Full transcript: Author and Wall Street Journal reporter Ben Fritz on Recode Media

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

No two ways about it: Marvel movies make money.

His new book is “The Big Picture: The Fight for the Future of Movies.”

On this episode of Recode Media with Peter Kafka, Wall Street Journal reporter Ben Fritz talks about his new book, “The Big Picture: The Fight for the Future of Movies.” Fritz says the economics of the movie business have been completely transformed by the rise of online streaming services and by brands like Marvel, which have supplanted name-brand stars and directors as the most reliable indicator of a film’s success.

You can read some highlights from the interview here or listen to Recode Media on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts.

Below, you’ll also find a lightly edited transcript of the full episode.


Peter Kafka: This is Recode Media with Peter Kafka. That is me. I’m Peter Kafka. I’m here at Vox Media headquarters in New York City. I’m talking to Ben Fritz from The Wall Street Journal, who’s written a new book called “The Big Picture: The Fight for the Future of Movies.” Hey, Ben.

Ben Fritz: Hey, Peter.

That’s called an introduction. Before we go further, I want to ask you to recommend this podcast to a friend, to the internet. I’ve been sending out emails recommending Ben’s book. I sent out a Twitter DM yesterday recommending Ben’s book. Someone wrote back and said, “I’m in line at Barnes & Noble to see Ben speak.”

Oh wow.

So that is how one does sort of hand-to-hand promotion. I’m asking you guys to do that so you can listen to this podcast for free. Okay. Golda, is that an adequate promotion? We’re gonna make Golder a character on this show.

And now, Ben, welcome.

Thank you, Peter.

I wanted to work with you for years.

That’s right. You’ve spoken about it for a long time.

You’ve rejected my entreaties, so this will count. You’ve written this awesome book. It’s about the movie business.

Yes.

If you listen to this podcast, so you’re a nerd who likes media, and the business of media, and how technology’s changing that, this is for you.

Right.

It’s a great book. I finished the whole thing. Last chapter on the subway here. Give me the thesis of the book.

Thesis of the book is that we’ve entered a new era of the movie business, which I call the franchise era of filmmaking. The movie business, correctly understood now, I think, is driven primarily by brands, by branded franchises — you know, your Marvel, your Fast and Furious, your Transformers, your Star Wars — and the age of movie stars, or the age of original films, the age of a diverse slates by studios is over, and those movies, they’re still created on the fringes of the business.

If you are someone who wonders why every movie is a superhero movie, or a Transformers movie, if you like that, if you complain about that, this is the book that explains that. And this isn’t a nuance that you quite clearly … I hadn’t really processed all the way through. The idea that movie studios spending a lot of time and attention on big blockbusters is not a new idea, and what is happened over the last 10 or 15 years is instead of saying, “We’re making a Bruce Willis movie or a Tom Cruise movie,” is that, “We’re making a movie that’s about Star Wars or Transformers,” or some brand that you presumably already know.

Right, yeah. Certainly there have been big-budget summer movies since “Jaws,” right, but now it’s not about the movie stars. The star vehicle is over, the Will Smith vehicle, the Bruce Willis vehicle is definitely over, and it’s these brands that are managed just as much as Procter & Gamble manages their brands. That’s what the most successful movie studios do, and the brands are really what’s relevant to consumers globally.

You buy an Apple product because you’re loyal to Apple. You go see a Marvel movie because you’re loyal to Marvel. And this has transformed the economics of the business for sure.

And you explain this in depth, sort of the why — let’s see if I got my reading comprehension correct — but it seems like you’re calling out three specific things that sort of pushed the business this way. One is the internet, and specifically Netflix and the fact that they’re sort of bringing so much content to you at home. Two is the death of DVDs, which cut out a really profitable part of the business and allowed them to make money from less successful movies. And the third is sort of the rise of China. Am I getting that correct?

Yes.

Yay me!

You comprehended that very well. I would say that the …

I read the book.

Yeah, look at you. Not everybody who’s interviewed me has actually read the book thoroughly, I don’t think. Yes, and I would say the rise of Netflix, I would very … related to that, fold into it, is the golden age of TV, which includes Netflix and Amazon, of course, and also cable networks.

If I’m watching “Breaking Bad” commercial-free for 45 hours at home, it’s gotta be something pretty fantastic to get me into the theater.

Yeah, right. Has to be an amazing theatrical experience. Not to mention that “Breaking Bad,” essentially, is one big 45-hour story, right?

Right.

I mean, it’s essentially a really long movie. I think that’s a way to understand it.

Right, and that’s sort of a cliché now, right, that these … that “Game of Thrones” and “Breaking Bad” are a very long movie, but it’s true.

It is true.

And even the stuff that’s mediocre, right, is good enough to keep me engaged. So what is gonna get me to the theater? And specifically what is gonna get someone who’s spent money on a movie out to the theater?

Right, sure, right. You mean most TVs, obviously, you have a subscription to it, so the marginal cost of watching that next Netflix or HBO show is zero, and the marginal cost of going to see a movie is substantial, especially if you have kids and need babysitters and everything, so you’ve got so many good options for zero dollars.

They’re gonna get you out of the house, it better be one of two things: Either something so spectacular you would be inferior to watch it in your living room, or that rare thing that happens once in a while still, which is like a cultural moment that you want to be part of and everybody’s talking about “Get Out.” You can’t miss “Get Out.”

Right. I wanna talk more about the industry in general and the book — or what we can learn from the book — but I do wanna highlight something that surprised me when I started reading it, because the title doesn’t say so and there’s nothing in the copy that indicates this, but at least half the book is about the story of Sony Pictures, specifically. You have great access and great detail, and that’s because you’re using … Well, you tell me. You fill in the blank.

Because of the hack of Sony Pictures now a little over three years ago, yes.

So basically that provided you with enormous source material?

Right. You’re correct. We didn’t advertise it heavily because I didn’t want people to see this as a hack book or a Sony book.

Hack book or “This is the story of what happened three years ago at Sony.”

Yes, exactly right. That wouldn’t be so compelling. This is about …

But it is super compelling, because it’s the kind of reporting you wouldn’t normally be able to do. You have all this insight into what Michael Lynton’s thinking, what Amy Pascal is thinking, because they’ve written it in their own words in a way that you can’t really normally get ever.

True, well, this is …

Contemporaneous notes filed by the people in charge of the theater.

Yes, that was absolutely … that was my in to the book. That’s where I started. This hack happened. Is there a book in the hack? That’s really where I started three years ago. First, it was like maybe this is like “too big to fail.” You’re inside the drama and you see what happens, but there were two problems with that. One is the problems in a movie studio and an executive getting fired is not exactly akin to the American economy almost collapsing, and it was so over-covered at the time. There wasn’t a lot left to say about what was happening there.

But I did … the more I dug into it, the more I thought, “Hey, this stuff they are talking about are all these issues that I think about and everybody I know who goes to the movies thinks about.” The people in Hollywood are actually having the same kind of debates. Why can’t we make original movies for adults anymore? Why’s that so hard? How we gonna handle this franchise age? What are we gonna do that will appeal to people in China? How are we gonna compete with Marvel and Star Wars? That’s what the people at Sony were debating, and I realized this is a great …

And you write a book like this, it can’t just be me pontificating, or it could, but I don’t think that’s such a good book, but you want to have characters. You want to have an arc. You wanna see people grappling with problems, and the Sony executives whose emails were released, I think combined with the documents that get you into the economics of their business and combined with some additional reporting that I did provides a narrative and characters that drive all these big issues we’re talking about.

Because if you remember the Sony hack — and it’s hard to remember now because we’re post WikiLeaks, and then everything has been hacked. There was a couple months of enormous coverage of what was in the documents, and lots of embarrassing personal stuff about Amy Pascal’s shopping habits and racial slurs. She came off much worse, I think, just sort of her job and the nature of how she communicated via email.

Yes.

And everyone sort of harvested the emails for salacious stuff. I pulled out something that David Goldberg had written to Michael Lynton about how to fix the music business, but you went and said, “Oh, there’s a story of a business here.” And the reason why it’s interesting for you and for readers is Sony is a studio that had been doing well and could not keep up with the move into blockbusters — which is a little hard to reconcile, because if you think a little bit about this, these are the people who had “Spider-Man,” which is one of the most successful blockbuster franchises.

Yeah, of the early 2000s.

How come they weren’t able to go, “Well, ‘Spider-Man’s’ working. Let’s do more of this.”

Sure. “Spider-Man” was sort of in an age when you have these diverse movie slates and you have a couple of tent poles. “Spider-Man” was a tent pole, combined with all your Adam Sandler comedies and your star vehicles with Will Smith and your original dramas and all those sorts of things. So, Sony did succeed with “Spider-Man,” but what they weren’t able to do was sort of turn that into a brand, turn into a cinematic universe.

The thing about “Spider-Man” was it was really … for them, in their mind, the way Sony used to do things, it was attached to the talent. It was attached to Tobey Maguire, the star, and Sam Raimi, the director, and as they got more and more powerful and demanded more and more money, the profits from those movies went down and it creatively got worse. If you recall “Spider-Man 3” when he turns into an emo Peter Parker …

Is it the one where he’s dancing?

And he dances in the streets.

Yeah.

Right. It was pretty terrible, and even though it grossed more than the prior two, the “Spider-Man” films, the profits were way down because they were giving all the money to the talent.

But there’s multiple “Spider-Man” reboots.

Then they rebooted it.

Andrew Garfield was the “Spider-Man.”

Yeah, they rebooted it with Andrew Garfield, and it was not so successful anymore. They just didn’t do it well, and that was the only successful franchise that they had. They weren’t able to transition, and by the time the reboot came out, this was when Marvel Studios with “Avengers” and “Captain America” and “Iron Man” and so on was on the scene had created a new, more appealing to global moviegoers style of superhero film, and Sony was really behind the curve.

The bigger issue you’re pointing to that I should mention is it just happened to be Sony that got hacked, but if I was gonna pick a studio that would be a great character, so to speak, for this transition from the star-driven diverse-slate era of filmmaking to the franchise era of filmmaking, Sony would probably be the best one, because they were so successful in the 2000s, and they’ve had such a hard time in the 2010s. They haven’t been able to make this transition.

And it wasn’t that Amy … Am I pronouncing her name correctly? Is it Pascal?

Pascal.

Pascal was above making movies that lots of people wanted to go see, right? She made plenty of Adam Sandler movies. He had basically his own corner of the lot.

Yeah.

Lots of dumb Will Ferrell movies. Nothing wrong with that. But her heart wasn’t in it, right? Those were the things that bought houses. And then what she really liked was making these sort of mid-tier sort of movies with Tom Hanks.

Yes, she likes making …

“Captain Phillips.”

“Captain Phillips,” “The Social Network.” These are the kind of movies that really drove her and excited her, and she’d work with filmmakers like James L. Brooks — even though they cost her a lot of money — because she believed in them and they had made her money in the past. She loved her talent. She got into the movie business not because she wanted to run a studio. She got into it because she loved making movies. She is now a producer again, and she was a producer to start with, and that’s really where her heart is.

She made “The Post.”

Yes, she was Oscar nominated for “The Post” this year.

That is a classic Amy Pascal-type movie, right.

Yes, absolutely.

Stars, prestige, real story you should care about.

Yep, absolutely. It’s an old-fashioned, down-the-middle, quote-unquote prestige movie.

Did that movie make money?

It made a little bit of money. Yeah. I mean, it made a little bit of money, which is totally fine. It used to be you had 10 of those and they all make a little money, combine them together, and you have one or two “Spider-Mans” and you have a great year. But now, it’s rare that those movies make any movie, and the little bits of money that some of them do is erased by the ones that flop and then make nothing on DVD, which is why the only way to make real profits in the movie business these days is to have your “Jumanjis” and your “Fast and Furious.”

Well, there’s a couple versions. I wanna talk about that, but quickly, we make money because people advertise with us. So please, don’t forward past this ad. You should listen to it. This advertiser is awesome, because they support Recode Media. Listen up.

[ad]

We’re back here with Ben Fritz, who wrote “The Big Picture,” which you should go buy. What’s the best way for someone to buy your book? Do you care if they buy hardcover, or paperback, or e-copy?

There’s no paperback yet, but I don’t care …

Don’t buy the paperback.

Don’t buy the paperback. You’re gonna have a hard time. But I don’t care if you buy an e-book or a hardcover. Whatever you like. If you wanna support your local bookstore, that’s awesome. I highly recommend doing that.

What boosts your …

Of course there’s Amazon rankings, and if you buy it on Amazon you boost my ranking, which gets more people to pay attention to it, so that’s great, too.

Go buy it on Amazon, who also makes movies. We can talk about that in a minute.

Yes, they do.

The counterpoint to Sony is Disney.

Yes.

Which owns Marvel, Lucasfilm, Pixar. Dominates moviemaking, right, or dominates this era of moviemaking, dominates the blockbuster franchise version of it. I talk about this all the time. Those three studios that Disney bought, bought collectively for about $ 15 billion dollars. Sort of the best M&A in modern media. Is their success today solely because they had the foresight to buy those three properties? Anyone who bought those three properties would be doing as well as they are?

No, it’s not entirely that. I mean, that’s a big chunk of it. Their success is also, frankly, their willingness to abandon every other kind of movie. Bob Iger sold Miramax. He shut down Touchstone, which means he stopped making indie movies. He stopped making R-rated movies. He stopped making romantic comedies, stopped making original dramas for adults.

Bob Iger didn’t come from the film business. He came from TV, and he was willing to look at it with sort of this, frankly, kind of cold financial approach, and say the branded movies make more money. He said to me, it’s a quote in the book, he said, he loves movies. At the time, “Spotlight,” when I interviewed him, had won best picture. He said, “I love ‘Spotlight.’ I love movies like that, but movies like that are a terrible business. Even in success, the profit margin is pretty thin.”

“Terrible, terrible business,” I think is the quote, right?

“Terrible, terrible business,” yes, and the profit margin’s thin. The profit margin for the branded movies is better, so he bought them. Very smart. And the other smart thing he did is he largely has left them alone. They have their own creative culture, and the creative culture of Marvel is quite different than the creative culture of Pixar, for example, and the people who work there are all passionate about what they do. The Marvel executives are Marvel geeks. The Pixar people are animation geeks.

There used to be this idea — and I think Amy Pascal at Sony would exemplify it — where well, no, the studio head of production, he or she ultimately gets involved and decides what’s best. The comic book people shouldn’t make comic book movies because they’re too geeky and they’re not gonna know what the broad audience wants. So you’d have the superhero movies that were not made …

You’d bring in adults to say, “We’re gonna translate this nerdy thing into something that has broader reach.”

Yes, exactly, and it turns out that the opposite has succeeded. Marvel’s run by Marvel geeks, and Bob Iger and Disney have let them do it, and they’ve been massively successful by leaning into everything that worked about the comics.

If you care at all about this stuff, by the way, your story of Marvel and how that brand was built, and then nearly sold, and how Sony could’ve bought the entire thing for what? 25 million?

Sony had the opportunity to buy the movie rights to virtually every Marvel character for $ 25 million, and the response …

Said, “No, that’s too much.”

The response of the executives was, “Who’s ever gonna be interested in seeing a movie about Iron Man or Captain America or Black Panther? Nobody cares about them.” All they cared about was “Spider-Man.”

So they just bought “Spider-Man” for a few million dollars, for what would’ve essentially been the cost of like half an Adam Sandler movie. They passed on the rest of Marvel. It’s an amazing story. Go read it for that alone, but read the whole book.

Again, back to what you were talking about at Disney, it’s not just that he bought those franchises. Then he said, “We’re gonna get out of the other businesses, because the risk involved in making a movie that might be very, very commercial but doesn’t have a brand attached to it, it’s too high. Also, that the mid-tier movie, much less, the upside there is too limited, and we can still lose a ton of money.”

Yeah.

Because by the way, you can make a failed blockbuster movie, right.

Absolutely.

Attaching Marvel or Lucasfilm … Actually all of those are always successful. But you could make a very commercial movie attached to a brand and it still won’t work.

Mm-hmm.

What I’ve been thinking a lot about is why studios aren’t spending money on the very low-budget movies. I just talked to Jason Blum last week at South By Southwest. Seems like — and I talked back and forth with him about this — his formula where you cap your downside, he says he can’t lose money essentially by spending up to $ 5 million on a movie, and then theoretically, could have really, really big pay days when you get a “Get Out” or a … What else did he do this year? “Split.”

“The Purge,” “Split.”

Really big. I can imagine why Disney would say, “Our model works because we only want giant home runs.” But why aren’t more studios … why aren’t more people trying to do the Jason Blum method where you say, “We’re gonna cap this. By the way, we’re not trying to make art films. We wanna make commercial films.” Why aren’t more people trying to do that sort of low, low budget, minimized-risk model of moviemaking?

I think it’s a good question why your Paramounts and your Sonys have not been doing that as successful as Universal has with Jason Blum, and all I can say is I know in some cases they’ve tried to do it, and they’ve done it poorly, and they haven’t managed to get any successful films out of it. Paramount actually had a division — I’m forgetting what it’s called — but who’s devoted entirely to trying to do super-low-budget films, and trying to do just that, and basically none of the movies that came out of that made it to theaters. They were all … they went straight to VOD. They just weren’t very successful at it. Jason and the people he works with have managed to have a few major hits coming out of that formula.

I think that falls in the category of one of those things that seems easy to say but is hard to do. Just like make a superhero cinematic universe. Easy to say, but look at the results Warner Bros. had with DC, and you know it’s easier said than done.

Following the easier said than done, you spent some time in the book talking about Netflix is moving to movies, Amazon’s moving to movies. These are guys with essentially unlimited resources.

Yeah, yes.

Right, billions of dollars for content. Basically, they have not had real success in movies. Netflix will tell you that “Bright” was successful.

Who knows, but it doesn’t seem likely.

First of all, it’s a terrible movie.

Yep.

And second I think Netflix can shove something in your face and say that you’ve watched it, but that’s not successful.

That’s not success. Absolutely.

Whenever I ask someone why hasn’t Amazon and Netflix been successful at movies yet, the standard answer’s sort of a shrug and, “Hey, movies are hard, and they just haven’t had enough at bats.” Do you think that’s the case?

Well, I would dispute your thesis a bit. I would say Amazon has had some success in the field they’re playing in, which is the indie movie. Two of the most successful indies — and I know it’s weird to say indie and Amazon — but two of the most successful lowest-budget prestige movies of the past couple years have been “Manchester by the Sea” and “The Big Sick,” which were released by Amazon in theaters first before they went on to Prime.

Right. Now those are movies someone else made, they bought, and we’ll call it as is …

They bought and released those movies. Yes.

Then Netflix, by the way, has done some of that. That’s the same thing, right. Not in movies.

Yes. Well, they actually bought “Mudbound” at Sundance, nominated for Oscars. I mean, people liked it. Who the heck knows how many people watched it.

They’ve at least had critical success and success by indie-movie standards in theaters.

Yes, and that’s significant. Indie movies, large studios, have significantly but not completely abandoned that field, and Amazon and Netflix, especially Amazon, are just completely taking it over, because they don’t care about making profits on individual films the way the studios have to. They’ve taken over that, and the question now I think you’re pointing to is, as they start getting into bigger-budget films, mid-budget films, $ 50, $ 100 million, star vehicles, Will Smith vehicles, can they succeed?

The one thing they can’t do, so far — one of the few advantages the major studios have left — is Netflix and Amazon, when they’re streaming, don’t seem to figure out: How do you create an event? How do you make this a significant thing? When a movie comes out and you see it on billboards everywhere and it’s playing in the local multiplex near you, and people who are seeing it, we’re all seeing it together and we’re all seeing it at the same time. It’s not just on my queue and I’m gonna get to it. We’re all seeing “Black Panther” right now. That’s a major event. That’s something that Netflix has not figured out how to do, and that seems fine with TV shows, but with movies that’s a problem.

Do you think if Netflix made “Black Panther,” the exact same movie, and said, “We’re opening it Friday. By the way, if you wanna have a ‘Black Panther’ party, we’ll accommodate that. We’ll throw screenings in theaters.” Or however you wanna do it. Do you think that movie has the same degree of success culturally?

That’s been a debate I’ve been having with some people recently, because it’s a big question. My argument would be no. I don’t think it would have the same impact culturally, because I don’t think we’d all be seeing it around the same time. I think some of us would get to it when we get to it. I think the fact that it feels like it’s a big deal to go out of the house to go see it, that takes a real effort, so therefore that’s something that seems more meaningful to you. You’re seeing it in a group, and you see other people screaming, laughing, having a great time, and then the fact that we’ve all seen it within a span of just a few weeks, therefore we’re all talking about it, I think that absolutely is different.

I remember some of the most significant movies of my lifetime and being in the theater, or waiting on line to see “Jurassic Park,” let’s say, or something. Even the TV shows I loved, like “The Simpsons” or “Freaks and Geeks,” I don’t remember where I was sitting. I don’t remember the moment I saw that episode.

I think the counterpoint is “Game of Thrones,” right, where lots of people are watching it at 9:00 on Sunday, but then there’s a ton of viewing that happens within the next couple days, right, so everyone who’s interested in “Game of Thrones” is watching it within the week.

Right, but a TV show can build to that, for sure. A TV show that becomes successful, right, but a movie is a one-time thing, so you can’t sort of build up. After a season or two, “Game of Thrones” becomes this big thing. We all talk about it every Monday after seeing it the prior night. Perhaps, if Netflix was making every Marvel movie, by the time they got … they had made a bunch of them, become more and more significant, but for a one-off movie, you just can’t create that overnight online.

So you’re reporting the book for a couple years. You finished reporting when last year?

I finished all the research in like late 2016, and then I started my writing.

So this is the problem with anyone who writes a book, right, but I think particularly someone who’s doing what you’re doing. You’re writing about something that’s in flux, which is that there’s a bunch of stuff that’s happened in the movie business.

Wait. Has anything interesting happened in Hollywood in the past six months?

That is not in your … ’cause I’ve got an advance copy here that I got from you months ago, and I thought, well, maybe there was pressure. You would’ve felt pressure to slap something in about Disney-Fox.

I mean, there was no way to do it.

It’s not in there.

It’s not in there. Not in the final version. There’s no way to do it. I mean, the last change I made to the book was November or December, I had had something in there saying the business-friendly Trump administration is likely to approve the AT&T-Time Warner deal.

Yes, I saw that.

Did you see that?

Yeah.

That is slightly changed in the final version.

That has changed.

That’s the last change I made. But Disney-Fox I don’t have in there. It happened too late. But I would like to believe that if you’ve read the book, that deal is not surprising to you.

You lay out the case for why Disney would be rapacious … why Disney would want more, because they’re doing it really well. Beyond the fact that if this deal goes through that this gives Disney the “Fantastic Four” and “X-Men” franchises.

“Avatar.”

What other impact does it have on the movie business? It just sort of accelerates the trend we’re talking about?

Yeah, I mean, it’s two things. It takes us towards the streaming age. I think, obviously, the ultimate motivation now for everything Disney does now these days is to compete with Netflix. That’s where they’re heading, and they’re also gonna take control of Hulu, so they’ll have three streaming platforms.

Maybe.

Maybe? You think not?

There’s the thesis, right, that maybe this is a chip that they give to Comcast.

Yes, that is possible, depending on everything going on with Sky and everything, but certainly Disney wants to take over Hulu.

That is what they say publicly.

Okay. Fair enough, yes.

And may well believe.

I do believe that. And they’ll have their own Disney streaming service they’re launching, and they have ESPN, and they know they need to compete aggressively with Netflix and go directly to consumers. The Fox deal gives them Hulu, gives them more content. Disney has really shrunk the amount of content they create significantly, which has worked great for them in the movie theater model.

Online you need a little bit more. They’re not gonna produce the 700 pieces a year that Netflix is doing right now, but they need more. They wanna have more brands, because Disney’s all about brands, and after they get “Avatar” they get “X-Men.” They’re getting Fox Searchlight, which is ironic, because Bob Iger shut down Miramax, but I think that’s a business that pairs well with Hulu, should they hold on to it. Hulu’s sort of their adult streaming service, and Fox Searchlight makes movies for adults, but what you are gonna see, though, no matter what they keep from Fox, Fox is gonna be shrunk down, if not ultimately abandoned.

We’re moving to an age of fewer studios, which is what you see in any business when a business is kind of old and new competition comes at them aggressively, then the older businesses start consolidating. They have to do that. They need the resources to compete, and because there’s not as much money to be made in the old moviemaking model, so the old studios have to consolidate in order to challenge Netflix and Amazon, and soon Apple.

Up until the Disney-Fox deal, and you say this in your book, though the conventional wisdom is that the idea that you’re gonna see the movie in the theater, and you’re gonna have to wait many months to see it at home, that’s going away, because Netflix, because Amazon, because by the way, the studios wanna stop this. They wanna figure out some way that you can watch the movie relatively quickly at home. Shorten that window.

Yeah.

Now it seems like, because Disney’s buying Fox, Disney was the one studio that didn’t wanna do this, because they’ve got a model that works really well, that momentum has stopped. I asked Kevin Mayer about this onstage, and he says, “Yeah, this model works great for us. We’re gonna keep doing it.” So do you think we’re gonna go several more years where you’re gonna have to learn to wait many months to see “Black Panther”?

I do think that’s on hold. But the Disney-Fox deal takes two studios out of the equation who wanna do that, and I think Warner Bros. certainly feels like they can’t be in the lead on this, because they’re trying to get bought by AT&T, and something like this is disruptive or might help the government’s case against them, so I think the idea of movies coming to home sooner is on hold. Although, ultimately, it still seems inevitable that window is going to shrink.

What I do think could happen sooner that’s interesting is now that everybody’s pushing towards streaming, you’re gonna see as soon as a movie’s available to watch at home: Right now it’s on DVD and VOD for a few months before it goes to pay TV, HBO or Netflix. That’s gonna start to shrink. I think you’re gonna start to see the movies get on your streaming / pay TV platform, HBO, essentially a streaming platform now, Netflix or the new service Disney’s launching. I wouldn’t be surprised if a movie’s only available on DVD and VOD for a few weeks before it’s available to stream on your subscription service right away.

Because the idea that you’re gonna buy a physical or even digital copy of something, that era’s gone.

That era’s going away.

That era’s left in music, right. Everyone is now … understands that you consume something by paying a recurring subscription fee and streaming it whenever you want.

Right, sure. Absolutely right. That is what consumers like now. It’s what they’re used to, especially younger consumers, and then obviously Disney as they launch the streaming service, wants to make it really appealing. Well, one way to make it appealing is this is the way, maybe this is the only way you can watch a Disney movie at home. Or it’s a way you can watch it at home right away.

And if you’re a studio, that’s sad, because you’ve lost DVD sales and you’re losing with EST, right. That’s buying through iTunes, a digital download. You say, “Well, yes, but now you’re gonna get this monthly recurring fee.” Ten, 15 bucks, whatever your share of that is, and you’re gonna get that all year long, no matter what you give people. So you’re better off in the end.

You’ve acquired a consumer, right, as they say, and you’ve got that recurring revenue, and now you’re starting to get data on that consumer. You know who they are. You know what they like. It’s helpful for marketing. It’s helpful even thinking about what you should make next. That is clearly more valuable, is to own a consumer than to sell them a one-off piece of content.

Back to Amazon and Netflix, Amazon specifically. Again, terms of shift, right? Roy Price, who was running Amazon Studios is out, as of last fall.

Yep.

And at the same time, Amazon said, “You know this whole thing where we’re doing ‘Transparent’ and we win awards? That’s great. We need giant blockbusters now, and that’s where we’re gonna spend our money.” As you point out in the book, Amazon had carved out its niche as “we’re the giant conglomerate that supports indie filmmakers.” Does that go away as well? They haven’t been explicit about that.

They haven’t been explicit about it in film. And so in TV, they’re making that switch fast. They wanna have their “Game of Thrones,” as they say.

All the quirky comedies, out the window.

Yep, those are gone. They’re not buying those anymore.

We want really big hits.

They spent something like more than $ 250 million just for the rights to do a “Lord of the Rings” show. By the way, a “Lord of the Rings” show for which they can’t use any of the characters who were in the films.

Right.

So, what’s it gonna be?

By the way, that’s gonna be a half billion, right, by the time they’re done actually making these films?

Yeah, by the time they’re making it and everything, absolutely. Yeah, massive investment. So in TV they’re making that switch.

In film, they haven’t yet, and they’re slowly starting to do some slightly bigger films. They’re partnering with studios. They’re partnering with Warner Bros. on … I’m forgetting the name, but on an adaptation of a book that might be a $ 40 or $ 50 million movie, so they’re starting to move in that direction, but they just signed the deal with Alexander Payne, who’s an indie filmmaker. That’s definitely the part of the film business that they have latched on to. It’s something that differentiates them and I think gets them more affluent consumers who will buy a lot of stuff on Amazon, which is of course their most important goal.

Bringing this back to Sony. You decide, “Hey, I’m gonna root through the Sony hack emails, as well.” Did you think, “I don’t know. I don’t know if I wanna make a book about using stolen emails.” Again, you talk about it in the introduction. This book is based on stolen emails. Did it take you a while to get comfortable with that idea?

I think, actually, it was more once I started doing it that I started to become uncomfortable. At first, I felt fine, and like other people, as soon as the hack happened I’d gone through to find some of the juiciest.

Did you google yourself?

Of course.

Yeah.

Of course, I searched myself, and … Am I allowed to curse on this podcast?

Yeah, yeah.

Okay, good.

Fuck yeah.

So I found … I searched for Ben Fritz and I found this time I wrote an article about Amy Pascal that she really didn’t like, and another executive who works for Warner Bros. was like, “Don’t worry about him. Fuck Ben Fritz.”

That’s gotta be very exciting.

It was, yeah. The fact that studio executives are talking about how much they fucking hate me, that felt great.

But yeah, going into it, I felt like this is such great material. This is gonna be … I felt good about it. And when I sold the book proposal, and I started, okay, now I have to read every single one. Find what’s interesting and relevant. The way I did it I was like, “Okay. Right now I’m reading Amy Pascal’s emails. Then I’m gonna read Michael Lynton’s emails.” So there’d be a few months where I’m just living in her world and almost getting in her head, and that started to feel uncomfortable.

Did you tell them, “Hey, I’m reading every single email.”

Yeah, I told them as soon as the book proposal was out. Ironically, or let’s say poetic justice for me, the book proposal leaked before I sold it, so the Hollywood Reporter got their hands on it, so I called Amy and Michael and said, “You’re gonna read about this. I’m doing this. I’m gonna do it as respectfully as I can, but just want you to know.” So yeah, there were times I was …

At that point, everyone had rummaged through their underwear drawer, right?

Yes.

So did they feel any differently about it coming out in book form as opposed to 40 different stories?

At the time, they seemed … they were not pleased, but they were like, “Well, we know you.” I told them I’m not writing anything about your underwear, your Amazon orders, about your kids. I’m not gonna write about any of that stuff. I promise you. They seemed sort of like … they were resigned to it, and they seemed okay with it.

I would say, as the process went on, they both and other people at Sony went back and forth, and they’re like, “I’m okay with this,” or, “Oh my god. This is a nightmare.” But I did my best to … I did it by fact-checking with them. I let them know everything that’s gonna be in the book, so at minimum they couldn’t accuse me of surprising them.

Have you heard from them since?

I have … Well, I guess what I can say is that I have presented everything to them to make sure they wouldn’t be surprised by what would be published, and any responses they may have given to me they asked, I think, they would not be for public consumption.

Again, it’s intimate, but it’s not leering, right?

Absolutely.

Yes, Amy Pascal’s getting a mammogram and she’s jotting down emails, but you’re not making fun of the fact that she’s getting a mammogram. She’s trying to save a movie.

Right, right. I mean, you can’t … this is their personality, because they both bring their personalities to their jobs, and you can’t understand how they do their job without knowing that Michael is this very cool customer who comes from a background of great privilege, and was a bit disengaged, let’s say, from the movie business. It could’ve been any business for him. And Amy is really neurotic and really passionate about movies, and she’s up writing almost incomprehensible emails at 1:00 am that are 5,000 words to her subordinates all the time.

So you get to know them in that sense, but there’s nothing about their purely personal lives, their own personal business, especially nothing about their families. I will say while I was researching it, anytime I started reading an email and I was like, “This is clearly personal,” especially if it involved their family, I just stopped reading it and went on to the next one.

You write about the movie business. You’ve done it for a long time. You like movies, right?

Yes, I do.

Like a lot of people who cover this business.

Yes.

After a deep dive of several years into this book, are you hopeful about movies, or are you resigned to the future of movies?

I am hopeful. I would say, after I was mostly done with the manuscript I felt a little depressed, and then when I sat back to write the conclusion, and I especially I thought more about the streaming platforms, I feel I’d say, maybe two-thirds better and one-third worse, and the two-thirds better is that what any fan of movies really should want is for great movies to be made, for great content to be made, and the digital companies are creating more great visual content than ever before, and some of it is pure movies, and then some of it is a limited series, and some of it is a TV season, but it’s only eight episodes, and you start to say, “What is the difference?”

If you’re watching it at home on your TV or your iPad, what’s the difference between a movie or a limited series or a short TV season? It all starts to blur. And a lot of TV shows now are from people who used to be quote-unquote filmmakers, and are ideas in the past they would’ve brought to a studio to make into a film.

So you’re gonna get amazing stuff delivered to you at home in different lengths, and you can decide if you wanna call it a movie or a TV show or webisode.

Yes.

Seems like, though, the idea that you’re gonna go to the movie theater and see “The Social Network,” that’s gone and it’s not coming back. That if you’re gonna go to the movie theater, it’s generally gonna be to go see a Marvel movie or something like that, and that you’ll have some anomalies like the “Get Outs” of the world or, again, maybe Jason Blum will make other horror movies that you’ll go. There’ll be some weird anomalies.

Yeah.

Seems like the idea of going to a movie theater and seeing “Lady Bird” in a couple years will just be gone.

Yep, that’s disappearing, and that’s …

And how do you feel about that?

I have mixed feeling about that, right? On the one hand, if more “Lady Birds” are made, and no matter how they’re made, no matter where you watch it, that seems like a great thing. But what’s missing, what we were talking about earlier, this idea that we’re all seeing it together at the same time. It’s part of the cultural conversation. It’s an event that impacts our culture that is lessening and will go away, and that I think is a shame.

When we’re all just watching things on our digital queue and getting around to it when we get around to it, and you and I are not watching the same things at all, and if we are it’s certainly not at the same time, that lessens the ability, I think, of art to impact our culture, and that is something movies have done really successfully for the past century, and that is a bummer.

And if you’re Netflix or someone like that, you say, “You’re just complaining because you listen to radio plays, and things evolve, and things change, and by the way, we can’t tell you, but lots of people watched ‘Orange Is the New Black.’”

Mm-hmm.

“And they were having a shared experience. We just weren’t talking about it that way.” You don’t buy it.

I don’t. I mean, I think it’s evident. I mean, it’s evident that it’s not impacting our culture in the same way. Netflix’s whole business model is we have something for everybody, not we all are watching the same thing at the same time. That’s definitely their model. I believe them that people are watching it, but I don’t believe that 99 percent of the content Netflix is producing is really impactful on our culture, and especially their movies. That is undeniable, and if they try to argue against that, I think it’d be laughable, but they have yet to produce a movie that has had any significant impact on American culture.

We got you all whipped up. That’s a good way to leave the interview.

Yeah.

And promote your book in your words. Go buy the …

Please go buy “The Big Picture …”

There you go.

“The Fight for the Future of Movies” by the really handsome author Ben Fritz, and if you’re someone who has wondered why are there so many superhero movies and sequels and remakes and spinoffs at the multiplex, why are there so few interesting original films for adults, this book explains why that happened, how we got here and what the future of movies may be as all the digital companies are moving in.

Sold. I would buy it. Except I’ve already read it. You guys will enjoy this if you’ve listened to this podcast. If you’ve gotten all the way through this podcast, you will love this book. Go buy the book. Thanks, Ben, for joining us.

Thank you so much, Peter.

Recode – All

Cash For Apps: Make money with android app

Honey — the under-the-radar coupon startup — has held talks to raise around $100 million in a new investment

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

Honey co-founder Ryan Hudson

The Los Angeles-based startup operates an unsexy but lucrative business.

Online coupons may sound so 2008, but they are still big business in 2018.

Honey, a startup whose internet tool tells online shoppers whether there is an eligible coupon for their purchase, has held talks to raise somewhere around $ 100 million in new investment money, according to multiple sources.

Honey co-founder Ryan Hudson confirmed the talks to Recode in February, but at the time said his company had discontinued the discussions to focus on new product development. But after another inquiry last week, Hudson confirmed that the talks had restarted.

“Something came inbound that we’re seriously considering but not closed so nothing to announce yet,” he wrote in an email. He declined to provide more details.

Honey, based in Los Angeles, was founded in 2012 and makes technology that scours the web for available digital coupons and sales. Its website browser extension then displays those coupons or sale codes to shoppers right when they reach the checkout page on thousands of partnering retail sites. The tool is designed to help shoppers feel confident about going ahead with their purchase — coupon or no coupon — without leaving the page.

The funding discussions come at a time when investors have shown renewed interest in digital-native consumer brands that have the potential for mass appeal, and especially those that can grow fast without losing massive amounts of money.

Hudson said in February that Honey was basically running at “cash-flow neutral” and would only raise money if the terms were too good to pass up. The startup generates revenue by earning a commission on transactions at some partnering merchants since it says its tool increases purchase conversion rates. Honey also makes money from a cash-back program similar to that of Ebates, the unsexy online shopping site that is nonetheless a cash cow; Rakuten bought it for $ 1 billion in 2014.

Over the past year, Honey has beefed up its staff from 30-something people to north of 120 as it quietly builds the next version of the company. Honey has raised around $ 40 million in venture capital from Anthos Capital and others to date.

“If we plan to just do what we do today, we would do that with a much smaller team and be generating a lot of cash,” Hudson said.

He declined to provide details of what the company is working on other than saying it will be “a mobile version of the Honey shopping experience” that will likely launch before the holidays.

“If people think of us as a coupon extension a year or two from now,” he said, “we will have failed at execution.”

Recode – All

Cash For Apps: Make money with android app

Menlo Ventures is making its first real bet on crypto as Bitpay raises $40 million

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

Not all investors or companies believe bitcoin will ultimately be used for day-to-day transactions. Menlo and Bitpay beg to differ.

Venture capital firms over the last year or so have wrestled with how forcefully to lean into investing in startups linked to cryptocurrencies:

  • Is blockchain technology so consequential that we should reorient our entire investment strategy?
  • Is it a fad that we can avoid as our competitors get distracted?
  • Or should we gingerly — maybe even reluctantly — make a few investments just to minimize our downside until it’s clearer whether there is indeed money to be made here?

Now an older-line venture firm — Menlo Ventures — is making its first investment in the world of blockchain, the tech that undergirds virtual currencies. Menlo is part of a new $ 40 million financing round at Bitpay, a startup that allows merchants to accept and store bitcoin paid by customers.

Not all venture capitalists are excited about businesses that rely on normal people using bitcoin for everyday transactions. Investors and startups increasingly see cryptocurrencies as an asset to be traded like gold, not as something to be used at a shopping mall like a dollar bill. And so several top-tier venture capitalists who invest in crypto told Recode they passed on Bitpay amid concerns about how the company’s business model fits into the trends in the industry.

Bitpay CEO Stephen Pair disputed that the company had any trouble fundraising, saying that it had to “expand” the round from a planned $ 30 million to the final $ 40 million total due to high demand.

The company did something unusual during fundraising, too: It announced in December its intention to raise a fundraising round that was not yet closed, unveiling the in-progress $ 30 million round led by a fund managed by Aquiline Capital Partners. Menlo’s investment is part of the same round.

“We wanted to make sure that anybody who wanted to participate could, and announcing it serves that purpose,” Pair said.

That might not be read as a sign of strength, but Bitpay says that in 2017 it processed more than $ 1 billion in bitcoin payments. Pair says the company has been profitable for a year and a half and therefore hasn’t needed to raise much money — it last raised about $ 30 million in 2014.

And even if there are some investors and industry veterans who are pessimistic on bitcoin payments in the United States, cryptocurrencies are potentially quite attractive overseas for buying and selling goods. In countries with a large unbanked population or where currency values gyrate wildly, bitcoin can be a stabler form of payment and make commerce easier, especially for the poor.

So it’s no surprise that Bitpay is thinking about using this money to fuel its international expansion, particularly into Asia. Pair said Bitpay could expand open an office on the continent this year in either Hong Kong or Singapore. Several of the investors in this round are Asia-based.

But what’s most interesting about this round is what it says about how Menlo, founded in 1976, will deal with this new sphere of startup innovation. Tyler Sosin, who is leading Menlo’s work in crypto, said his firm had been evaluating startups using blockchain for the last 18 months but had yet to find something that they loved.

Sosin said that Menlo feels blockchain will be integral to the future of payments — and that they are attracted to payments platforms because it doesn’t require them to bet on the success of any individual cryptocurrency.

Menlo has yet to participate in an initial coin offering, or ICO, Sosin said, nor has it purchased cryptocurrencies outright with firm dollars. While the fund has been slower to engage than some of its rivals, Sosin insisted that the industry is still evolving and that Menlo was eager to dive more fully into this set of startups.

“It’s early, early days,” he said. “We imagine there will be some very big companies.”

Recode – All

Cash For Apps: Make money with android app

President Obama ‘made the best decisions he could’ about Russia, former advisor Valerie Jarrett says

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

On Recode Decode, Jarrett says tech companies should work with the government to safeguard democracy.

As a senior White House advisor for all eight years of Barack Obama’s presidency, Valerie Jarrett says Obama used to ask his staff, “When are you going to bring me the easy decisions?”

“And we’d go, ‘Oh no, we took care of those,’” Jarrett said on the latest episode of Recode Decode, hosted by Kara Swisher. “‘You get the tough ones.’”

One of those tough decisions that has fallen under retroactive scrutiny was how Obama reacted to early emerging evidence that Russian-backed actors were attempting to sway the 2016 U.S. elections. Was there more he should have done?

“You make judgment calls every single day,” Jarrett said. “With the benefit of hindsight, we would all maybe do things differently, but I feel confident that based on what he knew, when he knew it, he made the best decisions he could.”

She expressed sympathy for the tech companies that she said weren’t aware that their platforms were “being used as a force for evil.” But she said there’s a more important role they can play in future elections, rather than merely looking back on what could have happened differently in 2016.

“It should be a united front of the private sector and government saying, ‘What could be more key to our democracy than preserving the integrity of our voting?’” Jarrett said. “We should all be really dedicated to that.”

You can listen to Recode Decode on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts.

On the new podcast, recorded in front of a live audience at South by Southwest 2018, Jarrett reflected on how quickly technology has changed — in politics and everywhere else — in just a decade.

The technology revolution is like no other revolution we’ve seen before in our country,” she said. “I remember, President Obama was in office when he asked me what I knew about Twitter, and I said, ‘You mean, like, all a-twitter?’ That was in 2008, and I had no idea what he was talking about.”

Today, Jarrett is something of a techie herself, serving on the boards of Lyft and 2U, and advising the Los Angeles-based media company ATTN. She said she disagreed with the idea that, since 2016, her fellow Democrats have become more “anti-tech.”

“I think tech is an incredible tool for good,” she said. “I’m not anti-tech at all. I want to figure out how to make tech stay as good of a tool as it can, and do no harm — or, do as little harm as possible.”

If you like this show, you should also sample our other 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.
  • On Too Embarrassed to Ask, also hosted by Kara Swisher, we answer the tech questions sent in by our readers and listeners. You can hear new episodes every Friday on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts.
  • And Recode Replay has all the audio from our live events, including 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.

Recode – All

Cash For Apps: Make money with android app

Meet Barry McCarthy, the man behind Spotify’s daring public offering

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

Spotify’s CFO pushed for this week’s direct listing, which could change life for Wall Street and for big tech startups.

When Spotify goes public Tuesday, the spotlight will shine on 35-year-old CEO Daniel Ek, who has built a $ 20 billion company and helped revive the music industry along the way.

But if Spotify’s unusual “direct listing” offering — done without the traditional assistance from investment banks — is successful, credit will go to a Spotify executive thirty years Ek’s senior, who doesn’t want any attention: Barry McCarthy, the company’s chief financial officer, who is acknowledged as the architect of the unorthodox, and to some, controversial public offering.

If the direct listing works, it could pave the way for other tech startups to follow suit. That could potentially cut out Wall Street banks and their clients from a lucrative revenue stream, and would roil the financial services industry.

But people who know McCarthy say he does not care about the broader implications of his plan — he isn’t motivated by some ideological crusade to stick it to Wall Street, nor by some high-minded attempt to chart a new future for the technology sector.

“I don’t think it’s a middle finger to Wall Street because he comes from Wall Street,” says Reed Hastings, the CEO of Netflix, where McCarthy was its CFO for eight years. “He’s as Wall Street as it gets.”

In a traditional offering, a startup hires bankers to find investors to buy its stock, a pre-qualified group willing to take the risk of taking on shares in a company that hasn’t trade openly. The bankers sort out the right price for these shares by wrangling and haggling with these investors, who then sell those shares the following day on an open exchange like the NASDAQ or the NYSE.

In the direct listing that Spotify is attempting, there will be no bankers to find qualified pre-buyers and set a price for the initial stock sale. The shares of SPOT will just open on the NYSE exchange on Tuesday.

Some spurned bankers are quietly rooting for Spotify and McCarthy to fail. Their argument: The strategy has real risk, because they haven’t been able to help the company guarantee an appetite for its shares, and they won’t step in to stabilize the stock if something goes wrong. Its stock value could swing frantically.

So if Spotify stock trades wildly in its opening days, or tanks in its opening months, McCarthy could end up as the poster child for Silicon Valley arrogance. Some bankers will see it as comeuppance for an executive who tried to fix a system that in their eyes wasn’t broken.

McCarthy first joined Spotify in 2014 as a member of its board, and moved to the CFO role a year later. As the company started edging toward a long-awaited IPO, he started selling Ek on the direct listing.

McCarthy presented the entrepreneur and his board with a clinical, “brutally logical” diagnosis of why Spotify shouldn’t sell shares to institutional investors right before trading begins.

Spotify, he argued, could avoid the regulations, fees and distractions since it didn’t need to raise money, already had a well-known consumer brand and had a good idea of how much it was worth from all the private trades done for years by existing investors.

“It’s not like Barry’s wanted to do this forever and this was the opportunity,” said one person close to the company. “Barry does not care about how history remembers him or doesn’t remember him.”

McCarthy is an unlikely iconoclast. He started his career at Credit Suisse First Boston in the 1980s, trading mortgage-backed securities when that industry first took off. He headed to his first CFO role at a different music company, Music Choice. And then at Netflix, he executed a traditional IPO under Hastings.

McCarthy helped Hastings create a fast-growing DVD-by-mail business, with a high-flying stock price — and then helped Hastings pull the company back from the abyss in 2011, when a bungled price hike, a disastrous plan to split the company into two, and the loss of crucial content from two Hollywood studios pushed the company’s stock down 77 percent in four months.

But as Hastings recalled, McCarthy wanted to be a CEO or a COO. It took him three years after leaving Netflix to find it, but he did — at Clinkle, a much-hyped payments company that raised money from A-list backers and then flamed out in spectacular fashion.

McCarthy lasted six months as COO, but avoided career disaster.

“It’s the classic tension: You can get the bigger job at the smaller company, like a Clinkle kind of thing,” Hastings said, adding with some understatement: “I’m sure he’s found Spotify much more satisfying than Clinkle.”

But his time at Netflix made him well-suited to serve as Ek’s de facto Sheryl Sandberg or Eric Schmidt — a voice of experience that carries a lot of weight for the young chief executive. Though in this case, it is the older wise man pushing the more radical idea.

His Netflix pedigree, coupled with Spotify’s Netflix-like grow-fast-now, worry-about-profits later strategy, conveys an implicit promise to would-be Spotify investors: This is another consumer growth rocket ship.

McCarthy made that connection explicit at Spotify’s Investor Day last month.

“This reminds me of my first ten years of Netflix,” he told investors, in what he said was his first public speaking event in eight years.

McCarthy isn’t cutting out banks entirely from Spotify’s public offering. The company will spend up to $ 50 million in advisory and other fees — an out-of-pocket expense it will pay for immediately. (If Spotify had done a traditional IPO, its bankers would have made most of their money by reselling an allotment of Spotify equity.)

That’s real money, even for banks the size of Goldman Sachs. David Solomon, Goldman’s CEO heir apparent, made a personal plea in Goldman’s pitch to Spotify, playing up his now well-publicized side-job as DJ D-Sol, according to two people with knowledge of the pitch. It worked.

Spotify has considered other alternative paths to going public. Ek and venture capitalist Chamath Palihapitiya had some very early conversations about using Social Capital Hedosophia, Palihapitiya’s planned special purpose acquisition vehicle, to acquire Spotify and “back in” to public status that way, according to multiple people with knowledge of the conversations. Social Capital declined to comment.

And even once a direct listing was chosen as the play, the company confronted hiccups.

Spotify had to spend months walking regulators at the Securities and Exchange Commission through the details of the plan. And late last year, Spotify had to hammer out a way to mollify a pair of investors who had issued debt to Spotify that would only convert to equity when the company officially IPO’d. McCarthy and Ek found a way to soothe what at one point appeared to be a sticking point in the negotiations.

That has all led to to Tuesday, when Spotify shares will trade freely for the first time. It will be a big deal for Spotify, and it may be a big deal for future startups and the bankers who want to work with them.

Good luck getting McCarthy to say it’s a big deal to him. “I don’t think he’s trying to be the hero,” said one person close to the process. “He’s not an evangelist. He’s not really trying to change the world.”

Recode – All

Cash For Apps: Make money with android app

Snapchat is mocking Facebook and its Russian political ads controversy with a new April Fools’ Day filter

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

Nothing is off-limits in the fight between the two social media companies.

Snapchat is leaning into its bitter rivalry with Facebook this April Fool’s Day, unveiling a photo filter that pokes Facebook in the eye for its inability to curtail the Russian influence campaign on its site.

A new filter allows you to pretend you are uploading a new profile photo to Facebook — but the standard news feed language that someone “updated their profile picture” instead reads in Cyrillic. The people who like the photo are “Your Mom,” “A bot” and “2 others” — with all that language being featured in Cyrillic-looking text.

Here’s our friend Casey Newton of our sister site The Verge showing off the feature.

It’s a pretty aggressive prank by Snapchat — which has largely evaded the election-related Russia controversies that have ensnared Silicon Valley giants like Facebook, Twitter, Google and Reddit. But Snapchat hasn’t shied away from hand-to-hand combat with the social media giant that owns Instagram. Instagram copied Snapchat’s stories feature and its rise as a competitor to Snapchat is at least partly responsible for Snap’s business problems and lackluster performance on Wall Street.

Last April Fools’ Day, Snapchat nodded to that beef with a filter that that allowed someone to take a photo and apply a filter that was literally the Instagram interface. Well played.

But this year’s prank hits at a much more sensitive note — Facebook is in crisis, and Snapchat is pointing and laughing.

Recode – All

Cash For Apps: Make money with android app

The Saudi Crown Prince is headed to Silicon Valley. One of its fanciest hotels is closed to the public. Coincidence?

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

Saudi Crown Prince Mohammad bin Salman

Why can’t you stay at The Four Seasons this week?

One of Silicon Valley’s most luxurious hotels is closed to the public for six days this week to make room for a VIP.

It’s a good bet that very important person is Saudi Crown Prince Mohammad bin Salman and his entourage.

The Fours Seasons Silicon Valley, located in East Palo Alto, isn’t accepting reservations from Monday, April 2, through Saturday, April 7, according to the hotel’s director of rooms, Ehab Mekhael. Some guests who had previously reserved rooms are being moved to rival hotels in the area.

Hotel management is telling those relocated guests it needs the rooms to accommodate a “large VIP delegation” at the request of the U.S. Department of State, according to an email from the hotel staff obtained by Recode.

Here’s an excerpt from the email: “The State Department has approached the hotel for a large VIP delegation next week. Due to the hotel’s layout and location they’re adamant that we are the best fit for their high security needs which will be restricting the hotel and all outlets from other guests.”

This move comes at the same time that Saudi Arabian Crown Prince Salman is visiting the West Coast area and meeting with tech leaders including Tim Cook, top Google executives and VCs.

A press rep for the State Department and the spokesperson for the Saudi Arabian Embassy did not respond to requests for comment when asked if the Saudi Crown Prince and his entourage were staying at the hotel. Four Seasons PR rep Malia O’Connor said the hotel wouldn’t disclose the names of individual guests.

The Saudi delegation effectively closed down the Plaza Hotel in New York this week, where they signed a memorandum of understanding with SoftBank to invest up to $ 200 billion in solar power development in the Crown Prince’s kingdom. The delegation was so big that they reportedly had to book additional rooms at the Four Seasons and St. Regis to host the group in its entirety.

Recode – All

Cash For Apps: Make money with android app

Full transcript: Chris Kirchhoff, formerly of the Pentagon’s Silicon Valley office, on Recode Decode

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

Flying cars could be in our future.

“I’m from the government, I’m here to help.”

On this episode of Recode Decode, hosted by Kara Swisher, Christopher Kirchhoff, a former partner at DIUx, the Pentagon’s Silicon Valley office, talks about how the Defense Department is trying to be smarter about technology.

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

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


Kara Swisher: I’m Kara Swisher, executive editor of Recode. You may know me as the general in charge of the Militia Etherege, but in my spare time, I talk tech, and you’re listening to Recode Decode, a podcast about tech and media’s key players, big ideas and how they’re changing the world we live in.

Today in the red chair is Chris Kirchhoff, a former partner at the Pentagon’s Silicon Valley office DIUx, which stands for Defense Innovation Unit Experimental. What a name. It funds private companies in exchange for commercial products that can solve national defense problems. He’s also a visiting technologist at Harvard University’s Institute of Politics. Chris, welcome to Recode Decode.

Chris Kirchhoff: Thank you.

When I met you, you were working for Ash Carter. Is that correct?

I was.

Explain this DIUx because I think it’s really interesting. The CIA has an innovation unit here, all kinds of government agencies do, but Ash was a real technophile.

You have to give him credit for his vision. Back in …

He’s defense secretary under President Obama.

He was, but in 2001, he was merely Professor Ash Carter at the Kennedy School of Government, and he wrote an article that said the rate at which commercial R&D is growing is quickly going to surpass what the federal government, the Defense Department, spends on R&D. And so, less than a generation from now, the Defense Department is going to have a real problem. It’s going to be out of touch unless it pivots to private R&D.

He wrote that article in 2001. Of course, fast-forward, and 2015 he becomes secretary of defense and one of his first initiatives is essentially making that pivot happen. So that’s where myself and three other partners get launched out here to Silicon Valley.

So explain how you got here, because we had Ash on the show when he was defense secretary. It was a great show. And he had some really interesting stances on a lot of things. Encryption, he parted ways with President Obama on that issue, all kinds of issues.

But what … how did you get to do that? And talk a little bit more about the background of getting it out … hadn’t been out here, which has been that defense has been very involved with tech but in a different way.

This is peculiar history where Silicon Valley and the Pentagon have been tied together in lots of ways for a very long time.

Yeah. The internet, for example.

Right. Going back to Stanford in the ’60s, actually, there is this incredible deep history out here of federal funded innovation that has really helped commercial firms flourish. But that, interestingly enough, has died out a bit. There’s definitely been a gap, particularly in the last 15 years, a gap that we were in part designed to fill.

What was your background?

Yes, I was minding my own business working as a national security aide in Washington. I was going to Security Council at the time and I had known Ash.

That’s not a small thing.

Yeah.

What were you doing there?

I was the director of strategic planning. So I was in charge of the office at the NSC that is supposed to look into the future and worry about what you can afford next.

Okay. How did you get the skills to acquire to do that job?

Crystal balls. No, I studied technology policy in college and then I got my PhD and then started off in Washington and national security. It turns out there’s a whole lot of technology challenges in national security. I ended up working quite extensively for all the years of the Obama administration on different tech issues.

Through that I had a chance to work for the chairman of the Joint Chiefs of Staff and worked very closely with Ash Carter before he became secretary, and as a result, when Ash thought about forming this office, he realized that he would need a combination of people to help run it, that the office has to of course know Silicon Valley, you would need to know Washington and the military. That’s an awful lot to ask of one person. So he decided to create a partnership through me and together with three other people with very different skills. I was sort of the Washington guy sent out.

Right.

This is actually a problem, because at the time I had five suits and one pair of jeans, so I had to go buy a bunch of jeans. But I moved out here a couple of years ago.

So, what was your charge? You had studied just tech policy. What were the challenges you were looking at at the National Security Council? Give examples for us.

Sure.

This is intelligence on our challenges we face for the government.

The National Security Council is a fascinating place to work, first of all, but 90 percent of the folks there are worried about what’s on fire today or what’s gonna be on fire tomorrow. That of course is appropriate and necessary. So knowing that they decided to create a small office that was trying to figure out what would be on fire five years from now, that office has kept on going. In fact, the person who took my desk, believe it or not, was the one who wrote the deep state banker memo and then got fired.

Yeah, thanks for that.

So now I know my …

Was there a deep state?

Yeah.

Did you find one in the drawer?

I actually I got a deep state sweatshirt made.

Okay, good.

And I was wearing it out here in Silicon Valley.

Who thinks of these things? Anyway, so you were there at the NSC … and what were you doing? What were you looking at? Like, what’s going on, whatever crisis had happened at that time?

Yes, I was looking actually at a technology … Tech is throwing national security a huge curveball right now because you have all the scary things that we all know about — missiles and nuclear technology from other nations — but then you have other kinds of commercial technology coming online.

So you have really cheap microelectronics, those microelectronic power drones. People can put grenades on drones. There’s all kinds of examples of emerging technology primarily coming out of the startup world, coming from Silicon Valley, in essence. Now, there’s a huge opportunity to a lot of this technology from a national homeland security standpoint, but there’s also a huge risk.

Right.

So we looked quite a bit at that topic.

Okay, what about the Russian involvement in the elections? Was that something you all weren’t paying attention to?

You know, one of the people who was supposed to speak at my White House farewell in August of 2016, couldn’t make it because she had to go to a very important meeting, which I later find out it was on that topic.

On that topic. Right.

So there were definitely a small number of people that were working on that.

So, you were there at the NSC and then you were dragged out here, essentially.

No, it was fantastic. I threw my golden retriever in the back of the car, drove over the Potomac, threw my BlackBerry out the window and came out to the land of, you know …

You do have BlackBerrys still there? Only place that still has Blackberrys, Washington, D.C.

What was your idea to come out here? Because again, a lot of agencies have representation here in Silicon Valley and opened up offices.

They do. I mean, it’s pretty small, though, to be honest with you. So In-Q-Tel is a strategic investment firm that you referenced earlier that works for the intelligence community. Then you have a couple of other representatives running around, but the playing field is really pretty open. There’s not too many people here that ingest a lot of technology and get it working in the federal government. We wanted to come out here, actually spend money, actually buy technology, pilot it, and then if it worked, use it at scale in the department.

Right, and back in the department, DARPA is doing that too, correct?

Yes. DARPA is one of the neatest parts of the federal government. It was a privilege to …

The D … Defense, what is it?

Advanced Research Projects Agency, we have to have acronyms. We’re DIUx and they’re DARPA.

DARPA has a very unique mission, which is to do really risky moonshot-style R&D. So if they’re trying it …

Like Mach 10 planes and things like that.

Right. It probably won’t work, but if it works it’ll be amazing. So they invented little things like the internet and the Stealth and all the sensors that made precision warfare work. That’s DARPA.

DIUx had a very different mission, which is to say there are some awesome off-the-shelf technologies being produced today, whether it’s a cybersecurity software suite, whether it’s a robotic ship, whether it’s a drone, whether it’s a new kind of data from commercial satellite, and you can use that today. You don’t have to do anything further to develop it. So our office had a very distinct mission from DARPA, which is to buy technology that’s available right away.

And when you talk about buy, what was that? How much money did you have to do this?

Well, I’m proud to announce that the office has just crossed the billion dollar mark in just under two years of making investments in tech.

This is already making investments, a billion dollars in investments.

Right. This is not making investments in the Silicon Valley venture capital way of buying equity, this is actually buying technology from companies, piloting it. And then there’s a really neat superpower the office has that Congress gave the department, which said if you do a technology pilot and you buy it a certain way you can immediately — and it works — you can immediately allow anyone in the department to buy that technology and scale them.

Without having to go through …

Without having to re-compete. Which is like … this is like the Holy Grail of federal acquisition and we’re privileged to be able to use them.

Give me examples of what … you get out here and what are you … how do you introduce yourself? Again, Silicon Valley doesn’t do a lot of business. It does defense business but not as much as you might imagine.

Yeah, no. I mean, it doesn’t do business with the government really at all.

There’s always people around, the Beltway Bandits.

And for good reason. So, if you’re a startup, your business plan says there’s a thing called …

Your drone startups.

Right. There’s a $ 25 trillion dollar consumer technology market and my tech is going to sell great there. If you go to an investor and you say there’s this teeny federal market, they have to file a lot of paperwork to get into and they don’t tell you for 18 months if you’re in or not. We want to focus on that, you know you don’t get funded.

Right.

So we knew that if we came out here with the regular tools the government uses to buy technology, we’d fail. We knew we had to find a different set of tools and we did. And because of those new tools, we can get a contract in about 30 days from start to finish, rather than 18 months.

Right. So, give me an example of once … you get out here and how do you introduce yourself? And then I wanna know what you invested.

Yeah, no. “I’m from the government, I’m here to help.”

“I’m here to buy your technology.” It feels like an episode that David Duchovny should be in. But what was … you kind of look like David Duchovny … anyway, how do you approach this world? Because it’s done in a very different way here.

Yeah, we were lucky to partner with a number of folks that are of the Valley and have a network of relationships here and have run startups and then CEOs at tech companies and have been executives and know their way around far better than I do. So we were able to use them to help us navigate the rollout here. We did that by first coming up with a particular challenge that we wanted to work on, somebody in the military would bring us a hard problem and they were doing it with an actual real-life mission that they figured commercial tech might be able to help with.

Give me an example.

Okay, so maritime surveillance. Right now, it’s really expensive to take airplanes and fly them with sensors looking, for instance, for boats carrying drugs. Wouldn’t it be amazing if, instead of flying 737s with military gear on them, we could take low-cost drones put the same surveillance packages on them, either on the surface of the ocean or in the air, and perform the same mission for much lower costs?

The group that brought that particular problem to us then caused us to go and do some market research to ask the question among the folks in the venture capital community and technologists we know. “Does anybody have tech that might be relevant to this problem? If so, put us in touch.” And then we ran a competition and we had an open bidding competition that anybody could enter. We found some firms had great tech. We were able to move forward in that particular case with the tech pilot.

So they can then sell that directly to the government.

Right, and there’s some additional benefits. I mean obviously the Department of Defense market is not a small one. So, particularly for a startup, there’s real opportunity there, but we provide some additional benefits too, that has been important for startups. We have things like test ranges that are really easy to get on. So if you’re a flying car company — and we work with a couple of those — we can get you on …

Get the flying cars, but go ahead.

You’re welcome in our test ranges in a hurry. That’s a great asset the department has.

Similarly, we can get your user feedback really quick. So it was a great example of one of the technologies that we deployed to Afghanistan with some troops, they were able to get the engineers some real criticism about what wasn’t working, which caused three iterations and the tech that made it much better that allowed the company …

What was the tech?

The tech actually was an amazing communications device. It was a mouthpiece, made by a company called Sonitus, and it allowed hands-free two-way communication using a bone conduction technology.

Near your ear.

Pretty wild. It vibrates your jawbone in such a way that causes the eardrum to vibrate. So imagine you’re on a patrol in Afghanistan or jumping off an airplane or a helicopter. There’s lots of noise. You’re having to grab a walkie-talkie or grab a microphone, which is not great because — or put headphones on to hear — because you’re wanting to keep track of your area, what’s going on around you. So this technology is just a little retainer-like thing that you clip onto your teeth, it proved to be really useful to troops on patrol.

Did they buy them then?

They did, actually.

So let’s get into the procurement issue because … and then we can get to more of the things the defense department needs going forward. The procurement is they design things very specifically. We always get story after story about that, that they design a toilet in a way … when there’s a commercial toilet industry that’s fantastic. They’ve designed in a certain way, they need to have it. It creates enormous costs. It’s out-of-control costs and all these Beltway Bandits take advantage of the situation and know how to work the system. And then there’s all the people that are revolving doors and military people into military contractors, blah, blah, blah. Because they buy everything, the military buy’s everything.

I know that’s certainly true.

Yeah.

But that comes from a particular history, right, which is if you’re going to, if you’re going to buy a nuclear submarine you can’t exactly go on Amazon.com and find 45 vendors.

No, not today. Maybe tomorrow.

Maybe tomorrow.

But they get it there faster.

They sure would. The result of that is the government system — particularly the defense acquisition rules — are set up to deal with companies where there’s often only one vendor. So that raises the question of how do you get a fair price for the taxpayer.

Right.

And the way that you get a fair price is your list out 45 pages of specifications for the toilet seat, and you say you must meet them in a certain cost, and that’s how we know we’re getting a fair deal for the taxpayer.

Right.

That works okay for a nuclear submarine. It doesn’t work as well for gear that’s much more commercially available. That’s where the problem exists, because we don’t need a drone company selling drones on Amazon.com today that could be used in military mission to fill out 65 pages of technical specifications where their drones should be.

How did you push back within the administration … the way that defense firms set up for that? Because you’ve got all these people. How do you create that situation? What’s the impetus for doing it?

Well, we got really lucky because in our corner we had Ash Carter, Secretary Ash Carter, who really believed in this mission and said, “I want you to find a way to do this, and if anybody tells you you can’t do it, you bring it to me.”

So we did the first thing you always do in these situations. We took a lot of lawyers to lunch and we discovered a very obscure provision of law, called other transaction authorities, that actually had to do this for advanced technology.

You get to work outside the federal acquisition rules quickly, you could just sit down with companies, you get to share information. It had everything we were looking for. Shockingly, very few people in the department were using it. Why? Well, it was obscure, not too many of the contracting officers or lawyers were trained in it. But after taking enough lawyers to lunch, we found a couple that were willing to work with us and agree that this would be a perfect fit.

What you were doing.

And we, as a result, became one of the first groups to use it widely and to use that special provision I referred to earlier, which allows you to go from pilot to production contract without re-competing.

Without re-competing.

When we get back we’re talking to Chris Kirchhoff. He was a former partner at the Pentagon’s Silicon Valley office DIUx, which stands for Defense Innovation Unit Experimental, it’s been funding private companies to the tune of a billion dollars in exchange for commercial products that can solve the national defense problems. When we get back we’re going to talk more with Chris about what those problems are and what are some of the things that he got done when he was there.

[ad]

We’re here with Chris Kirchhoff, a former partner at the Pentagon’s Silicon Valley office DIUx, which stands for Defense Innovation Unit Experimental. It has funded private companies in exchange for commercial products that solve national defense problems. He’s now a visiting technologist at Harvard University’s Institute of Politics.

Chris, talk a little bit about what … some of the things you were looking for when you got here. You mentioned a few, that problem in Afghanistan with an earpiece, essentially. Name some other things that you guys invested in, and how did you … how did you find … you did searches for them, all kinds of research to find them. Who did you focus on? The big companies? The Googles? Or did you go to the smaller startups in what you were looking for?

Yes, we actually started first by talking to different units in the military and asking them, “Hey, what’s your hardest problem these days? Is there something you think we could do to potentially help?”

And we went from there to doing market research and asking the question, “Is there tech somewhere out in the tech world that might be relevant?”

The big surprise, I think, is showing up in Silicon Valley you’d expect cybersecurity software, software in general, to be a huge part of your portfolio. But actually it turns out most of our deals, many more than software, has gone towards hardware, which I think reflects a huge shift in the Valley here towards hardware itself that was a real surprise.

So a couple examples of projects we’re really proud of. One actually, funny story. Eric Schmidt is the chairman of the Defense Innovation Board.

Yes, he is.

Took his band of innovators around the world.

Is he still that?

He is, yup.

Explain the Defense Innovation Board. We don’t need to explain Eric Schmidt.

Right, so the Defense Innovation Board is a group of folks from outside the department, each of whom have really deep expertise in an area of tech, and they travel together essentially as a bunch of consultants who visit different commands around the world and look at what they’re doing and then make suggestions for maybe how they could be doing things better.

And so the story here is I think representative of the kind of insights they’re able to have. They toured the air operation center in Qatar. So this is the war room, if you will, that’s prosecuting in the air war.

We have most of our forward bases are — correct? — in Qatar.

Right.

It’s in the news lately, recently.

Yes. So if you’re trying to prosecute an airstrike in Iraq, in Syria, this is the operation center that does that.

Eric noticed there are these three or four captains doodling on a giant white board and they were … they had all these numbers and symbols and he said, “Well, what on earth are you doing?” They said, “Oh, we’re planning tanker routes. It’s one of the hardest things to do is to get enough refueling tankers in the right orbit so that they can link up right with aircraft to refuel them as we’re getting ready to do airstrikes.”

Eric said, “Well, there’s a thing called software. Why are you still doing this manually?” And they said, “Oh, well we actually have software that does it but it’s awful, it doesn’t really work. So the three of us just take 60 man hours every day to do this. And it’s a real pain because if one thing changes that we’ve got to go do it all over again.”

The math. It’s like they’re in “Hidden Figures.”

Right. So Eric shook his head and said …

Recalculate those Moon trajectories.

And then he turned to DIUx and said, “All right, you guys fix this.” So we did. We sent some of our Air Force guys forward with iMacs. They set up shop. They actually knew how to code. In less than really three months they built a prototype app that allowed the same programming to occur automatically in seconds.

Who had built their first one?

A defense contractor had built their first one and there was a refresh scheduled and we met them, they said, “Don’t worry. The refresh is being worked on now. The initial version should come in 2020, 2021.” We were of course astonished at the length it time …

Timing, and of course we are.

Well … we were proud anyway to send a very small number of folks forward, and in just under $ 2 million.

The fact that they messed up Obamacare just makes … I had an argument about Obamacare with someone and they were like, I said, “Well, you know Tinder makes all these matches, it’s all matching, it was all you had to do was matching, Tinder makes all these matches every day, millions and millions of matches.” And they said, “Are you comparing Obamacare to Tinder?” And I said, “No, Tinder works.”

At the time it was funny, but it was … the expenses were enormously different between what government was charged in terms of software and what you could get almost off the shelf. There’s no shelf to get it off anymore, in fact. You know what I mean? It was a shocking inability to just use software on the fly.

But this is a great way that Eric and the innovation wars were able to contribute, but they know other ways of doing things.

Right.

And the process can not only make the U.S. military more effective, but save millions even billions of taxpayer money.

What I find shocking is that they haven’t updated this. That’s the part I don’t get, when businesses have … when consumers have … But, anyway that’s another rant I can make later.

So can you … you had the defense, the board, that Eric was on. Right?

Mm-hmm.

And then what you did was you would go around and do this all around the world?

Right. We work closely with the Innovation Board. Ash Carter also founded, there’s something called the Defense Digital Service, which is a bunch of programmers that work on IT issues.

Special ones, and every agency had those. They were moving those into every agency.

Well, that was the ambition at the end of the Obama administration, but as we know, science and technology in the current administration is a bit more challenged.

They aren’t there. It’s okay, you can say it, there’s nobody working there. But that was the goal is to put people in each agency to redo their IT.

And that actually brings up one of the bigger lessons that I’ve always taken away from my time both in government and out here, which is there is such extraordinary talent out here and there is no way we are going to get them to apply for a civil service job.

Right.

Right, and so we need to find some kind of way to get folks out here that are ready to take a year or two of public service and kind of like the Peace Corps, send them in.

Yeah, that’s what they’re trying to do. I was just with Chris Madell in Washington.

But let’s get back to the things you guys did. What else did … A billion dollars is a lot of money. That’s a pretty fair-sized VC fund, for example. What other things did you do?

Yeah, so we did a couple projects with flying cars, which I think really will be …

Explain that please.

The future of, yeah, military transportation. So right now we use helicopters to get around the world. An aircraft investigator once described to me, a helicopter is a million parts flying closely in formation.

That sounds great.

Wouldn’t it be great to move to an electric-powered vehicle with the same range that has one moving part, is silent. So we’re experimenting with different ways to deliver those troops …

Explain flying car. How do you conceive of it? Because I know Larry Page is working, a lot of people are working on flying cars. What does that mean?

Yes, I think there’s … personal air vehicles are of course, as people around here say, an industry of the future, that’s certainly true. So our question …

VL … vertical lift and take off.

Our question is how can we use this prototype technology to do military missions better? And it turns out there’s enormous opportunity both for delivering troops and special forces into denied areas. There’s also great possibilities for resupply, all of which right now are being carried out through much …

Through helicopters.

Right.

Right. Explain how it flies, if you’re talking about a flying car, how it’s different than a helicopter.

Yeah. Well, it’s a large drone, essentially, and because it’s electrically operated you have far fewer number of parts than you do in internal combustion engines, so your rate of engine failure is much lower. It’s fully autonomous. The range, actually, is pretty impressive on certain companies’ prototypes.

So what you have is actually something that’s very close to being operational, something that we can almost …

Just like a Tesla of the sky.

Exactly.

And does it look like a helicopter? Does it look like a …

It looks like something out of a “Batman” movie.

Right. Which one? I mean, it has four copter … they have a propeller, correct?

Yeah, there’s a few different designs. But yeah, they all look like a cross between something out of a “Batman” movie and “The Jetsons.”

Okay, and so you would fly those … fly these cars — and they’re not hovercrafts because that’s a whole different area of … people aren’t looking at that?

They can hover, right, which is useful for resupply. But yeah, they can do all kinds of things. So, it was our mission to ask the question if, gosh, you could potentially use these. And how ought we be planning to use this future technology?

Well, everyone put up their hand for that one, right? Like regular people want a flying car. Or everybody wants a flying car, presumably.

That’s true, but it’s much more likely that the military will start experimenting with them first.

Right. First. So, they would do them in missions, in resupply, in night missions, anywhere a helicopter goes, correct? Right now.

Right.

Right. Then it would not have to do a lot of maintenance and difficulty.

And you can do things, too, like to segregate a squad. Right now, we’ve put a lot of people typically in one or two helicopters. That’s not great for all kinds of obvious reasons, so wouldn’t it be nice to have 10 or 12 aerial vehicles carrying the same number of people that will not be nearly as vulnerable.

And easier to move, less dangerous to crash and things like that. All right. So how much money do you put into it that, and who’s making those?

Well, the same companies that you probably know about are making them, and this is again an example where the Department of Defense can actually play a role helping these companies on their commercial path.

It’s where they want them, right.

First of all, we have a small amount of money to spend and many of these companies are so capitalized … our money is peanuts, but we also have test ranges that they can go tomorrow and fly on.

Explain these test ranges. They have places where? In secret installations? Or where?

There are secret test ranges. Most of them are not, and a couple of them are actually very close to the Bay Area. So DIUx has set up a couple test ranges, one for flying cars, another actually for drones and anti-drone technology. Which is another real issue on the battlefield.

Right.

How can we stop a missle or other foreign adversaries from using drones to disrupt …

Right. Grenades, or look at us. They can do almost anything, correct? Poison or dispersing … and we could use the same, presumably. I’m sure we have.

Sure.

Yeah. So drones is another one. What other things did you find?

A lot of …

By the way, it was in a “Homeland” episode, they had a drone and then, all right, shot it down.

If only it all worked like “Homeland” or the movies.

Where Carrie saves everything.

I made some great investments in cybersecurity and cloud software, and some undersea and sea-surface technology.

Okay, explain the undersea.

Well, it turns out one of our great advantages militarily is our undersea technology. But at the same time there’s been a lot of progress made on the commercial front. Different kinds of submersibles and robots that can operate in new ways. So that’s another great example of startups out here that have developed a technology that is for a different purpose altogether, but actually it’s quite relevant for military missions.

So this is submersibles to spy … that’s what submersibles are for? Presumably.

You can do that. You can conduct ocean surveillance. You can monitor temperature conditions, which are really important for other Navy missions. There’s a whole bunch of things you can do. Again, these are … DIUx is after broad classes of technology that can be transformational in many ways.

Beyond the submarine.

Right.

Then give me one other. Outfits. Clothes. Exoskeletons.

Outfits. Yeah, sure. So we’re … right. Wearables, it turns out, is another great place that there’s a heck of a lot of innovation going on right now on the commercial market.

Imagine you’re on an infantry squad and you have a mission that involves getting miles away in tough conditions. Dehydration is actually one of your biggest enemies. Imagine having a wearable sensor that would allow the squad leader to know when one of his or her soldiers was in danger of dehydration. Little things like that can make an enormous difference.

That’s a great idea, yeah. And what about exoskeletons and things like that? Were you involved in those?

We have not done any exoskeletons, but that again is another great example …

Carrying and lifting.

Right.

They’re using them in factory lines now.

They certainly are. Which is a whole nother area of potential innovation, of what technology are we using in modern factories that could also be used in defense factories.

Right. Right. That are being used. Do you find the defense people very open to all this, what you are bringing to them? Or did they think there’s this weird group of guys out in Silicon Valley …

Yeah, it was, to be honest, pretty mixed. The Defense Department is …

Big.

Big. Really big, actually, and also very tradition bound for good reason, because it turns out that mistakes in war are costly and you remember them.

So we really did have, I think, a challenge to prove to people that commercial tech could actually be durable enough and good enough to perform — and in cases even outperform existing military technology.

Right. Then when you … what would you say your most successful thing is? When we get back we’re going to talk about what the big challenges are going forward. But what would you think your most successful investment in your tenure was?

To be honest, I think it’s just showing that it can be done.

Right. You can have an innovative, nimble group.

Right, so taking six Air Force programmers and a couple iMacs and for under $ 2 million in literally eight weeks coming up with an app that revolutionized how the air war is fought. That caused a lot of folks across the Air Force to notice and ask the question, “Well gosh, I have this problem too. Could you send some of your guys my way?” Strangely enough, cultural change, I think, is going to be our biggest lever, if you will.

Right. And now what happened in the Trump … do they even know you’re there? Did they know you were there? What was the … what happened after Mattis, I guess?

Yes. Secretary Mattis was very kind with his time. He comes from a background of playing an incredibly transformational role in the Marine Corps so he gets transformation, and he came out last summer and spent a day and a half here in Silicon Valley. I think he’s very enthusiastic about our mission. Sees the logic, sees fit and wants to grow.

And continues to support it.

Yup.

Continues to … how many partners are here now?

So, we are a couple … Those that started have just moved on and we’re in the process of putting a new leadership team in place.

And that will be the same amount of people doing these investments?

Roughly, and in the office we started with 12 and we’re now almost up to 70 or 75.

You’re located where? In your usual …

Yeah, headquarters is down in Mountain View on Moffett Field. We have a office in Boston, teeny office in Austin, Texas, then a small office also in the Pentagon.

Great. We’re here with Chris Kirchhoff, who just left the Defense Department or I guess Innovation Lab almost, in Silicon Valley, DIUx, which stands for Defense Innovation Unit Experimental. Who came up with that, Chris? Anyway, when we get back, we’re going to talk about where things are going in defense and what will be happening in the near and far future.

[ad]

We’re here with Christopher Kirchhoff. He’s a former partner at the Pentagon Silicon Valley Defense Office, DIUx, which stands for Defense Innovation Unit Experimental. How did you come up with that awful name? I like DIUx but the rest …

I know. Well, first of all, we had to have an acronym because if we didn’t have an acronym they would not start the office.

Cool.

We figured X was kind of cool, but I definitely wouldn’t turn to the Pentagon for some really …

Yeah, how about Wakanda? So now you’re a visiting — I’m gonna get to Wakanda — visiting technologist at Harvard University’s Institute of Politics. So let’s talk about where the challenges are that we face from a defense point of view going forward. I assume you look at, obviously — I’m joking about Wakanda, but I’m not — this idea of how we think about innovation, how we incorporate it into our defenses.

This doesn’t seem to be an administration that’s super interested in science and technology. That science and technology office is not staffed. It hasn’t been staffed. It was a new thing with President Obama, but the Office of Science and Technology has always been there for half a dozen administrations, I think. And it doesn’t … I don’t think it has a head yet, does it? It doesn’t. No, it does not. Which is like frightening in a lot of ways. So can you talk about what our challenges are now in the near term without science advisers at the White House?

Yes. I was really impressed …

I’m assuming the different agencies still are interested in science, some of them.

Yes. No, that’s certainly true. So the United States is in this peculiar predicament right. We’re 4 to 4.4 percent of the world’s population. We still command a quarter of global GDP. It’s why we have nice houses, nice big screen televisions, all that.

Our challenge going forward is our economic competitiveness. How on earth can we keep generating so much of the global economy with so few people? And if we’re going to be successful at this we’re going to have to make sure the leading part of our economy, the part of our economy that’s most dynamic, that tech sector really succeeds. The tech sector at the moment, if you haven’t noticed, is producing crazy, wild, disruptive technology and that technology will not be successful without the government clearing the road for it.

100 percent.

So what I worry about most now is whether that road can get cleared. Whether there are enough people out here in the tech sector talking to people in Washington about what needs to be done.

Which they’re not. Right. So talk about the areas. I mean, I’m assuming AI, robotics, automation, infrastructure, self-driving, all kinds of things like that.

Yeah.

Or is there more? I mean, cybersecurity.

No, it’s all these things and …

Non-hackable elections.

Wouldn’t that be nice? These things are all important, and one of the greatest challenges is just with people, because the people that tend to know the most about these technologies are not employed in Washington. They’re employed far away. That creates a challenge to begin with. How on earth do we get the people that know the most about the technology talking to the people that are in charge of writing regulations?

So let’s start with that. There was a big push by the Obama administration to get techies to come for short amounts of time and they fixed Obamacare, they fixed a lot of things, they moved in and fixed things. Now they’re really having a hard time recruiting anybody, correct?

They are, and that’s something I worry about a lot. We did this big review in the White House that looked across radical merchant technology.

This is Obama’s …

Right, and where would … It just completely turned upside down the mission of certain federal agencies and departments. The Department of Treasury, for instance, it regulates money.

Right.

Something kind of important, and it also turns out is the biggest bank for the government. It clears a lot of payments for federal agencies. So blockchain is going to be something that completely changes the Department of Treasury’s mission. So we asked the question, “Well, how many people are there today in the Department of Treasury that have enough expertise to participate in a peer conversation about blockchain?”

I would say zero, probably.

That was the answer, actually, and it’s not a surprise because the Department of Treasury doesn’t have a DARPA. They haven’t been recruiting for PhD cryptographers. But, it turns out they need to.

Yeah.

And desperately.

Well, they’ve got a Goldman Sachs banker running it who has a kind of unusual manner — I think we can be kind, that’s a kind way of putting it — who doesn’t seem interested in that. Correct? I mean that’s … is that where it comes from, the top in the Department of Treasury?

I think on the tech issues it has to come from the top because if you’re going to get people in the department you’re not through the usual means, right? Get them involved in the top of the policy conversations. You’re going to have to be the one that opens that door.

Right. And these are the departments, presumably, involved with regulating the blockchain. Which they won’t be able to regulate at some point because it’s unregulatable on some level of its being created by not them, or being monitored by not the government.

And you can just imagine if you were to walk across to each building in Washington and ask people there, “What do you do and how is it likely to change in the next five years based on what’s being invented in a garage somewhere?” Boy, there are some real challenges that we’re going to face going forward.

So Treasury, blockchain and what else? Let’s go through them. Blockchain …

I think blockchain and other technologies are …

And then cryptocurrency.

Right. That, of course, impacts the intelligence community’s mission. It also impacts, believe it or not, the development mission. Blockchain is going to revolutionize how a lot of development takes place, whether it’s land titles or new financial technologies to the developing world.

Similarly, the Department of State, there’s this thing called digital now that turns out it changes how we communicate. Almost every department or agency across the government is facing some real curveballs, and the curveballs are coming fast and most of them are not equipped with the kind of people or the kind offices …

Explain what challenge the Department of State faces.

Well, the Department of Defense is lucky because it does have places like DARPA that are part of it. That attracts top commercial talent, that are the best of what they do, and they can …

These are big challenges.

Right, they can look around the corner and say, “Hey boss, there’s this thing that you ought to know about called stealth technology.” Unfortunately, the Defense Department is one of a few parts of the government that has an advanced technology shop like that. And that’s because 30 years ago nobody thought advanced technology was relevant to, say, diplomacy, but it certainly is today. So I think we face a real transformational challenge of how do we re-engineer the State Department to have in it some technologists that can think about how diplomacy might be different going forward?

So how would you … what would they need? What are the issues they need to focus on?

Right. So a lot of the State Department’s mission is reporting and communicating. That, of course, has completely changed. But a lot of the State Department’s mission also is American values. It turns out, our values are actually bound up quite a bit in our technology, and our technology is the kind of mobile phone operating systems that we create and the kind of internet we advocate for.

These are all deeply technological areas, and again ask the question, how many of your scientists are there today working at State?

Zero.

The answer is small.

Small. And that’s everything … I mean, they operate around the world, has to have some technological element.

There’s this funny story. I think there’s something like 140 foreign governments that have a presence here in Silicon Valley. Until last year, the State Department didn’t have anybody here.

Who do they have here?

They had one person who I think got fired.

Oh, okay.

Or sent along, when the administration changed.

Right. Okay. That’s not good. Another department, name another one. Education. Oh, good God.

Yes, so education is not something I personally looked at, but I mean, there again … Look, ed tech, the revolution going on at ed tech. Does the Department of Education have a DARPA-like appendage that is imagining what the future of ed tech is?

No.

And how that will affect American education policy?

Right. So through every single department, and our government, they have to be thinking about … what about this idea that they were gonna … I mean, I know that Chris Liddell and Jared Kushner were pushing the Office of American Innovation. Pretty much everybody quit it. I think a lot of people that were on these different business councils have left over, I think it was Charlottesville.

How do you get Silicon Valley reengaged then with the government, or this government at least? You have a president who seems entirely uninterested in science and technology and in fact is hostile to it.

These are … the past months have not been kind to those who care deeply about this topic. But I think it’s just crucial to step back and notice that, as a nation, this is our future. This is the one thing we cannot afford to get wrong.

So why are we affording and getting it wrong?

I think a lot of people in Silicon Valley are still sort of pretending that what happens in Washington doesn’t really matter to them. And I think a lot of people in Washington just don’t have easy ways to get the knowledge they know they need.

How do they get … because it really is, you gotta convince people, tech people, to come there. These people have jobs everywhere and are easily available to them here and across the world, really. How do you entice them to come to government?

I’ll give you one great example we found. In the U.S. they have something called the Global Development Lab that’s all about technology innovation and global development.

This is where?

USA.

Okay.

It was run, actually, by a former Apple employee named Ann-mae Chun, and she, within that lab, had the operational innovation team that was the team design to get to “yes.” So it had people from the legal department, from the HR department, from the contracting department, and whatever problem was brought to that team, “Hey, how do we get this Silicon Valley executive in for a year? How can we do this contract faster?” They were given the charge of coming up with a way to do it.

So they actually hired a tech recruiter. Imagine that, the government hiring somebody who is an expert in recruiting technologists with skills.

I can’t believe we’re saying, “Imagine that.” It’s like 2018 at this point.

Right. I mean, you would think, right? But it turns out that the bulk of the government, of course, is governed by the Civil Service Act, whose history goes back to the age of the telegraph, it was designed originally to staff the Post Office. Great at providing general administration, not so great at bringing in tech skills for term tours.

Yet, despite that, every department agency generally has a couple hiring authorities in the books, that if leadership says, “Hey, go do this,” you can get people in.

So what do you imagine … because I see other governments moving very heavily into technology within the government sector. And I’m sure they’re not ever as perfect as any of them. They’re all large bureaucracies so you’re going to fall prey to that. What are the biggest issues that our country faces, do you think?

I think one of the … again, going back to the importance of people, you can sit around a table in Washington and not even know that technology is in the middle of the issue you’re trying to solve if you don’t have somebody around the table that can see it.

So if you don’t have a tech team … I mean, if you have a lawyer in the room and an economist in the room, everybody in Washington has got their lawyer and their economist. But if you don’t have your technologist, you don’t even know what you’re missing. So I think that’s the first and probably the most fundamental part of the solution.

And then of the issues, what do you think the most critical thing is that we have to focus in on?

I think we’re at a moment where technology is probably a part of almost every major issue in one way or another.

Terrorism.

I think you can’t any longer say, “Oh well, here are the four issues that technology is a part of and the 12 that aren’t,” and then divide your staff that way. And that’s part of the challenge. This is different than it was even 10 years ago.

So you have to have a technologist at every juncture of governing.

It’s totally ordinary to have a lawyer and an economist on your staff, in fact they have career paths that are set up to support that.

Right, but not for technologists. All right, so what are you doing at Harvard? I want to finish up. What are you studying?

I’m having a ton of fun 20 years after I was a freshman. I got involved in public policy. There’s a little corner of Harvard called the Institute of Politics, it’s a living memorial to JFK. I’m teaching a seminar on the topic of “Public Leadership in a Technological Age.” So whether you’re a computer science undergraduate or somebody studying government — or classics, for that matter — what ought you know about technology, about how it’s produced, about how it’s governed. You can be a future leader on this issue and get ready to join the conversation after you graduate.

And what is your one main thing you tell them? That you have to …

Yeah. Right. Ask not what you … no. So, we get together and we host a bunch of speakers from tech, also from tech policy in Washington. We’re looking for ways to get internships through so they can actually go experience what tech is. And what we tell them is that there definitely is a role, whatever educational track you’re on, to be able to learn more. Whether you’re a computer scientist that … Harvard just debuted an ethics and computer science course this semester. Something that turns out was kind of relevant.

Yes, very.

But if you look at the curriculum on the whole, it’s certainly not built with the idea in mind that we’re in the business of producing leaders that have to be able to grapple with technology policy.

Absolutely. All right, Chris, this has been really interesting. If you … if I had to worry about one thing — I really do like the idea of a flying car — but if I had to worry about one thing and I know you’re not, you don’t want to pick one. What is the thing that you think that government needs to focus most strongly on in the tech area?

Sure. Well, I had a chance to work on Ebola, on the White House Ebola task force.

That’s not coming back, is it?

Well, the thing is we’re kind of changing the world in the wrong way, right? So we’re deforesting, we’re … roads and air travel everywhere and when we deforest, we create these things that scientists call ecosystems where species clump together that normally don’t and it turns out that’s basically creating the world into a giant petri dish for emerging infectious disease.

So I actually worry the most, to be honest, about pandemics, I’m kind of in the Bill Gates camp on that one, when it comes to security.

I’m with you on pandemics, you know I’m obsessed with pandemics.

Do you have any Purell in the office? We should probably …

I have a lot.

Good.

I’m a pandemic obsesser.

Thank you so much, this has been very depressing. But we do need technologists in government and this administration really needs to focus on it, but I’m not … I have to say, I’m not very hopeful about that at this point. But we can always hope things can change.

Anyway, this had been Chris Kirchhoff. He’s a former partner at the Pentagon’s Silicon Valley office DIUx, which stands for Defense Innovation Unit Experimental, which is still operating here. It funds private companies in exchange for commercial products that can solve national defense problems. Thank you, Chris, for coming.

Thanks for having me.

Recode – All

Cash For Apps: Make money with android app

Chicago Mayor Rahm Emanuel says Apple’s technology is a ‘means, not an end’ to help public education in his city

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

Tech can can help equalize opportunities in education, the Mayor says.

Chicago Mayor Rahm Emanuel explained how he sees Apple helping Chicago public school students learn how to code after the company’s education-themed keynote on Tuesday.

Emanuel spoke with Recode’s Kara Swisher after Apple’s event at Lane Tech College Prep High School, where Apple announced its new partnership with Chicago Public Schools and Northwestern University to train local computer science teachers in coding.

“Apple is an important part of making computer coding universal and making sure kids have that,” said Emanuel. “There’s 6,000 school districts across the United States. Every one of them would be excited to have Apple.”

Apple is creating a Center for Excellence at Lane Tech where Northwestern University trainers will provide free technical education to local high school teachers through Apple’s Everyone Can Code program as well as training on Apple’s programming language, Swift. The company says the program is an effort to address the shortage of high school computer science teachers.

Chicago Public Schools made coding a requirement for high school graduation back in 2015 — the first urban school district to do so — and has educational partnerships with other tech companies such as Cisco and IBM, the Mayor said.

Still, Emanuel emphasized that technology should never supplant the fundamentals of education.

“Technology doesn’t replace literature, it should complement it,” said Emanuel. “Sometimes there is an overemphasis on technology as if the other stuff is not necessary,” he said.

In his interview with Recode, Emanuel also discussed his passionate support for Dreamers and the importance of privacy online. You can watch the full video below:

To learn more about Apple’s plans around education and job training, watch Tim Cook’s interview on “Revolution: Apple Changing the World,” a TV collaboration between Recode and MSNBC that is scheduled to air on Friday, April 6 at 8 pm ET.

Recode – All

Cash For Apps: Make money with android app

Tim Cook’s advice to his younger self: ‘The joy is in the journey’

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

“Our purpose is to serve humanity.”

“Knowing everything you know now, what would be the greatest piece of advice you’d give your high school self?”

That was the final audience question for Apple CEO Tim Cook during this week’s taping — at a Chicago public high school — of “Revolution: Apple Changing The World,” a TV collaboration between Recode and MSNBC that’s scheduled to air on Friday, April 6 at 8 pm ET.

His response: “I would tell myself that the joy is in the journey.”

The crowd applauded loudly, and Cook shifted into commencement-address mode, continuing:

And that the real purpose of life — everybody talks about “find your purpose, find your purpose, find your purpose” — the truth is we all have the same purpose. And we should all quit looking. Our purpose is to serve humanity.

More applause.

And so, most people ask themselves the wrong question. The question they should be asking is: How should I serve humanity? What will be my gift?

And they should ask that pretty much every day, because you can give small gifts and you can give large gifts and it doesn’t have to be — certainly doesn’t have to be money. Most of your gifts will never be money. They will be a gift of yourself and your passion — your way of changing the world, improving the world for other people.

And I wish I would have realized that sooner. Because I went through a period of time that I was rudderless where I thought I should be looking for my purpose. I looked under every sheet, behind every door, and everywhere, and I couldn’t find it. I thought, “Oh my God, there’s something wrong with me. I can’t find it.”

And then I found it in Apple, and I found a company that believed at the company level that its job was to serve humanity and —

Another round of applause.

It’s that that has made all the difference for me — is just being a part of that. And I wish I would have found it earlier. I wish somebody would have hit me over the head with it earlier.

Steve [Jobs] hit me over the head with it. It just took a little while.

This wasn’t Cook’s first time delivering this message, but it struck a chord in the room — a high school gymnasium.

In 2010, he addressed the Auburn graduating class, concluding, “Let your joy be in your journey — not in some distant goal.” Six years ago, he talked about it — in the context of his relationship with Steve Jobs — with Recode founders Kara Swisher and Walt Mossberg at the D conference.

But after more than an hour and a half of taping the show, discussing in-the-news topics like privacy, regulation, political pressure and job creation, it was a nice way to wrap up.

Recode – All

Cash For Apps: Make money with android app