Fear, Greed, and Quiet Exuberance

In this podcast, Motley Fool analyst David Meier and host Mary Long discuss:

• What's changed and stayed the same since March 2020.
• If cooling inflation data is enough to calm markets.
• Meta's plan to train an AI chip in-house.

Then, IWG CEO Mark Dixon joins for a conversation about hybrid work, changing downtowns, and how companies can measure the financial benefits of in-person connection.

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A full transcript follows the video.

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This video was recorded on March 12, 2025

Mary Long: Where were you five years ago? Right now, you're listening to Motley Fool Money. I'm Mary Long, joined today by David Meier. David, happy to see you. Good to be here. How are you?

David Meier: I'm good. How are you?

Mary Long: Doing pretty well. I thought we would kick off the show by having a moment of reflection, if you will, because five years ago, yesterday, the World Health Organization declared COVID-19 a pandemic. Five years simultaneously feels like a very long time at a very short time. It's just that has hit me pretty hard because it's pretty wild to think about all the ways that the world has changed since March 2020.

I also think that this anniversary comes at an interesting time because right now is a time when a lot of people are very unsure and very uncertain about the future, not just about the future of the economy, but about the future of the world and so it might be helpful to level set a little bit. Again, use this moment of reflection to think about, yes, not only what has changed in the world over the past five years, but also what has stayed the same. What was true in March 2020 that is also true in March 2025. One thing that comes to my mind is that the stock market was and is reacting to big, scary news. COVID felt unprecedented in 2020. Most of us had never seen or experienced a global pandemic before. For many, this whole year has felt massively unprecedented, as well. As we toil that over in our minds, David, let's turn this back to companies, right?

David Meier: Yes.

Mary Long: My task for you, my ask for you is, what are some companies that back in 2020, got ahead of their skis on valuation and never fully recovered from that slash also what are some companies that have proven themselves to be really solid five year holds that maybe didn't look that way in March of 2020?

David Meier: For the first part of the question, the company that just absolutely stands out in my mind is Zoom Communications. This was the company that essentially saved businesses. Because when offices closed, everyone flocked to their video conferencing technology, and it proved to be amazing. You got to think about this company was significantly smaller at the start of the pandemic and essentially, ramped up its infrastructure as millions, tens of millions of new customers came onto its platform. Yet, I don't know about you, but I remember Zoom being extremely reliable at a time when it was seeing unprecedented volumes of traffic.

That is actually an amazing technological feat. But as soon as the world got connected via Zoom, where was the growth going to come from? If you look at the five-year chart of that company and the ticker symbol is ZM, it ramped up just as it should have, as the company began to grow, and then it's pretty much stalled out from about 2022 to today. We've seen a decline. It can't grow nearly as fast as it was when it was essentially being adopted as a technology. That's one that got ahead of it definitely got ahead of its skis.

But one that's been proven to be extremely reliable over that same five years is ServiceNow, and the ticker symbol is N-O-W. This is a company again, with everyone moving. Businesses were already using ServiceNow to essentially help them manage all of their IT. As more and more people went away from work-bound IT to homebound IT, so we have new devices coming onto various networks. People spread out not just concentrated in an office. They were essentially all over the place. Service now adjusted all of its offerings, was able to attract all new customers. It in the process kept adding to its functionality and the more and more customers that joined decided to stay with the company. It decided to upsell to the next level of service that they offered.

If you look at a five-year stock chart for now, especially relative to Zoom, it's pretty much been steadily up into the right. Which is pretty incredible, considering what happened in 2022 when inflation started to rear its ugly head and interest rates went up. The stock took a hit, but it basically powered on through that. Zoom communications and ServiceNow are the two that I would think are the best examples.

Mary Long: Well, and I think that those it's fitting to use those two examples together. Because they're playing on the same trend, this move to remote work. Yet, Zoom is the one, I'm going to argue that they both follow this Lynchian approach of look around you and it is very obvious Zoom.

David Meier: Totally correct.

Mary Long: Everyone is using it for social reasons. Like as to just talk to friends. I had so many happy hours back then. But one, you have to dig a little bit deeper to find. You have to actually lean on expertise in the industry and go a little bit dive a little deeper than just what is obvious, What's right out there? What is everyone following? Same trend, but very different ways of riding the wave of that trend. We'll bring this today. We've been talking about the past. We've been talking about COVID having shaken the world five years ago. The spot that we're in now in March 2025 is that similarly to how it was moving in March of 2020, the stock market is moving and not in the direction that we often like to see it move in. That is down.

This downward movement is a product of a number of things. One, tariffs. I don't know if you've heard of them. Also some iffy employment data that came out last week. There's recession talk after years of thinking that we've maybe struck a staff landing. There are also worries about potential stagflation. On that last point, we did get some fresh CPI data out this morning that shows inflation cooling slightly last month, which is seemingly good news on the inflation front. The Dow opened a notch higher this morning as a result of that data. David, is the consumer price index the medicine that the market needs right now?

David Meier: All those things that you brought up before your question are spot on. They're all worries that are happening now. The answer to the direct question about CPI and inflation is I can only give it a maybe. It is good that the inflation rate came in a little bit less than was expected. But it's not going down significantly. It's proving to be a little more sticky. Now this is something I actually do follow. Even though I do fundamental analysis of companies, over my career. I've been learned that I probably need to follow the macro situation a little bit more than I should have in the first part of my career, let's say, it's proving to be a little bit more sticky than people have realized.

The idea of stagflation, right, where you have no growth, little growth, or maybe even some declining growth in our economy as measured by the gross domestic product GDP. If you have inflation on top of that, that's bad. That's not good for consumers. We feel terrible when that happens. The thing that can happen is if those inflation worries persist or go up, that actually is a negative feedback because people don't buy as much as they used to, which can actually potentially cause a recession. I'm not projecting there is going to be one, but all those combined together, and then you throw in some other uncertainties. There's something called the misery index, which is a combination of the unemployment rate and the inflation rate. If unemployment goes up at a time when inflation is staying high or maybe even go higher, again, the consumer who drives our gross domestic product feels bad, and when they feel bad, they don't spend as much. So I don't know which direction this is going to break, but clearly, over the past week or so, the markets have been getting a little more worried and prices have been pushing down. We definitely like to see inflation come down at a faster rate than it has.

Mary Long: You talk about the misery index. The stock market is one indicator of investor sentiment and how investors are feeling about what the market might look like in the future. But there are other indicators, too. CNN publishes what's called a fear and greed index. It's a marker that goes 0-100, and it determines or suggests whether the market is feeling extremely greedy, whereas a one indicates that, there's a lot of extreme fear in the market right now.

Yesterday afternoon, I checked that index that fear and greed Index was at a 16. This morning, it had ticked up a little bit, but it was still at 19. Both of those numbers put the fear and greed index staunchly in the extreme fear category. Just this phrasing alone, fear, greed brings to mind, to me, as a certain Warren Buffett quote that I'm sure many of our listeners are familiar with about being greedy when others are fearful, when others are greedy. Does that apply to today, David, or is there an exception here?

David Meier: That is an awesome question. I completely agree with the direction that you pointed out of the CNN fear and greed indicator. I think fear has picked up but if you look at some of the valuation multiples for various parts of the market, they're actually still pretty high. If I look at the magnificent seven stocks, for example, the biggest of the big stocks, their forward PE ratio still trades somewhere around 25. The S&P 500 index trades at around let's call it 21, 22, I haven't checked in a couple of days. Small Caps, which have been lagging behind trade at around 14, 15.

If I use the Magnificent 7 and the S&P 500 forward PE ratios, that doesn't show fear. That still shows a little bit of exuberance. There can be pockets of opportunities in individual stocks, but I would broadly speaking, I would actually push back and say, I don't think this is necessarily the right time to buy the market as a whole, but you can always find opportunities in individual stocks based on their individual price movements.

Mary Long: Then, before we move on to our next topic for the day, with all that in mind that you just said, what are you doing with your portfolio? Has your outlook for the year ahead changed very much since January 1st of the year? Are you making any adjustments that you'd maybe like to share with the listeners of Motley Fool Money?

David Meier: Sure. I will say, actually, yes, my outlook has changed a little bit. Coming out of 2024 and into 2025, I was confident about the economy. I thought, there's a lot of things that were moving in good directions. We've only recently started to see little bits of changes in the data going in the wrong direction, but not severely. From that standpoint I have a little bit more worry about the economy, not a lot, but a little bit more. Should I be worried about stocks? I don't know. It's hard to ignore what's happened over the last week, that's for sure. From a portfolio standpoint, I will say, 2023 and 2024 were years where basically I put my investment portfolio to work and sold lots of things in order to pay for lots of life events, weddings, houses, cars, things like that.

I actually don't have any stocks right now, but I will say this, I am getting more and more interested in the savings that I have begun to re accumulate in putting that to work. I've been touting this for quite a while. I still think there are good opportunities on the small cap side, but if we continue to get these market pullbacks and the S&P 500, especially the largest companies, those are some of the best companies in the world, whether it's NVIDIA or Amazon.com. You name it. Those companies are well run. They serve huge markets. They have amazing competitive advantages, and I would definitely be getting interested as those stocks begin to pull back because why wouldn't I want to own shares of some of the best companies in the world, especially if they're at lower prices.

Mary Long: Speaking of some of the biggest companies in the world, we've got two different chip-related stories coming out today from two different Reuters reports. One of those reports reveals that Meta is testing its first in-house AI training chip. This chip would be designed to train on Meta's proprietary artificial intelligence systems. It would also reduce Meta's dependency on NVIDIA. Meta is allegedly aiming to use its own in house chips by 2026. I want to hit on the competition piece in a second. We are still in the hypothetical realm here, but from the perspective of someone who uses Meta's products, what is the difference between a Meta-trained chip and an NVIDIA-trained one?

David Meier: From the user perspective, none. As someone who interfaces with Facebook or Instagram, you won't feel the difference if Meta decided to use their own chip versus NVIDIA chips to train their AI systems on the data that they have. You just won't. This is it's definitely all about Meta controlling its costs and controlling its infrastructure. What do I mean by that? Meta is a unique company in that they actually own their own data centers. Cost is extremely important to them. If they can design a chip that specifically about training on their data. They can optimize that chip by optimizing that chip, I can get the most performance out of it. I can get the least power consumption out of it because an NVIDIA chip is an amazing chip that can serve a wide variety of customers. Meta make minor. I don't know if Meta needs 50% of its capabilities, 30%, 80%. I just don't know.

But a specific chip designed by Meta to run only for the sole purpose of training its own data on its own hardware, they can get significant cost savings, especially at a time when Nvidia has incredible pricing power. Every other competitor wants their chips. From a user standpoint, we wouldn't feel the difference but from a shareholder standpoint, this could actually reduce their CapEx requirements, could reduce their operating costs, could push their margins higher, could push their ICs higher, which would be good for Meta shareholders.

Mary Long: Controlling costs if you're a company sounds like a very attractive proposition. It seems to me that it is very likely that we'll see even more stories like this moving forward. If you're Nvidia, how do you protect yourself from other companies coming out and building their own thing or training their own thing?

David Meier: A very good question. It is a dilemma for them because the one reaction that they would have is to make sure that their chips basically serve as many customers as possible so that they try to make the switching cost very high. Meaning, Meta don't use don't go to your own chips. Our chip does exactly what you need and can do it well. But the other part of it is can Meta use it as a negotiating tool? Can they say, Hey, if there's a real threat to having Meta or anybody else make a substitute chip, there's probably a price at which they could negotiate with Nvidia to say, if you don't want me to do this, reduce it by 10%, 20%, whatever that percentage is. It can be difficult for Nvidia to deal with these direct threats if they truly come to fruition. But again, the thing to remember is Nvidia is the clear leader here. Their chips are amazing. They're continuing to reinvest all that capital to make them better and better, more power efficient, and they price them according to the demand that's out there, which we know is still there and probably rising. I don't think in the short term Nvidia has to do anything drastic, but I do think it's something that's going to get them to pay attention to the competitive position a little more closely.

Mary Long: We'll close with that other chip related Reuters story. Taiwan Semiconductor has allegedly approached some fellow chip companies, one being Nvidia, also AMD, Broadcom, Qualcomm, about going in on Intel's foundry business together. The property and plant equipment of Intel's foundry business has a book value of $108 billion yet Intel as a whole posted an $18.8 billion net loss in 2024 and its stock price has been halved in the past year. David, what would a joint venture like this mean for Intel?

David Meier: Oh, my gosh. This is also such a good question because Intel has actually had a lot of struggles here. Taiwan Semiconductor has been advancing chip technology at a faster rate than Intel has been able to from a foundry standpoint. Basically, how do I get more transistors on the chip? How do I make them smaller? How do I make them more energy efficient, and how do I manufacture this? This is an extremely difficult manufacturing problem to solve when you're trying to basically optimize variables that don't want to be optimized against each other. What it can do is it can bring in outside capital, outside expertise to try to get the Intel foundry moving back on the technological innovation trajectory that they would like to be on.

But the price would be, you have to give up some control. They won't own the foundry outright because the group of owners, if this comes to fruition would want to share in the spoils. Where Intel does have the advantages, the US government would like to see Intel be a significant piece of this market. If I read correctly, the promises that Taiwan's semiconductor and the group of investors along with them won't own more than 50% of this which seems like a good thing to do. But in order for the Intel foundries to basically get back on the right trajectory in terms of technology, in terms of capacity output, things that the United States really wants from a strategic standpoint to be able to control more of their own chip manufacturing. It probably has to move in this direction. Otherwise, it'll continue to lag behind.

Mary Long: David Meier, always a pleasure to have you on the show. Thanks so much for spending your morning with us to record this segment of Motley Fool Money.

David Meier: Thank you very much for having me, Mary.

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Mary Long: One of the ways that COVID changed the world, offices got a whole lot emptier, but some have been starting to fill back up. Next on the show, I'm joined by Mark Dixon, the CEO of International Workplace Group. IWG likens itself to an Airbnb or Uber for offices. Mark and I talk about the current state of hybrid work, the changing dynamics of cities, and how corporations can measure the financial benefits of in person connection. Today, this idea of hybrid work is pretty common. That's due in large part to COVID and the rise of remote work, but not entirely to that. But you founded Regus, which is now IWG in 1989. Employees are familiar with this shifting role of hybrid work in our lives and in our own experiences. But as an industry insider and somebody who's been in this business for three decades, how has the idea of hybrid work evolved over that pretty long time period?

Mark Dixon: It's not about real estate and it's not about COVID or pandemics, it's all about technology. When I started the business with one center, you had huge mobile phones that you needed were heavy and not very mobile, didn't work very well. You had Tex and you had fax. You didn't have the Internet as such. Now, the world changed with the way technology has just completely changed how people work and how they can work, that is the driver. That is the catalyst for change. As technology develops, it makes companies and people makes it possible to adopt completely new and much more efficient ways of carrying out their duties and being more productive, and that's what we're part of. That's what's driving the evolution and development of the business.

Mary Long: Can you shine a light on what exactly some of those technologies look like? I know IWG is rolling out this increasingly asset light model. You're partnering more with companies that are wanting to utilize office space. Apart from granting access to that office space that different companies might want to utilize, what services whether that's technology or an amenity of some other sort, does a company get through partnering with IWG?

Mark Dixon: Well, again, we're middleman between the property investors and then a huge number of customers, large corporations, and so on. We offer a big range of services here from clearly we do offices, but we also have a huge medium room business. People need to collaborate more, that's become bigger. You can use an office by the day. That's become a huge business, as well. You've got services. All the offices come. They're completely equipped with all the infrastructure that you need to operate your business, all the technology, everything is there, all the furniture, the whole thing. You can just turn up and use it whether that's for one person for one day or 100 people for over 100 days, whatever you want, you can buy it.

We've evolving now to more services. We have a consulting firm as an example, which helps companies make the transition to hybrid work. It's actually an important change for a company. It's not just about space. It's about changing work practice. We have a work-from-home business that does about $400 million of revenue where we're supporting more than a million people that work from home. There's lots of different aspects to what we do.

Mary Long: IWG currently has a market cap of a little shy of $2 billion. But you've called out, again, in these earnings that you just reported earlier this month, that you see a $2 trillion addressable market. Walk us through how you land on that number.

Mark Dixon: Very rough numbers. This is the real estate market, if you like. The whole of the market depends on how you measure it, but between $6-8 trillion. That is all commercial real estate. How you get to two trillion is about a quarter of space will be occupied by hybrid work operations. That is the opportunity. It's about 25% of the workforce, about 1.2 billion workers globally that are office workers, and that is based around about a quarter of those people buying hybrid or support one kind or another.

Mary Long: I want to talk a little bit about culture because I feel as though you all must be uniquely positioned to see how the future of work is changing to see how company cultures are changing and how office or remote, or hybrid landscapes play into that. It's hard for a company that's fully remote to build a culture. It's also hard for a company that's hybrid to build a culture. Are there any examples of client companies that you work with that you think have handled this transition to the hybrid world, especially well when it comes to building culture?

Mark Dixon: I think the impression is that somehow it doesn't build culture. But again, culture is not built through proximity. That's a fallacy. The culture is built through companies focusing on their people and making sure that people are communicated to well and making sure people are clear about their objectives, making sure people are brought together at appropriate times in a curated way so that when they need to meet the idea that somehow you bring people into an office for two days a week or three days a week, and they all meet up that is very unlikely to happen.

Coming back to your question, many companies, not a few, a lot of them especially start-ups, go hybrid only from the beginning, much more flexible, much cheaper, and basically enable them to just hire people anywhere because their biggest problem is hiring people and managing cost. We can see a lot of large corporations that are also embracing hybrid because it's well managed. It saves the money, makes their people more productive, and enables them to hire more and better people. There are thousands and thousands of companies already embracing it, but it's a management change not a property change. Everyone is missing the ball. The ball is about supporting people to be more productive to measure that. It's not about whether it's in an office or at home, or wherever it may be. It's about that and you have to work on culture. We see oftentimes companies save money on real estate, invest more in culture.

Mary Long: Talk to us a bit about how you all think about location. Remote work in any capacity gives people back time that was previously lost to a commute and IWG has said, the reality is that the office is not dead. It's just moved to a more convenient place, closer to where people actually live. Eighty percent of the new locations that you all signed in 2024 were in suburbs or smaller towns rather than in traditional central business districts. I would think though, that it's hard to be an international company and still have a pulse on where in suburban areas or rural areas there's a demand to meet. How do you all approach expanding and access in suburban and more rural locations? What does that research process look like?

Mark Dixon: Computerized, basically. Sure. We use the same software that McDonald's or Burger King would use to assess how our people live in the vicinity. Again, it's a wonderful digital world where all this stuff is available. We know the characteristics of our customers. We check that there's enough demand in the area, and we've been very successful. As you said, we published our results. Our ability to fill up our centers in very rural locations as well as the suburbs has been great. We've done well. We do one building with an owner. We do them more because we're able to create revenue and cash flow for them. It is a technical activity, but it's no different to a fast food chain rolling out their concepts across the country.

Mary Long: Relatedly, I'm curious how different countries are approaching the changing work environment. How does hybrid work look different in the US, which is increasingly a growing market for you? You've just changed your reporting structures that you're reporting in US dollars rather than in pounds. How does the hybrid work environment look different in the US than it does in say, Europe?

Mark Dixon: Well, it's similar. I would say the US has got higher adoption. I think US companies are much more focused on the bottom line. They don't mind kicking tradition out the door and saying, look, what works best, not what people think works best, but what actually will help our bottom line. Number 1, but it's happening everywhere from the most traditional places. That are places like Japan to anywhere in Europe. It happens quicker when public transport is less good. Let's say, places, some cities or countries where the public transport is cheap and very good, commuting is not a problem. It's quite short. Smaller countries places like Copenhagen, Denmark. All the offices are near where people live, so you're always in the city. You can cycle to work. It's a close thing.

But for all the bigger capital cities, it's a problem. The infrastructure is not there, or it's expensive to use and time-consuming. That's what's driving everything. Basically, it's that plus technology and its productivity and the way you can get that very visible for the people that manage people and the companies that pay for it to be able to see, are we being productive or not?

Mary Long: 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. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Motley Fool only picks product, said it would personally recommend two friends like you. For David Meier and Mark Dixon, I'm Mary Long. Thanks for listening Fools. We'll see you tomorrow.

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. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. David Meier has no position in any of the stocks mentioned. Mary Long has positions in Airbnb. The Motley Fool has positions in and recommends Advanced Micro Devices, Airbnb, Amazon, Intel, Meta Platforms, Nvidia, Qualcomm, ServiceNow, Taiwan Semiconductor Manufacturing, Uber Technologies, and Zoom Communications. The Motley Fool recommends Broadcom and International Workplace Group Plc and recommends the following options: short May 2025 $30 calls on Intel. The Motley Fool has a disclosure policy.