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Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm

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Speaker 1: Bloomberg Quick Takes Tim Stanabek. We're here every day bringing

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Speaker 1: you the latest news from the world of business and finance,

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Speaker 1: plus technology, politics, economics, all purtnising the power of Business

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Speaker 1: Week reporters and editors, not to mention our journalists and

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Speaker 1: analyst in more than one twenty countries. You can download

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Speaker 1: Bloomberg Business Week and iTunes, SoundCloud, or Bloomberg dot Com.

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Speaker 1: You can also listen to our radio show at two

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Speaker 1: pm Eastern Time on Bloomberg Radio or watch us on

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Speaker 1: YouTube search Bloomberg Global News. Alright, so we've often talked

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Speaker 1: about metal platforms, the company formerly known as Facebook getting

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Speaker 1: beaten up by investors, down about fifty this year alone,

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Speaker 1: down from its all time high back in September one,

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Speaker 1: well as Bloomberg Business Week calumnist Max Chafkin rights, despite

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Speaker 1: Mark Zuckerberg's attempt to present Meta as an underdog, Max

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Speaker 1: says it's not time to feel sorry for the social

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Speaker 1: media giants. So let's get to it. This story on

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Speaker 1: the Bloomberg and Bloomberg dot Com slash Business Week and

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Speaker 1: Max joining us on the phone from Queen's So, Max,

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Speaker 1: why shouldn't we feel sorry for Meta? So what's happened

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Speaker 1: over over this year basically is the economy and kind

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Speaker 1: of the social media ecosystem is sort of reverting to

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Speaker 1: pre COVID norm So there was this moment, you know,

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Speaker 1: in twenty people are spending all of their time, uh

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Speaker 1: you know on the internet, spending huge sums of money

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Speaker 1: on you know, online shopping, and that was amazing for

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Speaker 1: Facebook's business and excuse me Meta's business. And what's happened

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Speaker 1: is we've seen a reversion which has led to you know,

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Speaker 1: all these kind of like doom and gloom predictions, both

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Speaker 1: from inside the company and from analysts. Um. The thing is,

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Speaker 1: the pre COVID version of Facebook was still dominant, and

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Speaker 1: when you look at the competitive landscape, yes, TikTok Um

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Speaker 1: is gaining ground in terms of cultural mind share that

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Speaker 1: you have a lot of young people on the platform,

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Speaker 1: but it's not even close. Facebook still basically owns social

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Speaker 1: media and and that isn't changing anytime soon. And I

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Speaker 1: think what's what's happening more is zucker Bird is attempting

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Speaker 1: to position the company both because it's in this uh

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Speaker 1: Ani trust conversation and as a way to of course

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Speaker 1: get more productivity out of his employees, to to sort

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Speaker 1: of try to find ways to um you know, to

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Speaker 1: continue to stay ahead of TikTok, you know. Max. The

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Speaker 1: other big story obviously with Facebook is this pivot to

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Speaker 1: the metaverse. H Why why we're calling it meta now

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Speaker 1: instead of Facebook? And why I can never remember the

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Speaker 1: ticker symbol for the stock? But I wonder, you know,

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Speaker 1: it just seems like there's been nothing but criticism about

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Speaker 1: that strategy UM and you know, surely part of that investment,

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Speaker 1: big investment in the metaverse is reflected in this just

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Speaker 1: awful stock price performance this year. I'm wondering how you're

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Speaker 1: thinking about that though. Is it possible that is an

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Speaker 1: underdog story? I mean, is Zuckerberg seeing something in the

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Speaker 1: metaverse that everyone else isn't or is this just a

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Speaker 1: quixotic UH campaign that he's going to regret? Do you think? Well?

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Speaker 1: I think meta Facebook already can trolls a lot of

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Speaker 1: the metaverse. You know, they acquired this as as part

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Speaker 1: of their sort of push into um VR, into new platforms. Right,

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Speaker 1: they paid around two billion dollars to this company called

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Speaker 1: Oculus that that turned into Facebook Meta's you know, VR

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Speaker 1: a rum thing, and uh, the question is how big

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Speaker 1: does this market get? Right, Zuckerberg is spending billions of

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Speaker 1: dollars and rebranding the company and so on with the

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Speaker 1: hopes that this is the next big platform, as big

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Speaker 1: as mobile phones or something like that. But we don't

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Speaker 1: actually know that will be the case. So so in

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Speaker 1: in sort of the best case scenario, this becomes huge,

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Speaker 1: it's the biggest PCs, and and that's the vision that

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Speaker 1: Zuckerberg has talked about for for years. Really, you know,

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Speaker 1: the worst cases, Facebook just controls relatively small market and

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Speaker 1: then continues to dominate, uh, social media as it does today.

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Speaker 1: I mean it's still furnillon dollar market cap company. I

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Speaker 1: mean it's it's exactly and I think about there's so

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Speaker 1: many companies when we talk about the law of large numbers.

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Speaker 1: I mean you're looking at revenue still for this year

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Speaker 1: forecasting to be something like a D eighteen billion dollars.

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Speaker 1: I mean, this company still still makes a lot of money. Well,

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Speaker 1: And and one thing that I think people have sort

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Speaker 1: of missed is there's there's been this conversation like, oh

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Speaker 1: maybe maybe uh meta Facebook is lost it's cool, right,

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Speaker 1: the young people are going to TikTok and what what

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Speaker 1: it's easier to forget that that has been going on

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Speaker 1: for basically a decade, you know, it's a about a

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Speaker 1: decade ago that Facebook first lost it's cool, maybe a

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Speaker 1: little bit earlier than that. And Zuckerberg has found ways

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Speaker 1: time and again to adjust, you know. And originally that

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Speaker 1: that adjustment meant um, buying Instagram and then copying aspects

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Speaker 1: of Snapchat, buying WhatsApp, um. And we're seeing that play

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Speaker 1: out again. He can't buy TikTok because of antitrust scrutiny, um,

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Speaker 1: but he can't copy it and and and the company

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Speaker 1: is making progress there. It hasn't yet found ways to

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Speaker 1: generate revenue. But but these these TikTok like products are

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Speaker 1: definitely um gaining in terms of users, crime, spend, and

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Speaker 1: that's sort of things got back. So I'm wondering a

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Speaker 1: lot of times when you see a company sort of

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Speaker 1: stumble like this at least its share price, uh and

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Speaker 1: and sort of uh not posting that block bluster growth

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Speaker 1: like uh meta once did you know I would start

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Speaker 1: wondering about the guy at the top and his uh,

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Speaker 1: you know how secure his position is there you know,

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Speaker 1: obviously Zuckerberg is is both CEO and chairman of the company.

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Speaker 1: Is it just insane to think that there could be

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Speaker 1: some risk to him in that position, um, you know?

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Speaker 1: Or is he just so ingrained in the company that

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Speaker 1: you know, it would be foolish for anyone to try

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Speaker 1: to agitate to to have him either you know, removed

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Speaker 1: completely or at least give up one of those two

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Speaker 1: titles chairman and CEO. So I mean he would have

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Speaker 1: The important thing is he would have to do it right.

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Speaker 1: It he controls Facebook in addition to being um, you know,

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Speaker 1: the the CEO and the chairman through these super voting shares.

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Speaker 1: So he would have to conclude or or I guess

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Speaker 1: was like be forced by a court or something, um

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Speaker 1: that that this would be you know, better for the company.

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Speaker 1: And I don't think that's gonna happen anytime soon. And

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Speaker 1: that's partly because of my sense of of the psychology

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Speaker 1: of Mark Zuckerberg, right, like, this is his identity, you know,

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Speaker 1: It's it's very hard to imagine him, um not being

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Speaker 1: at the top of Facebook. I think it's probably very

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Speaker 1: hard for him to imagine that. And I also think

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Speaker 1: you know, the company has kind of found Uh. I

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Speaker 1: don't know if you called a scapegoat. But but in

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Speaker 1: terms of executive changes, right there, Cheryl Sandberg is moving

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Speaker 1: on and and and and she was um some of

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Speaker 1: the focus of some of the criticism around Facebook. So

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Speaker 1: I think there, I think he had I think he

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Speaker 1: has made some executive moves at the top in response

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Speaker 1: to pressure. UM. But I don't think one of those

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Speaker 1: moves is going to be removing himself anytime soon. So

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Speaker 1: the point is what that you know, and I think

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Speaker 1: about as we talk about the story, and you're right,

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Speaker 1: I think I feel like some of the conversations around

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Speaker 1: it is like, oh, whoa is you know? Meta? But

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Speaker 1: I mean this is a company still even if numbers

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Speaker 1: maybe or the growth numbers aren't as strong as they

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Speaker 1: used to. I mean when it comes to things like advertising,

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Speaker 1: I mean, this is still where folks go. And we've

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Speaker 1: just got about thirty seconds here. Yeah, it's un avoidable

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Speaker 1: from an advertising perspective, and I think it's just worth

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Speaker 1: keeping in mind that there's this political story playing at

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Speaker 1: the same time, which is that Facebook is under scrutiny

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Speaker 1: and it's to its advantage to play up competition. So

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Speaker 1: I think it's important to you know, just take that,

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Speaker 1: take it with a grain of salt. Every time they

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Speaker 1: talk about fear of TikTok and so on, somebody managing

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Speaker 1: the message, the narrative. Max, is what you're saying. I

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Speaker 1: think he's gone all right. Anyway, check out this story.

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Speaker 1: You can find it on the Bloomberg and of course

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Speaker 1: online at Bloomberg dot com, Slash business Week about Facebook

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Speaker 1: and Mark Zuckerman. Of course that was Zuckerberg. Excuse me,

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Speaker 1: that of Christmas. Max Jafkin, columnist of Bloomberg Business Week,

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Speaker 1: joining us on the phone from Queens, New York. You

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Speaker 1: are listening in watching Bloomberg Business Week, cal Master Mike

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Speaker 1: Reagan and this is Bloomberg. You're listening to Bloomberg Business

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Speaker 1: Week with Carol Messer and Bloomberg Quicktake Tim Stanovich on

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Speaker 1: Bloomberg Radio. Well social media news sites. Man, they let

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Speaker 1: up last night on the news that former President Donald

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Speaker 1: Trump faces intensifying legal and political pressure after FBI agents

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Speaker 1: search his Florida home in a probe of whether he

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Speaker 1: took classified documents from the White House when he left office.

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Speaker 1: You've probably read the story. Well, that story it is

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Speaker 1: among the top five of today's most read stories on

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Speaker 1: the Bloomberg. For more and understanding a bit about the

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Speaker 1: legal aspect of this story, let's bring in Bloomberg News

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Speaker 1: senior reporter Joe Zoe Tilman. She is on the phone

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Speaker 1: from Washington, d C. Zoe. Good to have you here

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Speaker 1: with Mike Reagan and myself. So what do we need

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Speaker 1: to understand about the legal process and justification initially for

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Speaker 1: that search at Moral Lago, Right? So, you know, the

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Speaker 1: critical thing here is that to get a search warrant,

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Speaker 1: to get a judge to sign off on a search warrant,

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Speaker 1: you don't need to show that a particular person committed

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Speaker 1: a crime. You know, this isn't the same as charge

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Speaker 1: as against the former president. What they have to out

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Speaker 1: to a judge is that there is probable cause that

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Speaker 1: they will find evidence of crimes at the location. You know,

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Speaker 1: a big question for all of us is what exactly

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Speaker 1: the search warrant says? Um prosecutors would have to identify

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Speaker 1: which federal crimes uh they think are they would find

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Speaker 1: evidence of, and that would give us a big clue

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Speaker 1: into what where the investigation is headed. Who's focused on?

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Speaker 1: You know what the potential charges might be and what

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Speaker 1: the potential penalties on the table might be very big,

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Speaker 1: unresolved unknown at this point. Um. But you know, it's

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Speaker 1: it's not as if the Attorney General or the head

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Speaker 1: of the FBI woke up one morning and said, let's

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Speaker 1: go raid Trump's house. Um. They had to bring something

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Speaker 1: of substance to to a judge who had to meet,

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Speaker 1: you know, preset standards for signing upon that. So I'd

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Speaker 1: love that sort of tap into your expertise and experience

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Speaker 1: covering court cases like this because there are so many

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Speaker 1: various investigationations into former President Trump. Most of the reporting

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Speaker 1: seems to indicate that this was focused squarely on the

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Speaker 1: removal of documents from the White House and and taken

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Speaker 1: to mari Lago when they should have gone to the

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Speaker 1: National Archives. But I wonder, you know, given all the

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Speaker 1: other investigations, is it possible that evidence pertinent to those

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Speaker 1: uh could be used from the search? Um? Or does

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Speaker 1: it all depend basically one what the warrant says. You know,

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Speaker 1: what all can they take away from Marilago that could

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Speaker 1: be used in other other investigations? Right, so you know,

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Speaker 1: when they when they go into a search warrant. They

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Speaker 1: cannot just do a free for all look for any

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Speaker 1: evidence of a crime. They usually have to specify, you know,

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Speaker 1: we are looking for um, White House records with classified

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Speaker 1: markings or any evidence boxes marked classified or these are

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Speaker 1: from the White House, um. You know. But once they

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Speaker 1: take those documents, if in the course of the search

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Speaker 1: they see I think that this the phrase has sort

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Speaker 1: of in plain view, but that can mean a lot

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Speaker 1: of different things. In practice, other evidence of crimes that

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Speaker 1: can be fair game for investigators to use, even if

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Speaker 1: it's not related to the original purpose of seeking the warrants.

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Speaker 1: So the classic example is, you know, FBI agents go

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Speaker 1: into a house on a search warrant or you know, uh,

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Speaker 1: looking for guns, and on the table they see drugs.

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Speaker 1: You know, those drugs are fair game. UM. It's a

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Speaker 1: bit more complicated when you're talking about, you know, the

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Speaker 1: contents of a document that's been sieved pursuant to a

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Speaker 1: search warrant related to some other issue of the substance

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Speaker 1: or the circumstances of those documents. So it's it's possible,

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Speaker 1: but it's not quite clear. So so you know, I've

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Speaker 1: seen in some of the reporting on Bloomberg different sources

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Speaker 1: saying that this is unprecedented. But I am curious. Is

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Speaker 1: it accurate to say that this is unprecedented for a

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Speaker 1: former president? And now people have talked us about the

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Speaker 1: Clintons returning White House for or after they had got home.

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Speaker 1: I mean, is what's going on right now? Possibly just

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Speaker 1: an oops on the part of the former president Donald

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Speaker 1: Trump that he just took stuff home that he shouldn't have,

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Speaker 1: or I don't know, like, how are we supposed to

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Speaker 1: see this and just got about forty seconds? Yeah, you know,

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Speaker 1: I think my understanding is it's unprecedented for a search

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Speaker 1: warm to be executed at the home of a former president.

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Speaker 1: That seems to be agreed upon. You know, normally prosecutors

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Speaker 1: would treat a former president with kid gloves. They would

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Speaker 1: try to get whatever they need through other means that

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Speaker 1: are not you know, a a very dramatic execution of

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Speaker 1: a search warrant quote unquote rate of a home. So

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Speaker 1: the thinking here is that there is some urgency that

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Speaker 1: prosecutors felt in taking this. You know, it's definitely more

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Speaker 1: of an escalation than we've seen in the treatment of

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Speaker 1: public officials coming from the Justice Department. All right, and

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Speaker 1: just quickly fifteen seconds. Is it related to the January

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Speaker 1: six committee investigation or we don't know, we don't know. Okay,

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Speaker 1: that was quick. We will reacently be following your reporting

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Speaker 1: and I'm sure coming back to you. Um so, thank

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Speaker 1: you so much really setting us straight in terms of

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Speaker 1: the legal side of this to get a better understanding.

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Speaker 1: Zoe Tilman, Senior reporter. She covers legal issues and courts

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Speaker 1: out of d C for Bloomberg News. She's joining us

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Speaker 1: on the phone from the nation's capital. This is Bloomberg

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Speaker 1: Business Week with Carol Messer and Bloomberg Quick Takes Tim

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Speaker 1: Stinovic on Bloomberg Radio. Another one of our most read

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Speaker 1: stories on the Bloomberg Today. How's to do with college

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Speaker 1: endowments posting their biggest losses since the financial crisis? So

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Speaker 1: let's get the story from Bloomberg News Higher education finance

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Speaker 1: reporter Janet Lawn. She joins us at our Bloomberg Interactive

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Speaker 1: Broker's studio. So good to have you here. So what's

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Speaker 1: going on? Well, given what was in the stock market

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Speaker 1: for the year, the SNP was down twelve percent um,

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Speaker 1: not a huge surprise. I've seen my far oh one

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Speaker 1: K I know so I think what is surprising is

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Speaker 1: the huge contrast from last year when you saw some

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Speaker 1: endowments have have returns of scent wash you had in St.

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Speaker 1: Louis had a return of sixty. So it's a big change.

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Speaker 1: And uh, you know, the smaller endowments are definitely more

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Speaker 1: heavily rely relying on US equities, and of course bonds

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Speaker 1: didn't do so well in the fiscal year too, And

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Speaker 1: usually the bigger endowments have a big a lot of

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Speaker 1: help from private equity and other alternatives, and they just

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Speaker 1: didn't get that kind of insulation this year. You know,

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Speaker 1: Janet full disclosure. I just wrote my first college tuition

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Speaker 1: check for my oldest so you know, if I look

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Speaker 1: a little shell shock, that's that's the reason. But you know,

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Speaker 1: reading the story from that perspective of a parent of

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Speaker 1: a kid going into school, I can't help but worry.

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Speaker 1: Does a poor endowment year mean that tuition is going

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Speaker 1: to go up even more next year? Especially with this inflation?

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Speaker 1: I mean, colleges are dealing with inflation as much as

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Speaker 1: anyone else, But how do you think about tuition in

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Speaker 1: sort of both of those variables, a high inflation and

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Speaker 1: poor year for endowments, So good question. The good new

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Speaker 1: is that spending is not determined by one year of

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Speaker 1: endowment returns. It's typically an average of three to five years.

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Speaker 1: So last year's amazing returns definitely helps even out the spending. Now,

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Speaker 1: inflation is another story because when colleges set there say

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Speaker 1: their meal plans of say a three percent increase in February. Uh,

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Speaker 1: they're actually having to spend a lot more. So you

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Speaker 1: may see it next year, um in in your overall

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Speaker 1: cost for dining or if you're if your kid is

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Speaker 1: still in the dorms, that may increase. Yeah, the the

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Speaker 1: inflation is a is a problem on campus, both in

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Speaker 1: terms of the supply chain. You know, you may not

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Speaker 1: get all the types of food you want in the cafeteria,

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Speaker 1: plus a labor shortage. So to teach my kid to cook,

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Speaker 1: I think it is the bottom one. I am, I am.

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Speaker 1: My daughters like reducing the mail mail plan as we speak. Um,

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Speaker 1: I love you include this in your story. Colleges typically

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Speaker 1: need annual games at least seven percent to keep pace

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Speaker 1: with annual spending, and that plays to kind of some

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Speaker 1: of this stuff. I feel like you're talking so can

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Speaker 1: so As you said, though they wait three years or

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Speaker 1: something before they start to change some things. It's an

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Speaker 1: it's an average of spending depending on how they've done

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Speaker 1: over three years or some schools you do the rolling

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Speaker 1: um five year average. So one year is not going

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Speaker 1: to have a huge impact on spending, just like last year,

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Speaker 1: when you know, schools had very robust returns, they didn't

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Speaker 1: spend at all. Do we can I just ask, do

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Speaker 1: we ever see an endowment, especially after a year that

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Speaker 1: was so phenomenal last year where they do park a

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Speaker 1: lot of things in quote unquote a cash like investment

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Speaker 1: and say right, because you could coast for or especially

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Speaker 1: you know, do they ever do that to kind of

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Speaker 1: just played a little bit safer? Well, I guess it

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Speaker 1: just really depends on the schools. And last year you

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Speaker 1: had an overallocation to private equity because the returns were

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Speaker 1: so strong. We had a story about this a few

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Speaker 1: months ago that schools, you know, their their allocation to

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Speaker 1: private equity was in the age because they just were

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Speaker 1: you know, they just did so well. When Michigan State

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Speaker 1: was describing one fund had a thousand percent return. Wow,

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Speaker 1: Well I wanted to ask you about that. That sort

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Speaker 1: of the strategies of endowments. I mean, obviously you hear

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Speaker 1: about sort of the stars, the David Swinson's of the world. Um,

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Speaker 1: but you cover this space so closely. I'm curious, you know,

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Speaker 1: the market nerd and me wants to know, is do

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Speaker 1: any of these endowments just do passive sort of sixty

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Speaker 1: forty type of thing or is everyone trying to be

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Speaker 1: David Swinson talking like a balanced fund. Yes, well, a

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Speaker 1: lot of schools did try to be like David Swinson.

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Speaker 1: And uh, you know, I think given the success of

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Speaker 1: private equity and and and hedge funds, maybe not more recently, Uh,

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Speaker 1: schools wanted to try to find other ways to make money.

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Speaker 1: They saw Yale's endowment exploding. Um we we did a

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Speaker 1: big story several years ago on a school in Wisconsin

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Speaker 1: that had been in index funds for for fifteen years

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Speaker 1: and their tenure returned the pants off of hard. So

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Speaker 1: some schools, you know, they just don't have as much money.

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Speaker 1: You know, if you're a tiny endowment with fifty million

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Speaker 1: dollars two hundred million dollars, you can't get into those

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Speaker 1: funds anyway. So you're you're safer being an index funds

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Speaker 1: and you're ultimately paying less fees. Of course, this year

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Speaker 1: you're getting colloppored like everyone else. I guess, right, both

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Speaker 1: on the stock and bond end of it, right, right,

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Speaker 1: It's just like you know, it's just been the environment.

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Speaker 1: So as a result of a year like this, do

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Speaker 1: we ultimately then see endowments kind of retrenching and being

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Speaker 1: even more cautious in terms of their plays. Are they

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Speaker 1: looking for some alternate new alternative opportunities? UM? I just wonder,

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Speaker 1: like what do they do in terms of adjusting. They

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Speaker 1: say they're long term investors, so they're not really changing

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Speaker 1: any strategies. You know, they're they're still in private equity

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Speaker 1: and hedge funds, and they may not be as much

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Speaker 1: in commodities. If they're you know, if they're shedding fossil

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Speaker 1: fuel type UM investments, which you know we're the best

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Speaker 1: performer this year, is there a lot of that going on?

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Speaker 1: Sort of E S G s they're shedding UM. You know,

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Speaker 1: if you're a two hundred million dollar endowment and you're

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Speaker 1: in UM, you know, you're in funds where you can

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Speaker 1: sell things. It's very easy to say you have divested.

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Speaker 1: But if you are a big endowment and you have

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Speaker 1: lots of investments in private equity that, as you know,

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Speaker 1: take ten twelve years down wind, you're not doing anything.

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Speaker 1: You may be not putting new money and such things.

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Speaker 1: Maybe in winding. That's Heartwood Harvard announced last year. All right,

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Speaker 1: well listen, as we said, it's among our most read

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Speaker 1: stories on the Bloomberg in terms of what's going on

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Speaker 1: with college endowments and their performance. Genital Lawrence. So great

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Speaker 1: to have you in studio, Bloomberg of Course News Higher

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Speaker 1: Education finance reporter Janit Laurren. Check her out at Janet

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Speaker 1: Lauren on Twitter. You are listening to Bloomberg Business Week

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Speaker 1: and this is Bloomberg Radio. You're listening to Bloomberg Business

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Speaker 1: Week with Carol Masser and Bloomberg Quick Takes Tim Stinovic

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Speaker 1: on Bloomberg Radio. So Bloomberg City Labs reported on the

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Speaker 1: fifteen Minutes City, basically giving every resident of a city

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Speaker 1: the ability to meet their soun needs within a shot,

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Speaker 1: short walk or a bike ride. It's been talked about

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Speaker 1: for Paris, Utah suburb. And our next guest certainly gets

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Speaker 1: that and plays into that. We welcome Mark Dixon, Founder,

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Speaker 1: executive director and CEO of the workplace solutions company, i

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Speaker 1: w G International Workplace Group companies worked with Microsoft, Disney,

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Speaker 1: black Rock, Uber, so many household names and we welcome him,

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Speaker 1: he joins us on the phone from London. Mark got

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Speaker 1: to have you here with Mike Reagan and myself. Um,

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Speaker 1: how are you? Yeah, good good, A long day with

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Speaker 1: a good one. I feel like every day is along

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Speaker 1: along one. You guys, though, did report a financial update

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Speaker 1: in your business for the first half and noted that

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Speaker 1: as a company you're looking forward with cautious optimism for

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Speaker 1: the rest of Give us a little bit more color

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Speaker 1: on your business specifically and what you mean by cautious optimism. Well, look,

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Speaker 1: there's a very very strong change in the way companies

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Speaker 1: are working. Um. I think it's actually somewhat helped by

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Speaker 1: the economic uncertainty that pervades in the world today. Um.

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Speaker 1: You know, CFOs around the world are looking at ways

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Speaker 1: they can control or cutch costs. Hybrid working that means,

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Speaker 1: you know, allowing people to work in a more flexible

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Speaker 1: way close to where they live. It's very popular, saves

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Speaker 1: about half the fixed cost and well, if it's what

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Speaker 1: people want, so it's quite an easy thing to introduce

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Speaker 1: and it will also cut your carbon footprint by a

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Speaker 1: round about sevent So, you know, there are a lot

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Speaker 1: of driving forces that are getting American and global companies

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Speaker 1: to change the way they work. It's you know, things

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Speaker 1: work well in the pandemic, but now there are new

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Speaker 1: drivers and that's that's really cost cutting. So with that,

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Speaker 1: demand is very strong for us UM in spite of

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Speaker 1: a more difficult economy. And although we're you know, we

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Speaker 1: have to find inflation like everyone else around the world,

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Speaker 1: we've got very strong revenue growth twenty three and that's

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Speaker 1: converting into strong margin improvement and equally sean cash though,

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Speaker 1: which we're very pleased about um you know, at this

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Speaker 1: time when cash is absolutely keen. Yeah, Mark, I'm wondering

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Speaker 1: what hybrid working looks like in practice. I'm curious sort

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Speaker 1: of what are the most common examples you're seeing? Is

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Speaker 1: it you know, Carol, Carol comes into the office Monday

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Speaker 1: and Tuesday. I come in Wednesday and Thursday, and everyone's

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Speaker 1: out on Friday. What are sort of the most common

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Speaker 1: scenarios you're seeing for for companies doing this. It's something

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Speaker 1: that's very much misunderstood. It's not it's not about sort

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Speaker 1: of coming into the office is about convenient working. So

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Speaker 1: the elephant in the room here, it's commuting. It's not

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Speaker 1: working from home, it's not working from a central office.

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Speaker 1: Is avoiding commuting. So for workers around the world, commuting

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Speaker 1: is very time consuming. It's become a lot more expensive

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Speaker 1: with the aw price increases, and you know it's inconvenient

428
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Speaker 1: and it's unnecessary for many people. So what people are

429
00:23:21,840 --> 00:23:28,199
Speaker 1: looking for it's not necessarily working from home. That's okay occasionally,

430
00:23:29,280 --> 00:23:32,240
Speaker 1: but it's not okay all the time because it can

431
00:23:32,359 --> 00:23:35,760
Speaker 1: damage productivity. So it's about finding a place to work

432
00:23:35,800 --> 00:23:38,840
Speaker 1: that's just down the road. UM. It's finding a place

433
00:23:38,880 --> 00:23:43,840
Speaker 1: to work that's convenient, and that's what that's what individuals

434
00:23:43,920 --> 00:23:47,159
Speaker 1: want and for companies that have said earlier, it's a

435
00:23:47,200 --> 00:23:52,440
Speaker 1: lot cheaper. So hybrid work is about your workers out

436
00:23:52,520 --> 00:23:57,679
Speaker 1: there UM working more convenient, more localized locations. You have

437
00:23:57,960 --> 00:24:03,120
Speaker 1: less fits corporate office space UM, which saves you lots

438
00:24:03,160 --> 00:24:08,679
Speaker 1: of money, and you bring people together once a fortnite,

439
00:24:09,400 --> 00:24:12,080
Speaker 1: once a week, once a month. You bring them together

440
00:24:12,160 --> 00:24:16,560
Speaker 1: to collaborate in a meaningful and well organized, curated way.

441
00:24:17,760 --> 00:24:20,560
Speaker 1: Mark just got about twenty five seconds. We apologize, So

442
00:24:20,640 --> 00:24:23,240
Speaker 1: are you using more companies opting to do that, saying

443
00:24:23,280 --> 00:24:25,320
Speaker 1: we don't want to have a lease, We're just going

444
00:24:25,359 --> 00:24:27,359
Speaker 1: to get the space when we need it. And again

445
00:24:27,480 --> 00:24:31,920
Speaker 1: just about twenty seconds. Yeah, yeah, just think about it.

446
00:24:32,119 --> 00:24:36,119
Speaker 1: Like Spotify is to music, we are too um to

447
00:24:36,240 --> 00:24:39,480
Speaker 1: the real estate industry. Make it as a streaming product,

448
00:24:39,560 --> 00:24:42,800
Speaker 1: use it anywhere any place you want. Um. That's what

449
00:24:42,840 --> 00:24:46,400
Speaker 1: companies want, and that's what individuals want, and it's growing fast. Yeah.

450
00:24:46,440 --> 00:24:48,320
Speaker 1: We always talked about the uberization of the world, or

451
00:24:48,320 --> 00:24:50,280
Speaker 1: things on demand when we need it, and I feel

452
00:24:50,320 --> 00:24:54,520
Speaker 1: like we are seeing that to some extent, as you said, Mark,

453
00:24:54,720 --> 00:24:57,399
Speaker 1: in real estate when it comes to company. Mark Dixon,

454
00:24:57,400 --> 00:25:00,440
Speaker 1: founder CEO of i w G Global, joining us on

455
00:25:00,480 --> 00:25:07,359
Speaker 1: the phone from London. Come back soon. I'm broom a

456
00:25:07,560 --> 00:25:11,000
Speaker 1: journal now. But you let me drive. No, no, no no

457
00:25:12,600 --> 00:25:17,560
Speaker 1: home please, I'll do the gravel. I want to drive.

458
00:25:19,840 --> 00:25:25,840
Speaker 1: It's a good question. D This is the drive to

459
00:25:25,920 --> 00:25:32,080
Speaker 1: the globe down on Bloomberg Radio. All right, Yes, indeed

460
00:25:32,119 --> 00:25:34,160
Speaker 1: we are counting down on the market closed, just about

461
00:25:34,160 --> 00:25:36,720
Speaker 1: ten and a half minutes left as we do so,

462
00:25:36,960 --> 00:25:39,520
Speaker 1: a headline just crossing the Bloomberg. The US Justice Department

463
00:25:40,000 --> 00:25:42,399
Speaker 1: preparing to see Google as soon as next month, according

464
00:25:42,440 --> 00:25:44,840
Speaker 1: to people familiar with the matter, capping years of work

465
00:25:44,880 --> 00:25:48,639
Speaker 1: to build a case that the alphabet unit illegally dominates

466
00:25:48,680 --> 00:25:51,920
Speaker 1: the digital advertising market. So just taking a quick check

467
00:25:52,080 --> 00:25:54,560
Speaker 1: on Google shares and they are right now just down

468
00:25:54,560 --> 00:25:57,080
Speaker 1: about half a percent, so they continue to trade off

469
00:25:57,119 --> 00:25:59,439
Speaker 1: their loads of the session. All right, let's get to

470
00:25:59,480 --> 00:26:01,400
Speaker 1: the markets. We've been bouncing around. We've got a big

471
00:26:01,400 --> 00:26:04,760
Speaker 1: inflation print tomorrow. So great to have back with us.

472
00:26:04,760 --> 00:26:08,920
Speaker 1: Animal Letty, head of active equity, head of active equity

473
00:26:08,960 --> 00:26:11,399
Speaker 1: at all spind Global Investments. She joins us here in

474
00:26:11,440 --> 00:26:14,840
Speaker 1: our Bloomberg Interactive broker studio. UM, I'll get it out.

475
00:26:14,880 --> 00:26:16,439
Speaker 1: There's just too much going on. You and I were

476
00:26:16,480 --> 00:26:18,480
Speaker 1: just saying, remember when it used to be quiet in

477
00:26:18,520 --> 00:26:22,879
Speaker 1: this summer. It's not. Um, How does that? You know,

478
00:26:23,000 --> 00:26:26,160
Speaker 1: the constant news flow, whether it's economic news, whether it's

479
00:26:26,200 --> 00:26:30,120
Speaker 1: earnings news, whether it's Fed speak or just questions about recession,

480
00:26:30,160 --> 00:26:33,639
Speaker 1: no recession, How does that complicate kind of adjusting portfolios

481
00:26:33,640 --> 00:26:36,200
Speaker 1: are figuring out where we go from here. It's such

482
00:26:36,240 --> 00:26:39,359
Speaker 1: a great question, Carolin. I think it's really about trying

483
00:26:39,400 --> 00:26:45,480
Speaker 1: to tune things out sometimes, um, which is interesting because

484
00:26:45,480 --> 00:26:48,159
Speaker 1: most people would go like you have to know everything

485
00:26:48,240 --> 00:26:52,640
Speaker 1: that's going on, the challenges, really tuning out the noise

486
00:26:52,880 --> 00:26:57,119
Speaker 1: and carefully paying attention to the things that really only

487
00:26:57,160 --> 00:26:59,840
Speaker 1: matter to the to the socks that you were in

488
00:27:00,040 --> 00:27:03,920
Speaker 1: sit in, or to your portfolios and your strategy. And

489
00:27:04,080 --> 00:27:06,159
Speaker 1: that's really what our investment teams are trying to do

490
00:27:06,280 --> 00:27:08,360
Speaker 1: right now. That's Carol's used to tune in me out,

491
00:27:08,440 --> 00:27:15,399
Speaker 1: so she's but you know, one thing you have to

492
00:27:15,440 --> 00:27:18,359
Speaker 1: sort of tune into is the earning season. And I

493
00:27:18,359 --> 00:27:20,600
Speaker 1: think it's been kind of a wild one. I mean,

494
00:27:20,720 --> 00:27:22,720
Speaker 1: no surprises, it's been in a wild few years, but

495
00:27:23,200 --> 00:27:25,440
Speaker 1: it seems like some days you'll see a retailer come

496
00:27:25,440 --> 00:27:27,840
Speaker 1: out and they're having all sorts of trouble and their

497
00:27:27,880 --> 00:27:30,600
Speaker 1: stock tanks, and then the next day some other consumer

498
00:27:30,720 --> 00:27:33,439
Speaker 1: companies like now everything's great. I mean, is it is

499
00:27:33,480 --> 00:27:37,640
Speaker 1: it execution issues? Is it sort of idiosyncratic issues some

500
00:27:37,680 --> 00:27:40,280
Speaker 1: companies are handling inflation and supply chain better or is

501
00:27:40,280 --> 00:27:42,080
Speaker 1: there something else that play? Do you think? You know?

502
00:27:42,560 --> 00:27:46,440
Speaker 1: It's so it's so interesting because there's like a bifurcation

503
00:27:46,480 --> 00:27:49,320
Speaker 1: that's really happening. And as we're looking at earnings and

504
00:27:49,680 --> 00:27:52,640
Speaker 1: talking to our portfolio managers last week and they were

505
00:27:52,680 --> 00:27:55,280
Speaker 1: describing this to like you almost have to bucket the

506
00:27:55,280 --> 00:28:00,119
Speaker 1: companies that are talking about struggling with the consumer, and

507
00:28:00,160 --> 00:28:01,960
Speaker 1: then the ones that are saying, we're not seeing it yet.

508
00:28:02,480 --> 00:28:05,600
Speaker 1: And it's challenging because in the past you would either

509
00:28:05,640 --> 00:28:07,639
Speaker 1: see it, they'd all see it, or none of them

510
00:28:07,640 --> 00:28:10,880
Speaker 1: are silling Is it a high end end I think

511
00:28:10,920 --> 00:28:13,639
Speaker 1: that's what it is. And the fortunate thing about me

512
00:28:13,720 --> 00:28:16,280
Speaker 1: living in the Midwest is I'm talking to a lot

513
00:28:16,320 --> 00:28:19,159
Speaker 1: of my friends family who are don't have a lot

514
00:28:19,200 --> 00:28:22,760
Speaker 1: of disposable income, and um, you know, one example of

515
00:28:22,760 --> 00:28:25,080
Speaker 1: a friend of mine who uses a credit card only

516
00:28:25,080 --> 00:28:28,200
Speaker 1: for groceries and gas said and like my credit card, bill,

517
00:28:28,680 --> 00:28:32,200
Speaker 1: I looked at last year's use it for the same thing.

518
00:28:32,400 --> 00:28:36,120
Speaker 1: Only those two things double over the last year. And so,

519
00:28:36,560 --> 00:28:37,840
Speaker 1: you know, if you don't have a lot of disposal

520
00:28:38,160 --> 00:28:40,800
Speaker 1: will income, you're being impacted. And in the companies that

521
00:28:40,800 --> 00:28:43,880
Speaker 1: were impacted Walmart, Target, you know, the companies that are

522
00:28:43,920 --> 00:28:47,320
Speaker 1: touching those the companies are saying we're not seeing it yet, Visa,

523
00:28:47,960 --> 00:28:52,120
Speaker 1: you know, MasterCard, they're not. You know, they're touching more

524
00:28:52,160 --> 00:28:54,920
Speaker 1: of the higher end consumer, the consumer that has more

525
00:28:54,920 --> 00:28:58,720
Speaker 1: disposal income. We're seeing buckets of that, and then certainly

526
00:28:58,720 --> 00:29:03,080
Speaker 1: companies that have how your input costs feeling more pressures

527
00:29:03,240 --> 00:29:07,400
Speaker 1: as well, but real, true bifurcation and not a lot

528
00:29:07,440 --> 00:29:11,480
Speaker 1: of correlation between you know, every company. So and you know,

529
00:29:12,360 --> 00:29:15,000
Speaker 1: we obsessed about things like the inflation print tomorrow or

530
00:29:15,120 --> 00:29:18,560
Speaker 1: FED meeting, like something like tomorrow's inflation print. How important

531
00:29:18,920 --> 00:29:21,400
Speaker 1: is it to you and how you think about managing

532
00:29:21,400 --> 00:29:24,719
Speaker 1: money right now? Yeah, what's interesting about inflation is just

533
00:29:24,800 --> 00:29:27,320
Speaker 1: kind of where we're at today and then the direction

534
00:29:27,320 --> 00:29:31,160
Speaker 1: of where it's going. Tomorrow's print in of itself not

535
00:29:31,400 --> 00:29:35,080
Speaker 1: probably meaningful. Um, we want to know, gosh, have we

536
00:29:35,160 --> 00:29:37,800
Speaker 1: seen the peak? Is a peak behind us? But again

537
00:29:37,840 --> 00:29:40,240
Speaker 1: that's only just a short term metric, right If we've

538
00:29:40,240 --> 00:29:43,000
Speaker 1: seen the peak, is it? Are we going to, like,

539
00:29:43,360 --> 00:29:45,680
Speaker 1: you know, test it again in the future. I mean,

540
00:29:45,960 --> 00:29:48,480
Speaker 1: all of those questions are still because that's the thing.

541
00:29:48,520 --> 00:29:51,000
Speaker 1: I do feel like there used to be times passed

542
00:29:51,000 --> 00:29:52,600
Speaker 1: where I think we could kind of figure out where

543
00:29:52,640 --> 00:29:55,120
Speaker 1: we're going. And I don't know whether it's post pandemic.

544
00:29:55,200 --> 00:29:57,479
Speaker 1: I don't know whether it's just so much money that

545
00:29:57,520 --> 00:29:59,600
Speaker 1: was pumped in and then now it's being sucked out,

546
00:29:59,640 --> 00:30:03,400
Speaker 1: like I'm trying to understand that maybe this time is different.

547
00:30:03,400 --> 00:30:06,520
Speaker 1: Forgive me for saying that, but I think it is

548
00:30:06,600 --> 00:30:09,320
Speaker 1: different this time. And I think the frustrating thing about

549
00:30:09,320 --> 00:30:12,160
Speaker 1: being an investor in this market rather than a trader

550
00:30:12,920 --> 00:30:16,400
Speaker 1: is that you're focused on the long term and traders

551
00:30:16,520 --> 00:30:20,200
Speaker 1: right now are focused on short term trading and focused

552
00:30:20,240 --> 00:30:23,640
Speaker 1: on what's happening tomorrow and positioning for that. So if

553
00:30:23,640 --> 00:30:26,640
Speaker 1: you look at the inverse correlation to like the biotech

554
00:30:26,720 --> 00:30:30,600
Speaker 1: index or growth versus value, it's just trading on whatever

555
00:30:30,640 --> 00:30:34,440
Speaker 1: the bond market is doing, right, and long term investors

556
00:30:34,440 --> 00:30:36,800
Speaker 1: are saying, no, I'm going to focus on quality here

557
00:30:36,960 --> 00:30:40,520
Speaker 1: and companies and management teams that can manage through a

558
00:30:40,720 --> 00:30:45,320
Speaker 1: clearly different you know, resume change, paradigm shift, whatever you

559
00:30:45,320 --> 00:30:47,480
Speaker 1: want to call it. For the future. We definitely have

560
00:30:47,560 --> 00:30:49,960
Speaker 1: higher inflation. We definitely are going to see higher rates

561
00:30:50,000 --> 00:30:52,080
Speaker 1: probably over the next decade then we've seen over the

562
00:30:52,120 --> 00:30:55,560
Speaker 1: past decade, and stock selection is going to matter. The

563
00:30:55,640 --> 00:30:58,960
Speaker 1: unfortunate thing is right now the traders are winning and

564
00:30:59,000 --> 00:31:02,440
Speaker 1: just swinging the market. It's based on the the you know,

565
00:31:02,680 --> 00:31:05,520
Speaker 1: but based on yield. So when you talk about quality

566
00:31:05,520 --> 00:31:08,280
Speaker 1: and we hear this a lot like it's it's kind

567
00:31:08,280 --> 00:31:10,840
Speaker 1: of the time to be defensive and look for quality companies.

568
00:31:11,120 --> 00:31:13,920
Speaker 1: How do you define quality? You know, is it dividend yields,

569
00:31:14,040 --> 00:31:16,960
Speaker 1: is it just strong balance sheets? All the above. I

570
00:31:17,000 --> 00:31:19,320
Speaker 1: think free cash flow is going to matter more than

571
00:31:19,360 --> 00:31:24,160
Speaker 1: anything because the cost of capital is you know, extremely

572
00:31:24,240 --> 00:31:28,480
Speaker 1: high for some companies UM, and it's going to matter

573
00:31:28,560 --> 00:31:32,000
Speaker 1: a lot more. I mean, when you had free capital

574
00:31:32,120 --> 00:31:36,720
Speaker 1: essentially UM for so many years, it caused a lot

575
00:31:36,800 --> 00:31:39,600
Speaker 1: of you know, companies to get out of control. A

576
00:31:39,680 --> 00:31:42,960
Speaker 1: lack of discipline, I would say, and you're going to

577
00:31:43,080 --> 00:31:45,320
Speaker 1: have to have more discipline going forward. So I would say,

578
00:31:45,360 --> 00:31:49,480
Speaker 1: free cash flow, strong balance sheets, and then management teams,

579
00:31:49,640 --> 00:31:53,760
Speaker 1: management teams who have experienced different cycles before. That's going

580
00:31:53,840 --> 00:32:00,040
Speaker 1: to matter a lot more. No, no memes, quality of

581
00:32:00,240 --> 00:32:03,040
Speaker 1: See I didn't hear that. I just got about thirty seconds.

582
00:32:03,080 --> 00:32:05,440
Speaker 1: So where don't you want to be right now? I

583
00:32:05,480 --> 00:32:09,320
Speaker 1: think where you probably don't want to be is again,

584
00:32:09,360 --> 00:32:12,880
Speaker 1: I would focus on, you know, the lack of quality.

585
00:32:12,960 --> 00:32:15,880
Speaker 1: I would stay away from, like the this rally we've

586
00:32:15,960 --> 00:32:20,800
Speaker 1: seen in you know, the high yield space in the

587
00:32:21,240 --> 00:32:24,480
Speaker 1: in the companies with kind of poor balance sheets, companies

588
00:32:24,520 --> 00:32:27,360
Speaker 1: you know, like if you just do a quick m

589
00:32:27,760 --> 00:32:30,560
Speaker 1: a quick screen of companies that are gonna need to

590
00:32:30,640 --> 00:32:33,960
Speaker 1: raise capital in the next year, like forget it because

591
00:32:33,960 --> 00:32:36,280
Speaker 1: it's gonna be too expensive, it's gonna be problematic. UM.

592
00:32:36,320 --> 00:32:38,040
Speaker 1: I always wish we had more time. Thank you so

593
00:32:38,120 --> 00:32:40,880
Speaker 1: much for taking the time to be with us. Thank you.

594
00:32:41,000 --> 00:32:43,400
Speaker 1: Always get to talk to feedback Amma Letty. She is

595
00:32:43,440 --> 00:32:46,360
Speaker 1: head of Active Equity at all Spring Global Investments, joining

596
00:32:46,440 --> 00:32:50,080
Speaker 1: us here in our interactive broker studio. Thanks for listening

597
00:32:50,120 --> 00:32:53,600
Speaker 1: to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud,

598
00:32:53,680 --> 00:32:55,800
Speaker 1: or Bloomberg dot com, and you can also listen to

599
00:32:55,840 --> 00:32:58,440
Speaker 1: our radio show at two pm Eastern on Bloomberg Radio

600
00:32:58,560 --> 00:33:01,280
Speaker 1: or watch us on YouTube. Art to Bloomberg Global News

601
00:33:06,640 --> 00:33:06,680
Speaker 1: m