Speaker 1: From the heart of work, innovation, money and power. CALLI
Speaker 1: in Silicon Valley and beyond. This is Bloomberg Technology with
Speaker 1: Emily Jay. I'm Caroline Hyde in New York in for
Speaker 1: Emily Chang, and this is Bloomberg Technology. Coming up. In
Speaker 1: the next hour, earnings come thick and fast. We delve
Speaker 1: in on Alphabet shares full after third quarter earnings per
Speaker 1: share and sales they miss estimates, search, YouTube, the network
Speaker 1: division all full short of analyst expectations. We're going to
Speaker 1: break it all down for you in the Ripple Effects
Speaker 1: plus Built Rewards, the company that uses a point system
Speaker 1: to help you pay rent or a home down payment
Speaker 1: just for its valuation quadruple Overnight, I'll chat with the CEO,
Speaker 1: Uncle Jane, about the startups, unicorn status and what it
Speaker 1: plans to do in a tough housing market. And it
Speaker 1: is the only story you need to read about Crypto. Ever,
Speaker 1: Bloomberg's Matt Levine has written a cover to cover issue
Speaker 1: of Bloomberg Business Week, the second of its kind in
Speaker 1: the magazine's nine three year history. Us Later in the hour,
Speaker 1: we pushed towards further earnings, further fundamentals, and we bring
Speaker 1: in while the ramifications of the latest dost that we
Speaker 1: just got after the bow. I'm prettysed to say that
Speaker 1: broad Sweet Media Group CEO Daniel Newman is with us.
Speaker 1: Is also the founding part of Principal Analysts of Future
Speaker 1: and Research, basically a man who's at the cuting edge
Speaker 1: of what digital transformation means for you and your business
Speaker 1: and can analyze. Basically, we'll go with either market capitalization
Speaker 1: or market impact, and I think market impact is going
Speaker 1: to be coming from Alphabet today, and I'm interested in
Speaker 1: your perspective, Daniel, Well, it was a miss any real
Speaker 1: areas concerned, though, Well, I think we had an overall expectation, Caroline,
Speaker 1: of seeing the ad market pullback. I think the big
Speaker 1: concertain isn't as much for Google as it is for
Speaker 1: the rest of the ad space. As I said to
Speaker 1: Emily last quarter when I joined the show at the
Speaker 1: same period of time, I said, Alphabet's top of the heat.
Speaker 1: There are the technology for advertised are that is going
Speaker 1: to be the last to be removed, the last to
Speaker 1: be slowed. And this means that the advertised business is
Speaker 1: slowing significantly, and I'm worried about what this means for Meta.
Speaker 1: We already saw what happened to snap um, So that's
Speaker 1: my biggest concern. I still think that the Google business
Speaker 1: overall is robust. I think it's the best of class,
Speaker 1: and I'm still optimistic that going forward that Google is
Speaker 1: still going to offer a lot of value to its shareholders.
Speaker 1: I was also a little concerned about the slowing of
Speaker 1: the cloud business. Despite the fact that it beat, it
Speaker 1: didn't quite keep up with what we saw from Azure
Speaker 1: this quarter. And that's going to be something to watch
Speaker 1: as well, because they're pouring a lot in they're still
Speaker 1: losing money in that particular business. But I did I
Speaker 1: did attend their Google Cloud Next event. I did hear
Speaker 1: from Thomas Curry and the CEO of that group, and
Speaker 1: it does seem that that investment is going to pay
Speaker 1: off as the market continues to spend on enterprise. Of course,
Speaker 1: we know that in many ways this is a company
Speaker 1: that's backed off from some other bets, in large part
Speaker 1: because they've got to double down on where is profitable
Speaker 1: for them at the moment we've poured out. The CFO
Speaker 1: of Alphabet was speaking with her own end Ludlow a
Speaker 1: bit earlier, and she was saying in terms of YouTube
Speaker 1: for example, I would say the largest driver of the
Speaker 1: deceleration was a further pullback and spent from some advertisers
Speaker 1: that was a cross brand and direct response talk to
Speaker 1: us about whether or not this is going to be
Speaker 1: there for what we read into meta you were just
Speaker 1: saying about the impact. We heard it from Snap the
Speaker 1: Warriors about the market marketing budgets getting that little bit smaller.
Speaker 1: Is there anywhere in terms of reinvestment, in terms of
Speaker 1: doubling down YouTube shorts and they're like that you want
Speaker 1: to see to prove that still YouTube is where you
Speaker 1: have to be for eyeballs. Yeah, I think they need
Speaker 1: to stay the course on their strategy. The macroeconomic conditions
Speaker 1: are in this moment what they are, and the Google
Speaker 1: does have the best product. They are diversifying, they are innovating.
Speaker 1: The YouTube short product is interesting, and of course TikTok
Speaker 1: has the most acceleration and that's what YouTube is trying
Speaker 1: to do to answer to what TikTok has been able
Speaker 1: to to do. You know, I watched IBMS earnings last
Speaker 1: week in the strength of the enterprise, so kind of
Speaker 1: on the other side of Google will with their cloud business.
Speaker 1: I really think that investment is going to be even
Speaker 1: more critical coming out of this pandemic. Companies are going
Speaker 1: to have to adjust UH and the investment in cloud
Speaker 1: an enterprise maybe the area that provides the biggest opportunity
Speaker 1: going forward. And we also saw that with the top
Speaker 1: and bottom line beat from Microsoft. So I think that's
Speaker 1: an opportunity for Google, you said, Guy bausifually therefore, in
Speaker 1: touch discussing Microsoft, which is being dragged in lower lower
Speaker 1: and after I was training large part because of the
Speaker 1: moon music coming out of Alphabet. But this was a
Speaker 1: beat across the board. This is a company that's still
Speaker 1: posting even though it's worth more than a trillion dollars
Speaker 1: revenue growth of more than nine effects headwind s. But
Speaker 1: where did you see some of the concerns in terms
Speaker 1: of corporate spending any Well, it seemed that the biggest
Speaker 1: concern and what sort of drove this stock down after
Speaker 1: hours was more than it just didn't hit its azure number.
Speaker 1: The mark looking for closer. I think it came out
Speaker 1: at thirty five. Of course, just like Ruthport said at Google,
Speaker 1: you know, FX was an issue across the board at Google.
Speaker 1: But I actually like the fact that it was you know,
Speaker 1: diverse that the company performed in most category is in productivity.
Speaker 1: It performed in the intelligent cloud business, it performed pretty well,
Speaker 1: and even in personal computing. In on the consumer side
Speaker 1: with surface and gaming, an area that a lot of
Speaker 1: people were concerned, it came in at where it was
Speaker 1: expected to Caroline, So I actually didn't feel as negatively
Speaker 1: about the quarter. I meant growth. It's still above you know,
Speaker 1: the fold that grew a little bit faster than the
Speaker 1: Google Cloud business, and it's still indicative to me the
Speaker 1: enterprise is stronger. That's why I alluded to that IBM
Speaker 1: result last week. I think that surprised a lot of people,
Speaker 1: but enterprise seems to be where spending will continue. Advertising
Speaker 1: seemed more compression, and of course consumer, I'm really concerned
Speaker 1: about how some of the consumer tech focus brands are
Speaker 1: going to turn out this quarter. Well said, I want
Speaker 1: to double down on what sat In Adela was saying.
Speaker 1: Of course, we await what's being sent in the cools,
Speaker 1: but he on in the press release of the earnings,
Speaker 1: was talking about the world facing increasing headwinds and digital technology.
Speaker 1: We made the ultimate tailwind, basically the argument that it's defrationary.
Speaker 1: Do you buy that. Have we not just brought forward
Speaker 1: all of that spending during covid ors There's still more
Speaker 1: to come. Yes, Satia is really saying the same thing.
Speaker 1: And I've had a few other conversations. I had one
Speaker 1: with Harvin Krishna. I had one with Bill McDermott a
Speaker 1: Servant and Service Now, and both of them have used that,
Speaker 1: and I've actually really found that to be the case.
Speaker 1: Companies during this pandemic that had to spend rapidly to
Speaker 1: support their growth did a lot of hiring, added a
Speaker 1: lot of short term costs, and as long as the
Speaker 1: growth was there, they didn't necessarily need to fix that.
Speaker 1: Now that we're seeing the market compress a little bit
Speaker 1: the economy slow, some of those digital transformation investments and
Speaker 1: things like automation and AI they need to be fully
Speaker 1: implemented so that some of those costs, those hiring freezes,
Speaker 1: and those pullbacks are able to not slow customer experience
Speaker 1: and product delivery. So I think those digital investments are
Speaker 1: going to be much more robust. But I do think
Speaker 1: starting to see some of those hiring freezes, those layoffs,
Speaker 1: some of the slowing revenue and of course margin compression
Speaker 1: in the near term are going to be the continued
Speaker 1: concern for tech. But long term, it's hard to not
Speaker 1: think that Mike or Soft and companies like them are
Speaker 1: gonna be solving a lot of these problems for enterprises. Okay, Daniel.
Speaker 1: So therefore, when we look ahead to Amazon, is that
Speaker 1: going to be a fixer for this quarture? In particular,
Speaker 1: when we're looking at a metro, is that going to
Speaker 1: be a hit because of the advertising spend where line
Speaker 1: not who you're most concerned about, who your least concerned
Speaker 1: about for us, Yeah, I'm quite concerned about meta. It
Speaker 1: would It's hard to think with the big dollars being
Speaker 1: invested in their metaverse, people were already sort of nervous
Speaker 1: about that. You see Google and alphabets advertising dollars, you know,
Speaker 1: going a little bit the wrong way in terms of
Speaker 1: the markets perception, and like I said, I think they're
Speaker 1: the top of the heap for advertising. Last to be
Speaker 1: cut out. Apple is gonna be really interesting to watch
Speaker 1: because Apple it tends to have that consumer quality that
Speaker 1: that bucks some of the consumer trends in terms of
Speaker 1: people of higher affluence continue to buy even when the
Speaker 1: market gets tougher, but their iPhone fourteen specs. For some
Speaker 1: of the numbers are a bit worrying. Two people, I
Speaker 1: really want to see the a WUS cloud number. That's
Speaker 1: such a huge number. Four. Amazon's opping and despite e
Speaker 1: commerce and the holiday and some of these prime days,
Speaker 1: you know, Amazon has had a tough couple of quarters.
Speaker 1: I still believe that they're building a bigger and bigger
Speaker 1: moat for e commerce. So in the long run, it's
Speaker 1: hard to not like them. But a WS has been
Speaker 1: so instrumental, and that is the biggest cloud provider. And
Speaker 1: if my enterprise thesis is true, Caroline, then aw S
Speaker 1: should at least be seeing the same kind of growth
Speaker 1: that Asure did. Really smart conversation with you, as always, Daniel,
Speaker 1: thank you so much for pointing us forwards. Daniel Newman
Speaker 1: here of course put Sweet Media Group CEO as such
Speaker 1: in a dalla in Microsoft's sup press release just now
Speaker 1: says it is a world facing increasing headwinds. Recessionals. For example,
Speaker 1: they remain top of mind for investors this earning season,
Speaker 1: and a recently bo economics model projects the likelihood of
Speaker 1: a US recession is now and then the next twelve months.
Speaker 1: So let's put all of these earnings and valuations into
Speaker 1: contact because so far, as head of Invested strateg Sheet,
Speaker 1: li Is Young is with us some place to say,
Speaker 1: and as we get the micro data with the earnings
Speaker 1: and whether their meats or their beats, ultimately in the
Speaker 1: back of our mind is what are the valuations of
Speaker 1: these businesses and do they reflect these headwinds that they're
Speaker 1: being hit by. What do you make of the way
Speaker 1: in which you've line ourselves up for earning season. Well, look,
Speaker 1: I think we're sitting at a point in the year
Speaker 1: where we've done a lot of work and valuations have
Speaker 1: seen a decent amount of pain since January, and I
Speaker 1: think it's less about what's the right valuation for these
Speaker 1: stocks to be at, and it's more about what are
Speaker 1: people actually willing to pay for them. Knowing that we
Speaker 1: have not solved all the problems that still lie ahead,
Speaker 1: and knowing that we still have a pretty uncertainty of
Speaker 1: political backdrop, we're coming up on mid term elections, We've
Speaker 1: got all the classic kind of market signals that are
Speaker 1: saying a recession might be coming, those are all going off,
Speaker 1: So there is still a decent amount of uncertainty ahead.
Speaker 1: Not to mention that just the month of October. Despite
Speaker 1: this rally, we've seen more almost half of the days
Speaker 1: with a more than two percent swing in the SMP
Speaker 1: five hundred. That is a lot of volatility, and a
Speaker 1: VIX that's still hovering around thirty also indicates to me
Speaker 1: that the next few weeks are going to be bumpy.
Speaker 1: And what's wild is a volatility in the salt market
Speaker 1: is basically nothing in comparis into the volatility if you've
Speaker 1: seen in the bond market, in the FX market. And
Speaker 1: I'm interested in these correlations because, for example, today's trade,
Speaker 1: we saw stocks rally and tech do well because bond
Speaker 1: markets rallied and niels pushed lower. Is that the sort
Speaker 1: of correlation we're likely to keep on seeing. Well on
Speaker 1: a day like today, I think it was very much
Speaker 1: a rate story. So we got some housing data earlier
Speaker 1: in the morning, about nine am Eastern time, and if
Speaker 1: you just look at the tape and how things moved
Speaker 1: throughout the day, that nine am release of home prices
Speaker 1: coming down pretty sharply is what I think sent ten
Speaker 1: year yields down, It sent two year yields down, and
Speaker 1: everybody got sort of excited that, oh it's working. Inflation
Speaker 1: is going to go away, and then stocks rallied on
Speaker 1: the other side of that also, though you want to
Speaker 1: look at the fact not just tech rallied, but high
Speaker 1: beta stocks rallied, And that's not necessarily something that I
Speaker 1: would expect to be lasting in an environment where we have,
Speaker 1: in my opinion, more than a fifty chance of a
Speaker 1: recession in the next six to twelve months. So it
Speaker 1: really was a very risk on trade. It was sort
Speaker 1: of this, Oh, it's a big relief. We might get
Speaker 1: a solved on the inflation problem. It might be sooner
Speaker 1: than we think. But the issue is that once that
Speaker 1: boulder starts rolling down the hill, it's really difficult to
Speaker 1: stop it at a certain point and not go into
Speaker 1: contraction territory. To that end, of course, with basically all
Speaker 1: the market moves kind of being dictated by bad news
Speaker 1: being good news, the Federal Reserve perhaps not hiking quite
Speaker 1: so much as we had expected. How much of a
Speaker 1: dollar story is this all going to be? Are we
Speaker 1: likely to see? Are we now at pink dollar? This
Speaker 1: is hugely important to a lot of the micro stories.
Speaker 1: For example, a Microsoft that had highlighted the head winds
Speaker 1: of a strong dollar. Yeah, I mean, look we've thought
Speaker 1: that we were at peak dollar, and when I say we,
Speaker 1: I mean just investors at large. Think there have been
Speaker 1: a lot of people who thought were at peak dollar
Speaker 1: earlier this year, So I don't know if this is
Speaker 1: peak or not. Regardless, even if it is technically peak,
Speaker 1: that doesn't mean that it's going to come down with
Speaker 1: a quickness. So a strong dollar in general, as we know,
Speaker 1: is a headwind not only to trade, but it's a
Speaker 1: headwind to those large cap corporations that have a lot
Speaker 1: of international revenue. And those big companies are the ones
Speaker 1: that have been the market story. And if you're a
Speaker 1: newer investor, those are also the companies that have really
Speaker 1: been the winners for you in the portfolio. So it's
Speaker 1: difficult to kind of shift your mindset. But I would
Speaker 1: encourage people that even in an environment like this, you
Speaker 1: have to think about maybe where the opportunities are, and
Speaker 1: they could be in places that you wouldn't normally look.
Speaker 1: So a strong dollar is actually very good for smaller
Speaker 1: cap companies because they get a majority of their revenue
Speaker 1: from inside US borders, so they don't have that headwind.
Speaker 1: So looking at things like that, the last thing I'll
Speaker 1: say about a strong dollar. Is that from a macro perspective,
Speaker 1: the signal that you want to see is that when
Speaker 1: the dollar weakens, that tends to mean that we're nearing
Speaker 1: the end of a tightening cycle or nearing the end
Speaker 1: of a hiking cycle. The fact that the dollar is
Speaker 1: still pretty strong here, I think means that the Fed
Speaker 1: continues to hike and they right now don't have a
Speaker 1: ton of reason not to, particularly with such a strong
Speaker 1: labor market as we've seen time and time again. And
Speaker 1: what's been interesting is on an anecdotal basis, you hear
Speaker 1: of startups and actually some big tech listed companies dialing
Speaker 1: back their head count looking to actually just slow hiring
Speaker 1: or indeed fire. Are you likely to hear you anticipating
Speaker 1: more concerns being voiced by CEOs as we're in earning season,
Speaker 1: because I'm not hearing it particularly from Satya Adela or
Speaker 1: from well Ruth poor At or or soon Pitch. I.
Speaker 1: So if we look at the labor market just in particular,
Speaker 1: I would expect to see some weakness in it and
Speaker 1: see that coming through in the data closer to the
Speaker 1: end of the year. So the labor market is one
Speaker 1: of the last things if not the last thing to
Speaker 1: turn when you have an economic contraction or a slowdown.
Speaker 1: And if you just think about that logically, there's a
Speaker 1: reason we're not hearing about it from c e O
Speaker 1: S because they will do everything else they can to
Speaker 1: control costs before they have to actually lay people off
Speaker 1: and cut jobs. So what we're hearing right now is
Speaker 1: a lot of hiring freezes and that's coming through in
Speaker 1: the data. So if you just look at the job
Speaker 1: openings or the JOLTS number that we got for August,
Speaker 1: job openings came down by one point one million. That
Speaker 1: was a huge drop. So now the ratio of the
Speaker 1: number of jobs open per unemployed worker is one point seven.
Speaker 1: That's down from two. We used to have two jobs
Speaker 1: for every unemployed person. Pre pandemic, that number was one
Speaker 1: point two. So that's still that gap still has to
Speaker 1: narrow a bit. The risk is that that gap narrows
Speaker 1: and then we're in this kind of comfortable supply demand
Speaker 1: place with labor. That's when if we haven't slowed the bleeding,
Speaker 1: that's when you start to hear about layoff. So we
Speaker 1: still have some time between now and I think that point,
Speaker 1: but I do expect it to start coming through in
Speaker 1: the in the labor data, see some weakness by the
Speaker 1: end of this year. Ultimately, at this moment, is with
Speaker 1: so much you talking about recession, people thinking, since she's high,
Speaker 1: with a lot of lack of clarity, is it time
Speaker 1: to put all that cash that people have been taking
Speaker 1: out of stocks putting it into cash? Is time to
Speaker 1: reinvest or keep powder driving? Now you can think about
Speaker 1: reinvesting it and and look, nobody's going to call the
Speaker 1: bottom perfectly, and if they do, it's going to be lucky.
Speaker 1: So let's just all stop trying. Right But if you
Speaker 1: think about just where we are, you're to date with
Speaker 1: an SMP still down twenty or so year to date,
Speaker 1: that's a better entry point than it was in January.
Speaker 1: So I would start to get ready on what's the
Speaker 1: shopping list? What are the sectors and the industry groups
Speaker 1: that you would be interested in buying and drip in slowly.
Speaker 1: So in this particular moment right now, I would be
Speaker 1: looking at financials because they're still very attractively priced compared
Speaker 1: to many other sectors, and they don't have a ton
Speaker 1: of pain ahead. In my opinion, I think they've been
Speaker 1: pretty punished through this cycle, and I think they can
Speaker 1: come out well. On the other side, I'll be looking
Speaker 1: at industrials and I've been talking about healthcare for a
Speaker 1: very long time. I think that healthcare is a great
Speaker 1: long term investment. And then a little bit further down
Speaker 1: and look, I think this rally is fragile, so I
Speaker 1: would expect another correction on the other side of it.
Speaker 1: If and when that happens and you see an SMP
Speaker 1: get back down to previous levels, so let's say something
Speaker 1: like thirty or below, that's when you start to nibble
Speaker 1: on riskier things. You start to look at semiconductors, you
Speaker 1: start to look at tech again, and you start to
Speaker 1: look at other things that might be a little bit
Speaker 1: more high beata. And then later even after that, when
Speaker 1: the economy really confirms that it's weakened, so when the
Speaker 1: labor market starts to fall apart, that's when you start
Speaker 1: to look at things like home builders and you get
Speaker 1: back in on that train. You look at small caps
Speaker 1: in that environment as well. Well. We've got a great
Speaker 1: conversation to common terms of fuel, exposure to the real
Speaker 1: estate market always so small at Helping Dovetail, you'll conversation
Speaker 1: with our audience who was so interested in tech. We
Speaker 1: thank you, Lizzie young A so far of course, head
Speaker 1: of investment strategy there. Meanwhile, coming up, Amazon expands payment
Speaker 1: options including Venmo at last ahead of the holiday season
Speaker 1: or discuss the strategy, the expectations visi Blue meg off earnings.
Speaker 1: There was another key story that occurred today, Amazon adding
Speaker 1: Venmo at last as a new payment option for customers,
Speaker 1: of course, all ahead of Black Friday and the key
Speaker 1: holiday season when we expensive Sofa is actually here in
Speaker 1: New York and of course he covers Amazon for us.
Speaker 1: You know that. Wonderful to have you in the same
Speaker 1: studio spends to talk to us about. Finally, this has
Speaker 1: been in the works for what like a year already. Yeah,
Speaker 1: the Venmo Amazon tie up has been in the works
Speaker 1: for for quite some time. And then Venmo in particular
Speaker 1: PayPal has really wanted to move this, you know, a
Speaker 1: peer to peer payment system thing like Okay, we bought
Speaker 1: a pizza and you're gonna vend me ten dollars to
Speaker 1: get that beyond simply people splitting the cost of bills
Speaker 1: and things into something that they can actually make money
Speaker 1: off of, which would be you know, commerce buying things. So, yeah,
Speaker 1: this is a this is a very big deal for
Speaker 1: for PayPal and Venmo in terms of trying to nudge
Speaker 1: that along. It's something they've been working on a long time.
Speaker 1: Right now. You maybe see it, you know, for uh
Speaker 1: used by a patron at like a nail salon or
Speaker 1: some other small business like a landscape, or you're not
Speaker 1: really seeing it used you know, to buy from big retailers.
Speaker 1: So this could be a big, big symbol to sends
Speaker 1: a message Amazon is willing to do it, why why
Speaker 1: not you? And then Amazon has an incentive to try
Speaker 1: to uh you know, lower the cost of accepting any
Speaker 1: kind of payment at all. So it just gives them
Speaker 1: potential negotiating power if this were to take off, especially
Speaker 1: take off with millennials when they're negotiating rates with the
Speaker 1: big cards, you know, on how much of each transaction
Speaker 1: they share with them. We know, we remember that sounds
Speaker 1: still that they had over in the UK with Visa
Speaker 1: for example. I'm interested in, well, therefore, ahead of the
Speaker 1: holiday season, how many people do they think will actually
Speaker 1: be using this versus by now pay later that they
Speaker 1: have with the firm or just you know, in the
Speaker 1: credit card that you have on top with them. Yeah, exactly.
Speaker 1: I think that's still going to be Traditionally, the predominant
Speaker 1: way that people pay is that the credit card that
Speaker 1: they already have, and that's the problem here. Venmo has
Speaker 1: a lot of incentive to make this work. Amazon has
Speaker 1: a lot of incentive to make this work. Customers don't
Speaker 1: really have much incentive to use it. So how are
Speaker 1: they going to try to compel people to break those
Speaker 1: habits and uh and and start using Venmo to pay
Speaker 1: for things. There's been a real long game for Venmo.
Speaker 1: They don't really disclose uh how much They've got billions
Speaker 1: of dollars slashing slashing around in Venmo, but it's still
Speaker 1: mostly things that they don't make money on and people
Speaker 1: just paying back one another for these little nickel and
Speaker 1: dime things. Um. So the question is will they get
Speaker 1: people to use Venmo the way they use their credit cards.
Speaker 1: We'll see what sort of incentives they give us. Thank you, Spencer,
Speaker 1: so great to have him here, and he's gonna be
Speaker 1: a busy guy because of course Amazon's got their numbers
Speaker 1: coming out later in the week. We thank him for
Speaker 1: spending some time with us. This is Bloomberg Technology. I'm
Speaker 1: Caroline Hyde in New York. Let's talk to another New
Speaker 1: York startup. Because built rewards and loyalty program and credit
Speaker 1: card that converts rent payments into points, it's now saying
Speaker 1: it's valuation more than quadrupled one five billion dollars. Left
Speaker 1: Lane Capital led a hundred fifty million dollar equity funding
Speaker 1: round for the startup. We want to know how they're
Speaker 1: going to use the funds, the growth trajectory. Who better
Speaker 1: than to talk through it all CEO and core Jane.
Speaker 1: Great to have you here. Hey, it's going to be here, Caroline,
Speaker 1: thanks for having me. So tell me what is the
Speaker 1: growth jerectory? How can you penetrate yet further the market
Speaker 1: and disrupt basically financial institutions. Today, more than ever, rent
Speaker 1: prices continue to soar. And one of the things that
Speaker 1: banks and I think startups have missed is you on
Speaker 1: one hand, you have startups trying to cryptocurrencies to people,
Speaker 1: and then banks still running a model from twenty years ago.
Speaker 1: And we said, if you look at our generation, the
Speaker 1: biggest expense people have is rent. Why don't you get
Speaker 1: anything back for that? Right? Why can't I build my
Speaker 1: credit history just by paying my rent on time? Or
Speaker 1: why can't I earn points and miles to travel the
Speaker 1: world by paying rent? And so you know, it took
Speaker 1: us four years to bring together the real estate industry,
Speaker 1: to bring together the payment networks, the banks, the airlines,
Speaker 1: the hotels. But fourteen months ago when we launched this,
Speaker 1: we weren't really sure how fast it would pick up. Right,
Speaker 1: what's been crazy to see, is it? I mean less
Speaker 1: than fourteen months, we've had over three billion dollars of
Speaker 1: payments going through this just on the rent side, people
Speaker 1: who have signed up for the built Master card or
Speaker 1: so let's to pay rent at any apartment and earned
Speaker 1: points as well as replace your kind of everyday card
Speaker 1: that's seen over one point six billion dollars of spend already.
Speaker 1: So you're seeing this massive uptake from a generation saying,
Speaker 1: hold on a second rent is my biggest expense. You
Speaker 1: can give me value there. I'll be loyal to you
Speaker 1: across all of my other spend categories. And by the way,
Speaker 1: if you can help me build a path to homeownership,
Speaker 1: that's really how you lock me in. And so it
Speaker 1: talk to me about that path to home ownership because
Speaker 1: it's about building up your credit quantity. But how else.
Speaker 1: So look, one of the challenges with home ownership and
Speaker 1: I just bought my first place here. It was so complicated,
Speaker 1: and I consider myself a financially astute like individual. But
Speaker 1: you look at that and saying I'm going to spend
Speaker 1: X amount of months. Let's say you're New York rent
Speaker 1: which by the way, the average New York rent is
Speaker 1: almost six thousand dollars. Now do you know what I mean?
Speaker 1: You think about that first goal? I thought, time you
Speaker 1: start earning points and miles and your six thousand color
Speaker 1: a month rent payment. But now you take that and
Speaker 1: you say, well, how do I even know if it's
Speaker 1: better to rent or own? How can I compare that?
Speaker 1: And today nothing existed. And so we went out and
Speaker 1: we actually partnered with Fannie Mae, Freddie Mack and fh
Speaker 1: A and built the first tool where you can actually
Speaker 1: see based on your credit profile, your income, real time
Speaker 1: interest rates, say, here are the homes that you could
Speaker 1: buy for the same monthly payment as your rent, and
Speaker 1: you can compare apples apples and if you're ready to buy.
Speaker 1: We also got regulatory approval to use your points to
Speaker 1: cover your down payment. Huh, so that one life this morning.
Speaker 1: By the way, congratulations, you're talking points, you're talking rewards,
Speaker 1: you're talking gen Z millennials. I can only infer that
Speaker 1: AMEX is what looking at you in particular? Who are
Speaker 1: you in terms of income level? Who are you in
Speaker 1: terms of demographic Who is coming to you? So the
Speaker 1: vast majority of our card holders, in the vast majority
Speaker 1: of our loyalty members are thirty five. Right. So if
Speaker 1: you live in a high rise building in a major
Speaker 1: city in New York, l A, San Francisco, Chicago, Denver,
Speaker 1: chances are you're living in a built alliance property, which
Speaker 1: means you're using built to pay your rent at all
Speaker 1: of these buildings. Then you also have thirty five yearls
Speaker 1: who live in other buildings or mom and pop landlords,
Speaker 1: and they're signing up for the built Master card in
Speaker 1: the wells Fargo and they're getting to earn points and
Speaker 1: build their credit for no annual feed. Right. So when
Speaker 1: you raising this money, is it about marketing? Is it
Speaker 1: about doubling down country eating into market share? What are
Speaker 1: the is about? Building partnerships? Is about hiring? Where do
Speaker 1: you look at in terms of your to do list?
Speaker 1: So one of the things that we spent a lot
Speaker 1: of time with this business. A little different from our
Speaker 1: peers in Silicon Valley is profitability. So Built is a
Speaker 1: profitable business. So when we look to you know, grow
Speaker 1: the business, we weren't actually looking to raise money. It
Speaker 1: was an old friend of mine from Left Lane Capital
Speaker 1: reached out and said, hey, there's an opportunity for us
Speaker 1: to finish bringing together strategic partners into this business if
Speaker 1: we do a large financing together. And so, led by
Speaker 1: Left Lane, we went down and we brought partners like
Speaker 1: Gray Star, who's the largest property management company in the country,
Speaker 1: Invitation Homes, who is the largest single family rental company
Speaker 1: in the country, and then even our banking partners like
Speaker 1: Wells Fargo to double down and really build that defensible
Speaker 1: mode around this business. Right, So is it about in
Speaker 1: this landscape where look, valuations are coming down, people are
Speaker 1: not just writing checks in quite the same liberal almana
Speaker 1: than they were. Is this about strategic investors? Is this
Speaker 1: about evaluation that was slightly lower than you anticipated? What
Speaker 1: was it like? You know, I'm not one I don't
Speaker 1: believe in playing the valuation game because inevitably that you know,
Speaker 1: all all these things come to an end, right And
Speaker 1: so even as we were doing this round, we actually
Speaker 1: looked at fairly conservative publicly traded comps, which I know
Speaker 1: is a heresy to stay in Silicon Valley. If you
Speaker 1: think about a lot of the work we do on
Speaker 1: a loyalty space, it's not that different than a payment
Speaker 1: network like Master Carter Visa. And so we look at
Speaker 1: if we're taking a piece of transactions, whether that's rent
Speaker 1: or your dining right, and we can start to clip
Speaker 1: that on all of your biggest expenses while rewarding the customers,
Speaker 1: then that's not that different from the payment network. And
Speaker 1: so that's how we really built the valuation. That's how
Speaker 1: we built the business. And look, I think today entrepreneurs
Speaker 1: should be focused number one on strategic capital. You know,
Speaker 1: we were lucky to get that both from Left Lane
Speaker 1: Capital but also from our real estate partners and our
Speaker 1: banking partners who get to work with us on the
Speaker 1: payment side and on the investment side. I'm looking at
Speaker 1: a Visa, I can bring it up on the Bloomberg
Speaker 1: and estimated p ratio for looking is twenty three times.
Speaker 1: They're trading in a P ratio twenty nine times in
Speaker 1: the hair. And now there is a they are a company.
Speaker 1: They just had their earnings and actually are raising their dividend,
Speaker 1: giving more money in terms of the buy back to investors.
Speaker 1: And they're saying that the economy is still pretty strong.
Speaker 1: Are you seeing a strong and using a slowing down
Speaker 1: of payments from your customers? What does the environment like?
Speaker 1: So one of the other exciting things I think when
Speaker 1: you think about this type of business is that it's
Speaker 1: fairly countercyclical to any recission um And so when in
Speaker 1: good times you see a lot of spend, whether it's
Speaker 1: on retail or travel, which we see on the built
Speaker 1: master card, but even in downturns, you still see that
Speaker 1: rent continues to be an expense that most people still
Speaker 1: have to pay month over month. And so if you
Speaker 1: can make that better payment experience right and reward them,
Speaker 1: our business days fairly recession proof. As consumers change spending
Speaker 1: the habits elsewhere. And what about you and hiring? And
Speaker 1: you are you based in New what is so? We are?
Speaker 1: We are in New York office. We are probably one
Speaker 1: of those crazy companies that have believed an in person office,
Speaker 1: and so our team has been coming in since it
Speaker 1: was allowed um one, and so we continue to have
Speaker 1: folks come in and I'll tell you like that has
Speaker 1: been one of our best recruiting tools to being in
Speaker 1: New York and telling folks that we are an in
Speaker 1: person culture that you can come in and work with
Speaker 1: other really smart people to help solve real problems that
Speaker 1: affect frankly, our own employee base and their friends. So, so,
Speaker 1: is there any hybrid have you said, look, will be,
Speaker 1: we'll be, We'll put your purposes. Yeah. Look, I think
Speaker 1: it's really important as a CEO in today's economy to
Speaker 1: be clear on where you stand. I think it's that
Speaker 1: ambiguity that's been very hard for folks because then you
Speaker 1: feel the pressure to go in, but don't know if
Speaker 1: you should go in and no one else And so
Speaker 1: we've just made it really simple. We're an in person company.
Speaker 1: If you need to take time and be flexible, we're
Speaker 1: totally okay with that. But I gotta tell you that
Speaker 1: the productivity, the morale. We've had no turnover at this
Speaker 1: business really in the last fourteen months since we launched
Speaker 1: the product, and I think that's a testament to people
Speaker 1: just having those relationships, those friendships and candily working on
Speaker 1: problems that actually matter to society. Today, right, And I
Speaker 1: think what I'm really excited about today is this built
Speaker 1: home stuff. I mean, if we can help young people
Speaker 1: understand what it takes to go from renting to home
Speaker 1: ownership and make it as easy to understand as here's
Speaker 1: what you're paying and rent, here's what you could buy
Speaker 1: for that same amount, and by the way, here's how
Speaker 1: much you need to save, and if you want, you
Speaker 1: can use your points to cover that down payment. I mean,
Speaker 1: that is going to be the most important driver to
Speaker 1: fixing inequality in our generation, because otherwise a small handful
Speaker 1: will get to buy homes and build wealth and everybody
Speaker 1: else will be left behind paycheck to paycheck. And I
Speaker 1: think if we can help move the needle even a
Speaker 1: little bit on that, it's a really motivating opportunity. Financial knowledge,
Speaker 1: financial empowerment. We are here for it, come and talk
Speaker 1: about it all day every day. And Chow Jane, of course,
Speaker 1: the Built CEO, talking about well what I'm pretty passionate
Speaker 1: about too. Meanwhile, coming up the story of crypto, where
Speaker 1: did it come from? How does it work? Because they're
Speaker 1: all a scam, mr All. Where would it take us?
Speaker 1: We discussed in the latest issue of Broomberg Business Week,
Speaker 1: which is totally utterly from page the start to the finish,
Speaker 1: dedicated to these questions. There's a broom bag. Hi. I'm Mattlivian,
Speaker 1: former lawyer and investment banker. Now I'm a columnist for
Speaker 1: Bloomberg Opinion, where I write a finances letter called money Stuff.
Speaker 1: For the past few years, the most polarizing thing in
Speaker 1: finance has been crypto. Crypt grew out of Setoshi Nakamoto's
Speaker 1: Bitcoin white paper to become, among other things, the set
Speaker 1: of lines on charts that went up, some people bought Lamborghinis,
Speaker 1: and then this year those lines on charts went down.
Speaker 1: If you're at crypto skeptic, this was very satisfying crypto enthusiasts.
Speaker 1: It was just another reason to double down. I don't
Speaker 1: have strong feelings either way about the value of crypto.
Speaker 1: I like finance. I think it's interesting and if you
Speaker 1: like understanding the structures that people built to organize economic reality,
Speaker 1: crypto is amazing. Bloomberg Business we asked me to write
Speaker 1: about crypto, and when I was finished, it was enough
Speaker 1: to fill an entire issue cover to cover. It's called
Speaker 1: the Crypto Story, and I think it's as thrilling to
Speaker 1: read as a ride in a lambo. Matthew Levine, Bloomberg
Speaker 1: opinion columnists who covers finance, who wrote the entire issue
Speaker 1: the Latest Business Week, just the second time in the
Speaker 1: magazine's history, and one single author has done that. So
Speaker 1: in today's Crypto Report, we're going to look at that story,
Speaker 1: where it comes from, what it means, and why it
Speaker 1: still matters that Bloomberg's Business Weeks pat Regnia, because it
Speaker 1: takes two to tango, and you had to edit the
Speaker 1: whole thing. So it's the labor of love for you,
Speaker 1: as it is for the person who wrote it. Taught
Speaker 1: us a little bit about this fort opus of lessay
Speaker 1: and really what the key takeaways were for you. So
Speaker 1: for me it was country is an opportunity to have
Speaker 1: crypto demystified. I've I've spent the last you know, a
Speaker 1: couple of years really getting deep into crypto, and every
Speaker 1: story I do, I'm asking the writer, wait, what is
Speaker 1: this thing? Is this a company? Is this a protocol?
Speaker 1: What's this thing that's happening on the block? Chane, Crypto
Speaker 1: has a way of filling the space with new words
Speaker 1: and what seemed like new ideas that you have to
Speaker 1: decode in order to even tell the simplest story about crypto.
Speaker 1: And one of the things that Matt really accomplished in
Speaker 1: this piece, and I think that everyone who reads it
Speaker 1: will enjoy this, is that it takes crypto step by
Speaker 1: step and explains it and most importantly, doesn't do it
Speaker 1: with the purpose of selling you on crypto. In fact,
Speaker 1: I think it's really a tool for thinking about it
Speaker 1: so that when you're encountering it and you're asking yourself,
Speaker 1: what is this thing that I'm looking at? What is
Speaker 1: this thing I'm being sold or pitched on, What is
Speaker 1: this thing I might be considering investing in? What is
Speaker 1: this thing my kid is talking to me about? Is
Speaker 1: this something that that I am familiar with, as opposed
Speaker 1: to being intimidated into thinking that I couldn't understand it?
Speaker 1: And it's so much more sophisticated than I could grasp
Speaker 1: and well done. Because the bit that irritates me so
Speaker 1: much is this discussion about democratization. But it's very under
Speaker 1: democratic to put up acronyms in areas that we don't
Speaker 1: understand and then make every one feel that it's still
Speaker 1: a wall garden, but where the addiction has been real
Speaker 1: and I've seen it in my own family is from
Speaker 1: traditional finance or trad fy that if I'm amuse us
Speaker 1: with that ton of phrase, but traditional finance they if
Speaker 1: they catch the bug for crypto, they'll go all in
Speaker 1: as well. Are we still hearing of that revolving door
Speaker 1: and whether that will continue? Well, I think some of
Speaker 1: that was happening. As Matt says, you know, the lines
Speaker 1: were going up for a while and so this was
Speaker 1: a place to go. Lately, the lines have been going down.
Speaker 1: Um uh not obviously in traditional finance and in crypto.
Speaker 1: So that may that may slow things down. But one
Speaker 1: of the things that crypto does is it gives people
Speaker 1: like another door to go through. So sometimes maybe you
Speaker 1: are I think we've seen this. You're you're doing something
Speaker 1: in traditional finance and things aren't quite clicking for you,
Speaker 1: or it's not moving as fast as you'd like. Meanwhile,
Speaker 1: over here there's this other new financial system that if
Speaker 1: you can master a piece of code, because it's all
Speaker 1: there and it's and it's new to get built, you
Speaker 1: can you can start moving right away. You know, those
Speaker 1: of us who have come finance for a while knows
Speaker 1: that you know that there's cycles where that happens where
Speaker 1: there's a new thing on the ground I mean I
Speaker 1: I started covering finance in the nineties. This sort of
Speaker 1: sounds unbelievable, but once mutual funds were the hot thing
Speaker 1: that if you were young, you would start, you would start,
Speaker 1: and then it was e T F this is sort
Speaker 1: of a place where people can get in on the
Speaker 1: ground floor. Well, people started to get in. I think
Speaker 1: when crypto became something that many could have understand or
Speaker 1: at least be tantalized by, was n f T. So
Speaker 1: it was the idea that, oh, I can understand that
Speaker 1: the royalty is going to be going to an artist.
Speaker 1: People can own what they have made and keep sort
Speaker 1: of a value of that as it goes through different
Speaker 1: people's hands. Is n f T still a gateway to
Speaker 1: the system because they have so fallen out of love
Speaker 1: in terms of evaluation perspective, where are we in crypto
Speaker 1: in the longer term? So, you know, Matt when he
Speaker 1: looks at the piece, kind of talks about sort of
Speaker 1: how thin the connection is between the code that you're
Speaker 1: investing in on the blockchain and what the actual piece
Speaker 1: of art is. I do think that for a lot
Speaker 1: of people, um you know, it's sort of disturbing to
Speaker 1: imagine that, like, well, bitcoin, what's backing the value of
Speaker 1: a bitcoin? I don't know. Um now, there's nothing really
Speaker 1: backing the value of a board eight. But at least
Speaker 1: you could sort of say to yourself, it's like, well,
Speaker 1: I kind of understand the art market, so at least
Speaker 1: to the extent that it's a little bit arbitrary and aesthetic.
Speaker 1: I understand that there's a market like that. I think
Speaker 1: this is outside of the scope of Matt Store, but
Speaker 1: I think we've all observed that there were there were enough,
Speaker 1: there were enough shenanigans in that market, kind of creating
Speaker 1: inflated valuations. Um. I mean that I think that's given
Speaker 1: people a lot of pause about getting into that space.
Speaker 1: So what then, Because we talk a lot across all
Speaker 1: of our platforms here that yes, in some ways it's
Speaker 1: a store of value, still is generally a trading asset type.
Speaker 1: When does it become more than that? When does it
Speaker 1: become integral to yours and my way of life? I mean,
Speaker 1: that's really the question that Matt's wrestling with. Matt, as
Speaker 1: you know, is really just an expert on finance, and
Speaker 1: what he really focuses on is the degree to which
Speaker 1: crypto finance is just finance. It's very similar lard of
Speaker 1: finance when you strip it all down. Even though it's
Speaker 1: a new thing and it gives people a new, faster
Speaker 1: start on certain things, it's often rebuilding the same structures
Speaker 1: that we've had before, maybe a new ways, often in
Speaker 1: disastrous ways. Inside of the crypto space. We didn't just
Speaker 1: see a crypto winner. We really saw a crypto two
Speaker 1: thousand and eight. They build all of the structures that
Speaker 1: created a financial crisis inside of crypto um. I think
Speaker 1: it's very interesting that that crisis didn't really weak out
Speaker 1: into the rest of the market. I think, however, that's
Speaker 1: probably one reason why crypto is continuing to be worth
Speaker 1: our attention. Is the people who are building these structures
Speaker 1: are building things that look a lot like the things
Speaker 1: in traditional finance that break and sometimes break disastrously. Well done, well,
Speaker 1: what an enormous read. Go have a look at his work,
Speaker 1: and that of course of Matt levin Bloomberg Business Weeks
Speaker 1: pat Menia, We thank him. Let's get you up to
Speaker 1: speed with the latest in the Musk Twitter saga. Elon
Speaker 1: Musk has impact fact pledged earlier to close the acquisition
Speaker 1: of Twitter by Friday. He announced this in a video
Speaker 1: conference call with bankers we understand helping fund the deal.
Speaker 1: It's all according to sources Ed Ludlow, of course, minute
Speaker 1: by minute across this particular deal. And well he said
Speaker 1: he would do it at the beginning, and now it
Speaker 1: seems as always being forced to do it at the end. Yeah,
Speaker 1: this this is one of the interesting situations where the
Speaker 1: devil's in the detail. And Bloomberg also reporting that, according
Speaker 1: to sources, the banks are kind of braced for this
Speaker 1: borrowing notice that should have come Tuesday. Then the money
Speaker 1: that the banks have pledged in the former debt would
Speaker 1: go into es grow Thursday. And as you said, Carrow,
Speaker 1: he's told these bankers that he fully intends to close
Speaker 1: the deal by five pm Friday. You know, the Twitter
Speaker 1: stock reacted in a way you'd expect. He got closer
Speaker 1: to the dollars twenty cents per share offer price, and
Speaker 1: it's kind of a soft indication from the street that, yeah,
Speaker 1: we think we're at a place where this deal is
Speaker 1: going to get done, and the mechanics of it as
Speaker 1: such that you know, they're moving in that direction. I
Speaker 1: would say we'd already reported a week ago that you
Speaker 1: bankers and advisors on both sides of enacting diligently to
Speaker 1: meet that five pm Eastern time deadline on Oxo, which
Speaker 1: was set by the chance Re Delaware chance rejudge. So
Speaker 1: we know where we stand. And of course later in
Speaker 1: the week twenty six we get Twitter earnings. Talk to
Speaker 1: us about the earnings you've just been digesting. Talk about
Speaker 1: the conversation you had with Ruth Poor at Alphabet. Yeah,
Speaker 1: I mean Alphabet, you know, missing on the top and
Speaker 1: bottom line. Interesting. You know, clearly this is a challenging
Speaker 1: environment for them. In that conversation with Ruth Poor actually
Speaker 1: kind of gave some granularity on the pool back in
Speaker 1: ad budgets across brand and direct ads, particularly on YouTube.
Speaker 1: But ultimately she gave some detail on the macro picture, right,
Speaker 1: which is that the macro environment remains challenging. Um and
Speaker 1: you know, this is a quarter in which all big
Speaker 1: tech companies that derive profits from sales I should say,
Speaker 1: from around the world are facing currency head winds. M
Speaker 1: But you know a point in the middle there. The
Speaker 1: sequential deceleration was primarily driven by lapping what parts saying
Speaker 1: is we're comparing this quarter to what was frankly an
Speaker 1: astonishing quarter in the same period a year ago, where
Speaker 1: they saw just incredible double digit top line growth as
Speaker 1: they recovered from the earlier stages of the pandemic um.
Speaker 1: That's a that's an interesting trick sometimes that executives used
Speaker 1: to point you to a comparison with a strong quarter,
Speaker 1: but anasts many across the bord ahead of earning exam
Speaker 1: has been downgrading the outlooks of companies, and so it's
Speaker 1: always a jolt when they missed them. So I think,
Speaker 1: what does the read across How are you thinking about
Speaker 1: what she's talking about in terms of YouTube, in terms
Speaker 1: of advertisers, what does this mean perhaps for tomorrow for meta? Yeah,
Speaker 1: I think what we're seeing is that there's broad weakness
Speaker 1: in the ad space. Right when we had Snaps earnings
Speaker 1: last week and they scrapped guidance and they had their
Speaker 1: slowest growth on record, they gave some pretty granular deta
Speaker 1: about the pullback by advertisers. The question from the street
Speaker 1: was is this specific to Snap because of what they're
Speaker 1: offering struggling to gain traction with advert isis or is
Speaker 1: this more widespread. In the commentary we've had from roof
Speaker 1: Pat and other Google Alphabet executives, you can see it
Speaker 1: is more widespread, and I guess that it builds some
Speaker 1: concern going into Meta earnings this Thursday. Yes, certainly, I
Speaker 1: think she in one of her key ones, she was saying, look,
Speaker 1: this is this is a pullback and advertising. The question
Speaker 1: is is how long it lasts? And I'm sure we'll
Speaker 1: be getting some more granular detail from the calls that
Speaker 1: are going on with analysts with investors at the moment,
Speaker 1: and so smart, we thank you for delving in with
Speaker 1: the key questions with her and bringing them to us
Speaker 1: as swiftly as he did. Meanwhile, that does it for
Speaker 1: this edition of Bloompeg Technology Wednesday. Do not miss the
Speaker 1: next studio at one point, oh how many chanting a
Speaker 1: story to the door dash CEO. So you want to
Speaker 1: be looking in on that. What is he seeing in
Speaker 1: terms of the consumer the resilience, the desire to spend
Speaker 1: up to get your deliveries as many a question also
Speaker 1: the labor market therein as well, and how we continue
Speaker 1: to consider those employees. Don't forget to check out our
Speaker 1: podcast of course as well. You can find it on
Speaker 1: the terminal if you're lucky enough to have one. Also,
Speaker 1: of course you can go to Apple Justify to my heart,
Speaker 1: and of course go and check out what we've been
Speaker 1: making of the latest Spotify earnings, which of course have
Speaker 1: come minute. Was a big look out for what's Apples
Speaker 1: saying in its earnings later in the week, sit with
Speaker 1: us a Blue Bag TV and of course across all
Speaker 1: our products for the earnings discipline Bag