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Speaker 1: From Mahart where Innovation, Money and Power Collie in Silicon

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Speaker 1: Valley n Beyond.

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Speaker 2: This is Bloomberg Technology with Caroline Hide and Ed Ludlow.

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Speaker 3: Live from Bloomberg's World headquarters in New York. I'm Shanali

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Speaker 3: bask In for Caroline Hyde and Ed Ludlow.

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Speaker 4: This is Bloomberg Technology. Coming up on this hour, full

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Speaker 4: earnings coverage ahead.

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Speaker 3: We're going to break down results from Meta and push

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Speaker 3: ahead to Amazon and Intel's earnings after the bell, Plus

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Speaker 3: Sam Megan Fried's testimony is the latest must see moment in.

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Speaker 4: The high profile fraud case.

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Speaker 3: Updates this hour, and we'll look at the thorny issues

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Speaker 3: over technology between the US and China as President Biden.

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Speaker 4: Plans to meet with China's foreign minister.

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Speaker 3: Now from Tech Earnings, let's bring in Alison Porter, a

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Speaker 3: portfolio manager from Janis Henderson on Global Technology Leader's Team. Alison,

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Speaker 3: we talk so much about this magnificent, magnificent seven dynamic.

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Speaker 3: When you look at some of the drawdowns, we're saying,

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Speaker 3: how do you play what's next?

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Speaker 5: I mean, when you look at today, you can see

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Speaker 5: that this is the first day in sometime that we've

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Speaker 5: actually seen all of those Magnificent seven stocks actually down together,

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Speaker 5: and we're definitely seeing some signs of profit taking, and

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Speaker 5: I think that's really a reflection of more where the

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Speaker 5: market is, where bond yields are, and some profit taking

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Speaker 5: than it is on earnings results. You know, when you

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Speaker 5: look at Meta's results last night, across the board, they

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Speaker 5: were really very strong, and you know, we've seen.

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Speaker 1: Expectations to tick up.

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Speaker 5: I think the Magnificent seven are very very There's a

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Speaker 5: wide dispersion of valuations, and even companies like Meta that

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Speaker 5: are trade at a discount to the broader equity market,

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Speaker 5: that trade at a discount to other technology stocks are being

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Speaker 5: hit hard today.

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Speaker 1: So it's not really.

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Speaker 5: About valuations, it's not been about earning estimates, but just

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Speaker 5: some profit taking.

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Speaker 1: I think, given as the market has been.

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Speaker 5: So concentrated and we're seeing a bond deals almost top

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Speaker 5: five percent.

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Speaker 3: When you're looking at the metal warning on economic uncertainty

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Speaker 3: and you look across the technology sector, who do you

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Speaker 3: think will be most hard to hit in this scenario

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Speaker 3: that has not been sold off significantly enough.

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Speaker 5: So you know, I don't think Meta warned on the

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Speaker 5: macro to be I think, you know, Meta commented that

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Speaker 5: you know, after major conflicts, there's sometimes a pause or

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Speaker 5: a slowdown, and actually their guidance be forward revenue bracketed.

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Speaker 1: Exactly where consensus laws.

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Speaker 5: But when we came into twenty twenty three, earnings estimates

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Speaker 5: for twenty twenty four for META or for about ten dollars.

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Speaker 5: Now as we're exiting this year, estimates are for seventeen dollars,

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Speaker 5: So we've seen that seventy percent increase in expectations already.

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Speaker 5: Maybe some disappointment that those aren't continuing to go up,

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Speaker 5: but I think, you know, given where bondis are, given

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Speaker 5: the macro uncertainty, not raising guidance has caused some profit taking.

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Speaker 1: Obviously with bond deals where they.

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Speaker 5: Are, there's concern about the consumer the stronger dollar in Europe.

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Speaker 5: But you know, we think most of the pressure that

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Speaker 5: we've seen has not been on retail spend on smaller items,

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Speaker 5: but on items where the consumer has to actually borrow.

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Speaker 5: So that's not really been an advertising sprind or smaller

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Speaker 5: cap or purchases, but more in terms of where consumers

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Speaker 5: have had to borrow, like autos, where we're definitely seeing

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Speaker 5: a bit of a slowdown.

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Speaker 3: You know, talking about bond yield a little more. You

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Speaker 3: do see a cooling today, but they have been extraordinarily

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Speaker 3: all at all. How do you think that this will

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Speaker 3: continue into this story When you're thinking about how tech

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Speaker 3: response to rates.

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Speaker 5: Well, you know, we think that in twenty twenty, which

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Speaker 5: obviously was a huge year for for technology, money was free.

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Speaker 5: Interest rates were almost at zero, and it caused some

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Speaker 5: irrational buying of stocks which are perennially unprofitable. But that

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Speaker 5: higher cost of capital now is really causing investors. It's

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Speaker 5: a great environment for active investors, actually, because investors have

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Speaker 5: got to really get back to fundamentals and focus on

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Speaker 5: those companies.

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Speaker 1: That actually have the strongest balance sheets.

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Speaker 5: And actually the technology sector has best balance sheet across

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Speaker 5: all of equities. You know, Meta has over twenty five

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Speaker 5: billion in net cash, Alphabet is over ninety billion in

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Speaker 5: net cash. And that means that those companies can not

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Speaker 5: only continue to reinvest in new areas such as artificial

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Speaker 5: intelligence and driving more innovation and earning scains, but it

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Speaker 5: also means that they can buy back stock and they

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Speaker 5: can start to really return money to shareholders. And we

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Speaker 5: saw that with Metal last quarter, buying over three billion

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Speaker 5: and stock back and Alphabet also continuing on that journey

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Speaker 5: of shareholder return, which we think is really strong long

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Speaker 5: term support for these companies and for shareholders.

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Speaker 3: Are you seeing any buying moments right now or do

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Speaker 3: you think that it's just too volerable and the sell

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Speaker 3: off as yet to come still.

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Speaker 5: Now, we think this is a great environment for active investors,

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Speaker 5: and we do think that valuation discipline is more important

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Speaker 5: than ever in this market given the pace of innovation

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Speaker 5: on artificial intelligence.

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Speaker 1: I think if you're trying to look.

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Speaker 5: Out for ten or twenty years and pick winners in

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Speaker 5: ten or fifteen years time, and you're willing to look

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Speaker 5: at losses every year, that's a very difficult environment. That's

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Speaker 5: not what we look for. We look for companies have

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Speaker 5: strong balance sheets, strong positive free cash flow, who can

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Speaker 5: continue to reinvest, and we do see some really attractive

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Speaker 5: valuations which are at a discount to the broader equity

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Speaker 5: market for actually what is much stronger long term growth?

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Speaker 3: How are you looking at this earning in as well?

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Speaker 3: We're looking forward to a host of more companies Intel, Amazon,

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Speaker 3: What are you going to.

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Speaker 4: Be looking for.

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Speaker 5: Look at You know, when you look at metas earnings,

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Speaker 5: some of the key factors that came out of.

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Speaker 1: Meta's earnings, where you know.

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Speaker 5: The strength of engagement, that's the user engagement user how

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Speaker 5: users react to the platform and the products that you serve,

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Speaker 5: and efficiency, a focus on capital allocation.

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Speaker 1: So when we look we hear.

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Speaker 5: Amazon's results tonight, again that's going to be key.

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Speaker 1: You know, what are prime members.

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Speaker 5: Doing, how are they responding to investments in their regionalization,

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Speaker 5: And then we'll look at AWS and I think the

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Speaker 5: growth in AWS is going to be a key driver

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Speaker 5: out of Amazon Web. Amazon's results tonight, expectations have come

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Speaker 5: down somewhat from sixteen percent growth.

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Speaker 1: Down closer to.

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Speaker 5: Twelve percent that people are looking for and I think

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Speaker 5: we're just looking for a stabilization in some of that

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Speaker 5: those optimization trends. After the strength that myso soul in

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Speaker 5: its cloud division, Investors want to see that Amazon is

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Speaker 5: ticket is also seeing some benefits all of that's investments

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Speaker 5: in artificial intelligence as well, that they are seeing some

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Speaker 5: stabilization and the optimization that they've seen from customers over

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Speaker 5: the last year.

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Speaker 3: Alice Importer of Janis Henderson, we thank you for your time.

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Speaker 3: Let's hone in now on the digital advertising space for

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Speaker 3: these companies and bring in. Rachel Tippograph, the founder and

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Speaker 3: CEO of Micmac and e commerce marketing platform for multi

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Speaker 3: channel brands.

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Speaker 4: Rachel, when you look at.

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Speaker 3: Meta itself, what did you take away?

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Speaker 6: I was super excited to see metas earnings because what

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Speaker 6: it demonstrated is that advertising is active in market and

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Speaker 6: Meta has made their ads more efficient.

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Speaker 7: And how have they done that with focus?

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Speaker 6: Meta stop focusing on the metaverse, Meta stop focusing on

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Speaker 6: trying to build native.

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Speaker 7: Commerce, and they went all in on improved their core business,

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Speaker 7: which is advertising. And a huge part of that is.

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Speaker 6: The investments that they one have made to combat changes

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Speaker 6: with Apple's iOS privacy changes where all of a sudden

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Speaker 6: the world moved from automatically opt in to now automatically

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Speaker 6: opt out, as well as AI. What AI is allowing

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Speaker 6: to happen within the advertising ecosystem is it's lowering the

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Speaker 6: barrier to entry. It's making it easier to buy ads

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Speaker 6: than ever before because one of the first areas that

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Speaker 6: Meta has invested in is on the creative side, and

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Speaker 6: creative has typically been a huge barrier to buying ads.

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Speaker 3: Rachel, when you think about the potential slow down the

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Speaker 3: economy could face, how much are you concerned that this

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Speaker 3: is going to eat into advertising dollars and who is

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Speaker 3: the kind of worst off here if things slow down materially.

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Speaker 6: I think the outlooking to four on advertising is shaky,

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Speaker 6: and the reason being is that the biggest brands in

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Speaker 6: the world are under an enormous amount of pressure.

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Speaker 7: Their margins are really compressed.

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Speaker 6: It's more expensive than ever before to bring goods to market,

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Speaker 6: to bring them to a retailer, and then negotiate those

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Speaker 6: relationships with retailers.

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Speaker 7: That's really where the margin compression is happening.

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Speaker 6: And so in order for them to meet Wall Street's numbers,

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Speaker 6: typically one of the first places that they.

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Speaker 7: Cut budget is in advertising.

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Speaker 6: That being said, we are entering the holiday season, so

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Speaker 6: typically you'll see brands allocate upwards seventy five percent of

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Speaker 6: their media.

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Speaker 7: Budget two Q four.

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Speaker 6: But I think that they're going to be really choosy

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Speaker 6: with their dollars and they're going to invest it in

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Speaker 6: platforms where there's consistent ROI Meta is one of those platforms.

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Speaker 6: At Nickmac, around eighty five percent of the paid brand.

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Speaker 7: Impressions that we see go through Meta. That's how significant

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Speaker 7: they are. But the other big area is retail media.

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Speaker 6: Meta's competition isn't just Snap and Pinterest and TikTok, it's Amazon,

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Speaker 6: it's Target, it's Walmart. And we'll see how that is

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Speaker 6: out in Amazon's earnings leader.

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Speaker 3: Today, Rachel, can the holiday season save these companies?

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Speaker 7: I don't think so. I think that the holiday season

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Speaker 7: is going to be really tough. What we have seen

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Speaker 7: in micmacs data this year is that there's been.

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Speaker 6: A seventeen percent decline in the average vasket size, and

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Speaker 6: that really has to do with inflation. Consumers are spending,

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Speaker 6: but they're being more selected and.

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Speaker 7: They're willing to trade down right now.

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Speaker 6: I believe that that's going to translate into the holiday season.

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Speaker 3: Rachel Tipograph of micmac, thank you for your time. Coming up,

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Speaker 3: we have more to expect on Amazon's earnings and preview

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Speaker 3: for Intel's earnings after the valve. And speaking of chips,

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Speaker 3: as we had to break watching shares of sk Heinex,

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Speaker 3: the South Korean memory chip maker, following the most in

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Speaker 3: the year after reporting a larger than expected loss.

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Speaker 4: More earnings coverage ahead. This is Bloomberg Technology. Now let's

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Speaker 4: get back to earnings.

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Speaker 3: Amazon do out after the bell today and Bloomberg Spencer

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Speaker 3: Soper is joining us.

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Speaker 4: Now, when you look.

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Speaker 3: At what has already happened in the big tech industry,

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Speaker 3: are you concerned that or are investors concerned rather that

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Speaker 3: Amazon could be facing a greater slowdown ahead in any fashion.

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Speaker 8: Yeah, this is going to be very telling because you

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Speaker 8: see the market already reacted to Alphabet's earnings on cloud sales,

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Speaker 8: and so they're already kind of expecting, you know, a

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Speaker 8: similar trajectory with Amazon. Let's from our Amazon last quarter,

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Speaker 8: it's cloud computing sales growth was the lowest it has

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Speaker 8: ever been, and investors are really hoping to see that

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Speaker 8: that's the bottom of the troth and we're and we're

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Speaker 8: moving back upward. So yeah, there's definitely concern around the

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Speaker 8: cloud market, and also concern on advertising sales, like your

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Speaker 8: previous guest was talking about the Facebook market, and Amazon

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Speaker 8: advertising is something that definitely contributes to its profit margin.

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Speaker 8: And then if people are pulling back there, investors are

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Speaker 8: going to be interested to see what that means for

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Speaker 8: Amazon's results.

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Speaker 4: So we're talking about a truck.

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Speaker 3: And a key business. Do you think that there's any

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Speaker 3: signs of turnaround?

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Speaker 8: Well, Microsoft, there's mixed messages, right, because Microsoft had a

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Speaker 8: good print and Alphabet didn't. So yet it will be

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Speaker 8: interesting to see where Amazon differentiates. And one thing I

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Speaker 8: think where investors are concerned about is maybe Amazon getting

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Speaker 8: a little bit quite a little flat footed on artificial intelligence.

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Speaker 3: Bloomberg Spencer so for thank you so much for your

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Speaker 3: time and out today after the bell.

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Speaker 4: Also is Intel.

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Speaker 3: The quarterly report will update investors on progress to turn

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Speaker 3: around its fortunes and regain lost sales. Bloomberg cy and

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Speaker 3: King joins us now from San Francisco. What do you

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Speaker 3: think the future looks like for Intel, particularly in this

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Speaker 3: very heated competitive space that they're walking into further.

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Speaker 9: Yeah, I mean there are two things that play here.

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Speaker 9: Analysts are saying basically, look, the PC market is through,

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Speaker 9: it's worse. That's the big volume segment for Intel. So

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Speaker 9: we're going to get some kind of an improvement going forward.

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Speaker 9: But they are still concerned about, you know, what spencers

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Speaker 9: companies are doing, what Amazon is spending on servers, what

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Speaker 9: Google is spending on servers, and whether they're shifting away

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Speaker 9: from Intel technology and pouring more money into accelerators that

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Speaker 9: they're getting from in video.

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Speaker 3: Well, is there a sense that in PCs that the

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Speaker 3: worst is over in terms of any potential slump.

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Speaker 9: Yeah, I mean, that's what a lot of analysts have

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Speaker 9: been saying. That's what kind of Intel has indicated that

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Speaker 9: this mountain of inventory that we've been working through for

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Speaker 9: the last few quarters has perhaps been used up and

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Speaker 9: we're back to whatever normal shipments are. But again, there's

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Speaker 9: still a question of what our consumers and companies spending

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Speaker 9: on PCs and what level is the real normal for

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Speaker 9: the PC market, whether we go back to that pandemic

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Speaker 9: level of over three hundred million units or whether we're

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Speaker 9: somewhere in two hundred million units and that's the future now, Ian.

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Speaker 3: What do you think about the Nvidia Intel combine here?

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Speaker 3: Is there any sense that they're going to do a

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Speaker 3: better job taking back some share.

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Speaker 9: We'll really have to see what they say later today.

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Speaker 9: But the problem that everybody has, and not just Intel

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Speaker 9: has right now is in video are so far ahead

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Speaker 9: with these new products, and that Intel, AMD and anybody

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Speaker 9: else who's really going to try and make a dent

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Speaker 9: in what Invidia has done has to have new products,

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Speaker 9: really strong products with all of the software that backs

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Speaker 9: them up in the market right now, and frankly, they don't.

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Speaker 9: They're just at the beginnings of these efforts. They're just

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Speaker 9: at the beginnings of trying to get the Amazons the

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Speaker 9: Googles to buy their stuff and to sign off on

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Speaker 9: that because right now the solid bet is on video

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Speaker 9: because they have things in the market that people trust them.

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Speaker 10: Know.

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Speaker 3: You take a look at Intel still year to date,

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Speaker 3: it's still up more than twenty percent, further draw down

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Speaker 3: as of late. But do you think that valuation here

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Speaker 3: justifies kind of where the PC market is today?

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Speaker 9: Yeah, I mean the valuation really is what the market sets.

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Speaker 9: That isn't something we can sort of focus on too tightly.

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Speaker 9: What really matters, I think in terms of investors right

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Speaker 9: now is the momentum. The last couple of quarters, things

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Speaker 9: have not got worse and that's been a positive for

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Speaker 9: Intel because before that it was getting worse.

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Speaker 11: At a horrible rate.

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Speaker 9: The bet now is we are approaching the bottom or

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Speaker 9: are through the bottom. And really what Intel needs to

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Speaker 9: do today is show another example of Hey, things didn't

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Speaker 9: get worse, they got incrementally better. But as the CEO,

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Speaker 9: Pat Gelsing has said over and over again, they've got

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Speaker 9: a long way to go. They're still twenty five billion

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Speaker 9: dollars south on an annual basis of where they were

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Speaker 9: at their peak in terms of revenue.

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Speaker 4: I thank you for your coverage.

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Speaker 3: We look forward to your coverage after earning today as well.

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Speaker 3: Sam Bigmanfried is testifying today in a New York court

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Speaker 3: room in a high profile fraud trial over the collapse

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Speaker 3: of his FTX crypto exchange. And for more on this,

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Speaker 3: we're going to bring in Bloomberg's Max Chafkin, who's been

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Speaker 3: following this trial very closely.

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Speaker 4: What is the defense even bringing forward.

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Speaker 3: At this point in terms of how they could prove

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Speaker 3: him to be not guilty.

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Speaker 12: Well, I mean, the most important thing to remember is

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Speaker 12: the defense doesn't have to tell a story. All they

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Speaker 12: have to do is poke some holes in the prosecution story.

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Speaker 12: The problem is that the prosecution story has been very,

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Speaker 12: very convincing.

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Speaker 11: I mean, again, it's hard to know.

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Speaker 12: We're not on the jury, we're not seeing exactly what

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Speaker 12: they're seeing. But we've seen witness after witness some of

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Speaker 12: Sam bankman Fried's closest friends, his employees, his confidants, including

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Speaker 12: his ex girlfriend Caroline Ellison, essentially put a lot of

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Speaker 12: the blame for this on him, show that he was

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Speaker 12: involved very detailed ways in the alleged misappropriation of a

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Speaker 12: huge amount of user money. The prosecution rested case. The

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Speaker 12: defense has called two expert witnesses. One is a lawyer

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Speaker 12: from Bahamas, the other is a tech like basically a tech.

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Speaker 11: Consultant, and then we're going to see Sam Bankman freed.

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Speaker 12: We got a signal earlier yet last night basically sent

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Speaker 12: saying that what he's going to talk about are advice

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Speaker 12: from his lawyers, sort of blaming this on his lawyer,

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Speaker 12: saying his lawyers told him was okay and industry practices,

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Speaker 12: essentially arguing that he didn't do anything wrong.

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Speaker 11: He thought this was okay all along.

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Speaker 4: Do you think that's convincing?

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Speaker 12: Again, the prosecution's case has been strong and very detailed,

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Speaker 12: and unfortunately for Sam Bankman freed. Again, we're seeing many witnesses,

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Speaker 12: basically everyone who is close to him except for his parents, frankly,

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Speaker 12: saying very damning things about him, and not just saying

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Speaker 12: damning things about him, but backing it up with kind

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Speaker 12: of documentary evidence that they've been showing the jury.

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Speaker 3: Why do you think he wants to testify? Typically, in

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Speaker 3: cases like this, their advice by their lawyers not to testify.

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Speaker 3: You've talked to him, you've covered him. Well, what's in

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Speaker 3: his mind?

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Speaker 12: Well, I think anyone who's traditional criminal defendants do not

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Speaker 12: testify in their own defense, especially not in cases like this.

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Speaker 11: It's not in their interest.

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Speaker 12: Sam bangman Fried is not a traditional criminal defendant. He

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Speaker 12: is somebody who loves to talk. I think, you know,

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Speaker 12: loves to hear the sound of his own voice and

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Speaker 12: is very effective at it.

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Speaker 11: He's a good talker, a good persuader.

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Speaker 12: Used it allowed him to kind of grow the valuation

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Speaker 12: of FTX to these crazy heights, to grow his own

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Speaker 12: net worth to something like thirty billion dollars. And I

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Speaker 12: think the plan here is to sort of talk his

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Speaker 12: way through this, which you know, not necessarily the most

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Speaker 12: legally sound strategy. I think if you talk to most

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Speaker 12: criminal lawyers.

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Speaker 11: But again, he is in trouble.

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Speaker 12: There have been a lot of very compelling witnesses for

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Speaker 12: the prosecution. This may be his only outlet, so I

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Speaker 12: think it's a high risk maneuver. I think the chances

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Speaker 12: of success are not necessarily super high. But I'm not

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Speaker 12: sure what his other options are.

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Speaker 3: Well, what about the idea here of the sentence, because

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Speaker 3: if he were to be found guilty.

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Speaker 4: He's facing a number of charges.

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Speaker 3: Do you think that by testifying he can lighten the

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Speaker 3: load for himself.

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Speaker 12: Well, I think for sure if he's able to somehow

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Speaker 12: complicate the story. It's just not clear that what he

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Speaker 12: has to offer is going to complicate that story. His

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Speaker 12: basic defense has been that he was relying on advice

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Speaker 12: of his lawyers and that FTX actually had a lot

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Speaker 12: of money that customers will eventually be made whole. That

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Speaker 12: second part very relevant to FTX creditors. They are going

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Speaker 12: to be super excited to hear that if it's true,

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Speaker 12: which again huge questions. Sam Bank mcfree doesn't necessarily have

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Speaker 12: the best track record at the moment. That'll mean a

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Speaker 12: lot to people who lost money on this thing. It

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Speaker 12: doesn't mean anything for the legal case, right, he's accused

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Speaker 12: of fraud, he's accused of taking the money and gambling it.

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Speaker 12: The fact that he won potentially maybe if you believe

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Speaker 12: what he's saying is legally irrelevant, and I don't think

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Speaker 12: we'll have a huge impact on.

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Speaker 3: His sentence, you know, quickly here last night we were

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Speaker 3: together watching the new Ruined documentary that Bloomberg Originals had

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Speaker 3: come out, with and you made this extremely strong case

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Speaker 3: against effective altruism. And I'm wondering you think with this

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Speaker 3: case that so many of the ideals that' say big

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Speaker 3: Bean freed and brought forward, do they just die off?

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Speaker 12: I think the effect of ultruous community is really struggling.

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Speaker 12: This is the charity that Sam Bangmfried was involved with.

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Speaker 12: He's so closely associated with it. You know, hundreds of

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Speaker 12: billions of dollars from FTX ostensibly profits, although at some

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Speaker 12: you know, you sort of wonder how much that money

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Speaker 12: may have come from customers. It's all tied up with this.

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Speaker 12: So it's going to really hurt the movement. It's going

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Speaker 12: to be hard to recruit new followers.

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Speaker 3: Bloomberg's Max Chack, can we thank you so much for

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Speaker 3: your time. Welcome back to Bloomberg Technology. I'm Chanelli Bassett

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Speaker 3: in New York. Now moving to a big meeting for

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Speaker 3: President Biden. He said to meet with China's foreign minister

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Speaker 3: tomorrow and Washington, potentially laying the groundwork for a leaders

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Speaker 3: meeting next month. And now for Mourroaw, let's bring in

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Speaker 3: Bloomberg's Nick Wadhams. Nick, what's at stake?

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Speaker 13: Well, a lot of things are at stake here. The

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Speaker 13: chief thing is that we are looking for the US

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Speaker 13: and China basically to get a relationship back on track

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Speaker 13: after a whole series of setbacks. There have been a

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Speaker 13: fair number of meetings Secretary of State Anthony Blincoln, when

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Speaker 13: Commerce Secretary Gena Raimondo, several others. So they're going to

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Speaker 13: be laying the groundwork for Shijinping when he's expected to

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Speaker 13: come to San Francisco for an APEC meeting, and there

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Speaker 13: will be a one on one almost certainly with Joe

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Speaker 13: Biden there that that hasn't been announced yet. So what

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Speaker 13: you're really seeing as an administration that wants to get

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Speaker 13: things back on track and do what Joe Biden likes best,

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Speaker 13: which is those interpersonal relationships with other leaders around the world.

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Speaker 3: Now, Nick, if you think about that potential meeting over

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Speaker 3: in San Francisco, how does this set the stage for

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Speaker 3: that exactly?

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Speaker 4: And what do you expect?

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Speaker 13: Well, I think you know the big question is what

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Speaker 13: would come out of that meeting. Would it just be

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Speaker 13: another handshake, a sort of symbolic action, and then not

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Speaker 13: amount to really much of anything. The last time these

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Speaker 13: two leaders met in Bali Indonesia almost exactly a year ago,

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Speaker 13: there was a lot of talk about, Okay, we want

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Speaker 13: to set a flo under the relationship. We want to compete,

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Speaker 13: but we don't want conflict. And what we've really seen

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Speaker 13: is that hasn't necessarily been born out. While there has

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Speaker 13: been some improvement of the relationship bilaterally, you've seen a

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Speaker 13: lot of real tension points, battles over intellectual property, about

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Speaker 13: micro trips, about export controls, and obviously now the real

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Speaker 13: kinetic situation in the South China Sea, where the US

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Speaker 13: is CE has says it's seen a real uptick and

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Speaker 13: aggressive action by Chinese vessels against the US and its allies,

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Speaker 13: so that a lot of those disputes really remain unresolved.

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Speaker 13: It's not clear at all how a leader's meeting, which

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Speaker 13: wouldn't last all that long, would resolve any of those issues.

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Speaker 3: Blumberg's Nick Watams, thank you for your time. It's really

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Speaker 3: the perfect setup because now for more on US China relations,

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Speaker 3: we're going to bring in Liza Tobin, a senior director

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Speaker 3: for Research and analysis for the Economy at Special Competitive

442
00:22:49,160 --> 00:22:53,400
Speaker 3: Studies Project. She previously served on the National Security Council's staff.

443
00:22:53,440 --> 00:22:57,639
Speaker 3: As China director, and she led multiple US strategies and

444
00:22:57,680 --> 00:23:02,400
Speaker 3: policies related to China, Liza, when you think about these

445
00:23:02,600 --> 00:23:04,720
Speaker 3: meetings that are ahead of us, what can change?

446
00:23:05,840 --> 00:23:08,240
Speaker 14: Thank you so much, Sonali for having me on today.

447
00:23:08,359 --> 00:23:11,879
Speaker 14: So I think the administration's expectations for this meeting are

448
00:23:11,920 --> 00:23:16,680
Speaker 14: relatively low. As the previous reporter mentioned, they're really trying

449
00:23:16,720 --> 00:23:19,720
Speaker 14: to stabilize ties and make sure that there are open

450
00:23:19,760 --> 00:23:23,359
Speaker 14: lines of communication to deal with these various tensions that

451
00:23:23,400 --> 00:23:26,720
Speaker 14: are ongoing in the world. I think the administration would

452
00:23:26,800 --> 00:23:29,199
Speaker 14: like to make sure that should something happen, should there

453
00:23:29,240 --> 00:23:31,520
Speaker 14: be a contingency, they have someone to call in Beajing,

454
00:23:31,560 --> 00:23:33,600
Speaker 14: someone that will reliably pick up the phone.

455
00:23:33,800 --> 00:23:36,520
Speaker 3: Now, how do things start to change when you think

456
00:23:36,520 --> 00:23:39,680
Speaker 3: about China's economy and where it stands right now? Does

457
00:23:39,720 --> 00:23:44,320
Speaker 3: this lessen the aggressive posturing between the two nations in

458
00:23:44,400 --> 00:23:47,959
Speaker 3: terms of any potential to work together to advance economic initiatives.

459
00:23:49,160 --> 00:23:50,959
Speaker 14: So, I think you bring up a great point. The

460
00:23:51,000 --> 00:23:54,080
Speaker 14: mood music on the Chinese economy has really changed in

461
00:23:54,119 --> 00:23:57,720
Speaker 14: the last several months. It used to be that we

462
00:23:57,800 --> 00:24:01,000
Speaker 14: thought of the Chinese economy just is on a upward

463
00:24:01,040 --> 00:24:03,600
Speaker 14: trajectory for a long time, and I think that really

464
00:24:03,640 --> 00:24:06,439
Speaker 14: has changed and taken an about face, and now I

465
00:24:06,440 --> 00:24:09,919
Speaker 14: think the global consensus is that China is past the

466
00:24:09,960 --> 00:24:13,399
Speaker 14: era of miracle economic growth and they're possibly caught in

467
00:24:13,440 --> 00:24:17,680
Speaker 14: a middle income trap indefinitely where they will never return

468
00:24:17,760 --> 00:24:19,800
Speaker 14: to that rapid growth. However, I think one thing we

469
00:24:19,840 --> 00:24:22,520
Speaker 14: have to keep in mind is that the Chinese economy

470
00:24:22,640 --> 00:24:26,000
Speaker 14: is already quite large. It's the second largest economy in

471
00:24:26,040 --> 00:24:29,040
Speaker 14: the world, so there's still a lot of resources they

472
00:24:29,080 --> 00:24:31,879
Speaker 14: can bring to bear to develop their military and to

473
00:24:32,160 --> 00:24:35,720
Speaker 14: pursue their technology ambitions, so they're not going to be

474
00:24:36,040 --> 00:24:38,760
Speaker 14: too constrained on that side. I think where they will

475
00:24:39,520 --> 00:24:42,920
Speaker 14: really kind of pair back is on the social services side.

476
00:24:43,000 --> 00:24:44,720
Speaker 3: Well, it's been interesting because how do you think about

477
00:24:44,760 --> 00:24:47,840
Speaker 3: the potential to invest from both countries. When you think

478
00:24:47,880 --> 00:24:51,679
Speaker 3: about the United States and the existing financing needs the

479
00:24:51,800 --> 00:24:55,720
Speaker 3: Chinese economy and any potential slowdowns, where do you see

480
00:24:55,800 --> 00:24:59,600
Speaker 3: the investments in future technology artificial intelligence paying off more.

481
00:25:00,880 --> 00:25:03,160
Speaker 14: I think that's a really great point. In the last

482
00:25:03,200 --> 00:25:06,159
Speaker 14: several years, the US government has been caught with some

483
00:25:06,320 --> 00:25:10,560
Speaker 14: unwelcome technology surprises where China was able to race ahead

484
00:25:10,880 --> 00:25:13,520
Speaker 14: and get ahead of the United States on several important

485
00:25:13,520 --> 00:25:18,359
Speaker 14: technologies like hypersonic missiles, EV batteries, five GI network hardware,

486
00:25:18,720 --> 00:25:21,080
Speaker 14: and so really I think we learned the lesson that

487
00:25:21,119 --> 00:25:24,600
Speaker 14: we can't be complacent, that China is a determined rival

488
00:25:24,680 --> 00:25:27,159
Speaker 14: and it's willing to put a lot of resources behind

489
00:25:27,160 --> 00:25:27,719
Speaker 14: its goals.

490
00:25:28,040 --> 00:25:29,960
Speaker 7: And what has happened in the last.

491
00:25:29,680 --> 00:25:32,960
Speaker 14: Year is you've seen that the AI revolution is really

492
00:25:33,080 --> 00:25:35,280
Speaker 14: upon us, and so I think that's given us a

493
00:25:35,320 --> 00:25:38,280
Speaker 14: shot in the arm in the United States because most

494
00:25:38,359 --> 00:25:41,760
Speaker 14: of the really great firms in the generative AI space

495
00:25:42,000 --> 00:25:44,800
Speaker 14: that we're really excited about are US firms, and so

496
00:25:44,840 --> 00:25:47,280
Speaker 14: I think it shows that the US can still innovate.

497
00:25:47,640 --> 00:25:50,480
Speaker 14: We can't still lead, but we can't take our lead

498
00:25:50,520 --> 00:25:53,399
Speaker 14: for granted. We have to invest at home and do

499
00:25:53,560 --> 00:25:55,320
Speaker 14: more to run faster.

500
00:25:55,720 --> 00:25:58,720
Speaker 3: Now, giving you and focus so much on strategy, look

501
00:25:58,880 --> 00:26:02,560
Speaker 3: ten years out, when you think about how global the

502
00:26:02,560 --> 00:26:05,280
Speaker 3: world has been and how interconnected the US and China

503
00:26:05,359 --> 00:26:07,399
Speaker 3: have been, does that need to be the case in

504
00:26:07,440 --> 00:26:07,920
Speaker 3: the future.

505
00:26:09,440 --> 00:26:12,360
Speaker 14: So, I think what we've seen over the last few

506
00:26:12,440 --> 00:26:17,080
Speaker 14: years of experiencing Chinese economic coercion, where China's putting pressure

507
00:26:17,160 --> 00:26:20,479
Speaker 14: on foreign businesses, pushing them out and all of that,

508
00:26:20,800 --> 00:26:23,080
Speaker 14: is that over the long term, we do need to

509
00:26:23,119 --> 00:26:26,520
Speaker 14: reduce our exposure to China. We really should be trading

510
00:26:26,560 --> 00:26:31,879
Speaker 14: and investing more with other democratic market economies, other economies

511
00:26:31,920 --> 00:26:34,720
Speaker 14: that respect the rules and that want to trade fairly,

512
00:26:35,240 --> 00:26:38,879
Speaker 14: and that promote transparency and the rule of law. I

513
00:26:38,960 --> 00:26:41,200
Speaker 14: think the track record of China over the last twenty

514
00:26:41,320 --> 00:26:43,800
Speaker 14: years is that is not the direction they're heading. In fact,

515
00:26:43,800 --> 00:26:48,639
Speaker 14: the opposite Undersijenping, where really they've made a choice to

516
00:26:48,680 --> 00:26:50,919
Speaker 14: go in a different direction. So I think we really

517
00:26:50,960 --> 00:26:54,240
Speaker 14: need to be reducing our exposure. And this doesn't mean

518
00:26:54,280 --> 00:26:57,080
Speaker 14: in cutting everything off, but I think we should when

519
00:26:57,160 --> 00:27:00,639
Speaker 14: it comes to strategic technologies and our investments and trade

520
00:27:00,680 --> 00:27:03,440
Speaker 14: in those sectors, it really should be doing it more

521
00:27:03,440 --> 00:27:04,560
Speaker 14: with other democracies.

522
00:27:04,800 --> 00:27:08,200
Speaker 3: When you think about President Biden's approach to China here

523
00:27:08,320 --> 00:27:13,399
Speaker 3: and the initiatives already put in place to boost American competitiveness,

524
00:27:14,040 --> 00:27:15,960
Speaker 3: what do you find to be the most effective.

525
00:27:17,600 --> 00:27:20,320
Speaker 14: So I think there's an emerging kind of two pronged

526
00:27:20,400 --> 00:27:24,040
Speaker 14: approach promote and protect. So the promote side is this

527
00:27:24,160 --> 00:27:28,800
Speaker 14: emerging American industrial strategy. You have massive investments in the

528
00:27:28,840 --> 00:27:32,440
Speaker 14: semiconductor sector as well as the Inflation Reduction Act, which

529
00:27:32,480 --> 00:27:36,800
Speaker 14: puts a lot of domestic investment into renewable energy evs

530
00:27:36,880 --> 00:27:39,879
Speaker 14: and the like, and so that's all a really great start,

531
00:27:39,880 --> 00:27:41,840
Speaker 14: and we need to be doing more of that and

532
00:27:41,960 --> 00:27:47,360
Speaker 14: investing spending more on research and development. There's a lot

533
00:27:47,359 --> 00:27:49,840
Speaker 14: of bang for the buck if we invest in these things,

534
00:27:49,880 --> 00:27:52,719
Speaker 14: they tend to pay off economically and also for our

535
00:27:52,760 --> 00:27:54,919
Speaker 14: security and resilience. So I think we need to keep

536
00:27:55,000 --> 00:27:55,919
Speaker 14: going in these areas.

537
00:27:56,800 --> 00:28:00,119
Speaker 3: Liza Tobin of the Special Competitive Studies Project, we think

538
00:28:00,119 --> 00:28:02,880
Speaker 3: you for your time now coming up. Coinbase is out

539
00:28:02,920 --> 00:28:05,520
Speaker 3: with its second State of the Crypto Report, and they

540
00:28:05,520 --> 00:28:06,440
Speaker 3: are sharing.

541
00:28:06,160 --> 00:28:08,040
Speaker 4: The details exclusively with Bloomberg.

542
00:28:08,280 --> 00:28:11,920
Speaker 3: Jesse Pollock, Senior director of Engineering at Coinbase, joins us next,

543
00:28:12,240 --> 00:28:34,840
Speaker 3: this is Bloomberg. As crypto continues to come into its own,

544
00:28:35,000 --> 00:28:38,320
Speaker 3: so do attitudes about how it's used. Coinbase is putting

545
00:28:38,320 --> 00:28:40,600
Speaker 3: out its second State of the Crypto Report, and it

546
00:28:40,640 --> 00:28:44,000
Speaker 3: analyzes how Americans from different age groups and backgrounds feel

547
00:28:44,040 --> 00:28:46,960
Speaker 3: about crypto and the financial system as a whole. More

548
00:28:47,000 --> 00:28:50,160
Speaker 3: than half of those surveyed said they don't use or

549
00:28:50,360 --> 00:28:53,880
Speaker 3: rarely use traditional finance tools, and thirty eight percent say

550
00:28:53,920 --> 00:28:57,719
Speaker 3: that crypto and blockchain can increase economic opportunities joining us

551
00:28:57,760 --> 00:29:00,120
Speaker 3: now with more on this is Jesse Pollock's senior director

552
00:29:00,120 --> 00:29:03,360
Speaker 3: of engineering at Coinbase. It's interesting because, you know, we

553
00:29:03,400 --> 00:29:05,760
Speaker 3: always think about crypto as in part being born out

554
00:29:05,800 --> 00:29:09,080
Speaker 3: of the financial crisis, people turning to crypto out of

555
00:29:09,160 --> 00:29:12,400
Speaker 3: mistrust of the financial system. But we're standing here today

556
00:29:12,560 --> 00:29:15,760
Speaker 3: and Sam bankman Freed is about to potentially testify it

557
00:29:15,800 --> 00:29:21,440
Speaker 3: as own trial. And you've had many investors be very

558
00:29:21,480 --> 00:29:25,400
Speaker 3: burned by the downfall of crypto last year, So how

559
00:29:25,440 --> 00:29:26,640
Speaker 3: then do they regain trust?

560
00:29:26,720 --> 00:29:26,960
Speaker 2: Now?

561
00:29:28,160 --> 00:29:28,600
Speaker 4: Yeah?

562
00:29:28,640 --> 00:29:30,600
Speaker 15: Absolutely, And I think if you look at the Sam

563
00:29:30,680 --> 00:29:33,320
Speaker 15: Bank free trial, but we don't think that that's representative

564
00:29:33,320 --> 00:29:34,880
Speaker 15: of the crypto industry. You know, if you look at

565
00:29:34,880 --> 00:29:37,320
Speaker 15: businesses like Coinbase, I think what you've seen is that

566
00:29:37,360 --> 00:29:40,240
Speaker 15: for the last decade we've been building in a trusted way,

567
00:29:40,360 --> 00:29:43,200
Speaker 15: helping people understand how to use crypto in an easy,

568
00:29:43,240 --> 00:29:46,320
Speaker 15: secure way, and people have really leaned into that. And

569
00:29:46,360 --> 00:29:48,400
Speaker 15: I think the challenge that we've seen at the same

570
00:29:48,440 --> 00:29:51,600
Speaker 15: time is that because of a lack of clear regulatory environment,

571
00:29:52,080 --> 00:29:56,320
Speaker 15: increasingly folks have also been pushed into offshore, unregular environments

572
00:29:56,360 --> 00:29:58,560
Speaker 15: like SBF, which has led to bad outcomes. And so

573
00:29:58,600 --> 00:30:00,000
Speaker 15: I think the thing that we need to be doing

574
00:30:00,120 --> 00:30:04,840
Speaker 15: rebuild trust is to be investing in these clearer policy frameworks,

575
00:30:05,120 --> 00:30:07,120
Speaker 15: and that's exactly what we looked at with this report,

576
00:30:07,320 --> 00:30:09,080
Speaker 15: and we think that there's a ton of appetite and

577
00:30:09,120 --> 00:30:12,120
Speaker 15: a ton of urgency from the American people around getting

578
00:30:12,160 --> 00:30:14,880
Speaker 15: clear regulations in place so that crypto can be used

579
00:30:14,920 --> 00:30:16,880
Speaker 15: as this powerful tool to upgrade our systems.

580
00:30:16,960 --> 00:30:18,800
Speaker 3: Now, when we're talking about crypto, or are we talking about

581
00:30:18,800 --> 00:30:22,280
Speaker 3: crypto at large or are we talking about bitcoin Jesse, I.

582
00:30:22,200 --> 00:30:24,160
Speaker 15: Think we're talking about crypto at large. You know, Bitcoin

583
00:30:24,320 --> 00:30:27,239
Speaker 15: was obviously the first crypto that kind of brought this

584
00:30:27,320 --> 00:30:29,960
Speaker 15: technology onto the scene, But over the last decade, we've

585
00:30:29,960 --> 00:30:32,040
Speaker 15: seen how crypto can be used in a ton of

586
00:30:32,040 --> 00:30:34,640
Speaker 15: different ways beyond just money. And I think increasingly people

587
00:30:34,680 --> 00:30:36,560
Speaker 15: are seeing this kind of like the next generation of

588
00:30:36,600 --> 00:30:38,680
Speaker 15: the Internet, where they're seeing crypto as a tool that

589
00:30:38,720 --> 00:30:41,280
Speaker 15: can take these financial systems which in many cases have

590
00:30:41,360 --> 00:30:43,920
Speaker 15: been around for you know, one hundred years and haven't

591
00:30:43,920 --> 00:30:47,680
Speaker 15: really been upgraded, and use that technology to upgrade those

592
00:30:47,720 --> 00:30:50,840
Speaker 15: systems and make them actually work better for everyday people.

593
00:30:51,240 --> 00:30:55,360
Speaker 3: Now, what are people actually using crypto mostly for at

594
00:30:55,440 --> 00:30:56,400
Speaker 3: large these days?

595
00:30:56,440 --> 00:30:57,640
Speaker 4: Is it an investment.

596
00:30:57,680 --> 00:30:59,880
Speaker 3: Is it a payment rail and if it's a pain

597
00:31:00,400 --> 00:31:02,720
Speaker 3: when you look at how it's used in America, why

598
00:31:02,760 --> 00:31:05,040
Speaker 3: would it be any better than how we use any

599
00:31:05,080 --> 00:31:08,240
Speaker 3: other credit card company or other type of form of payment.

600
00:31:09,120 --> 00:31:09,320
Speaker 11: Yeah.

601
00:31:09,360 --> 00:31:11,840
Speaker 15: I think when crypto originally kind of started, it was

602
00:31:11,840 --> 00:31:14,000
Speaker 15: definitely mostly used as an investment. That was kind of

603
00:31:14,000 --> 00:31:15,960
Speaker 15: the early days of crypto. I think what we're seeing

604
00:31:15,960 --> 00:31:19,880
Speaker 15: increasingly now is that crypto is expanding its utility, and

605
00:31:19,920 --> 00:31:22,520
Speaker 15: that's really where we're focused as a business, seeing how

606
00:31:22,520 --> 00:31:24,760
Speaker 15: crypto can be used for payments, how can we use

607
00:31:24,760 --> 00:31:27,280
Speaker 15: for commerce, How it can we use to support creators

608
00:31:27,360 --> 00:31:30,560
Speaker 15: who are making music and doing other kinds of activities

609
00:31:30,600 --> 00:31:32,600
Speaker 15: on the Internet. And I think that's where we see

610
00:31:32,640 --> 00:31:35,640
Speaker 15: the most opportunity in the future in terms of how

611
00:31:35,640 --> 00:31:37,520
Speaker 15: this is actually going to be better than the systems

612
00:31:37,520 --> 00:31:39,280
Speaker 15: that we have today. I think if you look at

613
00:31:39,280 --> 00:31:42,760
Speaker 15: these systems, in many cases, people are paying really high fees.

614
00:31:42,880 --> 00:31:46,280
Speaker 15: For instance, the average small business pays three percent of

615
00:31:46,320 --> 00:31:49,719
Speaker 15: their profit, which is fifty percent of their overall margin,

616
00:31:49,880 --> 00:31:52,600
Speaker 15: to credit card processors. We think there's an opportunity to

617
00:31:52,680 --> 00:31:55,600
Speaker 15: use crypto to lower those fees for small businesses to

618
00:31:55,640 --> 00:31:58,720
Speaker 15: make payments faster and easier for everyday people, and to

619
00:31:58,800 --> 00:32:00,880
Speaker 15: open up a ton of access the people who don't

620
00:32:00,880 --> 00:32:01,760
Speaker 15: have access today.

621
00:32:02,280 --> 00:32:05,040
Speaker 3: You think about colleges and universities when you look at

622
00:32:05,040 --> 00:32:08,520
Speaker 3: what's happening on campus, is there anything that's happening there

623
00:32:08,600 --> 00:32:11,400
Speaker 3: that tells you the direction of travel for the industry.

624
00:32:12,520 --> 00:32:12,800
Speaker 4: Yeah?

625
00:32:12,840 --> 00:32:17,160
Speaker 15: Absolutely, you know, I think Americans have been promised this

626
00:32:17,240 --> 00:32:19,320
Speaker 15: American dream for a long time, and I think for

627
00:32:19,400 --> 00:32:22,160
Speaker 15: older generations that was very much the case. But people

628
00:32:22,200 --> 00:32:24,520
Speaker 15: in my generation, I think what we've seen is we

629
00:32:24,520 --> 00:32:26,640
Speaker 15: were told go to college, you'll get a good job,

630
00:32:26,800 --> 00:32:27,400
Speaker 15: you will.

631
00:32:27,520 --> 00:32:28,560
Speaker 4: Get to buy a house.

632
00:32:29,120 --> 00:32:31,360
Speaker 15: In fact, we went to college and we got debt,

633
00:32:31,680 --> 00:32:33,959
Speaker 15: and there weren't jobs and it was impossible to buy

634
00:32:34,000 --> 00:32:35,800
Speaker 15: a house. And I think that this is leading to

635
00:32:35,840 --> 00:32:38,760
Speaker 15: people to say, hey, these systems aren't working for us

636
00:32:38,840 --> 00:32:42,920
Speaker 15: and we need new systems. And people are looking to say, hey,

637
00:32:43,040 --> 00:32:45,120
Speaker 15: how can I find new ways to make money? How

638
00:32:45,120 --> 00:32:48,360
Speaker 15: can I have different kinds of jobs that give me

639
00:32:48,400 --> 00:32:51,080
Speaker 15: access in different ways to the economy. And they see

640
00:32:51,120 --> 00:32:55,520
Speaker 15: crypto as a really, really powerful tool for upgrading these systems.

641
00:32:55,680 --> 00:32:58,000
Speaker 15: And so I think what we're seeing on college campuses

642
00:32:58,200 --> 00:33:00,200
Speaker 15: and what we're seeing in folks too. Maybe our drop

643
00:33:00,280 --> 00:33:02,920
Speaker 15: out of colleges aren't following the traditional path. Is this

644
00:33:03,040 --> 00:33:06,680
Speaker 15: excitement and this energy to find new pathways that can

645
00:33:06,760 --> 00:33:09,800
Speaker 15: lead to that American dream that currently today is unachievable.

646
00:33:10,280 --> 00:33:13,000
Speaker 3: You were also very involved in the creation of Base,

647
00:33:13,200 --> 00:33:17,080
Speaker 3: and when you look at what not just clients and

648
00:33:17,120 --> 00:33:20,600
Speaker 3: customers and people who are buying using crypto in terms

649
00:33:20,640 --> 00:33:23,960
Speaker 3: of coin based customers, how are other members of the

650
00:33:24,000 --> 00:33:26,520
Speaker 3: community thinking about new use cases.

651
00:33:27,640 --> 00:33:30,080
Speaker 15: Yeah, people are building all sorts of things on Base,

652
00:33:30,440 --> 00:33:32,680
Speaker 15: and we like to think about Base as kind of

653
00:33:32,720 --> 00:33:36,040
Speaker 15: on chain like online happened in the early two thousands.

654
00:33:36,040 --> 00:33:38,880
Speaker 15: And what this means is this really powerful platform where

655
00:33:38,960 --> 00:33:42,200
Speaker 15: new kinds of applications are emerging. So we're using people

656
00:33:42,200 --> 00:33:45,840
Speaker 15: build applications that are helping small businesses with loyalty. We're

657
00:33:45,840 --> 00:33:48,560
Speaker 15: seeing people build new kinds of games. We're seeing people

658
00:33:48,640 --> 00:33:51,600
Speaker 15: bring music on chain, and in general, we're seeing people

659
00:33:51,680 --> 00:33:55,640
Speaker 15: embrace crypto as this incredibly powerful platform that's actually making

660
00:33:55,640 --> 00:34:00,040
Speaker 15: it easier, better, faster, cheaper for people to transact and

661
00:34:00,080 --> 00:34:01,320
Speaker 15: to engage on the Internet.

662
00:34:01,680 --> 00:34:03,440
Speaker 3: I'm going to push you a little here, Jesse, because

663
00:34:03,480 --> 00:34:05,680
Speaker 3: I get pushed on this too. Why is it a

664
00:34:05,680 --> 00:34:07,360
Speaker 3: better mouse trap than what we already have.

665
00:34:08,680 --> 00:34:09,040
Speaker 4: Yeah.

666
00:34:09,200 --> 00:34:11,600
Speaker 15: So, like I said, again, most of the systems that

667
00:34:11,680 --> 00:34:14,759
Speaker 15: we're operating in are tens or hundreds of years old.

668
00:34:14,840 --> 00:34:16,640
Speaker 15: And what that means, it means that people are paying

669
00:34:16,680 --> 00:34:18,960
Speaker 15: high fees. It means that when they're trying to move

670
00:34:18,960 --> 00:34:21,520
Speaker 15: money it maybe takes three to five days. It means

671
00:34:21,520 --> 00:34:24,719
Speaker 15: that the people who are controlling those systems are very

672
00:34:24,760 --> 00:34:28,000
Speaker 15: select few. And I think the opportunity was on chain

673
00:34:28,440 --> 00:34:31,880
Speaker 15: is the opportunity to bring more people in, to lower

674
00:34:31,920 --> 00:34:34,719
Speaker 15: those fees, to make transactions faster, and to make it

675
00:34:34,760 --> 00:34:37,839
Speaker 15: so we can rebuild these systems that can give better

676
00:34:37,880 --> 00:34:40,440
Speaker 15: outcomes to everyday people. And again going back to our

677
00:34:40,480 --> 00:34:43,880
Speaker 15: State of Crypto report, what we're seeing is that excitement

678
00:34:43,880 --> 00:34:46,759
Speaker 15: about crypto is not a partisan issue. You know, Democrats

679
00:34:46,760 --> 00:34:50,880
Speaker 15: and Republicans and independents are adopting crypto at the same rates. Instead,

680
00:34:50,960 --> 00:34:54,239
Speaker 15: it's a generational issue. And what that means it means

681
00:34:54,239 --> 00:34:57,239
Speaker 15: that young people today, because they're seeing this opportunity to

682
00:34:57,320 --> 00:34:59,880
Speaker 15: use this technology to update the systems, they're almost three

683
00:35:00,080 --> 00:35:03,800
Speaker 15: times is likely to own crypto. Young people are saying

684
00:35:04,000 --> 00:35:07,040
Speaker 15: they're majority likely to go and vote for candidates who

685
00:35:07,040 --> 00:35:09,640
Speaker 15: are supporting crypto, and I think young people are saying,

686
00:35:10,840 --> 00:35:13,560
Speaker 15: you're either with us or you're behind us. We are

687
00:35:13,560 --> 00:35:16,000
Speaker 15: going to take these new technologies, we are going to

688
00:35:16,080 --> 00:35:18,960
Speaker 15: upgrade these systems, and we're going to make a better America.

689
00:35:19,080 --> 00:35:21,719
Speaker 15: Whether you are on our team or not, we want

690
00:35:21,760 --> 00:35:23,440
Speaker 15: you to be here. We want to work with you.

691
00:35:23,560 --> 00:35:25,120
Speaker 4: Jesse Dear, We want to do this together.

692
00:35:25,200 --> 00:35:27,319
Speaker 3: Do you ever feel like sometimes the industry is trying

693
00:35:27,320 --> 00:35:29,560
Speaker 3: to accomplish too much? You give us a ton of

694
00:35:29,560 --> 00:35:33,040
Speaker 3: potential use cases. You know, it's interesting to see that

695
00:35:33,480 --> 00:35:36,600
Speaker 3: many exist, But if it's trying to compete with so

696
00:35:36,719 --> 00:35:39,080
Speaker 3: many existing systems, what's the narrative?

697
00:35:40,280 --> 00:35:42,399
Speaker 15: Yeah, well, I think you know, you could have said

698
00:35:42,400 --> 00:35:45,000
Speaker 15: the same thing about the Internet in the early two thousands, Right,

699
00:35:45,200 --> 00:35:47,760
Speaker 15: is the Internet trying to upgrade all of our world

700
00:35:47,800 --> 00:35:49,839
Speaker 15: to come online? And I think if we look now,

701
00:35:49,960 --> 00:35:52,120
Speaker 15: you know, a decade, two decades later, what we've seen

702
00:35:52,200 --> 00:35:54,319
Speaker 15: is the Internet has transformed the world. And I think

703
00:35:54,360 --> 00:35:56,759
Speaker 15: we see the same opportunity here and we're not just

704
00:35:56,800 --> 00:35:58,800
Speaker 15: seeing it kind of in the abstract. We are seeing

705
00:35:58,800 --> 00:36:01,520
Speaker 15: it in the concrete. Every single day, you know, I

706
00:36:01,600 --> 00:36:04,400
Speaker 15: talk to people who are using crypto to transact to

707
00:36:04,480 --> 00:36:07,520
Speaker 15: people who are using an adopting crypto, like at Blackbird

708
00:36:07,840 --> 00:36:11,200
Speaker 15: in New York City restaurants to make better connections with

709
00:36:11,239 --> 00:36:13,880
Speaker 15: their customers and drive more revenue for their small businesses.

710
00:36:14,040 --> 00:36:16,760
Speaker 15: To artists who are using crypto to build more meaningful

711
00:36:16,760 --> 00:36:20,319
Speaker 15: connections with their fans. And to financial institutions you know,

712
00:36:20,400 --> 00:36:23,239
Speaker 15: like JP Morgan, like Coinbase, that are using crypto to

713
00:36:23,360 --> 00:36:26,759
Speaker 15: lower settlement times and to increase the efficiency of these systems.

714
00:36:26,840 --> 00:36:28,799
Speaker 11: And so we believe that, like the.

715
00:36:28,800 --> 00:36:32,040
Speaker 15: Internet, on chain has the opportunity to completely transform our

716
00:36:32,040 --> 00:36:32,760
Speaker 15: world for the better.

717
00:36:33,680 --> 00:36:46,680
Speaker 3: Jesse Pollocks, Senior director of Engineering at Coinbase. Morgan Stanley's

718
00:36:46,680 --> 00:36:50,000
Speaker 3: succession race is over, and boy was it a long

719
00:36:50,000 --> 00:36:53,000
Speaker 3: and heated succession race. Earlier today I spoke with Morgan

720
00:36:53,040 --> 00:36:56,400
Speaker 3: Stanley CEO James Gorman and incoming CEO Ted Pick, and

721
00:36:56,440 --> 00:36:59,719
Speaker 3: what they told me is they expect dealmaking to make

722
00:36:59,760 --> 00:37:03,160
Speaker 3: a back and to lead the next cycle. Take a listen.

723
00:37:04,160 --> 00:37:08,120
Speaker 16: Organizations grow because you have change. I mean, you're not

724
00:37:08,160 --> 00:37:10,200
Speaker 16: going to grow by doing the same thing again and again.

725
00:37:10,800 --> 00:37:13,560
Speaker 16: And I feel like we set this up several years

726
00:37:13,560 --> 00:37:17,400
Speaker 16: ago with the board. We've had a very very intentional

727
00:37:17,400 --> 00:37:20,800
Speaker 16: process and we ended up with a phenomenal outcome, which

728
00:37:20,840 --> 00:37:24,160
Speaker 16: is Ted, and we've got other unbelievably good executives who

729
00:37:24,160 --> 00:37:27,800
Speaker 16: are taking leadership roles as co presidents Andy Sepson and

730
00:37:27,880 --> 00:37:28,480
Speaker 16: Dan Sinkret.

731
00:37:28,600 --> 00:37:31,000
Speaker 10: So it's sort of what you hope for. I mean,

732
00:37:31,040 --> 00:37:33,240
Speaker 10: you try and drive strategy, you try and put together

733
00:37:33,280 --> 00:37:36,800
Speaker 10: a team, you try and deal with the inevitable knocks

734
00:37:36,840 --> 00:37:39,560
Speaker 10: that you get from the market and the disappointments that

735
00:37:39,640 --> 00:37:42,480
Speaker 10: come in times in any complex business. But at the

736
00:37:42,560 --> 00:37:44,120
Speaker 10: end of the day, you're also trying to hand it

737
00:37:44,160 --> 00:37:47,120
Speaker 10: off for the next generation. So it feels great and

738
00:37:47,160 --> 00:37:47,839
Speaker 10: it feels right.

739
00:37:47,920 --> 00:37:50,239
Speaker 3: You've been rumored to be a CEO contender for oh

740
00:37:50,239 --> 00:37:52,399
Speaker 3: so long, Ted, How does it finally feel to step

741
00:37:52,400 --> 00:37:53,359
Speaker 3: into the role next year?

742
00:37:53,719 --> 00:37:54,200
Speaker 1: Finally?

743
00:37:54,680 --> 00:37:57,000
Speaker 17: Morgan Stanley was the first place that I worked out

744
00:37:57,040 --> 00:38:00,239
Speaker 17: of college, and thirty three years later, I'm sitting next

745
00:38:00,280 --> 00:38:01,400
Speaker 17: to mister James Gorman.

746
00:38:01,840 --> 00:38:03,120
Speaker 11: It's the thrill of a lifetime.

747
00:38:03,200 --> 00:38:04,080
Speaker 2: I'm so excited.

748
00:38:04,719 --> 00:38:08,279
Speaker 3: Now you've really inherited a gift here, a massive transformation

749
00:38:08,440 --> 00:38:11,520
Speaker 3: over fourteen years, one of the best valuations here in

750
00:38:11,560 --> 00:38:14,319
Speaker 3: global banking. But there are investors who are worried this

751
00:38:14,360 --> 00:38:15,680
Speaker 3: is as good as a guests what do you.

752
00:38:15,680 --> 00:38:17,680
Speaker 17: Tell them there's more to come.

753
00:38:18,200 --> 00:38:19,040
Speaker 11: There's more to come.

754
00:38:19,360 --> 00:38:22,160
Speaker 17: We look at the five year chart, the ten year chart,

755
00:38:22,640 --> 00:38:23,799
Speaker 17: the fifteen year chart.

756
00:38:24,600 --> 00:38:25,160
Speaker 11: The wealth and.

757
00:38:25,080 --> 00:38:29,440
Speaker 17: Asked management businesses have these remarkable, durable earnings. The Global

758
00:38:29,480 --> 00:38:32,560
Speaker 17: Investment Bank has lots of miles to go. So we're

759
00:38:32,680 --> 00:38:35,360
Speaker 17: thrilled about the business strategy we have in place and

760
00:38:35,400 --> 00:38:37,520
Speaker 17: it's going to continue to deliver a long term value

761
00:38:37,520 --> 00:38:38,040
Speaker 17: for Sheerald.

762
00:38:38,239 --> 00:38:39,680
Speaker 3: Now for both of you, we've been in such a

763
00:38:39,719 --> 00:38:43,279
Speaker 3: prolongedble market that has hit such volatile times as of late.

764
00:38:43,560 --> 00:38:45,359
Speaker 4: Do you expect the next couple.

765
00:38:45,040 --> 00:38:48,160
Speaker 3: Of years from Morgan Stanley to be a little more choppy?

766
00:38:48,200 --> 00:38:51,640
Speaker 10: You know, I don't know's I thought this year would

767
00:38:51,680 --> 00:38:54,839
Speaker 10: be tough than it was. A lot of what's going

768
00:38:54,840 --> 00:38:57,799
Speaker 10: in the market conspise against our particular business makes some

769
00:38:57,840 --> 00:39:01,160
Speaker 10: of the more commercial retail banks mortgage bank very different

770
00:39:01,160 --> 00:39:04,120
Speaker 10: business model. But our turn will come. I think, you know,

771
00:39:04,560 --> 00:39:08,799
Speaker 10: I personally think the US has dodged a recession. I

772
00:39:08,800 --> 00:39:12,040
Speaker 10: think the FED is very close to being final within

773
00:39:12,200 --> 00:39:16,640
Speaker 10: probably twenty five basis points. We're starting to see activity.

774
00:39:16,680 --> 00:39:18,680
Speaker 10: Look for the Chevron deal we just announced the other day.

775
00:39:18,719 --> 00:39:22,080
Speaker 10: I'm in phenomenal so we're seeing activity in different sectors.

776
00:39:21,880 --> 00:39:25,040
Speaker 10: It's coming alive now. So no, I think the next

777
00:39:25,080 --> 00:39:26,920
Speaker 10: couple of years will be great. But what I care

778
00:39:26,960 --> 00:39:29,799
Speaker 10: about is over the really long run. When we set

779
00:39:29,840 --> 00:39:32,040
Speaker 10: about on this journey, we weren't focused on a quarter,

780
00:39:32,640 --> 00:39:34,319
Speaker 10: and if the stock takes a dip in a quarter,

781
00:39:34,400 --> 00:39:37,160
Speaker 10: I say, that's kind of good news because we're buying

782
00:39:37,200 --> 00:39:39,840
Speaker 10: back stock and every share you buy back, you're retiring

783
00:39:39,880 --> 00:39:42,560
Speaker 10: a dividend, So shareholders who hang tough at getting a

784
00:39:42,600 --> 00:39:45,879
Speaker 10: four and a half percent yield and we're buying back

785
00:39:45,960 --> 00:39:49,239
Speaker 10: stock and the stock's cheap, so it's it's kind of

786
00:39:49,239 --> 00:39:52,399
Speaker 10: a good situation being But medium term, no, I think

787
00:39:52,440 --> 00:39:53,560
Speaker 10: we're I think the film is going.

788
00:39:53,520 --> 00:39:53,919
Speaker 11: To do great.

789
00:39:54,239 --> 00:39:55,960
Speaker 3: Ted, what are the biggest challenges for you as you

790
00:39:56,040 --> 00:39:57,120
Speaker 3: navigate this environment?

791
00:39:57,640 --> 00:40:01,080
Speaker 17: There's just so much opportunity. We're definitely a new paradigm.

792
00:40:01,880 --> 00:40:03,799
Speaker 17: Interest rates are going to be higher for longer, and

793
00:40:03,840 --> 00:40:07,600
Speaker 17: the world's gotten smaller, which means the clients need advice

794
00:40:08,080 --> 00:40:09,960
Speaker 17: they need in the wealth and asked and management space

795
00:40:10,000 --> 00:40:13,279
Speaker 17: they need in the institutional space our corporate clients, and

796
00:40:13,320 --> 00:40:16,120
Speaker 17: we're going to have lots of activity around those clients.

797
00:40:16,120 --> 00:40:18,839
Speaker 17: So I just want to make sure that we are

798
00:40:19,080 --> 00:40:22,600
Speaker 17: completely aligned in the business strategy we have in place.

799
00:40:22,640 --> 00:40:26,400
Speaker 17: It's something that James is painstakingly put together for fourteen years.

800
00:40:26,680 --> 00:40:29,560
Speaker 17: The market knows we want to do so I'm incredibly

801
00:40:29,600 --> 00:40:31,279
Speaker 17: optimistic over the next couple of years.

802
00:40:31,400 --> 00:40:31,560
Speaker 4: Now.

803
00:40:31,560 --> 00:40:33,920
Speaker 3: That does it for this edition of Bloomberg Technology, And

804
00:40:33,960 --> 00:40:36,759
Speaker 3: don't forget to check out the VTech podcast. You can

805
00:40:36,800 --> 00:40:40,440
Speaker 3: find it on the terminal as well as online on Apple, Spotify,

806
00:40:40,640 --> 00:40:43,279
Speaker 3: and iHeart This is Bloomberg