machine-readable

🎙️Media M&A (Business Breakdowns)

In this interview, Matt Reustle talks to Blake Saunders, a media investment banking expert and a partner at Core Advisors:

We cover the shift from generational ownership of media assets to rapid-fire M&A, how legacy media companies are responding to the potential of YouTube and Substack, and the dystopian economics of a future where media is driven by AI and algorithms.

Contents

On Sunday, I shared an interview with Doug Rushkoff. Doug said something in it that has kept rattling when he talks about the algo nudging us into binaries:

We desperately want to be machine-readable in this world. And the way to be machine readable is not to be in that liminal in-between space. Where do you fall?

Machine-readable.

This is what Postman recognized as Huxleyian dystopia as opposed to Orwellian. Our freedom wouldn’t be stolen by an authoritarian Big Brother but traded to our tech overlords for convenience and cat vids. (Ok, maybe Postman didn’t anticipate the cats).

Self-reinforcing loops of scale and consolidation have bottomless appetites for capital when the TAM is the entire human-wide industry of sales and persuasion. So long as you possess a waking minute with attention to spend, there is a last-mile problem the tech giants get paid to broker.

To defend your attention is to resist the bid to become machine-readable. Just as the food scientists at McDonald’s engineered the perfect mix of salt/fat/sweet addiction, there are wildly well-funded efforts to keep your eyeballs. You’ll understand why I chose the food analogy by the time you get to the end of this excerpt.

Technology will accelerate the Pareto-filtering of our society. I appreciate this excerpt because its implied message is critical: Sort yourself.

I mean don’t let that all-time sick disco guitar riff distract you from the message:

From the interview (emphasis mine):

Matt
I stopped getting my news from some sources. I mean, social media has overtaken the news feed so quickly that that’s incredibly hard to dig out of, especially if it’s not well-researched. Everything that we’ve talked about has a tie to what’s happening in AI. But would you just wax poetic in terms of the impacts that AI are having on the market? From any angle you want to hit on, what would you say stands out?

Blake
The biggest thing is people still question if it’s going to have an impact and then use weird analogies to say that everything’s going to be fine. Society is very fragile. The reason why we had a shutdown during COVID was not because half of the population had COVID—it was because a couple of percentage points and we had to stop the spread. So when you think about how our economy is built, the amount of people that are actually working in the US is not whatever 300 million plus people; it’s a lot less.

And the amount of people that actually pay taxes is less than that. AI doesn’t really need to impact that many jobs, but if it impacts a couple of them, it will need to radically change how we deliver value to people that aren’t working. This idea that the more free time we get, the more creative we get—it’s not true. We have more free time than we’ve ever had.

And most people are stuck on their phones and they have more anxiety, they have less friends, they have less sex, we’re more overweight than we have ever been, ever. If there’s one fact that someone can point to to say all this extra time and all this extra technology has made our life better, I don’t see it. I made this point last week: the only way to coexist with AI in a normal way is to disconnect, not connect more. The COVID point is we underappreciate how significant the tax rates will need to increase, not just on ordinary income.

I think the safe haven of capital gains—and you start to see regressive tax societies in Europe and other places where they start to come after retirement. And it’s the Elon Musk tax of let’s just figure out a way to tax assets that you haven’t sold yet. It has to come because you’re going to have to rebalance out how people make a living, which is going to be UBI. It’s a weird debate that I get into with people and most of the times the other side of the debate is just it’s going to be so great and stuff like that.

Great in their minds, which they don’t see yet: is everybody on GLP-1s, everybody on social media 24 hours a day? To me that’s not good.

Matt
If the AI is naturally deflationary, where it could do all the road work and it can teach in the schools, pick your various government expenses, then maybe there’s some offsetting impact?

Blake
I recently bought business class tickets to Japan and I was thinking, this is so cheap and I can just buy for a personal expense. I would normally not buy business class tickets on a 15-hour flight. Yes, the world will be completely deflationary and I think most things will be cheap. The problem is most people will be given effectively government money and the people that are creating assets and creating value will make a lot of money and basically be able to do whatever they want. Yes, everything will be cheap, but most people won’t be able to buy it.

Matt
It’s very dystopian. But I hear you in terms of the reality of it.

Blake
I’m not trying to be the 3 a.m. radio show of the aliens are coming—play out these basic trends. So if everyone gets an extra hour because of technology, are they going to put down their phones? I see this every time I take my son to the playground. Everyone else is on their phone, which is crazy to me. Put your phone down.

If people are given an extra hour, AI is going to be more addicting, not less. The world’s not going to end. For people that are operating businesses, it should be okay, but you just need a recognition that is probably why I started my own firm: you have to be a creator of economic value. That’s the only way to sort of exist.

You can’t be an employee and then there has to be a significant recognition—one or two percentage changes in the economic base and how people are employed. If we just take out drivers in the US, semi-truck and Uber drivers, that’s a big hit to the income base. It has happened before when we had to pay back the debt from World War II, where the tax rates were much higher for an extended period of time. It’s less about worrying about it and more about looking at where the trends are going.

If you have the realization you could see the COVID lockdowns coming a couple weeks before, and I think you can see this coming now, where the income base is going to go down, the taxes are going to go up. There’s still a society that you and I want to exist in which is less technology and more creative. I think there’ll be a lot of creativity happening, but for the majority of Americans, and that is today, 60% of Americans are overweight. It’s just a fact.