Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. This is Bloomberg business
Speaker 1: Weekdaily reporting from the magazine that helps global leaders stay
Speaker 1: ahead with insight on the people, companies, and trends shaping
Speaker 1: today's complex economy, plus global business finance and tech news
Speaker 1: as it happens. The Bloomberg Business Week Daily Podcast with
Speaker 1: Carol Masser and Tim Stenebeck on Bloomberg Radio.
Speaker 2: President Trump directed US government agencies to stop using Anthropics products,
Speaker 2: capping a feud between the AI Giant and the Pentagon
Speaker 2: over safeguards on its technology. The President said before four
Speaker 2: o'clock today, right, there would be a six month quote
Speaker 2: phase out period for agencies, including the Defense Department, that
Speaker 2: are using Anthropics products. I thought, and we're going to
Speaker 2: bring up his tweet in a second. Here is the
Speaker 2: left true social not a tweet. I'm sorry. The left
Speaker 2: wing nut jobs at Anthropic have made a disaster mistake
Speaker 2: trying to strong arm the Department of War and force
Speaker 2: them to obey their terms of service instead of our constitution.
Speaker 2: Their selfishness is putting American lives at risk.
Speaker 3: Meantime, we've also seen, according to Axios, saying that Anthropic
Speaker 3: and the Pentagon are still negotiating a deal is still
Speaker 3: That was after the president's post on Social Access reporter
Speaker 3: citing a source on Anthropic and Pentagon in an ex post,
Speaker 3: So I don't know clock ticking though here.
Speaker 2: Well, fortunately we got Katrina Manson back with US's Bloomberg
Speaker 2: News reporter who covers tech in national security. She's also
Speaker 2: the author of the forthcoming book Project Maven, a Marine
Speaker 2: Colonel his Team in the Dawn of AI Warfare. The
Speaker 2: book comes out next month, but you can pre order
Speaker 2: it now. She joins us from New York. Katrina, congratulations
Speaker 2: on the book. I'm looking forward to reading it. I
Speaker 2: know it's been a long project, but it's totally related
Speaker 2: to exactly what you have been reporting on in recent
Speaker 2: weeks and sharing with us on our program, the back
Speaker 2: and forth that Carol and I just had. Where is
Speaker 2: this Anthropic Pentagon relationship right now?
Speaker 4: Well, it's very significant that the President's weighed in and
Speaker 4: called this directive. But of course you're quite right to
Speaker 4: say that, to indicate this is the man who knows
Speaker 4: the art of the deal, and things are going to
Speaker 4: keep going unraveling. Anthropic over the course of six months
Speaker 4: will be extremely complicated. They're in the tech stack, they're
Speaker 4: in the intelligence community, they are used in combat operations
Speaker 4: on Maven's smart system, which is a Palenteer system. It's
Speaker 4: not impossible to replace them, and of course the President
Speaker 4: is suggesting a six month phase out, and even Anthropic
Speaker 4: when they gave their very strong statement yesterday said we
Speaker 4: will help if the choice is to remove us, we
Speaker 4: will make sure that transition is smooth. And then you've
Speaker 4: got now Warner calling in from the Senate Intelligence Committee
Speaker 4: suggesting this is a politicized attack, and of course the
Speaker 4: president they'd call them left wing nutjobs, so he is
Speaker 4: concerned that this is not really a debate about the
Speaker 4: future of war, but a jostling for position over which
Speaker 4: company gets what. And if the Axios report is correct,
Speaker 4: I don't have separate reporting to that, then this could
Speaker 4: be still part of that process, Haig Seth. Of course,
Speaker 4: the Secretary.
Speaker 5: Of War or Defense had given.
Speaker 4: Us until five oh one, so we'll also still be
Speaker 4: waiting to see if the Defense Department wants to weigh in.
Speaker 3: You know, I think about national security with all of
Speaker 3: this stuff AI, you name it, you know, raw materials, everything,
Speaker 3: and I just think about if this comes undone is
Speaker 3: that a loss for national security for the United States.
Speaker 4: It's quite hard to work out the ways in which
Speaker 4: the US military machine is dependent on AI at the moment. Well,
Speaker 4: that's what I've been trying to do in this book, honestly,
Speaker 4: and it has threaded through of course LLMS and gentic AI.
Speaker 4: This is something that is being rapidly adopted but also
Speaker 4: really really unknown and unreliable in many cases. So the
Speaker 4: military and the intelligence community, both of them in terms
Speaker 4: of national security, have been experimenting from pretty early on
Speaker 4: after that first moment when chat GPT was launched back
Speaker 4: in when it was at November twenty twenty three, and
Speaker 4: they have started really trying to develop their own systems. Obviously,
Speaker 4: Anthropic is the interesting one because they're on the classified cloud.
Speaker 4: They found a way to do it, and they were
Speaker 4: threaded through a number of systems, mostly helping things run
Speaker 4: faster if you imagine an enterprise service, but just happening
Speaker 4: in a classified way, really trying to draw on data
Speaker 4: points and make things go swifter, quicker, connect things smatter
Speaker 4: through bureocracy in that sense, that could slow national security down.
Speaker 5: But of course, the.
Speaker 4: Thing they said that they were worried about wasn't politics,
Speaker 4: it was autonomy. They didn't want their tools being involved
Speaker 4: in autonomous warfare because they're not ready. And we were
Speaker 4: increasingly beginning to hear from military leaders, not just the
Speaker 4: campaigners who you would expect to have a problem with this,
Speaker 4: like stop killer robots, but actually the former leader, the
Speaker 4: former director of Project maeven Jack Shanahan, who's a retired
Speaker 4: three star general, said look, lms are not ready for
Speaker 4: prime time. He put that post out yesterday and just
Speaker 4: said this technology isn't ready yet, which is very much
Speaker 4: in line with what Anthropic had been saying.
Speaker 3: I want to go back to the Axios. We have
Speaker 3: a little bit of a follow read through on this.
Speaker 3: Anthropic and the Pentagon still negotiating ahead of the Pentagon's
Speaker 3: five oh one pm ET deadline, are reached deal. Citing
Speaker 3: a source familiar, Axios goes on to say, if no
Speaker 3: deal has reached, Defense Secretary Pete Hexath's plans to declare
Speaker 3: Anthropic a supply chain risk, there's five oh one deadline,
Speaker 3: Might it, Katrina be extended? What where did this deadline?
Speaker 3: You can talk deadline in the past, you know deadlines
Speaker 3: can move.
Speaker 4: I mean, so much of this is performative, as we've
Speaker 4: seen a lot of very loud public statements, as we
Speaker 4: actually have learned the disagreement on paper comes down to
Speaker 4: the term as appropriate. There have been letters going backwards
Speaker 4: and forwards, so we've been told that are about whether
Speaker 4: human judgment will be used over the use of force
Speaker 4: in an autonomous situation. And we had Emil Michael talking
Speaker 4: to Bloomberg TV much more cool headed than he was
Speaker 4: last night. Last night he was calling dari Amadee a
Speaker 4: liar and saying he had a god complex. This morning
Speaker 4: with Bloomberg, he was saying, look, talks are carrying on.
Speaker 4: So I think, of course this is a negotiation. They've acknowledged.
Speaker 4: I think in multiple ways that they're really dependent on
Speaker 4: Claude and that thought is really good and they want
Speaker 4: to keep using it. Claud doesn't want to be involved
Speaker 4: in autonomy, and I was learning, of course that if
Speaker 4: the department pushes ahead but autonomy in the way it
Speaker 4: wants to do, it could be quite hard to have
Speaker 4: one system that allows autonomy and another that doesn't touch
Speaker 4: autonomy that Claude would be on.
Speaker 6: So they do need to work out.
Speaker 4: Exactly what their red lines are. Even if they're coming
Speaker 4: to a much softer accommodation behind closed doors now. But
Speaker 4: you know, with the President weighing in and with heg
Speaker 4: Seth maintaining this position, there's no reason to think they
Speaker 4: will reach a deal at five oh one.
Speaker 2: So, Katrina, just in the last twenty seconds that we
Speaker 2: have with you, when I was on my way home yesterday,
Speaker 2: this crossed. It was just minutes after you were on
Speaker 2: our program talking about it, but it said it was
Speaker 2: this post from anthropics Dario Amiday saying that the company
Speaker 2: cannot accede to the Department of Defense. Did you learn
Speaker 2: anything just in thirty seconds. Did you learn anything new
Speaker 2: in that post last night?
Speaker 5: Yeah? Here, I've got it right in front of me.
Speaker 4: Actually, I thought there was a very interesting part of it,
Speaker 4: a detail to pick out, which is we've offered to
Speaker 4: work directly with the Department of War on R and
Speaker 4: D to improve the riability of these systems that they
Speaker 4: have not accepted this offer. I thought that was very interesting.
Speaker 5: They are saying, we want.
Speaker 4: To help you use this while technology in a reliable way,
Speaker 4: and you help us help.
Speaker 3: You, which is similar to what the Undersecretary of Defense
Speaker 3: at earlier this morning.
Speaker 5: You go to a dinner party.
Speaker 3: You want to sit to somebody, you want to sit
Speaker 3: next to somebody like Katrina.
Speaker 5: I'm just gonna put that out there.
Speaker 2: Stay with us. More from Bloomberg Business Week Daily coming
Speaker 2: up after this.
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Speaker 3: All right, that's the latest on the US economic picture.
Speaker 3: Let's get to two companies looking at our economy and
Speaker 3: the issue of affordability, especially when it comes to housing
Speaker 3: and really the ability to own a home. As we
Speaker 3: know home ownership in the US, it offers stability, it's
Speaker 3: an offer, a way to create wealth.
Speaker 7: And this is a really big part of the American dream.
Speaker 3: I laugh, but it's not funny because a lot of
Speaker 3: people between US home prices outpacing wages. It's made it
Speaker 3: really difficult for many to afford a home in the
Speaker 3: United States.
Speaker 2: Well, two companies are looking to address that. We're talking
Speaker 2: about Compass and Rocket Companies. The two announced to a
Speaker 2: three year strategic alliance aimed at expanding home listing inventory
Speaker 2: to create a significantly enhanced and affordable home buying and
Speaker 2: selling experience for American family.
Speaker 3: All right, we wanted to know more. Also, we should
Speaker 3: point out our next two guests. Both of them had
Speaker 3: earnings last night. Compast shares are a little bit lower
Speaker 3: the company forecast first quarter revenue, the top analyscet testaments,
Speaker 3: and shares of Rocket rallying after the mortgage finance company
Speaker 3: posted revenue and adjusted profit for the fourth quarter that
Speaker 3: beat the average analyst estimate, which.
Speaker 7: Means we're going to get to the macro as well.
Speaker 3: With us in studio, Robert Refkin, he's founder, chairman and
Speaker 3: CEO of Compass International Holdings, and Varun Krishna, President and
Speaker 3: CEO Rocket Companies, both joining us here in studio. Welcome,
Speaker 3: like you are the perfect guests to have right now
Speaker 3: with so much going on, I want to talk about
Speaker 3: the partnership though, and how it gets to the affordability issue.
Speaker 7: Let's go right there. Robert, who whatever wants to kick it.
Speaker 5: Off, please go ahead. So let's get it.
Speaker 8: Well.
Speaker 9: Look what this represents is the number one largest brokerage
Speaker 9: in the world, Compass three hundred and forty thousand agents,
Speaker 9: nine brands Compass, Corcoran, So the Best, Caldel Banker, Beterhomes
Speaker 9: and Garden e A Central twenty one, Christie's and ad
Speaker 9: Properties partnering with the largest mortgage company in the world
Speaker 9: to help sellers by giving them something they've never had before,
Speaker 9: which the ability to market their homes to sixty million
Speaker 9: buyers without days on market and price drop history. Ultimately,
Speaker 9: there's a risk to listing negative insights that are on
Speaker 9: listings that we are taking off the listing so for
Speaker 9: the first time so that they can market without risks.
Speaker 9: There should not be these artificial barriers.
Speaker 2: Yeah, come on in here, because if we think about affordability,
Speaker 2: you know what we hear over and over again from
Speaker 2: economists is, yeah, mortgage rates matters matter. You know, it
Speaker 2: matters how much people are are thinking about buying and
Speaker 2: their salaries and how they think about affordability. But it
Speaker 2: really has to do with supply and if we're not
Speaker 2: building more homes in places where people want to live,
Speaker 2: we're just not going to make a dent. How do
Speaker 2: you do it if you're not a builder.
Speaker 10: I think it's a very complicated problem, and I think
Speaker 10: it's really important that industry participates and does its part,
Speaker 10: and the purpose of this partnership is really to attack
Speaker 10: affordability in two ways. The first one is inventory. As
Speaker 10: Robert shared, we plan to bring as a result of
Speaker 10: this partnership, five hundred thousand to a million listings to
Speaker 10: the market that are not accessible and.
Speaker 5: So why aren't they accessible Because part.
Speaker 10: Of the issue is that certain sites provide access to
Speaker 10: these private exclusives and coming soon listings, and these are
Speaker 10: inventory that really comes down to a more flexible way
Speaker 10: for sellers to be able to advertise their home. And
Speaker 10: what we think is that everyone is really focused on
Speaker 10: the buyer. That's obviously a very important side of the equation,
Speaker 10: but in some ways the entire world is forgotten about
Speaker 10: the other side of the equation, and that's the seller.
Speaker 10: And so this partnership first is focused on the seller.
Speaker 10: It's about lowering the barrier to entry so that more
Speaker 10: listings can be advertised online on redfin and on Compass.
Speaker 10: That's one side of the equation. The second side of
Speaker 10: this is a mortgage partnership, and that's where we are
Speaker 10: building a more integrated platform for buyers so that buyers
Speaker 10: that use Rocket Mortgage, that use Compass can actually save money.
Speaker 10: They can get up to six thousand dollars in closing
Speaker 10: costs coverage. They can save up to one percent on
Speaker 10: payments for the first year. And so it's a very
Speaker 10: multifaceted challenge to fix affordability. But what's great about this
Speaker 10: partnership is it fixes things for both buyers and sellers
Speaker 10: on both sides of the ecosystem.
Speaker 3: But I got to ask, you know, one of the
Speaker 3: things that Tim and I we've covered this a lot
Speaker 3: in terms of affordability, and yes, it's some of it
Speaker 3: is buying homes, affordable homes where they are needed.
Speaker 7: It's not just buying homes.
Speaker 3: But the other thing is a lot of folks have
Speaker 3: said we need to pay people more, that it's an
Speaker 3: income thing, So like, are you guys going to give mortgages?
Speaker 3: Are you changing your metrics in terms of income and
Speaker 3: so and so forth? Qualifies yeah, because that gets to
Speaker 3: the affordability issue too.
Speaker 10: Yeah, I mean, I think, look, the reality is affordability,
Speaker 10: as you said, is much more than just supply and demand,
Speaker 10: although supplying demand are probably the major ways to.
Speaker 8: Attack the problem.
Speaker 10: But a part of this is you have to have
Speaker 10: more ways to qualify people you have alternative ways to
Speaker 10: look at things like credit. You have to think about reform,
Speaker 10: you have to think about wage.
Speaker 2: What do you think about self employed?
Speaker 10: We have diversified the way that we look at our population.
Speaker 10: I mean, you look at things like the creator economy,
Speaker 10: you look at the self employed economy. So you have
Speaker 10: different ways that people make income, have credit, and it's
Speaker 10: really important I think to acknowledge that and to diversify
Speaker 10: the way you qualify folks.
Speaker 2: So the idea big picture is you increase supply, you
Speaker 2: get more homes listed out there, it frees up inventory
Speaker 2: for people to buy that first home.
Speaker 9: Robert, But yeah, go ahead, So you mentioned developers and holders. Look,
Speaker 9: unfortunately that will just take too long. If we attack
Speaker 9: the builder side, that will take two years to have
Speaker 9: even the most modest impact. The bigger impact is not
Speaker 9: really where you play. The bigger impact exactly what we
Speaker 9: play on both. But the bigger impact is on existing
Speaker 9: home sales, and that's where there's there's been less inventory
Speaker 9: because so many homeowners locked into low mortgage rates and
Speaker 9: they don't want to lose that low mortgage rate to
Speaker 9: transfer to a six.
Speaker 11: Percent mortgage rate.
Speaker 9: So the way to expand the existing home sale market
Speaker 9: is to reduce the bearers to entry. And so let
Speaker 9: me give you some examples. Yeah, why do sellers say
Speaker 9: when's the right time to list? There shouldn't. There shouldn't
Speaker 9: be a right time to list. But they're worried about
Speaker 9: days on market? Why is there a fear of what
Speaker 9: price should we go at? Well, there shouldn't be a
Speaker 9: price drop history. That shouldn't be a conversation. You know,
Speaker 9: my wife would never want to sell her home, but
Speaker 9: do you ask her is there a price you'd sell
Speaker 9: your home?
Speaker 11: Yes, there's a price, there's always a price.
Speaker 2: But don't those histories inform the potential seller? Doesn't that
Speaker 2: data show and help inform a buyer? Doesn't that provide
Speaker 2: more information to the market.
Speaker 9: So look, if I were buying your company, I would
Speaker 9: love your investment banker told me how long you've been
Speaker 9: trying to sell your company and how many times you
Speaker 9: drop the price. But that's not what I'm buying. That's
Speaker 9: a negotiating point for leverage. If buyers deserve to know price,
Speaker 9: job history and days and market sellers to deserve to
Speaker 9: know how long has that buyer been searching, how many
Speaker 9: times they put in office that fell through and fell
Speaker 9: out a contract. And so we believe if you the buyer,
Speaker 9: what you need is you need more inventory. So to
Speaker 9: help you the buyer, the best thing that we can
Speaker 9: do is just let the seller sell however they want.
Speaker 11: And if we do that, they'll be more inventory.
Speaker 3: So then wait a minute, So then now does the
Speaker 3: seller have more information or you're just getting rid of
Speaker 3: it and it's just kind of a through.
Speaker 11: We're just getting rid of it for the first time.
Speaker 5: So you just listed and you go.
Speaker 9: If you go to Australia, the word days on marketing
Speaker 9: and price job history are not on the sites. They
Speaker 9: don't exist. The reason why is that system was built
Speaker 9: for sellers here. It was built because everyone's forced to
Speaker 9: put in the MLS. It was built for buyers. And
Speaker 9: so we're just trying to bring the pendulum back and
Speaker 9: give individual homeowners the same advantages as the builders. Builders
Speaker 9: market without days on marketing, price jop history. So we
Speaker 9: should give homeowners the same opportunity.
Speaker 3: What makes you so sure this is going to work
Speaker 3: in terms of the affordability, because I also wonder if
Speaker 3: you remove some of that information. To Tim's point, if
Speaker 3: there have been price drops that ultimately brings down the
Speaker 3: cost of the price of housing.
Speaker 7: But if you don't have that and it.
Speaker 3: Just kind of stays and maybe doesn't really indicate what's
Speaker 3: happening at the broader market, Doesn't that lead to price appreciation,
Speaker 3: and that doesn't get to the affordability.
Speaker 10: I think there's two things to point out. I think
Speaker 10: the first thing is I think no one can disagree
Speaker 10: that today there is no inventory right Like, we have
Speaker 10: an issue with the way the system works today, which
Speaker 10: is that we looked at some redfinn data and so
Speaker 10: half of the homes that are listed right now have
Speaker 10: been on the market for sixty days plus. So we
Speaker 10: have a lot of stale inventory. You don't have a
Speaker 10: lot of new inventory.
Speaker 3: So I spend my neighborhood because I like to check
Speaker 3: and keep an eye inter there's.
Speaker 10: There's not much inventory is coming on market. And so
Speaker 10: to me, it's less about some of these metrics. It's
Speaker 10: more just like, how do you create more inventory? More
Speaker 10: inventory it creates more competition, it reduces scarcity, and that
Speaker 10: creates pricing advantage. So the bigger picture for us is
Speaker 10: just how do you attack the supply problem? Because without sellers,
Speaker 10: you're not going to have buyers and every seller ends
Speaker 10: up being a buyer. And that's really what we're focused
Speaker 10: on here.
Speaker 2: Robert, you're a data driven guy. How do you measure
Speaker 2: if this actually works? Like, what's the metric?
Speaker 11: We will see more inventory come to the market.
Speaker 2: How much more inventory?
Speaker 9: Before restrictions came into the industry through something called clear Cooperation,
Speaker 9: which forced every individual American homeowner to put their listening
Speaker 9: in MLS after twenty four hours, ninety percent of our
Speaker 9: listing started off outside of the MLS system. And when
Speaker 9: that rule came into effect, we saw less inventory. And
Speaker 9: so I can't give you the exact number, but we will.
Speaker 9: We will see how much more inventory we will bring
Speaker 9: to the market and we'll share that.
Speaker 11: With the public.
Speaker 7: Will this work in any rate environment?
Speaker 11: Absolutely?
Speaker 9: Just there should be no fear to list, There should
Speaker 9: be no downside to list, There should be no barrier
Speaker 9: to list. You should be able to list however you want.
Speaker 9: Do you want to not disclose the price sin say
Speaker 9: price spawn request? Do you want to have how many
Speaker 9: photos you want? You want to have no photos? Do
Speaker 9: you want to have an address that just this fifth
Speaker 9: Avenue luxury penouse without seeing the exact unit? Number whatever
Speaker 9: you want. If you take away all those bears, you
Speaker 9: will have more inventory.
Speaker 3: Help me understand too, What does this do to the
Speaker 3: selling process the real estate agents who are selling properties,
Speaker 3: who often sometimes I would say, covet certain properties.
Speaker 7: Does that change any of them?
Speaker 9: Well, obviously, I believe deeply in real estate ags. My
Speaker 9: mom is a real estate agent, all my clients are agents.
Speaker 7: Is well calling you and say what my.
Speaker 9: Mom supports this idea, okay, as he supports the partnership,
Speaker 9: but no agents are at the center of this. And
Speaker 9: you know we both are companies with loan officers and
Speaker 9: real estate agents. We are empowering the real estate professionals
Speaker 9: that are required to make the transaction happen.
Speaker 10: The other thing I would add around the rate environment
Speaker 10: to that question.
Speaker 3: You guys did kind of smile when I said, what
Speaker 3: was going on with the ten year and how we
Speaker 3: some rates moved down?
Speaker 5: So it does impact Well, it's great.
Speaker 10: To see rates moving in a good direction. We think
Speaker 10: that gets more buyers off the sideline. But I think
Speaker 10: what's unique.
Speaker 7: It's the economy slowing down. Andy's going to be working,
Speaker 7: that's right.
Speaker 10: What's unique about Rocket in particular is that Rocket has
Speaker 10: the home search experience. We have a servicing book and
Speaker 10: because of that, we can acquire clients at a lower cost.
Speaker 10: And when you can acquire clients that are lower cost,
Speaker 10: you can help save them money on the overall transaction,
Speaker 10: and so you eliminate a lot of the friction. You
Speaker 10: become more efficient by using technology, and that turns into
Speaker 10: real savings in terms of lower rates and lower fees,
Speaker 10: and that happens in any rate environment. That's what's unique
Speaker 10: about business.
Speaker 3: Some of the mortgage origination costs, some of these things
Speaker 3: will go away or be reduced.
Speaker 10: Or what that's right, and that's because that's because many
Speaker 10: of the clients are buying they're already homeowners that we service,
Speaker 10: and then they're buying their next home, and so the
Speaker 10: cost to acquire that client becomes significantly lower. And because
Speaker 10: we do a good job servicing them, we can then
Speaker 10: provide them with their next purchase, a cash out refinance
Speaker 10: home equity loan, can do all of that more efficiently
Speaker 10: because that cost of acquisition has come down significantly.
Speaker 2: Well, we have a couple of minutes left and we
Speaker 2: want to talk a little bit about the macro environment
Speaker 2: and the individual companies as Carol mentioned both of you
Speaker 2: guys reported earnings late yesterday. Compass shares down about one
Speaker 2: point five percent. The company forecasts first quarter revenue that
Speaker 2: topped analyst estimates. When you look out at the landscape
Speaker 2: right now, where are you seeing signals of strength and
Speaker 2: where you see signals of weakness?
Speaker 9: Robert, So, overall, we have more inventory, which has been
Speaker 9: the key bottleneck over the last five years, which has
Speaker 9: not been enough inventory. So we have nine per cent
Speaker 9: more inventory than we did this time last year, but
Speaker 9: still less than pre pandemic levels. Prices are basically flat
Speaker 9: to up one percent. We have four percent more pending
Speaker 9: contracts than we did this time last year, so things
Speaker 9: are okay. We're not out of the woods yet. Mortgage
Speaker 9: rates being at three year lows at just under six percent,
Speaker 9: I think the key is, can we see sub six
Speaker 9: percent mortgage rates not for a day, not for three days,
Speaker 9: but for a season. If we do, then I think
Speaker 9: we will start will be out. We will see strength
Speaker 9: in the market for Roon.
Speaker 3: Same question to you, what do you see when it
Speaker 3: comes to the macro, how does it compare from last year,
Speaker 3: a year ago, six months ago, and your visibility on
Speaker 3: the outlook.
Speaker 8: Yeah.
Speaker 10: I mean generally, when you look at all the different
Speaker 10: industry forecasts, we expect the mortgage market to be bigger
Speaker 10: in twenty twenty six than twenty twenty five. I think
Speaker 10: the question is just how much bigger and how far
Speaker 10: up into the right.
Speaker 5: So a lot so more activity, more.
Speaker 10: Activity, more purchase behavior, more refinance behavior. Obviously, as Roberts said,
Speaker 10: we see inventory starting to creep up a little bit,
Speaker 10: which is good. We're starting to see rates cooperate, which
Speaker 10: is good. And I think that for the first time
Speaker 10: you're starting to see a five handle on the raid
Speaker 10: environment and that's going to bring a lot of buyers
Speaker 10: off the sideline. And so we do expect twenty six
Speaker 10: to be better than twenty five. But a big part
Speaker 10: of this is just some companies have built a business
Speaker 10: model to be able to thrive in any rate environment,
Speaker 10: and that's kind of what our focus is.
Speaker 2: We know the President is so focused on affordability. He's
Speaker 2: focused on making sure that people can get into homes.
Speaker 2: Have either of you guys had conversations with the administration.
Speaker 8: We have.
Speaker 10: I mean, we have great relationships with everyone at the
Speaker 10: administrative world, and we support reform. We support affordability. We
Speaker 10: support new programs, new initiatives. Anything we can do to
Speaker 10: create more buyers and sellers and improve the supply challenge
Speaker 10: that we have in this country we support.
Speaker 3: Was there anything in terms of a specific program that
Speaker 3: you would like or policy that you'd like to see
Speaker 3: the administration support?
Speaker 8: Yeah?
Speaker 11: I would. I'd very much like to see them.
Speaker 9: Eliminate the National Association Real It is clear cooperation rule
Speaker 9: that forces homeowners to put their listings in mls. It's
Speaker 9: not NAR's home, it's the homeowner's home, and they should
Speaker 9: have the freedom to market their home when, where and
Speaker 9: how they want.
Speaker 5: Great stuff.
Speaker 3: Please come back, let us know how this partnership's going
Speaker 3: and the impact that you guys are seeing.
Speaker 7: Really appreciate it.
Speaker 3: Robert Refkin, Founder, chairman and CEO Compass International Holdings and
Speaker 3: Varun Krishna, President and CEO Rocket Companies.
Speaker 7: Joining us right here in studio. Gentlemen, Thank you again.
Speaker 2: Stay with us. More from Bloomberg Busines This Week Daily
Speaker 2: coming up after this.
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch
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Speaker 3: Shares of due A Lingo are tanking today. The stock
Speaker 3: in fact right now down about seventeen percent.
Speaker 7: It did though, hit.
Speaker 3: Its lowest intra day since February of twenty twenty three,
Speaker 3: now down more than eighty percent since May of twenty
Speaker 3: twenty five, and about twenty two percent of the float
Speaker 3: is short, so there's some real negative sentiment on the name.
Speaker 3: Shares sliding after the companies said it's drive to gain
Speaker 3: subscribers would mean slower earnings growth and narrower profit margins
Speaker 3: in the short term. Tim, you keep reminding us that
Speaker 3: there's a lot going on with the company, some transformations here.
Speaker 8: Yeah.
Speaker 2: The company said it would step up investment in AI
Speaker 2: and sacrifice some degree of monetization in order to accelerate
Speaker 2: user growth and engagement. The goal double the current number
Speaker 2: of daily active users to one hundred million in twenty
Speaker 2: twenty eight. Great to be talking again with a member
Speaker 2: of the Duelingo c suite. Back with Luis von Ahn,
Speaker 2: co founder, chairman, president and CEO of Duelingo. He joins
Speaker 2: us from New York. Louis always good to see you.
Speaker 2: We're going to talk about the quarter and the outlook
Speaker 2: in a minute, but I want to start big picture
Speaker 2: with AI because I mean, you've been thinking and researching
Speaker 2: AI for decades. At this point, you're a recipient of
Speaker 2: a MacArthur Genius Foundation grant back in the year two
Speaker 2: thousand and six. We're working on AI. This is nothing,
Speaker 2: nothing new to you, what's happening right now. But answer
Speaker 2: the question for investors, is AI a threat to your business?
Speaker 6: Well, first of all, thank you for having me.
Speaker 12: You know, I think that we're in a unique point
Speaker 12: in time where because of AI.
Speaker 6: We're going to be able to teach significantly better.
Speaker 12: And you know, Dueling was is by a wide margin,
Speaker 12: the largest app in education in the world, and I
Speaker 12: think because of that, we're going to be able to
Speaker 12: really take advantage of this, you know, AI boon to
Speaker 12: be able to teach significantly better. And our sense is
Speaker 12: that within the next few years, we're going to have
Speaker 12: an app that teaches us well as a one on
Speaker 12: one tutor, but also is as fun as a mobile game.
Speaker 12: And if we're really able to do that, I think
Speaker 12: there's just so much more that we canencapture. So that's
Speaker 12: what that's what we're doing, we're really shooting for that.
Speaker 3: So jumping on the AI bandwagon, I mean, I guess
Speaker 3: what I guess what investors want to know is what
Speaker 3: is dual Lingo's advantage over potential new AI learning apps.
Speaker 12: Well, uh, you know, at the moment, we're not we're
Speaker 12: not particularly concerned with competition in terms of you know,
Speaker 12: other other education apps.
Speaker 8: We have.
Speaker 6: For example, for.
Speaker 12: Language learning, we have about eighty five percent of the
Speaker 12: market share of all daily active vities of people who
Speaker 12: are learning a language.
Speaker 6: So we have huge scale.
Speaker 12: And what differentiates us is that, because of that scale,
Speaker 12: we just have more data into how people learn than
Speaker 12: anybody else and we can use that to train our
Speaker 12: own specific models. So we just have the advantage of scale,
Speaker 12: of being able to watch literally billions of exercises every
Speaker 12: day by people who are learning different things.
Speaker 3: But as you know, this is going and this is
Speaker 3: moving pretty quickly the AI impact it seems, and to
Speaker 3: be fair, you are right, like we'll see may say
Speaker 3: this is you know, we're kind of early in on
Speaker 3: this process and the impact. But what does dual lingo
Speaker 3: offer that can't easily be replicated by a large language model,
Speaker 3: And how do you kind of view that competitive landscape evolving.
Speaker 6: Yeah, I mean there's a there's a there's a number
Speaker 6: of things.
Speaker 12: I mean, for one, with doual lingual, what we do
Speaker 12: is we try to build a habit of learning. I mean,
Speaker 12: for example, fifteen million of our daily active users have
Speaker 12: a streak of longer than three hundred and sixty five days,
Speaker 12: meaning they have been using dualingo for a year or
Speaker 12: longer and haven't missed the day. So we're really trying
Speaker 12: to build a habit for that. And this is why
Speaker 12: do a linguist part game, part education, And that's you know,
Speaker 12: I think that's just the right thing. It just turns
Speaker 12: out the hardest thing about learning something by yourself is
Speaker 12: staying motivated. The actually the content to learn has been
Speaker 12: there for a long time. So for example, it's you know,
Speaker 12: you've been able to learn a language by just reading
Speaker 12: a book for hundreds of years.
Speaker 6: That has been there.
Speaker 12: It's just what we do differently is we motivate people
Speaker 12: to continue doing it.
Speaker 6: And that's hard to get right.
Speaker 2: So what are what our investor is not getting right?
Speaker 2: In your view, Carol? Carol mentioned some of the stock
Speaker 2: moves and now you know, down at a point that
Speaker 2: you haven't seen since February of twenty twenty three. What
Speaker 2: are investors missing here?
Speaker 6: I think it's a matter of timing.
Speaker 12: You know, on our end, we are trying to build
Speaker 12: a company for the very long term. We're trying to
Speaker 12: do something that you know, for example, in our in
Speaker 12: our shareholder letter, we said that we were shooting to
Speaker 12: have a double the daily active uses.
Speaker 6: That we have now.
Speaker 12: I mean, at the moment we have a little north
Speaker 12: of fifty million daily active users worldwide.
Speaker 6: We're trying to have more than one hundred million.
Speaker 12: But we're saying that that's going to take some time,
Speaker 12: and so we'rekins concentrated in the long term.
Speaker 6: And you know what we're doing is we're trading off.
Speaker 12: This year's you know, financial metrics for a much larger
Speaker 12: thing in.
Speaker 6: The long term.
Speaker 3: Right, yeah, go ahead, Well I get that right. You know,
Speaker 3: companies have to invest in order to provide growth going forward.
Speaker 3: And I think it's fair to say that we understand
Speaker 3: why investors, I mean, they're not loving your forecast for
Speaker 3: first quarter adjusted EBITA that's missing the mark from what
Speaker 3: the street was expecting twenty twenty six revenue. Also that
Speaker 3: forecast missing same story for twenty twenty six adjusted EBITA overall.
Speaker 3: So you talk about building this to double your daily
Speaker 3: active users to one hundred million, how much will how
Speaker 3: long will that build actually take and what kind of
Speaker 3: visibility do you have on that to kind of maybe
Speaker 3: reassure investors at this isn't something that takes longer while
Speaker 3: the AI world continues to challenge established players.
Speaker 12: Yeah, I mean, we're the way we're seeing it is
Speaker 12: We're going to spend this year really working on three things,
Speaker 12: really teaching better, improving the free user experience, and also
Speaker 12: expanding to other subjects. I mean, by now we are
Speaker 12: we already teach math, music, and chess, and you know,
Speaker 12: we've been growing quite a bit. About fifteen percent of
Speaker 12: our active users are learning things that are you know,
Speaker 12: other than languages. Our chess courtse has grown quite significantly.
Speaker 12: So these are the three things that we're working on,
Speaker 12: and we're going to be working on that for the
Speaker 12: rest of the year, and we're expecting that towards the
Speaker 12: end of the year we're going to see some improvements
Speaker 12: in our year over year growth rate. We're still growing,
Speaker 12: I mean, we've had five years of really phenomenal growth.
Speaker 12: We iPod in twenty twenty one, and since then we've
Speaker 12: more than five x our active users, so you know,
Speaker 12: we expect that will continue growing pretty strongly.
Speaker 2: Luis, is the idea in making changes to the free
Speaker 2: tier is it to get more people who don't use
Speaker 2: dulingo now to use the free tier, or is to
Speaker 2: get those free free tier users to upgrade to a
Speaker 2: paid tier.
Speaker 12: Historically, what we have done is we have try to
Speaker 12: you know, the way we generate value on duolingo is
Speaker 12: there's two parts of it. One is how many active
Speaker 12: uses we have. That's kind of like the size of
Speaker 12: the pie that has grown quite significantly. And then there's
Speaker 12: how many of these people are paying us because we
Speaker 12: have this freemium model, that's you know, like the fraction
Speaker 12: of the pie that our payers.
Speaker 6: Historically we have worked on both.
Speaker 12: We have worked on growing the pie and also growing
Speaker 12: the fraction of the pie that is paying, which is
Speaker 12: why our bookings have grown really significantly over the last
Speaker 12: five years. This year, we're mainly concentrating on just growing
Speaker 12: the pie, that is the number of people that are
Speaker 12: actively using dual Lingo. Because it is our belief that
Speaker 12: because of the moment that we're in. We really want
Speaker 12: to have as many people as possible actually learning something
Speaker 12: meaningful and dual Lingo and once we're able to do that,
Speaker 12: I mean, one of the main advantages that we have,
Speaker 12: certainly against new entrance is scale. They're just there's there's
Speaker 12: no other education app that has the scale that we have.
Speaker 3: Well, great to always get a check on what you
Speaker 3: guys are up to and really appreciate it. Love to
Speaker 3: hear more too as we go out throughout the year,
Speaker 3: how things are going.
Speaker 2: I'm the three fifty five, I think my lingo I'm
Speaker 2: almost at a year.
Speaker 3: I think I think Sebastian actually said he's on his
Speaker 3: streak is about seven hundred and seventy. That's one of
Speaker 3: our producers. Hey, Louise, thank you so much. Luis fan On,
Speaker 3: co founder, chairman, president, CEO of due Lingo. When we
Speaker 3: come back and check on trading and stocks on the move.
Speaker 5: This is Bloomberg Business Week Daily.
Speaker 2: Stay with us. More from Bloomberg Business Week Daily coming
Speaker 2: up after this.
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch
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Speaker 2: Well, the President posting about Anthropic and federal agencies. He's
Speaker 2: telling all agencies, the President that is to stop using
Speaker 2: Anthropic Federal agencies cease use of Anthropics technology. Anthropic made
Speaker 2: a mistake to strong arm the Pentagon. This is now
Speaker 2: a redhead cross in the Bloomberg terminal. The President posting
Speaker 2: on true Social about anthropic and federal agencies. The latest
Speaker 2: the President telling all agencies to stop use of anthropics technology.
Speaker 2: We're gonna have Katrina Manson on the program in the
Speaker 2: four o'clock hour. There was a four five pm Eastern
Speaker 2: time deadline yesterday. Anthropics Starrio Amidae came out just after
Speaker 2: our program ended and essentially said we are not we're
Speaker 2: not wavering from our position about our technology not being
Speaker 2: used for these two things, mass surveillance of Americans correct
Speaker 2: and fully autonomous drones drone fully autonomous weapons.
Speaker 11: Right.
Speaker 3: Yeah, but talking a lot about in terms of mass
Speaker 3: drones being used, and I understand was that the Pentagon
Speaker 3: was going to be talking with Anthropics. So we're kind
Speaker 3: of counting down to the wire on that as well.
Speaker 3: In the meantime, we want to get to our own
Speaker 3: Eric Wiener, talk a little bit about the trade today,
Speaker 3: the week, the month, Ready to start a new one.
Speaker 3: Eric Wener, Senior Editor Equities America's here at Bloomberg News
Speaker 3: in our interactive Brokers studio never dul date. Interesting trade,
Speaker 3: interesting trade? Where should we begin here as we are
Speaker 3: wrapping up February.
Speaker 2: Yeah, that's interesting is one word to use.
Speaker 7: I just the market stocks are down for the week overall.
Speaker 2: I am we start with banks? Well yeah, because yeah.
Speaker 5: Well yes, but I am also.
Speaker 3: Confused about hot inflation print. But yields are down and
Speaker 3: I'm trying to understand. That doesn't make sense to me.
Speaker 3: Is it just that we are so worried about the
Speaker 3: outlook here? The private credit worries, the private market worries,
Speaker 3: leading to yes, what you said? So homage to you,
Speaker 3: Tim in terms of.
Speaker 8: Banks, did you did you say that? Because that's actually
Speaker 8: what's what appears to be going on. I mean, you
Speaker 8: can't get a straight answer directly from like the bond market,
Speaker 8: but but that does appear to be what's going on,
Speaker 8: which is I mean the keyword would be uncertainty. There's
Speaker 8: so much up in the air. It's because it's not
Speaker 8: just you know, private credit. It's basically the whole lending
Speaker 8: landscape possibly being you know, under in risk at risk,
Speaker 8: and so you're looking at.
Speaker 3: You're talking about corporate, regional, individual, everything.
Speaker 8: Well or what. So there's risk that there's rising the
Speaker 8: rising problems in credit cards, there is you know, rising
Speaker 8: delinquencies across the lending spectrum. And then you have all
Speaker 8: of this private funding which is less regulated and has
Speaker 8: been financing a lot of the technology growth that's been
Speaker 8: going on. So you have this big mishmash of risks
Speaker 8: that are flowing in ways that we can't really predict
Speaker 8: right now. What we do know though, is that the
Speaker 8: last time there was a blow up, it got really ugly.
Speaker 8: So that's really what like the first Brands thing, you know,
Speaker 8: all of the stuff that happened a couple of years
Speaker 8: ago is really scaring people right now. And if you
Speaker 8: look at who's exposed to it, it's much bigger companies
Speaker 8: and much more important in central companies because you're talking
Speaker 8: about open AI, you're talking about anthropic you're talking about
Speaker 8: companies that are driving the technological growth that we need
Speaker 8: and that we're counting on. And if they can't get
Speaker 8: the funding that they are anticipating then that spending that
Speaker 8: is ricocheting across the market could be pulled back. And
Speaker 8: that's really the underlying fear of everything going on with
Speaker 8: AI right now. So it sort of spills over into
Speaker 8: a whole bunch of different places. And we haven't even
Speaker 8: talked about Iran yet.
Speaker 2: You have any we're going to talk about Iran, But
Speaker 2: you've got me on the underlying fears about AI, and
Speaker 2: that's certainly one of them, is the idea that maybe
Speaker 2: we won't see the results of all this spend. Another
Speaker 2: one is what happened with Block slash Square last night
Speaker 2: and a forty percent reduction in force, and it has
Speaker 2: people thinking and we've I'm sorry to beat a dead horse. Well,
Speaker 2: we've been doing this all day today because I think
Speaker 2: there are a lot of yeah, I think there are
Speaker 2: a lot of questions still about you know, is this
Speaker 2: idiosyncratic to Jack Dorsey and to Square or is this
Speaker 2: something that is actually going to happen at many different
Speaker 2: companies with white collar jobs, because it does raise market questions.
Speaker 2: And yes, the stock reaction for Square today is up.
Speaker 2: But then when you start thinking about this, Okay, if
Speaker 2: all these companies can do more with half the number
Speaker 2: of employees, where do those employees go? And then what
Speaker 2: mean for their spending power?
Speaker 5: So crin right, well.
Speaker 8: Yeah, in other words, and we did all. I mean, look,
Speaker 8: I made my bones on that this week. But you're
Speaker 8: you're on the tip of the whole concern, which is
Speaker 8: that if you look at all of the technological innovation
Speaker 8: that has happened, you know, over the last one hundred
Speaker 8: years or so, mostly it's involved things that may kill
Speaker 8: a job here or there, but will ultimately increase jobs.
Speaker 2: The horseless carriage, for example.
Speaker 8: Yes, exactly, the the the automobile, which you know put
Speaker 8: buggy whips out of business but then created a whole
Speaker 8: transportation industry. So this specific technology is designed to make
Speaker 8: things more efficient in a very specific way, which is
Speaker 8: to eliminate the need for you and I to be intermediaries.
Speaker 8: And that's white collar jobs. So the concern is very real,
Speaker 8: and Dorsey kind of got after it. I mean, he's
Speaker 8: running a successful business, they're making a lot of money,
Speaker 8: and he can and if he can make things that
Speaker 8: much more efficient, then great for him. However, what we're
Speaker 8: hearing is that we are very very far away from this.
Speaker 8: It's interesting, you know, the Pentagon attacking anthropic. Nobody would
Speaker 8: say that right now you need automated weapons. You know,
Speaker 8: we're just not there yet. And the idea that we
Speaker 8: shouldn't have guardrails on this seems like very much being
Speaker 8: out in front, and the same kind of way that
Speaker 8: like thinking that everybody is going to be replaced tomorrow,
Speaker 8: is being way out in front. However, the longer term
Speaker 8: risk is, yes, that high earning job. This is coming
Speaker 8: after high earning jobs which are really underpinning the economic growth,
Speaker 8: not just through production but through consumption, and this could
Speaker 8: actually go right after those people that we need to
Speaker 8: be spending, which is scary.
Speaker 2: Fortunately, between now and Monday, if we don't get replaced, AI,
Speaker 2: I think I can say this that you're going to
Speaker 2: join me for a special live conversation on Monday morning.
Speaker 2: I'll send out the details of it, but it's at
Speaker 2: eleven am Eastern time, and we're going to talk about
Speaker 2: this exact thing. Carol.
Speaker 5: Yeah, I don't know.
Speaker 3: I do worry about this circular financing. That's confusing. And
Speaker 3: you know, I don't want to say Ponzi scheme or
Speaker 3: anything because I think that that but this idea of right,
Speaker 3: did you.
Speaker 8: Look at the open ai ideal today.
Speaker 5: Yeah, oh yeah. So what I'm saying like, so, yeah.
Speaker 7: I want to be careful. I don't want to accuse. No,
Speaker 7: that's smart, but I.
Speaker 8: This is the risk. This is the risk. So and
Speaker 8: I realized that, and then figure take one step back
Speaker 8: and realize that it's coming from private credit. So like,
Speaker 8: if you look at open ai today, Okay, Amazon is
Speaker 8: going to spend fifty billion dollars and then open ai
Speaker 8: is going to spend one hundred billion more on AWS
Speaker 8: and all of this is coming from well, Amazon has cash,
Speaker 8: but well they're free. Cash flow actually is going to
Speaker 8: be negative next year. But the idea is that they
Speaker 8: don't really need.
Speaker 5: The private Yeah, but it's okay, it's okay.
Speaker 8: But they don't really need the private market, but open
Speaker 8: ai does. So if all of that gets pulled back
Speaker 8: and they can't honor the one hundred billion dollars that
Speaker 8: they promised, that unwindes a whole bunch of expectations, including
Speaker 8: a Amazon's expected revenues. So like, how do you value
Speaker 8: the stock? And that's really the question.
Speaker 3: When I go to our AI expert, Rachel Mett's brilliant
Speaker 3: smart on this AI and We say to her, I
Speaker 3: want to understand open AI is balance sheet and she's.
Speaker 5: Like me too.
Speaker 7: And so that to me is we talk about.
Speaker 3: The importance of transparency and understanding value and yet we
Speaker 3: don't quite have it, and I feel like we're going
Speaker 3: to have to do this.
Speaker 5: Yeah five seconds, Well.
Speaker 8: That is really that's really it. That's the danger of
Speaker 8: the private Now they're going to go public so they
Speaker 8: will have the stock.
Speaker 2: But this is the danger of private companies about down
Speaker 2: to Eric Wiener. We do it because he is the best.
Speaker 3: So killer I'm Eric Wiener, Thank you so much, senior
Speaker 3: editor here at Bloomberg News.
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