Speaker 1: This is Bloomberg Business Week Daily, reporting from the magazine
Speaker 1: that helps global leaders stay ahead with insight on the people, companies,
Speaker 1: and trends shaping today's complex economy. Plus global business, finance
Speaker 1: and tech news as it happens. Bloomberg Business Week Daily
Speaker 1: with Carol Masser and Tim Stenebek on Bloomberg Radio.
Speaker 2: Hi, everyone, welcome to the weekend edition of Bloomberg Business Week. Yeah,
Speaker 2: a lot coming out investors in a holiday shortened trading week,
Speaker 2: no trading, just a reminder in the US on Thursday
Speaker 2: because of the Juneteenth holiday.
Speaker 3: Still a log coming at US again, including the escalating
Speaker 3: conflict between Israel Andy Ron, the fourth FED decision of
Speaker 3: the year, and a G seven meeting of global leaders.
Speaker 2: Yeah, that is our macro. Our guest this week, the
Speaker 2: CEO of the publicly held connect One Bancorp, on the
Speaker 2: FED business environment and consumer credit.
Speaker 3: Speaking of consumers, Dana Telsey knows retail like no other,
Speaker 3: so we're concerned about this week's retail sales data that
Speaker 3: dropped for a second month and was the largest decline
Speaker 3: since the start of the year. It's a question we'll
Speaker 3: post to her.
Speaker 2: We do, indeed, and we've got a global view on
Speaker 2: tariffs and trade and President Trump with the head of
Speaker 2: Ireland's foreign Direct Investment Agency. That's one reaction. We get
Speaker 2: another reaction from the CEO of Synergy Maritime and United Maritime,
Speaker 2: and then in our next hour the CEO of Axiom
Speaker 2: Space on building Era defining space infrastructure and oh wine
Speaker 2: from Uruguay.
Speaker 4: It's really good.
Speaker 3: And Carol knows it's really good because she tried it.
Speaker 1: I did.
Speaker 3: Okay, all that to come, we begin with a read
Speaker 3: on the US economy banking, especially regional banking. Just before
Speaker 3: this week's FED decision, we caught up with Frank Sorrentino,
Speaker 3: chairman and CEO at the publicly held New Jersey based
Speaker 3: community bank Connect one Bank Corp. Which is the parent
Speaker 3: company of Connect One Bank.
Speaker 4: That's right.
Speaker 2: Connect One Bank counts small businesses and construction companies among
Speaker 2: its customers. The bank recently merged with First of Long
Speaker 2: Island Corp, which brings its total assets to about fourteen
Speaker 2: billion dollars. CEO Frank Sorenttino kicked off our conversation about
Speaker 2: why he's optimistic, still optimistic about this US economy.
Speaker 5: Yeah, it's interesting, you know, if you go back a
Speaker 5: couple of months the Liberation Day, and you took a
Speaker 5: nap on that day and woke up today, you'd say, well,
Speaker 5: I don't know, things don't look too bad. Other than
Speaker 5: what's going on overseas, the market is pretty much rebounded
Speaker 5: or recovered most of the ground. You know, people feel
Speaker 5: the economy is on more sturdy ground today than they
Speaker 5: thought in those weeks after that news. But the economy
Speaker 5: still is quite robust in the markets that we served,
Speaker 5: as you know, Connect one is in the New York
Speaker 5: metro market in New Jersey, New York now Long Island
Speaker 5: in a pretty big way, and the vast majority over
Speaker 5: the client base that we have is still seeing strong
Speaker 5: demand for products and services, a lot of service oriented businesses.
Speaker 5: There's still an enormous amount of demand for housing, for apartments,
Speaker 5: for all types of construction, warehousing, uh, even office, which has,
Speaker 5: as you know, been you know, the subject of you know,
Speaker 5: a lot of conversation over the last two two or
Speaker 5: three years or so, has is seeing a tremendous rebound
Speaker 5: As we're moving, you know, through this period of time.
Speaker 3: I'm getting to a few questions from loyal listener Ryan
Speaker 3: Horan reaching out over the instant Bloomberg. He's glad we're
Speaker 3: talking to you because a great check of small business
Speaker 3: and the consumer. He's curious about any worrying trends or
Speaker 3: any pullback in underwriting that you're seeing. Are you adding
Speaker 3: to reserves to shield any non performing loans?
Speaker 5: You know, most banks are reporting that they're seeing a
Speaker 5: fairly benign credit perspective out there. I know there was
Speaker 5: a lot of tariff talk UH sixty days or so ago,
Speaker 5: and a lot of investors were very concerned about how
Speaker 5: tariffs may impact bank earnings, you know, through the through
Speaker 5: the credit cycle, through any sort of credit cycle that's
Speaker 5: really quite diminished these you know, recently in the past
Speaker 5: few days or weeks UH, and banks are still reporting
Speaker 5: a fairly benign credit period. There are certainly one offs,
Speaker 5: as we would always expect there to be, and there's
Speaker 5: appropriate reserving going on at most banks, But there's nothing
Speaker 5: systematic that's out there that where banks are feeling that
Speaker 5: there are particular segments of the market that are showing
Speaker 5: more signs of weakness than than normal.
Speaker 4: Why is that?
Speaker 5: When we start I always start with we have a
Speaker 5: four percent unemployment rate. Everyone has a job, and anyone
Speaker 5: who's looking for a job can get a job, and
Speaker 5: so things are good. People are getting raised, There's, you know,
Speaker 5: plenty of opportunity in the market. There's been an enormous
Speaker 5: amount of liquidity put in the market over the last
Speaker 5: dozen years or so. That is just driving our economy
Speaker 5: to all time highs. The market is reacting to that.
Speaker 5: You can't buy a car, you people are waiting in
Speaker 5: line for homes and apartments. Luxury goods are on fire.
Speaker 5: You go to the airport, you can't get on a plane.
Speaker 5: It's the economy. I keep saying the economy is robust,
Speaker 5: and everyone keeps challenging me why I use that word. Well,
Speaker 5: it just is. And so all of these things are
Speaker 5: driving GDP is growing it over three three and a
Speaker 5: half percent. That's what's driving. What's going on, notwithstanding all
Speaker 5: the news that you're hearing about, you know a lot
Speaker 5: of global issues and other you know political you know
Speaker 5: craziness that's going on in the marketplace.
Speaker 2: Well, what do you make you know, we talked the
Speaker 2: retail sector earlier with Dana Telsey, and we talked about
Speaker 2: everyone trading down. So you're seeing discount retail doing better
Speaker 2: than most airlines pulling guidance. It feels like there's stuff brewing,
Speaker 2: and I think it's safe to say that employers are
Speaker 2: really gun shy about letting go of workers. There is
Speaker 2: some labor hoarding going on because they remember all too well, Frank,
Speaker 2: what happened after COVID and nobody could find workers, right.
Speaker 4: So I just you know, I just wonder if you've
Speaker 4: seen a lot of economies.
Speaker 2: I know I ask you this all the time, but
Speaker 2: I just do wonder, are you hearing anything autecnotally where
Speaker 2: people are like, we're a little nervous and you know,
Speaker 2: these tariffs are more onerous or yeah.
Speaker 5: Yeah, I think we are seeing consumers being a bit
Speaker 5: more price sensitive, and I think they are, you know,
Speaker 5: maybe not spending as lavishly as they might have in
Speaker 5: the past, and they got a little shook up with
Speaker 5: the tariffs, and they're looking at some specific products that
Speaker 5: you know, may have changed in price. There's been some
Speaker 5: hoarding going on that I do think impacted some of
Speaker 5: that consumer spending. I know for a fact that's impacted
Speaker 5: you know, building supplies and building goods. You know, people
Speaker 5: front loaded buying things and anticipation of the tariffs. So
Speaker 5: there's a lot of turbulence going on in the marketplace today.
Speaker 5: My read, however, is though if you strip out you know,
Speaker 5: some of the you know, gas and tariff related items
Speaker 5: out of the consumer spending, you'll actually see numbers were
Speaker 5: actually up a bit, not down. And even what they're
Speaker 5: reporting that that you know, the consumer spending was down
Speaker 5: a bit, it's down less than one percent or point
Speaker 5: something percent, So it's not a it's not a sea
Speaker 5: change that's going on. There is you know, some volatility here,
Speaker 5: but overall, I still see I don't I do not
Speaker 5: see a recession, and I still see a fairly robust
Speaker 5: economy ahead, you.
Speaker 3: Know, I I we're talking to you on Tuesday, June seventeenth,
Speaker 3: the day before we hear from Fed Shair J.
Speaker 6: Powell.
Speaker 3: We don't know what he's going to say say. I
Speaker 3: think I know what he's gonna say to some question
Speaker 3: when he answered some questions specifically about politics and his
Speaker 3: own future, because he said those same answers for months.
Speaker 3: But Frank, I'm curious what you see of the as
Speaker 3: the path of the Federal Reserve for the remainder of
Speaker 3: the year. Give us your dot plot.
Speaker 5: Well, based on what I just said to you if that,
Speaker 5: if that in fact is what's going on in the economy,
Speaker 5: then the expectation has to be that the FED does
Speaker 5: not lower rates because the economy is still quite strong,
Speaker 5: and so my belief would be that you'll see a
Speaker 5: You will definitely see some commentary about the uncertainty that
Speaker 5: lies in the marketplace as we move forward. There are
Speaker 5: lots of things to be uncertain about. You know, tariff's
Speaker 5: being won, the war in the Middle East, the war
Speaker 5: in Ukraine, and how those things are impacting you know,
Speaker 5: gasoline prices, which happened to be down, but you know,
Speaker 5: could rise dramatically depending on where things go. So there's
Speaker 5: going to be a lot of things that are inputs
Speaker 5: that the FED will be looking at that will determine
Speaker 5: what's going to happen in the future, and they may
Speaker 5: give some guidance about what they think those things would
Speaker 5: be going forward. The market expects the FED to cut
Speaker 5: at least one, if not two times this year. I
Speaker 5: believe it'll be closer to one, and be careful what
Speaker 5: you wish for. I do believe that again, this economy
Speaker 5: will continue to roll on and the FED is going
Speaker 5: to have a tough time to lower interest rates as
Speaker 5: we move through the cycle, Frank, I.
Speaker 4: Do wonder too.
Speaker 2: You know, this was an interesting past earning cycle where
Speaker 2: we actually did have folks give you two scenarios like,
Speaker 2: if everything's good, here's what our numbers will be. If
Speaker 2: they're not, here's you know where they will be, and
Speaker 2: quite arrange. And I'm not saying everybody did that, but
Speaker 2: it was just for those of us who have covered
Speaker 2: publicly held companies for a long time and earned the
Speaker 2: earning season. I don't remember people doing that. I've seen
Speaker 2: people pulling guidance a lot, but not giving scenarios. How
Speaker 2: many heurius about the conversation do you have with your team?
Speaker 2: Do you talk about a lot of different scenarios in
Speaker 2: this environment because it could go a lot of different ways,
Speaker 2: or no, you feel much more confident to say this
Speaker 2: is probably the course, and here's why we.
Speaker 4: Can make decisions based on this course.
Speaker 5: We definitely have those discussions. We're definitely keeping our ear
Speaker 5: close to what's happening. And the thing that I constantly
Speaker 5: bring back to the table is, let's listen to what
Speaker 5: our clients are telling us. And so you know, it's
Speaker 5: one thing for us to predict what we think is
Speaker 5: going to happen based on facts, figures, whatever. But earing
Speaker 5: in from our clients and what they're experiencing in each
Speaker 5: of the various segments that we do business with, to me,
Speaker 5: is much more important than any view we may have
Speaker 5: on our own. So we're still hearing that folks in
Speaker 5: general are in good shape. There's a fair amount of
Speaker 5: liquidity still in you know, folks checking accounts and their
Speaker 5: ability to borrow still remains strong. And so we continue
Speaker 5: to see a fairly robust economy going forward. And that's
Speaker 5: what we're modeling for and that's what we're predicting for
Speaker 5: the future.
Speaker 3: Some people say uncertainty. Frank's word is robust. That's the
Speaker 3: word he is. He's used over and over again.
Speaker 5: Co existent, You've been consistent, and uncertainty is is a
Speaker 5: challenge though, and it is impacting you know, people's decision
Speaker 5: making ability. And so, you know, one of the things
Speaker 5: that I always look at and always counsel people is, hey,
Speaker 5: look at what's really going on on the ground, and
Speaker 5: you know, try not to get caught up in all
Speaker 5: the headlines of you know, what may be going on
Speaker 5: around you that don't that doesn't necessarily impact you. I've
Speaker 5: had conversations with clients we're talking to me about tariffs,
Speaker 5: and tariffs don't actually impact their business, right, So I'm saying, well, okay,
Speaker 5: why are we focused on that? So uncertainty absolutely can
Speaker 5: change the direction of the economy.
Speaker 3: That was Frank Sorrantino, chairman and CEO at the publicly
Speaker 3: held New Jersey based community bank connect One Bank Corp.
Speaker 2: You're listening to Bloomberg Business Week coming up. Banking a
Speaker 2: great way to get a read on what's going on
Speaker 2: right now, So too is the good Old US consumer.
Speaker 3: Dana Telsey is up next on retail.
Speaker 7: Expectations are second half of July into back to school
Speaker 7: is when you'll see the price optics and when you
Speaker 7: speak to companies, it'll more be on some of the
Speaker 7: goods that are newer and have more product or make
Speaker 7: or embellishment in them. Essentials are going to be watched
Speaker 7: very carefully. The phrasing is surgical and select items where
Speaker 7: there are price increases. That's where it will happen.
Speaker 4: It won't be across everything.
Speaker 3: This is Bloomberg.
Speaker 1: This is Bloomberg Business Week Daily with Carol Masser and
Speaker 1: Tim Steneveek on Bloomberg Radio.
Speaker 2: US monetary policymakers voted unanimously to hold US interest rates
Speaker 2: study for a fourth straight meeting this past week on Wednesday,
Speaker 2: as they await clarity on whether tariffs will leave a
Speaker 2: one time or more lasting mark on inflation. FED Chair
Speaker 2: J Powell said is still unclear how much of the
Speaker 2: bill will fall on the shoulders of US consumers, but
Speaker 2: he expects to learn more about tariffs this summer.
Speaker 8: The amount of the tariff effects, the size of the
Speaker 8: tariff effects, their duration, and the time it will take
Speaker 8: her all highly uncertain. So that is why we think
Speaker 8: the appropriate thing to do is to hold where we
Speaker 8: are as we learn more, and we think our policy
Speaker 8: stances is in a good place where we're well positioned
Speaker 8: to react to incoming developments.
Speaker 3: After the Powell news conference, we caught up with Ross Mayfield,
Speaker 3: investment strategists at BAIRED Private Wealth Management in Bloomberg Intelligence,
Speaker 3: Chief US rate strategist Ira Jersey. Iira put the decision
Speaker 3: in some context for US.
Speaker 9: Yeah, I think there's some people who think that firstly,
Speaker 9: that the Federal Reserve does have to cut interest rates
Speaker 9: because they see cracks in certain parts of the economy
Speaker 9: and then there's other people who are fearful of tariffs
Speaker 9: and think that, you know, inflation might increase. And you know,
Speaker 9: I this was as I expected. And what's always interesting
Speaker 9: about this, you know, and we have to as market
Speaker 9: professionals kind of parse every single thing coming out of
Speaker 9: the FED Reserve.
Speaker 10: Is the reaction function? Right?
Speaker 9: What is the Fed's reaction function? So we heard a
Speaker 9: number of if van statements from Jare Powell, and you know,
Speaker 9: those fan statements could mean, you know, give us at
Speaker 9: least a little bit of an indication under what circumstances
Speaker 9: they'll make any kind of policy adjustments.
Speaker 3: Hey, Ross, come on in here and just give us
Speaker 3: your general overview of how the meeting went, your expectations,
Speaker 3: Where they met, where they not met. What was your
Speaker 3: big takeaway?
Speaker 5: Yeah?
Speaker 3: I think they were largely met.
Speaker 11: I mean, don't I don't know anyone who expected much
Speaker 11: action at this meeting or a resolution of all the
Speaker 11: uncertainty that they've been discussing at this meeting, given that
Speaker 11: we're still in this kind of tarff pause. You know,
Speaker 11: we have the potential for oil prices to swing and
Speaker 11: impact headline inflation.
Speaker 3: So I didn't expect much.
Speaker 11: I'm on the side of the camp that thinks the
Speaker 11: FED should be a little more aggressive and cutting. I
Speaker 11: think the cracks in the labor market are starting to
Speaker 11: really accumulate. And to hear FED sch our pals say
Speaker 11: that the labor market is I forget the exact language,
Speaker 11: but on solid footing.
Speaker 3: Yeah, he wouldn't agree with you. I think ross that
Speaker 3: the cracks are starting to appear. What data are you
Speaker 3: paying attention to that he's not.
Speaker 11: Yeah, certainly, the anecdotal evidence of layoffs is rising. But
Speaker 11: if you look at something like warn notices or initial
Speaker 11: claims and continued claims, I mean we're sitting at multi
Speaker 11: year highs for a lot of those levels. If you
Speaker 11: look at some of the employment statistics about people fresh
Speaker 11: into the job for us out of college, you know
Speaker 11: that the unemployment rate there is a not record highs
Speaker 11: by any means, but is significantly higher than the overall
Speaker 11: on employment rate. So I think it's a labor market
Speaker 11: where we have tight supply, and especially in this you know,
Speaker 11: given the immigration policy, but it is not a robust
Speaker 11: labor market and we are well north of a neutral policy.
Speaker 11: I think that getting to neutral should be more more
Speaker 11: of a goal for the Fed who doesn't seem to
Speaker 11: want to get there until the end of twenty twenty
Speaker 11: six if you look at the CCP.
Speaker 4: All right, come on in uh irah.
Speaker 5: Yeah.
Speaker 9: So I just want to want to say I think
Speaker 9: that's part of this debate, like where is neutral? And
Speaker 9: you know there's you know, the FED will say that
Speaker 9: they're still have restrictive policy, but a lot of the
Speaker 9: other information that some of us me included, have looked
Speaker 9: at suggests that actually they're probably pretty close to neutral.
Speaker 9: So unless there's a deceleration of the economy, the FED
Speaker 9: probably doesn't have to adjust interest rates. Now, the question is,
Speaker 9: and to Cross's point, like they can't wait until the
Speaker 9: economy is clearly really bad before they cut interest rates.
Speaker 9: But I do suspect that because of this overhang of
Speaker 9: inflation and the recent past episode that we just had,
Speaker 9: that the FED will try to wait until almost the
Speaker 9: last minute, and then once it cuts, it'll cut faster.
Speaker 9: And I go back to the.
Speaker 10: Statement that J.
Speaker 9: Powell made in May at his at the press conference
Speaker 9: where he said, like, look, we know how to deal
Speaker 9: with a weak economy. We could just cut more aggressively
Speaker 9: and get down below the neutral rate to stimulate the economy.
Speaker 9: We don't want to have to go the other way
Speaker 9: and have to hike interest rates rate if inflation were
Speaker 9: to remain relatively high.
Speaker 3: Hey, Ira, a couple more to you, and then we're
Speaker 3: going to bring ross back in here. But I'm wondering
Speaker 3: about a couple of things here. One specifically, is the
Speaker 3: question of AI and the labor force. The bed chair
Speaker 3: was asked about that. Carol, and I cannot stop talking
Speaker 3: about this. What did you make of the way that
Speaker 3: he answered this question about AI and the effect on
Speaker 3: the labor force?
Speaker 2: Feels like there's a pig pile of all of a sudden,
Speaker 2: people are waking up and saying, Okay, there's going to
Speaker 2: be a lot of jobs lost because of AI.
Speaker 9: Well, there's always disruptions. Whenever you have new technologies, there's
Speaker 9: always disruptions and you wind up having you know, layoffs
Speaker 9: in some sectors, and then the new economy creates other
Speaker 9: jobs and new jobs. We've done that over centuries since,
Speaker 9: you know, even before the Industrial Revolution, you've always seen
Speaker 9: you know, things replacing other things. I mean, we did
Speaker 9: it thirty years ago, right when you think about the Internet,
Speaker 9: and you know, in nineteen ninety five, very.
Speaker 10: Few firms had websites.
Speaker 9: Yet today everyone does, right and this is kind of
Speaker 9: an extension of that. So we created a whole new
Speaker 9: economy around the Internet that now is creating more jobs.
Speaker 9: Whereas robotics and other things like manufacturing, they're less people
Speaker 9: are needed to do the same amount of work in
Speaker 9: labor than was needed in nineteen seventies.
Speaker 3: That's Bloomberg Intelligence Chief US rate strategist Ira Jersey and
Speaker 3: Ross Mayfield of Bear.
Speaker 2: We also got some economic data this past week, specifically
Speaker 2: US retail sales falling nine tenths of a percentage point
Speaker 2: in the month of May. That is the largest decline
Speaker 2: since the start of the year, with seven of thirteen
Speaker 2: categories posting declines.
Speaker 3: We've got a trusted a voice on retail, somebody who's
Speaker 3: analyzed this area through multiple cycles and gets into the
Speaker 3: details like no one else. The founder, CEO and chief
Speaker 3: Research Officer of Telsey Advisory Group, Dana Telsea here in
Speaker 3: our Bloomberg BusinessWeek Studio. I want to start with the
Speaker 3: big picture data data, the data that we got earlier today,
Speaker 3: the largest decline since the start of the year. Obviously,
Speaker 3: people not buying cars has a lot to do with this,
Speaker 3: But is it proof that tariffs do affect the way
Speaker 3: that customers think about buying things?
Speaker 7: So a couple things you have, Yes, it was one
Speaker 7: of the weakest months. You look at cars, which were
Speaker 7: the real week link it's twenty percent of retail sales.
Speaker 7: You've seen some of the other data points where the
Speaker 7: sporting goods department stores frankly did a touch better. I
Speaker 7: think overall, the pull forward of sales, I think we're
Speaker 7: seeing some of that. We put out a tracker every
Speaker 7: Tuesday of eighty items and how the prices have changed.
Speaker 7: We've done this for nine weeks now, we're going to
Speaker 7: continue to do it. We haven't seen much change in
Speaker 7: prices yet. Expectations are second half of July into back
Speaker 7: to school is when you'll see the price upticks. And
Speaker 7: when you speak to companies, it'll more be on some
Speaker 7: of the goods that are newer and have more product
Speaker 7: or make or embellishment in them. Essentials are going to
Speaker 7: be watched very carefully. The phrasing is surgical and select
Speaker 7: items where there are price increases. That's where it will happen.
Speaker 7: It won't be across everything, but the mood and the
Speaker 7: sentiment look at the numbers you got from the sentiment index.
Speaker 7: Those are better than expected, a little surprising given the
Speaker 7: headwinds that you're seeing in some of the services. The
Speaker 7: restaurant numbers certainly continue to show a downturn.
Speaker 2: So yeah, so add it up for us, like you've
Speaker 2: seen cycles, you've seen stress points that we have gone through,
Speaker 2: whether you know great financial crisis code, like, there's a
Speaker 2: lot of things.
Speaker 12: How would you.
Speaker 4: Describe the retail environment?
Speaker 2: And I know it's hard to throw everything in one
Speaker 2: bucket because there's so many different verticals.
Speaker 7: I think right now it's more uncertain the change that's
Speaker 7: different this retail environment than others. Even luxury has come down,
Speaker 7: even your luck, so your high income spender isn't spending
Speaker 7: in the same magnitude and you don't have the flood
Speaker 7: of taurusts that have come to the United States like
Speaker 7: you had in the past to buy those discretionary items.
Speaker 7: We still seeing essentials, grocery, that's where the consumer is spending.
Speaker 7: They'll spend selectively on some services, but take a look.
Speaker 7: We've seen airfares well Cojet Blue today talk about reduced demand.
Speaker 7: So how I added up is it feels a little
Speaker 7: bit more uncertain because of the volatility, and it's not
Speaker 7: complete down trends across the board. It's very selective and
Speaker 7: I think could it come yes. I think it's more
Speaker 7: let's go into the summer through the second half of
Speaker 7: the summer and see what these price increases are. But
Speaker 7: there's more concern over slowing than growing.
Speaker 3: It's interesting that you brought in tourism here, especially when
Speaker 3: it comes to retail. I'm wondering on the other side
Speaker 3: of things, We've heard from executives and companies, including Coca Cola,
Speaker 3: that the crackdown on immigration is actually affecting their sales.
Speaker 3: I'm wondering from a retail environment, is the ice crackdown
Speaker 3: on undocumented immigrants weighing on sales for any retailers out
Speaker 3: there at this point? People being afraid to shop, people
Speaker 3: afraid to go out, that sort of thing.
Speaker 7: And you think about it for restaurants in terms of
Speaker 7: the workers working in restaurants. You've certainly seen it some
Speaker 7: of the low end points and the retailers. It's interesting
Speaker 7: that the dollar stores performed okay, so that's where you
Speaker 7: would think you would, yeah, show up, but it hasn't
Speaker 7: shown up there as much. And also you look at Walmart.
Speaker 7: Walmart's sales were better than expected.
Speaker 2: So we are seeing I hate to say trading down.
Speaker 2: I feel so like not nice, but I just feel
Speaker 2: like maybe just people are being smart right I'm looking
Speaker 2: for the best bar.
Speaker 7: They are trading down. Look where Walmart has talked about
Speaker 7: the biggest growth coming from is their highest income consumer.
Speaker 7: You've seen it from others. Look at TJ Max on
Speaker 7: the off price side. You've seen what they have and
Speaker 7: they're an umbrella for pricing, so they'll always be lower
Speaker 7: than everyone else. And I think they're going to be
Speaker 7: a beneficiary as we go through the back half of
Speaker 7: the year.
Speaker 3: When you and I spoke earlier this spring, you mentioned
Speaker 3: that we could be seeing some empty shelves later this year.
Speaker 3: Has that materialized in anything that you cover and is
Speaker 3: that still a possibility.
Speaker 7: It's a possibility. It hasn't materialized yet because the goods
Speaker 7: that are on the shelves right now, there's still some
Speaker 7: of the low cost goods. Ordering for holiday is happening
Speaker 7: right now, and it would show up frankly first when
Speaker 7: you get to the holiday season. But you know what
Speaker 7: you have TJX buyers overseas in China right now looking
Speaker 7: to take over and take control of and acquire those
Speaker 7: canceled items, So go to the off pricers.
Speaker 2: Yeah, kind of fascinating. Well, you know, and I just wonder,
Speaker 2: you know, ultimately in terms of supply chains, right, we
Speaker 2: talked about so much of that because of the tariffs, Dana.
Speaker 2: When you think about you know, clothes and things like that,
Speaker 2: I mean, it's already been moving away from China, correct, Like,
Speaker 2: give me some perspective on where all of the stuff
Speaker 2: that we are wearing, where it really is manufacting.
Speaker 7: Where things are coming from. Yes, they've all looked to
Speaker 7: reduce their exposure to China. Vietnam has been very popular, Mexico, Cambodia,
Speaker 7: Brazil hard to come back into North America and the
Speaker 7: US given the high labor costs. But it's been Mexico,
Speaker 7: it's been Vietnam, it's been Brazil and Cambodia that we
Speaker 7: hear goods are going towards.
Speaker 4: How much is still made in China.
Speaker 7: Depends on which type of retail retailer. Everyone is trying
Speaker 7: to get to single digits. No one wants to stick
Speaker 7: stick there at double digits.
Speaker 4: Connect was that happening ahead of it's.
Speaker 7: Been happening since the last time we had tariffs. Everyone
Speaker 7: had accelerated it. But keep in mind one of the
Speaker 7: beneficiies of China labor costs are compelling, and the make
Speaker 7: that they put into the product and the expertise is
Speaker 7: faster and better than others. As a long time sourcing
Speaker 7: executive always tells me, there's no China like China.
Speaker 4: Wow, Okay, but it.
Speaker 3: Seems like Dana, at least for President Trump. It doesn't
Speaker 3: matter if it's made in China or it's made in Vietnam.
Speaker 3: It's not made in the US. It's going to be
Speaker 3: hit with a tariff. Yes, So how are retailers dealing
Speaker 3: with that?
Speaker 7: They'll raise prices on some selective goods, and it's a
Speaker 7: third to third, A third, a third they'll diversify their sourcing,
Speaker 7: a third they'll share the cost of the manufacture, and
Speaker 7: a third they'll raise prices on select goods to the
Speaker 7: end consumer.
Speaker 3: When you say select goods, do you mean obviously it's
Speaker 3: we can't put them all in the same bucket.
Speaker 7: Higher price goods.
Speaker 3: Higher price goods because the consumer has a higher willingness
Speaker 3: to pay because.
Speaker 7: It's new and different, it's something that isn't a basic okay,
Speaker 7: which makes.
Speaker 2: Me wonder like which companies are going to see it
Speaker 2: hurt in terms of their balance sheets on that you know,
Speaker 2: first quarter retail sales. Right, We've seen all these numbers.
Speaker 2: So which names do you think stand out? Really is
Speaker 2: the biggest winners? Which are the biggest loser?
Speaker 7: You look at Birkenstock with their closed toad shoes, very popular,
Speaker 7: still doing really well. I think that there's.
Speaker 3: Definitely some moment in there that was Dana Telsey, founder
Speaker 3: and CEO of the Telsea Advisory Group.
Speaker 2: Still ahead on Bloomberg Business Week Global Shipping and global
Speaker 2: leaders on edge in today's uncertain environment?
Speaker 3: Or are they the CEO of Synergy Maritime and the
Speaker 3: head of Ireland's Foreign direct Investment Are They're up next?
Speaker 3: This is Bloomberg.
Speaker 1: This is Bloomberg Business Week Daily with Carol Masser and
Speaker 1: Tim Stenovek on Bloomberg Radio.
Speaker 2: This past week, two giant ocean going tankers collided and
Speaker 2: caught fire off the coast of the United Arab Emirates
Speaker 2: near the Strait of Harmmu's energy choke point.
Speaker 3: Separately, two vessels were approached by Iranian boats near the
Speaker 3: Strait of horn Mouz, which is noteworthy during regional tensions.
Speaker 3: The incidents rattled global oil and shipping markets, with forward
Speaker 3: freight agreements rallying an oil tanker rate surging more than
Speaker 3: fifty percent at one point due to the increased tensions.
Speaker 2: The Israel Iran conflict was definitely on the radar of
Speaker 2: the global shipping industry, was really on the mind of
Speaker 2: all of us. Just ask Stamatus Santanus, which we did.
Speaker 2: He is chairman and chief executive officer of the publicly
Speaker 2: held global shipping company Synergy Maritime.
Speaker 3: He's also CEO of United Maritime. United was spun off
Speaker 3: from Synergy back in twenty twenty two. We talked with
Speaker 3: him early in the week and he explained how geopolitical
Speaker 3: uncertainty is forcing him to adjust shipping routes.
Speaker 13: I mean, we were going through the Red Sea all
Speaker 13: the time, connecting let's say Australia to Europe and all that.
Speaker 13: Now we have around the Cape of Good Hope. So
Speaker 13: that has added a lot to the tone mild effect,
Speaker 13: and of course the pollution. Because you do more miles,
Speaker 13: you emit more co twos, it's more expensive for the consumers.
Speaker 13: You go longer distance. So the answer is yes, I mean,
Speaker 13: every little thing that happens or bigger thing, it's good
Speaker 13: for ratees, but but for the Earth, I guess.
Speaker 3: Do you see it getting worse in the strait of
Speaker 3: horm moves anytime in the near future. I know you
Speaker 3: said you're optimistic, and you're optimistic by nature, but that's
Speaker 3: a real energy choke point. As Carol mentioned, I.
Speaker 13: Want to believe that there's nothing serious is going to happen,
Speaker 13: and the collision you had today is not actually a
Speaker 13: product of wars. The shadow fleet. You know, the shadow
Speaker 13: fleet has been going around since the Russian invasion, and
Speaker 13: you have all these undocumented and shadow ships going around,
Speaker 13: and there's like a danger and it's only a miracle
Speaker 13: that we haven't seen more of these things happening because
Speaker 13: of the shadow fleet. It's yeah, that's a product of
Speaker 13: the previous war, not like this war.
Speaker 2: Now, how are you, as someone right who's got to
Speaker 2: watch these things so closely determine like or think about, Okay,
Speaker 2: this is not such a big issue, this could be
Speaker 2: something more substantial.
Speaker 13: Well, we try to be prepared, I mean, except for
Speaker 13: the insurance and stuff we whenever we see like any
Speaker 13: conflict arising, we don't want to put the risk health,
Speaker 13: risk of our crews, of our people, so we just
Speaker 13: stay out of that. And we are lucky to have
Speaker 13: partnered with some of the world's biggest chatters, and whenever
Speaker 13: we tell them that we want to avoid what there is,
Speaker 13: they listen to us, so they're not going to push
Speaker 13: us to go through the war areas.
Speaker 3: What tools do you have on ships to prevent from
Speaker 3: pirate attacks or defend from pirate attacks.
Speaker 13: We I mean, if anyone says that they have sophisticated
Speaker 13: tools avoiding that they're lying because you know, we just
Speaker 13: avoid these areas and whenever we have to cross pirate
Speaker 13: there is, we always have armed guards on board of ships.
Speaker 3: Otherwise there's no other way to do it, no other
Speaker 3: way to do it.
Speaker 13: I mean, whoever says that, yeah, these are commercial ships,
Speaker 13: slow going commercial.
Speaker 3: Ships, targets targets.
Speaker 13: Yeah, so you just avoid it all together.
Speaker 4: It's very big, but yeah, right, super big.
Speaker 10: Okay.
Speaker 2: One thing I want to ask you what's great is
Speaker 2: tim and I love to watch money flows, right, money
Speaker 2: tells you so much, but I also love to watch
Speaker 2: when it comes to transportation. Transportation flows tells us a
Speaker 2: lot about what's going on in the world. The US
Speaker 2: more protectionist policies. How has that impacted global drive? Back
Speaker 2: to Mead, what are you seeing in that regard.
Speaker 13: Well, I'm sureful it is what the right resion eventually,
Speaker 13: but so far it has created a lot of uncertainty.
Speaker 13: A lot of people are just don't know what to do.
Speaker 13: I mean, imports in the United States have really dropped
Speaker 13: significant in the last few months because of the potential
Speaker 13: tartifs that I don't even know if they have kicked
Speaker 13: in or not kicked in already. So we need certainty
Speaker 13: and we need to make sure that people will be
Speaker 13: able to trade always for the benefit of the US
Speaker 13: consumer and always for the benefit of everybody. But it
Speaker 13: really has to be like a dependable and you know,
Speaker 13: to know what you expect. That's the thing.
Speaker 2: Certain things already changing in terms of you like flows
Speaker 2: back to the United States. We have seen changes right already.
Speaker 13: Indeed, yes, I mean what we do which is at
Speaker 13: On or Cole and Box site doesn't really change. It's
Speaker 13: still super strong the demand for these raw materials because
Speaker 13: you needed for infrastructure. As you know, a lot of
Speaker 13: investors in including a lot of people here in the
Speaker 13: government have invested significantly in infrastructure in the Middle East.
Speaker 13: We have one point six three million dollars of investments
Speaker 13: happening there, new nice buildings and all that. So this
Speaker 13: is going to happen. They're all fully funded and it's
Speaker 13: good for our business.
Speaker 3: I guess on the protectionist policies, I'm wondering what you're
Speaker 3: seeing in terms of goods flowing to and from China,
Speaker 3: and specifically of China is looking elsewhere for commodities that
Speaker 3: are typically sourced from the US. I mean, we could
Speaker 3: talk grains, we could talk corns, so I being wheat
Speaker 3: and the like, or we could talk other commodities too.
Speaker 13: What are you seeing, Well, suddenly the last few weeks
Speaker 13: we saw a surge in exports from the US golf,
Speaker 13: the American golf. So we see a surge in Yeah,
Speaker 13: we see a surge of America. Yes, okay, exactly exactly. Well,
Speaker 13: I just want to hear what you So we see
Speaker 13: surge in you know, coin products, maze, you know, grains
Speaker 13: and all that. So that has been good. Actually we're
Speaker 13: not expecting that, and we came into it coming from Yes,
Speaker 13: and we do a lot of coal, lot of going
Speaker 13: where to India and in China as well. We see
Speaker 13: that picking up slowly, slowly.
Speaker 4: That's but it was. It did slow down, It did
Speaker 4: slow down a lot.
Speaker 13: Yeah, but now it's picking up again. I don't know
Speaker 13: if it's going to be there to stay, but for
Speaker 13: the time being, it's going quite well the last few weeks.
Speaker 13: Let's hope it's going to remain. And we do a
Speaker 13: lot of coal trades out of India to sorry, Baltimore
Speaker 13: to India. So we've done a couple of trades recently
Speaker 13: which we hadn't done for a while.
Speaker 2: So in terms of any of the flows that have shifted,
Speaker 2: is it just, in your view, kind of defensive maneuvers
Speaker 2: and just a result of maybe short term blips and
Speaker 2: you think things are going to go back to the
Speaker 2: way it is, or do you see some new long
Speaker 2: term trade flows based on the shipping demand.
Speaker 13: Well, China's reliance to the used grains has dropped a lot.
Speaker 13: I mean they learned their in the previous administration, not
Speaker 13: the immediate previous, but the previous before that. Yeah, and
Speaker 13: they have now dependent they're more dependent now in South
Speaker 13: American corps, you know. So that's that's the corpse, you know,
Speaker 13: So that's the thing. If it ever gets back to
Speaker 13: you know, importing more and more grain products from the US,
Speaker 13: I hope it does, but it doesn't really seem like
Speaker 13: that in the near future.
Speaker 3: Before we let you go just thirty seconds, I think
Speaker 3: right now there's a focus on where ships are built
Speaker 3: that hasn't been yes, in focus really ever in my career,
Speaker 3: specifically Chinese built ships. Are there any Chinese built ships
Speaker 3: in your fleet?
Speaker 13: In our fluidat of the twenty nine we only have one,
Speaker 13: which is basically a Japanese yard based in China, So
Speaker 13: I don't know if that qualifies for Chinese altogether. But
Speaker 13: the vast, vast majority is made in China. Yes, made
Speaker 13: in China, but not really by Chinese yard. So Chinese interesting.
Speaker 13: So I'm not concerned about us. The only good thing
Speaker 13: I need to say is we've been in discussions with
Speaker 13: the US administration about that issue, and they're listening. They're positive,
Speaker 13: and they're listening. They want to find a solution, so
Speaker 13: they're not like totally black or white.
Speaker 3: That was the modest Santanas, chairman and CEO of the
Speaker 3: global shipping company Synergy.
Speaker 2: Geopolitics a major theme of this past week with G
Speaker 2: seven global leaders gathering in Canada to talk wars, conflicts, trade, tariffs,
Speaker 2: and a lot more.
Speaker 3: Another global voice to put it all in context for US,
Speaker 3: Michael Loewen, CEO of IDA Ireland. It's the Foreign Direct
Speaker 3: Investment Agency of the Irish government.
Speaker 14: When we last met actually just in March of this year,
Speaker 14: I think we've gone through a loss in those intervening weeks.
Speaker 14: To be honest, probably as much as I've seen in
Speaker 14: my career in foreign direct investment. A lot has happened
Speaker 14: in a very short space of time. And when you
Speaker 14: think about from the tariffs in terms of what tariffs means,
Speaker 14: where they're going to be composed, at what level and
Speaker 14: what timeframe, A lot of those questions still remain unanswered
Speaker 14: as we sit today, and I think from a European
Speaker 14: perspective of we are very clear that, you know, bringing negotiation,
Speaker 14: trying to get to a point of as opposed consensus
Speaker 14: around what this looks like. It's so critically important for
Speaker 14: investment flows and indeed for the economic prosperity of the world.
Speaker 14: You know, whether it's the US or whether it's the Europe,
Speaker 14: or indeed whether it's the Asia, So that's a that's
Speaker 14: a real area of focus from a European perspective and
Speaker 14: indeed the Irish government perspective. And of course you're correct,
Speaker 14: this is all against the backdrop then of some other
Speaker 14: conflicts across the world, and you know, we see that increasing,
Speaker 14: so you know, it's we're very mindful of that in
Speaker 14: the context of trade flows and trade investments as well,
Speaker 14: because that brings another level of uncertainty into the equation.
Speaker 3: Yeah, it's been pretty much exactly three months since we
Speaker 3: last saw you. You were here in New York right
Speaker 3: before you went to Washington with the Prime Minister to
Speaker 3: visit the White House, that you met with the President,
Speaker 3: you met with his team. How did the meeting go?
Speaker 14: So you're correct, the last time was here, I left them.
Speaker 14: I went to d C with On T. Shuck or
Speaker 14: our Prime minister. The medium went very well, actually, and
Speaker 14: I think actually it was was in reflecting on it,
Speaker 14: you'd say that, you know, the President was actually very
Speaker 14: gracious in terms of his engagement. Yes, there was fourth
Speaker 14: Right discussions and you know he talked about the challenges
Speaker 14: in terms of trade, trade deficits in particular.
Speaker 3: And this was before all the teriffs were announced.
Speaker 14: Yeah, this is before but remember this was all very
Speaker 14: you know, it was all very live and active at
Speaker 14: that point because you were this we were talking about
Speaker 14: this is the fifteenth, sixteenth of March, so it was
Speaker 14: all becoming very transparent or apparent as to what was
Speaker 14: always going to come down the tracks. So I would
Speaker 14: say that that that that meeting and engagement very much
Speaker 14: reflect this the relationship which is one hundred years between
Speaker 14: Ireland and the US, and I think in any relationship
Speaker 14: there can be pints of let's call it discussion, and
Speaker 14: that was the discussion that we had, but would think
Speaker 14: it was very respectful on both on both sides.
Speaker 2: Michael, what changes have you guys seen in investment flowers?
Speaker 2: What are you seeing from your vantage point?
Speaker 14: Yeah, so what we're seeing today, actually, Carrol, it is interesting.
Speaker 14: So I can sit here today and actually in two
Speaker 14: weeks time I'll be sharing with her Minister Peter Burke
Speaker 14: are results for the first half of the year. And
Speaker 14: what I can't disclose them to you on what I could, yeah,
Speaker 14: but I won't. But what I can say is this
Speaker 14: is that we continue to see investment flows. In fact,
Speaker 14: it is a power with last year in terms of
Speaker 14: the first half of last year, which is maybe somewhat
Speaker 14: maybe surprising giving the level of uncertainty that you see
Speaker 14: across the globe. But the reasons where we see that
Speaker 14: is and we're seeing across a number of different areas.
Speaker 14: We're seeing reinvestment in research and innovation continuing and companies
Speaker 14: looking to double down on their investments in Ireland in innovation.
Speaker 14: We're also seeing a lot of investment as well in
Speaker 14: terms of new entrants into the Irish economy, which is
Speaker 14: really important, and that's because they're looking for global marketplace,
Speaker 14: stable locations where they who's just trusted and proven, I believe,
Speaker 14: and that's what they're seeing in Ireland in terms of
Speaker 14: the future world.
Speaker 2: I know you can't reveal all, but I am curious
Speaker 2: so on that where there's new investments coming in. Are
Speaker 2: there conversations you're having with entities, global companies, US companies
Speaker 2: who say we want to do more stuff with you
Speaker 2: guys because we don't necessarily want to be in the US.
Speaker 4: Or other like give me an idea.
Speaker 2: There's anything that's a repercussion or you know the result
Speaker 2: of an action by the White House.
Speaker 14: Yeah, So I don't think it's it's it's a scenario
Speaker 14: of we don't want to do it in location A,
Speaker 14: so we're doing location B. I actually think companies are
Speaker 14: looking to actually, how can we grow our business, Where
Speaker 14: can we grow that from? What markets do we want
Speaker 14: to serve and where can we get the skills or
Speaker 14: are the policies that support that. That's really what we're
Speaker 14: seeing and what we do in Ireland is that, you know,
Speaker 14: we make sure we bring is stability and certainty to
Speaker 14: those areas of policy. In terms of talent and talent availability,
Speaker 14: not just Irish talent, but international talent. These are the
Speaker 14: pieces that are setting I believe investors apart when they're
Speaker 14: looking at locations around the globe, because I said previously
Speaker 14: at the very core of FDI and of multinational companies,
Speaker 14: they look to international markets. They needing to national markets,
Speaker 14: need international supply chains, they need international talent. That's what
Speaker 14: the need in order to be successful. And that success
Speaker 14: isn't just success in the country they're located in. It
Speaker 14: actually comes back to their entire supply chain.
Speaker 3: That was Michael Loewen, CEO of IDA Ireland. It's the
Speaker 3: Foreign Direct Investment Agency of the Irish government and.
Speaker 2: That wraps up the first hour of the weekend edition
Speaker 2: of Bloomberg Business Week from Bloomberg Radio Ahead. In our
Speaker 2: next hour, sending everyone Someday into Space with the CEO
Speaker 2: of Axiom Space.
Speaker 3: Plus Meta, paying billions to tap into scale AIS intelligence.
Speaker 2: And experiencing wine in Uruguay. This is Bloomberg Business Week.
Speaker 2: I'm Carol Masser.
Speaker 3: And I'm Tim Steneveeck. Stay with us today's top stories
Speaker 3: and global business headlines. They are coming up right now.
Speaker 15: This is Bloomberg Business Weekdaily, reporting from the magazine that
Speaker 15: helps global leaders stay ahead with insight on the people,
Speaker 15: companies and trends shaping today's complex ECONO plus global business,
Speaker 15: finance and tech news as it happens. Bloomberg Business Week
Speaker 15: Daily with Carol Maser and Tim Steneveek on Bloomberg Radio.
Speaker 2: Plenty Ahead in our second hour of the weekend edition
Speaker 2: of Bloomberg Business Week, including AI for commerce and retail
Speaker 2: and building the next generation space Economy. We'll talk about
Speaker 2: that with the CEO of Axiom Space.
Speaker 3: Plus Meta gets out its checkbook to catch up in
Speaker 3: the AI race, and the Little Tuscany in Uruguay with
Speaker 3: Christian Wiley of Bodega Garzon.
Speaker 2: First up this hour, a little bit of AI news.
Speaker 2: This past week, Elon Musk's AI startup, Xai is burning
Speaker 2: through one billion dollars a month, with expected losses of
Speaker 2: thirteen billion dollars this year due to the high cost
Speaker 2: of building advanced AI models. Now to cover the gap,
Speaker 2: Xai is trying to raise nine point three billion dollars
Speaker 2: in debt and equity, with plans to spend over half
Speaker 2: of it in the next three months, and expects to
Speaker 2: be profitable by twenty twenty seven.
Speaker 3: That is a lot of cash burning. Certainly, the big
Speaker 3: spend is on and we recently caught up with one
Speaker 3: part on the AI spectrum, and that is the AI
Speaker 3: that customers deal with. That's where Daniel Wagner comes in.
Speaker 3: He's chairman and CEO of Resolve AI. Resolve is a
Speaker 3: suite of AI powered products. It's meant to help companies
Speaker 3: with customer attention, engagement, loyalty and support.
Speaker 4: It is nice to have you here with us.
Speaker 2: Tell us a little bit more about your company and
Speaker 2: the environment right now.
Speaker 16: Sure, so you know, I'm a multi decade entrepreneur in
Speaker 16: the tech business and Resolve AI is the culbination of
Speaker 16: my career in many respects, having built market leaders in
Speaker 16: e commerce and search. The development of Genai as a
Speaker 16: technology is an enabler and we use it to really
Speaker 16: enhance the digital experience for consumers. Right now, when you
Speaker 16: go onto an e commerce site, it's a very perfunctory experience,
Speaker 16: and it's actually very ineffectual because seven out of ten
Speaker 16: people who go into a physical store end up buying
Speaker 16: a product, and seven out of ten people to go
Speaker 16: into a digital store end up not buying a product.
Speaker 16: And the reason for that is because I believe they
Speaker 16: don't get the answers to their questions that they need.
Speaker 16: You know, if my wife wanted to go and buy
Speaker 16: me a mobile phone, she couldn't do it online because
Speaker 16: she couldn't get She doesn't know what iOS is or Android.
Speaker 16: She doesn't know what a megabyte is or a megapixel.
Speaker 16: But if she went into the AT and T store
Speaker 16: on Lexington Avenue, the salesman would help her through that process.
Speaker 16: So what we're doing with Jenai is we're changing, you know,
Speaker 16: e commerce into a conversational commerce. We've created a language
Speaker 16: model that is the best salesman on the planet with
Speaker 16: deep product knowledge empathy.
Speaker 4: So with your wife, what might it do with her?
Speaker 4: Who where you say? She doesn't have that?
Speaker 2: So she would go I'm in that camp too, which
Speaker 2: is why my husband buys all of our phones.
Speaker 4: But I'm just saying, like, how would that help her?
Speaker 16: So she would be able to go to a website
Speaker 16: now and say, hey, I need to buy my husband
Speaker 16: a mobile phone.
Speaker 10: What you know, what would you recommend?
Speaker 16: And the answer would be verbally or typed up on
Speaker 16: the screen. Well, tell me a little bit more about Osmond.
Speaker 16: Does he use a PC or a Mac? Is he
Speaker 16: a business person or a creative? Does he use his
Speaker 16: phone all day?
Speaker 10: Or you know?
Speaker 16: And the answers to those questions will will guide her
Speaker 16: to a phone with a long lasting battery or a
Speaker 16: phone with you know, an Android or an iOS and
Speaker 16: she would result probably with buying a phone from that
Speaker 16: digital site.
Speaker 3: Do you use your own LM that you've trained yourself
Speaker 3: or are you using a clod.
Speaker 16: Or We started developing this in twenty sixteen, so a
Speaker 16: lot before it became fashionable. I come from as an
Speaker 16: information services and as I mentioned before, commerce and retail,
Speaker 16: so we understood about data structure, We understood the implications
Speaker 16: of the algorithms that the foundational algorithms for Genai. So
Speaker 16: we started building a language model initially that could replicate
Speaker 16: the best salesman on the planet, and then we built
Speaker 16: products that sit on top of it that allow our
Speaker 16: customers to deploy it really as a plug into their
Speaker 16: existing sites. So it's a very easy deployment from it.
Speaker 3: But if it's if it's a plug, and then how
Speaker 3: does it know if you're shopping? How is an expert
Speaker 3: in shoes and running shoes, for example, versus an expert
Speaker 3: in phone.
Speaker 16: So think about our LLLM as a sort of blank
Speaker 16: sheet of paper when we approach a customer.
Speaker 10: It doesn't have the world's knowledge.
Speaker 16: It just has conversational skills. And then what we do
Speaker 16: is we import the product catalog of that retailer, so
Speaker 16: it could be shoes or whatever. Then there would be
Speaker 16: context around that.
Speaker 3: So you still have to train after a company side.
Speaker 16: Really it's already training you in jest, We've already trained
Speaker 16: the model to be a salesman. The training quote unquote
Speaker 16: of its product catalog is literally a matter of minutes,
Speaker 16: probably hours at most. And then the everything else about
Speaker 16: the language model and the technology is that it is
Speaker 16: a very proficient salesperson.
Speaker 4: So if you take a digital information, let's just take.
Speaker 10: A physical analogy.
Speaker 16: Okay, if I've running If I'm running a camera camera
Speaker 16: store and I need a new sales guy, and new
Speaker 16: sales guy or girl joins my retail.
Speaker 10: Store, the first thing I do say, hey, here's our products.
Speaker 16: You better learn about the products. Do you know anything
Speaker 16: about photography? You know, so that the next time somebody
Speaker 16: walks in, they can sell a camera. Now we're able
Speaker 16: to do that piece in a matter of minutes. And
Speaker 16: then from that point forward, all of the best sales
Speaker 16: capabilities are inherently built into our model.
Speaker 3: Where did you train it?
Speaker 10: Where did we train it?
Speaker 3: What information do you we use?
Speaker 16: We used the Canadian Book Repositor, which is two hundred
Speaker 16: million books, open source books, Wikipedia for language and context,
Speaker 16: and then so it has three hundred billion token data
Speaker 16: sets as the foundational model to it. We did this
Speaker 16: over a period of years, so unlike many others, we
Speaker 16: didn't throw bucket loads of cash, you know, into a
Speaker 16: big black hole. We trained it over period using a
Speaker 16: much more efficient model, and so it took us, you know,
Speaker 16: six or seven years. But then we ended up with
Speaker 16: the foundational model that has been recognized by Microsoft and Google,
Speaker 16: who are partnered with US as one of the leaders
Speaker 16: in the field.
Speaker 3: One of the examples you use on your website is saying,
Speaker 3: you have any dinner party, you want it vegetarian? You
Speaker 3: have six people coming, Yeah, more or less? Give me
Speaker 3: some recipes or what should I make? I could use
Speaker 3: chatch ept for that, yes, now, but why you.
Speaker 16: Couldn't do it on Degasino's website or on you know,
Speaker 16: a target. So we're sending to retailers. We're not selling,
Speaker 16: We're not providing you know, Google, we're providing best Bard.
Speaker 3: But is it a huge good? Sorry? Go ahead.
Speaker 2: So if your wife was looking for a phone, she
Speaker 2: would go to let's say Apple, well go to she'd.
Speaker 16: Go to Google and end up probably on AT and
Speaker 16: T side or Charison or something that.
Speaker 2: But with yours, she's going to either start with Verizon
Speaker 2: or start with Apple or Samsung or something.
Speaker 10: Right, No, not necessarily, I mean, because how do you compare?
Speaker 4: How do you get that?
Speaker 16: Like you've got to You've got to remember, right, there
Speaker 16: are millions of retailers out there. You're driving traffic to
Speaker 16: their sites all the time. When you get to that site,
Speaker 16: seven out of ten people drop out. So what we're
Speaker 16: doing is that when you arrive at that site, you're welcomed,
Speaker 16: you get answers to your questions, you get detailed information
Speaker 16: about the products you're looking at you and you're guided
Speaker 16: through the sales process. So if I went to Mace's
Speaker 16: today and I said, hey, I got to buy gift
Speaker 16: for my niece for her twenty first birthday, It's not
Speaker 16: gonna give me an answer. I'm going to have to
Speaker 16: navigate through lots of categorism try and figure out do
Speaker 16: I want to get her a candle?
Speaker 10: Do I want to get it? You know, I don't know.
Speaker 16: But if I was to ask that question of a
Speaker 16: salesperson in Maces, they say, hey, we've got.
Speaker 10: Lots of ideas for you.
Speaker 12: So they put how we're.
Speaker 16: Leveling up commerce from what was a poor experience to
Speaker 16: a very rich, engaging experience, which we believe and have
Speaker 16: shown results in better conversion, which has a material impact.
Speaker 4: Change in the conversion.
Speaker 16: Well, it's only been going, you know, a short period
Speaker 16: of time, but we announced only a few weeks ago
Speaker 16: that we've seen twenty five percent uplift in conversion, which
Speaker 16: is massive massive.
Speaker 3: What's to stop a company like chat GPT from just
Speaker 3: selling directly to Target or Deagostino and saying, Hey, this
Speaker 3: is the this is the this is what's going to
Speaker 3: power it. Yeah, come to us because we have this
Speaker 3: data set.
Speaker 10: So they're a generalist, right.
Speaker 16: So the issue with that is that they already think
Speaker 16: they know everything, and that contaminates the model. Okay, so
Speaker 16: if you ingest a whole load of cosmetics and fragrances,
Speaker 16: they're going to have names like savage and beast, and
Speaker 16: their descriptions are going to be things like BlackBerry notes
Speaker 16: with sandalwood and barbecue.
Speaker 10: Right now.
Speaker 16: A GENAI model like open ai doesn't understand that well
Speaker 16: and will hallucinate thinking you're talking.
Speaker 10: About a beast in the world. We don't.
Speaker 16: We have a clean slate. We're ingesting fragrances. We tell
Speaker 16: the model it's just fragrances you're ingesting, and then it
Speaker 16: knows how.
Speaker 10: To sell that.
Speaker 16: So it's a it's a different approach, and it's why
Speaker 16: Microsoft and Google partner with us because they recognize, both
Speaker 16: of them with significant investments in AI, recognize that we
Speaker 16: have really, you know, focused on this vertical to make
Speaker 16: this the most appropriate solution.
Speaker 2: Well, it sounds like each one because you're dealing with
Speaker 2: a particular retailer.
Speaker 4: It's their kind of closed data.
Speaker 10: Sets in some respect, it is, right, Yeah.
Speaker 2: And so you just kind of whittle it down. All right,
Speaker 2: I pull up the FA function. I know you're a
Speaker 2: young company, you just started, So what are your expectations
Speaker 2: in terms of revenue growth?
Speaker 4: Like, where do you see this company?
Speaker 10: We're getting it out of the park straight away.
Speaker 4: Of growth are you seeing?
Speaker 10: Well, you started at the beginning last.
Speaker 4: I mean it's easy to ramp last year.
Speaker 16: We had nothing beginning of this year. You know, we
Speaker 16: announced a couple of weeks ago forty one million consumers
Speaker 16: have our technology on their phones. I mean it's like
Speaker 16: almost instant. We're going to exit this year with one
Speaker 16: hundred million dollars of arr and we are. And we
Speaker 16: signed a deal only two or three weeks ago in
Speaker 16: partnership with Google, which was a ten million dollar annual
Speaker 16: deal with Liverpool in Mexico, a very large department.
Speaker 2: When is that partnership with Google? Because that's fascinating, Right,
Speaker 2: they're doing their own thing. They're worried about potentially being
Speaker 2: replaced in terms of a search engine, which is why
Speaker 2: they're doing Gemini. But they're watching very carefully right in
Speaker 2: terms of how people are now communicating online.
Speaker 16: Find Yourself and Google both wanted to do an exclusive
Speaker 16: deal with me. I rejected both of those advances and
Speaker 16: we ended up doing a non exclusive deal with both.
Speaker 16: It demonstrates our position in the market and the valuable
Speaker 16: asset that we have in this vertical.
Speaker 4: Google, So what's the deal with them? Tell me how that?
Speaker 16: So Google are introducing our technology to their retail customers
Speaker 16: as a solution which ties in those customers to Google
Speaker 16: Cloud and to us, so they see us as a
Speaker 16: sticky enhancement to Google Cloud. Microsoft are doing exactly the
Speaker 16: same thing and see us as a sticky enhancement to AZOR.
Speaker 16: Both Azore and Google Cloud are competitive cloud services that
Speaker 16: are really it's a you know, you can move from
Speaker 16: onto the other very easily. But with our technology sort
Speaker 16: of embedded in those customer accounts, they see.
Speaker 10: Us as you know, retaining those.
Speaker 16: Customers when they come up for renewal, and as a result,
Speaker 16: they're pushing us out to ninety percent of the retailers
Speaker 16: on the planet. Because those two companies basically deal with
Speaker 16: pretty much everybody.
Speaker 3: You've got a few different products in the suite of
Speaker 3: software as a service products. How do you know that
Speaker 3: consumers are okay with this at this point?
Speaker 16: Well, I think it's Look, I'm an innovator. All the
Speaker 16: products and services I've created in my career, which have
Speaker 16: all gone on to become market leaders, have always been very,
Speaker 16: very innovative. The first company I set up in ninety
Speaker 16: eighty four was a pioneer and online information. In fact,
Speaker 16: Mike Bloomberg licensed my content newspapers for the terminals back
Speaker 16: in eighty six, So we were pioneering stuff back then.
Speaker 16: We're pioneering stuff in the late nineties, and we're doing
Speaker 16: it again now. I started this in twenty sixteen, we're
Speaker 16: nine years in and now we're productizing it and going
Speaker 16: to market. We're way ahead of anybody else in the space,
Speaker 16: I believe, and I think it's being shown by the
Speaker 16: takeup we're seeing in the last few.
Speaker 10: Months that we're on to a winner.
Speaker 16: This is a this is a step up for commerce,
Speaker 16: and right now I believe the environments and the interfaces
Speaker 16: that we're using in commerce are so out of date
Speaker 16: they're forty years old, that they're due a complete refresh.
Speaker 2: Just really quickly thirty seconds. I haven't heard Amazon. Are
Speaker 2: you talking with Amazon?
Speaker 1: No?
Speaker 16: Obviously Amazon is the big competitor to every retailer on
Speaker 16: the planet.
Speaker 10: They do a great job.
Speaker 16: We're not going to try and sell to them, and
Speaker 16: we're certainly not going to be partnering with them. You know,
Speaker 16: our customers are everybody else.
Speaker 3: That was Daniel Wagner, chairman and CEO of Resolve AI.
Speaker 2: The AI race is on. Yes, indeed, so too is
Speaker 2: the next generation space race.
Speaker 3: Where we go with the CEO of Axiom Space.
Speaker 6: No single country, no single company, can get off the
Speaker 6: planet alone. And if you believe we are destined to
Speaker 6: be off planet, to be multiplanetary, which I do, we
Speaker 6: have to do it together. So that's what you're seeing.
Speaker 6: It can't be done alone.
Speaker 3: That story is next. You're listening to Bloomberg Business Week.
Speaker 3: This is Bloomberg.
Speaker 1: This is Bloomberg Business Week Daily with Carol Masser and
Speaker 1: Tim Steneveek on Bloomberg Radio.
Speaker 2: Some recent news from the world of space. NASA and
Speaker 2: Axiom Space postpone the launch of the Axiom mission for
Speaker 2: to the International Space Station.
Speaker 3: Everyone's familiar with NASA, of course, but axiom Space perhaps
Speaker 3: not so much. XIM is focused on developing private space stations,
Speaker 3: human spaceflight, space suits and more. Yeah, it's kind of rocket.
Speaker 2: Science, it is indeed. Tej Paul Batya is CEO of
Speaker 2: axiom Space. He stopp by our Bloomberg studio recently.
Speaker 6: You know, at axiom Space, we're developing the products and
Speaker 6: platforms for humanity to thrive off Earth. And you said,
Speaker 6: you want to talk about the macro and how the
Speaker 6: geopolitical situation right now impacts us. If we were to
Speaker 6: go a little more macro than of that, you know,
Speaker 6: up to the level of space looking down space has
Speaker 6: proven to be the ultimate experiment for international diplomacy through crisis.
Speaker 6: You know, the International Space Station is a collaboration of
Speaker 6: fifteen nations over the last couple of decades and over
Speaker 6: the last few years access to many more nations thanks
Speaker 6: to companies like Axiom Space and our public private partnership
Speaker 6: with NASA and other companies companies. What you really see
Speaker 6: is through the crisis times, what's happening down here is
Speaker 6: not really what's reflected up there. They're working together to
Speaker 6: develop this platform in this lab for the future of humanity,
Speaker 6: and what we see is what's happening down here does
Speaker 6: impact a lot of decision making, but ultimately up there
Speaker 6: it is the ultimate collaboration. And if you think about
Speaker 6: the International Space Station, it's the largest object ever created
Speaker 6: by humans. It is the most expensive product created by
Speaker 6: humanity in a time where it wasn't as connected in
Speaker 6: real time as this. You know, think about thirty years
Speaker 6: ago they were doing this across languages, across borders on phones,
Speaker 6: you know, in the Soviet Union and the US, in Europe,
Speaker 6: in Japan and Canada, and they got that thing built.
Speaker 3: You know, speaking of collaboration, I'm curious about the recent
Speaker 3: announcements that ACXIOM has made with foreign governments. I mean,
Speaker 3: we're talking Egypt, Check Public Portugal, among others. Perhaps there
Speaker 3: are some out there who might say that it looks
Speaker 3: like there could be AXIOM being a private sector arm
Speaker 3: of the State Department, essentially in the sense of boosting
Speaker 3: soft power globally, sort of as the US has used
Speaker 3: in the past space to diplomacy to compete against China.
Speaker 3: I'm curious about your take on this, and you know,
Speaker 3: if you have any coordination with the State Department or
Speaker 3: NASA when it comes to these deals.
Speaker 6: You know, it's spot on. I wouldn't necessarily say it
Speaker 6: as a space diplomacy arm of the State Department. What
Speaker 6: I'd say is what Axiom has proven is commercial companies
Speaker 6: can drive US diplomatic interests overseas. So we're a private company,
Speaker 6: We're an American company.
Speaker 4: Is this the new soft power?
Speaker 3: It is?
Speaker 6: And go ahead, And it's exactly what I mean. I
Speaker 6: would expand that a little bit also given the light
Speaker 6: of the news today. It's power, it's hard power, it's
Speaker 6: soft power, and its economic power. And what you see
Speaker 6: is a eight year old startup and you were saying
Speaker 6: that it's rocket space, rocket science. I joined the company
Speaker 6: a little under four years ago. I invested it, just
Speaker 6: became CEO. I invested in the company about five years ago.
Speaker 6: I don't have a space background besides being fascinated since
Speaker 6: I was three years old. Right, I'm not a rocket scientist,
Speaker 6: I'm not a billionaire. But here this outsider from the
Speaker 6: startup world, the tech world, the Google world, comes into
Speaker 6: space and in a very short period of time can
Speaker 6: have this outsized impact. And what we saw in this
Speaker 6: last week. I just arrived from Florida. We were down
Speaker 6: there for our launch.
Speaker 3: We're gonna talk about that in a minute.
Speaker 6: We were at tables and conversations with NASA, SpaceX, the Russians,
Speaker 6: the Indian Space Agency, the European Space Agency, the Hungarians.
Speaker 10: And the Polish.
Speaker 6: This is the future of international collaboration. And right in
Speaker 6: the center, in the front was a startup, an American startup,
Speaker 6: so being able to drive US diplomatic interests but also
Speaker 6: overall diplomatic interests. You mentioned the Chinese, they've had a
Speaker 6: space station since twenty twenty two, fully manned.
Speaker 3: Yeah, we remember the.
Speaker 6: First space race, which was the US versus the Soviet Union.
Speaker 6: The second space race is China versus the West and
Speaker 6: its industry. And the third space race is the first
Speaker 6: to create the next applications that are going to change humanity.
Speaker 6: So we see this rapidly scaling from sixty years down
Speaker 6: to six years to the next six months. I think
Speaker 6: you're going to see rapid development in space commercials.
Speaker 2: I have to ask you, my father was a rocket
Speaker 2: scientist and involved in the first space race, so I
Speaker 2: kind of liked tim, like, we just look.
Speaker 4: Love this world.
Speaker 2: But what I'm curious about is it was a race, yes,
Speaker 2: for the United States to succeed before others, and it
Speaker 2: just what you are laying out for me is a
Speaker 2: lot more collaboration between nations and regions of the world,
Speaker 2: where I feel like our headlines are often showing all
Speaker 2: of those that you were talking about, kind of with
Speaker 2: stress points and tensions. So tell me, I mean, does
Speaker 2: that really show a much more true picture of what
Speaker 2: is going on globally in terms of relationships. Help me
Speaker 2: make sense out of it?
Speaker 6: I think it does. And this comes back to your
Speaker 6: first macro question, and I will start macro and then
Speaker 6: I'll bring it very micro back to the first space race,
Speaker 6: the second space race, and what I think is a
Speaker 6: third space race. The macro point here is a little
Speaker 6: more philosophical, but it is actually a collaboration question. Is
Speaker 6: no single country, no single company can get off the
Speaker 6: planet alone. And if you believe we are destined to
Speaker 6: be off planet, to be multiplanetaryary, which I do, we
Speaker 6: have to do it together. So that's what you're seeing.
Speaker 6: It can't be done alone, despite what you're hearing down
Speaker 6: here and what you see on Twitter, and these problems
Speaker 6: are very very It's not a.
Speaker 4: Race though, to be the first nation to.
Speaker 6: Do It's a different race. So the first space race
Speaker 6: getting back to time was actually a race two countries.
Speaker 6: It was so hard and expensive and impossible that two
Speaker 6: countries were racing to get the first human, the first
Speaker 6: astronaut off planet. In those sixty years following that, there
Speaker 6: was an average of about eight humans per year that
Speaker 6: went off planet. In the last six years that average
Speaker 6: has jumped to twenty two people per year. So in
Speaker 6: just the last six years we've almost tripled the number
Speaker 6: of people that go up. Sixteen of those were with AXIOM,
Speaker 6: which is just in the last three years.
Speaker 3: Can you explain TAJ exactly where you work within the
Speaker 3: context of SpaceX for example, I think a lot of
Speaker 3: people are familiar with SpaceX. The launches get so much attention,
Speaker 3: the Dragon capsule and what it does with the ISS.
Speaker 3: Just explain where you sit in the ecosystem.
Speaker 10: Absolutely.
Speaker 6: So when we pull these missions together, like the AX
Speaker 6: four mission India, Hungary, Poland pulling through the European Space
Speaker 6: A and C, AXIOM is pulling that mission together. So
Speaker 6: we are going out getting the customers, creating the crew,
Speaker 6: procuring the vehicle, SpaceX being the launch provider, getting the
Speaker 6: permit from the ISS, primarily Nasai.
Speaker 3: Guys are essentially the producer.
Speaker 6: That's a great way of putting it. Actually, I don't
Speaker 6: think that language would necessarily translate to the space industry.
Speaker 6: Hollywood and Houston speak very different languages. It's both English,
Speaker 6: but it's very different languages Hollywood.
Speaker 3: But that sounds like what you're describing to make it happen.
Speaker 6: Yeah, and think about when a producer puts together a package, right,
Speaker 6: that's also an order that probably wouldn't resonate in the
Speaker 6: space industry. That packaging has a ton of value. Yes,
Speaker 6: the physical film or theater or studio or camera groups,
Speaker 6: but think about the intellectual property. Think about the products
Speaker 6: that created, get are created, and the derivatives that create value.
Speaker 6: So when we pull together these missions, there isn't a bit.
Speaker 6: There is a very large element of mission integration training,
Speaker 6: kayload integration, but the key is locking in the demand.
Speaker 6: Those countries are trusting us, and these decisions aren't made
Speaker 6: at a space agency level. These are done at the
Speaker 6: prime minister president level. You're not sending up a Humanto
Speaker 6: space with a startup with an American launch company without
Speaker 6: significant consideration and trust.
Speaker 3: You mentioned you were just back from Florida, where you
Speaker 3: were for the X four mission launch. It was ultimately scrubbed.
Speaker 3: When are we going to see a new date and
Speaker 3: what exactly have you been told about leakage on the ISS?
Speaker 6: Sure, So the mission was scheduled to launch earlier this week.
Speaker 6: We had some weather delays, which is normal for a
Speaker 6: lot of our guests who have gone down to Florida
Speaker 6: and wanted to see an anticipated a launch. While it's
Speaker 6: normal for the space business, it's not really normal for
Speaker 6: someone who flew down to Florida to see it, but
Speaker 6: it happens. I've been through four launches myself with Axiom
Speaker 6: now and the delays usually go you know, sometimes months
Speaker 6: and weeks, then day by day based on minor things.
Speaker 6: So we had a weather delay, totally normal. There was
Speaker 6: some data that came back from the launch vehicle which
Speaker 6: was resolved, also completely normal. Sometimes that happens during a
Speaker 6: test or readiness review. Sometimes it happens on the launch pad.
Speaker 6: Better to happen before than on the launch pad. But
Speaker 6: these are all measures for safety. Then this issue on
Speaker 6: the ISS, the leaks have been happening for a while.
Speaker 6: There is an effort to improve it, to fix it.
Speaker 6: The ISS is old, you know, it's a thing. You
Speaker 6: can think of it as a piece of equipment, not.
Speaker 3: Really like a building.
Speaker 6: It has a lifespan, which is it's coming to its end.
Speaker 6: The whole reason Axiom exists is we won an award.
Speaker 6: We are the exclusive company, the only company that can
Speaker 6: connect its modules commercial private modules to the ISS. The
Speaker 6: reason for that is to prevent a gap in human
Speaker 6: presence in lower thorbit. So Axiom connects what I'd say
Speaker 6: is a bridge, but it's actually physically a tunnel onto
Speaker 6: the ISS. We make sure we preserve whatever assets and
Speaker 6: value we have on the ISS. We connect our second module,
Speaker 6: and then we can separate and be a free flying
Speaker 6: commercial platform. So with the ISS itself, that's where we
Speaker 6: go right now. So in this production, imagine this as
Speaker 6: the studio or where we're going for So their risk
Speaker 6: profile and their safety profile is what we follow. But
Speaker 6: remember our risk profile is a little different. When NASA
Speaker 6: sends up astronauts with SpaceX, they're sending us astronauts. We
Speaker 6: are sending other countries astronauts. So we don't take any risks.
Speaker 3: Here since you rely on SpaceX for launching. What happens
Speaker 3: if Elon Musk has a fallout with President Trump and
Speaker 3: the US decides to move away from SpaceX, what happens
Speaker 3: to you.
Speaker 6: So what we have right now is what i'd call
Speaker 6: a supplier constrained market, and that's okay. There's only one
Speaker 6: way to go up and down. And what SpaceX has
Speaker 6: done is phenomenal, and I really hope it doesn't go away.
Speaker 6: Right It's important, it's important. It's very important. What I
Speaker 6: see from SpaceX's point of view and their mission. I understand,
Speaker 6: not the feud that's going on, not the rhetoric, not
Speaker 6: what's on Twitter.
Speaker 4: None of us understand it to be there.
Speaker 6: But I can understand the magnitude of what it takes
Speaker 6: to get off planet. Now, what they've created from a
Speaker 6: launch standpoint, it is phenomenal. It's elite, it is, you know,
Speaker 6: really a wonderful thing for humanity, and I'd hate to
Speaker 6: see it go away. With that said, in a supplier
Speaker 6: constrained market, certain dynamics are created so to be the
Speaker 6: other power player. If supply is locked in, you want
Speaker 6: to lock in demand because that gives you leverage. And
Speaker 6: we've seen this model. You brought up the producer angle.
Speaker 6: I got my start at ESPN in media, and we
Speaker 6: can go back to the seventies and eighties of cable
Speaker 6: and satellite how content companies how Bloomberg TV probably got
Speaker 6: its opportunity how ESPN, MTV, CNA and MTV when there
Speaker 6: was the cable satellite wars. Who benefited the content companies
Speaker 6: and the consumers. So I believe we're in that kind
Speaker 6: of market dynamic right now. So our hypothesis really been
Speaker 6: about the customer demand.
Speaker 1: That was tees.
Speaker 3: Paul Batya, CEO of Axiom Space.
Speaker 2: Still ahead on Bloomberg BusinessWeek, Meta spending megabucks on Scale
Speaker 2: AI and tapping into a mega wine experience in Uruguay.
Speaker 3: Those stories. Next, This is Bloomberg.
Speaker 15: This is Bloomberg Business Week Daily with Carol Masser and
Speaker 15: Tim Steneveek on Bloomberg Radio.
Speaker 3: Meta Platforms taking a forty nine percent steak in Scale
Speaker 3: AI with Alexander Wang, who's twenty eight years old, joining
Speaker 3: Meta as a top executive to build AI super intelligence. Steak, Right,
Speaker 3: it's a steak.
Speaker 2: It's sgak, yeah, not something you a steak and steak
Speaker 2: put in the ground.
Speaker 13: CA.
Speaker 3: It's not an acquisition, yeah, Okay.
Speaker 4: If it works like an acquisition, Davie.
Speaker 3: Says, do not call it an acquisition for a host
Speaker 3: of reasons, okay deeply. As US technology columnists for Bloomberg Opinion,
Speaker 3: he spent about fifteen years reporting on tech at the
Speaker 3: FT and BBC before joining Bloomberg. He joins us here
Speaker 3: in the Bloomberg Interactive brokers at studio, do we just
Speaker 3: not call this an acquisition? Why are we not acquired?
Speaker 3: Why are companies not acquiring things right now?
Speaker 12: Because they're afraid to They're afraid that the courts are
Speaker 12: going to undo their old acquisition. So at this time
Speaker 12: they're thinking probably too risky, too complicated. If the stake
Speaker 12: was fifty percent as opposed to forty nine percent, that
Speaker 12: would of course be a takeover rather than an investment,
Speaker 12: and immediately that would trigger all kinds of reviews. They'd
Speaker 12: have to wait, they'd have to get clearances, not only
Speaker 12: in the US but also around the world different regulators.
Speaker 12: There's no time for that in the AI era. They've
Speaker 12: got they've got to get to work straight away. And
Speaker 12: so we're seeing this sort of new approach which I
Speaker 12: sort of likened in a column I wrote to sort
Speaker 12: where a football team buys a great young prospect, you know,
Speaker 12: they pay a transfer for to compensate wherever he's leaving.
Speaker 12: In this case, for Wang, it's about you know, making
Speaker 12: investors hole at the Scale AI, the company he founded,
Speaker 12: and they bring on this young talent with the view
Speaker 12: that he's going to be, you know, the what. He's
Speaker 12: going to run a super intelligence team at Meta and
Speaker 12: this is obviously what Mark Zuckerbo thinks is needed to
Speaker 12: bring his team up to up to speed to compete
Speaker 12: against the other big teams.
Speaker 3: He's going to be sitting by. Mark Zuckerberg reportedly what
Speaker 3: is superintelligence?
Speaker 5: What is?
Speaker 3: And also scally Eyes not building its own super intelligence either,
Speaker 3: that's what That's what's confusing to me.
Speaker 12: So Scale Eye is an interesting company. It's kind of
Speaker 12: right at the very early stages of AI development. It's
Speaker 12: about hiring humans to dough data labeling and say that's
Speaker 12: a tree, that's a bus, and so forth.
Speaker 3: It doesn't sound like super intelligence to me.
Speaker 12: The crucial thing and a colleague, one of my colleagues,
Speaker 12: Ellen who Hewittt, wrote this fantastic piece about Alexander Wang
Speaker 12: today sort of talking about how this guy knows everybody
Speaker 12: in AI and he knows everything that's going on. And
Speaker 12: one of the things about Scale AI that makes it
Speaker 12: particularly useful for Meta is that it's a company that
Speaker 12: other companies would go to when they needed data. So
Speaker 12: they were working with open Ai, they were working with Google,
Speaker 12: They're working with several other companies, and so they have
Speaker 12: a bit of an insight into what those companies are
Speaker 12: working on and what sort of data they were needing
Speaker 12: to have. So now Mark Zuckerberg gets a bit of
Speaker 12: that intelligence.
Speaker 2: We want what you have, we want we wan't what
Speaker 2: you know about what kind of the whole landscape is
Speaker 2: doing when it comes to AI.
Speaker 4: What have these companies come to you for?
Speaker 12: Yeah, exactly. And also Alexander Wung is just known as
Speaker 12: a great networker, and so when so much of this
Speaker 12: AI race is about talent and bringing people on, we're
Speaker 12: hearing bug Zuckerberg is emailing people personally and saying, come
Speaker 12: and join us. I'll give you ten million bucks if
Speaker 12: you do it. This is this is just a signal
Speaker 12: of how fierce the AI rate is.
Speaker 4: A different type of signing bonus.
Speaker 12: Right like a smart star, but considerably bigger in terms
Speaker 12: of the numbers of.
Speaker 3: What's the promise though, I mean, what is this superintelligence
Speaker 3: that they're working toward? What is the world dev that
Speaker 3: meta Platforms wants to build and be ready for.
Speaker 12: I'm not sure I want to imagine it, frankly, but
Speaker 12: it's you and me both. There's various names for it now.
Speaker 12: Superintelligence or artificial general.
Speaker 3: Intelligence is a very EGI and super intelligence are the
Speaker 3: same thing.
Speaker 12: It's all basically the same goal, This idea that you
Speaker 12: can create this essentially one machine or you know, one
Speaker 12: technology that people can use for whatever sort of varied
Speaker 12: juices they want an AI to do. And there is
Speaker 12: this feeling that somebody will get there first. Right now,
Speaker 12: I'm of the view personally that there'll be several players
Speaker 12: doing this and that's how it's going to the land's
Speaker 12: going to turn out. However, I think there is a
Speaker 12: sort of panic to make sure that we've got to
Speaker 12: be you know, first, or very very close behind.
Speaker 4: To be fair, right.
Speaker 2: I mean Microsoft has done some similar moves right to
Speaker 2: try and position themselves by acquiring you know, either different
Speaker 2: people that seem to have certainly some AI insight or
Speaker 2: know how. I think alphabet has done the same thing, right,
Speaker 2: So they're all kind of jocking for position.
Speaker 12: They're all joking position, and they're also taking the same
Speaker 12: approach of we can't be seen to be acquiring companies,
Speaker 12: so but we can try and acquire people.
Speaker 5: Now.
Speaker 12: I think they're not as clever as they think in
Speaker 12: this regard. I think the Federal Trade Commission, the Department
Speaker 12: of Justice, they know what's happening here. They know this
Speaker 12: is competition, just in a different form. Because if you've
Speaker 12: got companies that are spending crazy money on wages, does
Speaker 12: that mean a smaller company just can't compete for talent?
Speaker 12: I guess not right, So there's going to be and
Speaker 12: we already know the FEC is looking into some of
Speaker 12: these deals.
Speaker 3: They are I'm looking what they're going to do. Yeah,
Speaker 3: what's going on when it comes to innovation at these
Speaker 3: huge companies. I mean, I read your column and I
Speaker 3: think to myself, this is turning into like a PEPSI
Speaker 3: buys Poppy for two billion dollars type of thing, because
Speaker 3: we want to let the startups duke it out for
Speaker 3: shelf space. When it comes to probiotic soda, we're not
Speaker 3: going to develop it ourselves.
Speaker 5: Is that happen?
Speaker 3: I thought I thought the startup ecosystem, I thought there
Speaker 3: was you know, a decade ago, I thought Facebook killed
Speaker 3: the startup ecosystem.
Speaker 12: Well, I mean, look, I guess it's a question of
Speaker 12: the shifting purpose of the ecosystem to those big companies, right.
Speaker 12: I mean, it used to be if you started a startup,
Speaker 12: you had several exit opportunities U IPO, you get acquired.
Speaker 12: You know, both of those channels have almost been closed off.
Speaker 12: We're not seeing so many tech companies IPO anymore. That's
Speaker 12: really dried up, and it's becoming much harder for tech
Speaker 12: companies to acquire companies at all. But at the same time,
Speaker 12: the startup ecosystem still has this fantastic ability to work
Speaker 12: quickly and bring out new ideas. And I wrote that
Speaker 12: in that Columny reference that you know, I'm not sure
Speaker 12: if Alexander Wang joins Meta as like a junior engineer,
Speaker 12: I'm not sure he rises through the ranks.
Speaker 3: That becomes this guy.
Speaker 12: I think that's only something you could do outside of
Speaker 12: the company, And that's just the nature of startups.
Speaker 3: That's Dave Lee, technology columnist for Bloomberg Opinion.
Speaker 2: Before we go, how about a journey to a family
Speaker 2: owned winery in Uruguay. Since nineteen ninety nine, Bodega Garzone
Speaker 2: have been making wine and developing a mega wine experience.
Speaker 3: Christian Wiley is Bodega Garzon's managing director. He stopped by
Speaker 3: to tell us all about it. It is.
Speaker 17: It is a time uncertain times. The tariffs, of course,
Speaker 17: came on top of a lot of complications into the
Speaker 17: alcohol wine industry, and you just basically need to keep going.
Speaker 17: You have a long term strategy and the most beautiful
Speaker 17: thing is that wines just get better with age, so
Speaker 17: we have to be patient. But it is, it is
Speaker 17: a challenge right now.
Speaker 3: It's tough. You know, when we think about so called
Speaker 3: New World wines. I think a lot of people often
Speaker 3: think of in South America, maybe Argentina or Chile, Uruguay
Speaker 3: not really on the map as a wine destination as
Speaker 3: much as other areas.
Speaker 17: Why well, I mean it's not on the map because
Speaker 17: they've been drinking all their wine they've been making for
Speaker 17: the last threes three centuries. But then got Song comes
Speaker 17: into play. And this is an incredible investment of Don
Speaker 17: Alejandro Uldoni. It's two hundred and fifty million dollars capex.
Speaker 17: It is the largest investor invest investment ever in the
Speaker 17: industry of wine. And this is right now in the
Speaker 17: region in the world, in the world world.
Speaker 3: So this is right.
Speaker 17: Next to the beach to the Uruguayan Riviera.
Speaker 3: So you have.
Speaker 17: Jossei Nacio, which is like the San Trope. So it's
Speaker 17: and it's it's done in a in a very if
Speaker 17: you like, forward thinking way of the most committed to sustainability.
Speaker 17: We were the first winery in the world to be
Speaker 17: one hundred percent LEAD certified and we work, you know,
Speaker 17: to express the place. It's a new troire that is,
Speaker 17: you know, the vision is for Albert Antonini, who's like
Speaker 17: the top wine maker from from Tuscany. And then we
Speaker 17: one of our pillars is the experiences, so we have
Speaker 17: Francis malmon Is our chef, so you experience these beautiful
Speaker 17: wines with an incredible view right next to the ocean
Speaker 17: in a place is that it's like the Senterpeo South America.
Speaker 4: You don't spend tw.
Speaker 2: Hundred and fifty million dollars on capex unless there's growth
Speaker 2: going on. Tell us about the business and in terms
Speaker 2: of top line growth, but it also sounds like it's
Speaker 2: also experiential that you guys have incorporated, so give us you.
Speaker 4: Know, we're Bloomberg.
Speaker 2: We love all the numbers so give us an idea
Speaker 2: in terms of the growth that you guys have seen.
Speaker 17: Well, we've basically gone from a place that didn't grow
Speaker 17: vines to a vineyard that has more than a thousand
Speaker 17: little parcels, little blocks. We've gone from zero to sixty markets.
Speaker 17: We're selling all over the world. It's become the main
Speaker 17: brand in Uruguay, but it's also the leader in the
Speaker 17: States and to Brazil, to Japan, China, UK and it's
Speaker 17: it's growing very fast normally.
Speaker 2: And what's fast is it high teens? Is it above that?
Speaker 17: Many years doubling the business, many years in a row,
Speaker 17: including COVID, and as you said, all the different cycles.
Speaker 17: Toasted to our first year with our new partners in
Speaker 17: the US with a wine bow. And again we did
Speaker 17: really well in a very tough year.
Speaker 5: But you.
Speaker 17: Have a level of investment that it's really projected very
Speaker 17: very long term. We have projects for hotels, we have
Speaker 17: a real estate on the beach. Mister Volgeroni has an
Speaker 17: incredible a golf course designed by Phil Michelson and Acha
Speaker 17: Caria that it's a PGA Tour preferred golf course. We
Speaker 17: make our own extra virgin olive oil so that we
Speaker 17: talked about there are.
Speaker 3: Some universe What is the biggest revenue driver? Is it
Speaker 3: the winer, is it the real estate? Where I ask
Speaker 3: if it's even the olive oil.
Speaker 17: Yeah, the first one was the olive oil, the extra
Speaker 17: virgin olive oil, and it's one like the best extra
Speaker 17: virgin olive oil in the world. A couple of times.
Speaker 17: The winery is the wines. It was driving the revenue.
Speaker 17: And it's not just setting wine as a product, it's
Speaker 17: also the experiences. So we have fifty thous visitors a
Speaker 17: year and this is in the middle of nowhere, as
Speaker 17: you just mentioned ou Wai. Yeah, and it's all very
Speaker 17: high income and networth people. It goes from twenty thousand
Speaker 17: people living there in Punta de Les de Anderson to
Speaker 17: two million tourists around New Years. It's a lot and
Speaker 17: a lot of them are celebrities like Clooney or Winneth
Speaker 17: Paltrow or Messi or it's ours.
Speaker 3: That's kind of our crew. Care well, I'm here to
Speaker 3: invite you.
Speaker 12: You have to corroborate this story, right.
Speaker 2: We only have Unfortunately about a minute and a half
Speaker 2: or so left. You did bring in some bottles of
Speaker 2: wine and tell us about what you brought. I don't
Speaker 2: want to mispronounced Blasto, tanate.
Speaker 12: Alberino, Alvardino.
Speaker 17: It will start with the white wine. Yeah, it's this
Speaker 17: is Albardino. We are the main grower of Alberdino in
Speaker 17: the Americas. It's the white great variety that like the
Speaker 17: Queen of Spain. We have the same kind of granite
Speaker 17: and Atlantic Ocean influence, similar to Galicia. And this is
Speaker 17: our actually our setting line in the US, perfect for
Speaker 17: summer or the end of the of the spring, if
Speaker 17: you like Top one hundred white spectator.
Speaker 3: So an awesome valley. This is like a twenty two
Speaker 3: dollars retail.
Speaker 4: That's great.
Speaker 17: So there's a beautiful opportunity there.
Speaker 3: That was Christian Wiley Bodega. Garzon's a managing director.
Speaker 2: And that wraps up the weekend edition at Bloomberg Business
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