WEBVTT - We're Arming The Rebels Of Amazon: Shopify COO 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penl podcast. I'm Paul swing you 0:00:05.360 --> 0:00:07.760 along with my co host Lisa Brahmas. Each day we 0:00:07.880 --> 0:00:10.440 bring you the most noteworthy and useful interviews for you 0:00:10.520 --> 0:00:12.640 and your money, whether at the grocery store or the 0:00:12.640 --> 0:00:15.960 trading floor. Find a Bloomberg Penil podcast on Apple podcast 0:00:16.120 --> 0:00:18.080 or wherever you listen to podcasts, as well as at 0:00:18.079 --> 0:00:21.280 Bloomberg dot com. So Shopify, I've got a stock for 0:00:21.320 --> 0:00:25.360 you Shopify, Lisa. The stock is upcent over the last year. 0:00:25.400 --> 0:00:28.160 These are the good folks that help merchants set up 0:00:28.160 --> 0:00:31.240 and manage their online stores. Stock has done phenomenon well, 0:00:31.280 --> 0:00:34.120 just had some great earnings out on the last couple 0:00:34.159 --> 0:00:37.680 of days. Hardly Finkelstein, chief operating Officer Shopify, joins us 0:00:37.680 --> 0:00:40.159 here on our Bloomberg Interactive Broker studio. Hardly, thanks so 0:00:40.200 --> 0:00:41.600 much for being with it. Usually we chat with you 0:00:41.600 --> 0:00:42.720 on the phone, so it's good to have you in 0:00:42.800 --> 0:00:46.640 studio to be here. What is driving the growth of Shopify. 0:00:46.760 --> 0:00:49.080 I mean when people think online, they just they just 0:00:49.200 --> 0:00:51.680 and they think retail. They just think Amazon putting retail 0:00:51.720 --> 0:00:53.680 out of business. But there are a lot of retailers 0:00:53.840 --> 0:00:56.319 using your technology that are kind of getting it done right. Yeah, 0:00:56.360 --> 0:00:59.440 there's a million merchants, a million stores now on Shopify 0:00:59.640 --> 0:01:02.280 and they old sixty one billion dollars in two thousand nineteen. 0:01:02.480 --> 0:01:04.760 That's up about forty nine percent from the previous year. 0:01:05.240 --> 0:01:08.120 Our revenue for two was approximately one point five billion. 0:01:08.120 --> 0:01:11.520 That's up. So certainly I think people are beginning understand 0:01:11.520 --> 0:01:13.720 what Shopify is and what we are is where the 0:01:13.720 --> 0:01:16.919 world's first retail operating system. And uh, we have stores 0:01:16.920 --> 0:01:18.720 that are starting on shop If they getting really big, 0:01:18.760 --> 0:01:21.400 that's the all Birds, that's the bombas Socks of the world, 0:01:21.400 --> 0:01:24.080 that's the gym Sharks of the world. They're becoming category leaders. 0:01:24.319 --> 0:01:26.800 But also we we also big brands I mentioned kitchen 0:01:26.840 --> 0:01:29.440 Aid and PepsiCo and PNG that are also moving over. 0:01:29.600 --> 0:01:31.920 So they use you, your guys platform as opposed to 0:01:31.959 --> 0:01:33.880 building themselves. Is that kind of the way do you 0:01:33.880 --> 0:01:35.680 think about Yes, some of them built these homegrown stores, 0:01:36.000 --> 0:01:38.199 homegrown stores and decided they don't want to run massive 0:01:38.200 --> 0:01:40.920 engineering teams. In other cases, they're migrating over from the 0:01:41.000 --> 0:01:44.240 large enterprise offerings. So if you look at a chart 0:01:44.319 --> 0:01:47.280 of your stock since the end of two thousand and eighteen, 0:01:47.520 --> 0:01:51.000 it's just con stratospheric, right, I mean, it's just absolutely rocketed, 0:01:51.080 --> 0:01:54.640 and I'm trying to understand how you maintain this sort 0:01:54.680 --> 0:01:57.280 of momentum at a time when there is a lot 0:01:57.320 --> 0:01:59.480 of competition and at a time when there still are 0:01:59.520 --> 0:02:02.160 a lot of questions about the economy. Yeah, So a 0:02:02.160 --> 0:02:04.040 couple of things. First of all, I think when we 0:02:04.080 --> 0:02:06.800 first swent public, which is does in fifteen, Shopify was 0:02:06.880 --> 0:02:11.040 really e commerce provider for merchants and entrepreneurs and small 0:02:11.040 --> 0:02:14.040 businesses in English speaking world. Since then, we've expanded well 0:02:14.080 --> 0:02:17.440 beyond e commerce. We now power physical retail across If 0:02:17.440 --> 0:02:20.040 you walk in any Albert store, you'll see Shopify powering 0:02:20.040 --> 0:02:22.320 the physical locations, and we do that across thousands of 0:02:22.320 --> 0:02:24.680 brick and mortar stores. We have a capital business. We've 0:02:24.720 --> 0:02:27.360 given them more than eight hundred million dollars in cash advances. 0:02:27.480 --> 0:02:30.480 We have a payments business. We're launching a fulfillmance business now. 0:02:30.760 --> 0:02:33.720 And we've also expanded beyond just our core geographies um. 0:02:33.720 --> 0:02:36.520 In fact, we've grown our um the amount of merchants 0:02:36.560 --> 0:02:39.440 on our platform outside English speaking countries from twenty four 0:02:39.520 --> 0:02:43.120 percent last year to this past quarter, and so we're 0:02:43.120 --> 0:02:45.520 seeing a larger TAM and we're doing more for our merchants, 0:02:45.560 --> 0:02:47.200 which is why I sort of refer to us as 0:02:47.240 --> 0:02:50.440 this retail operating system, not just an e commerce provider anymore, 0:02:50.560 --> 0:02:54.400 so you know, as an e commerce provider or expanded larger. 0:02:54.720 --> 0:02:56.480 You guys did not come out of Silicon Valley, did 0:02:56.520 --> 0:02:59.040 you. You You guys are in Ottawa. We are absolutely abel 0:02:59.160 --> 0:03:03.600 like the start up community, the startup vibe in Canada. 0:03:03.960 --> 0:03:06.040 It is audaa Audawa the place to do it? Or 0:03:06.160 --> 0:03:08.480 is it just entrepreneurs kind of all over? Yeah? Actually, 0:03:08.520 --> 0:03:12.799 I think startups in entrepreneurship and technology has become geographically agnostic. 0:03:13.080 --> 0:03:15.000 I actually think it's an advantage to be outside of 0:03:15.040 --> 0:03:17.160 Silicon Valley. I have a lot of piers that run 0:03:17.200 --> 0:03:19.600 companies like like Hours in the Valley and they tell 0:03:19.600 --> 0:03:22.240 me that the average tenure of employees they're super short, 0:03:22.280 --> 0:03:25.120 like eighteen months. We see incredible talent coming out of Canada, 0:03:25.240 --> 0:03:28.000 we see incredible loyalty, and I think there's something to 0:03:28.040 --> 0:03:30.520 be said about being the best place to work in 0:03:30.560 --> 0:03:32.919 any single geography. And I think Shoplay is the best 0:03:32.919 --> 0:03:34.880 place to work in Canada and one of them around 0:03:34.880 --> 0:03:38.080 the world. What about competition, I imagine that Amazon would 0:03:38.120 --> 0:03:40.360 love to get a piece of what you're doing. Yeah, 0:03:40.400 --> 0:03:42.640 So we don't get be with Amazon, our million merchants do. 0:03:42.760 --> 0:03:44.720 And I think what Amazon is doing is they're trying 0:03:44.720 --> 0:03:46.720 to build an empire, and what we're doing is we're 0:03:46.800 --> 0:03:49.200 arming the rebels, and the rebels are winning. So you 0:03:49.240 --> 0:03:52.200 see companies like Nike moving off Amazon because they want 0:03:52.200 --> 0:03:55.400 to have a direct relationship with or in consumers. All Birds, 0:03:55.440 --> 0:03:57.560 for example, if you try to buy All Birds and Amazon, 0:03:57.600 --> 0:03:59.440 you can only find fake all Birds and and and 0:03:59.640 --> 0:04:02.320 Albert has been built on Shopify. So basically the idea 0:04:02.400 --> 0:04:04.520 here is rather than go to Amazon, you're trying to 0:04:04.560 --> 0:04:06.640 give them tools to be able to do it themselves 0:04:06.920 --> 0:04:09.720 and create a platform. How do you offer them the 0:04:09.760 --> 0:04:13.160 same kind of visibility that they may get in an Amazon. Yes. 0:04:13.240 --> 0:04:15.000 So certainly if they're gonna put their products on a 0:04:15.040 --> 0:04:19.040 marketplace like Amazon or eBay, they're going to obviously, uh, 0:04:19.080 --> 0:04:22.000 they're gonna rent their customers to those to those brands. 0:04:22.279 --> 0:04:25.800 We actually created a platform where our merchants are brands 0:04:25.839 --> 0:04:27.760 can actually find their own customers and own them, whether 0:04:27.839 --> 0:04:30.240 through social media or you can buy marketing directly from 0:04:30.240 --> 0:04:33.839 Shopify on things like Google or Facebook or Snapchat or Instagram, 0:04:33.960 --> 0:04:36.440 and so rather than simply giving them, customers are renting 0:04:36.480 --> 0:04:38.440 them the way Amazon does, and eventually they can take 0:04:38.440 --> 0:04:41.080 them back. We actually empower these merchants to create their 0:04:41.120 --> 0:04:44.120 own customer basis and then connect directly with them. Where 0:04:44.120 --> 0:04:47.920 are you guys investing in heavily in SFN shop Life 0:04:47.880 --> 0:04:50.159 Fulfilm Network. We think that is if you sort of 0:04:50.160 --> 0:04:51.920 look at what we've been doing the last couple of years, 0:04:52.320 --> 0:04:54.600 we're taking off all the different challenges that a small 0:04:54.600 --> 0:04:57.120 business or a big business may have. We think fulfillment 0:04:57.200 --> 0:04:59.240 is one of those things people don't want to use, 0:04:59.480 --> 0:05:02.720 uh the party logistics companies because either the requirements and 0:05:02.800 --> 0:05:04.880 moms are way too high, or they put everything in 0:05:04.920 --> 0:05:07.960 the same box with their marketplaces logo on it. What 0:05:08.000 --> 0:05:10.760 we're doing is we're creating this network of third party 0:05:10.800 --> 0:05:14.320 warehouses were aggregating them using technology and software. We bought 0:05:14.320 --> 0:05:16.760 a company in Boston called six Rubber Systems last year 0:05:16.920 --> 0:05:19.040 for about four and fifty million dollars. They're going to 0:05:19.080 --> 0:05:22.320 provide incredible robotic technology to make all warehouses a lot 0:05:22.320 --> 0:05:25.400 more effective, and then we're gonna democratize shop of the 0:05:25.400 --> 0:05:27.359 Fulfilming Network. The way we've done with e commerce. Just 0:05:27.400 --> 0:05:30.120 real quick here, I'm wondering what's the most effective platform 0:05:30.240 --> 0:05:33.040 for advertising that you found. It really depends, I think 0:05:33.080 --> 0:05:34.800 for a lot of these DTC brands, the ones that 0:05:34.839 --> 0:05:38.560 are you know, new director consumer mattress companies or companies 0:05:38.600 --> 0:05:41.279 like that. Honestly, social media seems to be the best one. 0:05:41.400 --> 0:05:43.280 Now that being said, others are are in more of 0:05:43.360 --> 0:05:46.400 these traditional industries. Their TV is actually working really well 0:05:46.440 --> 0:05:49.680 for them. Interesting, Probably real quickly, Elon mess Musk is 0:05:49.720 --> 0:05:53.520 taking advantage of this surging share price to sell some stock. 0:05:53.560 --> 0:05:56.320 Are you guys interested in selling stock? Not at this pine? Okay, 0:05:56.640 --> 0:05:58.640 Harlie fickle ste and thank you so much for being here. 0:05:58.960 --> 0:06:02.360 Charlie Finkelstein, two operating officer of Shopify based in Ottawa, 0:06:02.520 --> 0:06:14.920 joining us here in our interactive broker studio. Well, the 0:06:14.960 --> 0:06:18.119 global travel industry is really at the forefront of feeling 0:06:18.279 --> 0:06:22.840 the brunt of the coronavirus. You know, I'm thinking cruise ships, hotels, casinos, 0:06:23.560 --> 0:06:27.120 really seeing business impacted significantly in the shares of those 0:06:27.160 --> 0:06:29.640 companies reflecting it as well. Our next guest has a 0:06:30.000 --> 0:06:33.200 equally cautious view of those sectors. Tuna A Moobi. He's 0:06:33.240 --> 0:06:37.360 a director and industry research analysts at cf R A Research. 0:06:37.440 --> 0:06:39.720 He joins us on the phone, Thanks so much for 0:06:39.880 --> 0:06:42.880 joining us again. I know you've gone become more cautious, 0:06:42.920 --> 0:06:45.400 downgraded a bunch of stocks. Tell us how you see 0:06:45.520 --> 0:06:48.599 kind of some of these uh, casino companies, cruise lines 0:06:48.640 --> 0:06:51.920 and the like. Good morning, uh Paul, my friend, and 0:06:52.040 --> 0:06:55.280 thanks for having me. Um. So over the past um 0:06:55.480 --> 0:06:58.159 two weeks or so, we have actually taken a more 0:06:58.680 --> 0:07:03.440 dare assessment of a potential impact of the coronavirus on UM, 0:07:03.560 --> 0:07:06.800 you know, the overall tourism and UM, you know, the 0:07:07.360 --> 0:07:12.000 cruise ships, UM, the online travel companies, the casinos. The 0:07:12.120 --> 0:07:15.960 one constant theme has emerged is that, UM, you know, 0:07:16.120 --> 0:07:19.760 while it's very difficult to quantify the overall impact, and 0:07:19.840 --> 0:07:21.960 of course no one really knows the duration of how 0:07:22.000 --> 0:07:24.520 long it's gonna last, but we think that it's starting 0:07:24.560 --> 0:07:27.440 to take a toll right now. And you just heard 0:07:27.440 --> 0:07:31.160 about you know, the higher number of death tolls UM, 0:07:31.320 --> 0:07:34.480 as well as more cases being diagnosed. So my sense is, UM, 0:07:34.880 --> 0:07:38.640 you know, the market may still be underestimating the potential 0:07:38.680 --> 0:07:40.920 impact of this, if you remember, UM, I think it 0:07:40.960 --> 0:07:43.240 seems to be some comfort level that if you compared 0:07:43.320 --> 0:07:46.080 to the um the Stars or the Bola, and while 0:07:46.160 --> 0:07:50.200 those cases were ultimately you know, resolved, limiting its impact, 0:07:50.680 --> 0:07:53.680 what warries us here is really the speed and severity 0:07:53.880 --> 0:07:56.360 of of the of the new cases that are being 0:07:56.400 --> 0:07:58.360 diagnosed on the death toll, which kind of leads us 0:07:58.400 --> 0:08:00.360 to believe that this is gonna come. You need to 0:08:00.400 --> 0:08:02.960 be an overhang as as the year goes on for 0:08:03.160 --> 0:08:05.240 for quite some time. You know, it's so interesting to 0:08:05.320 --> 0:08:08.920 hear you speak, because we speak with economists and investors 0:08:08.960 --> 0:08:11.720 who say they're expecting some sort of V shaped recovery 0:08:11.880 --> 0:08:15.360 in the economy of China and beyond. And I'm wondering 0:08:15.400 --> 0:08:19.240 as you look at MGM basically withdrawing their entire outlook 0:08:19.320 --> 0:08:22.160 for the year, citing the disruption from the coronavirus, the 0:08:22.240 --> 0:08:24.600 fact that they get twenty seven percent of their business 0:08:24.640 --> 0:08:27.560 from Macau UH and are losing and estimated more than 0:08:27.600 --> 0:08:30.840 a million dollars a day based on the current shutdown 0:08:30.920 --> 0:08:34.040 that we're seeing, how can we even be so sure 0:08:34.400 --> 0:08:38.000 that a place like MGM could compensate for this later 0:08:38.120 --> 0:08:41.720 on we can be at the short answer, We're actually 0:08:41.800 --> 0:08:44.640 are taking a more negative view of MBM downgrading to 0:08:44.720 --> 0:08:48.120 itsell ahead of their earnings. Um, you know report last night. 0:08:48.200 --> 0:08:51.640 I think that just confirmed to us, um that you know, 0:08:51.840 --> 0:08:53.720 no one really has a handle of this. So they 0:08:53.840 --> 0:08:57.720 talked about the expanded burn rate about one point five 0:08:57.800 --> 0:09:01.160 million dollars on a daily basis evil, while the casinos 0:09:01.320 --> 0:09:04.760 have been shot down mostly for peril, and that was 0:09:04.840 --> 0:09:07.400 also a thing that we heard from Wind Resources and 0:09:07.480 --> 0:09:11.120 in Las Vegas. So I think you're really starting to see, uh, 0:09:11.200 --> 0:09:13.959 you know, the casinos starting to feel the brunt of this. 0:09:14.160 --> 0:09:17.040 And remember, um, you know, these are you know, in 0:09:17.200 --> 0:09:20.720 an industry that was alreadily already I'm sorry, already massively 0:09:20.760 --> 0:09:25.240 impacted by the Hong Kong protest. So these latest coronavirus 0:09:25.320 --> 0:09:27.679 issue just seems to be adding a saut to to 0:09:27.880 --> 0:09:30.679 injury and really no one how to handle on on 0:09:30.800 --> 0:09:33.120 when this is gonna dissipay. Now, one more thing I'd 0:09:33.160 --> 0:09:35.720 add is that even when the situation is resolved, typically 0:09:36.000 --> 0:09:40.000 from a historical perspective, we usually see several months before 0:09:40.080 --> 0:09:43.679 things can get any semblance of normalization, which is really 0:09:43.720 --> 0:09:47.000 why we think this twenty um at least the first 0:09:47.040 --> 0:09:50.120 half certainly is gonna need much more caution to know 0:09:50.520 --> 0:09:55.240 this is definitely specific to the casino industry the travel industries. 0:09:55.920 --> 0:09:58.600 Is there, though, a broader brush that we could paint 0:09:58.800 --> 0:10:02.520 in terms of the potential longer term impact given your 0:10:02.559 --> 0:10:06.760 experience examining the corporate balance sheets of these companies as 0:10:06.800 --> 0:10:10.640 well as the likes of Amazon and Netflix. Well, you 0:10:10.720 --> 0:10:15.160 know one thing that I'd say that China overall, um, 0:10:15.640 --> 0:10:17.600 you know, most of these companies you talk about, Amazon 0:10:17.640 --> 0:10:21.800 and Netflix have a relatively limited direct exposure in China 0:10:21.920 --> 0:10:25.240 poly due to the regulatory um environment now. But I 0:10:25.360 --> 0:10:28.319 think the UM what I see is some type of 0:10:28.600 --> 0:10:33.440 uh uh you know, um kind of tangential fallout from 0:10:33.480 --> 0:10:37.920 this geopolitical situation. UM. A lot of these companies, even 0:10:38.040 --> 0:10:41.160 when they are not directly operating in China, have some 0:10:41.400 --> 0:10:46.160 type of strategic partnership. That's true certainly for online travel companies, 0:10:46.200 --> 0:10:48.480 and of course casinos have a huge stake in there. 0:10:48.960 --> 0:10:53.640 So every industry is different. China itself has been a major, 0:10:54.360 --> 0:10:59.440 uh you know, kind of driver of global tourism outbound travel, 0:11:00.160 --> 0:11:03.360 and I think what's important to remember is that while um, 0:11:03.720 --> 0:11:06.360 most of the issues right now appeared to be limited 0:11:06.400 --> 0:11:10.200 to China, they could be. In fact, it broader geopolitical 0:11:10.520 --> 0:11:14.240 impact across even the US and other uh you know 0:11:14.559 --> 0:11:17.959 markets like Europe. Of course, that depends on how fast 0:11:18.040 --> 0:11:22.240 those uh cases travel, but overall, while the overall impact 0:11:22.360 --> 0:11:25.120 on GDP growth is the relatively meted at this point, 0:11:25.200 --> 0:11:28.439 I think you could actually uh see that situation get 0:11:28.480 --> 0:11:31.240 out of control pretty fast. So so it's just on 0:11:31.360 --> 0:11:33.319 the cruise lines here. I know, when you talked to 0:11:33.360 --> 0:11:35.640 a lot of people about, you know, why don't you 0:11:36.040 --> 0:11:37.760 go on a cruise, one of the concerns is just 0:11:37.920 --> 0:11:39.959 being you know, stuck with so many people in a 0:11:40.040 --> 0:11:42.679 confined area, and it just seems like, you know, these 0:11:42.760 --> 0:11:45.319 outbreaks of diseases are perhaps more common there. Do you 0:11:45.360 --> 0:11:48.679 think there's longer term risk to kind of just the 0:11:48.720 --> 0:11:52.240 whole market, you know, total market size for the cruising 0:11:52.280 --> 0:11:55.400 industry from this, I think what's interesting that before this 0:11:55.520 --> 0:11:59.320 coronavirus outbreak, um, you know, the cruise industry fundamentals were 0:11:59.360 --> 0:12:01.520 pretty healthy. We're expecting the you know, kind of a 0:12:01.600 --> 0:12:05.200 near record year based on advanced indicators of booking and pricing, 0:12:05.280 --> 0:12:08.240 on board spending. Um, you know, all of those indicators 0:12:08.240 --> 0:12:11.000 seem to be holding up well. Now, Uh it seems 0:12:11.000 --> 0:12:13.520 like all bets are off when you kind of hear 0:12:14.080 --> 0:12:17.280 stories about you know, the diamond prices being quarantined and 0:12:17.480 --> 0:12:21.160 several other ships unable to find landing ports or destinations. 0:12:21.280 --> 0:12:23.679 My sense is that there is a certain amount of 0:12:23.720 --> 0:12:28.480 weariness out there, um among potential cruise passengers in terms 0:12:28.520 --> 0:12:32.360 of booking pending the resolution of this issue. So, um, 0:12:32.480 --> 0:12:35.880 I think you're starting to see the guidance from cruise companies. Uh. 0:12:36.000 --> 0:12:38.199 You know, at risk is actually why we took a 0:12:38.280 --> 0:12:41.600 more negative stance on Royal Caribbean as well as um 0:12:41.800 --> 0:12:45.240 A Norwegian Cruise, both of which we downgraded well obviously 0:12:45.280 --> 0:12:48.440 along on carnivals. So uh, this is something that's gonna 0:12:48.559 --> 0:12:53.400 over over the industry until any more visibility in terms 0:12:53.480 --> 0:12:56.640 of the potential resolution to not just real quick here 0:12:56.720 --> 0:12:59.439 thirty seconds. Do you buy this argument that Netflix is 0:12:59.440 --> 0:13:01.839 getting a whach boost from this because people are sitting 0:13:01.920 --> 0:13:04.559 home and doing Netflix and chill rather than going out 0:13:04.600 --> 0:13:09.360 potentially getting coronavirus a leita. That's something we've heard before, 0:13:09.480 --> 0:13:12.679 but I'd say a little bit far fetched at this point. 0:13:13.240 --> 0:13:15.920 It's really hard to kind of connect those dots. That 0:13:16.040 --> 0:13:18.880 being said. I mean, I can understand why, you know, 0:13:19.040 --> 0:13:22.520 maybe isolated cases that could be true, but hard to 0:13:22.600 --> 0:13:25.120 generalize here do you know, Moby, thank you so much 0:13:25.160 --> 0:13:27.839 to know MOBI director and industry analysts. It's c f 0:13:27.960 --> 0:13:29.840 R A Research and joining us on the phone from 0:13:29.880 --> 0:13:31.679 New Jersey, I love that I write a bunch of 0:13:31.720 --> 0:13:34.599 stories about how Netflix. You know, we talk about the 0:13:34.720 --> 0:13:37.760 negative impact of the coronavirus, but there are companies benefiting 0:13:37.800 --> 0:13:39.560 because people are staying home and they've got to do something, 0:13:39.640 --> 0:13:54.880 so they might as well watch movies. On Monday, the 0:13:54.920 --> 0:13:57.959 Department of Justice and anced charges against four members of 0:13:58.040 --> 0:14:03.160 China's People's Liberation Army hack of Equifax, and this was 0:14:03.280 --> 0:14:06.000 something that exposed millions of Americans and their private data. 0:14:06.520 --> 0:14:11.040 It raises questions. Putting aside this particular case, it raises 0:14:11.120 --> 0:14:14.120 questions about just how well we are able to detect 0:14:14.720 --> 0:14:19.040 the attacks that our data is exposed to every single day. 0:14:19.120 --> 0:14:22.080 Joining us here in studio, Steve Wagner, Global Managing Director 0:14:22.080 --> 0:14:25.440 of Decision Analytics four experience. Uh, Steve, so glad to 0:14:25.520 --> 0:14:27.720 have you. I want to start with that, where are 0:14:27.840 --> 0:14:31.080 we when it comes to detection when it comes to 0:14:31.120 --> 0:14:35.400 these attacks? Sure? Well, the particular angle that we tend 0:14:35.440 --> 0:14:38.480 to come at this from in my business is is 0:14:38.800 --> 0:14:43.840 really fraud and identity um within commercial transactions? So a 0:14:43.920 --> 0:14:46.400 lot of ways you can answer your question. We're focused 0:14:46.440 --> 0:14:50.840 on that particular angle UM I think when we think 0:14:50.880 --> 0:14:53.840 about it, and we just released a study that we've 0:14:53.880 --> 0:14:58.360 done a six hundred six thousand, five hundred consumers and 0:14:58.920 --> 0:15:01.440 six fifty bi no. This is in thirteen countries around 0:15:01.440 --> 0:15:04.160 the world, and we've been looking at this question of 0:15:04.680 --> 0:15:08.080 how businesses should sort of say, shape their understanding, how 0:15:08.120 --> 0:15:10.560 do they react, what do they do? So the big 0:15:10.960 --> 0:15:15.120 issue is businesses faced with those kind of security threats 0:15:15.640 --> 0:15:19.480 instinctively sometimes will just clamp down, right, I you know, 0:15:19.560 --> 0:15:21.000 the best thing for me to do is to not 0:15:21.440 --> 0:15:24.520 be involved digitally with anybody. Of course, that doesn't really 0:15:24.560 --> 0:15:28.400 allow you to do business very much. So the business persons, Yeah, 0:15:28.440 --> 0:15:30.320 the business person really has to think through what's the 0:15:30.440 --> 0:15:31.800 right way to do that, what's the right way to 0:15:31.880 --> 0:15:35.080 make commerce work? So what our business people are generally 0:15:35.200 --> 0:15:38.800 thinking about is how do I create an extraordinary digital 0:15:38.880 --> 0:15:42.040 experience for my consumers? That's what they want to do, right. 0:15:42.240 --> 0:15:46.600 What we found in this particular study was that of 0:15:46.680 --> 0:15:49.960 businesses believe that they're actually doing a good job of 0:15:50.000 --> 0:15:54.960 identifying who's coming to them, um Electronically, fifty of consumers 0:15:55.400 --> 0:15:58.360 believe that the business is actually understand who they are, 0:15:59.440 --> 0:16:03.040 which is obviously a significant mismatch. So do you think 0:16:03.080 --> 0:16:06.200 the businesses that think the businesses think they're doing a 0:16:06.280 --> 0:16:09.320 good good job identifying who their customers are? Is that 0:16:10.560 --> 0:16:12.840 is that kind of false sense of security there? Do 0:16:12.920 --> 0:16:16.400 you think that that is a really valid number? Well? What, well, 0:16:16.400 --> 0:16:18.200 I think the numbers valid in the study, but what 0:16:18.360 --> 0:16:20.240 they're what you have to get to in order to 0:16:20.360 --> 0:16:23.840 understand that mismatch is the way businesses are looking at 0:16:23.880 --> 0:16:26.600 it today versus the way consumers are looking at it. 0:16:26.920 --> 0:16:29.040 So the way when you when you talk to a consumer, 0:16:29.080 --> 0:16:31.240 what do they care about first and foremost in the 0:16:31.360 --> 0:16:35.120 digital interactions, they care about security. So actually, when you 0:16:35.200 --> 0:16:38.560 talk to a consumer your business, you're dealing with them 0:16:38.640 --> 0:16:42.840 online in disha of security. Make them feel better, make 0:16:42.880 --> 0:16:45.520 them happier to interact with you. A business. On the 0:16:45.600 --> 0:16:48.400 other hand, when you rank their priorities, number one in 0:16:48.480 --> 0:16:53.040 their priority list is uh creating an experience that is 0:16:53.320 --> 0:16:56.120 targeted to that individual, right, So in other words, they'll 0:16:56.120 --> 0:16:58.280 look at it, they'll say, yeah, I understand. I know 0:16:58.360 --> 0:17:00.840 who Paul is. I've seen them before. Um, that's all 0:17:00.880 --> 0:17:02.480 I need to know. Now. The real question is whether 0:17:02.560 --> 0:17:04.480 or not the things I say to Paul and what 0:17:04.600 --> 0:17:07.080 I do with Paul is really on target or not. 0:17:07.880 --> 0:17:10.200 And the consumers just saying, hey, look, actually, when you 0:17:10.280 --> 0:17:12.879 asked me for passwords and you asked me, you know, 0:17:12.960 --> 0:17:15.960 put me into a credential environment. That's what I'm willing 0:17:16.040 --> 0:17:18.680 to share. So, you know, but this goes really to 0:17:18.760 --> 0:17:21.159 the heart of do you know who you're dealing with? 0:17:21.640 --> 0:17:27.080 Do you know what the incoming attention you're getting really 0:17:27.320 --> 0:17:30.080 is about. According to the same study you you talked about, 0:17:30.080 --> 0:17:33.320 how fraud continues to increase, with fifty seven percent of 0:17:33.359 --> 0:17:35.960 businesses citing an increase in the past twelve months. And 0:17:36.040 --> 0:17:38.200 I just wonder how much this is an increase in 0:17:38.280 --> 0:17:41.080 the ability to detect some of these and how much 0:17:41.160 --> 0:17:44.560 is an increase in attacks or is it both? Yeah, 0:17:44.640 --> 0:17:46.800 So I think there's an opportunity in the market right 0:17:46.840 --> 0:17:50.359 now because I think what we've identified this mismatch between 0:17:50.400 --> 0:17:54.040 how consumers feel and where businesses are. Businesses also believe 0:17:54.600 --> 0:17:57.240 that if they really understand who the consumer is, fraud 0:17:57.280 --> 0:18:00.200 will go down so sort of it's clear in the 0:18:00.280 --> 0:18:03.760 study that businesses aren't quite getting it right yet. So 0:18:04.040 --> 0:18:08.200 what businesses need to do is UM is take more 0:18:08.240 --> 0:18:11.639 advantage of the data and the analytics that are available 0:18:11.760 --> 0:18:14.680 within these online digital environments. So right now, I don't 0:18:14.680 --> 0:18:16.959 think they do that enough. They tend to say, all right, 0:18:17.000 --> 0:18:19.720 I've gotten passwords for this individual, I know their name, 0:18:19.760 --> 0:18:22.280 I know if you I know them. But actually there's 0:18:22.359 --> 0:18:26.760 a quite a bit more UM available, and in particular, 0:18:27.119 --> 0:18:31.919 there's there are quite a few individual threat modality fraud 0:18:32.040 --> 0:18:35.000 tools that you can use. And the question is are 0:18:35.080 --> 0:18:38.960 these being knitted together into a comprehensive way or our 0:18:39.000 --> 0:18:41.679 business is just employing Oh, I use I use device, 0:18:41.800 --> 0:18:46.200 I d oh, I use biometric behavioral biometrics, I use this, 0:18:46.880 --> 0:18:49.560 when in fact, what you really need to win today 0:18:50.000 --> 0:18:53.639 is you need a comprehensive capability that incorporates sort of 0:18:53.800 --> 0:18:56.879 all of the different tools that are available, layers that 0:18:57.160 --> 0:19:01.360 with UM analytics so that you can really instruct strong defenses. 0:19:01.440 --> 0:19:03.640 Steve Wagner, thanks so much for joining us. Really fascinating 0:19:03.720 --> 0:19:05.639 that discussion is more and more of our time is 0:19:05.680 --> 0:19:08.920 spent online. Uh, you have to balance the does the 0:19:09.440 --> 0:19:11.680 business know me and are they protecting my data? And 0:19:11.720 --> 0:19:14.080 all those times. Such an interesting concept that, you know, 0:19:14.240 --> 0:19:17.560 there's one thing about having artificial intelligence detecting all of 0:19:17.640 --> 0:19:20.160 the incoming threats. It's another thing just know who you're 0:19:20.200 --> 0:19:22.320 dealing with at any given time and how do you 0:19:22.400 --> 0:19:25.040 do that well, and that sort of dual approach to 0:19:25.200 --> 0:19:27.520 trying to stave off some of the attacks that are 0:19:27.560 --> 0:19:29.800 seeming that seemed to be increasing for every business that 0:19:29.880 --> 0:19:33.120 does that does that operates in the online world, which 0:19:33.160 --> 0:19:36.879 is everyone everyone. Steve Wagener, Global Managing Director, Experience Digions 0:19:37.080 --> 0:19:41.199 Decision Analytics, based in Orange County, California, but joining us 0:19:41.200 --> 0:19:56.760 here in our Bloomberg Interactor broker Studio Tesla really in 0:19:56.800 --> 0:20:00.360 the front and focus today which shares up one point 0:20:00.440 --> 0:20:03.200 six percent. This is amazing because ahead of the open 0:20:03.320 --> 0:20:06.000 we saw shares down as much as seven point two 0:20:06.080 --> 0:20:08.680 per cent. And this comes after a filing showing that 0:20:08.760 --> 0:20:12.119 they planned a two billion dollar offering of common stock 0:20:12.200 --> 0:20:14.200 taking advantage of the rally and the share price that 0:20:14.280 --> 0:20:19.639 we've seen that's been absolutely astronomical. I'm trying to understand 0:20:20.080 --> 0:20:22.480 a why people don't seem to care that they're going 0:20:22.520 --> 0:20:26.280 to be diluted, very very marginally. But typically this is 0:20:26.359 --> 0:20:30.760 something that that matters, uh, and be why then Tesla 0:20:30.840 --> 0:20:33.320 didn't raise more? Kevin Tynan joining us here in our 0:20:33.320 --> 0:20:36.920 interactive broker studios Kevin Tyne and Senior Auto's analyst for 0:20:37.040 --> 0:20:40.760 Bloomberg Intelligence. Kevin, let's just first talk about the response. 0:20:40.880 --> 0:20:44.280 Why are shares up today? Um? Well, because I think 0:20:44.359 --> 0:20:48.720 the idea of adding uh capital of the balance she 0:20:49.119 --> 0:20:53.600 wasn't an overhang, right. I think that the investors believe 0:20:53.760 --> 0:20:56.840 that they are. He said this in the middle of 0:20:57.600 --> 0:20:59.840 they're going to be profitable from here forward. They're going 0:20:59.880 --> 0:21:03.159 to fund themselves from here forward. So I think that 0:21:03.480 --> 0:21:06.639 that removed the bear case or that bear argument at 0:21:06.720 --> 0:21:10.240 that time. Uh So, needing a little bit of capital here, 0:21:10.320 --> 0:21:12.600 it's it's it's not that big a deal to sort 0:21:12.600 --> 0:21:15.800 of reverse, especially when you think of the circumstances, right, 0:21:15.840 --> 0:21:18.680 it was it's a no brainer considering the way the 0:21:18.760 --> 0:21:21.160 stock is run and and the amount of it's it's 0:21:21.280 --> 0:21:23.200 absolutely the right thing to do. And to your point, 0:21:23.240 --> 0:21:26.560