Author Claire Evans wants you to know about the women who helped found the internet

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Claire Evans, author of the new book “Broad Band: The Untold Story of the Women Who Made the Internet”

Her new book follows the stories of women in tech from Ada Lovelace in the 1800s to cyber feminists of the ‘90s.

Claire Evans grew up as the daughter of a coder for Intel, and she never thought computers were strictly for boys. But as an adult, she became disappointed to find the story of Silicon Valley thoroughly dominated by male characters.

That’s why Evans set out to highlight the women who helped make the internet in her new book, “Broad Band: The Untold Story of the Women Who Made the Internet,” a series of biographical essays about important women in tech history the Wall Street Journal called “engaging,” while also “too-often fannish,” in its review.

Evans followed the stories of women in computing that span from Ada Lovelace, who published the first computer program in 1843, to cyberfeminism matriarch Sadie Plant, who inspired a generation of politically engaged women online in the early ‘90s.

Evans, who writes about technology for Vice’s Motherboard, spent two years digging up archives and tracking down subjects to add to the canon of internet pioneers.

Her writing was a welcome retreat from Evans’s other life as lead singer in an arty rock band with her partner, Jona Bechtolt. The couple made headlines in 2016 when they faked a sex tape leak for a video that never really existed. Evans called it a “failed experiment” at commenting on celebrity online culture. There was a backlash and the band later apologized.

Recode spoke with Evans about her book and the overlooked figures in tech’s past. The interview has been edited for length and clarity.

Why did you write this book?

I saw a need for it. A more personal reason is, I grew up on the computer — my dad worked for Intel and I had computers in my home from a very young age.

I never had a feeling when I was a kid that computers were for boys or girls or for anyone in particular. I thought they were just magical portals to the world. I always defined myself as an internet person and a net native. I learned how to write online. I was a blogger in the early blogging days. I wrote so much stuff that’s floating online forever, probably.

But I got to a point, I don’t know, maybe three or four years ago, where I started to feel like, as a person and more importantly as a woman, I didn’t really know what my place was anymore. I didn’t feel as free to express myself on the internet as I had when I was younger.

Who’s the internet even for, what is the internet, what does it become? That was kind of where my head was, and so because I’m into history and I’m into old-school computing, my immediate impulse was to go to the past and to try to trace it.

Whether or not I figured it out is up to the reader to determine, but it made me feel a little bit better about my place online.

Your book focuses on women who were foundational to computing and the early internet. Did you know about these women growing up?

No, I didn’t know them. And part of the catalyst of writing the book was I was writing a series of articles about feminism in the ‘90s online, cyber feminism, which was something I discovered just because that was literally a footnote on a Wikipedia page about something else.

It blew my mind, the fact that there had been this fully formed, really interesting, colorful feminist movement on the internet the exact same time that I was coming of age online, and I just couldn’t believe that I’d missed it. Then I started to think, “What else could I have missed?”

You found plenty of subjects.

It’s insane how many more stories there are. And it makes me excited on one level because we get to start to uncover these now, but it also makes me really frustrated that there have been so many books about history of tech that just parrot the same ten stories about Steve Jobs going to hire the guy from Pepsi — stories that we all know.

I enjoy those stories too, but it’s just so frustrating that there are other ones that are just as interesting and just as dynamic with just as funny and interesting characters as any of the things that we see in movies and TV now, so I wanted to make sure that we really start going there.

I want to have something that a young girl today can read and see herself in. I really believe that it’s much easier to see yourself in the future of something when you can see yourself in the past and you’re rooted in it.

Was it hard to write a book about women in tech that focuses on the past when there’s so much happening in the present?

There were so many points in the process of making the manuscript when some story would come out, like the Google internal memo or some of many stories of harassment, like the entire #MeToo movement happened while I was writing this book.

And every time that happened I would think, “Oh no, I’ve got to make make sure to include that, I’ve got to put #MeToo in the book, I’ve got to put Gamergate in the book. I’ve got to put all these contemporary things in the book, but ultimately, I wanted the book to be a sacred space where you don’t have any of that shit in it.

It’s just true stories of people doing amazing stuff against extenuating circumstances and succeeding. As much as that’s kind of a “rah rah” thing, I just wanted there to be that document, and I didn’t want to have to be in a position of retreat or reaction or defensiveness.

What are some of the stories you wanted to include but didn’t have space for in this book?

User interface design is a really huge space. A lot of really amazing women in UX design. I really wish I had the chance to talk to Susan Kare [an artist and graphic designer who created many of the interface elements for the Apple Macintosh in the 1980s], for example.

Who else did you wish you could have included?

I wanted to do a chapter on the women of Xerox Park. That’s one of those super mythologized spaces in early tech literature — all the the coders and anthropologists and computer scientists all hobnobbing it together in bean bag chairs. Xerox park is really famous for having these bean bag chairs that everyone sat in.

But there’s this woman, Adele Goldberg, who’s a really famous computer scientist, who tells this story in a video at the Computer History Museum about how the beanbag chairs were great except for if you were pregnant, It was impossible to sit down and get up. So the people that designed this collaborative, exciting neutral egalitarian environment did not at all think about how the women would actually be dealing with using it. It was very emblematic, I wanted to write about that.

You dedicated the book to the users, can you explain why?

There’s a woman in the book, Stacy Horn, who founded BBS [an early system for messaging and chatting online] in the late ‘80s, and in its heyday was a very popular social platform on the early net. But she still runs it.

And there’s maybe like a few hundred people that still use it, but this kind of dedication towards long-term care and really owning the responsibility of the platform you create, I think it’s something that is so powerful and I value that. I really want to see it reviewed and just the network as a whole and in the culture of tech as a whole.

I mean, it’s very difficult to do that, I know, because the entire industry is built on obsolescence and constant reinvention, but with [the women in the book], there’s a certain level of mindfulness for the long-term and for care.

Many of the women in your book had rich lives outside their work in technology, and you’re the same way. You are also in a rock band, Yacht.

We have to remember that people with well-rounded lives often have a great deal to contribute because they’re thinking about the larger systems of which they are a part.

One of the people in the book, Radia Perlman, she’s put this in my head, that we have this fantasy about engineers being people that took apart radios when they were a kid, and are obsessive about details and only think about the code. That’s cool and great and those people are necessary to build things, but we also need people that can think about the impact of that and can also think about the whole thing at a higher level, how it’s all going to work, where it’s going to fit in the marketplace, where it’s going to fit in the world in which it will become a part.

In May of 2016, you and your partner made headlines for orchestrating a fake sex tape leak to promote your music video. What was your thinking around that?

It was a failed experiment. We’ve been a band for a really long time and done these experimental projects that play with online culture. We were trying to speak to the disillusionment of clickbait and celebrity culture and the conviction with which people spread stories on the internet — the way that the algorithms and systems in place inflate and exacerbate those stories, but it was a very misguided approach.

We executed it poorly and used poor language. It was a disaster from the beginning and we regretted everything about it. It was something that brought us into a two-year period of creative hibernation, and part of the reason I threw myself into this project is because I had the time, and I had the desire to go deeper into issues of online life and understand a lot more about it and the best way to elevate the voices of women.

How do you regain trust with your audience?

As much as these things often seem entangled in my work, there’s a difference between art and journalism. I have always taken my writing seriously, and I hope that shows. This book isn’t about me, or Yacht, and it’s not fiction. It’s about highlighting the contributions of women who really deserve to be seen.

Why do you think we don’t hear more stories about women in tech?

I think various industries only recently awoke to the fact that womens’ stories are interesting to more than just 50 percent of the population, but in fact they’re interesting to 100 percent of the population.

It’s not that there haven’t been great books about women in tech — there have been. I have many heroes, Ellen Ullman, for example has been writing about this stuff for a long time. Sadie Plant wrote an amazing book in the ‘90s. We could always use a lot more, and there’s space for it.

I feel like already a big part of my reader base is very earnest men who want to learn, which touches me more almost, frankly, than the women excited about the book. I want everybody to know about these stories because they’re interesting. When you’re only interested in a small part of the story, you’re not getting the whole story.

I’m not super interested in countering great man history with great woman history, and I love pointing out heroes like Grace Hopper, Ada Lovelace, but I am more interested in them as full people than I am as stickers that you put on your binder.

I want you to know that Ada Lovelace had a drug problem, that Ada Lovelace was a compulsive gambler and she felt really weird about motherhood. There’s a lot of things in those stories that are more relatable, and it’s more interesting to me to learn how people manage to do exceptional things within the context of their lives.

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How is the internet changing March Madness?

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SB Nation editor in chief Elena Bergeron talks about brackets, streaming apps and paying players on the latest Too Embarrassed to Ask.

The 2018 NCAA Men’s Basketball tournament, a.k.a. March Madness, is an annual tradition for sports fans around the U.S. — and if you’re one of those fans, your options have never been better.

“Tech has really enabled the over-the-top fandom around this,” SB Nation editor in chief Elena Bergeron said on the latest episode of Too Embarrassed to Ask. “In previous years, if you had the CBS partnership — the rights to actually air the games — CBS was in control of what games it aired, on one broadcast network. Especially in the first weekend, when there are 64 teams, there are games going on simultaneously every day.”

“If you’re watching the wrong game, you’re going to miss the crazy Cinderella moment, the last-minute shot,” she added. “What technology has enabled everybody to do is, CBS now shares those rights across their networks and with TBS. Everyone is streaming these games on apps and there are live look-ins on ‘the good game.’”

On the new podcast, Bergeron talked about her tips for what sites have the best online brackets, how online streaming services are going to change all sports (not just basketball) and why she uses Twitter, but not Facebook, during March Madness games.

“Twitter, you use as a second-screen experience,” she said. “As games are going on in real time — this game that you think is not gonna be a very good game, ‘oh my God, it’s the last minute and this 2-seed is about to be upset!’ That’s how we’re finding out about a lot of stuff.”

You can listen to the new podcast on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts.

Bergeron also talked about a debate that gains steam this time every year: Given how lucrative March Madness is for colleges and broadcasters, why doesn’t the NCAA pay its players? Bergeron said the easiest solution would be to not try and pay players based on performance, as in the pros, but instead to give every athlete a modest cut of the profits.

“What you find is that’s what mostly what the players are asking for: ‘I need some money to get me through this college experience,’” she said. “The NCAA has a fund right now that’s sort of like an emergency fund for players, like if there’s a death in the family and they need to travel. There is a procedure through which you can protest the NCAA and say, ‘Release these funds to me.’ They just want better access to that stuff.”

“If you could articulate, ‘Hey, if you’re a college athlete in a major sport, you get $ 1000 over the course of the year,’ I think that would go a long way to people saying, ‘Hey, at least you’re revenue-sharing with the players,” Bergeron added.

Have questions about sports tech or anything else that you want us to address in a future episode? Tweet them to @Recode with the hashtag #TooEmbarrassed, or email them to

Be sure to follow @LaurenGoode, @KaraSwisher and @Recode to be alerted when we’re looking for questions about a specific topic.

If you like this show, you should also check out our other podcasts:

  • Recode Decode, hosted by Kara Swisher, is a weekly show featuring in-depth interviews with the movers and shakers in tech and media every Monday. You can subscribe on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts.
  • Recode Media with Peter Kafka features no-nonsense conversations with the smartest and most interesting people in the media world, with new episodes every Thursday. Use these links to subscribe on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts.
  • And finally, Recode Replay has all the audio from our live events, such as the Code Conference, Code Media and the Code Commerce Series. Subscribe today on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts.

If you like what we’re doing, please write a review on Apple Podcasts — and if you don’t, just tweet-strafe Kara and Lauren. Tune in next Friday for another episode of Too Embarrassed to Ask!

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Celebrities keep hurting Snap’s stock price — this time over an inappropriate ad

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Rihanna at the Grammys

Rihanna isn’t happy with Snap, and the stock is down. But the company is also dealing with an advertising problem.

For the second time in the past month, a popular celebrity has torched Snap’s stock with a public complaint.

Last month, it was Kylie Jenner who tweeted that she “[does] not open Snapchat anymore,” an admission that some believe caused Snap’s stock to drop more than 6 percent.

On Thursday, it was pop star Rihanna, who blasted Snap for allowing an inappropriate ad that asked users if they would rather “slap Rihanna” or “punch Chris Brown.” The ad would be inappropriate regardless, but you may also recall that Rihanna was the victim of domestic violence while dating Brown almost 10 years ago.

“Now SNAPCHAT I know you already know you ain’t my fav app out there!,” she posted Thursday. “But I’m just trying to figure out what the point was with this mess! I’d love to call it ignorance, but I know you ain’t that dumb!”

Snap apologized for the ad, calling it “disgusting,” and blocked the advertiser who posted it.

“This advertisement is disgusting and never should have appeared on our service,” the statement reads. “We are so sorry we made the terrible mistake of allowing it through our review process. We are investigating how that happened so that we can make sure it never happens again.”

The damage was done, though: Snap stock is down almost 5 percent on the day.

There are a few things to consider here.

The first is that celebrities seem to have an incredible impact on Snapchat’s business. These celebrity comments, while not happening in a vacuum, also seem to have a disproportionate impact on Snap’s stock.

It seems clear that investors are still trying to understand Snapchat themselves, a product still dominated by teen users. If you don’t use a product, a celebrity endorsement (or condemnation) goes a lot further than it would otherwise.

A Snapchat ad for Ashley Madison. Snapchat

Snap is also still establishing itself as a business and a public company. Can you imagine a single tweet or statement from any celebrity hurting Facebook’s stock? Facebook has been bashed by every politician and news organization in America for the past 18 months. Its stock is up almost 60 percent since the start of 2017. That’s because Facebook’s business is solid and proven, and investors aren’t overreacting to every new piece of information.

But there is also a legitimate issue here with Snapchat’s ad content: The quality of the ads isn’t always very high. This Rihanna ad is a perfect example, but there are others, like this ad for cryptocurrencies or an ad one user sent us for Ashley Madison, the dating site for people looking to have an affair.

This is usually what happens when you sell ads programmatically, or through software programs that don’t always require human moderation. Facebook deals with this issue, too, and so does Google. But their businesses are much bigger, and people are more immune to their stumbles.

Surprisingly, though, you can’t blame the algorithms for crummy Snap ads. The company still uses human moderators to approve the vast majority of ads, according to a company spokesperson. Only a small group of pre-approved advertisers can buy ads without a human approving them first.

Which means that Snap may not be suffering from a technology problem so much as a human problem, at least in the Rihanna case. But the issue also underscores Snap’s need to grow its pool of advertisers. If there were more ads to choose from, it’s likely these low-quality ads wouldn’t make it to the top of the pile.

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Ride-hail apps like Uber and Lyft generated 65 percent more rides than taxis did in New York in 2017

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Ride-hail drivers now pick up more passengers in a month than taxi drivers ever have in a month.

Ride-hail apps officially became more popular than New York City’s iconic yellow cabs as of the beginning of 2017.

Ride hail apps first overtook taxis in February 2017 at more than 10 million rides a month but quickly grew to a little more than 15 million monthly rides by the end of 2017, according to new analysis of data from the Taxi and Limousine Commission from blogger Todd Schneider.

By December 2017, drivers using ride-hail apps — Uber, Lyft, Gett, Via and Juno — performed 65 percent more rides per month than taxi drivers did in New York City.

The rise of Uber, Lyft and their cohorts isn’t exactly surprising, but even with Uber’s slowing growth, ride-hail companies very quickly performed about five million more monthly pickups that taxi drivers did.

A chart titled NYC Monthly Taxi Pickups shows the taxi line declining and the ride-hailing app line ascending. Todd Schneider

In spite of its slowing growth and a steep but short-lived drop-off after the #deleteUber campaign, Uber alone is making up the majority of monthly ride-hail rides.

Starting in November 2017, Uber drivers performed more monthly pick-ups than green and yellow taxi drivers. By December 2017, Uber surpassed 10 million rides a month in New York City. Lyft hit just over 2.5 million rides a month that same month.

Lyft saw the biggest increase in market share after the #deleteUber campaign in parts of Brooklyn, specifically Gowanus, Greenpoint and Prospect Heights. The company doubled their share from about 15 percent to 30 percent in those places.

It also appears ride-hail apps are filling some of the gaps in the outer boroughs of New York City such as Queens and Brooklyn — a value proposition both Uber and Lyft have often pitched. Uber and Lyft are each bigger than green and yellow cabs combined.

Uber performed a little more than five million rides a month in the outer boroughs as of December 2017 and Lyft performed approximately 1.5 million rides a month, while green and yellow taxis each fell far below the million-rides-a-month mark. Ride-hail apps altogether perform 10 times more rides in the outer boroughs than taxis do.

Even in Manhattan, where yellow cabs have historically reigned supreme, ride-hail apps were close to surpassing the taxi industry by the end of last year.

In a chart titled Manhattan Monthly Taxi Pickups, the taxi line has declined almost to the same point the ride-hailing apps line has ascended. Todd Schneider

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A former Walmart executive’s lawsuit claims the retailer has been inflating e-commerce growth numbers

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Tri Huynh, a former business development executive, says he was fired for raising concerns over the company’s practices.

Is Walmart cheating in its race to close the gap between Amazon and its own online business?

A new lawsuit from a former Walmart business development executive claims it is.

The suit, filed this week in Northern California federal court by Tri Huynh, alleges that Walmart has been lowering its standards to boost the size of its online catalogue; mis-categorizing some items listed for sale, which can result in overcharging some merchants who sell through; and failing to process $ 7 million in returned items.

Huynh says that he was terminated from his job in 2017 as retaliation for being a whistleblower by repeatedly bringing his concerns to e-commerce division leaders, and is suing for unspecified damages.

“This litigation is based on allegations by a disgruntled former associate, who was let go as part of an overall restructuring,” a Walmart rep tells Recode. “We take allegations like this seriously and looked into them when they were brought to our attention. The investigation found nothing to suggest that the company acted improperly. We intend to vigorously defend the company against these claims.”

The suit comes as Walmart has pumped billions of dollars into its e-commerce business over the last few years, including the acquisition of, to improve its websites and narrow Amazon’s lead in the space.

Huynh, who worked for Amazon previously, joined Walmart in 2014 as a director of business development for its online marketplace, which allows outside sellers to hawk their wares on alongside Walmart’s own products.

Huynh said lax internal controls allowed for frequent miscategorization of items sold by marketplace sellers, resulting in Walmart charging them a higher commission on sales than it should have. The suit also claimed that Walmart boasts about the size of its online catalogue but counts items that aren’t actually available for customers to purchase.

He also alleged that the giant retailer lowered its standards by allowing low-rated sellers to flood the marketplace with overpriced goods to artificially boost the number of items Walmart publicly claims are available through its marketplace.

Huynh said the lowering of standards resulted in an influx of inappropriate items, such as mugs labeled with phrases like “got Hitler?” and “got retard?”

Bloomberg first reported news of the lawsuit.

This post has been updated with a comment from Walmart.

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TheSkimm is raising $12 million from Google and other investors to build its subscription business

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TheSkimm co-founders Danielle Weisberg (on the right) and Carly Zakin

The startup has a newsletter with seven million subscribers, but it wants more revenue sources.

TheSkimm started out as a newsletter aimed at millennial women, but its founders have always said they wanted to expand into other product lines.

Now co-founders Carly Zakin and Danielle Weisberg have more money to make that happen: They have raised a $ 12 million round led by Google Ventures, along with Spanx founder Sara Blakely. Earlier investors, including 21st Century Fox, RRE and Homebrew, are in this round as well. The company has raised $ 28 million since 2012.

Investors the company talked to said Zakin and Weisberg were looking for a $ 100 million valuation; their last round, in September 2016, valued the company at around $ 55 million. The company declined to comment on its current valuation or whether it had sold secondary shares as part of this round.

TheSkimm’s core product is a daily newsletter that boils down world events into breezy, bite-sized chunks — today’s edition, on the U.K. expelling Russian nationals following the assassination of a former spy: “The Kremlin’s prob not stressing about all this.” The company says it now has seven million readers who open the letter at least once a month, with a 30 percent daily open rate.

But theSkimm has always positioned itself as a media brand with aspirations for multiple revenue streams. It has been building some of them in the last few years and now boasts podcasts, an e-commerce business and a subscription calendar app.

The company says it will use some of the money from its new round to build more subscription services — a very 2018 idea in mediaworld — and that it hopes Google Ventures and its Google connections can help it with some of its product plans.

Or, in the words of the company: “We have revolutionized the delivery of news and information to the most coveted demographic and, as we look to grow our membership by expanding our products and services, GV’s expertise and data-driven mindset makes them the ideal partner to aid in our expansion.”

Weisberg and Zakin appeared at Code Media last month, along with Brit + Co CEO Brit Morin, where they talked about building their brands and businesses. Here’s the video from that session:

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Former ESPN boss John Skipper says he left his job because a cocaine dealer tried to extort him

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“I had placed the company in an untenable position.”

Former ESPN boss John Skipper says he resigned last year because someone who had sold him cocaine was threatening to extort him.

Skipper’s disclosure, made via an interview with the Hollywood Reporter, solves a much-discussed mystery: Why did the man running one of the most powerful media properties in the world abruptly leave his post?

In December, Skipper said he was stepping down to deal with an unnamed “substance addiction.”

Now, he tells journalist James Andrew Miller that he had been a cocaine user over “the past two decades,” but says that up until late last year, he had “never allowed it to interfere with my work, other than a missed plane and a few canceled morning appointments.”

What changed in December, Skipper says, was that “someone from whom I bought cocaine attempted to extort me.” At that point, he says, he told his family, and then Disney CEO Bob Iger. Skipper said he and Iger “agreed that I had placed the company in an untenable position and as a result, I should resign.”

Since Skipper’s surprise resignation, speculation has swirled about the backstory behind the move. Some industry observers wondered if Iger had asked Skipper to leave because he wasn’t happy with ESPN’s performance, or if Skipper had issues beyond substance abuse, perhaps involving sexual misconduct.

Skipper tells Miller that “those rumors and speculations are categorically and definitively untrue. There were no such incidents at work during my entire tenure, including no allegations.”

Last week, Disney announced that Jimmy Pitaro, who had been running the company’s digital and licensing business, would replace Skipper. I’ve asked Disney and ESPN reps for comment.

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‘Get Out’ producer Jason Blum talks about Netflix, low-budget movies and the Oscars

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“My theory — very un-Hollywood — is I’d rather have a small piece of what I anticipate to be a much bigger pie than a big piece of what I anticipate to be a small pie.”

Blumhouse Productions CEO and founder Jason Blum talked with Recode’s Peter Kafka in front of a live audience at South By Southwest this year in a live taping of our Recode Media podcast.

You can listen to the interview in the embedded audio player below, or find Recode Media on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts. Below that, we’ve posted a transcript of the conversation, broken up into sections. Enjoy!

The Oscars

PK: Last week was the Oscars. This week is South By [Southwest]. What’s more fun?

That’s not fair. We had this conversation backstage, and now … The South By is less stressful than the Oscars. The Oscars are certainly more stressful.

PK: By the way, you’re here to promote your next set of movies, right? The “Get Out” phase is over, everyone’s seen “Get Out.”

We have two movies here, we have “Unfriended Dark Web,” which premiered last night.

PK: It’s the sequel to “Unfriended.”

Which is basically “Unfriended 2,” exactly. And then tonight, we have this movie called “Upgrade,” which Leigh Whannell, who wrote all the “Insidious” movies, and wrote “Saw,” directed “Insidious 3,” it’s his first original movie that he’s directed. And I’m really proud of both movies, and we’re here supporting and promoting them.

PK: Cool. I talked to you a little more than a year ago at Code Media. “Get Out” was not out yet, we showed a preview of it. I’m not the only one who had this reaction, I said, “I don’t know about that movie, it seems fine.”

Not sold.

PK: Not sold. So that was a few weeks before it came out. Did you know what you had with “Get Out”?

No, you never know … When a movie touches a cultural nerve like that, you … The only … I actually shouldn’t say that. I always say with “Paranormal Activity,” Oren knew. Because Oren would always say, “That movie’s going to be …” And obviously you want the director you’re working with to think that he’s got magic in a bottle. And every director always thinks they’ve got magic in a bottle. So that part …

PK: Let’s be clear, we’ll talk about your model …

But other people don’t know.

PK: We’ll talk about your model in a little bit. But one of the parts is, you test these things, right? You’re not just … Beause a lot of movies you don’t even bother to release, right, if they have to score a certain audience score.

I wouldn’t say, “Don’t bother to release.” We just release them in a different way.

PK: They do not go to theaters.

They don’t go wide to theaters.

PK: Right.

They don’t go to a lot of theaters.

PK: So, at what point with “Get Out” did you go, “Oh, this is a thing.”

Well, not at the test. “Get Out” tested B+/A-. It wasn’t … The scores of “Get Out” were not off the charts. We’ve had a lot of movies test higher than “Get Out.” The point that you’re asking about was the second weekend of release. So, it opened, it had a great open … It opened last Oscars, over the Oscar weekend. So it’s been over a year since it opened. And the opening was very solid but not incredible. But the second weekend was when we knew we had something. It’s when we knew we had something that was going to touch a nerve everywhere around the place.

PK: And what are you looking at? Are you looking at the numbers? Are you looking at …

You’re looking at the drop, the gross, the drop. And it dropped only about, less than 20 percent. And a great drop, especially for a genre movie, is 50 percent. So when the movie dropped 20 percent, we knew it was going to be a great, fun ride.

PK: So, Universal’s your distributor. At the point where you realized, “This is a hit,” is there anything else you can do? Or you’ve already done your work at that point?

Well, you can talk about it, immediately about it on an Academy campaign.

PK: Did you have to push Universal for that? Sounds like a maybe.

Maybe. I mean, I think it was … We didn’t really, in fairness, we didn’t think about the Academy campaign the second weekend of release. But after the story started coming out, after a month or six weeks into it, I definitely felt like we had a shot at that. And so we started thinking about it early.

The tricky thing about an Academy campaign in March is you can’t really … If anyone actually thinks you’re thinking about an Academy campaign for a $ 4 million horror movie that was released in February, you immediately get shut down. Right, it’s like, “Shut up with you. That’s never happening.” So you have to do a covert ops Academy campaign.

PK: And when did that pick up as a, “Actually, ‘Get Out’ could really win an Oscar. This could actually happen”?

Well, I don’t think that happened until way late. Until October, November. But the campaign started … We had little events, like, we did an event around the home video release, the digital release of the movie, which was March, April, May-ish, about three or four months after the theatrical release. And we had a kind of a big party for that, and we invited people that wouldn’t normally come to that. We brought the cast, we brought Jordan. And that definitely made people think like, maybe this movie will have a longer life than just this normal, traditional windows of the release of the movie.

PK: I was asking you, what was it like to sit at the Oscars, and you said, “Well, I tweeted.” So we can go back and review your tweets. What are the things you wanted to tweet but didn’t tweet, just between us and the internet here. What is that experience like, to sit there with a realistic chance of winning Best Picture?

I’ll tell you. I’ll tell you, I’ll tell you exactly what it’s like. So, in truth, the only thing you’re thinking about, or anyone in my position is thinking about, is the speech that you may or may not give. You have to convince yourself that you’re going to give this speech. So, in your mind, or in my mind, I’ve played out the whole thing: Where I’m going to walk, where I’m going to stand, where the microphone’s going to be. You have to imagine doing it, because you’re so nervous that you can’t think, “I’m not going to win,” because then you’re not going to be prepared.

So, in order to prepare … My poor wife, every time there was a commercial break, we’d go outside and I’d run through the speech with her. So by the time the award is called, I’ve won in my head. People say, “Are you surprised you lost?” I’m like, “Surprised? I couldn’t … I was shocked!” I couldn’t believe it. I had already won! I recorded and I practiced the speech five billion times, even before the Academy Awards, and I recorded it. I held up soap like this, and that was my Oscar. And I recorded a little video of me giving a speech, like, I’m such …

PK: You showed me a video on your iPhone, it looks great. You should share it.

I just showed it.

PK: It’s a good speech.

I want to tweet the speech, but I think it’s obnoxious. Someone said, “If you thank Guillermo [del Toro] and then tweet it …” But I think it’s still pretty obnoxious to give your Oscars speech that you didn’t get to give because you lost. But I sent it to a lot of people, so a lot of my friends saw it.

PK: So “Get Out” is this surprise hit, giant hit, really important culturally. It was — I might have this wrong — but I don’t think it was your biggest movie last year, was it? In terms of gross?

It wasn’t our biggest movie. “Split” was our biggest. “Split” did 280 and “Get Out” did 250.

PK: So who’s seen “Split”?

All right. Well, wait till you see …

PK: And everyone’s seen “Get Out,” right? So, it’s half the room. But “Split” grossed more. What does it say about the movie business — or audiences — that the movie with more cultural resonance didn’t gross as much as the one …

Well, that’s the world we live in.

PK: That’s the world we live in.

I mean, look at every other Best Picture nomination didn’t make … No one ever, they didn’t do any business, except “Dunkirk.”

But let me go back to the Oscars for one second. So, one of the things that I would share with you guys, to your question before about the Oscars, which is like, a complicated thing, is everyone says, “Congratulations! It’s so great, got four nominations. Jordan won best screenplay, he got an Oscar.” So on one level, you kind of have to, like, you have to pretend that that feels so great. Which, of course it does feel great.

PK: Should feel pretty good.

It does. But we also … You have to acknowledge the fact that we personally lost. You sound like such a baby if you’re like, “You know, it’s great Jordan won, but we lost.” You sound like such a spoiled jerk. But, to answer your question, that’s what’s going on in my head.

Blumhouse Productions

PK: This is why it’s fun to talk to Jason. But I did want to ask you a little bit more about “Split.”

You could go back to “Split,” yeah.

PK: Yeah, just, because I said before we came onstage, “Which of your movies should I see in advance of [our talk]? Because I’d seen “Whiplash” and I’d seen “Get Out,” but I don’t see a lot of horror movies, what should I see? You made me a personalized list.

Yes, I did.

PK: I don’t know how personalized it was, but I’m very happy.

You know it was, you could say, yeah.

PK: It was “Split.”

It was “Purge: Anarchy.”

PK: “The Gift.” “Purge: Anarchy.” “Happy Death Day.”


PK: “Paranormal Activity 3.”

Three. That was the best one.

PK: I got the three of them. But I did not … I remember that we talked about the fact that you were doing an M. Night movie, and that was going to be the big movie. But in my world, it came and went. No one I know has ever talked to me about that movie. Everyone I know is talking about …


PK: Yeah. Everyone is talking about “Get Out.”

Yeah, everyone talks about “Get Out.” But “Split” made more money, is your point.

PK: But, yeah. That is your model, by the way, right? It’s movies like “Split,” that may not have giant cultural resonance … Like, you’re not trying to win Oscars from it.

No, no.

PK: You’re trying to make movies for a price that do well in the box office.

Yeah. And I got asked about that a lot, now that that movie … And we did “Whiplash,” too. And now that the movie got, like, are you going to try and make … And that is, I feel that more than ever, that we’re definitely not trying to make movies that win Oscars. Now, in the same breath, I would say, when we make a movie and it gets recognized by the Awards or Oscars, that’s a great feeling. But we are not retrofitting movies to win Oscars, no.

PK: So the model is — and we’ve talked about this before, I think a bunch of people know this so we won’t belabor it. You make movies, generally for less than $ 5 million.


PK: Some of them go to the theaters, some of them don’t. And, you generally feel, even the ones that don’t, you can recoup your money through international sales or iTunes. So even worst case scenario, you don’t lose money on a movie.


PK: And then you get a lot of upside if you have a giant hit. Generally, horror or suspense.

Generally, yeah, genre. Exactly.

PK: I’ve been thinking about this since we talked last year. And we talked about it onstage as well, but I’m still confused. You’re really good at what you do. But this model also seems like a pretty straightforward model. Make movies that only cost X. Some of them will do really well, you’ll make money. Why aren’t other people trying to do what you do?

We did a … Harvard Business School, they do these case studies, and they’re doing a Blumhouse Case Study, which I’m very proud of. They have to, as part of the Case Study, they have to talk to the employees at the company. The senior management at Blumhouse. And one of the questions … And I get to edit it after. I just read a recent draft of it. And one of the most senior people at the company, who will remain unnamed at the moment, said in the thing, they said, “This model seems replicable, why don’t people replicate it?” And his answer was, “Yeah, I don’t know. It’s not rocket science.”

PK: So, I’m not the only idiot saying it, thank you.

Yeah, I crossed that out. The biggest reason it’s not replicated is because Hollywood is totally connected to ego. And ego does not allow for low-budget movies. They’re not cool. If you have … And I think it’s a real shame. It’s good for our business, but it’s bad for movies. It’s bad for the movies that we get to all see. That there’s this connection … And it’s so tied into the DNA of Hollywood, especially at the representation level. Agents, lawyers, managers, but also the artists, and everyone cannot disassociate the notion of, “If I have a hit, I should make more expensive movies.” Or, “more money is better.” And that sounds so silly and simple, but the longer that I’ve done this, I used to say maybe. It’s no question that’s why.

It’s like, the idea that you have a company that makes “Get Out,” and you’re not going to go make more expensive movies. Or, the idea that you have a company that makes as many hits as you have, and like, don’t you want to make a $ 100 million movie? Don’t you want to … And, I don’t want to do that, not for so many reasons. We obviously have the ability to make expensive movies. But I don’t want to do it, because I do believe that they’re just not as fun. The risk is so high, you second guess every decision. Every decision has to be run by a committee. When you make low-budget movies, you can move. And you might be right or you might be wrong. But we make a lot of movies. The reason we make a lot of movies is because they’re all very inexpensive.

And, to answer your question, I think there are other reasons, which — I don’t know how much time I want to take up on this question. But the biggest reason is what I just described.

PK: So we can spend a little more time on it. I’m assuming that one of the reasons that … I get why Disney doesn’t do this, right. Because in the very big studios, their business model is, spend a couple hundred million dollars on movies that will make a billion dollars. And that’s … “We are so big that we need to have giant out-sized hits to move the needle.”

But I would think someone else, who’s like Jason Blum, who considers himself idiosyncratic, or someone from the internet world would go, “I like this approach. It’s kind of intuitive. I don’t need to hang out in Hollywood, but I do want to fund a lot of movies.” You would think somebody else would’ve tried this by now.

Well, I could go through the individual ones. The studios don’t do it because they’re not built to make low-budget … Still, the best distribution in the world is done by studios. But it’s impossible …

PK: The machinery is built for these big things.

It’s impossible. The streamers eventually may. But right now, the streamers are over-paying talent, to compete. So if you’re going to do a low-budget movie, you’re definitely not doing a low-budget movie for Netflix. The reason people are working for Netflix right now is — I mean, Ted wouldn’t like it if I said this, but — right now they’re paying an enormous amount of money to these people up front. So streamers may eventually do it. But right now …

Also, the upside to our low-budget movies is they get a big, theatrical release. And Netflix doesn’t do that. And the other streamers don’t really do that, either. So that’s another reason. There’s another thing that you were just saying.

Oh, and in terms of individuals, I do really think it’s what I said. There are a lot of people who make low-budget movies, but that’s in between the tempo that they’re trying to get going. And it’s very different, as you know, when your business is solely focused on this one thing, as opposed to focused on it as a side business, along with this other business. And it’s really hard to give up that other business.

Streaming Services

PK: I was thinking about the streamers and the stories that you see about them overpaying. Netflix writes big checks, Amazon writes big checks. Apple is now writing these crazy checks, or even HBO, which pays well, is going, “We can’t keep up with that money.”

I would assume that filters down to you, because part of your pitch to a Jordan Peele is, “You’re going to make this movie at a price. But we’re going to give you basic, near-complete freedom to make this movie.” And it seems like Jordan Peele could now go to Netflix and Netflix will say, “You can make a movie for a much bigger price, and you’ll still have freedom.”

It filters down to us. The market for talent, for artists making TV and movies, is super wonky right now, because it’s not correlated to profitability, so it’s much, much, much more competitive. The thing that we can still offer is a big, theatrical release, which you can’t get at any of those other streamers. But, yeah. And we can also offer, if your movie hits, you’ll do … It’s much, much, much, much, it’s seven times more lucrative to work with us than to work with them.

PK: Because we’re going to give you a piece of the profits.

Exactly. It’s many, many more times. But if your movie doesn’t hit, of course, it’s much more profitable to work with them.

PK: So when you’re pitching them, when the next Jordan …

Because we don’t pay up front. And they pay up front.

PK: Right. And the next “Get Out” comes your way … First of all, is it even coming to you? Or do you have to go grab it from Netflix, go fight Amazon for it?

We, you know, we think about that a lot. We just bought a spec on Tuesday of this week. We bought another one yesterday. You have to fight for it. You have to fight for it. Then the fight is easier, sometimes. But we have to fight for it.

PK: And your sort of ace in the hole is, “Look, you could be up for an Oscar. We can bring you to the theaters. You’re going to get buried in the Netflix queue.”

Your ace in the hole, see, that question is very frustrating. Your ace in the hole, it’s like, I’m on the phone with the guy who wrote this script that we bought on Tuesday. And I’m explaining … And the script is built for our company. It’s the movie, it can be made for low-budget, a genre like, it’s … I get it, if it’s an Oscar movie, I got to fight for my life. Because, first of all, we wouldn’t be fighting for it. But second of all, we’re probably not the company for you.

But this movie is like, if I’m on the other end of the phone, who the hell else are you going to talk to? But I’m still hearing like, “Well, I like this one, and I like this one,” and you have to … So I still have to say, “Look, we did all these things, and this is how we’ll take care of you.” And like I said, it’s easier, but they don’t just come in the door.

PK: And the flip side, right, is that Amazon, Netflix are buying stuff from you, right? The stuff that you’re not sending out theatrically goes to them, oftentimes.

Correct. We sell a lot to Netflix, a lot to Amazon. We’re actually, funnily enough, premiering a movie that … We did the live action, new live action version of “Benji.” So, there hasn’t been a “Benji” movie since the early 2000, 2001, 2002.

PK: It’s not a horror film.

It’s not a horror film, I keep getting asked that. It’s not a horror film. I can tell you why we’re doing “Benji,” if you want to hear.

PK: Yeah, I do. The dog lives.

No, no, no. It’s a fully kids movie. And the premier is tomorrow in LA, and we sold it to Netflix. And the reason we’re doing “Benji” fits to a lot of exactly what we’re talking about.

The man who invented it, came up with “Benji,” is still alive. He’s 79, 80 years old. And in the early ’70s, he wrote the script to “Benji,” brought it to Hollywood. They laughed him out of town, said get out of town. And he said, “I still believe in this.” It’s kind of like “Paranormal Activity.” Put up his own money, made the “Benji” movie, brought the “Benji” movie to Hollywood. Everyone did exactly the same thing as “Paranormal Activity.” Laughed him out of town. On the finished movie, he went back and he distributed the movie himself. The movie was like the “Paranormal Activity” of 1972. It was in theatrical release for a year. It did like, $ 36 million — which today is $ 200 million or whatever the hell it is. And the family went on to make many movies and a “Benji” TV series.

He had a son named Brandon Kemp, who’s my age. And Brandon came into my office two years ago and told me that story, and said, “I want to write and direct the ‘Benji’ movie, but I want to do it 100 percent on my terms. I and my family understand who Benji is. My family understands how to make this movie. When I go to other places, they tell me Benji has to talk now, or Benji has to do this, Benji has to do that. We know what Benji has to do, and we know you’ll protect Benji.” And it sounds so funny. And we did. And we did. And we made a pure “Benji” movie, exactly like he wanted to make. I’m very proud of it. It has nothing to do with being scary, but everything to do, but everything to do with … We have two brands. We have our consumer-facing brand, which is scary movies. We have our industry-facing brand, which is, we protect the artist.

And in this case, the artist was Brandon and “Benji.” And we gave him total freedom to work within a limited parameter, to do exactly what he wanted to do with “Benji,” which a studio wouldn’t have let him do. And that movie, we sold to Netflix. And we had to make a decision, is it better as a theatrical or better as a Netflix movie? We could’ve gone either way. And in that case, we chose Netflix, because in my opinion, that’s where kids are watching movies. It remains to be seen whether or not we made the right choice or not. But my gut is we absolutely did. And I’ll let you know next time we talk, if we did or not.

PK: All right, we’ll talk in another year.

How do you decide when you want to branch out? You make scary movies, right? That’s what you’re good at, that’s what you make the most of. You occasionally take bets, like a “Benji” or a “Whiplash.” How do you decide, “We’re going to break out of that mold here, we feel comfortable making that bet.” Because you could do it all the time, right?

No, and again, you may say I’m rationalizing, but to me, we’re making a low-budget version of “Benji.” We’re giving all the creative control to the people who created “Benji.” And that is a Blumhouse movie. Again, industry, not consumer-wise, right. “Whiplash,” to me, even the content of “Whiplash” … If there’s such thing as a Sundance or independent version of a scary movie, “Whiplash” is very scary.

PK: It’s super tense.

The way that I define, especially on the television side, we haven’t talked about that. But we have a big TV company and we make a lot of television. And the way we describe the TV company is things that scare us. So we’re doing a scripted series on Roger Ailes. Now, he scares me, so he fits in our television brand. That’s kind of how we define what we do. And I really feel like “Benji” and “Whiplash” fit in very much to the DNA of the company.

Where We Watch Movies

PK: There’s this constant discussion in Hollywood, and branches into tech, about going to see movies in theaters, and are we going to continue doing that, and why don’t we get to see movies the same day and date they’re released in theaters, at home. There was a lot of movement toward it recently, and then seems like that stopped now, because Disney’s buying everything and Disney wants to put their movies in theaters. How do you feel about the theater-going experience versus watching at home? Ideally, you want people to see it in the theater, right? The movies you are most excited about, you put in the theaters.

Well, I’m glad you asked. I have a very specific feeling about this. It happened, you could say, windows. It happened. Will Smith is doing TV movies on Netflix. So in my opinion, we in the movie business kind of missed the boat. We seceded control to the people who don’t have deals with exhibition. And Netflix is making 50 theatrical movies a year that aren’t going theatrically.

So this idea that we had, windows were going to collapse, and it didn’t, and we held our ground. It’s a myth.

PK: You think it’s a done deal.

That’s not my opinion. Netflix is making $ 100 million movies starring Will Smith, that are playing on television. So while we couldn’t figure out an agreement to let people do what they wanted to do, Netflix said, “You guys keep fighting. We’re going to give the consumer what they want. And we’re going to give them movies at home.”

I really disagree with filmmakers telling the audience they have to see a movie in a movie theater, and I think it hurt. What that did, in my opinion, is make television series much more culturally relevant than movies. It gave television a leg up, and it gave streamers a leg up. I think the notion, in 2018 or 2019, of telling the consumer where … Telling an 18-year-old where he should see what you made is preposterous.

PK: So Netflix is spending a lot of money on movies, they’re hiring Brad Pitt, they’re hiring Will Smith. But they haven’t had “Orange Is the New Black.” They haven’t had “House of Cards.” They haven’t had a big, sort of cultural hit. They’ll tell you that lots of people saw .. Or I guess, Nielsen will tell you lots of people saw “Bright.” Why do you think they struggle with movies?

They just started.

PK: It’s too early for them.

Give them a chance. In six months, in 12 months, they’re going to have that movie. It takes time. Movies, you get to the “Get Out,” or the culturals that were the hits. You have to have a slate. And in six months, they’re going to have it. Or in 12 months, they’re going to have definitely the movie equivalent of “Orange Is the New Black” or “House of Cards” on Netflix. For sure.

PK: I thought you were going to tell me, there are some kinds of movies, especially the ones that you do, that work better when they work in a theater. It’s a shared experience. That “Get Out” was a much bigger hit because people saw it in the theater. People, when they reacted to it, there’s a special alchemy there that you don’t get on your couch or on your phone.

That’s true.

PK: Okay. That’s a good podcast. I just talk to myself.

I don’t think one happens at the exclusion … I’m not saying you have to tell the kid, “You have to watch it at home.” You can watch it in the movie theater or you can watch it at home.

Listen, my entire business is built on theatrical exhibition. Totally. And that’s how our movies are monetized way more than any ancillary streaming or anything else. I think it’s a vital part of the ecosystem of the movie business. But I think it’s a shame that we, all of us, couldn’t figure out an agreement. Because what it did was give the advantage to all the streamers. They have a financial advantage, and now they have a business model advantage.

PK: The horse has left the barn. The train is out of the station.

The horse is gone.

PK: What happens to “Get Out” or “Split” if you release them in theaters and you can stream at the same time? Are they more successful? Less successful?

Right now, they’re less successful, because that would be a one-off. But if there had been … if there was an agreement across … If “Split” was treated the same way as “Avengers,” and I don’t know what the right … I don’t know if it’s three weeks in a theater and then at home. It’s certainly not three months or four months. I don’t know what the right, perfect, perfect model is. We’d have to play with it. But you’d have to play with it collectively, not with one-offs.

It’s been tried, and one-off doesn’t work. They tried it with the Universal. People have tried it in one-offs. You have to kind of get together and make an agreement that isn’t, that’s legal. And then you’d have to play with what the model is. But the model as it is now just gives streamers a huge advantage.

Diversity and #MeToo

PK: Back to the Oscars, you were there. You saw Frances McDormand give her speech. When she said “inclusion rider,” do you know what she meant?

I have no idea, but I’m all for it.

PK: Okay. So, the rest of us, we’re all Googling “inclusion rider.” You figured out what it meant. Is that realistic?

An inclusion rider? I think is realistic. I think it’s realistic, absolutely. I actually think it’s a good idea.

PK: Do you think your talent will be asking for it?

If a director asks me for an inclusion … They’re the one who has to do all the hiring. So if a director asked me for an inclusion rider, we would do it in a second.

PK: And what do you think of … JJ Abrams has a different version of this, which is all our stuff has to have some level of diversity of production and casting, and we’re going to try to … I’ll let him speak for himself. But he’s got it sort of mandated, built in to Bad Robot from here on out.

I think actions speak louder than words. I’m not familiar with enough, with JJ’s output. But our movies, first of all, our company is 50 percent women. And if you look at our movies, they’re very, very focused on minorities and women in a profound way. And I think actions speak louder than words. So look at the people’s work as opposed to mandates for us. But I do think Ryan Murphy has a bigger company than us. His mandate that he gave, I think it’s spectacular.

PK: You spent five years at the Weinstein’s?

I spent … It keeps growing.

PK: It keeps growing? How many dog years?

It’s been about three-and-a-half years.

PK: So, in the last year … All the stories … Have you re-thought, either what you did then or how you want to behave, and how you want your company to behave going forward, in the light of that experience?

Yeah, I don’t think anyone running a company in entertainment has not re-thought the way their company has to behave. If they say they haven’t, they’re not telling the truth. Yes, we have. And we’ve concretely done a bunch of things to address our thinking on it. And you know, happily, we haven’t had any incidents at the company, but I think everyone is super mindful of it. And I think that’s a very, very positive change.

PK: I was reading a Maureen Dowd article where you said you don’t meet with actresses without someone else in the room. Does that pre-date the Weinstein stuff? The Weinstein recording from last year?

Yeah, and that wasn’t about … I don’t like to meet an actress, when I meet an actress, I don’t like to meet them alone in the room. Now I sound like Mike Pence. But I really do, I don’t do that for two reasons. I do that because I have found over the years that it’s that thing … It’s more true, I don’t discriminate like this, but it’s certainly more true of younger actresses than actresses who’ve been doing it a while. But a younger actress who feels like they have to perform and feels like they have to impress, it’s a very awkward thing for an actress to walk into your office on a general meeting.

Because the actress is saying, “See how great I am,” or, “See how pretty I am,” or whatever. It’s awkward, and you can look what I’m looking at the actress who’s 23 years old. They look uncomfortable. And as soon as you put another person … We have a woman named Teri Taylor who casts all our movies. And I found years ago, if I would bring Teri into the room, we’d just have a more productive meeting.

PK: So you’re saying it’s not a #MeToo thing. It’s not you protecting yourself from a lawsuit, or from accidentally harassing someone. But it is a #MeToo thing, it’s addressing a power dynamic, right? There’s an inherent …

It’s about addressing … It’s really a business thing. If I’m in my office with an actress, it’s because I want to work with her. It’s because I’m interested in working with her. And we’ll have a much more productive conversation about working if there’s someone else there. And she feels less pressure and I feel less pressure. And I find that it’s more productive for commercial reasons, which is what I’m having the meeting for in the first place.

PK: “Benji” is coming out. What else are you extraordinarily excited about this year?

I’m really … So our movies this year, we have “Truth or Dare,” which comes out Friday the 13th, my favorite day of the year. Sometimes there are two on that year. I always like to have a movie on Friday the 13th. “Happy Death Day” was Friday the 13th in October. I’m very, very … I hate the word excited … Proud of, eager for the world to see the movies that we’re here with. The “Unfriended Dark Web” and “Upgrade,” which we’re screening tonight.

PK: Midnight.

Midnight. Leigh Whannell is this incredible writer. He’s written so many great movies, a lot of them with us. He directed “Insidious 3,” I felt like he never got enough credit as the director of “Insidious 3,” he did such a good job.

PK: Leigh, you want to take a bow? He’s right there.

Oh, he’s right here. Buddy, you’re here. Hi, Leigh Whannell, ladies and gentlemen.

PK: Here he is.

Poor Leigh is sitting through my garbage. Thank God I didn’t see you. Anyway, I think he’s an extraordinarily talented director, and he really gets to show that in this movie “Upgrade.” So I’m really, really psyched, so I really hope all of you see it here either tonight or at the subsequent screenings.

And then, very happy about the new “Purge” movie, which we take on a new topic in “Purge” world. It’s the first “Purge,” it’s the first “Purge” that ever existed, and it just took place on Staten Island as a government experiment.

PK: Good Staten Island joke.

And then in the fall we have “Halloween,” which is amazing.

PK: Is it, you’re remaking “Halloween”?

I’m not even quite sure. Whatever I say is wrong. But I’ll tell you …

PK: But Jamie Lee Curtis is in it.

It’s a new “Halloween” movie. John Carpenter executive produced, Jamie Lee Curtis is in it, David Gordon Green directed it, Danny McBride and David wrote it, and it’s awesome.

PK: All right, I’m watching it. And then you’re going to do another M. Night movie, right?

And then we have “Glass,” which is the follow up to “Split.” So “Unbreakable,” “Split,” “Glass,” which is sick, I just saw the trailer for that.

PK: So when you do a movie like that, when you’ve got a director and it’s done really well, the budget goes up, right?

Sequels, our budgets are almost never five. Sequels, our budgets are more like 10 and sometimes 15.

PK: But you’re still holding it to a certain level.

By Hollywood standards, our sequels are still extremely inexpensive. But they’re not … The rules of our original movies and budgets do not apply to sequels, because sequels … The release rules don’t apply either. The sequels, we have a release before we start. So we know it’s going to be wide release. We have IP that we know works, and the budgets are higher as a result of that.

PK: That’s next year.

“Glass” is the beginning of January, yeah.

PK: I’ll watch it. I have more questions, but you guys can ask your own questions for Jason. We can do microphones. We’ll do a microphone. We’re recording this, so speak up.

Audience Q&A

Scott: Hey, I’m Scott Glosserman from Gathr Films. Going back to the question of why people aren’t replicating your model, you talked a lot about ego, and this ties into it. But there’s also an economic calculus, a lack of discipline, historically. Even the Morgan Stanleys of the world, who are lending the money, you typically get a big star all of a sudden who wants to be in a low-budget movie. And then everybody thinks they can just increase the budget exponentially.

So if someone like The Rock wanted to be in one of your low-budget movies, and it changes the economic calculus of the film, do you pass? Or how have you dealt with that?

We work with John Travolta, with J.Lo, with Ethan Hawke, with Patrick Wilson, Rose Byrne, we’ve had a bunch of … No one as big as The Rock.

Scott: How do you factor them in?

We don’t treat them any differently. And we’ve paid them an enormous amount of money, because the movies we’ve done with all of those people have been very successful. But they get paid exactly the same as everybody else up front, which is scale. And if they refuse to do that, even The Rock, we wouldn’t do it. We stick to our model no matter what.

Look, another answer to that question is, because Hollywood is so twisted around with money and budgets, there is this thing. And people say, you’re Roger Corman. And I love and admire Roger Corman’s work, and him. I think he’s an exceptional person. Our business model and Roger Corman have nothing to do with one another. He was making super-low-budget movies with kids who are just starting. We make super-low-budget movies with people who really know, who are very experienced, really know what they are doing. Possibly, they’ve done four movies and the last movie they did wasn’t a big success. James Wan and Leigh had done “Saw” together, and they came in my office and pitched “Insidious.” And James had done two movies for Universal that hadn’t worked very well.

I think Hollywood judges all of us, producers, writers, directors, so much more harshly for their last work as opposed to their body of work. But we work with people who really know what they’re doing, are willing to work for a cut of the profits in exchange for creative freedom. And that goes for all the actors too, in terms of paying them scale.

PK: So everyone gets scale up front, and then there’s profit sharing when there’s a hit.

Yes, and their share of the profits depends on what they’ve gotten in the past. So if you’ve never, ever been paid more than scale on a movie, you’re never getting more than scale on one of our movies. But if you’ve made $ 5 million on a movie, then we’re going to get you, if the movie is very successful, we’re going to get you to $ 5 million. And if it’s “Get Out,” we’re going to get you past $ 5 million.

PK: Is there a fixed percentage that you’ll distribute to talent?

No, it varies depending on what …

PK: So the overall pie. The overall pie could be …

The overall pie is fixed.

PK: Okay.

I get one piece of very, very generous pie like this. And I dole it out however I want. So I could hire all children and keep the pie. Or I can work with someone as great as Leigh, and say we’ll split the pie, and take thirds off the top.

My theory — very un-Hollywood — is I’d rather have a small piece of what I anticipate to be a much bigger pie than a big piece of what I anticipate to be a small pie. Not Hollywood thinking. Most people who had my deal would say, “I’m going to keep all of it, and I’m going to hire people who don’t have a lot of history because I don’t have to pay them anything.”

Case in point — sorry to go on on this. The reason why so many horror franchises go south is because — specific to horror, very, very specific to horror — there’s a hit horror movie. The producers or the studio or the financiers behind the horror movie says, “I got a hit. Let’s fire anyone who had anything to do with the hit, use the title, rehire people. We’ll keep more of it.” They do keep more, but generally it’s diminishing returns. That’s why most sequels of horror movies get worse and worse and worse. And where I’ve made a very conscious effort …

PK: Keep the band together.

Keep the band together. Or, James Demonaco, he wrote “Purge 1,” “Purge 2,” “Purge 3.” Now that was very expensive to do. But every “Purge” movie has gone up. “Insidious 4” made more than 1, 2 or 3. And that’s because the original people involved with “Insidious” are still very involved. Not only because we like each other, but because we’re financially incentivized to do that.

PK: You give good answers. Other questions?

A couple more back here.

Speaker 4: First off, I love your business model, because I think too many movies in Hollywood are overly developed, overly stylized.

Me, too.

Speaker 4: But I wonder, what’s keeping you from going into comedy? Because when I think of successful low-budget comedies, I think of “Caddyshack,” “Groundhog Day,” “Super Troopers,” “Bad News Bears.” What’s keeping you from branching this business model into comedy?

Name a theatrical comedy made for under $ 5 million in the last 15 years that’s made over $ 15 million at the box office. That’s what’s keeping me out of comedy. So and the reason for that, if you want my theory — it’s only my theory — is that low-budget comedy cannot compete with our movies. There’s a great place for low-budget comedy and limited releases. There’ve been tons of them. “Patti Cake$ ,” by the way, although it didn’t do business, is a spectacular movie. And the people who put up the money for “Patti Cake$ ” did great because Amazon bought it for so much money, even though the movie ultimately didn’t make that much money at the box office.

Comedy, my opinion, when you pay your $ 12 or $ 8 or $ 10 for the ticket, you have to have … You must have The Rock or a huge movie star or Kristen Wiig or whoever it is. Horror movies actually work better with people who aren’t super recognizable. Comedies, I think the audience wants a person that they know is really funny already in it, before they go to the Multiplex and buy a ticket.

Now, that comedian gets $ 10 million. Or The Rock, I don’t know what he gets, a gazillion dollars. Why would he ever work for scale when he can make all that up front anyway.

PK: Is “Superbad,” does “Superbad” fit in that category? There were no giant stars when that was made. Those guys were not giant stars.

“Superbad,” I think, was about 20 million. It’s an amusement park $ 20, $ 25 million movie. “Superbad” had scope to it. And I also think comedies, you need set pieces, you need scope. And you don’t get that for five million bucks.

PK: Other questions. You’ve sated all needs.

I’ve answered every question in the movie business.

PK: Everything has been answered. This’ll be our last question of the day.

Speaker 5: So Walt Disney says, we don’t make movies to make money. But we make movies to make money to make more movies. The horror genre has some of the highest ROI in film, and “Get Out” was pretty artistic, critically acclaimed, box-office success. So how do you balance the art of making movies with the business of making movies? And where is Blumhouse on that spectrum of maybe Relativity Media on one end, all the way to Annapurna Productions on the other end.

What was the last part? Where is Blumhouse on the spectrum …

Speaker 5: On the spectrum of, let’s say Relativity Media is the ultimate business model of a film. And Annapurna Productions is more of an art house. Where is Blumhouse on that? How do you balance art and business?

Think about it every day, of every decision we make. The way that I … I give a different answer to this question all the time, which just shows you I haven’t figured it out yet. I’m still thinking about it a lot. But I think a different way to answer the question is we do low-budget movies so that if we see something that we think is going to be great or different, we don’t have to think about how much money it’s going to make.

What low-budgets allow us to do is respond to stuff that we think is interesting and cool without having to run a model. So that’s not to say that first and foremost we need to make profitable movies to keep the lights on and keep doing what we’re doing. Because we love doing what we do. But I also think that one of the reasons the company is successful is we don’t run models. We don’t say, “I could do this, I could do this, I could do that.”

PK: Your model is your model, right. Your model is, worst case scenario, we get our money back.

Exactly. Our model is, if this doesn’t come out great, we’re going to recoup and let the upside take care of itself. And so I think that’s not exactly how we answer your question. I think Disney’s answer is a lot better than mine. But that’s because he’s Disney.

We really try as hard as we can to think about it as art and to give ourselves parameters not to let the business stuff creep into that decision-making. And then stick really, really firmly, and with a ton of discipline, to the model that we have. That’s the best answer I can give to that.

Recode – All

Cash For Apps: Make money with android app

Facebook finally suspended the anti-Muslim political group that President Trump retweeted last year

How Complete Beginners are using an ‘Untapped’ Google Network to create Passive Income ON DEMAND

Britain First shared posts “designed to incite animosity and hatred against minority groups,” Facebook says. So they’re out.

Facebook has permanently suspended the account for a far-right political group called Britain First — the same far-right group that shared anti-Islam videos that President Trump retweeted late last year.

That alone makes it interesting that Facebook finally banned Britain First.

But it’s also interesting that it took Facebook so long. Twitter suspended the Britain First account and the account of one of the group’s leaders back in December. Facebook is just doing it now after giving the group a “written final warning” that it was violating the service’s user guidelines.

“We do not do this lightly, but they have repeatedly posted content designed to incite animosity and hatred against minority groups, which disqualifies the Pages from our service,” Facebook wrote in a blog post Wednesday.

Some of the violating content included a photo of the group’s leaders with the caption “Islamaphobic and Proud,” and another post that compared Muslim immigrants with animals, a Facebook spokesperson confirmed.

The decision comes at a time when Facebook is struggling with how to deal with groups like Britain First. Facebook doesn’t like to decide what kind of rhetoric is appropriate or inappropriate for fear of encroaching on its users’ free speech rights. It has even started to ask users to rate the “trustworthiness” of news organizations in an effort to weed out those that may be spreading so-called fake news.

That trepidation, though, has led to the rise misinformation on the service, and in some instances like Britain First, the spreading of hateful rhetoric or opinions. Twitter is dealing with the same dilemma, and now both companies are under pressure from users and lawmakers to clean up their services, especially as the 2018 midterm elections loom closer.

It’s worth noting that Facebook announced Britain First’s suspension publicly. The account is high profile, especially given the Trump connection, but Facebook suspends thousands of accounts and users daily. It rarely, if ever, announces those suspensions. Clearly the company wanted everyone to know that it was taking a stand here.

Recode – All

Cash For Apps: Make money with android app

Full transcript: Chain CEO Adam Ludwin answers cryptocurrency questions on Too Embarrassed to Ask

How Complete Beginners are using an ‘Untapped’ Google Network to create Passive Income ON DEMAND

“It’s this sort of tug-of-war between FUD and FOMO that drives the [bitcoin] price in the short run.”

On this episode of Too Embarrassed to Ask, Kara Swisher and Lauren Goode tackle the blockchain, ICOs and cryptocurrencies with the help of Chain CEO Adam Ludwin. He explains what all of those terms mean and the differences among blockchain-related products and assets, including bitcoin, ethereum, lytecoin and filecoin.

You can read a write-up of the interview here or listen to the whole thing in the audio player above. Below, we’ve posted a lightly edited complete transcript of their conversation.

If you like this, be sure to subscribe to Too Embarrassed to Ask on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts.

Kara Swisher: Hi. I’m Kara Swisher, executive editor of Recode.

Lauren Goode: And I’m Lauren Goode, senior tech editor at The Verge.

KS: And you’re listening to Too Embarrassed to Ask, coming at you from the Vox Media podcast network. This is a show where we answer all of your embarrassing questions about consumer tech.

LG: It could be anything at all, like, “Kara, what are we going to name our cryptocurrency when we start something to finance the future of this show?”

KS: Karacoin. Karacoin.

LG: Oh, I like that.

KS: Yeah.

LG: I like Goode … No, Goodebit? Goodebit might be good.

KS: That’s nice. That’s good, too.

LG: Goodethereum.

KS: No. So send us your questions. Find us on Twitter or tweet them to @Recode or myself or to Lauren with the hashtag #TooEmbarrassed.

LG: We also have an email address. It’s, and a friendly reminder, there are two Rs and two Ss in “embarrassed.”

KS: There’s been a lot of interest in bitcoin and cryptocurrency, so a lot of people have a lot of questions and don’t know about it. They’re very interested in learning a lot more about it. There’s a lot of crazy people involved. There’s a lot of hype. There’s a lot of all kinds of stuff, and so we wanted to bring in someone to get some answers. Today on Too Embarrassed to Ask, we’re delighted to have Adam Ludwin in the studio. He’s the CEO of Chain, of course that’s the name, a private blockchain company. He’s going to explain what that means.

LG: I guess that means Chain is taken. We can’t do, like, Karachain.

KS: No, we’re not going to do that.

LG: We could, but … Yeah, we’re going to be answering all of your questions about blockchain, cryptocurrencies, ICOs that we’ve been hearing a lot about lately. Not quite sure I fully understand. Then, surprisingly, you sent in a lot of questions, so we’re very happy to have Adam here. Adam, welcome to the show.

Adam Ludwin: Thank you. Great to be here.

KS: Let’s just … Explain what Chain does, and then we’ll get into the basics of bitcoin. Nothing is too stupid for us, let’s just keep that in mind. You know what I mean? I think most people are confused by all the variety of things. It’s probably like the beginning of the internet, which sort of sorted itself out. So what does Chain do? And then we have lots of different questions.

Sure. Chain helps financial institutions take advantage of this new technology, basically to do two things. One, to transform their infrastructure. You can think of a blockchain as kind of like a new type of database. It’s helpful even if you’re just tracking existing financial instruments, like securities or loyalty points. But many financial institutions are also looking ahead at connecting into these public networks, like these cryptocurrency networks that you mentioned at the top of the show, which we can talk more about. We also help them to connect into that, and we hope over time bring the assets that they’re dealing with onto these new rails.

KS: Onto the new rails, all right. How did you get started in that? What was the … You were a lot of places. You were at RRE, so you were a venture capitalist, essentially.

That’s right. I was a …

KS: Consultant. All kinds of stuff.

Yeah. All sorts of jobs I actually don’t recommend many people try to do.

KS: Okay. How come blockchain?

I was working as a VC, and I was working at a fintech-oriented VC firm called RRE in New York City. I was working for the former CEO of American Express, Jim Robinson. Because of that, even though my job was kind of to do the non-fintech stuff, friends would always send me fintech ideas. I had a friend send me the bitcoin white paper in 2011 and basically say, “What do you think of this startup?” Of course, I quickly learned bitcoin wasn’t a startup, but I was completely captivated by what I was reading.

KS: Why?

Simply because all the fintech that I was looking at and investing in at RRE companies like Venmo and Square and Stripe, these were companies that were sitting at the top of the existing financial stack, the stack being governments …

KS: Underneath, right.

… central banks, regular commercial banks …

KS: Compliance.

… credit card networks, all the compliances. This big fat stack that equals financial services, and fintech … including today, when you think fintech, you’re really talking about these thin layers of user interface …

KS: Or apps, yeah.

… and apps that make it easier to use. Bitcoin was like a huge red reset button that said, “That stack isn’t relevant anymore. We already have the internet. What’s the least we can add to the internet to get back to money?” The answer was a few thousand lines of code, basically. That was conceptually very exciting.

It also struck me that it would take a very long time, if this thing ever became a meaningful part of the economy and the way financial services would work, it would take a very long time to get there. Nonetheless, I started meeting entrepreneurs, meeting startups that were trying to do something with bitcoin. It led me down the rabbit hole. Eventually, I decided I needed to spend all my time on this. RRE very graciously gave me a little bit of seed capital to get me started and that’s when Chain got off the ground.

KS: And you focused on financial firms because it was the lowest-hanging fruit, presumably?

Yeah, our original business plan was, “Let’s make it easy to build with blockchain technology.” We started with developers. We kind of then graduated into larger enterprises. Even to this day, the entire crypto and blockchain space I think is still characterized best as a frontier technology. It’s sort of like VR and AI and robots and drones. There’s definitely some clear value that people have identified, but generally, it’s still largely exploratory. That’s what’s exciting about it, but can also be frustrating if you’re an entrepreneur in this space. It’s nothing like building an iPhone app, for example.

KS: Right, right, and it’s … Go ahead, Lauren.

LG: That was actually going to be my next question. I want to get to bitcoin more, but one question I’ve been too embarrassed to ask is, when you start to consult with companies and tell them, “Here’s your blockchain strategy and here’s what you need,” does that actually translate into them hiring a bunch of people who are expert or knowledgeable in this area, and then they sit in cubes all day and they maintain their database for this company? How does that actually work?

The question we often get in the very first meeting with a traditional financial company is, “Hey, we’d love to do something with blockchain. Can you help us?” Then I’ll usually say, “Well, what’s your problem exactly that you’re trying to solve?” There’s often not a good answer to that very simple follow-up question because, like so many other buzzwords, large institutions, executives, they hear about a buzzword and they say, “Well, we’ve got to do something in this area.”

At the same time, there are meaningful use cases and opportunities that we’ve found and are pursuing, but a lot of the activity is just that: Activity without really substantial impact.

KS: Right. So what is blockchain, really? What is it? Explain. Do it as if you had to do the simple elevator pitch.

Sure. I’m going to answer the question.

KS: Very good.

I’m going to answer the question, but then I’m going to answer a slightly different one, which is, “What is cryptocurrency?” if that’s okay.

KS: Right, yes, that’s true.

Because they’re related.

KS: I just was at an event where someone said, “Blockchain is gold, but not as dumb.”

Interesting. I’ll build on that.

KS: Okay. Well, I think it’s true.

To me, blockchain is two very different things. On the one hand, as a very simple technical answer, it’s just a new type of data structure. It’s a different type of database.

KS: Stores values.

Just a way to store data, actually.

KS: Data, right. Okay.

That’s one extreme and that’s true. At the other extreme, in a much more conceptual sense it is a new internet counterculture. It’s both of those things. Collectively, all the activity you see around the blockchain space is a sort of decentralized movement to sort of challenge the status quo in both Silicon Valley, the sort of FANG stocks, as well as Wall Street. Yet, it’s just a new type of database. So I think neither of those answers actually are very instructive.

KS: Well, it’s a database that doesn’t need gatekeepers.

When implemented in a decentralized fashion like cryptocurrency, it’s exactly that: A database that’s updated without a central authority making those updates.

LG: Does it have to be digital? Can it exist in an analog form or … Actually, Adrian Jeffries from The Verge just wrote a really good piece about blockchain that I encourage everyone to go read, but that was one of the things that was brought up. Does it have to be digital?

That’s interesting. If your listeners Google “bitcoin mining by hand” or on paper, there was someone who actually mined a bitcoin block, did all the mathematical hashing functions with pencil and paper, so maybe there is something to that.

Let me define cryptocurrency because I think that is the central question I think people are still trying to wrap their minds around. What is bitcoin? What is Ethereum? What is filecoin? What are all these ICOs?

I think the best way to understand cryptocurrency is that it’s a new asset class. Like every other asset class, it doesn’t exist for its own self. It’s serving some other form of organization. You think of equities as an asset class, they support companies. You think of bonds, government bonds, they support government borrowing. You think of real estate supporting property owners.

So cryptocurrencies are no different. They’re enabling some higher form of organization, and what that is is called basically decentralized software or decentralized applications. So cryptocurrencies enable decentralized applications. That’s sort of it. Decentralized applications are a new idea and bitcoin was the first decentralized application. It was a decentralized application for payments. It was a way to, say, look at something like PayPal and replace the company with a protocol in a network. It’s for payments.

KS: Right, and give it value.

That’s right. Ethereum, it’s a little bit more meta because it’s a decentralized application for creating decentralized applications, so you sort of have to think of Ethereum like a tree. And if you really want to get at what it’s for you’ve got to look at the fruit and sort of ask, okay, well, do I think this decentralized application, whether it’s a voting system or a prediction market, is useful and interesting.

There’s another one called filecoin, another cryptocurrency where it’s a decentralized application for file storage. So similar to bitcoin looking at PayPal and saying let’s decentralize this, filecoin looks at something like Dropbox or a cloud storage service and asks the question, “Do we really need a centralized application and a company around that application to manage file storage when we have the internet and these protocols in an economic token that we can use to incent people to organize in this new way?”

Cryptocurrencies are really about enabling this new software model, and I think the open question for everyone is in which circumstances are these decentralized software models — which, by the way, are a lot less efficient, a lot harder to use.

KS: Take a lot more energy.

Take a lot more energy. There’s a lot of downsides to them.

KS: Slower.

Slower. So in what situations are they better and on what dimensions are they really differentiated from a centralized product?

KS: What exists. The centralized product, like, you could get it. You could transfer money in seconds and these take what, minutes?

It’s just hard to argue that for everyone bitcoin is better than Visa or filecoin is better than Dropbox or Ethereum is better than Amazon Web Services. What I’ve identified as one attribute that cuts across all decentralized services that centralized services just don’t have, don’t even aspire to have, is censorship resistance. Basically this ability for me to send anyone in the world bitcoin and really nobody can stop the two parties.

KS: Right. Which is why criminals and the porn people love it. At the same time, other people that don’t like all the gatekeepers love it too. Explain Ripple, then, because they’re saying Ripple could be the next bitcoin. Explain what it is and …

Sure. There are two technologies that are called Ripple and Stellar, similar models actually founded by the same person. Ripple and Stellar have a different model than bitcoin. The primary, the best way I could explain this is if you go look at the bitcoin network — and you can do this. There’s a website called and you can just sit there and watch bitcoin transactions streaming through.

What you’ll see is it’s just different people, you won’t know who they are. It will be anonymous. You’ll see this person sent two bitcoins to this person. You can just watch the network. It’s pretty cool. If you look at the Ripple ledger or the Stellar ledger, again, these are global public ledgers, if you look at those you won’t see primarily the Ripple asset, which is called XRP, or the Stellar asset, which is called Lumen. What you will see instead are all sorts of other assets that are riding on top of those ledgers.

So the core idea in a technology like Ripple is to allow you to anchor in or tether in other assets, but use it as a open rail. I think I get excited about that sort of technology because it starts to now allow us to think about moving assets that are meaningful to us — dollars, loyalty points, securities, bonds — but benefit from very low cost, very transparent, very efficient movement.

KS: Movement. Mm-hmm.

LG: I want to make sure I follow you here because I’m actually on right now and I see some of the transactions you’re talking about. It’s all BTC, it’s all bitcoin. The other things you’re describing, you’re saying that those are more open? Like Ripple is the equivalent of bitcoin in the sense that it’s a cryptocurrency, but it’s also providing the rails that others can trade on?


LG: Yeah, I think we’re going to have to break this down a little more.

Yeah, so I’ll explain a little bit more. So let’s start with bitcoin and then we’ll come back to Ripple. Part of what’s so difficult in terms of understanding bitcoin is that bitcoin actually serves three purposes on the bitcoin network. There’s a whole bunch getting conflated. It’s very elegant, but it’s helpful to unpack it.

So what are those three purposes? The first is that it provides the economic incentive or reward for the so-called miners which are processing the transactions to do that processing work. They don’t do it out of the goodness of their heart.

KS: They get a piece of it.

They’re getting paid, and so they’re getting paid in bitcoin. That’s its first use.

KS: It goes up in value.

That’s right. Its second use is as the fees that you pay to send a bitcoin transaction. So it actually costs a little bit of bitcoin to send bitcoin. It’s the fee or like the postage stamp that you would put on the envelope. The third thing is it’s the thing you’re sending on the network, right?

KS: Mm-hmm.

It’s like the store value that you’re sending and then you can translate to whatever your local value is, so it’s all three of those in one. In other blockchain models, those three get separated out, and Ripple is a good example. In the case of Ripple or Stellar, their respective tokens are only one of those three things, really. It’s the fee. To send a transaction on Stellar or on Ripple, you have to use their respective token as the postage stamp.

But what’s in the envelope isn’t also that — it can be, but usually it’s not. What it’s designed for is to put any arbitrary asset in that envelope and therefore benefit from the same …

KS: And transfer it.

… transfer model as bitcoin, but allow you to send other things.

KS: Right, not just bitcoin.

Not just bitcoin. I think that’s really important, because I think until we see a convergence of these open rails with assets that actually touch businesses and consumers …

KS: Meaning you’ve got to be able to spend it on something.

That’s right.

KS: So you don’t buy something in bitcoin. You don’t buy anything and … You’ve got to be able to trade in bitcoin for a horse or whatever the heck you want to buy.

That’s right. Bitcoin is not a particularly good medium of exchange. It’s very volatile, which isn’t its fault. It’s just the reality of the way the market works, but therefore it’s not desirable for merchants.

KS: No, why would you take it or give it?

That’s right, who want dollars to pay their bills that are due in dollars. Yes, you can exchange it, but with the volatility being where it is and the fees for exchanging, it all kind of washes out where it’s not that superior to just taking a traditional method of payment. But as soon as we can have the benefits of a bitcoin-like network with any type of asset, now I think you’re going to start to see innovation that will actually touch people beyond …

KS: To people actually use it. People actually …

That’s right, people actually using it.

KS: Why the volatility in price? What are people buying, precisely?

So all the price movement in cryptocurrencies is demand-driven. What I mean by that is when you say, “Well, why is the price of a barrel of oil X or Y?” The supply side …

KS: Well, people are hoarding it.

… and the demand side.

KS: That’s what’s happening, right? They’re grabbing it and holding it. Holder or whatever.


KS: Whatever.

Yeah, H-O-D-L.

KS: I don’t care for their stupid acronyms, but go ahead.

That’s because you’re not part of the counterculture.

KS: Oh, but they’re ridiculous. They’re so …

They want you to say that, though. That’s the thing.

KS: No, they don’t.

They do. They do.

KS: Whatever. What are they, 12?

LG: Wait, I have a question for you.

Many of them are 12. It’s very possible the inventor of bitcoin was only 12 or 13 at the time.

KS: All right, whatever.

LG: All right, the quick question I have about HODL is does it actually … I’ve heard two different explanations for it. It might be both. Does it stand for “hold on for dear life” or is it supposed to indicate that when you type really quickly that you might key in the wrong letter?

It’s the latter, so hold on for dear life was …

LG: It’s the latter? Okay.

… that was quite brilliant because when the thing was going down everyone is saying … But it was originally some kid, probably 12, in an internet forum during an early panic years ago saying, “Hodl,” just a typo, and he became famous. Or she.

KS: You know I have bitcoin. Do you know that?

I’m sorry?

KS: I have bitcoin.

You do.

KS: I bought it when I wrote a story about it in 2013. I don’t know where I put it.

That’s the problem.

KS: Right, that is. I know where I put my gold bars.

It’s like a Jerry Seinfeld, anyone can take a reservation, it’s the holding part. Yes, there’s the HODLers, but I think there’s something beyond that, which is because the supply of cryptocurrency is fixed, so there will only ever be 21 million bitcoins ever minted, it’s actually a very simple way to think about price. It’s all demand-driven. More people want it, the price goes up. Fewer people … So what drives people to want bitcoin and what drives people away from it?

KS: They’re scared of Armageddon, for some reason.

Yes, I think the HODLers are sort of long-term opportunistic, thinking about a better future, a future that they believe in. But I think in the short term it’s actually two different types of fear. There is the fear of missing out, which is … right?

KS: Yeah, of course.

Which is like every cocktail party you go to you hear about a cryptocurrency. You ignore it. Then the next year you’re like, “Oh man, if I had just invested when I heard it at that cocktail party I’d be on 100X return.” So that FOMO, which was really pronounced last year.

Then there’s a different type of fear, which is FUD, or the fear, uncertainty and doubt that this thing is all a giant Ponzi or there’s going to be regulatory or …

KS: Tulips.

… tulips, so it’s actually, it’s this sort of tug-of-war between FUD and FOMO that drives the price in the short run.

KS: There’s also the very real feeling that this world, everything is … I just interviewed Chamath Palihapitiya that everything is co-related, money, everything. It’s affected. This doesn’t get affected, and it’s an asset that you have. Like gold bars, that’s the first thing, gold but not as dumb.

It is.

KS: You’ve got to move gold around. It’s heavy. You need a guard.

It’s uncorrelated, for sure. It’s uncorrelated. I think gold — you brought it up earlier, too — gold’s a great example. Because when somebody asks me, “What’s the right price for bitcoin?” I just ask, “Well, what’s the right price for gold?” Unlike a company where you can do what’s called like a discounted cashflow analysis, look at the potential profit streams and do some math on it and get to a reasonable number for what a company should be worth or building what it should be worth based on rents, gold and bitcoin, they’re not really like that.

KS: No, they’re a hoarding mechanisms. That’s what, it’s a hoarding mechanism of value. Unless you want to wear it.

I think the original bitcoin paper was much more focused on bitcoin being a means of exchange. In reality, what’s happened is it’s become more of a digital gold idea and a lot of …

LG: That people are holding.

That’s not a criticism. A lot of startups start doing one thing, become something else, so …

KS: All right, we’re going to answer a couple more questions very quickly, very fast, because we want to get to the questions. We have so many. ICO, explain what an ICO is, just very quick because …

So it stands for initial coin offering.

KS: Got it.

It’s the idea that a team that wants to create a new cryptocurrency or a new token …

KS: Karacoin.

… like Karacoin, which I think you should do. You have a lot of followers HODLing Karacoin. The idea of an ICO is you’ll sell some of the coins in advance as a way to raise money to then build this project and bring it to market. It’s sort of a funding mechanism that combines a Kickstarter-like mentality with the token itself. It’s come under a lot of scrutiny recently as well from the FCC and …

KS: Ponzi scheme.

LG: How does it turn into actual functioning currency?

So the promise of an ICO is that you give us some money now, we’ll invest that in building the technology, and then when the network turns on your stake will be available on that network. That’s, by the way, exactly how Ethereum came about. So Ethereum …

KS: It’s exactly how stocks work. It’s how anything of value works, right?

Is it how stocks work, is that what you …

KS: Well, it’s equity.

Yeah, that’s true. If you think about a startup, exactly right, a private company, but I think Ethereum, bitcoin didn’t do this. It didn’t, conceptually the first one couldn’t have, but Ethereum did and because Ethereum itself can facilitate, by nature of it being a platform, further tokens to be created on top of it, you saw between 2016 and ’17 a lot of these tokens being created and minted on top of Ethereum. And I’ll say more if you want, but …

KS: No, I think we’ll go …

LG: These are not backed by traditional exchanges, so it’s not like you’re raising, it’s not on the Nasdaq or anything like that.


LG: You’re just saying I want to raise $ 150 million or whatever it is in exchange for when I get my cryptocurrency launched I will give you some of that coin.

That’s right, and then when they do launch, and sometimes even before, they’re listed on cryptocurrency exchanges like Kraken, Poloniex, etc.

KS: I see. Can you build entire societies on cryptocurrency and blockchain technology? We used to trade wheat for horses, we moved around, and assets were worth what they were worth. Not a very organized system, and that’s why we have currency.

Right. I will say there are people in the blockchain community who do see this as a foundational platform for a whole new way to think about society and civilization. As a startup entrepreneur just trying to make money and build a business and hire people, I don’t have a lot of time to be a philosopher, but there are definitely the philosophers in the community who talk about a future where everything is decentralized and enforced on networks, etc.

KS: They thought that about the internet, didn’t they? How old are you? You weren’t around for that.

I’m 36.

KS: No, you weren’t around. They were like that. Same thing, they were going to build communities that the gatekeepers were not going to be able to control.

We’re in the counterculture phase of the emergence of this technology.

KS: Right. The Whole Earth … That whole gang.

Yeah. By the way, this is what attracted me and I think a lot of people. I was in middle school and high school during the ’90s and felt kind of in the atmosphere the change the world …

KS: Oh no, that’s when the money grubbers got there. Before that it was …

Well, my dad was running a BBS out of our house …

KS: Oh yes, of course.

… in the early ’90s, so just before it got a little bit kooky.

KS: Yeah, ’94. The Netscape IPO. That’s the end.

’92, ’93, ’94. And I just loved it. I used to go to 2600 Meetups. I got my drivers license, the first thing I did is I drove to the train station in LA, went to 2600 Meetups, so I loved that era of the internet. I think I was very attracted to bitcoin because it felt like that again. So yeah, I think we’re in that phase again. It’s fun. But again, I don’t know or have a strong point of view on whether that will radically change society.

KS: There will be a Google of this. There will be a Google. There will be a …

Yeah, but they’ll just look so fundamentally different from what Google and Amazon look like that I think people will probably continue to be wrong about what is the next Amazon or Google.

KS: Right. No, 100 percent.

So we have tons and tons of questions. Lauren, I’m going to get to those because we have so many. I love all these questions. We’re here with Chain CEO Adam Ludwin talking about blockchain, ICOs and cryptocurrencies — that’s initial coin offerings and cryptocurrencies — and we’re now going to answer some questions from our readers and listeners. Lauren, will you read the first question?

LG: Sure. The first question is an email from Maryam Mujica, I hope I’m saying that correctly. The email says, “I’m definitely embarrassed to be asking this since I work in tech, but in a non-technical role so cut me some slack. Can you explain in layman’s terms how bitcoins actually work and how if at all they can be used to buy anything?”

KS: All right. Adam?

They can be used to buy things. When I’m demoing bitcoin I usually go to the Wikipedia website and go to donate and then click donate with bitcoin and then scan the donation QR code with my bitcoin wallet, like a Coinbase wallet. That’s usually a pretty good example and experience. If you’ve never used bitcoin to buy anything, I think donating to Wikipedia is a good way to try it out.

KS: You don’t give a full bitcoin to them, do you?

Not a full bitcoin. This is the other thing to know about bitcoin, you don’t have to deal in whole units. Each bitcoin is divisible 100 million times, so you can send up to a one hundred millionth of a bitcoin, which happens to … That cent is called a Satoshi, which is the pseudonym of the founder or founders.

KS: Every five, seven days I get an email from someone who says they’re Satoshi.

Do you really?

KS: One of them will be.

People are claiming to you that they’re Satoshi?

KS: One of them is. I know one of them is Satoshi.


LG: I think Kara is actually Satoshi.

KS: I am Satoshi. I am. I do, I get them all the time. So you can buy … presumably that’s the goal, eventually, is a currency. You want to buy something with it.

Yeah. I don’t know if bitcoin has missed its window to become that. I think it’s very possible it has.

KS: What would be the coin? Amazon coin.

I don’t know that it’s Amazon coin. I think bitcoin as a settlement instrument, as a digital goal, that’s become pretty clear, but I think mediums of exchange that are existing mediums of exchange like central bank money or merchant-issued money is probably …

KS: Yeah, so credit cards and cash seem to work pretty well right now.

Yup, yup.

KS: I think cash …

LG: I would love to be a fly on the wall, by the way, in a meeting room when Amazon meets with the government after it develops its decentralized cryptocurrency and starts having people buy things with it. That would be very fun.

Yeah. Well, Amazon Prime Reload, which is a prepaid cash program, is basically Amazon’s virtual currency.

KS: Yeah, it’s true. But there’s currency involved. I think all, I think currency currency, paper currency, is insane. It’s dumber than gold.

Paper currency is dumb because … I have some paper currency here and I’m just going to take it out.

KS: I never use it anymore.

I take Casual Carpool in the morning so I always have dollars, but the problem with paper, the problem with currency in general is it’s no longer free to use it. So the promise that the government’s going to give you a currency that’s free to transact in society, that’s a broken promise. It actually costs money to use money, not just in terms of bank fees …

KS: You move it around.

Just basic things like yeah, every single transaction costs the counterparts collectively 2 or 3 percent in fees. So we don’t have free money anymore. I think …

KS: It never was free money. It always cost something.

Maybe that’s true.

KS: It always cost something.

Yeah, yeah.

KS: You’re just not adding it up. You’re just not adding, just moving stuff around. You know, drug dealers like it.

Anyway, next is the email from Frank Reid. They like bitcoin better, I’m guessing. “As I understand it, there is no central depository or control of bitcoin other than trying to hide money.” That’s not true. “Why would someone want to invest in it? It seems like it’s the latest pyramid scheme. These pop up from time to time.” All right, that’s the tulip thing, or whatever, the porn center.

It empirically has been the best-performing asset class since the financial crisis, by a long way. People have been saying it’s a Ponzi scheme or the tulip thing …

KS: People believe it.

… and every few years it does have a big crash and correction.

KS: It just did.

It is right now, but it usually crashes to 90 percent higher than the previous low, so I think a Ponzi scheme is, the way I think about the Ponzi scheme …

KS: Pyramid, they said.

Or a pyramid scheme is like some entity that is intending to scam people by showing false returns that are based on new money coming in.

KS: Yeah, that’s true.

It’s not that. It’s not a fraud. It’s an open source technology you can audit and see for yourself. Whether it’s a market mania is a different thing.

KS: Right. Is it worth what it’s worth because it’s worth it?

But again, I come back to …

KS: Where are those dumb sneakers, Frank? I bet you have a pair of dumb sneakers that are not worth $ 1,000.

It’s also like the art market, like gold. There’s actually no empirical answer to what is the right price. It’s just too early. Most nascent technologies, they don’t get noticed in the first few years, nor do they have a massive capital market’s phenomenon around them. This one does because the thing itself is money.

KS: Right, but it has to convert to something. I think that’s the point, it does, but by the way, Frank, it’s not a central depository because it’s decentralized by its very design.

Right, there’s no central depository.

KS: All right, next one. Lauren.

LG: Next one is from Ravish Kumar. “Is the bubble burst and can anyone just spin up their own cryptocurrency?” That’s a good question. “I heard that many companies are working on their own, though I don’t know how true that is. #TooEmbarrassed.”

So the huge market mania in 2007 was — depending on how you count — probably the fourth or fifth big, excuse me, big bull market in bitcoin’s history. Those are usually followed by the market cooling off for a period. Anyone can … What’s the name of the …

KS: Karacoin.

LG: Karacoin.


KS: It’s going to be. It’s coming soon to a pyramid scheme near you.

Karacoin. We could create Karacoin by the end of this interview by taking the bitcoin source code off of GitHub, forking it, renaming it Karacoin, and maybe changing one or two parameters and giving it to the world. Whether Karacoin would have value …

KS: But someone would have to buy it. What price would I put on it?

It would be worth whatever the market says it’s worth. It would just be a demand …

KS: It has to start off at some price.

Well, the first buyer is going to come along and maybe you can set the price. If you’re the only one that has it at the beginning, but typically what would happen if it’s mined would be that people would run mining software and start generating them and they wouldn’t be buying it. They’d actually be converting energy into your coin. Then they would take those two in exchange.

KS: But how do I stop it from more coins being created, because that’s inflation, right?

You would. The way bitcoin works is the number of coins that will ever be created is hard-coded into the software.

KS: So I could make a number.

LG: Oh, so you can decide.

You can pick a number. Yeah.

LG: What are the parameters? When you said that you would take the source code but you’d change a couple parameters, what does that mean?

For example, you could say instead of 21 million Karacoins there’s going to be 100 billion Karacoins. You could say instead of the block time — meaning the amount of time between new blocks being added to the network, instead of that being 10 minutes, we want to make it five minutes.

KS: They can make more.

I’m basically implicitly referring to what actually has happened. So litecoin, if you’ve ever heard of litecoin, effectively took the bitcoin code base, tweaked not probably five lines of code — Charlie, if you’re out there, feel free to tweet at me and correct me — but very small amount of tweaks, renamed it litecoin and created it. It’s one of the interesting kind of emergent behaviors in this space, that you have this rich ecosystem of competing projects vying for attention and the ones that will survive …

KS: There’s going to be one Karacoin and people are just going to trade it back and …

Well, that’s kind of like the Wu Tang Clan album where there’s just the one.

KS: Just the one.

Like that. I think there’s something to that.

KS: It moves from person to person. They pay more and more for it. You see what I’m saying? It’s genius.

I like how you’ve been watching our Recode …

KS: Yeah, that’s true.

Why don’t you do a crypto-conference?

KS: We may launch a currency at Recode. You’re going to launch a currency.

You know what you should call it? Recoin.

KS: Recoin. Oh, you know what? Right now. You’re coming to Code. You are going to start a currency, you and me.


KS: Recoin. Okay, got it.


KS: Together.

I’m with you.

KS: We’re the founders. You’re Satoshi and I’m Satoshi II or something. We’ll have a name like that.

All right. “So what’s the deal with Coinbase?” Yeah, what is that? I think I have an account there. I don’t know how that happened.

Yeah, so Coinbase is a application that will store your bitcoins for you and will …

KS: And protect them from the people who want to kill you to get them.

Yeah, so one of the challenges around bitcoin is very much like paper currency, you’ve got — or gold — you’ve got to figure out a way to hold it securely. So you can hold bitcoin yourself with what are called private keys and you’ve got to keep those private keys in a secure software environment. If you’ve ever lost a password or forgotten a password, it’s about five times harder than managing passwords.

So most people have decided they don’t want to manage their own bitcoin. They want to use a service like Coinbase, which is centralized, and allow that centralized application to do it for them, make it easier to both manage and also to buy and sell. So that’s Coinbase.

KS: And presumably protect you.

They’re the most successful company in the space.

KS: The issues are some people break up their passwords. Sometimes they give it to someone else. They put it in … They don’t want to put in a safety deposit box because someone could take their kid and say, “Go get it from the safety deposit box.” People have a lot of it.

That’s right.

KS: They don’t like to talk about it. Although, these people have gold, too. I don’t know why they’re not nervous about holding the gold where it is. Anything can be taken, essentially. Some people split up everything.

That’s right.

KS: Does Coinbase stop that or is there …

Have they stopped …

KS: Because the bank, it’s really hard to take your money out of the bank.

Yeah, yeah, yeah.

KS: Because people are on to that.

Yeah, Coinbase, they have this thing called Vault, which for example has certain limits. Like you can’t take all your money out of the Vault at once. There are additional policies and there are good solutions for folks that are trying to manage a lot of the currency.

KS: That’s the business, protecting it.

Yeah, custody is a big … Cryptocurrency custody is one of the business models that works in this space. Exchange is another good business model. Being your own Satoshi, if it works, is a good business model.

KS: Meaning?

Meaning having a coin that has a large market cap.

KS: Right, right, but at the same time people are worried about holding. Just so you’re aware, if you hold it, don’t tell people you hold it. Don’t. There’s going to be people kidnapping people, things like that, just like they would with gold or a pile of cash. But in the case of gold — or not gold, but a pile of cash — if you start taking it out of the bank, the bank alerts authorities. There’s a good reason for gatekeepers in some cases.

That’s right, yeah. That’s why I have zero crypto.

KS: Right. Oh, interesting. You’re just selling the picks and shovels, aren’t you?

No, I’m joking, but …

KS: Oh, you have zero. You just lied to me.

Yes, yes.

KS: Okay. All right. That means you have 10 billion cryptos. All right.

“How are ICOs and IPOs different? Why can’t ICOs be launched through stock exchanges?”

Fundamentally, an IPO is an initial offering of shares. Shares are the ownership model for companies. ICOs are an initial offering of coins or tokens, and coins are the enable economic model for decentralized software. So just very different ideas there. What unites them — and I think what has drawn the interest of, say, the SEC — is that even though they’re fundamentally different things that they’re supporting and different mechanisms, they both are fundraising mechanisms.

So can you imagine a Nasdaq or a New York Stock Exchange facilitating ICOs? Sure. It would be a totally new business for them, but you could.

KS: You could. All right. Long question. Lauren, why don’t you read the whole thing, try to do it quickly.

LG: Yeah, let’s actually Bradley Kalgovas, thank you for sending in your questions. I’m going to ask the last one in your bunch because I think this is the most interesting and we’ve answered a couple of the others. “Is the price of bitcoin fundamentally linked to the cost of electricity to mine bitcoin? So example, as time goes on, there could be more processing power and more electricity required to power the processor to mine bitcoins so the cost to extract could go up over time.”

The price of bitcoin is not really tied to the cost of electricity, but the profitability of mining is tied to the cost of electricity, meaning the price of bitcoin is X, the amount you have to spend on electricity to get said bitcoin is Y. If you’re in a country with a expensive electricity it’s going to be unprofitable for you to mine. That’s because of the sort of perfect competitive nature of the bitcoin network. That’s why you see most of the mining in low-energy-cost countries like China, potentially even where governments may be even subsidizing.

KS: You make what, 12, what was the … You get point something.

Twelve point five bitcoin. It’s either 25 or 12.5 right now.

KS: But then at some point there won’t be any more.

That’s right. That’s probably another too embarrassed to ask question, which is if …

KS: No more miners.

As I was saying, there’s only 21 million and they’re still being mined, what happens when they’re all mined? By the way, you need miners to keep the network decentralized and operating, so what’s going to happen? The answer is, in addition to what’s called the block reward, which is this newly minted bitcoin that is generating, given to the miner for investing the energy in the network, miners also are the ones who received the fees …

KS: From moving it around.

… that I referred to earlier, from moving around, so they actually get both fees and block reward. So the theory at least is that once the block rewards are all gone, the miners will still have an incentive because of the fees.

KS: Right, so they’ll become bankers. That’s all. They’re bankers, right? They’re the little green guys.

I guess so.

KS: That’s what they are. All right, so let’s do from the Canadian. Which one’s from the Canadian? Here we go. Shami Humphries, which is, “I bought bitcoin from Coinbase not realizing I could add or buy more of it, but not transfer or sell because I’m Canadian. After many attempts …” What, are Canadians barred? Isn’t tariffs enough? “After many attempts to talk to them the only response I got was sorry, not at this time in Canada or Australia. We’re working on it. Do you have any idea” — HODLer — “what might change or how I can extricate myself from this?”

This is funny because Coinbase is like the fail whale of our era.

KS: I know, they’re like Trump.

They’re so successful and they’re doing great stuff and I’m a big fan.

KS: Yeah, I know. I met the CEO yesterday.

But … Brian? Okay, great.

KS: Yeah.

But their customer support has been this perennial challenge.

KS: Fail whale.

And it’s funny that people are so desperate they’re writing in to the Recode podcast to ask the CEO of an unrelated company if he might be able to put in a good word or help out with their customer problems.

KS: Do you know what? We have some dues here.

LG: Hey, that’s not desperate. I was just going to say. We get things done here.

KS: I do things all the time with no idea.

Maybe we can just say if Brian is listening, help out, who is it?

LG: Shami Humphries.

KS: Shami Humphries. All right, next one. So too bad, Shami. You’re going to have to wait until Coinbase or someone else gets to it, essentially. But they’ll get to it eventually.

LG: But we still think they’re nice.

KS: They need to be global. Coinbase has to be global for goodness’ sake, right? Come on.

Yeah, absolutely.

KS: Come on, Coinbase. What the hell.

Bitcoin’s global.

KS: Yeah, that’s right. Next one. Let’s get through these. We’ve got a couple more. We’ve got a lot more.

LG: Next one is from Dorian Benkoil who asks an inside-baseball question for us. “What applications are most likely to take hold in the mediasphere? There has, for example, been talk of both authentication tokens for identifying authors or subscribers and then using blockchain technologies to help with fraud.” So yeah, are we going to be running our new sites on blockchain?

KS: Recoin.

Recoin. I’m looking at this Recode sticker and I could just see it perfectly there. So media, all right, I don’t know much about media. You’re an expert, so I’m sorry to even broach this topic with any sense of an idea here, but there’s this thing called the AD Model.

KS: Mm-hmm. We know it.

I lot of people don’t like the AD Model.

KS: We don’t.

A lot of thinkers in the space, the intersection of cryptocurrency and media are asking is there a way to bridge these worlds so that we can create a new economic model to incent the creation of content, the conception of content, the curation of content? What might that look like?

I won’t say any more than that, other than there are a lot of people thinking about that, exploring that space. I’m hopeful something emerges.

KS: But it’s been done, payments, little tip jars and …

Yeah, the first thought is always the micro-payments, tip jar kind of thing, but I think we know that doesn’t work and I don’t think crypto solves that. I think there are more fundamental questions about can you curate and create content with new incentives? There’s a project called Steam It. It’s Steam, it’s another … It’s like a cryptocurrency Reddit.

The problem is they went too far and the whole thing is just people gaming it to make money off of content and so it’s actually a bad experience for the user when they’re reading the website. But the more experiments in this space, I think, the better. It would be exciting to replace the AD Model on …

KS: It would be. All right, next one, Haps: “I understand blockchains, it’s secure as long as no single entity controls more than half the processing power. If that’s the case, what do I do to combat potential fraud?”

So the listener is referring to something called the 51 percent attack, which I will allow others to Google if they’re interested, but basically yes, it means that a blockchain network, specifically in this case I think bitcoin, is susceptible to being … “taken over” is too strong of a word, but it loses some of its censorship-resistant properties if more than 51 percent of the network is controlled by either one or a set of colluding entities.

KS: That would be China.

In practice, that’s right, actually. I think more than half the mining is probably in China right now.

KS: Yeah, that would be China.


KS: Well, how do you combat it?

Well, it’s interesting because I’ve always wondered why, and maybe this is already happening, but since I’ve begun in this space, I’ve always wondered why U.S. government folks depending upon the department haven’t thought about creating just like a subsidized bitcoin mining project at real scale just in case bitcoin becomes a very important part of the world’s financial system. It just strikes me that China’s been a little bit more forward thinking and taking less …

KS: They only have a science adviser at the White House. It’s not happening, Adam.

True. But this was an Obama … this was too early.

KS: Obama forgot to notice or the Russians …

It was too early.

KS: … were attacking us on Facebook. None of them. None of them.

Yeah, I love Obama. I’m not blaming him, but …

KS: Oh. Oh, I am.

You’re blaming him for not getting into bitcoin?

KS: Not bitcoin. I think the Russian stuff.

Oh, the Russian stuff.

KS: I think all the government failed us on that. You know. Going way back, all the government failed us. They didn’t know. Okay, I’m going to give them …

So you should put the government on the block. You should join these people in Costa Rica that want to do like …

KS: No, Puerto Rico.

Puerto Rico. Yeah.

KS: Yeah, they’re crazy. No.


KS: A lot of … Go ahead. Next one, Lauren.

LG: Sure. Next one is from Bridget McGraw. “A lot of resources were dumped into digital badges, also known as micro-credentials in education, but the concept didn’t take off. How would we create a useful blockchain credentialing system for the broken education institution?” I feel like you just do for the insert broken institution here. This is really education.

KS: Yup, yup.

It is interesting that for whatever reason people, maybe because it’s so poorly understood, they take blockchain and make it its savior for everything. So I think tactically what the questioner is getting at is can you issue some sort of token that represents a qualification and put that on a global ledger such that it’s not run by a company that might go away, but for the foreseeable future I can always reference that?

This gets into other questions about, what about using blockchains for identity? What about using it for things like credit reports and credit scores? That whole area is fraught with challenges and I don’t have any good answers, but I’m sure someone smarter does. So I like the question. I don’t know that I have a good answer to it.

KS: Do you know if you put some blockchain on your skin it refreshes it beautifully.

I heard that.

KS: It’s like everything.

I think that’s one of the promises of Recoin if I remember …

KS: Exactly. Recoin is going to solve that.

Don’t forget to put that in your white paper.

KS: No, you’re going to make … You’ve just now been dragooned into Kara’s army.

If you put me in this red chair on your keynote stage I will launch Recoin with you. Okay?

KS: It is happening. Peter Kafka, get ready. Peter doesn’t get any.

“Is bitcoin’s future a long one or do you think it will be closed by another currency eventually?”

I think there will be an ecosystem of several cryptocurrencies. I don’t think it’s steady state to have hundreds or thousands, nor do I think …

KS: It’s like trains.

… it’s good to have one or two in the same way we have email, we have messaging services, we have web, we have Skype. I think you design a network with particular qualities and parameters and you optimize around those.

If you look at the financial system today, equities and loyalty points are very different, they’re very different systems, very different players. I think there will be several, but after any Cambrian explosion you typically get prey before predators, right?

KS: Tons. Yup.

You just get everything blooming and then something comes along and starts eating everything. So we’re kind of in that like everything has bloomed and it’s ripe for some predators, but I think there will be a steady series of several.

KS: The banks are freaking out, also the government. They’ll all try to insert themselves in some horrible lobbying fashion of some sort.

Yeah, yeah. I think that’s right.

KS: They will. They’ll have to.

It’s happening now.

KS: If someone’s going to eat their lunch it might as well be them. That’s what I always say about everything. So next one, Lauren, go ahead. Pick one.

LG: Yeah, we had several questions from our regular question asker, Liz Weeks, but unfortunately we don’t have time for all of them. Here’s one of them. “What happens if blockchain executes something and is then successfully challenged in court or an administrative process? For example, what if challenges a smart contract after it executes, is it irrevocable? If so, should we consider a higher level of capacity to execute a smart contract than a traditional contract?”

KS: Yeah, these are contracts. That’s what these are.

At the end of the day, a transaction on a blockchain is an irreversible bit of code that has been executed and forms an immutable history.

KS: Mm-hmm.

In fact, I think it’s pretty good evidence in court if you have the appropriate expert witnesses to explain it to the judge. So I think you’ll see probably more and more cases where a smart contract executed on a blockchain, if properly understood, will be about the best evidence you can have that you entered into a counterparty relationship and the thing was executed.

Now, the question becomes what happens if there’s a bug in the software and the spirit of the agreement is executed differently because it was written improperly? As everyone knows, all software has bugs. Those are issues which I think will be litigated.

KS: What happens if water pours on paper contracts? You can do that to everything.

That’s interesting. Yeah.

KS: Everything has comparability. The next question was about treaties, too. The same thing is how can you make sure people don’t go rogue on treaties?


KS: People can break them.

Yeah. I think in general folks are viewing blockchains as a solution to enforcing contracts and it’s helpful in general just to appreciate that. A blockchain can only enforce things that are native to the blockchain, so if you and I, Kara enter into a contract that says I will give you this bottle of Gatorade, the blockchain can’t say whether I did or not.

But if there’s a token on an Ethereum network that represents that Gatorade and I give that to you on the network, the contract can enforce that you have the Gatorade token, but again, it doesn’t mean that I’ve actually given you the Gatorade that it represents. So any time parts of reality live outside of a blockchain, the blockchain can’t actually help you. That often gets …

KS: So if a house gets transferred or …

Exactly. That’s a great example. A house or … There’s this IBM commercial I saw I think during the Super Bowl where it said, “This is a diamond. It’s on the blockchain thanks to IBM.” I’m going, “Okay, the diamond is sitting in a room somewhere. It’s not on the blockchain.”

So anyway, these connections between the real world and the digital, we have a long way to go before this tool can really help us.

KS: Yeah, you can’t make people from being cheaters. You can’t stop them. You cannot stop humanity from behaving badly.

I think that’s a deep and important point.

KS: For things. For things.

Yes, but on Recoin you will be able to.

LG: That’s like the internet. All tools can be used for good and can be used for bad.

KS: Okay, last question. I think I’ll ask it for both of you, but from Walt Mossberg, he’s a retiree. He’s trying to figure out where to put his money, his pile. Believe me, there’s a lot of piles of money over there, but it’s all in gold under his bed, of course, where Walt likes to keep it. He sleeps on it.

“Would you,” Lauren Goode, “accept your salary or your 401K match in bitcoin?” Same thing with you, Adam. Lauren?

LG: Only if it was Mosscoin. No, salary, no. 401K match, maybe. Maybe I’d be willing to experiment with that, but I’d have to do a little more research into it. It’s amazing actually when you think about all the people, myself included to a point, who will put things in mutual funds or say, “Sure, I’ll do it, my company will match my 401K and it will be distributed and diversified in some way,” but if you don’t actually really look at where it’s being held or what the movement is like, you could actually have no idea what’s going on.

KS: You never see your money, Lauren.

LG: What’s happening to your savings.

KS: When everyone’s talking about all these, I don’t want my money to be virtualized. It is virtual. You never see your pile of money. You don’t have a safe like in Harry Potter where it’s all sitting there making nothing, doing nothing.

It’s true. You want me to answer?

KS: Yes.

LG: Yes.

No, I wouldn’t want to take my salary in bitcoin because I think of cryptocurrencies and crypto-assets as part of a portfolio of assets, and I want to think about them separately in terms of what my allocation is going to be and which ones I want, if I want to rebalance and go long on certain ones or short on certain ones.

So I think of my paycheck as the thing I want to be the most stable kind of flat-line boring thing possible that I can then go and say, “All right, I’ll throw it away on this high-risk investment and see what happens,” or, “I’ll spend it on a latte.”

KS: What portion should people … Some are saying 2 percent.

I usually say, if you’re early in your kind of investment horizon, I tell friends 5 percent of your portfolio in crypto actually seems responsible.

KS: In which ones? All of them or just …

No, not all of them, because to your point earlier, there are a lot of hucksters and people that are just taking advantage, but there’s an emerging class of five or six that really are — and this is kind of goofy to say — but kind of blue-chip ones in this space, and there will be more. You do still have to be prepared to lose it all. It’s just, it’s that stark still.

KS: It’s like real estate in Florida. It could just be swamp. Lauren, would you accept your salary in avocado toast?

LG: You know, with how well it’s doing in San Francisco right now, absolutely.

Isn’t that the idea of a startup?

LG: That stuff is worth like $ 12.

KS: It is. It keeps going up in price. That’s because they add furikake or whatever that Japanese spice is to it. Then that’s another $ 3.

Anyway, this has been riveting. I’m going to talk to you about Recoin when we stop.


KS: This has been another great episode. Adam, we’re going to have you back to give us updates because this is really helpful. This is something that people are really interested in and they should be. It’s not total silliness. The redo of our currency system is the one thing that has resisted the internet and digital things, and so in some ways we’ve stayed in the dark ages in finance, for sure. It’s going to change. Same thing with health care and some other areas. So thank you for joining us.

Thanks for having me. This was a lot of fun.

LG: Thanks so much, Adam.

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