Tech CEOs Face Lawmakers’ Queries on Disinformation

You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio or watch us on YouTube search Bloomberg Global News. So this week's Bloomberg Business Week cover story, it's a business takeover about vaccine passports, which could not only help global tourism, but also some other industries as well. In fact, every industry is safe to say. Here's more with Bloomberg Business Week Assistant Managing

editor Jim Ellis. So, we've we've heard so much about, you know, the pain that businesses have had and the countries have had, you know, particularly tourist dependent countries, since the pandemic has pretty much stopped the ability that's sort of easily moved tween places or even the congregating groups.

So I thought it would be a great idea to sort of take a long look, deep dive at, you know, a the problem and also the range of solutions that are coming out now and whether this vaccine passport, this sort of mythical savior that so many people have been talking about, is really going to be as effective and is easy to put together as a lot of people

seem to think. I mean, this is one of those things that this is a solution that people came up with quite so quickly before actually understanding what it means. It's like, look at that, really, will it be the golden ticket? And you guys take us to Israel, you take us to uh Europe, where I feel like this is where we're starting to see kind of moves in that direction, at least more ahead than some other parts

of the world. Yeah, they've been very, very much more interested in in in getting things reopened in a coordinated way than here in the US for for a lot of reasons. I mean, it's in some ways it's simpler because their health systems sort of centralize a lot of data and so therefore, uh, here in the US, we've got a health system where you know, millions of different systems in every state and so it's sort of hard to be able to track people. That's easier and in

countries that have their own health systems. But more importantly, um, certain parts of the world are so impacted by the drop and travel that they have an interesting getting this back together, particularly Europe. Europe has a lot of countries, particularly in southern Europe, like a Greece or Spain or in Italy, that desperately need to urism to come back.

It's a big piece of their GDP and they want some reason to say that it's safe to travel, whether it's truly safe or whether that's just a big lead. It seems more and more businesses, whether it's an airline, whether it's in the hospitality business, but increasingly whether it's in things like sporting events, um um, you know, gyms, all those are looking to a vaccine passport as a way to say, hey, it's safe, here's your get out

of jail car. You have this. Now let's get back to business as usual, all right, So let's talk about some of the things that are out there. There's the International Air Transport Association. They've got a travel pass app. You've got the EU with their digital Green Pass proposal, You've got the A Okay Pass. Any of this really working well or at least maybe some tests of it, well, yeah,

the things are in test. The issue is that there's right now no coherent standard about what these things should um, you know, sort of what kind of data they should capture, and how they should be able to sort of share that data, and what do you have to do to make sure that data is sort of private because it's often tied to other data, other health data on you and other sort of just personal information on you, which is a really big issue in parts of the world,

particularly in Europe, where privacy is a major concern amount over everything. And so you've got a lot of competing systems as opposed to a standard, whether it's you know, right now, Air Frances trialing something called an a O K pass, um you know, IATA you know has its travel Pass, the Common Pass, which is something that's backed

by the World Economic Forum. All of these are basically competing systems that in various ways take your vaccination and and and COVID testing history and put it uh into a form that can somehow be displayed on a screen. Uh. The problem is that, um, you know, how that happens can really affect how private the data is. So increasingly what we're seeing is people are you know, coalescing around sort of an open standard that's tied in with the way that we look at security on the Worldwide Web,

which is pretty well adopted around the world. And the key here is rather than having a central database that has everyone in the world's health data, which is something that most people would not want, I'm just gonna say, you made me really nervous. Like I think about it's like similar to what we're trying to do with you know, medical history. Every time I go to the doctor's office,

I'm frustrated that I file something out. But will I be ultimately comfortable if there is a universal database that knows everything medically on me, particularly since that database is you know, some people would say that's cool if it's just to transport, to transit borders or something like that where government is involved, but increasingly, you know, this is going to be used in Britain is arguing now about whether this can be whether a vaccine passport can be

used for admissions to pubs. Um you know and um in other places. I mean, high It earlier this month said that it would consider using one of these apps, exploring using one of these apps to determine whether you should be able to attend a meeting or convention at one of its hotels. So, I mean a lot of

people are worried about that leaking out. So what the standard that seems to be emerging will be something that actually allows the data from your sort of health center or your health a tester to somehow go into a secure app within your phone and then you can decide what what piece of it you want to put out.

And so therefore the border guard or the hard tender or whatever wouldn't have access to all of your information, just what little piece you determine that they can have from the phone at that time, and that the user, the person whose data this is, would always be in control. If they can make that work, and they think that they can use web protocols to do that, then that may be a solution. Vaccine passport, Yes for me, Yes

for you. Yeah. Look, it is so tricky and I hesitate to be totally willing to give up my information, but we are really in unprecedented times right now. And it's so sticky because and we talked about this on Quick Take yesterday, there are so many issues with this, so many issues when it comes to equal access to vaccines. But I don't know, I don't know. I'm I'm I say, I say yes, but I'm also on the fence. I don't know. I feel like there's so much already information

we put out there. Is it just so bad to just say, Okay, yeah, I've got the vaccine. Is it as simple as that? And it's just, you know, some universal system that really makes it possible for us to start moving around. I mean, you know, my wife went got her first dose this week and she got a sticker that said that she got vaccinated. She just feeling probably kind of good. Not like she goes outside and wears it around, right, It's not like we're going anywhere

right now. Well, that, of course was Bloomberg Business Week Assistant Managing editor Jim l Is just really breaking down he oversaw the coverage. Be sure to check out the Vaccine Passport issue of the magazine. It's on newsstands now at Bloomberg dot com, Slash business Week, and of course, on the Bloomberg terminal. All of those stories really a thoughtful deep dive into the possibility of vaccine passports. This is Bloomberg Business Week with Carol Messer and Bloomberg. It

takes Tim Stenovik on Bloomberg Radio. Alright, so we are glued to our live blog that is all about three well known tech CEOs testifying up on Capitol Hill. We're talking about CEO Mark Zuckerberg, Google CEO Sundchi, and Twitter CEO Jack Dorsey testifying right now before the House Energy and Commerce Committee. The committee Tim is called Disinformation Nation social media's role and promoting extremism and misinformation. Take that, your three tex CEOs. You know, I'm starting to see

a pattern here. All right, let's get into it. What's the pattern that these guys get grilled all the time by members of the house, warm and fuzzy and cozy when they're up there. Let's get into it with Sarah Roberts, Assistant Professor of Information Studies at u c l A Graduate School of Education, Information studies author behind the screen

content moderation in the Shadows of social Media. She's with us from l A on the phone, John Erlickman, anchor byan and Bloomberg's the Open correspondent for CTV National News on the phone from Toronto. A great twosome to talking to Sarah. Let me kick it off with you, um this hearing. What's the problem? Who needs to be really accountable? How do you see it? You understand this world? Yes?

Thanks for having me to discuss um. I think one of the big takeaways that I had very early on in this hearing today, which is as we as we acknowledge one in a series, we see, we've seen that we've seen these guys being created before Congress now with the fair amount of regularity. One of the things that I was noting today was that there really are conversations happening by our Congress members that a number of different registers with regard to UH their their complaints, and they're

they're questioning to the CEOs. We have some members of Congress who are representing their constituents and talking about individual perceptions of you know, biased towards them based on perhaps political or religious orientation or creed or practice. We have other members of Congress talking about much larger issues such as the Rohinga genocide and me and mar that seems to have been orchestrated and and carried out through people

communicating on Facebook. That's fairly well known at this point. And then we have even members of Congress bringing it UH. Multilateral trade agreements into the conversation. Trade agreements notorious for their secrecy, and it comes comes to be the case that Section two thirty UH like language is being built

into them. So in a way, although I'm not known for my great UH sympathy towards the pech firms, I do have to say that it's it's quite a it's quite a feat for them to respond to all of these different registers that the problems are being asked to respond to are just coming at them from all different directions, and there's not a lot of cohesion from our Congress members.

It's you know, just as a constituent, I find that a little disappointing because it really does derail in some ways the kinds of complexity is that could be gotten into. Of course, we know that there's a lot of grand standing that goes on things that a lot of just yes or no, I answer the question to prove a points. So we got to take that political theater into and to the equation to right, and then that happens every time,

as we've seen time and time again. I should note that, as planned, the committee is recessing for fifteen minutes right now. I John Erlickman, come on in here and talk a little bit about the lawmakers and their lines of questioning here, because a common criticism over the past few years when it comes to the way that these members of Congress do speak to these CEOs, has been that it's not always clear that they know exactly what they're talking about.

Do they seem, you know, quote unquote read in on this. Yeah, it's a great question, Tim, And I'll be honest, after listening to so many of these grill sessions and I and I totally um um see you're serious coming from It's true that they have thrown at a whole bunch of stuff, and maybe the net result is you don't get as far as you need to get with what

ultimately the goal may have been with today. But at the same time, this has been some of the most compelling testimony that I've observed, partly because at the very least I have walked away so far feeling as if we have moved beyond whether we actually you know understand the business, you know, just watching everything, it felt to me like I don't need to know if this lawmaker understands everything that goes into the business of Facebook or Google.

There's a robust conversation around whether or not these massive platforms should have the power to ignore or police their content. Content that for years they said we don't create, so we're not responsible for and now they are saying we have or we want to implement better ways to police the content. And to the same A's point, they have come to the table with a lot of great examples

summary total. Maybe it's a you know, one politician whose posts were taken down, or maybe it's something else, but we've got we've gotten to a point where things can be toxic as a result of what happens on these platforms. They've done a lot of exciting things. The technology has allowed us to do a lot, but I would have hoped that they these executives were in many ways more prepared. And so now headlines are coming out because there are

served specific examples used like the capital riots. Right. Uh, some of the lawmakers were asking yes or no, do you bear responsibility for this? And there's sort of these stuttering answers, and you know, Jack Dorsey walks away as the one who acknowledges Okay, yes, Twitter did play a role in that. And I and I think that, um, I think that the line of questioning, although scattered, is

actually far more improved from when this process began. Accountability, yes or now Sarah, I'm pretending I'm one of the lawmakers. But do they ultimately need to be Sarah accountable for the content? I think this is what we're trying to figure out. Are they accountable? Should they be accountable? And we've only got about forty seconds and then we'll come back and talk some more. Yeah, I'll tell you that that that normative question is a bit of a misnomer

because the fact is that they are already accountable. They're just accountable to themselves. So it's not as if we're going from no kind of remediation and accountability. It's just that the public and now we both sides the aisle very much united in this hearing, with with with anger towards the firms. Well, or does it need to be

accountability to an outside entity and not just internally? All right, let's get right back to our discussion we're talking about the three big tech CEOs, Mark Zuckerberg, Sounder Pichai, and Jack Dorsey up on Capitol Hill right now. They're taking a little bit of a recess, but they are testifying about really disinformation on their platform. Sarah Roberts is still with US, Associate Professor of Information Studies at u c l A Graduate School of Education Information Studies and also

still with US. She's from l A. John Erlichman on the phone in Toronto. He's anchored being in Bloomberg's The Open Chris Bonnet for CTV National News. Um, Sarah, I just want to quickly follow up I was talking about, you know, you said there is accountability, but do we need to have more outside accountability of these social media platforms in order for it to be better and especially in terms of the spread of disinformation? Just quickly, yes,

absolutely absolutely we do. And you know, I made the point somewhat facetiously to illustrate the fact that what we have right now is the case of the Fox reguarding the hen House, and that doesn't usually turn out so well for the hen. Uh. It's it's just not a it's not a good model. And moreover, many other industries don't seem to enjoy this kind of uh, this kind of leeway that has led to the front uh becoming

the bihemos that they are. One Early on in the hearing, Zuckerberg pointed ingestured at his firms development of their Facebook Oversight board, the mechanism they're using once again to put a check on their decision making power. And that board is designed as a as a separate entity in the body that is wholly independent from Facebook. But the thing is still inside of Facebook's logic, and it still doesn't

curry the same kind of weight and power. That's something like governmental regulation might or should, and certainly does in the context of other industries. Broadcasting comes to mind as just right as we speak on the radio today, Hey John, come on in here and talk a little bit about this from the investor in business perspective, here, I'm looking at a chart of Facebook intra day. It's down four

tents of one percent. Twitter is down about eight tents of one percent, and Alphabet is tired by just two tents of one percent from a business perspective, From an investor perspective, what is the worst case scenario for these companies when it comes to regulation and it happens. I mean, you know, the reality, Tim is that we just this this hearing today. I think we started this conversation by saying a lot has been thrown out. The biggest question

becomes what contangibly come from this. So if there was something truly meaningful that did come, well, that would definitely changed the game. But I want to be clear that Facebook itself is being proactive in wanting to, you know, have a new version of the script because that way they can essentially, you know, have a way to just manage how things are playing out Washington, but on Wall Street, Uh, you know, with their messaging to investors. Um, the numbers

are pretty astounding, Kim and Carol. I mean, Facebook is going to generate more than a billion in revenue this year for the first time. Um, it will have done

that in seventeen years. That's faster than Microsoft, Amazon, Walmart, GM, Chevron A, T M T. And you know, it comes back to the fact that they're used by everybody and they have this massive advice you know, there was a funny there was interesting moment when Mark Zuckerberg was asked about advertising targeting those under the age of thirteen on Instagram, at which point he said, well, people under thirteen aren't allowed on Instagram, and um, come on, well exactly, and

and and he and and and so the lawmaker asked, well, okay, how do you verify that? And you know, well you enter your age and so I think there will come on John. But but Zuckerberg, what he talked about really the first time was that they're thinking of an Instagram for people who are under the age so they can further police it. So they've got a business plan for everything. And I gotta tell you, guys, to answer Tim's question, I mean, investors have loved this story. That is the reality.

You know, making money attracts people who want to make money. So what does that mean then, John from the investor world just quickly that I don't really think unless there are are our real teeth and what Wall makes are going to do. And I don't think we know that right now. That Facebook is still in a power position along with Google. Yeah, exactly, and they've gotten smarter in terms of lobbying and spending a lot more money, just

like UH companies that have been around for a hundred years. Sarah. Realistically, we've just got about a minute and a half left here. I mean, realistically, is this just grandstanding? We'll have these hearings and then we're gonna move on and nothing really changes. Well, you know, you you set it up perfectly for me to spike it over the net. I was reading report yesterday about the biggest players in the in the government relations a k a. Lobbying scene in terms of dollars

and boots on the ground in places like DC. Guests who's leading that race right now? If you guess Facebook, you'd be right. If you guess Amazon, you'd be right to their number two. And of course we're not talking about them today, but they're in the background here as well. So, um, you know, the question remains beyond these kinds of hearings that are a lot of political theater. We have to see what we'll actually shake out in the form of legislation.

But it's important to know that lawmakers often know where the bread is buttered, right, and these lobbyists are there to remind them. Uh So the money piece following the money is going to be important. And I also have to say, just as an industry watcher, you know, I just checked in with this with the trading and stock

prices just before I got on the call. And as we all know, these uh, these these firms have their shares trading at darn year fifty two week highs in some cases all time highs for for a firm like Twitter, which was languishing and languering, uh, languishing and linkering and these like really low places. It's way you know, right, many many times. Hey, guys, Sarah, we gotta run. This is great and I know we'll come back to this,

no doubt about it over the next few months. Sarah Roberts, Associate Professor of Information Studies at u c l A Graduate School of Education Information Studies. John Arlickman anchor Being and Bloomberg is the open Chris Bonnet for CTV National News. Guys, thank you so much. This is Bloomberg Journal. Yeah, but you let me drive. No, no drive home an please, I'll do the right drivel Lets me I want to drive, Just drive baby, question, get drying. This is the drive

to the Globe. Give me thanks well, drying us down on Bloomberg Radio quite just about nine minutes left in today's trading session. Let's get to the drive to the close. Bill Smede back with US CEO ce IO at Smede Capital Management, based in Seattle, but on the phone in Phoenix, Arizona. The Speed Value Fund, by the way, beating just about all of its peers so far this year and really over the past five years, returning on average more than annually.

Hey Bill, good to have you here with Tim and me. How are you very well? Thank you? So, how do you see the market environment right now? It's very interesting as always, that's one of the beauties of having this as an occupation. Uh, you have what is likely a bear market developing in the NASDAC. At the same time you have bull markets and the things that benefit the most from reopening. And it's harder to understand if you're in a place that hasn't reopened. I'm in Phoenix, Arizona,

and the this this town is almost completely open. There were a hundred and thirty eight cases in the state of Arizona recorded today, and you know that's down from ten thousand or something like that, you know, not very long ago. And and so watching the activity of people here is a nice picture of what it will look like once the combination of vaccinated plus you know already already had the virus, UH reaches that six level. So bill a bear market for the NASDAC. What about value

and where you see opportunity? What are some names? Well, uh, you know, we like the home builders. There's a line of logic out there that says, g because home building has gone so well that it has to be some kind of a top or a cyclical high. And we have a chart that shows the number of homes built each year divided by population going back sixty two years and the current the current home building level just gets us up to the deepest recession levels of the sixties, seventies, eighties,

nineties and two thousand's. So so basically we're just still about the third or fourth inning of a nine inning housing recovery that should stretch the next decade. We like Lennar, We liked d R. Horton and UH and we own NBR. And what everyone is kind of forgetting is that the

market share of these companies has grown immensely. Uh. We have one chart that shows that DR Horton, the largest home builder, had one percent market share in and they have about nine market share this year, and and that so we have a lot of houses to build, and those houses are going to predominantly be built by the ten largest home builders, and we own three of the top five. Hey, Bill, we got Jeff Mezger, the CEO of KB Home, joining us uh later than the show

in the next hour. What would you ask him? Oh? Uh, you know, I don't think we need to ask a lot. We we we We've been listening to Stuart Miller and UH and and speaking regularly and understanding their industry. KB is I believe a big California builder. And that's problematic

because California is a weird state for a couple of reasons. One, my my cousin helped create Proposition thirteen a long time ago, which caps people's property taxes at the price they bought the home at and and so people that are in their home never want to leave them because they never want to have to pay higher property taxes. And then secondarily, there's not a lot of land left in the most

attractive UH cities like San Francisco, Los Angeles, San Diego, etcetera. Therefore, it's just not that great a place to build homes unless you move quite a ways away, and they're doing that, I'm sure. But the big opportunity really is going to seventy five percent of the geography the United States where you can build homes for half the price of what

you can build them in California. Well, and do you think working from home and you know all of these stories about people and companies now saying listen, you don't have to work at our of it says you can work anywhere you want in the country. Do you think that's going to create some housing booms elsewhere and some opportunities in terms of home building in other markets? Well, I do, but I think the offices will move to

the less expensive areas also to accommodate that. And and I'm actually in the camp that thinks works from work from home is overrated. A good friend of mine ran a successful business for a long time. He said, it's not what's expected that gets done, it's what's inspected interesting, and it's it's hard to inspect what your employees are doing when you're not around them. Hey, I'm I'm in

your camp. Okay, not necessarily because I don't trust, you know, my colleagues, but I just like to be at work rather than at home. Um. Hey, it's it's good from a social stamp. Listen, just got about thirty seconds left. There any other names that you think are on your radar right now that you've committed new money and just

got to be really quick if you could. We think that people around the country that haven't opened up yet are going to be shocked at the number of people that go to class A malls like Mace rich On Simon malls shopping. I haven't want to get back to it. I haven't done that in years. Um, good stuff, Bill, Thank you so much. Stay well. Bill Smeade. He is CEO and c i O at SMAD Capital Management. As I mentioned, their value fund has been beating almost all

of its peers consistently over the past five years. Joining us on the phone in Phoenix. Thanks for listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, or Bloomberg dot com, and you can also listen to our radio show at two pm Eastern on Bloomberg Radio or watch us on YouTube. Search to Bloomberg Global News