WEBVTT - Bloomberg Businessweek Weekend - January 20th, 2023 0:00:01.040 --> 0:00:05.400 This is Bloomberg Business Week Inside from the reporters and 0:00:05.559 --> 0:00:09.200 editors who bring you America's most trusted business magazine, plus 0:00:09.240 --> 0:00:13.200 global business, finance and tech news as it happened. Sloomberg 0:00:13.240 --> 0:00:19.800 Business Week with Carol Messer and Tim Stentovic on Bloomberg Radio. Hi, everyone, 0:00:19.920 --> 0:00:23.680 Welcome to the weekend edition of Bloomberg Business Week. Davos Earnings, 0:00:23.720 --> 0:00:26.720 picking up US economic data showing the FED rate hikes, 0:00:26.720 --> 0:00:29.319 slag no more Well, it all added up to a 0:00:29.400 --> 0:00:32.080 market reset this week. With that in mind, this hour, 0:00:32.200 --> 0:00:34.040 we've got a bit of a theme on how the 0:00:34.080 --> 0:00:37.360 investing world and financial markets are changing. You might even 0:00:37.360 --> 0:00:40.080 call it a quote see change. More on that from 0:00:40.080 --> 0:00:42.800 oak Tree Capitals. Howard marks in a moment because that's 0:00:42.800 --> 0:00:46.080 what he says it's going on exactly. Also, the ever 0:00:46.240 --> 0:00:49.040 evolving narrative over how we work. We get into that 0:00:49.120 --> 0:00:51.839 with Aaron Levy. He's co founder and CEO at the 0:00:51.880 --> 0:00:55.639 online storage and document management software company Box and Well. 0:00:55.680 --> 0:00:58.760 Boxes largely weathered the storm that's battered the tech sector 0:00:58.800 --> 0:01:01.040 over the last year, so some of its peers have 0:01:01.120 --> 0:01:03.480 not been as fortunate. This week's issue of the magazine 0:01:03.520 --> 0:01:06.640 digs into the spade of layoffs it firms like Amazon, Microsoft, 0:01:06.720 --> 0:01:09.480 and Meta, and then on Friday, Google parent Alphabet said 0:01:09.480 --> 0:01:11.680 it will cut about twelve thousand jobs. That's more than 0:01:11.760 --> 0:01:14.680 six percent of its global workforce. And our cover story 0:01:14.720 --> 0:01:17.720 this week, It's All about a massive fake meat flop, 0:01:18.000 --> 0:01:20.720 will find out why the initial craze over plant based 0:01:20.720 --> 0:01:24.319 meat makers such as Impossible Foods and Beyond Meat has 0:01:24.360 --> 0:01:26.920 officially fizzled out. Oh of that to come. We begin 0:01:26.920 --> 0:01:29.759 with a voice familiar to the investment community, Howard Marks, 0:01:29.760 --> 0:01:32.560 the co founder and co chairman of oak Tree Capital Management, 0:01:32.760 --> 0:01:35.520 known for his investing in distress securities. The firm has 0:01:35.520 --> 0:01:38.480 a hundred and sixty three billion dollars in assets under management. 0:01:38.760 --> 0:01:40.800 He joined us in studio this past week to break 0:01:40.800 --> 0:01:43.319 down a recent research note that he published about what 0:01:43.360 --> 0:01:46.080 he calls a sea change in the world of investing. 0:01:46.240 --> 0:01:49.080 The point is that a sea change is something more 0:01:49.160 --> 0:01:54.880 fundamental than a minor cyclical fluctuation. It suggests a total 0:01:54.920 --> 0:01:59.760 transformation that will be somewhat long lasting. The point of 0:01:59.760 --> 0:02:05.280 the mo was that ever since the global financial crisis, 0:02:05.280 --> 0:02:09.600 the FED put in emergency measures to rescue the economy 0:02:09.680 --> 0:02:12.440 and the markets uh and they worked, but they were 0:02:12.480 --> 0:02:16.760 continued for a long time. Zero rates were the rule 0:02:16.880 --> 0:02:20.400 for seven years, which I was stunned to find out 0:02:20.480 --> 0:02:25.119 when I researched it. And uh, that conditioned the markets 0:02:25.200 --> 0:02:29.280 to depend on ultra low rates, which was unrealistic. And 0:02:29.280 --> 0:02:33.679 then when they tried in sixteen seventeen eighteen to raise rates, 0:02:33.720 --> 0:02:36.440 they got a lot of pushback. The fourth quarter of eighteen, 0:02:36.480 --> 0:02:39.600 you may recall, they took the Fed funds rate hit 0:02:39.600 --> 0:02:42.880 three and a quarter and the fourth quarter of eighteen 0:02:42.960 --> 0:02:45.880 was the worst fourth quarter in history as a consequence, 0:02:45.919 --> 0:02:50.640 So they were in a low return trap, and lenders 0:02:51.120 --> 0:02:54.000 likewise were in a low return trap. You know. I 0:02:54.000 --> 0:02:57.080 I gave a speech for eight years entitled investing in 0:02:57.080 --> 0:02:59.840 a low return World, and and it wasn't fun the 0:03:00.000 --> 0:03:01.480 because how do you get a good return in a 0:03:01.520 --> 0:03:04.640 low return world. You either accept the low returns or 0:03:04.720 --> 0:03:06.600 you take on more risk to try to get a 0:03:06.680 --> 0:03:09.200 high return, and that may not be a great idea either. 0:03:09.680 --> 0:03:12.960 So there is no easy out. And and we labored 0:03:13.000 --> 0:03:16.960 in the in the wilderness for a decade with low 0:03:17.080 --> 0:03:20.120 yields prevalent, and I think that that's not going to 0:03:20.240 --> 0:03:23.080 be the case to the same degree going forward. It's 0:03:23.120 --> 0:03:26.000 not just you know, low yields not being prevalent as 0:03:26.040 --> 0:03:28.400 being part of this sea change. What else do you see, which, 0:03:28.440 --> 0:03:29.840 by the way, you argue, this is only the third 0:03:29.919 --> 0:03:32.000 sea change you've seen in your career. Yes, well, And 0:03:32.600 --> 0:03:39.040 in the seventies I saw the adoption of risk return thinking. 0:03:39.080 --> 0:03:43.520 You know, before that a professional money manager or fiduciary 0:03:43.960 --> 0:03:46.040 the rules where this is okay to do, this is 0:03:46.040 --> 0:03:48.839 not okay to do. But with the advent of high 0:03:48.880 --> 0:03:52.280 yel bond issuance in the late seventies, people started to think, well, 0:03:52.320 --> 0:03:54.680 it may be risky, but I'm well paid to do it, 0:03:54.720 --> 0:03:57.240 so I'm gonna do it. It makes sense, And that 0:03:57.320 --> 0:03:59.960 has become the rule and been the rule ever since. 0:04:00.040 --> 0:04:02.760 And I think that was a very good change. Most 0:04:02.800 --> 0:04:05.120 of the things that we see in the financial world 0:04:05.160 --> 0:04:08.560 today are the result of that calculus. Then in the 0:04:08.680 --> 0:04:11.800 early eighties, of course, to fight the inflation that was 0:04:11.880 --> 0:04:16.320 prevalent in the US reaching mid teens, UH Vulker took 0:04:16.320 --> 0:04:19.039 the FED funds rate to twenty and that, you know, 0:04:19.120 --> 0:04:23.359 eventually killed off inflation and inflationary expectations. It kind of 0:04:23.440 --> 0:04:27.760 killed the economy, uh in the process. But then you know, 0:04:27.880 --> 0:04:30.240 I had a rate loan outstanding from a bank in 0:04:30.640 --> 0:04:32.920 eighty and I got a slip saying the rate is 0:04:32.960 --> 0:04:35.440 now two and a quarter. Forty years later, I was 0:04:35.480 --> 0:04:37.320 able to borrow money at two and a quarter. So 0:04:37.440 --> 0:04:39.840 we had a two thousand basis point decline and interest rates. 0:04:40.000 --> 0:04:42.960 And that was a major event. That was probably the 0:04:43.000 --> 0:04:47.159 biggest single financial event of the last half century. But 0:04:47.279 --> 0:04:49.320 nobody talks about it. How when do you want to 0:04:49.320 --> 0:04:51.240 ask you? And it's in your research note. You know 0:04:51.320 --> 0:04:54.880 you talk about when you see both rising asset values 0:04:54.920 --> 0:04:57.560 as well as a very low rate environment and what 0:04:57.680 --> 0:05:00.680 that does in terms of leverage, tell us how that 0:05:00.960 --> 0:05:04.760 maybe creates Ultimately, I'm assuming opportunities for you. Look, the 0:05:04.800 --> 0:05:07.520 government doesn't make anything. It doesn't add to GDP, it 0:05:07.560 --> 0:05:10.960 doesn't create anything. Oh it does is takes money in 0:05:11.080 --> 0:05:15.479 and puts money out, and it policy benefits some and 0:05:15.600 --> 0:05:18.880 hurts others. So the policies of the last fourteen years 0:05:18.880 --> 0:05:24.520 that I'm talking about benefited asset owners and borrowers and 0:05:24.600 --> 0:05:29.880 penalized lenders and savers. But it was a boon for 0:05:29.920 --> 0:05:32.760 anybody who owned assets and for anybody who borrowed. And 0:05:32.760 --> 0:05:35.440 what about people who did both, who owned assets on 0:05:35.520 --> 0:05:40.479 borrowed money, a double bonanza. The problem is that a 0:05:41.120 --> 0:05:44.600 the success of that depends somewhat on the persistence of 0:05:44.600 --> 0:05:49.159 that environment. And number two, environments that produced high profits 0:05:49.800 --> 0:05:53.160 usually encourage people to push the limits further and to 0:05:53.480 --> 0:05:56.920 go out and do riskier things because of the absence 0:05:56.960 --> 0:06:02.039 of of a risk aversion which you really ends up badly. Uh. So, 0:06:02.400 --> 0:06:04.960 you know, we've gone through an easy period for the 0:06:05.040 --> 0:06:07.400 last fourteen years. Be different now, and I believe that 0:06:07.480 --> 0:06:10.919 the coming period will be a harder period, not a cataclysm, 0:06:10.960 --> 0:06:15.640 not a depression. But you know, I think that people 0:06:15.800 --> 0:06:21.040 don't recognize that the last fourteen years have been unusually easy. 0:06:21.200 --> 0:06:24.000 So it opens up the question about where specifically you 0:06:24.000 --> 0:06:29.719 would see opportunities for distress, debt and beyond. Sure. Well, uh, 0:06:29.880 --> 0:06:32.359 first of all, I think we might see something and 0:06:32.440 --> 0:06:35.120 that would be a change. You know, in the in 0:06:35.200 --> 0:06:40.479 the very benevolent environment that we had over that period, 0:06:41.000 --> 0:06:43.040 it was very hard to default. It was very hard 0:06:43.080 --> 0:06:45.119 to go bankrupt. In fact, you had to have something 0:06:45.160 --> 0:06:48.520 seriously wrong to do that, because most companies that just 0:06:48.560 --> 0:06:51.600 burned money every quarter could borrow more. We just talked 0:06:51.600 --> 0:06:56.360 about the biotech sector that it's for them. Yes, so so, 0:06:56.520 --> 0:06:59.560 but when when risk aversion rears its head and you 0:06:59.600 --> 0:07:02.000 go in to get more, now, somebody might say, you 0:07:02.000 --> 0:07:03.440 know what, you're just burning money. We're not going to 0:07:03.480 --> 0:07:06.960 give anymore. So we're and I think it was November 0:07:07.200 --> 0:07:10.240 you talked with our team and you said, great bargains 0:07:10.280 --> 0:07:13.520 coming as recession looms. So we're specifically, I know we've 0:07:13.520 --> 0:07:16.360 been you know, is it energy, is it real estate? 0:07:16.440 --> 0:07:20.120 Is it where is it? Well? You know, uh, I'd 0:07:20.120 --> 0:07:24.080 never get down to that granular level. And uh, we 0:07:25.360 --> 0:07:30.160 our activities are kind of not planned. Uh, and we're opportunistic. 0:07:30.200 --> 0:07:33.640 When something pops up and we and and and some 0:07:33.720 --> 0:07:37.320 company has to roll over its debt and suddenly is unable, 0:07:37.480 --> 0:07:40.480 you know, we mobilize. So you know the point is 0:07:40.680 --> 0:07:43.440 we're not we're not laying plans in advance. Well, do 0:07:43.480 --> 0:07:45.840 we do we take something like Elon Musk and all 0:07:45.840 --> 0:07:47.960 the debt he took on for Twitter? Do we take 0:07:48.000 --> 0:07:51.000 a bed bath? And beyond another retailer falling to the wayside. 0:07:51.000 --> 0:07:53.280 I'm trying to think party City, Party City. Um, I 0:07:53.280 --> 0:07:55.480 feel like you could name any crypto firm over the 0:07:55.520 --> 0:07:59.280 last site. These these signs that are playing to what 0:07:59.320 --> 0:08:01.760 you're talking. Well, let me let me just say, without 0:08:01.840 --> 0:08:07.520 getting too specific, which I always try to avoid, that's okay. Um, 0:08:07.640 --> 0:08:11.240 that our our mantra is good company, bad balance sheet. 0:08:11.960 --> 0:08:15.680 A company a good company that has gotten over levered 0:08:16.200 --> 0:08:19.080 and that leverage level has turned out to be excessive 0:08:19.160 --> 0:08:24.160 for the environment that has unfolded. Uh, you can fix 0:08:24.200 --> 0:08:27.360 that by delivering the company. Maybe you take it through 0:08:27.360 --> 0:08:29.280 a bankruptcy in which you reject a lot of debt. 0:08:29.560 --> 0:08:32.720 But it's easy too. If you can delever a good company, 0:08:32.720 --> 0:08:37.240 it goes on to success or, or certainly it's it's reinstated. Uh. 0:08:38.040 --> 0:08:41.520 Bad companies are hard to fix as opposed to a 0:08:41.520 --> 0:08:44.000 good company with bad balance sheet. So you you you 0:08:44.120 --> 0:08:47.240 propose the list, you figure out which companies on that 0:08:47.320 --> 0:08:50.680 list you know are are important to stay in business 0:08:50.760 --> 0:08:53.400 for the next ten years. You mentioned a couple of retailers, Carol, 0:08:53.600 --> 0:08:57.520 which makes me question if you're any industries or sectors 0:08:57.520 --> 0:09:03.880 you would avoid historically. Um, we're okay with retail, although 0:09:03.920 --> 0:09:07.960 one has to be cognizant of the changing business model. Uh. 0:09:08.360 --> 0:09:10.920 You know, we're we're mostly active in what I would 0:09:10.920 --> 0:09:15.839 call the basic industries, the traditional industries. Uh, the ones 0:09:15.880 --> 0:09:24.120 with assets like energy, like like energy, yes, manufacturing, distribution, transportation, Uh, 0:09:24.160 --> 0:09:28.040 even retail under the right circumstances. Uh. You know where 0:09:28.040 --> 0:09:31.920 we historically have not been active has been, for example, technology, 0:09:32.000 --> 0:09:35.679 because there you need a higher level of expertise with 0:09:35.720 --> 0:09:41.080 regard to the subject matter. UM, intellectual property, style, fashion, 0:09:41.920 --> 0:09:45.880 things like that. UM, this environment, this see change, we 0:09:45.920 --> 0:09:47.880 only have about thirty seconds left. How long does it 0:09:47.920 --> 0:09:49.839 stay with us in your view? Because as you say, 0:09:49.880 --> 0:09:52.320 these don't happen a lot, but they do stick. Well. 0:09:52.559 --> 0:09:55.120 You know, I don't make forecasts, and I don't believe forecasts, 0:09:55.200 --> 0:09:57.960 especially my own. Having said that, you know, I'm not 0:09:58.000 --> 0:10:01.760 talking about uh, six months or a year, and I 0:10:01.800 --> 0:10:05.360 don't ever venture a thought to ten years. So I 0:10:05.360 --> 0:10:08.000 would say something in between. But I mean, this is material, 0:10:08.120 --> 0:10:11.640 and I would say a few or several years. Well, 0:10:11.640 --> 0:10:12.800 And I do feel like it mirrors some of the 0:10:12.840 --> 0:10:14.960 conversations we've had that this low rate environment of a 0:10:15.000 --> 0:10:17.559 generation who has never seen anything. But could we see 0:10:17.559 --> 0:10:19.640 a fourth sea change in your career? I hope I 0:10:19.679 --> 0:10:21.440 live long enough. That was Howard Marks. He's the co 0:10:21.520 --> 0:10:24.360 founder and co chairman of oak Tree Capital Management. Coming 0:10:24.440 --> 0:10:27.400 up next to Silicon Valley executives, as his company can 0:10:27.400 --> 0:10:31.080 serve users in any environment, regardless of whether workers ever 0:10:31.160 --> 0:10:33.719 returned to their offices. In all cases, you're going to 0:10:33.760 --> 0:10:36.480 be creating more digital content than ever before. And there's 0:10:36.480 --> 0:10:39.040 an explosion of video content, there's an explosion of written 0:10:39.080 --> 0:10:43.040 content as a result of companies getting more distributed, more collaborative, 0:10:43.400 --> 0:10:45.839 working in new ways. So in our case, these all 0:10:45.880 --> 0:10:48.920 point to long term tail ones because of just the 0:10:48.960 --> 0:10:51.920 massive digitization of our business processes and the way that 0:10:51.920 --> 0:10:55.280 we work. Box CEO Aaron Levy talks cloud technology, the 0:10:55.320 --> 0:10:57.840 outlook for the U S economy, and what he thinks 0:10:57.840 --> 0:11:00.360 of Elon Musk at the Helm of Twitter. You're listening 0:11:00.360 --> 0:11:12.000 to Bloomberg Business Week. This is Bloomberg. Please sees Bloomberg 0:11:12.080 --> 0:11:19.040 Business Week with Carol Messer and Tim Stinebeck from Bloomberg Radio. Well, 0:11:19.200 --> 0:11:20.960 it's been a while. In fact, the last time we 0:11:21.000 --> 0:11:23.520 talked with our next guest about his company, the world 0:11:23.640 --> 0:11:25.720 was in the thick of the pandemic we're talking about 0:11:25.720 --> 0:11:29.400 back in August of It's a very different environment today, 0:11:29.400 --> 0:11:32.920 and yet Tim one still with a ton of concerns. Yeah, 0:11:32.960 --> 0:11:36.600 we're talking about Box, the company develops internet application software 0:11:36.679 --> 0:11:39.480 and manages all types of multimedia content in the cloud. 0:11:39.800 --> 0:11:43.000 It was also a tech sector outlier in two shares 0:11:43.000 --> 0:11:45.320 of the nearly four point four billion dollar market cap. 0:11:45.360 --> 0:11:48.120 Company gained about nineteen percent last year. Yeah, I was 0:11:48.160 --> 0:11:49.599 kind of shocked when I checked out. I thought it 0:11:49.640 --> 0:11:53.680 was like a typo, a very different environment for that name. Certainly. Well, 0:11:53.679 --> 0:11:56.320 Aaron Levy is co founder and CEO at Box. We 0:11:56.440 --> 0:11:58.880 began by asking him about how his world has changed 0:11:58.920 --> 0:12:00.920 over the last two and a half years and what 0:12:00.960 --> 0:12:03.600 it all means for his company going forward. It's actually 0:12:03.640 --> 0:12:06.319 interesting reflecting on being in New York versus the Bay Area. 0:12:06.320 --> 0:12:08.240 I do think that, you know, it's a little bit 0:12:08.240 --> 0:12:10.240 of a tale of two cities in terms of actually, 0:12:10.320 --> 0:12:12.439 you know, kind of how much is back in both environments. 0:12:12.480 --> 0:12:16.480 We're back here more maybe by about in order of magnitude. Yeah, 0:12:16.559 --> 0:12:19.360 So it's it's definitely different environments, but we are seeing 0:12:19.360 --> 0:12:22.360 this across our customer base of companies coming back, returning 0:12:22.360 --> 0:12:25.240 to offices sort of, you know, establishing new work patterns, 0:12:25.720 --> 0:12:27.720 um And it's it's definitely going to be different than 0:12:27.760 --> 0:12:30.160 pre pandemic, but it's certainly equally going to be more 0:12:30.160 --> 0:12:32.280 different than during the peak of the pandemic as well. 0:12:32.400 --> 0:12:34.480 What makes you say that just just walking down the street, 0:12:34.520 --> 0:12:37.199 seeing the subways, what's going on. Every office building I've 0:12:37.240 --> 0:12:40.040 been in this week has been, you know, fairly packed 0:12:40.080 --> 0:12:42.000 and uh and maybe a little bit more muted than 0:12:42.080 --> 0:12:44.200 pre pandemic. But if you compare that to you know, 0:12:44.280 --> 0:12:46.560 sort of the Bay Area in California, it's it's definitely 0:12:46.559 --> 0:12:49.080 still pretty different. Okay. What's interesting about this though, is 0:12:49.120 --> 0:12:51.240 that we heard this week that Bob Iger and this 0:12:51.280 --> 0:12:53.000 is not a Silicon Valley company by any means, but 0:12:53.000 --> 0:12:54.680 he wants people to come back to Disney four days 0:12:54.679 --> 0:12:56.880 a week. And Caroline, I've talked about this quite a 0:12:56.920 --> 0:12:59.640 bit that you know, as the economy weekends and the 0:12:59.679 --> 0:13:01.959 work is not in as much control, we could start 0:13:02.040 --> 0:13:03.640 to see more and more people coming back. What are 0:13:03.640 --> 0:13:06.200 you seeing with with your data at box in terms 0:13:06.200 --> 0:13:09.120 of where people are accessing the product? Are they increasingly 0:13:09.160 --> 0:13:11.560 accessing it at home permanently? Do you think? Yeah? I 0:13:11.559 --> 0:13:15.720 think absolutely down from the pandemic peak. In terms of 0:13:15.720 --> 0:13:17.800 work from home, I do think companies are sort of 0:13:17.840 --> 0:13:19.840 all trying to figure out what are their rituals in 0:13:19.920 --> 0:13:22.479 terms of how people work and where they work from. 0:13:22.520 --> 0:13:24.960 You know, Bob Iger at Disney, you know Tim Cook 0:13:25.000 --> 0:13:27.000 at Apple, what we just saw from Howard Schultz at 0:13:27.080 --> 0:13:29.120 at at Starbucks, you know, pushing you know, some of 0:13:29.160 --> 0:13:32.080 these sort of three or four date policies. I think, um, 0:13:32.120 --> 0:13:33.680 you know, is sort of just now the tip of 0:13:33.679 --> 0:13:36.040 the iceberg of what might you know come next across 0:13:36.400 --> 0:13:39.320 fortunate hundred companies and and uh and more generally. But 0:13:39.360 --> 0:13:42.120 I do think, no matter what, some version of hybrid work, 0:13:42.320 --> 0:13:45.000 some version of more distributed work, some version of more 0:13:45.000 --> 0:13:47.880 flexibility is here to stay. Um. And what that all 0:13:47.960 --> 0:13:49.480 is going to point to is the need for digital 0:13:49.520 --> 0:13:53.400 technologies and cloud to be able to actually mediate how 0:13:53.440 --> 0:13:55.839 people work from any device or any location that they're 0:13:55.880 --> 0:13:58.120 working from. So we kind of are sort of fine 0:13:58.160 --> 0:14:00.800 with any outcome, whether everything's fully removed or partially back 0:14:00.840 --> 0:14:02.360 to the office or fully back to the It doesn't 0:14:02.400 --> 0:14:04.320 matter for you what the mixes does it in terms 0:14:04.320 --> 0:14:07.160 of your business growth. Now, in all cases, you're going 0:14:07.200 --> 0:14:09.640 to be creating more digital content than ever before, and 0:14:09.840 --> 0:14:12.240 there's an explosion of video content, there's an explosion of 0:14:12.280 --> 0:14:15.640 written content. As a result of companies getting more distributed, 0:14:15.679 --> 0:14:18.679 more collaborative, working in new ways. So in our case, 0:14:19.000 --> 0:14:22.120 these all point to long term tail ones because of 0:14:22.160 --> 0:14:25.200 just the massive digitization of our business processes and the 0:14:25.240 --> 0:14:27.000 way that we work. And you talk big broad and 0:14:27.040 --> 0:14:29.520 we do too, but remind our audience exactly like get 0:14:29.560 --> 0:14:31.560 down to the nitty gritty what you do for a company. 0:14:31.800 --> 0:14:35.440 So Box works with over a hundred thousand companies, uh 0:14:35.440 --> 0:14:37.600 and we have a platform that helps them securely manage 0:14:37.640 --> 0:14:40.720 their most important data, so their contracts, their financial documents, 0:14:40.720 --> 0:14:43.880 their presentations, their media content. We help you store it, 0:14:43.960 --> 0:14:46.840 share its secure it collaborate on that data from any 0:14:46.880 --> 0:14:49.840 advice anywhere. So it's a cloud platform that the powers 0:14:49.840 --> 0:14:52.960 how you work with your information. Bulks still small, mid, large, 0:14:53.600 --> 0:14:56.760 all size organizations. The majority of the revenue comes from 0:14:56.840 --> 0:14:59.480 large enterprises, so um so we tend to sort of 0:14:59.480 --> 0:15:02.640 be waited toward you know, the fortunate five hundred type organizations, 0:15:02.640 --> 0:15:05.040 but we support businesses of all sizes with with over 0:15:05.040 --> 0:15:07.360 a hundred thousand customers. Based on what you're seeing, sorry, 0:15:07.360 --> 0:15:10.400 I'm about I'll let you and based on what you're 0:15:10.400 --> 0:15:13.200 seeing recession, no recession globally U S what are you seeing? 0:15:13.600 --> 0:15:15.960 You know? I think you know these guys have to order, 0:15:15.960 --> 0:15:17.760 they have to work with you, they've got to say, hey, 0:15:17.800 --> 0:15:20.440 this is what we're thinking. I mean, I'm the last 0:15:20.440 --> 0:15:22.800 person that should decide the definition of a recession, but 0:15:23.040 --> 0:15:26.520 I ask no trend. Yeah, I think there's there's clearly 0:15:26.560 --> 0:15:28.720 a muting of um, you know, some degree of a 0:15:28.840 --> 0:15:31.760 muted kind of aspect of just share kind of corporate 0:15:31.760 --> 0:15:34.760 growth that that does tie into I t spend. Fortunately, 0:15:34.800 --> 0:15:36.600 we're in a position where we can help customers save 0:15:36.640 --> 0:15:39.600 money and drive up productivity and improve their security. So 0:15:39.680 --> 0:15:41.280 because we do see when people like I was just 0:15:41.320 --> 0:15:43.520 looking at lending trade, they cut workers in the stock 0:15:43.720 --> 0:15:46.320 like initially you know, went higher. So I do understand 0:15:46.320 --> 0:15:50.280 this idea of technology helping a company. Yeah, so technology 0:15:50.280 --> 0:15:53.040 will help companies get more efficient. Um, but we obviously 0:15:53.080 --> 0:15:55.280 want there to be a very robust, you know environment 0:15:55.320 --> 0:15:57.000 for for companies to grow. And I think there is 0:15:57.040 --> 0:15:59.920 a muting a little bit of the consumer economy, certainly 0:16:00.080 --> 0:16:02.480 in some of the consumer tech companies. You know, advertising 0:16:02.520 --> 0:16:05.160 dollars are are lessening a little bit. But our job 0:16:05.240 --> 0:16:06.760 is just to help companies no matter where they are, 0:16:06.760 --> 0:16:09.440 and that continuum to get more efficient, be more productive, 0:16:09.480 --> 0:16:13.600 stay more secure. Okay, something weird is happening because you know, 0:16:13.680 --> 0:16:17.320 most software stocks, most software stocks just got crushed. Okay 0:16:17.480 --> 0:16:20.400 last year, you guys are up ninety you're in fact 0:16:20.520 --> 0:16:24.000 close to record highs right now. How this is a 0:16:24.040 --> 0:16:26.560 high interest rate environment? What's going to really rough environment? 0:16:26.640 --> 0:16:29.280 I think connected with the cloud. Yeah, it is. It 0:16:29.360 --> 0:16:31.920 is a rough environment, particularly if you are a high 0:16:32.040 --> 0:16:35.720 growth company, UM, where your stock was largely bolstered by 0:16:35.760 --> 0:16:38.600 your growth rate and UM, and that with with kind 0:16:38.640 --> 0:16:41.160 of higher interest rates. UM. You know, the valuation of 0:16:41.160 --> 0:16:44.080 those companies have come down naturally. UM. You know, it's 0:16:44.080 --> 0:16:47.280 an interesting, you know, almost bitter suite dynamics. So we 0:16:47.440 --> 0:16:50.080 never really had an inflated valuation, so that meant there 0:16:50.120 --> 0:16:52.760 was sort of less less room to come down. At 0:16:52.760 --> 0:16:56.200 the same time, we've been working pretty um, you know, 0:16:56.280 --> 0:16:59.560 significantly on improving our profit margin in the past three years. 0:17:00.040 --> 0:17:03.680 So how do you do that? Just just hyper focus 0:17:03.720 --> 0:17:07.160 on efficiency across the business. UM. Actually not not really 0:17:07.160 --> 0:17:09.560 about cutting, but but you can kind of grow into 0:17:09.920 --> 0:17:12.080 um your your head count in a lot of cases 0:17:12.480 --> 0:17:15.600 largely by just remaining extremely focused on the areas that 0:17:15.600 --> 0:17:18.080 are working in the business. So doubling down in sort 0:17:18.119 --> 0:17:20.359 of the products that are are generating the greatest returns 0:17:20.400 --> 0:17:22.879 as opposed to diluting your bets, um, doubling down in 0:17:22.920 --> 0:17:25.400 the regions that are most productive, and so our case 0:17:25.520 --> 0:17:27.680 by region, I mean, you know where the most sort 0:17:27.720 --> 0:17:30.119 of you know, the largest I T spending markets and 0:17:30.119 --> 0:17:32.960 and not deluding our focus from a regional standpoint, um, 0:17:33.000 --> 0:17:36.040 getting really really focused on gross margin and the efficiency 0:17:36.040 --> 0:17:38.440 of our platform. So starting about three years ago, we 0:17:38.520 --> 0:17:40.280 kind of had a bunch of work streams across the 0:17:40.320 --> 0:17:43.040 business to get more efficient. And you know, fast forward 0:17:43.040 --> 0:17:45.040 to today that's actually in vogue, but it wasn't at 0:17:45.080 --> 0:17:47.320 the time, and so we never got that inflate evaluation. 0:17:47.680 --> 0:17:50.160 But as valuations came down, I think across the sector, 0:17:50.640 --> 0:17:53.600 ours by comparison was was holding up, you know, pretty nicely. 0:17:53.920 --> 0:17:55.440 You know, I want to ask you about something because 0:17:55.480 --> 0:17:57.200 this week, are we see was that with some research 0:17:57.320 --> 0:18:01.800 they anticipate there will will be kind of two has 0:18:01.840 --> 0:18:04.719 for US software stocks, and they talked about kind of 0:18:04.760 --> 0:18:07.840 overall what they see, but they did cut Box to underperform. 0:18:07.880 --> 0:18:10.719 They cut the price target to four from they're concerned 0:18:10.720 --> 0:18:13.920 about the sustainability of your turnaround, particularly of Japan growth 0:18:14.000 --> 0:18:16.960 slows your stock was down about six percent on that call. 0:18:17.160 --> 0:18:18.920 Can you address it? And they did also talk a 0:18:18.920 --> 0:18:21.760 lot about the Japanese market, which has been good for you. Yeah, 0:18:21.800 --> 0:18:24.879 so we we've seen tremendous growth in Japan. Um, we 0:18:24.960 --> 0:18:27.040 kind of got you know, sort of the right place, 0:18:27.119 --> 0:18:28.960 right time, and at the beginning of a kind of 0:18:29.000 --> 0:18:32.280 a SASS or cloud supercycle about you know, nearly ten 0:18:32.359 --> 0:18:34.639 years ago. So we had all the right partners, We 0:18:34.640 --> 0:18:36.280 had a great team on the ground, and we rode 0:18:36.320 --> 0:18:39.080 this wave of large companies adopting SASS and so that 0:18:39.080 --> 0:18:41.879 that's actually been a very strong tail into our business. 0:18:42.480 --> 0:18:45.080 Almost by definition, as that business get larger, the growth 0:18:45.119 --> 0:18:47.320 rate will come down. So so that you know, was 0:18:47.359 --> 0:18:49.280 in this sort of note, Um, it's actually something that 0:18:49.320 --> 0:18:51.520 we already anticipate and it's sort of built into our 0:18:51.560 --> 0:18:54.760 general model. UM. But but overall, you know, we we 0:18:54.760 --> 0:18:56.920 we we obviously care about the health of the global 0:18:56.960 --> 0:18:59.880 business even if the Japan growth rate comes down. UM, 0:19:00.000 --> 0:19:01.320 our job is to make sure that we manage that 0:19:01.440 --> 0:19:03.480 at a global level. Before we let you go. We 0:19:03.600 --> 0:19:06.200 got forty seconds your pointe on Twitter two point four 0:19:06.240 --> 0:19:11.520 million followers. Obviously you've been following with what are your 0:19:11.520 --> 0:19:13.959 thoughts on on what Elon Musk has done to the platform? 0:19:14.280 --> 0:19:17.680 So I'm I'm always a fan of kind of moving fast, 0:19:17.720 --> 0:19:19.720 innovating quickly, and so some of the some of the 0:19:19.800 --> 0:19:21.600 changes have been, you know, exciting to see some changes 0:19:21.640 --> 0:19:23.840 maybe I don't agree with as much. In general, I 0:19:23.880 --> 0:19:26.119 think that the platform should say, very very focused on 0:19:26.160 --> 0:19:29.560 getting to a global population of consumers. I think maybe 0:19:29.640 --> 0:19:32.280 less focus on the paid subscription product, more focused on 0:19:32.320 --> 0:19:35.760 more features at the free level. Still useful to you, Yeah, absolutely, 0:19:35.800 --> 0:19:38.600 I mean I just as useful as it was indispensable. 0:19:38.800 --> 0:19:41.879 That was Aaron Levy, the co founder and CEO at Box. 0:19:42.000 --> 0:19:44.280 Still ahead on Bloomberg Business Week, Where has all the 0:19:44.320 --> 0:19:47.320 money gone for biotech startups? Our team breaks down the 0:19:47.359 --> 0:19:50.120 sudden dearth of new investments in a space we rely 0:19:50.200 --> 0:19:54.359 on for new innovations, particularly ones that can benefit our health, 0:19:54.520 --> 0:19:57.920 whether they're public companies are private. People are focusing on 0:19:57.920 --> 0:20:01.240 only the most important z is or the drugs that 0:20:01.320 --> 0:20:04.760 have the biggest probability of success, And of course that 0:20:04.880 --> 0:20:07.679 means that those other diseases, those other patients who are 0:20:07.720 --> 0:20:10.879 waiting for medicines for their diseases are going to have 0:20:10.960 --> 0:20:12.680 to wait Plus we'll look at the growing wave of 0:20:12.760 --> 0:20:15.560 job cuts taking place across tech firms in Silicon Valley 0:20:15.600 --> 0:20:19.280 and beyond, and where displaced workers might turn next. This 0:20:19.480 --> 0:20:28.800 is Bloomberg Broadcasting from the financial capital of the world 0:20:28.960 --> 0:20:32.399 Bloomberg eleven Frio in New York to Washington, d C. 0:20:32.600 --> 0:20:37.320 Bloomberg to Boston, Bloomberg one O six one does San Francisco, 0:20:37.400 --> 0:20:40.840