Speaker 1: From the heart of where Innovation, money and power Collie
Speaker 1: in Silicon Valley, NBR. This is Bloomberg Technology with Caroline
Speaker 1: Hyde and Ed Ludlow. I'm Caroline Hyde of Bloomberg's World
Speaker 1: headquarters in New York, and I'med Ludlow in San Francisco.
Speaker 1: This is Bloomberg Technology. Coming up, we'll get a look
Speaker 1: at investing in private versus public markets. Karen Fronsky's with us,
Speaker 1: head of private Equity Investing over at Fidelity, and after
Speaker 1: planning the largest round of layoffs in big tech history,
Speaker 1: Amazon and Google are now learning how difficult it is
Speaker 1: to card jobs in Europe. We'll tell you why and
Speaker 1: how do you get your news We'll speak to the
Speaker 1: CEO of Substack as a newsletter publisher. There's a continuous
Speaker 1: growth in a tough market for fundraising. But first let's
Speaker 1: talk about money markets in the public to Maine. We're
Speaker 1: looking at the NASDAK currently up four ten percent. It
Speaker 1: was underwater earlier. We're seeing a bit of a mood
Speaker 1: shift as we entered towards the latter half of the
Speaker 1: trading day. Remember shortened trading week for many. In terms
Speaker 1: of the equity markets, the FX markets remain open tomorrow
Speaker 1: on what is known as Good Friday, we take a
Speaker 1: day off. We see the NASDAK push higher as people
Speaker 1: just start to get to grips of where the job's
Speaker 1: data is going to be. I'm also looking at what's
Speaker 1: happening with the SOX currently up just about a tenth
Speaker 1: of a percent at the moment, ship markets managing to
Speaker 1: come away from some of their lows yesterday, the ten
Speaker 1: year yield, though still lower, seventh straight day that we're
Speaker 1: seeing broncos falling for the ten year debt. Let's look
Speaker 1: at on let's look of what's happening in crypto markets,
Speaker 1: because we're basically still holding near that all important twenty
Speaker 1: eight thousand a level end. We just don't seem to
Speaker 1: be able to break through it as the dollar waivers
Speaker 1: on the day as we look towards that all important
Speaker 1: jobs data tomorrow. But dig in on the micro moves
Speaker 1: at the moment. Yeah, two moves that caught my eye.
Speaker 1: Alphabet parent company Google up two and a half percent.
Speaker 1: The Wall Street Journal reporting that Google is going to
Speaker 1: implement an integrate generative AI and conversational functionality into search.
Speaker 1: I think we thought that was coming, but the market.
Speaker 1: Moving on that, and Ali Barber up three and a
Speaker 1: half percent. A report out of China overnight that Ali
Speaker 1: Barber itself is working on a chat GPT style generative
Speaker 1: AI tool. Also had really key data in the private markets,
Speaker 1: this coming from Pitchbook and the Venture Capital Association that
Speaker 1: in the first quarter of this year thirty seven billion
Speaker 1: dollars worth of venture back deals. But that's the lowest
Speaker 1: level going back thirteen quarters. I think that's fascinating, Caroline.
Speaker 1: It's backward looking data, right, but you compare where we
Speaker 1: are in the private markets right now with how then
Speaker 1: as that one hundred has started this year the public markets,
Speaker 1: And then we think about the performance of some of
Speaker 1: those funds like Tiger, who are so sort of focused
Speaker 1: right now on the tech sector and it's helping them. Finally,
Speaker 1: I mean, when we're in a ball market for the
Speaker 1: NATZAC one hundred, it's going to help a certain number
Speaker 1: of companies that are committed to the tech space. And
Speaker 1: let's talk about just that, Ed Chase Coleman, Tiger Global
Speaker 1: staging that come back in the first quarter is well,
Speaker 1: there has been this rallyan tech shares. Let's helped the
Speaker 1: firm recoup from last year's pretty mega record for more,
Speaker 1: Let's bring in Hemma Harmer set the scene, because what
Speaker 1: they started off twenty twenty three with half the amount
Speaker 1: of money that they did in twenty twenty one. Yes,
Speaker 1: it's been a very difficult year for them. Last year
Speaker 1: they assets fell a ton They lost fifty six percent
Speaker 1: in their hedge funds. Last year. The long only was
Speaker 1: even worse. So their focus right now for them is
Speaker 1: how do they make back investor losses? And so the
Speaker 1: gain that we've seen in the first quarter up about
Speaker 1: seven percent, you know, not bad. They do have a
Speaker 1: ways to go, but I think investors are happy with
Speaker 1: any recovery and any gain. They will have to make
Speaker 1: more than one hundred percent to gain in order to
Speaker 1: make investors hold again. And Hemma, what's their track record
Speaker 1: on that? Right? Tiger's been in this game a long time.
Speaker 1: They've had bad years before. Will they come back? How
Speaker 1: long is it going to take them? Yeah, So in
Speaker 1: the past, if we look at you know, one of
Speaker 1: their worst years, they were down twenty six percent back
Speaker 1: in two thousand and eight. It took them about three
Speaker 1: years before they were able to make investors hole again.
Speaker 1: And then about in twenty sixteen, they were down again
Speaker 1: and they took them just a year to make investors whole.
Speaker 1: So that's pretty good if you look at, you know,
Speaker 1: being able to rebound, in being able to recoup those losses.
Speaker 1: I think the question is, now, you know, the fifty
Speaker 1: six percent loss from last year is far worse than
Speaker 1: both of those two previous years, So how long will
Speaker 1: it take for them to do that again? And talk
Speaker 1: to us About Chase Coleman himself, I mean, he doesn't
Speaker 1: speak off of publicly, does very little media, but he
Speaker 1: was hosting an event and it seems as though he
Speaker 1: was pretty bullish still on buying big tech right now. Yes,
Speaker 1: So he was speaking at a luncheon for the Boys
Speaker 1: Club in New York and he was talking about he
Speaker 1: was asked about where he sees opportunity right now, and
Speaker 1: he says that tech, you know, has been in something
Speaker 1: of a recession lately, but it looks interesting again that
Speaker 1: companies are using and incorporating more technology into their businesses,
Speaker 1: like Amazon, you know, using chat, GPT, and that he
Speaker 1: thinks he's bullish on fangs and would suggest buying fangs.
Speaker 1: So not unsurprising for a tech focus firms big Meta
Speaker 1: for example Meta, but interesting to see, you know how
Speaker 1: he sees the vote ahead for the space that he
Speaker 1: focuses on. All right, Bloomberg's hem a Palmer, thank you
Speaker 1: with that reporting. We should point out as well that
Speaker 1: Tiger Global declined to comment on the story. Let's turn
Speaker 1: out to investing in private markets the difference of what's
Speaker 1: going on in that space. With Karen Fronski, Fidelity Investments,
Speaker 1: head of Global Private Equity Investment, we brought you the
Speaker 1: data from what the VC landscape looks in the first
Speaker 1: three months three months of this year. You look at
Speaker 1: what's happening with the naz at one hundred and private markets.
Speaker 1: Where's your focus right now? What's your read on the
Speaker 1: macro picture? Well, we actually see the macro picture as
Speaker 1: being something really exciting and opportunistic for Fidelity. I'll echo
Speaker 1: some of what it sounds like Chase Common was saying,
Speaker 1: which is now is a time for investors to really
Speaker 1: be opportunistic and find great investment opportunities. The reality is
Speaker 1: there are fourteen hundred unicorns globally worth about five trillion dollars.
Speaker 1: There's a lot of great businesses out there for investors
Speaker 1: to come in and asked, and unlike twenty twenty one,
Speaker 1: we're starting to see a real rationalization in valuations. Some
Speaker 1: would argue there's still some room to go there, but
Speaker 1: when you look at the peak of the market in
Speaker 1: twenty twenty one, private market valuations were three and a
Speaker 1: half times more expensive than the Nasdaq on average, and
Speaker 1: you saw some companies raised and one hundred times arr
Speaker 1: or even higher than that. And valuations have really rationalized,
Speaker 1: so great businesses, valuations that are making a lot more sense,
Speaker 1: and we see a lot of opportunity. Caroline, I think
Speaker 1: you and I are trying to get a real global
Speaker 1: perspective as well, not just which sectors are sort of
Speaker 1: most interesting right now, but also geographically debates about China,
Speaker 1: the Middle East where there are opportunities right. Yeah, I
Speaker 1: think that's exactly right, and perhaps one that's garnering a
Speaker 1: little bit of what should we say emotion on public
Speaker 1: forums such as Twitter. Karen, I'm interested in your perspective
Speaker 1: of global allocation of money right now. Where are the
Speaker 1: valuations in the best? Yeah, it's a great question. The
Speaker 1: reality is, you know, I think there are great opportunities globally,
Speaker 1: and it doesn't always come down to just valuation. Well,
Speaker 1: a lot of what we're really focused on is what's
Speaker 1: the TAM, what's the total addressable market for a business
Speaker 1: and what type of problem is that business solving and
Speaker 1: do they have a real durable competitive moat that's durable
Speaker 1: over time, And of course we want to make sure
Speaker 1: the valuation is right and appropriate for that business. But
Speaker 1: when we look geographically, we see really large addressable markets
Speaker 1: in regions like India for example, where we've made some
Speaker 1: private investments for the last couple of years. China obviously
Speaker 1: we obviously take into account the geopolitical background of China
Speaker 1: as well, but Europe as well. So we are a
Speaker 1: global investor, both publicly but also privately, and those are
Speaker 1: a couple of the regions that we're most excited about.
Speaker 1: It comes down to the addressable markets that account in China.
Speaker 1: Because you say you take into consideration geopolitics, how is
Speaker 1: it affecting the way in which you allocate. Yeah, I
Speaker 1: mean the reality is, you know risk return, right, and
Speaker 1: we can't always prognosticate what governments are going to do,
Speaker 1: especially governments internationally, and so we just take a little
Speaker 1: bit more of a risk premium when thinking about allocating
Speaker 1: to regions where there might be a little bit more
Speaker 1: geopolitical risk that we can't otherwise account for, and ED
Speaker 1: we're going to have that conversation in depth a little
Speaker 1: bit later with a QVC. But ED, what's also interesting
Speaker 1: in anything we're always talking about is, Okay, we talk
Speaker 1: about countries, what about sectors? And boy do we talk
Speaker 1: about AI a lot right now? Yeah. I think what's
Speaker 1: interesting for me, Karen in particular, is that lots of
Speaker 1: the most exciting companies are private, and they're staying private
Speaker 1: for longer. I think I'm right in saying that you
Speaker 1: invested in SpaceX for the first time back in twenty fifteen.
Speaker 1: That was a long time ago. Now, how do you
Speaker 1: play that field where the most attractive companies are staying private? Well, listen,
Speaker 1: you know the beauty of our model at Fidelity is
Speaker 1: we can invest privately, we can obviously invest publicly, that's
Speaker 1: clearly in our DNA, and we can be opportunistic and
Speaker 1: investing in just the absolute best companies out there. I
Speaker 1: think it's not any secret that we all think the
Speaker 1: ipel market has been has been shut, has been frozen
Speaker 1: shut for over a year at this point in time.
Speaker 1: And the private markets have such a strong depth at
Speaker 1: this point in time, not only in capital but also
Speaker 1: quality of investors. That the beauty is that all of
Speaker 1: these companies can go public when the timing is really
Speaker 1: right and when the stars align, as opposed to being
Speaker 1: forced to go public. The other reason why we do
Speaker 1: this at Fidelity is, as you mentioned, you know about
Speaker 1: the number of public companies that are out there have
Speaker 1: basically halved in the last twenty five years, and there
Speaker 1: are a lot of companies that only exist privately. We
Speaker 1: don't have access to them publicly, and so it's really
Speaker 1: strategically important for us to start investing well ahead of
Speaker 1: their public event. You've had a lot of great exits,
Speaker 1: right I think Facebook, Uber, but less focus on SpaceX.
Speaker 1: How do you stay focused on the opportunity for them
Speaker 1: long term? Do you come back in and do later
Speaker 1: rounds for fear of missing out? Do you worry about
Speaker 1: the partners that are touted to be going into a
Speaker 1: name by SpaceX? Saudi is a name that's been discussed.
Speaker 1: It's a really interesting mindset you have to go into
Speaker 1: in an investment like that. Yeah, you know, listen, SpaceX
Speaker 1: has continued to execute extremely well when we look at
Speaker 1: their Starlink constellation that's up there right now, the focus
Speaker 1: on Starship coming out hopefully soon. It's a company that's
Speaker 1: executed incredibly well. And no, we never invest for fear
Speaker 1: of missing out. We invest when we continue to think
Speaker 1: there's value for our shareholders in investing more. And those
Speaker 1: are the underlying core principles that we try to stick to.
Speaker 1: We know that there are other areas than space that
Speaker 1: you're already interested in data, social, climate, tech, but also
Speaker 1: of course AI machine learning. That's what everyone is seeming
Speaker 1: to be excited about. But where in the apple location
Speaker 1: of AI are you excited about? Have you come to
Speaker 1: grips with so why the money is going to be made?
Speaker 1: It's a great question. We are still doing a lot
Speaker 1: of work on that question specifically. You know, AI has
Speaker 1: obviously been around for decades, but needless to say, open
Speaker 1: AI and chat GPT have brought it to the forefront
Speaker 1: and it certainly captured the imaginations and the excitement of
Speaker 1: all of us. And that's a question that we're spending
Speaker 1: a lot of time and doing a lot of research on,
Speaker 1: meeting with a lot of companies to understand where does
Speaker 1: the value accrete. Is it at the app layer, is
Speaker 1: it at the foundational layer, or is it at the
Speaker 1: infrastructure layer, or is it some combination of the three?
Speaker 1: Right You certainly don't have the final answer there yet.
Speaker 1: I don't think many people do. But it's an area
Speaker 1: where we're spending a lot of time and doing a
Speaker 1: lot of research. Karen Quickly twenty twenty two, really hard
Speaker 1: you thought about Chase Coleman Tiger. Did you have to
Speaker 1: change strategy? In reactions twenty twenty two, You know, listen
Speaker 1: to Our strategy has always had core underpinnings of looking
Speaker 1: for or great companies with a large addressable market that
Speaker 1: are disrupting something out there in the market, phenomenal management teams.
Speaker 1: I think what's changed for everybody is the concept of
Speaker 1: growth at any cost, and not just us. Every investor
Speaker 1: is very, very focused on the ROI on every dollar
Speaker 1: spent profitability or a clear and convincing path to profitability
Speaker 1: and really maximizing margins. But our core underlying principles have
Speaker 1: stayed the same throughout. Great to have some time in
Speaker 1: the kour and thank you Karen Fronsky, Fidelity Investments. After
Speaker 1: announcing some of the largest rounds of layoffs in their history.
Speaker 1: US big tech companies now being reminded how difficult it
Speaker 1: is to reduce headcount in Europe, largely due to labor
Speaker 1: laws in countries like France and Germany. Bloomberg, Zaggy Cantrill
Speaker 1: joins US from Germany. You were part of the reporting
Speaker 1: team on this. What it comes down to is labor protections. Right.
Speaker 1: Why are Amazon and Alphabet in particular finding this so
Speaker 1: hard to enact? Exactly? It's incredibly challenging in several European
Speaker 1: countries to do the sort of sweeping layoffs that we've
Speaker 1: seen in Silicon Valley, where we've seen people have to
Speaker 1: pack up their boxes within weeks or months of these announcements.
Speaker 1: That's not the case in Germany, where I said, we're
Speaker 1: in France, and to look at Germany for a second.
Speaker 1: The reason is essentially there needs to be negotiations with
Speaker 1: works councils, with employee representatives from within the company to
Speaker 1: create a negotiation and create a settlement for the amount
Speaker 1: of employees than leaving the extent of the cuts, and
Speaker 1: also what sort of settlement they're likely to get. And
Speaker 1: in France it's perhaps even more stringent than is in Germany,
Speaker 1: and there we're seeing companies like Google offering voluntary departure
Speaker 1: schemes and they're discussing essentially how to get people to
Speaker 1: leave by essentially buying them out of their jobs to
Speaker 1: get really generous, right, can you talk us through some
Speaker 1: of the changes they make to entire senior managers to leave, Yes,
Speaker 1: So essentially there are these discussions about giving senior managers
Speaker 1: very large packages in order to leave the company, which actually, noticeably,
Speaker 1: while not part of the same layoffs package, is also
Speaker 1: something we've heard at Meta with this idea of flattening
Speaker 1: their workforce, and that's something that Matter is proposing across
Speaker 1: the board. But what we're seeing in France is also
Speaker 1: based on an issue in France where it's not so
Speaker 1: easy to just let people go without cause, without them
Speaker 1: doing something that means that they should be fired from
Speaker 1: their job. It's not so simple just to let people
Speaker 1: go from these roles, and so these layols will come
Speaker 1: with a huge price tag for these companies. We've heard
Speaker 1: Alphabet already indicate that these layoffs could cost up to
Speaker 1: two point three billion dollars globally. And while they've said
Speaker 1: that in the US, the Brunt of those costs will
Speaker 1: be felt in Q one. And of course let's remember
Speaker 1: this is all about efficiency and being able to tighten
Speaker 1: the belt. While those class have felt in Q one
Speaker 1: this year in the US, that's not the case with
Speaker 1: places like France and Germany where these negotiations going Aggie.
Speaker 1: Amazon did not comment on the story. Google did and
Speaker 1: they explain to us that in some markets Romania, for example, Greece,
Speaker 1: they won't for now be cutting jobs. This is what
Speaker 1: they had to say. We're showing on the screen right now,
Speaker 1: old school tech structure is what caught my eye. Right
Speaker 1: you have compromises around stock compensation and also bonuses. There
Speaker 1: is some clever workarounds that Google in particular and Amazon
Speaker 1: are trying to do. What are they yes, So essentially
Speaker 1: these companies are looking at finding different ways in which
Speaker 1: to provide for instance, stock options is a good example
Speaker 1: to the departing workers. But also when you look at
Speaker 1: the broader structure around hiring in Europe, this is also
Speaker 1: a conversation around going forward, what it will look like
Speaker 1: to bring more people on board in these companies in
Speaker 1: these regions. And so, as you say, in some in
Speaker 1: some markets they're not they're not laying people off at all.
Speaker 1: That may also be a strategic point that the offices
Speaker 1: aren't actually that big in some of those markets. It's
Speaker 1: also about being able to have enough people on hand
Speaker 1: for dealing with the huge amount of content that is
Speaker 1: in various different languages around Europe. So while going forward,
Speaker 1: there are these question marks over the costs that this
Speaker 1: could bear for these companies. I don't think it really
Speaker 1: means that they're going to be pulling out of these
Speaker 1: markets or when it comes to hiring, they're They're likely
Speaker 1: to still be engaging with these workforces because countries like
Speaker 1: France and Germany are hugely important for Google for instance,
Speaker 1: Thanking Cantra, thanks so much staying late with us. We
Speaker 1: appreciate it. Meanwhile, let's turn to a stop. We're watching
Speaker 1: Sam heading for as low as profit, which there's a
Speaker 1: global financial crisis, if not longer, it was due to
Speaker 1: a sharp slowdown in Technomold. Of course, it's triggering losses
Speaker 1: in its semiconductor division. Now, South Korean chipmaker reporting preliminary
Speaker 1: results for the March quarter tomorrow. It's expected to say
Speaker 1: operating profit pronominated some ninety percent. Will continue to follow
Speaker 1: it from new York from San Francisco. This is Willimberger.
Speaker 1: All right, time for talking tech. First up Binance. In
Speaker 1: the CFTC lawsuit against Binance over sham compliance with US
Speaker 1: Derivatives regulations, three unidentified training firms have been cited as
Speaker 1: VIP clients. They've now been named Jane Street Group, Tower
Speaker 1: Research Capital, and Raddick's Trading. That's according to sources. The
Speaker 1: three US POMP firms were cited anonymously by the CFTC
Speaker 1: in its lawsuit is examples of how US clients accessed
Speaker 1: the platform. An elicit online marketplace where users sold stolen passwords,
Speaker 1: bank account information, and other sensitive data was shut down
Speaker 1: by the US, UK, Dutch and other law enforcement agencies
Speaker 1: this week. Authorities seize the site, known as Genesis Market
Speaker 1: as part of an effort dubbed Operation Cookie Monster. The
Speaker 1: site began in twenty eighteen and has offered access to
Speaker 1: data stolen from more than one point five million compromised computers,
Speaker 1: accounting for more than eighty million credentials that could be
Speaker 1: used to access accounts. That's according to the Department of Justice.
Speaker 1: Law enforcement arrested one hundred and nineteen people in connection
Speaker 1: with the site. That according to the European Police Agency
Speaker 1: EUROPOLE and finally, converting the world to entirely clean energy
Speaker 1: will require ten trillion dollars worth of investment, but continuing
Speaker 1: to rely on fossil fuels were cost about fourteen trillion
Speaker 1: that according to Elon Musk, a massive build out of
Speaker 1: solar panel factories and metal refineries are required over the
Speaker 1: next twenty years to deliver renewable power generation and electricity
Speaker 1: storage capacity, which will then be needed to power the
Speaker 1: global economy entirely with carbon free energy, Tessa said. And
Speaker 1: it's master Plan Part three, which was published today. The
Speaker 1: white paper fleshes out details a mosque's vision for a
Speaker 1: world without fossil Field's first outlined, of course, during that
Speaker 1: investor day last month. Next stay with EVS because STILLANTIS
Speaker 1: plans to manufacture an all electric version of the popular
Speaker 1: Ram truck and a factory of course in the United States.
Speaker 1: We understand all according to its CEO and most David Welch,
Speaker 1: and please say it's here in New York. But of
Speaker 1: course the auto show that's going on, some of the
Speaker 1: summits and talk to us about the Ram. The focus
Speaker 1: basically on making sure that they can access some of
Speaker 1: the Inflation Reduction Act offers to the consumer. Yeah, thanks Caroline.
Speaker 1: So just to get in the game with the inflation
Speaker 1: reduction egg, you've got to build the vehicle in the
Speaker 1: United States and then be on net. You've got to
Speaker 1: satisfy other requirements where the batteries are built, where the
Speaker 1: ingredients to the batteries are mined in por to get
Speaker 1: the full seventy five hundred dollars. But just to get
Speaker 1: in the room, you have to build the United States.
Speaker 1: So in that sense, I think the efflation Reduction action
Speaker 1: was a big incentive. It was a little bit up
Speaker 1: in the air in the sense that Carlos Tavarus, who
Speaker 1: told us about this at the auto show yesterday, has
Speaker 1: complained greatly about the cost of building evs, the lack
Speaker 1: of profitability. And we thought he has a pickup truck
Speaker 1: buyant in Mexico, he could possibly build the vehicle down
Speaker 1: there and save on wages and that sort of thing.
Speaker 1: But he says it's coming to the US, which plant
Speaker 1: exactly TVD. He said, in the next week or two,
Speaker 1: we may know that, Hey, David, in US, Let's be honest,
Speaker 1: the Lantis is playing catch up when it comes to electrification, right,
Speaker 1: that's right. The companies that have really made a big
Speaker 1: commitment here, Volkswagen, General Motors obviously test us the leader.
Speaker 1: Everybody's trying to catch them. Shantis has been a little
Speaker 1: bit more conservative with this ss Toyota. They see consumers
Speaker 1: still buying internal combustion vehicles and huge numbers. They don't
Speaker 1: see profits and electric vehicles yet, and they're thinking they
Speaker 1: can be a fast follow Just remind us of the
Speaker 1: scope of who the competition is. I'm thinking forward, I'm
Speaker 1: thinking what even Rivian to an extent for it's a
Speaker 1: big player. Obviously, they've got the f one, fifty, Lightning
Speaker 1: and the Marquis out there. Rivian and some of the
Speaker 1: startups are they're very legitimate players. However, their volumes right
Speaker 1: now are so small. I mean, Rivian's looking to make
Speaker 1: fifty thousand vehicles, you know. General Motors is saying they're
Speaker 1: going to sell fifty thousand just in the first half
Speaker 1: of this year, and they're just getting started one hundred
Speaker 1: thousand next year. Tessa's already pushing a million globally. So
Speaker 1: some of these startups, they have good technology and desirable vehicles,
Speaker 1: but getting to critical mass pretty tough for them all,
Speaker 1: I believe. Thanks David Welcha, Detroit, BRT. Thank you. Welcome
Speaker 1: back to a new mood technology. I'm Canaine Hid in
Speaker 1: New York and Imed Ludlow in San Francisco, and we're
Speaker 1: about halfway through the trading day, halfway through our show.
Speaker 1: Let's check in on basically the turnaround we've had since
Speaker 1: about half past eleven an hour ago. Nazdac breaking into
Speaker 1: the green as we walk towards what is going to
Speaker 1: be a holiday shortened week, maybe a little bit more
Speaker 1: risk appetite building into the system. We're still, of course
Speaker 1: anticipating that one important job Stata tomorrow morning. Two year
Speaker 1: yield basically flat on the day, having been on the
Speaker 1: downside the last few trading days as money sought more safety.
Speaker 1: We're seeing bitcoin again at that twenty eight thousand level.
Speaker 1: We cannot break through it. Moving on to some of
Speaker 1: the micro moves because basically, if you're going to see
Speaker 1: money moving into stocks, it's going to be AI related.
Speaker 1: On the day when you're looking at technology alphabet shares
Speaker 1: Google up two point four percent. Interesting what we see
Speaker 1: in terms of that reporting coming from the Wall Street
Speaker 1: Journal that yes, we knew an AI chatbot was being
Speaker 1: developed over at Google, but they're likely to be starting
Speaker 1: to lace it in and maybe providing the impact within
Speaker 1: Google relatively swiftly. Ali Baba more certainty there as soon
Speaker 1: as next week will understand the unveiling perhaps of its
Speaker 1: own AI generative AI chatbot and what they have on
Speaker 1: the table in terms of China. So a lot of
Speaker 1: this discussion is playing out on social media. Right You
Speaker 1: and I were in a news business, and I think
Speaker 1: right now we're really interested in knowing how our audience
Speaker 1: is getting their news, aside from this program Bloomberg Technology,
Speaker 1: of course. So we ask the question, do our daily poll,
Speaker 1: and here are the results, and I find them fascinating. Yeah,
Speaker 1: because social media Elon must wants Twitter to be the
Speaker 1: go to source of news. Sixty three percent of respondents
Speaker 1: as saying social media look down at substack and newsletters
Speaker 1: twelve percent of the vote. Caroline, you know you think
Speaker 1: about what's happened this week, chamath Pali Haatier, Social Cap
Speaker 1: putting their performance note out there on substack. Yeah, more
Speaker 1: and more people deciding to go direct to their audience.
Speaker 1: I mean, let's face it, there's been a bit of
Speaker 1: a brain drain from media, people leaving to go and
Speaker 1: do their own direct to consumer provision through newsletters. Yes,
Speaker 1: people are building them within media organizations, but also going
Speaker 1: to substack to and provide them just on a one
Speaker 1: on one basis. Yeah. I think what's interesting a well
Speaker 1: with substack is that you know it's you, yourself putting
Speaker 1: it out there on a platform, much like it is
Speaker 1: on social media. So let's talk about it because substack
Speaker 1: is actually inviting some of its contributors to become investors.
Speaker 1: The newsletter publisher tapping more money from less wealthy investors
Speaker 1: by letting its offers and subscribers put in as little
Speaker 1: as one hundred dollars for shares in an effort to
Speaker 1: keep growing. And what is a tough market for fundraising?
Speaker 1: Delighted to say, Caroline. Substack CEO Chris Bess joins us now. Chris,
Speaker 1: is the motivation here that you need money for substack
Speaker 1: or you're thinking about audience development. The main motivation here
Speaker 1: is we've been building this subscription network this year. We've
Speaker 1: seen it really start to take off. We've seen the
Speaker 1: power of the network kick in. We've seen people growing
Speaker 1: from as more and more people join the platform. The
Speaker 1: people who join are creating a lot of their value,
Speaker 1: and we wanted to create an opportunity for them to
Speaker 1: become investors. Caroline, I think the other thing that we're
Speaker 1: conscious of here is the reputation of the people are
Speaker 1: that are posting through substack. Rug I mentioned Social Capital
Speaker 1: and Chamath Pali Hapatia. They made it an active choice
Speaker 1: to put their annual performance of their fund on substack
Speaker 1: rather than other methods. Yeah, Chris, clearly you're winning subscribers
Speaker 1: writers as well. What is it thirty five million actor
Speaker 1: subscribers I'm interested in. Therefore, what's the uptake? How many
Speaker 1: have said, yeah, we want to not only write for
Speaker 1: you or consume value, but invest in you two. Honestly,
Speaker 1: we've been blown away by the response so far. I
Speaker 1: actually can't talk about it too much here. You have
Speaker 1: to go to the weef under page to look at
Speaker 1: look at what's there. But we've been very pleasantly surprised
Speaker 1: by both, you know, the sort of quantity of the
Speaker 1: response and also just the tenor up it. We've had
Speaker 1: a lot of people come out and talk about why
Speaker 1: they believe in substat why they think this thing is
Speaker 1: important for the world. I love seeing that twelve percent
Speaker 1: graphic at the start of the thing, the twelve smartest percent.
Speaker 1: It feels like this thing is really is really going.
Speaker 1: But what about that We've been blow away the questions
Speaker 1: that are being asked of you, though, Chris, more transparency,
Speaker 1: there's always I mean, I've been there reporting on when
Speaker 1: the bond market started to open up to retail investors
Speaker 1: in the UK and everyone said, well, it's because I
Speaker 1: can get more money more cheaply. Basically, people the investor
Speaker 1: isn't as institutionalized and therefore doesn't ask some of them
Speaker 1: more nuanced questions. What are you saying in terms of
Speaker 1: I want to know your costs, I want to know
Speaker 1: your revenue as substack totally And you know, the fact
Speaker 1: of the matter is Substack is a private company in
Speaker 1: a very competitive market, and a lot of the writers,
Speaker 1: the people on substack are not just members of the public,
Speaker 1: but a lot of them are reporters themselves, a lot
Speaker 1: of them people that cover the industry, and so we've
Speaker 1: had to think of everything we release as becoming public.
Speaker 1: So we've been pretty thoughtful about how we've done that.
Speaker 1: We've been stuck at releasing everything that we need to
Speaker 1: release as part of the REGCF. Other than that, you know,
Speaker 1: we've been we haven't shared a time. And the pitch
Speaker 1: that I've been making to people is really like, hey,
Speaker 1: investing in startups in general, any startup, even a great
Speaker 1: startup like substack, is a risky proposition. You can lose
Speaker 1: your whole investment. It's not a thing to do sort
Speaker 1: of lightly or with money that you don't want to
Speaker 1: make up. I'd be giving a little bit of a
Speaker 1: kind of an anti cell for folks on that front.
Speaker 1: I want people to come if it's something that they
Speaker 1: want to be a part of, if it's something that
Speaker 1: they're seeing the benefits of and they believe in. We're
Speaker 1: not trying to make it. It's it's not an appeal.
Speaker 1: I'm not trying to be Bernie Standers here saying, you know,
Speaker 1: please give us your money. This is an opportunity to
Speaker 1: be part of this thing if you want to, well,
Speaker 1: christ look, an investor's risk appetize is often driven by data.
Speaker 1: There is some data out there. Reportedly, you did nine
Speaker 1: million dollars of revenue in twenty twenty one. How did
Speaker 1: you do in twenty twenty two? Better? But I won't
Speaker 1: talk about it. Oh, come on, give us a sense
Speaker 1: of size of scope. You're trying to appeal to investors here,
Speaker 1: and you talked about the need to be transparent, have
Speaker 1: public facing data. Just explain to us the health of
Speaker 1: the business. How did it grow in twenty twenty too.
Speaker 1: We've gone over the numbers about growth on the subscriber base.
Speaker 1: How did that translate to performance for the business. So
Speaker 1: we had about thirty five million active subscriptions, now we're
Speaker 1: about we're about two million Paige subscriptions and the top
Speaker 1: the top ten publishers on substat combined to make twenty
Speaker 1: five million dollars a year. Those are the Those are
Speaker 1: the numbers we're sharing. If you could have raised through VC, Chris,
Speaker 1: would you have done Sorry I missed that. I think
Speaker 1: we go ahead. Yeah. Would you have fund raised through
Speaker 1: venture capital if it had been there last year this year?
Speaker 1: I mean, we know, I know that you're saying this
Speaker 1: is sort of this perfect way of building your momentum,
Speaker 1: getting people to come on board and invest. But if
Speaker 1: Venure Capital had been and was still awashed with cash
Speaker 1: and we hadn't had interest rates rise, would you have
Speaker 1: raised with VC? If the money had been there, and
Speaker 1: the checks were easier to be written. I understand the
Speaker 1: way that we've been thinking about this is we have
Speaker 1: sort of tuned the business not to rely on outside
Speaker 1: capital given the state of the market. So we're in
Speaker 1: a place where we have a path to doing the
Speaker 1: mission we set out to do, kind of regardless of
Speaker 1: what's going on in the market, whether there's further outside investment,
Speaker 1: any of those things. The way that I look at
Speaker 1: this is we can be a little bit, you know,
Speaker 1: work with the situation that exists in the market. You know,
Speaker 1: if there's opportunities to get more money on favorable terms.
Speaker 1: I think there's ways that we could use that to accelerate.
Speaker 1: But also we don't need it. I mean, this is
Speaker 1: a business that fundamentally works, and we have a path
Speaker 1: to building it with what we have. Chris, we started
Speaker 1: this segment talking about where people are going through their
Speaker 1: news US bloom Bag technology, social media, substack. I think
Speaker 1: you're working on substack notes, which too many seems to
Speaker 1: be an attempt to offer something similar to Twitter. The
Speaker 1: way I think of this is that the I think
Speaker 1: the era of the social network as we know it
Speaker 1: is ending. I think that a lot of the social
Speaker 1: the online media platforms, the twitters, the facebooks, the Instagrams
Speaker 1: are sort of pulling in this one direction, right The
Speaker 1: ad supported business model is kind of forcing everyone to
Speaker 1: turn into TikTok that's in that world, and I think
Speaker 1: it creates this huge opportunity in a different direction that's
Speaker 1: not about kind of like grabbing eyeballs and attention at
Speaker 1: all costs, but instead is about, you know, making things
Speaker 1: that people deeply value, letting people connect to things they trust.
Speaker 1: So I think all of online media is basically either
Speaker 1: going to have to turn into TikTok or is going
Speaker 1: to have to turn into substack in the next little bit.
Speaker 1: And substack notes is sort of our play to bring
Speaker 1: the easy sort of sharing, the short form, the ability
Speaker 1: to recommend anything to the subscription network that is substack,
Speaker 1: and we're tremendously excited about it. South Tax CEO Chris Best,
Speaker 1: thanks for joining us. Meanwhile, coming up, could some American
Speaker 1: investors be funding China's answer to Open AI? We'll have
Speaker 1: more on that pretty heated debate that's playing out all
Speaker 1: over the likes of Twitter with Lightship Capital partner Brian Raquin.
Speaker 1: And we're also talking about Savvy Games Group, part of
Speaker 1: the Saudi government's public investment funds. It's agreed to acquire
Speaker 1: game publishers Scope Plea for almost five billion dollars, the
Speaker 1: company has said yesterday in a statement. California based Scope Plea,
Speaker 1: publishers free to play social games, has raised money multiple
Speaker 1: times over the years, actually often grown through acquisitions from
Speaker 1: New York, from San Franciscosi Bloomberg some breaking news. President
Speaker 1: Biden administration is going to propose the toughest ever auto
Speaker 1: emissions rules, basically to spare demand for electric vehicles. This
Speaker 1: has been something that the pressure was on, not only
Speaker 1: from the US but geopolitically. Ed, you are our EV expert,
Speaker 1: certainly on this show, if not the entire network. Talk
Speaker 1: to us a little bit about why wissing this sudden
Speaker 1: focus on evs in particular. Yeah, the reporting here is
Speaker 1: really important. Biden is stopping short of an outright ban
Speaker 1: on production of gas powered vehicles, but toughening the mandates.
Speaker 1: You have to remember that under the Paris Climate Agreement,
Speaker 1: the United States has to cut its greenhouse gas emissions
Speaker 1: from two thousand and five levels by fifty percent from
Speaker 1: the end of the decade. Joe Biden also has a
Speaker 1: personal goal to have fifty percent of all new cars
Speaker 1: b electric by twenty thirty, so this is him acting
Speaker 1: on We believe from sources that the announcement will come
Speaker 1: formally next Wednesday, after the long weekend, but clearly some
Speaker 1: action here and coming from Detroit. Meanwhile, all the automakers
Speaker 1: are basically here in New York, and we've heard of
Speaker 1: all the supply coming in terms of evs. But it's difficult,
Speaker 1: this isn't it. Basically Test is already there in terms
Speaker 1: of production, but it's taken some time for some of
Speaker 1: the legacy in to makers. Yeah, competing forces depending on
Speaker 1: who you are, Right, if you're a legacy automaker in
Speaker 1: Detroit and you're transitioning from combustion engine to what we
Speaker 1: know is those OEMs have asked the administration for more time,
Speaker 1: an extension of the requirement deadlines. Your tesla, it's the opposite.
Speaker 1: You're like, hey, we're already in the game. Here be tougher.
Speaker 1: And that's what Tesla I'm sure in the corridors of
Speaker 1: the White House has been calling for. Suddenly, some geopolitics
Speaker 1: at play when it comes to the Binder administration. In fact,
Speaker 1: there's geopolitics at play in general when it comes to
Speaker 1: AI as well, and we're going to dig into that
Speaker 1: now because there's mostly a bit of an arms race
Speaker 1: going on, isn't there between the US and China? And
Speaker 1: it seems to be gaining a momentum as after open
Speaker 1: ais chat GPTEAM really has taken the world by storm
Speaker 1: last year. Now venture capitalists are starting to raise some
Speaker 1: concerns that US investors, US money and venture capital could
Speaker 1: be back in China's best hopes in the field in
Speaker 1: terms of a competitor. Now the debate is playing out
Speaker 1: all over Twitter after The Information reported yesterday that institution
Speaker 1: investors from America are backing Chinese based venture firms with
Speaker 1: dollars to put into China's top AI startups. Brian Broquin's
Speaker 1: general partners over at Lightship Capital, it's one of the
Speaker 1: vcs that's been taking part in that very debate. You're
Speaker 1: joining us now, Brian, great to have you, and so
Speaker 1: tell us you're concerned or not concerned by some of
Speaker 1: this hyperboly. I am ringing the alarm overright. AI requires
Speaker 1: the AI arms ratio, as you describe, it, requires capital.
Speaker 1: It's a very expensive endeavor. And so for the idea
Speaker 1: that a venture capital firm would take money from investors
Speaker 1: in the US send into China to build a product
Speaker 1: that could be used against US interests makes zerial sense. Okay,
Speaker 1: demystify from that perspective therefore, whether the money should be
Speaker 1: being pulled back from privately positioned businesses. But also we
Speaker 1: were just talking about how Ali Barber, for example, is
Speaker 1: set to as soon as next week unveil its own
Speaker 1: competitor to chat GPT. I look at who the biggest
Speaker 1: shareholders are of Vali Barber and well on the American
Speaker 1: Depository received perspective, it's Goldman, there's Morgan Stanley in there.
Speaker 1: Should they all be giving up on backing some of
Speaker 1: these public companies? I think in general there's opportunity other
Speaker 1: markets understood its capitalism. We agree with that. But there
Speaker 1: are certain technologies. For instance, Intel makes chips that can
Speaker 1: be used in North Korean missiles. No, we don't allow
Speaker 1: that in the US. This is exactly the same US
Speaker 1: capital and also US no, how shouldn't be used in
Speaker 1: creating these a actuals because how do you make an investment?
Speaker 1: You actually have a responsibility to make sure that company
Speaker 1: is successful, and therefore you're helping to make sure the
Speaker 1: China successful. And it's interesting that certain names within the
Speaker 1: VC community were highlighted by this information piece, in particular
Speaker 1: because they have venture arms in China. One of them
Speaker 1: really spoke out on Twitter. Yeah. And the idea here
Speaker 1: is that Sequoire has come out one of their partners
Speaker 1: on Twitter. I think we'll show out on the screen
Speaker 1: now instead, Sequoire China and Sequoire are different. The headline
Speaker 1: is misleading, Brian. Let's go back to the point. Investors
Speaker 1: have been going to China tech for a long time.
Speaker 1: This is specifically an anxiety coming around artificial intelligence, right,
Speaker 1: Why why is AI so problematic? Well, I enter both
Speaker 1: things on the different arms piece. When Sequoia is out
Speaker 1: raising money in China, saying where Sequoia where the brand?
Speaker 1: We know what we're doing. We can build the best companies.
Speaker 1: That's why you're going to give money to either arm.
Speaker 1: So though they may be legally separate entities, it is
Speaker 1: literally one strategy to create the world's most successful companies.
Speaker 1: In this case, that's an issue. And to the second point,
Speaker 1: like why is this so dangerous? I often describe AI
Speaker 1: as like dog years, right, So it's not aging year
Speaker 1: by year. Every year's three or five or seven years,
Speaker 1: and so only a couple of years from now what
Speaker 1: they're creating could be used to create a surveillance state,
Speaker 1: not just there but also here. Brian, you are an AIX,
Speaker 1: but you can sider yourself an AIX. But I think
Speaker 1: your prior successes include the sale of an AI company
Speaker 1: you founded. Are you worried that this is just the
Speaker 1: threat of competition from China outdoing what's happening in the
Speaker 1: United States. There's certainly that's certainly true. But the way
Speaker 1: the Chinese companies go about the AI space is different.
Speaker 1: I remember when I started my company in Cairos, we
Speaker 1: had the number one source of attacks were from China.
Speaker 1: Number two sorts the attacks were from Russia, constantly trying
Speaker 1: to get access to the data so they could then
Speaker 1: use that in their own uses. They do not have
Speaker 1: the same approach toward the morality around these technologies that
Speaker 1: we do in the US. In fact, we've seen some
Speaker 1: issues with the morality, the ethics, the speed of development
Speaker 1: here in the US itself as well. That open letter
Speaker 1: coming from hundreds of signatories wanting a pause on AI
Speaker 1: development here in the United States, Brian. From your perspective, therefore,
Speaker 1: is the US at risk of losing this battle versus
Speaker 1: the Chinese? And what more do you want put in
Speaker 1: place from a federal level, even I think it's a
Speaker 1: good point there. You know, our house and our hands
Speaker 1: are our clean either in the world of AI, we
Speaker 1: can do better, we can be better, but there is
Speaker 1: a process in a system that can allow for an
Speaker 1: improved AI. We're having those conversations now with morality leading
Speaker 1: leading the goal. Oftentimes in China these are not conversations
Speaker 1: or their conversations held in back rooms. And I think that's,
Speaker 1: you know, one of the challenges. What about the reverse.
Speaker 1: I know that we have Syphius in this country, But
Speaker 1: are you against say Saudi money or Chinese money coming
Speaker 1: in and investing in the AI field for US based startups. No,
Speaker 1: I'm completely inconsistent on this matter. I would I'm happy
Speaker 1: to take those dollars here and to use those you know,
Speaker 1: and into our framework. That said, I wouldn't want those
Speaker 1: technologies to be exported back to Saudi or back to
Speaker 1: China and used for human rights violations. From your perspective, Brian,
Speaker 1: what stops this because in many ways. If you're seeing
Speaker 1: it from a negative perspective, US money going to China,
Speaker 1: you're already saying, Look, Pandora's box has been opened. People
Speaker 1: went out there did joint ventures with China because at
Speaker 1: that point everyone was trying to build a more global
Speaker 1: and globalized state of capitalism. How do you unwind that? Yeah,
Speaker 1: I think China's evolved over time, as has the American position.
Speaker 1: I think you're seeing both on the right and the left,
Speaker 1: real concerns around TikTok and other platforms. The genie is
Speaker 1: out of the bottle, certainly, but in this case it's
Speaker 1: not too late to put it back in. Regulation can
Speaker 1: put us where we need to be if we have
Speaker 1: the strength to put it in place. Lightship Capital partner
Speaker 1: Brian Rocquin, thanks for joining us. Impact on jobs is real,
Speaker 1: but it doesn't have a super intelligence that will have
Speaker 1: a mind of its own. It really just it's the
Speaker 1: next word, because that's what you're asking it to do,
Speaker 1: you dot Com ceo Rich As such, they're talking about
Speaker 1: how basically apopalyptic scenarios around AI pretty unlikely, which is
Speaker 1: just the subject of my Business Weeks piece today about
Speaker 1: how the real risk of AI development might be more
Speaker 1: well closely into disinformation. Brobot Business Weeks, Max Chaffkin, I'm
Speaker 1: pieces say, is joining us to run through this hype
Speaker 1: around the intelligence part of artificial intelligence seems to be
Speaker 1: a little bit making it more of the hype cycle.
Speaker 1: What are the real issues? Do you think? Yeah, so
Speaker 1: it's kind of telling that the people that many of
Speaker 1: the people who are most worried about these technologies are
Speaker 1: also the people who are selling these technologies. And you
Speaker 1: can kind of see why, because if you're trying to
Speaker 1: sell something, it's very useful to say this might be
Speaker 1: too powerful, might be too scary. Now, that's maybe a
Speaker 1: cynical way to look at it, but as this piece
Speaker 1: points out, I think the kind of conversation around AI
Speaker 1: overlooks the issue of misinformation, which I would argue and
Speaker 1: I think many others argue, is the real concern. So
Speaker 1: we're not talking about superintelligence taking over turning us all
Speaker 1: into paper clips. We're talking about our social media, our
Speaker 1: search engines, basically all of our information consumption being flooded
Speaker 1: with garbage or stuff that kind of looks real but
Speaker 1: not real. So you think about junkie search results, junk
Speaker 1: fake stuff on social media. That's the sort of thing. Max,
Speaker 1: Caroline and I have had signatories to the petition on
Speaker 1: the show, and they don't even agree that a six
Speaker 1: month pause would work. Is there anything that they do
Speaker 1: agree on, whether they were a signatory or not. No,
Speaker 1: I mean, I think that what's interesting about the petition
Speaker 1: is it brings together a lot of different voices, some
Speaker 1: of whom are would more express the critique that I'm expressing,
Speaker 1: and others who are expressing this apocalyptic thing. And that's
Speaker 1: one of the reasons why I'm not sure this letter
Speaker 1: has been particularly useful or will change a whole lot.
Speaker 1: That said, you know, there is a possibility of regulation.
Speaker 1: I mean there are hints of that, you know, coming
Speaker 1: from the US government. You could imagine a situation right
Speaker 1: now where the US government is worried about takeover, but
Speaker 1: something smaller. It's got us all talking about it either way.
Speaker 1: Bloomberg Business Week's Matt Chafkin, thank you. That does it
Speaker 1: for this edition of Bloomberg Technology. Caroline, Yeah, short and week.
Speaker 1: We're off tomorrow. Go have a relaxing time. If you're
Speaker 1: not working too, don't forget to check out our podcast though.
Speaker 1: We've got a few minutes to spare. Find it on
Speaker 1: the terminal as well as online on Apple, Spotify, and
Speaker 1: iHeart from New York. From San Francisco, this is Blomberg