WEBVTT - Three Things to Focus On, Three Things to Ignore, Virtual Reality in Focus 0:00:00.160 --> 0:00:03.760 This is Bloomberg Business Week with Carol Messer and Jason 0:00:03.840 --> 0:00:10.280 Kelly on Bloomberg Radio. That three times that, three six 0:00:10.440 --> 0:00:16.280 and then no sound. There evidently are three core principles. 0:00:16.720 --> 0:00:19.600 That's why there is a three Things song joining us 0:00:19.600 --> 0:00:22.840 here in our interactive broker studios. Vinny Catalano, chief investment 0:00:22.880 --> 0:00:26.520 officer at Red Mount Capital Partners, also co founder and 0:00:26.560 --> 0:00:30.680 member of Adriatic Capital Partners. So, Vinny, what are these 0:00:30.800 --> 0:00:33.280 three core principles that we need to pay Okay, you 0:00:33.360 --> 0:00:36.600 start with the three core principles. Number one, professional investors 0:00:36.840 --> 0:00:41.800 are the markets. So it's best to know if you're 0:00:41.800 --> 0:00:46.479 going to swim with the sharks shark behavior, Okay, and 0:00:46.560 --> 0:00:50.640 so that's core principle number one. Principal Number two is 0:00:50.720 --> 0:00:55.680 that professional investors actions must be justified. They cannot go rogue. 0:00:56.080 --> 0:00:59.680 Even going rogue and being successful can be problematic for 0:00:59.720 --> 0:01:04.000 a essional investor. Why because there's a defined methodology and 0:01:04.040 --> 0:01:09.040 if they don't follow that defined methodology, management, asset managers, 0:01:09.280 --> 0:01:13.520 management will have a problem with them doing whatever they 0:01:13.560 --> 0:01:16.319 want to do, even if they are successful. And then 0:01:16.319 --> 0:01:19.200 the third core principle is that you as an investor 0:01:19.560 --> 0:01:22.200 want to exploit this behavior as best that you can. 0:01:23.319 --> 0:01:25.880 The expression the quote I like to refer to us 0:01:25.920 --> 0:01:28.920 from enemy of the state, and and that quote is 0:01:29.000 --> 0:01:32.000 if they're big and you're small, then you're a mobile 0:01:32.240 --> 0:01:36.360 and they're slow. You're hidden and they're exposed. So this 0:01:36.520 --> 0:01:39.440 is good for an individual investor if he or she 0:01:39.600 --> 0:01:43.080 knows how to play the game and to exploit the system. 0:01:43.120 --> 0:01:45.600 Those are the three core principles for starters. So what's 0:01:45.640 --> 0:01:49.120 an individual investors really focus on? There's so much information 0:01:49.160 --> 0:01:50.400 out there, and if they're sitting in front of a 0:01:50.400 --> 0:01:55.680 Bloomberg terminal, tremendous amounts of information at their fingertips. Should 0:01:55.680 --> 0:02:00.400 they be focusing on earnings, company management's macro stuff, trade? 0:02:00.440 --> 0:02:02.640 What should they be focusing on? They should be focusing 0:02:02.680 --> 0:02:05.200 on what professional investors focus on, which is going to 0:02:05.240 --> 0:02:08.840 be the inputs into the evaluation models. What are those 0:02:08.880 --> 0:02:13.720 inputs them? Mainly earnings, interest rates, and a degree of risk, 0:02:14.200 --> 0:02:17.239 and risk tends to be somewhat subjective, so that's a 0:02:17.280 --> 0:02:20.000 little bit problematic in that regard, But those are the 0:02:20.600 --> 0:02:24.440 three principles. So when you're looking at, for example, twelve 0:02:24.520 --> 0:02:27.440 months from now, what are earnings look like in the 0:02:27.480 --> 0:02:30.520 third quarter of next year, not bad. They look like 0:02:30.560 --> 0:02:34.680 a growth over So I guess that a key question 0:02:34.800 --> 0:02:38.919 recently has been what your timing is right? And as 0:02:38.919 --> 0:02:41.640 an investor, as an individual investor, it's one thing to 0:02:41.639 --> 0:02:43.079 do day trading. It's the other thing to have a 0:02:43.120 --> 0:02:46.919 six month horizon. It's another thing to do long term. 0:02:47.440 --> 0:02:49.600 How do you sort of advise all of the above, 0:02:49.639 --> 0:02:51.760 I mean, do you have clients that are trying to 0:02:51.840 --> 0:02:55.040 trade on a day to day basis. I have one 0:02:55.280 --> 0:02:58.079 client who does trade on a day to day basis, 0:02:58.639 --> 0:03:02.800 only one, And what he does is he focuses in 0:03:03.280 --> 0:03:07.720 on momentum. Now, if you are a short term trader, 0:03:07.960 --> 0:03:12.040 momentum is king okay because it will give you good 0:03:12.080 --> 0:03:14.960 indications of when you want to flow in and out 0:03:15.000 --> 0:03:19.800 with the money flow. But that really is more technical analysis, 0:03:20.600 --> 0:03:24.080 moving averages, things of that sort. And there are services 0:03:24.080 --> 0:03:25.720 that are out there that do that. But you can 0:03:25.760 --> 0:03:28.960 develop it yourself too, if you if you have the 0:03:29.000 --> 0:03:32.200 tools available. So many there are. There is so much 0:03:32.639 --> 0:03:37.480 noise out there, so much information. What investors actually ignore. Well, 0:03:37.680 --> 0:03:40.440 number one on the list of ignoring is going to 0:03:40.520 --> 0:03:47.440 be hard to quantify highly subjective type of UH metrics. 0:03:47.640 --> 0:03:51.680 For example, valuation that sounds like I'm doing double talking 0:03:51.840 --> 0:03:54.800 because I've referenced before what a professional investors and what 0:03:54.840 --> 0:03:57.120 do you want to concentrate on what they're looking at, 0:03:57.400 --> 0:04:00.400 which is the inputs into the valuation model of Okay, 0:04:00.440 --> 0:04:02.840 but what you need to be aware of is that 0:04:02.960 --> 0:04:06.480 valuation is highly subjective. It's like a rubber band. It 0:04:06.520 --> 0:04:10.040 can stretch and stretch and stretch. To John Maynard Kaine's quote, 0:04:10.040 --> 0:04:13.839 being irrational logan, and you can remain solvent those kinds 0:04:13.880 --> 0:04:17.719 of things, are you know, problematic valuation being one? Another 0:04:17.720 --> 0:04:21.479 one that's highly subjective is going to be investor sentiment. 0:04:22.120 --> 0:04:25.440 And this on my LinkedIn post generated a lot of 0:04:25.480 --> 0:04:29.600 interest and a lot of consternation a number of investors. 0:04:29.600 --> 0:04:31.640 What do you mean, you know, look at this tool, 0:04:31.680 --> 0:04:35.600 but there's a low probability of it of it being 0:04:36.200 --> 0:04:39.960 a decent climbing tool. You know, he was just looking 0:04:40.080 --> 0:04:43.800 at some SMP data showing the active managers have consistently 0:04:44.520 --> 0:04:48.800 underperformed the broader indexes. What a surprise. So, I mean, 0:04:48.920 --> 0:04:52.520 what's your the sort of sarcasm that is that is 0:04:52.560 --> 0:04:55.320 dripping all over your words? I mean, is your takeaway 0:04:55.320 --> 0:04:59.200 that investors should just steer clear of active strategies, not really, 0:04:59.279 --> 0:05:03.200 because you can plug in those active strategies into whatever 0:05:03.240 --> 0:05:06.680 your long time time arison is, whatever your risk tolerance is, 0:05:06.720 --> 0:05:09.160 whatever your goals and objectives are, and then you can 0:05:09.200 --> 0:05:12.479 plug in various different types of active strategies as long 0:05:12.520 --> 0:05:15.320 as if it's within the parameters of your goals and 0:05:15.360 --> 0:05:19.640 your expectations. Understanding of course, that if you have an 0:05:19.680 --> 0:05:23.520 active manager and that active manager is trying to quote 0:05:23.560 --> 0:05:27.760 beat the market or beat their bogies, so to speak, uh, 0:05:28.080 --> 0:05:31.840 don't be surprised if they don't. And that's, by the way, 0:05:32.200 --> 0:05:34.279 a big part of the reason why ETFs have been 0:05:34.400 --> 0:05:38.480 so successful over the years, because a lot of individual 0:05:38.520 --> 0:05:42.880 investors have gotten tired of the underperformance by active managers 0:05:43.120 --> 0:05:46.400 and they've gone to E t F route. In fact, 0:05:46.680 --> 0:05:51.760 now passive strategies in equities outpace the amount of money 0:05:51.800 --> 0:05:55.880 asked the management. In passive equity strategies now outpaces that 0:05:56.000 --> 0:05:58.440 in active strategies. Vinny Cadalina, thank you so much for 0:05:58.480 --> 0:06:01.599 being here with us. An Catlano's chief investment officer at 0:06:01.640 --> 0:06:04.800 Red Mound Capital Partners, also co founder and member of 0:06:04.880 --> 0:06:10.159 Adriatic Capital Partners. Joining us here in our Bloomberg Interactive brokers, 0:06:10.160 --> 0:06:19.080 studios to lives to reality, virtual reality impacting lots of 0:06:19.120 --> 0:06:22.320 businesses across the spectrum. I'm not sure people really understand 0:06:22.400 --> 0:06:25.240 some of the applications for virtual reality and how certain 0:06:25.279 --> 0:06:28.440 businesses and companies and services are are using virtual reality. 0:06:28.680 --> 0:06:30.360 To try and a little learn a little bit more, 0:06:30.400 --> 0:06:33.640 we welcome our next guest, Abbie Altberg, chief executive officer 0:06:33.720 --> 0:06:36.680 of Linden Lab, joining us on our Bloomberg nine sixties 0:06:36.680 --> 0:06:39.120 studio in San Francisco. Abbie, thanks so much for joining us. 0:06:39.240 --> 0:06:40.760 I wonder if you could just give us a little 0:06:40.800 --> 0:06:45.080 background on what your company, linden Lab, is all about. Hey, 0:06:45.440 --> 0:06:49.120 great to be here. Yeah, linden Lab makes it easier 0:06:49.160 --> 0:06:52.240 for people to create the world's they want. Um. We 0:06:52.320 --> 0:06:57.120 build the platforms and tools and ecosystems and financial systems 0:06:57.160 --> 0:06:59.840 to make it possible for people to create worlds in 0:07:00.080 --> 0:07:03.400 vite people into their worlds and have all kinds of 0:07:04.120 --> 0:07:09.000 entertainment or business activities, uh, and make money doing it. So. 0:07:09.040 --> 0:07:15.720 The company linden Lab was founded in lots changed since then. 0:07:15.840 --> 0:07:18.560 I mean, what are what sort of the latest thing 0:07:18.800 --> 0:07:23.480 in virtual reality? Yeah, I mean we've Second Life, our 0:07:23.560 --> 0:07:26.960 first product has not been in the market for over 0:07:27.040 --> 0:07:29.680 sixteen years and it's still going strong. Is this sort 0:07:29.720 --> 0:07:35.280 of the most you know, uh interesting virtual world ever created? UM, 0:07:35.360 --> 0:07:39.040 And the subject matter in there is extremely diverse, from 0:07:39.040 --> 0:07:43.400 healthcare to education, to entertainment and businesses of all kinds. 0:07:44.120 --> 0:07:46.960 And with this new wave of new technologies like virtual 0:07:46.960 --> 0:07:50.800 reality headsets and a lot of investments from bigger players 0:07:50.920 --> 0:07:55.679 entering UM, it's it's advancing rather quickly, although it's still 0:07:55.720 --> 0:07:59.680 feels slow, but it's it's uh. The immersion you can 0:07:59.720 --> 0:08:02.880 have by doing it in virtual reality versus just looking 0:08:02.920 --> 0:08:06.880 at it on a screen is tremendously powerful and will 0:08:06.960 --> 0:08:10.600 ultimately impact almost everything human beings do. It'll just take 0:08:10.640 --> 0:08:14.320 a while, but we can see the signs, so be uh. 0:08:14.360 --> 0:08:18.160 I know you've done some brand partnerships with companies including Levi's, 0:08:18.280 --> 0:08:21.520 Virgin Records, Spinning Records, and so on. Just give us 0:08:21.520 --> 0:08:24.360 an example of kind of what that looks like. It's 0:08:24.520 --> 0:08:26.840 like a practical example of kind of how you interact 0:08:26.880 --> 0:08:30.200 with certain brands. Yeah, I mean, we help some of 0:08:30.240 --> 0:08:33.600 these brands build entire worlds that are in the spirit 0:08:33.640 --> 0:08:36.199 of their brand, and it gives them a really interesting 0:08:36.240 --> 0:08:39.360 way of engaging with their audiences and their fans or 0:08:39.440 --> 0:08:44.480 their customers. And for some brands, it's about merchandise, and 0:08:44.520 --> 0:08:49.080 we help them sell virtual goods through our marketplace, UH 0:08:49.280 --> 0:08:55.000 and so they can display uh Levi's UH gears. I 0:08:55.000 --> 0:08:58.000 can go by Levi's T shirts with maybe Hello Kitty 0:08:58.760 --> 0:09:02.880 UH branding on it. Um so. And for other partners, 0:09:03.000 --> 0:09:05.880 it's it's music brands where their artists can perform in 0:09:06.240 --> 0:09:11.360 very large stadiums in front of thousands and thousands of people. Um. 0:09:11.440 --> 0:09:14.560 And ultimately, you'll see more of the activities we take 0:09:14.559 --> 0:09:18.400 for granted happening in physical space also happening in virtual space. 0:09:18.440 --> 0:09:21.240 People still want to look good, still want to be entertained, 0:09:21.280 --> 0:09:23.720 still want to do business, and so all of the 0:09:23.760 --> 0:09:27.280 things human beings do will more and more actively being 0:09:27.320 --> 0:09:30.040 done in virtual space as well. So let's talk about 0:09:30.120 --> 0:09:34.600 the business aspect of this. I imagine that there is 0:09:34.640 --> 0:09:37.640 a lot of competition right now. UM, what is the 0:09:37.679 --> 0:09:41.800 competitive landscape like for you? Well, it's still early. Um, 0:09:41.800 --> 0:09:44.880 there's not that many companies that are really enabling people 0:09:44.920 --> 0:09:46.840 to create their own virtual worlds. There's a lot of 0:09:46.880 --> 0:09:50.840 games out there, but enabling people to create their own 0:09:50.840 --> 0:09:53.960 worlds and where they own the content they create and 0:09:53.960 --> 0:09:57.520 and can make a business out of it um without 0:09:57.559 --> 0:10:03.000 having to be a sophisticated engineering company. H is something 0:10:03.000 --> 0:10:06.640 that we're helping create basically democratized ability to express yourself 0:10:06.640 --> 0:10:08.760 in this medium and share it with the world and 0:10:09.160 --> 0:10:12.440 profit from that well. And how do you make money? 0:10:13.040 --> 0:10:17.439 You can create content, so assets that you know, avatars 0:10:17.559 --> 0:10:21.880 and clothing for avatars and or world assets. Like you 0:10:21.880 --> 0:10:24.000 you want to have trees in your garden and you 0:10:24.040 --> 0:10:27.000 want to buy them from the tree guy. So in 0:10:27.080 --> 0:10:29.880 Second Life we have a GDP that's close to half 0:10:29.880 --> 0:10:32.880 a billion dollar US So there's a lot of economic 0:10:32.880 --> 0:10:37.600 activity for products and services within the virtual world. So 0:10:37.760 --> 0:10:40.320 looking forward, what do you think is going to be 0:10:40.800 --> 0:10:43.960 sort of the next big thing in terms of virtuality? 0:10:43.960 --> 0:10:46.360 I mean, one of the fantastic things about your role 0:10:46.400 --> 0:10:47.880 is you get to sort of have a bird's eye 0:10:47.960 --> 0:10:51.360 view of all the different ways that people are developing 0:10:51.440 --> 0:10:55.320 these worlds. Where do you think it's going. Well, there, 0:10:55.559 --> 0:10:58.120 it's going to continue to advance at a rapid rate, 0:10:58.320 --> 0:11:02.079 both with vertical applications that are very specific to specific 0:11:02.080 --> 0:11:06.160 industries or specific use cases, as well as horizontal platforms 0:11:06.200 --> 0:11:09.080 that lower the bar of entry for more people to 0:11:09.160 --> 0:11:12.880 participate in this kind of a medium. Um, you know 0:11:12.960 --> 0:11:15.240 the number of companies today, it's not that hard to 0:11:15.240 --> 0:11:18.200 get a website up and running. By creating a virtual world, 0:11:18.840 --> 0:11:21.240 it's been quite hard for to do and it's been 0:11:21.320 --> 0:11:23.479 sort of in the hands of the experts and specialists. 0:11:23.480 --> 0:11:26.320 And we're lowering the bar for who can participate in 0:11:26.360 --> 0:11:30.840 this new way of creating content and have social interaction 0:11:30.880 --> 0:11:33.280 in the world. Maybe, Alberg, thank you so much for 0:11:33.320 --> 0:11:37.319 spending time with us. Alburg, chief executive officer of Lynden Lab, 0:11:37.600 --> 0:11:41.280 joining us from our Bloomberg nine sixties studio in San Francisco. 0:11:41.840 --> 0:11:45.560 And I have to think, uh that the idea of 0:11:45.760 --> 0:11:49.280 virtual reality is changing so dramatically in terms of how 0:11:49.320 --> 0:11:52.800 different UH industries are looking at it. In terms of 0:11:52.880 --> 0:11:56.440 I remember once I was speaking with one entrepreneur who 0:11:56.520 --> 0:12:01.920 is trying to create a robot the virtual reality to 0:12:01.960 --> 0:12:05.120 help seniors who lived alone feel like they were part 0:12:05.240 --> 0:12:09.319 of a community, basically a mobile you know, mobile individuals. 0:12:09.640 --> 0:12:12.000 So many cool applications. Yeah, you go to the Consumer 0:12:12.000 --> 0:12:14.200 Electronics Show in January and Las Vegas and there is 0:12:14.280 --> 0:12:18.040 virtual reality applications all over the place. So that the 0:12:18.040 --> 0:12:21.120 technology is really advancing quickly. Yeah, and the key is 0:12:21.240 --> 0:12:23.160 how do you democratize it? How do you sort of 0:12:23.320 --> 0:12:26.360 make it bleed into the mainstream in a way, uh 0:12:26.520 --> 0:12:28.880 that is palatable for the individual.