Motley Fool Hidden Gems Investing - Mark Zuckerberg's North Star

Episode Date: September 29, 2017

Nike trips in North America. Roku pops in its Wall Street debut. McCormick reports some appetizing earnings. And the CEO of American Airlines makes a surprising declaration. Plus, Chris talks Facebook and Russia with David Kirkpatrick, author of The Facebook Effect: The Inside Story of the Company That is Connecting the World. Learn more about your ad choices. Visit megaphone.fm/adchoices

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I'm Chris Hill, and joining me in studio this week from Rule Breakers and Supernova, Aaron Bush, and from Million Dollar Portfolio, Jason Moser and Matt Argersinger. Good to see you, as always, gentlemen. We've got the latest headlines from Wall Street. Best-selling author David Kirkpatrick is our guest this week. And as always, we'll give you an inside look at the stocks on our radar. But we begin with sports retail. Shares of Nike are hovering close to a two-year low after a first quarter report that included

profits falling 24%. And Jason, you look at all the coverage out there, and there is a pretty healthy dose of pessimism in this regard, that this report from Nike is not a bump in the road. This seems to be a trend that a lot of people think is going to continue for a couple of years. Yeah, definitely not a bump in the road. I think now at least we can say, well, this isn't just an Under Armour thing. We're seeing across all of sporting retail, every party in the value chain there is having some trouble. I think the big story with Nike right now is North American headwinds are likely to persist for the foreseeable future. It's just a difficult retail environment and a changing retail environment. Now, with that said, that's

OK, because Nike's a big company, very well diversified, and they make about 55% of their revenue outside of North America. So, all in all, they will be fine. I think the market generally has some concerns on some of the goals that management has set for themselves a little bit further down the road. They had an investor presentation a few months back where they set some goals for 2020, looking to target $50 billion in sales by 2020, and for $16 billion of that to be in direct-to-consumer. Now, the strategy to direct-to-consumer is exactly what they need to be doing, and we're seeing Adidas and Under Armour doing the same things. I think that $50 billion target is probably a little bit lofty. I'd be surprised

to see them get there. We were modeling off some more conservative numbers in Million Dollar Portfolio when we added Nike a few months back. That said, the direct-to-consumer business was up 11%, online sales up 19%, their comp store growth is up 5%. I think the bigger worry for players in this space, it's your Dick's Sporting Goods, your Footlockers. Obviously, Sports Authority has already had to file. That's the toughest part in this value chain, and I think that's why we're seeing Nike and Under Armour all making such big investments in direct-to-consumer. I agree. It really is all about the traditional retail channel that we've seen affect so many brands. I just think, with

Nike, as Jason said, this is a brand with everlasting qualities, it's got a global presence. Depending on how long this North American malaise with retail lasts, it could go on for longer, but I'd say Nike, at a two-year low, at the valuation we're looking at today, we actually like it in the $1 million portfolio a lot. The good thing about the direct-to-consumer market is that, in the long run, that should boost the margins of the company over time. So, even though we are seeing some shorter-term worries with margins, how things are trending are actually positive if you play it out over a long period of time. Of course, that opens up other problems, such as Nike might not

have as much control over all the consumer touchpoints. But as for the financial profile of the company, it should be getting better. It's also interesting to see how they're making this pivot to this direct-to-consumer. On the one hand, in North America and whatnot, with these traditional established retail markets breaking more focus, they're having to pivot into a new strategy. Whereas in the emerging markets, where they're really just getting started, they're building this part of the business with more of a digital nature from the very start. So, it's interesting to see the difference between the two markets in the established versus the emerging. And I think it's kind of neat to see they're really

building that business for the future in these emerging markets and taking some of those lessons and bringing them over into the more established markets like here. One of Warren Buffett's more colorful quotes about business is that airlines are so bad that if a capitalist had been President Kitty Hawk, he would have done his successors a huge favor by shooting Orville down. Oh, how times have changed, gentlemen! This week Doug Parker, the CEO of American Airlines, said, and I quote, I don't think we're ever going to lose money again. We have an industry that's going to be profitable in good times and bad. Boy, Matty, that is really leaving no wiggle room whatsoever.

Are things that good, not just for American Airlines, but for the industry writ large? Well, I don't know about never losing money again. I'm sure they will find ways to lose money again. But like railroads 15 years ago, when Buffett was getting into railroads, I do think there's been a shift, and it's a major shift. As investors, we look for places in the market that are cheap, neglected, undervalued. Airlines have been like that for decades. But with the consolidation in the industry, you have the four top airlines now controlling 80% of tickets. You have the new ability to charge fees for luggage, seat preferences, food, entertainment that really wasn't there before in pricing.

And the biggest story is just, I just think, the secular downtrend in oil prices. I think one of the reasons the CEO of American Airlines is making that statement is because he sees a future of much lower oil prices. For forever, that was the biggest operating cost for airlines, was fuel prices. If those are coming down and airplanes themselves are more efficient, that does paint a more profitable future. Morningstar just came out with a recent report that I found interesting. saying, and they kind of agree with the sentiment by American Airlines CEO in saying, even in a recession or the aftermath of a shock, like a terrorist event, those things used to really cause terrible havoc for the airlines. Well, now they think, even in those environments,

they're going to be profitable. So, there's agreement there. It's not just a boom and bust industry anymore. So, I have to say, I think it is a time to look at airlines. I mean, never losing money, that is a very bold statement. I imagine at some point or another, they whip out the old non-GAAP card or adjusted earnings or whatever if they have a less-than-stellar quarter. But, yeah, that's never losing money. That just seems to be a very bold statement to me for a historically tough, tough investment. Well, I don't know Doug Parker, and I'm not a shareholder of American Airlines, but I was just trying to think, wait, any stock that I own, any company that I'm a part

owner of, would I want that CEO to come out and say something like that? Like, Howard Schultz, he's not running Starbucks anymore. But even if you're an Apple shareholder, do you want Tim Cook coming out and saying something like that? I'm a bit more of an under-promise and over-deliver guy, Chris. The hottest IPO in a while hit Wall Street this week. Roku, the maker of products for streaming TV services, went public at $14 a share. And in just two days, it doubled. It doubled, Aaron. I mean, is this hype of the highest order, or is this warranted in your mind?

I do not think it is warranted. I do think it is hyped. I think that the IPO was underpriced, so some of the pop that we're seeing probably isn't as justified. It just makes it look better than it is. When I look at Roku, the business, I do not see a fantastic business model. I think it's in a pretty tough evolutionary position. Gross margins are only about 40%. Free cash flow is barely positive. It really doesn't make money off of the devices itself. Obviously, that's not good enough to be a worthwhile business. The company is pursuing revenue deal shares with content providers, pay-per-view revenue, even advertising. When I see a company like Roku start pursuing advertising, it just shows me that maybe things aren't entirely

figured out as much as maybe they're letting it seem. All of that said, I actually think the long-term result of this type of box technology that you plug into the TV, the future is already set. The future is that those boxes are going to go away, because it's all going to be inside the TV itself. We saw in 2016, Roku TVs represented about 13% of smart TV sales, meaning that Roku was the operating system powering those TVs. That is definitely the right way to go. leads to different revenue options. I think it's fascinating, but it's still a tough position and 13% isn't quite so dominant. I don't get it, because I can't distinguish Roku from, say, Fire TV from Amazon, Apple TV, my PlayStation 4, which I use a

lot to watch TV and access entertainment apps. I totally agree with Aaron, at some point this is all built in. Even the video game companies say, the era of the console itself is probably going to be ending soon. The next generation of consoles is going to be built right into the smart TV. Roku is just a hardware, essentially a device, like a portal to all your favorite entertainment apps. I don't understand where the value there is going to be created. I'm not saying Roku can't be successful, but I was thinking about this. It feels like an apt comparison, at least. When GoPro went public and we saw on their S1 that they knew they were a hardware maker, but really that

the light at the end of the tunnel was becoming more of a media company, monetizing content or not. I just feel like that's kind of what Roku is trying to do here. I'm not saying they can't do it, but clearly GoPro has had a lot of trouble making that leap. Given where Roku is at this time and place in the market with all of these competitors out there, it's a very difficult transition to make. As an investor, I think you have to hold the burden of proof on them until they prove otherwise. In the long run, the ultimate differentiator is exclusive content, whether it's exclusive video apps or games, and I just have a hard time seeing Roku do that over someone like Apple.

So, we should not expect the CEO of Roku to come out and say, we're never going to lose money again. Well, they're not doing so hot right now. They never make money, that's the problem. Solid third quarter report from McCormick. The Spice Maker sales rose 9% and profits were higher than expected. Pretty good guidance, too, Jason. Hey, I just used McCormick Spices last night, Chris, as I was making pizza at home for the kids. I mean, I love the value proposition these guys communicate in their products. They basically say that their products represent 10% of the cost of the food that you're eating,

yet 90% of the flavor. So, I mean, that right there tells you everything. They really are responsible for pretty much everything that's going on your table or that stuff that you're buying in the restaurant. And I think that what we've seen in the past few months, there was a lot of concern with McCormick as they announced the acquisition of RB Foods, which was the French's and Frank's properties. They've closed that acquisition and everything has gone through relatively smoothly. There are some downsides in the near-term. It has added some debt to the company's balance sheet. It dings their credit rating a little bit. And I think that's where the concern maybe came in. Bigger picture, though, I think the

acquisition made perfect sense. It's right in their wheelhouse. I think it helps them gain more of a global presence and leverage of that cost structure, which will ultimately help boost margins down the line. And you're looking at a market that is going to continue to grow slowly but steadily. Euromonitor projects 5% growth in the space of 2021, and McCormick is always getting a pretty good share of that year in and year out. I mean, I defy you to look in your pantry at home and not find at least one or two McCormick products in there. So, all in all, a very well-run business, a good track record of growing earnings and dividends. It's one we have on the watch list in MDP, and we're really a little bit more concerned with the valuation

than anything. You got it on the watch list, so I'm guessing you were hoping for a bad quarter, because the stock bumped up about 5% on this report. I'm not going to lie, Chris, I was hoping it would go in the other direction. Coming up, a reminder that some birds don't actually fly high. We'll explain. Stay right here. You're listening to Motley Fool Money. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. Welcome back to Motley Fool Money. Chris Hill here in studio

with Matt Argersinger, Jason Moser, and Aaron Bush. Our usual man behind the glass, Steve Broido, still recovering from having his tonsils out. Rick Engdahl, producer of Motley Fool Answers and Rule Breaker Investing helping out behind the glass. Also behind the glass with us this week, long-time listener Drew Morris. Thanks for hanging out, Drew. Shares of Thor Industries up nearly 10% this week after hammering home strong earnings in the fourth quarter. See what I did there, Matty? The RV maker stock hitting a new all-time high. Yeah, millennials are into RVs? Apparently they are!

Who knew? Who knew? But that's what they're saying. And maybe it's true, because Unit sales for Thor up more than 50% in both their main towable and motorized segments. Part of that, they made an acquisition about a year ago, that's helping. But still, backlog of orders up more than 100%. It wasn't mentioned in the release, and I don't think Thor does a conference call, but I'd have to believe that lower gas prices are having somewhat of an impact on the RV industry. Gas prices peaked in 2012, they've fallen about 50% since then. And really, 2012-2013 was the inflection point for Thor's business, where sales really started taking off. So, you can see, a fuel-sensitive vehicle like an RV, obviously, that's a major

consideration. But I have to say, the growth looks great, they have a growing dividend. Stock is less than 20X earnings. I'm not an RV expert, I'm not a millennial either, but I have to say, stock looks interesting right here. Well, I'm glad you mentioned that about the gas prices, because I was wondering about that. I mean, given what we talked about earlier with American Airlines and the airline industry in general, and part of the bull case for that industry is the price of oil being lower today than it was a few years ago, and possibly staying lower. If Thor Industries, among others, is trading at a pretty low multiple, if gas prices aren't going anywhere, that's part

of the bull case. That's right. We're seeing the effect of what a potential secular decline in oil prices, and therefore fuel prices, can have across many, many industries. It's pretty underappreciated, I think. Roku was not the only closely watched IPO this week. Rovio Entertainment, the maker of the popular video game Angry Birds, went public. After a slight pop, shares ended up flat on opening day. At one point, Aaron, Rovio was trading below its IPO price. If Roku left money on the table, did Rovio just do a bad job of pricing their own IPO? It actually seems like they did a decent job of pricing the IPO, because this is

more of what we should be seeing. I mean, I like that we're seeing another gaming company go public, but when you look at it, Rovio is far weaker and far smaller than the other gaming companies that we're used to looking at, Activision, EA, Take-Two. Revenue is growing about 30% year-over-year, the business is profitable. So, it actually is a pretty good business. But in terms of the brands itself, this really is just Angry Birds, 100%. Unless you're into Fruit Nibblers or a couple other games that they have. It's all Angry Birds. Fruit Nibblers! I know, it's your favorite.

What if I told you there was a second Angry Birds movie coming in 2019? Does that get you interested in the stock? I don't know if that in and of itself gets me interested in the stock. I think the fact that they're able to take this gaming franchise and blow it up to a point to where, literally over the last six months, over half of the company's EBITDA came from licensing deals, I think that's really impressive. It's a risk, and I don't know if it makes me super excited because I really want to see them have other brands that pop. Well, we were talking during the break about Angry Birds versus other companies,

and I'm curious, Matty, how you view games versus franchises, because to me, League of Legends is a franchise. Angry Birds, maybe I should be thinking about it as a franchise, But to me, it's a highly successful mobile game. Right. Well, yeah, I think a great video game has several franchises. But hey, there are gaming companies. Rovio's one. I think for a long time, King Digital, Candy Crush was it for them. It was like 95% of revenue and profits. But it can work if you really can blow out the franchise and be successful. But I think down the road, you've got to have a second or third act. Otherwise, it gets really hard.

Alright, just a couple of minutes left. Let's get to the stocks on our radar this week. Aaron Bush, you're up first. What are you looking at? I'm looking at a smallish company called Q2. Right now, most small and medium-sized banks completely lack the skills to create digital platforms, even though their customers, the individuals, and companies are just looking for digital touchpoints for everything. So, Q2 helps these banks solve the problem. They maintain a digital banking platform that they sell to all different banks, make money based on how many people use it, how many services the bank ops into. The company is growing quickly, strong retention, strong upsell potential.

I think there's something interesting here. And the ticker? QTWO, Q2. Jason Moser, what are you looking at? Yeah, one that I initially researched and bought from my real money portfolio that I ran here at The Fool for a number of years, a company called Massimo, ticker M-A-S-I. They are in the business of pulse oximetry, Chris, and that is not the band that just headline at the 930 Club. That is an actual line of work. It focuses on measuring patients' pulse levels and oxygen levels in their blood. They have a nice razor and blade model. Very good job in protecting their technology. Looking at that for the watch list on MDP.

O' Matty, what are you looking at? We talked about the airlines earlier. If you believe this shift is happening, and I think it is, you might want to buy a basket of the airlines, but I'd say the best of the best to me looks like Delta Airlines. D-A-L, solid balance sheet, the less unionized workforce of all the four, good management, returning capital shareholders via dividend buybacks, nine times earnings. If Delta Airlines gets a market multiple, not a high multiple, just a market multiple, it's a double from here. I think that's the case for a lot of the airlines. But Delta looks like the strongest and the safest to me.

As a general rule of thumb, do you think the airlines as a group are cheap right now, despite what Doug Parker at American is saying? I think they're very, very cheap, and that's despite also Berkshire Hathaway and Buffett buying them over a year ago, or about a year ago. All right, Jason Moser, Aaron Bush, Matt Arkansas, thanks for being here. Thanks, Chris. It's been a busy week for Facebook. Up next, bestselling author David Kirkpatrick analyzes how Mark Zuckerberg is handling inquiries about Russia and his own presidential aspirations.

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slash fool. Equal housing lender, licensed in all 50 states, NMLSconsumeraccess.org, number 3030. There's an online world where I am king of a little website dedicated to me with pictures of me and a list of my friends and an unofficial record of the groups that I've met. Welcome back to Motley Fool Money. I'm Chris Hill. The social network is very much in the headlines these days. And here to help us make sense of it all is David Kirkpatrick. He is the founder and CEO of Techonomy, and he's the author of the New York Times bestseller, The Facebook Effect, the inside story of the company that is connecting the world. And he joins me now from New York. David, thank you so much for being here. Good to be here. Facebook is facing, I think it's fair to say, increased scrutiny over election-related Russian ads. And according to reports, at least 3,000 ads were placed on Facebook by a Russian company that was trying to influence the election.

And for months, Mark Zuckerberg denied that Facebook played any role in influencing the election. And now he is singing a new tune. He's turning over records to Congress, announcing changes to the way political ads will be placed on Facebook. What do you think so far of the way that Zuckerberg is handling these accusations? Well, actually, I think he's handling the accusations as well as anybody could. I think he's, in some abstract sense, he's handling it all very well. In fact, his initial denial about the whole thing, his statement that it's a crazy idea that fake news on Facebook could have had any impact on the election, was said to me

on stage at the Techonomy Conference last November, the day after the election. I had the good fortune to be interviewing him on stage right after all of us had received this shocking result. And he was at the time quite completely dismissive. Interestingly, yesterday, he basically said it was a mistake to have said that the day after the election, that he should not have been so dismissive um and obviously there's a problem uh he has been leading up to that sort of thing for some time and you know the fact that the washington post revealed just the other day that president obama took him aside less than two weeks after he said that crazy idea comment and and said to him hey man there's a real problem here and obama was getting these

disinformation from the intelligence agencies, et cetera, that must have really turned Zuckerberg's head in a big way, because who wouldn't have their head turned when the president of the United States says, you don't understand how your own company is working, and democracy, kind of a historic conversation and a very disturbing one for Zuckerberg. And if you look at the chain of events that happened subsequently, you know, that was November, mid-November is when, or a little toward late November is when Obama sensibly had this conversation with Zuckerberg, and I'm sure that's accurate. By February, Zuckerberg had so completely stepped back and rethought what Facebook was

all about that he published a 5,700-word essay on the importance of community in the world and Facebook's centrality to helping the world have more community. And that essay that he published was a historic essay in itself and already was taking some very different points of view than some of the things he had said to me on stage at Techonomy and was already starting to take more responsibility for this idea that Facebook had to sustain and create the capability for healthy community, both at the micro and the macro level in the world. And it's worth anyone who's interested in this to go back and read that very long, but very detailed and highly idealistic document. But in there, he did not specifically

acknowledge that fake news on Facebook had had a problem, you know, in the election, etc. In the meantime, I think between work done by the FBI, the CIA, the NSA, the press, it's become quite clear that there was a real problem. And, you know, now Facebook has not only acknowledged that there were the they did their own forensic investigation and found these 3000 accounts that Russian entities paid over one hundred thousand dollars to use to place advertising on fake news topics around the election. And they've turned over those ads to both Congress and the Mueller investigation. So in that sense, Facebook has directly cooperated into the investigation, into manipulation of the election. And just one final thing. Zuckerberg last week announced a set of concrete steps that Facebook was going to take, not just in the United States, but globally, to attempt to identify and suppress fake news when it emerged in electoral situations. And he said they were going to hire more people, they were going to beef up their algorithmic software approach to detecting and removing these things, and just generally take the whole matter very much more seriously. And, you know, it is a problem globally. It's not just the United States.

And the more we learn every day about the extent of Russian manipulation during the election, the more complex it appears. You know, this is a story that, as we've just been talking about, really started in 2016, has built slowly, and has gathered a lot of steam over the last couple of weeks, to the point where I should probably timestamp this interview that you and I are talking on Thursday afternoon. One of the stories that came out this morning is that some nice people at the United States Senate Intelligence Committee and the House Intelligence Committee would like to talk to not just Facebook, but Google and Twitter as well about the election. I'm glad you mentioned the thing that Zuckerberg said about hiring more people, because over the last 24 hours,

every analyst I've talked to or watched on financial television in reference to this issue has said the same thing, and it goes something like this. To fix this, Facebook is going to have to hire thousands more people. And from an investing standpoint, that is absolutely going to hurt their gross margins. Knowing what you know about Mark Zuckerberg, do you think he is approaching this like, this is an issue we have to fix, the costs be damned? Or does he have one eye on fixing it and one eye on what, to this point, have been some really nice gross margins? Well, they're the best margins of any comparably sized company in history. But I think it's too early to answer that question.

I think, you know, one of the more interesting things and actually a critique that I had about the essay he published about creating, it was called Creating Global Community in February. I think that's what it was called. It was something about global community. One of the real critiques I had about it was that he made all these very, very high-minded statements but did not say anything about what it would cost Facebook to make these changes and whether or not they were willing to sacrifice page views and advertising revenues in order to achieve these idealistic goals. And he has still not directly addressed that, except in the statements he made about hiring more people, beefing up the algorithms, making a more global effort. Clearly, there was cost involved, and there will be extensive cost. I mean, I do think, I'm not an investor in Facebook.

I've always very scrupulously avoided doing that, even though I could have made a lot of money because I've seen this company's prospects for a long time. If I were an investor, I would definitely be asking myself right now, and to be honest, it's not just around electoral interference. Given the scale of the social footprint of Facebook, and also, I would say, Google, and soon we will see Amazon entered into this discussion in various ways. given how almost certainly problematic it is going to be seen by governments all over the world that these companies have acquired so much power and are so susceptible to abuse how much is it going to cost any of these companies and particularly these three amazon facebook and google to take the ongoing remedial efforts that they by definition and necessarily are going to have to take for the foreseeable future and what what is the or just quickly what is the argument that it

might actually increase confidence in the services and therefore cause people to spend more time there and and in the long run increase page views and allow them to make more money or is it necessarily going to involve costs that will cut into the bottom line and cause them to make a lot less money. We don't know, but it's a critical question that investors who have basically bid these companies to the moon on the assumption there is nothing stopping them have never asked before. Do you have a sense of what Zuckerberg's North Star is for dealing with issues like this? Does he have... If North Star does not have to do with profit,

and that's something that you have to be extremely cautious about as an investor, is that Zuckerberg did not do this for the money. If you read his... And this is one reason you really need to read that essay to get a sense of the sheer unadulterated idealism that's at the base of his viewpoint about what he's really doing. um in the end in my opinion he cares more about facebook having a positive impact on the world than on it having a positive impact on the pocketbooks of his shareholders now he would

never say that he would never he would probably eject to that being said luckily he has cheryl Sandberg, whose primary job is to look after the revenues and the profits. But if push comes to shove and it's a choice between one and the other, I have absolutely no doubt that Zuckerberg will choose social responsibility over profit. And I admire him for that, by the way. And I think that's the right approach he should have. And I think it's something we in society should be relieved that he does have because of the sheer social footprint, the scale of the footprint that this company has. But it's a cause for extreme caution on the part of investors who are looking at this from a long-term point of view. He's been doing a bunch of traveling

around the United States, leading some to suggest that he has presidential aspirations. Do you put any credence in those suggestions? I doubt it. I mean, I don't know. I don't think so. My gut is that he doesn't want to be president anytime soon for a lot of reasons. I certainly don't. I can tell you right now, even if he wants to be president, he's not going to run anytime soon. That I can say with certainty. He wants to have a positive influence on the world, But I think he is much more focused and expects to remain focused on how Facebook is the vehicle for that than being distracted by something like political office. Why do you think that is? Well, for one thing, I honestly think Facebook already, running Facebook could be said already to be a more powerful position than being president of the United States.

If you look at it, it's 2 billion members globally, and the fact that it has all the effects we're describing here in literally every free country on the planet, really almost every country on the planet except for North Korea, you know, and few countries like Turkey, Iran, Russia, where it faces various forms of repression. And but, you know, Facebook running Facebook is an extremely gratifying and influential and powerful role to have in the world when it has become the world's leading platform for communication. So don't you know, that's not a minor matter. And in his view, if you don't forget, he also expects Facebook to really head towards all seven billion. and that's his aspiration. He wants it to be a platform for everybody, which is another reason why he knows he has to solve these problems, because if it's seen as detrimental to society, he won't achieve that goal. So I don't think for him, actually, despite what anybody might think, being president is such a big, you know, step up. And I also think that he can't really run

anytime soon, because Facebook has too much power algorithmically over the information flow for citizens in the United States and other countries. And if he were to run, it would put an enormous amount of attention onto this reality that he could almost, in effect, get himself elected. And that would not be Seemly And it would force A lot of regulatory scrutiny That he is desperate to avoid

Facebook I'm hooked On Facebook It's more than I want It's more than I need I'd shrivel up and die Without my many feet Take a look

You're hooked Coming up more with David Kirkpatrick Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill talking with bestselling author David Kirkpatrick. Facebook has this new deal with the NFL where they're going to get access to exclusive highlights. They recently tried to pay $600 million for the rights to stream cricket matches from India, and they lost out to Fox. A couple of weeks ago on the show, we had Andrew Brand from Sports Illustrated, and one of the things he said was that Facebook, Apple, these big tech

companies, they're absolutely going to start bidding on the major sports in the United States in a big way. Do you see this NFL deal right now with Facebook as just sort of the tip of the iceberg? Oh, totally. I mean, Amazon, Apple, Google, Facebook, YouTube as part of Google, possibly even including Snap and others. These are becoming the primary media platforms. They are by far the richest media companies. Therefore, if they were to determine that it really is to their advantage to buy sports rights, they will be able to outbid anyone. I don't think Facebook yet is determined enough. I mean, $600 million was a lot to bid for the cricket rights in, or whatever it was,

was it cricket? Yeah, in India. They could have gone much higher. I mean, it's not, they have a lot of priorities. It's not their only priority or their top priority. And I would actually expect Amazon to get there a lot sooner than Facebook, given the things they've already done in production of television. But these are the companies with the wealth and the aspirations to carry the content that we want to watch, and they will win unless government tells them they can't. All right, last question, then I'll let you go. Aside from Facebook, from your techonomy office in New York, what is going on right now in technology that is of interest to

you personally? It could be a specific company, it could be a specific type of technology, or just some sort of trend. What are you curious about these days? Well, I think the most interesting thing happening, I think there's two things in tech that are most interesting. One is the power of these companies, which we've just been discussing, and how society decides to address that. That is the number one most interesting thing to me right now, especially because I wrote a book about Facebook. But the other thing which actually ends up being related is the influence of artificial intelligence in society and who wins and who loses as it takes over more and more parts of our world. And the related question of

what its impact will be on employment. I happen to think a very interesting piece of that is that there's a very strong case to be made, which the Wall Street Journal argued in a recent major front page piece, and which I've written about in separate places, that it very well may be that as AI gets deployed more and more parts of society, it creates more employment than it destroys, even though something like truck driving might go away as self-driving cars replace it, self-driving trucks. There are so many ways that we're going to be able to do new things that create new value and increase productivity and give people new ways of achieving results we want to achieve to make society healthier, happier, wealthier, etc. But I think there's a very good chance that

the combination of people plus artificial intelligence is going to create a lot of jobs. But the meme that is most prevalent now is that jobs will be primarily destroyed by artificial intelligence. And I find that debate fascinating. You can read more from David Kirkpatrick. You can go to techonomy.com. You can also pick up a copy of his book, The Facebook Effect, the inside story of the company that is connecting the world. David, thank you so much for being here. Thanks so much for having me. Coming up in October, our guests will include bestselling author Derek Thompson and Pulitzer Prize-winning columnist Stephen Perlstein.

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