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Facebook Had Profound Role In Enabling Trump: McNamee · Bloomberg Intelligence

• 0:02
  Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul Sweene. You,
• 0:05
  Speaker 1: along with my co host Lisa Brahma Waits, each day
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  Speaker 1: we bring you the most noteworthy and useful interviews for
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  Speaker 1: you and your money. Whether at the grocery store or
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  Speaker 1: the trading floor. Find a Bloomberg Penil podcast on Apple
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  Speaker 1: podcast or wherever you listen to podcasts, as well as
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  Speaker 1: at Bloomberg dot com. This is the interview of the day.
• 0:22
  Speaker 1: Roger McNamee, co founder Elevation Partners, joining us here in
• 0:25
  Speaker 1: our Bloomberg Interactive Brokers studio. We talk a lot about
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  Speaker 1: Facebook on this radio station, but maybe we don't talk
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  Speaker 1: enough about the impact that Facebook has on our daily lives,
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  Speaker 1: on privacy, on political elections in this country. But that's
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  Speaker 1: gonna change right now. Roger, thanks so much for joining us. Okay,
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  Speaker 1: Facebook taken to the cleaners by the public about the
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  Speaker 1: role that it played knowingly or unknowingly in the election
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  Speaker 1: in terms of allowing discourse to go in different directions.
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  Speaker 1: Have they learned their lesson as we gear up for
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  Speaker 1: the election? Right? We want them to have learned that
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  Speaker 1: democracy is too important to be damaged by the interests
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  Speaker 1: of any corporation. The one they've actually learned is that
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  Speaker 1: Facebook is global, that in many ways it's like a
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  Speaker 1: nation state, and as a result, it has the power
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  Speaker 1: to ignore the needs of countries that it operates in.
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  Speaker 1: I mean, keep in mind, this is a company that
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  Speaker 1: has ignored subpoenas from the parliaments of the United Kingdom
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  Speaker 1: and Canada, which are two of its largest and most
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  Speaker 1: profitable markets. And so I think what's going on right
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  Speaker 1: now is that I think Mark has concluded that Facebook's
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  Speaker 1: future will be best assured by maintenance of the status quo,
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  Speaker 1: so to say, the real action President Trump, and you know,
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  Speaker 1: without being too obvious about it, I think there making
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  Speaker 1: changes that at the margin are immensely valuable to the
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  Speaker 1: Trump campaign where eld of to other campaigns, specifically the
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  Speaker 1: decision to reverse the policy on fact checking campaign ads,
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  Speaker 1: and there's an analogous one that they've done for Mark Bloomberg,
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  Speaker 1: where they've chosen not to fact check things done by
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  Speaker 1: influencers on Instagram and YouTube that are paid for by campaigns.
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  Speaker 1: And those are choices that in a normal democracy you
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  Speaker 1: wouldn't make, but at this moment in time, in this
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  Speaker 1: particular country, those are decisions Facebook has made with at
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  Speaker 1: best mild pushback. Well we had. We did get some
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  Speaker 1: pushback from George Sorrow's civilionaire of philanthropist and uh AN investor,
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  Speaker 1: and he wrote a note in the Financial Times saying
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  Speaker 1: that Zuckerberg and Cheryl Sandburg should be removed from their
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  Speaker 1: posts and saying they should not accept political advertising. Is
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  Speaker 1: there any other push that perhaps has a little more
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  Speaker 1: than an op ed in the Financial Times from George
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  Speaker 1: Sorrows actually to get them to do that. My hypothesis
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  Speaker 1: is that Mr Soros was speaking mostly to the European Union,
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  Speaker 1: where I think he is message has a welcome audience.
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  Speaker 1: You know, I think he is enormously respected around the world,
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  Speaker 1: but particularly in Europe. The challenge that we face are,
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  Speaker 1: I think, simply put, is there are no counterfeiling, sorry,
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  Speaker 1: countervailing forces in our democracy. You know, we were designed
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  Speaker 1: to have three elements of government that pushed back on
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  Speaker 1: each other. We would have pressed that pushed back on
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  Speaker 1: all elements government. You would have business and religion that
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  Speaker 1: pushed back on each other. And now the things that
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  Speaker 1: caused those to be in opposition to each other have
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  Speaker 1: broken down, and so you know, the Trump administration is
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  Speaker 1: put together an alliance with business and a portion of
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  Speaker 1: the of the religious world that has allowed it to
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  Speaker 1: withstand any pushback from journal and has allowed to defy
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  Speaker 1: two hundred and forty years of convention in operating the government.
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  Speaker 1: And that I think we cannot overstate the profound impact
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  Speaker 1: that Google and Facebook have had in enabling that. We
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  Speaker 1: should note that Michael Bloomberg is the founder and principal
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  Speaker 1: shareholder of Bloomberg LP and Bloomberg News and Bloomberg Radio. Roger,
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  Speaker 1: you know, with all your experience in Silicon Valley, UH,
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  Speaker 1: silver Lake Partners, Elevation Partners, we've you know, during all
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  Speaker 1: that time, the US has taken a very light touch
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  Speaker 1: to regulating Silicon Valley and technology versus say the European Union,
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  Speaker 1: going all the back to Microsoft and things like that.
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  Speaker 1: Do you sense that that is fundamentally changing at all?
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  Speaker 1: We've had some CEOs and clarting, including Mark Zuckerberg brought
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  Speaker 1: in front of a Congress that's kind of new, that
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  Speaker 1: fields new. Do you think things are changing? I believe
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  Speaker 1: that they have to change. I think the tech industry
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  Speaker 1: is today where the chemicals industry was in nineteen sixty,
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  Speaker 1: where where the medicine industry was in nineteen hundred, or
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  Speaker 1: where the building trades were after the Great Chicago Fire.
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  Speaker 1: Where these things are so strategic to the economy that
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  Speaker 1: you have to find a way to have them operate
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  Speaker 1: without doing great harm. And you know, the chemicals industries
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  Speaker 1: to pour mercury into fresh water, and that had massive
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  Speaker 1: consequence for public health as well as for the environment.
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  Speaker 1: And we said, look, we're not gonna allow that anymore.
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  Speaker 1: We're not gonna allow you to spuse smoke into the atmosphere.
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  Speaker 1: And you know, you remember what New York City was like,
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  Speaker 1: you know, in the seventies and early eighties, when you
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  Speaker 1: couldn't see anything because of all the smog. And tech
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  Speaker 1: is now in that place, and we have to have
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  Speaker 1: some kind of regulation. And in my mind, we've tried
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  Speaker 1: self regulation that's failed miserably, and we really need to
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  Speaker 1: impose it from the outside and has to start, frankly,
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  Speaker 1: from the people who use the products, who have to
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  Speaker 1: recognize that there's a lot of harm being done to
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  Speaker 1: our children, there's a lot of harm done to our family.
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  Speaker 1: In France, right we can't have Thanksgiving dinner without getting
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  Speaker 1: into political fights and these things are not an accident.
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  Speaker 1: They're part of the business model. Roger unfortunately only had
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  Speaker 1: a better minute left. But I do want to ask you.
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  Speaker 1: You were an early investor and a mentor to Mark Zuckerberg.
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  Speaker 1: Do you regret investing in it? I wish that I
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  Speaker 1: had been more successful by persuading Mark in that there
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  Speaker 1: was a structural problem at Facebook. Did you know there was?
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  Speaker 1: I first observed it at the beginning of twenty I
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  Speaker 1: wish I'd seen it sooner, but I had stopping active
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  Speaker 1: there in two thousand nine, and candidly, I was just
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  Speaker 1: enjoying the success of the company because in the early
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  Speaker 1: days it just felt like this was one of the
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  Speaker 1: really great new companies, and Mark's value system in those
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  Speaker 1: days had no negative manifestations that you could see, at
• 6:49
  Speaker 1: least that I saw. But when I started to see
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  Speaker 1: the problem in sixteen, I then reached out to him
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  Speaker 1: in October and said, Mark, there is something structurally wrong
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  Speaker 1: with the business model, the out rhythms, and the culture
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  Speaker 1: that's allowing bad people to hurt innocent people. I gave
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  Speaker 1: them some examples from civil ryans, and then I really
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  Speaker 1: focused on both what I saw in the Democratic primary
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  Speaker 1: with disinformation but especially Brexit, where you could see that
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  Speaker 1: disinformation almost certainly affected the outcome. And I spent three
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  Speaker 1: months pleading with them, beginning before the election and then
• 7:22
  Speaker 1: continuing for months afterwards as their friends just think, look,
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  Speaker 1: you got to treat this like Johnson and Johnson treated
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  Speaker 1: the thilent all poisoning. You got to come to the
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  Speaker 1: defense to people, use the practices America. And he didn't listen. Well,
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  Speaker 1: apparently not. Roger mcmacnamee, thank you so much for being
• 7:39
  Speaker 1: with us. Tremendous speaking with you, Roger McNamee as co
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  Speaker 1: founder of Elevation Partners based in Menlo Park, but joining
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  Speaker 1: us here in our interactive Brokers studios and early mentor
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  Speaker 1: and investor in Facebook. Really interesting insight into the current
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  Speaker 1: election cycle and the possibility that Facebook will play a
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  Speaker 1: similar role. Yeah, sting into it in terms starting more.
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  Speaker 1: In addition to Rogers starting to get more attention, I
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  Speaker 1: think from a different walks of life. Well. As a
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  Speaker 1: democratic race heats up for the White House, one theme
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  Speaker 1: that is emerging is taxation and taxation of the rich.
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  Speaker 1: To get a sense of kind of where the different
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  Speaker 1: candidates stand, we welcome Laura Davidson She's a congressional tax
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  Speaker 1: reporter for Bloomberg News, joining us in the Bloomberg Ninia
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  Speaker 1: nine one studio on Washington, d C. Lara, thanks so
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  Speaker 1: much for joining us. Give us if you would kind
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  Speaker 1: of a summary of where some of the candidates are
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  Speaker 1: in terms of taxation going forward. Yeah, so there's really
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  Speaker 1: quite arranged. They're all promoting sort of the same ideas,
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  Speaker 1: higher taxes on the wealthy, higher taxes on corporations. But
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  Speaker 1: really the difference is the magnitude of how much they
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  Speaker 1: want to raise those levies. So kind of at the
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  Speaker 1: bottom level, you have Amy Klobachar, Mike Bloomberg, Joe Biden.
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  Speaker 1: They're proposing, you know, some some modest increases to to
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  Speaker 1: the corporate tax rate end um, as well as some
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  Speaker 1: levees that would hit higher earners, but they haven't gone
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  Speaker 1: as far as like a wealth tax, for example. On
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  Speaker 1: the other end, you have um Sanders uh short, shortly
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  Speaker 1: followed by Warren and then Buddha Judge kind of lagging
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  Speaker 1: there in third place of sort of the biggest tax
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  Speaker 1: increases you'd see. What they're proposing is really sort of
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  Speaker 1: um is massive compared to other presidential tax plans we've
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  Speaker 1: seen in years past. They're looking at tens of trillions
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  Speaker 1: of dollars, you know, just for comparison, and Hillary Clinton
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  Speaker 1: in sixteen proposed a you know about one and a
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  Speaker 1: half trillion dollar tax plans. So there's big differences in um,
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  Speaker 1: sort of what the more moderate lane is doing and
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  Speaker 1: what the progressive lane is proposing. Laura, let's drill into
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  Speaker 1: two particular proposals, because there are two individuals on that
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  Speaker 1: stage tonight that are going to be really front and center,
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  Speaker 1: and that is Bernie Sanders because he is emerging as
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  Speaker 1: the modified front runner of this race. And Michael Bloomberg,
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  Speaker 1: majority owner and founder of Bloomberg LP, which owns this
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  Speaker 1: radio station and and the news segment. Uh, this is
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  Speaker 1: gonna be the first debate that he is going to
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  Speaker 1: participate in, and so a lot of eyes on him
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  Speaker 1: and he's compreppers entering the more moderate branch of the
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  Speaker 1: Democratic Party. Can you give us a sense on on
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  Speaker 1: sort of the scale, uh, and what their proposals actually are. Yeah,
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  Speaker 1: So just looking at a corporate taxes, for example, there's
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  Speaker 1: some new numbers out on that, so that's kind of
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  Speaker 1: a small piece to look at. Uh, Bernie Sanders, for examples,
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  Speaker 1: is looking at proposing higher corporate taxes of about almost
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  Speaker 1: four trillion over a decade. So he's looking at raising
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  Speaker 1: the corporate rate back to thirty percent, which is where
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  Speaker 1: it was before the Trump tax law, and as well
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  Speaker 1: as getting rid of some depreciation benefits that that kind
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  Speaker 1: of helped corporations lower their tax rates. So that would
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  Speaker 1: be a huge increase in In the other direction, Mike
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  Speaker 1: Bloomberg is also talking about raising corporate tax rates, but
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  Speaker 1: um going to about twenty eight percent, which is, you know,
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  Speaker 1: lower than it had been, but um kind of a
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  Speaker 1: number that Obama had had championed for many years. That
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  Speaker 1: would be only about a one point to one point
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  Speaker 1: three trillion dollar increase over a decade UM. And at
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  Speaker 1: that twenty eight number, you see come up a lot.
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  Speaker 1: And that's also Joe Biden's been talking about that um
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  Speaker 1: Amy Klobuchars, that has the lowest number in the field
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  Speaker 1: at which is actually something a number that that Republicans
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  Speaker 1: had talked about UM when they were planning their tax
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  Speaker 1: reform a couple of years ago. So, Laura, one of
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  Speaker 1: the big big issues that really came to the forefront
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  Speaker 1: in was income inequality. How did these tax plans impact that,
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  Speaker 1: if at all? Um So, it really depends on not
• 11:18
  Speaker 1: kind of the specific provision and kind of how you
• 11:21
  Speaker 1: look at them all in total as well. But this
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  Speaker 1: is an issue that you hear, you know that Bernie
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  Speaker 1: Sanders and Elizabeth Warren have talked about specifically, but across
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  Speaker 1: the board, all plans would would would tax the rich
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  Speaker 1: a lot more. Income inequality and wealth inequality are sort
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  Speaker 1: of two different issues. Income inequalities a lot easier to tackle.
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  Speaker 1: You can do that by, you know, raising the capital
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  Speaker 1: gains rate, which nearly every candidate has proposed to do,
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  Speaker 1: tax at the same as labor income, raising income rates
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  Speaker 1: on on high earners, um doing things like a financial
• 11:48
  Speaker 1: transaction tax, which uh Mike Bloomberg I said yesterday he
• 11:52
  Speaker 1: would support him. That's been something that Sanders and Warren
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  Speaker 1: and Buddha Judge and another candidates have been talking about
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  Speaker 1: for a while. Wealth inequality is a little bit trickier
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  Speaker 1: because that's on accumulated wealth. In our tax system as
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  Speaker 1: it stands right now, doesn't tax wealth. It just taxes
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  Speaker 1: income essentially. So the wealth tax that Warren and Sanders
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  Speaker 1: have been talking about would do more to alleviate wealth inequality.
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  Speaker 1: But there's a lot of questions about one of that,
• 12:13
  Speaker 1: is that politically viable? And two is it even constitutional?
• 12:16
  Speaker 1: Is anyone talking about rolling back some of the salt
• 12:20
  Speaker 1: issues salt tax deductions? Well, I mean, I'm just wondering
• 12:23
  Speaker 1: because there's been a theory this is disproportionately hit coastal
• 12:27
  Speaker 1: states that are traditionally voted for Democratic candidates. However, the
• 12:31
  Speaker 1: salt tax deduction and the state and local tax deduction
• 12:35
  Speaker 1: really does tend to favor wealthier individuals. So it's not politically,
• 12:40
  Speaker 1: uh necessarily going to support the Democratic case, has or
• 12:43
  Speaker 1: been any way in there by the Democratic candidates. You
• 12:46
  Speaker 1: have really just touched on sort of the the hot
• 12:48
  Speaker 1: button issue among kind of democratic tax thinkers right now.
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  Speaker 1: And so really the the movement on salt has been
• 12:54
  Speaker 1: on Capitol Hill. Democrats on the campaign trail have not
• 12:57
  Speaker 1: been talking to that party, partly because it is a
• 12:59
  Speaker 1: such a state specific issue. Some of those states haven't
• 13:02
  Speaker 1: even come up yet um in the primaries. As well
• 13:04
  Speaker 1: as it it's a politically difficult thing because if you
• 13:07
  Speaker 1: live in Florida or Iowa or Kansas or or any
• 13:10
  Speaker 1: of these states that that have either no income taxes
• 13:12
  Speaker 1: or very low rates. This is an important to you,
• 13:15
  Speaker 1: but if you're in Connecticut or New York or California,
• 13:17
  Speaker 1: this is so what Democrats on on the hill say
• 13:20
  Speaker 1: is they believe that if a Democrat were to come
• 13:22
  Speaker 1: into the White House, so they were to take back
• 13:23
  Speaker 1: the Senate and have control, salts would be on the table,
• 13:26
  Speaker 1: but that Democrats on the campaign trail are just really
• 13:29
  Speaker 1: too scared to talk about it right now. So, Laura,
• 13:31
  Speaker 1: what's the argument today, the contemporary argument for not raising taxes?
• 13:36
  Speaker 1: The contemporary argument for not raising taxes. Well, so, so
• 13:39
  Speaker 1: that's sort of kind of your traditional um trickle down
• 13:42
  Speaker 1: kind of um idea that Republicans, you know, have champion
• 13:46
  Speaker 1: for a long long time. Though, I've been talking to
• 13:48
  Speaker 1: some Republicans and they've been saying, uh, you know, and
• 13:50
  Speaker 1: you see this with with Trump talking about a middle
• 13:52
  Speaker 1: income tax cut, is that they're really concerned to talk
• 13:56
  Speaker 1: about lowering rates for the for top earners and for corporations.
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  Speaker 1: You know, the Republicans used to talk for a long
• 14:02
  Speaker 1: time about Louis wearing that top rate which now sits
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  Speaker 1: at thirty seven percent for individuals down to something in
• 14:07
  Speaker 1: the twenties. That's really off the table. They're not They're
• 14:09
  Speaker 1: not going there. You see kind of both the window
• 14:12
  Speaker 1: of what both parties are are kind of talking about
• 14:15
  Speaker 1: has shifted to the left, you know, of course for
• 14:17
  Speaker 1: the Democrats, but also some for the Republicans. Laura, thanks
• 14:20
  Speaker 1: so much for joining us. We really appreciate your thoughts there.
• 14:22
  Speaker 1: Laura Davison, Congressional tax reporter for Bloomberg News, joining us
• 14:25
  Speaker 1: from the Bloomberg N nine one studio in Washington, D C.
• 14:27
  Speaker 1: And of course, UH taxation is going to be one
• 14:30
  Speaker 1: of the key things I suspect that we're going to
• 14:32
  Speaker 1: hear a lot about tonight at the debates. Well, there
• 14:34
  Speaker 1: also is the bifurcation and the Democratic Party. You've got
• 14:36
  Speaker 1: Bernie Sanders emerging very much as a front run are
• 14:39
  Speaker 1: consolidating some of the UH the support that previously had
• 14:43
  Speaker 1: been split with Elizabeth Warren and it's really going to
• 14:46
  Speaker 1: be him very much on the forefront. And Michael Bloomberg
• 14:49
  Speaker 1: coming into the first debate again, UH founder and majority
• 14:53
  Speaker 1: owner of Bloomberg LP. It's just going to be really
• 14:55
  Speaker 1: interesting to see where the focus is is it on
• 14:59
  Speaker 1: what plan? There are two further the US economy and
• 15:02
  Speaker 1: and sort of you know, with healthcare, etcetera. Or is
• 15:05
  Speaker 1: it going to be on beating President Trump? And those
• 15:07
  Speaker 1: are sort of some of the two narratives that have
• 15:09
  Speaker 1: been dominant throughout the entire race. Boys, we think back
• 15:24
  Speaker 1: to en and even year to date here, equity markets
• 15:27
  Speaker 1: very very strong. Here one area that's you know, performed better,
• 15:31
  Speaker 1: but still I think a little bit unloved as a
• 15:33
  Speaker 1: financial sector. Dave Ellis, and portfolio manager for Hennessey Funds,
• 15:37
  Speaker 1: joins us. He's based in Boston, but joining us here
• 15:39
  Speaker 1: in our Bloomberg Interactor Broker studio. So so Dy've give
• 15:42
  Speaker 1: us a sense of kind of just the financial stocks.
• 15:44
  Speaker 1: And I think back to some of the big players
• 15:46
  Speaker 1: of Goldman Sacks, the cities at JP Morgan's had a
• 15:49
  Speaker 1: pretty good twenty nineteen in terms of performance. How do
• 15:51
  Speaker 1: you think how's the group in general been performing? Financials? Well,
• 15:56
  Speaker 1: I think there's a you're saying a separation the people
• 15:59
  Speaker 1: that are balance sheets entric, meaning that they have the
• 16:02
  Speaker 1: bulk of their earnings from the balance sheet, they're they're
• 16:04
  Speaker 1: not doing well. Uh, they're underperforming. And I have a
• 16:08
  Speaker 1: small cat financial fund that's actually down for the year
• 16:11
  Speaker 1: and that's primarily a balance sheet centric business. But the
• 16:15
  Speaker 1: ones that are that are have more fee income, more
• 16:17
  Speaker 1: more recurring fee income, like a Visa or master card,
• 16:20
  Speaker 1: they continue to do well because that's what people want.
• 16:22
  Speaker 1: They don't, you know, they don't want to own these
• 16:25
  Speaker 1: balance sheets that are under threat from either credit or
• 16:28
  Speaker 1: low rates. A lot of people look at the banks
• 16:31
  Speaker 1: as sort of completely dependent on the yield curve. The
• 16:34
  Speaker 1: flat of the yield curve in the United States goes
• 16:36
  Speaker 1: the gap between in particular two year and ten year
• 16:38
  Speaker 1: treasury yields, the less value people see in financials today,
• 16:43
  Speaker 1: we're seeing the yield curve flatten it again. Do you
• 16:46
  Speaker 1: think that this is a fair assessment of the relationship
• 16:49
  Speaker 1: between the yield curve and financials? I think so, I
• 16:52
  Speaker 1: mean disappointingly. So. You know, when I started many many
• 16:56
  Speaker 1: years ago, FED funds are eighteen percent, so it didn't
• 16:59
  Speaker 1: matter what the yield curve was, you made plenty of money.
• 17:01
  Speaker 1: But now the flatness of the yeld curve and the
• 17:03
  Speaker 1: lowness of rates relative to zero is a double whammy.
• 17:07
  Speaker 1: And if you look at a big bank like JP Morgan,
• 17:10
  Speaker 1: half of their profits going to come from the balance sheet.
• 17:13
  Speaker 1: If you look at a medium sized a smaller bank,
• 17:15
  Speaker 1: it can be seventy five of their income comes from
• 17:19
  Speaker 1: the balance sheet. So if rates are gonna go low
• 17:22
  Speaker 1: and we're gonna end up like Japan here in America,
• 17:24
  Speaker 1: those those spreads are gonna come in and that's gonna
• 17:27
  Speaker 1: attack half to of their revenue. So if I told
• 17:31
  Speaker 1: you that half of Apple's revenues we're under pressure, where
• 17:35
  Speaker 1: do you think the stock would be going? Right? All right,
• 17:38
  Speaker 1: let's we see. Let's take a look at the asset
• 17:40
  Speaker 1: management side of the business. We had another deal announced yesterday,
• 17:44
  Speaker 1: Franklin Templeton buying leg Mason fifty dollars to share. Um.
• 17:49
  Speaker 1: Is that just a reaction to the issue that has
• 17:52
  Speaker 1: plagued the asset management business for almost a generation now,
• 17:54
  Speaker 1: which is pressure on fees. I think it's it's that,
• 17:59
  Speaker 1: and it's also these acquisitions allow them to reset employee levels,
• 18:05
  Speaker 1: compensation levels, layers of management levels, so you have a
• 18:10
  Speaker 1: number of things that go on there. Um. But again
• 18:13
  Speaker 1: this is addition. By subtraction, You're you're putting two companies
• 18:16
  Speaker 1: together that are losing a u M hoping that you
• 18:20
  Speaker 1: can buy subtraction. Meaning even though you're still shrinking. You
• 18:24
  Speaker 1: can add value for the shareholders by and again resetting
• 18:28
  Speaker 1: the corporate structure. That that's what acquisitions allow you to do.
• 18:32
  Speaker 1: Uh and and I think you're going to see that
• 18:35
  Speaker 1: more in this business. The backdrop of this merger was
• 18:38
  Speaker 1: that active management, in particular equitative active equity fund management
• 18:44
  Speaker 1: is a dying industry. That is your industry. What do
• 18:47
  Speaker 1: you what do you think when people say that, Well,
• 18:50
  Speaker 1: I think there's you know, it's an industry that is
• 18:54
  Speaker 1: is under pressure because of what the market is doing.
• 18:59
  Speaker 1: Um and the market is giving you fairly decent performance metrics,
• 19:06
  Speaker 1: which makes the index funds a safer way to play.
• 19:10
  Speaker 1: So what what the FED is essentially done is taking
• 19:14
  Speaker 1: a lot of the volatility out of capitalism. They did
• 19:17
  Speaker 1: it two decembers ago. They did it when what's three
• 19:22
  Speaker 1: or four months ago when the repo thing. They don't
• 19:24
  Speaker 1: allow capitalism to come back in and therefore allow active
• 19:28
  Speaker 1: management to add value. And so as long as the
• 19:32
  Speaker 1: FED is there tamping down volatility and tamping down capitalism,
• 19:38
  Speaker 1: than being in an index fund, we're just going along
• 19:41
  Speaker 1: with the flow of money and the growth of money
• 19:43
  Speaker 1: in the system. Remember, the money is going coming into
• 19:46
  Speaker 1: the system every day. There's more dollars out there every day.
• 19:50
  Speaker 1: If if the same amount goes in the stock stocks
• 19:53
  Speaker 1: will slowly go up. And if the FED says we're
• 19:56
  Speaker 1: not going to have any volatility, then you should just
• 19:58
  Speaker 1: own an index fund. But once volatility returns, if it
• 20:01
  Speaker 1: ever does, the act of management will will win. And
• 20:05
  Speaker 1: the question is that the market doesn't, at least investors
• 20:08
  Speaker 1: don't believe that that's going to happen right now. What
• 20:10
  Speaker 1: areas are you looking at right now that are most uh,
• 20:13
  Speaker 1: you know, attractive to you right now? Again, we're eleven
• 20:16
  Speaker 1: years into this financial economic cycle. The markets have been rallying, uh,
• 20:20
  Speaker 1: And so where do you see opportunities? Well, I think
• 20:24
  Speaker 1: you know, the market is telling you that you should
• 20:26
  Speaker 1: own five stocks. Um. And that's and and financials aren't
• 20:32
  Speaker 1: one of them, are right? Well right, they aren't. But
• 20:34
  Speaker 1: but certainly the visa master cards of the world have
• 20:37
  Speaker 1: done quite well. And that's why you know, my large
• 20:39
  Speaker 1: capt fund is performed well. Thank god, I'm doing something right, um.
• 20:44
  Speaker 1: And I think that's I think the winners are going
• 20:46
  Speaker 1: to continue to be winners. And you know, the on
• 20:51
  Speaker 1: in the companies that don't want to invest in their future,
• 20:54
  Speaker 1: don't want to take chances are going to continue to
• 20:56
  Speaker 1: fall by the wayside. And I think you just have
• 20:59
  Speaker 1: a lot of having have knots out there. You have
• 21:01
  Speaker 1: it in in income and distribution, you have it in
• 21:03
  Speaker 1: stock valuations, you have it in home prices, and it's
• 21:07
  Speaker 1: just going to continue. Dave Ellison, thank you so much
• 21:10
  Speaker 1: for being with us. Dave Ellison is a profolio manager
• 21:12
  Speaker 1: of the Hennessey Small Cap and large cap financial funds,
• 21:16
  Speaker 1: joining us here in our interactive brokers studio is normally
• 21:19
  Speaker 1: based in Boston. A really interesting kind of conundrum and
• 21:23
  Speaker 1: I've heard this before, Paul, from people saying the FED
• 21:26
  Speaker 1: is killed off the volatility as well as sort of
• 21:29
  Speaker 1: the natural price discovery that markets have been used to.
• 21:33
  Speaker 1: And the question is, you know what will occur if
• 21:37
  Speaker 1: they allow it to go back or does this mean
• 21:39
  Speaker 1: that they kind of can't. They can't, And if you
• 21:42
  Speaker 1: look around the world, it's not just the FED, E
• 21:44
  Speaker 1: c B and some other central bankers as well. So
• 21:46
  Speaker 1: that seems to be the world we're in right now
• 21:48
  Speaker 1: post financial crisis. The digital transformation of the industries from
• 21:59
  Speaker 1: shopping to buying cars to buying homes to UH finding
• 22:03
  Speaker 1: a place to stay when you visit another city has
• 22:05
  Speaker 1: been dramatic. It has overhauled the entire economy in many ways,
• 22:09
  Speaker 1: and there is a question of how this is impacting
• 22:11
  Speaker 1: the music industry or streaming is gaining such a big
• 22:15
  Speaker 1: share of how people access music. Joining us now is
• 22:18
  Speaker 1: Ben Mendoza. He is co founder and chief executive officer
• 22:21
  Speaker 1: of beat Chain, based in London. Joining us here today
• 22:24
  Speaker 1: in our interactive broker studios UH and beat Jane kind
• 22:28
  Speaker 1: of caters to this new era. But before we get
• 22:31
  Speaker 1: into what you do, can we talk about how does
• 22:33
  Speaker 1: a musician today make money? Okay, thanks to NASA, thanks
• 22:37
  Speaker 1: very much for having having me here. Um, it's a
• 22:39
  Speaker 1: very good question that musicians today make most of their money. Um,
• 22:44
  Speaker 1: if they're you know, the normal musicians that are that
• 22:49
  Speaker 1: are playing clubs and and and other events, make most
• 22:52
  Speaker 1: of the money from live performance. They will make some
• 22:55
  Speaker 1: money from streaming, but it will typically be possibly fifteen
• 23:02
  Speaker 1: max um. So they need to be able to sell
• 23:05
  Speaker 1: tickets and sell their merchandise and perform. That's how they
• 23:10
  Speaker 1: do it, all right, So how does beach chain fit
• 23:12
  Speaker 1: into the economics of today's music industry. Okay, Um, the
• 23:17
  Speaker 1: thing about musicians is then they're not necessarily the most
• 23:22
  Speaker 1: technically savvy people. Okay, So what we've done at Beach
• 23:26
  Speaker 1: Chain is we've tried to abstract away all the technicalities
• 23:29
  Speaker 1: of boosting your brand using social media and other ways
• 23:34
  Speaker 1: in which you can get in front of your target
• 23:36
  Speaker 1: audience and made that very simple for musicians to use.
• 23:40
  Speaker 1: So we put together a whole set of tools, a
• 23:42
  Speaker 1: sort of platform which includes understanding where your audience is
• 23:47
  Speaker 1: seeing us literally a dashboard with a with a map
• 23:51
  Speaker 1: that says, this is where Spotify listeners are listening to you,
• 23:55
  Speaker 1: this is where your Facebook fans are, and so on,
• 23:58
  Speaker 1: so that you can understand who likes what and decide
• 24:02
  Speaker 1: when you're going to play your next event where to
• 24:05
  Speaker 1: go to do that because you can see where your
• 24:08
  Speaker 1: fans are congregated. Okay, So we provide that we also
• 24:13
  Speaker 1: provide a set of tools that allows these musicians to
• 24:16
  Speaker 1: post out on the social channels automatically against a schedule,
• 24:23
  Speaker 1: the right sort of content that's going to be engaging
• 24:25
  Speaker 1: for their fans. Many musicians have this idea that the
• 24:31
  Speaker 1: first thing they should do is get some music up
• 24:34
  Speaker 1: on Spotify, you know, and they'll get some streaming revenue
• 24:38
  Speaker 1: from that. Well, actually, that's not the advice we would
• 24:40
  Speaker 1: give them. We would say, before you do that, build
• 24:43
  Speaker 1: up a fan base who wants to stream it. You know,
• 24:46
  Speaker 1: you've got to You've got to actually engage those bad audience.
• 24:49
  Speaker 1: So the tools we have are designed to do that.
• 24:51
  Speaker 1: There's always been a complaint in an era when CDs
• 24:55
  Speaker 1: for a thing or vital was the dominant form of
• 24:59
  Speaker 1: getting your music, where the labels had such power over
• 25:03
  Speaker 1: which music got distributed. Do they still have that power,
• 25:09
  Speaker 1: Absolutely they do. But the the opportunity there is there
• 25:13
  Speaker 1: now with the technology as it is today for artists
• 25:17
  Speaker 1: to sidestep that. It used to be that if you
• 25:21
  Speaker 1: wanted to promote yourself and build that audience I was
• 25:25
  Speaker 1: talking about, then you needed the dollars that the big
• 25:28
  Speaker 1: major's had behind you to do that. But has it
• 25:31
  Speaker 1: really been a really changed I mean, I'm just trying
• 25:34
  Speaker 1: to figure out if you can get enough of a following,
• 25:38
  Speaker 1: whether it's on Instagram or whether it's on Facebook, whether
• 25:41
  Speaker 1: you see an increasing number of cases where people are
• 25:44
  Speaker 1: able to sort of make their own fortune away from
• 25:47
  Speaker 1: the labels in a way that's unique. Yes, absolutely, and
• 25:50
  Speaker 1: we have case studies that show this. For the last
• 25:53
  Speaker 1: two years, we've been working with a number of bands
• 25:55
  Speaker 1: and across all genres that have managed to build up
• 26:00
  Speaker 1: literally hundreds of thousands of fans um and that's enabled
• 26:05
  Speaker 1: them to put on shows where they've hired the venue themselves,
• 26:09
  Speaker 1: they've sold the tickets themselves, and they keep the majority
• 26:12
  Speaker 1: of that that money this way, when they were doing
• 26:15
  Speaker 1: it through the traditional routes of having label services and
• 26:18
  Speaker 1: promoters and managers, then obviously those middlemen all take their
• 26:23
  Speaker 1: share and less ends up in the musicians pocket. So
• 26:26
  Speaker 1: what's the economic model for your company? For for beach chain,
• 26:28
  Speaker 1: how do you guys generate revenue? Okay, we generate revenue
• 26:32
  Speaker 1: by having a three tier model, so that the lowest
• 26:35
  Speaker 1: tier of the beaching platform is actually free to use
• 26:39
  Speaker 1: and it gives a lot of very valuable information. But
• 26:42
  Speaker 1: if you want to get into them the real meat
• 26:46
  Speaker 1: of of promoting yourself and using the marketing tools that
• 26:50
  Speaker 1: we we've supplied, then we have a subscription model, which
• 26:53
  Speaker 1: is for the sort of premium level is and then
• 26:59
  Speaker 1: per month, and at the sort of superstar end is
• 27:02
  Speaker 1: only per month, so it's still sort of the cost
• 27:06
  Speaker 1: of a pizza a month. We need to keep it
• 27:08
  Speaker 1: affordable for musicians. So what's the draw I mean, do
• 27:12
  Speaker 1: you have a sense that there would be interest from
• 27:15
  Speaker 1: a major record label to acquire you or partner with you? Okay?
• 27:21
  Speaker 1: I think there are lots of people looking at what
• 27:25
  Speaker 1: we're doing in the industry. I mean, we have already
• 27:27
  Speaker 1: fifty thousand people signed up to be Chained and we've
• 27:31
  Speaker 1: only just launched, So there's a lot of interest in
• 27:34
  Speaker 1: what we're doing and a lot we're getting a lot
• 27:36
  Speaker 1: of user feedback. And obviously it's not perfect jet and
• 27:38
  Speaker 1: we're carrying on improving it all the time. But I
• 27:42
  Speaker 1: think there's a whole bunch of services, especially when you
• 27:45
  Speaker 1: look at the data science, when you look at the
• 27:47
  Speaker 1: data that we generate, and this is something that the
• 27:51
  Speaker 1: artists individually are necessarily interested in, but the industry is
• 27:55
  Speaker 1: you can see signatures in that data. You can you
• 27:58
  Speaker 1: can look at those artists that are breaking out in
• 28:01
  Speaker 1: different areas, and that is very valuable even to the
• 28:04
  Speaker 1: major Can you imagine a time when you have Netflix
• 28:08
  Speaker 1: kind of listens or or monitors what people like and
• 28:12
  Speaker 1: then takes pieces of that and kind of recreates a
• 28:15
  Speaker 1: show based around that. Are you saying that that's kind
• 28:17
  Speaker 1: of that's basically what we're doing in the background. I
• 28:19
  Speaker 1: mean there's a lot of um, interesting technology getting towards
• 28:24
  Speaker 1: machine learning and and even some AI or that that
• 28:27
  Speaker 1: that tends to be banded around fairly freely these days. Um.
• 28:33
  Speaker 1: When you when you bring those different data sets together,
• 28:35
  Speaker 1: you can infer a lot of information and you can
• 28:38
  Speaker 1: make actionable insight out of that. So yes, definitely we
• 28:43
  Speaker 1: are seeing that we can help artists by saying, look,
• 28:48
  Speaker 1: this is what's working for other acts like you in
• 28:51
  Speaker 1: your in your genre, try doing this. You know post
• 28:54
  Speaker 1: here have this type of content and when they do
• 28:58
  Speaker 1: that they see a big uplift in the in their responses,
• 29:01
  Speaker 1: Um that they got. Ben Mendoza, thanks for joining us.
• 29:04
  Speaker 1: Really fascinating story. You talk about industry, like you mentioned earliers,
• 29:07
  Speaker 1: it's been disrupted. Boy, the music industry has been disrupted
• 29:10
  Speaker 1: with technology well, and it's so interesting to think about
• 29:12
  Speaker 1: how you can get such real time feedback about what's
• 29:17
  Speaker 1: popular and what's not and how you can sort of
• 29:19
  Speaker 1: tailor the music to that. And that's sort of what
• 29:22
  Speaker 1: we're seeing out of Netflix. The way they try to
• 29:23
  Speaker 1: craft shows around the likes or dislikes of the viewers. Yeah,
• 29:27
  Speaker 1: I could see how this would be for the independent
• 29:30
  Speaker 1: artist would be who's not signed up to a big label.
• 29:32
  Speaker 1: This would be hugely value added story. Ben Mendoza, co
• 29:35
  Speaker 1: founder and chief executive officer of be Chain, based in London,
• 29:39
  Speaker 1: but were fortunate that he's joining us here in our
• 29:41
  Speaker 1: Bloomberg Interactive Broker studio here in New York. So very
• 29:45
  Speaker 1: interesting on the music business. We've seen, uh, you know,
• 29:48
  Speaker 1: more and more the artists given kind of how the
• 29:50
  Speaker 1: music industries evolved as made most of their money today
• 29:54
  Speaker 1: by touring and uh it's less so from the recorded
• 29:58
  Speaker 1: contracts that they have with their labels. Interesting to see
• 30:01
  Speaker 1: how beat chain fits in here. Thanks for listening to
• 30:03
  Speaker 1: the Bloomberg P and L podcast. You can subscribe and
• 30:05
  Speaker 1: listen to interviews at Apple Podcasts or whatever podcast platform
• 30:08
  Speaker 1: you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney.
• 30:12
  Speaker 1: I'm Lisa abram Woyit's I'm on Twitter at Lisa abram
• 30:14
  Speaker 1: woits one before the podcast. You can always catch us
• 30:17
  Speaker 1: worldwide on Bloomberg Radio