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ESG, TMT, Equality, And Polestar (Podcast) · Bloomberg Intelligence

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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney. Alongside
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Speaker 1: my co host Matt Miller. Every business day, we bring
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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
0:18
Speaker 1: at Bloomberg dot com slash podcast. E s G Investing.
0:23
Speaker 1: I first started hearing about it maybe ten years ago
0:26
Speaker 1: from some of my institutional investor clients in Europe. First
0:31
Speaker 1: they roll into it like, is Disney is environmental, social
0:34
Speaker 1: and governance? And I said, I think Disney is okay.
0:37
Speaker 1: That was my big stock pick of the day back
0:39
Speaker 1: in the day. I think it's s d okay. I mean,
0:42
Speaker 1: it's Mickey Mouse, right, I mean, how bad could it
0:44
Speaker 1: be from the E s G perspective? But a lot
0:46
Speaker 1: of pope folks wrong. No, I think I'm okay. I
0:49
Speaker 1: think I'm okay. It's Mickey's pretty good. Mickey, Mickey, Mickey's
0:52
Speaker 1: pretty good. But a lot of folks it's obviously issue
0:55
Speaker 1: has become a major major trend. I think it's gone
0:57
Speaker 1: two ways. It's gone. On the one hand, it's it's
1:00
Speaker 1: been a good label to use for marketing, right, and
1:05
Speaker 1: we've seen that takeoff and really sputter out over the
1:08
Speaker 1: last couple of months because E s G E t
1:10
Speaker 1: F s have now gone negative and let's look at somebody.
1:13
Speaker 1: I was gonna say, it's and the the other way
1:15
Speaker 1: it's gone, Um, people who are activists or is activists
1:19
Speaker 1: the right term. Maybe people who actually do something with
1:23
Speaker 1: their steaks, you know, put their money where their mouth
1:25
Speaker 1: is and change the world. We have one of those
1:27
Speaker 1: people in the office in the studio right now, Yasmin
1:30
Speaker 1: Dia Bilder joins us. She's the head of E t
1:32
Speaker 1: F S and managing director at Engine Number one, which
1:35
Speaker 1: you know probably from last year's proxy battle that won
1:38
Speaker 1: them three spots on the board. So it's been great
1:41
Speaker 1: to have you in here. Um, talk to us about
1:44
Speaker 1: the first of all, the kind of crash and burn
1:47
Speaker 1: of the marketing side of E s G investing, because,
1:49
Speaker 1: like I said, E t F flows have gone negative. Now, yeah,
1:53
Speaker 1: it's a really interesting trend. You're scene right now, So
1:55
Speaker 1: I should say off the bat, we don't see ourselves
1:57
Speaker 1: as E s G providers, but let's talk definition. What
2:00
Speaker 1: is E s G investing. You mentioned environmental, social, and
2:03
Speaker 1: governance data. Ultimately, what most of these strategies are doing
2:07
Speaker 1: they're trying to rate companies and rank companies. So ultimately
2:10
Speaker 1: they're saying what companies look quote unquote best across environmental, social,
2:15
Speaker 1: and governance issues and what look worst? And then many
2:17
Speaker 1: strategies are built off the back of it. Um Typically
2:20
Speaker 1: what you see is strategies that exclude the worst or
2:23
Speaker 1: by the best. The challenge with the space and you're
2:25
Speaker 1: seeing it sort of play out real time is first
2:28
Speaker 1: and foremost, what is a good company and what's a
2:30
Speaker 1: bad company? Right Like, many of these data providers actually
2:33
Speaker 1: have no correlation across what where they actually rank companies.
2:37
Speaker 1: In fact, Facebook is the best example. Some rank it
2:40
Speaker 1: is a top quartel, some rank its bottom quartel. It's
2:43
Speaker 1: a very personal discussion, insane. Now you see the performances.
2:47
Speaker 1: The other thing though, which is it? It tends to
2:48
Speaker 1: be that many of these portfolios are just overweight technology
2:52
Speaker 1: and underweight oiling gas and so what are you seeing
2:54
Speaker 1: the last couple? Because Exon is clearly a bad company
2:57
Speaker 1: right from it. I don't know how they are in
2:59
Speaker 1: terms of the social and governance side of things. But
3:02
Speaker 1: in terms of environmental you just measure them by you know,
3:06
Speaker 1: CEO two emissions. Surely X it's one of the worst
3:10
Speaker 1: companies in the world. Right, we'll all talk about our
3:12
Speaker 1: campaign and what we were hoping to see for X
3:15
Speaker 1: on mobiles. It's the anniversary kind of it's right around
3:17
Speaker 1: now is when we had what we were able to
3:20
Speaker 1: successfully place three people on the board of directors of Exxon,
3:22
Speaker 1: and we did that with owning just two basis points
3:25
Speaker 1: in the company. It's very fashion. I mean, if I
3:28
Speaker 1: were on that board. But but you know what was
3:30
Speaker 1: interesting is we really focused our argument on the shareholder
3:34
Speaker 1: argument for what we wanted to talk about, not the
3:36
Speaker 1: morality climate argument. And what we were really focusing on
3:39
Speaker 1: was a few things. First, it was all about governance.
3:42
Speaker 1: It was about the fact that, whether you like it
3:44
Speaker 1: or not, whether you believe in climate change or not,
3:47
Speaker 1: energy is going through huge transformation, whether it's government regulation
3:50
Speaker 1: or shifting consumer preferences, and we felt that the board
3:54
Speaker 1: would benefit from additional folks who had real, true transformational
3:58
Speaker 1: energy experience. It was also about their capital allocation strategy.
4:03
Speaker 1: And so I think the real interesting thing from the
4:05
Speaker 1: campaign for me was two fold one was you can
4:07
Speaker 1: own a small part of a company, but if you
4:09
Speaker 1: focus on the shareholder value argument, you can bring people
4:13
Speaker 1: along with you. Um. And the other is that you know,
4:16
Speaker 1: moving the conversation from ideology to economics, and that was
4:19
Speaker 1: where we had our success. That's key, right, that's super key,
4:23
Speaker 1: And in that sense you can easily understand why shareholders
4:29
Speaker 1: would want you there. They've got to make this transformation anyway.
4:32
Speaker 1: The guys they know on the board are probably a
4:35
Speaker 1: all guys and be only know how to put holes
4:38
Speaker 1: in the ground and pull out the Earth's precious resources,
4:42
Speaker 1: and they need someone to show them the way. How
4:44
Speaker 1: does the C suite react, Well, we are an engagement focus.
4:47
Speaker 1: From the traditional theory of change in this space is divestment,
4:51
Speaker 1: which is if you don't like it, don't own it.
4:53
Speaker 1: And when I say this space, I mean broadly. It's
4:55
Speaker 1: true for climate, it's true for social issues. A lot
4:57
Speaker 1: of times e s g. People just sell you know, tobacco,
5:01
Speaker 1: sell oil, sell everything that's bad, probably gunmakers, and that
5:05
Speaker 1: doesn't really help, right because someone else just buys those
5:09
Speaker 1: steaks and keeps making tobacco, oil and guns. Well, when
5:12
Speaker 1: you think about I think carbon decarbonization in general. I
5:16
Speaker 1: think there's a real strong case to make for own
5:18
Speaker 1: and engage. I mean, energy is one place, but how
5:20
Speaker 1: about global greenhouse gas emissions comes from energy, transportation and agriculture.
5:26
Speaker 1: Like this is the heart of the transition. When we
5:28
Speaker 1: talk about the energy transition, which is, by the way,
5:31
Speaker 1: a big investment opportunity for investors. That's where it's happening.
5:34
Speaker 1: And our theory of changes um not just that it's
5:37
Speaker 1: not just that the small green technology companies are going
5:39
Speaker 1: to be the ones driving it, but that actually the
5:41
Speaker 1: big traditional incumbents have to transform themselves. So that's the automakers,
5:45
Speaker 1: that's the big ad companies, and that's our That's where
5:48
Speaker 1: we spend our time. And I will say, um, all
5:51
Speaker 1: of our engagements post xcon have been very collaborative because
5:54
Speaker 1: we're not the first people to tell the c suite
5:56
Speaker 1: of these large companies, Hey, there's a lot of focus
5:59
Speaker 1: on decarbonization. You need to have a strategy and so
6:02
Speaker 1: in some ways, I think the fact that we approach
6:04
Speaker 1: it from a shareholder value perspective allows us to have
6:07
Speaker 1: a really good dialogue with companies. What's real quickly thirty seconds,
6:11
Speaker 1: what's the next industry that you think is should get
6:14
Speaker 1: some of attention from an E s G perspective. I
6:16
Speaker 1: think the demand side of decarbonization is interesting. Everyone focused
6:19
Speaker 1: on oil and gas, but transportation is a really interesting one, right.
6:22
Speaker 1: It's it's a move to all electric vehicles. A lot
6:24
Speaker 1: of the market is focused on that, but but you
6:26
Speaker 1: have to think more deeply about it. It's what are
6:28
Speaker 1: the commodity inputs like lithium and aluminum that are needed
6:32
Speaker 1: for that. So it's a really interesting investment opportunity. Good stuff,
6:35
Speaker 1: good stuff. Yasmin, thanks so much for coming into our
6:37
Speaker 1: Bloomberg Interactor Broker studio. Yasmin daya build your head of
6:40
Speaker 1: E T f s and a managing director at a
6:43
Speaker 1: really cool firms called Engine Number one. Is probably a
6:46
Speaker 1: story behind that name as well. We'll get that, uh
6:49
Speaker 1: next time our next guest. In my notes, it says
6:56
Speaker 1: it was two point two billion assets under management his fund.
6:59
Speaker 1: He now has over nine of the firm's assets in cash,
7:02
Speaker 1: with the remaining ten in defensive fixed income. I can
7:05
Speaker 1: honestly say I've never seen that before. Let's check in
7:08
Speaker 1: with Phil Toes, CEO of Toes Asset Management. Phil, thanks
7:11
Speaker 1: so much for joining us really appreciate it. Talk to
7:13
Speaker 1: us about your portfolio here and your your cash position.
7:16
Speaker 1: Where is it? Our our notes correct? Are our notes correct? Yeah?
7:20
Speaker 1: So we shifted slightly in the last couple of weeks
7:22
Speaker 1: and when they move up in the markets, moved us
7:24
Speaker 1: into more of a round a cash position relative to
7:29
Speaker 1: our earlier this year. But what what drives us there
7:33
Speaker 1: isn't isn't really are thinking about the markets, but rather
7:36
Speaker 1: just algorithms that are trend following, algorithms that have the
7:40
Speaker 1: ability to attempt to move us into either either fixed
7:44
Speaker 1: income or cash instruments. And because fixed income has been
7:47
Speaker 1: doing so poorly that we've largely just been in cash.
7:50
Speaker 1: But that's been in the position that we've had primarily
7:53
Speaker 1: since January thirteenth of this year. So it's been a
7:56
Speaker 1: it's been a good thing to just not be playing.
7:59
Speaker 1: But it's like, I mean, it reminds me of Pablo Escobar.
8:03
Speaker 1: He also held most of his assets in cash, and
8:06
Speaker 1: the rats ate about ten percent every year. You have
8:09
Speaker 1: the same problem, right, don't you lose money through uh
8:14
Speaker 1: just inflation? Yeah. So if if all you're doing is
8:19
Speaker 1: putting money in cash and didn't have a plan to
8:21
Speaker 1: come back in then then that's exactly what would happened,
8:23
Speaker 1: and inflation would eat you. But if you think about
8:25
Speaker 1: the way, so to our base cases that this will
8:28
Speaker 1: be a continuing bear market, and what we've seen in
8:31
Speaker 1: the last couple of weeks is a fair market trap.
8:35
Speaker 1: So if that, if that scenario plays out, the way
8:37
Speaker 1: the markets tend to work is they move down and
8:40
Speaker 1: then they even pick up more volatility. UH. And And
8:43
Speaker 1: what happens across our platform, across our different funds in
8:46
Speaker 1: EATS is that we have a trend following algorithm and
8:50
Speaker 1: just as we exited in the early phase of this decline,
8:53
Speaker 1: they would be designed to attempt to re enter in
8:55
Speaker 1: the early stage of a rebound. So then via zoom
8:58
Speaker 1: out and look at let's let's say this is like
8:59
Speaker 1: a typical bear market and it bottoms and somewhere around
9:02
Speaker 1: October of this year, UH somewhere around thirty five percent lower.
9:06
Speaker 1: At that point, having been in casual of it, it
9:09
Speaker 1: would have been a fantastic thing. But then you have
9:11
Speaker 1: the possibility for rebound, and that, frankly, is what it's
9:14
Speaker 1: all about, which is positioning yourself. You know, it's always
9:17
Speaker 1: so amusing to hear people talk about buying the dip,
9:19
Speaker 1: and the real question is what are they buying the
9:21
Speaker 1: dip with if they remain fully invest in the whole time.
9:24
Speaker 1: So yeah, yeah, the idea is to not make a
9:28
Speaker 1: market call necessarily, but to position yourselves in a way
9:32
Speaker 1: that address was at least the contingency that this bear
9:34
Speaker 1: market will continue, and then also positions yourself to potentially
9:39
Speaker 1: capture the rebound. And that's you know, this is not
9:42
Speaker 1: something new for us. We've been doing this since nineties six.
9:44
Speaker 1: We we saw the same kind of thing happened during
9:47
Speaker 1: the Internet double burst and the financial crisis, So we're
9:51
Speaker 1: we've got a long history of trying of navigated. By
9:53
Speaker 1: the way, speaking of bubbles, um, dot com and housing,
9:58
Speaker 1: what do you think we're look at today, especially with
10:01
Speaker 1: regards to I just bought a house for more money
10:03
Speaker 1: than I thought it'd ever spend on any one thing
10:05
Speaker 1: in my entire life, and I'm still skeptical that I
10:09
Speaker 1: can actually afford it. Yeah, So I think it's really
10:13
Speaker 1: fascinating because you get, you know, get conversations like this.
10:15
Speaker 1: You have a decent because little rally in the stock market,
10:19
Speaker 1: and everyone just thinks, well, we're back to to life
10:21
Speaker 1: as normal. But I think we're anything but that. One
10:24
Speaker 1: of the most compelling you know, you mentioned housing. One
10:26
Speaker 1: of the most compelling data points I've seen in the
10:28
Speaker 1: last six months is the you know, the Schiller Housing
10:33
Speaker 1: Price Index, which you know, for a hundred years, that
10:37
Speaker 1: index range between a hundred and a hundred and twenty
10:40
Speaker 1: because it's a real, real prices inflation, justin prices for houses.
10:44
Speaker 1: And then we saw that shocking increase of the index
10:47
Speaker 1: up to two hundred during the during the two thousand
10:52
Speaker 1: seven and then it came back down again. But right
10:54
Speaker 1: now we're at two twenty. So in real terms, we're
10:58
Speaker 1: higher with these historically, and so that that, you know,
11:04
Speaker 1: compare that with the fact that we're in the top
11:06
Speaker 1: quintile in stock valuations. But here's the big one. Here's
11:10
Speaker 1: the big one, which is that the said has changed
11:13
Speaker 1: his motivations and where primarily over the last you know,
11:17
Speaker 1: the say, thirteen years, that said has actively tried to
11:20
Speaker 1: avoid financial market declines. Now you can actually argue that
11:25
Speaker 1: because of demand pull inflation, which effectively means that people
11:29
Speaker 1: are buying so much stuff because they have so much money.
11:32
Speaker 1: You know, Now the said, you know, maybe implicitly they're
11:35
Speaker 1: not coming out and saying that, but they may have
11:37
Speaker 1: a motivation to pop the bubble. And so that's a
11:42
Speaker 1: completely different scenario, completely different world to live in. So
11:45
Speaker 1: instead of it being like fourth quarter of two thousand
11:47
Speaker 1: and eighteen where said they're saving the day, now the
11:52
Speaker 1: said may uh, you know, have have some kind of
11:56
Speaker 1: an incentive to actually see financial asset prices, home prices
11:59
Speaker 1: come to more reasonable levels as a way of addressing inflation. Absolutely,
12:03
Speaker 1: I feel just third thirty seconds, it feels to me
12:06
Speaker 1: like your firm and your strategy tries to time the market.
12:09
Speaker 1: Is that right, Well, so we we we do. We
12:13
Speaker 1: can't extu the markets. We also use options hedging, but
12:16
Speaker 1: we would say no, not really, because most market timers
12:19
Speaker 1: are trying to make a market call and predict what's
12:20
Speaker 1: going to happen, and that tends to not go well often.
12:24
Speaker 1: So instead of doing that, all we're doing is just
12:26
Speaker 1: falling trend following algorithms, and so that tends to be
12:29
Speaker 1: in our history, a relatively reliable way of doing two things,
12:34
Speaker 1: which is getting out of the way of the real
12:35
Speaker 1: train wrecks, but also participating in what you know generally
12:39
Speaker 1: is just rising markets, and that's what markets do nine
12:42
Speaker 1: of the time. So the idea is is not not
12:45
Speaker 1: making a market call, which is not market timing, but
12:47
Speaker 1: actually positioning yourself in the way address contingencies. All right,
12:51
Speaker 1: So great stuff, man, thanks for coming on and really
12:53
Speaker 1: appreciate a really interesting kind of you, even behavior and investing,
12:58
Speaker 1: which I wanted to get to. So I hope we
12:59
Speaker 1: can get you on again, Phil, because I know you
13:01
Speaker 1: were a founder of the Behavioral Investing Institute, and I
13:04
Speaker 1: think that's that sounds pretty pretty interesting as well as
13:07
Speaker 1: released to investing. All Right, I just typed an FB
13:12
Speaker 1: equity go into my terminal for the Facebook and I
13:15
Speaker 1: got nothing. Nothing. It says it changed it's symbol today
13:19
Speaker 1: to meta, so not gonna type in meta equity go
13:23
Speaker 1: and I get Okay, there we go. I got my
13:25
Speaker 1: ticker there, and all thats two more letters. It used
13:27
Speaker 1: to be, dude, You remember when you get smaller, Yes,
13:30
Speaker 1: to get down to that, if you had one letter
13:32
Speaker 1: that was the most coveted of all tickers, like if
13:36
Speaker 1: you were t then people stopped calling you anything else.
13:39
Speaker 1: They just called you t right ford, all that kind
13:42
Speaker 1: of good stuff. All right, So I'm blaming Matt Bloxham.
13:44
Speaker 1: He's a t M T anlost to Bloomberg Intelligence. He's
13:46
Speaker 1: based in London, runs all of our t MT stuff
13:49
Speaker 1: over there. Uh we snagged him about five years ago,
13:54
Speaker 1: don't remember. Uh, telecoms, tech media and technology. That's right,
13:59
Speaker 1: that people still use that moniker mat is that still?
14:02
Speaker 1: I thought that was a thing from the nineties. They
14:04
Speaker 1: still do, but I still every day you get the question,
14:07
Speaker 1: what is what's what's that team and the team? That's right?
14:10
Speaker 1: So so Matt talk to us about it. Let's just
14:12
Speaker 1: start with with Facebook. This is a meta free studio,
14:15
Speaker 1: so what we can still call it Facebook is the
14:19
Speaker 1: market buying off on this transformation. Then Mr Zuckerberg wants
14:23
Speaker 1: to take meta platforms through over the next I don't know,
14:26
Speaker 1: five to ten years. Yeah, I guess not. You know,
14:28
Speaker 1: when the share prices down over the last twelve months,
14:32
Speaker 1: I guess not. Um And I guess you know they've
14:35
Speaker 1: got bigger near term issues, you know that. I mean,
14:38
Speaker 1: obviously Instagram has been the big growth engine for them,
14:40
Speaker 1: and TikTok is adding huge amounts of pressure to the
14:44
Speaker 1: ad revenues they can generate from that. So I think
14:46
Speaker 1: they need to kind of sort out the current business first.
14:48
Speaker 1: And you know, I think that the metaverse, if it
14:50
Speaker 1: ever becomes more than just you know, the current kind
14:53
Speaker 1: of gaming environment it really is today, UM, then there's
14:56
Speaker 1: going to be a lot of rivals for it. And
14:57
Speaker 1: I think your historically Facebook UM gained its success by
15:02
Speaker 1: acquiring businesses and building them. I guess with the new
15:06
Speaker 1: constraints around um M and A, it's a question mark
15:09
Speaker 1: about whether they will be able to kind of follow
15:11
Speaker 1: that and whether they can successfully execute an organic struct
15:14
Speaker 1: in that area. I have questioned Facebook's ability to actually
15:18
Speaker 1: be the main player in the metaverse ten twenty years
15:22
Speaker 1: from now, And I got a lot of pushback on
15:24
Speaker 1: Twitter from people who said, you know what, they have
15:26
Speaker 1: invested a ton you know, they bought Oculus Rift, which
15:29
Speaker 1: was the VR headset. You know, they've done stuff, and
15:33
Speaker 1: they're spending money UM to be a major player. Do
15:36
Speaker 1: you agree, UM? I mean, I agree that they've been
15:39
Speaker 1: spending a ton of money, But then yeah, a lot
15:41
Speaker 1: of other people are spending a ton of money too,
15:42
Speaker 1: and it's you know, completely open field UM. And I
15:45
Speaker 1: think we've seen with every big technology wave, it's been
15:48
Speaker 1: a new player that nobody saw coming that's ended up
15:51
Speaker 1: being the big player. I mean that that's essentially what
15:54
Speaker 1: Facebook is. You know, it was the current the current
15:57
Speaker 1: king of the last technology cycle. I mean, I think
16:00
Speaker 1: what's going to be interesting for the metaverse as a
16:02
Speaker 1: whole is what Apple does with this kind of room
16:05
Speaker 1: with a r VR headset. And if it comes out
16:07
Speaker 1: next year, you know Apple's weight. You know, we'll create
16:09
Speaker 1: this I think so called halo effect for everybody. So
16:13
Speaker 1: maybe that will help Facebook, but you know they're going
16:15
Speaker 1: to face a lot of UM current and non existent
16:20
Speaker 1: UM competitors, you know, even the next three to five years.
16:23
Speaker 1: Think there's also I think I think there's a conception
16:27
Speaker 1: of what the metaverse is that requires you to put
16:30
Speaker 1: on a headset and something that blocks out the rest
16:34
Speaker 1: of the world. But I feel like we've already gone
16:37
Speaker 1: beyond dipping our toe into the pool of metaverse. Like
16:40
Speaker 1: if you spend all day working from home, you're on Zoom,
16:44
Speaker 1: you're on Slack or whatever, and then you spend your evenings, um,
16:48
Speaker 1: you know, shooting people on call of duty, and all
16:51
Speaker 1: of your frends are from forums You're watching other people
16:54
Speaker 1: shoot people on call of duty, Like aren't we already
16:58
Speaker 1: in a sense living in the metaverse. I think there
17:00
Speaker 1: are multiple meta verses essentially in another areas dating. You know,
17:04
Speaker 1: a lot of the big dating platforms are moving into
17:06
Speaker 1: a kind of VR environment. Yeah, you don't even have
17:10
Speaker 1: to go out of your house, and neither does she
17:14
Speaker 1: or he or whatever the person identifies as. You can
17:17
Speaker 1: spend some money on virtual gifts as you know. Crazy.
17:22
Speaker 1: All right, I'm honest with you. I'm done with this
17:24
Speaker 1: whole conversation. Let's talk music. Spotify. How to Capital Markets?
17:27
Speaker 1: Day said they got their analysts, they got their investors
17:30
Speaker 1: coming in. There's another stock. You know, you talk to
17:33
Speaker 1: these high flying technology names. It's all fifty percent this year.
17:38
Speaker 1: What's the story with Spotify? I mean, I thought the
17:40
Speaker 1: future of music was kind of renting this stuff. Yeah,
17:43
Speaker 1: and you know, I think it's I guess one of
17:44
Speaker 1: the near term worreas that people have had is that,
17:48
Speaker 1: in the wake of the whole Netflix subscribe by growth
17:52
Speaker 1: slowing um that perhaps Spotify is a similar kind of
17:55
Speaker 1: platform where there's going to be um a challenge there.
17:59
Speaker 1: I think Spotify is a bit different because unlike video
18:03
Speaker 1: subscription services, where essential you've got exclusive, unique content and
18:06
Speaker 1: you've spent tons of months to build it. Essence, you
18:09
Speaker 1: can get most music across all platforms. So if it's
18:12
Speaker 1: more about the user interface and the kind of platform itself,
18:15
Speaker 1: and your Spotify is a very strong, compelling platform. So
18:19
Speaker 1: I think they don't face the same kind of stagnation
18:21
Speaker 1: risks that we've seen with Netflix, and yesterday they were
18:26
Speaker 1: incredibly bullish on the mid term. They've got, you know,
18:29
Speaker 1: give or take half a billion users today and want
18:31
Speaker 1: to get that to a billion over the long term.
18:34
Speaker 1: I think you're one of the One of the bigger
18:36
Speaker 1: issues that they've had recently is the drag on profits
18:39
Speaker 1: from there for a into podcasts. They're not even making
18:43
Speaker 1: a gross margin on that today, and they were trying
18:46
Speaker 1: to reassure people that they'll get to some kind of
18:48
Speaker 1: gross margin in the next year or two. Um. You know,
18:51
Speaker 1: I think that the shares moved a little bit possibly yesterday,
18:54
Speaker 1: but you know, I think there's still a long way
18:55
Speaker 1: for them to go. To the podcasting business everybody in
18:58
Speaker 1: their Jack introduced a new podcast yesterday, Dak Shepherd of
19:03
Speaker 1: you Know, Armchair Expert, which is arguably one of the
19:05
Speaker 1: best podcasts that there is with his wife Kristen bell Um,
19:10
Speaker 1: the actress famous for Frozen among other things. Um, and
19:15
Speaker 1: they're going to give relationship advice and do I pay
19:17
Speaker 1: for this? Is just all that support you have to
19:19
Speaker 1: be on Spotify together, that's the idea, right, And Armchair
19:22
Speaker 1: Expert moved to Spotify. I think Obama is. I guess
19:25
Speaker 1: he was on Armchair Expert, but he's also got a
19:28
Speaker 1: deal with Spotify and he has a lot on there
19:31
Speaker 1: beyond just music, right, yeah, exactly. But it's it's a
19:34
Speaker 1: very different model where we can with the music. There's
19:36
Speaker 1: that they have a pay away to the music platforms,
19:39
Speaker 1: so there's kind of less risk around it, whereas you know,
19:42
Speaker 1: the podcast taken them into purchase a kind of content acquisition,
19:46
Speaker 1: if you like, so a bit more like a PATV platform,
19:49
Speaker 1: and you're kind of risking, you know, hundreds of millions
19:52
Speaker 1: of dollars essentially just to try and kind of generate
19:55
Speaker 1: more users and keep people on the platform. So it's
19:58
Speaker 1: quite a different business model, and I guess it's spook
20:01
Speaker 1: people a bit, you know that that it's a drag
20:03
Speaker 1: on earnings podcasting in general. How big is it is
20:08
Speaker 1: that profitable business? Is it? Something that Um, well, I
20:12
Speaker 1: think it is for some of the podcasters, right, made
20:15
Speaker 1: a lot of money, and that's what pushed a lot.
20:17
Speaker 1: In fact, I think, actually, this is what I was
20:19
Speaker 1: thinking of. Obama has a deal with Spotify, but they're
20:22
Speaker 1: ending it now because of Neil Young and all these
20:25
Speaker 1: people who are mad about Joe Rogan saying like you
20:28
Speaker 1: can feel COVID by drinking horsty Warmer. Yeah, yeah, that's
20:33
Speaker 1: what I mean. As you said, I think that the
20:35
Speaker 1: big winners, um right now, all the all the big,
20:38
Speaker 1: the big podcast is actually I think there was a
20:40
Speaker 1: story um earlier in the week that she's even some
20:43
Speaker 1: of the smaller podcast is generating you know, relatively big
20:46
Speaker 1: bucks all advertising. Yep, yep. Interesting. All right, Matt, don't
20:51
Speaker 1: we have a podcast Bloomberg Market? We do? We should.
20:53
Speaker 1: We should get some some big ad people on there.
20:57
Speaker 1: I'll make a few phone calls. Get that going, all right,
20:59
Speaker 1: Matt Blocks, and thanks so much for joining us here
21:01
Speaker 1: in our Bloomberg Interactive Broker studio. It's in how long
21:04
Speaker 1: are you here? I'm here until tomorrow, you think, PARTI,
21:07
Speaker 1: And he flies back to London Queen Victoria Street, which
21:10
Speaker 1: is our London office which is just so awesome. Um.
21:14
Speaker 1: It's just an amazing right in the city of London,
21:16
Speaker 1: right by the Bank of England, right smack down there.
21:19
Speaker 1: And there's a Greg right down the street, so you
21:20
Speaker 1: can always get good sausage roll. Yeah. There you go,
21:24
Speaker 1: all right at Blocks and t mt Annals Bloomberg intelligence
21:26
Speaker 1: student joining us year. We appreciate getting the latest on
21:29
Speaker 1: all things tech media and telecom. Lots to talk about.
21:33
Speaker 1: They're always June is Pride month and a month when
21:39
Speaker 1: we're focusing on equality issues here at Bloomberg. Today we
21:43
Speaker 1: speak with Jape Rice and chief economist at Wells far
21:45
Speaker 1: going to talk about the economic influence of the LGBT community.
21:49
Speaker 1: And I must note that Jay was educated down the
21:52
Speaker 1: road from my Duke University at some school down and
21:56
Speaker 1: I think it's Chapel Hill or something. The name escapes me,
21:58
Speaker 1: but maybe we'll get to it at some point. Jay,
22:00
Speaker 1: Thanks for joining us here talk to us about Wells
22:03
Speaker 1: Fargo and how you guys or financial services in general
22:07
Speaker 1: kind of thinks about the LGBT community. It's it's pretty big. Um.
22:11
Speaker 1: I'm just wondering growing and growing and wonder if they
22:13
Speaker 1: get you know, kind of the um, the focus for
22:16
Speaker 1: maybe the financial services business. Well, that's that's a good question, Paul.
22:20
Speaker 1: And and so, first of all, it is it has
22:22
Speaker 1: been and growing. Um. So just put just a level
22:25
Speaker 1: set here, um And and yes it's kind of vary,
22:28
Speaker 1: but you know, if you look at the Gallop data,
22:30
Speaker 1: it would uh be around seven percent or so of
22:35
Speaker 1: the population today. Put that in perspective, and that was
22:37
Speaker 1: only three and a half percent, you know, about a
22:39
Speaker 1: decade ago. So it certainly is growing. And you know,
22:43
Speaker 1: whether or not it gets the full attention of the
22:45
Speaker 1: financial service community at this point, I think is an
22:48
Speaker 1: open question. But this is also a young population and
22:51
Speaker 1: as that um and well educated, and as that population
22:55
Speaker 1: continues to grow, uh, with the young population, they're going
22:59
Speaker 1: to be more financial services and you know, other sorts
23:02
Speaker 1: of of goods and services as well. Well. It's also
23:05
Speaker 1: an incredibly diverse group. I mean, there are a lot
23:09
Speaker 1: of letters there, and each one person in this community
23:13
Speaker 1: is an individual human. Is it hard to market to
23:17
Speaker 1: or offer financial services to a group like this when
23:21
Speaker 1: it's made up of such unique individuals? Yeah, I think
23:26
Speaker 1: it is. And and and part of the part of
23:29
Speaker 1: the issue I think is so not only is you know,
23:32
Speaker 1: it's very diverse in terms of different um sex, sexual orientation,
23:38
Speaker 1: but it's also the data isn't all that really um
23:43
Speaker 1: good right now, the best day that we have really
23:46
Speaker 1: would be on individuals who are lesbian, gay, and bisexual.
23:50
Speaker 1: When it comes to you know, trans or queer or
23:54
Speaker 1: other sorts of areas, that data isn't as good and
23:57
Speaker 1: and probably because what you're looking at is you're looking
24:00
Speaker 1: at self identification, and for many reasons, many of these
24:05
Speaker 1: individuals don't really want to self identify as that. So
24:09
Speaker 1: whereas you may have really good data on say white
24:13
Speaker 1: males or or black females or et cetera, UM, the
24:17
Speaker 1: data in this community is not quite as as robust
24:20
Speaker 1: as it is in other areas. J From I guess
24:25
Speaker 1: an economic demographic perspective, what do we know about the
24:28
Speaker 1: LGBT population in terms of you know, educations and incomes
24:33
Speaker 1: and things like that. Yeah, So so again, what we're
24:37
Speaker 1: pot we looked at here and in the data we
24:39
Speaker 1: have would be on individuals who identify as lesbian, gay,
24:43
Speaker 1: and bisexual. And I would say that that that group
24:46
Speaker 1: of people is more educated than the overall population. So well,
24:52
Speaker 1: individuals have to be friend to get right, if you
24:54
Speaker 1: if you have more income, you know that if you
24:57
Speaker 1: feel secure enough in your environment that if you feel
25:01
Speaker 1: safe enough to identify as one of these as part
25:06
Speaker 1: of the group that's discriminated against like this from the
25:08
Speaker 1: get go, you're automatically gonna be likely to have more
25:12
Speaker 1: wealth and more education, right, I think I think that's right. Yeah,
25:16
Speaker 1: And you know, again it's it's hard to parse all
25:18
Speaker 1: that out. But what we do know are you know,
25:21
Speaker 1: a lesbian, gay, and bisexual individuals. If you look at
25:25
Speaker 1: the people who have a bachelor's degree, that's roughly twenty
25:28
Speaker 1: seven of that community um. The overall population that's about
25:33
Speaker 1: And then when you look at post bachelor so that
25:36
Speaker 1: would be master's, pH d. Professional degree, you're looking at
25:41
Speaker 1: more than twenty and that's five percentage points higher than
25:45
Speaker 1: the overall population. And consequently, UH, these individuals tend to
25:50
Speaker 1: have higher income UM in general than you know, the
25:54
Speaker 1: overall population. JA any geographic diversify K should there. I mean,
26:00
Speaker 1: I think the expectation or the supposition is that maybe
26:04
Speaker 1: more on the coastal UH cities for example in New
26:07
Speaker 1: York and San Francisco, might have a higher percentage is
26:10
Speaker 1: that what your data shows. Yeah, so we didn't look
26:13
Speaker 1: at it in terms of metropolitan statistical areas per set.
26:17
Speaker 1: We looked at it in terms of states, and the
26:19
Speaker 1: District of Columbia got it. And when you look at
26:21
Speaker 1: it there Washington, d C. You know, so the overall
26:25
Speaker 1: average again is somewhere seven eight percent outside of Washington.
26:30
Speaker 1: You see, it's you know, these individuals are going to
26:33
Speaker 1: be concentrated in you know, the West Coast, um, in
26:36
Speaker 1: the Upper Midwest, in the Northeast. But that's said every
26:41
Speaker 1: state in the in the United States, UM has individuals
26:45
Speaker 1: who who are identified with this community. Great stuff, all right, Jay,
26:49
Speaker 1: thanks so much for joining us. They're really fascinating and
26:51
Speaker 1: that you guys have done a lot of economic research
26:54
Speaker 1: on this community. Jay Brice and Managing director and chief
26:58
Speaker 1: economist at Wells Fargo. But I think it's a community
27:01
Speaker 1: that hasn't really been addressed by the financial industry. Right,
27:05
Speaker 1: so there's a lot of money at stake there, UM
27:09
Speaker 1: for the bank that can crack this nut first or
27:14
Speaker 1: or best right UM. And Jay is a great uh
27:18
Speaker 1: resource to have on because not only is he a
27:21
Speaker 1: managing director in chief economist at Wells Fargo, but he's
27:23
Speaker 1: also been an adjunct professor at a very regionally diverse
27:27
Speaker 1: group of University of Alabama, at North Carolina, at Johns Hopkins,
27:32
Speaker 1: and Georgetown. So great to get everything from Jay. Thanks
27:36
Speaker 1: for listening to the Bloomberg Markets podcast. You can subscribe
27:39
Speaker 1: and listen to interviews with Apple Podcasts or whatever podcast
27:43
Speaker 1: platform you prefer. I'm Matt Miller. I'm on Twitter at
27:47
Speaker 1: Matt Miller three pt on false Sweeney I'm on Twitter
27:50
Speaker 1: at pt Sweeney Before the podcast. You can always catch
27:53
Speaker 1: us worldwide at Bloomberg Radio