Insider Inc. CEO on what the stock market says about the economy and why we should rethink the way Americans get health insurance
- Insider Inc. cofounder and CEO Henry Blodget says the market is indicating that big investors think the worst is over and things will get incrementally better from here. He says in order to believe that you have to assume the US will really get its act together in terms of testing and contact tracing.
- Blodget says the coronavirus pandemic will speed up the consolidation that was already starting to happen in the digital media industry and the crisis has demonstrated the strength in the subscription model.
- He added that some of the surge in online shopping we are seeing now will stick around after the crisis, and there are some media companies that are very well-positioned for that.
- Blodget hopes the unemployment disaster the country is facing will accelerate the conversation around whether our health insurance should be tied to our employers.
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Henry Blodget is the CEO and editorial director of Insider Inc. Blodget recently launched a beta email publication where he shares insights about the biggest stories of the day. You can sign up to receive regular updates here.
Blodget spoke to editor-at-large Sara Silverstein on Friday about what is happening with stocks and how he expects the digital media industry to change longterm as a result of this crisis. Following is a transcript of the video.
Silverstein: Henry, the markets are closed today, but the first four days of the week have been the strongest week for US stocks since 1974. What is going on with the market?
Henry Blodget: Well first, hello everybody. Thank you very much. Sara, thank you and the team for having me. So basically the conclusion among big investors is the worst is over. It's going to get better from here. The Fed has just pumped four plus trillion dollars of stimulus and emergency packages and everything else in it's only going to be incrementally better news from here. Got to get on board. Off we go.
Is that right? Well, I think to believe that you have to assume that the worst is in fact over, and we're now going to reopen the country, and it's going to go smoothly, and there aren't going to be outbreaks that we suddenly need to clamp back down on, and life is relatively quickly going to return to normal.
I think you have to believe that the United States will really get its act together in terms of testing, in terms of contact tracing, which is going to require tech solutions that are going to freak out a lot of people on the privacy side, so forth. Isolation, where we know what to do with people that have it. We need to be able to do all of these things. Alternatively, we need to come up with some miracle drug that will control this until we get to a vaccine in 12 to 18 months.
And so I would think that it's actually not going to be as smooth as the market is suggesting based on this week. But again, the impression has been, the worst's over, it's going to get better, got to be on board.
Silverstein: And on the tech side, you wrote about this in your email, your new email newsletter. What is the tech solution that you're talking about, and what are the privacy concerns?
Blodget: So there are two main methods for contact tracing. The old fashioned one is you have a group of people who interview anybody who gets sick and they say, "Who did you have contact with in the last week?" Then they go to each one of those people individually and say, "You really should isolate, and by the way, who did you have contact with?" It's very slow, labor intensive. When you have a disease that is spreading rapidly like this, it requires just huge manpower and infrastructure.
Sounds great. I'll tell you based on the feedback that I've heard, and just knowing the concerns around privacy in this country, I think there's going to be a huge backlash against that idea. You have to get people to buy in. Is the government going to force us to do this? Is it a law? If not, it's voluntary. Really? We're all going to do this. We're all going to say, "Please, track me all around, even anonymously.", and by the way, who has access and so forth.
So I just think it's going to be tricky here. This is an advantage that a lot of countries have over us. It turns out that we're not, our system is not so great at controlling pandemics.
Silverstein: And the coronavirus crisis has affected every industry. How are things faring in digital media?
Blodget: I think this is putting a lot of pressure on advertising spending, which is what a lot of digital media has been dependent on.
I think from a high level, the industry has gone through a very common development cycle where 15 years ago nobody really believed in it. You couldn't raise any money. There were very few competitors, and ironically, therefore, there was a lot of opportunity.
Then you had lots and lots of companies make big investments in digital media. A lot of traditional companies decided that digital was the future. They started investing huge amounts of money and about three or four years ago we really reached a point where we had too many companies all competing and that began this big shakeout and consolidation phase.
And what's happening now will very much accelerate that. There are just a lot of companies that are going to come under a lot of pressure, and I think you'll see more consolidation as a result.
Silverstein: Any other longterm impacts you expect to see on media companies because of this crisis?
Blodget: Well, I think we're seeing the strength of the subscription model, and those are doing well, so and advertising does work. It's just that suddenly there's a lot less to go around, so that's why consolidation will make sense.
I think in general we're definitely seeing some changes in consumer behavior that could stick with us. One is just a huge surge in online commerce, which is one of the only sectors that's growing in the economy, for very obvious reasons, but my guess is that that could stick around, not to the extent that we're seeing it today, but could stick around.
People are getting much more comfortable with digital banking and investments. We're certainly, we're seeing a lot of activity there, so I do think some consumer behavior is going to change, and for some media companies, they're very well positioned for that.
Silverstein: And the job market is in a really rough place right now. What long-term changes to the way America works do you anticipate?
Blodget: Well, I think a rough place is a very kind way of putting it. It's just an absolute horrific disaster, 17 million people laid off in the last three weeks, likely to continue for more weeks. It is a Great Depression style, at least temporarily, dislocation, and obviously just incredibly hard for so many people.
I hope that this whole experience will accelerate the conversation around whether we really should have our healthcare and health insurance linked to our employment. This is a historical accident, the system that we have, came out of World War II where there were wage controls. And so companies decided to offer other benefits to boost compensation without raising wages. That's where the insurance came from.
But it's just, the system is so unsuited for something like what we're seeing, a pandemic. And obviously when people lose their jobs, a lot of them lose insurance. The government will step in for a little while, but it's not a longterm solution. So I would hope that this makes people sort of say, "Is there a better way to do this?"
Silverstein: And one thing that you've been thinking about so much over the last few years is better capitalism, where companies are not just responsible to their shareholders, but to the community at large, and their employees. When you think about what's happening now from that aspect, how do we get companies to behave in the best interest of every stakeholder? And will they be rewarded for how they behave in the future?
Blodget: I think this has been a slow shift over the last few years where companies are doing things like raising wages when they don't have to. Five years ago, the idea that we would have a $15.00 minimum wage nationwide was just heresy. It was crazy, ludicrous. Now it's starting to make sense and even the fast-food industry is getting behind it, and saying that's reasonable. And so I think in general companies are starting to behave a little bit better, and we're beginning to realize, "Hey, we are all in this together."
I think right now in the midst of this crisis, you have some companies that can afford to do that, and some of them are doing it. You've seen pledges for no layoffs and so forth. Other companies unfortunately have just been hit so hard, they don't have any choice. Companies aren't, you can't exist without cash. And we've seen a lot of companies revenue drop 95% or more. There's not much you can do at that point. So nobody should begrudge a local restaurant or small organization for having to leave lay off their folks. I mean there's just nothing they can do.
And so I think overall I'm optimistic that this idea that we're all in it together and companies do need to look out for their stakeholders, is gradually taking hold, and hopefully this crisis will help with that. But there are some companies that are just getting so hard hit, they can't do anything, they can't save anybody else if they can't save themselves.
Silverstein: And we have a few people in the audience who want to get your perspective. As an employer in New York City, how long do you think this is going to last before New York City is open for business again?
Blodget: Well, I think, fortunately, we've been very fortunate. We're in a sector of the economy where there's a lot of interest and the team has just done in such an extraordinary job, moving out of our office into 750 offices, and our audience and clients have been helping out. So that's good. And obviously we're all wondering that.
I think if we are now peaking, which it seems like we are in terms of the number of new cases, and cases continue to decline, I think within a month or so there will be tentative next steps. I don't think we're going to be able to suddenly switch and everybody goes back to work. I think there has to be a very careful plan.
We've got to have a lot of surveillance in place, not privacy-intrusive surveillance, but just watching if there are any outbreaks, how to isolate people, and warn their contacts and so forth. But I would hope that within a month we start to be able to take small steps in that direction.
Silverstein: And when you think about the economy at large, how do you think about how the economy relates to the stock market?
Blodget: The stock market usually tends to react in advance of whatever is happening in the economy. The stock market is often wrong. Sometimes it tanks and things are fine, and other times it tanks and it's predicting a big drop in the economy. Certainly, we saw a huge drop a couple of weeks ago in the stock market and that was anticipating what's happening now.
So the market tries to be a forecasting mechanism for the economy, and it's not always right. As whatever the joke is about stock market having forecast nine of the last two recessions, or sort of gets to that, although in this case obviously we're in worse than it a recession. It's just been a calamitous event.
Silverstein: And for people who are really worried about their portfolios, who are checking in every day, what should they be thinking about it? What perspective should they have?
Blodget: I think, the stock market, we've been sort of deceived or sort of lulled into a sense of safety by the last 12 years, or 10 years, where basically every year we went up, there were a couple of drawdowns, but not bad, right back. The market does go through those periods, but it also goes through periods like the one we're having now.
And so I think for most normal people, and that's people who are not trading all day, or trading for entertainment or fun or what have you, but just normal people who are investing for retirement, you really want to take a longterm view, and you really want to do it psychologically by every time you invest think about, "Okay, how am I going to feel if the stock market's suddenly down 50% from there?" And historically, sometimes it's gone more than that. Most of the time less, which is good. But you really have to ask yourself, "Wow am I going to feel?" And if the answer is "I'm going to feel horrible, and I'm going to panic, and I'm going to sell my stocks.", then put less into the market because it's always there as a possibility.
And that said, if you're investing in the long term, over the long term, stocks have returned a lot better than a lot of other assets. So certainly I still have a lot of money in the market for retirement and so forth. Try not to worry about what's happening. It's hard, but the worst thing you can do is get scared out by a really precipitous drop like this. Because then everybody sells at the bottom, and it never quite feels safe getting back in, and then 10 years later you have you're at the top of another bull market, finally you feel reassured, and buy in right at the top. That's what you want to avoid.
Silverstein: And as an employer in New York City, what is keeping you up at night about your business?
Blodget: The first thing is just making sure that we are doing what we can to reduce risk for our team, and we decided to go out early, before the city sort of mandated working remotely. In hindsight, very glad that we did that. Beyond that it's just trying to keep people sane. It's hard to work in your house all day and so forth and try to assure people that we're going to get through this, which we are, and keep our team together.
Again, we're very fortunate that what we produce is very much in demand right now, and it's very helpful. And so that's good. But that's the main thing. And obviously just hoping that we work through this quickly as a country and world, because we are all in it together.
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