American Consequences - August 2021

COVID: A Remedy for U.S. Health Care?

The Fed's Virtual Reality

Afghanistan: The Rapid Collapse







AUGUST 2 0 2 1


A merica’s cresting on a few torrential financial and political waves as summer sets... rising cases in the Delta COVID variant, staggering prices due to inflation, and punch-drunk exuberance in the markets. Will these manic swells and swings of the late-pandemic economy come crashing down upon your savings soon? In a world where you feel like you can’t trust the Fed, D.C., the CDC, nearly all social media, and most news outlets... in a country where we can all barely agree on what’s real ... deciding what to do with your money can seem daunting. But you have to say grounded... which is to say, don’t act like the Federal Reserve . In my feature story this month, I detail how the Fed is living in an alternate universe where inflation, “everything” bubbles, and unhinged market zeal don’t exist. But back in reality, I share how to best invest in these uncertain times. Editor-in-Chief P.J. O’Rourke knows capitalism is in the crosshairs, noting how Biden’s clumsy executive order attempting to “promote competition” in the American economy serves as a middle finger to free markets. RealClearMarkets Editor John Tamny adds that while state and local tax deductions inspire ire from the Left and Right, the centrist’s take is the clearest: market-driven wealth bests political waste. As the pandemic endures and partisan tensions rise between the vaxxed and the

unvaxxed, Stansberry Research’s health- investment expert Thomas Carroll notes the irony of COVID helping America’s health care infrastructure. And while we’re talking health care, you can’t ignore the looming shadow of Big Pharma. Stansberry’s Retirement Millionaire Editor Dr. David “Doc” Eifrig knows you’re sick of pharmacy prices bleeding you dry with costly prescriptions, so he provides the insider’s script for saving money on your meds. Transitioning from medical maladies to the disease of social media, Executive Editor Kim Iskyan examines the strange case study of a tech behemothic that’s still a woeful investment as a company: Twitter. On the international front, Executive Editor Buck Sexton paints a somber portrait of America’s abandonment of Afghanistan and the wake of Taliban terror that awaits. Back in the states, American Consequences writer Andrew Amundson has a few (hundred) choice words for the groping governor of Empire State in our latest Dunce of the Month . And for all the Defund the Police wokesters, P.J. O’Rourke has a message: You haven’t gone far enough. To get our hands politically dirty and impact real change, we need to defund the sanitation department. Regards, Trish Regan Publisher, American Consequences


August 2021


Grocery Store Billionaire WARNS OF OCTOBER SURPRISE

Billionaire John Catsimatidis is not like most wealthy men and women the financial media are obsessed with these days. He’s not a hedge-fund manager... or a venture capitalist. He’s not the founder of an electric car company... or a software developer. And he’s not a cryptocurrency backer... or “Fintech” entrepreneur. Instead, Catsimatidis made his billions the old-fashioned way... by focusing on two areas of life that affect nearly every American, every single day: groceries and real estate . That’s why I think it’s safe to say John Catsimatidis has a better handle on what’s really happening in the economy and with the American consumer , compared to just about anyone else out there. And recently, Catsimatidis went public with an alarming prediction... He says a huge shift is looming in the U.S. economy and financial system, which will reveal itself in a dramatic way this October... ( To see why Catsimatidis is so concerned, click here .)

A wealthy former Goldman Sachs banker agrees with Catsimatidis and says: “Most Americans are completely unprepared for what’s about to take place in our country.”

He goes on to add:

“This is not surprising, since roughly half the U.S. population was born AFTER 1981... and we simply haven’t seen anything like this in roughly 50 years.” What exactly is going on, and what has these two successful and wealthy men so concerned ? Well, this former Goldman Sachs banker – in addition to being a part-owner in several restaurants and a winery – is a founding partner in one of America’s most successful financial research firms. And he’s just issued an urgent warning... what he calls a “ Final Wake-Up Call ” for any American who cares about their money, finances, or retirement.

WE’RE BACK… AND IN PERSON! The 2021 Stansberry Research Conference Las Vegas, Nevada October 25-26 Featuring: Stansberry Research Founder, Porter Stansberry 2021 Stansberry Research Conference as Vegas, Nevada October 25-26 We’re B ck & In Person! Don’t miss out on the chance to be in the room and hear from the brightest minds in finance and the opportunity to learn about new investments … Last year’s recommendations are soaring, some as high as 355%! Don’t pass on this opportunity. Click here for all the details.


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## 34





Inside This Issue BY TRISH REGAN

48 Equal Defunding for All! BY P.J. O'ROURKE



Joe Gives Competition the Finger BY P.J. O'ROURKE

50 Taking Tax Breaks With a Grain of SALT BY JOHN TAMNY


Editor in Chief: P.J. O’Rourke Publisher: Trish Regan Managing Director: Jamison Miller Executive Editors: Kim Iskyan, Buck Sexton Managing Editor: Laura Greaver Creative Director: Erica Wood Contributing Editors: Andrew Amundson, Thomas Carroll, Dr. David "Doc" Eifrig, John Tamny Advertising: Paige Henson, Jill Peterson Editorial Feedback: Published by:

12 From Our Inbox

58 What We're Reading


18 Bird Brain: The Worst-Managed Tech Company in History BY KIM ISKYAN

64 The Pill Box Hack: A Script for Picking Big Pharma’s Pockets BY DR. DAVID "DOC" EIFRIG 70 Dunce of the Month: New York State of Mine BY ANDREWAMUNDSON

28 A Taliban Blitzkrieg BY BUCK SEXTON

34 COVID: The Remedy for U.S. Health Care? BY THOMAS CARROLL

74 Featured Contributors

42 The Fed’s Virtual Reality BY TRISH REGAN



American Co sequ nc s

American Consequences




Last month, President Joe Biden issued an “Executive Order on Promoting Competition in the American Economy.”

Never mind that the executive order’s title itself is an implicit insult to the American spirit of stop-at-nothing rivalry. It’s as if Joe wandered into the locker room of a Texas high school football stadium on a Friday night and told the quarterback, “You should play hard.” Americans will compete at anything . Pickleball. I rest my case. Nonetheless, Joe is worried... about something... But what? That’s not exactly clear because the executive order is 16 pages of bureaucratic bumwad seemingly written by junior underlings up all night with too much coffee and too many Yale law degrees. One repeatedly raised concern is “market concentration.” The phrase is vague but seems to mean that you can take the idea that A Big Monopoly Is Bad and expand it to Just Big Is Also Bad and maybe even to Better Is Not So Good Either.

Perhaps the nefarious global ping-pong market concentration is threatening a pickleball buyout. Monopolies, semi- monopolies, and

companies that seem to dominate their business

The problem with what Joe puts his finger on is that it’s a government finger. And we all know which finger the government gives us... sector are (unless their dominance is enforced by government power) self-repairing free- market breakdowns, as Toyota taught GM. Biden is not deterred by economic theory, let alone economic fact. He says, “... excessive market concentration threatens basic


August 2021

From Editor in Chief P.J. O’Rourke


American Consequences



economic liberties, democratic accountability, and the welfare of workers, farmers, small businesses, startups, and consumers, tinkers, tailors, soldiers, sailors, rich men, poor men, beggar men, thieves.” (Although I can’t absolutely swear that last part was in there, especially the mention of “rich men.” But I was already drifting off even though this was the first sentence of the executive order. I had to go get myself some coffee and a law degree from Yale to keep going.) The fix for Biden’s broad definition of market concentration is to limit free-market freedoms in order to make the free market more free. This is paradoxical... or maybe just stupid. To give Joe his due, he does put his finger on some marketplace annoyances – prescription drug prices higher than the cost of a good funeral, giant bloated fatso tech companies that squash and suffocate anyone who tries to sit on the Internet couch, and small farmers buying the farm as Big Ag runs over them with a grim reaper (that can only be serviced by a factory-authorized dealer). The problem with what Joe puts his finger on is that it’s a government finger. And we all know which finger the government gives us ... No doubt there’s unfairness in agriculture, but no business sector in America has experienced more interference from government than farming – dating back to the squalid federal auctions, to land speculators of territories won from Britain in the Revolutionary War. There’s not a single cow pie in the history of the nation that the government hasn’t stepped in.

Do we really trust government to outsmart Big Pharma on drug prices? Just wait until your next visit to Walgreens... “That will be $3 for the heart medication and $225.99 for the Tylenol.” And “net neutrality” sounds like a nice idea. But which federal department, regulatory agency, congressional committee, or presidential commission will decide what’s “neutral”? Remember who runs the post office. If we’re not careful, we could wind up getting all our e-mail, social media posts, and TV streaming services delivered once a day, except on Sundays and national holidays, at a cost of 55 cents each. In his presidential decree, Biden orders “promoting competition within industries through the independent oversight of mergers, acquisitions, and joint ventures.” (My italics.) Independent of what ? Not independent of politics, I bet. So, if you’re doing any merger and acquisition activity, you’ll not only have to pay a huge fee to an investment bank, but you’ll also have to make a huge donation to whatever political party happens to be in power. Joe orders airlines to provide “improved service.” (My suggestion? Order all the passengers off the plane. Service will improve – for the flight crews.) Joe orders the Defense Department to look and see if there’s enough competition among defense contractors. (Maybe we could buy missiles from Hamas. They seem to have an excess of them in Gaza.) Joe orders hearing aids to be cheaper. (YOU SAID CHEAPER HEARING AIDS, JOE.)


August 2021

This is the “White House Competition Council.” Members include the heads of every government bureau and department you’ve ever heard of plus some you’ve never heard of in your life, like “the Office of Information and Regulatory Affairs.” The Competition Council “shall be led by the Assistant to the President for Economic Policy and Director of the National Economic Council” whose name may or may not be Larry, Moe, or Curly. So how is Joe going to put his order about agencies with overlapping jurisdiction into effect? By creating another agency with overlapping jurisdiction! And talk about urgency... talk about quick and decisive action from a fast-on-its-feet government leadership... The White House Competition Council will meet twice a year. While we wait for the Competition Council to get seated (competing for a chair closest to the most prominent Stooge), let’s consider the broader issue... What is Joe Biden doing giving us 16 pages of orders without so much as a nod from Congress, a wink from the judiciary, or a peep from the electorate? Joe is not His Imperial Majesty. Joe is not a King or a Queen, certainly not an Ace, and barely a Jack. He’s the rooster crowing from atop the Washington, D.C. dung heap only by dint of a few votes from disgruntled ex-Trumpsters.

Unfortunately, Joe fails to point out one area of American life where there’s too much competition. Joe gives an order: “It is the policy of my Administration that, when agencies have overlapping jurisdiction, they should endeavor to cooperate fully in the exercise of their oversight authority...” This is accompanied by a list of agencies with overlapping jurisdiction, which, now that I’ve had five or six cups of coffee and gone to Yale, I’ll quote in full: [Such agencies] include the Department of the Treasury, the Department of Agriculture, the Department of Health and Human Services, The Department of Transportation, the Federal Reserve System, the Federal Trade Commission, the Securities and Exchange Commission, the Federal Deposit Insurance Corporation, the Federal Communications Commission, the Federal Maritime Commission, the Commodity Futures Trading Commission, the Federal Energy Regulatory Commission, the Consumer Financial Protection Bureau, and the Surface Transportation Board. (And I promise not to make any other full quotations from the Executive Order on Promoting Competition... or readers will be competing to see who can kill me first.) So how is Joe going to put his order about agencies with overlapping jurisdiction into effect? By creating another agency with overlapping jurisdiction!

American Consequences



force than regulations, which have greater legal force than executive branch directives/ guidance... Also, there’s no legal significance to the word ‘order.’” Thus, an executive order falls somewhere between empty threats to take the car keys if your teenage kid doesn’t mow the lawn and saying, “pretty please with sugar on top.” ... Which Biden’s “Executive Order on Promoting Competition in the American Economy” comes right out and admits on the last of its 16 pages. I shall break my promise with one more dreary quote from the document:

Don’t we have a system of checks and balances?... Or checkbook balances?... Or an Olympic balance-beam medalist?... Or something like that?... It’s in the Constitution. Therefore I got in touch with my brilliant friend Ilya Shapiro, director of the Robert A. Levy Center for Constitutional Studies at the Cato Institute libertarian think tank. The essence of the ignorant question I asked Ilya was, “Presidential executive orders? WTF?” The essence of Ilya’s informed reply was that executive orders are “the president telling his underlings how he’d like the law enforced.” Thus, an executive order falls somewhere between empty threats to take the car keys if your teenage kid doesn’t mow the lawn and saying, “pretty please with sugar on top.” I italicized the “like” because, although Ilya notes that executive orders can be thrown out in court and nullified by Congress, I’d also add that they can be ignored (with some political peril) by federal appointees. You remember how Trump kept ordering and ordering “The Wall” to be built but still wound up with not enough fencing along the Rio to contain a small herd of cattle? Ilya continues, “You can think of it this way: Constitutional provisions have greater legal force than statutes, which have greater legal

This order shall be implemented consistent with applicable law and subject to the availability of appropriations... Nothing in this

order shall be construed to impair or otherwise affect: the authority granted by law to an executive department or agency... This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforced at law or in equity... In other words, the executive order is a pointless waste of time. And I worry that so is this Letter From the Editor. Except for one thing... President Biden has just given us an important and worrisome, if somewhat blurry, vision of “how he’d like the law enforced.” And when it comes to law, I don’t care for presidents with blurry vision.


August 2021


Biden’s Next Project Could Get Billions in Taxpayer Money

Billions in government funding will soon flow into one small market. It’s a market that 99% of investors hardly pay attention to... but according to Bloomberg, it could see a 14-fold increase in demand in the coming years... Now the Biden Administration has signed off on a vast stimulus, pumping billions of dollars into this traditionally overlooked sector of the market... It’s not the semiconductor industry...

And there’s even higher potential upside for those who buy shares of my favorite stock, which is trading for under $5 today... During my research, I’ve discovered this small company that’s capitalizing on this trend in a very unique way – one that I have never seen in my 20-year career... And I believe 10 times gains are on the table for anyone who invests in this company today... I’ll give you a little hint... The last time this sector was in high demand, the entire market grew 5 times higher... and some of the top stocks saw gains of 1,098%... 2,326%... even 2,983%....

Or blockchain technology... Or artificial intelligence...

But this market is critically important if Biden wants to meet some of his aggressive sustainability goals. That’s why I’m predicting big gains for anyone who invests in this space as soon as September 1 – when this legislation is expected to go into effect.

And now it’s happening again... For the full story, click here .


But I don’t know from whom I stole it. I may have lifted it from the 1993 Aerosmith CD Get a Grip . But Colorado journalist Dan Dun informs me that Aerosmith might have nicked it too. Dunn says there’s a tune with that moniker on Motorhead’s 1988 album, Rock ‘n’ Roll . And Motorhead may have filched the thing themselves, because I saw the phrase on T-shirts worn by Shi’ite militiamen in Lebanon in 1984 or 1985. I don’t know where the militiamen got the phrase, but I assure you they stole the T-shirts.” Re: New Subscribers I am so happy I found the website. PJ is one of my favorite authors. Parliament of Whores is one of my favorite reads, along with many of his others. – Scott T. P.J. O’Rourke Reply: A brash “YOU’RE WELCOME,” Scott! PoW is one of my favorite things I’ve written. I will never get as large and slow-moving of a target as the entire U.S. government in my sights again. Trish, I feel you’re doing a great job giving us the truth with facts. – Barbara H. Trish Regan Reply: Barbara, the truth is all that matters. Thank you for being a loyal reader. Trish still has it! You still remain calm, cool and collected as you recommend all to be the same in the bumpy market, which is at its historical high. Thanks for your experienced advice. – Wally P.

Re: A Cry From the Far Middle

I read Mr. O’Rourke’s acknowledgments cause I always read that first before I ever start a book. It usually gives me an insight as to whether or not the book is worth my time. I enjoyed it so much, I am returning this copy to the library and ordering my own. – Diane O., from central Idaho where moderates are an endangered species P.J. O’Rourke Reply: Thank you, Diane. Buying an author’s book is the highest compliment an author can be, as it were, paid. I, too, find the “Acknowledgements” sections of books interesting. Read carefully, they’re often a good place to catch an author fibbing. I try my best to be reasonably truthful. As you may recall from the acknowledgements in A Cry..., I said, “[An] acknowledgement sentence to be on the look-out for begins, ‘This book could never have been written without...’ What follows is usually an encomium to a spouse or partner. What should follow is the word ‘money.’” PJ, I have always treasured your Brash take on things. Yes, Aerosmith was right: eat the rich. – Mike R. P.J. O’Rourke Reply: Thanks, Mike. As you note, I brashly stole Eat the Rich as the title of my book. But – to continue with the “acknowledgements” theme – I said in my ETR acknowledgements, “I stole the title.


August 2021

gave me so much to say that I ran out of space. However, although I consider Hayek to be one of the most brilliant thinkers of the 20th century, I’m sometimes slightly reluctant to recommend TRTS as a primer. Hayek’s political-economic subject matter is broader and more complex. And he is harder to read than the Friedmans. German, not English, was Friedrich’s first language. And, though he writes in English, his sentences have a tendency to end up in that German-

Trish Regan Reply: Wally, it’s important to be able to cut through the noise. I’m glad you appreciate clarity! Trish, I miss watching your show, you’re the best! – Patricia S. Trish Regan Reply: Patricia, I appreciate the kind words. Glad to have you here as a subscriber! I am a classically trained economist, who specialized in Monetary

style train wreck of verbs. But you’re right, Hayek is where people should go when they’ve digested the Friedman classics. As to your plea that “we must find a way, or we will be lost!!!” Phil D., below, has some useful suggestions about this serious worry. Re: How to Argue in Favor of Free Markets To P.J. O’Rourke: I’ve never read either of the books from Milton Friedman which you recommended in your email today, but i did watch Free to Choose on television. I think it was on PBS when it originally aired in 1980. (Yes, i am that old.) Fortunately for the young people you would like to reach, it is on streaming on Amazon prime—yes, Amazon!

theory/policy and a history of Economic thought; and you could not be more right... except probably should have included one other book: The Road to Serfdom, by Friedrich Hayek. But I must say the most profound comment in your piece was that you can argue the case, but cannot convince them! That is what was spot on!!! I share that view and that frustration. BUT... we must find a way, or we will be lost!!! – Gerry C. P.J. O’Rourke Reply: Thank you, Gerry, for intellectual support from a genuine intellectual. Funny you should mention Hayek. I had intended to include The Road to Serfdom in my article, but Milton and Rose Friedman


American Consequences



of the Free to Choose series and your wise suggestion that parking kids in front of a screen is a better way of penetrating their minds than hitting them over the head with musty old books. (Sad though that may be to say.) I’m in touch with the Free To Choose Network, and I will pass along your notion that this is one case where we should make an exception to the “no free lunch” rule. By the way, the FTC Network has an excellent documentary on Thomas Sowell available. I think you (and most American Consequences readers) will greatly enjoy it. Thank you again for your thoughtful Inbox comment. Hello PJ, Milton Friedman also wrote a book called M oney Mischief . You might point some of your readers to chapter 8, The Cause and Cure of Inflation which starts on page 189. Keep up the great work! You often provide the goal post when it is sometimes lost in the clouds. – Richard H. P.J. O’Rourke Reply: Richard, shame on me. I confess to never having read Money Mischief , but I shall do so promptly. And I hope other readers will as well. Thank you for the kind goalpost analogy. I hope I get closer to it in

Not too long ago, I re-watched it when it was still free to Prime members and reminded myself where I’d heard Friedman say something. Generally the segments begin with a presentation by Friedman and end with a discussion group. (The last episode substituted an interview for the discussion group.) Unfortunately Free to Choose on streaming (like all lunches according to another Friedman book title) is no longer free. I think I watched all of it, although not necessarily in order. Thomas Sowell is in one discussion group looking much much younger than he was even at that time and talking with the passion of a leftist radical, except that the content of what he said was more that of a libertarian one. The segment on education was especially well done, showing experiments in educational alternatives and the financial challenges they faced. If you want to reach young people, streaming might be better than books, at least for a start. – Phil D. P.J. O’Rourke Reply: Phil, a vivid memory of 1980 makes you a youngster in my eyes. I can’t remember what I had for lunch today. Thank you for your eloquent description



August 2021

Rather, it’s relieving them of just a portion of their already-enormous tax liabilities. Better yet, the poor in any state (blue or red) gain nothing from the rich handing over more dollars to the Feds. The taxes paid by the rich are a tax on all of us . Government spending is a tax. Better that the damage from government spending be as local as possible. Your praise of wealth to sustain inventive growth is delusional. The railroad tycoons advanced transportation with massive Federal land grants. Tesla manufactures electric cars with massive Federal subsidy, and is about to litter the sky with 5 G satellites which will pollute the heavens and exterminate much of life on earth. And Rockefeller created illegal monopolies that now cloud the atmosphere with global warming CO2. Oh, we have so much to thank the super rich for, like a great mail system. And our capitalist health system gets us the worlds most expensive terrible health that ranks 38th among nations. A more privatized, monopolized capitalist system might cause your undeservedly high minimumwage to fall to where it should, maybe a generous $.25 per month, like back in Adam Smith’s era.

prose than I ever did on the gridiron. (I was so scrawny I could be tackled with a stern glance.) Re: Taking Tax Breaks with a Grain of SALT I usually agree with Mr. Tamny’s logic, but not this time. His position that it is better to have tax dollars spent closer to home appears good on the surface. However, I think he is falling for the socialist utopia line of thinking, where all decisions are fair & equitable. To give the rich a federal tax break for living in an over-taxed blue state is ridiculous. While the richest of the rich live in blue states, the poorest of the poor live there too. They are the victims of local government corruption, lax law & order enforcement, among the other ills of our society. It is only the rich in these states that can change the local & state tax & spend policies. Giving them back the SALT federal tax deductions is a disincentive to having them do so. Also, why should blue state billionaires pay less for national defense to protect their bigger bankrolls? – Tommy J. John Tamny Reply: Yes, but the rich already fund the vast majority of the federal government. SALT isn’t relieving them of taxes.

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relevant and I wish I had read it before writing this piece. On a related front, a friend flagged a 1972 study from MIT that predicts the collapse of civilization in 2040 – and so far it has been worryingly prescient (it’s discussed here). It’s a fascinating arena, and thank you for your kind words. Finally, someone is talking about this... No growth is the ONLY way forward. Really negative growth, especially population growth. Good article, but the real problem is population and money printing. – DMZ Kim Iskyan Reply: DMZ, thank you for your message. We people seem very much to be the core of the problem. When I was a summer camp counselor (a while ago!), we used to joke that summer camp would be a ton of fun and so much better if we didn’t have to deal with all those annoying kids who showed up for camp (for whom, of course, we were there in the first place). I wonder if Mother Earth sometimes thinks about how nice Earth would be without us humans... Re: Don’t Be Tempted by Robinhood’s Massive IPO An extremely readable and concise description of the IPO marketplace, which I’ll be sharing to many today, starting with my four children. Informative, as always. – Fred J. Kim Iskyan Reply: Fred – thank you for your words. IPOs are the sports cars of the investment world – full of sex appeal and flash, but very often devoid of substance, and they leave the buyer with a sense of regret... and a lighter wallet/brokerage balance.

And all those Asian tiger economies had nothing to dowith personal household savings rates of 35%... it was the billionaires that created modern growth. What a crock! – Kendrick M. John Tamny Reply: Kendrick, I think you’re too hard on the rich. Consider how you’re communicating with me. All these advances you enjoy are a creation of the rich. Does government intervene too much in business? No doubt... I’d love a totally free market. But the lack of same doesn’t diminish the gargantuan accomplishments of the rich in the U.S. You can disdain them, but a world without their accomplishments would be defined by unrelenting drudgery. This would include an inability for us to communicate. Re: Why a No-GrowthWorld Is Inevitable Thank you, Kim, for your article on rethinking the constant GROWTH economy model. So happy to read some creative 21st century thought! (Not sure if Kate Rayworth’s Donut Economics got you pondering on how to reframe a successful, productive, healthy economy that serves humanity and our ‘mother ship’ Earth?) Bravo for breaking down how the future might look for us in innovative terms & taking a nibble at the donut. – Andra M. Kim Iskyan Reply: Andra, I’m not familiar with Donut Economics ... but it seems highly



August 2021


UNFILTERED. UNWAVERING. HARD HITTING. INFORMATIVE. Each week, the American Consequences podcast dives deep into fiscal and monetary policy, politics, and economics. You’ll get a view of the Fed, theWhite House, and theWorld like nowhere else. Subscribe to stay up-to-date on the biggest guests and the best analysis, all with the signature Trish Regan insight.




August 2021

By Kim Iskyan


Social-networking service Twitter is a truly iconic brand and product that’s the nervous system of the information age...

It’s also been an epic disappointment on many levels.

It has been a terrible investment... has left tens, if not hundreds, of billions on the table... is run by the worst kind of part-time CEO... and has shown few signs of figuring out what’s wrong.

Why hasn’t Twitter made it? And will it ever?


American Consequences



Yet the number of mentions of the name of one of the biggest threats to geopolitical peace in the world (Iran) over the same period? 798. And mentions of the finance world’s hottest investment theme (ESG, or environmental, social, and corporate governance)? 881. Tweets win, hands down. Twitter is an extraordinary, transformational product – in a market where the rewards for just minor tweaks of tech innovation come with nine zeros. And despite all this... Twitter is a disappointment of Hindenburg-ian dimensions . AN EPICALLY BAD INVESTMENT It’s silly to assess an individual’s worth to society based on his net worth. For people, money is just one dimension of the how-am- I-doing scoreboard of life. But it’s not at all nonsensical to gauge the success of a company based on how much wealth it delivers to shareholders. After share price returns, anything else (bringing value to customers, beating the competition, providing opportunities to employees, keeping the staff lounge stocked with peanuts, etc.) is secondary – and a pathway – to one share price appreciation, which benefits small shareholders like you and me. (Profits are nice... but not a necessary or sufficient condition to make money for shareholders.) And on this, Twitter has been a big failure... Investing at or around the IPO (initial public offering – that is, when a company first sells

TWITTER’S TREMENDOUSNESS Twitter is the heartbeat of the worlds of entertainment, media, and news, available to anyone with a phone... all over the world, with 206 million users globally (18% of whom are in the U.S.). It’s a technological, cultural, political, and communication juggernaut, with reach and influence that’s rivaled only by a handful of other companies (like Facebook and Google). Twitter is one of history’s few brands that is sufficiently ubiquitous and dominant to become a word (and a verb, no less) – in the company of google, xerox, and taser. Twitter is an extraordinary, transformational product – in a market where the rewards for just minor tweaks of tech innovation come with nine zeros. It allows users direct and unfiltered access to the firsthand insights and thoughts of celebrities, politicians, the boldface folks who – just a decade ago – were available only through the filter of the media. For four years, Twitter was the primary platform that an American president used to communicate to his followers, the media, the country, and the world... a high-tech policy platform and soapbox and megaphone, all wrapped into one. Just how big is Twitter? The number of times the Financial Times used the word “tweet” in the past year: 1,088. (And the likelihood that a material number of these were referring to the sound that a bird makes? Approaching zero.)


August 2021

since the closing price on the day of the IPO through now. Let that sink in... Now, sure, lots of companies underperform the S&P 500. Lots of investors do, too. But few companies are so bad at filling the space that they occupy... and leaving so much cash lying in the corner, untouched.

shares to the public) of tech companies that have turned out to be revolutionary usually is a great way to get rich... with the important exception of Twitter . Shares of Alphabet (formerly Google) are up nearly 5,000% since the company went public in 2004 (that's around 12 times the S&P 500 Index's return over that period). Facebook is up around eightfold since 2012, and today is valued at 20 times the market capitalization of Twitter's $50 billion. Since its IPO in 1997, Amazon shares are up nearly 2,000 times (enough to turn $10,000 into $20 million). Microsoft – up nearly 3,000 times since 1986 – is valued at more than 40 times Twitter. But Twitter – which punches in the same weight class as these companies in terms of impact, reach, influence – isn't even in the same universe in terms of returns. Since Twitter sold shares to the public in late 2013, its shares have risen 49%... If you'd bought shares of a boring old S&P 500 ETF then, you'd be up three times as much. That's assuming that you bought TWTR shares after the first-day share-price pop – and were not one of the lucky few institutional investor insiders who bought at the actual offering price. If you were able to buy at the actual IPO price of $26/share (compared with $62 today) and suffered through dips and valleys – Twitter shares have fallen by more than 50% within a year several times – you'd be up 138% (vs. around 150% for the S&P). In other words... Twitter shares rose more on the first day of trading than they’ve risen


Twitter has been world-class at uncovering (or stumbling into) the next big thing, and then putting a dagger to the throat of its golden goose... just before someone takes a very similar idea, tweaks it a bit, and then goes on to create enough wealth with it to make King Solomon feel like his gold mines are lacking. First... in March 2015, Twitter bought Periscope, which was one of the first companies to get a handle on livestreaming (which – as your grandkids could tell you – is online streaming media content that’s like personal TV, in that it’s recorded and broadcast at the same time, in real time). It was the popular new kid in town, for a while. Then Facebook – with around five times more users than Twitter at the time – got into livestreaming and sucked some of the air out of the room for Periscope. And meanwhile, gaming live-broadcast startup Twitch ate the rest of Periscope’s lunch. Twitch allows gamers to stream their screens so that others can watch them play video games (yes, that’s an actual thing). Amazon bought Twitch in 2014 for nearly $1 billion. Most of Periscope’s livestreaming functionality

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was migrated to the main Twitter platform in 2016, and Periscope as a standalone app was closed down in March 2021. But have you ever heard anyone ever talk about livestreaming on Twitter? Me neither... and that’s the ashes of Periscope. Twitch, though, now has 27 million daily visitors and 6 million creators – aka gamers – who stream every month (including my son, who swears by it). According to CNBC, today Twitch has an estimated standalone valuation of $15 billion. That’s equivalent to around 30% of Twitter’s current valuation. Twitter is what may have been a gold nugget the size of Mars. Vine is a big what-if for Twitter. Most likely, a whiff. If Twitter had a CEO with his eye on the ball – more on that below – perhaps today my son would be streaming his Fortnite exploits on Twitter instead of Twitch. Twitter would have a foothold in the $180 billion gaming industry (that’s more than movies and sports combined). It would also have an entrée into a youthful audience that’s more interesting than the demographic that hangs around Twitter, which my 17-year-old daughter – who is fluent in Snapchat and uses “Insta” when necessary – calls “that kind of social media thing that old people use.” MONEY LEFT ON THE TABLE, CASE NO. 2 The Periscope experience is Little League,

though, compared to the Vine episode, which belongs in the Hall of Fame of Missed Opportunities... Founded in June 2012, social media app Vine was purchased by Twitter four months later for a reported $30 million. With Vine, users could create and share six-second video clips – kind of like the video analog to the short- form text posts of Twitter (140 characters, increased to 280 in 2017). But Twitter proved (again) to be a poor steward of a great idea. As tech news website The Verge explained in October 2016, “Twitter’s mounting core business problems this year [have] all but ensured it [will] eventually be sold off or shuttered.” Vine was closed down for good in January 2017. In form, style, and product, Vine is very similar to TikTok, the video-sharing social- networking service owned by China’s ByteDance. TikTok, which initially allowed for 15-second videos (increased to 60 seconds last year... and then to three minutes last month), was launched in China in September 2016. TikTok went global a year later. Today, it has more than 1 billion active monthly users (including 130 million in the U.S., or almost 40% of the population). That’s around five times the number of current Twitter users . How much money did Twitter, with TikTok- before-TikTok Vine, leave on the table? In early August, the Financial Times reported that ByteDance is hoping to go public in Hong Kong later this year or in early 2022 (the crackdown on tech in China notwithstanding). The company will likely


August 2021

be valued upwards of $180 billion – which was its valuation when it raised capital in December 2020. That’s more than three times the total market capitalization of Twitter. Perhaps Vine was the one that got away – or maybe it was a bullet dodged. Maybe in a parallel universe where two-left-feet, can’t- walk-and-chew-gum-at-the-same-time Twitter didn’t get its grubby, value-destroying hands on Vine, the app would have failed anyway... and would still have been receiving its last rites, just when TikTok was in the cradle. Or perhaps Vine wouldn’t have been able to come up with an approximation of TikTok’s magic algorithm that makes the app so addictive and successful. And to be fair to Twitter, it’s not unusual for the guy who comes up with a fantastic, world-changing idea worth a herd of unicorns (“unicorn” is the venture-capital term used to describe a startup company that’s valued at more than $1 billion) to lose out on the garage full of Lambos. Often, it’s the people who improve upon the great idea – and learn from the mistakes of the guy who first came up with it – who become string-of-private-islands rich... in this case, TikTok. (Apple is renowned for applying its superior technology, design, distribution, and customer service to others’ ideas – say, the smartphone – and blowing it out of the water... and less famous for coming up with its own big ideas.) Still, Twitter is what may have been a gold nugget the size of Mars. Vine is a big what-if for Twitter. Most likely, a whiff.

TWITTER’S SOCIAL FAILURE Social media has the scope to create goodness and promote empathy by bringing together people with common interests – whether it’s in Far Side comic strips, recipes for spicy peanut butter, what’s going on in the neighborhood, or political inclinations. And it has tremendous scope to widen (and poison) the cleavages that divide people. If Twitter had had a CEO with his eye on the ball, perhaps today my son would be streaming his Fortnite exploits on Twitter instead of Twitch. Twitter would have a foothold in the $180 billion gaming industry (that’s more than movies and sports combined). Twitter has failed hard in moderating its platform to eradicate – or at least effectively limit – the toxicity that imbues so much of social media. As marketing professor, entrepreneur, and gadfly Twitter shareholder Scott Galloway wrote in a public letter to the board of Twitter... The outrage that unchecked social media imposes on our psyches is pulling at the fabric of our republic and threatens the foundations of our social order. Democracy relies on mutual understanding and respect. In addition to handling urgent political crises, Twitter’s CEO needs to scale back “mutual animosity” and help heal public discourse in the U.S...

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Former-President Donald Trump had a black belt in using Twitter to spread lies and sow division. Normal users would have been banned years ago for breaking Twitter’s rules like Trump did – but the company allowed him to remain on the platform, “citing the public interest (over which [Twitter] has assumed a guardian role),” the New York Times wryly observed in mid-July. That was days after Trump’s Twitter account was finally suspended, after his tweets that are said to have incited violence following the siege of the Capitol on January 6. And the suspension – not only after the horse had left the barn, but after he’d gone into town, met a nice mare, and sired a few mini-me horses – was due in part to hundreds of Twitter employees signing a letter urging the company’s CEO to ban the president... and not after Twitter finally realized that it had been violating its own rules of conduct, egregiously and repeatedly, and decided to do the right thing.


Twitter CEO Jack Dorsey co-founded Twitter in 2006 and has been heading it up – after a first stint as the head of the company ended in 2008 – since 2015. In 2009, Dorsey – who, for his considerable shortcomings as a leader of people and organizations, is a brilliant technologist – co-founded small- business digital-payments company Square, where he’s also CEO. That company went public in 2015... and now is valued at more than double Twitter. Being the CEO of one public company is a big job, and heading up two is (at least) twice the work. Dorsey needs to fit it in between his other pursuits... like his regular ice baths and habit of fasting for 22 hours of the day. When you have a net worth of around $15 billion, you can afford to not give many hoots



August 2021

come up with brilliant ideas, and push Twitter to new heights when the boss only pops in during the morning. (In late November 2019, Dorsey announced that he planned to live in Africa for part of the next year – which he abandoned in the face of COVID-19 restrictions and heavy criticism. It’s bad enough to be a part-time CEO... and it’s far worse if you’re eight or so time zones away from the company you’re ostensibly managing.)

if people think you’re weird (in July, Business Insider delicately labeled him “unusual”). The problem, though – for Twitter shareholders, at least – is that Square is a lot more important to Dorsey’s personal bottom line than Twitter. He owns (as of March) 13% of Square, which is worth around $17 billion. Meanwhile, the 2% of Twitter that Dorsey controls is valued at about $1 billion. Which company would you spend more time on? (The $2.9 million Dorsey made by selling his first-ever tweet as an NFT wouldn’t have even been enough to amount to a rounding error for Dorsey’s net worth. He gave that money, significant shareholdings in Square, and other assets to charity.) Twitter’s CEO is part-time and not as focused on, or invested in, the company as he is with his other interests. It’s tough to get senior management – or anyone else – to work hard,

He owns (as of March) 13% of Square, which is worth around $17 billion. Meanwhile, the 2% of Twitter that Dorsey controls is valued at about $1 billion. Which company would you spend more time on?



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Despite its uptick in financial and share price performance, it’s clear that Twitter is the guy at sea who’s drowning – not waving for help. Its second-quarter shareholder letter reads like a company that’s focused on doing the same thing: selling advertising. It’s squeezing the advertising lemon and making a few more drops of lemonade. But there’s no new thought or innovation about how such a powerful platform can dominate its space – rather than shrink into a small corner of it, as it’s doing now. “If Twitter has any sense of its future, it seems to lie in doubling down on targeted advertising and copying features from competitors,” New Republic wrote in February. What’s more – maybe most important for the company’s long-term survival – it hasn’t come up with a plan to address harassment and content moderation on the platform.


Some change has been afoot at Twitter. In March 2020, boldface tech investment firm Silver Lake announced that it was putting $1 billion (at the time, equal to around a 4% stake) into Twitter. It also said that it was linking up with activist investment company Elliott Management, which at the time also held a 4% stake in Twitter, in part to take some seats on the company’s board. “This is a great day for Twitter shareholders and the commonwealth,” Galloway wrote about the deal, predicting that the stock would hit all-time highs by the end of the year. (He was off by two months, as the shares more than tripled from March 2020 lows to hit highs in February 2021.) Despite its uptick in financial and share price performance, it’s clear that Twitter is the guy at sea who’s drowning – not waving for help. And recently the company has posted solid results. Second-quarter revenue was up 74% to $1.19 billion. (It’s not a fair comparison... but during the same period, Facebook posted net income – not revenue – that was eight times bigger than Twitter’s revenue.) As a nice change of pace, it actually made money, with a 6% net margin. (That means that for every $1 in revenue, the company made a profit of 6 cents.) Facebook, by comparison, had a 36% net margin.


1. Get rid of the CEO.

Get a full-time manager/visionary who is incentivized to make Twitter something much, much bigger. Don’t let Dorsey’s empty virtue signaling (quarantine beard, showy 10- day retreats to Myanmar, black turtlenecks... yes, all part of the schtick) distract you. And then – once Twitter has some time to get over its inferiority complex, and its employees no longer feel like they can duck out early since, hey, the boss does it every day – maybe it can focus on the matter at hand: making something big.


August 2021

But in the second-quarter shareholder letter, there was no mention of Twitter’s new toy or business. And in any case, Twitter should be trying a number of approaches to get users to pull out their wallets for content... ideally, user-generated (remember TikTok?). Barring that, though, Twitter could create its own content. It could sprinkle some of the $873 million (not a typo) it spent in 2020 on research and development on making stuff that people want to watch or read... and charge them for it. Hey, it could work .

2. Extract value from the platform.

Galloway wrote... Value is created on [Twitter] every second. Influencers build followings, businesses find customers, ideas are generated and shaped. But Twitter, in a misguided posture of neutrality, lets all this economic

activity flow across its platform and neither cultivates nor harvests it.

How? It should be possible to easily sell goods on Twitter – and for Twitter to collect revenue from those sales (the company has been working on this). People with large followings – from which they can make a mountain of money – could be charged a type of follower subscription fee. Lots of other platforms (see: Instagram... Facebook... LinkedIn...) have figured out how to make money from having a lot of people buying and talking and learning on their platforms. Twitter has to try things... fail... and succeed. So far, it has done little, if any of those. 3. Create and curate content. In January, Twitter acquired Revue, a service that makes it easy to start and publish newsletters. It may have noted the success of Substack, a similar product that launched in late 2017 and already has half a million paying subscribers – that is, unique users who pay for a subscription newsletter. In recent years, businesses that deliver subscriptions – whether it’s to Netflix or the bacon-of-the- month club – that auto-renew to provide a steady and recurring revenue stream have been increasingly viewed positively by investors.

4. Try stuff and break glass and don’t be afraid to fail.

Twitter has held snowflakes in its hand – Periscope and Vine – and let them melt. The company is still small enough – with revenues of just $3.7 billion in 2020 – that a few good ideas could change the conversation entirely... from a boring, has-been social media app to a player that’s finally filling out its uniform and making a difference. But to get there, it needs to get going. ______ Twitter is the big airport that sees just a few planes come in every day... the dusty ‘69 Corvette under the tarp that needs a new gearbox and some love... the teenage track star who fell out of shape but still has the muscle memory to be a champion. It’s a platform with potential, but still needs some work. Will Twitter get there? Given the recent run- up in Twitter’s share price, some investors think that it will – or that at least it’s going to try. While its record isn’t promising, Twitter could still surprise.

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