Speaker 1: From Mahard.
Speaker 2: We're Innovations Money and Power Collie in Silicon Vallet NBN.
Speaker 2: This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
Speaker 3: I'm Caroline Hyde of bloomgg's world headquarters in New York,
Speaker 3: and I'm Ed.
Speaker 4: Lovelow in San Francisco. This is Bloomberg Technology coming up.
Speaker 3: We have got the latest on the held of the
Speaker 3: banking system and of course the state of fundraising, which
Speaker 3: are in by some kvcs from viet Ventures and Costanoa Ventures.
Speaker 4: Plus Coinbase weighing the United Arab Emirates for its international hub.
Speaker 4: We hear from Coinbased CEO Brian Armstrong on what's driving
Speaker 4: that decision, and we'll have.
Speaker 3: The latest on meta as of the social media giant
Speaker 3: may end Facebook and Instagram news content in Canada and
Speaker 3: as the company vows to fight back against the ftc.
Speaker 5: Of children's data.
Speaker 3: Now, as we dwell on that story around a publicly
Speaker 3: traded company, let's go more broadly across the indices right
Speaker 3: now because.
Speaker 5: Some caution in today's trading.
Speaker 3: Even though we've got to lift in European trading and
Speaker 3: Asian trading, today we just pull back a little bit.
Speaker 3: The nastack off six points. We're basically flat on the day,
Speaker 3: coming off of our lows. We're really though, seeing some
Speaker 3: pressure on the bond market. This is we not more
Speaker 3: focus on the FED, but we actually focus on supply,
Speaker 3: on corporate bonds being sold ultimately and a whole hef
Speaker 3: to them. We're expecting some thirty five billion dollars towards
Speaker 3: the rest of the week. So we're up by five
Speaker 3: basis points as we see a supply pressure coming. Two
Speaker 3: year yields currently creeping up to three point ninety six percent,
Speaker 3: and I'm looking at the vics.
Speaker 5: Just starling back a little bit.
Speaker 3: So even though we see this cautious trading volatility is low,
Speaker 3: we're still well below that twenty handle at seventeen. Moving on,
Speaker 3: that's not what's happening in the world of crypto because
Speaker 3: we have seen volatility there no surprise in many ways,
Speaker 3: not by three and a half percent.
Speaker 5: We're going to dig in ed to the stories.
Speaker 3: Around finance around some of the ability to be able
Speaker 3: to trade the og in the crypto space. Interestingly, some
Speaker 3: new means coming onto that particular well ecosystem basically, and
Speaker 3: it's clogging up.
Speaker 4: Yeah, two holts in the twenty four hour period or
Speaker 4: twelve hour period on Binance. The operational update is that
Speaker 4: Binance says those pending Bitcoin Tracs transactions were process bottom
Speaker 4: of this board, you see crypto related stocks in the
Speaker 4: equity space also.
Speaker 6: Moving to the downside.
Speaker 4: Very closely link to that story up here as the
Speaker 4: scaler twenty one percent gain biggest jumps at September, at
Speaker 4: one point on track for its biggest jump since the
Speaker 4: end of December twenty twenty. There's a lot of feel
Speaker 4: good in the cyber space after its prelim results came
Speaker 4: in far above expectations. If you see energy in the
Speaker 4: cybersecurity space, that is why regional banks again a story.
Speaker 4: We're seeing a rebound, particularly in pac West, following on
Speaker 4: from what we saw on Friday. You know, we were
Speaker 4: also asking ourselves again, Caroline, what is the rationale here?
Speaker 4: There's been a lot of fighting talk from PacWest about
Speaker 4: its operational health. I remind myself for this program Bloomberg
Speaker 4: Technology that when it was founded in nineteen ninety nine,
Speaker 4: it was with a remit to serve Venture act companies.
Speaker 4: Really important for our audience because many of them have
Speaker 4: some sort of banking service, even with these regional banks.
Speaker 5: Yeah, it is important to think about.
Speaker 3: Also the more broad risks taking that people do and
Speaker 3: don't want to do, is we're still slightly cautious around
Speaker 3: the ultimate safety of the banking system. Let's talk about
Speaker 3: pack Uess and so much more with our one and
Speaker 3: only Sali bus second Sally. It feels as though anxiety
Speaker 3: levels dialed back a little bit today, but through any
Speaker 3: fundamental reason.
Speaker 1: Here Westen these stocks have sold off pretty dramatically, and
Speaker 1: if you look through Friday evening, we had a lot
Speaker 1: of tenuous news, for example Fitch placing pack West on
Speaker 1: a negative ratings watch. But to the point that you're
Speaker 1: making fundamental reasons, it's not because of the deposit base
Speaker 1: they did that, and it's not because of the holdings
Speaker 1: the bond holdings that have hurt many of these banks.
Speaker 1: The reason they put them on a negative watch is
Speaker 1: because they're worried about the strategic direction moving forward. There
Speaker 1: are stories last week about potential strategic asset sales. What
Speaker 1: is a business model of pack Wes moving forward? I
Speaker 1: would also to Ed's point here that a few of
Speaker 1: these banks that are still under pressure, not beyond First Republic,
Speaker 1: pack West, Western, Alliance has been the worst performer on
Speaker 1: the KBW Bank Index. Here a lot of banks that
Speaker 1: are based out West, and what is it about these
Speaker 1: firms that really bring these deposit base and the risks
Speaker 1: tied to the lending altogether that have investors spooked at
Speaker 1: this moment?
Speaker 4: So notally, if there's anything that the market's cheering, it
Speaker 4: seems to be a dividend cut. Why is that such
Speaker 4: a significant factor with this stock.
Speaker 1: It's interesting because typically when you see a dividend cut,
Speaker 1: you don't see investors reacting positively. But in this instance,
Speaker 1: the reason that there might be a little bit of
Speaker 1: relief is because investors are looking to pack West to
Speaker 1: do everything it can to keep its capital based strong,
Speaker 1: and that means some tough decisions in the meantime. It
Speaker 1: doesn't need to be the case that these banks fall
Speaker 1: into deeper and deeper concern after we've seen such big
Speaker 1: issues already. But again, there are longer term worries here
Speaker 1: ed and you really see it reflected in the bond
Speaker 1: prices of Western Alliance and pack West which have their
Speaker 1: bonds trading the ones maturing in twenty thirty one trading
Speaker 1: at sixty or forty cents on the dollar. Still, when
Speaker 1: I talk to investors on the sidelines as well, there's
Speaker 1: a hesitancy to get in until some of these existential
Speaker 1: questions are cleared.
Speaker 4: Up in Invectionali Bassekat in New York, thank you. Let's
Speaker 4: stick with a story and bring in FIAT ventures Managing
Speaker 4: partners Marcos Fernandez, Marcos, what is uniquely relevant to the
Speaker 4: VC community that you're a part of and venture bank
Speaker 4: startups in this scenario with the regional banks? Why are
Speaker 4: you paying such close attention?
Speaker 7: Absolutely so, banks like First Republic, like Silicon Valley Bank
Speaker 7: and pac West. As was mentioned, they cater towards the
Speaker 7: venture community, both venture capital funds and the founders that
Speaker 7: we back the startup community as a whole, And it's
Speaker 7: not just the deposits that they hold, but it's venture
Speaker 7: debt solutions that help them expand out their runways. For
Speaker 7: those founders in particular, it's loans that help them be
Speaker 7: able to do things like purchase homes when a lot
Speaker 7: of their values tied up in private equity. So we
Speaker 7: pay a big attention to it, certainly, and work very
Speaker 7: closely with our founders to help them seek alternatives, especially
Speaker 7: as markets continue to be more violatle.
Speaker 4: This is the biggest two day jump in pack weest
Speaker 4: on record. But from your perspective, I guess you're not
Speaker 4: lying awake at night thinking about that. I mean, what
Speaker 4: is the ongoing consideration for vcs like you and your
Speaker 4: portfolio companies.
Speaker 7: Yeah, so, unlike Silicon Valley Bank, which sprung about really quickly,
Speaker 7: you know, the news broke on a Thursday, and even
Speaker 7: going into the weekend, we didn't have certainty. The FED
Speaker 7: did a great job this time by coming out first
Speaker 7: thing Monday morning making sure that there is both certainty around.
Speaker 8: The deposits as well as a suitor. So it really
Speaker 8: did help us sleep a little bit better at night.
Speaker 7: And also for a lot of the startups that we've
Speaker 7: been working with, we've been helping them seek alternatives over
Speaker 7: the last several weeks.
Speaker 6: As this continues to unfold.
Speaker 8: So the short answer is, no, we haven't lost too
Speaker 8: much sleep behind it. What I will say is there's.
Speaker 7: Phenomenal people at the PacWest Banks of the world, as
Speaker 7: First Republic and Silicon Valley Banks, and so I think
Speaker 7: mostly we want to make sure that we're good to
Speaker 7: our partners those institutions.
Speaker 4: As well, you know, Caroline, the reason I ask those
Speaker 4: questions is that if you're a startup founder or a VC,
Speaker 4: you're kind of uniquely not liquid, right. Think about all
Speaker 4: of your net worth that's tied up in the equity
Speaker 4: valuation of your private company. The other thing we've learned
Speaker 4: is that now you're if you're a founder, you've got
Speaker 4: to find options. You've got to diversify, you've got to
Speaker 4: modernize your banking.
Speaker 3: And maybe start tapping FinTechs, other solutions, ones that don't
Speaker 3: actually have a banking license but certainly have an offering.
Speaker 5: And this is.
Speaker 3: Where Marcus, your experience comes so into play.
Speaker 5: You've backed the likes of Brex personally over the years.
Speaker 3: You're someone who's worked at other FinTechs so far as
Speaker 3: well as well in the crypto ecosystem.
Speaker 5: Tell us about fintech whether this is a moment for.
Speaker 3: It to outperform or whether actually there's more worry around
Speaker 3: more newer entrants.
Speaker 7: Absolutely, Caroline, I hate to say that my glass is
Speaker 7: always half full, but in this case, one.
Speaker 8: Of the early winners is certainly FinTechs.
Speaker 7: So you mentioned Brex, others like Mercury Bank, they've seen
Speaker 7: a lot of influx of deposits for two big reasons.
Speaker 8: First as they built tech stacts.
Speaker 7: On top of legacy infrastructure, which helps them onboard and
Speaker 7: open up more accounts more easily. And then second is
Speaker 7: they work with multiple financial institutions and banking partners, So
Speaker 7: not only does that allow for them to see more
Speaker 7: diversity behind those deposits, it allows them to extend out
Speaker 7: the federal protections that fall within that for their consumers. Now,
Speaker 7: while a lot of companies and individuals have gone back
Speaker 7: towards these pillarbanks the Wells Fargo, b of A's JP
Speaker 7: Morgans during these uncertain times, it's also exposed a lot
Speaker 7: of the inefficiencies behind these institutions that rely on a
Speaker 7: lot of individuals, time and processes to be able to
Speaker 7: open up accounts.
Speaker 8: So again, this is just another issue, an instance.
Speaker 7: Of why fintech and a lot of digitization behind traditional
Speaker 7: financial services is so important.
Speaker 3: What do you want to see built this moment, when
Speaker 3: you are so uniquely focused on fintech, on the future
Speaker 3: of fintech, on backing new startups and founders and visionaries,
Speaker 3: what is the problem you want most salted at the moment?
Speaker 7: Absolutely so, I think the first wave of financial technology
Speaker 7: innovation people focused on direct to consumer businesses. We think
Speaker 7: of the sofar as the chimes the money lions of
Speaker 7: the world. But the next wave is certainly much more embedded,
Speaker 7: so in some cases you actually won't know that there's
Speaker 7: a fintech at play behind these traditional institutions that you're
Speaker 7: bringing your money to and your deposits to. And that's
Speaker 7: really important because over time, every company under the sun
Speaker 7: has some sort of financial aspect with their business, and
Speaker 7: so that next wave is really going to be led
Speaker 7: by those that are building the picks and shovels in
Speaker 7: infrastructure that allow both large traditional financial service firms to
Speaker 7: become more efficient, but also those in adjacent industries like healthcare, mobility, climate,
Speaker 7: future of work.
Speaker 8: And that's what gets us really excited.
Speaker 3: When I hear picks and shovels, I immediately start to
Speaker 3: think of those who are saying talking about the mining
Speaker 3: ed of crypto in particular, and just fold in. I
Speaker 3: suppose that on a day where we really keep an
Speaker 3: eye on what's happening in crypto, there's a read across
Speaker 3: with Cosmarkos having worked at Ripple for a while.
Speaker 4: Yeah, I think if you're going to draw some commonality
Speaker 4: what we're talking about. I guess it's the want for
Speaker 4: decentralized systems. That also the same cycle we went through
Speaker 4: in crypto, we saw play out in banking to a
Speaker 4: certain extent. I mean, Marcos threat those two together for
Speaker 4: us when you are looking at what's happened in the
Speaker 4: banking sector, the hype and boom cycle as well around
Speaker 4: what happened with crypto, do you sort of have the
Speaker 4: same systemic concerns that apply to both.
Speaker 7: In some cases you see a lot of correlation between
Speaker 7: the two.
Speaker 8: Right, it's individuals get really.
Speaker 7: Excited about the potentials of a technology, but it takes
Speaker 7: time for that to become something that we can adopt
Speaker 7: over a large scale. Fintech for example, a lot of
Speaker 7: neobanks came in and got people excited, but during this
Speaker 7: market volatility, we're seeing them go back to these traditional
Speaker 7: pillar banks.
Speaker 8: Same thing with crypto.
Speaker 7: Right, the idea of decentralized systems is still really exciting,
Speaker 7: has a ton of use cases and applications, but it
Speaker 7: takes time to build that underlying infrastructure at a scale
Speaker 7: where millions and hundreds of millions of global individuals can
Speaker 7: actually take it advantage of that. So certainly there's correlations
Speaker 7: behind the two. But what I'd say is it's not
Speaker 7: to use a sports metaform. But we're not just in
Speaker 7: the early innings, like I don't even know if we
Speaker 7: started the game yet for both fintech and for cryptocurrencies,
Speaker 7: because there's so much potential to be had here and
Speaker 7: we're finally seeing a market where people can go back
Speaker 7: to building the fundamentals behind it, so building out the
Speaker 7: businesses that will help us scale to those hundreds of
Speaker 7: millions of consumers, both in the US and on global markets.
Speaker 3: That leads us very smoothly onto our next conversation.
Speaker 5: We thank you for that.
Speaker 3: Fat Ventures managing partner Marcus Fernandez great to has some time.
Speaker 9: In the.
Speaker 6: Crypto exchange.
Speaker 4: Coinbase is weighing the United Arab Emirates for its international hub.
Speaker 4: CEO Brian Armstrong says the UAE is leading the way
Speaker 4: regionally in crypto. He spoke to Bloomberg at the Dubai
Speaker 4: Fintech Summit earlier.
Speaker 6: Have listened.
Speaker 10: Coinbase our mission is to increase second our freedom in
Speaker 10: the world, so that means we really need to do
Speaker 10: that in many many countries. Obviously, We started in the
Speaker 10: US and took a very compliance focused approach and became
Speaker 10: a listed company there and that's been a big piece
Speaker 10: of our revenue still, but we've increasingly expanded into other
Speaker 10: major markets around the world. Now what we're doing is
Speaker 10: we're looking for a home to set up an international
Speaker 10: hub that could serve the long tail of countries in
Speaker 10: the world, you know, the Middle East, Africa, maybe parts
Speaker 10: of Asia as well. And from that point of view,
Speaker 10: the UA is very attractive. I mean, the UA deserves
Speaker 10: a ton of credit. They're the first country in the
Speaker 10: world I'm aware of that created a dedicated new regulator
Speaker 10: to crypto and they've published a clear rule book and
Speaker 10: it's very business forward and protecting of consumers.
Speaker 2: So they head by a country mod here relative to
Speaker 2: the UK and relative to the.
Speaker 10: US, well, I would say they are ahead of where
Speaker 10: the US is. You know, the EU has actually published
Speaker 10: comprehensive crypto legislation already. The UK is on their way there.
Speaker 10: But I would say the UAE is their approach has
Speaker 10: been more forward thinking than the US so far.
Speaker 2: So we spoke to your CFO, you're the CEO the
Speaker 2: West Notes everybody, you know, we sort of digging around
Speaker 2: for news here and I sat down and what is
Speaker 2: the as well as noticed, is it an armageddon moment
Speaker 2: potentially for coinbase in the United States of America.
Speaker 8: I think this.
Speaker 10: Moment is really an opportunity for us to finally get
Speaker 10: some regulatory clarity in the United States, and we're happy
Speaker 10: to do that. By the way, it's I think it's
Speaker 10: a great role for us to play in the industry
Speaker 10: and for America.
Speaker 6: You going head to head with the SEC.
Speaker 8: Well, that's true.
Speaker 10: I mean, look, we don't relish the opportunity to be
Speaker 10: in litigation with one of our primary lob regulators. We've
Speaker 10: sought out regulation all over the world and tried to
Speaker 10: be proactive when there wasn't clarity. But if there's no
Speaker 10: clear rule book in the US, we created our own
Speaker 10: best practices to evaluate you know, over one thousand assets
Speaker 10: and we rejected eighty percent of them the two hundred
Speaker 10: and twenty percent that we list. We believe our commodities
Speaker 10: and there's been no clear rule book, and so if
Speaker 10: we receive it well, as notice, I feel like we
Speaker 10: have a duty to take a push back and go
Speaker 10: see a case law that will help bring this clarity
Speaker 10: to the US.
Speaker 2: I mean I fitted a rhyme with this question for
Speaker 2: about two hours. Sec CFTC. What is the question you
Speaker 2: asked the CEO, And here's the question. Are these regulators
Speaker 2: fit for purpose?
Speaker 10: Well, I think there's certainly a role, yes, because crypto
Speaker 10: is many things. Crypto is has commodities. Crypto has some
Speaker 10: bitter securities. We don't list them, but there are some
Speaker 10: out there. We think there should be a robust, healthy
Speaker 10: market for that. There's also stable coins, which are more
Speaker 10: like currencies. There's artwork, you know, with NFTs, and so
Speaker 10: crypto is going to have a number of different regulators.
Speaker 10: It probably is going to need new legislation to be
Speaker 10: passed in the US. And the good news isn't there's
Speaker 10: broad BIPARTI isn't supporting Congress for that exactly to happen.
Speaker 2: Could you see a day of a troop side I'm
Speaker 2: gone from the US.
Speaker 6: We're not going to leave the US.
Speaker 10: You know, we do have a choice of where to
Speaker 10: invest our dollars around the world in any given moment,
Speaker 10: but we're not going to leave the US. It's an
Speaker 10: important market. And the good thing about the US is
Speaker 10: there's rule of law, and so we do reach the
Speaker 10: right outcome eventually.
Speaker 4: Coinbase CEO Brian Armstrong with her own menace Cranny, Caroline one.
Speaker 5: And any manus.
Speaker 3: Meanwhile, let's stick with crypto a little bit more. You
Speaker 3: reference the earlier ed the finance situation. How it's we
Speaker 3: started the drawals of bitcoin itself a slighting congestion on
Speaker 3: the tokens book chain. After two holts in less than
Speaker 3: twelve hours, the suspensions had weighed in the cryptocurrency markets.
Speaker 3: More broadly, it seems like we can go to our
Speaker 3: own Katie Lines out there in Washington to just discuss
Speaker 3: what are these new mean coins that are getting on.
Speaker 3: What is the original of the cryptosphere. Before we sort
Speaker 3: of associate NFTs meme coins with ethereum, But.
Speaker 5: Why are we now associating it with Bitcoin.
Speaker 11: Well, you can trace it back to the new Ordinals
Speaker 11: protocol that was introduced earlier this year, Caroline, which as
Speaker 11: you are alluding to, allowed now non vegeible tokens meme
Speaker 11: coins to be minted on the Bitcoin network, which primarily
Speaker 11: they usually were just based on ethereum. The fact that
Speaker 11: they have now come to be part of this network,
Speaker 11: this ecosystem, has meant that it is more congested, congested,
Speaker 11: and as result, fees have gone higher as well, and
Speaker 11: Finance says that is really what the problem was here,
Speaker 11: that this wasn't as was speculated earlier about people pulling
Speaker 11: money from their exchange, that this really was just a
Speaker 11: congestion problem.
Speaker 8: And as a.
Speaker 11: Result, to address this, to make sure that it doesn't
Speaker 11: happen again, they have raised fees to make sure all
Speaker 11: of those pending transactions actually will be mined by bitcoin miners.
Speaker 11: But that's ultimately what it comes down to here' Stz,
Speaker 11: the CEO of Byance, saying that some of those fees
Speaker 11: are up eighteen times over just the last month that
Speaker 11: we've seen more and more activity taking place on this blockchain.
Speaker 4: I think that the data point to call my eye
Speaker 4: from the Bloomberg reporting is that five billion dollars worth
Speaker 4: of transactions happened in that twenty four hour period. From
Speaker 4: a volume perspective, makes you realize that bitcoin is kind
Speaker 4: of everything from a volume perspective, right, that it was
Speaker 4: the volume of transaction is trying to ram through that caused.
Speaker 6: All of this.
Speaker 8: Yeah, that's exactly right.
Speaker 11: Again, a congestion problem, but you are speaking to the
Speaker 11: kind of volume that binance is seen here. This is
Speaker 11: also why this exchange in particular is so critical in
Speaker 11: terms of driving sentiment for the broader ecosystem, because it
Speaker 11: is by far the largest in the world, especially after
Speaker 11: the collapse of FTX. So really people look to binance
Speaker 11: as kind of a bell weather for what is happening
Speaker 11: in the wider system. So the amount of activity there
Speaker 11: when they do see disruptions like this is reason why
Speaker 11: you start to see some market participants getting concerned. But yeah,
Speaker 11: it's a great point ed. When we are talking about
Speaker 11: the broader crypto ecosystem of coorse, bitcoin really is the
Speaker 11: not monolith, but really just the dominant cryptocurrency in this ecosystem.
Speaker 11: Maybe all of these mean coins that are now clogging
Speaker 11: things up are really just kind of a distraction at
Speaker 11: the end.
Speaker 5: Of the day.
Speaker 3: Yeah, I mean, before we dive into the world of
Speaker 3: Pepe and some of the other exuberant rising coins that
Speaker 3: are basically like what a couple of cents or dollars
Speaker 3: and suddenly rise ever higher. Talk to us a little
Speaker 3: bit more about the international focus we had had anxiety
Speaker 3: around finance, what more about just more broadly global interaction
Speaker 3: with crypto at the moment, we're still seeing desire to
Speaker 3: be training here in the US, whether it's over there
Speaker 3: in certain parts of Asia, what happens in China at
Speaker 3: the moment, because I mean, what is it still was
Speaker 3: thinking about how China is interacting with cryptom worldly well.
Speaker 11: Especially as China it seems likes looking to kind of
Speaker 11: build up Hong Kong as another center for this activity.
Speaker 11: And it really comes down to the differences in the
Speaker 11: regulatory environment, right Caroline. I mean when you're looking at
Speaker 11: Finance in particular, in theory binance US is supposed to
Speaker 11: operate independently and it's kind of owned silo. But we
Speaker 11: know that the CFTC earlier this spring sued Finance for
Speaker 11: violating US derivatives rules. It's been under a lot of
Speaker 11: regulatory scrutiny here in the US, and the same ghost
Speaker 11: for other players as well. We were just hearing how
Speaker 11: coinbase wants to have a wider footprint internationally because at
Speaker 11: the end of the day, these regulations what activities people
Speaker 11: can actually engage on do differ country by country, So
Speaker 11: that is a huge factor in here. And I would
Speaker 11: note as well, and part of this regulatory landscape, what
Speaker 11: has happened with the bankings here in the US is
Speaker 11: when the liquidity picture comes into the conversation. I've had
Speaker 11: a lot of guests on Bloomberg Crypto in recent weeks
Speaker 11: and months talking about how liquidity really is just so
Speaker 11: thin and that exacerbates the price moves to the upside, sure,
Speaker 11: which is what God is north the thirty thous, but
Speaker 11: also to the downside, which we're obviously seeing play out
Speaker 11: and really broad based selling in crypto today.
Speaker 4: Bloomberg's Katie Lines adding Washington d C. Thank you very much.
Speaker 4: Now coming up, China's bay Doo, known for its line
Speaker 4: with smart home devices, is adding a new product to
Speaker 4: its AI operated roster and entering of an already crowded arena.
Speaker 6: Talking tech coming up, Carot.
Speaker 3: Yeah, another key story we're going to keep covering is
Speaker 3: we'll see ed shares of the company over in Asia
Speaker 3: trading had absolutely rocketed more than seven percent.
Speaker 5: We'll talk about why perhaps.
Speaker 3: We're seeing some more optimism coming from the leader of
Speaker 3: that business from New York.
Speaker 5: The a's a Bloomberg.
Speaker 6: Time for talking tech.
Speaker 4: First up, China limiting access by foreign entities to its
Speaker 4: after a series of reports published by US researcher firms
Speaker 4: spooked government officials. This according to The Wall Street Journal,
Speaker 4: the mover's expected to make it harder to analyze.
Speaker 6: What's going on inside China.
Speaker 4: There's tensions between Beijing and Washington mount Speaking of China,
Speaker 4: Chinese tech firm Baidu is entering the mobile phone market,
Speaker 4: adding a smartphone to its portfolio of gadget similar to
Speaker 4: the likes of Amazon's Alexa division. The device will be
Speaker 4: unveiled next week and will utilize its artificial intelligence software
Speaker 4: plus C. The ten Cent bank self East Asia internet
Speaker 4: company boosting pay for most of its workers this summer.
Speaker 4: Workers who joined on or before March thirty first will
Speaker 4: get a five percent salary bump. CEO Forest Lee says
Speaker 4: the company has reached quote self sufficiency after taking dramatic
Speaker 4: measures to slash costs Caroline.
Speaker 3: Yeah, what a different tack from a few months ago
Speaker 3: for that particular company. Meanwhile, well, coming up, we've got
Speaker 3: to dive into what's happening to meta today. International stories
Speaker 3: are bound a vow to fight back against here in
Speaker 3: the US the FTC as it faces some pretty stiff
Speaker 3: reviews of its privacy policies. We'll also be discussing what
Speaker 3: it's doing about Canada too. Let's just check in on
Speaker 3: how the shares are moving. Let's check in on how
Speaker 3: more broadly the tech market is moving. Meta actually managing
Speaker 3: to hold up about We're down in tenth of a percent.
Speaker 5: That's in line with the rest of the market.
Speaker 3: There's caution out there at some big tech heavyweights are
Speaker 3: just dragging some of the industries a little bit lower
Speaker 3: today after what had been a lot of exuberance following
Speaker 3: a few of their earnings from New York and San Francisco.
Speaker 3: This is Bloomberg. Welcome back to Bloomberg Technology. I'm Canon
Speaker 3: Hide in New.
Speaker 4: York and our med love Loo in San Francisco. Carey,
Speaker 4: let's go to check on the market. That has to
Speaker 4: be honest, there's not a huge amount of energy in
Speaker 4: financial markets this Sunday morning. You look at the NAS
Speaker 4: that one hundred, we are completely flat. Although some slight
Speaker 4: wood downward pressure across the majority of names outperformance slightly
Speaker 4: in the SOXSORL although.
Speaker 6: Modest up to tens to one percent.
Speaker 4: It's interesting to note that a lot of the AI
Speaker 4: related chip names, your AMDs and videos actually as well
Speaker 4: as Alphabet are moving to the upside during Monday's session,
Speaker 4: some movement in bonds are up five basis points on
Speaker 4: the US ten year three point four to nine one
Speaker 4: point three point five percent, and then kind of risk
Speaker 4: off when it comes to crypto. We talked about that
Speaker 4: story all throughout the show, the pause on the finance
Speaker 4: platform in terms of bitcoin transaction, but that has had
Speaker 4: an impact with below twenty eight thousand US dollars per token.
Speaker 6: Some individual movers.
Speaker 4: That are interesting z Scale are really outperforming and actually
Speaker 4: carrying a number of cybersecurity stocks with it. It posted
Speaker 4: prelium results far ahead of expectations. Kind of puts to
Speaker 4: rest this idea that spending on cybersecurity was under question.
Speaker 4: Alphabet as I pointed out, an AI related name up
Speaker 4: one and a half percent, and then to the downside.
Speaker 4: You see Microsoft and Meta actually has paired some of
Speaker 4: its losses. But those were two big point drags on
Speaker 4: the major indices.
Speaker 3: Let's dig into one of them, I mean point drags lower.
Speaker 3: We've got volume sin, but there is a lot of
Speaker 3: news to digest when it comes to Meta at the moment,
Speaker 3: in particular, let's talk about it here in the United States.
Speaker 3: The company really fights back saying it's going to oppose
Speaker 3: an FTC plan to look at banning it from profiting
Speaker 3: off of children's data. For more, we want to bring
Speaker 3: in Blie Meg's Emny Burnbound and the backstory to this
Speaker 3: is what the FDC is really analyzing some mistakes made
Speaker 3: in the messenger part of the offering to children, but
Speaker 3: trying to sort of read that across to a broader
Speaker 3: implication for how they make money from children more broadly.
Speaker 12: Yeah, So the FTC is looking back to an agreement
Speaker 12: that they came to with Meta in twenty twenty. So
Speaker 12: alongside a five billion dollar civil penalty, which is record
Speaker 12: breaking in the agency's history, they had Meta agreed to
Speaker 12: a series of privacy pledges, and they say that Facebook
Speaker 12: has not adhered to the promises that it made, and
Speaker 12: that gives them the right to go back, revise that
Speaker 12: agreement that they came to with Facebook in twenty twenty
Speaker 12: and put all these new standards and these new processes
Speaker 12: in place for ensuring that they are actually protecting the
Speaker 12: privacy of US users.
Speaker 6: Emily, what's Meta's arguments in all of this?
Speaker 12: Meta says that the agency is vastly overstepping on its authorities.
Speaker 12: That they are trying to take a mechanism that the
Speaker 12: agency does have, which is revising old agreements, and they
Speaker 12: are going too far in you know, banning them from
Speaker 12: monetizing children's data, putting all these new restrictions that would
Speaker 12: force them to submit to privacy reviews before they launch
Speaker 12: any new products. They say this is too sweeping. They
Speaker 12: intend to fight it in court, and that it shows
Speaker 12: the FTC is biased against Meta.
Speaker 4: All right, Bloomberg's Emily Burnbaum at in DC, thank you.
Speaker 4: Let's stick with this story for more META and bring
Speaker 4: in Diana Moss, President and CEO of the American Antitrust Institute. Dan,
Speaker 4: how much does this test the boundaries of the FTC's
Speaker 4: ability to shape privacy policy but through enforcement?
Speaker 13: I think that's a great question. I think we're seeing
Speaker 13: right now a real tension between the FDCs mandate to
Speaker 13: promote consumer protection but also to promote competition. They've had
Speaker 13: a bit of a rough go and some of the
Speaker 13: competition cases involving big tech, and of course now we
Speaker 13: see the moves on privacy.
Speaker 6: But I think the.
Speaker 13: Important thing to remember here is that user data is
Speaker 13: the fuel, the gasoline that powers the digital platforms and
Speaker 13: collecting that data, harnessing the value of it through AI
Speaker 13: and machine learning is really core to the value proposition
Speaker 13: of attracting users and locking them into a particular platform.
Speaker 4: Diana, you heard what Emily had to say about Meta's
Speaker 4: arguments in this dispute. Do you think that Meta fighting
Speaker 4: FTC on this will bring them success, that this is
Speaker 4: an example we're actually pushing back will fall in metas favor.
Speaker 13: I actually don't you know. I think what we're seeing
Speaker 13: here is a natural evolution, sort of a growing recognition
Speaker 13: that the FTC alone cannot, through its authorities, address both
Speaker 13: the competition and the privacy issues, and as I just said,
Speaker 13: they're both integrally related. Using data, potentially abusing data is
Speaker 13: the way to recognize or realize that value proposition. I
Speaker 13: think what we're seeing is going to be a series
Speaker 13: of violations and pushback because that is the value proposition.
Speaker 13: You're talking about, very strong incentives for the digital platforms
Speaker 13: to use and potentially abuse data to realize that value proposition.
Speaker 13: And I think where we might be going is the
Speaker 13: need for a broader system of regulation in the United States,
Speaker 13: much like in the UK, both on competition issues but
Speaker 13: on privacy issues as.
Speaker 3: Well, and you reference the UK the what about more
Speaker 3: broad regulation, just more globally and more joined up approach.
Speaker 13: Well, I think that's where it's going. The problem is
Speaker 13: we have a lot of jurisdictions and we don't have
Speaker 13: any sort of international authorities, but there is a tremendous
Speaker 13: amount of cross fertilization and collaboration on international regulatory approaches.
Speaker 13: And I think the other thing to realize here is
Speaker 13: what's going on with META and the data in this
Speaker 13: particular case is going to be no different than other
Speaker 13: platforms use of data to power the e commerce and
Speaker 13: the social media platforms and advertising on their platforms. So
Speaker 13: a regulatory infrastructure would address not only these concerns with Meta,
Speaker 13: but also other digital platforms that are very powerful.
Speaker 3: And to be fair, I mean metas already limited kind
Speaker 3: of information that informs certain ads, particularly when it relates
Speaker 3: to teens on its apps. They withdrew the ability for
Speaker 3: advertisers in particular to sort of target teams and their
Speaker 3: interest in their activities. You basically only know location data
Speaker 3: in an age, but they're going to have quite a
Speaker 3: pr feet on their hands because anything saying no, no, no,
Speaker 3: we need to be able to make money by advertising
Speaker 3: directly to children. How do they manage to make that nuance?
Speaker 3: With your years and decades of experience in this, can
Speaker 3: companies make a case for themselves that this is in
Speaker 3: line with you know, ultimately what's good for the company,
Speaker 3: but also not detrimental to society More broadly.
Speaker 13: I think that's a hard line to walk, given how
Speaker 13: integral data collection and data processing and harnessing the value.
Speaker 8: That data is for the digitals.
Speaker 6: And I think the.
Speaker 13: US is getting to a point where the comfort level
Speaker 13: in accepting promises and reassurances from the companies about how
Speaker 13: they will not misused data, it's beginning to where it's thin.
Speaker 13: And what we see here with the FTC, to their credit,
Speaker 13: is a strong enforcement action, but it's really this case
Speaker 13: by case approach when this problem is so systemic amongst
Speaker 13: the digital platforms use and potential abuse of data that
Speaker 13: that warrants a broader regulatory system like we see elsewhere
Speaker 13: elsewhere in the world.
Speaker 3: Meanwhile, Meta called the FTC's latest preceding a political stunt.
Speaker 3: Diana Moss, we thank you so much, President and CEO
Speaker 3: of the American Anti Trust Institute. And in fact, it's
Speaker 3: another focus under the day, with Meta the company saying well,
Speaker 3: it might end news content on Facebook and Instagram. Over
Speaker 3: in Canada, then as if lawmakers pass a bill requiring
Speaker 3: social networking platforms to pay media publishers to feature their work.
Speaker 3: Meant to describe the bill as fundamentally flawed, but supporters
Speaker 3: say it addresses a marketing balance. Is that more people
Speaker 3: turn to digital platforms for newsed something that we think
Speaker 3: about on the daily.
Speaker 4: YEP coming up, how startups can keep up with big
Speaker 4: tech in the Aii.
Speaker 6: That's next.
Speaker 4: We've cost No Adventures partner Martina Lauchenko, who gives us.
Speaker 6: Her view of the landscape. This is Bloomberg.
Speaker 4: This is a global story that caught my eye. Japanese
Speaker 4: firm MUFG planning to start two debt funds alongside tech
Speaker 4: lender Liquidity Capital.
Speaker 6: The funds will be established.
Speaker 4: Under a joint venture MARS Growth Capital, and provide as
Speaker 4: much as four hundred million dollars in financing for middle
Speaker 4: and later stage startups in Japan and Europe. The move
Speaker 4: is the latest by Japan's biggest banks to ramp up
Speaker 4: startup finance, where they increasingly see potential for new business.
Speaker 3: Caroline fascinating giving the timing aird and look at all
Speaker 3: us big tech companies like Microsoft, like Google dominate the
Speaker 3: conversation surrounding investments in artificial intelligence, but that VC's there too.
Speaker 3: They're flagging house startups can perhaps so get lost on
Speaker 3: the battlefield. Here's on what some of our recent guests
Speaker 3: are saying about the AI ecosystem.
Speaker 8: We are in the middle of an incredible revolution in AI.
Speaker 14: I would say there's many more bad AI startups than
Speaker 14: good startups, and it's very hard to differentiate if you're
Speaker 14: not experienced with AI.
Speaker 15: If you're a company today and you're not embracing the
Speaker 15: changes that are taking place with AI, you're going to
Speaker 15: be behind.
Speaker 4: Let's take actions to help form it safely.
Speaker 14: I think it's too early to regulate the AI. We
Speaker 14: don't know enough about it.
Speaker 15: I think the companies that are building this recognize that
Speaker 15: regulation is needed.
Speaker 3: There's so much to get into with our next guest,
Speaker 3: Martina Lachenko, of course as Christinoa Ventures, and I'm interested
Speaker 3: Martina in well, the view points there around regulation a
Speaker 3: thick and fast, but ultimately about how you sought the
Speaker 3: wheat from the chaff. You heard that from Vanokoza saying
Speaker 3: there's far more bad AI startups outla then they're all good.
Speaker 3: How do you discern which one's are good on the
Speaker 3: marketplace right now?
Speaker 9: Well, at Costanoa, we invest in really early stage startups
Speaker 9: and so at that point you really have to assess
Speaker 9: the founder and the fundamentals of their idea. And we
Speaker 9: are absolutely seeing this wave of companies that we call
Speaker 9: generative AI native where they are clearly built on top
Speaker 9: of generative AI from the start, and you recognize it immediately.
Speaker 5: So just in the last two weeks, I.
Speaker 9: Saw two startups same category. One was more like the
Speaker 9: AI remodel or it was glamped on, and the other
Speaker 9: was clearly built on top of the large language models
Speaker 9: and the generative AI that everybody was talking about on
Speaker 9: your show, And you immediately notice the difference just in
Speaker 9: how they're built, what the interface is like, and how
Speaker 9: they talk about what their product vision is.
Speaker 5: So there is a distinction and.
Speaker 9: That's absolutely what early stage venture capitalists are looking to
Speaker 9: invest in now.
Speaker 3: It was interesting last week suddenly the open source versus
Speaker 3: wall garden conversation came in to bear, particularly.
Speaker 5: Around artificial intelligence.
Speaker 3: What are you seeing in terms of who's going to
Speaker 3: eat who's lunch, Because it felt as though certain over
Speaker 3: at Google are saying, look.
Speaker 5: Really, it's open source.
Speaker 3: It's no one owning a particular large language model that's
Speaker 3: going to ultimatenyone out here.
Speaker 5: Well, I think you need both. I think both feed
Speaker 5: each other.
Speaker 9: The vibrancy of the ecosystem requires the open source side
Speaker 9: of the house where everyone can contribute.
Speaker 5: But the wild garden aspect is.
Speaker 9: The thing about generative AI is you have to be
Speaker 9: an expert to recognize when it's going off of the
Speaker 9: rails and how to put in place the guardrails to
Speaker 9: make it safe so that when it's used anywhere else
Speaker 9: it makes sense. And it tends to need to be
Speaker 9: more purpose built for a company or for what is
Speaker 9: being used for for it to do its job well.
Speaker 9: And that's where you might need a combination of built
Speaker 9: on top of the open source foundation but the world garden,
Speaker 9: making it more purpose built and intentional for whatever it's purpose.
Speaker 4: Let's take an example from your portfolio. Quizlet how long
Speaker 4: has that been in your portfolio?
Speaker 9: It's been our portfolio for almost eight years.
Speaker 6: Almost eight years.
Speaker 4: Okay, So to Caroline's point, you know, Vinocosa's point everyone
Speaker 4: is now trying to discern what is it, what is
Speaker 4: a viable AI related or AI adjacent company, and what
Speaker 4: is not? How has your thinking changed from when you
Speaker 4: first made that Quizler investment almost eight years ago to
Speaker 4: when you're confronted with a deck right now.
Speaker 9: So Kosteno has been around for about ten years, and
Speaker 9: the way we have always looked at AIAI has been
Speaker 9: around for quite some time, and it's really about what
Speaker 9: is the infrastructure that enables AI. And you need large
Speaker 9: sums of data, and you also need great machine learning.
Speaker 9: You need great machine learning algorithms, and so it's companies
Speaker 9: that have been around for some time that have the
Speaker 9: data set that let them build and train those models
Speaker 9: so that at this point in time they can actually
Speaker 9: provide that level of AI that everyone's experiencing. So a
Speaker 9: company like quiz it's a great example. We have a
Speaker 9: monstrous data set, the largest user generated data set of
Speaker 9: learning tools in the world, and they've been training this
Speaker 9: data for years and so now they're able to use
Speaker 9: that on behalf of users and creating this generative AI
Speaker 9: approach To how what people are.
Speaker 6: Expecting in this environment?
Speaker 4: Where does the balance of power lie with the vcs
Speaker 4: or the AI driven founders.
Speaker 9: I think it's always a partnership. I think with the
Speaker 9: best VC firms that's always going to be. The founders
Speaker 9: have great ideas, they have wonderful talents that they're bringing
Speaker 9: to bear. But when the VC is really genuinely additive
Speaker 9: and a great partner, it only makes them better. So
Speaker 9: our startups, our founders tend to be technical, either product
Speaker 9: or engineering based, and so they need more of that
Speaker 9: go to market partner.
Speaker 5: That's what we spend time with them on.
Speaker 9: Because you need the Steve jobs to the Steve WOSNEYAC combination.
Speaker 9: And if they don't bring it, then who backs them
Speaker 9: actually needs to help them with that.
Speaker 5: So that's what we focus.
Speaker 6: On, Caroline.
Speaker 4: Irrespective of the application or where in the data preer,
Speaker 4: deep learning inference part of the cycle you lay, I
Speaker 4: think everyone agrees on one thing, which is we need
Speaker 4: to have some parameters and some regulation in place, and
Speaker 4: whether it's.
Speaker 3: Self regulation or whether it's coming from the government. Martina,
Speaker 3: to that point, are you on the optimistic front and
Speaker 3: are you nervous about how quickly we're advancing without formal
Speaker 3: guardrails in place?
Speaker 5: Well, I'm both.
Speaker 9: I'm super optimistic, and I'm also nervous. I don't think
Speaker 9: the government has a good idea of what they can
Speaker 9: do to help regulate this, and so I really think
Speaker 9: it's going to be incumbent on companies themselves to be
Speaker 9: responsible in how they're taking advantage of this technology and
Speaker 9: putting in place those guardrails I mentioned before. We're going
Speaker 9: to have sort of a before times and then after
Speaker 9: times of those generative AI native companies, or at least
Speaker 9: in how they think and that they are putting in
Speaker 9: place those guardrails that you don't have to be an
Speaker 9: expert to recognize that it's going off the rails, and
Speaker 9: that's going to have to come from the companies themselves.
Speaker 9: The government's not going to be able to regulate that.
Speaker 4: Thanks to Martina Laschenko partner of course, with costs and
Speaker 4: no Adventures, the thing they call my Eye Caroline. Over
Speaker 4: the weekend, Warren Buffett and Charlie Munger hold court during
Speaker 4: the Berkshire halfway and your meeting on Saturday. Of course,
Speaker 4: they talked about things you'd expect like Apple and Elon
Speaker 4: musk and guess what else Ai and Charlie Mungers like, well,
Speaker 4: I'm skeptical, and Warren Buffett comes out with what was
Speaker 4: a pretty profound statement of the parallels of what we're
Speaker 4: seeing in AI and human history.
Speaker 5: What was it? An atom? Mom?
Speaker 3: He referenced, I mean extraordinary language amazement. He also seemed
Speaker 3: to demonstrate when it came to chatchipt other AI tools,
Speaker 3: what they're already doing, how they're already upending things. But
Speaker 3: ultimately it feels as though he said, what was it?
Speaker 3: He compared it to splitting of the atom as potentially
Speaker 3: dangerous advance and technology. And that's It's interesting the way
Speaker 3: we just had Martina articulate that, yes, I'm optimistic, but
Speaker 3: I'm also nervous about really the advance is the swift
Speaker 3: nature of it and how it's going to upend basically
Speaker 3: every industry, particularly when you know there is Charlie Munger
Speaker 3: and Warren Buffett salt in the middle of energy industry,
Speaker 3: of banking industry.
Speaker 5: Of all sorts that are going to be upended by AI.
Speaker 6: Yeah.
Speaker 4: One thing I point out is that, you know, is
Speaker 4: it relates to Elon Musk. Is very praising of Elon
Speaker 4: Musk and Tesla and entrepreneurial ism, but he said, you know,
Speaker 4: for them but have away. They need certainty and visibility
Speaker 4: on returns, and in the field of AI or whatever
Speaker 4: Elon's doing with Tesla and Twitter, that's not the sort
Speaker 4: of certainty and visibility that they're going to get. Apple
Speaker 4: selling debt in the US blue chip bomb market, borrowers
Speaker 4: flooding in looking to raise cash before two key pieces
Speaker 4: of data later in the week, Caroline CPI, PPI. But
Speaker 4: this is something that Apple does annually, right, and you
Speaker 4: think for me shareholder returns. They use those funds for
Speaker 4: buybacks and dividends.
Speaker 3: Yeah, this is all often what happens after earnings. We
Speaker 3: saw it with Meta already tapping the bond market. They
Speaker 3: come out, they decide that they're going to be raising
Speaker 3: funds and look diversify the way in which that they
Speaker 3: have money to hand. But it does feel though that
Speaker 3: maybe we're gravitating towards the safer areas the credit markets.
Speaker 3: I was just looking at how the Dish chairman, of course,
Speaker 3: the company that's slightly under more pressure at the moment,
Speaker 3: is saying that the debt market really isn't open to
Speaker 3: us at the moment with these financial worries, with the
Speaker 3: macro headwind that is upon us, no wonder the big
Speaker 3: juggernauts like Apple, like Matter, with a lot of cash
Speaker 3: on their hands, are able to sell and sell easily,
Speaker 3: but not for everyone.
Speaker 5: It would feel like.
Speaker 4: Yeah, look, five billion dollars in up to five parts.
Speaker 4: According to a Bloomberg sauce, at the long end, thirty
Speaker 4: year bond could yield one hundred and thirty five basis
Speaker 4: points over comparable treasuries. So that's what we're waiting on.
Speaker 3: Yeah, why we saw a bit of a sell off
Speaker 3: in the bond market more generally today in terms of
Speaker 3: US treasuries. But let's focus in on the Apple part
Speaker 3: of all of this right now, because after its earnings
Speaker 3: we did hear it's turning its attention really to what
Speaker 3: feels like emerging markets right now to get their growth.
Speaker 3: Montgam and please to say that after the calm of
Speaker 3: the earning storm, you join us to really digest from LA.
Speaker 3: It seems like Indias front and centered is all about international.
Speaker 5: Growth right now.
Speaker 16: I've never heard Apple talk about emerging markets in India, Indonesia,
Speaker 16: the UAE more than they did on the earnings call
Speaker 16: last week. And it's pretty clear why these messages that
Speaker 16: they talk about on these earnings calls. They're very carefully crafted,
Speaker 16: they're very deliberate in what they say, and they don't
Speaker 16: say we're about to enter our third quarter, or I
Speaker 16: should say, we're in our third quarter where Apple is
Speaker 16: likely to announce its third annual revenue decline in a row.
Speaker 16: It's very clear that they've plateaued, at least for now
Speaker 16: in the US, the larger Americas, Europe, Asia, China specifically,
Speaker 16: and so investors in Wall Street they want to see
Speaker 16: where's the future growth. So Apple has a new pitch
Speaker 16: for them, Like you said, it's emerging markets.
Speaker 6: Right.
Speaker 16: They talked about how this was one of the best
Speaker 16: quarters ever for emerging markets. They talked about how they
Speaker 16: have very low market share in India and other low
Speaker 16: emerging markets like Mexico, like Brazil, like Indonesia, And that
Speaker 16: might be bad on the surface, but the reality is
Speaker 16: that means there's big untapped markets for Apple to grow into.
Speaker 4: Right.
Speaker 16: They make you know, between fifteen and twenty billion dollars
Speaker 16: per quarter in China. Right, Imagine if Apple could find
Speaker 16: another market, maybe it's India, where they can add another
Speaker 16: five ten billion dollars per quarter just in that one country. Right,
Speaker 16: that's a massive opportunity, and over time, if they are
Speaker 16: able to tap into these emerging markets properly, if people
Speaker 16: decide to buy their products, if they make key new
Speaker 16: devices and services geared towards those markets, it's very possible
Speaker 16: that Apple revenue could grow exponentially just from those new regions.
Speaker 3: I mean, while some exponential growth of your own writing.
Speaker 3: The Power On is on the discord now I understand
Speaker 3: markam and brilliant to have you on to discuss all
Speaker 3: things Apple. It's a great story. You've got to go
Speaker 3: and read it on his daily weekly Power On. Meanwhile,
Speaker 3: we look at that does it with this edition of Bloomberg.
Speaker 4: Technology Today recap. Don't forget the podcast. Wherever you get
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Speaker 6: This is Bloomberg