In this podcast, Motley Fool analyst David Meier and host Deidre Woollard discuss:

Gary Stevenson, author of The Trading Game, explains what it was like to be one of the world’s top financial traders.

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Deidre Woollard: So many platforms, so little time. Motley Fool Money starts now. Welcome to Motley Fool Money. I’m Deidre Woollard here with Motley Fool analysts David Meier. David, how’re you today?

David Meier: Am doing very well, how are you?

Deidre Woollard: Good. It seems like this is a tech Thursday, a SaaS Thursday. Want to dive in on the companies that are really making the news today, which are Salesforce, Snowflake, and Okta. Let’s start with Salesforce. Dividend, we’re starting to see dividends pop-up. Meta did it, now Salesforce is doing it. Forty cents a share. That’s all right, it’s a start. But to me, I’m looking at this as a signal. How should we be thinking about this? Last quarter we definitely had Salesforce being more cautious, they’re not going off in buying things anymore. Is this company growing up?

David Meier: Definitely. The dividend, if you go back 10 years, there’s no way a dividend was anywhere near anyone’s radar and that’s a function of Marc Benioff quite frankly, being Marc Benioff. He’s a visionary, he’s a technologist. He wanted to put together all these pieces and create a great company, which he did. But I think that where the credit needs to really go is CFO Amy Weaver. In 2021, she became the CFO and she had the unenviable task of trying to rein Marc Benioff in to bring more fiscal discipline to the company. To say, hey, if we’re going to do an acquisition, it really has to meet these certain requirements for not only from a strategic standpoint, but from a fiscal standpoint. With Salesforce generating significantly more profit and cash flow than it ever has before, it’s able to not only invest for growth and do it in a disciplined way, but now being a bigger, more mature company, it can actually fulfill its promises of returning excess capital to shareholders in different ways. We’re seeing it in buybacks, we’re seeing it in dividends. And quite frankly, this is exactly the trajectory the company needs to go on.

Deidre Woollard: Well, good on her for doing what a couple of co-CEOs were not able to do. I wanted to talk just as quick sec about that buyback because sales stock-based comp always been an issue with Salesforce. They’re going after it, $10 billion buyback program. They bought back about 7.7 billion last year. It’s going in the right direction.

David Meier: Again, this is a complete change in the way the company operates. Look, stock-based compensation for a company like Salesforce is going to continue to be an important part of attracting and keeping the talent that they need in order to take the company in the direction they want to go. Again, it’s good that they have this excess cashflow where at a minimum they can offset the dilution and hopefully they’re making opportunistic purchases with that capital at times when the stock price looks attractive.

Deidre Woollard: And it’s interesting because they bought a lot of things and now they’ve been trying to figure out how to knit them all together. So looking at that, it’s not just a maturing company, it’s still looking for growth. The big swing that Benioff spent so much time talking about on the earnings call was the Einstein platform. Sees it as this AI ecosystem. Platform keeps coming up in the conversations that you and I are having. We talked about it with Palo Alto Networks. We’re going to talk about it a lot today. So is this a true Platform? Because I worry that people are using the word Platform and maybe as a catch-all, that’s not necessarily a Platform. Benioff talked about islands of trap data. I’m not quite sure what that means, but maybe you can explain.

David Meier: Yes. Like we did with Palo Alto, let’s step back and think about where Salesforce came from real quickly. So again, Salesforce, it’s in the ticker, CRM, Customer Resource Management. That was what they were focused on helping salespeople become more effective by giving them tools to figure out how to manage all of their contacts to land new customers and talk to prospects, et cetera. But we’ve added, you got sales, you got the CRM component, you have marketing component, you have Slack, you have productivity component, you have all these different components. And what they want to do is to, again, bring them together and say, hey, if you want your business to run efficiently and effectively on the customer-facing side of things, come to us. That is now the Platform. It’s not just CRM. It’s how do I do all of that well? And the thing that they want to stitch it together is Einstein, which is the AI machine learning, all the analytics that can basically say, hey, you’re doing all these things from a sales perspective, from a marketing perspective, communications perspective, what can we learn from all that data that we’re creating?

So becoming even more of a platform is what they are doing and it is the right thing for them to do. So let’s talk about these islands of trap data. So essentially, there are many ways in which many places where businesses store data. It doesn’t all just go to Salesforce. There’s so many different areas that where data can be. And the idea is for AI to work efficiently and effectively, we would like all the data to be in one place. So it makes the computations more efficient. If I can bring in more diverse groups of data, let’s say sales data, marketing data, operations data, things like that, maybe I’ll get a better insight. So what they are trying to do is a very worthwhile problem to go find a solution for. And they believe that their platform, although services they have as well as the Data Cloud says, hey, if you want, you can bring all of your data to Salesforce and that will actually make the job easier. Those are all going in the right direction as long as we assume that AI is going to continue to be an important part of it. I think that’s true. So I like all the things they are communicating about Einstein Data Cloud, the Platform, et cetera.

Deidre Woollard: I like the vision. I think there is something that so many companies are wrestling with is that they’re generating more data than ever. Generative AI is pushing out more data. Everybody’s got too much data. A few years ago there was the whole data is the new oil thing. We don’t know what to do with the oil. So what I’m curious about is how does it play into the sales? Because you’re selling the CRM, you’re selling Slack and other things. How does Einstein factor into the future?

David Meier: So an excellent question. Early on when they were first borough rolled out Einstein, again, it was a way to basically get more out of the tools that you were already using. And I don’t know the specific pricing structures, but maybe you paid a little bit more for your CRM and you got Einstein on top of it. Maybe you didn’t sell Einstein directly early on. You just had to pay to unlock it, let’s say. But now if you take this different approach, it’s not necessarily the software underneath the CRM, the marketing, et cetera. That’s important, but if I can get customers to essentially aid for the value add as opposed to just access that’s a different way of selling things and a different way of pricing things. So I don’t think they’ve quite figured out how all their business processes to basically put Einstein front and center, how to use this incentivize the Salesforce? How do I make sure that all my billing software can handle these things? I think they’re working on that. That’s the way I would say, hey, maybe Einstein is not factored into the guidance yet. I think they’re still trying to figure out how they’re going to do it. And if I had to really guess, I would say maybe that might be a little upside surprise either later in fiscal 25 or into fiscal 26.

Deidre Woollard: Well, let’s move on to the big wow moment after market close yesterday, which is that Frank Slootman, CEO of Snowflake he’s retiring. He’s not leaving the company. He’s going to stay on as the Board chair. But this really shocked people. You’ve got Sridhar Ramaswamy, he was the Senior President of AI. Spend with the company a couple of years, came in through an acquisition. This feels like a signal that AI is running the show, but the market cap pretty riled up by this one.

David Meier: Again, we talked about it with Salesforce. There’s no question that AI is front and center and that a lot of what Snowflake is trying to do is basically be an enabler of AI for businesses all over the world. But I don’t think Sridhar became president just because of what he’s done in the AI segment. We have to remember he actually came from Google [Alphabet’s], where he spent many years in both commercial leadership roles as well as engineering leadership roles. Snowflake is a complicated technical company. Not only do you need someone who understands the changing commercial landscape, but you also need someone who understands the changing technological landscape. I believe that’s the big reason why Sridhar was promoted. He has all the chops and it’s going to be a big challenge going forward. This stuff’s going to only get more and more complicated. Having somebody with his background as well as his ability, given he was an entrepreneur to have a vision as well. I think those are the qualities they were looking for in a CEO to take Snowflake to the next level, so to speak.

Deidre Woollard: Well, one of the things I’ve heard people talk about is that Slootman more of a sales guy, Ramaswamy, more of a technologist as you put it. But this is a company that seems to be in an interesting spot. Growth is still strong but slowing a little bit. They talked about changing the forecast process to be more receptive to current trends. That seems like some double speak for things aren’t going to get better. What’s happening with this?

David Meier: That’s a whole lot of words [laughs] Here’s my interpretation, and we’re seeing this across a number of larger SaaS oriented companies. This idea that customers are still optimizing their spending. What that’s meaning is, we know the things that we want to do from the technological standpoint are important and we customers are willing to make these investments. But how do we ensure that we get the right return on the investment? How do we make sure that our spending levels don’t get out of control? What I think that word solid is trying to say is they don’t have enough evidence to say, customer buying behavior has flipped back to a times when they were more willing to spend. As a result, it’s you’re not confident that that’s happening. You can’t really put that in your guidance. To show that the demand levels are changing, the buying habits are changing, and as a result, we’re going to resume faster growth. That’s what I think that means. Growth is expected to slow on a quarterly basis for Snowflake across calendar year 2024. I think that statement basically was necessary as a justification about why that’s going to happen.

Deidre Woollard: Well, I think we’re hearing a different type of reasoning for this slowdown than we were a couple of quarters ago. Because we were hearing before, the sales cycle is slow, this is what we’re experiencing. Now, I feel like with Snowflake and with Okta too. I’m hearing more about the customer base isn’t going to grow dramatically, but we’re going make more products. We’re going to get more out of each customer. On the Okta call, they talked about this, the hunter and farmer models. Hunter goes out, gets new clients, farmer basically gets more out of the land. Is this a theme we’re seeing? Is this a next trend of what we’re possibly going to see from some of the SaaS companies?

David Meier: It’s very interesting from an Okta standpoint that that’s what they brought out in their call because this model has actually, is already being used by lots and lots of different SaaS companies.

Deidre Woollard: Yes.

David Meier: The reason is just as you said, once you get through that big push of adoption and you become a mainstream product, customers are going to come in. Yes, we want it. But investing in sales and marketing that gets your customers to buy more is potentially a way to get more return on those dollars. Good companies have figured out how to do both. It’s good that both of these companies have recognized it. Okta brought it to the conference call with some fanfare. But as a SaaS company, you needed to be doing this a couple of years ago. Let’s put it that way. This should have been your model from Day 1.

Deidre Woollard: It seems like the platform amortization is part of a way to bundle that up as a sales tool, but also as a framework.

David Meier: A 100%. Because if you can figure out, let’s say a customer has a need for one product, you can get them in the door that way. But once you learn more about that customer, once you develop a relationship with them, once you’ve figured out more about what their needs are. That’s the perfect opportunity to say, hey, by the way, we also have product X and product Y, and product Z and we can bundle them together and you can get them on our platform. It’s seamless in terms of since we’re a SaaS company, we can flip a switch and you can get access. That’s spot on

Deidre Woollard: We talked about a lot of stocks on the show, but it’s just a peak. The Motley Fool’s investing universe. This year we’re rolling out a new offering. It’s called Epic Bundle. The service includes seven stock recommendations every month, model portfolios and stock rankings. All based on your investor type. We’re offering Epic Bundled Motley Fool Money listeners at a reduced rate, as a thanks for listening to the show. For more information, head to We’ll also include a link in the show notes for you. We’ve got another perspective from an author who broke away from the world of high finance. I caught up with Gary Stevenson, author of the trading game about his time at Citibank and the disconnect between traders and the real economic world.

Deidre Woollard: I want to get a little bit into your story because there are these moments in the story where you’re trading and there’s that tension. You had a few like I’d call them stomach flip over our moments. One from me is when you realized these fresheners no banks offering -4.5% interest on three-month swaps. There’s just a moment where I think people who have less tolerance for risk might’ve pulled out their money. You went the opposite way. It reminds me of this, there’s a saying from the Economist Keynes about the market can stay irrational longer than you can stay solvent. Tell us a little bit about what happened there.

Gary Stevenson: Yes, it’s a very big learning experience. That was my second full-year trading. I started working as a short-term registrar in 2008, which is obviously the Lima crisis. It became enormously profitable business because we were making short-term loans of dollars, everybody needed dollars. Basically, we could borrow them from the Central Bank at zero and lend them out at 2%. It was a lot of easy money, basically. When you do it in the ethics swap, you have to lend one currency and borrow another currency. At that time I was a Swiss franc trader, I was lending dollars and borrowing Swiss francs. It was an easy ride, to be honest, everybody was making a lot of money. I made a lot of money in my first year when I was extremely young, didn’t know what I was doing and I was just copying everybody really lending dollars, borrowing but unlike experts Swiss francs, every trader has their own currency. Then suddenly one day I have nowhere. I refresh my P&L, it’s my PNS profit and loss for those who don’t know, and it shows down half $1 million and I’m thinking what’s going on here? I’m trying to look for the reason. I just wanted to brokers and the brokers says Swiss National Bank has put something up on their website. I look on the website and the Swiss National Bank is offering this unbelievably cheap foreign exchange swap, where they essentially lend out Swiss francs for -4.5%, which is, I don’t need to tell you, an extremely negative rate. The Swiss franc position was an incidental part of my dollar position. I had an FX swap, I was lending dollars. You have to borrow Swiss francs against it, that’s the way the FX swap works. Suddenly I was just getting absolutely hammered.

Then I lost something like $1 million that first day basically. I described it to you before when you trade interest rates is realizable. You do the trade now, you wait a year and you see, was I right or not? Then immediately, instinctively, again we discussed in the book whether this is real, whether it was an emotional reaction. I thought -4.5% is an impossibly low interest rate. You simply cannot keep rates at -4.5%. If you charge the banking system -4.5%, they’ll start trying to charge that to their customers, their customers will take the money out of the bank because you can get 0% with your money under your pillow. I just thought it’s wrong, it’s never going to stay at 4.5%. In the first couple of days, I lost a couple of million dollars and instead of stepping out, I stepped in and backed it up. It turns out I was right. In the long run, those interest rates were not sustainable and they came all the way back relatively quickly. But because I was stepping into the position quite aggressively despite losing money, I managed to lose $8 million P&L within a week, which is an enormous amount. At the time, that was only 2010 so I would’ve been 23 still.

It was enormous amount of money for me to lose and I eventually ended up getting stocked up by my management. I went from up $4 million for the year to down $4 million for the year, and then obviously I had to watch the trade come all the way back. Anyone who has been trading for long time will know this. It’s not enough to just be right. You need to be able to survive. You need to be there by the time you’re actually right. Sometimes being right is the easier part of the trade. Sometimes the tricky part is knowing how much to do. Especially if you’re basically certain you’re right because if you’re certain you’re right, you want to do everything. But if you do everything, then even if it goes against you for a month or maybe even a week, if it’s a big move, you’ll get stocked up and it doesn’t matter whether you’re right. I think that’s described in the book as, basically two rules for life, be right in the end, be alive at the end. It’s super-important. I tried to stand up to the Swiss National Bank.

Deidre Woollard: One of the things I found interesting in the book that I feel like sometimes people who come in from the outside, like you did, they’re often able to see beyond the status quo. One of the things in the book, it’s this juxtaposition of institutional and university knowledge and economic theory versus the ability to rest, go the opposite way, follow your gut, which it seems like it’s an advantage when the economy doesn’t perform the way that everybody expects it will. During the time period where you just keep betting on interest rates staying suppressed. You were very young. Was your youth, your outsider’s data an advantage at that point?

Gary Stevenson: It definitely was in the end because I think one of the beautiful things about trading is there’s not many spaces in this world that rewards you for turning around to all of the people around and saying, you guys, you’re all wrong. Human societies are not generally built to reward those people. If you turn around and said to everybody around you, you’re all wrong, then you’ll become quite unpopular very quickly and I think this causes problems of intellectual groupthink. It causes problems in politics, it causes the problems in academia, it cause problems in economics because we as humans don’t like it when we’re called wrong. We tend to punish people who say we’re all wrong. We can end up with situations like where we are now, where the economy just gets worse year after year and the economists are wrong year after year and nobody can basically call them out. I tried to be in academia and it’s basically impossible to challenge these people. Whereas in trading, if everyone around you is wrong and you notice it, you are going to make an absolute fortune. It’s music to my ears as a trader, when everybody around me says, no Gary, you’re wrong because I know everybody thinks I’m wrong. I’m going to make an absolute fortune.

I think this is where we talk about class a lot in the book. Here in London, there’s a stereotype of the cockneywide boy market boy trader. This artful dodger-type character because back in the ’80s and ’90s, the financial areas in the east of London, which is where these people used to live. And in the ’80s and ’90s, there are a lot of these people going into trading. In the early 2000s, things massively changed. By now, basically, unless you are from a very rich family and went to elite schools, it’s almost impossible to get in there. Once you’re in there, there is actually a massive sameness about these people. They might have come from the same countries, very international, but they will come from rich families, elite schools, elite universities, elite jobs, and they basically don’t know anyone who is poor. This guy’s job is economic analysis. How much can you realistically know about the economy if you don’t know a single person in an average financial situation? This is a situation, both in the universities and in most of politics, and in the trading floor. After 2008, markets predicted that interest rates would go up in 2009 and they didn’t, and then in 2010, and they didn’t, and then ’11, and then ’12, and then ’13, and then ’14. Every year, these guys predicted essentially an economic recovery. After two-and-a-half years of this, you start thinking, these guys are just clueless, they’re just wrong. But the big advantage I had, is I could go out and ask people. I studied economics at their own School of Economics. I know the theory. The theory is basically low interest rates are supposed to get you spending.

Go out at the time when rates are very low, you go out and ask people why don’t you spend everyone will say exactly the same thing. We don’t have any money. Then you sit there, pondering this idea, we know that hundreds of billions are being poured in and nobody’s got any money. I was bouncing this around in my head and I was trying to work out, where is this money going? Then one day you look around and you realize, everyone in this room is a multimillionaire. [laughs] You know where the money is going and it’s not going to get to ordinary people. I think that was the penny drop moment for me and I realized what we have is a fundamental crisis of inequality. Nobody’s seriously talking about fixing that. Everybody wants growth and productivity. The problem is inequality. Nobody’s fixing that. I realized this is not a recession. This is not one one-week year, there’s not two-week years. This is a downhill slope all the way to hell and I started betting on that and by the end of the year, I was Citibank’s most profitable trader in the world. You said when you went above that?

Deidre Woollard: Well, that’s the turning point in the book is you’re trading all the time. You’re betting on this situation. As you said, one of the top traders in the world. These are just massive numbers shifting back and forth on your profit and loss sheet. At that point were you still aware of the numbers, the money behind it, or did it just become pure numbers for you?

Gary Stevenson: This is the thing about games. We’ve spoken about the positive side of the games and I love games. I still love games now. Game theory was my big subject at university and I still play games when I have a little bit of time and I want to zone out. Games are very engrossing and they can suck you in and they can become addicted. The big game that we play, all of us in this world is the game of money. We’re all trying to make money. I’ve got a YouTube channel and I’ll put videos every week saying, listen, if we don’t deal with this growing inequality, our society will collapse and your kids will be heartbreakingly poor. The number 1 most common message I get sent on that channel is Gary, how do I make money? This is the dark side of games. I’ve put us through the epigraph, the quote in the beginning of the book of quote from my friend’s Grandad, he used to wander around his house when we were kids, he was Indian and he didn’t speak much English. He used to just say, life is life, game is a game. We never really understood what he meant. But I think I’ve come to understand. I think what it means is, if you focus too much on the game, then you can easily forget about what’s important. The book, I think, has that comment about society but it absolutely definitely has that comment about me, and you’ve read the book.

There is without a doubt, I became so engrossed with this game and so obsessed with this game, and I was very good at the game but it absolutely consumed me and overwhelmed me and it just became everything that I did. Games are great [laughs] but if you lean too much into them, that is obviously a downside as well.

Deidre Woollard: As always, people on the program may have interest in the stocks they talk about. The Motley Fool may have formal recommendations for or against, sod don’t buy yourselves stocks based solely on what you hear. I’m Deidre Woollard. Thanks for listening. We’ll see you tomorrow.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. David Meier has no position in any of the stocks mentioned. Deidre Woollard has positions in Alphabet and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, Okta, Palo Alto Networks, Salesforce, and Snowflake. The Motley Fool has a disclosure policy.

Growth for Salesforce, Snowflake, and Okta was originally published by The Motley Fool

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