WEBVTT - Amazon Tries Prime Day … Again 0:00:02.240 --> 0:00:05.600 From the heart of where innovation, money and power collive 0:00:06.360 --> 0:00:10.880 in Silicon Valley and beyond. This is Bloomberg Technology with 0:00:10.960 --> 0:00:27.080 Emily Jay Imed Ludlow in New York in for Emily Chang. 0:00:27.160 --> 0:00:29.880 This is Bloomberg Technology coming up in the next hour. 0:00:30.040 --> 0:00:33.040 Tech continues to tumble, then as that one falls for 0:00:33.080 --> 0:00:36.159 a fifth day, it's worst streak since February, as angst 0:00:36.159 --> 0:00:40.199 amongst global central banks and a strong dollar grows. Plus, 0:00:40.400 --> 0:00:43.879 Amazon goes after deal hungry shoppers. As retailers braced for 0:00:43.920 --> 0:00:47.239 a lackluster holiday season, the econmost Giant will hold a 0:00:47.360 --> 0:00:50.320 second Prime Day sale this October. In the fight back 0:00:50.440 --> 0:00:54.440 against inflation. And is it a bird? Is it a plane? No, 0:00:55.000 --> 0:00:57.280 it's your delivery falling from the sky. We talked a 0:00:57.360 --> 0:01:01.480 zipline about the drone startucks, new sound technology, the latest 0:01:01.520 --> 0:01:04.760 play to win over regulators. We'll get to that in 0:01:04.760 --> 0:01:08.240 a moment, but first, Amazon's trying Prime Day again. The 0:01:08.240 --> 0:01:11.319 company is offering a two day early access sale on 0:01:11.360 --> 0:01:14.479 October eleventh and twelve, ahead of the holiday season. It's 0:01:14.520 --> 0:01:17.120 the first time it's done two Prime Day events in 0:01:17.160 --> 0:01:20.640 the same year. This as retailers across the world one 0:01:20.680 --> 0:01:24.520 of a slowdown in holiday shopping here to discuss Bloomberg's 0:01:24.600 --> 0:01:29.320 Spencer Soper Spencer, what's the play here from Amazon? Hey? 0:01:29.319 --> 0:01:31.959 Why not? You know, try to slap Prime Day on it, 0:01:32.000 --> 0:01:33.720 Try to get people excited, Try to get a bunch 0:01:33.720 --> 0:01:35.560 of them to your to your site, so as much 0:01:35.600 --> 0:01:37.360 stuff as you can. They definitely got a lot of 0:01:37.360 --> 0:01:39.360 merchants dealing with an inventory blood like a lot of 0:01:39.360 --> 0:01:41.360 other a lot of other retailers, they want to move 0:01:41.400 --> 0:01:43.200 into quickly and they want to try to get people's 0:01:43.200 --> 0:01:45.759 money before somebody else does. So we've got this kind 0:01:45.800 --> 0:01:48.760 of race going on of Christmas creeping earlier and earlier 0:01:48.760 --> 0:01:51.360 into the season. Was this a surprise that they would 0:01:51.360 --> 0:01:53.240 add a second Prime Day or did we know that 0:01:53.280 --> 0:01:55.960 it was in the works now? Really there were some 0:01:56.040 --> 0:01:58.200 reports about it about it happening. I think it was 0:01:58.240 --> 0:02:01.200 the precise day was really the the only the only 0:02:01.280 --> 0:02:04.360 news and that they're kind of rebranding it as uh 0:02:04.600 --> 0:02:07.360 as a Prime Early Access as as opposed to calling 0:02:07.360 --> 0:02:10.160 it Prime Day two because Prime Day two just doesn't 0:02:10.200 --> 0:02:13.400 sound fresh enough or something. You told us a little 0:02:13.400 --> 0:02:15.800 bit about inventories. You know, I think a lot of 0:02:15.800 --> 0:02:18.239 the sellers on Amazon had to do this juggling acts 0:02:18.320 --> 0:02:22.120 right of supply chain crunch getting things in the last 0:02:22.160 --> 0:02:24.360 holiday season. A lot of that didn't turn up until 0:02:24.400 --> 0:02:26.720 the middle of this year. So what's the risk here 0:02:26.760 --> 0:02:30.200 for the sellers on on the Amazon platform. Well, the 0:02:30.280 --> 0:02:32.160 risk is that they don't sell it, you know. So 0:02:32.240 --> 0:02:34.440 I think we're gonna see prices drop drop a lot 0:02:35.280 --> 0:02:39.480 on consumer goods, you know, on on nondiscretionary I'm sorry, 0:02:39.480 --> 0:02:42.800 on discretionary purchases, right, so, you know, and then and 0:02:42.840 --> 0:02:45.280 then they're trying to align with consumer case. A lot 0:02:45.280 --> 0:02:47.000 of things people want to past couple of years during 0:02:47.040 --> 0:02:50.320 the pandemic, they just don't want anymore. So, um, how 0:02:50.320 --> 0:02:51.839 do you entice somebody to buy that? If they don't 0:02:51.840 --> 0:02:53.160 want it, You've got to give him a great, great, 0:02:53.160 --> 0:02:55.520 great deal. So you know that that's going to be 0:02:55.560 --> 0:02:58.280 the danger there, And a lot of these merchants anticipating 0:02:58.320 --> 0:03:00.720 taking taking haircuts on a lot of the even retooling, 0:03:01.200 --> 0:03:04.360 retooling their product line to try to try to align 0:03:04.400 --> 0:03:08.120 better with with what people are buying. Now, what's the 0:03:08.280 --> 0:03:11.520 mood music been from Andy Jasse and Amazon about the 0:03:11.560 --> 0:03:15.200 state of the global consumer, about the economic pain that 0:03:15.240 --> 0:03:18.639 we're seeing around the world. They haven't given a whole 0:03:18.639 --> 0:03:20.639 lot of guidance on it or set a whole lot 0:03:20.919 --> 0:03:23.240 you know, they're still just trying to, uh, you know, 0:03:23.760 --> 0:03:26.760 promote their business, be the place to go for for deals, 0:03:26.840 --> 0:03:30.680 be the place to go for your holiday shopping, preach convenience, um, 0:03:30.760 --> 0:03:32.640 and just try to try to stand out, you know. 0:03:32.720 --> 0:03:34.920 So uh, you know, basically, it's just going to be 0:03:34.960 --> 0:03:37.520 a dog bite for every consumer dollar, and they want 0:03:37.520 --> 0:03:40.120 to They want to get everyone they can. I remember 0:03:40.120 --> 0:03:42.240 the conversation you and I were having last year. I 0:03:42.280 --> 0:03:45.400 was in London at the time. But Black Friday, Cyber Monday. 0:03:45.640 --> 0:03:48.800 What does the second Prime Day event mean in terms 0:03:48.880 --> 0:03:52.120 of how consumers spend with those kind of other traditional 0:03:52.160 --> 0:03:56.200 holiday shopping periods. Yeah, we don't know. If they're kind 0:03:56.240 --> 0:04:00.880 of borrowing tomorrow's spending today. I think a lot of 0:04:00.920 --> 0:04:03.080 this is retailers just racing realizing that people are probably 0:04:03.080 --> 0:04:05.560 gonna be coming up against the edges of their spending 0:04:05.600 --> 0:04:07.200 limits come to the holiday season. You know, it's like 0:04:07.200 --> 0:04:09.440 people are leaning on their credit cards to pay for 0:04:09.480 --> 0:04:11.640 things like food and fuel. You know, that's how they've 0:04:11.640 --> 0:04:13.880 been dealing with inflation. So come holiday season, they might 0:04:13.880 --> 0:04:15.960 not have a lot of room even on their credit cards, 0:04:16.279 --> 0:04:18.240 let alone money to spend. So I think they're just 0:04:18.279 --> 0:04:20.800 trying to lock those sales in while people still have 0:04:20.839 --> 0:04:22.960 money hey spend. So what are we hearing from the 0:04:22.960 --> 0:04:28.480 retailers themselves to have their small businesses on the Amazon platform. 0:04:28.520 --> 0:04:32.000 I've just said there, they're not expecting the best holiday. 0:04:32.040 --> 0:04:35.720 You know. Again, they recognize as an inventory glut. They 0:04:35.760 --> 0:04:37.560 know that they're competing with against a lot a lot 0:04:37.560 --> 0:04:39.560 of other sellers, so they're gonna have to pay for 0:04:39.640 --> 0:04:42.000 advertising to stand out. Then they're gonna have to have, 0:04:42.440 --> 0:04:44.960 you know, good discounts to get buyers, to compel buyers 0:04:45.000 --> 0:04:49.440 to buy. So they're not looking for a great holiday. Alright, 0:04:50.000 --> 0:05:01.520 spens a sofa, Thank you very much. Let's talk megacaps. 0:05:01.600 --> 0:05:05.360 Shares of Microsoft have dropped about year to date, almost 0:05:05.440 --> 0:05:08.120 double the decline Apple is seen in its stock, But 0:05:08.240 --> 0:05:12.040 research from Bloomberg Intelligence finds if you get the microscope out, 0:05:12.480 --> 0:05:16.719 Microsoft is outperforming the iPhone maker on almost every single 0:05:16.800 --> 0:05:21.039 financial metric and might be better positioned to survive a recession. 0:05:21.279 --> 0:05:24.039 Joining us to discuss is the author of that research. 0:05:24.080 --> 0:05:27.840 Bloomberg Intelligence, senior tech analysts and a rag Rona anag 0:05:28.120 --> 0:05:32.520 What is the thesis here? So the pizzas is very simple. 0:05:32.600 --> 0:05:34.880 When you look at the tech space, software has been 0:05:35.000 --> 0:05:37.560 killed quite a bit over the last one year or 0:05:37.560 --> 0:05:40.479 I would say nine months because of rising grade, because 0:05:40.520 --> 0:05:43.240 it's one of the highest growth sectors. And you know, 0:05:43.320 --> 0:05:47.320 we think Microsoft has been punished unjustly compared to the 0:05:47.400 --> 0:05:50.160 likes of Apple, who has performed better than in the 0:05:50.320 --> 0:05:52.880 same frame. And our pieces is if you look at 0:05:52.880 --> 0:05:55.840 the growth profile of Microsoft, it's better than Apple. If 0:05:55.880 --> 0:05:58.000 you look at the margin profile, it's better than Apple. 0:05:58.520 --> 0:06:01.000 And and finally, in most importantly, it is a lot 0:06:01.080 --> 0:06:05.719 less dependent or exposed to China than Apples. I think 0:06:05.720 --> 0:06:07.719 we have a bloom bag terminal a chart that shows 0:06:07.839 --> 0:06:11.120 us the twelve months price to earnings multiples on both 0:06:11.120 --> 0:06:15.680 Apple and Microsoft. Microstoft come down a little blow Apple 0:06:16.080 --> 0:06:19.920 in recent trading sessions. Our investors just sort of more 0:06:20.040 --> 0:06:24.839 focused on Microsoft's near term, what it's doing right now what, 0:06:25.040 --> 0:06:28.320 rather than what it could do. See I think in 0:06:28.400 --> 0:06:31.520 both cases, the Microsoft has not disappointed anybody in the 0:06:31.600 --> 0:06:33.680 last time I would see quartered and then think if 0:06:33.720 --> 0:06:35.960 you go into the next quarter, also, you know they 0:06:35.960 --> 0:06:38.120 haven't realized their guidance. Now dollar is going to be 0:06:38.120 --> 0:06:40.839 an issue, so translation risk is there and which we 0:06:40.880 --> 0:06:43.400 all know. But if you look at the constant guardency growth, 0:06:43.640 --> 0:06:46.400 we see no reason why Microsoft cannot grow twelve to 0:06:46.480 --> 0:06:49.200 fifty percent in constant guardency at least for the next 0:06:49.240 --> 0:06:51.840 two quarters. And even if we had a bad recession 0:06:51.880 --> 0:06:53.960 next year, you know, we still argue that it can 0:06:54.000 --> 0:06:56.920 grow north of ten percent in constant guardency. It has 0:06:56.960 --> 0:07:01.120 a very diverse portfolio of software prod from cloud to 0:07:01.320 --> 0:07:04.320 office to Windows and you know, a mixture of all 0:07:04.320 --> 0:07:07.160 of this. Should let should you know, allow them to 0:07:07.200 --> 0:07:10.480 grow north of Temple sent silicior into that idea of 0:07:10.560 --> 0:07:15.120 being recession prof or at least better positions to weather 0:07:15.160 --> 0:07:19.320 a recession. You know, Microsoft and Apple do have different businesses. 0:07:19.400 --> 0:07:23.520 Why is Microsoft better positions and weather a recession than Apple? 0:07:24.800 --> 0:07:27.440 So we argue that enterprises are in a better position 0:07:27.600 --> 0:07:30.360 than consumers are now. In the case of Apple, you know, 0:07:30.400 --> 0:07:32.920 Apple consumers in most cases are rich people and they 0:07:32.960 --> 0:07:35.600 will continue to buy Apple the iPhones. But if you 0:07:35.640 --> 0:07:38.240 look at a year, will be your growth comparison? You know, 0:07:38.240 --> 0:07:40.880 Apple's consensus if you just go by consensus for the 0:07:40.960 --> 0:07:44.080 next two years it's high single digits. If you look 0:07:44.120 --> 0:07:47.040 at Microsoft, it's going to be in low double didgets 0:07:47.120 --> 0:07:50.720 at least for that timeframe. So even without you know, 0:07:51.120 --> 0:07:53.679 diving deep into that, they can surprise on the upside 0:07:53.680 --> 0:07:56.120 because of cloud or because of any other reason. And 0:07:56.160 --> 0:07:59.520 this is not even accounting for the Activision acquisition going through. 0:08:00.160 --> 0:08:04.760 Microsoft is better position because of its enterprise presence. There's 0:08:04.840 --> 0:08:08.000 one key market there were all zeroed in on right now, 0:08:08.360 --> 0:08:12.679 and that's China. Where does China fit into this idea 0:08:13.240 --> 0:08:16.600 that Microsoft may be better position right now in some 0:08:16.680 --> 0:08:20.480 sense relative to Apple. So if you look at Apple, 0:08:20.520 --> 0:08:23.000 Apple is very exposed to the Greater China region and 0:08:23.320 --> 0:08:26.400 you know it generates over its revenue there, but more 0:08:26.440 --> 0:08:29.040 importantly from its supply chain. You know, bulk of the 0:08:29.080 --> 0:08:33.160 phones are assembled in that market. Any disruptions googlely because 0:08:33.200 --> 0:08:36.880 of you know, COVID reasons, are any to your political tensions, 0:08:36.920 --> 0:08:39.960 you know, Apple will love a hard time to fulfill 0:08:40.040 --> 0:08:43.280 the demand for its products. While when you look at Microsoft, 0:08:43.360 --> 0:08:46.679 it does depend on China for its expansion of its 0:08:46.679 --> 0:08:50.000 cloud data centers, but other than that, it does not 0:08:50.080 --> 0:08:53.240 generate that much revenue away from from China or for 0:08:53.360 --> 0:08:56.120 that matter um you know is exposed to it either 0:08:56.160 --> 0:08:59.520 from a supply chain a lot less than what Apple is. 0:09:01.480 --> 0:09:04.000 We broke some news the other day here on Bloo 0:09:04.040 --> 0:09:09.960 Days Technology about Microsoft's confidence that this activision deal gets done, 0:09:10.000 --> 0:09:12.400 and the market really seems to be paying attention. What 0:09:12.440 --> 0:09:15.439 was your read on that. I think this is going 0:09:15.480 --> 0:09:18.360 to be a very interesting acquisition for everybody in the 0:09:18.400 --> 0:09:21.240 tech cline because I think the journal consensus is that 0:09:21.360 --> 0:09:24.359 the regulators are going to be very tough on Microsoft, 0:09:24.400 --> 0:09:26.840 and which is partially the easy you see a massive 0:09:26.880 --> 0:09:30.800 price cap, but it's you know, I think every every 0:09:30.840 --> 0:09:34.640 couple of months we will see if there are no major, 0:09:35.280 --> 0:09:37.480 i say, hang ups from the regulators, you would see 0:09:37.480 --> 0:09:39.840 that price cap closing. In fact, that I touch our 0:09:39.880 --> 0:09:42.520 sanalist thinks that the dealer is going to go through 0:09:43.120 --> 0:09:46.760 because of the nature of the deal rather than you know, 0:09:46.800 --> 0:09:48.800 the size of Microsoft all the size of the deal 0:09:50.000 --> 0:09:56.400 Apple fundamental strong near term risk. Why did you write that? Yeah, 0:09:56.440 --> 0:09:58.440 I mean the reason we say that is because if 0:09:58.480 --> 0:10:01.760 you look at Apple for right now, their revenue comes 0:10:01.760 --> 0:10:04.880 from both to Europe and China, and those are two geographies, 0:10:04.920 --> 0:10:08.280 are two regions that are facing economic slowdown, right now 0:10:08.320 --> 0:10:10.720 in fact Europe, we think is things are probably going 0:10:10.760 --> 0:10:13.200 to get worse before, you know, in the near term, 0:10:13.400 --> 0:10:15.719 before they get better. The second thing we want to 0:10:15.760 --> 0:10:18.320 point out is that the iPhone fourteen is not a 0:10:18.320 --> 0:10:21.600 moving leader, a needle move of four a Apple, just 0:10:21.679 --> 0:10:24.720 because the hardware design is still old and in most 0:10:24.760 --> 0:10:27.080 cases and the base model even the processor is a 0:10:27.120 --> 0:10:29.800 bit old, and like the next year's model is going 0:10:29.840 --> 0:10:31.520 to be a big shift. When you look at the 0:10:31.559 --> 0:10:34.240 Apple's installed base of let's say eight hundred million I 0:10:34.360 --> 0:10:36.880 phone and with the refars cycle of about three points 0:10:36.920 --> 0:10:39.600 in seven million phones three point six years, you're gonna 0:10:39.600 --> 0:10:41.920 sell about two hundred twenty million phones. We don't see 0:10:41.920 --> 0:10:44.720 that needle changes. They see it as much, alright, man 0:10:44.880 --> 0:10:47.960 I agran A crunching the numbers of Bloomberg Intelligence, Thank 0:10:48.000 --> 0:10:50.480 you very much. Sticking with Apple, the company has begun 0:10:50.520 --> 0:10:54.960 manufacturing it's new iPhone fourteen in India much sooner than expected. 0:10:55.000 --> 0:10:58.200 Production is weeks ahead of schedule after Fox con found 0:10:58.200 --> 0:11:02.840 the process. Surprisingly s Apple is expanding manufacturing a tensions 0:11:02.840 --> 0:11:06.400 in China, where most iPhones are made, escalate with the US. 0:11:06.559 --> 0:11:08.920 At the same time, India has been keyed to make 0:11:08.960 --> 0:11:12.800 the country into a viable competitor to China in technology 0:11:13.040 --> 0:11:18.280 and production capabilities, and Apple's aggressive push into audio, specifically 0:11:18.280 --> 0:11:22.120 wireless headphones, has been one of the company's most successful bets. 0:11:22.280 --> 0:11:27.080 Bloomberg's Max Chafkin explains the controversial strategy around the AirPods 0:11:28.920 --> 0:11:33.960 good Morning. For years, investors and fans of Apple have 0:11:34.000 --> 0:11:36.839 been waiting to see if the company's CEO, Tim Cook 0:11:37.080 --> 0:11:39.760 can release a product to match the success of the iPhone. 0:11:40.040 --> 0:11:42.920 But Apple's next big thing might be in your pocket already. 0:11:43.320 --> 0:11:50.000 I'm talking about these little things, AirPods. Third party estimates 0:11:50.000 --> 0:11:53.520 suggest Apple sold around a hundred twenty million pairs last year, 0:11:53.720 --> 0:11:56.440 taking in about twenty billion dollars. And the reason for 0:11:56.440 --> 0:11:59.000 their success also gets to the heart of why Apple 0:11:59.080 --> 0:12:02.120 is so controversy. Partly it's a credit to the headphones themselves, 0:12:02.240 --> 0:12:05.080 but only partly. It's sort of easy to forget that 0:12:05.120 --> 0:12:08.960 when these were released, reviewers hated them. They didn't sound great, 0:12:09.120 --> 0:12:12.960 they got lost easily, they're not durable, they're environmentally questionable. 0:12:13.400 --> 0:12:15.719 But they had one thing going for them. They were 0:12:15.880 --> 0:12:18.360 easy to set up. With the iPhone. This wasn't in 0:12:18.360 --> 0:12:21.439 an accident. It was the culmination of cook strategy to 0:12:21.520 --> 0:12:24.240 transform the phone from a one off product to an 0:12:24.320 --> 0:12:27.760 ecosystem of services like iCloud and accessories like the Apple 0:12:27.800 --> 0:12:31.079 Watch and AirPods. Non these extras really do much without 0:12:31.120 --> 0:12:34.240 the phone, and the phone doesn't work particularly well without them. 0:12:34.480 --> 0:12:38.160 Back in when Apple announced air pods, the company also 0:12:38.200 --> 0:12:41.280 made everybody else's headphones worse by getting rid of the 0:12:41.320 --> 0:12:44.160 audio jack on the iPhone. To use normal headphones, you 0:12:44.160 --> 0:12:47.160 need an adapter. The company's VP of marketing said this 0:12:47.240 --> 0:12:51.400 was about one thing, courage, which okay, sure, but it 0:12:51.480 --> 0:12:55.400 was also about Apple's awesome market power that makes a 0:12:55.440 --> 0:13:00.199 company controversial Spotify, Epic Games, Tile and even Google. I'll 0:13:00.240 --> 0:13:04.080 say it abuses its power, but antitrust litigation will take years, 0:13:04.120 --> 0:13:07.480 and until then Apple can extract ever more money out 0:13:07.480 --> 0:13:10.679 of its fifteen years young cash cow the iPhone who 0:13:10.760 --> 0:13:14.680 needs the next big thing? Thanks to Max Chafkin for 0:13:14.800 --> 0:13:17.760 that coming up. Remote working during the pandemic has left 0:13:17.760 --> 0:13:20.319 many New York office is empty. How the trend is 0:13:20.400 --> 0:13:23.679 part of a larger property dilemma in major cities across 0:13:23.720 --> 0:13:36.880 the world. This is Bloomberg. The rise of remote work 0:13:37.000 --> 0:13:39.200 during the pandemic has put New York City at this 0:13:39.280 --> 0:13:42.720 center of a global property dilemma, where multibillion dollar buildings 0:13:42.720 --> 0:13:46.800 sit vacant, leaving property owners in a buying Bloomberg's Natalie 0:13:46.800 --> 0:13:49.360 Wong has the details. Now, as you know, I'm visiting 0:13:49.400 --> 0:13:52.559 from San Francisco. If I take a stroll down Third Avenue, 0:13:53.000 --> 0:13:56.760 there's far fewer workers going through revolving doors than there were, 0:13:56.840 --> 0:13:59.600 say four years ago, when I was last here. What's 0:13:59.640 --> 0:14:01.720 the story, right? And you see a lot of vacant 0:14:01.720 --> 0:14:04.160 storefronts as well. Um as you well know, a lot 0:14:04.200 --> 0:14:06.480 of workers are just not coming into the office, and 0:14:06.679 --> 0:14:09.560 companies are reducing their real estate footprint because of that, 0:14:09.920 --> 0:14:12.440 and those that are looking to expand are simply just 0:14:12.480 --> 0:14:14.880 not looking at an office building on Third Avenue. You know, 0:14:14.880 --> 0:14:19.520 we're all still using tools like Zoom and teams, Microsoft teams. 0:14:19.600 --> 0:14:23.000 You know, there's a multiple options. But what are the 0:14:23.120 --> 0:14:27.320 landlords going to do to fix this? To get workers 0:14:27.480 --> 0:14:30.320 and companies back into the buildings themselves. A lot of 0:14:30.400 --> 0:14:33.160 landlords all across the city are adding amenities. They're putting 0:14:33.160 --> 0:14:35.680 in hundreds of millions of dollars into their office building 0:14:36.000 --> 0:14:38.840 to add stuff like outdoor spaces, new lobbies and new 0:14:38.880 --> 0:14:42.400 elevators to entice new tenants and then hopefully those tenants 0:14:42.400 --> 0:14:44.280 will get their workers to come back in as well. 0:14:44.320 --> 0:14:46.800 As we're slowly starting to see happen across the city. 0:14:47.080 --> 0:14:50.840 It's a longstanding problem. Same in San Francisco. There's just 0:14:50.960 --> 0:14:55.560 not enough apartments an affordable price point. But there's a 0:14:55.560 --> 0:14:57.440 lot of empty buildings. You just told me, how do 0:14:57.480 --> 0:15:00.400 we convert? And why is it so hard to convert 0:15:00.520 --> 0:15:04.000 those office buildings into residential That's a question that everyone's asking, 0:15:04.320 --> 0:15:06.040 you know. The reality is a lot of the midtown 0:15:06.080 --> 0:15:08.640 office buildings are so big and rectangular, and there's just 0:15:08.720 --> 0:15:11.920 so much dark spaces within those buildings that it's hard 0:15:11.960 --> 0:15:15.960 to convert into livable residential areas. And on top of that, 0:15:16.000 --> 0:15:18.800 there's zoning restrictions with the city that doesn't allow for 0:15:18.840 --> 0:15:21.960 these types of UM renovations to be made, and there's 0:15:22.000 --> 0:15:25.640 no tax or financial incentives that are provided to landlords 0:15:25.680 --> 0:15:30.120 to embark on this super costly UM renovation. That's the 0:15:30.160 --> 0:15:33.880 building owners perspective. What are the tenants want? You know, 0:15:33.920 --> 0:15:37.120 what are they asking for? Tenants want the best in 0:15:37.160 --> 0:15:39.800 the newest places. They want to be near Grand Central Terminal, 0:15:39.840 --> 0:15:43.120 they want to be near their peers. You know, private 0:15:43.120 --> 0:15:46.040 equity finance firms, mega big tech firms that are expanding 0:15:46.040 --> 0:15:48.080 on far west side of Manhattan, and they have a 0:15:48.120 --> 0:15:50.280 lot of options to choose from. So if they're going 0:15:50.280 --> 0:15:53.320 to choose between you know, a Third Avenue nineteen fifties 0:15:53.320 --> 0:15:55.720 building that has sort of been renovated but not really 0:15:56.200 --> 0:15:58.840 or look at Hudson Yards where there's new skyscrapers and 0:15:58.920 --> 0:16:01.320 landlords are providing incentives to get you to move in. 0:16:01.440 --> 0:16:03.400 They're going to choose the newer ones, right, This is 0:16:03.440 --> 0:16:05.920 part of our Bloomberg Big take. Of course, what was 0:16:05.960 --> 0:16:08.720 the thing that surprised you most reporting this out? I 0:16:08.760 --> 0:16:11.080 think the thing that surprised me the most was really 0:16:11.160 --> 0:16:14.240 just how much this impacts everyone, not just landlords, but 0:16:14.320 --> 0:16:16.560 tenants and also the city. You know, the city has 0:16:16.640 --> 0:16:19.560 lost a lot of tax revenue due to the decline 0:16:19.600 --> 0:16:21.720 in the values of these office buildings, and it doesn't 0:16:21.760 --> 0:16:24.840 look like it's going to turn around anytime soon. All Right, 0:16:25.000 --> 0:16:36.240 Thank you to Bloomberg's Natalie wog This is Bloomberg Technology 0:16:36.240 --> 0:16:38.160 im Ed Ludlow in New York. Let's get back to 0:16:38.160 --> 0:16:42.280 that market volatility. Major benchmarks like the NASA continue to 0:16:42.360 --> 0:16:47.080 fluctuate is economic uncertainty and monetary policy changes sper concern 0:16:47.480 --> 0:16:49.720 and that includes a hit to all corners of the 0:16:49.760 --> 0:16:53.120 technology universe, making this a tough environment for everyone from 0:16:53.160 --> 0:16:57.360 megacats to Silicon Valley startups. Let's bring Embrace Capital General 0:16:57.400 --> 0:17:04.120 partner Alfred Schwang, He's known as the v least CEOs CEO, Alfred, 0:17:05.160 --> 0:17:08.960 what is your read on these markets right now? Well, 0:17:09.000 --> 0:17:12.360 and thank you for having me um At Raised Capital. 0:17:12.640 --> 0:17:16.760 We are seed in earliest invested in infrastructure companies like 0:17:16.880 --> 0:17:21.000 Data Breaks, Salana and ft x. So. When I saw 0:17:21.119 --> 0:17:23.920 Raised Capital founder sound Free, Sam Bank win Free in 0:17:23.960 --> 0:17:27.000 New York Lass Week, we talked about how the crypto 0:17:27.119 --> 0:17:30.000 market was in much worse shape in two thousand nineteen 0:17:30.600 --> 0:17:33.040 as it is compared to today when he first started 0:17:33.080 --> 0:17:36.240 ft X. So. The growth stage and the late stage 0:17:36.280 --> 0:17:39.560 venture market may have been dampened obviously by the recent 0:17:39.600 --> 0:17:43.760 market crash, but we are seeing early stage deals thing 0:17:43.960 --> 0:17:47.960 very strong. I think because of a few reasons. Number one, 0:17:48.480 --> 0:17:53.400 seed funding is not tied revenue. Market slowdown has very 0:17:53.440 --> 0:17:57.199 little little impact to early stage founders. So when we 0:17:57.320 --> 0:18:01.920 inveus we look for a founder market it right right, 0:18:01.920 --> 0:18:05.760 So and mostly stage companies race eighteen twenty four months. 0:18:05.800 --> 0:18:10.280 Our runway to find that fit. The soup number two 0:18:11.040 --> 0:18:13.919 I peel is not the only rather exiit anymore. I 0:18:13.920 --> 0:18:17.679 mean we look at the reason Adobe fig twenty billion 0:18:17.760 --> 0:18:21.680 dollar mega deal. We can see um the next two 0:18:21.720 --> 0:18:24.479 years it's going to be very strong and animaking. So 0:18:24.560 --> 0:18:28.760 that's the colical and three Francier capital investors are sitting 0:18:28.840 --> 0:18:32.000 on a hundred and sixty two billion dollars of cash 0:18:32.280 --> 0:18:36.520 for new investments. So these dry powders the driving energy 0:18:36.560 --> 0:18:39.000 to fine the best founder and a lot of early 0:18:39.040 --> 0:18:42.760 stage deals. So what you're saying is not risk aversion 0:18:43.080 --> 0:18:45.080 like we see in the public markets, like we see 0:18:45.080 --> 0:18:48.720 in the later stages. Are you guys ready to spend, 0:18:48.760 --> 0:18:51.560 you're ready to deploy capital or are you sitting on 0:18:51.600 --> 0:18:54.920 the sidelines. No, no, We're definitely not sitting on the sideline. 0:18:55.160 --> 0:18:59.960 We've been extremely active in investing. In fact um, if 0:19:00.080 --> 0:19:03.600 you look at the cycle posts a you two thousands 0:19:03.640 --> 0:19:06.480 post two thousands in name the very best you know, 0:19:06.560 --> 0:19:10.600 brick out company, we're invested soon after those crashes, really 0:19:10.640 --> 0:19:14.240 good companies and strong founders you know, bubble up to 0:19:14.280 --> 0:19:18.159 the top and then valuations are very rational, so you 0:19:18.200 --> 0:19:20.600 can make bets and be able to have drive large 0:19:20.640 --> 0:19:23.280 ownership much easier. So this is definitely a good time. 0:19:24.040 --> 0:19:29.400 It talks about valuations being rational. There's hundreds of startups 0:19:29.400 --> 0:19:35.320 out there, potentially more with unicorn status, right, billion dollar valuations. 0:19:35.400 --> 0:19:38.960 What's the risk that we see those valuations come down, 0:19:39.320 --> 0:19:45.160 that there's a major repricing of startups of a certain size. Well, 0:19:45.359 --> 0:19:48.280 this happens in every cycle. So the lay stage deal 0:19:48.359 --> 0:19:52.639 obviously will be highly impacted by the equity market and 0:19:52.640 --> 0:19:56.040 where it's going, because that's where people thought liquidity would be. 0:19:56.200 --> 0:19:59.080 But now we're also seeing, you know, going back to 0:19:59.119 --> 0:20:02.320 the Figma deal, twenty billion dollars in size, right, because 0:20:02.400 --> 0:20:05.280 any I P or could possibly drive for investors along 0:20:05.280 --> 0:20:09.000 the way. So I'm actually not concerned because tax always 0:20:09.000 --> 0:20:12.439 needed and we're about to see one major revolution of 0:20:12.480 --> 0:20:15.399 going the centralization through work free of the type of 0:20:15.400 --> 0:20:18.159 application that will we emerge in the next generation. So 0:20:18.320 --> 0:20:22.080 very good time. Indeed, they call you the Silicon Valley 0:20:22.320 --> 0:20:26.720 CEOs CEO. You were an early investor in a lot 0:20:26.720 --> 0:20:30.119 of names we now know, right f tx Selana, you 0:20:30.320 --> 0:20:35.600 founded and took public be A Systems right, give me 0:20:35.680 --> 0:20:39.320 the founder's perspective. How hard is it right now to 0:20:39.440 --> 0:20:43.520 be a fledgling startup or a founder with an idea 0:20:43.880 --> 0:20:46.439 to sit in front of an investor and come away 0:20:46.480 --> 0:20:50.200 with some cash in your pocket. Well, without doubt, raising 0:20:50.240 --> 0:20:53.919 money is not quite like last year. And founder has 0:20:53.960 --> 0:20:56.239 to be willing on the game to be able to 0:20:56.440 --> 0:20:58.520 have a story about how they will be able to 0:20:58.560 --> 0:21:01.960 generate revenue. So, thank goodness the world revenue and cash 0:21:02.000 --> 0:21:04.479 for matters a game, So we which a crucial thing 0:21:04.560 --> 0:21:07.840 or running wheel businesses. So and the other thing is, 0:21:08.119 --> 0:21:11.119 you know, runway and costs and expenses. We're seeing a 0:21:11.240 --> 0:21:14.680 slew of layoffs, mostly not because those companies cannot afford 0:21:14.720 --> 0:21:17.600 those people, but they're rethinking how to get the profitability 0:21:18.000 --> 0:21:20.240 and cash for positive. So those are things I think 0:21:20.240 --> 0:21:22.720 it's good discipline that we should be seeing. Good see 0:21:22.760 --> 0:21:26.120 you driving great companies that will last a long long time. 0:21:27.400 --> 0:21:29.840 There's maryas I know that you have a keen interest 0:21:29.880 --> 0:21:32.840 in Web three, being when we talk about that in 0:21:32.880 --> 0:21:36.080 such big abstract terms, you know, what will big tech 0:21:36.160 --> 0:21:38.520 do when it comes to Web three? Will they do 0:21:38.560 --> 0:21:41.399 anything at all when it comes to Web three? Do 0:21:41.440 --> 0:21:43.240 you think investors are starting to lose a bit of 0:21:43.240 --> 0:21:48.760 patients there. Well, Um, web free is much more cyclical 0:21:48.880 --> 0:21:50.840 than the regular market. So you look at the cycle. 0:21:50.960 --> 0:21:53.480 Web free is pacing on about three years because we 0:21:53.520 --> 0:21:56.520 saw the last crash in about two nineteen. We saw 0:21:56.560 --> 0:21:58.920 a crash in two thousand two. So we look at 0:21:58.960 --> 0:22:01.840 regular cycle, it's about eight to ten years. Web Free 0:22:01.840 --> 0:22:04.760 cycles about every three years. It's just showing the maturation 0:22:04.880 --> 0:22:08.240 of the technology is moving a lot faster than other 0:22:08.280 --> 0:22:11.880 cycles we've seen. You know, um, you know, look at it. 0:22:12.040 --> 0:22:14.480 You know, you know, like Amazon Web Service to say, 0:22:14.640 --> 0:22:18.760 BS from Amazon controls over one foot of Western's world's 0:22:18.880 --> 0:22:22.159 internet infrastructure, right, that really is unheard of. You have 0:22:22.320 --> 0:22:26.960