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Speaker 1: This is Masters in Business with Barry Ridholts on Bloomberg Radio. Hi,

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Speaker 1: I'm Barry Ridholts. Welcome to the podcast today. My guest

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Speaker 1: is a really a fascinating tale of success and then

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Speaker 1: UH collapse and then redemption. And it's really an interesting

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Speaker 1: UH tale of of second chapters. And in America. Henry Blodgett,

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Speaker 1: who rose to fame in the nineteen nineties as a

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Speaker 1: stock analyst at Oppenheimer. He very famously UH put a

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Speaker 1: four hundred dollar price tag on Amazon when it was

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Speaker 1: about two forty dollars. It was his one year out

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Speaker 1: price target. It hit that target in three weeks and

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Speaker 1: actually in a month had gone to five hundred dollars UM.

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Speaker 1: Henry covered a lot of other companies he was at

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Speaker 1: Oppenheimer at the time. He ended up going to Merrill

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Speaker 1: Lynch and really becoming one of the top ranked institutional

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Speaker 1: analysts that covered UH technology and dot com stocks. When

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Speaker 1: everything collapsed, Henry got into quite a bit of trouble

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Speaker 1: with the SEC and with Elliot Spitzer. UH. The Spitzer

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Speaker 1: case actually ended up going nowhere, but the SEC find

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Speaker 1: him about four million dollars and banned him from the

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Speaker 1: industry for life. That was the one question I meant

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Speaker 1: to ask and didn't get to ask him, which was, hey,

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Speaker 1: would you ever like to apply to get readmitted? But

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Speaker 1: I remember a period of time when you couldn't mention

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Speaker 1: Henry's name without people really getting terribly, terribly upset. Oh

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Speaker 1: he's such a bad guys. This is that. I always

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Speaker 1: thought he was a a very thoughtful, very sincere guy,

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Speaker 1: and I think he was. There's an argument to be

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Speaker 1: made that he was made a scapegoat as much as anything. Look,

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Speaker 1: you could have found any analysts who had put really

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Speaker 1: high price targets on just about all of those crazy

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Speaker 1: dot com stocks, all of which collapsed. Henry had been

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Speaker 1: foolish enough to actually tell his honest feelings about what

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Speaker 1: he thought about this stuff and emails to his colleagues

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Speaker 1: at Mary Lynch. I always interpreted what he had written as, Hey,

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Speaker 1: we're really way too highly ranking these things. Why don't

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Speaker 1: we down grad? Why don't we bring these things down? Um?

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Speaker 1: And you know, some of these stuff is just junk.

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Speaker 1: And I believe the phrase was pos You can figure

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Speaker 1: out what that stands for, and it's not the point

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Speaker 1: of sales. Um. And so when Spitzer began his investigation,

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Speaker 1: you know blog, it really got dragged from the mud,

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Speaker 1: really got um shredded, and I think he suffered quite

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Speaker 1: quite a bit through that. And and and there are people

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Speaker 1: who said, hey, too bad, the guy was making twelve

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Speaker 1: million dollars a year for putting high price tags on

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Speaker 1: stuff that turned out to be worthless. But I think

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Speaker 1: it's a lot more nuanced than that, and there's a

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Speaker 1: lot more subtlety there. I've always found him to be

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Speaker 1: very intelligent, very thoughtful. I think he brings a very

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Speaker 1: very interesting approach uh to looking at the world of

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Speaker 1: equities and looking at technology and following as I called

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Speaker 1: it in his wandering in the desert. For a few

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Speaker 1: years he launched a new media company which is essentially

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Speaker 1: a modern digital media firm, called Business Insider, and it

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Speaker 1: has since become one of the most successful digital media

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Speaker 1: outfits there is. H So, I found this conversation to

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Speaker 1: be really quite fascinating. Um, he's really a colorful and

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Speaker 1: and more less colorful and less controversial than I think

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Speaker 1: his reputation has created. But I found this to be

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Speaker 1: an absolutely fascinating conversation, and I hope you will also so,

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Speaker 1: with no further ado, here's my conversation with editor in

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Speaker 1: chief and co founder of Business Insider Henry Blodgett. This

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Speaker 1: is Masters in Business with Barry Ridholds on Bloomberg Radio.

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Speaker 1: My guest today is the famous and infamous Henry Blodgett,

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Speaker 1: who I've actually known. You will save that story for

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Speaker 1: a long time. I want to say back till nine

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Speaker 1: A long, a long time for those of you who

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Speaker 1: may not know who. Henry is. A b A in

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Speaker 1: history at yale H lived in San Francisco, taught English

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Speaker 1: and Japan and then ultimately became a nationally ranked tennis

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Speaker 1: player before moving into finance, where he became famous for

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Speaker 1: call on Amazon, which we'll get into a lot of

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Speaker 1: details later on. The Institutional Investor all star team of

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Speaker 1: analysts at one point making at least a corner of

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Speaker 1: Wikipedia twelve million dollars a year, and Merrill lynch Um, Henry,

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Speaker 1: welcome to Bloomberg. It's great to be here. And before

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Speaker 1: you get an army of fact checkers. The nationally ranked

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Speaker 1: tennis player part that's actually now, but it's only technically

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Speaker 1: because I am a partner with my dad and the

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Speaker 1: father and son Ultra Senior system. He is great. I

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Speaker 1: am the weak link on the team. But he has

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Speaker 1: gotten us nationally ranked. But I was not nationally ranked

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Speaker 1: as a singles player. So you come with the kind

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Speaker 1: of unusual background. You really began in journalism. How did

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Speaker 1: you find your way to Wall Street? I found my

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Speaker 1: way to Wall Street after being a journalist writing a book.

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Speaker 1: As you say, I spent a year in Japan. I

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Speaker 1: worked for about three years as a freelance journalist and

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Speaker 1: wrote a book. Ultimately ended up at CNN Business News.

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Speaker 1: My father had been in finance, I'd grown up around it.

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Speaker 1: I had this weird liberal arts education that basically taught

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Speaker 1: me that capitalism was bad and one should go anywhere

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Speaker 1: but to Wall Street and finance and so forth. By

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Speaker 1: my late twenties, I could no longer deny that I

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Speaker 1: actually found it fascinating. Started to interview, went through lots

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Speaker 1: of different interviews, and then ultimately joined an investment banking

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Speaker 1: training program and credential securities. So what was that training program?

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Speaker 1: Like a good introduction to a liberal arts specialist in

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Speaker 1: accounting and finance. And then a couple of years of

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Speaker 1: working in different groups. I did private equity and then

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Speaker 1: ultimately was in the technology group, and that was when

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Speaker 1: the Internet was really getting started, and so I did

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Speaker 1: several transactions in that and then ultimately found my way

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Speaker 1: to research. One of the advantages of a new industry

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Speaker 1: coming along like that is it creates thirty empty chairs

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Speaker 1: effectively in Wall Street research departments. And I got an

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Speaker 1: Internet browser before everybody else, so I knew a little

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Speaker 1: bit more about it. It was a great fit with

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Speaker 1: the journalists background combined with the finance background, so it

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Speaker 1: was ultimately a great place for me to be on

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Speaker 1: on Wall Street. So then you move over to Oppenheimer,

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Speaker 1: and that's really where you began to garner some public recognition.

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Speaker 1: What what was the analysts group like in uh in Oppenheimer?

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Speaker 1: Back then, Oppenheim was a great small firm. There were

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Speaker 1: lots of tech boutiques in those days, and Oppenheimer was

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Speaker 1: one of those. So there lots of action, lots of

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Speaker 1: responsibility for people like me who didn't have decades of experience,

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Speaker 1: but they would give you a chance. And so I

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Speaker 1: was handed a bunch of internet companies, which I've followed

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Speaker 1: at Prudential as a banker actually as well, So I

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Speaker 1: knew the industry a little bit, but was able to

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Speaker 1: roll out coverage on a O L, Yahoo, Amazon, some

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Speaker 1: of the other early Internet pioneers new sector, huge excitement.

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Speaker 1: As you remember, the stocks were doing incredibly well in

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Speaker 1: late nineties. Year after year after year, people predicted, oh,

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Speaker 1: it's just a bubble, it's going to end in disaster,

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Speaker 1: and then it would be yet another year where these

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Speaker 1: five years, five years later they were absolutely right. But

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Speaker 1: you have by double digit in one year. Even the

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Speaker 1: NAZZAC doubled for years and years. If you if you

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Speaker 1: ran for the hills at the first time of overvaluation,

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Speaker 1: you missed one of the great bubbles of all time.

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Speaker 1: That's right, and that was the first lesson for me

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Speaker 1: that bubbles and booms and busts, or as much of

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Speaker 1: the part of the free market as weather, basically in

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Speaker 1: the climate, we're never going to get away from them.

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Speaker 1: There are reasons why the pattern keeps happening for us.

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Speaker 1: Now we find in ourselves in another big tech boom

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Speaker 1: that is going to end in a bust. It's nothing

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Speaker 1: like the nineties, but it's bit's shaping up to be

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Speaker 1: a pretty impressive boom. Money is falling out of the

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Speaker 1: sky for a lot of tech companies, so so let's

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Speaker 1: stick with the nineties. From now, we'll come back to

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Speaker 1: and so so in you make a famous call at

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Speaker 1: the time, Amazon, a little known book or somewhat known

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Speaker 1: online bookseller uh is trading in the mid two hundreds

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Speaker 1: to forty I believe, and you put a four hundred

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Speaker 1: dollar price target on it, and the world goes crazy.

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Speaker 1: The world went crazy, and I was at that point,

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Speaker 1: I had been doing the job of a Wall Street

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Speaker 1: cell side research channelists a couple hundred institutional clients. It's

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Speaker 1: a relatively closed community. You're talking to people who are experts. Ultimately,

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Speaker 1: what happened there was when I had initiated coverage on Amazon,

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Speaker 1: it was a very controversial company. People either thought it

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Speaker 1: was going to zero or it was going to be monstress.

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Speaker 1: I ran a whole bunch of different scenarios and said, look,

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Speaker 1: the stock could be worth anywhere between zero and five hundred.

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Speaker 1: My salesforce after watching me increase my price target to

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Speaker 1: ten to fifteen percent above the stock price several times,

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Speaker 1: basically said look, Henry, this is so frustrating. When you

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Speaker 1: just tell us what you think this can do. The

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Speaker 1: stock keeps going up. We keep missing it because you're

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Speaker 1: being too conservative in your price targets. What do you think?

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Speaker 1: So I ran a bunch of scenarios again, they triangulated

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Speaker 1: on and I said, okay, here's my target four dollars.

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Speaker 1: And of course that is no different than raising a

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Speaker 1: price target on a stock, but that extra zero made

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Speaker 1: a lot of difference. For whatever reason, it plucked the

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Speaker 1: chords of the zeitgeist. And that day was quite an adventure.

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Speaker 1: Let me tell you. I suddenly went from very much

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Speaker 1: institutional obscurity to a name that was used. I don't

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Speaker 1: know what. I don't even to say it. Everyone had

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Speaker 1: put It was a raw shack test. Everyone had different

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Speaker 1: reactions to the call. Unfortunately worked out, but it was

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Speaker 1: worked out. And let's clarify that in three weeks hit

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Speaker 1: your one year target of four hundred dollars, and within

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Speaker 1: a month it was at five hundred dollars. So to

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Speaker 1: say it worked out is a is a little bit

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Speaker 1: of understatement. What was the subsequent pushback to the to

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Speaker 1: the call. Well, the pushback the immediate pushback was this

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Speaker 1: is ridiculous. Ultimately it's just a bookstore. Everyone who thought

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Speaker 1: Amazon's not making money some of the same things you

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Speaker 1: hear today with Amazon fifteen years later. People were not

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Speaker 1: sold on it. People didn't fully appreciate how big the

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Speaker 1: Internet could be, and ultimately I had no in expectation

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Speaker 1: that the stock was going to go through the roof

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Speaker 1: right away and to be so that was a huge surprise,

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Speaker 1: huge surprise, went through the roof, and then ultimately crashed

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Speaker 1: to something like thirty dollars a share split adjusted or six.

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Speaker 1: I think possibly even wrote it all the way down

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Speaker 1: and then obviously it's come back and on a split

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Speaker 1: adjusted basis that four is about sixty seven dollars, So

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Speaker 1: doing well over the long haul. I'm Barry Hults. You're

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Speaker 1: listening to Masters in Business on Bloomberg Radio. My guest

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Speaker 1: today is Business Insiders founder editor in chief Henry Budget.

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Speaker 1: We were discussing the rocketship ride of Amazon in the

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Speaker 1: late nineties. It went from two forty to four hundreds

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Speaker 1: of five hundred, really went kind of crazy. Um, there

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Speaker 1: were some kind of copycat analysts. I recall someone putting

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Speaker 1: a thousand dollar price target I think on Cisco, and

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Speaker 1: then someone else tried to outdo them, putting two thousand

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Speaker 1: dollars on Qualcom. Do you recall that sort of mayhem?

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Speaker 1: I remember some that came later on many stocks there

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Speaker 1: were there are a lot of stocks that were hot,

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Speaker 1: they were out of my sector, so I wasn't following those.

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Speaker 1: But that sort of begat an era of you know,

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Speaker 1: evaluation doesn't matter, Let's just let's just go for it.

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Speaker 1: And ultimately the lesson was valuation does matter. And with

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Speaker 1: Amazon in particular, I, like a lot of other people,

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Speaker 1: had a spreadsheet about what was possible. I ran a

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Speaker 1: bunch of scenarios, and there were certainly scenarios where the

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Speaker 1: company would go bankrupt, but there were other scenarios where

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Speaker 1: the company could be a lot bigger than folks were

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Speaker 1: expecting in the late ninety nineties. And one of the

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Speaker 1: things that Jeff Bezos and others in Amazon saw relatively

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Speaker 1: early was in digital, unlike the physical world, you could

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Speaker 1: have a single company that could be both incredibly deep

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Speaker 1: in a particular sector and incredibly broad, and that created

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Speaker 1: the opportunity for the company to be massive if they

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Speaker 1: got it right. And in Amazon's case, happily that came

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Speaker 1: to reality. In many other cases where folks were effectively saying, look,

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Speaker 1: we're going after this massive market opportunity. If we only

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Speaker 1: get a tiny piece of it, we're worth fifty x

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Speaker 1: where we are now. In many many cases that didn't

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Speaker 1: work out. But if you step back from the whole process, Ultimately,

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Speaker 1: anytime there's a new opportunity, like the Internet, you have

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Speaker 1: to do a lot of experimenting as an economy to

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Speaker 1: figure out what works, what the models are, which companies

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Speaker 1: come out of it. Usually there is mass carnage and

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Speaker 1: a few companies come out of it, and ultimately that

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Speaker 1: is what happened in the although I have to say

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Speaker 1: the magnitude of the crash caught even me by surprise them.

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Speaker 1: We have a mutual and Dan Gross who wrote a

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Speaker 1: book about bubbles called pop why bubbles are good for

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Speaker 1: the economy, And he uses the example of of railroads

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Speaker 1: and automobiles and television and radio and cars and fiber optics,

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Speaker 1: and same situation. You have this land grab where everybody

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Speaker 1: piles into the space. There's a handful of survivors, a

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Speaker 1: handful of winners, and then everybody else sort of builds

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Speaker 1: on the bones of of what the investors essentially subsidized

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Speaker 1: that failed. But now all that infrastructure eventually gets used.

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Speaker 1: Railroads are probably the best example. Railroad is a great example,

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Speaker 1: and the Internet is a great example. If you look

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Speaker 1: how the Internet has gone on to change the economy,

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Speaker 1: it's actually vindicated a lot of what the crazy pundit

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Speaker 1: seemed to be saying in the nineties about how big

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Speaker 1: it would be. It's changing everything now and we're still

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Speaker 1: in the relatively early phases of that as we roll out.

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Speaker 1: So it was as profound as a lot of folks

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Speaker 1: were saying. But ultimately there was a lot of money

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Speaker 1: made and a lot of money lost, relatively quickly because

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Speaker 1: the companies got creamed. So so let's talk about some

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Speaker 1: of the companies that didn't get creamed. You know, again,

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Speaker 1: back to the late nineties, we had firms like Intel

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Speaker 1: and Microsoft, and del and Cisco and E m C

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Speaker 1: and Oracle and Son that essentially, even though they got

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Speaker 1: dinged up in two thousand, they essentially survived and thrived

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Speaker 1: going forwards, some obviously more than others. Um But how

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Speaker 1: do those companies compare to the pets dot com of

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Speaker 1: the day. Well, a lot of those were hardware companies.

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Speaker 1: We've needed a lot of hardware and the Internet boom,

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Speaker 1: there has been a whole new hardware opportunity that's been

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Speaker 1: created that Apple has taken incredible advantage of and and

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Speaker 1: Samsung has taken incredible advantage of But even with pets

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Speaker 1: dot Com. Interestingly, there are plenty of now online pet

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Speaker 1: supply companies that are doing fine. The question was did

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Speaker 1: they have enough capital to get there? Was there too

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Speaker 1: much competition at that point. I remember in the pet

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Speaker 1: war there were at least five pets dot COM's, all

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Speaker 1: coming out of the gate at the same time, all

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Speaker 1: the same idea, all with huge pots of capital, spending

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Speaker 1: it to kill each other. None of them had time

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Speaker 1: to get to escape velocity. And yet now we have

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Speaker 1: online pet supply. The idea wasn't crazy, It was just

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Speaker 1: that there was really too much competition and too much

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Speaker 1: capital at the right. When we look at Amazon, they're

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Speaker 1: kind of unique in that there isn't a ton of

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Speaker 1: competition for them, and they very successfully expanded. Look the

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Speaker 1: most recent earnings for what we got, people were shocked

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Speaker 1: at how much their cloud business has developed. So they've

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Speaker 1: kind of turned into a technology company at least as

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Speaker 1: much as a book or other sort of retailer. And

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Speaker 1: Amazon's extraordinary and the big advantage that Amazon has had

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Speaker 1: from the beginning because of who it is owned by

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Speaker 1: Jeff Bezos, is a very long term focus, and Amazon

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Speaker 1: from the beginning has been willing to make seven year

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Speaker 1: bets where they will lose a ton of money in

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Speaker 1: the early years, knowing that a lot of those bets

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Speaker 1: will fail, but if they make a couple that work,

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Speaker 1: it pays off in spades. And that's exactly what's happened

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Speaker 1: with Cloud is that they had this big infrastructure themselves.

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Speaker 1: They start they realized, hey, wait a minute, we've had

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Speaker 1: to build this. Everyone is going to have to read this.

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Speaker 1: Let's rent it out effectively and see if we can

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Speaker 1: turn it into a business. And they did this in

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Speaker 1: secret for a long long time before everyone figured out,

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Speaker 1: hey there's a business here, and by that time they

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Speaker 1: were miles ahead. And as you say, they just pulled

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Speaker 1: that rabbit rabbit out of the hat, and the market

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Speaker 1: is quite impressed. What's fascinating is how many other companies

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Speaker 1: would the market tolerate not generating a lot of revenue

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Speaker 1: and profits. Well, let me clarify that they generate a

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Speaker 1: ton of revenue, but they don't make a lot of profits.

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Speaker 1: Some people have argued, if we use gap accounting, they're

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Speaker 1: making no profits. To me, what you're saying that's so

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Speaker 1: fascinating about Bezos is simply how patient his investors have been.

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Speaker 1: I think, far more patient than just about any other

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Speaker 1: tech company out there who could have done what he's done.

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Speaker 1: As long as he's done and not been called okay,

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Speaker 1: want are you going to start throwing off some profits?

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Speaker 1: Some people are saying that all the time. When are

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Speaker 1: you going to throw off profits? Amazon isn't profitable. It's

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Speaker 1: a running joke within a certain community. And then, as

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Speaker 1: you point out, Amazon's core shareholders are okay with that. Now,

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Speaker 1: let me disclose I have owned Amazon for more than

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Speaker 1: ten years, so I've benefited from the run. Jeff Bezos

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Speaker 1: is an investor in my company. I think Amazon is great,

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Speaker 1: and I think he in his approach, is wonderful for

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Speaker 1: the economy. But what he would say about the shareholders is,

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Speaker 1: as long as you are very clear about what you

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Speaker 1: are going to do and what your philosophy is, the

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Speaker 1: shareholders who support that philosophy will find you and you

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Speaker 1: don't have to worry about everybody else. And what I

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Speaker 1: would say is it's very important. What they are doing

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Speaker 1: is reinvesting cash flow. They're saying, our opportunity is so

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Speaker 1: massive that rather than build up a huge pile of

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Speaker 1: cash that we don't know what to do with except

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Speaker 1: buy back our stock like so many pennies are doing,

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Speaker 1: We're gonna keep investing in new projects. And as a shareholder,

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Speaker 1: you either trust that that is smart or you think

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Speaker 1: it is stupid and you complain about the profitability. In

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Speaker 1: case of Amazon has worked out well, I'm very redults.

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Speaker 1: You're listening to Masters in Business on Bloomberg Radio. My

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Speaker 1: guest today is Henry Blodgett. He is the editor in

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Speaker 1: chief and founder of Business Insider, which we'll talk about

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Speaker 1: in a few minutes. But before we get to that,

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Speaker 1: let's talk a little bit about a wee bit of

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Speaker 1: trouble that you ran into in the two thousands, and

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Speaker 1: let me just set the stage for this um. So,

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Speaker 1: the dot COM's collapsed, and as often happens, we start

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Speaker 1: looking for somebody to blame, and the SEC really kinda

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Speaker 1: was looking around, but it turned out it was the

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Speaker 1: New York Attorney General, Elliot Spitzer, who wanted to blame

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Speaker 1: the analyst community for what was essentially everybody losing their

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Speaker 1: heads and getting way too exuberant. And you were the

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Speaker 1: poster out with the New York a g and he

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Speaker 1: came at you pretty hard. Ultimately, had you kicked out

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Speaker 1: of the industry. I believe it was a voluntary UH

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Speaker 1: agreement and paid a nice fat fine was it four

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Speaker 1: million dollar or something like that fat? And ultimately you

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Speaker 1: kind of wandered in the desert a little bit after that.

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Speaker 1: Is that Is that a fair assessment? It's a little

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Speaker 1: bit conflated. Elliot Spitzer, as you say, he was the

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Speaker 1: one who launched the investigation, and the investigation was between

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Speaker 1: the relationship between the research department and the banking department

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Speaker 1: at investment banks, and in the ninety nineties, as you remember,

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Speaker 1: analysts had been a part of the financing process. They

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Speaker 1: were part of the RPO process, part of the pitch

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Speaker 1: representing the exactly and Elliot Spitzer came in said this

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Speaker 1: is outrageous as a conflict of interest and and so forth,

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Speaker 1: and he was right that it was a conflict of interest.

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Speaker 1: It's certainly not the only conflict on Wall Street. Many others.

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Speaker 1: I'm sure you know from talking about security is one

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Speaker 1: of the biggest conflicts is everybody wants you to be positive.

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Speaker 1: Nobody wants you to be negative about anything. Because everybody

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Speaker 1: owns stocks, they want them to go up. They don't

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Speaker 1: want to be anybody to be embarrassed. So that's a

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Speaker 1: big conflict with the institutions. But so Spitzer focused on

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Speaker 1: that one conflict, found a lot of nice emails in

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Speaker 1: which my team and I were venting back and forth.

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Speaker 1: Now let me interrupt you right there, because here's where

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Speaker 1: I know Elliott. I like him. Here's where I think

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Speaker 1: that I disagree with him. I read and all your emails,

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Speaker 1: which is my nightmare, is all my emails are published

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Speaker 1: in the Wall Street Journal. Um, but your emails about

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Speaker 1: this is a pos and really negative about companies. I

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Speaker 1: always read them in the context of, Hey, why do

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Speaker 1: we have a by rating on this? This is crap.

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Speaker 1: Let's downgrade it as opposed to ha ha, we have

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Speaker 1: a by rating on a piece of junct. Am I

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Speaker 1: am I misreading that? Or did I get that more

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Speaker 1: or less right? You got it right. Now, let me

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Speaker 1: preface it by saying that there are two different situations here.

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Speaker 1: The SEC is actually the entity with whom I settled

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Speaker 1: and got kicked out of the end of streak. Um,

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Speaker 1: Elliott Spitzer actually dropped to me from the case, so

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Speaker 1: I can talk about that. But the the original allegation, yes,

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Speaker 1: that was our position was these are taking out of context.

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Speaker 1: We're talking about Sure there's friction back and forth, but

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Speaker 1: that doesn't mean that the research report is misleading. So forth,

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Speaker 1: the implication was right that there was a conflict and

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Speaker 1: therefore the reports were misleading. And let me see what

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Speaker 1: I said then, which is that I never wrote a

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Speaker 1: single word in a research report that I didn't believe,

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Speaker 1: but the fact that there was a conflict undeniable but

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Speaker 1: exactly um and so anyway, so that's how it played

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Speaker 1: out with ether Spitzer. And to finish that story, life

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Speaker 1: is very long. Elliott and I are now actually sort

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Speaker 1: of friends. Elliott went through his own touch of He

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Speaker 1: started his comeback by writing it Slate, which is where

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Speaker 1: I had started my journalism come back after I got

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Speaker 1: objected from the industry. So Elliot and I've had a

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Speaker 1: lot to talk about over the years, uh, and it's

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Speaker 1: been very interesting. One of the things somebody said to

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Speaker 1: me when I was in the middle of that where

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Speaker 1: it was just being really crushed in the press and

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Speaker 1: you you whipped pretty badly, was take a long view ride.

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Speaker 1: It out there will be another side, even though it

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Speaker 1: doesn't look like it now. And I certainly didn't believe

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Speaker 1: that at the time. I thought when my professional life

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Speaker 1: certainly was over. Second half so not uncommon here, They're

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Speaker 1: not uncommon, They're not impossible, and people have recovered from

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Speaker 1: a lot worse and gone to do great things. And

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Speaker 1: that was a very big motivating factor for me. But

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Speaker 1: somebody did give me the advice just to take the

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Speaker 1: long view, and I'm glad so Kenna Letta did a

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Speaker 1: piece on you and he said that you had written

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Speaker 1: a book on your experiences, but the SEC wouldn't let

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Speaker 1: you publish it. Is this true? It's not the SEC.

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Speaker 1: It was I was actually when I left Wall Street.

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Speaker 1: I left in two thousand one, this was before Elliot

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Speaker 1: Spitzer filed his allegations. I left to write a book

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Speaker 1: about the bubble, and to me, it was a fascinating story.

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Speaker 1: I had grown up in the sort of family ethos

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Speaker 1: of a far off relative of mine made a pile

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Speaker 1: of money, and the family story was he was on

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Speaker 1: the Siberian railway, he lost everything in became a pauper.

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Speaker 1: So I was always I just obsessed with this idea

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Speaker 1: of bubbles is this is this what we're going through,

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Speaker 1: And people in the said, oh no, now we have

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Speaker 1: the SEC and we have accounting and we're much smarter

432
00:23:18,560 --> 00:23:22,160
Speaker 1: and so human nature. Well, there you go. You understand

433
00:23:22,160 --> 00:23:23,359
Speaker 1: it in a way that a lot of us did not,

434
00:23:23,440 --> 00:23:25,679
Speaker 1: including me at that point. The SEC is never going

435
00:23:25,720 --> 00:23:28,199
Speaker 1: to stop bubbles. I think we all no one is.

436
00:23:28,240 --> 00:23:30,919
Speaker 1: They're just part of the free market and we should

437
00:23:31,080 --> 00:23:33,240
Speaker 1: learn to live with them, if not love them. But anyway,

438
00:23:33,480 --> 00:23:36,360
Speaker 1: so I was writing a book about that, and then

439
00:23:36,359 --> 00:23:40,000
Speaker 1: the Elliott spits are allegations hit, and the lawyers kindly

440
00:23:40,040 --> 00:23:41,800
Speaker 1: took me in a back room and wrapped duct tape

441
00:23:41,800 --> 00:23:43,720
Speaker 1: around my head and said there will be no publishing

442
00:23:43,720 --> 00:23:48,240
Speaker 1: of anything. And ultimately, so now that's old years later

443
00:23:48,280 --> 00:23:53,679
Speaker 1: and resolved. The I actually read it recently. It's okay,

444
00:23:53,800 --> 00:23:55,960
Speaker 1: it holds up, it holds up. All right, that's great.

445
00:23:56,000 --> 00:23:58,520
Speaker 1: I'm Barry Ridhult. She listening to Masters in Business on

446
00:23:58,560 --> 00:24:02,199
Speaker 1: Bloomberg Radio Mike US today Henry Blodgett. He is the

447
00:24:02,320 --> 00:24:06,960
Speaker 1: founder and editor in chief of Business Insider. Welcome, Henry,

448
00:24:07,160 --> 00:24:09,280
Speaker 1: great to be here. So let's talk a little bit

449
00:24:09,280 --> 00:24:13,280
Speaker 1: about what you did following your running with Elliot Spitzer,

450
00:24:13,680 --> 00:24:16,840
Speaker 1: you kind of wandered the desert a bit, and then

451
00:24:17,000 --> 00:24:21,840
Speaker 1: not too long thereafter, one Martha Stewart got into a

452
00:24:21,840 --> 00:24:25,920
Speaker 1: little trouble of our own, was accused of insider trading.

453
00:24:26,640 --> 00:24:29,760
Speaker 1: And I don't know who who reached out to who,

454
00:24:29,800 --> 00:24:33,160
Speaker 1: but the editor of Slate tagg you or vice versa,

455
00:24:33,200 --> 00:24:35,679
Speaker 1: and said, Hey, Henry, would you like to cover this trial?

456
00:24:35,880 --> 00:24:37,679
Speaker 1: What as you say? That was in the middle of

457
00:24:37,720 --> 00:24:42,119
Speaker 1: my getting creamed publicly in the press. My reputation was destroyed.

458
00:24:42,280 --> 00:24:44,800
Speaker 1: I had I don't think it's an exaggeration to say

459
00:24:44,880 --> 00:24:47,359
Speaker 1: millions of people who'd have the privilege of listening to

460
00:24:47,359 --> 00:24:49,480
Speaker 1: me in the ninety nineties had been just told I

461
00:24:49,480 --> 00:24:52,879
Speaker 1: should go off with my life, and I didn't. Ultimately,

462
00:24:53,280 --> 00:24:56,600
Speaker 1: I wanted to do whatever I could do to earn

463
00:24:56,680 --> 00:24:58,600
Speaker 1: back the trust from people who would give me the

464
00:24:58,680 --> 00:25:00,439
Speaker 1: chance to do that. And one of the things I

465
00:25:00,440 --> 00:25:02,560
Speaker 1: could do was right. I was a journalist before I

466
00:25:02,600 --> 00:25:05,520
Speaker 1: went to Wall Street. I wasn't prevented from doing that.

467
00:25:05,880 --> 00:25:08,119
Speaker 1: I didn't know whether anybody would publish me. But I

468
00:25:08,160 --> 00:25:10,000
Speaker 1: called a friend of mine in New Yorker and said, look,

469
00:25:10,040 --> 00:25:12,240
Speaker 1: Martha Stewart's in trouble. I know something about being in

470
00:25:12,280 --> 00:25:15,159
Speaker 1: trouble at securities case. I could write about this. Is

471
00:25:15,160 --> 00:25:17,679
Speaker 1: there anybody that would publish me? And she said, I

472
00:25:17,720 --> 00:25:19,880
Speaker 1: know just the person and it's exactly what you said,

473
00:25:19,960 --> 00:25:22,240
Speaker 1: Jacob Weisberg. It's slate. Was kind of say, you're on

474
00:25:22,280 --> 00:25:24,400
Speaker 1: board cover the trial for us, and so I went

475
00:25:24,400 --> 00:25:26,399
Speaker 1: down to the courtroom every day and I covered the trial.

476
00:25:26,920 --> 00:25:30,840
Speaker 1: Got started in journalism again was digital. Ultimately did a

477
00:25:30,880 --> 00:25:32,840
Speaker 1: lot of freelancing over the next couple of years, wrote

478
00:25:32,880 --> 00:25:35,640
Speaker 1: a book about investing, started a blog and that led

479
00:25:35,640 --> 00:25:37,440
Speaker 1: to Business Inside Or. A friend of mine called me

480
00:25:37,480 --> 00:25:39,159
Speaker 1: and said, look, what do you think about a publication

481
00:25:39,240 --> 00:25:42,679
Speaker 1: focused on technology business? And this was Kevin Ryan. That's right,

482
00:25:42,760 --> 00:25:46,760
Speaker 1: Kevin Ryan. And you knew him. I knew from back

483
00:25:46,760 --> 00:25:48,520
Speaker 1: in the nineties as an analyst. I was covering the

484
00:25:48,520 --> 00:25:50,960
Speaker 1: company Double Click had gone public and now they're a

485
00:25:51,040 --> 00:25:54,439
Speaker 1: part of is it Google? Yeah, that's right. Um, so

486
00:25:54,520 --> 00:25:57,280
Speaker 1: you guys launched this what was the early days of

487
00:25:57,320 --> 00:26:00,840
Speaker 1: Business Inside Or, Like, the theory was digital is a

488
00:26:00,880 --> 00:26:03,280
Speaker 1: new medium. If you go back through the history of media,

489
00:26:03,359 --> 00:26:04,879
Speaker 1: what you find is that in the days of a

490
00:26:04,920 --> 00:26:07,919
Speaker 1: new medium, existing media sort of take their product and

491
00:26:07,920 --> 00:26:10,359
Speaker 1: they try to shove it into the new medium. Early

492
00:26:10,440 --> 00:26:13,320
Speaker 1: TV news broadcast where people reading newspapers in front of

493
00:26:13,320 --> 00:26:19,679
Speaker 1: a micro not not particularly compelling. But then this amazing

494
00:26:19,720 --> 00:26:22,760
Speaker 1: new medium of TV with pictures all of the world evolves.

495
00:26:22,800 --> 00:26:25,600
Speaker 1: It's very different from print, but it's very powerful. So

496
00:26:25,640 --> 00:26:29,560
Speaker 1: the idea was digital will evolve its own form of journalism,

497
00:26:29,560 --> 00:26:32,320
Speaker 1: with its own model and storytelling and distribution. It will

498
00:26:32,320 --> 00:26:35,000
Speaker 1: be very different. Let's not try to jam a square

499
00:26:35,119 --> 00:26:37,920
Speaker 1: peg and around hole. Let's figure out what works. And

500
00:26:38,359 --> 00:26:42,720
Speaker 1: ultimately we experimented a lot over several years to try

501
00:26:42,720 --> 00:26:44,800
Speaker 1: to figure out what worked, what people wanted, how to

502
00:26:44,840 --> 00:26:48,119
Speaker 1: distribute the stories, how to tell the stories, and ultimately

503
00:26:48,560 --> 00:26:50,960
Speaker 1: we have evolved. What is in the early stages I

504
00:26:51,040 --> 00:26:54,320
Speaker 1: think of being a very successful, long term digital journalism

505
00:26:54,359 --> 00:26:58,160
Speaker 1: business with a native digital model, and it's as different

506
00:26:58,400 --> 00:27:01,640
Speaker 1: from print and television as in television are from each other.

507
00:27:02,080 --> 00:27:06,840
Speaker 1: But demographically, twenty five year olds are seventy digital now

508
00:27:07,000 --> 00:27:11,159
Speaker 1: computers and mobile, and so the media consuming public is

509
00:27:11,200 --> 00:27:13,040
Speaker 1: only going to get more so over the next ten years.

510
00:27:13,080 --> 00:27:15,760
Speaker 1: So let's let's follow this progression. When you launched, how

511
00:27:15,760 --> 00:27:19,159
Speaker 1: many employees did you launch with one? Me? And we

512
00:27:19,200 --> 00:27:21,000
Speaker 1: had two others when we launched the site, so it

513
00:27:21,080 --> 00:27:23,680
Speaker 1: was three of us in the loading dock of another startup,

514
00:27:24,040 --> 00:27:26,720
Speaker 1: writing frantically and the door would open once in a

515
00:27:26,720 --> 00:27:29,040
Speaker 1: while and the Fresh Direct guys would deliver soda for

516
00:27:29,119 --> 00:27:32,119
Speaker 1: that startup. One of us would go on vacation, our

517
00:27:32,160 --> 00:27:35,320
Speaker 1: readership would drop because we didn't have We weren't filling

518
00:27:35,320 --> 00:27:38,679
Speaker 1: the space exactly. But over time's grown. Now we're at

519
00:27:38,680 --> 00:27:40,560
Speaker 1: two hundred and fifty. We have a hundred and twenty

520
00:27:40,560 --> 00:27:44,080
Speaker 1: five journalists just producing great stuff to global publication. And

521
00:27:44,119 --> 00:27:47,840
Speaker 1: now we're the number one business publication by reach about

522
00:27:47,880 --> 00:27:51,720
Speaker 1: seventy million liters a month, and we're number one in Australia.

523
00:27:50,680 --> 00:27:53,360
Speaker 1: And because the data point, I was going to ask

524
00:27:53,359 --> 00:27:56,880
Speaker 1: you about twenty four million monthly uniques a year ago,

525
00:27:57,040 --> 00:28:00,440
Speaker 1: so you're telling me you're growing that rapidly globally. That's right,

526
00:28:00,600 --> 00:28:02,760
Speaker 1: that's right. We launched in the UK last year and

527
00:28:02,760 --> 00:28:04,600
Speaker 1: the site is already number one in the UK in

528
00:28:04,680 --> 00:28:08,080
Speaker 1: terms of business and it's because we're approaching it as

529
00:28:08,080 --> 00:28:11,200
Speaker 1: a new medium. We're not again trying to clone print

530
00:28:11,400 --> 00:28:14,280
Speaker 1: or TV, and we've been able to resonate with a

531
00:28:14,320 --> 00:28:16,560
Speaker 1: new generation of leaders, which is who we're writing for.

532
00:28:17,040 --> 00:28:21,080
Speaker 1: So who is the typical business insider reader? Typical business

533
00:28:21,080 --> 00:28:24,480
Speaker 1: side readers? Thirty five year old executive with a smartphone

534
00:28:24,880 --> 00:28:27,040
Speaker 1: getting his or her news on the go, want to

535
00:28:27,080 --> 00:28:28,639
Speaker 1: share it, want to get it how they want to

536
00:28:28,640 --> 00:28:31,359
Speaker 1: get it, which maybe through Twitter or Facebook or linked

537
00:28:31,440 --> 00:28:34,919
Speaker 1: in or coming to the site or email. Wants to

538
00:28:34,960 --> 00:28:38,760
Speaker 1: share it with everybody very easily. Wants a wide variety

539
00:28:38,800 --> 00:28:42,960
Speaker 1: of stories, from video to long articles to short posts,

540
00:28:43,240 --> 00:28:45,880
Speaker 1: many different kinds. But are are the main readers we

541
00:28:45,960 --> 00:28:48,640
Speaker 1: care to are? They're part of the digital generation? So

542
00:28:48,720 --> 00:28:51,840
Speaker 1: who do you look at as your competition? Clearly it's

543
00:28:51,880 --> 00:28:53,800
Speaker 1: not the New York Times in the Wall Street Journal.

544
00:28:54,280 --> 00:28:57,160
Speaker 1: Is it more along the lines of BuzzFeed and courts

545
00:28:57,240 --> 00:29:00,479
Speaker 1: and recode? Or who is the competition? Fact think, mostly

546
00:29:00,520 --> 00:29:03,600
Speaker 1: the way the news business or organizes itself is there

547
00:29:03,640 --> 00:29:06,960
Speaker 1: are many business publications and then there are general news

548
00:29:06,960 --> 00:29:09,760
Speaker 1: publications New York Times as general news, Washington Post. We

549
00:29:09,800 --> 00:29:13,000
Speaker 1: don't really compete with them at all. We do compete

550
00:29:13,360 --> 00:29:17,480
Speaker 1: generally with digital business publications like the Wall Street Journal,

551
00:29:17,760 --> 00:29:21,240
Speaker 1: like Bloomberg's web presence, which is quite different from obviously

552
00:29:21,280 --> 00:29:23,920
Speaker 1: the terminal business, which is a spectacular Business As is

553
00:29:23,920 --> 00:29:26,560
Speaker 1: the website very good. There are many good competitors in

554
00:29:26,600 --> 00:29:31,120
Speaker 1: the space. Good news is. The desire for business news

555
00:29:31,120 --> 00:29:35,040
Speaker 1: and information is exploding globally, and so there is room

556
00:29:35,120 --> 00:29:37,840
Speaker 1: to support a lot of players, and and we're in

557
00:29:37,880 --> 00:29:39,640
Speaker 1: that sector. Let's talk a little bit about some of

558
00:29:39,680 --> 00:29:43,520
Speaker 1: the accusations that have have come up, um, not just

559
00:29:43,640 --> 00:29:45,520
Speaker 1: two Business and Sider, but to a lot of the

560
00:29:45,600 --> 00:29:49,080
Speaker 1: digital companies out there. Hey, you guys just cut and

561
00:29:49,120 --> 00:29:54,200
Speaker 1: paste mainstream media stuff or or slightly annotated. You're really

562
00:29:54,240 --> 00:29:57,440
Speaker 1: not doing a lot of original writing. How do you

563
00:29:57,480 --> 00:30:00,240
Speaker 1: respond to that? I just think it's complete misunderstanding of

564
00:30:00,280 --> 00:30:03,280
Speaker 1: what the better publications are doing. And and don't forget,

565
00:30:03,320 --> 00:30:05,520
Speaker 1: this is an industry. It's in its early stages. You've

566
00:30:05,520 --> 00:30:08,959
Speaker 1: got a lot of experimentation going on. Media has always

567
00:30:09,040 --> 00:30:12,760
Speaker 1: built upon stories generated by other media. I remember when

568
00:30:12,800 --> 00:30:15,520
Speaker 1: I was at CNN Business News in THEES. My first

569
00:30:15,600 --> 00:30:19,520
Speaker 1: job was stand by the Reuters machine, rip off the

570
00:30:19,560 --> 00:30:21,640
Speaker 1: paper as they come out with the stories, and then

571
00:30:21,720 --> 00:30:24,200
Speaker 1: run with the stories over to the producer who will

572
00:30:24,240 --> 00:30:26,600
Speaker 1: circle the ones she wants with a red pen, and

573
00:30:26,640 --> 00:30:30,320
Speaker 1: then you write them up. So CNN's news was Reuters

574
00:30:30,360 --> 00:30:33,240
Speaker 1: in those days. And New York Times often reports a

575
00:30:33,320 --> 00:30:35,840
Speaker 1: story that was reported by the Wall Street Journal. Media

576
00:30:35,880 --> 00:30:38,960
Speaker 1: has always built on itself. What we do is we

577
00:30:39,440 --> 00:30:41,480
Speaker 1: use all of the sources that are out there in

578
00:30:41,520 --> 00:30:44,320
Speaker 1: the world, which include all other media organizations, but also

579
00:30:44,360 --> 00:30:48,000
Speaker 1: include Twitter and commentators like you, and Facebook, and the

580
00:30:48,080 --> 00:30:52,120
Speaker 1: direct feeds of many many influential people that we follow,

581
00:30:52,360 --> 00:30:55,480
Speaker 1: plus the telephone, plus in person meetings, plus pretty much

582
00:30:55,480 --> 00:30:58,680
Speaker 1: any reporting tool you could imagine, and then we combine

583
00:30:58,720 --> 00:31:02,240
Speaker 1: all those into stories. And sometimes we're building on a

584
00:31:02,280 --> 00:31:04,720
Speaker 1: story that's reported by the New York Times or others.

585
00:31:05,000 --> 00:31:08,240
Speaker 1: Sometimes they're building on our stories. And as we get

586
00:31:08,280 --> 00:31:09,960
Speaker 1: bigger and bigger, and as as a lot of the

587
00:31:09,960 --> 00:31:13,320
Speaker 1: digital companies get bigger and bigger, ultimately we're getting woven

588
00:31:13,360 --> 00:31:17,040
Speaker 1: into the fabric of mainstream media. And if you look

589
00:31:17,080 --> 00:31:23,440
Speaker 1: demographically for the younger generation, BuzzFeed is squarely mainstream media

590
00:31:23,760 --> 00:31:25,880
Speaker 1: right now, and in ten years from now they will

591
00:31:25,920 --> 00:31:27,920
Speaker 1: be in the middle of the mass market. And and

592
00:31:27,960 --> 00:31:30,440
Speaker 1: our hope is that it's the same for the new

593
00:31:30,480 --> 00:31:34,320
Speaker 1: generation of leaders. That that's really quite fascinating. Um, when

594
00:31:34,360 --> 00:31:36,400
Speaker 1: do you let me ask you a question that I

595
00:31:36,440 --> 00:31:39,040
Speaker 1: bet you asked a lot of corporate executives in your day,

596
00:31:39,600 --> 00:31:42,160
Speaker 1: When are you guys going to become profitable? We have

597
00:31:42,320 --> 00:31:45,440
Speaker 1: been profitable, believe it or not, at different times marginally.

598
00:31:45,840 --> 00:31:49,240
Speaker 1: So when we started, I was scarred by the dot

599
00:31:49,240 --> 00:31:52,360
Speaker 1: com bubble watching so many companies that were promising effectively

600
00:31:52,400 --> 00:31:55,120
Speaker 1: fly into the mountain because the funding machine shut off

601
00:31:55,160 --> 00:31:57,200
Speaker 1: and they ran out of cash. They got out too

602
00:31:57,200 --> 00:32:00,200
Speaker 1: far ahead built up to my infrastructure. So we have

603
00:32:00,280 --> 00:32:03,719
Speaker 1: always run the company conservatively. We've raised enough money and

604
00:32:03,760 --> 00:32:07,080
Speaker 1: we have done a plan over a year or two

605
00:32:07,240 --> 00:32:10,320
Speaker 1: to get to break even with the cash that we have.

606
00:32:10,840 --> 00:32:13,480
Speaker 1: Each time we've done that, the opportunity has seemed so

607
00:32:13,560 --> 00:32:15,680
Speaker 1: much larger that it seemed to make sense to raise

608
00:32:15,760 --> 00:32:18,600
Speaker 1: new capital and invest it. So we now have a

609
00:32:18,600 --> 00:32:21,120
Speaker 1: new big partner in addition to Jeff Bezos and and

610
00:32:21,160 --> 00:32:23,880
Speaker 1: a couple of our VC partners. We now are a

611
00:32:23,920 --> 00:32:26,600
Speaker 1: German media company named Axel. Springer is a big investors.

612
00:32:26,680 --> 00:32:28,959
Speaker 1: So this will be an investment year for us. Next

613
00:32:29,040 --> 00:32:31,400
Speaker 1: year will be investment. But a few years ago we

614
00:32:31,480 --> 00:32:34,520
Speaker 1: did make a profit. It was enough to buy one MacBook.

615
00:32:35,000 --> 00:32:37,200
Speaker 1: It was not coining money. But again we're not in

616
00:32:37,240 --> 00:32:39,240
Speaker 1: a position, or not in a place right now where

617
00:32:39,280 --> 00:32:41,840
Speaker 1: we want to drive bottom line. What we want to

618
00:32:41,840 --> 00:32:46,640
Speaker 1: do is continue to effectively invent the future for digital journalism.

619
00:32:46,840 --> 00:32:50,320
Speaker 1: And when we look at digital media, it's changing so

620
00:32:50,480 --> 00:32:54,560
Speaker 1: rapidly and so constantly. How can anybody stay on top

621
00:32:54,600 --> 00:32:59,760
Speaker 1: of what has really just become a hilacious rate of change.

622
00:32:59,800 --> 00:33:03,560
Speaker 1: It's it's Unbelievable's right, the rate of innovation is spectacular.

623
00:33:03,680 --> 00:33:06,400
Speaker 1: But I think you can fall back and be sure

624
00:33:06,600 --> 00:33:09,640
Speaker 1: of one thing, which is people are always going to

625
00:33:09,720 --> 00:33:15,280
Speaker 1: want the latest news and intelligent, good storytelling. Question is

626
00:33:15,560 --> 00:33:18,640
Speaker 1: how are those stories told? In what medium? How are

627
00:33:18,640 --> 00:33:22,120
Speaker 1: they distributed? Ultimately? As a reader, how do you find them?

628
00:33:22,520 --> 00:33:23,959
Speaker 1: How are you going to go to a TV? You're

629
00:33:23,960 --> 00:33:28,560
Speaker 1: gonna go to Facebook. But the fact that we want stories,

630
00:33:28,600 --> 00:33:31,720
Speaker 1: we are human storytelling animals, and we want to know

631
00:33:31,760 --> 00:33:33,600
Speaker 1: what's going on in the world, we can be very

632
00:33:33,640 --> 00:33:35,880
Speaker 1: sure of that. The question is ultimately, what does the

633
00:33:35,920 --> 00:33:38,240
Speaker 1: business model look like? And I do think, based on

634
00:33:38,280 --> 00:33:41,800
Speaker 1: our experience and BuzzFeed and others, including Bloomberg's media business,

635
00:33:41,800 --> 00:33:45,600
Speaker 1: which is excellent, there is a lot of advertising money

636
00:33:45,640 --> 00:33:49,200
Speaker 1: that can support a lot of great journalism, and then

637
00:33:49,240 --> 00:33:53,120
Speaker 1: there are subscription models for folks who want much more

638
00:33:53,200 --> 00:33:57,000
Speaker 1: narrowly focused journalism or much longer or more expensive journalism,

639
00:33:57,080 --> 00:33:59,440
Speaker 1: and those models are going to work. And the latest

640
00:33:59,480 --> 00:34:03,240
Speaker 1: frontier the TV industry is finally starting to crack the

641
00:34:03,320 --> 00:34:07,600
Speaker 1: traditional industry and there's gonna be huge opportunity there for

642
00:34:08,200 --> 00:34:12,320
Speaker 1: new video storytelling producers to come in with a different

643
00:34:12,320 --> 00:34:16,880
Speaker 1: model and approach and ultimately create stories for platforms like

644
00:34:16,920 --> 00:34:20,080
Speaker 1: Netflix or HBO or even the broadcast networks, which we'll

645
00:34:20,120 --> 00:34:22,279
Speaker 1: be looking for it, and ultimately you'll have a whole

646
00:34:22,320 --> 00:34:25,440
Speaker 1: new age of video journalism as well. We've been speaking

647
00:34:25,480 --> 00:34:28,720
Speaker 1: with Henry Blodgett of Business Insider in addition to Business

648
00:34:28,719 --> 00:34:31,080
Speaker 1: insider dot com. If people want to find you online,

649
00:34:31,400 --> 00:34:33,560
Speaker 1: where's the best place for them to track you down?

650
00:34:33,760 --> 00:34:37,920
Speaker 1: At H blodge It on Twitter at h blodget on Twitter. Uh,

651
00:34:38,040 --> 00:34:40,400
Speaker 1: be sure and check out the rest of our conversation

652
00:34:40,520 --> 00:34:43,160
Speaker 1: where after we finish the broadcast portion, we just let

653
00:34:43,160 --> 00:34:46,120
Speaker 1: the tape run and and keep going. Feel free to

654
00:34:46,200 --> 00:34:49,600
Speaker 1: check out my daily column on Bloomberg View dot com.

655
00:34:49,760 --> 00:34:53,359
Speaker 1: Follow me on Twitter at rid Halts. I'm Barry Hults.

656
00:34:53,360 --> 00:34:56,719
Speaker 1: You're listening to Masters and Business on Bloomberg Radio. I'm

657
00:34:56,719 --> 00:34:59,840
Speaker 1: Barry rid Halts, and this is the podcast portion of

658
00:35:00,040 --> 00:35:02,560
Speaker 1: Masters in Business on Bloomberg Radio. But if you're listening

659
00:35:02,600 --> 00:35:06,000
Speaker 1: to this, you probably already know that this is the

660
00:35:06,040 --> 00:35:09,960
Speaker 1: podcast portion. UM. I saved this story for this part

661
00:35:10,040 --> 00:35:13,799
Speaker 1: because it's actually where we first met and a very

662
00:35:13,800 --> 00:35:17,279
Speaker 1: true story and more appropriate for the podcast than for

663
00:35:17,320 --> 00:35:20,080
Speaker 1: the radio. So in I want to say it was

664
00:35:20,120 --> 00:35:24,240
Speaker 1: either nine it was, and you'll know by the story

665
00:35:24,400 --> 00:35:27,839
Speaker 1: exactly what it is. I had gone to a conference

666
00:35:28,520 --> 00:35:31,960
Speaker 1: that then was called Silicon Alley Insider. It was all

667
00:35:32,000 --> 00:35:35,920
Speaker 1: the way downtown, and it was after Henry's famous four

668
00:35:36,360 --> 00:35:41,040
Speaker 1: dollar call. And he shows up at this conference, and

669
00:35:41,200 --> 00:35:44,880
Speaker 1: by a twist of fate, I go to the men's

670
00:35:44,960 --> 00:35:48,200
Speaker 1: room and Henry and I, who had never met, are

671
00:35:48,360 --> 00:35:53,399
Speaker 1: standing literally next to each other at the arnals, and

672
00:35:53,600 --> 00:35:57,680
Speaker 1: you are wearing a name tag and it says Silicon

673
00:35:57,719 --> 00:36:02,040
Speaker 1: Alley Insider, Henry Blodgett Oppenheimer, and then in magic marker

674
00:36:02,600 --> 00:36:07,360
Speaker 1: crossed off Oppenheimer and the words Merrill Lynch printed underneath.

675
00:36:07,480 --> 00:36:11,319
Speaker 1: And I saw that, and I knew the whole Amazon story,

676
00:36:11,400 --> 00:36:14,400
Speaker 1: and I leaned over to you and said, save that tag.

677
00:36:14,719 --> 00:36:17,200
Speaker 1: It's gonna be worth something one day. Does that ring

678
00:36:17,239 --> 00:36:19,719
Speaker 1: a bellrier? Great? Investor. It does not ring a bell.

679
00:36:20,000 --> 00:36:22,080
Speaker 1: I can place it in time just because I know

680
00:36:22,120 --> 00:36:25,880
Speaker 1: what the day that had to be early to be February.

681
00:36:27,120 --> 00:36:29,000
Speaker 1: That was that. And I don't know if you remember

682
00:36:29,000 --> 00:36:34,279
Speaker 1: that conference. It was the top floor of this massive UM.

683
00:36:34,320 --> 00:36:39,120
Speaker 1: It was this massive, old windowed conference facility. And I

684
00:36:39,200 --> 00:36:41,040
Speaker 1: just and I went home and told I went back

685
00:36:41,040 --> 00:36:43,600
Speaker 1: to the office and told the story. Hey, you'll never

686
00:36:43,760 --> 00:36:47,920
Speaker 1: guess who I bumped into in the men's room at

687
00:36:48,000 --> 00:36:51,920
Speaker 1: the Silicon Alley inside. And I've told that story many

688
00:36:51,960 --> 00:36:54,759
Speaker 1: many times, and so there are other people who can

689
00:36:54,800 --> 00:36:58,200
Speaker 1: who can verify that. UM. So happy to be good

690
00:36:58,200 --> 00:37:02,560
Speaker 1: material for you know it was actually UM. Well, I've

691
00:37:02,560 --> 00:37:05,239
Speaker 1: actually been holding it for sixteen years and now I

692
00:37:05,320 --> 00:37:07,400
Speaker 1: got to now I got to trot it out. But

693
00:37:07,480 --> 00:37:10,640
Speaker 1: the hands of God, that's absolutely true. So let's talk

694
00:37:10,680 --> 00:37:13,960
Speaker 1: a little bit about UM some recent calls and some

695
00:37:14,040 --> 00:37:16,239
Speaker 1: recent things that I know. We only have you for

696
00:37:16,280 --> 00:37:19,000
Speaker 1: a finite amount of time, which is true about everybody

697
00:37:19,000 --> 00:37:21,640
Speaker 1: on the planet, but a really finite amount of time.

698
00:37:21,960 --> 00:37:24,719
Speaker 1: So my head of research, Mike Batnick, who you know

699
00:37:24,800 --> 00:37:29,000
Speaker 1: as the relevant investor UM, said, ask Henry about that.

700
00:37:29,080 --> 00:37:33,239
Speaker 1: Barriss call UM. So I'm gonna ask you, do you

701
00:37:33,280 --> 00:37:37,040
Speaker 1: think stocks are still wildly overvalued as they were back

702
00:37:37,040 --> 00:37:39,680
Speaker 1: in Yes, I do. And I think if I go

703
00:37:39,760 --> 00:37:42,760
Speaker 1: back in time to where I got really vocal about it,

704
00:37:42,760 --> 00:37:45,400
Speaker 1: it was about eighteen months ago, and I think what

705
00:37:45,480 --> 00:37:49,160
Speaker 1: I said is they're super overvalued. Sometime in the next

706
00:37:49,160 --> 00:37:52,160
Speaker 1: couple of years, we're looking at a possible draw down oft.

707
00:37:52,800 --> 00:37:55,359
Speaker 1: So we have six months left and then you can

708
00:37:55,440 --> 00:37:58,800
Speaker 1: make merciless fun of you. You said you're not selling

709
00:37:58,800 --> 00:38:01,680
Speaker 1: your stocks. Let's mark it is wildly of value. But

710
00:38:01,719 --> 00:38:03,800
Speaker 1: I'm not selling my stuff. I am not a trader

711
00:38:03,840 --> 00:38:06,400
Speaker 1: at all. And one of the things that I learned

712
00:38:06,680 --> 00:38:10,080
Speaker 1: as an individual investor, both on Wall Street and then

713
00:38:10,120 --> 00:38:14,239
Speaker 1: after Wall Street is ultimately, for most individual investors who

714
00:38:14,239 --> 00:38:16,680
Speaker 1: are not being paid to manage somebody else's money or

715
00:38:16,800 --> 00:38:20,040
Speaker 1: give advice, just managing their own, the smartest thing to

716
00:38:20,120 --> 00:38:23,319
Speaker 1: do is to hold a portfolio of index funds and

717
00:38:23,400 --> 00:38:26,319
Speaker 1: rebalance once in a while when the asset allocation. That's

718
00:38:26,360 --> 00:38:28,680
Speaker 1: what we do. That's right, and I really think that

719
00:38:28,760 --> 00:38:32,239
Speaker 1: is the best strategy for most individuals and a lot

720
00:38:32,360 --> 00:38:37,280
Speaker 1: of major institutions because the market is so competitive now

721
00:38:37,320 --> 00:38:40,160
Speaker 1: and there are so many smart people that to have

722
00:38:40,239 --> 00:38:43,719
Speaker 1: a consistent edge and to consistently beat all the other

723
00:38:43,719 --> 00:38:46,239
Speaker 1: poker players at the table and beat them by so

724
00:38:46,320 --> 00:38:50,880
Speaker 1: much that you can cover your transaction costs. Really difficult

725
00:38:50,880 --> 00:38:53,719
Speaker 1: to do. That's Charlie Ellis's theory. We had him on

726
00:38:53,760 --> 00:38:56,919
Speaker 1: a few weeks ago. He was totally delightful. And those

727
00:38:56,920 --> 00:38:59,080
Speaker 1: of you who haven't heard that, do yourself a favor

728
00:38:59,120 --> 00:39:02,839
Speaker 1: and go listen to it. Is uh, truly lasts. They

729
00:39:02,840 --> 00:39:05,279
Speaker 1: will make them like that. They do old school, old

730
00:39:05,280 --> 00:39:09,120
Speaker 1: school gentlemen. But that that is you know, what ends

731
00:39:09,200 --> 00:39:13,160
Speaker 1: up really driving a lot of debates is how can

732
00:39:13,200 --> 00:39:17,239
Speaker 1: you consistently make money above and beyond your costs, above

733
00:39:17,280 --> 00:39:21,040
Speaker 1: and beyond your taxes? And the answer is usually I'm

734
00:39:21,120 --> 00:39:23,799
Speaker 1: that good, but most people aren't. That's right, that's what

735
00:39:23,840 --> 00:39:26,920
Speaker 1: most people think. And ultimately, most people think they're better

736
00:39:26,920 --> 00:39:30,080
Speaker 1: than average drivers and better than average intelligence and so forth.

737
00:39:30,080 --> 00:39:35,279
Speaker 1: We're overcomp lake exactly, and so ultimately I think that's

738
00:39:35,280 --> 00:39:38,000
Speaker 1: the best strategy. Now, that said, the call that your

739
00:39:38,000 --> 00:39:41,760
Speaker 1: partner is referring to is, yes, I believe that stocks

740
00:39:41,840 --> 00:39:45,440
Speaker 1: right now are almost overvalued by a factor of two,

741
00:39:45,640 --> 00:39:48,719
Speaker 1: and I think that what that means over the next

742
00:39:48,760 --> 00:39:50,879
Speaker 1: ten years. I have no idea what's going to happen

743
00:39:50,920 --> 00:39:52,839
Speaker 1: over the next year or two, But over the next

744
00:39:52,880 --> 00:39:56,040
Speaker 1: year ten years, we're gonna have lousy equity returns. In

745
00:39:56,080 --> 00:39:58,760
Speaker 1: my opinion, we're also, however, going to have lousy bond

746
00:39:58,800 --> 00:40:02,200
Speaker 1: returns and allows the cash returns and probably allowsy real

747
00:40:02,320 --> 00:40:05,759
Speaker 1: estate returns as interest rates ultimately regress back up toward

748
00:40:05,880 --> 00:40:10,319
Speaker 1: normal levels. So I don't there's very little financially that

749
00:40:10,360 --> 00:40:12,240
Speaker 1: you can invest and feel like there's a huge return.

750
00:40:12,280 --> 00:40:14,239
Speaker 1: So I just think we're in a period where the

751
00:40:14,239 --> 00:40:16,160
Speaker 1: next ten years are gonna be a lousy for financial

752
00:40:16,160 --> 00:40:18,439
Speaker 1: assets of all kinds. What about you know, we look

753
00:40:18,480 --> 00:40:21,120
Speaker 1: at Europe much cheaper than us, we look at emerging

754
00:40:21,160 --> 00:40:25,120
Speaker 1: markets cheaper. Still, what about that as an opportunity? If

755
00:40:25,120 --> 00:40:28,680
Speaker 1: you really believe in a global asset allocation model, don't

756
00:40:28,680 --> 00:40:31,400
Speaker 1: you want to have exposure to perfectly fair And I

757
00:40:31,440 --> 00:40:33,680
Speaker 1: think that most of the valuation models that I've seen

758
00:40:33,840 --> 00:40:36,719
Speaker 1: do suggest that that, in fact, emerging is a much

759
00:40:36,760 --> 00:40:41,919
Speaker 1: better opportunity, likely a better long term return, but more

760
00:40:41,920 --> 00:40:45,439
Speaker 1: potential return. So let me lay out a let's play

761
00:40:45,440 --> 00:40:49,680
Speaker 1: with a scenario, and I have this for past few years,

762
00:40:49,680 --> 00:40:53,600
Speaker 1: I've been fending off earnings are at record highs. How

763
00:40:53,680 --> 00:40:55,600
Speaker 1: is the market going to do better when earnings are

764
00:40:55,680 --> 00:40:58,359
Speaker 1: record highs? And I turned around and say, well, we've

765
00:40:58,360 --> 00:41:03,239
Speaker 1: had very very low hiring, we've had very limited capex.

766
00:41:03,880 --> 00:41:07,400
Speaker 1: If um was it. The head of black Rock came

767
00:41:07,440 --> 00:41:09,799
Speaker 1: out and said, hey, CEO s, start investing in your

768
00:41:09,800 --> 00:41:13,080
Speaker 1: own companies. Lawrence Lawrence Fink came out, and a few

769
00:41:13,120 --> 00:41:14,960
Speaker 1: other people have said, we're eating our seeding corn. We

770
00:41:15,000 --> 00:41:18,480
Speaker 1: have to make more investing. So the more investments in companies.

771
00:41:18,480 --> 00:41:23,440
Speaker 1: So the scenario that maybe says future returns aren't terrible

772
00:41:24,000 --> 00:41:26,800
Speaker 1: is that we begin right, We've already seen wage pressure.

773
00:41:27,080 --> 00:41:31,080
Speaker 1: We've already seen Walmart and McDonald's and targets say hey,

774
00:41:31,120 --> 00:41:33,879
Speaker 1: we have to raise our lowest salary because we can't

775
00:41:33,880 --> 00:41:37,319
Speaker 1: find people can hire people at those wages. Maybe we're

776
00:41:37,320 --> 00:41:41,320
Speaker 1: starting to see the early stages of a virtuous cycle

777
00:41:41,400 --> 00:41:46,000
Speaker 1: where wages go up. Ultimately this is inflationary, but it

778
00:41:46,080 --> 00:41:48,560
Speaker 1: takes a few years to get their wages go up.

779
00:41:48,560 --> 00:41:52,840
Speaker 1: There's more hiring, there's more spending, there's more profits. Companies say, okay,

780
00:41:52,880 --> 00:41:56,200
Speaker 1: the financial crisis is behind us. They do a little

781
00:41:56,200 --> 00:41:59,560
Speaker 1: more capex, you get another round of virtuous benefits and

782
00:41:59,640 --> 00:42:03,040
Speaker 1: sun the stocks that looked kind of pricey are no

783
00:42:03,120 --> 00:42:06,000
Speaker 1: longer all that pricy. I hope that happens. That is

784
00:42:06,040 --> 00:42:08,880
Speaker 1: a great scenario. And we have been in a system

785
00:42:09,080 --> 00:42:14,360
Speaker 1: that for really thirty years now has effectively put shareholders

786
00:42:14,400 --> 00:42:19,279
Speaker 1: first and ordinary people who actually work second, because they're

787
00:42:19,360 --> 00:42:21,560
Speaker 1: viewed as costs and the ideas you pay them as

788
00:42:21,560 --> 00:42:24,080
Speaker 1: little as possible. Now you do have a lot of

789
00:42:24,120 --> 00:42:26,600
Speaker 1: folks coming out, and it's a great sign that Starbucks

790
00:42:26,640 --> 00:42:29,880
Speaker 1: and McDonald's and others are doing this where you voluntarily

791
00:42:29,920 --> 00:42:33,560
Speaker 1: pay people more than you might absolutely have to. And

792
00:42:33,600 --> 00:42:36,200
Speaker 1: what people forget is that wages that go out in

793
00:42:36,239 --> 00:42:38,480
Speaker 1: the economy are revenue for everybody else. And so this

794
00:42:38,600 --> 00:42:40,960
Speaker 1: idea that we're all just going to hike margins forever

795
00:42:41,120 --> 00:42:43,719
Speaker 1: by firing as many people as we can, ultimately we're

796
00:42:43,760 --> 00:42:47,280
Speaker 1: firing our customers. And that's the reins paradox of thrift.

797
00:42:47,400 --> 00:42:50,560
Speaker 1: You can't, you can't cut your way to you can't.

798
00:42:50,640 --> 00:42:53,520
Speaker 1: And so I hope that exactly what you laid out happens,

799
00:42:53,560 --> 00:42:56,680
Speaker 1: that in fact, wages do go up, profit margins come

800
00:42:56,719 --> 00:43:00,320
Speaker 1: down because we are sharing more of the economy's wealth

801
00:43:00,440 --> 00:43:03,560
Speaker 1: with the people who create it by working that that

802
00:43:03,600 --> 00:43:07,360
Speaker 1: creates more spending by consumers who are no longer strapped.

803
00:43:07,360 --> 00:43:09,800
Speaker 1: That is a great scenario. Likely do you see that scenario.

804
00:43:09,960 --> 00:43:12,080
Speaker 1: I hope that that happens. I think it is likely

805
00:43:12,120 --> 00:43:14,960
Speaker 1: that wages go up. But to finish your scenario, which

806
00:43:15,000 --> 00:43:18,320
Speaker 1: is that somehow in that environment we don't have rising

807
00:43:18,320 --> 00:43:21,120
Speaker 1: interest rates at all, You're gonna have to have exactly

808
00:43:21,160 --> 00:43:23,759
Speaker 1: you are. And so I think when rising interest rates

809
00:43:23,760 --> 00:43:26,800
Speaker 1: go up, what arise. What happens is the housing market

810
00:43:26,880 --> 00:43:30,360
Speaker 1: has to cool because mortgages get more expensive. Ultimately it

811
00:43:30,440 --> 00:43:34,359
Speaker 1: costs more to borrow money. Uh, you stocks get revalued

812
00:43:34,480 --> 00:43:37,799
Speaker 1: because suddenly the bond market is actually yielding something, and

813
00:43:38,040 --> 00:43:41,239
Speaker 1: that we may go through a long period where equities

814
00:43:41,239 --> 00:43:44,879
Speaker 1: do not return a lot. But again, bonds are looked

815
00:43:45,000 --> 00:43:47,640
Speaker 1: terrible on a long term basis, to scary to invest in.

816
00:43:47,719 --> 00:43:49,719
Speaker 1: And interest rates rise, you get hose there too. So

817
00:43:49,800 --> 00:43:53,799
Speaker 1: it's not unless you hold them to know that. But

818
00:43:53,960 --> 00:43:56,080
Speaker 1: but even then it's a it's a paltry return. We're

819
00:43:56,080 --> 00:43:58,480
Speaker 1: just we're in a period stepping way back from everything

820
00:43:58,719 --> 00:44:03,560
Speaker 1: from we have had this golden age of financial assets.

821
00:44:04,320 --> 00:44:06,400
Speaker 1: I think that the levels on all these things are

822
00:44:06,440 --> 00:44:09,720
Speaker 1: now going to go and reverse eventually, unless we're Japan,

823
00:44:09,840 --> 00:44:12,800
Speaker 1: which is no great scenario where in stay at zero forever.

824
00:44:13,360 --> 00:44:16,480
Speaker 1: Ultimately they reverse, and that the golden age of financial

825
00:44:16,480 --> 00:44:18,479
Speaker 1: assets ends. And then maybe we go to real world

826
00:44:18,520 --> 00:44:21,520
Speaker 1: assets like you described, which would be wonderful. We bring

827
00:44:21,560 --> 00:44:24,359
Speaker 1: back innovation, start getting people coming out of NBA's They

828
00:44:24,360 --> 00:44:26,320
Speaker 1: don't just want to go into finance. They want to

829
00:44:26,320 --> 00:44:29,200
Speaker 1: go build things that are great for consumers in addition

830
00:44:29,200 --> 00:44:31,400
Speaker 1: to financial products, which are also great for consumers. I

831
00:44:31,440 --> 00:44:33,480
Speaker 1: don't want to hammer people in the financial industry, but

832
00:44:33,680 --> 00:44:35,960
Speaker 1: there's a lot more other cool stuff out there to

833
00:44:36,040 --> 00:44:38,879
Speaker 1: make other than financial products, and and so we could

834
00:44:38,880 --> 00:44:40,560
Speaker 1: be headed for a golden age of that, which would

835
00:44:40,560 --> 00:44:42,600
Speaker 1: be great. So when we look around the world, you've

836
00:44:42,600 --> 00:44:46,680
Speaker 1: seen Japan at practically zero forever. Now Germany flirting with

837
00:44:46,760 --> 00:44:49,440
Speaker 1: being depending on what time of the day it is.

838
00:44:49,800 --> 00:44:53,200
Speaker 1: Sometimes the German Bund is actually cheaper than what we

839
00:44:53,280 --> 00:44:56,480
Speaker 1: see in Japan. And why wouldn't that pull US bonds

840
00:44:57,000 --> 00:45:00,399
Speaker 1: down with the rest of the world. Look, Switzerland is now, hey,

841
00:45:00,440 --> 00:45:02,960
Speaker 1: you want to lend us money, It will only cost

842
00:45:03,000 --> 00:45:06,839
Speaker 1: you two percent to lend Switzerland money. It's kind of

843
00:45:06,840 --> 00:45:12,800
Speaker 1: off the charts crazy near term. Could rates go lower, absolutely,

844
00:45:12,880 --> 00:45:14,879
Speaker 1: and I'm not looking at that again, I'm stepping back

845
00:45:14,920 --> 00:45:18,040
Speaker 1: from it at some point. If things go the way

846
00:45:18,040 --> 00:45:20,440
Speaker 1: we hope it will go, which is what you describe,

847
00:45:20,520 --> 00:45:23,799
Speaker 1: which is companies start paying better, more people go back

848
00:45:23,840 --> 00:45:25,879
Speaker 1: to work, we have full employment, you start to get

849
00:45:25,880 --> 00:45:29,480
Speaker 1: more spending. Ultimately you get some inflation back in the

850
00:45:29,520 --> 00:45:33,239
Speaker 1: system to a healthy level. Interest rates probably rise. I

851
00:45:33,239 --> 00:45:34,880
Speaker 1: don't think we're in a period where you're gonna have

852
00:45:35,200 --> 00:45:38,440
Speaker 1: negative or flat interest rates forever, and ultimately that wouldn't

853
00:45:38,440 --> 00:45:41,560
Speaker 1: be good. It would not signify a healthy global economy.

854
00:45:41,760 --> 00:45:43,799
Speaker 1: So one thing we didn't talk about when we were

855
00:45:43,840 --> 00:45:47,600
Speaker 1: discussing the launch of Business Insider was the impact of

856
00:45:47,680 --> 00:45:50,319
Speaker 1: social media. You mentioned you made reference to Twitter and

857
00:45:50,360 --> 00:45:54,800
Speaker 1: Facebook and LinkedIn, but we really didn't delve into it. What, um,

858
00:45:54,800 --> 00:45:59,160
Speaker 1: how does that impact the news business first and just

859
00:45:59,360 --> 00:46:04,520
Speaker 1: the world of an testing as well on the news business.

860
00:46:04,560 --> 00:46:08,879
Speaker 1: Social media effectively or another distribution channel that are very

861
00:46:08,920 --> 00:46:12,600
Speaker 1: important for any media digital media publisher, whether it's news,

862
00:46:12,600 --> 00:46:15,840
Speaker 1: whether it's movies, whether it's TV. Social is an incredibly

863
00:46:15,880 --> 00:46:19,880
Speaker 1: powerful distribution platform and there are many different social networks

864
00:46:19,920 --> 00:46:23,000
Speaker 1: they've carved out different niches for themselves. You have different

865
00:46:23,040 --> 00:46:25,040
Speaker 1: groups of people on them. Twitter tends to be a

866
00:46:25,120 --> 00:46:29,360
Speaker 1: very immediate group of people, news hounds. Facebook it's about

867
00:46:29,360 --> 00:46:31,640
Speaker 1: your friends and it's about stories you might like. Maybe

868
00:46:31,680 --> 00:46:36,760
Speaker 1: it's not compelling news that's happening now. Pinterest is very contemplative,

869
00:46:36,840 --> 00:46:40,120
Speaker 1: beautiful pictures and places to go to, not immediate in

870
00:46:40,120 --> 00:46:43,360
Speaker 1: the same way. So each social network has its own audience.

871
00:46:43,360 --> 00:46:45,719
Speaker 1: People use it differently. But for those of us in

872
00:46:45,760 --> 00:46:49,399
Speaker 1: the digital media business, they are wonderful distribution platforms and

873
00:46:49,920 --> 00:46:53,440
Speaker 1: in terms of investing, Facebook is illustrated they can be

874
00:46:53,719 --> 00:46:58,720
Speaker 1: marvelous investments once they gain a huge percentage of their market.

875
00:46:58,800 --> 00:47:02,840
Speaker 1: Facebook right now is most of the upside there was

876
00:47:02,880 --> 00:47:04,880
Speaker 1: captured before they went public, but it has been a

877
00:47:04,960 --> 00:47:08,200
Speaker 1: very good public investment as well. And if you look

878
00:47:08,200 --> 00:47:10,480
Speaker 1: at Facebook going forward, as long as things continue to

879
00:47:10,520 --> 00:47:13,880
Speaker 1: go well they are they have taken their margins way

880
00:47:13,920 --> 00:47:17,920
Speaker 1: down because they are investing incredibly aggressively for the future.

881
00:47:17,960 --> 00:47:20,240
Speaker 1: That's five to ten years out and at some point

882
00:47:20,600 --> 00:47:22,960
Speaker 1: they don't have any content creation costs. All they have

883
00:47:23,000 --> 00:47:25,080
Speaker 1: to do is make the platform and other people publish

884
00:47:25,120 --> 00:47:27,920
Speaker 1: into it, so eventually they should have very nice looking margins.

885
00:47:27,960 --> 00:47:30,520
Speaker 1: And and what about Twitter, which is struggling a little bit,

886
00:47:30,560 --> 00:47:33,640
Speaker 1: at least on the business side. I know, in terms

887
00:47:33,640 --> 00:47:37,319
Speaker 1: of the content and news side. If I'm stuck out

888
00:47:37,320 --> 00:47:40,640
Speaker 1: of the office and just grab my phone, I can't

889
00:47:40,640 --> 00:47:43,839
Speaker 1: tell you how often non farm payroll I don't really

890
00:47:43,840 --> 00:47:46,640
Speaker 1: care about non farm payrolls report. I think it's the

891
00:47:46,640 --> 00:47:49,719
Speaker 1: most overhyped and I've written about this a ton of times,

892
00:47:49,760 --> 00:47:53,080
Speaker 1: but I also I'm curious with the number. Is So,

893
00:47:53,160 --> 00:47:55,840
Speaker 1: when if I'm out of the office, if I'm away

894
00:47:55,880 --> 00:47:58,799
Speaker 1: from a Bloomberg terminal, and non farm payroll comes out,

895
00:47:59,280 --> 00:48:01,200
Speaker 1: the first thing I do is I reached for Twitter,

896
00:48:01,680 --> 00:48:05,600
Speaker 1: and I will get all the data, all the information, comments, observations, whatever,

897
00:48:06,800 --> 00:48:11,400
Speaker 1: before it shows up anywhere else. Is Twitter the new tape?

898
00:48:11,480 --> 00:48:13,040
Speaker 1: Is that? Is that? I think that's the way to

899
00:48:13,040 --> 00:48:15,000
Speaker 1: think about It's the new tape. And and so what

900
00:48:15,040 --> 00:48:16,880
Speaker 1: does that mean? Well, it means that those of us

901
00:48:16,920 --> 00:48:20,959
Speaker 1: who are news addicts are all over Twitter all the time.

902
00:48:21,080 --> 00:48:24,439
Speaker 1: Journalists are all over Twitter. Celebrities. It's a wonderful way

903
00:48:24,440 --> 00:48:27,799
Speaker 1: to connect with millions of people who are interested in you.

904
00:48:28,400 --> 00:48:31,640
Speaker 1: But it turns out that the news addict percentage of

905
00:48:31,640 --> 00:48:35,760
Speaker 1: the population is probably ten of the population for most

906
00:48:35,760 --> 00:48:38,239
Speaker 1: other people as Sure, if it's important, let me know.

907
00:48:38,400 --> 00:48:40,160
Speaker 1: But I'm not going to be glued to a tape

908
00:48:40,200 --> 00:48:42,440
Speaker 1: all the time. And Facebook is the one that has

909
00:48:42,520 --> 00:48:45,880
Speaker 1: captured that market. It is. If it's really important, it

910
00:48:45,920 --> 00:48:49,080
Speaker 1: will surface in my stream. Otherwise it's about friends and

911
00:48:49,120 --> 00:48:52,200
Speaker 1: family and local stuff and that's meaningful to me. So

912
00:48:52,280 --> 00:48:55,040
Speaker 1: that's interesting. So take us through a day in the

913
00:48:55,080 --> 00:48:59,920
Speaker 1: life of Henry Blodgett. What you know, your colleague Joe

914
00:49:00,040 --> 00:49:04,560
Speaker 1: Weasenthal who's now here Bloomberg along with you and everybody else,

915
00:49:04,880 --> 00:49:08,000
Speaker 1: a few of Mike are swallowing the whole world. Well

916
00:49:08,040 --> 00:49:11,879
Speaker 1: we have um. He very famously would would wake up

917
00:49:11,880 --> 00:49:16,200
Speaker 1: at some ungodly hour and you know, basically start his day.

918
00:49:16,200 --> 00:49:18,640
Speaker 1: What I miss? What's going on? What? What time does

919
00:49:18,680 --> 00:49:20,759
Speaker 1: Henry start his day? Well? I used to do that.

920
00:49:21,080 --> 00:49:23,120
Speaker 1: I used to be on the couch at five o'clock

921
00:49:23,120 --> 00:49:25,040
Speaker 1: in the morning. And my wife will tell these stories

922
00:49:25,080 --> 00:49:26,759
Speaker 1: about how I knew you were doing the right thing

923
00:49:26,800 --> 00:49:30,200
Speaker 1: when I would hear this uproarious laughter with you amusing

924
00:49:30,239 --> 00:49:33,840
Speaker 1: yourself at five fifteen in the morning. Coming up the stairs.

925
00:49:33,840 --> 00:49:35,960
Speaker 1: She said, Okay, I know he's doing something that is

926
00:49:35,960 --> 00:49:38,000
Speaker 1: good for him to do. We'll keep that up. Now

927
00:49:38,040 --> 00:49:40,239
Speaker 1: we have other great people who do that. I get

928
00:49:40,280 --> 00:49:43,120
Speaker 1: up generally around six, I see what the news is,

929
00:49:43,160 --> 00:49:44,960
Speaker 1: I see how we're doing it. I go in. We

930
00:49:45,040 --> 00:49:47,520
Speaker 1: now have a very big team of great people, and

931
00:49:47,560 --> 00:49:49,600
Speaker 1: so a lot of what I'm focusing on is trying

932
00:49:49,600 --> 00:49:51,640
Speaker 1: to make sure the ship is sailing in the right direction,

933
00:49:51,719 --> 00:49:55,040
Speaker 1: getting everybody behind it and so forth. So, unfortunately, don't

934
00:49:55,040 --> 00:49:57,400
Speaker 1: have as much time to write as I did before.

935
00:49:57,760 --> 00:50:00,680
Speaker 1: I love to write, miss it, but sually we'll find

936
00:50:00,680 --> 00:50:02,239
Speaker 1: a carve out some time to do that. You used

937
00:50:02,280 --> 00:50:05,560
Speaker 1: to write at least daily. Now I barely see your byline,

938
00:50:05,600 --> 00:50:07,520
Speaker 1: Go go buy once a week or so, that's right.

939
00:50:07,600 --> 00:50:09,359
Speaker 1: I used to write five to ten stories a day

940
00:50:09,440 --> 00:50:15,200
Speaker 1: because that the pace. Absolutely, that's right doing it back

941
00:50:15,200 --> 00:50:17,359
Speaker 1: in and he taught us all how to do it,

942
00:50:17,400 --> 00:50:19,480
Speaker 1: and and so I was definitely doing that, and then

943
00:50:19,480 --> 00:50:21,239
Speaker 1: it went to about it once a day, and you're

944
00:50:21,280 --> 00:50:23,400
Speaker 1: right now it's about once a week. So do do

945
00:50:23,440 --> 00:50:25,719
Speaker 1: you miss that? Or is it good to step back

946
00:50:25,760 --> 00:50:29,160
Speaker 1: and focus your efforts elsewhere. It's good for the company.

947
00:50:29,320 --> 00:50:32,480
Speaker 1: Somebody needs to be looking ahead and hopefully heading us

948
00:50:32,520 --> 00:50:35,760
Speaker 1: in an intelligent direction and getting everybody working together. And

949
00:50:35,960 --> 00:50:38,400
Speaker 1: one of the things you realize is you grow a company,

950
00:50:38,440 --> 00:50:40,319
Speaker 1: and I'm sure you've seen this as well, is it's

951
00:50:40,360 --> 00:50:43,960
Speaker 1: just when you're leading and managing, you have this privilege

952
00:50:44,000 --> 00:50:46,799
Speaker 1: of managing somebody, smart people. It's about them, and I

953
00:50:46,840 --> 00:50:51,000
Speaker 1: want to help them become great. And so I do

954
00:50:51,080 --> 00:50:53,239
Speaker 1: miss it. I love writing, and I love what we're

955
00:50:53,280 --> 00:50:55,560
Speaker 1: doing now, and it's fun to continue to do that.

956
00:50:55,640 --> 00:50:57,160
Speaker 1: And at some point, hopefully I'll be able to do

957
00:50:57,200 --> 00:50:58,560
Speaker 1: a little bit more of that. But right now we're

958
00:50:58,560 --> 00:51:01,239
Speaker 1: in a phase where we're growing incredibly rapidly, so all

959
00:51:01,280 --> 00:51:03,520
Speaker 1: of my attentions focused on that. So who were some

960
00:51:03,600 --> 00:51:06,799
Speaker 1: of your early mentors UM, either in this industry or

961
00:51:06,880 --> 00:51:11,160
Speaker 1: on on Wall Street? Well? As an analyst, I was

962
00:51:11,280 --> 00:51:15,000
Speaker 1: fortunate enough to get to know several other senior analysts

963
00:51:15,040 --> 00:51:17,839
Speaker 1: who are excellent. One is Alice Schroeder, who I think

964
00:51:17,960 --> 00:51:22,080
Speaker 1: is um been associated with Bloomberg along with pretty much

965
00:51:22,080 --> 00:51:23,760
Speaker 1: everybody else in the world at one part or another.

966
00:51:23,760 --> 00:51:26,759
Speaker 1: She wrote the book about Warren Buffett. Of course, very

967
00:51:26,880 --> 00:51:30,560
Speaker 1: very smart and I think so, and she was a

968
00:51:30,600 --> 00:51:35,640
Speaker 1: wonderful mentor. Steve Levy as a mentor of technology different

969
00:51:35,640 --> 00:51:38,160
Speaker 1: different Steve Levy, but a technology analyst. I had a

970
00:51:38,160 --> 00:51:40,880
Speaker 1: couple of folks. Chris Katowski, who is the head of

971
00:51:40,920 --> 00:51:45,040
Speaker 1: research at Oppenheimer, was a great um mentor. So lots

972
00:51:45,040 --> 00:51:48,239
Speaker 1: of people in the Wall Street sell side business, lots

973
00:51:48,239 --> 00:51:50,719
Speaker 1: of great investors. One of the great privileges at that

974
00:51:50,800 --> 00:51:52,680
Speaker 1: job is that you get to hang out with just

975
00:51:52,800 --> 00:51:56,000
Speaker 1: seriously smart people. For me to sit down with Julian Robertson,

976
00:51:56,360 --> 00:51:58,760
Speaker 1: have Julian say, like, Henry, what is it with this Amazon?

977
00:51:58,960 --> 00:52:01,719
Speaker 1: It's a bookstore? It's iculous, And so I would hear

978
00:52:01,880 --> 00:52:03,480
Speaker 1: how he was thinking about it. I would tell him

979
00:52:03,520 --> 00:52:05,440
Speaker 1: how I was thinking about it, and to be extaviitled

980
00:52:05,480 --> 00:52:08,000
Speaker 1: to change ideas with that, and and so many just

981
00:52:08,080 --> 00:52:11,359
Speaker 1: one after the other, these incredibly smart people. So UH

982
00:52:11,560 --> 00:52:14,280
Speaker 1: got a wonderful education there. And then after I left,

983
00:52:14,520 --> 00:52:16,640
Speaker 1: I met Jack Bogol and I went through all the

984
00:52:16,680 --> 00:52:19,799
Speaker 1: indexing and ultimately, as I said, became convinced that that

985
00:52:19,880 --> 00:52:22,799
Speaker 1: was the smart way for individuals to invest. So on

986
00:52:22,880 --> 00:52:26,800
Speaker 1: the on the research side and analytical side in Wall Street,

987
00:52:26,800 --> 00:52:30,160
Speaker 1: I have wonderful mentors. In terms of business, there were

988
00:52:30,160 --> 00:52:33,000
Speaker 1: a lot of pioneers in digital media and journalism that

989
00:52:33,040 --> 00:52:35,960
Speaker 1: we looked to that were very helpful. And I had,

990
00:52:36,239 --> 00:52:38,840
Speaker 1: in following a lot of dot com companies during the

991
00:52:38,880 --> 00:52:42,040
Speaker 1: nine nineties, had seen lots of entrepreneurs and were was

992
00:52:42,160 --> 00:52:45,040
Speaker 1: around the VC community and so got to know that

993
00:52:45,160 --> 00:52:47,680
Speaker 1: very well. And my partner, Kevin Ryan was was had

994
00:52:47,719 --> 00:52:50,399
Speaker 1: founded several companies by that time and built them, so

995
00:52:50,600 --> 00:52:53,000
Speaker 1: it's very helpful to work with him. How did your

996
00:52:53,000 --> 00:52:57,000
Speaker 1: relationship with Jeff Bezos developed well? I covered Amazon as

997
00:52:57,000 --> 00:52:59,880
Speaker 1: an analyst and I met Jeff occasionally at analyst a

998
00:53:00,080 --> 00:53:02,200
Speaker 1: is and was, as I said, very impressed with Amazon.

999
00:53:02,280 --> 00:53:04,799
Speaker 1: Unfortunately worked out from a following at point of view,

1000
00:53:04,840 --> 00:53:06,759
Speaker 1: and Jeff delivered on everything he said he was going

1001
00:53:06,800 --> 00:53:09,480
Speaker 1: to deliver on, and I loved the service. And one

1002
00:53:09,520 --> 00:53:13,600
Speaker 1: of the things that Jeff hammers on again and again

1003
00:53:13,680 --> 00:53:16,280
Speaker 1: that has been so great for me to think about

1004
00:53:16,400 --> 00:53:19,160
Speaker 1: in in running a business is they're just obsessed with

1005
00:53:19,239 --> 00:53:22,719
Speaker 1: customers and making customers happy. And ultimately I feel like

1006
00:53:22,760 --> 00:53:24,760
Speaker 1: we do a great job with our readers and users

1007
00:53:25,160 --> 00:53:27,160
Speaker 1: that will everything else will take care of itself, and

1008
00:53:27,200 --> 00:53:31,320
Speaker 1: so that lesson has been very helpful. But so I

1009
00:53:31,320 --> 00:53:33,960
Speaker 1: fell out of touch with Jeff for ten to fifteen

1010
00:53:34,040 --> 00:53:36,439
Speaker 1: years and then I was writing a fair bit about

1011
00:53:36,440 --> 00:53:39,000
Speaker 1: Amazon on Business Insider, and one day I got a

1012
00:53:39,040 --> 00:53:41,000
Speaker 1: call saying, we want to have dinner. It's like, sure,

1013
00:53:41,280 --> 00:53:43,239
Speaker 1: be great dinner. So we went out to dinner and

1014
00:53:43,400 --> 00:53:45,719
Speaker 1: had a good too in New York and in New

1015
00:53:45,800 --> 00:53:48,160
Speaker 1: York talking, we talked about the old times, and we

1016
00:53:48,280 --> 00:53:50,879
Speaker 1: talked about the New Times, and we talked about the

1017
00:53:50,920 --> 00:53:53,120
Speaker 1: media business. This was before he had bought the walls

1018
00:53:53,200 --> 00:53:57,440
Speaker 1: the Washington Post, and he was a very interesting reaction

1019
00:53:57,440 --> 00:53:59,920
Speaker 1: to it. He said, look, I actually like this business.

1020
00:53:59,920 --> 00:54:01,480
Speaker 1: I think it's very interesting, and I think there's some

1021
00:54:01,520 --> 00:54:06,200
Speaker 1: similarities between commerce and media in digital and so we

1022
00:54:06,239 --> 00:54:08,040
Speaker 1: talked about that and that was interesting. And then six

1023
00:54:08,080 --> 00:54:11,120
Speaker 1: months later he said, hey can I invest in? It

1024
00:54:11,160 --> 00:54:14,359
Speaker 1: wasn't like you were you were pitching him basically, this

1025
00:54:14,440 --> 00:54:18,160
Speaker 1: was holy un un what's the word I'm looking for?

1026
00:54:18,520 --> 00:54:22,400
Speaker 1: This was unsolicited you Basically he said, hey can I invest?

1027
00:54:22,480 --> 00:54:25,799
Speaker 1: And You're like, okay, absolutely, the check that that is

1028
00:54:26,000 --> 00:54:29,680
Speaker 1: um So that's really quite an endorsement from from a

1029
00:54:29,680 --> 00:54:33,239
Speaker 1: guy like him who's been just so wildly successful, very

1030
00:54:33,280 --> 00:54:36,440
Speaker 1: much so. And just again, it's such a privilege to

1031
00:54:36,560 --> 00:54:38,759
Speaker 1: spend any time with him and and some of the

1032
00:54:38,760 --> 00:54:42,600
Speaker 1: guidance that he has given by what he does at Amazon.

1033
00:54:42,719 --> 00:54:45,160
Speaker 1: What Amazon does is tremendously helpful, but he's also just

1034
00:54:45,200 --> 00:54:49,120
Speaker 1: given me some individual guidance that's been wonderful. You know,

1035
00:54:49,239 --> 00:54:51,440
Speaker 1: a lot of people don't realize he was a D. E.

1036
00:54:51,640 --> 00:54:54,480
Speaker 1: Shaw the large hedge fund for a good couple of

1037
00:54:54,560 --> 00:54:59,440
Speaker 1: years before in the nineties, before launching Amazon. You know,

1038
00:54:59,480 --> 00:55:03,239
Speaker 1: he's a sending character. I think people really don't know

1039
00:55:03,280 --> 00:55:05,560
Speaker 1: who he is. I think that's right, and I think

1040
00:55:05,560 --> 00:55:09,640
Speaker 1: that he now that Amazon is is successful and is

1041
00:55:09,760 --> 00:55:12,400
Speaker 1: viewed as a success story, people are starting to appreciate

1042
00:55:12,840 --> 00:55:16,880
Speaker 1: the value of his long term view and commitment. But again,

1043
00:55:17,000 --> 00:55:19,600
Speaker 1: as an economy, I think we have so much to

1044
00:55:19,680 --> 00:55:22,560
Speaker 1: learn from that we have become so short term oriented,

1045
00:55:22,640 --> 00:55:27,400
Speaker 1: so obsessed with this quarter maximizing profits. He just shows

1046
00:55:27,480 --> 00:55:29,640
Speaker 1: again and again that if you have a vision and

1047
00:55:29,640 --> 00:55:32,680
Speaker 1: you're willing to make big bets, and you are communicating

1048
00:55:32,800 --> 00:55:35,279
Speaker 1: very clearly with your shareholders about this is what we

1049
00:55:35,360 --> 00:55:38,240
Speaker 1: are going to do again and again. If you don't

1050
00:55:38,320 --> 00:55:42,200
Speaker 1: like that, don't own the stock. Ultimately, there's a lot

1051
00:55:42,280 --> 00:55:45,240
Speaker 1: more flexibility than we think in how we run companies,

1052
00:55:45,280 --> 00:55:47,920
Speaker 1: and I just see so many Fortune five companies that

1053
00:55:48,239 --> 00:55:52,960
Speaker 1: are scared of the activist shareholder making such short term

1054
00:55:53,200 --> 00:55:58,000
Speaker 1: decisions cutting R and D, firing everybody they can, rather

1055
00:55:58,040 --> 00:56:00,680
Speaker 1: than saying, hey, there's a big future five ten years out,

1056
00:56:00,800 --> 00:56:02,600
Speaker 1: let's make a big bet and go after it. And

1057
00:56:02,640 --> 00:56:04,359
Speaker 1: we need more of that in the economy. You know,

1058
00:56:04,760 --> 00:56:08,600
Speaker 1: the rise of so called shareholder value, which is not

1059
00:56:08,800 --> 00:56:11,520
Speaker 1: the law, It was just a philosophy. I think it

1060
00:56:11,560 --> 00:56:14,000
Speaker 1: did a lot of damage and it's now starting to

1061
00:56:14,120 --> 00:56:18,280
Speaker 1: fall out of favor because you see companies like Apple.

1062
00:56:18,400 --> 00:56:22,400
Speaker 1: You couldn't have created an Apple without going back to

1063
00:56:22,480 --> 00:56:25,680
Speaker 1: that first iPod and willing to roll the dice on

1064
00:56:25,800 --> 00:56:30,360
Speaker 1: something like an iPhone or an iPad. And you know,

1065
00:56:30,680 --> 00:56:33,480
Speaker 1: most companies don't have the ability to make that sort

1066
00:56:33,480 --> 00:56:34,840
Speaker 1: of bet. By the way, if you ever want to

1067
00:56:34,880 --> 00:56:38,680
Speaker 1: have fun, use the way back machine, use Google and

1068
00:56:38,760 --> 00:56:42,360
Speaker 1: look at some of those early reviews for the iPad

1069
00:56:42,480 --> 00:56:44,880
Speaker 1: or the iPhone for that matter, and they were brutal.

1070
00:56:44,920 --> 00:56:49,080
Speaker 1: They were terrible. Um. John Gruber runs Daring fire Fireball,

1071
00:56:49,120 --> 00:56:52,880
Speaker 1: which is a blog I really like, calls it Claim Chowder,

1072
00:56:52,880 --> 00:56:55,239
Speaker 1: and he occasionally publishes them, and some of them are

1073
00:56:55,360 --> 00:57:01,720
Speaker 1: just so horrifically shortsighted. It's one thing when Steve Balmer says,

1074
00:57:02,640 --> 00:57:05,480
Speaker 1: you can't change the battery, what who's gonna buy one

1075
00:57:05,480 --> 00:57:08,360
Speaker 1: of these? He's biased and you expect him not to

1076
00:57:08,400 --> 00:57:12,000
Speaker 1: get it. But professionals who were supposed to be either

1077
00:57:12,120 --> 00:57:16,320
Speaker 1: tech journalists or vcs or I hate the word futurists,

1078
00:57:16,640 --> 00:57:18,640
Speaker 1: when these guys miss it. It's like, wow, what do

1079
00:57:18,760 --> 00:57:21,160
Speaker 1: these guys do for a living? It's amazing, that's right,

1080
00:57:21,400 --> 00:57:23,840
Speaker 1: And I think to your point, the if you go

1081
00:57:23,880 --> 00:57:26,240
Speaker 1: back to the early nineteen eighties, which is where the

1082
00:57:26,320 --> 00:57:30,880
Speaker 1: shareholder value movement started, we had Gordon Gecko, famously character

1083
00:57:30,920 --> 00:57:34,600
Speaker 1: in the movie Greed Is Good. In those days, our

1084
00:57:34,640 --> 00:57:37,400
Speaker 1: companies needed a kick in the ass, and you had

1085
00:57:37,480 --> 00:57:41,960
Speaker 1: managements over rewarding themselves huge perks on the company. We

1086
00:57:42,000 --> 00:57:45,880
Speaker 1: had different tax schemes, so ultimately you wanted to create perks,

1087
00:57:45,920 --> 00:57:49,640
Speaker 1: and the companies had incredibly low margins. We needed as

1088
00:57:49,640 --> 00:57:53,040
Speaker 1: an economy to be kicked into shape, make the company's

1089
00:57:53,040 --> 00:57:56,520
Speaker 1: more efficient, more profit to shareholders, and so forth. But

1090
00:57:56,600 --> 00:57:59,120
Speaker 1: now the pendulum is a strong way too far the

1091
00:57:59,160 --> 00:58:02,960
Speaker 1: other way, and we have forgotten that a great company

1092
00:58:03,080 --> 00:58:07,000
Speaker 1: will not only deliver current profit to shareholders, but ultimately

1093
00:58:07,000 --> 00:58:09,800
Speaker 1: will be a wonderful place to work, will sustain all

1094
00:58:09,840 --> 00:58:12,280
Speaker 1: the people who work there in a way that takes

1095
00:58:12,280 --> 00:58:15,560
Speaker 1: them above the poverty line, gives them a good life.

1096
00:58:16,000 --> 00:58:18,560
Speaker 1: Effectively the middle class that we had that we have lost.

1097
00:58:18,880 --> 00:58:21,040
Speaker 1: That's what we should be striving for. Our companies should

1098
00:58:21,080 --> 00:58:24,919
Speaker 1: be serving a balance of their constituencies, not just short

1099
00:58:25,000 --> 00:58:29,560
Speaker 1: term shareholders, especially not just activist shareholders who ultimately whether

1100
00:58:29,640 --> 00:58:31,800
Speaker 1: they do a lot of good. But there are also

1101
00:58:31,840 --> 00:58:34,440
Speaker 1: folks who clearly it's basically just pay me off so

1102
00:58:34,480 --> 00:58:36,840
Speaker 1: I will go away. I was always astonished at people

1103
00:58:37,000 --> 00:58:40,160
Speaker 1: going not to keep talking about Apple, But here is

1104
00:58:40,200 --> 00:58:45,720
Speaker 1: what is literally, not not an exaggeration, literally the most

1105
00:58:45,760 --> 00:58:49,920
Speaker 1: successful company in the world. And what makes you think

1106
00:58:50,040 --> 00:58:52,640
Speaker 1: that you, Mr Hedge fund manager, are going to tell

1107
00:58:52,720 --> 00:58:55,520
Speaker 1: these guys how to run their business. You live the

1108
00:58:55,800 --> 00:58:58,200
Speaker 1: vent the iPod. You didn't invent the iPhone. You didn't

1109
00:58:58,200 --> 00:59:01,040
Speaker 1: invent the iPad. You didn't invent Apple TV, you didn't

1110
00:59:01,120 --> 00:59:04,360
Speaker 1: vent Apple Watch, you didn't invent a MacBook Air. My

1111
00:59:04,680 --> 00:59:09,640
Speaker 1: laptop is such a delightful thing and I use it

1112
00:59:09,680 --> 00:59:12,840
Speaker 1: to death. That two years in the battery is like

1113
00:59:12,920 --> 00:59:15,320
Speaker 1: it used to last nine hours, eight hours. I could

1114
00:59:15,320 --> 00:59:17,920
Speaker 1: fly to California on on a charge, and I use

1115
00:59:18,000 --> 00:59:19,560
Speaker 1: it back and forth on the train every day, and

1116
00:59:19,600 --> 00:59:22,720
Speaker 1: I just charge and drain and charge and drain this

1117
00:59:22,760 --> 00:59:26,120
Speaker 1: battery twice a day. And eventually it's like, gee, I'm

1118
00:59:26,160 --> 00:59:28,400
Speaker 1: you know, I noticed by the time I got home, Wow,

1119
00:59:28,400 --> 00:59:32,720
Speaker 1: I got I'm really going so I want like this

1120
00:59:32,800 --> 00:59:35,000
Speaker 1: laptop so much. Hey, what's it gonna cost for a

1121
00:59:35,040 --> 00:59:38,440
Speaker 1: new battery? Great? Put it in. And they were a

1122
00:59:38,480 --> 00:59:41,120
Speaker 1: pleasure to deal with. And I know the next one

1123
00:59:41,560 --> 00:59:45,840
Speaker 1: is going to be fantastic. Um, but I just can't

1124
00:59:45,880 --> 00:59:49,160
Speaker 1: bring myself. It's it's not even two years old. It's

1125
00:59:49,200 --> 00:59:53,960
Speaker 1: that good. How can anybody tell these guys you need

1126
00:59:54,000 --> 00:59:57,520
Speaker 1: to do more share buy backs? You, Hey, they're looking.

1127
00:59:57,600 --> 01:00:00,520
Speaker 1: It's obvious they're looking at almost two dollars. They want some.

1128
01:00:00,640 --> 01:00:02,600
Speaker 1: It's it's that simple, that's right, And they're getting it.

1129
01:00:02,680 --> 01:00:05,120
Speaker 1: And Apple has listened on the share by backs, but

1130
01:00:05,200 --> 01:00:07,640
Speaker 1: the idea that they should suddenly dive it, end out

1131
01:00:07,680 --> 01:00:10,240
Speaker 1: all the cash and or buy or borrow. A huge

1132
01:00:10,240 --> 01:00:14,800
Speaker 1: amount of this is the technology industry changes quickly. Yes,

1133
01:00:14,920 --> 01:00:17,640
Speaker 1: they have a depression mentality because they went through the depression,

1134
01:00:17,880 --> 01:00:20,680
Speaker 1: got their butts kicked. So having a big mountain of

1135
01:00:20,720 --> 01:00:24,240
Speaker 1: cash as your savior or just sort of savings account,

1136
01:00:24,400 --> 01:00:26,640
Speaker 1: no problem with that at all. And people don't realize that.

1137
01:00:27,320 --> 01:00:30,120
Speaker 1: The young guns out there don't realize if it wasn't

1138
01:00:30,120 --> 01:00:36,680
Speaker 1: from Microsoft putting add into Apple, well, it's served Microsoft's purpose.

1139
01:00:36,720 --> 01:00:39,080
Speaker 1: Because of Apple went belly up, there would have been

1140
01:00:39,280 --> 01:00:43,440
Speaker 1: no other legitimate competing operating system to them, and so

1141
01:00:43,640 --> 01:00:47,160
Speaker 1: they just happened to be that. Steve Jobs came back,

1142
01:00:47,320 --> 01:00:50,920
Speaker 1: cut that deal with Bill and Lo and Behold ended up.

1143
01:00:51,240 --> 01:00:53,240
Speaker 1: He had to talk about having a ten year vision,

1144
01:00:53,520 --> 01:00:58,440
Speaker 1: but how many companies would have that free reign from shareholders.

1145
01:00:58,640 --> 01:01:01,040
Speaker 1: I talked to hedge fund guys who tell me they

1146
01:01:01,040 --> 01:01:05,120
Speaker 1: have clients who email them if they're you know, slightly

1147
01:01:05,160 --> 01:01:09,240
Speaker 1: soft for a week, forget quarterly, forgets monthly. There you know,

1148
01:01:09,280 --> 01:01:10,840
Speaker 1: the markets up and down for a week and they're

1149
01:01:10,880 --> 01:01:14,320
Speaker 1: not making money that week, and they get shareholders saying, hey, half,

1150
01:01:14,320 --> 01:01:16,160
Speaker 1: some of you guys aren't making me any money this week.

1151
01:01:16,200 --> 01:01:20,680
Speaker 1: That's right. We've got so many incredibly smart, aggressive, competitive

1152
01:01:20,680 --> 01:01:25,600
Speaker 1: people focused on a business in which unfortunately corporate investments

1153
01:01:25,680 --> 01:01:27,919
Speaker 1: like that and investments in R and D can't pay

1154
01:01:27,920 --> 01:01:29,880
Speaker 1: off in a week. Sometimes you do have to make

1155
01:01:29,920 --> 01:01:32,280
Speaker 1: a five to ten year bet. And we just need

1156
01:01:32,280 --> 01:01:34,320
Speaker 1: as an economy to figure out how to get balance

1157
01:01:34,400 --> 01:01:37,680
Speaker 1: back in the system, to have good profit margins, not

1158
01:01:38,240 --> 01:01:43,440
Speaker 1: record profit margins, and good salaries, not the lowest possible salaries.

1159
01:01:43,480 --> 01:01:46,280
Speaker 1: Otherwise we're gonna hollow out the economy, and that's a

1160
01:01:46,320 --> 01:01:49,040
Speaker 1: real problem. I know we only have you for a

1161
01:01:49,200 --> 01:01:52,560
Speaker 1: fineite amount of time, So let me ask you some

1162
01:01:52,680 --> 01:01:55,720
Speaker 1: of my and ever increasingly finite amount of time. Let

1163
01:01:55,720 --> 01:01:59,120
Speaker 1: me ask you, um, my last few questions, some of

1164
01:01:59,160 --> 01:02:01,800
Speaker 1: which I ask all of our guests. What do people

1165
01:02:02,240 --> 01:02:04,800
Speaker 1: not know about Henry Blodgett that you would want them

1166
01:02:04,840 --> 01:02:09,240
Speaker 1: to know? I think at this point everyone knows more

1167
01:02:09,320 --> 01:02:12,040
Speaker 1: than they want to know about Henry Blodgett. But it's

1168
01:02:12,200 --> 01:02:16,200
Speaker 1: wonderful to be here, and thank you for the question, okay, um,

1169
01:02:16,320 --> 01:02:19,440
Speaker 1: And and so now for our our standard big three questions,

1170
01:02:20,080 --> 01:02:23,400
Speaker 1: what has changed since you joined the industry? And is

1171
01:02:23,440 --> 01:02:25,800
Speaker 1: this a good thing or a bad thing since I

1172
01:02:25,880 --> 01:02:28,120
Speaker 1: joined the finance industry or are they well I'm now

1173
01:02:29,320 --> 01:02:31,680
Speaker 1: part of what has changed over the past twenty years

1174
01:02:31,680 --> 01:02:36,880
Speaker 1: in finance. The industry has just gotten unbelievably professionalized every

1175
01:02:36,960 --> 01:02:39,280
Speaker 1: step of the way. But just before I was an analyst,

1176
01:02:39,280 --> 01:02:42,480
Speaker 1: companies used to send out their earnings by facts. It

1177
01:02:42,480 --> 01:02:45,400
Speaker 1: wouldn't even hit a wire would go out of the facts,

1178
01:02:45,720 --> 01:02:48,440
Speaker 1: and maybe the analysts would call that night. There wasn't

1179
01:02:48,480 --> 01:02:51,680
Speaker 1: a call where everyone gets on and listens and all

1180
01:02:51,680 --> 01:02:55,400
Speaker 1: that stuff. To now we have earnings distributed, you've got

1181
01:02:55,400 --> 01:02:58,960
Speaker 1: regg f D, you've got these closed conference call. Everything

1182
01:02:58,960 --> 01:03:02,080
Speaker 1: else has just gotten so professionalized, and so I think

1183
01:03:02,120 --> 01:03:04,960
Speaker 1: ironically that has eliminated some of the opportunity that was

1184
01:03:05,000 --> 01:03:08,560
Speaker 1: there for some of the smarter asset managers back twenty

1185
01:03:08,640 --> 01:03:11,440
Speaker 1: years ago has now been effectively arbitraged away. Because when

1186
01:03:11,440 --> 01:03:14,240
Speaker 1: you've got to David Einhorn's competing with each other, they're

1187
01:03:14,240 --> 01:03:17,000
Speaker 1: both incredibly brilliant and see everything, there's not a lot

1188
01:03:17,000 --> 01:03:20,440
Speaker 1: of opportunity left, especially for somebody looking in from the outside,

1189
01:03:20,440 --> 01:03:23,360
Speaker 1: trying to trade from home. So then let me ask

1190
01:03:23,400 --> 01:03:26,880
Speaker 1: you the follow up question, which is what major shifts

1191
01:03:26,920 --> 01:03:29,640
Speaker 1: do you see coming up in the future, both in

1192
01:03:29,800 --> 01:03:34,600
Speaker 1: finance and in media. In finance, I think the recognition

1193
01:03:34,840 --> 01:03:37,480
Speaker 1: that indexing is the best way to go from most

1194
01:03:37,560 --> 01:03:42,080
Speaker 1: individual investors and a lot of corporate entities will gain

1195
01:03:42,440 --> 01:03:46,520
Speaker 1: increasing sway. Ultimately, it's just is it is the smart

1196
01:03:46,600 --> 01:03:49,800
Speaker 1: way to invest uh in media. I think that the

1197
01:03:49,880 --> 01:03:53,800
Speaker 1: big profound change that we're going to see is the

1198
01:03:53,840 --> 01:03:58,360
Speaker 1: current demographic that's described as millennials sixteen or thirty four,

1199
01:03:58,400 --> 01:04:00,880
Speaker 1: depending on how you want to describe it. They spend

1200
01:04:00,960 --> 01:04:05,120
Speaker 1: seven of their media time on digital, on the smartphone,

1201
01:04:05,160 --> 01:04:07,760
Speaker 1: at on computer, and then a little TV on top

1202
01:04:07,760 --> 01:04:11,840
Speaker 1: of that. That is the future in ten to fifteen years.

1203
01:04:11,920 --> 01:04:14,080
Speaker 1: They are the mass market, and those of us who

1204
01:04:14,080 --> 01:04:15,880
Speaker 1: grew up reading the newspaper are going to be on

1205
01:04:15,920 --> 01:04:20,200
Speaker 1: our porches surveying the last few years of sunsets before

1206
01:04:20,200 --> 01:04:22,880
Speaker 1: we leave this earth. Those media will leave the earth,

1207
01:04:22,920 --> 01:04:25,560
Speaker 1: you will have a whole new group of brands uh,

1208
01:04:25,680 --> 01:04:27,920
Speaker 1: some of which I think we're starting to see now.

1209
01:04:28,080 --> 01:04:31,120
Speaker 1: But ultimately, this idea that the millennial generation is going

1210
01:04:31,200 --> 01:04:34,200
Speaker 1: to reach thirty five and suddenly develop a hunger to

1211
01:04:34,200 --> 01:04:36,640
Speaker 1: get a newspaper in the morning is a little bit misguided.

1212
01:04:36,840 --> 01:04:38,959
Speaker 1: I still get the New York Times at home, and

1213
01:04:39,160 --> 01:04:43,000
Speaker 1: the only reason I get the print edition is because

1214
01:04:43,040 --> 01:04:46,320
Speaker 1: of my dog Max. His chore was to go out

1215
01:04:46,360 --> 01:04:50,080
Speaker 1: and get the paper, and since he passed away in February.

1216
01:04:50,200 --> 01:04:53,920
Speaker 1: I haven't had the heart to kill the paper that

1217
01:04:53,560 --> 01:04:56,680
Speaker 1: if that is coming. It's just, you know, I used

1218
01:04:56,680 --> 01:04:59,520
Speaker 1: to have ink stained hands. And then just similar for us,

1219
01:04:59,560 --> 01:05:01,240
Speaker 1: we got to in our family because we were worried

1220
01:05:01,320 --> 01:05:03,680
Speaker 1: that our our kids were brother growing up to be videots.

1221
01:05:03,720 --> 01:05:05,280
Speaker 1: They spend all the time in the screen. We've got

1222
01:05:05,280 --> 01:05:07,919
Speaker 1: to get the paper. And the paper sits in its

1223
01:05:07,960 --> 01:05:10,280
Speaker 1: tube on the front stoop all day and then I

1224
01:05:10,320 --> 01:05:11,720
Speaker 1: come home and pick it up and take it and

1225
01:05:11,760 --> 01:05:13,600
Speaker 1: stick it in the recycling. And it's not that it's

1226
01:05:13,600 --> 01:05:15,720
Speaker 1: not filled with great stuff. It's just that I get

1227
01:05:15,720 --> 01:05:18,040
Speaker 1: it through other means. I get the Wall Street Journal

1228
01:05:18,080 --> 01:05:20,440
Speaker 1: in the office, the Times at home, and very often

1229
01:05:20,640 --> 01:05:23,600
Speaker 1: it just they just end up the same thing. By

1230
01:05:23,640 --> 01:05:26,200
Speaker 1: the way, the Wall Street Journal app for for the

1231
01:05:26,240 --> 01:05:29,600
Speaker 1: iPad is great Times isn't that bad. But the Journal

1232
01:05:29,640 --> 01:05:33,800
Speaker 1: app is fantastic as a digital distribution device. But I

1233
01:05:33,840 --> 01:05:35,800
Speaker 1: still end up doing the bulk of what I do

1234
01:05:36,040 --> 01:05:38,720
Speaker 1: on the computer as opposed to the iPad or the

1235
01:05:38,720 --> 01:05:42,960
Speaker 1: I phone. Last question, everybody gets this, um, what do

1236
01:05:43,000 --> 01:05:47,200
Speaker 1: you know today about investing that you wish you knew

1237
01:05:47,520 --> 01:05:50,160
Speaker 1: when you began? And by the way, you can expand

1238
01:05:50,200 --> 01:05:53,760
Speaker 1: that to investing Wall Street Finance. What do you know

1239
01:05:53,800 --> 01:05:56,360
Speaker 1: about the industry today that you wish you knew way

1240
01:05:56,360 --> 01:06:00,160
Speaker 1: back when? If I had known what I know nowt

1241
01:06:00,640 --> 01:06:05,680
Speaker 1: about the difficulty of picking stocks successfully and beating the market,

1242
01:06:05,800 --> 01:06:07,720
Speaker 1: I would never have been able to do the job

1243
01:06:07,760 --> 01:06:09,800
Speaker 1: that I did in the ES. So in a way,

1244
01:06:09,800 --> 01:06:12,160
Speaker 1: I'm glad because it was a good experience for me.

1245
01:06:12,200 --> 01:06:15,160
Speaker 1: I loved watching the boom, the Internet boom, getting to

1246
01:06:15,200 --> 01:06:18,439
Speaker 1: know all these companies analyzing them. But after I left

1247
01:06:18,440 --> 01:06:20,360
Speaker 1: the industry and I read a lot of the academic

1248
01:06:20,400 --> 01:06:24,800
Speaker 1: research and really understood the arithmetic of active management and

1249
01:06:25,120 --> 01:06:29,320
Speaker 1: understood that, it became clear that unless you are getting

1250
01:06:29,360 --> 01:06:32,960
Speaker 1: paid to manage somebody else's money, that the best way

1251
01:06:32,960 --> 01:06:36,120
Speaker 1: to invest is to invest in index months. And that

1252
01:06:36,280 --> 01:06:40,800
Speaker 1: is it's not an opinion, it is demonstrably the fact.

1253
01:06:41,080 --> 01:06:44,400
Speaker 1: The math is hard to exactly, and so if I

1254
01:06:44,440 --> 01:06:46,240
Speaker 1: had known that, it would have been much more difficult

1255
01:06:46,280 --> 01:06:49,920
Speaker 1: for me to be a stock analyst. Although the primary

1256
01:06:49,920 --> 01:06:53,360
Speaker 1: constituency for most Wall Street stock analysts is helping active

1257
01:06:53,400 --> 01:06:55,920
Speaker 1: managers for trying to pick stocks, so that it's not

1258
01:06:55,960 --> 01:06:57,760
Speaker 1: a knock on anybody that's in that business, it is

1259
01:06:57,800 --> 01:07:02,640
Speaker 1: a wonderful, incredibly intellectually simulating business that's endlessly challenging, and

1260
01:07:02,680 --> 01:07:04,360
Speaker 1: some people do end up beating the market, and there's

1261
01:07:04,360 --> 01:07:06,800
Speaker 1: no reason not to try. But if you're an individual,

1262
01:07:07,120 --> 01:07:09,920
Speaker 1: your odds of finding those few people who are going

1263
01:07:10,000 --> 01:07:13,840
Speaker 1: to beat the market consistently after taxes and fees are

1264
01:07:13,960 --> 01:07:17,160
Speaker 1: so small that it is just simply not worth even trying.

1265
01:07:17,480 --> 01:07:19,919
Speaker 1: And if we look at indexing today, I want to say,

1266
01:07:19,920 --> 01:07:24,200
Speaker 1: it's about fIF of the total assets invested. Sure, Van

1267
01:07:24,240 --> 01:07:29,280
Speaker 1: Goard has three trillion dollars about which are indexes, But

1268
01:07:29,600 --> 01:07:34,160
Speaker 1: overall it's fairly early in the rise of indexing. It's

1269
01:07:34,200 --> 01:07:36,920
Speaker 1: not like, hey, this has already happened. This is still

1270
01:07:36,960 --> 01:07:38,800
Speaker 1: I don't know, second or third inning. Is that a

1271
01:07:38,800 --> 01:07:41,240
Speaker 1: fair Yes? I think so, And everyone said wow, But

1272
01:07:41,320 --> 01:07:43,440
Speaker 1: what if when index has become such a big percentage

1273
01:07:43,480 --> 01:07:46,040
Speaker 1: of the market, then there's that much opportunity, then alpha

1274
01:07:46,040 --> 01:07:48,160
Speaker 1: will be great. When we talk about right, when we

1275
01:07:48,160 --> 01:07:50,760
Speaker 1: get to seventy eight percent, then maybe you can start talking.

1276
01:07:50,760 --> 01:07:52,320
Speaker 1: I don't even think it will get that far. I

1277
01:07:52,320 --> 01:07:55,320
Speaker 1: think once you hit fifty or so percent, and there's

1278
01:07:55,360 --> 01:07:58,520
Speaker 1: nothing magic about that, but once it's half the market

1279
01:07:59,080 --> 01:08:01,960
Speaker 1: Suddenly the lack of opportunity that we've seen in hedge

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Speaker 1: funds and stock pickers and mutual fund managers, suddenly there's

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Speaker 1: that much less of them. The competition gets reduced, and

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Speaker 1: maybe when everybody is quote unquote everybody is indexing, maybe

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Speaker 1: that creates a greater opportunity for when it's of people

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Speaker 1: stockpicking like you and Charlie Ellis said, the competition is

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Speaker 1: so intense, all these guys sort of cancel each other out.

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Speaker 1: Flip that around and say what happens when it's only

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Speaker 1: thirty or stock picking. Hey, maybe the competition is that

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01:08:34,640 --> 01:08:37,800
Speaker 1: much less and the correlations go down a little bit

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Speaker 1: and we see some alpha generation. Right now, it doesn't exist.

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Speaker 1: It's tough. Well, Henry, thank you so much for being

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01:08:45,760 --> 01:08:47,600
Speaker 1: so generous with your time. I know you have to

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01:08:47,640 --> 01:08:51,160
Speaker 1: be somewhere um you've For those of you listening, be

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01:08:51,240 --> 01:08:54,120
Speaker 1: sure and check out I guess if you're listening this

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01:08:54,240 --> 01:08:57,840
Speaker 1: far into it, you probably are are familiar with the

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01:08:57,880 --> 01:09:00,679
Speaker 1: other podcast. You can look up an Inch, Down an Inch,

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01:09:00,880 --> 01:09:03,720
Speaker 1: and and find all the rest of our podcasts on

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01:09:03,760 --> 01:09:07,320
Speaker 1: either Bloomberg dot Com or Apple iTunes. Be sure and

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01:09:07,400 --> 01:09:10,679
Speaker 1: check out my daily column on Bloomberg view dot com

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01:09:10,800 --> 01:09:14,679
Speaker 1: or follow me on Twitter at rid Halts. I want

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01:09:14,680 --> 01:09:17,439
Speaker 1: to thank Um Henry for spending so much time. Barry,

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01:09:17,479 --> 01:09:19,360
Speaker 1: thank you. This is great. You're one of the best

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Speaker 1: financial commentators and smartest guys out there, so it's a

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01:09:22,000 --> 01:09:26,920
Speaker 1: huge pleasure. Keep more, keep going, You're enormously six more.

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01:09:26,920 --> 01:09:29,960
Speaker 1: Sucking up is the line from from a Pretty Woman.

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Speaker 1: You've been listening to Masters in Business on Bloomberg Radio.