'Bloomberg Technology' Full Show (04/20/2023)
Hardware, innovation, money and power collide in Silicon Valley and beyond. This is Bloomberg Technology with Caroline Hyde and Ed Ludlow. I'm Caroline Hyde IBEX 1 headquarters in New York at Ludlow is on assignment. This is Bloomberg Technology. Coming up, TSMC shares jumped the most since February despite a global slump in chip demand and warnings of softness, but signs of stabilization. We discuss Tesla risking margins in order to boost sales volumes. The company has been cutting car prices
on a near monthly basis. Musk hinted at more cuts to come. And Space X is one step closer to getting humans to Mars. After getting its star ship off the ground, we'll break down the surprise ending to the historic launch. First, as always, we check in on these markets. And, well, as you see, we're actually getting some reprieve to some of the individual movers today. We wanted to go more broad to start, but I'll go in on the micro for the first and foremost. IBM currently up nine tenths of a
percent as it gave a forecast for annual revenue in-line with analysts projections, delivering a cautiously optimistic sign, perhaps amid this uncertain economy. Lam research up seven point seven percent, really managing to outperform as some of these China curbs on impact and company quite as much as it had anticipated. Remember, this has come as we have breaking news that Biden is to unveil China investment cuts before the G7 summit in May. We move back to the broader indices, NASDAQ off by five tenths of a percent.
We're still worried about the economy. The headwinds we see actually signs more of those recessionary headwinds upon us. Some of the jobless claims coming in higher than expected. Some of those business macro data not ringing quite so strong today. We see the two year yield, therefore, fall on the back of perhaps potential for the Federal Reserve, not have to hike quite so far, so fast. We're at four point one six. Bitcoin as we see some risk aversion down by two and a half percent, though all of this is as we tried to digest what's happening in lam research on the higher side of things in terms of chips. But what we saw, interestingly, is we
have some TSMC in particular actually rising, even though perhaps we saw both signs of concern around this business. Many saying, I'm pleased to say, is here with us. Just walk us through the ideals of TSMC up, even though we're still bottoming when it comes to the chip cycle, according to the CEO. Yeah, and the results are much better than feared. You could see their pricing actually
grew 11 percent, even though their first shipments were down 15 percent. But the pricing held up quite nicely, which is reflected in the gross margins. So compared TSMC gross margin versus microns microns was the worst quarter in the history of the company, negative. Thirty one percent in the case of TSMC due to a 200 basis point decline. And the pricing, like I say, held up very well. So and they didn't cut CapEx ahead of
the earnings. There was speculation they going to cut their CapEx. That didn't happen. They read for the reaffirmed the CapEx for this year.
And the reason they're spending is because they have to diversify their own supply chain for their unused, largely because of what Joe Biden's doing in terms of executive orders to target China, U.S. relations. Absolutely. They have to open overseas fabs, one in Arizona, one in Japan. They're talking about, you know, production being live by 2024. So clearly they are diversifying. They have no choice. And that is where the gross margin impact may show up, because those fabs aren't going to be as profitable as the ones they have in Taiwan right now.
So that's the longer term risks they have, because as they diversify their locations and the factories, it will have an impact on their pricing and, you know, the cost structure. So clearly that's a risk. But they have the visibility and the commitments from their strategic partners like Apple, like in video. These are the customers of TSMC and they have visibility for, you know, demand on like that 3 nanometer node, the 2 nanometer node there. They will run at full utilization. I'm worried about Intel and you know, what will happen to them because of what we saw with Micron. And I think if you are diversified right now, you are in a good spot. TSMC is exposure to high performance
computing was 44 percent of their revenue. Remember, smartphones was the largest segment. Now it's high performance computing. That's where the EAI chips come into play. And I think if you are not diversified
right now as a chip manufacturer, you have a problem. If you push us poverty forward, it's trying to read the tea leaves. When an IBM is out there saying, actually, we're a bit more upbeat despite, you know, slowing and headwind economy. We've got companies. You just have to be in the right place
at the right time to weather this current quarter, right? Absolutely. Autos, again, bright spot, autos, revenue grew 38 percent. It's still small, but it could be the next high performance computing segment. Remember, high performance computing was
much smaller three years back. So that's where if you're a manufacturer, you'd need to diversify. And I think Intel, that's what they need to show when they report earnings. Don't tell me. Internet of Things is actually becoming a reality man. Deep thing. We love him on that.
Just pushing us forward to what you need to be worried about with the next set of earnings that's go from chips to Evie's. Now, in terms of earnings and Tesla. Actually down quite hard today after its first quarter, margins were hit by a slew of price cuts. Well, I we reduced prices considerably in early Q1. It's worth noting that our operating margin remains among the best in the industry. We've taken a view that pushing for higher volumes and a larger fleet is the right choice here versus a lower volume and higher margin. Let's bring in the Wesley Group managing partner and former Tesla board member Steve Wesley. For more on this.
So is this the right course of action, short term pain for long term market share? Well, I think it absolutely is. I mean, look at this solid Q1 results, record delivery sold to four hundred and twenty three thousand units on a way to doing one point ninety two million units this year. That's stunning. Twenty three point three billion in revenues, slightly above forecast net profit, 2.5 billion for the 15th consecutive profitable quarter. A share price up 51 percent for the year. Hard argue with those numbers, but I think they're doing the right thing. Cutting costs, expanding market share. That is a smart move.
I mean, as you say, revenue is rising at rose 24 percent. But you say it's hard to argue. But investors are arguing that cutting the overall market capitalization of this company on the day pretty hard. What do you think investors got wrong? They just get too ambitious in the short term. I think there is probably a bit of ebullience in the marketplace, but I think as people step back and look at this, as Eli said, this is. Essentially one of the most profitable
auto companies in the world. They can afford to trigger a global price war. And that is just what they're doing. They're taking price cuts, prices down six times this year, already twice more in the last 30 days. That's stunning. But they can afford to do it. Others can't. What's interesting here is people need to understand. They say, is there a demand issue? Absolutely not.
The entire world is going all electric customers bought 10 million electric vehicles last year. They're projected to be at 20 million vehicles a year within just three years. So there's not going to be a shortage of demand. You I think he's smart. He's buying market share when he can. And I think that move is going to pay off. I mean, it's worth reiterating our operating margin is down, but it's still above 11 percent.
Look at GM. That's just six point six percent in Ford's. That's just 4 percent. What is there any concern around Elan and his navigation of this company at the moment? He's meant to be giving us the Cybertron production pretty soon, but he is still kind of distracted, it feels like, with what's going on with Twitter. And he's also got a space company that is running and making big strides on. Well, look, who knows how distracted he is, just looking at the numbers.
You've got to be pleased with the car companies going from one point three one million in vehicle sales last year to one point nine or two million this year. Factually, they're just growing faster than anybody else out there. Second, because Tesla has been smarter and executed better on the profitability issue because of three things. First, to bring battery production in-house, that lowers costs. Second, the clear leader in what's called a software, they're miles ahead of anybody else on that third.
The clear leader in the robot ization of the manufacturing process. They get cars produced in a fraction of the time of others. What does that led to to EPS? The gross margins.
It looks like at 3x the gross margins of Toyota, almost 5 x gross margins of Ford. Now those numbers will come down a little bit. But as long as he can expand the Tesla name, I think Tesla is going to be looking awfully good.
I think he's making a move that may hurt him a little bit for the short term, but it's going to pay big dividends for the long term. Steve, you talk about how demand is not the issue here. I just want to bring in another viewpoint from an key senior equity strategist at Federated Hermes. That's one Linda DAX. I'll just have a listen to what she had to say. As we know in these last couple of years with Covid, first you couldn't find a car. And then there were too many cars. You know, there was a glut of used cars, et cetera.
And so now and now we have Tesla saying basically saying we'll sacrifice margins in the name of using this factory space that we have. So as long as the consumer still has money, then, yeah, that's a blessing. That's that's a piece of disinflation. And they'll probably take him up on it. To anything, Steve would make you second guess that the consumer has money. NUTTER Oh, look, I generally agree with what you said, but you've got to remember here is one test, the first, but the Model 3, for example, are all out the door. It was about a sixty thousand dollar
car. Today it's at forty thousand. It was government stimulus. It's really down to and state stimulus that also available down to about 30 to 33000. This is getting pretty close to where a Honda Accord is in those prices.
There is not going to be any demand issue. And I think that's why long term you making the right move. What do you want to see from me on in terms of his own investment now in terms of continuing to expand production? Because when they have that sort of great master plan they just came out with earlier this year, it felt like some of the production levels were just extraordinary.
Well, they are extraordinary. You've got to look at most of the other competitors, GM, Ford. They have one or two evey plants up and running. Tesla already has four giga factories, a new one in Monterrey coming, which will be up literally in less than 12 months. New battery plants in Shanghai and later have already online.
So Tesla, simply put, is just moving faster than others. You got to give him credit for that. Just look at the numbers comparison. You know, in the honorable mention category of Ford announced 10000 evey unit sales compared to four hundred twenty three thousand for Tesla, General Motors at twenty thousand. They're not catching up. They're falling further behind. The fascinating news, if you step back and look at it, is the major competitors to Tesla are two Chinese companies.
Be widely Hang Seng ISE. This is a global changing of the guard, and I think investors should look back and see really three things. First, Tesla's lives extending their lead. Second, the Chinese are coming quickly. And third, a lot of these smaller firms. New Fisker and so on that come Lordstown, they're just can have a hard time making the cut. Yeah, I think E1 is pressing consolidation in the industry and I think he's going to be the winner when all is said and done. Steve, I just want to drill in on that
really interesting point about China. We know that actually some Chinese demand is frustrated by the price cuts, but the Chinese investment is that we know commitment to Shanghai, for example, not only with coal production, but battery production. Are you worried about geopolitics here? We just hear that President Biden will unveil China investment curbs before the G7 summit.
He doesn't want U.S. companies like Tesla investing in China. Yeah, look, there's a tale of two cities here on the upside. Just China's the world's largest auto market, and Tesla has moved quickly, put manufacturing facility there, and Tesla is killing it in China. That flip side of that curve is if there's ever a real estrangement, a geopolitical crisis and anything like what happened in Ukraine where Russia nationalized a lot of our companies test, that would be in a world of hurt because 40 percent of their capacity comes from China today. But in the meantime. If you want to win in the auto industry,
you've got to be playing. China is the largest market in the world. Seven of the top ten biggest selling Eevee are Chinese names. So right now, Tesla has played the game well. And I think if you're your own musk, you have to be going to bed every night praying that the Cold War with China doesn't get worse. Right now, he's looking awfully smart.
We'll see. I'm not sure he's in a bad. I think he's on a safe somewhere. And at Twitter, I mean, the factory floor, maybe he gets his few hours of sleep. We thank you so much. The WB group managing partner, Steve
Westly. Great to have you. Meanwhile, let's talk about it. President Joe Biden aiming to sign an executive order in the coming weeks that will limit investment in key parts of China's economy by U.S. businesses. And that's all according to sources. The administration has been debating the
measure for almost two years now and it plans to take action before a summit of the Group of Seven. That's due to start on May 19th in Japan. Coming up a second time wasn't exactly the charm for the massive Space X Starship rocket launch, which of course, exploded in the sky just minutes after liftoff. But there was positives amid these technicalities.
We'll dive into what Musk himself had to say. And let's just take a look at another key earnings read off. We saw AT&T come out with its numbers and went down hard on this particular stock. Of course, it's missing analysts
estimates for free cash flow in particular. They added perhaps fewer subscribers than a year earlier, although they did beat in that particular month when the 400000 added. But free cash flow was 1 billion in the period. And Wall Street wants to see more than three billion from New York.
The Supreme CAC. Space X is star ship rocket. Quite complete its mission on its second launch attempt. Starship appeared to explode in the sky
several minutes after lifting off from the facility over at Ketchikan in Texas. More on these events. We're joined by Bloomberg's long crush. He was just at the launch site earlier and Elon Musk himself said expectation. He said, look, as long as we don't blow up the launch pad and they didn't. No, they didn't. They actually got pretty far away from
the launch pad, and I will say from the ground it was a spec. Macular site. Well, before the explosion happened, I mean, we could feel the rumble in our chest of those 33 engines, though, I think when I looked at the livestream later, not all of those 33 engines you can see on the screen were actually a. So there were some engine problems. I think apparently with we'd like some more confirmation from space X.
But, yes, they they did get valuable data hopefully just from being able to clear the launchpad. But yes, something didn't quite go right around two and a half minutes into flight. The stage it is supposed to separate and instead the rocket seemed to veer wildly off for that.
Oh, I think taking sort of hits on this line. Lauren, I'll just ask one more question. I for your line stabilizes a little bit. But Space X did say they experience a rapid unscheduled disassembly before stage separation. So new ones that push us forward. We knew that there was a delay. They then came on for 20, which we know is a key take for you to Musk in many ways. What do we expect next? A little bit more description of what went wrong and then the next test flight, I guess.
Yeah, for me personally, I really want to know what actually caused the mishap. You know, why did this stage separation not occur as planned? What was going on with those engines that appeared to be out? And then also I'd like to know from Space X whether or not, you know, the rocket broke up on its own or if they terminated the rocket personally with the flight termination system. It's a system they can use to blow up the rocket to protect the uninvolved public. And then, yes, you know what? How will they incorporate the lessons learned from this flight into the next flight that they do, which I believe Ilan said would happen in the next few months.
So very much looking forward to the timeline and then also the root cause of this issue. Extraordinary. We continue to keep a across all of it with our own law in Russia. Thank you so much for making the time. Meanwhile, let's turn our attention to the financial world for a moment, because American Express set aside a little bit more cash to cover any possible loan losses as the economy starts to slow. That did ultimately weigh on some of the
earnings, even though the CEO would say, look, this is just a normalization. Shares fell despite spending volume still climbing 14 percent. I got to have a chat with CEO Steve Inquiry about investments in financial technology in particular. He said We had a guy and our models forever and our credit models and our role models, how we market to our customer, what we're thinking about A.I. even more now is in our customer service. And of course, he sort of made me
chuckle with the fact that the new technology a couple of years ago was all about block chain. Now it's all about new tech that is GP T and he in particular saying that looking at this stuff for a while and well, we'll just have to do it in a controlled way and make sure you find the right business case. Have much more on what IBEX had to say a little bit later in the 2:00 p.m. hour. Meanwhile, coming up, a look at today's big take, which I have to say exposes the dangers of tech stocks. Algorithm to troubled teens discipline
back. Today's Bloomberg Quicktake. It's an emotional one. It sheds light on the ways in which tech stocks, personal feed can actually be a never ending stream of anxiety negativity as part of her series on tech talk and it's trust safety issues. Bloomberg Businessweek Hovell writes
that the app's algorithm has led teenagers down rabbit holes related to self-harm, to depression, even suicide. This say Olivia joins me now. And it's heart wrenching, this story. A mother having to after the death of her child. Look at what terms you search for on an app such as Tick Tock. He's such a Batman, basketball, weightlifting. What did he get?
That what chase NASCAR was seen as a stream of counting about anxiety, depression, unrequited love, self-harm, and in some cases, suicide. I actually watched this account and it's still sending that content today. It was really difficult to see what he would have seen and to try and put yourself in the shoes of a teenage boy watching neverending streams of really sad videos. What, therefore, does this say about an algorithm that in many ways people tend to tick top for joy, for hilarity, for fun? Why is this happening to vulnerable teenage children? And that's what his parents kept asking as they thought. Tick Tock was about creating joy.
That's the company's slogan. They thought it was funny. Happy dance videos. And when I went to meet them in Long Island earlier this year, they asked that question of where are the hippie videos? You know, we were looking at his account together and what is still being seen today. And there are no happy videos coming through. Tick Tock sees that it has worked on this specific issue and it's been working on it for years, trying to break up repeated videos about said topics, whether it's depression or eating disorders or suicide related content. But effectively, what this account shows us is that those efforts have fallen short. In some cases, they haven't worked.
Tick tock have responded. You've had a spokesman in particular speak to say they're committed to safety, the well-being of its users, but especially teens, researchers and child psych colleges. They're getting more and more anxious about this on their own. What steps can anything be done from a regulatory perspective when next goes in your reporting journey? Well, I think one of the biggest concerns for child psychologists and researchers is that we're seeing this looming youth mental health crisis. We're seeing new data showing that kids
are experiencing higher levels of hopelessness, of suicidal thoughts, of anxiety. And alongside that, we're seeing explosive use of social media. So while causation is very hard to prove, the correlation is right there in front of us.
And that begs the question of what more can be done. Tick Tock isn't the only platform that has a recommendation engine that is pushing harmful content to kids. And one of the calls that we've seen time and time again from researchers is give us transparency. Let us study your algorithm, lead us understand how it works, what drives it, what powers it. Right now, these companies aren't willing to provide that kind of transparency to researchers, and that is frustrating the academic community. They feel locked out from studying a phenomenon that is impacting millions of kids around the world.
And every year you keep bringing us transparency and we thank you for it. It's an amazing read, heart wrenching one. Olivia Calvo. Meanwhile, coming up, we're going to talk about something entirely different. European lawmakers passing an ambitious set of rules to govern the crypto industry.
A report from the U.K. next. This is Bring Back. Welcome back to Bloomberg Technology AM Caroline Hyde in New York.
Let's get a quick check on these markets for you, because we are still under pressure from a big tech perspective. NASDAQ 100 coming off of its lows just turned off by a quarter of a percent. We're worried about economic gloom. The jobless claims ticking higher. Some of the business macro data not looking quite as pretty. So instead of that bad news being good
news in terms of the Fed, today's bad news is bad news. And we're worried about the economy. You take money off the table. We take money off out of Microsoft, drop by a quarter of a percent. Not big move. Remember, just after the bell yesterday,
we got some news that a mosque was potentially threatening Microsoft with a lawsuit over Twitter's data used when its training, its A.I. algorithms. But we're off by a quarter percent more broadly with the market today. Alphabet shares are on the flip side. Remember, they've sort of been the underdog when it comes to A.I., but Alphabet seems to be on the rise a little bit, maybe kind of use generative A.I. to create ad campaigns according to the
FTSE up one and a quarter. Let's move it on to the other previous area of exuberance when it came to tech and it was all about crypto, of course, bitcoin off by two point three percent with sub thirty thousand after what's been a spectacular run up so far this year. Maybe some calm coming out of as we start seeing some resiliency to the financial market, in particular the banking market here in the United States. This is earnings come in and we see a little bit of weakness just in the world of. We're off by one and a half percent down below that 2000 mark. Let's talk a little bit more about crypto.
Not so much. The price moves on the day, but the future of regulation. Police say Emily Nicole joins us for what is some movement at last when it comes to regulation. But over in Europe, can you talk us through what's being decided at the moment in terms of the first EU sort of package that seems to be coming towards tech and crypto startups over that? So the EU has been working on its crypto legislative package the last three years, and it's finally here.
The European Parliament formally approved the final text of the markets in crypto license regulation, also known as Mika might get depending on your translation. Earlier today, I note that includes is basically a bill of rules. That means that now crypto companies seeking to operate from the EU will need to register in one of the member states, and that then allows them the right to passport those approvals across the entire bloc. It also seeks to put in place some risk management and corporate governance structures so that companies are able to operate within the EU under the purview of supervisory authorities and in a bid to avoid another RTX collapse. Yet it's felt like the talk was pretty
tough coming from the shadow representative of Mika Miko. Have you sat saying you need to provide a safe haven no longer to fraudsters and criminal organizations, but really a unified way of regulating crypto? It's got to be joy to many founders is in some way. The crypto industry as a whole is generally very happy about making it because in their eyes it's, you know, any rules at all, a good rules, and we'll really see that. We mean, you know, bespoke rules for crypto in the eyes of the industry. It's something that doesn't really fit
into its existing financial services. But not every regulator agrees those proposed in the UK, for example, the rules that were set up by the government earlier this year. Those would seek to set crypto under existing financial services rules. And we've heard Gary Gensler in the US earlier this week saying that crypto should fit under the existing financial services rules in the US. But the companies, when they come into
the FTSE and talk to them about it, just don't really like what they hear. Yeah. No wonder, therefore, Europe's been taking a bit of market share in terms of crypto venture funding. Emily Nichol, we thank you so much. And really for crypto, the real cloud has been regulatory uncertainty here in the US. But sticking on crypto, we've had a lot about the crypto sphere choosing Miami.
If you are building in the US to be one of its key hubs, in fact, Bitcoin Miami is around the corner. It's not just crypto has emerged as one of several rising hubs in tech at large. It's brought about by the pandemic shifting trends, of course. So today we want to focus on Intel Miami a little bit. The Emerge Americas conference is kicking off in Miami right now. Bring theses tech entrepreneurs together
for two days. Let's bring in the Emerge America CEO Felicia Corrado. Wonderful to have some time with you. You've also been nominated as the U.S. representative on the board of the World Bank Group by President Joe Biden. So some big tasks at hand. Chair to finish a. Talk to us a little bit about what's
happening about the signature event. You launched back in 2014. How many people are you expecting? Yeah. Thank you. First, Caroline, for having me on Emerge Americas was founded in 2014 with a similar focus to transform my me into me, a global tech hub. And we do that by convening all stakeholders that make up any thriving tech ecosystem from government to hire startups for investors. And we connect the dots between the entrepreneurs, the capital and the talent.
And we tell the stories of how South Florida and the recall is transforming. We're doing this specifically to capitalize on this very moment. And so today we have more than 20000 attendees from all around the world that are convened here to showcase their their their new startups, their investments, and to make those connections to help take their businesses to the next level. I would say, you know, talking a little
bit about or dovetailing from your previous speakers, if last year was all block chain this year is all out A.I.. We've got literally the guy who wrote the Bible on A.I., the former CEO and chairman of Google. Schmidt will be keynoting tomorrow. And I just got off stage with the seven time football champion, drill entrepreneur and best selling author Tom Brady, who was our opening keynote this this morning. But interestingly, T.J., of course, I would associate Tom Brady more with
crypto with change. So is he pivoting to A.I. as well? I mean, how are you seeing what has been real up in V.S. money being allocated to Miami, perhaps taking a hit from 2022 like the rest of the tech world because of the pullback in crypto money? Well, that's a great question. But it's actually more of a myth. The reality is the data speaks for itself. Miami has led the nation in terms of venture growth being number one in the nation, former venture activity since the start of the pandemic. While the rest of the world to be
contracting, Miami actually only continues to expand. We've grown about 248 percent since the start of the pandemic. And while investments continue to focus on fintech, we also have been one of the leading health tech hubs. And I would say and argue also for climate tech with with this being also incredibly important to our community and to the region as a whole. But surely money must be pulling back. And in a way, I mean, has the money that in terms of sponsorship coming for your event pulled back any compared to 2020? That's actually a great question, and the reality is, no, we are actually pacing ahead of where we were in 2022. We've have more enterprise tech companies like Microsoft, Google and Dell for startups. We've taken up more space on our Expo
floor. We also partner with us year round. We're not just a bet, we're we're a platform. And so we organized startup pitch competitions, innovation challenges, investor summits year round. And these tech leaders are not just planting a flag here in South Florida. They're looking to also expand their footprint, apparently resilient to the macro trends. We thank you so much. Imagine America's CEO, Philip J.
Corrado. Meanwhile, coming up, we'll take a further look at the Miami RTS scene. So far, ventures of the partners CAC belongs over there at the event. When I talk about, well, whether they're
putting boots on the ground in Miami, plus a look at one particular LatAm company I currently bring, the shares fell off by a quarter of a percent. But some interesting moves in terms of how much that building up is the largest e-commerce company over there in Latin America. And it's fucking tech layoffs by adding 13000 workers this year. Bring back. Time now for RTS Roundup, starting with Tiger Global. Ten point seven billion dollar venture fund houses recording a 20 percent paper loss as of December 20 22. That's all according to the information.
It's taking a hit, of course, from the FCX bankruptcy. So as a matter of tease in the company's portfolio, on the positive side, J.P. Morgan is closing its inaugural growth equity fund with over one billion dollars in aggregate capital commitments, 80 percent, which is available to deploy in new investment opportunities and to help its portfolio companies scale. Let's stick with the VCR, seeing a little bit more and funding. Let's get back to emerge Americas
conference over Miami. Crypto tech workers moving there. So did we see deals? Therefore, still, mommy's not at the level of the biggest hubs like here in New York or over in the Bay Area, bringing in only a fraction of the deals compared to these major hubs. According to pitch book. Will it bring in more? That's all someone on the background has. Wang's their partner at Sapphire Ventures. What you'll read about what the opportunities are in Miami because Sapphire Ventures doesn't have an office there.
Right. But are you making investments that. Thanks vote. Thanks for having me on. Caroline. You know, we don't have an office in Miami, but we constantly look for opportunities that are outside of the Bay Area and New York and some other court tech markets. I would say the innovation here at emerge, as well as the broader Miami city has been has been amazing. I've got the opportunity to talk to a
lot of founders, NBC specifically in certain areas like crypto API and developer tools and all that. Of course, you'll largely sort of focusing on bigger later stage companies. What are the opportunities for that now? I we're just hearing from the CEO of Emerge saying this year is pivoted from all things crypto to all things artificial intelligence. What sort of companies attracted? Yeah, I understand. So, you know, we think a ISE a super
trend for a decade next decade. Come in a short window. However, you know, the processes that are being disrupted by the short term from a value creation perspective are actually better captured by incumbents to some extent. Right. So let's say, you know, if you are trying to build the next generation salesforce, tell stories by adding a on top could potentially do better than a company. So look for companies and founders that have a unique take on A.I. and how do you apply just certain business processes and the way I think about this as compared to, let's say, the Internet. Right. We don't we don't have new speed as a way of consuming content from the Internet all the way until Facebook came up, the concept newsfeeds.
So we're still waiting for that big moment for long term value creation. I can already see multiple pockets where I could really come in and create real value and disrupt existing business processes. Customer Lend us your expertise as to how you're sorting wheat from chaff because there's an awful lot of people who is suddenly an AI company or an AI startup that when? A few months ago. So how are you ensuring that what they're building is really changing the way in which productivity could be? Yeah.
Caroline, this is a great crash. This space is emerging so fast. Frankly, it's very hard to track even from an investor perspective, right? We had Sapphire Ventures. We'd be starting, we'd be investing a ISE for last DAX. So this is not a brand new thing, it's just a Jeremy models themselves had been a new way to interact with human beings and add certain chat functions that are familiar, familiar to the users themselves. So for me, I really look for one again,
a founder that has a unique take on a specific problem. So not necessarily just starting from technology, but starting from the business problem itself. That's that's probably number one. And number two, from a pure technological standpoint. I'd like to understand how they differentiate from the incumbent solutions. Right.
Better is a distribution advantage better. It's, you know, pure technological advantage. Do you have a new take on distribution? Because every day again, going back to my point earlier, I know just applying to existing business process doesn't solve the distribution problem and incumbents own distribution.
So that's a big thing. I keep seeing companies and I keep trying to challenge founders. What's their unique take on this? Because what was interesting is what seems to have the crypto world really concerned right now is regulatory lack of clarity. And we still have a lot of concerns. Let's say in the way in which A.I.
is currently being built, the ethical nature in which it can be scaled. Do you worry about regulation? How do you see this? CEOs, the founders are talking to navigate that one. Yeah, that's it. That's a great question. Again, I think, you know, first of all, I think a safety should be top of mind for both regulators and builders at the same time. I think in the valley there is the sense of, you know, you try to build first and ask for forgiveness later sort of thing. And I think that philosophy, a
mentality, doesn't necessarily apply to a ISE. Now, we are, you know, despite the fact that in some sense we're kind of close to a guy, you know, we're not that close yet. So we are we do have some time to figure this out from a framework perspective. Well, we do want to see some real clarity around, you know, regulars come in and draw the line for companies and founders to play within that.
Right. And, you know, that just takes time and takes practice. And given how fast a space is involving. I'm assuming the regulations probably will come not this year, but the DAX you you specialize pottering V to be SaaS companies as well.
That isn't just all things they are. Things like cybersecurity, cultural, good old kind of almost economic resilience, building of cyber companies. Where else is attracting you? Because it can't just be checks being written to a ISE kind of. One hundred percent. Look, I would say going back to that point, I you know, I don't think about a specific companies. I think about how people apply. I enjoy cyber marketing, sales and orders other pockets of B2B sounds. Right. Today you don't.
You don't find a company and say, we're mobile, right? Just like tomorrow. I don't think we'll see companies or say that I only and cyber to me is an incredible, you know, incredibly exciting space. Right. I think, you know, no one cyber has been the top priority for increased spending, but everybody's looking to get less and get more out of laughs. Right. It's the analogy I use is like our iPhone. You know, when we first got iPhone, we've got 10 outs on this. We can keep downloading new apps now.
We've had a thousand apps on iPhone. We're not a download new apps. And similar thing is happening cyber to where to see sales. The key buyers are looking for consolidation in real time. And secondly, I think what's incredibly interesting signing is, you know, the talent shortage in cyber is unfortunate, not going away anytime soon. So there is going to be opportunities for companies to come in and provide not only just, you know, alerts and insights for companies to provide a lot of my solutions forward for those companies and buyers who want to tackle cyber SKU challenges. How so?
I saw those are incredibly excited. All very exciting about how much these founders are having to get to grips with. Where valuations are now are even for something as exciting and exuberant as A.I. or cyber. Yeah. Look, Carol, I think it's a great crash and I don't have a crystal ball. I would say, though, I think valuation is coming down real time. You know, it's bridging the public
market and the market is bringing in real time now. At what point do we get you an equilibrium on where we started seeing a lot more deals happening? My personal guys is probably we're still a couple of quarters way from that point. But I would say, you know, efficient growth has been a big, big trendy word this year in the valley for good reasons. And one of the key reason and one of the key unwinds statement behind efficient growth is not low. Growth is created equal.
Right. We're gonna have high growing, high profile companies that are flying today that may not be a big public IPO. Companies that could go grow efficiently and we'll have it now as investors are looking for new points which efficient growth early on in company cycle.
So instead of just looking at growth early on series A, series B, they're outing for the efficient growth sooner than later, which is which is another phenomenon that's impacting the funding market. And how how much are you being impacted by the fact that the exit market is pretty close? This consolidation, as you said, but maybe not so much from a regulatory perspective, from the big American companies being able to buy up smaller ones as we've previously seen, and let the IPO market still finish up. Yeah, yeah, totally. I think fortunately, most local phone companies have years of cash on their back on their balance sheet. We believe most of our companies are building resilient, long term, sustainable B2B businesses that don't always have a demand, right. The way I think about us is no economy is a function of productive growth. And B2B SAS is a big driver behind that
increase in productivity growth and a lot of our companies in DAX DAX. So, you know, the way I think about is there's a demand market. It's just how we get from point A to point B while surviving this downturn.
Casbah, great to spend some time with you. Go have fun over at the conference. Customer whining partner at Sapphire Ventures. Meanwhile, coming up, we are sticking with all things Miami. We're looking at it from a different lens. Tech media workers on Hyla from
companies like Metta Disney. Now BuzzFeed preparing to lay off hundreds of workers in the coming days. To Pipeline Equity CEO CAC Roy about the health of the labor force. Speaking of BuzzFeed, let's just dig in on that particular story because shares are currently off by war.
Twenty three percent in just this one day, they're shutting down the news operation as part of a retrenchment that result. And we understand 180 layoffs. Chief operating officer, chief rabbit officer also departing amid the cutbacks. From New York, the back. We continue our coverage of the Emerge America conference with a look at the labor market, gender economists critical, Roy joins us from Miami.
She's a CEO and founder of Pipeline Equity, uses artificial intelligence to help companies address and take action against gender biases in the workplace and Costco. When we look at these more headlines that BuzzFeed is gonna be laying off people when a matter started to execute on this way of thinking about how they lay off people and how it affects some of that overall gender equity and other areas affecting, you know, what we've seen so far is that that actually isn't true, unfortunately. So, for instance, the tech labor force is about 26 percent women. And yet so far they've been about 65 percent of those laid off, which is really unfortunate because we're actually taking a step backward in terms of gender equity in tech at a time when we actually need to be moving forward given all the advancements in artificial intelligence.
And everyone's so excited about artificial intelligence, how does your overall data work? What do you use the power of A.I. to do? Well, what we actually do is ensure that every people's decision that companies make so pay performance potential, for instance, are actually equitable before they're made. So a lot of companies, for instance, do pay gap analysis. And what we do is actually ensure the pay gap is closed and keep it closed.
And how does I take that a step forward? How you start to see other companies develop on this? Yes. So what we're actually seeing is that, for instance, if you look at performance reviews, what we do is actually look at how we use natural language processing and we find about a third of all performance reviews contain bias. So we can actually correct that before that performance review becomes part of someone's permanent employment record. And that actually catalyzed these companies toward equity. We've seen, for instance, on average
that our customers increase equity by 67 percent in the first three months on our platform. We love how hearing how a ISE actually practically being used in here and now. Kartika Roy, enjoy Miami. She's a pipeline equity that does it for this edition of Bloomberg Technology. Do not forget to check out our podcast on Apple, Spotify and I heart this every Mac.
2023-04-21 15:52
