Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
Speaker 1: from coast to coast with Caroline Hyde in New York
Speaker 1: and Eva low in sentences go.
Speaker 2: This is Bloomberg Tech coming up.
Speaker 3: SpaceX acquires wireless spectrum from EchoStar for about seventeen billion dollars.
Speaker 3: Must starlink with a new director, sell opportunity plus.
Speaker 4: We discuss Elomusque's one trillion dollar pay package offer.
Speaker 3: But the corporate.
Speaker 4: Governance advisor for Tesla's special.
Speaker 3: Committee, and we sit down with the CEOs of renowned
Speaker 3: public and private companies, roadblocks and Cognition late to this hour,
Speaker 3: Let's get to our top story. So SpaceX acquires spectrum
Speaker 3: licenses from Echo Star in a seventeen billion dollar deal.
Speaker 3: It's split between cash and SpaceX stock. There is a
Speaker 3: lot more to it than that. Let's get out to Washington, DC.
Speaker 3: Bloom As Kelsey Griffith has the details. Let's just start
Speaker 3: with the basics of the deal. What is SpaceX offering
Speaker 3: here and what is SpaceX.
Speaker 5: Getting Absolutely so, SpaceX is offering a much needed infusion
Speaker 5: of cash for EchoStar. It's helping EchoStar beat a regulatory
Speaker 5: probe that's been hanging over it for months, in which
Speaker 5: EchoStar could have lost many of its valuable spectrum licenses
Speaker 5: because the FCC said that it wasn't putting them to use.
Speaker 5: So this deal allows EchoStar to partner with SpaceX and
Speaker 5: delivered director device service, and that's a goal that SpaceX
Speaker 5: has had for a long time. So both companies are
Speaker 5: really getting a lot out of this.
Speaker 4: Okay, it gets money EchoStar, but it's no longer going
Speaker 4: to be a viable competitor to T Mobile, to AT
Speaker 4: and T. Meanwhile, T Mobile perhaps less viable as a
Speaker 4: long term partner with Starlink.
Speaker 5: That's right, there's a lot of moving pieces here, but
Speaker 5: exactly as you said, this sale does represent the sort
Speaker 5: of closure of EchoStar being a fourth standalone wireless competitor,
Speaker 5: as the terms of the Sprint T Mobile deal sort
Speaker 5: of dictated. So we're seeing them sell off this remaining
Speaker 5: crown jewel of echostars spectrum portfolio, and instead it's going
Speaker 5: to be in more of a partnership mode with both
Speaker 5: T Mobile on the direct to device side and also
Speaker 5: on the side of AT and T where they're still
Speaker 5: offering some mobile services there. So we're also seeing that
Speaker 5: SpaceX really might become a bit more independent, like you
Speaker 5: mentioned Caroline in offering these direct to device services on
Speaker 5: its own terms.
Speaker 3: Kelsey, Spectrum refers to this sort of range of invisible
Speaker 3: radio frequency, and I think that's really important to go
Speaker 3: back to, like what are we talking about here. When
Speaker 3: the FCC kind of looked at EchoStar, I think my
Speaker 3: understanding was they were like, you're not even using the
Speaker 3: space that you're assigned. So take that and what you
Speaker 3: just said about starlink and standing on its own two feet.
Speaker 3: I was part of the T mobile beta when they
Speaker 3: had that relationship.
Speaker 2: How would this be different for SpaceX, So I'm.
Speaker 5: Still kind of working through the details on my side
Speaker 5: as well, But on a very high level, it does
Speaker 5: seem that SpaceX is in a better position, owing more
Speaker 5: spectrum to offer its own director device service on a
Speaker 5: standalone basis. We're still waiting to hear more from the
Speaker 5: company about what that might look like.
Speaker 4: Well, thank you for the latest in the reporting. It's
Speaker 4: an ongoing del that you're doing for us. Kelsey Griffith,
Speaker 4: thank you so much on the deal. Meanwhile, turning to
Speaker 4: the broader tech sector, let's bring in. Janetmui, head of
Speaker 4: market analysis for RBC Brewin Dolphin. It's always great to
Speaker 4: get your take because there are deals happening at the moment. Janet,
Speaker 4: we are seeing new record highs for Broadcom after its earnings,
Speaker 4: and yet there's this wall of worry that the market
Speaker 4: has to climb up, and that's the macro picture.
Speaker 6: Hey, Caroline, thanks for having me. I think on the
Speaker 6: optimistic side, we have seen Marquez climbed to the wolf
Speaker 6: worry very well in the second quarter, So I guess
Speaker 6: I would take a glass half fool view from here
Speaker 6: because I think primarily the most important thing is that
Speaker 6: you look at the earnings results, particularly technology, communications services
Speaker 6: and discretionary I think these are really great results and
Speaker 6: gives us more comfort that actually companies remain resilient and
Speaker 6: they benefit from AI. Profitability is increasing. The visibility of
Speaker 6: broadening in AI application is there, So I'm cautiously optimistic.
Speaker 6: There are certainly micro headwinds there, but I am keeping
Speaker 6: an optimistic view. But I think overall we are keeping
Speaker 6: a modestly positive stands not overlaid bullish at this stage.
Speaker 4: Janet. What was interesting as looking at Bloomberg Intelligence data,
Speaker 4: This morning. It's showing that basically AI and capital expenditure
Speaker 4: spending is propping up the US economic growth. It represents
Speaker 4: about a percentage point of all GDP additions so far
Speaker 4: in twenty twenty five. How important is the AI story
Speaker 4: to offset what is the weakness we see in the
Speaker 4: labor market for example.
Speaker 6: Yeah, I think that is very significant. You mentioned the
Speaker 6: contribution from AI Cappax. I think he has overtaken consumer
Speaker 6: spending as a contribution to GDP groups, So that's unprecedented.
Speaker 6: It really just highlights how important this area is, and
Speaker 6: we are actually seeing a lot of visibility in this
Speaker 6: AI capac spending. We already know the exact figures from
Speaker 6: the hyperscalers already, and there are also loads coming from
Speaker 6: other sovereign states going into investments in the US for example.
Speaker 6: So I think this is very exciting. This is an
Speaker 6: area that keeps US investors excited because this is all
Speaker 6: incremental demand which is arguably new which haven't existed before.
Speaker 6: So that that's I think a very positive thing.
Speaker 3: Dannet on the Bloomberg terminal this morning, the focus is
Speaker 3: a FED cut in September. Will it or won't it?
Speaker 3: What's the technology investors' perspective on that.
Speaker 6: Well, I think it is very much like very likely.
Speaker 6: I would say, unless there's some surprise in this week's data,
Speaker 6: I think it's pretty much baked in, to be honest.
Speaker 6: I think from an investor perspective, particularly in growth areas
Speaker 6: like tech, a rate cut would be appreciated, and I
Speaker 6: think further insight into how much the fat can ease
Speaker 6: over the coming year would be important as well. And
Speaker 6: I would suspect they may lean into a more davish tone, which, ultimately,
Speaker 6: if they're rade cuts that are outside of a recession,
Speaker 6: recession is not a base case, by the way, that
Speaker 6: tends to benefit stocks. And as I said, you're adding
Speaker 6: the earning store, you're adding the AI Capex story. So
Speaker 6: I think that's a pretty much cautiously optimistic I would.
Speaker 3: Look cautiously optimistic. You know what does not appear to
Speaker 3: be cautious is activity. Karen and I did the story
Speaker 3: about SpaceX buying spectrum licenses for Eco Star. There was
Speaker 3: still an earning story last week with Broadcom. Corporate America,
Speaker 3: particularly in technology right now, seems full of confidence and
Speaker 3: to have momentum.
Speaker 2: Is that what you see?
Speaker 6: Yeah, yeah, I will say, so, I think they're obviously
Speaker 6: risk from the macroside. For example, most clearly we saw
Speaker 6: that the labor market is weakening, so is it gonna
Speaker 6: be a further concern? Are there going to be further
Speaker 6: worse data revision that shows things are actually worse than expects,
Speaker 6: And of course the potential inflation impacts from tarifs. You
Speaker 6: can also argue that the markets are a bit complacent
Speaker 6: on that, and of course President Trumken potentially flare up
Speaker 6: any geopolitical nuance. We just don't know, so I guess
Speaker 6: that's why I mentioned cautiously up Tomist. I think there
Speaker 6: are lots of positive factors out there, but as investors,
Speaker 6: we just also have to keep an eye on all
Speaker 6: the risks out there. So that's why, as I said,
Speaker 6: we're modestly progressed, but we're not overly overly Poolish.
Speaker 3: Janet Mauie from rbcper and Dolphin back on Bloomberg Tech,
Speaker 3: Thank you very much.
Speaker 2: They're coming up in the show.
Speaker 3: The US considers a new option to try and prevent
Speaker 3: disruptions to the global electronics industry. Going to have those
Speaker 3: details next. This is Bloomberg Tech.
Speaker 4: The US. Well, it's proposing annual approvals for exports of
Speaker 4: chip making supplies to Korean giants such as SKA Heinek,
Speaker 4: Samsung with Chinese manufacturing hubs. Now, this is a compromise
Speaker 4: to try and prevent disruptions to the global economic and
Speaker 4: electronic industry after revoking Biden era waivers that could have
Speaker 4: meant countless license requests a year. Bloomberg's Tech Executive editor
Speaker 4: Mike Shephard Joyce's in Washington.
Speaker 2: This built on last.
Speaker 4: Week's story where the waivers were taken away and it
Speaker 4: meant that thousands of licenses might be having to be
Speaker 4: asked for each year. Is this some sort of compromise.
Speaker 7: Well, it sure is taking shape in that forum care
Speaker 7: And that was one of our big questions and our
Speaker 7: discussions of this last week, is what would take its
Speaker 7: place the blanket waivers that the US government had been
Speaker 7: granting to Samsung and sk Heinex to allow them to
Speaker 7: continue sending supplies of restricted equipment to their facilities in China.
Speaker 7: That had really helped those plants remain in operation even
Speaker 7: with US restrictions. More broadly applying to China, the revocation
Speaker 7: of the so called balot dated end user agreement really
Speaker 7: threatened to upend operations at those facilities. So now what
Speaker 7: they will have to do is on an annual basis,
Speaker 7: basically come up with a shopping list for lack of
Speaker 7: a better word, carrow for the US government to approve
Speaker 7: on an annual basis, and that would include semiconductor manufacturing
Speaker 7: equipment and other inputs like chemicals in exact quantities to
Speaker 7: get approval on an annual basis. Now, on one level,
Speaker 7: it's a measure of relief for the companies which have
Speaker 7: really been grappling with the prospect of a lot of uncertainty.
Speaker 7: At least they know that they'll have to do this
Speaker 7: every year. But then again, Caro, they're going to have
Speaker 7: to go through this exercise every year, and it's going
Speaker 7: to be a bureaucratic headache for them, and it will
Speaker 7: be a burden for the government agencies as well. It
Speaker 7: also thrusts these companies right into the middle of the
Speaker 7: competition between the US and China, and it's a new
Speaker 7: headache on trade for Samsung, an sk Heinex, and the
Speaker 7: South Korean government as it grapples with taris at The
Speaker 7: Trump administry has also recently imposed.
Speaker 3: Mike There is a second and separate story about the
Speaker 3: United States and South Korean firms. Last week, the US
Speaker 3: raided a JV between Hyundai and LG Energy in Georgia.
Speaker 3: Now we're reporting that other South Korean firms are kind
Speaker 3: of scrambling to get ahead of a bigger picture situation.
Speaker 7: What are the details, Well, the details are this that
Speaker 7: there was a rate over the weekend at this battery
Speaker 7: facility in Georgia operated by Hyundai and LG Energy, as
Speaker 7: you noted, and a number of the workers involved were
Speaker 7: South Korean. Now, one thing that's important to note is
Speaker 7: that for these foreign makers not only of batteries and
Speaker 7: other sophisticated electronic equipment, but also semiconductor makers, as they
Speaker 7: try to put their plants from overseas here in the US,
Speaker 7: they need that foreign talent, They need that homegrown engineering
Speaker 7: know how, the technical skill. They need to be schooled
Speaker 7: in the systems that have worked well in their home countries.
Speaker 7: For instance, Hyundai and LG in South Korea, but also
Speaker 7: Samsung is preparing to invest in its own plants here
Speaker 7: in the US. They will have to bring in their
Speaker 7: own engineers, and they are facing a squeeze in the
Speaker 7: number of visas that they can legally obtain through the
Speaker 7: US government.
Speaker 2: The H one B.
Speaker 7: Visa program annually allows for only eighty five thousand in total,
Speaker 7: and of that total, South Korea gets a grand a
Speaker 7: grand total of two thousand visas, and that's not nearly
Speaker 7: enough to be able to supply those plants. So the
Speaker 7: companies have been trying to work around this. And it's
Speaker 7: an example ed you know, we talk about this perhaps
Speaker 7: being separate from the other story on the on the waivers,
Speaker 7: the end of the blanket waiver on exports to China,
Speaker 7: but really for South Korean companies, they really do see
Speaker 7: this as another conflict with the US in terms of
Speaker 7: how they're able to do their business here in the
Speaker 7: US and abroad. So it really does become a challenge.
Speaker 7: And now the question is how are the companies and
Speaker 7: the South Korean government raised this with the US and
Speaker 7: perhaps seek a solution.
Speaker 3: Makes Mike Sheppard out of DC, thank you very much.
Speaker 3: Chip Designer, Qualcom and Google Cloud deepening their partnership to
Speaker 3: bring AI agents to cars. Qualcom CEO Christiano mum told
Speaker 3: us people need to think of cars as digital firsts.
Speaker 3: Listen to this.
Speaker 8: We said that this is going to happen. We said
Speaker 8: that once you are behind the wheel of a car,
Speaker 8: you have you have no legacy of OSS and applications,
Speaker 8: and that the new agentic experiences enabled by Jenai will happen,
Speaker 8: especially because voice is very natural as an interface. So
Speaker 8: the way you should think about this the same thing
Speaker 8: that is happening, for example, with smart glasses, and we're
Speaker 8: incredibly excited about what's happening there as new personal AI devices.
Speaker 8: It's going to happen when you're behind the wheel of
Speaker 8: the car. The car has those answers were used for navigation.
Speaker 8: They can see things, they can see the road, they
Speaker 8: can see different things as you navigate. And then you
Speaker 8: have this computing power that can run AI models into
Speaker 8: the car. The Gemini models get integrated the digital chassis
Speaker 8: and now you can have a gentic experience in the car.
Speaker 8: You can do search, you can ask about a planning navigation.
Speaker 8: You can ask you and I to tell you a
Speaker 8: story of different things as you drive along. You can
Speaker 8: ask about what is the review of a certain restaurant
Speaker 8: that you want to do? Would stop if you want
Speaker 8: a reservation. The possibilities are endless.
Speaker 4: You paint a picture of the future of driving. What
Speaker 4: about Gemini models that set them apart? Were they only
Speaker 4: game in town due to the previous relationship. Did you
Speaker 4: really set them versus some of the competition.
Speaker 8: There's a lot of development of foundational models, and one
Speaker 8: thing that we've been saying for the past two years
Speaker 8: now is happening. I think those models are evolving to
Speaker 8: have big models in the cloud and models that also
Speaker 8: run on the edge and work together. This is true
Speaker 8: for all companies. It's true for Gemini, it's true for
Speaker 8: open Ai, it's true for what's happening in Meta and
Speaker 8: in an Amazon and et cetera. And I think that's
Speaker 8: a great opportunity. We have obviously a very close relationship
Speaker 8: with Google, but I expect that maybe other car companies
Speaker 8: may want other models as well. And I think that's
Speaker 8: the change in the car computing. I think the car
Speaker 8: is going to embrace those agentic experiences very very fast.
Speaker 4: Well com CEO Christiana Aarman coming up Cognition CEO Scott
Speaker 4: wu joins us to talk about the company's new fundraise
Speaker 4: is valuation as it integrates Windsor following that acquisition of
Speaker 4: the coding startup in July. This is really bad tech.
Speaker 3: Artificial intelligence startup Cognition AI has a new evaluation ten
Speaker 3: point two billion dollars post money, coming from a roughly
Speaker 3: four hundred million dollar funding round. The deal comes just
Speaker 3: a few months after Cognition purchased AI coding start up Windsurf,
Speaker 3: in the wake of Google's agreement to license windsurfs technology
Speaker 3: and hire away pretty much most of its talent. Cognition
Speaker 3: CEO Scott Wou is with us to talk about it.
Speaker 3: I think the most interesting part here is not that
Speaker 3: you've been able to raise more money at a higher
Speaker 3: evaluation necessarily, but since you guys acquired what was left
Speaker 3: of Windsurf, you have seen massive acceleration. Why did that
Speaker 3: happen so quickly?
Speaker 9: Yeah, yeah, no, it's it's been like pemut butter and chocolate,
Speaker 9: basically having the two product experiences. And you know, I
Speaker 9: think in code especially, I think AI has really really
Speaker 9: taken off, and all the best software engineers have already
Speaker 9: you know, entirely changed their workflorce. The two main product
Speaker 9: experiences that you really see for that are one the
Speaker 9: ad which is what Windsurf is, and to the agents,
Speaker 9: which is what Devon is. And now that we have
Speaker 9: that combined suite. We've just seen growth accelerating. We've been
Speaker 9: able to you know, bring Windsurf customers onto Devon, bring
Speaker 9: Devin customers onto Windsurf, and also just continue to.
Speaker 2: Grow much much better.
Speaker 3: Founders fun led this round eight vc Lux Capital prior
Speaker 3: investors also participated many others. When you were negotiating the
Speaker 3: funds and the valuation, how much was the sort of
Speaker 3: what you got for Windsurf baked into that conversation.
Speaker 2: You know, it's funny.
Speaker 9: And so we raised this round, you know, just recently.
Speaker 9: But as we were doing the Windsurf deal in July,
Speaker 9: that weekend, I was on the phone with Peter kind
Speaker 9: of giving an update on.
Speaker 2: The business, Peter being Pizza Tal, Peter Tal, that's right.
Speaker 9: Giving an update on the business and how things were going,
Speaker 9: and talking about the winster of opportunity that we had
Speaker 9: in front of us. And they were, first of all,
Speaker 9: you know, they were they were extremely supportive of doing
Speaker 9: the deal and they saw the same synergy as well.
Speaker 3: But they were very clear with us.
Speaker 9: That that they were very happy to give the support
Speaker 9: that we needed to make sure that we could get
Speaker 9: the deal done as well. And so that was a
Speaker 9: lot of what gave us the confidence to go ahead
Speaker 9: and go through with the acquisition.
Speaker 4: How much is the money necessary right now, Scott to
Speaker 4: fend off competition? Now, I'm thinking of you as the
Speaker 4: first AI software engineer.
Speaker 3: That's what Devon is.
Speaker 4: But we hear some aman talking about GPT five, how
Speaker 4: good it is at coding. How much you seeing other
Speaker 4: companies trying to get in the space.
Speaker 2: Yeah, yeah, yeah, absolutely so far.
Speaker 9: You know, we've been quite efficient as a business in
Speaker 9: terms of capital spend, but of course we see a
Speaker 9: lot of ways that we can accelerate our business further
Speaker 9: with a lot more capital. There's a lot of work
Speaker 9: to do on good of market and on just generally
Speaker 9: growing the business out there, but of course much more
Speaker 9: to do as well on research, model training and so on.
Speaker 4: And many would say the talent wars, as many have
Speaker 4: deen them, is an expensive habit for many.
Speaker 3: Scott.
Speaker 4: I want to go into your talent because it's fascinating
Speaker 4: the way in which you're offering incredibly generous buyouts to
Speaker 4: certain Windsurf employees, largely because is it because the team
Speaker 4: is too large or do you see it more as
Speaker 4: a cultural alignment, Because it's about the grind You've tried
Speaker 4: to make very clear to them.
Speaker 9: Yeah, it's more about the cultural alignment. And you know,
Speaker 9: I think it's worth calling out that, you know, especially
Speaker 9: in AI with things moving as fast as they are,
Speaker 9: we have a very very intense culture and and and
Speaker 9: that's a lot of what we are. And obviously it's
Speaker 9: it's not it's not for everyone, and so we want
Speaker 9: to make sure that it's clear for folks that that's
Speaker 9: the case. And you know, I think for the right
Speaker 9: people it's it's it's amazing and it's exactly what they're
Speaker 9: looking for. But again, it really is not for everyone.
Speaker 9: And we've been excited to grow the team. I mean,
Speaker 9: we've brought in some incredible folks from from the windsurf
Speaker 9: side now in the in the last six seven weeks
Speaker 9: post this acquisition, and then also been growing the team
Speaker 9: in a lot of other ways as well.
Speaker 2: Well a lot of other ways.
Speaker 3: My understanding, Scott is that two historic or either participating
Speaker 3: investors in this round have decided to join you full time.
Speaker 2: That's who are they and why? Yeah?
Speaker 9: Yeah, So so we had Christian Lawless from Conversion Capital
Speaker 9: who came and joined us full time, and then Emily
Speaker 9: Cohen from Neo. Both of those were early investors in US,
Speaker 9: supported US, you know, all the way through, and have
Speaker 9: made the decision to come join US full time, which
Speaker 9: we're extremely excited about.
Speaker 3: There's a lot to clarify and unpacked here. My understanding
Speaker 3: is that when you close the Windsurf deal, revenues basically
Speaker 3: doubled overall, and enterprise combined enterprise ARR is running at
Speaker 3: thirty percent just in that period. But you said something
Speaker 3: a minute ago, Well, we've been very disciplined. You founded
Speaker 3: this company in late twenty twenty three.
Speaker 2: Correct, Yeah, end of twenty three, started twenty four, and.
Speaker 3: You've spent burned call it where you were about twenty
Speaker 3: million dollars in that period of time.
Speaker 10: That's right.
Speaker 3: Why do you need four hundred million dollars?
Speaker 2: Yeah, yeah, No, it's a great question.
Speaker 9: I mean, And to be clear, you know, I think
Speaker 9: Devin was already growing exponentially, you know, up until this deal.
Speaker 9: Windsurf was growing exponentially itself.
Speaker 2: Up until this deal.
Speaker 9: You know, we got to bring the products together and
Speaker 9: the businesses together and do that. I think from our perspective,
Speaker 9: as the game gets bigger and bigger and bigger, to
Speaker 9: Caroline's point. You know, it's very valuable to have the
Speaker 9: capital to be able to do much larger work in
Speaker 9: model training, or to be able to grow and blood
Speaker 9: scale our business much faster.
Speaker 3: You call it a game.
Speaker 4: The game gets bigger and it is about mission focus
Speaker 4: right now, Scott, so many people have so many questions
Speaker 4: about the culture of building startups. Right here, right now,
Speaker 4: it does feel world changing. But Scott, I put it
Speaker 4: to you, when you're talking about routinely being in the
Speaker 4: office through the weekend, doing some of your best work
Speaker 4: late at night, many of us literally living where we work,
Speaker 4: how do you keep people engaged? Sure, within your talent pool,
Speaker 4: you probably have to lose carers in some way. You
Speaker 4: have to lose those who have other physical and mental passions.
Speaker 4: But when you're asking people to develop the latest and
Speaker 4: greatest product that maybe replaces them themselves, how do you
Speaker 4: keep them grinding?
Speaker 2: Yeah?
Speaker 9: Yeah, you know, I think on the one hand, of course,
Speaker 9: there I think there's all of the incentives and the benefits,
Speaker 9: and it's you know, it's very important for everyone at
Speaker 9: the company to be an owner of the company and
Speaker 9: to hold equity in the company. I actually think that
Speaker 9: the most important piece of it, to be honest, is
Speaker 9: you know, for many of us on the team of
Speaker 9: course are programming nerds ourselves, and because of that, I
Speaker 9: think teaching an aid A program is maybe the funnest
Speaker 9: thing that we could be working around and spending our
Speaker 9: time on. And the truth is a lot of it
Speaker 9: is very very self directed for us.
Speaker 4: The passion Scott, we we love having you want to
Speaker 4: talk about it, and the fundraise congratulation co founder and
Speaker 4: CEO of Cognition There.
Speaker 2: Welcome back to Bloomberg Tech.
Speaker 3: I want to get back to that deal between Echo
Speaker 3: Star and SpaceX, who are buying spectrum licenses from EchoStar.
Speaker 3: So the stocks up about sixteen percent in the session
Speaker 3: right a show that two day charts show the jump.
Speaker 3: On August twenty sixth, the stock had jumped almost ninety percent.
Speaker 3: Because AT and T is also in the markets by
Speaker 3: spectrum licenses, this is a stock that's trading at all
Speaker 3: time highs. We focus very much on the SpaceX portion
Speaker 3: at the start of the show if you're just joining us, Caro,
Speaker 3: But for Echo Star, this is a company that's got
Speaker 3: itself out of a bit of trouble by doing this
Speaker 3: transaction and.
Speaker 4: The board market signaling at to Echo Star. But let's
Speaker 4: dig in more to Musk Inc. And the recent board
Speaker 4: proposed one trillion dollar potential pay package being put to investors,
Speaker 4: an unprecedented incentive in corporate America. Of course, we're going
Speaker 4: to bring in Professor Shane Goodwin. He's executive director of
Speaker 4: SMUU Corporate Governance Initiative. You were brought in by Teslas
Speaker 4: Special Committee to advise it on corporate governance matter, including,
Speaker 4: and I'm quoting from Tesla's proxy here, satisfaction of fiduciary
Speaker 4: duties under Texas law.
Speaker 3: Take us to Texas law.
Speaker 4: Shane, How is that different versus Delaware, particularly when you're
Speaker 4: thinking about more predictable corporate governance framework as it's said
Speaker 4: in the proxy.
Speaker 11: No, absolutely. First of all, thank you very much for
Speaker 11: having me. It's a delight to see you again. With
Speaker 11: respect to Texas law versus Delaware. The one thing I
Speaker 11: do want to make clear for everyone is this pay package,
Speaker 11: which is actually a pay for performance. It's not a
Speaker 11: pay for promises, and that's one of the things I
Speaker 11: want to make clear. There are a lot of headlines
Speaker 11: right now, but this package as it's designed today actually
Speaker 11: works in Texas clearly, but it works in really every
Speaker 11: other state, including Delaware. As everyone talks about the differences,
Speaker 11: we can get into some of the details, but it
Speaker 11: really is a pay for performance package and not a
Speaker 11: pay for promises.
Speaker 4: And some of those performances are interestingly around a million robots,
Speaker 4: a million robo taxis, but actually it's still about getting
Speaker 4: twenty million actual evs on the road chain. How much
Speaker 4: was there a focus still in the bread and matter
Speaker 4: of what Teeser is, which is an EV maker.
Speaker 12: Well, that's what it.
Speaker 11: Is today and obviously, as everyone knows, and something that
Speaker 11: both Laon and the rest of the company and the
Speaker 11: board have talked about through at a critical inflection point
Speaker 11: today moving from a traditional EV manufacturer into a world
Speaker 11: that's with AI robotics, energy transformation, and as that master
Speaker 11: plan for clearly demonstrated, this is about sustainable abundance and
Speaker 11: this was the right time to actually make this decision today.
Speaker 11: This is about timing and responsibility. It's certainly not reckless
Speaker 11: to make a decision today to keep the leadership and
Speaker 11: vision of Elon and that's exactly what the board and
Speaker 11: obviously the special Committee determined.
Speaker 3: Professor Goodwin, the board addressed Musk's political activity and wrote
Speaker 3: in the proxy it had secured assurances that that activity
Speaker 3: would wind down. Taking into account the shareholder initiated proposal
Speaker 3: to invest in Xai, the board appears prepared to allow
Speaker 3: Elon Musk to continue to have responsibility across a number
Speaker 3: of companies at the same time. How much was that
Speaker 3: discussed the split focus as leader of a number of entities.
Speaker 11: Now, it's a great question, and look, this is not
Speaker 11: a new topic. Obviously that the everyone has known that
Speaker 11: Elon's had a lot of other ventures and interests. When
Speaker 11: I say interest he before even came to Tesla, he
Speaker 11: was at Space x So this is not new. What
Speaker 11: I can tell you and what I have observed of myself,
Speaker 11: and this is something from being inside and watching it.
Speaker 11: The art of committee that has a related transaction oversight
Speaker 11: as well as what the board and obviously the special
Speaker 11: Committee thought through very extensively, is how do we harness
Speaker 11: everything that is great that Elon brings to the table,
Speaker 11: and then how can we actually work together as we
Speaker 11: move and transition Tesla from this EV manufacturer which is
Speaker 11: a world class and moving that now to an AI
Speaker 11: focused robotics and energy sustainable abundance company. And so this
Speaker 11: has thought about very extensively and it has actually been
Speaker 11: addressed throughout this whole process.
Speaker 3: This committee, that the Board committee met with Musk ten times,
Speaker 3: and in the course of the three hundred pages, a
Speaker 3: negotiation plays out right where they Musk is able to say, well,
Speaker 3: here are my terms. How typical atypical is that given
Speaker 3: that the big package is atypical? And what did you
Speaker 3: advise the board on allowing must to come back and say,
Speaker 3: here is what I want in return for what you want?
Speaker 11: Well, no, you're absolutely correct that there is definitely a
Speaker 11: negotiation that goes between a board and a CEO on
Speaker 11: any of these topics. And what informs my view and
Speaker 11: my decision is not just today as the corporate executive
Speaker 11: director for our SMU's corporate Governance initiative, it was over
Speaker 11: twenty five years of investment banking. I actually spent time
Speaker 11: in the boardrooms with these companies, advising them on M
Speaker 11: and A transactions. Today I'm I'm also a board member,
Speaker 11: I'm also an investor, but more importantly, as wearing the
Speaker 11: hat as a professor and a teacher, if you will,
Speaker 11: I actually teach on these topics all the time, and
Speaker 11: this is a very important topic that comes up as
Speaker 11: far as CEO compensation. How do you retain, motivate, and
Speaker 11: incentivize your management team to align with shareholder interests? And
Speaker 11: that's fundamental here and that's exactly the process the undertook.
Speaker 11: What I can tell you is that they had discussions
Speaker 11: with Elon throughout the process. But any deliberations and any
Speaker 11: thoughtfulness that went in, including all the alternatives and now
Speaker 11: the alternatives were all detailed in the proxy. Those were
Speaker 11: all done within the special Committee and then brought to
Speaker 11: the board. But it's a very typical process to have
Speaker 11: board members engage with their CEOs to understand what their
Speaker 11: vision is first, and that was very clear. We need
Speaker 11: to understand what the CEOs and management team's vision is
Speaker 11: and then how do we blind that to our shareholders.
Speaker 4: Interesting, of course on the board is Elon Musk, his
Speaker 4: brother Kimmel Musk too. They recused themselves when it came
Speaker 4: to putting forward this proxy to the investor base. But
Speaker 4: the twenty eighteen pay package, it was challenged, it was
Speaker 4: overturned because of so called conflicts of interest. What safety
Speaker 4: guards have you in this time? Chane to push back
Speaker 4: on any cynicism around it.
Speaker 12: Sure, and there are going to be some critics, to
Speaker 12: be sure, but this was.
Speaker 11: Actually thought about with an address the twenty eighteen Delaware Considerations.
Speaker 11: This has a fully informed, disinterested special committee. Both Robin
Speaker 11: Denholm and Kathleen Wilson Thompson were not only viewed as
Speaker 11: disinterested by the board when they formed the special committee,
Speaker 11: but McDermott, led by Wilson Chew and Joanna Lynn, actually
Speaker 11: conducted their own separate disinterested and not only at the
Speaker 11: time of when this was occurred back in February, but
Speaker 11: everywhere through and up until today. And I've seen all
Speaker 11: the files and seen all the questionneers. That is a
Speaker 11: very important point. The second point is that they acquired
Speaker 11: and hired engaged independent advisors, and what I mean by
Speaker 11: that are accounting firms, valuation firms, compensation companies and then
Speaker 11: also in the case for me a governance to discuss
Speaker 11: about the implications around that.
Speaker 12: So this was thought through with in contemplation. What happened.
Speaker 11: It was a seven and a half month process. It
Speaker 11: did include, as you already talked to about Elon's vision,
Speaker 11: but he was exclude from all the deliberations.
Speaker 3: Professor Goodwin, A question from our audience actually submitted to you.
Speaker 3: If I may across the operational and financial targets and requirements,
Speaker 3: why include the ebit DA goal.
Speaker 2: Were you involved in that?
Speaker 11: I wasn't necessarily involved with certainly picking out any of
Speaker 11: the operational targets. That was the special committee working directly
Speaker 11: with the company. There needs to be an alignment to
Speaker 11: be sure between what operational goals and what that will
Speaker 11: actually translate on financial performance. But what is clear is
Speaker 11: there are market capitalism targets all the way up to
Speaker 11: eight and a half trillion dollars, but also you have
Speaker 11: to meet operational targets as well, and obviously we talked
Speaker 11: about that.
Speaker 12: That includes.
Speaker 11: Robotics, the omnibile and then also the target you mentioned
Speaker 11: about ebit DAH. That's extremely critical to make sure there's
Speaker 11: an alignment between operational performance and also performance in the
Speaker 11: performance of the stock.
Speaker 4: Shane, you advise on corporate governance, you sit on boards.
Speaker 4: You're also a teacher a lecturer, Professor, how extraordinary is
Speaker 4: this one key pay package offering when.
Speaker 3: You teach about it?
Speaker 11: Well, I do think that the headlines obviously of a
Speaker 11: trillion catches the attention for sure. But what I would
Speaker 11: point out though, is that maybe the headlines chase those numbers,
Speaker 11: but this plan chases results. And as I mentioned, there's
Speaker 11: no pay unless there's performance.
Speaker 12: So there are no results, there are no votes, and
Speaker 12: there's no payout.
Speaker 11: So what I would point people to is to say
Speaker 11: this trillion, I would focus on seven and a half
Speaker 11: trillion dollars of performance, that generation that the shareholders are
Speaker 11: going to receive, and obviously alignment for Elon Musk along
Speaker 11: the way and the rest of the management team as well.
Speaker 3: Shane Goodwin, executive director at SMU Corporate Governance Initiative and
Speaker 3: an advisor to Tesla's board and the committee that did
Speaker 3: that compensation package, thank you very much. Shares of Roadblocks
Speaker 3: basically flat. Now they've been markedly higher after a big
Speaker 3: moment for the company, and lists have been raising their
Speaker 3: price targets for the stock because Roadblocks just held its
Speaker 3: developers conference and it really reinforced its growth prospects. To
Speaker 3: like to say that Roadblocks is CEO David Zuki is
Speaker 3: with us here in San Francisco. Roadblocks moments now, I
Speaker 3: don't know necessarily you put too much stock into the
Speaker 3: headline of what an analyst says. But there are analysts
Speaker 3: out there saying that this is potentially transformational for engagement.
Speaker 3: So let's start with Roadblocks Moments. What is it and
Speaker 3: why so important?
Speaker 13: Yeah, so, thank you coming off a great developer conference
Speaker 13: and coming off, you know, reiterating our audacious goal of
Speaker 13: getting ten percent of all gaming running on roadblocks. Look,
Speaker 13: we're looking for ways that developers can share and people
Speaker 13: can find their amazing experiences. A lot of people go
Speaker 13: on to social media. Roadblocks Moments is right inside Roadblocks.
Speaker 13: It allows users to capture a great moment, like at
Speaker 13: the bottom of a roller coaster, or when you have,
Speaker 13: like something really amazing happen, and turn that into a
Speaker 13: short little video that other people can watch. What's really
Speaker 13: exciting about roadbox Moments. If you really like what you're seeing,
Speaker 13: you can click on it and jump directly into a
Speaker 13: Roadblox game. So it's it's one hundred percent Roadblocks. It's
Speaker 13: fun to watch and you find great new stuff.
Speaker 3: Dave, We've talked about this idea in the past. Is
Speaker 3: it a competition for ribles with the likes of TikTok
Speaker 3: or is it something different? You know, gamers, actually people
Speaker 3: playing the games go to Twitch and YouTube, this goes
Speaker 3: back to the creator. It's slightly different.
Speaker 13: There's a really interesting angle to hear and that anyone
Speaker 13: on roadblocks can make a Roadblox moment ultimately, and also
Speaker 13: a lot of the creators, whether we're playing minute golf
Speaker 13: for something else, are going to have the capability to
Speaker 13: let you automatically take a clip of your favorite thing,
Speaker 13: like a hole in one. So we're hoping individual users
Speaker 13: on roadblocks can make amazing moments other people can watch
Speaker 13: them and then find them miniature golf game.
Speaker 4: A developers conference is exactly about the creator's Dave, and
Speaker 4: you offer them these moments, You offer them new AI improvements,
Speaker 4: new tools, ultimately ways to thrive the take rate for
Speaker 4: the content creators. At the moment, Dave, talk us through
Speaker 4: why you're recompensing them even more.
Speaker 13: Yeah, thank you. Long term, we've shared we want to
Speaker 13: grow bookings faster than our employee costs or our cogs
Speaker 13: or infracosts, and we want to take that remaining cash
Speaker 13: and as much as possible distribute it transparently directly to
Speaker 13: the creators. So arguably the top applause at our developer
Speaker 13: conference was for the first time in six years, we
Speaker 13: increased the dev x rate, or the percent that our
Speaker 13: creators take home today for every robot they're they're earning
Speaker 13: eight point five percent more than they used to. And
Speaker 13: as you correctly know, we introduce this a pile of
Speaker 13: new AI capability that we can talk about as well.
Speaker 4: Yeah, what goes on behind that AI capability? How much
Speaker 4: you having to think through, get the right talent in place,
Speaker 4: and what is it that it allows roadblocks to really harness?
Speaker 13: Yeah, rolling the clock back. We became an AI shop
Speaker 13: over four years ago and over the last four years
Speaker 13: have developed over four hundred AI models, so text translation, safety,
Speaker 13: voice filtering, text filtering, all of that. What's really exciting
Speaker 13: is we have a vision not just of using AI
Speaker 13: for safety, civility or for creating games, but AI should
Speaker 13: be live inside of every experience. And so we were
Speaker 13: demoing live three D experiences where people were creating vehicles
Speaker 13: on the fly by talking about them, where in the
Speaker 13: past it was very hard for many of us to
Speaker 13: create vehicles. So we would say for any form of creativity,
Speaker 13: fashion vehicles, we're going to have more people creating in
Speaker 13: roadblocks experiences.
Speaker 3: Dave when you bring all these people together in San Jose,
Speaker 3: what were the pieces of feedback you got from the
Speaker 3: developer community, good or bad? That either surprise you and
Speaker 3: you think, I got to go and act on that.
Speaker 13: Now with the team, when people think about building a
Speaker 13: high tech company and with us this really audacious goal.
Speaker 13: Could we have ten percent of all the gaming running
Speaker 13: on roadblocks, RPGs, auto racing, sports, all of that. Interestingly enough,
Speaker 13: the creators really want raw scale, raw performance, raw realism.
Speaker 13: They're looking as we design this gaming platform in the cloud,
Speaker 13: can it be bigger? Can it be better? So, in
Speaker 13: addition to the devx rate and the economics, some of
Speaker 13: the biggest applause was really around hardcore technical features that
Speaker 13: support ultimately photorealism and scale.
Speaker 3: Part of that is that use engagement. The data on
Speaker 3: engagement for August is looking strong. Might carry through for
Speaker 3: the rest of the year. We've talked about this before
Speaker 3: and it's worth repeating. You have had Friday nights and
Speaker 3: Saturday nights where the servers are melting. How are you
Speaker 3: dealing with that?
Speaker 13: I knowed, Yeah, we like the servers to melt. That's
Speaker 13: obviously a good thing, not a bad thing. Last year,
Speaker 13: our peak concurrency around this time was eleven million people
Speaker 13: playing Roadblocks at the same time. Two weeks ago, there
Speaker 13: were over forty five million people playing Roadblocks at the
Speaker 13: same time, and this was a coordinated event.
Speaker 10: We like it.
Speaker 13: A lot of the creators of the top games all
Speaker 13: had events at the same time to try to melt
Speaker 13: our servers. What's beautiful about our architecture is in addition
Speaker 13: to our primary focus, like we build our own data centers,
Speaker 13: we have great cloud partners, and our cloud partners now
Speaker 13: can come online for two or three hours on a Saturday.
Speaker 13: We can burst into this forty five million concurrency. So
Speaker 13: it's a really great problem. Tell all these creators try
Speaker 13: to stress our system briefly at time.
Speaker 4: A problem has been safety, Dave, and you've been leaning
Speaker 4: into that with AIS. You just articulated still about what
Speaker 4: is it forty percent of your users are under thirteens.
Speaker 4: You've been making changes, particularly about estimates of user ages
Speaker 4: and check ins, Dave. How is that being received by
Speaker 4: developers and by countries at the Middle East, in particular of.
Speaker 13: Late I'd highlight we have a history of leaning in
Speaker 13: before law or legislation. For example, California, age appropriate design code.
Speaker 13: We leaned in on that because we were already doing it.
Speaker 13: Last week we announced a somewhat bold and audacious vision
Speaker 13: to lead the industry in using facial age estimation, id
Speaker 13: estimation and other tools to know the age of everyone
Speaker 13: approximately on our platform, who's using communication, and also to
Speaker 13: use that to maybe adjust a bit who communicates with who.
Speaker 13: The key I'd like to highlight is this sits on
Speaker 13: top of everything else we do, which is filtering all texts,
Speaker 13: filtering all voice, and also not allowing image sharing or
Speaker 13: video sharing on the platform. We think it's going to
Speaker 13: set a standard that other social media, messaging and comms
Speaker 13: products will look into.
Speaker 4: Following David ZOOKI love having you on. Thanks for talking
Speaker 4: us through it found a CEO of roadblocks. Appreciate the time.
Speaker 4: Now coming up, let's talk Apple. It's about to launch
Speaker 4: its new iPhone seventeen air tomorrow.
Speaker 2: Will it live up to the hype?
Speaker 4: A's next as is a Bloomberg Tech Apple's biggest product
Speaker 4: launch of the year.
Speaker 2: It's tomorrow.
Speaker 4: The company which has fallen behind in the generator of
Speaker 4: AI race, shall we say we'll show if it's new
Speaker 4: iPhone seventeen for more and what we can expect, Blue
Speaker 4: Most Chief Global consumer tech correspondent Mark German, Mark, you
Speaker 4: always have it before, we told it tomorrow. What are
Speaker 4: you most excited about?
Speaker 14: Yeah, I'm excited about the new iPhone seventeen Pro line. Personally,
Speaker 14: I think that the new design on the back looks
Speaker 14: pretty cool. I think the camera upgrades are pretty substantial,
Speaker 14: probably the most substantial in the history of the product.
Speaker 14: And for Apple, that is what is going to drive sales.
Speaker 14: It is those new Pro models. They're going to heavily
Speaker 14: market and feature this new iPhone seventeen Air so to speak,
Speaker 14: which is this much slim down phone.
Speaker 10: It's about a third thinner than the iPhones of today.
Speaker 14: But I still think for Apple's revenue purposes, it's the
Speaker 14: profones that are going to be the big driver here.
Speaker 3: Mark. I really appreciated how you set the scene for
Speaker 3: Air in your power on. You compared it to the
Speaker 3: launch of Macair. Right, My first MacBook was like twenty
Speaker 3: ten MacBook.
Speaker 2: Pro at the time, a big, old, chunky thing.
Speaker 3: At first that was a difficult thing for Apple, and
Speaker 3: with time and innovation things improved. Explain the pathway you
Speaker 3: see for the Air going forward.
Speaker 14: Well, it's the same as the MacBook Air pathway right.
Speaker 14: It came out in two thousand and eight. It had
Speaker 14: some things that worked well. The screen was full size,
Speaker 14: the keyboard was full size eyes it was a nice
Speaker 14: product with a touch track multi touch track pad, the
Speaker 14: first in the industry. But it was too expensive, it
Speaker 14: was too slow, and the battery life wasn't great. The
Speaker 14: iPhone Air is going to be very similar. It's going
Speaker 14: to have a breakthrough design with its thinness, it's going
Speaker 14: to have great flagship features like a six point six
Speaker 14: in screen with one hundred and twentyz refresh rate, but
Speaker 14: it's going to have limitations on its camera and its battery.
Speaker 14: Over time, you'll see the MacBook Air transition play out
Speaker 14: as the iPhone Air transition.
Speaker 10: So you'll see the ultimately the pro phones.
Speaker 14: Get thinner, get lighter, get more processor heavy, and get
Speaker 14: better cameras.
Speaker 10: And so this is a peak of the future.
Speaker 14: It's just your beta testing what's really to come here
Speaker 14: With something that ultimately will be a little bit subpar
Speaker 14: compared to Apples other models.
Speaker 4: Many would say perhaps all of this so called innovation,
Speaker 4: It really is innovative, but compare it to foldable phones
Speaker 4: and compare it to generator AI use cases at Google
Speaker 4: and competitors. How are you expecting this one to stack up?
Speaker 14: Well, if you take two iPhone error side by side
Speaker 14: and you put some tape in the middle, maybe some glue,
Speaker 14: there's your foldable phone. Because that's basically what Extra's foldable
Speaker 14: phone is going to be like. Right, This is to
Speaker 14: prove out the concept of making a panel as thin
Speaker 14: as possible, slimming down the battery.
Speaker 10: And so this is you know, Apple testing.
Speaker 14: You know, Apple has much higher volumes than any of
Speaker 14: these other companies that have foldable phones that we've been
Speaker 14: talking about, right, and so they kind of need to
Speaker 14: test these things in the wild. They need to test
Speaker 14: their manufacturing capabilities, They need to engineer these things earlier
Speaker 14: on to make sure when they do release the foldable
Speaker 14: next year, it's at that Apple quality level. And Apple,
Speaker 14: at the end of the day, is a hardware company,
Speaker 14: and they're doubling down on what they're good at and
Speaker 14: how they make their money. And so this is going
Speaker 14: to be primarily a hardware showcase. You're not going to
Speaker 14: see a whole lot of new AI features. They may
Speaker 14: refer to things as AI, but ultimately this is about
Speaker 14: the products.
Speaker 3: Bloomberg's Mark Gunman, Thank you, and Bloomberg Tech will be
Speaker 3: live from Apple's event tomorrow. Tune in for some great
Speaker 3: conversations before and after. That does it for this edition,
Speaker 3: though a Bloomberg Tech carrot.
Speaker 4: Yeah we can catch up. Don't forget to check in
Speaker 4: on the podcast if find out on the terminal as
Speaker 4: well as online on Apple, Spotify, and iHeart a Big
Speaker 4: week to come to miss out. This is Bloomberg Tech