Restraints on Immigration Will Hurt the Economy, Carbonite's Ali Says

our host right now, Muhammad Ali. He is the president and the chief executive of Carbonite. Thank you very much for hosting us. Thank you for being here. Um, let's begin by just maybe outlining for people a bit of a strategy change on the part of Carbonite, because I can remember when it was focused almost exclusively on the consumer. Back up your data and don't worry about it, but

there's been a shift. You bought some assets from s Gay, you purchased a company, I believe earlier in the year of double Take software in order to kind of shift your strategy to move more into the enterprise. Can you tell us about that? Yeah, no, thank you for asking. Today is actually a big day here at Carponite. We're using our investor day as an opportunity to really showcase the strategy that we've implemented over the last three years,

which is a huge transformation for the company. As you pointed out, we used to be and we still are, that reliable company of backs up your laptop, but today we now actually have a portfolio that we have built both organically and inorganically that does what we call complete data protection. As you know, data is everywhere now, it's the most important asset. It's in the cloud, it's in a lot of different clouds, it's on prem it's on

a whole bunch of operating systems. We're one of the very very few companies now that can protect all that data, your whole I T system, regardless of where it is. Mohammed, you previously were chief strategy officer at Heltt Packard, You've been at IBM. This is a smaller company, and I'm wondering, can you speak to the unique challenges UH being in a scrappy organization and say one of these uh legacy

behemoth tech companies. Sure, Um, you know, I actually start up my career at a small company was called Adobe before became a big company, and then I did and artificial intelligence startup. Today we call that a big data startup. So I love the small company. I love the scrappiness. Um. Now, you know, when I got to IBM and tow hb UM, one of the one of the things that that that scrappiness was able to allow me to do is to help those companies transform because it was very difficult to

those companies transform from within. And so I, you know, I helped IBM transform into a software services company again through a large number of divestitures and acquisitions to build a portfolio. Uh. And then at HP, I you know, I led the project to split the company into various parts. Again sort of that scrappy thinking, Uh, if the company is too big to really be successful, can you make

the smaller parts successful? So this, you know, the scrappy thinking, as regardless of whether it's big company or small company, is really important. We have that scrappy thinking here at Carbonite, and that's why I think we've been able to you know, more than double the company in the last two and a half years. Does that scrappy attitude apply also to spending money on marketing? Because this has a competitive business, and as Lisa said, you you are smaller than some

of your competitors. I'm just gonna preview maybe one of the questions you're gonna get at your investor day, which is, you know, how much you're gonna spend a lot of money on this? How are you going to afford all this? Yeah? I mean, you know, we've been around for twelve years. We started out as one of the very first companies that advertise in radio software companies, uh, the advertising radio. And we have learned through tremendous amount of data and analytics,

how to best deploy that money. And so twelve years later, we can you know, we have an extremely advanced business intelligence team that uses some of those artificial intelligence techniques that I've talked about, you know, just just a little while ago, to determine how to best place that money and make it return in the most efficient way. You know, one thing that we hear again and again from a variety of chief executive officers is how difficult it is

to hire talent right now. Uh, and that you know that the job market is incredibly tight, particularly in certain areas, and I'm wondering, uh, you know, clearly based on the clear love of Star Wars in our offices. Um, you know, there is a certain culture here. But I'm wondering on a broader level, how concerned you are about um sort of bigger U S policies like the H one B visa policy. Uh, and whether you view that potentially affecting

your business. Oh, very concerned, and it certainly affects our business. But you know, if you think about America, America was really built on this, uh, you know, incredible combination of domestic talent and immigrant talent. I mean not just for the last few years, but for two hundred years. Um. You know, I walked in the office this morning and I got this beautiful card with this long letter inside from one of our employees. And I'm just gonna read

one paragraph. And she came. She came from China. It was four years ago that I decided to come to the United States to pursue my MBA because I believe that if I work hard towards a clear goal, anything is possible. And I found that with the right attitude and inspirational leadership, such dreams can come true. Now, we didn't hire her because she's from China. We hired her because she was globally the best candidate for the job.

That's what makes American company strong. We're able to hire the best and we're able to innovate better than anyone else. If somehow, all of a sudden that is curtail or these people go elsewhere, we have we have a problem here. And if you think about the fact that over fifty percent uh fortune companies here in Massachusetts were started by an immigrant or a child of an immigrant. If we no longer have those people, it's going to affect our economy.

You know. Earlier we were speaking with your chief evangelist, Norman Guardgayell and yes, and we were talking about the cyber threats and cyber tests because of course these are in the headlines in the worst Equifax. Indeed, I want to get your thoughts on that and what do you believe will happen as a result. Uh Well, so, unfortunately, I think we live in an era where more and

more of these things are going to happen. And what carbonite does is it allows it allows you to bring your business back to life after you've been either attacked by one of these you know, cyber crime situation, whether it's ransomware. Whether you've been hit by Hurricane Arama, whatever the situation, carbon I will bring your company back to life. Uh. Now you still have to clean up afterwards, as Equifax

will have to do. But you know, unfortunately, they're just so many of these cyber weapons out there now, developed either by industry or by cy criminals or our governments, and they're being leaked. So I think we are in actually a very complicated time here. Well, I'd love to wrap my head around what that means to bring the business back. Does it mean restoring the data? Does it mean uh, putting new encryptions in to prevent another attack? What does that mean to you? Yeah? So, um so,

first and foremost, it's about resurrecting the business. So if you get hit by a tornado or a hurricane, as was the case just recently. We have a customer who called us right before this hurricane was about to hit the island the Caribbean and said, we need you to back up our system so that if we no longer have a hotel there, at least from home, we can we have everything we can resurrect this, maybe not in that computer environment, maybe in your cloud and that's something

we can do. We could spin up your entire I T environment in our cloud and have you run as long as you too in our cloth to keep going. Airlines, for example, use us to ensure high availability, so if their systems go down, they fail over to our systems and they keep running. Now, in terms of preventive aspects, right, uh, like, we also provide some level of security, but at the end of the day, you're most likely going to get hit. Mohamad Ali, thank you so much. Mohamed Ali, President, chief

executive officer of Carbonite, based in Boston. Part let's talk about the future when it comes to small cap stocks, and here to help us is Drew Bejia. He is the vice president portfolio manager of the g I M small Cap Focused Growth Strategy for Granaham Investment Management firm. Why they manage over a billion dollars. The small Cap Focused Growth fund has about a quarter of a billion dollars and they are based in wolf M, mass Drew, thank you very much for being with us and coming in.

Maybe just first of all, make the case for small cap stocks for people that may not be familiar with this particular asset class. Sure, so we're we're looking for small cap growth companies. And you know, our our clients tend to be pension plans and now months that need returns to essentially pay pay pensioners their retirement. What characterizes small cap for you? Right? So, small cap typically it's under two billion dollars put the sweet spots around a

billion dollars in market cap. And the idea is that these companies, because they're small, can grow faster and accumulate um can appreciate over the long long haul. So, Drew, I'm looking at the performance of this fund and it's up more than timber cent year to day, which is ahead of the Rustle tooth hoousand. And I'm wondering, you know what, what were the main drivers? What were the sort of wagers that you got? Did you got right? Uh? So?

In generally, as I mentioned, we're looking for companies that can grow and uh stocks that have good risk reward and we take fairly concentrated bets five six seven percent of the portfolio at times, and this year I think we're actually up about or so and and what's uh we've been able to do is is the bigger bets have worked out and for the most part, the smaller bets um, the ones that haven't worked out or have been smaller positions are some of the companies that have

been a big winners. So we recently exited a position in Shopify, which is no longer small cap, but his uh you know, an e commerce solutions provider for small to medium size businesses that has done very well this year and risk reward and market cap uh cause us to exit the position. What what what kind of h work do you have to do in order to get the information necessary to make these kinds of investments because many small cap stocks are not covered by any analysts

and it doesn't seem to be a large following. Sure, So at Grana hand we're a pretty small shop. We have about twenty people, but uh seven of us are very experienced in small caps. So we're very experienced team that is looking for these small cap growth companies. I call them desert island companies because if you sent me to a desert island and come back five, six, seven, ten years from now, they'd be uh much much more valuable,

they much bigger. So part of what we do is exclusively look for those companies, and it's easier to find diamonds in the rough if if you're if you're expresing, But where do you go to? Where do you go to find these? I mean, is it someone that comes in with an idea, says, oh, my family just bought something, or you went to an investor presentation, because a lot of companies have trouble getting getting any kind of following

or anybody to wat you know, watch over them. Sure. Well, as I mentioned, we have seven people looking for these desert islands, secular growers and uh UM in that we cover a pretty wide net and can quickly reject most companies.

So industry UM contacts suppliers, customers of companies we already know, etcetera. So, Drew, you know, it's it's sort of this popular belief right now that there's money flowing toward anything and everything that asks for money right now, just given the current backdrop, backdrop of central bank liquidity. Uh do you think that that is an inaccurate characterization of this current market. I'd have to say that there is capitals not scarce. UM growth is scarce, and so I think you're seeing um

and and rates are low. So that combination is leading toward investors to look for anything where they can have uh, prospects for growth. Well, but I guess that's what I'm getting at is, you know, how do you sort of adjust your models to understand what value is at a time when there is so much capital that's pushing up valuations, and how do you adjust your your expectations for growth going forward? Uh, you know, based on the idea that this might this might end. Yeah, so that you separate

the asset from the price of the asset. So the asset has in our case, little to do with the access to capital. There's there's plenty of capital, so that asset and our growth expectations, we're only looking for these companies that are pretty rare that can sustain growth in terms of pricing of the asset. You're right, there's been

a flood of capital. And what we do is a probability weighted expected return, which has good scenarios and bad scenarios, and we probably wait them so it tries to capture both. So real quick, thirty seconds, what's your best idea right now that you're looking at our company that you've recently bought. Uh, well, not the best idea, because we have a fairly concentrate concentrated UH portfolio. But for example, there's a company here in Boston called ub spot UH. It's a platform for

small to medium sized businesses. They're basically created a category called inbound marketing. We use it high value, add open ended opportunity. Very interesting Desert Island company. The stock we also think has good risk, reward and probability way to expect the return. Drew Bejia, thank you so much for joining us. Drew Bejia as vice president portfolio manager of the g i M small cap focused growth strategy for Grinahan Investment Management, which manages UH about a billion dollars

and is based in Waltham, Massachusetts. Let's bring in Margaret Tollive right now. Our White House corresponded. Margaret is in Washington, and Margaret, I'm wondering if you could just sort of unpack a little bit of what the President was describing, because it seems as though he was making a very great distinction between the people of the various countries and the responsibilities of the world leaders in order to fulfill

this promises he describes it of freedom, justice and peace. UH. You know, it's really interesting because when we hear the two messages of the president's speech. One was sort of UH, uniting the world around action, UH, particularly towards North Korea

and also UM on Ivan. But the second was to kind of drill home on this point that's been central to his, you know, still relatively new political career, the idea of of the primacy of nation states, of sovereignty and such, and so the way he treated the needle was again to say that you can be UM looking out for number one. In effect, every country can have its own version of an America First policy, and they can still UM interact through the United Nations on issues

that rise above individual national interests. At these are the two themes. Uh. They did sort of at sometimes bump into one another. But his mission again was to try to thread the needle between someone who's been himself skeptical in the past of the utility of organizations like the United Nations, but in this case saying, UH on North Korea and Iran, I really think the world needs to come together around what the US wants an act. Well, Margaret, you know, I'd love to just get your big picture

sense of how this speech was likely received. He did stay on script. He did quote historical figures in American history. What was your first impression. Uh. We were very much interested in looking around the room, not just to hear what he was saying, but to watch how people were reacting. And I was interested in seeing the notes from my colleagues who were on the floor and sending color. UM, some key US allies holding onto every word. Be at

Israel or be a Japan Uh, some other countries. Ministers at times go ahead checking their their phones for notes, kind of in and out of the stream of of what he was saying. Uh. And then of course, UM looking for where a couple of the countries who were targets of these discussions stood in the room earlier before he began to speak. UM. North Korea as foreign minister appeared to be in the room later on, UM not as visible. So well, I think we're going to see

the reaction from the world begin to trickle in. There were a couple of lines that were important for domestic audience, such as the president's UH talk about Venezuela and how the problem was in fact the ideology of socialism that did not go over a real big and at the same time, some of the discussions about the need to act the score of Iran or the problems in North Korea. There seemed to be a lot of agreement in the room, so um different messages for different people. And this is

always true for US President. He's talking at once to the world and to his own uh based not so well all of the American voters, but particularly his base. And again his base is the basi that is inherently skeptical of the value and the utility of the United Nations. Margaret Taller, thank you so much for joining us. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud,

or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo wits one. Before the podcast, you can always catch us worldwide on Bloomberg Radio.