Speaker 1: From Mark hard Of. We're Innovation, Money and Power Calve
Speaker 1: in Silicon Valley, NBM. This is Bloomberg Technology with Caroline
Speaker 1: Hide and Ed Ludlow. I'm Caroline Hired of Bloomberg's World
Speaker 1: tadquarters in New York, and I met Ludlow in San Francisco.
Speaker 1: This is Bloomberg Technology coming up Financial conditions. They tighten
Speaker 1: what the latest details in the banking crisis mean for
Speaker 1: your tech investing. We go live outside of Suez and
Speaker 1: talk first Republic stock drop, plus what the banking fallout
Speaker 1: means for crypto as Bitcoin tops twenty eight thousand for
Speaker 1: the first time since June amid the turmoil, and we'll
Speaker 1: bring you the latest on job cuts in the world
Speaker 1: of technology. Amazon announces it's laying off an additional nine
Speaker 1: thousand employees. All that so much more coming up Broadly,
Speaker 1: the focuses on the banking sector, right That's where the
Speaker 1: feel good is. In the equity markets. You see underperformance
Speaker 1: in megacaps. They had a really strong week last week
Speaker 1: tech scene as a safety play. We're unraveling that this week.
Speaker 1: Some megacat names down considerably. Amazon down two percent. It
Speaker 1: actually paired losses on the headline nine thousand additional layoffs Caroline,
Speaker 1: but now continuing to trade lower. The number that always
Speaker 1: gets me is nine thousand plus eighteen thousand is twenty
Speaker 1: seven thousand layoffs in total. You have to remember at
Speaker 1: the end of last year they had one point five
Speaker 1: four million workers globally. Yeah, to drop in the ocean,
Speaker 1: it is. But remember most of those one and a
Speaker 1: half million are actually contract based. So if you're looking
Speaker 1: more at a corporate job, it's what, well, three hundred
Speaker 1: thousand or there or thereabouts. What's interesting is, like with Meta,
Speaker 1: a second key round of layoffs and like with Meta,
Speaker 1: kind of drawn out, maybe not happening till April till May.
Speaker 1: What does that mean for the overall job state or
Speaker 1: what does that mean for the macro picture, not just
Speaker 1: for technology as well. Yeah, but bloom those Mike McKee
Speaker 1: says exactly that it won't show up in the day
Speaker 1: until later in the year. Look at where the cuts
Speaker 1: are aws recruitment. Twitch interesting there because some of those
Speaker 1: are growth areas, some of them are consistent with what
Speaker 1: Amazon's done already, and once again just very painful here
Speaker 1: for an HR at any of these technology companies and
Speaker 1: all of this, Let's set it back into the macro backdrop,
Speaker 1: because this is what happens when interest rates rise. This
Speaker 1: isn't a cooling of an economy. This is jobs having
Speaker 1: to be sacrificed. This is also a rising interest rate
Speaker 1: world means for banks, and that is what we've been
Speaker 1: digesting all week long special coverage here roon Bloomberg and
Speaker 1: we've got to bring you from a technology context because
Speaker 1: it's been a frantic weekend. You saw Credit Suez the
Speaker 1: takeover by rival UBS. What does this mean for the
Speaker 1: overall investment landscape? Shnani Bassak, who's been working around the
Speaker 1: clock on Sunday, in fact, outside the company's New York headquarters.
Speaker 1: How does it feel, Listen, Caroline, this is really an
Speaker 1: iconic moment. This is an iconic building. I'm standing in
Speaker 1: front of Credit Squeeze at eleven Madison Avenue, a building
Speaker 1: that they've been at since the nineteen nineties, not too
Speaker 1: long ago, signing a multi decade lease, filled with people
Speaker 1: and one of the biggest investment banks in the United States,
Speaker 1: and now their crosstiwn V rival just less than thirty
Speaker 1: blocks away. The fate of this building, the people in it,
Speaker 1: there are a lot of anxieties that are under the surface.
Speaker 1: Remember the UBS CEO and a memo Jess late yesterday
Speaker 1: had told his staff that this is not a done
Speaker 1: deal yet in the sense that it still needs to close,
Speaker 1: meaning they should not be sharing information yet with their
Speaker 1: rivals over at Credit sweez Swee is still indeed arrival.
Speaker 1: With that said, remember before this deal was ever announced,
Speaker 1: Caroline Credit Sweezes had a plan to cut about nine
Speaker 1: thousand jobs over time, and UBS, while they have not
Speaker 1: given that sense of how deep the headcount reductions could go,
Speaker 1: there's still a plan to have about an eight billion
Speaker 1: Swiss frank cost reduction plan annually through twenty twenty seven,
Speaker 1: which implies significant job cuts. Now, on one hand, there
Speaker 1: is some silver lining here that when folks across Wall
Speaker 1: Street look at what's happening, Credit sweez has been one
Speaker 1: of the top in banks in the world, it presents
Speaker 1: an interesting opportunity for UBS to be getting even bigger
Speaker 1: in the United States. There are some worries as they
Speaker 1: roll off some of the more difficult assets in that
Speaker 1: investment bank, but this is really at this moment, in
Speaker 1: addition to a financial story, a very significant talent one
Speaker 1: with deep history here in the United States. Yeah, the
Speaker 1: repercussions are really being felt as well in the credit
Speaker 1: markets and the debt markets, which I'm going to get
Speaker 1: into later in the show. Bloomberctionali Bassett, thank you so much.
Speaker 1: Outside Credit Swiss in New York. Now, the TERMOI in
Speaker 1: the banking sector continues, but it sparked that rally in
Speaker 1: bitcoin and crypto related stocks. Katy Greifeld here with more
Speaker 1: and Katie, they're talking about high degree of correlation between
Speaker 1: basically real rates coming down and liquidity situation. What are
Speaker 1: you seeing out in the markets when it comes to crypto. Well,
Speaker 1: when you look at the rally that you're seeing in bitcoin,
Speaker 1: crypto broadly, but led by bitcoin, it really boils down
Speaker 1: to two theories. You have the one you were just
Speaker 1: talking about, which is that macro narrative that you're seeing
Speaker 1: big tech rebound mightily. Maybe not today, but last week
Speaker 1: it's best week of the year for the Nasdaq one hundred.
Speaker 1: We could be looking at the last rate hike of
Speaker 1: the FEDS tightening cycle on Wednesday. There's some talk about
Speaker 1: quantitative tightening maybe not being long for this world. All
Speaker 1: of that would be good for bitcoin and that's what
Speaker 1: you're seeing in the price is the other theory is
Speaker 1: sort of the original promise of crypto, basically that you
Speaker 1: want to be your own bank, you want to get
Speaker 1: away from the banking system. That is what some of
Speaker 1: the bitcoin maximalists on Twitter are saying right now. But
Speaker 1: you look at the performance of this asset class as
Speaker 1: a whole, some of those crypto stocks as well, it
Speaker 1: seems like it's leaning towards the macro narrative. Cara, I'm
Speaker 1: looking at CYP cryptgo on the Bloomberg and you forget. Actually,
Speaker 1: you look at all the other tokens, they're all lower,
Speaker 1: they're all in the red. Bitcoin continues to climb higher.
Speaker 1: That's where the focus is right now. It's the og
Speaker 1: perhaps it is well, the safety trade when you're looking
Speaker 1: at the world of crypto. But Katie, also, what's been
Speaker 1: so interesting, We're going to dig into it in a moment,
Speaker 1: is the worry about US crypto builders here in the
Speaker 1: United States being forced basically to bank outside of the
Speaker 1: United States, maybe even to move their entire company. It
Speaker 1: was notable that over the weekend, Signature Bank, which of
Speaker 1: course had been put up you know, taken over by
Speaker 1: regulators was being swooped up by a comment. Well, a
Speaker 1: region low bank, a community lender here in New York.
Speaker 1: What are you hearing of, basically resilience of the crypto
Speaker 1: market in general. Well, Caroline, that's kind of the irony
Speaker 1: is that along with that maximalist theory that these crypto
Speaker 1: companies they need to use the banking system. I mean,
Speaker 1: you saw Silvergate Signature. Those were huge players, huge you know,
Speaker 1: instances where crypto companies connected to traditional finance. And it
Speaker 1: is interesting if you look at some of the stocks
Speaker 1: associated with the crypto industry. I'm talking about some of
Speaker 1: the miners, for example, they're actually outperforming bitcoin. It's really
Speaker 1: striking to me that if you look at Marathon Digital
Speaker 1: I had to check the numbers a few different times.
Speaker 1: It's up one hundred thirty six percent this year. Even
Speaker 1: though bitcoin miners as an industry, they've really been struggling
Speaker 1: with higher energy costs, lower bitcoin prices. That's really compress
Speaker 1: their margins. But you're really seeing risk on across the
Speaker 1: crypto space. We'll see if it lasts. We're just stepping
Speaker 1: down by three quarters of a percent at pretty notable
Speaker 1: that twenty eight thousand level Katie Greifeld again working throughout
Speaker 1: the weekend. I think she had more source conversations than
Speaker 1: she does on a daily basis. They thank her. Let's
Speaker 1: morden this conversation out. Let's bring in Noel Atchison, the
Speaker 1: founder of the new Zetta crypto is macro. Now you
Speaker 1: have been writing on your day off over there in Spain, Noel,
Speaker 1: what is the sentiment like, why do you think bitcoin's rallying?
Speaker 1: To start it off? O, Caroline? It is such a
Speaker 1: complicated cresting at the moment. There is so much going on.
Speaker 1: Katie totally correctly identify two of the main threads that
Speaker 1: are driving the Bitcoin performance. One is the macro story.
Speaker 1: Bitcoin is a risk asset, has often traded like a
Speaker 1: macro asset, as we know, and it is even more
Speaker 1: than that though it is arguably the most sensitive asset
Speaker 1: two shifts in monetary liquidity. There's also the banking crisis,
Speaker 1: and Katie did mention how that ties into the crypto thesis.
Speaker 1: I mean, Caroline, just fourteen years ago, just over Tatoshi Nakamoto,
Speaker 1: the creator of bitcoin, embedded in the very first bitcoin blog,
Speaker 1: the link to the headline Chancellor on the brink of
Speaker 1: second bailout of banks. So this reminds how the macrocrisis
Speaker 1: leads into the banking crisis, which leads into the crypto crisis.
Speaker 1: All these threads are getting very intertwined, all that they
Speaker 1: are separate, and we also do have the market structure
Speaker 1: thread going in here. Bitcoin's market structure is quite unusual
Speaker 1: and that is one of the drivers of the speed
Speaker 1: of the rally that we've seen such seventy percent so
Speaker 1: far this year. And we also have the technological evolution
Speaker 1: which is still going on. So so many things going
Speaker 1: on at the moment driving the bitcoin's performance roative two
Speaker 1: minus piers that you mentioned, and that isn't itself unusual
Speaker 1: because usually in a market bitcoin underperformance ed. What's interesting
Speaker 1: is this sort of narrative that's thriving out there that
Speaker 1: maybe bitcoin weather's crises chaos at least sent relatively well well. Now,
Speaker 1: while the logic seems to be, you look at what's
Speaker 1: happening in the banking sector, right, excuse me, and then
Speaker 1: we're resetting expectations for rates globally, the FED, the ECB.
Speaker 1: That seems to be a part of the equation here
Speaker 1: when it comes to Bitcoin in particular, and The fact
Speaker 1: that there are so many parts of this equation, and
Speaker 1: you're totally right, gives bitcoin a support, a floor if
Speaker 1: you like, that many other risk assets don't have. When
Speaker 1: it comes to the banking crisis, it is obviously a
Speaker 1: factor and people paying closer attention to this, But very
Speaker 1: few of us believe that bitcoin is going to replace
Speaker 1: the banking. For your banking is convenient, it will recover
Speaker 1: from the crisis you perhaps in some other format. But
Speaker 1: what bitcoin represents from many it is it's an insurance asset.
Speaker 1: It's adjusting case, it's an ability. It represents an ability
Speaker 1: to transact even when the banking system isn't working. And
Speaker 1: I'm not suggesting it's going to stop working, but it
Speaker 1: is that insurance quality that many people are paying attention to. Now. Now, well,
Speaker 1: what is the biggest headwind to bitcoin from this point? On? Regulation?
Speaker 1: Regulation and the deep banking of the crypto industry which
Speaker 1: you referred to earlier. The d banking is a big
Speaker 1: blow to the North American trypto industry the US, I
Speaker 1: should say more specifically, but it's not a death blow
Speaker 1: by any means, and it's not really going to hamper
Speaker 1: much of the innovation much mure, there's somebody going to
Speaker 1: go elsewhere. There's another thing that's much people looked about bitcoin.
Speaker 1: It's mobile. It is so mobile. It can work just
Speaker 1: as well from anywhere in the world as it can
Speaker 1: from say San Francisco or New York. The US will
Speaker 1: lose out on a lot of talent and also investment
Speaker 1: capital and also innovation potential, but it will eventually realize,
Speaker 1: you know, the mistake that it's making, and come to
Speaker 1: its senses and try to scramble to catch up. Meanwhile,
Speaker 1: the bitcoin will continue to evolve in terms of the technology,
Speaker 1: in terms of the adoption, and in terms of understanding
Speaker 1: its role in the world. What about other crypto assets?
Speaker 1: Are the don bitcoin or any of them in insurance
Speaker 1: contract too? Not as simply as bitcoin. It's obviously DeFi
Speaker 1: has shown that it can weather the mother of all
Speaker 1: stress tests. It has done so many times over the
Speaker 1: past few months, over the past year, arguably defy even
Speaker 1: during the very dramatic weekend we had this past one,
Speaker 1: but the one before with the depeg of USDC continued
Speaker 1: to work just fine. USDC repegged as soon as we
Speaker 1: get access to the banking rails, So defy is definitely
Speaker 1: something to be looked at, but there is the regulatory overhang.
Speaker 1: Ethereum is another interesting situation. We have a big upgrade
Speaker 1: coming up, but again regulatory uncertainty, which is why Bitcoin's
Speaker 1: outperformance in an upmarket is unusual right now. Normally it's
Speaker 1: the as you mentioned, Caroline, it's the safe and big
Speaker 1: air quotes there the crypto asset, it normally underperforms and
Speaker 1: others totally outshine it because they are higher bolletied. But
Speaker 1: not right now because of the regulatory uncertainty. That is
Speaker 1: a headwind for the whole crypto market, including Bitcoin. Of
Speaker 1: what Bitcoin's doing anyway, well, in simple times, it's the
Speaker 1: regulation where there are still more questions to be answered.
Speaker 1: No actress, an author of the crypto is macro now
Speaker 1: news that are coming to us from Madrid. Thank you,
Speaker 1: Coca Cola. It is the latest big name revealing new
Speaker 1: AI tools today the soft drink's giant announced Create Real Magic.
Speaker 1: It's an AI platform that lets you generate original artwork
Speaker 1: with pretty iconic Coola visual assets. Having partnered with Open
Speaker 1: Ai with Baine for this initiative, where therefore Rapley is
Speaker 1: to welcome the CFO John Murphy into this discussion because
Speaker 1: you really are the executive that focuses in on innovation
Speaker 1: thinking about these sorts of ways in which it drives revenue.
Speaker 1: How does a deal like this drive revenue? John, Well, thanks,
Speaker 1: nice to be with you. First of all, we're at
Speaker 1: the forefront of an incredible new technology and capability. We
Speaker 1: believe it's part of our ongoing marketing agenda, the transformation
Speaker 1: of our marketing agenda and annie new exciting engagement with
Speaker 1: our consumer base is at the core of helping us
Speaker 1: create new value. In fact, our own bloombag intelligence analysts
Speaker 1: wrote that Coca Cola's forecast for generating seven to eight
Speaker 1: percent organic revenue growth this year hinges in large part
Speaker 1: on achieving success with the emphasis on innovation and marketing.
Speaker 1: Just tell us how this particular AI platform is going
Speaker 1: to drive marketing In particular, what do you think this
Speaker 1: will bring to the forefront in terms of innovation and
Speaker 1: well engagement from your core audience and user base. Well,
Speaker 1: marketing and innovation is really the engine that allows us
Speaker 1: to connect with our consumer base. We are on a
Speaker 1: journey to digitizing a lot of our interactions. We love
Speaker 1: this new technology as a way to allow us to
Speaker 1: engage in a very innovative and exciting way. And the
Speaker 1: program we've just launched today goes through till the end
Speaker 1: of March. It's an open invitation for millions of people
Speaker 1: to co create with us, to get another brand better
Speaker 1: and ultimately to bring awareness to the to the business
Speaker 1: and to our portfolio. So we're really really excited with
Speaker 1: learning and understanding how we can continue to build this
Speaker 1: new capability into into the work we're doing going forward.
Speaker 1: On that note, John chat gpt in and of itself
Speaker 1: is raised concerns around accuracy about some of the responses
Speaker 1: it's given. How closely are you looking at sort of
Speaker 1: deepening the integration of the underlying technology the tool into
Speaker 1: Coca Cola's business more broadly With those concerns in mind, well,
Speaker 1: I think any new, potentially disruptive technology is going to
Speaker 1: generate its first share of controversy, and it's really important
Speaker 1: to scale it within an enterprise like ours. It's really
Speaker 1: important to of good governance, good protocols, and the ability
Speaker 1: to collaborate with the various stakeholders we have involved with us,
Speaker 1: both internally and externally. So we're looking at this as
Speaker 1: a bold move versus a reckless one, and we think
Speaker 1: we have in place those protocols that will allow us
Speaker 1: to incorporate it and advance of that scale across the company. Johnny,
Speaker 1: is this relationship with open AI a marketing exercise in
Speaker 1: and of itself or is it actually needle moving when
Speaker 1: it comes to what Cooda is doing with technology. This
Speaker 1: is a much broader relationship than just a marketing campaign.
Speaker 1: We look at this has been an opportunity to really
Speaker 1: take any complex business challenge and compress it into a
Speaker 1: set of solutions that normally would take a lot longer
Speaker 1: and a lot more energy and time to deliver. Clearly,
Speaker 1: it's in the early stages. We have a test, learn
Speaker 1: and scale mindset, but we see it as being pivotal
Speaker 1: to the ongoing evolution of how we do business. Oles
Speaker 1: CFO and President John Murphy, thank you so much for
Speaker 1: your time, Caroline. Really interesting how we talk about innovation
Speaker 1: in big business. Let's talk tech a little bit more.
Speaker 1: Now see the largest Southeast Asia's internet firm and at
Speaker 1: one point the world's best performing stock. It's emerging from
Speaker 1: a pretty painful twenty twenty two. In a memoate of staff,
Speaker 1: billionaire founder for US. Lee says that after months of
Speaker 1: steep job cuts, the Asian Internet child has made changes
Speaker 1: it needs to deliver profits over the long haul, marking
Speaker 1: a turning point for the company. But the CEO also
Speaker 1: warns the company it still needs to prove that it
Speaker 1: can sustain a profit, writing quote, a job is not
Speaker 1: done yet. Similarly, Indonesian right hailing, an e commerce provider,
Speaker 1: go to Group, just reported a narrower adjusted loss for
Speaker 1: the fourth quarter after extensive cost cuts. The adjust had
Speaker 1: lost before interest, tax, depreciation and amaturization. That's a bit
Speaker 1: dark shrank, while revenue actually tripled, highlighting resilient demand even
Speaker 1: amid the cost of living squeeze in Southeast Asia. The
Speaker 1: company has cut six hundred rolls from its workforce this month,
Speaker 1: adding the one thousand, three hundred jobs it acts last year.
Speaker 1: There is a theme here, folks. Meanwhile, let's talk chips.
Speaker 1: Taiwan's exports of integrated circuit chips to China and Hong
Speaker 1: Kong falling from a fourth month in a row. That's February.
Speaker 1: As Washington Beijing tensions, they just simmer and demand for
Speaker 1: electronics continues to drop off. Exports in fact fell thirty
Speaker 1: one percent from a year earlier, the worst declined since
Speaker 1: two thousand and nine. China's market share of Taiwanese i
Speaker 1: SEE exports plunged to the lowest level since February twenty nineteen.
Speaker 1: All according to Balloomberg Data. Read First Republic resume trading
Speaker 1: extended its declines to forty six percent in the session.
Speaker 1: Has been halted again, of course, a number of ratings
Speaker 1: agencies cutting the rating on the bonds in decent hours.
Speaker 1: This is bloom bag. We're talking a lot about layoffs,
Speaker 1: those that are doing them, Amazon, those that are trying
Speaker 1: everything to avoid them. Just take Apple, for example, pulling
Speaker 1: every lever that it can to cut costs so it
Speaker 1: doesn't have to lay off full time employees. Let's bring
Speaker 1: in Mark German, who has just been writing time after
Speaker 1: time about some of the areas that Apple is able
Speaker 1: to compress costs on. Yeah, thank you so much both
Speaker 1: for having me. Apple is unique amongst the biggest tech companies.
Speaker 1: I mean, as we saw today Amazon cutting another several
Speaker 1: thousand jobs. We've seen Meta do multiple rounds of layoffs, Microsoft, Google.
Speaker 1: So Apple stands out, you know from that perspective. So
Speaker 1: how are they avoiding it? Well, first of all, you
Speaker 1: look at their cash balance. They have so much cash, right,
Speaker 1: they have so much momentum Right now with the stock price,
Speaker 1: sales are beginning to normalize. So from an outside perspective
Speaker 1: plus an internal perspective, it would be truly horrific. Right.
Speaker 1: It's horrible when other companies do layoffs, but for Apples specifically,
Speaker 1: would be horrific given their momentum, given the strategies they
Speaker 1: have in place, given the history they have in place
Speaker 1: for them to do layoffs. So what are they doing?
Speaker 1: Cutting back on travel, requiring senior vice president approval for
Speaker 1: many budget items. They're not backfilling, so as people are
Speaker 1: leaving in certain positions, they're not replacing them. They're not
Speaker 1: allowing cross department transfers on the corporate side in some cases,
Speaker 1: they're not allowing cross store transfers on the retail side.
Speaker 1: In some cases, firings are up on the retail side,
Speaker 1: not for layoff purposes, but your standard reasons about attendance
Speaker 1: and maybe lying about your hours and such. Right, So
Speaker 1: they're basically thinking of everywhere they can save money, and
Speaker 1: they're doing it. A part of the story as well, Mark,
Speaker 1: we just had thirty seconds is that actually throughout the
Speaker 1: Panamic era they hired judiciously compared to their peers. Right.
Speaker 1: They didn't do anything different during the pandemic in terms
Speaker 1: of hiring and spending as they did before. Right, whereas
Speaker 1: all these other tech companies they may be doubled or
Speaker 1: tripled or hiring or r and d spending in some cases,
Speaker 1: and now things are normalizing, they have to pull back.
Speaker 1: So Apple stayed the course. Not much has to change now.
Speaker 1: Bloomberg's Mark German, writing in power on check it out
Speaker 1: dot com and on the terminal, Welcome back to Bloomberg Technology.
Speaker 1: I met Ludlow in San Francisco. It's nine thirty am
Speaker 1: here on the West coast, but four thirty pm in London, says,
Speaker 1: take a look at where European markets closed. In the
Speaker 1: equity space, the stocks Europe six hundred up one percent,
Speaker 1: volatility and meet concerns. In the banking sector, we see
Speaker 1: a pullback modestly in the bond market. The German ten
Speaker 1: year burned off by a single basis point two point
Speaker 1: one percent. The concern all around credit Swiss ubs has
Speaker 1: come in to buy credit Swiss. It's Swiss traded shares
Speaker 1: down fifty seven percent fifty six and a half percent
Speaker 1: in Monday session, UBS Group up one and a half
Speaker 1: percent after doing that deal with backstop on liquidity from
Speaker 1: central banks. The concern really is in the additional Tier
Speaker 1: one bonds, the riskiest bank bonds where we saw a
Speaker 1: real write down risk. This is Credit Swiss is eighty ones.
Speaker 1: This is where the action's been throughout Monday's session. The
Speaker 1: concern is that similar effects will creep into eighty ones
Speaker 1: of other banks. We're seeing that play out as well.
Speaker 1: But Caroline, we have some sort of solution in the
Speaker 1: banking sector in Europe. The permanency of it is still
Speaker 1: in question, and we still looked at what's happening here
Speaker 1: in the US with First Republic Bank. We still think
Speaker 1: about what it all means for interest rates setting of
Speaker 1: course the FED coming on Wednesday, and we think about
Speaker 1: what higher interest rates means for jobs too. That clear
Speaker 1: and evident in the world of technology today, Amazon laying
Speaker 1: off an additional nine thousand employees, adding to cuts that
Speaker 1: were already the largest round of layoffs in the company's history.
Speaker 1: I Spending, Bloomberg Intelligences, and Ragrana just what was interesting
Speaker 1: about Andy Jase's own communication in the memo that Bloomberg
Speaker 1: seemed to get just ahead of the curve was the
Speaker 1: fact that they're focusing in on areas that really are
Speaker 1: growth drivers aws advertising. Yeah, I think that was the
Speaker 1: big thing. You don't want your day looking at non
Speaker 1: retail units where the major job cuts are, you know.
Speaker 1: For Thus this indicates that, you know, there is probably
Speaker 1: still a downward pressure on growth rates in Amazon's cloud unit.
Speaker 1: That has been the you know, the key story for
Speaker 1: Amazon for some time. It is the biggest profit driver.
Speaker 1: In fact, last year it was the only profit driver
Speaker 1: for the company. And I think it, you know, just
Speaker 1: shows that the cloud consumption still remains under pressure and
Speaker 1: a ragin. In his statement, Andy Jase was talking about
Speaker 1: uncertainty in the economy, the need to be lean the
Speaker 1: rest of the years nine thousand additional LAYOFS twenty seven
Speaker 1: thousand in total. What Caroline and I have been discussing
Speaker 1: is that there at the end of last year one
Speaker 1: point five four million work is globally three hundred thousand
Speaker 1: corporate jobs. It seems like a drop in the ocean.
Speaker 1: Do you think that they would need to cut deeper
Speaker 1: later on? So the four The number you want to
Speaker 1: focus on is that three hundred and fifty thousand that
Speaker 1: we read at you know, Matt's piece in January. Those
Speaker 1: are the high paying jobs. Those are the ones that's
Speaker 1: more focused. I don't look at the other ones, the
Speaker 1: retail jobs, as much. But but you know, these numbers
Speaker 1: do matter because if you were to take per head
Speaker 1: costs for this, it's pretty high. Margins for awers have
Speaker 1: been declining over the past two to three quarters because
Speaker 1: of age inflation, because of higher energy costs. I think
Speaker 1: this is just one way for them to get those
Speaker 1: costs back in order. Limberg Intelligence is Anna Igrana. Thank
Speaker 1: you for your analysis. Let's stick with the story and
Speaker 1: bring in Kara Brennan, Chief people Officer over Latise. Kara,
Speaker 1: it's a big headline and it's a week after meta.
Speaker 1: What is your assessment at the level of layoffs that
Speaker 1: we're seeing right now in this technology industry? You know,
Speaker 1: as mentioned, we all know the rational thought here is
Speaker 1: that this is similar to what happened a few years ago.
Speaker 1: Technically it should be perceived as a drop in the
Speaker 1: bucket compared to the total employment that we have here
Speaker 1: in Silicon Valley and in our tech companies overall. But man,
Speaker 1: it sure doesn't feel that way. After the weeks that
Speaker 1: we've had recently with Silicon Valley Bank now First Republic Bank.
Speaker 1: We at Lattis and our five thousand customers are having
Speaker 1: a lot of conversations about how to keep employees engaged,
Speaker 1: how to keep morale at a functional level. While everyone's
Speaker 1: facing these challenges, Caroline, we should point out that these layoffs,
Speaker 1: this latest round, won't happen until mid April, and if
Speaker 1: there will be separation packages of course, but morale right now,
Speaker 1: what I'm hearing, at least within Meta, I'm sure in
Speaker 1: Amazon as well, is low. Yeah, a meta I'm sure
Speaker 1: now at Amazon. The feeling that it's not going to
Speaker 1: be happening overnight. You are a people driven business at
Speaker 1: Lattice CAA. What could be being done differently? Do you
Speaker 1: think in terms of communication? So much of this is
Speaker 1: about proactive communication as much as it is about reactive
Speaker 1: And you saw in Jesse's memo that he's talking about
Speaker 1: trying to contain this conversation within the conversation the context
Speaker 1: of the larger planning for the organization, trying to double
Speaker 1: down on the thoughtfulness that came with these decisions around
Speaker 1: the job cuts. What we know from being on the
Speaker 1: ground is that we have a number of organizations where
Speaker 1: people don't understand why the cuts were made where they were.
Speaker 1: We know on the HR side that it makes sense
Speaker 1: to during these times to cut recruiters, to cut some
Speaker 1: other administrative functions. We're hearing now we're learning more about
Speaker 1: what's happening on the cloud side of the businesses within Amazon.
Speaker 1: But that's the real question. People want to understand, why
Speaker 1: are these decisions made? Why was I affected? Why was
Speaker 1: my coworker affected? And that's what our companies are asking
Speaker 1: asking for information about. How do we proactively communicate so
Speaker 1: we don't create more noise than necessary? And when you're
Speaker 1: a chief people officer of a company like Lattice, is
Speaker 1: it reality that then there's a lot of talent that
Speaker 1: you could hire up if you were in that stage.
Speaker 1: I know a lot of companies aren't, or are people
Speaker 1: when they're not being made off till April till May.
Speaker 1: When does that actually become a reality? This talent that
Speaker 1: suddenly people can get for perhaps a little bit cheaper
Speaker 1: than previously. On the chief people officers side, there's lots
Speaker 1: of there's definitely conversations within our networks about what will
Speaker 1: the impact of this be in the broader marketplace. And
Speaker 1: we are starting to see the impact of the of
Speaker 1: the layoffs that were happening in the fall, and it's
Speaker 1: probably going to be at least a quarter post layoff
Speaker 1: before we'll see these people ready to turn back into
Speaker 1: the market and look for their next jobs. We are
Speaker 1: challenged with really wonderful exit packages from a lot of
Speaker 1: these companies when you're trying to rehire these folks quickly.
Speaker 1: But I'll tell you, as a chieve people's officer and
Speaker 1: someone who really cares about that side of the business,
Speaker 1: I'll take that any day. Kara Lattice is a people
Speaker 1: management platform, right. It also includes an element of performance review.
Speaker 1: What are you seeing in the data? What are you
Speaker 1: learning about how companies are going about drawing up these lists?
Speaker 1: Because they have to draw up lists, right. You know,
Speaker 1: in some cases I've reported in Meta for example, there
Speaker 1: had been some kind of more widespread layoffs that were
Speaker 1: done with a sledgehammer rather than a scalpel. But how
Speaker 1: do you make the decision? Well, each company is different.
Speaker 1: The best way to make the decision is to be
Speaker 1: extremely thoughtful and as you mentioned, use a scalpel and yeah,
Speaker 1: people are coming to our platform. We're seeing usage numbers
Speaker 1: increase because the organizations that really care about driving the
Speaker 1: right outcomes for the business, or organizations that are turning
Speaker 1: back into what we know are really good practices performance management,
Speaker 1: talent reviews, engagement measurement from a surveying perspective, those are
Speaker 1: all things that we provide through the platform. That being said,
Speaker 1: those are the companies that are going to weather this storm,
Speaker 1: that are going to make the right decisions if in
Speaker 1: the worst case scenario they have to make a decision
Speaker 1: about exits, and they're going to be on the other
Speaker 1: side having made really strategic, thoughtful choices. Layoffs are never
Speaker 1: pleasant to talk about, but we are learning about how
Speaker 1: these are going about. Car Brennan of Lattice, thank you
Speaker 1: for your time. Now, coming up, we'll unpack the ongoing
Speaker 1: banking crisis and the impact on the VC landscape of
Speaker 1: specially when it comes to tech with Kyle York, CEO
Speaker 1: of your Kaie. Caroline and what has been the banking
Speaker 1: crisis impact on crypto It is had if ahenomenal run
Speaker 1: up twenty five of the course of a week or so.
Speaker 1: Today we pull back slightly, maybe some relief after credits
Speaker 1: we's being brought by ubs. We're seeing the bank stocks rise,
Speaker 1: micro strategy down. Of course, a key cups are related
Speaker 1: stock Bitcoin of by eight tenths percent. Still now that
Speaker 1: twenty eight thousand level, this is grimmer. I believe in
Speaker 1: a few months, three to six months, business will be
Speaker 1: back to normal. We of course encouraged our founders to
Speaker 1: leave everything by three months of money. Yeah, in Silicon
Speaker 1: Valley bank have three months worth of cash outside, so
Speaker 1: we didn't want to cause a bank run. At this point,
Speaker 1: FDIC money is safe. We encouraging our founders to put
Speaker 1: money back in SBB. That was venowed Coast, the founder
Speaker 1: of Coast of Measures, on his predictions about how long
Speaker 1: we can expect the banking crisis to impact startups, Caroline
Speaker 1: one view, But I would say an informed and experienced view,
Speaker 1: which is that it's going to take a few months
Speaker 1: to unravel. We asked our audience what they thought. The
Speaker 1: answer is kind of consistent with that. Yeah, it feels
Speaker 1: that hope is there that months. Coast is right forty percent,
Speaker 1: but it's pretty evenly split and still to have almost
Speaker 1: a quarter saying it's going to take years. This is
Speaker 1: a major impact, and this is still playing out. Look,
Speaker 1: there are many still wandering about their banking relationships or
Speaker 1: First Republic, even though we've got thirty billion coming to
Speaker 1: them in terms of deposits from their own rivals. We
Speaker 1: reported on this program how quickly founders were able to
Speaker 1: diversify their banking and in some cases, like Rippling Right,
Speaker 1: raise money in just three days. On the other hand,
Speaker 1: there is nervous this there about how psychologically this is
Speaker 1: ult momentum in the private markets. Yeah, and we can
Speaker 1: talk about that sort of sentiment. And at the moment,
Speaker 1: we're seeing financial conditions basically Titan get worse. We're worried
Speaker 1: about access to finance, and certainly there's going to be
Speaker 1: a lot of war founders out there who just don't
Speaker 1: know where the next check is coming. Then when do
Speaker 1: we see their force and the big tech companies doing
Speaker 1: layoffs like we do today. Yeah, Well, let's keep it going.
Speaker 1: Kyle York's CEO, co founder and managing partner of york
Speaker 1: Ie the investment firm, was out with this tweet last Friday.
Speaker 1: The business is built to help companies grow, are actually
Speaker 1: failing them. That was the York take, Kyle, What did
Speaker 1: you mean by that? Listen? I think fundamentally the venture
Speaker 1: capital industry that's been around for forty years has gotten
Speaker 1: kind of almost too big to fail and others sulf Right.
Speaker 1: If you think about the mantra of nine of ten
Speaker 1: startups fail, how is that good for the entrepreneur or
Speaker 1: the founder or the economy if the client or venture
Speaker 1: capital firm is their limited partners and their investors and
Speaker 1: not necessarily the companies and the people that they're back
Speaker 1: in Carrow on the last seven days of programs, every
Speaker 1: venture capitalist that's been on the show had a different strategy. Right.
Speaker 1: In Vinokosa's case, he went into his own pockets and
Speaker 1: made loans to portfolio company out of his own funds,
Speaker 1: not the firm's funds. Everyone did it differently. Yeah, we had,
Speaker 1: of course have founders fund joined us last week after
Speaker 1: many had said, well, maybe they had antagonized some of
Speaker 1: the concerns, particularly in social media, by the media finding
Speaker 1: out that they were advising their port photo companies to
Speaker 1: pull money. Kyle, what did you do in this situation
Speaker 1: for those port photo companies that had money in SPV, Well, listen,
Speaker 1: if you're an operator, every single day is hard. And
Speaker 1: if you have lived through the last few years of COVID,
Speaker 1: in the global pandemic, and now the banking crisis that
Speaker 1: we're dealing with in technology and startups, you really just
Speaker 1: need a warm blanket around you, and you need a
Speaker 1: helping hand, and you need to triage. You can go
Speaker 1: in the triage mode. This is wartime for startups. They
Speaker 1: need to know that they have investors and they have advisors,
Speaker 1: and they have people around them that can help them
Speaker 1: figure out what to do during these times. Thankfully, a
Speaker 1: lot of our companies that are very very early stage,
Speaker 1: a lot of them have multiple banking relationships so ended
Speaker 1: up either local or regional banks married with a Silicon
Speaker 1: Valley bank or a First Republic or a Chase Bank.
Speaker 1: Had some diversity, so it enabled them to move funds
Speaker 1: thoughtfully and collaboratively during the process. And you know, we
Speaker 1: just kind of warned our founders. You know, even though
Speaker 1: it's real nice ending to a movie in the Titanic,
Speaker 1: when the gentlemen are playing the violin on the end
Speaker 1: of the ship, there really was no reward necessarily to
Speaker 1: be that musician on that ship. So I would just
Speaker 1: be very thoughtful and pragmatic. I think it's going to
Speaker 1: fundamentally shift how companies manage money moving forward. What about
Speaker 1: managing business? Did you call have to think, Okay, who
Speaker 1: are winners here? Who do we choose to back to
Speaker 1: offer support to or could you do it for all? Well?
Speaker 1: I think at the end of the day, the way
Speaker 1: our model works, we invest in B to B software,
Speaker 1: so recurring revenue subscription businesses. Again, we're really really early stage,
Speaker 1: and we're always, unfortunately needing to bucket companies into different categories.
Speaker 1: You have your high flyers, you have your stable growers,
Speaker 1: you have the ones that are struggling. You know, but
Speaker 1: at this point in time, to be honest with you,
Speaker 1: you know, it was such the throes of war and
Speaker 1: you need to just react and sort of support everyone
Speaker 1: on the backside of it. Though, Carolina and Ed were
Speaker 1: definitely focused on, you know, what to do now? Right
Speaker 1: the funding markets. Over the last couple of years, you've
Speaker 1: seen valuations constrain. You've seen later stage markets of course,
Speaker 1: the IPO market, public tech market come down. This is
Speaker 1: only good for B to B software because there's no
Speaker 1: denying that more and more applications are using a cloud,
Speaker 1: and more automation and AI is needed, but you know
Speaker 1: how long is it going to take for it to settle?
Speaker 1: The market needed a correction though, right, I mean the
Speaker 1: multiples were far too great. Companies doing a million of
Speaker 1: revenue or being valued over one hundred million dollars that
Speaker 1: was just not sustainable and you can't play power law
Speaker 1: that long or if you start out founders. Well, I mean,
Speaker 1: the only area that people seem to feel that they
Speaker 1: do want to write checks at the moment, maybe rippling
Speaker 1: aside is artificial intelligence, right, and I wonder if the
Speaker 1: checks get smaller or larger and as we could think
Speaker 1: about that. Yeah, I think you're just going to see
Speaker 1: valuations that are more sane, right, I mean, I think
Speaker 1: we all know what a good company should be valued out,
Speaker 1: whether in the public markets to the private markets, and
Speaker 1: there's just been so much, so many tailwinds in the
Speaker 1: last several years that have made those valuations skyrocket. Companies
Speaker 1: Investors want to invest in good, sustainable, long term businesses
Speaker 1: has always been the fundamental approach of your KYE. I
Speaker 1: think you're just going to see a lot more pragmatism
Speaker 1: come to the market, which, in the end, I actually
Speaker 1: think it's going to be a good thing for entrepreneurs everywhere. Kyle,
Speaker 1: there were big themes and ideas for twenty twenty three
Speaker 1: that we were discussing even as recently as the night
Speaker 1: before SBBs collapse. Right about the idea of probably fewer
Speaker 1: checks being written, the sizes of checks at the start
Speaker 1: of this year being different to what they were in
Speaker 1: twenty twenty two and twenty twenty one. You're doing twelve
Speaker 1: to twenty deals a year, seed stage up, What is
Speaker 1: business slight for you this year? What kind of transactions
Speaker 1: will you be doing in at what cadence? It's honestly
Speaker 1: never been better for us. Again, we are very early stage.
Speaker 1: It's one nice thing to be a newer fund where
Speaker 1: we have actual capital constraints to how much capital we
Speaker 1: can deploy per year. Think about how large the largest
Speaker 1: funds in the world have gotten. Think about how large
Speaker 1: the funding rounds for those companies that they're investing in
Speaker 1: ore and how big their checks need to be to
Speaker 1: deploy a billion dollars two billion dollars. That's kind of
Speaker 1: played its way into into this market problem where so
Speaker 1: much capital needed to be deployed, and that the valuation
Speaker 1: sensitivity and the pragmatism around the business fundamentals mattered a
Speaker 1: little less for us. We're kind of staying the course
Speaker 1: at this early stage, seed stage. There's more and more
Speaker 1: industries now right for disruption, including banking that we're going
Speaker 1: to look at a lot of vertical applications and different
Speaker 1: things that we think have a lot of momentum out
Speaker 1: in the backs of COVID, the pandemic digital health thanking
Speaker 1: I said, management of a sex of Thanks Kyle, great
Speaker 1: to have some time with you. Thank you, Kyl york
Speaker 1: seemingly picking the right end of the spectrum to be
Speaker 1: on at the moment. The CEO and founder a managing
Speaker 1: partner of york I E. Meanwhile, coming up, we've got
Speaker 1: to talk TikTok. The CEO is about to get grilled
Speaker 1: on the hill later this week. This is the app
Speaker 1: is on the increasing pressure politically speaking, here's what Coasla
Speaker 1: found of an old Coosler also had to say about that.
Speaker 1: I think in general TikTok has been used for spying
Speaker 1: on US citizens. So if that's true, and I don't
Speaker 1: have as much information as the administration does, then we
Speaker 1: clearly should penalize that kind of behavior. Let's get to TikTok.
Speaker 1: The company CEO, Show Chew will have to testify before
Speaker 1: the House Energy and Commerce Committee this week, bringing in
Speaker 1: Bloombo's k lines out of DC. This is a pretty
Speaker 1: highly anticipated appearance, isn't it. It is because it's the
Speaker 1: first time he will testify in front of a congressional
Speaker 1: committee here in the US. This hearing is on Thursday
Speaker 1: at ten am, and according to the statement from the committee,
Speaker 1: it is going to be testimony centered around TikTok's consumer
Speaker 1: privacy and data security practices, the impact on kids, as
Speaker 1: well as the relationship with the Chinese Communist Party. We
Speaker 1: know at in Caroline that this has long been the
Speaker 1: concern of US lawmakers and authorities, the idea that TikTok
Speaker 1: is owned by byte Dance, a Chinese company, and that
Speaker 1: the data that it collects on tens of millions of
Speaker 1: active users here in the US could be inappropriately shared
Speaker 1: with the Chinese government. Now, of course, TikTok has repeatedly
Speaker 1: set it operates independently and protects US data through an
Speaker 1: alliance with Oracle. I would imagine we are going to
Speaker 1: hear that line multiple times in the hearings on Thursday.
Speaker 1: But we could get a great deal of pushback from
Speaker 1: US lawmakers in that regard. And who are the lawmakers
Speaker 1: listening to this instance, We were speaking to then Koslo,
Speaker 1: who we understand is going to be having a dinner
Speaker 1: in Washington ahead of this, but also are they listening
Speaker 1: to well, the young pod of that constituency who really
Speaker 1: light the app. Well, yeah, there's political difficulty here right
Speaker 1: when younger voters who you need in order to get
Speaker 1: seek and win reelection, are heavily the ones that are
Speaker 1: using this app. That does make this difficult, But it
Speaker 1: does seem by and large the narrative is that national
Speaker 1: security concerns top that. And I would note that this
Speaker 1: isn't just on the part of Congress. The Biden administration
Speaker 1: is looking at this as well. Bloomberger's supporting last week
Speaker 1: that the administration is pushing Byte Dance to sell TikTok
Speaker 1: or risk being banned here in the US, and TikTok
Speaker 1: has come back and staid a divestiture would not actually
Speaker 1: solve those national security issues. That simply changing ownership doesn't
Speaker 1: change the rules under which data is collected and used.
Speaker 1: So This is an ongoing conversation, but yes, one that
Speaker 1: does bring great political difficulty when it comes to gen
Speaker 1: Z and young voters. Katie Nine's keeping us on us
Speaker 1: them all things happening on the hill, of course, as
Speaker 1: we built towards that Thursday meeting. Now does it? Meanwhile,
Speaker 1: for this edition of Bloomberg Technology, you do not want
Speaker 1: to miss tomorrow ed We've got Kathy Wood of our
Speaker 1: convest joining the show. It's going to be a key
Speaker 1: conversation across AI, a coross crypto, across markets, a bank crisis. Yeah,
Speaker 1: and I know that she's keen to get back to
Speaker 1: the discussion around technology. Don't forget recap this show on
Speaker 1: our podcast. You can find it wherever you get your
Speaker 1: podcast apples, Spotify, iHeart And of course on Bloomberg, Day
Speaker 1: one of a busy week, Caroline, lots more to come.
Speaker 1: This is Bloomberg