Facebook Had Profound Role In Enabling Trump: McNamee

our Bloomberg Interactive Brokers studio. We talk a lot about Facebook on this radio station, but maybe we don't talk enough about the impact that Facebook has on our daily lives, on privacy, on political elections in this country. But that's gonna change right now. Roger, thanks so much for joining us. Okay, Facebook taken to the cleaners by the public about the role that it played knowingly or unknowingly in the election in terms of allowing discourse to go in different directions.

Have they learned their lesson as we gear up for the election? Right? We want them to have learned that democracy is too important to be damaged by the interests of any corporation. The one they've actually learned is that Facebook is global, that in many ways it's like a nation state, and as a result, it has the power to ignore the needs of countries that it operates in.

I mean, keep in mind, this is a company that has ignored subpoenas from the parliaments of the United Kingdom and Canada, which are two of its largest and most

profitable markets. And so I think what's going on right now is that I think Mark has concluded that Facebook's future will be best assured by maintenance of the status quo, so to say, the real action President Trump, and you know, without being too obvious about it, I think there making changes that at the margin are immensely valuable to the Trump campaign where eld of to other campaigns, specifically the decision to reverse the policy on fact checking campaign ads,

and there's an analogous one that they've done for Mark Bloomberg, where they've chosen not to fact check things done by influencers on Instagram and YouTube that are paid for by campaigns. And those are choices that in a normal democracy you wouldn't make, but at this moment in time, in this particular country, those are decisions Facebook has made with at

best mild pushback. Well we had. We did get some pushback from George Sorrow's civilionaire of philanthropist and uh AN investor, and he wrote a note in the Financial Times saying that Zuckerberg and Cheryl Sandburg should be removed from their posts and saying they should not accept political advertising. Is there any other push that perhaps has a little more than an op ed in the Financial Times from George

Sorrows actually to get them to do that. My hypothesis is that Mr Soros was speaking mostly to the European Union, where I think he is message has a welcome audience. You know, I think he is enormously respected around the world, but particularly in Europe. The challenge that we face are, I think, simply put, is there are no counterfeiling, sorry, countervailing forces in our democracy. You know, we were designed to have three elements of government that pushed back on

each other. We would have pressed that pushed back on all elements government. You would have business and religion that

pushed back on each other. And now the things that caused those to be in opposition to each other have broken down, and so you know, the Trump administration is put together an alliance with business and a portion of the of the religious world that has allowed it to withstand any pushback from journal and has allowed to defy two hundred and forty years of convention in operating the government. And that I think we cannot overstate the profound impact

that Google and Facebook have had in enabling that. We should note that Michael Bloomberg is the founder and principal shareholder of Bloomberg LP and Bloomberg News and Bloomberg Radio. Roger, you know, with all your experience in Silicon Valley, UH, silver Lake Partners, Elevation Partners, we've you know, during all that time, the US has taken a very light touch to regulating Silicon Valley and technology versus say the European Union, going all the back to Microsoft and things like that.

Do you sense that that is fundamentally changing at all? We've had some CEOs and clarting, including Mark Zuckerberg brought in front of a Congress that's kind of new, that fields new. Do you think things are changing? I believe that they have to change. I think the tech industry is today where the chemicals industry was in nineteen sixty, where where the medicine industry was in nineteen hundred, or where the building trades were after the Great Chicago Fire.

Where these things are so strategic to the economy that you have to find a way to have them operate without doing great harm. And you know, the chemicals industries to pour mercury into fresh water, and that had massive consequence for public health as well as for the environment. And we said, look, we're not gonna allow that anymore. We're not gonna allow you to spuse smoke into the atmosphere.

And you know, you remember what New York City was like, you know, in the seventies and early eighties, when you couldn't see anything because of all the smog. And tech is now in that place, and we have to have

some kind of regulation. And in my mind, we've tried self regulation that's failed miserably, and we really need to impose it from the outside and has to start, frankly, from the people who use the products, who have to recognize that there's a lot of harm being done to our children, there's a lot of harm done to our family. In France, right we can't have Thanksgiving dinner without getting into political fights and these things are not an accident.

They're part of the business model. Roger unfortunately only had a better minute left. But I do want to ask you. You were an early investor and a mentor to Mark Zuckerberg. Do you regret investing in it? I wish that I had been more successful by persuading Mark in that there was a structural problem at Facebook. Did you know there was?

I first observed it at the beginning of twenty I wish I'd seen it sooner, but I had stopping active there in two thousand nine, and candidly, I was just enjoying the success of the company because in the early days it just felt like this was one of the really great new companies, and Mark's value system in those days had no negative manifestations that you could see, at

least that I saw. But when I started to see the problem in sixteen, I then reached out to him in October and said, Mark, there is something structurally wrong with the business model, the out rhythms, and the culture that's allowing bad people to hurt innocent people. I gave them some examples from civil ryans, and then I really focused on both what I saw in the Democratic primary with disinformation but especially Brexit, where you could see that

disinformation almost certainly affected the outcome. And I spent three months pleading with them, beginning before the election and then continuing for months afterwards as their friends just think, look, you got to treat this like Johnson and Johnson treated the thilent all poisoning. You got to come to the defense to people, use the practices America. And he didn't listen. Well, apparently not. Roger mcmacnamee, thank you so much for being

with us. Tremendous speaking with you, Roger McNamee as co founder of Elevation Partners based in Menlo Park, but joining us here in our interactive Brokers studios and early mentor and investor in Facebook. Really interesting insight into the current election cycle and the possibility that Facebook will play a similar role. Yeah, sting into it in terms starting more. In addition to Rogers starting to get more attention, I

think from a different walks of life. Well. As a democratic race heats up for the White House, one theme that is emerging is taxation and taxation of the rich. To get a sense of kind of where the different candidates stand, we welcome Laura Davidson She's a congressional tax reporter for Bloomberg News, joining us in the Bloomberg Ninia nine one studio on Washington, d C. Lara, thanks so much for joining us. Give us if you would kind of a summary of where some of the candidates are

in terms of taxation going forward. Yeah, so there's really quite arranged. They're all promoting sort of the same ideas, higher taxes on the wealthy, higher taxes on corporations. But really the difference is the magnitude of how much they want to raise those levies. So kind of at the bottom level, you have Amy Klobachar, Mike Bloomberg, Joe Biden.

They're proposing, you know, some some modest increases to to the corporate tax rate end um, as well as some levees that would hit higher earners, but they haven't gone as far as like a wealth tax, for example. On the other end, you have um Sanders uh short, shortly followed by Warren and then Buddha Judge kind of lagging there in third place of sort of the biggest tax increases you'd see. What they're proposing is really sort of um is massive compared to other presidential tax plans we've

seen in years past. They're looking at tens of trillions of dollars, you know, just for comparison, and Hillary Clinton in sixteen proposed a you know about one and a half trillion dollar tax plans. So there's big differences in um, sort of what the more moderate lane is doing and

what the progressive lane is proposing. Laura, let's drill into two particular proposals, because there are two individuals on that stage tonight that are going to be really front and center, and that is Bernie Sanders because he is emerging as the modified front runner of this race. And Michael Bloomberg, majority owner and founder of Bloomberg LP, which owns this

radio station and and the news segment. Uh, this is gonna be the first debate that he is going to participate in, and so a lot of eyes on him and he's compreppers entering the more moderate branch of the Democratic Party. Can you give us a sense on on sort of the scale, uh, and what their proposals actually are. Yeah, So just looking at a corporate taxes, for example, there's some new numbers out on that, so that's kind of

a small piece to look at. Uh, Bernie Sanders, for examples, is looking at proposing higher corporate taxes of about almost four trillion over a decade. So he's looking at raising the corporate rate back to thirty percent, which is where it was before the Trump tax law, and as well as getting rid of some depreciation benefits that that kind

of helped corporations lower their tax rates. So that would be a huge increase in In the other direction, Mike Bloomberg is also talking about raising corporate tax rates, but um going to about twenty eight percent, which is, you know, lower than it had been, but um kind of a number that Obama had had championed for many years. That would be only about a one point to one point three trillion dollar increase over a decade UM. And at that twenty eight number, you see come up a lot.

And that's also Joe Biden's been talking about that um Amy Klobuchars, that has the lowest number in the field at which is actually something a number that that Republicans had talked about UM when they were planning their tax reform a couple of years ago. So, Laura, one of the big big issues that really came to the forefront in was income inequality. How did these tax plans impact that, if at all? Um So, it really depends on not kind of the specific provision and kind of how you

look at them all in total as well. But this is an issue that you hear, you know that Bernie Sanders and Elizabeth Warren have talked about specifically, but across the board, all plans would would would tax the rich a lot more. Income inequality and wealth inequality are sort of two different issues. Income inequalities a lot easier to tackle.

You can do that by, you know, raising the capital gains rate, which nearly every candidate has proposed to do, tax at the same as labor income, raising income rates on on high earners, um doing things like a financial transaction tax, which uh Mike Bloomberg I said yesterday he would support him. That's been something that Sanders and Warren and Buddha Judge and another candidates have been talking about for a while. Wealth inequality is a little bit trickier

because that's on accumulated wealth. In our tax system as it stands right now, doesn't tax wealth. It just taxes income essentially. So the wealth tax that Warren and Sanders have been talking about would do more to alleviate wealth inequality. But there's a lot of questions about one of that, is that politically viable? And two is it even constitutional? Is anyone talking about rolling back some of the salt

issues salt tax deductions? Well, I mean, I'm just wondering because there's been a theory this is disproportionately hit coastal states that are traditionally voted for Democratic candidates. However, the salt tax deduction and the state and local tax deduction really does tend to favor wealthier individuals. So it's not politically, uh necessarily going to support the Democratic case, has or

been any way in there by the Democratic candidates. You have really just touched on sort of the the hot button issue among kind of democratic tax thinkers right now. And so really the the movement on salt has been on Capitol Hill. Democrats on the campaign trail have not been talking to that party, partly because it is a such a state specific issue. Some of those states haven't

even come up yet um in the primaries. As well as it it's a politically difficult thing because if you live in Florida or Iowa or Kansas or or any of these states that that have either no income taxes

or very low rates. This is an important to you, but if you're in Connecticut or New York or California, this is so what Democrats on on the hill say is they believe that if a Democrat were to come into the White House, so they were to take back the Senate and have control, salts would be on the table, but that Democrats on the campaign trail are just really too scared to talk about it right now. So, Laura, what's the argument today, the contemporary argument for not raising taxes?

The contemporary argument for not raising taxes. Well, so, so that's sort of kind of your traditional um trickle down kind of um idea that Republicans, you know, have champion for a long long time. Though, I've been talking to some Republicans and they've been saying, uh, you know, and you see this with with Trump talking about a middle income tax cut, is that they're really concerned to talk about lowering rates for the for top earners and for corporations.

You know, the Republicans used to talk for a long time about Louis wearing that top rate which now sits at thirty seven percent for individuals down to something in the twenties. That's really off the table. They're not They're not going there. You see kind of both the window of what both parties are are kind of talking about has shifted to the left, you know, of course for the Democrats, but also some for the Republicans. Laura, thanks

so much for joining us. We really appreciate your thoughts there. Laura Davison, Congressional tax reporter for Bloomberg News, joining us from the Bloomberg N nine one studio in Washington, D C. And of course, UH taxation is going to be one of the key things I suspect that we're going to hear a lot about tonight at the debates. Well, there

also is the bifurcation and the Democratic Party. You've got Bernie Sanders emerging very much as a front run are consolidating some of the UH the support that previously had been split with Elizabeth Warren and it's really going to be him very much on the forefront. And Michael Bloomberg coming into the first debate again, UH founder and majority owner of Bloomberg LP. It's just going to be really interesting to see where the focus is is it on what plan? There are two further the US economy and

and sort of you know, with healthcare, etcetera. Or is it going to be on beating President Trump? And those are sort of some of the two narratives that have been dominant throughout the entire race. Boys, we think back to en and even year to date here, equity markets very very strong. Here one area that's you know, performed better, but still I think a little bit unloved as a financial sector. Dave Ellis, and portfolio manager for Hennessey Funds,

joins us. He's based in Boston, but joining us here in our Bloomberg Interactor Broker studio. So so Dy've give us a sense of kind of just the financial stocks. And I think back to some of the big players of Goldman Sacks, the cities at JP Morgan's had a pretty good twenty nineteen in terms of performance. How do

you think how's the group in general been performing? Financials? Well, I think there's a you're saying a separation the people that are balance sheets entric, meaning that they have the bulk of their earnings from the balance sheet, they're they're not doing well. Uh, they're underperforming. And I have a small cat financial fund that's actually down for the year

and that's primarily a balance sheet centric business. But the ones that are that are have more fee income, more more recurring fee income, like a Visa or master card, they continue to do well because that's what people want. They don't, you know, they don't want to own these balance sheets that are under threat from either credit or low rates. A lot of people look at the banks

as sort of completely dependent on the yield curve. The flat of the yield curve in the United States goes the gap between in particular two year and ten year treasury yields, the less value people see in financials today, we're seeing the yield curve flatten it again. Do you think that this is a fair assessment of the relationship between the yield curve and financials? I think so, I

mean disappointingly. So. You know, when I started many many years ago, FED funds are eighteen percent, so it didn't matter what the yield curve was, you made plenty of money. But now the flatness of the yeld curve and the lowness of rates relative to zero is a double whammy. And if you look at a big bank like JP Morgan, half of their profits going to come from the balance sheet. If you look at a medium sized a smaller bank, it can be seventy five of their income comes from

the balance sheet. So if rates are gonna go low and we're gonna end up like Japan here in America, those those spreads are gonna come in and that's gonna attack half to of their revenue. So if I told you that half of Apple's revenues we're under pressure, where do you think the stock would be going? Right? All right, let's we see. Let's take a look at the asset management side of the business. We had another deal announced yesterday,

Franklin Templeton buying leg Mason fifty dollars to share. Um. Is that just a reaction to the issue that has plagued the asset management business for almost a generation now, which is pressure on fees. I think it's it's that, and it's also these acquisitions allow them to reset employee levels, compensation levels, layers of management levels, so you have a number of things that go on there. Um. But again

this is addition. By subtraction, You're you're putting two companies together that are losing a u M hoping that you can buy subtraction. Meaning even though you're still shrinking. You can add value for the shareholders by and again resetting the corporate structure. That that's what acquisitions allow you to do. Uh and and I think you're going to see that more in this business. The backdrop of this merger was that active management, in particular equitative active equity fund management

is a dying industry. That is your industry. What do you what do you think when people say that, Well, I think there's you know, it's an industry that is is under pressure because of what the market is doing. Um and the market is giving you fairly decent performance metrics, which makes the index funds a safer way to play. So what what the FED is essentially done is taking a lot of the volatility out of capitalism. They did it two decembers ago. They did it when what's three

or four months ago when the repo thing. They don't allow capitalism to come back in and therefore allow active management to add value. And so as long as the FED is there tamping down volatility and tamping down capitalism, than being in an index fund, we're just going along with the flow of money and the growth of money in the system. Remember, the money is going coming into the system every day. There's more dollars out there every day. If if the same amount goes in the stock stocks

will slowly go up. And if the FED says we're not going to have any volatility, then you should just own an index fund. But once volatility returns, if it ever does, the act of management will will win. And the question is that the market doesn't, at least investors don't believe that that's going to happen right now. What areas are you looking at right now that are most uh, you know, attractive to you right now? Again, we're eleven

years into this financial economic cycle. The markets have been rallying, uh, And so where do you see opportunities? Well, I think you know, the market is telling you that you should own five stocks. Um. And that's and and financials aren't one of them, are right? Well right, they aren't. But but certainly the visa master cards of the world have done quite well. And that's why you know, my large capt fund is performed well. Thank god, I'm doing something right, um.

And I think that's I think the winners are going to continue to be winners. And you know, the on in the companies that don't want to invest in their future, don't want to take chances are going to continue to fall by the wayside. And I think you just have a lot of having have knots out there. You have it in in income and distribution, you have it in stock valuations, you have it in home prices, and it's just going to continue. Dave Ellison, thank you so much

for being with us. Dave Ellison is a profolio manager of the Hennessey Small Cap and large cap financial funds, joining us here in our interactive brokers studio is normally based in Boston. A really interesting kind of conundrum and I've heard this before, Paul, from people saying the FED is killed off the volatility as well as sort of the natural price discovery that markets have been used to. And the question is, you know what will occur if they allow it to go back or does this mean

that they kind of can't. They can't, And if you look around the world, it's not just the FED, E c B and some other central bankers as well. So that seems to be the world we're in right now post financial crisis. The digital transformation of the industries from shopping to buying cars to buying homes to UH finding a place to stay when you visit another city has

been dramatic. It has overhauled the entire economy in many ways, and there is a question of how this is impacting the music industry or streaming is gaining such a big share of how people access music. Joining us now is Ben Mendoza. He is co founder and chief executive officer of beat Chain, based in London. Joining us here today in our interactive broker studios UH and beat Jane kind of caters to this new era. But before we get into what you do, can we talk about how does

a musician today make money? Okay, thanks to NASA, thanks very much for having having me here. Um, it's a very good question that musicians today make most of their money. Um, if they're you know, the normal musicians that are that are playing clubs and and and other events, make most of the money from live performance. They will make some money from streaming, but it will typically be possibly fifteen max um. So they need to be able to sell

tickets and sell their merchandise and perform. That's how they do it, all right, So how does beach chain fit into the economics of today's music industry. Okay, Um, the thing about musicians is then they're not necessarily the most

technically savvy people. Okay, So what we've done at Beach Chain is we've tried to abstract away all the technicalities of boosting your brand using social media and other ways in which you can get in front of your target audience and made that very simple for musicians to use.

So we put together a whole set of tools, a sort of platform which includes understanding where your audience is seeing us literally a dashboard with a with a map that says, this is where Spotify listeners are listening to you, this is where your Facebook fans are, and so on, so that you can understand who likes what and decide when you're going to play your next event where to go to do that because you can see where your

fans are congregated. Okay, So we provide that we also provide a set of tools that allows these musicians to post out on the social channels automatically against a schedule, the right sort of content that's going to be engaging for their fans. Many musicians have this idea that the first thing they should do is get some music up on Spotify, you know, and they'll get some streaming revenue from that. Well, actually, that's not the advice we would

give them. We would say, before you do that, build up a fan base who wants to stream it. You know, you've got to You've got to actually engage those bad audience. So the tools we have are designed to do that. There's always been a complaint in an era when CDs for a thing or vital was the dominant form of getting your music, where the labels had such power over which music got distributed. Do they still have that power,

Absolutely they do. But the the opportunity there is there now with the technology as it is today for artists to sidestep that. It used to be that if you wanted to promote yourself and build that audience I was talking about, then you needed the dollars that the big

major's had behind you to do that. But has it really been a really changed I mean, I'm just trying to figure out if you can get enough of a following, whether it's on Instagram or whether it's on Facebook, whether you see an increasing number of cases where people are able to sort of make their own fortune away from the labels in a way that's unique. Yes, absolutely, and

we have case studies that show this. For the last two years, we've been working with a number of bands and across all genres that have managed to build up literally hundreds of thousands of fans um and that's enabled them to put on shows where they've hired the venue themselves, they've sold the tickets themselves, and they keep the majority of that that money this way, when they were doing it through the traditional routes of having label services and

promoters and managers, then obviously those middlemen all take their share and less ends up in the musicians pocket. So what's the economic model for your company? For for beach chain, how do you guys generate revenue? Okay, we generate revenue by having a three tier model, so that the lowest tier of the beaching platform is actually free to use

and it gives a lot of very valuable information. But if you want to get into them the real meat of of promoting yourself and using the marketing tools that we we've supplied, then we have a subscription model, which is for the sort of premium level is and then per month, and at the sort of superstar end is only per month, so it's still sort of the cost of a pizza a month. We need to keep it affordable for musicians. So what's the draw I mean, do you have a sense that there would be interest from

a major record label to acquire you or partner with you? Okay? I think there are lots of people looking at what we're doing in the industry. I mean, we have already fifty thousand people signed up to be Chained and we've only just launched, So there's a lot of interest in what we're doing and a lot we're getting a lot of user feedback. And obviously it's not perfect jet and

we're carrying on improving it all the time. But I think there's a whole bunch of services, especially when you look at the data science, when you look at the data that we generate, and this is something that the artists individually are necessarily interested in, but the industry is

you can see signatures in that data. You can you can look at those artists that are breaking out in different areas, and that is very valuable even to the major Can you imagine a time when you have Netflix kind of listens or or monitors what people like and then takes pieces of that and kind of recreates a show based around that. Are you saying that that's kind

of that's basically what we're doing in the background. I mean there's a lot of um, interesting technology getting towards machine learning and and even some AI or that that that tends to be banded around fairly freely these days. Um. When you when you bring those different data sets together, you can infer a lot of information and you can

make actionable insight out of that. So yes, definitely we are seeing that we can help artists by saying, look, this is what's working for other acts like you in your in your genre, try doing this. You know post here have this type of content and when they do that they see a big uplift in the in their responses, Um that they got. Ben Mendoza, thanks for joining us. Really fascinating story. You talk about industry, like you mentioned earliers,

it's been disrupted. Boy, the music industry has been disrupted with technology well, and it's so interesting to think about how you can get such real time feedback about what's popular and what's not and how you can sort of tailor the music to that. And that's sort of what we're seeing out of Netflix. The way they try to craft shows around the likes or dislikes of the viewers. Yeah, I could see how this would be for the independent artist would be who's not signed up to a big label.

This would be hugely value added story. Ben Mendoza, co founder and chief executive officer of be Chain, based in London, but were fortunate that he's joining us here in our Bloomberg Interactive Broker studio here in New York. So very interesting on the music business. We've seen, uh, you know, more and more the artists given kind of how the music industries evolved as made most of their money today by touring and uh it's less so from the recorded

contracts that they have with their labels. Interesting to see how beat chain fits in here. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa abram Woyit's I'm on Twitter at Lisa abram woits one before the podcast. You can always catch us worldwide on Bloomberg Radio