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Speaker 3: It's been ten years since Google now Alphabet bought Ways
Speaker 3: for one point fifteen billion. That was back in twenty thirteen.
Speaker 3: Oil Levine, of course, co founded a Ways. He's also
Speaker 3: an investor and move it. Intel bought that one for
Speaker 3: a billion back in twenty twenty. And last time around
Speaker 3: he joined us. We talked about his new book, fall
Speaker 3: in Love with the Problem, Not the Solution, a handbook
Speaker 3: for entrepreneurs. So delighted to have ARII back with us
Speaker 3: here in our Blueberry Interactive Brokers studio. Hello, Hello, we
Speaker 3: weren't dissing you as you walked in, and so forgive us.
Speaker 3: How are you do it?
Speaker 4: Okay?
Speaker 3: Do it okay? Trying to make sense of all the
Speaker 3: creeze when it comes to AI, Can I just jump
Speaker 3: in with you? Because I feel like when you were
Speaker 3: in February.
Speaker 4: I just wanted can I just say thank you? Because
Speaker 4: I was using Ways yesterday all on my way to
Speaker 4: City Field, and it got me there in a timely manner.
Speaker 3: I drove a cab driver crazy earlier this week because
Speaker 3: he was following something else. I'm like, I'm on Ways
Speaker 3: and here's what you're gonna do talk to us about.
Speaker 3: First of all, do you ever regret selling it?
Speaker 5: No? I you know, people have regrets of the stuff
Speaker 5: that they haven't done.
Speaker 3: I think we might have talked about this, but you don't.
Speaker 5: You just you know, I moved on. I left after
Speaker 5: the acquisition so I can build more startups and and
Speaker 5: I am very happy with the decision back then. And
Speaker 5: at the end of the day, look, when you're making
Speaker 5: a decision, it's the right decision, the right decisions, or
Speaker 5: no decisions. And this is it.
Speaker 3: So you got a T shirt on is fall in
Speaker 3: Love with the problem not the solution? So those on
Speaker 3: our streaming service and YouTube can see this. You've also
Speaker 3: got a book out with that title. AI. Is it
Speaker 3: a problem? Is it a solution? Is it both?
Speaker 5: Is it yet to be determined? But it's definitely a solution.
Speaker 5: We just not clear what is the problem.
Speaker 4: Yet, Well, as a startup guy, you've got to look
Speaker 4: at the technology like that and automatically start thinking of applications,
Speaker 4: right of ways to use it for progress or profits.
Speaker 4: What do you think about the potential of AI?
Speaker 5: So, in general, my approach would we start with the problem, right,
Speaker 5: start with the use case, and only then build a solution.
Speaker 5: I mean this key is because the generative language is
Speaker 5: very powerful. Right then if we ask one hundred people
Speaker 5: on the street have you tried that? Then probly all
Speaker 5: of them are going to say yes. The challenge is
Speaker 5: that if you're going to ask them are you still
Speaker 5: using it? And very few are going to tell you yes,
Speaker 5: which basically means that we are not a product market yet,
Speaker 5: or it's not applicable for the for the consumer market,
Speaker 5: for the mass market. Yet there are some cases that
Speaker 5: I would say this is awesome, right, So if you
Speaker 5: are if you are in the business of generating content,
Speaker 5: this is going to be very helpful to you can
Speaker 5: generate way more content based on that.
Speaker 3: Or are you investing in it?
Speaker 5: Nope, not yet. Many of my companies are actually using AI,
Speaker 5: but not that generating language yet.
Speaker 3: Why not?
Speaker 5: Because you know it was not available until recently. And
Speaker 5: now I have one company in the medical space that
Speaker 5: is actually having the knowledge and requires the language generation
Speaker 5: for that, and this is going to be a leapfrog
Speaker 5: for them.
Speaker 4: Do you still think about I know Ways was ten
Speaker 4: years ago, but do you still think about navigation and
Speaker 4: the possible the possibilities that AI could help in in
Speaker 4: that space. I mean, my first thought when I heard
Speaker 4: your name and AI was I wonder if this could
Speaker 4: help me avoid speeding tickets more often? Because that's one
Speaker 4: of the benefits of Ways is that I can see
Speaker 4: where others have pointed out that the costs.
Speaker 5: Because at least are waiting.
Speaker 4: So do you think AI could help at all in
Speaker 4: making you know, Google Maps a better product for example?
Speaker 5: So so Ways is based in a lot of cases
Speaker 5: on crowdsource on one hand, than AI on the other hand. Right,
Speaker 5: and so we can understand right contry, we can use
Speaker 5: the they you know, we can look at different users
Speaker 5: and from their behavior understand what is going on. And
Speaker 5: so we have built the AI system before we even
Speaker 5: knew how to say that, right, And I think that
Speaker 5: many companies have built an AI capabilities into their product
Speaker 5: before we actually had the region or the generation of
Speaker 5: the language.
Speaker 3: Do you think of generative AI as akin to some
Speaker 3: other tech development? I mean, I don't know. I think
Speaker 3: folks are been talking about the creation of the Internet.
Speaker 3: I don't know, how do you think about it?
Speaker 5: People are saying that this is, uh, the biggest revolution ever, right,
Speaker 5: and I would say, no, no, no, wait a minute,
Speaker 5: It's not there yet. It's definitely not as big as
Speaker 5: the Internet itself. It's definitely not as big as the
Speaker 5: mobile phone itself. It's definitely not as big as the smartphone. Right, yeah,
Speaker 5: the PC yet?
Speaker 4: Is it a yet?
Speaker 5: Or is it might be yet? But because at the
Speaker 5: end of the day, what all the other tools that
Speaker 5: I've mentioned did is that they interconnect people and they
Speaker 5: enable people to become better, better, to communicate, better, to
Speaker 5: access the information better for anywhere, anytime, anywhere, And this
Speaker 5: increased the abilities of the people. Now we are looking
Speaker 5: into a system that may be able to generate content
Speaker 5: by itself, but less likely to be creative.
Speaker 4: Well, you know, if you're talking about falling over the problem.
Speaker 4: All of the things that we just talked about, the Internet,
Speaker 4: the mobile phone, the PC, right, they were solving the
Speaker 4: problem of I guess connectivity in some ways, but now
Speaker 4: those things are the problem, or connectivity is the problem.
Speaker 4: I have how many email accounts? I have three cell phones,
Speaker 4: I have you know, ib and Facebook, and I want
Speaker 4: to be less connected. So for me, the problem that
Speaker 4: AI could solve is helping me deal with all of
Speaker 4: this connectivity that I have.
Speaker 5: Absolutely, I agree. Right, So what you're basically saying is
Speaker 5: that I'm overwhelmed with information and I would like something
Speaker 5: to you know, scan out from this information and figure
Speaker 5: out what is really important and bring that to me
Speaker 5: in a better way.
Speaker 3: Just the signal no more noise please?
Speaker 5: Yes? Definitely yes. And is that something that the current
Speaker 5: engine can do, probably with enough training, definitely yes. Is
Speaker 5: that the use case that we will end up with?
Speaker 5: Maybe yes?
Speaker 3: So would you say, and I'm thinking about our audience
Speaker 3: and investing audience, you know, who have just watched this
Speaker 3: AI euphoria and we've seen something like an Nvidia, but
Speaker 3: some other names just go kind of off the charts.
Speaker 3: Would you say it's too early to make that investment play?
Speaker 6: No.
Speaker 5: I think that if you don't play in this game,
Speaker 5: then definitely you are going to.
Speaker 3: Lose, right, So it's not too early to go into.
Speaker 5: Some of these, it's not too early. And to a
Speaker 5: certain extent, what I would like to also mention is, look,
Speaker 5: we look at it and we say, okay, wait a minute,
Speaker 5: that chat GPT just appear in our life about six
Speaker 5: months ago. Right, So you look at it and you say,
Speaker 5: in six months it's done so much. Right, Wait a minute.
Speaker 5: Open AI is seven years old. It takes a lot
Speaker 5: of time to create value. And the first part of
Speaker 5: this value or the value generation journey was about creating
Speaker 5: the technology, and now we are looking for the use
Speaker 5: case that will make it valuable. In some cases it's
Speaker 5: already there, but in some cases it's not there yet.
Speaker 4: Do you have an overarching investment strategy?
Speaker 5: I mean, you've.
Speaker 4: Created and sold two billion dollar businesses. Probably people come
Speaker 4: to you with pitches left and right.
Speaker 5: All the time.
Speaker 4: Is there one kind of overarching strategy that you use
Speaker 4: to drive your investments?
Speaker 5: I do, right, because at the end of the day,
Speaker 5: my mission in life is to create value, and I
Speaker 5: can create value through different ways. One of them is
Speaker 5: you building solutions to a problem that will help you
Speaker 5: to become better. And so this is ways or movie
Speaker 5: or pont Era or Zumka or C three or Fairfly
Speaker 5: or many of my startups, and that other one is
Speaker 5: through guiding and mentoring and teaching others, right. And the
Speaker 5: book is about fulfilling my destiny of creating value as
Speaker 5: sharing the know how. And to a certain extent, when
Speaker 5: you share the know how, when I go into a
Speaker 5: company and I help them, at the end of the day,
Speaker 5: what happens is that they sign up to my know
Speaker 5: how and that increased their likelihood of being successful. So
Speaker 5: my methodology is not about guessing what's right, is creating
Speaker 5: what's right.
Speaker 3: So for entrepreneurs, you might grab your book and kind
Speaker 3: of get, you know, fall into your philosophy and benefit
Speaker 3: from it. I do wonder or what you think is
Speaker 3: one of our biggest problems today that needs solving.
Speaker 5: You know, we can look at many problems, right. So
Speaker 5: a lot of us are speaking about, wait a minute,
Speaker 5: we are way too much connected.
Speaker 6: Right.
Speaker 5: You look at the younger generation and they are connected
Speaker 5: into social media in the levels that are beyond imagination, right,
Speaker 5: and in some cases they're not happy. Right, And so
Speaker 5: happiness of younger generation is a challenge. You look at
Speaker 5: medical services, right. Medical services in the US are five
Speaker 5: times more expensive than they are in Germany.
Speaker 3: Now, it's not to live in Germany, he talks about
Speaker 3: all the time.
Speaker 5: And it's not that they're better in Germany. In here
Speaker 5: that in Germany. Right, it's simply five times more expensive.
Speaker 5: So you look at it and say, okay, wait a minute,
Speaker 5: this is waste of free sources.
Speaker 6: Right.
Speaker 5: We started weighs in two thousand and seven in order
Speaker 5: to help people to avoid traffic jams. There are more
Speaker 5: traffic jams today than the work in two thousand and seven, right,
Speaker 5: So obviously this problem is not done yet and we
Speaker 5: will need to address that as well. And so there
Speaker 5: are a lot of big problems that needs to be addressed.
Speaker 5: And I think that at the end of the day,
Speaker 5: it's the entrepreneurs that are going to change the world.
Speaker 5: And yeah, our role is to encourage it.
Speaker 3: Well, love it and love when you come in so great. Uri,
Speaker 3: Thank you so much, Olivine, co founder of Ways.
Speaker 1: Of Course.
Speaker 3: Check out the book fall in Love with the Problem,
Speaker 3: Not the Solution.
Speaker 1: If you're listening to the Bloomberg Business Week podcast, catch
Speaker 1: us live weekday afternoons from three to six Eastern Listen
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Speaker 3: A Bloomberg News team of Pema Parmer, Lin, Ley Lynn
Speaker 3: and Sarah McBride reporting today that secondary market, you know
Speaker 3: where backers of postal health startups can sell their stakes
Speaker 3: to other investors, are drawing increasing interest from venture capital
Speaker 3: and other money managers that are really looking to snap
Speaker 3: up chunks of private companies on the cheap. It's a
Speaker 3: sign of the times, Matt.
Speaker 4: Yeah, Well, I mean I've seen this sign of the
Speaker 4: times before, so it's a sign of the times again.
Speaker 4: The warning warning. Well, no, I mean, for example, before Facebook,
Speaker 4: iPod you know, secondary markets were all the rage at
Speaker 4: the time, and if you've gotten this dock then you'd
Speaker 4: have had a lull, but you would be very wealthy
Speaker 4: right now.
Speaker 3: No, it's a really good point, so let's get into it.
Speaker 3: Bloomberg News hedge fund reporter Hemla Palmers here and Javier
Speaker 3: Avolosi is co founder and CEO of Caplit joining us
Speaker 3: and they are a provider of pre IPO class market data.
Speaker 3: And he is with us on zoom from San Francisco. Heima,
Speaker 3: set up your story, give us the background.
Speaker 2: Right, So there's a few things that are going on
Speaker 2: right now in the market. We're seeing founders, employees, investors
Speaker 2: of startup companies really under pressure right now, a lot
Speaker 2: of them seeking liquidity, and so they're looking to get cash,
Speaker 2: you know, maybe because the job market is difficult, maybe
Speaker 2: because interest rates are arising. There's fewer exits for employees
Speaker 2: now if there's not as many IPOs, and so they
Speaker 2: need cash, and so they're looking to increasingly in this
Speaker 2: environment sell their shares on the secondary market, or firms,
Speaker 2: hedge funds or venture firms maybe looking for liquidity as
Speaker 2: well for the similar reasons, also looking for liquidity selling
Speaker 2: those shares on the secondary The other side of that
Speaker 2: is that there's great opportunity to buy stuff because the
Speaker 2: prices are incredibly attractive in this environment as valuations have fallen.
Speaker 4: So, Javier, is your company then kind of like a
Speaker 4: Bloomberg for private companies.
Speaker 7: I think that's the exact right way to characterize it. Matt, So,
Speaker 7: first of all, thank you for having me on, Carolyn
Speaker 7: Matt and Himma for including us in the article. What
Speaker 7: we do is we really work to aggregate a lot
Speaker 7: of the market activity that's happening in the secondary market
Speaker 7: and bring transparency to the market by centralizing this pricing
Speaker 7: activity into one place. So when him or others want
Speaker 7: to shine a light through the form of media, cap
Speaker 7: like can be a resource in terms of saying what
Speaker 7: the pricing of these private companies is based on what
Speaker 7: we see in secondary trading.
Speaker 4: So do secondary markets then use your data in order
Speaker 4: to make the transactions more transparent.
Speaker 7: That's exactly right. So the biggest users of the Caplite
Speaker 7: platform are actually brokers who have a responsibility to their clients,
Speaker 7: as Hima described. In some cases that's employees or founders.
Speaker 7: In other cases that's institutional investors who are looking to
Speaker 7: sell their stock pre ipo for whatever reason. We would
Speaker 7: serve the broker who is then building that client relationship
Speaker 7: and effectively helping them to buy or sell something.
Speaker 3: So what your data is actually what Emma said, is
Speaker 3: that valuations have gone down a lot, correct, And this
Speaker 3: is why you know, whether it's a hedge fund or
Speaker 3: other private investors, they're saying, wait, here's an opportunity for
Speaker 3: me because these are really distressed it seems like assets.
Speaker 7: That's exactly right, Carol. So and to quantify that a bit.
Speaker 7: On average, we see pre IPO Unicorn type companies trading
Speaker 7: at about a fifty percent discount from where the VC
Speaker 7: that invested in them last valued them, and that discount
Speaker 7: has been increasing for the past twelve months and is
Speaker 7: finally starting to stabilize. So there's an old adage in
Speaker 7: the private markets that private markets tend to lag what's
Speaker 7: going on in the public markets, and that has played
Speaker 7: out almost exactly in this latest cycle, where private company
Speaker 7: data is about a quarter maybe a little bit more
Speaker 7: lagging behind publics. And so when we saw the public
Speaker 7: market turn in October and start to rally, private markets
Speaker 7: are following that trend very closely, just in a quarter
Speaker 7: or two delay.
Speaker 2: So as we see the buying that's increasingly prominent in
Speaker 2: the space, how do we tell whether someone is buying
Speaker 2: because they believe in the company and they think that
Speaker 2: they can get it at a very attractive price, or
Speaker 2: are we if we're seeing some buying of companies where
Speaker 2: the firm is I invested in over so long that
Speaker 2: they just really can't afford to have that company struggle.
Speaker 2: Therefore we'll want to buy more shares and provide them
Speaker 2: with liquidity or something.
Speaker 7: Yeah, you are right to point out it's absolutely a
Speaker 7: function of both. So we have seen quite a bit
Speaker 7: of existing investors snapping up shares, especially back in Q
Speaker 7: three and Q four, mostly Q four and leading into
Speaker 7: Q one of this year, where investors who are already
Speaker 7: on these companies cap tables who have full information into
Speaker 7: how these companies are performing, saw the fifty percent drop
Speaker 7: that had been happening over the past couple of quarters
Speaker 7: and saw that as a perfect entry point to kind
Speaker 7: of start building on exposure that they already owned. But
Speaker 7: our market is pretty thematic, and so when I think
Speaker 7: about answering this question of what are investors looking for,
Speaker 7: how are they picking the right ones? Oftentimes they're playing
Speaker 7: certain themes. This is not dissimilar than the public markets.
Speaker 7: A massive theme that is being played on right now
Speaker 7: is regenerative AI, right, and so a lot of what's
Speaker 7: pushing the public markets up is also pushing private markets up.
Speaker 7: So you have companies like Open AI or Anthropic or
Speaker 7: data bricks or salonists who are sort of benefiting from
Speaker 7: these tailwinds that are pushing the markets up.
Speaker 4: More broadly, we've seen a couple of times xavier where
Speaker 4: private markets have gotten secondary markets have gotten really big
Speaker 4: As I mentioned before the Facebook IPO, when there were
Speaker 4: so many unicorns out there, we saw that as well,
Speaker 4: employees just looking at cash in buy a big house
Speaker 4: or whatever before they went public. What do you think
Speaker 4: is driving it right now? Is it just the valuation
Speaker 4: drop and the fact that there's a lack of exits.
Speaker 7: So I think that lack of exits piece is a
Speaker 7: point that probably deserves more attention. This might sound like
Speaker 7: crazy to say than it's already received, and a sort
Speaker 7: of a loser in that situation that is not often
Speaker 7: talked about is the employee or even some of the
Speaker 7: very earliest investors like investors, These are folks who expected
Speaker 7: an exit event to happen in late twenty twenty one
Speaker 7: or early twenty twenty two, and for really market driven
Speaker 7: in macro reasons, their company, their private company, shelved that
Speaker 7: offering and have sort of like basically put it on
Speaker 7: hold indefinitely. And so what's been driving a lot of
Speaker 7: liquidity seekers to the market is you have in your
Speaker 7: head that you're about to receive a very large payout
Speaker 7: for work that has been happening for years, and suddenly
Speaker 7: that's delayed indefinitely. Now you're turning to the private markets
Speaker 7: to help get you some of that cash that you
Speaker 7: had already sort of mentally been budgeting for the reason
Speaker 7: so that's kind of where the cell side comes from.
Speaker 7: The reason the buyside is coming back very strongly is
Speaker 7: that IPO window is starting to crack open. So every
Speaker 7: time you have an article talking about Klavio filing or
Speaker 7: Rubric hiring bankers to row, refreshing a registration statement for
Speaker 7: a public offering, these are bits of news that get
Speaker 7: pre IPO investors really rushing back into the space to
Speaker 7: help clean out some of the supply that's being that's
Speaker 7: being added to the market by employees, founders, and early investors.
Speaker 3: Heavier in terms of what you're seeing and these depressed valuations,
Speaker 3: but obviously investors finding some opportunities. What it does it
Speaker 3: give you any kind of clues about the broader market
Speaker 3: environment as we are kind of in this funny place
Speaker 3: where I feel like every day we're debating what, you know,
Speaker 3: a FED speaker says, or Jay Powell says, or what's
Speaker 3: going on with the economic environment. So I'm just curious
Speaker 3: if it gives you any clues about kind of the
Speaker 3: health of this overall financial market.
Speaker 7: It does. I mean, I really think about the pre
Speaker 7: IPO and private markets generally as a proxy for risk appetite.
Speaker 7: And so, you know, when we start to see the
Speaker 7: bid to ask volume ratio at Caplight starting to flip
Speaker 7: towards more of equilibrium between the amount of buy interests
Speaker 7: that's in the market and the amount of sell interest
Speaker 7: and that that's the closest it now is the closest
Speaker 7: time we've been to that equal really since twenty twenty one.
Speaker 7: That starts to give me confidence in the broader rally
Speaker 7: that's happening across capital markets. You know, I think we've
Speaker 7: worked with private company CEOs CFOs to help them kind
Speaker 7: of understand when they should even be thinking about raising
Speaker 7: additional primary capital and or if they should be thinking
Speaker 7: about a public exit for the first time in twelve
Speaker 7: or twelve or so months. And so, in a way,
Speaker 7: the adage that I referenced earlier that said private markets
Speaker 7: lags public markets. While that is true from a pricing standpoint,
Speaker 7: the risk taking sentiment that happens in our market can
Speaker 7: sometimes be predictive of when companies are going to come
Speaker 7: out and raise primary rounds or even potentially listed on
Speaker 7: the public markets.
Speaker 2: On that point about the bit ask spread, you know,
Speaker 2: we're seeing not as many deals actually done compared to
Speaker 2: the opportunity. I'm curious what you think it'll take for
Speaker 2: the transactions to actually increase.
Speaker 3: And just got about thirty seconds half of here.
Speaker 7: Of course. Yeah, So keeping it brief, the biggest necessity
Speaker 7: was a reduction in valuations, and now that that has happened,
Speaker 7: we're seeing more bids come into the market, larger bids
Speaker 7: come into the market. And whenever we see these three
Speaker 7: factors reducing prices, more bids and larger bids, we tend
Speaker 7: to see closed transactions. So I actually and we ourselves
Speaker 7: are seeing a lot of these through our platform. So
Speaker 7: I actually think this next quarter Q three of twenty
Speaker 7: twenty three is going to be a pretty active quarter
Speaker 7: in terms of reporting out closed secondary transactions.
Speaker 3: Really cool perspective, Very cool.
Speaker 4: Yeah, agreed, Very awesome.
Speaker 3: Javier, Thank you so much. Javier Avalos, co founder and
Speaker 3: CEO Caplit, joining us on Zoom from San Francisco courtesy
Speaker 3: of our own Hema Palmer. Thank you so much. Thank
Speaker 3: you Marie bringing us Javier. Here's she, of course's hedge
Speaker 3: fund reporter at Bloomberg News.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 1: Just Say Alexa, playing Bloomberg eleven thirty.
Speaker 3: As we continue to explore our world where equality and
Speaker 3: diversity inclusion are lacking, today, we're going to look at
Speaker 3: it mat from the perspective of small business and diversity.
Speaker 3: You and I talk about it in a million times.
Speaker 3: I mean, if we had a buck for every time
Speaker 3: we cite the McKenzie study and diversity and the importance
Speaker 3: and how it, you know, impacts the financial bottom line.
Speaker 3: This should have been solved years ago.
Speaker 4: Yeah, no, absolutely, But you know, one of the problems
Speaker 4: is the structural impediments to wealth creation for black and
Speaker 4: other minorities in this country have really held them back from,
Speaker 4: for example, home ownership, you know, or small business ownership.
Speaker 4: And that's what we're gonna focus on right now.
Speaker 6: All right.
Speaker 3: Tina Ashley is with us, president of the Insight Center
Speaker 3: over at Capital One. She is with us on zoom
Speaker 3: in DC. Sheina, nice to have you here. Tell us
Speaker 3: a little about the program, this stuff that you guys
Speaker 3: recently did.
Speaker 8: Yes, great to be here, Matt and Carrol, thank you
Speaker 8: so much for having us. We took a study, a
Speaker 8: deep dive into sort of looking at this question. There
Speaker 8: are a lot of efforts right now that are focused
Speaker 8: on small business ownership as a pathway to addressing the
Speaker 8: racial wealth gap, but it's a very much understudied topic
Speaker 8: in that we haven't had a lot of research out
Speaker 8: there in the field that really looks at the returns
Speaker 8: to wealth for the business owner himself or herself from
Speaker 8: owning that business. And over history, we have seen for
Speaker 8: the average business owner that business owners generally have greater
Speaker 8: wealth than non business owners. But that's looking at the
Speaker 8: average American and that's typically looking at the white business owner.
Speaker 8: So we wanted to disaggregate the data look very specifically
Speaker 8: at black and Hispanic business owners. And while others have
Speaker 8: looked at this question nationally, we wanted to take a
Speaker 8: place based blens on this and we went into a
Speaker 8: mid size city in Richmond to see that at that level,
Speaker 8: do we still see patterns of which business owners yield
Speaker 8: a wealth return from their business ownership. And what we
Speaker 8: found was a bit surprising that business owners actually had
Speaker 8: half the wealth of non business owners through the time
Speaker 8: period from the study. So looking between twenty seventeen and
Speaker 8: twenty twenty two, non business owners had greater wealth gains
Speaker 8: than business owners, and that enrichment we think though that
Speaker 8: some of that could be the academic Yeah, definitely, yeah, definitely.
Speaker 8: You know, this was a time where there was just
Speaker 8: a lot of government support to non business owners and
Speaker 8: also the business owners too, but business owners were trying
Speaker 8: to pour a lot more of that capital back into
Speaker 8: their business so that they could just survive, and so
Speaker 8: the business owners may not have been looking to capture
Speaker 8: some of that for their own wealth building.
Speaker 5: What is the.
Speaker 4: What is the difference between black owners and white business
Speaker 4: owners in terms of the wealth effects.
Speaker 8: Yeah, so even in the study where we did see
Speaker 8: some black and Hispanic business owners really thrive and build
Speaker 8: the kind of wealth that we want to see, thirty
Speaker 8: five percent of business owners in the study gained at
Speaker 8: least one hundred and eighty eight thousand dollars of return
Speaker 8: from their business. And that number is significant because it's
Speaker 8: the difference in the racial wealth gap on average between
Speaker 8: black and white people in this country. But even those
Speaker 8: that had that high level of wealth gain, it was
Speaker 8: still only twenty five percent of the wealth gain that
Speaker 8: a white business owner in Richmond had, So the racial
Speaker 8: wealth gap still persists.
Speaker 4: You know.
Speaker 8: What we found though, that for those that were able
Speaker 8: to actually make wealth gains, it was under the right conditions.
Speaker 8: So there's access to capital, which is number one a
Speaker 8: condition that helps business owners thrive. But more importantly, what
Speaker 8: we found in this study was that social capital and
Speaker 8: knowledge capital were essential, and so access to the kind
Speaker 8: of networks and incubators and sponsors and mentors that really
Speaker 8: help business owners understand when it's the right time for growth,
Speaker 8: how to price their products, how to tap into new markets.
Speaker 8: We found that those business owners, regardless of race, that
Speaker 8: had that kind of access to networks and knowledge were
Speaker 8: those who were able to succeed.
Speaker 4: So what do we do about it?
Speaker 1: Then?
Speaker 4: You know, we hear these kind of statistics all the
Speaker 4: time and they're disturbing to say the least, depressing probably
Speaker 4: is a better word.
Speaker 3: But the persistence of it right that we're yeah, we
Speaker 3: continue to talk about it and doesn't change that.
Speaker 4: But what can be done to create you know social
Speaker 4: knowledge networks if you will, for black and Hispanic you
Speaker 4: know potential business owners so that they can reap bigger benefits.
Speaker 8: That is a great question. Yes, this is a not
Speaker 8: a study to highlight the problems once again, but want
Speaker 8: to seek solutions. And one of the things that we
Speaker 8: were interested in because this is a time of massive
Speaker 8: public investment in small business the historical levels of funding
Speaker 8: coming out of treasury and out of the private sector
Speaker 8: to support small business owners and their growth. Much of
Speaker 8: that is going directly to small business owners themselves through
Speaker 8: the form of grant and different kind of capital. But
Speaker 8: what this study raises as a different solution that we
Speaker 8: also need to think about in addition to the capital
Speaker 8: that's going directly to the business owner is support to
Speaker 8: create an ecosystem that will provide that kind of network
Speaker 8: effect and the access to knowledge and insight and expertise
Speaker 8: that the business owners need not just to start a business,
Speaker 8: but to continue to grow and expand that business over time.
Speaker 8: And so what we're calling for is just greater investment
Speaker 8: in technical assistance and more use of technology to be
Speaker 8: able to bring that technical assistance to the business owner
Speaker 8: in real time. We saw that black and Hispanic business owners,
Speaker 8: even though they're in communities like Richmond, which are so
Speaker 8: rich in these resources. There are accelerators and incubators and
Speaker 8: CDFIs all who exist within the community, but black and
Speaker 8: Hispanic business owners aren't tapping them at the same rate
Speaker 8: as white business owners. And part of that is because
Speaker 8: it's not offered online in a virtual environment where you
Speaker 8: could work on it at different hours of the day,
Speaker 8: or tailored from a cultural competency perspective so that it
Speaker 8: really reaches them in the way that they want. And
Speaker 8: so we think this is a time for increased investment
Speaker 8: in technical as systems that draws on technology to be
Speaker 8: able to deliver expertise in real time and democratize access
Speaker 8: to that information.
Speaker 3: All right, Well, good insight and fun to get some
Speaker 3: time with you you and and really shed some light
Speaker 3: on this. Sheena Ashley, president of the Insight Center over
Speaker 3: at Capital One, joining us on Zoom from Washington, d C.
Speaker 3: I agree with you, though, Matt, like I feel for
Speaker 3: everyone who's trying to make this better because I just
Speaker 3: feel like we have to do this a long time,
Speaker 3: and we feel like the problem just continues to persist.
Speaker 6: Right.
Speaker 4: I was just looking up Robert Smith, for example, you know,
Speaker 4: the billionaire at Vist Equity Partners. But of course he
Speaker 4: went to MI I T and at Columbia University and
Speaker 4: he builds that kind of network.
Speaker 5: Also, both of his parents are doctors.
Speaker 3: All right, you are listening and watching Bloomberg Radio, brother
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Speaker 4: Let me drive? Oh no, no, no, no, who's going to honey?
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Speaker 3: I want to drive.
Speaker 5: It's a good question.
Speaker 1: This is the drive to the clues for th Well
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Speaker 3: All right, everybody just got about seventeen eighteen minutes left
Speaker 3: in today's trading session. Are you yawning?
Speaker 4: Are you can come on?
Speaker 3: All right, everybody's watched on YouTube in Bloomberg originals. That
Speaker 3: was a yawn.
Speaker 4: I was just refreshing my lungs because I only got
Speaker 4: about five hours of sleep.
Speaker 3: So okay, what did your daughter say to you this morning?
Speaker 4: Daddy? Are you tired?
Speaker 6: Yes?
Speaker 3: Indeed, I feel like the markets are a little tired
Speaker 3: when it comes to the bounce that we've seen in
Speaker 3: a big way. Right on the equity side of things.
Speaker 3: We've got, as Charlie mentioned, a little bit of a
Speaker 3: gain on the S and P Nasdaq really the opperformer
Speaker 3: once again, I'll eat tens of a percent down a
Speaker 3: little bit lower. But as Romaine said earlier, it really
Speaker 3: does seem like it's a rat story again.
Speaker 6: With J.
Speaker 3: Powell back up on Capitol Hill, did have some economic news,
Speaker 3: so let's get to it. A really cool guest, Veronica Clark, economist,
Speaker 3: Everett City Group. She's with us on Zoom in New
Speaker 3: York City. Veronica, I love that we have you here
Speaker 3: as we count down to the close, because I really
Speaker 3: feel like in terms of equity markets or financial assets,
Speaker 3: we really have to have a good understanding about the
Speaker 3: economic backdrop to kind of understand maybe where financial assets
Speaker 3: go from here, where they should go from here based
Speaker 3: on the fundamental economic backdrop. So where are we?
Speaker 4: Yeah?
Speaker 6: Yeah, it is a really confusing backdrop right now. Unfortunately,
Speaker 6: I mean we're all waiting for this recession that still
Speaker 6: is not happening. And of course, you know, with that
Speaker 6: recession not happening, we're not getting the slowdown in spending
Speaker 6: or activity, and that means inflation is still high, that
Speaker 6: means the Fed is still raising rates. It is a
Speaker 6: very confusing, confusing backdrop. But of course we had Powell
Speaker 6: today and yesterday. This is still a FED that's focused
Speaker 6: on on raising rates and slowing activity a bit more.
Speaker 4: So, what kind of rate increases do you expect going forward?
Speaker 4: Are we going to see the two that were indicated
Speaker 4: in the dot plot, or as Raphael put it, or
Speaker 4: we're going to see passive tightening that doesn't include actual
Speaker 4: rate hikes, but just a reduction of inflation to bring
Speaker 4: the real rate up.
Speaker 6: Yeah, those we're a bit dubbish comments from Bostic, but
Speaker 6: I think you know, we are with most of the
Speaker 6: FOMC members right now with the committee and seeing two
Speaker 6: more rate hikes. We'd actually seen that even ahead of
Speaker 6: last week's meeting, you know, had been penciling in potentially
Speaker 6: that they could have even raised rates last week. Of
Speaker 6: course we didn't get that, but we've been penciling in
Speaker 6: a five fifty five seventy five terminal rate for this
Speaker 6: year for a while. Of course, the median dot last
Speaker 6: week did come up to that range. So we are
Speaker 6: still penciling in two more hikes right now, thinking that
Speaker 6: they'll be in July and September, but of course a
Speaker 6: lot of variability on when we might get them. But yeah,
Speaker 6: still think that the rates are rising a bit more
Speaker 6: just because you know, inflation is still pretty persistently high.
Speaker 3: How often do you guys say, maybe J. Powell might
Speaker 3: get this right, or how many times do you say
Speaker 3: he might just get this wrong?
Speaker 6: Yeah, I mean, I think the Fed is is doing
Speaker 6: the right thing here. You know, they were, you know,
Speaker 6: potentially a bit behind the curve, you know, when we
Speaker 6: had inflation coming up, but you really, you know, I
Speaker 6: think it does need to be. Inflation is still the
Speaker 6: number one focus, and we heard that from him, you know,
Speaker 6: today and yesterday they have met their you know mandate.
Speaker 6: On the employment side, you know, we have a very
Speaker 6: low unemployment rate. We're still running you know, monthly job
Speaker 6: gains that surprise to the upside every month, you know,
Speaker 6: three hundred and thirty nine thousand in the last report.
Speaker 6: But we are not there on the inflation side of things,
Speaker 6: and we do still have persistently high inflation. So I
Speaker 6: think they're they're doing the right thing, and that that
Speaker 6: has to be your focus right now.
Speaker 1: You know.
Speaker 4: I got an email from Torsten Slock this morning over
Speaker 4: at Apollo showing the average new mortgage payment across the country,
Speaker 4: and it is a shocking chart. I had a messag
Speaker 4: him to make sure the data is correct, because we
Speaker 4: average between one thousand and fifteen hundred dollars over the
Speaker 4: last twenty years, and now we're looking at a three
Speaker 4: thousand dollar or average monthly payment for a new home purchase.
Speaker 4: Is this an environment in which the consumer is going
Speaker 4: to be able to keep up? Yeah?
Speaker 6: It is. It is pretty incredible. I mean, housing affordability
Speaker 6: is not good right now. Obviously that's partly due to
Speaker 6: higher mortgage rates, but it's also because home prices, you know,
Speaker 6: they they did come down a little bit, but not
Speaker 6: that much, especially relative to the last three years of
Speaker 6: you know, really substantial home price increases. We of course
Speaker 6: had some existing home sales data out this morning. Those
Speaker 6: median prices on a seasonally adjusted basis are actually really
Speaker 6: rising again. We saw that in the May data. I
Speaker 6: think it's just an issue of yeah, housing is still
Speaker 6: very unaffordable. But you know, if you did lock in
Speaker 6: a lower mortgage rate over the last couple of years,
Speaker 6: which a lot of people did, then you're not going
Speaker 6: to sell that home. You're not going to sell your home,
Speaker 6: You're not going to give up that rate. So supply
Speaker 6: of housing is still really constrained, which of course we
Speaker 6: know from the last years of supply is constrained. That
Speaker 6: means upward pressure on prices.
Speaker 3: Yeah, and we've done a bunch of stories. I think
Speaker 3: everybody has right this. Yeah, here's a US home resales
Speaker 3: barely rises, inventory constraints worsen. I mean we now, I know,
Speaker 3: I have a lot of relatives or they're not leaving
Speaker 3: their homes because they've.
Speaker 4: Got really low rates.
Speaker 3: Having said that, Fronick, I'm curious what's more important though,
Speaker 3: in terms of economic growth. Is it that the labor
Speaker 3: market stays strong and people keep on working, or is
Speaker 3: it that people are buying homes?
Speaker 6: Yeah, it is. It is really fundamentally going to come
Speaker 6: down to what happens with the labor market. You know,
Speaker 6: we we've been surprised, I think on you know, the
Speaker 6: degree of excess savings that was built up over the
Speaker 6: pandemic that you know, how much that's been able to
Speaker 6: come out and support spending come out into the economy.
Speaker 6: But the main thing that you know, will continue to
Speaker 6: drive you know, spending, will continue to have people wanting
Speaker 6: to buy homes, you know, to at least in an extent,
Speaker 6: is if people still have a job. That is, you know,
Speaker 6: the number one issue is, you know, as long as
Speaker 6: the labor market is still just as strong, then there's
Speaker 6: really not a lot of that downward pressure on inflation
Speaker 6: at least, you know, and that's a bit of a
Speaker 6: worry for the Fed, you know, they of course, you
Speaker 6: see inflation and labor market as very linked.
Speaker 5: We have seen.
Speaker 4: The initial jobless claims finally kind of jump up. I
Speaker 4: know that they keep being revised down, so the first
Speaker 4: readings are always like above two fifty, and then they
Speaker 4: get revised down significantly. What do you think the chances
Speaker 4: are that the labor market cracks here? And if so,
Speaker 4: how fast can it go? Veronica?
Speaker 6: Yeah, that's that's really what we're all looking for now.
Speaker 6: I mean, I think you know, we are included in this.
Speaker 6: We have an expectation, a lot of people do, for
Speaker 6: you know, a mild recession later this year. Have been
Speaker 6: expecting it for a while, been expecting the labor market
Speaker 6: to slow. I do think that claims data, you know,
Speaker 6: is probably the best leading signal of that. But you know,
Speaker 6: it would be if we saw initial jobas claims trending
Speaker 6: higher week after week, for you know, a number of weeks.
Speaker 6: If the increase in claims was broad based across states,
Speaker 6: that's really not.
Speaker 3: Well, That's what I wanted to ask you of Veronica, right,
Speaker 3: because the run up has been concentrated in just a
Speaker 3: handful of states. So I'm just nationally the U States,
Speaker 3: the claims remain below the twenty nineteen average. So if
Speaker 3: we start to see a broad now that's more worrisome.
Speaker 6: Yeah, I would think. So, you know, we've seen claims
Speaker 6: higher in California. Of course, we know about tech playoffs.
Speaker 6: We've seen that in other data, so that's not too surprising.
Speaker 6: It's still there. Of course, we know maybe a month
Speaker 6: or so ago had this increase in Massachusetts that turned
Speaker 6: out to be fraud. It looks like maybe that could
Speaker 6: be some issues in some other states the last couple
Speaker 6: weeks of claims, and maybe even more so in the
Speaker 6: next couple of weeks. We did get a law change
Speaker 6: in Minnesota where education workers are able to file for
Speaker 6: unemployment over the summer break. Yeah, so that actually is
Speaker 6: a you know, an idiosyncratic you know, it's not layoffs,
Speaker 6: but could mean that claims are a bit harder to interpret.
Speaker 6: So yeah, I really do want to look at detail.
Speaker 3: Scott It you'll see where it is. We got to
Speaker 3: run Veronica Clark over at Citygroup. Citygroup. Excuse me, an
Speaker 3: economist there on zoom in New York City. This is
Speaker 3: Bloomberg Radio.
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