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Q) We want to talk about the significance, when it comes to Silicon Valley, and specifically what happened today with the stock markets. Many people we've spoken with on the street are saying, "Listen, there's so much uncertainty." We know that Wall Street doesn't like uncertainty. We know that this is being driven by fear. How would you categorize the significance in Silicon Valley?
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Moshavi: I think in general, stock market fluctuations are driven by rational and emotional concerns. The rational concerns right now are that companies like Apple have had their supply chains significantly interrupted. A lot of the manufacturing takes place in China, and iPhones and other products. So, when they can't meet the production schedules that they're used to, that's going to affect their profitability.
Q) We want to know how it's going to trickle down and impact the regular person, someone who isn't investing.
Moshavi: The emotional side is very much tied to our own individual wallets. If we feel less wealthy because the market has dropped, we're a little less likely to make that extra purchase, or maybe spend a little more on that dinner we were thinking about. What happens then, is the companies that we are no longer giving our money to are a little less profitable, which makes the stock market nervous. Which makes us feel even less wealthy, and the cycle continues.
Q) Many are panicking, What would be your approach?
Moshavi: Economically, you have to play the long game. In terms of really not trying to market time, but understand that historically, after big market declines the market typically comes back. I think in the short term, people feel less wealthy, and so they are likely to make decisions where they're spending less. I think the challenge is not to get too caught up in these cycles where you basically completely shut down. Having said that, Italy is a great example of an economy that's based on tourism. So, when those tourism dollars stop, there's a significant impact. I think some of the alarms that are being sounded, again, whether they're true or not remains to be seen, are that this could tip certainly some countries into a recession and that there's at least some risk. Economists right now disagree on the degree of that risk, but there's some risk that it could tip us into a global recession.
Q) Some industries are actually benefiting from this. Travel is not, but who's benefiting?
Moshavi: 3M right now, stock went up about a percent today. They make surgical masks. Companies like Zoom, that are in the teleconferencing space. If business travel is down, there are going to be more meetings that need to be conducted via teleconference. There's a company that's actually in the medical teleconferencing business whose stock went up 15% today. There's always somebody in some marketspace that's positioned to economically benefit from these kinds of situations.
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Q) There are people who are alarmed that a crisis in China can impact the U.S. market the way that it has. Is that unique at all?
Moshavi: No, we've been a global economy for a very long time. There's an extraordinary degree of interdependence among companies. You may be an American company officially, or a Japanese company, or a German company, but at the end of the day, you're a global company.
Q) Many people are looking at the downturn and thinking about the 2008 Recession. Is that something we should be gearing up for at this point. I know there are still so many questions.
Moshavi: I think it's way too early to weigh in on that.
Q) We're starting to see more of these coronavirus cases here in the Bay Area, specifically. We know that when it comes to the stock market, we're also talking about Silicon Valley. What is it about the Bay Area that really makes it a hub for all these issues?
Moshavi: It's a huge landing place for international travelers. It's a popular tourism spot, but it's also the gateway to many parts of Asia, in terms of direct flights. So, you're naturally going to have just a lot of both business travel and tourist travel coming through the area. You have companies that are global in their scale that are based here. All these Silicon Valley companies are global companies at the end of the day, with facilities all over the world. So, you put all those pieces together and yeah, the Bay Area is probably as significantly impacted as anywhere else in the country.
Q) Some people we spoke with said this is the time to buy, this is the time to invest. Your reaction?
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Moshavi: There's an old Warren Buffett saying, "When people are fearful, be greedy. When people are greedy, be fearful." And Mr. Buffett has made some pretty good choices, economically in his life. So, that's something to offer.
Q) For people thinking, "What does this mean for me?" Your answer.
Moshavi: I think, even if you don't invest in the stock market, if company profitability is affected, that could potentially affect hiring. It could affect certain jobs in certain sectors. So again, way too early to predict what those would be. But yes, there are absolutely implications, potentially for folks who don't invest in the market.
Q) We're saying it's way too early. When would be the time to sound the alarm?
Moshavi: I don't know. It a fair question to ask, but I don't know.
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