Tech Selloff and Affirm Earnings

does it mean for buy now, pay later? I'll ask a firm CEO max selection. With America's credit card debt nearing highs not seen since the financial crisis and flying taxis might not just be fodder for sci fi and more. We're going to show you a company with hopes to get them in the air and soon like kind of soon. Want to dig deeper into what this means for tech and investing and bringing Steve Sarah Sino, founder and general partner at Active in Capital, a growth stage from that

focuses on commerce. So Steve, just what was your reaction to these comments from j Pal and how do you think it's going to impact markets more broadly. Yeah, well, if you listen to his comments, uh during his last speech, it's pretty clear that they weren't going to move off rate hikes anytime soon, even though there was a lot of wishful thinking on behalf of people like me other investors.

I think this is a good desk reality that happened just as people are returning from vacation, getting kids back into school. Investors are paying attention again. And I'm not surprised by how much market was down. I think, look, the four trajectory here doesn't look great. Um. And there's some interesting things when you look at the overall public market versus private markets. You predicted there would be millions of layoffs in tech specifically the last time we spoke,

that was just a couple of months ago. What do you think now? I did so that was back in May. Also at at that time of restimation was the market was going to pull back. I think the layoffs has just begun. Um. It's happening across almost everyone's portfolio and

probably eating their companies. And what's interesting is even though the overall markets are down more than particularly on the growth side, growth tech stocks are down much more than what we're hearing from the bigger consultants, meaning the allocators of capital to investors. The Q two numbers are gonna come in down four to six percent. So what does that mean. That means that investors gps haven't taken their medicine and there is going to be more pain in

our market. And that pain is in the form of layoffs. It's going to be the form of something like twenty of all venture back companies going out of business. Of venture back companies aren't going to survive this absolutely, like we saw this in two thousand, two thousand one, two thousand two. And what happens when the market pulls back, Investors start taking their time to invest, we're more patient with capital. LPs pulled back as well, and there's just

less capital go around. We're seeing it also less company creation. So the pace of company creation last year was much faster than this year. And what you're gonna have to do as an investors rationalize your companies um and every investor is going through that right now. So hang on, are you saying you think this is gonna be as bad as the dot com bust? I don't know. That's a question. I'm like, that's a question. I think this

could if this is a prolonged period. What what's really painful for tech investors and growth investors generally is prolonged market malay's prolonged volatility because it's a lot easier to come in and invest behind and market that's a little bit more stable or market they were, you know, interest rates or continue to go down when they're going up like this. This hasn't happened a long time, and I think when the pace slows, you have to rationalize where

you put your cap at all. So if this last for two or three years, you could see more than of the company's about a business it will last for a year or two. The market rebound much faster. And again, you know, this is tied into what Pal did today with regards to inflation. Growth stocks are very very sensitive to interest rates, and interest rates at three per cents one thing, it's going to five six percent is going

to be another. And that's what we're waiting for because we can invest in these valuations if rates are going much higher. So are you estimating a one, two or a three year downturn? And how is that impacting your investment strategy. Yeah, right now, we're expecting a two to three year malays, so meaning our companies need to have capital for at least two and a half to three years. Man, i'mum, what is that like? What companies are We looking at?

Two types? So one is these companies being created in this environment and this happened back in two thousand, Better DNA very strong culture around protecting capital, and they're just growing up in a different way. Those companies are rising from the ashes of this mass. They're gonna be very strong. We're very interested in the earlier stage. You also have companies at the much leader stage, meaning they've got hundred

hundreds of millions of revenue. And what's happened is a lot of the late station investors have actually pulled out of the market, and there's a lot of reasons for that, but because they're not there, other investors now can step in at reasonable valuation. So it's really a barbell. Some of these very large companies with proven business models, high gross profit, they're going to do great. Um, two of

our companies, Saloonas and Triads just raised capital. And then these earlier stage businesses that are coming out rising out of the ashes are probably going to do really well. They're going to prove their business model, they're going to prove their unit economics, and that's when people like me come in and put capital onto supercharged growth. So there are opportunities, but there will be pain. Let's talk a little bit more about that pain. What does that mean

from a labor market perspective. I mean, there's been some really interesting swings in the labor market. You know, you're saying layoffs while we've got unemployment at historic lows. Yeah, the data is really hard to wrap our head around because it's not what we're seeing in the market generally. So I you know, I can't vouch for the government data, but we will see layoffs in tech and there's some interesting things, um that are happening when you start laying

people off. You know, we're seeing salaries and just general inflation around the cost of hiring really good people starting to slow a little bit. This is typically what you would see in a down market, but it's not being reflected in the data. The interesting thing is our companies with B two B exposure are doing very well. Some of them have re accelerated growth. Our companies with more B two C exposure. On the converse side are having a harder time, and this is more recent, and this

could be because inflation is really affecting people's pocketbooks. But when you look at this, this is why this market is so difficult to parse, is that there are companies performing really well, but right now we see more on the B two B side than the B two C side. All right, Steve, thanks for giving it to a straight activate founder and general partner, Steve Saraceno, We're gonna let you get on with your weekend, hopefully put some of this doom and gloom out of your head for a while.

A firm fat expectations in its latest earnings report, except for a lower than expected forecast, siting macro economic uncertainty ahead that sent shares tumbling. This as we heard from FED chair, your own pal that taming inflation will likely require restrictive monetary policy for some time. Let's talk about it all with the firm CEO and co founder, Max Option himself. Max, great to have you back with us.

So listening to your call, you said, the economy is more than likely in the beginning stage of a downturn. Now that we see and hear what j Pal has to say. The FED is going to stay hawkish. Do you think a recession is inevitable? You know, I'm no macro economists, so I'm glad uh. You know Mr Powell is uh is in charge, not me. UM. I do think that the need for by out pay leader goes up.

Both in a case of recession, we go folks are trying to make sure that their cash flow is impacted a little as possible, and in the inflation, which is where we are right now, the pocketbook is hit harder because everything is a little bit more expensive, so we are seeing more demand for the product. But because of the uncertainty in the macroeconomic events ahead, it seems very pertinent to be very very focused on credit outcomes and that that's reflecting our guide. Can you give us some

color on what you're seeing in consumer spending habits. You know, obviously consumers are under pressure. Everything is more expensive, from gas to groceries. How is that reflected in your data? So there's definitely the great rotation. We've talked about this before, but the you know, sometimes it may a tremendous number of goods were replaced with services, and I think It corresponds more than anything to this idea that we've all been cooped up for a long time because of the pandemic.

But over the fourth of July weekend, we saw unbelievable growth in travel, um experiences, tickets, all the sort of standard things that you would expect people sort of jump back onto after COVID. They're all still doing really really well, and the demand is very very strong. There's definitely real weakness relative to last year and even the year before, and things like homewears, um and uh, quite a lot of other things that just what we pre purchased during

the pandemic, if you will. Now our point of view is actually a little bit skewed because we're still growing really really quickly. We saw, you know, over growth in general merchandise, which is just the growth we're seeing within our partners like Walmart and Target and Amazon. Folks are buying commodities because that you know, that's something that you buy all the time anyway, and so we're seeing short

and growth within the merchants that we have. But I think very broadly, e commerce grew only seven percent last year, which is probably the lowest number in a very long time for comparison, Affirm grew eleven fold that much, but perhaps in a better year would have growing an investor. So we're seeing credit Americans, credit at you know, has

not seen since the financial crisis. I'm wondering if the economy is in a more difficult position and consumers are under pressure, does that mean more business for by now pay later and Affirm? But is that not good for the economy. You know, it's a careful balance. Um, it is definitely good for us so long as we're good at our job, which is managing risk and underwriting, and we are. We are very confident in our ability, and our latest numbers proved that pretty decisively. So you know,

I think that that's we continue to deliver on that promise. Obviously, over extending the consumer is a terrible idea. Nothing stays more than looking at something you purchased and realizing that you can't pay off over time, and so we are very careful not to extend credit where we think the consumer will not be able to carry the burden. Um. It does help that we don't charge late fees, we

don't have compounding interest. All the things that we build in the product from the very beginning to fully align ourselves with our end consumer help us be motivated to make the right decisions, and so we feel good about our position, our ability to help consumers. UM. I think America will have to borrow more because the prices are going up, and we're here to do our part, but world also gonna have to be careful with how we use credits. The delinquency rate rose more than two for

the first time this year in July and August. Is that an alarming sign for you? I think it was more like one percent about a year ago. And how are you addressing that beyond beyond you know, changing or tightening the criteria for underwriting a great question. UM. Credit performance is generally very, very seasonal. So if you sort of look at the charts that we put in our supplement as we file all of our filings, you'll see that it really is mimicking the patterns of annual performance.

Going back to for example, twenty and twenty one, we're just very, very weird years. On the one hand, there was tons of buying. On the other hand, of the government was literally handing out money to consumers. Delinquencies were repressed artificially, if you will. The Guard rails we use when you run our business is return on assets, which

is basically gargon for yield. What are investors are capital partners get from the loans that we generate and absolute adjusted charge offs or basically losses that we're willing to take on. Obviously, our capital partners would worry if those losses ticked up more than various covenants and groups that we have. And if you look at all of our metrics, certainly the metrics I look at and the metrics that we filed publicly, we have managed to both of those

guard rails exceedingly well. If you look at our for example, allowance for loss provision, and it's been taking down every quarter for the last three So we are managing credit better than we have given any much more benign credit climate. Now what it actually means practically, the cool thing about a firm is because we're integrated so deeply into the Emergen ecosystem, we have a lot more interactive tools beyond just your basic We're so sorry your card has been declined.

That's an awful experience. Somebody wants to have that. In fact, if you actually look at our approvals quoted on quarter, I think we added three points of incremental approvals across the hire portfolio. Doesn't mean that everybody on average gets three percent more likely to say yes. Is that we figured out ways to say yes even when we think the consumer is seeking on too much risk for them. For example, we can say, hey, we need to verify

your income because we think you're overburdening yourself. Now, if we're convinced that your income is different from what we estimated it to be, it would be wonderful to extend

the credit to you. Or for example, we can say, hey, we think you should make it down payment on this couch or on this bicycle, because once you do that, it's a lot easier for you to carry the burden of this particular So we've really been deploying a lot of those tools all across the last six nine months, and we would see increased demand, increase approvals, and better credit outcomes. You know, our firm shares obviously had a pretty big downward move today. There is a broader market

sell off. Your CFO said, you're approaching the next fiscal year prudently. I mean, what's your reaction to the affirm stack drop, the broader tech sell off and you know, the possibility weren't for this kind of volatility for the foreseeable future. You know, I think, I think, and I don't even have to try. I definitely think of a firm in measures of years and quarters is not a it's an artificial marker that I think, Uh, we have

messed for ourselves. It is far better to worry about how we'll do next year and the year after in a decade from now than what the stock price will do for us tomorrow afternoon. Certainly, in a day like today, I think we are a footnote to a footnotes to a broader sell up thanks to the Hawkers policy statements that we just heard. Um, that's it. You know, I've never been more excited to show up to work as I am today. We have a ton of stuff to build.

We bragged a lot about really amazing engagement metrics and debit plus the card that we've been working on for so long. You know, it's definitely and you know, my heart goes out for our team. And obviously the investors that look at the stock price always want to see it go up. I would encourage them to look to the future. The product that we're building really makes a difference. We see so much positive consumer sentiment. We know what

we're doing managing credit. We've done really well and we'll continue to do so. Over time, the market will catch up and the share price will do what it always does. I am very, very focused to leading the company to a long term, successful business of permanent value. So let's

talk about the lot term. On the call, you talked about the pursuit of growth, the possibility of buying up other players, given you know that the you know, the broader macro environment, some of these other players may be struggling. We've seen some other players go through you know, other BNPL players go through some pretty big layoffs. What are you looking at? What kind of companies are you looking at? And could we see you know, a big deal or

an acquisition spree um. Definitely nothing to report today. I want to make sure that there's no no speculation in embedded in my answers here. But you're totally right. The thing that the way I think about potential targets, and we're definitely looking quite actively now. We have shown to be really really good at credit management, and obviously the economic realities uncertain will continue. Having book hands and the wheel will continue to need credits and approvals and all that,

but we know what we're doing. We we've shown this to ourselves and much more importantly frankly, to our credit investors capital market partners. There are companies that have had amazing ideas, They built great products, so the beginnings of something really wonderful, but they're just not good at underwriting. And you get better at it with scale and time. We've been at it for eleven years, with a lot of data, with a lot of experience. We know how to manage it. It would be great to find some

of these ideas and teams. Really, really, the most important thing about any company is the people running it. And when you find these teams and they're missing that credit management muscle or actually capital markets which we've also built up over the years, you know that those kind of acquisitions are fantastic because you know, you you love what they've built and you want to make it go faster and get bigger, and so that that is what we're looking for. The filter for me, I learned I didn't

invent this one. This was something one of my investors told me. You know, is this acid better off owned by a firm and if the answer is yes, you should look. And if the answer is I'm not sure, stop looking now. So we apply that filter judiciously. All right, appreciate that little nugget of advice. Max Lapchin, co founder and CEO of from Great to have you back, Max is appreciate the time. Thank you. Some other stories we're watching, Apple facing a potential anti trust suit from the Department

of Justice. Shares dropped after Political reported the lawyers are in the early stages of drafting a complaint against Apple. The DJ hopes to file it by the end of the year. California is the first government in the world to effectively ban gas powered car sales. By California Air Resources Board voted unanimously to adopt a plan that mandates zero mission and hybrid plug in vehicle sales. The rule will likely be adopted by fifteen other states currently signed

on to California's existing zero mission vehicle program. And Mark Zuckerberg vented to Joe Rogan about the pains of content moderation. The medicineo says it's simply quote sucks, but he's more pleased with his company methodology then rival twitters. Here's what

he had to say on the Joe Rogan experience. One theme in my world view around this stuff, and when it gets to some of the stuff that we talked about before, is like, I don't think that this stuff is black and white, or that you're ever going to have like a perfect AI system. UM. I think it's all trade offs all the way down, because this whole thing that's like arbitrating what is okay and what is not.

I obviously have to be involved in that because this is at some levels, you know, I run the company and um, and I can't just abdicate that. But but I also don't think that as a matter of governance, you want all of that decision making vested in one individual. Welcome back to Bloomberg Technology. I'm emily changing san from Cisco. Let's get back to the markets and the Texel off. I want to bring in four Runner managing partner Ury

Kim for more on this uh eerie. Obviously, there are big questions about what a more hawk ish FED and high interest rates means for venture capital. What's your reaction to what j Powell had to say? Well, I don't know that anyone's really surprised, because we've all been we've all been thinking about how things were going to pan out with inflation and how to manage it. It's just been a very volatile few years, a total roller coaster from pre COVID, post COVID being a run up and

now a huge market corrections. So, you know, I think that never before of private markets then as connected to public markets. Um, usually we'd say, hey, these companies are young, they've got time. We don't need to worry about what's

happening out there. I think ultimately investors see what's happening to private to public companies and they say, hey, if this is how the valuation is going to look, then I need to moderate my entry point and the valuation that I'm going to pay right now because there might not be a uh a top end of the market when we go public. So I think there are a lot of open questions about that. And you know, today

no one wants to price a deal. That's the that's the sort of freezing of the market, and everyone's trying to figure out what's happening in the market to see if that means that they can start, you know, investing in a cautious way. Um, But what it does mean is that companies have to get back to unit economics, good business fundamentals, um, and just realize if you want to build a business that's gonna last, it's gonna make sense, and the valuations will come and go as they do

in the public markets. You know, we heard from an investor earlier in the show, so you sirs, you know of Active in Capital. He had some pretty gloomy things to say. He said he thinks there's gonna be millions of layoffs in tech and that they've only just begun, that potentially more than twenty of venture backed companies will fold, and that the downturn is going to last two to three years. What do you think? Do you agree with that? It's a pretty grim picture. I don't want to agree

with that. We have to we have to realize that that's a possibility for for sure. Um. What would I say to that? I think that you know, it would be imprudent if companies today didn't take the opportunity to right size their teams and to be thoughtful about if markets stay volatile and funding and capital resources are limited going forward, you just want to be able to have optionality and maybe you don't need to grow to year

over year. Maybe you can grow a little bit slower, but continue to build a business that people can look at and say, hey, there's a real company here. It makes sense over time, it will continue to generate profitability. Profitability was not something people were looking at for the last handful of years, maybe even the last decade. So you know, will the recession happen and stick around longer? Who knows? I mean reading tea leaves. Maybe, but ultimately,

great businesses are made in recessions as well. And it it just it creates constraints that the best companies continue to do well because they're the only game in town. And yes, that might mean that twenty percent of companies are going to go out of business, And candidly, maybe that's okay. You know, maybe in a bull market you see too many businesses being funded that ultimately don't have

the right economic structure to be real companies over time. Um. So, you know, I'm a glass half bull sort of person. Uh so, you know, we're cautiously optimistic and we're just gonna do do our jobs, continue to do it through uptimes and down times. Meantime, there are new rules from the NASDAK requiring listed companies to have more diverse wards that are being challenged and challenged in federal court starting

next week. I know you've been thinking a lot about this. Uh, you know, what do you make of the fact that there's a challenge to something that to others would seem so obvious. You know, it's it's hard to see just because I am a diverse board member, both female and Asian. And the number of women who have um been appointed to boards Fortune five hundred boards of the last year has actually, over the last three years has doubled. Um. There was a stat that said women comprised of all

the Fortune five hundred board appointments last year. That's amazing. You know, black directors were of new appointees that would never have happened if all this light weren't shone down on the fact that there wasn't any diversity before. And so when you have these mandates put out there, Yes it's challenging, Yes it's a quota, and and maybe that's not the right way to manage the process, but what it resulted in was real action and we were filling

the pipeline with new people. Um. The record number of appointees that were new appointees that had never been board members. Was that that's the lynch fan because if you would have always had to have board experience to get another board role, the look, not many of us have that um and so what's that first moment that a woman or a person of color can get that experience? Uh? And and so I think that these sorts of rules or at least guidelines does put pressure on boards to

prioritize diversity. And I think it's better for the company, it's better for management to have a more variable viewpoint around the table. And ultimately, you know, it may not be a law that we have to comply with, but it's certainly going to be something that shareholders, customers, employees, leadership all want. And so whether there's a rule or not, I certainly hope to continue champion that it doesn't always work.

I mean, sometimes you know, you have needs and if there isn't a female or person of color who has that experience, I get it. But then how can we fill the pipeline. How can we make sure to get other ways of getting that experience into the hands of people that are you know, important to have as a

voice around the table. Use me the point that a very hot venture capital investing environment over the last year meant a lot of people taking a lot of board seats as these companies were raising new rounds and expanding their boards. But that that also meant Um, I believe the term you used is shotgun weddings and that that hasn't always been a good thing. Can you explain what

you mean by that and how that's played out? Yeah, I think in certainly, and there's been plenty of other years in the last decade where there's a real exuberance in the investing market and the founders have a choice of the people to get to work with. But a lot of times you end up picking the person who bid the highest, and that's not always the best decision because that person is gonna be an investor on your cap table for a very long time, in fact, maybe

into verptuity and um. If they take a board seat, they're going to be on your board for a long time. You know, we talk around our table that says many of these investor board members stay on your board longer than marriages last, and that's like seven or eight years. So if you're not aligned with the vision and the values and the communication and the partnership style of the

person that's investing in your company as a majority investor. UH. And then as such, joining the board, you are stuck working with this person and dealing with this person for a really long time. And the job of a board member it's a to do share responsibility to do what's in the best interest of shareholders. And that's not always going to be aligned with what the CEO wants to do or feels like they want to do. UM. So

the relationship is meant to have tension. There's an appropriate push pull, but ultimately the board members have to stand up for the shareholder value and UM and and that is just a voice that you definitely want to make sure you're aligned with. I'd love to get your reaction to the big Solica Valley controversy over the last couple of weeks, which has been andreason horror it's writing its biggest check ever to Adam Newman. UM. You know a

controversial founder. Uh, residential real estate idea. Some people, Uh, I think it's a good thing. Some people don't like it. What do you think. I don't know that I have a say in that one. You know, really, when investors have founders they've worked with before, they back them again. And you know, there are a lot of things that happen in companies that are not portrayed actually in market or with press, and so nobody knows except for the

management team and the board, um, what happened. Uh. And so if Andreason continues to have faith in Adam, that's great, they should back them. It Really it shouldn't be that if you have a company that you know goes under or doesn't go as planned, that you can never work again. It's just the investor has to decide, I still trust you, I still believe in you as a founder, and I want to back you again. And that's kind of the

end of it. So I don't know enough of what happened in that company, like what really happened in that company and ultimately what led to the ups and downs, and no one really does, so I don't, you know, chop from the cheap seats over here. Um, But I understand the intention of when you back somebody you've worked with and you've been in the trenches with. So perhaps

that is what is driving that investment decision. You're not sitting in the cheap seats you're but I appreciate you taking a swing at that ere Kim flour runner managing partner um and speaking from some very valuable real estates. If I could describe those seats myself, thank you. Okay. Meantime, the US and China are nearing a deal to avoid mass delistings. The agreement would allow American auditors to go to Hong Kong to check the records of Chinese but

he's listed in New York. Bloombergs David Weston spoke with one of the architects of the deal, US Public Company Accounting Oversight Board Chair Erica Williams. Take a listen. So the agreement, as Chair Ginsler mentioned, is the most detailed and prescriptive that we've ever had with the Chinese, and it provides for us to have complete access to the audit work papers in China with no loopholes and no exceptions.

There are three key provisions. First, the p c o B and the p c o B alone has the authority to select which firms and audit engagements we inspect and investigate. Second, there are procedures that allow us to view the audit work papers completely with no redactions. And third, we have direct access to interview and to take testimony of any of the individuals who are involved in the audits that the pco B chooses. How does this compare

with arrangements with other countries? They have public and traded companies who are traded our exchanges, So we are able to access the audit work papers of more than fifty countries. Every country where the p c o B has registered entities we accept China, we've been able to have complete access. This agreement allows us that complete access that we demand so that we can audit the auditors in China. And it is, though um more detailed and prescriptive than any

agreement we've ever had with the Chinese. Does it go any farther than your arrangements of other countries or does it go any less far? And by the way, are there any special provisions with respect of sensitive data, because as I understand the Chinese card was saying, we're worried about national security. There are no special arrangements with China. We are not providing them anything that we don't provide

other regular regulators and entities around the world. So this is just an agreement that's very detailed, so that there are no questions that the p c o B is going to be able to have full complete access as is required under the Holding Foreign Companies Accountable Act that can was passed and we are very hopeful UM that this first step in reaching the agreement will allow us once we get our inspectors and investigators on the ground in China to have complete access as it's written in

paper UM in the agreement. Matter. Sure you just said the critical phrase their first step. I mean we all know that's one thing to get an agreement. And by the way, congratulations, I know you've been working on it a long time, but then you have to actually get it implemented. What are the next steps in implementation? So I have instructed our inspectors and investigators to be able

to be on the ground in China in mid September. UM. We are actually going to be conducting the inspections and investigations in Hong Kong because the health and safety of our staff is of critical importance. We are though going to be able to have full and complete access to the Chinese work papers UM in Hong Kong that we need in order to conduct our inspections and investigations. How big a job is this, I guess one of the things I'm asking is how many people are gonna have

to send over there? And how long is it going to take them? So inspections and investigations, David, they take as long as they take. UM, I can't predict that. Right now, we have a team of talented, dedicated pc O B staff that are ready in their bags, are packed and ready to go. UM. And whether or not we are able to complete the inspections and investigations really will determine be determined on whether or not the Chinese provide us with complete access as is required under the

agreement that we signed today. All right, Erica Williams, their US public company Accounting Oversight board chair. I don't necessarily think move to proof of stake is a great thing for Ethereum in the short run. I mean, essentially, Bitcoin and ether are the only proof of work networks still alive, and we haven't seen any issue on the other proof of steak networks. We think that Ethereum very well could get back to a thousand or even lower if the

merge doesn't go well. If the merge goes well, basically that's going to allow the concept of staking happen and in individuals institutions can earn eight nine and I think proof of steak will be just fine on rooting as an operator for Ethereum Merge to be smooth and to happen in September fifte very well. Ethereum has been promising proof of steak since basically they started wake me up

when the transition happens. Time now for a crypto report, And just heard from some of our of our guests there and what they think of the upcoming Ethereum merge, both bowls and bears alike. Let's talk about this more now with our own David Pan who has been covering the merge. So, David a lot of writing on this, and a lot depends on whether it happens smoothly or not. Right, So, I was seeing a lot of discussion around the whether

the margin will be successful. We have been seeing growing concern among some of the investors saying, yeah, you know, like the there there will be more awareness of the potential security risks um during and after the merge. Uh They Basically one argument from the investors is that the merge basically has been simulated uh in on a serious test nets but not in the real environment, so nobody knows what really happened during the merge and after the merge.

Another reason is that you know, hackers are not incentivized the initiative attack against the network um UM during the merge on the test nets UM, so you know, like it is a really it is a really really big question mark UM around the merging and whether it's going to be successful or not. Theory recently raised bug bounties basically, as I understand it, paying people to find flaws in

the system. How much will that help UM that would have only help you know, A has been increased from two hundred and fifty thousand dollars to one million dollars. That kind of reflects the growing concern over the security

risks potentially UM. But UM in terms of UM whether that will actually be effective in preventing any potential attacks and we we don't know because we have seen UM attacks that have cost the investors losing billions of dollars, So UM who knows, you know, what will happen after the emerge and like we would certainly see a more vulnerable state of the network during and after the emerge,

and UM UH that will be. Everybody is actually expecting to see, you know, how this would unfold, and some of them are saying it's going to be successful, but successful by some of the others who are more skeptical of the transition. They're saying, you know, um, the risks, risks are are bigger and bigger over time, you know, as we get closer to the merch. Al right, lots to continue to watch as we get towards mid September. Bloomberg,

David Pan, thank you. Well, it might sound like the stuff of sci fi, but the reality of flying taxis maybe closer than you think. Bloomberg's on a Rug Kataki explains, if you had the option of skipping traffic while coming from point A to B, will you take it? What if it wasn't the sky? Electric flying taxis are a lot closer to reality than what we think. But the big question is how will people perceived this flying objects? And that is why Volo Poplar is showcasing its aircraft

here in Singapore. The Vola City is a fully electric aircraft which is designed for the inner city mission. It's caters for the highest safety, for low noise and for a fully electric flight. One big obstacle is that not a single electric flying taxi has regulatory approvals in place. Companies like Bullock Opter do believe that they will get it pretty soon enough, just in time for the four Paris Olympics, but regulators will take their time to ensure

these flying vehicles are actually safe enough. We have eighteen fully electric motors, and if we lose one or two motors, or if they're not working, we can still safely perform our mission. Airlines have an ambitious target of turning carbon neutral by twenty fifty, while electric flying taxis are not expected to replace Airbus eight twenties or boiling seventy sevens in the near term. This is definitely a forest step in that direction. We're sitting inside the Velocity and as

you can see, it's very comfortable. You have a lot of leg space which you nobody don't have at the conventional helicopter. Well, you also can see it's a two seater and this is the autonomous version. In the starting configuration we will have a pilot sitting here and the passenger, and in the autonomy version you don't need that anymore. The big question is how much artist things going to cost.

Bono Coopter says it will be forty percent cheaper than helicopters could begin which and eventually it will be at par which premium taxis That means anybody who can afford a taxi can afford a flying taxi. This is how we move. I'm on aratogy for more stories like this, please follow us on your favorite platforms. And finally, a billion dollar action may be coming from one of Silicon

Valley's most prolific art collectors. Around one fifty artworks from the collection of the late Microsoft co founder Paul Allen are set to be auctioned at Christie's in New York this fall. Christie and Allen's estate expect to bring in more than a billion dollars. Christie says all proceeds will go to philanthropy, and that does it. For the sedition of Bloomberg Technology Monday, we're gonna hear from the CEO of Cube, Christina Ross, about the challenges for startups when

it comes to funding in a downturn. And don't forget to check out our podcast wherever you get your podcast. I'm Emily Chang in San Francisco. Have a wonderful weekend, everyone. This is Bloomberg,