Designeds a mobile app to share content with friends, but it looks a lot like snapchat messaging. We have the details. First, our top story. Foras bad news, good news tesla after thirdquarter delivery numbers. Cars. Ivered 97,000 elon musk had hiked the idea of reaching 100,000. Tesla shares sank. Analyst looksc ahead to earnings following the delivery numbers. We have them falling short of guidance. Even if you look at the production levels, there was some record production levels, 96,000 some odd units they would need to be a significant increase in that. I think there is hope the shanghai factory will be able to come online, but we remain skeptical. Taylor with more, i want to bring in orton johnson, and also and also iohnson, reporter. We talked about the delivery numbers. Im curious about that composition mix. What do you make of the different models and the price differential . The model three was 82 of deliveries. Three,reat for the model but it is a concern because the margins are lower than on the other models that are higher priced. Gordon, is the biggest concern they are selling more of the cheaper cars, and that is pressuring margins . But the the concern, biggest concern is the street is expecting q3 revenue to grow. Asps areto 2019, down, and they sold more cars. , they onlyath recognize 1 12 of the least revenue in the quarter they sell it, we think revenue will be down yearoveryear. If revenue is down come it could turn into a busted growth story. Taylor how do they boost Revenue Growth . We dont think they do. If you look at european sales, norway, the netherlands, and spain, in the mix of model threes sold, it dropped andificantly from q1 to q3, other models increase significantly. Ofre is a 10,000 discount one model versus the longrange allwheel drive, so you will get negative impact in this quarter as well. This tree is at a 200 million loss. We are coming close to a 400 million loss. While elon musk has everyone focused on production, we think they need to focus on profit. Taylor you heard a lot about that average selling price. From what you hear on the street x the composition of the s an they need to sell that is ever elusive . Tesla has other levers to pad their balance sheet. They make a lot of money selling , but they credits could recognize more credit revenue or regulatory credits in europe. They have deferred revenue from full selfdriving, and how they realize that revenue as they roll out features is something they can pull on going forward. Could argueon, you this company has an expectations problem. I want to pull up a quote from gene munster. I spoke with him yesterday. He said when a company talks about delivering 100,000, you are hoping for 102,000, not 97,000. This is a credibility hit, classic textbook example. Expectations this companys biggest problem . It is not the biggest problem , but it is funny this is the time people are calling for a credibility issue. They said they were going to be profitable every quarter. They have burned close to 1 million. They talk about funding secured, selling hundreds of thousands of cars. The biggest problem is tesla is not making money, and it looks like it will be worse in q3. There are things, levers they can pull, but if you look at the 408 Million Dollar loss in q2 and think about q3 and asps are down 3000, if you assume 200 million in revenues and full selfdriving revenues and give them credit for no restructuring , you still come to a roughly 400 million loss, if you assume asps are down 3000, which is fair from so i think it will be ugly this quarter. Taylor from the demand perspective, how is the u. S. Market . Is it mature . It is hard to say, because the growth of tesla has been viral. A lot of families have more than one tesla. In california, i see more and more model threes. California is just one state, and there are plenty of states with a model three has yet to penetrate. Electric vehicles do well in certain climates and states, but not a 50state market yet. Taylor his demand in europe and china the next leg of growth . That is what people are focusing on. That is what people are focusing on. If you take out the netherlands, where there is an incentive being cut, u. K. Where there is back demand being filled, growth was down in q3. In china, tesla shanghai factory is looking to produce 150,000 model threes out of the gate. 30,000 tochina is 40,000 annually. There is a huge gap, tons of competition. They are not in the top 10. The entry price for the model three in china is 48,000, so there doesnt look like there is any respite nearterm. We think they will have to find significant grip growth somewhere else. Taylor let me push back a little bit. The company said they are entering the Fourth Quarter with the backlog. Does that not show a sign of demand . What tesla has been graded marketinghey started the model three as a 35,000 car, full selfdriving, able to drive coasttocoast in the marg the u. S. , so they built up a big backlog over years, and now that they are unleashing that car into other markets, they are executing on that backlog they built over years. The backlog does not suggest demand. It suggests they are entering markets. Once you go through that backlog, you will have real, organic growth levels. U. S. Q3 sales are down 20 yearoveryear. Ford was up 5 . Gm was up 6 . Fiat was flat. We are seeing the negativity of actual organic demand in q3. Taylor the biggest talking point that you want to get from earnings . We need to know if they will reaffirm fullyear guidance. Taylor lively conversation. Thank you both for joining me. , company out of wework leaders told staffed up cuts are coming. Weworks costcutting efforts would include layoffs. The new coceos stated the cuts will be handled as humanely as possible. We will cover this in detail later this hour. At whyup we look startups and investors are taking a fresh approach to diversity and ethics. This is bloomberg. Startups approach gly inersity is increasin the spotlight. Wework is one example. Joining me to discuss the importance of diversity and formeris ellen pao, the interim ceo of reddit. She will speak at tech crunch disrupt, making the case that an Ethical Company means a better bottom line. Thank you for joining me. I wanted to start with that Corporate Governance problem so much in the example of wework. How do you measure a boards Corporate Governance . Is it that they need a female on board . What does good Corporate Governance look like to you . I think we have strayed. When i was in ball school, we talked about law school, we talked about the people you are supposed to treat as your constituents, not just investors , but employees, the community, the public at large. We have moved from surveying the public and taking care of employees to focus on wealth generation. A lot of that comes from changes that started with google. When they started their corporate formation, the founders had a huge super vote for each share of stock they had that gave him control of a company. I dont know if it still goes on to this day, but they have had super voting control of all sorts of different issues, and that has come down to a lot of startups that have formed since. My understanding is wework had 20 votes per share for the founder and ceo, which made him the ultimate decider of many things. When you have a board that cant really do that much because the founder has so much control, you wonder if that is going to be effective at all. Taylor are the companies doing a good enough job of making on . Ds diverse enough early you cant just do it right before you go public. What is happening five years previously . There is a problem with the board level and executive level. This ongoing problem in tech have few women and people of color, and a tiny amount of women of color, especially from underrepresented groups, and a lot of times boards are formed by investors, Senior Partners and managing partners who sit on the board and make these decisions, and often they are very homogeneous, talking to people who look like him and who dont experience a lot of the things that people from different groups experience. They dont have exposure. They live in a bubble. When you have a board that is very homogeneous, they often miss big things. If you look at companies and their problems, because they dont have other voices, perspectives, dont understand the people who are renting on airbnb might be from different groups and there might be some racism, if you have pictures, and how will we address that . They end up addressing it five years later when they start getting scale and have to rebuild their whole system. Taylor what does an ethical tech Company Look Like to you . It starts from the beginning when you are hiring the first engineers, the first marketing people, when you are building your company. You have to think about, looking for mythe right faces team . , only hiring from my friends, people who look like me, people so findingternity, people from different experiences, people coming from different backgrounds with different perspectives, it is important from the very early days. We have programs to encourage earlystage startups to look at and measure and hold themselves accountable for the diversity on their teams and to make sure they are including those people from different groups in a way that everybody is having a good experience. Taylor what do the numbers show you about the bottom line of companies that have diversity and inclusion, versus those who do not . They have done a lot of work to show that companies with areal and gender diversity 35 more likely to have better financial results, that is a huge percentage. If i am running a company, i would rather have those odds be better by 35 then not, and i dont understand why companies are not reading the research and internalizing it in bringing together more diverse boards and management teams. Taylor you are part of that change. You are an investor yourself. When you look at the companies you are investing in indy vc pipeline, how involved are you in the day today to make sure that is included . For me, it starts at the investment level. I talked to founders about diversity, inclusion, and whether it is a priority come especially if the team does not have much diversity to start in the founder team, and i only work with people who are interested. If they plan to go in the weight we have gone in the last five or six decades emigrate. There decades, great. There are plenty of people who can help you. Taylor we take a look at a lot of the ipos that have gone south this year. What is the pressure to be profitable, especially a start up, these days . With the recent ipos imploding, not being able to get out, or going down a significant amount, people are realizing the markets are not rewarding your are actually, they looking for a longterm strategy and Business Model. And that is driving more investors to look earlier, like we cant just ride out the growth numbers. We need to look at the dollars and the cash flow and the actual profitability, and that is changing how i think i dont see the whole swath of investment, but from my perspective, people are getting more focused on revenue numbers commit the Business Plan for getting the profitability, and how are you going to be a longterm business . Taylor a lot of other concerns have been about valuation, as you look at the landscape, is it overvalued to you . It has been overvalued for a long time. These companies are raising billions and billions of dollars. T is incredibly frothy it has been on this pace of growing valuation for many years , so it doesnt feel like there was a sudden jump. It has been this ongoing climb, and now it has come to the point where it is a bubble going to burst. Taylor Companies Like softbank, big money coming in, have they structurally change the environment, or can you still compete . That is a good question. I invest at the early stage, two founders, or five employees. I think everybody is trying to expand with a cover. People at my level are trying to raise funds so they can invest in the next stage when they see which other earlystage startups are making huge gains and i can double down and put more money in because i was not able to get that much ownership because the valuations are so high. Now you see firm saying you should not work with individual investors, you should only work with firms because they are going earlier and earlier so they can have that birdseye view to what is working sooner and get into them with an advantage because they have the relationships. I think they are still changing. I hope there is still room for people like me, because the firms out there today are homogeneous, and if you dont allow players commend, it will stay that way. Taylor we look forward to your panel tomorrow at techcrunch. That was ellen pao. Andng up, amazon planning 800 Million Data Center in argentina. How they could be reaping big tax benefits from the expansion. That is next. This is bloomberg. Amazons Cloud Division is expanding. Ae Company Plans to build Regional Data Center in a free trade zone in argentina. Amazon is preparing to invest about 800 million in the project over 10 years and will reap considerable tax benefits. Themore, i want to bring in person who covers amazon forest. Why argentina . Amazonsthis will be First Data Center in south america since its first one in now this was1, so in argentina come the second economy in south america, so it is expanding its presence in latin america for the first time in several years. Taylor spencer, when i was in new york, amazon was looking at expanding their second headquarters, and they got a lot of pushback for tax breaks. Is there any risk amazon gets backlash for the amount of tax breaks in argentina . I have not heard much on that. A lot of these are fairly standard for the trade zone down there, so that would be any business operating in this specific trade zone, getting these benefits that the argentine government put in place to try to grow more Tech Companies and entice more Tech Companies and other knowledgebased economy players in that area, so it seems like it is pretty standard. The big benefit is there are breaks on energy use taxes, and because data centers consume so much energy, that will be one thing, but most of the benefits seem to be standard for any business going into those trade free sounds. Taylor you talk about how Companies Want to be close to data centers because they can get the extra high speed that comes with being in the same country. What other Tech Companies outside of amazon could take advantage of this program and are poised to benefit . The Cloud Computing industry is 200 billion globally, growing close to 20 a year, so amazon is racing to Big Data Centers around the globe, as well as microsoft and google, so you have this race to create capacity and create the best User Experience. Its not just the customers physically based in that country that benefit, any Global Platform that is serving its customers through the cloud that has end users in those countries would also benefit, so a platform that serves south american customers through a data center in argentina would have a better User Experience than if those customers in south america had to access the services through data centers in europe or the u. S. , like they do now. Taylor it sounds like this could be the first stop of many for amazon as they look to expand the global cloud center, right . Yeah, there is a big investment in Cloud Computing. They have done in the u. S. Come australia, south africa is on the map, so yes, they are absolutely trying to build capacity as more and more companies see the benefits of having onsite data servers and onsite staff to maintain and manage them to outsource that to someone else and gain all those efficiencies. This is just another indicator that amazon sees their business continue to grow. Taylor thank you for joining me. Quarter, nd one corner, the king of social networks, and then another, they are ready to go headtohead. This is bloomberg. Havewould bet that we will a legal challenge and i would bet that we would win the legal challenge. And it [stammering] suck for us . Ically yeah, i dont want to have a lawsuit against our own government. Taylor lets start broadly here. What are these regulatory hurdles having an impact, if line . N facebooks bottom nine you look at usage, but what is definitely changing is the way facebook is able to take advantage of this demand and its longterm prospects in a way, and its happening because of a few reasons. It does not have an impact on business strategy. Product delays because of regulatory hurdles, and you have lower targeting potential and its impact on the future increasingcosts because of regulatory requirements, so if you look at longterm expectations, they are not getting the credit in terms they can actually diversification of revenues. The strategies they have at hand and regulations are to sort of roll back some of that longterm. Taylor i want to start on the cost side of things. Compliance costs could be millions, billions, you name it. You have any sense of what the actual Compliance Costs are and how that could impact the next 20 months . It has already had an impact on facebook. If you look at margins, they have already declined. The expectation is that the cost will taper going into this year with the election cycle, we dont know if it will hold or not, but the cost structure of doing business in todays environment has changed, and that is not rolling back. What would be more interesting is if you actually look at expectations for growth for this company for the next years. 20 Revenue Growth is what the market is expecting, give or take, barring a recession. If you look at that growth and markethat with end growth, you will notice they are only getting credit for what mobile advertising and things like that are doing. They just have to do slightly marginally good in market share to achieve those numbers. Of theother end spectrum, they have massive potential. If they are able to wreck it never get regulatory hurdles and pick their battles and diversify into that, you