Speaker 1: From the heart of where innovation, money and power collive
Speaker 1: in Silicon Valley and beyond. This is Bloomberg Technology with
Speaker 1: Emily Jay him Emily Chang in San Francisco, and this
Speaker 1: is Bloomberg Technology coming up in the next hour. Summer
Speaker 1: travel help boost Airbnb to a record quarter, but expectations
Speaker 1: are even higher for the current quarter. I'll talk to
Speaker 1: CEO Brian Chesky about investors raising the sticks, plus Michael
Speaker 1: Sailor's next chapter, The micro Strategy co founder is stepping
Speaker 1: down as CEO to focus on wait for it, more Bitcoin.
Speaker 1: Sailor joins us later to talk about why he's making
Speaker 1: moves in a continuing crypto winter, and despite record inflation
Speaker 1: and pressure on consumers, so far had better than expected results,
Speaker 1: bucking a bad news trend for fintech. See EEO Anthony
Speaker 1: Nodo will share his view on the macro environment and
Speaker 1: spending plans as competitors like robin Hood sort of massive
Speaker 1: round of layoffs. We will get to all of that
Speaker 1: in a moment, But first, Airbnb, as I said, just
Speaker 1: notched its best second quarter revenue ever. The home sharing
Speaker 1: giant says it's only going to get better. The travel
Speaker 1: rebound has given hosts more pricing power, which with average
Speaker 1: daily rates now tire than pre pandemic. Airbnb chair and
Speaker 1: CEO Brian Chesky joins me. Now, so, Brian, I have
Speaker 1: to ask you about the market reaction here because shares
Speaker 1: open down. They've paired most of their losses for the day,
Speaker 1: but they're still down thirty so far this year. What
Speaker 1: do you think investors are missing? I think there's a
Speaker 1: lot of insertinty on travel right now, and um, you know,
Speaker 1: but I think the best thing we can do is
Speaker 1: continue to tell our story. Our revenue was up fifty
Speaker 1: eight percent year of a year. We generated eight million
Speaker 1: free cash flow in the quarter, nearly nearly three billion
Speaker 1: dollars in the last year, and I think one of
Speaker 1: the things we shared with investors is that our bookings
Speaker 1: actually accelerated from jundist July. So I think one of
Speaker 1: the things we saw is that there's a lot of
Speaker 1: demand for our Q three Q four summer travel. And
Speaker 1: you know, we're just we're focused on things we can control,
Speaker 1: so that's what we're doing. Still, there's some disappointment about
Speaker 1: your forecast still going to grow, but growing the same
Speaker 1: rate as last quarter. We had Brent phil who covers
Speaker 1: Airbnb from jeffreys On saying, look, I might be the
Speaker 1: perfect example of a person I just took a big trip.
Speaker 1: Now I'm back home. Maybe I'm gonna slowly spending down.
Speaker 1: Slow might traveled down just because of what's happening in
Speaker 1: the macro environment. How concerned are you about that? You know,
Speaker 1: we're not too concerned right now about the macro environment.
Speaker 1: One of the things we learned was two years ago.
Speaker 1: I mean, we experienced something that we think is going
Speaker 1: to be much worse than this current macro end of
Speaker 1: my environment when the pandemic hit our business shop in
Speaker 1: eight weeks. But the thing that was remarkable is what
Speaker 1: happened next. We recovered really fast round any other travel company.
Speaker 1: And that's because are models adaptable. We have nearly every
Speaker 1: type of space and nearly every type of community. So
Speaker 1: whatever happens the economy, people I think are still gonna
Speaker 1: want to live on Airbnb. They're still gonna want to travel.
Speaker 1: If they want to save money. Everything's a great way
Speaker 1: to do that. And you know, we're great for crossing boarders,
Speaker 1: were great urban travel, but we also are great for
Speaker 1: non urban destination stuff you want to get in a
Speaker 1: car and travel nearby. We work from that through that
Speaker 1: as well. So I think we're a very adaptable model
Speaker 1: and in a difficult economic time. Whatever remind people were
Speaker 1: actually born in the recession. During that period of time,
Speaker 1: during the financial crisis, people turned to Airbnb to become hosts.
Speaker 1: People wanted to save money and seek the value that
Speaker 1: they got from Airbnb. So we're actually feeling really positive
Speaker 1: right now. So dark cause RuSHA He I spoke to
Speaker 1: him yesterday, the CEO of Uber. He said he thinks
Speaker 1: Uber is quote recession resistant. Is that how you describe Airbnb?
Speaker 1: Are you recession proof? I mean, you know, we were
Speaker 1: born in the recession. We dealt with a pandemic reloss
Speaker 1: eighty percent of our business in eight weeks. We just
Speaker 1: established that we had a record Q two and we're
Speaker 1: feeling really good about Q three. So I think we
Speaker 1: are as well positioned as anybody for a recession if
Speaker 1: that were to happen. Obviously, we've been talking a lot
Speaker 1: about the companies doing layoffs, big tech companies like Netflix, Shopify,
Speaker 1: coin Base. We're just hearing Walmart doing layoffs. I I
Speaker 1: spoke to Tim Cook just ahead of their earnings call
Speaker 1: Apple planning to slowdown spending on hiring and growth. Also
Speaker 1: said Apple plans to be deliberate about its spending. Are
Speaker 1: you changing your spending or investing or hiring strategy at
Speaker 1: all given the downturn? What's your approach? Absolutely not. We
Speaker 1: are not pulling on the brakes. If anything, I'd be
Speaker 1: interested in stepping onto the gas. And here's why, because
Speaker 1: we've been through this movie before. Two years ago, we
Speaker 1: had to right size our business. We made a lot
Speaker 1: of difficult choices. We got really focused. That's why we
Speaker 1: went from a company that had negative free castle and
Speaker 1: now positive three billion of last year. So we are
Speaker 1: not changing our Harvard plans, We are not changing any
Speaker 1: any investment the thesis. We are staying really focused and
Speaker 1: we've sustained our discipline. We were disciplined over the last
Speaker 1: couple of years when we right sized our business, and
Speaker 1: we're staying discipline, We're staying focused, and actually we're we're
Speaker 1: focused on right now is next travel season. We're focused
Speaker 1: on how can we step on the gas to be
Speaker 1: prepared for the next travel season? All right, So what's
Speaker 1: gonna happen next travel season? It's clear from your results
Speaker 1: that Urban and cross border travel are back. What are
Speaker 1: the locations the destinations that are going to be most popular. Well,
Speaker 1: I think it's gonna be. You know, I thought last
Speaker 1: year was gonna be the travel rebound of the century,
Speaker 1: and it nearly was, but then, of course we had
Speaker 1: the pandemic bounced back with delta strain. This was an
Speaker 1: even bigger year. That's why this was a record cord
Speaker 1: for US. Remember this is before Asia's recovered. You know,
Speaker 1: a large percent of travel is Asia Pacific that is
Speaker 1: not recovered because much of Asia Pacific is cross border
Speaker 1: and people aren't freely crossing borders yet. Also urban and
Speaker 1: cross border more generally is just beginning to recover. Now.
Speaker 1: Prosper order is double what it was this time last year.
Speaker 1: But I think that everything is going to continue to recover, obviously,
Speaker 1: notwithstanding whatever happens the economy. I think it's going to
Speaker 1: be even even bigger travel season next year. Now, Airbnb
Speaker 1: closed shop in China at the end of July because
Speaker 1: it was just so tough to do business. They're given
Speaker 1: the zero COVID policy, But you're now focusing on outbound
Speaker 1: China travel. Do you have any expectation of when restrictions
Speaker 1: will ease and when that uh will open up. No,
Speaker 1: I don't, I mean we are. We're not going to
Speaker 1: try to be in the business of predicting when UM
Speaker 1: countries are going to reopen, but we're going to be
Speaker 1: in the business being the most prepared whenever they do,
Speaker 1: so we'll be ready whenever boarders reopened. And to be clear,
Speaker 1: that China outbound business was always the prize, the biggest
Speaker 1: prize with the Chinese consumer base wanting to travel around
Speaker 1: the world and stay in homes. That's not really uh,
Speaker 1: you know, that's not really a robust business right now
Speaker 1: because people aren't really crossing the border. But when they are,
Speaker 1: we're going to be ready. And the way we're preparing
Speaker 1: is of making sure we have enough homes in all
Speaker 1: the corridors, whether it's Japan, Korea, Southeast Stags or the
Speaker 1: other places that Chinese travelers go. We're gonna be prepared
Speaker 1: to have enough homes. We're gonna market them that this
Speaker 1: is a great option for them. How much more pricing
Speaker 1: power do you think hosts can have in this market?
Speaker 1: I mean, this is the worst inflationary environment that you
Speaker 1: know Airbnb has ever seen. Well, I think that, um,
Speaker 1: we are at we you know, our businesses a somewhat
Speaker 1: seasonal business. So right now it's peak booking windows. So
Speaker 1: a lot of people are traveling right now, and so
Speaker 1: because a lot of people are traveling right now, prices
Speaker 1: will tend to go up a little bit now. Bookings
Speaker 1: right now in August or typically for September on September
Speaker 1: on is really after the peak travel season, and so
Speaker 1: that will provide some pricing relief presumably. So I do
Speaker 1: think there's going to be quite a bit of flex
Speaker 1: um entering the system as we kind of go off
Speaker 1: of high season. There also seems to be a trend
Speaker 1: in companies by being up short term rentals in bulk,
Speaker 1: and I wonder if that makes you at all concerned
Speaker 1: about inventory and what do you what do you mean
Speaker 1: by that? I just make sure I understand the question. Well,
Speaker 1: you've got these property companies, these property managers that are
Speaker 1: buying up short term rentals in bulk, which I wonder
Speaker 1: if that could be more competition for Airbnb or inventory
Speaker 1: growth more difficult, you know, I think that like for
Speaker 1: the most part, I think it's just good to remember
Speaker 1: the scale that Airbnb operates in. We have four million hosts.
Speaker 1: We have six million listings around the world, hundreds of
Speaker 1: millions of guests. So I think the scale of Airbnb
Speaker 1: is critical, and I think that ultimately what hosts decide
Speaker 1: is they usually want to go to platform where they
Speaker 1: get the most demand, and they always typically want incremental demand.
Speaker 1: And Airbnb has probably more demand for homes than any
Speaker 1: other platform in the world. So I think that we're
Speaker 1: still going to be the place for people to go.
Speaker 1: This is the category that we created, and it's you know,
Speaker 1: it's gonna be something that I think you can stay
Speaker 1: really strong. Airbnb employees might be driving some of that demand.
Speaker 1: I know. You know obviously earlier this year and you
Speaker 1: announced that Airbnb employees could live and work from anywhere,
Speaker 1: And I'm so curious to learnings from this policy so far.
Speaker 1: What's been great, what's been more challenging, anything that you
Speaker 1: think needs to be tweaked. Yeah, it's been a really
Speaker 1: great experiment so far. I mean, what we announced is
Speaker 1: that employees can live and work anywhere. We won't change
Speaker 1: their pay if they move within the country, and we
Speaker 1: are going to make it easier for them to travel
Speaker 1: and work from up to a hundreds seven different countries.
Speaker 1: What we found is that number one, the reaction was
Speaker 1: incredibly amazing. We've actually had hundreds of thousands of people
Speaker 1: visit our jobs paid, so clearly people want this. I
Speaker 1: think it's going to open up access to tons of
Speaker 1: the talent all over the world. We begin, we've begun
Speaker 1: to gather employees. Our guidance isn't to only be on Zoom.
Speaker 1: Our guidance is that we would like people to be
Speaker 1: together at least a week of quarter. So we're trying
Speaker 1: to do is balance the best of Zoom the best
Speaker 1: of real world. And we don't think that's necessarily being
Speaker 1: in the office three days a week. We think that's
Speaker 1: less frequent, more meaningful engagements. What I've learned is it
Speaker 1: takes central plan and you don't want a free for all.
Speaker 1: Whether or not you bring people back to an office,
Speaker 1: you allow remote work, you want to have it centrally
Speaker 1: planned because if one team does an off site, that
Speaker 1: can stop everything if they're clapping another team. So I
Speaker 1: think the key is being really organized, really disciplined. But
Speaker 1: if you do that, you don't need to be an
Speaker 1: office to see people working, to know they're getting their
Speaker 1: job done. You just need to be really organized. And
Speaker 1: more organized you are, the more flexibility you can offer.
Speaker 1: Last quick question, I know you're back at your home
Speaker 1: in San Francisco, but you've been living on Airbnb for
Speaker 1: for some time now. I know I've seen some pictures
Speaker 1: of you and your dog Sophie. What what have been
Speaker 1: your favorite destinations and where are you off to next? Well, like,
Speaker 1: one of my favorite ones is Sophie and I went
Speaker 1: to ann Arbor, Michigan, where we stayed in a Frank
Speaker 1: Lloyd Right home. And who knew that franklid Right homes
Speaker 1: are on Airbnb. Well, we have actually the entire collection
Speaker 1: of them under our design category on Airbnb, so that
Speaker 1: was amazing. I'm actually going to Europe and a little
Speaker 1: over a week, so I'll be looking forward to staying
Speaker 1: in some really great airbnbs as well. And I think
Speaker 1: I've stayed in like twelve to third different airbnbs obay
Speaker 1: my last count um since the beginning of the year,
Speaker 1: so I've gone to like places all over the country
Speaker 1: and it's really great. It turns out you can run
Speaker 1: a really large public company from a laptop and someone
Speaker 1: else's home. I'm gonna have to track down your your
Speaker 1: twelve to thirteen reviews on Airbnb. Bryan Tesky, CEO of Airbnb,
Speaker 1: always good to have you. Thank you for stopping by.
Speaker 1: Thank you. How Speaker Nancy Pelosi I did her visit
Speaker 1: to Taiwan pledging the US would not abandon its commitment
Speaker 1: to the democratically elected government. China reacted, announcing the series
Speaker 1: of military exercises and trade sanctions on Taiwan are Bloomberg
Speaker 1: News political director Jody Schneider joins US now from Washington. So, Jody,
Speaker 1: what do you make of this trip and the way
Speaker 1: that it has played out. Well, it's interesting, Emily, because
Speaker 1: before the trip, we were hearing a lot of threats
Speaker 1: from China from President Hu jumping directly from Chinese officials
Speaker 1: who warned a gray of consequences if Nancy Pelosi made
Speaker 1: that trip to Taiwan. She's humping. The president himself said
Speaker 1: that there would be uh that the U s and
Speaker 1: Taiwan would get burned if that happened. But now she went,
Speaker 1: She got there safely, She spent the night, she met
Speaker 1: with the Taiwan's president and some other government officials, and left.
Speaker 1: Uh said a lot of things about the US commitment
Speaker 1: to Taiwan, uh and Uh. Now China is sort of
Speaker 1: backing off that belligerent tone and saying give us some time,
Speaker 1: have patience with us while we develop our strategy for
Speaker 1: determining what we do about Taiwan in terms of that retaliation.
Speaker 1: So it really has been a market difference in tone
Speaker 1: in the past twenty four hours and since Nancy Pelosi
Speaker 1: left the island. How are we expecting China to retaliate.
Speaker 1: We spoke to an analyst yesterday who say, we're not
Speaker 1: going to see it right away, but you're gonna see
Speaker 1: them hold this against certain companies and this is going
Speaker 1: to play out over years, not days. Yeah, I think
Speaker 1: that's probably right. China is famous for its you know,
Speaker 1: having a long view in terms of geopolitical kinds of things, uh,
Speaker 1: and certainly political kinds of events. One thing, I mean,
Speaker 1: there's two different categories. One is military. And while no
Speaker 1: one expects uh that China and Ji Jimping are going
Speaker 1: to try to do something that that could be um,
Speaker 1: you know, that would be very dramatic to try to
Speaker 1: unify Taiwan with the mainland. We do expect that things
Speaker 1: like missile tests and military drills will certainly be part
Speaker 1: of this, and they've already announced that. They've said that
Speaker 1: missile tests could occur at any time to kind of
Speaker 1: showcase the strength of China's army and China's defense forces.
Speaker 1: But they and then also uh, these drills which they've
Speaker 1: said we'll start soon, So I think we will see
Speaker 1: some of that, but also economic the thing about some
Speaker 1: of these military drills, as these could disrupt the Taiwan airspace,
Speaker 1: and Taiwan today complained about that, saying they wouldn't be
Speaker 1: able to have commercial flights uh, and you know, operate
Speaker 1: the same kind of way. Also shipping, shipping could be disrupted,
Speaker 1: and trying to make some announcements today already about how
Speaker 1: they would not send some products to Taiwan. Also, as
Speaker 1: you note tariffs and it could become economically punitive in
Speaker 1: some categories of goods. So that could be a real
Speaker 1: way to try to punish Taiwan. So I think we
Speaker 1: will see this more over time, and perhaps a variety
Speaker 1: of strategies being used to try to squeeze Taiwan. Interesting, Okay,
Speaker 1: lots of complicated dynamics to continue to watch play out
Speaker 1: over years. At Jody Schneider E Bloomberg political director. Thank
Speaker 1: you all right, Come at more companies moving out of
Speaker 1: San Francisco, including one of the most chrominent venture capital
Speaker 1: firms in tech. That story next. This is Bloomer Technology,
Speaker 1: one of Silicon Valley's most prominent venture capital firms, has
Speaker 1: announced the location of its new headquarters in the Cloud.
Speaker 1: Andrews and Harrowitz is the latest in a mass exodus
Speaker 1: around the Bay Area since the pandemic. But as companies relocate,
Speaker 1: Silicon Valley still remains the top draw for venture capital dollars.
Speaker 1: San Francisco attracted fifty two billion in VC funding in
Speaker 1: the first half of the year, more than one third
Speaker 1: of the total that according to Pitchbook. Bloom Brigs was
Speaker 1: at Chapman covers venture capital and start outs for us.
Speaker 1: She's with me here now. So it's a pretty big
Speaker 1: deal that Andrewson Harrowitz is moving its headquarters, if you will,
Speaker 1: to the cloud, opening these offices in Miami and other
Speaker 1: parts of the country. Right, it's a major deal. This
Speaker 1: is a watershed moment, uh for Silicon Valley Andrewson Horowitz.
Speaker 1: For people that aren't as familiar with it, it's one
Speaker 1: of the largest um you know vcs with the most
Speaker 1: under management, you know, the backed household names including Airbnb, Roadblocks,
Speaker 1: Lift as well as and Roll and coin based and others.
Speaker 1: And they employ more than than most other VC firms.
Speaker 1: So for them saying hey, Silicon you no longer need
Speaker 1: we no longer need to be in Silicon Valley green
Speaker 1: lights UM, that practice for founders who are already finding
Speaker 1: that working remotely works really well. So is this the
Speaker 1: start of a trend? Well, I would say that it's
Speaker 1: a continuation of a trend that actually began before the
Speaker 1: pandemic UM, and this simply accelerates it. For example, if
Speaker 1: you look globally, UM, you know how venture capital was distributed. UM,
Speaker 1: the US got eighty four percent of the total venture
Speaker 1: capital back in two thousand four. In two thousand twenty one,
Speaker 1: the US only got Silicon Valley UM share of that
Speaker 1: continues to go down UM over time, and this is
Speaker 1: accelerating that. And the reason why is because as there
Speaker 1: are so many new places to get funding, it's not
Speaker 1: just Sandhill Road anymore. So is your expectation that Silicon
Speaker 1: Valley will still maintain some sort of dominance, but that
Speaker 1: there will be a lot of mini Silicon Valleys across
Speaker 1: the United States and really around the world. Right. Um,
Speaker 1: I think that's a pretty fair bet. Um. I think that,
Speaker 1: you know, based on some of the talent here, I
Speaker 1: don't think it's um, you know likely for you know, uh,
Speaker 1: you know, a massive exodus of people to suddenly say no,
Speaker 1: we're gonna rip, We're gonna sell all of our homes,
Speaker 1: rip our rips, our kids out of schools and all
Speaker 1: of that. But um, you know, there's there's definitely competition
Speaker 1: from other hubs with lower costs of living, lower taxes,
Speaker 1: and um, you know, equally equal access to cash and talent.
Speaker 1: And some of them are pretty loud. I'm thinking about Miami.
Speaker 1: Miami is very loud, la Is and l a is
Speaker 1: very loud. Um as well as well as a number
Speaker 1: of other markets that have been increasingly gaining steam, like
Speaker 1: including you Salt Lake City, Atlanta. Um. You know, you
Speaker 1: look at some of these other markets that were overlooked
Speaker 1: by venture capitalist who didn't want to get on a
Speaker 1: plane or arrange the travel to go and do a
Speaker 1: seed deal and do the work with the very early
Speaker 1: stage companies when they really need that one on one.
Speaker 1: They weren't willing to do that. So in a way
Speaker 1: remote work makes venture capital more accessible to a larger
Speaker 1: number of founders that maybe were historically overlooked. All right, fascinating,
Speaker 1: will certainly continue to follow this trendler was that Chapman
Speaker 1: always get to have you back on the show. By
Speaker 1: the way, Bloomberg LP, which owns Bloomberg News, has invested
Speaker 1: in Andres and Harrowitz. Welcome back to Bloomber Technology and
Speaker 1: Emily Chang in San Francisco. Many fin tech stocks have
Speaker 1: gotten claubed in the first half of the year, lagging
Speaker 1: the SMP five hundred with growth slowed by COVID. Add
Speaker 1: to that rising interest rates pressuring payment stocks, and fears
Speaker 1: over a US for session. It always is a question
Speaker 1: of which payment stocks are best positioned to whether the
Speaker 1: downturn or at ludlow back with us and what do
Speaker 1: you think that are so far kind of case and
Speaker 1: point where you look at the numbers up twenties eight percent,
Speaker 1: biggest jump in the stocks in January, four straight day
Speaker 1: of gains, a really strong top line growth, adjusted net
Speaker 1: revenues up fifty year on year, eighth consecutive quarter of
Speaker 1: positive ebit DAR bring up the numbers, mr direction and
Speaker 1: let's look at what the street was really paying attention to,
Speaker 1: which was this strong guidance for the rest of the years,
Speaker 1: showing growth for the second half this year despite changing
Speaker 1: market in economic conditions, market volatility really interesting. Moving to
Speaker 1: view products as well, Deposits for so Far Bank up
Speaker 1: a hundred quarter on quarter, relatively new product personal loans
Speaker 1: also up, so they seem to be doing well. They
Speaker 1: seemed to be consistent, is what CEO Antoo had to
Speaker 1: say during the earning school. Let's compare year to date
Speaker 1: versus robin Hood as an example, had a lot of
Speaker 1: news out of them this week. They actually will be
Speaker 1: kind of lead, lagging behind robin Hood. But big jump
Speaker 1: in the stock today and investors seem to think that
Speaker 1: so Far as one stock that has some momentum in
Speaker 1: I'd love them. Thank you. I want to stick with
Speaker 1: Sofa now and bring in to you know Anthony himself, Anthony,
Speaker 1: great to have you back with us. So look, strong earnings,
Speaker 1: you're bucking the trend here. How do you explain this
Speaker 1: big uptick in deposit Sure, thank you for having me, Emily.
Speaker 1: The big uptick and deposits reflects the fact that for
Speaker 1: the first time this quarter we had our national bank
Speaker 1: open and having a bank license allows us to actually
Speaker 1: offer the consumer and interest rate and checking or say
Speaker 1: things that we determine as opposed to a bank sponsor
Speaker 1: determining it. And we've taken an approach where we really
Speaker 1: want to be the primary relationship with our members. We
Speaker 1: want them to be with us for all the major
Speaker 1: funcial decisions they make in their lives, in all the
Speaker 1: days in between. In order to be that primary relationship,
Speaker 1: we really need to be the place they do their
Speaker 1: direct deposit. So we're offering them one percent interest um
Speaker 1: if they do direct deposit with us, and that's on checking,
Speaker 1: no minimum balance, no restricting on spending. They could spend
Speaker 1: when they want. They just have to do direct to
Speaker 1: posit with us. And that's allowing us to use those
Speaker 1: deposits to fund their loans at a much lower cost.
Speaker 1: And so the two businesses are really synergistic. Higher restrate
Speaker 1: in checking gives us more deposits at a lower cost,
Speaker 1: so we can lend more to more people and it
Speaker 1: drives a great virtual circle. Now, I know you're expecting
Speaker 1: strong growth in the second half, but you know you've
Speaker 1: got a recession looming. We've got all these these dire
Speaker 1: warnings from policymakers, from other CEOs, What are you preparing
Speaker 1: for sure? Well, we've we've been preparing for a war
Speaker 1: since March of two thousand and twenty, when the goal
Speaker 1: of pandemic hit UM. The President of United States told
Speaker 1: federal student loan borrowers they didn't have to continue to
Speaker 1: make payments on those federal student loans as part of
Speaker 1: the Carre's Act, and that was credibly important for our country. Well,
Speaker 1: that had a negative impact on our student loan refinancing business.
Speaker 1: If you're not paying your student loans, there's no motivation
Speaker 1: to refinanceing to a lower rate. So that the US
Speaker 1: went from generating about two point one billion dollars in
Speaker 1: originations UM two and a half years ago in the
Speaker 1: Q one to only four in a million this quarter. Well,
Speaker 1: the reason we've been able to drive record revenue growth
Speaker 1: this quarter and the prior three quarters is because we're
Speaker 1: one stop shop for the consumer's financial needs. So we
Speaker 1: have businesses that can operate and off overcome challenges in
Speaker 1: one area to another. As an example, our technology platform business,
Speaker 1: we're building out the a ws fintech through two companies,
Speaker 1: Galileo and technicis Gallet saw on acceleration and its revenue
Speaker 1: growth because of the greater need for people at lower
Speaker 1: costs and use new technology platforms. So we really benefit
Speaker 1: in different environments. And in this environment, we're seeing great
Speaker 1: trends and personal loans, checking and savings invest strong demand
Speaker 1: on credit card and also strong demand for technology services.
Speaker 1: Now you've got the student lawn moraditorium set to end
Speaker 1: at the end of this month, but it's unclear what
Speaker 1: the Biden administration is gonna do if it's going to
Speaker 1: extend that pause, you know, follow through on this idea
Speaker 1: of maybe canceling student debt altogether. What are you preparing
Speaker 1: for their I mean, does the war continue, Yes, it does.
Speaker 1: Our outlook for the second half of two thousand twenty
Speaker 1: two assumes the student loan moratorium continues throughout the entire year,
Speaker 1: and also that the President does provide forgiveness at about
Speaker 1: ten thousand dollars for individuals. Um. If that actually happens,
Speaker 1: and it's definitive, we could see a little bit of benefit,
Speaker 1: but we're not counting on it. Um. We assume the
Speaker 1: more torm will continue through the end of the year,
Speaker 1: but once the government makes it the definitive statement, then
Speaker 1: people can make real choices. Right now, they're doing nothing
Speaker 1: and it's actually hurting them. They're not benefiting from refinancing
Speaker 1: before rates go higher, and they're expected to go higher,
Speaker 1: so lose some of the savings. In addition to that,
Speaker 1: they're not sure how much it is gonna be forgiven,
Speaker 1: or if it will be forgiven at all, so they're
Speaker 1: not sure if they should refinance at all. So once
Speaker 1: we have a decision, we'll be able to pivot off
Speaker 1: of that and go to market in a in a
Speaker 1: concerted way. But right now we're anticipating no benefit of
Speaker 1: the more Tory amending before the end of the year. Meantime,
Speaker 1: you know, we still have what seems to be a
Speaker 1: deteriorating macro environment. Walmart just announced more layoffs today. Robin
Speaker 1: Hood announced yesterday they're laying off their workforce. Robin Hood
Speaker 1: as a competitor to so far in some respects. I
Speaker 1: was on this call with Latin of the CEO, who said,
Speaker 1: you know, he anticipated market conditions, good market conditions would
Speaker 1: lack less longer than they've lasted, So that's on me.
Speaker 1: He used those words, what's your own approach to hiring
Speaker 1: another costs. I mean, you know, is there any chances
Speaker 1: coming for you? Well, we've been built tightening since March
Speaker 1: of two thousand twenty when that largest business and our
Speaker 1: most profitable business got cut by sv and so we've
Speaker 1: been pretty prudent about how we're allocating our capital and
Speaker 1: what we're investing in. We've delivered eight consecutive quarters and
Speaker 1: three quarters in a row of record revenue, and we
Speaker 1: had gap profitability in our bank for the first time
Speaker 1: this quarter. And that's because of a prudent relationship between
Speaker 1: how much we invest, what risk we willing to take,
Speaker 1: and also dropping into the bottom line. So we endeavor
Speaker 1: to drop about thirty of incremental revenue to offense and reinvest.
Speaker 1: That keeps us disciplined and on costs on the cost
Speaker 1: side of the equation, and not build up with fixed
Speaker 1: expense that we can't cover within Coromonto revenue. Anthony not
Speaker 1: CEO of Sophie always going to have here, Anthony, thank
Speaker 1: you for joining. Thank you all right, coming up, Michael
Speaker 1: Sailor stepping down as CEO of micro Strategy. But it
Speaker 1: doesn't necessarily mean the end of the bitcoin error. We're
Speaker 1: gonna hear directly from him about that and much more
Speaker 1: coming up next. This is Bloomberg micro Strategy is changing
Speaker 1: up its leadership. Michael Sailor, who co founded the company
Speaker 1: in ninety nine, is giving up his CEO title, saying
Speaker 1: he will increase his advocacy efforts for holding bitcoin. Shares
Speaker 1: of microL Strategy climbed as much as after this announcement.
Speaker 1: Sailor will continue to service executive chair micro Strategy pro
Speaker 1: is it in Funk, Well, we'll take on that CEO
Speaker 1: role on August eight. Joining me to talk about all
Speaker 1: this and more is Michael Saylor himself. Michael, great to
Speaker 1: have you with us, So talk to us about what
Speaker 1: drove this decision to move on from that CEO spot.
Speaker 1: Is it the end of the Bitcoin era for micro Strategy? No, No,
Speaker 1: it's the getting of the bitcoin era. Um. We got
Speaker 1: into bitcoin about two years ago and it's been a
Speaker 1: story of great success. The stock is up a hundred
Speaker 1: and twenty three. We outperform bitcoin. We did three x
Speaker 1: as well as any other enterprise software company, about three
Speaker 1: x as well as any other big tech company. So
Speaker 1: the shareholder returns have have been better than any competitive
Speaker 1: stock or any competitive asset. Class, and most importantly, our
Speaker 1: balance sheet has swelled. We've increased our enterprise value by
Speaker 1: more than seven hundred and thirty in essence, from six
Speaker 1: hundred million to five and a half billion dollars over
Speaker 1: that twenty form on time frame. So now we've got
Speaker 1: to the to the next point in our development where
Speaker 1: we've decided we wanted to have a full time, world
Speaker 1: class CFO, and we also wanted to bring one more
Speaker 1: person the management team. So Andrew Kang joined us in
Speaker 1: May as CFO. Fongly had been the president and CFO
Speaker 1: of the company, and when Andrew joined, that opened up
Speaker 1: the door for us to make Fong the president and
Speaker 1: CEO and for me to move to the role of
Speaker 1: executive chairman of the company. Now, some people have written
Speaker 1: in the news that somehow this is related to our
Speaker 1: quarterly result or this large impairment charge we talk in
Speaker 1: Q two. It's totally unrelated. The fact is I've been
Speaker 1: working with Fong on CEO succession for about four years
Speaker 1: now and it's always been part of the plan. We
Speaker 1: finally got to the point where we had Andrew, our
Speaker 1: new CFO on board and we could actually make the
Speaker 1: change in Fong to b CEO. So I think that
Speaker 1: the markets responding to the fact that now instead of
Speaker 1: two executives Uh Sailor and Fong Lee, we have free executives,
Speaker 1: and um, it allows me to do what I like
Speaker 1: to do, which is bitcoin advocacy bitcoin acquisition. I'll continue
Speaker 1: to provide oversight for bitcoin acquisition as the chair of
Speaker 1: the Investments Committee of the board. I'll stay as the
Speaker 1: Chair of the board, and it means Fong who has
Speaker 1: been the president and the chief operating executive, he'll just
Speaker 1: be running the day to day business and Andrew, whose
Speaker 1: world class CFO, will be here to help us pursue
Speaker 1: all of our financial strategies. Okay, so just for the record, then,
Speaker 1: to those who are speculating that you were pushed out
Speaker 1: of this role, is there any truth to that? No,
Speaker 1: I'm first of all, it's my idea, Emily, and second
Speaker 1: of all, some people say it's their idea. I'm the
Speaker 1: controlling shareholder of the company. I have the majority of
Speaker 1: the voting stock and so I've been planning to place
Speaker 1: Falling as the CEO since we made him chief operating officer.
Speaker 1: That was like and we made him president in and
Speaker 1: at that point he was running sales, marketing, technology services,
Speaker 1: pretty much everything. And he was the CFO and so
Speaker 1: that was his two years to get comfortable in that role.
Speaker 1: And uh, and we couldn't elevate him to CEO until
Speaker 1: we had another CFO. It's it's you know, it's totally
Speaker 1: inappropriate to have a CEO and CFO as one person
Speaker 1: in a publicly traded company. So the catalyst for this is, um,
Speaker 1: when could I find a CFO and when would when
Speaker 1: would Falling have had the time to season in the
Speaker 1: role and both of those things. Uh, they the plan
Speaker 1: predates my infatuation with bitcoin, Emily, it goes back that
Speaker 1: far many years. All right, still, micro Strategy lost a
Speaker 1: billion dollars due to your bitcoin holdings. It's underperforming. You
Speaker 1: know the biggest tech companies that are also underperforming. How
Speaker 1: do you square that? You know, how much is too
Speaker 1: much for you? Or when will it ever be too much? Okay, Well,
Speaker 1: first of all, it's a non cash and definite and
Speaker 1: tangible loss um. The number that matters to our shareholders
Speaker 1: is that's the number of bitcoin we hold on our
Speaker 1: balance sheet. And as I've just laid out, over a
Speaker 1: two year period, are our strategy outperformed in NASDAC by
Speaker 1: a factor of ten. So we are volatile in the
Speaker 1: near term, more volatile than a lot of things. But
Speaker 1: volatility is the price you pay for performance. We could
Speaker 1: have chosen a more conventional path in August of and
Speaker 1: just given five hundred million dollars back to the shareholders
Speaker 1: and operated an enterprise software company that would have been
Speaker 1: worth about sixty dollars a share. But there's no way
Speaker 1: we could have achieved superior shareholder returns if we weren't
Speaker 1: willing to take a risk and embrace that volatility. So
Speaker 1: the result that you can see it is the stock
Speaker 1: is above three hundred dollars a share. It gyrates. We
Speaker 1: had more volatility in one hour emily than we had
Speaker 1: in twelve weeks before. But I embraced the volatility because
Speaker 1: the alternative would be we're dead money and no one
Speaker 1: cares about us now. Even Tesla sold seventy of its
Speaker 1: crypto holdings, And on that day that Tesla announced it,
Speaker 1: you tweeted, if you sell seventy five a few bitcoin,
Speaker 1: you only have twenty of your bitcoin left? Is Elon
Speaker 1: Musk wrong? Such a sad day for Tesla? It's you know,
Speaker 1: we all regret having having chosen great assets, all of
Speaker 1: my investment mistakes in my entire career where I bought
Speaker 1: a good thing and then I sold it too soon.
Speaker 1: And uh, there's never going to be more than twenty
Speaker 1: one million bitcoin. In a hundred years from now, there
Speaker 1: will be no more than twenty one million bitcoin. So
Speaker 1: I think that it's a buy and hold strategy. I
Speaker 1: think that, uh, you know, Tesla has has many other
Speaker 1: issues that I am not pervy too, so it's not
Speaker 1: my ways to criticize them. But I do think that
Speaker 1: acquiring and folding high quality property forever is a good
Speaker 1: investment strategy, and Bitcoin, in my opinion, is the highest
Speaker 1: quality property in the world. Now, a housekeeping question. You
Speaker 1: filed with the SEC to issue four hundred fifty thousand
Speaker 1: shares as part of an employee benefit plan. Is that
Speaker 1: going to the new CEO to you two other employees. No, Um,
Speaker 1: there will be a stock option grant to the new CEO.
Speaker 1: It's sixty thousand shares, um, but the rest goes to
Speaker 1: the employees, not to me. Um. I haven't had any
Speaker 1: stock option grants since ten and I work for a
Speaker 1: dollar a year, so uh, we have made a concerted
Speaker 1: effort to make sure that nearly all of our employees
Speaker 1: have either stock options or restricted stock units, and that
Speaker 1: way they share in in our bitcoin strategy success as
Speaker 1: well as our enterprise business intelligence strategy success. And that's
Speaker 1: been a highly successful motivational program. It's cut our attrition
Speaker 1: in half and been great from Morrel. So, look, I
Speaker 1: know bitcoin supporters have been arguing for a decade that uh,
Speaker 1: you know, decentralized cryptocurrency would dethrone the US dollar. It
Speaker 1: hasn't happened yet. Will that happen? No, I don't think
Speaker 1: it will happen. But what I do think is there's
Speaker 1: incredible consensus that the entire world wants a digital dollar,
Speaker 1: like a stable coin like Circle or tether and um,
Speaker 1: and they want it because their currencies are collapsing and
Speaker 1: eight billion people would like to have dollars on their
Speaker 1: Android phone. And I also think there's a consensus that
Speaker 1: a digital commodity like bitcoin is a really important asset
Speaker 1: to stand alongside things like gold or oil or land.
Speaker 1: And there's incredible demand for that sort of digital property
Speaker 1: in the world. And so I think bitcoin will. Bitcoin
Speaker 1: is going to grow as an asset class as it's
Speaker 1: legitimized and embrace as an asset class. I think it
Speaker 1: will coexist alongside other assets. And I think that there
Speaker 1: will always be fiat currencies from strong, well run nation states.
Speaker 1: But Emily, it is true that in place like Sri
Speaker 1: Lanka and Venezuela and Nigeria, their currencies aren't collapsing, and
Speaker 1: those citizens are going to use the dollars and medium
Speaker 1: of exchange for the near term. And if you want
Speaker 1: a long term store of value, and I'm saying looking
Speaker 1: out four years or longer, you want property, and and
Speaker 1: bitcoin is is of course that long term digital property
Speaker 1: you want to hold is a store of value, all right,
Speaker 1: Michael Sailor. Always good to have you, Michael, Thank you.
Speaker 1: Onto the latest and the Twitter Musk saga Twitter suppeded
Speaker 1: records from equity investors and sought information on investors like
Speaker 1: Mark Andreason and Ken Griffin and a whole of other
Speaker 1: venture capital figures you may have seen tweeting about it
Speaker 1: this over Elon Musk's financing of the four billion dollar buyout.
Speaker 1: We should note that Bloomberg LP, which owns Bloomberg News,
Speaker 1: has invested in Andres and Horowitz and here to break
Speaker 1: it all down for us is Jeff Feely, our reporter
Speaker 1: who covers the courts of Delaware and who has been
Speaker 1: very busy over the last few weeks. So, look, are
Speaker 1: these moves pretty common as part of discovery, Jeff, It's
Speaker 1: standard operating procedure for both sides in these lawsuits to
Speaker 1: issue a bunch of subpoenas to banks, equity investors, lawyers
Speaker 1: so they can gather the information they need to build
Speaker 1: their cases. So we've actually spoken to some of these
Speaker 1: friends of Elon Musk who have been subpoena and one
Speaker 1: of them is David Sacks, who's actually come on our
Speaker 1: show a couple of times in the last few months
Speaker 1: to talk about the potential for this deal to happen.
Speaker 1: Take a listen to what he had to say. When
Speaker 1: you put bots on Twitter and pretend to be someone
Speaker 1: you're not, when you pretend, when you basically violate the
Speaker 1: authenticity requirement, were basically perpetrating and kind of fraught that
Speaker 1: is not free speech, that's fake speech. Is perfectly fair
Speaker 1: game under any kind of free speech policy to take
Speaker 1: down those kinds of bots, and I fully expect that
Speaker 1: Ellen will be far more effective at doing that than
Speaker 1: the current management of Twitter because they've been unable to
Speaker 1: do that. So you know, obviously we don't know what
Speaker 1: kind of discussions they've had behind the scenes, if if
Speaker 1: any at all, But what might the courts be hoping
Speaker 1: to get from someone like a David sax Well. This,
Speaker 1: this issue of the box is really where the rubber
Speaker 1: is going to meet the road. As my understanding, it's
Speaker 1: very difficult to get very specific numbers on these things
Speaker 1: because everybody has to deal with them. That that's not
Speaker 1: just Twitter, it's a common problem in the tech industry
Speaker 1: when you're dealing with this kind of stuff. So it's
Speaker 1: not going to be an easy argument for Mr Musk
Speaker 1: to win on. And the Twitter folks, of course say
Speaker 1: that it's all sort of a pretext ginned up so
Speaker 1: to to provide a basis for him to walk away.
Speaker 1: Judge McCormick is going to be the ultimate decider of
Speaker 1: all of it. Okay, what's next here, Well, we're still
Speaker 1: in the discovery phase, so we're gonna still have a
Speaker 1: blizzard of subpoenas. Next we'll start with notice of depositions
Speaker 1: and they'll be you know, probably hundreds of depositions in
Speaker 1: this case, bankers, Mr Musk, the Twitter folks. You know,
Speaker 1: everybody's gonna have to sit down and say their peace,
Speaker 1: and then we're gonna go to trial in October and
Speaker 1: it should be quite a show. A show. Indeed, we
Speaker 1: will be following this blizzard of subpoenas and I know
Speaker 1: you will continue to be very busy through October. Jeff Phalely,
Speaker 1: thank you for waiting and appreciate it. Okay, that does
Speaker 1: it for this edition of Bloomberg Technology. Coming up later
Speaker 1: this week Thursday, we've got Steve Wesley from the Wesley Group.
Speaker 1: We're gonna be covering Tesla's annual meeting. Of course, he
Speaker 1: was a former director on Tesla's board. And don't forget
Speaker 1: to check out our podcast wherever you get your podcasts.
Speaker 1: I'm Emily check in San Francisco. This is Blueberg. H