Mark Zuckerberg Always Knew What He Was Doing: Joe Nocera

and on Bloomberg dot com. Mark Zuckerberg always knew. This is how jon Oh Sarah starts his column on Facebook, which she says only has itself to blame for a drastic remedy which might be in the works on the part of a g s all around the country. Let's bring in Jono Sara now for our Bloomberg Opinion piece of the day. Joe obviously a Bloomberg Opinion columnists covering business. So Joe, what did Mark Zuckerberg always know? Hi, Banni.

He always knew that these companies that he was buying and telling the government it was just a little, a

little purchase. We're in fact, companies that he could see might one day proved to be a serious competitor, and he was cutting off competition with these purchases, even though it was two thousand twelves in the case of Instagram and two thousand fourteen in the case of what's happened, if it was going to become such a problem, you know that a g s around the country want something done about it, Why didn't regulators stop those purchases at

the time. Well, to be honest, I don't think regulators. I think I think Markael Zuckerberg was a lot more foresighted about this sort of thing then the regulators were. So for instance, you know, one of the reasons they let Instagram go through was because Instagram had no revenue. So the thought was, well, if Instagram has no revenue, then they're really not expanding markets uh their market share

by buying Instagram. Um. You know. The other thing is that at the time there were other photo apps, so the idea was, well, you buy Instagram. You know, there's still companies like uh Camera I think it was called Camera Anywhere or something like that. Camera also, yes, Camera Awesome, which no longer exists of course. So um, so I think the regulators were you know, honestly, I don't think Mark Zuckerberg and Facebook were completely straight with the regulators

about their rationalpha buying these companies. And second of all, I don't think the regulators were foresighted enough to see the potential harm down the road. So what's your outlook for what happens with the FTC and these forty eight attorneys general dual antitrust suits now to undo both the merger of Facebook and Instagram as well as the takeover

of What'sapp. Does the succeed eventually? It's really hard to know because, um, you know, if this goes to court, you know, it's gonna be a couple of years before there's a trial. That's That's that's point number one. Um, And who knows, you know how you know, Facebook, no doubt try to settle in some way that does not

uh force them to give up Instagram and What's App. Um. And you know, like if you take the Microsoft case as an example, Yes, the district court judge in that case ordered that Microsoft be broken up into two parts, but that was eventually overruled by the by the appeals court. And and although Microsoft wound up being sanctioned, they wound up remaining the same company that they once were. So it's it's way too early to think that it's either going to be broken up or it's not going to

be broken up. It's just there's no there's just no way to know. Is it bad for corporate America that Facebook, Instagram, and What'sapp or all one big company? Now? I certainly think it's it's bad for consumers, um. I mean, the the main issue is that there's no competition in the social media space. They're just none. So if you don't like Facebook's privacy policy, where are you going to go? You go to Instagram, you're still in Facebook. If you

go to What'sapp, you're still on Facebook. Where you close your browser and open a book, well you could, you could, you could, but who does that in this world that we live in? I mean, but that's sort of the problem, isn't it? Isn't it a joe? People have really embraced social media as a way of connecting, and it's it's almost like they can't do without it. All of these studies on addiction and so on, they really sort of

hit the point. People have now got so used to messenger and you know, posting updates on Facebook that it's almost like the phone was. It's become a utility. Well, I agree with you. I agree with you about that. Um, but I would say, uh, turning Facebook into a utility is is even is more than even the Justice Department you can hit the FTC can handle at this point.

But but look, if you had I need to, if you had um, Instagram and What's App as separate entities from Facebook, they could compete on the basis of privacy. They could compete on the basis of how are you going to use your data? They could compete on the basis of what kind of ads will we put in front of you or what kind of disinformation? Will we have this information or will we not have you know,

you can have that kind of competition. UM and and and I think that's really what the g S and the and the and the FTC are are trying to accomplish. Is there time, I mean, is it too late, I should say, for this to succeed in the sense that you know, even What's Up founder left because of how you know, the what'sapp was turning into under the Facebook banner. Is the train gone so long from the station that

it's going to be hard to bring it back? Um? Well, you know Facebook has not really integrated those two apps, uh, you know, um intertwined it is Facebook, so they you know, breaking it up would actually be in those terms relatively simple. The question is who would run those companies? And you know, we're getting way ahead of ourselves. But my, my, my strong guess is that the government would not allow some Facebook executive to to go over to Instagram and they

have to undoubtedly find new leadership. UM. And so I don't think it's it's I really don't think it's too late in that sense. In a in a legal sense, that's a different question. And the problem there is that the courts over the last two or three decades has become very tolerant of mergers and has used a very standard called the consumer welfare standard to decide, uh, if a merger is okay or not. That really UM makes it almost impossible to put a glove on the big

tech companies. So that has to change over their course of the next few years in order for Facebook to be broken up. Will it hope, Joe? Will it hope?

These A G S and the FTC that you know, many many early workers in Silicon Valley that totally believed in in the projects, let's say, of connecting the world have now turned against Silicon Valley for the reason you know that it did become the monster that everybody got eaten up by Will it hope that that so many of those employees have now turned against Facebook absolutely, because let's face it, those people are the ones who wouldn't

want on the witness stand um. Also, more importantly, almost as just as importantly, is the fact that both Republicans and Democrats in Congress really are become anti big tech, so anti Facebook, anti Amazon, anti anti Google, and so uh, there's a decent possibility that legislation of some sort will pass anti Truss legislation will pass in the next Congress, not this one, but in the next Congress that could well um put strictures on these companies and make it

easier to break them up. Joe, we will watch this with absolute interest, but it's going to be years, as we heard earlier from Dave Wilson, So Joe, we expect that you'll be following it as well and keeping us up to date with your Bloomberg opinion columns out really all week on the Bloomberg and please do follow Jonah Sarah for all of his wonderful columns. That's Jonah Sarah,

Bloomberg opinion columnist joining us and his latest column. Facebook has only itself to blame for drastic remedy, and our thanks to Emily Chang for bringing us that wonderful interview with newly minted billionaire Brian Chesky his golden retriever, Sir Richard Parker. I'm sure we'll also benefit from this I p O. As we said, we are waiting for the

first trade. Emily brought the news of where it was being priced to Brian, and I can tell you because I saw the screen his eyebrows raised when she said one thirty nine. That's of course now moved up even higher to one fifty And we haven't even had a first trade yet, so it's not done yet. We're off to the races. Let's bring in Mundy Singh for a little bit of intelligence here. Mundy senior tech industry analyst for Bloomberg Intelligence and has been listening to that interview

as well. A b n B. The I p O priced at sixty eight dollars. We're looking at more than double that now, and Emily put that to Brian Chesky and he was extremely surprised. Are there dangers here, Maundy that it's going to be overpriced? I think so, especially you know when you look at evaluation of about fifteen to twenty times sales for a new I p O and a mature company like Airbnb. Airbnb is not a startup or you know, an early stage company like Snowflake was,

you know, a couple of months back. So this is a company that will likely have five billion dollars in revenue next year. And for any you know, high growth company, the most important thing investors care about is growth. So you know, we are still coming out of the pandemic, and yes, there will be a vaccine driven recovery next year, but beyond that, I'm not so sure Airbnb can keep growing at thirt top line every year. And that's the risk.

When the market values at fifteen to twenty times sales, the valuations can be cut into half the moment you know there is a doubt that the growth is going to decelerate. Mandyp He came out and said that in April, when they got debt financing, the price they got then would have priced them at thirty books a share. In April was obviously a very different time. We were just into the pandemic and it was the worst of the pandemic.

But that's a huge difference thirty dollars a share. It shows you how just a sentiment can change absolutely, and you know they have to go to Silver Lake and six Streets. Really, these guys are the veterans, you know when it comes to the private equity investments. So at that point of time, Airbnb was going through a cash burn issue. He mentioned about cancelations. Cancelations were at its peak at that time and they really had to raise cash.

So the market sentiment has shifted completely since then. And look, other sectors in tech have also done well. We have seen a lot of software I p s do really well. The biggest concern I have with Airbnb is online travel is a saturated or somewhat of you know, a highly penetrated market when it comes to shift to online. You look at food delivery. Food delivery is still in the very early stages of you know, shifting to online. But in case of Airbnb, it's a consolidated market. You've got

three big players Booking, Expedia, Airbnb. I think what Airbnb has to show is really good execution, probably take share from Expedia for it to keep justifying this kind of evaluation. And he did mention that there how brought back Airbnb experiences, and they are looking at opportunities in other sort of dimensions. Certain opportunities are perishable, was the word to use. Certain are not, and we'll look at those down the road.

So presumably experiences is not a perishable opportunity for them, and so they brought that back, but they had to to let some of that go now. He also mentioned that they took two d and fifty million dollars from the balance sheet to give it to their hosts at the beginning of the pandemic. It was a very very

difficult time. There is danger here that they're going to have to keep tapping that balance sheet every time there's a hiccup, right, bundyep Well, so Airbnb again is a gig economy company, and with the gig economy companies, you know, when you don't have all these people who are kind of working for you but they are not employees, you have to keep, you know, using incentives. It's the same

with Uber having to use driver incentives. It's the same with door Dash having to use incentives for the careers. And Airbnb has to keep doing things, which is why we think the cost of doing business for the gig economy companies is higher than the traditional you know, ok is like booking an Expedia, So that will weigh on on the cost side for the near to medium term. The people want things to be intimate and private. Now, he was explaining why he thinks the Airbnb has a

leg up on just the general hotel room. He also said that for business travel, you know, people don't need to check in at an airport at midnight to have an eight am meeting anymore anything, so that that will also help airbnbs business. I mean, there are reasonable expectations, but are they scientific. Well, so, look, the last time we had a crisis, financial crisis, Airbnb started back then. Now we had sort of you know, a six month crisis. Things will change, I'm sure you know, coming out of

this pandemic. Consumer behavior will change. Now Airbnb will be able to you know, benefit from that change, but chances are there will be another startup somewhere who's also trying to, you know, do things to leverage the change in habits and and so I think I treat Airbnb as a mature company. And granted they have created this category alternative accommodations, but it's not said that they can keep you know, growing their top line, they have to find new categories

for growth, and there's a still a lot to execute upon. Alright, man Deep, thank you, Mandy. People will get back now to his Bloomberg to what's that a b NB taker to see when the first trade trades. Mandeep Sing is senior tech industry analysts for Bloomberg Intelligence and of course

giving us some context there around that. Brian Chesky interview Brian very adept At giving us his personal story, which of course always goes down well with investors, particularly when you talk about your mom and dad being so social workers and how you're going to celebrate with your golden retriever. Let's bring in now somebody who has been watching with

great interest the Scotus hearings and Funny and Freddy. We're not going to get a decision from Scotus obviously until the middle of next year, but Chris Whale and German of Whale and Global Advisors has lots of thoughts on what should happen and what will happen. Chris welcome, Oh, thank you, Vannie. I hope you're well great, Thank you. So talk to us a little bit about what we heard yesterday at the Supreme Court. It was happening as we were live on air, so we didn't get a

chance to actually listen in on the oral arguments. But if you heard them, what were the orient arguments made and if you didn't, what would have been made? Well, No, I I read the summaries. I didn't get a chance to actually listen to it. I probably will later. But essentially, the shareholders of Fannie and Freddie Mac, the r sets private shareholders are arguing that the money's taken by the Treasury after the failure of these two entities should be returned.

And they're basically saying, well, these are private comp and ease the received or the excum of the conservatorship was wrongly imposed upon us, and and you know we should basically get the companies back for nothing. Um. I take a different view, which is that the companies did in fact fail. Congress provided a framework for dealing with this, and the Treasury required them when they were taken over, to pay the taxpayer for the rap for the securities

at the issue. In other words, Fannie Freddy Mac mortgage bonds are triple A rated because the government of the United States stands behind them. The government of the United States also stands behind the two corporate entities. The companies at the plaintiffs and the Supreme Court action are trying to get control of again. And as you know, during the Bush administration, there was a lot of talk and a lot of acts about getting Fannie and Freddy out

of government control. So here we are, and essentially the plaintiffs are asking the Supreme Court to step in between Congress and the executive branch and essentially overturned the decisions made by Treasury with the authority of Congress and return the moneies to private shareholders. I don't think that's going to happen so and I've I've felt that way since day one. Judge Lamberth many years ago came out with a decision. It basically said, Vanni, I'm sorry, I can't

do anything for you. Go up to Capitol Hill and he said, this is a political problem. And he's right, because when Congress creates something, they created Fannie Mae and Freddie Mack, and then they subsequently sold shares to the public. Okay, you end up with this hybrid. It's neither public nor private. But the one thing that you can very clearly see

is that these are not independent entities. They're federally chartered and all of the india of control that you would use, say in a bank, uh situation or in company if you're trying to decide who's in control. The government is still in control. They regulate them, the appoint the officers or review you know, the appointment of officers and directors. They have a lot of public policy control over them. Yeah, exactly. And that is then the powers, which is back to

Mark Calabria. In some ways, he's the f h F A head. Will he keep his job through the next administration and what will he do? That's when clear we have to find out. And again this is in front of the courts if the president has the power to remove him for any reason. Remember they litigated over this, and they also litigated over the Consumer Finance Protection Bureau because it was a unit terry, single director kind of

a design for the agency. And so what happened was the courts ultimately said, now the president can remove at the time, this was Richard Cordrey anytime he wants because to prevent the president from extra sizing that authority they

judged to be unconstitutional. So my guess is is that the Biden administration is going to find some way, one way or another once the courts have ruled to remove Mr Callabria because he is so far out of step with both the industry and with what we need today, I think he's going to have a fairly short half life. What does it mean for the mortgage industry in the United States? Chris? Where do you see it headed? Oh?

Next year is going to be another boom year. Profit margins will be less because competition for those loans is intensifying. But you know, I'm in the process of buying a house right now. I got pre approved in a day. Well, you're though you're special, Chris. No, I'm not special. I'm telling you that. And this was a non bank. I won't mention their name, But the non banks are so

much more efficient than the commercial banks. It's frightening. I got an appointment with Bank America a week later, and I got pre approved by a non bank next day, had two. So are there any dangers in the system left? Yes, if volumes slowed down, then uh. The forbearance that Congress gave borrowers is going to become a problem because Congress didn't pay for cleaning up the mass. They left it

with the private sector, and that's unfair. The Congress is going to have to go back pretty quickly in January February and provide some kind of support for the industry to clean up all of the forgiveness and the forbearance that was provided for and the Cares Act. And it wasn't just consumer residential mortgage loans, Fotnie, this was business loans too. You had a lot of states imposed moratoria on private lending, auto loans, all of these things. Well,

who's paying for that? The note holders and the investors and the companies that issue these uh these loans. So we have a kind of a troubling situation because if we mess up the private bond market, this economy has got big problems. The reason the US recovered so well during this mess with COVID is because we still have a private marketplace. Chris, it's always just fascinating to speak with you, Chris Whale, And of course author are several

books as well, most recently Ford men. Do look them up on Amazon dot Com or your nearest bookstore dealer. Talking to Chris, they're about Fanny Freddie. Of course we're not going to get any resolution on that anytime soon, that's for sure. All Right, it's time not to talk packaged foods. When is it not time to talk packaged foods. Let's bring in Xavier uncle Vic who is CEO of Amy's Kitchen. Savir first, give us, you know, the the overview of what happened to you from the beginning of

the pandemic to now. Did you see a surge or did people just stay away completely from stores and you know there therefore hurting your sales? Good morning, good afternoon. Thank you for welcoming me. Yes, definitely, we've seen a significant surge and we were as a company delighted to help those consumers needs. But the pandemic peak has been

significant for our business. For me, growth in sales or frozen minimum of fifty for frozen foods to a maximum of a hundred sixty percent growth in sales during the peak of the pandemic for our soups, you know, um, and we were, we were, you know, definitely challenged to those orders by our customers and consumers. They're happy also to mobilize to help the consumers to feel better, eating

better and healthier as well. Yeah, and you know, we all know the Amy's Kitchen packaged foods from our local drain reader CPS or what have you. You're really everywhere and there are two hundred and fifty varieties of your packaged foods, and you're also in thirty countries. I have to ask, are the spacks circling listen? We were probably independent, family owned business. Sure, I think this is this is something that we're super delighted to be when it comes

to the nature of our company. And at the moment of time, Yes, our family founders have been massively contacted in the past today where they're very much willing to stay remain independent and family owned as a business. And there's there's a value to this because it allows us to think and act long term and do the right

thing according to our purpose and our values. And and we're allotted today to be in a position where we can we can grow and develop from within and uh and having a great team and great employees at Amy's that are very much supporting our growth agenda and and helping the world to be in a very place in in in a way, sure, but is it not tempting to take some of the capital or some of the ideas so that you could scale up even further. I mean you're doing a pretty good job of scaling already.

You know, if you're in thirty other countries around the world, but you know, a capital and fusion like that or an I you is it not at all tempting. It is always tempting, Yeah, but you you you also have to reflect about what your long term strategy as a company and and what the owners of your company wants

to do. And for us, we're delighted to say that our owners are very much looking to stay in the course and be independent and and help us to our challenge the business and the ones that are running the business to find ability to stay and remain free by

performing better. And this is what we've done for the last years as a as a leadership team and me as a CEO, having the objective of driving financial freedom so we can reinvest and we're not tempted by looking outside of our our founders and an existing capital savire and talk to us about a competition between you guys and the likes of say Bird's Eye or Finders or

some of these others. How do you weight watchers? I mean, there are so many out there, and yet it is pretty easy to spot the Amy's packaged foods in your in your local growth where you've got to, you know, very definite look and it's it's a niche products, But how are you keeping your moat around your business? So first and foremost, as you as you just said, we're

the only family owned business. We're also the only business that is proposing to consumers um organic, sustainably sourced ingredients that are making our meals that we cook every day in our kitchens, and and the way we make our food, the way we source our ingredients, it is quite unique. So the way we position ourselves in the marketplace is not so much looking at our competition and trying to

gain share. We're very much and that's the discussion we have with all the customers that we do business with. The whole Foods of the world are independent natural stores, but also wall Mark and also Target. We look at it at Amy's helping those customers to grow the category we're in, so to grow the entree category, to grow the soup categories. So we keep saying we're not here to gain share on top of our competitors. We're here to bring new consumers to the marketplace and grow the categories.

Grow the frozen category, grow the soup category. So for us, for many many years, when the soup can category was down, Amy's was growing. When the frozen category were down, Amy's was growing and helping those customers to grow and to develop their cells. So it was a very mutual relationship by helping having consumers being exposed to better food for them and better foods of the planet. Zavier were pretty

much out of time. But I have to ask you what was the best selling items through the pandemic and what your favorite is too. My favorite is the result of I cannot leave without a beautiful risulto with a with a mail of those marshrooms being cooked in a in a night. Choose and the best seller, Uh, it's not the best seller. It's not the best seller which was And so where it depends on where we are.

So if you think about pizza vegan bugarita pizza is our best seller, but it all depends in the channel we operate, and we're happy to say, and this is why we're somewhat everywhere but also very customized. Fault customers. Well, you're making us hungry now, Savier. So Thank you for that savior. Uncle Vic is the CEO of Amy's Kitchen and me thank him forward joining Thanks for listening to

the Boomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Bonnie Quinn. I'm on Twitter at Bonny Quinn. And Paul Sweeney I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio