WEBVTT - Zuckerberg Hits Panic Button at Meta 0:00:01.800 --> 0:00:04.440 This is Bloomberg Business Week. I'm Carol Masser and I'm 0:00:04.440 --> 0:00:07.280 Bloomberg Quick Takes Tim Stanabek. We're here every day bringing 0:00:07.280 --> 0:00:09.840 you the latest news from the world of business and finance, 0:00:09.840 --> 0:00:13.640 plus technology, politics, economics, all purtnising the power of Business 0:00:13.640 --> 0:00:17.119 Week reporters and editors, not to mention our journalists and 0:00:17.160 --> 0:00:20.000 analyst in more than one twenty countries. You can download 0:00:20.000 --> 0:00:23.239 Bloomberg Business Week and iTunes, SoundCloud, or Bloomberg dot Com. 0:00:23.400 --> 0:00:25.160 You can also listen to our radio show at two 0:00:25.160 --> 0:00:27.840 pm Eastern Time on Bloomberg Radio or watch us on 0:00:27.880 --> 0:00:32.240 YouTube search Bloomberg Global News. Alright, so we've often talked 0:00:32.240 --> 0:00:35.320 about metal platforms, the company formerly known as Facebook getting 0:00:36.000 --> 0:00:39.159 beaten up by investors, down about fifty this year alone, 0:00:39.240 --> 0:00:42.199 down from its all time high back in September one, 0:00:42.240 --> 0:00:45.680 well as Bloomberg Business Week calumnist Max Chafkin rights, despite 0:00:45.680 --> 0:00:49.680 Mark Zuckerberg's attempt to present Meta as an underdog, Max 0:00:49.720 --> 0:00:52.120 says it's not time to feel sorry for the social 0:00:52.200 --> 0:00:54.080 media giants. So let's get to it. This story on 0:00:54.080 --> 0:00:56.840 the Bloomberg and Bloomberg dot Com slash Business Week and 0:00:56.880 --> 0:00:59.120 Max joining us on the phone from Queen's So, Max, 0:00:59.160 --> 0:01:03.480 why shouldn't we feel sorry for Meta? So what's happened 0:01:04.240 --> 0:01:08.880 over over this year basically is the economy and kind 0:01:08.920 --> 0:01:11.440 of the social media ecosystem is sort of reverting to 0:01:11.560 --> 0:01:14.440 pre COVID norm So there was this moment, you know, 0:01:14.600 --> 0:01:19.800 in twenty people are spending all of their time, uh 0:01:19.880 --> 0:01:22.200 you know on the internet, spending huge sums of money 0:01:22.280 --> 0:01:24.720 on you know, online shopping, and that was amazing for 0:01:24.760 --> 0:01:28.720 Facebook's business and excuse me Meta's business. And what's happened 0:01:28.760 --> 0:01:31.080 is we've seen a reversion which has led to you know, 0:01:31.080 --> 0:01:33.479 all these kind of like doom and gloom predictions, both 0:01:33.520 --> 0:01:37.040 from inside the company and from analysts. Um. The thing is, 0:01:37.400 --> 0:01:41.160 the pre COVID version of Facebook was still dominant, and 0:01:41.200 --> 0:01:44.920 when you look at the competitive landscape, yes, TikTok Um 0:01:45.040 --> 0:01:48.480 is gaining ground in terms of cultural mind share that 0:01:48.600 --> 0:01:50.240 you have a lot of young people on the platform, 0:01:50.440 --> 0:01:54.680 but it's not even close. Facebook still basically owns social 0:01:54.680 --> 0:01:57.600 media and and that isn't changing anytime soon. And I 0:01:57.640 --> 0:02:01.040 think what's what's happening more is zucker Bird is attempting 0:02:01.120 --> 0:02:04.360 to position the company both because it's in this uh 0:02:04.400 --> 0:02:06.920 Ani trust conversation and as a way to of course 0:02:06.960 --> 0:02:09.799 get more productivity out of his employees, to to sort 0:02:09.800 --> 0:02:12.240 of try to find ways to um you know, to 0:02:12.280 --> 0:02:15.320 continue to stay ahead of TikTok, you know. Max. The 0:02:15.320 --> 0:02:18.400 other big story obviously with Facebook is this pivot to 0:02:18.720 --> 0:02:21.880 the metaverse. H Why why we're calling it meta now 0:02:21.919 --> 0:02:24.000 instead of Facebook? And why I can never remember the 0:02:24.000 --> 0:02:26.800 ticker symbol for the stock? But I wonder, you know, 0:02:26.919 --> 0:02:30.720 it just seems like there's been nothing but criticism about 0:02:30.800 --> 0:02:36.239 that strategy UM and you know, surely part of that investment, 0:02:36.680 --> 0:02:39.080 big investment in the metaverse is reflected in this just 0:02:39.520 --> 0:02:43.919 awful stock price performance this year. I'm wondering how you're 0:02:43.960 --> 0:02:46.360 thinking about that though. Is it possible that is an 0:02:46.400 --> 0:02:49.160 underdog story? I mean, is Zuckerberg seeing something in the 0:02:49.160 --> 0:02:51.800 metaverse that everyone else isn't or is this just a 0:02:51.919 --> 0:02:56.120 quixotic UH campaign that he's going to regret? Do you think? Well? 0:02:56.160 --> 0:03:01.040 I think meta Facebook already can trolls a lot of 0:03:01.040 --> 0:03:04.119 the metaverse. You know, they acquired this as as part 0:03:04.120 --> 0:03:08.920 of their sort of push into um VR, into new platforms. Right, 0:03:08.919 --> 0:03:11.359 they paid around two billion dollars to this company called 0:03:11.400 --> 0:03:15.800 Oculus that that turned into Facebook Meta's you know, VR 0:03:16.040 --> 0:03:21.119 a rum thing, and uh, the question is how big 0:03:21.120 --> 0:03:24.800 does this market get? Right, Zuckerberg is spending billions of 0:03:24.840 --> 0:03:28.040 dollars and rebranding the company and so on with the 0:03:28.080 --> 0:03:30.880 hopes that this is the next big platform, as big 0:03:30.919 --> 0:03:33.120 as mobile phones or something like that. But we don't 0:03:33.160 --> 0:03:35.960 actually know that will be the case. So so in 0:03:35.800 --> 0:03:38.600 in sort of the best case scenario, this becomes huge, 0:03:38.640 --> 0:03:40.880 it's the biggest PCs, and and that's the vision that 0:03:41.040 --> 0:03:43.840 Zuckerberg has talked about for for years. Really, you know, 0:03:43.880 --> 0:03:47.880 the worst cases, Facebook just controls relatively small market and 0:03:47.920 --> 0:03:51.960 then continues to dominate, uh, social media as it does today. 0:03:52.040 --> 0:03:54.960 I mean it's still furnillon dollar market cap company. I 0:03:54.960 --> 0:03:58.120 mean it's it's exactly and I think about there's so 0:03:58.160 --> 0:04:00.880 many companies when we talk about the law of large numbers. 0:04:00.920 --> 0:04:03.440 I mean you're looking at revenue still for this year 0:04:03.560 --> 0:04:06.080 forecasting to be something like a D eighteen billion dollars. 0:04:06.080 --> 0:04:10.800 I mean, this company still still makes a lot of money. Well, 0:04:10.840 --> 0:04:13.080 And and one thing that I think people have sort 0:04:13.120 --> 0:04:15.560 of missed is there's there's been this conversation like, oh 0:04:15.600 --> 0:04:19.160 maybe maybe uh meta Facebook is lost it's cool, right, 0:04:19.200 --> 0:04:21.279 the young people are going to TikTok and what what 0:04:21.480 --> 0:04:23.479 it's easier to forget that that has been going on 0:04:23.640 --> 0:04:26.080 for basically a decade, you know, it's a about a 0:04:26.120 --> 0:04:29.360 decade ago that Facebook first lost it's cool, maybe a 0:04:29.400 --> 0:04:32.880 little bit earlier than that. And Zuckerberg has found ways 0:04:33.240 --> 0:04:36.000 time and again to adjust, you know. And originally that 0:04:36.120 --> 0:04:40.000 that adjustment meant um, buying Instagram and then copying aspects 0:04:40.000 --> 0:04:43.200 of Snapchat, buying WhatsApp, um. And we're seeing that play 0:04:43.360 --> 0:04:48.200 out again. He can't buy TikTok because of antitrust scrutiny, um, 0:04:48.240 --> 0:04:50.480 but he can't copy it and and and the company 0:04:50.680 --> 0:04:53.039 is making progress there. It hasn't yet found ways to 0:04:53.040 --> 0:04:56.360 generate revenue. But but these these TikTok like products are 0:04:56.360 --> 0:04:59.599 definitely um gaining in terms of users, crime, spend, and 0:04:59.600 --> 0:05:01.720 that's sort of things got back. So I'm wondering a 0:05:01.800 --> 0:05:03.720 lot of times when you see a company sort of 0:05:03.760 --> 0:05:07.040 stumble like this at least its share price, uh and 0:05:07.040 --> 0:05:11.120 and sort of uh not posting that block bluster growth 0:05:11.240 --> 0:05:14.200 like uh meta once did you know I would start 0:05:14.240 --> 0:05:18.039 wondering about the guy at the top and his uh, 0:05:18.120 --> 0:05:20.440 you know how secure his position is there you know, 0:05:20.480 --> 0:05:25.279 obviously Zuckerberg is is both CEO and chairman of the company. 0:05:25.640 --> 0:05:28.800 Is it just insane to think that there could be 0:05:28.800 --> 0:05:32.680 some risk to him in that position, um, you know? 0:05:33.040 --> 0:05:36.040 Or is he just so ingrained in the company that 0:05:36.320 --> 0:05:38.200 you know, it would be foolish for anyone to try 0:05:38.240 --> 0:05:41.120 to agitate to to have him either you know, removed 0:05:41.160 --> 0:05:43.080 completely or at least give up one of those two 0:05:43.120 --> 0:05:46.760 titles chairman and CEO. So I mean he would have 0:05:46.800 --> 0:05:48.680 The important thing is he would have to do it right. 0:05:48.720 --> 0:05:52.440 It he controls Facebook in addition to being um, you know, 0:05:52.480 --> 0:05:55.159 the the CEO and the chairman through these super voting shares. 0:05:55.400 --> 0:05:57.839 So he would have to conclude or or I guess 0:05:58.160 --> 0:06:00.679 was like be forced by a court or something, um 0:06:00.760 --> 0:06:03.400 that that this would be you know, better for the company. 0:06:03.520 --> 0:06:05.640 And I don't think that's gonna happen anytime soon. And 0:06:05.640 --> 0:06:09.160 that's partly because of my sense of of the psychology 0:06:09.200 --> 0:06:12.440 of Mark Zuckerberg, right, like, this is his identity, you know, 0:06:12.480 --> 0:06:15.839 It's it's very hard to imagine him, um not being 0:06:15.960 --> 0:06:17.680 at the top of Facebook. I think it's probably very 0:06:17.680 --> 0:06:20.160 hard for him to imagine that. And I also think 0:06:20.240 --> 0:06:23.960 you know, the company has kind of found Uh. I 0:06:24.000 --> 0:06:25.880 don't know if you called a scapegoat. But but in 0:06:25.960 --> 0:06:29.000 terms of executive changes, right there, Cheryl Sandberg is moving 0:06:29.040 --> 0:06:32.320 on and and and and she was um some of 0:06:32.360 --> 0:06:34.960 the focus of some of the criticism around Facebook. So 0:06:35.000 --> 0:06:36.880 I think there, I think he had I think he 0:06:36.920 --> 0:06:39.520 has made some executive moves at the top in response 0:06:39.560 --> 0:06:42.280 to pressure. UM. But I don't think one of those 0:06:42.279 --> 0:06:44.600 moves is going to be removing himself anytime soon. So 0:06:44.640 --> 0:06:46.800 the point is what that you know, and I think 0:06:46.839 --> 0:06:48.760 about as we talk about the story, and you're right, 0:06:48.839 --> 0:06:50.719 I think I feel like some of the conversations around 0:06:50.720 --> 0:06:53.560 it is like, oh, whoa is you know? Meta? But 0:06:53.640 --> 0:06:57.800 I mean this is a company still even if numbers 0:06:57.800 --> 0:06:59.560 maybe or the growth numbers aren't as strong as they 0:06:59.680 --> 0:07:02.000 used to. I mean when it comes to things like advertising, 0:07:02.040 --> 0:07:03.880 I mean, this is still where folks go. And we've 0:07:03.920 --> 0:07:08.240 just got about thirty seconds here. Yeah, it's un avoidable 0:07:08.240 --> 0:07:10.160 from an advertising perspective, and I think it's just worth 0:07:10.280 --> 0:07:12.960 keeping in mind that there's this political story playing at 0:07:12.960 --> 0:07:15.320 the same time, which is that Facebook is under scrutiny 0:07:15.400 --> 0:07:18.400 and it's to its advantage to play up competition. So 0:07:18.440 --> 0:07:20.760 I think it's important to you know, just take that, 0:07:20.880 --> 0:07:22.680 take it with a grain of salt. Every time they 0:07:22.720 --> 0:07:26.080 talk about fear of TikTok and so on, somebody managing 0:07:26.120 --> 0:07:30.600 the message, the narrative. Max, is what you're saying. I 0:07:30.640 --> 0:07:32.880 think he's gone all right. Anyway, check out this story. 0:07:32.880 --> 0:07:34.880 You can find it on the Bloomberg and of course 0:07:34.960 --> 0:07:39.080 online at Bloomberg dot com, Slash business Week about Facebook 0:07:39.200 --> 0:07:42.280 and Mark Zuckerman. Of course that was Zuckerberg. Excuse me, 0:07:42.360 --> 0:07:45.000 that of Christmas. Max Jafkin, columnist of Bloomberg Business Week, 0:07:45.040 --> 0:07:47.960 joining us on the phone from Queens, New York. You 0:07:48.000 --> 0:07:50.280 are listening in watching Bloomberg Business Week, cal Master Mike 0:07:50.360 --> 0:07:57.160 Reagan and this is Bloomberg. You're listening to Bloomberg Business 0:07:57.160 --> 0:08:01.600 Week with Carol Messer and Bloomberg Quicktake Tim Stanovich on 0:08:01.760 --> 0:08:05.440 Bloomberg Radio. Well social media news sites. Man, they let 0:08:05.520 --> 0:08:07.680 up last night on the news that former President Donald 0:08:07.720 --> 0:08:11.760 Trump faces intensifying legal and political pressure after FBI agents 0:08:11.760 --> 0:08:14.480 search his Florida home in a probe of whether he 0:08:14.480 --> 0:08:17.239 took classified documents from the White House when he left office. 0:08:17.240 --> 0:08:20.080 You've probably read the story. Well, that story it is 0:08:20.400 --> 0:08:22.680 among the top five of today's most read stories on 0:08:22.720 --> 0:08:25.840 the Bloomberg. For more and understanding a bit about the 0:08:25.960 --> 0:08:28.760 legal aspect of this story, let's bring in Bloomberg News 0:08:28.760 --> 0:08:31.960 senior reporter Joe Zoe Tilman. She is on the phone 0:08:31.960 --> 0:08:34.360 from Washington, d C. Zoe. Good to have you here 0:08:34.360 --> 0:08:37.200 with Mike Reagan and myself. So what do we need 0:08:37.280 --> 0:08:41.560 to understand about the legal process and justification initially for 0:08:41.640 --> 0:08:45.319 that search at Moral Lago, Right? So, you know, the 0:08:45.720 --> 0:08:49.240 critical thing here is that to get a search warrant, 0:08:49.240 --> 0:08:51.320 to get a judge to sign off on a search warrant, 0:08:51.320 --> 0:08:54.480 you don't need to show that a particular person committed 0:08:54.520 --> 0:08:57.480 a crime. You know, this isn't the same as charge 0:08:57.480 --> 0:09:00.240 as against the former president. What they have to out 0:09:00.440 --> 0:09:02.880 to a judge is that there is probable cause that 0:09:02.960 --> 0:09:07.280 they will find evidence of crimes at the location. You know, 0:09:07.360 --> 0:09:10.280 a big question for all of us is what exactly 0:09:10.320 --> 0:09:14.439 the search warrant says? Um prosecutors would have to identify 0:09:14.520 --> 0:09:18.440 which federal crimes uh they think are they would find 0:09:18.520 --> 0:09:20.600 evidence of, and that would give us a big clue 0:09:20.720 --> 0:09:25.080 into what where the investigation is headed. Who's focused on? 0:09:25.320 --> 0:09:27.680 You know what the potential charges might be and what 0:09:27.760 --> 0:09:30.880 the potential penalties on the table might be very big, 0:09:31.000 --> 0:09:35.200 unresolved unknown at this point. Um. But you know, it's 0:09:35.240 --> 0:09:38.000 it's not as if the Attorney General or the head 0:09:38.000 --> 0:09:40.360 of the FBI woke up one morning and said, let's 0:09:40.360 --> 0:09:44.040 go raid Trump's house. Um. They had to bring something 0:09:44.240 --> 0:09:47.280 of substance to to a judge who had to meet, 0:09:47.360 --> 0:09:50.920 you know, preset standards for signing upon that. So I'd 0:09:50.960 --> 0:09:54.440 love that sort of tap into your expertise and experience 0:09:54.520 --> 0:09:58.599 covering court cases like this because there are so many 0:09:58.800 --> 0:10:03.080 various investigationations into former President Trump. Most of the reporting 0:10:03.080 --> 0:10:06.880 seems to indicate that this was focused squarely on the 0:10:06.920 --> 0:10:09.720 removal of documents from the White House and and taken 0:10:09.760 --> 0:10:11.400 to mari Lago when they should have gone to the 0:10:11.480 --> 0:10:15.400 National Archives. But I wonder, you know, given all the 0:10:15.440 --> 0:10:19.200 other investigations, is it possible that evidence pertinent to those 0:10:19.559 --> 0:10:23.439 uh could be used from the search? Um? Or does 0:10:23.440 --> 0:10:25.880 it all depend basically one what the warrant says. You know, 0:10:26.760 --> 0:10:30.080 what all can they take away from Marilago that could 0:10:30.080 --> 0:10:34.160 be used in other other investigations? Right, so you know, 0:10:34.240 --> 0:10:36.360 when they when they go into a search warrant. They 0:10:36.400 --> 0:10:38.800 cannot just do a free for all look for any 0:10:38.840 --> 0:10:41.320 evidence of a crime. They usually have to specify, you know, 0:10:41.400 --> 0:10:46.640 we are looking for um, White House records with classified 0:10:46.679 --> 0:10:52.000 markings or any evidence boxes marked classified or these are 0:10:52.040 --> 0:10:55.319 from the White House, um. You know. But once they 0:10:55.440 --> 0:10:58.840 take those documents, if in the course of the search 0:10:59.000 --> 0:11:02.040 they see I think that this the phrase has sort 0:11:02.040 --> 0:11:03.839 of in plain view, but that can mean a lot 0:11:03.840 --> 0:11:08.360 of different things. In practice, other evidence of crimes that 0:11:08.440 --> 0:11:12.760 can be fair game for investigators to use, even if 0:11:12.760 --> 0:11:15.640 it's not related to the original purpose of seeking the warrants. 0:11:15.640 --> 0:11:18.560 So the classic example is, you know, FBI agents go 0:11:18.679 --> 0:11:22.680 into a house on a search warrant or you know, uh, 0:11:22.920 --> 0:11:25.800 looking for guns, and on the table they see drugs. 0:11:25.840 --> 0:11:28.600 You know, those drugs are fair game. UM. It's a 0:11:28.600 --> 0:11:30.959 bit more complicated when you're talking about, you know, the 0:11:31.360 --> 0:11:34.920 contents of a document that's been sieved pursuant to a 0:11:34.960 --> 0:11:39.319 search warrant related to some other issue of the substance 0:11:39.600 --> 0:11:42.920 or the circumstances of those documents. So it's it's possible, 0:11:43.000 --> 0:11:46.040 but it's not quite clear. So so you know, I've 0:11:46.080 --> 0:11:49.520 seen in some of the reporting on Bloomberg different sources 0:11:49.559 --> 0:11:52.160 saying that this is unprecedented. But I am curious. Is 0:11:52.400 --> 0:11:55.960 it accurate to say that this is unprecedented for a 0:11:56.040 --> 0:11:58.360 former president? And now people have talked us about the 0:11:58.360 --> 0:12:01.640 Clintons returning White House for or after they had got home. 0:12:01.679 --> 0:12:04.080 I mean, is what's going on right now? Possibly just 0:12:04.160 --> 0:12:07.559 an oops on the part of the former president Donald 0:12:07.640 --> 0:12:10.520 Trump that he just took stuff home that he shouldn't have, 0:12:10.800 --> 0:12:12.959 or I don't know, like, how are we supposed to 0:12:13.040 --> 0:12:16.160 see this and just got about forty seconds? Yeah, you know, 0:12:16.200 --> 0:12:18.920 I think my understanding is it's unprecedented for a search 0:12:18.960 --> 0:12:21.600 warm to be executed at the home of a former president. 0:12:21.679 --> 0:12:25.599 That seems to be agreed upon. You know, normally prosecutors 0:12:25.600 --> 0:12:28.240 would treat a former president with kid gloves. They would 0:12:28.320 --> 0:12:31.400 try to get whatever they need through other means that 0:12:31.440 --> 0:12:34.920 are not you know, a a very dramatic execution of 0:12:34.920 --> 0:12:38.040 a search warrant quote unquote rate of a home. So 0:12:38.240 --> 0:12:40.520 the thinking here is that there is some urgency that 0:12:40.600 --> 0:12:44.200 prosecutors felt in taking this. You know, it's definitely more 0:12:44.200 --> 0:12:47.000 of an escalation than we've seen in the treatment of 0:12:47.000 --> 0:12:49.920 public officials coming from the Justice Department. All right, and 0:12:49.960 --> 0:12:52.240 just quickly fifteen seconds. Is it related to the January 0:12:52.320 --> 0:12:56.760 six committee investigation or we don't know, we don't know. Okay, 0:12:56.840 --> 0:13:01.120 that was quick. We will reacently be following your reporting 0:13:01.120 --> 0:13:03.160 and I'm sure coming back to you. Um so, thank 0:13:03.200 --> 0:13:05.520 you so much really setting us straight in terms of 0:13:05.720 --> 0:13:07.840 the legal side of this to get a better understanding. 0:13:07.920 --> 0:13:11.959 Zoe Tilman, Senior reporter. She covers legal issues and courts 0:13:12.080 --> 0:13:14.400 out of d C for Bloomberg News. She's joining us 0:13:14.440 --> 0:13:18.360 on the phone from the nation's capital. This is Bloomberg 0:13:18.440 --> 0:13:22.120 Business Week with Carol Messer and Bloomberg Quick Takes Tim 0:13:22.160 --> 0:13:26.000 Stinovic on Bloomberg Radio. Another one of our most read 0:13:26.040 --> 0:13:28.800 stories on the Bloomberg Today. How's to do with college 0:13:28.880 --> 0:13:32.040 endowments posting their biggest losses since the financial crisis? So 0:13:32.240 --> 0:13:34.920 let's get the story from Bloomberg News Higher education finance 0:13:34.960 --> 0:13:37.680 reporter Janet Lawn. She joins us at our Bloomberg Interactive 0:13:37.679 --> 0:13:40.640 Broker's studio. So good to have you here. So what's 0:13:40.640 --> 0:13:44.440 going on? Well, given what was in the stock market 0:13:44.480 --> 0:13:47.640 for the year, the SNP was down twelve percent um, 0:13:47.679 --> 0:13:49.920 not a huge surprise. I've seen my far oh one 0:13:50.000 --> 0:13:54.360 K I know so I think what is surprising is 0:13:54.440 --> 0:13:57.559 the huge contrast from last year when you saw some 0:13:57.679 --> 0:14:02.000 endowments have have returns of scent wash you had in St. 0:14:02.000 --> 0:14:05.880 Louis had a return of sixty. So it's a big change. 0:14:06.040 --> 0:14:09.480 And uh, you know, the smaller endowments are definitely more 0:14:09.520 --> 0:14:12.920 heavily rely relying on US equities, and of course bonds 0:14:12.920 --> 0:14:15.720 didn't do so well in the fiscal year too, And 0:14:15.840 --> 0:14:19.480 usually the bigger endowments have a big a lot of 0:14:19.520 --> 0:14:22.600 help from private equity and other alternatives, and they just 0:14:22.640 --> 0:14:25.000 didn't get that kind of insulation this year. You know, 0:14:25.080 --> 0:14:28.880 Janet full disclosure. I just wrote my first college tuition 0:14:29.000 --> 0:14:30.640 check for my oldest so you know, if I look 0:14:30.640 --> 0:14:33.720 a little shell shock, that's that's the reason. But you know, 0:14:33.720 --> 0:14:36.240 reading the story from that perspective of a parent of 0:14:36.240 --> 0:14:39.040 a kid going into school, I can't help but worry. 0:14:39.200 --> 0:14:43.720 Does a poor endowment year mean that tuition is going 0:14:43.760 --> 0:14:47.560 to go up even more next year? Especially with this inflation? 0:14:47.600 --> 0:14:50.240 I mean, colleges are dealing with inflation as much as 0:14:50.440 --> 0:14:53.440 anyone else, But how do you think about tuition in 0:14:53.640 --> 0:14:56.160 sort of both of those variables, a high inflation and 0:14:56.680 --> 0:15:00.080 poor year for endowments, So good question. The good new 0:15:00.160 --> 0:15:03.200 is that spending is not determined by one year of 0:15:03.280 --> 0:15:07.120 endowment returns. It's typically an average of three to five years. 0:15:07.400 --> 0:15:12.240 So last year's amazing returns definitely helps even out the spending. Now, 0:15:12.280 --> 0:15:16.680 inflation is another story because when colleges set there say 0:15:16.680 --> 0:15:21.240 their meal plans of say a three percent increase in February. Uh, 0:15:21.280 --> 0:15:24.760 they're actually having to spend a lot more. So you 0:15:24.800 --> 0:15:28.160 may see it next year, um in in your overall 0:15:28.200 --> 0:15:30.120 cost for dining or if you're if your kid is 0:15:30.160 --> 0:15:32.880 still in the dorms, that may increase. Yeah, the the 0:15:32.920 --> 0:15:36.080 inflation is a is a problem on campus, both in 0:15:36.160 --> 0:15:38.160 terms of the supply chain. You know, you may not 0:15:38.240 --> 0:15:41.640 get all the types of food you want in the cafeteria, 0:15:41.760 --> 0:15:44.800 plus a labor shortage. So to teach my kid to cook, 0:15:44.840 --> 0:15:46.880 I think it is the bottom one. I am, I am. 0:15:47.120 --> 0:15:50.520 My daughters like reducing the mail mail plan as we speak. Um, 0:15:51.160 --> 0:15:53.640 I love you include this in your story. Colleges typically 0:15:53.680 --> 0:15:55.560 need annual games at least seven percent to keep pace 0:15:55.600 --> 0:15:57.480 with annual spending, and that plays to kind of some 0:15:57.520 --> 0:15:59.640 of this stuff. I feel like you're talking so can 0:15:59.840 --> 0:16:02.280 so As you said, though they wait three years or 0:16:02.320 --> 0:16:05.080 something before they start to change some things. It's an 0:16:05.160 --> 0:16:08.720 it's an average of spending depending on how they've done 0:16:09.080 --> 0:16:11.760 over three years or some schools you do the rolling 0:16:12.040 --> 0:16:16.120 um five year average. So one year is not going 0:16:16.120 --> 0:16:18.680 to have a huge impact on spending, just like last year, 0:16:18.720 --> 0:16:22.240 when you know, schools had very robust returns, they didn't 0:16:22.240 --> 0:16:24.760 spend at all. Do we can I just ask, do 0:16:24.840 --> 0:16:27.720 we ever see an endowment, especially after a year that 0:16:27.840 --> 0:16:31.680 was so phenomenal last year where they do park a 0:16:31.720 --> 0:16:34.280 lot of things in quote unquote a cash like investment 0:16:34.280 --> 0:16:38.080 and say right, because you could coast for or especially 0:16:38.080 --> 0:16:40.800 you know, do they ever do that to kind of 0:16:40.840 --> 0:16:43.680 just played a little bit safer? Well, I guess it 0:16:43.800 --> 0:16:47.120 just really depends on the schools. And last year you 0:16:47.240 --> 0:16:51.480 had an overallocation to private equity because the returns were 0:16:51.520 --> 0:16:53.600 so strong. We had a story about this a few 0:16:53.640 --> 0:16:57.520 months ago that schools, you know, their their allocation to 0:16:57.560 --> 0:17:02.120 private equity was in the age because they just were 0:17:02.280 --> 0:17:05.200 you know, they just did so well. When Michigan State 0:17:05.359 --> 0:17:08.760 was describing one fund had a thousand percent return. Wow, 0:17:08.880 --> 0:17:10.840 Well I wanted to ask you about that. That sort 0:17:10.840 --> 0:17:13.640 of the strategies of endowments. I mean, obviously you hear 0:17:13.640 --> 0:17:17.200 about sort of the stars, the David Swinson's of the world. Um, 0:17:17.480 --> 0:17:20.520 but you cover this space so closely. I'm curious, you know, 0:17:20.640 --> 0:17:23.439 the market nerd and me wants to know, is do 0:17:23.480 --> 0:17:26.240 any of these endowments just do passive sort of sixty 0:17:26.280 --> 0:17:28.119 forty type of thing or is everyone trying to be 0:17:28.320 --> 0:17:31.480 David Swinson talking like a balanced fund. Yes, well, a 0:17:31.520 --> 0:17:34.120 lot of schools did try to be like David Swinson. 0:17:34.640 --> 0:17:38.239 And uh, you know, I think given the success of 0:17:38.440 --> 0:17:43.640 private equity and and and hedge funds, maybe not more recently, Uh, 0:17:43.760 --> 0:17:47.000 schools wanted to try to find other ways to make money. 0:17:47.000 --> 0:17:50.960 They saw Yale's endowment exploding. Um we we did a 0:17:50.960 --> 0:17:54.080 big story several years ago on a school in Wisconsin 0:17:54.200 --> 0:17:57.560 that had been in index funds for for fifteen years 0:17:57.600 --> 0:18:00.919 and their tenure returned the pants off of hard. So 0:18:01.000 --> 0:18:03.480 some schools, you know, they just don't have as much money. 0:18:03.560 --> 0:18:06.439 You know, if you're a tiny endowment with fifty million 0:18:06.480 --> 0:18:09.360 dollars two hundred million dollars, you can't get into those 0:18:09.400 --> 0:18:13.000 funds anyway. So you're you're safer being an index funds 0:18:13.040 --> 0:18:15.920 and you're ultimately paying less fees. Of course, this year 0:18:15.920 --> 0:18:18.400 you're getting colloppored like everyone else. I guess, right, both 0:18:18.440 --> 0:18:20.560 on the stock and bond end of it, right, right, 0:18:20.600 --> 0:18:22.480 It's just like you know, it's just been the environment. 0:18:22.680 --> 0:18:24.480 So as a result of a year like this, do 0:18:24.560 --> 0:18:29.000 we ultimately then see endowments kind of retrenching and being 0:18:29.160 --> 0:18:31.760 even more cautious in terms of their plays. Are they 0:18:31.880 --> 0:18:37.480 looking for some alternate new alternative opportunities? UM? I just wonder, 0:18:37.560 --> 0:18:39.800 like what do they do in terms of adjusting. They 0:18:39.800 --> 0:18:43.040 say they're long term investors, so they're not really changing 0:18:43.080 --> 0:18:47.600 any strategies. You know, they're they're still in private equity 0:18:47.600 --> 0:18:49.840 and hedge funds, and they may not be as much 0:18:49.880 --> 0:18:53.120 in commodities. If they're you know, if they're shedding fossil 0:18:53.200 --> 0:18:57.800 fuel type UM investments, which you know we're the best 0:18:57.840 --> 0:18:59.800 performer this year, is there a lot of that going on? 0:19:00.119 --> 0:19:03.040 Sort of E S G s they're shedding UM. You know, 0:19:03.080 --> 0:19:05.600 if you're a two hundred million dollar endowment and you're 0:19:05.640 --> 0:19:07.840 in UM, you know, you're in funds where you can 0:19:07.880 --> 0:19:10.560 sell things. It's very easy to say you have divested. 0:19:10.600 --> 0:19:12.480 But if you are a big endowment and you have 0:19:12.600 --> 0:19:15.320 lots of investments in private equity that, as you know, 0:19:15.480 --> 0:19:18.560 take ten twelve years down wind, you're not doing anything. 0:19:18.560 --> 0:19:20.920 You may be not putting new money and such things. 0:19:20.960 --> 0:19:24.439 Maybe in winding. That's Heartwood Harvard announced last year. All right, 0:19:24.480 --> 0:19:26.880 well listen, as we said, it's among our most read 0:19:26.880 --> 0:19:29.320 stories on the Bloomberg in terms of what's going on 0:19:29.400 --> 0:19:32.520 with college endowments and their performance. Genital Lawrence. So great 0:19:32.520 --> 0:19:35.560 to have you in studio, Bloomberg of Course News Higher 0:19:35.640 --> 0:19:38.760 Education finance reporter Janit Laurren. Check her out at Janet 0:19:38.800 --> 0:19:42.080 Lauren on Twitter. You are listening to Bloomberg Business Week 0:19:42.119 --> 0:19:47.520 and this is Bloomberg Radio. You're listening to Bloomberg Business 0:19:47.520 --> 0:19:51.359 Week with Carol Masser and Bloomberg Quick Takes Tim Stinovic 0:19:51.840 --> 0:19:55.520 on Bloomberg Radio. So Bloomberg City Labs reported on the 0:19:55.520 --> 0:19:58.880 fifteen Minutes City, basically giving every resident of a city 0:19:58.920 --> 0:20:01.560 the ability to meet their soun needs within a shot, 0:20:01.720 --> 0:20:04.119 short walk or a bike ride. It's been talked about 0:20:04.119 --> 0:20:08.119 for Paris, Utah suburb. And our next guest certainly gets 0:20:08.160 --> 0:20:11.800 that and plays into that. We welcome Mark Dixon, Founder, 0:20:11.840 --> 0:20:15.000 executive director and CEO of the workplace solutions company, i 0:20:15.320 --> 0:20:19.600 w G International Workplace Group companies worked with Microsoft, Disney, 0:20:19.680 --> 0:20:23.520 black Rock, Uber, so many household names and we welcome him, 0:20:23.560 --> 0:20:25.840 he joins us on the phone from London. Mark got 0:20:25.880 --> 0:20:29.720 to have you here with Mike Reagan and myself. Um, 0:20:29.760 --> 0:20:35.359 how are you? Yeah, good good, A long day with 0:20:35.480 --> 0:20:37.520 a good one. I feel like every day is along 0:20:37.800 --> 0:20:40.520 along one. You guys, though, did report a financial update 0:20:40.520 --> 0:20:43.040 in your business for the first half and noted that 0:20:43.080 --> 0:20:46.399 as a company you're looking forward with cautious optimism for 0:20:46.440 --> 0:20:49.480 the rest of Give us a little bit more color 0:20:49.520 --> 0:20:54.480 on your business specifically and what you mean by cautious optimism. Well, look, 0:20:54.640 --> 0:20:59.240 there's a very very strong change in the way companies 0:20:59.240 --> 0:21:03.960 are working. Um. I think it's actually somewhat helped by 0:21:04.000 --> 0:21:09.360 the economic uncertainty that pervades in the world today. Um. 0:21:09.400 --> 0:21:12.920 You know, CFOs around the world are looking at ways 0:21:13.000 --> 0:21:17.359 they can control or cutch costs. Hybrid working that means, 0:21:18.000 --> 0:21:20.320 you know, allowing people to work in a more flexible 0:21:20.359 --> 0:21:25.119 way close to where they live. It's very popular, saves 0:21:25.160 --> 0:21:29.480 about half the fixed cost and well, if it's what 0:21:29.520 --> 0:21:32.840