Speaker 1: From the heart of where innovation, money and power collive
Speaker 1: in Silicon Valley and Beyon this is Bloomberg Technology with
Speaker 1: Emily Jay Imed Ludlow in New York in Family Chang
Speaker 1: This is Bloomberg Technology. Coming up in the next hour.
Speaker 1: Mark Zuckerberg warns Meta employees that are restructuring is on
Speaker 1: the horizon. The company is implementing a hiring freeze and
Speaker 1: will shrink teams to quote, shift energy to other areas.
Speaker 1: Will share more of the transcript obtained by Bloomberg. Plus,
Speaker 1: Apple gets downgraded following Bloomberg's report about iPhone production, and
Speaker 1: now we're learning of a high profile executive leaving the
Speaker 1: company after a crude TikTok of him went viral. And
Speaker 1: we've got to talk about the sell off. Across financial markets,
Speaker 1: the S and P five drops to a twenty two
Speaker 1: month flow as the fed hawks circle, Big Tech takes
Speaker 1: some beating. I want to get straight to that Micron
Speaker 1: conversation and bring in Joanne Pheeny and Advisors, capital management
Speaker 1: partner and portfolio manager Joe and give me a second one.
Speaker 1: I bring you some of the headlines Micron seeing first
Speaker 1: quarter of fiscal first quarter adjusting revenue four to five
Speaker 1: four point five billion dollars. The estimate, of course six
Speaker 1: billion dollars, but some of the commentary around the slow
Speaker 1: down in demand and supply catching up is pretty astonishing.
Speaker 1: We're down much more considerably, and after ours, we've paired
Speaker 1: some of those losses. What's your read on what we're
Speaker 1: seeing from Micron. Yeah, you know, pretty clear investors really
Speaker 1: accepting a pretty weak guide from Micron, and that's what
Speaker 1: they got. But I think they are reassured that Micron
Speaker 1: is cutting capecks by That's what investors were looking for
Speaker 1: and indicates that micro is gonna be real careful about
Speaker 1: adding to the problem. Clearly, we have a lot of
Speaker 1: supply from the memory makers and not enough to may
Speaker 1: have particularly because of the PC weakness that we're seeing.
Speaker 1: You know, they expect PC ship this' to be down
Speaker 1: related to memory, and so you know they're taking the
Speaker 1: right steps. But that just shows you memory is a
Speaker 1: very very tricky place to invest. It's very cyclical. But
Speaker 1: let's try and throw this forward. We kind of look
Speaker 1: to Micron as if it's a crystal ball of what's
Speaker 1: to come in the global economy. What is the story
Speaker 1: when it comes to consumer electronics in which geographies are
Speaker 1: we most concerned about. Well, you know, I think we're
Speaker 1: seeing a worldwide slowdown in some consumer demand, and that's
Speaker 1: Micron is going to pick that up. The real question
Speaker 1: is what's happening beyond the consumer in particular. You know,
Speaker 1: we still have a lot of good data points and
Speaker 1: suggests auto and industrial remains strong. They're still shortages there.
Speaker 1: It's gonna take probably another year to work those through.
Speaker 1: Uh So, you know, companies like Texas Instruments are wealth
Speaker 1: positioned for that. We continue to like them, We've held
Speaker 1: them for a long time of clients. The real question
Speaker 1: I think people are gonna be looking for on the
Speaker 1: call as it continues is what's happening to cloud and
Speaker 1: data center. There's some concerns that firms seeing some consumer
Speaker 1: weakness might slow down their investments, But the long term
Speaker 1: fact in that world is that data usage across all
Speaker 1: sorts of devices is going to continue to increase. We
Speaker 1: need wider pipes, we need more storage. So ultimately, you know,
Speaker 1: companies that play into that area, while they might suffer
Speaker 1: a pause, are going to be really well positioned for
Speaker 1: the long term for investors, and a lot of them
Speaker 1: have gotten cheap, whether it's a sienna or a broadcast. Joanna,
Speaker 1: how did we get this so wrong? I remember talking
Speaker 1: to you, talking to Iatan King, Bloomberg News Chip reporter
Speaker 1: about the vision for a multi multi courter cycle that
Speaker 1: would just go on indefinitely. This was going to happen
Speaker 1: coming out of the pandemic. But that hasn't happened, has it. Yeah,
Speaker 1: you know, I think what we got wrong all of
Speaker 1: us was there was so much spending during the pandemic,
Speaker 1: and that really came on the heels of a very
Speaker 1: strong period from to nineteen really through until the pandemic.
Speaker 1: There are signs actually that inventory were starting to build
Speaker 1: before the pandemic hit, and then that got disrupted by
Speaker 1: the demandering the pandemic for PCs and everything else. And
Speaker 1: so now we're starting to see that side really come off.
Speaker 1: But don't let's not misconstrue the implications. I think cloud
Speaker 1: and data sent A remains. There are concerns that firms
Speaker 1: might take a bit of a pause on when they
Speaker 1: do the installations, but that ultimately does still look like
Speaker 1: a very strong segment of the market. So you really
Speaker 1: have to pick and choose your semi conductor companies to
Speaker 1: hold at this point. I love talking to you, Joanne,
Speaker 1: because you've spent a lot of time looking at the
Speaker 1: semiconductor industry, and you know you're an expert, but you're
Speaker 1: also looking at the markets more broadly. Right I'm looking
Speaker 1: at it and has that one hundred down significantly? Again?
Speaker 1: With four days into the week, we're going we're heading
Speaker 1: towards another tough week in global equity markets with a
Speaker 1: focus on tech. What is top of mind for investors
Speaker 1: right now? Are we still not convinced by the direction
Speaker 1: of travel for the FED that we can concerned about
Speaker 1: global slow down spurred by inflation? What is the story
Speaker 1: for you? You know, there are some real solid risks
Speaker 1: out there for the global economy. I mean, the war
Speaker 1: in Ukraine is is not trivial. There could be bigger
Speaker 1: risks from that. The energy situation is a concern. The
Speaker 1: amount of that central banks around the world have to
Speaker 1: raise raids is a concern and will that lead to recessions?
Speaker 1: Probably so the rodd slowdown that I think folks are
Speaker 1: worried about this really has yet to resolve itself into
Speaker 1: sort of how big, how deep, and how long it
Speaker 1: will be and investors, you know, are concerned about how
Speaker 1: much volatility they can stand. But if you have a
Speaker 1: long enough time arizing, you have to look back at
Speaker 1: history and recognize that the market sells off the most
Speaker 1: tend to tend to do that before recessions begin, and
Speaker 1: they take to storm to recover before we even know
Speaker 1: officially that we've had a recession. And so for a
Speaker 1: long enough term investor, and I mean a year, two years,
Speaker 1: three years, there are some pretty good opportunities out there,
Speaker 1: but one has to be able to stomach the volatility,
Speaker 1: which doesn't look like it's going to go away anytime soon.
Speaker 1: Stomaching the volatility. That should be my daily job title
Speaker 1: Advisers Capital Partner, Jo Anthony. Thank you. Let's get back
Speaker 1: to our top tech story. Meta has announced a hiring
Speaker 1: freeze and warned employees and restructuring the Facebook parents first
Speaker 1: ever head count cut. Let's bring in Bloomberg's Kurt Wagner,
Speaker 1: who broke that story, but also Bloomberg Intelligence senior analyst
Speaker 1: Man deep Seeing to discuss. Kurt, I want to start
Speaker 1: with you set the scene for us. What do we
Speaker 1: learn in the course of our repulity on Thursday? Yeah,
Speaker 1: so this was during a Q and A that happens
Speaker 1: weekly between Mark Zuckerberg and all employees that Beta, and
Speaker 1: he said, uh, you know, hey, I promised you I
Speaker 1: was going to come back with some uh you know,
Speaker 1: ideas about where the budgets headed for three. And the
Speaker 1: big news is there's gonna be hiring Freeze and that
Speaker 1: it sounds like most teams within Meta are going to
Speaker 1: see their budgets reduced next year. And so how exactly
Speaker 1: that's gonna play out within each individual team is going
Speaker 1: to be different. In some cases, you know, when someone
Speaker 1: leaves a team, they're just not going to fill that
Speaker 1: role again. Some people are going to be moving from
Speaker 1: team to team, and then in some cases they're gonna
Speaker 1: be kicking out low performers, right, which is a pretty
Speaker 1: drastic thing that we haven't seen that Facebook in a
Speaker 1: long time or ever. And so this really just feels
Speaker 1: like a moment, right this company that has been growing
Speaker 1: and expanding for eighteen years finally hitting a bit of
Speaker 1: an issue here. I want to show you life some
Speaker 1: of what Mark Zuckerberg told Better employees on Thursday, these
Speaker 1: comments obtained by Bloomberg News. There are a number of
Speaker 1: ways to reduce the size of a group. Some teams
Speaker 1: will transfer people to other teams that are growing. A
Speaker 1: lot of teams will choose not to backfill when somebody departs.
Speaker 1: But ultimately he used the word shrink. Two questions. This
Speaker 1: is a company that historically has not reduced headcount. But
Speaker 1: what is the reality of what we're talking about here? Yeah,
Speaker 1: we didn't get specific numbers. You may recall last week
Speaker 1: the Wall Street Journal had a report that that met
Speaker 1: Him might cut cost by ten percent, but that wasn't
Speaker 1: clear if that was just headcount or other things. But again,
Speaker 1: as you point out, this is not a company that
Speaker 1: has normally or historically ever done this kind of thing.
Speaker 1: So any idea of shrinking that headcount from is a
Speaker 1: huge deal because I think last quarter they added almost
Speaker 1: six thousand employees and in the quarter, right, so the
Speaker 1: idea that they're going in the other direction all of
Speaker 1: a sudden is pretty notable. All right, let me bring
Speaker 1: in Bloomberg Intelligent Senior Tech annaly Man deep saying this
Speaker 1: is a company that face headwinds on the bottom line,
Speaker 1: actually the top line as well. What is your reaction
Speaker 1: to this news. Well, the one thing is we know
Speaker 1: every company in this space is doing that where you
Speaker 1: heard that from Alphabet Snapchat, So it's not a total
Speaker 1: surprise that they announced the hiring freeze. The problem for
Speaker 1: meta is we don't have visibility to win that top
Speaker 1: line growth will resume, not only because advertising is going
Speaker 1: through a cyclical downturn, but also because of the challenges
Speaker 1: that are meta specific, which is the pivot to videos,
Speaker 1: the Apple's I d f A changes, They have the
Speaker 1: largest exposure to direct response ads and look the reality
Speaker 1: labs losses. They are really hurting because Facebook's metas free
Speaker 1: cash flow went from thirty billion to less than ten
Speaker 1: billion this year. That's huge. If you're an investor, you're
Speaker 1: thinking when will that thirty billion free cash flow return?
Speaker 1: And I don't think we have the visibility. So on
Speaker 1: your screen I pulled up meta reality lads. Actually, I
Speaker 1: think I'm right in saying last quarter sales grew four
Speaker 1: and fifty million odd, but the loss was almost three billion.
Speaker 1: This is part of metas pivot to the metaverse. Is
Speaker 1: it just that it's becoming too painful the cost in
Speaker 1: the near term. Yeah, And as an investor you have
Speaker 1: to ask, what are these spending three billion a quarter
Speaker 1: on just they are taking the losses, but remember these
Speaker 1: are recurring and you know, is it going on? Product
Speaker 1: isn't going on just adding employees, which it looks like.
Speaker 1: I mean, they clearly over hired over the last two years.
Speaker 1: But the recurring losses is what is mind boggling here
Speaker 1: and the scale of you know, the losses. And when
Speaker 1: you compare it to an alphabet or a snapchat, which
Speaker 1: are also investing in meta words or a R v R,
Speaker 1: it doesn't show up in their R and D spens.
Speaker 1: So that's where I think Meta really has to show
Speaker 1: two investors what is it that they're spending all this
Speaker 1: money on? What do we know about? What Zuckerberg to
Speaker 1: say for the reasons behind this? Why now? Why are
Speaker 1: they doing this? Well, you pointed to the macroeconomic environment, right,
Speaker 1: and this is something that we've seen a lot of
Speaker 1: these tech companies, especially advertising based tech companies, talk about
Speaker 1: over the last couple of months and couple of quarters,
Speaker 1: which is, you know, there's inflation, there's a war going
Speaker 1: on in Europe. Uh, you see all of these things
Speaker 1: kind of colliding and oftentimes when there is a recession
Speaker 1: or any hint of a recession, the first budget that
Speaker 1: tends to go with the marketing budget, right, and so
Speaker 1: when you're making money from advertising, it can be very
Speaker 1: cyclical with you know, that's why we see a spike
Speaker 1: at the holidays, right, same kind of thing. When there
Speaker 1: are reductions in marketing spend because of other things going on,
Speaker 1: these companies usually feel at first, and so that's been
Speaker 1: a lot of the reasoning for why they're cutting back
Speaker 1: on these costs Mandate. There's also the other strategy, which
Speaker 1: is to go off to video in a crowded field
Speaker 1: with TikTok and YouTube and you and I've been discuss
Speaker 1: saying about how the ad side of that business is tough.
Speaker 1: Explain to me why, Well, not only you've got you know, TikTok,
Speaker 1: there's also Netflix which is trying to get into ads,
Speaker 1: and we know Amazon has been, uh, you know, doing
Speaker 1: very well on the search side. So clearly this field
Speaker 1: is getting crowded and metals problem is not only are
Speaker 1: they losing engagement. Remember the time spent on beta, Instagram
Speaker 1: and Facebook properties is declining, even though their daily active
Speaker 1: user growth is holding up, but their time spantas declining.
Speaker 1: So the impressions growth is going down and ad pricing
Speaker 1: is going down. So that's a double valmy. And that's
Speaker 1: why pivoting to videos is just the wrong time, because
Speaker 1: they are behind TikTok and all these other platforms and
Speaker 1: and it's just gonna take more time. They don't have
Speaker 1: the creator base that a TikTok has, so they have
Speaker 1: to bring the creators. Guess what. There has to be
Speaker 1: a revenue sharing model that's gonna eat into the gross margin.
Speaker 1: So a lot of problems in terms of making that pivot.
Speaker 1: Now they should have done that before pivoting to ours.
Speaker 1: The battle for eyeballs continues. Bloomberg's Kurt Wagner and of
Speaker 1: course Bloomberg Intelligence senior tech analyst Man Deep sing thank
Speaker 1: you to you both. Coming up. An Apple executive is
Speaker 1: ousted after a viral TikTok details next, This is Bloomberg.
Speaker 1: More bad news for Apple this week. Shares plunged by
Speaker 1: as much as six percent Thursday, wiping twenty billion dollars
Speaker 1: from its market value. Now Bloomberg has learned one of
Speaker 1: the company's senior executives is leaving after a TikTok emerged
Speaker 1: of him making an off color joke. Bloomberg's Mark German
Speaker 1: is here to explain, Mark, what did you learn in
Speaker 1: the course of your reporting. On Thursday today, we reported
Speaker 1: that Tony Blovin's, Apple's longtime vice president of procurement, been
Speaker 1: at the company for about twenty two years or so.
Speaker 1: He is leaving the company after he appeared in a
Speaker 1: very viral video that aired earlier this month on Instagram
Speaker 1: in TikTok uh and in the video he made some
Speaker 1: crude comments. This is a TikTok and Instagram account by
Speaker 1: a creator named Daniel Mack. He goes up to people
Speaker 1: at car shows in Beverly Hills elsewhere in the world,
Speaker 1: goes up to people and asks them, if they're driving
Speaker 1: a fairly expensive car, what they do for a living.
Speaker 1: And Blevin's response was clearly not in line with what
Speaker 1: Apple felt was acceptable, leading to his departure now from
Speaker 1: the company. As he said, Tony Blevins as a senior
Speaker 1: executive essentially head of procurement for Apple. That's a massive role.
Speaker 1: What projects has he been involved in? What deals has
Speaker 1: he done for the company? Yeah? Absolutely, Blevin's has been
Speaker 1: headed procurement for Apple and what that means he does
Speaker 1: all the supplier agreements and partner agreements for many of
Speaker 1: Apple's products, particularly iPhone, the iPad, and some of their
Speaker 1: other mobile devices. So I'll give you an example of
Speaker 1: the Global Star deal that Apple did earlier this month
Speaker 1: or announced earlier this month as part of the new
Speaker 1: Satellite Emergency s OS feature for the iPhone fourteen and
Speaker 1: fourteen pro that was overseen by Blevins. Blevins did the
Speaker 1: complex negotiations related to Apple sourcing five g qualcom modems
Speaker 1: for the latest iPhone units. He also did deals with Intel,
Speaker 1: uh Samsung, Display Imagination Technologies, any of the big suppliers
Speaker 1: that you've heard of. It was his responsibility to get
Speaker 1: those components ahead of the competition and at better prices
Speaker 1: than the competition, leading to Apple's strong margins. Some people
Speaker 1: in the company say he's even irreplaceable given how important
Speaker 1: he was to Apple's bottom line and their product roadmap.
Speaker 1: Mark what do we know about how Apple dealt with
Speaker 1: this issue internally and what has Apple's response been to
Speaker 1: our reporting? So the video was first published on TikTok
Speaker 1: on September five and on Instagram on September six. After
Speaker 1: the video became public, which, by the way, it has
Speaker 1: well over a million views on TikTok and over forty
Speaker 1: comments on Instagram, so I'd quantified it as fairly viral.
Speaker 1: People within the Apple Operations and Procurement organization reported the
Speaker 1: video to Apple's human resources department, which then enacted an
Speaker 1: investigation into the situation. We're told that this month Jeff Williams,
Speaker 1: Apple's CEO, chief operating officer, made the decision that Blevins
Speaker 1: would be leaving the company. And today I spoke to Blevins.
Speaker 1: He issued a statement which is in our story. It's
Speaker 1: a formative an apology that can you can read in
Speaker 1: the article itself. And I spoke to Apple as well,
Speaker 1: and Apple confirmed that Blevins would be leaving the iPhone maker.
Speaker 1: All right, those are the latest details on that report.
Speaker 1: Bloomberg's Mark German, thank you very much. Amazon is boosting
Speaker 1: pay for hourly workers in the US. The online retailing
Speaker 1: gilet says the move will raised the average starting wage
Speaker 1: for most frontline employees in warehousing and transportation to nineteen
Speaker 1: dollars an hour. Bloomberg has learned that Amazon will close
Speaker 1: all but one of its US call centers and shift
Speaker 1: hundreds of office employer ease to remote work. That's a
Speaker 1: move that would help save money on real estate, but
Speaker 1: there are headwinds for Amazon's m and A ambition. Senator
Speaker 1: Elizabeth Warren of Massachusetts says she and other lawmakers have
Speaker 1: asked the FTC to reject Amazon's proposal to buy i
Speaker 1: Robot that according to a report from Axios, last week,
Speaker 1: the FTC asked Amazon and I Robot to send additional
Speaker 1: information about the proposal. On Wednesday, Amazon senior vice president
Speaker 1: of Devices told me he feels confident the deal will
Speaker 1: go through, and soft Bank Group has begun laying off
Speaker 1: employees at its loss making Vision Fund. Sources say that
Speaker 1: soft Bank expects to cut at least thirty of its staff.
Speaker 1: The London based Vision Fund unit had about five hundred employees.
Speaker 1: It recently posted a twenty three billion dollar loss, with
Speaker 1: most of that coming from a plunge evaluations of portfolio companies. Now,
Speaker 1: Porsche is confident despite a lackluster I p O in Germany.
Speaker 1: On Thursday, Porsche just eked out again during its trading debut,
Speaker 1: with the I p O valuing the company at around
Speaker 1: seventy three billion dollars. It's CFO told Bloomberg the company
Speaker 1: can meet its revenue target of as much as forty
Speaker 1: billion for this year despite the difficult macro economic situation.
Speaker 1: Here's some of that conversation. We have successfully mastered one
Speaker 1: of the biggest largest ip yours in Europe ever. And yeah,
Speaker 1: so far we are very proud and yeah, and I
Speaker 1: would like to say thank you to our entire team.
Speaker 1: Horsberg has ensured said b Knstantia today and I cast
Speaker 1: my mind's eye back to four years ago and you flagged.
Speaker 1: You came out and said maybe we should I po
Speaker 1: Porsche with a market cap of around eighty billion euros.
Speaker 1: There was a bit pushback internally externally when you came
Speaker 1: out with that. Do you feel vindicated? Yeah? Absolutely. It
Speaker 1: was a tough fired over four years now, but we succeeded.
Speaker 1: Now we can't stand here. We are very happy. Yeah,
Speaker 1: and we see further potential for the future. Is our
Speaker 1: strong brand? How are you going to cooperate between the
Speaker 1: parent company Volkswagen and Porsche. You have a little bit
Speaker 1: more independence now, but we know historically there's been tension
Speaker 1: between the brands and the portfolio. How you can incorporate
Speaker 1: and make sure there are synergies that work for you
Speaker 1: at Porsche. Yeah, we have negotiated an Industrial Corporation Contract
Speaker 1: b c W and has clearly regulated that Posher has
Speaker 1: autonomy in future. The Posher board will decide in future
Speaker 1: completely independent from b W. And yeah, that's a great
Speaker 1: situation for us. We want to unlook Portia's full potential,
Speaker 1: of course, but we have also the possibility in future
Speaker 1: to work together vis W group brands. We are beneficial
Speaker 1: for Porsche. That's that's the case when it comes to
Speaker 1: sharing technologies like the tai Kan used also for the
Speaker 1: Audi Eton GT, fooling emissions, bundling, purchasing volumes are to
Speaker 1: using production capacities like Ccaen and Bratisla. Okay. And talking
Speaker 1: about production, so you have the factories in Germany, you're
Speaker 1: producing Germany, you're producing in Slovakia. Where do you build
Speaker 1: out the factories of the future for Porsche. Yeah, hopefully
Speaker 1: in Germany and in Slovakia. There's no as a plan
Speaker 1: that was Porsche CFO Lutes Meshka. And what's interesting, I mean,
Speaker 1: last year the Taykan electric Porsche out sold the traditional
Speaker 1: nine eleven. But what's also interesting out the news on Thursday,
Speaker 1: Porsche promising you purists out there that the nine eleven
Speaker 1: will remain a gasoline vehicle. The nine leven will still
Speaker 1: be running on gasoline for years to come. An interesting one.
Speaker 1: What do you make of that? Tweet me? Welcome back
Speaker 1: to Bloomberg Technology. IMD Lovelow in New York, India plans
Speaker 1: to boost the financial incentives it offers makers of tablets
Speaker 1: and laptops to manufacture them in the country. It's part
Speaker 1: of Norndra Moody administration's effort to wou companies like Dell
Speaker 1: and Apple, and a challenge to China, has the main
Speaker 1: tech production base. The plan is to offer as much
Speaker 1: as five and fifty million U S dollars per manufacturer,
Speaker 1: According to a document seen by Bloomberg News, Apple recently
Speaker 1: started making the new iPhone fourteen in India earlier than expected.
Speaker 1: Following a smooth production rollout and sticking with Apple, the
Speaker 1: iPhone makers shares dropped again Thursday. Apple was hit by
Speaker 1: a rare downgrade with Bank of America seeing the tech
Speaker 1: giants dominance at risk. Here with the details bloom Bugs
Speaker 1: Bailey Lipshelves Bailey. Yeah, and we saw Apple fall almost
Speaker 1: five percent after that downgrade from Bank of America, wiping
Speaker 1: out close to a hundred and twenty billion dollars in
Speaker 1: market value, really sounding the alarm over concerns surrounding a
Speaker 1: weaker consumer demand over the next year, as well as
Speaker 1: concerns really around the fact that the US dollar is
Speaker 1: trading so strong. Apple is a company that generates more
Speaker 1: than half of its UH sales from overseas. That really
Speaker 1: hitting shares today. But there was a bank that came
Speaker 1: out kind of disagreeing with that downgrade. That was Rosenblack
Speaker 1: at that company, or that firm upgrading shares on Apple
Speaker 1: or it's rating on Apple to buy from neutral, saying
Speaker 1: that they're seeing strength and demand from iPhone fourteen purchases,
Speaker 1: primarily the I four, iPhone fourteen pro and that ultra watch,
Speaker 1: so really kind of seeing value over the near immediate
Speaker 1: medium term and then looking at it though from a
Speaker 1: broader standpoint. Over the last week, we've seen Apple shares
Speaker 1: really falling under market pressure that coming after that Bloom
Speaker 1: report that the company was pulling back on plans to
Speaker 1: potentially ramp up production of that iPhone four team. But
Speaker 1: Wall Street really has been disagreeing in the past few
Speaker 1: days about whether consumers are shifting towards buying iPhone fourteen
Speaker 1: pros and the pro Max more high end models as
Speaker 1: opposed to that low basic entry level at the iPhone fourteen.
Speaker 1: All right, thanks to Bloomberg's Bailey Lipscholtz, Apple was just
Speaker 1: one drag on equity markets Thursdays then has that one
Speaker 1: hundred fell almost three percent. Global investors are bracing for
Speaker 1: central bank policy tightening and a slowdown across economies around
Speaker 1: the world. Private market investors a bracing to for more
Speaker 1: on the state of tech and venture capital. That's bringing
Speaker 1: Andrea Lamari, general partner at Manhattan Venture Partners, and Andrew,
Speaker 1: Let's just start with a big picture. What is going
Speaker 1: through your head right now when you sit at your
Speaker 1: desk and you look at the world, what do you see? Well,
Speaker 1: and I definitely see a change in excitement across the
Speaker 1: venture market. I think generally what US enture capitalists believe
Speaker 1: is that we're bracing for winter yet again. But this
Speaker 1: time around, it's really that the crystal ball going into
Speaker 1: Q one and Q two of next year is quite
Speaker 1: unclear for most of us, and some of us are
Speaker 1: just breathing a side of relief that many of our
Speaker 1: companies just have a war chest of cash sitting on
Speaker 1: their balance sheet for now, so I think we're all
Speaker 1: just bracing for winter. We aren't exceptionally excited about any
Speaker 1: of the I p O prospects, so we want to
Speaker 1: remain bullish. Ultimately, it's an assessment of where will companies
Speaker 1: go and how will they control spending money going into
Speaker 1: the rest of the year. I'm taking a look at
Speaker 1: some of your firm's portfolio companies, interesting names, you know,
Speaker 1: that's another perspective. When you speak to the founders and
Speaker 1: executives at these firms, you know, many of them sizable.
Speaker 1: What is your advice to them in this market? Well,
Speaker 1: many of the companies in our portfolio are very late
Speaker 1: stage and preparing for an I p O. Quite frankly,
Speaker 1: we believe that there's a three step formula for the
Speaker 1: comp bunnies that are preparing for I p O s
Speaker 1: going into the remainder of the year, as well as
Speaker 1: Q one and Q two, and those three things are
Speaker 1: first and foremost that they have to have a really
Speaker 1: compelling tail wind story that will project them really high
Speaker 1: going into being a public company. So, for example, Trip
Speaker 1: Actions is going to ride those very deliberate tail winds
Speaker 1: and prepare for their confidential filing and I think overall
Speaker 1: that tells a really compelling story that for number two
Speaker 1: on the list is show value creation to retail investors
Speaker 1: that once they buy into an i p O that
Speaker 1: there's only upward mobility from there. And then number three
Speaker 1: is that they actually can control spend and remove the
Speaker 1: obvious nature of being unprofitable and show that path of profitability,
Speaker 1: if not right before the i p O but after.
Speaker 1: So those are really the three things that we're going
Speaker 1: into our late stage companies and directing them on. Andrea
Speaker 1: your a venture capitalist, and we're always thinking about the
Speaker 1: FED higher rates. How brave a decision is it to
Speaker 1: sit on the sidelines right now and not deploy capital.
Speaker 1: I think right now, overall we all are kind of
Speaker 1: bracing to say we can wait just a bit longer.
Speaker 1: I think that there will be a lot of questions
Speaker 1: coming from the limited partner community that are investing in
Speaker 1: these venture funds going into Q one of next year
Speaker 1: if many of us do not deploy capital for the
Speaker 1: remainder of this year. But for now, I think we're
Speaker 1: all just really comfortable sitting tight and saying, hey, we're
Speaker 1: here to just support our portfolio companies so that the
Speaker 1: end the year really strong and focus less on where
Speaker 1: the FED is going with the higher interest rate hype,
Speaker 1: and say, listen, let's just control where the balance sheet
Speaker 1: is going. Sit tight, many of them still have hiring
Speaker 1: freezes that are in place, and stop spending money on
Speaker 1: crazy R and D projects. To wrap up a beer,
Speaker 1: are we talking about this is being sort of a
Speaker 1: multi courtA not phenomenon the process. I mean, do you
Speaker 1: think that we get to the end did this year
Speaker 1: first quarter of next and things change or are you
Speaker 1: kind of battening down the hatches a bit A bit
Speaker 1: longer term than that. I would say we're all battening
Speaker 1: down the hatches a bit longer than that. I don't
Speaker 1: see much of the dismay going into Q two of
Speaker 1: next year, but at least Q one, because I think
Speaker 1: we're all going to have a really retrospective look on
Speaker 1: once we get into the first quarter overall companies, at
Speaker 1: least we'll be able to display that they controlled spend,
Speaker 1: they cut costs where they needed to, and show that
Speaker 1: the growth can continue. But I don't know if I
Speaker 1: see that it's going to be any more than quite
Speaker 1: frankly neutral until we go to Q two or companies say, okay,
Speaker 1: now that we have a handle on our balance sheet,
Speaker 1: we could really rev up where we had controlled all
Speaker 1: of our costs in two. So I'm much more bullish
Speaker 1: about a Q two A trajectory from here. There's a
Speaker 1: term that we've bandied around a little bit, the I
Speaker 1: p O winter. Is there an I p O winter,
Speaker 1: particularly for tech? I absolutely think so. I think we're
Speaker 1: all really excited, And of course we obviously have a
Speaker 1: bit of a bias to say, okay, we might have
Speaker 1: prospects such as Instacart that will really be a shining star,
Speaker 1: maybe even a trojan horse for some other companies that
Speaker 1: are comparable to go public at that time frame in
Speaker 1: Q four, But really that I p A winter, it's
Speaker 1: gonna be freezing, it's gonna be chilly, and it's gonna
Speaker 1: go until the second half of December. If we don't
Speaker 1: see any I p O s by November, late November,
Speaker 1: and then the first week of December, I really would
Speaker 1: say it's quite maybe quite a cold winter going into
Speaker 1: Q one. I kind of like your sort of refreshing honesty,
Speaker 1: you know, if you're being honest with yourself, And we
Speaker 1: think back to say the beginning of well, we just
Speaker 1: really overvaluing growth. We were overvaluing growth at all costs
Speaker 1: in lieu of profitability. I absolutely think so. I think
Speaker 1: companies we want a hundred x are growth because that's
Speaker 1: what startups are fueled to do. However, now we're really
Speaker 1: seeing what the after effects, the aftershocks of that are
Speaker 1: going to be. And right now companies are pricing you know,
Speaker 1: well below ten x forward revenues, and I think that
Speaker 1: that's a healthy place for us to be. And I
Speaker 1: think that that's going to take, you know, another two
Speaker 1: three quarters to recover from when it comes to valuation stabilization.
Speaker 1: And at this point in time, companies are just absolutely
Speaker 1: terrified of taking a valuation haircut, so they're agreeing to
Speaker 1: some pretty aggressive investor friendly terms in new rounds of
Speaker 1: funding today. Alright, Manhattan, Benja Partners General partner, Andrea Lamary,
Speaker 1: what a pleasure to have you on. Come back, Thank you.
Speaker 1: All right? Coming up, as voters head to the polls
Speaker 1: in November, how will the results impact blockchain policy? Will
Speaker 1: share the results of a survey all about that. Next,
Speaker 1: this is Bloomberg alright, time for our daily crypto report.
Speaker 1: Bloomberg Snelly Bassett take it from him. Thank you. Ed.
Speaker 1: We're going to talk today about the intersection of crypto,
Speaker 1: Web three and politics because there's a new pull out
Speaker 1: from Hound Ventures and Morning Consults, and for more on
Speaker 1: those findings is Hound Ventures chief policy Officer. To Mike
Speaker 1: and Tillman, thank you so much for joining us. I'm
Speaker 1: really curious here because you have about eight hundred people
Speaker 1: are so that you surveyed through this with Monty or
Speaker 1: more in consult But was there anything really surprising to you?
Speaker 1: We know more money has been going into crypto lobbying,
Speaker 1: We know that this is going to be seen as
Speaker 1: an issue for lawmakers. But what was different here that
Speaker 1: you didn't expect to see? Well, there are a couple
Speaker 1: of real standout issues going into these critical midterm elections.
Speaker 1: We recognize that the next Congress is very likely to
Speaker 1: write the rules that will define policy architecture for the
Speaker 1: next generation of the Internet, and it's critical for those
Speaker 1: policymakers to know what Americans are thinking as they embark
Speaker 1: on that process. The first big takeaway for us is
Speaker 1: that the Web three voter is now a very significant constituency.
Speaker 1: If you think historically, for example, about the role that
Speaker 1: organized labor has played in US elections, and it's been
Speaker 1: a very consequential role. We now have more voters in
Speaker 1: these key swing states that hold digital assets than hold
Speaker 1: an organized labor card a union card. So this is
Speaker 1: a very substantial swath of the electorate we're talking about.
Speaker 1: The second big takeaway for US is that this is
Speaker 1: an issue that is prepartisan or bipartisan. There are substantial
Speaker 1: majorities of voters that say they will vote against They'll
Speaker 1: be less likely to vote for candidates who aren't in
Speaker 1: favor of or supportive of constructive policy making around the
Speaker 1: future of Web three. On that really quickly, because you know,
Speaker 1: you think about this is either a bipart is an issue,
Speaker 1: but you know, on one hand, voters seem to be
Speaker 1: more likely to post standidates who standard with policies, but
Speaker 1: they're slightly leaning towards Democratic senators. Why is that the case.
Speaker 1: Traditionally the Democrats have been tougher on the financial industry
Speaker 1: and technology, So why in this instance are you expecting
Speaker 1: that not to be the case. Well, as a group,
Speaker 1: Web three voters tend to be younger, they tend to
Speaker 1: be more diverse, and they tend to be solidly middle
Speaker 1: class and at least in a couple of those categories
Speaker 1: you do see close alignment. Broadly speaking, with the Democratic Party. Again,
Speaker 1: the fascinating thing to us on the whole is the
Speaker 1: degree of unanimity that we find across party lines and
Speaker 1: across ideological lines when it comes to these results. This
Speaker 1: is one of the last bastions of true bipartisanship in
Speaker 1: American public policy today. And the other critical thing which
Speaker 1: I would highlight is over mind percent of the voters
Speaker 1: that we surveyed were in favor of the core principles
Speaker 1: that underlie Web three. So specifically, there we're talking about
Speaker 1: digital platforms that are community owned, community governed, and give
Speaker 1: individuals a greater say in how their data is used.
Speaker 1: That's a big deal, yea. And on that exact note,
Speaker 1: here are we talking about crypto more largely? Are we
Speaker 1: talking about tokens? Are we talking about Web three? What
Speaker 1: part of the spectrum here are voters really interested in
Speaker 1: and seeing more policy being thoughtful towards well? Over sevent
Speaker 1: of voters feel the big tech has too much power
Speaker 1: in their lives. They are looking for an alternative to
Speaker 1: a digital framework that frankly isn't working very well. It's
Speaker 1: neither desirable nor sustainable, and growing numbers of the electorate
Speaker 1: are I think cluing into that fact. What we see
Speaker 1: is that there is a broad appreciation of the potential
Speaker 1: that Web three has to create an Internet that gives
Speaker 1: more opportunity to more individuals and democratizees access to a
Speaker 1: lot of the financial and digital tools that have historically
Speaker 1: been the domain of very small numbers of people, and
Speaker 1: voters are responding to that in a big way. Now,
Speaker 1: do you think that in any fashion this will be
Speaker 1: a single issue voter kind of situation here? Given so
Speaker 1: much else is happening, especially in the economy when you
Speaker 1: see a lot of people really burn from inflation here.
Speaker 1: Do you the a a war going on in Europe?
Speaker 1: To what extent does this fall into all of the
Speaker 1: other issues that are happening in America today? Well, we
Speaker 1: know that for a subset of these voters, these are
Speaker 1: very strongly held views, and they are passionate about the
Speaker 1: potential of this technology. And they're also passionate, frankly about
Speaker 1: the need to build a better Internet, the need to
Speaker 1: develop a new digital architecture that is going to meet
Speaker 1: their needs a lot better than what we have today.
Speaker 1: Beyond that, this is I think the early days of
Speaker 1: what has the potential to become a very large and
Speaker 1: very powerful constituency in American politics. Uh. And it is
Speaker 1: unlike anything we've seen before, and that it is simultaneously
Speaker 1: an industry, but it's also a community, and that convergence
Speaker 1: is creating some big opportunities to think differently about how
Speaker 1: we define policy in this space. You know, this is
Speaker 1: the mid terms right around the corner here, the second
Speaker 1: part of Biden's term. To what extent do you expect
Speaker 1: to see a serious movement on a lot of the
Speaker 1: crypto regulation that has been promised from from lawmakers now
Speaker 1: for many many months. Well, we already today are in
Speaker 1: a pretty remarkable position when you consider where we were
Speaker 1: just two years ago. The fact that we have multiple
Speaker 1: very serious bipartisan pieces of legislation working their way through Congress,
Speaker 1: a very serious executive order that's forging a whole of
Speaker 1: government approach to digital assets and web three. All of
Speaker 1: these are promising signs. We've certainly got a long way ago.
Speaker 1: And my assumption is that a lot of the legislating
Speaker 1: at least is going to fall on the shoulders of
Speaker 1: the next Congress. But the fact that there is a
Speaker 1: real opportunity to create the cornerstones, to establish the cornerstones
Speaker 1: of what this new digital policy framework will involve, is
Speaker 1: something none of us should take lightly and frankly why
Speaker 1: these elections and the voters that decide them are so
Speaker 1: important to Mega Tillman Pound Ventures Chief policy Officer, thank
Speaker 1: you so much on the heels of your new survey
Speaker 1: out with Morning Consulted back to you. This week, the
Speaker 1: company Illumina is hosting the Genomics Forum in San Diego.
Speaker 1: It includes speakers from Barack Obama to Bill Gates, and Thursday,
Speaker 1: Illuminate announced its first new sequencing technology in more than
Speaker 1: two years. The company says it can read a person's
Speaker 1: entire genetic code for as little as two hundred dollars
Speaker 1: a pop. Here for a bloom Bag exclusive on the
Speaker 1: announcement is a luminous CEO Francis to SUSA. Frances talked
Speaker 1: to me about the technology that's gone into this latest
Speaker 1: iteration of sequencing tech. What have you actually done to
Speaker 1: update it? This is a huge movement step forward in
Speaker 1: our technology platform. We really redid every part of the
Speaker 1: sequencer so we've invented an entire new chemistry called Exley SPS.
Speaker 1: We invented a whole new optic system, including the glass
Speaker 1: we needed for the lens. This didn't exist anywhere in
Speaker 1: the world, so we had to invent new glass to
Speaker 1: use in the lens. We've invented a whole new data
Speaker 1: path with high performance compute on the machine itself. So
Speaker 1: really this has been just a ground up redo of
Speaker 1: our sequencer platform so that we could get a major
Speaker 1: step change in terms of performance and really bring the
Speaker 1: price of sequencing, of genomic sequencing, you know, down to
Speaker 1: the market. We're also able to make this more sustainable
Speaker 1: product and eliminate the need for the cold chain. So
Speaker 1: before that you needed dry ice to ship the reagents
Speaker 1: to run the machine to the labs around the world,
Speaker 1: and you don't need that anymore. And so this makes
Speaker 1: a sequence are accessible to countries around the world that
Speaker 1: don't have access to cold chaine. So it's a big
Speaker 1: step forward in accessibility. For instance, your ultimate goal is
Speaker 1: a one hundred dollar genome, you're at two hundred dollars.
Speaker 1: It's it's just you playing it safe, you know. Our path,
Speaker 1: our strategy as a company has been to drive the
Speaker 1: prices down, and we've done that over the course of
Speaker 1: many years. When we first launched our sequence or in
Speaker 1: two thousand and seven, the price to sequence one genome
Speaker 1: was a hundred and fifty thousand dollars and that was
Speaker 1: a breakthrough price in the market. We've gone from a
Speaker 1: hundred and fifty thousand dollars or genome to two hundred
Speaker 1: dollars a genome in that time for two thousand and
Speaker 1: seven until today, so greater than price reduction, and we're
Speaker 1: not stopping there. We believe to make genomics accessible to
Speaker 1: everybody and have to differ prints in healthcare that it
Speaker 1: can we need to keep going. Does this once again
Speaker 1: make you the market leader, the tech leader? Do you
Speaker 1: leap frog back to that position of leadership? You know,
Speaker 1: we do. We really believe that in order to move
Speaker 1: the market forward, we need just to drive more innovation
Speaker 1: to make sequencing accessible. At this point, we do believe
Speaker 1: that our products represent the best sort of value proposition
Speaker 1: to customers in terms of performance and price. But look,
Speaker 1: the reality is were very early in this market right
Speaker 1: If you think about the market opportunity in front of us,
Speaker 1: we still have largely untapped the medical need for genomic sequencing,
Speaker 1: So the vast majority is of the market is still
Speaker 1: in front of us. A lot of innovation to do
Speaker 1: to really open up the markets, as do we think
Speaker 1: they need to be. I want to ask you about
Speaker 1: the reality of this for your customers. We're talking about
Speaker 1: labs right, complicated, sophisticated lads. You're talking two D genome,
Speaker 1: but it's an expensive cost for them. What have your
Speaker 1: pre order has been like, what does the initial interest
Speaker 1: from your customer they's been well, the earlier response has
Speaker 1: been phenomenal. You know, we gave a sneak beak to
Speaker 1: a few customers before we made the variety of the
Speaker 1: announcement this morning, and every single one of them pre ordered.
Speaker 1: So we're at this stage now we're taking orders. We
Speaker 1: ship the instrument in Q one of next year, so
Speaker 1: a few months from now, and we're gonna be taking
Speaker 1: orders between now and then. The response has been strong
Speaker 1: on the number of fronts. People really appreciate the price reduction,
Speaker 1: People love the sustainability features, so reducing the waste and
Speaker 1: the plastic and people we had a couple of customers
Speaker 1: come to us in tears about the fact that you
Speaker 1: no longer need a cold chain so this product is
Speaker 1: now available in parts of the world that just didn't
Speaker 1: have access to hide through with sequencing. Francis, your seven
Speaker 1: billion dollar deal for Grail was vetoed by the European
Speaker 1: Union this stage of the process, do you give up?
Speaker 1: You know, the deal for Grailer's an important one because,
Speaker 1: as you know, we invented with Grail was a blood
Speaker 1: test that can find fifty types of cancer across stages.
Speaker 1: That's life changing because we know that ten million people
Speaker 1: a year die of cancer, and we also know that
Speaker 1: if you catch a cancer early, your arts are surviving
Speaker 1: are so much higher than if you catch it late.
Speaker 1: Now of the people who die from cancer die from
Speaker 1: cancers that are caught at late stages. So by doing
Speaker 1: the blood to die, rolling out Grill's blood tays more broadly.
Speaker 1: You know, we believe that that has the potential to
Speaker 1: save many lives around the world, and we can roll
Speaker 1: out more broadly than Grailed with on its own. So
Speaker 1: it's important. We're going to continue through the process to
Speaker 1: see if we can win on appeal with the European Commission. Alright,
Speaker 1: Iluminous CEO, frances to Zoza, a pleasure to have you
Speaker 1: on the program. That does it. For this edition of
Speaker 1: Bloomberg Technology Friday, we'll have Katie Horn of Horn Ventures
Speaker 1: to talk about her bets for the future of the Internet.
Speaker 1: Don't forget to check out our podcast. You can find
Speaker 1: it on the terminal, on Apple, Spotify. Of course, I
Speaker 1: heart this is Bloomberg.