We are back and we missed you. Two weeks is a crazy amount of time to be away.
I don't understand how children do this for weeks or months at a time.
There's a lot of video games.
I was sitting there, had somebody this morning say, "It feels like it must have gone by so fast." Oh.
And I was thinking, "No, it absolutely didn't go by. It felt like two months. Two months. We manipulated time."
Yeah. But thank you to the Microsoft team, the Activision team. They sent us codes for Modern Warfare 4. My review is in. It's fantastic. I love it. It's a really good game. Really polished. And the kill block.
Did you revert back at all? No.
Didn't really have the opportunity. I was joking about full relapse, just gaming from dusk till dawn. But that is in fact... I had a relapse.
Not in the cards these days.
Pizza. I was eating pizza like twice a day at times. Was eating a lot of pizza, surfing a lot.
That's good. Do you think pizza is potentially addictive?
You think that there could be a settlement?
I do think... I don't think there could. I think there should be.
There should be. I do wonder, like, because cigarettes were very scientifically proven to be addictive. Like you can give nicotine to a mouse and it will go and try and get more nicotine. Like it's the most cut and dry. You can run the experiment with any animal.
In the blood. Based on my own personal experience, pizza and surfing would fall into that same bucket.
Oh, you give a mouse pizza.
If you give a mouse a cookie, you give a mouse a barrel.
Barrel, he was going to want to with a lime. Yeah.
Yeah, for sure. But it will be interesting to see where the addiction stuff goes, because when all this came up, you know, the Meta social media addiction, I was kind of like, give a mouse to scroll. Like I understand that people were trying. I don't know. Can you get mice or monkeys addicted to reels? Maybe.
I'm sure. Almost certainly.
You think you could get a monkey addicted to Instagram reels?
We got 100%. We're going to find out. We can't get any monkeys because they're sold out.
No, no, you can get a monkey. You just have to pay top dollar. Okay.
They're expensive, but you can buy one. It did seem like it was a tougher sell because it was not a chemically addictive product. It was more of a psychological thing. There's a benefit to it. There's a free speech element. All very complicated. I was not expecting to see a big settlement when this first came up years ago. I thought it was going to be more nickel-and-diming, little case-by-case things, but in fact there has been a huge settlement by Meta two days ago, or this was when this was written. This was August 26th. Meta announced settlements with attorneys general representing 48 states and the District of Columbia and three US territories. So there were only two states that held back. I believe it's Texas and New Mexico over allegations that Facebook and Instagram harmed children and teens. So this has been boiling up for a while. There were smaller settlements. This is the big one. And so the high-level numbers here: Meta will pay the states 12.7 billion over 10 years, and it could go up to 18 billion if other platforms join the settlement.
It is a big number. And honestly, if you are a state legislator or you care about having your state funded for a variety of things, this is good. This is a size-gong moment for the states because they will be getting this money distributed to them and they can use that to do whatever states do, from education to healthcare. There's a lot of different things that states can do. I know Tyler's pissed because he doesn't like the government getting a dime, but it is a size moment for them.
I did find a video of a chimpanzee hitting reels. If we can pull this up.
Let's pull this up. Let's pull this up. This is key. This is important. This is very... definitely more important than... Ooh. Okay. Yeah, this looks okay. Maybe social media is addictive now that I'm seeing this. Yeah, it might be universal if it crosses. Wow.
Yep. Yep. I mean, that's just good UI design. Come on. You got to give the UX engineers some credit here. Make it so easy to use that even a monkey could use it. That was the prompt. If it crosses species barriers, I'm much more likely to agree that something could be addictive. But well, and here especially, you know, he's looking at other monkeys.
Oh, okay. That's a little... I don't know. Yeah.
No, I know. But an algo feed, it's going to naturally start a lot of those videos.
Anyway, everyone has been drawing analogies to the tobacco industry's master settlement agreement around this because that's the last time there was a huge multi-billion, tens-of-billions-of-dollars settlement between a large organization around addiction and a bunch of states. That's what happened when cigarette companies signed the master settlement agreement. All the companies agreeing to pay all the states, but the structure was a little bit different and there's some nuance there. And so Eric Suford over at Mobile Dev Memo, friend of the show, he said, "Meta's settlement is no big tobacco moment." That was his takeaway in Mobile Dev Memo. You should go subscribe because this post is a paid post. But I'll take you through some of the interesting analysis that he put together. I was debating with a lawyer friend of mine about this over the weekend and have some interesting details here. So the headline here is that what Meta is going to pay as a percentage of revenue, or what the social media industry will pay as a percentage of revenue relative to what the tobacco industry paid as a percentage of revenue, is off by almost an order of magnitude. So let's put them in context here. So he says Meta's settlement is comparatively paltry. A white paper from the USDA using BLS data estimates that the total US consumer expenditure on tobacco products in 1998, when the master settlement agreement was signed, was roughly 57 billion a year. Annualizing the roughly 250 billion in combined tobacco settlement payments over 25 years produces an average of 10 billion per year is what they've been paying. And so that was equivalent to 17.5% in 1998 gross domestic expenditure. So you can think about it as like when tobacco got hit with like, you're addictive, what did the government say you got to pay? They asked for 17.5%.
Very, very meaningful. Very, very meaningful.
And that's off the top, right? Yes. Yes. This is revenue.
It's not like, hey, you got to give us a percentage of your profits.
Yes. And so it's calculated in a more complicated way. It's not exactly a percentage. It's on a per-pack sold, but it is inflation-adjusted. And so there's a whole bunch of other mechanics that really have allowed the master settlement agreement to deliver tens of billions of dollars on an ongoing basis. Even while now tobacco sales are slumping, cigarette sales are declining. And so that does create more complex dynamics for the states. But still, it's 17.5% of the industry's revenue coming to states as effectively an extra tax on top, which I think a lot of people would agree is good because cigarettes are bad, right? But what's going on with Meta and social media? So given Meta's full-year 2025 US revenue of 75 billion roughly per the company's 10-K, its average annual payment, if they pay the full 18 billion because they're paying that over 10 years, it's 1.8 billion. So what is 1.8 billion of 75 billion? It's 2.4%. So instead of 17.5%...
Sorry, where are you getting the 75 billion?
75 billion was their US revenue.
US? Globally it was like a couple hundred.
Yeah, bigger, bigger. But you have to comp it to domestic because that's where this is taking effect, right? It would be even lower if you look at overall revenue, which is a good point. But you can think about it as tobacco had to pay 17.5% of domestic revenue, social media 2.5% of domestic revenue. So not quite an order of magnitude, but a significant gap there. And so it's important to reiterate here, says Eric Suford over at Mobile Dev Memo, that the MSA payment, the master settlement agreement payment schedule, is inflation-adjusted and tracks unit sales. Meta's settlement has no such mechanism. So let's say that Meta doubles revenue. Their percentage they'll pay is lower. And then let's say inflation kicks in. They're still going to be paying, you know, this 1.8 billion a year. 10 years from now could be pennies if hyperinflation happens. Who knows?
Yeah. The only reason it felt somewhat significant from a dollar standpoint is because Meta is just spending so much money on AI, right?
You can just imagine Zuck being like, I really wish I could have given that to Jensen, right?
So I had the opposite read, which was I saw 18 billion and I was like, ah, that's like a month of AI spend for them. And I was like, ah, this is not that much money. And then of course it's over 10 years. And so when you think about it as it's 1.8 billion a year. So that's 100 mil a month. That's their token budget right now. I don't know, maybe less. Overall it's insignificant. But when they are spending more money than they are making, it hurts a little bit more.
Mike Isaac's been reporting on this. He says Meta is going full bore with pushing other companies to add the same restrictions it will add to its apps as part of the settlement. Meta plans to run this copy as a full-page print advertisement in the Washington Post, the Los Angeles Times, and the New York Times tomorrow morning. Wow. A little circular deal for Mike promoting the New York Times. He works there, man. Undisclosed. What's going on?
No. Yeah. And it is just a wonderful spin to be forced to pay a 17 billion settlement for getting children addicted to your product and then tell other addictive social media companies to join us in supporting teens. It's just chef's kiss from...
You think it should be like join us in apologizing as well, basically.
Well, I just think it's a good spin. That's... okay. Well, here's what they said. Through this agreement, they've set out a path toward industry-wide commitments to further empower parents by introducing a 2-hour daily time limit, turning off access to our apps at night as a default, no notifications during school hours, clear prompts and notifications to teens every 15 minutes of continuous screen time, new parental supervision controls so parents can decide how their teens use their apps. I think all this makes sense. Defaults are powerful. So even if a parent wants to go in and allow their kid because they got a night owl who's cooking up an incredible new IG account and is printing or something, I don't know. I mean, there are plenty of good reasons to use social media even while you're young. But defaults are powerful and I think this is a good thing. I don't think it affects the business that much. I don't think they make that much money from young people because kids don't buy cars on Instagram and expensive things, whereas a lot of millennials and even Gen Xers and boomers are on there shopping all the time. So the immediate revenue impact of any of these is minimal. You just don't want to wind up in a situation where you lose ground to TikTok and YouTube because they become the kid-friendly one that the kids are like, "Oh well, TikTok doesn't have any of these stupid restrictions, so I'm going to use that." And then they remain a user for their entire life and you lose an entire job.
Yeah. I mean, if somebody is primarily addicted to Instagram and they get their 2-hour budget and historically they would have used the product for 3, 4 hours, you have that spillover attention. So it will potentially help less addictive social media platforms get more user minutes.
Yeah. Exactly. And this was the original Instagram threat was that a younger generation was using Instagram and Facebook was going to become like the, what do they call it? The blue app or the old book or something. I don't know. It was going to only maintain the older cohort. And that's sort of what happened. But it didn't matter because Meta bought Instagram. Then Snapchat was even like the younger crowd. They tried to buy it. They couldn't. They wind up cloning it. They were successful. And so the company maintained, but they can't let a new social media app come up and dominate kids. Not for the short-term monetization, it's for the long-term.
They don't mention Snap in the open letter. Is that a shots fired?
I think so. I don't know. Tim Cook sent a final memo to Apple employees on his last day as CEO. He said, "I will miss this work in ways I can only begin to imagine, even as I remain completely at peace with my decision." Just reading the entire... regretting it, but I will miss it. He's a workaholic. He doesn't want to retire. I was really hoping he would have another 30-year run in him. You know, like if Warren Buffett and Charlie Munger can work till they're in their 90s, why can't Tim Cook? Like what fundamentally, how is the job?
I think he was unhappy with the pay.
Yeah. I mean, when you have MLB players making as much money as you while you're running one of the largest companies in history, when you're one of the greatest CEOs in history, period. Yeah. And you can barely... 74.3. They couldn't even get him over 75. Yeah. And not enough people were willing to march on Cupertino in protest of this. Right. And so I think at some point he's like, look, if shareholders... I'm voting with my feet. I'm voting with my feet. I'm out. I'm out.
In the news today in the Wall Street Journal, booming corporate earnings fuel lofty outlooks. The economy is doing very well. A lot of that's driven by tariff refunds. Tim Cook. I mean, people lament the lack of an entirely new form factor. The Vision Pro wasn't a breakout success. Like a lot of the great devices still came from the Steve Jobs era and Tim Cook merely managed and carried everything along. Obviously did so much on the services side that no one really gives him credit for with advertising in the App Store and just money-printing machine working flawlessly. But he also negotiated a very tumultuous political environment for a decade or more essentially flawlessly. Like the fact that Donald Trump has never called Tim Cook Tim Crook is a huge, huge feather in his cap.
Because it was sitting right there as a Trump-style dig.
He never had to go for it. And so he was able to negotiate Washington and all of the different quagmires that are there, not get his supply chain nuked, keep the products flowing. There were little hiccups here and there, but overall the company has been firing on all cylinders. So what a great sendoff. You can go read the full letter. Apple Vision Pro layoffs went beyond video and gaming. It included employees across the company including people working on device security, audio engineering, Siri integration, testing and the product's operating system. They are focused on AI devices and people are really optimistic about the new Mac M6 chip, like just being really good for AI and being something that continues to drive value for the company and creates an AI-winner narrative in the face of not really spending any money on AI in the traditional sense. Not buying a Neolab, not buying a bunch of data centers, staying out of the weeds, but still benefiting because these powerful computers get only more powerful when you have computer use.
It still is so crazy they haven't pulled the trigger on a Neolab.
