WEBVTT - Rare Apple Sell Call, Using Data to Predict Behavior 0:00:02.560 --> 0:00:08.320 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:10.080 --> 0:00:14.080 This is Bloomberg Business Week, insight from the reporters and 0:00:14.240 --> 0:00:18.320 editors that bring you America's most trusted business magazine, plus 0:00:18.400 --> 0:00:22.320 global business, finance and tech news as it happens. Bloomberg 0:00:22.440 --> 0:00:27.400 Business Week with Carol Masser and Tim Stenovek on Bloomberg Radio. 0:00:27.600 --> 0:00:30.080 All right, everybody, yes, indeed, this is Bloomberg Business Week. 0:00:30.240 --> 0:00:31.880 I want to talk a little bit about Apple. Apple 0:00:31.880 --> 0:00:34.360 shares have had a challenging start to twenty twenty five, 0:00:34.400 --> 0:00:37.479 investors freighting over weakness in the critical Chinese market, the 0:00:37.560 --> 0:00:41.120 shares falling for five strade sessions before Monday's bounce, in 0:00:41.200 --> 0:00:44.440 the longest losing streak since April. They've been pressured by 0:00:44.479 --> 0:00:47.519 China's smartphone data, which Alice said pointed to weaker iPhone 0:00:47.520 --> 0:00:50.479 shipments and a router's report that Apple is offering discounts 0:00:50.479 --> 0:00:53.239 in China. A lot going on. Noticing it all and 0:00:53.280 --> 0:00:56.600 weighing in Moffatt Nathanson, which today downgraded the iPhone maker 0:00:56.680 --> 0:01:01.360 to sell, citing high valuation, antitrust, overhanging weakening position in China, 0:01:01.520 --> 0:01:03.280 the firm setting a price target of one hundred and 0:01:03.320 --> 0:01:06.760 eighty eight dollars a share, which before today's open implied 0:01:06.800 --> 0:01:10.640 a twenty three percent decrease. Craig Moffatt, founding partner and 0:01:10.680 --> 0:01:13.399 senior Alset Moffat Nathanson, joining us in New York City. Craig, 0:01:13.520 --> 0:01:16.119 so great to have you here with us. We kind 0:01:16.160 --> 0:01:18.360 of laid out what your call was all about, but 0:01:18.400 --> 0:01:20.840 walk us through a little bit more deep more deeply 0:01:21.160 --> 0:01:23.600 the specifics around that downgrade, because not a lot of 0:01:23.600 --> 0:01:26.319 people do cell ratings, especially on a name like Apple. 0:01:27.319 --> 0:01:29.800 You're right, Hi, Carol, thank you for having me. I 0:01:31.400 --> 0:01:36.000 think you put it right. This is largely a evaluation call, 0:01:36.040 --> 0:01:39.600 so I want to be clear Apple. We wouldn't argue 0:01:39.640 --> 0:01:42.360 with anyone who says Apple is a great company. We 0:01:42.440 --> 0:01:46.360 think that their AI strategy is a very sound strategy. 0:01:46.840 --> 0:01:51.440 I love the appeal of the fact that Apple has 0:01:50.800 --> 0:01:55.000 a low capital intensity approach to AI, that they have 0:01:55.280 --> 0:01:57.400 the trust of customers, and on and on. They have 0:01:57.480 --> 0:02:00.560 a lot of advantages. No one would dispute that. But 0:02:00.640 --> 0:02:03.160 it's trading at thirty three and a half time's earnings, 0:02:03.240 --> 0:02:05.800 and one way to think about it is just think 0:02:05.880 --> 0:02:10.120 about the PEG ratio, if you will, the ratio of 0:02:10.560 --> 0:02:15.720 growth rate of the multiple to growth rate. It's trading 0:02:15.720 --> 0:02:18.360 at a PEG ratio north of three. The rest of 0:02:18.400 --> 0:02:21.399 the MAG seven trades at a PEG ratio of around two. 0:02:21.960 --> 0:02:25.720 So you're talking about a fifty percent premium even to 0:02:25.880 --> 0:02:30.639 the peers within the MAG seven. That just doesn't make sense. 0:02:30.680 --> 0:02:33.960 Given what are some very material risks, and you mentioned 0:02:33.960 --> 0:02:38.320 some of them. China is a very real risk, not 0:02:38.520 --> 0:02:42.359 just because the Chinese government, for obvious reasons, is going 0:02:42.400 --> 0:02:47.280 to be disinclined to allow Western language models in China, 0:02:47.320 --> 0:02:49.720 so you're going to have to have a domestic partner 0:02:49.760 --> 0:02:53.200 and share economics with now, but also because the Chinese 0:02:53.280 --> 0:02:58.520 handset competitors have gotten much stronger. Another risk that is 0:02:58.600 --> 0:03:01.320 not discounted in the stock rice at all is the 0:03:01.320 --> 0:03:04.679 anti trust risk you and here I'm not talking about 0:03:04.720 --> 0:03:07.840 the anti trust risk in the cases against Apple, although 0:03:07.880 --> 0:03:11.760 there are plenty of them. The real anti trust risk 0:03:11.919 --> 0:03:16.359 that's very approximate is the risk in the Google case, where. 0:03:16.160 --> 0:03:18.799 Explain explain that risk to Apple? How is that? How 0:03:18.840 --> 0:03:19.480 is Apple at risk? 0:03:19.560 --> 0:03:23.880 Because twenty five percent of apples operating income comes from 0:03:24.040 --> 0:03:27.800 payments from Google, and the judge in the Google case 0:03:27.840 --> 0:03:31.760 has specifically said those payments are illegal. Now, you can 0:03:31.840 --> 0:03:36.440 imagine that there are outcomes where where they still pay 0:03:37.960 --> 0:03:40.240 some or all of that, but you can't pretend that 0:03:40.280 --> 0:03:43.480 there's no risk at all when the judge has already 0:03:43.640 --> 0:03:46.320 said that Google is guilty and the payments they make 0:03:46.360 --> 0:03:49.200 to Apple are illegal. I mean, that's twenty five percent 0:03:49.200 --> 0:03:52.640 of Apples operating income. It's it's twenty five billion dollars 0:03:52.640 --> 0:03:56.480 a year. And so the point we were making in 0:03:56.520 --> 0:04:00.520 this morning's downgrade, and again, I love app just as 0:04:00.600 --> 0:04:04.080 much as everybody else, but there are very real risks 0:04:04.120 --> 0:04:08.440 that are simply not appropriately discounted in the multiple that 0:04:08.480 --> 0:04:10.800 Apple is being awarded right now in the market. 0:04:10.960 --> 0:04:12.960 I want to zero in on the China risk and 0:04:13.000 --> 0:04:16.080 what exactly is because this is a story we've been 0:04:16.080 --> 0:04:18.560 talking about for years. At this point, Craig like concern that, 0:04:18.839 --> 0:04:20.800 you know, Chinese consumers are not going to buy as 0:04:20.839 --> 0:04:24.240 many Apple devices as they have previously. Switching costs are 0:04:24.240 --> 0:04:26.760 pretty switching barriers are pretty low in China because of 0:04:26.839 --> 0:04:28.880 these you know, over the top third party apps. People 0:04:28.920 --> 0:04:31.159 don't get locked into the iOS ecosystem like they do 0:04:31.200 --> 0:04:34.440 in other countries because of we Chat, et cetera. What's 0:04:34.440 --> 0:04:36.040 going on in China in your view. 0:04:37.000 --> 0:04:39.280 Well, I think the biggest thing that's going on in 0:04:39.360 --> 0:04:44.800 China is that the other handset manufacturers, Huawei, Honor and 0:04:44.839 --> 0:04:48.440 so on have gotten much better. If you went back 0:04:48.480 --> 0:04:52.440 to the last big iPhone cycle, which was the five 0:04:52.520 --> 0:05:00.560 G cycle in circa twenty twenty one, the Apple competitors 0:05:00.640 --> 0:05:04.080 at the time were significantly weaker than they are today. 0:05:04.200 --> 0:05:09.080 And interestingly, Huawei in particular, because the government of the 0:05:09.200 --> 0:05:15.600 US put sanctions on Huawei and limited Huawei's access to 0:05:16.880 --> 0:05:19.400 chipsets and that sort of thing, Huawe has had to 0:05:19.400 --> 0:05:23.680 sort of reinvent itself with domestic technology, and they've done 0:05:23.680 --> 0:05:26.680 a really good job. The handsets that they make are 0:05:26.760 --> 0:05:31.400 now fully competitive. They are not a replacement for Apple. 0:05:31.440 --> 0:05:35.000 I'm not suggesting that they are, but they have a 0:05:35.080 --> 0:05:39.480 really competitive offering, and so the market share opportunity for 0:05:39.520 --> 0:05:42.080 Apple is simply not what it was in the last 0:05:42.080 --> 0:05:46.520 big cycle. But you also have this time the government's 0:05:46.920 --> 0:05:49.839 thumb on the scales, and there's a couple of ways 0:05:49.839 --> 0:05:52.200 for that. One is, as I said, you're simply not 0:05:52.400 --> 0:05:55.359 going to have the Chinese Communist Party saying it is 0:05:55.400 --> 0:06:01.800 acceptable to have Western lms answering questions like what happened 0:06:01.800 --> 0:06:05.240 at Tianneman Square. So you're going to have to have 0:06:06.640 --> 0:06:12.680 domestic partners or in order to be able to offer AI, 0:06:14.240 --> 0:06:17.360 and that means a different margin structure and what have you. 0:06:17.360 --> 0:06:22.520 You also have a very real risk from tariffs. And 0:06:23.320 --> 0:06:27.440 it's not just in fact, not even primarily that Apple 0:06:27.480 --> 0:06:31.080 itself imports almost all of its components, and in fact 0:06:31.120 --> 0:06:35.440 today imports all of its handsets mostly from China because 0:06:35.720 --> 0:06:39.000 they're assembled there. Even if you even if they are 0:06:39.040 --> 0:06:42.359 exempted as they were during the last Trump administration, you 0:06:42.480 --> 0:06:48.320 have the risk of retaliatory tariffs in response to American 0:06:48.320 --> 0:06:51.680 tariffs that could be related to the auto market or 0:06:51.760 --> 0:06:58.840 completely unrelated categories, but where foreign governments respond by putting 0:06:58.920 --> 0:07:02.919 tariffs on a company that is obviously quite highly identified 0:07:02.960 --> 0:07:05.960 with the US. So again I don't want to suggest 0:07:06.000 --> 0:07:10.160 that any of these risks are base case risks. It's 0:07:10.200 --> 0:07:13.720 not like there's a sixty or seventy percent chance that 0:07:13.880 --> 0:07:16.320 any one of them will happen. But if you have 0:07:16.440 --> 0:07:18.720 all of these potential risks, all of which are not 0:07:18.840 --> 0:07:23.080 shouldn't be described as sort of a tail risks. These 0:07:23.080 --> 0:07:28.080 are really real possibilities. In all of these cases that 0:07:28.080 --> 0:07:31.360 there are negative outcomes and they ought to be reflected 0:07:31.600 --> 0:07:35.440 in the multiple of the stock with a more sober multiple, 0:07:35.480 --> 0:07:36.520 and they simply are not. 0:07:36.760 --> 0:07:39.920 Craig our Apple device is not seen as having the 0:07:39.960 --> 0:07:43.800 same allure to the Chinese consumer as they once did. 0:07:44.840 --> 0:07:47.240 You know, I don't know that that's the case. There 0:07:47.240 --> 0:07:50.760 are still Apple is still a brand with real cachet 0:07:51.120 --> 0:07:58.000 in China. But you know, remember you now have Huawei 0:07:58.040 --> 0:08:03.960 introduced a trifold phone for where you have Samsung devices 0:08:04.000 --> 0:08:07.559 that have had foldable screens for a long time coming 0:08:07.600 --> 0:08:14.280 in from Korea. So the gap between Apple and its 0:08:14.320 --> 0:08:17.440 competitors is not what it once was. There's just there's 0:08:17.440 --> 0:08:20.560 simply no way to argue that that's not the case. 0:08:21.760 --> 0:08:24.080 You know your report, You know, pundents you have watched 0:08:24.080 --> 0:08:26.400 Apple stockgrind higher of the last several months have shrugged 0:08:26.400 --> 0:08:28.760 off the appreciation as a melt up on known news. 0:08:28.760 --> 0:08:30.960 But that's not quite right. And you go, there has 0:08:30.960 --> 0:08:32.760 been a lot of news, right, it's just all been bad. 0:08:33.040 --> 0:08:36.360 Why them melt up? Then? Why does everybody I don't know, 0:08:36.400 --> 0:08:40.199 maybe it's a stupid question, but why does everybody continue 0:08:40.280 --> 0:08:43.559 to chase it and send it higher? When there are 0:08:43.600 --> 0:08:47.240 some real threats in terms of, as you said, the 0:08:47.400 --> 0:08:51.000 DOJ case against Google, that would really take out a 0:08:51.000 --> 0:08:54.240 big chunk of kind of the financial or the balance 0:08:54.240 --> 0:08:57.160 sheet right of that company, of Apple specifically. So why 0:08:57.200 --> 0:08:59.840 does everybody kind of continue to support it, Why do 0:08:59.880 --> 0:09:02.120 they chase it? Why is there the melt up? 0:09:02.960 --> 0:09:05.120 You know, it's a great question. Now, first I should 0:09:05.120 --> 0:09:08.800 be clear, you know, although the stock has climbed higher 0:09:08.840 --> 0:09:11.200 and higher over the last few months, it's only traded 0:09:11.240 --> 0:09:14.520 in line with the market. So to some degree, this 0:09:14.559 --> 0:09:17.960 is an indictment of the way the market overall is 0:09:18.000 --> 0:09:22.160 pricing equities right now, particularly in the face of rising 0:09:22.240 --> 0:09:27.320 interest rates in therefore appropriately higher discount rates. It's but 0:09:27.600 --> 0:09:31.720 I suspect Carol, that the real issue here is is 0:09:31.760 --> 0:09:35.120 that there is this narrative that Apple is the quote 0:09:35.200 --> 0:09:38.960 unquote safe choice among the mag seven, and that it 0:09:39.040 --> 0:09:42.240 is such a strong consumer brand, has such an unassailable 0:09:42.240 --> 0:09:46.959 franchise that it's the safe place to be. And while 0:09:47.000 --> 0:09:51.680 that's absolutely true operationally, it's not a safe place to 0:09:51.720 --> 0:09:54.079 be if it's trading at thirty three times earnings. It's 0:09:54.120 --> 0:09:56.520 a safe place to be if it's appropriately valued, but 0:09:56.559 --> 0:10:02.400 if it's if it's already being awarded an extraordinarily high multiple, 0:10:02.800 --> 0:10:05.719 nothing safe about that, even if it is a very 0:10:05.720 --> 0:10:06.760 strong business model. 0:10:06.800 --> 0:10:08.559 So if it gets down to one eighty eight that's 0:10:08.559 --> 0:10:10.520 your price target, do you change your rating and do 0:10:10.559 --> 0:10:12.000 you say, okay, now you can come in and buy, 0:10:12.200 --> 0:10:14.080 or do you kind of still wait and see. 0:10:14.160 --> 0:10:16.640 Well, we would certainly say that what you want to 0:10:16.640 --> 0:10:18.079 get to is you want to get to a price 0:10:18.120 --> 0:10:20.520 where it's fairly valued, and if it gets below that, 0:10:20.640 --> 0:10:23.840 then there's actually an opportunity to buy it. And I 0:10:23.880 --> 0:10:27.400 certainly wouldn't argue that Apple doesn't deserve an attractive valuation. 0:10:27.480 --> 0:10:31.280 It's a great company. It's just that when you start 0:10:31.280 --> 0:10:34.679 to get to thirty three times earnings and again a 0:10:34.720 --> 0:10:38.800 peg ratio of north of three, what that implies is 0:10:38.840 --> 0:10:42.280 that the market has already priced in an enormous amount 0:10:42.559 --> 0:10:45.960 of potential good news, and so you'd have to see 0:10:45.960 --> 0:10:49.880 something quite extraordinary to be able to say that over 0:10:50.440 --> 0:10:54.200 the next call it, one, two, three years, that the 0:10:54.240 --> 0:10:58.400 stock can actually deliver attractive returns given this starting point. 0:10:58.760 --> 0:11:01.120 Okay, Craig, while we have you don't just cover Apple, 0:11:01.160 --> 0:11:05.360 you also cover Comcast, Echo Star, Charter, Altie, Verizon and 0:11:05.440 --> 0:11:09.360 more Charter Communications. It's your top pick for twenty twenty five, 0:11:09.480 --> 0:11:13.560 despite cord cutting accelerating, despite what's happening to PATV, Why 0:11:13.679 --> 0:11:14.440 is it your top pick? 0:11:15.360 --> 0:11:17.280 You know, it's funny in some ways, it is the 0:11:17.400 --> 0:11:20.920 exact antithesis of what we were just talking about with Apple. 0:11:21.960 --> 0:11:24.400 Charter and the cable stocks have been given up for dead, 0:11:24.440 --> 0:11:30.480 and so they are extraordinarily attractive valuations. And a company 0:11:30.559 --> 0:11:34.280 like Charter, remember, Charter was one of the best performing 0:11:34.320 --> 0:11:36.520 stocks in the S and P for a decade. It 0:11:36.559 --> 0:11:41.280 was out twenty threefold, I think over a decade when 0:11:41.280 --> 0:11:45.600 it was buying back a ton of stock and had 0:11:45.600 --> 0:11:50.560 a really attractive levered equity return strategy. They suspended that 0:11:50.679 --> 0:11:54.839 strategy for a while in order to invest really aggressively 0:11:55.040 --> 0:11:59.160 in rural buildouts, and the market has seen the free 0:11:59.160 --> 0:12:02.200 cash flow yield go down during that capital investment cycle. 0:12:02.960 --> 0:12:05.679 You could argue that those are actually pretty good investments, 0:12:06.960 --> 0:12:10.680 but the market hasn't found them as exciting as the 0:12:10.720 --> 0:12:13.960 old strategy of buying back stock. Well, they've already said 0:12:14.000 --> 0:12:17.200 they're largely getting to the end of that strategy, and 0:12:17.280 --> 0:12:20.760 so they will as CAPEC starts to come down, they're 0:12:20.800 --> 0:12:23.559 going to resume their stock buybacks in a very big way. 0:12:24.720 --> 0:12:28.080 And it's a company that we see growing in the 0:12:28.080 --> 0:12:31.000 load to mid single digits. Not sexy, but by the way, 0:12:31.040 --> 0:12:34.320 that's what Apple is growing as well, but growing in 0:12:34.320 --> 0:12:37.360 the load of call it low single digits. But it's 0:12:37.440 --> 0:12:42.920 priced for negative perpetual growth. And by our twenty twenty 0:12:43.040 --> 0:12:47.760 eight free cash flow estimate, we have this thing trading 0:12:48.000 --> 0:12:52.040 at a something like thirty three percent free cash flow 0:12:52.120 --> 0:12:56.880 yield on twenty twenty eight. That's an absurd, absurd valuation, 0:12:57.160 --> 0:13:00.079 and so I just think it's way too cheap and 0:13:00.480 --> 0:13:03.160 a really exciting opportunity at this price. 0:13:03.360 --> 0:13:06.160 Hey Craig, just one last question. You know, it's funny 0:13:06.160 --> 0:13:08.080 coming off the Golden Globes. I was kind of like, 0:13:08.200 --> 0:13:10.400 oh my god, it's just content coming from just all 0:13:10.440 --> 0:13:13.360 these different places and streaming and regular teeth. It's just 0:13:13.440 --> 0:13:16.760 kind of nuts. But I am curious as we look 0:13:16.760 --> 0:13:20.840 at where content's coming, in particular streaming other than Netflix, 0:13:20.840 --> 0:13:23.640 do you think the legacy media companies can navigate the 0:13:23.760 --> 0:13:26.200 change towards streaming. 0:13:26.080 --> 0:13:26.719 In a clear way. 0:13:26.760 --> 0:13:29.079 And unfortunately just got about forty five seconds. 0:13:29.760 --> 0:13:33.400 Well, it depends what you mean. By can they navigate it, 0:13:34.040 --> 0:13:37.440 Will they survive? Of course? Will it ever be as 0:13:37.480 --> 0:13:40.840 good a business as the old legacy cable network business 0:13:40.960 --> 0:13:43.160 was and it's heyday. No, it's just not going to 0:13:43.200 --> 0:13:46.560 be as attractive a business because it's so much easier 0:13:46.559 --> 0:13:50.760 for customers to churn. That creates a less attractive revenue profile, 0:13:51.520 --> 0:13:55.600 a less attractive cost profile. But you will still have winners, 0:13:55.760 --> 0:13:58.760 and they may not be winners on the scale of Netflix. 0:13:58.840 --> 0:14:01.600 But Disney is still going to be all right in 0:14:01.640 --> 0:14:04.000 the in the streaming business. Again, it's just not going 0:14:04.040 --> 0:14:06.240 to be as good as the business that they are 0:14:06.320 --> 0:14:06.960 leaving behind. 0:14:07.280 --> 0:14:09.760 Thank you, thank you so much. Really really enjoyed this, 0:14:10.800 --> 0:14:13.880 and happy New Year to you, really appreciate it. Craig Moffatt, 0:14:14.200 --> 0:14:17.440 founding partner and senior analyst, Debret Moffatt Nathanson joining us 0:14:17.480 --> 0:14:18.920 right here in New York City. If you missed any 0:14:18.920 --> 0:14:20.480 of it, be sure to check out our podcast feed 0:14:20.520 --> 0:14:21.800 a little bit later on. You can find it at 0:14:21.800 --> 0:14:23.360 Bloomberg dot com or on the Bloomberg Well. 0:14:23.360 --> 0:14:25.560 Big news out of meta Platforms Today, the company is 0:14:25.560 --> 0:14:27.400 going to end a third party fact checking on its 0:14:27.440 --> 0:14:30.320 social media platforms in the US, letting users comment on 0:14:30.360 --> 0:14:32.800 post accuracy with a community note system that it said 0:14:32.800 --> 0:14:34.360 it will promote. 0:14:34.040 --> 0:14:35.680 Free expression that could go wrong. 0:14:36.280 --> 0:14:39.400 Look over to x formerly known as Twitter, for example. 0:14:40.120 --> 0:14:41.560 A lot of questions around this name. 0:14:41.800 --> 0:14:43.000 Well say, what could go wrong? 0:14:43.080 --> 0:14:45.960 Well, okay, there are a lot of questions around this. Yeah, 0:14:46.000 --> 0:14:48.800 political questions, what it's doing ahead of the next administration 0:14:49.160 --> 0:14:51.680 in the wake of yesterday's announcements with the board and 0:14:52.400 --> 0:14:56.200 new folks in public policy, but also what it's going 0:14:56.240 --> 0:14:58.160 to do to engagement. And the reason I'm talking about 0:14:58.160 --> 0:14:59.920 engagement is because that's what it's the core of meta 0:15:00.040 --> 0:15:04.160 platforms business model. Using the services we use them, then 0:15:04.200 --> 0:15:06.840 the services know who we are. They learn who we are, 0:15:07.200 --> 0:15:11.119 Advertisers can better target ads to us. It's data, it's algorithms, 0:15:11.160 --> 0:15:12.520 it's big data. That's the currency. 0:15:12.600 --> 0:15:15.440 Yeah. This is Sandra at Mats's Business and Her World. 0:15:15.440 --> 0:15:18.120 She's Associate Professor of business at Columbia Business School, the 0:15:18.120 --> 0:15:20.720 author of a new book out today, mind Masters, The 0:15:20.800 --> 0:15:23.840 Data Driven Science of Predicting and Changing Human Behavior. She 0:15:23.920 --> 0:15:27.200 joins us in our Bloomberg Interactive Booker studio. I'm so 0:15:27.280 --> 0:15:29.480 glad to have you here with us. Welcome, happy New year. 0:15:30.400 --> 0:15:32.120 Before we get into the book. I mean, when you 0:15:32.160 --> 0:15:36.280 hear this development from meta platforms, I don't know what's 0:15:36.320 --> 0:15:39.840 your reaction and what confidence do you have that we 0:15:39.880 --> 0:15:42.080 don't have a lot of misinformation and some problems as 0:15:42.120 --> 0:15:43.080 a result out of this. 0:15:43.360 --> 0:15:45.400 I mean, I think I share your concerns of getting 0:15:45.480 --> 0:15:47.800 rid of content moderation, because, right, I think we've seen 0:15:47.840 --> 0:15:51.440 over the last couple of years what happens with misinformation, 0:15:52.000 --> 0:15:54.360 and just frankly, I think misinformation is just such a 0:15:54.400 --> 0:15:56.480 small piece of the entire puzzle because a lot of 0:15:56.480 --> 0:15:59.480 the information that's out there is not necessarily fake and 0:16:00.200 --> 0:16:02.840 not true, but it's just slant in right, So it's 0:16:02.880 --> 0:16:05.920 not necessarily that it's actually inaccurate, but it has like 0:16:05.960 --> 0:16:08.400 a certain angle and a certain spin that speaks to 0:16:08.680 --> 0:16:11.400 what we want to hear. And for me, that's even 0:16:11.480 --> 0:16:14.040 a bigger problem because it's much harder to regulate, right, 0:16:14.040 --> 0:16:17.560 it's much harder to take down from content moderators or 0:16:17.600 --> 0:16:20.640 as metas trying to do now just from a consensus 0:16:20.640 --> 0:16:23.160 among users. Right, that's an even higher bow when we 0:16:23.160 --> 0:16:26.320 think about these news that are maybe not actually inaccurate 0:16:26.520 --> 0:16:29.280 but certainly tailored to a certain opinion. 0:16:29.640 --> 0:16:31.440 Is this the way of the future, though, Are we 0:16:31.480 --> 0:16:35.080 sort of moving past this idea of a fact based 0:16:35.120 --> 0:16:39.760 society and one that's more based on interpreting what you 0:16:39.840 --> 0:16:41.680 see that's thrown at you. And I think it takes 0:16:41.680 --> 0:16:44.800 on a different The question takes on something different when 0:16:44.920 --> 0:16:47.360 you know, as I'm asking, I'm thinking about AI generated 0:16:47.360 --> 0:16:49.440 content and what we do know is real and what 0:16:49.480 --> 0:16:51.000 we don't know is not real. 0:16:51.200 --> 0:16:53.480 Yeah, I think it's a risky gamble to think about 0:16:53.480 --> 0:16:57.800 this moving post or past what I think of shared reality, right, 0:16:57.880 --> 0:17:02.200 it's the idea that as a society, people living together, frankly, 0:17:02.520 --> 0:17:04.560 we can make sense of the world in a way 0:17:04.560 --> 0:17:07.400 that at least offers us the opportunity to have a discussion. 0:17:07.760 --> 0:17:09.880 And I think the moment that we entered this world 0:17:09.960 --> 0:17:13.199 where I have completely a completely different reality than you 0:17:13.240 --> 0:17:15.480 and we're not even discussing it because we're cut into 0:17:15.640 --> 0:17:18.360 in these echo chambers online right where I don't even 0:17:18.400 --> 0:17:20.600 see what you see, I think that's a really risky 0:17:20.640 --> 0:17:22.879 gamble because it's it's not even out there anymore. We 0:17:22.920 --> 0:17:25.879 don't have the public square anymore where we can say, well, 0:17:26.000 --> 0:17:28.160 this is something that you've seen, I've seen this, Well, 0:17:28.160 --> 0:17:29.879 what do you think is actually true? How should we 0:17:29.960 --> 0:17:32.080 be moving forward? I think that is what is what 0:17:32.160 --> 0:17:32.520 is missing? 0:17:32.640 --> 0:17:34.160 Well, it's so funny, I think we thought social media. 0:17:34.160 --> 0:17:36.960 It's been great sparking all these conversations, but it's really 0:17:37.000 --> 0:17:40.080 kind of a one one you know, pathway dump if 0:17:40.119 --> 0:17:41.679 you will, right, and then you kind of have to 0:17:41.680 --> 0:17:43.880 deal with it. What I want to ask you is 0:17:43.960 --> 0:17:46.760 your book Mind Masters, The Data Driven Science of Predicting 0:17:46.800 --> 0:17:49.600 and Changing Human Behavior. I want to get into the predictability. 0:17:49.840 --> 0:17:53.119 Do you say that if we had really monitored social 0:17:53.119 --> 0:17:55.240 media we would have been able to predict the January 0:17:55.320 --> 0:18:00.359 sixth uprising? Could we have predicted some other things, you know, 0:18:00.880 --> 0:18:03.000 in terms of what has happened in society? 0:18:03.280 --> 0:18:06.679 Yeah, So what I'm mostly interested in is actually trying 0:18:06.720 --> 0:18:10.320 to understand individuals. So what you're talking about is like 0:18:10.359 --> 0:18:13.240 predicting these macro level trends, right, It's like how is 0:18:13.280 --> 0:18:15.920 the collective acting? And I do think that you might 0:18:15.920 --> 0:18:18.200 have been able to predict that, right, because it's this 0:18:18.240 --> 0:18:20.879 is all coming down to sentiment. It's like people are angry, 0:18:21.000 --> 0:18:27.280 people want to change, So the fact that people matters hands. 0:18:27.560 --> 0:18:29.560 It's like what we call social listening. It's trying to 0:18:29.560 --> 0:18:31.080 see what is it that people care about? 0:18:32.440 --> 0:18:36.440 And you talk specifically about something called psychological targeting, which 0:18:36.480 --> 0:18:38.400 I don't know that, tim have we kind of really, 0:18:38.440 --> 0:18:41.440 I don't know that I've heard that terminology. What is that? Yeah? 0:18:41.480 --> 0:18:46.040 So psychological targeting is the way in which algorithms can 0:18:46.080 --> 0:18:50.000 translate your data into psychological constructs. So it's really trying 0:18:50.000 --> 0:18:51.760 to make sense of you as a person. Right if 0:18:51.800 --> 0:18:54.080 I told you what, I can get access to everything 0:18:54.080 --> 0:18:56.919 you post on social media to maybe your credit card spending, 0:18:56.920 --> 0:18:59.919 your Google searches, the sensors that I'm betted in your 0:19:00.040 --> 0:19:04.399 smartphone which keep track youration via the GPS. 0:19:04.080 --> 0:19:05.040 Sense of for example. 0:19:05.240 --> 0:19:07.880 It doesn't seem that intimate, but once I can tell you, well, 0:19:07.880 --> 0:19:11.400 I can translate these traces into an understanding of whether 0:19:11.400 --> 0:19:16.240 you might be extroverted, impulsive, neurotic, whether you vote for 0:19:16.240 --> 0:19:20.040 a certain candidate, your political orientation, your sexual identity. Those 0:19:20.080 --> 0:19:22.280 are all really intimate insights. And that is the cracks 0:19:22.320 --> 0:19:25.639 of psychological targeting. It's making use of AIM machine learning 0:19:25.800 --> 0:19:29.000 to translate data into human understandable profile. 0:19:29.119 --> 0:19:30.760 Do you have to use AI and data? Because your 0:19:30.760 --> 0:19:33.480 book opens up talking about your own personal experience. The 0:19:33.640 --> 0:19:36.000 first eighteen years of your life spent in a very 0:19:36.000 --> 0:19:39.440 small village of what five hundred people, and an accident 0:19:39.440 --> 0:19:42.280 that you had that then immediately everybody knew about what's 0:19:42.280 --> 0:19:45.720 the connection between that and where technology is today and 0:19:45.720 --> 0:19:46.320 what tech can do? 0:19:46.520 --> 0:19:48.520 Yeah, So I think it's absolutely right, and that the 0:19:48.520 --> 0:19:51.720 fact that we oftentimes observe people's behavior and make inferences 0:19:51.720 --> 0:19:54.720 about who they are isn't new. Right in this village 0:19:54.720 --> 0:19:56.920 that I grew up and people observe what I was doing, 0:19:56.960 --> 0:19:58.760 They saw me running to the bus every morning, and 0:19:58.800 --> 0:20:01.480 they probably figured out that I wasn't the most organized 0:20:01.520 --> 0:20:03.879 person in the world. And so the incident that you 0:20:03.920 --> 0:20:06.879 were referring to is essentially I had this motorcycle crash 0:20:06.920 --> 0:20:08.439 and the whole village knew about it. 0:20:08.520 --> 0:20:10.320 Right, So in an instance, those. 0:20:10.119 --> 0:20:13.080 New spread and it's not just like an isolated well 0:20:13.119 --> 0:20:15.480 this is what happened. It's like, Okay, I'm gonna now 0:20:15.600 --> 0:20:18.320 understand who Sandra is, and I'm going to use that 0:20:18.359 --> 0:20:21.600 knowledge moving forward to maybe push her in certain directions. 0:20:21.640 --> 0:20:24.080 But maybe she if she's not organized, maybe she's not 0:20:24.119 --> 0:20:25.800 the one that I want to rely on when I 0:20:25.800 --> 0:20:27.280 have to move my stuff and when I have to 0:20:27.400 --> 0:20:30.919 organize something that has to be perfectly done. So I 0:20:30.960 --> 0:20:33.080 think that the shift to the digital world just means 0:20:33.119 --> 0:20:36.040 that we have neighbors all around us, and they're not 0:20:36.160 --> 0:20:40.439 really physical neighbors. They're neighbors that are algorithms and they 0:20:40.520 --> 0:20:42.439 observe everything we do based on the data and then 0:20:42.480 --> 0:20:43.840 make very similar inferences. 0:20:44.200 --> 0:20:48.960 Yeah, all right, So so I don't know that, you know, 0:20:49.040 --> 0:20:50.520 the horse is out of the barn, out of the 0:20:50.560 --> 0:20:53.640 social media barn. So I'm just like, I don't know 0:20:53.760 --> 0:20:55.600 where do we need to go or how do we 0:20:55.680 --> 0:20:59.359 then need to think about social media? I mean, I 0:20:59.359 --> 0:21:01.280 think I read that is it something that you did 0:21:01.840 --> 0:21:04.200 where you put I think all your social media down? 0:21:04.320 --> 0:21:06.280 I think it was a calumn for the times or 0:21:06.280 --> 0:21:09.320 something where you stepped away, Like, what is it that 0:21:09.359 --> 0:21:12.120 we need to do to maybe have a better way 0:21:12.119 --> 0:21:15.240 forward and maybe understand society at large. 0:21:15.400 --> 0:21:17.240 I think it's a great question, and to me, it 0:21:17.280 --> 0:21:19.639 actually comes back to this analogy of the village, right 0:21:19.640 --> 0:21:21.919 because the fact that my neighbors knew everything about me, 0:21:22.000 --> 0:21:25.040 they knew my innovations, preferences, dreams, hopes, and so on, 0:21:25.440 --> 0:21:27.960 actually allow them to give the best advice ever because 0:21:27.960 --> 0:21:30.199 they knew me right, They really understood what I wanted, 0:21:30.440 --> 0:21:32.840 but it was also like a lot of room for manipulation. 0:21:33.240 --> 0:21:35.080