WEBVTT - A Deep Dive Into The GameStop Hearing: MIT's Aral, Ritholtz 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.760 at Bloomberg dot com slash podcast. Let's bring in Barry 0:00:22.840 --> 0:00:26.640 rid Holtz Shall we Bloomberg opinion columnists, host of Masters 0:00:26.680 --> 0:00:29.800 in Business on Bloomberg Radio, which I highly recommend. He's 0:00:29.840 --> 0:00:32.040 also the founder and chairman, of course in chief investment 0:00:32.080 --> 0:00:35.400 officer of Riddholtz Wealth Management. All right, Barry, we've got 0:00:35.400 --> 0:00:37.839 some folks going to Congress, going to Washington, d C. 0:00:38.040 --> 0:00:40.760 Today to talk about that all the game stop stuff. 0:00:41.240 --> 0:00:46.160 Would it be naive of me to expect any meaningful discussion? 0:00:46.520 --> 0:00:51.840 Dare say, maybe even some action items. What are you expecting? Um, 0:00:51.920 --> 0:00:56.520 a lot of noise and fury and nothing, A whole 0:00:56.520 --> 0:00:59.640 lot more heat than light, to say the least. Look, 0:01:00.080 --> 0:01:04.520 this is really a very very specific incidents that this 0:01:04.640 --> 0:01:08.960 is not a systemic problem. You have a whole bunch 0:01:09.000 --> 0:01:12.480 of board people at home, you don't have access to casinos. 0:01:13.280 --> 0:01:16.000 Take a take a message board that, by the way, 0:01:16.040 --> 0:01:19.120 has talked about hundreds and hundreds of stocks over the 0:01:19.160 --> 0:01:23.680 past decade, and they happen to find one that had 0:01:24.600 --> 0:01:28.160 what not only was it under ten dollars, which means 0:01:28.240 --> 0:01:31.920 it's pretty cheap, but it had an enormous short interest 0:01:32.000 --> 0:01:37.520 and and uh cheap stock options and and that combination 0:01:37.600 --> 0:01:41.880 along with free trading and the gamification of trading on 0:01:41.880 --> 0:01:46.680 the robin. They know, yeah, that's that's right. It's you know, 0:01:46.720 --> 0:01:49.760 not everything is going to be spent on on chicken tenders. 0:01:49.760 --> 0:01:52.080 You've gotta leave a little money for the for that 0:01:52.240 --> 0:01:55.640 coal option, gamma squeeze play. But you know, this is 0:01:55.680 --> 0:01:59.320 this is really one of those things that Congress should 0:01:59.360 --> 0:02:04.400 be focusing on big systemic problems, not whether this one 0:02:04.520 --> 0:02:10.160 stock was pumped or dumped by this one group of 0:02:10.160 --> 0:02:14.480 of message board officionados. The SEC is more than capable 0:02:15.000 --> 0:02:19.320 of enforcing if if a crime was committed and pursuing it. 0:02:19.480 --> 0:02:25.240 And yet and yet, Barry, this is the one issue, Uh, 0:02:25.280 --> 0:02:28.120 this is the one issue that um Ted Cruz and 0:02:28.240 --> 0:02:32.040 AOC get on the same page for. You know, what 0:02:32.120 --> 0:02:35.880 does that tell you about? It tells you that the 0:02:35.919 --> 0:02:39.840 most dangerous place in Washington, d C. Is between a 0:02:39.919 --> 0:02:44.680 television camera and and some of the higher profile congress people. 0:02:44.760 --> 0:02:47.080 That that's what it tells you that, look, you know, 0:02:48.120 --> 0:02:52.360 there is a legitimate issue that lots of people are hurting, 0:02:52.840 --> 0:02:55.840 and that some people are doing silly things with their 0:02:55.880 --> 0:02:58.959 rent money because they don't see any other way to 0:02:58.960 --> 0:03:02.840 to earn a living. Uh. That's an issue that certainly 0:03:02.919 --> 0:03:07.160 is worthy of debate. But the specifics, the contours of 0:03:07.200 --> 0:03:12.359 the GameStop trade are so specific to this one company. 0:03:12.480 --> 0:03:14.920 You know, it's an outlawyer, and I don't think you 0:03:15.000 --> 0:03:20.560 can demonstrate anything worthwhile about markets and regulation and what's 0:03:20.560 --> 0:03:24.560 going on by holding up you know, one out of 0:03:25.840 --> 0:03:29.200 stocks and saying, look, the system has broken. I think 0:03:29.480 --> 0:03:31.440 hang on, I think you're ignoring one part of it. 0:03:31.560 --> 0:03:35.160 Which I'm not saying that I buy into this theory, 0:03:35.200 --> 0:03:39.000 but if you're, if you're into conspiracy theories, it's pretty 0:03:39.160 --> 0:03:43.080 easy to imagine that super billionaires that were trying to 0:03:43.120 --> 0:03:46.640 short this company to death, we're able to control robin 0:03:46.720 --> 0:03:52.520 Hood which they pay right for traffic and then cover 0:03:52.600 --> 0:03:54.960 it up. Well. The the other cool thing if you're 0:03:54.960 --> 0:03:58.400 a conspiracy theorist is that those super billionaires also control Congress, 0:03:58.440 --> 0:04:00.360 so you're never going to find out about it. But 0:04:00.400 --> 0:04:03.320 what do you think about the possibility of any ties. 0:04:03.880 --> 0:04:08.360 So it's wrong to call that a conspiracy theory because 0:04:09.160 --> 0:04:12.360 various trading firms, from Citadel to some of the other 0:04:12.480 --> 0:04:17.719 high frequency shops, they are robin Hood's customers. They're the 0:04:17.760 --> 0:04:21.360 ones who pay robin Hood. You know, there's this illusion 0:04:21.520 --> 0:04:24.039 that the users who are buying and selling stocks on 0:04:24.160 --> 0:04:28.320 robin Hood are the customers. That that's wrong, that they're 0:04:28.400 --> 0:04:31.320 the product. Their order flow is what gets sold. It's 0:04:31.320 --> 0:04:34.040 like radio and when you ask people what what are 0:04:34.200 --> 0:04:36.920 what is radio's product? And most people say, well, radio 0:04:36.960 --> 0:04:40.320 sells advertising and the answer is no, radio sells an 0:04:40.320 --> 0:04:45.800 audience to advertisers. Well, robin Hood sells an audience of 0:04:45.880 --> 0:04:50.120 traders flow to market makers and high frequency traders who 0:04:50.240 --> 0:04:53.800 pay them. So it really reflects a people calling this 0:04:54.200 --> 0:04:58.480 a conspiracy theory. This is really a textbook example of 0:04:58.640 --> 0:05:04.000 Dunning Krueger effect. These people just simply don't know how 0:05:04.160 --> 0:05:07.559 markets operate and how trading operates. Now, I'm not saying 0:05:07.560 --> 0:05:10.200 this is the optimal circumstance, and I'm not saying this 0:05:10.240 --> 0:05:12.800 is better or worse than other ways of doing it. 0:05:13.160 --> 0:05:16.920 But the simple facts are that in order to improve 0:05:17.520 --> 0:05:20.880 both price discovery and reduce the spreads between the bid 0:05:20.920 --> 0:05:22.800 and the order. But but bear, you're not saying that 0:05:22.880 --> 0:05:28.240 Ken Griffin ordered Lad to stop the Reddit attack. No, 0:05:28.600 --> 0:05:32.320 the Lad was out of capital. There are specific rules 0:05:32.360 --> 0:05:36.960 from the SEC and you cannot allow thousands and thousands 0:05:36.960 --> 0:05:40.960 of clients to buy billions and billions of dollars of 0:05:41.120 --> 0:05:44.720 stock and risk having that get cut in half and 0:05:44.760 --> 0:05:48.160 not be able to settle because you lack sufficient capital. 0:05:48.480 --> 0:05:51.880 And to Lad's credit, he went out to Goldman Saxon 0:05:51.960 --> 0:05:54.479 Chase and got a couple of billion dollars in one week, 0:05:54.560 --> 0:05:57.640 and the next week picked up another three billion dollars, 0:05:57.680 --> 0:06:01.600 but they had to put a bosch on buying more stock. 0:06:04.920 --> 0:06:07.279 I'm not I'm not buying that, Barry. He went on 0:06:07.320 --> 0:06:10.400 clubhouse and told Elon Musk they wanted three billion dollars, 0:06:10.560 --> 0:06:12.400 but it took him then twelve hours to get him 0:06:12.440 --> 0:06:14.600 down to like one five. Give me a break if 0:06:14.640 --> 0:06:17.080 you can. If you can bargain them down like that 0:06:17.160 --> 0:06:19.760 and going round up billions in twenty four hours, why 0:06:19.760 --> 0:06:22.520 do you need to stop trading? Why not just we'll 0:06:22.560 --> 0:06:25.760 continue this conversation at at a later day, will swap 0:06:25.839 --> 0:06:29.040 conspiracy stories. Barry Ridholts, thanks so much for joining us 0:06:29.040 --> 0:06:31.039 here at Bloomberg Opinion Collins and host a Masters in 0:06:31.080 --> 0:06:34.320 Business on Bloomberg Radios. Also the founder, chairman and chief 0:06:34.360 --> 0:06:39.160 investment officer of Rit Holt Well Management. Well, Matt, we 0:06:39.279 --> 0:06:43.640 just concluded a spirited debate with our Bloomberg Opinions Barry Ridholts, 0:06:43.680 --> 0:06:47.440 on the value of these hearings today, these game stop hearings, 0:06:47.480 --> 0:06:50.680 Barry suggesting maybe a little bit more show uh than 0:06:50.720 --> 0:06:54.080 any substance. But our next guest, Matt, says, game stop 0:06:54.240 --> 0:06:57.840 hearings today, they are necessary. Se Non are all director 0:06:57.920 --> 0:07:00.920 of the m I T Initiative on the Digital Economy 0:07:00.920 --> 0:07:03.200 at m I T s, Professor of Management I T 0:07:03.480 --> 0:07:08.160 Marketing and Data Science and founding partner of Manifest Capital. Uh, 0:07:08.400 --> 0:07:10.640 sign on, thank you so much for joining us here. 0:07:10.920 --> 0:07:13.520 You know we're really having a debate today, saying should 0:07:13.640 --> 0:07:17.800 we even be having hearings on this issue of investor trading? 0:07:17.840 --> 0:07:20.640 Give us your thoughts, Well, I mean I think that 0:07:20.720 --> 0:07:24.560 we have to know more about what happened. Uh. You know, 0:07:24.880 --> 0:07:29.440 this is in a sense an unprecedented UH, sort of 0:07:29.760 --> 0:07:34.840 new form of crowdpower. UH. And there are multiple different 0:07:34.960 --> 0:07:39.080 types of speech going on in the UH in the 0:07:39.120 --> 0:07:42.680 reddit sub reddits that are driving for instance, the game 0:07:42.760 --> 0:07:46.520 stopped stock price, and we need to know more. We 0:07:46.560 --> 0:07:50.200 need a full SEC investigation and hearings can help as well, 0:07:50.560 --> 0:07:53.840 because we don't know, for instance, where there people involved 0:07:53.840 --> 0:07:58.040 in this conversation that had ties to institutional investors. While 0:07:58.200 --> 0:08:02.640 some had funds lost money, others made a lot of money, 0:08:02.720 --> 0:08:05.520 like black Rock I think made something like three billion dollars. 0:08:05.560 --> 0:08:08.480 And the former CEO of Chewy was a big holder 0:08:08.520 --> 0:08:11.680 of game Stop stock prior to the ride ton. So 0:08:11.800 --> 0:08:13.760 we need we need to we need to know more. 0:08:14.480 --> 0:08:18.400 You know, I've noticed, um after this, during and after this, 0:08:18.520 --> 0:08:20.720 all of my friends from high school, who never cared 0:08:20.720 --> 0:08:22.680 about what I did for a living started calling me 0:08:22.720 --> 0:08:26.320 and asking me about this stock and that stock. UM. 0:08:26.360 --> 0:08:29.840 My wife, who doesn't know anything about the market, she 0:08:29.880 --> 0:08:32.520 thinks the word rally is funny. She said, should I 0:08:32.520 --> 0:08:35.960 get a robin Hood account? I mean, everybody, the shoeshine 0:08:35.960 --> 0:08:38.720 boy is getting in on this now. The question is 0:08:38.720 --> 0:08:42.640 is that dangerous? Muhammadi Arian also asking is this causing 0:08:42.679 --> 0:08:45.200 a danger. What are you thinking on Well, I mean, 0:08:45.240 --> 0:08:47.960 I think that the democratization of the markets is a 0:08:48.000 --> 0:08:50.599 good thing. I don't think that in any way we 0:08:50.640 --> 0:08:56.440 should limit anyone's access to the markets. But I think 0:08:56.480 --> 0:08:59.600 what we're seeing is that we don't have a full 0:09:00.040 --> 0:09:04.360 asp on how the information ecosystem that we've created in 0:09:04.400 --> 0:09:07.240 the last ten years or so through social media is 0:09:07.320 --> 0:09:11.520 related to the financial ecosystem that we see. So obviously, 0:09:11.559 --> 0:09:16.760 if there was misinformation flowing in these conversations, that would 0:09:16.840 --> 0:09:21.360 run a foul of the sec that's pure market manipulation. 0:09:22.200 --> 0:09:26.080 But if people are just raw rying their stock purchases 0:09:26.200 --> 0:09:28.800 in a public way as they're buying stocks, it's not 0:09:28.840 --> 0:09:31.800 clear that any of that is illegal in any way. 0:09:31.960 --> 0:09:34.800 There's also a third form of communication, which is about 0:09:35.120 --> 0:09:40.160 coordinating um stock purchasing, which is kind of akin to 0:09:40.880 --> 0:09:44.800 collusion on the producers side, but it's not really the same. 0:09:45.200 --> 0:09:47.160 So we have to know more, and we have to 0:09:47.280 --> 0:09:51.439 think about the implications of the ties between the information 0:09:51.480 --> 0:09:55.360 ecosystem that we have and the financial markets. All right, 0:09:55.480 --> 0:09:59.320 we're rejoined by Barry rid Holtz, Bloomberg opinion columnist. Barry, 0:09:59.480 --> 0:10:01.040 you know we're seem to sign on a row of 0:10:01.200 --> 0:10:03.760 m I t you know, making some really valid points 0:10:03.760 --> 0:10:06.200 about bringing and trying to get some more information here 0:10:06.280 --> 0:10:09.800 through uh congressional hearings here, bart do you think this 0:10:09.880 --> 0:10:11.679 is just something that the SEC can deal with and 0:10:11.720 --> 0:10:15.040 it's just a regular old short squeeze that we've seen before. Well, 0:10:15.040 --> 0:10:18.280 it's a combination of a regular short squeeze with a 0:10:18.320 --> 0:10:20.960 bit of a because the stock was so cheap, and 0:10:21.040 --> 0:10:24.080 because there was such a large run of out of 0:10:24.080 --> 0:10:28.760 the money care options, there was also the gamma squeeze 0:10:29.080 --> 0:10:33.840 aspect of this. I'm not sure what Congress is gonna find. 0:10:34.120 --> 0:10:37.440 I don't know if they're the institution best equipped to 0:10:37.600 --> 0:10:42.040 investigate this. The one caveat I would really emphasize is 0:10:42.800 --> 0:10:45.640 the you know, Wall Street bets Unreddit. I don't really 0:10:45.720 --> 0:10:48.559 see how this is very different than what we used 0:10:48.600 --> 0:10:51.400 to see with the Yahoo message boards or the Raging 0:10:51.480 --> 0:10:55.600 Bull message boards in the es that we lived through this. 0:10:56.280 --> 0:10:59.400 Here's a question, Barry, how is it Is it the 0:10:59.480 --> 0:11:03.640 same as you know, Facebook and Twitter being manipulated by 0:11:03.720 --> 0:11:07.640 the Russians as has been alleged during the two thousand 0:11:07.679 --> 0:11:10.439 sixteen election. I mean, if they could do that, if 0:11:10.440 --> 0:11:13.400 you buy into that, Um, why couldn't they also mess 0:11:13.480 --> 0:11:17.800 with us markets by you know, fabricating Wall Street bets 0:11:17.800 --> 0:11:22.120 on Reddit. News flash, don't get trading ideas off of Twitter. 0:11:22.240 --> 0:11:24.720 Let me let me write that down. I mean a 0:11:24.720 --> 0:11:28.400 lot of this stuff is really just basic common sense. 0:11:28.840 --> 0:11:32.360 My assumption is if I read something on Facebook or Twitter, 0:11:33.000 --> 0:11:36.720 especially about a stock where another person might have obsested 0:11:37.040 --> 0:11:41.840 financial interest, my immediate assumption is most of this is 0:11:41.880 --> 0:11:46.080 probably nonsense. Now, maybe that's because I'm an old skeptic 0:11:46.120 --> 0:11:48.960 who's been in the markets for too long, but I 0:11:49.000 --> 0:11:53.360 think the youth kind of have to learn um information 0:11:53.440 --> 0:11:58.400 theory and who they can trust and what's signaling? What's noise? Hey? 0:11:58.440 --> 0:12:00.920 Sign it? You actually wrote a book on this incitled 0:12:01.040 --> 0:12:04.480 The Hype Machine. How social media disrupts our elections, our economy, 0:12:04.520 --> 0:12:07.240 and our health, and how we must adapt. Give you 0:12:07.400 --> 0:12:13.040 this game stop Reddit? Uh, you know trading event as 0:12:13.080 --> 0:12:17.920 perhaps something bigger in the economy, in our trading. How 0:12:17.920 --> 0:12:20.439 are you kind of piecing that together? Well? I mean, 0:12:20.480 --> 0:12:24.640 I think that a big difference between the message boards 0:12:24.679 --> 0:12:28.760 of old and uh, the information ecosystem of today is 0:12:28.840 --> 0:12:33.760 algorithmic amplification. You know, this information moves so fast and 0:12:33.840 --> 0:12:39.920 scales so rapidly today and is driven by algorithms routing 0:12:40.000 --> 0:12:43.760 information uh in different ways across the network that we 0:12:43.880 --> 0:12:48.240 have to understand the scale, speed, and potential impact of 0:12:48.880 --> 0:12:52.680 this information diffusion in our society today. And I think 0:12:52.720 --> 0:12:54.520 we have to see it as a little bit different 0:12:54.559 --> 0:12:59.839 because we're seeing almost weekly, uh, you know, ripped from 0:12:59.840 --> 0:13:04.080 the headlines, uh, the impact of these social networks and 0:13:04.120 --> 0:13:07.360 social media companies on our society, whether it's uh the 0:13:07.400 --> 0:13:12.640 spread of political misinformation or coronavirus vaccine misinformation, or signing 0:13:12.720 --> 0:13:14.880 the rise and fall of stock prices. What do you 0:13:14.920 --> 0:13:18.600 think about the populace concern that these billionaire masters of 0:13:18.679 --> 0:13:22.760 Wall Street were able to whip robin Hood into shape 0:13:22.760 --> 0:13:26.400 and break the backs of you know, Joe Trader. Well, 0:13:26.400 --> 0:13:28.680 I mean, I think that the David and Goliath story 0:13:28.760 --> 0:13:32.959 doesn't really apply very well to game Stop. I think that, uh, 0:13:33.000 --> 0:13:36.600 you know, anybody who understands the business model of robin 0:13:36.679 --> 0:13:41.000 Hood knows that it makes money from institutional clients that 0:13:41.160 --> 0:13:45.439 are providing the back ends of the trades, that they 0:13:45.480 --> 0:13:49.160 are essentially giving commission free to the retail investors. So 0:13:49.200 --> 0:13:53.600 I think that robin Hood has a precarious future, both 0:13:53.640 --> 0:13:56.400 because of backlash from the retail investors when they were 0:13:56.480 --> 0:13:59.320 not allowed to sell the game stop stock price, you 0:13:59.320 --> 0:14:02.680 know stock they were buying, but also from the realization 0:14:02.720 --> 0:14:05.440 that hey, maybe we are the product here and maybe 0:14:05.440 --> 0:14:09.760 the institutional investors the client. So Barry earlier, we were 0:14:09.760 --> 0:14:12.360 having a heated discussion about, you know, kind of whether, 0:14:12.800 --> 0:14:15.280 uh that David Portnoy's of the world were right in 0:14:15.400 --> 0:14:17.640 saying that, you know, the robin Hood and the other 0:14:17.679 --> 0:14:21.440 platforms they screwed us by not allowing us to trade 0:14:22.120 --> 0:14:27.240 and Elizabeth Warren and exactly but again that the narrative 0:14:27.280 --> 0:14:29.280 coming from those platforms, it's like, hey, we were just 0:14:29.760 --> 0:14:31.400 you know, doing what we have to do to meet 0:14:31.400 --> 0:14:33.920 our margin calls. How do you come down on that? Yeah, no, 0:14:34.120 --> 0:14:37.400 that's exactly right. So you guys touched on three really 0:14:37.400 --> 0:14:40.680 important things. First, you know, this is a company that 0:14:40.720 --> 0:14:45.080 has grown so rapidly robin Hood, that their their capital 0:14:45.080 --> 0:14:47.600 base just failed to keep up with the massive run 0:14:47.680 --> 0:14:50.800 up in the assets on their balance sheets. I clearly 0:14:50.840 --> 0:14:54.080 think and you could see in the multiple times they 0:14:54.120 --> 0:14:57.280 tapped various lines of credit to add capital to their 0:14:57.280 --> 0:15:01.600 balance sheets that that was clearly a risk management process. 0:15:01.680 --> 0:15:05.760 And and it's very imaginable that had the stock collapsed 0:15:06.080 --> 0:15:09.880 before they had settlements done, they would have been short tens, 0:15:10.040 --> 0:15:12.320 you know, hundreds and hundreds of millions of dollars that 0:15:12.320 --> 0:15:15.880 they couldn't afford. So that's number one. Number two, I 0:15:15.920 --> 0:15:19.320 totally agree with the professor about the impact of of 0:15:19.440 --> 0:15:23.840 all the algorithmic stimulus UM. And it's not just it's 0:15:23.880 --> 0:15:26.240 not just Twitter and Facebook. You have to look at 0:15:26.800 --> 0:15:30.960 UH ticktock also is something that's using UH that approach 0:15:31.160 --> 0:15:36.560 plus the gamification of stock trading, that's a very, very 0:15:36.640 --> 0:15:40.880 dangerous combination. I love having we have Barry ritt Holtz 0:15:40.880 --> 0:15:43.720 whose podcast as Masters of Finance, and then we have 0:15:43.800 --> 0:15:48.520 the professor who are probably teaches Masters students at m 0:15:48.560 --> 0:15:51.400 i T professor. One quick final question we've been talking 0:15:51.400 --> 0:15:53.040 about T plus two, which is like you have to 0:15:53.120 --> 0:15:56.120 use a cotton gin and a printing press UM to 0:15:56.440 --> 0:15:59.200 verify that you bought stock these days, When are we 0:15:59.240 --> 0:16:02.360 gonna start using blockchain and make it faster? Oh? I 0:16:02.400 --> 0:16:05.280 think that's a great question, and I think that, uh, 0:16:05.320 --> 0:16:09.280 it's interesting to juxtapose that with the rise of the 0:16:09.320 --> 0:16:12.400 price of bitcoin recently, because I really think that the 0:16:12.480 --> 0:16:15.400 major innovation. There is the blockchain. I think that you're 0:16:15.400 --> 0:16:19.080 going to see blockchain uh sort of um become a 0:16:19.160 --> 0:16:24.640 decentral decentralized verification technique across many different industries, and I 0:16:24.680 --> 0:16:27.680 think it's going to spur a ton of innovation. Uh. 0:16:27.720 --> 0:16:31.320 It's a way to keep things decentralized but also verified. 0:16:31.400 --> 0:16:36.400 It's a way uh to to give people assurances um 0:16:36.440 --> 0:16:38.560 that that I think could be very helpful in a 0:16:38.640 --> 0:16:41.600 number of industries. Santana Role, thank you so much for 0:16:41.720 --> 0:16:44.440 joining us. We really appreciate gating your perspective. Snana Role, 0:16:44.480 --> 0:16:47.280 director of the m I T Initiative on the Digital Economy. 0:16:47.320 --> 0:16:50.280 And Barry Ridholts, thanks for coming back again for another segment. 0:16:50.280 --> 0:16:54.320 Barry Ridhults Bloomberg Opinion Commus, Masters in Business Podcasts and 0:16:54.400 --> 0:16:58.360 Ridholt's Wealth Management Matt A great discussion there. We'll see 0:16:58.400 --> 0:17:01.840 what happens on these hearings this afternoon. It should be 0:17:01.960 --> 0:17:07.560 very interesting, folks. When I tell you that rich green 0:17:07.680 --> 0:17:11.240 Field of Lightshed Partners is one of the leading voices 0:17:11.359 --> 0:17:15.520 in the media, telecom and technology space, uh, take it 0:17:15.560 --> 0:17:17.120 from me. I've been covering a space for a long 0:17:17.119 --> 0:17:19.080 time and he really got me to rethink a lot 0:17:19.119 --> 0:17:21.760 of my assumptions over the last several years, particularly as 0:17:21.800 --> 0:17:26.120 it relates to media and technology converging. Rich, in my mind, 0:17:26.160 --> 0:17:29.240 was the absolute first analyst on Wall Street to predict 0:17:29.359 --> 0:17:32.080 the secular decline of some of these traditional media companies 0:17:32.240 --> 0:17:35.199 due to their inability to pivot to technology such as 0:17:35.240 --> 0:17:38.600 streaming and the Netflix of the world. And Rich joins us. Now, Rich, 0:17:38.800 --> 0:17:40.880 thanks so much for joining us here. You've done such 0:17:40.880 --> 0:17:44.440 a wonderful job for your clients talking about the convergence 0:17:44.480 --> 0:17:47.879 of technology and traditional media, and now you're bringing a 0:17:48.040 --> 0:17:51.639 fund to market to capitalize on some further trends in 0:17:51.640 --> 0:17:54.720 that space. Tell us about it. Well, look, I think 0:17:54.800 --> 0:17:58.120 the key for us has been you can't understand what's 0:17:58.160 --> 0:18:01.879 happening in the public markets without understanding what's happening in 0:18:01.960 --> 0:18:05.600 the early stage startups that are affecting the media ecosystem. 0:18:05.680 --> 0:18:08.320 So give you an example. You know, look at look 0:18:08.320 --> 0:18:10.640 at Facebook, right. You know, we were writing about Facebook 0:18:10.640 --> 0:18:13.879 back in two thousand seven talking about why every media 0:18:13.920 --> 0:18:17.400 company should be buying it literally obviously none of them did. 0:18:17.480 --> 0:18:20.040 That was five years before Facebook went public. But look 0:18:20.080 --> 0:18:23.399 at Facebook today versus you know, even Disney is dwarfed 0:18:23.400 --> 0:18:26.120 by Facebook, right, and despite all of that, Disney has done, 0:18:26.119 --> 0:18:28.000 and Disney had to go out and buy Fox to 0:18:28.080 --> 0:18:30.679 get this, you know, to try to scale up. You know, 0:18:30.720 --> 0:18:32.479 I think that, you know, sort of there has been 0:18:32.600 --> 0:18:36.560 sort of a lack of understanding of the legacy media 0:18:36.600 --> 0:18:39.119 companies of technology and it's why we're really from a 0:18:39.160 --> 0:18:42.480 research standpoint, why we've devoted so much of our focus 0:18:42.800 --> 0:18:45.040 to looking into the future and trying to figure out 0:18:45.160 --> 0:18:48.679 where the media, tech and telecom sectors are going. The 0:18:48.800 --> 0:18:51.720 natural evolution of that is, well, you see all these companies, 0:18:51.720 --> 0:18:54.359 you're meeting, all of these companies. We want to invest 0:18:54.400 --> 0:18:57.359 in some of these companies at the earliest stages, at 0:18:57.359 --> 0:18:59.760 the seed level in the Series A, we're seeing the 0:18:59.760 --> 0:19:01.720 man away as part of what we're doing on the research, 0:19:01.760 --> 0:19:03.840 and now we can actually put capital behind them. And 0:19:03.840 --> 0:19:07.120 so we've gone out and raised Lightshed Ventures Fund one, 0:19:07.160 --> 0:19:10.640 which is a seventy five million dollar venture fund that's 0:19:10.680 --> 0:19:13.520 going to invest on the private side of the TMT 0:19:13.680 --> 0:19:17.159 ecosystem and really put our core theses that we have 0:19:17.320 --> 0:19:19.960 for the public companies to work on the private side. 0:19:19.960 --> 0:19:22.080 And I think both of them will be very, very 0:19:22.080 --> 0:19:24.879 symbiotic in terms of how we leverage our learnings across 0:19:24.920 --> 0:19:29.880 the two places. So Facebook has to be a unique 0:19:29.920 --> 0:19:34.639 case because there are very few products used by you know, 0:19:34.760 --> 0:19:37.320 well over a billion people. I guess water and air. 0:19:37.960 --> 0:19:41.520 You can't really own this. Is there something that you 0:19:41.600 --> 0:19:45.320 think is um nearly as exciting though? Is there anything 0:19:45.680 --> 0:19:48.560 new that we don't know about that you think maybe 0:19:48.600 --> 0:19:53.200 could be the next almost kind of close to possibly Facebook? 0:19:54.240 --> 0:19:56.120 A guy that that's a tough one. I mean, what 0:19:56.119 --> 0:19:58.240 what could be used by two and a half billion 0:19:58.280 --> 0:20:01.240 people for thirty forty five mi it's today? I don't know. 0:20:01.800 --> 0:20:05.160 I mean, look, I met Daniel e eleven years ago. Um, 0:20:05.200 --> 0:20:07.480 you know, before they had even launched service in the US. 0:20:07.560 --> 0:20:10.160 This is the founder of Spotify, and you know we've 0:20:10.200 --> 0:20:13.720 been friends with Daniel ever since. And you know, following 0:20:13.760 --> 0:20:17.679 from the earliest days the Spotify story and obviously you 0:20:17.680 --> 0:20:20.320 know that's now grown to be a gigantic company and 0:20:20.840 --> 0:20:23.440 a public company. Uh. And so we're always trying to 0:20:23.480 --> 0:20:25.560 figure out where kind of where the puck is going. 0:20:25.600 --> 0:20:28.280 I mean, right now, I'll tell you big categories that 0:20:28.320 --> 0:20:30.919 are of interest to us. You know, you look at 0:20:30.920 --> 0:20:33.040 what's happening in audio, I mean, I was an early 0:20:33.160 --> 0:20:36.920 investor in one dry that just got acquired by Amazon. Obviously, 0:20:36.920 --> 0:20:39.400 Spotify has made a lot of acquisitions in the podcast space, 0:20:39.480 --> 0:20:43.280 So audio broadly defined, I mean, look at clubhouse and 0:20:43.320 --> 0:20:48.240 Twitter spaces right this specifically, Yeah, Well, I'm just saying 0:20:48.240 --> 0:20:51.320 like audio is exploding, right, Like we're all realizing that. 0:20:51.760 --> 0:20:55.760 You know that there's this incredible opportunity in audio to 0:20:55.800 --> 0:20:58.960 make money. You know, it's it's because you don't have 0:20:59.000 --> 0:21:00.600 to be staring at the screen. You can do two 0:21:00.600 --> 0:21:02.199 things at once. You can be walking, you can be 0:21:02.240 --> 0:21:04.679 at the gym. You know, you don't have to be 0:21:04.840 --> 0:21:07.119 staring at a screen, and so there's a lot of 0:21:07.160 --> 0:21:10.080 incremental time spending your day that audio can fill in 0:21:10.119 --> 0:21:12.120 a lot of value add from audio. And I think 0:21:12.400 --> 0:21:15.840 whether it's podcasting, whether it's um, you know, kind of 0:21:16.119 --> 0:21:19.600 live audio, the way we're seeing in clubhouse and Twitter spaces, 0:21:19.760 --> 0:21:21.880 and I'm sure it sounds like Facebook's already moving into 0:21:21.920 --> 0:21:23.720 that to try to copy it. I think there's a 0:21:23.760 --> 0:21:27.600 lot of opportunities in audio that are really interesting. Again, 0:21:27.640 --> 0:21:29.960 will any of them live up to be Facebook sized businesses. 0:21:30.320 --> 0:21:32.840 It's way too early to know, but I think there's 0:21:32.880 --> 0:21:36.679 tremendous value creation in the audio sphere. And then on 0:21:36.720 --> 0:21:39.560 top of it, I'd say, this whole creator economy is fascinating, right, 0:21:39.560 --> 0:21:41.760 I mean, we you know, it's funny in your intro 0:21:42.200 --> 0:21:44.600 you are talking about sort of this collision of media 0:21:44.640 --> 0:21:46.480 and tech. You know, obviously we we came up with 0:21:46.480 --> 0:21:49.439 the hashtag probably seven years ago of good luck Bundle, 0:21:49.480 --> 0:21:51.240 which was sort of the break part of the legacy 0:21:51.280 --> 0:21:53.679 cable bundle, which you know, seven years ago, if we 0:21:53.680 --> 0:21:55.760 were on Bloomberg, I think a lot of people listening 0:21:55.800 --> 0:21:58.280 would have called us a heretic. Now it's consensus thinking 0:21:58.280 --> 0:22:01.520 that the bundles collapsing in linear TV is going away. 0:22:01.600 --> 0:22:04.640 But I think the logical next step to the shift 0:22:04.720 --> 0:22:09.639 from the traditional TV to streaming TV is actually the 0:22:09.680 --> 0:22:13.120 creator economy and watching individual creators. And I don't just mean, 0:22:13.720 --> 0:22:16.479 you know, watching them on YouTube in the sense of 0:22:16.520 --> 0:22:19.879 like you're watching somebody you know, uh, you know, you 0:22:20.160 --> 0:22:23.960 do comedic stuff. It's watching somebody play a game on Twitch. Right, 0:22:24.400 --> 0:22:27.119 It's like there's you know, it's not even just playing 0:22:27.160 --> 0:22:30.240 the game. Obviously gaming is exploded, but watching people play 0:22:30.320 --> 0:22:33.919 games has become massive, and you look at roadblocks in 0:22:34.000 --> 0:22:38.920 Minecraft I mean, look roadblocks like we have to leave 0:22:38.920 --> 0:22:40.760 it there. Rich, well, we'll bring it back just because 0:22:40.800 --> 0:22:42.199 of the time, but will certainly bring you back and 0:22:42.200 --> 0:22:44.320 get some more thoughts on this. We appreciate a Rich 0:22:44.320 --> 0:22:49.679 Greenfield Partner media annalyst that light Shed partners. While the 0:22:49.720 --> 0:22:54.720 power crisis in Texas continues, continued brutally cold weather through 0:22:54.760 --> 0:22:56.880 the middle part of the country, extending all the way 0:22:56.880 --> 0:22:59.840 down into the southern parts of Texas. Unprecedented cold there 0:23:00.080 --> 0:23:03.960 really impacting the entire grid. Joe Carol Houston, bureau chief 0:23:03.960 --> 0:23:07.520 for Bloomberg News. He joins us on the phone from Houston. Joe, 0:23:07.520 --> 0:23:09.120 thanks so much for taking the time. I know it's 0:23:09.160 --> 0:23:12.600 tough down there. I'd love for you to share with 0:23:12.720 --> 0:23:16.360 our listeners what it's like on the ground in Houston, 0:23:16.800 --> 0:23:20.000 for you and your fellow citizens down there. Well, we're 0:23:20.000 --> 0:23:23.399 above twenty degrees fahrenheit this morning, which is uh, it's 0:23:23.400 --> 0:23:26.160