Speaker 1: I'm Caroline High the Bloomberg's World headquarters in New York
Speaker 1: and then ed Ludlow in San Francisco. This is Bloomberg Technology.
Speaker 1: Elon Mask feuding with the San Francisco mayor after makeshift
Speaker 1: bedrooms in the office is a city violation, but Silicon
Speaker 1: Valley giants and notorious for sleeping pods, bean bags other
Speaker 1: company setups. We discussed precedents and priorities and f t
Speaker 1: X warning signs. How did the company win over so
Speaker 1: many venture catalysts and investors. We discussed due diligence and
Speaker 1: the venture capital outlook. We see the insights Brian Lee
Speaker 1: and Microsoft meets the FTC on its activision deal after
Speaker 1: striking a call of duty agreement with Nintendo and Microsoft
Speaker 1: doesn't own call of duty. Yeah, we get to grips
Speaker 1: of gaming. But first, who else but elon Mark is
Speaker 1: currently sparring with the city of Francisco after Twitter turns
Speaker 1: sun space at the company's headquarters and to make shift bedrooms,
Speaker 1: which it turns out as a possible violation of the
Speaker 1: city's building codes. Fra is here with more. We know
Speaker 1: that he likes to tustle. We know that he likes
Speaker 1: to Tussele on Twitter, but in particular does he have
Speaker 1: a like to stand on here? How much of a
Speaker 1: focus is this for the city. Well, you know, as
Speaker 1: the city has said they need to look into any
Speaker 1: complaints that come forth, and there has been a complaint
Speaker 1: about the Twitter offices, the fact that they're they're putting
Speaker 1: beds and armchairs into various conference rooms, which I guess
Speaker 1: they have room floor because a lot of employees have
Speaker 1: been cut or laid off, but it is it is
Speaker 1: sort of unusual to expect employees to sleep with the
Speaker 1: office in an actual furnished bedroom. I mean, despite the
Speaker 1: culture we're speaking about with sleeping bags and knap pods. Yeah,
Speaker 1: I mean talk to us though more generally about the
Speaker 1: balance the lack thereof for tech workers at the moment
Speaker 1: in Sam Francisco, all people having to sleep on the floor.
Speaker 1: Is this something that happens at Lodgers is very focused
Speaker 1: on really and elam lass culture? Well, you you see
Speaker 1: this all the time at startups, right and even even
Speaker 1: in early high growth companies. I remember um talking to
Speaker 1: employees at Snapchat a few years ago about how they'd
Speaker 1: they'd turned some bedrooms and they too maybe did a
Speaker 1: code violation in the opposite direction, turning from some residential
Speaker 1: housing in bedrooms in Venice, California into offices. Um so,
Speaker 1: so I think that, um it's not unheard of. What
Speaker 1: I think we're seeing here is the pendulum swing from
Speaker 1: being really in the favor of workers, giving workers flexibility,
Speaker 1: letting them work from anywhere, letting them work from home,
Speaker 1: to this period where we're seeing this big spate of
Speaker 1: tech layoffs and people concern for their jobs and in
Speaker 1: the future of their employment and willing to do, you know,
Speaker 1: sort of whatever it takes to prove to the employer
Speaker 1: that they are hard workers. And so the power is
Speaker 1: really shifting back to the employer right now in this
Speaker 1: economic stress time. We reported in this pace that Musque
Speaker 1: is making these sleeping arrangements available not just for existing
Speaker 1: Twitter staff, but some of the other workers from his
Speaker 1: other companies that he's brought in to do that. And
Speaker 1: we've reported in recent weeks that at first it was
Speaker 1: you've got to come back to the office forty hours,
Speaker 1: Then it was some of you be working eighty hours.
Speaker 1: What's going on inside Market Street office of Twitter? Right now,
Speaker 1: everyone's got to be on the tent floor. Dad you've
Speaker 1: gotta you've gotta show up. If you're as a programmer
Speaker 1: or a designer, you better be there creating this environment
Speaker 1: of collaboration, of brainstorming. I think Must really wants to
Speaker 1: feel momentum from employees. Meanwhile, these are the employees that
Speaker 1: were recruited based on this promise of work from anywhere forever. Um.
Speaker 1: It's sort it was really a pioneer even before COVID
Speaker 1: in this idea that employees could could really be productive
Speaker 1: from from any where. They could log into the internet,
Speaker 1: and Jack Dorsey himself loved to occasionally work remotely as
Speaker 1: just a completely flipped culture. UM. And I think one
Speaker 1: thing we need to be UM maybe a little concerned
Speaker 1: about here um or at least on the watch for
Speaker 1: does Twitter actually end up staying in San Francisco, Because
Speaker 1: we've seen the future of of Musk spats with governments,
Speaker 1: you know, the most prominent example being moving Tessa's headquarters
Speaker 1: from Palo Alto to Austin, Texas. I want to think
Speaker 1: about what Elon Musk actually said in his tweet. He
Speaker 1: essentially accuses San Francisco's mayor London Breed of being too
Speaker 1: focused on this issue, not enough on the Fentinel crisis
Speaker 1: is an example, and that's what he referenced. We had
Speaker 1: the San Francisco District Attorney in our office for about
Speaker 1: an hour last week getting a sense of the priorities
Speaker 1: in this city. Where does San Francisco revival, if you
Speaker 1: want to call it that sit right now? Well, I
Speaker 1: think that there's a lot of a lot of hope
Speaker 1: for a different set of circumstances under the new District Attorney,
Speaker 1: But it's not all on on her um. There is
Speaker 1: a lot of of bringing energy back into the city
Speaker 1: that needs to occur, and you know, the layoffs at
Speaker 1: Twitter probably haven't completely helped that. Right as he's he's
Speaker 1: trying to get people to come back into the office,
Speaker 1: there are also probably a lot of San Francisco based
Speaker 1: workers who who no longer have jobs on Twitter um,
Speaker 1: alongside a lot of other layoffs that we've seen at
Speaker 1: at San Francisco based companies such as as Salesforce. So
Speaker 1: I do think it's going to be a long road um.
Speaker 1: But I think Twitter, of all companies, is is right
Speaker 1: in the middle of one of the more crime written
Speaker 1: parts of the city and could be feeling any changes
Speaker 1: more dramatically Blue, Sarah fro thank you very much. Let's
Speaker 1: get to an update on the trial of Pharaon NOSS
Speaker 1: former president ramash Sonny Bawani, which is still underway. Bloomberg's
Speaker 1: Peter Bloomberg, who is one of our league webits, is
Speaker 1: following this case and joins us with the lay tists.
Speaker 1: You know, we've been waiting for this since July. What
Speaker 1: is it that we're waiting for. We're waiting on the
Speaker 1: judge to compose a sentence. Paulani was convicted of fraud,
Speaker 1: and the judge has to decide whether he'll get a
Speaker 1: prison term and if so, how long. And given it
Speaker 1: was more than eleven years for one Elizabeth Holmes, many
Speaker 1: are expecting what hire Peter Well somewhere around the same
Speaker 1: amount of time. It could be somewhat less, or it
Speaker 1: could be somewhat more. But the prosecutors have made the
Speaker 1: case that they are equally ah culpable for defrauding investors
Speaker 1: and that Paul Wanni, in addition, uh was was convicted
Speaker 1: of defrauding patients. Caroline and I both remember the moment
Speaker 1: that the sentencing was part us for Elizabeth Holmes herself
Speaker 1: just a little more than eleven years um at the
Speaker 1: lower end of the range that the prosecutors and the
Speaker 1: judge had kind of discussed. That was severe too many,
Speaker 1: But there are all others that are saying, actually, in
Speaker 1: Bowani's case it could be even more severe. Well it
Speaker 1: could because as I mentioned, he was convicted of additional
Speaker 1: counts that she was acquitted of. And also we're waiting
Speaker 1: on the on on the judge to to to indicate
Speaker 1: whether he may think that Bowani was somehow more responsible
Speaker 1: because he's older and more experienced, he had run a
Speaker 1: software company in Silicon Valley prior to taking this job,
Speaker 1: whereas she was nineteen year old nineteen years old when
Speaker 1: she dropped out of Stanford, and so she was was
Speaker 1: the younger, less experienced of the two. And then the
Speaker 1: other wild card, of course is that during her trial
Speaker 1: she accused him of abusing her during their romantic relationship,
Speaker 1: sexual and psychological abuse, which he of course wasn't a
Speaker 1: witness in that case and didn't get to speak to it,
Speaker 1: and it didn't come up in his own trial. Uh So,
Speaker 1: if the judge has any conclusions in his own mind
Speaker 1: about whether Bowani somehow manipulated homes or treated her badly.
Speaker 1: That could also factor into the sentence, of course, this
Speaker 1: being key one that many are looking at in terms
Speaker 1: of precedence setting as well. Peter Bloomberg, it's gonna be
Speaker 1: there with all the latest. We thank you so much.
Speaker 1: We await those headlines. Mean while coming up so much
Speaker 1: more to discuss in terms of the future of VC investments.
Speaker 1: In fact, um, we know they're on truck for a
Speaker 1: sharp drop, perhaps the sharpest in more than two decades
Speaker 1: this year. But what is the effect of f t
Speaker 1: X in particular, Blomberg, let's talk about venture capital investments
Speaker 1: not too hot right now. In fact, they're about to
Speaker 1: see their stepest drop in more than two decades, even
Speaker 1: surpassing the decline of the dot com crash and of
Speaker 1: course of the financial crisis and Ludlow bring us up
Speaker 1: to speed whether the details, Yeah, it's interesting. A data
Speaker 1: set published by Preaking on Wednesday six billion dollars deployed
Speaker 1: by venture capitalists globally in the first eleven months two
Speaker 1: but on a year on year basis, that's a drop
Speaker 1: of more than which is a big change. Right you
Speaker 1: think about sort of the energy in these markets. You
Speaker 1: have to go back, as you said, well close to
Speaker 1: two thousand years, following the dot com bubble, also following
Speaker 1: the two thousand and eight financial crisis, and this is
Speaker 1: the biggest drop since then. You know, it's an interesting environment,
Speaker 1: higher rates, putting a premium on capitol, down rounds and
Speaker 1: markdowns in terms of valuations, and sort of skittishness, nervousness
Speaker 1: the global economy. What was really interesting for me with
Speaker 1: two other data points Carrow, China in the US. In
Speaker 1: China the value of deals down and in the US down.
Speaker 1: Those are two kind of leading VC markets as well.
Speaker 1: So it's a confluence of factors. But we're coming from
Speaker 1: a high base in one and it's not been a
Speaker 1: great year. One was extraordinary, We're going to remember. And
Speaker 1: the comparison is being made by none other than Brian Lee.
Speaker 1: Were really pleased to welcome him. Now. Has got great data,
Speaker 1: great statistics, and great context for us because of course,
Speaker 1: the senior vice president of see the Insights Intelligence Unit,
Speaker 1: you do phenomenal work just crunching the data and understanding
Speaker 1: the mood change here. Just talked to us Brian about
Speaker 1: where we're coming down from in terms of and overall,
Speaker 1: whether there's demise sort of folds into yes. Certainly. I
Speaker 1: think when we talked about one against almost any measure,
Speaker 1: it was a record year not only in terms of
Speaker 1: the amount of funding going to private companies, but the
Speaker 1: number of you as they were actually done. So we
Speaker 1: were moving out a pace of almost a hundred companies
Speaker 1: being funded every day, um and hunt to day. So
Speaker 1: what we saw was as a byproduct, was enormous inflated
Speaker 1: valuations that we were seeing from companies not only in
Speaker 1: the crypto space or in other kind of interesting areas,
Speaker 1: but telehealth, sustainability, tech, etcetera. UM. In a lot of ways,
Speaker 1: it felt like there were there was too much money chasing,
Speaker 1: despite the fact that it was so many deals, too
Speaker 1: few deals, and there in lies so many issues that now,
Speaker 1: of course the main focus is one of FTX. All
Speaker 1: of these concerns sort of become emblematic in their demise.
Speaker 1: The fact that we've seen basically a lack of due diligence,
Speaker 1: money just flying after particular investments, particular companies that blew
Speaker 1: up the valuation is just extraordinary propensity. But also also
Speaker 1: interesting about the ft X situation, perhaps the cooling effect
Speaker 1: it's full from Grace is having on the rest of
Speaker 1: the VC market is that it too spawned other startups,
Speaker 1: It too made investments. Just talked us about the work
Speaker 1: you've done and how sprawling ft X is own funding
Speaker 1: and funding in other companies walls. Yeah, So we were
Speaker 1: learning more every day about the web of investments from
Speaker 1: not only Sam Bankman freed themselves, but f t X Ventures,
Speaker 1: Alameda Research Ventures and their related entities. I think what
Speaker 1: we've known is that collectively they've made hundreds of investments
Speaker 1: in private companies across a wide variety of markets, including
Speaker 1: crypto exchanges, defy n f t s, and blockchain infrastructure,
Speaker 1: just to name a few. What we found in our
Speaker 1: research is that when we looked across the portfolio of companies,
Speaker 1: about three quarters of those investments where an early stage companies.
Speaker 1: I think what makes this a little bit thorny is
Speaker 1: that each of these investments will now have to be
Speaker 1: properly valued and disposed of as we moved through the
Speaker 1: bankruptcy process. And this presents a lot of challenges for
Speaker 1: companies that took money from f t x's venture arms
Speaker 1: for a couple of reasons. So number one, obviously thinking
Speaker 1: about the reputational hit that that f t X has
Speaker 1: had on the crypto industry, but also the broader valuation
Speaker 1: declines that we've seen across the past year, it's entirely
Speaker 1: likely that we'll see equity stakes being sold at a
Speaker 1: substantial discount, probably as much as or more. Um So,
Speaker 1: these types of events and this event, this event in bankruptcy,
Speaker 1: will trigger a revision of each company's valuation, creating potential
Speaker 1: issues for them as they attempt to raise additional capital.
Speaker 1: And so it's going to be a very difficult process
Speaker 1: for some of these companies as they think about how
Speaker 1: do we move forward, how do we raise additional capital
Speaker 1: at the valuation that we now have um I also
Speaker 1: mentioned just very quickly, uh that we are also assuming
Speaker 1: that a lot of these equity stakes are cash. What
Speaker 1: we've seen from some of the data that that that
Speaker 1: recently came out is that some companies were funded with tokens,
Speaker 1: and so obviously that would decrease the value of the
Speaker 1: equity state tremendously as the tokens themselves are drastically marked down. Brian,
Speaker 1: there's also the other side of the equation. I think
Speaker 1: we can bring up some of the names that invested
Speaker 1: in f t X in and Sam Bankman, Freed and
Speaker 1: many of those high profile names had to mark down
Speaker 1: the value of their states to zero, you know, from
Speaker 1: from various bars. The question I have for you is
Speaker 1: about due diligence. How can some of these reputable firms
Speaker 1: have made these decisions and come up with this result. Yeah.
Speaker 1: I mean, while I can't weigh obviously on the specifics
Speaker 1: of a particular VCS dude diligence process, I think it's
Speaker 1: safe to say that at least the basic level of
Speaker 1: due diligences was done here, which would have included things
Speaker 1: like financials, but also information related to governance protocols. So
Speaker 1: that said, I think there's two things that I'd say here. First,
Speaker 1: if there was fraud, which we believe that there is,
Speaker 1: if fraud was indeed perpetry, it's entirely possible that there
Speaker 1: were a number of misrepresentations by Sam Bankman, Freed and
Speaker 1: other executives during due diligence that muddied the evaluation process. Second,
Speaker 1: while every investor in these companies presumably did do their
Speaker 1: own due diligence, the demand for deals and this sense
Speaker 1: of fomo that we got in one, especially in the
Speaker 1: crypto space, definitely affected not only deal terms and valuations,
Speaker 1: but also likely increase the risk appetite for many. So
Speaker 1: you want to point out very quickly, Brian, if I may, that,
Speaker 1: of course no charges have been brought against Sam Bankman
Speaker 1: freed yet for fraud. I want to ask you really
Speaker 1: quickly before we run out of time, what does this
Speaker 1: do evaluations and interest from private markets in this space
Speaker 1: going forward? Yeah, so we clearly think that valuations already
Speaker 1: have been on a downward slope. So from Q one
Speaker 1: two thousand twenty two on, we've been seeing some pretty
Speaker 1: remarkable declines in terms of funding. We think that FTX
Speaker 1: is only going to compound some of the skittishness that
Speaker 1: I think that we're seeing from vcs, especially in this area.
Speaker 1: That being said, a lot of these companies hasn't mentioned
Speaker 1: earlier or early stage companies, and so as a result,
Speaker 1: their evaluations might not be hit as hard as well.
Speaker 1: You'll see sort of differences in some of those spaces,
Speaker 1: so crypto exchanges of course, but in blockchain infrastructure and
Speaker 1: those sorts of their areas you probably won't see as
Speaker 1: big of a hit directly attributable to f TX. Brian Lee,
Speaker 1: Senior Vice President, of see the Insights Intelligent Unit Thank
Speaker 1: you Now. Layoffs are accelerating across tech companies. Adobe has
Speaker 1: just scrapped about one hundred jobs concentrated in sales. Some
Speaker 1: of the employees who lost their jobs were given the
Speaker 1: opportunity to find positions elsewhere in the company. That's, according
Speaker 1: to sources, also Planned, saying it dismissed two hundred sixty staffers,
Speaker 1: around twenty of its employees, citing changing matt or economic
Speaker 1: conditions and the company needing to rein in costs. The
Speaker 1: tech industry has been slashing jobs at a pace nearing
Speaker 1: the early days of the COVID nineteen pandemic. In November,
Speaker 1: the sector announced more than fifty thousand cuts, for a
Speaker 1: total of eighty thousand or so this year. Time now
Speaker 1: for our top tech calls, starting with, of Course, Carl
Speaker 1: Varner shares sinking after Webbish analyst Seth bash and cut
Speaker 1: the online car used retailer to underperform from neutral as
Speaker 1: follows a Bloomberg report that Cavana's largest creditors, including Apollo
Speaker 1: Global and Pacific Investment Managers, signed a pact binding them
Speaker 1: to act together in negotiations with the company. The move
Speaker 1: is meant to prevent the credit of fighting each other
Speaker 1: in debt restructure negotiations, which Basham views negatively, saying investors
Speaker 1: see a high probability of default and sticking with cars.
Speaker 1: Tesla may need to make additional price cuts in China
Speaker 1: in the coming year to stimulate demand, which could put
Speaker 1: more pressure on automotive gross margins. That's according to Bernstein.
Speaker 1: Tesla shares were down Wednesday as it offers further incentives
Speaker 1: to Chinese customers in an effort to boost sales, and finally,
Speaker 1: online travel stocks fell Wednesday, the space to be avoided
Speaker 1: by investors heading into three according to Wolf Research and
Speaker 1: a note to clients. On Wednesday, the firm cut its
Speaker 1: view to overall sector from overall underweight from market wait.
Speaker 1: This following an expected downturn in demand. Carrow, Oh poor,
Speaker 1: all airlines. Are you getting on a flight anytime soon?
Speaker 1: In I might be getting a flight across the Atlantic soon.
Speaker 1: But you know, I got the stronger dollar. I got
Speaker 1: that stronger dollar on my side, which is rare in
Speaker 1: my lifetime, as you know, yes, exactly, and now it
Speaker 1: is rather nice when you go back to the UK.
Speaker 1: But all in all, it is just this constant pressure
Speaker 1: on some of these with these were the beating up
Speaker 1: companies during the pandemic, then came back and now back
Speaker 1: under pressure. But really does feel some of the economic
Speaker 1: headwinds are so pressing at the moment, particularly when it
Speaker 1: comes to valuations in technology. Yeah, they had a bright
Speaker 1: spot coming out of pandemic. Everyone was eager to travel,
Speaker 1: but then the economic reality here and you can look
Speaker 1: for a deal online, but it's not always there. So
Speaker 1: key to keep an up to speed when some of
Speaker 1: these analyst ratings and these companies and indeed some of
Speaker 1: the share price falls that we see. Welcome back to
Speaker 1: Blooberg Technology. I'm Caroline Hide in New York and I'm
Speaker 1: alongside Ed Lullow out in San Francisco, and we have
Speaker 1: got to talk gaming now, because Microsoft executives were actually
Speaker 1: meeting with FDC chair Lena Kahan to discuss the details
Speaker 1: of that activision Blizzard merger well call at sixty nine
Speaker 1: billion dollar deal and Microsoft Nintendo meanwhile agreeing to a
Speaker 1: ten year deal to bring Call of Duty to the
Speaker 1: Nintendo universe. All of that is trying to assuage any
Speaker 1: concerns around that's seen nine billion dollar deal and of
Speaker 1: course the agreement itself depends on if Microsoft is actually
Speaker 1: able to close that's say, seen nine billion dollar acquisition.
Speaker 1: He discussed all of it. Leon, Nilan and Leah just
Speaker 1: talked to us Lena Khan in a room Microsoft executives.
Speaker 1: How much convincing do they need to do to get
Speaker 1: this through? Yeah? Well, Lena Khan has been a pretty
Speaker 1: aggressive any trust enforce her since she was named to
Speaker 1: the post last summer um. The FTC under her already
Speaker 1: brought a suit against Meta Platforms over a pretty small
Speaker 1: virtual reality deal, but one that the FTC was concerned
Speaker 1: would give Meta a real leg up in virtual reality
Speaker 1: and allow the social network to sort of dominate that.
Speaker 1: So they have a lot of concerns about the big
Speaker 1: tech giants sort of using acquisitions to get a leg
Speaker 1: up or become dominant. Is sort of emerging markets UM
Speaker 1: and Microsoft one of the big reasons it said it
Speaker 1: needs us steals because it thinks to fetus cloud gaming
Speaker 1: UM and cross platform giving I e. You know, you
Speaker 1: don't necessarily need to buy these fancy consoles from Microsoft
Speaker 1: or a PlayStation or Nintendo. You might be able to,
Speaker 1: you know, access all the same games either on your
Speaker 1: computer or your phone and mobile device. So um, I
Speaker 1: think there's gonna be a lot of concern from the
Speaker 1: FTC about whether this gives Microsoft too much power. I
Speaker 1: think I'm right in saying that. In recent days, Lena
Speaker 1: Khan commented that there's a misconception the FTC is anti deal.
Speaker 1: It was also interesting last night lear too look at
Speaker 1: the Bloomberg terminal and look at our reporting this meeting
Speaker 1: is happening, and then the headline about a ten year
Speaker 1: deal with Nintendo for a a product they don't yet own,
Speaker 1: Call of Duty. And these are the kind of things
Speaker 1: that that Lena Kahn wants to see Microsoft doing if
Speaker 1: they're to have a chance for this deal to go through. Yeah.
Speaker 1: Microsoft has actually outlined a bunch of things that they're
Speaker 1: doing to try and like placate the FTC. They enter
Speaker 1: UM a union neutrality agreement with the c w A
Speaker 1: over potential concerns related to labor. They also announced that
Speaker 1: they were no longer going to require employees to sign
Speaker 1: UM non computer and nondisclosure agreements related to any like
Speaker 1: sexual harassment or sexual assault allegations, again trying to suage
Speaker 1: some of the FTCs stated concerns about non competes, So
Speaker 1: I'm not surprised at all actually that they announced that,
Speaker 1: like right before they were going to come here to
Speaker 1: Washington to sort of meet with her. The important thing
Speaker 1: about the Nintendo agreement they signed or announced yesterday is
Speaker 1: it only applies to the console. If Nintendo was going
Speaker 1: to offer one of these subscription services, they wouldn't necessarily
Speaker 1: get access to these games. Well said, and also I
Speaker 1: want to sort of shine a light on who they
Speaker 1: haven't struck a deal with MIA and that being Sony.
Speaker 1: And there was a great quote coming from Phil Spence,
Speaker 1: of course, man who manages the Xbox part of the business,
Speaker 1: and he's really saying that there's been one game industry bunches,
Speaker 1: but that's really been raising all the objections, and that
Speaker 1: is Sony. And he thinks actually, basically they're spending all
Speaker 1: their time talking to regulators and not trying to get
Speaker 1: a deal done. Truth in that. There is certainly some
Speaker 1: truth in that. I mean, Brazil is the only regulatory
Speaker 1: agency that is so far given um a verdict on
Speaker 1: the deal. Sony was the major complainant there. The uk
Speaker 1: c m A has a very public process, so a
Speaker 1: lot of the filings that go through that are made public,
Speaker 1: and Sony has been again the main complainant. They're they're
Speaker 1: very concerned about what having Activision's library of games will
Speaker 1: make Microsoft a much more appealing gaming platform than PlayStation.
Speaker 1: Lee and Alan, we want to thank you so much.
Speaker 1: I doesn't want to thank Phil Spencer there because we're
Speaker 1: going to update his photo. It's a little bit an
Speaker 1: old school one. We thank you. Meanwhile, look, we want
Speaker 1: to stick with the world of gaming. We want to
Speaker 1: shift gears a bit because we've talked a lot about,
Speaker 1: for example, content moderation and freedom of speech on social platforms. Now,
Speaker 1: a new report by the Anti Defamation League suggests we
Speaker 1: look at it from a gaming perspective as well. Now,
Speaker 1: according to this report, white supremacist ideas gained significant exposure
Speaker 1: through online video games this year. One in five adults again,
Speaker 1: one in five reported being confronted by white supremacist ideologies.
Speaker 1: Now that's more than double the rate of a year earlier.
Speaker 1: Joining us to discuss anti defamation leads Director of Strategy
Speaker 1: in Operations Daniel Kelly. The data is significant. It's concerning
Speaker 1: because it's also being targeted at children as well. I
Speaker 1: think it was a pre teens, pre teens taught to
Speaker 1: us at the moment, the response from the companies that
Speaker 1: kind of games we're seeing this being involved in, and
Speaker 1: how they're tackling it. Sure so, right now, the only
Speaker 1: game company that has an explicit policy against white supremacist
Speaker 1: extremism is Roadblocks UM. Other than that, you really don't
Speaker 1: have any major game company that is UM that has
Speaker 1: actually an explicitly stated policy saying that extremism is prohibited
Speaker 1: on their service. And the result of this is what
Speaker 1: we see in the games said make up the sort
Speaker 1: of top tier of where players are experiencing white supremacist
Speaker 1: ideologies at this point, Call of Duty is at the
Speaker 1: top with adults being exposed to white supremacist ideologies. They're
Speaker 1: followed by Grand Theft, Auto Valeriant, World of Warcraft in Fortnite. Now,
Speaker 1: it's interesting, of course, companies in response to the story
Speaker 1: being written up have been responding, and Roadblocks, as you say,
Speaker 1: has a policy overall, and they've been coming back sort
Speaker 1: of talking at length about some of their views. We
Speaker 1: know that overall. The spokesperson from Right Games, for example,
Speaker 1: has been saying they're creating a safe and inclusive environment
Speaker 1: for all players, it's core to their mission. Notably, Take
Speaker 1: Too didn't immediately respond to a request to comment, but
Speaker 1: call of duties code of conduct. They say they have
Speaker 1: got prohibits harassment, discrimination, and our games are designed for
Speaker 1: joy and connection, Daniel, when they want it to be
Speaker 1: for joy in connection. What can they do actively now
Speaker 1: to try and suppress such hate speech, such words that
Speaker 1: are so hateful to so many. I think there's a
Speaker 1: difference between having a policy against hate speech and discrimination
Speaker 1: and having a policy against white supremacists, extremism and extremism generally.
Speaker 1: What what these responses really show is how early in
Speaker 1: the process a lot of game companies are in building
Speaker 1: out policies around these issues. They're sort of combining a
Speaker 1: bunch of different phenomena in online spaces into one policy,
Speaker 1: when in fact, when you look at social media, for example,
Speaker 1: they've spent you know, a good amount of time differentiating
Speaker 1: between what is extremism, what is terrorism, what is hate speech,
Speaker 1: what is harassment, and how do these things manifest in
Speaker 1: their platform. I think the game companies need to do
Speaker 1: a lot more time building policies and operationalizing those policies
Speaker 1: uh such that they're able to actually action against extremist
Speaker 1: content as well as finding on their platforms. Are there
Speaker 1: any technological solutions that a d L is proposing what
Speaker 1: are essentially tear names right in the gaming industry invest
Speaker 1: in look at to improve this situation. So I think
Speaker 1: one area where companies can stand to invest more is
Speaker 1: around voice chat moderation. Right now, a lot of tools
Speaker 1: that are available for content moderation and really focused on
Speaker 1: text chat, and the technology to detect an action content
Speaker 1: in voice chat is really nascent in comparison to that,
Speaker 1: So I would recommend that companies invest in developing the
Speaker 1: technology to really be able to do voice chat moderation
Speaker 1: at scale. We thank you so much. Director's Strategy and Operations,
Speaker 1: Daniel Kelly. Ramesh Sunny Balwani, of course, who was CEO
Speaker 1: over at Sarnos, has now been sentenced thirteen years in
Speaker 1: afford case. He was a former president convicted of conspiring
Speaker 1: with Elizabeth Holmes, who of course got more than eleven years.
Speaker 1: So the CEOO Balwani is getting a hundred and fifty
Speaker 1: five months or hold, so it's twenty months more than
Speaker 1: Elizabeth Holmes. Now overall, the judge will decide later on
Speaker 1: how much restitution Balwani must pay as well. Remember he
Speaker 1: was of course convicted earlier this year on twelve counts
Speaker 1: of wire fraud conspiracy to commit wi fraud as well.
Speaker 1: So we focus in on, of course, the long running
Speaker 1: saga when it comes to this blood testing startup, and
Speaker 1: as it draws to a close ed, Yeah, that's right.
Speaker 1: There was an expectation he might get a more severe sentence.
Speaker 1: So let's get some other stories that we're keeping across.
Speaker 1: Robin Hood says activity on the platform is steady, but
Speaker 1: is still much lower than levels. Robin Hood reported monthly
Speaker 1: active users for November of twelve point five million, about
Speaker 1: thirty three percent fewer than the eighteen million users it
Speaker 1: reported in one. Crypto trading volume is down sixty year
Speaker 1: over year, in equities trading volume down fifty four percent,
Speaker 1: shares of robin Hood and down seven year to date,
Speaker 1: and things aren't looking better for coin base coming up.
Speaker 1: F t X is impact on retail investor trends and
Speaker 1: also institutional adoption of crypto. But first, let's take a
Speaker 1: look at n f t sales. They're down to a
Speaker 1: sixteenth month low following that f t X blow up.
Speaker 1: This is Bloomberg. We continue to gauge the fallout from
Speaker 1: f t X. We just had a great conversation with
Speaker 1: CB Insights about some of the impact it's had their
Speaker 1: own funding issues and then the funding issues for other companies.
Speaker 1: Let's keep talking about the contagion, the chill of the
Speaker 1: SCRIPTO winto with Shinnani Bassek, Who's going to walk us through, Well,
Speaker 1: look some of the future issues some of the firms
Speaker 1: that are currently facing concerns right now. Yeah, we have
Speaker 1: to look outside of f t X because there are
Speaker 1: other firms that due to f t X for other reasons,
Speaker 1: are facing is choose and I want to start with
Speaker 1: Genesis here because the lending business there that had faced withdrawals.
Speaker 1: They came out, the interim CEO came out with a
Speaker 1: letter to investors giving a general sense of timeline, which
Speaker 1: is very helpful to understand. As we know they've hired
Speaker 1: a restructuring advisor. You have part of the letter here
Speaker 1: saying that they anticipate that will take additional weeks rather
Speaker 1: than days to sort this out. So in some ways
Speaker 1: that creates some sense of calum because you have a
Speaker 1: timeline here, but again that means weeks of anxiety rather
Speaker 1: than days of one to figure out what the timeline
Speaker 1: will be here and whether they will ultimately have to
Speaker 1: seek a more severe uh you know, coming together of
Speaker 1: this issue. So that's a genesis itself. That's on the
Speaker 1: lending side of things. I want to move over to
Speaker 1: exchanges because in the exchange world there's a lot of
Speaker 1: interesting things happening. You've been talking on the show a
Speaker 1: lot about coin based, very simple story. They're they're saying
Speaker 1: that revenue will fall fifty this year. I'm not sure
Speaker 1: what will look like necessarily next year. But remember so
Speaker 1: much of this is about what's happening in the broader
Speaker 1: crypto industry, and I do want to talk about what
Speaker 1: this means about how other exchanges Caroline are reacting in
Speaker 1: terms of competitive pressures because you have Finance US cutting
Speaker 1: fees and remember over at Bloomberg Intelligence, Eric Bacunas has
Speaker 1: been really great on this. It was bound to happen,
Speaker 1: bound to happen, This fee war that you're seeing in
Speaker 1: exchanges in the crypto industry similar to what you saw
Speaker 1: in traditional finance. So what does that look like discounts
Speaker 1: when B and beat tokens are used for fees, volume
Speaker 1: based discounts, so if you go over a certain threshold
Speaker 1: and trading, and again this is something that they are
Speaker 1: proud of their pioneering zero free trading, but these types
Speaker 1: of moves are going to continuously impact revenue as we
Speaker 1: see that few pressure on the industry. Lastly, on exchanges,
Speaker 1: I wanted to talk about sushi swap. Why because we're
Speaker 1: talking about centralized exchanges and cryptocurrencies. Let's exactly, so what
Speaker 1: is happening over sushi swap. You have the chief explaining
Speaker 1: that there's a liquidity issue that could be created here.
Speaker 1: The token had plunge, The treasury has one point five
Speaker 1: years about eighteen months of runway left many projects because
Speaker 1: of the crypto winter more, they're facing similar optacles. They
Speaker 1: have said in this letter here that they don't need
Speaker 1: to necessarily go by the way of all these other
Speaker 1: firms that are facing more severe issues, but to be
Speaker 1: able to stave off some issues here, they do need
Speaker 1: to meet some changes in terms of how they think
Speaker 1: about the token arm it's ban swab. Good friend, Shali Bassek,
Speaker 1: thank you. How are you across so many things? I mean,
Speaker 1: all zooming out to the FDS, impact on institutional adoption
Speaker 1: let's discuss with Stephm Weett, CEO of Front Financial, which
Speaker 1: advises traditional firms on ways to participate in the crypto space.
Speaker 1: So we point out its valuation has fluctuated a little
Speaker 1: from eighty million dollars to around eleven million dollars during
Speaker 1: this downturn. I mean, you know, clearly there's an impact.
Speaker 1: Whether you're a retail investor, there's an impact if you
Speaker 1: are an institutional investor considering dipping your toe. What is
Speaker 1: the mood music from the clients that you serve. Yeah,
Speaker 1: it's definitely had a major impact on sentiments. I mean
Speaker 1: there's definitely several, Uh, you know, there's several there's many
Speaker 1: institutional investors who have the gun plans to enter the
Speaker 1: digital assets space, and you know, even as recently as
Speaker 1: the Celsius lunar disasters and just the general market downturn
Speaker 1: as a whole has caused them to step back from
Speaker 1: those maybe reconsider them all together. But I will say that,
Speaker 1: you know, our firm has been around for for over
Speaker 1: four years now, so we were born in the in
Speaker 1: the two thousand eighteen downdraft, and there is considerably more
Speaker 1: institutions sticking around this time than there was previously. I mean, ineen,
Speaker 1: it was really aggressive. The degree to which institutions trying
Speaker 1: to associate from the space, notably the cbo E killing
Speaker 1: their bigcoin future, was quite extreme, and you are seeing
Speaker 1: many institutions stick with UH, stick with crypto this time
Speaker 1: around and see as an opportunity in spite of the
Speaker 1: sentiment being understandably low. Stephan, Just to be clear, have
Speaker 1: you any exposure to f TX or any other of
Speaker 1: Sam Bankman's freeds companies or any financial relationship to him? No,
Speaker 1: we don't. We we have to stick for our language
Speaker 1: in their press releases. We are a public company need
Speaker 1: but we have no direct well and that means no
Speaker 1: accounts with f t X or any other relationships like that,
Speaker 1: and in material financial exposure altogether. However, as you point out,
Speaker 1: we are a firm that's operating in this industry and
Speaker 1: there is indirect impacts as you suggested, such as those
Speaker 1: two sentiment talk to us about can you give us
Speaker 1: a sense of how many institutions are coming to how
Speaker 1: many clients do you have, how many people are wanting
Speaker 1: to be in this space? Yeah, so we have a
Speaker 1: bit of a we have a broad kind of institutional
Speaker 1: client their institutions. There is now an institutional client in
Speaker 1: crypto which is really here to stay. And I define
Speaker 1: those as, you know, the bitcoin mining firms, large blockchain
Speaker 1: development companies, payment processors that are now accepting cryptocurrency that
Speaker 1: want to deal in large size, you know via block um.
Speaker 1: And then there's then there's the active manager, which has
Speaker 1: kind of been you know, a very kind of slow,
Speaker 1: has had a very slow adoption cycle. You know, I
Speaker 1: think in a lot of ways, the active manager has
Speaker 1: kind of had trouble seeing where they fit into this space.
Speaker 1: You know, this space is so volatile that it's not
Speaker 1: palatable for people to owe, you know, for firms that
Speaker 1: are trying to focus on strong risk adjusted returns and
Speaker 1: targeting twenty to annualizer turns to hold assets is volatile passively.
Speaker 1: But what we did start to see at the end
Speaker 1: of the year, we started to see institutions that are
Speaker 1: viewing the arbitrage dynamics and cryptocurrency. For example, I mean
Speaker 1: there's a there there are often times where where crypto
Speaker 1: traders are willing to borrow US dollars at far higher
Speaker 1: rates then you see in borrowing markets. Uh in traditional
Speaker 1: finance just due to the lack of dollars in the
Speaker 1: ecosystem altogether. UM, and these dynamics that really present arbitrage
Speaker 1: alpha generation opportunities that are quite unique to a nascent
Speaker 1: space like crypto. UM. People are starting to understand. So UM,
Speaker 1: those clients are coming in the in the tens definitely,
Speaker 1: not in the hundreds. UM, but it is, it is
Speaker 1: happening for sure. But you, of course publicly traded companies,
Speaker 1: as we said, and of course, like much of the space,
Speaker 1: has seen a particular a fall in your share price
Speaker 1: and market capitalization. When it comes to transparency, when you're
Speaker 1: putting out are you putting out how many customers you have?
Speaker 1: Are you putting out what revenue statements look like? Are
Speaker 1: we are we expecting fewer people to be entering the
Speaker 1: space and coming to be served by a company like yours.
Speaker 1: So I mean, specifically with that farn T, it's a
Speaker 1: little bit an awkward question. I mean, we went public
Speaker 1: in at the end of April, right as the market
Speaker 1: start to accelerated sell off, both in cryptocurrency and traditional finance.
Speaker 1: So you know, we've been in a position where we
Speaker 1: haven't really had to guide the market all that much.
Speaker 1: In terms of our expectations, and we're finding ways to
Speaker 1: do that as we understand the environment that we're coming into. Um,
Speaker 1: you know, for firms like ours, it's a bit of
Speaker 1: an interesting opportunity landscape because you know, we are getting
Speaker 1: as of right now, we're getting out of this relatively
Speaker 1: unscathed relative to a lot of competitors that are going
Speaker 1: out of business. So we've actually seen a large influx
Speaker 1: of clients that are looking to do trades with f
Speaker 1: R n T now that they're like anuse what numbers
Speaker 1: are we talking? Yeah, again in the tense, you know,
Speaker 1: that's that's that's in the tens of clients kind of
Speaker 1: coming to us in in the in the weeks months,
Speaker 1: you know, tens, twenties, thirties, that's that's material for us.
Speaker 1: I mean, this is you know, I think a lot
Speaker 1: of time that the institutional wave of crypto has been
Speaker 1: a little exaggerated in terms of what's actually been happening.
Speaker 1: People have been taking very broad use of the term institution.
Speaker 1: But yeah, we're very pleased with the progress that we're seeing,
Speaker 1: even in an ugly market like this. Thanks for being
Speaker 1: that transparent. We thank you for Stefan. We let Franti
Speaker 1: Financial see of Amazon shoppers are getting scammed by best
Speaker 1: seller badges, and we're going to break down how this works.
Speaker 1: So merchants will take popular items like a phone mount
Speaker 1: for your car and put it in a category with
Speaker 1: much slower sales. Those phone mounts are gonna rocket to
Speaker 1: the best seller rank because a lot more people buy
Speaker 1: them than by windshield wiper fluid hoses. When's the less
Speaker 1: time you want some of those If you search Amazon
Speaker 1: for form mount for a car, you're gonna see a
Speaker 1: lot of pro ducts, and a lot of those products
Speaker 1: are going to have the best seller badges. It's kind
Speaker 1: of a stamp of approval. But only if you take
Speaker 1: a minute and look more closely, you're going to see
Speaker 1: that a lot of those phone mounts are in completely
Speaker 1: unrelated categories. We're talking things like replacement axle shafts. It's
Speaker 1: tough to say how widespread this scam is, but Bloomberg
Speaker 1: found more than twenty five examples of best sellers in
Speaker 1: the wrong categories based on a search for phone mounts alone.
Speaker 1: But this is also a time of year when trickery
Speaker 1: really peaks on Amazon because shoppers are spending so much
Speaker 1: you a shoppers are going to spend about a hundred
Speaker 1: and twenty billion dollars online in November and December. Amazon's
Speaker 1: policies prohibit sellers from putting products in the wrong categories,
Speaker 1: but this example alone shows how enforcement is is really
Speaker 1: hit or miss. I must have been had on a
Speaker 1: phone case, ed windscreen, fluid pipes, what I mean. It's entrepreneurial,
Speaker 1: to say the least, some of them playing the system.
Speaker 1: People always try and do it. But it's a great
Speaker 1: piece by Spencer Soap. You've got to go online and
Speaker 1: indeed on the Blomberg terminal to go read more of it.
Speaker 1: But that doesn't for this edition of Brienberg Technology. Do
Speaker 1: not forget to check out our podcast. We're everywhere from
Speaker 1: New York for San Francisco. This is Broomberg