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Hello and welcome to another episode of the Odd Lots Podcast.
I'm joll Wisenthal, and I'm Tracy all the way.
Tracy, you know, I can never get enough talking about late nineties dot com.
I know you're just gifting episodes to yourself at this point, but that's fine. I'm into it.
That's always been the case for all the years we've done this podcast. I've made that comment here and there, but you know, recently it has a particular salience because people are trying to understand AI. We had that conversation down in DC several weeks ago with Blair Levin talk about some of the similarities and dissimilarities between AI and telecoms. So at least we have an excuse for these conversations.
There is definitely a newspeg I'm looking at a chart of super Micro right now. They just put out results that I guess we're disappointing because the shares are down about twenty percent. We're recording this on April thirtieth at ten to oh four am. And Joe, can I just say we can labor this intro as much as you want about like similarities with the early two thousands tech bubble. But I'm just excited to speak to your old boss. That's all I want to get out of this conversation. Just Joe stories.
Okay, that's fine. So this is an episode that I've wanted to make happen for a very very long time, and the timing is suddenly working out. I don't even know what we're really going to talk about, but we'll have a good conversation. Yes, we are speaking to my old boss. So a couple of major caveats or disclaimers, et cetera. I owe this guest a huge chunk for my own career and the success and the good fortune that I've had in my career. We're going to be speaking,
of course, to Henry Blodgett. He's the editor of a new publication called Regenerator. It's gonna be focused on innovation and business and news and tech and stuff like that. Of course, the connection to me is that he is the founder of Insider. When I joined, I think it was called Silicon Alley Insider, and then Business Insider, and then Insider. I'm not exactly sure what the final iteration
of the name was. And of course Prior to that, several years earlier, he had been a tech analyst at Merrill Lynch, one most famous analysts of the sort of tech sector. And of course have to acknowledge the second caveat or disclaimer here, which is he was famously or infamously prevented afterwards from working on Wall Street. Have to mention that maybe it'll come up. But with all of this throat clearing out of the way, Henry thrilled to have you on the podcast. Finally, this is a little weird.
I'm actually a little nervous, if I'm being totally honest, I'm actually I don't usually get anxious ever in any setting anymore. I'm a little anxious talking to my old boss.
Well, it is great to be here. It's a privilege. You guys do an amazing job. And I would say the student has become the master.
No, but for real, thank you so much for coming on odd lot. It's really excited. I'm trying to think.
Oh, this is very sweet.
I know.
No, I'm like actually a little bit like a verklemped.
I'll ask a question, yeah, Tracy, the.
First question, want to collect myself.
How did you find Joe?
Oh?
I wonder if he remembers I was aware of Joe at another publication. I can't remember what it was, and I can't remember whether I hired Joe or Julie Hansen hired Joe or somebody else. But there he was, and we were in an environment where I was surrounded by a newsroom full of very eager, excited folks. And again and again and again the one who differentiated himself by
his incredible fascination with and mastery of all things. And it's a big We were to write with an internet metabolism, which is somewhere between talk radio and magazines, whereas a lot of other folks wanted to come in and basically recreate the New Yorker. And so we spotted your talent very fast, and then your career took off like a rocket ship, and we were lucky to have you as long as we did.
I like the idea of people just not finding Joe, but just being aware of Joe. It's sort of like like the Mister Bean intro, where you just fall out of the sky. Joe's just there and everyone kind of became aware of it.
So there's actually a very elegant connection to all of this, which was the first time we met was during you know, it's like probably Tech Week in New York, and we met at a party at Gracie Mansion when Michael Bloomberg was the mayor and now we're here at Bloomberg and so we met. I was at Paid Content. I was covering earnings. You guys at Silicon Alley were covering earnings and so forth, and we chatted, and then several months later I joined all right, enough about all the personal stuff.
No, I'm gonna have more questions, but go on.
You know, I love talking about the late nineties, and we'll get small picture, but big picture when you look at this incredible enthusiasm for AI and it sort of cooled off obviously in the market over the last several months, but from a business perspective, it's tons and tons of AI interest. You know, what reminds you of the late nineties, whether it's telecom or just dot com, and what feels dissimilar to you.
Well, stepping back, if you look at AI as a sector, yeah, that is very reminiscent of what happened in the late nineties, where in the mid nineties the Internet came along, everybody knew it was going to be huge. Yeah, there was suddenly a huge scrum of investment capital attracted to it. We had this experimentation for five years where a lot of people were making money hand over fist. Then we went through a devastating crash, which is normally the pattern. Here.
The same thing is happening within the AI sector. But I should step back and say, just to check, I looked at the broader tech sector and we are categorically not in a tech bubble right now. You look at the big Magnificent seven, whatever you want to call them, they are trading at high but arguably reasonable earnings multiple.
And that was the case say six months ago, two before we had.
Some higher multiples, but still thirty times earnings or thirty five times earnings for the video, which is the big AI stock or the most direct way to play it. But yes, if you look in the private markets, and this is one thing that's very different is all of this is happening in a private right now, So we don't have a very good view of the financials of these companies.
But all you need is like a PhD in a white paper, you're getting like half a billion dollar valuations for these starts.
That's right, Yes, it's extraordinary. And I think one thing to look at to sort of check the sanity of it is, let's look at the biggest one, open Ai. Ok, they just did a huge round where they raised forty billion dollars at a three hundred billion dollar value. Six months to twelve months earlier, investors were being declared absolutely insane for investing at one hundred billion and one hundred and fifty and now here we are at three hundred
and So what does that mean? Is it clearly insanity? Well, if you look at open AI's fundamental business based on what we know, which is again very secondhand and so forth, they are doing something like twelve billion dollars of revenue this year. Now, stepping back, that is an incredible number for a company that is five years old. This company is growing a faster rate than pretty much any company
in history. And if you look at one of the financing models from a year ago at one hundred and fifty billion dollar valuation, apparently the projection was that they would do one hundred billion dollars of revenue in twenty twenty nine. If that is the case, and I would assume that that number is probably higher now given that they've jacked the valuation up, then we're looking at three times revenue twenty nine erska. A lot has to go right.
But if you believe that open ai is going to win this next wave in the same way that Google or Amazon ultimately won the Internet wave, three times revenue for that, even given that they're burning five billion dollars a year, you know, you can see how professional investors who really actually do know the numbers are getting there. So I would just say if you look at that,
that is probably the justification. And then the other thing that people forget, or at least I don't hear when I hear this disgust, is that most professional investors are investing in preferred stock. That's very different than public markets
where we're buying common because you have downside protection. Basically, for soft Bank and the others who just invested in open Ai at three hundred billion, to lose money, open has to be liquidated at less than forty billion, Otherwise they get all their money back off the top, and they may even have provisions in the deal that give them a ratchet on top of that that give them a return. So it's very hard to really know what's
going on. But that's that's the thing. So stepping back again, you look at that and you say, whoa based on today's numbers, Yeah, that is a fantastical valuation, but this is probably what investors are looking at now. Another point that brad Gersner and others have made about this is if you look back in the nineteen nineties, what happened
with the internet companies. We had the premier companies like Amazon and Yahoo had these phenomenal valuations, and then there were all of the secondary companies that looked similar, did the same thing. We're in the same market, and a lot of investors who missed the big ones came roaring into I gotta get into Licosts or Excite or info seek or CD now they're cheaper than Amazon. I will just say that pretty much all of those companies went
to zero. So the idea now that you can escape the incredibly high open AI valuation by investing in Anthropic or groc or any of the secondary ones. Maybe that works. Maybe there's room for dozens of companies, but if past his prologue here, there's gonna be one winner, which and us. The last thing I'll say is by the way, it might not be open AI because if you look at the big winners of the nineteen nineties, Yahoo would and they got creamed by Google, which came in during the crash.
Amazon almost went bankrupt. You did not have to buy it in the late nineteen nineties, although I did, and then we wrote it down ninety something percent. It almost went bankrupt, and then finally seven years later it went to the moon. But these things play out. I do think we'll have the same sort of pattern in this sector that at some point will hit a peak everything
oh crater. Everyone will pile on and say, oh see how stupid every one buddy was, and then a few companies will go on and make all of the money that was lost worth it for the folks who were in the winners.
I'll just say two things. Having been worked at actually two venture backed startups paid content which did sell for a little bit to The Guardian and also Insider. I'm very intimately familiar with the concept of preferred stock versus common stock and how that gets treated in an acquisition. And one thing Tracy that I was like working with Henry. He actually knows numbers and remembers these details which I appreciate in these conversations.
Yeah, I can tell. Okay, Henry, you just went through all the AI stuff, So I'm just going to ask you, what's your favorite memory of Joe?
No, okay, okay.
Okay, I won't, I want, I wont okay. On AI, it strikes me that one of the big parallels, and you just touched on it there. But it's the narrative, right, and it's the idea that AI is going to change the world. Back in the nineties, we had the whole the Internet's going to change the world, which was true. It was true that the Internet changed the world, just potentially not in the way analysts had been forecasting at that time. Talk to us about I guess the story
that is being built around AI. And as a former Wall Street analyst, I imagine you are very, very familiar with the importance of narrative slash stories in pitching some of these investment ideas.
Yes, I think that if you look at the idea behind what's happening with AIS, it's a revolutionary new technology that will smash into the economy and have major changes. And one of the theories that sounds right to me, certainly based on the Internet and other technologies that have come in, is that the economy will now adapt and
there will be three kinds of companies. There will be traditional companies that refuse to use AI and ultimately lose their competitive advantage, or maybe they are in a business that has nothing to do with AI, maybe paint or something like that, so it doesn't matter. There will be companies that try to integrate AI into their traditional operations, and those would be analogous to the clicks and mortar
companies back in the nineteen nineties and since. And then there will be companies that are built around AI, so they're not providing the technology, but they are using AI in a new way, and that's giving them the ability to be vastly more productive or grow at a much greater rate. And so I think that that's the way we'll see the economy adapt. And I do think the storytelling it's not directly related to AI, although part of it is one of the stocks that fascinates me right now.
And this will be the exception to my declaration there's no bubble in broader technology. Is Tesla. Tesla has always traded at a multiple that has almost nothing to do with its current operations and everything.
To do with Elon some imagined future business that's going to produce a mountain of cash, and it's always six to eighteen months away.
People used to talk about Steve jobs ability to create a reality distortion field. Elon Musk is much better at it than Steve Jobs. Was to the point where he can go on an earnings call on a disastrous quarter like Tesla had, tell a story about robotaxis and humanoid robots and trillions of dollars of revenue, and he's going to go from spending less than a tiny percentage of his time at Tesla to a little bit more of his time at Tesla, And in the week since the
stock is up twenty percent. That is because of two things. One, Elon's ability to tell an amazing story, and that is what leaders have to do. They have to rally people to work together to create a better future. And then two, importantly, it's not just storytelling. Elon has done on the business side some things that are simply astounding. One of the companies, if you created only one of the companies he's created, that would be a hall of fame performance for most entrepreneurs.
He's created a of them, the rocket company, the satellite internet company, Tesla, which you people, forget, no new car companies to survive for seventy five years, and suddenly he builds one, and even now in its demolished state, Tesla is still has the single best selling car on the planet.
It's amazing. So that's what storytelling is, and so much of what I think Michael Moritz from Sequoia said this the other day, so much of what he would teach in business school if he were teaching a course, is not finance or financial analysis or accounting, but how to tell a story and get your not just your investors, although that's important, but your employees on board and excited about this great thing that you're going to build, and
the suspension of disbelief. And I do think that Elon Musk is extraordinarily good at that, and by the way, Sam Altman must be extraordinarily good at it too, or they wouldn't be where they are, you.
Know, going back to the late nineties or I guess the early two thousands. You know, obviously we remember Ao well time Warner is the deal that we associate with a peak of euphoria. But from a sort of actual fundamental standpoint, what was the first sign to you that
a cool wind, a cool breeze was coming on. Do you have a memory of like, oh, maybe some of these growth forecast because when you think about, well, what could dent private AI valuations or what could even dent you know, public one, or what could invented tesla, was there a moment is like, huh, is not quite living up to what I thought in terms of some of the numbers, et cetera.
Yes, definitely, But I should also say this benefits from the twenty twenty hind side, sure, which is if you wanted the one of the features of these periods of market history, and if you look at all of them, you go back to two lips. So you look at the nineteen twenties or the PC bubble in the early nineteen sixties or seventies I think, or eighties, you know,
they all share these features. And one of the things that I remember very clearly about the nineteen nineties is pretty much every year you had a deafening chorus of people saying, this is lunacy, it's just a bubble, it's crazy, it's a fad. And every year there was a pullback of twenty to thirty percent, where everybody freaked out, and you had enormous numbers of stories written saying, see, everyone was a moron, they were all insane, and it's over now. And then I like how.
Henry talks in business inside our headlined.
We would then roar off to new highs, and then the same thing would happen the next year. So if any one of those had led to the crash, we would all look back and say, see that was the thing. And I will say that the other thing you find in these bubble periods is that they're two kinds of people. There are the people who think that the world is forever different and all the old valuation metrics can be
discarded because it's different this time and so forth. And then they're the people who think, no, we are in a bubble, but I'm going to ride the bubble right to the end, and then I'm gonna get off right
at the top. Boddy else crashes. So I would say that by nineteen ninety eight, and I wrote a lot about this at the time, I was very much in the we are in a bubble camp, but I was also in the camp of the internets of profound technology that's going to radically change things and create very huge companies. So my investment recommendation early on at Merrill Lynch was, hey, if you're good, by the way, don't touch these things, if you're not incredibly risk tolerant, because there's just way
too much risk. But if you are, buy a few of them so you have some diversification, and plan to hold them for five to ten years. And that's what I did myself. And I look back at in my investment in AML, my investment in Yahoo and others, and say, what on earth was I thinking? What an idiot wish I hadn't. Fortunately, my investment in Amazon, despite almost going to zero, that actually over ten years paid all back.
So that is the way to do it. And you know, no public investors are investing in AI now, but if you were going to, I think that sound and I would even tighten the screen tighter, which is like, only invest in the best ones because everybody else is going to be toast. But with that big preamble, what was the moment?
So in two.
Thousand, as I recall part of what it happened, part of what was fueling the bubble. And you find this in every bubble, is that there is something that is goosing the fundamentals of the companies that is actually attached to their valuations and what's happening in the markets. And so I was really looking for that. And usually it's debt, like people are borrowing margin dad or the dead and in the telecom sector in the nineteen nineties, that's what
it was. All these telecom companies buying, borrowing so much money, they're buying all the Cisco equipment, everything else. And eventually that train stopped and crashed. But in the consumer internet sector, which is where I was focused, like advertising, I was looking for that leverage. I knew that the problem was that you get embedded in the leverage in the system. And in the star summer of two thousand it started to break down, but I still didn't see what it was.
And you know what it was. What it was was the incredible public market appetite for these securities, both on the death side and the equity side. And so every new company, as you said, I think there was something like four hundred companies that went public in nineteen ninety nine, just insane. Every new company would go out and raise
thirty million dollars. They would immediately spend five million on a portal deal with Yahoo, and they'd spend five million on Sun Microsystems servers, and they'd spend five million on Oracle and so forth. And they were all losing huge amounts of money. So what was actually happening was even though they weren't borrowing money, they were getting money from the public markets, and they were turning into actual spending with.
So i iwer an investor in an IPO that was turned into revenue for Yahoo.
That's flattered Yahoo's revenue exactly. And then mean, in meantime, you had this narrative that had been going on for years, not a week, but years, where all of the old economy companies and their management teams, we're getting totally shamed by resisting the Internet. Meanwhile Amazon puts up these extraordinary numbers every quarter. You know, it's not Barnes and Noble is not going to kill them. In fact, they're going to kill Barnes and Noble. That started to become clear.
So you have panic in the traditional economy saying we are the train is leaving the station, and if I don't get on that train or run after it, I'm going to get fired. So even all those guys started competing for the Yahoo deals and others, and so you just just tremendous creation fundamental revenue. And then when the ipo market closed and the debt markets start to close,
suddenly the tap got cut off. And within nine months, Yeah, Yahoo, one of the best stocks in my sector, dropped I think ninety three percent because all of its revenue disappeared. And so that was the leverage. And so something will be happening here that's like that. And maybe a lot of companies are panic spending on AI because they don't want to look like the behind the times. Maybe a lot of consumers are trying AI and they're not going to actually figure out how to use it in a
way that's profitable. So there may be a lot of leverage getting built into the system. And by the way, very obvious one is we have this theory right now that open AI. You know, it's all about just building bigger clusters, spending more on Capex and Microsoft. Now they're all spending eighty billion dollars a year on Capex. We
may have another deep seek moment. Right It's suddenly like oh, we can do it, but with a little software trades, don't need to spend all that much on the chips, and then everything's going to crash.
Tracy. I've been joking that if you're an investor in a big tech company, you probably hate to see the huge amount of capex being spent, But the only thing worse would be a big decrease in the amount of capex being spent, because that would be the actual signs and to come.
Yeah, well, okay, so on this point, I mean, you touched on this earlier when you were talking about how a lot of the financing for AI right now is coming from the private markets. But it seems to me that the incestuousness in the tech industry, or maybe the circularity is a better way of putting it, this is the issue, right And when I see some of the things going on right now, like for instance, you know, hedge funds loaning core weave based on GPU GPUs, that's it.
Or in video yeah, investigative clue weave so that they could buy in video chips exactly.
Yeah, this seems very like circular slash incestuous to me. And at the same time, because so much of it is happening in the private market between hedge funds and private equity and these private deals, it seems very difficult to track.
That's right, and that is absolutely happening. We're seeing it. And then the other thing that I think people aren't talking about it. I said it earlier, I said, I hope Navidia, my goodness, it's one of the big the pure playway to play AI. It's only trading at thirty thirty five times earnings. That's reasonable, okay, But that's reasonable based on Navidia having monopoly power, being the only hose of these chips, just selling an extraordinary number of them
over the last year or two or three. And what happens if demand for those chips drop or China vaults past us and chips suddenly we don't need them anymore. There's a better way to make AI other than buying so many chips, then their earnings are gonna crash. And maybe Navidi is actually trading at two hundred times next year's earnings. We don't know yet. We just know in hindsight and so forth. But to your point, that's exactly
the way to look at it. And I would say, stepping back from it, We're still pretty early in terms of time in this wave. We're only a couple of years in where it's really getting going, and so you know, maybe it's nineteen ninety seven as opposed to late nineteen ninety nine. I don't know. And that's one thing I mean, I'm one of the things I'm trying to figure out is Okay, Navidia's edge, how long do they keep that?
And the reason the deep Seak announcement was so unsettling, and by the way, Navidia stock has crashed and not recovered since then, is that they seem to have figured out a way to produce similar quality technology without the chips, and then you have a lot of people coming back and saying, oh, no, they bought them or they're using them in Vietnam Jeff's paradox. Yeah, exactly. But that's why Navidia is not recovered is because people don't believe that.
Yeah. And of course now people are also talking about Huawei getting significantly better and that their chips could be closed maybe one generation behind. So the prospect of further deep seek moments, so to speak, is certainly out there, and of course that could also threaten open eyes valuation just given how much you know you know deep seek is open source, and whether you can actually monetize that AI edge that they have, presuming they still have an
AI ed lot of questions. I'm gonna throw a different curve ball into the conversation. So you mentioned Elon mentioned Amazon, Jeff Bezos was an investor in Insider, correctly. I don't know if you ever talked to those guys anymore or whatever. Elon obviously the most public phase of techs, you know, warming towards Trump and Bezos to some extent. He was at the inauguration too. I've asked this question to others and I still don't what happened, not like, is it
wrong or right or whatever? What changed in tech from your perspective such that these people who were extraordinarily successful under the sort of existing way we think about economics and politics, that they felt compelled to throw their support to varying degrees by someone who, at a minimum setting aside his success, really wants to change the system. Where did that come from?
Do you think? I think it's a great question. I've spent a lot of time actually looking into that and talking to people and trying to figure it out. And what I've been struck by is the level of personal anger involved. Even after the election, after President Trump won, there were what I would describe as victory laps taken by some very powerful and influential folks in Silicon Valley, and even then, like you just hear some seething anger
and desire for payback. And I think it's a few things. One, I do think the Biden administration did not do a good job of making the technology industry writ large. And again, this is one of the United States most powerful, successful industries. We had led the world not feel even a little bit appreciated. In fact, the whole anti billionaire rhetoric where we've got to get the pitchforks and so forth, it's
all bad Biden administration. You know, you really need to diss Tesla back then and Elon Musk when he was clearly waffling at that when we're in.
A period of we were saying that EV's are an exist central part of America's not even invited.
To the conference or what it was, so so I think that was part of it. I do think the lack of a better way to describe it, the woke wave and Silicon Valley companies feeling like they were being
were attempted takeovers by the employees over the CEOs. I think there's a clap back effect there, and then I think there's just a purely financial calculation, which is, look, we have a job to We had to look out for our companies and our investors and so forth, and listen, this administration, referring to the Biden administration, is way too much regulation and process and the clear they don't like
what we do. And at that point, ironically, most people in business did think that the Trump administration would be a pro business administration, and for a day it looks that way, and now it does not. In fact, it looks like the most anti United States business administration in anybody's memory hundreds of years. So I think that's where it came from. And I also look in Silicon Valley also has an inherent kneejer contrarianism, and I think that
was at play also too. It's like, oh, everybody thinks something, then why are they wrong? And what's the other way of doing it? But I also do think it is shifting back now, not to the point where anybody who supported President Trump publicly or campaigned for him or whatever is we'recanting. In fact, when that comes up, it's always, oh, and look at the alternative we are. This universe is so much better. But I will say they're saying it a little bit less enthusiastically than they were.
A month ago, a little less loudly.
Yes, And I am starting to hear, well, you know, maybe the tariffs, maybe it was good that we're highlighting the problems in China, But like.
It's an expensive media.
Could there have been a better way to do it? Could you have actually had a long term plan, and could you have phased it in so you didn't go and punch American companies in the mouth along with consumers? Is there something behind the trade war? Because in the beginning, remember it was all just hey, he's negotiating and shooting from the hip. They're gonna be on their knees in the office tomorrow morning. I don't hear that much anymore.
And I think actually folks who had thought that President Trump is a quote free trader or actually realizing no, actually, the guy who.
Loves you can't defend that one about tariffs for forty years.
You can't defend loves teriffs, and so I do hear that, and I do hear fears that the longer this lasts, it might have really lasting impact. And so I think it's coming around.
So I assume you're still connected to a bunch of startups and founders and you're working on your own new thing right now, what's the funding environment like at the moment? Are you seeing people that uncertainty around policies start to feed into funding for you know, things that potentially are not at all directly related to manufacturing or tariffs.
I don't know what's happened in the last month in the venture market, especially the second year of the for series A and so forth. My guess is the early investing is pretty much fine as long as the capital is there a company that has a small valuation, that's probably there. But usually where you see it is in Series A, Series B, series C. Because venture capitalists are very tied to the exits. One of the real problems in venture capital for the last really five ten years,
it's been the IPO market has been so sclerodic. You have to be a colossal company, and so that's why a lot of companies have looked for exits. But I will say that one of the big problems with waging a trade war this way, where literally overnight you decouple two economies that are deeply interlinked, is that it is impossible for companies to plan. And Apple is a very good example. They spent decades building a world class global supply chain that benefited the entire world, including the United
States consumers. We get these amazing iPhones for the price we get them for. And to effectively say guys, you got to put that supply chain on a ship and get it to Texas by tomorrow morning is just not going to happen. And so Apple is doing what any intelligence company would do, which is saying, you know, look, I do think that this there's gonna be this long term pressure to a couple from China. We need to diversify a little bit for a lot of reasons. So
what do they do. Do they move IP production for the United States back to the United States.
They do not.
They moved to India, which someone will spike the football and say that's exactly what we wanted to happen. India is a friend, China's an enemy. I will appall most of odd Lot's listeners by saying that I actually do not believe that China's enemy, and I liked, I actually
liked the fact that our economies which super integrated. And yes, the trade relationship is unfair, and yes, there are a lot of things that America and the allies that used to have could have done to bring China to the table and make it fair and open up the markets. But United States companies did a hell of a lot of business in China and still do and that is now at risk, along with our metals and everything else. And by the way, again I understand from a political perspective,
the virtue of having an enemy. It's very easy with divide the world. It's us versus them. But the more we are enemies to me, the more risk we're eventually going to actually end up in a real war. Not just that I like the interlinkedness we live in a globalized, integrated economy. I think imagining that the United States can suddenly just decouple itself and we're thrilled, I think that what's going to happen is the rest of the world's
going to knit together and go on without us. And so even going back to the premise for the trade war, I have issues Just.
To be clear, I don't think the you know, there is no odd lots house of view on anything littlone our listeners. I think if you know, if there is something closed, it's actually quite a bit of.
Well, what I will say is in odd lots, yeah, if we think, sure the same way, that's true. What I hear when I talk to some of my friends, Yeah, I really clad and is oh my god, listen, Oh you are the most naive human in America. How can you not understand that this is not a gladiatorial fight to the death and China is our enemy and we must sock it to them. I just simply do not. That's interesting because is a cooperative activity. It's like a potluck dinner.
This is a good So I would say, if there's something close to a house view, which there is no house view, it's a certain admiration, high level of admiration for what's been accomplished technologically in China and economically over the last several decades, and not a gladiatorial sense, but there are areas where it creates risk. But I do get the impression, especially in DC, that this is this
idea of US verse China. It's got to be the most bipartisan view that there is in the world, you would say, in your circles and tech and media that shared that view absolutely.
And Ezra Klein and Tom Friedman of The New York Times have a great podcast about this. Tom Friedman is written about this. And another guy who's very outspoken from the Silicon Valley community about it is Bill Gurley, formerly a Benchmark who basically say this idea that we're going to beat China in Ai and we're going to quote win the Ai War, it's crazy, It's not gonna happen. And that's the real message from Deep Seek. And here we have all of this plotting, like how can we
keep the Navidia chips away from China? We got to maintain our advantage and so forth. Meanwhile, all these companies suddenly appear in Vietnam and everywhere else that the whole lo and hold have huge data centers filled with Navidia chips that anybody can use, and so forth, and we've got to now agree we're going to send them less powerful chips, although even President Trump's not thrown that out,
costing Navidia investors five billion dollars a year. I just think again, the more integrated our economies are, the better. I do think the best way to approach the China imbalances, and they are real, would have been to get together with Europe and a lot of other countries in Asia and say, hey, guys, we love working with you, but you got to change a few things. You got to
open the markets a little bit and so forth. And I just I think one one thing I hope that everybody in Washington, and I think Wall Street tends to have a much more clear eye view of it is Listen, China is going to be much bigger and more powerful than the United States. They are. That's okay, we blew past Europe seventy five years ago. You know what, people still live in Europe. They still have culture, they have good lives, they have good jobs, and you know what,
we're not fighting them. They're not fighting us because we've got more powerful. So I think the United States has got to get over this idea that we rule the world forever and we got to keep down China. China. I mean, look at it as a human being. Twenty five years ago, poverty in China was appalling for hundreds of millions of people, and they have now moved.
Out of product shortenary.
That is a good thing, not a bad thing. It's a good thing. And the richer countries get, the less likely they are to defend themselves with missiles and so forth. So I just think we should step back and look at this idea that's been created and as you say, extraordinarily bipartisan in NBC in particular, that China is going to be our enemy forever. We got to beat them.
We're not gonna beat them, it's not gonna happen. But we can still take care of our own security, build amazing companies, get richer, have a remarkable country, and coexist and work with China. That's my view, and you can tell me.
I like it, I like it, I like it.
Can I go back to one of the disclaimers in the intro, not about Joe, the other one about you being sort of excommunicated from wallst And part of that was based on well all of it was based on research from the tech bubble, right, And as a consequence of the tech bubble, we saw lots of new regulation around how analysts can actually publish research, and Chinese walls in investment banks and things like that looking back on what was published back then versus what's being published now
on AI, do you see similarities? Do you see improvements as a result of some of those measures taken in the early two thousands.
I think that the well, stepping back, yes, thank you for bringing up my ex conversation, still just a mortifying episode to me, and I am so grateful to you too, And there so many other people in the last twenty five years who've given me this second chance and so forth. And you know, I learned a ton about that process.
Elliott Spitzer, who was the guy who went after me obviously, and everybody we had our own thing afterwards, and suddenly he had his own trouble, and then I was on his show and he was on my show, and life goes on, and we even had a lunch together at one point. So life goes on, but a very much learning experience. And by the way, because we talked about bubbles earlier, that is the final feature of these episodes.
And John Kenneth Gallbraith has written about this, where there's a huge backlash against the folks who were sort of held up as being the geniuses and doing really well. And that's how the society moves on and so forth. So anyway, I wish I hadn't been in the middle of that, but I was, and so forth, and it's too bad because I love Wall Street. But anyway, you look at research. I'll tell you what I think the biggest thing that has been lost that sucks, and it's
not actually research. It's the fact that we don't have an IPO market anymore. And my view at the time and now is that the more opportunities investors have, the better and early stage tech IPOs are highly risky. Most of them end up going out of business. People lose their shirts and so forth. But I I don't think that necessarily the job of the public market is to make it impossible for investors to lose their shirts. I think actually it is to create a range of options.
We had this amazing you know, the public markets in the nineteen nineties were terrific. You could raise a lot of money and so forth. Now by the time you go public, the vast majority of the gains have already been grabbed by professional investors, and so you know, smaller investors can't even get at them. So I would say that I think the IPO market back then was better. And I think the discipline of company going public is good. Bill Gurley's talked a lot about this, So I think
that's too bad that we've lost that. And I think in research, I don't look back. In the nineteen nineties, analysts were asked to do lots of different jobs. There were articles in Wall Street Journal all the way along. You know, analysts wear two hats. They write about stocks, and they also talk to companies about raising money, and the companies have to like them, or of course they would never choose the firm to take them.
Come.
Analysts were in a position where they're doing a lot, and I would say, as an analyst, now okay, fine, now it's just right about stocks and talk to investors and so forth. But interestingly, one of the big things that was cited is proof that there was some deep corruption in research, which I do not believe there was, was that so many of the ratings were positive, So many of the ratings are still positive. And you know what, h there are a lot of reasons for that. One,
analysts only cover the companies that they like. Generally, nobody likes a beyar. You go out and just insult a company all day you know, what are you doing? And it's see when the markets are going up, especially in a sector like this, you know, most stocks go up, so there are a lot of reasons for it that have something to do with something else, and it's just been interesting to watch that that really hasn't changed that much.
You know, in a way, it feels like we kind of have the worst of both worlds with early stage investing because we don't have the sort of companies going public when they're young. But I keep seeing you know, you see them on the subway, like these ads like invest in private companies through an app, and it's like you're not getting any information, you have no idea what
valuations you're getting at. And so they they're finding these ways to suck in retail money because they're attracted to these ideas of or buy SpaceX on the secondary market with no you know, no ten queues or anything. So in a way, it feels like this sort of worst of both worlds in terms of the public's access to early stage company.
That is totally right. And in fact, when I first saw the first one of those go by in some feed or email, like oh, you can invest in this new organic wine company where there's no booze and so forth or whatever it happens to be. WHOA. I had the same reaction that Gordon Gecko had when he got out of jail in the Second Wall Street movie, where
he's like, my god, all this stuff is legal now. Yea, so it's legal, and you're right, it's terrible all this secondary trading where you have no idea what the company's financials are, and you have no idea what the capital stack looks like, and how much preferred stock is piled on top of the crappy common stock that you're buying from some employee. You have no idea. So yes, I think we're much better off in the world where it's
just out there. And by the way, ninety five percent of investors shouldn't go anywhere near early stage tech idea. It's IPOs ever, no matter how much money your friends are making. But there's a difference. Yeah, it's hard, but there's a difference between having a choice like that and just preventing it. And unfortunately that's where we are. And I just don't think it's the financing pipes have rerouted.
Companies are getting money. That's great, but I think having a little bit more ability to go public earlier would be great.
There's so much we could talk about and we could, you know, we could. We haven't talked at all about the media business in part cause like I don't know, it's a little naval gazing, etcetera. We could take that in a million different directions. Let me just say this simple question. Could you start a business insider today? Business insider I think started two thousand and six, or was
ali insider now it's twenty twenty five. What's different today that you either you could or you couldn't make that bet?
I think you could make it, I think far less likely to be successful because if you look at a media business, there are two pieces to it. There's the editorial and there's the distribution. And really what the Internet did and what enabled some new companies for a while, a lot of new companies, but some new companies to grab hold in a way that would have been much more difficult before is distribution got completely blown up. You look at newspapers, you look at cable, you look at
all these different legacy media businesses. They were all protected by the technology of the time. Internet blew all of that up and very importantly, it created eight hours during the workday where you were between the morning newspaper and the TV evening news where lots of cool things were happening. Hey, you want to know what's happening, And suddenly you have on your desktop Business Insider at Silicon Alli, Insider is
telling what's going on. And by the way, you have four hundred and thirty two websites that are reporting different things. It's very convenient to have it all brought into one place for you, especially if it's adding analysis. It's like having a TV host, or it's like having you guys, but at your convenience on a website. So we early on had a lot of people addicted to that. You couldn't build that today because the web has been completely
deprecated in terms of its influence. Everything has moved to apps. We're much more in a world where the media distribution looks much more like what it did in the TV and paper days, where it's controlled distribution. Shelf space matters, you don't have very much, and so now the big new companies that are being built are being built with direct distribution like email and app and so forth. And that's how my own media consumption has shifted. I was a huge, diehard web guy.
Yeah, me too.
And now it's just with the paywall situation, which is brutal, like you've got to sign into every site on every platform. It's infuriating. It's much easier to just go to the app. So things have changed. So the original model for businesses it would not have worked. I do new models work, and business owners do very well, very so proud of them. Very hard to come through this period and survive.
And we are, by the way, Tracy, when I was hired at Business Insider, the name of the vertical that I originally worked for have been going fifty minutes without saying it. There's the name that children not go mention clusterstock dot com.
This is how I used to link to your work. I wrote for Joe Clusterstock.
Henry Blodgett, thank you so much for coming on. Odd lots could talk for a long time.
Let me a little of special bonuses, Tracy, What is it about? Joe? Was like, what is so? I'll tell you one, Tracy. When you're trying to build a startup what has been described as hustle culture and since insulted as hustle culture as we have this big backlash to work life balance and oppressive bosses and all other stuff. It actually really matters. You are running for your life.
And the way Jeff Bezos described it to me after he invested was, you know, you guys have effectively created this little flame that you hold in the palm of your hand, and that is a huge accomplishment, Like you've created fire out of nothing. But all around you the winds are blowing. They're these huge forces that are threatening to snuff it out. Like nurture that flame, protect it, make it grow. Eventually, it's a fire. So to do that you actually need people who are totally dedicated, and
Joe was extraordinarily dedicated. We had a team of a few folks who are around Joe's age who really made business inside are possible because they were so into it. And then the other Joe Wisenthal attribute that I think has contributed to alots becoming the thing that everybody has to listen to and so forth is Joe has a remarkable ability to inspire other people to get excited about the way he sees the world and to work with him.
And the lines moving on the to.
The point where yes, the new York Times famously, back in those early days, wrote a profile of Joe Wisenthal which one could have interpreted as this poor man is insane and he's going to drop dead, and this sounds like hell on Earth, which is like twenty four hours a day, I twitching waiting for the jobs report all that stuff. But instead Joe turned it into this incredible positive and everyone's like, oh my god, I want to not only be like Joe, I want to work with
Joe and so forth. And I think your audience feels that enthusiasm. One of the things you used to say to me a lot, which I loved, was everything is interesting. Yeah, and people like try to find the one thing that's interesting, like when you really dive in. And so you've taught yourself well about markets and stuff. So anyway, this is.
Actually the foundation of odd lots, that everything is interesting.
So all right, we gotta stuff. I can't hear anything. All right, We're good, We're good, Thank you very much. I'm just gonna say I, I don't know how many people I've told this. I don't know if I've told you, Henry, I've told my therapist only. There were weekends in like twenty ten and twenty eleven. This is true where I would like wake up on a Saturday. This is I mean, this is like real disturbed, unbelling stuff. And something I think is I couldn't have had children in those years.
I know I had children later had been really hard and I would like wake up and I don't I almost don't want to say this. I'd like want to like punch a pillow because it was like so intense, I need to get that out. And a few times I started typing emails to you because I was like so like upset, and then I was like, actually, have nothing to be upset about, Like there was nothing specific. Was just like anyway, very intense times and difficulty but
rewarding times. There was nothing wrong, but there was nothing wrong. It was just like this was like this sort of hot house called it's too much because.
You bring up a good point and maybe odd lots listeners interested in this too, like we have in the past five seven years.
Yeah, there's been this huge backlash. This is what again to that because it was like sort of damage.
And oppressive businesses and these terrible sol jobs and so forth. And what I will say is, and I think you saw it too. Seeing it in my own life a lot is that Actually work can be incredibly therapeutic when you can find something that you can dive into. Yeah, it becomes flow state. Not to the point where it's totally obsessive and you're stressed all the time. That's terrible.
I guess what all I meant to say was it was necessary and I get the backlash is absolutely it was a necessary energy too much, and I get the backlash anyway. Henry Blodgett, thank you so much for coming on odd blods.
It's such a privilege to be here when you utilizes do a great job, and I will keep listening.
Thank you so much. Tracy. I'm sort of like a little emotionally rattled after that episode in a way I usually don't get after recording our typical podcasts. I have to admit, do you.
Think you impressed your old boss? I think you did.
I think so.
I think he's proud. I think I you know, yes, Do I still have this really intense like memories of like trying to surpass traffic goals and things like that from those years. Absolutely, And I think that sits in my mind still today when I look at like podcast download numbers or the Apple business charts and stuff like that.
Yeah, And also, I mean I take the point that if you're a startup, you're running towards a proverbial finish line that actually never really comes, and so there's a sense of urgency, but it's it's working at that was clearly unsustainable, right, It's unhealthy.
Which I said I couldn't have had children.
Yeah.
Also, well, I was going to say it locks a certain proportion of the population out of talking for that particular market.
Which percent one hundred percent. You know, Tracy, you mentioned that Henry sort of speaks and business insider headline. Business insider headlines turned out to be very influential to headlines all over them and so talking to Henry it is sort of like seeing where to some extent, like modern media came from. I mean, they were like a handful of these, you know, BuzzFeed was obviously another one, et cetera, Gawker,
We've talked to Nick Denton. There were a handful of these, like really important media brands of that era that to this day, like their own influence right now probably diminished, but their influence more broadly on how like you know, reporting et cetera evolved is clearly evident to this day.
Well, Henry's been influential in a number of right, like not just on media, but he ended up being very influential on Wall Street, And we talked a little bit about that. You know, what we should do once this episode publishes, we should look at the transcript and just pick out, like every sentence that would be a BIA headline. I bet you'd get like dozens, if not hundreds, that.
Should be one of our newsletters when this Yeah, I think that would actually be really fun.
All right, shall we leave it there.
Let's leave it there.
This has been another episode of the Audlots podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.
And I'm Joe Wisenthal. You can follow me at the Stalwart. Follow our guest Henry Blodgett. He's at h Blodgett. Follow our producers Carman Rodriguez at Carman armand dash Ol Bennett at Dashbock and Kale Brooks at Kale Brooks. From our odd Lots content, go the Bloomberg dot com slash odd Lots. We have all of our episodes in a daily newsletter. And you can chat about all of these topics twenty four to seven in our discord discord dot gg slash odlines and if.
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