Speaker 1: I'm Caroline Hired everyone Imberg's world sad quarters in New York,
Speaker 1: and I'm Ed Ludlow in San Francisco. This is Bloomberg
Speaker 1: Technology coming up. Tech stocks, they take a hit the
Speaker 1: latest inflation print, spooking risk on sentiment, will get the
Speaker 1: sector outlook class, we'll get the outlook for M and A.
Speaker 1: Is the Justice Department eyes Adobe's twenty billion dollars bid
Speaker 1: for Figma. And on the one year mark of Russia's
Speaker 1: invasion of Ukraine, we'll take a look at why cybersecurity
Speaker 1: is more important now than ever. All that and so
Speaker 1: much more coming up broadly invested today. We were shunning
Speaker 1: risk and mid fears of that impact of higher rates. However,
Speaker 1: Kate More of black Rock, speaking earlier today to our
Speaker 1: John Ferries, see some silver lining scarrow for the tech sector.
Speaker 1: There was a decent amount of over hiring across tech
Speaker 1: and in software in parts of Sammy's and we've seen
Speaker 1: those companies get out ahead of the market in terms
Speaker 1: of announcing layoffs. So that's been really productive, and so
Speaker 1: I expect these companies are going to weather this economic
Speaker 1: and policy storm pretty well. What I've been really encouraged
Speaker 1: with is how honest the guidance was during reporting fourth quarter. Okay,
Speaker 1: encouragement with certain moves coming from the tech sector. Let's
Speaker 1: dig in with Nancy Tangla. You know her, of course,
Speaker 1: Lafa Tangla Investments. She would cause heading over there, the
Speaker 1: CEO role, the CIO role, Nancy and as great as
Speaker 1: always to have some time with you. So do you
Speaker 1: agree there with the black Rock view that actually companies
Speaker 1: in technology space are taking the action necessary? I did,
Speaker 1: Thanks for having me, Caroline and Ed loved the new show. Thanks. Yeah,
Speaker 1: I do. I think we felt that way for a while.
Speaker 1: We were arguing in the fourth quarter that it was
Speaker 1: time to start adding risk back into your portfolio, the
Speaker 1: attack and consumer discretionary. And the reason for that is
Speaker 1: that these companies, the ones that we own and like,
Speaker 1: are the ones they're delivering strong beats every quarter of
Speaker 1: last year, raising guidance, and they're still not feeling the
Speaker 1: love from Wall Street. So we like the names that
Speaker 1: are reliable, earning sprowers with strong management teams. And yeah,
Speaker 1: I mean technology and energy are the two most productive
Speaker 1: sectors on a revenue per employee basis, And if you
Speaker 1: just look at it, just use Apple as an example there,
Speaker 1: per employee's five hundred and fifty thousand dollars in revenue
Speaker 1: versus the rest in the market one hundred and forty thousand.
Speaker 1: So they're already very productive companies. And yeah, some of
Speaker 1: them got very fat and they've they've had to shed employees,
Speaker 1: and I think that's a good thing for the bottom line.
Speaker 1: But the two companies that we like the most haven't
Speaker 1: had to do that because they managed through the pandemic
Speaker 1: pretty well. Yeah, Nancy, I want to get some of
Speaker 1: those specific names that I do feel like there's energy
Speaker 1: in this idea around a more hawkish FED, and it's
Speaker 1: really relevant to the technology set. You know. PC Friday
Speaker 1: was the latest of a series of data points and
Speaker 1: FED speak that kind of change the mindset, it seems like,
Speaker 1: at least in the short term. Do you agree with that. Well,
Speaker 1: I've been pretty critical of the FED, and I think
Speaker 1: I understand why the market hasn't believed what they've said.
Speaker 1: These are you know, we've said we thought that inflation
Speaker 1: peaked in June, that it rises mostly symmetrically, and I'm
Speaker 1: the same on the way down, but it's never linear.
Speaker 1: So you know, the market's paying such close attention to
Speaker 1: numbers that ultimately get revised, and they're not looking so
Speaker 1: much at the trends. So I see this as an
Speaker 1: opportunity to step in and continue to buy these names,
Speaker 1: because as soon as the market stops trading on interest
Speaker 1: rate fears and starts trading on the fundamentals, these names
Speaker 1: are going to be You're going to be well positioned
Speaker 1: for the next three to five years, which is our
Speaker 1: investing time. Horizon Nancy, you teased us with two specific
Speaker 1: names that you're excited about. Would you care to share
Speaker 1: a little bit more about what they are? Yeah, so
Speaker 1: I'm I'm actually hiding out it in client village, trying
Speaker 1: to finish my book. But so's a book as well,
Speaker 1: The End of Senses. But yeah, So the two names
Speaker 1: that we liked the most, one just reported and of
Speaker 1: course it has had a nice run from the report.
Speaker 1: But that's Palo Alto Network. So what we have said
Speaker 1: in our portfolios is we want to own old economy
Speaker 1: companies that are embracing the digital and AI revolution and
Speaker 1: then the suppliers of those tools. And so Paaloatto is
Speaker 1: a cloud cybersecurity company. They beat on revs, they beat
Speaker 1: on Bill billings. They their next gen security software is
Speaker 1: at sixty three percent gross margins beat. I mean, there's
Speaker 1: there's nothing not to like about this company and the report.
Speaker 1: So that's one and then the other is a neighbor
Speaker 1: of yours service now Bill McDermott is by far the
Speaker 1: best CEO in corporate America in my view. They turned
Speaker 1: in an excellent quarter. They beat and they raised and
Speaker 1: their margins holding up very nicely. So solution on the cloud,
Speaker 1: paddle out to a cybersecurity solution, and I think both
Speaker 1: those names are members of our twelve Best Ideas portfolio.
Speaker 1: Shout out for a Bill, who's joined this show many
Speaker 1: a time. Talk to us a little bit about the
Speaker 1: AI hype nancy and whether or not you really feel
Speaker 1: it will ultimately change in every industry. I do think so, Caroline. However,
Speaker 1: you know it's we're early innings. One of my colleagues
Speaker 1: chat GPT me and I learned a lot of things
Speaker 1: about myself that I didn't know. So there are problems, right,
Speaker 1: and then there's the creepy factor. But if you look
Speaker 1: at a company like Deer, they are using AI to
Speaker 1: target fertilizing a single seed, and this becomes very important
Speaker 1: as young people don't want to become farmers as we're
Speaker 1: hitting up against a structural labor shortage in this country.
Speaker 1: I really do believe I'm the last baby bone were
Speaker 1: still working. The people that retired are not coming back,
Speaker 1: and so I think we have to solve our problems
Speaker 1: with technology, and many companies are doing it simplistically, like
Speaker 1: a public storage that allows clients to sign up and
Speaker 1: access their storage locker without any human contact, all the
Speaker 1: way to Asylum, which is correcting water infrastructure problems digitally
Speaker 1: from a central area, and that's one and a half
Speaker 1: times more profitable. So I do think it's real. I
Speaker 1: think AI, as I said early in the innings, and
Speaker 1: that's also why we like you know name like Microsoft
Speaker 1: that's also in our twelve Best Ideas portfolio. They sort
Speaker 1: of span the gamut of cloud and AI, and I
Speaker 1: think you have to be exposed. So we're looking for
Speaker 1: opportunities all the time. Now, see always owning your experience,
Speaker 1: not what generation you're born in. Just tell us a
Speaker 1: little bit lastly about where you look now we've all
Speaker 1: been sort of perhaps trading off earnings. We're now looking
Speaker 1: towards you know, Morgins a focus on efficiency. What are
Speaker 1: the next key words, fores or data points you're going
Speaker 1: to be trading off. So I do think inflation is
Speaker 1: still the overriding concern that the market has, that the
Speaker 1: FED let it go for too long. And you know,
Speaker 1: you know this ed being in a Californian you know,
Speaker 1: you get a controlled burn and it can easily turn
Speaker 1: into a wildfire. And that's really what we saw. And
Speaker 1: so now the question is can they can they rain
Speaker 1: it back in? I think the leading indicators that we
Speaker 1: look at indicate they can. I also think the leading
Speaker 1: indicators indicate we're going to go into a mild recession.
Speaker 1: And so those are the key words that the algas
Speaker 1: and the hedge funds are going to be trading off.
Speaker 1: And we're going to use that volatility as an opportunity
Speaker 1: to add to holdings in our portfolio. So smart always
Speaker 1: using tech, whether it's for investment or investing in tech.
Speaker 1: That's a tanglaan leaf. Tangler investments take us some time
Speaker 1: out of writing a bookhead there, Yeah, up in Incline Village,
Speaker 1: of all places, that's one place I'd love to be
Speaker 1: this weekend. But she makes the same point that guests
Speaker 1: a week have made that you want to be positioned
Speaker 1: with those names who are best place to take advantage
Speaker 1: not necessarily around hype with AI, but around the investment
Speaker 1: that succumb when companies need to have access to those tools.
Speaker 1: And it's interesting as to whether we continue to see themes.
Speaker 1: You know, there's been these themes borne out whether you're
Speaker 1: like in Palo Alto, whether you're liking it in video.
Speaker 1: There's also been the themes on the downside having it,
Speaker 1: and I feel each earning season brings us whether we
Speaker 1: can just broad brush retail as one sector where we
Speaker 1: can dig into the likes of e commerce players all
Speaker 1: having this sort of sticking point that we've seen this week.
Speaker 1: I mean, let's just reflect for a moment some of
Speaker 1: the earnings coming from the likes eBay, the sell off
Speaker 1: that we saw so painful in wayfare. Etsie actually outperformed
Speaker 1: on the day of its numbers and actually it showed
Speaker 1: some sort of growth, but again there was some concerns
Speaker 1: about its forward looking guidance. And I wonder what we'll
Speaker 1: see from like more the bricks and mortar stores next
Speaker 1: week and where they're managing to lean into digital, whether
Speaker 1: e commerce is just a concern there. Two. Yeah, and
Speaker 1: our colleagues of Bloomberg News have kind of crunched the
Speaker 1: numbers at the index of online retailers about how far
Speaker 1: off we are from the pandemic highs. What those names
Speaker 1: all having common is a drop off in activity. That's
Speaker 1: the concern that actually their end users, consumers have stopped
Speaker 1: spending and the outlooks murky as well. There's really very
Speaker 1: few glimmers of hope. But we all bought too much online.
Speaker 1: We did our spending on weight there. We're still deciding
Speaker 1: that it's about experiences, is about getting on flights as
Speaker 1: going out to moost places in California and visiting you ed.
Speaker 1: Is the pendulum just swinging somewhat? And are we over
Speaker 1: reacting to it? Not so fast? Adobe. The Justice Department
Speaker 1: is preparing a suit to try and block Adobe's twenty
Speaker 1: billion dollar purchase of Figma. According to sources, it could
Speaker 1: come as soon as next month. This is a big deal. Literally.
Speaker 1: You likely know Adobe tools like Photoshop or Premium for
Speaker 1: video editing. Figma is known as software for designing app
Speaker 1: or website interfaces. It's trouts Todobe's competing XD products In
Speaker 1: recent years now, buying Figma is a big bet. Buy Adobe.
Speaker 1: The creative work is going to be important for small
Speaker 1: businesses and everyday users on the web, and that's a
Speaker 1: market Figma's rapidly controlling. Adobe made multiple attempts to buy
Speaker 1: Figma in twenty twenty and twenty twenty one, and ultimately
Speaker 1: they sealed the deal with a price tag that was
Speaker 1: double Figma's then valuation, a pretty premium. Now an antitrust
Speaker 1: suit makes the deal a little more shaky, and it's
Speaker 1: Adobe's most serious spat with antitrust regulators since the nineties.
Speaker 1: One to watch story of the Day, one of the
Speaker 1: stories of the week, Caroline looking at the shares of
Speaker 1: Adobe this Friday as well, down almost eight percent, but
Speaker 1: it was the biggest drop since September. You know, you
Speaker 1: and I've been talking for twenty four hours, right about
Speaker 1: the idea that sort of some regulator somewhere looking at
Speaker 1: this deal wasn't surprising, but how quickly the DOJ moved
Speaker 1: was And certainly when I was reading the cell side
Speaker 1: notes earlier this morning, there's a little bit of jitters
Speaker 1: out there about the risk of Adobe not being able
Speaker 1: to seal a deal with Figma. Yeah, and isn't it
Speaker 1: kind of ironic that the shares of Adobe fell so
Speaker 1: hard when we first learned about the deal, people felt
Speaker 1: they were over paying, and now they're worried about the time,
Speaker 1: the investment, the focus that they've given less they get
Speaker 1: into some of maybe the arbitrage that could be played
Speaker 1: in this current environment. Bloom Bag's intelligence chen Fani is
Speaker 1: with us, So it's been on all day, relentlessly bringing
Speaker 1: your analysis to now the probabilities we have to decide
Speaker 1: whether this gets through or not. I suppose we're not
Speaker 1: surprised that the US administration once again is eyeing such
Speaker 1: a deal. You know, that's right. This is the timing
Speaker 1: is really tough for Adobe. You know, we have a
Speaker 1: really aggressive administration right now when it comes to M
Speaker 1: and A and particularly tech companies, and particularly a deal
Speaker 1: like this where you see what looks like in incumbent
Speaker 1: buying a scrappier, newer, kind of nascent startup, really one
Speaker 1: that's really rivaling and could become a bigger competitor in
Speaker 1: the future. So it sort of looks like a defensive
Speaker 1: deal where it's just trying to take competition out of
Speaker 1: the market. And there's particular sensitivity to that. So you know,
Speaker 1: the thing is about probability. It's really hard once the
Speaker 1: DOJ SEUs to really understand what's going to happen in
Speaker 1: that trial. These cases can be hard for the DOJ
Speaker 1: to win, and it hasn't had such a great track record.
Speaker 1: But in this case, we'll have to see how the
Speaker 1: evidence shakes out, because I think at least superficially, it
Speaker 1: looks like the DOJ may have a decent case here.
Speaker 1: But remind us of that track record of late right. Well,
Speaker 1: the thing is, the DOJ and FTC have both decided, look,
Speaker 1: we're going to bring the tough deals. We're going to
Speaker 1: challenge the tough deals. In the past, they really would
Speaker 1: sue those deals where they were pretty sure they could win.
Speaker 1: The evidence is sort of stacked in their favor. They're
Speaker 1: going to go into court and it's going to be
Speaker 1: easy for them. But they've said, look, this hasn't worked.
Speaker 1: We've allowed too much consolidation, particularly big tech companies buying
Speaker 1: up small, scrappy competitors. We regret some of these deals
Speaker 1: we've cleared in the past, like Facebook and Instagram or
Speaker 1: Google YouTube or double Click, and we have to we
Speaker 1: have to be more careful about this, and even we
Speaker 1: have to go take these cases to court even if
Speaker 1: they're tough, and when they do that, they're going to
Speaker 1: lose some. So the DOJ recently law to challenge in
Speaker 1: court to stop United Healthcare from buying Change. That was
Speaker 1: one deal that where had had a tough time. The
Speaker 1: FDC recently lost its challenge to Murder trying to buy
Speaker 1: a small virtual reality company called Within. They have had
Speaker 1: successes not so much in through litigating, but through getting
Speaker 1: the companies to abandon the deal prior to getting to
Speaker 1: that final decision by a judge. I think it's important
Speaker 1: to point out as well, Jennifer Wright, that according to sources,
Speaker 1: you know, this is what the DOJ is considering. One
Speaker 1: source said that this could happen as soon as next month.
Speaker 1: Meetings between the DOJ and Adobe have been taking place.
Speaker 1: Adobe issued US this statement, we are engaged in constructive
Speaker 1: and cooperative discussions with regulators in the US, UK and EU.
Speaker 1: I wanted to bring that up because actually not just
Speaker 1: to get Adobe side of the story across, but it
Speaker 1: raises a point that actually globally they're going to have
Speaker 1: to pass a number of tests anyway. I wonder could
Speaker 1: you distill for our audience what that test is likely
Speaker 1: to be. It seems to center around XD, Adobe's kind
Speaker 1: of existing offering, that's right. I mean, XD looks like
Speaker 1: it's a competitor to Figma's offering, and in fact, you know,
Speaker 1: there's been a lot of news about the fact that
Speaker 1: Figma's taking customers from Adobe, and that's pure competition in
Speaker 1: the market right now. The regulators tend to be really coordinated,
Speaker 1: so there's a lot of discussion between the Federal Trade Commission,
Speaker 1: the European Commission, the regulators in the UK, and they
Speaker 1: tend to be pretty aligned about being aggressive with big tech.
Speaker 1: So to the extent that Adobe can work out some
Speaker 1: sort of settlement or compromise that would allow this deal
Speaker 1: to clear, it's going to have to get all three
Speaker 1: of those regulators to come together to agree to that.
Speaker 1: Maybe it would be the divestment of Adobe XD. You know,
Speaker 1: possibly that would fix the issue, but I'm not so
Speaker 1: sure that that will be enough, particularly for the US
Speaker 1: and for the UK regulators who might also be concerned
Speaker 1: about the possibility that Figma could grow into a bigger
Speaker 1: competitor to Adobe in the future. Beyond just the XD product.
Speaker 1: The other dailway tracking of course moment is Microsoft Activision.
Speaker 1: You're our senior analyst for antitrust litigation. Could you draw
Speaker 1: in your experience for us? How is this environment compared
Speaker 1: to those you've seen in the past. It seems really
Speaker 1: tough to pull off a big piece of tech M
Speaker 1: and A right now. It is really tough. I mean,
Speaker 1: all of these tech deals are going to get a
Speaker 1: lot of scrutiny by the FTC and DJ and the
Speaker 1: Microsoft Activision deal is just a perfect example of how
Speaker 1: things have changed. I mean, five or ten years ago.
Speaker 1: That deal, which we call a vertical deal because the
Speaker 1: companies don't really compete head on, they're just at different
Speaker 1: levels of the supply chain. For a video game making
Speaker 1: creation and for video game distribution, which would be the
Speaker 1: Microsoft piece with its consoles and its subscription service. That
Speaker 1: kind of deal years ago was pretty much a shoe in.
Speaker 1: Sometimes the companies would have to agree to behavioral conditions
Speaker 1: to get the deal to clear, but it was pretty
Speaker 1: much a given that that's the route it was going
Speaker 1: to go. Today, we have this challenge by the FEC
Speaker 1: already and possibly by the UK and Europe as well.
Speaker 1: Bloomberg Intelligence is Genuary. Thank you so much for joining
Speaker 1: us late on a Friday top top story this week,
Speaker 1: We're grateful for your analysis and Caroline, as we always do,
Speaker 1: we went to our audience and said, what do you
Speaker 1: make of this? What do you make of M and
Speaker 1: A right now for tech in You know, the answers
Speaker 1: are kind of consistent with what we've heard the clamp
Speaker 1: down underway, I mean front and center. We know that
Speaker 1: this isn't as we're just saying, a US theme. This
Speaker 1: is a European theme, this is a UK theme. This
Speaker 1: is across the spectrum, whether it's Microsoft, Activision, Blizzard, whether
Speaker 1: it's Adobe, and it feels as though our audience are
Speaker 1: pretty much well aware of it. It's just one step
Speaker 1: in a multi step process and we'll continue to track it. Now.
Speaker 1: Coming up, what's new in the world of AI? A
Speaker 1: clamp down on chat GPT from China to Wall Street.
Speaker 1: That's all in our Talking Tech Next. This is Bloomberg
Speaker 1: time out for Talking teg China will introduce rules to
Speaker 1: govern the use of AI across a swath of industries
Speaker 1: in an effort to regulate emergencepheres as chat GPT fever
Speaker 1: sweeps the world's second largest economy. The government says it
Speaker 1: will push for the safe and controllable application of AI services,
Speaker 1: which it considers a strategic industry, and will continue to
Speaker 1: monitor its evolution over the longer term to gain a
Speaker 1: better understanding of the ethical concerns around AI and sticking
Speaker 1: with AI, Meta just introduce a research tool for building
Speaker 1: AI based chatbots and other products, seeking to create a
Speaker 1: buzz for its own technology and compete with Google and Microsoft.
Speaker 1: The tool, Lama Believe It or Not, is Meta's latest
Speaker 1: entry into the realm of large language models, which CEO
Speaker 1: Mark Zuckerberg says quote have shown a lot of promise
Speaker 1: in generating text, hamming conversations, summarizing written material, and more
Speaker 1: complicated tasks like solving math theorems or predicting protein structures
Speaker 1: and back. In the US, a growing amount of global
Speaker 1: investment banks aping down on chat GPT, particularly on Wall Street.
Speaker 1: Bank of America, City Group, Deutsche Bank, Goldman, sax Group,
Speaker 1: and Wells Fargo are among lenders that have recently banned
Speaker 1: use of the chat bot, with Bank of America telling
Speaker 1: employees that chat GPT and open AI tools are prohibited
Speaker 1: from business use, that according to sources. This follows earlier
Speaker 1: reports that JP Morgan had implemented equivalent measures this week.
Speaker 1: And I find this so interesting, Caroline. It goes back
Speaker 1: to what Nvidia CEO Jensen Huang told Ari and King
Speaker 1: earlier this week, which is basically, chat GPT is great.
Speaker 1: The momentum around it is great. But when business needs
Speaker 1: a tool, they don't need chat GPT. They need something appropriate,
Speaker 1: something that is customed for them, and they also don't
Speaker 1: need the risk of people sharing internal information that then
Speaker 1: suddenly gets spit up. In another inquiry down the line,
Speaker 1: there was reporting from other news sources that Amazon had
Speaker 1: taken a very similar view. Some of the general counsels
Speaker 1: they're worried about the fact that certain terms of phrases,
Speaker 1: certain types of conversation looked remarkably like relatively sensitive information
Speaker 1: of theirs. So I'm sure that there is trying to
Speaker 1: be this clamping down on this software. And we've talked
Speaker 1: about it, haven't we. The cyber risk that has built
Speaker 1: into this large language models, this generative AI. It's always exciting,
Speaker 1: but I'm sure companies want to keep herain on it. Yeah,
Speaker 1: and the content risk as well. We've reported about the
Speaker 1: inaccuracies that some of these AI tools are generating. Think
Speaker 1: about Bard's launch week, right, and then how difficult that
Speaker 1: was for for bet shares because of an inaccuracy which
Speaker 1: was brought to light. So it's a real risk on
Speaker 1: the content side as well. Welcome back to the MED technology.
Speaker 1: I'm Carline Hide in New York and La Medlove Low
Speaker 1: in San Francisco, and carry this bits me because I
Speaker 1: want to take a look at cryptocurrencies. Right. It's been
Speaker 1: an interesting week for risk assets in particular, and the
Speaker 1: point I would make here is these are the four
Speaker 1: biggest tokens by market value globally, right, And what we
Speaker 1: see actually, particularly in Bitcoin's case, is a relatively high
Speaker 1: degree of correlation between, for example, than as that one
Speaker 1: hundred in bitcoin. And you know on the week relatively
Speaker 1: substantive declines on bitcoin ether binance. And you know what
Speaker 1: we're reading on the Bloomberg terminal, particularly good piece from Vildana,
Speaker 1: our colleague on the Cross Asset team, about a bit
Speaker 1: of a liquidity crunch at times of crisis. That's what
Speaker 1: the market's starting to see now. And as you and
Speaker 1: I discussed on Twitter spaces earlier, right, the key thing
Speaker 1: about the SBFFTX developments. While nothing to do with market mechanics,
Speaker 1: is still impacts the psychology of this market. So I
Speaker 1: thought that was really interesting to look at how these
Speaker 1: crypto currencies have behaved in a week where risk assets
Speaker 1: are taking on board the future outlook for the FED,
Speaker 1: and maybe we can try to draw some kind of
Speaker 1: conclusion going forward. Let's draw more conclusions with Jill Gunta,
Speaker 1: Espresso Systems chief strategy officer and dig in there a
Speaker 1: little bit about the correlations, because actually we've started to
Speaker 1: see maybe a movement away the fact that crypto had
Speaker 1: been relatively well bid. While textox has still been under
Speaker 1: some pressure, Crypto has actually performed very robustly over the
Speaker 1: course of the year so far. This week notwithstanding, perhaps
Speaker 1: I think it's taken a lot of people in the industry,
Speaker 1: both asset allocators and also builders by surprise and sort
Speaker 1: of a running joke in the industry has become what
Speaker 1: bear market, you know, it almost feels like we deserved
Speaker 1: much worse in terms of price action. So yeah, I
Speaker 1: would say overall, I think crypto has been very well
Speaker 1: bid over the course of the start of this year,
Speaker 1: particularly when you take into account the hangover psychologically, as
Speaker 1: you mentioned from of course the fts fall out at
Speaker 1: the end of last year, but also in the United States,
Speaker 1: the spate of regulatory pressure that the industry has been
Speaker 1: coming under over the last several weeks, and we've had
Speaker 1: time and time again some of the frustration around that
Speaker 1: is a lot of its backward looking, a lot of
Speaker 1: its regulation by enforcement. Jill, When you're trying to build,
Speaker 1: when you are creating what especial systems is all about
Speaker 1: the infrastructure, how to try zact, how to interact online,
Speaker 1: do you really got enough guidance? I would say yes
Speaker 1: and no. You know, I think we tend to talk
Speaker 1: about when we're talking in the media about the government
Speaker 1: as sort of one monolith, and that's just not the case.
Speaker 1: I think you'll find that, you know, certain agencies and
Speaker 1: certain departments within the US government are very proactive in
Speaker 1: terms of being hands on working directly with builders. I
Speaker 1: would say the Treasury Department in particular has done a
Speaker 1: really good job of creating clearer guidance and being very
Speaker 1: friendly to builders and innovators. I would say that other
Speaker 1: areas of the US government have been much horror opaque
Speaker 1: in terms of what they want out of the industry,
Speaker 1: and it has been more regulation by enforcement, and that
Speaker 1: does create challenges, but that's just the US government. You know.
Speaker 1: One of the beautiful things but also challenging things about cryptocurrency,
Speaker 1: of course, is that it's highly global, and so you know,
Speaker 1: it's a it's a much larger chess game than just
Speaker 1: that jelly you mentioned this week kind of being an
Speaker 1: outlier based on performance of different digital assets so far
Speaker 1: this year. But you probably heard me talking about this
Speaker 1: idea in the market that there's some caution which is
Speaker 1: impacting liquidity or in other words, you know, the kind
Speaker 1: of negative headlines that keep on rolling around this industry,
Speaker 1: are you know, kind of directly inducing a liquidity crunch.
Speaker 1: Is that something that you're seeing. It is a concern,
Speaker 1: I would say, but again I think that for most
Speaker 1: people in the industry it's been actually a pleasant surprise
Speaker 1: of how much liquidity it is still slashing around in
Speaker 1: the market again following the really serious fallout at the
Speaker 1: end of last year. And so I would say it
Speaker 1: is a concern and certainly has been over the course
Speaker 1: of this week, and you know, especially as people are
Speaker 1: keeping an eye on what the FED is doing, and
Speaker 1: as risk assets trade down. More broadly, it is on
Speaker 1: people's minds, but at least from where I'm sitting, less
Speaker 1: so than I might have expected. And I think a
Speaker 1: part of that is also a lot of people in
Speaker 1: this market, a lot of both investors in this market
Speaker 1: as well as builders in this market, tend to take
Speaker 1: a longer term outlook and play less on the short
Speaker 1: term time horizons of weeks to months. And I think
Speaker 1: that there's a lot to be bullish about, and therefore
Speaker 1: a lot that's keeping liquidity in crypto assets and in
Speaker 1: this system from again that much longer, longer term perspective.
Speaker 1: With that in mind, you talked there about there being
Speaker 1: a lot to be bullish about. What are those things?
Speaker 1: You know? I remember on a daily basis referring to
Speaker 1: bitcoin as an inflation hedge, and we don't say that
Speaker 1: as much anymore, But but I wonder what are the
Speaker 1: underlying fact is that long term investors in different digital
Speaker 1: assets consider. It's honestly, a lot of it is deep
Speaker 1: in the weeds, infrastructure building that's happening. So just this week,
Speaker 1: coin base came out and announced that they were working
Speaker 1: on their own version of a layer to scaling solution
Speaker 1: for ethereum, and so you can think of this as
Speaker 1: you know, a layer that would sit on top of
Speaker 1: ethereum that would make the underlying protocol more accessible, more scalable,
Speaker 1: lower fees, faster throughput all of these complaints that users
Speaker 1: and developers have had for years about the issues in
Speaker 1: the space that are keeping it from being actually useful
Speaker 1: for mainstream applications outside of things like the inflation hedge
Speaker 1: story that the industry has been hanging its hat on
Speaker 1: for real use cases along the lines of payments and
Speaker 1: real financial infrastructure, and so it's it's been a lot
Speaker 1: of again deep in the weed sort of technical development
Speaker 1: R and D. It's not the kind of stuff candidly
Speaker 1: that's making headlines every day, but when you're in those weeds,
Speaker 1: it can feel very promising and very bullish, and a
Speaker 1: lot of investors in the space do spend time deep
Speaker 1: down those rabbit holes as well. And you had been
Speaker 1: one of those investors and came across to sort of
Speaker 1: be one of those builders, and those focus points for
Speaker 1: infrastructure tell us them what headlines should be being written.
Speaker 1: What is the decentralized application that we're going to be
Speaker 1: Is it payment? Is it storage. Where does it end
Speaker 1: up being practical in our every day do you think
Speaker 1: most swiftly? Yeah, Well, I mean to answer your first
Speaker 1: question in terms of the headlines that should be being written,
Speaker 1: I think that this layer two story around Ethereum scaling
Speaker 1: again that means lowering fees for end users, and that
Speaker 1: means faster transaction rates, higher throughput, all of these types
Speaker 1: of things. That is a major story that I think
Speaker 1: that should be written. Of course, there was a lot
Speaker 1: of attention last year to the upgrade of Ethereum to
Speaker 1: move it being proof of work, which of course was
Speaker 1: very computationally intensive and also very bad for the environment.
Speaker 1: I think that if part of Ethereum's bid over the
Speaker 1: course of the beginning heard of this year has actually
Speaker 1: been following on from again that's sort of deep in
Speaker 1: the weed's infrastructure work, and I think we've yet to see, Caroline,
Speaker 1: what applications will end upcoming of this. We're really in
Speaker 1: like an infrastructure building phase for the industry as opposed
Speaker 1: to an application building phase as of right now. But
Speaker 1: I personally am very bullish on the payments use case.
Speaker 1: It's been sort of the holy grail of cryptocurrency, even
Speaker 1: going back to bitcoin. That was sort of, you know,
Speaker 1: the original vision of bitcoin that we've yet to see
Speaker 1: come to fruition. But looking around at the infrastructure being built,
Speaker 1: I really do think it's happening this time, Joe. Really
Speaker 1: interesting that you end on infrastructure. There was a headline
Speaker 1: that crossed the Bloomberg term and all this Friday that
Speaker 1: the court my coincidentally about Puerto Rico giving basically tax
Speaker 1: support tax breaks for blockchain developers. And the reason I
Speaker 1: bring that up is that we're trying to gauge Caroline
Speaker 1: and I about how supportive the United States says as
Speaker 1: a place to foster the underlying technology as a regulatory environment,
Speaker 1: and all the headlines this week, and with that in mind,
Speaker 1: what's your assessment about the health of this industry in
Speaker 1: America right now? I'll be honest. I think it's I
Speaker 1: think it's a challenge for the United States, and I
Speaker 1: think that it's a challenge that the folks in DC
Speaker 1: are doing well to start paying attention to. And I
Speaker 1: say that in the present tense because I think many
Speaker 1: of them are one of our investors. Electric Capital. They
Speaker 1: put out a developer report every year, and overwhelmingly what
Speaker 1: was notable to me on this Developer Report this year
Speaker 1: was the exodus of developers who are domiciled in the
Speaker 1: United States versus in other parts of the world over
Speaker 1: the last two to three years. And I think a
Speaker 1: lot of that does come down to the regulatory environment here.
Speaker 1: But you know, there are those of us who still
Speaker 1: feel strongly about being US domiciled companies, about building here
Speaker 1: despite the headwinds that that brings to us, and about
Speaker 1: working directly with regulators and policymakers and even enforcement officers
Speaker 1: in Washington to make sure that we're building things right.
Speaker 1: There are still many of us, but it hasn't been
Speaker 1: easy and it does only seem to be getting harder.
Speaker 1: But again, kudos to those in Washington who are paying
Speaker 1: attention to this dynamic and are fighting to keep the
Speaker 1: innovation on shore in the US. And kudos to you
Speaker 1: for coming and telling us about it. Those sorts of relationships,
Speaker 1: We thank you. Especial Systems Chief strategy Officer Jill Gunta
Speaker 1: was love having her on the show. Thank you. Have
Speaker 1: a good weekend coming up. It's been one year since
Speaker 1: the start of the war in Ukraine. Will come back
Speaker 1: on the state of cyber warfare among all of this.
Speaker 1: A cybersecurity firm Arctic Wolf. That's next, and this is Bloomberg.
Speaker 1: Today it marks one year since Russia's invasion of Ukraine
Speaker 1: and the war well underway. It isn't only on the ground,
Speaker 1: but also in cyber warfare. Our next guest says, look,
Speaker 1: Russia is likely to continue carrying out more targeted cyber
Speaker 1: attacks against the EU countries in particular and companies with
Speaker 1: a goal of gathering threatentelligence damaging those companies joining US
Speaker 1: now Nick Scheiner, CEO cybersecurity firm Arctic Wolf. Nick took
Speaker 1: us through your thinking, how do we anticipate these sorts
Speaker 1: of attacks will take place? Yeah, I think it'll be
Speaker 1: you know, steady and over time. Here what we saw
Speaker 1: at the beginning of the conflict was that Russia, Ukraine
Speaker 1: and neighboring countries kind of pointed their gaze at each
Speaker 1: other and away from European countries and companies and companies
Speaker 1: in the US. And what we're starting to see now
Speaker 1: after what was a bit of a lull in twenty
Speaker 1: twenty two, is a resurgence of activity here in twenty
Speaker 1: twenty three, as folks start to use their time and
Speaker 1: energy and resources on targeting you know, both European companies
Speaker 1: and US companies in kind as they continue to work
Speaker 1: and evolve their their strategy in region. I think what's
Speaker 1: interesting for me, Nick is, I know, the activity specifically
Speaker 1: around the war in Ukraine was high at the beginning
Speaker 1: of the year and was present, but actually there is
Speaker 1: some data suggesting that ransomware attacks originating from Russia in
Speaker 1: particular have decreased. Why is that. Yeah, I think right
Speaker 1: now they're focused primarily on their defenses with the Ukraine
Speaker 1: and what they need to do to when their their
Speaker 1: current uh, you know war, and and what I think
Speaker 1: we're seeing as it relates to businesses is an increase.
Speaker 1: And I think the reason for that is because while
Speaker 1: a lot of the nation's state you know actors are
Speaker 1: focused on quite frankly each other, we're seeing that you know,
Speaker 1: the smash and grab you know type bad actors, uh
Speaker 1: you know, have to find a way to you know,
Speaker 1: make money and have to find a way to support
Speaker 1: their you know, livelihood, and they're doing so through a
Speaker 1: resurgence of activity you know, into the European markets in
Speaker 1: the US markets, and we're seeing that both you know,
Speaker 1: through our core business in companies trying to find ways
Speaker 1: to bolster their you know, security defenses and their security
Speaker 1: security post but also in you know activity as it
Speaker 1: relates to you know, incident incidents and incident response any
Speaker 1: types of companies in particular where the vulnerabilities are most acute,
Speaker 1: all the warriors are most pernicious. I mean, assuming its utilities,
Speaker 1: energy companies, but where else might not we think of, yeah, utilities, energies, companies,
Speaker 1: you know, healthcare organizations, financial institutions. You know. Unfortunately, Um,
Speaker 1: we're seeing activity really across the board, and it's for
Speaker 1: a variety of different reasons, and those reasons are you know,
Speaker 1: sometimes unknown until you know after the fact. But I
Speaker 1: really don't think that there's any industry or or business
Speaker 1: that's immune to you know, the threat of cyber activity
Speaker 1: or cyber warfare um. And you know, us as a
Speaker 1: business at Arctic Wolf, you know, our whole businesses around
Speaker 1: ensuring that we can you know, end cyber risk for
Speaker 1: our customers and help to stabilize the environment for the
Speaker 1: market wholesale. One of the tools that the United States
Speaker 1: has utilized in conjunction with allies is sanctions, and those
Speaker 1: have been largely to disrupt the movement of money across boarders.
Speaker 1: But I wonder how do sanctions fit into the cybersecurity realm,
Speaker 1: nick Yeah, I don't think it plays as strong of
Speaker 1: a role, just given the nature of the way in
Speaker 1: which ransomware and these bad actors you know, make their
Speaker 1: their money. A lot of this is being done through
Speaker 1: ransomware payments, you know, through cryptocurrency, uh And unfortunately there
Speaker 1: aren't you know, strong mechanisms to you know, be able
Speaker 1: to track that down, you know, and or a place
Speaker 1: you know, sanctions and things like that against it, Nickmas
Speaker 1: might be a tough question and figure me if it's
Speaker 1: out the remit. But one of the stories really focused
Speaker 1: on when this first erupted was of course the human
Speaker 1: side of all of this, and in many ways also
Speaker 1: the talent side. In particular Ukraine, phenomenal developers, companies had
Speaker 1: big teams there in many instances. What about the talent
Speaker 1: flow out of Russia. Have we seen the really keen
Speaker 1: developers and some of those that are incredibly good at
Speaker 1: cyber hacking as well? Are they still there? Are they present?
Speaker 1: Have any left? Yeah? I think certainly we've seen evidence
Speaker 1: that quite a few I have left and they're starting
Speaker 1: to form alliances with other folks that they might have known,
Speaker 1: either in Russia or otherwise as part of a previous group.
Speaker 1: And certainly I think that's also why we're starting to
Speaker 1: see changes in the way in which you know, the
Speaker 1: countries are are operating, you know, with or against each other.
Speaker 1: So there's in some ways a talent shortage for the
Speaker 1: Nation States as it revolves around cyber both on the
Speaker 1: defensive end on the offensive. And I think, you know,
Speaker 1: as those groups kind of start to re emerge and
Speaker 1: as they start to get back together, we're going to
Speaker 1: see that they're you know, leveraged both as part of
Speaker 1: you know, what's happening with the Nation States, but we're
Speaker 1: also going to see that they uh, you know, begin
Speaker 1: to operationalize and get stronger with regard to um, you know,
Speaker 1: their their day to day, which is to you know,
Speaker 1: attack European and US entities. Nick Schneider, Arctic Wolfsey, thank
Speaker 1: you for joining us. It does mark one year since
Speaker 1: Russia's invasion of Ukraine, and cybersecurity played such a big
Speaker 1: rolling headlines rolling our coverage at that war. So thank
Speaker 1: you for your time. Let's get back to well, this
Speaker 1: week's big story on the Hill in the World of Technology,
Speaker 1: section two thirty. We're joined that by Nora Benevide's senior
Speaker 1: council and director of Digital Justice. As writes over at
Speaker 1: the Free Press, it's an avocacy group that filed one
Speaker 1: of the amicus briefs in the Google versus Gonzalez case,
Speaker 1: and you also testified before Congress on the subject previously. Norah.
Speaker 1: The arguments have been made as to perhaps why from
Speaker 1: technology's perspective, it would be wrong to overdo and throw
Speaker 1: out section to thirty and the protections. But is there
Speaker 1: nuance to that? Is there ways in which it can
Speaker 1: be more targeted, more directed, so that it can help
Speaker 1: push back on hate speech at least in some of
Speaker 1: the harassment or well, thanks for having me. You know
Speaker 1: what's been difficult about the case this week is that
Speaker 1: the facts were so tragic. You know, the case stemmed
Speaker 1: from the killing of a young college student who was
Speaker 1: traveling abroad, and their family feels that YouTube and by extension,
Speaker 1: Google are really aiding and abetting terrorists by recommending terrorists
Speaker 1: related content because their child was killed by ISIS. Those
Speaker 1: are some of the worst facts and there has really
Speaker 1: struggled to grapple this week with where liability should rest.
Speaker 1: Google argued that it is not liable because it is
Speaker 1: shielded from suit by Section two thirty that protects them
Speaker 1: they are arguing, and of course the family then feels
Speaker 1: like Google should be liable because it makes recommendations that
Speaker 1: its algorithms are giving people content. But it's the first
Speaker 1: time the court has heard or considered Section two thirty,
Speaker 1: and it's really when you take a step back a
Speaker 1: monumental case in that way. I mean, for almost three hours,
Speaker 1: the court wrestled with this question, and I don't know
Speaker 1: how far they got, but they really tried to consider
Speaker 1: the distinction, if any between recommending content versus publishing content. Yeah,
Speaker 1: and it felt that they were very aware and voiced
Speaker 1: it that they are not technology experts. Ultimately, it felt,
Speaker 1: dare I said, to generalize sort of the wrong case
Speaker 1: for them to be deciding this, because they do want
Speaker 1: to reassess Section two thirty, particularly some of the right leaning,
Speaker 1: age leaning justices talk to us about whether it can
Speaker 1: be in any way partly updated Section two thirty in
Speaker 1: the right way. From your perspective, MM, great question. You
Speaker 1: know the Justice has really covered a wide range of things.
Speaker 1: I would say they kind of the full damn. It
Speaker 1: was from caution to confusion, as you say, about the
Speaker 1: complexities here and the complexities of ruling on something, you know,
Speaker 1: the potential liability for platforms. Ultimately, I think there seemed
Speaker 1: to be a recognition from the court that it might
Speaker 1: not be the right place, the best place to do
Speaker 1: the balancing and the trade offs that would be required
Speaker 1: from amending section to thirty, and that modification, if happening
Speaker 1: at all, needs to come from somewhere else. So that's
Speaker 1: something that Free Press has been incredibly active on, you know.
Speaker 1: Nor I'm so glad that Caroline asked that question because
Speaker 1: for me, the other part of it is that it's
Speaker 1: not necessarily who should be considering this. What I'm hearing,
Speaker 1: you know, talking to social media companies, talking also to
Speaker 1: different parties to what's going on is that where do
Speaker 1: we ask the right questions? And what we're not hearing
Speaker 1: is what are the technological solutions? In other words, what
Speaker 1: is it that everyone wants to fix this issue? Well,
Speaker 1: everyone was to debate Section two thirty. As we know,
Speaker 1: because of the last week, some people think that there's
Speaker 1: a kind of blunt solution. Doing away with it altogether
Speaker 1: could solve some of the problems on the Internet. I
Speaker 1: just don't think that's the case. Section two thirty is
Speaker 1: a foundational and necessary law for a few reasons. Frankly,
Speaker 1: it lowers barriers to people sharing their own content online.
Speaker 1: Without it, platforms would be forced to vet any content
Speaker 1: that people are posting, because of course they wouldn't want
Speaker 1: to then be liable for everything that their users say
Speaker 1: and do. I think that the test right now should
Speaker 1: not be whether a platform fill truths or recommends content.
Speaker 1: It needs to be whether platforms have actual knowledge of
Speaker 1: the grievous harms caused by content on their priforms. Nora
Speaker 1: Benevide's Senior council and director of Digital Justice and Civil
Speaker 1: Rights for the Free Press. Thank you that doesn't carry
Speaker 1: for this edition of Bloomberg Technology. I know I'm sad too.
Speaker 1: It was quite a serious way in which the ende
Speaker 1: of the show. But it's a serious topic. We're going
Speaker 1: to keep on digging into it. But I hope you
Speaker 1: have perhaps a more lighthearted weekend ahead of you. But
Speaker 1: maybe tune in if you can to our podcast. You
Speaker 1: can find one on the terminal You can go online
Speaker 1: on Apple or Spotify on iHeart wishing you a wonderful
Speaker 1: weekend ed without the wine. I hear that's up for lent.
Speaker 1: You two