Speaker 1: From the heart of where innovation, money and power collive
Speaker 1: in Silicon Valley and beyond. This is Bloomberg Technology with
Speaker 1: Emily Jay I'm Taylor REGs in New York and for
Speaker 1: Emily Chang, this is Bloomberg Technology coming up for the
Speaker 1: next hour, getting a better deal. Elon Musk now saying
Speaker 1: that he might try to renegotiate the sale price for Twitter,
Speaker 1: causing this doctor ball even further, as many questions remain
Speaker 1: over how viable this takeover actually is. Plus billions wiped
Speaker 1: out in Terra USD in that crash, why can we
Speaker 1: learn from it? What does it mean for the future
Speaker 1: of stable coins. We'll discuss all of this and more
Speaker 1: with John Woo from Eva Labs and while Doctor Strange
Speaker 1: in the multiverse of Madness, it talk box office record
Speaker 1: here for the second straight week our movie theaters back.
Speaker 1: Are there still head winds ahead? More on that later
Speaker 1: this hour. But of course, and we cannot go on
Speaker 1: for at least two minutes into this show without talking
Speaker 1: about the latest drama between Elon Musk and of course
Speaker 1: his takeover and the proposed takeover of Twitter. Really interesting
Speaker 1: comments coming out of Elon Musk today hinting that he
Speaker 1: might want to renegotiate the deal at a lower price,
Speaker 1: saying that it quote wouldn't be out of the question.
Speaker 1: And these latest comments, of course coming from Elon Musk
Speaker 1: via a video conference at a summit over down in Miami,
Speaker 1: and it was hosted by a podcast called all In
Speaker 1: for more on these comments, of course, where the deal stands.
Speaker 1: I'm so pleased to be joined here by our very
Speaker 1: own mandage seeing of course over from Bloomberg Intelligence and
Speaker 1: Kurt Wagner joining us from Bloomberg News. Kurt, can I
Speaker 1: just start with you from someone who's been following and
Speaker 1: covering this company and of course Elon Musk and solve,
Speaker 1: how do you think just sort of the way that
Speaker 1: this has played out in the drama that it's putting
Speaker 1: really on the company too? I Mean, doesn't this just
Speaker 1: feel like the mos Twitter thing of all time to happen? Right?
Speaker 1: It's just, uh, this deal that just continues to be
Speaker 1: a roller coaster um and the fact that we now
Speaker 1: have Ellen kind of coming out today and suggesting, Hey,
Speaker 1: I might be you know, interested in negotiating a lower
Speaker 1: price for this deal, even though I just offered something
Speaker 1: else a few weeks ago. It just all feels like
Speaker 1: this is kind of cascading in a negative way for Twitter.
Speaker 1: I always have said that the worst case scenario for
Speaker 1: them would be that this deal falls apart and they're
Speaker 1: kind of left standing there without anybody to come acquire them,
Speaker 1: And it feels like that's becoming more and more likely
Speaker 1: every day. And man, Deep, let me bring you in
Speaker 1: on that, because, similar to what we just heard from Kurt,
Speaker 1: I was hearing from Dan Eves over a web butch
Speaker 1: earlier saying again, serve this worst case scenario, they're going
Speaker 1: to be left at the altar alone. Right. How do
Speaker 1: you think about the lack of no bidders and is
Speaker 1: this Elong's way of negotiating down in price. I do think,
Speaker 1: you know, he doesn't have a way out of paying
Speaker 1: that billion dollars and breakup termin NTIONC in case he
Speaker 1: wants to walk away. But at the same time, the
Speaker 1: odds of the deal happening are higher than they were
Speaker 1: probably three weeks back when the deal was announced. And
Speaker 1: the reason I say that is because at least he
Speaker 1: has six point five billion in commitments from you know,
Speaker 1: co partners, and what he really wants to do here
Speaker 1: is to you know, move away from that margin loan.
Speaker 1: So right now he doesn't have about you know, trolls
Speaker 1: to thirty billion dollars in financing. He has already sailed
Speaker 1: a bunch of sold a bunch of stock, so that's
Speaker 1: about you know, eleven billion. He's got six point five
Speaker 1: billion in commitments, so it really wants to move away
Speaker 1: from that troll flowing five billion margin loan. And that
Speaker 1: is what I think he's looking to renegotiate here to
Speaker 1: bring that price flaw. Very interesting and Curt, I think
Speaker 1: at the heart of this issue comes down to the
Speaker 1: percent of users that are represented by bods when you
Speaker 1: think about Twitter, whether that number is five or relative
Speaker 1: to meta, snap TikTok, I mean sort of the other
Speaker 1: social media covers companies that you cover. How does that
Speaker 1: bought relationship fit into this narrative. Yeah, he talked a
Speaker 1: lot about that today. He was at a conference in Miami.
Speaker 1: Are Bloomberg reporters. My colleagues were not at the conference,
Speaker 1: but we're able to listen in to the conference as
Speaker 1: it was happening, and he brought this up. You know,
Speaker 1: he was saying, Hey, this is an issue. Um, I
Speaker 1: don't believe that the bots are less than five percent
Speaker 1: of the total user base, which is what Twitter says,
Speaker 1: and earnings and there are and Facebook says something similar.
Speaker 1: To be clear, this is not a unique situation for Twitter, um,
Speaker 1: but Ellen has had an issue with bots. He has
Speaker 1: made it part of his kind of campaign of how
Speaker 1: he's going to clean up the service and what he's
Speaker 1: going to do to change Twitter. And he's saying he
Speaker 1: believes it's to be a lot higher. And we saw
Speaker 1: CEO Parague Augura Wall from Twitter kind of going back
Speaker 1: and forth with Ellen today trying to explain, Hey, here's
Speaker 1: how we measure bots, and Elon replied with a poop emoji. Right.
Speaker 1: He clearly was not int listed in Auger Wall's explanation here,
Speaker 1: and I think that's a big sign as to why he's,
Speaker 1: you know, saying this is on hold. He wants more answers.
Speaker 1: You're not allowed to use that emoji with me, Kurt,
Speaker 1: Neither is Mandy. Never. I would never do that, Mandy.
Speaker 1: You've been commenting on this. Similarly, you take a look
Speaker 1: at the bottom up analysis of these companies, the actual
Speaker 1: fundamentals user growth, revenue growth, profitability, How, MANDYEP do you
Speaker 1: think about the percentage of boughts at the impact on
Speaker 1: the health of this company all. So clearly it's a
Speaker 1: bigger problem with Twitter. And when you take out let's
Speaker 1: say five of the users are bought, so the e
Speaker 1: v per user goes up that Elon is paying with
Speaker 1: this deal. And when you look at a complex Snapchat
Speaker 1: or Pinterest right now, the e v per user is
Speaker 1: close to a hundred dollars there, as with the four
Speaker 1: billion deal, it comes down to around two hundred dollars
Speaker 1: for Twitter. And look, could have had this problem of
Speaker 1: you know, basically exaggerating their user numbers and they had to,
Speaker 1: uh enough, come out and say that the actually using
Speaker 1: numbers are lowers. So it's not a new problem. But clearly,
Speaker 1: if you're valuing a company based on the total number
Speaker 1: of users, then you have to think about, you know,
Speaker 1: revising the price lower because the actual number of users
Speaker 1: are lawer Amand it just a follow to you on this.
Speaker 1: I think we're having a broader discussion, and this broader
Speaker 1: discussion is underway about if that price target set a
Speaker 1: floor for how we think about valuing these companies. And
Speaker 1: the broader market is telling you, at least today in
Speaker 1: the last few weeks, we're rethinking valuations on every level,
Speaker 1: not just because yields are higher on the discount rate falls,
Speaker 1: but the big valuations of growth at any cost. How
Speaker 1: then sort of is this played out in the also
Speaker 1: thinking about the way that we're valuing these companies and
Speaker 1: these tech companies. Well, so clearly, you know, social media
Speaker 1: companies aren't really growth companies anymore. If you have to
Speaker 1: think about you know, growth, really it has to the
Speaker 1: next leg all social media would be more on the
Speaker 1: meta word side right now. Valuation have gone down everywhere,
Speaker 1: But I think Twitter isn't a high growth company anymore. Yes,
Speaker 1: it can sustain it EBITDA, but we're not talking about
Speaker 1: forty growth even if it goes private. So that is
Speaker 1: where you know, you have to really think about which
Speaker 1: is actually growth going forward as opposed to what can
Speaker 1: generate pre cash flow to pay off the you know,
Speaker 1: interest payment and current come back in here, I think
Speaker 1: as you think about pushing this story forward, what do
Speaker 1: you want to see next? What are you looking for
Speaker 1: if what can we do private that we couldn't do public?
Speaker 1: What do you want to see in terms of leadership?
Speaker 1: What are you really looking for to understand if this
Speaker 1: company really can turn it around. Well, I think the
Speaker 1: best way to grow the business is not going to
Speaker 1: be to abandon advertising altogether, which is what it feels like. Ellen,
Speaker 1: what kind of wants to do? He's talked about a
Speaker 1: subscription product. I think that's fine, but really I think
Speaker 1: what you need to do if your Twitters, you need
Speaker 1: to figure out how to get the kind of user
Speaker 1: data that works with targeted ads, that works with direct
Speaker 1: response ads, right. That is what Facebook and Google do
Speaker 1: really well. It's something that Twitter has always struggled with.
Speaker 1: They already have an ad business, They have advertisers who
Speaker 1: are interested. They just need more granular data in order
Speaker 1: to do that direct response type stuff. And now it's
Speaker 1: easier said than done. But I think that's the one
Speaker 1: thing that if they can figure that out, I think
Speaker 1: the business could really benefit from that. Mandy, do you agree, Well, clearly,
Speaker 1: I think subscriptions is part of the story here, and
Speaker 1: but we've seen subscription businesses aren't easy. Look at Netflix.
Speaker 1: You know Netflix is moving into adds. Do you really
Speaker 1: need a combination of ads and subscriptions? Moving away completely
Speaker 1: from ads would be a mistake. Really appreciate that both
Speaker 1: of you great insight fundamental analysis. So appreciate the conversation
Speaker 1: Mandy seeing of course, and our very Kurt Wagner out
Speaker 1: there in our beautiful San Francisco office. We want to
Speaker 1: talk now about a new social media law out of
Speaker 1: Texas that has many in the tech world fearful of
Speaker 1: what might be allowed to flow on your feed all
Speaker 1: in the name of censorship. Groups representing Twitter, Facebook, and
Speaker 1: YouTube warned the Supreme Court that unless this Texas law
Speaker 1: is blocked, anything from Russia propaganda as well as neo
Speaker 1: Nazi post denying the Holocaust could show up. Insiders of
Speaker 1: course now warning that these extremest views could cause social
Speaker 1: media companies to lose millions in advertising for more. I'm
Speaker 1: joined back Techonomy founder David Kirkpatrick, who thankfully you've been
Speaker 1: sort of all over this and I am curious to
Speaker 1: think about. I believe a Supreme board who can decide
Speaker 1: what cases they want to hear and what cases they
Speaker 1: want to rule on. What at the heart of this
Speaker 1: issue really is going on for some of these tech companies, Well,
Speaker 1: thanks Taylor. Basically, what the tech industry is asking the
Speaker 1: Supreme Court to rule that a tech that a federal
Speaker 1: appeals courts ruling last week which allowed this law to
Speaker 1: take effect, was it must be removed and vacated because
Speaker 1: the impact that it would have on tech companies is
Speaker 1: so extreme that it would almost make it impossible to
Speaker 1: operate any kind of website where there is conversation if
Speaker 1: that site has more than fifty million users. It's a
Speaker 1: truly inane, idiotic and illogical and crazy effort to change
Speaker 1: the rules for what seems to be just partisan advantage.
Speaker 1: It talks us about the advertising, of course, that we
Speaker 1: mentioned in the introduction. The companies, of course benefit from
Speaker 1: the advertising. What would stop sort of that flow of advertising?
Speaker 1: In your opinion, well, that's a great question, because obviously
Speaker 1: advertisers only want to appear in an environment that's rational
Speaker 1: and makes their products look good in contexts. If if
Speaker 1: websites are prevented from taking down any kind of extreme
Speaker 1: statement by any user, it could really make these sites
Speaker 1: much less kind of culturable for advertising, and I could
Speaker 1: see it having an effect, although the problem is even
Speaker 1: more basic than that. Essentially, the companies are being told
Speaker 1: by this Texas law, if it were to really take effect,
Speaker 1: that they can't make any real decision about what kind
Speaker 1: of contact flows. Content flows across their own networks. But
Speaker 1: these are commercial companies who built these commercial websites for
Speaker 1: commercial reasons. They have every right under the Constitution to
Speaker 1: operate their sites as they see fit, and this law
Speaker 1: attempts to remove that right from them, which is just
Speaker 1: plain wrong and and on constitution clear, Let's talk about
Speaker 1: something else I'm reading here in your notes. It really
Speaker 1: speaks out to me that it allows people to also
Speaker 1: sue these companies as well if they're censored for their viewpoints.
Speaker 1: How does this sort of open up and I know
Speaker 1: that we're not lawyers here to sort of open the
Speaker 1: floodgates for these potential lawsuits as well. And then the
Speaker 1: impact that has on businesses and consumers. Well, there's so
Speaker 1: many crazy aspects to this law, but one way to
Speaker 1: think about it is that that companies wouldn't be able
Speaker 1: to do well no matter what they did. They would
Speaker 1: be damned if they do and damned if they don't,
Speaker 1: because the law allows anyone who's viewpoint, which is the
Speaker 1: term they use, has been used as a basis for
Speaker 1: removing their content, to sue the company. Okay, however, if
Speaker 1: those viewpoints are hateful, racist, uh, show some kind of
Speaker 1: libel or whatever. They will then probably which they're but
Speaker 1: they're prohibited from taking them down. Remember, people who are
Speaker 1: affected by those posts will almost certainly then sue the
Speaker 1: sites because they are being affected by these posts that
Speaker 1: have not been removed. So in effect, the sites can't
Speaker 1: win either way. It just underscores yet again how fundamentally
Speaker 1: illogical the law is. But it's worth remembering. It seems
Speaker 1: like the whole point of these laws, and there was
Speaker 1: an attempt at a similar law in Florida, is to
Speaker 1: get back at the website, particularly Facebook, YouTube, Twitter, etcetera,
Speaker 1: because they're perceived to have an anti conservative bias. And
Speaker 1: the conservative majority in the Texas legislature has passed this
Speaker 1: law and the conservative Texas governor has signed it. But
Speaker 1: the fact is it simply cannot work, and it's it's
Speaker 1: being done for pure political partisanship and and and without
Speaker 1: enough thought. David, it's interesting you mentioned Meta of course
Speaker 1: formerly we knew that as Facebook, you mentioned YouTube. We're
Speaker 1: talking a lot about Twitter of course right now when
Speaker 1: in the sitegeist with Elon Musk of course stepping in
Speaker 1: and giving a price potentially to take private of all
Speaker 1: the companies you've been studying for decades over the years,
Speaker 1: who would be most impacted and who is most susceptible
Speaker 1: to getting a hit? Of course from this, well, the
Speaker 1: law is meant to a li to any company that
Speaker 1: has fifty million or more users, But it really is
Speaker 1: intended it's aimed at Facebook and Twitter primarily and YouTube
Speaker 1: because those are the sites where speech, so to speak,
Speaker 1: is most frequently taking place, and they do frequently make
Speaker 1: judgments when pate speech or political incitement or violence is
Speaker 1: endorsed or whatever to remove posts now, but it would
Speaker 1: it could affect any site that has over fifty million users,
Speaker 1: which could be for example, Netflix or Disney Plus if
Speaker 1: if there's any kind of content or conversation, well, I
Speaker 1: guess those are probably not good examples. But any site
Speaker 1: that has any kind of dialogue, say the Near Times
Speaker 1: or any kind of Bluebird for that matter, if if
Speaker 1: the number of users is big enough, there will be
Speaker 1: no allowance for moderation. In effect, so it's it's taking
Speaker 1: away a fundamental right for any company that is attempting
Speaker 1: to foster a safe and rational conversation online. David, what
Speaker 1: do you think is you think about sort of the
Speaker 1: next step pushing the story forward. Do you want to
Speaker 1: see changes to the fundamental businesses so that this isn't
Speaker 1: an issue. We we talked a lot about Twitter having
Speaker 1: its crisis that it's going through right now. What are
Speaker 1: you really looking for as you look to these companies, Well,
Speaker 1: there are really big questions, and the reason the situation
Speaker 1: has arisen does flow in part from the failure of
Speaker 1: management by these companies. I don't think that Facebook in particular,
Speaker 1: or any of the social media companies for the most part,
Speaker 1: although some extent I'd leave Snap and maybe even TikTok
Speaker 1: out of this. But certainly Facebook and Twitter have not
Speaker 1: done as good a job as they should have of
Speaker 1: articulating what is allowed and what is not allowed and
Speaker 1: sticking to very clear standards. From the beginning. They let
Speaker 1: themselves get into a place where there's a sense of
Speaker 1: k us and I think part of it was they
Speaker 1: were trying to placate the Trump administration and didn't want
Speaker 1: to seem to be anti conservative, and they really allowed
Speaker 1: a lot. I think they allowed a lot of inappropriate
Speaker 1: content that was supposedly conservative but was really inciting um.
Speaker 1: But now because they took down enough of it that
Speaker 1: it got the right angry there are legislators all over
Speaker 1: the country trying to take these rash moves against them,
Speaker 1: really out of partisan dislike. But I think the long
Speaker 1: term issue is the companies have to establish clear standards
Speaker 1: for what is and is not allowed, and communicated clearly
Speaker 1: and stick to it. It's very, very hard. I don't
Speaker 1: think most of these companies anticipated when they got into
Speaker 1: these businesses how complicated the decisions they'd have to make
Speaker 1: would become. But that's where they are, and that's just
Speaker 1: the fact a complicated issue. We're grateful that you're here
Speaker 1: to give us your expert analysis and insights to Economy
Speaker 1: founder David Kirkpatrick really appreciate it, and we're going to
Speaker 1: have more to come, of course, including a report on
Speaker 1: the impact of well the China lockdowns. What that means
Speaker 1: for us, This is Bloomberg. China's economy is paying the
Speaker 1: price for the government's COVID zero policy, with industrial output
Speaker 1: and consumer spending sliding into the worst level since the
Speaker 1: pandemic began. Our very own Bloomberg Stephen Eagle has more
Speaker 1: clear sign China's economy contracted sharply in April as continued
Speaker 1: COVID zero lockdowns hammered industrial and consumer activity nationwide with
Speaker 1: its too wealthiest cities, though Shanghai and Beijing under COVID
Speaker 1: restrictions read tails. Sales nationwide plummeted a worse than expected
Speaker 1: eleven point one percent last month as tens of millions
Speaker 1: of people were confined to their homes. Factory output two tanked,
Speaker 1: falling two point nine percent, the largest and only second
Speaker 1: year of a year monthly contraction of industrial production in
Speaker 1: thirty two years. Yes, since n now, the consensus estimate
Speaker 1: was for a modest rise, but clearly China's industrial might
Speaker 1: was slowed by the lockdowns and those supply chain issues.
Speaker 1: China's nationwide jobless rate also taking up to six point
Speaker 1: one percent now. Shanghai has been in lockdown for nearly
Speaker 1: two months, but this week is starting to relax some
Speaker 1: of the most strict curbs as COVID caseloads and inter
Speaker 1: community infections start to fall. Now. Beijing has signaled policymakers
Speaker 1: will step up support for the economy, as evidenced by
Speaker 1: the PBOC on Sunday, cutting mortgage rates for first time homebuyers.
Speaker 1: China's National Bureau of Statistics, also admitting that COVID outbreaks
Speaker 1: in April had a big impact on the economy, but
Speaker 1: claims that the negative effect will be short term and
Speaker 1: that economic activity should start recovering gradually. Still, the economic
Speaker 1: shocks from she dimpaying zero tolerance approach to virus containment
Speaker 1: are obvious, pushing China's ambush ambitious full year growth target
Speaker 1: of around five and a half percent further out of reach.
Speaker 1: Stephen Engel, Bloomberg News, Hong Kong are very on Bloomberg
Speaker 1: Steve Nigle. Now, of course, talking about those supply chains
Speaker 1: ahead of the port of Los Angeles, cargo flows from
Speaker 1: China to the busiest port in the US appear consistent
Speaker 1: despite that ongoing pandemic. Here's some of what Jean Siroka
Speaker 1: told Bloomberg. This is gonna take some time. There's an
Speaker 1: episode just about every day that impacts us in the
Speaker 1: supply chain, whether it's on the ground, the atrocities in
Speaker 1: Ukraine impacting energy and agriculture goods flow, the lockdowns in Shanghai,
Speaker 1: point three percent inflation, producer prices going up eleven All
Speaker 1: of this is in the supply chain equation. Soroka says
Speaker 1: that there are no imminent signs of course of a
Speaker 1: slowdown in demand from American consumers based on the number
Speaker 1: of full shipping containers that they are seen arrived in
Speaker 1: the port. Coming up. We're still on that theme. Inflation,
Speaker 1: of course, still on the rise, interest rates climbing, tech
Speaker 1: stocks falling. What's next on the horizon, We have all
Speaker 1: of that more and next. This is Bloomberg. This is
Speaker 1: Bloomberg Technology. I'm Taylor Regg's in New York and for
Speaker 1: Emily Chang. Let's get an update now on the markets.
Speaker 1: The sell off, Katie of course still joining us now,
Speaker 1: Katie Greifeld. It just continues. I mean, we're looking to
Speaker 1: attack in the NAZAC one hundred often addition a one
Speaker 1: percent today hard to catch a break. Absolutely, Friday's bounce
Speaker 1: it came, and it went very quickly, of the SMP
Speaker 1: five hundred, ending four tenths of percent lower. Big tech
Speaker 1: felt even bigger. You have the NASZAC one hundred finishing
Speaker 1: well one point two percent lower. And that was even
Speaker 1: as some of the steam came out of treasury yields,
Speaker 1: the ten year treasury yield falling about four basis points
Speaker 1: or so on the day. And you have bitcoin it's
Speaker 1: rally a little bit after hours, a little bit of
Speaker 1: a nudge. But yesterday or this current day, Monday, it
Speaker 1: fell over three percent. You can see it's below that
Speaker 1: thirty thou dollar per coin mark. And what called my
Speaker 1: eyes that you actually saw the cbo ET Volatility Index,
Speaker 1: the VIX. It actually fell a little bit today it's
Speaker 1: mac below thirty. That's still above its one year average
Speaker 1: about twenty one, but still a little bit of a
Speaker 1: breath there today even as you did see that sell
Speaker 1: off resumed. But the question becomes, I mean, how much
Speaker 1: can volatility really fall as stocks continue to fall. If
Speaker 1: you look year to day, you can see the NAZAC
Speaker 1: one hundred down about twenty five per cent, so big tech,
Speaker 1: those growth names really taking the brunt of the selling.
Speaker 1: The SMP it continues to flirt with that bear market
Speaker 1: again that is at it's getting closer tailor at about
Speaker 1: six year today losses. And of course Katie were so
Speaker 1: excited to have you tomorrow joining us on Bloomberg markets.
Speaker 1: I can't close from two to five pm. It is
Speaker 1: our pleasure, so really appreciate that. Katie gry felt, of
Speaker 1: course joining us here with more on these markets and
Speaker 1: then sort of leads us right into our next conversation.
Speaker 1: We've talked a lot about this sell off. What does
Speaker 1: it mean for a new round of fundraising? Right when
Speaker 1: you think about all the belt tightening around the corner,
Speaker 1: does that cascade into another big problem? Doesn't mean to
Speaker 1: slow down in enterprise technology spending? Does this drive down
Speaker 1: another leg in the industries earnings outlook? Well, if you
Speaker 1: have earnings, that's the first problem with some of these companies.
Speaker 1: Be Capital co founder and managing partner Raj Gongly of
Speaker 1: course joining us here for more. Can we just start
Speaker 1: big picture when you think about just the pressure of
Speaker 1: broad based on these valuations, maybe it's risk of recession,
Speaker 1: maybe it's rising yield. How are you thinking about portfolios
Speaker 1: of some of these new companies and well, the pressure
Speaker 1: now they may not be worth what we thought they were.
Speaker 1: I think that it's the exact right question that everyone's
Speaker 1: asking in VC is um what are your company is
Speaker 1: truly worth? You may have paid something for them six
Speaker 1: or twelve months ago, but I think where the market
Speaker 1: is going is actually very healthy. We're resetting to a
Speaker 1: set of valuations that are going to make more sense
Speaker 1: and actually help us build better companies. And while there's
Speaker 1: going to be some short term pain. I think that
Speaker 1: eventually you're going to see some of the sectors that
Speaker 1: are traditionally resilient, like healthcare cybersecurity bounced back first, but
Speaker 1: we're gonna have to go through a bit of pain,
Speaker 1: and a path to profitability is going to be one
Speaker 1: of the most important discussions that everyone is happening. Talk
Speaker 1: to me about that. So I remember, I think I
Speaker 1: was in San Francisco in and we were talking a
Speaker 1: lot about we work at the time, and it was
Speaker 1: about growth at any costs no longer works. That any
Speaker 1: cost has to be reevaluated because we need to see
Speaker 1: some free cash flow soon and we need to see
Speaker 1: it sooner rather than later. Is that the same conversation
Speaker 1: we continue to have now here. You're exactly right. I
Speaker 1: mean growth at any cost has never worked. Uh, it's
Speaker 1: I don't think we are dramatically shifting to survival at
Speaker 1: any costs. You still want growth, but you want growth
Speaker 1: at a much more resonable cost um. And what that
Speaker 1: means is thinking looking at things like the burn rate
Speaker 1: of the business are going to be really important. I mean,
Speaker 1: that's things that if you're not a profitable business you've
Speaker 1: got to be managing or burn during times like this.
Speaker 1: And frankly, if you're a late stage business that was
Speaker 1: hoping to IPO, you better have at least eighteen months
Speaker 1: of runway because IPO markets could take a while to
Speaker 1: come back. I've been reading a lot of to sort
Speaker 1: of the market analysis about how to prepare for a
Speaker 1: recession if it's conserving capital of even if a recession
Speaker 1: isn't company coming, how do you plan for it? How
Speaker 1: do you think about that capital, the balance sheet, the employees,
Speaker 1: the culture, and making sure that the able around you
Speaker 1: are appropriate. What should some of these big founders be
Speaker 1: thinking about when they're trying to manage a business through
Speaker 1: this volatility? You know, I think these big founders, that's
Speaker 1: where they are because they're great leaders. And I think
Speaker 1: over the next six, twelve, eighteen months, you're going to see,
Speaker 1: you know who amongst this group really knows how to
Speaker 1: manage and management morale is going to be difficult when
Speaker 1: some of morale was built around if you're a public company,
Speaker 1: it was built around stocks and stock options, and if
Speaker 1: your private company was still built around your shares and
Speaker 1: the valuation in the private market, and now you're gonna
Speaker 1: have to motivate employees who primarily were being paid through
Speaker 1: stock private or public, and motivate them to work harder
Speaker 1: than potentially they've even ever worked before in a much
Speaker 1: more challenging environment. I think the great leaders are the
Speaker 1: ones who are going to do it by telling people
Speaker 1: that stay focused on our purpose and our mission, and
Speaker 1: we'll all make it through this together and we'll come
Speaker 1: out the other side of better company. We've long often
Speaker 1: talked about the if you want to use the word bubble,
Speaker 1: and we don't have to use that word, but a
Speaker 1: lot of that sort of inflation of the evaluations came
Speaker 1: from too much capital chasing too few too much cash right,
Speaker 1: chasing too few companies. How do you think about the
Speaker 1: deployment of that cash and the best use of cash?
Speaker 1: Then at this moment, well since sinceurity went there, and
Speaker 1: you use the word, what I would say is that, Yeah,
Speaker 1: what I would say is that, um, you know, cash
Speaker 1: now is going to be for very core activities. You
Speaker 1: seem businesses that have gone into a lot of non
Speaker 1: core activities. I think you're gonna see a retrenchment to
Speaker 1: the court. You're gonna see companies focus on the regions
Speaker 1: that really makes sense and already are profitable or have
Speaker 1: a shorter path to profitability. And you're going to see
Speaker 1: more add on businesses that can be launched for much
Speaker 1: lower cost first things that are far from the core.
Speaker 1: You know, specifically for us in software, healthcare, and fintech,
Speaker 1: the three areas that we best. We think healthcare is
Speaker 1: probably one of the most Brazilian sectors. We're going to
Speaker 1: continue to invest there, and frankly, for some of our
Speaker 1: businesses that have a lot of capital, this is the
Speaker 1: time's play offense and look at how you can acquire
Speaker 1: companies for lower valuations. And I think you'll see corporates
Speaker 1: do that too over the next twelve months. I really
Speaker 1: appreciate your time, your perspective, your knowledge and insight. Speak
Speaker 1: Capital co founder and managing partner Gongli thank you. As always,
Speaker 1: of course, we want to go back to maybe private companies,
Speaker 1: back to some of the big public companies that we've
Speaker 1: been following. Microsoft is set to boost employees paychecks in
Speaker 1: an effort to combat inflation. The company announced its plans
Speaker 1: to nearly double its budget for employee salaries and boost
Speaker 1: the range of stock compensation it gives to some workers.
Speaker 1: By at least tw This is all in an effort
Speaker 1: to retain staff. The move said is to mainly affect
Speaker 1: early to mid career employees, all at the software giants.
Speaker 1: And of course, coming up, what is the future of
Speaker 1: stable coins after the Terro Luna to blackled last week,
Speaker 1: we'll discuss this bloomberg time now for our crypto report,
Speaker 1: we have to get back to that meltdown that followed
Speaker 1: the Terra usc algorithmic stable coins collapse, and total investors
Speaker 1: may have lost as much as forty two billion dollars
Speaker 1: in that crush. This is according to Elliptic. Our crypto
Speaker 1: contributortional E. Bostick is here with more. And I think
Speaker 1: my favorite line from Katie Greyfield on Twitter was ust
Speaker 1: no longer means US treasuries. How the heck is this
Speaker 1: all about crypti? Yeah, I mean that's a great question,
Speaker 1: especially because there's a lot of stable coins to keep
Speaker 1: an eye on, US, d C, Tether and USC is
Speaker 1: the one we're certainly talking about now because that's the
Speaker 1: one where the DP pagging has really led to a
Speaker 1: lot of losses among the Terra ecosystem investors. And you
Speaker 1: have Tara now talking about restructuring the plan here so
Speaker 1: that people can recoup some of their funds potentially or
Speaker 1: at least start to build on the network and a
Speaker 1: broad away. But if you look since the initial d pegging,
Speaker 1: almost nine percent of a decline and ripple effects indeed
Speaker 1: across the DeFi ecosystem. But let's just take a look
Speaker 1: at bitcoin itself for a second tailor, because Bitcoin is
Speaker 1: of course the largest of cryptocurrencies. We've seen it bounce
Speaker 1: back quite a bit since the initial fears about the
Speaker 1: crypto ecosystem that large, and now only down about sixteen
Speaker 1: percent over the nine day period. We have seven days
Speaker 1: of gains. We have about three percent worth of losses
Speaker 1: over twenty four hour period, but again just coming off
Speaker 1: that low again but still just hovering around thirty's and
Speaker 1: such a wild swing show. You've been all over it,
Speaker 1: so I want you to stick with me here. I
Speaker 1: want to bring in John Wu of course into this conversation,
Speaker 1: president of all the Labs of course, lead developer of
Speaker 1: the Avalanche blockchain, and just big picture to kick us off.
Speaker 1: I think some of the biggest questions is if it's
Speaker 1: a stable coin and it's not stable, what is it?
Speaker 1: How do you think about that. Well, first of all,
Speaker 1: there's a couple of types of stable coins. There's ones
Speaker 1: that are actually backed by US dollar reserves like USDC,
Speaker 1: and then these algorithmic stable coins like the Terra Luna,
Speaker 1: which was, you know, an innovative experiment. Unfortunately, we can
Speaker 1: all say it didn't work out. Um, But in the
Speaker 1: back of all of our minds, I think every crypto native,
Speaker 1: web free person really has a hope that someone could
Speaker 1: figure out a minetary system or a stable coin. It
Speaker 1: doesn't rely on existing things that you know, are traditionally
Speaker 1: out there as reserves. So we all rooted for it.
Speaker 1: Unfortunately it did not work out. It's still very early
Speaker 1: in the space and I'm sure there will be more
Speaker 1: experiments and innovation now. Uh. In terms of the latest
Speaker 1: restructuring plan, from why I understand, um, they are trying
Speaker 1: to figure out who are the smaller holders and use
Speaker 1: whatever is left in reserves to basically give back to
Speaker 1: those smaller holders. So that would be my number one
Speaker 1: thing this point. It is what it is, but use
Speaker 1: whatever reserves to give back to the retail people that
Speaker 1: were left holding the bag, if you will, And that's
Speaker 1: the best thing to do at this point. I want
Speaker 1: to ask you more about that, John, because what does
Speaker 1: it say about the restructuring of crypto ecosystem? Who should
Speaker 1: get paid, who has claim on the assets at the
Speaker 1: end of the day, and what does the what does
Speaker 1: the company, what does the protocol actually owe to its investors?
Speaker 1: How does this play out? Sure that needs more clarity
Speaker 1: over time, But to me, at least from a common
Speaker 1: sense perspective, the this is the one industry where the
Speaker 1: retail investor have actually call it front run investor institutions.
Speaker 1: For years, it's been retail investors globally that's supported this
Speaker 1: ecosystem until very recently, if you will so Um philosophically,
Speaker 1: I think again, the right move is to use whatever
Speaker 1: is left to figure out who are the small bag
Speaker 1: holders or wallet holders and try to make them whole
Speaker 1: as much as possible. So what about the idea that
Speaker 1: other stable coins can be made with new models? You
Speaker 1: talked about experimentation here for a second. To what extent
Speaker 1: does the industry needs something like an algorithmic stable coin
Speaker 1: or a partial algorithmic stable coin in order to scale, John,
Speaker 1: So the industry right now does not need it. What's
Speaker 1: going to come out of this situation is USDC, which
Speaker 1: has a lot of transparency backed one to one with
Speaker 1: the US dollar. Wild game market share um USDT was
Speaker 1: tested a little bit um, but they need to come
Speaker 1: out with better transparency and they will do that. And
Speaker 1: then you have other stable coins, you know, facts, so
Speaker 1: they've all held up. Actually, so it would be nice
Speaker 1: to have an algorithm stable coin. But just like any economy,
Speaker 1: economy needs a certain unit of account for a medium
Speaker 1: of exchange that is stable and not as volatile, and
Speaker 1: for now, maybe one that's tied to the US dollar
Speaker 1: and has transparency is the best thing. You know. I'm
Speaker 1: curious about certainty in other ways besides regulatory I'm curious
Speaker 1: about the technology itself, potential hacks, potential chains, depegging, if
Speaker 1: it's a stable coin. I'm wondering about your thoughts on
Speaker 1: Layer one protocols in general year and investor appetite for
Speaker 1: them after some of the mishaps we've seen. Great, great question,
Speaker 1: And if you look at UM the space and the
Speaker 1: many cycles, let's not confuse cyclical issues with secular growth
Speaker 1: in times like this this when actually the quality companies
Speaker 1: or quality protocols or quality applications that actually gain market
Speaker 1: share and have even more innovation and build better UM.
Speaker 1: So my opinion is it's unfortunate. No one likes to
Speaker 1: see crypto asset prices go down, but the benefit of
Speaker 1: it is the guys or the people with quality products
Speaker 1: to have better utility and are really building something real
Speaker 1: will take market share and also come out stronger and
Speaker 1: provide more utility in the end. Also when it comes utility,
Speaker 1: you know, I know tomorrow in our Crypto show, our
Speaker 1: weekly Crypto show one thirty every week on Tuesday's, we're
Speaker 1: gonna be talking about etherory on the merge and gas
Speaker 1: fees and whether they can come down in light of
Speaker 1: new projects. I mean, I'm wondering how this also pertains
Speaker 1: to you and Avalanche and the ability to bring down
Speaker 1: gas fees at the end of the day. So, first
Speaker 1: of all, great show or a DVR that and I
Speaker 1: watch it all the time, so thank you for putting
Speaker 1: that on. And in terms of what the merge will
Speaker 1: be doing, it's really ethereum will get to where Avalanche
Speaker 1: already is the first part. It will come in stages
Speaker 1: and the first part for them will be going to
Speaker 1: proof a stake. But it's still gonna miss out on
Speaker 1: the instant settlement that Avalanche has or the scalability that
Speaker 1: Avalanche has. I mean, just this weekend, the Avalanche plockchain
Speaker 1: had a scaling function called a subnet, and these gaming
Speaker 1: companies actually launched on these subnets. Transactions on Avalanche increased
Speaker 1: twenty five while prices went down like twenty fold. There's
Speaker 1: more transactions now an Avalanche on the daily basis there
Speaker 1: are on Ethereum. So with the merge and with all
Speaker 1: these things that you're trying to improve, there will get
Speaker 1: to at some point a place where many newer generation
Speaker 1: layer ones are already at such as Avalanche. I should
Speaker 1: say the show also is at one pm. My bad, John,
Speaker 1: but thank you so much. We also um the speaking
Speaker 1: of Avalanche and the ability to kind of make it
Speaker 1: through this down market. I'm wondering from your perspective, as
Speaker 1: things are kind of cooling down in the crypto market,
Speaker 1: what do you take this time to do? Take this
Speaker 1: time to focus again? The ones is similar to the
Speaker 1: segment previous when you had the venture capital sign the
Speaker 1: good companies that have a good call it balance sheet,
Speaker 1: they have the ability now to gain share and to
Speaker 1: continue to build. Maybe instead of thinking about eighteen months
Speaker 1: or twenty four months for the next race. You want
Speaker 1: to be a little more frugal and last for thirty.
Speaker 1: But with that said, the ones with the good balance
Speaker 1: sheet and the ones with good products should go out
Speaker 1: there and innovate and take some share. So that's how
Speaker 1: Avalanche Novel Labs is treating this down term. Such a
Speaker 1: pleasure for both of you. John Wu of course, present
Speaker 1: of Alva Labs nor Vera and bloomberg sationality Bostic joining
Speaker 1: us for Crypto show as she does as always, Doctor
Speaker 1: Strange in the Multiverse of Madness topped the box office
Speaker 1: for the second straight week, underscoring the appeal of superhero films.
Speaker 1: But the theater business it is still struggling to come back.
Speaker 1: Let's get into all of this their very own Bloomberg's
Speaker 1: Lucas Shaw. Could this be seen as a bell weather
Speaker 1: for the way the industry is recovering well? The performance
Speaker 1: of the new Doctor Strange movie is a really good
Speaker 1: sign for the movie business. It's it's outperforming its predecessor,
Speaker 1: the you know, the the initial Doctors Strange by quite
Speaker 1: a bit. It's already grossed more than it in just
Speaker 1: a couple of weeks. Uh. That being said, you know,
Speaker 1: the comic book movies are those that we know people
Speaker 1: are coming back to see comic book movies. The most
Speaker 1: recent Spider Man movie is one of the most successful
Speaker 1: movies of all time. The real question is are people
Speaker 1: going to come in between those comic book movies? And
Speaker 1: I'm not sure Dr Strange helps us answer that interesting.
Speaker 1: I'm also thinking big picture about what we learned from
Speaker 1: Netflix and the decline of maybe the quote stay at home,
Speaker 1: the streaming the subscribers there is that a sign that
Speaker 1: maybe we're not watching it at home, but we are
Speaker 1: indeed thinking about going back and seeing theaters outside. Yeah,
Speaker 1: and people are definitely going out into the world, you know.
Speaker 1: I'm sure you guys have have had folks on TV
Speaker 1: talking about you know, hotel stays being pretty close to normal,
Speaker 1: lots of you know, travel is up. People are going
Speaker 1: out into the world to concerts, theme parks. Um. I
Speaker 1: don't know that that movies are everyone's first choice. You know,
Speaker 1: the movie business is on track to do better than
Speaker 1: it did in one that's of course not saying all
Speaker 1: that much. It's still well beloved right now. The numbers
Speaker 1: from twenty nineteen, Yeah, I mean, that's that's not saying
Speaker 1: a lot. I think, as you appropriately put talk to
Speaker 1: me about Netflix specifically, a strategy to look at releasing
Speaker 1: movies in theaters, maybe take advantage of the reopening. They
Speaker 1: haven't really done that before. What is that telling you?
Speaker 1: How do you gauge the success? Yeah, you know Netflix
Speaker 1: has released movies in theaters, but not kind of globally
Speaker 1: in the major chains. They've had to pick off a
Speaker 1: lot of the smaller chains and the independent theaters. Um,
Speaker 1: there is a desire in certain corners of Netflix to
Speaker 1: take at least a handful of their titles and give
Speaker 1: them what we think of as a normal release or
Speaker 1: would be only in theaters for a month or forty
Speaker 1: five days. There'd be a real marketing campaign behind it
Speaker 1: so that people actually knew that it was coming out,
Speaker 1: because Netflix often to save its marketing for after a
Speaker 1: title it is out. But the big question is whether
Speaker 1: the people at the very top of Netflix want to
Speaker 1: do this. You know, movie theaters as as we just discussed,
Speaker 1: want fresh product. They would love to get their hands
Speaker 1: the Netflix movies. For all their talk about how Netflix
Speaker 1: is killing their business, but they're only going to take
Speaker 1: those movies if Netflix commits to marketing them, specifically those
Speaker 1: in theaters. And I'm hoping that we'll see some resolution
Speaker 1: on this in the next few months. I know that
Speaker 1: Netflix is talking about are exploring testing a couple of
Speaker 1: big titles in the fall, say that the sequel to
Speaker 1: Knives Out, which was a huge hit a few years ago,
Speaker 1: But we don't know the resolution just yet. Really appreciate it.
Speaker 1: Our very own Lucashaw joining us as always, and well,
Speaker 1: that does it for this edition of Bloomberg Technology. But
Speaker 1: don't worry. We're back tomorrow and we are going to
Speaker 1: be live from Boston, starting with the Clothes to PM Eastern.
Speaker 1: I'll be joining us. Then we'll take you through Triple
Speaker 1: Take and then finishing off with the triple threat that
Speaker 1: is Bloomberg Technology. It'll be two to six pm live
Speaker 1: of course from Boston, so make sure to check it out. Also,
Speaker 1: don't forget to check out our new podcasts. You can
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Speaker 1: and I Heart This is Bloomberg at sett