Zuckerberg Hits Panic Button at Meta

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YouTube search Bloomberg Global News. Alright, so we've often talked about metal platforms, the company formerly known as Facebook getting beaten up by investors, down about fifty this year alone, down from its all time high back in September one, well as Bloomberg Business Week calumnist Max Chafkin rights, despite Mark Zuckerberg's attempt to present Meta as an underdog, Max says it's not time to feel sorry for the social

media giants. So let's get to it. This story on the Bloomberg and Bloomberg dot Com slash Business Week and Max joining us on the phone from Queen's So, Max,

why shouldn't we feel sorry for Meta? So what's happened over over this year basically is the economy and kind of the social media ecosystem is sort of reverting to pre COVID norm So there was this moment, you know, in twenty people are spending all of their time, uh you know on the internet, spending huge sums of money on you know, online shopping, and that was amazing for

Facebook's business and excuse me Meta's business. And what's happened is we've seen a reversion which has led to you know, all these kind of like doom and gloom predictions, both from inside the company and from analysts. Um. The thing is, the pre COVID version of Facebook was still dominant, and when you look at the competitive landscape, yes, TikTok Um is gaining ground in terms of cultural mind share that you have a lot of young people on the platform,

but it's not even close. Facebook still basically owns social media and and that isn't changing anytime soon. And I think what's what's happening more is zucker Bird is attempting to position the company both because it's in this uh Ani trust conversation and as a way to of course get more productivity out of his employees, to to sort of try to find ways to um you know, to continue to stay ahead of TikTok, you know. Max. The other big story obviously with Facebook is this pivot to

the metaverse. H Why why we're calling it meta now instead of Facebook? And why I can never remember the ticker symbol for the stock? But I wonder, you know, it just seems like there's been nothing but criticism about that strategy UM and you know, surely part of that investment, big investment in the metaverse is reflected in this just awful stock price performance this year. I'm wondering how you're thinking about that though. Is it possible that is an

underdog story? I mean, is Zuckerberg seeing something in the metaverse that everyone else isn't or is this just a quixotic UH campaign that he's going to regret? Do you think? Well? I think meta Facebook already can trolls a lot of the metaverse. You know, they acquired this as as part

of their sort of push into um VR, into new platforms. Right, they paid around two billion dollars to this company called Oculus that that turned into Facebook Meta's you know, VR a rum thing, and uh, the question is how big does this market get? Right, Zuckerberg is spending billions of dollars and rebranding the company and so on with the hopes that this is the next big platform, as big as mobile phones or something like that. But we don't

actually know that will be the case. So so in in sort of the best case scenario, this becomes huge, it's the biggest PCs, and and that's the vision that Zuckerberg has talked about for for years. Really, you know, the worst cases, Facebook just controls relatively small market and then continues to dominate, uh, social media as it does today.

I mean it's still furnillon dollar market cap company. I mean it's it's exactly and I think about there's so many companies when we talk about the law of large numbers. I mean you're looking at revenue still for this year forecasting to be something like a D eighteen billion dollars.

I mean, this company still still makes a lot of money. Well, And and one thing that I think people have sort of missed is there's there's been this conversation like, oh maybe maybe uh meta Facebook is lost it's cool, right, the young people are going to TikTok and what what it's easier to forget that that has been going on for basically a decade, you know, it's a about a decade ago that Facebook first lost it's cool, maybe a little bit earlier than that. And Zuckerberg has found ways

time and again to adjust, you know. And originally that that adjustment meant um, buying Instagram and then copying aspects of Snapchat, buying WhatsApp, um. And we're seeing that play out again. He can't buy TikTok because of antitrust scrutiny, um, but he can't copy it and and and the company is making progress there. It hasn't yet found ways to generate revenue. But but these these TikTok like products are definitely um gaining in terms of users, crime, spend, and

that's sort of things got back. So I'm wondering a lot of times when you see a company sort of stumble like this at least its share price, uh and and sort of uh not posting that block bluster growth like uh meta once did you know I would start wondering about the guy at the top and his uh, you know how secure his position is there you know, obviously Zuckerberg is is both CEO and chairman of the company.

Is it just insane to think that there could be some risk to him in that position, um, you know? Or is he just so ingrained in the company that you know, it would be foolish for anyone to try to agitate to to have him either you know, removed completely or at least give up one of those two titles chairman and CEO. So I mean he would have The important thing is he would have to do it right.

It he controls Facebook in addition to being um, you know, the the CEO and the chairman through these super voting shares. So he would have to conclude or or I guess was like be forced by a court or something, um that that this would be you know, better for the company. And I don't think that's gonna happen anytime soon. And that's partly because of my sense of of the psychology of Mark Zuckerberg, right, like, this is his identity, you know, It's it's very hard to imagine him, um not being

at the top of Facebook. I think it's probably very hard for him to imagine that. And I also think you know, the company has kind of found Uh. I don't know if you called a scapegoat. But but in terms of executive changes, right there, Cheryl Sandberg is moving on and and and and she was um some of the focus of some of the criticism around Facebook. So I think there, I think he had I think he has made some executive moves at the top in response to pressure. UM. But I don't think one of those

moves is going to be removing himself anytime soon. So the point is what that you know, and I think about as we talk about the story, and you're right, I think I feel like some of the conversations around it is like, oh, whoa is you know? Meta? But I mean this is a company still even if numbers maybe or the growth numbers aren't as strong as they used to. I mean when it comes to things like advertising, I mean, this is still where folks go. And we've

just got about thirty seconds here. Yeah, it's un avoidable from an advertising perspective, and I think it's just worth keeping in mind that there's this political story playing at the same time, which is that Facebook is under scrutiny and it's to its advantage to play up competition. So I think it's important to you know, just take that, take it with a grain of salt. Every time they talk about fear of TikTok and so on, somebody managing

the message, the narrative. Max, is what you're saying. I think he's gone all right. Anyway, check out this story. You can find it on the Bloomberg and of course online at Bloomberg dot com, Slash business Week about Facebook and Mark Zuckerman. Of course that was Zuckerberg. Excuse me, that of Christmas. Max Jafkin, columnist of Bloomberg Business Week, joining us on the phone from Queens, New York. You are listening in watching Bloomberg Business Week, cal Master Mike

Reagan and this is Bloomberg. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quicktake Tim Stanovich on Bloomberg Radio. Well social media news sites. Man, they let up last night on the news that former President Donald Trump faces intensifying legal and political pressure after FBI agents search his Florida home in a probe of whether he took classified documents from the White House when he left office.

You've probably read the story. Well, that story it is among the top five of today's most read stories on the Bloomberg. For more and understanding a bit about the legal aspect of this story, let's bring in Bloomberg News senior reporter Joe Zoe Tilman. She is on the phone from Washington, d C. Zoe. Good to have you here with Mike Reagan and myself. So what do we need to understand about the legal process and justification initially for

that search at Moral Lago, Right? So, you know, the critical thing here is that to get a search warrant, to get a judge to sign off on a search warrant, you don't need to show that a particular person committed a crime. You know, this isn't the same as charge as against the former president. What they have to out to a judge is that there is probable cause that they will find evidence of crimes at the location. You know, a big question for all of us is what exactly

the search warrant says? Um prosecutors would have to identify which federal crimes uh they think are they would find evidence of, and that would give us a big clue into what where the investigation is headed. Who's focused on? You know what the potential charges might be and what the potential penalties on the table might be very big, unresolved unknown at this point. Um. But you know, it's it's not as if the Attorney General or the head of the FBI woke up one morning and said, let's

go raid Trump's house. Um. They had to bring something of substance to to a judge who had to meet, you know, preset standards for signing upon that. So I'd love that sort of tap into your expertise and experience covering court cases like this because there are so many

various investigationations into former President Trump. Most of the reporting seems to indicate that this was focused squarely on the removal of documents from the White House and and taken to mari Lago when they should have gone to the National Archives. But I wonder, you know, given all the other investigations, is it possible that evidence pertinent to those uh could be used from the search? Um? Or does

it all depend basically one what the warrant says. You know, what all can they take away from Marilago that could be used in other other investigations? Right, so you know, when they when they go into a search warrant. They cannot just do a free for all look for any evidence of a crime. They usually have to specify, you know, we are looking for um, White House records with classified markings or any evidence boxes marked classified or these are

from the White House, um. You know. But once they take those documents, if in the course of the search they see I think that this the phrase has sort of in plain view, but that can mean a lot of different things. In practice, other evidence of crimes that can be fair game for investigators to use, even if it's not related to the original purpose of seeking the warrants.

So the classic example is, you know, FBI agents go into a house on a search warrant or you know, uh, looking for guns, and on the table they see drugs. You know, those drugs are fair game. UM. It's a bit more complicated when you're talking about, you know, the contents of a document that's been sieved pursuant to a search warrant related to some other issue of the substance or the circumstances of those documents. So it's it's possible,

but it's not quite clear. So so you know, I've seen in some of the reporting on Bloomberg different sources saying that this is unprecedented. But I am curious. Is it accurate to say that this is unprecedented for a former president? And now people have talked us about the Clintons returning White House for or after they had got home.

I mean, is what's going on right now? Possibly just an oops on the part of the former president Donald Trump that he just took stuff home that he shouldn't have, or I don't know, like, how are we supposed to see this and just got about forty seconds? Yeah, you know, I think my understanding is it's unprecedented for a search warm to be executed at the home of a former president. That seems to be agreed upon. You know, normally prosecutors

would treat a former president with kid gloves. They would try to get whatever they need through other means that are not you know, a a very dramatic execution of a search warrant quote unquote rate of a home. So the thinking here is that there is some urgency that prosecutors felt in taking this. You know, it's definitely more of an escalation than we've seen in the treatment of public officials coming from the Justice Department. All right, and

just quickly fifteen seconds. Is it related to the January six committee investigation or we don't know, we don't know. Okay, that was quick. We will reacently be following your reporting and I'm sure coming back to you. Um so, thank you so much really setting us straight in terms of the legal side of this to get a better understanding. Zoe Tilman, Senior reporter. She covers legal issues and courts out of d C for Bloomberg News. She's joining us

on the phone from the nation's capital. This is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Another one of our most read stories on the Bloomberg Today. How's to do with college endowments posting their biggest losses since the financial crisis? So let's get the story from Bloomberg News Higher education finance reporter Janet Lawn. She joins us at our Bloomberg Interactive Broker's studio. So good to have you here. So what's

going on? Well, given what was in the stock market for the year, the SNP was down twelve percent um, not a huge surprise. I've seen my far oh one K I know so I think what is surprising is the huge contrast from last year when you saw some endowments have have returns of scent wash you had in St. Louis had a return of sixty. So it's a big change.

And uh, you know, the smaller endowments are definitely more heavily rely relying on US equities, and of course bonds didn't do so well in the fiscal year too, And usually the bigger endowments have a big a lot of help from private equity and other alternatives, and they just didn't get that kind of insulation this year. You know, Janet full disclosure. I just wrote my first college tuition check for my oldest so you know, if I look

a little shell shock, that's that's the reason. But you know, reading the story from that perspective of a parent of a kid going into school, I can't help but worry. Does a poor endowment year mean that tuition is going to go up even more next year? Especially with this inflation? I mean, colleges are dealing with inflation as much as anyone else, But how do you think about tuition in sort of both of those variables, a high inflation and

poor year for endowments, So good question. The good new is that spending is not determined by one year of endowment returns. It's typically an average of three to five years. So last year's amazing returns definitely helps even out the spending. Now, inflation is another story because when colleges set there say their meal plans of say a three percent increase in February. Uh,

they're actually having to spend a lot more. So you may see it next year, um in in your overall cost for dining or if you're if your kid is still in the dorms, that may increase. Yeah, the the inflation is a is a problem on campus, both in terms of the supply chain. You know, you may not get all the types of food you want in the cafeteria, plus a labor shortage. So to teach my kid to cook, I think it is the bottom one. I am, I am. My daughters like reducing the mail mail plan as we speak. Um,

I love you include this in your story. Colleges typically need annual games at least seven percent to keep pace with annual spending, and that plays to kind of some of this stuff. I feel like you're talking so can so As you said, though they wait three years or something before they start to change some things. It's an it's an average of spending depending on how they've done over three years or some schools you do the rolling

um five year average. So one year is not going to have a huge impact on spending, just like last year, when you know, schools had very robust returns, they didn't spend at all. Do we can I just ask, do we ever see an endowment, especially after a year that was so phenomenal last year where they do park a lot of things in quote unquote a cash like investment and say right, because you could coast for or especially you know, do they ever do that to kind of

just played a little bit safer? Well, I guess it just really depends on the schools. And last year you had an overallocation to private equity because the returns were so strong. We had a story about this a few months ago that schools, you know, their their allocation to private equity was in the age because they just were you know, they just did so well. When Michigan State was describing one fund had a thousand percent return. Wow, Well I wanted to ask you about that. That sort

of the strategies of endowments. I mean, obviously you hear about sort of the stars, the David Swinson's of the world. Um, but you cover this space so closely. I'm curious, you know, the market nerd and me wants to know, is do any of these endowments just do passive sort of sixty forty type of thing or is everyone trying to be David Swinson talking like a balanced fund. Yes, well, a lot of schools did try to be like David Swinson.

And uh, you know, I think given the success of private equity and and and hedge funds, maybe not more recently, Uh, schools wanted to try to find other ways to make money. They saw Yale's endowment exploding. Um we we did a big story several years ago on a school in Wisconsin that had been in index funds for for fifteen years and their tenure returned the pants off of hard. So some schools, you know, they just don't have as much money.

You know, if you're a tiny endowment with fifty million dollars two hundred million dollars, you can't get into those funds anyway. So you're you're safer being an index funds and you're ultimately paying less fees. Of course, this year you're getting colloppored like everyone else. I guess, right, both on the stock and bond end of it, right, right, It's just like you know, it's just been the environment.

So as a result of a year like this, do we ultimately then see endowments kind of retrenching and being even more cautious in terms of their plays. Are they looking for some alternate new alternative opportunities? UM? I just wonder, like what do they do in terms of adjusting. They say they're long term investors, so they're not really changing any strategies. You know, they're they're still in private equity and hedge funds, and they may not be as much

in commodities. If they're you know, if they're shedding fossil fuel type UM investments, which you know we're the best performer this year, is there a lot of that going on? Sort of E S G s they're shedding UM. You know, if you're a two hundred million dollar endowment and you're in UM, you know, you're in funds where you can sell things. It's very easy to say you have divested.

But if you are a big endowment and you have lots of investments in private equity that, as you know, take ten twelve years down wind, you're not doing anything. You may be not putting new money and such things. Maybe in winding. That's Heartwood Harvard announced last year. All right, well listen, as we said, it's among our most read stories on the Bloomberg in terms of what's going on

with college endowments and their performance. Genital Lawrence. So great to have you in studio, Bloomberg of Course News Higher Education finance reporter Janit Laurren. Check her out at Janet Lauren on Twitter. You are listening to Bloomberg Business Week and this is Bloomberg Radio. You're listening to Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes Tim Stinovic

on Bloomberg Radio. So Bloomberg City Labs reported on the fifteen Minutes City, basically giving every resident of a city the ability to meet their soun needs within a shot, short walk or a bike ride. It's been talked about for Paris, Utah suburb. And our next guest certainly gets

that and plays into that. We welcome Mark Dixon, Founder, executive director and CEO of the workplace solutions company, i w G International Workplace Group companies worked with Microsoft, Disney, black Rock, Uber, so many household names and we welcome him, he joins us on the phone from London. Mark got to have you here with Mike Reagan and myself. Um, how are you? Yeah, good good, A long day with a good one. I feel like every day is along

along one. You guys, though, did report a financial update in your business for the first half and noted that as a company you're looking forward with cautious optimism for the rest of Give us a little bit more color on your business specifically and what you mean by cautious optimism. Well, look, there's a very very strong change in the way companies are working. Um. I think it's actually somewhat helped by

the economic uncertainty that pervades in the world today. Um. You know, CFOs around the world are looking at ways they can control or cutch costs. Hybrid working that means, you know, allowing people to work in a more flexible

way close to where they live. It's very popular, saves about half the fixed cost and well, if it's what people want, so it's quite an easy thing to introduce and it will also cut your carbon footprint by a round about sevent So, you know, there are a lot of driving forces that are getting American and global companies to change the way they work. It's you know, things work well in the pandemic, but now there are new

drivers and that's that's really cost cutting. So with that, demand is very strong for us UM in spite of a more difficult economy. And although we're you know, we have to find inflation like everyone else around the world, we've got very strong revenue growth twenty three and that's converting into strong margin improvement and equally sean cash though, which we're very pleased about um you know, at this time when cash is absolutely keen. Yeah, Mark, I'm wondering

what hybrid working looks like in practice. I'm curious sort of what are the most common examples you're seeing? Is it you know, Carol, Carol comes into the office Monday and Tuesday. I come in Wednesday and Thursday, and everyone's out on Friday. What are sort of the most common scenarios you're seeing for for companies doing this. It's something that's very much misunderstood. It's not it's not about sort of coming into the office is about convenient working. So

the elephant in the room here, it's commuting. It's not working from home, it's not working from a central office. Is avoiding commuting. So for workers around the world, commuting is very time consuming. It's become a lot more expensive with the aw price increases, and you know it's inconvenient and it's unnecessary for many people. So what people are looking for it's not necessarily working from home. That's okay occasionally, but it's not okay all the time because it can

damage productivity. So it's about finding a place to work that's just down the road. UM. It's finding a place to work that's convenient, and that's what that's what individuals want and for companies that have said earlier, it's a lot cheaper. So hybrid work is about your workers out there UM working more convenient, more localized locations. You have less fits corporate office space UM, which saves you lots of money, and you bring people together once a fortnite,

once a week, once a month. You bring them together to collaborate in a meaningful and well organized, curated way. Mark just got about twenty five seconds. We apologize, So are you using more companies opting to do that, saying we don't want to have a lease, We're just going to get the space when we need it. And again just about twenty seconds. Yeah, yeah, just think about it. Like Spotify is to music, we are too um to the real estate industry. Make it as a streaming product,

use it anywhere any place you want. Um. That's what companies want, and that's what individuals want, and it's growing fast. Yeah. We always talked about the uberization of the world, or things on demand when we need it, and I feel like we are seeing that to some extent, as you said, Mark, in real estate when it comes to company. Mark Dixon, founder CEO of i w G Global, joining us on the phone from London. Come back soon. I'm broom a journal now. But you let me drive. No, no, no no

home please, I'll do the gravel. I want to drive. It's a good question. D This is the drive to the globe down on Bloomberg Radio. All right, Yes, indeed we are counting down on the market closed, just about ten and a half minutes left as we do so, a headline just crossing the Bloomberg. The US Justice Department preparing to see Google as soon as next month, according to people familiar with the matter, capping years of work to build a case that the alphabet unit illegally dominates

the digital advertising market. So just taking a quick check on Google shares and they are right now just down about half a percent, so they continue to trade off their loads of the session. All right, let's get to the markets. We've been bouncing around. We've got a big inflation print tomorrow. So great to have back with us. Animal Letty, head of active equity, head of active equity at all spind Global Investments. She joins us here in

our Bloomberg Interactive broker studio. UM, I'll get it out. There's just too much going on. You and I were just saying, remember when it used to be quiet in this summer. It's not. Um, How does that? You know, the constant news flow, whether it's economic news, whether it's earnings news, whether it's Fed speak or just questions about recession, no recession, How does that complicate kind of adjusting portfolios are figuring out where we go from here. It's such

a great question, Carolin. I think it's really about trying to tune things out sometimes, um, which is interesting because most people would go like you have to know everything that's going on, the challenges, really tuning out the noise and carefully paying attention to the things that really only matter to the to the socks that you were in sit in, or to your portfolios and your strategy. And that's really what our investment teams are trying to do

right now. That's Carol's used to tune in me out, so she's but you know, one thing you have to sort of tune into is the earning season. And I think it's been kind of a wild one. I mean, no surprises, it's been in a wild few years, but it seems like some days you'll see a retailer come out and they're having all sorts of trouble and their stock tanks, and then the next day some other consumer companies like now everything's great. I mean, is it is

it execution issues? Is it sort of idiosyncratic issues some companies are handling inflation and supply chain better or is there something else that play? Do you think? You know? It's so it's so interesting because there's like a bifurcation

that's really happening. And as we're looking at earnings and talking to our portfolio managers last week and they were describing this to like you almost have to bucket the companies that are talking about struggling with the consumer, and then the ones that are saying, we're not seeing it yet. And it's challenging because in the past you would either see it, they'd all see it, or none of them are silling Is it a high end end I think

that's what it is. And the fortunate thing about me living in the Midwest is I'm talking to a lot of my friends family who are don't have a lot of disposable income, and um, you know, one example of a friend of mine who uses a credit card only for groceries and gas said and like my credit card, bill, I looked at last year's use it for the same thing. Only those two things double over the last year. And so, you know, if you don't have a lot of disposal

will income, you're being impacted. And in the companies that were impacted Walmart, Target, you know, the companies that are touching those the companies are saying we're not seeing it yet, Visa, you know, MasterCard, they're not. You know, they're touching more of the higher end consumer, the consumer that has more disposal income. We're seeing buckets of that, and then certainly companies that have how your input costs feeling more pressures as well, but real, true bifurcation and not a lot

of correlation between you know, every company. So and you know, we obsessed about things like the inflation print tomorrow or FED meeting, like something like tomorrow's inflation print. How important is it to you and how you think about managing money right now? Yeah, what's interesting about inflation is just kind of where we're at today and then the direction of where it's going. Tomorrow's print in of itself not probably meaningful. Um, we want to know, gosh, have we

seen the peak? Is a peak behind us? But again that's only just a short term metric, right If we've seen the peak, is it? Are we going to, like, you know, test it again in the future. I mean, all of those questions are still because that's the thing. I do feel like there used to be times passed where I think we could kind of figure out where we're going. And I don't know whether it's post pandemic.

I don't know whether it's just so much money that was pumped in and then now it's being sucked out, like I'm trying to understand that maybe this time is different. Forgive me for saying that, but I think it is different this time. And I think the frustrating thing about being an investor in this market rather than a trader is that you're focused on the long term and traders right now are focused on short term trading and focused

on what's happening tomorrow and positioning for that. So if you look at the inverse correlation to like the biotech index or growth versus value, it's just trading on whatever the bond market is doing, right, and long term investors are saying, no, I'm going to focus on quality here and companies and management teams that can manage through a clearly different you know, resume change, paradigm shift, whatever you want to call it. For the future. We definitely have

higher inflation. We definitely are going to see higher rates probably over the next decade then we've seen over the past decade, and stock selection is going to matter. The unfortunate thing is right now the traders are winning and just swinging the market. It's based on the the you know, but based on yield. So when you talk about quality and we hear this a lot like it's it's kind of the time to be defensive and look for quality companies.

How do you define quality? You know, is it dividend yields, is it just strong balance sheets? All the above. I think free cash flow is going to matter more than anything because the cost of capital is you know, extremely high for some companies UM, and it's going to matter a lot more. I mean, when you had free capital essentially UM for so many years, it caused a lot of you know, companies to get out of control. A lack of discipline, I would say, and you're going to

have to have more discipline going forward. So I would say, free cash flow, strong balance sheets, and then management teams, management teams who have experienced different cycles before. That's going to matter a lot more. No, no memes, quality of See I didn't hear that. I just got about thirty seconds. So where don't you want to be right now? I think where you probably don't want to be is again, I would focus on, you know, the lack of quality.

I would stay away from, like the this rally we've seen in you know, the high yield space in the in the companies with kind of poor balance sheets, companies you know, like if you just do a quick m a quick screen of companies that are gonna need to raise capital in the next year, like forget it because it's gonna be too expensive, it's gonna be problematic. UM. I always wish we had more time. Thank you so much for taking the time to be with us. Thank you.

Always get to talk to feedback Amma Letty. She is head of Active Equity at all Spring Global Investments, joining us here in our interactive broker studio. 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. Art to Bloomberg Global News m