'Bloomberg Technology' Full Show (10/19/2021)
From the heart of where innovation money and power collide. In Silicon Valley and beyond. This is Bloomberg Technology with Emily Chang. I'm Emily Chang in San Francisco and this is Bloomberg Technology. Coming up in the next hour Netflix once again surprises a big beat in global subscribers and it has nothing to do with squid game which isn't even reflected yet in this quarter. Shares up in late trading up. We'll break down the results. Plus trading in your pandemic sweats for designer digs rent the runway has revealed that subscribers are rebounding as the company looks to head to the public markets at one point three billion dollar valuation. And live from L.A. we'll bring you the latest from the Milken Institute Global Conference. Bloomberg's Carol Massar will sit
down with Kathy Wood of ARC Invest. Later this hour we're gonna get to all of that in a moment. But first it's going to look at the markets with Bloomberg's critic Gupta and Christie. A rally in stocks today. What did you see. Absolutely. Emily Green on the screen. And once again tech that really key outperformed. But it wasn't tech alone. Check out what rallied with it. Of course those Chinese ADR is
the thing that's having so much regulatory scrutiny really weighing on those shares today. They were the out performer up over 3 percent in the session. And of course now that we have a little of after hours trading you are seeing Bitcoin slipping from its highs today. But during the session actually very strong reactions in Bitcoin despite some of that news about Bitcoin futures. The big concern there was would that detract from some of the populism around a crypto assets in particular. But Emily that is not the case. Looks like it's still got about a 4 percent bid in today's session. I wanted to bring it back to
those big tech stocks though because they did lead the index lower over the last couple months in the last six sessions. They've actually been leading it hired here. I'm using Apple is kind of a proxy for those big tech names. You can really see Apple in the last four sessions in particular having a pretty good day. If you widen that out to Google or excuse me Alphabet or Microsoft that becomes five or six pretty good sessions of gains. Facebook or Amazon still a couple good sessions. So this
is pretty interesting. Very reflective of what you're seeing in the broader index. I want to end with the major after our story. And that of course is Netflix shares were up as high as three percent after hours after they beat their subscriber growth. Bloomberg was estimating four point four million total subscribers. Emily they came out with three point seven now projecting eight point five million next quarter. So some good news on Netflix. And on top of that just to put that cherry on top. You did see they so they say that they are going to be cash positive cash
flow positive excuse me next year. That did. Like I said move our shares after hours up by about 3 percent. It looks like pairing some of those gains and even Disney was taking higher once again. Looks like paring some of those gains. Emily. All right. Thanks so much. And I stick with Netflix now and bring in Andre Swanston senior vice president for entertainment and media
at Trans Union. Andre good to have you back here on the show. So look stronger subscriber growth of the year even as the world continues to reopen. We're getting off our couches and going to work. Are you surprised by this. No I'm not at all. Actually I think contrary to what a lot of other people think and I really thought that the projected number was quite low and that would be higher coming off of you know probably their worst quarter ever in it or at least in last four or five years. Typically when they've had a really really poor quarter in terms of subscriber acquisition the increase or the following quarter is really really substantial. And so I actually think that this was less of a bit of an increased.
So is that because Netflix is doing something wrong. I think it's because Netflix is not really doing anything different than it has historically. And so Netflix has been right so many times when people have doubted that strategy. I think a lot of people thought they were investing too much in international content years ago and that's although wasn't reflected in its numbers. I think that that holds true with the success of looping in squid games and other things. The challenge though is that they're still very slow to diversifying their revenue stream. And I think that the concern that I would have is that when you look three or four years out I don't think anybody doubts that a Disney plus will probably have a larger subscriber base to Netflix. There's others that are challenging for that premium subscriber base as well. But they still don't have an adequate fit offering. The transition into gaming has been very slow. There's
diversification of revenue. There's some merchandising that they they mentioned. But that doesn't appear to want it. Disney or NBC Universal does. And so I think that's the biggest challenge is that it's pretty much just more of the same. Interesting take. Obviously it's quite game has been the talk of the last few weeks. Netflix just announced it's been viewed in one hundred forty two million households. And you know sort of the devil's advocate case here is that a company like Disney can't put a game on Disney. Plus I mean it was a it was a risk for Netflix.
And clearly it's paid off. So what makes you think they won't be able to keep on bringing hits like this and beating Disney or HBO or some of these others continually going forward. Yeah. Well you know they say the past is prologue. If you look at the amount of dollars that Netflix is invested in the content of the last five or six years they've spent more money than just anybody. And you know we still we still get riled up in terms of the media world. Whenever there's a huge blockbuster success with a TV show or movie contrary to that it's big news when Disney flops. Because the expectation is that their content is going to be so successful and so valuable. And so when I look at kind of when I
look at Netflix if Netflix is challenge or their battle is to just out produced content that is better or more global or more valuable than Disney before NBC Universal or HBO I don't think that's necessary. The game they want to play because all those companies have much more ways to to monetize their audience. Netflix does. And so they. So so just even to come stand pat the next few years they actually do have to have better content and bigger hits which I think is challenged. Interesting. Well
speaking of content Netflix has been embroiled in a very public controversy about its Dave Chappelle special and comments that he made about trans rights. Co CEO Ted Serrano's has defended the decision to put this on their platform. Netflix employees some of them really not happy about this. What's your take on how much this impacts the broader Netflix story. I haven't thought much about what the impact would be to Netflix and broader. I think there's always a challenge between when you look at freedom of speech and an artist or an actor comedian producers right to be creative or to address its issues. At the same time you have
to be respectful of the different constituencies that consume your content and distribute it. And I think that's really up for Netflix to make their own decision. I will comment on what they're deciding not to do that but I think people need to be able to to to to face the consequences of any decision that they make. So. So if they're standing behind the showing the special I think that's their ability to do that and whatever the repercussions of that. If that impacts their subscriber base or
for the things that I think is good for the. All right. Well Andre thanks for raising some interesting points. Andre Swanston senior vice president at TransUnion. Always good to have you here on the show. Taking a look now at what else we are watching. Insta Cart is acquiring caper A.I. a startup that makes self checkout shopping carts. The smart carts use image recognition cameras and weight sensors to automatically detect items placed inside the 350 million dollar in cash and stock deal. It's part of in-store carts effort to tap more areas of growth ahead of its anticipated public offering. And coming up Rent the runway announces plans to raise over
three hundred million dollars in an IPO. And chip maker Global Foundry is looking for as much as two point six billion dollars in its plans to go public. We'll look at a roundup of the latest offerings and what's ahead for the rest of the year. That's next. This is Bloomberg.
Twenty twenty one has already been a banner year for public listings and there are still more to come. Fashion rental company Rent the Runway is seeking to raise as much as a 350 million dollars in its upcoming IPO which would value the company at one point three billion dollars at the top of the range. For more I'm joined by our Bloomberg deals reporter Crystal Z. Crystal rent the runway obviously struggled in the pandemic. People weren't leaving home or getting out of pajamas literally. So how have they recovered since the you know easing of lockdowns and how is that just driving the decision to go public now. So looking at the S-1 and the updated S-1 which she launched today it looks like financially we haven't seen as much recovery but the number of subscribers have actually gone up year on year basis in the first half of the year. Revenue and
net losses are mostly flat but we've seen almost a double in active users this quarter compared to the beginning of their fiscal year which was in February or this year. So it seems like even though people aren't going back to the office just yet some events are coming back. And that is something people do you know giving them excuse to dress up again. And that could have driven their decision to go public now. But the company that warned that in their risk factors section that how long the content of the pandemic would go on it's a concern. And that would severely impact their business if it could carry ons for longer. They're also cautioning in the filing they may not achieve or be able to sustain profitability. How do you expect investors to respond to
a deal like this. So it's actually pretty simple. What kind of language like most company that happened to part with profitability tend to put that kind of language in it. That said it seems like people online have some you know have their own thoughts on it. Some saying that this you know have the company really have and really haven't
proven that they have any ability to be profitable and get the pandemic definitely did not help. And I'm sure if they were given a chance they would have gone public and at a different time. But it seems like they have showed some recovery even though it's not in the financial terms just yet. Meantime Global Foundries planning to raise two point six
billion dollars in their IPO. Curious if they're taking advantage of the ongoing chip crunch and how that will play into how investors look at this deal. Yeah I'm sure chip shortages really playing into their favor. Them and Bartolo together are going to raise upward of two billion dollars in the listing. A majority of this year we've seen a bunch of consumer facing technology companies. So at the telling of this year we've seen Global Foundry was an informatics. A lot of these enterprise and
tech hardware companies are coming in at the back end of the year which actually could play into their advantage because of the backing. Investors tend to get a little bit more risk on when you have a more substantial business. We have proven with proven revenue and proven profitability that could really do well in the end of the year. So it really is a good time for global foundries as well as for investors. They actually have attracted a lot of investors for a cornerstone that have
indicated upwards of 1 billion of interest. So if the deal is two point six billion but in fact they really have to sell a lot less than that. All right. Well we'll be looking out for the additional action coming up later this year. Crystal Zee our Bloomberg News deals reporter thanks so much for that update. And Thursday catch a special edition of Bloomberg Markets the close focusing on supply chain pain. Our Caroline Hyde and Romaine Bostick will be live from the second busiest container point in the United States the port of Long Beach as supply chain issues across the globe persist. They're going to be talking some of the key voices impacted by the supply squeeze. Some guests including Maria Cordero of the Port of Long Beach.
Jeff Freeman president and CEO of the Consumer Brands Association. And Jessica CALDWELL Edmonds dot com executive director of Insights. And to another story we are watching the first U.S. Bitcoin linked exchange traded fund debuts pro shares Bitcoin Strategy ETF. Simeon Hyman shares global investment strategist shared his thoughts earlier right here on Bloomberg. We think this is gonna allow many people who've been waiting for an easy way to do this in a robust way to do this to now be involved and have it in their portfolios. Weighing in on the new ETF Guggenheim's global CIO Scott Miner
it says it's a very exciting development and a way for investors to bypass digital wallets. Miners spoke to Bloomberg Television at the Milken conference earlier today. Bitcoin in and of itself is very difficult. Mike for us we've invested in that point for our clients but you end up in you have to be in something that's a tradable vehicle like an ETF. So I think the ETF is a very interesting development. And while miners won't call Bitcoin a value play he doesn't recommend shorting it. In fact he thinks the world's most popular cryptocurrency will rise over the coming months. Take a listen. You see bitcoin and what it's done over the last few weeks. You know I I can't tell you it's a value but I won't tell
you that you should shorted because you know it's likely to be higher in the coming months. Diplomatic bear as ever we're going to have much more from the Milken Institute Global Conference Bloomers Carol Massar. We'll be speaking with Kathy Wood of ARC Invest. We're gonna bring that conversation to you live later this hour. Coming up the
American dream or almost. We're going to talk about the challenges facing immigrants who want to start their own companies right here in the United States after the break. We're gonna speak with partners from a V.C. fund aimed at leveling the playing field. That is next. This is Bloomberg's. The U.S. prides itself on being a nation of immigrants and yet starting your own company as an immigrant in this country is far from easy if not impossible for some. My next guests are determined to change that. Modern Mehta and Maria Salamanca are with Unshackled Ventures a fund dedicated to helping immigrant founded companies money. And Maria thank you so much for joining
us. Maria I'll start with you. What motivated you to start a fund focused on immigrant entrepreneurs. Now what I was really lucky to be the first hire after Monaghan I tend to go finding partners started the fund. But I myself am an immigrant. I'm a refugee. Came to the United States when I was seven years old from Columbia moved to Florida with my parents. And then ever since then I've been trying to repay what this country has given me and lived up to. What is the American Dream which is a very high standard to meet for. For immigrant families like my own. So it feels very natural to me to see a
farm that was going to be the first that that first check that family and friends round into immigrant entrepreneurs say I want to be part of that. I want to make it easier for them and help them succeed faster. How do you plan to do things differently than traditional venture capital firms like when it comes to decision time. Where do you see yourself making a decision then. Partners at other firms might. Yeah one of the things Maria hinted on was we really try to be that first check and I think what that means in true statistical relevance is that 60 percent of our commitments happened before the company was even incorporated meaning they don't have a you know Delaware C Corp. And what that really reflects is this idea of being a friends and family type of investor. And so for us it really comes down to challenging some of the pattern recognition behaviors of Silicon Valley RTS and specifically basing an investment decision entirely on their LinkedIn profile. Rather we try to understand the distance they've traveled the adversity muscle that they've built and underwrite the people fully recognizing that their ideas might shift but the people who will solve the problem won't. Maria you mentioned you're a former refugee yourself. You also
worked for Ford US the immigration lobbying group founded by Mark Zuckerberg. And I'm curious what insight that gave you into others experiences that might be similar but still different than your own. Yeah I mean look there's there's a there's the numbers can speak from the self right. And the United States population of far
more folks are about 14 percent. But we also know that 20 percent of the self-employed population happen to be foreign born. And when you look at just tech alone 20 to 25 percent on any given year are startup entrepreneurs are foreign born. And when you look at just unicorn companies. So those are over a billion dollars that gets closer to 50 percent of them being founded by these. And so when you look at our economy whether it is the small businesses the mom and pop shops or the most
sophisticated technology companies I mean we're talking Google PayPal Tesla Apple all founded or co-founded by immigrant entrepreneurs. There's clearly a journey there and this muscle to innovate. And when you think about who has a competitive advantage and a global viewpoint to build global companies with massive market caps it's going to be immigrant entrepreneurs. We're nearing a deadline where the green cards of eighty thousand people currently working in the United States might expire. What are your thoughts on this. What do you think needs to happen here.
Well when you think about the reason for this happening it's it's fundamentally because of something that no one expected to happen globally. Right. A lot of this backlog in exploration is because of the global pandemic. And so just like we've done for many other categories and other things around this country specifically around policy I think we need to take the same approach here and give people whose deadlines are coming up or have just passed give them at least six to twelve more months to stay in status and go to the process as our Department of Homeland Security and USCIS re staff and get through that backlog. It would be an action an absolute travesty for this many people who are predominately tech workers to not be able to know that they can still work here when they've already paid so much in taxes and giving back the country in such a meaningful way. Maria is your fund going to be helping immigrant founders secure visas will you help them navigate this process. Yeah I think the unique part of how we structured the plan from day one was we know that it takes a lot of time and time is something that entrepreneurs do not have in the early days of company building with so many things. And also they're juggling
in there. And so we have an in-house immigration counsel that helps each of our founders figure out what is the best pathway forward. A couple answers right. How do we get you working in your company full time as soon as possible. And how do we make sure that when this company is successful five to 10 years from now we have figured out a way for you to stay in this country and work and make new American jobs. And so we are one of the few if not the only funds out there that has immigration team focused solely on providing this support to immigrant founders day one. Money and you back to startup called Higher Club which just filed for bankruptcy last week. I know not everyone is going to be a winner. But what's your take on that and anything that maybe the company could have done differently.
It's a great question. Ah look I think this was one of those situations where as California passed maybe five some of the contract worker statuses also affected that company. And while certainly the company intends to continue to stay in business the CEO just announced that he helped somebody negotiate a record improving salary of two hundred thousand dollars. Think about that. Two hundred thousand are higher salary by getting some help from higher club. We think this business should be around. The CEO is fantastic and I think his his story is not done. And so this is part of the the bigger and there that we really believe in is foreign born entrepreneurs really will continue to go big so they don't have to go home. And I think that's what kind of embodies that American dream and their story so. Well
go big so you don't have to go home. That's something that I can get behind mine. And Metta and Maria Salamanca from Unshackled Ventures. Thank you both. We'll keep following your story. All right. Coming up we're going to bring you live to the Milken Institute Global Conference in L.A. Bloomberg Carol Massar will be sitting down with CAC a word of Archon vast. Always a lot to
say there. You don't want to miss it. This is Bloomberg. This is Bloomberg Technology Emily Chang in San Francisco. Let's take you now to the Milken Institute Global Conference in Los Angeles where my colleague Carol Massar is speaking with our investors Kathy Wood. Let's go back because how did you get here. I mean my gut from just talking to you is that there was no plan to be a celebrity fund manager and someone that we print out a story every day about your comings and goings. So what was your plan.
Well my plan because you put in the financial and yes I've been in the financial industry and after the tech and telecom bust and then even more so after 0 8 0 9 I began to see just incredible risk aversion career risk business risk. And everybody was worshipping the almighty index benchmarks. And that was not consistent with what we were doing. It also we were becoming I describe it as an order and order duck you know. And I also felt this was very bad behavior. I feel like the maybe investing and tried and true is not wrong but investing only in the past.
I do believe is wrong you know because there are so many. So there is so much in the way of innovation evolving. Right. And I did not feel like it could be funded appropriately in the in the public markets. The private markets were screaming. So valuations were crazy there. The same kind of stock was selling for a fraction of the valuation in the public markets. Right. So I felt there was an I felt there was an arbitrage opportunity. Many people in the public world said oh those private valuations those are going to crash. We didn't think that was true. We thought the public market valuations were going to move up. So I felt that this focus on
innovation had been lost research lost investing lost in the public markets. And I said we could we could fulfill a huge unmet need and and change this misallocation of capital which is all about the past especially because of the explosive growth opportunities there are in the future. How hard was it in the early days and you essentially bootstrapped. It might for three years. Yes. And yet people working at home right now we all worked on and off it. We all worked in an office. You see how hard that was. A very actually that was a very important part of coming together. The bonds that we created during that time will never leave us. So how was it in the early days. We were on a mission. And you know I never thought we were going to fail. Many other people thought we were going to fail. Right. I remember Eric Balchunas
is very kind in in the beginning. He's very kind. Hamburg followed. I follow yet. I think you're topping that list. And he really thought we were destined for failure. And and basically told me so in a very nice way. But I just didn't believe that. And one of the reasons people thought we were going to fail is here. We chose a rapper that was dominated by passive portfolios and put an active strategy in there. And people thought that was crazy. Now after two and a half years of no traction effectively I began to say wow was that bad. Was that a bad move. And so we did. We started doing separate and that separately managed accounts and so forth.
But it turns out that that was a great decision because so many people thought it was such an awful decision. Right. We had so much visibility that when we started to gain traction when we started when the inflows started it was like a head fake. And you know it got so much more attention than we would have gotten otherwise. Welcome back to Bloomberg Technology. Let's get back to the Milken Institute Global Conference in L.A. where Bloomberg's Carol Massar is speaking with Kathy Wood of Aachen Best. I mean what we're institutional investors saying to you in the
early days when you made your pitch too volatile that that was the pitch. I mean that was the response too volatile. We couldn't possibly do that. And here we are. We are a volatile strategy. Right. And are our response was well volatility on the upside is not a bad thing. Right. And last year was a good example of that. But not in arts. But the other thing we we we said at the time
and we actually took our cues from a value investor who said to us I would never buy one stock in your portfolio. But I like your research. And you might be right. I'm going to just put five percent. There's a value investor 5 percent as a hedge and as did our first institutional investor which is value oriented. Right.
And kind of thought we were behaving like a value manager long term time horizon and looking for extreme values as well. Value investors are using price to book and dividend yield and that sort of thing. We're using growth. You know we're using spectacular growth rates that no one is expecting. And Tesla was our first proof of concept. I would say very visible one where people were saying what are they talking
about. And all we had done was used rights law which is the centerpiece of our our research to try and figure out how quickly costs would decline in battery park systems and therefore how how much prices would fall for electric vehicles and how quickly the uptake would be. And we saw Elon Musk magnificent things happening and it wasn't so easy to be invested in test that early on. For us it was easy because you just believe the story or we say well the most important call
that we made initially with Tesla was all right. Tesla's battery technology is unlike any other auto manufacturers battery technology. Tesla was riding down the cost curve of the consumer electronics industry. So laptops cell phones whole image volumes. Right. And when you get a scaling like that costs come down. It's called a
learning curve. In the tech industry. So Elan you had auto manufacturers and auto analysts laughing at him. Elon is building his car on top of cell phone batteries. Isn't that funny. And what they didn't believe was that the engineering was possible. Right. So there was a it wasn't that they just didn't think it was possible. And he did. And so even today these cylindrical batteries that he's been using relative to lithium ion pouch lower cost and will remain lower cost for at least three years we think which means that any other auto manufacturer who wants the same performance and the same range at the same price will have to lose money on every car sold. So it keeps him in a really great position. And that's only one of four barrier to entry. Well but that was the first call we had to make. So Elon Musk and Tesla. So there is a point that you would get out. No there's a story you've talked
about. You put a mark on the stock price I think was three thousand. Yeah. Three thousand is our base case not our bookcase but our base case. OK. So there is a point where you could say OK I'm moving on. You've gotten out of Apple. I mean these are backward looking companies or technologies that you don't think are not necessary. Not necessarily. They're very well understood. Their dynamics are well understood. They are the fangs. They're well owned. And we just want our clients to be
exposed to the next fangs which are not going to be in the fan category but the next things. And Tesla Tesla is becoming a fan. You know I think. Right. And up in that grouping at some point. So yeah we would sell. So our minimum hurdle rate of return expectation for a stock is 15 percent at an annual annualized
rate over five years. So a doubling over five years. Tesla is about nearly a quadrupling over five years so well within our range. So you know we have been taking profits and and that's because Tesla in here I think it's becoming very obvious now that electric vehicles are taking massive share from traditional gas powered vehicles. And so the stock finally is responding to that reality because that has been a true bounce back. Yes it has whereas most of our much of our portfolio has still been in a bit of a weak spot. So this is called portfolio management. That's all this is. Let's talk performance because it's been off
the charts and it was certainly last year. This year it's been a little bit tougher. If I go last year seven or five of ARC 72. Yes. Return an average of one hundred and forty one percent three were the top performers among all U.S. funds. We wrote the story over the top stock picker in 2020. This year if we look at ARC innovation down around 25 percent
from its peak in February of this year it's up 7 percent for the year. What's tougher about this year for you guys. Well what's it's not tougher. We expected it and wanted it actually. Not that we want our stocks go down but what we didn't want was another bubble which which was when the market became more and more narrowly focused on just one group. Right. Instead what
happened. Energy is up 50 percent this year. Financials are up 30 percent. And oh by the way we think those two sectors are going to be the most disrupted of any. But what's happened is there has been a rotation into value as a style as fears of inflation and interest rates increasing picked up. And therefore there's been a broadening out of this bull market. I think we are in a very strong bull market very strong bull market. It has overcome a doubling of interest rates long term interest rates in the first quarter.
All of this tax talk all of this strife no worry that there's so much money chasing too many options. I mean am I worried about inflation. Yes that's the question. Yes. Well and bubbles within the market not bubbles. I can tell you the way I know that is from the nature of the questioning that we get when we go into any meeting retail or institutional. Right. It's much more about risks. Very little about opportunity. That's not what happens during a bubble but inflation. Now we do have a differentiated point of view there.
Art Laffer is my mentor. We did an interview with you at it. Yes. And so I've always had to as part of my portfolio management perspective I've always had to have an understanding of the economic backdrop. You actually debated Henry Kaufman way back when. Oh yes. From what I said Jed Anderson Janice and Henry Kaufman our words loud. Gary Weill virginal doctor do you know doctors doom and gloom. No doctors. Doom and death right. Yes yes. Yes. So and that's where I learned about you know wow
if everyone is going in that direction. And back then it was inflation and interest rates are embedded in the system at a double digit rate. The early 80s. Right. And and someone dares to go the opposite way after those who had gone the opposite way had been bludgeoned with higher interest rates and higher inflation. So this was timing. There's a lot of money to be made. And that's how I felt about innovation and that's how I still feel about it. So inflation
and what we expected inflation. I do these YouTube. And we started talking about the base effect and supply chain issues. Last year I didn't expect a second round of supply chain issues where now we have people hoarding because of Christmas that I didn't expect. And so we're getting another round of inventory building but not in businesses in homes. That car they bought last year is in their driveway or their garage. Auto sales. Auto sales. People to many people don't realize this in the U.S.
peaked in April at 18 and a half million units and are now at twelve. Now that is not just chip shortages. That is I bought my car last year. I'm probably never buying another gas car again. I'm going to wait for an electric vehicle. That's what I think is going on or some of what's going on. Right. So if we're right on that then then I think there's a lot of double and triple ordering in the system right now. This happens at the end of every cycle. And certainly when there is talk are up your inventories right now in a toilet paper you know tissues and all of that Clorox.
And so I do believe that after Christmas we will see the other side of this. Welcome back to Bloomberg Technology more of our conversation now with Marc and best CEO and CIO Kathy Wood. Here's my colleague Carol Massar at the Milken Institute Global Conference in L.A.. Tell me a bit more about Bitcoin and where you see. I mean I've never seen anything so debated. Obviously we're seeing more
legitimization as we see regulators certainly in the US and around the world moving forward. Today was a big day. What is the long term play when it comes to something like crypto currencies and Bitcoin. So Bitcoin specifically. We got involved when it was a six billion dollar market cap and here's Art Laffer again in. In my life and in ARC's life it was a six billion dollar cap and now it's over a trillion which is. But we were asking the question this was 2015 could bitcoin
serve the three rolls of money. And we came to the conclusion that it was possible. Art Laffer collaborated. He tore our original paper up. And as we were going through it he said this is the first. This is the rules based monies monetary system. I've been waiting for since we left the gold exchange standard 71 1971. Right. And I said to him oh how big could this be. And he said well how big is the US monetary base. And back then remember this is six billion dollar cap. Back then it was a four and a half trillion dollar monetary base. Today we're at eight and half trillion. And and bitcoins at 1 trillion. And that's that's just one of
its roles. One of its rules. I think the most fascinating thing that's happening is in El Salvador. Have you heard they deemed bitcoin. The president who tweets every day deemed bitcoin legal tender as a Bloomberg Quicktake question. OK. Every week anyway. And sent achievable wallet to every everyone in the population eligible. So four million. Three million. It had 30 dollars worth of bitcoin in it. Three million have to have downloaded it.
Only one point two million in that country have a banking relationship. So this is the new bank digital wallet. And it's going to be true in this country is going to be true around the world. So all in all in China you've been and you've been out and sometimes we're trying to undress you. So how are we supposed to look at China right now and clampdowns
that we've seen in the government certainly on different sectors that have just decimated those sectors in terms of the value of them. Yes. So what is what is what do you expect to be your involvement. Yes. And in fact our first move away from China was when China was you had a very strong move. And what you know the innovation there was being deeply appreciated while ISE was not. So that was that kind of move. The second time we moved in or. Then we moved in. Why. We saw the reaction to Covid and we got more interested because it was the most disciplined country in terms of both monetary and fiscal policy during the crisis. And I thought that China had the possibility of becoming the Germany and Switzerland of the world. You know in terms of discipline monetary.
As soon as Jack Ma was banished effectively right. Last November we started pulling back because what we're doing and especially during February through May where our strategy just to give you a sense how volatile that is our strategy from mid-February through mid-May most people wouldn't admit this may be but this is how volatile. Yeah. Transparency was down 37 percent peak to trough. So we have come back. But during that period what we do as we always do we concentrated our portfolio towards our highest conviction names. China was moving away because almost every week and month there was a new regulatory move a crackdown. And so so it was easy to do that. It was great because I'm
always scrambling looking for cash during a correction. OK. Where's the confidence. Lower. Where. Where. Where less. Buy into somebody who is our fave right here now. Common prosperity. So what have we done. I know China in our flagship. We do own some China in a few of our portfolios the ones focused on our autonomous tech technology and robotics. But we're very particular very low margin companies because margin is clearly not appreciated by the government anymore. Common prosperity. Right. And and very beneficial. Beneficial to Tier 3 Tier 4 cities. Common prosperity. So JD Logistics JD Dot.com can do does it stay this way do you
think in China for a while. Well it's hard to say. Yeah China is certainly a country when they make a decision it's long longer term it's longer term planning. Right. President Xi certainly seems to be on this. And I think he is very unsettled that the three child policy is not working. Yeah. And so there is a big social engineering. And by the way this is all very forecasts about. Right. I mean demographics. They knew 50 years ago what was going to happen
right. So I think that's part of it. And you know there there is there is there are the haves and the have nots in China like there are like there is around the world. I think China's taking it more seriously because there's probably more social unrest than we now appreciate. What I don't understand is they're going after real estate which is 75 percent of the consumer savings in China and you know in China. And if if. Yes individual saving if if the prices are going down which they have been I think that could really hurt consumer confidence. I think it already is. And then last weekend we can before the government the national government went after the regulators regulators who had focused on the financial industry as well as the financial institutions. I'm just saying well they're playing with fire. So moving. Yeah.
And talk about a cyclical risk out there. Think about that. If we lose China at the margin. China has been responsible for a tremendous amount of cyclical growth. Right. And commodity price inflation didn't emanate panel here. And you know one of the risks that they one of the bankers brought up is that China specifically GOP geopolitical even though in terms of military tension. So what everybody's watching. So the future. Yeah it's in Florida. Oh yes. OK. Well most people would tell you there are tax considerations and so forth. That horse that. Well that's part of it. Of course.
However we were looking for a city that might be able to evolve into something like Austin has. And you think it can. Yes. Absolutely. If you have not been to St. Pete you must go. I have now become St. Pete official ambassador. So has been the St. Pete. St. Pete. Right. Fairmount. How it is. I mean I. All my life I've said I will never live in Florida. And here I am. I
went to St. Pete. It is a young vibrant town. Folk focused on culture arts music a lot of tourism very clean very lovely very friendly people from all over the place. And I do think we could have something like a south by southwest in the St. Pete Tampa region. I think Tampa's very exciting as well. That was archivist Kathy Woods speaking with Carol Massar my colleague. And that does it for this edition of Bloomberg
Technology. Make sure you tune in tomorrow. We're gonna be digging in the earnings from Tesla and IBM. I'm Emily Chang in San Francisco. This is Bluebird.