Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
Speaker 1: my co host Matt Miller. Every business day we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
Speaker 1: at Bloomberg dot com slash podcast. I've been waiting all
Speaker 1: week talk to Sarah Green Carmike, so we will good
Speaker 1: night these two all right, and say thank you very much, Abigail,
Speaker 1: Thank you very much. Brian. Let's bring in Sarah Green
Speaker 1: Carmichael because she wrote an opinion piece at the beginning
Speaker 1: of the week that really piqued my interest talking about
Speaker 1: the fact that all these layoffs were reporting on and
Speaker 1: now it's every day. UM, a few thousand at least
Speaker 1: could be a really bad idea by the executive board.
Speaker 1: So Sarah joins us now on Bloomberg Radio. UM. She's
Speaker 1: a former executive editor at the Harvard Business Review, where
Speaker 1: she hosted the HBr idea cast for mentor at Brown
Speaker 1: University's Women's launch Pad, and of course you probably recognize
Speaker 1: her from barrens um. Now she's writing for us. Sarah,
Speaker 1: What's what's the idea here that these companies have just
Speaker 1: gone through so much and spent a lot to hire people,
Speaker 1: now they're starting to fire those very same people. Yeah,
Speaker 1: it seems like a little bit of wasted resources. It's
Speaker 1: sort of like you painted the room and now you've
Speaker 1: decided to get renovate it. Um. So it makes the
Speaker 1: company's look a little bit uh, shortsighted, I guess, and
Speaker 1: I think you know, the big message that when I
Speaker 1: looked into the research and talk to people was that
Speaker 1: you've spent all this money to hire people. What's most
Speaker 1: important is not the exact number of employees, but your culture.
Speaker 1: Do you have a culture of innovation? Um? If you do,
Speaker 1: you could weather the recession and ask yourself, you know,
Speaker 1: what do we do with this extrac capacity? You know,
Speaker 1: what new things do we create? How do we take
Speaker 1: advantage of this time? Um? But instead it seems like
Speaker 1: companies are being a little bit penny wise count foolish
Speaker 1: by saying, you know, jettison ng um sometimes a small
Speaker 1: percentage of their workforce, but still you know tens of
Speaker 1: thousands of people, Sarah. Do we know a couple of things.
Speaker 1: One is these companies. A lot of these tech companies
Speaker 1: have almost doubled their workforces in the last three to
Speaker 1: four to five years, so one could argue, boy, they overhired.
Speaker 1: And second, there's also an argument that, you know, like
Speaker 1: a lot of companies, a lot of industries, they didn't
Speaker 1: really let people go during the pandemic. That would be
Speaker 1: kind of heartless here, So maybe they got some ketchup
Speaker 1: to do there. What do you do? You get a
Speaker 1: sense that this is specific to the tech industry because
Speaker 1: Michael Barr from Bloomberg News was just in here this
Speaker 1: morning reporting Taco Bell they need employees. You know, Chipotle
Speaker 1: they need twenty thousand employees. I don't know, it's kind
Speaker 1: of tough to circle that square there. Yeah, you know,
Speaker 1: we've been talking about the k saped economy for years now,
Speaker 1: and it does seem a little bit like this is
Speaker 1: you know, tech companies, it's also some financial firms UM
Speaker 1: and consulting firm UM. You know, maybe some of these
Speaker 1: firms are a little overstaffed, especially the tech companies, because
Speaker 1: in some cases, you know, they still have many more
Speaker 1: employees than they did at the start of the pandemic
Speaker 1: even with the layoffs. Right, So they're still growing UM,
Speaker 1: so that you could make it. I think a solid
Speaker 1: argument is that the tech companies might be in a
Speaker 1: slightly different position. UM. But I think, you know, for
Speaker 1: so many companies, you know you mentioned food service, UM,
Speaker 1: retail businesses. So many companies are having trouble just hiring anyone.
Speaker 1: So it's a very sort of weird economy where you
Speaker 1: can't get enough people at one level and other companies
Speaker 1: think maybe they've got slightly too many. I do think
Speaker 1: that if those tech companies are continuing to grow UM,
Speaker 1: hiring freeze might have been better than the kind of
Speaker 1: incredibly morale damaging prospect of LAOPP. That's the one of
Speaker 1: the big problems, right, is the damage to morale, Because
Speaker 1: you know, if you get fired, that's bad, UM. But
Speaker 1: if if you're worried about getting fired for months and
Speaker 1: then you narrowly avoid the acts, that's still not great.
Speaker 1: Especially if some of the people out the door are
Speaker 1: you're you know, you're still close with you might end
Speaker 1: up hating your managers and what do you call it
Speaker 1: quiet quitting? Yes, exactly, Yeah, I mean I think one
Speaker 1: of the things that really comes through in the data
Speaker 1: is that layoffs you lead to higher turnover. Do you
Speaker 1: have the people that you fire, um, and then you
Speaker 1: have the people who all then spend the next few
Speaker 1: months dusting off their resumes and looking for work elsewhere.
Speaker 1: So it really could lead to a lot of attrition
Speaker 1: which could lead some of these firms to become understaffed,
Speaker 1: which can be very costly. How much of this is
Speaker 1: We used to have a function on the Bloomberg terminal
Speaker 1: l O S S Go Lost Go, and I think
Speaker 1: we got rid of it because it felt heartless. What
Speaker 1: it would do is did put up a price chart
Speaker 1: of the stock, and then it would put red circles
Speaker 1: around the firing announcements. And of course usually when you
Speaker 1: announce firings, Wall Street, being the heartless mob that it is,
Speaker 1: goes and buys the stock. Right. How much of this
Speaker 1: do you think is driven by that because these tech
Speaker 1: stocks have gotten hit hard. I think it's very much
Speaker 1: driven by quarterly expectations um so. And I think what's
Speaker 1: a shame is that you will see if stock rise
Speaker 1: a little bit, usually on announcing layoffs um. But then
Speaker 1: you know what happens the next quarter or the quarter
Speaker 1: after that, You know, the stock usually settles right back down. Again. UM,
Speaker 1: so it does seem like it's actually very short term
Speaker 1: thinking kind of saying, how can we play K Wall Street?
Speaker 1: What can we do to show them that we're taking
Speaker 1: it seriously? Um And unfortunately, I think, you know, the
Speaker 1: message so often to the remaining employees is you know,
Speaker 1: we'll just have to do more with less. And I
Speaker 1: think what actually might happen at some of these companies
Speaker 1: is people will have to do less with less. You know,
Speaker 1: it will affect revenue, it will affect other opportunities that
Speaker 1: they you know, I would hope to achieve in the
Speaker 1: long run. Alright, great stuff. I really appreciate you taking
Speaker 1: the time. Sarah Green Carmichael, she is the editor Bloomberg
Speaker 1: Opinion talking about layoffs and we've seen it again. It's
Speaker 1: it's tough to kind of, you know, kind of take
Speaker 1: a look at all the data with the the global
Speaker 1: labor market is so so strong. But these tech companies,
Speaker 1: we've seen a lot of headline noise here in terms
Speaker 1: of layingoff the panel and it hasn't been driving the
Speaker 1: price up recently. Maybe initially yeah, maybe, uh, you know,
Speaker 1: the non tech comes especially when three M says we
Speaker 1: gotta fire thousands of people, or in IBM says we
Speaker 1: gotta fire thousands of people. People say, ohs, what's what's
Speaker 1: the deal with your demand? Exactly right, So we'll see
Speaker 1: if we're gonna get more of that. We a lot
Speaker 1: of tech earnings next week and we'll stay on top
Speaker 1: of that. We'll see what they want to do with
Speaker 1: their head count. This is Bloomberg Ben Slaven, global head
Speaker 1: of E T F S. Yeah, exactly, Ben Slaven, He's
Speaker 1: a global head of E t S or B and
Speaker 1: Y Melon Assets Servicing. He's here in a Bloomberg Interactive
Speaker 1: Broker studio. So he gets the gold star today for
Speaker 1: showing up when most people don't show up at work.
Speaker 1: And literally I'm looking around, I don't see a body here. Um,
Speaker 1: but that's kind of how the world is these days. Ben.
Speaker 1: I mean it's Friday, right, I know, I guess that's whatever.
Speaker 1: So Ben, you at E T F S, I mean,
Speaker 1: you can't help but grow. It's just a question of
Speaker 1: how much you do grow in the E T F business.
Speaker 1: Talk to us about B and Y Melon. What are
Speaker 1: you guys seeing in the business these days? Well, first,
Speaker 1: thanks for having me. Great to be here. And before
Speaker 1: we begin, I just want to give a quick happy
Speaker 1: birthday shout out to Spy. So we're thirty. We are.
Speaker 1: We are thirty years into the e t F journey
Speaker 1: and years maybe Nate Nate most was sort of the
Speaker 1: considered the godfather all those years ago. Um, he actually
Speaker 1: recently passed, but the legacy lives on. But here we are,
Speaker 1: Oh is that right? Okay? Yet long gone? At this point,
Speaker 1: I actually think it's condos. But in in this environment,
Speaker 1: we've seen an acceleration of not only product launches, but
Speaker 1: also adoption by investors. So last year was a record
Speaker 1: for the e t F industry. UM. Actually, in the
Speaker 1: last two years at B and Y Melon, on our
Speaker 1: platform that we service a large percentage of the industry,
Speaker 1: we were launching almost one e t F a day
Speaker 1: on our platform. Now that is slowed in. Our expectation
Speaker 1: is that it will slow a bit and also closures
Speaker 1: will pickup, so on a net basis, we might not
Speaker 1: hit that record, but the que looks strong and one
Speaker 1: of those drivers is really the mutual funds starting to
Speaker 1: convert to e t reasons right, we had a regulatory
Speaker 1: change that allowed mutual fund conversions to e t f
Speaker 1: s and frankly, e t F s are just a
Speaker 1: lot cheaper. I mean, if you're an investor, it makes
Speaker 1: a lot more sense depending on obviously your goals and
Speaker 1: what you want to deal with, your risk holrange, ceter But, uh,
Speaker 1: you're looking at twenty five or fifty basis points maybe
Speaker 1: or a hundred rather than you know, one and a
Speaker 1: half or two percent. Fees matter um, and that has
Speaker 1: been one of the drivers of e t F adoption.
Speaker 1: But look, you know, from an asset manager standpoint, investors
Speaker 1: are clearly preferring the e t F structure, and that
Speaker 1: is putting a lot of pressure on the industry. So
Speaker 1: some of the mutual fund sponsors are saying, hey, if
Speaker 1: we can't beat them, join them. And now that the
Speaker 1: path is open to convert a mutual fund to an
Speaker 1: e t F, it just provides another way for large
Speaker 1: mutual fund complexes to enter the e t F space
Speaker 1: and continue to grow their funds and to some degree
Speaker 1: stop some of the bleeding that we've seen coming out
Speaker 1: of mutual funds at the expense of e t F.
Speaker 1: I don't. I don't. When I was a sell side
Speaker 1: of analysts, I made a living with the mutual funds.
Speaker 1: I go up to Boston, see you know, Fidelity and
Speaker 1: Putnam and all those guys. So that's because they had
Speaker 1: a ga jillion analysts covering chemicals and media and all
Speaker 1: that kind of stuff, and lots of portfolio managers. If
Speaker 1: they were to convert to an e t F and
Speaker 1: cut the fees by like a jillion, what happens to
Speaker 1: all those all that cost, the analyst, that portfolio manages
Speaker 1: all that stuff, what happens to that cost? It's putting
Speaker 1: an incredible amount of pressure on those asset managers. In fact,
Speaker 1: I read an analysis UM and I believe it was
Speaker 1: one of the Bloomberg analysts who made an assumption that
Speaker 1: roughly twenty billion in revenue has been sucked out of
Speaker 1: the asset management industry sector, and a large degree of
Speaker 1: that is due to e t f s, whether it
Speaker 1: be simply the cost as you were mentioning, but also um,
Speaker 1: you know, really the fact that it's a lot of
Speaker 1: that asset is passive UM that has come in to
Speaker 1: the industry which doesn't require those those analysts. Although there's
Speaker 1: a lot of actively managed ETFs and they're really gaining
Speaker 1: in popularity. I mean, Jack Bogel would be ironically, I
Speaker 1: think celebrating in his grave right now because this is
Speaker 1: part of his legacy as well, even though he turned
Speaker 1: down uh what is it, Nate most when he first
Speaker 1: came to his office. Yeah, I mean the old the
Speaker 1: old e t f adage is the whole passive is massive,
Speaker 1: you know, sort of tagline. But you're right, it's changing
Speaker 1: from a product development standpoint. If you think at what's
Speaker 1: happening now versus where the assets are, more than half
Speaker 1: of the products in the industry that we're launched in
Speaker 1: this sort of latest sort of wave of new products
Speaker 1: are actively managed. In fact, that that's what we saw
Speaker 1: on our own platform and if you look at our
Speaker 1: que going forward again, the majority of the products are
Speaker 1: active and if you see what is going on just
Speaker 1: this year. At this point in the market cycle, actively
Speaker 1: managed ETFs are about three percent roughly of the industry,
Speaker 1: but they've accounted for about forty of the flows here
Speaker 1: in three in January. So again small base, but you
Speaker 1: are seeing, um, you know, quite a bit of investor interest.
Speaker 1: Part of that is the market cycle, and part of
Speaker 1: that is there's just frankly more product and choice for
Speaker 1: investors to to choose from and and that's driving it.
Speaker 1: So does the corporations to companies. Did they offer e
Speaker 1: t f s for the four one case because some
Speaker 1: people study that's that's kind of where that's for mutual funds. Yeah,
Speaker 1: it's a it's a great question. Um. You know, four
Speaker 1: o one case have been kind of the last stand
Speaker 1: um really for mutual funds, and that is where the
Speaker 1: stickiest and and sort of mutual funds remain dominant. But
Speaker 1: the bottom line is e t f s are starting
Speaker 1: to crack into that market. The fact is for more
Speaker 1: than a decade you can have e t f s
Speaker 1: and four oh one case. I've had one myself and
Speaker 1: invested in e t f I don't think you simply
Speaker 1: need a broke rach account right to be able to
Speaker 1: access those ETFs. And so it really is a matter
Speaker 1: of the four one k plan itself allowing investors to
Speaker 1: access ETFs, and so we can by the way he
Speaker 1: manages doesn't fidelity dolom my my guy Rick at a
Speaker 1: Meret prize UM. He sent me recently a few um
Speaker 1: options and s junk was one of them. So I
Speaker 1: told him, I told him, I want high yield, but
Speaker 1: so you can and I think the real um One
Speaker 1: of the other big drivers though, is that the kids
Speaker 1: are investing in apps right, and they don't want as
Speaker 1: much of the red tape when they're using robin Hood
Speaker 1: or we Bowl or whatever. And this is just a
Speaker 1: much easier way to invest in the diversified product if
Speaker 1: that's what you're after. You can also besting single stock
Speaker 1: ETFs and leverage up, but this just seems like so
Speaker 1: much cleaner and uh than than a mutual fund, right Lukely.
Speaker 1: And again there's the other benefits we talked about. Certainly
Speaker 1: liquidity in the low cost is a piece of it,
Speaker 1: but remember even when we're talking about retirement accounts, you know,
Speaker 1: it's also about the ability to construct with precision asset
Speaker 1: allocation models that fit a variety of not only time horizons,
Speaker 1: but profiles. And again, the ETFs continue to proliferate, and
Speaker 1: that precision allows the asset allocators or those putting that
Speaker 1: kind of investment advice out there for investors, whether it
Speaker 1: be packaged or not, with an incredible amount of precision
Speaker 1: and the ability to again customize those portfolios. That really
Speaker 1: makes sense for investors, which is just very difficult to do,
Speaker 1: uh in a mutual fund rapper. I mean, I can't
Speaker 1: even think of any reason to be long the asset
Speaker 1: management business at all. This ETFs thing, it's a long
Speaker 1: term story, it seems to me. I mean, is Boston Fidelity,
Speaker 1: Putnam Wellington? You know those guys, what do they do?
Speaker 1: I mean, a lot of them are trying to jump
Speaker 1: into If you can't beat them, join them. I mean,
Speaker 1: Fidelity is a great example. I mean they have come
Speaker 1: in to the e t F market UM and now
Speaker 1: they're really starting to ramp up not only the product
Speaker 1: development but also the distribution of those products, and you're
Speaker 1: starting to see the assets move forward. JP Morgan another
Speaker 1: large firm that's really trying to lean into the e
Speaker 1: t F effort. That's again had a legacy mutual fund business,
Speaker 1: so it's it's changed. What do you guys do it?
Speaker 1: And y Mel and assets Servicing? How do you So?
Speaker 1: We we provide infrastructure to the entire industry, so roughly
Speaker 1: we have a quarter of the industry's assets UM and
Speaker 1: we saw last year because of the record volume, we
Speaker 1: saw close to one point a trillion dollars in notional
Speaker 1: volume flowed through our pipes. And these are the creation
Speaker 1: and redemption orders that are coming through all the e
Speaker 1: t f s we service and company we have, you know,
Speaker 1: again provide all of that back middle office services to
Speaker 1: power up our sponsors e t f s and again
Speaker 1: that businesses grow going for sure, and at the same
Speaker 1: time the complexity is growing as well as these products
Speaker 1: proliferate UM and you know, again covering almost every asset class,
Speaker 1: every market in the world that you can possibly think
Speaker 1: of putting in an e t F at this point.
Speaker 1: One of the things that drew me to e t
Speaker 1: f s to begin with was well, Eric Valtunists and
Speaker 1: um uh Tony Santa Tara Vegas, who who do research
Speaker 1: for us, are on the money. UM. They run through
Speaker 1: the flows and you can really read so much what's
Speaker 1: going in the broader market by e t F flows.
Speaker 1: And that's what I thought initially was so cool. What
Speaker 1: do you see in the flows right now? Lack of conviction.
Speaker 1: That's not a great answer. I knew you were gonna
Speaker 1: I knew you were gonna You're gonna be unhappy with that,
Speaker 1: but that is the fact. It is interesting to see.
Speaker 1: So if you just take something like fixed income, which
Speaker 1: again we saw a very large churn in fixed income
Speaker 1: last year. I mean obviously due to the bond market
Speaker 1: route again money coming out of mutual funds into e
Speaker 1: t F s UM where E t F again picked
Speaker 1: up market share. And you look at what's happening in
Speaker 1: January and I just took a look at the leaderboard
Speaker 1: and you see UM not only short duration. You see
Speaker 1: the long bond tilt. You know that's one of year
Speaker 1: plus picking up flow. You see high yield, you see
Speaker 1: investment grade UM. I see a g G which is
Speaker 1: the total bond market all picking up flow. Hence my
Speaker 1: comment at this point lack of conviction. The one thing
Speaker 1: we are seeing that's unique as international UM, and that's
Speaker 1: been a sort of hot you know, coming into the
Speaker 1: beginning of this year. All right, Ben, great stuff, Ben Slaving,
Speaker 1: Global head of e t S b N Y Melon
Speaker 1: Assets Servicing chat GPT. I don't know what it is,
Speaker 1: but you know, you build. You take a look, what's
Speaker 1: it take to build a website these days? You just
Speaker 1: hire some kid and he does it for you. I
Speaker 1: think chat GPT now is that kid and it does
Speaker 1: it in thirty seconds. I mean it depends again like
Speaker 1: the AI told us when Sam Potter and Katie Greifeld
Speaker 1: tried to put an e t F together. It really
Speaker 1: depends on your parameters, right, You've got to be a
Speaker 1: little more specific, and you just build me a website.
Speaker 1: All right, Let's talk to someone you kind of in
Speaker 1: this space. James Cliff, founder of the firms called Durable. Uh, James,
Speaker 1: thanks so much for joining us here. Tell us what
Speaker 1: Durable does, and then we'll get into the whole chat.
Speaker 1: GPT MAC can talk about it, because I really don't know.
Speaker 1: Thanks for having me. Yeah, So, Durable helps small businesses
Speaker 1: get online in less than thirty seconds. So with three inputs,
Speaker 1: your location, your business category. Um, wait, there's two inputs,
Speaker 1: you essentially have a working website. We rate the copy,
Speaker 1: we pick your images, we pick your colors, we pick
Speaker 1: your layout. Give you everything you need to launch a
Speaker 1: beautiful website in less than thirty seconds. Get a customed
Speaker 1: domain name, get analytics built in, and then you're off
Speaker 1: to the races. And what's that called? And what does
Speaker 1: that cost me? Right now? It's free for thirty days
Speaker 1: and ten dollars a month. So I so exactly. So
Speaker 1: I had read about Durable. I've heard about this, and
Speaker 1: that's why my guest thirty seconds was pretty much on
Speaker 1: the money. Um, and then what's the next step. I mean,
Speaker 1: I assume you can find two in it at some
Speaker 1: point after you give those just those two variables exactly.
Speaker 1: There's a there's a custom editor within it. We actually
Speaker 1: have AI within the platform as well, so you can
Speaker 1: regenerate different components, you can test different copy. Essentially, our
Speaker 1: whole product is thinking it from an AI perse perspective,
Speaker 1: So just making it really easier for people to play
Speaker 1: around with different layouts, different images, getting to a point
Speaker 1: where they're just excited about what they're creating and what
Speaker 1: they're launching. So typically this website building process for an individual,
Speaker 1: one you're doing on your phone when you're in a
Speaker 1: McDonald's drive through half the time, So like, how do
Speaker 1: you make that experience fun and enjoyable as opposed to
Speaker 1: this kind of clunky experience where you're trying to get
Speaker 1: a pixel to be in the right place. Um. And
Speaker 1: that's really how we're thinking about, is how do we
Speaker 1: make this accessible to the folks out there that I
Speaker 1: want a website but don't have one yet. The cool
Speaker 1: thing is I've owned a domain name for I'm gonna
Speaker 1: say over fifteen years. Have you that? I just have
Speaker 1: never acted a few of them actually because I had
Speaker 1: this idea way back in the day. So I bought
Speaker 1: go to hell pants dot com and Cocktail party pants
Speaker 1: dot com and Mr fancy Pants where you're going, okay exactly,
Speaker 1: but I never I was like, I don't know what
Speaker 1: ht ellie even stands for. So I've never acted on that.
Speaker 1: So now I guess I could do it with UH
Speaker 1: with durable exactly. Who who is your your typical customer James? Yeah,
Speaker 1: So typically we're we're working with solo business owners, so
Speaker 1: someone who's I'm an owner operator of their business. So
Speaker 1: primarily in the services space, so we have a very
Speaker 1: wide variety of those folks though, So personal trainers, creatives, consultants,
Speaker 1: home services, essentially anywhere where you're trading your hours for
Speaker 1: dollars or hours for projects. Were really great fit because
Speaker 1: typically these folks don't have the time or the budget
Speaker 1: to hire expensive web development firms, and they're pretty simple
Speaker 1: businesses that you're trying to operate. You're not trying to
Speaker 1: run these complex e commerce inventory. It's Hey, I'm offering
Speaker 1: a service, how do I get that online? Get more
Speaker 1: cost mers and make my life easier. UM. That's really
Speaker 1: who we're working with. All right, So chat GPT you
Speaker 1: say it's dominated your inbox and news feeds. Talk to
Speaker 1: us about that business and kind of the impact of
Speaker 1: chat GPT on your Um, they're a partner, Yeah, I think, Um.
Speaker 1: I mean it's the most exciting technology that I've seen
Speaker 1: in my fifteen years working on the internet. UM. And
Speaker 1: I think the world agrees. Um. I'm excited about it.
Speaker 1: And I think it's this new evolution of software. Right.
Speaker 1: So previously is there's this world where um, the user
Speaker 1: has to do the work, UM, which is you gotta
Speaker 1: log in, you gotta click the buttons, you got to
Speaker 1: think of what to say, you gotta think of what
Speaker 1: image to choose. UM. For a knowledge worker, it's hey,
Speaker 1: I need to create this formula and excel, I need
Speaker 1: to write this document. Um. Whereas now this new AI
Speaker 1: revolution is creating this um different world where the AI
Speaker 1: does the work and your skill and knowledge is what
Speaker 1: can actually tell the A what to do. UM. So
Speaker 1: it's this new paradigm shift that I'm just so excited
Speaker 1: about because so much of work and even for our users, right,
Speaker 1: it's UM, it frustrates me that they have to do
Speaker 1: these things within the app. Um, why don't we just
Speaker 1: make it automated? Why can't you just talk to your
Speaker 1: app to ask it to do things? How much smarter
Speaker 1: can software get? Um? So I'm just looking at this
Speaker 1: as a brand new user experience. UM, that's gonna open
Speaker 1: up just so many opportunities for folks to UM make
Speaker 1: their jobs better and easier. I mean, this kind of
Speaker 1: technology is finally starting to work in places where we've
Speaker 1: been trying to make it work for a long time.
Speaker 1: Right with sirie and you know your car, My car
Speaker 1: can finally call my mom when I push the talk
Speaker 1: button and say call mom. It hasn't been able to
Speaker 1: do it for a decade. Um, is this going to
Speaker 1: replace a lot of you know, for example, what me
Speaker 1: and Paul do, I saw the Wall Street Journal reporting
Speaker 1: earlier that UM BuzzFeed, which is you know, journalistic news site,
Speaker 1: is gonna rely on chat GPT to write some of
Speaker 1: its content. Yeah. I think if you look at any
Speaker 1: evolution of technology, there's always this sphere of job replacement. UM.
Speaker 1: What I believe in is it's gonna let people focus
Speaker 1: on what they're really good at. So y'all are very
Speaker 1: good at your jobs. You've got an audience, you've got
Speaker 1: a personality. UM one, you could train your own AI
Speaker 1: model to scale yourself, so maybe you start doing fifteen
Speaker 1: different radio shows and fifteen different languages in real time. UM.
Speaker 1: So I think the the individual actually becomes more important.
Speaker 1: And everyone says everyone's worry about A replacing their jobs. UM,
Speaker 1: I think it's gonna replace a lot of employers, whereas
Speaker 1: the individual can now become their own business of one
Speaker 1: and scale themselves and solve all the things that UM
Speaker 1: employers or corporations do well. I think individuals will have
Speaker 1: the power to do that. So I think it opens
Speaker 1: up a lot more opportunities than it takes away. And yeah,
Speaker 1: I think we again, we haven't seen what this can
Speaker 1: do yet. But I think for folks like anyone with
Speaker 1: a skill and who can think critically and use this technology,
Speaker 1: I think it makes them a lot or powerful as
Speaker 1: an individual and gives them a lot more economic opportunity
Speaker 1: across the world to UM. And there's a lot of
Speaker 1: a lot of markets that we're seeing. Even UM that
Speaker 1: English is their second language. They're building a website in English,
Speaker 1: and now they can offer their skills to a brand
Speaker 1: new market and communicate in not their first language. It's
Speaker 1: like it's been compared to Calculator a lot, right, So
Speaker 1: Paul Universe, you guys grew up with that Hewlett Packard
Speaker 1: you know, yeah exactly, that didn't replace you, that made
Speaker 1: you better at your job exactly. Alright, So I think
Speaker 1: it's pretty fascinating. I guess Max Headroom isn't coming to
Speaker 1: to replace us anytime soon. Um. So what's the uh
Speaker 1: what's the path forward look like for durable then? Um?
Speaker 1: You know, how do how do you scale up from here?
Speaker 1: When's the I p O? Yeah, I mean we'll we'll
Speaker 1: ask the AI when the I p O is. But
Speaker 1: the traction has been incredible. So there's so much market
Speaker 1: demand for what we're doing. We're growing like month over
Speaker 1: month um and the numbers are not mall at this point.
Speaker 1: So it's really just trying to catch up on building technology.
Speaker 1: So we've got a massive backlog for engineers to work through.
Speaker 1: We're retraining and retraining our own AI models. Um, we're
Speaker 1: building these brand new user experiences. UM. So again thinking
Speaker 1: AI first, what what? How how minimal can these inputs
Speaker 1: be to to build workflows for our customers. So really
Speaker 1: looking at abstracting as much as possible UM for this
Speaker 1: solo business owner. So one part of that marketing and websites,
Speaker 1: and then you have UM workflows like invoicing and scheduling
Speaker 1: and then accounting and kind of the back office stuff.
Speaker 1: So every piece of this workflow for an individual business owner,
Speaker 1: how do you make their job so easy that all
Speaker 1: they have to do is show up do the work?
Speaker 1: And I think, in my ideal world, you can say, hey,
Speaker 1: I've got this skill, Um, I pressed two buttons, I've
Speaker 1: got a business, I've got a customer lined up tomorrow,
Speaker 1: and all of a sudden, I just have this complete
Speaker 1: freedom over my pressing, my schedule flexibility, um. And to me,
Speaker 1: that's the utopian world that we're trying to create, all right, James,
Speaker 1: great stuff. James Clift is the founder of a durable
Speaker 1: creating websites. It's like a matter of seconds. How cool
Speaker 1: is that this move to somebody who does this stuff
Speaker 1: for living and he is working in a huge scam.
Speaker 1: This is don Steinbruger. He's been covering markets for a
Speaker 1: long time. He's a CEO and founder of agecol Partners.
Speaker 1: But he's working down and he does it from Richmond, Virginia,
Speaker 1: which is probably my favorite town in America. I love Richmond,
Speaker 1: went to school there, my twins were born there. Great
Speaker 1: great town. Somehow, Don who is the proud member of
Speaker 1: the Summit High School, New Jersey Class of Night, somehow
Speaker 1: he's working his scam down there in Richmond. Don, Thanks
Speaker 1: what for joining us again here? I mean, what are
Speaker 1: you telling your clients about these markets? Here? I mean,
Speaker 1: earnings are coming in, the Fed Reserve is moving a
Speaker 1: lot of moving pieces here. What are you telling your clients? So, Paul,
Speaker 1: I think it's a good time for the hedge fund industry. Uh,
Speaker 1: you know, I am not optimistic on the capitol markets
Speaker 1: this year, as you know that that is said they're
Speaker 1: going to continue to raise rates or that though at
Speaker 1: a slower pace. Uh. You know, people have known for
Speaker 1: a long time. You don't want to fight the fet
Speaker 1: theF THATT is not going to lower rates probably until
Speaker 1: at least two thousand and twenty four. I think there's
Speaker 1: gonna be a recession. It's going to cause some headwinds
Speaker 1: for the equity market. So I'm not looking at the
Speaker 1: equity market oring back up interest rates go up a
Speaker 1: little bit more, it's not going to be good for
Speaker 1: the bond market. So, you know, relative value UH hedge
Speaker 1: fund strategies, I think it make a lot of sense.
Speaker 1: UH hedge fund strategies that aren't correlated to the U
Speaker 1: SMP five hundred, I think helped diversify a portfolio, like
Speaker 1: global macro and UH quantitative global macro strategies like C
Speaker 1: T A S. I think it's gonna be a year
Speaker 1: where UM active management outperforms indexes. You know, we've seen
Speaker 1: volatility come down a lot across people tell us that
Speaker 1: every single year, like active management is going to outperform
Speaker 1: every year. That's that's the beginning of the year mantra
Speaker 1: for people in the financial industry. Well, you know, for
Speaker 1: a decade, it didn't happen for a decade. You just
Speaker 1: had everybody putting money in index funds and that just
Speaker 1: caused index funds to outperform. So last year you did
Speaker 1: see UH long shirt equity managers at a lot of
Speaker 1: alpha relative to the SMP five hundred, and I think
Speaker 1: you're going to see the same thing this year because
Speaker 1: I think you're going to see more volatility in the
Speaker 1: marketplace and volatility is good for active management because active
Speaker 1: managers are you know, picking a target price to sell at,
Speaker 1: and if you have volatility, it reaches that target price quicker.
Speaker 1: You also are able to buy securities at a lower
Speaker 1: price because you have high volatility, prices go below the
Speaker 1: intrinsic value. So what about then, value versus growth or
Speaker 1: small versus big. I think a small and mid cap
Speaker 1: or where you want to be, relative valuations look very strong.
Speaker 1: I also like outside the US, so international small cap
Speaker 1: um much greater inefficiencies, better valuation standpoint. I think you're
Speaker 1: going to see a weekend into the dollar. There's greater inefficiencies,
Speaker 1: not as many Wall Street coverage of companies over in Asia.
Speaker 1: So that's an area we're focused on. Hey, donn it
Speaker 1: used to be, you know, back in the day, if
Speaker 1: I had two or three good years on the bond desk,
Speaker 1: or equity desk or commadi's desk, a Goldman or fixed income,
Speaker 1: I could just go out and hang my own shingles,
Speaker 1: start a hedge fund, raise a billion dollars. Is that still?
Speaker 1: Is that still a thing? It is not. I mean,
Speaker 1: it's the most competitive industry there is. There's probably fifteen
Speaker 1: thousand hedge funds and they're all calling on the same
Speaker 1: institutional investors to get money. So these pension funds and
Speaker 1: Downmond funds, foundations, I mean, they are literally getting called
Speaker 1: by thousands of people that want to sell hedge funds,
Speaker 1: private equity, real estate, long only. So brand is becoming
Speaker 1: more and more important in the industry and you're seeing,
Speaker 1: you know, for example, a majority of hedge funds have
Speaker 1: less than five hundred million assets, and probably five cent
Speaker 1: of flows are going to hedge funds with less than
Speaker 1: five million assets, which is a problem because these firms
Speaker 1: are getting too big, and the bigger you are, the
Speaker 1: harderness to generate the terms. Well, who are the biggest
Speaker 1: The biggest winners last year were the absolute behemoths, right, Um,
Speaker 1: Bridgewater and Citadel, Right Citadel, Yeah, and all those guys.
Speaker 1: So so if you look at the HFR index that
Speaker 1: they have one index that equally waits hedge funds, and
Speaker 1: that was down about four. They have another one that's
Speaker 1: asset weighted, kind of like the SMP asset weights companies.
Speaker 1: The asset weight of one was flat performance wise, but
Speaker 1: that's really unusual if you go back over long periods
Speaker 1: of time, smaller hedge funds significantly outperform large hedge funds,
Speaker 1: and I think that's going to be the case going forward.
Speaker 1: So if you really want to generate a lot of
Speaker 1: returns for hedge funds, you don't want to invest in
Speaker 1: the largest hedge funds. You want to find the up
Speaker 1: and commerce. How about the commodity space? How does investors
Speaker 1: play that? Because commodities have had a big run and
Speaker 1: we're talking about inflation here and China's reopening, China's reopening, well, obviously, Uh,
Speaker 1: commodities did really well last year. There are a couple
Speaker 1: of different ways you can play it. I mean they're
Speaker 1: they're pure commodity managers that you can invest in. You
Speaker 1: could also invest in you know, global macro that's allocating
Speaker 1: the equities, fixed income, curgencies, commodities and let them choose,
Speaker 1: you know, what weight commodity should be. There's also, uh,
Speaker 1: these quantitative managers I mentioned before, C T A. S.
Speaker 1: It's probably the hedge fund industry. They're quantitatively trying to
Speaker 1: determine where the best value is and again you let
Speaker 1: them determine whether they should be heavily weighted in commodities
Speaker 1: or not. Alright, good stuff all right, don appreciate it
Speaker 1: as always giving us a lay the land of the
Speaker 1: Hedge Fund biz Don Steinbrug, founder and CEO of age Croft.
Speaker 1: He is uh proud of lum of the University of Richmond.
Speaker 1: He's a fellow Spider like me, and he's a lum
Speaker 1: of Summit High School. In Summit class of night. Some
Speaker 1: stellar people came out of that class, I can tell
Speaker 1: you right away. One of the most read stories on
Speaker 1: the terminal deals with our good friends of Goldman Sachs,
Speaker 1: the CEO David Solomon. His pay is getting cut by
Speaker 1: twenty five million dollars. And that's during a year which
Speaker 1: the share price and profit tumbled and the firm retreated
Speaker 1: from a highly public effort to create a consumer. Who
Speaker 1: broke that news only Bassett and Steve Dixon. She's only
Speaker 1: backs bass She covers all things Wall Street for Bloomberg News.
Speaker 1: She joins us here in our Bloomberg Interactive Broker studio.
Speaker 1: When I first read your reportingly, I said, good for
Speaker 1: Goldman Sachs, Good for David Solomon. The rank and file
Speaker 1: are taking pay cuts this year. Bonuses are down, and
Speaker 1: here's my leader participating in the pain too. Yeah, I
Speaker 1: think that was my read. Well, you have to look
Speaker 1: at two things here. According to people familiar with the matter,
Speaker 1: this is definitely in line with cuts you're gonna see
Speaker 1: for partners and senior managers at Goldman. But then you
Speaker 1: also have to take a look at what the filing
Speaker 1: says here and what it says about why. Look, I
Speaker 1: look at a lot of filings. It's the only place
Speaker 1: anymore after f t X that I could trust anything anymore.
Speaker 1: But I think it's really important to look at it
Speaker 1: because board determines compensation at the end of the day,
Speaker 1: his basse page stay the same as a two million,
Speaker 1: which is often done with the variable compensation was what
Speaker 1: dropped off meaningfully. Last year was a record year. But
Speaker 1: the one thing that they said also is that this
Speaker 1: is kind of in line with his ability to strategically
Speaker 1: reposition the firm. So both the fact that you have
Speaker 1: come down from a record year last year you had
Speaker 1: record levels of pay. You also had special awards tied
Speaker 1: to last year's pay for David Solomon. But this year
Speaker 1: you have to remember that this thirty percent drop in
Speaker 1: his total compensation package is just so much steeper than
Speaker 1: you're seeing at the other banks, Morgan Stanley's drop is
Speaker 1: only ten percent. Jamie Diaman at JP Morgan, it's stable.
Speaker 1: They did get rid of his special award package that
Speaker 1: shareholders kind of revolted against last year, so it's not
Speaker 1: like there was no pressure on Jamie Diamonds pay. But
Speaker 1: you do see this kind of a typical compensation package
Speaker 1: really follow a lot more Goldman Sacks than you saw
Speaker 1: at the other banks. So how much does the do
Speaker 1: we say the failure of Marcus? That is that safe
Speaker 1: to say? The reason you could say that is because
Speaker 1: there are parts of Marcus that they're unwinding. I think
Speaker 1: it's confusing because it's really like a lending business. But
Speaker 1: they have Green Sky, which is a separate lending business,
Speaker 1: So it's not like there's not a consumer of this there.
Speaker 1: They just bought a huge one. Yeah. No. But when
Speaker 1: they first announced these plans, um some of us who
Speaker 1: know less about Wall Street than you and Alice and
Speaker 1: Williams thought, Okay, Goldman Sax is gonna come in and rule.
Speaker 1: You know, everyone's going to be using Marcus. They're gonna
Speaker 1: own the high end consumer segments. Let me do something,
Speaker 1: do you really use Marcus? Who? How many people. Do
Speaker 1: you know that uses Marcus to borrow money from, or
Speaker 1: even Goldman Sacks to borrow money from. What you did
Speaker 1: at Marcus was put your cash in at an interest
Speaker 1: rate that was way higher than you got anywhere else
Speaker 1: for a long amount of time. So when they engage
Speaker 1: with consumers, because remember they still have a lot of
Speaker 1: high net worth individuals that are really important to their
Speaker 1: going forward strategy. Goldman has always managed money for the
Speaker 1: richest of the rich in the world. Do they keep
Speaker 1: a business like Marcus where they're working with so many
Speaker 1: companies and they want to get these younger folks that
Speaker 1: are going to get wealthier over time that work for
Speaker 1: those companies and you know, manage their money, have them
Speaker 1: saved with them. I think these are big existential questions
Speaker 1: for Goldman Sacks, which is very different than like, hey,
Speaker 1: let me get a Chase card. But at the time
Speaker 1: time it seemed like they were gonna beat Out and
Speaker 1: twenty six and Revolute. I didn't At the time, it
Speaker 1: seemed like they were going to take they were going
Speaker 1: to be the American Express Platinum card of the future,
Speaker 1: and they're not. I think that that was a pipe
Speaker 1: dream always. Frankly I think that that was a bit
Speaker 1: of hype around. Well. I was excited about it, and
Speaker 1: now I know you never were. I sat next to
Speaker 1: you reporting on Matt Miller, who always said that the
Speaker 1: Goldmen card sucks. He always did him and Tom Keane,
Speaker 1: but there was never really that much of a product.
Speaker 1: Just anyway, do you think he from shareholder's perspective, the
Speaker 1: board perspective, maybe the partnership of perspective, does he get
Speaker 1: mark it down for Marcus And if so, how much? Well, listen,
Speaker 1: at the end of the day, there were parts of
Speaker 1: the bank that we're having record numbers, really just blow out, blowout,
Speaker 1: blowout performance. Remember Goldman's acts, their equities trading desk last
Speaker 1: year had some quarters where the even surpass Morgan Stanley.
Speaker 1: Their dealmakers blew through the roof by a margin though
Speaker 1: I have not seen in many, many many years relative
Speaker 1: to the other banks, but up markets, this seems reputational
Speaker 1: to me. And I don't know if that was blank find?
Speaker 1: Was that blank find was that? I can't remember really
Speaker 1: because I'm wondering if I'm aboard, if I'm Solomon. I mean,
Speaker 1: do I have to worry a little bit here that
Speaker 1: I'm going to be painted by this marketing is really
Speaker 1: going to be an issue for me longer term. This
Speaker 1: consumer business lost two billion dollars last year. It lost
Speaker 1: four billion dollars over a couple of years, a few
Speaker 1: years there, and so even beyond the reputational issue, it
Speaker 1: is a money issue. And not for nothing. Million bucks
Speaker 1: for the CEO of Goldman SAX, that's nothing. You walk
Speaker 1: across the street to Carlisle Group that KKR, those guys
Speaker 1: are really making the bank. So one thing we didn't
Speaker 1: see yet this was just the ceo paychecks that we're
Speaker 1: seeing the compensation packages that are coming out through regulatory findings.
Speaker 1: What has not come out yet is my favorite filing,
Speaker 1: which is the proxy where you see the total executive
Speaker 1: and directors compensation. So what is his number two, number three,
Speaker 1: number four making? Are they facing the same types of
Speaker 1: pressure on their compensations? If the trader makes a hundred
Speaker 1: million bucks, Goldman Sax doesn't report that in any filing, right,
Speaker 1: and and there are plenty of people who make more
Speaker 1: money than the CEOs at these banks. To your point,
Speaker 1: and to the other point you're making, that's interesting speaking
Speaker 1: of Wall Street talent and hiring, you know, Jonathan Great
Speaker 1: black Stone this week had told me they're slowing hiring
Speaker 1: at black Stone, and they had a huge compensation package
Speaker 1: for their private equity guys last year, but that was
Speaker 1: mostly because they were able to sell a lot of
Speaker 1: companies at the beginning of last year. The Goldman Saxes
Speaker 1: of the world. Are they going to bring in their
Speaker 1: two hundred analysts to their investment bank or three hundred
Speaker 1: anar whatever it is like City and Goldman Sex Works.
Speaker 1: Are the big banks still doing it or they paired
Speaker 1: that back. That's a great question. I don't know what
Speaker 1: younger people hiring looks like this year. My friend hughes
Speaker 1: Son who works at the NBC, what does Tom King
Speaker 1: call it? The death star air? I'm agnostic, and so
Speaker 1: a news is news is news, and so when you
Speaker 1: look at what he had kind of calculated, it was
Speaker 1: interesting if you look at the severance packages for all
Speaker 1: the people who are being laid off at Goldman that
Speaker 1: if you average it out based on the number of
Speaker 1: people who are being let go, it's like a hundred
Speaker 1: forty dollars, I want to say, which is a very
Speaker 1: low end um in terms of pay scale, which means
Speaker 1: either younger workers are being laid off. Her back office
Speaker 1: workers are being laid off for the most part. They're
Speaker 1: definitely retirements happening across Wall Street at a faster rate.
Speaker 1: So you are seeing people leaving on the higher end
Speaker 1: of the pay scale. But do you then hire a
Speaker 1: lot more young people coming in? I don't. I'm gonna
Speaker 1: I'll go down to Duke in a couple of months
Speaker 1: for my board meeting. I'll get the first hand skinny
Speaker 1: because that we get those numbers. You're they're nervous. I
Speaker 1: hear MBAs and young people are nervous. Can I just
Speaker 1: talk about something else? Question? Talking about next week? Yes,
Speaker 1: I'm going out in Miami tomorrow. Nice it's hedge fund week.
Speaker 1: Oh of course. And they're not meeting in Cleveland, meeting
Speaker 1: in It's called Singer's Kim Kardashian, who is now wait
Speaker 1: wait all Singer makes sense to me, Elliott. Kim Kardashian
Speaker 1: now has a private equity firm. My newsletters coming out
Speaker 1: calls her the buyout queen because remember, there's not that
Speaker 1: many women leading private equity firms, and so she's doing
Speaker 1: kind of like the keynote like end speech at this
Speaker 1: big conference. There are four conferences down there in Miami
Speaker 1: starting this weekend. Morgan Stanley's Big conference, a huge prime broker,
Speaker 1: the m f A conference, that Eye Connections conference. There's
Speaker 1: Tiger twenty one, which is a lot high worth individuals.
Speaker 1: Oh yeah, that's right. We talked to the Tiger guy. Yeah. Yeah,
Speaker 1: So I'm gonna be kind of hanging out in a
Speaker 1: lot of lobbies. Nobody better that we would want down
Speaker 1: there than no. I'm excited. Uh and I'm Sanale is
Speaker 1: one of the best reporters that I know here. Can
Speaker 1: I carry your bags? Can I I would do that? Guys?
Speaker 1: So nice to me. Well, we look forward to we
Speaker 1: look forward to getting the download the skinny or whatever
Speaker 1: you call it from Miami from Shanale next week when
Speaker 1: she is down in Miami. You'll call in right, call
Speaker 1: in excellent, excellent. Mike mcgloane's down there too. Maybe we'll
Speaker 1: get him to go over there and do some you know,
Speaker 1: frontline reporting on maybe you know, the E T F
Speaker 1: S and crypto and all. Maybe Mike mcglogan can talk
Speaker 1: to Kim Kardashian exactly. I'm sure you like that. Thanks
Speaker 1: for listening to the Bloomberg Markets Podcast. You can subscribe
Speaker 1: and listen to interviews with Apple Podcasts or whatever podcast
Speaker 1: platform you prefer. I'm Matt Miller. I'm on Twitter at
Speaker 1: Matt Miller three. Put on fall Sweeney I'm on Twitter
Speaker 1: at pt Sweeney. Before the podcast, you can always catch
Speaker 1: us worldwide at Bloomberg Radio