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Bloomberg Invest 2023 (Podcast) · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
0:04
Speaker 1: my co host Matt Miller.
0:05
Speaker 2: Every business day we bring you interviews from CEOs, market pros,
0:09
Speaker 2: and Bloomberg experts, along with essential market moven news.
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Speaker 3: Find the Bloomberg Markets podcast called Apple Podcasts or wherever
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Speaker 3: you listen to podcasts, and at Bloomberg dot com slash podcast.
0:21
Speaker 4: We are going to continue to monitor markets throughout the
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Speaker 4: day here, of course, but right now we have a
0:27
Speaker 4: very special guest with us here in New York City.
0:30
Speaker 4: We've got Kristin Olsen. She's a partner of Alternative capital
0:33
Speaker 4: Markets at Goldman Sachs. She's here to discuss investing strategies
0:37
Speaker 4: and give us her outlook for alternative markets. She was
0:40
Speaker 4: also in a great panel this morning that was far
0:42
Speaker 4: too short about positioning for a recession, so we're gonna
0:45
Speaker 4: get some more time with her. Thankfully, Kristen, thank you
0:47
Speaker 4: for being here with us in person. I imagine that all
0:52
Speaker 4: capital markets are very attractive right now as we're in
0:54
Speaker 4: this recessionary environment.
0:56
Speaker 5: Can you talk to me.
0:56
Speaker 4: About what business is looking like for you?
0:59
Speaker 6: Sure?
1:00
Speaker 7: Well, I would say clients are increasingly upping their allocations alternative.
1:04
Speaker 7: So we've always had a very big strategic weight towards
1:07
Speaker 7: alternative investments. And I think what our clients have seen
1:10
Speaker 7: over the past twenty five years is the private markets
1:14
Speaker 7: have generated real alpha versus the public markets, and they've
1:17
Speaker 7: seen it with less perceived volatility and correlation to traditional markets.
1:22
Speaker 7: And so obviously that's attractive right now. I think when
1:25
Speaker 7: people are looking under the hood at where an alternatives,
1:28
Speaker 7: they focused traditional private equity. In this market, secondary private
1:32
Speaker 7: equity is particularly compelling. Obviously, liquidity is at a premium,
1:38
Speaker 7: and so the opportunity to buy private equity at a
1:40
Speaker 7: discount is pretty compelling right now. And then in this
1:44
Speaker 7: environment private credit, the ability to be top of the
1:48
Speaker 7: capital structure and in this market yet double digit un
1:52
Speaker 7: levered returns is very very compelling.
1:55
Speaker 3: Christian, I'm down here in Orlando, Florida today at the
1:58
Speaker 3: B and Y Melon Persihing Insight Conference, and what we've
2:01
Speaker 3: heard of yours, retail investors really have an appetite for
2:05
Speaker 3: alternative investments.
2:06
Speaker 1: How do you view that source of wealth, that pool
2:09
Speaker 1: of capital.
2:11
Speaker 7: Certainly we see that as a very big growth opportunity.
2:15
Speaker 7: I think that market and those investors have not has
2:18
Speaker 7: had as many opportunities to get into alternatives. And what
2:21
Speaker 7: we're seeing over the last couple of years or some
2:24
Speaker 7: new opportunities in private credit, in particular with the advent
2:28
Speaker 7: of a number of these non traded BDCs that provide
2:31
Speaker 7: quarterly yield and access to this type of private credit market. Similarly,
2:36
Speaker 7: we've seen the private real estate side non traded wreaths,
2:39
Speaker 7: and both of those are structured to accommodate a broader
2:41
Speaker 7: universe of investors than traditional alternatives are available to. And
2:46
Speaker 7: then I think the next question will be how does
2:47
Speaker 7: that investor based access private equity and what structures will
2:52
Speaker 7: become available in that space.
2:54
Speaker 4: Within reads which is so interesting that you bring up
2:58
Speaker 4: Can you talk to me a little bit more about
2:59
Speaker 4: that and what clients are interested in.
3:02
Speaker 7: So from from my client base, they're looking more at
3:05
Speaker 7: the and this is on the private well side, ultrahigh
3:08
Speaker 7: net worth and if we even go down to kind
3:10
Speaker 7: of mass affluent, it's more of the private rate market
3:14
Speaker 7: as opposed to the public rate market. But you know,
3:17
Speaker 7: I think there's some hesitancy right now. You know, those
3:21
Speaker 7: investments have a fixed yield in an environment where private
3:25
Speaker 7: credit with floating rate, floating yields are probably a little
3:27
Speaker 7: bit more attractive, and I think there's a little bit
3:30
Speaker 7: of a wait and see as where do the real
3:33
Speaker 7: estate values for existing pools of assets shake out, and
3:36
Speaker 7: probably some concerns in the near term about where evaluations
3:38
Speaker 7: are going.
3:40
Speaker 3: So Christian, you mentioned earlier private credit, and that's a
3:43
Speaker 3: business that I think if I were to come back
3:44
Speaker 3: again and start my Wall Street career all over again,
3:47
Speaker 3: that would be an area that I would look really
3:49
Speaker 3: hard at. I'm just amazed at the amount of capital
3:52
Speaker 3: flowing to private credit.
3:54
Speaker 1: What's your view of that that market?
3:56
Speaker 7: We think right now it's quite compelling. Look, obviously, there's
3:59
Speaker 7: been a big pivot post the global financial crisis. Right
4:02
Speaker 7: banks pulled back significantly from this type of direct lending,
4:06
Speaker 7: and alternative credit providers stepped in. So I think you have,
4:09
Speaker 7: you know, five times the amount of capital in that
4:11
Speaker 7: space then you did back in two thousand and nine.
4:14
Speaker 7: And then if you sit here today and you look
4:16
Speaker 7: at you know, base rates up five hundred basis points,
4:18
Speaker 7: credit spreads widening. If you can pick the right managers
4:22
Speaker 7: that can select the right credits. Unlevered yields of ten
4:25
Speaker 7: plus percent and levered returns that are low teens, you're
4:30
Speaker 7: not that far off from the returns that investors might
4:32
Speaker 7: be thinking of for private equity. And so, you know,
4:36
Speaker 7: we think that risk return today is very attractive and
4:39
Speaker 7: hence you're seeing a lot of capital flow into that space,
4:43
Speaker 7: and particularly if we've been in a yield starb environment
4:46
Speaker 7: and that yield's pretty attractive today.
4:48
Speaker 4: Is that changing the calculation of the traditional sixty forty portfolio?
4:53
Speaker 4: Have we moved past that at this point?
4:56
Speaker 1: Well?
4:56
Speaker 7: Look, I mean I think underneath sixty forty there's always
4:59
Speaker 7: a lot of asset classes in there, and from my perspective,
5:02
Speaker 7: we have a big strategic weight to alternatives, and so
5:05
Speaker 7: private credit would be part of that, you know. And
5:07
Speaker 7: so for us, we think about a moderate client approaching
5:10
Speaker 7: twenty five percent, and alternatives and private credit would be
5:13
Speaker 7: a part of that twenty five percent.
5:16
Speaker 3: Christin, you know, I've done some work with some university
5:18
Speaker 3: endowments and I am just I'm not shocked, but I'm
5:21
Speaker 3: just really surprised at how much endowments have leaned into
5:26
Speaker 3: alternative investments, some of them at thirty to forty percent
5:28
Speaker 3: of their endowment in alternatives.
5:31
Speaker 1: How do you view that source of capital.
5:34
Speaker 7: Yeah, look, they've traditionally you know, I think they're leaning in.
5:37
Speaker 7: I would bet they're leaning in even more than that today.
5:40
Speaker 7: So they've always been one of the largest allocators allocators alternatives.
5:43
Speaker 7: I think what you're seeing is the individual investor kind
5:47
Speaker 7: of getting up closer to those levels. You know, we
5:50
Speaker 7: just did our Family office survey and you know, when
5:53
Speaker 7: we went out to that universe of investors, we saw
5:55
Speaker 7: that they were on average allocated forty four percent to alternatives,
6:00
Speaker 7: so even higher than where you see kind of the
6:02
Speaker 7: endowment community. And then further, they're actually mostly looking to
6:06
Speaker 7: actually increase that in the coming year. So you know,
6:10
Speaker 7: I think you're seeing a bit of a pivot. Obviously,
6:12
Speaker 7: we talk a lot about the institutional world having a
6:14
Speaker 7: bit of a denominator effect right where their alternatives have performed,
6:18
Speaker 7: their traditional assets values have you know, declined, and as
6:23
Speaker 7: a result, they're actually not able to keep adding as
6:25
Speaker 7: much as they have historically, whereas the individual community, the
6:28
Speaker 7: family office community, is actively adding to their alternatives allocations.
6:32
Speaker 4: When did this start? When did the interest start to
6:35
Speaker 4: really pick up?
6:37
Speaker 7: I would say for the ultra high net worth community,
6:40
Speaker 7: there's always been very meaningful interest, and the reason being
6:43
Speaker 7: that that investor base has the ability to endure the
6:46
Speaker 7: ill liquidity and thus benefit from the ill liquidity premium
6:49
Speaker 7: in those markets. But over the past several years, I
6:52
Speaker 7: think you've seen even more of a lean in to
6:54
Speaker 7: alternatives from that channel. And then I think you're seeing growth,
6:57
Speaker 7: you know, as we alluded to in the in the
7:00
Speaker 7: retail space and the ultra high net and the mass
7:02
Speaker 7: affluent space, as more and more people want to access
7:05
Speaker 7: the alpha that is generated in these markets.
7:08
Speaker 3: Kristin, what does the data show historically about how alternatives
7:12
Speaker 3: as an asset class perform in what could be a
7:16
Speaker 3: recessionary environment, however shallow it may prove to be.
7:20
Speaker 7: Yeah, Look, I think if we look at the past
7:22
Speaker 7: twenty five years private equity, the median private equity manager
7:26
Speaker 7: has generated positive returns, although they've varied every single year
7:29
Speaker 7: for the last twenty five years. And if you think
7:31
Speaker 7: about what the alpha, so the outperformance that they're generating
7:34
Speaker 7: relative to traditional markets, the median managers across buyot and
7:38
Speaker 7: growth have done three to five hundred points basis points
7:41
Speaker 7: a year better than their public market equivalent. And if
7:45
Speaker 7: you go to top quartel managers that our performance is
7:47
Speaker 7: going to be even higher. And so again, if you
7:50
Speaker 7: have the ability to endure the illiquidity in this asset class,
7:53
Speaker 7: you are getting rewarded even with the median manager, but
7:57
Speaker 7: obviously more important to pick top quartel managers in this space.
8:01
Speaker 4: Looking a little bit more broadly, kristin, what's your outlook
8:04
Speaker 4: for the rest of the year. What are you most
8:06
Speaker 4: concerned about and what are you excited about? What's keeping
8:09
Speaker 4: you up at night and helping you go to sleep?
8:12
Speaker 7: Oh gosh, one of my most concerned about. Well, look,
8:15
Speaker 7: I mean I think everyone is concerned about, you know,
8:18
Speaker 7: the possibility of actually going into a recession, although it
8:20
Speaker 7: seems like some of those fears are abating a little bit.
8:24
Speaker 7: I think the beauty in the ASCID class I focus
8:27
Speaker 7: in though, is all of these things create different types
8:29
Speaker 7: of opportunity. So when you look at the hood under
8:31
Speaker 7: the hood, if we do go into a recession or
8:34
Speaker 7: hip bumps in the road, you know, we'll start looking
8:36
Speaker 7: at managers that can think about how to provide capital
8:39
Speaker 7: into those disruptions, right, whether it's a special situations manager,
8:43
Speaker 7: strategic lenders, distressed managers. So I think you know, the
8:48
Speaker 7: theme of this right as we think about a recession,
8:50
Speaker 7: we were there opportunities. I think in alternatives you will
8:52
Speaker 7: see opportunities. They'll just be different than the opportunities that
8:56
Speaker 7: we were excited about maybe three or four years ago,
8:58
Speaker 7: which happened to lean a lot into growth and tech
9:01
Speaker 7: and venture. That being said, you know, with valuations down
9:05
Speaker 7: a lot, there's going to be opportunity in that space
9:07
Speaker 7: as well going forward.
9:09
Speaker 3: Kristin, thank you so much for joining us. Really appreciate
9:11
Speaker 3: getting some of your time. Christin Olsen, she's a partner
9:14
Speaker 3: Alternative Capital Markets at Goldman Sachs, so getting some good
9:18
Speaker 3: thoughts there on the alternatives market.
9:22
Speaker 6: You're listening to the team. Ken's her live program, Bloomberg Markets,
9:26
Speaker 6: weekdays at ten am Eastern on Bloomberg dot Com, the
9:29
Speaker 6: iHeartRadio app and the Bloomberg Business App, or listen on
9:32
Speaker 6: demand wherever you get your podcasts.
9:36
Speaker 1: Madison Mills in New York.
9:38
Speaker 3: I'm down here in Orlando, Florida at the BNY Melon
9:41
Speaker 3: Pershing Insight Conference. Having a great time down here, but
9:44
Speaker 3: unfortunately I miss hanging out with my buddy and Maletti.
9:47
Speaker 3: She's Offsprings, head of Active Equity. She's in New York
9:51
Speaker 3: with Madison and great to talk to you as always.
9:54
Speaker 3: I'm seeing a market here in where I've got seven
9:57
Speaker 3: stocks basically driving the entire bu for the S and
10:00
Speaker 3: P five hundred. Is it time to look for some
10:04
Speaker 3: names that might be getting lost here?
10:06
Speaker 8: I think it is, Paul, and I'm sorry I'm missing
10:09
Speaker 8: you here in person, but good for you to be
10:11
Speaker 8: in Florida. It is the interesting thing, though, is if
10:15
Speaker 8: you do look underneath and find time to dig around,
10:20
Speaker 8: there are some really interesting stocks and more dispersion when
10:25
Speaker 8: you look down cap, when you look in the mid
10:28
Speaker 8: cap space, and when you look in the small cap space,
10:30
Speaker 8: there's a lot more dispersion. And believe it or not,
10:33
Speaker 8: companies are really moving on fundamentals.
10:37
Speaker 4: What are the fundamentals that you feel are most important
10:40
Speaker 4: to you when sussing out these quality companies?
10:42
Speaker 8: Yeah, you know, Madisine, I'm glad you said it, because
10:45
Speaker 8: the key really is quality, and I know people are
10:47
Speaker 8: tired of hearing it. But when you have uncertain futures
10:51
Speaker 8: like we do now, an uncertain future and so many
10:53
Speaker 8: macro things that are quite honestly just nobody really knows
10:59
Speaker 8: what's going to come next, you have to look at quality.
11:03
Speaker 8: For us, that's really balance sheets. It's do they have
11:06
Speaker 8: free cash flow? Can they support and direct their own future?
11:11
Speaker 8: And clearly, and Paul, you know this probably better than
11:15
Speaker 8: I do. Management teams that have had experience dealing with
11:19
Speaker 8: difficult times too really helps.
11:20
Speaker 3: Sounds that sounds a lot like active management. And so
11:24
Speaker 3: I mean, I mean, how do you think about it?
11:27
Speaker 3: I mean, one of the things I'm concerned about is
11:29
Speaker 3: there's still maybe some earnings risk in this market here.
11:33
Speaker 1: How do you think about that issue, that potential headwind?
11:36
Speaker 8: Yeah, you know, Paul, we've been in an earnings recession
11:39
Speaker 8: and I think that is something also that gets lost.
11:42
Speaker 8: Up until this last quarter, you know, we have seen
11:45
Speaker 8: earnings declines almost across the board, except for again a
11:48
Speaker 8: few names here and there. Even this quarter we had
11:52
Speaker 8: very little earnings growth. In fact, I think it only
11:54
Speaker 8: came from two sectors, technology and industrials. But we are
11:59
Speaker 8: seeing companies that are being able to hold margins pretty well,
12:03
Speaker 8: being able to hold arnians pretty well. Those are the
12:05
Speaker 8: type of companies that we're looking for. We do think
12:08
Speaker 8: the future is going to continue to be uncertain, but
12:11
Speaker 8: wouldn't exit the equity markets because we still even if
12:15
Speaker 8: there is a downturn, think there's going to be opportunity
12:18
Speaker 8: and companies that can adapt and do well, and so
12:24
Speaker 8: still kind of bullish on the unique opportunities, not the
12:29
Speaker 8: overall opportunity.
12:31
Speaker 4: And as Paul mentioned, it's these seven names driving a
12:34
Speaker 4: lot of the rally that we've been seeing. When you
12:37
Speaker 4: look further down the pipeline, what are some of the
12:40
Speaker 4: names or themes if you don't want to talk about
12:42
Speaker 4: names that are that investors are missing out on right now?
12:47
Speaker 8: You know, the small and mid cap space I think
12:50
Speaker 8: has almost been left for dead. They've underperformed. The Russell
12:54
Speaker 8: two thousand has underperformed the Russell three thousand five of
12:58
Speaker 8: the last consecutive years and nine the last eleven years.
13:02
Speaker 8: History would suggest that can't go on for much longer.
13:05
Speaker 8: So whether or not we're going to see the larger
13:08
Speaker 8: cap names start to sell off or the smaller cap
13:12
Speaker 8: names start to outperform, I'm not sure what's going to
13:15
Speaker 8: close the gap, but something has to give there, and
13:18
Speaker 8: so I think the smaller and mid cap space has
13:20
Speaker 8: a lot of opportunity. And what I'm hearing from our
13:24
Speaker 8: investment teams is they're seeing it and they're finding it there. Also,
13:27
Speaker 8: when the economy slows and we've gone from six percent
13:29
Speaker 8: growth down to one, those smaller cap companies tend to
13:34
Speaker 8: have faster growth. The only thing I would caution is
13:38
Speaker 8: if we do head into a recession, you could see
13:41
Speaker 8: a little bit of pause before you see that acceleration.
13:44
Speaker 3: Hey, and in a world where an investor can get
13:47
Speaker 3: four and a half percent into two year treasury, you
13:49
Speaker 3: know how important now are dividends to you and your
13:52
Speaker 3: teams here. We had a guest on a few months
13:54
Speaker 3: ago that said, you know, this is going to be
13:55
Speaker 3: the decade of the dividend.
13:57
Speaker 1: How do you guys think about that?
13:58
Speaker 8: I do think it's really and Paul, I mean, if
14:01
Speaker 8: you can get dividends on top of an equity return,
14:06
Speaker 8: that's going to be much more attractive than it was before.
14:11
Speaker 8: I think investors, you know, in a double digit teen
14:15
Speaker 8: high teen twenty percent return market, people don't really care
14:19
Speaker 8: about the dividend. But if we are now in a
14:22
Speaker 8: lower return environment where equities return you know, high single digit,
14:27
Speaker 8: if we're lucky, that's going to be the return. A
14:31
Speaker 8: company that can produce a dividend on top of that,
14:33
Speaker 8: that's going to be pretty interesting. And by the way,
14:36
Speaker 8: it's also a sign of quality that a company has
14:39
Speaker 8: the ability to pay the dividend and maybe increase the
14:41
Speaker 8: dividend over time.
14:43
Speaker 4: Quality always makes me think about Apple. Uh what do
14:48
Speaker 4: you think about the Apple? I mean, is it just
14:51
Speaker 4: way overplayed at this point?
14:53
Speaker 8: You know, it's interesting because I don't think I mentioned
14:57
Speaker 8: the stat but you know, the entire market cap of
15:00
Speaker 8: Apple near three trillion dollars. You know, it might be
15:02
Speaker 8: well deserved. I'm not going to sit in the seat
15:05
Speaker 8: and say that it's not. We probably won't know that
15:08
Speaker 8: for the next.
15:09
Speaker 5: Year or two.
15:10
Speaker 8: But the entire market cap of Apple is bigger than
15:15
Speaker 8: the entire market cap of the Russell two thousand. So
15:17
Speaker 8: do you want to own some of those two thousand
15:20
Speaker 8: companies or one individual company? And I just think the
15:23
Speaker 8: risk reward is a little bit less certain with Apple
15:29
Speaker 8: at these prices.
15:31
Speaker 3: And you know it just you know, a month or
15:33
Speaker 3: two ago, all we were talking about was the health
15:36
Speaker 3: or the potential headwindow of the US banking system, and
15:39
Speaker 3: you know, a handful of names really had had some trouble.
15:42
Speaker 1: There is it time to look at some of those regional.
15:45
Speaker 3: Banks because it seems to have, you know, kind of
15:47
Speaker 3: those concerns seem to have been laid a little bit.
15:50
Speaker 8: Yeah, Paul, what I'm hearing from our investment teams on
15:53
Speaker 8: the banks, you know, there are probably some opportunities, but
15:58
Speaker 8: I think there is also, you know, a real, a
16:03
Speaker 8: real thoughtful approach that our teams are taking because they
16:07
Speaker 8: know that more change is coming. We're seeing regulators suggests
16:11
Speaker 8: that more capital is needed at the big banks. Clearly
16:15
Speaker 8: that's coming down to the smaller banks as well. I
16:19
Speaker 8: don't know that we've seen the last shoe to drop
16:22
Speaker 8: on the smaller regional banks from everything that I'm hearing
16:25
Speaker 8: from our investment teams, So I you know, I'm not
16:29
Speaker 8: sure that it's time to run and grab all you
16:34
Speaker 8: can get in that space.
16:35
Speaker 4: We have like thirty seconds left here. What does that
16:38
Speaker 4: shoe drop look like?
16:40
Speaker 8: You know, That's that's the million dollar questions, And I
16:43
Speaker 8: wish I could answer that. I think, you know, we're
16:46
Speaker 8: all trying to figure out. You know, there's there's always
16:51
Speaker 8: cracks that you see in the market, and you're always
16:53
Speaker 8: trying to figure out. I'm certainly a big warrior. I
16:58
Speaker 8: would I would say that the likely next shoot to
17:02
Speaker 8: drop is the economy is going to see, you know,
17:07
Speaker 8: more pressure, the credit tightening that's likely to come from
17:11
Speaker 8: these This bank weakness could create pressure across the board,
17:16
Speaker 8: and that's that's probably the most likely scenario with Aunay Blackslaw, Yeah.
17:20
Speaker 1: And great stuff.
17:21
Speaker 3: As always, I always appreciated getting a few minutes of
17:23
Speaker 3: your time, particularly when you are in the big town.
17:26
Speaker 3: And Maletti, she's all Springs, head of Active Equity and
17:30
Speaker 3: as I say, time and time again, pound for pound,
17:32
Speaker 3: I think some of the smartest investors are from Milwaukee, Wisconsin.
17:36
Speaker 1: And I don't know why, but there's a lot of
17:38
Speaker 1: good folks out there doing a lot of good work.
17:40
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17:59
Speaker 3: Now we're going to go to an interview with coinbased
18:01
Speaker 3: CEO and co founder Brian Armstrong. He sits down with
18:03
Speaker 3: Bloomberg shanale Bassic after the sec suit Coin base for
18:06
Speaker 3: a range of alleged violations.
18:07
Speaker 1: Let's go to the conversation right now.
18:09
Speaker 9: Do you think you're going to have to go here?
18:11
Speaker 10: Yeah, Well, this was not unexpected. You know, we've been
18:15
Speaker 10: in discussion with the SEC for a long long time,
18:18
Speaker 10: even going back to before we were a public company.
18:20
Speaker 11: We started sharing with them how we.
18:22
Speaker 10: Operate our business, how we list assets on the platform,
18:25
Speaker 10: how we think about our staking program, and through a
18:29
Speaker 10: large number of dialogues back and forth, they allowed us
18:31
Speaker 10: to become a public company. You know, we had many
18:34
Speaker 10: discussions with them in the last year when their tones
18:36
Speaker 10: started to change and they started to come to us
18:39
Speaker 10: with more questions about the business.
18:41
Speaker 11: So we were very forthcoming.
18:42
Speaker 10: We met with them probably thirty times over the last year,
18:45
Speaker 10: and we started to kind of ask them for feedback,
18:47
Speaker 10: and we said, you know, we would like there to
18:49
Speaker 10: be a robust market in the US to trade crypto securities.
18:53
Speaker 10: Of the thousand plus assets we've reviewed today, we've rejected
18:57
Speaker 10: ninety percent of them, the ones we we believe our commodities.
19:00
Speaker 10: What feedback do you have for this for us? How
19:02
Speaker 10: can we come in and register, how can we work together?
19:05
Speaker 10: And unfortunately we were met with silence. We really got
19:08
Speaker 10: no feedback in those thirty meetings. The first meeting where
19:11
Speaker 10: they were scheduled to come and give us feedback, they
19:14
Speaker 10: canceled it a few days before that, and then we
19:16
Speaker 10: got a wells notice a few days after that. So
19:19
Speaker 10: it's really unfortunate. We work with regulators all over the world,
19:22
Speaker 10: other regulators here in the US. I think I'm a
19:25
Speaker 10: reasonable person to get along with, but unfortunately the SEC
19:29
Speaker 10: under this chair has taken a regulation by enforcement approach
19:33
Speaker 10: instead of creating a clear rule book in the US
19:36
Speaker 10: that can allow this industry to be built in a
19:38
Speaker 10: safe and trusted way.
19:39
Speaker 9: You know, when was the last time you personally met
19:42
Speaker 9: with Gary Gensler and what did you say?
19:45
Speaker 11: Right?
19:45
Speaker 10: So, when he first came in as the chair, I
19:49
Speaker 10: flew out to New York. I reached out to him.
19:51
Speaker 10: Our team has reached out. I tried to make an
19:53
Speaker 10: effort to connect with him in person, because that's what
19:55
Speaker 10: I try to do whenever a new regulator kind of
19:57
Speaker 10: comes in. Unfortunately, we were not able to connect at
20:00
Speaker 10: that time. I'm not sure why we couldn't get on
20:02
Speaker 10: his calendar, and we followed up a few times in
20:06
Speaker 10: the in the year after that, we eventually got a
20:08
Speaker 10: meeting that was virtual. You know, it may have been
20:11
Speaker 10: COVID related or something like that, but we were able
20:13
Speaker 10: to get a virtual meeting. But unfortunately, it was frankly
20:17
Speaker 10: like a pretty icy reception. I would say, you know,
20:20
Speaker 10: we sort of came in hat in hand and said, hey, chere, Gensler.
20:22
Speaker 10: You know you've asked people to come in and register respectfully,
20:25
Speaker 10: We're here to register. What would you like us to do?
20:27
Speaker 10: What process would you like us to go through? And
20:30
Speaker 10: his response was, you know, talk to your lawyer. I'm
20:33
Speaker 10: not here to advise you. And that was kind of
20:36
Speaker 10: how the conversation started. And so and at that point,
20:39
Speaker 10: you know, we realized there was a gap. You know,
20:43
Speaker 10: we felt like this was an important technology that we
20:45
Speaker 10: felt needed to be built in a safe and trusted
20:48
Speaker 10: way here in the US, in a way that consumers
20:50
Speaker 10: were protected. And I don't know what his motivations or person,
20:54
Speaker 10: you know, his personal views were, but it didn't seem
20:57
Speaker 10: like he was on the same page.
20:59
Speaker 9: So what does this mean for you? If the government
21:02
Speaker 9: cracks down so hard on crypto on coinbase sec? Does
21:07
Speaker 9: coinbase exist in five years?
21:09
Speaker 11: Absolutely?
21:10
Speaker 10: We do, And I want to make an important point,
21:12
Speaker 10: which is that the SEC chair may have a certain
21:16
Speaker 10: point of view, but that's not representative of the whole
21:18
Speaker 10: US government. In fact, quite the opposite. I would say
21:23
Speaker 10: the SEC Chair as a bit of a really an
21:25
Speaker 10: outlier here kind of in the US government. So when
21:28
Speaker 10: I meet with members of Congress, I think the broad
21:30
Speaker 10: consensus probably amongst eighty percent of people I talk to
21:32
Speaker 10: both sides of the aisle, it's a pretty it's a
21:35
Speaker 10: pretty reasonable view they have, which is, we don't know
21:37
Speaker 10: exactly what this technology is going to become, but we're
21:39
Speaker 10: seeing every other major financial hub in the world move
21:42
Speaker 10: towards clear legislation. We need to make sure that this
21:45
Speaker 10: innovation happens in the US in a way that again,
21:47
Speaker 10: let's just protect consumers. Let's supply some basic good ideas
21:50
Speaker 10: around a mlky C and audited financial statements and make
21:54
Speaker 10: sure there's no wash trading. Let's create a clear market
21:57
Speaker 10: structure where you know, businesses cannerstand, which is CFTC, SEC,
22:02
Speaker 10: who should who should they talk to about which types
22:04
Speaker 10: of assets? So Congress is recognizing this, and the White
22:08
Speaker 10: House is as well. Actually, the Biden administration put out
22:10
Speaker 10: in an executive order about a year ago, kind of
22:13
Speaker 10: asking all the branches of government to sort of say,
22:15
Speaker 10: get your act together on crypto. We don't there's some risks,
22:18
Speaker 10: but there's some real important opportunities with this technology.
22:21
Speaker 11: Let's create a clear regulatory framework.
22:23
Speaker 9: Will you fight this all the way to the Supreme Court?
22:26
Speaker 9: Do you think you'll have to? And do you have
22:28
Speaker 9: the financial resources to do that?
22:31
Speaker 11: Yeah?
22:31
Speaker 10: So even if this takes some time, you know, that's okay.
22:36
Speaker 10: We've so in Q one we were adjusted a bit
22:39
Speaker 10: a positive as a company, even in the depths of
22:41
Speaker 10: this crypto bear market, if you want to call it that.
22:43
Speaker 11: We have over five billion dollars a balance on the balance.
22:45
Speaker 10: Sheet, right, So, and frankly, even though that this complaint
22:49
Speaker 10: came in from the SEC, it's really business as usual today, right.
22:53
Speaker 10: We're continuing to trade the assets that we have on
22:55
Speaker 10: our platform. You know, we trade over two hundred assets
22:58
Speaker 10: on our platform. The SEC complaint mentioned just thirteen of them,
23:01
Speaker 10: so a relatively small percentage of the assets we trade.
23:04
Speaker 10: We also have business overseas and other countries.
23:07
Speaker 11: We arrive a lot of.
23:09
Speaker 10: Revenue from other sources that are not related to trading fees.
23:12
Speaker 10: So you know, Coinbase is well capitalized and adjusted a
23:16
Speaker 10: bit A positive and key one. I think we're going
23:18
Speaker 10: to be fine going to court. In fact, it's a
23:21
Speaker 10: relatively small portion of our company that you know, we
23:23
Speaker 10: have a great legal team, policy team, et cetera that's
23:26
Speaker 10: working on this, and what I really want, you know,
23:28
Speaker 10: ninety ninety five percent of the company to be focused
23:30
Speaker 10: on is just building great products for our customers and
23:33
Speaker 10: making sure we don't lose sight of that. And so
23:36
Speaker 10: this is a very serious matter that I'm going to
23:38
Speaker 10: work on with a couple of our executives, but really
23:41
Speaker 10: the vast majority of the company needs to keep building
23:43
Speaker 10: because that's how this technology is going to ultimately benefit
23:46
Speaker 10: a billion people hopefully.
23:48
Speaker 9: How long does the regulatory overhang last? The reality is
23:52
Speaker 9: this could take many, many months. And do you think
23:54
Speaker 9: that your investors might lose some faith or even your
23:57
Speaker 9: customers while you go through this?
23:59
Speaker 11: Yeah?
23:59
Speaker 10: Well, I mean, look, this is not a new concept, right,
24:02
Speaker 10: There's been lots of discussion. The SEC has had rhetoric
24:05
Speaker 10: around this for several years that I think has influenced
24:09
Speaker 10: the market. And so the investors in coinbase, are you know,
24:13
Speaker 10: comfortable with that if they're because there. It's all public, right,
24:16
Speaker 10: and it's not like some secret thing that's being revealed.
24:20
Speaker 10: And I think they're taking a long term view that
24:22
Speaker 10: Coinbase is a very different company. We're kind of in
24:25
Speaker 10: an end of one right, We're we're really the only
24:28
Speaker 10: company that was based here in the US that went
24:30
Speaker 10: public that has audited financial statements that's taken a compliance
24:33
Speaker 10: first approach.
24:35
Speaker 11: You know, even in this.
24:35
Speaker 10: Recent sec complaint by the way that came out yesterday,
24:38
Speaker 10: it was unfortunate they sort of did it back to
24:40
Speaker 10: back with other another complaint that went out there. You know,
24:43
Speaker 10: that may have been intentional to try to conflate the two,
24:45
Speaker 10: but I think people are smarter than that, and they
24:47
Speaker 10: recognize that. You know, this complaint against Coinbase, there were
24:51
Speaker 10: no allegations, no allegations of misappropriation of customer funds, there
24:55
Speaker 10: was no allegations of wash trading. You know, myself and
24:58
Speaker 10: the executive team were not named person only. It's really
25:02
Speaker 10: debating this more technical legal question of are some of
25:05
Speaker 10: these assets commodities or are these securities?
25:07
Speaker 11: And I think that's.
25:09
Speaker 10: Something the court will have to decide to sort of
25:11
Speaker 10: get some legal pres some case law out there, which
25:13
Speaker 10: will ultimately benefit us, because that's what we've been asking
25:16
Speaker 10: the sec for for a long time, is how do
25:18
Speaker 10: we get more clarity? So if we need to go
25:21
Speaker 10: to the courts to do it, it's not our first choice.
25:23
Speaker 10: We'd rather the regular had just published a clear rule book.
25:26
Speaker 10: But if they're not going to do that, the courts
25:28
Speaker 10: are there in the US to avail ourselves up.
25:31
Speaker 9: So part of this was about securities being registered or
25:35
Speaker 9: not in terms of how they're listed on your exchange,
25:39
Speaker 9: But part of this was about staking also, So staking
25:42
Speaker 9: obviously is becoming a more important part of the crypto ecosystem.
25:46
Speaker 9: Do you plan based on how the regulators are treating
25:48
Speaker 9: staking to wind down your staking service?
25:52
Speaker 10: No, we're not going to wind down our staking service.
25:54
Speaker 10: Again as these court cases play out, it's really business
25:58
Speaker 10: as usual. We're going to continue to operate.
25:59
Speaker 12: That.
26:00
Speaker 10: You know, snake staking only represents about three percent of
26:03
Speaker 10: our net revenue, but it is a it's a very
26:05
Speaker 10: important function in the crypto community, and it serves an
26:09
Speaker 10: important part of these decentralized blockchains. And I guess I
26:12
Speaker 10: should mention also that you know, Coinbas's staking product is
26:16
Speaker 10: architected and built in a way to be compliant, and
26:19
Speaker 10: we've actually think it's materially different than some of the
26:21
Speaker 10: other ones out there which have been called staking, and
26:24
Speaker 10: so yeah, we're going to continue to operate our staking business.
26:27
Speaker 9: So if users wanted their funds back in the staking
26:31
Speaker 9: service at this point in time, does Coinbase have the
26:34
Speaker 9: ability to service that at scale in case that there
26:37
Speaker 9: is a larger run on the staking business.
26:40
Speaker 10: Yeah, So you know, staking is really something that's a
26:44
Speaker 10: decentralized part of part of these decentralized protocols. So Coinbase
26:48
Speaker 10: is really just you know, it's a pass through mechanism.
26:50
Speaker 10: We're helping people access these decentralized protocols. So some of
26:53
Speaker 10: the decentralized protocols have, for instance, like a lock up
26:55
Speaker 10: period of you know, some number of days when you
26:58
Speaker 10: initiate the withdrawal request, and so we're just making that
27:00
Speaker 10: kind of information available to the customer. But it's yeah,
27:05
Speaker 10: you know, all the the funds are there backed one
27:07
Speaker 10: to one that when you're when you're staking something, it's
27:09
Speaker 10: being pledged into these these decentralized protocols, and we actually
27:12
Speaker 10: don't even have the ability to you know, move it
27:14
Speaker 10: somewhere else at that point it's we're just giving people
27:18
Speaker 10: access to these centralized protocols.
27:19
Speaker 9: So the business face withdrawals, does that have a material
27:23
Speaker 9: impact on Ethereum's price? And how does claimities prepare for
27:26
Speaker 9: something like that? What do you mean is there kind
27:31
Speaker 9: of a broader run that you have to be prepared for?
27:33
Speaker 10: Oh well, okay, so in in our business, we're not
27:37
Speaker 10: We're not a bank, right, we don't do fraction reserve,
27:40
Speaker 10: and so there's not really this concept of a run. Right,
27:43
Speaker 10: all the all the funds are there, backed one to
27:45
Speaker 10: one and you don't have to take our word for it.
27:46
Speaker 10: You know, are as a public company, we have auditors
27:49
Speaker 10: Deloitte in this case, who's gone in and verified all
27:51
Speaker 10: of that. You can kind of confirm it in our
27:53
Speaker 10: financial statements. So you know, if people want to withdraw funds,
27:57
Speaker 10: they one hundred percent of it is there.
27:58
Speaker 11: There's no such thing as a run really.
28:01
Speaker 9: So how do you answer the question of you know,
28:04
Speaker 9: on one hand, there is sec that is, you know,
28:08
Speaker 9: causing a big overhand in terms of both you guys
28:10
Speaker 9: and the industry. On the other hand, just financially, you know,
28:14
Speaker 9: rates are higher in the United States, people are more
28:16
Speaker 9: inclined to keep their money in a bank.
28:18
Speaker 11: Why should they keep their.
28:19
Speaker 10: Money with you? Well, what's interesting in crypto, there's been
28:23
Speaker 10: the evolution of something called stable coins, right, and so
28:26
Speaker 10: we're actually in consort with another company Circle in the space.
28:29
Speaker 10: We've created a USD coin, which is the second largest
28:33
Speaker 10: stable coin out there. And as you've mentioned, interest rates
28:36
Speaker 10: in this environment, that's been both a good source of
28:38
Speaker 10: revenue for US, but it's also something that we've passed
28:41
Speaker 10: along to customers, so customers can actually earn rewards on
28:45
Speaker 10: USDC and get access to some of these higher interestate environments.
28:51
Speaker 9: Brought our question not just about coinbase, but about the industry.
28:54
Speaker 9: As you know, more regulatory enforcement actions come to the forefront,
28:59
Speaker 9: how much of an over do you think that will
29:00
Speaker 9: have on crypto pricing?
29:03
Speaker 11: You know, it's hard for me to say.
29:04
Speaker 10: It was actually kind of surprising yesterday with this complaint
29:07
Speaker 10: that came out, crypto was up, which I would not
29:10
Speaker 10: have expected.
29:11
Speaker 11: So I don't know what to make of that.
29:12
Speaker 10: I don't know if it means that people knew something
29:15
Speaker 10: was coming but they expected it to be worse.
29:17
Speaker 11: Than it actually was, or.
29:20
Speaker 10: If they just felt that, you know, they're still a
29:24
Speaker 10: believer in it or something. But you know, I don't
29:27
Speaker 10: try to predict what's going to happen in these markets.
29:29
Speaker 10: You know, we don't operate a hedge fund or anything
29:32
Speaker 10: like that. We just want to provide a good service
29:34
Speaker 10: to our customers around the exchange and all the products
29:36
Speaker 10: we offer.
29:37
Speaker 9: Before I let you go, I want to ask about
29:39
Speaker 9: not crypto. I want to ask about artificial intelligence. Even
29:42
Speaker 9: talking about it all day as a crypto entrepreneur, how.
29:45
Speaker 11: Do you see AI?
29:47
Speaker 9: Do you see it as a competing factor in terms
29:49
Speaker 9: of dollars going towards technology? Do you see dovetailing with
29:53
Speaker 9: your industry at all?
29:55
Speaker 10: Well, AI is certainly one of those couple really important
29:59
Speaker 10: technology trends the US needs to get right, along with crypto,
30:02
Speaker 10: and I think we're seeing a similar question start to
30:04
Speaker 10: happen in Congress along with crypto, is like, hey, how
30:06
Speaker 10: should this be.
30:06
Speaker 11: Regulated so it can be done in a safe, trusted way.
30:10
Speaker 10: I do think there's a couple interesting intersections between AI
30:13
Speaker 10: and crypto. One of them is that you know, in
30:16
Speaker 10: the world of AI, there you know it's so easy
30:19
Speaker 10: to mass generate things, whether it's a news article or images,
30:23
Speaker 10: and so the provenance of those and the authenticity of
30:26
Speaker 10: it can be a little bit hard to figure out.
30:29
Speaker 11: And in a world of crypto.
30:31
Speaker 10: One of the great things about crypto, you know, with
30:32
Speaker 10: NFTs and whatnot, you can actually have a.
30:35
Speaker 11: Digital signature that proves, you know, this.
30:38
Speaker 10: Was issued by Bloomberg or by Brian Armstrong or whoever.
30:43
Speaker 10: So I think it could be useful to track the
30:44
Speaker 10: provenance of creative works, whether that's text, audio, video, et cetera.
30:49
Speaker 10: The other thing that might be interesting is that a
30:51
Speaker 10: lot of these these you know, bots or autonomous agents
30:55
Speaker 10: in the AI sphere, they're going to need to go
30:57
Speaker 10: get things done in the world. Right people are already
30:59
Speaker 10: using them to sort of say, hey, order my groceries
31:02
Speaker 10: or you know, maybe build this website and spin up
31:04
Speaker 10: this server. And so they're gonna need financial money. They're
31:08
Speaker 10: gonna need money to go do things in the world,
31:10
Speaker 10: these these AI agents, and so I think that actually
31:13
Speaker 10: in the future you're probably gonna see a lot of
31:15
Speaker 10: crypto transaction happening between AI agents or AI and various
31:20
Speaker 10: businesses around the world because crypto is kind of the
31:22
Speaker 10: native money of the Internet.
31:24
Speaker 11: The Internet. Internet is global, it's decentralized.
31:26
Speaker 10: Every country everybody in the world can participate in it,
31:29
Speaker 10: and so it wouldn't really make sense to use you know,
31:32
Speaker 10: the dollar, the euro in a truly global context. If
31:34
Speaker 10: you you know what you want to be country agnostics.
31:37
Speaker 10: I think AI will use crypto more.
31:38
Speaker 9: How much are you actually working on that future?
31:44
Speaker 10: So our we're not trying to build something that is
31:49
Speaker 10: allowing bots to like transact.
31:51
Speaker 11: In crypto at the moment. But what we are doing
31:52
Speaker 11: is we're building.
31:53
Speaker 10: Good infrastructure, you know, picks and shovels, if you will.
31:55
Speaker 10: So with coinbas Cloud, for instance, we're making our APIs
32:00
Speaker 10: around how crypto is stored and transacted and commerce happens,
32:03
Speaker 10: and we're just exposing those kind of like Amazon Web services,
32:05
Speaker 10: but to any business that.
32:07
Speaker 11: Wants to integrate it.
32:07
Speaker 10: So I suspect more businesses will integrate that over time,
32:10
Speaker 10: and some of those may use AI. We're also using
32:13
Speaker 10: AI in our business in a few other ways. I mean,
32:15
Speaker 10: we use it a lot for fraud prevention, you know,
32:18
Speaker 10: and unfortunately we get people signing up putting in stolen
32:22
Speaker 10: credentials and things like that, and so we've developed a
32:24
Speaker 10: lot of really good machine learning to detect that, and
32:28
Speaker 10: you know, we're occasionally we're testling it in a few
32:30
Speaker 10: other areas too, just like around Actually, like you know,
32:33
Speaker 10: our design teams, they'll sometimes look at mid Journey or
32:37
Speaker 10: DOLLI and sort of generate an interface using ANI at least,
32:40
Speaker 10: like you know, show me five ideas for what an
32:42
Speaker 10: interface might look like to do remittances in crypto or
32:46
Speaker 10: for content creators to have a direct relationship with their audience,
32:49
Speaker 10: and what with the interface for that? And AI is
32:51
Speaker 10: just like a great assistant, you know, it doesn't. I
32:53
Speaker 10: don't think AI really is taking people's jobs. It's taking
32:56
Speaker 10: tasks off their plates, largely to make their jobs more efficient.
33:01
Speaker 10: And so having like a you know, a research assistant
33:04
Speaker 10: or someone like that, you know, a tutor or a
33:07
Speaker 10: mentor or a therapist whatever. Everybody can have one of
33:09
Speaker 10: these paired with them, and I think it'll just make
33:11
Speaker 10: humans more productive.
33:13
Speaker 9: Ran we're out of time, but thank you so much
33:15
Speaker 9: for your time as for taking our questions.
33:16
Speaker 11: Thank you.
33:18
Speaker 6: You're listening to the team Ken's are Live program Bloomberg
33:21
Speaker 6: Markets weekdays at ten am Eastern on Bloomberg dot com,
33:25
Speaker 6: the iHeartRadio app, and the Bloomberg Business app, or listen
33:28
Speaker 6: on demand wherever you get your podcasts.
33:32
Speaker 3: Bn Y Melan Pershing, it's a conference boy. The story
33:35
Speaker 3: for me over the last twenty four hours as an
33:37
Speaker 3: avid golfer, an avid watcher of the world of the
33:39
Speaker 3: business of golf, is the merger between the PGA Tour
33:43
Speaker 3: and the Live Golf.
33:45
Speaker 1: No, what's all that coming? Including me? Leanna Baker joins us.
33:48
Speaker 3: She's a US deal's team managing director with Bloomberg News.
33:52
Speaker 1: Leanna, what what happened?
33:53
Speaker 3: Because this is one hundred and eighty degree return for
33:56
Speaker 3: the PGA who said they would never merge with Live.
34:00
Speaker 12: You mentioned that you're still shocked by this news. I
34:03
Speaker 12: am too. But from what we understand, over the past
34:06
Speaker 12: seven weeks, both sides had been talking. It had very secretive,
34:11
Speaker 12: very few bankers or wars involved. It seems like meetings
34:15
Speaker 12: happened all over the world. We heard in Venus, Italy,
34:18
Speaker 12: there was a meeting they closed the deal. In San Francisco.
34:21
Speaker 12: There's also meetings in London, and they really kept us
34:24
Speaker 12: close to the best and they didn't want it leaking
34:26
Speaker 12: out to anyone because they knew how controversial and explosive
34:28
Speaker 12: this merger would be.
34:30
Speaker 4: And now we're hearing about potential antitrust scrutiny. What's the
34:35
Speaker 4: likelihood of that becoming a big issue for both sides here.
34:40
Speaker 12: This is something the government will definitely review. They look
34:43
Speaker 12: at most mergers. You might recall that LIVE PGA had
34:46
Speaker 12: been suing each other over things related to anti trust,
34:51
Speaker 12: so it had already been kind of kicked up as
34:54
Speaker 12: an issue. Live had been accusing PGA of, you know,
34:59
Speaker 12: blo walking them out and being a monopoly. So this
35:02
Speaker 12: is something that you know, they've dropped all litigation. So
35:06
Speaker 12: the question is who will really oppose this deal, Who
35:11
Speaker 12: would really complain to the government. The Saudi's clearly of
35:14
Speaker 12: very deep pockets. There's probably going to be a lot
35:17
Speaker 12: of lobbying happening. So at this point it's too early
35:20
Speaker 12: to know if this is something that'll be blocked because
35:22
Speaker 12: it seems like both sides really wanted to happen.
35:25
Speaker 3: Lean The timing here seems really odd that, like they
35:28
Speaker 3: announced this yesterday, nobody knew, including you know, presumably Jack Nicholas,
35:32
Speaker 3: Tiger Woods, Rory McElroy, those types of people nobody really knew.
35:36
Speaker 3: Agents didn't know. They had little to no information to
35:39
Speaker 3: disclose so far about the details here, does it feel
35:43
Speaker 3: kind of half baked here that maybe they were their
35:45
Speaker 3: hand was forced to disclose something.
35:49
Speaker 12: So I'm the managing editor of the deal's team of
35:51
Speaker 12: Bloomberg and we follow mergers all the time. It's really
35:54
Speaker 12: common for only a small group of people to know
35:57
Speaker 12: about a really important merger because leaks could kill a deal.
36:00
Speaker 12: Let's say uh Yasir el Rumayan, the Saudi executive charge
36:08
Speaker 12: was seen with the commissioner of PGA like that could
36:11
Speaker 12: have blown the cover. So it's not that unique that
36:17
Speaker 12: these people weren't involved. What's unique is that there were
36:19
Speaker 12: so many high profile people who maybe could have known
36:22
Speaker 12: and didn't. What does still have baked is that there's
36:25
Speaker 12: no value on any of this. If you look at
36:28
Speaker 12: the statement yesterday, there's nothing mentioned. L Raumayan said that
36:33
Speaker 12: Saudi Pis is prepared for the best billions in the entity,
36:36
Speaker 12: but we don't have the details. That's something we're really
36:39
Speaker 12: trying to dig into. What is this merger work, What
36:42
Speaker 12: is the value of PGA, What is the value of
36:44
Speaker 12: live We here it'll be sorted out over the summer.
36:47
Speaker 12: That's what's strange though, that we don't have any information
36:50
Speaker 12: at this point.
36:51
Speaker 4: Is there any chance of this relationship alienating some fans
36:55
Speaker 4: or is that is that a concern for either side
36:58
Speaker 4: here or is it just you know, money wins.
37:02
Speaker 12: Money definitely wins. That seems to be the lesson here.
37:05
Speaker 12: The question is, well the fans when I saw that,
37:08
Speaker 12: Rory mackelroy came out with a statement saying that this
37:11
Speaker 12: is going to be good for the sport. But long term,
37:15
Speaker 12: you know, Saudi has a history of human rights violations,
37:19
Speaker 12: and the question will be will fans be able to
37:21
Speaker 12: look past that when they're rooting for you know, another
37:24
Speaker 12: Tiger Woods comeback. So it's a great question. But the
37:28
Speaker 12: PGA must have decided that for the long term health
37:33
Speaker 12: of the sport they were going to make more money
37:35
Speaker 12: with the Saudis than not.
37:38
Speaker 3: So Leandy is getting you covered deals for a living here.
37:41
Speaker 3: What's the I mean, what's the next step here?
37:44
Speaker 11: I mean?
37:45
Speaker 3: Are are they going to try to release more information?
37:46
Speaker 3: What do you what do you expect to see?
37:48
Speaker 12: So sources tell us that over the course of the
37:51
Speaker 12: summer more information will come out around the value of
37:55
Speaker 12: the deal. We've heard the Saudis are going to study
37:59
Speaker 12: the valuation of what each party brings to the table.
38:03
Speaker 12: In terms of assets. There could be an investment bank
38:06
Speaker 12: that's brought on. There already were bankers involved, but there
38:08
Speaker 12: could be another one brought on. So I think the
38:11
Speaker 12: financial details will leak out over the summer, and this
38:15
Speaker 12: is a framework agreement, so we can see something more
38:17
Speaker 12: official tied up over the next few months.
38:20
Speaker 1: Leanna, thanks so much for joining us.
38:22
Speaker 3: Really appreciate getting the update, and you raise a fantastic
38:24
Speaker 3: point which I hadn't even thought about, which is no
38:26
Speaker 3: valuations were assigned here, and you just kind of get
38:28
Speaker 3: a sense like who can see upper handers from an
38:31
Speaker 3: economic perspective in terms of valuation. So we really appreciate
38:34
Speaker 3: Leanna Baker us Deal's team at Managing director with Bloomberg News.
38:37
Speaker 1: Give I guess the latest.
38:38
Speaker 3: Here on the PGA and the live tour coming together,
38:43
Speaker 3: a huge, huge develop in the world.
38:45
Speaker 1: Of professional golfers. We're gonna have more coming up. This
38:48
Speaker 1: is Bloomberg.
38:49
Speaker 6: You're listening to the tape. Can's a our live program
38:52
Speaker 6: Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio,
38:56
Speaker 6: the tune in app, Bloomberg dot Com, and the Bloomberg
38:59
Speaker 6: Business app. Also listen live on Amazon Alexa from our
39:02
Speaker 6: flagship New York station. Just say Alexa playing Bloomberg eleven thirty.
39:08
Speaker 1: Marty, thanks so much for joining us in New York.
39:10
Speaker 3: We're all over the place here on a remote broadcast,
39:14
Speaker 3: and thanks so much for joining us. You know, I
39:16
Speaker 3: want to start with the issue that has been on
39:19
Speaker 3: every CEO's mind. I don't care if they're in the
39:22
Speaker 3: dog food business or in the technology business, they have
39:25
Speaker 3: to lead with AI, which back in the day we
39:28
Speaker 3: called it artificial intelligence. Marty, you sit on the board
39:31
Speaker 3: of Alphabet aka Google. One could argue that that is
39:34
Speaker 3: an existential threat to Google and a search business.
39:38
Speaker 1: How do you guys think about AI?
39:41
Speaker 13: Well, I think about AIS something that's the natural evolution
39:44
Speaker 13: of software. And it's amazing what's been going on in
39:47
Speaker 13: this latest evolution. And Google has been for some time
39:52
Speaker 13: an AI first company. It's been at least a decade
39:56
Speaker 13: since Sundar CEO made that declaration and and specifically bold
40:02
Speaker 13: and responsible AI. I think it's an incredible opportunity space
40:06
Speaker 13: for Google, and few institutions on the planet have the
40:09
Speaker 13: kind of the kind of human capital and other capital
40:14
Speaker 13: resources dedicated to AI like Google does. It's an incredibly.
40:19
Speaker 4: Exciting time, and you were just saying, the question is
40:22
Speaker 4: is it going to be five AI or is it
40:25
Speaker 4: going to be five billion?
40:26
Speaker 1: Right?
40:27
Speaker 4: If you had to bet, which of the two would.
40:29
Speaker 5: You bet on?
40:30
Speaker 13: Yeah, that's a great question. I really don't know the answer.
40:35
Speaker 13: It's these ais take incredible amounts of resources to train them, right,
40:41
Speaker 13: hundreds of millions of dollars, And so right now it
40:45
Speaker 13: looks like there's going to only be a few of
40:47
Speaker 13: these frontier models that have been heavily trained because they
40:50
Speaker 13: cost hundreds of millions of dollars to train. There could
40:53
Speaker 13: always be some kind of breakthrough. The transformer paper that
40:57
Speaker 13: Google published in twenty seventeen, well that's the e in
41:01
Speaker 13: chat GPT that lopped off at least three orders of
41:04
Speaker 13: magnitude and the cost of training these models, maybe somebody
41:07
Speaker 13: will think of another one. There is a model that
41:10
Speaker 13: started with Meta that's out in the open right now
41:13
Speaker 13: and a lot of people are experimenting with that. To
41:15
Speaker 13: get to answer your question, if I have to call,
41:17
Speaker 13: I would say it's probably gonna be a lot. Like
41:19
Speaker 13: cloud services generally, there's a lot of reasons why you
41:23
Speaker 13: want the compute to be in the cloud, and you're
41:26
Speaker 13: probably gonna want one of those lms that's been trained
41:29
Speaker 13: up on so much information, and you're definitely going to
41:32
Speaker 13: want data privacy and security and enterprise grade around it.
41:36
Speaker 13: And so I don't know how many of those they're
41:39
Speaker 13: going to be. And then I think open source AIS
41:42
Speaker 13: will be great for certain very specific vertical applications.
41:46
Speaker 1: Marty. That's kind of where I wanted to go here.
41:48
Speaker 3: I mean, you think about some of the applications of AI,
41:51
Speaker 3: and it gets very scary very quickly.
41:55
Speaker 1: Is this thing? Is it even able to be regulated?
41:58
Speaker 1: If so, how do you think it might develop? Sure?
42:01
Speaker 13: So I am for years a proponent of regulation. Of course,
42:08
Speaker 13: the right regulation, and that's the hard part.
42:11
Speaker 1: Usually we need.
42:12
Speaker 13: Some kind of crisis or calamity, and then the regulation
42:16
Speaker 13: happens after that. The financial crisis is a pretty good example.
42:21
Speaker 13: And then in the regulation you get ten thousand different things,
42:27
Speaker 13: most of which are probably not that necessarily or useful.
42:30
Speaker 13: But for instance the financial regulation, there was something that
42:33
Speaker 13: was incredibly useful, which was the capital adequacy tasks. Right,
42:36
Speaker 13: so we got something powerful and necessary out of it.
42:39
Speaker 13: And so here I would like to get in front
42:42
Speaker 13: of it but still have a light touch right, So
42:45
Speaker 13: maybe there will be a thousand, or a million, or
42:48
Speaker 13: a billion flowers blooming with all of these With all
42:51
Speaker 13: of these AIS, I think we can take some pages
42:53
Speaker 13: from things that we have already learned about. So, for instance,
42:57
Speaker 13: electronic trading, there was a time when you could just
43:00
Speaker 13: a lot of orders into the exchange and maybe if
43:02
Speaker 13: your algo had a mistake in it, you had runaway
43:05
Speaker 13: orders and you lost a lot of money, and that
43:07
Speaker 13: was really bad and it could destabilize markets. And so
43:10
Speaker 13: you ad you add some throttles, you add some checkpoints,
43:13
Speaker 13: you make sure that every so often you've once again
43:16
Speaker 13: demonstrated that you've got adequate capital to put those trades in.
43:19
Speaker 13: So we got to be extremely careful about the interface
43:23
Speaker 13: points between the AIS and the APIs into the banking system,
43:28
Speaker 13: the stock trading system, the air traffic control system, the
43:31
Speaker 13: electricity grid, all of those points. We need to have
43:35
Speaker 13: a lot of belts and suspenders and controls around. We
43:38
Speaker 13: know how to do this. Actually we've been doing it
43:39
Speaker 13: since the railroad, so we've been doing this for hundreds
43:42
Speaker 13: of years, and so I might need some regulatory help
43:46
Speaker 13: to galvanize attention. A pattern might be something that happened
43:50
Speaker 13: with gene editing. I'm old enough to remember back in
43:52
Speaker 13: the seventies when gene editing first came up as a possibility,
43:56
Speaker 13: there was a famous conference in a silomar where all
44:00
Speaker 13: the scientists and US, Chinese, everybody got together and said,
44:05
Speaker 13: let's put down some guardrails. So one of the things
44:07
Speaker 13: that came out of there is we can do gene
44:09
Speaker 13: editing in an organism, but not in the germ line,
44:12
Speaker 13: not the osites, not what could go on and permanently
44:17
Speaker 13: alter the human race. We're not going to touch that.
44:20
Speaker 13: And those guardrails have served us reasonably well. They've been imperfect.
44:25
Speaker 13: There was a scientist in China, as it turned out,
44:27
Speaker 13: who went and edited the germ line, and the Chinese
44:30
Speaker 13: came down really hard on them. And I think this
44:32
Speaker 13: is something that we can share with China, is that
44:35
Speaker 13: nobody wants this to end up in a bad place
44:37
Speaker 13: for human civilization. Generally we have that alignment.
44:41
Speaker 4: Are we already late on getting that for AI?
44:45
Speaker 13: No, No, there's time, but time's a wasting and so
44:51
Speaker 13: in the short term, like this year, we need to
44:55
Speaker 13: start having the discussions, and they need to be done
44:58
Speaker 13: at an Internet national framework and there may be needs
45:02
Speaker 13: to be an international agency along the lines of the
45:06
Speaker 13: Atomic Energy Agency that sets standards on these controls, and
45:11
Speaker 13: then people can attest that their AI meets these standards
45:15
Speaker 13: and do it in a way. I think this is
45:17
Speaker 13: also important where a lot of flowers can bloom, right,
45:21
Speaker 13: we want to do this in a careful way. But
45:23
Speaker 13: this kind of regulation does need to happen, and it
45:26
Speaker 13: needs to happen promptly. I'm not one of those alarmists.
45:29
Speaker 13: I do not see AI ending in the extinction of
45:32
Speaker 13: the human race. It is fascinating. If anything I see
45:35
Speaker 13: parallels to the dot com boom. Right, It's wonderful to
45:38
Speaker 13: see all this hype and then all the CEOs are
45:41
Speaker 13: talking about it, and out of the dot com boom,
45:43
Speaker 13: we got pets dot Com, and we also got Amazon
45:47
Speaker 13: and Google.
45:47
Speaker 3: Right, yep, Marty, you know it feels like we're at
45:50
Speaker 3: the let's call it the top of the first inning,
45:52
Speaker 3: if you will, of this AI game year, and I
45:54
Speaker 3: think investors are struggling to maybe try to get some
45:59
Speaker 3: exposure to the opportunity here in for better or worse,
46:02
Speaker 3: in Vidia has I think kind of become that name
46:04
Speaker 3: where sure, if I got to own AI, I have.
46:07
Speaker 1: To own in VideA.
46:07
Speaker 3: But where else do you think investors should be thinking
46:11
Speaker 3: about investing in in what is you know, kind of
46:13
Speaker 3: an application or that we don't really know how it's
46:15
Speaker 3: going to evolve.
46:16
Speaker 1: Sure?
46:16
Speaker 13: Well, I'm a big believer that history doesn't necessarily repeat,
46:20
Speaker 13: but it does rhyme. And so if you look at
46:22
Speaker 13: past past booms, you see that there's this migration up
46:27
Speaker 13: the stack, up the logical stack of abstraction. Right so,
46:30
Speaker 13: right now in video is absolutely an obvious place to go.
46:33
Speaker 13: You can't get h one hundreds for lover money. They
46:36
Speaker 13: cost forty thousand dollars a pop and they've all been
46:39
Speaker 13: ordered years in advance, right, so that's great. What is
46:43
Speaker 13: a higher level abstraction than video? Will You could look
46:46
Speaker 13: back at previous booms and you could say, well, and
46:49
Speaker 13: the next level of abstraction past the chips, was the phones,
46:53
Speaker 13: the smartphones, and those are pretty good investments. And then
46:56
Speaker 13: that would lead you, of course to Apple among the others,
46:58
Speaker 13: and then you got into the provider of software services
47:02
Speaker 13: around that mobile ecosystem, and that included many other companies Google,
47:07
Speaker 13: Amazon and so on. So I would look for the
47:09
Speaker 13: same thing here, I would just see who's going to
47:11
Speaker 13: be building the software applications on top of the cheps
47:16
Speaker 13: yea and those would.
47:17
Speaker 7: Be places to look looking kind of further down.
47:19
Speaker 13: The line that yes, absolutely the next few years. And
47:23
Speaker 13: Nvidia is an amazing company. I had the opportunity to
47:27
Speaker 13: be there in twenty seventeen early, kind of a long
47:29
Speaker 13: time ago, and they had this unbelievable demo that kind
47:33
Speaker 13: of clued me into what was coming. They had this
47:36
Speaker 13: monitor with beautiful, a beautiful person on it, and the
47:38
Speaker 13: picture changed every thirty seconds, another beautiful person, different ethnicity,
47:43
Speaker 13: different gender, different height, different everything. And then after an
47:45
Speaker 13: hour of this, they said, oh, by the way, none
47:48
Speaker 13: of those people has actually existed. We trained an AI
47:52
Speaker 13: model on people that were thought to be beautiful, and
47:55
Speaker 13: then we ran it in reverse and asked it to
47:57
Speaker 13: generate beautiful people. And so this is seventeen, so they've
48:01
Speaker 13: been on it. So I would look for all of
48:03
Speaker 13: the companies that are building these incredible applications and those
48:06
Speaker 13: would be places to invest.
48:10
Speaker 11: Great.
48:11
Speaker 4: Well, yeah, Paul, Paul, all right, we've got thirty seconds
48:14
Speaker 4: left here. Do you see this as a bubble similar
48:17
Speaker 4: to the dot com era or it sounds like you're
48:19
Speaker 4: too optimistic for that.
48:21
Speaker 13: I look, I have been working in AI for a
48:23
Speaker 13: long long time, back back since the eighties, and and
48:29
Speaker 13: what is happening is truly exciting, right And what has
48:32
Speaker 13: happened is we've gotten to the second half of the chessboard,
48:35
Speaker 13: the proverbial chessboard, where you're doubling the grains of rice
48:38
Speaker 13: at every square. And it's not that interesting for the
48:41
Speaker 13: first thirty two squares, but right right around forty or so,
48:44
Speaker 13: it gets incredibly interesting. And we are we're in that
48:48
Speaker 13: spot right now. So as it is the bubble, there
48:50
Speaker 13: are going to be some companies that are pure hype
48:52
Speaker 13: and they don't bound to anything, and there's a lot
48:54
Speaker 13: of crazy capital going in and there's going to be
48:57
Speaker 13: some amazing things coming out of this. You want to
49:00
Speaker 13: own those.
49:01
Speaker 3: Marty, thanks so much for joining us. Really really appreciate
49:03
Speaker 3: getting some of your time. Marty Schabas, Vice chairman of
49:06
Speaker 3: partner at six Street Partners.
49:07
Speaker 6: You're listening to the tape cats our live program Bloomberg
49:10
Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the
49:14
Speaker 6: tune in app, Bloomberg dot Com, and the Bloomberg Business app.
49:17
Speaker 6: You can also listen live on Amazon Alexa from our
49:20
Speaker 6: flagship New York station. Just say Alexa play Bloomberg eleven thirty.
49:26
Speaker 4: All right, I'm sitting here in New York with Mark Blasri.
49:29
Speaker 4: He's co founder and CEO of Avenue Capital Group and
49:32
Speaker 4: the former owner of the NBA's Milwaukee Bucks. He is
49:35
Speaker 4: here with us to discuss a lot of money and
49:37
Speaker 4: sports topics. But I want to start on pickleball because
49:41
Speaker 4: I love it and I'm excited to get your thoughts
49:43
Speaker 4: on it. Mark, talk to me about why pickleball has
49:46
Speaker 4: more growth potential than the NBA or than any other
49:50
Speaker 4: spot in your eyes.
49:51
Speaker 5: Right now, I don't know if it has more growth potential.
49:54
Speaker 5: I think what it has is massive potential, and it's
50:00
Speaker 5: I think it's fastest growing sport today. And part of
50:05
Speaker 5: that is just that everybody from all different walks of
50:08
Speaker 5: life are able to play it. Right. So, before we
50:11
Speaker 5: got on, you told me you love to play it.
50:13
Speaker 5: When I was talking to somebody here earlier, they were
50:16
Speaker 5: explaining to me how they love pick a ball, And
50:20
Speaker 5: what you find is it's just a wide mixture of
50:25
Speaker 5: different people who want to play it. Whether you're super athletic.
50:28
Speaker 5: Whether you're not right basketball, you've got to be somewhat athletic, yes, right,
50:33
Speaker 5: and pick a ball. It's you can get very good
50:38
Speaker 5: at it, very quickly, and I think that's why people
50:41
Speaker 5: love playing it, and so I think it's got massive potential.
50:47
Speaker 5: When you try to look around the United States, every
50:49
Speaker 5: time I turn. You know you mentioned it earlier. Think
50:53
Speaker 5: of Central Park. You know here in New York. The
50:57
Speaker 5: last thing we would have thought five years ago was
50:59
Speaker 5: that you would have sixteen pickleball courts, right all of
51:02
Speaker 5: a sudden, Now you have it here in the middle
51:05
Speaker 5: of the most populous city in the United States, and
51:08
Speaker 5: they're turning a part of Central Park in there where
51:12
Speaker 5: you've got pickleball courts. Why because there's this demand and
51:17
Speaker 5: so all that is just going to keep on growing.
51:20
Speaker 5: And it's not that they put on sixteen basketball courts.
51:24
Speaker 5: They've already got basketball courts in Central Park. So I
51:28
Speaker 5: think you're gonna have You just have a sport that
51:31
Speaker 5: is growing by leaps and bounds, and I hope it continues.
51:35
Speaker 3: Hey, Mark, getting back to the basketball, you sold your
51:38
Speaker 3: stake in the Milwaukee Bucks for at evaluation, about three
51:41
Speaker 3: and a half billion dollars, So nice trade there. But
51:43
Speaker 3: I have to ask you about one of the pillars
51:46
Speaker 3: evaluation in the NBA, in Major League Baseball, in the
51:50
Speaker 3: NHL is the regional sports network and that industry is
51:53
Speaker 3: in complete disarray. The leading player out there back by
51:56
Speaker 3: a Sinkler Broadcast group filing for bankruptcy.
51:59
Speaker 1: How do you see that playing out?
52:02
Speaker 5: Well, I think it's a great question. I think the
52:05
Speaker 5: regional players have had issues. I think what has not
52:10
Speaker 5: had an issue is obviously on the national level. So
52:14
Speaker 5: when you take a look at sort of media rights nationally,
52:18
Speaker 5: those have continued to grow. You saw that with the NFL,
52:21
Speaker 5: You're going to see it with the NBA, You're seeing
52:23
Speaker 5: it with baseball. You'll see it. I think you'll see
52:27
Speaker 5: that everywhere. So I think nationally those rights are going
52:30
Speaker 5: to keep on growing, Whereas I think on the regional
52:34
Speaker 5: side that's had more issues. And you know, I think
52:39
Speaker 5: obviously it's always Sinclair with about you know, sixteen at
52:42
Speaker 5: least in the NBA, you've got sixteen teams that were
52:45
Speaker 5: affected by that when you had the bankruptcy. So I
52:49
Speaker 5: would be positive on the national side, and obviously I'm
52:52
Speaker 5: negative on the regional side.
52:55
Speaker 4: Going into streaming though and circling a little bit back
52:58
Speaker 4: to the pickuball conversation, and are you concerned at all
53:01
Speaker 4: that people don't necessarily want to watch pickleball at that
53:05
Speaker 4: big of a scale, that an Apple TV is not
53:08
Speaker 4: necessarily going to be streaming pickleball tournaments anytime soon?
53:13
Speaker 5: I actually am not. Hopefully I'll try to prove it
53:16
Speaker 5: to you right now. So would you say you're a
53:19
Speaker 5: big sports fan?
53:21
Speaker 1: Mark?
53:21
Speaker 7: You know the answer?
53:22
Speaker 5: Okay, so you're you're Medza Medza happen right, You'll watch
53:26
Speaker 5: it a little bit, not a good all?
53:28
Speaker 11: Right?
53:28
Speaker 5: Have you ever watched the Olympics? Have you watched curling
53:31
Speaker 5: on the Olympics?
53:33
Speaker 4: Happened before?
53:34
Speaker 5: Okay? So if you have, that means you will watch
53:37
Speaker 5: anything on sports. Just think of it that way, because
53:42
Speaker 5: if you're watching curling and you just admitted that you are,
53:47
Speaker 5: and you're not even a sports fan and you're watching curling,
53:49
Speaker 5: I mean, have I been in the room while curlings?
53:51
Speaker 5: On the fact that people will watch curling. So here's
53:56
Speaker 5: the reason why the reason why people watch curling, and
54:00
Speaker 5: the reason why people will watch pick a ball, and
54:02
Speaker 5: the reason why they will watch darts or anything is.
54:05
Speaker 5: People love watching the best in the world compete, and
54:09
Speaker 5: that's really what it is. So you're gonna love watching
54:13
Speaker 5: pick a ball because when you're watching the best people
54:15
Speaker 5: in the world compete at something, average people love that.
54:20
Speaker 5: They want to aspire to something, they want to see, Hey,
54:23
Speaker 5: what is it that the best we're able to do?
54:24
Speaker 5: That I'm not right, And that's what you're gonna find.
54:28
Speaker 5: So there's this massive demand for sports because people and
54:33
Speaker 5: you're seeing it, whether it's on streaming, that it's not
54:36
Speaker 5: gonna be how you and I grew up watching sports,
54:39
Speaker 5: which was sitting in the living room watching a game
54:42
Speaker 5: on a TV. It's gonna be streaming. When I look
54:44
Speaker 5: at my kids or I look at any young person,
54:48
Speaker 5: it's much more on their phone. It's much more on
54:49
Speaker 5: a tablet. The other thing that's going on and you're
54:52
Speaker 5: seeing it is the gambling aspect of it. People love
54:56
Speaker 5: gambling on it. It's not where you went to your bookiet,
55:00
Speaker 5: it's betting a dollar here, a dollar there, and so
55:04
Speaker 5: sports and gambling have become very interrelated. So I think
55:08
Speaker 5: you're going to find that going forward. You've got these
55:09
Speaker 5: massive opportunities and all these different sports teams and sports leagues.
55:13
Speaker 3: Hey, Mark, how about some of the big technology companies,
55:15
Speaker 3: whether it's an Apple or an Amazon, do you expect
55:19
Speaker 3: them at any time to really jump into the deep
55:22
Speaker 3: end of the pool and you know, get into the
55:24
Speaker 3: sports business, whether it's you know, taking an NFL uh
55:28
Speaker 3: TV package and really make the big the big dive.
55:31
Speaker 1: Do you expect that to happen?
55:33
Speaker 5: Well, let's put it this way. It should if you
55:36
Speaker 5: are Apple at any of these other companies, what do
55:40
Speaker 5: you want? You want people watching your product? So what's
55:44
Speaker 5: the problem with Apple or what's the problem with Netflix?
55:48
Speaker 5: You can record and you'll end up watching something you don't.
55:52
Speaker 5: You never watch it live. You watch it a week later,
55:55
Speaker 5: a month later. You know, some of us only want
55:58
Speaker 5: to watch these shows after the all sixteen episodes have
56:02
Speaker 5: come in. Right, So I love watching ted Lasso, but
56:05
Speaker 5: I want to watch it all at once. I don't
56:07
Speaker 5: want to wait once a week, so I'll wait till
56:09
Speaker 5: the whole season's over. You can't do that with sports,
56:12
Speaker 5: You really can't. You can't say, well, I'm gonna record
56:14
Speaker 5: the Super Bowl and I'm gonna watch it six months later.
56:17
Speaker 5: I'm recording the NBA Finals and I'll watch it in
56:20
Speaker 5: three months, You've got to watch it live. So for Apple,
56:24
Speaker 5: for Netflix, for any of these companies, for Meta, if
56:28
Speaker 5: what you want is more young people, if what you
56:31
Speaker 5: want is more consumers, you're gonna want consumers who are
56:34
Speaker 5: able to see something watching it live, and that will
56:38
Speaker 5: go on to your other products. So that's actually why
56:41
Speaker 5: I think they'll get into it.
56:42
Speaker 4: But the youngest consumers are watching their content on TikTok,
56:47
Speaker 4: they're not even on Netflix. How are you thinking about
56:51
Speaker 4: positioning content for that type of platform?
56:53
Speaker 5: Oh, that's easy. All you have to do is just
56:55
Speaker 5: make an NBA game one minute long, and I think,
56:58
Speaker 5: and I think you're fine, give me a high. That's
57:01
Speaker 5: all it is. You know, if you can make baseball
57:03
Speaker 5: one minute long, if you can do all these sports.
57:05
Speaker 5: If so, I think I think I've solved the dilemma
57:10
Speaker 5: for you. Okay, you know, now you've just got to
57:12
Speaker 5: go convince the NBA, Major League Baseball, and everybody else
57:16
Speaker 5: to have their games on TikTok and have them no
57:18
Speaker 5: more than one minute.
57:19
Speaker 4: But but my broader question is, you know, sure we're
57:22
Speaker 4: all in on Netflix and streaming, but is there any
57:27
Speaker 4: downside to that?
57:27
Speaker 11: Thinking?
57:28
Speaker 4: Is there a miss on the social media play that
57:31
Speaker 4: could be the next generation's only way of watching.
57:35
Speaker 5: Yeah, but look, if the next generation is only going
57:37
Speaker 5: to want to focus on things over a minute, you know,
57:40
Speaker 5: that are under a minute, then they're going to miss
57:43
Speaker 5: out on sports. That's you know, you've got to sort
57:46
Speaker 5: of just say there are things in life that are
57:48
Speaker 5: going to take longer than a minute, right, So that's
57:51
Speaker 5: what's going to happen. And whether it's baseball, basketball, hockey,
57:57
Speaker 5: no matter what sport it is, it's going to take longer.
58:00
Speaker 5: And if you want to watch it, here's what's going
58:01
Speaker 5: to happen. And if you want things that are going
58:04
Speaker 5: to only be you know, in thirty second increments, you're
58:08
Speaker 5: going to miss out on a lot of things in life.
58:10
Speaker 3: Hey, Mark, you know, probably the biggest story in sports
58:12
Speaker 3: over the last twenty four hours has been the merger
58:15
Speaker 3: of the PGA Tour and Live Golf. I'm not sure
58:17
Speaker 3: if you're a golf industry enthusiast, but was that just
58:21
Speaker 3: a case of just you gotta go where the money is.
58:25
Speaker 5: Like, I don't know, I mean, I'm reading the same
58:27
Speaker 5: things you are. It seems a bit odd as to
58:32
Speaker 5: what's happened. I probably will refrain from talking about it
58:36
Speaker 5: until I've read more or understood more. But you never
58:41
Speaker 5: would have thought that was going to happen, And the
58:43
Speaker 5: fact that it happened overnight, there's got to be a
58:46
Speaker 5: lot of other reasons for it. So I'll wait until
58:50
Speaker 5: you can figure out and tell me why something where
58:54
Speaker 5: two people were so against each other all of a sudden,
58:57
Speaker 5: now are the best of partners.
58:59
Speaker 1: Yeah, just kind of goes I guess Mark too.
59:01
Speaker 3: You know, you got to think about the valuation here,
59:03
Speaker 3: and you know our our deals reporter Bloomberg News was
59:06
Speaker 3: she pointed out something very interesting in the whatever it
59:10
Speaker 3: was at least yesterday, which was very very little. There
59:14
Speaker 3: was no value, no mention of valuation. What's the PGA
59:16
Speaker 3: tour work, what's livedtour worth? And that's typically what you
59:20
Speaker 3: would get in an Emerger announcement and we don't have
59:23
Speaker 3: any of that. So this just seems so I don't know,
59:25
Speaker 3: a little half baked, I guess, But as you say,
59:27
Speaker 3: we'll have to see how the the more details come out.
59:29
Speaker 5: Now you could it on the head. I mean, it's
59:32
Speaker 5: what are the valuations? I don't even know what the
59:35
Speaker 5: PGA tour was worth before, right, right, So it'll be
59:40
Speaker 5: interesting to see where these values are and I think
59:44
Speaker 5: all that will come out in the next couple of weeks.
59:47
Speaker 5: But yeah, it's been it's been very surprising.
59:51
Speaker 4: There's a portion of the audience too here and we
59:54
Speaker 4: saw this in the Netflix show about the PGA tour
59:58
Speaker 4: and their relationship with Saudi that is not going to
1:00:02
Speaker 4: watch because of that relationship. Is that something that you
1:00:06
Speaker 4: would have thought about if you were at the helm
1:00:08
Speaker 4: of this deal or is it just the idea that
1:00:11
Speaker 4: and I keep stealing this from Paul that money wins
1:00:14
Speaker 4: in the end regardless of any loss of audience.
1:00:18
Speaker 5: I don't know. I think part of it is their
1:00:22
Speaker 5: job will be to get back people who are not
1:00:28
Speaker 5: going to be happy about that, right, And that's the
1:00:30
Speaker 5: challenge with anything. I think it's you know, the challenge
1:00:33
Speaker 5: the NBA had was during COVID getting people to come
1:00:37
Speaker 5: back and watch games, and I think you've seen that
1:00:40
Speaker 5: not only have they been able to do that, it's
1:00:42
Speaker 5: actually been record ratings, all right. It was the same
1:00:45
Speaker 5: thing if you think about Baseball when they had their strike, right,
1:00:48
Speaker 5: So there's always an issue. I think the challenge is
1:00:52
Speaker 5: going to be for the sport, to get those customers
1:00:57
Speaker 5: back or get those fans back. Yeah, and if they're
1:01:00
Speaker 5: able to, then it'll be fine. If they're not able to,
1:01:03
Speaker 5: then it's gonna have been a big miss.
1:01:05
Speaker 3: Hey, Mark, just about thirty seconds left here, we got
1:01:07
Speaker 3: the Heat and the Nuggets in the NBA Finals.
1:01:10
Speaker 1: What's your take.
1:01:12
Speaker 5: I think it's great. I mean, uh, you know what
1:01:14
Speaker 5: I love about it is the fact that the Heat
1:01:16
Speaker 5: in every series have been the massive underdogs and sort
1:01:20
Speaker 5: of proved everybody wrong. They were the undogs against the Bucks,
1:01:24
Speaker 5: they were the undogs against the Knicks, against the Celtics.
1:01:29
Speaker 5: All those teams were supposedly better, and yet the Heat
1:01:31
Speaker 5: went out they were supposed to get swept. I think
1:01:35
Speaker 5: they're doing great. I'm I'm just a big fan of
1:01:39
Speaker 5: watching people compete. So when you get to see the
1:01:41
Speaker 5: best in the world compete, it's it's fabulous. So I
1:01:45
Speaker 5: hope it goes to seven games.
1:01:47
Speaker 1: Yeah.
1:01:48
Speaker 3: It's just been an amazing season so far, an amazing
1:01:50
Speaker 3: run for the Heat. So we'll see how that plays out.
1:01:53
Speaker 3: Mark Laswi, thank you so much for giving us some
1:01:55
Speaker 3: of your time here. Thank Mark Lazary, co founder and
1:01:57
Speaker 3: CEO of Avenue Capital Group.
1:02:04
Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can
1:02:07
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever
1:02:11
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1:02:15
Speaker 2: at Matt Miller nineteen seventy three.
1:02:17
Speaker 1: And I'm Fall Sweeney. I'm on Twitter at pt Sweeney.
1:02:20
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Speaker 3: Bloomberg Radio