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- [00:00]
Joseph Cox
In today's world, data breaches happen all the time. And even the most secure companies can't always protect their employees personal information from ending up in the wrong hands. That's where DeleteMe comes in. DeleteMe is a service that removes your employees sensitive information from hundreds of data broker websites, sites where hackers can find phone numbers and emails within seconds. Rachel Toback, CEO of Social Proof Security, says attackers use this data to target employees with phishing messages and AI powered phone scams. But Delete Me makes it harder for these bad actors by scrubbing your employees details regularly. It's simple. Attackers are lazy. If it's too hard to find contact info, they'll move on to easier targets. DeleteMe takes care of this for you, doing the heavy lifting so you don't have to. And over time, they keep removing the information so it stays stays down, protecting your team from constant exposure. If your business has a social presence or deals with clients, you need DeleteMe. Visit DeleteMe.com 404Media and start safeguarding your team's information today. That's DeleteMe.com 404Media.
- [01:18]
Emmanuel Mayberg
Hello and welcome to the 404Media podcast where we bring you unparalleled access in worlds both online and and IRL. 404 Media is a journalist founded company and needs your support. To subscribe, go to 404 Media Co as well as bonus content every single week. Subscribers also get access to additional episodes where we respond to the best comments. Gain access to that content @404Media co. I'm your host, Joseph and with me are two of the other 404Media co founders. The first being Emmanuel Mayberg.
- [01:50]
Jason Kebler
Hello.
- [01:51]
Emmanuel Mayberg
And Jason Kebler.
- [01:52]
Joseph Cox
Hey. Good to be here. Yeah, good to not be hosting.
- [01:56]
Emmanuel Mayberg
Oh, is that what you did last time?
- [02:00]
Joseph Cox
No. When you're out here, we just don't do it at all. We have a robot ask us questions.
- [02:06]
Emmanuel Mayberg
I mean, yeah, I go on holiday, you outsource me to a robot. That sounds fine to me. I'm back. Jason, what is this first story we're going to talk about?
- [02:19]
Joseph Cox
So this is your story. It's called Elon Musk and Elon Musk is in quotes here because it's a username which we'll get into. Elon Musk was a prolific money launderer for hackers and drug traffickers. It was secretly the FBI. Joseph, this is a really great story based on a lot of court documents and just like sourcing and reporting that you did over the course of A few weeks. So this person was named Elon Musk, whm. So who was he? And I guess, what is whm?
- [02:52]
Emmanuel Mayberg
Yeah, and look, straight up, I'm not going to say Elon Musk, whm for the entire podcast. I'm just going to say Elon Musk. You all know we're not talking about the actual Musk. It's a username that this person took. But the WHM refers to White House Market, which is one of these dark web marketplaces like Silk Road, like alphabay. And to be honest, I covered those places a lot back in 2013, 14, 15, but they're still going. I just don't think people pay that much attention to them anymore. I'm not sure about the size of these ones, but some of them got pretty substantial after Silk Road, and actually a lot, lot bigger. But that was just one of these marketplaces where Elon Musk advertised his services. And what he offered was something which I think is really overlooked by a lot of the technology press, which is this crucial cog in the underground economy. So let's say you're a drug trafficker or a hacker, and you have all of this bitcoin that you've got from selling your drugs or hacking to companies that's all well and good, but you can't really do anything with it. You can't go up to every Lamborghini dealership or whatever and try to buy it with Bitcoin or Monero. They're not going to accept it. And that looks pretty weird anyway, right? You need to convert that crypto into cash. That presents a real problem for criminals, because if they just go do it at Coinbase or something, they're going to ask for ID and then, you know, maybe get a fake id, whatever. But there's a lot of friction there. And Coinbase or Binance are going to give information to the authorities. So what Elon Musk offers is you send me your bitcoin and I will just send you cash physically in the mail. No know your customer kyc, no id, and you can anonymously cash out your crypto.
- [04:50]
Joseph Cox
So one thing, one detail in this story that I thought was really good is that a lot of the times the cash was sent within the pages of children's books. Is that. That's right?
- [05:00]
Emmanuel Mayberg
Yeah. So what happened at the start of the investigation is the FBI start doing all of these undercover buys because, you know, Elon Musk is advertising this stuff on the dark web, but we have no idea where he is. So they do a bunch of buys for $1,000 here, $2,000 there. It all goes to this post box somewhere in Kentucky. And they open it up and it just looks like children's books, or in some cases, the pages of children's books sort of taped together, sort of relatively innocuous, looks somewhat normal. You then open those up, and there are envelopes inside, two envelopes one inside the other. You get through those, and then that' where the cash is. Now, obviously, whoever's shipping this money has done that to try to mask it so it doesn't get caught in transit, that sort of thing. But it is pretty funny that, yeah, they were shipped in children's books. And I really tried to do that with this article because, as you say, the vast majority is based on court documents. And it wasn't like I just went to Pacer, the US Court records website. I just downloaded a bunch of records and wrote it. This was spread across dozens and dozens of dockets that weren't immediately obviously connected. I had to figure out, oh, this case is actually part of this case. And there's sort of a spider web of all of these different dockets going on. And you get lots of details like that, like the children's books, some of the money mills, we'll talk about the guy buying Mercedes, all of that sort of thing.
- [06:30]
Joseph Cox
Right. So the FBI wasn't just investigating Elon Musk, whm or I mean, maybe that was their ultimate target. But they, like, they, in the start, they identified a single person. How did they do that? And then what happened after they sort of identified this one? I guess you'd call them a money launderer or an accused money launderer. But how? How did they identify him?
- [06:56]
Emmanuel Mayberg
Yeah. So with all of these undercover buys where all of this cash is arriving at the post box, they. They find that it keeps being shipped from different places in New York, like these villages and towns sort of in upstate New York. And they kind of gloss over this in the court records. I'm not 100% sure, but what seems to have happened is that they zeroed in on that area because all of these packages keep coming from there. And then eventually they manage to perform physical surveillance on this person who they believe is shipping the packages. This person, they arrest him. A little while later, they burst into his apartment. They shout his name. He then comes out from the bedroom. He's living with a parent or his parents, it seems. We don't actually name him in the article because it turns out later that he actually flips and becomes a confidential Human source for the FBI and for the authorities. And it just didn't seem right naming that person, even though you can figure it out if you piece all of the pulls the different documents together. But what they do there is almost like a very old school investigation. Right? You think about the dark web and all this technical stuff, and actually there is a real world component because there are real people moving physical cash around, and they've identified someone shipping this cash. They then flip him, and then that's a way to investigate the rest of the money laundering ring. And this person who we call Eric puts on a camera, I think a microphone as well, and they go and continue basically laundering money while the FBI is monitoring them. And that would often involve going to a grocery store car park or something like that and picking up or moving $100,000 to $300,000 at once. So while the FBI was buying a grand or two here or there, it's obvious that the money laundering ring is actually much, much bigger and moving much, much more money. And there's that physical part. And then also in these conversations with Elon Musk, because of course, with the undercover buys, the FBI is posing as a drug trafficker online. They follow the blockchain, which shows all of the bitcoin transactions, and they're able to figure out, or estimate, I guess, that something like $90 million is moving through this guy's cryptocurrency account. So it's a huge money laundering ring. And, well, this was actually a long time ago now, I think in 2013. But longtime readers and listeners may remember an article we wrote way back then about a money laundering ring in New York. And, oh, that was really interesting because they were exchanging cryptocurrency for cash and all that sort of thing. It turns out it was this one. We didn't know that at the time, but now I've pieced together all of these other court documents and it's, oh, this is an even bigger case than that somehow.
- [09:56]
Joseph Cox
Right. And so they eventually identify who they believe to be Elon Musk, and they essentially trick him into flying to the United States. Is that right?
- [10:10]
Emmanuel Mayberg
Yeah. And I was kind of blown away by this, but through the confidential human source in the money laundering organization, they get a WhatsApp number and they actually get a lot of phone numbers and all that sort of thing, which is one of the main numbers he communicates with. They then do all of these different search warrants and court orders. They do one with uber, I think, PayPal, Binance for sure, as well. And they eventually identify this 30 year old or late 20s Indian national with the surname Morica. I hope I'm pronouncing that correctly. Apologies if I'm not. But they figure out it's him and he's off in India and they're figuring out, well, how do we get him here? And it turns out he'd made a ton of applications to visit the US over the years and they always denied. We don't really know why they were denied, but they always were. And now this time when he makes another application, the FBI clearly communicates with the State Department and says, hey, approve it. And you go through the court documents and it says the only reason the State Department approved this travel authorization was because the agency knew that this person was going to be arrested. Now I'm sure that happens. You know, I'm sure there are cases if you just look around, but that was the first time I seen that in the court record where it's like, well, we're just going to approve him. So he comes to the country and then we're going to arrest him. But they lure him over and of course it's after they arrest him the story actually gets really, really interesting.
- [11:46]
Joseph Cox
Yeah, I mean that, I know that was a lot of lead up, but basically they, they arrest this person who is supposedly Elon Musk. Whm. And then they basically take over his Persona and they, they run his money laundering business for a year.
- [12:06]
Emmanuel Mayberg
Yeah. So I guess, I guess to back up briefly, I came across this case because somebody sent me a court record that we'll talk about in a second. And then I worked it backwards. I was trying to figure out, huh, who is this money launderer that the FBI took over? And that led me to the Elon Musk case. It was announced in January, but it didn't really get much coverage at all. So I went back from that and then brought all the court records together and figured it out. And what happened is that the FBI takes it over. And I managed to actually have the prosecutor's office confirm to me that they ran it for 11 months, nearly a year. And honestly I was pretty surprised by that from reading the court records. I was estimating with the timeline I had in front of me. Well, it looks like they ran it for at least three, four, maybe six months, something like that. But it really blew me away that they said that they ran it for 11 and during that time they investigated Elon Musk's customers, or I guess the FBI's customers now. And the FBI didn't get back to me. I did speak to the prosecutor's office, as I said, and they were quite hazy on the details, but they did say the investigation looked into drug traffickers in Miami, a robbery at knifepoint in San Francisco, and then lots of hacking investigations as well. The prosecutors wouldn't say whether those investigations were specifically before they took over the account or after they took over the account. They just said there were investigations both before and after. So.
- [13:48]
Joseph Cox
Right. I mean, there's shades here of Darkwire, the Incredible true story of the Largest Sting Operation ever. A book by Joseph Cox where the FBI, we've talked about it a lot, but the FBI took over a. An encrypted cell phone company. And this is just the latest of, like, the FBI secretly running criminal organizations for, like, sometimes months or years at a time. And in the. In the meantime, it's like crimes are being committed. It sometimes takes them quite a while to start arresting people. Can you talk about some of the other ones that you've covered?
- [14:23]
Emmanuel Mayberg
Yeah. So, yes, there is the Anom case N a N o m where as you say, they took over an embryonic encrypted phone company, put a backdoor in, and then used that to wiretap the world. That was thousands of devices, something like 9 to 12,000, depending at the point in time you have that you have. When the FBI launched its own cryptocurrency secretly, they didn't come out and say, this is the FBI coin. It was. It was a covert operation to catch people doing pump and dump schemes. I didn't cover that at the time, but I definitely took notice when it came out and there was a press release about it. And the other one is one I got obsessed with years ago, back when we were at Motherboard writing there, when the FBI took over a child abuse website on the Dark web and they ran it for two weeks in order to deliver malware to visitors of that website. All of these cases are shades of gray. You know, it's not black and white. You can on one side see, oh, well, the f. You'd see why the FBI would do that. They want to flip criminal infrastructure against criminals and then use that as an avenue to target them. On the other side, they are arguably facilitating criminal activity, at least for a period of time. So with the Dark Web child abuse site, they were serving child abuse material to child abusers and allowing them to access that. With Enom, they were facilitating drug trafficking and assassinations. And in my book that you mentioned, at least one person was killed through an assassination. Planned on that app. I guess the Pump and Dump one is a little bit sort of not as extreme as those, although I need to look into it. But here, if all of the cases we've connected are accurate, I mean the FBI is running the money laundering operation and in order to do that you have to send criminals money, obviously so they don't suspect it, but also that you get their physical address. And there's one case in there which at least lines up on the timeline and they say that this alleged hacker from Scattered Spider, the prolific hacking collective, communicated with a money laundering service on telegram that they didn't realise was an undercover FBI operation. And this alleged hacker originally asked for $50,000 and they upped it to $75,000 and the FBI mailed the cash to them, it got their physical address and whatever and this person went on to flash a bunch of cash on Snapchat. And these are violent criminals, they do very high profile hacking operations, they steal a lot of money and they also conduct physical violence against one another and members of. And yes, of course this operation was done in order to investigate these people, but you can't dance around the fact that it facilitated them in some way as well. And there's, and there's a tension there and you know, some people will fall on one side, some people fall on the other, maybe some in the middle, but you have to like address that tension because this is wild, you know, it's really, really crazy.
- [17:33]
Joseph Cox
Yeah. So I mean in this case there's drug trafficking prosecutions in Miami, a robbery in San Francisco and then, you know, a lot of hacking and then, you know, some like pretty high profile hackers were wrapped up in this. Right?
- [17:53]
Emmanuel Mayberg
Yeah, I mean the main one that we point to is the Scattered Spider investigation, but the authorities are remaining very, very tight lipped on this. And of course originally when they started to figure out the contours of this operation. I would love to speak to the agents, even if it's the agents at the U.S. postal Inspection Service who are part of the undercover buys or of course the FBI or the prosecutors. And I would love to talk to the money mules as well. It's been a while since I covered a case where everybody basically doesn't talk except the prosecutors. Very, very briefly, in a few emails with me, defense lawyers wouldn't get back to me. The people who actually did some of the crimes didn't get back to me. FBI didn't, us PIs didn't either. And I've figured out why that is. It's because when you go through the court transcripts, the prosecutors explicitly say we haven't done a press release about this because there's ongoing investigations. And now the Elon Musk Persona has retired. I sent it a DM on telegram and it doesn't, it doesn't look like it delivered. So whoever is in control of that FBI hasn't responded to my request for comment. But this is going to maybe not snowball, but more will come out about this. You know, give it a couple of months, something like that. I'm sure there'll be a big splashy press release saying how the FBI did this, but they really don't want to talk about it for the moment. And I guess just the last thing I'll say before we go to the next segment is that another reason they may not want to talk about it is because authorities did some pretty controversial stuff here beyond running the money laundering operation while conversing with Elon Musk in an undercover capacity. They sent the person some YouTube links in an attempt to build rapport, that sort of thing. The authorities then demanded the Google turnover, the IP addresses and identifying information of everybody who watched those YouTube videos over like an eight day period, something like that. And Forbes actually covered that demand a while ago because they found an unsealed court record. But they didn't have all of the context, which now we've built upon after Forbes reporting as well. And experts that Forbes spoke to at the time is like, well, that's unconstitutional because you may have just done basically some search warrant or court order that implicates a bunch of people because they happen to watch a YouTube video which thousands of people have already watched. So there's a ton of stuff in this story. I definitely recommend people go read the full thing because we're almost just scratching the surface. It's a 3500 word piece. But yeah, it was a fun one. I'm glad we could get it out.
- [20:49]
Joseph Cox
Yeah, I mean, the last thing I'll say is just like, you know, you, as you mentioned, you've covered the FBI doing the kind of secretly running these criminal organizations or posing as criminals or running like criminal infrastructure over the years. And every time you do it, I'm like, oh, well, they've done everything now. And it was funny when you wrote this piece, I was like, oh, I guess they, I hadn't thought about them running a dark web money laundering operation. And surely the next time this happens, I will be surprised again. But I mean, I have to say I'm running out of Ideas for things that the FBI can run secretly without people knowing in order to entrap criminals.
- [21:31]
Emmanuel Mayberg
Yeah, I guess a VPN or something would be a good one. I feel like that must have happened and we just don't know about it. But you're right, they will leverage any criminal infrastructure they can to flip it against them. And that brings up all sorts of things.
- [21:45]
Joseph Cox
Haven't they tried to run tor exit nodes before? Possibly, yes. Well, or they. The Carnegie Mellon thing. Maybe we don't shouldn't get into it, but years ago they tried to unmask tour traffic by doing something with Carnegie Mellon, which had control of some tour exit nodes, I believe.
- [22:03]
Emmanuel Mayberg
Yeah. Back in around 2014. And that's how they unmasked Silk Road 2. I was actually looking back into that case because I feel like it's been long enough. If you're listening you know more about that, please let me know. It's 10 years this point, so I think we should go back and try and get the full story on that. Let's leave that there because we have a jam packed segment about tariffs and Trump deliberately didn't put at the front of the show because people be like, oh good, we're going to have a podcast not about politics. Well, now you're here, we're going to bait and switch you because we actually have a ton of stuff that I think that other people aren't really covering or at least from our perspective. And we'll be right back after this.
- [22:55]
Joseph Cox
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- [24:27]
Rachel Toback
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- [25:53]
Joseph Cox
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- [27:33]
Emmanuel Mayberg
All right, and we are back. Let's keep these stories short because there's a a lot to get through from a lot of different angles. The first one is written by both Emmanuel and Jason. I think big Tech backed Trump for acceleration. They got a decel president instead. Emmanuel, I guess you can start us off here. Who backed Trump in Big Tech and why did they do that? And then we'll get to the decel part. Who did it and what were they after initially?
- [28:04]
Jason Kebler
Obviously Elon Musk, who is in the administration at DOGE doing all the slashing of government agencies, but also Andreessen Horowitz, the venture capital firm backing some of the biggest tech companies in the world. Mark Andreessen specifically is very vocal and is advising the administration. David Sachs, who is one of the PayPal mafia people and has a podcast about tech and is also in the administration now as a cryptocurrency and AI czar. And as you can tell by me saying they all have some kind of role in the administration and what they do there. The reason they back Trump is, well, their stated reason is that they are for technological progress, they're for innovation. They are very focused on AI right now, both in terms of their ideals and their politics, but their business as well. And they thought that the Biden administration, Lina Khan's ftc, various laws that they tried to pass and executive orders that the Biden administration tried to pass on regulating AI, all of that was not helping AI develop, wasn't making America very competitive globally. And AI and Trump, who is anti regulation, anti big government, anti welfare, is not very concerned about the energy and carbon costs of training huge AI models. He would be better for the cause. And they backed him financially, they backed them publicly and they all Got to play a role in the administration in some fashion, or a lot of them did. But that I don't think worked out like they wanted.
- [30:06]
Emmanuel Mayberg
No. Right now we have these mounting tariffs, as we're recording, there's more than 100% tariff on China, and then all of this other stuff as well. But what do you mean that Trump is decel? And I think you should probably define that, because I don't think most people know what that term is.
- [30:24]
Jason Kebler
Yeah. So all the people I describe fall into this camp in technology, but more specifically around AI, that's all about acceleration. And the idea there is that humanity has sort of stagnated in innovation, and the way for us to make society better and make everybody prosper is to really push forward on developing technologies faster than we have been in the past few decades and with a particular focus on AI. And in order to do that, they think you have to lift a lot of the government regulations and sort of upend how we do a lot of things in this country and globally. So that's the accelerationist camp, and they use the term decel as a derogatory term to refer to anyone who stands in their way. So they want to accelerate and push forward, and broadly speaking, liberals, Democrats, the left, people who are worried about climate change, people who are for some sort of austerity when it comes to energy, they are all decelerating and are referred to as decel. And then there's also this big concept of de growth, where you don't want to just slow things down. You want to kind of scale back humanity's footprint as a whole, which, I mean, this is a more extreme position, but it's one that they point out a lot, which is they're like pronatalists and they want more people because we're gonna max out the population of the planet and then go to other planets. And all this is going to be possible because of space travel and AI and infinite energy and yada yada, yada. And then there are some camps in the left that are like, well, actually, we're not going anywhere. This is our only planet. And the only way to make it sustainable in the long term is to reduce the population of humanity on the planet overall. And, yeah, that's also obviously like a decel de growth position.
- [32:38]
Emmanuel Mayberg
Yeah. And Trump isn't exactly promoting growth right now, with company stocks tumbling, free trade being a thing of the past. And of course, there's the sub headline of the article, which I'll just read out because it's so good Effective accelerationists didn't just accidentally shoot themselves in the foot. They methodically blew off each of their toes with a.50 caliber sniper rifle. Who came up with a.50 caliber sniper rifle? They couldn't decide if it was a manual or Jason, obviously.
- [33:08]
Jason Kebler
And me, obviously, it's me, the gamer. But I was corrected and I was told that you would not be able to do that with the.50 cal. You'd blow off your whole leg immediately with.
- [33:17]
Emmanuel Mayberg
Yeah, but I think you know that.
- [33:19]
Jason Kebler
I know, whatever.
- [33:20]
Joseph Cox
It's okay.
- [33:20]
Jason Kebler
It's all good. I appreciate, I appreciate the gun nuts who pointed that out to me.
- [33:25]
Emmanuel Mayberg
Yeah, okay, sure.
- [33:27]
Joseph Cox
I mean, we'll get into it. In the other stories, I think they're all kind of tied together, but like a big part of, of, you know, decel versus accelerationism versus, you know, globalism versus not is like, even with something like clean energy, you know, you have, like, really cheap solar panels coming out of China, for example. And that, that has, like, led to, like, a, a huge increase in capacity in the United States and elsewhere. And you have, like, this kind of global competition where there's a theory that, and it's a pretty good theory, I think, that you have, like, American companies competing against companies from all over the world. And tariffs are like an artificial barrier on that. And so if you are trying to get like the best and brightest ideas to rise to the top, you sort of want free trade, you want American companies to be able to take advantage of, you know, inexpensive labor, the manufacturing capabilities of other countries, et cetera, et cetera, you have a more like, interconnected world. And, you know, there's a, there's some good and some bad that comes with that. But I think that sort of putting up across the board tariffs means there's like, more hurdles to that. And so if you are an accelerationist who says we really need to invest in the future of technology, broadly speaking, you know, there you have kind of these Silicon Valley folks who will complain about competition from China, but like a new innovation from China in artificial intelligence, for example, that can quickly become incorporated into American artificial intelligence. And you can take that across, like any sort of technology, and by putting up tariffs, like, you're making all that kind of a lot harder. And you have an entire, you know, class of people who say, if we're going to stop climate change, like, you sort of need a race toward, like a technological utopia. And I'm not saying that that is what we need because I think it's like, far more complex than that. But Trump is undoubtedly decelerationist with these tariffs as opposed to the alternative.
- [35:48]
Jason Kebler
Yeah. So you asked about like what Trump said, and I think as we've said since 2016 or 2015, it really doesn't matter what he says, it's what he's doing. And I think when he was talking in the campaign, he was aligning himself with these people and it was like, yeah, I'm pro AI and I'm pro cryptocurrency and I'm pro innovation and all this stuff. So in terms of what he says he's for this stuff, they're on the same page. But in reality, this has been a disaster. And it's a disaster for reasons that Jason could get into in a moment and that he covers very well in his stories. But you're just the protectionist, isolationist policies that Trump is implementing, even on a long enough timeline where they do onshore a lot of these jobs that over the decades have been exported to other countries. It's fundamentally a worldview that is incompatible with this kind of utopian techno, utopian techno optimist, utopian vision that these people have. Because in order to colonize other planets and do cold fusion and cloning and biotech and all this stuff, it's a global effort, it's a society wide effort that requires free trade, it requires all these specialized manufacturing hubs.
- [37:15]
Emmanuel Mayberg
Right?
- [37:15]
Jason Kebler
It's like you get chips coming out of Taiwan and you get the rare earth minerals coming out of parts of Africa. And it's just that we can't build this stuff without leveraging all of humanity. And then on top of that, as we've reported over the last few weeks, a lot of this development comes from academia and it comes out of government agencies. And like the, all the technologies that we are now leveraging, nuclear, semiconductors, they're all originally born out of like government project or government subsidies. And certainly the greatest minds in the world who are coming to this country in order to go to the best universities in the world. And all the policies about cutting funding to universities and deporting students for their politics, that just also inherently incompatible with, with accelerationism. And I'm checking Twitter all day just to see if like all these people that I mentioned have said anything about this. And they either have not said anything, they're just like totally quiet. Mark Andreessen has not tweeted in more than a week or they're starting to say like, hey, these tariffs are not good. Let's find a way out of this tariff strategy as soon as possible, because this is going to destroy my value, it's going to destroy my companies, and it's going to destroy our vision for the future.
- [38:50]
Joseph Cox
Yeah. And I mean, last thing on this, and then some of the other stories will be quicker, is that I think a lot of Silicon Valley has been expecting deregulation across the board, which is very good for stock prices, usually. And there's not been that many IPOs in Silicon Valley, you know, in recent years. So I think you had a lot of venture capitalists really, like, pushing for Trump, waiting for all these, like, tech companies to be deregulated. And they have been in some ways. But then you add tariffs on top of it, and you have all this uncertainty that Emmanuel is talking about. So people don't want to ipo, so they don't get their exits, they don't get their money. And then the other thing is that tariffs are, like, worse than regulations. They're a type of regulation in many ways. But if you know what the regulations are, the argument goes, you can work around them, you can capture them, you can lobby against them, and if you're big enough, you can kind of continue doing your business. Whereas if you have a tariff one day and then no tariff the next day, and then a different tariff the next day, it's like you don't know where to build your factory, you don't know how to do your supply chains. And so it ends up having the effect of being, like, worse than any sort of regular regulation because you don't even know what the rules are going to be, and therefore you can't run your business.
- [40:13]
Emmanuel Mayberg
Yeah, and that's all very important, especially about academic and health research and all of that. But the Switch 2 is going to probably get more expensive, and I think we need to focus on that. This is a story from Jason. Sea of idiocy. Economists say Trump tariffs will raise price of Switch 2 and everything else. You actually wrote this pretty early on in the first batch of the tariff announcement. And look, I know I said 100% earlier. Who knows what the tariffs are? When you're listening to this right now, I'm not even going to get specific. It could change in literally 20 minutes. I don't know. So there's no point. Just imagine there's tariffs. Okay, There probably is. How's it going to affect the price of the Switch two, Jason?
- [40:54]
Joseph Cox
Yeah, so, I mean, it sounds frivolous, but, like, the day that the tariffs were announced, Liberation Day was also the day that the Switch 2 was announced, which is just, you know, massively anticipated. Consumer Tech product. And notably Nintendo shifted a lot of its manufacturing from China to Vietnam and Cambodia in part seemingly to try to avoid tariffs, which tariffs on China, which a lot of tech companies have done. Like Apple has moved a lot of its manufacturing to Vietnam, India, other countries that are not China because there's less tariffs there. And actually a lot of Chinese companies have set up, like, I guess you'd call them subsidiaries or shell corporations in like Mexico, Vietnam, et cetera. So a lot of these factories, like in Vietnam are sort of like assembling Chinese products and then importing them to the US at lower rates. So in any case, it's just like I, I emailed a bunch of economics professors. You know, I talked to someone at Harvard, I talked to someone at Princeton, and I said, like, what is going to happen here? Because I thought it would be an interesting, like, microcosm of what is going to happen to a lot of other things. And you know, with the caveat that all of them said we aren't sure what's going to happen with any individual product, they said, you know, like, even though Nintendo announced a release date and a price which is $449 in the United States, they were maybe planning on having some tariffs, but they certainly weren't planning on having like 50% tariffs, 80% tariffs. Like, who knows what the tariffs are going to be. And so some of the professors I spoke to said, like, it's entirely possible that Nintendo will increase the price. And others said, you know, maybe Nintendo will eat the tariffs, like, take a less, like a hit on the profitability of the Switch or take a bigger loss on the Switch. We don't know how much it costs to make a Switch too. But traditionally video games consoles have been sold at a loss and then companies make up that price from all the games that you buy. And so there's some people saying, like, oh, well, maybe they'll just like take even a bigger loss on the Switch to hardware and make money. And then lo and behold, the next day Nintendo announces that it's, you know, canceling, not canceling pre orders, but it's not going to, it's going to delay pre ordering for the Nintendo Switch 2. And so in the US in the US in the US and so presumably, like, we don't really know, you know, if the console itself is going to be delayed, if Nintendo is going to try to shift manufacturing somewhere else, if it's going to raise the price, if it's going to release the Nintendo Switch 2 globally, but not in the US to start, which would seem crazy but I mean these are kind of unprecedented times.
- [43:51]
Jason Kebler
I think historically Nintendo is the only console maker that doesn't sell at a loss. They either break even or make a small profit. And that just has been their strategy for several cycles.
- [44:05]
Joseph Cox
It's because they're selling old hardware, am I right?
- [44:07]
Jason Kebler
I mean they, they push power less than their competitors and in order to like you know, make cleaner margins. But so that's a good, like it might cost around what is it? 450 is the price.
- [44:27]
Emmanuel Mayberg
Yeah, right now.
- [44:28]
Jason Kebler
So it's like it's probably, it probably costs something around that. But for them to say all they want at this point is to get as many pre orders as possible in order to start counting on that money to come in once the console launches. So for them to pull out of what I assume is the biggest market in the world for their business is so, so dire. And Nintendo was the first to do it. But as like some of our other stories show, not the last.
- [45:04]
Joseph Cox
Yeah, let's mention the Framework laptop here. So Framework is a repairable, upgradable laptop that is made by a California company but manufactured in Taiwan. And they announced on Monday that they're going to stop selling the entry level Framework laptop in the United States because they said like they straight up said that they planned for a world where there was zero tariff on Taiwan and that that's the world that they existed in previously and they can't count on that anymore so they're no longer selling it to people in the U.S. i think Razer just announced the laptop manufacturer that they're going to pull some products.
- [45:46]
Emmanuel Mayberg
Raz Razer pauses direct laptop sales in the US as new tariffs loom was the headline just before we started recording.
- [45:53]
Jason Kebler
Razer manufacturer of like high end gaming PC hardware.
- [46:00]
Emmanuel Mayberg
Yeah, so you have those and I'm sure look while recording there's probably another one we've missed and there's going to be more in the coming days. The Nintendo delaying of the pre orders was insane and I think unprecedented, at least in my memory. I don't remember something like that. And then we're seeing it in the high end consumer electronics and then maybe it's going to trickle down to other stuff. Right. And talking about other stuff, much more widely used technology is the iPhone obviously. And there's this idea and I don't have it verbatim in front of me, so correct me if I'm wrong Jason, but generally the idea is that with these tariffs of course course manufacturing will move to the US at least that's the Trump administration's hope. And that could include Apple and Magic Lea. Magically, a factory is going to appear and then Americans are all going to be screwing the screws into iPhones and that sort of thing. You wrote this piece which was very good. A US made iPhone is pure fantasy. Why is that?
- [47:03]
Joseph Cox
Yeah, so maybe let's play the clip here. It's Secretary of Commerce Howard Lutnick on CBS's Face the Nation. So here's the clip. Great American workers, you know, we are going to replace on other networks, millions of people. Well, remember the army of millions and millions of human beings screwing in little, little screws to make iPhones. That kind of thing is going to come to America. And then like immediately after I published this article, Trump said that he believes that iPhones can be made in the United States. And this is like an idea that pops up every couple years. There was a big push to try to make Mac pros in the United States and Apple did do that for a little while. Like it's been a goal of every president since I believe Obama to, for Apple to like bring some manufacturing back to the U.S. and it has brought some assembly back to the U.S. it has a factory in Austin, Texas where, you know, they do some Mac pros but not all Mac pros, which are like the very high end, like $5,000 desktop computers. And you know, I've reported on supply chains, on mining on the iPhone in particular and the repair industry for a long time. And also Apple's sort of like environmental record, how the iPhone is made, like labor issues around it, so on and so forth. And it's just ludicrous to suggest that Apple is going to somehow move iPhone manufacturing to the United States. And it's not clear what that would even mean. You know, you could possibly bring iPhone assembly to the United States. Like that is theoretically possible, I guess, where you would hire a bunch of Americans to do the little screws. But the components in the iPhone, like, I think that you need to realize the iPhone is one of the most complicated and just miracle of modern engineering and modern supply chains. It's the most complicated device like ever made at the scale that it's made. It's just like this tiny little box that has, you know, hundreds of different types of metals and minerals and sensors and components inside of it. My friend, our friend Brian Merchant wrote this book called the One device that's about all of the components that are inside the iPhone and where they came to be and where they come from and it's truly just like a global thing. You know, every year Apple releases information about its suppliers. This is like a 28 page PDF, like tiny, tiny type that just says, here are all the manufacturers that we work with. Almost all of them are in countries that are not the United States. And you're talking about, you know, the circuit boards, the superconductors, the, the chips, the memory, like the Bluetooth, whatever, like all that stuff. You know what I'm talking about. The inside of the phone is being made by like hundreds of companies all over the world. And so even if it was ultimately assembled in the United States, it still, all of these components are going to be subject to tariffs. You know, they have to release information about all of the mines that they work with, where all of the metals and rare earth minerals come from. So the United States has one single mine in California that does rare earth minerals, which, you know, these are things like neodymium and other things that I'm blanking on the names of right now that do, like touchscreen, capacitive touch and things like that. And it's like these come from largely China, but all over the world they released this document that says that they get tin, gold and two other minerals from 79 different countries, 200 different refineries and smelters all over the world. And so the idea that just you're going to snap your fingers and suddenly be able to do all of that in the United States is ludicrous. I think that, you know, tariffs may very well push Apple to make more of the phone in the United States and to try to do more in the United States, but that's a really long process. And there's been reports that Apple flew like three giant planes full of iPhones to the United States today to avoid tariffs, because the deadline for when these go into effect is Wednesday. And so it's just like this is. There's going to be a lot of pain regardless of sort of what happens here.
- [52:08]
Emmanuel Mayberg
Yeah, apparently it's five planes filled with iPhones, which is nuts. And then last thing I'll say, just before we started recording, the US Press secretary said these jobs could absolutely come to the US and this was specifically about iPhone manufacturing. Trump believes we have the labor, we have the workforce, we have the resources to do it. And then the press secretary said Apple's investments in the U.S. well, they wouldn't have done those if they didn't think there was potential for growth in the US they might just do that one because they were already doing it actually before The Trump administration, there was already a lot of movement there also. What else are you gonna do? You've gotta do it, otherwise you're gonna get completely screwed.
- [52:53]
Joseph Cox
Right. So, I mean, let me talk about the labor part really quickly because, you know, Howard Lutnick was like, oh, we're just gonna make robots that will assemble the iPhones and Americans will make those robots.
- [53:05]
Emmanuel Mayberg
Oh, okay.
- [53:06]
Joseph Cox
First of all, it's like the, like, we don't have that expertise here, like tsmc, who makes, you know, superconductors and famously now has a factory in Arizona, had to import people from Taiwan on special visas, which, you know, not a great time to immigrate to the United States right now in order to build that factory. Foxconn was supposed to build a factory in Wisconsin, spent billions of dollars doing it, and it never went into effect. And half of the people who work at TSMC now that it is open are Taiwanese. And the reason for that is, like, they're. There's just not the expertise in the United States right now. And so, you know, it's possible that, you know, with reskilling and, you know, it's called reshoring, where you're bringing manufacturing back to the United States. I think it's like a laudable goal and there's ways of doing it. And, you know, Joe Biden's Chips act was doing a lot of that. There's been a lot of incentives over the years where people are bringing that sort of expertise to the US and are training people how to do it. But that's a long. It's a long process. It's like China, Vietnam, Cambodia, et cetera. They've been doing this for decades at this point. And that is they have an education system and a training system that, you know, has allowed them to make really high tech factories over there. We don't have that to the same extent here. And right now Apple still like Apple's manufacturing partners because it has a lot of different companies that make different components. There's 1.4 million people who do that. And it's like you have one. You have essentially one factory in Arizona, tsmc, and they can't even find enough Americans to staff that one factory at this point. So laudable goal, but it's just like, I don't see it.
- [54:59]
Jason Kebler
It's.
- [54:59]
Joseph Cox
It's going to take a really long time for something like this to come fully back to the United States. And what happens in the meantime? It's like you have Apple flying five planes worth of iPhones here. Well, what happens when the new phone is supposed to come out in September or next year or the year after that. Like this is a multi year process and the tariffs are here now, so I don't know what's going to happen, but it doesn't seem good.
- [55:24]
Emmanuel Mayberg
Yeah, stuff's going to get crazy. All right, we'll leave that there. If you're listening to the free version of the podcast on now, play us out. But if you are a paying for 404 media subscriber, we're going to talk about that new Facebook book that Meta is trying to silence and why Jason in particular thinks it's really important you can subscribe and gain access to that content at 404 Media co. As a reminder, 404 Media is journalist founded and supported by subscribers. If you do wish to subscribe to 404 Media and directly support our work, please go to 404. You'll get unlimited access to our articles and an ad free version of this podcast. You also get to listen to the Subscribers only section where we talk about a bonus story each week. This podcast is made in partnership with Kaleidoscope. Another way to support us is by leaving a five star rating and review for the podcast. That stuff really helps us out. This has been 404 Media. We will see you again next week.