Latest / Bloomberg Intelligence / Ackman Has Old Data and Incomplete Info in War on ADP, CEO Says

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Ackman Has Old Data and Incomplete Info in War on ADP, CEO Says · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Abramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
• 0:15
  Speaker 1: you and your money, whether you're at the grocery store
• 0:17
  Speaker 1: or the trading floor. Find the Bloomberg p m L
• 0:20
  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Now
• 0:31
  Speaker 1: we're going to visit with Carlos Rodriguez. He is the
• 0:33
  Speaker 1: president and the chief chief executive of a d P
• 0:37
  Speaker 1: and just by way of quick background, in August, Bill
• 0:40
  Speaker 1: Ackman's Pershing Square Capital announced that it had taken an
• 0:43
  Speaker 1: eight point three percent steak and since then it has
• 0:46
  Speaker 1: been in a well proxy battle with a DP. In
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  Speaker 1: here to tell us more is Carlos Rodrigez. Carlos, thank
• 0:52
  Speaker 1: you very much for being here. Appreciate it. Thank you
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  Speaker 1: for having me. All Right, I'm gonna I'm just gonna
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  Speaker 1: start you off by um asking you, based on your
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  Speaker 1: experience in the job and who you've talked to and
• 1:02
  Speaker 1: your analysis, do you really believe that Bill Ackman wants
• 1:06
  Speaker 1: to make a DP a better company or does he
• 1:10
  Speaker 1: just want to make a lot of money and go away?
• 1:14
  Speaker 1: I think it's probably little bit of both. Uh. There's
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  Speaker 1: no question that the business model that he has is
• 1:19
  Speaker 1: really about making a lot of money and eventually going away.
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  Speaker 1: But I think he has some uh done a lot
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  Speaker 1: of research on the company and certainly has some ideas
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  Speaker 1: about how to make the company better. So it's probably
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  Speaker 1: a little bit of both. So do you think that
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  Speaker 1: he's largely right in his criticisms of a DP. No.
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  Speaker 1: I think that, you know, some of his information is outdated. UM.
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  Speaker 1: I think as he's done his research, he's probably spoken
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  Speaker 1: to some folks that have a perspective of a DP
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  Speaker 1: that's probably outdated. He um. As you mentioned that, the
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  Speaker 1: first time we heard from Bill was in August, so
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  Speaker 1: he hasn't had the benefit of really having a dialogue
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  Speaker 1: with the company to understand the things we've been working on.
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  Speaker 1: So let's go over what his main criticisms are. He's
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  Speaker 1: been saying that a DP has a quote buy not
• 2:00
  Speaker 1: build model, whereas he would like to see a more
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  Speaker 1: innovative spirit. Um. He has some other complaints too, among
• 2:08
  Speaker 1: them that board members don't have a big steak in
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  Speaker 1: the company like himself. He's saying, I have a better
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  Speaker 1: sense of the interest of shareholders. What's your sense, what's
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  Speaker 1: your what's your counter to those points? Well, starting with
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  Speaker 1: the ownership question, all of our directors have been deferring
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  Speaker 1: the cash comp portion of their fees for many years,
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  Speaker 1: and some of them have millions of dollars worth of
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  Speaker 1: ADP stocks. So it's just not I think it's an
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  Speaker 1: accurate depiction of our board, and there's the stake that
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  Speaker 1: they have in an ADP. In terms of the innovation point, um,
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  Speaker 1: you know, we've we've really been all about innovation over
• 2:42
  Speaker 1: the last six years, and I think that's one of
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  Speaker 1: those items where I think we've had an opportunity to
• 2:47
  Speaker 1: have dialogue and communicate with Bill. He probably would have
• 2:50
  Speaker 1: a different perspective because we've been investing in cloud technology
• 2:54
  Speaker 1: over the last six years, We've moved of our clients
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  Speaker 1: the new cloud solutions. So I think it's really, I
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  Speaker 1: think again outdated information. It's it's just not it's not accurate.
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  Speaker 1: What about margins, He's noted that the felt that margins
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  Speaker 1: were too low in the business. What's That's an interesting
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  Speaker 1: question because we we meet with investors obviously on a
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  Speaker 1: regular basis, as you can imagine, and the absolute level
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  Speaker 1: of our margins really isn't one of the items that
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  Speaker 1: we've heard a lot about up until Bill uh contacted
• 3:23
  Speaker 1: us UM. So we obviously have margin improvement initiative under way.
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  Speaker 1: We've actually grown our margins by five basis points over
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  Speaker 1: the last uh five years during my tenure, and we
• 3:34
  Speaker 1: have a plan that we've publicly put out there to
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  Speaker 1: increase the margins by another five basis points over the
• 3:40
  Speaker 1: next three years. So I think we're focused on margin
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  Speaker 1: as Bill is. I think it's really about pace and
• 3:45
  Speaker 1: I think the risk reward ratio of how fast you move.
• 3:48
  Speaker 1: So there have been a lot of public jobs back
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  Speaker 1: and forth. I'm wondering on the private side, have you
• 3:53
  Speaker 1: sat down with Bill Ackman explained your point of view
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  Speaker 1: and what was that like if so, we have We've
• 3:59
  Speaker 1: had a think professional and cordial conversations. Bill also came,
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  Speaker 1: myself and our chairman with Bill, and we've also had
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  Speaker 1: a meeting with the full board of directors where Bill
• 4:10
  Speaker 1: came and Uh gave his his the information that he had,
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  Speaker 1: the research that he had done, and then his his
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  Speaker 1: opinions about where the company should go. So I think
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  Speaker 1: the company has been open to dialogue and I think
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  Speaker 1: it's been professional and cordial. So he went on television
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  Speaker 1: shortly after Bill Ackman announced his steak and called him
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  Speaker 1: a used car salesman in a spoiled brat. Your your
• 4:31
  Speaker 1: rhetoric is a lot less inflammatory today. Is there a
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  Speaker 1: reason for that? Um? You know, probably time heals all wounds,
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  Speaker 1: as they say, So, I think, uh, you know, Bill
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  Speaker 1: is a significant shareholder, and we obviously are open to
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  Speaker 1: listening to all shareholders. We do disagree obviously with his
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  Speaker 1: his perspective on the timing of how fast we should
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  Speaker 1: be improving our margins, and we also disagree with the
• 4:54
  Speaker 1: board disagrees with the candidates that he's proposed as as nominees.
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  Speaker 1: But you know, we're trying to folk, it's really facts. Now,
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  Speaker 1: what's been your main objection to the people he's nominated
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  Speaker 1: in his idea? Well, it's not myself, it's really the board,
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  Speaker 1: in our nominating governance committee, who interviewed the candidates. And
• 5:11
  Speaker 1: you know, we believe that we have a strong and
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  Speaker 1: independent board. We've added, for example, four new members over
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  Speaker 1: the last three years, including three with strong technology experience.
• 5:19
  Speaker 1: One of them is Bill Ready, who's the CEO of PayPal.
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  Speaker 1: So We've added some really great talent around technology in
• 5:25
  Speaker 1: order to really help us push this innovation movement that
• 5:29
  Speaker 1: we have in the company. And so we think we
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  Speaker 1: have a strong independent board that is very capable as
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  Speaker 1: a good mixture of tenure and history with the company,
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  Speaker 1: but a lot of fresh thinking as well. So I
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  Speaker 1: think the committee, the nominee and governance committee just came
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  Speaker 1: to the conclusion that there really wasn't any additive value
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  Speaker 1: from the three directors that builds proposing. Can you describe
• 5:48
  Speaker 1: what it was like and where you were when you
• 5:51
  Speaker 1: first learned that Pershing Square had an eight point three
• 5:54
  Speaker 1: percent stake in your company. Actually, I do remember that
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  Speaker 1: quite well, and I probably will remember it for a
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  Speaker 1: long time. I was in my car arriving home about
• 6:02
  Speaker 1: to leave on a on a trip, UH and I
• 6:05
  Speaker 1: was actually leaving a board meeting, and I looked at
• 6:08
  Speaker 1: my my cell phone rang I looked at it, and
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  Speaker 1: it said Bill Ackman, And so I entered the phone
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  Speaker 1: and Bill and I had again a professional and cordial
• 6:15
  Speaker 1: conversation where he said that he wanted to replace five
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  Speaker 1: directors of the company and replace me, and that the
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  Speaker 1: company just needed to move faster, and that he wasn't
• 6:26
  Speaker 1: that he had an eight percent stake. He didn't clarify
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  Speaker 1: at the time that he had only a two percent
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  Speaker 1: stake and the rest was in stock options, which we
• 6:34
  Speaker 1: you know, figured out later down the down the road.
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  Speaker 1: But um, you know, obviously immediately called our chairman after that,
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  Speaker 1: and then we had a board meeting to discuss the
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  Speaker 1: situation and then to talk about next steps. I love
• 6:44
  Speaker 1: the idea of cordially discussing, you know, saying to somebody
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  Speaker 1: I'd like to see removed, and cordially saying, well, I
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  Speaker 1: disagree with you. I imagine it was quite a quite
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  Speaker 1: a conversation. Well, it was, I have to admit of
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  Speaker 1: a surreal moment. But you know it's my job to
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  Speaker 1: be I think, unemotional, and I think I serve at
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  Speaker 1: the pleasure of the board and also at the pleasure
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  Speaker 1: of the shareholder. Carlos Rodriguez, thank you so much for
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  Speaker 1: joining us. Carlos Rodriguez as President and chief executive officer
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  Speaker 1: of a d P, which is based in Roseland, New Jersey. ADP,
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  Speaker 1: of course, is very well known for the employment reports
• 7:17
  Speaker 1: that they put out in a regular basis that are
• 7:19
  Speaker 1: used as a gauge of the employment market in the
• 7:22
  Speaker 1: United States. Well, Chinese President j Ping has warned of
• 7:38
  Speaker 1: severe challenges while laying out a roadmap to turn China
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  Speaker 1: into a leading global power by twenty fifty. He was
• 7:45
  Speaker 1: speaking at the twice a Decade Party gathering, and uh,
• 7:48
  Speaker 1: we're here to tell us a little bit more about
• 7:50
  Speaker 1: it and maybe some analysis is Bill Rhodes. Bill Rhodes
• 7:54
  Speaker 1: is the author of Banker to the World, Leadership Lessons
• 7:57
  Speaker 1: from the front Lines of Global Finance, and of course
• 8:00
  Speaker 1: he is also the president and chief executive of William
• 8:03
  Speaker 1: Rhodes Global Advisors. Bill Rhodes, thank you very much for
• 8:06
  Speaker 1: spending time with us. Jumping spoke about the Chinese dream.
• 8:11
  Speaker 1: Does the Chinese dream include a nuclear armed North Korea? Well,
• 8:16
  Speaker 1: I think that, uh. As you remember, Pim, I've been
• 8:19
  Speaker 1: saying on your show for the last more than a
• 8:23
  Speaker 1: year that the most important political event of this year
• 8:26
  Speaker 1: was not going to be the elections in Europe, but
• 8:29
  Speaker 1: the nineteenth Party Congress, which, as you mentioned, already started.
• 8:33
  Speaker 1: And this sort of crowns Shi Jin Ping as the
• 8:37
  Speaker 1: leader at least for the next five years, if not longer,
• 8:40
  Speaker 1: because um, if he decides to keep his chief lieutenant
• 8:44
  Speaker 1: once she's shun on the Standing Committee of the Pull
• 8:47
  Speaker 1: Up Burero, and this will be announced at the end
• 8:49
  Speaker 1: of the conference. First of all, how many members will
• 8:52
  Speaker 1: be on the Standing Committee of the Pull Up Buro?
• 8:55
  Speaker 1: Will it be UH seven as you have now, will
• 8:58
  Speaker 1: reduce it to five? And very important whether he'll keep
• 9:01
  Speaker 1: one she's shot because once she's shot is A sixty
• 9:03
  Speaker 1: nine and the informal day to retire among seniors in China.
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  Speaker 1: And so if he keeps him on, this man opens
• 9:12
  Speaker 1: the door for U Shijun Pain not only to do
• 9:16
  Speaker 1: this five years UH to UH two thousand twenty two,
• 9:20
  Speaker 1: but opens his door to do another five years, which
• 9:23
  Speaker 1: would be something that has not happened since Dong Joe
• 9:26
  Speaker 1: Pang and Mouse Tom. So it's very critical in this area.
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  Speaker 1: I also feel, and as you know, I did an
• 9:34
  Speaker 1: up ed on it came out two days ago, that
• 9:38
  Speaker 1: China is the only one who can basically halt what's
• 9:41
  Speaker 1: going on in UH in Korea with Kim Jong oon
• 9:45
  Speaker 1: and this continuous development of missile technology and matching it
• 9:49
  Speaker 1: with nuclear capability UH nuclear warheads. And the reason the
• 9:55
  Speaker 1: Chinese can do that is they supply almost all the
• 9:57
  Speaker 1: oil and gas, and if they cut that off UH,
• 10:00
  Speaker 1: and they've taken they've said they're going to cut off
• 10:02
  Speaker 1: a little bit, but they need to cut off basically
• 10:04
  Speaker 1: all of it, because then the Chinese, the Chinese will
• 10:08
  Speaker 1: have the ability to stop the Korean armed forces right
• 10:12
  Speaker 1: in their truck. And I think that's what needs to
• 10:14
  Speaker 1: be done. UH. And hopefully with his visit UH that
• 10:19
  Speaker 1: President Trump is going to make UH in the next
• 10:22
  Speaker 1: few weeks to UH China, and he will be the
• 10:26
  Speaker 1: most important person to have arrived in China after the
• 10:29
  Speaker 1: Party Congress, which is by the way, held every five years.
• 10:32
  Speaker 1: So this gives these two the opportunity to try and
• 10:36
  Speaker 1: sort out North Korea because the sanctions so far approved
• 10:40
  Speaker 1: UH at the United Nations won't do it. Bill Um,
• 10:44
  Speaker 1: You're an unbelievably expert negotiator. You have vast experience over
• 10:49
  Speaker 1: decades of negotiating debt deals and other deals across the world.
• 10:53
  Speaker 1: And I'm wondering, can we talk about what we've gleaned
• 10:57
  Speaker 1: from the beginnings anyway of the nineteen National Congress of
• 11:01
  Speaker 1: the Communist Party of China, of what China wants its
• 11:05
  Speaker 1: role to be as a global negotiator and a global
• 11:08
  Speaker 1: force much akin to the US. Well, I think in
• 11:12
  Speaker 1: Asia they want to replace the United States as the
• 11:16
  Speaker 1: leading military political entity. Uh, that's the immediate goal. And
• 11:21
  Speaker 1: as you know, since he took off as five years ago,
• 11:24
  Speaker 1: sheijun Ping has substantially upgraded and continues to upgrade the
• 11:29
  Speaker 1: Chinese military, whether it be the army, the navy, where
• 11:33
  Speaker 1: they particularly upgraded a big time, where the air force,
• 11:36
  Speaker 1: and so he wants to be the dominant power there.
• 11:40
  Speaker 1: And so this is going to be a challenge to
• 11:42
  Speaker 1: the United States. Now what the global uh let's say,
• 11:47
  Speaker 1: aspects of this will be is not are not clear.
• 11:51
  Speaker 1: But I think the real challenge for shijun Ping within
• 11:54
  Speaker 1: China is to handle and to tackle some of the
• 11:57
  Speaker 1: economic and financial problems. I mean, the debt has been
• 12:01
  Speaker 1: growing way out of line, the debt to GDP. It's
• 12:04
  Speaker 1: over and uh if he continues at the same page
• 12:08
  Speaker 1: next year, it will go over. Well, this isn't sustainable
• 12:13
  Speaker 1: over time, and so uh what it what it does
• 12:16
  Speaker 1: is caused distortions in the economy. I mean, the continuing
• 12:21
  Speaker 1: funding of the of the state owned enterprises. Uh, you know,
• 12:25
  Speaker 1: to a tremendous degree. Uh is not really healthy because
• 12:28
  Speaker 1: a lot of these zombie companies UH in the areas
• 12:31
  Speaker 1: of coal, steel, shipbuilding, and the former premier of China
• 12:35
  Speaker 1: had started to UH Juranji some twenty years ago had
• 12:39
  Speaker 1: started the process of trying to weed out some of
• 12:42
  Speaker 1: the zombie zombie companies. But this is sort of stopped.
• 12:45
  Speaker 1: And what Shi Jinping wants to do is to sort
• 12:49
  Speaker 1: of merge the state owned enterprises with some private enterprise
• 12:53
  Speaker 1: to make them stronger, but not really to downsize, and
• 12:56
  Speaker 1: which is necessary. Then you have a bubble in the
• 12:58
  Speaker 1: property and real estate market which needs to be looked after. UH.
• 13:03
  Speaker 1: And at the same time you have a similar situation
• 13:06
  Speaker 1: with the growing debt of the municipalities. Added to all
• 13:09
  Speaker 1: of this, you have a problem with shadow banking, which
• 13:12
  Speaker 1: is now from of total GDP of China, and it's
• 13:17
  Speaker 1: very lightly regulated, if at all. And so all of
• 13:20
  Speaker 1: these things, if they're not dealt with over the next
• 13:23
  Speaker 1: couple of years, could really cause a problem economically and
• 13:26
  Speaker 1: financially in China. And UH and I think slow growth,
• 13:31
  Speaker 1: which as you know, is so important only to China
• 13:34
  Speaker 1: but the world. Well, but Bill, I'm wondering if now
• 13:37
  Speaker 1: that this important meeting this twice a decade meeting is
• 13:41
  Speaker 1: close to being finished. Will China be more aggressive in
• 13:45
  Speaker 1: curbing some of that leverage now that there doesn't have
• 13:48
  Speaker 1: to be sort of a dance up to the up
• 13:51
  Speaker 1: to the meeting. Well, that is my hope and the
• 13:54
  Speaker 1: hope of a lot of China followers is that that
• 13:58
  Speaker 1: that will happen uh starting next year. Now they've taken
• 14:02
  Speaker 1: some steps by putting in a reformer to run the
• 14:05
  Speaker 1: Banking Commission, the cbr C, and they will have to
• 14:09
  Speaker 1: replace uh The governor of the Central Bank of China,
• 14:13
  Speaker 1: the People's Bank of China, who is first rate um
• 14:16
  Speaker 1: is Shoa Chuan, because he's already three or four years
• 14:19
  Speaker 1: over his retirement and they'll have to replace him the
• 14:22
  Speaker 1: end of this year and next year. And the the
• 14:24
  Speaker 1: institution that is most respected within China and worldwide is
• 14:29
  Speaker 1: the People's Bank of China. So there are a lot
• 14:31
  Speaker 1: of things that that Shi Jimping has to do. One
• 14:35
  Speaker 1: of the other rumors that's going around and will certainly
• 14:37
  Speaker 1: know that in the next few days, is whether Uh
• 14:42
  Speaker 1: Hi Jumping will keep his premier, who is Likau Chung,
• 14:47
  Speaker 1: And normally the division there is the head of state.
• 14:50
  Speaker 1: Uh looks after the political side has a military under him,
• 14:54
  Speaker 1: but the economic side is driven by the premier, like
• 14:58
  Speaker 1: the famous Juan Ji who was so strong twenty years
• 15:02
  Speaker 1: ago and got China into w t O and changed
• 15:05
  Speaker 1: the whole economy of the world basically not only of China.
• 15:09
  Speaker 1: And there are rumors that that one Shi Shan who
• 15:12
  Speaker 1: I mentioned earlier, who's so close to President Shi Jimping,
• 15:16
  Speaker 1: might be in that position. We'll know within four or
• 15:19
  Speaker 1: five days. Also as part of this very positive aspect
• 15:25
  Speaker 1: that s. Jimping is putting forward the China Dream, et cetera,
• 15:30
  Speaker 1: they will be announcing uh the third quarter results of
• 15:33
  Speaker 1: their GDP on Thursday, and they'll probably show, if not
• 15:37
  Speaker 1: seven percent, very close to seven percent, So that'll you know,
• 15:40
  Speaker 1: that'll get them off on a on a in a
• 15:42
  Speaker 1: very positive way. But they have to start making these
• 15:45
  Speaker 1: reforms starting next year without a doubt. Bill Rhodes, thank
• 15:49
  Speaker 1: you so much for joining us. As always. Bill Rhodes,
• 15:51
  Speaker 1: President and chief executive officer of William R. Rhodes Global Advisors,
• 15:55
  Speaker 1: also banker for decades, including a long time at City Group.
• 16:10
  Speaker 1: Let's talk about Facebook. There was a story on the
• 16:11
  Speaker 1: Bloomberg today that was fascinating looking at how Facebook and
• 16:16
  Speaker 1: Google helped anti refugee campaigns in swing states ahead of
• 16:21
  Speaker 1: the election in the US last year. Vernon Silver, Projects
• 16:25
  Speaker 1: and Investigations reporter for Bloomberg News authored this piece also
• 16:28
  Speaker 1: here in the studio Shia Oviday Vernon, can you just
• 16:32
  Speaker 1: outline what you found. Basically, what happened is this group
• 16:35
  Speaker 1: which is against h immigration refugees, with all these ads
• 16:39
  Speaker 1: that they wanted to put on the Internet in advance
• 16:41
  Speaker 1: of the elections, targeted key swing states like Nevada and
• 16:45
  Speaker 1: North Carolina. And they didn't just buy the ads. You know,
• 16:47
  Speaker 1: when you think about Russian interference, you think about people
• 16:50
  Speaker 1: who are unknown buying these ads. They went directly to
• 16:52
  Speaker 1: the ad sales people at these companies and work with them.
• 16:55
  Speaker 1: In some cases, the companies, the big two were helping
• 16:58
  Speaker 1: tailor the message for them and even in the case
• 17:01
  Speaker 1: of Facebook in one case using these videos which were
• 17:04
  Speaker 1: you know, making fun of what happens if the Islamic
• 17:06
  Speaker 1: State comes to Paris type of thing, and using them
• 17:09
  Speaker 1: to test their products. What's been the reaction from the companies.
• 17:13
  Speaker 1: You know, they sell ads, that's that's their jobs. It's
• 17:16
  Speaker 1: just money to them. Well, no part of it is
• 17:18
  Speaker 1: they can't be sensors either. And it's really it's a
• 17:21
  Speaker 1: fine it's a fine line. But why you can refuse
• 17:23
  Speaker 1: to accept someone's advertise? Where do you draw the line? Well,
• 17:27
  Speaker 1: I want to bring Shira in here, Shira, I'm wondering
• 17:30
  Speaker 1: what the implications are for Facebook as these new facts
• 17:34
  Speaker 1: emerged that not only did they allow some of these
• 17:38
  Speaker 1: political operatives to advertise, but they helped them hone their
• 17:42
  Speaker 1: message and experimented with the best most attractive social placing.
• 17:47
  Speaker 1: I mean, what's the implication from a regulatory standpoint as
• 17:50
  Speaker 1: well as a business one. Well, look, I think we've
• 17:53
  Speaker 1: clearly seen this year, particularly since the the U. S
• 17:56
  Speaker 1: Election and the presidential election and the fall, that Facebook
• 17:59
  Speaker 1: and Google especially are now under a microscope about everything
• 18:04
  Speaker 1: to do with their business and particularly the power of
• 18:07
  Speaker 1: those two companies to literally influence two billion or more
• 18:12
  Speaker 1: people around the world. Right, And they pitch themselves as
• 18:16
  Speaker 1: we can change people's minds or influence people to buy
• 18:19
  Speaker 1: soda and soft drinks and soda and you know, for trucks,
• 18:24
  Speaker 1: and it turns out they may also be vehicles to
• 18:27
  Speaker 1: you know, turn people against immigrant groups or to help
• 18:31
  Speaker 1: sway elections. In places like Germany. Well, Vernon, I just
• 18:35
  Speaker 1: want to come back to this idea of Okay, where
• 18:36
  Speaker 1: do you draw the line. I mean, you can't advertise cigarettes, right,
• 18:40
  Speaker 1: you can't advertise cigarettes on television. You've got billboards telling
• 18:43
  Speaker 1: people not to smoke. There are a variety of advertisements
• 18:46
  Speaker 1: and a variety of topics that are not permitted in
• 18:50
  Speaker 1: certain venues. What is so difficult If these companies are
• 18:53
  Speaker 1: so smart and they have all this great PhD talent
• 18:56
  Speaker 1: and all these technical wizards, what's so difficult about saying
• 18:59
  Speaker 1: we're going to draw the line of things that are
• 19:01
  Speaker 1: obviously not true and things that are really just designed
• 19:05
  Speaker 1: to incite people rather than to inform them. Those restrictions
• 19:08
  Speaker 1: you just mentioned go back to the point that was
• 19:10
  Speaker 1: just made about regulations. These are things that came from
• 19:13
  Speaker 1: the outside, and that's the risk to them. Well, okay,
• 19:16
  Speaker 1: so political advertising, and this is the issue, right, because
• 19:19
  Speaker 1: at what point do you say, well, this is inciting
• 19:21
  Speaker 1: people versus this is trying to make a point from
• 19:24
  Speaker 1: a political party, Shia. What would happen to say, Facebook's
• 19:29
  Speaker 1: ad sales if there was a regulation saying that they
• 19:32
  Speaker 1: could not help craft or place prominently political ads. We
• 19:38
  Speaker 1: I don't think we really know the answer to that,
• 19:40
  Speaker 1: because Facebook does not disclose of the size of their
• 19:45
  Speaker 1: revenue from political advertisements or kind of political related advertisements. UM.
• 19:50
  Speaker 1: I think the reality is the scale of Facebook. There
• 19:53
  Speaker 1: is no single advertiser, or even no single category that
• 19:58
  Speaker 1: is a you know, seriously material piece of their business.
• 20:02
  Speaker 1: I think Facebook set around the election that political advertising
• 20:05
  Speaker 1: was not a top ten ad category for them. UM.
• 20:08
  Speaker 1: I am also not sure that we're going to see
• 20:10
  Speaker 1: that kind of regulation in the US around political advertising
• 20:14
  Speaker 1: on Facebook or other Internet properties. Everything is a little
• 20:18
  Speaker 1: bit sort of amorphous outrage against Facebook at the moment,
• 20:21
  Speaker 1: but I don't know that I've seen a credible kind
• 20:24
  Speaker 1: of legislative proposal. Yeah. I mean, the interesting thing there is,
• 20:29
  Speaker 1: you know that it's not in the financials but talking
• 20:32
  Speaker 1: to the people on the other end who are placing
• 20:34
  Speaker 1: the ads. In the case of the German far right party,
• 20:37
  Speaker 1: we were talking millions, we were talking hundreds of thousands.
• 20:40
  Speaker 1: This was very small money for a big company like Facebook,
• 20:45
  Speaker 1: and yet this was a campaign that helped a far
• 20:48
  Speaker 1: right party come to power for the first time since
• 20:51
  Speaker 1: the Second World War in Germany. Although you could argue
• 20:55
  Speaker 1: that it is exactly because these small fry operations can
• 20:59
  Speaker 1: have such a huge reach on Facebook that Facebook has
• 21:03
  Speaker 1: attracted the same kind of advertising, the bulk of the
• 21:06
  Speaker 1: advertising that it has. So yes, it's small potatoes in
• 21:08
  Speaker 1: and of itself, but the platform and the opportunity there
• 21:11
  Speaker 1: is really what has attracted so many people. Wonderful story.
• 21:15
  Speaker 1: Thank you very much. Verdon Silver, Projects and investigations reporter
• 21:18
  Speaker 1: for Bloomberg and of course you can follow him on
• 21:21
  Speaker 1: Twitter at v T Silver and our thanks also to
• 21:24
  Speaker 1: Shira Oviday. You can follow Shira, our technology gad flyg
• 21:28
  Speaker 1: columnist at Shira Oviday. This is Bloomberg, all right. We
• 21:43
  Speaker 1: want to get smarter when it comes to what's going
• 21:45
  Speaker 1: on in Wall Street. So we have Hugh Son. He
• 21:47
  Speaker 1: is our finance reporter for Bloomberg News, and you can
• 21:50
  Speaker 1: follow Hugh on Twitter at Hugh Underscore. San s o
• 21:54
  Speaker 1: n Alright, Hugh, you are sort of debuting a three
• 21:58
  Speaker 1: part series that the Bloomberg has put together about automation
• 22:02
  Speaker 1: on Wall Street, and I gotta say I like the
• 22:03
  Speaker 1: title of this one. The upbeat bankers who privately worry
• 22:07
  Speaker 1: about gutting their staff, do they also worry about gutting themselves.
• 22:12
  Speaker 1: I mean, you know, you let them in, and computers
• 22:15
  Speaker 1: they have a way of expanding, don't they. I think, um,
• 22:18
  Speaker 1: I think top management believes that they will be the
• 22:20
  Speaker 1: last to go. Somebody's gonna have to turn off the
• 22:22
  Speaker 1: lights at the end of the captain. Huh yeah, yeah,
• 22:25
  Speaker 1: I mean you still need decision makers at the very top.
• 22:27
  Speaker 1: I think. All right, So tell us about this this
• 22:29
  Speaker 1: uh series and what you got at in in the
• 22:32
  Speaker 1: first of the of the three parts stores. Well, we
• 22:35
  Speaker 1: and everybody else really have been writing about this in
• 22:37
  Speaker 1: piece meal for quite a while now, and I thought, um,
• 22:40
  Speaker 1: we needed to do something a bit more definitive and
• 22:43
  Speaker 1: and so the real thrust of this piece is a
• 22:46
  Speaker 1: data visualization project that shows across asset class, across the job,
• 22:51
  Speaker 1: across Wall Street, hedge funds, banks, everywhere, just the efforts
• 22:56
  Speaker 1: that are being done in machine learning and AI, in
• 22:58
  Speaker 1: different things like a robotic process automation, which is, you know,
• 23:02
  Speaker 1: a simpler form of AI. And the real takeaway for
• 23:05
  Speaker 1: us was that there is no part of the empire
• 23:10
  Speaker 1: that a finance that is completely untouched by this and
• 23:13
  Speaker 1: it's just the beginning. Well, he one thing that struck
• 23:16
  Speaker 1: me is the adoption of computers and artificial intelligence has
• 23:20
  Speaker 1: been largely builled as a way to remove the mundane
• 23:24
  Speaker 1: tasks from humans, giving them more leeway to really be creative.
• 23:30
  Speaker 1: This story really paints a different picture. Can you talk
• 23:33
  Speaker 1: about that well? So that I think the story we're
• 23:35
  Speaker 1: talking about is um it comes from conversations we've had
• 23:40
  Speaker 1: with with executives you say, you know, on background, not
• 23:45
  Speaker 1: not for you can't name me. This is not something
• 23:47
  Speaker 1: that I want taped. But I think this is really
• 23:50
  Speaker 1: gonna this is really going to kill a lot of jobs.
• 23:52
  Speaker 1: And this is on my mind. And so when you
• 23:55
  Speaker 1: think about organizations with hundreds of thousands of people, not
• 23:59
  Speaker 1: every is gonna be not everybody is doing something on
• 24:02
  Speaker 1: a daily basis that is creative that requires um, you know, uh,
• 24:06
  Speaker 1: real abstract thought and creativity. And so what happens when
• 24:11
  Speaker 1: their jobs get automated away? Right? And this is this
• 24:13
  Speaker 1: is gonna have a real human impact. I think of,
• 24:16
  Speaker 1: for example, the introduction of a t M S right
• 24:19
  Speaker 1: automated telemachines and what that did to the banking industry.
• 24:23
  Speaker 1: I recognize that at the time, the headlines were that
• 24:27
  Speaker 1: there would become there would be no tellers in any bank. Well,
• 24:31
  Speaker 1: that didn't really come to pass, although it has changed.
• 24:35
  Speaker 1: I'm wondering, is there the possibility that it will not
• 24:39
  Speaker 1: happen in this straight line path at many in the
• 24:41
  Speaker 1: industry seat It most certainly won't happen in a straight
• 24:43
  Speaker 1: lighting path, and most certainly won't happen tomorrow or even
• 24:46
  Speaker 1: in three years. Um, but it is happening right now.
• 24:49
  Speaker 1: And and a t M S. That's a good example.
• 24:51
  Speaker 1: That's something that's added. If you have a t M S,
• 24:53
  Speaker 1: it's another channel that you get money. Uh. You know,
• 24:56
  Speaker 1: just because you have um, you know, uh an app
• 25:00
  Speaker 1: banking app on your phone, doesn't mean that you still
• 25:02
  Speaker 1: don't need the branch. Um. What we're talking about is
• 25:05
  Speaker 1: a little different. We're talking about um uh computer programs
• 25:09
  Speaker 1: that essentially automate the tests of what people do today.
• 25:13
  Speaker 1: I'll give an example. What one example is loan underwriting.
• 25:17
  Speaker 1: Person does loan underwriting looks at the potential borrower and
• 25:20
  Speaker 1: sees if they're a good credit risk. Takes hours and
• 25:22
  Speaker 1: hours and even days. Can a computer do that faster,
• 25:26
  Speaker 1: cheaper and better? Uh? I think so? So are there
• 25:31
  Speaker 1: any estimates by anyone of how much wall Street head
• 25:36
  Speaker 1: count could shrink over the next decade or two due
• 25:40
  Speaker 1: to the adoption of artificial intelligence. Another you know, um,
• 25:44
  Speaker 1: it's a opining about AI is the growth industry. I
• 25:47
  Speaker 1: mean there's a ton of consultants, uh, you know who
• 25:49
  Speaker 1: put out where people can go for their new employment. Right,
• 25:53
  Speaker 1: that's that's that's somewhere. Yeah, that's somewhere you can um
• 25:56
  Speaker 1: make a name. And and I mean in general, you
• 25:57
  Speaker 1: hear you hear people say thirty percent in five years,
• 26:00
  Speaker 1: and thirty does not seem high when you when you
• 26:03
  Speaker 1: think about the numbers of people who are in the
• 26:05
  Speaker 1: maiden back office doing things which are centrally moving numbers
• 26:10
  Speaker 1: from one screen to another and making sure that the
• 26:12
  Speaker 1: trains run on time. Staff cuts across Wall Street over
• 26:16
  Speaker 1: the next five years is what some think is a
• 26:19
  Speaker 1: conservative estimate. Is a number that has come up ballpark
• 26:23
  Speaker 1: time and again from different from people from the companion
• 26:26
  Speaker 1: to you know, to uh, you know John crying at
• 26:29
  Speaker 1: Deutsche to to consultants. Yes they get that from a computer. Huson.
• 26:35
  Speaker 1: Thank you so much for joining us, and we look
• 26:37
  Speaker 1: forward to reading the next iterations of this series. An
• 26:41
  Speaker 1: important uh, an important series to really read and consider
• 26:44
  Speaker 1: about Wall Street going forward. Houston is a finance reporter
• 26:48
  Speaker 1: for Bloomberg, and you can find both the stories and
• 26:51
  Speaker 1: it's in their graphics, which are really quite compelling. Their
• 26:54
  Speaker 1: interactive and show which areas of finance are most at
• 26:58
  Speaker 1: risk of getting shar on the human side due to computers.
• 27:05
  Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
• 27:08
  Speaker 1: You can subscribe and listen to interviews at Apple Podcasts, SoundCloud,
• 27:12
  Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm
• 27:15
  Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa
• 27:19
  Speaker 1: abramowits one before the podcast. You can always catch us
• 27:22
  Speaker 1: worldwide on Bloomberg Radio