WEBVTT - Bloomberg Businessweek Weekend - September 10th, 2021 0:00:01.040 --> 0:00:05.400 This is Bloomberg Business Week Inside from the reporters and 0:00:05.600 --> 0:00:09.200 editors who bring you America's most trusted business magazine, plus 0:00:09.240 --> 0:00:13.200 global business finance and tech news as it happened. Bloomberg 0:00:13.240 --> 0:00:16.759 Business Week with Carol Messer and Bloomberg Quick Takes Tim 0:00:16.800 --> 0:00:21.680 Stinevin on Bloomberg Radio. Hi, everyone, Welcome to the weekend 0:00:21.800 --> 0:00:24.959 edition of Bloomberg Business Week. Carol Masser is taking some 0:00:25.040 --> 0:00:28.080 well deserved time off. Coming up this hour, it's not 0:00:28.160 --> 0:00:31.200 a week without talking about the shrinking gap between traditional 0:00:31.240 --> 0:00:34.000 finance and crypto. Plus, we're gonna hear from one tech 0:00:34.120 --> 0:00:37.560 CEO who's focusing on the fight against ransomware, and next 0:00:37.600 --> 0:00:40.239 hour we hear from the CEO of lands End. He 0:00:40.320 --> 0:00:42.519 talks to us about the outlook for the holidays and 0:00:42.600 --> 0:00:45.479 how tough it's been to find employees. All that and 0:00:45.520 --> 0:00:47.600 more to come over the next two hours, but we 0:00:47.680 --> 0:00:50.440 begin with the current issue of Bloomberg Business Week magazine. 0:00:50.600 --> 0:00:53.479 It's the City's issue and feature stories about cities all 0:00:53.520 --> 0:00:56.520 over the world, the challenges they faced throughout the pandemic, 0:00:56.560 --> 0:00:59.360 and what they'll look like years into the future. It 0:00:59.440 --> 0:01:01.960 also takes a close look at one area of Seattle, 0:01:02.160 --> 0:01:05.280 a commercial district that has undergone trial by virus. The 0:01:05.319 --> 0:01:08.559 pandemic changed the heartbeat of urban areas across the US, 0:01:08.640 --> 0:01:10.880 and a few more so than the Pike Pine corridor 0:01:10.920 --> 0:01:14.319 of Seattle's Capitol Hill neighborhood. I spoke with Noah bou Hire, 0:01:14.440 --> 0:01:16.880 finance reporter for Bloomberg News, and I was joined by 0:01:16.920 --> 0:01:20.640 my Bloomberg Quick Take colleague Katie Greifeldt. Well, it's UM. 0:01:20.680 --> 0:01:23.440 I think what a lot of people would imagine as 0:01:23.480 --> 0:01:29.200 a Biburne at all hours, retail arts, commercial district. There's 0:01:29.560 --> 0:01:34.640 music venues, a ton of restaurant. UM. It's not uh, 0:01:34.880 --> 0:01:37.160 giant buildings, but you've got a lot of you know, 0:01:37.360 --> 0:01:41.760 for six seven eight story UM apartment blocks that have 0:01:41.880 --> 0:01:44.480 retail at the ground floor. So it was really the 0:01:44.520 --> 0:01:48.880 part of Seattle that that that felt most citylike outside 0:01:48.880 --> 0:01:52.040 of UM downtown. And what happened over the last year 0:01:52.040 --> 0:01:54.760 as the pandemic took hold and commuters started staying home 0:01:54.760 --> 0:01:56.880 and not going to those restaurants, and and then just 0:01:56.920 --> 0:01:59.600 a few months later, in the aftermath of the murder 0:01:59.600 --> 0:02:03.360 of George Floyd, UM activists took to the streets there 0:02:03.400 --> 0:02:07.400 to demand racial justice. Yeah, so look, it was an 0:02:07.400 --> 0:02:11.280 interesting UM neighborhood to follow for all those reasons you 0:02:11.400 --> 0:02:14.959 just mentioned. UM. You know, a lot of the businesses 0:02:15.200 --> 0:02:19.800 in in this corridor UH were the kinds of places 0:02:19.840 --> 0:02:22.760 that you know, relied on a vibrant street life and 0:02:22.760 --> 0:02:25.880 and and people being able to get together. And obviously 0:02:25.919 --> 0:02:29.800 the pandemic UM made that difficult. And UM the other 0:02:29.840 --> 0:02:32.320 thing that was interesting about this neighborhood is that there 0:02:32.360 --> 0:02:37.560 are just a ton of UM, smaller businesses. So you know, uh, 0:02:38.360 --> 0:02:41.400 Amazon has one of their Grocery Stories stores there. There's 0:02:41.440 --> 0:02:45.040 a Starbucks reserve Rosty in the neighborhood, so there's some 0:02:45.080 --> 0:02:47.840 corporate presence, but there were also a lot of small 0:02:48.440 --> 0:02:53.120 uh scrappy businesses that just had to figure it out. UM. 0:02:53.200 --> 0:02:57.079 And UH you know, with this piece, I I followed 0:02:57.280 --> 0:02:59.799 UM a number of them uh through the last year 0:02:59.800 --> 0:03:02.360 and a half to figure out how they did it. 0:03:02.440 --> 0:03:06.960 Because while you know a number of businesses did UM 0:03:07.160 --> 0:03:11.120 go under during the pandemic, UM, a lot managed to 0:03:11.160 --> 0:03:17.440 get to this point uh through UM the generosity of customers, 0:03:17.480 --> 0:03:23.799 through UM government assistance programs, and just a lot of 0:03:24.000 --> 0:03:30.320 scrappiness that I don't think um uh people and fully appreciated, 0:03:30.720 --> 0:03:32.640 and so no, it's a great piece. And one of 0:03:32.680 --> 0:03:34.800 the reasons why it's such a good read is because 0:03:34.840 --> 0:03:37.040 you did track a group of four businesses over the 0:03:37.080 --> 0:03:39.440 past year and a half. And I'm curious, you know, 0:03:39.480 --> 0:03:43.120 you mentioned the scrappiness of the businesses and the business owners, 0:03:43.160 --> 0:03:47.360 but I'm curious if there was a uniting common denominator 0:03:47.520 --> 0:03:50.839 and how they were all able to get through the pandemic. Yeah, 0:03:50.920 --> 0:03:53.240 that's a great question. UM I I really think it 0:03:53.320 --> 0:03:57.200 is the constellation of factors it was. It was you know, 0:03:57.320 --> 0:04:02.520 these these were established businesses with loyal customers and UM. 0:04:02.560 --> 0:04:05.360 You know, to the extent UH some of them were 0:04:05.360 --> 0:04:08.320 able to do go fund means government assistance, which is 0:04:08.400 --> 0:04:12.920 absolutely key UH programs like the Paycheck Protection Program. Pretty 0:04:13.000 --> 0:04:15.840 much everyone took that money. UM. It was either a 0:04:15.880 --> 0:04:20.719 form of bridge financing or UM uh to get them 0:04:20.720 --> 0:04:24.719 to other federal grants or UM or or it was 0:04:24.720 --> 0:04:27.880 the thing itself that that helped get them through UM. 0:04:27.920 --> 0:04:31.760 And then you know, I think another uh under appreciated 0:04:31.800 --> 0:04:33.919 part of this is that, UM, we're talking about a 0:04:33.960 --> 0:04:35.840 city where a lot of people have been willing to 0:04:35.839 --> 0:04:39.640 get vaccinated, and even though we've had pretty strong, um 0:04:39.640 --> 0:04:44.840 strong public health restrictions here in Washington State throughout the pandemic. 0:04:45.400 --> 0:04:48.240 UM people were willing to go back to this neighborhood 0:04:48.320 --> 0:04:51.560 when when those things lifted, because we're talking about a 0:04:51.600 --> 0:04:56.120 city where you know, seventy five more than seventy of 0:04:56.520 --> 0:05:01.640 UH people twelve and up have have gotten their jobs. Well, 0:05:01.720 --> 0:05:05.000 it's interesting because one of the one of the elements 0:05:05.040 --> 0:05:06.840 of this that really sticks out to me, that really 0:05:06.880 --> 0:05:10.640 caught my attention is the graphical representation of the change 0:05:10.680 --> 0:05:14.360 in weekly visits from that are in here charts that 0:05:14.440 --> 0:05:18.679 just show how foot traffic has not returned to retail 0:05:18.800 --> 0:05:24.200 establishments there too, restaurants there even after the vaccine rollout, 0:05:24.279 --> 0:05:28.719 to music venues for example, in some cases restaurant visits 0:05:28.720 --> 0:05:33.760 are still down even after vaccinations fifty from nineteen. How 0:05:33.760 --> 0:05:36.960 are these business owners dealing with that? Yeah, that's a 0:05:37.040 --> 0:05:38.560 that's a great question. I do. I do want to 0:05:38.600 --> 0:05:41.000 highlight that the data here is really interesting. We were 0:05:41.040 --> 0:05:45.360 able to get foot traffic data on about fifty locations 0:05:45.360 --> 0:05:48.920 around this neighborhood. Most of them were you know, commercial establishments, 0:05:49.080 --> 0:05:53.039 and UM, I think that data really does show you, 0:05:53.240 --> 0:05:57.040 like you said, that things are a far are far, far, 0:05:57.120 --> 0:06:00.400 far from being back to normal. Um and the reason 0:06:00.440 --> 0:06:03.680 these businesses are still you know, any of these owners 0:06:03.680 --> 0:06:05.560 will tell you things are not back to normal. I 0:06:05.560 --> 0:06:08.720 mean they are. They are still very much in the 0:06:08.760 --> 0:06:11.120 thick of this. And we're, you know, going into the 0:06:11.160 --> 0:06:14.000 fall when things like outdoor dining are going to be 0:06:14.080 --> 0:06:17.480 harder to do, and frankly and Seattle just not comfortable 0:06:18.360 --> 0:06:21.480 because it rains so much here. So I think that's 0:06:21.520 --> 0:06:23.840 a big part of this part of this story is 0:06:23.880 --> 0:06:27.800 that these businesses have been resilient, but they are by 0:06:27.839 --> 0:06:30.120 no means, you know, out of the ways yet. That 0:06:30.240 --> 0:06:32.920 was Bloomberg Finance reporter Noah Boo Hire. You're listening to 0:06:32.960 --> 0:06:35.880 Bloomberg Business Week coming out of the CEO of cracking 0:06:35.880 --> 0:06:39.520 a bank, on closing the gap between crypto and traditional finance. 0:06:39.920 --> 0:06:51.640 This is Bloomberg. This is Bloomberg Business Week with Carol 0:06:51.680 --> 0:06:57.560 Messer and Bloomberg Quick Takes Tim Spinovik from Bloomberg Radio. Now, 0:06:57.680 --> 0:07:00.360 this past week was a particularly notable one for crypto. 0:07:00.600 --> 0:07:03.040 We had the Bitcoin flash crash, where the crypto suddenly 0:07:03.080 --> 0:07:07.800 plunged sevent in just minutes. David Knitsky is the CEO 0:07:07.920 --> 0:07:10.240 at crack and Bank. It's one of the largest crypto 0:07:10.320 --> 0:07:14.240 exchanges with over eight million users worldwide. They've had about 0:07:14.280 --> 0:07:15.960 one million new sign ups in the second quarter of 0:07:17.320 --> 0:07:18.920 I spoke with David and I was joined by my 0:07:19.000 --> 0:07:21.720 quick Take co host Katie Greifeld. We started by asking 0:07:21.800 --> 0:07:25.440 why he's chosen Wyoming for the company headquarters. Wyoming past 0:07:25.560 --> 0:07:29.520 the first of its kind new regulatory license here for 0:07:29.680 --> 0:07:34.320 a special special purpose depository institution. It's a state chartered bank. 0:07:34.440 --> 0:07:37.440 And up until now, crypto companies have really been round 0:07:37.440 --> 0:07:41.440 peg square hold into existing licenses and regimes that didn't 0:07:41.440 --> 0:07:43.520 make a ton of sense, and we're kind of locked 0:07:43.560 --> 0:07:46.400 out of the existing banking mold. So for that reason, 0:07:46.400 --> 0:07:49.120 we'll bring in the US business under a more certain, 0:07:49.240 --> 0:07:53.160 more formal, and better regulatory regime, as well as expanding 0:07:53.200 --> 0:07:55.840 in the new opportunities, new products and markets. As you see, 0:07:55.880 --> 0:08:00.240 everything's converging between crypto, neo bank, spintech, traditional and were 0:08:00.320 --> 0:08:01.520 we want to be at the heart of that market. 0:08:01.520 --> 0:08:03.840 But but you do call yourself a bank, Yeah, we are. 0:08:03.880 --> 0:08:06.800 We are state chartered bank, and so Wyoming is interesting. 0:08:06.800 --> 0:08:11.480 Obviously has positioned itself to be a crypto hotbed. Where 0:08:11.520 --> 0:08:14.960 does that stand with the rest of the United States. 0:08:14.960 --> 0:08:18.720 Are other states moving towards Wyoming or is Wyoming really 0:08:18.760 --> 0:08:20.800 an outlier at this point? Why? I mean, definitely got 0:08:20.800 --> 0:08:24.040 the ball started, but the ball rolling. But a number 0:08:24.040 --> 0:08:27.160 of states have let's say, borrowed liberally from the Wyoming 0:08:27.160 --> 0:08:30.680 playbook and enacted their own version of a similar charter, 0:08:31.040 --> 0:08:34.199 and it's provoking federal regulators to take action as well. 0:08:34.240 --> 0:08:37.160 That's kind of the beauty of our republic and our 0:08:37.200 --> 0:08:40.120 system here where states can be the laboratories of innovation 0:08:40.360 --> 0:08:43.520 and push things forward faster than the federal government have. 0:08:43.720 --> 0:08:45.880 So it's really been a spark that's moved the whole 0:08:45.880 --> 0:08:48.400 industry forward. David, you say that kracking will be the 0:08:48.440 --> 0:08:53.080 first United States crypto bank, It's I'm wondering the problem 0:08:53.120 --> 0:08:55.040 that you're're setting out to solve here, what is not 0:08:55.120 --> 0:08:58.079 being met by traditional finance. Yeah, so in the traditional 0:08:58.240 --> 0:09:01.720 regimes right now, you can either apply for fifty state 0:09:01.760 --> 0:09:05.400 money transmission licenses or you can try and none of 0:09:05.400 --> 0:09:08.640 them have like crypto specific language. They're built for like 0:09:08.720 --> 0:09:11.320 Western unions and fin techs of the world. And then 0:09:11.600 --> 0:09:14.760 or you could try to pursue a banking license. But 0:09:15.040 --> 0:09:17.199 the federal regulators b C, the s c i C 0:09:17.600 --> 0:09:21.079 have been inconsistent about that UM and they don't have 0:09:21.360 --> 0:09:23.840 written moved about how they're going to treat crypto that 0:09:23.920 --> 0:09:26.959 has a dedicated supervisory and oversight manual. We just want 0:09:27.000 --> 0:09:29.359 to know, Hey, this is how we're gonna be regulated 0:09:29.559 --> 0:09:32.000 and what our expectations are and we can meet them. 0:09:32.120 --> 0:09:35.560 So for those reasons, the lack of clarity around some 0:09:35.640 --> 0:09:38.800 of the stuff in other states is really suboptimal. And 0:09:38.920 --> 0:09:41.920 banking has been a traditional problem for crypto cracking is 0:09:42.000 --> 0:09:45.520 lucky to have a swath of good third party banking partners, 0:09:45.559 --> 0:09:48.240 but there's nothing like vertically integrating and controlling your own 0:09:48.280 --> 0:09:50.680 destiny direct to the FED. And so, David, I've always 0:09:50.720 --> 0:09:53.800 been curious, you know, how do you scale? Obviously there 0:09:53.840 --> 0:09:57.120 are regulatory hurdles, but in terms of the average American 0:09:57.280 --> 0:10:00.760 who maybe only has a passing understand ending of what 0:10:00.920 --> 0:10:04.720 bitcoin and what cryptocurrencies are, how do you convince them 0:10:04.760 --> 0:10:07.720 that this is the next, you know, wave of banking, 0:10:07.760 --> 0:10:11.400 this is the next evolution of how you handle money. 0:10:11.440 --> 0:10:16.520 How do you bring that message beyond just the cryptocurrency community. Yeah, Well, one, 0:10:16.600 --> 0:10:19.800 the crypto currency community is is growing rapidly and more 0:10:19.800 --> 0:10:23.360 and more kind of mainstream adoption is taking place. We 0:10:23.400 --> 0:10:25.640 think that's going to continue. So on the one hand, 0:10:25.640 --> 0:10:27.640 the market is coming to us. But on the other hand, yeah, 0:10:27.800 --> 0:10:32.600 just banking license lets us offer online mobile checking accounts 0:10:32.600 --> 0:10:37.199 and savings accounts and traditional equities brokerage, things like that 0:10:37.200 --> 0:10:39.640 that you know mainstream America are used to. And so 0:10:39.679 --> 0:10:42.079 if you put that side by side or crypto, it's 0:10:42.080 --> 0:10:44.560 a kind of a great conversion mechanism. You do know 0:10:44.800 --> 0:10:46.920 on the Cracking Banks website that you are not f 0:10:47.000 --> 0:10:49.280 d I c ensured. The money that you put in, 0:10:49.400 --> 0:10:50.920 the crypto you put in is not f d I 0:10:50.920 --> 0:10:53.360 c ensured. Explain why that is a little bit and 0:10:54.320 --> 0:10:56.880 why you think that consumers from who might be a 0:10:56.920 --> 0:10:59.720 little concerned about that should or should not be Yeah, anything, 0:11:00.200 --> 0:11:03.160 their advantages to our structure. So the way that the 0:11:03.280 --> 0:11:05.880 SPDI charter works is we are required to be a 0:11:06.040 --> 0:11:09.719 fully reserved, fully back bank, so we maintain we take 0:11:09.720 --> 0:11:12.040 customer deposits and we keep a hundred percent of it 0:11:12.200 --> 0:11:15.320 in cash, so we don't have the types of market 0:11:15.400 --> 0:11:18.679 or credit risks or insolvency risks that the FBI c 0:11:18.920 --> 0:11:21.600 was meant to protect against. So as a result, we're 0:11:21.640 --> 0:11:24.120 kind of exempt from having to apply for that. There 0:11:24.240 --> 0:11:26.920 is no you know, risk because we're not lending money 0:11:26.960 --> 0:11:29.200 out in the mortgage portfolios, we're not putting it into 0:11:29.600 --> 0:11:32.480 we're not even putting the treasuries, let alone longer duration 0:11:32.559 --> 0:11:36.040 or risk your instruments. Given the increased interest in crypto 0:11:36.120 --> 0:11:39.360 the way, we do see traditional financial institutions starting to 0:11:39.440 --> 0:11:43.000 embrace it. If you expect to get significant competition from 0:11:43.120 --> 0:11:45.720 the big names in banking and even community banks, yeah, 0:11:45.720 --> 0:11:47.920 I mean I expect more and more to realize the 0:11:47.960 --> 0:11:50.920 opportunity and come to the market. We welcome them, not 0:11:51.000 --> 0:11:53.360 particularly concerned about it. As you see any new like 0:11:53.440 --> 0:11:56.240 technology medium, normally it's the folks who are kind of 0:11:56.240 --> 0:11:59.080 that native to that medium are the ones that do best. 0:11:59.080 --> 0:12:01.640 I think it'll be pretty cha vallenging for institutions and 0:12:01.720 --> 0:12:05.240 incumbents to really adopt the crypto fully. But I think 0:12:05.280 --> 0:12:07.480 it does help the market more broadly, and I do 0:12:07.559 --> 0:12:10.360 think the question is to find the existing financial industry 0:12:10.360 --> 0:12:13.200 coming to crypto rather than crypto coming to the financial industry. 0:12:13.240 --> 0:12:14.720 And so I want to switch gears and talk about 0:12:14.720 --> 0:12:17.400 stable coins because I'm kind of obsessed with them. For 0:12:17.440 --> 0:12:21.240 those listening who don't know, stable coins are cryptocurrencies that 0:12:21.440 --> 0:12:25.440 try to maintain a fixed exchange rate with a fiat currency, 0:12:25.800 --> 0:12:28.120 usually it's the dollar. They try to maintain a one 0:12:28.160 --> 0:12:32.280 to one peg. They've come under a lot of scrutiny lately. 0:12:32.679 --> 0:12:34.640 Some people might have heard of Tether. It's the largest 0:12:34.640 --> 0:12:36.679 stable coin. It was supposed to be back to one 0:12:36.720 --> 0:12:39.480 for one by US dollars. We learned in May that 0:12:39.559 --> 0:12:42.840 it wasn't. That actually holds a ton of commercial paper, 0:12:43.240 --> 0:12:46.640 maybe thirty one billion. If you look at Tether's market cap, 0:12:46.840 --> 0:12:51.200 I'm curious what that could look like going forward. We 0:12:51.280 --> 0:12:55.439 know that Treasury Secretary Jin Yellen is concerned about stable coins. 0:12:55.800 --> 0:12:59.600 Some FED policymakers have made worried noises as well. I'm 0:12:59.600 --> 0:13:02.200 curious even whether you think that we could see regulation 0:13:02.240 --> 0:13:06.120 in that space. Yeah. I always expect regulation in thought 0:13:06.200 --> 0:13:09.319 new financial markets, no doubt. I think the stable coins 0:13:09.360 --> 0:13:11.600 are a net benefit and a boon. In fact, the 0:13:11.720 --> 0:13:15.559 US should love stable coins. It is the best way 0:13:15.920 --> 0:13:20.880 to maintain our dollar reserve and hegemony and for our 0:13:21.200 --> 0:13:24.120 kind of global reach and global economic cloud. And so 0:13:24.160 --> 0:13:26.080 the U s should love stable coins. But we know 0:13:26.120 --> 0:13:28.280 that the US doesn't love stable coins, and you do 0:13:28.360 --> 0:13:31.080 have banks like Barkley's warning that this could raise some 0:13:31.120 --> 0:13:34.000 really thorny issues for the FED. If there is a 0:13:34.160 --> 0:13:37.200 run on Tether people trying to redeem their holdings, that 0:13:37.280 --> 0:13:40.280 could cause Tether to dump commercial paper on mass, and 0:13:40.320 --> 0:13:44.600 the commercial paper market is crucially important to just the 0:13:44.600 --> 0:13:47.440 functioning of companies. So I'm curious what would get the 0:13:47.520 --> 0:13:50.240 US on board if they should love stable coins. Not 0:13:50.320 --> 0:13:53.120 surprising that a bank would be wary of something that 0:13:53.440 --> 0:13:56.480 definitely is competitive to it, And there are certain areas 0:13:56.480 --> 0:13:59.360 of stable coins that you know could potentially use a 0:13:59.400 --> 0:14:01.640 little bit more and parency, no doubt, And in fact, 0:14:01.679 --> 0:14:05.400 even teather, which is certainly the more questionable ones in 0:14:05.400 --> 0:14:08.760 the market, like it's getting better and it is definitely changing. 0:14:08.840 --> 0:14:11.480 It's kind of like balance sheet to these concerns. So 0:14:11.559 --> 0:14:13.400 I do think that's going to change over time, and 0:14:13.400 --> 0:14:16.360 there's going to be more transparency, whether by force or 0:14:16.440 --> 0:14:19.360 just by market dynamics. So I expect that to happen 0:14:19.560 --> 0:14:22.440 sooner rather than later. That was David Kannitski, CEO at 0:14:22.480 --> 0:14:25.720 Cracking Bank, Still Ahead on Bloomberg Business Week. Who wins 0:14:25.720 --> 0:14:28.600 and who loses? In the Age of Tech Titans, We're 0:14:28.600 --> 0:14:30.880 gonna hear from the man who literally wrote the book 0:14:30.920 --> 0:14:39.520 on it. This is Bloomberg Broadcasting from the financial capital 0:14:39.520 --> 0:14:43.360 of the World, Bloomberg eleven Rio in New York to Washington, 0:14:43.440 --> 0:14:47.520 d C. Bloomberg to Boston, Bloomberg one O six one 0:14:47.640 --> 0:14:51.080 does San Francisco, Bloomberg nine six to the country Sirius 0:14:51.240 --> 0:14:54.400 XM Chamber one nine and around the globe the Bloomberg 0:14:54.440 --> 0:14:59.000 Business and Bloomberg Radio dot Com. This is Bloomberg Business 0:14:59.080 --> 0:15:02.240 Week with Kara A Messer and Bloomberg Quick Takes Tim 0:15:02.360 --> 0:15:07.360 Stinovin on Bloomberg Radio. Many people may think that they 0:15:07.440 --> 0:15:10.000 understand the secrets to the success of Silicon Valley and 0:15:10.040 --> 0:15:12.760 the Thing stocks, but the truth is well a lot 0:15:12.800 --> 0:15:15.880 more complicated. That's at least according to investment banker and 0:15:16.000 --> 0:15:19.280 Columbia Business School professor Jonathan Knee. He's the author of 0:15:19.280 --> 0:15:22.120 the new book The Platform Delusion, Who Wins and Who 0:15:22.120 --> 0:15:25.120 Loses in the Age of Tech Titans. We spoke to 0:15:25.160 --> 0:15:27.160 him earlier in the week. I was joined by Bloomberg's 0:15:27.160 --> 0:15:30.200 West Coast correspondent at Ludlow, and we started by asking 0:15:30.240 --> 0:15:32.520 him if there's any secret to the success of these 0:15:32.560 --> 0:15:35.880 big tech companies, calling them platforms is a way that 0:15:35.960 --> 0:15:39.600 makes people feel comfortable that, well, they're all doing great, 0:15:39.680 --> 0:15:43.280 and that's the secret. But the reality is many more 0:15:43.360 --> 0:15:48.160 platform businesses are unsuccessful than our successful and when you 0:15:48.240 --> 0:15:52.360 look at the sources of strength of each of those businesses, 0:15:52.880 --> 0:15:57.400 they are quite different. So let's start with Apple, for example, 0:15:57.520 --> 0:15:59.960 because there's a lot of news about Apple, including the 0:16:00.040 --> 0:16:03.520 fact that we do expect the company to unveil hardware 0:16:03.760 --> 0:16:05.560 and is that my colleague at though my co host 0:16:05.640 --> 0:16:08.520 on the show reported one of the key people in 0:16:08.520 --> 0:16:10.680 the Apple's car program, excuse me, has been posted going 0:16:10.760 --> 0:16:14.320 to Ford. Let's start with Apple. What's what's the secret Apple? Well, look, 0:16:14.400 --> 0:16:17.520 at the end of the day, Apple is a product company, 0:16:17.560 --> 0:16:21.880 and in fact, the vast majority of Apple's revenues has 0:16:21.960 --> 0:16:26.040 been for since the death of Steve Jobs, has been 0:16:26.160 --> 0:16:30.360 from a single product, the iPhone. That is still the case, 0:16:30.440 --> 0:16:33.520 that is still a majority of their revenues. But what 0:16:33.720 --> 0:16:38.600 makes it so phenomenally profitable is in fact the platform 0:16:38.680 --> 0:16:41.480 aspect of the business, which is really the app store, 0:16:42.000 --> 0:16:47.960 that has created an ecosystem of wild and extraordinary profitability 0:16:48.360 --> 0:16:52.080 and the new leadership post Jobs has done a phenomenal 0:16:52.160 --> 0:16:57.040 job of monetizing that ecosystem and monetizing that product. But 0:16:57.440 --> 0:17:01.320 you know what, in the world of products, eventually everything 0:17:01.400 --> 0:17:04.119 is a toaster. So if you if you don't come 0:17:04.200 --> 0:17:07.120 up with a new one, a radical, new one, at 0:17:07.160 --> 0:17:09.520 some point, you're not going to be able to ring 0:17:09.560 --> 0:17:12.639 out any more juice from that lemon. There's more to go. 0:17:13.040 --> 0:17:18.720 It's a phenomenally profitable and fantastic company, but eventually you've 0:17:18.720 --> 0:17:20.520 got to come up with something new, which is why 0:17:20.560 --> 0:17:23.440 you hear them throwing out crazy ideas like well, I'm 0:17:23.440 --> 0:17:26.160 going to build a car. Healthcare is the next thing 0:17:26.240 --> 0:17:29.840 for Apple, which is fine in theory, but there's no 0:17:29.920 --> 0:17:32.639 evidence that those are things that Apple is very good at. 0:17:33.040 --> 0:17:36.200 How do you assess this basket of mega cap tech 0:17:36.280 --> 0:17:38.879 companies as we come out of the pandemic. It seems 0:17:38.920 --> 0:17:42.320 they found some relevancy, some stickiness. But what is your 0:17:42.359 --> 0:17:47.280 main takeaway of the fortunes of those companies from COVID nineteen, Well, 0:17:47.400 --> 0:17:51.000 in many cases, what you've seen is phenomenon that we're 0:17:51.040 --> 0:17:57.160 going to happen eventually being pulled forward, people being willing, 0:17:57.280 --> 0:18:02.120 even even your grandma's willing to buy groceries online when 0:18:02.200 --> 0:18:07.760 the alternative is getting a deadly virus. So it definitely 0:18:07.840 --> 0:18:11.399 helped a number in permanent ways. But it's very important 0:18:12.119 --> 0:18:15.240 with a number of companies, not just the big ones, 0:18:15.400 --> 0:18:19.119 to distinguish things that are pulled forward and permanent and 0:18:19.280 --> 0:18:24.400 things that basically gave companies that frankly didn't have much 0:18:24.440 --> 0:18:28.760 reason to survive a an extra whiff of life and 0:18:28.960 --> 0:18:32.320 it's not gonna last after things normalize. That's not the 0:18:32.320 --> 0:18:34.880 case with any of those guys. All those guys are 0:18:34.880 --> 0:18:36.639 going to be here for a long time. A're going 0:18:36.800 --> 0:18:39.359 going to do well. And mostly it's a pull forward phenomena. 0:18:39.840 --> 0:18:43.840 But at least two of the five fang companies are 0:18:43.920 --> 0:18:49.679 in incredibly competitive marketplaces, Netflix and Amazon at least the 0:18:49.680 --> 0:18:52.040 part of Amazon is that is an e commerce and 0:18:52.080 --> 0:18:55.320 those are both very low margin businesses and they are 0:18:55.359 --> 0:18:59.200 both facing more competition than ever before. Well, let's talk 0:18:59.200 --> 0:19:01.600 a little about that, Anathan, because you write in the 0:19:01.640 --> 0:19:03.920 Platform Delusion who wins and who loses in the Age 0:19:03.920 --> 0:19:07.359 of tech Titans, that there is this myth that these 0:19:07.400 --> 0:19:12.200 companies are invincible and that discourages competition. Where are these 0:19:12.200 --> 0:19:16.000 companies vulnerable well, each one has got a different achilles heel. 0:19:16.160 --> 0:19:18.560 Let's start with the strongest one. You said, Google sits 0:19:18.560 --> 0:19:20.400 on top, and it sits on top for a reason. 0:19:20.960 --> 0:19:26.920 In search, it's mind blowing business. It is unlike many 0:19:26.960 --> 0:19:32.760 cases where people talk about learning and AI and big data, 0:19:33.000 --> 0:19:36.360 where actually, in practice those things don't do very much 0:19:36.400 --> 0:19:38.720 for you. In the case of Google, it does do 0:19:38.800 --> 0:19:41.240 a lot for you. And the thing about Google that's 0:19:41.240 --> 0:19:45.480 so incredible is it keeps doing more and more as 0:19:45.640 --> 0:19:49.520 it gets more and more activity. So in search it's 0:19:49.560 --> 0:19:53.879 a monster. But what's their achilles heel. It's that in 0:19:54.000 --> 0:19:58.280 anything other than search, their track record is miserable, I 0:19:58.280 --> 0:20:02.040 mean miserable. A great example of that is their attempt 0:20:02.119 --> 0:20:05.960 to compete with Amazon in AWS. It started trying to 0:20:06.040 --> 0:20:10.000 compete with AWS at exactly the same time as Microsoft. 0:20:10.800 --> 0:20:13.359 That's Columbia Business School professor Jonathan Knee. He's also the 0:20:13.359 --> 0:20:15.760 author of the new book The Platform Delusion. Who Wins 0:20:15.760 --> 0:20:18.600 and Who Loses in the Age of Tech Titans. You're 0:20:18.600 --> 0:20:21.560 listening to Bloomberg Business Week. Up next, we stay with 0:20:21.560 --> 0:20:26.119 the tech industry, but move closer to cybersecurity. This is Bloomberg. 0:20:33.680 --> 0:20:37.240 You're listening to Bloomberg Business Week with Carol Messer and 0:20:37.280 --> 0:20:42.600 Bloomberg Quick Takes Tim Stinovich from Bloomberg Radio. It seems 0:20:42.640 --> 0:20:44.919 like each week we learn of a new hacker attack 0:20:45.000 --> 0:20:47.439 on some computer network, whether it's on a pipeline at 0:20:47.480 --> 0:20:50.080 meat processing facility, the subway system here in New York, 0:20:50.480 --> 0:20:52.600 or even the u N as we learned just this week, 0:20:52.960 --> 0:20:55.359 we spoke to Wendy Thomas, the CEO of the global 0:20:55.440 --> 0:20:58.679 cybersecurity company Secure Works, just as she was appointed CEO. 0:20:58.840 --> 0:21:02.560 This week she's book with me and Bloomberg's Katie Greifeld Well, 0:21:02.760 --> 0:21:05.840 always feeling great about leading an organization that does such 0:21:05.840 --> 0:21:10.080 amazing work. Secure Works is all about securing organizations globally, 0:21:10.640 --> 0:21:13.639 and frankly, it's just a privilege for me to continue 0:21:13.640 --> 0:21:15.639 to fight the good fight with secure What do you 0:21:15.640 --> 0:21:17.760 see as the main challenge right now? Not just facing 0:21:17.800 --> 0:21:20.640 Secure Works, but facing each and every company that operates 0:21:20.720 --> 0:21:23.040 right now in a world where it seems like each 0:21:23.040 --> 0:21:26.639 and every day we hear new ransomware attacks, new cybersecurity threats, 0:21:27.000 --> 0:21:30.040 and companies essentially being taken to their knees. Were ransom 0:21:30.080 --> 0:21:33.679 You've absolutely hit on one of the prevailing trends in 0:21:33.720 --> 0:21:36.440 the security space. And you know, it's easy to take 0:21:36.480 --> 0:21:39.000 away from all these headlines that the attackers may be 0:21:39.080 --> 0:21:43.480 winning the fight. Frankly, we see many threat actors now 0:21:43.520 --> 0:21:47.159 frankly offering ransomware as a service and so for you know, 0:21:47.280 --> 0:21:49.879 hud six dollars, you can purchase hacking tools on the 0:21:49.960 --> 0:21:52.760 dark web, and when the barriers to entry are low 0:21:52.880 --> 0:21:56.280 and the rewards are high, you see proliferation of this 0:21:56.359 --> 0:22:00.400 type of crime. In fact, the ransomware payouts in globally 0:22:00.440 --> 0:22:03.639 alone we're about twenty billion dollars. So that is a 0:22:03.760 --> 0:22:07.760 top security concern for all of us. The stats show 0:22:07.840 --> 0:22:11.560 that there's a ransomware attack on a business every eleven seconds. 0:22:11.600 --> 0:22:14.760 So these attacks are, as you said, hitting closer and 0:22:14.760 --> 0:22:16.920 closer at a home for all of us, as supply 0:22:17.000 --> 0:22:19.840 chains and food and gas are disrupted, and we see 0:22:19.880 --> 0:22:23.760 headlines as business leaders and feel a responsibility to protect 0:22:23.800 --> 0:22:26.840 our organizations going forward. And here's the thing. It's such 0:22:26.880 --> 0:22:29.879 an opportunistic crime. It can feel when you're attacked that 0:22:29.960 --> 0:22:33.439 you were targeted, but frankly, they're very rarely targeted at 0:22:33.440 --> 0:22:36.919 a specific company or even an industry. They're targeted at 0:22:36.960 --> 0:22:40.240 companies that are an easy target. Let's talk about that, 0:22:41.600 --> 0:22:45.159 the fact that it is opportunistic, that it's not necessarily 0:22:45.240 --> 0:22:49.440 companies being targeted or singled out. I mean, how should 0:22:49.520 --> 0:22:52.879 businesses take that information that it is opportunistic? How do 0:22:52.920 --> 0:22:56.280 you even protect your business against that? What you want 0:22:56.280 --> 0:23:00.280