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This is Bloomberg Business Week, insight from the reporters and editors that bring you America's most trusted business magazine, plus global business, finance and tech news as it happens. Bloomberg Business Week with Carol Masser and Tim Stenovek on Bloomberg Radio.

This is Bloomberg Business Week, insight from the reporters and editors that bring you America's most trusted business magazine, plus global business, finance and tech news as it happens. Bloomberg Business Week with Carol Masser and Tim Stenovek on Bloomberg Radio.

All right, everybody, yes, indeed, this is Bloomberg Business Week. I want to talk a little bit about Apple. Apple shares have had a challenging start to twenty twenty five, investors freighting over weakness in the critical Chinese market, the shares falling for five strade sessions before Monday's bounce, in the longest losing streak since April. They've been pressured by China's smartphone data, which Alice said pointed to weaker iPhone shipments and a router's report that Apple is offering discounts in China. A lot going on. Noticing it all and weighing in Moffatt Nathanson, which today downgraded the iPhone maker to sell, citing high valuation, antitrust, overhanging weakening position in China, the firm setting a price target of one hundred and eighty eight dollars a share, which before today's open implied a twenty three percent decrease. Craig Moffatt, founding partner and senior Alset Moffat Nathanson, joining us in New York City. Craig, so great to have you here with us. We kind of laid out what your call was all about, but walk us through a little bit more deep more deeply the specifics around that downgrade, because not a lot of people do cell ratings, especially on a name like Apple.

All right, everybody, yes, indeed, this is Bloomberg Business Week. I want to talk a little bit about Apple. Apple shares have had a challenging start to twenty twenty five, investors freighting over weakness in the critical Chinese market, the shares falling for five strade sessions before Monday's bounce, in the longest losing streak since April. They've been pressured by China's smartphone data, which Alice said pointed to weaker iPhone shipments and a router's report that Apple is offering discounts in China. A lot going on. Noticing it all and weighing in Moffatt Nathanson, which today downgraded the iPhone maker to sell, citing high valuation, antitrust, overhanging weakening position in China, the firm setting a price target of one hundred and eighty eight dollars a share, which before today's open implied a twenty three percent decrease. Craig Moffatt, founding partner and senior Alset Moffat Nathanson, joining us in New York City. Craig, so great to have you here with us. We kind of laid out what your call was all about, but walk us through a little bit more deep more deeply the specifics around that downgrade, because not a lot of people do cell ratings, especially on a name like Apple.

You're right, Hi, Carol, thank you for having me. I think you put it right. This is largely a evaluation call, so I want to be clear Apple. We wouldn't argue with anyone who says Apple is a great company. We think that their AI strategy is a very sound strategy. I love the appeal of the fact that Apple has a low capital intensity approach to AI, that they have the trust of customers, and on and on. They have a lot of advantages. No one would dispute that. But it's trading at thirty three and a half time's earnings, and one way to think about it is just think about the PEG ratio, if you will, the ratio of growth rate of the multiple to growth rate. It's trading at a PEG ratio north of three. The rest of the MAG seven trades at a PEG ratio of around two. So you're talking about a fifty percent premium even to the peers within the MAG seven. That just doesn't make sense. Given what are some very material risks, and you mentioned some of them. China is a very real risk, not just because the Chinese government, for obvious reasons, is going to be disinclined to allow Western language models in China, so you're going to have to have a domestic partner and share economics with now, but also because the Chinese handset competitors have gotten much stronger. Another risk that is not discounted in the stock rice at all is the anti trust risk you and here I'm not talking about the anti trust risk in the cases against Apple, although there are plenty of them. The real anti trust risk that's very approximate is the risk in the Google case, where.

You're right, Hi, Carol, thank you for having me. I think you put it right. This is largely a evaluation call, so I want to be clear Apple. We wouldn't argue with anyone who says Apple is a great company. We think that their AI strategy is a very sound strategy. I love the appeal of the fact that Apple has a low capital intensity approach to AI, that they have the trust of customers, and on and on. They have a lot of advantages. No one would dispute that. But it's trading at thirty three and a half time's earnings, and one way to think about it is just think about the PEG ratio, if you will, the ratio of growth rate of the multiple to growth rate. It's trading at a PEG ratio north of three. The rest of the MAG seven trades at a PEG ratio of around two. So you're talking about a fifty percent premium even to the peers within the MAG seven. That just doesn't make sense. Given what are some very material risks, and you mentioned some of them. China is a very real risk, not just because the Chinese government, for obvious reasons, is going to be disinclined to allow Western language models in China, so you're going to have to have a domestic partner and share economics with now, but also because the Chinese handset competitors have gotten much stronger. Another risk that is not discounted in the stock rice at all is the anti trust risk you and here I'm not talking about the anti trust risk in the cases against Apple, although there are plenty of them. The real anti trust risk that's very approximate is the risk in the Google case, where.

Explain explain that risk to Apple? How is that? How is Apple at risk?

Explain explain that risk to Apple? How is that? How is Apple at risk?

Because twenty five percent of apples operating income comes from payments from Google, and the judge in the Google case has specifically said those payments are illegal. Now, you can imagine that there are outcomes where where they still pay some or all of that, but you can't pretend that there's no risk at all when the judge has already said that Google is guilty and the payments they make to Apple are illegal. I mean, that's twenty five percent of Apples operating income. It's it's twenty five billion dollars a year. And so the point we were making in this morning's downgrade, and again, I love app just as much as everybody else, but there are very real risks that are simply not appropriately discounted in the multiple that Apple is being awarded right now in the market.

Because twenty five percent of apples operating income comes from payments from Google, and the judge in the Google case has specifically said those payments are illegal. Now, you can imagine that there are outcomes where where they still pay some or all of that, but you can't pretend that there's no risk at all when the judge has already said that Google is guilty and the payments they make to Apple are illegal. I mean, that's twenty five percent of Apples operating income. It's it's twenty five billion dollars a year. And so the point we were making in this morning's downgrade, and again, I love app just as much as everybody else, but there are very real risks that are simply not appropriately discounted in the multiple that Apple is being awarded right now in the market.

I want to zero in on the China risk and what exactly is because this is a story we've been talking about for years. At this point, Craig like concern that, you know, Chinese consumers are not going to buy as many Apple devices as they have previously. Switching costs are pretty switching barriers are pretty low in China because of these you know, over the top third party apps. People don't get locked into the iOS ecosystem like they do in other countries because of we Chat, et cetera. What's going on in China in your view.

I want to zero in on the China risk and what exactly is because this is a story we've been talking about for years. At this point, Craig like concern that, you know, Chinese consumers are not going to buy as many Apple devices as they have previously. Switching costs are pretty switching barriers are pretty low in China because of these you know, over the top third party apps. People don't get locked into the iOS ecosystem like they do in other countries because of we Chat, et cetera. What's going on in China in your view.

Well, I think the biggest thing that's going on in China is that the other handset manufacturers, Huawei, Honor and so on have gotten much better. If you went back to the last big iPhone cycle, which was the five G cycle in circa twenty twenty one, the Apple competitors at the time were significantly weaker than they are today. And interestingly, Huawei in particular, because the government of the US put sanctions on Huawei and limited Huawei's access to chipsets and that sort of thing, Huawe has had to sort of reinvent itself with domestic technology, and they've done a really good job. The handsets that they make are now fully competitive. They are not a replacement for Apple. I'm not suggesting that they are, but they have a really competitive offering, and so the market share opportunity for Apple is simply not what it was in the last big cycle. But you also have this time the government's thumb on the scales, and there's a couple of ways for that. One is, as I said, you're simply not going to have the Chinese Communist Party saying it is acceptable to have Western lms answering questions like what happened at Tianneman Square. So you're going to have to have domestic partners or in order to be able to offer AI, and that means a different margin structure and what have you. You also have a very real risk from tariffs. And it's not just in fact, not even primarily that Apple itself imports almost all of its components, and in fact today imports all of its handsets mostly from China because they're assembled there. Even if you even if they are exempted as they were during the last Trump administration, you have the risk of retaliatory tariffs in response to American tariffs that could be related to the auto market or completely unrelated categories, but where foreign governments respond by putting tariffs on a company that is obviously quite highly identified with the US. So again I don't want to suggest that any of these risks are base case risks. It's not like there's a sixty or seventy percent chance that any one of them will happen. But if you have all of these potential risks, all of which are not shouldn't be described as sort of a tail risks. These are really real possibilities. In all of these cases that there are negative outcomes and they ought to be reflected in the multiple of the stock with a more sober multiple, and they simply are not.

Well, I think the biggest thing that's going on in China is that the other handset manufacturers, Huawei, Honor and so on have gotten much better. If you went back to the last big iPhone cycle, which was the five G cycle in circa twenty twenty one, the Apple competitors at the time were significantly weaker than they are today. And interestingly, Huawei in particular, because the government of the US put sanctions on Huawei and limited Huawei's access to chipsets and that sort of thing, Huawe has had to sort of reinvent itself with domestic technology, and they've done a really good job. The handsets that they make are now fully competitive. They are not a replacement for Apple. I'm not suggesting that they are, but they have a really competitive offering, and so the market share opportunity for Apple is simply not what it was in the last big cycle. But you also have this time the government's thumb on the scales, and there's a couple of ways for that. One is, as I said, you're simply not going to have the Chinese Communist Party saying it is acceptable to have Western lms answering questions like what happened at Tianneman Square. So you're going to have to have domestic partners or in order to be able to offer AI, and that means a different margin structure and what have you. You also have a very real risk from tariffs. And it's not just in fact, not even primarily that Apple itself imports almost all of its components, and in fact today imports all of its handsets mostly from China because they're assembled there. Even if you even if they are exempted as they were during the last Trump administration, you have the risk of retaliatory tariffs in response to American tariffs that could be related to the auto market or completely unrelated categories, but where foreign governments respond by putting tariffs on a company that is obviously quite highly identified with the US. So again I don't want to suggest that any of these risks are base case risks. It's not like there's a sixty or seventy percent chance that any one of them will happen. But if you have all of these potential risks, all of which are not shouldn't be described as sort of a tail risks. These are really real possibilities. In all of these cases that there are negative outcomes and they ought to be reflected in the multiple of the stock with a more sober multiple, and they simply are not.

Craig our Apple device is not seen as having the same allure to the Chinese consumer as they once did.

Craig our Apple device is not seen as having the same allure to the Chinese consumer as they once did.

You know, I don't know that that's the case. There are still Apple is still a brand with real cachet in China. But you know, remember you now have Huawei introduced a trifold phone for where you have Samsung devices that have had foldable screens for a long time coming in from Korea. So the gap between Apple and its competitors is not what it once was. There's just there's simply no way to argue that that's not the case.

You know, I don't know that that's the case. There are still Apple is still a brand with real cachet in China. But you know, remember you now have Huawei introduced a trifold phone for where you have Samsung devices that have had foldable screens for a long time coming in from Korea. So the gap between Apple and its competitors is not what it once was. There's just there's simply no way to argue that that's not the case.

You know your report, You know, pundents you have watched Apple stockgrind higher of the last several months have shrugged off the appreciation as a melt up on known news. But that's not quite right. And you go, there has been a lot of news, right, it's just all been bad. Why them melt up? Then? Why does everybody I don't know, maybe it's a stupid question, but why does everybody continue to chase it and send it higher? When there are some real threats in terms of, as you said, the DOJ case against Google, that would really take out a big chunk of kind of the financial or the balance sheet right of that company, of Apple specifically. So why does everybody kind of continue to support it, Why do they chase it? Why is there the melt up?

You know your report, You know, pundents you have watched Apple stockgrind higher of the last several months have shrugged off the appreciation as a melt up on known news. But that's not quite right. And you go, there has been a lot of news, right, it's just all been bad. Why them melt up? Then? Why does everybody I don't know, maybe it's a stupid question, but why does everybody continue to chase it and send it higher? When there are some real threats in terms of, as you said, the DOJ case against Google, that would really take out a big chunk of kind of the financial or the balance sheet right of that company, of Apple specifically. So why does everybody kind of continue to support it, Why do they chase it? Why is there the melt up?

You know, it's a great question. Now, first I should be clear, you know, although the stock has climbed higher and higher over the last few months, it's only traded in line with the market. So to some degree, this is an indictment of the way the market overall is pricing equities right now, particularly in the face of rising interest rates in therefore appropriately higher discount rates. It's but I suspect Carol, that the real issue here is is that there is this narrative that Apple is the quote unquote safe choice among the mag seven, and that it is such a strong consumer brand, has such an unassailable franchise that it's the safe place to be. And while that's absolutely true operationally, it's not a safe place to be if it's trading at thirty three times earnings. It's a safe place to be if it's appropriately valued, but if it's if it's already being awarded an extraordinarily high multiple, nothing safe about that, even if it is a very strong business model.

You know, it's a great question. Now, first I should be clear, you know, although the stock has climbed higher and higher over the last few months, it's only traded in line with the market. So to some degree, this is an indictment of the way the market overall is pricing equities right now, particularly in the face of rising interest rates in therefore appropriately higher discount rates. It's but I suspect Carol, that the real issue here is is that there is this narrative that Apple is the quote unquote safe choice among the mag seven, and that it is such a strong consumer brand, has such an unassailable franchise that it's the safe place to be. And while that's absolutely true operationally, it's not a safe place to be if it's trading at thirty three times earnings. It's a safe place to be if it's appropriately valued, but if it's if it's already being awarded an extraordinarily high multiple, nothing safe about that, even if it is a very strong business model.

So if it gets down to one eighty eight that's your price target, do you change your rating and do you say, okay, now you can come in and buy, or do you kind of still wait and see.

So if it gets down to one eighty eight that's your price target, do you change your rating and do you say, okay, now you can come in and buy, or do you kind of still wait and see.

Well, we would certainly say that what you want to get to is you want to get to a price where it's fairly valued, and if it gets below that, then there's actually an opportunity to buy it. And I certainly wouldn't argue that Apple doesn't deserve an attractive valuation. It's a great company. It's just that when you start to get to thirty three times earnings and again a peg ratio of north of three, what that implies is that the market has already priced in an enormous amount of potential good news, and so you'd have to see something quite extraordinary to be able to say that over the next call it, one, two, three years, that the stock can actually deliver attractive returns given this starting point.

Well, we would certainly say that what you want to get to is you want to get to a price where it's fairly valued, and if it gets below that, then there's actually an opportunity to buy it. And I certainly wouldn't argue that Apple doesn't deserve an attractive valuation. It's a great company. It's just that when you start to get to thirty three times earnings and again a peg ratio of north of three, what that implies is that the market has already priced in an enormous amount of potential good news, and so you'd have to see something quite extraordinary to be able to say that over the next call it, one, two, three years, that the stock can actually deliver attractive returns given this starting point.

Okay, Craig, while we have you don't just cover Apple, you also cover Comcast, Echo Star, Charter, Altie, Verizon and more Charter Communications. It's your top pick for twenty twenty five, despite cord cutting accelerating, despite what's happening to PATV, Why is it your top pick?

Okay, Craig, while we have you don't just cover Apple, you also cover Comcast, Echo Star, Charter, Altie, Verizon and more Charter Communications. It's your top pick for twenty twenty five, despite cord cutting accelerating, despite what's happening to PATV, Why is it your top pick?

You know, it's funny in some ways, it is the exact antithesis of what we were just talking about with Apple. Charter and the cable stocks have been given up for dead, and so they are extraordinarily attractive valuations. And a company like Charter, remember, Charter was one of the best performing stocks in the S and P for a decade. It was out twenty threefold, I think over a decade when it was buying back a ton of stock and had a really attractive levered equity return strategy. They suspended that strategy for a while in order to invest really aggressively in rural buildouts, and the market has seen the free cash flow yield go down during that capital investment cycle. You could argue that those are actually pretty good investments, but the market hasn't found them as exciting as the old strategy of buying back stock. Well, they've already said they're largely getting to the end of that strategy, and so they will as CAPEC starts to come down, they're going to resume their stock buybacks in a very big way. And it's a company that we see growing in the load to mid single digits. Not sexy, but by the way, that's what Apple is growing as well, but growing in the load of call it low single digits. But it's priced for negative perpetual growth. And by our twenty twenty eight free cash flow estimate, we have this thing trading at a something like thirty three percent free cash flow yield on twenty twenty eight. That's an absurd, absurd valuation, and so I just think it's way too cheap and a really exciting opportunity at this price.

You know, it's funny in some ways, it is the exact antithesis of what we were just talking about with Apple. Charter and the cable stocks have been given up for dead, and so they are extraordinarily attractive valuations. And a company like Charter, remember, Charter was one of the best performing stocks in the S and P for a decade. It was out twenty threefold, I think over a decade when it was buying back a ton of stock and had a really attractive levered equity return strategy. They suspended that strategy for a while in order to invest really aggressively in rural buildouts, and the market has seen the free cash flow yield go down during that capital investment cycle. You could argue that those are actually pretty good investments, but the market hasn't found them as exciting as the old strategy of buying back stock. Well, they've already said they're largely getting to the end of that strategy, and so they will as CAPEC starts to come down, they're going to resume their stock buybacks in a very big way. And it's a company that we see growing in the load to mid single digits. Not sexy, but by the way, that's what Apple is growing as well, but growing in the load of call it low single digits. But it's priced for negative perpetual growth. And by our twenty twenty eight free cash flow estimate, we have this thing trading at a something like thirty three percent free cash flow yield on twenty twenty eight. That's an absurd, absurd valuation, and so I just think it's way too cheap and a really exciting opportunity at this price.

Hey Craig, just one last question. You know, it's funny coming off the Golden Globes. I was kind of like, oh my god, it's just content coming from just all these different places and streaming and regular teeth. It's just kind of nuts. But I am curious as we look at where content's coming, in particular streaming other than Netflix, do you think the legacy media companies can navigate the change towards streaming.

Hey Craig, just one last question. You know, it's funny coming off the Golden Globes. I was kind of like, oh my god, it's just content coming from just all these different places and streaming and regular teeth. It's just kind of nuts. But I am curious as we look at where content's coming, in particular streaming other than Netflix, do you think the legacy media companies can navigate the change towards streaming.

In a clear way.

In a clear way.

And unfortunately just got about forty five seconds.

And unfortunately just got about forty five seconds.

Well, it depends what you mean. By can they navigate it, Will they survive? Of course? Will it ever be as good a business as the old legacy cable network business was and it's heyday. No, it's just not going to be as attractive a business because it's so much easier for customers to churn. That creates a less attractive revenue profile, a less attractive cost profile. But you will still have winners, and they may not be winners on the scale of Netflix. But Disney is still going to be all right in the in the streaming business. Again, it's just not going to be as good as the business that they are leaving behind.

Well, it depends what you mean. By can they navigate it, Will they survive? Of course? Will it ever be as good a business as the old legacy cable network business was and it's heyday. No, it's just not going to be as attractive a business because it's so much easier for customers to churn. That creates a less attractive revenue profile, a less attractive cost profile. But you will still have winners, and they may not be winners on the scale of Netflix. But Disney is still going to be all right in the in the streaming business. Again, it's just not going to be as good as the business that they are leaving behind.

Thank you, thank you so much. Really really enjoyed this, and happy New Year to you, really appreciate it. Craig Moffatt, founding partner and senior analyst, Debret Moffatt Nathanson joining us right here in New York City. If you missed any of it, be sure to check out our podcast feed a little bit later on. You can find it at Bloomberg dot com or on the Bloomberg Well.

Thank you, thank you so much. Really really enjoyed this, and happy New Year to you, really appreciate it. Craig Moffatt, founding partner and senior analyst, Debret Moffatt Nathanson joining us right here in New York City. If you missed any of it, be sure to check out our podcast feed a little bit later on. You can find it at Bloomberg dot com or on the Bloomberg Well.

Big news out of meta Platforms Today, the company is going to end a third party fact checking on its social media platforms in the US, letting users comment on post accuracy with a community note system that it said it will promote.

Big news out of meta Platforms Today, the company is going to end a third party fact checking on its social media platforms in the US, letting users comment on post accuracy with a community note system that it said it will promote.

Free expression that could go wrong.

Free expression that could go wrong.

Look over to x formerly known as Twitter, for example. A lot of questions around this name.

Look over to x formerly known as Twitter, for example. A lot of questions around this name.

Well say, what could go wrong?

Well say, what could go wrong?

Well, okay, there are a lot of questions around this. Yeah, political questions, what it's doing ahead of the next administration in the wake of yesterday's announcements with the board and new folks in public policy, but also what it's going to do to engagement. And the reason I'm talking about engagement is because that's what it's the core of meta platforms business model. Using the services we use them, then the services know who we are. They learn who we are, Advertisers can better target ads to us. It's data, it's algorithms, it's big data. That's the currency.

Well, okay, there are a lot of questions around this. Yeah, political questions, what it's doing ahead of the next administration in the wake of yesterday's announcements with the board and new folks in public policy, but also what it's going to do to engagement. And the reason I'm talking about engagement is because that's what it's the core of meta platforms business model. Using the services we use them, then the services know who we are. They learn who we are, Advertisers can better target ads to us. It's data, it's algorithms, it's big data. That's the currency.

Yeah. This is Sandra at Mats's Business and Her World. She's Associate Professor of business at Columbia Business School, the author of a new book out today, mind Masters, The Data Driven Science of Predicting and Changing Human Behavior. She joins us in our Bloomberg Interactive Booker studio. I'm so glad to have you here with us. Welcome, happy New year. Before we get into the book. I mean, when you hear this development from meta platforms, I don't know what's your reaction and what confidence do you have that we don't have a lot of misinformation and some problems as a result out of this.

Yeah. This is Sandra at Mats's Business and Her World. She's Associate Professor of business at Columbia Business School, the author of a new book out today, mind Masters, The Data Driven Science of Predicting and Changing Human Behavior. She joins us in our Bloomberg Interactive Booker studio. I'm so glad to have you here with us. Welcome, happy New year. Before we get into the book. I mean, when you hear this development from meta platforms, I don't know what's your reaction and what confidence do you have that we don't have a lot of misinformation and some problems as a result out of this.

I mean, I think I share your concerns of getting rid of content moderation, because, right, I think we've seen over the last couple of years what happens with misinformation, and just frankly, I think misinformation is just such a small piece of the entire puzzle because a lot of the information that's out there is not necessarily fake and not true, but it's just slant in right, So it's not necessarily that it's actually inaccurate, but it has like a certain angle and a certain spin that speaks to what we want to hear. And for me, that's even a bigger problem because it's much harder to regulate, right, it's much harder to take down from content moderators or as metas trying to do now just from a consensus among users. Right, that's an even higher bow when we think about these news that are maybe not actually inaccurate but certainly tailored to a certain opinion.

I mean, I think I share your concerns of getting rid of content moderation, because, right, I think we've seen over the last couple of years what happens with misinformation, and just frankly, I think misinformation is just such a small piece of the entire puzzle because a lot of the information that's out there is not necessarily fake and not true, but it's just slant in right, So it's not necessarily that it's actually inaccurate, but it has like a certain angle and a certain spin that speaks to what we want to hear. And for me, that's even a bigger problem because it's much harder to regulate, right, it's much harder to take down from content moderators or as metas trying to do now just from a consensus among users. Right, that's an even higher bow when we think about these news that are maybe not actually inaccurate but certainly tailored to a certain opinion.

Is this the way of the future, though, Are we sort of moving past this idea of a fact based society and one that's more based on interpreting what you see that's thrown at you. And I think it takes on a different The question takes on something different when you know, as I'm asking, I'm thinking about AI generated content and what we do know is real and what we don't know is not real.

Is this the way of the future, though, Are we sort of moving past this idea of a fact based society and one that's more based on interpreting what you see that's thrown at you. And I think it takes on a different The question takes on something different when you know, as I'm asking, I'm thinking about AI generated content and what we do know is real and what we don't know is not real.

Yeah, I think it's a risky gamble to think about this moving post or past what I think of shared reality, right, it's the idea that as a society, people living together, frankly, we can make sense of the world in a way that at least offers us the opportunity to have a discussion. And I think the moment that we entered this world where I have completely a completely different reality than you and we're not even discussing it because we're cut into in these echo chambers online right where I don't even see what you see, I think that's a really risky gamble because it's it's not even out there anymore. We don't have the public square anymore where we can say, well, this is something that you've seen, I've seen this, Well, what do you think is actually true? How should we be moving forward? I think that is what is what is missing?

Yeah, I think it's a risky gamble to think about this moving post or past what I think of shared reality, right, it's the idea that as a society, people living together, frankly, we can make sense of the world in a way that at least offers us the opportunity to have a discussion. And I think the moment that we entered this world where I have completely a completely different reality than you and we're not even discussing it because we're cut into in these echo chambers online right where I don't even see what you see, I think that's a really risky gamble because it's it's not even out there anymore. We don't have the public square anymore where we can say, well, this is something that you've seen, I've seen this, Well, what do you think is actually true? How should we be moving forward? I think that is what is what is missing?

Well, it's so funny, I think we thought social media. It's been great sparking all these conversations, but it's really kind of a one one you know, pathway dump if you will, right, and then you kind of have to deal with it. What I want to ask you is your book Mind Masters, The Data Driven Science of Predicting and Changing Human Behavior. I want to get into the predictability. Do you say that if we had really monitored social media we would have been able to predict the January sixth uprising? Could we have predicted some other things, you know, in terms of what has happened in society?

Well, it's so funny, I think we thought social media. It's been great sparking all these conversations, but it's really kind of a one one you know, pathway dump if you will, right, and then you kind of have to deal with it. What I want to ask you is your book Mind Masters, The Data Driven Science of Predicting and Changing Human Behavior. I want to get into the predictability. Do you say that if we had really monitored social media we would have been able to predict the January sixth uprising? Could we have predicted some other things, you know, in terms of what has happened in society?

Yeah, So what I'm mostly interested in is actually trying to understand individuals. So what you're talking about is like predicting these macro level trends, right, It's like how is the collective acting? And I do think that you might have been able to predict that, right, because it's this is all coming down to sentiment. It's like people are angry, people want to change, So the fact that people matters hands. It's like what we call social listening. It's trying to see what is it that people care about?

Yeah, So what I'm mostly interested in is actually trying to understand individuals. So what you're talking about is like predicting these macro level trends, right, It's like how is the collective acting? And I do think that you might have been able to predict that, right, because it's this is all coming down to sentiment. It's like people are angry, people want to change, So the fact that people matters hands. It's like what we call social listening. It's trying to see what is it that people care about?

And you talk specifically about something called psychological targeting, which I don't know that, tim have we kind of really, I don't know that I've heard that terminology. What is that? Yeah?

And you talk specifically about something called psychological targeting, which I don't know that, tim have we kind of really, I don't know that I've heard that terminology. What is that? Yeah?

So psychological targeting is the way in which algorithms can translate your data into psychological constructs. So it's really trying to make sense of you as a person. Right if I told you what, I can get access to everything you post on social media to maybe your credit card spending, your Google searches, the sensors that I'm betted in your smartphone which keep track youration via the GPS.

So psychological targeting is the way in which algorithms can translate your data into psychological constructs. So it's really trying to make sense of you as a person. Right if I told you what, I can get access to everything you post on social media to maybe your credit card spending, your Google searches, the sensors that I'm betted in your smartphone which keep track youration via the GPS.

Sense of for example.

Sense of for example.

It doesn't seem that intimate, but once I can tell you, well, I can translate these traces into an understanding of whether you might be extroverted, impulsive, neurotic, whether you vote for a certain candidate, your political orientation, your sexual identity. Those are all really intimate insights. And that is the cracks of psychological targeting. It's making use of AIM machine learning to translate data into human understandable profile.

It doesn't seem that intimate, but once I can tell you, well, I can translate these traces into an understanding of whether you might be extroverted, impulsive, neurotic, whether you vote for a certain candidate, your political orientation, your sexual identity. Those are all really intimate insights. And that is the cracks of psychological targeting. It's making use of AIM machine learning to translate data into human understandable profile.

Do you have to use AI and data? Because your book opens up talking about your own personal experience. The first eighteen years of your life spent in a very small village of what five hundred people, and an accident that you had that then immediately everybody knew about what's the connection between that and where technology is today and what tech can do?

Do you have to use AI and data? Because your book opens up talking about your own personal experience. The first eighteen years of your life spent in a very small village of what five hundred people, and an accident that you had that then immediately everybody knew about what's the connection between that and where technology is today and what tech can do?

Yeah, So I think it's absolutely right, and that the fact that we oftentimes observe people's behavior and make inferences about who they are isn't new. Right in this village that I grew up and people observe what I was doing, They saw me running to the bus every morning, and they probably figured out that I wasn't the most organized person in the world. And so the incident that you were referring to is essentially I had this motorcycle crash and the whole village knew about it.

Yeah, So I think it's absolutely right, and that the fact that we oftentimes observe people's behavior and make inferences about who they are isn't new. Right in this village that I grew up and people observe what I was doing, They saw me running to the bus every morning, and they probably figured out that I wasn't the most organized person in the world. And so the incident that you were referring to is essentially I had this motorcycle crash and the whole village knew about it.

Right, So in an instance, those.

Right, So in an instance, those.

New spread and it's not just like an isolated well this is what happened. It's like, Okay, I'm gonna now understand who Sandra is, and I'm going to use that knowledge moving forward to maybe push her in certain directions. But maybe she if she's not organized, maybe she's not the one that I want to rely on when I have to move my stuff and when I have to organize something that has to be perfectly done. So I think that the shift to the digital world just means that we have neighbors all around us, and they're not really physical neighbors. They're neighbors that are algorithms and they observe everything we do based on the data and then make very similar inferences.

New spread and it's not just like an isolated well this is what happened. It's like, Okay, I'm gonna now understand who Sandra is, and I'm going to use that knowledge moving forward to maybe push her in certain directions. But maybe she if she's not organized, maybe she's not the one that I want to rely on when I have to move my stuff and when I have to organize something that has to be perfectly done. So I think that the shift to the digital world just means that we have neighbors all around us, and they're not really physical neighbors. They're neighbors that are algorithms and they observe everything we do based on the data and then make very similar inferences.

Yeah, all right, So so I don't know that, you know, the horse is out of the barn, out of the social media barn. So I'm just like, I don't know where do we need to go or how do we then need to think about social media? I mean, I think I read that is it something that you did where you put I think all your social media down? I think it was a calumn for the times or something where you stepped away, Like, what is it that we need to do to maybe have a better way forward and maybe understand society at large.

Yeah, all right, So so I don't know that, you know, the horse is out of the barn, out of the social media barn. So I'm just like, I don't know where do we need to go or how do we then need to think about social media? I mean, I think I read that is it something that you did where you put I think all your social media down? I think it was a calumn for the times or something where you stepped away, Like, what is it that we need to do to maybe have a better way forward and maybe understand society at large.

I think it's a great question, and to me, it actually comes back to this analogy of the village, right because the fact that my neighbors knew everything about me, they knew my innovations, preferences, dreams, hopes, and so on, actually allow them to give the best advice ever because they knew me right, They really understood what I wanted, but it was also like a lot of room for manipulation. So what I've been thinking a lot about is like, how do we actually push towards this.

I think it's a great question, and to me, it actually comes back to this analogy of the village, right because the fact that my neighbors knew everything about me, they knew my innovations, preferences, dreams, hopes, and so on, actually allow them to give the best advice ever because they knew me right, They really understood what I wanted, but it was also like a lot of room for manipulation. So what I've been thinking a lot about is like, how do we actually push towards this.

How do we use these insights to help people?

How do we use these insights to help people?

And that could range anywhere from well, can I use insights to help you become healthy and happier by helping with mental I'm wondering about the and I should.

And that could range anywhere from well, can I use insights to help you become healthy and happier by helping with mental I'm wondering about the and I should.

Say, you took a decision holiday and put AI in charge of my life. Forgive me, I misread it, but it's like we could talk about that later.

Say, you took a decision holiday and put AI in charge of my life. Forgive me, I misread it, but it's like we could talk about that later.

Incentives the idea of incentives, and I'm wondering about mis aligned incentives right now because if every time I pick up my phone, every app I'm looking at, the incentive is to keep me in that app by feeding me information that will keep me engaged. Are the companies that create these programs do they have our interests at heart? Do they have our best interests at heart? Or are the incentives totally misaligned?

Incentives the idea of incentives, and I'm wondering about mis aligned incentives right now because if every time I pick up my phone, every app I'm looking at, the incentive is to keep me in that app by feeding me information that will keep me engaged. Are the companies that create these programs do they have our interests at heart? Do they have our best interests at heart? Or are the incentives totally misaligned?

Yeah?

Yeah?

So I think that the ones that you're talking about, which is like really attention economy, there the incentives are not in your favor. But if the only thing that I'm trying to do is engage you. What I'm going to show you is content that's negative, that's morally outraging, because that's what keeps us there and that's just playing into human nature. I do think, however, that there's a lot of companies outside of that space, right, So there's a lot of mental health applications, for example, that are popping up now, and the other are people people are using and it's a totally different way of commercializing because it's not necessarily grabbing your attention, but it's trying to help you make the most of the service. But you're absolutely right, the classic social media platforms that are the current big players incentives are really difficult to aligned.

So I think that the ones that you're talking about, which is like really attention economy, there the incentives are not in your favor. But if the only thing that I'm trying to do is engage you. What I'm going to show you is content that's negative, that's morally outraging, because that's what keeps us there and that's just playing into human nature. I do think, however, that there's a lot of companies outside of that space, right, So there's a lot of mental health applications, for example, that are popping up now, and the other are people people are using and it's a totally different way of commercializing because it's not necessarily grabbing your attention, but it's trying to help you make the most of the service. But you're absolutely right, the classic social media platforms that are the current big players incentives are really difficult to aligned.

Soandra, maybe we just have calling it social media because if anything social Yeah, no, I'm serious, Like, you know, we kind of buy into this whole idea that look, it's going to reduce you know, reduce the gaps in the world and you know, make us all closer. And I think during I think about the Middle East uprising, like initially the Arab spring that we thought, oh my god, look at the good of social media, right, and that was years ago already. But I do think, you know, we by constantly saying social media are kind of buying into this and reinforcing the branding.

Soandra, maybe we just have calling it social media because if anything social Yeah, no, I'm serious, Like, you know, we kind of buy into this whole idea that look, it's going to reduce you know, reduce the gaps in the world and you know, make us all closer. And I think during I think about the Middle East uprising, like initially the Arab spring that we thought, oh my god, look at the good of social media, right, and that was years ago already. But I do think, you know, we by constantly saying social media are kind of buying into this and reinforcing the branding.

That's absolutely true, and it's also I think it almost strects from the entire narrative, right because we're only talking about social media.

That's absolutely true, and it's also I think it almost strects from the entire narrative, right because we're only talking about social media.

So the only thing that's top.

So the only thing that's top.

Of mindful people when they think about data that is intrusive is social media. But then think of about all of the other stuff. Again, It's like your Google searches is what you buy with your credit card. It's the data that gets captured by your smartphone that is really if you think about the analog comparison, that's a person walking behind you twenty four to seven, your smartphone knows exactly where you're right at any given.

Of mindful people when they think about data that is intrusive is social media. But then think of about all of the other stuff. Again, It's like your Google searches is what you buy with your credit card. It's the data that gets captured by your smartphone that is really if you think about the analog comparison, that's a person walking behind you twenty four to seven, your smartphone knows exactly where you're right at any given.

Point in the ultimate stalker exactly.

Point in the ultimate stalker exactly.

So have you changed your behavior based on your research?

So have you changed your behavior based on your research?

It's a great I think actually, just observing my own behavior has made me a lot more pessimistic about the idea that we can just ask consumers to take care of their own data, right, because I don't have twenty four seven to read all of the terms and conditions.

It's a great I think actually, just observing my own behavior has made me a lot more pessimistic about the idea that we can just ask consumers to take care of their own data, right, because I don't have twenty four seven to read all of the terms and conditions.

I'd much rather spend a meal.

I'd much rather spend a meal.

Oh, come on, piece the case, there's no way if we want to exactly if we want to change something, I think we just need systemic changes and that could be regulation which changes the default.

Oh, come on, piece the case, there's no way if we want to exactly if we want to change something, I think we just need systemic changes and that could be regulation which changes the default.

How likely is that?

How likely is that?

Well, you do see.

Well, you do see.

Regulation across the globe, right, so if you look to Europe, if you look at California, but it's still focused on this notion of like, well we just give control to people, and I think that's a that's a tricky gamble.

Regulation across the globe, right, so if you look to Europe, if you look at California, but it's still focused on this notion of like, well we just give control to people, and I think that's a that's a tricky gamble.

Aren't you freaked out?

Aren't you freaked out?

My kids?

My kids?

And yeah, you know, because it's.

And yeah, you know, because it's.

Only going to get worse, and schools like you have to be on these social media platforms to also different social media platforms. Sondra, thank you so much, Thank you so much. Sondra Matts. Her book is mind Masters, The Data Driven Science of Predicting and Changing Behavior.

Only going to get worse, and schools like you have to be on these social media platforms to also different social media platforms. Sondra, thank you so much, Thank you so much. Sondra Matts. Her book is mind Masters, The Data Driven Science of Predicting and Changing Behavior.

This is the Bloomberg Business Week podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from two to five pm Eastern on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business App. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal

This is the Bloomberg Business Week podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from two to five pm Eastern on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business App. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal