Elon Needs a Vacation
ON THE POD: Arbitrage Media, Episode 123
Troy’s at “advanced” tennis camp, so Brian and Alex discuss the shifting dynamics of the newsletter and video game markets. Newsletters are entering into bubble territory, while parts of the video game market are losing ground after a long run of robust growth. Plus: an urban redevelopment good product.
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Out Friday AM.
PVA CONVERSATION
When in doubt, travel
TROY: This week, a quick post from vacation. If I don’t do this, it won’t get done. As expected, our Anonymous Banker filed copy early. Bankers are built like that.
I texted newsletter wunderkind and inveterate traveler Feed Me Emily Sundberg this morning about what makes a great vacation:
Food is important to me. Density of the hotel is important to me. Service is important and the feeling of things not being like manufactured. I’m really sensitive to employees secretly being miserable and like putting on a fake smile
I’m deeply romantic so I like vacations to be transportive and that usually starts with the hotel. It doesn’t have to be fancy but it needs to be nice.
Sounds right. I will be working diligently on my tennis game and wearing this:
Vacation reading
Moshin Hamid's 2017 novel Exit West was floating around our house this summer. The family consensus was positive. I grabbed it on the way out the door and devoured it yesterday. It's a beautiful and effortless read, perfect for this moment. Exit West is a love story wrapped in a migration fable, where magical doors collapse borders — home is fluid, family is chosen, relationships shift with time and place as the world remakes itself around us. "We are all migrants through time," Hamid writes. A reliable book friend said his earlier Moth Smoke is better. I will try to find today.
I also grabbed Alex Karp’s new treatise, The Technological Republic: Hard Power, Soft Belief, and the Future of the West. Karp admonishes Silicon Valley for wasting brain power on trivial consumer BS (food delivery, social nets, ad tech) while the US falls behind in defense, healthcare and education. Central to their thesis is the call for a renewed partnership between the tech industry and government, reminiscent of the collaborations during World War II. See if I can get through it.
Meanwhile in podcast land, I can’t get enough of “lying sack of shit” Michael Wolff (their words not mine) talking about his new book, All or Nothing: How Trump Recaptured America. Wolff stops by Vanity Fair Inside the Hive and the Ankler Pod.
Alex, how was your vacation?
ALEX: Good, we really wanted to simplify things as planning things in winter with both a kid in school and a wife that works at a school means there’s a 50/50 chance someone or everyone gets sick. Thankfully we got sick before and after the trip so we got 4 days of enjoying all inclusive cocktails and tacos. Juggling a lot of things in our daily lives so we ended up taking the simplest path forward and did a resort — which I’m usually either against or picky about but I just wanted to take a break and it worked.
TROY: All inclusives terrify me. Seems off brand for you.
ANONYMOUS BANKER
Sad banker laments price of luxury vacation
I just returned from Deer Valley, and the world seems to get crazier by the day. It’s wild to review a credit card statement and realize that a weeks-long ski vacation now costs multiples of the value of my first car. In a time when people are complaining about the price of eggs, I was “fortunate” to secure three-hour ski lessons for my three-year-old—at $1,000 per day.
Why does this matter for M&A?
Dan Primack recently noted in his newsletter that “Private equity’s rocket launch is being delayed by storm clouds.” Meaning the deal volume this year isn’t booming as much as people thought it would due to inflation, economic data, and continued higher interest rates. But I’m also noticing other forces at play.
As the cost of living continues to rise—from everyday essentials to Stein Eriksen Sunday brunches—there are increasing pressures on investors and operators alike. Investors are looking to realize value from existing holdings, while operators are being pushed toward exits, sometimes at less-than-ideal valuations. Despite a sluggish start to the year, I expect company executives and investors to pursue deals aggressively, driven in part by the need for liquidity to sustain increasingly expensive lifestyles.
Good Deals from the week
Content is doing ok
Ashely Flowers + Crime Junkie - Raised $40mm from TCG. With $45mm of annual “profit” and the deal valuing her company at $250mm (according to Bloomberg), the valuation (~6x current year EBITDA) may strike some as low, but it’s hard to rationalize a higher viable entry point for an investor. The business has to scale 3x for a firm like TCG to hit its return hurdle. Some have commented that having SiriusXM as a partner may have diluted the valuation, but think of Sirius as a national ad sales engine; Sirius trumps all other platforms when it comes to audio ad sales (even Spotify). If you have a burgeoning audio business, Sirius is the best partner for monetization.
Attribution is Key
DoubleVerify acquired Rockerbox in an $85M deal (Axios article). There are several companies in this space (focused on ad campaign performance and attribution measurement) with enterprise values of ~$100-$300m; expect to see a few more trades like this soon, as larger ad tech companies need to provide better offerings to brand and agency clients and decide to buy rather than build.
More AI Money
Anrthopic is closing a $3.5bn round (up from their initial target of $2bn) at a valuation of $61.5 billion (WSJ article). The FTX estate should have held onto their stake a little longer (this round values the company at 3x the last valuation). DeepSeek isn’t slowing new capital from flowing into the foundational model companies. Anthropic’s CEO wrote a good blog post explaining how the economics behind developing the models have not changed (link).
A couple of things from our group chat
Can AI or tech have a luxury tier? The Wild Economics Behind Ferrari’s Domination of the Luxury Car Market
By leveraging the rabid fandom of its customers through a business model based on uber-scarcity, the storied Italian company is enjoying a new golden age. Following an almost tenfold increase in the stock since its initial public offering almost a decade ago, Ferrari is now worth $90 billion, making it the most valuable car company in Europe—despite delivering just 13,752 vehicles last year.
Volkswagen, which sold more than 9 million cars last year, has a market capitalization that is roughly $40 billion lower. Most of Europe’s auto industry is plagued by a weak domestic market, a costly transition to electric vehicles and new competition from China.
OpenAI's weekly active users surpass 400 million (Reuters)
Apple is rebundling recipes. (TechCrunch)
They’ll strip out the auto play and junk and be a 10x better experience and product. This is a real pickle for publishers. They are trapped in business models that cause them to make shitty products that can’t compete with upstream aggregators.
Perplexity moves to the browser (TechCrunch)
Everything eventually makes it's way to the brower. Perplexity wants its own. They will innovate on AI product and ad model while others fight for model dominance.
Martin Gurri seemed to annoy Ezra. I give him credit for bringing on people who see things differently than him and having civil conversations about ideas. It can be hard bc there is so much built-in disingenuousness in much of the New Right.
In 2016, when Donald Trump won the first time, a little-known book became an unexpected phenomenon. It was “The Revolt of the Public,” self-published two years earlier by a former C.I.A. media analyst, Martin Gurri. Gurri, who is now a visiting research fellow at the Mercatus Center, argued that a revolution in how information flowed was driving political upheavals in country after country: The dynamics of modern media ecosystems naturally created distrust toward institutions and elites, and this was fueling waves of revolt against the status quo. The problem, though, was that though these dynamics could destroy existing political systems, they could not build enduring replacements.
When Did the Tech "vibe shift" towards the Right start? Data analyzing All In Podcast as a representative sample
I used to be an avid listener of The All-In Podcast, which was launched in March 2020 during the early days of the pandemic and features tech industry multi-millionaires like Jason Calacanis, Chamath Palihapitiya, David Sacks, and David Friedberg.
I thought it began as an insightful forum for discussions about startups, venture capital, and tech trends. But then (imo) it became increasingly political and, in its current state, a platform for the tech right.
My observation was The hosts (apart from David Sacks) started as typical tech industry Democrats—socially liberal, fiscally moderate, and ideologically opposed to Trump. However, as I followed them, it increasingly felt to me that the podcast gradually shifted rightward and eventually toward Trump.
While Democracy Burns, Democrats Prioritize… Demolishing Section 230? (TechDirt)
But Durbin’s fundamental mischaracterization of Section 230 as mere “legal immunity for big tech” betrays either willful ignorance or calculated misdirection. Section 230 is, at its core, a shield for speech – your speech, my speech, everyone’s speech. It protects individuals and small websites far more than it protects Silicon Valley giants. It’s what keeps you safe when you forward an email or share a post. It’s what enables sites for people to review doctors or mechanics or employers. It’s what makes it possible for Wikipedia to exist. It’s what enables the very digital discourse we need to maintain democracy.
The Second Trump Administration’s New Forms of Distraction (New Yorker)
Doomscrolling, as Eiseman referenced—the overindulgence in anxiety-inducing news stories and commentators shouting in text online—accomplishes even less than it did before, because Internet discourse lacks any coherent direction. There is no longer a clean division of anti- and pro-Trump; the field is crowded and the President himself can appear at times sidelined by larger forces. The Democratic Party and its organizations seem at a loss to develop any kind of unifying messaging in the short term. But that inertia may be intensified by how the social-media ecosystem has palpably decayed since the late twenty-tens, and not just because the politics of the platforms have shifted toward Trump. A.I. is rampant, algorithmic feeds such as Instagram’s have been known to favor posts from businesses and aggregators over individuals, and Meta’s social networks have suppressed political content by default. Online discussion is increasingly driven by independent “creators,” who publish podcasts, videos, or newsletters. The experience of using social media lately is less about interactive socializing than passively consuming broadcast content, which may intensify feelings of powerlessness. Fabio Hanelt, a student in Germany, told me that he turned to Reddit to observe political trends: it may not be wholly reliable for news, but the platform, where users react in real time, has a persistently human quality.
GOOD PRODUCT