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Speaker 2: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
Speaker 2: my co host Matt Miller.
Speaker 1: Every business day we bring you interviews from CEOs, market pros,
Speaker 1: and Bloomberg experts, along with essential market moving news.
Speaker 2: Find the Bloomberg Markets Podcast called Apple Podcasts or wherever
Speaker 2: you listen to podcasts, and at Bloomberg dot com, slash
Speaker 2: podcast open AI. This is the story of the morning.
Speaker 2: I'm going to assume most people will figure it. I
Speaker 2: have kind of seen the news right now. It looks
Speaker 2: like Microsoft might be a little bit of a winner here.
Speaker 2: So we're going to round Table to sing ed Ludlow,
Speaker 2: he's host to Bloomberg Technology and Mandeep saying he's our
Speaker 2: senior technology analyst for Bloomberg Intelligence. So Mandib at this
Speaker 2: stage and it's still a very fluid situation, I'm not
Speaker 2: even sure where the employees are going from open Ai,
Speaker 2: whether they're staying at the existing thing or whether they're
Speaker 2: going to go over to Microsoft. I'm not even sure
Speaker 2: where Sam Altman is. But it appears that Microsoft hired
Speaker 2: by Microsoft. We'll see. I'm waiting to see, like triple confirmation.
Speaker 1: Zatcha n Adella confirmed it. He's the CEO of Microsoft.
Speaker 3: It can be going.
Speaker 2: I don't know where these guys.
Speaker 4: It's Silicon Valley.
Speaker 2: The kids don't know what they're doing. Mandib, it seems
Speaker 2: like it's a win win win for Microsoft here, what's
Speaker 2: your take.
Speaker 5: Actually, we sort of disagree with that consensus. Few that
Speaker 5: nice for Microsoft simply because you know, when you are
Speaker 5: acquiring talent like this, it's not the best way to
Speaker 5: you know, build a new product. And in this case,
Speaker 5: the IP still remains with open Ai, so it's not
Speaker 5: as if they can poured over the large anchorage model,
Speaker 5: which is really the key to building the ecosystem, they
Speaker 5: will have to build it from scratch. And remember, when
Speaker 5: you're training AI, you need, yes, the infrastructure, but you
Speaker 5: also need large amounts of data. And Microsoft mader like
Speaker 5: three months to make Rock Well. So Twitter had a
Speaker 5: lot of their own data. So that's what it comes
Speaker 5: down to. Can they build a model just based on
Speaker 5: being data? The answer is no. And that's where.
Speaker 6: I think why not?
Speaker 1: Because Bing has a lot of data.
Speaker 5: Look at how long Bing had had integration with open
Speaker 5: ai Chat GPT. Still they haven't been able to take
Speaker 5: any share from Google, and Microsoft's CEO admitted that that
Speaker 5: despite the integration with open Ali and and so clearly
Speaker 5: there is a lot more to open AI's IP than
Speaker 5: what we know. And that's why it's a proprietary foundational model,
Speaker 5: unlike Madawslama, which is open source.
Speaker 2: So there all right, So I want to bring in
Speaker 2: Ed Ludlow if for no other reason then he's literally
Speaker 2: in Silicon Valley and Ed, your job right now is
Speaker 2: explain to me why I or anybody else in this
Speaker 2: country should care about what's happening it opened ai and
Speaker 2: Sam Maltman.
Speaker 1: Have you cared about anything else all weekend?
Speaker 6: Yeah?
Speaker 4: That's well.
Speaker 7: I mean, you know, to my credit, chaps, I am
Speaker 7: on almost every single byline that we've written since Friday lunchtime.
Speaker 7: So forgive my dower mood. But look, this is what's
Speaker 7: at stake, billions of dollars of value in the private markets.
Speaker 7: The elimination of a company that is the clear market
Speaker 7: incumbent for both consumer facing and enterprise tools that are
Speaker 7: powered by a large language model and are presented in
Speaker 7: the form of a chatbot or generator of AI tool.
Speaker 4: And third of all, there will be a.
Speaker 7: Massive spotlight on my Microsoft because the question will remain
Speaker 7: do they buy the rest of it? Well, what we
Speaker 7: reported over the weekend is that when all of this
Speaker 7: wrangling was go on, and we can get into it,
Speaker 7: I've got some great gossip for you guys. But the
Speaker 7: principal consideration was Sam wanted the board to resign. They didn't.
Speaker 7: They dug in and he did not come back. But
Speaker 7: one offer on the table was whether Microsoft or not
Speaker 7: took a board seat, And the reason that they didn't,
Speaker 7: I'm told by sources, is that there would just be
Speaker 7: too much scrutiny from an antitrust perspective, too much concentration
Speaker 7: of influence of a company that is leading the direction
Speaker 7: of AI in the real world.
Speaker 4: That's what we're talking about here.
Speaker 1: Well, now they get most of the company for free, right.
Speaker 1: I mean, I'm interested to hear what you've been hearing,
Speaker 1: and I know that you. First of all, Ed, I've
Speaker 1: been reading everything you've been writing, and thank you for
Speaker 1: the work. I can't believe you've had any sleep, and
Speaker 1: you look amazing.
Speaker 7: I apologize for that because I haven't had any sleep.
Speaker 4: That's why I'm.
Speaker 1: Secondly, to me, it looks like Microsoft now gets that's
Speaker 1: Altman and Brockman and maybe five hundred other employees pretty
Speaker 1: much for salaries.
Speaker 8: Right.
Speaker 1: I guess maybe a signing bonus, but they don't have
Speaker 1: to spend eighty six billion dollars or even if you
Speaker 1: take out their thirteen you know, seventy three billion dollars.
Speaker 1: Isn't that a huge win?
Speaker 4: Right?
Speaker 7: Open AI has seven hundred and seventy employees. Five hundred
Speaker 7: of those have signed a letter to the board this morning,
Speaker 7: which I've seen, saying that if the board doesn't resign,
Speaker 7: those five hundred will resign and they will go to Microsoft.
Speaker 7: When Satya Nadella posted on X last night, he buried
Speaker 7: the lead. It was a very long statement. The idea
Speaker 7: that Sam and Greg Brockman, the former chair of open
Speaker 7: AI's board, were joining Microsoft, was right at the bottom.
Speaker 7: But there was very clear language there, and I'd ask
Speaker 7: the audience to go and look out for it. It
Speaker 7: said those two with others joining from open Ai.
Speaker 4: Satya said it last night. So that's a very real risk.
Speaker 7: And what I would say is that at the core
Speaker 7: of this story is the open aies almost the entirety
Speaker 7: of its value. And Mande may disagree here, but the
Speaker 7: entirety of its value that the investors outlined to me
Speaker 7: is its intellectual capital. If you take those top ten
Speaker 7: data scientists and the top product guys, which is Sam Outman,
Speaker 7: and you take them somewhere else, open has ai has
Speaker 7: nothing left. That's what we're talking about here.
Speaker 1: Okay, I'm looking at the ip that mandplay.
Speaker 2: That's what I'm saying. Many if I'm looking at Microsoft stock,
Speaker 2: it's only up seven ten to one percent, I would
Speaker 2: have thought it a up ten percent or more.
Speaker 6: Why do you think that is?
Speaker 5: And look, Opening Eye has a lot of other investors too,
Speaker 5: So granted Microsoft owns forty nine percent of the company,
Speaker 5: but there are other investors, the private rounds that they
Speaker 5: had before Microsoft got on board.
Speaker 1: And so I think, by the way, can I just
Speaker 1: ask clearly clarify the Microsoft owns forty nine percent of
Speaker 1: the for profit unit in the nonprofit structure or do
Speaker 1: they own forty nine percent of the whole thing?
Speaker 5: Forty nine percent of the whole thing? But Ed can
Speaker 5: confirm if that's he has a different point of view.
Speaker 7: Well, on paper, on paper, the on the balance sheet
Speaker 7: of Microsoft, it will show that the open aillc or
Speaker 7: the incorporated for profit business.
Speaker 4: But again the audience, there's a.
Speaker 7: Ven diagram or a diagram out there, sorry, not a
Speaker 7: ven diagram that sets it out. And you can say,
Speaker 7: but man Deep is right, forty nine percent Microsoft holds.
Speaker 7: I'd make one observation that the other fifty one percent
Speaker 7: on the cap table. My understanding is that even the
Speaker 7: biggest individual shareholders from a venture firm perspective own less
Speaker 7: than one percent each, which is another reason that this
Speaker 7: is so chaotic right now.
Speaker 6: Right an Alman says he on none.
Speaker 5: Well, so, I mean, look, at the end of the day,
Speaker 5: there is a lot of ip within open the eye.
Speaker 5: If the employees leave, they can't take that IP. And
Speaker 5: that's the thing about a tech company is you know,
Speaker 5: if I have an algorithm or a model that's within
Speaker 5: a company until unless Microsoft ends up buying that company,
Speaker 5: they don't have rights to the open ai foundational model
Speaker 5: and for employees to recreate that. Let's say the five
Speaker 5: hundred employees recreate that model within six months, what is
Speaker 5: your IP? I mean any other company can do it then.
Speaker 5: So it puts Microsoft in a tough spot because one,
Speaker 5: on the one hand, it could show that AI large
Speaker 5: arid models are a commodity. On the other hand, they
Speaker 5: may have to buy the whole company for eighty billion
Speaker 5: because the other fifty one percent want a good exit.
Speaker 5: They don't want the company to die.
Speaker 2: Act at third thirty seconds, what are you reporting on?
Speaker 2: What are you guys working on today? What are you
Speaker 2: chasing today?
Speaker 4: Okay, the big thing is going to be private markets.
Speaker 7: There was a tender that was open for hundreds of
Speaker 7: billions of dollars for employees of open ai to sell
Speaker 7: shares to thrive capital. My understanding is that is very
Speaker 7: much in doubt. Friday, the market for private open ai
Speaker 7: stock was incredibly liquid, very.
Speaker 6: Un in doubt. It's probably a way to say it.
Speaker 7: Yes, that liquidity slams shot Friday while I was having
Speaker 7: lunch with a so who is trying to buy in
Speaker 7: that market, look out for that. People are going to
Speaker 7: get burned. These are transactions that were pending and will
Speaker 7: now not go through.
Speaker 6: I'd say got burned. Yeah, story is over ed.
Speaker 2: Thank you so much for joining us, and I know
Speaker 2: you're busy ed Ludlow and your team out there for
Speaker 2: Bloomberg Technology man deep seeing senior technology annels for Bloomberg Intelligence.
Speaker 2: Appreciate getting you two folks together as we continue to
Speaker 2: report on this dynamic technology story.
Speaker 8: You're listening to the team Ken's are Live program Bloomberg
Speaker 8: Markets weekdays at ten am Eastern on Bloomberg dot com,
Speaker 8: the iHeartRadio app and the Bloomberg Business app, or listen
Speaker 8: on demand wherever you get your podcasts.
Speaker 2: All Right, So Matt and I were just talking like
Speaker 2: one of the key fundamental issues here in this open
Speaker 2: AI seems to be the debate within open AI and
Speaker 2: within the tech industry and with I guess just kind
Speaker 2: of the tech world in general about AI weighing commercialization
Speaker 2: versus the fact that this in could end civilization. So
Speaker 2: that seems to be getting a little bit lost here
Speaker 2: in some of the reporting here today. Maybe our next
Speaker 2: guest can help us out. Jim Anderson. He's the CEO
Speaker 2: of Beacon Software. He joins his life here in our
Speaker 2: Bloomberg Interactive Brooker's studio. So, Jim, how do you, guys,
Speaker 2: you know, in that space, in the software space, how
Speaker 2: do you think about AI in terms of commercializing it
Speaker 2: but by also being cognizant of the potential risk it
Speaker 2: could posed.
Speaker 9: Yeah, Paul, it won't surprise you to hear that we
Speaker 9: think first about commercializing it, right, Because if you can't
Speaker 9: commercialize it, you don't have anything to really worry about, right.
Speaker 9: So in the eyes of a sort of capitalist or
Speaker 9: a private sector person, you tend to focus on that first.
Speaker 9: I think one of the things social media has taught
Speaker 9: us is, hey, let's not collectively be so naive about
Speaker 9: the negatives. Let's not wait a decade and see what
Speaker 9: damage we've wrought and then see if we can undo it.
Speaker 9: So I do think there's including with private sector, capitalistic companies,
Speaker 9: there's a lot more willingness to try to anticipate those
Speaker 9: negative effects. But you know, the open eye example is
Speaker 9: an extreme example of a capitalistic company worth reportedly eighty
Speaker 9: billion dollars according to Microsoft, run by a nonprofit with
Speaker 9: a very different sensibility. And it's not really surprising that
Speaker 9: you ended up with a very different view of the world.
Speaker 1: Well, and as we know, with social media, you just
Speaker 1: can't put the genie back in the bottle, right. And
Speaker 1: the problem is where social media seems to now in hindsight,
Speaker 1: be a cancer on society that we can't cure. AI
Speaker 1: could be like a massive cardiac arrest. I mean, it
Speaker 1: could just kill us all. But no one can care
Speaker 1: about that anymore since we can make money on it today.
Speaker 1: It doesn't matter if it's going to destroy society in uh,
Speaker 1: you know, decades.
Speaker 6: Yeah, I don't know that. I would agree that nobody
Speaker 6: can care about it anymore.
Speaker 4: But you can care.
Speaker 9: But you can't do anything if you can't stop stop, right.
Speaker 9: But I think it's it's interesting. I mean, you know
Speaker 9: that we could have a debate about Skynet and whether
Speaker 9: you know the end of humanity, how likely that is
Speaker 9: to happen. I think the risk of that is it
Speaker 9: misses you know, if everything is the extinction of humanity.
Speaker 6: Or or or not.
Speaker 9: I mean, you know, you've you've sort of dialed it
Speaker 9: up to eleven, right, there's nothing less than that. I
Speaker 9: think there are plenty of near term harms that are
Speaker 9: much more likely that will happen much more quickly that
Speaker 9: we run the risk of glossing over and think about it, right,
Speaker 9: remember the early days of email, right, you know, Wow,
Speaker 9: this is amazing. I can communicate with people, and then scammers, grifters, fraudsters,
Speaker 9: and marketers decided, hey, I can send a billion emails
Speaker 9: for the same price as one and all of our
Speaker 9: inboxes started being flooded. Well now, basically content creation is
Speaker 9: effectively free with the chat, GPT and those kinds of tools.
Speaker 9: With AI, now, I think the entire Internet runs the
Speaker 9: risk of being flooded with spam, misinformation, and just garbage.
Speaker 9: And we're all going to have a very pragmatic challenge,
Speaker 9: you know, sort of managing through that. Never mind the
Speaker 9: terrible potential long term use cases. Just in the near term,
Speaker 9: we're going to have a lot of real problems because
Speaker 9: bad actors are going to take these tools and do
Speaker 9: bad things with them.
Speaker 2: So open or just AI in general, I mean with
Speaker 2: open AI, I guess as we speak part of Microsoft.
Speaker 2: Now what are the competitors out there and just an artificialgens?
Speaker 2: What are the competitors and does it change? It seems
Speaker 2: like it's got to change the competitive landscape.
Speaker 6: No doubt it will.
Speaker 9: I mean you you want to say, okay, what are
Speaker 9: the chatbot competitors who are building large language models that
Speaker 9: you know Google's got Barred Anthropic was a former AI person. Uh,
Speaker 9: you know, there's a there's a couple of them out there,
Speaker 9: but you know, building your own large language models like
Speaker 9: a billion dollar proposition. So it's not going to be
Speaker 9: dozens of these things. It's a it's a big tech
Speaker 9: kind of investment. But I think what's interesting is you
Speaker 9: raise a point about you know, we all tend to
Speaker 9: think of AI in terms of chat, GPT and chatbots,
Speaker 9: and that's really amazing and it's got some really interesting
Speaker 9: use cases, but think about other worlds like transportation, healthcare, manufacturing.
Speaker 9: AI has the ability to transform those industries. Traffic, Like,
Speaker 9: imagine a world where autonomous vehicles and those have their
Speaker 9: own sets of challenges, can untangle traffic in big cities
Speaker 9: and we no longer have to sit in traffic jams.
Speaker 9: Imagine a world where you know, radiologists don't miss scans
Speaker 9: on X rays or MRIs and things like that. I mean,
Speaker 9: you know, there's plenty of use cases where AI can
Speaker 9: truly help humanity and substantive powerful ways that have nothing
Speaker 9: to do with chatbots that are powered by AI and
Speaker 9: these underlying large language models.
Speaker 1: So the large language model or the data set, I
Speaker 1: guess is the most important issue that you deal with.
Speaker 1: How do you look at this from Beacon software perspective?
Speaker 1: Like what data sets are the most important? You know,
Speaker 1: which ones do you want to get a hold of?
Speaker 1: Which ones can we not touch? Yeah, it's such a huge.
Speaker 9: Issue, right, Yeah, it is, And we've specialized in transportation, right,
Speaker 9: so we're working with state dots Georgia and other states
Speaker 9: to say, okay, how are you going to untangle traffic
Speaker 9: mainly in your big cities, which is where you've got it.
Speaker 6: Well, they're actually a wash in data.
Speaker 9: They've got more data than they know what to do with,
Speaker 9: than they can effectively store, than they can effectively harness.
Speaker 9: And what's AI great at taking a massive data set
Speaker 9: and making sense of it? And these connected vehicles now,
Speaker 9: think about it. Every time you've got a Tesla on
Speaker 9: the road. Every time you turn your windshield wipers on,
Speaker 9: there's a signal right there that's been captured.
Speaker 6: And you say, well, who cares? Well, guess what if
Speaker 6: you harnessed every vehicle on the road and you knew
Speaker 6: when they're winch wipers were on? At what level?
Speaker 9: You now have a hyper local precipitation map that's the
Speaker 9: likes of which nobody else has.
Speaker 6: Right, It is awesome.
Speaker 9: So those times are that right, But you've got to
Speaker 9: be able to capture the data. You've got to be
Speaker 9: able to intelligently use the data, and you've got to
Speaker 9: not be able to drown in the data, which is
Speaker 9: what everybody is facing right now. And AI, to oversimplify,
Speaker 9: AI has the AI ability to keep you from drowning
Speaker 9: and data like you have been.
Speaker 2: Is there who's thinking about how AI should be managed?
Speaker 4: Regulated?
Speaker 2: Is anybody thinking about that out there?
Speaker 9: There's lots of thinking that. The question is anybody doing
Speaker 9: anything about it? So I think, you know, again, let's
Speaker 9: give credit where credits do. I think regulators, legislators, and
Speaker 9: even the companies themselves are thinking about it, are talking
Speaker 9: about it, and I think there's legitimate criticism. Great, you
Speaker 9: just want to think and talk about it and never
Speaker 9: do anything as a way of deflecting.
Speaker 6: You know, the EU of course takes a leadership.
Speaker 9: Role and a lot of things around privacy and data protection,
Speaker 9: all that would stand a reason they might take a
Speaker 9: more aggressive and they already have, you know, started to
Speaker 9: take steps towards a more aggressive position than the US.
Speaker 9: I think you're going to ask the big We're going
Speaker 9: to ask the big tech companies to be more responsible
Speaker 9: and maybe sign up.
Speaker 6: To a higher standard than we would have a decade ago.
Speaker 9: Okay, Microsoft, Okay, Google, Okay, Facebook, Meta, you know those
Speaker 9: types of companies, We're going to expect more out of them.
Speaker 9: But I think at the end of the day, especially
Speaker 9: in the US, ultimately Congress is going to have to
Speaker 9: get involved in Yeah, that they have a few.
Speaker 2: Issues questioning coming from our Congress.
Speaker 1: I won't mention there are a few I can definitely imagine,
Speaker 1: but it's a horror show thinking about it.
Speaker 6: So how long, Jim.
Speaker 1: Until we have real leaps forward in like autonomous driving?
Speaker 1: And I mean the real question is how long is
Speaker 1: it going to be until we have far fewer deaths
Speaker 1: from traffic accidents?
Speaker 9: Yeah, I'm glad you mentioned that because We've got forty
Speaker 9: three thousand people a year die on US roads.
Speaker 6: It is a public health crisis.
Speaker 9: I mean, people don't typically think about it that way,
Speaker 9: and those are human driven cars, so there's a crying
Speaker 9: need for that. But we saw lost over the weekend
Speaker 9: in all of the open AI news cruise. The Robotaxi
Speaker 9: company CEO stepped down. I don't know if you saw that. Yeah, yeah,
Speaker 9: but controversy because they were not open and transparent. There
Speaker 9: was an incident involving a robot taxi in San Francisco.
Speaker 9: Somebody was seriously injured. They didn't really quite disclose what happened,
Speaker 9: and so they lost trust there. And so it's striking
Speaker 9: to me this sort of everybody wants to move fast,
Speaker 9: but if you move too fast, you end up going slower, right,
Speaker 9: because all you're going to do is create a backlash.
Speaker 9: You're going to set the entire industry back year or two.
Speaker 9: I don't know what the timeframe will be, but I
Speaker 9: think it's critical that companies involved in Tesla is being
Speaker 9: maybe the most notable of this around US autonomous driving
Speaker 9: is running the risk of sort of poisoning the well
Speaker 9: and setting things back because they're being too aggressive and
Speaker 9: to the beginning of our conversation, right, what does big
Speaker 9: tech do? They just know how to do big tech right.
Speaker 9: They go fast. I'm a private sector company. I've got
Speaker 9: to grab adoption while it's there. I've got to move fast.
Speaker 9: You know what's the famous line Facebook at move fast
Speaker 9: and break things right until they realized they broke something
Speaker 9: to maybe signific.
Speaker 2: Exactly all right, Jim, thanks so much for joining us.
Speaker 2: Jim Anderson. He's the CEO of Beacon Software. His job
Speaker 2: is to fix the traffic in Atlanta, Georgia. Good luck
Speaker 2: with that.
Speaker 8: You're listening to the tape Cat's are live program Bloomberg
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Speaker 1: We have Matt Matt Siegel in here. He is the
Speaker 1: head of I guess cryptoanalysis over at van Neck. What's
Speaker 1: your official title at van Neck, head of Digital assets Research?
Speaker 3: You got it.
Speaker 1: I was pretty close, and I mean before we get
Speaker 1: into anything else, when are we gonna see these ETFs
Speaker 1: finally allowed by the SEC? Because it doesn't even feel
Speaker 1: like Gary Gensler's dragging his feed anymore. It's like he's
Speaker 1: grasped on to a chair and people are trying to
Speaker 1: pull him.
Speaker 3: What's the deal.
Speaker 10: The final deadline for approval of a number of these
Speaker 10: spot bitcoin ETFs is the first half of January, So
Speaker 10: there's a lot of logistics that has to go on
Speaker 10: behind the scenes at the SEC, with various divisions talking
Speaker 10: to each other and communicating with issuers to button up
Speaker 10: all but it's going to happens very high percentage by
Speaker 10: the first half of January next year.
Speaker 1: So what does that mean for the market? I mean,
Speaker 1: even beyond bitcoin, Bitcoin itself is trading above thirty seven
Speaker 1: thousand dollars, which to me is just absolutely nuts because
Speaker 1: I started covering this kind of as a joke in
Speaker 1: twenty twelve and it was like, you know, ninety dollars,
Speaker 1: So the fact that that same string of code could
Speaker 1: be worth thirty seven thousand dollars is nuts to me.
Speaker 1: But a lot of people still look at this as
Speaker 1: kind of a failed experiment, which.
Speaker 6: Baffles the mind.
Speaker 10: Well, let's start with the impact of the ETF. When
Speaker 10: an investor buys bitcoin on coinbase a retail investor, they're
Speaker 10: paying an average of two point five five percent in
Speaker 10: transaction fees. When an ETF buyer buys a bitcoin ETF
Speaker 10: in Europe, where these spot products trade, they're paying ten
Speaker 10: to twenty basis points in spreads and commissions and fees
Speaker 10: are often zero. So what we have is an order
Speaker 10: of magnitude decline in costs for the end user. And
Speaker 10: essentially you're mainlining a bitcoin only exchange into the brokerage
Speaker 10: account of every investor in the US.
Speaker 6: Can you arbitrage that, by the way, as a trader.
Speaker 10: Well, that's why we have That's why there's a functioning
Speaker 10: futures market, and the CME's market share of that futures
Speaker 10: market has recently reached an all time high. So it
Speaker 10: is the regulated flows. Bitcoin ETFs have seen one billion
Speaker 10: dollars in flows in the last month. That's eighty percent
Speaker 10: of the total year to date that we've seen. So
Speaker 10: the flows are coming from the regulated side. It bitcoins
Speaker 10: up thirty percent in the last month. When it's one
Speaker 10: way buying in an illiquid asset like this, the price
Speaker 10: impact can be large.
Speaker 2: All right, there was an election in Argentina. Please explain
Speaker 2: to me why this has a connection to bitcoin.
Speaker 1: Pretty shock result as well. I mean looks like Elvis.
Speaker 1: Javier lives with his mom and six dogs. One how
Speaker 1: do you pronounce his last name?
Speaker 6: Milay Malay.
Speaker 10: Javier Malay is a libertarian who has been very vocal
Speaker 10: about his desire to eliminate the Central Bank of Argentina.
Speaker 10: Argentina has the worst performing currency in Latin America in
Speaker 10: the last three decades. It's had the most number of recessions,
Speaker 10: it has the least amount of foreign direct investment. So
Speaker 10: sticking with the same path is kind of the definition
Speaker 10: of insanity, keeping the same thing going and expecting something
Speaker 10: to change. This new leader has plans to dollarize the economy.
Speaker 10: He has been very outspoken about his belief that central
Speaker 10: banks are a scam that impose an inflationary tax on
Speaker 10: regular citizens, and he's I've also been very outspoken in
Speaker 10: his admiration for bitcoin in restoring money and value to
Speaker 10: its original creator, which is the private sector. So we've
Speaker 10: been observing for some time that crypto adoption in Argentina,
Speaker 10: both bitcoin and stable coins, is the highest in Latin America.
Speaker 10: And the highest among the highest in the region.
Speaker 2: Go into that inflation you were talking about.
Speaker 10: Yeah, folks are holding tether in order to maintain dollar
Speaker 10: purchasing power. The other thing we've noticed, the largest private
Speaker 10: oil and gas company in Argentina just announced plans to
Speaker 10: mine bitcoin with the excess gas and methane that's a
Speaker 10: byproduct of their existing production. So it's very rational, we think,
Speaker 10: for countries to use their stranded energy, monetize it to
Speaker 10: earn bitcoin, and in the process give their citizens a
Speaker 10: hedge on the Fiat imposed inflationary tax that Melee has
Speaker 10: spoken so much about.
Speaker 1: By the way, I'm not an official libertarian, like I'm
Speaker 1: not racially anything, especially in a day and age when
Speaker 1: you only vote against someone and not for anybody. But
Speaker 1: aren't the founding fathers, Like, isn't this country kind of libertarian?
Speaker 1: Isn't that the point of America?
Speaker 2: Exactly? And you're in a great state of Ohio, that's
Speaker 2: where you're from, So it's yeah.
Speaker 1: So, Matt, what's your take on the rest of the
Speaker 1: twenty thousand other coins? I mean, bitcoin is something we
Speaker 1: could talk about all day and I think, you know,
Speaker 1: even Gary Gendler doesn't think bitcoin is a security, but
Speaker 1: everything else has a question mark. Are there are there
Speaker 1: like ten that you like and the rest are junk?
Speaker 1: Are there a hundred that you like and the rest
Speaker 1: are junk?
Speaker 3: How does the whole thing look to you?
Speaker 10: We think the vast majority of the value in this
Speaker 10: ecosystem is going to accrue to a handful of protocols
Speaker 10: and thus tokens, and it's very early stages in those days,
Speaker 10: and there's still a lot of regulatory uncertainty.
Speaker 6: So just focusing.
Speaker 10: On bitcoin because of the huge number of catalysts for
Speaker 10: next year, including the lack of supply. More than seventy
Speaker 10: percent of bitcoin supply has not moved in the last year.
Speaker 10: That is an all time high. The bitcoin having which
Speaker 10: is an algorithm change, occurs next April that will cut
Speaker 10: the amount of bitcoin by half that is generated. We're
Speaker 10: in the middle of an absolute boom in bitcoin fees,
Speaker 10: so transaction fees on the bitcoin blockchain are now fifteen
Speaker 10: percent of all bitcoin minor revenues, which is an all
Speaker 10: time high. That's been turbocharged by these NFTs on bitcoin
Speaker 10: and with the ETF coming and the institutional adoption.
Speaker 6: Via state affiliated actors.
Speaker 10: Right, So my call is that Argentina will become the
Speaker 10: fifth country in the world to mine bitcoin for its
Speaker 10: own state reserves, joining El Salvador, Bhutan, Oman and the UAE.
Speaker 10: And with that regulatory certainty and the existence of the
Speaker 10: ETF and the US government and G seven's continued overspending
Speaker 10: debt and deficit problems, that they'll be large institutional buyers
Speaker 10: that will migrate to bitcoin.
Speaker 4: You know.
Speaker 10: The history is that the rest of the coins benefit
Speaker 10: from that, but that usually happens after the having which
Speaker 10: is next April.
Speaker 1: All right, So while we have you here, tell us
Speaker 1: what your thought is on world coin, because we've been
Speaker 1: talking about Sam Altman all day in regards to his
Speaker 1: position at OpenAI or now Microsoft. But he started this
Speaker 1: like biometric cryptocurrency. I don't know how it works, like
Speaker 1: measures your eye and keeps the data. But what's the
Speaker 1: story with that. It's a layer two ethereum based coin.
Speaker 10: So you can see from the regulation being passed in
Speaker 10: the UK and in Canada around what can be said
Speaker 10: on internet platforms that there's a huge desire to differentiate
Speaker 10: the humans from the bots.
Speaker 4: Right.
Speaker 10: Presidential candidate Nikki Haley was in the media last week
Speaker 10: saying that everyone needs to be verified in order to
Speaker 10: participate on social media. I doubt that's going to happen
Speaker 10: in the US, but if it were, and we wanted
Speaker 10: to preserve some user privacy, than a cryptographic network that
Speaker 10: can verify user identity without revealing the name would be
Speaker 10: an attractive product. And at the that's essentially what orl
Speaker 10: cooin is trying to do. So we do think that
Speaker 10: over the next year there's going to be some innovation
Speaker 10: that allows AI to be differentiated, whether it's generated by
Speaker 10: human or by a bot, and that crypto has a
Speaker 10: role to play in preserving privacy while enabling those functions.
Speaker 8: That's cool.
Speaker 2: That's Siegel, Thank you so much for joining us.
Speaker 3: Matt Sigua.
Speaker 2: He's a head of digital assets research for Vaneck, joining
Speaker 2: us live here in our Bloomberg Interactive Brokers studio, and
Speaker 2: John Tucker is going to come up prepare executive summary
Speaker 2: of what we discussed in this segment. So everybody's on
Speaker 2: this minute exactly right.
Speaker 8: You're listening to the tape. Can's our live program Bloomberg
Speaker 8: Markets weekdays at ten am Eastern on Bloomberg Radio, the
Speaker 8: tune in app, Bloomberg dot Com, and the Bloomberg Business app.
Speaker 8: You can also listen live on Amazon Alexa from our
Speaker 8: flagship New York station Just say Alexa playing Bloomberg eleven.
Speaker 4: Now.
Speaker 1: We have been talking a lot about airlines on this
Speaker 1: program and the difficulty that the manufacturers have making enough planes.
Speaker 1: There is just a huge order right for three hundred
Speaker 1: of the was it the seven three seven or.
Speaker 4: I think so?
Speaker 8: I don't know.
Speaker 6: In any case, a bunch of them.
Speaker 1: If you order a plane today, your chances of getting
Speaker 1: it soon are very low. I just got a message
Speaker 1: from Ali Ben al Maldani, the CEO of ABL Aviation.
Speaker 1: He said he was at the show and putting some
Speaker 1: orders there too, and he could come on and talk
Speaker 1: about it.
Speaker 6: So I was like, great, come in the studio.
Speaker 1: He's in New York for one day only.
Speaker 4: Oh, we got him.
Speaker 1: We get him on set. Ali, thanks so much for
Speaker 1: joining us. Tell us about the state of aviation in
Speaker 1: terms of ordering a plane right now? How difficult is it?
Speaker 1: You know, what are the prices like and when can
Speaker 1: you expectually? When can you actually expect to get delivery?
Speaker 11: Look at so much much we'll have being or pleasure.
Speaker 11: It's always an issue, I think to get aircraft today.
Speaker 11: As we said last time, we have seven years to
Speaker 11: eight ys wait for both manufacturers.
Speaker 3: Bowling go Evers.
Speaker 11: You have some issues, of course with the engines. You
Speaker 11: saw what's happened with pattern Witness. We have a few
Speaker 11: issues on the engine side that we need to fix
Speaker 11: and that's been fixed by the OEMs.
Speaker 3: You saw Dubai.
Speaker 11: Airshow last week was the biggest order since I was seventeen.
Speaker 11: So the other book on in Dubai was insane. You
Speaker 11: had emails that's made a huge order, fly Dubai. Ethiopian
Speaker 11: made a big order. So there's a big demand. There's
Speaker 11: not enough supply and that's the first issue. And Evan,
Speaker 11: since a lot of aircraft during COVID got so tired,
Speaker 11: it's extremely hard today for airlines to find aircraft that
Speaker 11: they can operate, and that's one of the biggest issues.
Speaker 11: We spoke about it last timer we were here. We
Speaker 11: keep on seeing it more and more and even the
Speaker 11: order like seventeen eight hundred and the classics are being
Speaker 11: asked to come back to the markets because we need
Speaker 11: them to fly them. And we see again during the
Speaker 11: casemas season where there's a big need. You saw it
Speaker 11: last summer we spoke about you guys going to Europe.
Speaker 11: What was the cost of tickets was going high and
Speaker 11: higher because of the demand and the lack of aircraft
Speaker 11: being provided.
Speaker 2: So I envision a desert in Arizona, New Mexico, and
Speaker 2: a lot of seven thirty sevens. A lot of seven
Speaker 2: fifty sevens are sitting out there because they were decommissioned
Speaker 2: for whatever reason over whatever recent period of time. Can
Speaker 2: I just go grab one of those planes and refurbishing
Speaker 2: and put them back in the air.
Speaker 3: It's not as easy as you think.
Speaker 11: So if you want to get what we call an
Speaker 11: aircraft a water again, you have a long process to
Speaker 11: go again to put those aircraft back into service. You're
Speaker 11: not going to just come and flies again. It needs
Speaker 11: an inspection. It's need was we call an agyan inspection.
Speaker 11: It needs a few inspections to get back, which are
Speaker 11: very costly. So the difference between the cost of getting
Speaker 11: it back and getting on your aircraft, that's why there's
Speaker 11: not a bit hard to be made. And we saw
Speaker 11: it in the last two to three years where the
Speaker 11: cost of leasing to seventeen seven eight hundred on eighteen
Speaker 11: twenty not a kno, but another generation went to the OOF.
Speaker 3: It went so expensively.
Speaker 11: So today if you lease in aircraft it's almost about
Speaker 11: forty to fifty percent then it was a few years ago.
Speaker 11: So there is a big demand, and that's unpacs. Of course,
Speaker 11: the ticket spiices.
Speaker 1: So by the way, the big order was for set
Speaker 1: triple sevens, the seven seven seven. That's the amage order
Speaker 1: that you're talking about seven x triple seven x, and
Speaker 1: that's what it's a much bigger plane.
Speaker 3: Right.
Speaker 1: You like the single aisle, You like the seven three
Speaker 1: sevens in the eight three twenties.
Speaker 3: I like the twenties.
Speaker 11: I love the eight to twenty, which is a single
Speaker 11: the smallest one that delta opates a loss. We have
Speaker 11: lots of them with delta on the airplanes. I love
Speaker 11: this because it's very liquid. You can move them very quickly.
Speaker 11: You can the cost of fixing them to Differense airlines
Speaker 11: much less. If you need to have a white body
Speaker 11: fisted against with the Differense airline, the cost is very high.
Speaker 11: It was become most one to at least million of
Speaker 11: dollars to make its fits for basics, to make it
Speaker 11: fit to a new airline, versus when it's a smaller
Speaker 11: one when all economy class I can move them very
Speaker 11: quickly between one airline and another one.
Speaker 2: What is the state of the oe MS, the Airbus
Speaker 2: and the Boeing. Why are they having such a difficult
Speaker 2: time ramping up production?
Speaker 1: Yeah, I don't understand that, you know. I a couple
Speaker 1: of years ago I ordered the Mercedes G five hundred
Speaker 1: and it took about a year for them to make it.
Speaker 1: Now they only had have one factory in Rocks in Austria, right,
Speaker 1: So I get that, and they're not making more than
Speaker 1: like twenty five thousand a year. These airline manufacturer airplane
Speaker 1: manufacturers are like the biggest companies in the world. They
Speaker 1: have factories all over the place. Why can't they just
Speaker 1: get more people on there and make more metal.
Speaker 11: Well, first of all, they don't have if you look
Speaker 11: at Boingois, they don't have faxies all over the place.
Speaker 11: They have certain amounts of factory, each assembly line, it's
Speaker 11: a factories assembly line. Each assembly line have a certain
Speaker 11: amount that they can produce every months.
Speaker 3: It's seattle.
Speaker 11: All of them have certain amounts that they can produce.
Speaker 11: That's the first issue. So they can not over produce.
Speaker 11: They produce what they can do. They're producing a max
Speaker 11: of course max capacity. They're doing their best to supply
Speaker 11: as much as they can. But the second issue that
Speaker 11: you have to remember that it was a COVID start
Speaker 11: doing COVID issue is a supply chain. And if you
Speaker 11: look at all the supply chain, because you have to
Speaker 11: remember EPs and Boeing assembler, the assemble everything that is
Speaker 11: provided to them. So all the bug supply chain is
Speaker 11: a big issue. So it's not only in aircraft. It's
Speaker 11: as you said, in cars. If you want to other cars,
Speaker 11: then especially in car Matt, there's a big issue of.
Speaker 3: Finding a car.
Speaker 11: If I tell you today go find a G four
Speaker 11: hundred diesel, it's almost impossible to find because us the
Speaker 11: guys saw this and the cost of a car on
Speaker 11: aircraft is about twenty percent and before COVID.
Speaker 1: Right, so you've seen that huge inflation amount as well.
Speaker 1: What are margins like for you? I mean, does that
Speaker 1: inflation eat into your margin or is the demand the
Speaker 1: least aircraft still so strong.
Speaker 11: The amount to these aircraft is very strong. There's a
Speaker 11: big demand. But you have to remember all of us,
Speaker 11: of course lovers, our deals.
Speaker 3: We need to get debts. The cost of deaths is
Speaker 3: what kills us.
Speaker 11: I think on the deals because you have seventy eighty
Speaker 11: percent of deaths on issue.
Speaker 2: Where does that that come from? The regular the JP
Speaker 2: Morgan chasing get one.
Speaker 11: Yeah, JPYM Morgan is actually that market. So you have
Speaker 11: two types of deaths. Of course, secured and secured deaths
Speaker 11: on You have other the banks, the banks that come
Speaker 11: and provide you a death on it. You know, all
Speaker 11: the players from back of America to GIPM Morgan, the city,
Speaker 11: to the Japanese banks, to the Chinese banks. And you
Speaker 11: used to have which is a lot less active today,
Speaker 11: the capital markets. So before that you can do an
Speaker 11: ABS secuvization and use as capital markets money which was
Speaker 11: at that time cheaper. As of today, the capital markets
Speaker 11: for aviation is not very active for the last two years.
Speaker 11: It used to be a lot more active on the
Speaker 11: ABS side. I think in the next year or two
Speaker 11: it might come back. But the capital markets was a
Speaker 11: very competitive way of financing aircraft.
Speaker 6: Is private credit does that play a.
Speaker 3: Role, Yes, of course it's very active as well. Private credit.
Speaker 11: Life insurance a lots of insurance life insurance companies land
Speaker 11: because the leases are seven years, eights, twelve, years. So
Speaker 11: it's much as the maturity of the insurance the life
Speaker 11: insurance companies.
Speaker 2: We heerd from some of the just folks in the
Speaker 2: industry that India is going to be is a big
Speaker 2: growth market, will continue to be a huge buyer of
Speaker 2: aircraft as they look to expand their fleet. Are you
Speaker 2: seeing that?
Speaker 11: Well, if you see the last order, this was a
Speaker 11: four months ago of Erindio, it was the biggest order
Speaker 11: was ever made. I think it was aboust five hundred
Speaker 11: acap that the orders. Wow, so that order was huge.
Speaker 11: Look India, with a few airlines out there is an
Speaker 11: amazing jurisdiction you can lease aircraft that The issue that
Speaker 11: you have with India is how do you process aircrafts?
Speaker 11: Because in aviation you have what you call a cape
Speaker 11: town counties. So those countries that signed the Keep County
Speaker 11: Kept On treaty allows.
Speaker 3: You to a process with aircraft process.
Speaker 11: Yes, it's similar to Chapter eleven kind of treaty where
Speaker 11: you can go to those counties and they possess those.
Speaker 2: So if an airline doesn't make its least payment to you,
Speaker 2: you can literally go to that country and repossess exactly.
Speaker 3: Okay, But in India it's it's harder.
Speaker 11: I don't believe as of yet they're not the signature
Speaker 11: of the Cape Son treaty.
Speaker 3: You need to check, but I don't think they are.
Speaker 11: So that's harder on those countries that didn't sign the
Speaker 11: kept creaty to go poss aircraft. That's the hardest part
Speaker 11: was if someone doesn't make payments, similar to a car
Speaker 11: in America, you goss car and leads it to someone else.
Speaker 11: That's what's in aviation. You can move it from one
Speaker 11: airline to one airline. It's a chapter eleven. You do oppossession,
Speaker 11: you fix the corw the aircraft and new movies?
Speaker 2: Can you what is China?
Speaker 8: Is that?
Speaker 4: Are they signatory?
Speaker 8: Yeah?
Speaker 3: It changes on the monthly day.
Speaker 1: I know that Russia, the Russian War in Ukraine through
Speaker 1: kind of a wrench into that in terms of that region.
Speaker 1: What has the Middle East been like since Hamas the
Speaker 1: Hamas Israel conflicts started?
Speaker 3: Has that?
Speaker 1: Has that been notable?
Speaker 6: In the business.
Speaker 11: Innoviation within nices? You know most airlines Ivan what doing
Speaker 11: the best. If you look at Emirates flight by all
Speaker 11: the airlines Indision are very active avail operations like the
Speaker 11: p officer advantages and those airlines are really booming, so
Speaker 11: there's no impact.
Speaker 3: If we look at.
Speaker 11: One of our clients in Israel, yes there's little bits
Speaker 11: of umpacts, but l Al was very open with us.
Speaker 11: They tell us every day what's going on. They give
Speaker 11: us a feedback. The government is supportive, so Havan. For
Speaker 11: one of our clients, which is l in Israel, which
Speaker 11: with whom we have five seventy sevens, they're very open.
Speaker 11: They tell us everything and they will always open in business.
Speaker 11: They always told us during COVID about payments, how to
Speaker 11: fix it. So the rection with is amazing, the very
Speaker 11: open airlines to work with.
Speaker 6: But how closely are you watching that?
Speaker 1: I mean if things broaden out to eleven and Syria,
Speaker 1: if God forbid, Iran gets involved, I mean it's going
Speaker 1: to be difficult for every business, but.
Speaker 11: Not only aviation. And look, Mattwinami, I'm a very optimistic guy.
Speaker 11: I hope that this will never happen. I hope that
Speaker 11: people will come back to the reason and it will
Speaker 11: be fixed. You know, as a guy from local that's
Speaker 11: the business. Of course, with all religions, I think that
Speaker 11: it's just a political thing and I hope you to stop.
Speaker 11: I don't believe on the long term, it's a good
Speaker 11: thing for any of us, and not only in aviation.
Speaker 3: It will be an umpact for everything. So I really
Speaker 3: hope to stop.
Speaker 11: And it will have If that's happened, it will have
Speaker 11: a lot more impacts than the OSHA can in my
Speaker 11: view for aviation. So because the vision is very sensitive,
Speaker 11: it's in the middle between Asia and Europe. It's a
Speaker 11: Asian that is extremely important for us in aviation in business.
Speaker 11: So my hope is that it will stop and come soon.
Speaker 2: And all right, Ali, thank you so much for joining
Speaker 2: us here again, Ali Ben l Madonna. He's the CEO
Speaker 2: of a bl Aviation gives us a good view into
Speaker 2: the world of aviation and aviation fans.
Speaker 1: Thanks for listening to the Bloomberg Markets podcasts. You can
Speaker 1: subscribe and listen to interviews at Apple Podcasts or whatever
Speaker 1: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
Speaker 1: at Matt Miller nineteen seventy three.
Speaker 2: And I'm Faull Sweeney. I'm on Twitter at pt Sweeney.
Speaker 2: Before the podcast, you can always catch us worldwide at
Speaker 2: Bloomberg Radio.