WEBVTT - Xerox CEO on Business Reinvention 0:00:02.520 --> 0:00:10.480 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business Week, 0:00:10.760 --> 0:00:14.040 insight from the reporters and editors that bring you America's 0:00:14.040 --> 0:00:18.720 most trusted business magazine, plus global business, finance and tech 0:00:18.800 --> 0:00:22.880 news as it happens. Bloomberg Business Week with Carol Masser 0:00:23.160 --> 0:00:25.760 and Tim Steneveek on Bloomberg Radio. 0:00:26.239 --> 0:00:29.360 It is Bloomberg BusinessWeek. That's Carol, I'm Tim. Shares of 0:00:29.440 --> 0:00:32.240 Xerox falling today as much as thirteen percent did close 0:00:32.240 --> 0:00:35.159 out the day lower by about five point eight percent. 0:00:35.200 --> 0:00:37.920 The company did report adjustin earnings per share for the 0:00:37.960 --> 0:00:41.239 fourth quarter that missed the average analyst estimate, though revenue 0:00:41.240 --> 0:00:46.120 did beat analyst estimates. We've got with us Steve Bandrzak, 0:00:46.240 --> 0:00:48.440 the CEO of Xerox Holdings Corp. He joins us here 0:00:48.479 --> 0:00:51.040 in the Bloomberg Interactive Brokers Studio. 0:00:51.080 --> 0:00:52.839 Steve, good to see you. How are you great to 0:00:52.880 --> 0:00:54.600 have me? Thank you doing well? Hey? 0:00:54.640 --> 0:00:56.840 So, you said in the earnings release that we continue 0:00:56.840 --> 0:01:00.000 to see steady progress in our reinvention, reflecting the res 0:01:00.000 --> 0:01:03.080 resilience of our team and initiatives taken to date. 0:01:03.160 --> 0:01:06.200 Where are you right now in your reinvention? Yeah? So 0:01:06.240 --> 0:01:07.600 reinvention is a three year journey. 0:01:07.880 --> 0:01:09.480 The three year program that we set up and it's 0:01:09.480 --> 0:01:12.480 all about getting Zerox back to revenue growth and getting 0:01:12.520 --> 0:01:15.280 back to double digit operating profit. And so we're about 0:01:15.319 --> 0:01:17.959 two thirds into that journey. But really the important part 0:01:18.040 --> 0:01:21.520 is we're set the foundation of the overall reinvention strategy. 0:01:21.560 --> 0:01:24.559 The first is getting our core stable and growing again, 0:01:24.600 --> 0:01:26.640 and we put a bunch of different things around what 0:01:26.680 --> 0:01:28.360 we do in our operating model, what we do with 0:01:28.400 --> 0:01:30.880 our sales team, what we're doing with our channels, new 0:01:30.920 --> 0:01:33.880 product introductions, and so forth. Second piece is we have 0:01:33.920 --> 0:01:36.280 to get twenty percent of our revenue that is growing 0:01:36.400 --> 0:01:39.160 faster than the decline in the print industry. So we've 0:01:39.160 --> 0:01:41.280 acquired a company called it Savvy, which is a really 0:01:41.440 --> 0:01:44.160 IT solution. So if you think about a services led 0:01:44.280 --> 0:01:47.960 software enabled business, a tech powerhouse that drives productivity in 0:01:47.960 --> 0:01:49.600 a workplace, that's where we're going. 0:01:49.640 --> 0:01:52.560 And one of the things we're really so diversifying into consulting. 0:01:52.560 --> 0:01:56.480 Diversifying into services and software. So if you think about 0:01:56.520 --> 0:01:59.880 all the different tools that you have in the IT space, 0:02:00.560 --> 0:02:03.200 we have and have the ability to bring it into 0:02:03.560 --> 0:02:06.760 SMB medium and smaller business units, where. 0:02:06.560 --> 0:02:09.240 You have the relationships with the businesses already because they 0:02:09.240 --> 0:02:10.440 have your printer products. 0:02:10.440 --> 0:02:13.480 Being two hundred thousand clients that we have in that space, 0:02:13.560 --> 0:02:15.720 and we talk about relationships. It's not that we ship 0:02:15.800 --> 0:02:19.240 them stuff. We actually people ten thousand service technicians on 0:02:19.320 --> 0:02:21.799 the ground inside of the facilities where we have long 0:02:21.880 --> 0:02:24.840 term relationships and we trust it. So we're now bringing 0:02:24.960 --> 0:02:28.720 other services, things like network as a service, security is 0:02:28.760 --> 0:02:31.480 a service. Many of these companies do not have the 0:02:31.560 --> 0:02:34.920 IT capabilities of very large companies like Bloomberg, where they 0:02:34.919 --> 0:02:37.680 have tremendous IT assets and they can take advantage of 0:02:37.680 --> 0:02:41.119 all these technology trends. If you're a school, you're a university, 0:02:41.120 --> 0:02:44.160 you're a medical center, you're a strip mall, you're a hospital, 0:02:44.440 --> 0:02:46.800 you don't have those capabilities. So you can talk about 0:02:46.840 --> 0:02:48.880 AI all you want, but if you don't have the 0:02:48.960 --> 0:02:52.280 infrastructure and you don't have the ability to orchestrate all 0:02:52.280 --> 0:02:55.200 that data and serve it up into AI, it's completely useless. 0:02:55.280 --> 0:02:57.040 So we're excited about playing in that space. 0:02:57.080 --> 0:02:58.919 So you're two thirds of the way into your plans, 0:02:59.000 --> 0:03:01.640 and I think when it comes to your priorities, your 0:03:01.680 --> 0:03:05.080 reinvention plans deep it is about that it's you know, 0:03:05.120 --> 0:03:08.720 your acquisitions, How do you want investors to measure success 0:03:08.760 --> 0:03:11.240 when they look at your company? Right now? Investors, if 0:03:11.280 --> 0:03:13.480 you look at the reaction today, not so key on 0:03:13.520 --> 0:03:16.760 what they heard. So how should investors measure your success 0:03:16.800 --> 0:03:17.360 at this point? 0:03:17.800 --> 0:03:20.000 A couple of things. First of all, when you think 0:03:20.040 --> 0:03:22.960 about a journey of a reinvention, you've got to get 0:03:23.000 --> 0:03:25.680 your core fundamentals right, and that's what we're doing in 0:03:25.720 --> 0:03:27.520 the first part of it. So you're starting to see 0:03:27.520 --> 0:03:31.480 things like twenty percent sales productivity. We're seeing that, we're 0:03:31.480 --> 0:03:34.760 seeing double digit placement of units in the in the 0:03:34.880 --> 0:03:37.680 Q four where you have that where you place a unit, 0:03:37.720 --> 0:03:40.120 and then you see long term supplies as you go forward, 0:03:40.400 --> 0:03:44.360 So signs of how do we get our core business stable. Second, 0:03:44.480 --> 0:03:47.520 the acquisitions. You think about lexmod acquisition right right when 0:03:47.520 --> 0:03:50.040 we go and make that acquisition, it is immediately a creative. 0:03:50.120 --> 0:03:50.920 You with two. 0:03:50.920 --> 0:03:53.760 Hundred million dollars percentages about a dollar EPs, it's a 0:03:53.800 --> 0:03:57.400 creator will actually lower our debt. So the acquisition strategy 0:03:57.520 --> 0:04:00.600 strengthens our core diversifies our business. The other thing is 0:04:00.600 --> 0:04:02.840 we have digital services, right you talk a lot about 0:04:02.880 --> 0:04:06.720 AI digital services, the ability to take data. You think 0:04:06.720 --> 0:04:10.040 about AI without data is completely useless. Well, we play 0:04:10.080 --> 0:04:10.720 in that space. 0:04:10.880 --> 0:04:13.160 But how much data? I mean, if you listen, we 0:04:13.200 --> 0:04:16.000 talk about this NonStop. In terms of the power of 0:04:16.040 --> 0:04:18.600 AI is based on the data it can acquire. There 0:04:18.600 --> 0:04:21.040 are so many data providers and to be fair, probably 0:04:21.160 --> 0:04:24.599 bigger than you guys. So how do you compete in 0:04:24.720 --> 0:04:28.640 terms of the quantity and clarity and quality of your data? 0:04:28.760 --> 0:04:31.440 Not the data providers, it's the data that our clients own. 0:04:31.520 --> 0:04:32.919 So if you think about hospitals, you. 0:04:32.920 --> 0:04:35.120 Think about managing their data. 0:04:34.760 --> 0:04:37.520 Helping them orchestrate it. It's really important. 0:04:37.600 --> 0:04:37.720 Right. 0:04:37.720 --> 0:04:40.760 You could have it on physical files where it's paper based, right, 0:04:40.880 --> 0:04:42.440 it could be in share points, it could be in 0:04:42.520 --> 0:04:45.320 all over. Think about things like video. Nobody thinks about 0:04:45.400 --> 0:04:48.440 data in terms of video, things like censor data. 0:04:48.560 --> 0:04:48.720 Right. 0:04:48.760 --> 0:04:51.800 We help our clients orchestrate all that and then serve 0:04:51.839 --> 0:04:53.839 it up on top of AI. So we're using the 0:04:53.960 --> 0:04:56.680 data that our clients have, even data that they don't 0:04:56.680 --> 0:05:00.280 realize that they need to drive differentiation use it AI. 0:05:00.520 --> 0:05:02.840 So think about video data, right, and you put AI 0:05:02.839 --> 0:05:06.479 on video data and you send somethings wrong in a campus, Well, 0:05:06.560 --> 0:05:08.800 that doesn't do anything unless you can have it to 0:05:08.839 --> 0:05:11.760 the appropriate alert systems. We do that every day with 0:05:11.880 --> 0:05:13.480 our workflow and our processes. 0:05:13.839 --> 0:05:17.640 You mentioned you want revenue to outpace the decline of 0:05:17.760 --> 0:05:21.599 the actual print and paper business. 0:05:22.080 --> 0:05:23.880 Does that hit a floor. 0:05:24.080 --> 0:05:28.359 Somewhere where Yes, people are using more electronic communications, so 0:05:28.400 --> 0:05:29.440 they're not printing as much. 0:05:29.920 --> 0:05:31.200 But when does that decline stop? 0:05:31.400 --> 0:05:33.320 So two things prison A print is not dead, which 0:05:33.400 --> 0:05:34.040 is really interesting. 0:05:34.080 --> 0:05:38.839 People look at print. It is not dead. A ton 0:05:38.880 --> 0:05:39.279 of print. 0:05:39.800 --> 0:05:41.760 It's a shift right, even the badge coming in right, 0:05:41.800 --> 0:05:43.680 you think about the bridges coming into this bound in print. 0:05:43.720 --> 0:05:46.200 So print even you take a look at ups boxes, 0:05:46.240 --> 0:05:49.320 Amazon boxes, we're printing a ton. So print isn't debt. 0:05:49.440 --> 0:05:51.720 We have to move where print is. When you take 0:05:51.720 --> 0:05:54.159 a look at TAGA decline in print over the next 0:05:54.160 --> 0:05:56.840 couple of years, it's two to three percent decline. So 0:05:56.920 --> 0:05:59.119 we want to decline slower than us who we're actually 0:05:59.120 --> 0:06:01.640 gaining market share. But the other real thing is when 0:06:01.680 --> 0:06:04.440 you think about print, there's a tremendous amount of value 0:06:04.520 --> 0:06:09.080 inside of print value and invoices, valuing contracts value in 0:06:09.200 --> 0:06:12.799 medical records. We can help our clients to unleash that 0:06:12.800 --> 0:06:16.640 that particular data, unleash that power of that data and 0:06:16.760 --> 0:06:19.680 actually turn into something that's actionable. And that's what we're 0:06:19.720 --> 0:06:20.920 working on helping our clients. 0:06:20.960 --> 0:06:23.400 You know, looking at your stock, it's been on a 0:06:23.480 --> 0:06:26.839 somewhat steady, you know, decline. Let me just throw it out. 0:06:26.839 --> 0:06:28.840 It lost fifty four percent last year. It is up 0:06:28.880 --> 0:06:32.200 eight percent a year to date. About seventeen percent though 0:06:32.240 --> 0:06:34.440 of the float is shorted. So there's a real negative 0:06:34.760 --> 0:06:37.640 skew in terms of what investors expect from you guys 0:06:38.800 --> 0:06:42.200 as part of the strategy. Ultimately, is someone buying you 0:06:42.200 --> 0:06:44.800 guys out? I mean, have you had interested suitors? Is 0:06:44.839 --> 0:06:45.200 that it? 0:06:45.440 --> 0:06:48.000 You know, just the opposite. We're going to be the consolidated. 0:06:48.040 --> 0:06:50.080 I know you've been buying, but I'm just curious, have 0:06:50.160 --> 0:06:50.920 you had anybody? 0:06:51.160 --> 0:06:53.200 No, we want to be a tech powerhouse. We want 0:06:53.200 --> 0:06:56.920 to drive productivity in the workplace. We've got an incredible brand. 0:06:56.920 --> 0:06:59.279 Do you think about Xerox. In the history of Xerox, 0:06:59.520 --> 0:07:02.960 We've got ten thousand plus partners. You don't build that 0:07:03.080 --> 0:07:06.560 channel partnership overnight. We have tremendous go to market assets, 0:07:06.600 --> 0:07:08.919 tremendous assets what we do. So No, we're going to 0:07:08.920 --> 0:07:10.440 be the consolidator in our industry? 0:07:10.480 --> 0:07:13.840 Would you implore explore doing something even larger to kind 0:07:13.840 --> 0:07:16.200 of scale does matter in this? Forsture, I don't know 0:07:16.200 --> 0:07:16.920 what to tell you. 0:07:17.000 --> 0:07:19.120 Look, I did the IBM PC spin out as part 0:07:19.160 --> 0:07:21.400 of the team that built Lenovo, so I understand what 0:07:21.480 --> 0:07:24.200 consolidation takes and what it looks like. We will be 0:07:24.200 --> 0:07:26.040 the consolidator in our industry. We're going to be a 0:07:26.080 --> 0:07:26.960 tech powerhouse again. 0:07:27.000 --> 0:07:27.360 How much? 0:07:27.400 --> 0:07:29.360 Because right now you're about a one point one billion 0:07:29.400 --> 0:07:32.120 dollar marketing, Like what's your anticipation of like kind of 0:07:32.120 --> 0:07:33.760 where you go if you think about the market. 0:07:33.600 --> 0:07:35.320 Camp today for the we think we're tremendously on the 0:07:35.360 --> 0:07:36.880 values from a market cap perspective. 0:07:36.920 --> 0:07:40.080 You just take investors short. Yeah, right, But that's okay. 0:07:40.240 --> 0:07:42.480 That's why I talk about the reinvention to three year strategy. 0:07:42.760 --> 0:07:45.280 You know, I'm not trying to build something for tomorrow. 0:07:45.320 --> 0:07:48.160 I'm trying to build something long term, sustainable growth and 0:07:48.240 --> 0:07:50.880 something that puts us back in the tech powerhouse position. 0:07:51.280 --> 0:07:52.800 What I love to see if you take a look 0:07:52.800 --> 0:07:55.000 at it, savvy and you take a look the partners 0:07:55.000 --> 0:07:57.320 that we have in the ecosystem and the reason why 0:07:57.360 --> 0:07:59.400 they're coming to us is because we can reach clients 0:07:59.440 --> 0:08:00.400 they don't read right. 0:08:00.680 --> 0:08:01.360 And so when you. 0:08:01.320 --> 0:08:04.520 Think about the office space, you think about hospitals, you 0:08:04.520 --> 0:08:07.000 think about all the places that we service, we can 0:08:07.080 --> 0:08:10.520 bring tremendous amount of value by bringing us partners into 0:08:10.560 --> 0:08:11.440 that ecosystem. 0:08:12.520 --> 0:08:14.840 I want to talk a little bit about the balance sheet. 0:08:15.000 --> 0:08:18.400 Buybacks have stopped, dividends on the decline, partly due to acquisition. Yes, 0:08:18.680 --> 0:08:21.960 free cash flow now targeted toward debt reduction. How much 0:08:22.000 --> 0:08:23.440 debt do you think you can pay down over the 0:08:23.480 --> 0:08:25.720 next two years and give us an idea of your 0:08:25.800 --> 0:08:28.200 ultimate capital structure goals. And why even keep a dividend 0:08:28.280 --> 0:08:28.760 at this point? 0:08:29.040 --> 0:08:30.040 Yeah, So a couple of things. 0:08:30.040 --> 0:08:31.880 So first of all, we just recently announced that we 0:08:31.920 --> 0:08:33.680 cut the dividend half, trying to get it back to 0:08:33.720 --> 0:08:35.880 a normal ratio in terms of what was what would 0:08:35.880 --> 0:08:38.319 we look like? And so we're really focusing on now 0:08:38.440 --> 0:08:39.839 is how do we lower our debt. And one of 0:08:39.880 --> 0:08:41.480 the things that people don't realize if you take a 0:08:41.480 --> 0:08:44.080 look at out total debt. Inside of that total debt, 0:08:44.120 --> 0:08:47.360 we have we call finance receivables where we have taken 0:08:47.520 --> 0:08:50.200 leases or we've taken manage print services put it on 0:08:50.200 --> 0:08:51.000 our balance sheet. 0:08:51.360 --> 0:08:52.040 We flip that. 0:08:52.040 --> 0:08:54.000 Strategy a couple of years ago and we called forward 0:08:54.000 --> 0:08:56.199 front agreement. So what happens at the end of each quarter, 0:08:56.520 --> 0:08:58.880 we have a company that actually buys those receivables, we 0:08:58.960 --> 0:09:01.840 get that cash back in and so today we started 0:09:01.840 --> 0:09:03.839 that journey and we said we had about one point 0:09:03.880 --> 0:09:06.439 four billion that we can actually put cash back onto 0:09:06.440 --> 0:09:09.160 the balance sheet. We have about two years left of that, 0:09:09.320 --> 0:09:11.640 so that gives us, if we do nothing other than 0:09:11.720 --> 0:09:14.760 continued a strategy, roughly four hundred million dollars for the 0:09:14.800 --> 0:09:16.760 next two years that we put on a balance sheet, 0:09:16.840 --> 0:09:19.600 and we're using that to drive our reinvention. We're using 0:09:19.600 --> 0:09:22.360 that to drive our acquisitions. We're using that to. 0:09:22.320 --> 0:09:23.160 Reduce our debt. 0:09:23.240 --> 0:09:25.199 So we loaded the dividends so that we can help 0:09:25.240 --> 0:09:27.840 pay back our debt when we do. The Lexmann acquisition 0:09:27.920 --> 0:09:28.959 will accelerate that. 0:09:29.240 --> 0:09:31.000 So you paid down how much debt in the of 0:09:31.040 --> 0:09:32.080 the next two years, only got. 0:09:31.960 --> 0:09:33.160 About ten to y Yeah, the goal is to get 0:09:33.160 --> 0:09:34.720 around three to three and a half percent. 0:09:35.080 --> 0:09:39.520 Okay, reduction, reduction, Okay, all right, good to know we've 0:09:39.559 --> 0:09:41.360 ran out of time. We had a million more questions 0:09:41.840 --> 0:09:43.079 come back, Hopefully you'll come back. 0:09:43.080 --> 0:09:45.160 I look forward to so much for having me on. 0:09:45.320 --> 0:09:48.600 Steve, of course, is the CEO of Xerox Holdings Corporation, 0:09:48.720 --> 0:09:51.160 joining us right here in our Bloomberg Business Week studio. 0:09:51.200 --> 0:09:51.880 This is Blueberg. 0:09:52.320 --> 0:09:54.800 Carol, I don't know you. You were listening to Caroline 0:09:54.840 --> 0:09:59.360 Levitt earlier of the UH I almost said to buy 0:09:59.520 --> 0:10:00.559 the Trump and administration. 0:10:00.920 --> 0:10:03.319 She's the White House Press secretary, right, you heard that 0:10:03.640 --> 0:10:06.360 little bit. She was asked, I know we were preparing 0:10:06.400 --> 0:10:06.880 for a show. 0:10:06.960 --> 0:10:08.439 Yeah, to be fair, but we were listening. 0:10:08.480 --> 0:10:08.640 Yeah. 0:10:08.720 --> 0:10:09.600 Yeah, because it. 0:10:09.520 --> 0:10:11.520 Was the first White House Press briefing. 0:10:11.559 --> 0:10:12.199 Yeah, exactly. 0:10:12.600 --> 0:10:13.960 She said that the National. 0:10:13.720 --> 0:10:17.680 Security Council is studying concerns associated with the Chinese AI 0:10:17.760 --> 0:10:20.920 company Deep Seek. That's according to the White House Press Secretary. 0:10:20.920 --> 0:10:22.600 She was asked about it todayt her first press briefing. 0:10:22.720 --> 0:10:25.240 Yeah, it's interesting, right, and we've had Trump's ais are 0:10:25.720 --> 0:10:29.000 David Sachsing and Fox News that there is substantial evidence 0:10:29.040 --> 0:10:32.000 at Deep Seek distilled knowledge from open a Eyes. 0:10:31.880 --> 0:10:33.800 Model, so dust is settling. 0:10:34.240 --> 0:10:35.920 You know, well this listen, We've talked about this with 0:10:35.960 --> 0:10:39.360 our own Rachel Metz. That Open Ai, according to someone 0:10:39.480 --> 0:10:41.960 in the know, a person familiar that they seem to 0:10:41.960 --> 0:10:47.640 be looking into exactly how deep seek did what they 0:10:47.640 --> 0:10:52.120 did and whether or not they tapped into a open 0:10:52.160 --> 0:10:56.520 aies model. So it's interesting and I think this is 0:10:56.559 --> 0:10:57.959 part of what we're trying to figure out in the 0:10:58.000 --> 0:11:01.560 last twenty four to forty eight hours since the story 0:11:01.640 --> 0:11:04.600 hit yesterday about deep Seek's capabilities and being able to 0:11:04.640 --> 0:11:06.920 do what it did in terms of creating a chatbot 0:11:07.920 --> 0:11:13.000 add a much cheaper it seemed like investment input. Uh, 0:11:13.200 --> 0:11:15.640 and so we're trying to understand did it really cost 0:11:15.679 --> 0:11:20.080 that little? Are the capabilities on par with open aies chatchypt. 0:11:20.240 --> 0:11:21.800 I don't know. There's a lot of questions we're trying 0:11:21.800 --> 0:11:23.840 to figure out, and what did they use to do it. 0:11:24.000 --> 0:11:27.200 That was a point that Ian King also made to 0:11:27.320 --> 0:11:31.440 us earlier in the program. He said, well, if they 0:11:31.559 --> 0:11:37.760 indeed were able to use these degraded Nvidia GPUs that 0:11:37.840 --> 0:11:40.920 are not subject to export restrictions, then that would be 0:11:40.920 --> 0:11:44.200 pretty remarkable, right right, because that would show you don't 0:11:44.200 --> 0:11:46.240 need the compute that you thought you needed in order 0:11:46.280 --> 0:11:47.440 to do something to the scale. 0:11:47.640 --> 0:11:50.080 Yeah, exactly. So, I mean, I feel like there's still 0:11:50.080 --> 0:11:53.760 a lot of questions and we're getting more information, so too, 0:11:54.360 --> 0:11:55.719 this is going to be there's going to be more 0:11:55.720 --> 0:11:56.600 to come curate. 0:11:56.840 --> 0:11:59.480 I'm curious what Michelle Geida thinks about it. She's CEO 0:11:59.520 --> 0:12:01.959 of the Croc Institute for Tech Diplomacy at Produce. She's 0:12:01.960 --> 0:12:05.200 also former Assistant Secretary of State for Global Public Affairs. 0:12:05.240 --> 0:12:07.839 She did that in the first Trump administration from twenty 0:12:07.840 --> 0:12:10.439 eighteen to twenty twenty. She joins us from Nashua, New 0:12:10.440 --> 0:12:13.720 Hampshire this afternoon. Michelle, how did you look at the 0:12:13.760 --> 0:12:18.520 news about deep Seek that really we learned last week 0:12:19.080 --> 0:12:22.160 but really came to the fore yesterday. 0:12:22.280 --> 0:12:25.040 Yeah, as you guys were just saying, there are were 0:12:25.160 --> 0:12:28.040 and still are a lot of question marks around deep Seek, 0:12:28.320 --> 0:12:31.160 in particular, how much did it really cost for them 0:12:31.200 --> 0:12:34.760 to develop this new quote unquote cheap model that they've 0:12:34.800 --> 0:12:37.280 self reported. Did they do it without in video chips 0:12:37.400 --> 0:12:39.120 or the advanced in video chips? Did they do it 0:12:39.120 --> 0:12:41.800 without subsidies? So still a lot of question marks. I 0:12:41.800 --> 0:12:44.880 think the most important thing to focus on is what's ahead, 0:12:45.160 --> 0:12:49.280 And regardless of whether this was an effort in which 0:12:49.280 --> 0:12:52.360 a Chinese government had a hand or not, the Chinese 0:12:52.400 --> 0:12:55.280 government will have a hand in it going forward. Because 0:12:55.440 --> 0:12:59.360 if it is as strategic as it sounds, deep Seek 0:12:59.520 --> 0:13:01.600 is a game changer, could be a game changer for 0:13:01.720 --> 0:13:06.120 the overall AI ecosystem and being able to more efficiently 0:13:07.240 --> 0:13:10.280 compute than we've done before. And so we can anticipate 0:13:10.320 --> 0:13:12.440 that the Chinese government is going to co opt this 0:13:12.760 --> 0:13:15.120 and start to use it to its strategic advantage for 0:13:15.320 --> 0:13:18.880 civil military fusion where there are no barriers between a 0:13:18.920 --> 0:13:21.160 consumer app and what China wants to do with a 0:13:21.200 --> 0:13:25.679 military and that has implications for our national security all right. 0:13:25.800 --> 0:13:28.480 But at the same time, you know, most nations would 0:13:28.480 --> 0:13:30.600 say I'm gonna play Devil's advocate a little bit, right, 0:13:30.720 --> 0:13:32.800 the US is trying to be the best as well 0:13:32.840 --> 0:13:34.679 when it comes to AI. Right, this is what just 0:13:34.720 --> 0:13:37.680 goes on around the world. I'm sure Europe wants to 0:13:37.720 --> 0:13:39.920 make sure that they are, you know, in the game 0:13:39.960 --> 0:13:43.000 as well when it comes to AI. I understand not 0:13:43.320 --> 0:13:47.040 all parts of the world collaborate, certainly on advanced technology, 0:13:47.080 --> 0:13:49.960 and there are national security concerns. So what's the right 0:13:50.000 --> 0:13:53.720 policy going forward where a certain amount of collaboration is required, 0:13:54.360 --> 0:13:58.360 especially you know, whether it's you know, nuclear warheads or AI, 0:13:58.840 --> 0:14:01.000 we need a certain amount of collab aberration to make 0:14:01.040 --> 0:14:03.240 sure that the world can survive going forward. 0:14:04.280 --> 0:14:06.719 Yes, you're exactly right, and that's what tech diplomacy is 0:14:06.760 --> 0:14:09.040 all about, is how do we get trusted partners and 0:14:09.120 --> 0:14:12.520 allies that includes the europe and like minded partners who 0:14:12.760 --> 0:14:16.640 ultimately believe in freedom, who ultimately believe in the dignity 0:14:16.640 --> 0:14:19.840 of individuals, who do things like abide by the rule 0:14:19.880 --> 0:14:23.120 of law. So we're looking for those trusted partners. Europe 0:14:23.160 --> 0:14:27.120 is a great example. Indo Pacific partners are a great example. 0:14:27.480 --> 0:14:30.040 The challenge with China is that they have proven time 0:14:30.040 --> 0:14:32.480 again that they are in authoritarian state and they have 0:14:32.520 --> 0:14:35.320 a different value set that they want to advance through 0:14:35.360 --> 0:14:38.200 the use of emerging technology. So you're exactly right. The 0:14:38.280 --> 0:14:41.080 more allies that we can get behind trusted technology that 0:14:41.200 --> 0:14:44.680 advances things like liberty and security, the better. 0:14:45.000 --> 0:14:48.200 Is there a concern that in this administration we could 0:14:48.400 --> 0:14:52.520 potentially alienate some of our allies. We saw what happen 0:14:52.720 --> 0:14:55.880 over the weekend with Columbia. There's a real tit for 0:14:55.960 --> 0:15:00.440 tat going on there Mexico. In sending these planes of 0:15:00.480 --> 0:15:05.960 migrants back, We've i know, ruffled some feathers there to 0:15:06.040 --> 0:15:10.680 the north with potential tariffs on Canada. What about when 0:15:10.680 --> 0:15:13.680 it comes to parts of Europe with discussion of Greenland, 0:15:14.040 --> 0:15:18.920 the Panama Canal as well in the you know, in 0:15:18.920 --> 0:15:23.240 Central America. Is there a chance that we could alienate 0:15:23.400 --> 0:15:26.000 allies who might be important when it comes to tech diplomacy. 0:15:27.160 --> 0:15:29.480 Well, this is what diplomacy is all about. It's the 0:15:30.080 --> 0:15:32.760 art of being able to advance your own national interests 0:15:32.800 --> 0:15:35.320 at the same time, you can do it in collaboration 0:15:35.440 --> 0:15:38.640 with trusted partners and allies who have similar interests. And 0:15:38.720 --> 0:15:41.760 let's not forget in the first Trump administration, the founders 0:15:41.760 --> 0:15:45.640 of the Kroc Institute, Keith Krack and Mung Chang At, 0:15:45.480 --> 0:15:48.920 the president of Purdue University, built the Clean Network to 0:15:48.920 --> 0:15:52.160 secure five G that had sixty countries and two hundred 0:15:52.200 --> 0:15:55.760 telecommunications companies all working together to put trust at the 0:15:55.760 --> 0:15:59.760 center of five G and not use untrusted vendors like Huawei. 0:15:59.800 --> 0:16:02.600 So well, there is a case study on how to 0:16:02.600 --> 0:16:06.920 work together with sixty countries at least to secure critical technology. 0:16:06.960 --> 0:16:09.840 And I think there's a similar opportunity to do that now. 0:16:10.000 --> 0:16:12.040 So Michelle, let me ask you. You have some insight 0:16:12.640 --> 0:16:18.120 having been a member of the Trump administration the first 0:16:18.160 --> 0:16:22.320 first go round. And I'm just curious that the diplomacy 0:16:22.320 --> 0:16:24.160 that we're seeing so far out of the White House 0:16:24.160 --> 0:16:27.760 feels like it can be somewhat combative even to former 0:16:28.000 --> 0:16:31.560 US allies. You sound like you are arguing that we 0:16:31.600 --> 0:16:34.400 should be, you know, if anything, reaching out perhaps to 0:16:34.440 --> 0:16:36.680 our European allies to make sure that we are working together, 0:16:36.760 --> 0:16:39.560 to collaborate on something like AI, to make sure that 0:16:39.600 --> 0:16:42.760 there is supremacy for the United States as well as 0:16:42.800 --> 0:16:47.440 with our allies against maybe other foes. So how does 0:16:47.640 --> 0:16:50.920 the diplomacy that we might get or lack thereof, out 0:16:50.920 --> 0:16:55.480 of this current administration perhaps maybe is problematic, especially when 0:16:55.480 --> 0:17:00.720 it comes to something like AI, development, supremacy, security. 0:17:02.040 --> 0:17:04.640 Well, remember that diplomacy as a means to an end. 0:17:04.920 --> 0:17:08.480 Diplomacy doesn't happen for diplomacy's sake. It's ultimately to advance 0:17:08.480 --> 0:17:11.320 the interests of the United States. And when you think 0:17:11.359 --> 0:17:14.720 about the case study with the clean network in twenty 0:17:14.840 --> 0:17:18.040 twenty in the last the first Trump administration and what 0:17:18.080 --> 0:17:20.240 we stand to do now remember it's also really early 0:17:20.359 --> 0:17:23.800 in the administration. But diplomacy as a means to an end, 0:17:23.800 --> 0:17:25.960 and so the ultimate measure of success is did we 0:17:26.040 --> 0:17:28.879 advance the interests of the United States and ideally our 0:17:28.960 --> 0:17:32.159 partners and allies at the same time, And there's different 0:17:32.160 --> 0:17:34.679 methods for doing that. And when you have trusted partners 0:17:34.680 --> 0:17:36.960 and allies, you can be open and honest and have 0:17:37.080 --> 0:17:40.080 direct conversations around how you achieve these ultimate goals. 0:17:40.160 --> 0:17:43.119 Well, what insight can you give us about having been 0:17:43.160 --> 0:17:45.639 part of the first Trump administration in terms of I 0:17:45.640 --> 0:17:48.240 think it's fair to say I've been talking with a 0:17:48.240 --> 0:17:52.200 lot of CEOs, we have organizations saying it's early days, 0:17:52.200 --> 0:17:54.600 as you said, in the administration, But how do you 0:17:55.080 --> 0:17:58.240 from someone who has some inside knowledge of kind of 0:17:58.280 --> 0:18:02.800 what is maybe just talk are speaking, you know, kind 0:18:02.840 --> 0:18:06.199 of harder, and what is the things that really will 0:18:06.240 --> 0:18:10.080 become actions and policy that will impact businesses and markets 0:18:10.119 --> 0:18:11.000 and relationships. 0:18:11.800 --> 0:18:13.720 Yeah, well, it's always hard to tell them. I'm not 0:18:14.200 --> 0:18:16.520 in government right now, and so the thing to know 0:18:16.600 --> 0:18:20.720 is that there are generally multiple channels of communication, whether 0:18:20.760 --> 0:18:23.639 it's coming from the State Department or other agencies, but 0:18:23.680 --> 0:18:26.760 there are multiple lines of communication, and so all of 0:18:26.760 --> 0:18:31.199 those things happened together to help advance America's interests. What 0:18:31.359 --> 0:18:34.560 I can say is under this administration, what we've seen 0:18:34.600 --> 0:18:38.800 so far when it comes to the leading theme for 0:18:38.880 --> 0:18:41.480 this administration, when they say America First, we've seen that 0:18:41.520 --> 0:18:44.280 it also means innovation first, and when it comes to 0:18:44.359 --> 0:18:48.040 artificial intelligence, that means supporting and advocating for projects like 0:18:48.080 --> 0:18:50.679