# USC Marshall Webinars

Data: 11-01-2025 21:44:00

## Lista de Vídeos

1. [How high social impact organizations are maintaining success in a virtual environment](https://www.youtube.com/watch?v=ewOLZgWY4rU)
2. [The Future of Entertainment](https://www.youtube.com/watch?v=EgucNEJZ4M0)
3. [The GameStop Short-Squeeze and Its Risks to Our Economy](https://www.youtube.com/watch?v=gYjLE3KHlZk)
4. [State of L.A. Business, A New Los Angeles: Our Post-Pandemic Economy](https://www.youtube.com/watch?v=RRHzqVQhgQk)

## Transcrições

### How high social impact organizations are maintaining success in a virtual environment
URL: https://www.youtube.com/watch?v=ewOLZgWY4rU

Idioma: en

hello everyone welcome to today's
marshall webinar
how high culture social impact
organizations succeed in a virtual
environment
the session is also a part of our trojan
family weekend program
we thank all of you for attending we
have adley wortman who will be
moderating for us today
and he is the david c bonnette professor
of social entrepreneurship
and founding director of the brittingham
social enterprise lab
we also have mark laronger president and
ceo of chrysalis enterprises
and christina de jesus president and ceo
of greendot public schools california
you may submit any of your questions
using the q a feature below
as we'll have a time to answer them
towards the end of our discussion
so with that said i will hand it off to
adlai
thanks eugene um thank you all for
coming today i appreciate it
i think you'll find it interesting uh
as you said as sujin said my name is
adley wortman
i'm the david c bennett professor of
social entrepreneurship at usc
where i started the social enterprise
lab the brittingham social enterprise
lab
since covid started and we were all sent
home
i've been speaking to lots and lots of
people who run
especially large social enterprises and
social organizations
and while they were all saying to me
that they're going to financially get
through this
the challenge that they're seeing is
that
they're looking at how do they maintain
the culture
so many social organizations whether
they be schools or whether they
be and we know that as we say fight on
whether they be schools or whether they
be
social service organizations all really
have what we would call a special sauce
there's something that's going on there
among the successful ones
where they have built a high culture of
success
meaning for the charter schools a lot of
the reasons that they
out do and out succeed the traditional
public schools
is because they've built a tradition of
look
you're going to be successful when you
show up at this school you're going to
do really well when you show up at the
school
we have pictures of colleges and signs
of colleges on the walls it is an
expectation for you that everyone in the
organization
feels uh and christina
runs that organization while mark
laurenter
runs chrysalis which actually works with
a population experiencing homelessness
and extremely low income to help them
get their first or
the first job in decades for many of
them
and their lobby itself is a secret
sauce what goes on there inside their
lobby meeting with
with uh folks who are clients
sort of again saying with the minute you
walk in the door we expect
success so what we're looking at is
today
is now that we move that into a virtual
environment
how do we keep staff engaged in that is
in that exercise
and how do we keep clients and students
engaged in that
so let me introduce who's joining us
today
uh christina de jesus uh
is the president of green dot public
schools california
she's the oldest of four children who
grew up in a mixed race home
her father immigrated to the united
states from the philippines
and had a successful career in the u.s
navy thank him for his service christina
it was his choice choices
of her parents that made about the
school
she went to and her siblings attended as
children
that brought her to her calling as an
educator the school's repair
center to forever change the way she
dreamed
about what is possible she is a triple
graduate of a school as we say across
town
i'm not going to say anything more she's
the proud auntie of six nieces
uh first-time puppy owner and even more
congratulations will be getting married
in january in a gigantic
virtual uh wedding so she's learned how
to bring culture online
uh mark leads chrysalis the only
la based non-profit that works solely
with homeless
and those disconnected from the
workforce to help them find
and retain employment mark is actually
before joining chrysalis 13 years ago
has a 30-year experience as a private
sector entrepreneur
and corporate leader after a long career
with ibm in dc in new york
mark had a couple of entrepreneurial
ventures among them mark was 20 years
ahead of his time
and started a company that had this
crazy idea of picking up food from
restaurants
and delivering them to your house
through a cab network
have we ever heard of anything like that
before uh mark sold that
uh before he joined chrysalis he's on
the advisory board of the california
community foundation
and proudly will say that he's a senior
fellow
at my birtingham social enterprise lab
so welcome
both of you and thank you for taking
time out of your busy day
i know you all have lots and lots of
responsibilities
as we start this christina i'd like you
to go first
could you take a few minutes to talk
about your organization
give us a quick what it does how many
students and participants staff size
budget etc of course
i'll just say um i i thought about
wearing my blue and gold
spiky wig uh this this this afternoon
for this panel and then
thought against it um didn't want the
crowd to be too harsh on me but thank
you it's
uh we have the ability to turn your
video
that's what i figured so i figured i'd
keep it completely professional
um it's a pleasure to be here with all
of you today and i
i am here today speaking with a
tremendous sense of responsibility
to the hopes and dreams of over 11 000
students in green dot california schools
across los angeles
um i'm in my 19th year at green dot
didn't ever think i'd be here that long
um and in my seventh year as ceo so i
have been able to see
pretty much every change the
organization has undergone um almost
since the beginning
um greenock public schools california is
an organization that operates 19
public charter middle and high schools
across some of the highest need
communities in los angeles
we're often asked where did you get your
name so green dot actually comes
from a map of inter internet
connectivity across los angeles which is
actually very
relevant given the circumstances we're
in right now green dots
showed libraries schools recreation
centers
essentially places that were wired to
the internet and in many ways
wired to resources red dots represented
those places across the city that
did not have internet connection and so
our hope was to turn red dots green
by partnering with communities to
provide students with the opportunities
and resources necessary to amplify
their inherent talents and to live out
their dreams and
we've actually in the last six months
given new life to our name
by ensuring every green dot student has
access to a computer
and internet connectivity so they can
connect to the internet
our mission is to help transform public
education so all students
and that all in our mission is very
purposeful um
all does mean all for us that all
students graduate prepared for college
leadership in life
and we serve about a 94
socioeconomically disadvantaged student
population
and 98 students of color um proudly
serve those communities
and can talk a little bit here in a
moment about some of the work that we've
been doing
in partnership with those communities
over the last six months given
an incredible resource divide that has
been laid bare by
by this pandemic thank you so i just
want to repeat
one of the things that you said many
people
around the country think of charter
schools as a small little school that's
in their neighborhood
we're talking about something very
significantly different here
so if i have it right from what you said
11
000 students in 19 schools
across la and
just for an idea how many staff and
what's the size of your budget
about a thousand employees 600 of those
are teachers
about 600 give or take or teachers our
annual budget
is just over 165 million dollars all
publicly funded dollars
and just to give you a sense based on
what you said we are essentially in the
top
seven percent in terms of size of
district traditional school district
across the country
most districts people think of lausd and
other large districts but most districts
across the country are relatively small
i mean so we're in the top seven seven
percent in terms of size
amazing so those of us who think that
non-profit leaders aren't running big
things
uh 165 million dollar budget is uh
quite a responsibility uh thank you for
that mark
um could you tell us about chrysalis and
uh in the same way you know and again
we're going to hear
not about 50 clients i'm going to guess
that is true although we're not a 135
million
agency we're a 30 million agency but
we are trying to have an impact on folks
as you
said in your intro adelaide that are
disconnected from the workforce people
that have
experienced homelessness had
interactions with the criminal justice
system or otherwise been disconnected
from the workforce
we're trying to help them get back on
the path to self-sufficiency
by finding and most importantly
retaining a job
uh it's it's our philosophy of chrysalis
that a job
in our society in our community is one
of the key ways out of poverty
and yet so many of the men and women
that we serve
for a whole host of reasons um have
been deprived of that opportunity or not
been able to figure out how to make that
happen for them
so that's what we're about we've got
five centers uh throughout
los angeles county or four in l.a county
downtown l.a near skid row one in the
valley in pacquama
in santa monica south la and
two years ago we opened our first office
outside of l.a county
in anaheim and orange county and in each
of those centers
in pre-coveted times we would see four
to five hundred clients a day
they're coming to us voluntarily because
they've heard something about us a
friend referred them
maybe they saw one of our social
enterprise crews which we'll touch on in
a second
and they are ready willing and able to
work but they just aren't sure how to do
it
they need a hand up not a handout as we
talk about it
so we go through an intensive case
management process with them
treating the 4 000 clients we see in a
traditional year
with the dignity and respect that each
of them deserve
because each one of them presents to us
with their own set of circumstances and
challenges and barriers and our staff's
job is to help
our clients overcome whatever that
particular mix of barriers and
challenges is
so they can get uh onto their goals
their career
goals for many of our clients uh it's
just a matter of working with them for
a few weeks a month or two to help them
build their self-confidence clean up
their resume
perhaps help connect them with some
resources to
address some transportation needs that
they have and then they're able to
conduct a job search and land at whole
foods or starbucks or at a
transportation company but for a
significant set of our
clients if you look at the list of
barriers that they're facing
i mean it's just go down the list
everything is checked off the list
it's unlikely that they will have
success doing this on their own the
first time around
so we hire them ourselves into one of
three employment social enterprises that
we operate
um the idea behind these businesses is
that we're providing
real life vocational skills training and
development
but even more importantly we're helping
our clients understand what it's like
to work show up on time work on a team
wear a uniform respond to coaching and
supervision
make mistakes and be able to recover
from those mistakes get a paycheck
and know how to invest a paycheck
appropriately
yesterday or rather tomorrow's payday
and
i believe our payroll register has 555
clients on it so that's 555 folks that
especially now would probably not be
working if but
for the businesses and the employment
opportunities that we're providing
but these are real jobs there are
contracts with private organizations
other nonprofits or some city agencies
that if we're not doing it the private
sector is competing for those contracts
we just happen to be really good at
doing that kind of work
and we make money at it it's profitable
but it's since we're a non-profit it's
called margin and it goes
to help defray uh the service side of
our
our budget we've got about 185 uh
professional staff members
um that work with us permanently i'm
proud to say that about
50 of them our former clients that had
worked in our businesses
and had shown leadership potential and
we've promoted them up through the ranks
and they are now
working primarily in our social
enterprises as supervisors and
uh and team leads so that's a little bit
about what we're up to
just a little so then again uh like we
said with christina while people think
that
non-profits may be small or non-profits
may be not
complicated to run uh so let me see if i
have this right you're seeing
550 or 500
clients per day i don't know how many
businesses see 500 customers per day
you have 550 people employed
in your business that you're running uh
and 185 full-time employees of your
organization
and a 30 million dollar budget so other
than that what do you do
just kidding i i get to have coffee
and do zoo meetings like this yeah
you're bored you're bored most of the
day right
uh we and don't even use the board word
because that also implies the
25 members of my board that are my
bosses which is just another bonus
all right maybe some of them are on this
call and i love you all it's right
i know some of my board members are on
this call so uh i'm on my toes
uh so mark you know i know chrysalis
particularly well
um we always used to talk about the
lobby
right the the magic that happens in the
lobby
and how that impacts a client's success
could you talk a little bit about that
yeah you know i know culture is kind of
the thread through um through today's
talk
and facilities are one of the first
things that come to mind for me are
facilities they're very intentionally
designed
to create a space that is welcoming
that's warm
and that provides the clients that we
work with an environment that is
probably different from where they live
or other service providers that they
interact with
there's no visible security there's no
uh
security walls that you have to be
buzzed in or out of or that type of
thing
and what goes on in that lobby every day
is
not only the services that we're
providing but the services and the
interactions that happen between clients
in the community that builds
we are not a cohort based program where
folks all come in at the same time and
kind of go through it in group
but the relationships that form in that
lobby and the the tips about
life about jobs about housing about how
to deal with
somebody in the neighborhood all of that
stuff is happening
in the lobbies of our offices every day
and
if anybody that's out there in the
audience is in the real estate business
you know how expensive space is in la
and a lobby takes up a lot of space and
it's just one of those things that we
have to do because that is a one of the
distinctive elements of our
of our facilities and of our program at
its heart
so um as i'm involved in homelessness
issues
uh i've walked into a lot of homeless
organizations and i'm gonna
christina your your very follow-up to
this question
uh most of the ones i walk through have
three security guards at the door
uh a metal detector and uh
they're afraid of me when i get 10 feet
from the door
so how many metal detectors do i have to
go through to get into chrysalis
that would be zero so so what you're
saying therefore is
even at the front door you're sending a
signal
this is what life is like when you're
trusted absolutely
we want to model behavior for our
clients we want them to have the dignity
that all of us
have in our life and that begins with
the greeting they get at the front door
by the person
that's at the front desk it means that
there's 24 computers that they have
access to
and we trust them to use it means that
we have coffee in the morning
it means that they have access to other
resources that they're not going to find
anywhere else
in the community that they they operate
in why shouldn't they have that
it's absolutely essential to our program
and it goes to
just basic human dignity so i love the
concept of space as case manager
that the way you design the space is
much is as much
part of how you create that culture as
anything else
christina i had the great honor
of visiting lock high school which was
the worst
high school the least successful high
school in all of los
angeles before green dot did its
takeover
and i had to walk through
a metal detector and actually be sniffed
by a
drug dog on the way into the school
that is no way to treat a student tell
us how you
at green dot change that kind of culture
yeah i think so similar to what mark
said there are
no metal detectors in any of our schools
i'll just also say
although it does spark some controversy
we fought back
very hard against a policy
told we had to implement that it was a
district policy
that required us uh to randomly metal
detector wand
students every day um and so
we fought that battle for over six
months
until we were told uh you need to figure
out a way to do this or you're gonna
we're gonna close your schools so you
know we're we're very
very focused our whole mission is
focused on equity our whole mission is
focused on
social justice our whole mission is
focused on providing
families who have been systemically
excluded from high quality education
options
with the options they deserve in their
neighborhood and similar to what mark
said
uh you know it starts with what happens
when you enter
the facility we actually have an
initiative going on right now
to ensure that all of our facilities
when we come back
to hybrid whenever that happens whenever
covid
the cova trends allow called uh
vip ensuring that our facilities are vip
ready every day
because we have vips who are students
and our families who enter every single
day
um and so they deserve to have a
building
and classrooms that um that show them
just how valuable and important they are
um
so you know i would i would say that
lock at this point we we focus
very much on culture we've focused very
much in a large comprehensive high
school
with trying to provide a sense of
smallness and community
um today we have divided the school into
two
key academies one is the ninth and tenth
grade academy one's at 11th and 12th
grade academy
so that every student is seen in every
sense of the word
i see you with my eyes i see you with my
heart
i see you with my mind um and so making
sure that
no no child it's kind of like your
cheers where everybody knows your name
everybody knows when you've been absent
for a number of days and they're asking
you how you're doing and
what's going on we have also brought in
a whole team of mental health
professionals a lot of times
you know what gets in the way of
learning are there are obstacles around
mental
health um around financial insecurity
we've seen food insecurity up front and
center in our organization and so
in addition to educating students online
we've served
almost a million meals to to families
and community
members because that's what we needed to
do we needed to meet the moment
uh with whatever family is required so
um
you know one of our core values two of
our core values one is respect for
others in the community and the other is
that
all stakeholders are critical in the
education process
and so we really try to create an
organization as i mentioned that
makes you feel seen makes you feel heard
and makes you feel that you're a part of
the process that this isn't happening to
you we're doing these things
with you and that you have voice and you
have agency
we do that with our teachers and a lot
of that's embedded we do have a teachers
union
which i think most people don't think of
charter schools as as partnering with
labor unions we have two labor unions
our collective bargaining agreements
solidify um
how we intend to amplify teacher voice
counselor voice and classified employee
voice within our organization
we're a very strong feedback with a very
strong feedback culture
with 360 surveys happening all the time
and using those surveys to to make
midstream changes to the work that we're
doing but
i think this idea of building a very
similar what mark
talked about making sure that everybody
feels they have value
they're treated with dignity that
you know no matter how you come to us
we're going to take you from where you
are
and we're going to help you be the best
version of yourself
um is this how we try to approach the
work i know
i'm tearing up as i hear about this i'm
a sucker for these kind of things
um are you a uniform school still
we are you are i remember um when locke
first opened
uh and i was there the first week
um somebody said to me watch out for the
tuck
and i was like what's the tuck and what
the talk was
was that as the students were waiting in
line to come in
and have the principal say hello to them
by name when they got towards the front
of the line they made sure to tuck in
their uniform shirt
because they knew they wouldn't be
allowed in without it it was for a while
i was like what's the tuck
um so so there you go you've got the
tuck you've got the uniforms you've got
the
teachers you've got the love you've got
the respect and here we are on
zoom right how do you transfer
something like that and you're on zoom
with and i'm going to say with so
you know as you mentioned title 1
students are 98
or not you know or 94 98 so these are
students who don't necessarily have
a house where they have their own room
right or they don't have
internet access for or that's reliable
or they have
five kids at home all sharing the same
internet
at different grades at different schools
how have you been able to
deal with that and keep this beautiful
culture together
yeah i mean so it hasn't come without
his challenges
and i will say you know perhaps the the
biggest challenge which you hit upon
is um what i mentioned earlier in that
the last six months
um have laid bare the persistent
inequities and injustices that have
plagued
our country for centuries um and the
pandemic
has exposed for all of us to witness the
digital divide
the economic divide the opportunity
divided in the resource divide and we
have seen that front and center
and the reckoning with race that our
country is grappling with right now
is inextricably tied to all of those
divides
and so you know seeing and witnessing
that every day
there's a tremendous wave of
responsibility that all of us in our
organization feel
to deliver and to meet this moment with
what is required to help students
succeed
so for us it started with what you what
you just talked about
kids have to be connected and unless all
can be connected then we can't truly say
we are serving all
and so we quickly put together all of
our resources
started a fundraising campaign and we
bought um we're now at more than
a one-to-one device student-to-device
ratio
so every student who needed a chromebook
got one
today we have over 80 percent of our
students who have come to pick up a
chromebook and we've deployed those to
homes
we also know that internet is a problem
and so
we also purchased mifi's portable wi-fi
devices
for every student who needed one so
right now we're at a little over twenty
percent of students who are using a
green dot wi-fi
to connect to daily live lessons um
in addition to that there's been so
first one was connectivity you gotta be
connected
we know that you you may not have the
resources i talked about meal service
you need to eat we're going to provide
it and you can come by the school
any day of the week and pick up food and
bring it home for you and for
the folks in your in your in your home
and your family
the next for us was thinking through you
know there's a lot of research that's
come out
since the spring that you know um no
surprise
students living in low income
communities have gotten short shift they
have
less access to high quality distance
learning options
they have less access a far less access
to live
instruction via zoom so as we were
working and partnering with our two
unions
that data was front and center for us
and we once again said we have to our
mission requires us
to come uh to come up with a model that
truly serves all kids
and provides them with what kids the
school i've taught at in santa monica
for seven years we know are receiving um
the resources
and the attention they're receiving so
we put together a schedule that has live
daily lessons every day
right now we're at over 90 average daily
attendance that is
live attendance across 11 000 kids
because
teachers take attendance in zoom class
we know that 96
of our students are accessing their
assignments on our platform on our
assignment platform
so um you know it all started with let's
get you access and let's build a
structure that helps you to be
successful
um in addition to that we've kept some
things that are important to our culture
so we have
an advisory class which is supposed to
be your home base
a place where you can let your hair down
where we address social emotional
challenges where the teacher is
connected with you and intimately knows
what your needs are so we
maintain that advisory class in our
schedule every day kids go to advisory
the first part of the day in zoom
we also have a period called academic
outreach where teachers are
programmed to reach out to students
individually to check in on them how are
you doing what do you need
i have seen you haven't been in class
for the last two days what's going on
what can we provide
we've quickly brought all of our mental
health and counseling professionals
online so that we're providing those as
well
during the off hours when live
instruction is not happening
um and i think that the other thing that
we've really tried to do
with families social media has been
a godsend in terms of how our schools
are communicating with families and
maintaining transparency uh all the
creative things we had a principle
dissecting a frog live on
instagram anything they can do to engage
families and students
and then i have started you know um as a
leader
trying to figure out how do i maintain a
sense of flow and keep everybody aligned
and so we started in the spring with
four key priorities
every week i send out an update on each
of those priorities with data that says
here's how
here's the progress we've made here's
where we're hitting the mark here's
where we need to continue to work so
that across all 19 schools
everybody's marching to the same to the
same drum
and i think you know mark hit on this
earlier when he was talking about
facility but
i think we know as a leader you have to
be intentional about
culture it doesn't just happen and the
minute you stop
being intentional the minute you stop
paying attention
it can get away from you and so you know
i've also
during these times when everybody is
very anxious for very good reason
many times i've had to come in and
remind folks here's where we're headed
here are the supports we're providing
and we're doing this together and you
know what this is hard work
but this is the best place to do hard
work and let's not let's not forget it
sorry i'm going to get back to that
issue of um
your teachers and team and how their
reaction to this
um i just think you know i want to
highlight for people i love highlighting
things here
as you can tell um you said that 90
of your students are online 96 are doing
their homework
how does that compare for your
population
target population at lausd the la
school district what percentage of their
students have made it online do you know
and they have not produced that data for
the fall i know there was an article
that came out in l.a times in the spring
i don't want to misspeak but i believe
when they they
did provide a number um for whatever
attendance looked like in the spring
of around 25 of low-income students in
low-income communities were
were signing in uh or attending so 75
sorry sorry go ahead we're not so 25
we're signing in
correct right so right so we're talking
about the possibility that i had read
that up to 75 percent of low-income
students at lausd
never signed in for school once they got
sent home
i mean can can you imagine that
inequity i mean i'm just it hurts me to
even think about
um so congrat a 90 number is
what i would expect from green dot but
still amazing
so congratulations um so mark
you have a different population you
serve of adults
uh and getting them online uh
is not the same opportunity they're not
for many of them they're not sitting at
home
uh they don't have the chromebooks uh
how are you
delivering services now to your client
base
when when all this went down in
mid-march
you know i was just talking earlier
about our facilities and how special
they are and we put such
an emphasis on it um i've been at
crystal's 13 years and i've always
thought of us as a place-based
resource people come to our centers as a
community center almost
and now we can't do that and i i had
some real sleepless nights about how
what we were going to be able to do in
the short
term um i i just
am so astounded by the creativity of my
staff and
their commitment to our our mission that
they
figured it out and since this six month
or almost seventh month
uh we're entering here we're actively
case managing
3 800 of our clients through phone text
email video however we can
connect with a client uh we're meeting
them where they're at
and for a lot of those clients we are
talking about jobs yes that's
primarily why they came to us but what
we're hearing from our clients at the
moment is that's not what they want to
talk about that's not their problem
at the moment the problem at the moment
is they're hungry the problem at the
moment is they're about to be evicted
the problem at the moment
is fill on the blank right we've all
read and seen these stories and so
not only do we have to pivot from
providing
uh services virtually versus in person
but also thinking differently about our
mission and our role in the community
and how can we
provide the supports that our clients
need to
stay consistent with our mission which
is to help somebody get on that pathway
to self-sufficiency by finding a job
yeah but right now that pathway is like
all over the place it's a figure eight
up and down all over
if we need to keep folks on that pathway
so eventually they are ready to
pursue their their career goals and we
gotta figure out new ways of doing it
so we um immediately changed our focus
to providing a more comprehensive set of
services to clients we raised a bunch of
money
through a lot of really generous folks
in the community that has allowed us to
distribute
almost 600 000 in cash supports with
cash like supports to clients to help
pay rent pay car payments
pay for cell phones pay for laptops
whatever we could do to keep them well
and safe we wanted to try to do it
that's not something we normally do
it's not normally a part of our budget
but we figured it out my team figured it
out
and we put a plan in place and made it
happen
it's not perfect it's not ideal i go
into the office a couple times a week to
take care of things that i need to do in
person
and it's just lonely i mean we have this
beautiful
huge lobby and office in a and there are
three people that are
doing whatever they need to do or
clients coming in to pick up paychecks
or something
it's sad and it breaks my heart um but
at the same time i also know there are
hundreds of conversations that are going
on virtually around southern california
that my staff are doing
from their bedrooms by the way well
another set of issues is
how do we preserve this culture of our
most important asset being our staff
many of whom are not particularly well
paid our case managers make forty five
thousand a year
fifty thousand dollars a year you know
what their living situation is going to
be in la they've got three roommates
and their roommates are doing the same
thing right and so trying to manage
broadband in the household
and a workspace that they can do case
management
and hear really difficult stories all
day long the secondary trauma that that
creates
it's it's it's definitely created a new
set of challenges for us but
the reason you work at a place like
chrysalis or a place like green dot is
because you're committed you're
committed to the community you're
committed to the mission
and and you figure it out you know
somebody else has it
worse than i do certainly and that many
of our staff do
and so we're going to do what we have to
do to help our clients
and and at times that's going to be
really stressful um
and cause other unintended consequences
but
because we are a human services provider
we're gonna still continue to provide
those human services even if we can't be
face to face with a person
or when we go back next year sometime
maybe there's a sheet of plexiglass in
between us but
we'll still be there awesome i uh my
daughter is a case manager at downtown
women's center
and she spends her days at home now
listening to those stories and one of
her complaints
is all these stories are being told to
me in my bedroom
and when i leave my when i come back to
my bedroom to sleep all those stories
are still
there i don't get to try to leave them
at the office
we have some questions laura is asking
she works for a legal services
non-profit on the client side of things
she would like to figure out and it was
going to be my next question
so thank you laura what are you doing
with staff itself
to keep them part of the culture so so
i'll ask you again to follow up mark is
there something you're doing for that
stuff is this something changed the way
you work with them
yeah there's there's a a number of
things that we're doing differently
um and one that i think
speaks to me in in my job we realized
early on that
people are anxious people are unsure
information trans
transfer wasn't happening as
appropriately as we wanted
and so we started this thing called the
butterfly broadcast it's an all staff
zoom call every wednesday at 11 o'clock
for an hour
um and we're now doing it every two
weeks but we were originally doing it
every week
and we had never as a leadership team
ever done anything like that we'll have
maybe a staff retreat a couple times a
year something like that but not an all
hands on deck
call every day or every week
and we i specifically
talked really frankly about our
financial position
and and the challenges as an
organization that we face
and also highlighted some of the green
shoots of things that were
really cool going on in other parts of
the organizations and we were able to
shine the spotlight on staff members
line staff members they're doing super
creative stuff
it's now become just a ingrained part of
our culture that we're not never going
to be able to take away
and stop doing it's been fantastic but
the level of transparency that my
leadership team and i
have been encouraged to show and i'm
proud to say i think we're getting the
feedback that we have been incredibly
transparent
has been good for the organization good
for us it's made it
much more possible for us to make rapid
change and ask people to do things that
maybe weren't in their job description
they signed up for
but this is what we need you to do and
here's why um people accept it and
so it's been transparency communication
communication communication in whatever
media
we use we're a microsoft teams
organization we weren't
before march but we are now and i live
on it as does
most of my staff embracing technology
and also at the same time recognizing
that bedroom effect
that you were talking about for your
daughter it's it's real i was just
meeting with a group of
new employees yesterday and we were
talking about boundaries
and space and how do you turn off at the
end of the day because you don't get to
walk
out of that building at five o'clock
every day
you just walk out of your bedroom to go
to the kitchen and then you come back to
your bedroom right so
all of those things i think just
providing the space for for staff to
talk about it
vent about it is similar to what you
guys have done with some of these
spaces for your students to be able to
process we've created those
those intentional spaces virtually for
our staff
without management involved necessarily
to be able to process
a lot of different stuff that i wouldn't
have thought of doing but they've been
suggested by staff members that it
worked really well
it's yeah i i think i've gotten uh
11 teams messages while we're on this
call so
we i'm relying on it too uh we're an
advertisement here for
microsoft um christina
people become teachers for such a very
like
like case managers people become
teachers because of this
desire to stand in front of the room and
these are these become your children
i mean these are these are people you
care about their kids
how do you how did they and you help
them move
that feeling that devotion that feeling
of success
into their bedrooms
it's challenging i mean everything from
you know our high school students don't
like to turn on their cameras so you
feel like you're a little bit like a
radio
newscaster right talking out there is
this resonating with any of you because
i can't see your faces
um to um just how to navigate multiple
platforms
on zoom it's not just me talking at you
but interactive platforms and so we have
really tried to double down which is
aligned with what we usually do which is
lead with support so we've actually
provided
a robust set of professional development
sessions
for staff so they felt comfortable
and confident about what they were being
asked to do we also have weekly
professional development built into
our schedule and so our school leaders
are
leading professional development helping
them continue to hone their skills but
also
serving as a sounding board for what's
working and what's not
when we surveyed our staff 96
of staff said they felt connected they
felt a part of the community still so
that's been a real
focus for us and we're doing it through
those venues of professional development
sessions during the week
we also are we do what are called food
for thoughts where me
and our chief academic officer basically
spend lunch
and we now do it over zoom spend lunch
with teachers at a given school
it's an open platform for questions
comments concerns it just promotes
relationship and transparency
allows us to also have our ears to the
ground all the time what's happening and
what do we need to respond to
um it's by no means perfect i think you
know both of you hit on i've been saying
since uh since march when school's
closed everyone
is just a little bit not okay right
whether you live alone
you have small children who you're
trying to
get in front of a zoom class at the same
time that you're working
um just the stresses and anxiety of the
world around us um
there's a ton of ambiguity which is very
destabilizing for a teacher who
teaches our planners we like to plan we
have a lesson plan we've got a unit plan
and so so much ambiguity is really
destabilizing for people
um and so we have our you know our four
kind of priorities or pillars that we're
trying to stick to are around
equity and access connection and
well-being so part of it is
just acknowledging that people are
struggling
relieves you know allows people to take
a breath okay so you see
you see them struggling here um
transparency and communication
is another pillar and then
sustainability which is both a
financial sustainability marker as well
as just sustainability in the work
so one of the ways that we are you know
helping to continue to
help teachers feel confident about
what's going on is we're trying to make
midstream changes when it makes sense so
actually
are my teacher union present and i just
sent out a joint message saying
we've heard you all the feedback we're
making the following adjustments
for quarter two to our distance learning
model to adjust um to adjust accordingly
so for example
we incorporated a 20-minute nutrition
break
in between the first period of the day
and the second period of day because
teachers and students were saying
i don't have enough time to go grab a
snack to
you know to feed my own kids at home i
need more time so we added a 20 minute
nutrition we added more planning time
for teachers
because they were saying planning online
is far harder
than planning for in-person instruction
and so part of this is just being
responsive
to the needs and and not being so stuck
and inflexible and saying this is what
we're doing and we're doing it
for the whole year has really helped
people to feel
um one a continued connection to the
organization
but also too that they're working for an
organization that cares about them as
people
um and i think at the end of the day
that's what that's what most of us want
anyway
um exactly um i can tell you as a
teacher myself
i spent over a hundred hours
this summer redoing everything about
every one of my classes all my lesson
plans
everything because they just i needed to
do something differently to make it as
effective online
especially knowing that our students and
are all
uh and many of my students are adults
are all spending their days staring in
front of a computer
and we can't really expect them to to
sit and watch somebody lecture for two
hours those days are over
um but but so that's why i want to ask
you
a follow-up question on that which is
do you think this will change who you
hire
do you think that different people will
apply or that
you might look for different uh
qualities when you hire a teacher
no that's actually i've not thought
about it until this moment um but i
think my
my response my mathematical response to
that is no because
while logistically and technically
everything has changed
about the way teaching and learning is
delivered in our organization
um we never skipped a beat on mission
and we never skipped a beat on values
and so you know yeah these technical
skills
we can teach you that um but but our
hiring practices right now and will
after after cobin vet for values
alignment um because at the end of the
day that's what gets you through
these tough times and so so no i don't
think it'll change the way we hire it's
gonna change the way
you don't go um all the way to uh 1.2
devices to every student
ratio and not change the way instruction
is delivered in a school building
so there will be changes i don't see us
um
i don't see us completely stopping using
some of these platforms
but i don't think that that's going to
fundamentally change who we hire
we want people who are passionate about
our mission and about
our students and believe in them
so that they can also believe in
themselves and that's not going to
change yeah i
i agree and and i do think and we've
been talking about this a lot
education will never be the same our
dean said something in a meeting the
other day he thinks that education will
change
more in the next three years than it has
in the last 30.
and uh i agree i i like a lot of what i
can offer now
that i couldn't before uh including
having speakers like you
uh in front of my students and only
having to ask an
hour of your time rather than half a day
to come into class
uh though i miss seeing you in person um
mark we have a question that i i think
is perfect
for you so part of the chrysalis culture
as it is in most organizations
includes donors uh your supporters your
board members your
um all of the folks they're very much
like like green dot part of the
chrysalis family
they get that buzz they come into the
office and see what's going on there and
say
how much money can i give you so you
don't have that anymore plus you don't
even get to meet them you don't
you don't get to go to the cocktail
party and hang out with them
how are you moving that process and that
relationship over to online
well i wished every donor that came in
said how much money can i get
but yeah it's uh that's been that's been
tricky um
i think our community our existing
donors
responded immediately uh we sent out
some appeals but
but we had folks coming to us saying
this is a crisis you guys are getting
slammed
how can i help that that was a
conversation of what do you need
let me write the check and wire it to
you i think there's a
a finite duration to that right um this
is now going into seven months
it'll be a year before we know it so are
those donors going to continue
responding that way
we need to find new ways to engage them
in a meaningful
way um because we can't do in-person
events we've got a couple of big
events we do every year can't do it that
way we did a virtual thing in the
in the spring and it worked out really
well but those are going to be played
out so
we're i think in november we're
launching our first
virtual donor tour where we're
going to do an online zoom type
walkthrough of the office somehow i'm
not sure how we're exactly going to do
that but we're going to do it
um we're i'm doing a lot of these zoom
or
whatever uh teams uh face-to-face with
donors
where we're talking about our story and
just figuring out ways to communicate in
a real way um over these formats even
though we can't be face-to-face
or we can't sit down in the office and
bring a client in to talk
so how can we get a client to join us to
do what they would do in person but do
it over a zoom call
i i think the good news is all of our
societies going through this together
so whether you're a student a parent a
donor
you got the same issues right in your
own life and so it's not a shock for me
to say i'm sorry i wish i could host you
for a site visit but i can't well
they get it and they probably wouldn't
want to come downtown or to a facility
right now anyway
so uh it's it's about getting creative
using all the tools that we have but
then just being really authentic
and transparent with our community
and they want to help so part of being a
fundraiser is
trying to figure out how do i connect
the dots between how somebody wants to
help and what their capacity might be
in some cases it's volunteering we still
have volunteer needs we just have to do
it differently so how can we connect
them into that side of our house
and it's not just about the money
although it's always primarily about the
money
it's always about the money uh i'm a
professor in a business school no matter
what we're talking about it's always
about the money
um christina's laughing you know the the
teachers don't get that but it's
but they got to get paid at the end of
the week um
and mark that question actually uh came
from a butterfly ball supporter so
i hope that person continues to buy that
table
um well we have we have big plans for
next spring so
stay tuned if you're on our butterfly
ball email list you'll be hearing about
something big we're trying to put
together for next spring i can't wait
um so another question is
um somebody was talking about um that
providing space to talk about these
issues is very important
um what are the measures
um that are helping you what kind of
training are you doing
so that people feel like they have some
sense of control
of their lives and of their jobs
christina you want to take a shot at
that training i'm trying to think of
well so i think we're um you know as i
mentioned we are
trying to provide an ample amount of
time
at least once a week and then we did a
good amount of training in the summer
in the spring and then we have some
pupil free days
throughout the year where we're going to
continue to provide
training just on the technical stuff
here's how you use the platform here's
how you navigate challenges so we're
finding
that kind of training um but i think so
that helps people feel confident and
like they have control
the other thing that we're trying to do
which is less about training is just
create a sense of stability in a very
unstable
world and so part of that is
um you know we just announced we're
going to stay in distance learning until
december
and that just let people breathe thank
goodness i now know what the next three
months look like
i think that's the right decision based
on all the data i'm seeing
but it it was definitely the right
decision for the people
who are working with us and who we have
the privilege to serve because there was
everybody was kind of halfway in and
halfway out very anxious about the
possibility of going back to school and
so
really trying to create clarity control
what we can control
because there are so much out of control
has helped people
and i think you know this constant
communication and transparency
helps people feel like okay there aren't
these side conversations that are
happening
that i don't know about um i know the
latest and the greatest
and that gives me peace of mind to move
forward and i think the other thing is
just you know we've been really
intentional um throughout the whole
organization
with providing spaces for people to be
people
and to know when to take a moment and
take a step back
um the one thing that that's happened
over the last six months is all of us
have been able to see each other's
humanities through a computer screen
the number of cats and toddlers and
that i've seen on camera reminds us that
we are people
as well as educators um and really
allowing that humanity to inform
how we treat our people and how we talk
about how hard this is
i think helps people feel like okay i
can go at it another day
um it's not perfect you know as mark
said it's not perfect there are people
uh just on any given day somebody could
struggle and you know i was talking to
somebody yesterday
who was saying i'm trying to figure out
is it the personal stuff that i'm
dealing with
is it the work stuff i can't separate
them anymore
so i'm actually not sure what i'm mad
about um and so just
just allowing people to have because you
know the non-contingent interactions
that you get in the hallway or you stop
by someone's cubicle those are gone
unless you zoom bomb somebody and say
hey i'm here just to check in on you so
you have to intentionally
provide that space to download when
you're you
are with people in meetings um and
create some informality
as as you continue to push forward with
the mission
i i i'm almost sorry we have four
minutes left
because i would so love to end with your
discussion of
remembering people's humanity i think
the real question is here
um at what point do we start to feel
um that that this is not just that this
is the new normal
that this is something that we're gonna
have to live with past december
you know that we could be living with
you know at usc
we've told people to some extent staff
members
you know think about working at home if
you're not critical to
clients think about staff members for um
a thousand you know for till september
actually
through the summer um whether or not you
know subject to coming back but
but we're starting to do you think it
will how much do you think will change
if you sort of say hey this is this is
normal for the next
few years
boy i hesitate to think if what the
world is going through right now is
normal for
a few years but for us we are definitely
looking at the longer term somewhere
what
it sounds like usc is doing and to
christina's point of certainty
we also made the call in august that our
staff would not be coming back to the
office
before the end of the year um and
we tried to make the best guess we could
but the staff needed that certainty
and i'm sure in december we're going to
make an announcement that pushes it out
significantly further maybe
till the middle of the year and
when we do come back and there's a
vaccine and people feel more comfortable
congregating again it is going to be
different
everything is going to be different um
i think the good news out of all this
for us anyway
is we've learned that we can do things i
never would have thought possible before
and that's offered more effective and
efficient services
for some of our clients in a much better
work environment for some of our staff
why do we not want to preserve that why
do we not want to figure out what's the
best that we've learned through all this
and preserve it
when we think about how we can have
greater impact and serve more people i
don't necessarily need to spend a
million dollars on a new office
someplace right are there other ways we
can partner
to provide a satellite office and then
virtually connect staff
we never would have thought that way
before but this is providing us
the space to think about it so i think
that's a good thing yeah there's a lot
of tragedy
and a lot of this just sucks it's just
not good
but um i want to try to be glass half
full on
on on it as well we're learning a lot
that i think will make this a stronger
and a more effective organization
so i couldn't imagine two more
consummate professionals uh being here
to teach
about this issue for all of uh people
who've been watching
um i feel privileged to know you both
uh i do and i'm sure i speak for my
students and everyone that
that anything we can do to help you uh
we want to do
because we need you to succeed we
absolutely do 60
000 homeless people in la hundreds of
thousands of students in la who aren't
getting educated
uh thank you so much for what you both
do
uh and uh i'm gonna have to say to you
especially christina mark's got his ufc
hat behind him
i'm just going to say to you christina i
have to say it fight on and you don't
get to say go bruins i'm sorry
thank you everybody did i do an eight
clap yeah dad i'm just kidding
okay thanks everybody we'll talk to you
thanks again have a good one

---

### The Future of Entertainment
URL: https://www.youtube.com/watch?v=EgucNEJZ4M0

Idioma: en

[Music]
[Music]
hmm
[Music]
huh
[Music]
[Music]
hmm
hello everyone welcome to today's
marshall webinar
the future of entertainment towards the
end of our discussion we will hold a q a
session
and please feel free to submit your
questions at any time during this
webinar
using the q a feature at the bottom of
your zoom window
with that said i'd like to introduce s
mark young
who holds the george bozanic and is also
a professor of accounting at leventhal
in addition professor young is a new
york times best-selling author for his
book
the mirror effect how celebrity
narcissism introducing america
mark thank you very much sir jean
welcome everyone to our webinar um
i will be moderating today's session and
for about the first 45 minutes or so
i will pose questions to our panelists
this will be an interactive
discussion so even though a question
might be posed to one person
i'm hoping that everyone will voice
their opinions
after that we'll have about 20 to 25
minutes of
q a some questions have already been uh
submitted
uh by attendees but please feel free to
ask questions
and i'll we will try to get to as many
as we can
today i'm delighted that we have been
able to enlist
three outstanding panelists just growed
from legendary entertainment
elaine paul from amazon studios and john
dendik
founder of malaga consulting and former
deputy global leader
for media and entertainment at ernst
young consulting
they will provide their perspectives on
the state of affairs of the
entertainment industry
because each panelist's resume is
extensive i have picked out
a few things that you might find
interesting
uh let's begin with josh joshua b grodd
is the ceo of legendary entertainment
a leading studio company based in
burbank california
legendary creates film television
digital and comic content
that is distributed globally mr grodd
previously held the title of partner
at the la office of ireland manila llp
and i was chair of the firm's
transactions practice where he focused
on mergers and acquisitions
equity and debt financing including
structured debt financing
day-to-day governance uh corporate
governance matters
and transactions involving intellectual
property across a
wide range of industries throughout this
25-year plus
career mr grodd regularly facilitated
film
tv and video game financing and mergers
and acquisitions including representing
and advising
dalio wanda group corporation limited
in the 3.5 billion dollar purchase of
legendary entertainment
uh mr grid sits on the board of
directors of the special olympics of
southern california and the los
angeles police foundation and is chair
of the board of councillors at usc
school of dramatic arts he holds a ba
from ucla
and a jd from loyola law school
elaine paul serves as cfo and vp of
finance
for amazon studios in this role elaine
oversees portfolio
and financial planning for amazon's
global
slate of original film and television
programming
as well as studio operations her team
includes data science
strategy business intelligence and
advanced analytics
in addition to content planning and
analysis and production finance
prior to joining amazon elaine served as
cfo
of hulu for six years during a time of
pivotal change and disruption in the
industry
before hulu elaine worked at the walt
disney company for 19 years
most recently as svp of corporate
strategy business development and
technology where she led various
acquisitions
new business initiatives and strategy
investments domestically and
internationally
prior to her time at disney elaine
worked as as an associate at the kinsey
company
and the financial analyst at morgan
stanley elaine holds an mba from the
harvard business school
and a ba in economics and history with
distinction from stanford
i wanted to go back to uh mr grodd for a
minute just to say a fun fact about him
apart from collecting vintage watches uh
josh is really an old-school school
purist when it comes to listing star
wars and the original star trek tv
series
as his favorites a fun fact about elaine
is that she was the tv show host for
stanford university's version of the
dating game
broadcast on the university's closed
caption tv station i've known elaine for
about eight
nine years never heard about that before
but most intriguing is that elaine who
hails from oklahoma
has attended greased pig chasing
contests
and yes that is exactly uh the way it
sounds
maybe she can tell us a little bit about
that as we go on
john dendik is an expert in new business
models
and innovative and disruptive businesses
as one of ernst young's most senior
partners
and deputy global leader of its
fast-growing technology media and
telecom
five billion dollar global business uh
this business focuses on how
technological developments cloud ai
rpa 5g cyber blockchain etc
are affecting business and enabling
disruption by empowering consumers
john has served as lead or advisory
partner on
top global clients including netflix
cuibi
disney fox hilton house of blues news
corporation
liberty media etc in june 2020
he retired from ernst young his current
activities focus on his company
malaga consulting and he serves on a
number of boards and committees
fun fact about job if he seems
recognizable to you
it may be because you have seen him as
the face of ernst young
for 15 years who delivered the winning
envelopes
in parentheses without issue according
to him
to the presenters of the globally
televised annual golden globes
emmys and american music awards john is
a semi-retired semi-professional rugby
player
marathoner and triathlete and an
enthusiastic golfer
now for those of you who are really
youtube aficionados
you may recall in 2012
big bang theory did a skit for
the emmys where they referred to john
dendik as
john the human spreadsheet mendic
so with those introductions um i'd like
to begin
and uh ask about the general effect of
covert 19.
and john let me start with you you know
when you look at the trends
of entertainment consumption since the
start of the pandemic
how much of this is pandemic related and
temporary
and how much of this is the new normal
thanks mark and uh happy to be here with
uh my two esteemed panelists today i
think
to answer that question in general what
we're seeing
in the pandemic demand and supply is
really just what we see
on an ongoing basis but accelerated that
is that consumers
are in the driver's seat enabled by to
not technology about what they want to
consume
so i'm just going to comment on a couple
of uh segments where i think there's
been some tailwinds
during the pandemic video streaming and
video games
and a couple of segments live
entertainment and sports where there's
maybe been some headwinds and talk about
how
how temporary or permanent they may be
so uh
first of all from a streaming uh you
know this is clearly the
the the biggest business in
entertainment pre pandemic and post
whether you call it ott
vod internet television direct to
consumer
it has been the and continues to be the
big growth engine and we have seen
significant
acceleration during the last six months
if you look at netflix it it gained 26
million
new subscribers in its second calendar
quarter in a three-month period
it was about the size of its full 2019
subscriber growth if you look at disney
with its disney plus new offering
in less than a year it's generated 73
million new
paid subscribers which is way ahead of
its plans
and as i think we'll discuss later there
are several other
uh new entrants to the streaming game
whether it's uh
peacock hbo max
and the the big tech companies like
alain's company and apple are also
participants so what what this means
that's that is a tailwind in and of
itself in terms of subscriber growth it
also means it's a great time to be in
the video production
business it's the golden age of video
production because not only do we have
significant ongoing demand from the
traditional
uh media companies studios and
independents for original content to the
tune of i think it was about 89
billion dollars in 2019 there's also
significant
new demand from the ott streamers and
players
so the tune of about 39 billion or about
a 35
uplift in demand and so the demand for
video content
uh on an ongoing basis will be
significant and a great growth
opportunity for the industry the the
asterisk to that which i think we'll
probably talk about too is
while there's great demand for video
content the pandemic has resulted in
you know a slow down of the ability to
supply that
but from a from an ongoing trend i
expect the the demand
to to remain strong moving on to video
gaming
you know gaming remains one of the least
expensive forms of consumer
entertainment
and it has significant potential to
capture a greater share of discretionary
spend
especially when you look at the cloud
gaming side which provides access to any
game
anywhere on any device that's the major
new
platform there's some great new games
being developed for gaming there's some
great new platforms
look at taking a geographic view the
largest gaming company by revenue in the
world is 10
cent that's based in china and it
reached record daily
uh active users earlier this year for
its top two games when there was over
200 million
daily active users for those games
during what to them was the early phases
of covert and maybe as a proxy for
future trends the the
daily active users or dius for 10 cents
once
china has moved a little bit back to
post code normal
those daily active users actually
declined
as people went back to work but what
we've seen
is the time spent on gaming has remained
higher than pre-code
so essentially there's a new normal here
driven by the players who have become
emotionally and financially invested
in the games and enjoying the social
social element and it's mobile enabled
so
those are the two uplifts i would say on
the
on the on the headwinds categories live
entertainment
obviously live entertainment is
generally with the absence of sports
but entertainment concerts music and the
like is essentially shut down
and you know the public health being the
primary issue and consumer confidence
being the secondary issue
you know other reasons behind this and
so until there is
something that enables there to be not
these national if not global
uh consistent health uh
improvements and a vaccine then music
artists aren't going to consider doing a
tour
when something's allowable in one place
but not in another
it just makes planning that kind of
activity impossible
and what one thing the people in the the
tour business will say is
until you can really get resumption of a
regular live event you'll need to have a
hundred percent of the people in the
capacity you can't have
one in six seats so what
what the business thinks is that uh
maybe q3 or q4
2021 there could be a resumption of
normal activities
uh you know pending successful vaccine
and maybe by 2022 there'll be a
you know back to 2018 2019 levels
uh the good thing that the people i talk
to in that space feel and i
as a consumer of one i would endorse
this is it's not like the consumer
demand has gone away for this and so
artists are looking forward to the
opportunity to talk again because that's
what they do and love
and we as consumers are looking forward
to the opportunity of
viewing that enjoyable content so so
hopefully that is a temporary versus a
a permanent change the last one i'll
touch on is
is live sports uh and as we've seen live
sports has kind of limped back
uh to business to different degrees
depending on the sport
uh you know you have some sports like
maybe golf and
car racing formula one that happen to be
designed in a socially distanced way and
so
it's easier to to conduct the sport
tennis might be another
then on the other extreme you have uh
football that has a large number of
players spending a lot of time very
close together and so we're seeing that
issue in the nfl
the economic side of it is you know
sports get a lot of its revenue from the
in
arena in game in stadium fan experience
but also gets a higher chunk of its
revenue
again depending on the sport from the
broadcast so you know
with with the resumption of sports
broadcast revenues and advertising have
have come back there's been a bit of a
debate as to whether
the demand for sports has gone down
because if you look at any of the big
sporting
events that have been broadcast for the
last few months from the nba finals
to the world series of baseball to the
nfl games they are all individually
down in terms of their ratings compared
to their prior year
but then if you look to the fact that
they're essentially have been condensed
into a short period
and are stacked on top of each other the
the viewing in aggregate for
for broadcast sports has actually gone
up in
the three months ended october went up
seven percent versus the prior year
and so in aggregate it seems that the
demand is there but on an individual
sport basis
uh there's a bit of dilution or or
spreading of the audience so
uh i'll i'll stop them uh elaine and
josh any comments uh
that was pretty thorough so um
thank you um i i think the
the initial question was how is kova
changing
uh the face of entertainment is that
fairly accurate
yes um so i think that
for for you know i won't touch on sports
or or concert or touring
but from a very practical perspective
um and you know we're partners with
amazon in a number of different shows
which is
you know which is terrific and they're
they're terrific partners
um we have collectively had to figure
out
how to produce content in a very
challenging environment
um you know we we can build
all the protections that we need around
safety and we've done that with you know
with amazon and our other partners on
productions that are happening now
around the world
um you know we have testing on a daily
basis
we have health screenings we recently
invested in
in bracelet technology that will
location track you down to the foot when
you walk onto our sets
so that we can be highly accurate in
contact tracing
especially given the fact that i can't
remember what i had for dinner last
night so asking somebody who they were
in proximity with
over the past 48 hours is next to
impossible but now through technology
we're able to really pinpoint that
and as a result reduce the number of
people
that we have to quarantine um but you
know net net it's adding millions of
dollars to every production
in order to keep everybody safe and
safety is really the guiding principle
for us and the partners that we have on
our television shows
um the the what we have witnessed
across our library of films and for our
new content
uh is that the demand for content
uh has never been higher uh we've burned
through the inventory that we built up
pre-covered
and i believe that you know the the
covet effect is really an acceleration
of probably two years of consumer
adoption
um of of of streaming services
whether or not everyone's going to adopt
all the services hard to say
you know i don't know that there's any
definitive study yet on how many
services people are going to become a
subscriber to you read some that say
three
some that say five but the one thing
that's consistent is you deliver premium
quality content onto a platform
and right now that content is being
consumed at an amazing
amazing rate um and so
when we look at the when we look at the
landscape we look at you know our
partners like we have at amazon
you know or netflix um and we say all
right you know how can we deliver
compelling content to them
um because our content is what is
driving their subscriber growth
not just ours but you know compelling
content is what's driving subscriber
growth
and so the pressure on us to be back
into the market to create it
and to deliver it um has never been
greater but also the opportunities have
never been greater
um and i think yeah what what also
you know we have to remember in the
dynamic that's currently at play
is that for at least my entire
professional career and i would venture
to say elaine and john as well
we've never had something the size of a
global network
that never existed before right you'd
have hbo which was a very
large domestic pay network that had 25
to 30 million paying subscribing
households
and you inject a piece of content into a
network of that
size and it has a finite ceiling on
value
just based on the size of the network
well you
have the same piece of content and you
inject into
a 180 million person network
or 125 million person network
the content is has a higher ceiling on
value
so um you know the the
economics of our business are changing
the approach to the market
of our business and changing consumer
behavior
i i don't know that it is is changing as
dramatically as we all believe it is
changing right now because we're in this
kind of
covet bubble um
so i i i think it's going to be
interesting to see what happens toward
the end of next year with respect to
you know theatrical exhibition uh
tv est dvd home entertainment in
addition to
streaming um right now clearly the
streaming platforms because they are
the most convenient since we're all at
home the most accessible
um are growing exponentially but i don't
know i don't yet know i'm not yet
convinced
that the theatrical experience is dead
uh as others may say i actually think
that there's a lot of life left in the
theatrical experience and
and you know with not science based but
you know when you look at
when you look at us as a species you
know we like to do things together
we're a communal species and you go back
to the days of the caveman sitting
around the fire
and they loved it when you know the
caveman stood up or cave woman stood up
and told a great story about trying to
be a you know not eaten by it by
some kind of big scary monster and they
all were laughing and pointing and
you know then they all went to bed um
you know telling stories now putting
them on the various networks around the
world
or the global networks um is really an
evolution of that
and going to a movie theater or as
another shared communal experience is
really an evolution of sitting around
the campfire
and hearing someone tell the story and
having that shared experience
so i'm not sure that the shared
experience of content consumption is
going to go away the way some may
predict thank you elaine
thank you thanks for having me and it's
nice to be joined by
uh such um an accomplished set of
uh colleagues so nice to be here um
yeah it's been very interesting um to be
in the front seat uh during covet at um
a
major steering streaming platform so
covid for us
um has uh without standing
you know uh has been an accelerant
of um consumer behavior and i
think josh said it that probably things
that were may have taken
two plus years for uh to happen have
really been accelerated by covid
um in terms of consumer behavior um
cutting the cord the theatrical
experience uh getting more comfortable
with uh with streamed entertainment
and streaming more at home um and so
for us we have a global business um
prime video is a part of a multi-benefit
um subscription with the prime
subscription globally
um we're in 200 uh countries worldwide
and um what we saw with kovid is
a step change in our business
fundamentals really both
in terms of number of uh streaming
subscribers
and in terms of the engagement of those
subscribers
um so that's been sort of the reality
for our business fundamentals
um a publicly released statistic is
uh it's a it's rather old now but um
amazon did announce that we had
150 million prime subscribers worldwide
that was
um an announcement some time ago so
to the point about global networks um
yeah this the scale of these streaming
platforms
is really um you know unprecedented
in terms of uh if you think about it as
a single outlet
for uh creators and for content to reach
um customers worldwide um
the we've also seen a step change
in um some of the business models and
windowing
and theatrical release window of course
is probably the most
obvious that's been impacted with the
largely the closure of theaters
and with studios um embracing a model
that they probably
would not have embraced um were it not
for the shutdown of theaters
to release films direct to streaming
platforms
and that happened by necessity at first
um and maybe establishing a bit of a new
norm um
so for amazon particularly we had
a great success with um
my spy came onto our platform as an
original
film debuted on amazon prime then that
was followed by borat which was
a a really big success for us
and um timely with cultural relevance
and uh and we've announced eddie
murphy's coming to america we'll also be
debuting um premiering on amazon prime
worldwide
um so seeing that sort of uh
change in um theatrical windowing
and embracing an opportunity to go for
the you know for movies to
uh debut on streaming platforms as well
as a pvod model
um so amazon prime
in addition to our s-vod we have uh
transaction video on demand and um
channels
as well and trolls for example
uh came and enter you know it really
introduced the premium video on demand
model
um and we saw that as a big success on
amazon prime with people
having the opportunity to uh pay
a premium to get it in the traditional
sell-through
window if you will but uh but accelerate
it pay a premium to get it much
accelerated
so we've seen the acceleration of all
sorts of
um changes to distribution models
to the business models with the addition
of pvod to the business models with the
start on a streaming platform
first and skip the theatrical window all
together
and um outside of just movies of course
the the fundamentals of streaming tv um
i i think this covet presented like that
stick
that step change um accelerant
uh other things in terms of covet of
course it's been
super disruptive to production and uh
has increased cost and um put a stop on
things for
you know a matter of months and we are
all getting back to what's the new norm
of how we produce and covet environments
and
um and josh josh spoke to that and
what that's required in terms of massive
change in terms of just the operations
of production
and the uh safety protocols and and
building plans that can be flexible
knowing that
production could get shut down for a
week or two if there's an incident
and uh planning things differently as a
result
so i'll stop there elaine let me just
follow up
quickly on this um are you guys
trying to garner more international
content as a result of uh
the issues with domestic production
um it's not an issue with domestic
production
covett has presented an issue for global
production
uh and the extent to
the extent of that of course is on a
country by country basis
but from the fundamentals of we're now
producing in a coveted environment
and that requires safety protocols and
also
um you know is subject to getting shut
down or new restrictions or whatever
zone whatever jurisdiction and whatever
coveted you know code red green or blue
any particular country is in we have to
be flexible um for our global production
we produce in 16 countries globally
and um so it's impacted us across the
globe
um what not related to covet but in
terms of international content
not to supplant quote unquote domestic
content for our domestic subscribers
but a super important thing in running a
global
streaming service is uh
local content is extremely important
to um to having a success to having a
uh a service that resonates with the
local
customers in um in india in the uk
in germany and brazil and so we've seen
a big expansion
um or we proactively uh pursued a big
exam
a big expansion in our what we call our
local production
efforts where we'll produce original
programming
um out of the uk out of germany out of
brazil out of india out of japan
and that's super important to
um to growing and building a healthy
and thriving service in uh
in each individual local market and just
an interesting thing to know from the
amazon perspective
i think domestically we often think
of uh customers often think of amazon
prime as shipping
and then now we're increasingly training
customers to
uh know that we have incredible
streaming
video content as part of that offering
with jack ryan and first run
films and the boys and et cetera um
internationally in some of the
developing markets
video is actually the lead uh for amazon
prime and then commerce comes on the
back of that so
video is a super strategic part of the
multi-benefit subscription offer that
prime offers around the world and
international markets is often sometimes
the lead for that so
local international content is
incredibly
important in our global um
you know business development great
thank you
um let me switch gears from now and talk
about uh something that you've already
touched on which is
uh exhibition window shrinkage and its
implications
um yesterday uh when the media announced
that all 17 of its
2021 films will be shown on hbo max
on the same day that they come out in
theaters and
i'm wondering if you could give us your
thoughts josh
well we're right in the middle of that
with two huge movies
on that slate it is still a very fluid
situation
uh nothing has been finalized with
respect to when the movies are going or
how they're going or if they're going
um and in just scrolling through some of
the q a i mean there's a lot of
questions on the topic of windowing
so let me just spend a moment to discuss
that so
the the by way of background the
traditional window business before
the covid started was you would have a
movie come out in theaters
and then roughly 72 to 90 days later you
would have a window where you'd be able
to get that movie on home entertainment
so that's dvd
tv or est tv is transactional video on
demand
est is is is purchasing electronic sell
sell-through
roughly four months later you'd start to
see it on your pay tv
platform which now also includes the
streaming platforms
uh there'll be it'd be there for a while
then you'd have a free tv window then
you'd hop scotch between paid tv free tv
pay tv free tv
and you know that kind of patchwork you
know
lays out across the globe in a country
by country basis
and it was a very it was a very
lucrative model for a very long time
because you effectively had
four ways to monetize the same piece of
content
theatrically home entertainment paid
television free television
um with the with coven and even before
kovit
you know the pressure on theatrical was
mounting
because you had high marketing costs you
had high production costs and the tails
for those windows that i just described
were starting to shrink
um we've seen that with every studio
when i was lawyering i did most of the
financings for all the studios so i saw
their data
um and so we and we've seen it in recent
box office performance pre-covered
the the historical problem was that the
exhibitors
amc's the cinemarks of the world
refused to shorten that theatrical
window and said if you want to eat into
my theatrical window of 72 to 90 days
i'm not going to carry your movie well
covet all of a sudden threw that on it
turned that on its head and changed the
leverage 100
to the studios saying i have a 200 plus
million dollar investment in a whole
raft of movies
i need to monetize it or 100 million
whatever the number is
i need to get it out you cannot stand in
my way and the exhibitors
had an existential question which is
are we still relevant in the food chain
so historically you had somewhat of an
alignment of interest between exhibition
and
distribution now you didn't really have
an alignment you had existential
and monetary um and as a result you
started to see that the
changing of windows under the guise of
temporary during covet
the problem with potential problem
with things like day and date on a post
covered basis is that the economic model
for exhibition
if you lost roughly seven percent of
your box office
most of the exhibitors would go bankrupt
that's you know in terms of a margin
basis
um and so you know you can imagine
what's going to happen because the the
exhibition has two levers to play with
they have
exclusivity right well actually three
exclusivity
ticket price and settlement rate right
well they can't raise the ticket price
much higher than it is because all of a
sudden it doesn't become an
entertainment value proposition that's
worth
that's worth engaging in um
they you know they they are going to
lose the windowing fight because at the
end of the day the whole structure of
the downstream rights is undermining
the value up front so it becomes down to
settlement rate settlement rate is the
split between the studio
and the exhibitor as to how much they
get of the ticket
a big movie a dunes godzilla versus kong
something like that whereas we're at
probably a 60
plus meaning we get 60 of the ticket
price
the exhibitor the movie chain takes 40
the economics to make it work in a new
world where you're having a shrinking
and you're losing attendance
it's going to be like 80 20 in favor of
the exhibitor
which means that you're not going to get
any money out of exhibition which means
you're not going to invest in marketing
the movie which means the whole system
starts to shake
a little bit and potentially start to
fall apart
so i don't yet know because we're just
too early and we're
you know we're too we're too early in
all of it how it's going to shake out
once covid gets out of the way during
the covet moment
whether that is lockdown or immediately
after
we start to come out you know and we
have a return
back into the marketplace there's going
to be a different economic model that's
going to put a lot of pressure
you know on exhibition and we're going
to be more reliant on the other revenue
streams
which means film could start to look a
lot like television
in terms of getting a paid tv platform
to pay a big license fee to get the
rights
but on a permanent basis i don't yet
know how that's going to shake out
rule of thumb by the way is about
80 of your box office is generated
within the first 17 days of exhibition
so you know that you're you're going to
see
on a permanent basis a shorter window
it's not going to be 72 days it's not
going to be 90 days
will it be day and date
not sure will it be 17 days will it be
31 days
i think we're going to have something
that's actually going to be
dynamic windowing which i haven't heard
a lot of people talk about which is
going to be
based on the performance of the movie in
the theater
we will have a window that will that
will you know expand and contract
and you know for those of us who are now
doing new new
output deals with streamers it will be
something like
if we pull it off and give it to you
earlier we get paid x if we pull it off
and give it to you later we get paid x
minus some number um to properly value
the rights
so it's it's a dynamic time the great
part that underlies all of this though
uh which is not lost on me and i i know
it's not lost on
my other panelists is that we're in a
business and we're making a product
that people want uh not a lot of
industries are in that business right
now
so um and and where the product we make
is wanted around the world so you know
really the question for us
is working with exhibition in
partnership
working with the the paid television
which now as i said includes the
streaming platforms in partnership
to figure out what is the model that
makes the most economic sense to be able
to continue to create
great great compelling content
thank you john any thoughts yeah and i
i i agree with that and it's interesting
because the theatrical
uh exhibition process is
is as as josh says it's very much of a
it's a shared experience it's a communal
experience it's not it's not live it's
just watching a film
you know recorded film on a bigger
screen but it's the experience of
viewing it is a lot different than
sitting
in your living room you know watching tv
and so i think
if you're looking at consumer demand in
a post-pandemic world
there will be demand for that especially
for you know young people want to get
out of the house want some separation
you know it's a social experience maybe
you know compared to you know going out
for dinner as opposed to deciding if you
want to
watch content in your living room or
with a bunch of strangers you know on a
bigger screen so i think
i think there is some strategic demand
that will
that stays there for that to me the
question is you know you kind of have
today you have three participants in
groups in this in this
ecosystem or discussion you have the the
exhibitors or the theater changes as
josh described who who would like as
much exclusivity as they can
essentially they they spend big capital
investments on their
facilities they have you know great
projectors big screens
nice comfortable chairs they provide
food and beverage and
you know they're in big malls anchor
tenants it creates a lot of pedestrian
traffic that everybody likes so that's
sort of
so they like that they you know as
joshua they probably on average pay
about half
of the ticket price to the uh to the
firm producer but they keep 100 of the
food and beverage revenue that they they
get to charge while people are there so
that
they're looking to preserve that then if
you have the pure
production business pure play it's
looking just
to maximize does josh describe what it's
you know revenues are and traditionally
that maximization has been driven off
an initial theatrical release the third
sort of category i think you have now
that is a bit different in terms of
its economics is you have the uh the
film production business that is in a
vertical the integrated business that
also owns a streaming business
and so that business is looking to
obviously maximize the revenue from
its individual film but it's also
looking to maximize the value of its
entire business that
to a large part might be driven on
growth in streaming subscribers so if
you look at
you know this year for example you know
disney
as a company has lost about eight to
nine billion dollars because of its
problems in the theme park business that
we all know have been
closed but because it's uh
subscription business of disney plus has
grown
better than planned it its stock is up
this year so you know some
some of these big integrated media
companies are looking
analyzing you know how much value this
film
is to their streaming service in terms
of either
new subscribers reducing churn you know
value versus
going through a traditional model so i
think that's a different dynamic that
we're seeing that
coincides with the with the pandemic
elaine i want to ask you um something
related but a little bit different
um so covered it seemed like the esfad
market was getting very very crowded
and um you know equity came in
unfortunately didn't last very long now
with so many such demand content what is
your prognosis
for the esvat market will more people
interval
companies be leaving um
well it's interesting the domestic
environment currently
there's been a you know huge influx
of additional competition if you will so
um
netflix well-established player globally
um
amazon uh a close number two currently
uh globally um disney of course
came in very strong domestically and i
think we could all
expect to see its global growth
um to be successful um
the rest of the competition currently
and i'm oversimplifying of course
is uh has largely been domestic so
um hbo max it's been um
covered that uh well covered that
they're probably
a bit disappointed with their subscriber
attraction to date and it's been
largely uh you know it's a domestic play
now but they
do have the opportunity to create an
international footprint
and um and i'm you know certain they
will
be successful and uh growing it's very
interesting what they're doing with uh
with the movies starting with wonder
woman um
and then uh others are are jumping in
the fray so there's been coverage in the
last week
of discovery's entrance into it and
you know everybody is is trying to find
their
direct to consumer play if they don't
already have one um
peacock took a slightly different
approach
with um an ad supported
uh model in addition to
um what they offer their the comcast
uh subscribers so um
long way of saying i think the domestic
my personal view is the domestic
market will probably shake out and
rationalize a little bit
um and globally i think it's it's very
hard
to um establish a global platform
um it's uh expensive um
the technology is by no means simple to
be able to get
your streaming um video
app and content you know on all
devices across all technologies with uh
local language local currency
capabilities etc etc so
um that's expensive the uh
the it's a high
fixed cost business um s vod is a high
fixed cost business and it's all about
leverage and scale
so i do think um it's going to be
challenging
for these uh later entrants that have
perhaps a more niche and specialized um
content offering to go global
and then in terms of what they can do
domestically
um it will be interesting to see what
shakes out uh and is it a series of um
multiple offerings for which customers
pull out their wallets for subscription
after subscription after subscription
or do things rationalize with um some
aggregated plays
and uh and different business and
economic models that we're already
seeing
um in the marketplace so
um it's early early days but i think the
good news is
it is early days and all the macro
fundamentals there are a ton
of tailwinds um supporting the
fundamentals
of direct to consumer and s-vod that
that bode well domestically and globally
thank you you know amazingly time is
running
fast here so i wanted to just turn to
some questions
um josh i asked you you mentioned about
june 2021
and mozilla versus kong tell us just a
little bit about those films because i'm
really excited about them well a lot to
be excited i've seen both
and uh for those of you that are dune
fans um
the movie over delivers um incredibly
talented director and an amazing cast
and godzilla vs kong the great thing
about that movie is i just got to say
the title and everybody kind of gets
excited and knows what it is
um but you know the the the one thing i
will say about that
and i also will say about some of the
projects that we're doing some of some
of them
are with you know amazon is
the and it kind of goes back to the com
the topic we were just talking about
you have a a growth in people
trying to stand up streaming platforms
people who shouldn't be standing up
streaming platforms right you have like
lines of gate stars stars trying to
become a stream platform
mgm owns epics they're trying to become
a streaming platform
everybody's trying to launch a streaming
platform some advertising supported some
subscription supported
but the one thing that that is a
a systemic shift in
in streaming is that historically
on cable we had to buy the channel in
order to potentially get
a show right so if i wanted to watch
vikings which is now coming to amazon
which i'm very excited about
um but if i wanted to watch vikings i
had to be a history channel subscriber
um
what put aside whether it was an
authenticated video on demand experience
but i had to be a subscriber to
directv or or comcast to get the channel
so i was
making my buying decisions based on
channel
and in an ott world you're able or
should be able to be able to make your
buying decision
based on show so when i'm looking around
i want to say oh i like that show
i want to watch that show when i want to
watch it
i don't have to watch the channel or by
the channel
and what's happening is everybody is
rushing in to build their ott
platform the landscape is going to look
a lot like cable which is you're going
to have a proliferation of channels
which
take out the word channel put in ott
platform right
you know amazon netflix discovery stars
epics et cetera et cetera their channels
and
on the channel will be great content so
what i
i really believe at the end of the day
you know putting aside
structural problems which i don't think
there's going to be a lot of structural
problems meaning like just your
streaming
technology doesn't work things like that
at the end of the day the winners are
going to be determined based on who has
great content
if you have terrible content you're not
going to win
if you have great content you're going
to win
and you know i look at our company we're
in the business of supplying we're
we're supplying great content to whoever
wants to buy the content we're not going
to build a streaming platform
and it's finding the the channel or the
streaming platform
that looks and values your content the
right way
to then say that's a great home for this
let's partner and
you know without calling out elaine too
much here
you know we have a show with them that's
been announced called paper girls
which is an amazing show based on the
prime brian k
vaughn comic book um about young
young girls who actually have paper
routes who get caught in a war between
two different groups
involved in time travel so it's a great
show it's female empowerment it's
everything you want in a television show
it's diverse
right which is terrific um and
the content if we do our job right in
partnership with amazon
it will be a great piece of content
that's what drives success right there's
a lot of ways you can consume it but you
got to have the thing to consume
[Music]
thank you elaine i want to ask you a
similar question um
you've got two original series coming
out among many
called one is the sound of metal and the
other is the wilds
could you talk a little bit about those
yeah sound of metal is a a movie
um and uh that is
i would put it in the category of um an
interesting prestige uh film
um and the wilds is a series
that we call targeted towards our young
adult audience
and um a big opportunity that we see
in terms of delight further delighting
and serving customers is to delight
and serve the young adult and uh
african-american audiences
particularly josh alluded to diversity
he alluded to female empowerment
and and that's something we're very
focused on as we look at our
uh go forward slate of product
is creating um products that will
particularly
draw in young adult audiences um
diverse audiences etc and the wilds we
are super
super excited about for its potential
with
um with young adult audiences i have
uh three teenagers and um
i'm excited about it and my daughter is
excited about it so i encourage you all
to check out the trailer for the wilds
great thank you everyone you know i'd
like to uh
turn to some of the questions we've
gotten a ton of questions here
and uh we have a huge marshall student
representation so let me start with uh
with a number of questions that have
come up um
the first question is how can marshall
students best prepare themselves to be
competitive in the world of the
entertainment business
uh you know we have lots of different
classes
um you know within the marshall school
and in
uh collaboration with the uh cinematic
art school as well so
you know what kind of classes should
they be taking what kind of majors
should they be following
um your thoughts john maybe we can start
with you
yeah it's a good question i i've said
and this was a pre-covered uh
a pre-covered question and i have three
grown kids and
not none of them did this but if you
were if i was advising someone to go
what to study in in college today it
would be a dual major in
uh uh i.t technology and mandarin
because i think those are really the two
languages
of the future as you know we're moving
into a a digital world we're in the
digital world and i think a lot of what
we've been talking about today
will mean that you know those technology
skills will be
more highly rated and so uh in terms of
the
sectors i think i mentioned these you
know get gaming and
film production and for a period of time
the
the streaming channels are going to be
in are going to be growing at huge rates
and they're going to have a high demand
for
for great students and i'm sure marshall
will have a lot of those
a lot of those candidates here as uh as
good picks
thank you josh any advice
well i i uh i would say
if there's tax classes take some tax
classes because a lot of decision making
is driven by
tax mitigation and tax credit strategy
um you know we you know elaine alluded
to filming around the world we're
filming around the world
we hunt out jurisdictions that have the
best soft money benefits through tax
rebates and
highly complicated structuring
so from a business perspective
understanding tax understanding
international tax
um is vital for
the finance side of our business from
the from an operational side
you know i guess the the best advice i
would say is get your feet wet get in
there get into the pool
right go get a pa job go get any job
in the business to to start building
your relationships the one thing and
i've said this to some other students
um you know we have a very robust
internship program at legendary
and we make content um you know
elaine makes content that travels around
the world
but uh our business is actually really
small
right everybody kind of knows everybody
right and so
you know like you know a woman who works
with elaine jen salty i've known since
high school
right it's just it's the nature of this
industry
and i encourage everybody to think of
themselves who are going into this
or want to go into this business as
don't
think of yourself as wanting to go into
it
think of yourselves once you've started
to take classes in that
in this that'll lead toward a career in
this space
you need to think of yourself as that
you are already in it
and now you've just started the process
of moving up the ladder
and so get your feet wet get any job you
can
it doesn't matter what it is get out
there and build your network
the one great thing and i've said this
before on other panels
about participating in a panel like this
if you're a student
is that now indirectly you now are part
of my network elaine's network and
john's network
right that's pretty special that's
amazing that's an amazing benefit that
marshall has given you all
um don't squander it thank you
elaine uh great answers
from both of you um so looking at it
from the business and finance
perspective
uh a major change that i've seen
um since uh i
entered the workforce is i would incur
it is data
data and advanced analytics and
particularly in these direct to consumer
businesses
um there is a wealth of data
that when analyzed um
properly and uh can add
immense insight um insight
into the value of a customer insight
into the
potential value of content insight into
how much one should
uh pay to acquire a particular customer
insight into marketing effectiveness and
i could go on and on and on
and what i've realized is that
the ability to get that data and analyze
it
often surpasses the average analytics of
an average mba
and um so i think getting skills
in um data science and advanced
analytics
is incredibly um
important and uh is super
valuable in the marketplace today and i
would give
my now teen children um advice if they
were pursuing a business career
and ultimately thinking about uh
graduate school i would be
um encouraging yes take the uh
traditional business classes and
understand that
but absolutely get a tech data
and um statistics advanced analytics
uh um courses
and and things to sort of complement
that if not be the focus so
i i see like a an mba data science
as um just an incredibly marketable set
of skills
thank you uh i'm gonna go back to
something that john mentioned which is
the role of china
and uh john i'm wondering um
can you expand on on this issue seeing
that you thought that one of the most
important things that
students could take would be to take
courses on mandarin
yeah and i think and i'd be interested
in uh josh and elaine's views
also i mean china is clearly a along
with india is a huge market
measured by population measured by
upward opportunity
uh it has some huge strengths
in terms of it being technologically
advanced
uh focused on gaming with the
tencent alibaba and the like it was for
a period of time very outwardly focused
on investing in the us as
josh knows firsthand that that has been
pulled back you know whether temporarily
or
or beyond but whether you look at china
as as a market
for you know for customer content
if you do it it's huge if you look at it
as a as a partner
for supplying uh content whether it's
uh gaming or or similar business there's
great skills
there and i think you know even though
us china
relations aren't probably at an all-time
high i'm guessing that that will
that will improve over time and things
will will come
close together again so i think it's a
it's a great opportunity
josh elaine any thoughts
well we we have an office in china we
operate there quite extensively
um you know the the china market
as a box office this year surpassed the
u.s
although obviously this is an outlier
year
um i think it probably will wind up
surpassing the us
um you know next year as well you know
the china market is really a
um is really a two window market you
have theatrical then you have platform
and that's all the
monetization that you have there um and
in some ways
it makes it a lot easier because you're
throwing you know the the marketing
resources into
a theatrical opening there are curves on
what you can spend theatrically to
market your movie there
the government tells you when you can
start marketing the government tells you
when you can go into the theater
and the government tells you when you
come out of the theater so
um you still really have to play by the
rules there which you know is somewhat
uh
challenging um but you know we're in a
we are we are in a global business we
are in a business of entertaining people
and providing content around the world
in both local the local language they
speak
and in english whether it's subtitled or
dubbed
um and so we're cognizant of making
content
for everybody um china is without
question
behind the us the second largest
theatrical market
or maybe the first so we have to be
aware of of their tastes
and they've evolved quite rapidly you
know five years ago
you could put anything up you wanted and
if it was big and spectacle
you probably did okay the audience is
now very discerning
uh the first night you get a malion and
i think it's do young um uh
you know review and if you didn't score
right um
you know your your box office is
curtailed so they are very discerning in
that market
elaine any comments um yes so
we're not in china which uh i believe is
more of
a a remnant of the our
commerce um business and the
opportunities for prime
so it's interesting we're out of one of
the biggest um
entertainment markets in the world we
are everywhere else
um and india i think
these emerging markets um india is
really really interesting because of its
rich history
of um of bollywood and local
content um creation and a really rich
local uh entertainment business
and culture and affinity for content
content and everything else
what's interesting about the direct to
consumer model in
the emerging markets is the business
models because while they
represent vast opportunity
um it's a difference willingness and
ability to pay
and different technology as well so um
we have a product in some markets that's
a mobile
mobile first mobile only um uh lower
cost
uh sort of entry product um and
that's i think what's unique and
interesting about some of the developing
markets
is finding for direct to consumer
businesses
is finding what's the business model
that will work to set
you know to satisfy what can be in
quantity of
demand and numbers of potential
customers
really great but with very different
sort of per subscriber economics if you
will
um and uh
and then of course um i mean the
entertainment business
goes without saying is is a global
business and it's both
exporting content globally and being
cognizant of what
uh some content and some genres exports
better than others
and then two um when you're thinking
about serving a global consumer base
making sure that you're delighting
customers with the local
uh local content local stories local
talent
um that will uh
that will delight um our international
global
local audiences thank you thank you
um going back to some of the questions
that have been submitted there's a
couple related to the
paramount decree the first one is given
the lifting of the department of
justice's paramount decree
which prohibits studios from owning
movie theater chains
what is the likelihood of a major studio
buying a movie theater chain what
studios might do this
uh john do you have any thoughts on this
uh i don't but uh you know clearly
if if a
media company was looking to vertically
integrate that that obviously is a
form of vertical integration uh you know
the
the theater chains are obviously at a
point of financial and economic weakness
at the moment has reflected in their
you know in their stock rights and their
liquidity so bob
if if somebody was looking to do that
this would probably be a less expensive
time
than otherwise but i'm i'm not sure i
would expect to to see that
josh your thoughts i would agree i don't
think you're going to see the studios
buying a movie theater chain you know
they're they're investing so much money
right now
in building out their direct to consumer
experience that
uh i think that that would be off
message for most of the studios right
now
claim i would concur
okay another uh question what's the
future of vr and
ar in uh the business
well you know we we created a really
amazing vr
movie with alejandro naritu about
immigration that actually won a
honorary academy award
and so it was a it was a terrific
exercise
the problem right now with vr at least
is that the installed user base is just
not large enough to support the
economics
that you spend on creating the content
um you know you you could probably
port as people are doing content over
from
games and have a vr game but if you
really want a vr experience like what we
did
you know with alejandro you're talking
about spending you know
17 to 20 million dollars on a production
and when you look at the installed user
base and the uptake you would need
uh the economics just owed pencil so
until you have a larger installed user
base
i think it's going to be more of a
marketing novelty
from a cinematic perspective
clearly from gaming it's a very valuable
add-on
channel um and yeah we're actively
involved in doing some ar
and vr stuff on as a
add-on to some of the games we're making
related to our movies and television
shows
um ar probably has a little bit better
of a chance because it's a little more
more widely adopted but i think there's
a lot of runway we have left
but you know for adoption before we
really see this as a
a very viable new platform for for
entertainment
i'd love to chime in on um virtual
production and josh probably
may have some thoughts on this too um
but a big
uh interesting area for us
is what we're calling a virtual um
virtual studio virtual production and it
was utilized
uh the technology was utilized for
example um
in the production of the mandalorian to
create
and it's it's unbelievable what the
technology can do so it's
this massive massive uh
you know green screens that can create
for the actor
and ultimately the viewer the sense of
being in a 3d
um complex world
but it's really produced in a green
screen environment
and um this can have
a significant it's expensive technology
to get into
but once you get into it you can imagine
the savings
instead of having to create i'm gonna
make it up you know some
mega war scene in the mountains
somewhere with
thousands of actors and blah blah blah
you can
create that environment virtually and
then have your
you know your lead uh talent doing that
and the thing that's super interesting
about it is that from the talents
perspective
it's almost a 3d experience so that they
feel like they're
operating in a world of mountains and um
leagues of soldiers and whatever else uh
and that's
interesting from a cost perspective it's
also
super interesting from a location
perspective
and three it's very interesting in a
covered world
where doing scenes like that um
become so much more complex and covet
because of the risk and the testing and
the
protocols and everything else that it
also can help address some of our
our covet production challenges
yeah that and we actually did that um
it's it's called volume stage
um and using volume staging um
you know it is right now very expensive
but it is a
advancement um when you have certain
shots we did it with we actually did
with amazon
on carnival row where we did volume
stage on some pickup shots instead of
having to go back to
uh to budapest i think um
and or prague and
um it's it is expensive um
you know but when you marry volume stage
with things like lidar technology where
you don't have to film
a city anymore you just use the lidar
digital renderings of it
you know the cg work you know a little
separate from the vr the cg work in
production is making tremendous strides
um ultimately yeah we will have a lot of
cost savings there we haven't quite
realized it yet
but as it becomes more commercial um it
will hopefully bring down production
costs
yeah i i would just add you know i think
technology mark is
is continuing to evolve and it's a it's
a journey not a sprint for
you know those you mentioned you know 5g
should be an enabler for these because
it's going to increase
you know the bandwidth and access and
there are in the art of the possible
there are things around blockchain that
can be good business
models or big business systems or
validation systems going forward but
so i think we should keep an eye on
these but i'm not sure they're on the
one yard line
thank you um elaine there's a question
for you about
the kind of data that uh that your
company collects on consumers
and uh one issue about um
whether whether and why you don't
disclose
ratings uh we've talked about this
before when you come to class i'm
wondering if you could talk a little bit
about that before we close today
um yeah well in terms of data on
consumers of course we operate
well within the bounds of all privacy
laws and things like that
so that's a very sensitive issue and
um and important and we are
uh first and foremost focused on that on
pers
on protecting you know all the privacy
and that sort of thing of any
uh consumer data but we can certainly
look at um
but we look of course you can look at
the data of who's viewing and
how long do they when do they when
are folks leaving a particular show at
what minute in an episode
at what episode um if
content cluster affinity clusters folks
who like
this particular piece of content also
are arrayed around x y and z and that
can help inform
uh where we need to invest further and
where we're adequately serving our
our customers um in terms of
viewership and um quote unquote ratings
data
um right now we see
no particular you know
been a benefit to disclosing that and
there is a great benefit
to um to knowing it and and having that
data internally
if you think about nielsen data and the
original need for it
it was for advertising it's for an
advertising based model where
the advertiser needed a third party
validator to say yes my coca-cola ad
is going to reach xyz people and xyz
demo
and so i'm i'm willing to pay you what
you said that i owe you for that
um but uh there's no
um such need in the in
our version of the streaming world so
um we've been hesitant to
uh to externally feel any need to
disclose that
thank you um soojin our time is
uh just about up so what i would like to
do before we close
is to thank elaine josh and john for
an extremely informative panel
discussion today
um i hope to see you all in the future
so eugene i'm gonna
turn it back to you i don't know if
you'd like to close
um thank you so much to all of our
panelists
and to mark and john elaine and josh
thank you so much
for just participating in this
discussion and many of you have asked if
this recording will be made available
which it will be
on our marshall website and for all of
you who have registered will send a
follow-up email as well
so thank you once again and i will end
the meeting now thank you

---

### The GameStop Short-Squeeze and Its Risks to Our Economy
URL: https://www.youtube.com/watch?v=gYjLE3KHlZk

Idioma: en

[Music]
fun
[Music]
[Music]
foreign
[Music]
[Music]
[Music]
hello everyone welcome to today's
martial webinar
the gamestop short squeeze and its risks
to our economy
towards the end of our discussion we
will hold a q a session
please feel free to submit your
questions at any time during this
webinar
using the q a feature at the bottom of
your zoom window
please also note that this session is
being recorded and we will send a
follow-up email to all of our
registrants
now acting as both our moderator and
panelists for today's discussion
we have professor larry harris who holds
the fred free keenan chair in finance
here at usc marshall as a former sec
chief economist his research teaching
and consulting address regulatory and
practitioner issues
in trading and investment management and
he is also the author
of training and exchanges market
microstructure for practitioners
larry the floor is yours well thank you
very much
before we start let me bring to your
attention that we're at the beginning of
black history month
and the usc marshall school has put
together an excellent program
you can find that program by just
searching on usc marshall
black history and i strongly recommend
it to you
it's my great pleasure to introduce to
you
a truly excellent panel of uh
experts to talk today about
the gamestop issues
first we have terri odinn odin
he's the rudd family foundation
professor of finance at
the excuse me
um at the haas school of business at the
university of california berkeley
he's an expert in uh how
retail investors behave and particularly
in relation to their brokerage accounts
pete kyle is the charles e smith chair
uh
professor of finance at the university
of maryland
robert h smith school of business
pete is a a very broad thinking
economist who spent a lot of time
thinking about manipulations of various
types
we have with us also paul brody he's
chief financial officer
treasurer secretary and a director of
interactive brokers
as am i um paul knows
a tremendous amount about the challenges
of funding a brokerage
its capital requirements and how
clearinghouses operate
and the uh the risk that clearinghouses
face
when dealing with brokers and in
extraordinary situations
such as we see with gamestop and then
finally we have fei-fei li who's a
partner head of equities for research
affiliates
the they are they are a adviser to buy
side investment managers
she knows a tremendous amount about how
the buy side relates to the markets and
how they think about
events such as the type of event that
we're just going through here
so um i'm going to start out by just
laying out
the framework for uh what's happening
just so that we're all on the same page
you're all quite aware that's been
phenomenal volatility
in gamestop during the last week in an
event that's called the short squeeze
just so that we're all on the same page
let me talk about what it means to
sell a stock short and what the dangers
are
and i will identify some of the people
who got hurt and some of the people who
benefited
from this recent volatility and then
we'll turn it over to our experts to
talk about
the event from their unique perspectives
so first of all what is short selling
if you think that a stock is overvalued
and likely to drop in value in the
future and you own that stock
you would sell the shares that you own
because you'd avoid
losses if you did that if you didn't
hold those shares if you didn't own
shares you could still profit
from your knowledge again maybe not
knowledge but your prediction
by selling the stock short
which means that you borrow stock from
somebody who owns it
and then you sell it and there'll be
somebody who will buy it the reason you
need to borrow the stock
is because the person who is buying the
stock is expecting to receive it
and so your broker on your behalf will
arrange something called a stock loan
and you'll pay a little rate a little
bit of interest sometimes a lot of
interest if it's hard to
acquire the shares you'll pay some
interest to the
to the broker who will pay it to the
lender
so that you can get those shares and now
your profit
if price subsequently drops
so if price does drop as you are
predicting you
will have you will be able to buy it
back at a cheaper price
and when you buy back those shares you
then deliver them back to the lender
and the lender is out of the story and
you've made money because you sold at a
high price
and bought low now normally you make
money by buying low and selling high but
you can also make money by selling high
and buying low and that's what short
selling is
now i told you the good story
for the point of view of the short
seller if prices
fall the short seller makes money the
most money that a short seller can make
is a hundred percent
that's if they sell say at 17 and price
goes to zero
but prices can also go the other
direction
so if the short seller sells and prices
subsequently rise
as they did with the gamestop story
prices rose all the way up to 480
something
a lot of a lot of huge increase
here's what happens the short seller is
losing money
because as prices rise they bet that
prices will drop but if they have to
repurchase the shares
they will have to repurchase them at uh
at a higher price and then they have
violated the formula for making money
they would have sell low and bought high
and that's how you lose money
now it's a little bit more complicated
this but
i'll share with you one other important
detail and paul will probably discuss
this further as well
the lender of the stock is always
concerned about whether they will be
able to get the stock back
uh that's true for any lender they are
they always want whatever they lent back
and that's fair
so we secure those loans with the system
that says that when you borrow the stock
you have to give the lender the money
that you received when you sold it
and now here's where it gets interesting
if price
subsequently rises what we ask
is for the short seller to give money
to the lender to compensate for the fact
that the price has risen
so if price goes from uh 17 to 20
dollars then the lender will have to
the i'm sorry the short seller will have
to give the lender
through the intermediation of the broker
the short seller will have to give the
lender
uh three dollars per share and so you
can see that if price goes up to 480
dollars
an awful lot of money has to move as the
short sellers are losing money
if the short seller doesn't have the
money
they get caught in uh in a difficult
position
they will have to buy back their shares
because they cannot continue to keep the
position open
so when the shares are purchased back
the
um purchase volume tends to that these
buy orders
tend to push prices higher and the short
seller locks in losses
that can be very very damaging as we've
seen
in this last episode
now a short squeeze is what happens when
a number of people recognize or just by
chance prices rise when people recognize
that there's
that there's a potential for squeezing
the shorts by pushing the price
up that's what a short squeeze is
so people acting either in concert by
design
or perhaps coincidentally uh pushing
prices up because they recognize that
there's a
vulnerability in the system when the
prices rise
then the shorts will be caught in what's
called a short squeeze
and i mentioned that it can be by design
or
they can also end up getting squeezed
simply if
the company announces that they have
fantastic earnings and the price shoots
up or something like that
that could also cause a short squeeze
that's probably that's certainly not
what happened
in the gamestop story
so i've explained to you how the shorts
lose money
let me explain to you another uh player
that lost a lot of money in this event
and then um we'll move on to our
panelists
so the shorts lose money because price
went up when
they weren't expecting it and if it was
forced up by on them by
by traders who were designing to do this
who understood that this is what would
happen
then of course there's potential legal
issues and ethical issues
and public policy issues that we'll be
discussing
but now let's talk about what happens
when the price is really high
so price goes high and there are a lot
of individual investors
and i imagine that terry may talk about
this
who see that prices have been rising and
they they know that their neighbors have
made a lot of money and they think
well maybe i can make some money too and
so they end up buying
and they're buying tends to push prices
higher
but at some point you know that this
can't go on forever
and so there's undoubtedly going to be a
lot of traders who buy at high prices
um quite foolishly probably but maybe
they don't know any better
and then when when the event
ends as it certainly must and prices
fall
those people last holding the bag end up
losing
so the situations like this are
something like a ponzi scheme
that requires new people to come in and
buy
when other people are selling and so the
organizers of
if there were organizers or the
coincidental beneficiaries
of the of this short squeeze
when they're selling out at higher
prices if other people are replacing
them then prices won't drop but if they
if prices drop before they can sell out
then they won't have made as much money
as they might otherwise would
so we have concerns about uninformed
maybe foolish traders
who have bought at very high prices and
end up holding the bag at the end
so they may have bought it 400 and
prices dropped to
under 100 that's certainly something
that will be of great concern to them
but it also may be of concern to us
so i'm going to close now with just a
few comments about
why we might be concerned about why
people lose money
so the people who bought at high prices
who are uninformed well it was their
decision to buy
but we have a public interest in the
fact that they're losing money because
many of them
will look at the markets in the future
and say gee i just don't want to do this
kind of trading in
in the future in fact maybe i don't want
to do any equity trading at all
and so they won't invest in the markets
and
their capital then can't be used by
companies to
build new projects that benefit all of
us
and then perhaps worse if they're not
invested in the markets
they won't be saving as efficiently and
as successfully as many other people
and they'll end up retiring less wealthy
than they otherwise would
and if there are a lot of them they may
vote to have the government
subsidize them in their retirement
by raising retirement benefits and the
rest of us will have to pay for that
so you may not have a lot of sympathy
for people foolishly engaging in this
behavior
but it will have consequences for all of
us
i leave it to others to judge how
serious you think they are but i can
tell you that my students
many of whom engaged in who bought and
almost all of whom have lost
say that they're really reluctant to get
back in and this is at a time when
young people are in their formative ages
and lessons learned now can be long
lasting lessons
now what about the short sellers on
average short sellers
do tend to be right there have been many
studies that have shown that
the short sellers when they start
selling they push prices down
nobody likes that the prices are
dropping
certainly not the companies
who are being hit by the short sellers
but the prices tend to reflect the fact
that the companies are overvalued and
the prices do
tend to stay down
the uh that actually provides a very
important service in the economy
though nobody likes the messenger
the service is is that it ensures that
prices reflect values
so that our uninformed traders don't end
up buying at inflated prices
and then losing when prices subsequently
drop as they surely will
if the company is suffering serious
problems
but it also ensures that companies that
have inflated
values are not able to issue new
shares at inflated prices because when
they issue new
shares at inflated prices they consume
capital that might otherwise be used by
other companies with better ideas so for
instance
now companies that have better ideas
might be investing in
vaccine research or new material
research that will
facilitate the production of of
new airplanes or rockets to the moon or
who knows what
or or simply new services um
but the the key thing and the reason why
our economy is so wealthy is that we've
used the markets well to allocate
capital to people who have the best
ideas
now um this is not just idle discussion
let me close with one final
uh observation amc was also targeted by
the
reddit uh wall street uh what's it
called wall street bets
group or people affiliated with it or
identifying with it
and the price of amc went up a lot now
amc is a business that also has
problems as does
gamestop um amc's problem is
is twofold um people have discovered
that if you put
a 65-inch monitor on your wall
and have 4k uh resolution
that you get quite an incredible
experience and that you can stream
movies
on demand uh to your to your
house and even more so with covid
they've discovered that
they maybe don't need those theaters as
much as they did and of course coveted
by itself is keeping people out of the
theater so the company's in a
in a lot of trouble even if it weren't
for covid uh
it would be um it wouldn't have the same
prospects that people might have thought
five years ago
they were very clever in the last few
days
when their price was pushed up they
issued new shares
and so those new shares brought in a lot
of money and that money will allow them
to survive longer in a business
that may actually have to shut down
ultimately
if that's the case that money will have
been wasted it would have been better
spent
on new vaccine research than perhaps
sustaining a business that's failing
and so that's an example of the economic
inefficiencies that concern us
when we think about having prices that
are informative
of the true values of a company nobody
believes that
that gamestop had a true fundamental
value above 400
or even above 100 it hasn't traded
above 30 for about five years
and of course like other retail
companies it's it's got
problems right now it uh trades a
product that
is easily delivered over the internet
and can be purchased over the internet
as well and they have
bricks and mortar stores we've seen many
other
retailers go bankrupt under those
circumstances
i have no information that would suggest
that they will go bankrupt
but frankly their prospects don't seem
to me
to justify a valuation of a hundred or
four hundred
so there's no question that there was an
extraordinary volatility event here
okay so with that said um let me turn to
terry
and ask him for any prospectus he might
have on
on the traders who engaged in this
trading
and um and perhaps on how they organized
terry terry you're unmuted
thank you all right um
so i actually just wrote a paper about
robin hood uh users with
my perennial co-author brad barber
xinhuang
and chris schwartz
a timely choice of topics and what we
were looking at
were events
where there was a big increase in the
number of robin hood users
and what subsequently happened now
we looked at we ranged
just how big the event had to be we had
like
initially looked at 20 000 such events
and then
a narrower set of what we call big
hurting events
and the big hurting events were where
you got
a couple hundred fold increase in the
number of users in robin hood in a day
and the question is what happens well
contemporaneous with the increase in
number of users you see a big
spike in price in most cases right price
goes up a lot
and consistently over the next
few days in particular over the next 20
days it drops
down it doesn't on average drop down as
low as where it started
and in some cases maybe you know
sometimes the stock may have been
underpriced to begin with but what we
see is
this buying activity all at once highly
concentrated
and drops of you know 20
on average for the extreme events uh
over the next
few weeks we also looked to see
the information we had wasn't um
detailed enough
to exactly figure out how much money was
made or lost
but we were able to determine at least
that more
of these users were losing money
then making money just because a lot of
the buying came in
after the price had pushed up quite a
bit i think of what happened
uh with robinhood as sort of the same
type of event but more of a sort of like
a supernova
the same thing but just amped up a great
deal
and so a question is of what coordinates
this this
hurting activity hurting the sense that
people these retail investors are all
suddenly on the buy side of the market
at the same time
and i think what this is doing is
a combination of human psychology and
cognitive limitations
with changes in technology on the human
psychology thing is
we can only process so much information
we have limited attention
so when an investor decides to buy a
stock
it's rare that the investor says well
i've got 5 000 choices let me give some
thought to each of them
more often an investor is just going to
wait till the stock catches his or her
attention and they say
i like it or i don't like it so you know
it used to be how did that happen
well for those of us old enough to
remember lewis rookheiser
you'd say oh you watch wall street week
on friday night
and if he talks about a stock you like
you call your broker up on monday
morning
and you buy it and it's been shown that
the stock that that recommended in that
show
went up on monday and then drifted down
over the next few days
same thing happened in the newspaper the
dartboard column in the wall street
journal
then you get to 24 7 uh television
and there have been studies that say you
know the same thing happens when kramer
recommends a stock
and you can even see i've seen graphs in
real time
cramer gives his pitch stock price goes
up
stock price goes down and i've with
another paper i'm looking at we've gone
and then looked at the trading of retail
investors around these events
it's just what you'd expect retail
investor buying goes up
stock price goes down what's
interesting with the change of
technology is
back in the 70s and even in the 80s you
couldn't really buy a stock because you
you knew other individuals were buying
it you might buy it because
it caught your attention it was in the
paper and maybe you're buying for the
same reason they're buying
or you might read it had a lot of volume
but
it was very hard other than your
brother-in-law or your next-door
neighbor to really know what anyone else
was doing
and that has changed and i think that's
that's a really
interesting thing that you could be on
reddit on on
wall street bets and suddenly you know
what other people are thinking
and you know what they're planning to do
and
they're all there's both a group think
where
everyone is giving the same story oh
this is going up
there's a probably some of the
excitement of being in a group
a group activity oh we're all doing this
together
and there's this coordination where it
suddenly of all these people doing the
same thing at the same time
and to some extent there's a lack of the
sort of analysis that larry was just
giving us
there probably weren't a lot of people
saying
well this thing can't possibly be worth
what it's trading at today so anyone who
buys it is taking an awfully big risk
so i i think that well human psychology
and i spent most of
my uh academic career focusing on how
the biases
uh decision biases the heuristics the
cognitive limitations we have
affect investor behavior but i think the
other part of it is
as the technology and the environment
changes
that affects uh behavior quite a bit too
thank you very much terry pete you want
to talk a little bit
about um manipulation how we um
how we should think about um whether
this was okay or not or
uh should the rules change yeah i'll be
happy to
chat about that and let me start with
something you said larry
and that is market competence is very
important um because it's important that
uh investors feel comfortable investing
in equities
one of the reasons that americans are
wealthier on average than germans it's
not that we save more
it's that we invest in equities and
we've earned a higher return
investing in equities that say people in
germany have earned investing in
uh cash um so it's it's
it's good to have a society in which
people have confidence enough
to invest in equities they get a good
return and also they stimulate economic
growth and make the economy function
better
if you look at the history of the sec um
ver larry i should say was the chief
economist a number of years ago one of
the reasons it was set up during the
great depression was to help restore
market confidence and part of the
mission of restoring market confidence
is to allow investors to correctly feel
that markets are not rigged against them
and so you have a concept for price
manipulation
uh which is uh essentially a nefarious
practice
that you don't want other people to
follow so how do you define it
and the interesting thing about price
manipulation is that the law
doesn't give you a a real precise
different definition in many cases
price manipulation is just an abusive
practice that creates an artificial
price
what does that mean well that means we
haven't figured out a precise
way to define it uh in uh in terms that
are easily
verified uh by objective analysis but
there's an element of subjectivity or an
element of economic analysis
that needs to be applied to to think
about what price manipulation is
so if we ask ourselves is there
manipulation going on
um in the case of game gamestop we we
open up
intellectually and also factually a kind
of interesting uh can of worms
so let me let me describe first um uh
you know what price manipulation is not
and then i'll describe what i think
price manipulation is so i think what
price manipulation is not
it's not differences of opinion you know
some people like a company and they buy
it other people don't like a company
um and they sell it and the market you
could think of as a kind of
uh uh averaging mechanism which puts all
the differences of opinion that people
have together
and comes up with a price now what is it
that we want markets to do for us well i
wrote a paper on this a number of years
ago
and i i said there they're kind of two
things that we would like the market to
do from us
uh do forest the first one larry
mentioned and that is we would like for
the market to create
prices that are reasonably good
approximations of value
economists call that efficient markets
but reasonably good
approximations of value and one of the
reasons we want markets to do that
is so that if a naive investor who
doesn't understand
what a stock is really worth comes in
and buys it just because they like it or
they fell in love with it
having reasonable prices protects them
from paying too much
um the other thing that we would like
markets to do is to be reasonably liquid
so that we can
trade the stocks pretty easily if you
look at what terry was just saying a
minute ago
when stocks are recommended uh and many
people go in and buy the stocks the next
day the price
bumps up well it would be good if the
price didn't bump up that much maybe
bumping up a little bit is reasonable
but you don't want it to bump up too
much
right so having a more liquid market and
a more accurate price
those are those are good goals um of of
a market
so let's let's define price manipulation
as as an abuse of practice kind of the
way the law does and
but we're left with the question of what
kind of abusive practices might there be
that would interfere with the market's
ability to create an
accurate price and also interfere with
the market's ability to make the stock
um
easy to trade and i would uh i would say
that um
they're they're kind of two if i were at
the sec i would i would be looking at at
two different
uh angles um on manipulation uh the
first angle
um i'm gonna call a a a short squeeze
in the sense that you are putting kind
of
artificial pressure on the people who
have sold the stock short
one way you do that is by making it very
expensive for them
to borrow the shares they need to sell
or to borrow the shares that they need
to
even kind of roll over from from time to
time
to maintain their short position and the
way you can make that very expensive for
them
is if you yourself own or control a
large amount of the stock
and just refuse it to refuse to lend it
to them
um now what it would look like is that
you're turning down a profit opportunity
so it's almost like you're turning down
the ability to make something out of
nothing when you do that
and so it's a kind of big red flag that
the sec
could could look for to see if someone
is not lending shares
that could be lending shares and making
lives for the short sellers
uh easier and that would in general have
a beneficial effect on markets by
allowing the short sellers
uh to kind of cast their vote on what
they think the price is worth
okay the other type of uh but i haven't
seen a lot of facts on exactly who is
lending and who is not lending
uh the shares so i think it's something
that should be investigated and maybe
we'll get
some kind of report or something on this
um you don't want it to be too hard for
short sellers to sell shares short
otherwise naive investors are not
protected
against what i'm going to talk about
next and what i'm going to talk about
next is another type of manipulation
where someone circulates rumors or
circulates information or maybe they
just circulate lies
saying i think this is the greatest
stock in the world and they persuade
naive investors to buy it and the naive
investors buy it and that pushes the
price up
enormously just like larry described
happened to gamestop
and like terry was describing what
retail investors are inclined to do
um so uh but what if the person who is
circulating that information or
circulating the rumors saying that the
stock is great and that everybody should
buy it is actually selling it behind
their backs
there's an element of something that
looks like and smells like
fraud there that you're trying to make
money at somebody else's expense
by using deceit saying you like the
stock when you really don't
so that's another thing that i would
look at if i were
the sec and investigate if any of the
people who are participating
in spreading information about the stock
were actually trading in the opposite
direction
uh from the way they were uh
participating um and finally
whether you are holding the collateral
off the market and not lending it to the
shorts or whether you are
uh trying to keep the price pumped up by
circulating bad information
one thing you could look for is whether
there's a conspiracy in other words
whether you're working together
with some kind of agreement with other
people now i think uh
the an agreement among 10 000 retail
traders that's not signed but it's just
a kind of herd mentality
that might not pass i don't know i'm not
a lawyer but that might not pass legal
muster as a as a conspiracy
but there could be a small group of
people who are uh
are colluding to not lend collateral uh
to the
to the short sellers we don't know
whether that's the case or not we
haven't seen the facts yet um
and that or there could be a small group
of people who are systematically
spreading
uh rumors that they know to be false
because they're trading in the opposite
direction that's something
uh that i think should be investigated
so let me summarize um
in general we want the market price to
be accurate we want markets to be liquid
things can go awry like they seem to
have gone in gamestop
and when things start going awry some
some other things can happen that
economists have also studied
and one is that if you're short or if
you
trade in a margin account uh you're you
might be voting with
sort of like casting lots of votes in an
election or something you're trying to
uh throw your weight around more than uh
you otherwise uh would be able to by
using leverage
uh to not only sell everything you have
but also go short or not only to
invest all of your your money in the
stock but even invest more money than
you have by by buying on margin
um but the the downside of that is that
if things start moving against you as
larry said
you get margin calls and if you get
margin calls you suddenly have
less money to invest and if you have
less money to invest you can only
support a longer a smaller position
so the shorts are forced to buy the
stock back because the price is moving
against them
they have a lot of their wealth invested
in the stock and similarly a trader
who's long
has got a big long position that's on
margin
they will be forced to sell when the
price falls uh because they also get a
margin call
uh of the in the opposite direction um
but
the result is the price fluctuations get
amplified might not reflect fundamental
value they might rise too much or fall
too much
um and that's a problem that that needs
to be thought about
so having reasonable amounts of leverage
in the system not too much and not too
little
seems to me to be a worthy goal of
securities regulation
so whether uh there's a repo squeeze
going on that i like to call it the
failure to lynch collateral to the
shorts i think that's something paul
brody will talk to us about later
so i'll stop there um
what a good cue for paul brody um paul
the most popular question we've seen on
the q a
is how is it possible that a
stock could have short interest more
than a hundred percent
i haven't seen the number myself i've
seen a hundred and forty bounty debate
for game stock
and that may or may not be so but uh i
definitely know it's possible
if you could comment on that but more
generally talk about
the financing commitments that a
broker-dealer has to make to support the
phenomenal trading that we've seen and
of course the implications for
uh clearing and settlement and the
demands uh that the
national securities clearing corp has on
broker dealers that'll help people
understand better
what happened with robin hood and and
the the back office issues sure larry
thanks
well uh my remarks will probably be a
little bit briefer than the professors
here who are
undoubtedly accustomed to speaking for
about 50 minutes at a time
so um let me
first start by talking about the
financial sector's infrastructure
uh is in place to to try to ensure that
the system's financially sound
so risk management must be continually
enforced
at all levels and the players are
brokers and exchanges
and clearing houses and regulators
uh capital maintained at several levels
provides buffers against the default by
any one participant
and the tools for maintaining capital
are and and controls are margin
requirements
trading restrictions capital
requirements
and market integrity rules
so despite the negative comments this
past week about broker actions
if one understands the plumbing behind
the apps and the interfaces
it's not hard to see that the actions
taken by brokers and clearinghouses were
part of standard
risk management albeit in a roller
coaster market
um let me turn to
larry's point about short interests
in aggregate so
why is it bad for the markets uh
that you know we can see such uh
tumultuous such a rollercoaster ride
uh in such a short period of time for a
small number of stocks
but let's look at at the gamestop
numbers
uh there are about 70 million shares
outstanding
i think the float is actually even a
little less than that
um market talk was
the short interest could have been it
could have gone as high as 140
so that would be about 100 million
shares over the 70 long
so that implies that
there are 170 million shares
long because it's the 70 that are
actually issued and outstanding
plus another hundred that went long
against those shorts
so if we take say friday's price
pick up price of gamestop say 350.
we're talking about 60 billion dollars
and that's unlikely to be mostly little
people yes there are a lot of them
but it's a pretty big number
and what can happen in this case well
longs can repay their loan holders
can repay their margin loans so
margin loans when somebody buys stock
and borrows the money to buy it
frees up that stock that allows the
broker
to finance that loan if they wish to
by by using that stock as collateral
if the customer pays money into their
account
repaying that margin loan the broker can
no longer use those shares
so if a lot of that happens and
especially in an environment where
brokers are raising margin requirements
as prudent risk management strategy
repaying the margin loans means the
brokers have to recall
the shares that they have lent to other
brokers who borrowed them
to cover the shorts of their customers
but larry was talking about before
so if if the borrower the short is
unable
the broker has to buy those shares in
the market
and that's going to drive the price up
and at what price
there's no limit to what price a single
stock might go to
which is why you you can you can
gain 100 the price goes to zero but you
can literally lose an infinite amount so
imagine the consequences
um
let's talk about the plumbing for a
little bit
so trades are executed on exchanges
they're submitted to a clearinghouse
called national securities clearing corp
and scc
it's part of what you might have heard
called dtcc which is depository trust
and clearing court that's just a holding
company
they run a sophisticated risk management
system
so that requires clearing member firms
to deposit money to cover
two components first is a risk component
because they are protecting the clearing
house and all of its participants
against possible price fluctuations on
their obligations
between trade day and settlement day
which is two days here in the u.s
uh they run a a value at risk of our
type of computation it's very
sophisticated and it comes up with a
risk amount that both sides have to put
in
and the second component is a mark to
market component which is merely
marking the unsettled trades to the
current market price
and the broker on the losing side has to
pay in
that money which of course comes back
when the trades
eventually settle in two days so for
both computations
all stocks are included all stocks
these stocks are not singled out the
same computation runs
on everything this bar charge is very
sensitive to spikes in volatility
for individual stocks so one or a small
number of individual stocks
can really impact the amount of deposit
that a clearing member firm has to put
up with the clearinghouse
the key being that these deposits
protect all of the participants in the
process
the brokers in the clearinghouse and the
ultimate customers
because of the default were to cause a
broker to go bankrupt
that broker's customers might be at risk
but
other brokers and their customers would
not be because
if sufficient deposits have been made at
the clearinghouse
they can make everybody good even though
when
one of the participants might have
defaulted
how can excess leverage be controlled
a higher margin requirements is the
obvious uh
solution um brokers did that
they raised margin requirements and put
on certain trading restrictions
for safety's sake because
brokers recognize quickly even in real
time
that their their liabilities their their
exposure at the clearinghouse
is going up because especially in a case
like
like this all of those customers are
buying they're all on the buy side
so a a large price movement could create
a huge
uh liability for the clearing member
firm to have to put up a deposited
clearinghouse which is what we read in
the news
one simple solution i'm not
promoting this but the sec
could require short margin of 50 percent
which is where it starts now
plus let's say some variable amount like
one percent for each one percent of
short interest reported
um in order to facilitate that
by the way short interest should be
reported daily it's fairly obvious that
bringing it out into the sunlight
will give everybody more information all
the time right now
short interest in aggregate for the
industry is reported every two weeks
and that's on an eight day eight trading
day leg so it's not actually helpful to
anybody
but if you could see it every day for
the prior day in aggregate
we're not talking about understanding an
individual
people are firms who own who own those
positions but
rather what is the general market
sense and is there a short interest
building up that would be very
uh helpful information um
so the last thing i want to say is um
there's a concept of circuit breakers
that have been in place
for equity index products for years when
when markets went
uh crashed years and years ago
there was a general recognition that
there were futures products
and and equity products and things that
were
based around the same thing and
uh when they all moved in unison
uh that could create a lot of tumult and
a circuit breaker puts a pause on the
trading day
we're human beings it allows human
participants to take a moment to think
clearly
uh and and then carry on
uh the futures markets have long had
daily price limits and many futures
contracts that do exactly that
you hit the price limit there's a
temporary trading halt
so there are various things that the
regulators could look at doing
um to assist risk management
and to uh sort of iron out the bumps a
little bit
um let me leave it there and uh turn it
back to you larry
well thank you paul now i didn't have a
stopwatch or anything but i don't think
you spoke any longer than the rest of us
but i don't think you spoke any
shorter either which would suggest that
you might qualify as a professor someday
[Music]
can you tell us a bit about
institutional
uh investment managers and
what you've seen uh in the last few days
and thought
about this extraordinary episode yeah
sure certainly thank you larry
um i just want to first of all make it
clear to the audience
uh research affiliates you know we are
not a head found
we actually pick a long-term perspective
when we approach investing
and at research affects you know we
offer
long-only fundamental based valuation
conscious
well-diversified strategies to investor
either it's active equity strategy or
it's you know smart beta which is a
quasi-passive more like index type of
investing
so we we represent only uh we don't
represent the entire spectrum of buy
side only a very small segment of it
i'm happy to talk about the impact for
you know the segment we operate
in then we extend this discussion into
the other spectrum of the buy side
be more you know fancy headphones you
know long short
managers in the long only space you know
if you are
a long only very boring uh value
investor you know to buy low and
sell high one extraordinary event like
this happened
it's really lucky for you you can sit in
the chair you know pull out a cup of
coffee
and watch this interesting episode as a
matter of fact i think that
netflix made announcements yesterday
they are making a movie out of this game
stuff trading
right so everybody can watch not only
you know the market
participants but your grandparents your
kids you know they can all enjoy uh to
see what's going on
um and at research affiliates you know
only active strategy type of thing
we manage we have discretion over the
methodology
so we certainly view this as a great
profitable opportunity we had a lengthy
discussion regarding
exit threshold you know at which point
you would like to exit from this
position
because clearly this stock is the price
has been pushed up too high
you know we got the stock into our
strategy because it was a value stock
we got it the years ago when the price
was a low single digit
when we look at sales and book value etc
the economic footprint the fundamental
of the firm actually dwarfs
its market capitalization back then so
we bought it as a you know lowly priced
undervalued stock and typically you know
we buy low and sell high because we
believe if the company's fundamental or
you know certain
uh anchor is the
kind of the central point for the price
to fluctuate
around you know eventually the mean
revert process will
bring the price and the value of the
securities price higher so we can make a
profit
in this case the price went way up
higher than we expected
uh and you know we were not really up to
the rebalancing time yet
so we talked about the exit rule we look
at the historical you know sample
over past 10 years uh only
gamestop is the only stock you know when
we look at monthly data is the only
stock
whose price has gone up like 20 times
within a short period of time within
you know within a quarter and over the
entire investment universe we manage
which is uh more than 10 000 securities
including
u.s security international emerging
market small cap
you know again over past 10 years when
we look at quarterly data
only three occasions the individual
stocks price went up you know five times
higher
so that's a very rare event you know
when that happens
we should certainly capitalize it and
make money for our investor
and on the passive side of uh you know
investment strategy we manage we call
smart beta which is a
kind of index investing we don't have
lots of flexibility
you know rule is a rule so we stick to
the rule
and i watched against up rise to you
know
number three in one of the strategy we
offer with the index partner footsie
russell
and now because of the price drop to
around 90
today's i think today the the stock is a
number 22 in that particular portfolio
i think the rebalance hasn't rebalancing
date hasn't come yet
but even even white came you know a
month later if we can
sell the stock at you know 50
it's still pretty awesome game because
we got it at really really low price
and on the other hand i i do want to you
know mention you know when you get into
a
index strategy you pay very low
management fee
that's also the cost you don't have lots
of flexibility
and to a degree i don't even know
whether the flexibility would always be
good or bad for you because
you know in this case certainly you want
to sell it early but there are other
cases
you want to change the rule but exposed
you could know you were wrong
for example for our you know index
strategy
during global financial crisis in 2009
march
you know we we were supposed to
rebalance and we got lots of clients
costs
telling us to stop rebalancing back into
financials
because you know we have to you know
increase the weight of financials since
their fundamental size really are much
larger than
the price uh they they were given back
then
so we stick to the rule we basically
told the investor this is the index
strategy we cannot frequently change the
rules so we actually got into their
sizable position of citibank of bank of
america
and all those large positions became
much larger
in the next six months than 12 months
which created a pretty awesome alpha for
our smart beta investors
so that's the space we're operating and
now you know when we take
uh take a look into the you know hedge
farm space you know even though we don't
operate in the space i spoke with
you know my friends out of curiosity you
know i learned from the people who have
more expertise than i do
to see how they operate you know when we
talk about longshore strategy often we
refer to
fundamental based hedge fund and those
guys actually take
very concentrated position because i did
ask them how come
you you guys don't put you know a
position limit
they said we have very concentrated
position we typically don't do that
and you know when we look at the
quantitative method to do risk
management most of the time they don't
add value
but that's true we know risk management
over the performance over the return
they don't add value they are supposed
to reduce risk
so i think you know this is a a lesson i
think
those long short people those hedge
funds could actually really really learn
i think retail investors identified a
loophole in their operation they taught
them a lesson
and i think hedge funds needs to to
become much more serious
about risk management in terms of
you know putting enough money aside to
meet margin costs
and also a position limit uh
in terms of you know retail
participation has grown up really really
high
from five percentage points to you know
35
as of today so the market participation
changed
i think the hedge fund managers needs to
get used to
their short position have to lose lots
of money before they can make a game
the duration of them making the money
will be much longer than before
and i think that's the reality people
have to face
uh in addition i think the uh for our
investors for you know young investors
like the audience
we also need to understand the shorting
can be extremely dangerous even when you
are right
simply because your timing is imperfect
shorting can be very very dangerous
so i i really want investors young
investors to form a long-term
perspective when we approach investing
but you know people also enjoy taking
pleasure from gambling so
i i think just you know limit your
allocation
in this type of activity radio thank you
very much
uh so as we've gone around among our
various experts i'm sure that
all of them have thought of something
things that they might have wanted to
add
as i did i'm going to make two three
very quick points
and then ask the rest of you if you
wanted to add something it
something that somebody else said that
resonated with you uh the first one is
that when short sellers are hurt
as they are in this circumstance they're
going to withdraw from the market
as faith said they're gonna in they're
going to employ
more risk management and uh the problem
of course is that if the shorts withdraw
then we're going to get more volatility
and the problems that uh
pete spoke about was of people who are
investing in stocks at high prices and
don't know it they're going to end up
losing
another point i'd like to bring to your
attention
and this is not well understood but very
important
is that when brokers post capital
margins with uh the
clearing corporation nscc they're not
allowed to
use their customers money they can only
use
the capital that belongs and is owned by
the broker
and the reason for this is that we don't
want the brokers to be losing our
customers money
and so uh while you think that gee the
the customer's full has all the money to
pay for the stock why are we worried
about this
and the answer is is that uh the system
has to be secured by the broker's money
not just the customer's money
and then the last thing i would like to
bring to everybody's attention is
something that has hardly ever appeared
in the press in this episode
which is that these hedge funds are not
just a
monolith called the hedge fund they are
investment vehicles into which people
invest money and the entities that
invest in hedge funds
include public pension funds
primarily and those public pension funds
are
teachers firemen
policemen uh and also the private
pensions funds the electricians the
plumbers
uh the retire and all sorts and so
um while the hedge funds have been
kicked in the teeth and
certain elements may be rejoicing in
this tension between
the small guy and the big guy there are
an awful lot of small guys who got hurt
because they were invested in hedge
funds
that while we could criticize the
management of the risk management on an
x post basis perhaps wasn't so
unreasonable on an
ex-ante basis remember that we're
calling for better risk management
not against fundamental risks
but we're calling for better risk
management against
collective actions whether by design or
by chance
that have caused prices to move far far
from where they really ought to be and
so
blaming hedge funds and saying this is
appropriate is problematic
and it represents um the people who
argue
now the fourth point i'll make this
point later i don't want to dominate
this
anybody else have any other observations
they'd like to add we can also turn to
some questions
i'd say one thing sort of taking off of
what faithful was saying is that
i don't think i think there's been some
perhaps a lack of clarity between
investing long term for your environment
and having some
fun and
[Music]
people who are investing like trade
actively trading
money that they can easily afford to
lose that's very different than people
uh investing money they can't afford to
lose and i
i know even from talking to some
reporters today there are going to be
stories about people who lost
money that they could not afford to lose
in in this process and
what's robin hood's um mission statement
to democratize investing
for all or something close to that uh
something they are making it very easy
to trade
uh and that's true and it's they're also
to some extent hiding some of the costs
because the commissions are free
but there are other costs such as the
poor execution due to payment for order
flow
and things like that
i actually think the democratization
probably somebody got there first when
jack bogle
made it possible to uh have a
well-diversified
long-term strategy and pay four dollars
for every ten thousand you had invested
a year
i actually just worry about
people who are
trading like a game but with money that
they
can't afford to lose
i would like to add just a couple of
sentences to what terry said
um and that is and also to what pepe
said is that is people who do
like to trade um especially younger
people
they make the mistake of being momentum
traders
and they make the mistake of being
momentum traders with the wrong
time horizon for momentum so
they just get the timing uh really bad
they'll be seeing a stock that goes up
and they but they fall in love with it
they buy it because they like it and
it's a good company
but it's very overvalued and they buy it
when everybody else is buying it which
pushes the price up even more
and then subsequent returns are kind of
bad uh so
if you're uh if you're
not a huge expert you might be better
off being a kind of contrarian trader
over fairly long horizons and you know
if they describe the advantages of being
a contrarian trader buying
a bag of stocks you can sell them when
they become
overpriced or highly priced
anybody else want to add something i'll
just say that despite all the
negative political overtones these days
to make a point on what pete said uh
can you imagine how much worse it would
have been for the small investors who
ended up losing
had the brokers not put the brakes on
some of this trading
good point very good point we have about
15 minutes left to us
and we have enough questions to occupy
us for about 15
days so we're going to have to be
parsimonious in our responses
and the questions too by far away the
most popular question seems to be
how is it possible that more shares can
be sold
short than there are shares outstanding
so we'll direct that to paul and then
also ask him how does that resolve
itself
what challenges are there of of
reducing that short interest
right so you start with the float that's
out there and
let's use that the numbers you're
talking about gamestop let's let's just
say it's uh 70 million shares
uh and then somebody comes in to sell
short so
that short seller is going to borrow
shares from
one of those holders of the long stock
well after that transaction takes place
you now have one more party that's long
and one more
and to offset that one party who's short
so you have what i like to think of is
open interest
long and short above the actual shares
outstanding
uh but those shares cycled around
now the next time that happens somebody
else sells short
they also borrow shares but they may be
borrowing shares that the
that the first short seller sold to and
delivered to
and that is a mechanism
where the shares that would seem to be
outstanding spiral upward
because the the pump has been primed
by a could even be a small number of
shares because if you do a lot of these
transactions around and around
whoever's long at the end of the day can
lend those shares to the next
short who comes in and that's how you
get a situation
where you can have huge short interests
that could even exceed the long
outstanding issued shares how does it
unwind
the easy answer is these transactions
start going in the other direction where
the shorts buy themselves in
and when they get delivery then they
return the borrowed shares
and that's true uh
in in practice there's a stickiness to
that
for some reason it's operational i think
because you know the shares among
brokers the brokers gotta let the shares
now they have to get them back maybe
there's a delay time because there are
rules that you can't demand shares back
right away you have to have
given the settlement period or two or
three days to get shares back
there's a stickiness to unwinding that
spiral
that just throws another wrench into the
works here
but that's how you can get that's how
you can get tremendous short interest
great and i'll put this next question to
pete
um somebody asked why would a hedge fund
short a stock instead of buying put
options uh
and the uh questioner asks says
there seems to be a lot more risk when
doing so yet relatively little
extra upside and so that is a very good
question
and you you uh get it uh i've gotten
that question many times before
um and the answer there there are
several reasons why you're rather short
to stock
first of all trading the stock is
probably more liquid than trading the
the options so um the cost of doing the
trade
is going to be lower if you sell the
stock short than if you sell the option
or buy the option second of all uh the
returns on buying options
might be rather low so um if the
and that's because the the volatility uh
that is factored into the option price
uh might be higher than what the
subsequent volatility of the stock is
actually going to be
and so you wind up paying a lot for the
option price
and then the third factor is uh if you
wanted to sell the stock short you would
you would have to course borrow it
and you would have to pay a fee to
borrow it that's a cost you might think
why don't i just
buy a put option i don't have to pay the
fee well guess what that fee is going to
be priced into the put option
because there's somebody who's doing
arbitrage between the option and the
stock
that's going to price that fee into the
option so there are three reasons why
trading options are expensive they're
not as liquid as the stock the fees
from shorting them already built into
the price and the volatility that is
used to price them might be too high
those three things all make the price of
buying a put option expensive
and of course um if the exclusive
sure go ahead so i thought about that a
lot as well i agree with
everything pete said but there was one
additional reason i
i i thought about but i wasn't sure
whether it is a true reason i would like
to get
pete's opinion on that i thought when
you um
by put option you also associate a very
explicit time horizon with it
so you really predict the stock price go
down below certain level
within certain days because the option
time decay is pretty fast
but when you do shorts you can you know
choose a roughly target you know
hopefully the gme price go down to 20
within you know three months or six
months i don't have to be very accurate
with my
my time estimate would that actually
play a role as well
uh it certainly does play a role whether
you're buying a put option or a call
option if the horizon you're waiting for
the price of the stock
to fall when you buy a put option you're
waiting for it to rise when you buy a
call option
it's not going to fall for five years
you probably have a hard time finding
options with a five-year maturity
that you could even trade um and the
ones that are more liquid you know
they have a higher cost than trading the
stock but they're they're more
more liquid than the ones with sometimes
with the longer maturities
um they they may not have a maturity
long enough for your idea to work
so it's a good point i'd like to um
emphasize that if we had a world where
hedge funds simply were prohibited from
going short but could still buy puts
then uh their buying puts as as pete
said would just
transfer the problem from the hedge fund
to the
dealers who sell the puts because the
dealers will hedge by going short
here's another question perhaps terry
want to pick this one
one up and maybe already expressed a
little bit but getting
a chance to riff a little bit more what
are your feelings about the reddit
um thread wall street bets and the
groupthink theories that
quickly arose which influenced retail
traders to buy in
late in the game
well this is the problem isn't it
it's the people who arrive
late to the party and somebody mentioned
before
while it's not explicitly the same you
know the dynamics are a little different
than a ponzi scheme when the prices get
so far above fundamentals that the only
thing
keeping them there is new buyers
it it has that same feature that when
you run
out of new buyers
it's going to all come crashing down and
the last people to join come in
uh get hurt um
it worries me i mean yeah i'm not
worried about the overall
so much the functionality of the market
as uh
people who as they say some people
are betting money they can't afford to
lose and they don't
really understand it's just exciting and
then you get on
a site where there is this group think
everyone says this is what's going to
happen
and you join in um
probably better to do it with five
dollars and fifty thousand
get a little and get a little bit of the
thrill with a lot less risk
can i can i add a little thought here
please um back during the dot-com bubble
uh in the late 1990s there were there
were people that put their entire
retirement nest egg into dot-com stocks
thinking that they were going to be able
to retire at the age of 60
rather than the age of 65 and there was
there were hedge funds just shorting the
dot-com stocks but they got run over and
had to buy in their positions and
push the price up even higher and some
of these uh people who
friends of mine bought at these peak
prices back in 1999
and guess what they didn't retire at 60
and they didn't retire at 65 either
you know they're still working and uh
that is
the situation you don't want to see that
happens
when markets uh get get disconnected
from fundamentals for
years at a time you know you wonder
whether that's going on now or
uh or not but you know back in the
dot-com bubble they called it the new
economy it turned out it wasn't all that
new after all
uh the the what's going on in markets
today has a similar flavor
so we've only five more minutes uh
before us
uh i'd like to introduce the last topic
um
it's a little bit of a softer topic but
still extraordinarily interesting
which is the question of
sort of economic justice the
wall street vets people have promoted
themes
that hey uh this is just the common guy
getting back
to at the uh the big guys uh the big
guys have been
running us over uh doing all sorts of
illegal things and
and so so this is just economic justice
my observation about this and i'll ask
the other panelists for their
observations will
now the first observation is that this
is a moral equivalence argument
it says that you did bad so i can do bad
as well
and yeah you've heard many many times
from probably from when you were four
years old
that two bads don't make two wrongs
don't make a right
so i find that a particularly troubling
argument
although of course they don't think that
they're in the wrong but
their trading is if not
illegal certainly disruptive
it's not making the markets more liquid
and it's not making prices more
informative
and as a consequence you can only
conclude that their trading is parasitic
which i find troubling um but this
question of
you know democracy and stuff like that
and you know the
sec looks out for the big guys and not
the small guys
i wonder if you could um uh our
panelists could comment on that and what
your impressions are about the movement
as a whole
anybody want to take it i'll comment
just and two sentences
there has been a increased participation
by retail investors in the market
recently
but retail investors often tend to be
momentum traders
and institutional investors are a
smaller fraction of the market and they
often
tend to be contrarian for example value
trading tends to be contrarian
and uh that that increased mix of retail
investors probably will
enhance volatility at least for a while
um and that will perhaps lead to low
returns after prices have been running
up
it's something we need to worry about um
i don't know what you can do besides
issue warnings and educate people
like we're trying to do today and tell
people to be careful and pursue
proven personal risk management but but
that's something to think about paul let
me ask you is it your impression that
the
sec has failed to enforce against large
institutions
uh that they have a bias towards going
after small people
not been my impression i think they do
just fine going after the large guys
um they they spend a lot of resources
there
and they probably get better return
there they don't have much
you know they don't have much reason to
go after the little guys
okay um we are approaching the end of
our time
and so i want to thank all of our
panelists and ask if there's any last
words that somebody like to throw in
[Music]
so okay we're lacking such words let me
turn it over
again to our usc host hostess
and thank everybody for your attention
and
remind you that great things are
happening at usc
and we greatly appreciate all your
support
and of course your concern about these
events that are happening in our markets
thank you so much for attending um and
um
now we'll hear just a few final words
yes thank you to everyone for joining
this webinar today
and thank you once again to all of our
panelists here
as mentioned this webinar has been
recorded and we'll be sending a
follow-up email to all of our
registrants later this week
so thank you again and i will end the
webinar now bye everyone
thank you bye-bye thank you

---

### State of L.A. Business, A New Los Angeles: Our Post-Pandemic Economy
URL: https://www.youtube.com/watch?v=RRHzqVQhgQk

Idioma: en

[Music]
[Music]
[Music]
[Music]
[Music]
[Music]
[Applause]
[Music]
[Applause]
[Music]
[Applause]
[Music]
[Music]
[Applause]
[Music]
[Applause]
[Music]
[Applause]
[Music]
so
[Music]
[Music]
[Music]
[Music]
[Music]
[Music]
do
[Music]
[Music]
[Music]
[Music]
[Applause]
[Music]
[Applause]
[Music]
so
[Music]
[Music]
so
[Music]
[Music]
so
[Music]
[Music]
welcome to the los angeles area chamber
of commerce's inaugural state of la
business a new los angeles our
post-pandemic economy
to kick us off please join me in
welcoming vice president of supply
management and support services for
southern california gas company and 2020
la area chamber of commerce board chair
danita willoughby
good morning and welcome to our first
state of la business
i am excited to be here with you today
and i hope you are ready for a day
filled with great conversations with
business policy and education leaders
from across our region
to say that 2020 has been a challenging
year filled with twists and turns would
be an understatement of the decade the
pandemic has had a detrimental effect on
our region's economy los angeles has
seen 15 000 permanent business closures
and an unemployment rate of 16 percent
from our largest employers to our
smallest of businesses the impact has
been felt
to face these challenges businesses have
had to shift their business models pivot
to digital operations but they've shown
incredible innovation and resiliency
during our conference today we'll
explore our theme
a new los angeles our post pandemic
economy
you will hear from leaders from across
various sectors that are ready to roll
up their sleeves collaborate and develop
a plan for how we get our region on a
path to recovery
this is just one example of how the
chamber is working with our community to
build a thriving region for all
now before we get started with today's
programming i would like to thank our
sponsors without their generous support
this event would not be possible thank
you to our presenting sponsor amazon
our gold sponsors edelman facebook hntb
our silver sponsors a t delta airlines
los angeles times
ring
southern california edison wells fargo
our bronze sponsors coca-cola valero
wsp
now for word from our presenting sponsor
amazon please join me in welcoming leila
ruhi president of ring
good morning to the la chamber to our
elected officials and to my fellow
angelenos i'm laila ruhi president of
ring
amazon and ring are thrilled to be
presenting sponsors of today's event
at ring our mission is to help make
neighborhoods safer
2020 has presented all of us with a
unique set of challenges but never has
there been a time where we have felt
more connected to our neighbors
over the last six months we have seen
time and time again
neighbors stepping up for neighbors and
angelino stepping up for angelino
like kade who hopes to safely deliver
groceries and visit his elderly
grandfather in santa clarita valley
good
morning hey
i'm i'm actually i'm at the store right
now grabbing stuff for you guys and then
i'll drop it off okay
okay
love you
love you too
we are confident that through
cross-sector collaboration we will
continue to move our city forward
ring and its mission to make
neighborhoods safer was born in a
backyard in los angeles and we are proud
to still call los angeles our home we
are committed to making los angeles and
the broader community
a better place every day we are thrilled
to be here today among our region's
leaders to discuss our city's
post-pandemic economy together
especially through the conversations
taking place today and with the help of
the la chamber i'm confident that we
will continue making our neighborhoods
safer better places to live and work for
many generations to come
thank you layla we are incredibly proud
to have you and amazon with us today and
as a valued member of the la area
chamber of commerce
with that we are ready to dive into our
first session of the day the next
chapter for la's regional economy to
help get us started please join me in
welcoming our session sponsor facebook
hi everyone my name is diana ducas and i
manage facebook's economic impact
efforts we're thrilled to continue
partnering with the la area chamber of
commerce as we all seek
to guide and support small businesses
during and our business community during
these unprecedented times
this chamber like so many across the
country have been our go-to experts on
how we all help maintain our communities
and keep small businesses afloat
thank you so much to maria and the
entire chamber team for all of your hard
work
we are honored to serve as a sponsor for
today's session the next chapter for
la's regional economy
at facebook our mission is to build
products and services that connect our
global communities and that starts with
our local markets
as you all know small businesses are the
heartbeat of our communities and as you
all know they are struggling to survive
these very uncertain times we have
hundreds of employees who work and live
in the la area we consider ourselves an
la business thank you so much for having
us
this pandemic isn't just a health crisis
it is an economic crisis and it's
hitting small businesses particularly
hard
i continue to be so inspired by the way
people are jumping in and are eager to
help our communities and facebook wants
to continue to help
that's why we've introduced several new
products and features to support small
businesses we committed 1.5 million
dollars in covid grants to support small
businesses during this time and we've
also created a business resource hub
both on instagram and facebook to
provide small businesses the tips and
tools and trainings that they need to
help get through this crisis
it is so important for us all to
continue building tools that support
small businesses and we want to make
that easier for for you to support them
as well
this recovery is long it is going to be
a long journey but we are all in this
together
thank you so much for your time thank
you for having me i hope you enjoy the
rest of the session and i hope you're
all well take
care now i'd like to introduce ernst
young's managing partner for greater los
angeles leading a team of over 2 200
professionals who serve more than 1 000
clients in all of los angeles key
industries patrick neiman
good morning
i'm pleased to be with you today as
leaders in la to discuss the current and
future state of la business
for the past seven months
we have all felt the brutal and very
real impact of coven 19.
while it is imperative that we
acknowledge the impact and continued
risk
of this very real pandemic
it is equally important to talk about
the future of our region and i'm
thankful that the la area chamber of
commerce has brought us together for
this purpose
today is a day to focus on the recovery
of los angeles and our broader region
today is a day to consider a path
forward
today is a day to think about
what we can become
as i reflect on the future of la
business i think it's important to
remember our rich history and strong
legacy
for instance my firm ernst young
is celebrating its 100th year in los
angeles
many companies universities and other
institutions have been in la even longer
than that
as we celebrate our milestone i've often
thought back to those few ernst and
young partners who were sent west
to be a part of a growing business
community and seize the opportunity that
la presented
going even further back it's interesting
to reflect upon the founding
of our la area chamber of commerce in
october
1888
132 years ago this week
you may not know that our chamber's
founding came about as the result
of a downturn in the local economy
you see
la's population was decreasing rapidly
as one thousand people each month
were leaving town
la had gone from seventy thousand
residents to fifty thousand in just a
few years
there was a sudden realization of the
need to dismiss doubts and reinvigorate
the courage of the citizens
yes
132 years ago
a small group of business leaders came
together to quickly reverse a very
concerning trend
at the same time they came together to
plot a course for our region's long-term
success
i think we have the same opportunity
starting today
to address the short term
as we plan for the long term
i believe that our chambers founders
would be quite fulfilled to know that
their legacy continues to carry on
132 years later with this gathering here
today convened by the organization they
started
but even more they would be in awe to
see what la has become
a diverse center of commerce comprised
of virtually every sector that last year
represented gdp of roughly one trillion
dollars
nearly five percent of our country's
output
a center of higher education with more
than 100 colleges and universities
developing talent and future leaders
a region where families have access to
the most advanced health and medical
care in the world
in a community with faith-based and
other non-profit organizations
bringing together the public and private
sectors to accomplish immeasurable good
and look out for the most vulnerable
amongst us
that growth opportunity and charitable
spirit comes from la
it represents la it is la
we need a plan to live and work through
the pandemic
i think that our business community is
ready for this
and to do what is necessary to remain
safe and healthy in the workplace
we are rightly focused on the serious
health risks posed by covid19 but
at the same time we need la business to
re-emerge stronger than ever
with a path forward for not just months
to come but decades to come
why is this important
when we talk about business
some reduce this to being about
profits for a small group growing the
top and bottom lines
there's nothing wrong with profits for
those who take risks and create jobs
but there is so much more at stake
a strong l.a business community can
restore jobs for hundreds of thousands
if not millions
and ensure workers abilities to support
their families
these are mothers and fathers many with
young children
this is about turning around and eroding
tax base that will decrease funding for
first responders
child and family services the homeless
and many other services for our region's
most vulnerable
think about the charities and other
non-profit organizations that won't have
the funding to meet their missions think
about the impact on our health
facilities and educational institutions
in the end
these agencies and institutions are
pillars in our society and all of them
are in strict inextricably linked to the
business community so in a very real way
the future of our region depends on the
future of our business community
our society cannot thrive without it
with sound policies we can get our
region healthy again economically and
socially
earlier i talked about the history
of the la area chamber of commerce
i think we should all find inspiration
and direction in what a small group of
business leaders were able to accomplish
but we can also examine more recent
history to recall what is possible
one example
at the beginning of 2020
unemployment in la county was at its
lowest point in more than 40 years
in a matter of seven months coven 19 has
caused the loss of nearly 1 million jobs
we have to dig out of this we must move
forward and we must find a way to live
and work through a pandemic
rather than waiting for it to go away
it will take business labor
educational institutions the non-profit
community and government all working
together including our elected city
county and state officials
now is the time
that we should all be leaning in
but we need to be leaning in the same
direction
and our goal shouldn't just be to
mitigate the damage of or recovering
after covid19
rather we should aspire to work together
to be stronger than ever and to become
resilient and competitive for decades to
come
we need to have honest discussions and
consider real solutions to address our
challenges
whether they have been caused by covid19
or
whether they existed before this
pandemic
this is the time to think big
and consider how strong l.a can be and
should be
and compared to 1888
think of the resources we have with the
right policies decisions and strategy
there is no region that should thrive
more than los angeles
in closing i want to once again thank
the chamber for convening us today
and also to express my sincere thanks to
each of you for your time and even more
for caring so much about los angeles and
helping to build a plan for our future
i hope you find today productive and i
wish you and your loved ones the very
best in these uncertain times
thank you
i'm excited to introduce our panel
discussion it's a question that's on the
minds of business leaders not only in
our region but throughout the country
please join me for a fireside chat
discussing the next chapter for la's
regional economy
join me in welcoming our panelists for
this morning sessions session on la's
regional economy first we have monica
bankin monica is the children's and
social services deputy and the economic
and workforce development deputy for los
angeles county supervisor katherine
barger advising on issues related to
foster youth education social services
workforce development economic
development community services and aging
next we have jeff garrett
who is a distinguished international
political economist and linkedin
influencer
jeff
joined usc as dean of the marshall
school of business
in july and recently finished his first
100 days as dean of the marshall school
where he joined us from the same role as
dean at the wharton school in
pennsylvania
finally let me introduce scott
j olmsted the group head for the
technology group within global
commercial banking for bank of america
scott leads a team that advises emerging
growth to public companies in the
technology industry across multiple
segments of their business so welcome to
each of you and i'm going to start
with a question for monica
monica los angeles has some of the
highest numbers of business closures in
the country
can you speak to the magnitude and
impact of these closures to our region's
economy
and how has the county been supporting
our businesses and workforce during the
pandemic
thanks pat
definitely l.a county has seen a larger
magnitude and impact of business
closures and that's because of the types
of businesses we have here and i think
they would be no surprise to most people
arts entertainment recreation tourism
food services were very diversified in a
lot of those things
but it also means that when we had those
types of closures and many of them are
still closed especially including
tourism tourism-related industries like
hotels et cetera
recreation museums indoor museums
and pretty much anything related to
filming that was closed for quite some
time it impacted us greatly right now
we're around a 25 unemployed and that's
based on numbers from the state economic
development department but what we found
is that that those numbers could be
a little off in some ways and i think my
labor economist trends would agree
um
the numbers are a little old we get them
about a month out
and also we believe that there's
possibly they there are under counting
gig workers which we have a lot of here
in l.a
also we found out most recently that the
fraud that we've all seen in the news
when edd started imposing new fraud
mechanisms
on applications they actually had a
decrease of 82 percent
of applications each week due to fraud
so that's why our magnitude and impact
is much greater because of the types of
businesses that we have
and that also
reflects the types of people that work
in those jobs and so what we're seeing
is an impact in groups that uh
are seeing a higher
impact and that includes uh women young
workers between the ages of 16 to 24
black asians and hispanic those with
less educational attainment
most unemployed are having a high school
bachelor or degree or less
and how has the county supported
businesses and workers at this time
well we've had the karazak dollars and
that's been about 1.2 billion dollars
that we've received from the federal
government those issues and those things
have gone to health impacts in the
county including
coveted testing housing rental relief
foreclosure support
but also expanded funding for business
loans and grants for both nonprofits
arts nonprofits small businesses micro
entrepreneurs so just kind of a lot of
people that have been seeing um
particular impacts and the types of
groups that would be unable to get ppp
loans so we're working try to expand
uh and meet the state stringency
requirements so we can move out of the
less restrictive into the most
out of the most restrictive tier and
into a less restrictive tier
so those are some of the things we are
trying to do and uh we're gonna keep up
the good work
thanks monica uh to you and all your
colleagues at the county and know how
hard you're working on our behalf
scott
um you and your colleagues at bank of
america see a lot
what impact have you seen amongst your
business banking clients big
and small in the la region
and what has bank of america done to
support businesses through this pandemic
thanks pat
monica said it very well in terms of the
impact it's been significant
to companies in the la area the types of
industries
that make up the la economy is very much
around group gatherings or
venues or inside you know theaters and
and so with their limitations on that it
was a significant hit to a lot of
companies revenue streams um
unanticipated as well that was one of
the other things that was really
impactful to these companies is within a
matter of weeks they went to having no
revenue from hearing about the pandemic
and making it to the u.s to when they
were shutting down they were not
prepared um for this and so
um it was
something that they tried to jump on as
quickly as possible
but the first thing was to get the
health of their employees and to get
them safe and then to come back and
focus on the business so a lot of the
work that the bank has been doing within
the business community
revolves around in that first part was
really getting these companies the
amount of liquidity that they needed in
order to be sustainable during this time
period so for the larger companies we
were able to go to the capital markets
and help them raise money and get them
out you know multiple years
so that they had the ability to be
you know around and keeping their
employees that they could employed
you know here for a while to be able to
work out of it
for the small and medium-sized
businesses
we were a major part of the ppp program
within a couple of weeks we had set
everything up
within the la county
we helped
32 thousand plus companies receive over
two billion dollars worth of ppp funding
to help sustain their business and of
note is that 80 of those businesses that
we helped get that money had 10
employees or less
so ellie is made up of a lot of small
businesses and those are the ones that
as monica said they were impacted
probably the most uh in this speed
in terms of which happened because their
liquidity amount is not as much as some
of the other bigger corporations so we
are consistently trying to work with
them to help out on the other front is a
lot of these employees
either had reduced pay or you know maybe
lost their pay completely
so through our customer assistance
program
nationally we have 1.8 million payment
deferrals whether that's through credit
card auto mortgage uh home equity line
or even some small business uh lending
outside of what you know money came from
ppp so we've really been trying to
prop up and keep these businesses
running as much as they possibly can in
a very difficult environment and
liquidity is a way that they they can do
that
another way that we've been helping out
is through our foundation
we've made four million dollars worth of
grants um to some of the micro lenders i
mean monica mentioned that as well we've
been helping to uh on that front also
we've been uh uh helping on the health
care front so we made a donation to
ultimate foundation which has been
helping out you know some of the um
discrepancies in terms of health care
you know available to you know different
parts of the los angeles population to
make sure that some of our underserved
communities you know get the health care
that they need because a lot of them are
frontline workers um you know we were an
essential business we are an essential
business so we stayed open the whole
time we had financial centers open
during from the beginning all the way
currently now because banking needs to
happen for a lot of small business to
continue to run so we were providing
mass for a number of people we've made a
million dollar commitment to mass within
the la community so we're trying to
soften the blow so to speak of what's
happening within the economy get
everybody on a setting a footing that
they can
be ready to which we're starting to see
now to build again to start to figure
out how they're going to
make their business be a little
different to deal with this because it
is going to be around for a long time
and we want to be there to support you
know the la community
thanks scott and thanks to bank of
america you um and and the other banks
have really been a big part of the
solution in helping so many companies so
many of those
uh family businesses entrepreneurs that
you talked about through this tough time
jeff uh you marshall is a very global
institution you have a very global
background
this is a global health and economic
crisis like perhaps we've never seen
before
can you speak to the current state of
internal
trade and our
global economy and its impact on our
regional economy
yeah thanks very much
i i think it is appropriate that we've
focused thus far on
small and medium-sized enterprises
because they clearly are the core of the
la economy but
uh the other thing that's distinctive
about la obviously is that it's the
gateway to the asia pacific with nearly
half of uh goods entering the u.s
entering through the ports of la and
long beach
when i think on many dimensions the
pandemic is accelerating trends that
were already there
and i think that's true with respect to
trade and especially with respect to the
u.s china economic relations so
everyone knows that we're talking now
about less reliance on china for
production and final assembly there's an
imperative to shorten supply chains and
we're also talking about instead of
offshoring jobs talking about reassuring
jobs um
let me just focus on on u.s china for a
second
um
one thing that that i don't think has
received much attention in the press or
as much as much attention as it should
have is that the u.s china trade deficit
has actually come down a lot
uh since 2016
more than more than by more than a
hundred billion dollars
but the reason for that isn't
a more u.s exports to china it's it's
fewer u.s imports
from china
so if i if i think about the future and
what it means for la with respect to to
us china in particular
i do think there are export
opportunities for
la based industries into the chinese
economy and above all the creative
economy i think is a is a great
opportunity and i don't think the
creative economy will be subject to the
same kind of
technology come national security
restrictions that are affecting other
parts other parts of
exports to china but maybe more
important is the fact that the
diversification of american supply
chains
away from away from china
is going to
empower a lot of other economies around
the world so right now we're seeing
vietnam for example
becoming a new place where american
firms want to do final assembly and
manufacturing instead of southern china
but looking forward i think the big
opportunity is mexico
mexico has a low cost space
and it doesn't have any of the trade
restrictions obviously that now apply
with respect to china
we have lots of concerns obviously about
physical infrastructure and about
governance in mexico but the proximity
of mexico to southern california is just
an extraordinary opportunity so i i
think in a lot of businesses obviously
beginning with logistics
mexico is going to become an
increasingly important part of the
regional economy in the years ahead that
trend was already there but i think it's
absolutely being accelerated by the
pandemic but more importantly by by the
the re-basing of u.s china relations
really interesting jeff and i appreciate
that
perspective
scott i'm going to come back to you and
and once again you and your colleagues
bank of america touch businesses
from across the region and from
virtually all sectors and
industries how the bank and business has
been adapting during the covet 19
pandemic
and and also how can businesses share
best practices to enhance regional
collaboration
sorry thanks pat um you know it was
mentioned in in private prior uh
conversations around you know innovation
um
when you have a situation where you're
almost survival mode that's when you
really start to realize i've got to look
at my business for a different lens
what was working before
maybe isn't working again right now and
so i need to
innovate i need to change i need to look
at how am i going to make my business be
different so that i can accommodate the
situation that i'm in right now and so
what happened was a lot of things that
were kind of in flight i would call it
for a lot of businesses became front and
center and so it is now an accelerated
pace for a lot of the innovation that
companies were wanting to put out there
or ones that were slow to adopt are now
saying i have to because if i don't i'm
not going to be able to you know survive
in this go forward
economy so what we're seeing a lot of
companies doing there's a lot around
technology i spent a lot of time in this
space we see a number of companies who
are adapting you know different types of
technologies mainly around payments when
you think about the large you know
business to consumer environment that
the la economy is in
having those payments you know not be in
the form of cash
you know early on in the whole pandemic
nobody wanted to touch anything so
giving cash was not something that was
really going to be you know a good use
for you know for you know different
companies to use as a currency and in
fact you know there was a situation at
the very beginning where coins were in
shortage because nobody was you know
necessarily using cash but the ones that
were they couldn't get necessarily
change because it was sitting in you
know different different companies
different people's homes and it wasn't
circulating the same way that happened
so what you're starting to see is more
companies adopting things like apple pay
or samsung pay or zell or any of the
payment systems where it's done through
a device that most people have and they
carry with them all the time which is
your phone
we're seeing companies that are moving
their supply chains you know around
different ways
which you know jeffrey just talked about
you know maybe not all coming from you
know asia pacific but from other areas
that are much closer and much more
reliable for them to be able to you know
get their their services and their
products that they need
it is really looking into um
how can i be the most efficient with
what i'm doing so that when i'm you know
delivering the product that i i am it's
a great client experience and it's just
different than what i was doing before
so think a lot of the you know food
service you know industry where you know
they
a lot of them become mostly take out
versus dine in which is a very different
business model to run but they had to
adapt to that in order to survive and
now they're thinking about the the
client experience how do i make that
client experience better just take that
across a multiple different industries
that's the phase i you know feel as
we're talking to different businesses of
how can they be different during this
pandemic to still have that same great
client experience they did pre-pandemic
but it's you know going to adhere to all
the safety situation that we have to
deal with and and the different
environment we had to deal with and it's
really that thought process and that
that innovation and much like you
started with in your opening softball i
mean
there's been different types of
situations that the economy has gone
through that have been significant you
know one of being the 1918 flu
it changed the way people did business
going forward and we're in another one
of those times and people just need to
be looking at their businesses a little
differently
there's a lot of resources out there to
help think about that
and have a different delivery in terms
of how how they provide that business
the way to share that too is is trade
groups it's you know the conventions
that typically happen in person it'll be
online for a while but they will come
back again at some point in time to be
in person is sharing best ideas it's
things such as this the lha
organizations that have multiple people
from different disciplines talking about
what they're doing because a lot of this
is not necessarily industry specific
it's more business model enhancement
that they can utilize within their own
industry to be able to deliver for
their clients and in a way that's safe
for everybody that's out there so it's
it's been a
interesting kind of pivot away from
really the oh my goodness what's
happening to my company to i've
stabilized it now now how do i get back
into a mode where i'm i'm getting back
to the business that i would before and
it will take a long time to get there
this is not going to be a you know a
quick recovery most likely but they're
getting the right steps to make things a
little easier for their clients to do
business with them and for them to do
business with their clients and it's
starting to feel
a little bit more regular more business
as usual and that's like to see that now
it's just about making sure we get
enough people back to work and the
economy back on stable footing so that
we can have these companies really
growing and not just being stabilized
thanks scott regular sounds really
really good for so many of us right now
so
monica i'm going to come back to you you
mentioned
a few moments ago about the impact on
different constituencies around la
how's the county addressing the
disproportionate health and economic
impacts faced by
communities of color during the pandemic
minority-owned businesses for instance
uh definitely and thanks pat yeah i
wanted to mention who is impacted early
on uh so it helps us kind of reset and
focus on what the intentions are
i would say a few years ago
when i was at rand my colleagues did a
really great research project on
kind of the workforce of california's
tourism industries and it was exactly
what we said it was young people
entering a job for the first time or
inch or maybe someone older but entering
the workforce at a at their first time
as an entry-level job
helping at a theme park or answering the
phones at a hotel or something
but those experiences are really
important um over the long term
and so when we don't have those now and
there really isn't another skill to to
push back on that's the problem with how
we want to be moving towards innovation
i think we we all saw this in probably
the
late 90s early 2000s with the japanese
economy as well that it was either you
know innovate or die
and changing in business models
in terms of how are we helping our
minority uh in business uh operations
here in los angeles uh the county's
really been trying to focus
efforts on health
in those regions as well as supports and
business supports for low-income
communities and highly impacted regions
uh and part of that is the the county of
los angeles really does want to see
those those areas focus
another piece of that that has come up
recently which you may have seen in the
news is the state has uh created a
health equity score
for communities that you can't move out
of different tiers within the
coronavirus closure structure
unless you're addressing health equity
issues
so the county has partnered with a fair
number of our community organizations
to really share information with uh with
adults with seniors
with
english language learners in those
regions
and providing assistance and support so
that we do see that those uh the health
of those communities does increase
thank you monica
jeff i have a question for you i
mentioned earlier this morning um
a hundred plus universities colleges
around los angeles i talked about my
firm celebrating its 100th anniversary
your institution the marshall school is
also celebrating its 100th year here in
la
uh usc been around much longer than that
so i'm interested in how you know our
universities partnering with the county
and the private sector to aid pandemic
relief efforts
and what can higher education do to help
facilitate a successful and inclusive
economic recovery
fantastic questions um let me just start
with the fact that for higher education
the pandemic has actually been a lesson
in how u.s federalism operates
higher education has been affected by a
lot of policies coming out of washington
in the pandemic in particular the status
the visa status of international
students uh decisions that governor
newsom makes make a big difference for
us so do those of mayor eric garcetti
but but the proximate one actually for
us is the la county health department
which
has to allow or disallow certain
activities for the university and at the
moment uh usc is in a remote semester
for all of our students
because l.a county has said that the
only thing we can do on campus is is
really essential work um beginning with
healthcare provision but not quite
limited to that um i think everyone
should remember with respect to usc that
usc is the largest private sector
employer in los angeles and and i think
uh it's really been a standout feature
of president carol fault's first year
as president of usc that she's really
said our people are our greatest asset
and the university is has held the line
on staffing and employment during the
pandemic in ways that i think are very
admirable
thinking about the marshall school
business schools are all about two-way
engagement with the business community
it's key to everything that we do that's
how we recruit students it's how we
place students and we want to provide
thought leadership about the future of
business
when i think about the future of higher
education again i think the pandemic is
accelerating trends that were already
there and the biggest one concerns
affordability and access so the value of
higher education to lifetime earnings
remains really clear
but obviously costs have been rising
faster than the consumer price index now
for a couple of decades
i think what usc has done with respect
to affordability and access has been
really admirable
the university now provides free tuition
for any family with family income under
eighty thousand dollars a year
um usc as a private university is really
a large recipient and benefits
enormously from transfer students from
community colleges i think about 750 new
community college students transfer to
usc undergraduate every year
and 20 percent of all usc undergraduates
now are first-generation students that
is the first person in their family to
go to college
if i focus in just for a second on
business education
uh degrees are foundational the skills
that people learn in bachelor's degrees
master's degrees mbas are foundational
and we're committed certainly to making
them more available both on campus but
also leveraging technology usc and
marshall have been leaders in online
degrees for almost a decade now but i
think the big trend is going to be
lifelong learning for everyone
so i i hope that the marshall school can
be there for people as they change
careers as they need to acquire new
skills
skills for jobs that don't even exist
yet so so i do think
lifelong learning as well as degrees is
going to be the one-two punch for
business schools
what kind of skills are people going to
need i think we're seeing right now
a really interesting bifurcation where
an emphasis on on facility with
technology data analytics is obviously
now uh put a premium on in so many
sectors
but equally important then as ai becomes
a more dominant feature of the economy i
think interpersonal skills
and and the value of being human is
going to increase in the business world
so
so i think that the the priority for
marshall is going to be that one two
punch um two one two punches first
degrees are foundational but lifelong
learning for everyone and then second
yes technical skills are really
important but equally so are
interpersonal skills
wonderful input jeff and much appreciate
it
monica uh today we've we've gathered uh
people from the private sector people
from government uh um you know clearly
across um a cross-section of our greater
la
community
how important are public private
partnerships and addressing the
challenges faced by
businesses and communities during the
pandemic and
what what has worked and what will be
critical as we move forward in your view
well i would say uh
private public-private partnerships uh
it used to be called ppp before uh this
year's ppp
and i would say ford county i i was
using that term a long time and all of a
sudden it became
you know
the paycheck protection and it's like
what it used to be public private
partnerships i i would say it's always
valuable we especially at the county
found it very valuable
because there are certain things that
and i think in a good way we don't want
government to
have everything and have its lever on on
everything that just isn't
something that i think
is
most useful uh
especially when there's other people
that have talents and skills etc so in
terms of testing for covid county
partnered early on with a fair number of
our pharmaceutical companies to start
looking at testing and locations you'll
even see in the vote centers now a lot
of those locations are private locations
like the pantages or the forum
etc that have kind of stepped up and
helped us
and i've worked with a lot with
community groups that have been helping
with food distribution
in their communities creating food
pantries even colleges that have opened
up their food pantries uh that used to
be for some of their needy students that
have expanded that to the community at
large i know that did happen at pasadena
community college
um and what we also found i would say
for those public private partnerships is
for those businesses that have been
partners or vendors to the county and i
think that's something i would really
want to stress for those watching uh
today
is the importance of kind of taking the
time early on to apply through a very
laborious process of becoming a county
vendor even
restaurants or caterers that had worked
at the county before when we had
expanded the great plates initiative
which is food service for seniors
those companies that were already in the
system we could kind of work really
quickly and get them a contract to help
out and deliver food to needy seniors
who were homebound
that used to be able to go to senior
centers and those senior centers closed
because of the coveted closures so to me
i think those are some really great
examples of public-private partnerships
and one pat that we're thankful for your
leadership on was the la county economic
resiliency task force supervisor barger
really did want to make sure that we
were hearing from
communities and from business sectors
themselves because they have the most
expertise in their area and they will be
the ones to be able to help us and help
identify how we can open safely when we
open up businesses and i think that's
been very valuable is to have that
conversation
um
and i think we've done a really good job
here in l.a county at being able to
listen and hear and have a dialogue
to be able to have things that are safe
and and open and as we're moving along
it with this process of openings
you know to be able to work with our
businesses and restaurants were a great
example of restaurants saying hey these
certain things work for us these other
things
we cannot make any money if you go down
that road
so you know we we can't be open at 10
capacity it's just easier to go bankrupt
and that's not what we wanted to see so
that was really helpful and valuable
advice and so that's why i would say for
everyone please let your voice be heard
in the appropriate way
you know timely share information with
your elected officials and really be
solution focused
which is helpful everyone's angry at a
lot of things right now that are closed
and
and i get it and i i too would like to
see a lot of things open
but for those businesses if you have a
solution and a way that you think this
could be done in a better way or here's
information i'd like to share with you
uh that's very helpful for your elected
officials
yeah thanks for that monica and and to
your point uh serving on the economic
force
i can tell all that uh
supervisor barger as the chair of the
county supervisors
and um you know others they really
listen and what was so impressive was we
came from different sectors and a lot of
us from
not just the business community but also
the educate higher education
um
nonprofit and it was interesting what a
unified voice we had even though we came
from different places and different
walks of life
and i really do believe the county's
listening and
is continuing to pay attention as is the
health the health department needs to
clearly and our state officials no doubt
so
thanks for that input and once again for
everything you and the county uh team is
doing
um we have time for
um one more question perhaps and maybe
scott scott i think i'll come to you
first on this and
jeff perhaps we can hear some
perspective from you and maybe monica as
well
but as we look ahead to 2021 and the
years to come
i talked earlier about the decades to
come
what do you see as the greatest
challenge
and uh the opportunity as we seek to
rebuild a prosperous inclusive economy
and uh where do you see your respective
sector making the greatest impact scott
do you have any thoughts on that
yeah i mean one of the things that
became very apparent in this pandemic is
um the inequalities of how the pandemic
affected uh different communities um
in in a very impactful way and so you
know
as bank of america we noticed this very
quickly on uh in the whole pandemic and
have been trying to support that and not
uh too long ago just you know a month or
so ago
bank of america announced a one billion
dollar multi-year commitment to address
the economic uh equality in the
communities of color
um and really what that comes down to as
we break down some of what we're trying
to do
it really has to do with getting them
prepared for a new economy um job
training is one of the things you know
either reskilling or upskilling um
providing money for for that so that
there's you know a
uh a better opportunity as you know jeff
said
the economy will be different there are
jobs we don't even know about yet um
having everybody prepared for that um to
support you know the the communities uh
adversely affected by the health crisis
mentioned that before with our uh
commitment to uh ultimate
other uh health communities as well is
uh frontline workers are mostly uh
people of color and they have been the
most affected and when you look at the
statistics
of those effective versus the population
it's it's very um
uh troubling how different it is for our
underserved communities
the money will also go to direct
investment in minority depository
institutions um to you know help them to
take care of their own communities and
what they're trying to do in supporting
them and then lastly also we'll do some
equity investments into
private equity firms that are minority
owned and or
they're serving the minority-owned
businesses and we really view that to
have a healthy economy it has to work
for everybody it can't just work for a
limited few so by making these
investments to gain that equality which
will be a multi-year long-term
strategy that needs to take place as we
get through the economy to be back to
where it was before we want it to look a
lot different um than it did previously
where it's resilient it's sustainable
and it is inclusive of everybody
contributing within the la community and
reaping the rewards of that strong
economy
thank you scott jeff any any thoughts
challenges opportunities
well i i couldn't agree more on the
opportunity uh diversity equity and
inclusion and and certainly for
the marshall school
uh
that agenda is incredibly important not
only on campus but in terms of our
relationships with with the local
community i think
urban universities uh have a special
challenge and responsibility but also an
incredible opportunity to work with
their local communities
but zooming out a little bit you know it
a cliche i would normally use is there's
real time and then there's university
time universities are
typically crusty slow-moving
institutions lots of status quo bias
i just don't think that's going to be
the case post-pandemic you know i i
think it's likely that there'll be more
innovation in higher education in the
next few years than there's been in the
past several decades
and and i think a lot of that is going
to focus on
career outcomes for students uh and and
preparing students and lifelong learners
for the world of work
and you know i i look forward to that
very much i think it will make business
schools uh even more central to all of
higher education than they've been in
the past
thanks jeff and monica same question for
you
yeah thanks and i totally agree with
both uh scott and and jeff on that i
think the challenges to me what we've
seen are the technology challenges we've
heard about that with the digital divide
with who has access to technology part
of that is an infrastructure issue
uh that we're using really old systems
to get approvals
even to kind of repair and fix older
technology like cell towers etc
even just to fix it you're going through
a whole new process so you're adding
years and years and years and we're
seeing with so many people either
having school at home or working at home
the system is really taxed because it
was it's intended and created in such a
way
to make it difficult to make it better
so that's something that we're working
on right now at the county and i'm i'm
really excited about it because i think
it's going to have really long-term and
positive dividends for the entire
community
but the the challenge on the flip end as
well is to see
where we are now and that we're not
there with some of the technology pieces
and that's really challenging and
problematic we've heard that from
students that don't have access or they
have one computer in the home
but there's three siblings so you know
or maybe the parent needs that computer
to be able to do their job and they
didn't own that already or their wi-fi
is bad or they don't have a hot spot so
now you're seeing that the challenge is
on the education or work side and we're
also seeing that in terms of increased
uh court cases because the courts have
all not been virtual for this most of
this time
um and all these challenges you have to
think about the energy infrastructure
that's needed to kind of carry the
system
on the back end so i hope that our state
and our region is really looking at a
heavy-duty infrastructure investment
like in these things
to really move us to that next step and
when we're thinking about all these
technology pieces and and satellites and
low urban earth orbit
satellites etc there's an infrastructure
there that we we need to focus and push
on so that's kind of the the challenge
and the opportunity in one
yeah thanks mark you hit a really
important point and i might just
embellish a little bit the we've talked
about higher education today
uh but also
you know education in general and that
digital divide as we're calling it now
i can speak firsthand having two high
school age sons who go to school in the
city and um
on occasion
their their fellow students
are found in their cars in the parking
lot because they just don't have access
to what some of us can take for granted
um good wi-fi mine's held up this
morning thankfully even though i have
two high school classes going on around
me uh but i think that's really
important and i'd add to that the
importance of um getting our kids back
in school not for just for their own
sake which is really important but also
think of all the working families who
um gosh if if their kids are home
especially the youngest of the kids
hard for mom and dad to go back to work
so i think we all need to be paying
attention to that
and it's beyond local officials because
our state officials clearly need to
embrace that concept and and pay
attention
i thought i'd add one um comment a bit
of a closing comment but to my own
question of what are the challenges and
opportunities i i talked earlier i think
la is a region and once again you think
about what those few business leaders
did in 1888 with
some resources but nothing compared to
what we have today
and i think about what we are able to do
and i really truly believe i did not
grow up in los angeles but i've been
here
almost my whole adult life and
there is no region that should thrive
like los angeles like southern
california like the state of california
and one thing that i think is a
challenge but an opportunity at the same
time is
we we just like in our own businesses
and no matter what that business is
there's a business to higher education
there's a business to health
we all operate in different sorts of
businesses
and i think it's important to not take
any of our constituents
for granted and to pay attention to the
competition
that is out there
because l.a
can can can thrive can be the leader
there's no doubt in my mind but we also
need to
um do what we can to stay ahead of our
competition whatever whatever
competition difference these different
regions and once again i think that's
the opportunity to
not just recover not just to mitigate
the damages of this pandemic but uh
let's think about how la can be even
stronger even better
and compete and thrive
more completely better than ever better
than pre pandemic i hope that's our goal
so i want to thank
monica
jeff and scott for the
really valuable input for this great
discussion today
and i want to thank once again
and thank everybody for participating
today because these are really important
discussions i think this was one
important discussion
to come today
so thank you again and have a wonderful
day
thank you for joining us for the next
chapter for la's regional economy
session
next you'll have the opportunity to join
our first set of concurrent sessions
you can choose between either the future
of la's infrastructure transportation
power and sustainability or health care
and ed tech in a health crisis
accelerating advancements and ensuring
access
please select your session choice under
the sessions tab at the top of your
screen we will see you back at 9 50 a.m
you

---

