Audio is the white whale of social media. A TikTok- or Twitter-like platform for audio recordings sounds like a solid bet on paper. Audio is intimate and imaginative. The stakes are lower, and the costs more accessible, compared to recording video content. Best of all, social audio appears to be new and exciting — like it’s never been done before.

“Every couple of years, a new audio social media platform emerges, excites us through its novel approach, and briefly captures our collective attention,” said Michael Mignano, co-founder of podcast platform Anchor and a partner at VC firm Lightspeed. While the podcasting industry has grown substantially, with more than one-third of Americans listening to podcasts regularly, there so far hasn’t been a similar market for short-form audio.

No one has definitively cracked the code on how to entice people, on a large scale, to engage with audio-only content like they do videos or text, and any success has been short-lived. After capturing imaginations during the pandemic, live chat platform Clubhouse receded from the mainstream. Twitter pulled resources from its Clubhouse clone, Spaces, in June.

Meta shut down its short-form audio Soundbites and podcast hub in May. Startups like Shuffle, which billed itself as the TikTok for podcasts, have also shut down. Others like Snipd, an AI-based podcast app that lets users create and scroll through podcast snippets, have just started chasing the audio dream, convinced its take on social audio might have the right formula to finally take off.

Apple and Spotify, the preeminent podcasting platforms, are perhaps best positioned to experiment with social, shareable audio; Spotify has perhaps come the closest with its year-in-review Spotify Wrapped slideshows. Both declined to speak on the record, but pointed Protocol to blog posts about how they segment podcast episodes. Spotify acquired a company called Podz in 2021 that generates audio clips, hinting that the company may invest more in the social discovery aspect of audio. But its plans are unclear so far.

Will it ever be audio’s time to shine? It’s at a disadvantage in our short-attention-span economy filled with shiny images and the never-ending scroll, founders told Protocol. Listening is an inherently passive experience, making it more difficult to sell to investors and the average user.

“We’re doing something else when we’re listening to audio, right?” said Cliff Lampe, a University of Michigan professor specializing in digital communication. “That’s not true with either reading or video because it grabs more of our attention.”

Audio has a virality problem

“Is a hit machine for audio even possible? And is it something anyone even wants?” asks journalist Stan Alcorn at the top of his viral 2014 article, “Why Audio Never Goes Viral.”

Eight years later, the question remains. Audio is still more difficult to share on the internet, despite countless startups and platforms offering solutions to the problem. It’s not because companies haven’t tried hard enough — users just aren’t that interested.

“It competes poorly with video when it comes to user-generated enthusiasm, basically,” said Brian Lamb, co-founder of education tech company Swivl. “If you’re trying to get people to author original content, they’re more likely to want to just do video.” Swivl used to offer a user-generated audio platform called Synth that has since shut down.

Audio faces an uphill battle. For one, you can’t skim it easily. You have to listen to audio linearly, making it an inefficient mode of consumption. It also doesn’t require all your attention; many people listen to podcasts while running errands, working out, or cooking. “The reality is you can consume content so much more quickly and efficiently through your eyes than you can through your ears,” Mignano said.

If you’re trying to get people to author original content, they’re more likely to want to just do video.”

Because of this inherent barrier to listening, it’s harder to convince creators to invest in stellar content. Recording professional audio is hard enough at its core. Lampe also pointed out that it’s a rare skill to speak well, “especially using the cadence and emotion, reducing your number of ‘ums’ and hesitations.”

Chris Messina, social tech expert and inventor of the Twitter hashtag, said the cognitive cost for listeners creates a very high bar for audio content. “If I want someone to listen to what I have to say, I better be fucking, like, interesting,” Messina said.

Both Mignano of Anchor and Lamb of Synth started with the idea of an “audio Twitter” in which users could record original, short-form voice content. It’s not a bad idea; Twitter itself has audio origins with defunct podcast platform Odeo. But in Anchor’s case, Mignano quickly realized that while there was demand to create audio content, it hadn’t reached a critical mass. Plus, the content quality was poor without creative tools. Even a grainy, poorly recorded video can go viral. But choppy audio is far less engaging.

Once Anchor released creator tools, the social audio began to resemble podcasts. But who wants to visit Anchor, the new kid on the block, for podcast-like audio when you could get essentially every podcast from Apple or Spotify?

“We transitioned into being a really easy to use podcasting platform,” Mignano said. “With the tap of a button, instead of just publishing to your social graph inside of the Anchor app, we published it to Spotify and to Apple podcasts and all these places.” The model worked, and the switch ultimately led to a Spotify acquisition in 2019.

Lamb ran into the same problem with Synth. While the tech was sound, it didn’t have the content users wanted. Lamb pivoted from offering user-generated content to offering both manual and automatic podcast-snipping tools. Still, it didn’t resonate with consumers. Lamb shut down the consumer side of Synth a year and a half ago and officially shut the tool down for educators a month ago..

It’s niche

Kevin Smith, CEO of AI startup Snipd, said he’s not building a social audio app at the moment. Snipd lets users manually clip podcasts, automatically segments podcasts into highlights and chapters, and has a “for you” page full of clips with transcripts as the visual. Audio information can easily get lost in the big bad podcast universe. Smith wants to help listeners harness it.

“Our goal is to build an app that unlocks the knowledge in podcasts,” Smith said. “If the social aspect helps with that, then we don’t have a problem with it.”

He’s interested in tackling the barrier to discovering podcasts and making them easier to consume. Turning podcasts into bite-sized bits helps, but it’s also more social as well. It’s easier to share audio nuggets than the whole meal. Smith says Snipd appeals to a wide range of users, and he’s optimistic it will continue to grow. He credits the latest advancements in natural-language processing for making Snipd’s mission possible. Transcribing audio has become easier, as is segmenting it into core parts.

Snipd automatically segments podcasts into highlights and chapters, and lets users manually clip podcasts. Image: Snipd

But it’s especially struck a chord with the productivity community. For obsessive notetakers, being able to embed audio snippets into your Notion- or Obsidian-based second brain (productivity speak for note-taking system) is a win. “We didn’t expect that a certain percentage of our users would be so enthusiastic about plugging this into your second brain,” Smith said.

Finding a niche is powerful, and it can surround a product with passionate, dedicated users. But serving only a small subset of people can also hold products back from attaining mainstream popularity, the kind of success that VCs and media generally expect from ambitious startups. Synth, for instance, had a built-in user base of educators because of its parent company. It allowed teachers to incorporate student voices in class projects.

“In education, it’s a little bit different because someone’s requiring you to do it,” Lamb said. “There are very different motivators involved in capturing and creating that content.”

But Synth didn’t succeed when it came to the general consumer market. Shuffle faced a similar issue. Ada Yeo, co-founder and CEO of the now-defunct company, said the tool had early power users from tech Twitter. But the product was split between users who wanted the tool for note-taking purposes and general users who might have used it to share podcast clips on social media.

“We just couldn’t find a way to crack other communities,” Yeo said, referencing the worlds of comedy and sports podcasts, “that would lead to a more mainstream product.”

Podcasting itself is a niche form of entertainment compared to TV or movies. Anybody can create a podcast now, but in Messina’s words, this means a lot of the audio out there is “shit and probably should never have been recorded.” Excellent audio certainly exists, but blockbusters are rare. With a crowded audio market, there are fewer listeners to go around, making it harder for audio platforms to scale to the level of a social network. Maybe committing to the niche is the answer, Messina suggested.

“We evaluate [social audio] and define its success based on the size of success we’ve seen before,” he said, “as opposed to saying, ‘Actually, this can be a very healthy ecosystem, but it’s a small suburb of social media land.’”

Audio’s saving grace: AI or Spotify

If any type of audio platform were to grow into a proper social network, experts agree it would have to focus on short-form clips. This American Life rolled out a product called Shortcut in 2016 that was meant to “make podcasts as shareable as GIFs” (RIP GIFs, by the way). But it doesn’t appear to have caught on, and six years later, Shortcut is still in beta.

Smith says Snipd’s AI features may make the process of creating clips less time-intensive, while also making it more likely users see audio they like. Snipd’s AI discovery algorithm is far from perfect, but Smith said the team is working on improving it.

Messina said we have to be less precious about the way we consume podcasts. Allowing AI to chop podcasts into shareable bits makes audio easier to consume, and a social audio platform more viable. “In the future, it may become easier to remix, reshape, snip, and share those audio moments,” Messina said.

Apple is generating transcripts to help with search results, but they’re not publicly available to listeners. Spotify has transcripts only for its original shows so far. Messina thinks Spotify might be moving toward enabling social audio, allowing users to share response clips to podcasts.

Mignano, who left his role as Spotify’s head of talk in June, declined to speak about specific plans but emphasized the company’s ambitions to foster more podcast creators. “Spotify has been pretty public around its ambitions to be a platform for tens, if not hundreds of millions of creators,” Mignano said. “The company continues to do a lot of work to make it easier for nonprofessionals to make podcasts.”

“[S]ocial audio has come at the wrong time at the moment.”

While small startups may conceive of better recommendation engines, the popularization of social, short-form audio depends largely on major platforms and whether they decide to invest in supporting it. For companies like Apple or Spotify, experimenting with short-form audio makes sense. For the major social media platforms with visuals or text as the standard, audio feels more like just one feature among many.

“It certainly feels like something that’s untapped and ripe for experimentation, but social audio has come at the wrong time at the moment,” said social media expert Matt Navarra. “Twitter’s in disarray, Meta’s placing its bets on a very small number of things it thinks is going to work out.” In other words, audio is not on many companies’ list of priorities.

Mignano recently wrote about podcasts increasingly becoming more visual, with podcast creators releasing video segments on TikTok. Though Mignano believes in the beauty of audio, he doesn’t think it’s ready for social media prime time.

“Audio is just unique in the world of social,” Mignano said. “It’s incredibly rich, it’s intimate, it's immersive, but it has this disadvantage.”

As the midterms draw closer, some of the tech industry's most urgent issues and opportunities are also on the ballot. At the national level, anti-Big Tech crusaders — who just happen to be backed by Big Tech money — have made cracking down on the likes of Meta and Google key planks of their campaigns.

Meanwhile, in states across the country, ballot measures will determine the future of everything from EV funding to how gig work works, with some policies kicking in as soon as next January if they receive approval from voters.

While all eyes will be on Washington, here are some issues that smart tech leaders should be watching.

California, Proposition 30

What it does: Proposition 30 will impose a new tax on the state's ultra-wealthy to finance climate initiatives. If approved by voters, it will impose an additional 1.75% tax on Californians whose annual incomes are more than $2 million. The tax will be in place beginning next January and will come to an end in 2043; it could end sooner if the state is able to cut its emissions to 80% of 1990 levels.

Why it matters to tech: The tax is expected to generate up to $5 billion annually, with the majority of the funds going toward California’s ambitious electric vehicle plans. About 45% of the tax dollars will be spent on rebates for people, businesses, and local governments that buy electric vehicles, and 35% will be spent on expanding the EV charging network in the state. California is the leader in terms of EV adoption in the United States.

Tech executives could be among the prime targets of the tax: 44% of billionaires in California made their money from tech.

Who’s backing it: The measure is supported by the California Democratic Party, environmentalists, and, because some of the money will fund wildfire prevention, the state’s firefighter association. But its biggest backer is Lyft, which has bankrolled the yes vote, contributing $45 million out of the $47 million made to the supporting committee, according to state filings. Last month, Lyft CEO Logan Green said the tax was needed “to help turn back the clock on this existential threat,” referring to the climate crisis.

But Lyft’s support is one reason why Gov. Gavin Newsom has broken from his party in opposing Prop. 30. In a TV ad opposing the ballot measure, Newsom described Prop 30. as a “Trojan horse” initiative. “Prop. 30 has been advertised as a climate initiative. But in reality, it was devised by a single corporation to funnel state income taxes to benefit their company,” he said.

Illinois, Amendment 1

What it does: In Illinois, voters will decide on a measure that would amend the state’s constitution to include an explicit provision that employees have the right to organize and collectively bargain over wages, hours, and working conditions.

Why it matters to tech: It comes at a time when workers in companies including Amazon and Apple have started unionizing to advocate for wage increases and other improved working conditions. In April, Staten Island warehouse workers became Amazon's first unionized employees, sparking a union drive across the country. Earlier this month, workers at an Amazon warehouse in a Chicago suburb staged a walkout on Prime Day, when the ecommerce giant is especially busy.

Amendment 1 in Illinois will guarantee workers the right to organize, even as Big Tech has resorted to well-known union-busting strategies. That may be particularly important in Chicago, a city where the tech industry employs nearly a fifth of the city’s overall workforce.

Who’s backing it: The amendment is backed by many workers’ rights organizations, unions in Illinois, and the state’s Democratic Gov. J.B. Pritzker. “Worker safety and economic security is a fundamental right of all workers, from domestic workers to Ph.D.s,” Tim Drea, chapter president of the Illinois AFL-CIO, told a local news station. “Everybody deserves a safe workplace and economic security.”

However, local business groups warn it could make the state uncompetitive compared to its neighbors. “There’s so much going on that says we’re not business-friendly,” Todd Maisch, president of the Illinois Chamber of Commerce, told local station WGEM. “It sends a signal that we are not serious about becoming a pro-business state.”

New York, Proposal 1​

What it does: Proposal 1 is a ballot measure that will allow the state to borrow $4.2 billion to fund climate initiatives. A $3 billion bond was initially proposed by Gov. Andrew Cuomo, but it was increased under Gov. Kathy Hochul.

Why it matters to tech: If approved by voters, it could be a major opportunity for the climate tech sector. Some $1.5 billion will be used for climate change mitigation, and $1.1 billion will go to flood risk reduction. The rest will be used for land conservation and water-quality projects. The proposal will fund the upgrade of cooling centers, projects aimed at making public universities and other state-owned buildings energy efficient, and zero-emission school buses.

According to the legislation that produced the measure, “disadvantaged communities shall receive no less than thirty-five percent of the benefit of the funds.”

Who’s backing it: The “yes” campaign has received endorsements from a wide range of local climate and conservation groups including the New York Botanical Garden and Central Park Conservancy.

Washington state, Advisory 40

What it does: Voters will partake in a nonbinding advisory vote on a bill that has already been passed by the state legislature. That bill, HB 2076, set a per-trip pay floor for Uber and Lyft drivers, gave drivers paid sick leave, and prohibited surge pricing during the first seven days of an emergency declared by the governor or the president.

Why it matters to tech: Technically, HB 2076 has already passed. But because the bill levies a premium on rides in Washington, state law also requires that voters get a chance to have their say. Their vote won’t definitively determine the fate of the legislation, but will act as guidance to the legislature as to whether it should repeal or uphold the law. The outcome of the advisory vote could also be an important measure of public support, which other states may find interesting.

The legislation stands to have a big impact on the ride-hailing industry in Washington. While it stops short of classifying the drivers as full employees and will restrict local governments from formulating their own policies, the expanded rights represent a big win for advocates of ride-hail drivers.

Aside from paid sick leave, the bill sets out processes for how platforms can deactivate drivers. It also will divert 15 cents per trip to a nonprofit that will fight for the rights of drivers in disputes with the platforms. Those fees will begin in July 2024.

Who’s backing it: When the state House was debating the bill, it received support from both Uber and Lyft. Local Democrats hailed it as the “best in the nation” package for app drivers. But it was opposed by the National Employment Law Project, which said the bill did not do enough to protect the rights of drivers.

Montana, Constitutional Amendment 48

What it does: C-48 will amend Montana’s constitution to explicitly require law enforcement agencies to secure a search warrant before accessing people’s electronic data. The amendment would update the state’s constitution, which already contains protections for physical items such as paper documents and homes.

Why it matters to tech: The bill’s proponents say it will bring Montana’s statutes into the 21st century, as everyday life revolves around electronic communication. “A majority of everything we do now is electronic — our finances, our medical information, our conversations — and this amendment makes it explicit that our electronic data and communications are protected from unreasonable search and seizures from the government,” Republican state Sen. Ken Bogner, who sponsored the amendment, told NBC Montana.

Who’s backing it: The amendment has support from conservative groups like Americans for Prosperity Montana. There are no active campaigns to oppose the ballot measure, but the Senate bill that produced the measure was voted against by some Montana House Democrats. The Montana Association of Chiefs of Police also opposed it, but is not campaigning to stop it. “When it comes to handcuffing us to the point we can’t do our job and we can’t hold people accountable for their actions against people, then I have an issue with it,” Wade Nash, head of the police association, said.

Without any opposition, Montana is set to join Missouri and Michigan, which added electronic data protections to their own constitutions in 2014 and 2020, respectively.

​The Arizona Senate race

Why it matters to tech: With an equal split in the Senate, Republicans are hoping to wrestle back control with the help of two tech entrepreneurs. In Arizona, Blake Masters is challenging incumbent Democrat Mark Kelly. Masters has made criticism of tech companies, especially social media platforms, a central part of his campaign right from its inception.

“The internet, which was supposed to give us an awesome future, is instead being used to shut us up,” he said in his first campaign video. “America’s future will be determined by how Congress chooses to regulate Big Tech in the coming decade,” he later wrote in a Wall Street Journal op-ed. “We must resist the domination of a corporate technocracy and chart a new course.”

Kelly has, meanwhile, his own tech bona fides, including his successful negotiation of the Chips Act, which was passed by Congress. Early signs show that the bill’s passage has led to billions in chip-related investment across the country.

Who’s backing it: Masters has received significant backing from his billionaire ally, PayPal co-founder Peter Thiel. Despite Thiel’s deep pockets, Kelly has raised eight times more money for his campaign than Masters and is projected to win.

The Ohio Senate race

Why it matters to tech: Just like Masters, J.D. Vance has been vocal about his criticism of social media content-moderation policies, despite his tech ties. “I know the technology industry well. I’ve worked in it and invested in it, and I’m sick of politicians who talk big about Big Tech but do nothing about it,” he wrote on his campaign website. The solution is simple: “We need to break up the big tech companies, to reduce their power in our economy and our politics.”

A Vance campaign press account was suspended by Twitter in September 2021, drawing ire from the candidate. “This is what happens when we allow five companies to control what we’re allowed to say,” he tweeted. Twitter later said the suspension, based on suspected impersonation, was an error. Vance is running against incumbent Tim Ryan and is projected to be ahead. Ryan, has in turn, branded Vance as a “Silicon Valley elitist,” referring to his opponent’s ties to Big Tech.

Who’s backing it: Vance has also received significant support from Thiel. Since Vance now looks poised to win, Thiel is reportedly redirecting his efforts to support Masters in Arizona, where he is trailing. If both or even one of Thiel’s candidates is successful in helping the GOP flip the Senate, they could add to the growing list of Big Tech’s Republican adversaries in Washington.

The Texas governor race

Why it matters to tech: The race between Beto O’Rourke and Gov. Greg Abbott is especially important because of new laws passed in Texas with Abbott’s blessing, including a wide-ranging social media content-moderation law. The law prohibits social media platforms from discriminating on the basis of viewpoint, a law that platforms argue curtails their First Amendment rights and is currently being debated in the courts.

That’s not to say O’Rourke will go easy on tech giants. During his bid for the presidency in 2019, O’Rourke said, “I think the best way to approach the fact that people have become the products on these platforms — that our privacy has been violated, that we’re confronted with 37-page user agreements — is to regulate them more seriously, and perhaps to treat them a little bit more like a utility.”

Despite his anti-Big Tech position, Abbott has also courted companies including Meta to come to Texas, which is quickly becoming a major tech hub.

Who’s backing it: Because of Abbott’s policies, it is perhaps no surprise that O’Rourke has received significant contributions from Big Tech. While the post-pandemic work environment has lured many Silicon Valley workers to move to Texas, that has not translated to support for Abbott. “It’s not surprising they do not support Gov. Abbott,” Heidi Welsh, the founding executive director of Sustainable Investments Institute told Bloomberg in March, “because they’re moving to Texas for the job, not the politics.”

Hello, and welcome to Protocol Entertainment, your guide to the business of the gaming and media industries. This Friday, we tell you what it’s like to be a regular user of Meta’s Horizon Worlds platform.

Despite all the bugs, Horizon can be fun

Hardly anyone is using Horizon Worlds, Meta’s big bet on the metaverse. The social VR platform is attracting just 200,000 monthly active users, according to The Wall Street Journal. That’s severely missing the mark for a company that’s operating multiple services with billions of users, as my colleague Nick Statt pointed out earlier this week.

And this is where I have to make a confession: I am one of those 200,000.

I started exploring Horizon Worlds earlier this year, and after a few false starts, I found Arena Clash, a Horizon Worlds launch title that the company describes as “a team-based laser tag game.” Arena Clash lets you compete in two teams of up to three players, and each game takes just five minutes. Perfect for a quick distraction during your lunch break, or a way to wind down at night without having to commit to hours-long gameplay.

I should mention that I am one of those people who likes to tell others that “I’m not a gamer.” Nonetheless I fell in love with Arena Clash, to the point where I have now played a couple hundred games and fired more than 100,000 shots, if the in-game stats are to be believed. And while there are players who are far more skilled, I somehow managed to become fairly decent at it.

In fact, I currently rank among the game’s top 500 players.

Whether that’s an achievement or not is very much up to debate, which tells you as much about the state of Horizon Worlds as my VR gaming skills. The platform had 300,000 monthly active users at the beginning of this year, and Arena Clash’s in-game scoreboard suggests it has attracted around 285,000 players to date.

However, many of those players may have just joined once, only to never return. It’s also common practice among players to have alt accounts, with some suggesting that starting over with a new account is the only way to avoid some of the game’s glitches.

And there are many, many glitches, as anyone who has played more than a handful of matches can tell you.

• Arena Clash is supposed to give every player a basic handgun to start, with more powerful weapons scattered across the game map itself. For a long time, people would frequently appear in the game without a gun, unable to defend themselves.
• More recently, players have occasionally been able to keep shooting others even after they have been knocked out.
• Sometimes, players don’t die at all.
• Sometimes, players whose headset has run out of battery remain stuck in the game.
• There are days when the game doesn’t work at all, or when it appears to severely lag for every player.
• Sometimes, the Horizon Worlds app crashes completely.
• At other times, the 360-degree view of the world around you is replaced with a black tunnel, with a slice of the Arena Clash world in front of you, and an upside-down version of it mirrored behind you — a pretty jarring, stomach-churning experience.

There are also some moderation challenges. Overall, Arena Clash players are a good-natured bunch, with the occasional playful trash-talking. Still, people are people, and some people aren’t much fun to be around.

• One time, I overheard someone threatening to find out another player’s real-life address to “f--- them up.” By the time I was able to pull up the menu to start a poll to ban the player, the next game had already started, and I couldn’t figure out who the culprit was.
• One time, a player somehow managed to load a pornographic image onto their Horizon Worlds selfie camera and showed it to unsuspecting bystanders.
• Horizon Worlds is supposed to be 18 and over, but there are frequently players who sound much younger. Many of them fit right in, but some are prone to homophobic slurs.

And yet, despite all of this, I keep returning to the game, together with a bunch of other diehards and a small but steady flow of casual players.

• Part of the attraction is that Arena Clash is a form of low-effort social fun. You get to have these short-burst intense adventures with other people, and you can always take off your headset when you’ve had enough.
• Even so, there are some real moments of joy beyond the gameplay. At times, people share sweet stories about their jobs, pets, or loved ones between games. One time, someone even started an impromptu rap session.
• Players far better than me have been organizing regular tournaments.
• A few people have taken the Arena Clash map and created their own variations, which can be fun to explore.
• The not-quite-ready-for-primetime nature of Horizon Worlds has also contributed to an atmosphere of camaraderie, with more-experienced players regularly helping newcomers get the hang of things.

Arena Clash is proof that Horizon Worlds can be fun, despite some of its technical shortcomings. Sure, it would be great if there were a lot more players, and squashing some of those bugs may be a good first step to make Horizon more popular. But my ongoing fascination with Arena Clash has also taught me that it’s more important to give people something engaging to do together than obsess over building the perfect platform.

If I was in charge of Horizon Worlds, I would spend less time worrying about creating perfect-looking avatars, borderline-creepy living rooms, monetization tools that won’t make anyone any money without an audience to sell to, or half-baked replacements for real-life interactions. Heck, I don’t even care about legs! Instead, I’d love to see more first-party games in the same vein as Arena Clash that can draw a crowd.

Because ultimately, without new users, Horizon will remain a barren playground for metaverse unicorns like me.

A MESSAGE FROM GOALS HOUSE

It's becoming increasingly appreciated among the broader business and NGO community that the planet and people elements of sustainability are mutually dependent, and as such a focus on one at the exclusion of the other will be fruitless. But balancing profit and sustainability progress remains a more thorny debate.

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Thoughts, questions, tips? Send them to entertainment@protocol.com. Enjoy your day, see you Tuesday.

Chief finally has a clubhouse in San Francisco, but don’t call it a coworking space. The 8,600 square feet do include conference rooms, one-person Zoom rooms, and open-plan seating, but it also has a bar, lounge seating, and — like Chief’s other clubhouses in New York, L.A., and Chicago — a piano.

“To me, what the piano represents is ‘this is not a coworking space,’” Chief co-founder Lindsay Kaplan told me on a tour of the clubhouse in advance of its official opening Thursday. “This is a place where you can sit back and take meetings in a very laid-back manner.”

Unlike the Wing, the women-focused coworking space and club that shut down this summer after a six-year run, Kaplan and co-founder and CEO Carolyn Childers are still much more interested in building and supporting Chief’s network than boosting its physical amenities.

That’s why Chief’s main offering, curated, 10-member “Core” peer groups that meet monthly with an executive coach, will still take place virtually.

“What we most optimize for is finding the right and perfect 10 people for you to be with,” Childers said. “Even in San Francisco, that might be somebody outside the city.”

Before Chief expanded outside of New York, the groups still met in person, but applicants who said they wanted to join for the space didn’t tend to make it off the waitlist. The network is about the peer group, and the space is more like “the container that it can happen in IRL,” Kaplan said.

The network is more closely modeled after the Young Presidents’ Organization, the 72-year-old network of under-45 chief executives who help each other work through professional and personal challenges. YPO is all about its network and doesn’t have spaces of its own, Childers said.

Kaplan and Childers also got inspiration from Carole Robin, a longtime facilitator of the popular “touchy feely” course at Stanford, in thinking through “how you create the right level of, frankly, vulnerability that you need to get to in order to truly work through things,” Childers said. “The Core [group] truly does get to a place of being able to talk to what’s really happening for you, both personally and professionally, because those two things very much mesh.”

That said, the clubhouse is also a place where members can host guests, hold their board meetings, and — yes — take Zoom calls. Ten percent of Chief’s 20,000 members live in the Bay Area, but when Chief was planning its next clubhouse, San Francisco was also the most requested city by members who don’t live in the Bay Area. In other words, Chief members in cities such as Boston and D.C. wanted a clubhouse in San Francisco where they could visit while in town.

Despite that, Childers and Kaplan try to more closely emulate a Harvard alumni club, which have clubhouses with “great amenities,” Kaplan said, but most of the real benefits come from being a part of a vast, powerful network. But with a mission to change the face of executive leadership, the women-focused atmosphere might also feel like something more approachable — Kaplan recalled a similar feeling of camaraderie with other women trying on clothes in the communal dressing room at the old New York department store Loehmann’s.

“It kind of reminds me of this intimate space,” Kaplan said. “If you tried on something and you went in front of the mirror, all the women around you were, like, ‘Honey, that looks good.’”

A federal appeals court struck a major blow against the Consumer Financial Protection Bureau with a finding that its funding mechanism is unconstitutional.

The decision is likely to be challenged, setting up a major fight for the future of the top U.S. consumer-finance watchdog. That battle could introduce significant uncertainty for the many fintech businesses that fall under the agency’s purview.

The decision

A three-judge panel of the New Orleans-based 5th Circuit Court of Appeals found Wednesday that the CFPB’s funding structure violated the Constitution’s separation of powers doctrine.

As set up under the 2010 Dodd-Frank Act, the CFPB is funded by the Federal Reserve rather than congressional appropriations. That way, in the Obama administration’s view, the agency could avoid political influence and be funded similarly to other banking regulators. But Republicans have chafed at what they view as anti-business practices and a lack of oversight.

The structure has been the target of legal challenges before. In this decision, the court ruled in favor of a lawsuit from two trade groups seeking to overturn the CFPB’s 2017 payday lending rule. Because the CFPB’s funding is unconstitutional, the decision said, the rule itself is invalid.

The background

Other courts have found the CFPB’s funding to be constitutional, a point the Wednesday ruling acknowledged. But the panel of Trump-appointed judges said the CFPB’s setup is different from other self-funded agencies.

"Congress did not merely cede direct control over the Bureau’s budget by insulating it from annual or other time-limited appropriations," the panel wrote. "It also ceded indirect control by providing that the Bureau’s self-determined funding be drawn from a source that is itself outside the appropriations process — a double insulation from Congress’s purse strings that is 'unprecedented' across the government."

Democratic Sen. Elizabeth Warren, who oversaw the CFPB's creation, responded to the ruling on Twitter, writing that "extreme right-wing judges are throwing into question every rule the CFPB enforces to protect consumers and businesses alike."

Republican Sen. Cynthia Lummis, meanwhile, said the CFPB "needs the same Congressional oversight as every other government agency."

What’s next

The CFPB is expected to challenge the ruling, though it has yet to confirm that. It could request what’s known as an en banc review from all judges on the 5th Circuit or push the issue to the Supreme Court.

A CFPB spokesperson said “there is nothing novel or unusual about Congress’ decision to fund the CFPB outside of annual spending bills” and that the agency "will continue to carry out its vital work enforcing the laws of the nation and protecting American consumers.”

To that point, the CFPB issued new guidance to credit-reporting agencies Thursday about omitting what it called "junk data" from credit reports.

The CFPB has faced several challenges to its existence over its 11 years in business. In 2020, the Supreme Court ruled that restrictions on when its leader can be removed were unconstitutional, but rejected a plea to strike down the agency as a whole.

An analysis from the law firm Ballard Spahr noted that the 5th Circuit’s decision applies only to federal district courts in Texas, Louisiana, and Mississippi. But “because it is an appellate court ruling, it might be given weight by district courts outside of the Fifth Circuit considering challenges to CFPB enforcement actions.”

That means the impact could spread far beyond the agency’s payday lending rule.

"The holding will call into question many other regulations that protect consumers with respect to credit cards, bank accounts, mortgage loans, debt collection, credit reports, and identity theft," tweeted Chris Peterson, a former enforcement attorney at the CFPB who is now a law professor at the University of Utah.

The most significant fear from progressive lawmakers and consumer groups is that the CFPB could see its resources chopped if left to the whims of Congress.

"Making the CFPB the only banking regulator subject to Congressional appropriations would put the most pro-consumer federal agency at risk of being starved of the funding it needs to protect consumers,” said Mike Litt, the consumer campaign director for the U.S. Public Interest Research Group.

Fintech focus

The new court decision comes as the CFPB, under Biden-appointed director Rohit Chopra, has taken a more aggressive stance toward the financial industry than his Trump administration predecessors. That includes a growing focus on fintech products such as algorithmic lending and “buy now, pay later” arrangements. Chopra has also promised scrutiny over the way large technology companies are expanding into financial services.

But the agency is also taking up initiatives with fintech industry support, including finally setting up open-banking rules to guide data-sharing between financial institutions and tech companies.

What the ruling means for the fintech industry remains to be seen. Should it hold up long term, a lack of resources could hamper the CFPB’s pledge to supervise a broader group of fintech businesses.

“Supervisory programs are really resource-intensive,” said Patrick Haggerty, a director at advisory firm Klaros Group. “If the agency is relying on appropriations, you might decide to keep the team more lean and mean and targeted for specific issues.”

While regulators and companies can occasionally come into conflict, the agencies also serve an important role in providing rules of the road and certainty for business models. If the decision casts further uncertainty around CFPB’s existing regulation, that’s probably bad for business.

“If you don’t know what the rules are, it is hard to innovate,” said Melissa Baal Guidorizzi, a partner with the law firm Orrick and former senior CFPB enforcement attorney. “Legal uncertainty can cause considerable friction, particularly for innovators.”