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Snapchat Went From Frat Boy Dream to Tech World Darling. But Will it Last? 

Thursday, Oct 17 2013
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L.A. does tech the way it does everything else: with red carpets and velvet ropes.

Consider the Social 25 party, held this year at the exclusive 41 Ocean Club in Santa Monica. The VIP event, which kicks off L.A.'s Social Media Week, honors 25 celebrities and brands who — in the words of organizer Drew Baldwin — are crushing it on social. Sam Pepper is there, muttering something and posing with his hangers-on for the paparazzi. Never heard of him? He has 1.3 million subscribers on YouTube. After him comes sprightly Olga Kay, another YouTube star, a Russian juggler whose catchphrase is "I have the Internet by the balls."

Past the bouncers, the crowd is full of attractive people in expensive clothes. From the snippets of conversation, it could be any Hollywood party: "Did I ever get back to you? Ben said he'll take the meeting." Jason Bentley, the KCRW deejay, is deep inside his headphones, spinning.

click to flip through (3) PHOTO COURTESY OF SNAPCHAT - Evan Spiegel, left, and Bobby Murphy worked to create Snapchat in a Stanford dorm room.
  • PHOTO COURTESY OF SNAPCHAT
  • Evan Spiegel, left, and Bobby Murphy worked to create Snapchat in a Stanford dorm room.
   
 

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A skinny young man approaches the bar in a T-shirt, jeans and white sneakers. Even though he tipped the bartender $20 on the last round, it still takes a while to get his two tequila-and-sodas, possibly because he looks like a teenager.

But he's actually 23, and he's one of the honorees — maybe the most important one here. Once he gets his drinks, a security guard uses a pocket flashlight to guide him and his pals back to a VIP room within the VIP party, where he can hang out without being bothered.

He is Evan Spiegel, the chief executive of Snapchat, the insanely popular smartphone app that lets you send disappearing pictures to your friends. With just 20 employees, and no revenue, the company is valued at a staggering $800 million. Before the night is over, Spiegel will have his photo taken with Mayor Eric Garcetti, who exults, "We love having you in Los Angeles!"

Also in the VIP room are Spiegel's co-founder, Bobby Murphy, his chief operating officer, and Nick Tran, the head of social media for Taco Bell, who led his company into the realm of ephemeral advertising by launching its Beefy Crunch Burrito on Snapchat. They all lean in for a group selfie.

One of the great things about Snapchat's success, Spiegel says, is the free tacos.

L.A. has long had an inferiority complex toward New York. But lately, the locus of the city's envy has shifted west, to Silicon Valley. As more of the nation's cultural landscape is dominated by tech, L.A. has sought to stake its own claim, touting its creative workforce and rebranding itself as Silicon Beach.

Snapchat is one of L.A.'s proudest successes. Mike Bonin, the Westside councilman, brags that the company is in his district. "It's a company where you can look at them and credibly ask, 'Is this the next Facebook?' " Bonin enthuses.

"Snapchat is clearly on track to do some things that no one has seen before in L.A." says Greg Bettinelli, a partner at L.A.-based Upfront Ventures. In the world of technology, he says, "What L.A. has never had before is this tentpole company that is famous throughout the world."

Snapchat grew out of L.A.'s carefree, beach-brah culture. Spiegel was raised in Pacific Palisades; his company is headquartered in a bungalow on the Venice boardwalk. Its YouTube videos depict teenagers racing turtles and joy-riding in the Los Angeles River over an indie soundtrack.

Granted, in some respects Spiegel resembles any other successful tech entrepreneur. He launched Snapchat from a dorm room in Palo Alto, and dropped out a few credits shy of graduation to work on it full-time. He also has the Silicon Valley habit of mentioning that he is leading a revolution.

But in many other ways, Spiegel is the product of his L.A. surroundings. For starters, he's not a cloistered geek. Yes, he was into computers as a kid, but he was just as proficient at snowboarding. And though he was shy as a youngster, in high school he willed himself into becoming an expert party thrower, and eventually was made social chair of his Stanford fraternity.

Spiegel also has eschewed Silicon Valley. He prefers L.A., he told an interviewer earlier this year, because you can meet people who are not obsessed with tech. In Silicon Valley, he says, everyone is trying to pitch an app.

But where he is a real outlier is in his attitude toward his own success. One of the cherished ideas of the tech world is that success is based on talent and hard work, and that everyone has an equal chance. But Spiegel, who grew up in a wealthy family, has little use for what he calls "the myth of meritocracy." Where others see success as a function of effort, he sees it as luck.

Spiegel declined through a company spokeswoman to be interviewed for this story. In chronicling his background and the rise of Snapchat, the L.A. Weekly consulted court records, interviewed experts and examined Spiegel's published remarks.

The story is one of privilege, talent, betrayal and serendipity. Its ending has not been written yet. Will two bros with one big idea change the world? Or will they blow through millions in venture capital and then disappear?

Evan Spiegel was born in 1990, the oldest child of two lawyers. His mother, Melissa, a Harvard Law graduate, worked as a tax attorney, though she stopped when her children were born. His father, John W. Spiegel, studied economics at Stanford and got his law degree from Yale. He is a partner at the powerhouse corporate law firm of Munger, Tolles & Olson.

John Spiegel's mentor was Warren Christopher, the distinguished statesman who headed up the Christopher Commission, which reformed the Los Angeles Police Department in the wake of the Rodney King beating. Christopher hired Spiegel as the commission's general counsel, and once joked that he did so much work that it should be called the Spiegel Commission.

By the time Evan was born, his father was well established. He developed a specialty in securities law and represented Southern California Edison when it nearly went bankrupt during the California energy crisis. His annual pay climbed to more than $3 million in 2006.

The family enjoyed a $2 million house in Pacific Palisades, undertaking a $1 million remodel in 2000. They had five luxury cars, including three Lexuses and a restored 1966 Mustang, and memberships in the Riviera Club, the California Club, the Jonathan Club and the La Jolla Beach & Tennis Club. They took regular trips to Europe, the Bahamas and Maui, staying in Four Seasons resorts. Young Evan enjoyed Jet Skiing and wakeboarding. On one occasion, he and his father went snowboarding by helicopter in Canada, court records show.

Evan and his two younger sisters attended Crossroads, the private prep school in Santa Monica, and were assisted by tutors, some of whom charged up to $250 an hour. For many years, the family also had a full-time housekeeper.

John Spiegel strove to make sure his children understood that their life was privileged. Every Christmas, he would take them to hand out food at Head Start centers. Through their church, All Saints Episcopal in Beverly Hills, they traveled to Mexico to build houses for the poor.

When Evan was in fourth grade, he was "mistreated by some of his schoolmates," according to his father's court filings. His father intervened and, in the belief that such bullying was widespread at Crossroads, he formed a Dads Council to address it. Over the years, Evan's social difficulties abated.

When young Evan learned to drive, he was given the use of a new 2006 Cadillac Escalade. The school did not allow him to park it on campus. But fortunately for Evan, Southern California Edison had a property next door. His father called in a favor with his longtime client, and Evan got to park in the gated Edison lot. (John Spiegel did not respond to requests for comment.)

Evan led a charmed existence right up until April 2007, when John and Melissa Spiegel informed their children they were getting a divorce.

As might be expected with two Ivy League lawyers, the Spiegel divorce was intensely litigated. Legal bills ran upward of $1.5 million, and the case file is thousands of pages long, filled with squabbling about finances and custody arrangements.

The divorce took an emotional toll on Evan. But he also became adept at playing one parent off the other in negotiations, which would resemble his later savvy handling of venture capitalists.

In the summer of 2007, when John Spiegel bought a new house in Pacific Palisades for $3.3 million, he enlisted the set decorator for the TV show Friends, a family friend, to decorate it. Given wide latitude over his room, Evan got a custom, white leather, king-size bed, custom closets and a large, state-of-the-art computer system. From his computer, he could control a movie theater in the basement.

As his mother noted in a court filing, she did not have a movie theater in her house. That fall, his senior year at Crossroads, Evan decided to move in with his father full-time.

Through a friend at church, Evan had landed a marketing internship at Red Bull. He was obsessed with the energy drink, and the internship entailed throwing promotional parties to boost the brand. But until the fall of 2007, according to his mother, he was not allowed to throw parties at home.

That fall, however, he held several bashes at his father's new house. On one occasion, in October 2007, about 300 teenagers came to the house. One girl suffered a "medical emergency" and was hospitalized, according to his mother's court filing.

Evan began to rack up significant expenses around that time, often incurring overdraft fees. His father let it go for a while, not wanting to compound the stress of the divorce. But in February 2008, he finally insisted that Evan come up with a budget.

Evan complied, but he wanted a reward for his discipline. He no longer wanted to drive the Escalade. Instead, he wanted a new BMW 550i, which had a sticker price of $75,000.

He laid out his case in a letter to his father on Feb. 12, 2008. He began by thanking his father for working so hard to afford "such an amazing lifestyle," assuring him that he understood how privileged they were. "We live in a bubble," Evan wrote.

He went on to propose that he limit his spending on clothes, food, entertainment and transportation to $2,000 per month — but went on to ask for a $2,000 emergency fund because "my life is full of unforeseen expenses."

Then he turned to the topic of the car. Because he was doing more driving in the city, he argued, he needed a more fuel-efficient vehicle. He also stressed that he had decided not to make other purchases — like art for the house and a trip — in order to afford the BMW.

"Cars bring me sheer joy," he wrote. "I would really appreciate you validating me and all of my hard work by leasing the BMW. ... Boys attach so much value to cars, and it feels so nice to pull up next to all the rich, arrogant assholes at Crossroads and know that I can still drive a car just as nice as theirs but I didn't sell out and compromise my integrity. I have overcome a lot of difficult obstacles in my childhood (this past year included) and it feels really nice to have you and Mom acknowledge my success."

Evan's mother was in favor of getting the car, but John Spiegel was unmoved. He believed that its 360-horsepower engine made it unsafe for a 17-year-old boy. He also thought it was an unwarranted extravagance.

Evan did not take his father's refusal well. Over the next few days, he racked up 11 more overdrafts, which precipitated a screaming argument, meticulously documented by both parents in their warring filings. Over the next several days, the conflict escalated — until it was finally agreed that Evan would move back in with his mother.

In a note, his father wrote, "I will always love you, and will always be available when you want to try to heal the rift between us."

A few days later, Evan's mother leased the BMW for him. Two months after that, Evan confirmed his father's fears by getting a speeding ticket. He was going 62 mph in a 35 mph zone on Sunset Boulevard. He asked his father to appear with him in juvenile court.

Stanford University has become ground zero for tech. In 2012, a study by two Stanford professors estimated that each year, companies founded by Stanford alumni earn $2.7 trillion in global revenue. The school is growing increasingly exclusive, admitting just 5.7 percent of applicants for the class of 2017.

Within Stanford, the design program would be one of the best places to go looking for future billionaires. Product designers are trained to work across disciplines, conceptualize thorny problems and devise elegant solutions. While pop culture portrays programmers as the lone geniuses of the tech world, developing software tends to be a team effort. Coders are essential, but it's the product designers who are responsible for the user's experience.

Evan Spiegel ended up as a Stanford product design major. In sixth grade, he had bonded with his computer teacher and learned to build a computer from scratch, according to an interview he gave to the Palisadian-Post. As a senior, he'd seemed initially inclined to attend the University of Michigan. But its charms proved no match for his father's alma mater.

His parents had made charitable contributions to Stanford, and in the spring of 2008, John Spiegel helped his son get into the school. (Though they were not speaking at the time, John Spiegel said in a court declaration that Evan called him from a vacation in Prague to "thank me for the help that I provided him in gaining admission.")

But while young Spiegel may have been handed many advantages, he also had the drive to make the most of them. One of his key talents was for meeting the right people and making a good impression.

As an undergraduate, his adviser was David Kelley, who runs the graduate design program, or d.school. Through a friend of the family, Spiegel was referred to Peter Wendell, founder of Sierra Ventures, who allowed him to sit in on his graduate-level class on entrepreneurship and venture capital. Spiegel was seated next to the guest speakers, who included some of the biggest names in tech, such as Google CEO Eric Schmidt and Chad Hurley, co-founder of YouTube.

For a mentor and patron, Spiegel found Scott Cook, the CEO of Intuit. As Spiegel would later tell an audience at a Stanford Women in Business conference, the top executives at great companies are reaching retirement age.

"They want to pay it forward. They know how lucky they are," he said at the conference. "After class one day, I begged Scott Cook for a job."

Cook took an interest in Spiegel, giving the undergrad an opportunity to work on a text-based platform that Intuit was developing for use in India. After gaining valuable experience there, Spiegel decided to try to launch his own project.

Though what followed fits neatly into Silicon Valley's mythology of self-made success, Spiegel is up front in acknowledging how many breaks he got along the way.

"I am a young, white, educated male," he said at the conference. "I got really, really lucky. And life isn't fair."

As a result, his advice for young people runs contrary to the typical nose-to-the-grindstone tech ethos: "It's not about working harder; it's about working the system."

In 2010, tech blogger Chris Dixon wrote a widely circulated post, titled "The next big thing will start out looking like a toy." Citing examples like the telephone and the personal computer, Dixon argued that disruptive technologies tend to be dismissed at first because they are so simple that they seem to be almost useless. Snapchat, which launched the following year, fit that description perfectly.

The idea for the app came out of a conversation about sexting among Kappa Sigma fraternity brothers. One of them was Frank Reginald Brown IV, known as Reggie — a friend of Spiegel's since freshman year. The South Carolina native had attended the McCallie School, a private boys' boarding school in Tennessee. Like Spiegel, he was the son of a Stanford grad — his father is a pediatrician.

Spiegel and Brown had rushed Kappa Sigma together in 2009. Spiegel eventually became Kappa Sigma's social chair. However, the fraternity got into trouble in the fall of 2010 when it held a drunken party during a "dry" weekend. The administration judged the incident to be part of a pattern, and kicked the frat off campus. Brown and Spiegel were living in the Kimball Hall dormitory in spring 2011 when the idea for Snapchat was hatched.

The Kappa Sigma motto is "Brothers in Heart Throughout Life." But anyone who has seen The Social Network's depiction of the acrimonious founding of Facebook could guess how long that brotherhood would last. Brown, now a student at Duke University's Fuqua School of Business, has filed a lawsuit alleging that he first proposed an app that would allow users to send self-deleting photo messages. Spiegel, he claims, repeatedly said it was a "million-dollar idea."

"This," Brown's lawsuit begins, "is a case of partners betraying a fellow partner."

By the time Brown and Spiegel first discussed the disappearing-photo idea, Spiegel had already been working with an older fraternity brother, Bobby Murphy, on several failed startup ideas. Spiegel was the designer, while Murphy — a computer science major from the Bay Area — wrote the code. One idea would help high school seniors applying for college. It was a flop.

According to Brown's lawsuit, Spiegel and Brown agreed to bring Murphy in to write code for the disappearing-picture app, initially called Picaboo. According to documents that have come out in the lawsuit, the app was conceived of as "a timed picture messaging game," with images set to expire after 10 seconds or less.

Sexting was part of the idea from the start. An early-draft press release suggested that Snapchat would be a good way for a "betch" — Stanford frat slang for a bitch — to send "incriminating photos." Without Snapchat, "A betch would be at the mercy of her captor if anyone ever got ahold of her phone," the press release said.

But the app was by no means intended to be limited to sexy photos. Other draft press releases suggest taking photos of shoes, crazy faces, a new haircut or food stuck in your teeth.

"These are photos of moments, so capture them how you live out your daily life," the release says. "Most importantly, don't worry about what comes next."

That summer, the three fraternity brothers worked on the project together at Spiegel's father's house. While Spiegel designed the user interface and Murphy did the coding, Brown — the English major — was left in a subordinate role. Among his contributions, according to his lawsuit, was "Ghostface Chillah," the app's ghost logo. As chief marketing officer, Brown also wrote press releases and the terms of service.

At first, the arrangement was friendly.

"Yo dawg," Spiegel texted Brown in early June. "Startuphau5."

The three celebrated the launch of the app, in July, with a cake decorated with the ghost logo. The app immediately started to take off. "This thing is a rocket ship," Spiegel texted to Brown.

Unlike many similar apps, Snapchat did not depend on Facebook's social web for growth. Neither, in the early going, did it rely on media attention. Instead, teenagers spread the app by word-of-mouth, inviting friends to join through their cellphone address books. Among the first to get it rolling was Spiegel's younger cousin in Orange County. Spiegel himself did some of the promotional work, sending a message to a blogger, telling her that he had built the app with two "certified bros — our frat just got kicked off campus."

That summer, Spiegel began to worry that their idea would be stolen. Brown was given the job of drafting and filing the patent application.

By that time, Brown had become worried about his role in the company. Earlier that summer, he'd overheard Spiegel and Murphy discussing the idea of replacing him.

He used the patent application to maximize his leverage. He put Spiegel's name last on the list of inventors, offending Spiegel in the process. Brown then refused to share the application with his partners, precipitating a confrontation.

By this point, Brown had returned home to South Carolina. In a heated, three-way phone call on Aug. 16, 2011, Brown demanded a share of the company, according to Murphy's deposition testimony. He listed his contributions to the app — upsetting Spiegel with his suggestion that he had "directed [Spiegel's] talents."

Spiegel hung up, leaving Murphy to talk to Brown. According to Murphy's testimony, Brown wanted 30 percent equity in the company. Murphy shot him down: "That's not gonna happen."

Soon after hanging up, Spiegel sent one of his last text messages to Brown. He struck a conciliatory note: "Hey man I honestly feel insulted so I wanted to make sure I didn't want to overreact. I definitely want to continue the conversation but it's hard when I feel so attacked. I want to make sure you are given credit for the idea of disappearing messages because it sounds like that means a lot to you."

The attempts at appeasement did not last. Soon thereafter, Spiegel and Murphy changed the passwords on the accounts and the servers, and cut off all communication with Brown.

The following spring, Brown sent an email threatening litigation. He said he would accept 20 percent equity but would settle for less. "I encourage you to think deeply about this matter," he wrote.

Spiegel's lawyers responded by accusing Brown of a "transparent and deliberate attempt to shake down Mr. Spiegel and Mr. Murphy for a share in a company to which you contributed nothing."

With no written contract, Brown's attempt to claim one-third of the company will be an uphill fight. David Aronoff, an attorney who handles intellectual-property cases, argued that even if Brown came up with the idea, it would be a "stretch" to argue that his contributions entitle him to equity.

"Once you blurt out an idea, it's free in the air for anyone to use," Aronoff says. "If he blurted it out without first having made his contract, he could very well be screwed here."

After Brown was forced out, Spiegel and Murphy changed the name of the company from Picaboo to Snapchat. Downloads started to spike in January 2012. Spiegel has theorized that it began to take off after teenagers received iPhones with front-facing cameras for Christmas.

Sam Leichenger was among the earliest adopters. Now a senior at Hamilton High School in West L.A., he was first exposed to Snapchat in February 2012, when he got on an elevator at a student-government conference.

"Just all of a sudden, somebody yelled 'Snapchat!' " Leichenger recalls. "Everybody made a funny face and posed for the picture, and I'm like a deer in the headlights."

He was one of the first at his school to download the app. "All of a sudden, all your friends have it."

"It's, like, the best way to have a conversation ever," says Leila Berkovitz, 17, another student at Hamilton. "It's, like, casual communication."

By February 2012, Spiegel and Murphy had 40,000 users and were maxing out their credit cards to pay for the servers, according to an account in The New Yorker. They eventually took $485,000 from Lightspeed Venture Partners in May 2012 — a deal for which Spiegel has expressed some regret, since the terms made it harder to bring in new partners and proved costly to change.

As Snapchat took off, the media tried to figure out why it was so successful. The combination of disappearing photos and teenagers led to an obvious conclusion: sexting. A December 2012 Today Show segment was typical. "As a parent, you try to meet your kids' friends and know where they are hanging out," Matt Lauer said. "But do you know what they're doing on their phones?"

But the obvious answer is not always the right one. While media accounts have been hyping the perils of teen sexting for years now, at least one study, from the University of New Hampshire, found that only 1 percent of teens had sent photos that could be considered pornographic.

Spiegel quickly grew frustrated with having to argue that the app was not for naughty pictures. "I just don't know people who do that," Spiegel told TechCrunch. "It doesn't seem that fun when you can have real sex."

For Snapchat, the perception threatens to hinder broad-based acceptability, which ultimately could make it harder to attract mainstream advertisers. Also, sexting is too small a niche for Spiegel's ambitions.

"You can't build a business off sexting," he told The New York Times.

Other illicit uses — like taking pictures of drugs — don't explain Snapchat's success, either. But something has to account for the app's exponential growth.

The explanation Spiegel prefers is that "ephemeral messaging" offers users greater freedom to be themselves. He believes this portends a broad change in online communication.

"Ephemeral should be the default," Spiegel said at this year's All Things D conference.

Viktor Mayer-Schönberger, professor of Internet governance and regulation at the Oxford Internet Institute, at the University of Oxford, is one of the leading thinkers in the area of "digital forgetting." In 2009, he published Delete: The Virtue of Forgetting in the Digital Age, in which he detailed the unintended consequences of making online information permanent and argued for digital "expiration dates."

In an email exchange, Mayer-Schönberger said he is delighted to see his vision coming true.

"Obviously there is also a bit of hype here, and some of the interest will peter out," he said. "But I think that there is a significant portion of users that will want ephemeral communication, and that this will provide sufficient demand for innovative apps to establish themselves."

In February, Internet sociologist Nathan Jurgenson extolled the possibilities of temporary photography in The New Inquiry. "The ephemerality sharpens viewers' focus: Once received, a Snapchat countdown is a kind of time bomb that demands an urgency of vision, a challenge to exhaust the meaning from the image before the clock runs out," Jurgenson wrote. "Given only a peek, you look hard."

Snapchat subsequently enlisted Jurgenson to write posts on its company blog.

So far, though, the only clear success story in the "ephemeral space" is Snapchat. That's not for lack of competition. Among the many other apps that offer disappearing messages are Efemr, Wickr, Wink, Blink, Glimpse, Grpyhn, Ansa, Frankly, Secret.li, Spirit, Squawk, Poke, Burn Note, Vidburn and Clipchat. None comes close.

"There's no second place to Snapchat right now. They're sort of top dog," tech blogger Steve Cheney says. "They just went off on their own and created a cult brand from a new form of communication. No one would have predicted that would have ever happened."

Whatever one makes of the philosophical explanations, luck also played a key role. Cheney says: "They hit the market at a good time with a drop-dead simple product."

Late last year, it became clear that Snapchat posed a threat to Facebook. According to TechCrunch, Facebook founder Mark Zuckerberg first tried to buy the app. When he was rebuffed, he personally wrote code for Poke, Facebook's copycat app.

The attempt to torpedo Snapchat failed. Snapchat recently announced that users were sharing 350 million snaps per day.

"Snapchat's success defies a lot of Silicon Valley convention," Semil Shah, a tech columnist and investor, says. "It's a fascinating gimmick, and very, very smart."

In June, Snapchat closed a $60 million funding round, which put its valuation at $800 million — a titanic sum for a company that has never earned a cent in revenue. According to several reports in the tech press, Murphy and Spiegel also got $10 million apiece in the deal.

Dennis Phelps, general partner of Institutional Venture Partners, led the financing. In a blog post, he said it was among the most competitive rounds he had ever seen, and that he invested "because they let us." He also explained that Snapchat aims to become "a core utility that sits atop the home screens of billions of mobile devices."

If that happens, Phelps' bet no doubt will pay off many times over. But there's also a danger that teenagers will move on to something else. For some of the earliest users, that may already be happening.

"The appeal diminished a little bit," says Sam Leichenger, who has used the app for more than 18 months. "It got old. ... It's not the utility of it that kept people coming back, because you don't need it in any way, shape or form. Now I just send one out if it's really funny."

Snapchat also has to figure out how to earn revenue without ruining the user experience. Taco Bell's burrito promotion was a promising experiment, but it's not clear whether advertising will work on such a personal platform. (For now, Snapchat is so ill-equipped for advertising that someone at Taco Bell had to manually click on all 10,000 people who asked to receive disappearing taco pics.) Another possibility is "in app" purchases, such as stickers or filters that users could apply to their photos.

But with $73 million in venture funding, Snapchat does not have to turn a profit anytime soon. For now, Spiegel and Murphy can afford to experiment and find new ways to keep users addicted.

Last year, they added 15-second videos. Two weeks ago, the company unveiled Snapchat Stories — which allow users to compile and share a running 24-hour slide show of their lives, only to have them disappear at the end of the day.

"I would imagine they're running hundreds and hundreds of little tests," Shah says. "From a business point of view, they're playing with house money. They've already created so much value."

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