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Twitter CEO Dick Costolo seemed momentarily taken aback at last night’s PandoMonthly in San Francisco when Sarah Lacy asked him “how big of a fuck up” it was that Twitter missed out on acquiring Instagram.

“How much of a fuck up was it?” Costolo asked, as if he were surprised, and perhaps ever so slightly insulted, by the question.

Given the speculation around what actually went down in the days leading up to the announcement that Facebook would acquire the photo-sharing startup in a deal worth $1 billion – and actually, probably because of it – Costolo’s next response was about as non-committal and prosaic as possible.

“We had a number of conservations with those guys along the course of their lives,” he said, “but it was acquired by Facebook.”

Asked by Lacy if, in retrospect, he thinks Twitter should have been more aggressive in its attempts to buy the company, Costolo gave no hint of remorse, saying simply: “I don’t have any regrets about the way we thought about and approached the landscape.”

The chatter in Silicon Valley has been that Mark Zuckerberg “stole” Instagram from right under Twitter’s nose just as Costolo’s company seemed to have a deal sewn up. The acquisition negotiations are the subject of much dispute among key players involved with all three of the companies.

In her Vanity Fair profile of Instagram, Kara Swisher described Twitter co-founder Jack Dorsey and Chief Financial Officer Ali Rowghani putting forward that they considered a formal offer to acquire Instagram for somewhere in the region of $500 million. Dorsey and Rowghani said they gave Instagram CEO Kevin Systrom a term sheet, which the Instagram founder denies. He later told both Costolo and Zuckerberg that he had ultimately decided to take on a large round of investment in order to keep the company independent. But Zuckerberg didn’t take no for an answer and days later forged a deal over hamburgers in the Facebook founder’s home.

In a post on the New York Times’ Bits Blog, Nick Bilton relayed the accounts of anonymous Twitter and Facebook sources, who said Instagram had verbally agreed to a deal from Twitter worth $525 million in cash and shares. Twitter found out about the Facebook deal at the same time as the rest of the world, Bilton reported.

But at a PandoMonthly event in October 2012, Systrom told Sarah Lacy he was not playing off one suitor against the other, and that Twitter did not put an offer on the table to acquire his company. The rumors weren’t true, he said. “People look for conflict, and they look for a story,” he said. “A lot of times, small details get exaggerated.”

Scandal! Disagreement! Deflection!

But ultimately, who cares, right?

Not Dick Costolo – at least, according to him.

The way he tells it, Costolo didn’t spend much time sulking about the loss. “I was in Japan at the time, and this reporter asked me, ‘Well, what are you guys going to go do now?’” he told Lacy. “I thought about it for a second and realized what she was asking me. And I still believe this: Remember when Google bought YouTube? Everyone was like, ‘Oh, videosharing! We gotta go do that!’”

He didn’t want to be sucked into that group-think. Instead, the company moved on to thinking about what was the next big thing in constrained publishing, a key tenet of Twitter’s product philosophy. Soon, he got a call from Dorsey saying that he had to meet the guys from Vine, a video-making app that Twitter would later acquire before it even launched. Vine was thinking about publishing in the same way as Twitter, Costolo said.

“I think it’s a mistake to think about things in the context of ‘Well, we didn’t do XYZ, so now we have to go do something like that,’” Costolo explained. “I don’t think that’s a smart way to think about things.”

In the end of this particular exchange, Lacy gave Costolo an easy way out. So, she said, it just wasn’t in the cards and it didn’t work out?

Costolo repeated the phrase. “It wasn’t in the cards, and it didn’t work out.”

Interesting choice of words. Eight months after Twitter’s attempted acquisition of Instagram fell through, the latter withdrew its support for Twitter’s in-line photo display units, called “cards.” It was seen as a strong indication that the relationship between the two companies had soured.