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This is Bloomberg Technology with Caroline Hide and Ed Ludlow.
Live from Bloomberg's World headquarters in New York. I'm Shanali bask In for Caroline Hyde and Ed Ludlow.
This is Bloomberg Technology. Coming up on this hour, full earnings coverage ahead.
We're going to break down results from Meta and push ahead to Amazon and Intel's earnings after the bell, Plus Sam Megan Fried's testimony is the latest must see moment in.
The high profile fraud case.
Updates this hour, and we'll look at the thorny issues over technology between the US and China as President Biden.
Plans to meet with China's foreign minister.
Now from Tech Earnings, let's bring in Alison Porter, a portfolio manager from Janis Henderson on Global Technology Leader's Team. Alison, we talk so much about this magnificent, magnificent seven dynamic. When you look at some of the drawdowns, we're saying, how do you play what's next?
I mean, when you look at today, you can see that this is the first day in sometime that we've actually seen all of those Magnificent seven stocks actually down together, and we're definitely seeing some signs of profit taking, and I think that's really a reflection of more where the market is, where bond yields are, and some profit taking than it is on earnings results. You know, when you look at Meta's results last night, across the board, they were really very strong, and you know, we've seen.
Expectations to tick up.
I think the Magnificent seven are very very There's a wide dispersion of valuations, and even companies like Meta that are trade at a discount to the broader equity market, that trade at a discount to other technology stocks are being hit hard today.
So it's not really.
About valuations, it's not been about earning estimates, but just some profit taking.
I think, given as the market has been.
So concentrated and we're seeing a bond deals almost top five percent.
When you're looking at the metal warning on economic uncertainty and you look across the technology sector, who do you think will be most hard to hit in this scenario that has not been sold off significantly enough.
So you know, I don't think Meta warned on the macro to be I think, you know, Meta commented that you know, after major conflicts, there's sometimes a pause or a slowdown, and actually their guidance be forward revenue bracketed.
Exactly where consensus laws.
But when we came into twenty twenty three, earnings estimates for twenty twenty four for META or for about ten dollars. Now as we're exiting this year, estimates are for seventeen dollars, So we've seen that seventy percent increase in expectations already. Maybe some disappointment that those aren't continuing to go up, but I think, you know, given where bondis are, given the macro uncertainty, not raising guidance has caused some profit taking.
Obviously with bond deals where they.
Are, there's concern about the consumer the stronger dollar in Europe. But you know, we think most of the pressure that we've seen has not been on retail spend on smaller items, but on items where the consumer has to actually borrow. So that's not really been an advertising sprind or smaller cap or purchases, but more in terms of where consumers have had to borrow, like autos, where we're definitely seeing a bit of a slowdown.
You know, talking about bond yield a little more. You do see a cooling today, but they have been extraordinarily all at all. How do you think that this will continue into this story When you're thinking about how tech response to rates.
Well, you know, we think that in twenty twenty, which obviously was a huge year for for technology, money was free. Interest rates were almost at zero, and it caused some irrational buying of stocks which are perennially unprofitable. But that higher cost of capital now is really causing investors. It's a great environment for active investors, actually, because investors have got to really get back to fundamentals and focus on those companies.
That actually have the strongest balance sheets.
And actually the technology sector has best balance sheet across all of equities. You know, Meta has over twenty five billion in net cash, Alphabet is over ninety billion in net cash. And that means that those companies can not only continue to reinvest in new areas such as artificial intelligence and driving more innovation and earning scains, but it also means that they can buy back stock and they
can start to really return money to shareholders. And we saw that with Metal last quarter, buying over three billion and stock back and Alphabet also continuing on that journey of shareholder return, which we think is really strong long term support for these companies and for shareholders.
Are you seeing any buying moments right now or do you think that it's just too volerable and the sell off as yet to come still.
Now, we think this is a great environment for active investors, and we do think that valuation discipline is more important than ever in this market given the pace of innovation on artificial intelligence.
I think if you're trying to look.
Out for ten or twenty years and pick winners in ten or fifteen years time, and you're willing to look at losses every year, that's a very difficult environment. That's not what we look for. We look for companies have strong balance sheets, strong positive free cash flow, who can continue to reinvest, and we do see some really attractive valuations which are at a discount to the broader equity market for actually what is much stronger long term growth?
How are you looking at this earning in as well? We're looking forward to a host of more companies Intel, Amazon, What are you going to.
Be looking for.
Look at You know, when you look at metas earnings, some of the key factors that came out of.
Meta's earnings, where you know.
The strength of engagement, that's the user engagement user how users react to the platform and the products that you serve, and efficiency, a focus on capital allocation.
So when we look we hear.
Amazon's results tonight, again that's going to be key.
You know, what are prime members.
Doing, how are they responding to investments in their regionalization, And then we'll look at AWS and I think the growth in AWS is going to be a key driver out of Amazon Web. Amazon's results tonight, expectations have come down somewhat from sixteen percent growth.
Down closer to.
Twelve percent that people are looking for and I think we're just looking for a stabilization in some of that those optimization trends. After the strength that myso soul in its cloud division, Investors want to see that Amazon is ticket is also seeing some benefits all of that's investments in artificial intelligence as well, that they are seeing some stabilization and the optimization that they've seen from customers over the last year.
Alice Importer of Janis Henderson, we thank you for your time. Let's hone in now on the digital advertising space for these companies and bring in. Rachel Tippograph, the founder and CEO of Micmac and e commerce marketing platform for multi channel brands.
Rachel, when you look at.
Meta itself, what did you take away?
I was super excited to see metas earnings because what it demonstrated is that advertising is active in market and Meta has made their ads more efficient.
And how have they done that with focus?
Meta stop focusing on the metaverse, Meta stop focusing on trying to build native.
Commerce, and they went all in on improved their core business, which is advertising. And a huge part of that is.
The investments that they one have made to combat changes with Apple's iOS privacy changes where all of a sudden the world moved from automatically opt in to now automatically opt out, as well as AI. What AI is allowing to happen within the advertising ecosystem is it's lowering the barrier to entry. It's making it easier to buy ads than ever before because one of the first areas that Meta has invested in is on the creative side, and creative has typically been a huge barrier to buying ads.
Rachel, when you think about the potential slow down the economy could face, how much are you concerned that this is going to eat into advertising dollars and who is the kind of worst off here if things slow down materially.
I think the outlooking to four on advertising is shaky, and the reason being is that the biggest brands in the world are under an enormous amount of pressure.
Their margins are really compressed.
It's more expensive than ever before to bring goods to market, to bring them to a retailer, and then negotiate those relationships with retailers.
That's really where the margin compression is happening.
And so in order for them to meet Wall Street's numbers, typically one of the first places that they.
Cut budget is in advertising.
That being said, we are entering the holiday season, so typically you'll see brands allocate upwards seventy five percent of their media.
Budget two Q four.
But I think that they're going to be really choosy with their dollars and they're going to invest it in platforms where there's consistent ROI Meta is one of those platforms. At Nickmac, around eighty five percent of the paid brand.
Impressions that we see go through Meta. That's how significant they are. But the other big area is retail media.
Meta's competition isn't just Snap and Pinterest and TikTok, it's Amazon, it's Target, it's Walmart. And we'll see how that is out in Amazon's earnings leader.
Today, Rachel, can the holiday season save these companies?
I don't think so. I think that the holiday season is going to be really tough. What we have seen in micmacs data this year is that there's been.
A seventeen percent decline in the average vasket size, and that really has to do with inflation. Consumers are spending, but they're being more selected and.
They're willing to trade down right now.
I believe that that's going to translate into the holiday season.
Rachel Tipograph of micmac, thank you for your time. Coming up, we have more to expect on Amazon's earnings and preview for Intel's earnings after the valve. And speaking of chips, as we had to break watching shares of sk Heinex, the South Korean memory chip maker, following the most in the year after reporting a larger than expected loss.
More earnings coverage ahead. This is Bloomberg Technology. Now let's get back to earnings.
Amazon do out after the bell today and Bloomberg Spencer Soper is joining us.
Now, when you look.
At what has already happened in the big tech industry, are you concerned that or are investors concerned rather that Amazon could be facing a greater slowdown ahead in any fashion.
Yeah, this is going to be very telling because you see the market already reacted to Alphabet's earnings on cloud sales, and so they're already kind of expecting, you know, a similar trajectory with Amazon. Let's from our Amazon last quarter, it's cloud computing sales growth was the lowest it has ever been, and investors are really hoping to see that that's the bottom of the troth and we're and we're
moving back upward. So yeah, there's definitely concern around the cloud market, and also concern on advertising sales, like your previous guest was talking about the Facebook market, and Amazon advertising is something that definitely contributes to its profit margin. And then if people are pulling back there, investors are going to be interested to see what that means for Amazon's results.
So we're talking about a truck.
And a key business. Do you think that there's any signs of turnaround?
Well, Microsoft, there's mixed messages, right, because Microsoft had a good print and Alphabet didn't. So yet it will be interesting to see where Amazon differentiates. And one thing I think where investors are concerned about is maybe Amazon getting a little bit quite a little flat footed on artificial intelligence.
Bloomberg Spencer so for thank you so much for your time and out today after the bell.
Also is Intel.
The quarterly report will update investors on progress to turn around its fortunes and regain lost sales. Bloomberg cy and King joins us now from San Francisco. What do you think the future looks like for Intel, particularly in this very heated competitive space that they're walking into further.
Yeah, I mean there are two things that play here. Analysts are saying basically, look, the PC market is through, it's worse. That's the big volume segment for Intel. So we're going to get some kind of an improvement going forward.
But they are still concerned about, you know, what spencers companies are doing, what Amazon is spending on servers, what Google is spending on servers, and whether they're shifting away from Intel technology and pouring more money into accelerators that they're getting from in video.
Well, is there a sense that in PCs that the worst is over in terms of any potential slump.
Yeah, I mean, that's what a lot of analysts have been saying. That's what kind of Intel has indicated that this mountain of inventory that we've been working through for the last few quarters has perhaps been used up and
we're back to whatever normal shipments are. But again, there's still a question of what our consumers and companies spending on PCs and what level is the real normal for the PC market, whether we go back to that pandemic level of over three hundred million units or whether we're somewhere in two hundred million units and that's the future now, Ian.
What do you think about the Nvidia Intel combine here? Is there any sense that they're going to do a better job taking back some share.
We'll really have to see what they say later today. But the problem that everybody has, and not just Intel has right now is in video are so far ahead with these new products, and that Intel, AMD and anybody else who's really going to try and make a dent in what Invidia has done has to have new products, really strong products with all of the software that backs them up in the market right now, and frankly, they don't.
They're just at the beginnings of these efforts. They're just at the beginnings of trying to get the Amazons the Googles to buy their stuff and to sign off on that because right now the solid bet is on video because they have things in the market that people trust them.
Know.
You take a look at Intel still year to date, it's still up more than twenty percent, further draw down as of late. But do you think that valuation here justifies kind of where the PC market is today?
Yeah, I mean the valuation really is what the market sets. That isn't something we can sort of focus on too tightly. What really matters, I think in terms of investors right now is the momentum. The last couple of quarters, things have not got worse and that's been a positive for Intel because before that it was getting worse.
At a horrible rate.
The bet now is we are approaching the bottom or are through the bottom. And really what Intel needs to do today is show another example of Hey, things didn't get worse, they got incrementally better. But as the CEO, Pat Gelsing has said over and over again, they've got a long way to go. They're still twenty five billion dollars south on an annual basis of where they were at their peak in terms of revenue.
I thank you for your coverage.
We look forward to your coverage after earning today as well. Sam Bigmanfried is testifying today in a New York court room in a high profile fraud trial over the collapse of his FTX crypto exchange. And for more on this, we're going to bring in Bloomberg's Max Chafkin, who's been following this trial very closely.
What is the defense even bringing forward.
At this point in terms of how they could prove him to be not guilty.
Well, I mean, the most important thing to remember is the defense doesn't have to tell a story. All they have to do is poke some holes in the prosecution story. The problem is that the prosecution story has been very, very convincing.
I mean, again, it's hard to know.
We're not on the jury, we're not seeing exactly what they're seeing. But we've seen witness after witness some of Sam bankman Fried's closest friends, his employees, his confidants, including his ex girlfriend Caroline Ellison, essentially put a lot of the blame for this on him, show that he was involved very detailed ways in the alleged misappropriation of a huge amount of user money. The prosecution rested case. The
defense has called two expert witnesses. One is a lawyer from Bahamas, the other is a tech like basically a tech.
Consultant, and then we're going to see Sam Bankman freed.
We got a signal earlier yet last night basically sent saying that what he's going to talk about are advice from his lawyers, sort of blaming this on his lawyer, saying his lawyers told him was okay and industry practices, essentially arguing that he didn't do anything wrong.
He thought this was okay all along.
Do you think that's convincing?
Again, the prosecution's case has been strong and very detailed, and unfortunately for Sam Bankman freed. Again, we're seeing many witnesses, basically everyone who is close to him except for his parents, frankly, saying very damning things about him, and not just saying damning things about him, but backing it up with kind of documentary evidence that they've been showing the jury.
Why do you think he wants to testify? Typically, in cases like this, their advice by their lawyers not to testify. You've talked to him, you've covered him. Well, what's in his mind?
Well, I think anyone who's traditional criminal defendants do not testify in their own defense, especially not in cases like this.
It's not in their interest.
Sam bangman Fried is not a traditional criminal defendant. He is somebody who loves to talk. I think, you know, loves to hear the sound of his own voice and is very effective at it.
He's a good talker, a good persuader.
Used it allowed him to kind of grow the valuation of FTX to these crazy heights, to grow his own net worth to something like thirty billion dollars. And I think the plan here is to sort of talk his way through this, which you know, not necessarily the most legally sound strategy. I think if you talk to most criminal lawyers.
But again, he is in trouble.
There have been a lot of very compelling witnesses for the prosecution. This may be his only outlet, so I think it's a high risk maneuver. I think the chances of success are not necessarily super high. But I'm not sure what his other options are.
Well, what about the idea here of the sentence, because if he were to be found guilty.
He's facing a number of charges.
Do you think that by testifying he can lighten the load for himself.
Well, I think for sure if he's able to somehow complicate the story. It's just not clear that what he has to offer is going to complicate that story. His basic defense has been that he was relying on advice of his lawyers and that FTX actually had a lot of money that customers will eventually be made whole. That second part very relevant to FTX creditors. They are going to be super excited to hear that if it's true, which again huge questions. Sam Bank mcfree doesn't necessarily have
the best track record at the moment. That'll mean a lot to people who lost money on this thing. It doesn't mean anything for the legal case, right, he's accused of fraud, he's accused of taking the money and gambling it. The fact that he won potentially maybe if you believe what he's saying is legally irrelevant, and I don't think we'll have a huge impact on.
His sentence, you know, quickly here last night we were together watching the new Ruined documentary that Bloomberg Originals had come out, with and you made this extremely strong case against effective altruism. And I'm wondering you think with this case that so many of the ideals that' say big Bean freed and brought forward, do they just die off?
I think the effect of ultruous community is really struggling. This is the charity that Sam Bangmfried was involved with. He's so closely associated with it. You know, hundreds of billions of dollars from FTX ostensibly profits, although at some you know, you sort of wonder how much that money may have come from customers. It's all tied up with this. So it's going to really hurt the movement. It's going to be hard to recruit new followers.
Bloomberg's Max Chack, can we thank you so much for your time. Welcome back to Bloomberg Technology. I'm Chanelli Bassett in New York. Now moving to a big meeting for President Biden. He said to meet with China's foreign minister tomorrow and Washington, potentially laying the groundwork for a leaders meeting next month. And now for Mourroaw, let's bring in Bloomberg's Nick Wadhams. Nick, what's at stake?
Well, a lot of things are at stake here. The chief thing is that we are looking for the US and China basically to get a relationship back on track after a whole series of setbacks. There have been a fair number of meetings Secretary of State Anthony Blincoln, when Commerce Secretary Gena Raimondo, several others. So they're going to be laying the groundwork for Shijinping when he's expected to come to San Francisco for an APEC meeting, and there will be a one on one almost certainly with Joe
Biden there that that hasn't been announced yet. So what you're really seeing as an administration that wants to get things back on track and do what Joe Biden likes best, which is those interpersonal relationships with other leaders around the world.
Now, Nick, if you think about that potential meeting over in San Francisco, how does this set the stage for that exactly?
And what do you expect?
Well, I think you know the big question is what would come out of that meeting. Would it just be another handshake, a sort of symbolic action, and then not amount to really much of anything. The last time these two leaders met in Bali Indonesia almost exactly a year ago, there was a lot of talk about, Okay, we want to set a flo under the relationship. We want to compete, but we don't want conflict. And what we've really seen
is that hasn't necessarily been born out. While there has been some improvement of the relationship bilaterally, you've seen a lot of real tension points, battles over intellectual property, about micro trips, about export controls, and obviously now the real kinetic situation in the South China Sea, where the US is CE has says it's seen a real uptick and aggressive action by Chinese vessels against the US and its allies, so that a lot of those disputes really remain unresolved.
It's not clear at all how a leader's meeting, which wouldn't last all that long, would resolve any of those issues.
Blumberg's Nick Watams, thank you for your time. It's really the perfect setup because now for more on US China relations, we're going to bring in Liza Tobin, a senior director for Research and analysis for the Economy at Special Competitive Studies Project. She previously served on the National Security Council's staff. As China director, and she led multiple US strategies and policies related to China, Liza, when you think about these meetings that are ahead of us, what can change?
Thank you so much, Sonali for having me on today. So I think the administration's expectations for this meeting are relatively low. As the previous reporter mentioned, they're really trying to stabilize ties and make sure that there are open lines of communication to deal with these various tensions that
are ongoing in the world. I think the administration would like to make sure that should something happen, should there be a contingency, they have someone to call in Beajing, someone that will reliably pick up the phone.
Now, how do things start to change when you think about China's economy and where it stands right now? Does this lessen the aggressive posturing between the two nations in terms of any potential to work together to advance economic initiatives.
So, I think you bring up a great point. The mood music on the Chinese economy has really changed in the last several months. It used to be that we thought of the Chinese economy just is on a upward trajectory for a long time, and I think that really has changed and taken an about face, and now I think the global consensus is that China is past the era of miracle economic growth and they're possibly caught in a middle income trap indefinitely where they will never return
to that rapid growth. However, I think one thing we have to keep in mind is that the Chinese economy is already quite large. It's the second largest economy in the world, so there's still a lot of resources they can bring to bear to develop their military and to pursue their technology ambitions, so they're not going to be too constrained on that side. I think where they will really kind of pair back is on the social services side.
Well, it's been interesting because how do you think about the potential to invest from both countries. When you think about the United States and the existing financing needs the Chinese economy and any potential slowdowns, where do you see the investments in future technology artificial intelligence paying off more.
I think that's a really great point. In the last several years, the US government has been caught with some unwelcome technology surprises where China was able to race ahead and get ahead of the United States on several important technologies like hypersonic missiles, EV batteries, five GI network hardware, and so really I think we learned the lesson that we can't be complacent, that China is a determined rival and it's willing to put a lot of resources behind its goals.
And what has happened in the last.
Year is you've seen that the AI revolution is really upon us, and so I think that's given us a shot in the arm in the United States because most of the really great firms in the generative AI space that we're really excited about are US firms, and so I think it shows that the US can still innovate. We can't still lead, but we can't take our lead for granted. We have to invest at home and do more to run faster.
Now, giving you and focus so much on strategy, look ten years out, when you think about how global the world has been and how interconnected the US and China have been, does that need to be the case in the future.
So, I think what we've seen over the last few years of experiencing Chinese economic coercion, where China's putting pressure on foreign businesses, pushing them out and all of that, is that over the long term, we do need to reduce our exposure to China. We really should be trading and investing more with other democratic market economies, other economies that respect the rules and that want to trade fairly,
and that promote transparency and the rule of law. I think the track record of China over the last twenty years is that is not the direction they're heading. In fact, the opposite Undersijenping, where really they've made a choice to go in a different direction. So I think we really
need to be reducing our exposure. And this doesn't mean in cutting everything off, but I think we should when it comes to strategic technologies and our investments and trade in those sectors, it really should be doing it more with other democracies.
When you think about President Biden's approach to China here and the initiatives already put in place to boost American competitiveness, what do you find to be the most effective.
So I think there's an emerging kind of two pronged approach promote and protect. So the promote side is this emerging American industrial strategy. You have massive investments in the semiconductor sector as well as the Inflation Reduction Act, which puts a lot of domestic investment into renewable energy evs and the like, and so that's all a really great start, and we need to be doing more of that and
investing spending more on research and development. There's a lot of bang for the buck if we invest in these things, they tend to pay off economically and also for our security and resilience. So I think we need to keep going in these areas.
Liza Tobin of the Special Competitive Studies Project, we think you for your time now coming up. Coinbase is out with its second State of the Crypto Report, and they are sharing.
The details exclusively with Bloomberg.
Jesse Pollock, Senior director of Engineering at Coinbase, joins us next, this is Bloomberg. As crypto continues to come into its own, so do attitudes about how it's used. Coinbase is putting out its second State of the Crypto Report, and it analyzes how Americans from different age groups and backgrounds feel
about crypto and the financial system as a whole. More than half of those surveyed said they don't use or rarely use traditional finance tools, and thirty eight percent say that crypto and blockchain can increase economic opportunities joining us now with more on this is Jesse Pollock's senior director of engineering at Coinbase. It's interesting because, you know, we always think about crypto as in part being born out of the financial crisis, people turning to crypto out of
mistrust of the financial system. But we're standing here today and Sam bankman Freed is about to potentially testify it as own trial. And you've had many investors be very burned by the downfall of crypto last year, So how then do they regain trust?
Now?
Yeah?
Absolutely, And I think if you look at the Sam Bank free trial, but we don't think that that's representative of the crypto industry. You know, if you look at businesses like Coinbase, I think what you've seen is that for the last decade we've been building in a trusted way, helping people understand how to use crypto in an easy,
secure way, and people have really leaned into that. And I think the challenge that we've seen at the same time is that because of a lack of clear regulatory environment, increasingly folks have also been pushed into offshore, unregular environments
like SBF, which has led to bad outcomes. And so I think the thing that we need to be doing rebuild trust is to be investing in these clearer policy frameworks, and that's exactly what we looked at with this report, and we think that there's a ton of appetite and a ton of urgency from the American people around getting clear regulations in place so that crypto can be used as this powerful tool to upgrade our systems.
Now, when we're talking about crypto, or are we talking about crypto at large or are we talking about bitcoin Jesse, I.
Think we're talking about crypto at large. You know, Bitcoin was obviously the first crypto that kind of brought this technology onto the scene, But over the last decade, we've seen how crypto can be used in a ton of
different ways beyond just money. And I think increasingly people are seeing this kind of like the next generation of the Internet, where they're seeing crypto as a tool that can take these financial systems which in many cases have been around for you know, one hundred years and haven't really been upgraded, and use that technology to upgrade those systems and make them actually work better for everyday people.
Now, what are people actually using crypto mostly for at large these days?
Is it an investment.
Is it a payment rail and if it's a pain when you look at how it's used in America, why would it be any better than how we use any other credit card company or other type of form of payment.
Yeah.
I think when crypto originally kind of started, it was definitely mostly used as an investment. That was kind of the early days of crypto. I think what we're seeing increasingly now is that crypto is expanding its utility, and that's really where we're focused as a business, seeing how crypto can be used for payments, how can we use for commerce, How it can we use to support creators who are making music and doing other kinds of activities
on the Internet. And I think that's where we see the most opportunity in the future in terms of how this is actually going to be better than the systems that we have today. I think if you look at these systems, in many cases, people are paying really high fees. For instance, the average small business pays three percent of their profit, which is fifty percent of their overall margin,
to credit card processors. We think there's an opportunity to use crypto to lower those fees for small businesses to make payments faster and easier for everyday people, and to open up a ton of access the people who don't have access today.
You think about colleges and universities when you look at what's happening on campus, is there anything that's happening there that tells you the direction of travel for the industry.
Yeah?
Absolutely, you know, I think Americans have been promised this American dream for a long time, and I think for older generations that was very much the case. But people in my generation, I think what we've seen is we were told go to college, you'll get a good job, you will.
Get to buy a house.
In fact, we went to college and we got debt, and there weren't jobs and it was impossible to buy a house. And I think that this is leading to people to say, hey, these systems aren't working for us and we need new systems. And people are looking to say, hey, how can I find new ways to make money? How can I have different kinds of jobs that give me access in different ways to the economy. And they see crypto as a really, really powerful tool for upgrading these systems.
And so I think what we're seeing on college campuses and what we're seeing in folks too. Maybe our drop out of colleges aren't following the traditional path. Is this excitement and this energy to find new pathways that can lead to that American dream that currently today is unachievable.
You were also very involved in the creation of Base, and when you look at what not just clients and customers and people who are buying using crypto in terms of coin based customers, how are other members of the community thinking about new use cases.
Yeah, people are building all sorts of things on Base, and we like to think about Base as kind of on chain like online happened in the early two thousands. And what this means is this really powerful platform where new kinds of applications are emerging. So we're using people build applications that are helping small businesses with loyalty. We're
seeing people build new kinds of games. We're seeing people bring music on chain, and in general, we're seeing people embrace crypto as this incredibly powerful platform that's actually making it easier, better, faster, cheaper for people to transact and to engage on the Internet.
I'm going to push you a little here, Jesse, because I get pushed on this too. Why is it a better mouse trap than what we already have.
Yeah.
So, like I said, again, most of the systems that we're operating in are tens or hundreds of years old. And what that means, it means that people are paying high fees. It means that when they're trying to move money it maybe takes three to five days. It means that the people who are controlling those systems are very
select few. And I think the opportunity was on chain is the opportunity to bring more people in, to lower those fees, to make transactions faster, and to make it so we can rebuild these systems that can give better outcomes to everyday people. And again going back to our State of Crypto report, what we're seeing is that excitement about crypto is not a partisan issue. You know, Democrats and Republicans and independents are adopting crypto at the same rates. Instead,
it's a generational issue. And what that means it means that young people today, because they're seeing this opportunity to use this technology to update the systems, they're almost three times is likely to own crypto. Young people are saying they're majority likely to go and vote for candidates who are supporting crypto, and I think young people are saying,
you're either with us or you're behind us. We are going to take these new technologies, we are going to upgrade these systems, and we're going to make a better America. Whether you are on our team or not, we want you to be here. We want to work with you.
Jesse Dear, We want to do this together.
Do you ever feel like sometimes the industry is trying to accomplish too much? You give us a ton of potential use cases. You know, it's interesting to see that many exist, But if it's trying to compete with so many existing systems, what's the narrative?
Yeah, well, I think you know, you could have said the same thing about the Internet in the early two thousands, Right, is the Internet trying to upgrade all of our world to come online? And I think if we look now, you know, a decade, two decades later, what we've seen is the Internet has transformed the world. And I think we see the same opportunity here and we're not just seeing it kind of in the abstract. We are seeing
it in the concrete. Every single day, you know, I talk to people who are using crypto to transact to people who are using an adopting crypto, like at Blackbird in New York City restaurants to make better connections with their customers and drive more revenue for their small businesses. To artists who are using crypto to build more meaningful
connections with their fans. And to financial institutions you know, like JP Morgan, like Coinbase, that are using crypto to lower settlement times and to increase the efficiency of these systems.
And so we believe that, like the.
Internet, on chain has the opportunity to completely transform our world for the better.
Jesse Pollocks, Senior director of Engineering at Coinbase. Morgan Stanley's succession race is over, and boy was it a long and heated succession race. Earlier today I spoke with Morgan Stanley CEO James Gorman and incoming CEO Ted Pick, and what they told me is they expect dealmaking to make a back and to lead the next cycle. Take a listen.
Organizations grow because you have change. I mean, you're not going to grow by doing the same thing again and again. And I feel like we set this up several years ago with the board. We've had a very very intentional process and we ended up with a phenomenal outcome, which is Ted, and we've got other unbelievably good executives who are taking leadership roles as co presidents Andy Sepson and Dan Sinkret.
So it's sort of what you hope for. I mean, you try and drive strategy, you try and put together a team, you try and deal with the inevitable knocks that you get from the market and the disappointments that come in times in any complex business. But at the end of the day, you're also trying to hand it off for the next generation. So it feels great and it feels right.
You've been rumored to be a CEO contender for oh so long, Ted, How does it finally feel to step into the role next year?
Finally?
Morgan Stanley was the first place that I worked out of college, and thirty three years later, I'm sitting next to mister James Gorman.
It's the thrill of a lifetime.
I'm so excited.
Now you've really inherited a gift here, a massive transformation over fourteen years, one of the best valuations here in global banking. But there are investors who are worried this is as good as a guests what do you.
Tell them there's more to come.
There's more to come.
We look at the five year chart, the ten year chart, the fifteen year chart.
The wealth and.
Asked management businesses have these remarkable, durable earnings. The Global Investment Bank has lots of miles to go. So we're thrilled about the business strategy we have in place and it's going to continue to deliver a long term value for Sheerald.
Now for both of you, we've been in such a prolongedble market that has hit such volatile times as of late.
Do you expect the next couple.
Of years from Morgan Stanley to be a little more choppy?
You know, I don't know's I thought this year would be tough than it was. A lot of what's going in the market conspise against our particular business makes some of the more commercial retail banks mortgage bank very different business model. But our turn will come. I think, you know, I personally think the US has dodged a recession. I think the FED is very close to being final within probably twenty five basis points. We're starting to see activity.
Look for the Chevron deal we just announced the other day. I'm in phenomenal so we're seeing activity in different sectors. It's coming alive now. So no, I think the next couple of years will be great. But what I care
about is over the really long run. When we set about on this journey, we weren't focused on a quarter, and if the stock takes a dip in a quarter, I say, that's kind of good news because we're buying back stock and every share you buy back, you're retiring a dividend, So shareholders who hang tough at getting a four and a half percent yield and we're buying back stock and the stock's cheap, so it's it's kind of a good situation being But medium term, no, I think we're I think the film is going.
To do great.
Ted, what are the biggest challenges for you as you navigate this environment?
There's just so much opportunity. We're definitely a new paradigm. Interest rates are going to be higher for longer, and the world's gotten smaller, which means the clients need advice they need in the wealth and asked and management space they need in the institutional space our corporate clients, and we're going to have lots of activity around those clients. So I just want to make sure that we are completely aligned in the business strategy we have in place.
It's something that James is painstakingly put together for fourteen years. The market knows we want to do so I'm incredibly optimistic over the next couple of years.
Now.
That does it for this edition of Bloomberg Technology, And don't forget to check out the VTech podcast. You can find it on the terminal as well as online on Apple, Spotify, and iHeart This is Bloomberg