May 5, 2025 • 54 mins
What does history say about how big the AI boom can get, and who will ultimately win out? When does a boom turn into a bubble that turns into a bust? On this episode of the podcast, we speak to Henry Blodget, the founder of Business Insider (and Joe's old boss there). In the late '90s, Henry was one of the most well-known Wall Street analysts covering internet stocks, before the crash and recriminations, which ended up in his lifetime ban from the industry. His new project is a publication called Regenerator, which will again focus on business and tech. We discuss the state of the AI boom, and what lessons we can draw from the dot-com era. We also talk politics, what's changed on Wall Street over the last 25 years or so, and a bit on the state of the media business.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:18):
Hello and welcome to another episode of the Odd Lots Podcast.
Speaker 3 (00:22):
I'm joll Wisenthal, and I'm Tracy all the way.
Speaker 2 (00:24):
Tracy, you know, I can never get enough talking about
late nineties dot com.
Speaker 3 (00:31):
I know you're just gifting episodes to yourself at this point,
but that's fine. I'm into it.
Speaker 2 (00:35):
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.
(00:56):
So at least we have an excuse for these conversations.
Speaker 3 (00:59):
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.
(01:21):
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.
Speaker 2 (01:27):
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,
(01:49):
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.
(02:11):
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
(02:33):
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.
(02:55):
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.
Speaker 4 (03:03):
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.
Speaker 2 (03:09):
No, but for real, thank you so much for coming
on odd lot. It's really excited. I'm trying to think.
Speaker 3 (03:14):
Oh, this is very sweet.
Speaker 4 (03:15):
I know.
Speaker 2 (03:15):
No, I'm like actually a little bit like a verklemped.
Speaker 3 (03:18):
I'll ask a question, yeah, Tracy, the.
Speaker 2 (03:20):
First question, want to collect myself.
Speaker 3 (03:22):
How did you find Joe?
Speaker 1 (03:23):
Oh?
Speaker 4 (03:24):
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
(03:49):
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
(04:10):
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.
Speaker 3 (04:18):
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.
Speaker 2 (04:31):
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
(04:54):
and so forth, and we chatted, and then several months
later I joined all right, enough about all the personal stuff.
Speaker 3 (05:01):
No, I'm gonna have more questions, but go on.
Speaker 2 (05:04):
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,
(05:25):
whether it's telecom or just dot com, and what feels
dissimilar to you.
Speaker 4 (05:29):
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
(05:49):
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
(06:09):
the big Magnificent seven, whatever you want to call them,
they are trading at high but arguably reasonable earnings multiple.
Speaker 2 (06:18):
And that was the case say six months ago, two
before we had.
Speaker 4 (06:21):
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.
Speaker 2 (06:39):
But all you need is like a PhD in a
white paper, you're getting like half a billion dollar valuations
for these starts.
Speaker 4 (06:45):
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
(07:06):
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
(07:28):
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
(07:48):
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
(08:09):
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
(08:32):
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
(08:54):
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
(09:17):
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
(09:37):
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
(10:00):
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
(10:20):
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
(10:43):
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
(11:03):
in the winners.
Speaker 2 (11:03):
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
(11:27):
appreciate in these conversations.
Speaker 3 (11:28):
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?
Speaker 2 (11:35):
No, okay, okay.
Speaker 3 (11:38):
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
(12:01):
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.
Speaker 4 (12:16):
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
(12:36):
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
(12:57):
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
(13:20):
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.
Speaker 2 (13:37):
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.
Speaker 4 (13:45):
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
(14:09):
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,
(14:29):
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
(14:51):
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
(15:13):
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.
Speaker 2 (15:50):
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
(16:12):
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.
Speaker 4 (16:28):
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
(16:50):
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
(17:11):
was a moron, they were all insane, and it's over now.
And then I like how.
Speaker 3 (17:16):
Henry talks in business inside our headlined.
Speaker 4 (17:21):
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
(17:41):
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
(18:02):
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,
(18:23):
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
(18:44):
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
(19:06):
to be toast. But with that big preamble, what was
the moment?
Speaker 2 (19:11):
So in two.
Speaker 4 (19:13):
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,
(19:35):
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
(19:56):
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,
(20:19):
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.
Speaker 2 (20:41):
So i iwer an investor in an IPO that was
turned into revenue for Yahoo.
Speaker 4 (20:46):
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
(21:07):
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
(21:28):
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.
(21:50):
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,
(22:11):
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,
(22:31):
don't need to spend all that much on the chips,
and then everything's going to crash.
Speaker 2 (22:35):
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.
Speaker 3 (22:50):
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,
(23:13):
hedge funds loaning core weave based on GPU GPUs, that's it.
Speaker 2 (23:19):
Or in video yeah, investigative clue weave so that they
could buy in video chips exactly.
Speaker 3 (23:24):
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.
Speaker 4 (23:38):
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
(24:00):
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
(24:21):
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
(24:43):
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,
(25:06):
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.
Speaker 2 (25:16):
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
(25:37):
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.
(25:59):
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
(26:23):
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?
Speaker 4 (26:39):
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,
(27:01):
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.
(27:23):
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.
Speaker 2 (27:43):
A period of we were saying that EV's are an
exist central part of America's not even invited.
Speaker 4 (27:47):
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
(28:09):
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
(28:30):
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
(28:52):
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
(29:14):
so much better. But I will say they're saying it
a little bit less enthusiastically than they were.
Speaker 3 (29:19):
A month ago, a little less loudly.
Speaker 4 (29:20):
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.
Speaker 3 (29:29):
It's an expensive media.
Speaker 4 (29:31):
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
(29:51):
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.
Speaker 2 (30:04):
Loves you can't defend that one about tariffs for forty years.
Speaker 4 (30:08):
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.
Speaker 3 (30:20):
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.
Speaker 4 (30:41):
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
(31:04):
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
(31:27):
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
(31:50):
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
(32:12):
the United States back to the United States.
Speaker 2 (32:14):
They do not.
Speaker 4 (32:14):
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
(32:37):
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
(32:59):
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,
(33:23):
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.
Speaker 2 (33:38):
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.
Speaker 4 (33:47):
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
(34:09):
must sock it to them. I just simply do not.
That's interesting because is a cooperative activity. It's like a
potluck dinner.
Speaker 2 (34:18):
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
(34:41):
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.
Speaker 4 (34:53):
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.
(35:15):
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
(35:36):
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
(35:56):
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
(36:19):
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
(36:41):
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.
Speaker 2 (36:59):
Out of product shortenary.
Speaker 4 (37:00):
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.
(37:22):
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.
Speaker 2 (37:33):
I like it, I like it, I like it.
Speaker 3 (37:51):
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
(38:14):
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.
Speaker 4 (38:31):
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.
(38:51):
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.
(39:14):
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
(39:35):
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
(39:56):
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
(40:17):
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
(40:39):
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.
Speaker 1 (40:59):
Come.
Speaker 4 (41:00):
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
(41:20):
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
(41:41):
have something to do with something else, and it's just
been interesting to watch that that really hasn't changed that much.
Speaker 2 (41:48):
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
(42:10):
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.
Speaker 4 (42:27):
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
(42:47):
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
(43:11):
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
(43:32):
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.
Speaker 2 (43:43):
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
(44:04):
ali insider now it's twenty twenty five. What's different today
that you either you could or you couldn't make that bet?
Speaker 4 (44:11):
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
(44:32):
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
(44:55):
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
(45:16):
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
(45:38):
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.
Speaker 2 (45:56):
Yeah, me too.
Speaker 4 (45:57):
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.
Speaker 2 (46:16):
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.
Speaker 3 (46:31):
This is how I used to link to your work.
I wrote for Joe Clusterstock.
Speaker 2 (46:37):
Henry Blodgett, thank you so much for coming on. Odd
lots could talk for a long time.
Speaker 4 (46:42):
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
(47:06):
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
(47:28):
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
(47:50):
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
(48:17):
the way he sees the world and to work with him.
Speaker 3 (48:20):
And the lines moving on the to.
Speaker 4 (48:22):
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
(48:43):
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,
(49:04):
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.
Speaker 3 (49:11):
Actually the foundation of odd lots, that everything is interesting.
Speaker 2 (49:15):
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,
(49:35):
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.
(49:57):
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.
Speaker 4 (50:10):
You bring up a good point and maybe odd lots
listeners interested in this too, like we have in the
past five seven years.
Speaker 2 (50:16):
Yeah, there's been this huge backlash. This is what again
to that because it was like sort of damage.
Speaker 4 (50:21):
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.
Speaker 2 (50:41):
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.
Speaker 4 (50:53):
It's such a privilege to be here when you utilizes
do a great job, and I will keep listening.
Speaker 2 (50:58):
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
(51:21):
to admit, do you.
Speaker 3 (51:22):
Think you impressed your old boss? I think you did.
Speaker 4 (51:24):
I think so.
Speaker 2 (51:25):
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.
Speaker 3 (51:44):
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.
Speaker 2 (52:00):
Which I said I couldn't have had children.
Speaker 4 (52:01):
Yeah.
Speaker 3 (52:01):
Also, well, I was going to say it locks a
certain proportion of the population out of talking for that
particular market.
Speaker 2 (52:09):
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
(52:32):
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,
(52:53):
reporting et cetera evolved is clearly evident to this day.
Speaker 3 (52:57):
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.
Speaker 2 (53:18):
Should be one of our newsletters when this Yeah, I
think that would actually be really fun.
Speaker 3 (53:23):
All right, shall we leave it there.
Speaker 2 (53:24):
Let's leave it there.
Speaker 3 (53:25):
This has been another episode of the Audlots podcast. I'm
Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 2 (53:30):
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
(53:51):
four to seven in our discord discord dot gg slash
odlines and if.
Speaker 3 (53:56):
You enjoy Odd Lots, if you like it when we
talk to Joe's old bosses, please leave us a positive
review on your favorite podcast platform. And remember, if you
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is find the Bloomberg channel on Apple Podcasts and follow
the instructions there. Thanks for listening,
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:18):
Hello and welcome to another episode of the Odd Lots Podcast.
Speaker 3 (00:22):
I'm joll Wisenthal, and I'm Tracy all the way.
Speaker 2 (00:24):
Tracy, you know, I can never get enough talking about
late nineties dot com.
Speaker 3 (00:31):
I know you're just gifting episodes to yourself at this point,
but that's fine. I'm into it.
Speaker 2 (00:35):
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.
(00:56):
So at least we have an excuse for these conversations.
Speaker 3 (00:59):
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.
(01:21):
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.
Speaker 2 (01:27):
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,
(01:49):
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.
(02:11):
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
(02:33):
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.
(02:55):
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.
Speaker 4 (03:03):
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.
Speaker 2 (03:09):
No, but for real, thank you so much for coming
on odd lot. It's really excited. I'm trying to think.
Speaker 3 (03:14):
Oh, this is very sweet.
Speaker 4 (03:15):
I know.
Speaker 2 (03:15):
No, I'm like actually a little bit like a verklemped.
Speaker 3 (03:18):
I'll ask a question, yeah, Tracy, the.
Speaker 2 (03:20):
First question, want to collect myself.
Speaker 3 (03:22):
How did you find Joe?
Speaker 1 (03:23):
Oh?
Speaker 4 (03:24):
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
(03:49):
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
(04:10):
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.
Speaker 3 (04:18):
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.
Speaker 2 (04:31):
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
(04:54):
and so forth, and we chatted, and then several months
later I joined all right, enough about all the personal stuff.
Speaker 3 (05:01):
No, I'm gonna have more questions, but go on.
Speaker 2 (05:04):
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,
(05:25):
whether it's telecom or just dot com, and what feels
dissimilar to you.
Speaker 4 (05:29):
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
(05:49):
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
(06:09):
the big Magnificent seven, whatever you want to call them,
they are trading at high but arguably reasonable earnings multiple.
Speaker 2 (06:18):
And that was the case say six months ago, two
before we had.
Speaker 4 (06:21):
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.
Speaker 2 (06:39):
But all you need is like a PhD in a
white paper, you're getting like half a billion dollar valuations
for these starts.
Speaker 4 (06:45):
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
(07:06):
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
(07:28):
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
(07:48):
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
(08:09):
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
(08:32):
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
(08:54):
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
(09:17):
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
(09:37):
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
(10:00):
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
(10:20):
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
(10:43):
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
(11:03):
in the winners.
Speaker 2 (11:03):
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
(11:27):
appreciate in these conversations.
Speaker 3 (11:28):
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?
Speaker 2 (11:35):
No, okay, okay.
Speaker 3 (11:38):
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
(12:01):
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.
Speaker 4 (12:16):
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
(12:36):
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
(12:57):
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
(13:20):
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.
Speaker 2 (13:37):
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.
Speaker 4 (13:45):
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
(14:09):
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,
(14:29):
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
(14:51):
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
(15:13):
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.
Speaker 2 (15:50):
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
(16:12):
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.
Speaker 4 (16:28):
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
(16:50):
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
(17:11):
was a moron, they were all insane, and it's over now.
And then I like how.
Speaker 3 (17:16):
Henry talks in business inside our headlined.
Speaker 4 (17:21):
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
(17:41):
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
(18:02):
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,
(18:23):
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
(18:44):
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
(19:06):
to be toast. But with that big preamble, what was
the moment?
Speaker 2 (19:11):
So in two.
Speaker 4 (19:13):
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,
(19:35):
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
(19:56):
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,
(20:19):
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.
Speaker 2 (20:41):
So i iwer an investor in an IPO that was
turned into revenue for Yahoo.
Speaker 4 (20:46):
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
(21:07):
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
(21:28):
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.
(21:50):
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,
(22:11):
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,
(22:31):
don't need to spend all that much on the chips,
and then everything's going to crash.
Speaker 2 (22:35):
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.
Speaker 3 (22:50):
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,
(23:13):
hedge funds loaning core weave based on GPU GPUs, that's it.
Speaker 2 (23:19):
Or in video yeah, investigative clue weave so that they
could buy in video chips exactly.
Speaker 3 (23:24):
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.
Speaker 4 (23:38):
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
(24:00):
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
(24:21):
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
(24:43):
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,
(25:06):
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.
Speaker 2 (25:16):
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
(25:37):
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.
(25:59):
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
(26:23):
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?
Speaker 4 (26:39):
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,
(27:01):
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.
(27:23):
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.
Speaker 2 (27:43):
A period of we were saying that EV's are an
exist central part of America's not even invited.
Speaker 4 (27:47):
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
(28:09):
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
(28:30):
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
(28:52):
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
(29:14):
so much better. But I will say they're saying it
a little bit less enthusiastically than they were.
Speaker 3 (29:19):
A month ago, a little less loudly.
Speaker 4 (29:20):
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.
Speaker 3 (29:29):
It's an expensive media.
Speaker 4 (29:31):
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
(29:51):
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.
Speaker 2 (30:04):
Loves you can't defend that one about tariffs for forty years.
Speaker 4 (30:08):
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.
Speaker 3 (30:20):
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.
Speaker 4 (30:41):
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
(31:04):
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
(31:27):
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
(31:50):
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
(32:12):
the United States back to the United States.
Speaker 2 (32:14):
They do not.
Speaker 4 (32:14):
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
(32:37):
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
(32:59):
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,
(33:23):
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.
Speaker 2 (33:38):
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.
Speaker 4 (33:47):
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
(34:09):
must sock it to them. I just simply do not.
That's interesting because is a cooperative activity. It's like a
potluck dinner.
Speaker 2 (34:18):
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
(34:41):
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.
Speaker 4 (34:53):
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.
(35:15):
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
(35:36):
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
(35:56):
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
(36:19):
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
(36:41):
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.
Speaker 2 (36:59):
Out of product shortenary.
Speaker 4 (37:00):
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.
(37:22):
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.
Speaker 2 (37:33):
I like it, I like it, I like it.
Speaker 3 (37:51):
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
(38:14):
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.
Speaker 4 (38:31):
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.
(38:51):
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.
(39:14):
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
(39:35):
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
(39:56):
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
(40:17):
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
(40:39):
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.
Speaker 1 (40:59):
Come.
Speaker 4 (41:00):
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
(41:20):
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
(41:41):
have something to do with something else, and it's just
been interesting to watch that that really hasn't changed that much.
Speaker 2 (41:48):
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
(42:10):
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.
Speaker 4 (42:27):
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
(42:47):
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
(43:11):
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
(43:32):
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.
Speaker 2 (43:43):
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
(44:04):
ali insider now it's twenty twenty five. What's different today
that you either you could or you couldn't make that bet?
Speaker 4 (44:11):
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
(44:32):
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
(44:55):
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
(45:16):
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
(45:38):
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.
Speaker 2 (45:56):
Yeah, me too.
Speaker 4 (45:57):
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.
Speaker 2 (46:16):
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.
Speaker 3 (46:31):
This is how I used to link to your work.
I wrote for Joe Clusterstock.
Speaker 2 (46:37):
Henry Blodgett, thank you so much for coming on. Odd
lots could talk for a long time.
Speaker 4 (46:42):
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
(47:06):
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
(47:28):
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
(47:50):
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
(48:17):
the way he sees the world and to work with him.
Speaker 3 (48:20):
And the lines moving on the to.
Speaker 4 (48:22):
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
(48:43):
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,
(49:04):
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.
Speaker 3 (49:11):
Actually the foundation of odd lots, that everything is interesting.
Speaker 2 (49:15):
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,
(49:35):
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.
(49:57):
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.
Speaker 4 (50:10):
You bring up a good point and maybe odd lots
listeners interested in this too, like we have in the
past five seven years.
Speaker 2 (50:16):
Yeah, there's been this huge backlash. This is what again
to that because it was like sort of damage.
Speaker 4 (50:21):
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.
Speaker 2 (50:41):
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.
Speaker 4 (50:53):
It's such a privilege to be here when you utilizes
do a great job, and I will keep listening.
Speaker 2 (50:58):
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
(51:21):
to admit, do you.
Speaker 3 (51:22):
Think you impressed your old boss? I think you did.
Speaker 4 (51:24):
I think so.
Speaker 2 (51:25):
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.
Speaker 3 (51:44):
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.
Speaker 2 (52:00):
Which I said I couldn't have had children.
Speaker 4 (52:01):
Yeah.
Speaker 3 (52:01):
Also, well, I was going to say it locks a
certain proportion of the population out of talking for that
particular market.
Speaker 2 (52:09):
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
(52:32):
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,
(52:53):
reporting et cetera evolved is clearly evident to this day.
Speaker 3 (52:57):
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.
Speaker 2 (53:18):
Should be one of our newsletters when this Yeah, I
think that would actually be really fun.
Speaker 3 (53:23):
All right, shall we leave it there.
Speaker 2 (53:24):
Let's leave it there.
Speaker 3 (53:25):
This has been another episode of the Audlots podcast. I'm
Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 2 (53:30):
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
(53:51):
four to seven in our discord discord dot gg slash
odlines and if.
Speaker 3 (53:56):
You enjoy Odd Lots, if you like it when we
talk to Joe's old bosses, please leave us a positive
review on your favorite podcast platform. And remember, if you
are a Bloomberg subscriber, you can listen to all of
our episodes absolutely ad free. All you need to do
is find the Bloomberg channel on Apple Podcasts and follow
the instructions there. Thanks for listening,
Hosts And Creators
Joe Weisenthal
Tracy Alloway
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