1 00:00:00,080 --> 00:00:12,960 Speaker 1: Ye. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 2 00:00:13,480 --> 00:00:17,560 Speaker 1: jay Ley. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,480 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:33,760 Speaker 1: Bloomberg dot com, and of course on the Bloomberg You know, John, 5 00:00:33,920 --> 00:00:36,760 Speaker 1: I'm looking at Uber today, Uh, in part because they're 6 00:00:36,880 --> 00:00:39,440 Speaker 1: raising more money because they're burning through cash very quickly, 7 00:00:39,479 --> 00:00:43,199 Speaker 1: and of course, uh, mainly because they announced that they 8 00:00:43,200 --> 00:00:48,080 Speaker 1: are going to halt their self driving test after a fatality. 9 00:00:48,120 --> 00:00:50,400 Speaker 1: And here to talk with us about that and some 10 00:00:50,440 --> 00:00:54,840 Speaker 1: of the implications is Richard Windsor Radio Free Mobile founder. 11 00:00:55,480 --> 00:00:59,720 Speaker 1: So Richard tell us why there was a fat fatality? Uh, 12 00:01:00,080 --> 00:01:04,720 Speaker 1: when autonomous driving was supposed to be safer. Now, yeah, 13 00:01:04,760 --> 00:01:07,600 Speaker 1: I mean, let's let's get I mean, the the important 14 00:01:07,600 --> 00:01:09,200 Speaker 1: stuff out of the way. Is I mean, the first 15 00:01:09,240 --> 00:01:11,080 Speaker 1: thing I think to bear in mind is that the 16 00:01:11,160 --> 00:01:15,600 Speaker 1: circumstance of this incident were so it was that if 17 00:01:15,640 --> 00:01:19,560 Speaker 1: that had just been a regular driver exactly the same circumstances, 18 00:01:19,600 --> 00:01:22,559 Speaker 1: there is almost no doubt whatsoever that the pedestrian probably 19 00:01:22,560 --> 00:01:25,959 Speaker 1: would have also have been killed. So it doesn't look 20 00:01:26,000 --> 00:01:30,760 Speaker 1: like it was a fault of the autonomous driving system. 21 00:01:30,800 --> 00:01:32,440 Speaker 1: But the main point I think the bear in mind 22 00:01:32,560 --> 00:01:36,720 Speaker 1: here is that you know, with four over forty deaths 23 00:01:36,720 --> 00:01:39,640 Speaker 1: on US roads every year, one of the major aims 24 00:01:39,800 --> 00:01:43,560 Speaker 1: of autonomous driving is to make it much safer. So arguably, 25 00:01:43,560 --> 00:01:45,760 Speaker 1: in this case than she needs to be much better 26 00:01:45,800 --> 00:01:50,120 Speaker 1: than the human. I love that self driving cars they're 27 00:01:50,160 --> 00:01:53,280 Speaker 1: just like us. So what's the road ahead? I mean, honestly, 28 00:01:53,440 --> 00:01:55,840 Speaker 1: this has been a very controversial path and a lot 29 00:01:55,880 --> 00:01:58,400 Speaker 1: of people were sort of counting on this experiment to 30 00:01:58,480 --> 00:02:00,880 Speaker 1: save Uber. Meanwhile, it is leading through cash and is 31 00:02:00,960 --> 00:02:03,720 Speaker 1: raising one and a half billion dollars in the loan 32 00:02:03,800 --> 00:02:07,160 Speaker 1: market right now. Um, is this a huge setback for them? 33 00:02:07,320 --> 00:02:09,200 Speaker 1: Or is it just a little bit of bad PR 34 00:02:09,919 --> 00:02:12,840 Speaker 1: among a stream of bad PR that just seems never 35 00:02:13,000 --> 00:02:16,360 Speaker 1: ending for Uber? Okay? I think, firstly, again to be 36 00:02:16,400 --> 00:02:18,240 Speaker 1: fair to Uber, I think if this had been a 37 00:02:18,240 --> 00:02:20,200 Speaker 1: way Moo vehicle, I think the outcome would have been 38 00:02:20,240 --> 00:02:23,120 Speaker 1: exactly the same. Um, you know, Weymo being you know, 39 00:02:23,240 --> 00:02:26,080 Speaker 1: the best company at autonomous driving. When it comes to 40 00:02:26,160 --> 00:02:29,359 Speaker 1: Uber itself, you need to separate it into long term 41 00:02:29,400 --> 00:02:31,840 Speaker 1: and short term. The long term, yeah, this is this 42 00:02:31,919 --> 00:02:36,160 Speaker 1: is a major problem because in the long term, Uber's 43 00:02:36,200 --> 00:02:39,040 Speaker 1: future is probably going to be dominated by autonomous driving, 44 00:02:39,040 --> 00:02:41,080 Speaker 1: which means the company needs to be very good at 45 00:02:41,120 --> 00:02:43,400 Speaker 1: it to survive. At the moment, they're not. This is 46 00:02:43,440 --> 00:02:46,480 Speaker 1: another setback that's a problem. The short term is something 47 00:02:46,480 --> 00:02:51,600 Speaker 1: completely different, which is that what Uber represents today as 48 00:02:51,639 --> 00:02:54,200 Speaker 1: a marketplace where people come to buy and sell things 49 00:02:54,440 --> 00:02:57,680 Speaker 1: e g. Drivers selling their services and passengers buying the 50 00:02:57,720 --> 00:03:00,920 Speaker 1: services of the drives. It's a marketplace, and the marketplaces 51 00:03:01,040 --> 00:03:04,120 Speaker 1: dominance is incredibly important for profitability. And this is the 52 00:03:04,240 --> 00:03:06,880 Speaker 1: key problem that Uber had last year. It lost a 53 00:03:06,880 --> 00:03:09,639 Speaker 1: lot of market share to lift last year, and it's 54 00:03:09,800 --> 00:03:12,280 Speaker 1: right at the point where it may lose its dominance 55 00:03:12,320 --> 00:03:16,320 Speaker 1: position in the United States, which would have substantial implications 56 00:03:16,320 --> 00:03:20,079 Speaker 1: for its ability to generate cash. Richard, speaking of dominant positions, 57 00:03:20,120 --> 00:03:26,120 Speaker 1: let's talk about Facebook. Where's Mark Zuckerberg? You got me? 58 00:03:26,200 --> 00:03:29,480 Speaker 1: I'm afraid I have no idea? Apologies, what is it? 59 00:03:29,600 --> 00:03:33,519 Speaker 1: Day four? Day four, and we haven't heard executives at Facebook. 60 00:03:33,560 --> 00:03:37,000 Speaker 1: It is remarkable how how bad they are at addressing 61 00:03:37,040 --> 00:03:41,920 Speaker 1: this situation. Yeah, it is a problem, and don't don't forget, 62 00:03:42,040 --> 00:03:44,440 Speaker 1: you know, think about you know, think about how they 63 00:03:44,480 --> 00:03:47,480 Speaker 1: grew up. Think about how Silicon Valley operates. They are 64 00:03:48,400 --> 00:03:50,800 Speaker 1: you know, they've always had this mindset of move very 65 00:03:50,880 --> 00:03:54,040 Speaker 1: quickly and allow things to break. Unfortunately, every now and again, 66 00:03:54,080 --> 00:03:56,320 Speaker 1: when you break something, it's far worse than you could 67 00:03:56,360 --> 00:03:58,880 Speaker 1: have anticipated. And I think, to be honest with you, 68 00:03:59,240 --> 00:04:02,280 Speaker 1: the bigger question is is where is Cheryl Sandberg? Because 69 00:04:02,560 --> 00:04:06,600 Speaker 1: Cheryl is much more the operation level head person inside 70 00:04:06,600 --> 00:04:11,560 Speaker 1: this organization. So I would have expected, you know, Cheryl, 71 00:04:11,600 --> 00:04:13,640 Speaker 1: who have started to move to contain this problem, and 72 00:04:13,720 --> 00:04:18,279 Speaker 1: they make him matters worse At the moment, Richard Um, 73 00:04:18,520 --> 00:04:21,600 Speaker 1: may I think a little bit, yes, Um, But at 74 00:04:21,600 --> 00:04:23,360 Speaker 1: the end of the day, I think it. I think 75 00:04:23,600 --> 00:04:27,360 Speaker 1: this highlights a much wire problem. And this problem is 76 00:04:27,920 --> 00:04:31,240 Speaker 1: that in general, consumers seem to have the impression that 77 00:04:31,320 --> 00:04:34,599 Speaker 1: the likes of Google and Facebook are free, and actually 78 00:04:34,640 --> 00:04:36,720 Speaker 1: they're not, and they never have been. The issue is, 79 00:04:37,200 --> 00:04:40,120 Speaker 1: when it comes down to it, in reality, the consumer 80 00:04:40,240 --> 00:04:43,479 Speaker 1: either pays for Facebook and Google services with personal data 81 00:04:43,640 --> 00:04:47,000 Speaker 1: or you pay with cash. That is the way it is, 82 00:04:47,400 --> 00:04:49,480 Speaker 1: and so I think when it comes to privacy, there 83 00:04:49,560 --> 00:04:51,560 Speaker 1: is going to come a point when these companies to 84 00:04:51,600 --> 00:04:54,840 Speaker 1: have to turn around to their consumers and say be clear, 85 00:04:55,440 --> 00:04:57,479 Speaker 1: is you're paying for this service with personal data, you 86 00:04:57,560 --> 00:04:59,840 Speaker 1: need to allow us to track you or we're gonna 87 00:04:59,839 --> 00:05:02,160 Speaker 1: have to charge you a certain amount of money per month. Yeah, 88 00:05:02,200 --> 00:05:04,000 Speaker 1: but Richard, is that going to be in a half 89 00:05:04,080 --> 00:05:10,920 Speaker 1: moment that causes Facebook and other tech companies to lose clients? Um? 90 00:05:11,040 --> 00:05:13,159 Speaker 1: Well yeah, Again, the question is is that you know 91 00:05:13,200 --> 00:05:16,320 Speaker 1: again the real question who are the clients of these companies, 92 00:05:16,320 --> 00:05:18,200 Speaker 1: because it certainly isn't the users. The way I think 93 00:05:18,240 --> 00:05:21,720 Speaker 1: about it is sadly the users, you and me with 94 00:05:21,839 --> 00:05:25,400 Speaker 1: a product that customers are the advertisers because these are 95 00:05:25,400 --> 00:05:28,320 Speaker 1: the guys who generate the money. Now I think my 96 00:05:28,920 --> 00:05:30,800 Speaker 1: I think this is going to work is particularly I 97 00:05:30,839 --> 00:05:33,640 Speaker 1: think gdp R in Europe is a good catalyst for this. 98 00:05:34,160 --> 00:05:37,680 Speaker 1: Is it increased his massive increasing regulatory pressure will put 99 00:05:37,720 --> 00:05:39,719 Speaker 1: them put these companies in the position where they have 100 00:05:40,000 --> 00:05:43,200 Speaker 1: up front about something they've kept quite quiet for a 101 00:05:43,240 --> 00:05:46,200 Speaker 1: long time, which is, look, if you want this service 102 00:05:46,240 --> 00:05:47,960 Speaker 1: to be free, we need to have access to your 103 00:05:47,960 --> 00:05:50,840 Speaker 1: personal data. If you don't like that, yeah, fine, but 104 00:05:50,920 --> 00:05:53,599 Speaker 1: you need to pay us and why you Professor Scott Galloway. 105 00:05:54,160 --> 00:05:56,400 Speaker 1: Richard has been very outspoken on all of this and 106 00:05:56,440 --> 00:05:58,960 Speaker 1: he wrote an Esquire earlier this year, and I'm going 107 00:05:59,000 --> 00:06:01,240 Speaker 1: to quote him. If you're a country club with a 108 00:06:01,279 --> 00:06:03,680 Speaker 1: beach or repall, it's more profitable in the short run 109 00:06:03,760 --> 00:06:06,880 Speaker 1: not to have lifeguards. There are risks to that business model, 110 00:06:07,080 --> 00:06:10,560 Speaker 1: as there are to Facebook's dependence on mainly algorithmic moderation. 111 00:06:10,880 --> 00:06:12,920 Speaker 1: But it saves a lot of money, and they've saved 112 00:06:12,960 --> 00:06:15,520 Speaker 1: a lot of money. They've made a lot of money. 113 00:06:15,520 --> 00:06:17,359 Speaker 1: Are we now at an inflection point where they're going 114 00:06:17,400 --> 00:06:19,400 Speaker 1: to have to start spending a whole lot more money 115 00:06:19,440 --> 00:06:25,960 Speaker 1: on people and headcount at Facebook? In fact, we're already there. Um. 116 00:06:26,680 --> 00:06:29,120 Speaker 1: In the research that Radio Free Mobile has done, we 117 00:06:29,360 --> 00:06:32,200 Speaker 1: actually highlighted the fact that Facebook, when it comes to 118 00:06:32,320 --> 00:06:36,320 Speaker 1: artificial intelligence and algorithmic moderation, they are the worst pretty 119 00:06:36,400 --> 00:06:38,520 Speaker 1: much out there today. And this is why they have 120 00:06:38,640 --> 00:06:43,320 Speaker 1: such a significant fake news problem. Um. And they've already 121 00:06:43,320 --> 00:06:45,280 Speaker 1: signaled this, you know, the company said, I think Q 122 00:06:45,520 --> 00:06:48,960 Speaker 1: three last year they were going to recruit ten thousand 123 00:06:48,960 --> 00:06:51,960 Speaker 1: more people, which basically means by the middle of this year, 124 00:06:52,320 --> 00:06:55,240 Speaker 1: Facebook is going to have more moderators than it has 125 00:06:55,320 --> 00:06:59,359 Speaker 1: in revenue generating or product development roles. And this is 126 00:06:59,400 --> 00:07:02,680 Speaker 1: why revenue US might do this year, but operating expansion 127 00:07:02,720 --> 00:07:05,920 Speaker 1: is going to go up fourly, giving a significant impact 128 00:07:05,920 --> 00:07:09,320 Speaker 1: on profitability going forward. This problem has already arrived, Richard. 129 00:07:09,320 --> 00:07:11,000 Speaker 1: From your perspective, do you think that the sell off 130 00:07:11,040 --> 00:07:13,760 Speaker 1: and Facebook shares and sort of the sympathy sell off 131 00:07:13,760 --> 00:07:18,000 Speaker 1: and other tex shares has gone too far? Great question. 132 00:07:18,200 --> 00:07:20,400 Speaker 1: I'm a little bit more cautious on Facebook because of 133 00:07:20,400 --> 00:07:25,720 Speaker 1: this deterioration in um operating performance in you know, this year. 134 00:07:26,000 --> 00:07:28,960 Speaker 1: In general, I have been a little bit more cautious 135 00:07:29,440 --> 00:07:31,880 Speaker 1: on these stocks simply because they have run very far. 136 00:07:31,960 --> 00:07:35,920 Speaker 1: Evaluations are now assuming an awful lot, which is why 137 00:07:36,040 --> 00:07:39,880 Speaker 1: from an investment perspective, you know, I've been preferring perhaps 138 00:07:39,920 --> 00:07:42,480 Speaker 1: those in China, particularly by Do, which is arguably one 139 00:07:42,480 --> 00:07:46,240 Speaker 1: of the cheapest artifice intelligence investments you can make, or 140 00:07:46,280 --> 00:07:48,720 Speaker 1: even ten cent, because in the Chinese market there's still 141 00:07:48,760 --> 00:07:51,280 Speaker 1: some distance to go. Richard, Wins has been greater cash 142 00:07:51,280 --> 00:07:53,360 Speaker 1: out with you are ready a free mobile fander joining 143 00:07:53,440 --> 00:08:11,520 Speaker 1: us on the phone from dubai yea Well. Facebook shares 144 00:08:11,600 --> 00:08:15,840 Speaker 1: are declining in a pre trade activity, and the question 145 00:08:16,080 --> 00:08:19,200 Speaker 1: is our trainer is gonna come in and buy this dip? 146 00:08:19,240 --> 00:08:23,120 Speaker 1: Would you? John? Would I buy the dip. Yeah, the 147 00:08:23,200 --> 00:08:25,840 Speaker 1: like minor, minor, tiny bit like the move. I would 148 00:08:25,840 --> 00:08:28,800 Speaker 1: buy about one. Yeah, it's enough of a dip for you. 149 00:08:29,160 --> 00:08:32,319 Speaker 1: I thought it was interesting that credit held up so well. Yeah, 150 00:08:32,360 --> 00:08:34,760 Speaker 1: well let's let's find out what Brian. Thanks Brian Levitt, 151 00:08:34,760 --> 00:08:39,199 Speaker 1: Oppenheimer Funds Senior investment strategist joining US. Now, Brian, are 152 00:08:39,240 --> 00:08:41,600 Speaker 1: you are you recommending that your clients go in and 153 00:08:41,640 --> 00:08:44,960 Speaker 1: buy the slight or you know, perhaps it'll be a 154 00:08:44,960 --> 00:08:50,880 Speaker 1: massive one hell off yesterday? Yeah, I think that. I 155 00:08:50,880 --> 00:08:53,600 Speaker 1: mean I always advise investors to kind of turn down 156 00:08:53,640 --> 00:08:56,679 Speaker 1: the volume on days, like on days like Thanks Brian. 157 00:08:59,400 --> 00:09:06,240 Speaker 1: Brian Levit joining US Investment Strategy. There's there's um, you know, 158 00:09:06,320 --> 00:09:09,200 Speaker 1: there's a conference of factors weighing on the market right now. 159 00:09:09,240 --> 00:09:10,839 Speaker 1: I don't think that this is the end of this 160 00:09:10,880 --> 00:09:13,840 Speaker 1: long term bull market. It's uh, you know, we're dealing 161 00:09:13,840 --> 00:09:17,920 Speaker 1: with uncertainty around trade, uncertainty with regulation and the technology sector, 162 00:09:18,160 --> 00:09:21,040 Speaker 1: uncertainty with around monetary policy, and we haven't had that 163 00:09:21,080 --> 00:09:24,600 Speaker 1: in a while. So was a pretty benign year, and 164 00:09:24,760 --> 00:09:27,680 Speaker 1: a correction was to be expected, and you know, typically 165 00:09:27,679 --> 00:09:31,319 Speaker 1: these corrections calm. We had one in February they test bottoms. 166 00:09:31,320 --> 00:09:34,480 Speaker 1: It takes some time to clear. This wasn't a correction, right, 167 00:09:34,520 --> 00:09:37,520 Speaker 1: what's that This doesn't count as a correction? Still right? Well, 168 00:09:37,559 --> 00:09:39,400 Speaker 1: not this one, but I think the one in February 169 00:09:39,400 --> 00:09:43,400 Speaker 1: count as a correction. And UM and so for long 170 00:09:43,480 --> 00:09:46,680 Speaker 1: term investors, UM, I suspect this cycle has room to run. 171 00:09:46,760 --> 00:09:50,080 Speaker 1: For the traders, I'll let them decide whether they're you know, 172 00:09:50,160 --> 00:09:52,920 Speaker 1: buying these bottoms. You know this one point eight percent 173 00:09:53,000 --> 00:09:55,880 Speaker 1: to client. But the long term investors should be more 174 00:09:55,960 --> 00:10:00,320 Speaker 1: cautious once the yield curve inverts and credit spreads out. 175 00:10:00,400 --> 00:10:04,280 Speaker 1: And we're not seeing that a lot of conversations about 176 00:10:04,320 --> 00:10:07,200 Speaker 1: the lack of volatility at the index level, but below 177 00:10:07,240 --> 00:10:10,640 Speaker 1: the index, Brian, we saw this continued rotation from value 178 00:10:10,640 --> 00:10:13,360 Speaker 1: to growth, from growth to value. If we continue to 179 00:10:13,400 --> 00:10:16,640 Speaker 1: see tech come under pressure in the United States with 180 00:10:16,880 --> 00:10:20,480 Speaker 1: calls for regulation and calls for new taxes, where do 181 00:10:20,520 --> 00:10:23,280 Speaker 1: you see the leadership coming from in this market. Well, 182 00:10:23,320 --> 00:10:25,080 Speaker 1: I still think it's going to be an environment where 183 00:10:25,120 --> 00:10:28,640 Speaker 1: you want to own the sectors that are exposed to 184 00:10:28,679 --> 00:10:31,320 Speaker 1: global growth, and you know technology is going to be 185 00:10:31,360 --> 00:10:34,480 Speaker 1: a part of that. UM. Although I agree regulation could 186 00:10:34,520 --> 00:10:36,720 Speaker 1: weigh on part of the part of the sector. I 187 00:10:36,720 --> 00:10:41,040 Speaker 1: think it's an industrials. I think it's UM materials, it's 188 00:10:41,040 --> 00:10:43,440 Speaker 1: it's the type of names that are going to benefit 189 00:10:43,480 --> 00:10:47,360 Speaker 1: from a decent growth environment around the world. UM some 190 00:10:47,440 --> 00:10:53,000 Speaker 1: pressure on the US dollar and UM, but A I 191 00:10:53,040 --> 00:10:55,600 Speaker 1: don't think that we're heading to an environment where the 192 00:10:55,760 --> 00:10:59,240 Speaker 1: true value oriented names become the big out performers. I 193 00:10:59,240 --> 00:11:02,000 Speaker 1: think you would need US significant catalyst for that. I 194 00:11:02,040 --> 00:11:04,439 Speaker 1: think some suspected that the tax bill could be that, 195 00:11:04,600 --> 00:11:07,680 Speaker 1: but we realize that the stimulus on the fiscal side 196 00:11:07,720 --> 00:11:10,959 Speaker 1: is somewhat being offset or is being offset by monetary tightening. 197 00:11:11,240 --> 00:11:13,280 Speaker 1: And if we just think about the G twenty communicate 198 00:11:13,360 --> 00:11:15,840 Speaker 1: that comes out letter this week is a PR statement 199 00:11:15,880 --> 00:11:19,200 Speaker 1: for global stability. The PR for global stability is not 200 00:11:19,240 --> 00:11:21,360 Speaker 1: too great at the moment. Reports here in the United 201 00:11:21,400 --> 00:11:24,000 Speaker 1: States that the President is said to be planning terrorists 202 00:11:24,040 --> 00:11:28,440 Speaker 1: of up to sixty billion dollars fresh terrorists on Chinese imports. 203 00:11:28,440 --> 00:11:33,400 Speaker 1: How is the PR around this global synchronized growth story. Well, 204 00:11:33,440 --> 00:11:36,080 Speaker 1: I think it's I think that we need to watch 205 00:11:36,160 --> 00:11:40,559 Speaker 1: and see, UM what could disrupt it? UM. The these 206 00:11:41,240 --> 00:11:43,840 Speaker 1: we've been saying for some time. The only thing that 207 00:11:43,920 --> 00:11:47,240 Speaker 1: will curtail this cycle is a policy mistake somewhere in 208 00:11:47,280 --> 00:11:50,920 Speaker 1: the world, whether that's on the monetary side in the US, Europe, 209 00:11:50,960 --> 00:11:55,000 Speaker 1: or China, or whether that's through some sort of beginning 210 00:11:55,120 --> 00:11:58,240 Speaker 1: of a trade battle around the world. I think that 211 00:11:58,440 --> 00:12:03,000 Speaker 1: could change a calculus on this. So UM, you know 212 00:12:03,160 --> 00:12:05,960 Speaker 1: we're we're longer in this cycle. I don't believe it 213 00:12:06,240 --> 00:12:09,920 Speaker 1: ends UM barring a major mistake. If we see something 214 00:12:09,960 --> 00:12:12,880 Speaker 1: that's too forceful on the monetary side or the trade side, 215 00:12:13,120 --> 00:12:16,520 Speaker 1: then we need to adjust our expectations. So, Brian, given that, 216 00:12:16,920 --> 00:12:19,559 Speaker 1: what are you recommending that clients do with their money, 217 00:12:19,640 --> 00:12:23,880 Speaker 1: in other words, how much allocation stocks, bunds. Well, we've 218 00:12:23,960 --> 00:12:26,400 Speaker 1: we've continued to believe that equities are the asset class 219 00:12:26,440 --> 00:12:30,520 Speaker 1: of choice. I I will like equities in this environment 220 00:12:30,600 --> 00:12:33,400 Speaker 1: until I see a significantly flat or yield curve not 221 00:12:33,400 --> 00:12:38,160 Speaker 1: not seventy five basis points significantly flat or um and 222 00:12:38,400 --> 00:12:42,280 Speaker 1: I see either an incredibly weak dollar which brings forward 223 00:12:42,320 --> 00:12:45,079 Speaker 1: the said or an incredibly strong dollar, which signals the 224 00:12:45,120 --> 00:12:48,480 Speaker 1: flight to quality. I don't believe we're there yet. So 225 00:12:48,800 --> 00:12:52,200 Speaker 1: for investors looking for growth UM to grow their assets, 226 00:12:52,200 --> 00:12:54,720 Speaker 1: we continue to think equities of the asset class of choice. 227 00:12:55,040 --> 00:12:58,079 Speaker 1: We favor the US cyclical names that are benefiting from 228 00:12:58,120 --> 00:13:01,839 Speaker 1: improving growth around the world. We favor the emerging markets. UM. 229 00:13:02,280 --> 00:13:05,840 Speaker 1: The backdrop for the emerging markets, barring too tight or 230 00:13:05,840 --> 00:13:10,960 Speaker 1: too significant of a trade battle, UM is quite good. 231 00:13:11,559 --> 00:13:14,800 Speaker 1: On the bond side, it's harder, although you know, yields 232 00:13:14,800 --> 00:13:18,319 Speaker 1: on investment grade are are UM. At least on treasuries 233 00:13:18,320 --> 00:13:21,280 Speaker 1: are better than they've been, which still like floating rate. 234 00:13:21,360 --> 00:13:23,360 Speaker 1: And I would say look to the emerging markets to 235 00:13:23,640 --> 00:13:27,280 Speaker 1: sovereign and corporate bonds. Real yields look quite attractive. Brian Lovitt, 236 00:13:27,280 --> 00:13:28,679 Speaker 1: thank you so much for joining us. Brian Levitt of 237 00:13:28,679 --> 00:13:43,319 Speaker 1: Oppenheimer Funds, the senior investment strategist. They're sounding very sanguine. 238 00:13:45,679 --> 00:13:47,600 Speaker 1: The White House is said to be planning to impose 239 00:13:47,679 --> 00:13:50,319 Speaker 1: tarists worth as much as sixty billion dollars on Chinese 240 00:13:50,320 --> 00:13:53,679 Speaker 1: products as an outcome one outcome of an investigation by 241 00:13:53,720 --> 00:13:57,760 Speaker 1: the US Trade Representative Robert Lightheiser. Those tarroists could come 242 00:13:57,840 --> 00:14:00,760 Speaker 1: as soon as this week. I want to bring in 243 00:14:00,800 --> 00:14:04,800 Speaker 1: Dinah Labor. She is a nod Economics chief economist. Diana 244 00:14:04,880 --> 00:14:06,520 Speaker 1: is great to have you with us on the program. 245 00:14:06,559 --> 00:14:08,719 Speaker 1: Sixty billion dollars worth of haterrorist Does that move the 246 00:14:08,800 --> 00:14:11,040 Speaker 1: dial and does that move us any closer to the 247 00:14:11,120 --> 00:14:15,600 Speaker 1: risk that things could get a bit ugly for international trade? Yes, 248 00:14:15,840 --> 00:14:19,080 Speaker 1: it does. And even though over the course of this 249 00:14:19,240 --> 00:14:24,080 Speaker 1: year China will try to mitigate the damage and will 250 00:14:24,120 --> 00:14:28,160 Speaker 1: engage in damage control, certainly before the November elections in 251 00:14:28,240 --> 00:14:31,800 Speaker 1: the US, further down the line, we are looking at 252 00:14:31,840 --> 00:14:35,600 Speaker 1: a full blown trade war. Really, how do we get there? 253 00:14:37,040 --> 00:14:41,920 Speaker 1: Look over the last twenty years, ever since China entered 254 00:14:42,000 --> 00:14:45,720 Speaker 1: the World Trade Organization in two thousand one, the globalized 255 00:14:46,120 --> 00:14:49,680 Speaker 1: economy as we have it has been all about incorporating China. 256 00:14:50,240 --> 00:14:53,640 Speaker 1: But it was on the premise that the Chinese were 257 00:14:53,800 --> 00:14:58,320 Speaker 1: converging to the Western liberal free market model. Maybe not 258 00:14:58,400 --> 00:15:02,880 Speaker 1: the politics, but certainly they can mix. And they have 259 00:15:03,000 --> 00:15:06,720 Speaker 1: now stated very clearly that they have no intention to 260 00:15:06,800 --> 00:15:11,560 Speaker 1: do so. They are going to pursue their own model 261 00:15:12,000 --> 00:15:16,560 Speaker 1: capitalism with Chinese characteristics. And as it is, this clash 262 00:15:16,640 --> 00:15:20,920 Speaker 1: between these two very different systems is not working out. 263 00:15:21,240 --> 00:15:24,280 Speaker 1: The global financial crisis was a result of that. The 264 00:15:24,440 --> 00:15:27,760 Speaker 1: years of week growth since nearly ten years now have 265 00:15:27,920 --> 00:15:30,880 Speaker 1: been a result of that. So there's no way unless 266 00:15:30,960 --> 00:15:34,960 Speaker 1: one or the other system converges that we can live 267 00:15:35,000 --> 00:15:37,400 Speaker 1: in the world of today. So, Diana, how much does 268 00:15:37,440 --> 00:15:44,040 Speaker 1: that reduce global growth for which time period are you 269 00:15:44,120 --> 00:15:46,680 Speaker 1: asking me? Are we talking about the next ten years 270 00:15:46,760 --> 00:15:49,280 Speaker 1: or are we look when what happened this year? When? When? 271 00:15:49,320 --> 00:15:52,120 Speaker 1: When does it start to matter? It will start to 272 00:15:52,240 --> 00:15:57,000 Speaker 1: matter already because trade war is one of the key 273 00:15:57,080 --> 00:16:02,560 Speaker 1: risks for financial markets this year. But in terms of growth, 274 00:16:03,120 --> 00:16:06,760 Speaker 1: actually two thousand and eighteen could well turn out to 275 00:16:06,800 --> 00:16:11,520 Speaker 1: be an okay year. China itself is likely to surprise 276 00:16:11,560 --> 00:16:13,480 Speaker 1: on the upside in the first half of the year 277 00:16:13,600 --> 00:16:18,440 Speaker 1: because outside of if you'd like, the headwinds from the 278 00:16:18,480 --> 00:16:23,360 Speaker 1: external side, they have been doing a remarkable job on 279 00:16:24,280 --> 00:16:29,000 Speaker 1: getting consumer spending going there. So there's been a genuine 280 00:16:29,040 --> 00:16:32,360 Speaker 1: rebalancing in the economy that has some way to go. 281 00:16:33,960 --> 00:16:37,080 Speaker 1: We can talk about the rebalancing of the Chinese economy shortly. 282 00:16:37,320 --> 00:16:39,120 Speaker 1: I want to find out whether there is an approach 283 00:16:39,600 --> 00:16:41,720 Speaker 1: from the rest of the world that could force China's 284 00:16:41,760 --> 00:16:44,440 Speaker 1: hand to open up at a speed that they would 285 00:16:44,480 --> 00:16:47,160 Speaker 1: not be comfortable with. Is there anything the United States, 286 00:16:47,400 --> 00:16:49,360 Speaker 1: Europe and much of the developed world can do and 287 00:16:49,440 --> 00:16:51,240 Speaker 1: he leave us they can pull to really ramp up 288 00:16:51,280 --> 00:16:56,200 Speaker 1: the pressure on China. Well, actually, what Trump is doing 289 00:16:56,240 --> 00:17:00,280 Speaker 1: now is ramping up the pressure on China. But the 290 00:17:00,400 --> 00:17:03,040 Speaker 1: thing is that if you actually talk to the Chinese, 291 00:17:03,160 --> 00:17:06,600 Speaker 1: and if you think to Leo her speech Davos, he 292 00:17:06,840 --> 00:17:10,560 Speaker 1: argued that the world will be surprised by China's opening 293 00:17:10,680 --> 00:17:13,879 Speaker 1: up this year. So what they have in mind, and 294 00:17:13,920 --> 00:17:17,440 Speaker 1: they will be drumming or beating the drum really loudly 295 00:17:17,440 --> 00:17:21,560 Speaker 1: on this one, is opening up with respect to getting 296 00:17:21,720 --> 00:17:28,199 Speaker 1: foreign money in and allowing greater access with presumably fewer 297 00:17:28,280 --> 00:17:32,160 Speaker 1: restrictions on foreign investment. That's kay. So they want money 298 00:17:32,200 --> 00:17:33,560 Speaker 1: to come in, and they wanted to come into their 299 00:17:33,560 --> 00:17:37,679 Speaker 1: banking sector and everywhere else. How much do you expect 300 00:17:37,680 --> 00:17:40,600 Speaker 1: them to really follow through with this protection of intellectual 301 00:17:40,640 --> 00:17:44,520 Speaker 1: property and just sort of other measures that would make 302 00:17:45,040 --> 00:17:50,320 Speaker 1: it palatable for foreign investment. On paper, they will probably 303 00:17:50,440 --> 00:17:55,719 Speaker 1: go quite far. In practice and reality, I remain a 304 00:17:55,760 --> 00:17:58,560 Speaker 1: bit more skeptical because when I look at everything else 305 00:17:58,560 --> 00:18:01,879 Speaker 1: that's going on in the corn me in particular, let's say, 306 00:18:02,000 --> 00:18:05,520 Speaker 1: at the build up of this great Internet firewall and 307 00:18:05,560 --> 00:18:08,040 Speaker 1: the requirements for service to be located in China and 308 00:18:08,119 --> 00:18:11,440 Speaker 1: all of that, doesn't you know, certainly leave me with 309 00:18:11,600 --> 00:18:15,720 Speaker 1: a particular sense of comfort. So what's interesting is that, yes, 310 00:18:15,760 --> 00:18:19,919 Speaker 1: they will sort of open up on paper more, but 311 00:18:20,080 --> 00:18:23,040 Speaker 1: will foreign money go in. What they certainly won't be 312 00:18:23,080 --> 00:18:28,560 Speaker 1: doing is relaxing the controls on outflows. Danna, you frame 313 00:18:28,640 --> 00:18:31,720 Speaker 1: this as almost an economic battle of civilizations, But I 314 00:18:31,800 --> 00:18:34,359 Speaker 1: just wonder whether we'll see a financial crisis in China 315 00:18:34,880 --> 00:18:38,359 Speaker 1: before we actually see a massive trade war and the 316 00:18:38,400 --> 00:18:41,280 Speaker 1: clash that you're kind of describing. Isn't it more likely 317 00:18:41,320 --> 00:18:44,080 Speaker 1: that China has a significant economic downturn at some point 318 00:18:44,080 --> 00:18:46,680 Speaker 1: in the next decade where they themselves have to take 319 00:18:46,720 --> 00:18:49,919 Speaker 1: a look at their own system and question the longevity 320 00:18:50,000 --> 00:18:55,120 Speaker 1: of it. There has already actually been a very substantial 321 00:18:55,160 --> 00:18:57,800 Speaker 1: growth slow down in China. If we look at the 322 00:18:57,880 --> 00:19:01,040 Speaker 1: raised China was growing before the fine anential crisis, it's 323 00:19:01,040 --> 00:19:04,680 Speaker 1: now half of those rates, even on their official numbers, 324 00:19:04,720 --> 00:19:08,560 Speaker 1: on the numbers that I've calculated, since two thousand five, 325 00:19:09,600 --> 00:19:13,280 Speaker 1: growth has certainly more than half. So they're definitely dealing 326 00:19:13,440 --> 00:19:17,640 Speaker 1: with having to find a new model. And I'd say 327 00:19:17,640 --> 00:19:19,959 Speaker 1: the next couple of years that make or break, and 328 00:19:20,000 --> 00:19:25,560 Speaker 1: I would put probability on make and on break. But 329 00:19:25,640 --> 00:19:27,800 Speaker 1: what has happened in the last couple of years, give 330 00:19:27,880 --> 00:19:30,600 Speaker 1: them gives them a little bit more leeway than, let's say, 331 00:19:30,640 --> 00:19:33,479 Speaker 1: I thought they would have if you had talked to 332 00:19:33,520 --> 00:19:37,440 Speaker 1: me as your colleagues did, let's say a year ago. Well, Diana, 333 00:19:37,480 --> 00:19:39,760 Speaker 1: I want to talk about what you said with respect 334 00:19:39,800 --> 00:19:43,680 Speaker 1: to this big a big financial markets risk. Talk about 335 00:19:43,680 --> 00:19:47,639 Speaker 1: the transmission mechanism. When do you markets start to care 336 00:19:47,840 --> 00:19:51,040 Speaker 1: and reflect this And are the specific sectors that we're 337 00:19:51,080 --> 00:19:53,480 Speaker 1: going to see fall out a bed as trade war 338 00:19:53,520 --> 00:19:57,960 Speaker 1: talks continue. Well, actually, if we are looking at a 339 00:19:58,000 --> 00:20:00,480 Speaker 1: type of event that is going to become answer to 340 00:20:00,520 --> 00:20:03,680 Speaker 1: what happened during the global financial crisis, I it's something 341 00:20:03,680 --> 00:20:06,960 Speaker 1: which undermines the structure of the global economy. No, we're 342 00:20:06,960 --> 00:20:09,920 Speaker 1: not talking just about the twenty centfol in equity prices, 343 00:20:09,960 --> 00:20:12,680 Speaker 1: which you know is negative but doesn't have the same 344 00:20:12,720 --> 00:20:15,960 Speaker 1: profound impact. What we need to look at is geo 345 00:20:16,080 --> 00:20:19,399 Speaker 1: political risk over the next three to five years. I 346 00:20:19,400 --> 00:20:22,880 Speaker 1: would say that will be the source Noline cares. We've 347 00:20:22,880 --> 00:20:26,040 Speaker 1: had plenty of geopolitical risk. What you probably Italian election, 348 00:20:26,160 --> 00:20:29,399 Speaker 1: what's going on in Washington? They were they might not 349 00:20:29,640 --> 00:20:34,160 Speaker 1: care until they'll have to. So there isn't China's financial 350 00:20:34,160 --> 00:20:39,080 Speaker 1: system implosion that's unlikely to be a source of global 351 00:20:39,080 --> 00:20:43,159 Speaker 1: financial risk in the next two to three years. By implosion, 352 00:20:43,240 --> 00:20:46,560 Speaker 1: I mean you know that the system unraveling. If I 353 00:20:46,600 --> 00:20:48,359 Speaker 1: have to look at what could be the source of 354 00:20:48,359 --> 00:20:53,440 Speaker 1: a real shakeout that undermines the structure, it is geopolitical 355 00:20:53,560 --> 00:20:57,520 Speaker 1: risk and it is very much related to what China 356 00:20:57,720 --> 00:21:00,639 Speaker 1: has in mind. So where's the flash point where in 357 00:21:00,680 --> 00:21:05,800 Speaker 1: the world Asia? Look, say, so what happens paid the picture? 358 00:21:05,920 --> 00:21:10,880 Speaker 1: It was a dark and stormy night. What happens? Um? 359 00:21:10,960 --> 00:21:13,800 Speaker 1: That's one area where I have made it a rule 360 00:21:14,440 --> 00:21:21,600 Speaker 1: not to not to not to be on record. Unfortunately, 361 00:21:22,000 --> 00:21:24,560 Speaker 1: you're concerned about the flash point between North Korea? Are 362 00:21:24,600 --> 00:21:27,240 Speaker 1: You're concerned about the economic dominance in China in the 363 00:21:27,280 --> 00:21:29,840 Speaker 1: region and the testing of that dominance by America. I'm 364 00:21:29,920 --> 00:21:33,480 Speaker 1: concerned as to what China has in mind in terms 365 00:21:33,520 --> 00:21:38,600 Speaker 1: of establishing its leading role in Asia. Yes, economically, But 366 00:21:38,640 --> 00:21:42,359 Speaker 1: I also just say, I was born in Bulgarian and 367 00:21:42,440 --> 00:21:47,280 Speaker 1: I lived under communism, So um, yes, I probably have 368 00:21:47,400 --> 00:21:53,400 Speaker 1: outdated fears and worries. Actually maybe not. So just moving on, 369 00:21:53,880 --> 00:21:56,760 Speaker 1: is the noise in Washington, d C. Just that is 370 00:21:56,760 --> 00:21:59,880 Speaker 1: that sort of absolutely irrelevant when it comes to sort 371 00:21:59,880 --> 00:22:02,439 Speaker 1: of moving the needle at of geopolitical risks. No, not 372 00:22:02,600 --> 00:22:07,000 Speaker 1: at all. I mean, Washington is really keen on and 373 00:22:07,040 --> 00:22:10,280 Speaker 1: we're likely to see aggressive action because the only thing 374 00:22:10,359 --> 00:22:13,800 Speaker 1: that stopped Trump last year was the expectation that the 375 00:22:13,880 --> 00:22:17,719 Speaker 1: Chinese might help with North Korea. But since then Trump 376 00:22:17,800 --> 00:22:22,080 Speaker 1: realized that even if they wanted to, actually China can't 377 00:22:22,080 --> 00:22:25,679 Speaker 1: do much at this stage. And in fact, this is 378 00:22:25,680 --> 00:22:29,160 Speaker 1: one geopolitical risk that I expect to receive North Korea, 379 00:22:29,480 --> 00:22:32,320 Speaker 1: in particular after the meeting, which both sides have an 380 00:22:32,320 --> 00:22:36,639 Speaker 1: incentive to present a positive outcome from Tonatu Lever. She 381 00:22:36,760 --> 00:22:39,080 Speaker 1: is an ODO Economics chief economist, and she joins us 382 00:22:39,080 --> 00:22:57,000 Speaker 1: here in New York. Danna, thank you very much. This 383 00:22:57,080 --> 00:23:00,400 Speaker 1: is Bloomberg Surveillance. I'm pim Fox along with my Holligan 384 00:23:00,520 --> 00:23:03,840 Speaker 1: co host Lisa Abramwitz. Shares of Facebook. Right now, they 385 00:23:03,840 --> 00:23:06,040 Speaker 1: are down a little bit more than two dollars and 386 00:23:06,160 --> 00:23:08,439 Speaker 1: eight cents, down a little bit more than one and 387 00:23:08,480 --> 00:23:11,280 Speaker 1: a half percent. Here to tell us about the company, 388 00:23:11,280 --> 00:23:15,760 Speaker 1: about the stock, and about the controversy surrounding personal information 389 00:23:15,920 --> 00:23:18,800 Speaker 1: is James chalk Mark. He is an equity analyst for 390 00:23:19,040 --> 00:23:21,840 Speaker 1: Monas Crespy and Heart and Company. He joins us here 391 00:23:21,840 --> 00:23:26,199 Speaker 1: in our eleven three oh Studios. James, let's look at 392 00:23:26,200 --> 00:23:29,240 Speaker 1: the investment thesis first. The other headlines we know the 393 00:23:29,240 --> 00:23:32,880 Speaker 1: Federal Trade Commission investigating the use of and the access 394 00:23:32,920 --> 00:23:38,480 Speaker 1: to personal data. What's the investment thesis from a stock perspective, right? 395 00:23:39,280 --> 00:23:41,280 Speaker 1: I think you have to look at this both short 396 00:23:41,400 --> 00:23:43,480 Speaker 1: term and long term. In the short term, it's going 397 00:23:43,520 --> 00:23:46,120 Speaker 1: to be painful and it's going to be choppy. I mean, 398 00:23:46,160 --> 00:23:49,320 Speaker 1: there's no if sans robuts about it, because the company 399 00:23:49,600 --> 00:23:52,560 Speaker 1: is going to be the skategoat of regulators as they 400 00:23:52,960 --> 00:23:55,240 Speaker 1: cracked down on it and to make an example of 401 00:23:55,280 --> 00:23:58,800 Speaker 1: not just the Facebook but of big cap tech. But 402 00:23:58,920 --> 00:24:00,880 Speaker 1: as you look at the long grew term, I think 403 00:24:00,960 --> 00:24:04,359 Speaker 1: that's where you do see a continued silver lining here 404 00:24:04,760 --> 00:24:08,879 Speaker 1: where they're able to really have unmatched scale with the 405 00:24:08,920 --> 00:24:11,520 Speaker 1: exception of Google. UH. And when you look at the 406 00:24:11,560 --> 00:24:15,960 Speaker 1: new regulations on privacy taking place overseas, it actually helps 407 00:24:16,000 --> 00:24:20,240 Speaker 1: them by threatening UH or limiting new entrance to the 408 00:24:20,280 --> 00:24:25,320 Speaker 1: market and making the incumbents increasingly the establishment. So longer term, 409 00:24:25,359 --> 00:24:28,199 Speaker 1: I think that they're going to be just fine, but 410 00:24:28,359 --> 00:24:31,000 Speaker 1: in the short term it's definitely choppy waters. All right. 411 00:24:31,080 --> 00:24:34,480 Speaker 1: So long term, you've got a company that's doing over 412 00:24:34,560 --> 00:24:37,359 Speaker 1: forty billion in sales and puts nearly twenty billion of 413 00:24:37,400 --> 00:24:41,399 Speaker 1: that to the bottom line. Correct, Okay. Does it matter 414 00:24:41,480 --> 00:24:46,480 Speaker 1: how Facebook responds to this controversy in order to keep 415 00:24:46,640 --> 00:24:51,399 Speaker 1: the advertisers who are filling their coffers with that forty 416 00:24:51,440 --> 00:24:55,720 Speaker 1: billion dollars worth of money. Absolutely, I mean it matters 417 00:24:55,760 --> 00:24:58,960 Speaker 1: in the sense that what is the pace of dollars 418 00:24:59,000 --> 00:25:02,560 Speaker 1: flowing to Facebook. It's not going to change if dollars 419 00:25:02,600 --> 00:25:06,040 Speaker 1: flow to Facebook, because there's really no choice because you 420 00:25:06,119 --> 00:25:09,640 Speaker 1: only have Google and Facebook that have uh the kind 421 00:25:09,640 --> 00:25:12,520 Speaker 1: of scale to reach a worldwide audience. You know, there's 422 00:25:12,640 --> 00:25:15,960 Speaker 1: there's no exceptions there. But the pace is certainly in 423 00:25:16,080 --> 00:25:21,000 Speaker 1: question because if there is any curtailment in engagement, any 424 00:25:21,080 --> 00:25:24,800 Speaker 1: fears around it, uh, you know, privacy concerns that cause 425 00:25:25,240 --> 00:25:30,080 Speaker 1: uh dips in content uh kind of generation on the platform, 426 00:25:30,560 --> 00:25:33,480 Speaker 1: uh and consumption of third party content, and that will 427 00:25:33,520 --> 00:25:36,919 Speaker 1: sway the pace of ad dollars moving towards the company. 428 00:25:37,280 --> 00:25:42,080 Speaker 1: Does it bring into question the current management skills at Facebook, 429 00:25:42,119 --> 00:25:45,919 Speaker 1: whether it is Cheryl Sandberg or Mark Zuckerber. Yeah, I 430 00:25:45,960 --> 00:25:49,680 Speaker 1: don't really see it as a skills in uh um, 431 00:25:49,720 --> 00:25:53,280 Speaker 1: you know, in the in the traditional sense. It's more, um, 432 00:25:53,320 --> 00:25:56,320 Speaker 1: how do they respond in a way that appeases at 433 00:25:56,359 --> 00:25:59,879 Speaker 1: least some factions of the company, of the of the 434 00:26:00,040 --> 00:26:03,560 Speaker 1: constituencies that are scrutinizing the company. And unfortunately, I think 435 00:26:03,600 --> 00:26:05,720 Speaker 1: that they face a catch twenty two right now, which 436 00:26:05,760 --> 00:26:09,639 Speaker 1: is why they've been so slow and responding responding, because 437 00:26:10,040 --> 00:26:13,440 Speaker 1: they have, uh, in a in a very uncanny way, 438 00:26:13,480 --> 00:26:18,880 Speaker 1: managed uh to uh receive scrutiny from not only both 439 00:26:18,920 --> 00:26:21,760 Speaker 1: sides of the political spectrum, but both sides of the 440 00:26:21,800 --> 00:26:25,080 Speaker 1: Atlantic Uh. So there's really little that they can do 441 00:26:25,280 --> 00:26:29,120 Speaker 1: or say I think that can remedy the current kind 442 00:26:29,119 --> 00:26:31,600 Speaker 1: of concerns around the business. All right, let me just 443 00:26:31,640 --> 00:26:35,960 Speaker 1: push back a second here, because I specifically referencing Alex Stamos, 444 00:26:35,960 --> 00:26:40,400 Speaker 1: he's the chief information security officer for Facebook. In an 445 00:26:40,480 --> 00:26:43,720 Speaker 1: article in The New York Times, he is described as 446 00:26:43,720 --> 00:26:49,240 Speaker 1: the person that urged more disclosure over Russian activity on Facebook. 447 00:26:49,640 --> 00:26:52,560 Speaker 1: According to the story, he got a lot of pushback 448 00:26:52,720 --> 00:26:55,399 Speaker 1: from those that are described as being more interested in 449 00:26:55,440 --> 00:26:59,879 Speaker 1: how much money is made than whether privacy is protected. 450 00:27:00,200 --> 00:27:04,000 Speaker 1: He scheduled to leave the company in August. That can't 451 00:27:04,040 --> 00:27:08,480 Speaker 1: be a good management image. Yeah, I mean, look, the 452 00:27:08,480 --> 00:27:11,880 Speaker 1: the the issue is around perceptions. There's a there's an 453 00:27:12,160 --> 00:27:17,280 Speaker 1: issue of perception around the lack of candor uh from Facebook. 454 00:27:17,320 --> 00:27:21,720 Speaker 1: There's an issue of perception around uh their willingness or 455 00:27:21,920 --> 00:27:26,399 Speaker 1: proactively uh not sharing information. And then there's uh perception 456 00:27:26,480 --> 00:27:30,439 Speaker 1: issues around uh them arguing semantics where they're you know, 457 00:27:30,520 --> 00:27:33,640 Speaker 1: arguing the traditional definition of data breach. You know, it's 458 00:27:33,680 --> 00:27:36,720 Speaker 1: like arguing what the definition of is is? You know 459 00:27:36,760 --> 00:27:41,640 Speaker 1: what I mean? So I think transparency is their friend 460 00:27:41,760 --> 00:27:45,640 Speaker 1: and over transparency is their best friend right now? Uh 461 00:27:45,760 --> 00:27:49,359 Speaker 1: this you mentioned Google as the other, as one or 462 00:27:49,359 --> 00:27:51,200 Speaker 1: the other, because of course there's Twitter, there are other 463 00:27:51,320 --> 00:27:56,480 Speaker 1: social media platforms. Uh. There's a report that Google's head 464 00:27:56,640 --> 00:28:01,359 Speaker 1: of their YouTube operation is looking to farm out oversight 465 00:28:01,920 --> 00:28:07,840 Speaker 1: two Wikipedia for the veracity and the truthfulness of the 466 00:28:08,000 --> 00:28:12,280 Speaker 1: videos that are posted on YouTube. Do you have any 467 00:28:13,119 --> 00:28:15,680 Speaker 1: thoughts about that? Yeah? I think that's a smart move 468 00:28:15,760 --> 00:28:19,880 Speaker 1: because Wikipedia naturally comes with the checks and balances. Uh. 469 00:28:19,920 --> 00:28:24,560 Speaker 1: You know there's a corek instituent group of people that um, 470 00:28:24,600 --> 00:28:29,360 Speaker 1: you know that that police Wikipedia. Obviously there are discrepancies 471 00:28:29,400 --> 00:28:32,720 Speaker 1: here and there. But I think that that self policing 472 00:28:33,200 --> 00:28:36,520 Speaker 1: from Wikipedia is really second to none. But how do 473 00:28:36,560 --> 00:28:40,520 Speaker 1: you know who the people are behind those self policing activities? 474 00:28:40,920 --> 00:28:44,800 Speaker 1: And indeed, according to the people at Wikipedia, they only 475 00:28:44,800 --> 00:28:48,320 Speaker 1: found out about this effort on the part of Google 476 00:28:48,360 --> 00:28:54,120 Speaker 1: and YouTube because of a discussion at south By Southwest 477 00:28:54,480 --> 00:28:58,600 Speaker 1: by the CEO who runs YouTube. Right. Well, I mean, 478 00:28:58,680 --> 00:29:00,200 Speaker 1: I mean, I guess what I'm getting at here is 479 00:29:00,240 --> 00:29:04,120 Speaker 1: the quality of the management and the experience of the management. 480 00:29:04,120 --> 00:29:06,880 Speaker 1: If you were talking about this in companies such as 481 00:29:06,880 --> 00:29:10,080 Speaker 1: the oil industry, or the airline industry or the chemical 482 00:29:10,240 --> 00:29:13,960 Speaker 1: you know what, wouldn't you get a lot more consternation 483 00:29:14,040 --> 00:29:16,200 Speaker 1: on the part of investors that say, wait a minute, 484 00:29:16,240 --> 00:29:19,440 Speaker 1: this is not the this is not top notch management. 485 00:29:19,520 --> 00:29:23,320 Speaker 1: Or maybe it is. I think it's it's it's not 486 00:29:23,440 --> 00:29:25,959 Speaker 1: the talent of the management as much as it is 487 00:29:26,280 --> 00:29:29,000 Speaker 1: um kind of the uncharted territory, you know, for all 488 00:29:29,040 --> 00:29:32,080 Speaker 1: of them. Uh, And I think that they're uh, you know, 489 00:29:32,200 --> 00:29:36,600 Speaker 1: era on the side of being defensive and reactive rather 490 00:29:36,640 --> 00:29:40,680 Speaker 1: than proactive, uh in in trying to stay in front 491 00:29:40,680 --> 00:29:43,520 Speaker 1: of the story. Because in every case that we've seen, 492 00:29:43,920 --> 00:29:48,840 Speaker 1: you know, the the questionable content on YouTube and now 493 00:29:48,880 --> 00:29:52,080 Speaker 1: all the Facebook's issues. It's been completely reactive in the 494 00:29:52,120 --> 00:29:58,720 Speaker 1: in the companies quite frankly, are not um recognizing the 495 00:29:59,640 --> 00:30:02,840 Speaker 1: concer earns and debate that's happening in the public sphere. 496 00:30:03,280 --> 00:30:05,800 Speaker 1: And I think, uh, you know, what I was just 497 00:30:05,840 --> 00:30:08,360 Speaker 1: talking about before, uh you know, I was on with 498 00:30:08,400 --> 00:30:11,400 Speaker 1: you was the fact that a lot of these management 499 00:30:11,440 --> 00:30:15,480 Speaker 1: teams and CEOs haven't uh you know, been uh you know, 500 00:30:15,640 --> 00:30:20,080 Speaker 1: candid with uh real interviews and trying to answer the 501 00:30:20,120 --> 00:30:23,560 Speaker 1: tough questions and and trying to uh you know, stay 502 00:30:23,920 --> 00:30:27,160 Speaker 1: or or engage in uh discussions that are off script, 503 00:30:28,120 --> 00:30:31,200 Speaker 1: and unfortunately that may come in the form of uh 504 00:30:31,280 --> 00:30:33,720 Speaker 1: Senate hearings. Well, well that's where our next question is 505 00:30:33,760 --> 00:30:36,240 Speaker 1: gonna be. Because the invitation on the part of the 506 00:30:36,360 --> 00:30:41,240 Speaker 1: U S Election Commission to testify being made public for 507 00:30:41,360 --> 00:30:46,600 Speaker 1: the heads of Twitter, Google as well as a Facebook. Uh, 508 00:30:46,840 --> 00:30:51,320 Speaker 1: that becomes a public airing of grievance. And as you 509 00:30:51,400 --> 00:30:54,400 Speaker 1: just described, it as about perception rather than a bad fact, 510 00:30:54,400 --> 00:30:58,760 Speaker 1: particularly uh when you're being asked questions by people who 511 00:30:58,920 --> 00:31:01,920 Speaker 1: may or may not have a spe cific agenda, right exactly. 512 00:31:01,960 --> 00:31:05,360 Speaker 1: And I think actually it could be a blessing in disguise, 513 00:31:05,480 --> 00:31:10,520 Speaker 1: because if they are forthright uh, in in that public sphere, 514 00:31:11,280 --> 00:31:13,600 Speaker 1: I think that they can win a lot of uh, 515 00:31:13,640 --> 00:31:16,920 Speaker 1: you know, points from the public and as well as 516 00:31:16,960 --> 00:31:20,360 Speaker 1: regulators in in in the based off of the degree 517 00:31:20,400 --> 00:31:24,680 Speaker 1: of candor that they exhibit. Uh. So you know, we'll 518 00:31:24,840 --> 00:31:27,120 Speaker 1: kind of see what happens here. I mean a lot 519 00:31:27,160 --> 00:31:32,360 Speaker 1: of I talk about perceptions because what Facebook is facing 520 00:31:32,480 --> 00:31:38,480 Speaker 1: right now, uh is nothing new. Companies have used Facebook 521 00:31:38,560 --> 00:31:41,360 Speaker 1: in in this way, in the way that you know 522 00:31:41,400 --> 00:31:44,320 Speaker 1: we're seeing with Cambridge Analytica, Right, But those are companies 523 00:31:44,520 --> 00:31:48,760 Speaker 1: versus foreign powers, right, I mean, I mean there is 524 00:31:48,800 --> 00:31:50,840 Speaker 1: it worth Maybe it's not worth making the distinction, but 525 00:31:50,880 --> 00:31:53,440 Speaker 1: don't you think it's a distinction between whether it's the 526 00:31:53,520 --> 00:31:57,880 Speaker 1: Russian government or Russian state actors versus companies trying to 527 00:31:57,880 --> 00:32:00,080 Speaker 1: get you to buy a product. Yeah, But at the 528 00:32:00,120 --> 00:32:02,760 Speaker 1: end that that they boils down to privacy though, uh 529 00:32:02,840 --> 00:32:07,000 Speaker 1: and and and and and who and how uh Uh 530 00:32:07,160 --> 00:32:13,160 Speaker 1: companies or foreign agents are able to utilize uh profiles 531 00:32:13,440 --> 00:32:16,920 Speaker 1: in a way to develop psychological profiles of people. And 532 00:32:16,960 --> 00:32:20,240 Speaker 1: obviously businesses want to influence as well as I mean 533 00:32:20,640 --> 00:32:26,040 Speaker 1: you if if you want to you know change behavior. Um, 534 00:32:26,080 --> 00:32:28,120 Speaker 1: you know Facebook's the best way to do it. Thanks. 535 00:32:28,840 --> 00:32:30,480 Speaker 1: We gotta we gotta run, but I want to thank 536 00:32:30,480 --> 00:32:34,280 Speaker 1: you very much. James chalk Mark equity analyst at Amas 537 00:32:34,360 --> 00:32:44,840 Speaker 1: Crespy and Heart. Thanks for listening to the Bloomberg Surveillance podcast. 538 00:32:45,240 --> 00:32:50,240 Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or 539 00:32:50,320 --> 00:32:54,640 Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom 540 00:32:54,720 --> 00:32:58,600 Speaker 1: Keane before the podcast. You can always catch us worldwide. 541 00:32:59,040 --> 00:33:00,240 Speaker 1: I'm Bloomberg Rady up.