Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul swing you,
Speaker 1: along with my co host Lisa Brahma wits. Each day
Speaker 1: we bring you the most noteworthy and useful interviews for
Speaker 1: you and your money. Whether at the grocery store or
Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
Speaker 1: podcast or wherever you listen to podcasts, as well as
Speaker 1: at Bloomberg dot com. But we are awaiting a conversation
Speaker 1: with Virgin Atlantic CEO Richard Branson and Social Capital CEO
Speaker 1: Chamas Polly Hapat and he is coming to speak with
Speaker 1: the Bloomberg's Body Queen and Guy Johnson to talk about
Speaker 1: a new venture to take space tourism public. That is,
Speaker 1: a Virgin Galactics effort to bring people to space who
Speaker 1: want to just experiencing it, experience it. How there could
Speaker 1: be an initial public offering and raise equity in it.
Speaker 1: It'll be interesting to see whether there is a big
Speaker 1: profit to be made here, as well as what the
Speaker 1: links will be between the public venture and the private
Speaker 1: in the private endeavor to try to go to space
Speaker 1: and the NASAs type of agents in the government. In
Speaker 1: other words, how much will the US sort of lean
Speaker 1: on private companies or in this case, public companies, to
Speaker 1: influence their decisions with respect to UH with with respected
Speaker 1: decisions with respect to space exploration. Joining us now to
Speaker 1: talk about that, as Christopher Jasper, transport aviation reporter for
Speaker 1: Bloomberg News. Christopher, what are we expecting to hear and
Speaker 1: what have we learned so far about Richard Branson's Virgin
Speaker 1: Galactic space tourism venture going public? UM? Well, it's using
Speaker 1: a somewhat unorthodox method to do this. Rather than going
Speaker 1: down an I p O route, He's going to accomplish
Speaker 1: a listing through a merger with a listed shell company
Speaker 1: in New York UH, which will hand over stake in
Speaker 1: the enlarged group and raise about eight hundred million dollars
Speaker 1: to take the project further. That seems to suggest that
Speaker 1: maybe an I p O might not have been a
Speaker 1: good idea. There's still quite a lot of skepticism out there,
Speaker 1: perhaps about whether UM space tourism really can work. We
Speaker 1: know that he's got about six people signed up, having
Speaker 1: paid eighty million dollars in deposits to travel, but the
Speaker 1: whole plan suggests, by his reckoning, that there may be
Speaker 1: millions of people who would be interested in flying to
Speaker 1: the edge of space if the price can be brought
Speaker 1: down enough, and if you're going to invest in Virgin
Speaker 1: Galactic long term, then that's really about that you're taking.
Speaker 1: Would you want to go to space, Well, I would
Speaker 1: like to go to space, absolutely, But I think people
Speaker 1: need to understand that this isn't a trip to the Moon.
Speaker 1: It's not it's not even a trip into higher Earth
Speaker 1: orbit where you can see the entire planet beneath few.
Speaker 1: This is essentially to the edge of space, where you
Speaker 1: get to see the curvature of the Earth and your
Speaker 1: experience weightlessness for a limited time. But you know you're
Speaker 1: you're you're not sort of going to feel like you're
Speaker 1: in Apollo eleven all the all the International Space Station,
Speaker 1: which perhaps is what people are looking for. Christopher Jasper,
Speaker 1: thank you so much for being with us. Christopher Jasper
Speaker 1: as Transport and aviation reporter for Bloomberg News. We are
Speaker 1: going to hear from Virgin Atlantic CEO himself, Richard Branson,
Speaker 1: as well as Social Capitals CEO. They're going to be
Speaker 1: talking about this joint venture space tourism going public with
Speaker 1: an I p O. Take a listen. We'd like to
Speaker 1: welcome now our Boomberg Radio and TV audience, as billionaire
Speaker 1: Richard Branson's Virgin Galactic is becoming the first ever space
Speaker 1: tourism venture to hit public markets. This after receiving an
Speaker 1: eight hundred million dollar investment from the publicly traded Social Capital.
Speaker 1: We joined now by Richard Branson and Social Capital co
Speaker 1: founder tell us. How are you happy, dear gentlemen, Thank
Speaker 1: you so much for joining. Richard? How did this meeting
Speaker 1: come about? I know that you had been in talks
Speaker 1: with the likes of Saudi Arabia and possibly other players
Speaker 1: as well. You pulled out of those after the death
Speaker 1: of journalists Kahog, for example, and that brought you to
Speaker 1: this meeting. Explain the origins of this investment. Well, when
Speaker 1: we sadly couldn't go ahead with the studies, um, I
Speaker 1: decided that I would found Virgin Galactic to profitability myself
Speaker 1: through through the Virgin group. And then we got a
Speaker 1: call from Shamath who said that he was keen to
Speaker 1: have a look and he went to see our space
Speaker 1: people spent some months looking into it and let why
Speaker 1: didn't you carry on from there? Well, I mean I've
Speaker 1: been an admirer of the business from afar Um and
Speaker 1: then we had a bunch of mutual friends who were
Speaker 1: early customers. Um. So I was always wondering what's really
Speaker 1: under the hood, And when I got to see the business,
Speaker 1: I was floored, quite honestly about what they built and
Speaker 1: the quality of the business that it would become. And
Speaker 1: so it took us nine months, but we got here
Speaker 1: and you were going to be chairman of the board
Speaker 1: with one million dollar personal investment as well. So Richard,
Speaker 1: did you talk with other funds? Did you look for
Speaker 1: other backers in Asia, for example, or in the Middle East? No?
Speaker 1: Um we we um. Yeah, as I said, I mean
Speaker 1: that that we did have the deal from the studies
Speaker 1: that that was not possible um and uh. And you know,
Speaker 1: if we were to actually take this public ourselves, it
Speaker 1: would take a long time. So I think that the
Speaker 1: Chamas approach seemed to work very well for us. Shamas,
Speaker 1: was this the last roll of the dice for you?
Speaker 1: My understanding is that the fund would have had to
Speaker 1: return investment money in September m Richard talked about the
Speaker 1: fact that this has been nine months. In the jest
Speaker 1: station it was it was you were kind of get
Speaker 1: a bit fine, weren't you. I don't think so. Um.
Speaker 1: You know, we've met more than two under companies over
Speaker 1: many many countries over the last two years. Um. It
Speaker 1: did take us nine months to do the diligence required
Speaker 1: to really get under the hood and understand what they've
Speaker 1: built and to feel comfortable across all aspects of the business.
Speaker 1: Could we have done another one, sure, Could we have
Speaker 1: invested in something else, yeah, Um, but I think that
Speaker 1: we found the absolute best company, something that will thrive
Speaker 1: in the public markets and frankly, something that's going to
Speaker 1: capture an enormous amount of consumer interest, giving the average
Speaker 1: person a chance to own a bit of space. And
Speaker 1: I think there's frankly nothing more exciting than that, Richard.
Speaker 1: The average person is going to own a bit of space.
Speaker 1: When is the first flight gonna be? Let's try and
Speaker 1: nail that down. Um. Now that we're a public company,
Speaker 1: I'm gonna have to be very circumspect on what I say. Um, So,
Speaker 1: what's happened. What's happening at the moment is we're moving
Speaker 1: the whole operation to New Mexico and uh, that's where
Speaker 1: the space sport is. We're moving our rockets there, We're
Speaker 1: moving our spaceships there. We're moving up mother ships there.
Speaker 1: Then we'll do a few final test flights from New
Speaker 1: Mexico in the new in the new situation um and
Speaker 1: then I'll go up and then and then we'll the
Speaker 1: public will go up. I'm not going to give us
Speaker 1: specific date because I'm told I'm not allowed to. But
Speaker 1: we're we're, you know, we've had two very successful flights
Speaker 1: into space recently. We've made five astronauts, the first five
Speaker 1: astronauts to being made in America since two thousand and nine.
Speaker 1: And so we're, you know, after fourteen years of hard
Speaker 1: work getting this far, we feel we're on on the
Speaker 1: verge of something very special. Now. It's very exciting because
Speaker 1: you specialize in sub orbital flights slightly different from Jeff
Speaker 1: bezos outfit and also Elon Mosque's outfit. They're looking at
Speaker 1: slightly other segments of space. If you like, fifty six
Speaker 1: miles above the Earth and three times the speed of
Speaker 1: sound which you have now hit. You did say that
Speaker 1: you will go up in will you uh if the
Speaker 1: if if our brave test pilots are ready to say
Speaker 1: to me, they've now tested the craft through and through,
Speaker 1: I will I will go up when they tell me
Speaker 1: to go up. But whether it's whether it's by the
Speaker 1: end of this year or slips into next year, we'll
Speaker 1: see how many customers have paid what a quarter of
Speaker 1: a million dollars? What's it up to now? So we
Speaker 1: we closed out booking people five years ago because we
Speaker 1: had six hundred customers. We've got eighty million dollars on
Speaker 1: deposits since the flot test flight, We've had two and
Speaker 1: a half thousand more people saying they want to come in.
Speaker 1: And you know, our research indicates that there's a very
Speaker 1: large number of people. This is a this is an
Speaker 1: incredibly capacity constrained market. Um. Just servicing the customers we
Speaker 1: have will take two two and a half years. Once
Speaker 1: you convert some of these people. The first three or
Speaker 1: four years of operation is already mostly spoken for. Okay,
Speaker 1: But to math, let me just kind of I'm gonna
Speaker 1: try and kind of after what you just said, what
Speaker 1: Richard said, I'm gonna try and nail down a little
Speaker 1: bit more detail and when this is all going to happen.
Speaker 1: Is are there any closes in the deal that you
Speaker 1: struck with Richard about when that first flight has to
Speaker 1: happen no. UM. The model that we are operating from,
Speaker 1: the operating model around which we're building the business, shows
Speaker 1: that we're going to be in commercial operations within a year.
Speaker 1: In the first half of next year is when we'll
Speaker 1: start to see the really ramping of of customer flights,
Speaker 1: of revenue generating flights. We expect profitability in mid UH
Speaker 1: two thousand and twenty one UM, and it's a business
Speaker 1: that frankly UH should achieve real scale by math. We
Speaker 1: will leave it there. Thank you very much, indeed math Richard, gentlemen,
Speaker 1: thank you very much, indeed, good luck. We've been listening
Speaker 1: to a conversation with Virgin Atlantic CEO Richard Branson as
Speaker 1: well as CEO of Social Capital about venture to take
Speaker 1: the space tourism business of Virgin Galactic public. As an
Speaker 1: increasing number of people seek to pay tons of money
Speaker 1: to just get a glimpse of the edges of space.
Speaker 1: There is a big question today how best to adapt
Speaker 1: to the radical changes currently that are happening in technology
Speaker 1: and frankly every single field, whether it's the consumer goods industry.
Speaker 1: When we see with Amazon, healthcare or beyond joining me now,
Speaker 1: I'm so pleased to say as Thomas Siebel. He is founder,
Speaker 1: chairman and CEO of C three, A long time innovator
Speaker 1: in the technology space. He's also the author of a
Speaker 1: new book, Digital Transformation, Survive and Thrive in an Era
Speaker 1: of Mass Extinction. Hydro Mamma, thank you so much for
Speaker 1: being with us, Tom, I want to start with why
Speaker 1: did you write this book? Well, it I've been in
Speaker 1: the information technology industry for four decades, and in the
Speaker 1: last decade I've seen as I go from boardrooms in Shanghai, Paris, Rome,
Speaker 1: New York, the CEOs and the chairman are all talking
Speaker 1: about this mandate for digital transformation, and candidly I couldn't
Speaker 1: figure out what they were talking about, and like as
Speaker 1: opposed to what analog transformation and uh so I spent
Speaker 1: about years thinking about it and and talking with these
Speaker 1: executives about what they were thinking about, and then the
Speaker 1: last two years writing about it to distill what the
Speaker 1: essence of digital transformation is all about. And the answer well,
Speaker 1: as we power into the twenty one century, we have
Speaker 1: a new step function of information technologies that are becoming available,
Speaker 1: including elastic cloud computing, big data, the Internet of Things,
Speaker 1: and artificial intelligence, and these technically. At the convergence of
Speaker 1: this technology. Of these technologies, we find this phenomenon called
Speaker 1: digital transformation that changes everything about the way that companies operate,
Speaker 1: the way that they manage themselves, the way they produce products,
Speaker 1: in the way they serve customers. And we see innovators
Speaker 1: in this field like Amazon is using ai IoT and
Speaker 1: cloud computing into completely revolutionized retailing, or Tesla ai IoT
Speaker 1: on wheels revolutionizing the automotive industry, or Airbnb doing the
Speaker 1: same thing to the hospitality industry, or you know, Uber
Speaker 1: no cars, no drivers, and yet they're you know, dramatically
Speaker 1: changing transportation, and so um companies that seem to be
Speaker 1: adopting these technologies are going to be in a position
Speaker 1: to thrive in this century, and those that don't will
Speaker 1: go the way of General Electric and Westinghouse and treasure Us.
Speaker 1: It seems like in a lot of conversations that we've
Speaker 1: had on this show, a lot of executives understand this
Speaker 1: and are highly focused on artificial intelligence cloud computing that
Speaker 1: is where their energies are going. But do you think
Speaker 1: that people are thinking abstractly enough about it, In other words,
Speaker 1: how to deploy some of this information or or do
Speaker 1: you think that they're not applying it enough. I think
Speaker 1: there's a recognition that it's urgent and whether and then
Speaker 1: we see leaders at companies like World dout Shell or
Speaker 1: a NOL in Europe, or CAT or three M or
Speaker 1: even the United States Air Force that seemed to understand it,
Speaker 1: get it or taking very concrete steps to realize this future.
Speaker 1: And then there are nine out of ten companies that
Speaker 1: are still floundering with it and haven't quite figured it
Speaker 1: out yet. And that's the mass extinction part UM. I
Speaker 1: think out of those nine out of ten companies, probably
Speaker 1: UM six or seven out of ten will figure it
Speaker 1: out and three or four will go out of business.
Speaker 1: So your company C three dot AI is working with
Speaker 1: Baker Hughes, which is a GE company, on a venture
Speaker 1: to use artificial intelligence in the energy space. Can you
Speaker 1: talk a little bit about that. Yes, we formed a
Speaker 1: joint venture with Baker Hughes, which one was one of
Speaker 1: the world's largest oil service providers, to bring an entire
Speaker 1: to bring AI and IoT to the entire value chain upstream, midstream,
Speaker 1: downstream of UM petrochemical UH and chemical UM exploration, production
Speaker 1: and delivery in a way to increase safety lower cost,
Speaker 1: increase liability, and decrease environmental impact. So one thing that
Speaker 1: I was struck by that you highlight in your book
Speaker 1: is that you actually think that big companies have a
Speaker 1: leg up when it comes to innovation in this space
Speaker 1: because they have access to the money that they need
Speaker 1: to put into it as well as the data. And
Speaker 1: I'm wondering how you think that will skew things going
Speaker 1: forward if sort of the small startups don't have as
Speaker 1: much of a chance to succeed. Oh, I think the
Speaker 1: small startups are very well positioned to really prosper by
Speaker 1: providing the enabling technologies for these big companies to realize
Speaker 1: their vision. When we get into AI. You know, data
Speaker 1: is the lifeblood of AI. Okay, and the more data
Speaker 1: they have, the more the more the more powerful you
Speaker 1: can be, and more precise you can be in using
Speaker 1: AI to customers advantage, to society's advantage, and to the
Speaker 1: environment's advantage. So I think there's a win win here.
Speaker 1: There's a win for small companies to develop the enabling technologies,
Speaker 1: and the big companies have the data and the CEO
Speaker 1: of the management teams with the will and the vision.
Speaker 1: I think everybody wins So it's one thing when we
Speaker 1: talk about corporations, but what about governments? What where are
Speaker 1: say where what's the government of the United States doing
Speaker 1: in terms of trying to adopt artificial intelligence and how
Speaker 1: that's going to shape their policies and uh surveillance. Well,
Speaker 1: I think the most extreme case, in the most important
Speaker 1: cases probably defense, and there is I mean, we are
Speaker 1: candidly at war today with China, and the first front
Speaker 1: is a I okay, and alex sorry Vladiman Putin said,
Speaker 1: whoever wins the battle in AI dominates the world. And
Speaker 1: it's true, and it won't be Russia. And so there
Speaker 1: is a dramatic acceleration going on between China that's spending
Speaker 1: between twenty billion dollars a year now and sixty billion
Speaker 1: dollars a year soon in this kind of top down
Speaker 1: to talitarian command and control state to um really advanced
Speaker 1: AI for events purposes. In the United States, we're doing
Speaker 1: the same thing in a much more messier way because
Speaker 1: we have a free market economy. So this is happening
Speaker 1: in garages in Silicon Valley and storefronts and Bronx. But
Speaker 1: you know, leaders like Heather Wilson, the Secretary of the
Speaker 1: Air Force or Ryan McCarthy, the Secretary of the Army.
Speaker 1: I mean these people get it. I mean they know
Speaker 1: John Murray, the head of the Army Futures Command. They
Speaker 1: get it. They know exactly what they're doing, and they're
Speaker 1: applying AI in UM in very effective ways to increase
Speaker 1: of efficiency, lower cost um uh, more efficient uh logistics,
Speaker 1: to be able to engage in cyber defense and in
Speaker 1: fact cyber war if they have to. One that I'm
Speaker 1: struggling to understand is what sort of the next iteration
Speaker 1: of transformation or disruption is to happen. I mean, we
Speaker 1: talk about Amazon, and we talk about the retail apocalypse
Speaker 1: that ensued based on the fact that they became less
Speaker 1: relevant because of the online marketplace. Is there some other
Speaker 1: industry that you think is next to be disrupted at
Speaker 1: a similar level due to the increasing use of artificial intelligence.
Speaker 1: I think there's no industry that isn't disrupted travel, transportation,
Speaker 1: financial services, government services, UM, police services, retail. I mean,
Speaker 1: you name it. There's no sir, there's no industry uh
Speaker 1: that isn't affected. This is a this is a quarter
Speaker 1: of a trillion dollar software market in three It's an
Speaker 1: entire replacement market for everything that's happened in the last
Speaker 1: thirty years and enterprise application software. So there's no industry
Speaker 1: that is an upend. Is there is there any truth
Speaker 1: to the idea that with the increasing use of artificial intelligence,
Speaker 1: it will make human beings less relevant as employees. Oh? No,
Speaker 1: I think there will be more opportunities for for people.
Speaker 1: There will be more interesting jobs. Okay, I think things
Speaker 1: will change. It's just like jobs changed when we move
Speaker 1: from you know, horse drawn carriages to automobiles. But more
Speaker 1: jobs were created, not less. And I think more jobs
Speaker 1: will be created here, but there will be different kinds
Speaker 1: of jobs, and there'll be more interesting jobs. But we're
Speaker 1: not marginalizing humans. There's just I mean the idea that
Speaker 1: you know, that that we're going to have you know,
Speaker 1: these you know, killer robots that are going to be
Speaker 1: embedded in your refrigerator. They're gonna take all over the household.
Speaker 1: You know, I think this is pretty far affected. I
Speaker 1: don't think we need to worry about that anytime. So
Speaker 1: we're not We're not heading to a full doctor who
Speaker 1: type scenario. Um. I do want to wonder what you
Speaker 1: think the government should be doing. So you talked about
Speaker 1: the army in the United States and how they seem
Speaker 1: to be very aware of the AI war that they're
Speaker 1: at with China. I'm wondering whether there is more that
Speaker 1: should be done, whether it's in the United States or
Speaker 1: Europe or in China, to fund different artificial intelligence incubators
Speaker 1: or other other factors that would actually give give people
Speaker 1: like I mean, do you feel like there's enough of
Speaker 1: an investment right now in a government level? Do you
Speaker 1: think they should be more involved? Well, I don't think
Speaker 1: there's any problem of shortage of investment in China. I canna. Shoot,
Speaker 1: they're doing it, and I think that the free market
Speaker 1: can take care of this, Okay, in the United States
Speaker 1: and Europe very well. I think a proper role of government, however,
Speaker 1: relates to social media. I think what's going on in
Speaker 1: social media is very troubling, okay, And these these companies
Speaker 1: are not regulating themselves. They're misusing personal and private data
Speaker 1: in in kind of very nefarious ways. Um, they are,
Speaker 1: you know, controlling the nature of speech and the Internet.
Speaker 1: They're controlling what's news. They're allowing these systems to be
Speaker 1: weapon I used to buy bad actors and you know this,
Speaker 1: This gets to very fundamental issues like whether or not
Speaker 1: we're able to conduct a democracy. So I think this
Speaker 1: is a proper role for government, and government government does
Speaker 1: not regulate, I think we're gonna have a problem. Tom Siebel,
Speaker 1: thank you so much for being here. Tom Siebel is
Speaker 1: founder and chief executive officer of C three dot AI
Speaker 1: based in California, but he joins me here in New York.
Speaker 1: He is the author of Digital Transformation, Survive and Thrive
Speaker 1: in an Era of Mass Extinction, with a forward by
Speaker 1: the Honorable Condolza Rice. Another slew of companies in the
Speaker 1: news are boutique investment banks Piper Jeffrey saying today it
Speaker 1: was agreeing to buy Sandler on neil and Partners for
Speaker 1: four hundred and eighty five million dollars. What does this
Speaker 1: mean for the boutique broker dealer space joining us now?
Speaker 1: I'm so pleased to say, as Chris Whalen, chairman of
Speaker 1: Whalen Global Advisors, Chris, I just want to start with
Speaker 1: what your first impression was when you saw the news
Speaker 1: that Piper Piper Jaffrey had agreed to buy Sandler O'Neill. Well,
Speaker 1: I think it's a great transaction for both firms. I've
Speaker 1: worked with Sandler for many years, going back to when
Speaker 1: I was at CROWL Bond Ratings. UH. They came in
Speaker 1: and were able to execute multiple transactions I think well
Speaker 1: over a hundred for small to midsize banks that we
Speaker 1: were rating at crow These were banks that it had
Speaker 1: no chance of being rated by the other agencies. And
Speaker 1: once they came in and they actually earned an investment
Speaker 1: grade rating, they could selp that to insurance companies. And
Speaker 1: the guys at Sandler jumped on this opportunity. They had
Speaker 1: historically been really an equity shop, and they came in
Speaker 1: and very effectively pursued that. They have wonderful research in
Speaker 1: that sector, both bank inks reads small non bank financial companies,
Speaker 1: and I think I hope that the guys that Piper
Speaker 1: are going to build that business because it's an area
Speaker 1: of the market that is not well followed. Is virtually
Speaker 1: nobody writing research about small banks, and I think it's
Speaker 1: an opportunity for them. So one thing that I'm struck
Speaker 1: by is back in two thousand twelve, even two thousand thirteen,
Speaker 1: actually two thousand and eleven, going back as far as then, UH,
Speaker 1: there was a wave of consolidation and talk of much
Speaker 1: more to come among smaller broker dealers, and it was
Speaker 1: sort of the which you kill kinds of shops that
Speaker 1: started up outside of the in the aftermath of the crisis,
Speaker 1: And I'm just wondering that kind of tapered down and
Speaker 1: what are we left with here? I mean, do we
Speaker 1: have another wave of M and A that you're expecting
Speaker 1: to see in some of these smaller broker dealers. I
Speaker 1: think the consolidation has to come in part because, as
Speaker 1: you know, the business is extremely competitive, and larger firms
Speaker 1: have been just hammer and tongue in combat over larger
Speaker 1: mandates because that's how they survive. Five they tend not
Speaker 1: to chase the smaller deals. But over the past few
Speaker 1: years you've seen the Goldman's and you've seen the JP
Speaker 1: Morgan's actually chasing deals that five years ago, ten years ago,
Speaker 1: they wouldn't have even looked at. So I think this
Speaker 1: is good because again, if they can take what they've
Speaker 1: built a Sandler, both the research and the execution capability
Speaker 1: and the investment bankers and grow that they have the
Speaker 1: space to themselves well, the small firms eventually have to
Speaker 1: compete with the larger firms. Yes, once the deal sizes
Speaker 1: get up in the hundreds of millions of dollars. But
Speaker 1: if you're doing a hundred hundred fifty million dollar UH
Speaker 1: subordinated dead issues, for example, for a small bank, you
Speaker 1: pretty much have that business yourself. I'm wondering what you're
Speaker 1: expecting in terms of potential tie ups. Are there any
Speaker 1: firms you're setting your eyes on to see whether they
Speaker 1: might join forces? Well, among the smaller ones are all
Speaker 1: private first off, so you don't have a lot of
Speaker 1: visibility into them. The boutiques tend to fall into a
Speaker 1: couple of different disciplines. Just pure investment banking with no execution,
Speaker 1: because that's a relatively easy broker dealer to run. Once
Speaker 1: you start touching money and you have customer accounts and
Speaker 1: you do sales trading, it's a much more complicated business
Speaker 1: and it requires capital. So it really depends where you're
Speaker 1: going to focus. I think the advisory business is going
Speaker 1: to remain a boutique because you know, people like myself.
Speaker 1: I'm affiliated with a little broker dealer in New York
Speaker 1: called jvb uh Securities. It's part of Cone and Company,
Speaker 1: and I focus on the mortgage market. That's just my specialization.
Speaker 1: There are a lot of other boutiques in the in
Speaker 1: the market to do the same sort of thing, but
Speaker 1: the execution side is hard because it's not particularly profitably.
Speaker 1: So you've covered this, you know, is anybody out there
Speaker 1: trading uh, you know, fixed income? And that's and that's
Speaker 1: actually what I want to ask you. I mean, given
Speaker 1: the fact that we have pretty narrow spreads uh in credit,
Speaker 1: when you're talking about potential for profitability, and then you're
Speaker 1: also talking about increasing use of electronic platforms and and
Speaker 1: other sorts of services, what's left Well, that's exactly right.
Speaker 1: The boutiques and even some of the larger independence both
Speaker 1: equity and fixed income, have been getting their market share
Speaker 1: taken away by the platforms. But you know, platforms can't
Speaker 1: make markets. Platforms don't sell. And I can't tell you
Speaker 1: how many times I've had clients who've been trying to
Speaker 1: use a platform come to us and say, hey, can
Speaker 1: you help us sell this? Because there's no one they're
Speaker 1: acting as their agent. That's the difference. So I think
Speaker 1: there is a role for the street. But the technology
Speaker 1: is changing rapidly and a lot of people get lured
Speaker 1: away with the illusion that they're going to get liquidity
Speaker 1: off of a passive platform that's just a bunch of
Speaker 1: investors facing one another. And I think the reality is
Speaker 1: you need help. If you want to sell a concept,
Speaker 1: sell a security, you have to have somebody to make
Speaker 1: the case for it who's knowledgeable enough to convince an
Speaker 1: investor to say yes. And that's a role that I
Speaker 1: think is going to remain. Thank you so much for
Speaker 1: joining us today, Chris Whale and as chairman of Alien
Speaker 1: Global Advisors. Earlier in the show, we were speaking with
Speaker 1: Thomas Siebel, the author of a new book Digital Transformation,
Speaker 1: Survive and Thrive in an Era of Mass Extinction, which
Speaker 1: raised a question how does one invest in the upcoming
Speaker 1: wave of transformation stemming from artificial intelligence and cloud computing.
Speaker 1: Here to give us a sense, at least from one perspective,
Speaker 1: is Bill Studebaker. He has President and Chief Investment Officer
Speaker 1: of Robo Global, with its flagship Robo et F, investing
Speaker 1: in UH some of the companies behind robotics and some
Speaker 1: of the technological advancements that are increasingly popular. So Bill,
Speaker 1: I just want you to first describe what it is
Speaker 1: that you're trying to identify in companies in terms of
Speaker 1: how to decide what to invest in. Okay, good morning, UM.
Speaker 1: Simply put, we're trying to identify the companies of the
Speaker 1: highest revenue threshold. The corresponds directly to selling technologies and
Speaker 1: robotics and AI. So we're going basically to the gold rush.
Speaker 1: These are the picks and shovels is either are the
Speaker 1: technologies that are enabling this revolution to happen. We're looking
Speaker 1: for companies that we think have high revenue purity. Importantly,
Speaker 1: also have you know, a high technological sort of moat
Speaker 1: around their business. And in doing this we employ a
Speaker 1: specific industry focus on robotics and AI. We have a
Speaker 1: team that's focused exclusively on this. We also have seven
Speaker 1: pH d s and our team that the who's who
Speaker 1: in robotics and AI. Please look at our website robo
Speaker 1: global dot com to get more insight, UM. But these
Speaker 1: are people that have created technologies, that have done research
Speaker 1: in academia for the better part of decades, that have
Speaker 1: an amazing perspective on the history. This gives us a
Speaker 1: real competitive mode around our business. We apply in E
Speaker 1: s G filters to the process after that. So this
Speaker 1: part of the index constitution is very industry, research driven,
Speaker 1: fundamentally focused. Okay, then we pass on to our calculation
Speaker 1: agent that that looks at for more you know, passive filters,
Speaker 1: minimum market gap, exchange rate eligibility, and we can own
Speaker 1: no more than five percent the Free Flow OUTPOPS Index
Speaker 1: now of eight eight companies, they're domiciles and fifteen different geographies.
Speaker 1: And the fun thing about this is less than two
Speaker 1: percent of these companies are in the SMP and in
Speaker 1: most critialencies. So these are, you know, investments that investors
Speaker 1: don't own yet, but I think they're gonna want to
Speaker 1: have a stake in as we go forward. So you're
Speaker 1: making a pitch, and you're making it strong. I'm sure
Speaker 1: a lot of people listen because right now, artificial intelligence
Speaker 1: and robotics certainly some of the biggest buzzwords out there.
Speaker 1: I'm trying to figure out how some of the trade
Speaker 1: war landscape and they tech war between the US and
Speaker 1: China affects US. I'm looking right now at your biggest holdings.
Speaker 1: Oceaneering International is a Houston based energy company, and then
Speaker 1: you have uh human to Tchnology, which is based in Taiwan.
Speaker 1: That is a company that I don't even know ball screws.
Speaker 1: Maintains ball screws in linear guideways. Is the description here
Speaker 1: I'm trying to figure out, I mean, does it affect anything, Well,
Speaker 1: clearly it does. I think there's a short term impact
Speaker 1: that there was an adjustment as we were exiting the
Speaker 1: end of two thousand eighteen early nineteen, and there was
Speaker 1: an impact there. Clearly this produced some slower economic activity.
Speaker 1: Roughly sixteen percent of index is industrial, so there was
Speaker 1: UM clearly slowed down in some capital spending there. You know.
Speaker 1: Having said that, we think the focus here must be
Speaker 1: on the long term. Okay, I'm sort of indifferent to
Speaker 1: what's happening in the market on any given day. If
Speaker 1: we go down the world where there's a resolution here,
Speaker 1: these companies are really gonna take off. However, you know,
Speaker 1: if the situation where there's more isolationism that goes on, UM,
Speaker 1: countries are going to have to employ more automation to
Speaker 1: supplant you know, what they would have been importing from before.
Speaker 1: So there's going to be continuing investment in robotics and
Speaker 1: AI regardless of what happens politically. That's my perspective. So
Speaker 1: I'm looking at your robo e T F, which managers
Speaker 1: they believe has one point three billion dollars of assets
Speaker 1: Center Management UM in North North North America. I'm just
Speaker 1: I'm wondering whether an E T F rapper is the
Speaker 1: correct rapper. If your view is the long term, well,
Speaker 1: we definitely think so. I think that active management has
Speaker 1: struggled for the last decade really because people sell what works,
Speaker 1: they sell what doesn't work, and stuck with what's in between. Okay, Um,
Speaker 1: when you look at this evolution that we're seeing, I
Speaker 1: think everyone always looks back in hindsight, look at the Internet,
Speaker 1: how amazing and disruptive that was. People that you know,
Speaker 1: wanted to pick what were the obvious winners. Think back
Speaker 1: in the late nineties two thousand, it was companies like
Speaker 1: AOL and Netscape and into Me and some of these
Speaker 1: companies that aren't even around. We now look at, you know,
Speaker 1: all the bank companies UM with a lot of envy
Speaker 1: going you know how and why wasn't I there? So
Speaker 1: it's easy to sort of recognize the winners after they happen.
Speaker 1: You know. We think, as you look at this indext here,
Speaker 1: we're at the front end of the most transformation period
Speaker 1: of time, probably the history of humanity and to pick
Speaker 1: the obvious winners and losers right now, we think is
Speaker 1: really difficult. I think the key is getting invested and
Speaker 1: staying invested, and looking back in three or five years,
Speaker 1: I think investors are going to be very well rewarded.
Speaker 1: Thank you so much for being here. Thank you. Bill
Speaker 1: Studebaker is President and Chief Investment Officer of Robo Global.
Speaker 1: UH shares up of that fund, particularly fund the Robot.
Speaker 1: The ticker is Robo r O b O, up at
Speaker 1: nearly twenty percent year to date. Thanks for listening to
Speaker 1: the Bloomberg P ANDL podcast. You can subscribe and listen
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Speaker 1: Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa
Speaker 1: abram Woyd's I'm on Twitter at Lisa Abramowit's one before
Speaker 1: the podcast. You can always catch us worldwide on Bloomberg Radio.