1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul Sweene. You, 2 00:00:05,360 --> 00:00:07,680 Speaker 1: along with my co host Lisa Brahma Waits, each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money. Whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor. Find a Bloomberg Penil podcast on Apple 6 00:00:15,520 --> 00:00:17,959 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:22,320 Speaker 1: at Bloomberg dot com. This is the interview of the day. 8 00:00:22,440 --> 00:00:25,800 Speaker 1: Roger McNamee, co founder Elevation Partners, joining us here in 9 00:00:25,800 --> 00:00:28,480 Speaker 1: our Bloomberg Interactive Brokers studio. We talk a lot about 10 00:00:28,560 --> 00:00:31,160 Speaker 1: Facebook on this radio station, but maybe we don't talk 11 00:00:31,240 --> 00:00:34,880 Speaker 1: enough about the impact that Facebook has on our daily lives, 12 00:00:34,880 --> 00:00:38,959 Speaker 1: on privacy, on political elections in this country. But that's 13 00:00:38,960 --> 00:00:42,159 Speaker 1: gonna change right now. Roger, thanks so much for joining us. Okay, 14 00:00:42,479 --> 00:00:46,680 Speaker 1: Facebook taken to the cleaners by the public about the 15 00:00:46,800 --> 00:00:51,080 Speaker 1: role that it played knowingly or unknowingly in the election 16 00:00:51,159 --> 00:00:54,520 Speaker 1: in terms of allowing discourse to go in different directions. 17 00:00:54,720 --> 00:00:56,720 Speaker 1: Have they learned their lesson as we gear up for 18 00:00:56,720 --> 00:00:59,640 Speaker 1: the election? Right? We want them to have learned that 19 00:01:00,040 --> 00:01:04,320 Speaker 1: democracy is too important to be damaged by the interests 20 00:01:04,319 --> 00:01:07,520 Speaker 1: of any corporation. The one they've actually learned is that 21 00:01:08,640 --> 00:01:12,000 Speaker 1: Facebook is global, that in many ways it's like a 22 00:01:12,120 --> 00:01:15,520 Speaker 1: nation state, and as a result, it has the power 23 00:01:16,240 --> 00:01:21,840 Speaker 1: to ignore the needs of countries that it operates in. 24 00:01:21,920 --> 00:01:24,119 Speaker 1: I mean, keep in mind, this is a company that 25 00:01:24,200 --> 00:01:28,360 Speaker 1: has ignored subpoenas from the parliaments of the United Kingdom 26 00:01:28,400 --> 00:01:31,640 Speaker 1: and Canada, which are two of its largest and most 27 00:01:31,680 --> 00:01:35,000 Speaker 1: profitable markets. And so I think what's going on right 28 00:01:35,040 --> 00:01:39,600 Speaker 1: now is that I think Mark has concluded that Facebook's 29 00:01:41,000 --> 00:01:46,280 Speaker 1: future will be best assured by maintenance of the status quo, 30 00:01:46,360 --> 00:01:50,200 Speaker 1: so to say, the real action President Trump, and you know, 31 00:01:50,400 --> 00:01:55,480 Speaker 1: without being too obvious about it, I think there making 32 00:01:55,600 --> 00:01:58,400 Speaker 1: changes that at the margin are immensely valuable to the 33 00:01:58,440 --> 00:02:01,800 Speaker 1: Trump campaign where eld of to other campaigns, specifically the 34 00:02:01,880 --> 00:02:07,440 Speaker 1: decision to reverse the policy on fact checking campaign ads, 35 00:02:08,360 --> 00:02:11,840 Speaker 1: and there's an analogous one that they've done for Mark Bloomberg, 36 00:02:12,240 --> 00:02:17,280 Speaker 1: where they've chosen not to fact check things done by 37 00:02:17,320 --> 00:02:21,640 Speaker 1: influencers on Instagram and YouTube that are paid for by campaigns. 38 00:02:21,720 --> 00:02:25,960 Speaker 1: And those are choices that in a normal democracy you 39 00:02:25,960 --> 00:02:29,880 Speaker 1: wouldn't make, but at this moment in time, in this 40 00:02:29,960 --> 00:02:35,399 Speaker 1: particular country, those are decisions Facebook has made with at 41 00:02:35,560 --> 00:02:39,760 Speaker 1: best mild pushback. Well we had. We did get some 42 00:02:39,800 --> 00:02:44,880 Speaker 1: pushback from George Sorrow's civilionaire of philanthropist and uh AN investor, 43 00:02:45,000 --> 00:02:48,760 Speaker 1: and he wrote a note in the Financial Times saying 44 00:02:49,120 --> 00:02:52,639 Speaker 1: that Zuckerberg and Cheryl Sandburg should be removed from their 45 00:02:52,680 --> 00:02:57,080 Speaker 1: posts and saying they should not accept political advertising. Is 46 00:02:57,120 --> 00:02:59,720 Speaker 1: there any other push that perhaps has a little more 47 00:03:00,120 --> 00:03:02,200 Speaker 1: than an op ed in the Financial Times from George 48 00:03:02,200 --> 00:03:07,040 Speaker 1: Sorrows actually to get them to do that. My hypothesis 49 00:03:07,040 --> 00:03:10,040 Speaker 1: is that Mr Soros was speaking mostly to the European Union, 50 00:03:10,320 --> 00:03:14,360 Speaker 1: where I think he is message has a welcome audience. 51 00:03:15,320 --> 00:03:19,720 Speaker 1: You know, I think he is enormously respected around the world, 52 00:03:20,120 --> 00:03:24,480 Speaker 1: but particularly in Europe. The challenge that we face are, 53 00:03:24,480 --> 00:03:27,600 Speaker 1: I think, simply put, is there are no counterfeiling, sorry, 54 00:03:27,680 --> 00:03:31,000 Speaker 1: countervailing forces in our democracy. You know, we were designed 55 00:03:31,040 --> 00:03:33,520 Speaker 1: to have three elements of government that pushed back on 56 00:03:33,560 --> 00:03:36,280 Speaker 1: each other. We would have pressed that pushed back on 57 00:03:36,400 --> 00:03:39,160 Speaker 1: all elements government. You would have business and religion that 58 00:03:39,280 --> 00:03:42,800 Speaker 1: pushed back on each other. And now the things that 59 00:03:42,920 --> 00:03:45,480 Speaker 1: caused those to be in opposition to each other have 60 00:03:45,680 --> 00:03:49,680 Speaker 1: broken down, and so you know, the Trump administration is 61 00:03:49,720 --> 00:03:52,480 Speaker 1: put together an alliance with business and a portion of 62 00:03:52,520 --> 00:03:56,760 Speaker 1: the of the religious world that has allowed it to 63 00:03:56,840 --> 00:04:03,040 Speaker 1: withstand any pushback from journal and has allowed to defy 64 00:04:03,240 --> 00:04:07,280 Speaker 1: two hundred and forty years of convention in operating the government. 65 00:04:07,280 --> 00:04:11,080 Speaker 1: And that I think we cannot overstate the profound impact 66 00:04:11,120 --> 00:04:14,840 Speaker 1: that Google and Facebook have had in enabling that. We 67 00:04:14,840 --> 00:04:17,320 Speaker 1: should note that Michael Bloomberg is the founder and principal 68 00:04:17,560 --> 00:04:21,920 Speaker 1: shareholder of Bloomberg LP and Bloomberg News and Bloomberg Radio. Roger, 69 00:04:22,400 --> 00:04:25,280 Speaker 1: you know, with all your experience in Silicon Valley, UH, 70 00:04:25,360 --> 00:04:30,280 Speaker 1: silver Lake Partners, Elevation Partners, we've you know, during all 71 00:04:30,279 --> 00:04:32,599 Speaker 1: that time, the US has taken a very light touch 72 00:04:32,760 --> 00:04:36,720 Speaker 1: to regulating Silicon Valley and technology versus say the European Union, 73 00:04:36,720 --> 00:04:38,960 Speaker 1: going all the back to Microsoft and things like that. 74 00:04:39,839 --> 00:04:43,960 Speaker 1: Do you sense that that is fundamentally changing at all? 75 00:04:44,040 --> 00:04:47,320 Speaker 1: We've had some CEOs and clarting, including Mark Zuckerberg brought 76 00:04:47,320 --> 00:04:49,400 Speaker 1: in front of a Congress that's kind of new, that 77 00:04:49,560 --> 00:04:52,120 Speaker 1: fields new. Do you think things are changing? I believe 78 00:04:52,200 --> 00:04:55,599 Speaker 1: that they have to change. I think the tech industry 79 00:04:55,680 --> 00:04:59,520 Speaker 1: is today where the chemicals industry was in nineteen sixty, 80 00:04:59,720 --> 00:05:03,840 Speaker 1: where where the medicine industry was in nineteen hundred, or 81 00:05:03,880 --> 00:05:06,640 Speaker 1: where the building trades were after the Great Chicago Fire. 82 00:05:07,040 --> 00:05:10,760 Speaker 1: Where these things are so strategic to the economy that 83 00:05:11,480 --> 00:05:15,400 Speaker 1: you have to find a way to have them operate 84 00:05:15,440 --> 00:05:20,159 Speaker 1: without doing great harm. And you know, the chemicals industries 85 00:05:20,200 --> 00:05:23,760 Speaker 1: to pour mercury into fresh water, and that had massive 86 00:05:23,839 --> 00:05:26,960 Speaker 1: consequence for public health as well as for the environment. 87 00:05:27,240 --> 00:05:29,240 Speaker 1: And we said, look, we're not gonna allow that anymore. 88 00:05:29,240 --> 00:05:31,960 Speaker 1: We're not gonna allow you to spuse smoke into the atmosphere. 89 00:05:32,000 --> 00:05:34,520 Speaker 1: And you know, you remember what New York City was like, 90 00:05:34,760 --> 00:05:37,000 Speaker 1: you know, in the seventies and early eighties, when you 91 00:05:37,040 --> 00:05:40,760 Speaker 1: couldn't see anything because of all the smog. And tech 92 00:05:40,839 --> 00:05:42,680 Speaker 1: is now in that place, and we have to have 93 00:05:42,760 --> 00:05:45,919 Speaker 1: some kind of regulation. And in my mind, we've tried 94 00:05:45,960 --> 00:05:50,040 Speaker 1: self regulation that's failed miserably, and we really need to 95 00:05:50,080 --> 00:05:52,640 Speaker 1: impose it from the outside and has to start, frankly, 96 00:05:52,880 --> 00:05:55,080 Speaker 1: from the people who use the products, who have to 97 00:05:55,160 --> 00:05:58,040 Speaker 1: recognize that there's a lot of harm being done to 98 00:05:58,080 --> 00:06:00,920 Speaker 1: our children, there's a lot of harm done to our family. 99 00:06:00,960 --> 00:06:03,799 Speaker 1: In France, right we can't have Thanksgiving dinner without getting 100 00:06:03,800 --> 00:06:07,440 Speaker 1: into political fights and these things are not an accident. 101 00:06:07,520 --> 00:06:10,200 Speaker 1: They're part of the business model. Roger unfortunately only had 102 00:06:10,200 --> 00:06:12,320 Speaker 1: a better minute left. But I do want to ask you. 103 00:06:12,320 --> 00:06:16,480 Speaker 1: You were an early investor and a mentor to Mark Zuckerberg. 104 00:06:16,880 --> 00:06:19,880 Speaker 1: Do you regret investing in it? I wish that I 105 00:06:19,920 --> 00:06:24,440 Speaker 1: had been more successful by persuading Mark in that there 106 00:06:24,480 --> 00:06:27,520 Speaker 1: was a structural problem at Facebook. Did you know there was? 107 00:06:28,279 --> 00:06:31,080 Speaker 1: I first observed it at the beginning of twenty I 108 00:06:31,080 --> 00:06:34,240 Speaker 1: wish I'd seen it sooner, but I had stopping active 109 00:06:34,279 --> 00:06:37,600 Speaker 1: there in two thousand nine, and candidly, I was just 110 00:06:37,800 --> 00:06:40,200 Speaker 1: enjoying the success of the company because in the early 111 00:06:40,279 --> 00:06:42,680 Speaker 1: days it just felt like this was one of the 112 00:06:42,760 --> 00:06:46,120 Speaker 1: really great new companies, and Mark's value system in those 113 00:06:46,240 --> 00:06:49,800 Speaker 1: days had no negative manifestations that you could see, at 114 00:06:49,839 --> 00:06:52,040 Speaker 1: least that I saw. But when I started to see 115 00:06:52,080 --> 00:06:54,480 Speaker 1: the problem in sixteen, I then reached out to him 116 00:06:54,520 --> 00:06:58,400 Speaker 1: in October and said, Mark, there is something structurally wrong 117 00:06:58,720 --> 00:07:00,960 Speaker 1: with the business model, the out rhythms, and the culture 118 00:07:01,000 --> 00:07:03,640 Speaker 1: that's allowing bad people to hurt innocent people. I gave 119 00:07:03,720 --> 00:07:06,440 Speaker 1: them some examples from civil ryans, and then I really 120 00:07:06,480 --> 00:07:09,679 Speaker 1: focused on both what I saw in the Democratic primary 121 00:07:09,720 --> 00:07:14,440 Speaker 1: with disinformation but especially Brexit, where you could see that 122 00:07:14,560 --> 00:07:19,040 Speaker 1: disinformation almost certainly affected the outcome. And I spent three 123 00:07:19,120 --> 00:07:22,360 Speaker 1: months pleading with them, beginning before the election and then 124 00:07:22,360 --> 00:07:25,800 Speaker 1: continuing for months afterwards as their friends just think, look, 125 00:07:26,480 --> 00:07:29,280 Speaker 1: you got to treat this like Johnson and Johnson treated 126 00:07:29,280 --> 00:07:31,360 Speaker 1: the thilent all poisoning. You got to come to the 127 00:07:31,400 --> 00:07:35,760 Speaker 1: defense to people, use the practices America. And he didn't listen. Well, 128 00:07:35,760 --> 00:07:39,120 Speaker 1: apparently not. Roger mcmacnamee, thank you so much for being 129 00:07:39,160 --> 00:07:41,360 Speaker 1: with us. Tremendous speaking with you, Roger McNamee as co 130 00:07:41,480 --> 00:07:45,240 Speaker 1: founder of Elevation Partners based in Menlo Park, but joining 131 00:07:45,320 --> 00:07:48,720 Speaker 1: us here in our interactive Brokers studios and early mentor 132 00:07:49,080 --> 00:07:54,760 Speaker 1: and investor in Facebook. Really interesting insight into the current 133 00:07:54,800 --> 00:07:58,320 Speaker 1: election cycle and the possibility that Facebook will play a 134 00:07:58,360 --> 00:08:01,720 Speaker 1: similar role. Yeah, sting into it in terms starting more. 135 00:08:02,200 --> 00:08:04,800 Speaker 1: In addition to Rogers starting to get more attention, I 136 00:08:04,800 --> 00:08:14,360 Speaker 1: think from a different walks of life. Well. As a 137 00:08:14,400 --> 00:08:17,280 Speaker 1: democratic race heats up for the White House, one theme 138 00:08:17,320 --> 00:08:20,880 Speaker 1: that is emerging is taxation and taxation of the rich. 139 00:08:20,960 --> 00:08:23,000 Speaker 1: To get a sense of kind of where the different 140 00:08:23,040 --> 00:08:26,440 Speaker 1: candidates stand, we welcome Laura Davidson She's a congressional tax 141 00:08:26,480 --> 00:08:29,080 Speaker 1: reporter for Bloomberg News, joining us in the Bloomberg Ninia 142 00:08:29,120 --> 00:08:32,080 Speaker 1: nine one studio on Washington, d C. Lara, thanks so 143 00:08:32,160 --> 00:08:34,520 Speaker 1: much for joining us. Give us if you would kind 144 00:08:34,520 --> 00:08:37,280 Speaker 1: of a summary of where some of the candidates are 145 00:08:37,640 --> 00:08:41,560 Speaker 1: in terms of taxation going forward. Yeah, so there's really 146 00:08:41,640 --> 00:08:44,680 Speaker 1: quite arranged. They're all promoting sort of the same ideas, 147 00:08:44,720 --> 00:08:48,200 Speaker 1: higher taxes on the wealthy, higher taxes on corporations. But 148 00:08:48,360 --> 00:08:50,880 Speaker 1: really the difference is the magnitude of how much they 149 00:08:50,880 --> 00:08:52,400 Speaker 1: want to raise those levies. So kind of at the 150 00:08:52,400 --> 00:08:55,960 Speaker 1: bottom level, you have Amy Klobachar, Mike Bloomberg, Joe Biden. 151 00:08:56,360 --> 00:08:59,080 Speaker 1: They're proposing, you know, some some modest increases to to 152 00:08:59,120 --> 00:09:01,400 Speaker 1: the corporate tax rate end um, as well as some 153 00:09:01,480 --> 00:09:03,520 Speaker 1: levees that would hit higher earners, but they haven't gone 154 00:09:03,559 --> 00:09:05,720 Speaker 1: as far as like a wealth tax, for example. On 155 00:09:05,800 --> 00:09:08,960 Speaker 1: the other end, you have um Sanders uh short, shortly 156 00:09:09,000 --> 00:09:11,360 Speaker 1: followed by Warren and then Buddha Judge kind of lagging 157 00:09:11,400 --> 00:09:13,680 Speaker 1: there in third place of sort of the biggest tax 158 00:09:13,720 --> 00:09:16,760 Speaker 1: increases you'd see. What they're proposing is really sort of 159 00:09:17,520 --> 00:09:20,920 Speaker 1: um is massive compared to other presidential tax plans we've 160 00:09:20,920 --> 00:09:23,480 Speaker 1: seen in years past. They're looking at tens of trillions 161 00:09:23,480 --> 00:09:25,920 Speaker 1: of dollars, you know, just for comparison, and Hillary Clinton 162 00:09:25,920 --> 00:09:28,400 Speaker 1: in sixteen proposed a you know about one and a 163 00:09:28,440 --> 00:09:31,800 Speaker 1: half trillion dollar tax plans. So there's big differences in um, 164 00:09:31,880 --> 00:09:33,720 Speaker 1: sort of what the more moderate lane is doing and 165 00:09:33,760 --> 00:09:36,920 Speaker 1: what the progressive lane is proposing. Laura, let's drill into 166 00:09:37,000 --> 00:09:40,040 Speaker 1: two particular proposals, because there are two individuals on that 167 00:09:40,120 --> 00:09:42,440 Speaker 1: stage tonight that are going to be really front and center, 168 00:09:42,800 --> 00:09:45,080 Speaker 1: and that is Bernie Sanders because he is emerging as 169 00:09:45,120 --> 00:09:48,600 Speaker 1: the modified front runner of this race. And Michael Bloomberg, 170 00:09:48,679 --> 00:09:51,320 Speaker 1: majority owner and founder of Bloomberg LP, which owns this 171 00:09:51,440 --> 00:09:54,360 Speaker 1: radio station and and the news segment. Uh, this is 172 00:09:54,400 --> 00:09:56,200 Speaker 1: gonna be the first debate that he is going to 173 00:09:56,280 --> 00:09:59,200 Speaker 1: participate in, and so a lot of eyes on him 174 00:09:59,240 --> 00:10:03,199 Speaker 1: and he's compreppers entering the more moderate branch of the 175 00:10:03,240 --> 00:10:06,240 Speaker 1: Democratic Party. Can you give us a sense on on 176 00:10:06,360 --> 00:10:10,720 Speaker 1: sort of the scale, uh, and what their proposals actually are. Yeah, 177 00:10:10,720 --> 00:10:13,120 Speaker 1: So just looking at a corporate taxes, for example, there's 178 00:10:13,120 --> 00:10:14,640 Speaker 1: some new numbers out on that, so that's kind of 179 00:10:14,679 --> 00:10:17,600 Speaker 1: a small piece to look at. Uh, Bernie Sanders, for examples, 180 00:10:17,679 --> 00:10:21,079 Speaker 1: is looking at proposing higher corporate taxes of about almost 181 00:10:21,080 --> 00:10:23,400 Speaker 1: four trillion over a decade. So he's looking at raising 182 00:10:23,440 --> 00:10:26,120 Speaker 1: the corporate rate back to thirty percent, which is where 183 00:10:26,120 --> 00:10:28,280 Speaker 1: it was before the Trump tax law, and as well 184 00:10:28,280 --> 00:10:31,439 Speaker 1: as getting rid of some depreciation benefits that that kind 185 00:10:31,440 --> 00:10:33,640 Speaker 1: of helped corporations lower their tax rates. So that would 186 00:10:33,679 --> 00:10:36,360 Speaker 1: be a huge increase in In the other direction, Mike 187 00:10:36,360 --> 00:10:39,240 Speaker 1: Bloomberg is also talking about raising corporate tax rates, but 188 00:10:39,559 --> 00:10:42,040 Speaker 1: um going to about twenty eight percent, which is, you know, 189 00:10:42,120 --> 00:10:44,599 Speaker 1: lower than it had been, but um kind of a 190 00:10:44,679 --> 00:10:47,640 Speaker 1: number that Obama had had championed for many years. That 191 00:10:47,640 --> 00:10:49,520 Speaker 1: would be only about a one point to one point 192 00:10:49,559 --> 00:10:53,280 Speaker 1: three trillion dollar increase over a decade UM. And at 193 00:10:53,280 --> 00:10:54,920 Speaker 1: that twenty eight number, you see come up a lot. 194 00:10:54,960 --> 00:10:57,560 Speaker 1: And that's also Joe Biden's been talking about that um 195 00:10:57,600 --> 00:11:00,200 Speaker 1: Amy Klobuchars, that has the lowest number in the field 196 00:11:00,200 --> 00:11:03,360 Speaker 1: at which is actually something a number that that Republicans 197 00:11:03,360 --> 00:11:05,240 Speaker 1: had talked about UM when they were planning their tax 198 00:11:05,240 --> 00:11:07,760 Speaker 1: reform a couple of years ago. So, Laura, one of 199 00:11:07,760 --> 00:11:10,160 Speaker 1: the big big issues that really came to the forefront 200 00:11:10,200 --> 00:11:15,800 Speaker 1: in was income inequality. How did these tax plans impact that, 201 00:11:16,200 --> 00:11:18,880 Speaker 1: if at all? Um So, it really depends on not 202 00:11:18,960 --> 00:11:21,040 Speaker 1: kind of the specific provision and kind of how you 203 00:11:21,040 --> 00:11:23,600 Speaker 1: look at them all in total as well. But this 204 00:11:23,679 --> 00:11:25,760 Speaker 1: is an issue that you hear, you know that Bernie 205 00:11:25,800 --> 00:11:28,600 Speaker 1: Sanders and Elizabeth Warren have talked about specifically, but across 206 00:11:28,600 --> 00:11:31,719 Speaker 1: the board, all plans would would would tax the rich 207 00:11:31,800 --> 00:11:35,320 Speaker 1: a lot more. Income inequality and wealth inequality are sort 208 00:11:35,320 --> 00:11:38,320 Speaker 1: of two different issues. Income inequalities a lot easier to tackle. 209 00:11:38,360 --> 00:11:40,079 Speaker 1: You can do that by, you know, raising the capital 210 00:11:40,120 --> 00:11:42,560 Speaker 1: gains rate, which nearly every candidate has proposed to do, 211 00:11:42,640 --> 00:11:46,000 Speaker 1: tax at the same as labor income, raising income rates 212 00:11:46,000 --> 00:11:48,760 Speaker 1: on on high earners, um doing things like a financial 213 00:11:48,760 --> 00:11:52,280 Speaker 1: transaction tax, which uh Mike Bloomberg I said yesterday he 214 00:11:52,280 --> 00:11:54,800 Speaker 1: would support him. That's been something that Sanders and Warren 215 00:11:54,800 --> 00:11:56,920 Speaker 1: and Buddha Judge and another candidates have been talking about 216 00:11:56,920 --> 00:11:59,600 Speaker 1: for a while. Wealth inequality is a little bit trickier 217 00:11:59,600 --> 00:12:02,199 Speaker 1: because that's on accumulated wealth. In our tax system as 218 00:12:02,240 --> 00:12:05,200 Speaker 1: it stands right now, doesn't tax wealth. It just taxes 219 00:12:05,440 --> 00:12:08,320 Speaker 1: income essentially. So the wealth tax that Warren and Sanders 220 00:12:08,360 --> 00:12:11,840 Speaker 1: have been talking about would do more to alleviate wealth inequality. 221 00:12:11,920 --> 00:12:13,440 Speaker 1: But there's a lot of questions about one of that, 222 00:12:13,520 --> 00:12:16,280 Speaker 1: is that politically viable? And two is it even constitutional? 223 00:12:16,440 --> 00:12:19,559 Speaker 1: Is anyone talking about rolling back some of the salt 224 00:12:20,360 --> 00:12:23,280 Speaker 1: issues salt tax deductions? Well, I mean, I'm just wondering 225 00:12:23,320 --> 00:12:27,120 Speaker 1: because there's been a theory this is disproportionately hit coastal 226 00:12:27,200 --> 00:12:31,480 Speaker 1: states that are traditionally voted for Democratic candidates. However, the 227 00:12:31,520 --> 00:12:35,120 Speaker 1: salt tax deduction and the state and local tax deduction 228 00:12:35,600 --> 00:12:39,800 Speaker 1: really does tend to favor wealthier individuals. So it's not politically, 229 00:12:40,200 --> 00:12:43,360 Speaker 1: uh necessarily going to support the Democratic case, has or 230 00:12:43,400 --> 00:12:46,360 Speaker 1: been any way in there by the Democratic candidates. You 231 00:12:46,360 --> 00:12:48,000 Speaker 1: have really just touched on sort of the the hot 232 00:12:48,000 --> 00:12:51,400 Speaker 1: button issue among kind of democratic tax thinkers right now. 233 00:12:51,480 --> 00:12:54,160 Speaker 1: And so really the the movement on salt has been 234 00:12:54,240 --> 00:12:57,280 Speaker 1: on Capitol Hill. Democrats on the campaign trail have not 235 00:12:57,320 --> 00:12:59,400 Speaker 1: been talking to that party, partly because it is a 236 00:12:59,480 --> 00:13:02,320 Speaker 1: such a state specific issue. Some of those states haven't 237 00:13:02,360 --> 00:13:04,600 Speaker 1: even come up yet um in the primaries. As well 238 00:13:04,640 --> 00:13:07,080 Speaker 1: as it it's a politically difficult thing because if you 239 00:13:07,120 --> 00:13:09,959 Speaker 1: live in Florida or Iowa or Kansas or or any 240 00:13:10,000 --> 00:13:12,160 Speaker 1: of these states that that have either no income taxes 241 00:13:12,240 --> 00:13:15,120 Speaker 1: or very low rates. This is an important to you, 242 00:13:15,160 --> 00:13:17,040 Speaker 1: but if you're in Connecticut or New York or California, 243 00:13:17,120 --> 00:13:20,160 Speaker 1: this is so what Democrats on on the hill say 244 00:13:20,280 --> 00:13:22,360 Speaker 1: is they believe that if a Democrat were to come 245 00:13:22,360 --> 00:13:23,640 Speaker 1: into the White House, so they were to take back 246 00:13:23,640 --> 00:13:26,160 Speaker 1: the Senate and have control, salts would be on the table, 247 00:13:26,440 --> 00:13:28,960 Speaker 1: but that Democrats on the campaign trail are just really 248 00:13:29,000 --> 00:13:31,120 Speaker 1: too scared to talk about it right now. So, Laura, 249 00:13:31,160 --> 00:13:35,600 Speaker 1: what's the argument today, the contemporary argument for not raising taxes? 250 00:13:36,800 --> 00:13:39,640 Speaker 1: The contemporary argument for not raising taxes. Well, so, so 251 00:13:39,679 --> 00:13:42,560 Speaker 1: that's sort of kind of your traditional um trickle down 252 00:13:42,679 --> 00:13:46,080 Speaker 1: kind of um idea that Republicans, you know, have champion 253 00:13:46,120 --> 00:13:48,120 Speaker 1: for a long long time. Though, I've been talking to 254 00:13:48,160 --> 00:13:50,520 Speaker 1: some Republicans and they've been saying, uh, you know, and 255 00:13:50,559 --> 00:13:52,480 Speaker 1: you see this with with Trump talking about a middle 256 00:13:52,480 --> 00:13:56,000 Speaker 1: income tax cut, is that they're really concerned to talk 257 00:13:56,040 --> 00:14:00,840 Speaker 1: about lowering rates for the for top earners and for corporations. 258 00:14:00,840 --> 00:14:02,480 Speaker 1: You know, the Republicans used to talk for a long 259 00:14:02,480 --> 00:14:04,440 Speaker 1: time about Louis wearing that top rate which now sits 260 00:14:04,480 --> 00:14:07,160 Speaker 1: at thirty seven percent for individuals down to something in 261 00:14:07,200 --> 00:14:09,760 Speaker 1: the twenties. That's really off the table. They're not They're 262 00:14:09,800 --> 00:14:12,280 Speaker 1: not going there. You see kind of both the window 263 00:14:12,360 --> 00:14:15,120 Speaker 1: of what both parties are are kind of talking about 264 00:14:15,160 --> 00:14:16,959 Speaker 1: has shifted to the left, you know, of course for 265 00:14:17,000 --> 00:14:19,960 Speaker 1: the Democrats, but also some for the Republicans. Laura, thanks 266 00:14:20,000 --> 00:14:22,240 Speaker 1: so much for joining us. We really appreciate your thoughts there. 267 00:14:22,320 --> 00:14:25,640 Speaker 1: Laura Davison, Congressional tax reporter for Bloomberg News, joining us 268 00:14:25,640 --> 00:14:27,800 Speaker 1: from the Bloomberg N nine one studio in Washington, D C. 269 00:14:27,920 --> 00:14:30,440 Speaker 1: And of course, UH taxation is going to be one 270 00:14:30,480 --> 00:14:32,160 Speaker 1: of the key things I suspect that we're going to 271 00:14:32,240 --> 00:14:34,040 Speaker 1: hear a lot about tonight at the debates. Well, there 272 00:14:34,080 --> 00:14:36,760 Speaker 1: also is the bifurcation and the Democratic Party. You've got 273 00:14:36,800 --> 00:14:39,240 Speaker 1: Bernie Sanders emerging very much as a front run are 274 00:14:39,280 --> 00:14:43,280 Speaker 1: consolidating some of the UH the support that previously had 275 00:14:43,400 --> 00:14:46,240 Speaker 1: been split with Elizabeth Warren and it's really going to 276 00:14:46,320 --> 00:14:49,800 Speaker 1: be him very much on the forefront. And Michael Bloomberg 277 00:14:49,840 --> 00:14:53,160 Speaker 1: coming into the first debate again, UH founder and majority 278 00:14:53,160 --> 00:14:55,040 Speaker 1: owner of Bloomberg LP. It's just going to be really 279 00:14:55,120 --> 00:14:59,040 Speaker 1: interesting to see where the focus is is it on 280 00:14:59,280 --> 00:15:02,920 Speaker 1: what plan? There are two further the US economy and 281 00:15:02,920 --> 00:15:05,480 Speaker 1: and sort of you know, with healthcare, etcetera. Or is 282 00:15:05,480 --> 00:15:07,240 Speaker 1: it going to be on beating President Trump? And those 283 00:15:07,240 --> 00:15:09,280 Speaker 1: are sort of some of the two narratives that have 284 00:15:09,360 --> 00:15:24,440 Speaker 1: been dominant throughout the entire race. Boys, we think back 285 00:15:24,480 --> 00:15:27,440 Speaker 1: to en and even year to date here, equity markets 286 00:15:27,680 --> 00:15:31,480 Speaker 1: very very strong. Here one area that's you know, performed better, 287 00:15:31,560 --> 00:15:33,480 Speaker 1: but still I think a little bit unloved as a 288 00:15:33,560 --> 00:15:37,080 Speaker 1: financial sector. Dave Ellis, and portfolio manager for Hennessey Funds, 289 00:15:37,280 --> 00:15:39,200 Speaker 1: joins us. He's based in Boston, but joining us here 290 00:15:39,200 --> 00:15:42,200 Speaker 1: in our Bloomberg Interactor Broker studio. So so Dy've give 291 00:15:42,280 --> 00:15:44,760 Speaker 1: us a sense of kind of just the financial stocks. 292 00:15:44,760 --> 00:15:46,400 Speaker 1: And I think back to some of the big players 293 00:15:46,400 --> 00:15:49,240 Speaker 1: of Goldman Sacks, the cities at JP Morgan's had a 294 00:15:49,240 --> 00:15:51,680 Speaker 1: pretty good twenty nineteen in terms of performance. How do 295 00:15:51,720 --> 00:15:56,240 Speaker 1: you think how's the group in general been performing? Financials? Well, 296 00:15:56,280 --> 00:15:58,960 Speaker 1: I think there's a you're saying a separation the people 297 00:15:59,000 --> 00:16:02,400 Speaker 1: that are balance sheets entric, meaning that they have the 298 00:16:02,440 --> 00:16:04,880 Speaker 1: bulk of their earnings from the balance sheet, they're they're 299 00:16:04,920 --> 00:16:08,120 Speaker 1: not doing well. Uh, they're underperforming. And I have a 300 00:16:08,120 --> 00:16:10,800 Speaker 1: small cat financial fund that's actually down for the year 301 00:16:11,320 --> 00:16:15,080 Speaker 1: and that's primarily a balance sheet centric business. But the 302 00:16:15,120 --> 00:16:17,680 Speaker 1: ones that are that are have more fee income, more 303 00:16:17,680 --> 00:16:20,200 Speaker 1: more recurring fee income, like a Visa or master card, 304 00:16:20,280 --> 00:16:22,400 Speaker 1: they continue to do well because that's what people want. 305 00:16:22,520 --> 00:16:25,480 Speaker 1: They don't, you know, they don't want to own these 306 00:16:25,480 --> 00:16:28,240 Speaker 1: balance sheets that are under threat from either credit or 307 00:16:28,320 --> 00:16:30,960 Speaker 1: low rates. A lot of people look at the banks 308 00:16:31,160 --> 00:16:34,400 Speaker 1: as sort of completely dependent on the yield curve. The 309 00:16:34,440 --> 00:16:36,640 Speaker 1: flat of the yield curve in the United States goes 310 00:16:36,760 --> 00:16:38,920 Speaker 1: the gap between in particular two year and ten year 311 00:16:38,960 --> 00:16:43,840 Speaker 1: treasury yields, the less value people see in financials today, 312 00:16:43,840 --> 00:16:46,480 Speaker 1: we're seeing the yield curve flatten it again. Do you 313 00:16:46,480 --> 00:16:49,240 Speaker 1: think that this is a fair assessment of the relationship 314 00:16:49,280 --> 00:16:52,240 Speaker 1: between the yield curve and financials? I think so, I 315 00:16:52,240 --> 00:16:56,400 Speaker 1: mean disappointingly. So. You know, when I started many many 316 00:16:56,480 --> 00:16:59,120 Speaker 1: years ago, FED funds are eighteen percent, so it didn't 317 00:16:59,120 --> 00:17:01,520 Speaker 1: matter what the yield curve was, you made plenty of money. 318 00:17:01,840 --> 00:17:03,640 Speaker 1: But now the flatness of the yeld curve and the 319 00:17:03,680 --> 00:17:07,840 Speaker 1: lowness of rates relative to zero is a double whammy. 320 00:17:07,920 --> 00:17:10,320 Speaker 1: And if you look at a big bank like JP Morgan, 321 00:17:10,359 --> 00:17:12,720 Speaker 1: half of their profits going to come from the balance sheet. 322 00:17:13,320 --> 00:17:15,560 Speaker 1: If you look at a medium sized a smaller bank, 323 00:17:15,600 --> 00:17:19,560 Speaker 1: it can be seventy five of their income comes from 324 00:17:19,600 --> 00:17:22,440 Speaker 1: the balance sheet. So if rates are gonna go low 325 00:17:22,480 --> 00:17:24,680 Speaker 1: and we're gonna end up like Japan here in America, 326 00:17:24,800 --> 00:17:27,119 Speaker 1: those those spreads are gonna come in and that's gonna 327 00:17:27,160 --> 00:17:31,440 Speaker 1: attack half to of their revenue. So if I told 328 00:17:31,480 --> 00:17:35,600 Speaker 1: you that half of Apple's revenues we're under pressure, where 329 00:17:35,600 --> 00:17:38,199 Speaker 1: do you think the stock would be going? Right? All right, 330 00:17:38,240 --> 00:17:40,840 Speaker 1: let's we see. Let's take a look at the asset 331 00:17:40,920 --> 00:17:44,040 Speaker 1: management side of the business. We had another deal announced yesterday, 332 00:17:44,320 --> 00:17:48,880 Speaker 1: Franklin Templeton buying leg Mason fifty dollars to share. Um. 333 00:17:49,000 --> 00:17:52,120 Speaker 1: Is that just a reaction to the issue that has 334 00:17:52,160 --> 00:17:54,840 Speaker 1: plagued the asset management business for almost a generation now, 335 00:17:54,840 --> 00:17:59,280 Speaker 1: which is pressure on fees. I think it's it's that, 336 00:17:59,359 --> 00:18:05,640 Speaker 1: and it's also these acquisitions allow them to reset employee levels, 337 00:18:05,720 --> 00:18:10,080 Speaker 1: compensation levels, layers of management levels, so you have a 338 00:18:10,160 --> 00:18:13,080 Speaker 1: number of things that go on there. Um. But again 339 00:18:13,119 --> 00:18:16,600 Speaker 1: this is addition. By subtraction, You're you're putting two companies 340 00:18:16,640 --> 00:18:20,520 Speaker 1: together that are losing a u M hoping that you 341 00:18:20,560 --> 00:18:24,159 Speaker 1: can buy subtraction. Meaning even though you're still shrinking. You 342 00:18:24,240 --> 00:18:28,600 Speaker 1: can add value for the shareholders by and again resetting 343 00:18:28,640 --> 00:18:32,440 Speaker 1: the corporate structure. That that's what acquisitions allow you to do. 344 00:18:32,880 --> 00:18:34,919 Speaker 1: Uh and and I think you're going to see that 345 00:18:35,000 --> 00:18:38,480 Speaker 1: more in this business. The backdrop of this merger was 346 00:18:38,560 --> 00:18:43,439 Speaker 1: that active management, in particular equitative active equity fund management 347 00:18:44,000 --> 00:18:47,199 Speaker 1: is a dying industry. That is your industry. What do 348 00:18:47,240 --> 00:18:50,360 Speaker 1: you what do you think when people say that, Well, 349 00:18:50,400 --> 00:18:54,639 Speaker 1: I think there's you know, it's an industry that is 350 00:18:54,640 --> 00:18:58,840 Speaker 1: is under pressure because of what the market is doing. 351 00:18:59,680 --> 00:19:06,080 Speaker 1: Um and the market is giving you fairly decent performance metrics, 352 00:19:06,280 --> 00:19:09,880 Speaker 1: which makes the index funds a safer way to play. 353 00:19:10,359 --> 00:19:14,200 Speaker 1: So what what the FED is essentially done is taking 354 00:19:14,240 --> 00:19:17,760 Speaker 1: a lot of the volatility out of capitalism. They did 355 00:19:17,800 --> 00:19:22,240 Speaker 1: it two decembers ago. They did it when what's three 356 00:19:22,280 --> 00:19:24,600 Speaker 1: or four months ago when the repo thing. They don't 357 00:19:24,640 --> 00:19:28,760 Speaker 1: allow capitalism to come back in and therefore allow active 358 00:19:28,760 --> 00:19:32,000 Speaker 1: management to add value. And so as long as the 359 00:19:32,040 --> 00:19:38,560 Speaker 1: FED is there tamping down volatility and tamping down capitalism, 360 00:19:38,640 --> 00:19:41,000 Speaker 1: than being in an index fund, we're just going along 361 00:19:41,000 --> 00:19:43,320 Speaker 1: with the flow of money and the growth of money 362 00:19:43,359 --> 00:19:46,160 Speaker 1: in the system. Remember, the money is going coming into 363 00:19:46,200 --> 00:19:50,760 Speaker 1: the system every day. There's more dollars out there every day. 364 00:19:50,960 --> 00:19:53,240 Speaker 1: If if the same amount goes in the stock stocks 365 00:19:53,240 --> 00:19:56,320 Speaker 1: will slowly go up. And if the FED says we're 366 00:19:56,320 --> 00:19:58,240 Speaker 1: not going to have any volatility, then you should just 367 00:19:58,280 --> 00:20:01,600 Speaker 1: own an index fund. But once volatility returns, if it 368 00:20:01,640 --> 00:20:05,359 Speaker 1: ever does, the act of management will will win. And 369 00:20:05,440 --> 00:20:08,320 Speaker 1: the question is that the market doesn't, at least investors 370 00:20:08,320 --> 00:20:10,640 Speaker 1: don't believe that that's going to happen right now. What 371 00:20:10,720 --> 00:20:13,840 Speaker 1: areas are you looking at right now that are most uh, 372 00:20:13,880 --> 00:20:15,920 Speaker 1: you know, attractive to you right now? Again, we're eleven 373 00:20:16,000 --> 00:20:20,359 Speaker 1: years into this financial economic cycle. The markets have been rallying, uh, 374 00:20:20,440 --> 00:20:24,560 Speaker 1: And so where do you see opportunities? Well, I think 375 00:20:24,720 --> 00:20:26,520 Speaker 1: you know, the market is telling you that you should 376 00:20:26,520 --> 00:20:32,639 Speaker 1: own five stocks. Um. And that's and and financials aren't 377 00:20:32,640 --> 00:20:34,640 Speaker 1: one of them, are right? Well right, they aren't. But 378 00:20:34,640 --> 00:20:37,359 Speaker 1: but certainly the visa master cards of the world have 379 00:20:37,440 --> 00:20:39,760 Speaker 1: done quite well. And that's why you know, my large 380 00:20:39,840 --> 00:20:44,360 Speaker 1: capt fund is performed well. Thank god, I'm doing something right, um. 381 00:20:44,400 --> 00:20:46,919 Speaker 1: And I think that's I think the winners are going 382 00:20:46,920 --> 00:20:51,320 Speaker 1: to continue to be winners. And you know, the on 383 00:20:51,520 --> 00:20:53,920 Speaker 1: in the companies that don't want to invest in their future, 384 00:20:54,000 --> 00:20:56,080 Speaker 1: don't want to take chances are going to continue to 385 00:20:56,119 --> 00:20:58,919 Speaker 1: fall by the wayside. And I think you just have 386 00:20:59,000 --> 00:21:01,439 Speaker 1: a lot of having have knots out there. You have 387 00:21:01,520 --> 00:21:03,760 Speaker 1: it in in income and distribution, you have it in 388 00:21:03,800 --> 00:21:07,600 Speaker 1: stock valuations, you have it in home prices, and it's 389 00:21:07,600 --> 00:21:10,120 Speaker 1: just going to continue. Dave Ellison, thank you so much 390 00:21:10,119 --> 00:21:12,880 Speaker 1: for being with us. Dave Ellison is a profolio manager 391 00:21:12,920 --> 00:21:16,479 Speaker 1: of the Hennessey Small Cap and large cap financial funds, 392 00:21:16,760 --> 00:21:19,880 Speaker 1: joining us here in our interactive brokers studio is normally 393 00:21:19,920 --> 00:21:23,480 Speaker 1: based in Boston. A really interesting kind of conundrum and 394 00:21:23,520 --> 00:21:26,200 Speaker 1: I've heard this before, Paul, from people saying the FED 395 00:21:26,320 --> 00:21:29,399 Speaker 1: is killed off the volatility as well as sort of 396 00:21:29,440 --> 00:21:33,199 Speaker 1: the natural price discovery that markets have been used to. 397 00:21:33,800 --> 00:21:37,480 Speaker 1: And the question is, you know what will occur if 398 00:21:37,520 --> 00:21:39,840 Speaker 1: they allow it to go back or does this mean 399 00:21:39,880 --> 00:21:42,200 Speaker 1: that they kind of can't. They can't, And if you 400 00:21:42,200 --> 00:21:43,960 Speaker 1: look around the world, it's not just the FED, E 401 00:21:44,040 --> 00:21:46,040 Speaker 1: c B and some other central bankers as well. So 402 00:21:46,320 --> 00:21:48,520 Speaker 1: that seems to be the world we're in right now 403 00:21:48,600 --> 00:21:59,120 Speaker 1: post financial crisis. The digital transformation of the industries from 404 00:21:59,280 --> 00:22:03,679 Speaker 1: shopping to buying cars to buying homes to UH finding 405 00:22:03,680 --> 00:22:05,800 Speaker 1: a place to stay when you visit another city has 406 00:22:05,840 --> 00:22:09,320 Speaker 1: been dramatic. It has overhauled the entire economy in many ways, 407 00:22:09,640 --> 00:22:11,679 Speaker 1: and there is a question of how this is impacting 408 00:22:11,960 --> 00:22:15,400 Speaker 1: the music industry or streaming is gaining such a big 409 00:22:15,440 --> 00:22:18,600 Speaker 1: share of how people access music. Joining us now is 410 00:22:18,640 --> 00:22:21,639 Speaker 1: Ben Mendoza. He is co founder and chief executive officer 411 00:22:21,680 --> 00:22:24,840 Speaker 1: of beat Chain, based in London. Joining us here today 412 00:22:24,880 --> 00:22:28,280 Speaker 1: in our interactive broker studios UH and beat Jane kind 413 00:22:28,280 --> 00:22:31,040 Speaker 1: of caters to this new era. But before we get 414 00:22:31,080 --> 00:22:33,680 Speaker 1: into what you do, can we talk about how does 415 00:22:33,680 --> 00:22:37,000 Speaker 1: a musician today make money? Okay, thanks to NASA, thanks 416 00:22:37,080 --> 00:22:39,679 Speaker 1: very much for having having me here. Um, it's a 417 00:22:39,760 --> 00:22:44,680 Speaker 1: very good question that musicians today make most of their money. Um, 418 00:22:44,920 --> 00:22:49,040 Speaker 1: if they're you know, the normal musicians that are that 419 00:22:49,080 --> 00:22:52,400 Speaker 1: are playing clubs and and and other events, make most 420 00:22:52,440 --> 00:22:55,560 Speaker 1: of the money from live performance. They will make some 421 00:22:55,600 --> 00:23:00,520 Speaker 1: money from streaming, but it will typically be possibly fifteen 422 00:23:02,040 --> 00:23:05,480 Speaker 1: max um. So they need to be able to sell 423 00:23:05,520 --> 00:23:10,280 Speaker 1: tickets and sell their merchandise and perform. That's how they 424 00:23:10,280 --> 00:23:11,960 Speaker 1: do it, all right, So how does beach chain fit 425 00:23:12,080 --> 00:23:17,199 Speaker 1: into the economics of today's music industry. Okay, Um, the 426 00:23:17,200 --> 00:23:21,359 Speaker 1: thing about musicians is then they're not necessarily the most 427 00:23:22,240 --> 00:23:26,040 Speaker 1: technically savvy people. Okay, So what we've done at Beach 428 00:23:26,080 --> 00:23:29,040 Speaker 1: Chain is we've tried to abstract away all the technicalities 429 00:23:29,160 --> 00:23:34,000 Speaker 1: of boosting your brand using social media and other ways 430 00:23:34,040 --> 00:23:36,120 Speaker 1: in which you can get in front of your target 431 00:23:36,160 --> 00:23:40,080 Speaker 1: audience and made that very simple for musicians to use. 432 00:23:40,440 --> 00:23:42,240 Speaker 1: So we put together a whole set of tools, a 433 00:23:42,280 --> 00:23:47,760 Speaker 1: sort of platform which includes understanding where your audience is 434 00:23:47,840 --> 00:23:51,440 Speaker 1: seeing us literally a dashboard with a with a map 435 00:23:51,840 --> 00:23:55,160 Speaker 1: that says, this is where Spotify listeners are listening to you, 436 00:23:55,400 --> 00:23:57,879 Speaker 1: this is where your Facebook fans are, and so on, 437 00:23:58,040 --> 00:24:01,840 Speaker 1: so that you can understand who likes what and decide 438 00:24:02,119 --> 00:24:05,520 Speaker 1: when you're going to play your next event where to 439 00:24:05,600 --> 00:24:08,040 Speaker 1: go to do that because you can see where your 440 00:24:08,040 --> 00:24:13,080 Speaker 1: fans are congregated. Okay, So we provide that we also 441 00:24:13,119 --> 00:24:16,600 Speaker 1: provide a set of tools that allows these musicians to 442 00:24:16,720 --> 00:24:21,960 Speaker 1: post out on the social channels automatically against a schedule, 443 00:24:23,119 --> 00:24:25,840 Speaker 1: the right sort of content that's going to be engaging 444 00:24:25,920 --> 00:24:31,520 Speaker 1: for their fans. Many musicians have this idea that the 445 00:24:31,560 --> 00:24:34,719 Speaker 1: first thing they should do is get some music up 446 00:24:34,720 --> 00:24:38,200 Speaker 1: on Spotify, you know, and they'll get some streaming revenue 447 00:24:38,200 --> 00:24:40,640 Speaker 1: from that. Well, actually, that's not the advice we would 448 00:24:40,640 --> 00:24:43,679 Speaker 1: give them. We would say, before you do that, build 449 00:24:43,720 --> 00:24:46,520 Speaker 1: up a fan base who wants to stream it. You know, 450 00:24:46,640 --> 00:24:49,600 Speaker 1: you've got to You've got to actually engage those bad audience. 451 00:24:49,680 --> 00:24:51,560 Speaker 1: So the tools we have are designed to do that. 452 00:24:51,800 --> 00:24:55,080 Speaker 1: There's always been a complaint in an era when CDs 453 00:24:55,119 --> 00:24:58,920 Speaker 1: for a thing or vital was the dominant form of 454 00:24:59,080 --> 00:25:03,680 Speaker 1: getting your music, where the labels had such power over 455 00:25:03,760 --> 00:25:07,919 Speaker 1: which music got distributed. Do they still have that power, 456 00:25:09,000 --> 00:25:13,800 Speaker 1: Absolutely they do. But the the opportunity there is there 457 00:25:13,800 --> 00:25:17,520 Speaker 1: now with the technology as it is today for artists 458 00:25:17,600 --> 00:25:20,920 Speaker 1: to sidestep that. It used to be that if you 459 00:25:21,000 --> 00:25:25,080 Speaker 1: wanted to promote yourself and build that audience I was 460 00:25:25,119 --> 00:25:27,720 Speaker 1: talking about, then you needed the dollars that the big 461 00:25:28,720 --> 00:25:31,840 Speaker 1: major's had behind you to do that. But has it 462 00:25:31,960 --> 00:25:34,640 Speaker 1: really been a really changed I mean, I'm just trying 463 00:25:34,640 --> 00:25:38,040 Speaker 1: to figure out if you can get enough of a following, 464 00:25:38,080 --> 00:25:41,440 Speaker 1: whether it's on Instagram or whether it's on Facebook, whether 465 00:25:41,520 --> 00:25:44,240 Speaker 1: you see an increasing number of cases where people are 466 00:25:44,280 --> 00:25:47,280 Speaker 1: able to sort of make their own fortune away from 467 00:25:47,280 --> 00:25:50,919 Speaker 1: the labels in a way that's unique. Yes, absolutely, and 468 00:25:50,960 --> 00:25:53,200 Speaker 1: we have case studies that show this. For the last 469 00:25:53,200 --> 00:25:55,959 Speaker 1: two years, we've been working with a number of bands 470 00:25:55,960 --> 00:26:00,640 Speaker 1: and across all genres that have managed to build up 471 00:26:00,800 --> 00:26:05,560 Speaker 1: literally hundreds of thousands of fans um and that's enabled 472 00:26:05,560 --> 00:26:09,280 Speaker 1: them to put on shows where they've hired the venue themselves, 473 00:26:09,359 --> 00:26:12,840 Speaker 1: they've sold the tickets themselves, and they keep the majority 474 00:26:12,880 --> 00:26:15,520 Speaker 1: of that that money this way, when they were doing 475 00:26:15,560 --> 00:26:18,520 Speaker 1: it through the traditional routes of having label services and 476 00:26:18,760 --> 00:26:23,200 Speaker 1: promoters and managers, then obviously those middlemen all take their 477 00:26:23,240 --> 00:26:26,199 Speaker 1: share and less ends up in the musicians pocket. So 478 00:26:26,280 --> 00:26:28,880 Speaker 1: what's the economic model for your company? For for beach chain, 479 00:26:28,920 --> 00:26:31,560 Speaker 1: how do you guys generate revenue? Okay, we generate revenue 480 00:26:32,160 --> 00:26:35,600 Speaker 1: by having a three tier model, so that the lowest 481 00:26:35,600 --> 00:26:39,160 Speaker 1: tier of the beaching platform is actually free to use 482 00:26:39,600 --> 00:26:42,720 Speaker 1: and it gives a lot of very valuable information. But 483 00:26:42,760 --> 00:26:46,160 Speaker 1: if you want to get into them the real meat 484 00:26:46,200 --> 00:26:50,560 Speaker 1: of of promoting yourself and using the marketing tools that 485 00:26:50,600 --> 00:26:53,680 Speaker 1: we we've supplied, then we have a subscription model, which 486 00:26:53,760 --> 00:26:58,960 Speaker 1: is for the sort of premium level is and then 487 00:26:59,160 --> 00:27:02,800 Speaker 1: per month, and at the sort of superstar end is 488 00:27:02,840 --> 00:27:06,680 Speaker 1: only per month, so it's still sort of the cost 489 00:27:06,680 --> 00:27:08,560 Speaker 1: of a pizza a month. We need to keep it 490 00:27:08,600 --> 00:27:12,440 Speaker 1: affordable for musicians. So what's the draw I mean, do 491 00:27:12,480 --> 00:27:15,840 Speaker 1: you have a sense that there would be interest from 492 00:27:15,840 --> 00:27:21,120 Speaker 1: a major record label to acquire you or partner with you? Okay? 493 00:27:21,880 --> 00:27:25,560 Speaker 1: I think there are lots of people looking at what 494 00:27:25,560 --> 00:27:27,680 Speaker 1: we're doing in the industry. I mean, we have already 495 00:27:27,720 --> 00:27:31,400 Speaker 1: fifty thousand people signed up to be Chained and we've 496 00:27:31,400 --> 00:27:34,439 Speaker 1: only just launched, So there's a lot of interest in 497 00:27:34,520 --> 00:27:36,120 Speaker 1: what we're doing and a lot we're getting a lot 498 00:27:36,119 --> 00:27:38,840 Speaker 1: of user feedback. And obviously it's not perfect jet and 499 00:27:38,840 --> 00:27:42,840 Speaker 1: we're carrying on improving it all the time. But I 500 00:27:42,880 --> 00:27:45,439 Speaker 1: think there's a whole bunch of services, especially when you 501 00:27:45,480 --> 00:27:47,199 Speaker 1: look at the data science, when you look at the 502 00:27:47,280 --> 00:27:50,840 Speaker 1: data that we generate, and this is something that the 503 00:27:51,040 --> 00:27:54,359 Speaker 1: artists individually are necessarily interested in, but the industry is 504 00:27:55,160 --> 00:27:57,960 Speaker 1: you can see signatures in that data. You can you 505 00:27:58,000 --> 00:28:01,040 Speaker 1: can look at those artists that are breaking out in 506 00:28:01,080 --> 00:28:04,080 Speaker 1: different areas, and that is very valuable even to the 507 00:28:04,160 --> 00:28:08,320 Speaker 1: major Can you imagine a time when you have Netflix 508 00:28:08,440 --> 00:28:12,159 Speaker 1: kind of listens or or monitors what people like and 509 00:28:12,200 --> 00:28:15,199 Speaker 1: then takes pieces of that and kind of recreates a 510 00:28:15,240 --> 00:28:17,120 Speaker 1: show based around that. Are you saying that that's kind 511 00:28:17,119 --> 00:28:19,280 Speaker 1: of that's basically what we're doing in the background. I 512 00:28:19,320 --> 00:28:24,320 Speaker 1: mean there's a lot of um, interesting technology getting towards 513 00:28:24,440 --> 00:28:27,920 Speaker 1: machine learning and and even some AI or that that 514 00:28:27,920 --> 00:28:33,000 Speaker 1: that tends to be banded around fairly freely these days. Um. 515 00:28:33,119 --> 00:28:35,439 Speaker 1: When you when you bring those different data sets together, 516 00:28:35,560 --> 00:28:38,360 Speaker 1: you can infer a lot of information and you can 517 00:28:38,400 --> 00:28:43,240 Speaker 1: make actionable insight out of that. So yes, definitely we 518 00:28:43,320 --> 00:28:48,200 Speaker 1: are seeing that we can help artists by saying, look, 519 00:28:48,280 --> 00:28:51,280 Speaker 1: this is what's working for other acts like you in 520 00:28:51,320 --> 00:28:54,680 Speaker 1: your in your genre, try doing this. You know post 521 00:28:54,760 --> 00:28:58,080 Speaker 1: here have this type of content and when they do 522 00:28:58,120 --> 00:29:01,440 Speaker 1: that they see a big uplift in the in their responses, 523 00:29:01,680 --> 00:29:04,360 Speaker 1: Um that they got. Ben Mendoza, thanks for joining us. 524 00:29:04,360 --> 00:29:07,760 Speaker 1: Really fascinating story. You talk about industry, like you mentioned earliers, 525 00:29:07,800 --> 00:29:10,400 Speaker 1: it's been disrupted. Boy, the music industry has been disrupted 526 00:29:10,400 --> 00:29:12,720 Speaker 1: with technology well, and it's so interesting to think about 527 00:29:12,960 --> 00:29:17,120 Speaker 1: how you can get such real time feedback about what's 528 00:29:17,160 --> 00:29:19,200 Speaker 1: popular and what's not and how you can sort of 529 00:29:19,200 --> 00:29:22,040 Speaker 1: tailor the music to that. And that's sort of what 530 00:29:22,040 --> 00:29:23,920 Speaker 1: we're seeing out of Netflix. The way they try to 531 00:29:23,960 --> 00:29:27,320 Speaker 1: craft shows around the likes or dislikes of the viewers. Yeah, 532 00:29:27,360 --> 00:29:29,480 Speaker 1: I could see how this would be for the independent 533 00:29:30,240 --> 00:29:32,400 Speaker 1: artist would be who's not signed up to a big label. 534 00:29:32,440 --> 00:29:35,680 Speaker 1: This would be hugely value added story. Ben Mendoza, co 535 00:29:35,760 --> 00:29:39,680 Speaker 1: founder and chief executive officer of be Chain, based in London, 536 00:29:39,760 --> 00:29:41,640 Speaker 1: but were fortunate that he's joining us here in our 537 00:29:41,640 --> 00:29:45,040 Speaker 1: Bloomberg Interactive Broker studio here in New York. So very 538 00:29:45,040 --> 00:29:47,680 Speaker 1: interesting on the music business. We've seen, uh, you know, 539 00:29:48,040 --> 00:29:50,600 Speaker 1: more and more the artists given kind of how the 540 00:29:50,680 --> 00:29:54,200 Speaker 1: music industries evolved as made most of their money today 541 00:29:54,760 --> 00:29:58,280 Speaker 1: by touring and uh it's less so from the recorded 542 00:29:58,320 --> 00:30:01,040 Speaker 1: contracts that they have with their labels. Interesting to see 543 00:30:01,040 --> 00:30:03,280 Speaker 1: how beat chain fits in here. Thanks for listening to 544 00:30:03,280 --> 00:30:05,680 Speaker 1: the Bloomberg P and L podcast. You can subscribe and 545 00:30:05,760 --> 00:30:08,880 Speaker 1: listen to interviews at Apple Podcasts or whatever podcast platform 546 00:30:08,960 --> 00:30:12,040 Speaker 1: you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney. 547 00:30:12,080 --> 00:30:14,560 Speaker 1: I'm Lisa abram Woyit's I'm on Twitter at Lisa abram 548 00:30:14,600 --> 00:30:17,200 Speaker 1: woits one before the podcast. You can always catch us 549 00:30:17,280 --> 00:30:18,840 Speaker 1: worldwide on Bloomberg Radio