This month, however, podcast host, author, and marketing professor Scott Galloway has been waging a unique campaign to strike back in the face of ICE’s lawless operations. Called Resist and Unsubscribe, Galloway’s initiative “targets tech and AI companies and inflicts maximum damage with minimum impact on consumers.”

Resist and Unsubscribe is premised on the idea that the president is unfazed by citizen outrage, the courts, or the media. Rather, Trump responds to only one thing: the market.

Galloway correctly recognizes that boycotting, say, certain retailers is unlikely to have a significant enough effect on the broader stock market to move the president. On the other hand, seven tech companies alone account for more than a third of the S&P 500 index, many of them propped up by massive spending on AI of late.

Hurting the bottom line of the largest tech firms, as well as the sycophantic CEOs running them in accordance with Trump’s whims, would actually be noticed. Tech companies also have the unique flaw (or in this case, advantage) of often being highly reliant on speculative measures of future potential revenues, like number of subscribers, as opposed to companies selling tangible goods that are valued on more established metrics. Forgoing a few of many available subscriptions is also a relatively easy sacrifice to ask of the individual consumer.

All this means that consumers like ourselves can have a much bigger influence on market capitalization by canceling Amazon Prime than we can by skipping a few trips to Target. It also means that the market is uniquely vulnerable to consumers who are willing to shun AI products.

The first step, according to Galloway, is unsubscribing from OpenAI’s ChatGPT and Anthropic’s Claude (if you are among these platforms’ few paying users). The next line of attack consists of unsubscribing from other tech services provided by companies that have “outsized influence over the national economy and our president” — including the services offered by Amazon, Apple, Google, Microsoft, Paramount+, Meta, Uber, Netflix, and Twitter (X). Lastly, Galloway identifies a number of consumer-facing companies as “active enablers of ICE” which may not be susceptible to the standard tech industry subscription revenue multiplier of 10x in calculating the implied market capitalization effect, but are, nonetheless, also obviously worth avoiding (I will provide a link directly to Galloway’s website in the final paragraph so you can easily access the full list of companies along with convenient “unsubscribe” links).

Well, I’m a little late to this party. I also don’t have many services that I can unsubscribe from to begin with (two, to be precise). Nevertheless, in the spirit of solidarity, I just jettisoned 50% of my subscriptions. Goodbye Netflix, and, hopefully, hello to a future where we all have something more concrete to look forward to than the next season of “3 Body Problem.”

The Resist and Unsubscribe campaign runs (at least) through the end of February. If this is the first you’re hearing of it, let me be the first to welcome you aboard. I have friends everywhere (if you need something to watch now that you’ve completed your unsubscribing mission, check out “Andor” on Disney+, that one’s not on Galloway’s list). As to whether or not this is working, well, all I can say for now is that as of market close on February 24, the NASDAQ and the S&P 500 are definitely down for the month.

Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at jon_wolf@hotmail.com.

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This Is Commoditization

The above hypothetical is what happens when a product becomes commoditized, which happens often. A commoditized product is one that has become so commonplace and interchangeable that it loses its uniqueness.

And when that happens, it also loses its pricing power.

Why? Once commoditization occurs, users see little meaningful difference between the various vendor options other than price. So, sellers can’t charge a premium for what they provide, particularly when the lower cost option provides roughly the same features, quality, and performance.

Some examples include things like economy seats on airlines: most customers shop based on price and the difference in service is relatively small. Another example is cloud storage which is now an expected feature — providers are interchangeable, and the market is price-driven.

Commoditization shows up in legal tech if tools that once felt novel become expected infrastructure. At that point, lawyers stop asking “what does this do?” and start asking “why does this cost more than the other one?” If it happens to GenAI, it will have direct impact on legal tech vendors whose products are based on GenAI. And their customers.

Indeed, a pretty big tech player may be betting that this may soon happen with GenAI. As Chance Miller noted in a recent episode of the daily 9to5 Daily, citing a report in The Information by Aaron Tilley, the potential for commoditization may be why Apple is proceeding cautiously with developing its own GenAI tools and it could foreshadow what may happen in legal. Tilley says (emphasis added):

Apple still has a team working on its own internal models that it could take advantage of in the future. But some Apple leaders hold the view that large language models will become commodities in the years to come and that spending a fortune now on its own models doesn’t make sense.

Here’s what Miller concludes: “If Apple leadership truly does believe LLMs will become commodities, then the company’s AI success will depend less on bespoke new models, and more on its ability to control the hardware, software, and services that AI runs on.”

Indeed, a short time later, Apple and Google announced that Apple is indeed going to use Google’s Gemini AI for Apple’s AI efforts.

Commoditization of Legal GenAI

Thus far, legal GenAI vendors have faced little competition from outside the legal community. But what would happen if, say, OpenAI decided to target the legal market and release general tools offering the strong privacy protections, enhanced accuracy, and stronger security lawyers and legal professionals crave?

If this were to occur, other players like Google, Anthropic, and Perplexity might follow. The greater market power of these companies could shift the legal GenAI market towards commoditization, where price becomes the primarily criterion.

It was just this kind of thing I mentioned in my post about a Business Insider interview of the founders of Harvey, Winston Weinberg and Gabe Pereyra, back in October.

At that point I noted their statements to the effect that they were less concerned about legal tech vendors and more about competition from OpenAI itself. Somewhat candidly, they admit that OpenAI could enter the legal tech space directly and cut out the middleman legal tech vendors.

These statements prompted me to observe: “[Weinberg and Pereyra] admit that OpenAI could enter the legal tech space directly and cut out the middleman legal tech vendors. Moreover, even if OpenAI never targets the legal field directly, it very well could release general tools offering the strong privacy protections, enhanced accuracy, and stronger security lawyers and legal professionals crave. In fact, OpenAI recently mentioned a contract review tool it developed and is using internally.”

Today’s Legal AI Marketplace

Today, there is a plethora of vendors offering all sorts of GenAI tools at a fairly high price. Their argument is that legal is a specialized market due to a) the ethical and privacy concerns and b) the need for accuracy. They go on to say that only they can offer the protections the specialized market requires and that open or public systems like ChatGPT, Gemini, Perplexity, or Claude simply can’t meet legal demands. Some even go so far as to say it’s malpractice to use the open systems.

And when it comes to legal research, vendors explain that only they have the data to make the systems work accurately and that this moat protects them. But the moat is not foolproof. The vendor argument ignores that the moat-protected legal research is only part of overall legal needs. Moreover, much of the data also exists within client databases that are not protected. More importantly, big players like Google and OpenAI or any of the other large players could simply license or acquire the data themselves, spreading those costs across far more customers while still undercutting specialized vendors on price.

Also, ignoring for the moment that their GenAI tools are also capable of making mistakes and making stuff up, a characteristic of LLMs that is intractable, legal tech vendors assume that just because the open systems haven’t made the case that their products can meet legal’s requirements, they won’t. Indeed, many of the vendor products depend in part on those open systems’ platforms to make their products function. And OpenAI at least is an investor in legal vendors like Harvey.

And as far as the hallucination and inaccuracy problem goes, we are already seeing vendors like Clearbrief offering solutions to the hallucination problem with tools that automatically verify LLM outputs primarily with non-GenAI tools. That potentially solves the cost of verification problem. What if OpenAI decided to do the same?

A Reality for Legal

Could GenAI legal tools become commoditized? The short answer is yes. The open GenAI providers have vast resources and capabilities. There is little to stop them from offering the privacy and confidentiality protections that lawyers demand. There is little to prevent them from offering tools like that being offered by Clearbrief. And if they put their minds to it, they could provide many of the same tools the legal tech vendors who trumpet their uniqueness do now.

And if that happens, the legal GenAI vendors could lose their uniqueness and pricing power. The big GenAI players would be forced to compete primarily on price. Legal tech vendors may not be able to legitimately compete on that basis: they have neither the financial staying power nor resources. The bigger players can spread costs across many more customers, legal and non-legal, can bundle features into larger platforms, and absorb margin pressure longer than the smaller legal vendors.

And let’s not forget many lawyers already used the open tools to do all sorts of things, so transitioning to relying on them for everything would be neither difficult nor time-consuming.

Thus far, the open GenAI providers have been content, like Microsoft, to merely offer their tools to the legal tech vendors as wrappers. But that doesn’t mean the open systems won’t decide to compete directly.

So, What’s Legal to Do?

It would be easy for law firms to just throw up their hands and just ignore the commoditization potential. But that’s not necessarily correct. In fact, law firms and in-house departments can do some things to better prepare for what may be the inevitable commoditization of GenAI tools.

But law firms typically ignore what’s developing in the tech market until it already happens. By doing so, they risk waking up one morning locked into a bunch of overpriced technology when there are just as good and cheaper products suddenly available.

Firms can avoid this by paying attention to what is going on in the marketplace and what vendors are doing. Indeed, the best strategy right now may be to keep their powder dry. To pay attention to the marketplace. To regularly review and monitor their tech stack and tech contractual commitments. To avoid long-term contractual commitments that lock them in. To look hard at things like termination rights and obligations. And to make sure they have an exit strategy should things quickly change.

Stephen Embry is a lawyer, speaker, blogger, and writer. He publishes TechLaw Crossroads, a blog devoted to the examination of the tension between technology, the law, and the practice of law.

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Apple's Cook doubles Nike stake, endorses CEO Hill's turnaround push [Reuters]

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Former Google and Stripe executive Alex Komoroske (who recently wrote for us about why the future of AI need not be centralized) has written an equally brilliant analysis  that traces all of these problems back to something called the “same origin paradigm”—a quick security fix that Netscape’s browser team implemented one night in the 1990s that somehow became the invisible physics governing all modern software.

The same origin paradigm is simple but devastating: Every website and app exists in its own completely isolated universe. Amazon and Google might as well be on different planets as far as your browser is concerned. The Instagram app and the Uber app on your phone can never directly share information. This isolation was meant to keep you safe, but it created something Komoroske calls “the aggregation ratchet”—a system where data naturally flows toward whoever can accumulate the most of it.

This is a much clearer explanation of a problem I identified almost two decades ago—the fundamental absurdity of having to keep uploading the same data to new services, rather than being able to tell a service to access our data at a specific location on the internet. Back then, I argued that the entire point of the open internet shouldn’t be locking up data in private silos, but enabling users to control their data and grant services access to it on their own terms, for their own benefit.

What Komoroske’s analysis reveals is the architectural root cause of why that vision failed. The “promise” of what we optimistically called “the cloud” was that you could more easily connect data and services. The reality became a land grab by internet giants to collect and hold all the data they could. Now we understand why: the same origin paradigm made the centralized approach the path of least resistance.

As Komoroske explains, this architectural choice creates an impossible constraint for system designers.

This creates what I call the iron triangle of modern software. It’s a constraint that binds the hands of system designers—the architects of operating systems and browsers we all depend on. These designers face an impossible choice. They can build systems that support:

• Sensitive data (your emails, photos, documents)
• Network access (ability to communicate with servers)
• Untrusted code (software from developers you don’t know)

But they can only enable two at once—never all three. If untrusted code can both access your sensitive data and communicate over the network, it could steal everything and send it anywhere.

So system designers picked safety through isolation. Each app becomes a fortress—secure but solitary. Want to use a cool new photo organization tool? The browser or operating system forces a stark choice: Either trust it completely with your data (sacrificing the “untrusted” part), or keep your data out of it entirely (sacrificing functionality).

Even when you grant an app or website permission only to look at your photos, you’re not really saying, “You can use my photos for this specific purpose.” You’re saying, “I trust whoever controls this origin, now and forever, to do anything they want with my photos, including sending them anywhere.” It’s an all-or-nothing proposition.

This creates massive friction every time data needs to move between services. But that friction doesn’t just slow things down—it fundamentally reshapes where data accumulates. The service with the most data can provide the most value, which attracts more users, which generates more data. Each click of the ratchet makes it harder for new entrants to compete.

Consider how you might plan a trip: You’ve got flights in your email, hotel confirmations in another app, restaurant recommendations in a Google document, your calendar in yet another tool. Every time you need to connect these pieces you have to manually copy, paste, reformat, repeat. So you grant one service (like Google) access to all of this. Suddenly there’s no friction. Everything just works. Later, when it comes time to share your trip details with your fellow travelers, you follow the path of least resistance. It’s simply easier to use the service that already knows your preferences, history, and context.

The service with the most data can provide the most value, which attracts more users, which generates more data. Each click of the ratchet makes it harder for new entrants to compete. The big get bigger not because they’re necessarily better, but because the physics of the system tilts the playing field in their favor.

This isn’t conspiracy or malice. It’s emergent behavior from architectural choices. Water flows downhill. Software with the same origin paradigm aggregates around a few dominant platforms.

Enter artificial intelligence. As Komoroske notes, AI represents something genuinely new: it makes software creation effectively free. We’re entering an era of “infinite software”—endless custom tools tailored to every conceivable need.

AI needs context to be useful. An AI that can see your calendar, email, and documents together might actually help you plan your day. One that only sees fragments is just another chatbot spouting generic advice. But our current security model—with policies attached at the app level—makes sharing context an all-or-nothing gamble.

So what happens? What always happens: The path of least resistance is to put all the data in one place.

Think about what we’re trading away: Instead of the malleable, personal tools that Litt envisions, we get one-size-fits-all assistants that require us to trust megacorporations with our most intimate data. The same physics that turned social media into a few giant platforms is about to do the same thing to AI.

We only accept this bad trade because it’s all we know. It’s an architectural choice made before many of us were born. But it doesn’t have to be this way—not anymore.

But here’s the hopeful part: the technical pieces for a fundamentally different approach are finally emerging. The hopes I had two decades ago about the cloud being able to separate us from having to let services collect and control all our data may finally be possible.

Perhaps most interestingly, Komoroske argues that the technological element that makes this possible is the secure enclaves now found in chips. This is actually a tech that many of us were concerned would lead to the death of general purpose computers, and give more power to the large companies. Cory Doctorow has warned about how these systems can be abused—he calls them Demon-haunted computers—but could we also use that same tech to regain control?

That’s part of Komoroske’s argument:

These secure enclaves can also do something called remote attestation. They can provide cryptographic proof—not just a promise, but mathematical proof—of exactly what software is running inside them. It’s like having a tamper-proof seal that proves the code handling your data is exactly what it claims to be, unmodified and uncompromised.

If you combine these ingredients in just the right way, what this enables, for the first time, are policies attached not to apps but to data itself. Every piece of data could carry its own rules about how it can be used. Your photos might say, “Analyze me locally but never transmit me.” Your calendar might allow, “Extract patterns but only share aggregated insights in a way that is provably anonymous.” Your emails could permit reading but forbid forwarding. This breaks the iron triangle: Untrusted code can now work with sensitive data and have network access, because the policies themselves—not the app’s origin—control what can be done with the data.

Years of recognizing that Cory’s warnings are usually dead-on accurate has me approaching this embrace of secure enclaves with some amount of caution. The same underlying technologies that could liberate users from platform silos could also be used to create more sophisticated forms of control. But Komoroske’s vision represents a genuinely different deployment—using these tools to give users direct control over their own data and to cryptographically limit what systems can do with that data, rather than giving platforms more power to lock things down. The key difference is who controls the policies. (And I’m genuinely curious to hear what Cory thinks of this approach!)

The vision Komoroske paints is compelling: imagine tools that feel like extensions of your will, private by default, adapting to your every need—software that works for you, not on you. A personal research assistant that understands your note-taking system. A financial tracker designed around your specific approach to budgeting. A task manager that reshapes itself around your changing work style.

To the extent that any of this was possible before, it required you simply handing over all your data to a big tech firm. The possibility of being able to separate those things… is exciting.

This isn’t just about better apps. It’s about a fundamental shift in the power dynamics of the internet. Instead of being forced to choose between security and functionality, between privacy and convenience, we could have systems where those aren’t trade-offs at all.

The same origin paradigm got us here, creating the conditions for data monopolies and restricting user agency. But as Komoroske argues in both the piece he wrote for us and this new piece, we built these systems—we can build better ones. We might finally deliver on its promises of user empowerment rather than further concentration.

As we’ve argued at Techdirt for years, the internet works best when it empowers users rather than platforms. The same-origin paradigm was an understandable choice given the constraints of the 1990s. But we’re no longer bound by those constraints. The tools now exist to put users back in control of their data and their digital experiences.

We can move past the learned helplessness that has characterized the last decade of internet discourse. We can reject the false choice that says the only way to access powerful new technologies is to surrender our freedoms to tech giants. We can actually build toward a world where end users themselves have both the power and control.

We just need to embrace that opportunity, rather than assuming that the way the internet has worked for the past 30 years is the way it has to run going forward.

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Internal friction with the Justice Department team that fights monopolies has led to private conversations in the Trump administration about whether to push out some staff in the antitrust division or to work to smooth out the issues, according to multiple sources familiar with the situation.

Gail Slater, who in March took charge of lawsuits against Capital One, Apple, Google and other major companies as head of the Justice Department’s antitrust division, still has support from some top officials in the administration, but she and some on her team have been a target of criticism from colleagues and business leaders, sources inside and outside the administration told CBS News.

In a related article, Politico managed to get some imput that puts some of the tension in focus:

“The Republican Party has two forces within it,” Fiona Scott Morton, a former deputy assistant attorney general in the Obama DOJ’s antitrust division, told DFD. “The money people, corporations who want to be allowed to merge anytime … and then there’s the populists who are more against large corporations.”

The really interesting bit is that Trump could be the final decision maker at the end of the day. It’s a little attenuated, but let’s assume for the sake of argument that Elon’s plan of having the FTC and DOJ antitrust departments collapse in on each other and the DOJ becoming the primary antitrust agency goes through. Trustbustin’ would be weakened generally, but the DOJ would still retain the authority to carry out criminal antitrust cases. Say there’s some egregious anti-competitive business practicing afoot and Zuckerberg or Bezos or their companies are hit hard with a Sherman Act violation and fined millions of dollars. Couldn’t Trump just… pardon them after the fact? And even if he has some bad blood with a billionaire that could get hit with an antitrust violation *cough Elon cough*, surely it’s nothing an anonymous investment in Trump’s memecoin couldn’t fix. He already extended the pardon power to corporations back when he pardoned BitMEX after it violated the Bank Secrecy Act. The presidential pardon could act as a strong check and balance that cuts in the favor of big business.

Tension Over Antitrust Division Crops Up Inside Trump Administration, Sources Say [CBS News]
What ‘America First Antitrust’ means for Big Tech [Politico]

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I had some success along each of these paths. Which pretty much makes me too much of a redneck to fit in well in big cities while simultaneously making me too much of an over-educated liberal to really feel at home out in the country.

That problem aside, my somewhat unique cultural perspective can also be an asset. Like when I notice weird things happening with the autocorrect features on various applications on my Apple iPhone.

I was texting my cousin this morning using Facebook Messenger. I mentioned “snaring rabbits.” Despite having spelled that perfectly the first time, Facebook Messenger’s autocorrect feature changed my carefully selected phrase to “sharing rabbits,” which totally makes more sense I guess, what with Easter coming up and all.

This was not an isolated incident. I have a friend who lives in Missouri. I text him from time to time to ask about his level of success in “gigging” frogs (the best definition of a “gig” that I’ve found is “a harpoonlike device,” so when you are gigging frogs, you are spearing them, to make delicious frog legs). My iPhone sure likes to automatically change that to “gagging” frogs.

There is certainly a discussion to be had about humane methods of what is legally referred to in many jurisdictions as animal “take.” I just don’t know why my iPhone seems intent on manual strangulation as opposed to a quick and neat spear thrust.

I did not readily find academic research about artificial intelligence applications potentially being biased against more rural terminology (there is a whole bunch of research out there about AI being racist, however). Anecdotally, I have noticed this repeatedly, and it kind of makes sense logically based on how text-based AI features function.

What an autocorrect feature (or a large language model asked to write something) is doing, after having read through all sorts of content similar to what is currently being generated, is predicting what the human writer is most likely to want to say. Only about 20% of Americans live in rural areas. That makes for a lot more people texting, messaging, and otherwise writing about things going on in cities, suburbs, and medium-sized communities. AIs are training disproportionately on content created by people living in higher-population areas.

For the record, I did ask the latest version of ChatGPT, “Do you know anything about gigging frogs?” It totally nailed the correct answer. It also asked me why I was I interested in gigging frogs, so I explained that I was trying to ascertain whether it was familiar with terms more commonly used in rural America. It assured me it was.

While I was at it, I actually got kind of wrapped up in a whole conversation with the thing about this entire article. ChatGPT more or less agreed with me about how less-sophisticated AI used in autocorrect features works and thus how it often fails to correctly recognize niche terminology that may be more prevalent in rural America as it tries to serve the broadest group of users possible. The whole thing was equal parts impressive and uncanny.

Maybe all we’ve learned here is that the AI in use to correct our grammar in iPhones and on Facebook is quite primitive in comparison to OpenAI’s perhaps appropriately hyped platform. But if you ask me (or ChatGPT), texting and messaging applications currently in use certainly seem to be biased against language, like niche hunting and fishing terms, used primarily among smaller groups of people.

There are obviously greater injustices in the world. I can tell you, though, that messaging applications correcting my already correct text messages about rural things is an almost weekly annoyance, and one that makes me feel just a little bit more resentful toward big tech companies every time it happens. That can’t be a good thing for America’s rural-urban political divide.

Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at jon_wolf@hotmail.com.

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Citing his “unique constitutional responsibility for the national security of the United States” and the “unfortunate timing of section 2(a) of the Act — one day before I took office as the 47th President of the United States,” he ordered the DOJ not to enforce the law for 75 days “to permit my Administration an opportunity to determine the appropriate course of action with respect to TikTok.”

Publicly Trump is floating a bid for the US government to buy half of the Chinese-owned app.

“TikTok is worthless, worthless if I don’t approve it, it has to close. I learned that from the people that own it. If I don’t do the deal, it’s worthless, worth nothing. If I do the deal, it’s worth maybe a trillion dollars, a trillion,” he babbled as he signed the order. “If I do the deal for the United States, then I think we should get half. In other words wait, I think the US should be entitled to get half of TikTok. And congratulations, TikTok has a good partner, and that would be worth, you know, could be $500 billion or something.”

The president, who claimed that it violated his First Amendment rights to kick him off social media platforms in January of 2021 alleging that they were functionally the US government, would like his own government to literally own a social media platform. And he’s apparently in direct talks with Chinese President Xi Jinping — dictator to dictator — to make it happen.

He scoffs at the very security concerns that a bipartisan Congress and the Biden administration, not to mention the Supreme Court, agreed justified the ban.

“Remember, they make telephones in China. They make all sorts of things in China. Nobody ever complains about that. Here they’re complaining about this, so many different products made in China, nobody ever complained about the only one they complain about is TikTok,” he went on, adding that it was fine, really if China exfiltrates data on American users because it’s mostly young people who use the app, and “If China is going to get information about young kids out of it, to be honest, I think we have bigger problems than that.”

This is a guy who signed an executive order in 2020 banning TikTok because “the spread in the United States of mobile applications developed and owned by companies in the People’s Republic of China (China) continues to threaten the national security, foreign policy, and economy of the United States.”

Perhaps unsurprisingly, the tech companies are unsure of how to proceed. Under the plain language of PAFACA, US entities may not “distribute, maintain, or update (or enable the distribution, maintenance, or updating of)” any application owned by TikTok’s parent company ByteDance, and the attorney general “shall conduct investigations related to potential violations” of the law.

Trump’s EO instructs the AG “to issue a letter to each provider stating that there has been no violation of the statute and that there is no liability for any conduct that occurred during the above-specified period, as well as for any conduct from the effective date of the Act until the issuance of this Executive Order.”

Clearly distributing TikTok violates PAFACA. This order is more than a promise to forego prosecution — it’s a declaration that the law is what Trump says it is, Congress be damned.

But even if companies had confidence that Trump wouldn’t change his mind again and decide that TikTok is a threat to national security, PAFACA has a five-year statute of limitations. Trump’s successor could still enforce the fines of $5,000 per user in violation of the law. Plus, the EO includes boilerplate language specifying that “nothing in this order shall be construed to impair or otherwise affect the authority granted by law to an executive department or agency, or the head thereof” and that it “does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.” So even if Pam Bondi (assuming she gets confirmed) sends out notes pinky-swearing not to prosecute anyone for violating PAFACA, that won’t help if the tech companies find themselves in court.

As it stands, the tech companies appear to be divided. Oracle and Akamai, which provide web support for TikTok, restored access over the weekend before Trump even took office and signed the order. But TikTok remains unavailable in the Apple and Google app stores. Apple informs users that it is “is obligated to follow the laws in the jurisdictions where it operates” and so it cannot offer new downloads, updates for existing users, or in-app purchases.

And so the question is whether the tech companies are going to fall on their swords and risk billions of dollars in fines by opening up shop to the 170 million American users of the app (most of whom are adults, BTW).

Turns out Trump was right in 2020 when he said the app could be used for “blackmail.” Just … not in the way we expected.

Liz Dye lives in Baltimore where she produces the Law and Chaos substack and podcast.

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Apple and Goldman failed to properly handle customer disputes, Rohit Chopra, the C.F.P.B.’s director, said on a call with reporters on Wednesday. Even when Goldman was alerted to disputes, Mr. Chopra added, the bank often failed to follow federal requirements to investigate and resolve them in a timely manner.

The agency also said Goldman and Apple misled consumers about interest-free payment options for Apple devices, charging substantial interest despite leading customers to believe they would get interest-free financing when purchasing Apple products with their Apple Card.

“The execution was a mess,” Mr. Chopra said, referring to the launch of the credit card partnership in 2019.

You can say that again, Rohit, and at this point we don’t think Solomon would even muster an argument. You might almost say that, having no meaningful experience as a Main Street bank, Goldman was ill-equipped to try to become one. Still, there is good news in all of this for Goldman, not that there was much danger of it happening regardless.

Regulators are barring Goldman from offering any new credit card other than the Apple Card unless it provides a “credible plan” showing the product will comply with the law.

Apple and Goldman Sachs Must Pay Nearly $90 Million in Credit-Card Inquiry [NYT]

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Last Monday, the judge in Google’s big antitrust trial (the first of a few) found that the company had, in fact, violated antitrust laws. The ruling is massive (286 pages), so it took a few days for me to get through it. You can read straightforward coverage of it elsewhere, so I wanted to focus some of my thoughts on what this actually means.

And my general conclusion is… not very much? At best, it’s marginally helpful to Microsoft (one of just three companies that is larger than Google) and marginally harmful to Mozilla. But… not all that helpful at all to people who want there to be more competition and better search.

From the beginning, I thought this was a particularly weak antitrust case (apparently I was wrong!). I also thought that one of the other antitrust cases the company is facing (about advertising tech) was a hell of a lot stronger. So I’m a bit surprised by the conclusion here, but still left perplexed by what actual benefit this outcome has (should it stand).

And, of course, none of it really matters at all right now, because Google will appeal, and the case will go on for another five or so years before anything is decided. And, at that point, it’s possible that we’ll be living in an entirely different world, perhaps one where AI-driven search engines make Google’s position less dominant anyway.

However, let’s take a step back first, and start with a few key points before delving into this ruling in particular.

1. Having more competition is good and having less competition is bad.
2. Google is a tremendously powerful company, known (at times) to abuse that power in unfortunate ways. It’s entirely reasonable (and probably sensible) not to trust the company. There’s a reason why we removed all Google tracking and ads from Techdirt years ago.
3. Things get complex when most people recognize that Google actually has the best search engine. That’s not to say it’s a good search engine. Many people believe it’s gotten a lot worse of late. But if users tend to think it’s the best and get upset at other companies if they present non-Google search results, what do you do? That was the question we asked last fall, and this ruling has not yet answered it.

All of that means that the situation here is uncomfortable. Judge Amit Mehta says that Google has a monopoly in search. He says the agreements it has made with Apple and Mozilla are a form of illegal tying. In these agreements, Google pays both of those companies lots of money to offer up Google search as a default in browsers and operating systems.

But, it’s a weird sort of monopoly in which the main evidence against the monopolist is that it pays billions of dollars to other companies. But, of course, the reasoning in the ruling is that Google pays that to effectively keep the market uncompetitive.

The judge finds that Google’s market share and the barrier to entry for new search engines is strong evidence that it has market power in search. The court found that Google did not have a monopoly in the search ads market, except in search text ads. It appears that Amazon’s product page ads somehow saved Google from also having a monopoly in regular search ads.

After establishing that Google has a monopoly in search and in text ads, it then explores whether or not its behavior is anti-competitive. Again, the Judge flat out says that everyone basically agrees that Google is the better product:

In a sense, Google is not wrong. It has long been the best search engine, particularly on mobile devices… Nor has Google sat still; it has continued to innovate in search…. Google’s partners value its quality, and they continue to select Google as the default because its search engine provides the best bet for monetizing queries…. Apple and Mozilla occasionally assess Google’s search quality relative to its rivals and find Google’s to be superior. … And Google’s rivals have tried to oust it as the default GSE. Microsoft, most notably, has pitched Apple on making Bing the default multiple times, and DDG made a bid to be the default for private browsing mode searches on Safari. …These firms have not succeeded in part due to their inferior quality. …. It is also true that Google foresaw that the future of search was on mobile. Microsoft acknowledges that it was slow to recognize the importance of developing a search product for mobile, and it has been trying to catch up—unsuccessfully—ever since.

The judge even quotes Apple’s Eddy Cue admitting that it wouldn’t be worth it for the degraded user experience, even if Microsoft paid them much more money:

The market reality is that Google is the only real choice as the default GSE. Apple’s Senior Vice President of Services, Eddy Cue, put it succinctly when, in a moment of (perhaps inadvertent) candor, he said: “[T]here’s no price that Microsoft could ever offer [Apple] to” preload Bing. Tr. at 2519:10-11 (Cue) (emphasis added). “No price.” Mozilla stated something similar in a letter to the Department of Justice prior to the filing of this lawsuit. It wrote that switching the Firefox default to a rival search engine “would be a losing proposition” because no competitor could monetize search as effectively as Google.

This again highlights the issue described above. But to the court, it is an argument that there is no real competition.

If “no price” could entice a partner to switch, or if doing so is viewed as a “losing proposition,” Google does not face true market competition in search

But also, that raises the issue of the other oddity mentioned above. If there’s no one else who’s better, then why is Google paying so much to Apple and Mozilla? Microsoft can’t outbid them, so why not pay less?

And here, the judge speculates that the payments disincentivize others from entering the space at all, based in large part on the founder of the defunct search engine Neeva.

That was the key takeaway from the testimony of Neeva’s founder and former Google Senior Vice President of Ads and Commerce, Dr. Ramaswamy. The court found him to be a particularly compelling witness. He put it best. When the court asked why Google pays billions in revenue share when it already has the best search engine, he answered that the payments “provide an incredibly strong incentive for the ecosystem to not do anything”; they “effectively make the ecosystem exceptionally resist[ant] to change”; and their “net effect . . . [is to] basically freeze the ecosystem in place[.]” Tr. at 3796:8–3798:22 (Ramaswamy). No one would ever describe a competitive marketplace in those terms. When the distribution agreements have created an ecosystem that has a “strong incentive” to do “nothing,” is “resist[ant] to change,” and is “basically [frozen] in place,” there is no genuine “competition for the contract” in search. It is illusory.

But all of that seems based on… pure hypotheticals. After all Neeva did enter the market. And failed. But others continue to try (like Kagi). Could Apple have made its own search engine? Maybe? Would it really have done so? Dunno. Would it have been any good? Also don’t know. Microsoft has spent billions on it and hasn’t done all that well. It seems more likely that the attempts by companies to use AI to reinvigorate search will have a better chance, and that’s unrelated to the issue of Google’s agreements.

And so, again, we get to remedies. The court can’t force someone else to create a good search engine that can compete with Google. Nor can it force Apple and Mozilla to default to other search engines when neither seem interested in doing so. About the only obvious move is to present a user choice screen of what search engine they want to use, which many users will see more as a nuisance than anything else. And… Europe already did this, and basically everyone still chose to use Google.

Some people point to reports about similar choice screens for browsers “working” in the EU, but that really depends on how you define “working.” Some reports highlighted how smaller browsers saw a large bump in users, but it still appears negligible relative to the market leaders.

So all of this leaves everyone in an uncomfortable and not very helpful position. Yes, it would be nice if there were other competitors in the market. But what about this ruling will actually make that happen? At best, this seems to give Google an excuse to pay less to Apple and Mozilla, which helps Google out and harms Mozilla, one of the few companies that is actually competing in the browser space.

That doesn’t seem like a good or healthy result.

Some are arguing that this calls for a “breakup” of Google, but it’s also difficult to see. What in breaking up Google enables more successful search engines to hit the market? Again, that kind of remedy seems more reasonable (and more likely to have an impact) in the other case about adtech.

And, again, by the time this case is actually over, years down the road, the entire market may have already shifted. This leaves things in an uncomfortable position. Yes, Google is dominant in the market. And, no, that’s not great. But how do you get someone else to build a really good search engine out of this remains unclear.

So, in the end, I still find this case frustrating. What do you do when the status quo seems way less than ideal, but the remedies presented don’t seem likely to help, and could actually do damage to a competitive player like Mozilla?

It’s also made more problematic by having different antitrust cases targeting different parts of Google’s business. If you could take a more holistic view of the company and its impact on various markets, it seems like the issues, the impact, and the potential remedies would take a more comprehensive view. But, instead, this is what we’re left with.

The DOJ won a historic antitrust case, which might not have any significant impact at all.

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When Musk first spouted off about suing advertisers fleeing his toxic brand back in 2022, we pointed out that he is not a lawyer and is a moron. Having seen the evidence unearthed today… that assessment holds.

Having seen the evidence unearthed today by Congress, 𝕏 has no choice but to file suit against the perpetrators and collaborators in the advertising boycott racket.

Hopefully, some states will consider criminal prosecution. https://t.co/5W4yf1wxVO

— Elon Musk (@elonmusk) July 11, 2024

The “evidence” Musk identifies here is unsupported conjecture from conservative commentator Ben Shapiro claiming that legacy media, elected officials, and social media platforms engage in a coordinated effort to keep private corporations from giving their money to people like Shapiro. It must, of course, be a conspiracy preventing businesses from giving him cash. As opposed to, you know, mainstream corporations simply not wanting to hand their money to a guy that calls being gay a mental illness in a country where over 70 percent of the population supports same-sex marriage.

Or, in Musk’s case, advertisers simply taking him at his word.

Elon Musk tells fleeing advertisers to 'go f*** yourself' at New York Times DealBook summit.

Read more: https://t.co/v9CLyPSU9y pic.twitter.com/7I6bY90gZz

— Sky News (@SkyNews) November 30, 2023

Compelling private actors to hand you money is not free speech and is, in fact, a violation of the advertisers’ free speech rights. This holds true whether it’s Apple distancing itself from a site overrun by white supremacists or Chick-fil-A refusing to sponsor RuPaul’s Drag Race.

In a flawed attempt to circumvent this, Shapiro offers a convoluted conspiracy theory casting businesses as incompetent victims of duress. Terminally attention starved law professor Jonathan Turley trotted out the same wingnut theory a few years back, casting private companies as anti-free speech if they choose not to give their money to Musk. As Turley argued, a private advertiser’s “choice” isn’t entitled to protection if they were responding to public pressure. Or as the companies call them: their customers. But for Turley — and Shapiro — businesses shouldn’t be listening to customers because customers have wrongthink opinions they get from nebulous woke elites practicing the evil art of “offering evidence and being persuasive.” I mean… we don’t want free speech to turn into some kind of “marketplace of ideas” here or anything!

As we explained at the time:

This, of course, turns the whole concept on its head. Free speech means the government can’t prevent the Nazis from marching in Skokie — free speech does not mean the government should punish people for protesting those Nazis marching in Skokie and it definitely doesn’t mean companies should be compelled to hire Nazis.

Unfortunately, this is the funhouse mirror brand of “free speech” championed within the right-wing echo chamber. And that echo chamber includes more than a few powerful officials these days. Several judges have embarked in publicity stunt boycotts over “free speech” issues on campus — query why consumer boycotts are evil and taxpayer-funded officials launching boycotts are fine — complaining that schools need to do more to stop students from protesting hate groups on campus. Free speech, by their reasoning, exists for only a certain class of speaker. The speaker with the stage, the microphone, the radio show, the cable network… this is the speaker with rights and this is the speaker that deserves, by force of law if necessary, the right to an audience of docile bullshit receptacles. It’s an authoritarian vision of free speech, where the function of the right is to silence any voice that might inconvenience the privileged.

Bringing us full circle back to Musk, the world’s richest person, who concludes his message today hoping for “criminal prosecution” because the companies he literally told to fuck themselves won’t hand him money.

Just as the Framers intended.

Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.

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Jon Stewart is back (one night per week) on The Daily Show, at least until the November election. Yes, it’s sending a wave of nostalgia through millennial and Gen X viewers. Beyond that, Stewart doesn’t seem to have lost his comedic chops, or his ability to bring complicated, often wonky, topics to the masses.

Enter Stewart’s recent interview with Federal Trade Commission chair Lina Khan. Khan has been outspoken in her calls for breaking up big tech companies, comparing them to Gilded Age monopolies. Under Khan the FTC has targeted powerful companies, including Amazon, with antitrust litigation.

Stewart discussed antitrust issues with Khan, and matters got even more interesting when the conversation turned to artificial intelligence and its potential to displace human workers. “I wanted to have you on a podcast, and Apple asked us not to do it,” said Stewart, referring to restrictions his former employer placed on the content he was attempting to put out on the topic. “Why are they so afraid to even have these conversations out in the public sphere?”

Khan replied that a position like the one taken by Apple “just shows one of the dangers of what happens when you concentrate so much power and so much decision-making in a small number of companies.” She added that throughout the history of this country, “there was a recognition that, in the same way that you need the constitution to create checks and balances in our political sphere, you also needed the antitrust and anti-monopoly laws to safeguard against concentration of economic power.”

Well, I guess we’re having the conversation now. Stewart has always been more focused on policy than his late-night peers. Let’s see more of this though.

Isn’t it more important – more entertaining, even – to hear about what a powerful government official is doing that probably impacts your daily life than to listen to Dwayne “The Rock” Johnson try to explain the plot of Fast and Furious 37? Next stop: Gary Gensler on Colbert.

Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at jon_wolf@hotmail.com.

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The Apple Watch, which first hit consumer shelves in 2015, is currently one of Apple’s best-selling products. The company sold nearly 50 million in 2022. The wrist-worn device has an array of heart monitoring features, such as electrocardiogram functionality and irregular heart rhythm detection, enabling users to conveniently track their heart health. Despite its smashing commercial success, the Apple Watch has faced years of legal challenges.

 Priya Abani — CEO of AliveCor, a company that currently has several lawsuits pending against Apple — thinks that the tech juggernaut has made a habit of taking intellectual property from smaller medical device firms in order to improve the functionalities of the Apple Watch. She also believes that Apple has avoided being held accountable because it “bombards” smaller companies with litigation it knows they won’t be able to afford.

In an unattributable statement emailed to MedCity News, Apple denied all charges that it uses aggressive litigation tactics to intimidate smaller companies making patent infringement claims against it. The tech company also said that it values innovation and respects intellectual property.

Meanwhile, Abani said AliveCor plans to stand its ground and continue to fight back against Apple any way that it can — with hopes that it can be the David that finally beats Goliath.

Litigation history

Founded in 2011 and based in Silicon Valley, AliveCor is a medical device company that sells remote and connected cardiac care services. Its founder — David Albert, who currently serves as the company’s chief medical officer — has been a pioneering figure in the field of mobile health technology for decades. He created AliveCor because he recognized the potential of utilizing smartphone technology to create portable, accessible electrocardiogram devices.

In 2016, the company launched its KardiaBand product, which is an FDA-cleared wearable wristband that integrates with the Apple Watch to provide continuous heart rate monitoring and ECG readings to detect atrial fibrillation. Two years later, Apple launched its own software and hardware to provide immediate ECG readings to Apple Watch users.

AliveCor discontinued the KardiaBand product in 2019 — this was announced about eight months after Apple launched its own ECG functionalities, according to news reports. Apple’s new native ECG capabilities had apparently made AliveCor’s product unnecessary.

That led to AliveCor suing Apple in December 2020. AliveCor filed its case in the U.S. District Court for the Western District of Texas, claiming that Apple had infringed on three of its patents — all of which focus on monitoring cardiac arrhythmia. These patents covered AliveCor’s technology and methods for detecting and analyzing heart rhythms using portable devices. AliveCor charges that the Apple Watch utilized similar technology for monitoring heart rhythms without proper authorization or licensing from AliveCor, thereby infringing on its intellectual property rights.

In April 2021, AliveCor ratcheted up the legal battle by filing another complaint against Apple with the International Trade Commission over the same three alleged patent infringements. This time, AliveCor sought to ban the import of the Apple Watch in the U.S. This would basically prevent Apple Watches from being sold in the U.S., as they are assembled overseas.

The ITC launched an investigation in May 2021. That same month, AliveCor filed an antitrust lawsuit against Apple in California federal court, which accused Apple of monopolistic behavior. The complaint alleged that Apple had violated the Sherman Antitrust Law and California’s unfair competition law by way of its decision to bar third-party vendors from providing heart rate monitoring apps for the Apple Watch.

In June 2022, the ITC issued an initial determination in favor of AliveCor.

But then in December 2022, the U.S. Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB) invalidated AliveCor’s patents at the request of Apple. The PTAB ruling said that AliveCor’s patents were unpatentable because they were too obvious considering the state of cardiac research and technology advancements.

AliveCor is battling the PTAB ruling — in a recent interview, Abani described these patent invalidations as Apple’s “desperate last-ditch effort” to “bully” her company out of pushing forward with its patent infringement lawsuits. Apple denied this characterization.

When it came time for the ITC’s final determination, which was also in December 2022, the agency sided with AliveCor. In this decision, the ITC declared that imports for all Apple Watches with ECG technology should be banned — but that it would not enforce such a ban until an appeal tied to the PTAB dispute was resolved. The case is currently on appeal.

“The ITC order and the PTAB case are now being decided at the federal circuit courts, so we’re looking at a summer timeframe in which more things will happen,” Abani said.

As for the antitrust case AliveCor filed against Apple, it was dismissed by a federal judge in February of this year. The reasoning for the dismissal is being kept under seal temporarily. Abani said her company plans to appeal the dismissal, remarking that she is “deeply disappointed and strongly disagree[s] with the court’s decision.”

“Standard playbook”

In Abani’s view, it is Apple’s “standard playbook” to intimidate smaller companies until they back out of fighting for their intellectual property.

“Apple’s vast resources allow them to squash small innovators,” she said. “They have more lobbyists and lawyers on their payroll than we have employees.”

Her medical device company is far from the only one that has fallen victim to Apple’s aggressive refusal to settle lawsuits and penchant for dragging out legal battles, Abani added.

For instance, pulse oximetry company Masimo also sued Apple in 2020 on the basis of patent infringement. In the lawsuit, the medical devicemaker accused Apple of poaching its staff in order to steal trade secrets. Masimo also accused Apple of infringing on 10 of its patents, including technology to track users’ heart rates and blood oxygen levels.

In December, the ITC banned the Series 9 and Ultra 2 models of the Apple Watch. This was the result of an ITC ruling that said Apple’s blood oxygen sensors did in fact infringe upon patents owned by Masimo and its subsidiary Cercacor Laboratories. The ITC paused this ban the next day, allowing the watches to be sold temporarily. But then in January of this year, the court reinstated the ban.

In response to the ban, Apple redesigned the Series 9 and Ultra 2 versions of its watches so they would no longer have blood oxygen monitoring features. These redesigned versions of the Apple Watch are currently being sold in the U.S. Neither Masimo nor its lawyers responded to requests for comment on the litigation.

A lawyer engaged in another patent infringement lawsuit against Apple also believes that Apple goes after the little guy.

Andrew Bochner, managing partner at Bochner PLLC, currently represents NYU Langone cardiologist Joseph Wiesel in a federal court case accusing Apple of using his patented atrial fibrillation monitoring tool in its Apple Watch without permission.

“Apple has fought back with various patent proceedings. They filed an inter partes review, and they lost that. Then they filed an ex parte re-exam, which is now working its way through the system. So they’ve done everything they can to avoid defensively litigating and have tried to go on the offensive against an individual doctor,” Bochner declared of the lawsuit between his client and Apple.

He asserted that the tech giant “just fights back against who challenges them without ever being accountable.” He also said that Apple is known among the legal community to have a certain modus operandi: they do “not entertain any sort of real settlement discussions” and instead battle “tooth and nail” in order to wear out their rivals with fewer resources.

During the case’s post-grant proceeding in the U.S. Patent and Trademark Office, Apple said that it filed “roughly 10%” of the office’s total post grant proceedings, Bochner noted. A post-grant proceeding refers to the legal process conducted after a patent has been granted, often involving challenges to the patent’s validity or enforceability. These proceedings often arise due to challenges mounted by third parties or competitors who assert that a patent is invalid, either because it is overly broad or not novel.

“They’re using the courts as a tool because they know it’s expensive — for companies large and small — to litigate,” he remarked.

Stealing IP can “actually be cheaper”

Another medical IP lawyer — Bethany Corbin, who currently serves as CEO of women’s health innovation platform FemInnovation — agreed that it’s not uncommon for large companies to take advantage of smaller opponents that don’t necessarily have the means to go through an expensive legal process.

She looked at this issue from the perspective of a larger company infringing on the patents of a smaller one. If a smaller company takes its patent infringement grievance to court and wins, this could cause a large tech company to have to pay millions of dollars. But millions of dollars “is a small drop in the bucket” for tech giants, Corbin pointed out. Apple garnered $383 billion in total revenue last year and more than $173 billion in profits.

“In some instances, it can actually be cheaper for a large tech company to steal the IP from smaller tech companies than to try to enter into a legal licensing arrangement,” Corbin said.

Big tech companies may try to “game” the patent system and challenge smaller firms’ patents in two different venues — the courts and the PTAB. When the PTAB was established in 2012, it gave big companies a whole new way to fight patent infringement litigation, Corbin explained.

Huge companies like Google, Apple and Samsung were responsible “for over 80%” of PTAB petitions in 2021, she added.

“The small tech company sues the larger tech company in court. The large tech company then petitions the PTAB to strike down the patents that the large tech company is accused of infringing. This leads to parallel litigation with double the cost for small tech companies that have very limited budgets,” Corbin stated.

The litigation fees alone could sink a small startup, she declared. She said the fees typically total hundreds of thousands of dollars, particularly as litigation drags on for years and through the appellate process.

In Corbin’s view, if a large tech company draws out litigation and refuses to settle, it is “essentially waiting for the smaller tech company to run out of money and fold.”

But in the case of AliveCor, Apple may have misjudged the startup’s tenacity. Abani said that her company’s claims “go well beyond AliveCor,” representing every small company and future innovation that is “at risk of being squashed by Goliaths like Apple.”

In Abani’s eyes, the fight against Apple is paramount to preserving fair competition in the medical device space.

“Defending our rights is expensive, but the alternative is to give in to those who would continue to copy, monopolize and otherwise suppress the progression of life-saving technologies,” Abani wrote Thursday in an emailed statement. “We are fortunate to be in a position to go toe-to-toe with Apple, for the benefit of our customers and other similarly impacted companies, while still running a successful business.”

On the appeal for its antitrust case against Apple, AliveCor will need to argue that the distinct court erred in dismissing the lawsuit. If the appellate court agrees with AliveCor, then the case will go back to the district court and progress into the next stages — discovery, summary judgment motions and eventually a trial.

After all of that occurs, the losing party can still appeal the judgment up to the appellate court and Supreme Court.

“This entire process can take several years, so the dismissal of the case is definitely not the end of the story. In some ways, it’s actually just the beginning,” Corbin remarked.

AliveCor did not disclose its appeals strategy, but Abani said her company will do whatever it takes to stand up for itself.

“We are committed to protecting our IP and ability to compete fairly in the marketplace, to ensure that consumers always have the option to choose the best products and services,” she declared.

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

The U.S. Department of Justice and 15 states on Thursday sued Apple (AAPL.O), opens new tab as the government cracks down on Big Tech, alleging the iPhone maker monopolized the smartphone market, hurt smaller rivals and drove up prices.
…
“Consumers should not have to pay higher prices because companies violate the antitrust laws,” Attorney General Merrick Garland said in a statement. “If left unchallenged, Apple will only continue to strengthen its smartphone monopoly.”

In case you’ve been out of the smartphone market, some iPhones retail for around $1600. And while some of the profit goes to R&D, it can’t be that much when most unveilings of iPhone models include stuff that Samsung has had for years now. The DOJ alleges that the increased profits Apple is seeing from sales stems from design choices that ultimately harm consumers:

[T]he U.S. alleges Apple made it more difficult for competing messaging apps and smartwatches to work smoothly on its phones. They also allege that Apple’s app store policies around streaming services for games have hurt competition.

It’s one thing to have a product that’s better than something else on the market. But your phone being better because the company is actively making other products worse behind the scenes doesn’t really scream free market.

Apple Accused Of Monopolizing Smartphone Markets In US Antitrust Lawsuit [Reuters]

Chris Williams became a social media manager and assistant editor for Above the Law in June 2021. Prior to joining the staff, he moonlighted as a minor Memelord™ in the Facebook group Law School Memes for Edgy T14s. He endured Missouri long enough to graduate from Washington University in St. Louis School of Law. He is a former boatbuilder who cannot swim, a published author on critical race theory, philosophy, and humor, and has a love for cycling that occasionally annoys his peers. You can reach him by email at cwilliams@abovethelaw.com and by tweet at @WritesForRent.

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But at a minimum price tag of $3,499 plus sales tax for the basic model, not everyone will be able to buy it. The target audience seems to be wealthy Apple fans, nonwealthy Apple superfans who will purchase it on credit with their Apple Card, social media influencers hoping to flex it to get more clicks and followers, and businesses.

While its business use has not been established, businesses seem to have several reasons to purchase it for their operations. They may find it useful for recruiting younger people who would be attracted to the newest tech products and are generally tech savvy. Or they might be able to use it to help employees with disabilities be more productive. Also, the purchase could be tax deductible as a business expense.

Some people might want to minimize the cost of major purchases by treating the purchase as a business expense and reduce their tax bill. But before people run out to start a business and write off the purchase of the Vision Pro as a business expense, there are a few tax rules you should know about.

Is it a startup cost? A startup business can deduct only $5,000 of startup costs from taxable income. Additional startup costs are generally deductible over 15 years.

It is debatable whether the Vision Pro would be a qualified startup cost, as it would depend on the nature of the business and when it is purchased. But if it is, paying just under $4,000 for the Vision Pro with sales tax will eat up a huge chunk of your $5,000 limit.

Can you expense the cost in full or does it have to be depreciated over time? Most major purchases of equipment that are expected to last more than one year cannot be claimed as a business expense deduction. Instead, only a portion of the cost must be deducted every year based on very specific depreciation rules under the tax law.

But a special rule known as a Section 179 deduction allows businesses to deduct a normally depreciable asset in full. While this sounds appealing, it is not always advantageous to do so.

What is your tax bracket? Assuming the purchase of the Vision Pro is immediately deductible, another thing to consider is your tax bracket. Remember that the purchase, if deductible, will reduce your taxable income. Your tax bill will not be reduced by the amount of the purchase. If you are in a higher tax bracket, then the deduction will result in greater tax savings. If you anticipate being in a lower tax bracket, then you may want to think about whether the tax savings is worth it. This is why claiming a Section 179 deduction mentioned above may not maximize your tax savings.

If your business incurs a net loss, will the IRS consider your venture a hobby? Lastly, if a business incurs a net operating loss, that loss can generally be used to offset other income. But if your business incurs a net loss for multiple years or if the business seems more like a hobby, the IRS may disallow the net loss.

While the IRS will look at all facts and circumstances, the Treasury regulations list a number of factors the IRS should consider when determining whether the business is more like a hobby:

• whether the taxpayer treats the activity like a business
• the expertise of the taxpayer or his advisors
• the time and effort expended by the taxpayer in carrying on the activity
• expectation that assets used in activity may appreciate in value
• the success of the taxpayer in carrying on other similar or dissimilar activities
• the taxpayer’s history of income or losses with respect to the activity
• the amount of occasional profits, if any, which are earned
• the financial status of the taxpayer
• elements of personal pleasure or recreation

These factors are not exclusive and each is given different weight depending on the circumstances. But generally, tax auditors will look at whether you had a plausible profit motive and took the necessary steps to make a profitable business.

This can be challenging for aspiring social media influencers. A skeptical tax auditor may have a hard time believing that there is a business purpose for posting photos or a video of someone using the Vision Pro. Having paid sponsors, subscribers or being monetized by YouTube or Twitter/X could certainly help your case. But it can take some time to establish enough credibility to be monetized and obtain sponsors.

These days, it is very easy to establish a business purpose for purchasing a smartphone or a tablet because these products have established business uses. But before you spend at least $3,500 on a new product like the Apple Vision Pro where the business purpose has yet to be established, make sure you have a plan to use it to help you earn business income. Otherwise, the IRS will limit how much of the cost you can deduct from your taxable income.

Steven Chung is a tax attorney in Los Angeles, California. He helps people with basic tax planning and resolve tax disputes. He is also sympathetic to people with large student loans. He can be reached via email at stevenchungatl@gmail.com. Or you can connect with him on Twitter (@stevenchung) and connect with him on LinkedIn.

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(Nope, still not calling it X. Sue me.)

Advertisers were already edging toward the exits before Musk endorsed the Great Replacement Theory last week, agreeing that Jews are part of a plot to flood the country with hordes of brown immigrants to vote out the “real” Americans. But just hours after his tweet, the liberal non-profit Media Matters for America (MMFA) published a story showing screenshots of ads for companies such as Apple, Xfinity, and IBM next to explicitly pro-Hitler content. This was apparently the last straw for those companies, as well as several others, who had been assured by Twitter’s putative CEO Linda Yaccarino that this could not happen. A stampede of major companies raced for the exit, including Yaccarino’s former employers at NBCUniversal.

Musk immediately promised to file a thermonuclear lawsuit, although the result was more of a wet fart, so embarrassing that none of his regular white shoe lawyers would soil themselves with it.

But no matter! Elon’s got cool new friends now that he’s at the bigot table with Catturd and The Babylon Bee.

“Fraud is both a civil and criminal violation. There are 2 dozen+ conservative state Attorneys General,” tweeted Stephen Miller, Trump’s former minister of white nationalism and immigrant bashing.

Interesting. Both civil and criminal …

— Elon Musk (@elonmusk) November 19, 2023

To be clear, there was no fraud. As Musk acknowledged, the MMFA screenshots were real. The fact that they were obtained by following a bunch of Nazi accounts and then hitting refresh a bunch of times is of no legal moment. But that didn’t stop the attorneys general of Texas and Missouri from launching themselves at Musk like cartoon suitors wooing a beautiful princess.

Missouri AG Andrew Bailey rushed to assure Musk that “My team is looking into this matter.”

And Texas AG Ken Paxton announced his own investigation, “to ensure that the public has not been deceived by the schemes of radical left-wing organizations who would like nothing more than to limit freedom by reducing participation in the public square.”

Yes, that would be the same Ken Paxton who launched an investigation of Twitter for supposedly concealing the number of bots on the platform when Musk was attempting to wriggle out of his offer to buy the company.

But Bailey’s position is perhaps even more ridiculous, since his office is the named plaintiff suing the Biden administration in the Missouri v. Biden jawboning case. The theory there is that Twitter, Facebook, and YouTube became agents of the federal government when they responded to pressure from the Biden administration to remove COVID misinformation.

“Having threatened and cajoled social-media platforms for years to censor viewpoints and speakers disfavored by the Left, senior government officials in the Executive Branch have moved into a phase of open collusion with social-media companies to suppress disfavored speakers, viewpoints, and content on social-media platforms under the Orwellian guise of halting so-called ‘disinformation,’ ‘misinformation,’ and ‘malinformation,'” the complaint alleges. And while that idiotic theory has been rejected by every other court to consider it, these guys filed their case in the Western District of Louisiana and got themselves in front of that lunatic Judge Terry Doughty, who actually bought it. His order barring the federal government from flagging misinformation, including with regard to public health and election security, is stayed pending review by the Supreme Court.

But before we go gorge ourselves on carbohydrates, let us pause to contemplate the cajones it takes for Bailey to claim that Twitter becomes a government actor and violates the First Amendment by removing anti-vaccine lies flagged by the government, and then to turn around and use his office to harass a non-profit for mean, true speech at the behest of Twitter’s owner.

It’s almost enough to make you lose your appetite for a five course meal celebrating the glory of the American experiment.

Liz Dye lives in Baltimore where she writes the Law and Chaos substack and appears on the Opening Arguments podcast.

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

Results included $23.5 billion in losses from investments….

Luckily, the old man doesn’t much care, first quarterly loss of the year—and one four times as large as that of the previous third quarter—or otherwise.

“We believe that investment gains and losses on investments in equity securities…. are generally meaningless in understanding our reported quarterly or annual results or evaluating the economic performance of our operating businesses,” Berkshire said in a securities filing.

Warren Buffett’s Berkshire Hathaway Sits on Record $157 Billion Cash Pile [WSJ]
Berkshire Stung by Losses in Its Stock Holdings [NYT]

Now, to be clear, I’ve explained many times before, in other posts, why people who freaked out about how Twitter handled the Hunter Biden laptop story are getting confused, but it’s usually been a bit buried. I had already started a version of this post last week, since people keep bringing up Twitter and the laptop, but then on Friday, Elon (sorta) helped me out by giving a bunch of documents to reporter Matt Taibbi.

So, let’s review some basics before we respond to the various wrong statements people have been making. Since 2016, there have been concerns raised about how foreign nation states might seek to interfere with elections, often via the release of hacked or faked materials. It’s no secret that websites have been warned to be on the lookout for such content in the leadup to the election — not with demands to suppress it, but just to consider how to handle it.

Partly in response to that, social media companies put in place various policies on how they were going to handle such material. Facebook set up a policy to limit certain content from trending in its algorithm until it had been reviewed by fact-checkers. Twitter put in place a “hacked materials” policy, which forbade the sharing of leaked or hacked materials. There were — clearly! — some potential issues with that policy. In fact, in September of 2020 (a month before the NY Post story) we highlighted the problems of this very policy, including somewhat presciently noting the fear that it would be used to block the sharing of content in the public interest and could be used against journalistic organizations (indeed, that case study highlights how the policy was enforced to ban DDOSecrets for leaking police chat logs).

The morning the NY Post story came out there was a lot of concern about the validity of the story. Other news organizations, including Fox News, had refused to touch it. NY Post reporters refused to put their name on it. There were other oddities, including the provenance of the hard drive data, which apparently had been in Rudy Giuliani’s hands for months. There were concerns about how the data was presented (specifically how the emails were converted into images and PDFs, losing their header info and metadata).

The fact that, much later on, many elements of the laptops history and provenance were confirmed as legitimate (with some open questions) is important, but does not change the simple fact that the morning the NY Post story came out, it was extremely unclear (in either direction) except to extreme partisans in both camps.

Based on that, both Twitter and Facebook reacted somewhat quickly. Twitter implemented its hacked materials policy in exactly the manner that we had warned might happen a month earlier: blocking the sharing of the NY Post link. Facebook implemented other protocols, “reducing its distribution” until it had gone through a fact check. Facebook didn’t ban the sharing of the link (like Twitter did), but rather limited the ability for it to “trend” and get recommended by the algorithm until fact checkers had reviewed it.

To be clear, the decision by Twitter to do this was, in our estimation, pretty stupid. It was exactly what we had warned about just a month earlier regarding this exact policy. But this is the nature of trust & safety. People need to make very rapid decisions with very incomplete information. That’s why I’ve argued ever since then that while the policy was stupid, it was no giant scandal that it happened, and given everything, it was not a stretch to understand how it played out.

Also, importantly, the very next day Twitter realized it fucked up, admitted so publicly, and changed the hacked materials policy saying that it would no longer block links to news sources based on this policy (though it might add a label to such stories). The next month, Jack Dorsey, in testifying before Congress, was pretty transparent about how all of this went down.

All of this seemed pretty typical for any kind of trust & safety operation. As I’ve explained for years, mistakes in content moderation (especially at scale) are inevitable. And, often, the biggest reason for those mistakes is the lack of context. That was certainly true here.

Yet, for some reason, the story has persisted for years now that Twitter did something nefarious, engaging in election interference that was possibly at the behest of “the deep state” or the Biden campaign. For years, as I’ve reported on this, I’ve noted that there was literally zero evidence to back any of that up. So, my ears certainly perked up last Friday when Elon Musk said that he was about to reveal “what really happened with the Hunter Biden story suppression.”

Certainly, if there was evidence of something nefarious behind closed doors, that would be important and worth covering. If it was true that through discussions I’ve had with dozens of Twitter employees over the past few years every single one of them lied about what happened, well, that would also be useful for me to know.

And then Taibbi revealed… basically nothing of interest. He revealed a few internal communications that… simply confirmed everything that was already public in statements made by Twitter, Jack Dorsey’s Congressional testimony, and in declarations made as part of a Federal Elections Commission investigation into Twitter’s actions. There were general concerns about foreign state influence campaigns, including “hack and leak” in the lead up to the election, and there were questions about the provenance of this particular data, so Twitter made a quick (cautious) judgment call and implemented a (bad) policy. Then it admitted it fucked up and changed things a day later. That’s… basically it.

And, yet, the story has persisted over and over and over again. Incredibly, even after the details of Taibbi’s Twitter thread revealed nothing new, many people started pretending that it had revealed something major, with even Elon Musk insisting that this was proof of some massive 1st Amendment violation:

Now, apparently more files are going to be published, so something may change, but so far it’s been a whole lot of utter nonsense. But when I say that both here on Techdirt and on Twitter, I keep seeing a few very, very wrong arguments being made. So, let’s get to the debunking:

1. If you said Twitter’s decision to block links to the NY Post was election interference…

You’re wrong. Very much so. First off, there was, in fact, a complaint to the FEC about this very point, and the FEC investigated and found no election interference at all. It didn’t even find evidence of it being an “in-kind” contribution. It found no evidence that Twitter engaged in politically motivated decision making, but rather handled this in a non-partisan manner consistent with its business objectives:

Twitter acknowledges that, following the October 2020 publication of the New York Post articles at issue, Twitter blocked users from sharing links to the articles. But Twitter states that this was because its Site Integrity Team assessed that the New York Post articles likely contained hacked and personal information, the sharing of which violated both Twitter’s Distribution of Hacked Materials and Private Information Policies. Twitter points out that although sharing links to the articles was blocked, users were still permitted to otherwise discuss the content of the New York Post articles because doing so did not directly involve spreading any hacked or personal information. Based on the information available to Twitter at the time, these actions appear to reflect Twitter’s stated commercial purpose of removing misinformation and other abusive content from its platform, not a purpose of influencing an election

All of this is actually confirmed by the Twitter Files from Taibbi/Musk, even as both seem to pretend otherwise. Taibbi revealed some internal emails in which various employees (going increasingly up the chain) discussed how to handle the story. Not once does anyone in what Taibbi revealed suggest anything even remotely politically motivated. There was legitimate concern internally about whether or not it was correct to block the NY Post story, which makes sense, because they were (correctly) concerned about making a decision that went too far. I mean, honestly, the discussion is not only without political motive, but shows that the trust & safety apparatus at Twitter was concerned with getting this correct, including employees questioning whether or not these were legitimately “hacked materials” and questioning whether other news stories on the hard drive should get the same treatment.

There are more discussions of this nature, with people questioning whether or not the material was really “hacked” and initially deciding on taking the more cautious approach until they knew more. Twitter’s Yoel Roth notes that “this is an emerging situation where the facts remain unclear. Given the SEVERE risks here and lessons of 2016, we’re erring on the side of including a warning and preventing this content from being amplified.”

Again, exactly as has been noted, given the lack of clarity Twitter reasonably decided to pump the brakes until more was known. There was some useful back-and-forth among employees — the kind that happens in any company regarding major trust & safety decisions, in which Twitter’s then VP of comms questioned whether or not this was the right decision. This shows a productive discussion — not anything along the lines of pushing for any sort of politically motivated outcome.

And then deputy General Counsel Jim Baker (more on him later, trust me…) chimes in to again highlight exactly what everyone has been saying: that this is a rapidly evolving situation, and it makes sense to be cautious until more is known. Baker’s message is important:

I support the conclusion that we need more facts to assess whether the materials were hacked. At this stage, however, it is reasonable for us to assume that they may have been and that caution is warranted. There are some facts that indicate that the materials may have been hacked, while there are others indicating that the computer was either abandoned and/or the owner consented to allow the repair shop to access it for at least some purposes. We simply need more information.

Again, all of this is… exactly what everyone has said ever since the day after it happened. This was an emerging story. The provenance was unclear. There were some sketchy things about it, and so Twitter enacted the policy because they just weren’t sure and didn’t have enough info yet. It turned out to be a bad call, but in content moderation, you’re going to make some bad calls.

What is missing entirely is any evidence that politics entered this discussion at all. Not even once.

2. But Twitter’s decision to “suppress” the story was a big deal and may have swung the election to Biden!

I’m sorry, but there remains no evidence to support that silly claim either. First off, Twitter’s decision actually seemed to get the story a hell of a lot more attention. Again, as noted above, Twitter did nothing to stop discussion of the story. It only blocked links to one story in the NY Post, and only for that one day. And the very fact that Twitter did this (and Facebook took other action) caused a bit of a Streisand Effect (hey!) which got the underlying story a lot more attention because of the decisions by those two companies.

The reality, though, is that the story just wasn’t that big of a deal for voters. Hunter Biden wasn’t the candidate. His father was. Everyone already pretty much knew that Hunter is a bit of a fuckup and clearly personally profiting off of the situation, but there was no actual big story in the revelations (I mean, yeah, there are still some people who insist there are, but they’re the same people who misunderstood the things we’re debunking here today). And, if we’re going to talk about kids of Presidents profiting off of their last name, well, there’s a pretty long list to go down….

But don’t take my word for it, let’s look at the evidence. As reporter Philip Bump recently noted, there’s actual evidence in Google search trends that Twitter and Facebook’s decision really did generate a lot more interest in the story. It was well after both companies took action that searches on Google for Hunter Biden shot upward:

Also, soon after, Twitter reversed its policy, and there was widespread discussion of the laptop in the next three weeks leading up to the election. The brief blip in time in which Twitter and Facebook limited the story seemed to have only fueled much more interest in it, rather than “suppressing” it.

Indeed, another document in the “Twitter Files” highlights how a Democratic member of the House, Ro Khanna, actually reached out to Twitter to point this out and to question Twitter’s decision (if this was really a big Democratic conspiracy, you’d think he’d be supportive of the move, rather than critical of it, but the reverse was true.) Rep. Khanna’s email to Twitter noted:

I say this as a total Biden partisan and convinced he didn’t do anything wrong. But the story has now become more about censorship than relatively innocuous emails and it’s become a bigger deal than it would have been.

So again, the evidence actually suggests that the story wasn’t suppressed at all. It got more attention. It didn’t swing the election, because most people didn’t find the story particularly revealing.

3. The government pressured Twitter/Facebook to block this story, and that’s a huge 1st Amendment violation / treason / crime of the century / etc.

Yeah, so, that’s just not true. I’ve spent years calling out government pressure on speech, from Democrats (and more Democrats) to Republicans (and more Republicans). So I’m pretty focused on watching when the government goes over the line — and quick to call it out. And there remains no evidence at all of that happening here. At all. Taibbi admits this flat out:

Incredibly, I keep seeing people on Twitter claim that Taibbi said the exact opposite. And you have people like Glenn Greenwald who insist that Taibbi only meant “foreign” governments here, despite all the evidence to the contrary. If he had found evidence that there was US government pressure here… why didn’t he post it? The answer: because it almost certainly does not exist.

Some people point to Mark Zuckerberg’s appearance over the summer on Joe Rogan’s podcast as “proof” that the FBI directed both companies to suppress the story, but that’s not at all what Zuckerberg said if you listened to his actual comments. Zuckerberg admits that they make mistakes, and that it feels terrible when they do. He goes into a pretty detailed explanation of some of how trust & safety works in determining whether or not a user is authentic. Then Rogan asks about the laptop story, and Zuckerberg says:

So, basically, the background here, is the FBI basically came to us, some folks on our team, and were like “just so you know, you should be on high alert, we thought there was a lot of Russian propaganda in the 2016 election, we have it on notice, basically, that there’s about to be some kind of dump that’s similar to that. So just be vigilant.”

This does not say that the FBI came to Facebook and said “suppress the Hunter Biden laptop story.” It was just a general warning that the FBI had intelligence that there might be some foreign influence operations, and to “be vigilant.”

This is nearly identical to what Twitter’s then head of “site integrity,” Yoel Roth, noted in his declaration in the FEC case discussed above:

“[F]ederal law enforcement agencies communicated that they expected ‘hack-and-leak operations’ by state actors might occur in the period shortly before the 2020 presidential election . . . . I also learned in these meetings that there were rumors that a hack-and-leak operation would involve Hunter Biden.”

Basically the FBI is saying, in general, they have some intelligence that this kind of attack may happen, so be careful. It did not say to censor the info. It didn’t involve any threats. It wasn’t specifically about the laptop story.

And, in fact, as of earlier this week, we now have the FBI’s version of these events as well! That’s because of the somewhat silly lawsuit that Missouri and Louisiana filed against the Biden administration over Twitter’s decision to block the NY Post story. Just this week, Missouri released the deposition of FBI agent, Elvis Chan, who is often found at the center of conspiracy theories regarding “government censorship.”

And Chan tells basically the same story with a few slight differences, mostly in terms of framing. Specifically, Chan says that he never told the companies to “expect” a hack and leak attack, but rather to be aware of the possibility, slightly contradicting Roth’s declaration:

Yeah, I don’t know what Mr. Roth meant or meant, but what I’m letting you know is that from my recollection — I don’t believe we would have worded it so strongly to say that we expected there to be hacks. I would have worded it to say that there was the potential for hacks, and I believe that is how anyone from our side would have framed the comment.

And the reason I believe that is because I and the FBI, for that matter the U.S. intelligence community, was not aware of any successful hacks against political organizations or political campaigns.

You don’t think that intelligence officials described it in the way that Mr. Roth does here in this sentence in the affidavit?

Yeah, I would not have — I do not believe that the intelligence community would have expected it. I said that they would have been concerned about the potential for it.

In the deposition, Chan repeats (many, many times) that he wouldn’t have used the language saying such an effort would be “expected” but that it was something to look out for.

He also doesn’t recall Hunter Biden’s name even coming up, though he does say they warned them to be on the lookout for discussions on “hot button” issues, and notes that the companies themselves would often ask about certain scenarios:

So from my recollection, the social media companies, who include Twitter, would regularly ask us, “Hey, what kind of content do you think the nation state actors, the Russians would post,” and then they would provide examples. Like, “Would it be X” or “Would it be Y” or “Would it be Z.” And then we — I and then the other FBI officials would say, “We believe that the Russians will take advantage of any hot-button issue.” And we — I do not remember us specifically saying “Hunter Biden” in any meeting with Twitter.

Later on he says:

Yeah, in my estimation, we never discussed Hunter Biden specifically with Twitter. And so the way I read that is that there are hack-and-leak operations, and then at the time — at the time I believe he flagged one of the potential current events that were happening ahead of the elections.

You believe that he, Yoel Roth, flagged Hunter Biden in one of these meetings?

No. I believe — I don’t believe he flagged it during one of the meetings. I just think that — so I don’t know. I cannot read his mind, but my assessment is because I don’t remember discussing Hunter Biden at any of the meetings with Twitter, that we didn’t discuss it.

So this would have been something that he would have just thought of as a hot-button issue on his own that happened in October.

He goes into great detail about meeting with tons of companies, but notes that mostly he’d talk to them about cybersecurity threats, not disinformation. He talks a bit about Russian disinformation campaigns, highlighting the well known Internet Research Agency, which specialized in pushing divisive messaging on US social media platforms. However, he basically confirms that he never discussed the laptop with anyone at any of these companies, and the deposition makes it pretty clear that if anyone at the FBI would have done so, it either would have been Chan himself or done with Chan’s knowledge.

As for the NY Post story, and the laptop itself, he notes he found out about it through the media, just like everyone else. And then he says that he didn’t talk with anyone at Twitter or Facebook about it, despite being their main contact on these kinds of issues.

Q. It’s your testimony that those news articles are the first time that you became aware that — you became aware of Hunter Biden’s laptop in any connection?

Yes. I don’t remember if it was a New York Post article or if it was another media outlet, but it was on multiple media outlets, and I can’t remember which article I read.

And before that day, October 14th, 2020, were you aware — were you aware of Hunter Biden — had anyone ever mentioned Hunter Biden’s laptop to you?

No.

[….]

Do you know if anyone at Twitter reached out to anyone at the FBI to check or verify anything about the Hunter Biden story?

I am not aware of any communications between Yoel Roth and the FBI about this topic.

Are you aware of any communications between anyone at Twitter and anyone in the federal government about the decision to suppress content relating to the Hunter Biden laptop story once the story had broken?

I am not aware of Mr. Roth’s discussions with any other federal agency. As I mentioned, I am not aware of any discussions with any FBI employees about this topic as well. But I only know who I know. So I don’t — he may have had these conversations, but I was not aware of it.

You mentioned Mr. Roth. How about anyone else at Twitter, did anyone else at Twitter reach out, to your knowledge, to anyone else in the federal government?

So I can only answer for the FBI. To my knowledge, I am not aware of any Twitter employee reaching out to any FBI employee regarding this topic.

/ How about Facebook, other than that meeting you referred to where an analyst asked the FBI to comment on the Hunter Biden investigation, are you aware of any communications between anyone at Facebook and anyone at the FBI related to the Hunter Biden laptop story?

No.

How about any other social media platform?

No.

How about Apple or Microsoft?

No.

Basically, the exact same story emerges no matter how you look at it. The FBI, along with CISA, would have various meetings with internet companies mainly to warn them about cybersecurity (i.e., hacking) threats, but also generally mentioned the possibility of hack and leak attempts with a general warning to be on the lookout for such things, and that they may touch on “hot button” social and news topics. Nowhere is there any indication of pressure or attempts to tell the companies what to do, or how they should handle it. Just straight up information sharing.

When you look at all three statements — Zuckerberg’s, Roth’s, and Chan’s — basically the same not-very-interesting story emerges. The US government had some general meetings that happen with lots of big companies to warn them about various potential cybersecurity threats, and the issue of hack-and-leak campaigns as a general possibility came up with no real specifics and no warnings.

And no one communicated with the companies directly about the NY Post story.

Given all that, I honestly don’t see how there’s any reasonable concern here. There’s certainly no clear 1st Amendment concern. There appears to be zero in the way of government involvement or pressure. There’s no coercion or even implied threats. There’s literally nothing at all (no matter how Missouri’s Attorney General completely misrepresents it).

Indeed, the only thing revealed so far that might be concerning regarding the 1st Amendment is that Taibbi claimed that the Trump administration allegedly made demands of Twitter.

If the Trump administration actually had sent requests to “remove” tweets (as Taibbi claims in an earlier tweet) that would most likely be a 1st Amendment issue. However, Taibbi reveals no such requests, which is really quite remarkable. It is also possible that Taibbi is overselling these claims, because this is a part of a discussion that we’ll get to in the next section, regarding Twitter’s flagging tools, which anyone (including you or me) can use to flag content for Twitter to review to see if it violates the company’s terms of service. While there are certainly some concerns about the government’s use of such tools, unless there’s some sort of threat or coercion, and as long as Twitter is free to judge the content for itself and determine how to handle it under its own terms, there’s probably no 1st Amendment issue.

Indeed, some people have highlighted the fact that the government gets “special treatment” in having its flags reviewed. But, from people I’ve spoken to, that actually goes against the “1st Amendment violation!” argument, because many social media companies set up special systems for government agents not to enable “moar censorship!” but because they know they have to be extra vigilant in reviewing those requests so as not to take down content mistakenly based on a government request.

So, sorry, so far there appears to be no government intrusion, and certainly no 1st Amendment violation.

4. The Biden campaign / Democrats demanded Twitter censor the NY Post! And that’s a 1st Amendment violation / treason / the crime of the century / etc.

So, again, the only way that there’s a 1st Amendment violation is if the government issued the demand. And in October of 2020, the Biden campaign and the Democratic National Committee… were not the government. The 1st Amendment does not restrict their ability, as private citizens (even while campaigning for public office) to flag content for Twitter to review against its policies. Hilariously, Elon Musk seems kinda confused about how time works. That tweet that we screenshotted about about the “1st Amendment” violation is in response to an internal email that Taibbi revealed about what Taibbi (misleadingly) says are “requests from connected actors to delete tweets” followed by a screenshot of Twitter employees listing out some tweets saying “more to review from the Biden team” and someone responding “handled these.”

There was then the next tweet which was a similar set of two tweets sent over from the Democratic National Committee (as compared to the Biden campaign in the first one). This includes a tweet from the actor James Woods, which the Twitter team calls special attention to for being “high profile.”

Except, as a few enterprising folks discovered when looking up those tweets listed, they were… basically Hunter Biden nude images that were found on the laptop hard drive, which clearly violated Twitter’s terms of service (and likely violated multiple state laws regarding the sharing of nonconsensual nude images). This includes the James Woods tweet, which included a fake Biden campaign ad that showed a naked picture of Hunter Biden lying on a bed with his (only slightly blurred) penis quite visible. I’m not going to share a link to the image.

A good investigative reporter might have looked up what was in those tweets before posting a conspiratorial post implying that these were attempts by the campaign to remove the NY Post story or some other important information. But Taibbi did not. Nor has he commented on it since.

On top of that, while Taibbi claims that these were “requests to delete,” as the Twitter email quite clearly says, these are for Twitter to “review.” In other words, these were flagged for Twitter to review if they violate Twitter’s policies as the naked images clearly do.

So, there’s clearly no 1st Amendment concern here because, despite Musk’s understanding of the space-time continuum, the Biden administration was not in the White House in October of 2020. Second, even if we’re concerned about political campaigns asking for content to be deleted, flagging content for companies to review to see if they violate policies is not (in any way) the same as demanding it be deleted. Anyone can flag content. And then the company reviews it and makes a determination.

Even more importantly, nothing revealed so far suggests that the campaign had anything to say to Twitter regarding the NY Post story or any story regarding the laptop. Literally the only concerns raised were about the naked pictures.

Finally, as noted above, the only other Democrat mentioned so far in the Twitter files is Rep. Ro Khanna who told Twitter it was wrong to stop the links to the NY Post article, and urged them to rescind the decision in the name of free speech. That does not sounds like the Democrats secretly pressuring the company to block the story. It kinda sounds like the exact opposite.

So despite what everyone keeps yelling on Twitter (including Elon Musk) this still doesn’t appear to be evidence of “censorship” or even “suppression of the Hunter Biden laptop story.” It’s just focused on the nonconsensual sharing of Hunter’s naked images.

As a side note, Woods has now said he’s going to sue over this, though for the life of me I have no idea what sort of claim he thinks he has, or how it’s going to go over in court when he claims his rights were violated when he was unable to share Hunter’s dick pic.

5. But Jim Baker! He worked for the FBI! And he was in charge of the Twitter files! Clearly he’s covering up stuff!

Here we are ripping from the stupidity headlines. This one came out just last night as Taibbi added a “supplement” to the Twitter files, again seemingly confused about how basically anything works. According to Taibbi in a very unclear and awkwardly worded thread, he and Bari Weiss (another opinion columnist who Musk has decided to share the files with) were having some sort of “complication” in accessing the files. Taibbi claims that Twitter’s Deputy General Counsel, Jim Baker, was reviewing the files, and somehow this was as problem (he does not explain why or how, though there’s a lot of conjecture).

Baker is, in fact, the former General Counsel at the FBI. It made news when he was hired.

Baker was subject to a bunch of conspiracy theory stuff a few years ago regarding the FBI and some of the sillier theories regarding the Trump campaign, including the Steele Dossier and the even sillier “Alfa Bank” story (which had always been silly and lots of people, including us, had mocked when it came out).

But despite all that, there’s really little evidence that Baker has done anything particularly noteworthy here. The stuff about his actions while at the FBI is totally overblown partisan hackery. People talk about the so-called “criminal investigation” he faced for his work looking into Russian interference in the 2020 election, but that appears to be something mostly cooked up by extreme Trumpists in the House and appears to have gone nowhere. And, yes, he was a witness at the Michael Sussman trial, which was sorta connected to the Alfa Bank stuff, but his testimony supported John Durham, not Michael Sussman, in that he claimed that Sussman made a false statement to him, which the entire case hinged on (and, for what it’s worth, the trial ended in acquittal).

In other words, almost all of the FBI-related accusations against Baker are entirely “guilt by association” type claims, with nothing at all legitimate to back them up.

As for Twitter, we already highlighted Baker’s email that Taibbi revealed, which shows a normal, thoughtful, cautious discussion of a normal trust & safety debate, with nothing even remotely political.

The latest claims from Taibbi and Weiss also don’t make much sense. Elon Musk has told his company to hand over a bunch of internal documents to reporters. Any corporate lawyer would naturally do a fairly standard document review before doing so to make sure that they’re not handing over any private information or something else that might create legal issues for Musk. And since a large chunk of the legal team has left the company, it wouldn’t be all that surprising if the task ended up on Baker’s desk.

Now, you can argue (as Taibbi and others now imply) that there’s some massive conflict of interest here, but, uh… that’s not at all clear, and not really how conflict of interest works. And, again, there’s little indication that Baker had a major role here at all, beyond being one of many who weighed in on this matter (and did so in a perfectly reasonable manner).

Honestly, Baker not reviewing the documents first would have potentially put him in legal jeopardy for not doing the very basic function of his job in making sure the company he worked for didn’t put itself in serious legal jeopardy by revealing things that might create huge liabilities for Musk and the company.

Either way, late Tuesday, Musk announced that Baker had “exited” from the company, and when asked by a random Twitter user if he had been “asked to explain himself first” Musk claimed that Baker’s “explanation was… unconvincing.”

And perhaps there’s something more here that will be revealed by Weiss now that the shackles have been removed. But, based on what’s been stated so far, a perfectly plausible explanation is that Musk confronted Baker wanting to know why he was holding back the files and what his role was in “suppressing” the NY Post story. And Baker told him, truthfully, that his role was exactly as was revealed in the email (giving his general thoughts on the proper approach to handling the story) and that he was reviewing documents because that’s his job, and Musk got mad and fired him.

Somewhat incredibly, Musk also seemed to imply he only learned of Baker’s involvement on Sunday.

Some people are claiming that Musk is saying he only discovered that Baker worked for him on Sunday, which is possible but seems unlikely. Conspiracy theorists had pointed out Baker’s role at the company to Musk as far back as April. A more charitable explanation is that Musk only discovered that Baker was handling the document review on Sunday. And I guess that’s plausible but, again, really only reflects extremely poorly on Musk.

If he’s going to reveal internal documents to reporters, especially ones that Musk himself keeps claiming implicate him in potential criminal liability (yes, it happened before his time, but Musk purchased the liabilities of the company as well), it’s not just perfectly normal, but kinda necessary to have lawyers do some document review. Again, as a more charitable explanation, perhaps Musk just wanted a different lawyer to do the review, and my only answer there is maybe he shouldn’t have gotten rid of so many lawyers from the legal team. Might have helped.

So, look, there could be a possible issue here, but given how much has been totally misrepresented throughout this whole process, without any actual evidence to support the “Jim Baker mastermind” theory, it’s difficult to take it even remotely seriously when there’s a perfectly normal, non-nefarious explanation to how all of this went down.

The absence of evidence is not evidence that there’s a coverup. It might just be evidence that you’re prone to believing in unsubstantiated conspiracy theories, though.

6. Still, all this proved that Twitter is “illegally” biased towards Democrats!

Taibbi made a big deal out of the fact that Twitter employees overwhelmingly donated to Democrats in their political contributions, which is not exactly new or surprising. Musk commented on this as well, suggesting sarcastically it was proof of bias at Twitter, but left out that among the companies in the chart he was commenting on… was also Tesla, where over 90% of employee donations went to Democrats.

But, more importantly, it’s not surprising in the least. Employees of many companies lean left. Executives (who donate way more money) tend to lean right. I mean, you can look at a similar chart of executive donations that shows they overwhelmingly go to Republicans. Neither is illegal, or even a problem. It’s just reality.

And companies making editorial decisions are… in fact… allowed to have bias in their political viewpoints. I would bet that if you looked at donations by employees at the NY Post or Fox News, they would generally favor Republicans. Indeed, imagine what would happen if someone took over Fox News and suddenly started revealing (1) communications between Fox News execs and Republican politicians and campaigns and (2) internal editorial meeting notes regarding what to promote. Don’t you think it would be way more biased than what the Twitter files revealed?

Here’s the important point on that: Fox News’ clear bias is not illegal either. And, indeed, if Democrats in Congress held hearings on “Fox News’ bias” and demanded that its top executives appear and explain their editorial decision making in promoting GOP talking points, people should be outraged over the clear intimidation factor, which would obviously be problematic from a 1st Amendment angle. Yet I don’t expect people to get all that worked up about the same thing happening to Twitter, even though it’s actually the same issue.

Companies are allowed to be biased. But the amazing thing revealed in the Twitter files is just how little evidence there is that any bias was a part of the debate on how to handle this stuff. Everything appeared to be about perfectly reasonable business decisions.

And… that’s it. I fear that this story is going to live on for years and years and years. And the narrative full of nonsense is already taking shape. However, I like to work off of actual facts and evidence, rather than fever dreams and misinterpretations. And I hope that you’ll read this and start doing the same.

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

And yet, for the life of him, he cannot figure out how to give his kids access to Apple TV+ or to get his phone to link to the sound system in his home gym, and in spite of his gold-plated education, needs someone to explain it all to him as if he were a five-year-old. And also to his 

Rokos Capital Management, owned by secretive British billionaire Chris Rokos, 52, is seeking a 'VIP Support Engineer' for one of its 'senior board members' and their family.

The iPad butler must have a 'comprehensive understanding' of Apple products and features, including 'Apple TV, HomePod, iPad, iPhone, Family Sharing, iTunes and Photos’.

The job advert says they will also need 'excellent communication and interpersonal skills' and the ability to 'explain technical concepts' in a 'clear and concise' fashion.

If this sounds altogether beneath someone with at least a second-class degree from one of the best two dozen university in the U.K. and at least three years “relevant working experience,” it should be noted that there are perks.

They must be prepared to travel to offices and homes across the world and to provide 'out-of-hours support', while resolving any technical issues 'in a pro-active and timely manner.'

Glad to see Chris is making excellent use of that half-billion pounds he paid himself last year.

Hedge fund billionaire Chris Rokos who made £509MILLION last year seeks 'iPad butler' to help his family look after their Apple phones, tablets and other gadgets [Daily Mail]
Billionaire hedge fund manager seeks 'iPad butler' to look after family's Apple gadgets [LBC]

Gene Levoff, 48, of San Carlos, California, pleaded guilty to six securities fraud charges at a hearing before U.S. District Judge William Martini in Newark, New Jersey…. Each count carries a maximum 20-year prison term and $5 million fine, though Levoff’s punishment would likely be much less. Levoff’s sentencing is scheduled for Nov. 10.

Of course, Levoff—who, again, once enforced policies against insider-trading—didn’t go down without at least trying the well-worn tactic of claiming that his job wasn’t even necessary.

In 2020, Mr. Levoff’s legal team filed a motion to dismiss the case, arguing that the complaint was unconstitutional because no law existed against insider trading. But Judge William Martini rejected the motion, saying that the argument was “incorrect” and that Congress passed laws to ensure “fair and honest markets.”

Former top Apple lawyer pleads guilty to insider trading [CNBC]
Former Apple Lawyer Pleads Guilty to Insider Trading [NYT]

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

Things change though. While there are certainly those who still ascribe to corporations the purpose of making money at the expense of just about anything else, private companies are nonetheless being increasingly called upon to focus on more than just the bottom line.

From a historical perspective, this shift makes some sense. In 2010, for example, a 5-4 majority of the United States Supreme Court reversed campaign finance restrictions on corporations that had stood for a century.

In the Citizens United case, the majority of the Supreme Court reasoned that the political speech of corporations should not necessarily be treated differently under the First Amendment compared to the speech of “natural persons.” But new rights come with new responsibilities — it would be naïve to think the public would accept that corporations could exercise the same rights as we natural persons without facing the same consequences for failing to do so responsibly.

Many attempts have been made in recent years, across the political spectrum, to hold corporations accountable for their statements, deeds, and positions. For some corporate leaders, this has translated into a renewed commitment to employees, the environment, and even suppliers as opposed to only shareholders. For Donald Trump, it meant asking his supporters to engage in dozens of boycotts of everything from Coca-Cola to Major League Baseball. For the most part, the market has been pretty good at sorting out reasonable versus unreasonable corporation actions without regard to baldly political cackling.

Today, with the crisis in Ukraine, we are facing the next stage in the evolution of corporate responsibility. Some businesses are not waiting for a public demand or public reprimand to help Ukraine or punish Russia. They’re just doing it on their own.

Nike, Apple, and IKEA quickly paused or canceled ongoing business activities in Russia following the breakout of hostilities. Tesla is allowing fleeing Ukrainians who own any type of electric vehicle to use its Superchargers, free of charge, in cities directly across the Ukrainian border. Tesla CEO Elon Musk also followed through with a promise to activate private spaceflight company SpaceX’s Starlink satellite internet service in Ukraine and to deliver a number of Starlink consoles to provide Ukraine with reliable internet access. Visa and Mastercard recently announced that they were suspending all transactions in Russia over the invasion of Ukraine. Even as some companies work with regulators to implement mandatory governmental sanctions, dozens of others are taking the initiative to impose their own sanctions on Russia and/or to provide aid to Ukraine.

Of course, some big-name companies with operations in Russia have been conspicuously silent. I won’t name names so I can’t be accused of calling them out before they have a little more time to take action (all right, one of them starts with “Mc” and rhymes with “cuckolds” if you really can’t live without a hint). UPDATE: The business that shall not be named, as well as a few others, suspended business in Russia after this was first published.

It is too early to know whether taking a meaningful stance on Russia’s invasion of Ukraine, or failing to do so, will actually have long-term monetary consequences for any individual company. Yet, efforts are underway to track which companies are doing what in response to the crisis.

What is the responsibility of companies to do something about Russia’s invasion of Ukraine? That, I suppose, is for you to decide. From a risk analysis perspective though, it’s hard to imagine an easier instance of picking the right side of an issue than opposing an unprovoked and completely unjustified invasion of another country that has already needlessly caused thousands of deaths.

This could be a nice little silver lining to an otherwise dark and dangerous time. There probably has never been such a profound example of so many corporations going out of their way to do the right thing not because they had to, not because it was necessarily profitable, but just because it was the right thing.

Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at jon_wolf@hotmail.com.

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

Even so, last week saw something truly unique. On February 3, Facebook’s stock (technically Facebook is now owned by “Meta Platforms” so I suppose I should be calling it “Meta stock,” even though that’s not going to catch on anytime soon) cratered by 26.4 percent.

The value of the company slumped by more than $230 billion. That is the largest daily loss in market capitalization in history for any U.S. firm.

Meta chief executive Mark Zuckerberg probably took it hard. According to the Bloomberg Billionaires Index, his personal net worth plummeted by $31 billion as a result of the stock slide. He’s still worth about $90 billion though, so even after losing a quarter of his wealth, ol’ Zuck is going to be just fine.

This latest stock rout for Facebook’s parent company is not completely unprecedented. The previous record-holder for the largest one-day drop in Facebook’s stock price was in July of 2018, when Facebook stock was down by 19 percent. Still, this one seems a bit different, and not just in its scale.

When it reported fourth quarter results for the first time under its new name, Meta missed earnings estimates. The company cited changes to Apple’s iPhone privacy settings as impacting its ad-targeting, and it also blamed macroeconomic challenges, including supply chain problems and inflation, for dragging down advertising budgets. There was a much bigger issue though.

In another first, Facebook reported its only quarter-to-quarter drop in daily active users to date.

For October, November, and December, Facebook’s daily active users were down to 1.929 billion. The previous quarter Facebook reported 1.930 billion daily active users.

Facebook remains the most popular social networking platform worldwide, and nearly 4 billion eyeballs on screens every day is nothing to scoff at. Facebook (or, ugh, Meta, if we must) is going to remain a massively huge, massively profitable company for a long, long time.

Growth is another matter though.

Almost a year ago, I wrote about how, for longtime users at least, Facebook is becoming increasingly boring and irrelevant. For teens, Snapchat surpassed Facebook as the most popular social media platform way back in 2016 — we can discuss ageism later, but being the platform of old people is not really a good look for any tech company from a returns perspective.

Meta’s supposedly signature “metaverse” is a bad idea that has already lost the company $10 billion. There is a pending Federal Trade Commission antitrust action against Facebook. Plus there’s Facebook’s role in spreading destructive mental health disorders, political disinformation, and genocide.

While Facebook’s era of social media dominance certainly isn’t over, we very well might have just reached the beginning of the end.

The societal implications of a social media network as pervasive as Facebook extend far beyond investor returns. If I could snap my fingers and make every Meta Platforms platform disappear in an instant, we would live in a very different country, and a very different world.

But this is capitalism. As long as a company is making money and delivering returns for investors, it’s not likely to go anywhere in the near-term.

Still, although Rome wasn’t built in a day, it didn’t crumble in one either. Only time will tell what the future holds for Facebook, but the worst day for any company’s stock price ever is an important milestone for Facebook and for all of us. Meta is not invulnerable. Even this tech giant that billions have come to communicate through, to rely on, and to, occasionally, fear, is subject to the same broad forces of history as the rest of us. Someday, even Facebook will fall.

Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at jon_wolf@hotmail.com.

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

European Union regulators and Silicon Valley’s major tech firms don’t always see eye to eye. But when it comes to privacy, Apple just made a French connection.

On Wednesday, France’s competition regulator tossed out a request made by advertisers and publishers to block Apple's plan to restrict tracking of individual's mobile app usage.

Not Out of Les Bois Yet
A quick background — last year Apple said it would begin to require apps on its smartphones and tablets to get permission before collecting someone’s so-called "advertising identifiers."

That announcement drew ire from both small developers and Facebook (which took out full-page attack ads in major papers). The anti-Apple coalition said the move would make it harder to make money from personalized ads, hurting retailers in the process:

Yesterday, France’s regulator rejected their plea outright:

• “We can’t intervene just because there might be a negative impact for companies in the ecosystem,” said Isabelle de Silva, who heads the Autorité de la Concurrence.
• “At this stage, we haven’t found flagrant examples of discrimination,” she added.

But Apple isn’t off the hook entirely. France said it will investigate whether Apple’s switch could be considered “self-preferencing” by imposing stricter rules on third-party apps than it does on itself.

What have you done for me lately? Apple has taken other steps so as not to appear the big meanie: Last year it gave a break to smaller developers, reducing the App Store cut it takes from developers with less than $1 million in revenue to 15% from 30%. That pushed Google to follow suit this week, when it made the same change to its Android Play Store.

The Takeaway: Expect more jockeying to come in the arena of big tech.

Tesla doubters have experienced a jolt of economic reality.

According to S3 Partners, short-sellers of Tesla’s gravity-allergic stock have lost $35 billion in 2020.

Falling Short
Tesla shares have been in ludicrous mode all year and are now up over 600%. In November, Tesla climbed 46% and short-sellers lost $8.5 billion in a single month.

Bruised and battered, many short-sellers have simply given up. The percentage of shares sold short has fallen around 63% so far this year. Still, about 6% of Tesla’s shares are held by short-sellers, well above the 1-2% average for large companies.

A few numbers to put the losses in perspective:

• Short-seller losses for high-fliers Amazon and Apple have been roughly $5 billion each this year.
• The U.S. airline industry posted combined losses of $24.2 through the first nine months of 2020, the worst in its history.
• Through the first 11 years of Tesla’s corporate history, it lost $6.7 billion.

Elon’s Warning: In an email to employees obtained by Electrek, he warned that if investors grow concerned with Tesla’s 1% profit margin, the stock will “immediately get crushed like a soufflé under a sledgehammer.”

The iPhone maker is venturing into the credit card business by partnering with Goldman Sachs and MasterCard. Apple is offering a cash-back credit card comparable to many other cards currently on the market. Not quite the level of innovation from the Steve Jobs era.

With profits and revenues down, Goldman Sachs is looking for new ways of “doing God’s work.” By approving subprime borrowers for the Apple Card, it's doing exactly that by offering products to people who don’t vacation in The Hamptons. 

In Goldman's defense, it was Apple who preferred a partner that would approve as many of its 100 million-plus U.S. iPhone users as possible. Apple unsuccessfully tried this in the 90's, when Steve Jobs “had an aversion” to rejecting the company's customers.  Other banks were hesitant to partner with Apple. An employee at a competitor of Goldman Sachs texted his buddy “Dude, if that portfolio ever makes money, I’m buying you a beer.” Citigroup pulled out over fears it couldn’t make an acceptable rate of return.

So what happens if you lose your Apple device? Well, you can’t pay your bill because there isn’t a web option to pay, unlike literally every other card provider. Payments can only be made through the Apple Wallet app. Of course, you can call and make a payment, but if you just lost your phone and are a subprime borrower, you likely won’t be able to afford a replacement. So for a company that was once named the most innovative company in the world for 10 consecutive years, Apple’s recent innovations include a credit card that can’t be paid online and removing the headphone jack.

It will be interesting to see if in a few years "The Big Short 2" is released, in which Goldman Sachs makes a killing on credit-default swaps on the creditworthiness of the borrowers who are more or less being forced into Apple’s credit card. After all, the “dude” at Goldman Sachs has to find some way to make money so he can get that beer.

Get more Hipster Trader at @Hipster_Trader, and sign up for his newsletter here.

Per WSJ:

Japan’s SoftBank Group Corp. unveiled a second technology megafund even bigger than its nearly $100 billion Vision Fund, answering skeptics who questioned whether anyone could raise so much in such a short time.

Vision Fund 2, as the company is calling it, expects to gather some $108 billion in capital from more than a dozen investors that have signed memorandums of understanding, ranging from Apple Inc. and Microsoft Corp. to Kazakhstan’s sovereign-wealth fund, SoftBank said Friday. Some $38 billion of that capital will come from SoftBank itself, funded by proceeds from the first Vision Fund.

Listen, we're avowed super fans of Son's previous artistic work exploring how one can make vast sums of money almost meaningless, but we're a little disappointed to see another $100 Billion-ish vision fund piece. Sure, this has fun little hilarious details like focusing on AI [ie, hastening the android-led armageddon] and a patron list that includes the Kazakh dictatorship, and maybe Goldman Sachs, Apple, and Microsoft:

Other investors including Goldman Sachs Group Inc. are in active talks to invest, people familiar with the matter said Thursday, and the fund’s size is likely to grow. The Wall Street Journal reported Wednesday that the Wall Street bank was among the investors set to back the fund, alongside Apple, Standard Chartered PLC and Microsoft, joining a roughly $40 billion investment from SoftBank itself.

Wait...Standard Chartered? That's hilarious. [And congrats to former Goldmanite Mark Schwartz who is likely even richer now.]

But this is also kind of still a retread. Unless DJ D-Sol and Tim Apple are willing to double the size of this second Vision Fund, we don't really see the artistic merit here. Even the Saudis aren't looking that thrilled to be patrons of this newest work, and everyone knows that MBS is a Masa Son stan...

While the first fund was backed largely by the sovereign-wealth funds of Saudi Arabia and the United Arab Emirates as well as SoftBank itself, the group of companies pledging money for Vision Fund 2 includes several Japanese and Taiwanese banks, insurers and pension firms—a more conservative and risk-averse type of investor.

At least two investors from the first Vision Fund—Apple and Taiwanese electronics company Foxconn Technology Group—are pledging money for the second fund, SoftBank said. Although Saudi Arabia and Abu Dhabi haven’t yet signed up, they have indicated they are likely to invest again, The Wall Street Journal reported earlier.

The only saving grace of this new work is the idea that Son needs the T-Mobile/Sprint merger to close so he can pull some cash out of SoftBank's massive stake in Sprint and hold up his end of funding for a 12-figure private equity fund aimed ag hastening the automation of most human jobs on the earth.

And what is that, if not outsider art?

SoftBank Rolls Out Second Tech Megafund, With Apple Among Top Investors [WSJ]

Unfortunately, Solomon’s enthusiasm hasn’t quite filtered down to the lower floors over at 200 West.

The card, revealed Monday at an elaborate Apple event, is hamstrung by the still-limited reach of Apple Pay, according to analysts led by Rod Hall, a senior equity analyst at the bank. Users will get 2 percent cash back on purchases at merchants who accept Apple Pay, and just 1 percent where Apple Pay isn’t accepted./“Even though Apple Pay is becoming more available, we would still expect a large percentage of transactions to be done at the 1% return level (using the physical card) so we would expect the typical consumer to perceive the cash return rate to be OK but not great,” the analysts wrote.

Goldman Sachs analysts are underwhelmed by the new Goldman Sachs-Apple credit card [CNBC]
Goldman Sachs CEO says Apple Card ‘completely changes the credit card experience’ [CNBC]

“One of the managers other than Warren had a position in Apple and sold part of it in order to make an unrelated purchase,” Buffett’s assistant Debbie Bosanek said in an email. “None of the shares under Warren’s direction have ever been sold.”

Was Todd Combs looking for some more fintech spending money? Did Ted Wechsler do, uh, whatever it is Ted Wechsler does? Who knows? What we do know is that Buffett didn’t just buy them from whoever sold them, and that there are a few things whoever sold them might have bought with those few hundred million iBucks.

Berkshire Hathaway Inc… added positions in Canada’s Suncor Energy Inc and software company Red Hat Inc…. Most other changes in Berkshire’s stock portfolio were relatively smaller, though it boosted its stake in JPMorgan Chase & Co 41 percent to 50.1 million shares, worth $4.9 billion.

Combs is a director at JPMorgan… Berkshire also confirmed its new, $261 million stake in StoneCo Ltd, a Brazilian credit card processor that went public in October.

One thing they definitely didn’t buy any more of its Oracle: Four months of looking into Larry Ellison’s weirdly-browed eyes was enough even for a long-term investor like Buffett (or Combs or Wechsler or whoever).

Berkshire also appeared to have shed a $2.13 billion stake in database software company Oracle Corp after having first disclosed it in November. It is rare for Berkshire, which owns some stocks for decades, to unwind an investment so fast.

Berkshire trims Apple stake, adds Suncor and Red Hat, exits Oracle [Reuters]

The Securities and Exchange Commission on Wednesday filed a lawsuit against a former high-ranking Apple Inc. employee who allegedly used inside information to trade the stock ahead of earnings announcements.

According to the SEC, Gene Levoff on three occasions used his position as corporate secretary to either profit, or avoid losses, of $382,000.

Apple's former senior director of corporate law getting nabbed for insider trading of Apple's stock is some pretty solid stupid crime fun, but we haven't even shared the best part. 

Levoff was responsible for Apple’s compliance with securities laws, including providing legal advice in connection with Apple’s SEC filings and financial reporting, and for managing Apple’s corporate subsidiary structure, the agency said.

If you're someone smart enough to be a senior lawyer and a corporate secretary at the largest consumer brand in the history of humankind, it stands to reason that you'd be smart enough to be subtle about trading your own stock on insider information...right?

In one case, Levoff sold some $10 million worth of Apple stock before earnings that came out on July 21, 2015, saving some $345,000 ahead of news that resulted in a 4% loss in Apple’s stock.

Sorry, we're finding it hard to type while giving a standing ovation and wiping a tear of pure bliss from our eyes.

Former high-ranking Apple employee charged by SEC with insider trading [MarketWatch]

But according to the world's most charismatic man, Apple is full of beans. US Commerce Secretary Wilbur Ross went on CNBC this morning to tell Joe Kernen that Tim Cook should stop being such a whiny bitch when it comes to the whole China situation.

After being pressed by morning television's human embodiment of all negative Irish-American stereotypes, our narcoleptic Commerce Secretary summoned whatever energy he had between morning naps to say this about Apple:

“I don’t think Apple’s earnings miss had anything to do with the present trade talks,” Ross said on CNBC’s “Squawk Box. ” “Think about it, there have been no tariffs put on Apple products. So that’s not it.”

While Ross left himself open to a more nuanced take on how tariffs work and what trade, like...is, we'll admit that we had no interest to really figure out what Ross was even talking about once we realized that he hadn't brought any props.

So, to recap: Apple is now at odds with the US government over what's wrong with Apple product sales figures and Wilbur Ross is still somehow speaking on behalf of the US government. Happy Monday, monsters.

Commerce Secretary Ross denies Apple’s revenue warning is tied to China [CNBC]

Let's focus on the iPhone part here.

You could argue that sales slumps are usually the fault of management and that a bleed on iPhones could have been offset by the sales of that new innovative product that Apple still hasn't produced. But we've all bought so much of Apple's shit already that we pumped the thing into a trillion dollar situation that we are forced to reckon with if it starts to shudder. Maybe Tim Cook should be replaced (open auditions on AppleTV would be our preference...and Marissa Mayer should go first), and maybe Goldman is right that Apple is even more deeply fucked than we are seeing in this moment, but we would argue that maybe we should all just feed the beast.

So run out into the streets and find the nearest Apple retail location near you [hint : it's in the douchiest hipster part of your town], trade in your iPhone, your iPad, your stupid watch, or even your laptop...well, maybe not your laptop since Apple hasn't really improved those in many years. Let the money flow and jumpstart the one consumer electronics company that has become so bloated and comfortable that it sends the markets into a panic by admitting that it's only going to pull down $84 billion in revenue for a single quarter. This is how economics work now, just ask the dream team of finance geniuses managing it in Washington.

Speaking of Washington, Steve Mnuchin is missing out on a major opportunity to counsel the president that $9 billion worth of iPhones cemented together could make a pretty nice wall on our southern border.

To Apple investors:
Today we are revising our guidance for Apple’s fiscal 2019 first quarter, which ended on December 29. We now expect the following:
- Revenue of approximately $84 billion
- Gross margin of approximately 38 percent
- Operating expenses of approximately $8.7 billion
- Other income/(expense) of approximately $550 million
- Tax rate of approximately 16.5 percent before discrete items

And, yes, this is going to bleed well beyond Apple only pulling down $84 billion in revenue for a single quarter, because...

While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China. In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.
China’s economy began to slow in the second half of 2018. The government-reported GDP growth during the September quarter was the second lowest in the last 25 years. We believe the economic environment in China has been further impacted by rising trade tensions with the United States. As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to our retail stores and our channel partners in China declining as the quarter progressed. And market data has shown that the contraction in Greater China’s smartphone market has been particularly sharp.

But while our president's ludicrous Chinese trade war sucks, sayeth Cook, so do iPhone sales...in China.

Lower than anticipated iPhone revenue, primarily in Greater China, accounts for all of our revenue shortfall to our guidance and for much more than our entire year-over-year revenue decline. In fact, categories outside of iPhone (Services, Mac, iPad, Wearables/Home/Accessories) combined to grow almost 19 percent year-over-year.

Looking beyond the fact that Apple has not really done anything revolutionary on the product side in almost a decade thus allowing much of the consumer tech sector to catch up with it and tarnish its image as the most innovative company in the world, a downward revision of $9 billion is basically Tim Cook throwing 9 billion theoretical dollars into the raging bonfire of debate over global trade and hoping that the smoke turns into a Rorschach test for investors primed to blame the Trump administration for literally everything. The rather tenuous grip on counterfactual optimism that has powered markets for the last few unconnected days could be pretty well undone by a concrete example of fallout from a global trade war and massive selling on the stock of a company with a market cap of $750 billion. That would make Apple's shitty quarter the world's problem, and that's just good management.

And, if he prays to the shrine of Steve Jobs hard enough, we think Cook might just get away with it. But judging from a 7% decline in AAPL after-hours trading, it's gonna be hella tight.

Letter from Tim Cook to Apple investors [Apple]

(For those of you wondering WTF The Water Coolest is, and what it's intentions are with the Opening Bell ... don't worry we've made you a new friend.)

Ashes to ashes, dust to dust [The Water Coolest]

Things haven't been this dark at PG&E since Jeff Skilling was a BSD and Enron traders were saying things like this to managers of power plants: "Ah, we want you guys to get a little creative, and come up with a reason to go down." It's worth noting that Pacific Gas and Electric declared bankruptcy in 2001, due largely to Enron's practices.

But now the utility provider is facing a different force of nature: wildfires which have already claimed the lives of 60 Californians. Shares of PG&E have fallen more than 60% in just six days over concerns about unprecedented damage to the provider's grid.

‘Unprecedented’ PG&E Uncertainty Spurs Morgan Stanley Downgrade [Bloomberg]

Celebrity death match [The Water Coolest]

Biggie vs. Tupac. Jobs vs. Gates. And now, Cook vs. Zuck. The CEO of Apple and totally-not-a-lizard-person, Mark Zuckerberg are trading jabs. The controversy? Zuck allegedly making Facebook execs use Android devices over Apple which was a response to Cook's comments that "Privacy to us is a human right. It's a civil liberty" (a response to Facebook's privacy issues). Shots fired.

Facebook confirmed Mark Zuckerberg's beef with Apple CEO Tim Cook in an official company statement [Business Insider]

I'm not mad, I'm disappointed [The Water Coolest]

Not up in here! Right on cue, DJ D-Sol says he's personally outraged by the 1MDB scandal in a voicemail delivered to all GS employees. Still, shares are reeling, with Goldman Sach's down for the fifth straight session.

Goldman’s CEO Says He’s ‘Personally Outraged’ by 1MDB Scandal [Bloomberg]

What else is happening today?

• Bernie Sanders and Ro Khanna from California are introducing The Stop WALMART Act, aimed at blocking big employers from buying back stock unless they pay all employees $15 per hour.
• In its quest to become the Uber of space flight, Rocket Labs has raised another $140M. The 'little rocket company that could' has now raised $288M and was last valued at $1.2B.

Occasionally, hedge fund superhero the Green Lantern discovers super powers that he lacks. And sometimes, he discovers new super powers he wished he lacked. Over the last several years, he has demonstrated a remarkable ability to lose money—lots of money—on just about anything. It doesn’t take a supervillainpulling a $70 billion buyout from the clear blue sky; the former cardsharp even finds excruciating ways to lose money at the poker table these days. It’s really quite the headache. Speaking of which…

Bayer AG, which was among Greenlight’s largest disclosed long positions at the end of the quarter, slumped about 11 percent since then.

Bayer! The company that invented Aspirin is now dishing out pain to the little boy crying into his shorts, making it impossible for him to enjoy his beloved Mets’ victory over the hated crosstown bullies. Einhorn’s case of Ackmania may have reached the terminalironic stage.

Oh, wait, there’s more? Of course there is.

Einhorn, who runs Greenlight Capital, trimmed his stake in Apple by 486,000 shares, reducing his position to about $26.3 million at the end of the second quarter, according to regulatory filings. Shares of Apple have jumped about 13 percent in the third quarter.

Impeccable timing, by the way, is also a symptom of chronic and late-stage Ackmania.

David Einhorn’s Greenlight Trimmed Apple Stake Before Shares Climbed [Bloomberg]
Roundup cancer verdict sends Bayer shares sliding [Reuters]

Is it impressive that Apple managed this feat after only four decades? All of them characterized by drama like a troubled genius, revolt, failure, rebirth, the same troubled genius but -like- good this time, a seismic shift in technology, death of said troubled genius, years of cynicism and an ever-growing list of competitors? And that it did it all at a P/E Ratio of like 20?

Sure, yeah, that's impressive.

But let's not be simpletons here. If recent market history has taught us anything, it's that a consistent and austerely managed plan to maximize profits, evade taxes, hoard cash, control Wall Street expectations and meticulously curate your public image is not the way forward anymore. A trillion dollar valuation is cool, but you know what's cooler? A ten-trillion dollar valuation driven ever-higher by a publicly egomaniacal CEO fostering a cult of personality and leveraging it via batshit outbursts in the media. Apple's historic run of vanilla dominance has been accretive, but there could have been so much more.

Remember when Steve Jobs died and everyone wondered if Apple could maintain its inventive dominance and then Tim Cook went on stage a few months later and was like "Here are more iPods and earphones that like fit your ears?" and then the stock price dropped off by like half because consensus was that Apple was boring now?

Well, what if Tim had gone out there and introduced a product that he was years away from being able to deliver? He could have gotten Jony Ive to design it, pretended it was feasible and mocked up gorgeous images and videos to present to the public. He could have gotten a Twitter account on which he could have humble-bragged about how dope his new thing was going to be and teased everyone with how many celebrities he had pre-ordering it and how it was going to change everything. And if anyone dared to challenge the veracity of his claims, Tim could have attacked them as paid agents of Apple short sellers, or just called them "pedos."

Can you imagine what the market would have done? A chance to invest in a secret new Apple product that was so expensive it just had to be life-affirmingly cool? The boost that would have given Cook quarter-over-quarter would have made his little 2012 hiccup inconsequential. And if analysts or customers ever got too curious, he could have just pushed the production timeline on his product back by a quarter or two, made a much bigger deal about Beats headphones, tell Jony to mock up some iFlameThrowers, or buy Yahoo. Cook has always had cash to burn and he should have built a Burning Man of his own in a public park in Cupertino and just shoveled that paper into it.

Cook could also have turned his personal life into a public billionaire vaudeville routine. Turning up at weird secret parties, getting single and being photographed out on the town with Jonathan Van Ness or Adam Lambert. Or, even better, he should have gone to a sex party and pretended like he had no idea when he got caught. The people that really move Apple's stock price would have eaten that shit up, and the norm-thinking short-sellers would have been drawn in like value investing moths to an illogical flame.

The big secret product could even have been something of a dud, blowing up in peoples pants or houses, setting fires from Palo Alto to Montauk and creating a media shitstorm. All Cook would have had to do was make Messianic claims about his vision and start acting fucking loony and cruel on Apple earning calls. By the time an actual great idea came back around or whoever remained working for him had worked out the bugs in the other thing, Cook would have been able to keep burning cash and leverage his cultish followers into a $1 trillion valuation back in 2014!

But now you're wondering if he could have been able to keep it up? If he would have folded under all the pressure of being a manically difficult and factually obtuse playboy billionaire industrialist? Well, you rube, he almost certainly would have by now, but who cares? When the music stopped, Cook could have just jumped on a quarterly call, announced austerity measures, apologized to analysts for being a vainglorious prick, settled down with new husband Frank Ocean and unveiled Apple's newest venture; an electric sports car that he was pretty sure he could mass-produce.

And there you have it, kids: Apple at $10 trillion.

Don't get mad at us, this is just how finance works apparently.

Well, Warren Buffett had a good day.
Apple shares rose 5.9 percent Wednesday, a day after it posted better-than-expected fiscal third-quarter earnings per share of $2.34, beating the $2.18 Thomson Reuters consensus. The company also gave sales guidance above Wall Street expectations for its September quarter.
The Oracle of Omaha's Berkshire Hathaway owned 239.6 million shares of Apple as of the end of March, according to FactSet. With Wednesday's more than 11 point rally in the shares, Buffett's company is up approximately $2.7 billion on its position, assuming it hasn't sold shares since then.

Chalk up for the little people!

Warren Buffett just made more than $2 billion in Apple [CNBC]

Since almost no one heard of Kendrick Lamar in 2008, it’s safe to say that a high-end headphone called “Beats by Lamar” might not have generated as much attention then as Beats by Dre. But to hear one man tell it, that’s maybe what they should have been called, if not in reality for marketing reasons than certainly for apportioning the profits reasons.

There are two stories about how the now-ubiquitous and now-owned-by-Apple headphones came around. The official history has Dr. Dre complaining to legendary record executive Jimmy Iovine that Apple’s shitty earbuds made his music sound terrible. Former hedge fund manager Steven Lamar remembers things a bit different: It was he who suggested the whole idea to Dre and Iovine, who, he says, eventually conspired to screw him out of his rightful 4% on every Beats headphone sold (and also sue him for calling himself Beats’ “co-creator”). Of which there were a lot.

Well, three-quarters of a Los Angeles jury agrees Colin Kaepernick’s favorite personal speakers have a little bit of Lamar in them, and that Dre and Iovine must thus give Lamar one-fifth of what he was asking for, which he can now use to fund the new headphone company he’s founded to destroy Beats by Apple.

An ex-hedge fund manager who claims to have been squeezed out of Beats Electronics by co-founders Dr. Dre and Jimmy Iovine ended four years of legal maneuvering with a $25 million payday….

Lamar contended he was owed $130 million in royalties from a dozen models of the headphone, while Dre and Iovine countered the settlement was meant to cover only the original Beats Studio…. Wednesday’s 12-member jury verdict in favor of Lamar credited him with royalties for sales on three Beats models: the Studio 2 Remastered, the Studio 2 Wireless and the Studio 3.

OK, Steve, just give Dre and Iovine a few minutes to fish that out of the clothes they were wearing when they sold Beats to Apple for $3 billion.

Ex-hedge fund manager gets $25M payday in Beats suit [N.Y. Post]

Turns out, when your strategy is to invest in companies that make apps you like, you’re going to have some duds, but you’re also going to pick a few winners. Facebook, it would appear, is one such winner. Their IGTV-induced all-time high prior to the market slide we saw on Monday may have been temporary, but it wouldn't be surprising if we saw those numbers again sometime soon.

Although I've only taken some basic finance courses and have invested a little myself, I consider myself an amateur. I've noticed that Facebook's financials are a little different than the rest of the FAANG's. So I'm going to give my best effort to do what few millennials would even consider doing. Research.

Now let's walk through some of the numbers

1. The Grandaddy of them all (according to what I've seen on Instagram): EBITDA

As you can see, there is consistent growth in both the EBITDA and even some growth in the EBITDA margin. This is especially impressive given that there is still growth in the LTM column, despite a massive scandal that sent the price of their stock down a couple notches. The scandal made many wary that Facebook would lose users, and ad revenue, but at this point, it seems society accepts that someone who is determined is going to find our data no matter what. In an era where people voluntarily bug their own homes for Amazon, I don't think people should be too worried about people seeing their leaked photos from Freshman year of college where they look a little too drunk for their age or those embarrassing middle school photos where you're decked out in Aeropostale and cargo shorts.

2. Returns compared to Alphabet, Netflix, Apple, and Amazon.

The website is profitable. Very profitable. As you can see, Facebook not only has a larger EBITDA margin than the rest of the FAANG, but the returns on assets, equity, and invested capital crush the remainder of the FAANG's median. In fact, they look like the Golden State Warriors of the FANG. The only company beating Facebook in any of those areas is Apple, with an ROE of 40.9%. I understand that returns aren't the only way to value a stock, but these numbers show that Facebook is efficient with their money and continually create substantial value for their shareholders in all areas.

3. Quick Ratio

Holy moly. Not only do they have a quick ratio of 9.6, but it's 860% larger than the median quick ratio of the other FAANGs. In a market, where a crash feels like it could be around the corner at any moment, Facebook won't be immune to failure, but with that many current assets, they should be able to weather the storm.

4. P/E and PEG

Although Facebook does seem very secure, it's quite clear that investors aren't as excited about future products compared to the rest of the FAANG. Much of this criticism is fair. Although Facebook continues to innovate and expand, their model is ad revenue with some Facebook Live shows on the side. The other FAANG companies provide services, make products, produce content, or a myriad of all three. Facebook is more one dimensional, and it will be interesting to see how they diversify in years to come.

Although my evaluation of the foundations of Facebook is very simple, I'm going to refrain from saying anything else because I'd be bullshitting if I was throwing out more numbers. I'm not saying Facebook is going to rule the world or take off to $1000 a share, but the numbers make it pretty clear that they are in a secure position. And Zuck navigating around Senate questions with Clarence Thomas-esque ability, I don't think Facebook will be hitting any new regulatory road bumps for the time being. Especially since they made that super sappy commercial.

All Charts provided by StockPitch.

Facebook's stock tumble cuts $36 billion from the social network's market value [MarketWatch]

Is Alexa Listening? Amazon Echo Sent Out Recording of Couple’s Conversation [New York Times]

As of Friday, it seems the tech giant will be gaining a new group cult followers, but not because of a new phone or new technology. On Friday, Apple released a statement to let us know they have made a deal with world-famous surprise gift giver and queen of middle-aged women everywhere, Oprah Winfrey.

"Together, Winfrey and Apple will create original programs that embrace her incomparable ability to connect with audiences around the world," Apple said in a statement Friday.

Apple signed the media mogul as they attempt to give life to a new streaming service, and this is a move in the right direction. Just as Christian rock bands begin with an established audience of Jesus-lovers, Oprah automatically brings in her fanatical fan base. Her fan base is so fanatical that any product Oprah touches sees a massive increase in sales. So much so that the sales increase after a Winfrey endorsement is called 'The Oprah Effect'.

With over two million affiliates, Oprah's Book Club has a far-reaching influence on its members and the overall community of readers. Authors such as James Frey, who wrote the controversial "A Million Little Pieces," (2005) see overnight fame and fortune after their works climb the Bestseller's lists upon being endorsed by the club. Jacquelyn Mitchard's "The Deep End of the Ocean" (1999) remained on the best seller list for 71 weeks, largely because of Oprah's recommendation.

It is not only books, but also book-related products that gained immediate public acceptance. After Winfrey passively announced during one of her interviews that she owns a LightWedge book light, the company saw daily sales increase from $3,700 to $90,000 in one afternoon. Likewise, after endorsing Amazon's Kindle, the product was sold out in a couple of hours.

Oprah's Treats

Food products such as Galaxy Desserts and Marie Belle Hot Chocolate saw a huge surge in demand after being featured on Oprah's Favorite Things. Galaxy experienced a 1,000% growth in sales and Marie Belle increased its annual revenue from $1 million to $5 million. These two items are merely a sample from a very comprehensive list of goodies.

Most recently, we've seen 'The Oprah Effect' manifest itself in her partnership with Weight Watchers

On-balance volume (OBV) broke out to a new high after Oprah reported her stake and has drawn a long series of new highs since that time. This signals outstanding institutional sponsorship as well as healthy speculative fervor.

Apple already has the largest Market Cap of any company on the market at roughly $928 billion, and the acquisition of Oprah will give them a chance to expand their market by challenging streaming companies like Netflix and Hulu. And with Oprah on their side, this challenge will be a serious one.

Oprah's Weight Watchers Stake Worth Half a Billion [Investopedia]

Measuring The "Oprah Effect" [Investopedia]

Apple announces multi-year partnership with Oprah Winfrey [Apple Newsroom]

“For Verizon, the time for a change in leadership is now, and I am confident that Hans is the right person to bring Verizon through its next chapter,” McAdam said in a statement.

Verizon has gained about 40 percent of its $202.5 billion market value since McAdam took charge of the company on Aug. 1, 2011.

Apple, Suppliers Drop After Report of Cut in iPhone Orders [Bloomberg]

Apple fell 2.1 percent in U.S. pre-market trading after its Frankfurt-listed shares also lost as much as 2.1 percent. Supplier AMS AG dropped as much as 6.7 percent. Other European semiconductor stocks including Dialog Semiconductor Plc, STMicroelectronics NV and Infineon Technologies AG all slipped after the Nikkei said that Apple told its supply chain to prepare about 20 percent fewer components for iPhones debuting in the latter half of this year, compared with 2017’s orders, citing people in the industry it didn’t identify.

McDonald’s Plans Corporate Job Cuts, ‘Eliminating Layers’ [WSJ]

In a video message that accompanied the memo, he said the layers between field consultants and Chief Executive Steve Easterbrook will be reduced to six from eight, according to a franchisee who watched the video.

Mr. Kempczinski didn’t mention the scope of the head-count reduction but is expected to provide additional details during a town-hall meeting Tuesday. A McDonald’s spokeswoman on Thursday also declined to say how many jobs could be affected but added that the new structure in the U.S. would better support franchisees and help the company be “more dynamic, nimble and competitive.”

For high-stakes summit with Kim, Trump trusts his gut over note cards [Reuters]

Kim, who at 34 is nearly half Trump’s age, will get a concentrated blast of what friends and foes of Trump have experienced since he became president: a volatile, unpredictable leader who can be at turns friendly or tough, or both at the same time.

The June 12 summit in Singapore will be the first face-to-face meeting between Trump, the former reality TV star who likes to keep people guessing up to a cliffhanger finish, and Kim, the heir to a reclusive dynasty with a history of reneging on promises to curb its nuclear ambitions.

Chinese city gets 'smartphone zombie' walkway [BBC]

"Everybody walking along here thinks that it's very safe; at the side of the road, there are cars, and the vehicles also come onto here, and sometimes only just avoid you."

Another local, Hu Shuya, says: "Young people's lives nowadays are fast, and they're always looking at their phones. This puts our minds at rest - those of us who are often looking at our phones - as it's a form of protection."

At Tuesday’s prices, the sale of 4,587,852 shares would be worth more than $853 million….

Tepper likely saw a hefty profit thanks to the appreciation of Apple even in recent months. Since November, when a smaller stake was first disclosed by Appaloosa, the stock has risen 9%. The fund's initial purchase happened some time between July and September, when Apple shares were even lower.

David Tepper’s hedge fund dumped its entire Apple stake ahead of the billionaire’s expected purchase of the Carolina Panthers [BI]

On the former (the crowdedness of that trade), it's taken the top spot for four consecutive months in BofAML's Global Fund Manager Survey and everyone knows that thanks in part to the dynamics described by Howard Marks in his "perpetual motion machine" piece published last summer, these names have been driven inexorably higher by a self-feeding dynamic that has begun to approximate autopilot.

(BofAML)

As far as the latter point (a shift back to value from growth), Richard Phillips and Kevin Muir from EastWest Investment Management wrote a great piece on that this week. The bottom line from their perspective is that we needn't write value's obituary just yet. Here's an excerpt from the full note:

During the past decade, the value strategy has experienced uncharacteristically low returns causing a significant amount of pain for hedge fund managers and other investors who invest in quantitatively cheap companies.

Although it’s tempting to proclaim that this time is different, it never is.

The decline of value stocks offers a compelling entry point relative to growth stocks.

All of that said, I've got an admission to make: I'm something of an Apple acolyte. Blame it on all the hours I spent playing Stunt Copter on the Classic or, if you like, on the simple fact (because that's what it is - a fact) that they make superior products, but I simply can't posit a scenario where Apple goes the way of BlackBerry or where people no longer want what Steve Jobs is posthumously selling.

Plus, their model doesn't depend on a lot of seemingly far-fetched premises like flying a car to Mars, or becoming more omniscient than the CIA without Congress deciding enough is enough, or like lighting money on fire because everyone knows the future of entertainment is original Adam Sandler programming and Will Smith's throwaways, or monopolizing everything from home loans to health food to pharmaceuticals to retail banking to the burgeoning giant-clock-in-mountain industry.

None of that is to say I harbor some kind of ill-will towards Tesla or Facebook or Twitter or Netflix or Amazon, it's just to say that if I was looking for the safest place to put $100K (or whatever) and my menu of options was limited to Tesla plus the tech high-fliers everyone loves, Apple wins. It's a no-brainer.

Or at least that's how it looks from where I'm sitting and as it turns out, at least one local grandpa agrees. You might recall Warren Buffett bought something like 75 million shares in Q1.

Apparently though, big money in general doesn't agree with grandpa (or with me) because according to a Bloomberg assessment of 13Fs, the institutional crowd dumped the most Apple shares in Q1 of any quarter going back 10 years or, more to the point, of any quarter since they've been tracking the data. Specifically, they sold some 153 million shares.

So what accounts for Apple falling out of favor? Well, who knows, really. Here's Bloomberg:

The drop in holdings is the third such reduction in the last four quarters, with the outlier being an 8.6 million share increase in the last three months of 2017. Investor enthusiasm for Apple has somewhat lessened this year amid concern about whether the company will be able to sustain its pace of iPhone unit sales, though the stock is up 10 percent year-to-date.

Or maybe these PMs are dissatisfied with the iPhone X's facial recognition (I mean look guys, if you buy your trophy wives plastic surgery, you can't expect Face ID to recognize them because after all, nobody else can). Or maybe folks are just taking profits.

One thing we know for sure is that everyone can't be buying the goddamn Carolina Panthers, so while David Tepper has a decent excuse for dumping his $776 million stake, we wonder what everyone else thinks they know that Warren Buffett doesn't.

The answer is probably: "nothing".

Just ask Ted Seides.

Deutsche Bank took up this line of argument this week, issuing a research report that highlighted $223 billion in sales done by Chinese subsidiaries of U.S.-based companies in 2015. According to the note,“General Motors sold more cars in China than in US last year. There are 310mn active iPhones in China, more than double the number in the US. These cars and phones did not show up as US exports to China, as they were made and sold in China. The US business interests in China are much larger than what the trade data shows. The looming trade war puts these interests at risk.”

While it’s helpful to know just how important China is to many U.S.-based multinational companies, it’s mistaken to assume that, from the perspective of the American voter, this will have any effect on the underlying politics of the trade war. Just because Chinese consumers are buying products with American logos on them, doesn’t meant that the benefits of these purchases accrue to the median American.

In fact, these figures illustrate what is unfair about Chinese trade laws more than they do Chinese openness to trade. Take for instance General Motors, which sold 4 million cars in China last year. The company does the vast majority of those sales through 10 joint ventures the company has with Chinese partner, like SAIC, the Chinese company with which it builds the popular Baojun brand.

But GM owns just 44 percent of Baojun, meaning the big winner of the joint venture is SAIC, which gets to rapidly increase its own expertise and technology through the venture. GM gets a toehold in the Chinese market in return, but the gains to that remain theoretical and unrealized. Despite China being a larger source of car sales and a large source of investment than any other country, just a fraction of the company’s profits come from there.

“Other foreign auto makers are consistently taken aback by GM’s apparently generous technology sharing” when it comes to Baojun, said Michael Dunne, a former GM executive told the Wall Street Journal in December. “The open approach has engendered considerable goodwill but it also leaves GM vulnerable to the whims of its powerful Chinese partner.”

GM makes most of its money selling SUVs and trucks to Americans, but wants to assure its place as a major global auto company of the future by establishing its presence in an economy that will be the major source of auto demand for years to come. To do that, it has no choice but to allow Chinese companies to appropriate its technology and know-how, as well as rely on Chinese labor, as a result of the steep 25% tariff that automakers who assemble their products abroad face in China.

So Deutsche Bank is correct that a Sino-American trade war puts the long-term interests of GM and McDonalds at risk. But just because a handful of major American companies have bet big on China, doesn’t mean that China is therefore an open economy, or that the presence of American companies in China does anything to benefit the average American.

Meanwhile, there is no single issue that the President has staked his reputation on like the trade deficit with China. Though trade balances are not the only measures we should use to measure the effects of government policy, China’s large trade surplus does reflect the ways in which it suppresses domestic consumption and subsidizes domestic production in order to boost employment and reinforce the power of its state-owned enterprises.

Whether or not the Trump Administration will have any success weaning China off these unsustainable policies remains to be seen. But it’s doubtful that the fate of GM and McDonalds is going to rally Americans to oppose the trade war.

Christopher Matthews is a writer who splits his time between New York City and Accra, Ghana, with an interest in the intersection of markets, the economy, and public policy. He previously held staff positions at Axios, Fortune Magazine, and Time Magazine, and has been published in Forbes and Debtwire.

Well, speaking of Apple...

For its fiscal fourth quarter ending Sept. 30, Apple’s revenue rose 12% to $52.58 billion and profit jumped 19% to $10.71 billion, or $2.07 a share, from $9.01 billion, or $1.67 a share, in the same period a year earlier. Analysts polled by Thomson Reuters had expected earnings of $1.87 a share.

Okay, now you guys just aren't paying attention.

"The market as a whole is quite high on a historical basis," he said. "I think that's due to the fact that interest rates are slow low. But there's no real competition for the money other than art and real estate…."

"I think we need interest rates to appreciate, to go up, because I think we are creating a bubble," he added.

Now, you might expect an octogenarian who spends much of his time ensuring that his New York City tax payments are as low as possible to locate the source of this bubble-blowing in these newfangled FANG stocks that the kids love so much, your Faceflix and Netbook and Goog-a-watchamacallit and what have you that no one really understand but whose share prices are seemingly divorced from both reality and gravity. But no: His little cubbies have told him all about them, and he just wishes that a younger him had the opportunity to buy them at these prices long before the existed.

“Right now the Apples, the Facebooks and the Googles are priced cheaper than they would have ever been in the ’60s, ’70s and ’80s,” Robertson, 85, said Tuesday at the CNBC Institutional Investor Delivering Alpha conference in New York.

While he’s a long-term investor in Facebook Inc., he finds Apple Inc. and Netflix Inc. enticing. “Netflix is tempting to me because it’s run by really good people and I love it too,” said Robertson, who founded New York-based Tiger Management in 1980 and turned it into one of the industry’s largest hedge funds. “Not liking Netflix is like saying you hate Santa Claus.”

Tiger Management’s Robertson says ‘we are creating a bubble’ in stocks [CNBC]
Julian Robertson Says FANG Stocks Aren’t Too Rich, the Market Is [Bloomberg]

Kansas City played the remainder of the game under protest, and after that protest was upheld – an extremely rare thing in baseball – the Royals returned to New York on August 18 to finish out their 5-4 victory, with Martin staging his own protest, which was denied when the umpires came prepared with a notarized letter affirming that Brett had touched all the bases on his homer.

The Pine Tar Incident played out fully in three weeks, but that was more than enough time to turn it into American business.

Emery Worldwide, which still exists in vestigial form under the umbrella of UPS, was a big player in the shipping game at the time, and acted quickly to become the company that shipped Brett’s bat from the American League office back to the future Hall of Famer after it was inspected. Not only that, Emery got Brett to do a commercial in which he thanked a deliveryman for the safe return of his lumber.

This is relevant today because of the revelation by The New York Times this week that the Red Sox were busted using an Apple Watch to steal signs against the Yankees last month. While stealing signs is legal and very much part of the game, using technological aids is verboten, and Boston got caught on camera doing it.

The Red Sox have the day off Monday, in the middle of a nine-game homestand, and if Chris Young, the outfielder who reportedly was the beneficiary of the cheating operation, or somebody else from the Red Sox isn’t at the Apple Store signing autographs that day, it will be a failure of American capitalism. Apple should give each player on the team a watch, then do a commercial lampooning the whole affair. There are lots of ways to capitalize on this, particularly locally, as Boston fans are plenty accustomed to railing against cheating accusations leveled against their teams.

Speaking of which, where is Bill Belichick’s commercial for video cameras? How does Tom Brady not have a personally-endorsed line of air pressure gauges or phone-smashing hammers? Belichick is a noted curmudgeon, but Brady? The guy has his own book out now to separate idiots from their money in pursuit of “peak performance.” The sports cheating segment of the advertising industry should have grown by leaps and bounds in the past 34 years, but instead we see it cratering, even at a time when shameless fraud in the real world is at an all-time high.

At least we still have Rob Gronkowski. His Dunkin Donuts commercials aren’t as good (meaning make-you-think-you’re-on-drugs bonkers) now with Odell Beckham Jr. as they were with David Ortiz, but currently in existence is the Gronkball wireless speaker. The list price is $79.95, but that only allows it to feel like a deal when you get it for the real price of $69.95. And if you don’t think that’s the real price, then you don’t know a thing about Rob Gronkowski, the biggest 14-year-old boy in the United States of America.

Gronkowski has no shame whatsoever. That’s how you make money. For their own enrichment and our entertainment, here’s hoping the Red Sox and Apple figure that out quickly.

But if you've been around Tesla for more than a few minutes, you know well that the standard rules don't apply. One person who's spent more than a few minutes thinking about Tesla is Greenlight Capital's David Einhorn, a long-time resident of Shortville and a stubbornly persistent believer in the idea that Tesla ought to comport with the physical laws that govern the universe, despite all evidence to the contrary.

In his latest letter to shareholders, Einhorn is at it again with his reasoned analysis and factual statements and other rhetorical tools that have approximately zero effect on Tesla and its adherents. Einhorn's gist: Tesla is no Apple:

When one person buys an Apple product, it makes the experience for other Apple customers better by supporting the developer ecosystem. This network effect attracts a stable and growing user base. TSLA is unlikely to sustain a competitive advantage by having a network of charging stations or by accumulating driver data.

Moreover:

Competition was very slow to develop for Apple ... By contrast, every major car company in the world intends to compete with TSLA in electric vehicles.

Important points, both. But Einhorn just can't seem to get over that whole profitability thing:

"When Apple launched the iPhone, it was immediately profitable," Greenlight wrote. But Tesla "does not make money selling cars and Mr. Musk shows little interest in profits."

Generally speaking, a genuine interest in profits is one of those traits investors kind of expect in an executive. But as we've said before, Tesla is no ordinary company and Musk is no ordinary executive. He's more of a dream monger. The goal of Tesla isn't to sell a bunch of crap, but to wholly transform the way we power our lives – which somehow to a lot of people seems like an easier task than selling a consumer product at a profit.

Granted, when Tesla investors make the Apple comparison they're not just fantasizing about black turtlenecks and quasi-religious customer experiences (as pertinent as these may be for Tesla). They're pointing to the actual phenomenon of disruption, which could indeed deliver massive returns to Tesla somewhere down the line should Musk and co manage to outflank legacy car companies in making an electric vehicle that the world actually wants.

Any objective reading will tell you that's a long shot, and that Einhorn's criticisms of the Apple-Tesla narrative are sharp and trenchant insights. But sharp and trenchant insights don't move TSLA. This does.

UPDATE: We couldn't have said it any better.

I should clarify: Tesla stock is obviously high based on past & present, but low if you believe in Tesla's future. Place bets accordingly … https://t.co/4zbc6vqZSZ

— Elon Musk (@elonmusk) July 17, 2017

DAVID EINHORN: Tesla bulls look at Elon Musk and think of Steve Jobs, but Tesla is not Apple [BI]