Speaker 1: This is Bloomberg business Week Inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business, finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Masser and Tim Stinebec from Bloomberg Radio.
Speaker 1: You took a bit more about this job's report eight thirty.
Speaker 1: I was pretty surprised. I was up there with Scarlett
Speaker 1: Foo We're watching the numbers come through, and we were like,
Speaker 1: what that's when you think this is a mistake. I
Speaker 1: thought that's what it was like, wasn't it Maybe? Yeah,
Speaker 1: it was out of control, all right, So let's get
Speaker 1: to it because this is you know, we we talked
Speaker 1: with Zip recruiter too, and they are seeing a strong
Speaker 1: job's report so and strong jobs market overall. So let's
Speaker 1: see what Becky Frankoitz is seeing. She's chief commercial Officer,
Speaker 1: President Manpower Group North America. She is back with us,
Speaker 1: joining us via zoom from Chicago. Hey, Becky, good to
Speaker 1: have you here with Tim and myself. So glass half full,
Speaker 1: glass half empty when it comes to the jobs market
Speaker 1: in your view, Yeah, I mean it was a blockbuster,
Speaker 1: monstrous number this morning that I don't think anyone expected, Like,
Speaker 1: we knew hospitality and leisure was coming back because our
Speaker 1: real time data told us demand had dramatically increased. We
Speaker 1: knew retail was coming back. But I don't know that
Speaker 1: anybody would have said we'd have over half a million
Speaker 1: jobs created in January. So I would say, always good
Speaker 1: for the American worker. I mean, more jobs are good
Speaker 1: for the American worker. I think the you know, it's
Speaker 1: an economic signal that it becomes uncertain what's to come. Okay,
Speaker 1: So was this at all a surprise to you, given
Speaker 1: that you have such a good read on where the
Speaker 1: economy is, what employers are looking for, what employees are
Speaker 1: looking for. I mean again, you admitted that nobody saw
Speaker 1: this coming, but um, did this hit you the same
Speaker 1: way it hit kind of everyone else? Yeah? So again, Tim,
Speaker 1: we knew hospital and leisure was coming, We knew retail
Speaker 1: was coming. New health continues regis nurses are still the
Speaker 1: most in demand job in our country, so we knew
Speaker 1: all of that. I would have said it was we
Speaker 1: saw demands start to come back in January, which you
Speaker 1: know is unusual, right because usually seasonally we start to
Speaker 1: see a reduction in headcount, particularly in retail as they
Speaker 1: had just from the holiday season. But when we started
Speaker 1: seeing that start to take off in the first couple
Speaker 1: of weeks of January, we knew it was going to
Speaker 1: be a positive, a very positive jobs report, and that
Speaker 1: it was. You know, the most encouraging thing I'll tell
Speaker 1: you is the participation. Just a little bit of tweak up,
Speaker 1: but I'll take it because we need every person that
Speaker 1: wants to contribute to the economy working. So I was
Speaker 1: very pleased to see that, particularly for women. You know,
Speaker 1: it was really funny. Becky Um Matt Miller came off
Speaker 1: his show on radio at noon is like, wait, wait, Mass,
Speaker 1: you know, pull up this chart, pull up this chart,
Speaker 1: and it was not farm Rales, and it's like, you know,
Speaker 1: we're not supposed to see this kind of job creation
Speaker 1: in January. Just what you were speaking to, right, Usually
Speaker 1: that's when everybody from the holidays gets laid off. But
Speaker 1: we started talking about this whole idea of labor hoarding
Speaker 1: something Tim and I've been talking about a lot with
Speaker 1: our guests. What signs are you seeing of that with
Speaker 1: some of your clients and customers. Yeah, so, Carol, I'll
Speaker 1: say it's gone beyond labor hoarding. Now I'm calling it
Speaker 1: pandemic paranoia. Um, so this overhang from the tight, very
Speaker 1: difficult labor market coming out of the crisis. Employers tried
Speaker 1: very hard to attract and retain workers. It was challenging,
Speaker 1: so they are holding on to their workforce with both hands.
Speaker 1: So that's the first thing. The second thing is we
Speaker 1: see all these headlines around layoffs, but if you put
Speaker 1: it in perspective, in December nine robust economy jobs are growing,
Speaker 1: layoffs for one of the workforce. December twenty nineteen, fast
Speaker 1: forward December layoffs under one percent of the workforce. And
Speaker 1: so even with the headlines, there's some rebalancing that's happening
Speaker 1: for some overhiring, particularly in tech. But make no mistake,
Speaker 1: tech unemployment right now in our country is one point
Speaker 1: eight percent one point eight compared to three point four
Speaker 1: so tech skills are still still in demand. How messy
Speaker 1: is this report messy in the sense of the data
Speaker 1: is going to be revised next month and it won't
Speaker 1: be as big of a jump. Yeah. Well, the revisions
Speaker 1: have all been upwards recently, so that's that was announced
Speaker 1: this morning as well. Um, there's probably some noise tim
Speaker 1: in it. I heard there's some noise around strikes, people
Speaker 1: coming off strike, but it's gonna be hard to adjust
Speaker 1: a half you know, million UM work job creation report
Speaker 1: down too far. Even if it's adjusted, it's still going
Speaker 1: to be a blockbuster report, way above what you know,
Speaker 1: we we anticipated, and I think, um, it will be
Speaker 1: interesting to see now if this is enough again to
Speaker 1: bring workers off the sidelines, particularly in hospitality and leisure.
Speaker 1: You know, another element of of you know, the pandemic
Speaker 1: hangover is we're seeing companies start hiring in advance, in
Speaker 1: advance of actually consumer activity, retail, hospitality and leisure getting
Speaker 1: ready for spring, and then they have a problem because
Speaker 1: they have to attract those workers that left boomerang workers
Speaker 1: back into the sectors that shut down during the crisis.
Speaker 1: So I think it's I think it's going to be
Speaker 1: a noisy path forward. Um. Possibly a little choppy waters,
Speaker 1: but this is an amazing way to start the year.
Speaker 1: One area that has gotten a lot of attention from
Speaker 1: US and from a lot of the business press, of course,
Speaker 1: has been tech layoffs. Over the last few months at
Speaker 1: companies like Meta, thousands of people laid off their alphabet,
Speaker 1: Amazon and more. UM, and I'm wondering if if those
Speaker 1: are how how you look at those in the context
Speaker 1: of of what you're actually seeing when you look at
Speaker 1: the data. Uh. I know, we spent a lot of
Speaker 1: time talking about them, but we don't yet see that
Speaker 1: showing up in the data. Well, I mean, because it
Speaker 1: pales in comparison to how much hiring happened in that sector.
Speaker 1: So it's pandemic hiring. But are those people getting rehired
Speaker 1: easily abs so? I mean again, tech unemployment is one percent,
Speaker 1: so they are getting scooped up either by other you know,
Speaker 1: midsized tech companies, and every company is now a digital
Speaker 1: tech company. So we're seeing people with tech skills hired
Speaker 1: in retail, hired in hospitals. I mean, every company these
Speaker 1: those skills, so they're quickly being reabsorbed into the job market. Hey, Becky,
Speaker 1: I do wonder though, if maybe we're starting to see
Speaker 1: wage pressure subside a little bit. Is that making it
Speaker 1: easier for companies who might not be so sure about
Speaker 1: how the business market plays out this year that they're
Speaker 1: going to say better still to kind of hold on
Speaker 1: to that worker, even if it costs a little bit more. Yeah, So, Carol,
Speaker 1: interesting on the cost a little bit more to hold
Speaker 1: onto because you know, our data would show that if
Speaker 1: you change jobs, and make note the quit rate has
Speaker 1: not gone down in nineteen months below four million a
Speaker 1: month nineteen months, So the American employee is continuing to
Speaker 1: have confidence in their own skill and the labor market.
Speaker 1: But it has been amazing to me to see the
Speaker 1: confidence people having their ability to get pay. If you
Speaker 1: change jobs in the last year, you got, on average,
Speaker 1: and this is average blue collar, white collar, the whole
Speaker 1: spectrument increase in your pay. If you state at your company,
Speaker 1: you got on average a seven percent increase in pay.
Speaker 1: So while we're seeing muting in the overall numbers, actually
Speaker 1: says to Billy, I wouldn't call muting stability at point
Speaker 1: three and overall wages. That we're still encouraging the labor markets,
Speaker 1: encouraging people to change jobs. Is that unusual, that jump
Speaker 1: and that difference. I mean, I would assume that if
Speaker 1: you leave a job, you tend to typically get paid more.
Speaker 1: Just got about twenty seconds. Yeah, what's unusual is the
Speaker 1: fact that we're not saying any slowdown, even with all
Speaker 1: of the coverage on concerns for the future economy, No
Speaker 1: slow down in quits all right. Always great to check
Speaker 1: in with you, Becky, have a great weekend. Becky francoit's
Speaker 1: chief commercial Officer, President North America at Manpower Group, joining
Speaker 1: us via a zoom from Chicago. Quit rate, she said, right,
Speaker 1: hasn't come below four million, and I believe nineteen months. Incredible. Yeah,
Speaker 1: that's interesting with the Jolts data earlier this week, right
Speaker 1: shows the strength of the worker. Um, you are listening
Speaker 1: in watching Bloomberg Business Week right here, I'm fry. This
Speaker 1: is Bloomberg Business Week inside from the reporters and editors
Speaker 1: who bring you America's most trusted business magazine, plus a
Speaker 1: business finance and tech news Bloomberg Business Week Podcast with
Speaker 1: Carol Messer and Tim Stinebec from Bloomberg Radio. Well, the
Speaker 1: new ways too of Bloomberg Business Week. It is out
Speaker 1: on newsstands online at Bloomberg dot com slash business Week.
Speaker 1: Of course, also on the Bloomberg terminal. We talked about
Speaker 1: the domestic cover story yesterday. Well, the international cover story
Speaker 1: is about the billionaire sun coming for w w E
Speaker 1: The Billionaires. Shot Khan you may know him, of course,
Speaker 1: is the owner of the National Football League's Jacksonville Jaguars
Speaker 1: and the English Premier League's Fulham Football Club. The con
Speaker 1: family is not worth, by the way, about seven point
Speaker 1: six billion dollars. The Sun Tony KHN with more on
Speaker 1: the story. Here's Bloomberg reporter Kimbasin. He's with us in
Speaker 1: the Bloomberg Interactive Broker studio. He's got a great beat.
Speaker 1: He covers celebrity and athlete business deals. We also got
Speaker 1: with us the editor of Business Week, Joel Webber, both
Speaker 1: joining us here in New York. So Joel, um, My,
Speaker 1: my big first question is wrestling real? All right? That
Speaker 1: was gonna be my big questions. How about I improve
Speaker 1: upon your questions? It is real, Kim? Is it a
Speaker 1: pro sport? Is it? It's it's a It's a professional
Speaker 1: form of entertainment. That's that's for sure. Like that. Yeah,
Speaker 1: And and what I love about this it's actually a
Speaker 1: huge it's called it Sports Rights business. Right. W w
Speaker 1: E has owned this thing and has consolidated any passed
Speaker 1: for uh, except there's a little bit of turmoil at
Speaker 1: w w E. And along comes an upstart who happens
Speaker 1: to have a little bit of money to throw around.
Speaker 1: How is he competing with w w E. There are
Speaker 1: billions in broadcast rights at stake here and w W
Speaker 1: is going through one of its most volatile periods in history.
Speaker 1: Uh Tony Khan's brand, it's called a e w All
Speaker 1: Elite Wrestling. They're trying to provide fans with an alternatives,
Speaker 1: something that not for lapsed fans who used to watch
Speaker 1: wrestling and then got sick of w W. Give them
Speaker 1: something more, something more, something fresh, something new, something else
Speaker 1: to watch besides the same product that's been on the
Speaker 1: on the air for so long. But part of that
Speaker 1: includes bringing some of the people over from w W E.
Speaker 1: So how is it fresh? How is it new? There's
Speaker 1: been quite a bit of a talent war, so they're
Speaker 1: they're hop scotching back and forth between these these two brands.
Speaker 1: We have them sourcing from the indie scene as well.
Speaker 1: These are like the much smaller little shows that happened.
Speaker 1: There's thousands of wrestlers playing these tiny shows across the
Speaker 1: country in places like you know, bingo halls and nightclubs.
Speaker 1: Now that sounds cool, Yeah it is. I've been to
Speaker 1: a couple of those. It is pretty cool. It's like
Speaker 1: a couple of dozen people just watching, watching them wrestle
Speaker 1: in the ring they set up there. Okay, is this
Speaker 1: like the XFL going after the NFL that that one
Speaker 1: didn't end? Well, I know by the way the new
Speaker 1: XFL maybe they're working with the NFL. But now this
Speaker 1: is uh the most well funded uh person to go
Speaker 1: against w w E in twenty years. So back twenty
Speaker 1: years ago, it was it was Ted Turner and w
Speaker 1: c W the billionaire going against the other billionaire. Now
Speaker 1: this guy, Tony con also has that kind of financial backing.
Speaker 1: Courtesy of Dad courtesy a Dad curs courtesy a shot. Okay,
Speaker 1: you kind of dodge the question here. You've watched a lot.
Speaker 1: Is it a sport that the cons version of this
Speaker 1: elite wrestling? So if I'm gonna go watch all elite wrestling,
Speaker 1: when am I gonna see? That's going to be different
Speaker 1: than w w E. A few big things here, more swearing,
Speaker 1: they will just curse on the microphone. Is more and
Speaker 1: more PG, more blood. There's definitely more violence there, and
Speaker 1: more folding chair shots like right in the back just
Speaker 1: black boom out. These are these are? I mean? So
Speaker 1: there's like actual uh wrestling there. There's definitely more wrestling.
Speaker 1: I heard this anecdote from from one of Vince McMahon
Speaker 1: at ww's former wrestlers. He went by Daniel Bryan there
Speaker 1: and he said that Vince called him up one day
Speaker 1: and was like, what is a E W doing better
Speaker 1: than us? So he spent two weeks watching all the
Speaker 1: a W programming to see what was up, and he
Speaker 1: concluded that a W just has more wrestling. They played,
Speaker 1: they placed more of an emphasis on like the craft
Speaker 1: of the show in the ring. W W has more
Speaker 1: different kinds of segments, a lot more talking. And he said,
Speaker 1: you know, it's like watching a wrestling show with no wrestling.
Speaker 1: How many hours of wrestling did you watch while reporting
Speaker 1: this story? I went to two shows to watch them
Speaker 1: live and backstage and everything. That was fascinating. Uh and yeah,
Speaker 1: a little a little bit more, a little bit more.
Speaker 1: Again he didn't answer, but is there an opportunity right
Speaker 1: when we've seen this before in kind of the corporate world,
Speaker 1: right when one company could be is the leader and
Speaker 1: they run into some trouble, whether it's financial problems or
Speaker 1: whether there's allegations against the CEO for misbehavior, UM and
Speaker 1: w W E is at that point does that provide
Speaker 1: especially since A e W has a pretty dp pockets,
Speaker 1: an opportunity, a real opportunity to move ahead. It says
Speaker 1: there's an inflection point coming up. Both their media rights
Speaker 1: are coming up next year or so, and these are
Speaker 1: going to be the biggest deals ever for the both
Speaker 1: of them. So a bunch of names are being floated
Speaker 1: right now. The battle lines are are WW is with
Speaker 1: NBC Universal, which is on my Comcast, and then the
Speaker 1: A e W is with Turner, which is owned by
Speaker 1: Warner Brothers Discovery. Uh. But then when when these rights
Speaker 1: are up forbidding, that brings in everyone else. We're talking
Speaker 1: you know, Amazon, Netflix, We'll see who's really interested in
Speaker 1: some wrestling programs. And that is ultimately I think one
Speaker 1: of the reason big reasons why I was interested in
Speaker 1: this want to put on international cover is we are
Speaker 1: at a moment where sports rights only go up, right,
Speaker 1: the value of these teams only it's like goes up
Speaker 1: by billions. Really, it's like, oh, it used be three billion.
Speaker 1: The rights are why the billionaires are buying them, right,
Speaker 1: And so if you can keep this off of someone
Speaker 1: else's network and maybe get yourself a buck in the process,
Speaker 1: it's kind of seems like an ingenious strategy, and in
Speaker 1: this case it basically like he concreated something out of nothing, right, um,
Speaker 1: and then goes poaching some talent. Uh so, how how
Speaker 1: does he have to uh, you know, broker, what's it
Speaker 1: gonna look like when this media circus comes to town
Speaker 1: to you know, feast on these rights. That's actually the
Speaker 1: reason he formed it is because he heard from the
Speaker 1: guy who at the time ran T and T and
Speaker 1: TBS that he was about to, you know, consider bidding
Speaker 1: a whole bunch of money, like more than a drellion
Speaker 1: dollars on w W rights for Fridays, and he said,
Speaker 1: you know, maybe there's a better option here. I think
Speaker 1: I feel like there's man those rights ended up going
Speaker 1: to Fox and now T N T and TVs they
Speaker 1: have his his show. I think the big ones here
Speaker 1: are that of Warner Brothers. Discovery is likely going to
Speaker 1: want to keep them, so we'll see how high that goes.
Speaker 1: Speaking of bidding and buying, our Sebastian Escobar, who is
Speaker 1: directing our show right now, reminded us that Tony Khan
Speaker 1: talked about or was considering, right maybe buying w W
Speaker 1: E is that still a possibility. Just got about thirty seconds.
Speaker 1: He will need a little help with that. I don't
Speaker 1: know if he can afford right now? Does dad have
Speaker 1: deep enough pockets? And analysts expect it to be up
Speaker 1: to eight billion dollars, so he would need cool Let's
Speaker 1: pull it up, sell the footballs in there by the
Speaker 1: rest sports or entertainment. Have we decided sports entertainment to
Speaker 1: put together sports entertainment? He's right right, all right? Thank
Speaker 1: you Sbastian. Also bringing it on it, Jill Weber, Editor
Speaker 1: Bloomberg Business Week. Here in our interactive broker studio along
Speaker 1: with campusy Reporter, covering the cool stuff celebrities, athletes, wrestling,
Speaker 1: and more here at Bloomberg News. This is the international
Speaker 1: cover story. Find it on newstands. If you're traveling outside
Speaker 1: the US, you can find it online at Bloomberg dot com.
Speaker 1: Slash business Weekend always on the Bloomberg terminal. This is
Speaker 1: Bloomberg Radio. You're listening to the Bloomberg Business Week podcast.
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Speaker 1: on Bloomberg Radio, the Bloomberg Business app band you Doo.
Speaker 1: You can also listen live to our flagship New York station,
Speaker 1: Just say Alexa play Bloomberg e Love and Dirty Well,
Speaker 1: getting a bit of a brakgomblooment today is the tech
Speaker 1: trade because it has been on a tear this week.
Speaker 1: You did have the tech bell Weather's, Apple, Amazon, and
Speaker 1: Alphabet posting results that showed an economic slowdown is throttling
Speaker 1: demand for everything from electronics and e commerce to cloud
Speaker 1: computing and digital advertising. It was a little bit of
Speaker 1: a bummer last night. It really was. Interestingly enough, despite
Speaker 1: the fact that you're seeing on the performance from Alphabet
Speaker 1: in from the Amazon, Apple shares are actually higher. Let's
Speaker 1: try to make sense of it. We got Bloomberg News
Speaker 1: technology reporter David Alba joining us on the phone from
Speaker 1: New York City. David, good to have you with us. UM.
Speaker 1: I want to start with just your big takeaways. How
Speaker 1: we look at this holistically, taken all together. What's the
Speaker 1: story that it tells. I think it tells the story
Speaker 1: that tech companies are not immune from broader economic slowdown. UM.
Speaker 1: You know, tech is usually seen as this industry that
Speaker 1: holds strong throughout um all sorts of ups and downs
Speaker 1: in the economy. But even these giants like Apple and
Speaker 1: Amazon and Alphabet um were hit by by the broader
Speaker 1: economic conditions, and you know, I think that it's pretty significant,
Speaker 1: um that the some of these Apple is was reporting
Speaker 1: the first quarter of um uh, not the sort of
Speaker 1: holiday quarter, but Amazon and Alphabets were and even then,
Speaker 1: you know, when there's usually high demand for products in
Speaker 1: the holiday quarter, that that was not the case this
Speaker 1: this this go round. I think what's interesting too, though
Speaker 1: you know, they were down last night. Apple's up two
Speaker 1: point six percent today. Uh, And we were reminding everybody that,
Speaker 1: you know, you really do want to listen to the
Speaker 1: conference calls and see if we you know, either how
Speaker 1: they try to walk back the quarter or provide some optimism.
Speaker 1: But it's not like they fell off a cliff either.
Speaker 1: Google is still down about three point six percent, and
Speaker 1: Amazon and mental check on the trade it is down well,
Speaker 1: Amazon's down nine So that's pretty severe. Um. I don't know,
Speaker 1: is there a net net in terms of what we
Speaker 1: got from the three of them? Yeah, I mean I
Speaker 1: think yesterday we saw you know, the company executive sort
Speaker 1: of giving out the excuses that you know that for
Speaker 1: their businesses performance. You know, Apple talked a lot about
Speaker 1: how because of the strength of the dollar and sort
Speaker 1: of their supply chain issues UM, which are global those
Speaker 1: were impacted UM alphabet UM, you know, sort of talked
Speaker 1: about UM how economic headwinds were impacting the business, UM
Speaker 1: as its search products, of maturing and it it really
Speaker 1: tries to spin things forward, emphasizing their AI products and
Speaker 1: and talking about what's to come. But I think another
Speaker 1: piece of context here is that these companies are sort
Speaker 1: of down relative to the year ago period, which was
Speaker 1: when everyone was sort of you know, still in the
Speaker 1: middle of the pandemic. There was like flush demand at
Speaker 1: that time, and all of these companies were flying really high,
Speaker 1: and so comparing it to this time one year ago,
Speaker 1: I think is is kind of a tough comparison when
Speaker 1: you when you think about it that way. Yeah, that's
Speaker 1: a really good point. Um, Davey, I'm not in trouble
Speaker 1: making sense of Apple today. It was I'm going to
Speaker 1: read what Mark Irman wrote on the live blog here, okay,
Speaker 1: because this is like, you know, Mark knows a thing
Speaker 1: or two about Apple. Apple had an overall miserable quarter.
Speaker 1: Revenue dropped five percent year over year, including declines for
Speaker 1: the iPhone, Mac wearable's, home and accessories. The miss Wall
Speaker 1: Street estimates for those categories along with overall revenue. Uh
Speaker 1: yet shares up two points six right now, that's resiliency.
Speaker 1: What's going on. I think it just speaks to Apple's
Speaker 1: reputation as a company that you know, for all intense,
Speaker 1: like basically it's just so in the mainstream, um wild
Speaker 1: demand was not exactly you know, sort of what they
Speaker 1: wanted in in the last few months. It's something that
Speaker 1: they can sort of be picking up. And I think
Speaker 1: that the stock market knows that Apple is just a
Speaker 1: very strong company and so we're seeing sort of the
Speaker 1: effects of that. Now. Yeah, it's interesting. Um, I'm thinking
Speaker 1: about the nasdac man the pop up, you know, yeah,
Speaker 1: the new nasdack Uh, Kathy would call it, which is
Speaker 1: kind of interesting, right, And I mean, I don't know,
Speaker 1: how do you you know, Davy, It brings up a
Speaker 1: good point him because Kathy does look forward to who
Speaker 1: will be kind of the next players that will be
Speaker 1: very dominant in some of the developing technologies. And it
Speaker 1: does make me think about you know, Apple, Google, met up,
Speaker 1: met is going through its own transformation. They got a
Speaker 1: big pop this week, but you know, time will tell
Speaker 1: whether this bet really makes sense. I'm trying to pull
Speaker 1: this up on the go ahead, David, I was trying
Speaker 1: to pull this up on the terminal, and I think
Speaker 1: probably you and I are going to go to the
Speaker 1: same place, which is the comments from UH from Alphabet,
Speaker 1: from Google CEO, Alphabet CEO Sunder. Yeah about AI. You know,
Speaker 1: I think there are a few things here, UM half
Speaker 1: companies for better or worse or obviously at the cutting
Speaker 1: edge of you know, sort of developments that underpin businesses
Speaker 1: moving forward. And you know UH Sun Dark, which I
Speaker 1: talked a lot about. Alphabet's UM commitment to AI so
Speaker 1: much so that they're actually breaking out Deep Mind, which
Speaker 1: is it's AI sort of division UM in the next
Speaker 1: company earnings as its O and UH line on on
Speaker 1: the company earning support UM. And they're also you know,
Speaker 1: making all sorts of moves like investing in Anthropic, which
Speaker 1: we reported on today. That's sort of an AI startup
Speaker 1: in this new field of generative AI. UM. If if
Speaker 1: you're not familiar with that, UM, think about chat GPT.
Speaker 1: That's generative AI because it generates text and and and
Speaker 1: other content based on a prompt UM. So that's kind
Speaker 1: of spinning it forward UM. And yeah, I think you
Speaker 1: know the future for these companies, UM looks possibly good.
Speaker 1: The other piece of context is just that there was
Speaker 1: so much on these earning calls about efficiency, about sort
Speaker 1: of UH slowing hiring, UM, making more strategic UM moves.
Speaker 1: As as the next year comes comes UM towards us.
Speaker 1: You know, they Mark Zuckerberg talked about kind of this
Speaker 1: being the year of efficiency for Facebook UM and and
Speaker 1: I think that that's something that the companies will really
Speaker 1: double down on, especially after we saw these waves of
Speaker 1: layoffs in the past few months. Well, I want to
Speaker 1: point to the story, and you mentioned this, the story
Speaker 1: that that you and and Dina wrote about Google investing
Speaker 1: almost four hundred million dollars in that AI start up.
Speaker 1: Four million dollars. That's that's serious money. I mean, that's
Speaker 1: that's like, it's not you know, pivoting to the metaverse money,
Speaker 1: but it's but it shows that that Google is taking
Speaker 1: this very seriously. Yeah. Absolutely, And you know they've also
Speaker 1: talked about their large language models, sort of their answer
Speaker 1: to chat GPT coming out in the coming months. UM.
Speaker 1: You know, million is a lot of money, that's true,
Speaker 1: but it's actually pretty small when you think about Microsoft's
Speaker 1: investment in open AI, which makes chat GPT, which was
Speaker 1: ten billion, you know that that we reported just last month,
Speaker 1: and that builds upon earlier investments of about a billion, so,
Speaker 1: you know, I think another thing to think about is
Speaker 1: how these giant tech companies are partnering with smaller AI
Speaker 1: startups to sort of stay at the cutting edge and
Speaker 1: forefront of these buzzy new AI products UM which also
Speaker 1: in turn needs them for computing power and resources and
Speaker 1: cloud cloud capabilities, that sort of thing. So it's kind
Speaker 1: of a happy partnership for for these companies. At this point,
Speaker 1: AI is not a new thing. What just happened though
Speaker 1: TV and just got about thirty seconds. Yeah, yeah, you know,
Speaker 1: I think is that these chat spots have just made waves,
Speaker 1: and I think that they've been marketed very smartly UM
Speaker 1: and taken hold on social media. The underlying technology is
Speaker 1: actually not that new, you know. If you look at
Speaker 1: AI experts talking about these chat spots, you know they've
Speaker 1: been around for a while. But the fact that anyone
Speaker 1: can use chat ubt now and millions of people around
Speaker 1: the world are UM, I think that speaks to sort
Speaker 1: of it really breaking into the mainstream these days. Well,
Speaker 1: we definitely are talking a lot about it Uh, Davey,
Speaker 1: thank you so much. Davey Alba Technology putter up Bloomberg
Speaker 1: News on the phone from New York City. This is
Speaker 1: Bloomberg business Week Inside from the reporters and editors who
Speaker 1: bring you America's most trusted business magazine, plus Blombo Business
Speaker 1: Finance and tech news. The Bloomberg Business Week Podcast with
Speaker 1: Carol Manser and Tim Stinebec from Bloomberg Radio. Yesterday, we
Speaker 1: had a very deep dive with Kathy would of our investment.
Speaker 1: She was all over her big ideas of fifty pages
Speaker 1: of big ideas, and it included five innovation platforms that
Speaker 1: are converging to create unprecedented growth trajectories. One of the
Speaker 1: platforms public block chains. In our weekly Crypto segment, our
Speaker 1: next guest test some thoughts on building better blockchain hardware.
Speaker 1: He's Michael Gao, founder and CEO at the cryptography hardware
Speaker 1: tech company Fabric Systems. He joins us via zoom from Lafayette, California. Michael,
Speaker 1: good to have you with us. How are you great?
Speaker 1: How are you? I'm doing pretty well. So explain what
Speaker 1: exactly you do at Fabric Systems. Because when people think blockchain,
Speaker 1: they don't think of something physical, but you're working on
Speaker 1: building a better, better blockchain hardware, and that of course
Speaker 1: is physical. Well, yeah, that's exactly right. So what Fabric
Speaker 1: Systems builds is Fabric is building much faster computers designed
Speaker 1: from the ground up, specifically for next generation cryptography algorithms.
Speaker 1: And when I say cryptography, I mean cryptography and not cryptocurrency.
Speaker 1: And there's a very very big difference there, and we're
Speaker 1: gonna talk about that. We'll dig a little bit deeper,
Speaker 1: um into what you mean specifically, and more of what
Speaker 1: your company has involved in. Yeah. Sure. So the main
Speaker 1: algorithms that we accelerate are zero knowledge proofs and fully
Speaker 1: homomorphic encryption, and basically those are mouthful. But what zero
Speaker 1: knowledge proofs are is, imagine that you walk into a
Speaker 1: liquor store, right, and let's say they card you. You
Speaker 1: show them your driver's license, but basically you're showing them
Speaker 1: your home address, you're showing them your real age, You're
Speaker 1: showing them all these things that you don't want to
Speaker 1: show the liquor store clerk, right, And so what zero
Speaker 1: knowledge proofs are is it's the equivalent of showing just
Speaker 1: a certificate that a certain statement is true. For example,
Speaker 1: I'm over twenty one, and this has a host of
Speaker 1: applications in and out of blockchain. In the blockchain, it
Speaker 1: helps the blockchain link up to real world applications like
Speaker 1: credit scores, insurance scores, you know, bank accounts, things like that,
Speaker 1: and makes blockchain actually be able to be useful for
Speaker 1: real world applications. But even outside of the blockchain, you
Speaker 1: can think of it as a new point on the
Speaker 1: privacy trade out curve where you know, government regulators can
Speaker 1: enforce laws without invading privacy. And so it's it's this
Speaker 1: really exciting set of algorithms that cryptographers has developed really
Speaker 1: really recently and have just gotten practical enough to the
Speaker 1: point where people can deploy them. Where are you seeing
Speaker 1: this technology deployed right now? Right now? It's on the verge,
Speaker 1: so you know, it's not really anywhere right now, And
Speaker 1: the main reason is that it's just not fast enough.
Speaker 1: So in order to prove, for example, that your creditsc
Speaker 1: is at least seven fifty or something like that, you
Speaker 1: would have to wait twelve seconds on a really really
Speaker 1: powerful Intel processors. So that's why we're building, you know,
Speaker 1: much faster computer specifically for these Well, it's interesting too
Speaker 1: and I think we lump everything together, and I mean
Speaker 1: blockchain with anything and everything crypto. There are distinctions to
Speaker 1: be made because I do think about, you know, the
Speaker 1: impact of the f t X fallout, UH and coming
Speaker 1: undone and Samuel sam Bankman free to what impact that
Speaker 1: has had on you as you move forward and on
Speaker 1: the work that you're doing. It's actually a tremendously positive impact.
Speaker 1: The thing I always say to people is that crypto
Speaker 1: is a problem for regulators. Cryptography is a solution. So
Speaker 1: for example, you know all these centralized exchanges in the
Speaker 1: supposedly decentralized finance world like f t X. You know
Speaker 1: all these exchanges that were essentially taking people's money, promising
Speaker 1: them an interest rate and not being able to pay it.
Speaker 1: It's a classic Bonzi scheme, right, and that has nothing
Speaker 1: to do with cryptography. So what cryptography is is a
Speaker 1: solution to those problems. So if zero knowledge proofs have
Speaker 1: been around, and you know, exchanges were using them in
Speaker 1: the time of the ft X, then exchanges would be
Speaker 1: able to prove that they have a certain amount of
Speaker 1: reserves and they can cover all their liabilities. That's actually
Speaker 1: a solution, not a problem. We should note that Sam
Speaker 1: Bakman free is still awaiting trial at this point. Uh,
Speaker 1: but a lot of the allegations that that you mentioned
Speaker 1: have been allegations that have been made by officials at
Speaker 1: this point. Um, go ahead, Carol, No, no no, no, go ahead, Michael.
Speaker 1: I was wondering about the hardware here, because when when
Speaker 1: we think about hardware that's using crypto, we think about
Speaker 1: hardware from from like the big huge names right in video. Um,
Speaker 1: and you think about computers that that use those chips.
Speaker 1: Where is your what is your technology when you say
Speaker 1: you're building a better computer, what are you building and
Speaker 1: who who are you competing with? And how can you
Speaker 1: compete with those companies? Yeah, we're I mean our main competition,
Speaker 1: as you said, it is in video and we're basically
Speaker 1: the video of cryptography. So in video focuses on video games,
Speaker 1: on AI, on graphics rendering, and on a host of
Speaker 1: very important applications. And what we do is we focus
Speaker 1: on cryptography, and by building the computer specifically just for cryptography,
Speaker 1: we're able to achieve better performance on those algorithms at
Speaker 1: the cost of, you know, for example, being worse at
Speaker 1: a I computation, which we don't focus on. So talk
Speaker 1: to us about time development and kind of you know,
Speaker 1: it's interesting. Let me go back for a second, because
Speaker 1: I think when all of this was starting, this was
Speaker 1: like pre pandemic. Blockchain made a lot of sense to
Speaker 1: me because I just think about that there's a lot
Speaker 1: of documents or transactions, there are things that we could
Speaker 1: cut out middleman middle people if you will, um that
Speaker 1: it makes a lot of sense. But it feels like
Speaker 1: there hasn't been as much momentum. Has there not been? Yeah,
Speaker 1: So the problem with the blockchain as it stands is
Speaker 1: that there are all these unfulfilled promises that were promises
Speaker 1: made at the outset. When I got into a bitcoint
Speaker 1: back in you know, we were all talking about this
Speaker 1: that you know, one day we would cut out the
Speaker 1: middleman and you know, financial transactions and credit cards and
Speaker 1: all these things, and there were just wasn't the technology
Speaker 1: from the cryptography perspective to make that happen. So, for example,
Speaker 1: Bitcoin can process a couple transactions per second, Visa can
Speaker 1: process the hundred thousand transactions per second, and only by
Speaker 1: using these next generation cryptography tools like ser knowledge proofs,
Speaker 1: can we actually use the blockchain and actually hit those
Speaker 1: you know, transaction throughputs to name just one example. Right,
Speaker 1: but even in the traditional finance industry, if you think
Speaker 1: about margin engines and under collateralized lending and all these
Speaker 1: different things, you know, you can't run those on a
Speaker 1: smart contract right now. The computational limit is just too low. Um.
Speaker 1: So that's why we're building dedicated hardware to actually fulfill
Speaker 1: the promise of blockchain, because in the absence of being
Speaker 1: able to fulfill those promises, the blockchain space has been
Speaker 1: you know, kind of written with bad actors and scams
Speaker 1: and frauds because they can't really make something that's actually useful.
Speaker 1: And so we actually want to make blockchain. Hey, Michael,
Speaker 1: you're joining us from California. What does your supply chain
Speaker 1: look like? Where is it? Where do you get where
Speaker 1: do you get components? Yeah, so we have a really
Speaker 1: really great relationship with major semi conductor fabricator in Taiwan.
Speaker 1: I'm sure you can think of which one that is.
Speaker 1: Does it does it start with the T, start with
Speaker 1: the t uh and then you know, those chips get
Speaker 1: fabricated and sent to um contract manufacturers in Southeast Asia,
Speaker 1: and then after that, you know they come back uh,
Speaker 1: you know, in fully assembled system. For does the supply
Speaker 1: chain at all go through China? No, that something is
Speaker 1: that intentional for you? It's really important in these times,
Speaker 1: you know, like when when everyone's trying to decouple their
Speaker 1: supply chain, you don't want to be the one left
Speaker 1: holding the bag. Hey, Michael. One thing I do wonder
Speaker 1: um is in terms of regulation and oversight, and sometimes
Speaker 1: maybe we do need a middleman to make sure things
Speaker 1: don't go astray. So I do wonder what needs to
Speaker 1: be in place regulatory wise for blockchain to really find
Speaker 1: kind of its full potential. Oh, that's a really good topics.
Speaker 1: So basically we've actually been talking to some regulators about this,
Speaker 1: but there's potential for regulators and actually blockchain applications to
Speaker 1: cooperate and strengthen regulation through algorithms. So one example is,
Speaker 1: you know, the SEC could require people to post that
Speaker 1: zero knowledge proofs that actual you know, financial statements are accurate.
Speaker 1: They could require people to provide zero knowledge proofs of leverage,
Speaker 1: or they could provide, you know, zero knowledge proofs that
Speaker 1: if the bank goes through uh, you know, major financial calamity,
Speaker 1: that it will be okay. Right, So you can even
Speaker 1: conduct stress tests using zero knowledge proofs, without having to
Speaker 1: reveal your sensitive positions and all that information, and without
Speaker 1: having auditors just standing in the room looking at you. Right.
Speaker 1: So it's it's really powerful. I it's a huge opportunity
Speaker 1: for regulators to finally be able to enforce many laws
Speaker 1: that otherwise are unenforceable because of privacy concerns, because of
Speaker 1: cost concerns, because of industry pushback. You know. It's a
Speaker 1: case where we can cut the red tape, you know,
Speaker 1: but still have regulations that really have teeth. Michael, thank
Speaker 1: you so much, really appreciated. He is chief executive officer
Speaker 1: of Fabric Systems. Joining us via zoom via zoom. Excuse
Speaker 1: me from Lafayette, California. You're listening to the Bloomberg Business
Speaker 1: Week podcast. Catch us live week days from two to
Speaker 1: five pm Eastern on Bloomberg Radio, The Bloomberg Business and
Speaker 1: you too. You can also listen live to our flagship
Speaker 1: New York station, Just Say Alexa play Bloomberg E Love
Speaker 1: and Dirty Journal. Yeah but you let me drive. Oh no,
Speaker 1: no, no no, no, honey, please do the revels. I want
Speaker 1: to drive. Good question. This is the Drive to the
Speaker 1: Clothes on Bluebird Radio. All right, everybody. We've got less
Speaker 1: than seventeen minutes left in today's trading session, and it's
Speaker 1: been an interesting one in a week that has just
Speaker 1: been full of so much. Of course, a monthly jobs report,
Speaker 1: and you are seeing stocks well off their best levels
Speaker 1: of the S session, the tech names taking it hard,
Speaker 1: hardest hit really, if you will, at a percentage basis,
Speaker 1: down about one and a half percent. Tim we're still
Speaker 1: up more than three percent on the NAZAC for the
Speaker 1: week over and up one point six percent on the S.
Speaker 1: I'm confused. I'm confused about the reaction today's jobs number
Speaker 1: between that the other economic data that we got. We
Speaker 1: get the Jolts data that we got earlier this week,
Speaker 1: and of course we heard from FED J. J. Powell.
Speaker 1: It seems that, you know, certainly the bulls are winning,
Speaker 1: and given that strength of the job's report today, I'm
Speaker 1: surprised to see not I'm surprised that I'm not seeing
Speaker 1: more of a sell off. I think, you know, talking
Speaker 1: about this this earlier with Scarlett Um and also with
Speaker 1: John Tucker downstairs. Yeah, he made a good point that
Speaker 1: wage growth was in line with expectations, and maybe that
Speaker 1: has people kind of tempered. That's one of the things
Speaker 1: I heard Mike McKee talk about earlier that in terms
Speaker 1: of wage gains, and I think Molly mentioned it to
Speaker 1: up but less than the month before. And so if
Speaker 1: we're seeing those wage pressures go away, that would be
Speaker 1: a big thing. That's the inflationary component to it. But
Speaker 1: how does wage pressure again, you always remind me this
Speaker 1: is backwards looking. Uh, how does wage pressure go away
Speaker 1: when there are still almost two jobs for every one person? Looking,
Speaker 1: people can just easily jump from one job to another job,
Speaker 1: and that's the best way to get a raise. If
Speaker 1: people are getting nervous, maybe they don't push so much. Um.
Speaker 1: But let's see what it all means potentially when it
Speaker 1: comes to the investment environment. So let's get to it.
Speaker 1: Let's get to the drive to the clothes. Vance Howard
Speaker 1: is back with us. He's CEO and portfolio manager at
Speaker 1: the fee only registered investment advisor, Howard Capital Management. He
Speaker 1: joins this via zoom from Roswell, Georgia. Hey, Van's nice
Speaker 1: to have you back with Tip and myself. What a week.
Speaker 1: I am exhausted. Tim's exhausted. It's a little crazy. Um,
Speaker 1: how do you see all of what came out investors,
Speaker 1: including the big tech earnings, the f O m C meeting,
Speaker 1: the jobs report. Sum it up for it what it
Speaker 1: means for potentially the markets, financial markets. I think it's great.
Speaker 1: I mean, I think that we've turned the corner. You know,
Speaker 1: our proprietary indicated the h c M buyline went positive
Speaker 1: about two and a half weeks ago. This is it
Speaker 1: went negative in January two. So we've sat in a
Speaker 1: whole lot of cash up until the past two or
Speaker 1: three weeks, and we've been buying the S and P
Speaker 1: wanted bo The two day move an average show on
Speaker 1: a technical basis, I think you've got to put aside
Speaker 1: a lot of the news out there and start trading
Speaker 1: what actually is happening in the markets, which is what
Speaker 1: we're doing, and we're buying. We've been buying a quite
Speaker 1: a number of things. We've moved from about to cash
Speaker 1: now to about in cash, and we'll continue to buy
Speaker 1: into any dips that we're seeing. You know, today's sent
Speaker 1: cash cash. How quickly did you move on that all?
Speaker 1: About about five to ten days, And so we started
Speaker 1: buying quite a bit of things over the past two weeks,
Speaker 1: and we've even stirred buying back the bonds. Our bond
Speaker 1: indicator went positive too, so we started buying you know,
Speaker 1: emerging market bonds and long term treasuries. What was it
Speaker 1: that shifted in this rally, Because we've seen other other
Speaker 1: rallies over the last year, and they've been false starts.
Speaker 1: We're not saying that this one's not well me either.
Speaker 1: I'm not saying that either, but you have to trade
Speaker 1: what actually is going on in the trend has actually changed.
Speaker 1: We did have a false start about the you know,
Speaker 1: right after the February March area when the market wanted
Speaker 1: to rally right up after that big sell off, But
Speaker 1: other than that, it's pretty much been kind of downhill
Speaker 1: the whole way down, with a few minor adjustments, you know,
Speaker 1: with a few minor buying opportunities that would present themselves
Speaker 1: to see a short term trader. But this is the
Speaker 1: first time in the whole year that we've seen the
Speaker 1: longer term trend turned back up, not the short and
Speaker 1: the intermediate term, but the longer term trend. That's a
Speaker 1: very very positive indicator right there. And I can tell
Speaker 1: you right now with the eh C M bodolne being positive,
Speaker 1: your odds are seventy three percent, chances going higher twenty
Speaker 1: seven percent. We get whipsaw, so at a seventy three
Speaker 1: ants of moving higher, you take that trade, you start buying.
Speaker 1: All right, you gotta take a step back. For those
Speaker 1: who maybe didn't hear you last time you talk about
Speaker 1: this HCM by line, I know it's proprietary, but what
Speaker 1: can you tell us about it? Um? You know that
Speaker 1: it's an indicator that looks at what so that our
Speaker 1: audience kind of has an idea of, um, what maybe
Speaker 1: triggers it? Yeah, nothing complicated. It's a trend indicator. It's
Speaker 1: just it's a very uh, very sophisticated trend indicator that
Speaker 1: has a high level of accuracy. And like I said,
Speaker 1: it turned negative in January. January of two twenty two.
Speaker 1: Of course we sat in a whole lot of cash,
Speaker 1: but we're still a rotten year for everybody, even if
Speaker 1: you're sitting in a lot of cash. And then of course,
Speaker 1: but this is the first confirmed BOS signal that we've
Speaker 1: had on the longer term trend of the h C
Speaker 1: on boline. This is a very positive thing. So all
Speaker 1: this news that's coming out, I tell people, you've got
Speaker 1: to trade what's happening right now, because we don't know
Speaker 1: what's going to happen tomorrow. Yesterday's gone, the trends up,
Speaker 1: you gotta start taking trades. Well, it does happen next week,
Speaker 1: because we do. Hear from a lot of FETE officials
Speaker 1: next week, including j Powell. And I've got to think,
Speaker 1: given his reaction to financial conditions easing, his his reaction
Speaker 1: to rallies over the last year, sometimes he comes out
Speaker 1: and squashes them or says things that squashed them. Well,
Speaker 1: you know, he came out of the twenty five basis
Speaker 1: point higher right there, and that was just a wonderful
Speaker 1: thing that the his rhetoric that he had wasn't that
Speaker 1: negative towards the market. I think he feels pretty good
Speaker 1: about inflation starting to calm down. When you look at
Speaker 1: the PC index that's starting to roll over. That's been
Speaker 1: a big key thing that that fed fear pal has
Speaker 1: been looking at. So I think you've got a lot
Speaker 1: of great things going on here. And the cash build up, guys,
Speaker 1: I'm telling you, we watched cash build up. This is
Speaker 1: the largest amount of cash build up I've ever seen
Speaker 1: in thirty five years of doing this. So this thing's
Speaker 1: got a lot of fuel to go higher. And if
Speaker 1: we what metric, what what specific metric are you watching
Speaker 1: when it comes to a cash build up. We look
Speaker 1: at a number of different things as far as cash
Speaker 1: build up, you know, money market flows that are going
Speaker 1: to just money market accounts. We try to look at that,
Speaker 1: and that number has been very, very high. So there's
Speaker 1: a lot of investors with a lot of cash. And
Speaker 1: you gotta remember too, this is the first year and
Speaker 1: forty years rere bonds have just taken an absolute beating.
Speaker 1: So you saw a lot of investors sell bonds and
Speaker 1: going to cash. But now they're ready to go back
Speaker 1: into the bond market, are ready to come back into
Speaker 1: the stock market, and I think that's gonna be a
Speaker 1: real big positive going forward. In Hey, looking at your
Speaker 1: buy list, a couple of things jump out. I shares
Speaker 1: US Technology E t F also the I share Semiconductor
Speaker 1: E t F. So you're all in it, sounds like
Speaker 1: when it comes to tech, Yeah, we were buying those
Speaker 1: two weeks ago, so we've had a pretty good run.
Speaker 1: You know, the past two weeks have been very kind
Speaker 1: to us UM and I do like the the E
Speaker 1: T S better. Let me tell you why. I think
Speaker 1: that some of these stocks are gonna take really have
Speaker 1: nice powerful jumps up, but they're also gonna take a
Speaker 1: beating and if they miss on any like look at
Speaker 1: Snaps and got just beaten to death over there for
Speaker 1: their earnings. I think you're better off broadening it out
Speaker 1: with an e t F and not taking individual stock
Speaker 1: risk in a market like this because a lot of
Speaker 1: people were hurt in two, a lot of fear out there,
Speaker 1: so just any kind of negative news shocks people and
Speaker 1: they'll they'll pull the ripcord pretty quick on an individual
Speaker 1: equity fans, good stuff. Love having you on the program.
Speaker 1: Let us know when you're back in New York. It
Speaker 1: was to get you in the studio last time. To
Speaker 1: appreciate you taking my time, alright, Vance Howard, He's chief
Speaker 1: executive officer, portfolio manager and Howard Capital Management. Via zoom
Speaker 1: from Roswell, Georgia. This is the Bloomberg Business Week podcast,
Speaker 1: available on Apple, Spotify, and anywhere else you get your podcast.
Speaker 1: Listen live each weekday starting a two pm Eastern on
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Speaker 1: terminal