Speaker 1: From the heart of We're Innovation of Money and Power
Speaker 1: cal in Silicon Valley, NBR. This is Bloomberg Technology with
Speaker 1: Caroline Hyde and Ed Ludlow. I'm Caroline Hyde of Bloomberg's
Speaker 1: world headquarters in New York, and I'med Ludlow in San Francisco.
Speaker 1: This is Bloomberg Technology coming up a conversation with Art
Speaker 1: Invests CEO Kathy Wood from the banking crisis to crypto
Speaker 1: and beyond. Will discuss it all, and we'll take a
Speaker 1: look at the health of startups amid the crisis. We're
Speaker 1: joined by the CEO of Pilots, the tech startup accountant
Speaker 1: doing the books of Silicon Valley, and we'll get the
Speaker 1: outlook for the gaming industry this year. Unity CEO John
Speaker 1: Ricatello joining us for an exclusive conversation on his findings.
Speaker 1: We of course are going getting now to a key
Speaker 1: conversation with Kathy Wood, and at that note, we do
Speaker 1: welcome in our TV as well as our radio audiences
Speaker 1: worldwide for the conversation with the Arc Invests CEO and
Speaker 1: CIO Cathy Wood. We've been discussing, of course, bank failures. Kathy,
Speaker 1: We've been talking about a confidence crisis and you have
Speaker 1: said that FED policy J. Powell was a primary culpit
Speaker 1: the pace really of rate hikes from such a low base.
Speaker 1: But for you, is the risk of a systemic credit
Speaker 1: event still key? Has that been avoided? Well, I think
Speaker 1: they're addressing the liquidity issue, but not really the stallvency
Speaker 1: issue from our point of view. A couple of things
Speaker 1: have happened here that have never happened really in history,
Speaker 1: and so the banks didn't expect it. The first was
Speaker 1: interest rates up nineteenfold in less than a year. Never
Speaker 1: happened under Vulker, which it was twofold ten to twenty percent.
Speaker 1: And the low base does matter. Many people dismissed it, saying, oh,
Speaker 1: just such a low base. No expectations were low base.
Speaker 1: So that the first we've never seen that magnitude of
Speaker 1: an earthquake, I would say. Then the second thing that
Speaker 1: no one expected, again because it hasn't happened in such
Speaker 1: a long time, was deposits leaving the system. For Silicon
Speaker 1: Valley Bank, it was venture capital facing a funding drought,
Speaker 1: and so they had to draw down their deposits. But
Speaker 1: then for others, we've got money market funds attracting paying
Speaker 1: much higher than deposits attracting flows, so that combination was lethal.
Speaker 1: And so now they have the backstop in now what
Speaker 1: do we have. We have them they're going to be
Speaker 1: paying up if they if they're depending on the facility,
Speaker 1: they'll pay roughly four point three seven percent right now?
Speaker 1: Is that rate ois plus ten And that's much higher
Speaker 1: than many of them have been paying for deposits number one,
Speaker 1: while in the case of Silicon Valley Bank, their average
Speaker 1: held to maturity security on the asset side of their
Speaker 1: balance sheet was only one point six. So they're going
Speaker 1: to see net interest losses now. Instead of having marked
Speaker 1: market hit equity, these losses are going to hit earnings. Kathy,
Speaker 1: that's the cause. Let's go to the effect. Since the
Speaker 1: collapse of Silicon Valley Bank, the market has changed its
Speaker 1: FED expectations for a less hawkish or a more dubbish FED.
Speaker 1: You cite the FED as the cause. How nimble arc being,
Speaker 1: how much are you recalculating your view going forward? Well,
Speaker 1: as we said before COVID, as we were descending into that,
Speaker 1: and we are saying, now, innovation solves problems. And you
Speaker 1: showed a few charts at the beginning that suggests that
Speaker 1: some of the innovators out there are solving problems. I mean,
Speaker 1: I think the most dramatic example of it to us
Speaker 1: was the behavior of bitcoin last week. It absolutely took off.
Speaker 1: It was a flight to safety vehicle, and so it
Speaker 1: is really proof of concept that innovation solves problems. There
Speaker 1: are in bitcoin fully decentralized, fully transparent, auditable which is
Speaker 1: addressing all of the banking's problems right now, and so
Speaker 1: a flight to safety a little bit of an insurance policy.
Speaker 1: There's no central point of failure in bitcoin. Caroline Arc
Speaker 1: has twenty thirty calls on bitcoin. The most bullish case
Speaker 1: around one point five million on bitcoin, the most bearish
Speaker 1: around two hundred and fifty thousand on bitcoin. Somewhere in
Speaker 1: the middle we have around six hundred and eighty two thousand,
Speaker 1: two hundred. That is this sort of base case there
Speaker 1: interesting at a time when no one is making that
Speaker 1: kind of long term projection. Yeah, and Kathy, we know
Speaker 1: you're a long term investor with long term calls, But
Speaker 1: what on earth gets us to that bull case of
Speaker 1: almost one and a half million dollars per bitcoin? If
Speaker 1: a bank crisis doesn't oh well, one of the things
Speaker 1: that happens in a crisis is a liquidity drives up,
Speaker 1: so that tends to hurt assets, and the fact that
Speaker 1: bitcoin moved in a very different way from the equity
Speaker 1: markets in particular was quite instructive. You'll find the building
Speaker 1: blocks of those price targets in our Big Ideas twenty
Speaker 1: twenty three. So our Big Ideas twenty twenty three and
Speaker 1: there for the base case, I would suggest quite conservative.
Speaker 1: We've dialed some of them down since last year. I
Speaker 1: know that corporate treasuries pulled away from bitcoin because because
Speaker 1: the regulators were pulling them away from from bitcoin on
Speaker 1: their balance sheet, so we've pulled back there. But we
Speaker 1: do believe that the behavior of the price through this
Speaker 1: crisis is going to attract more institutions. For example, we've
Speaker 1: done a report targeting institutional investors and an the allocation
Speaker 1: that they should make if they if they care about
Speaker 1: this new asset class diversifying their portfolios, and I believe
Speaker 1: it's somewhere between two and a half and six and
Speaker 1: a half percent, so not crazy. These are the sorts
Speaker 1: of allocations they would have made to emerging new categories
Speaker 1: of assets like real estate in the seventies, emerging markets
Speaker 1: and small cap in the eighties and nineties, and Kathy,
Speaker 1: I mean, let's discussed some of the ways that Kathy
Speaker 1: and Ark have invested and got exposure to crypto. Of course,
Speaker 1: there's the companies such as coin Basto. There's also GBTC.
Speaker 1: The gray scale bitcoin trust and regulation is in the
Speaker 1: eye of the storm there as well. Ed. I mean
Speaker 1: to talk us through what the SEC seems from pushing
Speaker 1: us towards. Yeah, and it calculated an interesting point. They're
Speaker 1: right about institution investors, Kathy, if I remember correctly, back
Speaker 1: in twenty twenty one, a big part of your thesis
Speaker 1: on the run up in bitcoin was that more US
Speaker 1: corporates would add it to their balance sheet in place
Speaker 1: of cash. That doesn't appear to have happened to the
Speaker 1: level that you'd hope. Is that because the US is
Speaker 1: just not a regulatory friendly environment for this to happen. Yes,
Speaker 1: you know, in the beginning of the crisis, it seemed
Speaker 1: like regulators wanted to blame crypto instead of the significant
Speaker 1: rise in interest rates and the deposit outflosed. Now we're
Speaker 1: seeing it as a solution to the problem, but the
Speaker 1: regulator are still are still reticent. Something interesting happened today,
Speaker 1: or maybe it was yesterday. Governor DeSantis basically said that
Speaker 1: he was going too. I don't know if you said
Speaker 1: this exactly, but the conclusion of his saying we're going
Speaker 1: to set Florida apart from the rest of the nation
Speaker 1: was this ability to touch companies that touch crypto. After all,
Speaker 1: these are cash deposits there FIA deposits, they're not crypto,
Speaker 1: and this can be done on a state by state basis.
Speaker 1: So I think you'll see Florida, like it has done
Speaker 1: in many other ways, distinguish itself from the rest of
Speaker 1: the pack. Kathy Katie Greifeld, my good friend and a
Speaker 1: just terrific reporter on the ECF beats, has been talking
Speaker 1: about gray scale and the opening arguments in the case
Speaker 1: with the SEC. In that discussion in how much are
Speaker 1: you considering adding to your position around trust? How are
Speaker 1: you reading how that grayscale situation is playing out? So
Speaker 1: it seems as though the judge is having some trouble
Speaker 1: understanding how the SEC could prove a bitcoin futures ETF,
Speaker 1: which is swaps based and therefore has counterparty risk, but
Speaker 1: will not allow a spot bitcoin ETF. It really makes
Speaker 1: no sense so they'll either have to basically shut down
Speaker 1: the Bitcoin futures ETF, it seems to me, or allow
Speaker 1: a bitcoin ETF. So I think Grayscale is doing Bitcoin
Speaker 1: a great service and its arguments have been very sound.
Speaker 1: We all saw our audience, Kathy, what they make of
Speaker 1: the behavior in bitcoin. This was what they had to
Speaker 1: say in the terms of how the set class behaves.
Speaker 1: Is it a must have in a banking crisis? Few
Speaker 1: respondents said yes, No, it's too volatile. As the main response, Caroline,
Speaker 1: interest in your take on that. What this all comes
Speaker 1: down to is how we're playing the interest rate environment, right,
Speaker 1: how we're reading the FED, how we're reading across different
Speaker 1: asset classes. Yeah, and to that point, Kathy, you have said,
Speaker 1: just earlier in the conversation, the rate of change of
Speaker 1: the FED, the nineteenfold increase in interest rates that have
Speaker 1: so upended you say, in many ways what's happening in
Speaker 1: the financial markets and financial conditions. But we did see
Speaker 1: signaling from the Fed. They did tell us they were
Speaker 1: going to be hiking rates and hiking rate fast. Why
Speaker 1: then didn't you move your portfolio around more? Well, the
Speaker 1: premise of the question is that we're an asset allocator.
Speaker 1: We are not. We invest exclusively in disruptive innovation, nothing else.
Speaker 1: What we did do was we concentrated our ship strategy
Speaker 1: so AARKK and and our other strategies AARKQ, a ARK
Speaker 1: WARKF and we moved in the flagships case, from fifty
Speaker 1: eight names in February of twenty one when we peaked
Speaker 1: down to twenty seven twenty eight names. We have a
Speaker 1: scoring system, and the scoring system is based on variables
Speaker 1: we believe are very important to innovation, and so we
Speaker 1: concentrated the portfolio. Many people in the traditional asset management world,
Speaker 1: when they go through a risk off period, they will
Speaker 1: diversify their portfolios by moving closer to their benchmarks. What
Speaker 1: they're doing is typically selling our kinds of names, and
Speaker 1: so that is why they're putting extreme pressure on them.
Speaker 1: Will create losses by selling stocks, and that gives us
Speaker 1: a tax loss asset which we have it's over two
Speaker 1: billion dollars right now against which we can take future
Speaker 1: gains and then concentrate towards our highest conviction names. We
Speaker 1: have a paper on our site which shows the benefits
Speaker 1: of this concentration strategy during risk off and diversification strategy
Speaker 1: during risk one, but of course when it's risk off,
Speaker 1: you've underperformed. And actually even on a five year basis,
Speaker 1: I know people will say, look, you're always looking in
Speaker 1: a long period, five year outlook kind of perspective. But
Speaker 1: look back from here over the last five years, and yes,
Speaker 1: it's been a turbulent time, it's been an interest rate
Speaker 1: hike time, but you've underperformed the S and P five hundred.
Speaker 1: What do you say to those that have a shorter
Speaker 1: time frame in terms of investing, those that are looking
Speaker 1: to retire in the next five to ten years, should
Speaker 1: they be with you or do we have to be
Speaker 1: long term? Equity investors that have a much longer runway
Speaker 1: to get have exposure to our investments. So we're the
Speaker 1: closest thing to a venture a strategy, to a venture
Speaker 1: capital fund in the public equity markets, and a venture
Speaker 1: fund has a long term investment horizon. If an investor
Speaker 1: cannot have that long term an investment horizon, then they
Speaker 1: should allocate perhaps a small amount to our strategy, say
Speaker 1: one or two percent, which, by the way, from what
Speaker 1: we can tell, most advisors have us at that one
Speaker 1: to three percent range. Now, why would you put any
Speaker 1: if the risk was the volatility that you see on
Speaker 1: this chart. It is because our companies are going to
Speaker 1: disrupt the traditional world order. And if we're right, then
Speaker 1: the large cap benchmarks and even some of the mid
Speaker 1: caps MidCap funds are going to be disrupted. We will
Speaker 1: be a hedge. Now, you'll, I will say it submit
Speaker 1: to you that last year was the most unusual year
Speaker 1: of my investment career, and not only mine, but bond investors.
Speaker 1: So bond investors had the worst year in two hundred
Speaker 1: and some odd years. When interest rates go up nineteenfold
Speaker 1: in less than a year, it's going to kill long
Speaker 1: duration assets. Bonds are long duration assets. They've never seen
Speaker 1: a year like that. Arc is a long duration asset.
Speaker 1: But if we're right and these companies are going to
Speaker 1: disrupt the traditional world order, then we want to be
Speaker 1: on the right side of change and the market will
Speaker 1: come our way away from those benchmarks which represent the
Speaker 1: traditional world order, to our strategies for a global TV
Speaker 1: and radio audience was speaking with Kathy Wood, CEO of
Speaker 1: Investment Management. Kathy in June on Stage up summit cited
Speaker 1: retail inventory levels and you told me to if you
Speaker 1: remember that inflation would unravel. Did you get that one wrong? No,
Speaker 1: if you look at if you look at upstream, what's
Speaker 1: going on. Commodity prices are coming down quite dramatically, some
Speaker 1: by seventy eighty percent. And I will also say the
Speaker 1: retail call was very right. I think I think you'll
Speaker 1: agree on that. The discounting, we think is going to
Speaker 1: continue to work its way through the system from the
Speaker 1: commodity price level to downstream nearer the consumer. And you
Speaker 1: can see this Tesla's cutting prices. Many people say, oh,
Speaker 1: it's because of competition. No, it's because their commodity prices
Speaker 1: are coming down. And Elon's even talking about deflation. And
Speaker 1: the cost associated with innovation is coming down because it
Speaker 1: follows a learning curve. So I think the innovation that
Speaker 1: our companies are delivering are going to be one part
Speaker 1: of the deflation commodity prices another. And I will also
Speaker 1: tell you the yield curve it last the week before
Speaker 1: last was down inverted by as much more than one
Speaker 1: hundred basis points. That also is a deflationary signal, as
Speaker 1: is what's now going on in the banking system. I
Speaker 1: think the banking system is fearing deflation. Well, Kathy to
Speaker 1: that note we've been talking about sort of a de
Speaker 1: facto tightening of financial conditions in the wake of Silicon
Speaker 1: Valley Bank. You move last year to give investors exposure
Speaker 1: to venture funds private firms in that partnership with Titan.
Speaker 1: Has that proved to be bad timing? How impacted has
Speaker 1: that been from SVB? And we've only got a couple
Speaker 1: of minutes left. Sure, well we're fledgedling. Still, it takes
Speaker 1: a long time. We have, as you say, with Titan,
Speaker 1: a social distribution strategy. We have other rappers as well.
Speaker 1: I'm much preferred to start a strategy during tough times.
Speaker 1: And actually now we can be a solution if we
Speaker 1: get inflows people looking for venture for they can get
Speaker 1: into our venture fund for only five hundred dollars. So
Speaker 1: again the democratization of investing and this idea public closest
Speaker 1: to a venture capital fund in the public markets to
Speaker 1: be able to actually do a venture fund at a
Speaker 1: time that the venture community needs us. If you look
Speaker 1: at Silicon Valley Bank, that situation has robbed a lot
Speaker 1: of venture capitalists funding. Has it involved in the US
Speaker 1: of innovation, Kathy, which you think I would say that
Speaker 1: regulations threatened to do that and certainly in the crypto space. Absolutely,
Speaker 1: But I also think that seizing up is not just
Speaker 1: a US phenomenon. It looks like it's more of a
Speaker 1: global phenomenon judging what has just happened in Europe. So
Speaker 1: it's not as much that it is regulation the likes
Speaker 1: of which we're seeing our blockchain technology. Okay, retain US's
Speaker 1: position innovation. Kathy very quickly. Did you have any exposures SVB,
Speaker 1: none whatsoever. Well as our business know and our company's
Speaker 1: very limited exposure, I was so surprised. I just wanted
Speaker 1: to see our little although I just wanted to clarify
Speaker 1: that for our audience. Kathy. I'm sorry to jump in,
Speaker 1: but we got to go. Kathy Wood, CEO of our
Speaker 1: invest We're really grateful for your time here across Bloomberg
Speaker 1: Television and Radio. Thank you. Now, coming up, we stick
Speaker 1: with the crypto discussion as Circle picks France for its
Speaker 1: new European headquarters. All of that. Next, this is Bloomberg
Speaker 1: time for a quick Wall Street Beat, where we take
Speaker 1: a deep dive into the world of Wall Street in
Speaker 1: Global Wall Street. In today Caroline Circle choosing France as
Speaker 1: its new European headquarters. Is interesting in that conversation with
Speaker 1: Caffee Wood, the same ideas that the US might not
Speaker 1: be the most friendly regulatory environment if you're trying to
Speaker 1: foster innovation or a change in the system. Yeah, really interesting,
Speaker 1: almost like a competition to Wall Street, shall we say,
Speaker 1: in this particular beat. But what's interesting the circle was
Speaker 1: as exposure to Silicon Valley Bank was the fact that
Speaker 1: we've got a deepeg of its key stable coin USDC
Speaker 1: for a moment because of that sort of connection of
Speaker 1: decentralized finance to centralized finance in that moment, but notable
Speaker 1: that really London's trying to be the place, UK trying
Speaker 1: to be the place for European regulatory space for crypto,
Speaker 1: but France seems to be winning out. They already wooed
Speaker 1: the likes of Binance previously. I remember five years ago
Speaker 1: when cause main function was to move money between borders
Speaker 1: before the crypto pivot. Welcome back to Bloomberg Technology. I
Speaker 1: made lovelow in San Francisco where it is nine thirty am,
Speaker 1: but over in London four thirty pm where European markets
Speaker 1: are closing. Continue momentum in the equity space to six
Speaker 1: hundred Europe at one point four percent, and continuing to
Speaker 1: see the Euro strengthen against the dollar at one o
Speaker 1: eight ish, the highest level for the Euro against the
Speaker 1: dollar since the first week of February. Like in the
Speaker 1: United States, as Caroline was talking about earlier, the action
Speaker 1: is at the short end of the curve when it
Speaker 1: comes to the bond markets, specifically in eurosenominated bonds. You
Speaker 1: look at the German two year up by around twenty
Speaker 1: three basis points as we kind of pull out of
Speaker 1: the more kind of haven assets, or at least at
Speaker 1: the short end of the curve, the more policy sensitive end.
Speaker 1: That's where the actions at more muted in guilt. You
Speaker 1: look at the UK two year yield, Okay, a little higher,
Speaker 1: but three point two seven percent. We're still kind of
Speaker 1: passing over the fallout from not necessarily what's happening with
Speaker 1: credit SUITEE and ubs, but the backstop being provided by
Speaker 1: central banks and liquidity situation, but also what the ECB
Speaker 1: is going to do going forward. To Caroline, all of
Speaker 1: that of course having repercussions for a sentiment across technology.
Speaker 1: But let's get back to some innovation in and of itself.
Speaker 1: Let's talk open AI of course. Well, actually it temporarily
Speaker 1: shut down it's popular chat GPT service just yesterday and
Speaker 1: it was in the morning after receiving reports of a
Speaker 1: bund then allowed some users to see the titles of
Speaker 1: other users chat histories. A spokesperson told Blingberg actually that
Speaker 1: the bug is an unnamed open source software caused that problem.
Speaker 1: An open AI is still investigating the precise cause. But
Speaker 1: right notable when something like this happens. You go to
Speaker 1: Reddit and you go to Twitter, and there's so many
Speaker 1: people that screen grabs and we're like, I've never asked
Speaker 1: chat GBT that you know, some of the images out
Speaker 1: there astonishing. But it shows like with all the euphoria
Speaker 1: comes risk that if the system breaks down, the user
Speaker 1: base is so big now and in many ways we've
Speaker 1: seen big companies, regulated companies, banks in particular, not wanting
Speaker 1: this sort of third party software, not letting people use
Speaker 1: chatsubt when they're in the workplace because of they're worried
Speaker 1: about vulnerabilities. Let's dig into that in this world of
Speaker 1: innovation or what it means in terms of cyber risks.
Speaker 1: Wendy Whittmoss with US Senior vice president for Unit forty
Speaker 1: two over at Palo Alto Networks. Of course, your bread
Speaker 1: and mutter is thinking about security, but particularly you're looking
Speaker 1: at vulnerabilities when it comes to outsources of your workflow,
Speaker 1: the supply chain into your company. You've just been putting
Speaker 1: out some key reports whenning what are the key findings
Speaker 1: at the moment, Yeah, Banks, Caroline, I think it really
Speaker 1: ties into the story that you're talking about here right
Speaker 1: in terms of technology being disruptive and that can be
Speaker 1: used for good, it can also be used for bad,
Speaker 1: and so I think our report really tells a story
Speaker 1: that we live every day, which is that banks, financial institutions, organizations, schools,
Speaker 1: cities throughout the world, they're all being targeted in particular
Speaker 1: by ransomware actors. And we show is that these cybercriminals
Speaker 1: are becoming even more effective at doing their job. They
Speaker 1: do a great job of understanding what's in an environment
Speaker 1: and which data that they can steal. And stealing is
Speaker 1: a very important concept here because what we're not seeing
Speaker 1: is just a traditional ransomware attack where an organization's data
Speaker 1: is encrypted, but we're seeing much like nation state actors
Speaker 1: have done for years, we're seeing data being stolen and
Speaker 1: ex filtrated from environment and used for extortion, and attackers
Speaker 1: are doing that on a daily basis. They're not just
Speaker 1: threatening it. We're actually seeing up four times every four hours.
Speaker 1: We're seeing more organizations data being posted ed with regularity,
Speaker 1: and the stakes well becoming evidently well high. Yeah, and
Speaker 1: there's a point that I wanted to make on chat
Speaker 1: GPT Wendy, which is that it impacted chat GPT and
Speaker 1: also the premium to GPT plus. While you could see
Speaker 1: the such titles of other uses, you could not actually
Speaker 1: get into the conversation. So I want to be clear
Speaker 1: you couldn't actually kind of access data relevant to other users,
Speaker 1: but it was basically deemed as a bug in the
Speaker 1: open source software. My question to you in the context
Speaker 1: of cybersecurity is are they is this kind of issue
Speaker 1: and after thought as people try to rush these products out,
Speaker 1: they don't think about kind of the base security of
Speaker 1: the software that they're writing, you know. So I think
Speaker 1: that software vulnerabilities across the board are challenging for every
Speaker 1: organization to deal with, and they're only going to become
Speaker 1: more of a problem just due to this scale that
Speaker 1: AI brings to the table. Right, So we're going to
Speaker 1: continue to see these type of vulnerabilities. You know, I
Speaker 1: think one thing that's exciting is that, you know, last
Speaker 1: week was released a national Cybersecurity Strategy, and in that
Speaker 1: we talk about in particular the need to protect expand
Speaker 1: the definition of critical infrastructure, so and the role that
Speaker 1: technology vendors and providers play in that. Right. So we
Speaker 1: see that with these my chain attacks becomes a major issue,
Speaker 1: but we're also seeing a lot more rapid information sharing
Speaker 1: that is becoming incredibly positive. I'm reading over the results
Speaker 1: or your findings in this research, and Caroline, what's so
Speaker 1: interesting to me is the types of businesses found most
Speaker 1: vulnerable are those businesses we entrust with our data on
Speaker 1: a daily basis, and I suppose also when we're thinking
Speaker 1: of keeping our own company protected. I don't know about
Speaker 1: you done countless training exercises about knowing fishing, but smishing
Speaker 1: is a new one. One day that you've been talking
Speaker 1: a lot about what are the ways in which companies
Speaker 1: can protect themselves. Yeah, so, you know, we've talked so
Speaker 1: much about AI write now the technology investments. But I
Speaker 1: think Carolyne, what you're getting at are the human side
Speaker 1: of that. I think one of the most compelling findings
Speaker 1: for us is that we've seen these attacks increased in
Speaker 1: now twenty percent of attacks that we deal with include
Speaker 1: a harassment element, and I would imagine that if we
Speaker 1: talk again in two months, we're going to see that
Speaker 1: number probably double. What I mean by that is attackers
Speaker 1: are specifically going after security, so executives, their families, reaching
Speaker 1: out to them, personally, their staffs, finding any way that
Speaker 1: they can to socially engineered data out of them, and
Speaker 1: that's going to become a continued, incredibly compelling And they're
Speaker 1: also getting super savvy about understanding how businesses work, right,
Speaker 1: So understanding that if I target not only your organization
Speaker 1: maybe has a great security barrier and perimeter, but you
Speaker 1: have business process outsoorders and outsourcers that also have access
Speaker 1: to your most sensitive data. And there are employees in
Speaker 1: those environments that I can target equally effectively that have
Speaker 1: access to your environment. So we're going to continue to
Speaker 1: see that type of activity directed towards employees across the board.
Speaker 1: And so how a company is protecting and assessing the
Speaker 1: vulnerabilities of that right supply chain. Yeah, you know, I
Speaker 1: think one of the biggest keys is the mindset shift.
Speaker 1: You're seeing so many organizations do that and actually win.
Speaker 1: So I think there's really a positive outlook here and
Speaker 1: our report tells that story too, which is that so
Speaker 1: many organizations are effectively defending against these attacks because they
Speaker 1: identify them early, they practice their response, they understand that
Speaker 1: these attacks are going to come. It's simply part of
Speaker 1: hosting a business on the Internet today, and they've got
Speaker 1: great relationships across the board, not only with experts but
Speaker 1: also law enforcement who can really rapidly provide them answers,
Speaker 1: often in the form of decryptors that can render these
Speaker 1: attacks ineffective. It is fascinating, and when you're reading these
Speaker 1: sorts of data reports is basically what the people the
Speaker 1: attackers are trying to set out to do here, right,
Speaker 1: And that's why our audience in particular should care because
Speaker 1: they're going off to finance, yes, they're going off to
Speaker 1: data and telecommunications. And the last one which we have
Speaker 1: to discuss weendy is cryptocurrency. Why are they targeting these
Speaker 1: specific areas? Is it just for financial gain? Well, any
Speaker 1: avenue they have that makes it easier to move money
Speaker 1: is certainly going to be a target. Right. So the
Speaker 1: more that we can work related to sharing information between
Speaker 1: public and private partnerships and stopping the ability of movement
Speaker 1: of cryptocurrency, for example, of disrupting attack or infrastructure. The
Speaker 1: more that we can do that, the more effective we
Speaker 1: are going to be against these attacks. And I think
Speaker 1: we are in a better place now in terms of
Speaker 1: that information sharing and being able to do it in
Speaker 1: a way that starts disrupting attack or infrastructure in really
Speaker 1: starting to stop some of these attacks. All right, Wendy Witmore,
Speaker 1: Senior vice president for Unit forty two palawlto Networks, thank
Speaker 1: you so much. Just a headline crossing the bloomberg on
Speaker 1: credit suites. They've decided to suspend some bonuses for credit
Speaker 1: suite staff that coming from the Swiss themselves. Will continue
Speaker 1: to track that story as a number of I'm sure
Speaker 1: technology industry, bankers and others impacted by that decision will
Speaker 1: bring you the latest report. Now, another story, a rare move.
Speaker 1: Google has suspended pdd's main Chinese shopping app pin Dodo
Speaker 1: from its play store after discovering malware in unsanctioned versions
Speaker 1: of the software. The action could cast a cloud over
Speaker 1: the company at a time when US lawmakers have accused
Speaker 1: Chinese owned apps like TikTok of potentially threatening national security,
Speaker 1: not really impacting ADRs. Shares of PDD up around half
Speaker 1: of a centage point. Yeah, coming up, we're also going
Speaker 1: to talk about the impact of the SVB fallout on startups.
Speaker 1: We're seen to hear CEO of the startup focus accounting
Speaker 1: firm Pilot. That's next, Caroline, And I mean you were
Speaker 1: just talking about Pindodo. Let's just stick on China for
Speaker 1: a moment because we're watching shows of ten Cents, the
Speaker 1: gaming and social media giant seeing Well, remember one hundred
Speaker 1: and sixty billion dollar rallies since October. The next leg, well,
Speaker 1: it's going to hinge on the crucial earnings release that's
Speaker 1: coming this week. Much of ten cents rally has been
Speaker 1: driven by anticipation features, sales streams, and of course I
Speaker 1: believe that Beijing It's promise of supporting the private sector
Speaker 1: and more on the company's earnings when they report tomorrow.
Speaker 1: This is Bloomberg. We continue to track the fallout from
Speaker 1: svb's collapse. What does it mean for the future of
Speaker 1: early and growth stage companies which relied on the bank
Speaker 1: to fill the gap left by bigger players. Less inclined
Speaker 1: to take on that kind of risk. In a not
Speaker 1: out today, our Bloomberg Intelligence team says liquidity contagion from
Speaker 1: lack of access to credit for startups and VC bank
Speaker 1: companies is quote undeniable and the SVB spot will be
Speaker 1: hard to fill. That research from dishagera at BI now
Speaker 1: what seemed is the founder and CEO of Pilots, an
Speaker 1: accounting firm for startups and small businesses which specializes in
Speaker 1: CFO services, bookkeeping, tax prep, etc. Joins me on set
Speaker 1: in San Francisco. A lot of people didn't understand and
Speaker 1: come Monday morning of this week, how SVB played out
Speaker 1: in real terms for running a business. What was the
Speaker 1: experience of your customer base. Well, it was very panicked,
Speaker 1: I can tell you that, and it was panicked on
Speaker 1: two fronts. One was, of course, for our customers that
Speaker 1: banked with SVB, which was about half of our customers.
Speaker 1: They were concerned about the safety of their deposits. But
Speaker 1: the second order thing I think many people have not
Speaker 1: anticipated is the impact this had on our clients being
Speaker 1: able to make payroll. Because if you didn't bank with SVB,
Speaker 1: but your payroll processor did, you had a problem Sunday
Speaker 1: night Monday morning, probably more importantly, I had so many
Speaker 1: phone calls and text messages from VC saying the ADPY
Speaker 1: went through, the ADPI went through, they had accessed SVB,
Speaker 1: but it didn't really mean anything. They were trying to
Speaker 1: make payroll. Where do you come in in that process?
Speaker 1: And it's basically an accountant? Sure, So our phone and
Speaker 1: email inboxes were ringing up the hook the entirety of
Speaker 1: the weekend, Thursday, Friday, all the way through Sunday night.
Speaker 1: Say Hey, what do I need to do here? What
Speaker 1: funds am I actually to be able to access? Which
Speaker 1: ones am I not going to be able to access?
Speaker 1: Do I have to file a claim with the FDIC?
Speaker 1: How do I actually make pyrol? Can I transfer funds?
Speaker 1: Have a personal account so I can pay my employees?
Speaker 1: There are just a lot of panic, a lot of
Speaker 1: uncertainty about tactically how do I make sure my employees
Speaker 1: get paid? You know, Caroline. In the last week or so,
Speaker 1: what's been put in perspective for me at least is
Speaker 1: we talk about startups tech in kind of abstract terms.
Speaker 1: They're businesses run by people with responsibilities. You know, That's
Speaker 1: really come out in the conversations we've had they are
Speaker 1: and that was going to be the collateral damage if
Speaker 1: a rescue of SVB didn't come in for the depositors
Speaker 1: were seen after effects of SVB are that the counterparty
Speaker 1: risks were so large because they banked the same types
Speaker 1: of clients. You are a founder dependent on the same
Speaker 1: types of clients Pilot is servicing tech startups. Did you
Speaker 1: something think, old goodness, I need to diversify my own business.
Speaker 1: I mean, one of the things we always think about
Speaker 1: the mission of Pilot has always been not to do
Speaker 1: accounting for technology companies, as though it's where we specialize.
Speaker 1: It's to help every small business owner out with this problem.
Speaker 1: So we're always thinking about how do we make sure
Speaker 1: our own customer base is robust against these types of shocks. Okay,
Speaker 1: so you haven't suddenly thought I need to broadened to
Speaker 1: make my marketing perhaps more of a just early small
Speaker 1: company SME rather than a VC focused backed sort of
Speaker 1: a company. I would say not urgently. I mean, this
Speaker 1: is always something we're talking about. But we have a
Speaker 1: number of startup customers who continue to grow and thrive,
Speaker 1: and we're excited to continue to serve them. Have you
Speaker 1: won business because of what's happened. Are there any founders
Speaker 1: that basically said, I can't do this, I need your help.
Speaker 1: I think probably what we did do is do a
Speaker 1: good job of helping people navigate the crisis. Now, I'd say,
Speaker 1: unlike another provider, if you have another bank, for example,
Speaker 1: probably lots of new bank accounts were opened as a
Speaker 1: consequence of all the sub excitement. It is not the
Speaker 1: case that lots of new pilot customers showed up at
Speaker 1: the door, though. I think folks appreciated that we kind
Speaker 1: of were a nice hand holding guide throughout the process.
Speaker 1: I was saying, a lot of people have said, Look,
Speaker 1: it isn't actually that easy to go around diversifying who
Speaker 1: you bank with. People want minimums, People want an ability
Speaker 1: to show the lack of risk in your business model.
Speaker 1: And that's WHYSBB was so important to the tech system.
Speaker 1: What are you now seeing. Are people still with ease
Speaker 1: changing banks? Are they able to diversify to ensure that
Speaker 1: treasury management is where they want it to be. Well,
Speaker 1: I think a lot of people are now willing to
Speaker 1: incur a lot more pain here than they were previously,
Speaker 1: which is before all of the SB and B excitement.
Speaker 1: I think no one thought too hard about is my
Speaker 1: bank safe? Is my bank secure? And now I think
Speaker 1: the prevailing sentiment is that folks who were might have
Speaker 1: otherwise taken a more laid back approach here have become
Speaker 1: effectively financial preppers, like they care deeply about making sure. Oh,
Speaker 1: I was shocked by the fact that this was not
Speaker 1: available for a few days. I now need to make
Speaker 1: sure this never happens again. I'll seem great to have
Speaker 1: your insights. Thank you, or seemed to her founder ZEO
Speaker 1: of Pilot. Microsoft tentatively defeated a bid by video gamers
Speaker 1: to block it's planned sixty nine billion dollar acquisition of
Speaker 1: Active Vision Blizzard. A judge tossed the case without prejudice
Speaker 1: last night, calling it wopefully short on detail. To talk
Speaker 1: about what that means and also the future of this
Speaker 1: acquisition as it sits in the gaming industry with John Riccatello,
Speaker 1: CEO of Unity Software, a software solutions provider for games
Speaker 1: running on mobile phones, tablets, PCs, consoles and of course
Speaker 1: AAR and VR. In the first instance, your reaction to
Speaker 1: this Microsoft act Vision deal for you, how does it
Speaker 1: change the landscape? Well, for us who probably doesn't change anything.
Speaker 1: I mean, Microsoft obviously is the maker up one of
Speaker 1: the lead console, the Xbox an Active Vision is one
Speaker 1: of the largest producers of game content. You know, this
Speaker 1: is the game industry who had been an industry of
Speaker 1: pac Man forever. Companies like Active Vision and Electronic Arts
Speaker 1: and take To have been acquiring. Sony and Microsoft have
Speaker 1: been acquiring, and then on the heels of all that,
Speaker 1: what we always see is new startups coming out of
Speaker 1: nowhere creating amazing things. So you know, this has been
Speaker 1: an industry of serial acquisition for decades and are unexpected
Speaker 1: to stop. Microsoft in Xbox is one console platform. Some
Speaker 1: news over the weekend. I hope we can bring it
Speaker 1: up on the screen, Caroline. I've made the jump and
Speaker 1: I've bought a PlayStation five having played on Google's Stardier
Speaker 1: for the last eighteen months. And of course, Caroline, Google
Speaker 1: shut down that platform. So there you go, that's the
Speaker 1: big news in the industry. Sho we make it that.
Speaker 1: I mean, you're meant to be agnostic, and but I
Speaker 1: mean it does seem that I know you're a key
Speaker 1: gamer and John to that point, at the moment, you
Speaker 1: have been thinking about the ways in which you can
Speaker 1: continue to develop. I'm sure you're agnostic. You're going across
Speaker 1: every single platform. Just talk to us about whether the
Speaker 1: hype around AARVR, the worry about people in this economic
Speaker 1: environment perhaps not making a big splurge like Head, particularly
Speaker 1: on a quest for example, is that making we think
Speaker 1: about your platform building. Well, I mean that's very realistic
Speaker 1: that the largest platform in the world today for gaming
Speaker 1: is mobile. That would be Android and iOS. There's north
Speaker 1: of four billion players there. Consoles are also super important,
Speaker 1: and some of the world's best content is made for
Speaker 1: consoles and also for the PC. And these are while
Speaker 1: they're much smaller in terms of users and aggregate, probably
Speaker 1: a couple hundred million users, they're also super important. And
Speaker 1: for someone like me, it's spending the game industry for
Speaker 1: a couple of decades. You know, I love them all,
Speaker 1: so you have to support them all Onlike ed I
Speaker 1: don't pick winners or favorites. Well, I don't pick winners
Speaker 1: or favorites either. I was playing Studia that was shut
Speaker 1: down by by Google in my past. Right now, mobile
Speaker 1: right is where everyone's playing. What I find so interesting
Speaker 1: is you have Netflix trying to move into mobile games.
Speaker 1: You have Apple in the App Store, you have the
Speaker 1: Google Play Store. All of them are also trying to
Speaker 1: track privacy policy changes. Advertising. What's that doing in the
Speaker 1: gaming space right now? Well, if the advertising market, it
Speaker 1: was definitely affected by the privacy changes that Apple implemented
Speaker 1: a couple of years ago, and then it also got
Speaker 1: hit to a degree by the economy. So starting last summer,
Speaker 1: buyers on the advertising side, the demand side, brought their
Speaker 1: spend down and anticipation of the recession like environment we're
Speaker 1: in right now, and that continues to today. It's a
Speaker 1: little depressed, but it's been stable now, I would say
Speaker 1: since the middle of last summer, so continues it be
Speaker 1: a robust market. It's a little depressed from the peaks
Speaker 1: of COVID or immediately post COVID. You have a large
Speaker 1: advertising arm You yourself had to make some tough decisions
Speaker 1: for unity, for the amount of employees you have amid
Speaker 1: these economic environment that we currently see just push us
Speaker 1: towards the hype cycle that we find ourselves. When it
Speaker 1: comes to generative AI, does that end up meaning that
Speaker 1: people look to still invest in your area in that
Speaker 1: way of producing content generative AI? Is that a help
Speaker 1: or hindrance in this environment. Well, so first off, let
Speaker 1: me just sort of bound this a little bit with
Speaker 1: some data. So we're an all time high today for
Speaker 1: the engagement that players have on a global scale, so
Speaker 1: north of four billion, as I mentioned a moment ago,
Speaker 1: and it's even higher than it was in covid era
Speaker 1: when people were living and working and studying at home.
Speaker 1: So the industry is very, very resilient. Yeah, it's actually
Speaker 1: kind of shocking, but it's done that. Well. Now, of
Speaker 1: course everyone's got this notion of a sort of a
Speaker 1: processionary environment. But the point they would make right now
Speaker 1: is the industry really moves on innovation and one of
Speaker 1: the most important innovations of gaming is AI Wow ending
Speaker 1: on Gaming Cara. What a show it's been from Kathy
Speaker 1: Wood to cybersecurity to gaming. An incredible start of the week,
Speaker 1: wonderful conversation. We need to see CEO there, John Ricatello.
Speaker 1: That does it. From this edition of Bloomberg Technology. That's
Speaker 1: to Bloomberg