tv Bloomberg Technology Bloomberg August 20, 2019 11:00pm-12:00am EDT
♪ emily: i am emily chang in san francisco and this is "bloomberg technology." coming up in the next hour, someone has to do it. pres. trump: somebody had to tick china off. china has been ripping countries off for years. emily: president trump takes a defensive tone. plus, more frustration for facebook. european regulators are already
probing the social network's libra digital currency on top of scrutiny here at home in the name of antitrust. we've got the details. can we hack it? several states voiced concerns over the security of their electronic voting systems ahead of the 2020 elections. we will talk to the man who successfully showed the world that voting machines could be hacked 15 years ago. but first to our top story, president trump defending his china trade stands, saying that while u.s. is not ready to make a deal with china just yet, somebody had to take them on. pres. trump: when you look at china, china has had the worst year they have had in 27 years. they want to make a deal with us. i can tell you i'm not ready to make a deal. unless they are ready to make the right kind of deal, i not am ready to make a deal. i am doing this whether it is good or bad for your statement about, will we fall into a recession for two months? the fact is somebody has to take china on. my life would be a lot easier if
i didn't take china on. i like doing it because i have to do it. emily: for more, shawn donnan from washington is with us. the president made several comments about china today. do you hear the messaging starting to change? shawn: there is a subtle change, and that is an acknowledgment that there could be short-term economic pain and the president saying, i'm willing to do it for this greater cause. this greater cause is taking on china after decades of cheating on trade. he has, in the past, insisted that his trade wars are doing no damage to the u.s. economy and that china is paying the cost of these tariffs. so it is a subtle change, and looks like a frustrated change. we are hearing this from inside the white house -- there is some frustration at what has been happening in the markets, all this talk about recessions, the likelihood of a recession, which still is fairly slim, but rising
with about one third of economists saying they expect some sort of recession in the next year or is not the message two. -- going into an election year, that is not the message the president likes to hear. you see him bristling at that. emily: how does this impact the talks that are supposed to start in september? of course, we don't know what will happen in the next hour, two hours, or days, let alone in a couple of weeks. shawn: these talks started in the spring of 2017 at mar-a-lago and have been on again, off again ever since. we are hoping and hearing -- the white house is certainly hoping it can get some kind of negotiation back on track. the principal negotiators, treasury secretary steven mnuchin, robert lighthizer. they spoke with their chinese counterparts last week. they are due to talk again in the coming week or two. there is some kind of working level talks going on.
if everything lines up, we may see a chinese delegation come to washington in september. there are a lot of things affecting these talks, including the situation with hong kong. included what is happening with huawei. we have seen the u.s. this week extend a narrow exception for some u.s. businesses who do business with huawei. there is still the broader threat of a crackdown. aily: huawei saying it is make it or break it moment for the company. you have the hong kong protests, as you mentioned. these are all potentially wrinkles that perhaps were not planned on by the administration. how does that impact how this plays out? shawn: i think the big question here is not just donald trump and his political situation, but xi jinping. he is looking to celebrate the
70th anniversary of people's republic come october, is unlikely to do anything too radical in these trade talks before then. we hav china that maybe they can wait things out and be more patient. xi jinping certainly doesn't have an election coming up next year like trump does. emily: you have tim cook meeting with the president on friday, making the plea that these tariffs don't hurt the company like samsung as much as they do apple. here the president saying it is for the greater good. do you think that the pleas of some of these companies will be heard? shawn: it is clear that the president had heard loud and clear tim cook's plea that if he was facing a tariff and his rivals at samsung were not, that
would put apple at a competitive disadvantage. that appeals to the president's businessman instincts. he doesn't like anything that puts an american business at a disadvantage. but at the same time, he is fully committed to his tariff policy, today raising the auto tariffs on imported cars from the european union just as he is headed to europe. the biggest thing we need to watch is the economic data going forward and what we see for u.s. gross domestic product in particular. we will get a second read of the second quarter figures coming next week on august 29. that and the direction of the economy will determine a lot more of what we see coming out of the white house in the weeks and months to come. emily: bloomberg's shawn donnan covering all the back and forth.
thank you so much for that update. meantime, antitrust regulators in the eu are already looking into facebook's digital currency libra. to be clear, this is a currency that still has not even launched, which has been scrutinized by u.s. and eu regulators alike. according to a document seen by bloomberg, the european commission is investing anticompetitive behavior here, concerns that libra could unfairly shut out rivals. this is not the only scrutiny libra faced. earlier this year facebook was grilled on capitol hill. we are joined by bloomberg tech's sarah frier and alastair mitchell, an investor in a number of early-stage tech companies with business in europe and the united states. explain to us what the eu is looking at. sarah: they are concerned, and reasonably so, that if the company controls this currency that could rival the u.s. dollar, that is way too much power to have. what facebook as said, this is
not just our product, this is a project with all these partners, there's a distributed network of people who will help on this. emily: some of those partners have kind of backed away. sarah: or refused to raise their hand. yes,could come out and say we stand behind facebook, but facebook has all the recognition in being innovative and creating this. there is a little bit of tension behind the scenes. alastair: i think the first angle from facebook's point of view, it shows the extent to theirtheir invitations -- ambitions in a post privacy world, this is a very ambitious move and the second thing is that it shows that stable coin alternative currencies are here to stay. this is no longer something for the future. facebook has been the leading
market, but they are not going in it alone. not only do they have to deal with the concerns of governments, but also their own central banks, who are figuring out whether they should be creating their own alternatives to fiat currency. that they are going up against technology companies that are coming up with their own version. we have invested in one called token x. it is going to be a very crowded world, despite the size of facebook's user community. emily: you already have the doj investigating big tech for antitrust. you've got the ftc investigating facebook specifically over antitrust. you have state attorneys general looking into big tech as well, and facebook decides to unveil libra. do you think they made a major miscalculation in trying to do this now? alastair: i think they have to do it. if they didn't do it now, somebody else would do it. i think the scale of their ambition is very high. they can't control some of those timings, but what has gone on in
the privacy world, some of what the device manufacturers and browsers have done to control bid on ads, and some of the legislative things in europe and now in the u.s. and california, they have to. i think we are seeing a shift from the tradition of the last 10 years, selling access to people for ads. it is a dramatic change for these big tech players, especially facebook. if they don't move into this area, the revenue streams will go away. emily: when the eu says they are worried about anti-competitive behavior as it pertains to cryptocurrency, what are they worried about sense libra doesn't exist? sarah: they are worried about facebook being this massive global power. 2.7 billion people use one of the facebook properties, that is a tremendous amount of influence over what they read and prioritize in their lives. we have seen scrutiny from all
angles and we will continue to, because facebook is still growing. they are not a dying brand by any stretch. i think that now that regulators understand that power, it is going to come down on them on the privacy angle still, it will be on the election interference angle, the propaganda angle. everything that they do will be subject to potential investigations and hearings and extra scrutiny. emily: you are invested in alternatives to libra. explain what the competition is great alastair: essentially the condition is saying in a world where traditional currencies go away, we want alternatives to the way we transfer money. that starts with foreign currencies. we have already had companies, out to make it easier to ship to one country and send money back. paymentst -- makes
less frictionful. that is something where the countries get very concerned because you manage your own currency. it is called a stable coin. then you have banks coming out to make their own version and then you have the central banks themselves worry about it. all of this is pointing to a future where currencies will be much more fragmented. the way we transact money will change. that is not just things like libra, but also things like open banking in europe. that is a huge change. credit card companies are petrified what that will do if i can just move money from bank to bank. change is happening at multiple levels, and libra is another example. emily: how do you compare the u.s. regulatory approach to europe? europe was on the leading edge of scrutinizing big tech, then the u.s. followed, now you see europe following the u.s. on cryptocurrency. alastair: europe had a reputation for being anti-tech or anticompetitive.
i think what they have seen is it has been more able to intervene in areas where they are trying to protect consumers. data was the first part. the u.s. brushed it off but then california made some rules, and that has led to a change in technology. apple followed that even further. effect, an even bigger which is they have actually stopped people being able to advertise and attract users the way they used to with cookies. that has been devastating for the likes of facebook and google. it has given rights back to the publishers. the needle has really swung. it has been interesting to watch. it started in europe, moved to the u.s., now the big tech companies. emily: how does this impact how you are advising your portfolio companies? alastair: first of all, we advise our companies to work hand-in-hand with the regulators and much more close contact rather than just to take them on. there was a time when the
central bodies were not as educated on technology as they are now. the second thing, we are interested in looking for opportunities for new companies to come in. what will be the facebook in a post privacy world? what is the alternative when we don't use google pay for ads anymore. what are the new technologies coming forward? new companies in the data and advertising world, transforming it. any change like this is a huge market opportunity. emily: sarah, what are next steps in the eu? sarah: the eu is on the leading edge of antitrust data and scrutiny. but there is still going to be a lot of question about whether they will take action that will actually hurt facebook in those areas. we have seen some really interesting arguments about data in europe as a form of currency, really. facebook has been able to join
up the data from all of its different properties into one organism. the ftc chair just came out and said that will make it harder for them to be broken up in the u.s.. the next thing to watch for, are some people going to ask facebook to not make that change, or are they already? alistair: or could they stop something like libra if they can't ultimately do anything on the other side? emily: so much more to follow and discuss. alistair mitchell and sarah frier. thank you both. coming up, streaming strategy. details on apple's new tv and movie subscription service are trickling out. how the tech giant plans to compete in the already crowded space. this is bloomberg. ♪
emily: apple's transition into a services company continues. on tuesday apple launched its credit card with goldman sachs in the united states. people with iphones running the latest software can apply for the cards by using the wallet app. this comes a day after apple announces they plan to roll out a subscription tv streaming service by november. we are joined by bloomberg tech's mark gurman. what are you reporting about apple tv? mark: apple is ramping up its work on this new service, a key part in their initiative to launch a lot of services to augment slow sales of hardware products. we are expecting a launch between october and november. one of the price points they have been considering internally is $9.99 a month. that was lineup with apple music and apple news plus, but i think it will come in quite below that in the end, given that they don't have the content library
like netflix and disney have. emily: which would be less than netflix, and disney is starting out low as well, around seven dollars. mark: i think apple will come in quite lower, in the form of discounts, trials, bundles. apple's service at least right now is not up to par with the likes of netflix, amazon, and disney. emily: apple is reportedly setting aside $6 billion to spend on original content. two seasons of "the morning show," the much-anticipated show with jennifer aniston and reese witherspoon, that is $300 million alone. -- ande knew initially this was a couple years ago -- apple set aside at least a billion dollars to do this. what they found out during the development of these shows, needing the top talent from oprah, steven spielberg, jennifer aniston, reese witherspoon, that costs a lot of money. $300 million on two seasons.
getting to $6 billion should not be so difficult. i have seen a few people being skeptical about that number. it also makes sense why apple would want that number out there is because it sets high expectations. emily: dan ives joins us on the phone. what do you make of these new details? weighing a possible price, unveiling of the service in november and apple spending $6 billion on original content, compared to netflix, which is $14 billion. for apple, you could say this is just an experiment still or a side business while that is netflix's bread and butter. dan: no doubt. i think right now, apple needed to significantly step up content. i think this is all about a drum roll into the major release later this year. this is key to the services business, and we think the opportunity is 100 million consumers in the next three to
four years. that is really the golden goose for cook and cupertino. right now services is key to the growth. that is really fuel in the engine for apple going forward. emily: apple card now available. i know some folks who have already signed up. they say it is a super simple, straightforward process. maybe that is only if you have good credit. [laughter] mark: should i get my apple card out? emily: let's see. you have yours. how has the rollout been? mark: this is the metal card. emily: there you go. mark: the cash back today, it was an interesting announcement, 3% back on uber. it makes it competitive. if they do more of these deals, that would mean this is a great card at no annual fee for a lot of people. emily: how optimistic are you about apple card? dan: apple card will be a bit of an uphill battle for them to get significant opportunity.
toause right now, it comes -- as retailers come on, what the incentives are, that is what i view as more in the background. right now, the focus is on the tv and distribution service. i do believe you will see more of a focus on the finance and banking side. i think this is just the tip of the iceberg in terms of what we are seeing on the card. you can see more details in the launch later this year. emily: apple pay, for example, started out as a very small business and has very slowly, but surely gained a lot more traction. it has almost been like a sneak attack over the last few years. could apple card be the same? mark: i think a lot of people who use apple services will use the apple card to pay for those. you get the cash back, it is all in one place, you can basically have a credit card to pay for everything apple. i think it will be the default card for apple pay. i think the apple card will go as far as apple pay goes and
emily: the founder of chinese telecom giant huawei is warning that the company is at a live or die moment. being in internal memo, he urged employees to form a so-called commando squad to explore new projects. he said workers who fail will have their salaries cut and may even lose their jobs. the uncertainty caused by u.s. sanctions has hammered huawei's smartphone business. uber was hit with a renewed antitrust challenge as it awaits a verdict on similar claims in
massachusetts. cab company has accused -- has a monopolization lawsuit against the ridesharing giant. they accuse uber of dominating the san francisco market by relying on their venture capital warchest "to weather losses while they undercut traditional taxis with undercut prices." fortnite has appeared to hit a speed bump. the shooting game is actually slowing down. revenue fell 38% in may. fortnite's publisher, epic games, hopes it has the solution. the company is more competitions after the success of last month's world cup. that tournament attracted more than 40 million players. coming up, hacking the vote. we will talk to one cyber expert who has broken into voting systems himself. find out what he thinks can be done to stop that from happening again. that i nexts -- is next.
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emily: this is "bloomberg technology." i'm emily chang in san francisco. ransomware attacks on the rise, this time in the state of texas. 23 small towns have fallen victim to hackers. while officials have declined to name all of the zones where official computer systems were hijacked, we know keene, texas has been hit by an attack. this follows similar attacks took place in baltimore and atlanta that saw systems like credit cards and email servers go dark. joining us to discuss this trend and much more on the world of digital threats is harri hursti, a whitehat hacker and the
founding partner of the cybersecurity firm nordic innovation labs. you may remember him from the award-winning hbo documentary, where he hacked u.s. voting machines and actually demonstrated that election results could be changed. he joins us from new york. thank you so much for joining us. let's start today with texas. what is your take on what is happening in texas and the rise of ransomware attacks on states in general? harri: almost every attack that happened to the public sector has an element of phishing. basically these are all sophisticated in the human hacking cents. technically sophisticated, but it is about the lack of human firewall. it is about triggering our human instincts to dictate how we behave against our best interests. it is all about how you trigger the humans to do your dirty bidding.
really, we have been trying to do technological barriers, but in the area of humans and how we protect humans, we have a long way to go. as long as we don't figure out that, these incidents will be growing. these are growing rapidly now. if you look at the number of breaches in last records from the first six months of this year, almost 50% up. ransomware, that is going to become much more sinister as time goes by. emily: what do you mean by more sinister? what are these sort of worst-case or even realistic scenario? harri: we humans are always worry about what is stolen. everything that is reported today is about how many records were compromised or stolen. but we are not looking at the other alternative, which is something left behind. what happens if there is false data getting inserted? you could cause a lot of havoc with that. loss of confidence, misinformation, ruined lives.
that is the question here. if you start from stealing, blackmailing people, holding their data as ransom, blackmailing them with something they don't want to be put in the public, and instead you insert data and start compromising that way, that gives a completely new avenue for people in that crimeware business to compromise people and get them to pay. emily: 15 years ago, you personally showed voting machines could be hacked and the results of the vote itself could actually be changed. how easy is it to hack voting machines today? certainly, technology has improved, but so has the ability of a hacker. harri: unfortunately, that technology has not really improved much. the same machines which i and others hacked in 2005, 2007, those same machines are still in use.
there was a lawsuit in georgia they did not patch a vulnerable version that was still in use. that improvement has not been as great as it should be. there has been a lot of improvements in the area of security, introducing paper ballots, limiting audits. we have a long way to go in the area of security of infrastructure. also, we have introduced new technology in the area. electronic poll books, we don't really have real standards established. there is a new technology which new attackoors and surfaces. emily: state election administration officials have said they are concerned. they say they are not getting enough money. how vulnerable would you say the u.s. presidential election is currently to hack attacks, and what are the biggest threats? harri: people have in their mind
the idea that you have an election office and it has an i.t. department. in reality, the way the i.t.ology is you have an department that happens to run the elections, one with a very strong security team. however a lot of election offices do not have a single full-time i.t. person. elections are massively under resourced and underfunded. it is very unfair, because the attacker just needs to get one thing where they can get in and the defender has to get all the million doors closed. it is a fundamentally asymmetric gain. when you see the most well-funded being pitched all the time. the current number is 3.2 billion records compromised, you can see how unfair the game is. the local jurisdictions, the states need a lot more resources and money is one way of creating
those resources. that being said, a large part of the problems we see today was created by money. in 2002, there was a rush and a lot of the machines were put in place in a hurry and they were not security standards and not documented best practices. next time when you fund it, this time we have to make sure the security standards are existing and enforced. emily: what would your message be to the white house and to congress? the president has expressed his own opinions about whether or not the russians actually hacked our election. and congress holds the purse strings and has the ability to give more money to the states and the states say that money is not coming. harri: more resources. some of the resources goes to technology. some of the resources needs to be in developing and training and getting human resources in place.
it is very obvious more funding is needed. also, bear in mind most of the infrastructure, a large chunk of the infrastructure was bought in 2002, 2003, 2004. those machines are old and tired. just from the machines, they are at the end of life. there must be a time when a reinvestment is happening and the whole infrastructure gets overhauled and modernized, either step-by-step or one goal. there is no way around it because the natural lifetime of these machines are coming to an end. emily: all right, lots to examine as we get closer to 2020. harri hursti, thank you for sharing your perspective with us. it is fascinating. ok, meantime, youtube is finalizing plans to end targeted ads on videos directed at kids. the move comes as the u.s. federal trade commission investigates whether the video
ldren's online privacy act, which bars companies from tracking kids online and serving them targeted behavioral ads. the agency reached a settlement with youtube, but did not release the terms. the change could immediately impact youtube's ad sales and google's bottom line. joining us to discuss, mark bergen. as i read your story, i thought whoever thought it was a good idea to collect data on children and target ads to them in the first place? mark: according to google and youtube, they are not collecting data on children and not targeting them with ads. they have this massive catalog and library. every time you and i watch a baby shark video, which i have they --ot of, emily: still watching baby shark videos? mark: we will probably see a targeted ad based on the websites i have visited, the loads of data google has collected on me. those are more effective ads and they are higher priced. that is what youtube has been
doing for years. they built up this massive ecosystem where they have thousands of people that make these youtube videos that earn their living's and make millions of dollars based on this advertising. emily: what is the ftc looking at the claims they never targeted ads to children? mark: for google shareholders, it is probably the best outcome. --re have been reports complainants said youtube should move everything to the kids app, which is designed for kids under 13 and doesn't serve targeted ads. the ftc commissioner said what if we just don't run ads on youtube videos aimed at kids? this is a solution. it seems like they are able to run ads, but not targeted, not using consumer digital data. emily: how much could that dent youtube's ? -- bottom line? mark: we don't know.
an analyst said, he estimated about 10% of youtube's kids media, $750 million, arguably less than 10% of overall youtube sales. there are other estimates that say the kids media on youtube is a much bigger slice of pie. emily: bloomberg's mark bergen. we still don't know where that ftc settlement actually landed, right? mark: the expectation is a record fine. probably north of $100 million. probably something google could shake off. emily: mark bergen, thank you so much. coming up, as global trade tensions escalate, some investors have found shelter in cryptocurrency, but is bitcoin really the safe haven advocates claim it to be? we will discuss the latest in crypto, next. this is bloomberg. ♪
emily: amid global trade tensions and economic slowdown, crypto enthusiasts have pointed to bitcoin as a safe haven. but the cryptocurrency is quickly losing the title. after rallying while u.s. stocks plunged this month, bitcoin sank over 15% last week. volatility continued into this week. cryptocurrency is now 45% below its high in 2017. joining us to discuss, blockchain capital general partners' spencer bogart in new york. we have bloomberg's mike mcglone who covers cryptocurrencies.
mike, walk us through the ups and downs for bitcoin over the last seven to 10 days. mike: consolidation. i think it is failing its -- filling its gains. about 14,000, and just pulled back to about 9000. it is basically retracing the bear market from 2018, but it went too far, too fast. it is up 200% on the year. the broader market, like the bloomberg galaxy crypto index is only up 60%. it is bitcoin breaking away from the pack. emily: is it a safe haven or is it like any other asset? spencer: longer-term, bitcoin will absolutely be a safe haven. as it grows, bitcoin evolves as it goes. right now, it is in this intermediate state right now where you have to think about what are the risks and how severe are they? i think when you have looming risks of monetary devaluation, bitcoin looks very attractive and i think that was a large driver of the recent run-up in price. when you think about really
severe crises taking place, a liquidity crunch, another global financial crisis, i think bitcoin will struggle to do well from a price perspective. i think it will continue to work well from utility perspective and bitcoin can withstand bank closures, etc. it can continue to function well. but longer-term, i think it will continue to evolve into a safe haven status. emily: don't buy bitcoin now? is that what you are saying? spencer: i think bitcoin will be worth a lot more in two to three years now than today. the exact price children three over the next few months is t.b.d. i am not convinced we have a full economic crises on the horizon now. emily: meantime, we have the eu scrutinizing facebook's libra. we have competitors emerging. we have binance trying to create a competitor to libra. what do we know about those plans? mike: every time i hear about a new stable coin like the latest from binance, it creates a
greater disparity in bitcoin for the rest of the market. it makes bitcoin become more like digital gold, because it is so unique. it is no one else's liability and it separates from the pack. those other stable currencies are what is needed, because most of the other cryptocurrencies do not do what they are supposed to do. they are not going to be used for day-to-day transactions. bitcoin is more like gold. as far as scrutiny, it helps bitcoin increase the pushback in some of the -- the term i have been using is the gaggle of 2400 other crypto's. like gold, it is unique among commodities. emily: how is this whole libra situation impacting the broader market? spencer: i think a lot of libra's partners and other large financial institutions, tech companies have been taking a wait and see approach towards cryptocurrency and bitcoin in particular. i think libra has kick started things. we need to start being proactive
because if we are not, someone else will be. we are seeing a lot of large financial institutions and tech companies working on initiatives behind the scenes to either offer access to bitcoin or other ways embrace cryptocurrency read emily: what is your over-under on when libra is ever launched? spencer: the concerns are so disparate in terms it is too private, not private enough, too open, not open enough. it will be difficult for them to thread the needle of the regulatory concerns. this circles back to the burden of asking for permission instead of asking for forgiveness. one of the reasons why we are so constructive on startups in this space that can get out there and win over users and ask for forgiveness later once the utility is demonstrated. i think facebook is in a tough situation for that. emily: is facebook really the company to be asking for forgiveness later? spencer: not right now. emily: mike, talk to us about the dynamic as this libra stuff plays out.
you have a lot of volatility in the market. the whole china trade situation. what are you watching for some sort of signals as to how the crypto market in general is going to perform? mike: volatility is a key thing. volatility in bitcoin is virtually guaranteed to reach new lows. you look at the 180-day volatility, about 40% from october of 2015. that marks the bottom of the market and it took off. with more and more vehicles coming on space, all of the ways people are getting involved with bitcoin, the volatility is guaranteed to get suppressed, which i think it is doing right now. good support around 8000. it could be stuck in that range endlessly, which would should put volatility low which makes it much more like gold. the key thing i watch is transactions and addresses used and those things that really signal the bear market last year, bullish this year and they really curtailed.
it tells me we are in extended hibernation in the price of bitcoin. emily: where is the crypto market a year from now? spencer: we will see a lot more users of bitcoin. we will see more nodes that support the network, more miners processing transactions. the important thing between now and then is that we have a new issuance of bitcoin created. that will create a little bit of a change in the stock to flow ratio and will drive the price a little higher. emily: spencer bogart, blockchain capital gp, thank you so much. as well as bloomberg intelligence's mike mcglone. we will continue to follow. still ahead, wework blasted. we will hear why one analyst is taking the company to task and issuing a warning about their ipo prospectus. that is next. this is bloomberg. ♪
emily: strong words about wework's ipo filing. an analyst who specializes in new listings called it a masterpiece of obfuscation. rett wallace says wework must've put in great effort to conceal the underlying economics of the company. one of wallace's issues, wework labeled some compensation as investments. the company is not commenting. let's take a listen to what he had to say about this on bloomberg television earlier. rett: the thing about wework is
it is a businesslike uber we should be able to understand easily. we rent big office space from landlords and we add glass, ping-pong and beer. we rent it out for a different price and we have money left over when it is done. the thing that is a challenge about this document, 383 pages later, i found myself more confused about what the actual economics are. the only reason this is a particular issue for this company is the burden of proof. if you lose $1.6 billion on the bottom line, you would think you would be motivated to make it easy for investors to understand why they should hand over $3.5 billion more to you, but they decided they don't have to do that. >> you talk about the top and bottom line. i want to run down that income statement, because you talked about one of the issues of cfa. one of the issues you said was the reclassification. sales and marketing expenses into operating expenses two years later, even though technically that expense
fundamentally has not changed. is that a margin story, or why that reclassification? why does that concern you? rett: it is not an obfuscation story -- they could make it easier to understand this. understand? easy to the basic proposition is super simple. to take, to recategorize an expense at the unit level into a different cost bucket, even though they have hundreds and hundreds of units and you don't break them out, so you cannot tell. is that expense really high, is it really low? we don't know the vacancy rates over time. how much work is it to keep those places full after 24 months? we don't know. the other thing we don't know is they talk about their memberships over time as if no one ever left. of course people leave wework all the time. how often do they have to replace those desks? none of that is clear in the filing. i think it means if somebody is taking about what are the long-term cash flow characteristics of this business, it makes it harder to understand. it is murky.
it pains to say that the money so far in this company comes from softbank, fidelity, benchmark -- these are smart guys. they have seen numbers that make them comfortable handing over lots of money. the only question i think this document phrases for us is why can't we see what those guys have seen, because clearly this story is not a slamdunk. >> this is perhaps not rare that it is not always the clearest in the ipo perspective. the fact you have an index to rate individual ipo's -- rett: it is the most correlated of all of the pieces of the index aftermarket performance. >> generally, the stat is if you do well, your shares do well. your indices, if you show well on an obfuscation index, your shares tend to outperform. who has done badly? who does not tend to do well in the ipo's we have seen? rett: negative correlations -- obfuscation is good for the stock going down. the other thing is fame and buzz
is another index. it turns out fuzzy stocks tend to be overpriced. the other thing is fancy investors. if you have fancy investors in your cap table -- >> too fancy. rett: on the one hand, the lowest would be like uncle bob, and the highest would be warren buffett. >> having softbank and fidelity isn't a ringing endorsement. rett: it could mean you are overpriced. in the interesting case of wework, they seem to be signaling they will ask for a price that is lower than their last public price, which uber ended up doing. these guys are fast forwarding to the let's not talk about $47 billion, let's go for some other lower number. emily: that was rett wallace. the justice department has gone to court to block sabre's $360 million acquisition of farelogix on antitrust grounds. sabre is the largest booking services provider in the u.s. the government says the deal would allow sabre to eliminate a
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