Speaker 1: This is Bloomberg business Week inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business, finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 2: Hi, everyone, Welcome to the Bloomberg Business Week Weekend Podcast.
Speaker 2: It was a very busy autumn week for markets that
Speaker 2: saw the latest federal reserve rate decision, with the FOMC
Speaker 2: holding firm for a second straight policy meeting as expected.
Speaker 2: We also got the October government jobs report and quarterly
Speaker 2: earnings from Apple.
Speaker 3: And speaking of earnings, the increasingly high tech agricultural equipment
Speaker 3: maker Agco gave its quarterly update. Coming up this hour,
Speaker 3: the CEO explains how the interest rate environment affects his
Speaker 3: capital intensive business. Then the head of the family owned
Speaker 3: car rental company Enterprise Mobility as it's called now, stops
Speaker 3: by with some key insights into the health of the consumer.
Speaker 3: There is a ton, Carol, that you can learn when
Speaker 3: you analyze the rental car.
Speaker 2: I feel like both of those conversations gave us a
Speaker 2: nice little peek into the economy. And then a bit
Speaker 2: later on the North American CEO of alcoholic beverage Giant
Speaker 2: Perno recard details, key trends, peanut butter, whiskey anyone, Maybe not,
Speaker 2: maybe not, I've heard about this, although there was a
Speaker 2: topic that definitely plays to you. We also talked about
Speaker 2: consolidation driving the global market for premium wines and spirits,
Speaker 2: a sector valued in the area of a quarter trillion dollars.
Speaker 3: All of that to come. We begin with a story
Speaker 3: in the finance section of the latest issue of Bloomberg
Speaker 3: BusinessWeek and what we love to talk about the Fed's
Speaker 3: impact on the treasury yield curve. It turns out there's
Speaker 3: another group of investors that seem to be playing a role.
Speaker 2: Interesting story with more and how hedge funds are driving
Speaker 2: volatility in the creator in US bond market. Bloomberg Market
Speaker 2: Senior editor Mike Reagan and I turned to our colleagues
Speaker 2: Daniza Sikova and Liz McCormick. Guys, so great to have
Speaker 2: you here with us. Denis, let's start with you. I'm
Speaker 2: curious about the conversation in the newsroom. Joel has a
Speaker 2: tendency they'll kind of walk around the newsroom and like
Speaker 2: kind of poke all about stories. How did this story
Speaker 2: come about? What was the conversation or did you know
Speaker 2: one of you say, like, you should see what hedge
Speaker 2: fund guys are up to, So tell us how this
Speaker 2: came to be.
Speaker 4: Yeah, so it came back to that theme. We've talked
Speaker 4: a lot about price sensitive and price incensitive buyers, so
Speaker 4: we wanted to look into who are really those new buyers,
Speaker 4: and hedge fund's a big part of it. And obviously,
Speaker 4: like if you think of just generally trading treasuries and
Speaker 4: think of it as the safest market and kind of
Speaker 4: a little bit slower moving market compared to I don't know,
Speaker 4: compared to equities, currencies, I don't know. So the conversation came,
Speaker 4: how has the day of those people changed? And this
Speaker 4: is what we asked them, so won't tail alpha the
Speaker 4: year's day is very different. You know.
Speaker 5: The first andingcdote is he wakes.
Speaker 4: Up every two two hours to check the prices, and
Speaker 4: you know it's being there on your Bloomberg terminal or whatever.
Speaker 4: You check your prices all the time, and following every
Speaker 4: little move and then every small data release is very
Speaker 4: important and potentially it can make you move things. And obviously,
Speaker 4: like some of those traits are voice trades.
Speaker 6: Sometimes you have.
Speaker 4: To be in the office and look at all those
Speaker 4: releases together decide where you have to make moves.
Speaker 6: And you can imagine this is.
Speaker 4: Very different than I don't know, five years ago, when
Speaker 4: the FED was such a big important buyer and prices
Speaker 4: maybe weren't as sensitive to those things.
Speaker 7: Yeah, this is why I'm not a tail risk hedge.
Speaker 8: From that that.
Speaker 2: Well, I want to bring listen to this conversation, Liz,
Speaker 2: because we talk about the extreme volatility that we see
Speaker 2: in the US bond market this year. So are they
Speaker 2: playing our hedge fund guys and gals, if you will,
Speaker 2: playing a significant role in that volatility?
Speaker 9: Well?
Speaker 6: Yeah, right? Is it circular?
Speaker 10: Right? And they like the volatility, they come in, they
Speaker 10: create more volatility, right, So it kind of feeds on
Speaker 10: itself and then more becomes and I have to do
Speaker 10: a shout out. I know Tracy Allowood at some point
Speaker 10: did a story Treasury is Trading.
Speaker 6: Like a memest, so we have to book that one up.
Speaker 6: But that it becomes like, you know.
Speaker 11: What was it?
Speaker 10: Oh, I think Mike Reagan must have edited one of
Speaker 10: these stories we did where there was other things that
Speaker 10: were like the hot things that was crypto and now
Speaker 10: look at this treasuries even today, look at the yields
Speaker 10: across the curve, it's like down, you know, over fifteen
Speaker 10: bases points.
Speaker 6: It's crazy.
Speaker 10: So I think hedge fund's coming in because there's more
Speaker 10: volatility and trading than that adds to it. But they
Speaker 10: do kind of on the flip side say hey, we're
Speaker 10: adding to the liquidity, we're you know, making markets. And
Speaker 10: Deniza knows. Today we had the refunding today and they
Speaker 10: had their barring committee, which the Treasury always does look
Speaker 10: into different things. One of them was like the demand base,
Speaker 10: and they brought up things that were in our story,
Speaker 10: not that it was from our story, but that the
Speaker 10: buying base has changed. You know, you have less commercial banks,
Speaker 10: foreign central banks, you have more households and hedge funds
Speaker 10: you know, involved in the treasury market. So it's kind
Speaker 10: of interesting that they brought that up today.
Speaker 2: Mike did call it a memestock by the way, early.
Speaker 7: Yeah, I really wanted to take credit for that, but
Speaker 7: of course was Tracy's way ahead me as usual. But Liz,
Speaker 7: you know, one of the sort of standard bread and
Speaker 7: butter hedge fund trades when it comes to the treasury
Speaker 7: market is something known as the basis trade, which basically
Speaker 7: looks to profit between discrepancies in the price of bond
Speaker 7: futures and the actual bonds trading in the cash market.
Speaker 7: That seems to be kicking into high gear this year,
Speaker 7: and there's a bit of a backlash to that from
Speaker 7: the government and some scrutiny about what hedge funds are doing.
Speaker 7: I know it's created its own backlash to the backlash,
Speaker 7: Ken Griffin coming out and saying, why do they care
Speaker 7: about this? This is sort of an innocuous trade that
Speaker 7: actually helps save taxpayers money in the bond market. Walk
Speaker 7: us through the basis trade and why there is scrutiny
Speaker 7: of it right now.
Speaker 10: Yeah, in fact, you're front running another story. I have
Speaker 10: get it out before you do. But yeah, it's been interesting.
Speaker 10: Like you said, we've had the FED the BIS, A
Speaker 10: lot of regulators say, hey, we'll worry the side of
Speaker 10: the size of this basis trade is gotten as jig
Speaker 10: as it was like in March twenty twenty.
Speaker 6: And we know what happened then.
Speaker 10: But yeah, normally this is kind of like you say,
Speaker 10: picking pennies up under steamroller. You're shorting the futures, you're
Speaker 10: buying the cash. If you take it to you know,
Speaker 10: to expiration of the futures, they should converge and where
Speaker 10: they see some discrepancies, some price discrepancies, that's why you'll
Speaker 10: do that trade. Where the risk comes in is that
Speaker 10: most of that is done using leverage, meaning using the
Speaker 10: repo market to finance the treasury side. So you have
Speaker 10: the risk that's what happened in like twenty nineteen, that
Speaker 10: repo rates go crazy for whatever reason and you just
Speaker 10: can't keep funding this trade. On the flip side when
Speaker 10: volatility picks up, as you know in futures, you tend
Speaker 10: to get margin calls. It's just part of the metrics.
Speaker 10: And so if you started getting margin calls on the
Speaker 10: short side, so you know, things can just go awry
Speaker 10: on both sides and all of a sudden, you know
Speaker 10: you just can't keep in this trade. Then there's a
Speaker 10: mass exit. That's the way that there's a problem when
Speaker 10: everyone's running on the same way and no one can
Speaker 10: get out. And remember Mike, in twenty twenty, we had
Speaker 10: people saying, Hey, I had a good trade, I.
Speaker 6: Couldn't even get out of that. There's just no liquidity, right, well, that's.
Speaker 2: What I wanted to ask. Don't we want it to
Speaker 2: be a little bit of a sleepy market that you know,
Speaker 2: foreign central banks and the FED and others you know,
Speaker 2: use and can count on to be kind of trade
Speaker 2: a certain way. I mean, don't we to some extent
Speaker 2: the need to care about the composition of buyers or
Speaker 2: are we just glad that there are buyers in this market?
Speaker 4: We do care about the composition for sure, and obviously,
Speaker 4: like just to give perspective, so those big traditional buyers,
Speaker 4: including the FED, commercial banks, foreign buyers used to count
Speaker 4: for seventy five percent of the ownership of the treasury market.
Speaker 4: That number now is fifty five percent. So this is
Speaker 4: a very big drop. And speaking to different experts who've
Speaker 4: been following this for a year, a lot of people
Speaker 4: saying that in a case where there's a little like
Speaker 4: a slightly bigger shock, probably there will be very sharp
Speaker 4: moves and the market is more fraud to those moves
Speaker 4: that and it was in the past. Because obviously hedge
Speaker 4: funds are a big part, they're very price sensitive, but
Speaker 4: mutual funds are also growing fast. Pension funds are growing fast.
Speaker 4: They're not necessarily moving as fast as hedge funds obviously,
Speaker 4: but are sensitive.
Speaker 5: To macro events.
Speaker 4: So all those different participants are a lot more likely
Speaker 4: to react on who knows the next banking news or
Speaker 4: oil prices or any of those little things.
Speaker 2: But hedge funds have always been a part of this market,
Speaker 2: right it is now there a bigger part we know,
Speaker 2: percentage wise.
Speaker 4: Yeah, they have tripled in the past year. So currently
Speaker 4: they own two point three trillion, which is close to
Speaker 4: ten percent of the treasury market.
Speaker 2: Which makes me wonder if you get sleepy again, Mike,
Speaker 2: do they just run in the other direction right to
Speaker 2: make money?
Speaker 7: Yeah, and it makes me you know, the dirty word
Speaker 7: in macroland is are you a tourist in this market?
Speaker 4: Yeah?
Speaker 8: Now, are you really a macro fund.
Speaker 7: Who's used to this trade and knows what to do?
Speaker 7: Or are you taking rescue yourquity manager? You know, I've
Speaker 7: seen a few headlines out this week Bill Ackman with
Speaker 7: shortening treasuries.
Speaker 8: He's changed his mind, He's.
Speaker 7: Now covering that short Stan Druck and Miller are a
Speaker 7: very wealth known hedge fund manager used to work with
Speaker 7: George Soroz without saying he's very bullish treasuries. So is
Speaker 7: that at least the tourist sort of mentality. Does it
Speaker 7: seem like the consensus is we've seen the peak and yields,
Speaker 7: it's now time to back up the truck and start
Speaker 7: going along the treasury market?
Speaker 8: Do you think?
Speaker 4: I think the peak is for sure, very important, but
Speaker 4: it's also very important that for a very long time
Speaker 4: it was the.
Speaker 6: Direction of trouble was very sure.
Speaker 4: And obviously like the FED is likely to continue rowing
Speaker 4: off its balance sheet, so them being a smaller portion
Speaker 4: of it guarantees more volatility, whether those trades are whether
Speaker 4: short bonds will still be a successful trade. Obviously this
Speaker 4: is going back to the debate where we've seen the peak,
Speaker 4: but the fact that they're more say relative value trades
Speaker 4: or or you know, basis traits or things where you
Speaker 4: can exploit that volatility, uh, stace, no matter whether we've
Speaker 4: reached dot peaks.
Speaker 2: I wondered too, Liz, come on back in. I mean,
Speaker 2: what you make for someoney who's also followed this, you know,
Speaker 2: for a long time in terms of the bond market
Speaker 2: and treasury trade. To see a greater role of hedge funds,
Speaker 2: I do wonder. Listen, they love volatility, right, They want
Speaker 2: things to move that's how you make money and quickly
Speaker 2: for investors. But I do wonder does that potentially, you know,
Speaker 2: or could it spell trouble. We always talk about right
Speaker 2: these changing rate environments, and you know, as the tide
Speaker 2: goes out, like we get to see all the problems
Speaker 2: and we you know, could it create some kind of
Speaker 2: crisis many or otherwise in the future.
Speaker 10: Well, I have to say, and I wouldn't be doing
Speaker 10: a good service. And maybe Treasury Department will still talk
Speaker 10: to me if I do mention that. John Josh Frost
Speaker 10: to the Treasury Department Assistant Secretary for Financial Markets publicly
Speaker 10: in a press conference. Listen, we still have a very
Speaker 10: diverse buyer base. We're not relying on any one type
Speaker 10: of investor or group of investors. So they're saying, hey,
Speaker 10: we're doing fine. But to your point, Carol, I think
Speaker 10: that is why regulators worry, like they're.
Speaker 6: Zoning in on leverage of things.
Speaker 10: But you don't want a massive positioning and with one
Speaker 10: group of investors, who if they go the other way,
Speaker 10: you just create this groundswell of movement and they take
Speaker 10: everyone else out in the process. So I think that's
Speaker 10: the risk when any trade gets too big especially when
Speaker 10: it's leveraged.
Speaker 6: That's a problem. But like I said, Treasury saying.
Speaker 10: We're okay, we're looking at all this, but we still
Speaker 10: have enough folks that want to buy our stuff that
Speaker 10: we're not concerned. But like, who knows, We're going to
Speaker 10: see what happens for now.
Speaker 7: How Yeah, yeah, Well, let's I wonder you know that
Speaker 7: that expression crowded trade comes to mind with a story
Speaker 7: like this. I mean, is there enough diversity in sort
Speaker 7: of the trades going on or is there a risk
Speaker 7: of crowding in certain trades, especially know where you look
Speaker 7: at how the yield curve has really steepened pretty aggressively
Speaker 7: in the last couple of months. You know, is that
Speaker 7: potentially a crowded trade or you know, are there any
Speaker 7: pockets of crowded trades we should think about in this
Speaker 7: market right now?
Speaker 10: Well, I would say I think the biggest one is
Speaker 10: the basis, even though some people argue there's reasons it's
Speaker 10: not as big. But I keep saying, like Denisa says,
Speaker 10: it's this debate have yields peaked and that I think
Speaker 10: people keep getting burned.
Speaker 6: You know, I mean, we've.
Speaker 10: Seen a massive fall today, but that yields have peaked,
Speaker 10: let me just load up, bring up the truck and
Speaker 10: buy them.
Speaker 6: And then yields go up again. And so I think that's.
Speaker 10: Where the risk is that people are trying to just
Speaker 10: can't seem to time this market right, you know. So
Speaker 10: that's creating the extra volatility, not just from the hedge
Speaker 10: funds but just regular macro funds, et cetera, thinking it's
Speaker 10: time now. Maybe they're okay in the long run because
Speaker 10: this will come back. But I think that's the risk
Speaker 10: that people just can't seem to get a clarity for
Speaker 10: sure where rates are going.
Speaker 2: Yeah, right, exactly. The crystal ball is really muddy right now, Deniza.
Speaker 2: Just to bring it back to how you guys kick
Speaker 2: off this story and the founder of long Tail Alpha
Speaker 2: and talking to him, does it feel like it's a
Speaker 2: trade he plans to be in for a long time
Speaker 2: or is it something he's like, yeah, this is maybe
Speaker 2: a one or two year thing, or I don't know.
Speaker 4: Yeah, I think this is not including the story, but
Speaker 4: he actually said that probably the best time for this
Speaker 4: trade is yet to come. As as cliche as that is,
Speaker 4: but this is something we've also heard.
Speaker 6: We talked to people.
Speaker 4: Of course, I mean, what else could he say. But
Speaker 4: we also talk to people like who are selling trading
Speaker 4: algorithms and who are very you know, have a very
Speaker 4: good perception where the basis trade is growing, and they're
Speaker 4: saying that in the past three months they've seen the
Speaker 4: most demand they've seen for these type of things, and
Speaker 4: obviously they have interested in saying that this will continue
Speaker 4: to be strong. But this is this is a thing
Speaker 4: we're saying. So for sure, there are numerous players in
Speaker 4: this space that they're saying that as long as there
Speaker 4: is uncertainty of peak heels, his longest the fit is
Speaker 4: rowing off his bounce.
Speaker 2: She heets haven't heard peak keelty.
Speaker 4: As long as we see that volatility, there may be
Speaker 4: more appetite for those things.
Speaker 2: Feels like we could see some more volatility, guys. Thank
Speaker 2: you so much. Bloomberg News process at reporter Daniza Zakova
Speaker 2: along with Bloomberg News. She correspondent for Global Macromarkets Liz McCormick.
Speaker 2: This story in the new upcoming issue Bloomberg Business Week,
Speaker 2: on newstands tomorrow, already on the Bloomberg and already online
Speaker 2: at Bloomberg dot com.
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Speaker 2: Well shares an ad co. Check it out, everybody. They're
Speaker 2: up for a third day. They're at more than six
Speaker 2: percent in that time. Company reported earnings yesterday morning, of
Speaker 2: which third quarter just at EPs was a big beat.
Speaker 2: Third quarter net sales in line with expectations, and the
Speaker 2: maker of tractors and combines also said it still sees
Speaker 2: fiscal year net sales of about fourteen point seven billion,
Speaker 2: slightly above estimates, with fiscal year just ADPs of about
Speaker 2: fifteen dollars seventy five cents a share. That's fifty cents
Speaker 2: above the company's earlier forecast. Three analysts nonetheless cutting their
Speaker 2: price targets on the company by an average of three
Speaker 2: and a half percent since it reported yesterday. So let's
Speaker 2: get to it. We have a great guest. We have
Speaker 2: the CEO, chairman, president and CEO at Aco. He's Eric
Speaker 2: and Eric Hensotia and excuse me, Eric Hensotia, He's on
Speaker 2: Zoom from Duluth Georgia, and he joins, us, forgive me,
Speaker 2: forgive me. I'm trying to race to get to you,
Speaker 2: So I apologize.
Speaker 9: Eric.
Speaker 12: Oh good, no problem.
Speaker 2: Really great to have you here with us. First of all,
Speaker 2: how are you? And I do have to ask you
Speaker 2: about the FED? In an environment where the FED says,
Speaker 2: you know, we could still continue raising rates, we're still
Speaker 2: worried about inflation. Does that kind of mesh with the
Speaker 2: outlook that you see?
Speaker 12: Well, your first question was how am I doing great?
Speaker 13: Just couldn't be happier with the progress that our company
Speaker 13: is having rel into our strategy.
Speaker 12: We're going to have two billion more in sales this year.
Speaker 13: We're going to grow margins significantly relative to the and
Speaker 13: it's all in line with our high tech focus on
Speaker 13: being the industry leader and smart farming machines relatively to
Speaker 13: the FED. You know, interest rates do weigh on farmers' minds.
Speaker 13: These are big as the carry a lot of technology.
Speaker 13: They're expensive machines, many times half a million to a
Speaker 13: million dollars, and so they often finance those machines, and
Speaker 13: higher interest rates are part of the part of the decision.
Speaker 13: I'm expecting that we're you know, at a high plateau,
Speaker 13: and that we're more likely over the coming year to
Speaker 13: have rates go down then up, and that would be
Speaker 13: welcomed by our customers, you.
Speaker 7: Know, Eric, I'm looking at the revenue growth of i
Speaker 7: CO over the years and really some impressive growth there.
Speaker 7: Twenty twenty one is up twenty two percent, twenty twenty
Speaker 7: two up fourteen percent, sixteen percent. This year it does,
Speaker 7: at least according to analyst estimates, look like you might
Speaker 7: be in for a dip in revenue last year, and
Speaker 7: I'm wondering what's the what's driving that? Is that entirely
Speaker 7: an Interra straight story or is there something else going on.
Speaker 12: It's actually very little related to interest rates.
Speaker 13: Agriculture often is not connected, not correlated highly with the
Speaker 13: regular GDP growth. It's more tied to the aggricultural agricultural economy.
Speaker 12: So the price of corn.
Speaker 13: Wheat, soybeans, and that's a function of how much green
Speaker 13: there is in the world. For the last two or
Speaker 13: three years, there's been green shortages and so grain prices
Speaker 13: have been high. That means more profit for our farmers.
Speaker 13: Now they've had a great year this year in terms
Speaker 13: of harvest, and so there's a little bit more stock
Speaker 13: prices have come down a bit, and that's really more
Speaker 13: what drives farmer profitability and in turn their interest to
Speaker 13: purchase equipment.
Speaker 2: Hey, Eric, what I wonder is longer term how you
Speaker 2: guys think about the business, how you plan, because I
Speaker 2: wonder if things like weather, climate change, demographics globally, is
Speaker 2: that more significant in terms of how you think about
Speaker 2: the growth longer term? And if so, what does that
Speaker 2: maybe indicate to you.
Speaker 12: Yeah, that's a great point, Carol.
Speaker 13: So we see three macro tailwinds plus this weather factor.
Speaker 13: So let me touch those real quickly. Number One, we're
Speaker 13: moving from eight billion people to ten billion people between
Speaker 13: now and twenty fifty. Number two, emerging economies are adding
Speaker 13: more meat to their diet as they do that. That's
Speaker 13: a multiplier on the demand for green chicken is a
Speaker 13: two to one multiplier, beef is a ten to one multiplier.
Speaker 13: And then third is renewable fuels, so ethanol in the
Speaker 13: United United States. But now the next one is renewable diesel.
Speaker 13: Ethanol consumes forty percent of the corn crop today. Renewable
Speaker 13: diesel is likely going to grow to that same kind
Speaker 13: of proportion over the next few years. Those are all
Speaker 13: macro tailwinds that cause the farmer to have higher yields,
Speaker 13: more pressure on higher yields, and then weather is another one.
Speaker 13: We're having more severe droughts and more severe floods every
Speaker 13: year that reduces.
Speaker 12: The overall global global ability to produce cream.
Speaker 13: So you add those four factors together and the farmers
Speaker 13: are pushed to have higher yields while using less inputs,
Speaker 13: less fertilizeder, pesticide, chemicals and things like that, and so
Speaker 13: there's a big squeeze for productivity. Using our technology, we're
Speaker 13: using artificial intelligence on our sprayers now to be able
Speaker 13: to use vision systems to identify the difference between a
Speaker 13: weed and a plant as a machine's going through the
Speaker 13: field and spray only the weed, saving like seventy percent
Speaker 13: of the chemical and a lot of automation of features
Speaker 13: throughout all of our products.
Speaker 2: Eric, you say, I'm assuming you've been using AI for
Speaker 2: a long time though, right.
Speaker 12: Yes, we have. Across many of our machines.
Speaker 13: We use AI to understand the variation in soil or
Speaker 13: crop and have the machine learn over time to be
Speaker 13: able to optimize itself real time in the field.
Speaker 7: It's amazing because when you think of AI, the last
Speaker 7: thing I think most people think of is farm labor.
Speaker 2: Do you think of machines though, I think a machine.
Speaker 7: Well, Eric made a great point and I wanted to
Speaker 7: ask them about this. Is right at the beginning, you
Speaker 7: said that technology aspect of your business is so important,
Speaker 7: and again, if you're not really familiar with aco, you
Speaker 7: might not.
Speaker 12: Think about that.
Speaker 7: But one thing I wanted to ask about, Eric, and
Speaker 7: full disclosure, I'm not an expert on tractors. In fact,
Speaker 7: I hire a kid to cut my own grass, so
Speaker 7: I'm really.
Speaker 2: I've driven a tractor, a big one.
Speaker 12: There we go.
Speaker 7: So I'm coming at this from a pure ignorance state
Speaker 7: of mind. But I would think that self driving technology
Speaker 7: would be easier to implement on the farm with a tractor.
Speaker 7: But from my understanding is it's not really I wonder
Speaker 7: if you could talk to us a little about where
Speaker 7: you are with that type of technology. You know, we
Speaker 7: we see it anytime soon, or is it just, for
Speaker 7: whatever reason, too complicated to have self driving tractors.
Speaker 12: Oh, it's a great topic.
Speaker 13: It's at the heart of our strategy is putting technology
Speaker 13: on machines to have the machine be smarter and be
Speaker 13: able to do more things for the customer. I talked
Speaker 13: about the sprayer. We're automating all our functions on all
Speaker 13: of our machines. We've increased our engineering spend by sixty
Speaker 13: percent over the last three or four years since we
Speaker 13: started a strategy.
Speaker 12: We've bought six tech companies.
Speaker 13: We just announced the biggest ag tech deal in history
Speaker 13: with Trimble agg where is over a two billion dollar
Speaker 13: deal to bring those to their technology and our technology together.
Speaker 13: So technology is a big deal. Now let's talk about
Speaker 13: the autonomy question. Already, guidance, which Trimble is one of
Speaker 13: the world leaders in, is used by farmers once they
Speaker 13: get into the field. They get into the field and
Speaker 13: they already turn on auto steer, which is a satellite
Speaker 13: driven guidance. Tip the steering wheel out of the way
Speaker 13: and the machine steers for itself. Now it's still supervised today,
Speaker 13: but most large AGG has is the machine is doing
Speaker 13: the steering for itself. We've committed when we were in
Speaker 13: Wall Street last week last year, we committed that by
Speaker 13: the end of the decade, so twenty thirty, we would
Speaker 13: have the full crop cycle, meaning planting spring, tractors harvesting
Speaker 13: all a ton with no driver in them and by
Speaker 13: twenty twenty five, we'd have a retrofit kit that would
Speaker 13: be able to be put on an existing machine to
Speaker 13: make it autonomous. So it's a more contained environment. There's
Speaker 13: not so much other traffic and other things in the way,
Speaker 13: and you can stop. You don't have a lot of
Speaker 13: other traffic around you, so you can. If it runs
Speaker 13: into a situation that hasn't seen before, the machine will
Speaker 13: just fail. Safe mode is stop, and then you can
Speaker 13: remotely view into it and restart it.
Speaker 2: It's like a boat, right, there's lots of move there's
Speaker 2: a lot of space around you. Autopilots work really really well. Hey,
Speaker 2: in twenty twenty four, what do we expect for your company?
Speaker 2: Do you see higher prices due to inflation continuing?
Speaker 12: Yeah, prices are going to moderate.
Speaker 13: You know, these last couple of years we put a
Speaker 13: lot of pricing into the market, more than our a
Speaker 13: little bit more than our cost. We expect to still
Speaker 13: put more than our cost into the market because of
Speaker 13: all this technology we're bringing in the value it generates.
Speaker 13: But inflation is coming down pretty significantly for us, and
Speaker 13: so we think it'll be.
Speaker 12: Much more normalized. You know, we haven't given guidance.
Speaker 13: But it'll be more in the mid to lowest single
Speaker 13: digits than where.
Speaker 12: We've been before.
Speaker 2: Any any kind of peaked in terms of the ag
Speaker 2: machinery market, do you see any kind of peeking out?
Speaker 13: Well, we've still got strong demand going into next year.
Speaker 13: Our order boards are out six or seven months on large.
Speaker 13: Egg were sold out for our seasonal products were all
Speaker 13: through bodyear twenty four, so we still see twenty four
Speaker 13: as a good year, although getting more normalized.
Speaker 2: All right, love it, listen, come back soon, So appreciate it.
Speaker 2: Eric Hansodia. He is chairman, presidentco at AGCO on Zoom
Speaker 2: from du Luth. George is so appreciate your time.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Eastern on Bloomberg Radio,
Speaker 1: the Bloomberg Business App and YouTube. You can also listen
Speaker 1: live on Amazon Alexa from our flagship New York station,
Speaker 1: Just say Alexa play Bloomberg eleven thirty.
Speaker 3: Well shares of Hurts closing out a record low today,
Speaker 3: This after the company last week mister earnings estimates amid
Speaker 3: Tesla price cuts in the high price of repairs for
Speaker 3: those evs really eager to hear from our next guest
Speaker 3: about all things when it comes to the car rental
Speaker 3: industry here in the US and around the world. Chrissy
Speaker 3: Taylor as President and CEO of Enterprise Mobility. It's the
Speaker 3: company Carol that until recently was known as Enterprise Holdings.
Speaker 2: That's right. They own National car Rental and Alamo. Chrissy,
Speaker 2: by the way, the third generation of the Taylor family
Speaker 2: to run Enterprise. Her grandfather Jack Taylor founded Enterprise back
Speaker 2: in nineteen fifty seven, and his son Andrew was CEO
Speaker 2: before Chrissy, so it really is a family run business. Enterprise,
Speaker 2: by the way, has a fleet of two point three
Speaker 2: million vehicles and ninety thousand employees around the world. And
Speaker 2: we are so delighted to have Chrissy here in our
Speaker 2: Bloomberg studio. Welcome, Welcome, welcome, Thank you so much.
Speaker 14: I'm great, Thank you so much for having us. And
Speaker 14: we're excited about this announcement. Once Enterprise Holdings and now
Speaker 14: Enterprise Mobility.
Speaker 5: Why the change.
Speaker 14: Yeah, we have been moving Enterprise really has been moving
Speaker 14: mobility forward for sixty five years, and we are excited
Speaker 14: because all of our business lines like Daily Rental are
Speaker 14: gigantic and our huge opportunity for for us. And so
Speaker 14: over sixty five years we have involved in terms of geography,
Speaker 14: customer segments, and products and services that we offer. And
Speaker 14: so when my grandfather founded Enterprise as a leasing company,
Speaker 14: we're now known as the world's largest rental car company.
Speaker 11: We now have we have car.
Speaker 14: Sales, a retail car sale operation, We've got car sharing,
Speaker 14: we've got vanpooling and commuting, We've got a truck rental business.
Speaker 14: We have global operations, we have hourly, we have luxury,
Speaker 14: we have a variety of technology solutions with partners, and
Speaker 14: so Enterprise mobility better fully represents who we are and
Speaker 14: what we do today.
Speaker 2: I don't you drones they're going to be doing.
Speaker 14: There aren't drones, but we are definitely leaning into the
Speaker 14: future about what's next.
Speaker 3: So you're prot you're private company, so we don't get
Speaker 3: a good look every quarter. You know, under the hood,
Speaker 3: so to speak of the company. But if you think
Speaker 3: about the whole pie, what portion of that is daily
Speaker 3: rental versus everything else you just mentioned, Because I think
Speaker 3: it's fair to say a lot of consumers no Enterprise
Speaker 3: for its core business.
Speaker 14: They do the world knows us as rental car and
Speaker 14: it is a majority of our business today. However, the
Speaker 14: original business that my grandfather founded, which is today Enterprise
Speaker 14: Fleet Management, has six hundred and seventy five thousand vehicles,
Speaker 14: where daily rental in North America has one point two
Speaker 14: million vehicles. So fleet is half the size of our
Speaker 14: of our rental business. We've got ninety thousand vehicles in
Speaker 14: our Truk rental operation, and we continue to grow our
Speaker 14: footprint with retail car sales with over one hundred and
Speaker 14: fifty dealership locations. So when we look across the enterprise
Speaker 14: mobility portfolio, there is a ton of opportunity, not just
Speaker 14: in rental. We love rental, but we are way more
Speaker 14: than a rental car company. And when we look at
Speaker 14: the future in growth, it really is in a lot
Speaker 14: of these other business lines where people have opportunities to
Speaker 14: develop careers.
Speaker 11: And stay with us for the long haul.
Speaker 2: It's great, Well, what is the most profitable part of
Speaker 2: your business?
Speaker 14: So when we look across our entire business, all of
Speaker 14: our businesses contribute to the bottom line and revenue. And
Speaker 14: so we had a phenomenal fiscal year, a record breaking
Speaker 14: fiscal year, and so we measure that in terms of
Speaker 14: employee engagement has never been higher. Customer satisfaction around the
Speaker 14: globe has never been better, and those two things drive
Speaker 14: business results.
Speaker 11: We look at our internet.
Speaker 2: The economy also drives absolutely.
Speaker 14: The traveler is back on. Yeah, no question, Sorry, I
Speaker 14: didn't mean to cut you off.
Speaker 2: No no no no, no, go go go, But I'm just
Speaker 2: we Tim and I were talking and kind of getting ready,
Speaker 2: like we love companies like this because it does give
Speaker 2: you a great snapshot of the economy at a time
Speaker 2: when we feel like Chrissy. We get such mixed data
Speaker 2: points from day to day, week to week.
Speaker 14: So the traveler is back on, and we see that
Speaker 14: at the airport and they want to travel. The business
Speaker 14: traveler is back only thirty percent when we talk about
Speaker 14: our daily rental business happens at the airport. Seventy percent
Speaker 14: of our business happens in our suburban market.
Speaker 3: Who are the people who are renting in suburban markets.
Speaker 11: Do have leisure customers.
Speaker 14: So when somebody's going away for Thanksgiving, they might drive
Speaker 14: from Saint Louis to Chicago. But a majority of that
Speaker 14: business is long term contracted business. So Bloomberg, when you're
Speaker 14: traveling for business, you go rent a car. We have
Speaker 14: many of those business customers that rent in the home city.
Speaker 14: And then we also have a large part of our business.
Speaker 14: If you unfortunately get an accident, you then your insurance
Speaker 14: company will refer you as the rental as we are
Speaker 14: the replacement vehicle, and so it's long term contracted business
Speaker 14: that we are helping the communities move.
Speaker 3: Let's talk evs. How do evs fit into the future
Speaker 3: of mobility.
Speaker 14: So we absolutely embrace the responsibility and the opportunity to
Speaker 14: transition our fleet, and we want to make sure we
Speaker 14: take a long term perspective on that and strategic look
Speaker 14: and put the customer at the center of everything that
Speaker 14: we do. There are three things when we talk about electrification.
Speaker 14: One customer experience. We want to make a positive difference
Speaker 14: in that experience for the customer because it is new
Speaker 14: technology and they don't understand most people don't understand charging.
Speaker 14: The second thing we focus on is power in our
Speaker 14: communities and infrastructure. So where are you charging in all
Speaker 14: of our local communities, And then we want to make
Speaker 14: sure that that charging its equitable and accessible because we
Speaker 14: have ninety five hundred locations not just at airport, but
Speaker 14: in a variety of communities that people need access and
Speaker 14: so for us, it's not about the numbers we're putting in. Yes,
Speaker 14: we've got electric vehicles in our fleet, but it is
Speaker 14: about making sure the customer has a great experience and
Speaker 14: we are a trusted, valued partner in that transition.
Speaker 2: Are you slowing the other purchase of EV's and we're
Speaker 2: asking because it does feel like there's some momentum behind
Speaker 2: kind of a slow down.
Speaker 3: And talked about it just last week consumers.
Speaker 14: Yeah, we have thousands of vehicles in EV's in our fleet,
Speaker 14: both in Europe and in the US, and our buy
Speaker 14: is a continuous buy and so we will continue to
Speaker 14: add evs, but it will be at the pace of
Speaker 14: our consumer and also our fleet management business.
Speaker 11: It's really important.
Speaker 14: It's not just about adding vehicles into our rental fleet.
Speaker 11: Our fleet management business. We help small to.
Speaker 14: Medium sized businesses with their goals. Domino's Pizza is a
Speaker 14: great example. They are an awesome partner and they are
Speaker 14: electrifying their delivery fleet. We are the fleet management company
Speaker 14: behind that, and we are a trusted advisor and we
Speaker 14: love to play that backseat role to help Dominoes achieve
Speaker 14: their goal of delivery, which is great. So it's about
Speaker 14: buying evs, but it's also about being a partner and
Speaker 14: a trusted advisor.
Speaker 3: Well, how many evs do you guys have the in
Speaker 3: the you know, traditional rental car fleet right now?
Speaker 11: So we have thousands.
Speaker 14: So we have probably about five thousand vehicles in traditional
Speaker 14: rental and we will put them in the We put
Speaker 14: most of them in our suburban market where people live
Speaker 14: and work.
Speaker 3: And do you see that number growing? How do you
Speaker 3: see that number growing over the next.
Speaker 14: Few years as our fleet grows and as the customer
Speaker 14: demand grows, we will continue to add those vehicles into
Speaker 14: our fleet.
Speaker 3: It's just like a start serment twice about it, though,
Speaker 3: after what we saw from Hurtz where they're saying, okay,
Speaker 3: you know the value of teslas have gone down, so
Speaker 3: that's hurt us as a business, and then the repair
Speaker 3: costs are more expensive than we thought. Does that make
Speaker 3: you think differently?
Speaker 11: So when the customer demand, we will continue to move
Speaker 11: at the pace of the customer we get.
Speaker 2: So that's what we're Tipheria is our consumers demanding them less.
Speaker 14: The demand for consumers and evs is very low right now.
Speaker 14: That is why it is important that that customer experience
Speaker 14: is on point. So we have thousands of them. We
Speaker 14: do transactions. People do ask for evs, right, but it's
Speaker 14: not to the point where someone is asking. The difference
Speaker 14: would be or the example would be a suburban rental
Speaker 14: over the holidays. We know everyone wants minivans and suburbans.
Speaker 14: They're loading up the cars, they're going on holiday. Some
Speaker 14: people want an EV. That's not to the point where
Speaker 14: we're at. And so fleet plans are very, very important
Speaker 14: in our business. We look at it every single day.
Speaker 14: We want to make sure that we.
Speaker 11: Have just like I look at the numbers, I look
Speaker 11: at the numbers.
Speaker 14: We want to make sure that our fleet is diverse
Speaker 14: and represents consumer demand so that we can meet their
Speaker 14: expectations and provide a great experience. And we have a
Speaker 14: huge role to play that. So we need to be
Speaker 14: on point when we're renting an EV. It's not only
Speaker 14: just it's electrified.
Speaker 11: These cars. Have you all driven an EV?
Speaker 8: Yeah?
Speaker 14: Their technology is this is a techno culture.
Speaker 3: It's off the hook, very getting and driving it for
Speaker 3: the first time.
Speaker 14: It's a rental, it is very complicated and the average
Speaker 14: age of the vehicle from the road is eleven is
Speaker 14: eleven years. They are fast, there's a lot of technology
Speaker 14: in it, and it's electric and so we need to
Speaker 14: be very mindful and thoughtful of what is the customer experience.
Speaker 14: So I know I'm a broken record, but it is
Speaker 14: really important that customer experience is high and we do
Speaker 14: the right thing by the customer.
Speaker 2: Top of mind. When you look at the next six
Speaker 2: to twelve months, does recession ever come into your mind
Speaker 2: right now?
Speaker 14: We are very optimistic. We do not see travels slowing
Speaker 14: down right now. And in all of our business lines
Speaker 14: with truck rental is a good indicator of the holidays
Speaker 14: because their last mile, they're delivering products and services that
Speaker 14: are coming for the holidays, and that business is doing
Speaker 14: very very well. And we see a strong holiday daily rental.
Speaker 14: We see a strong holiday and throughout the beginning of
Speaker 14: next year. So we are very optimistic about the next
Speaker 14: twelve months.
Speaker 3: Cool come back.
Speaker 2: This was really fun. We can talk so much more. No,
Speaker 2: it's like such a fascinating space and between cars consumers,
Speaker 2: it's a lot of stuff. But we've got to do
Speaker 2: some news. Thank you come back soon, Yes, thank you
Speaker 2: very much.
Speaker 12: Chu ch up.
Speaker 2: Yet we're so delighted Christy Taylor. She's president and chief
Speaker 2: executive officer of Enterprise Mobility. Joining us here in our
Speaker 2: interactive broker studio.
Speaker 1: You're listening to the Bloomberg Business Week Podcast. Catch us
Speaker 1: live weekday afternoons from three to six Eastern Listen on.
Speaker 9: Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App,
Speaker 9: or watch us live on YouTube.
Speaker 2: So let's get to it. Max Chafkin writes about it
Speaker 2: today's edition of.
Speaker 3: Those were his words, Taylor, I was just reading, right.
Speaker 2: Don't blame me for He's to me at his desk
Speaker 2: and he just chuckles his way through these things. It's
Speaker 2: the BW Daily, the Bloomberg Business Week newsletter. It gives
Speaker 2: you the power Business Week in a handy dandy form.
Speaker 2: Sign up at Bloomberg dot com Slash Newsletters. You can
Speaker 2: also read Max's story on the Bloomberg. He's here in
Speaker 2: our studio. Who ever thought.
Speaker 5: Wikipedia, well, you know, it's one of these.
Speaker 15: It's like a part of the Internet that I think
Speaker 15: we all take for granted that I, you know, have
Speaker 15: I've been only been thinking about this over the last
Speaker 15: week or so because Elon Musk has spent a lot
Speaker 15: of the last week attacking Wikipedia. He's in something of
Speaker 15: a tiff with the founder.
Speaker 2: I just tell you he's ticked off at everything.
Speaker 5: Well he's a tiff prone, we should say.
Speaker 15: But in any case, you know, Wikipedia is super interesting
Speaker 15: because you know, it's been around since two thousand and one.
Speaker 15: People who are about my age, you know, I'm forty one,
Speaker 15: will remember that. You know, college professors, high school librarians
Speaker 15: were very down on Wikipedia when it was launched in
Speaker 15: its early years, but over the years there's been basically
Speaker 15: study after studies showing that it's very accurate or compares
Speaker 15: well to traditional research sources. And I think, really importantly,
Speaker 15: as you said in that intro, tim it's doesn't it
Speaker 15: doesn't do a lot of the stuff that we've come
Speaker 15: to associate with the negative parts of the Internet. There's
Speaker 15: no ads, there's not a lot of rage bait, and
Speaker 15: there's a real care about the truth. And what's super
Speaker 15: interesting when you look at sort of recent research about
Speaker 15: Wikipedia is it's actually gotten less fringy over the years.
Speaker 15: So our normal thought about social media is it sort
Speaker 15: of tends to suck people into these far right or
Speaker 15: far left or just weird and kooky rabbit holes. Wikipedia
Speaker 15: has actually become less like that, which is which is
Speaker 15: super interesting and I think, you know, maybe worthy of acknowledgment,
Speaker 15: if not outright celebration. So the question is is how Yeah,
Speaker 15: So what's a couple of things. I Mean, one one
Speaker 15: big reason I think is the business model. You don't
Speaker 15: have this engagement driven BIS model that depends on getting
Speaker 15: people to stay there for a really long time. So
Speaker 15: if your goal was to like maximize ad spend, what
Speaker 15: you'd probably want to do is have lots of controversial
Speaker 15: articles about you know, about the wildest topics you know,
Speaker 15: so conspiracy theories or just like friends stuff. Wikipedia doesn't
Speaker 15: do that. The other thing is there was a conscious
Speaker 15: choice made by you know moderators, these these people who
Speaker 15: work essentially for free to maintain Wikipedia, to favor you know,
Speaker 15: mainstream news outlets and academic journals over kind of what
Speaker 15: you might think of as the do your own research
Speaker 15: school of a fact finding. And that, of course is
Speaker 15: in marked contrast to the trend that we've seen not
Speaker 15: just from Elon Musk right, who's been in this kind
Speaker 15: of long running battle with the mainstream media as he
Speaker 15: sees it, but also Facebook and all of the other
Speaker 15: social networks, they've all moved away from news. They've all
Speaker 15: moved towards this kind of like favoring influencers essentially over
Speaker 15: you know, academic papers and mainstream news organizations.
Speaker 5: And I think that's had a.
Speaker 15: Negative impact on the sort of truthfulness of what you
Speaker 15: find on the Internet.
Speaker 2: Not going to name names, but I think it's fair
Speaker 2: to say that people in the media business, maybe a
Speaker 2: few on air, you know, anchors and talent, occasionally are like, oh, Wikipedia,
Speaker 2: I've just been jammed a story, like, let me quickly
Speaker 2: look there. Having said that, is it accurate? Is it reliable?
Speaker 15: So and when you talk to people who have studied this,
Speaker 15: the answer broadly is yes. It compares well to you know,
Speaker 15: traditional news and information sources. That said, it kind of
Speaker 15: depends what you're looking at. So well trafficked Wikipedia entries
Speaker 15: are extremely accurate. I talked to an academic, Amy Bruckman
Speaker 15: at Georgia Tech, who said it's the most accurate information
Speaker 15: source ever created in human history for topics that are
Speaker 15: sort of well trafficked, and that includes controversial topics. So
Speaker 15: if you look at the page for like the war
Speaker 15: in Israel right now, you will see a you know,
Speaker 15: a thorough, fair minded, very fact filled entry for stuff
Speaker 15: that's more niche, where you maybe only have one or
Speaker 15: two editors, mean it's a lot less reliable.
Speaker 3: I don't even have I don't even think I have
Speaker 3: a wik vie. Well, either you're gonna have to change that.
Speaker 3: Maybe someone one of these you know, tens of thousands
Speaker 3: of editors can go and do that. But but it
Speaker 3: actually brings up a good point, Carol, brings up a
Speaker 3: good point, Max, is what happens when maybe a previously
Speaker 3: unknown presidential candidate wants to jump into the spotlight and uh,
Speaker 3: you know, hires some interns to go and try to
Speaker 3: you know, kind of edit the Wikipedia entry a little bit.
Speaker 15: Yeah, you know, Vivik Ramaswami got caught out essentially hiring somebody.
Speaker 15: This was actually disclosed on the Wikipedia page. I love
Speaker 15: so totally above board. But but I think this is
Speaker 15: a good example because he was called out number one
Speaker 15: and number two it essentially called attention to the thing
Speaker 15: that that he was interested in, you know, kind of
Speaker 15: affecting the Wikipedia entry on which which was this fellowship
Speaker 15: he had received from a Soros connected uh nonprofit. And
Speaker 15: and I think this is this tends to happen a lot.
Speaker 15: People will actually get caught trying to manipulate Wikipedia, and
Speaker 15: it sort of does a Striisand thing where where it
Speaker 15: essentially calls attention to the ways that the truth is.
Speaker 3: Being manipulate effective.
Speaker 15: Yeah, and that's the idea that when you deny something
Speaker 15: or you try to cover it up, but it only
Speaker 15: calls more attention.
Speaker 3: Barbara Streisand try to do it with one of our homes,
Speaker 3: you know, years ago, and then everybody was like, oh,
Speaker 3: barbar Streisand's home, let's go find it.
Speaker 15: And so yeah, so rich guys and powerful people are
Speaker 15: constantly stepping in it, either trying to edit their own
Speaker 15: Wikipedia pages that's like kind of amateur hour, or like
Speaker 15: hiring someone to do it, which is the case that
Speaker 15: happened here. And again I should say this was disclosed
Speaker 15: and that's part of why we found out about it.
Speaker 15: But Wikipedia has a very transparent system for showing you
Speaker 15: how stuff is edited. So one thing that's great is
Speaker 15: that if some false fact or conspiracy theories shows up
Speaker 15: on Wikipedia, it'll be taking care of. It'll be disappeared
Speaker 15: very quickly. That's the opposite of social media, right where
Speaker 15: you see these kind of engagement. Eight headlines and so
Speaker 15: on just circulate widely, even after they've been debunked on Wikipedia.
Speaker 5: They go away and you have this paper.
Speaker 15: Trail essentially where you can go back and see what happens,
Speaker 15: so you can see was it deleted appropriately? What is
Speaker 15: the truth of it? And so when you get into
Speaker 15: you know, well trafficked topics such as presidential candidates, you're
Speaker 15: not necessarily gonna get the most the best written article,
Speaker 15: but you're going to get something that is likely to
Speaker 15: be mostly factually true, relatively fair and balanced, and importantly
Speaker 15: something that you can kind of audit yourself. Right, they're
Speaker 15: these citations. You can go through it, you can decide, hey,
Speaker 15: how true is this? How much do I trust them?
Speaker 2: It's like amazing, right in this kind of mess of
Speaker 2: policing when it comes to social media that there's kind
Speaker 2: of the spuritans or API.
Speaker 5: I don't know if that's the right, right.
Speaker 15: I know it non paid, very idealistic. Yes, it's a
Speaker 15: throwback to the to the way the Internet was in.
Speaker 3: Surly Max doesn't have a Wikipedia page, but he cited
Speaker 3: many times on Peter Thiel's Wikipedia page. How if you
Speaker 3: knew that.
Speaker 15: Not notworthy enough, and that's a whole that's another big
Speaker 15: debate that happens on.
Speaker 3: In our minds. You're noteworthy enough. That means we also
Speaker 3: read his book about Peter.
Speaker 2: Tele's good, we could write. What all I'm going to
Speaker 2: tell you is you also have to check out his story.
Speaker 2: Either go to ex or Twitter or at Chafkin, or
Speaker 2: go to the Bloomberg or Bloomberg dot com because there's
Speaker 2: just one thing in there, because this is a family show,
Speaker 2: but about Elon offering a billion dollars.
Speaker 11: But there was a name.
Speaker 2: Changed what it would be called. So we're going to
Speaker 2: leave that on the table, shall we.
Speaker 5: Sounds good, it'll make you chuckle though.
Speaker 2: All right, we're going to run nex chef in Yes,
Speaker 2: you deserve a Wikipedia page and so much more. He
Speaker 2: is calumnist for Bloomberg Business Week, also.
Speaker 3: The author of the Contrarian Peter Teale and Silicon Valleys
Speaker 3: Pursuit of Power.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Easter on Bloomberg Radio,
Speaker 1: the Bloomberg Business app and YouTube. You can also listen
Speaker 1: live on Amazon Alexa from our flagship New York station
Speaker 1: Just say Alexa play Bloomberg eleven thirty.
Speaker 2: Plenty ahead in our second hour of the weekend edition
Speaker 2: of Bloomberg Business Week, including an exploration of America's culture
Speaker 2: wars from our team at the magazine, specifically when it
Speaker 2: comes to schools, brands, and political candidates.
Speaker 3: Plus the digital fundraising tool that helps kids raise money
Speaker 3: for school athletics clubs, and more. We speak with the
Speaker 3: CEO of Snap.
Speaker 2: Mobile first up this hour. We've got a woman with
Speaker 2: some serious credentials in the consumer good space, including stints
Speaker 2: in management with the likes of craft Foods, PepsiCo and
Speaker 2: sc Johnson.
Speaker 3: And mccurjee now serves as CEO of Pernoul Ricard North America,
Speaker 3: and this week she sat down with Carol and Bloomberg
Speaker 3: Market Senior editor Mike Reagan to offer her insights on
Speaker 3: the consumer trends driving a global spirits industry worth well
Speaker 3: over two hundred billion dollars.
Speaker 2: Well, I want to start big. Broadly, the global luxury
Speaker 2: wines and spirits market is driven by factors such as
Speaker 2: the growth and interest in premium and unique products, the
Speaker 2: rise in demand for organic and sustainable products, and the
Speaker 2: popularity of experiential, and it generated more than two hundred
Speaker 2: and twenty nine billion in twenty twenty one, anticipated to
Speaker 2: generate nearly four hundred and fifteen billion by twenty thirty one,
Speaker 2: a compound annual growth rate of about six point two
Speaker 2: percent from that tier time period, or from twenty twenty
Speaker 2: two to twenty twenty thirty one. That's from Allied Market Research,
Speaker 2: So big market. We know we all drank a lot
Speaker 2: during the pandemic. We're still kind of figuring out what
Speaker 2: normal is post pandemic. So let's get to it, because
Speaker 2: we have a perfect guest who is a front seat
Speaker 2: to this industry, delighted to have with us, Anne Mckergey.
Speaker 2: She is CEO of Preno Ricard North America and as
Speaker 2: I said, joining us here in studio, welcome, welcome, Welcome,
Speaker 2: great to be here, Carol. I love your background. I
Speaker 2: didn't even know this term FMCG fast Moving consumer good space.
Speaker 2: So you've worked at Craft Foods, Sales Marketing, General Management,
Speaker 2: PepsiCo SGSC Johnson. Excuse me, really, Senior Roles, Global Chief
Speaker 2: Marketing Officer, Global Chief Commercial Officer at s C. Johnson,
Speaker 2: present Global Snacks and Global insides of PepsiCo. What the
Speaker 2: heck makes some a fast moving consumer? Like I get
Speaker 2: it with alcohol, babet, but what makes it that?
Speaker 5: Well, what's interesting is alcohol is actually not at MCG.
Speaker 5: It's just CpG. Fast is like stuff that just flies
Speaker 5: off in a grocery store, like lazed potato chips. A
Speaker 5: thousand units per store per week. That's fast.
Speaker 2: Oh my god. So it's how do you then think
Speaker 2: about like something marketing sales that kind of a good?
Speaker 2: Or do you even have to because it just moves
Speaker 2: so quickly.
Speaker 5: It would just move so quickly, yeah, whereas it in
Speaker 5: spirits we don't move a thousand units for store per week.
Speaker 5: But you know, but we have very high price points.
Speaker 5: So even we might move not that fast, we make
Speaker 5: a lot of money.
Speaker 7: Yeah, and I got to cut right to the chase.
Speaker 7: Ye screwball whiskey, I'm fascinated with you. For those who
Speaker 7: are unfamiliar, it's peanut butter flavored whiskey. I picture commercial.
Speaker 7: You know you've got whiskey in my peanut butter? You
Speaker 7: got peanut butter. Now, I know you guys acquired the brand.
Speaker 7: I can't help but think though, if R and D
Speaker 7: person in your company had come up with that what
Speaker 7: your reaction would because it doesn't sound like something that
Speaker 7: would be a success, kind of a surprising success exactly.
Speaker 5: It's like nobody thought people needed wheels on suitcases, but
Speaker 5: here we are, we're all using them. So you know,
Speaker 5: Screwball whiskey. First of all, it's what an incredible gem, right,
Speaker 5: it was before we bought it the third fastest growing
Speaker 5: independent brand behind Tito's and Casa Zul. That's it's amazing.
Speaker 2: Yeah.
Speaker 5: And the founders, who are amazing people, right, They gave
Speaker 5: their heart and soul into that brand. And the reason
Speaker 5: that the brand even existed was the founder Steve. He
Speaker 5: is from Cambodia and came through refugee camps, etcetera. I'm
Speaker 5: gonna make a long story short.
Speaker 2: No, No, it's a really funny thing touched.
Speaker 5: Into it because God is some beautiful story. So it
Speaker 5: comes from Cambodia. He has polio. His parents do everything
Speaker 5: to get him here. They live in refuge refugee camps.
Speaker 5: Finally they come to Houston and the very first thing
Speaker 5: they give him is a peanut butter sandwich. It and
Speaker 5: for him, peanut butter represents freedom and so he has
Speaker 5: this passion about peanut butter, and you know, then he
Speaker 5: gets into the restaurant business and he just he takes
Speaker 5: jamison coincidentally and takes peanut butter and like puts the
Speaker 5: two together and creates screwball. And this thing is it's
Speaker 5: it's electric. It went on fire and if and the
Speaker 5: reason why is because the United States consumer a loves
Speaker 5: flavored whiskey number one, number two. We have a very
Speaker 5: sweet palette versus the rest of the world.
Speaker 2: Agree.
Speaker 5: So when people drink peanut butter whiskey with screwball, they're
Speaker 5: like and then they put in their mouth and they go,
Speaker 5: oh my god, that's amazing.
Speaker 12: That was my action.
Speaker 7: You hear about it and you're like, wait what and
Speaker 7: then you try it and it's like, oh, we had.
Speaker 2: We have the founders that have Duke and Dame salted
Speaker 2: caramel whiskey and the same thing. We're like, I don't
Speaker 2: get it. They actually brought us some liquor. I'm just
Speaker 2: going to put it out there. No, no, no, but
Speaker 2: it was really interesting. I taste it like no, no,
Speaker 2: no, no no. I don't like whiskey. I like bourbon, but
Speaker 2: I don't like whiskey. And like that just what it
Speaker 2: did to the tone in it. That's exactly what you
Speaker 2: are talking about. So people are playing is it easier
Speaker 2: to acquire versus play around in a lab?
Speaker 5: You know, we do both, right because the other you know,
Speaker 5: flavored whiskey that's been a huge success for us has
Speaker 5: been Jamison orange and this whole trend around old fashions
Speaker 5: and citrus and whiskey, and unlike other kind of flavored whiskeys,
Speaker 5: Jamison is very whiskey forward. But when you smell it,
Speaker 5: you smell the rind of the orange put in your mouth.
Speaker 5: You taste that whiskey and that orange after to it's
Speaker 5: just heaven. So there's becoming more kind of I would say, artisan,
Speaker 5: more invention around flavored whiskey. So we do both.
Speaker 2: What's the premium on acquisitions right now? Because I feel
Speaker 2: like these specialty liqueurs and people who are experimenting coming
Speaker 2: up with something different they're in People want them, Companies
Speaker 2: want them.
Speaker 5: They really do. And I will tell you it's kind
Speaker 5: of all over the board. And I would tell you
Speaker 5: because Tequilas have exploded some of the recent.
Speaker 2: Acquisitions, am I it's too much no offense. Celebrities love
Speaker 2: you George Clooney loved you. But I mean it feels
Speaker 2: like everybody's creating a tequila.
Speaker 5: They are, and what's really matters is quality tequila. That's
Speaker 5: where we are now, right, That's what's going to win
Speaker 5: in the end. So we just bought Codigo, which is
Speaker 5: a very high end, super premium. It's got this rose
Speaker 5: believe it or not Rose tequila. Oh wait till you
Speaker 5: put it in your mouth. So it's it's now about.
Speaker 2: It doesn't have to go to margarita.
Speaker 5: No, it does not. Actually, I'll tell you about what
Speaker 5: could go into a margarita that you wouldn't expect. But
Speaker 5: I'll come to that in a second. Peanut butter, No, No,
Speaker 5: it's mescal. Oh dell mgay mescal, which is the number
Speaker 5: one moscal capazaars. But you make a margarita with it
Speaker 5: and it's got that little extra smoke. It's unbelievable.
Speaker 2: I have to get it from my brother. He's a
Speaker 2: great margarita make.
Speaker 5: Oh thiscility listening, yes, and so so I will tell
Speaker 5: you now is the time for I mean, people just
Speaker 5: love to experiment. I agree that's post COVID right, because
Speaker 5: people like they were, you know, making areas at all experiential.
Speaker 5: It's all about the experience, and so having that right portfolio,
Speaker 5: making sure you're on the trend of all the things
Speaker 5: that are growing is really really critical, you know.
Speaker 7: And over the years, consolidation has been such a big
Speaker 7: theme in the beverage industry. You know, all the beer
Speaker 7: companies getting rolled up until we have two majors. I'm
Speaker 7: kind of surprised to see this Brown Foreman news today.
Speaker 7: They're selling the Finlandia vodka brand.
Speaker 2: How do you want it?
Speaker 11: Would you want it to know?
Speaker 2: Okay, we have absolutely no.
Speaker 7: I'm just going to say, but are the big is
Speaker 7: the big deal making in this space? Has it run
Speaker 7: its course? Have all the big deals that can be
Speaker 7: done have they been done? And now it's it's looking
Speaker 7: for these new growth, small batch type of things.
Speaker 5: Well, no, I think you're going to see it in
Speaker 5: both areas. So it did not surprise me about the
Speaker 5: de today with Coke. You have to understand both Coke
Speaker 5: and Pepsi, right, having worked at PepsiCo, you know, these
Speaker 5: are much narrower margin businesses. A lot of the carbonated
Speaker 5: soft drinks business is declining, so these people are looking
Speaker 5: for new profit pools so you're seeing a lot of
Speaker 5: these companies try to get into the alcohol business. And
Speaker 5: you know, Coke went early with Tapa Chico and you know,
Speaker 5: and so Pepsi's gone with Mountain Dew and so there.
Speaker 7: Now it makes sense to you to bold on liquor
Speaker 7: onto a soft drink company.
Speaker 5: So Lin put it this way. I love competition. Okay,
Speaker 5: We're about to do absolute Ready to Drink with Ocean Spray.
Speaker 5: Like it's it's like the biggest thing every retail I
Speaker 5: want Ready to Drink.
Speaker 2: I want to talk about that when we go back.
Speaker 5: But here's the thing. The reason they're getting into it
Speaker 5: is because they need more profit, they need more margin.
Speaker 5: And what's interesting about vodka right now in the industry
Speaker 5: is it's declining. The only thing that's growing as teams,
Speaker 5: it's declining. Anything that's white is declining. Jin vodka, rum
Speaker 5: all declining, okay, And so what's happening is you've got
Speaker 5: the Spirit company saying, oh, I don't want to be
Speaker 5: in there, and so but you got these these you know,
Speaker 5: software companies are like, I want to get in right.
Speaker 5: What I would say, because I am about to take
Speaker 5: over as chairman of Discus, which is the Trade Association,
Speaker 5: and I've said this to some of my friends of PepsiCo.
Speaker 5: Do it responsibly. I cannot tolerate, under any circumstances brands
Speaker 5: coming in, you know, and using kid packaging, advertising in
Speaker 5: the kids aisle. It's unacceptable. And you know, we have
Speaker 5: a responsibility as an industry.
Speaker 2: We've seen it with electronic cigarettes. Right, come on, folks
Speaker 2: like own it app do the responsible thing. Talking with
Speaker 2: Anne mccergey, she is CEO Pronovcard North America. She's in
Speaker 2: our Bloomberg Interactive Brokers studio, and I was thinking about,
Speaker 2: I mean, your brands.
Speaker 15: I had a.
Speaker 2: List here and I should just have you do it.
Speaker 2: Absolute Jamison, Koalua, hard liquor, Spirits, Champagne. I mean, I'm
Speaker 2: leaving out a lot. I think there's two hundred and
Speaker 2: forty brands overall. We just talked about Screwball, super premium
Speaker 2: peanut butter flavored American whiskey. How do you think about
Speaker 2: changes to the port folio and whether it's expansions, getting
Speaker 2: rid of how do you think about it?
Speaker 5: So you know what's great about our portfolio is it's
Speaker 5: very premium and we have and you want to keep
Speaker 5: that and we want to really keep that because if
Speaker 5: you look at two backcheck no, well you know good
Speaker 5: for trade jos. Okay, So, but what I tell you
Speaker 5: is when you think about consumption of alcohol, right, we
Speaker 5: all don't drink the same thing every time we drink.
Speaker 5: When we want to celebrate, we want to drink champagne. Right,
Speaker 5: we want to just relax and unwind. We might want
Speaker 5: a glass a bourbon.
Speaker 16: Right.
Speaker 5: When we want to impress somebody, we might want to
Speaker 5: take out a very high end cognac.
Speaker 10: Right.
Speaker 5: Nobody drinks the same thing. Why they drink is the
Speaker 5: context in which they're in. So when you have the
Speaker 5: right premium portfolio that goes across all these different occasions,
Speaker 5: you actually have an advantage. And our strategy for no
Speaker 5: recard is literally to activate more brands than our competition
Speaker 5: with the same cost to serve. So, but you have
Speaker 5: to do that if you know the science behind the demand,
Speaker 5: which brand belongs in which occasion, so you don't cannibalize yourself.
Speaker 5: So that is certain.
Speaker 2: Brands are really out front and center at certain times
Speaker 2: of the year, if you will.
Speaker 5: So, for instance, during Saint Patrick's Day, it's Jamison. Right
Speaker 5: in the summer, you're drinking Malibu, right. So there are seasons,
Speaker 5: there are occasions. Sometimes some occasions are year long, right.
Speaker 5: So you have to then devise a portfolio, and that's
Speaker 5: how you decide which brands you buy and which ones
Speaker 5: you sell.
Speaker 7: Your business model. It's like that Chumbawamba song. You know
Speaker 7: you got a whiskey, drink avoca, drink us my freaking
Speaker 7: But at the same time, you know, we all do
Speaker 7: drink different drinks at different times for different occasions, but
Speaker 7: also just in general. I get the impression that liquor
Speaker 7: consumers are a fickle group. You know, one year it's
Speaker 7: craft Beers the hot thing, the next year it's Seltzers,
Speaker 7: the next year it's fine whine.
Speaker 8: So how do you get ahead of that as an executive.
Speaker 7: In this industry.
Speaker 5: So we actually monitor the trends around how people are
Speaker 5: drinking in segments. So on average, in any given month,
Speaker 5: a consumer will drink about forty five drinks. Okay, that
Speaker 5: includes everything. Okay a month a month, right.
Speaker 2: So now I am mega No, I'm a mega lightweight.
Speaker 5: Go ahead, But what we've seen this is on average, right,
Speaker 5: some people drink wait less. So what you see on
Speaker 5: average is before the pandemic, forty five of those drinks
Speaker 5: were twenty of them were beer. Okay, after the pandemic,
Speaker 5: they've lost two whole drinks. There's only eighteen of them
Speaker 5: now for beer. And what gained was your spirit RTDs,
Speaker 5: spirits themselves, wine also longs.
Speaker 2: Ready to drink.
Speaker 5: Yeah, it's on fire. It's on fire because people are
Speaker 5: walking away from beer. Then they went to malted RTDs.
Speaker 5: But they're like, eh, taste isn't so great.
Speaker 2: How much is that growing the rtd Oh my god,
Speaker 2: for you guys, for us, it's it's exponential growth.
Speaker 5: It's like fifty percent like it.
Speaker 2: It's huge over a year.
Speaker 5: Yeah, it's huge, but off a small base, off a
Speaker 5: small base, small base, Okay, could it be a bigger base?
Speaker 5: Very much, a bigger base. I mean, we have RTDs
Speaker 5: and Absolute. We have it in Malibu, Jamison and an Absolute.
Speaker 5: We're just about to launch are ready to drink with
Speaker 5: Ocean spray? You know, So you think about you know,
Speaker 5: we were talking about the you know, the wonderful cocktail
Speaker 5: that you're all used to, which is the Cosmo. And
Speaker 5: so it's here's the big thing consumers post pandemic want
Speaker 5: cocktails conveniently period. That's what it is.
Speaker 2: Yeah, I'm not a good I know people who are
Speaker 2: really into it and they get the gear and they're
Speaker 2: like love it. I'm like, just give me the bottle,
Speaker 2: let me throw it over some ice.
Speaker 5: I'll tell you a great example. So this helps you
Speaker 5: understand the occasion. Women will get together, call it once
Speaker 5: a week, they'll have book club whatever, They'll drink their
Speaker 5: glass of Chardenay. And that's fine because it's easy to pour.
Speaker 5: You know, after week, after a week of Shardina, you're like,
Speaker 5: I really want a cocktail, but nobody wants to make
Speaker 5: a cocktail. So we launched Ready to Drink Altos margarita
Speaker 5: and literally all you do is pour it like you
Speaker 5: would wine, and it's an instant margarita. And I'm telling you,
Speaker 5: this thing is bar quality. And so now we're sourcing
Speaker 5: from wine as a as a tequila.
Speaker 2: It's pretty wild, Like you just get your head around it.
Speaker 2: But I've I sampled some over this summer and was
Speaker 2: really surprised at how good they were. Listen, we'd be remiss,
Speaker 2: We're Bloomberg Booze. Great leading indicator, especially because you play
Speaker 2: into the premium side. Of things of how the luxury
Speaker 2: market is going right now, how are the numbers in
Speaker 2: terms of this economy, and then going into next year,
Speaker 2: how would you describe it? How are you seeing it?
Speaker 5: Yeah, so you know, well we're getting past COVID, right,
Speaker 5: and COVID was a big boom. People were stocking up,
Speaker 5: et cetera, et cetera. The economy has been tough. We're
Speaker 5: seeing retailers actually bring down their inventories a bit because
Speaker 5: it's the cost of capital with interest rates is really
Speaker 5: really hard.
Speaker 2: That's interesting.
Speaker 5: We have the whole we have that whole global supply
Speaker 5: chain crisis. Now that's over. So what's what's happening is
Speaker 5: we're seeing resiliency in consumers drinking so you know, to
Speaker 5: sell out and what people are consuming. But now the
Speaker 5: inventory situation is kind of you know, kind of settling out.
Speaker 5: So when you look at the numbers, you know, from
Speaker 5: a net sales or a shipment's perspective, it's lower than
Speaker 5: actually what people are buying because there's a little bit
Speaker 5: of over inventory in the industry. But if you ask
Speaker 5: me long term, you said, those numbers in the beginning
Speaker 5: of the program like about six percent Kagger right, right,
Speaker 5: pre pandemic. That's we were going four or five percent
Speaker 5: every year. In the pandemic, it was double digits.
Speaker 1: Right.
Speaker 5: This is now the post COVID kind of shakeout, and
Speaker 5: I think as you move forward, you're going to go
Speaker 5: right back to that forty five percent.
Speaker 2: I love hearing about this. You've given us a snapshot
Speaker 2: on the economy. You and I and Mike. We're talking
Speaker 2: the break about drinking responsibly. You guys have a campaign.
Speaker 2: We have about forty five to fifty seconds left here.
Speaker 2: Just talk to us about that.
Speaker 4: Yeah.
Speaker 2: So I feel like you can't do one without the other.
Speaker 3: Yeah.
Speaker 5: So we believe on return on responsibility as much as
Speaker 5: return on investment. Everything from working with the government to
Speaker 5: get the Halt Right Act, to get breath lizers in
Speaker 5: cars so you cannot drive if you are drunk. We
Speaker 5: do a safe Night's program. We actually donated something called
Speaker 5: Engage Responsibly to stop hate online. And you know, we're
Speaker 5: trying to do everything that we can to be responsible.
Speaker 5: And you know, this call out to all my other competitors.
Speaker 5: Let's we're working together. Let's work together. Let's make it
Speaker 5: the right thing. I love it.
Speaker 2: So cars are going to be equipped you cannot start
Speaker 2: your car if you have alcohol. When do we get this?
Speaker 5: It's a law and now the car companies are trying
Speaker 5: to figure out.
Speaker 2: Come on, get it done exactly. Got the uaw out
Speaker 2: of the way, Let's get this together. I know that
Speaker 2: that is a very important issue for you, and we
Speaker 2: so appreciate you coming in. This was fine.
Speaker 5: Thank you.
Speaker 2: Come back so I promise with champagne or you got it.
Speaker 5: Next time will be I'm kidding, I'm kidding.
Speaker 2: This was a great way to wrap up in you guys.
Speaker 2: It's been so far a pretty crazy week. A mckerzy.
Speaker 2: She is ceopronover Card North America in our Bloomberg Interactive
Speaker 2: Brokers studio, Carol Master, Mike Reagan, this is Bloomberg.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from read a six Eastern Listen.
Speaker 9: On Bloomberg dot com, the iHeartRadio app and the Bloomberg
Speaker 9: Business App, or wants us live on YouTube.
Speaker 7: Well.
Speaker 2: Recent years have seen an explosion of boycotts and pressure
Speaker 2: campaigns aimed at everything from consumer companies think Disney, target
Speaker 2: bud Light. That's a little hint, everybody. Two Tech giants
Speaker 2: including Google, Facebook, and X to big banks and money managers,
Speaker 2: Black Rock, JP, Morgan City Group, a lot of targets.
Speaker 3: Yeah, it's actually kind of hard to keep up. There
Speaker 3: are so many boycotts and pressure campaigns. It's what Josh
Speaker 3: Green writes about when it comes to the polarizing cultural
Speaker 3: fights that dominate American public life. Also how they've poured
Speaker 3: into the consumer world, turning corporate America into a new
Speaker 3: battlefield when it comes to US politics. Check out his story.
Speaker 3: It's can be found on the Bloomberg terminal at Bloomberg
Speaker 3: dot com Slash business Week. Josh as national correspondent for
Speaker 3: Bloomberg Business. He's also the author of Devil's Bargain, Steve
Speaker 3: Mann and Donald Trump and the Storming of the Presidency.
Speaker 3: He joins us on the phone from Washington, DC. Also
Speaker 3: here is Joel Weber, the editor of the magazine. He's
Speaker 3: in our Bloomberg Interactive Broker's studio back in New York. Joel,
Speaker 3: there's a man who's got a company helping to navigate
Speaker 3: the culture wars, and he's got an interesting past. Didn't
Speaker 3: start the artist? Yeah, President Donald Trump's first presidential campaign. Yeah,
Speaker 3: didn't he saw the twenty sixteen election coming.
Speaker 17: Well, he was, as Josh writes, and this is part
Speaker 17: of this culture Wars package that we've been working on
Speaker 17: this week. And I thought from the minute Josh started
Speaker 17: talking about this that this was sort of a maybe
Speaker 17: the most important story in the package, because it showed that,
Speaker 17: you know, this person who is a top data scientist
Speaker 17: for Donald Trump in twenty sixteen took those lessons from
Speaker 17: what he saw and why the public underestimate or the
Speaker 17: press especially underestimated Donald Trump, and then turn that into
Speaker 17: something that he could talk to companies about. And so
Speaker 17: I was just really curious about what that looks like,
Speaker 17: because you're right you mentioned but light there earlier target
Speaker 17: like all of these the culture wars have come to
Speaker 17: corporate America, and yet there was someone who saw what
Speaker 17: it was all about before anybody else. And I just
Speaker 17: thought that was a really interesting insight. And those insights
Speaker 17: are actually incredibly valuable and something that I want to
Speaker 17: talk to Josh about. So Josh shy Trumpers who found them.
Speaker 16: So the guy we're talking about here is a data
Speaker 16: signer Republican data sign is named mattis Kowski, who has
Speaker 16: actually appeared in BusinessWeek magazine before in twenty sixteen, because
Speaker 16: longtime readers will remember that I was deeply embedded with
Speaker 16: the Trump campaign and during the twenty sixteen race, in
Speaker 16: a few weeks before the election, everybody expected Trump to lose.
Speaker 16: Me and a colleague got invited down with the only
Speaker 16: reporters allowed inside Trump's big data headquarters in San Antonio
Speaker 16: where he was doing all his kind of you know,
Speaker 16: Facebook data cooking and all that kind of stuff. And
Speaker 16: I met Matt Oshkowski on that trip. He was the
Speaker 16: head of Trump's data team, and he was the guy
Speaker 16: who was pushing the idea that was really laughed at
Speaker 16: at the time that there was a hidden tribe of
Speaker 16: Trump voters. You know, some people call them shy Trumpers
Speaker 16: or hidden Trumpers. But Matt, in his data was seeing
Speaker 16: that there were a lot of people who didn't ordinarily
Speaker 16: vote Republican who were really turned on by Donald Trump.
Speaker 16: They didn't care about taxes and you know, financial deregulation,
Speaker 16: they cared about immigration, wages, law and order. They tended
Speaker 16: to be rural, they tended to be older, and they
Speaker 16: were very, very angry and loyal to Donald Trump. And
Speaker 16: on the night the Trump won that election, me and
Speaker 16: my colleague pulled an all night or We got Matt
Speaker 16: on the phone at two am on election night and
Speaker 16: he sort of explained this all to us. Became a
Speaker 16: Business Week cover story the next day, and basically what
Speaker 16: I did in the story is kind of pick up
Speaker 16: the thread because Matt had a fascinating career since then.
Speaker 16: In the week after the election, obviously everybody wanted to
Speaker 16: know in politics, how did you guys do this? But
Speaker 16: his phone started blowing up, he told me at the time,
Speaker 16: not so much from political people, but from corporate brands
Speaker 16: and ad agencies and even professional sports teams. You know.
Speaker 2: He spent the.
Speaker 16: Next few months sort of circling the globe giving these
Speaker 16: talks about how it was he'd sort of identified this
Speaker 16: group of people and whether or not the kind of
Speaker 16: insights that he'd had about what he called voters cultural
Speaker 16: consciousness could be applied to the corporate space. And Matt
Speaker 16: thought it could and started this company that we write
Speaker 16: about in the issue at this time, taking those same
Speaker 16: insights and explaining how they kind of manifest themselves in
Speaker 16: the consumer arena, especially lately, and especially in terms of
Speaker 16: these kind of culture war boycotts we've seen around brands
Speaker 16: like Target and bud Light.
Speaker 17: Okay, so that's the thing that as you write, we
Speaker 17: saw what Trump was able to accomplish in the political realm,
Speaker 17: and even during his presidency we started to see it
Speaker 17: trickle over into into the corporate realm. What we've seen
Speaker 17: post Trump presidency is that has gone to eleven and
Speaker 17: if you're a business leader in this country, it just
Speaker 17: feels like you and your company could end up, you know,
Speaker 17: stepping in it again and again and again. So where
Speaker 17: does how does Oskowski help corporations?
Speaker 9: Now?
Speaker 16: Well, you know, his big insight with Trump and the
Speaker 16: motivations of voters was that what like normy political consultants
Speaker 16: didn't understand Republican and Democrat, was that it's really kind
Speaker 16: of values and morals driving people's behavior, kind of cultural
Speaker 16: consciousness that people just kind of come to the decisions
Speaker 16: in their lives through the lens of politics. And it's
Speaker 16: not just political decisions that they bring that lens to,
Speaker 16: it's also increasingly kind of consumer ones. So what he
Speaker 16: told me at the time was he's going around talking
Speaker 16: to these companies and ironically, one of the companies he
Speaker 16: talked to is Anhigh Bush, which which makes bud Light,
Speaker 16: But what he was trying to tell them was that, look,
Speaker 16: you your customers are kind of coming at the marketplace
Speaker 16: in a different way than maybe they did of before.
Speaker 16: This is something you should pay attention to. So I
Speaker 16: think his insight this year has has proven itself over
Speaker 16: and over. You know, back in March, bud Light launched
Speaker 16: this very controversial ad campaign with a transgender influencer. I mean,
Speaker 16: I remember talking to Matt at the time saying, you know,
Speaker 16: this doesn't make any sense because if you look at
Speaker 16: who bud Light's consumers are, and this is the sort
Speaker 16: of thing he studies, you know, they are a lot
Speaker 16: of them are you know, white male football sports fans.
Speaker 16: You know, the furthest thing you could get from the
Speaker 16: type of people who'd be positively influenced by a transgender
Speaker 16: Instagram influencer. And sure enough, you know, it blew up
Speaker 16: in right wing circles. It became viral on social media
Speaker 16: of you know, angry kind of trumpers going in and
Speaker 16: smashing up displays of bud Light and bud Light sales
Speaker 16: cell fairly precipitously kind of in the week's half for that.
Speaker 16: So I think it goes to highlight this sort of
Speaker 16: factor that he studies consumer's corporate sorry, consumers cultural consciousness
Speaker 16: and how that applies itself to different brands. And it's
Speaker 16: important to point out this isn't just Republicans. A lot
Speaker 16: of the boycott activity, and especially the political boycott activity,
Speaker 16: emanated on the right long before bud Light, and ironically enough,
Speaker 16: the real catalyst for that was Askowski's old boss, Donald Trump, who,
Speaker 16: once he got elected president, as we all remember, drove
Speaker 16: all kinds of corporate boycott's, you know, liberals pressuring companies
Speaker 16: to denounce Trump and really kind of upended the way
Speaker 16: that corporate brands deal with the political space.
Speaker 17: So josh Oskowski launches data intelligence company Human Behavior Now,
Speaker 17: and that's the main vehicle that he's using to like
Speaker 17: look out at corporate trends and consumer behavior.
Speaker 1: Right.
Speaker 17: And I'm curious, like when one thing that you read
Speaker 17: about here is that there are obviously the two extremes
Speaker 17: on both the left and the right, but actually the
Speaker 17: thing that drives change is that moderate middle talk to
Speaker 17: us about what he's observed there.
Speaker 16: Yeah, I mean, one of the things we had him
Speaker 16: do for this piece was to kind of go out
Speaker 16: and give us like a deck like survey research. Okay,
Speaker 16: who are the people actually boycotting? Like, who are they,
Speaker 16: where do they live, what are their motivations, and what
Speaker 16: effect are they having? And he came back with some
Speaker 16: really interesting information. First of all, the people boycotting and
Speaker 16: the conservatives are not necessarily all the kind of Trump
Speaker 16: supporters we remember from the campaign. By and large, they're
Speaker 16: not rural the way Trump supporters were. They're suburbanites, and
Speaker 16: the liberals are tend to kind of cluster in cities
Speaker 16: as you might expect. The other thing was, and this
Speaker 16: reminded me of kind of social media. There have been
Speaker 16: studies showing that the political content on Twitter is mainly
Speaker 16: produced like ninety percent of it is produced by people
Speaker 16: on the far right and the far left. Everybody else
Speaker 16: just kind of, you know, get gets hit with it
Speaker 16: when they log on. Very much the same thing with
Speaker 16: these consumer boycotts, that it's really driven by activists on
Speaker 16: the left and the right. But there was this large
Speaker 16: what he called movable middle of people who don't really
Speaker 16: care initially, you know, whether they're soap or their beer,
Speaker 16: has a political view on this or that, but eventually
Speaker 16: end up getting pulled in once this stuff gets picked
Speaker 16: up by the media. And we have a guy in
Speaker 16: the piece of FedEx driver who I talked to, big
Speaker 16: bud Light drinker, really hadn't been involved in politics, really
Speaker 16: hadn't cared about some of the fights like Target and Disney.
Speaker 16: But when the bud Light transgender influencer thing came out,
Speaker 16: he said, you know, that was the last straw, and
Speaker 16: he quit drinking bud Light. And I think that's a
Speaker 16: good example of kind of what's happening nationally. You know,
Speaker 16: a lot of people aren't waking up in the morning
Speaker 16: wanting to think hard about, you know, what political stances
Speaker 16: their brands are taking, and yet it's become enough of
Speaker 16: a hot button issue, especially in the political arena, especially
Speaker 16: in the Republican press eventual race, that people are noticing
Speaker 16: and we're having more and more evidence now that they're
Speaker 16: responding to it.
Speaker 2: What I love about this story is Josh, and it's
Speaker 2: in the piece too, is it's like, when the heck
Speaker 2: did Republicans get so angry with business? You thought they
Speaker 2: were so kind of hand in hand. So it's really
Speaker 2: if you think about a kind of big picture in
Speaker 2: terms of what's happening, it's like what the heck happened?
Speaker 2: So spin it forward for us, or take it forward
Speaker 2: for us, because it does make you wonder about what
Speaker 2: does come next? And I know you, you know, he
Speaker 2: this individual talks specifically about a parallel economy, so I'm
Speaker 2: curious about some of that.
Speaker 16: Yeah, well, the idea of a parallel economy is that
Speaker 16: it's the idea that you know, just as American politics
Speaker 16: has kind of polarized between liberals and conservatives, so too
Speaker 16: will the kind of conservative or sorry, will a consumer's sphere.
Speaker 16: And you know, a little bit of evidence that this
Speaker 16: is happening. There's a you know company went public a
Speaker 16: few years ago called Black Rifle Coffee, which presents itself
Speaker 16: as kind of a conservative alternative to Starbucks. You know,
Speaker 16: BusinessWeek we've written about like Razor because there's a conservative
Speaker 16: Razor company. I've written about conservative exchange traded funds that
Speaker 16: are anti EESG. So there's a little bit of basis
Speaker 16: for thinking that I personally have a hard time believing
Speaker 16: it because you know, we don't have any big conservative
Speaker 16: brands that are you know, Disney clones or you know
Speaker 16: ge clones, or even like a bud Light clone. Frankly,
Speaker 16: but what seems indisputable is that politics has inspected the
Speaker 16: corporate consumer sphere in a way that it's really hard
Speaker 16: to kind of untangle from. And the real catalyst there,
Speaker 16: I think was George Floyd's death in twenty twenty, where
Speaker 16: a lot of brands, almost every brand, kind of came
Speaker 16: out and made these statements about social justice that aligned
Speaker 16: very much with Democrats, and that caused a lot of
Speaker 16: pressure on those brands, both from the left to continue
Speaker 16: speaking out about political issues, and also a backlash from
Speaker 16: the right. We've now seen risen up with these campaigns
Speaker 16: against Target and against Light for taking you know, quote
Speaker 16: unquote woke positions on a lot of these issues. And
Speaker 16: it's also become a vehicle for presdential candidates like Florida
Speaker 16: Governor Ron DeSantis, who didn't really want to take on
Speaker 16: Donald Trump directly, so what he did was to start
Speaker 16: a lot of big cultural fights with companies like Disney
Speaker 16: and to try and have these culture war debates that
Speaker 16: would raise his profile as a presidential candidate. So I
Speaker 16: think activists on both sides, but especially on the Republican side,
Speaker 16: have realized that there is utility in politicizing the consumer
Speaker 16: space and that's why we're seeing more and more of this.
Speaker 3: I mean, is this something that ends after the primaries
Speaker 3: or is this something that goes into the general election
Speaker 3: where we have you know, whoever the nominee is continuing
Speaker 3: with this idea of attacks on corporate companies in the
Speaker 3: context of a culture war.
Speaker 16: You know, it's a great question. I spoke to Professor
Speaker 16: and the Piece who works with business leaders and surveys
Speaker 16: the min issues of politics, and the answer seems to
Speaker 16: be that a lot of CEOs have become a broiled
Speaker 16: in politics and now are having second thoughts about it,
Speaker 16: like maybe we don't want to be in the crosshairs,
Speaker 16: maybe we don't want to be subject to kind of
Speaker 16: these boycotts. But once you've gotten in, it's tough to
Speaker 16: get out. And one example of that is the pressure
Speaker 16: that a lot of these companies feel themselves to be
Speaker 16: under to speak out about the October seventh Hamas attacks
Speaker 16: on Israel. Not something that a lot of people want
Speaker 16: to do, and yet it's hard. It's hard not to
Speaker 16: weigh in.
Speaker 2: We got to run. Josh and Joel, thank you.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: Live weekday afternoons from three to six Eastern on Bloomberg Radio,
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Speaker 1: Just Say Alexa play Bloomberg eleven thirty.
Speaker 9: Well.
Speaker 2: As conservative politicians bring the rhetoric and beliefs of the
Speaker 2: evangelical right into mainstream classrooms, reshaping American public education, liberal
Speaker 2: families are using the rights hard won homeschooling protections to
Speaker 2: give their children a secular education in kitchens and living
Speaker 2: rooms across the country. This is from a story from
Speaker 2: the Bloomberg BusinessWeek team.
Speaker 3: Yeah with more on how culture wars here in the
Speaker 3: US are leading to another deep blow to public education.
Speaker 3: With us right now is Charlie Locke. She's Bloomberg BusinessWeek
Speaker 3: freelance contributor joining us on zoom from Portland, Oregon. Her
Speaker 3: story can be found on the Bloomberg terminal and at
Speaker 3: Bloomberg dot com Slash BusinessWeek. Also here with us in
Speaker 3: the Bloomberg Studio, the editor of Bloomberg Business Week, Joel Webber. Joel,
Speaker 3: good to have you with us, Charlie, good to have
Speaker 3: you with us. I love this story because when you
Speaker 3: think homeschooling. There's this image of who the typical homeschooler
Speaker 3: and homeschooling is in the US, and this is sort
Speaker 3: of up, you know, puts that entire theory or image
Speaker 3: on its head.
Speaker 17: Story is kind of changing a little bit. So we
Speaker 17: were working on this package of stories around America and
Speaker 17: culture Wars, and this idea of homeschooling came up. Homeschooling
Speaker 17: has long been a thing that conservatives have fun for mainly.
Speaker 17: What we're seeing though, is as the politics, especially around education,
Speaker 17: have begun to change in conservative strongholds, We've seen a
Speaker 17: stronger intervention in classrooms to even change curriculum in states
Speaker 17: that how our conservative, we're seeing mostly liberal leaning parents
Speaker 17: begin to take advantage of the homeschooling kind of push
Speaker 17: that was championed by especially evangelicals. So, Charlie, bring us,
Speaker 17: bring you in here, tell us how this story came
Speaker 17: to you.
Speaker 6: Yeah.
Speaker 18: So I write about kids and education a lot for
Speaker 18: a number of different outlooks outlets, including Bloomberg, and I
Speaker 18: have noticed over the past few years just more and
Speaker 18: more families that I have talked to in the course
Speaker 18: of my everyday reporting. We're considering homeschooling, particularly families in
Speaker 18: Red states where there is this increasingly conservative politicization of
Speaker 18: public education, whether that is in terms of what it's
Speaker 18: like for kids of color or trans or gay kids
Speaker 18: to go to public school, or in terms of curriculum
Speaker 18: and how kids are learning about American history or what
Speaker 18: they're not learning. And I've just talked to more and
Speaker 18: more parents who were kind of at their wits end
Speaker 18: about what to do, and it made me really curious about, Okay,
Speaker 18: is there this movement of is it really changing what
Speaker 18: it means to homeschool your kids and who's taking advantage
Speaker 18: of that, particularly because, as you mentioned, the history of
Speaker 18: homeschooling in the past thirty or forty years has really
Speaker 18: been built around the evangelical right, who have pushed really
Speaker 18: hard for the rights of homeschoolers, and particularly a certain
Speaker 18: type of homeschooling that really leaves it all in the
Speaker 18: hands of the parent without a lot of oversight, and
Speaker 18: so in in states with big evangelical communities like Florida,
Speaker 18: which I focus on in the story, there are a
Speaker 18: lot of rights and a lot of resources for homeschoolers
Speaker 18: because it's been pushed for from this particular graphic background,
Speaker 18: but now because of how public schools are changing and
Speaker 18: how politicians in conservative places are kind of adopting the
Speaker 18: rhetoric around a parental bill of rights or kind of
Speaker 18: a run school choice, picking up all this rhetoric that
Speaker 18: the home the far right homeschooling movement has used for
Speaker 18: a long time, it's pushing liberal families out of public schools.
Speaker 3: Well, Charlie, can you talk a little bit about some
Speaker 3: of the most I don't want to use the term egregious,
Speaker 3: but the anecdotes that you found were kind of what
Speaker 3: pushed these parents over the edge. You said, what they're
Speaker 3: teaching or what they're not teaching when it comes to
Speaker 3: American history. I was so surprised to reading your story
Speaker 3: some of the things that did motivate these parents to
Speaker 3: move them to homeschool their kids.
Speaker 18: Yeah. Absolutely. I mean, one that was really striking to
Speaker 18: me is one mom that I talked to in Florida
Speaker 18: whose twins were in sixth grade in public school in
Speaker 18: Florida last year, and their history teacher taught them that
Speaker 18: manifest Destiny referred to Native Americans who decided to move
Speaker 18: west because they wanted to try somewhere else and have
Speaker 18: more space, and she the mom looked at the curriculum
Speaker 18: and looked at the slides from that day's class. She
Speaker 18: really thought maybe her kids had misunderstood the lesson and
Speaker 18: the slides had nothing about the trail of tears, you know,
Speaker 18: really presented manifest destiny as this happy choice that Native
Speaker 18: people in the southeast made. I mean, there are other parents.
Speaker 18: I had talked to one mom who's all of the
Speaker 18: books were removed from her kids elementary school, in classrooms
Speaker 18: and in the school library, and for I think six
Speaker 18: months last year, there were just no books at school
Speaker 18: and kids weren't allowed to bring them because books hadn't
Speaker 18: gone through the Florida approval system yet. And she felt like,
Speaker 18: I can't send my kid to a school that isn't
Speaker 18: allowed to have any books in it. I mean, pretty egregious.
Speaker 2: Yeah, this is America today. What's interesting, too, is I
Speaker 2: feel like I wonder about the people Tim and I
Speaker 2: were talking about this actually before we got going, is
Speaker 2: these people were they nervous about talking to you? And
Speaker 2: we're curious about how you've found them. Was it difficult
Speaker 2: to find them?
Speaker 18: Yeah, a lot of the families were quite nervous about
Speaker 18: talking to me, and we do grant anonymity to a
Speaker 18: number of the parents in this article. I mean there's
Speaker 18: a real risk. I think that for a lot of
Speaker 18: these families, there's a real risk both that you know,
Speaker 18: in their communities that they would be ostracized because of
Speaker 18: some of the choices that they're making, and also in
Speaker 18: terms of the support that they're getting. States like Florida
Speaker 18: actually give money to homeschooling families to support them and
Speaker 18: support homeschooling, and some of the moms in particular in
Speaker 18: the story talked about how they really feel this tension
Speaker 18: between wanting those finances from the state of Florida or
Speaker 18: other states to be able to support their kids' education,
Speaker 18: but also not wanting to take away money from public schools,
Speaker 18: and so they don't want to have their name in
Speaker 18: there to jeopardize the funding that's enabling their kids to
Speaker 18: learn at home. But you know a lot of how
Speaker 18: you know, building a story like this takes a really
Speaker 18: long time, and I spent about six months building relationships
Speaker 18: with people who run communities like the Sea Homeschoolers group
Speaker 18: on Facebook and kind of building community with people who
Speaker 18: who are educators of homeschoolers and then a lot of
Speaker 18: it is word of mouth, talking to one mom who
Speaker 18: connects me to her local group, who connects me to
Speaker 18: someone else will.
Speaker 12: Talk to me.
Speaker 1: Charlie.
Speaker 17: I'm interested from the especially from the mothers. You talked
Speaker 17: to you and you made it. I thought a very
Speaker 17: clear point in the story about how mom centric all
Speaker 17: of this is. I am curious, like, does this feel
Speaker 17: just like a permanent shift for them or are they
Speaker 17: contemplating moving because of this?
Speaker 19: Like what's the what.
Speaker 17: Are the long term implications that you get a sense
Speaker 17: of from here reporting.
Speaker 18: Yeah, it's a really good question, and I think it's
Speaker 18: a very family to family question. I think a lot
Speaker 18: of these parents this is not an ideal solution for
Speaker 18: them and for their kids. There's a lot that they're
Speaker 18: having to sacrifice. Particularly so many moms who we're working
Speaker 18: in professional workplaces before this and felt like their only
Speaker 18: option was to step back and full time homeschool their kids.
Speaker 18: But it's not very sustainable financially for their family. It's
Speaker 18: not really what they want in terms of their careers
Speaker 18: and time. And some families are trying to figure out
Speaker 18: how to move out of state. I mean, it's hard
Speaker 18: to uproot your life and do that right, and other
Speaker 18: families who are kind of hoping that things will get
Speaker 18: better and hope that by the time their kids are
Speaker 18: in high school they'll be able to send their kids
Speaker 18: back to public school. But it's kind of trying to
Speaker 18: make the least bad decision for a lot of these families.
Speaker 1: You know.
Speaker 17: The other thing that your story explores is as people
Speaker 17: leave public schools, that creates this downward spiral. And since
Speaker 17: twenty you signed one point two million k through twelve
Speaker 17: students have left public education in the US, the same
Speaker 17: people who once celebrated the institutions. Once they leave like this,
Speaker 17: it means that the schools end up taking a tax
Speaker 17: hit too, right.
Speaker 18: Yeah, yeah, it means pretty substantial and honestly pretty scary
Speaker 18: hits for public school both because public schools are mostly
Speaker 18: funded by taxes within communities and by allocations federally based
Speaker 18: on how many students are enrolled in public school, and
Speaker 18: so when a bunch of families pull their kids from
Speaker 18: public school, it means the schools get less money federally
Speaker 18: because they have less students enrolled there, and it also
Speaker 18: means that they get less money locally because there's less
Speaker 18: support for taxes. If you're not sending your own kids
Speaker 18: to the public school, you don't care as much about
Speaker 18: about supporting those financially through your taxes. And then there
Speaker 18: are also all of these kind of softer effects too,
Speaker 18: or a lot of these parents, the parents who are
Speaker 18: able to step back from work full time and homeschool
Speaker 18: their kids are also parents who previously were really involved
Speaker 18: at the public school in terms of being on the
Speaker 18: pta or running fundraising drives or leading field trips, and
Speaker 18: so there's a lot of kind of the ways that
Speaker 18: public schools provide a lot of social services for families
Speaker 18: to need them. They will be less and less able
Speaker 18: to do that as more and more families who can
Speaker 18: opt out.
Speaker 12: The side doots.
Speaker 2: So many aspects of this story just you know, the
Speaker 2: trend and parental rights, the implications for moms and working women,
Speaker 2: and what it means, you know, Joel, for public school
Speaker 2: systems going forward does not.
Speaker 17: Look good, but you know, there's there's What I think
Speaker 17: it shows is the commitment of families, right and the
Speaker 17: fact that they saw what was happening and tried to
Speaker 17: do something about it.
Speaker 2: Incredible story that, of course is the editor of BusinessWeek,
Speaker 2: Jil Weber and Charlie Locke wrote the story Bloomberg BusinessWeek
Speaker 2: Freelance contributor. You can find it on the Bloomberg terminal,
Speaker 2: of course, at Bloomberg dot com slash BusinessWeek.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: Live weekday afternoons from three to six Eastern Listen on
Speaker 1: Bloomberg dot com, the iHeartRadio app and the Bloomberg Business app,
Speaker 1: or watch us Live on you.
Speaker 3: When I was a kid, Carol, Yes, and I needed
Speaker 3: to raise money for you know something at school. We
Speaker 3: did walk a thon's for charity. We did school trips.
Speaker 3: I did it the old fashioned way. Okay, this was
Speaker 3: the nineties. Keep that in mind. Okay, yep. I went
Speaker 3: door to door with a clipboard. I ranked doorbells. Actually
Speaker 3: wore rollerblades so I could do it quicker. It's nineteen nineties,
Speaker 3: so southern California, nineteen nineties. I should have skateboarded. Actually, well,
Speaker 3: it was, of course, before smartphones. Kids these days have
Speaker 3: other options, such as the one developed by our next guest,
Speaker 3: Cole Morgan, the founder and CEO of Snap Mobile. It's
Speaker 3: a digital fundraising tool that high schoolers can use. To
Speaker 3: raise money for schools, teams, clubs and more cols here
Speaker 3: with us in the Bloomberg studio. Cole, good to have
Speaker 3: you with us this afternoon. I should note you raised
Speaker 3: seven hundred million dollars for one hundred thousand plus groups
Speaker 3: and teams.
Speaker 2: It's a lot, it's a lot of money.
Speaker 3: Yeah, we're talking about some serious money here. Talk to
Speaker 3: us a little bit about the platform and also I'm
Speaker 3: interested in the business model here and then take great.
Speaker 19: Yeah, so we uh so, I would just say thank
Speaker 19: you for having me. When I called my mom and
Speaker 19: told her the idea for the business, I told her
Speaker 19: we were going to raise a million dollars for schools.
Speaker 2: How old were you?
Speaker 19: I was twenty eight at the time, thirty eight now
Speaker 19: and now and I we're actually approaching about eight hundred
Speaker 19: million dollars giving back to school so far.
Speaker 8: Wow.
Speaker 12: So yeah.
Speaker 19: So we've we started a few years, started ten years ago.
Speaker 19: We're in about half the schools in the United States.
Speaker 19: We focus on financial transparency in schools and helping groups
Speaker 19: of people raise money for a common cause, where a
Speaker 19: lot of the crowdfunding platforms online focus on individuals raising money.
Speaker 19: Come in quickly sign up, We help groups of people
Speaker 19: with that require oversight. So the school, you're a club organization,
Speaker 19: you know, where somebody actually needs to oversee the financials
Speaker 19: of the of the group. We help that group raise
Speaker 19: money and so the money goes directly to the organization
Speaker 19: or to the school, to the nonprofit or whatever it is,
Speaker 19: rather than the individual.
Speaker 2: So how does it work?
Speaker 19: Kids log in, they send send out emails, text message,
Speaker 19: social media. January first, we're launching mobile apps. We'll have
Speaker 19: over a million kids download our mobile app next year.
Speaker 3: So there's no mobile app up to now.
Speaker 19: No, it's all been a web app. Wow, because a
Speaker 19: web apps really, a web app was faster a web
Speaker 19: But we had we actually had a mobile app and
Speaker 19: we very first started. But it would show up. You'd
Speaker 19: try to get all these kids to download a mobile app.
Speaker 19: It would take too long. But that was ten years ago,
Speaker 19: and kids weren't.
Speaker 3: They kept thinking they were down Snapchat.
Speaker 19: That had happened. That's happened. Yes, yeah, so they so
Speaker 19: they now they log in, they download the mobile app,
Speaker 19: and they go through the flow. You know, they send
Speaker 19: out their emails to friends and family. I'm sure you
Speaker 19: guys have actually probably gotten an email from a niece
Speaker 19: or nephew to donate to a but it's a Finity program. No, nope.
Speaker 3: So it'll take you to a site that shows you
Speaker 3: that it is Snap Mobile.
Speaker 19: It's yeah, we'll show you so that that part of
Speaker 19: the platform is called Snap Raise, and it'll take you
Speaker 19: to that. It'll actually take you to that kid's fundraising page,
Speaker 19: because what we know is that people want to support
Speaker 19: kids and the causes that the kids care about. So
Speaker 19: it's not about supporting the actual football team directly, it's
Speaker 19: about supporting the kid who's a part of the football team.
Speaker 19: So it actually will take you to when my son
Speaker 19: starts using the platform, he's only two, it'll take you
Speaker 19: to Luke Preston Morgan's you know, football page, and you'll
Speaker 19: Luke will have a goal and then the team will
Speaker 19: have a goal above that. So it's a hierarchical structure
Speaker 19: that allows the team to raise money. So all one
Speaker 19: hundred kids on the football team are raising money at
Speaker 19: the same time for the same cost.
Speaker 3: You do live in Texas. You're already thinking about football
Speaker 3: and your kids only two?
Speaker 19: Yeah, yeah, well I played football. We live in Texas.
Speaker 19: This is the whole company is surrounded by it, it.
Speaker 2: Seems so logical. Yes, So what was it that? What
Speaker 2: was the idea initially that you said, Okay, this, this,
Speaker 2: We've got something here.
Speaker 19: Yes, it is very simple ideas. It looks more simple
Speaker 19: on the surface than it actually is underneath. So we
Speaker 19: have an entire organizational database that connects school administration all
Speaker 19: the way to the communities in which they live and
Speaker 19: that support them. So there's a lot of data and infrastructure,
Speaker 19: financial transparency, oversight, security compliance, right, But on the surface,
Speaker 19: it was really simple. I was selling discount cards and
Speaker 19: cookie dough in schools after I got done playing football,
Speaker 19: and a coach said to me, we love that you're here,
Speaker 19: but we hate why you're here. So there's got to
Speaker 19: be a better way. This is the honest to goodness story.
Speaker 19: It's on our website. I said, what do you mean,
Speaker 19: He said, our kids. You know we need help, We
Speaker 19: need to raise money, but we don't want to do
Speaker 19: the things that you're making us do, which is sell
Speaker 19: these things. The school doesn't like that we take cash.
Speaker 19: The kids don't want to sell things. The parents don't
Speaker 19: want to buy things. They just want to support. So
Speaker 19: I said, okay, just like my whole life, I've taken coaching.
Speaker 19: It's like what do I do? So I looked around
Speaker 19: the school and I saw every kid on their phone,
Speaker 19: and I started asking friends and family and people at
Speaker 19: bars and restaurants. I said, do you care about supporting kids?
Speaker 19: And they would say yes. And then I would say
Speaker 19: do you have cash in your wallet? And they would
Speaker 19: say no. And I would say do you have your phone?
Speaker 19: And they would say yes, And I would say you
Speaker 19: have your credit card? They would say yes. And so
Speaker 19: I just put together the idea of the phone, the
Speaker 19: credit card, and kids asking politely for community and family support.
Speaker 3: So what's your take rate?
Speaker 19: Our take rate is twenty percent?
Speaker 3: Wow, Yeah, that's very high. That's much higher than I
Speaker 3: thought it would be. So of every dollar that is donated, Yeah,
Speaker 3: your platform takes twenty percent. Yeah, yeah, I was expecting
Speaker 3: two or three percent.
Speaker 19: Yeah, it's a it's a high take rate for what
Speaker 19: we for. You know, what you think of in the
Speaker 19: world of crowdfunding, But if you look at, you know,
Speaker 19: some of the other individual platforms, they just tacking on
Speaker 19: in a different way. We don't do that. There's a
Speaker 19: service based model for us. So we help organize, coordinate, promote,
Speaker 19: maintain and manage the entire online fundraising event. So we're
Speaker 19: not the cheapest thing in fundraising, but we are the
Speaker 19: cheapest thing in school based fundraising, which is a very
Speaker 19: different thing because when you sell discount cards and cookies,
Speaker 19: you're only making fifty percent.
Speaker 3: That's one hundred and sixty million. I was just doing
Speaker 3: some calculations here. One hundred and sixty million dollars.
Speaker 2: But that's a big difference because you think about yeah,
Speaker 2: you know, whether it's Girl Scout cookies or what have you.
Speaker 2: You're saying that the kids only get fifty.
Speaker 19: Percent, Yeah, sometimes less, sometimes less?
Speaker 1: Yeah?
Speaker 3: Are you because there's a product involved?
Speaker 19: Sometimes yeah, but you can hide behind the you can
Speaker 19: hide behind the fact that the product is there.
Speaker 2: But I'll be honest with you, having done that for
Speaker 2: nieces and nephews and buying wrapping paper and stuff that
Speaker 2: I really don't want, I'd rather have just given them money.
Speaker 2: That's not the way it was set up. Are you
Speaker 2: going to only stay with schools, I don't mean only, but.
Speaker 19: No, we were, I mean we are the largest, you know,
Speaker 19: youth organization fundraising platform as well. Yeah, it's just our
Speaker 19: main focus is schools, but we grow into the we
Speaker 19: grow into the youth side as well. Yeah, one of
Speaker 19: the other things that we provide for the twenty percent
Speaker 19: take rate is f financial oversight and compliance for every
Speaker 19: dollar that comes into your school. So there's a school
Speaker 19: actually locally that an athletic secretary absconded with some of
Speaker 19: the money, and because they were a SNAP client, this
Speaker 19: just happened a few weeks ago. Because they were a
Speaker 19: SNAP client, they were actually going and have a full
Speaker 19: audit trail of every one of the donations and the
Speaker 19: dollars that came in, and they were able to help
Speaker 19: find out that what that athletic secretary.
Speaker 3: Had done, what happened. Are you profitable?
Speaker 19: We are not.
Speaker 3: Where are you spending all the money you've raised eight
Speaker 3: hundred million If eight hundred million dollars has gone to schools,
Speaker 3: which means one hundred and sixty million dollars has come
Speaker 3: to you, guys. If we're geting twenty percent, where's the money.
Speaker 19: Going investment into the technology. We've acquired a couple companies
Speaker 19: as well. We've acquired three businesses so far. We've also
Speaker 19: raised capital.
Speaker 3: As well, ninety million dollars in a series b led
Speaker 3: by the investment group that owns the LA Dodgers. Yes,
Speaker 3: Aldrige twenty twenty one. Yep, yep.
Speaker 19: Yeah, So we've hired, we invest in hiring outside salespeople.
Speaker 19: So our salesforce we have one hundred and fifty boots
Speaker 19: on the ground that actually serve the communities in which
Speaker 19: they live.
Speaker 2: Is such your highest overhead or is it that in technology?
Speaker 19: It's that in technologies. We've also scaled up our technology
Speaker 19: team as well.
Speaker 2: Thirty seconds left here. What's the endgame? Is it to
Speaker 2: go public?
Speaker 19: The endgame is to build the transformative platform that supports
Speaker 19: teachers and students. It's teachers and athletic directors and coaches
Speaker 19: the way that they support their kids. You know football
Speaker 19: background with me, so I focus on the process. If
Speaker 19: we build a great company that serves the needs of
Speaker 19: all of our customers, then who knows what happens, But.
Speaker 2: You're going to stay within like helping for the most part,
Speaker 2: schools or ken it expand.
Speaker 19: Schools, youth organizations, colleges. Yep, Yeah, it can grow quite
Speaker 19: a bit.
Speaker 2: There's a little bit of a growth runway there.
Speaker 3: Big market and imagine a mode too with getting the
Speaker 3: schools signed on. That's a hard part.
Speaker 19: Yeah, it's incredibly hard, and it's one of the reasons
Speaker 19: you have to invest the way that we're investing.
Speaker 2: Come back and let us know how things are going.
Speaker 2: I promise really interesting Cole Morgan, founder and CEO Snapmobile,
Speaker 2: joining us here in our Bloomberger studio. Good luck, We'll
Speaker 2: talk to you soon again.
Speaker 12: Thank you.
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