The Charizard Charade

Speaker 1: I want

Speaker 2: to start with a story about a Veblen good. Typically, the price of a good goes up, demand goes down. Classic economics. Fewer people will buy something, the more it costs. A Veblen good, for anyone who is unfamiliar, is just the name of a product that defies this. The price of a Veblen good goes up, and unexpectedly so too does its demand. Think vanity and luxury products. The people that buy Lamborghinis would probably stop buying so many Lamborghinis if everyone could afford a Lamborghini. The price being high, the exclusivity is responsible for at least some of the demand. Birkin bags, Rolex watches, and the subject of our first story this episode, a story about an amateur code breaker and a technological arms race and a crazy fraud scheme, Pokemon cards.

Speaker 1: We haven't pissed off the crypto community enough. Now we're gonna go for the Pokemon community.

Speaker 2: Pokemon cards, I think, have, oh, interesting claim, more utility.

Speaker 1: Really? Because last I checked, people don't even play the game that the cards are a part of because nobody wants to play with the cards because they're just collecting them so hard. Unlike Magic the Gathering, which I play, which I do own way too much money with the cards. But the utility of the card represents the value of it, except for, like, foils and other kind of, like, graphical BS. But, typically, the base card price is related to how useful it is and how rare it is. Operates very much like a normal good.

Speaker 2: There you go. And there's the Veblen corner of it, the commodity side of things, the trade. We're gonna talk about that a lot this episode. But suffice it to say, Pokemon cards are worth a lot of money. I we can't need to explain what Pokemon cards are. It's a collectible trading card game. Pocket Monsters, Pikachu, people are familiar. Pokemon cards are big business. The primary market is 1 to $1,500,000,000 a year. The secondary market's harder to pin down, but estimates cluster around several billion dollars annually. There are cards that have sold for $5,000,000. There's 65,000,000,000 Pokemon cards printed to date. It is one of the most widely produced physical media products ever and one of the most valuable per unit collectibles. Last number, over the last twenty years, high end Pokemon assets have delivered an annualized return of 34%.

Speaker 1: Yes. I'm I'm aware, and I have a feeling I know where the story is going. This is a very famous Pokemon card up for auction

Speaker 2: right now. No. It's not. But I Oh. I it maybe it connects. K. Pokemon cards are big business. So forging them has become big business, which means that grading them, verifying their authenticity is big business in a very serious technological arms race. Grading companies come up with some new way to verify the authenticity of the card, some paper, stock, quirk, or like measurable ink quality, or, or, or, and the forgers have to crawl through glass to figure out a way to fake it. Just like digital security, there's this arms race that never ends. It just gets harder and harder to run. In late twenty twenty two, rumors start to circulate about a guy named Takumi Akabane, one of the original designers of the Pokemon trading card game. Akabane, needing a little liquidity, was slowly selling off his personal archive of alpha and beta playtest materials. Cards printed before the game came out in 1996. Older than the oldest cards, the cards they made to design the game. Holy grail stuff for collectors. The CGC certified guarantee company, one of the biggest players in card grading, starts officially grading and authenticating these sets. And in September 2024, an Alpha prototype card sold for over $200,000 at a Sotheby's Fanatics auction. The market for this set of prototype cards is real. Except, we're talking about it here on Hacked, so of course it wasn't. This is the story of how a billion dollar industry's bulletproof authentication system was hacked by a dude with a microscope, exposing a forgery ring that turned about $20 worth of cardstock into a multimillion dollar fraud. Here, on Hacked. The music.

Speaker 1: I thought this was going in a very different way.

Speaker 2: K. Before we dig in, what was the way you thought it was going?

Speaker 1: So there's a very famous Internet personality, Logan Paul. I'm familiar. Now now of WWE fame as he essentially dresses up as this, like, I don't know what his I don't watch WWE, so roast mail you on the comments. Wait.

Speaker 2: Is he a wrestler? Isn't his brother a pun a boxer? I was calling him a puncher.

Speaker 1: Well, I think being a boxer is kind of a form of puncher.

Speaker 2: Are you speaking for it's professional puncherry.

Speaker 1: Lo Logan Paul is a WWE star now. Kind of rocks this yellow leather Pikachu ish kind of energy outfit.

Speaker 2: Okay.

Speaker 1: And he wears a Pikachu card in a diamond encrusted necklace and frame around his neck in his fights. And it is theoretically the rarest Pokemon card in the world. And it has a colored history, this card, because Jordan's eyes are lighting up.

Speaker 2: I'm glad you're in. I'm so intrigued.

Speaker 1: Yeah. So in Logan Paul's various business ventures, one of them was something called Liquid Marketplace. This is all from the top of my head, so I'm I'm I'm you need to fact check that.

Speaker 2: A half remembered story about an Internet influencer who's gotten into wrestling. It's perfect.

Speaker 1: So Logan exactly. Logan Paul, like, owned this card, and it's this illustrator Pikachu. It was a gift at a Pokemon tournament, I think, to, like, the judges, and there's only, like, one of them Right. That's at PSA 10 grade in the world. And and Logan Paul owns

Speaker 2: it.

Speaker 1: It's the rarest of the cards. Liquid Marketplace. Years later, Liquid Marketplace, one of the many ventures that Logan Paul's found himself involved in that, you know, get talked about by people like Coffeezilla.

Speaker 2: Mhmm.

Speaker 1: So he forms this online marketplace where you can buy fractional ownership in these rare collectibles. And this was the rare collectible that he used to launch Liquid Marketplace. You know, own a piece of this card. So he sells fractions of it to a bunch of people on Liquid Marketplace. He allegedly I'm just going off what I remember

Speaker 2: from this dome.

Speaker 1: Off the dome. Sells fractional ownership in this card to a bunch of people at a at a market valuation set by the Liquid Marketplace. Then he buys the card back from Liquid Marketplace for a price that he determines, not the marketplace price. Last time I heard about it, the people who had owned the fractions didn't even receive their fraction of the purchase that Logan Paul had made buying his own card back from Liquid Marketplace. So all of the people that had bought fractional share in it just kinda got hosed. Last I heard. Might might be different. So Logan Paul still has this card, wears it in the WWE arena, you know, kinda has all of this social clout and is now auctioning it online right now. The auction went live, I think, at the beginning of this month

Speaker 2: Oh, wow.

Speaker 1: Ends January 30. And I just looked it up, and it's already over $6,000,000.

Speaker 2: For the one card?

Speaker 1: And it still got seventeen days left in the auction.

Speaker 2: Wow. Yeah. Yeah. It's a commodity. There's a reason I opened the episode. There's a lot of ways into a Pokemon episode. Veblen good economics kind of stuff is a weird way in to a thing about a trading card game, but there's

Speaker 1: hacked way in.

Speaker 2: It it because it's a commodity. It's an asset that people buy and sell, and it seems important to understand it that way for the purposes of this story. Over somewhere else, to the the game's credit, is a game that people like to play. Kids like to collect it. When I was getting them as kids, I wasn't thinking about them as assets. I just really really wanted a certain card because I liked a character. But when you let that rinse and repeat for twenty years and you have, like, Bay Area engineers with a lot of nostalgia and even more disposable income, it becomes an asset. The way it becomes an asset in the trading card world is there's this term that we need to talk about that's gonna come up a lot in the story. It's the idea of a slab. A slab is just a card that has been graded and sealed inside of a hard, clear tamper resistant case. When you picture it, I haven't seen photos of Logan Paul and his Pikachu leather outfit. Neat.

Speaker 1: Me help you there.

Speaker 2: Thank you. But I'm guessing it's a slab version of the card. So the card has been

Speaker 1: It is. Yeah. It's got the grading the little grading strip at the top that talks about it.

Speaker 2: A grading company has authenticated the card, said it's real. It's very important for this story. And they've graded its condition. And then they've encased it in a rigid plastic holder, ultrasonically sealing it so that it can't be, like, opened basically without damaging the whole thing. And then they name it, give it some numbers. Basically, you put it in plastic, and it becomes fungible. You can trade it. You can sell it. There's now a market for these things, and it enters into the market. I'm just opening up Slack so I can see

Speaker 1: See the the photo of Logan Paulson.

Speaker 2: Opening up. Oh, that's elegant.

Speaker 1: Yeah. Elegant. So so here's the other thing. There's a little bit more I mean, I got one more stab of back history on this. Sure. Recently heard that this card so this card is a PSA 10 grade, which I'm sure we're gonna get into Yeah. In this episode. But but, essentially, it's it's perfection as far as quality goes.

Speaker 2: Right.

Speaker 1: It's been graded as a perfect specimen. I heard recently that this card actually was originally graded a PSA nine, and then Logan got it regraded, and it became a PSA 10.

Speaker 2: Right.

Speaker 1: So I don't know how you'd I don't know how you'd do that.

Speaker 2: You put him in a headlock and you body slam him is what you do. I just have the photo of him up, and I'm like, that guy's body slamming people left, right, and center just based on the outfit.

Speaker 1: Yep. Oh,

Speaker 2: man. So, yeah, in this photo, which maybe we'll link to in the show notes, he is he is rocking a a slab of a Pikachu card, you could say. And for just the the record, in case it's gotten tangled up, Logan Paul has is not legally implicated in this story at all. He has nothing to do with what we're about to talk about.

Speaker 1: I think if if you wanna just Google Logan Paul and legal troubles, you will find we've talked about him previously with his little animal

Speaker 2: Yeah. His NFT project. Yeah. Yeah. Yeah. Yeah. Yeah.

Speaker 1: One of the other stories that Coffeezilla would cover about him.

Speaker 2: Yeah. Go watch the Coffeezilla videos about Logan Paul if you if you feel like hearing about Logan Paul. In the meantime, our story does have some characters that we should talk about. We've already mentioned one, Takumi Akabane. He's an early Pokemon trading card game developer. He's the source of the initial archive here. He's the one who's publicly associated with this set of prototypes. He his name really is, like, the gravity well that makes this whole story believable and kinda kick off. And I wanna get this out of the way, in case someone only listens to the first half of this and they think, oh, one of the original Pokemon trading card game designers was a grifter. That's not really where this is going. His name is very important to this as the lineage of some of these cards, but we can't associate him with the bulk of the fraud that we're about to talk about. I just wanna get that out of the way up front.

Speaker 1: I had already started to associate him with the bulk of the fraud.

Speaker 2: The fraud.

Speaker 1: You you

Speaker 2: hear his name, and you're like, I think this guy's a Yeah. Of course.

Speaker 1: I I

Speaker 2: I'm just saying

Speaker 1: like, if I was an original game creator, like a game designer that made a game that now has this commoditization insane aspect to it, I could easily and credibly produce a bunch of assets that I could claim to be prototypical. You know, any of the parts that you need to to make the community go furious with their money

Speaker 2: Foaming at

Speaker 1: the mouth. Buy them all, foaming at the mouth, wanting it all. So the second you had mentioned that one of the original creators was involved, I was like, oh, this is just their payday.

Speaker 2: Yeah. The ease with which one could fake this is very relevant to this story. Three other characters we should talk about. Two of them, call them the buyers. Jason and Thomas. They're gonna come up later in the story. They're both like Bay Area engineers. Well, one's Bay Area, one's New York, but they're software engineers. They got a bunch of disposable income and a lot of nostalgia, and they become Pokemon card collectors. One of whom puts a a really jaw dropping amount of money on the line in this story. The last character and kind of our hero this story is a guy named Scott Mastro Matteo. Mastro Matteo is the one who turns this whole thing. He's, an admin of a Pokemon card trading website, and he's gonna come up later. But I wanna remember those. Takumi, the original designer, Jason and Thomas, the buyers, and Master Mateo, the sleuth. If you wanna learn more about this story, there's a really wonderfully reported piece and popular mechanic by, David Howard. It's totally worth checking out. We talk about some other stuff Popular Mechanic by, David Howard. It's totally worth checking out. We talk about some other stuff in this episode, but that's a really good place to dig in if you find the story fascinating. So 2022 Acobane posts kind of announces that these prototypes and playtest materials exist. Origin story stuff. These have been sitting in a drawer. They're like paper glued to stock. They got scuffed edges in the creases. They've just been sitting there since he designed the game over, like basically thirty years ago, and now he's selling them. Late twenty twenty three, the CGC, that authentication, company, starts grading and authenticating these prototype and playtesting cards. For buyers, this is really, really important and exciting. They're making slabs out of these things. There's this sense that someone has done the work to authenticate these cards. So, they go up for sale, and they start to sell. The one buyer that I mentioned, Jason, his decision kind of logic in this becomes a really good mirror of what happens across the market, which is this would be exceptionally easy to fake. These are prototypes. They're they're made with, like, you know, office printers, good printers, but, like, accessible printers. They're not made at scale. They're glued together. A lot of reason to be skeptical, but if a major grading company is authenticating these things, they're probably real. They've probably done the work.

Speaker 1: Sure. They've looked into the dots and graded and aged the the printing.

Speaker 2: That's foreshadowing everybody. Yes. Remember the word dots later. His confidence jumps to 95%, and he spends 6 figures on the first three of these cards. Early twenty twenty four, the trickle of cards starts to move a little bit faster. 09/20/2024, the CGC publicly announces, hey, super exciting announcement. There are more of these cards that we've gotten and we've been grading. Like, there there's more of these things. We're authenticating lots of them. We're authenticating hundreds of them. This is not a one off archive dump. It would seem during the development of Pokemon, a whole ecosystem of these early prototype cards emerged. At this point, collectors on the Internet start to get a little bit wobbly about this. If these are, like

Speaker 1: Sure.

Speaker 2: Playtesting tools it first off, if these are, like, used, handled playtesting tools, it's really odd that any of them could be graded mid condition. If these were made for a small circle of developers, all of whom, like, are documented, we know all the people that worked on this game, why is the market suddenly swimming in them? But for a lot of these buyers, the headline, Akabane, this known developer has said some of these I have real cards I'm selling, the CGC authenticating them, testimonials all across the Internet of people saying, I'm looking at these and they're real. There's so much evidence. There's so much buzz that this is happening, and this is real, and I should buy one of these for $500,000. Huge portion of his net worth. Thomas goes out and buys one.

Speaker 1: If I if I had like, so three of these things had showed up, and I had been the first one in the pool, I would be so heartbroken when 2,000 more showed up because scarcity is the is the driver of the Veblen good.

Speaker 2: There you go.

Speaker 1: So so if I had the only three in existence and I had paid $500,000 for them, I would probably see great returns assuming the insanity and frenzy of the Pokemon card collection continues. But the second that scarcity goes from, like, there's only three of these things in existence to turns out we all have boxes of them.

Speaker 2: Yeah. No. A 100%. Then then Yeah.

Speaker 1: Yeah. That that would be my thing. Supply and demand is real, and, you know, the more supply, the the lower the overall price of the average price.

Speaker 2: Yeah. The exclusivity matters. And ironically, that very first set of buyers of the original Accobane ones, while it seems as though they're losing their exclusivity right now, it will return. Scott, it will return. Foreshadowing. It's just straight up telling me. Just telling you of where this is going. There was this sense for these people who are passionate members of this community. I think for a lot of them genuinely really love this community and this this world and these characters. Yes, they're buying an asset. Yes, they're buying possibly a Veblen good. But there's a real sense of this thing I've loved for my whole life. I'm holding the root of it. If you love games, you probably really like game design. You're holding the game design documents. They had the root of something. So there's a real emotional engine to all of this.

Speaker 1: Can I take us on a digression?

Speaker 2: I'm about to take us on another, so please.

Speaker 1: In classic fashion, I will give you a hot take. Games like Pokemon, Magic, anything you're ripping packs, hoping for you know, hoping to turn your dream. Yes. Thank you. Exactly. I just see it as us teaching children how to gamble.

Speaker 2: Oh, literally where you're going with it, children.

Speaker 1: Yeah. Sure. That's that's literally all I see it. Like, especially if I saw I was just in Japan over the holidays. They have a lot of these claw machine parlors. Kids go spend their parents' money to try and, like, turn a dollar into a $50 prize. That risk reward function is the exact same as gambling, and we're just systemically rooting that structure into our children. You get it with, like, Counter Strike, with loot boxes, video games, microtransactions. You're not just buying the asset you want because there's no fun in that. There's no risk in in that. There's no reward to it. There's no scarcity. Yeah. So you buy loot boxes or you buy packs, Apex packs. You buy you know? And and to me, as somebody that's worked in social marketing and behavior norms based marketing for over a decade, We are just systematically teaching children how to gamble and how to get them used to it, and you're seeing an uptick. I'm gonna continue this digression. I recently was served an ad. We had talked previously about a company that you could bet your bills, like, if you have a $900 Visa balance. Did we not talk about this? No. Okay. There's an entire financial tech ecosystem that's starting that allows you to essentially gamble against your personal stuff. So, like, if I owe a thousand bucks on my Visa card, I can gamble that. And either I double it and I owe $2,000, or they'll pay it off for me in a fifty fifty game or a fifty one forty nine.

Speaker 2: Gonna say the odds there really, really matter.

Speaker 1: So there's there's there's an entire ecosystem. Yes. There's an entire fintech ecosystem growing out of this. And I was recently served an ad on YouTube, I think, where you could bet against your own weight loss goals. So your New Year's resolution is to lose 15 pounds. You go to this website. You put in all your details, your heights, your weights. You validate it. And you say, I'll lose this money for a thousand bucks. And next year, you come back, and if you've lost the weight, they'll give you a thousand bucks. And if you haven't lost the weight, you give them a thousand bucks.

Speaker 2: Is this like wow. Is this a poly market? Is this no. This is a new one. Cool.

Speaker 1: None not just one. I would say that the number one thing that I've seen in new enterprise start ups, fintech weirds, things that catch my eye, I've seen probably seven or eight of these companies show up in the last six to eight months where you can gamble on very specific things. And and they're very predatory. Like, they know that people at the beginning of the year have a resolution to be healthier, run more, eat more, be more active, etcetera. And they're leveraging that by advertising into those markets being like, would you do it for a thousand bucks? Would you lose 30 pounds? Like, what how much money do you

Speaker 2: lose? You won't.

Speaker 1: Yeah. We're willing to bet you won't.

Speaker 2: That's not great, but it's not great in a very different way, maybe without thinking about it too hard than gambling on debt. There's something really ugly to me and kind of nihilistic about

Speaker 1: Same same thing.

Speaker 2: Letting a person being like, I'm my life is being destroyed by this debt. I guess it's really no different than going into a casino on credit and gambling and saying, well, I could either pay off this debt or I can triple the size of my problem.

Speaker 1: Just yeah. Exactly.

Speaker 2: Yeah. Yeah. Sure.

Speaker 1: Anyway, so the I think all of this stems back to the fact that we, over the last twenty years, have normalized gambling, one of the most addictive things in the world. Like, gambling is one of the only things where you get the dopamine rush when you lose as much as you do when you win.

Speaker 2: That's

Speaker 1: That's what makes gambling so addictive, and we have completely normalized it into our children through things like ripping packs for Pokemon.

Speaker 2: I'm happy to say two things. One, that whatever loss aversion I have as a person quintuples in the presence of gambling. Mhmm. Like, I don't know if that I have they say I have a normal amount of loss aversion. But the second I know there's, you have. The second I know that there's, an odd, like, a statistical inevitability, every time I lose, I am filled with rage.

Speaker 1: Mhmm. So it's just it doesn't work. That's a healthy response.

Speaker 2: Yeah. I I feel pretty good about it. And I was I was popping booster packs like like mad as a kid. You don't get a Charizard by popping one or two of those things. And then the second thing is that's why I'm really excited to announce that this episode is brought to you by DraftKings.

Speaker 1: He's joking.

Speaker 2: It's not.

Speaker 1: We wish. Never.

Speaker 2: Okay. Okay. K. Pokemon cards. Back to

Speaker 1: it. Back

Speaker 2: to it. This is where the story gets, if not hacky in a cybercrime sense, then very, like, puzzle solvey and nerdy in a way that I think I really appreciate. I was reading a lot about this over the the holiday break. There's an Internet community that ends up kinda cracking this thing wide open. It's called e four. E four is a forum for, like, hardcore Pokemon card collecting people. This is a place where people, amongst other things, have a very deep vested interest in how people fake this set of collectibles. How do you spot the fakes before you buy them? How do the grading companies spot and prevent fakes? These are the people and they hone in on a vulnerability in both, I guess, the grading and the way some of these cards are being faked. Collectors on e four start circling in on this idea of printer metadata, and specifically something called MIC, machine identification code dots. When you print something Mhmm. There are these barely, barely, barely visible, dot patterns that certain laser color printers embed into every print shop. You'd never notice it to look at it, but if you get in there with a microscope, you can see in certain cases this type of dot. And this could be a very powerful tool for forgery detection.

Speaker 1: Not just forgery. I was gonna say, I think it it got like, the reason I knew about it is, like, ransom notes. Anytime you put something on paper, it's it's actually traceable to you.

Speaker 2: Yes.

Speaker 1: You print something off, you think it's like, I printed it. Nobody will know who it was. No. It's completely traceable.

Speaker 2: It's traceable to people that have very specific information that is kept very secret by printer companies, but not necessarily to law enforcement, to the public. Like, you and I would have a very different time trying to track this even if you had the best microscope on Earth because this information is kept very, very, privileged.

Speaker 1: Of course. Yeah. They don't they don't want everybody to be able to do it. But when they need to do it, they wanna be able to do it.

Speaker 2: The codes are secret. But folks we've talked about in the show before, I think you and I quite found them, the Electronic Frontier Foundation, the EFF, another character in this, don't really give a shit that the intent is for these codes to stay secret because they're cool and interesting people.

Speaker 1: They are. Supporters of the show.

Speaker 2: So these dots, they can encode date and time, printer serial device information, all this stuff into something that's basically invisible to the naked eye. Mhmm. The EFF has successfully documented these Xerox docu color tracking dots. It's a very popular line of printers, and how to decode them. This is a very rare case of one of these secret codes becoming public knowledge. It's and it's a really, really good collectibles forensic tool because it's nondestructive. Mhmm. You can analyze a scan versus the original. It's not easily faked even accidentally. Like, if you printed it, it just leaves those codes there. Mhmm. And importantly for our story, it's outside of I think what I learned through this story is, like, the typical card authentication instincts and process, which typically focus on type of paper stock, the type of ink used, the way the edges of the card look, the way the gloss is treated and aligned. The dots weren't really one of the go to methods, which I find really interesting. So enters Scott Master Mateo. Master Mateo is a moderator on e four, and he starts he's he's watching this whole prototype cards thing happen. And meanwhile, off to the side, he's learning about these dots from the community as they're talking about it, independent threads, talking about, oh, these machining code dots could be really, really useful. He starts looking at the rumblings about the prototypes. He's looking at the dots, and he puts two and two together. And he says someone should look at the MIC dots on these prototype cards. Because, again, they're printed on, like, card stock. They're not run through the normal process. Probably learn a lot by looking at those dots on these prototype cards.

Speaker 1: But they could even be used to validate them. Exactly. They were printed in whatever 1992 and on this person's specific printer at this place. It would even make them more credible.

Speaker 2: You sure could. Foreshadowing.

Speaker 1: Foreshadowing.

Speaker 2: He starts with what's available. He doesn't have one of these cards. Right? But there are very high resolution images from the auction sites. So he gets the scans. He starts using digital magnifying software and later a literal, like, microscope, and he starts experimenting with ways to make these dots visible on the scans. Magnification, but also color and light manipulation, taking these dots that are meant to be invisible and trying to render them visible in the scans. Very interesting, weird, tricky problem to solve. EFF Xerox decoding references exist, but applying it to a scan is messy. You have compression artifacts, resolution issues, inconsistent lighting with when the photograph was taken, you're looking for this faint yellow little thing on a busy card surface. But eventually, he has a breakthrough And he identifies a pattern consistent with Xerox docu color style grids and uses this EFF decoding tool to translate it into a timestamp of when that printer printed these mock up dev cards that are for sale. And he looks at the time stamp, and he says a bunch of these nineteen nineties prototypes, you know, part of this big tide of these, prototype cards in this multimillion dollar market, sure look like they were printed in 2024. Once he starts pulling on that thread, he realizes this isn't just a few fakes. There's been a manufacturing pipeline booted up here. And not all of the cards are showing the same dot patterns. Some are showing that Xerox style dot that can be decoded into specific print times. Other cards that he's looking at the scans of seem to have a pattern that most closely aligns with the Konica Minolta printer that doesn't have that e f f public decoder. So he just goes ahead and goes full send amateur code breaker, starts looking up published and researched, like, datasets on different tracking dots, And he figures out basically, like, his own version of the Konica Minolta printer Rosetta Stone to verify these this other set of cards. Assembles, like, a patchwork dataset of these dots from Minolta printers from, like, old research papers from when they were manufacturing it, older dot pattern samples, prints other sense send him. He gets a printer, prints some himself, compares it to that. Like, he goes full send on this thing. Love that. It's pretty cool. And the thing he figures out is that certain dot positions correlate very strongly with printer models and manufacturing area information that lets him estimate that a bunch more of these alpha error cards were built in and around 2016. So even if you can't nail the exact year the way he could with the e f f documented, printers, he could say, if these were supposedly made before 1996 and yet the printer technology would date it after 2016, We have another tranche of these things that have proven to be fake.

Speaker 1: I feel like that's just sloppy forgery.

Speaker 3: Yeah. You

Speaker 1: know? Yeah. Like, I've if if you really wanted to make a believable product, I'm sure you could've If you

Speaker 2: really wanted to for forge a Pokemon card, how would you do it? How would I do it?

Speaker 1: Well, for first, I would need to look into all of the ways they validate. But even just the printing

Speaker 2: Yes.

Speaker 1: Of of, like, concept cards. If these cards were supposed to date back to the nineties, why would you not just go out and find a nineties printer? Why would you not just go out and find nineties print stock? I'm sure you can find it. It's not impossible. You'll probably find a a ream of old print stock from the nineties and a printer that somebody would have had. Reset the firmware in it or however the date translation comes, whether it's for the firmware in the printer or through your computer, reset times. Even get, like, a Windows 95 box to do it from. And just Yeah. Like, check some of your set the BIOS time in the system, set the Windows time to the right thing, and just spend another two hundred hours and five thousand dollars making sure that you check off a lot of these things. Yeah. So to me, that's just sloppy. Like, I would have thought to do that if I was Yeah. If I was in the market of forging Pokemon guys. Maybe I should be because it sounds like it's quite the market.

Speaker 2: It seems like it's quite the market. And there's an interesting question of, do you want say I submit through proxies a 100 of these things to get graded, and the grading company can either catch 95 of them as being fake versus 85. Like, you you can get slightly more through the gate. Mhmm. But they only cost $20 in card stock in a couple hours of your time. Do you really care about the marginal difference? Are you just like, no? I just need I actually just need one of these to slip through.

Speaker 1: Well, and the beauty is is once they slip through, they're encased in plastic.

Speaker 2: Slabs, dog. Fungible.

Speaker 1: Everybody's checking them again.

Speaker 2: Nope. Except except Mastro Matteo, who's checking that shit like it's his job and who comes to the conclusion that there is massive fraud inside of this new prototype card ecosystem. And he writes up a big paper. Big old thing, he's gonna put it on e four, heart of this community. He's he's going public with it. There's this ethical gut check moment that I find fascinating. He pauses before publishing because if he's wrong, he's not just embarrassing self. He's detonating actual net worth.

Speaker 1: Like Yeah. Money. Money is real. Is

Speaker 2: is on the line here. We talked about Jason and Thomas.

Speaker 1: He's gonna get sued.

Speaker 2: He's gonna torch CGC's reputation. Like, he so he really goes on a fact check tour. Like, he's he's asking for scans from other collectors as a sanity check being like, I saw you bought this fourth round that went up. Can you please send me a scan of it? So it becomes this kind of distributed verification moment where you have multiple owners, multiple scans, just looking for these patterns and seeing where they repeat and where they differ. He also realizes that he's implicated, not implicated in the fraud, but, like, now that this new machine, this m I c dot thing seems to work, if you reply to everything, how many of his cards are

Speaker 1: fake? Mhmm.

Speaker 2: Like, at what point do you stop being the detached whistleblower and find you're like, oh, I'm bleeding?

Speaker 1: Yeah. Sure. Yeah. I'm I've half of my collection is garbage too.

Speaker 2: Right? January 2025, there was part of the reason we're talking about this because it was when I was reading about it. Master Mateo hits publish, community reads the evidence, goes public on e four, and that leaks out and gets broader coverage, which is how I found about it. Goes out over the holiday break, and buyers all get this horrible, like, pit in their stomach moment going like, this seems really, really damning for the integrity of this new prototype card market.

Speaker 1: I just wanna I just wanna cross cut back because any of the actual cards, like, the prototype cards that are printed on regular printer stock in a home printer, you know, something that would be abnormal for, like, the actual production cards.

Speaker 2: You got it.

Speaker 1: Because I'm assuming the production cards are printed on massive Heidelberg offsets. They're not gonna have the little little little pips all over them to tell you what date they were printed and what printer they were printed on.

Speaker 2: On a card stock that is probably kept under lock and key given the multibillion dollar size of this industry. Like, you've got it. These prototype cards are uniquely valuable and uniquely vulnerable.

Speaker 1: Yeah. Totally.

Speaker 2: So Master of Mateo's reporting goes live. It ripples throughout the community. And then the final twist, which we alluded to earlier, is that some of those earliest buys from the original Accobane collection seem like they might actually have been real. Jason, one of the first buyers, I think it was the 500 guy, drives to another collector's place, They do a high res scan on, like, a good flatbed, and sends them off. And they're able to verify that Jason's three early cards from, I think, that original Accobane collection show MIC dots consistent with 1990 like, nineteen nineties printing. Meaning, he probably got lucky buying early before the flood. Mhmm. Other earlier owners are checking. A few people are responding with high risk scans and seeing that some of those very, very first wave, like, prototype cards do seem compatible with nineteen nineties era printing. And the likely scenario emerges that a small number of authentic originals existed enough to establish credibility.

Speaker 1: Mhmm.

Speaker 2: And then malicious actors use that legitimacy, like, burst to manufacture a much larger supply and ride through the grading and authentication machine, which raises the really big question at the heart of all this, which is how did the CGC miss this? And this is where it becomes, like, a really interesting institutional problem versus just how do you make clever fakes? Like, that's fascinating and I think why I got into this. But, like, what what happened with the CGC here?

Speaker 1: Well, before we get to libelous, because I assume that's where we're going, the it's it's shocking to me that they did miss it because, like, I knew about it.

Speaker 2: Yeah.

Speaker 1: You know? Like, I foreshadowed a lot of the most happened. I hadn't read the story during

Speaker 2: Oh, yeah.

Speaker 1: No. No. You responding. Yes. It's like I I I knew that you could do this. I knew that you could check print dates, device IDs

Speaker 2: Yeah.

Speaker 1: Based on on things. How does a company whose job is it in its entirety is to spot duplications not?

Speaker 2: It's a really, really good question. And the thing that's weird is that machine encode dot like, NYC decoding is not obscure in digital forensics. It was the first thing you guessed. Mhmm. It comes up a lot. Mhmm. EFF documented Xerox decoding years ago for a reason. And that is a really big question in the middle of all this. Not live, just a question, which is why did the CGC not test for MIC at all? Or were they just testing inconsistently? Or maybe most damning, did the chain of custody implications of Accobane coming out publicly saying that these car this type of car does exist, like, override those warning signals. And I just don't know the answer to that. It seems like it has to be one of those, but I don't know which one.

Speaker 1: See, to to me, having having a credible actor come out and say these do exist and I have some and, pure, please grade them is the perfect setup to the fabrication behind, the lie behind, the the malicious intent behind. That to me, anything that wasn't hand delivered by credible person a should have went through even more rigorous scrutiny.

Speaker 2: Because it was printed on, like, home home printers. Like, it seems seems kind of obvious, but the practical reality of all of this, if you look at the numbers, is that these grading companies are authenticating it, like, an industrial speed. A lot of people are authenticating it like an industrial speed. A lot of people are getting Pokemon cards graded at any one time. And like I said earlier, the fraudsters only have to get it through that process some really small percentage of the time for this all to be extremely lucrative.

Speaker 1: Mhmm.

Speaker 2: Reports are about 1,500 cards have been recalled and are eligible for review in connection with this investigation. Like, 7 to 8 figure public sales of these things as of right now. They've issued a formal statement with the CGC acknowledging the reports and that they're setting up, like, a review path for the phrase was impacted certification numbers. It's basically they're receptive to people saying, like, I need you to check this again and money, please, for if it's fake. So that's all still unfolding. We're gonna have to see where that goes with the CGC. But

Speaker 1: I wonder if they carry, like how much in errors and omissions and errors did you have to to carry for this? Because that's what's gonna get hit. If they don't have a $100,000,000 in errors and emissions insurance,

Speaker 2: it's gonna

Speaker 1: be a real painful stretch for them.

Speaker 2: I mean and the refunds come with a a material cost. Like, the reporting again indicates that they are refunding submitters who returned cards for review and came back as not being fake. But, like, the the trust is the bigger issue here.

Speaker 1: Mhmm.

Speaker 2: Like, you you sent me a photograph of a man coming out in a in a giant leather outfit with a a slab around his neck as though it was gold bullion because a slab was a rock solid guarantee. It was as good as mine.

Speaker 1: Worth more than gold bullion.

Speaker 2: Literally, by mass. Really? It's cards it's paper. Yeah. Yeah. Totally.

Speaker 1: He could have he could have that entire slab could be solid gold, and it would not be worth and gold is worth tons right now.

Speaker 2: Yeah. Yeah.

Speaker 1: Yeah. If that entire thing could be a slab of gold, then it would be worth less

Speaker 2: Yeah.

Speaker 1: Than that Pokemon card is currently being valued at auction and still has seventeen days. Like, it could go for 10 to 12,000,000.

Speaker 2: Yeah. 10

Speaker 1: to $12,000,000 in gold, he wouldn't be able to walk out with.

Speaker 2: And that wrapper matters, and it used to be that you could trust it, like, one to one. And now there's a sense of, like, we well, the the slab is good, but has it been verified? Like, there's there's doubt. A little bit of doubt can grow and fester. Mhmm. And the irony of all this is that, let's say it becomes more secure because people start saying, show me the dots. Right? People come all the way around and they go, there's this new way, but now we know about it. Show me the dots. You've just created a new attack surface.

Speaker 1: Mhmm.

Speaker 2: Like, in theory, a sophisticated counterfeiter could try and spoof or manipulate or just buy a really old printer. And, yeah, the market for old printers gets more expensive, but, clearly, the return is there. So this report that this whole story really was kind of about is this really fascinating code breaking, puzzle solving, sleuthing expose, and also functions as a great blueprint for the next round of forgeries.

Speaker 1: I like it. I like I like the story. It's like the right right blend of, like, puzzle hacking. You know, you've got a you've got a hero Yep. Who solved it. It's it's a great little narrative. Make a great little movie. Because the, the reality is is is this one person with nothing but digital scans on probably consumer grade scanners.

Speaker 2: Like, we're

Speaker 1: talking 600 PPI scanners, not something that's insane. With consumer grade scanners, you know, 600 PPI scanners and a little bit of reference materials from the EFF was able to disprove. Well, he he didn't I they didn't have physical access to the actual No. Source material.

Speaker 2: All scans. From from what I can

Speaker 1: tell. So that's a that's a that's a that's a bad look for the grading company, I'm gonna say.

Speaker 2: Yeah. It's it's interesting because you get to watch in this one story the birth and death of a, like, fraud opportunity. Mhmm. Takumi Akabane comes out publicly and says, I have some early prototypes of Pokemon, which I'm I was developer of. Everyone knows this. This is publicly documented. I'm gonna be selling them. And independent of that, a bunch of people went a bunch of card stock just became worth worth hundreds of thousands of dollars that is distinct from all of the anti forgery systems that exist for verifying normal run Pokemon cards. It was like this moment was born and then not that long later, this other forum admin, Master Mateo goes, I figured out a way to to end it. So you get the birth and the death of a little fraud ecosystem that reveals a vulnerability in a much larger ecosystem of billions of dollars.

Speaker 1: I I can't help it but just take that model of someone of credibility comes forward with something. It's given a pass by society because of credibility, and then other people latch on. Like Yeah. Every time you go on social media, there'll be some popular post that's trending for a reason, and then there's a bunch of people latched on in the comments just, you know, pushing their own agenda. And it's the same kind of idea. You know? As a as a fraudster, it's probably a system to look for. You know? Sure. Wait wait wait for this situation to occur. It's very similar to, like, in stock trading. You look for technical patterns. Like, oh, there's a head and shoulders here. Maybe I'll Mhmm. Get out of my position or short the stock because history's shown us that, you know, seven out of 10 times, the stock's gonna come down now. Same thing goes here. You know? Let's look for this technical pattern of setup to occur, and then that's when we strike.

Speaker 2: That's when we strike. It's an interesting story.

Speaker 1: It is. Good story. I like it.

Speaker 2: Nice. Do you wanna kick it on over to to a little ad oasis and then, I don't even know

Speaker 1: what water slide.

Speaker 2: Add water slide because it's quick. It's quick. Let's rip on over to the add water slide when we come back and do a little chatty chat.

Speaker 1: Let's do

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Speaker 1: I gotta say I'm pretty shocked that this wasn't about Logan Paul, the special Pokemon. I was like, we're talking about Logan

Speaker 2: Paul today? Logan Paul today. I don't need that heat.

Speaker 1: Marketplace I

Speaker 2: don't need that heat.

Speaker 1: Fractional ownership, weird commodities and alternative investments, you know, little bit of fraud and nonpayment to the fractional owners. Now we got this card up for auction. I was like, there's no way we're not talking about Logan Paul.

Speaker 2: Yeah. I just think about the defamation suits between Coffey Sill and Logan Paul, and I think about them. That is a fascinating story. If you haven't read about that, go read about Coffeezilla's coverage of Paul's, I think I could say ill fated CryptoZoo NFT project. It's worth It's worth We even we

Speaker 1: have an episode about it. You can listen to our episode about it, but I will I will say anything to do with Logan Paul. There's a reason why I mentioned Coffeezilla all the time, and it's because I want you to go watch the Coffeezilla version of it rather than have us talk about it and get countersued.

Speaker 2: It's extremely good. It's very good coverage. You should go give it a look. Oh, chatty chat. K.

Speaker 1: Chatty chat.

Speaker 2: Very, very brief. This isn't a whole story, and it might just be a dead end where you go, oh, that's interesting. But, a YouTuber who I like named Ben Jordan did this video, and it was just it was just like a fun little tech thing that I thought was really, really neat. And it was as a as a fellow audio aficionado, I think you will find this fascinating. Spectrograms

Speaker 1: Mhmm.

Speaker 2: Which are basically images Like, a spectrogram is a way of visualizing audio. Mhmm. This YouTuber converted a ping image into a spectrogram. Like, he basically took a little drawing of a bird, converted into a spectrogram so it's a sound, played that sound to a bird, a starling, which is a bird known for mimicking sounds, and then recorded that bird later when it started making its own noises, mimicking what it had heard earlier. And when he looked at that audio, it had reproduced the original ping that he had played to the bird. Meaning that he was able to store an image in a bird. Does that make sense? You following me?

Speaker 1: So, really, what they've done is come up with a new form of cryptography Yes.

Speaker 2: Bird

Speaker 1: that is then that is then mobile, and it could be sent through Starling Birds.

Speaker 2: And are there better ways to attach a message to a bird? I'm picturing a pigeon with a little piece of paper on his ankle. Yes. But did you play an image as sound to a bird and then record the bird and reproduce the image later, which is just really freaking cool to me. No. And that's great. So, anyway, go look up Ben Jordan, his video about encoding images in birds. It was that was a that was a a fun one over the break.

Speaker 1: I I wonder how many people like, the the hidden message thing. I've always been fascinated with, like, how you pass a hidden message. You know, it's a fun game. Like, you could almost have an entire hackathon around, like, come up with a unique way to pass a hidden message. And that's a pretty cool one. Like, take words on a words on a transparent background and codify them into spectrograms.

Speaker 2: And put it even

Speaker 1: you could even add, like, a basic, you know, transformation to it where, say, you fill it out and rotate pixels. And then on the other side, you take the audio track, take it back into a spectrogram, undo the transformation, and then you've got an image.

Speaker 2: Yeah. The hackathon I'd have to think about how you would actually structure this, but a hackathon that's about transmitting a miss a message. And you can use digital means, but there has to be one link of it that is nondigital. There has to be one

Speaker 1: Oh, yeah.

Speaker 2: Do you know what I'm saying? Like, one thing that and it could be whatever. You could do it with a bird. You could do it with water. You could do it with weights. You could do it with light. You could do with all sort of light would make it too easy. But, basically, one link of the transmission has to be analog or nondigital. That could be that's fascinating. Or even, like, nonelectronic, like, it has to be yeah. That's cool.

Speaker 1: Because in in Uni, we used to codify messages in a bitmaps, like images

Speaker 2: Mhmm.

Speaker 1: Because it's every pixel is a binary, essentially, or is a is a number value for the color and the the gradient, the brightness, the rest of the the gist. Yeah.

Speaker 2: So

Speaker 1: you could just replace pixels or or add an alpha value or reduce a color intensity by a certain amount. And then on the other side, the person who received the image could run it through a reverse processor that would pull the pull the encoded message out. Mhmm. Putting it through an analog channel

Speaker 2: Yeah. I don't know how you do that. Like

Speaker 1: and be like, hey. We're gonna print the message, and we're gonna feed it to the bird. Yeah.

Speaker 2: We're gonna print the message and, like, put it in one of those pneumatic tubes that shoots it. We're gonna put the message in it. Yeah. Yeah. Yeah. Make a paper airplane out of it, and the launcher shoots it.

Speaker 1: But the the idea of, like, getting a gift of a bird and then recording the bird's chirp and then turning that into a message would be, like, the craziest. Be it'd be something for a spy movie.

Speaker 2: Like, a

Speaker 1: great plot line.

Speaker 2: Yeah. There's, like, a cool puzzle there of you just start with a bird.

Speaker 1: Mhmm.

Speaker 2: Like, the the clue to the puzzle is the bird. And you're, like, looking at the bird, and you're trying to think of it, and you notice the bird is making a noise. And, like Totally. The jump to, I'm gonna record that and look at the spectrogram, and then you notice, like, a triangle or something. You're like, oh, shit. Like, there's it's it's very satisfying. Some little part of my brain really, really liked that story.

Speaker 1: One of these days when we have more time, I would love to do an online puzzle hunt.

Speaker 2: We've talked about it for years.

Speaker 1: We've talked about it. Yeah.

Speaker 2: I would love to do

Speaker 1: something like that. This is this is one of those things that we should earmark for the for the war chest of, like, different puzzles.

Speaker 2: Yeah. Yeah.

Speaker 1: Yeah. Even though now we've talked about it to the audience, they will crack that quite easily.

Speaker 2: Well, the the bird. Hey. Right. The bird. If in a year we're talking about a puzzle and there's a bird involved, you know where to look. Chatty chat. K. Other stuff that happened over the break

Speaker 1: That barely anything happened. Right?

Speaker 2: Yeah. It's been real chill and normal and cool in the world. On our, hopefully, more fun beat of interesting weird tech stuff, CES happened, Consumer Electronics Show. Mhmm. The only thing anyone's really talking about added is Legos, and that's really fun to me. Did you did you follow this, Scott?

Speaker 1: I did not. Please educate me.

Speaker 2: You followed the Lego smart brick of it all?

Speaker 1: I I have been I have been chasing my own rabbit holes. I did see a lot of news show up about smart bricks, and they look like literally just a brick with an LED in it. So I'm sure that there's something much more complicated about them, but they did not they did not grab my attention.

Speaker 2: No. Not really. Like, I think what's fun about this this is not urgent or relevant for us to talk about. But LEGO came up with, like they they announced these little new interactive smart bricks that have basically a series of sensors in them, a little microscope, some, microphone, and some lights so that when you, like, put a figure down when you put Palpatine down in the seat of, like, this little seat, it makes a spooky Palpatine noise. Or when you put two I'm just gonna use Star Wars figures. Two characters with lightsabers together, it makes star, like, lightsaber battle noises. But the thing that I loved about this, as a person who really enjoys LEGOs, is that they didn't go introducing the new Lego smart build system, and we're changing Legos forever, and they're different now and smart, and there's a million parts. They just rolled out one little brick. And I think that hackery tinkery people are gonna have a ball with this. This seems like the kind of thing that people just, like, futz with and make weird new stuff out of. So, anyway, I thought it was pretty neat.

Speaker 1: I I I actually like, because for somebody that typically follows CES and and some of those for from personal hobbies side side, I did very little this year on CES. And maybe it was because I was in Japan. Grappling. And then when I got back from Japan, I was more jet lagged than I have ever been in my entire life.

Speaker 2: Yeah. You got that. Got this time.

Speaker 1: I for somebody who, you know, has traveled quite a bit Sure. And I have a pharmaceutical regimen to fight jet lag that has worked and has done me well for for decades. This time, I have no idea what happened. Like, I'm still I'm still feeling the effects, and we're, like, eight days later. Like, I'm still not sleeping on a good schedule. I'm still messed up from it. It's not not what I'm typically used

Speaker 2: to. So It's tough. That's that's a tough flight. Yeah. It seemed like CES was mostly weird gadgets versus, like, there's no big announcements. I think most of the big companies aren't even really participating. It's more odd stuff. Like, there's just like the weirdest little phones you've ever seen. There's that little blackberry phone. There's little square Android phones. They're just odd little devices, and cool Legos.

Speaker 1: One of the things I did see was, tie back to one of my favorite talk topics to talk about, which is hacking in video games. Hackers in the game Apex Legends figured out a way to take control of other players.

Speaker 2: Do go on. Do go on.

Speaker 1: Yes. Do go on. That that that's mostly it gone on. But there was a there was a boat there where where remote hackers were controlling players in the game. They just had lost control of their characters. So they had hijacked the the sessions, or I'm not sure exactly the technical details on it. And hopefully, those come to light because that would be something fun to talk about. But I think that might be a first. Like, I know that they had an Apex issue where hackers were able to put cheats onto sessions, like, during the world, like, world series of Apex or I can't remember exact

Speaker 2: Yeah. I remember this.

Speaker 1: We talked about that

Speaker 2: Yeah.

Speaker 1: Where where hackers were able to essentially make someone's game session act like it had cheats and function as though it had certain cheats, wall hacks, aim bot, stuff like that. This is the first time I've ever heard about remote control of a session. So I wonder how you

Speaker 2: oh, a lot of questions come out of that. Is Apex Legends I wonder what Apex Legends anti cheat is. And if they're in that, we won't run it inside of Steam or any of those others because we have, like, root level access to prevent anti cheating.

Speaker 1: Yeah. Apex has a pretty serious anti cheat, I think.

Speaker 2: Interesting. Given the speed running and the competitive gaming landscape and the role that Apex Legends plays in that, that is not surprising. It is surprising that you would be able to this level of compromise is pretty surprising because when I think of really high level intense compromises, it's typically stuff for allowing the player themselves to cheat and to get signals into the game that the game doesn't know are compromised in some way. In basically in the form of like controller inputs going around the anti cheat at that level. To get in on the game so that it applies to other players is like that Remote sessions. That is a shocking level of compromise for something that is that level of anti cheat.

Speaker 1: There was a a recent, busting of a Thai esports player playing realm of valor. Tokyo girl was busted essentially pretending to play. So on her it's a mobile game. And, essentially, I think it's a mobile game.

Speaker 2: Yeah. I

Speaker 1: should pull the deets on it. But, on on their screen during this contest, she was essentially fake playing, and somebody remotely she was streaming streaming a session of somebody playing remotely. So they were busted and disqualified from the tournament. And they were a massive esports influencer, mostly a personality in the game, but they were using TeamViewer essentially to remote watch somebody playing for them in this tournament.

Speaker 2: It's so interesting.

Speaker 1: That's an interesting one that caught me. The other thing that I saw, Andre Karpathy, one of the Mhmm. One of the brilliant minds behind the transformer architecture and chat g p t and all of the AI that we currently do. I think he's Canadian. I think he went to Waterloo. Might be making all this up, as I do. He he put out a tweet. I don't know if it was Christmassy. I think it was around Christmas, where he essentially just said, like, I'm I'm starting to feel like, my entire life, I've been known as a very gifted, sophisticated software developer and engineer, and I'm not keeping up to the way AI is changing our ecosystem fast enough that I feel like I'm falling behind.

Speaker 2: Oh, interesting.

Speaker 1: Yeah. So, like, some of the developments that have happened like, we've talked about AI software development a decent amount on the show. Yeah. But, the new Claude code setup

Speaker 2: Yep.

Speaker 1: Where you can have 10 different agents all working on feature sets inside of the same application, and you're kind of jumping around guiding them. You can remotely control the agents from, like, your mobile device when you're not at home. Like, the way the way that software development is going is crazy, and it's moving and changing so fast.

Speaker 2: So And your sense is that for him, he's saying that

Speaker 1: Yeah.

Speaker 2: It's disorienting to him. Yeah. And drink up.

Speaker 1: Yeah. Yeah. One of the inventors of Chad GBT that Yeah. Like, I feel like I've been writing code since I was, like, seven. I feel like software engineering. I speak code as well as I speak. I probably speak code better than I speak English. And I feel that way. Like, every two weeks that I don't keep up on what's going on in AI software development, I come back in being like, I'm new here. Like, what what do I do?

Speaker 2: Yeah. Right.

Speaker 1: And it's like, oh, you're not running, like, 13, you know, cloud code agents and, like like, I haven't written code in months. It came out that the lead programmer and creator of cloud code hadn't written a line of code in six months. Cloud Code is literally writing itself at this point with a human check like, q and a and check and balance.

Speaker 2: There's this fork emerging, and I'm gonna articulate this poorly because I'm thinking about this for the first time. And I just think of it because Karpathy was, I think, one of he's the guy I associate with OpenAI and I think coining the term if he didn't coin the term vibe coding, he was an early k. That's what I thought. And when I hear about when you hear vibe coding, you think of normal person using these tools to make something kinda small and trivial, but very personalized, and that's kinda useful. You you the vibe is sort of a synonym for a prompt, and it's like prompt coding.

Speaker 1: Totally. Yeah.

Speaker 2: But there's this other branch of for the power user, the person like you that speaks code as well, if not better than they speak English. Your words, not mine.

Speaker 1: It was more of the more of the sass you put on that statement when when you spoke it back to me that I'm happy.

Speaker 2: No. No. I didn't even mean it sassily. Like, I'm thinking genuinely about those people using these tools and how what they're doing is a level of, like, crazy like, no. I have, like, seven instances of this thing running, and I've got one writing over here, one writing over here, and this one's checking what this one is doing. I'm like, that doesn't sound like a vibe at all. That sounds like a weird, like, hyper accelerant on Mhmm.

Speaker 1: I I

Speaker 2: don't I'm reticent to say accelerant on productivity because there's such well documented stuff about, like, and then fix all of the shit it broke. But it's this it's creating this, like, for the professional, very different way of working that is somehow both held of a kind with vibe coding when I do it, but clearly so much its own thing.

Speaker 1: Yeah. There's a full Yeah. I think they're they I yes. Very much so. Vibe coding to me and the the concept of it, is like the replet crowd. You know, even some of the people who are like, I don't really know how to code, but I'm on, like, I'm on this site, and I've created a mobile application. Like, you're seeing way more SaaS products and and, you know, creators build their own solutions to problems they have rather than building enterprise software. Yes. Like senior engineers building prod like, products, not like personal products and small, you know, startups. Products. But people Yeah. Products. I gotcha. There there definitely yeah. There is a there is definitely a fork occurring and and a launchpad of productivity. Like, the reality is we used to go into interview applications and tests where they would challenge you with a bunch of thought puzzles and code challenges and things like that. The reality is is that in it's we're closer than ever to those challenges being also AI. Like, how good are you at leveraging these tools to get the most efficacy out of the money that we're gonna pay you? Because if we're gonna give you x $100,000 to be a senior engineer here, you know, the baseline used to be this many commits, this much change, this many feature overviews, etcetera. But now we've 10 x that.

Speaker 2: Right.

Speaker 1: So will you be able to meet our expectation?

Speaker 2: Yeah. The language that we use to describe it is lagging behind the practice of it. Mhmm. Because what you're doing when you're working on, like, neural nets and stuff with cursor open is so materially different than when you vibe code a little HTML website. Totally. And and we don't really have a good way of talking about it because they're both, like, technically coding with an LLM at your side, but they're so clearly different things. I think that there's this understanding that started to emerge, which is that if you're really, really good at something, LLMs are an accelerant. And if you're really, really bad at something or new at something, call it, LLMs are kind of false confidence.

Speaker 1: Totally.

Speaker 2: They make you feel like you're a little bit better at something than you are. If anyone's feeling with the Dunning Kruger, the idea that when you first start learning something, there's this value valley where you overestimate your ability. They're like Dunning Kruger accelerant. Whereas if you're good, they're just accelerant. It's really that understanding is starting to get a little bit better.

Speaker 1: Absolutely.

Speaker 2: And if you're good at something, if you were good at something that LLMs are now getting good at, and then you watch someone who isn't good at it, try and use the LLM. You watch it just sort of send them off down crazy roads. But if you know the path, they're pretty useful. It's an interesting interesting dichotomy.

Speaker 1: Yeah. I had lunch last Friday with a with a colleague, and we were chatting about the use of AI and what spaces it's disrupting and how much it's disrupting them. And I I I maybe it's biased because of my closeness to it, but software engineering feels like the number one case study for disruption. Like, it is like, if you think about what made a good software engineer, the closer that they were to a purely rational computer, the better they were as a software engineer. Now we just have purely rational computers doing that that task. Where when we talk about things like creative arts and outputs, lots of the things that you and I work on, it's not that great at. It's it's really great at, like, hey. Make me this thing.

Speaker 2: Yeah.

Speaker 1: But it's conceptually, like, I find copywriting by LLMs to be meh. I find any any kind of artistic output by them to be meh. Like, they just it it lacks that human touch. But code doesn't need a human touch. It's actually better when the humans don't touch it.

Speaker 2: So I can't I can't speak to the code side of things. I see the memes of people talking about the time they spend fixing the stuff that they output, but, obviously, they're in use in software development, so they they do have a lot of utility. And then on the creative side of things, it's just the Yeah. If it's if it can only produce based on that which it was trained on, it cannot, by definition, produce something new. And that's that's just a whole that's a whole world. But there is an an announcement that came out that I think is relevant because we were talking about it right before the break, which is so Apple, Siri, the boondoggle. Mhmm. The will it ever be good, an official announcement that happened, I think, just a couple of days ago is the time of recording, which is that Apple is going to be using Google's Gemini AI model to power, Siri.

Speaker 5: I'm

Speaker 2: gonna call it good Siri, which is supposed to be

Speaker 1: coming later this year. New new Siri. Actually, oh, no.

Speaker 2: Yeah. Good Siri.

Speaker 1: My Siri is listening to me.

Speaker 2: Mine is too. Sorry, everybody. That happened last night, and now I'm gonna pass it on. Yeah. I think that that was fascinating because we were we were talking about this in the same way that Apple very famously famously has the deal with Google for search. It seems to be coming, for the model. And what's interesting about this is that so it's gonna be a multiyear partnership. Apple's gonna be using Google's Gemini as the companies like cloud technology for future models. The quote in the press release that I think is very telling is these models will help power future Apple intelligence features, including a more personalized Siri coming this year. The important thing here is that they're still saying Apple Intelligence is going to run-in private cloud compute, which would suggest that we're going to have instances of Gemini running on Apple servers, which Apple will probably modify and call their own foundational model, but they're using Gemini as kind of a Sure. A foundation for their foundation. Where is that marketing? Where is that distinction actually real? We're gonna find out, but it is official. Siri will have a lot of Google gas in the tank.

Speaker 1: Yeah. The the new Apple foundational models will just be IP licensing agreements with Google. And and you know what? I'm here for it.

Speaker 2: Yeah. Really? Honestly, do it.

Speaker 1: A year ago, we were talking about how far behind they were, and they're about to get, you know, they're about to get all of the freebies. And good for them. Great business move. They they didn't have to spend the trillion dollars on NVIDIA GPUs that everybody else has, and they're about to leapfrog over and do some stuff. Great business.

Speaker 2: Smart. They're gonna still control the surface, Like, the in the sense that the end customer is still theirs. They still own that. They've eliminated the threat of people saying, I love my iPhone, but at this point, pixels are so similar. And I get all these cool useful, like, image editing, like all the objectively useful features that are inside of that. It's like, okay, you you've built a little bit you've kind of removed a bit of that moat for Android users. It's like, yeah. You get some of that over here. You get some of this over there. It's all it all kinda becomes a lot more of the same thing.

Speaker 1: I'm not I'm not an Android user, and I probably shouldn't speak to it, but I would go as far as to say from a user experience functionality perspective, Apple is losing to Android right now.

Speaker 2: In terms of AI specifically or in terms of UI and, like, UX?

Speaker 1: No. As as far as as far as feature set go, I think Apple is the UI UX company, and they have proven that time and time again. And the thing that I'm most excited about is Yeah. Apple will think of ways to integrate useful AI into things way faster than Google will. Mhmm. So I think that the the the Apple will is now and should be considering it as a a massive fundamental project for their company to become the company that knows how to integrate AI into people's workflows and use, like, use cases.

Speaker 2: Yeah.

Speaker 1: And I think I think that they they are the best people positioned to do it. The Apple ecosystems succeeded largely because of their UI UX savvy, and I think this is another case for them to showcase that. And I hope they do.

Speaker 2: When you look at I would bet that Apple is sitting on a pile of data.

Speaker 1: And a pile of money.

Speaker 2: And a pile of money that shows just how often people actually talk to voice assistants. Now there's a chicken and egg question of how often do you talk to a good voice assistant versus a trash one. I bet they have some access to maybe how often Android users talk to it, because they have unlimited funds and can probably just get that information.

Speaker 1: Yep.

Speaker 2: And at a certain point, they start going

Speaker 1: licensing agreement.

Speaker 2: It's part of the licensing agreement. And at a certain point, they go, 98 to 99% of your computing on this device is just looking at the screen and touching stuff. That does not need to be mediated by an LLM. But we have a voice assistant, and it is, by all accounts, trash. So how much control are we really giving up when we put someone else's model inside of this feature that doesn't get used that often? Because yes, the LLM is going to exist inside of the software. I'm sure Apple notes I'll be able to have it auto write something for me. But that's kind of an edge case in a lot of situations. I'm not having it write my texts for me. If I use a note, I'm just making a note of something, no LLM required. Basically, all this is doing is going, Siri's really bad.

Speaker 1: Useless, even.

Speaker 2: We can make it better. It's useless. It's keyword based in twenty twenty six, which is wild. It's like trigger words. So let's get this in here. Maybe they can solve the issue that a lot of voice assistants seem to still be encountering, which is that while the LLM is great for open forum conversation and inquiry, it's really bad for setting timers and stuff that the old system could do. Maybe they can go, all we're gonna do is we're gonna solve that one pain point. We're gonna leverage all of the utility that Google Gemini or Claude or OpenAI already had to make Siri more conversational. And then we're gonna go, this is 1% of your time spent using this device. Hands off. Let someone else deal with the LMM back end. Seems like kinda maybe the choice they've made.

Speaker 1: Yeah. The thing the thing that I'm more excited for is the whole Apple intelligence. I don't know if that

Speaker 2: Yeah. Yeah. That's how it makes me feel too.

Speaker 1: Yeah. Exactly. Great. You're killing my battery for zero Yeah. Productivity outputs. Great. Thanks. Yep. Killer. Not just the Siri changes. Like, Siri obviously is is a joke at this point. 2026. Siri is is is yeah. It's it's a it's a it's a joke for tech pundits like you and I.

Speaker 2: Yes. A 100%.

Speaker 1: But I think once they have like, Gemini three is quite good

Speaker 2: Mhmm.

Speaker 1: At at many, many, many things. I think once Apple has the ability to touch real good AI, utilize it, and look at ways to integrate it into their operating systems, I'm I'm quite intrigued to see what they do with it. Just given that they are such a UX first company, that I have very high expectations for them. Yeah. So don't let us down.

Speaker 2: No. Don't let us down. We've talked about this before of finder on the Mac. The key command is right there. It's useful for finding files. Marques Brownlee published a video where he was or maybe he was in a podcast of theirs. I can't remember. But that team was talking about Raycast, which is a a Mac finder alternative that just bakes a ton more functionality into it. It builds in a lot of features that are weirdly in Google, like auto translate and auto like, puts a calculator into it, lets you index files, lets you move stuff around, kinda turns it into a little finder window. Like, it just makes that little box that you type into on a on a Mac a lot more useful. And I think that this speaks to me, we've talked about this on the show before of maybe where Apple goes is those inputs where you're already typing into your computer. How do we make those more powerful? Rather than saying the whole computer is gonna be a chatbot everybody. It's clippy again. It's hooray. They're just gonna go, you're you're already typing here, here, and here. How do we add just a little smear of AI to make that a nicer, more human experience? That, I I think, would be smart for them. Also, because they're the king of the mountain and they couldn't have more to lose. If they whiff it, like, if they liquid glass the user experience, not just the aesthetic and the skin, but if they do something that people don't like to how the computer operates, that's a catastrophe for them. And you can tell that they're moving slow as a result.

Speaker 1: That that that would be where my mind goes to. Like, my expectation on them is very high. Yeah. And if they fail to meet that expectation, it's gonna be like, they've they've been mucking around with Siri and a number of these things for so long and have nothing to prove nothing to show for it.

Speaker 2: Yeah.

Speaker 1: This time, they can't mess it up.

Speaker 2: Yeah. Sure.

Speaker 1: You know, this is this is this is things are moving so quickly. Companies new companies are showing up. New applications are being developed so fast. This the market is moving at such a pace that I can't like, Google has got a one year head start on them.

Speaker 2: This is true.

Speaker 1: So they they just need to move quick, respond well, and do a good job.

Speaker 2: We, we've never gone down the road of trying to get invites to any of these events. We've never we've never done the request to get to go to dub dub.

Speaker 1: Oh, shit. I don't know

Speaker 2: I don't know if they're open for 2026, but I like it's like a flexible at some point to just go and I guess you just watch a video with other people because they don't even really do the presentations live anymore. Yeah. So that's less interesting. Would still go. Mhmm. I'm I'm fascinated by this one. I think it's gonna be an interesting interesting year for them.

Speaker 1: Totally. I think it's gonna be an interesting year for everybody, honestly.

Speaker 2: Yeah. Like,

Speaker 1: I think it's just gonna be it's gonna be a real just given everything that's everything that's up right now and everything that's down.

Speaker 2: Yeah. Sure. Polymarket will be baked into the OS by the end of the year. Everything's gonna be upside down.

Speaker 1: Yeah. It's good early.

Speaker 2: You're gonna be able to bet on other people's weight loss through Siri. It's just it's gonna be trash.

Speaker 1: Will Scott Scott and Jordan go to Dub Dub?

Speaker 2: Will Scott and Jordan go to dub yeah. Let's just bring the stakes way back down.

Speaker 1: 5%. You bet yes. It's like, would you like to bet money on this? It's like, yes. I would. So

Speaker 2: k. Logan Paul, Pokemon cards, Dub Dub, like those smart bricks. Is there anything else we should talk about before we wrap it up?

Speaker 1: I feel like something that we talked about, every year that we should just end with is, the approximate value of all cryptography fraud from last year.

Speaker 2: Cryptocurrency fraud?

Speaker 1: And well, not even just the fraud. But we've kinda talked about it. I feel like it's a running theme that every year we're like, oh, yeah. Last year, there was last year, there was 6,750,000,000 approximately stolen from cryptocurrencies, which is a 51% increase from 2024.

Speaker 2: Wait. You just you you you plowed right into it. That was the number for 2025?

Speaker 1: Yeah. The the the article that I'm looking at on coin paper, it is Yeah. Sure. 6,750,000,000. A substantial amount linked to North Korea. So North Korea is that they're stealing your money or your digital tokens.

Speaker 2: We, was thinking about this. We kinda took a year off of crypto.

Speaker 1: Mhmm. We did. We went AI.

Speaker 2: Yeah. It just seemed relevant. It seemed kinda urgent. It seemed certainly more interesting because there's at least the push and pull of the utility versus the scam of it all. It's like, clearly, there's some economic stuff going on in that space that's not great, but there's at least some software that does some cool new stuff. Whereas crypto kinda got boring of being like, it's just fraud tip to toe. So it's nice to know that while we weren't on the beat, it kept going. You know?

Speaker 1: You know, I will say that crypto, this year, my 2025 crypto learnings

Speaker 2: Mhmm.

Speaker 1: Is that crypto is actually very functional at enabling crime, and that's it. Stable stable coins. Then I'm not gonna talk a Bitcoin. I'm not talking Ether. I'm not talking any of this the garbage tokens. Straight up USDT and some of the, I think, coin Coinbase has a stable coin linked to the USD. Anything that has a USD digital token makes just an amazing way to move money around in circles where you don't want and don't wanna have to deal with moving physical cash.

Speaker 2: And Yeah.

Speaker 1: That is largely a criminal underworld, and 2025 seemed like that was the one big thing that I took away last year is, like, okay. Digital currencies actually do have a great use case, and it's all around crime.

Speaker 2: Yeah. I feel like we've known that for a while now. I remember the SeekFox interview. Like, it's it's very useful. It's Mhmm. Especially, like, a a US dollar tethered token. But but but just to go back, and I know you said fraud, so that probably already makes this distinction. But I feel like there's a really necessary distinction that needs to be made between, how do I print this? Crypto use for crimes where both participants know they're doing crimes. You know what I'm saying? Versus ones where only one of them know they're doing crimes. Like, the person who thinks they're paying their taxes because someone called them doesn't know the other one's doing crimes versus the person buying brick of cocaine. They both know they're doing crimes. And I wanna see the breakdown of that. What is the unit what is the economics of crypto as divided by both people know crimes versus whoopsie doodle, a crime happened to me.

Speaker 1: Yes. The the $6,700,000,000 number that I threw out was around theft, heist.

Speaker 2: Okay. Fraud. I didn't know a crime was happening. Oh, no. A crime happened.

Speaker 1: Stole my money. Yeah.

Speaker 2: Someone stole stole my money. Money.

Speaker 1: Yeah. Somebody stole my money.

Speaker 2: And then I I don't

Speaker 1: have you I don't have you a breakdown on, like, the

Speaker 2: That's the funny number.

Speaker 1: How much crime was enabled by crypto.

Speaker 2: Yeah. Because the North Korea no. The because the North Korean bucket of fraud would be in

Speaker 1: the '27.

Speaker 2: Yeah. That's theft versus, like, I wanna buy some heroin. You wanna buy some sell some heroin. Let's do it. Hey. It's a good thing we don't put this up on video yet because that would be the part that got clipped.

Speaker 1: Hey. Quick Google search has landed me on trmlabs.com. Take this for what it is. I don't know it to be true. Blog thing. 2026 crypto crime report. The 2026 crypto crime report key insight identifies a record of $158,000,000,000 in illicit crypto flows in 2025. So that, I assume, is the two people knowing that they're doing crime, moving money around. That's

Speaker 2: and, again, we're just talking about a number on a blog, but that is such an order of magnitude greater than the $6,000,000,000 that is fraud.

Speaker 1: Stolen. Yeah.

Speaker 2: It's like, oh, it's it's cry it's crime money.

Speaker 1: Crime money. Yeah.

Speaker 2: It's for crime. Crim it's for crimes. Like, putting it on the poster.

Speaker 1: Sanctions related to all activity in 2025 were overwhelmingly driven by Russian linked flows largely due to the rapid growth of the ruble peg stablecoin a seven a five, which processed more than 72,000,000,000 US dollars in total volume.

Speaker 2: Gnarly.

Speaker 1: Oh, it got sanctioned, that token. So sanctions now, extend into the digital crypto markets. Interesting.

Speaker 2: I was unaware of that as well. Okay.

Speaker 1: There you go. 100 and 100 and $160,000,000,000 in crime has been enabled by crypto.

Speaker 2: Kinda makes Pokemon cards seem like small potatoes.

Speaker 1: Well, we'll see what, see what the illustrator Charizard sells for or Pokemon or Pikachu or whatever it is.

Speaker 2: I should maybe I should get it graded.

Speaker 1: Maybe you should.

Speaker 2: Get a slab of it and find out.

Speaker 1: You should. Send it away.

Speaker 2: Yeah. Totally. K. K. Well, we're happy to be back for the year. We're gonna got a got a fun one lined up, assuming the interview goes. Got a fun one lined up for the next one. I think you'll really enjoy it. In the meantime, I hope you all stay well. Thank you so much for listening. We'll catch you in the next one.

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