WEBVTT - Spotify Layoffs, Markets, and Salesforce (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.520 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.640 at Bloomberg dot com slash podcast. Let's get over to Spotify. 0:00:22.840 --> 0:00:25.080 Here's a story. It's just I don't know if it's 0:00:25.120 --> 0:00:28.680 just another tech story, another tech company laying off people, 0:00:29.120 --> 0:00:31.040 but I mean the stock like the other tech names. 0:00:31.040 --> 0:00:34.040 So naming these announcements. It's up two point three. Let's 0:00:34.040 --> 0:00:37.960 bringing Githa Rogan Anthon. She covers all things media, digital media, 0:00:38.000 --> 0:00:40.720 all that stuff for Bloomberg Intelligence. So keita talk to 0:00:40.760 --> 0:00:44.879 us about Spotify. What's going on there with the company. Yes, 0:00:44.960 --> 0:00:47.320 it looks very much Paul, like you know, this company 0:00:47.360 --> 0:00:49.800 also fell into the same trap as other tech companies. 0:00:49.840 --> 0:00:53.880 They kind of overestimated demand just based on pandomic trends, 0:00:53.880 --> 0:00:55.639 and they, I guess they hire too many people. They 0:00:55.680 --> 0:00:58.920 basically double their head count from you know, about four thousand, 0:00:59.000 --> 0:01:01.320 five hundred people to all most close about ten thousand 0:01:01.680 --> 0:01:04.040 just over a span of two years. And now what 0:01:04.080 --> 0:01:06.600 are they faced with. Their faced with a subscriber slowdown, 0:01:06.720 --> 0:01:10.520 They're faced with advertising headwinds. Uh So there's a pullback 0:01:10.680 --> 0:01:13.520 across the business um and so they have to react. 0:01:13.760 --> 0:01:15.520 And this is exactly what they're doing. Is about a 0:01:15.560 --> 0:01:19.200 six percent got in their workforce that they announced this morning. 0:01:20.000 --> 0:01:21.839 So but you know, it's Spotify. When I think about 0:01:21.840 --> 0:01:25.600 the revenues drivers that you just highlighted advertising and subscriber 0:01:25.640 --> 0:01:29.959 goth but didn't Apple Music just you know, raise their prices. 0:01:30.000 --> 0:01:32.560 Doesn't give Spotify some rooms or maybe raise some prices. 0:01:33.000 --> 0:01:34.800 You know, that's a great point. I mean, you know, 0:01:34.920 --> 0:01:39.720 as we think about pricing power in the music streaming business, yes, exactly. 0:01:40.280 --> 0:01:43.240 You know, Spotify has held its price constant for you know, 0:01:43.280 --> 0:01:45.760 the longest period of times at about ten dollars. Apple 0:01:45.920 --> 0:01:48.600 just just raised it about eleven dollars a month. So 0:01:48.760 --> 0:01:51.960 the general expectation is, yes, they will be able to 0:01:52.040 --> 0:01:54.600 raise prices or they potentially will do it sometime in 0:01:54.600 --> 0:01:57.559 the first quarter. But again, where does that get you? Okay, 0:01:57.600 --> 0:02:02.040 you have about two hundred million subscribers, so that gives 0:02:02.040 --> 0:02:06.720 you an additional two million dollars of revenue annually. Again, 0:02:06.760 --> 0:02:09.840 not enough to mop the needle. You know. There's an 0:02:09.840 --> 0:02:12.040 opinion piece by Sarah Green Carmichael. I don't know if 0:02:12.040 --> 0:02:14.519 you've seen it, but she says layoffs often leave companies 0:02:14.560 --> 0:02:18.320 worse off, and she goes through the data, um, not 0:02:18.520 --> 0:02:22.000 just in terms of profitability, but just in terms of morale. 0:02:22.160 --> 0:02:25.079 Morale A lot of times it seems to break companies. 0:02:25.360 --> 0:02:28.359 You know, even those who are left are scurrying to 0:02:28.440 --> 0:02:32.200 look for other jobs. They hate management now, um, you know, 0:02:32.240 --> 0:02:35.920 they're not on board with the mission. Are these companies, 0:02:36.400 --> 0:02:40.320 not just Spotify, but across you know, the board, especially 0:02:40.360 --> 0:02:43.280 after they had such a difficult time hiring people last year? 0:02:43.600 --> 0:02:45.880 Are they shooting themselves in the foot themselves in the 0:02:45.880 --> 0:02:49.320 foot trying to um, you know, sail so close to 0:02:49.320 --> 0:02:53.200 the wind? I don't think so. I think and especially 0:02:53.240 --> 0:02:56.360 if you read kind of uh, you know, Spotify the 0:02:56.400 --> 0:02:59.480 CEO danielis letter, he said he might have been over 0:02:59.560 --> 0:03:01.800 ambitioned is And I think this is one of the 0:03:01.919 --> 0:03:05.520 things that we're seeing across in all of their investments 0:03:05.520 --> 0:03:07.360 actually with Spotify. So if you just look at Spotify, 0:03:07.440 --> 0:03:11.440 just very basically at their business model for every one 0:03:11.560 --> 0:03:14.240 of dollars of revenue that they generate, they pay out 0:03:14.240 --> 0:03:17.679 about seventy to seventy five cents to the record labels, 0:03:17.720 --> 0:03:20.440 so they really have no control over their content costs, 0:03:20.440 --> 0:03:22.400 which is what has kind of prompted this whole move 0:03:22.520 --> 0:03:25.400 for them to kind of really push into podcasts. This 0:03:25.480 --> 0:03:29.760 has been this really big source of investments for them. 0:03:30.240 --> 0:03:33.239 They've invested over a billion dollars right into the podcast market. 0:03:33.280 --> 0:03:36.800 They signed on the Obama as they signed on Prince Harry. Uh, 0:03:36.840 --> 0:03:40.400 you know, Joe Rogan, was that the only differentiator otherwise, 0:03:40.480 --> 0:03:43.120 get Apple Music and you're good to go. Yeah, exactly, 0:03:43.120 --> 0:03:44.720 so that you know, you have to own content. This 0:03:44.800 --> 0:03:47.200 is exactly what Netflix did, right. You have to have 0:03:47.280 --> 0:03:50.280 your own shows because content is the differentiator. The only 0:03:50.320 --> 0:03:52.920 thing is they've just spent too much for podcasts. They've 0:03:52.920 --> 0:03:55.440 already spent about one to one and a half billion dollars. 0:03:55.520 --> 0:03:58.480 It's only generated about two hundred millions so far in revenue. 0:03:58.920 --> 0:04:01.520 So there's just you know, we've come to a point 0:04:02.320 --> 0:04:05.480 when the industry really doesn't care about subscriber growth. And 0:04:05.520 --> 0:04:09.440 Spotify they already have a share of the music streaming market. 0:04:09.600 --> 0:04:12.240 There is a lot of runway for them to go 0:04:12.400 --> 0:04:15.720 grow in terms of subscribers, but nobody cares about subscribers anymore. 0:04:15.720 --> 0:04:19.839 They care about profits. And there's just no sustainable um 0:04:19.960 --> 0:04:22.039 or there's just the model just doesn't show us that 0:04:22.080 --> 0:04:26.440 this company can get to significant profitability anytime soon. So 0:04:26.839 --> 0:04:30.280 is you own the stock just on the come here 0:04:30.320 --> 0:04:32.919 that you just think it's it's a growth market. It 0:04:33.040 --> 0:04:34.560 is a growth market. And you know, if you just 0:04:34.600 --> 0:04:36.359 kind of look at music streaming, I think it's a 0:04:36.400 --> 0:04:40.760 defensive business. We have traditionally we've just not seen um 0:04:40.800 --> 0:04:44.040 as much churn in the music streaming business as compared 0:04:44.040 --> 0:04:46.800 to let's say video streaming, because you know, typically you 0:04:46.800 --> 0:04:50.039 you you subscribe to multiple video streaming services, whereas in 0:04:50.080 --> 0:04:52.360 the audio business it's just it's either a Spotify or 0:04:52.360 --> 0:04:55.000 an Apple or an Amazon. Um. So you know, there's 0:04:55.040 --> 0:04:58.040 there's uh, there's much less chance for streaming, much less 0:04:58.120 --> 0:05:02.159 chance for churn. Sorry, but um you know, these investments 0:05:02.600 --> 0:05:04.839 had a really kind of depressed to stop, all right. 0:05:04.880 --> 0:05:07.200 Keith a great stuff as always, Keith Roganathan. She's a 0:05:07.320 --> 0:05:10.839 US media analyst for Bloomberg Intelligence. She covers it all. 0:05:10.880 --> 0:05:13.039 She is the expert. We love getting a few minutes 0:05:13.080 --> 0:05:19.640 of her time or three weeks in to a new year. 0:05:20.000 --> 0:05:22.960 So far, so good. We got stocks up three and 0:05:23.000 --> 0:05:25.680 a half percent, we got bonds up a couple to 0:05:25.880 --> 0:05:29.039 three percent, a little bit better than last year. How 0:05:29.080 --> 0:05:31.159 about the rest of the year, Hans Olsen, We're gonna 0:05:31.160 --> 0:05:33.640 ask him that question. He's the c i O fiduciary 0:05:33.680 --> 0:05:36.640 trust company that got a jillion dollars of assets under management. 0:05:36.760 --> 0:05:38.919 He joins us here in our Bloomberg Inactor Broker studio. 0:05:38.960 --> 0:05:42.120 We appreciate him taking to schoot you down from Connecticut, Hans, 0:05:42.520 --> 0:05:44.760 when coming into this year, what were you telling your 0:05:44.800 --> 0:05:48.240 clients after what was really a disastrous year for the 0:05:48.279 --> 0:05:50.760 sixty forty portfolio out there? Yeah. Yeah, a lot of 0:05:50.760 --> 0:05:53.159 the trends that we saw in force last year we 0:05:53.200 --> 0:05:55.240 thought would bleed into this year, you know, sort of 0:05:55.240 --> 0:05:58.560 the reset of the price of money, Uh, concerns about 0:05:58.640 --> 0:06:01.640 you know, where interest rates top out and would we 0:06:01.680 --> 0:06:04.400 see a recession or not. So what we're what we 0:06:04.560 --> 0:06:07.200 thought right this The rally that we've seen over the 0:06:07.240 --> 0:06:10.840 last three weeks or so sort of fits, uh that 0:06:11.080 --> 0:06:14.360 of a of a counter trend rally, you know, bear 0:06:14.400 --> 0:06:18.359 market rally amidst a trend that I'm not sure that 0:06:18.440 --> 0:06:22.480 we've we've necessarily seen the bottom yet, could retest the bottom, 0:06:22.920 --> 0:06:25.679 but um, certainly we're like to see some more downside 0:06:25.760 --> 0:06:29.279 volatility here. So we're just about to get into the 0:06:29.360 --> 0:06:31.680 thick of it in terms of earning season, right, we 0:06:31.760 --> 0:06:36.680 get the big industrial companies reporting, UM as well as 0:06:36.839 --> 0:06:40.120 you know Microsoft and Teslas of the weirdos as well. Um, 0:06:40.160 --> 0:06:43.599 what do you expect in terms of the earnings? You know, 0:06:43.720 --> 0:06:46.000 we thought there would be an earning slowdown or is 0:06:46.000 --> 0:06:48.320 it going to materialize? We've had we lowered the bar enough. 0:06:49.720 --> 0:06:51.719 I think we will see an earning slowdown. Right, So 0:06:52.120 --> 0:06:55.040 if you look back even um, I don't know, eight 0:06:55.040 --> 0:06:58.280 weeks or so for the fourth quarter, Uh, the expectations 0:06:58.279 --> 0:07:00.240 that the earnings would be up something like three or 0:07:00.279 --> 0:07:03.080 four percent. Now the expectations will come in close to 0:07:03.640 --> 0:07:06.600 down somewhere four or five. So I think we're going 0:07:06.640 --> 0:07:11.600 to exit a very awful year in a difficult way, right, Um. 0:07:11.680 --> 0:07:14.240 And the question is does that set the stage for 0:07:14.560 --> 0:07:18.560 more I think in the early part yes it does. Um. 0:07:18.600 --> 0:07:22.200 You know, the expectations for this year are are I 0:07:22.240 --> 0:07:24.720 think modest and growing more modest by the day. The 0:07:24.800 --> 0:07:27.840 question really is what happens to margins? Right, So you know, 0:07:27.880 --> 0:07:31.200 the expectation this year is that revenues will be up 0:07:31.280 --> 0:07:36.360 what three percent but two or three percent, and earnings 0:07:36.360 --> 0:07:38.840 will be up four five So that says that the 0:07:38.880 --> 0:07:41.200 margins have to expand at this point in the cycle. 0:07:41.720 --> 0:07:44.800 Against this inflation back black backdrop, you would expect to 0:07:44.840 --> 0:07:48.640 see margins contract rather than expand. So that's got to 0:07:48.680 --> 0:07:52.280 get resolved. We will talk about earnings, and we'll talk 0:07:52.320 --> 0:07:53.760 about it a lot over the next few weeks. But 0:07:53.760 --> 0:07:55.040 at the end of the day, it still feels like 0:07:55.080 --> 0:07:57.320 the Fed is kind of the narrative here that people 0:07:57.360 --> 0:08:00.200 need to pay attention to. I mean, Matt's in the 0:08:00.280 --> 0:08:03.240 argument we need to see the FED remain firm here 0:08:03.280 --> 0:08:06.240 fifty basis points. Here's just one man's opinion. That's just 0:08:06.240 --> 0:08:08.920 one man's opinion. But the man has a beard, um, 0:08:09.000 --> 0:08:11.600 So we tend to pay attention um, and a good 0:08:11.640 --> 0:08:13.760 bed and a good beard, thank you. But what what 0:08:13.840 --> 0:08:16.280 are the good folks that fiduciary trust? Those are people 0:08:16.320 --> 0:08:17.920 I really pay attention to. What what are you guys 0:08:17.920 --> 0:08:20.520 thinking about this federal reserve? And maybe what's a good 0:08:20.560 --> 0:08:23.440 policy for them to pursue. Yeah, I think you have 0:08:23.560 --> 0:08:26.680 to squeeze the life out of inflation, and that means 0:08:26.720 --> 0:08:30.320 that you you keep rates high enough until there's no 0:08:30.440 --> 0:08:33.040 question that it's gone. And there's still a question. I mean, 0:08:33.040 --> 0:08:34.800 I think Larry Summers has been right on the mark 0:08:34.840 --> 0:08:36.520 with this, right. He says it's going to be hard, 0:08:36.559 --> 0:08:38.840 it's going to take some time. If you look at 0:08:38.840 --> 0:08:41.840 the PC numbers, which will see later this week, UM, 0:08:41.880 --> 0:08:43.679 my guess is that they're going to come in with 0:08:43.800 --> 0:08:46.840 that four and a half five, which is still a 0:08:46.960 --> 0:08:51.520 multiple multiple or so greater than where the Fed wants it. 0:08:51.640 --> 0:08:54.560 So the job is not done yet. And you know, 0:08:54.559 --> 0:08:57.400 they really the question will be what is the relationship 0:08:57.440 --> 0:08:59.440 between the price of money and the price of stuff? 0:09:00.000 --> 0:09:02.160 And that's the question that the Fed hasn't asked, and 0:09:02.440 --> 0:09:04.280 I think it was said in the earlier segment. You 0:09:04.280 --> 0:09:06.800 know you have to Um, no one wants to go 0:09:06.880 --> 0:09:09.160 down as the FED chairman it fails. No one wants 0:09:09.160 --> 0:09:13.959 to be the twentieth century g William Miller, Yes or right? 0:09:14.280 --> 0:09:16.559 Who wants that, uh you know, sort of next to 0:09:16.640 --> 0:09:20.440 their name. Um, yeah, totally agree, And I guess we'll see. 0:09:20.640 --> 0:09:24.680 I've noticed financial conditions keep getting looser and looser. Um, 0:09:25.040 --> 0:09:28.880 we three and a half percent unemployment. Uh, it seems 0:09:28.920 --> 0:09:30.520 like they have a long way to go, although we 0:09:30.559 --> 0:09:33.079 do see insurance inflation coming down. I want to ask 0:09:33.120 --> 0:09:36.400 about hedge funds, and I guess only your wealthiest clients 0:09:36.600 --> 0:09:40.240 get access to the Citadel's, the Bridgewaters, the d E Shaws. 0:09:40.240 --> 0:09:42.280 But if you get access to the biggest hedge funds, 0:09:42.320 --> 0:09:45.280 the biggest multi strategy hedge funds, you still knocked the 0:09:45.280 --> 0:09:46.959 ball out of the park last year. It doesn't matter 0:09:47.000 --> 0:09:49.439 what happens. Earnings doesn't matter for in a recession, doesn't matter, 0:09:49.520 --> 0:09:52.160 stocks go down. What do you think about, um, the 0:09:52.200 --> 0:09:55.000 shift that we're seeing from you know, long only hedge funds. 0:09:55.400 --> 0:09:57.559 You know, you could be a single pick a single name, 0:09:57.600 --> 0:10:01.120 a superstar and ride it with them to now multi strategy, 0:10:01.200 --> 0:10:04.360 multi manager hedge funds that are doing well. Yeah, I'm 0:10:04.480 --> 0:10:06.360 I'm a skeptic of hedge funds, and I think you're right. 0:10:06.400 --> 0:10:09.720 You know, if you f you that top one percent um, 0:10:09.840 --> 0:10:11.360 that's where to be, and you're going to pay for 0:10:11.440 --> 0:10:14.560 it to right in the top twenty made two billion 0:10:14.600 --> 0:10:19.160 dollars last year, but they lost two hundred and eight billion. 0:10:19.240 --> 0:10:21.400 There you go, there you go, And I just think 0:10:21.400 --> 0:10:24.359 you can replace a lot of that that market exposure 0:10:24.520 --> 0:10:27.800 with with other vehicles at a fraction of the cost. Again, 0:10:27.920 --> 0:10:31.080 they're always exceptions, um, And the Citadels and the like 0:10:31.200 --> 0:10:33.439 will will always stand out, and the ELTs will always 0:10:33.440 --> 0:10:35.959 stand out that way, But um, they are the exceptions. 0:10:36.000 --> 0:10:39.520 The rule is much more disappointing. You know, I noticed 0:10:39.840 --> 0:10:43.440 last year international markets. We talked to our international Bloomberg 0:10:43.440 --> 0:10:45.680 Intelligence people like Tim Craig head over in London and 0:10:45.880 --> 0:10:48.360 pointing out throughout the year, how you know international markets 0:10:48.360 --> 0:10:51.320 have outperformed the US. How do you think about that? 0:10:51.360 --> 0:10:53.600 In Yeah, I think that's probably going to be the 0:10:53.640 --> 0:10:58.640 sleeper story, right, the sleeper market three, which is, um, 0:10:58.720 --> 0:11:02.880 we expected the worst for Europe in many respects. It 0:11:02.920 --> 0:11:05.240 did not happen. Right, didn't have a cold winter, they 0:11:05.240 --> 0:11:10.240 didn't run out of energy, the pipeline infrastructure didn't collapse. Um. 0:11:10.280 --> 0:11:14.839 You know, inflation seems to be abating there. Uh and uh, 0:11:14.880 --> 0:11:17.720 you know those those markets have performed exceptionally. Well, if 0:11:17.720 --> 0:11:20.559 you're an American investor and we're right about the dollar 0:11:20.640 --> 0:11:25.079 that we've essentially seen peak dollar in this in this cycle, 0:11:25.600 --> 0:11:28.839 then international markets of all flavors are are gonna look 0:11:28.840 --> 0:11:30.760 pretty interesting this year. So I think that's gonna be 0:11:30.760 --> 0:11:33.160 the sleeper story. I mean, when your most exciting tech 0:11:33.200 --> 0:11:36.560 company is s A P. Yeah, that's definitely a sleeper story, 0:11:36.720 --> 0:11:38.960 that is right. But that maybe is the good thing. 0:11:39.000 --> 0:11:43.600 You know, they like semens and big manufacturing and that 0:11:43.679 --> 0:11:46.040 kind of stuff. That's the cultural energy. Look at the 0:11:46.120 --> 0:11:50.040 rotation that you've seen in both the sp and UM 0:11:50.600 --> 0:11:53.440 the MSc. I acqui. So the some of the Darling 0:11:53.480 --> 0:11:57.040 stocks fell out, like Tesla's, the metas the endvideos, right, 0:11:57.080 --> 0:12:02.079 what come? What replaces it? Exxon? Uh uh, Proctoring, gamble 0:12:02.679 --> 0:12:06.599 Um and Berkshire halfaway. We're just a few, So I 0:12:06.640 --> 0:12:09.559 mean it's it's there's an interesting rotation that's going on 0:12:09.640 --> 0:12:12.160 in the markets right now that will likely continue well 0:12:12.200 --> 0:12:14.640 into this year. How much attention do we have to 0:12:14.640 --> 0:12:17.679 pay to Washington d C. I'm so jaded by this 0:12:17.720 --> 0:12:21.040 whole debt ceiling thing because you know, I remember back 0:12:21.080 --> 0:12:25.000 when um Adam Johnson was here at Bloomberg, he did 0:12:25.000 --> 0:12:29.360 a special when the US got downgraded and everybody poured 0:12:29.400 --> 0:12:33.440 into treasuries. So it wasn't the horrible faith that we expected. 0:12:33.640 --> 0:12:36.320 Now they're doing it again, and I think everyone believes 0:12:36.320 --> 0:12:39.600 they'll eventually find a solution. Is totally political, but it 0:12:39.640 --> 0:12:42.840 could cause some ripples in financial markets, right yeah, it could. 0:12:43.000 --> 0:12:45.360 It could. I mean you don't when you start playing 0:12:45.360 --> 0:12:48.240 around the full faith and credit, Um, you know that's 0:12:48.280 --> 0:12:51.920 hostage that you don't want to take. Um because some 0:12:52.000 --> 0:12:55.200 people want to take that hostage gladly sell. Yeah. Not 0:12:55.280 --> 0:12:57.719 a good outcome. But the interesting thing last time that 0:12:58.040 --> 0:13:00.520 we went through this, we actually it up in a 0:13:00.600 --> 0:13:02.760 really good place, right so we saw we saw the 0:13:02.760 --> 0:13:05.800 deficit come down after that. What the credit rating agencies 0:13:05.840 --> 0:13:08.720 didn't like was the process. And this process isn't going 0:13:08.760 --> 0:13:11.160 to get any better at this time, right Um. If anything, 0:13:11.160 --> 0:13:12.840 it will be worse. I think the thing that we 0:13:12.840 --> 0:13:15.520 should be looking for is a resolution through the most 0:13:15.559 --> 0:13:18.800 unusual ways, which would be a discharge petition, which is 0:13:18.800 --> 0:13:21.960 where basically, because of the what happened a couple of 0:13:22.000 --> 0:13:24.320 weeks ago in the House, and because of these factions 0:13:24.360 --> 0:13:27.959 that exist in the in the majority party, you could 0:13:28.000 --> 0:13:32.319 see basically a coalition of the willing cut a deal, 0:13:32.640 --> 0:13:35.480 go right around the part of the party leadership and 0:13:35.520 --> 0:13:37.439 take it to the floor for a vote and get 0:13:37.480 --> 0:13:39.280 it done. You know, Hans, one of the things I've 0:13:39.280 --> 0:13:41.679 been I've been asking is just kind of what's who 0:13:41.679 --> 0:13:44.000 are gonna be the leaders of this market? To the 0:13:44.040 --> 0:13:46.400 extent we do have a sustained move upward here, I 0:13:46.400 --> 0:13:49.680 mean over the last twelve fifteen years it's been technology, 0:13:50.120 --> 0:13:52.040 but it just feels like that might not be the 0:13:52.080 --> 0:13:56.320 case here. How do you think about market leadership going forward? Yeah, 0:13:56.240 --> 0:14:00.720 which is this gets back to the whole idea of 0:14:00.720 --> 0:14:02.880 of this rotation going on within the market, a new 0:14:02.960 --> 0:14:05.760 leadership emerging, and I think it's more of the average 0:14:05.800 --> 0:14:08.240 stock versus the favored stock, right if you and if 0:14:08.280 --> 0:14:10.920 you proxy that for the SSP equal weight versus the 0:14:10.920 --> 0:14:14.560 market gap weight, that equal weighted version of the index 0:14:14.559 --> 0:14:16.880 has done very well over the last couple of years. 0:14:17.000 --> 0:14:19.960 Last year it outperformed the market cap weighted by about 0:14:20.000 --> 0:14:23.240 four basis points, pretty noteworthy, and it's doing the same 0:14:23.320 --> 0:14:27.760 thing this year. If if the narrative is correct around 0:14:28.120 --> 0:14:31.680 um China reopening, we don't go into recession. If your 0:14:31.960 --> 0:14:35.400 escapes recession, which is the story this morning, and we 0:14:35.440 --> 0:14:37.240 have we we escape it, or at least have a 0:14:37.240 --> 0:14:39.520 mild one, then you're going to want more of the 0:14:39.520 --> 0:14:42.440 cyclical names, right, Energy I think will be one of 0:14:42.480 --> 0:14:46.080 the standouts. Industrials will be another one, materials um and 0:14:46.120 --> 0:14:49.680 that's very different from the communication services the text of 0:14:49.760 --> 0:14:51.880 the past four or five years. Yeah, I mean energy. 0:14:51.920 --> 0:14:54.920 I'm just looking at x on mobile up on a 0:14:54.960 --> 0:14:57.320 trailing twelve month basis, So that was certainly a leader 0:14:57.480 --> 0:14:59.480 question is for a lot of folks like me that 0:14:59.560 --> 0:15:01.880 I missed trade. So but you know we've got w 0:15:02.080 --> 0:15:06.000 tech crude oil up again here at barrel. Hans Olson 0:15:06.080 --> 0:15:09.440 Hans Olsen, ce IO of Fiduciary Trust Company. Uh, he's 0:15:09.480 --> 0:15:12.960 based in Boston, but he's in here in New York 0:15:13.000 --> 0:15:15.440 for some unknown reason, nefarious reason, I'm sure, but he 0:15:16.200 --> 0:15:18.000 has to come to New York. I know. There's a 0:15:18.000 --> 0:15:19.160 lot of reason, a lot of ways to get in 0:15:19.160 --> 0:15:21.080 trouble here. So that's what I'm just calling out. Anyway, 0:15:21.080 --> 0:15:23.800 he joins us in a Bloomberg and studio. We appreciate it. 0:15:26.680 --> 0:15:30.080 Our c suite conversation for the day. We're talking information 0:15:30.120 --> 0:15:34.240 technology grid dynamics g d y N is a ticker 0:15:34.320 --> 0:15:37.080 to put in here your Bloomberg terminal. We're joined today 0:15:37.080 --> 0:15:40.400 by Leonard Lipschitz. He's the CEO of grid Dynamics. Uh, Leonard, 0:15:40.400 --> 0:15:42.520 thanks so much for joining us here. First of all, 0:15:42.520 --> 0:15:44.480 just give us the thirty thousand foot overview of what 0:15:44.640 --> 0:15:47.280 grid Dynamics is. How do you fit into that tex stack? 0:15:49.480 --> 0:15:53.680 Thank you for having Grid Dynamics is a global tech 0:15:53.720 --> 0:15:58.840 story engineer company. We generally consulted conidate with the largest 0:15:58.880 --> 0:16:04.120 most respective global brands and were so optimize and deliver 0:16:04.400 --> 0:16:09.000 the digital solutions to our clients. We drive the business 0:16:09.040 --> 0:16:12.840 of jewelity. We create innovation into the solutions, and we 0:16:12.920 --> 0:16:19.360 are known in digital commerce, artificial intelligence, the cloud roll 0:16:19.440 --> 0:16:24.120 out to help all clients expanding prospers. So that's pretty 0:16:24.200 --> 0:16:26.680 much what greeting empasies. So one of the things we 0:16:26.800 --> 0:16:28.760 we've noticed just from some of the big tech companies 0:16:28.760 --> 0:16:30.920 over the last couple of quarters is that the economic 0:16:30.960 --> 0:16:34.000 headwinds which are are are global in nature. They are 0:16:34.120 --> 0:16:38.560 in fact hitting the technology growth story and we're seeing 0:16:38.560 --> 0:16:41.880 tech stocks reflect that in the under performance we saw 0:16:41.960 --> 0:16:49.680 last year. How's it impacting your business your clients? Well, um, 0:16:50.120 --> 0:16:53.720 it is always you know, the headlines about something which 0:16:53.760 --> 0:16:58.440 happened in the world. When it comes to our specialization 0:16:58.680 --> 0:17:04.399 and I consulting specifically, UH, with addressing the client needs 0:17:04.440 --> 0:17:08.920 were broadly um, diversified. So yes, when we see some 0:17:09.080 --> 0:17:12.840 pressures coming in the tech world, UM, we find some 0:17:12.960 --> 0:17:17.840 continuous growth in a manufacturing space, there are you know, 0:17:17.960 --> 0:17:22.080 life signs that are broader way of addressing them. You know, 0:17:22.880 --> 0:17:26.719 they need some digital transformation. So UM we should kind 0:17:26.760 --> 0:17:31.239 of mixed signals. Some of them are extremely you know, 0:17:31.880 --> 0:17:35.679 prospering and growing, some of them more moderate and constraint. 0:17:36.200 --> 0:17:39.600 Before we go any further into what's going on at 0:17:39.680 --> 0:17:42.320 grid in the in the tech world in general, I 0:17:42.359 --> 0:17:48.000 gotta ask what you did as UM global lighting business 0:17:48.400 --> 0:17:50.840 head at at Ford Motor Company. What does that? What 0:17:50.880 --> 0:17:54.840 does that mean you you design and implement the headlights 0:17:54.880 --> 0:18:02.320 strategies or how's that work? You're going back decades ago? Um, well, 0:18:02.760 --> 0:18:07.480 I was very fortunate to start my career after the 0:18:07.840 --> 0:18:12.320 advanced degrees from various universities at Fort Mootor Company, and UH, 0:18:12.640 --> 0:18:16.119 right of the bat, we were facing the again the 0:18:16.119 --> 0:18:21.080 revolution and lightning with modern technology like H A D 0:18:21.600 --> 0:18:25.320 lamps and uh, you know Elergy technologies, and I just 0:18:25.359 --> 0:18:28.520 happened to be in the forefront. So we were working 0:18:28.520 --> 0:18:31.320 with Ford and then later when Ford spun off this 0:18:31.480 --> 0:18:34.760 Janet the division I was again fortunate to spare had 0:18:34.800 --> 0:18:39.680 a lot of innovations in the global very very renowned 0:18:39.720 --> 0:18:45.560 brands to change their entire behavior and comes to front lighting. No, 0:18:45.720 --> 0:18:49.359 that's fascinating. Let's get back then to tech. Now, I'm 0:18:49.400 --> 0:18:52.760 wondering how much of a concern rising rates are for 0:18:52.800 --> 0:18:56.480 you and for the industry. UM. And we've heard from 0:18:56.480 --> 0:18:59.600 a number of players on the West Coast that, um, 0:19:00.040 --> 0:19:03.560 the software spend uh, and I guess in general I 0:19:03.760 --> 0:19:08.679 T spending could be challenged this year. UM. How do 0:19:08.680 --> 0:19:14.280 you how do you see that good dynamics? Well, um, well, 0:19:14.440 --> 0:19:17.119 let's just let me answer the second question first, and 0:19:17.240 --> 0:19:19.959 they'll come back to the interest rates. So yes, UM, 0:19:20.160 --> 0:19:23.800 and the and the soft forth spend. Um, you see 0:19:23.800 --> 0:19:28.359 some pressure. So is with the industrial budget? Um? Start 0:19:28.440 --> 0:19:32.840 the first downturn we've facing the company, We've been around 0:19:32.920 --> 0:19:37.320 for sety years. Typically what makes the difference is how 0:19:37.359 --> 0:19:41.960 critical the applications are for the client. Again, when we 0:19:42.080 --> 0:19:47.520 come to the health of the company, it's about the pricing, personalization, 0:19:47.680 --> 0:19:52.280 supply chain, logistics. UM. You know, competitive innovation. So typically 0:19:53.160 --> 0:19:55.800 when you are in the midst of the very critical 0:19:55.920 --> 0:20:01.240 path for the competitive advantage and the clients are relying 0:20:01.280 --> 0:20:04.960 on you. There's a little bit of another behavior during 0:20:05.000 --> 0:20:07.960 the you know, some of the constraints with the client, 0:20:08.080 --> 0:20:13.280 they rely on their partners, like the supply partners like 0:20:13.359 --> 0:20:16.879 gre Dynamics, UM, just to lebage some of the risks 0:20:17.080 --> 0:20:20.280 in turn to their own budgets. So in general, I 0:20:20.320 --> 0:20:23.719 feel very bullish for the year. Of course, UM, you know, 0:20:23.800 --> 0:20:26.960 everybody kind of watches where the raids are. But this 0:20:27.040 --> 0:20:31.040 is more about the sentiment than the true behavior. And 0:20:31.080 --> 0:20:34.960 then I mean we'll go to the earnings call um 0:20:34.640 --> 0:20:37.440 and you know very soon in a month, and then 0:20:37.480 --> 0:20:40.640 we'll have more details about our performance. But I see 0:20:40.720 --> 0:20:45.160 that we have the UM, I would say for three 0:20:45.480 --> 0:20:49.160 on the road map perspective, a pretty comfortable expectation going 0:20:49.240 --> 0:20:51.440 toward the second half of the year. As part of 0:20:51.480 --> 0:20:55.560 the interest rates, UM, everybody is watching them because again 0:20:56.000 --> 0:21:00.800 many industries depend on our loans and particularly United States 0:21:00.840 --> 0:21:06.000 and again how plans. Majority of the are you large brands, 0:21:06.560 --> 0:21:09.639 enterprises and texts in the US. So yes, as we 0:21:09.680 --> 0:21:12.600 see a little bit over the tampering on the forecasting 0:21:13.119 --> 0:21:17.280 in terms of the future of the interest rates, some 0:21:17.320 --> 0:21:20.119 of their clients become a little bit more open to 0:21:20.400 --> 0:21:23.520 discuss long term plans. Um. You know, I don't have 0:21:23.720 --> 0:21:28.200 the magic one to you know, the crystal bolt of 0:21:28.320 --> 0:21:32.600 forecast exact numbers, but we we definitely have a little 0:21:32.600 --> 0:21:36.080 bit better sentiment today than it could have been like 0:21:36.160 --> 0:21:38.800 two or three months ago. So, Leonard, your your companies 0:21:38.840 --> 0:21:42.480 based out there in Silicon Valley, San Ramon, California. What 0:21:42.560 --> 0:21:44.560 are you and maybe not you guys, but what are 0:21:44.600 --> 0:21:48.000 your neighbors doing in terms of firing people laying off people. 0:21:48.040 --> 0:21:49.760 We've seen, you know, a whole bunch of tech companies 0:21:49.800 --> 0:21:54.480 announced layoffs, you know, including today most recently Spotify. What's 0:21:54.480 --> 0:21:58.080 going on out there with you guys. Well, we are 0:21:58.160 --> 0:22:01.040 headquartered in in the Bay Area, but we also have 0:22:01.119 --> 0:22:06.360 a very strong presence in Texas, you know, Atlanta, Georgia, 0:22:06.800 --> 0:22:10.280 New York, Jersey, you know, South East, as well as 0:22:10.600 --> 0:22:13.080