WEBVTT - Bloomberg Businessweek Weekend - July 15th, 2022 0:00:01.040 --> 0:00:05.400 This is Bloomberg Business Week Inside from the reporters and 0:00:05.600 --> 0:00:09.160 editors who bring you America's most trusted business magazine, plus 0:00:09.240 --> 0:00:13.160 global business finance and tech news as it happened. Bloomberg 0:00:13.240 --> 0:00:16.759 Business Week with Carol Messier and Bloomberg Quick Takes. Tim 0:00:16.800 --> 0:00:21.440 Stinovic on Bloomberg Radio. Hi, everyone, Welcome to the weekend 0:00:21.560 --> 0:00:24.360 edition of Bloomberg Business Week. We got another red hot 0:00:24.400 --> 0:00:27.200 inflation print for the month of June that has sparked 0:00:27.200 --> 0:00:30.000 talks of a possible one hundred basis point interest rate 0:00:30.080 --> 0:00:32.720 hike when the fo MC meets towards the end of July. 0:00:32.840 --> 0:00:35.360 Tim coming up on the broadcast today, We're going to 0:00:35.440 --> 0:00:38.240 explore the impact of those rising prices on the luxury 0:00:38.280 --> 0:00:40.800 goods market. We do that with the CEO of Sacks 0:00:41.200 --> 0:00:43.440 and then find Dining. We talked about that with chef 0:00:43.600 --> 0:00:47.320 Richard Sandoval. Plus our cover story details a five billion 0:00:47.360 --> 0:00:50.240 dollar calamity in the desert of Saudi Arabia just a 0:00:50.280 --> 0:00:53.920 mere half a trillion dollars. It is all of that 0:00:53.960 --> 0:00:56.720 to come first up. One big reason that consumer prices 0:00:56.720 --> 0:01:00.400 continue to soar steep energy prices and all they have 0:01:00.480 --> 0:01:03.680 come down from recent highs they're likely to remain elevated 0:01:03.720 --> 0:01:07.039 for months, if not years. Bloomberg's Will Kennedy writes about 0:01:07.040 --> 0:01:09.880 it in the Economic section a Business Week. Lyn Duan 0:01:10.080 --> 0:01:12.920 edited the piece. She's Bloomberg News Managing editor of Energy 0:01:12.920 --> 0:01:15.960 and Commodities here in the Americas. We spoke to Lynn 0:01:16.000 --> 0:01:19.080 on Wednesday, just as President Joe Biden was beginning his 0:01:19.120 --> 0:01:21.559 trip through the Middle East to meet with the region's leaders, 0:01:21.800 --> 0:01:24.600 with energy security high on the agenda. I don't know 0:01:24.720 --> 0:01:28.160 how you can look at the supply and demand fundamentals 0:01:28.160 --> 0:01:32.560 of this market and think that we can continue downward 0:01:32.720 --> 0:01:35.559 in either oil or gas. But the traders are thinking 0:01:35.600 --> 0:01:39.600 that right now. Traders. You know, we just had a 0:01:39.640 --> 0:01:42.840 story yesterday that I will highlight. It's a bit wonky, 0:01:42.880 --> 0:01:45.280 but if you read it, it's a scoop about the 0:01:45.319 --> 0:01:48.800 fact that traders are paying some of the highest premiums 0:01:48.800 --> 0:01:52.200 for physical barrels of oil in Europe than they have 0:01:52.400 --> 0:01:54.640 in years. So if you want to ask the traders, 0:01:54.640 --> 0:01:57.680 who probably know more about this than the economists and 0:01:57.680 --> 0:02:00.520 the politicians out there, they might tell you that oil 0:02:00.640 --> 0:02:03.360 is actually still very expensive. Here's the thing that I 0:02:03.400 --> 0:02:05.760 think about land and I think about supply demand, and 0:02:05.800 --> 0:02:08.600 I think okay, first of all, we continue to grow 0:02:08.639 --> 0:02:12.200 in terms of population, we continue to be a fossil 0:02:12.560 --> 0:02:15.600 fuel based economy globally, and yes, there's a lot of 0:02:15.600 --> 0:02:19.079 talk about alternatives, but we ain't there yet. So to me, 0:02:19.160 --> 0:02:21.480 that just says, of course, energy prices are going to 0:02:21.520 --> 0:02:25.040 stay high. That is correct. We're only halfway through the summer. 0:02:25.520 --> 0:02:27.760 We have hundreds of millions of people out there on 0:02:27.800 --> 0:02:30.560 the roads and in the air. We are so close 0:02:30.600 --> 0:02:35.000 to already passing pre pandemic demand levels, and the International 0:02:35.120 --> 0:02:38.200 Energy Agency is saying that we're only going to grow more. 0:02:38.240 --> 0:02:45.080 In Sure, a possible recession, Sure some inflation could could 0:02:45.160 --> 0:02:48.520 eat into demand growth, but I'm not sure there's anybody 0:02:48.560 --> 0:02:52.280 projecting that demand is going to fall well. And isn't 0:02:52.320 --> 0:02:54.280 that too like you were talking about traders, that we're 0:02:54.280 --> 0:02:56.440 talking about traders? I mean, isn't some of We were 0:02:56.480 --> 0:02:58.680 just talking about this with some other members of our 0:02:58.720 --> 0:03:01.080 Bloomberg team, and that what we've seen in terms of 0:03:01.080 --> 0:03:06.000 oil prices come down, that's just a trader's market because 0:03:06.000 --> 0:03:09.280 it concerns about a recession, but it's not necessarily the 0:03:09.320 --> 0:03:13.880 fundamental story. So we're talking about a difference between the 0:03:13.960 --> 0:03:17.799 macro and and and and market traders versus the physical 0:03:17.880 --> 0:03:22.160 oil traders, right, and so you know on a macro level, yes, 0:03:22.200 --> 0:03:24.880 there are recession fears. Yes, there is a fear that 0:03:25.160 --> 0:03:27.360 you know, a recession is going to drive the oil 0:03:27.400 --> 0:03:30.920 market lower because of a drop in demand. But remember that, 0:03:31.440 --> 0:03:35.600 aside from the pandemic lockdowns in and the demand that dropped, 0:03:35.640 --> 0:03:39.800 then the only economic downturn in modern history that is 0:03:39.800 --> 0:03:44.560 actually lowered oil demand was in two thousand eight. Every 0:03:44.600 --> 0:03:48.080 other recession has actually just slow demand growth. It's really 0:03:48.120 --> 0:03:50.880 interesting to hear Lynn. I wonder though, when it comes 0:03:50.920 --> 0:03:54.360 to what Mike McGlone of Bloomberg Intelligence tells us all 0:03:54.400 --> 0:03:57.120 the time, the cure for high prices is high prices. 0:03:57.480 --> 0:04:00.520 What about the ability of producers to come in and say, hey, 0:04:00.560 --> 0:04:02.040 we want to take advantage of these high prices, so 0:04:02.040 --> 0:04:04.560 we're gonna flood the market here? Not so right? So 0:04:04.600 --> 0:04:08.320 the question is if demand is inelastic and it's going 0:04:08.360 --> 0:04:11.960 to stay where it is, then where does supply budge? 0:04:12.160 --> 0:04:15.680 And that's a bigger question. And Will Kennedy actually does 0:04:15.720 --> 0:04:18.480 a good job of laying out the prospects of oil 0:04:18.520 --> 0:04:22.919 production growth. I mean, really, the power of rests in 0:04:22.960 --> 0:04:28.640 the hands of Saudi Arabia and the UAE, and they 0:04:28.680 --> 0:04:33.120 are the the only world producers who may be willing 0:04:33.240 --> 0:04:35.800 and have the capacity to raise it. And that's why 0:04:35.880 --> 0:04:38.880 you have Biden going out to Saudi Arabia for a visit, 0:04:39.080 --> 0:04:42.120 because he realizes that the world realizes that, and there 0:04:42.200 --> 0:04:45.039 is a lot of pressure on OPEC plus right now 0:04:45.360 --> 0:04:47.880 to be the saviors of the oil world. I love 0:04:47.960 --> 0:04:50.440 this line. It's it's not clear how much more cruise 0:04:50.480 --> 0:04:52.880 Saudi Arabia or the UAE has to give. As you said, 0:04:53.000 --> 0:04:55.320 a Ramco, Saudi Arabia state oil giant claims he can 0:04:55.360 --> 0:04:57.280 pump twelve million barrels a day. He has hit that 0:04:57.400 --> 0:05:00.360 rate only on so bring it back home. And we've 0:05:00.360 --> 0:05:02.960 heard from u S domestic producers in the big oil 0:05:03.000 --> 0:05:07.000 conglomerates that they're like, they've seen the booms and bust. 0:05:07.120 --> 0:05:10.720 They're not quick running to ramp up production and and 0:05:10.760 --> 0:05:13.840 Wall Street doesn't want to want them to. I mean, honestly, 0:05:14.120 --> 0:05:17.520 for two three years now, what Wall Street has been 0:05:17.600 --> 0:05:21.160 drilling into the shale drillers in Texas is that they 0:05:21.200 --> 0:05:24.880 need to stop spending so much money, stop going after growth, 0:05:25.320 --> 0:05:27.560 rain it in and try to make more money out 0:05:27.600 --> 0:05:31.000 of the production that they have on already. So something's 0:05:31.000 --> 0:05:33.640 got to give here, because this is not sustainable for 0:05:34.040 --> 0:05:36.880 not the world and not for American consumers. What gives? 0:05:37.480 --> 0:05:39.880 I mean, I've got to think that if we see 0:05:39.920 --> 0:05:43.640 a prolonged period of high oil prices in this way, 0:05:43.880 --> 0:05:47.280 supply gives before demand gives, because that's like a more 0:05:47.440 --> 0:05:50.400 permanent price signal that some of these industries and world 0:05:50.400 --> 0:05:55.480 producers can live off of and invest in. But also, 0:05:55.960 --> 0:05:58.760 you know, we we touch on the energy transition and 0:05:59.160 --> 0:06:02.120 say do we ramp up the alternatives? We exactly, I mean, 0:06:02.160 --> 0:06:05.279 we we we touch on it. It's you know, the 0:06:05.400 --> 0:06:08.960 argument that we make is a really huge surge, an 0:06:09.000 --> 0:06:12.520 abrupt one like this can actually be incredibly disruptive for 0:06:12.560 --> 0:06:17.640 the energy transition, not just because of you know, high 0:06:17.720 --> 0:06:22.680 oil prices raising inflation, thus prompting federal policymakers to raise 0:06:22.760 --> 0:06:28.120 interest right, but also because uh governments tend to buckle 0:06:28.400 --> 0:06:31.880 under the pressure of inflation and create a lot of 0:06:31.920 --> 0:06:36.080 subsidies for fossil fuel industries as opposed renewable energy. But 0:06:36.360 --> 0:06:38.240 if you see it for a prolonged amount of time, 0:06:38.279 --> 0:06:40.720 then you can really incentivize it. That was Linda on 0:06:40.880 --> 0:06:43.800 She's Bloomberg News Managing editor of Energy and Commodities. In 0:06:43.800 --> 0:06:47.120 the America's Coming Up, we hear from an executive at 0:06:47.279 --> 0:06:51.080 retail giant American Eagle on building a more responsive supply chain. 0:06:51.320 --> 0:06:54.200 When the pandemic hit us, it was also a route 0:06:54.200 --> 0:06:58.599 awakening that, like you know, the distribution centers were very fragile. 0:06:58.760 --> 0:07:02.080 You're listening to Bloomberg Busy this week. This is Bloomberg. 0:07:10.120 --> 0:07:14.080 This is Bloomberg Business Week with Carol Masser and Bloomberg 0:07:14.160 --> 0:07:18.920 Quick Takes. Tim Stinovik from Bloomberg Radio. We talked a 0:07:18.960 --> 0:07:21.360 lot about retail this past week. Even got an economic 0:07:21.400 --> 0:07:24.400 data point on retail. It's a sector, as you know, 0:07:24.520 --> 0:07:26.920 that went through a lot of disruption and innovation during 0:07:26.920 --> 0:07:31.080 the pandemic. With e commerce reigning supreme. Well today, retailers 0:07:31.120 --> 0:07:34.320 continue to face questions about consumer demand and of course 0:07:34.480 --> 0:07:37.920 those rough supply chains. One company is rethinking the way 0:07:37.960 --> 0:07:41.480 it distributes it's goods. Shaker not Rogen is executive vice 0:07:41.520 --> 0:07:44.520 president and Chief Supply chain Officer at American Eagle Outfitters. 0:07:44.600 --> 0:07:46.400 He joined us in the studio to help break down 0:07:46.400 --> 0:07:50.880 the company's collaborative approach. Even before like pandemic hitos. We 0:07:50.920 --> 0:07:54.240 started envisioning the future of the supply chain, how it's 0:07:54.240 --> 0:07:57.240 going to look very different and so um if you 0:07:57.280 --> 0:08:00.520 look at where there was a lot of costa escalation 0:08:01.400 --> 0:08:05.320 in you know, doing business, it was really like from 0:08:05.320 --> 0:08:07.840 what I call the middle mind the time the product 0:08:07.960 --> 0:08:10.920 enters into the country to the time it actually gets 0:08:10.920 --> 0:08:14.000 to the doorstep. And that was the fastest growing expense 0:08:14.040 --> 0:08:17.280 that we saw. And it's across the board. Like every industry, 0:08:17.320 --> 0:08:22.520 every retailer says that the shipping expenses, transportation, transportation expenses, 0:08:22.560 --> 0:08:25.160 they were like they were not leveraged. And so we 0:08:25.200 --> 0:08:27.400 wanted to change the game. We wanted to change the game, 0:08:27.440 --> 0:08:30.920 and we started thinking about what would the disruption look like, 0:08:31.280 --> 0:08:34.880 because we wanted to disrupt ourselves before the industry disrupts us, right, 0:08:34.920 --> 0:08:37.880 So we started laying out a strategy, and that strategy 0:08:38.040 --> 0:08:40.959 was all about getting the inventory closer to the end 0:08:40.960 --> 0:08:44.720 consumption point and doing it in an omni channel fashion 0:08:45.400 --> 0:08:47.600 so that you could you could maximize the value of 0:08:47.600 --> 0:08:50.720 the inventory, reduce the transportation cost. And the minds traveled 0:08:50.800 --> 0:08:52.200 hold on, how do you how do you get the 0:08:52.200 --> 0:08:55.880 inventory closer to the place of consumption, especially when this 0:08:55.920 --> 0:08:59.480 stuff is created half a world away. Yes, so what 0:08:59.600 --> 0:09:02.320 we talked about it is once it actually comes into 0:09:02.320 --> 0:09:06.319 the country, the time basically, like let's take an example, right, 0:09:06.360 --> 0:09:09.080 like if a pair of American Egan jeans was actually 0:09:09.080 --> 0:09:11.880 sold in a store, um, it would be sold on 0:09:11.920 --> 0:09:15.080 a Sunday, read on a Monday. The allocations would happen 0:09:15.080 --> 0:09:17.120 on a Wednesday, like you would actually pick back on 0:09:17.120 --> 0:09:19.560 a Thursday. It would show up like that, the trucks 0:09:19.559 --> 0:09:21.920 would leave on the following Monday. It would show up 0:09:21.920 --> 0:09:24.480 in the in the customers, in the stores like two 0:09:24.480 --> 0:09:27.800 weeks later pretty much. And so the time it takes 0:09:27.920 --> 0:09:30.640 was about like fourteen days the worst case scenario. And 0:09:30.679 --> 0:09:32.200 so what we wanted to do is how do we 0:09:32.320 --> 0:09:36.959 get to daily replenishment of the stores. And also, like 0:09:37.000 --> 0:09:39.520 you know, when you when you allocated the store, the 0:09:39.520 --> 0:09:41.280 product in the store is like literally like two and 0:09:41.280 --> 0:09:44.480 a half days away, right, So that like that compression 0:09:44.520 --> 0:09:46.320 of the time was what we were trying to aim for. 0:09:46.920 --> 0:09:49.760 And so what we did is basically we created a 0:09:49.760 --> 0:09:53.000 lot of decentralized locations. Instead of shipping from halfway across 0:09:53.040 --> 0:09:56.800 the country, we started putting distribution centers closer to where 0:09:56.800 --> 0:10:00.320 people live, started holding the inventory like the Amazon in 0:10:00.400 --> 0:10:04.360 terms of other distribution, absolutely like the Amazon model. And 0:10:04.400 --> 0:10:08.240 when we presented this, people thought I was crazy because 0:10:08.240 --> 0:10:12.120 it works for like you know, diapers and and soda, 0:10:12.280 --> 0:10:16.360 not necessarily for fashion because fashion change is pretty fast. 0:10:16.960 --> 0:10:18.880 And so what we had to do was really power 0:10:19.080 --> 0:10:22.080 our systems with a lot of advanced like thinking from 0:10:22.240 --> 0:10:26.560 a perspective, and that drove the inventory decisioning and the 0:10:26.600 --> 0:10:29.920 sciences associated with it, which really helped us like transformative. 0:10:30.000 --> 0:10:32.040 So basically, all of a sudden, tims really into yoga 0:10:32.040 --> 0:10:34.280 pants and they're like, you know, he lives in New York. 0:10:34.320 --> 0:10:36.080 You get kind of a spike there, you know, and 0:10:36.160 --> 0:10:38.520 others right, and the data says, we gotta get more 0:10:38.600 --> 0:10:40.880 yoga pants to New York. Yes, it's as simple as that. 0:10:41.000 --> 0:10:42.800 It's as simple as that, and like you know, creating 0:10:42.800 --> 0:10:46.120 a responsive supply chain. And when the pandemic hit us, 0:10:46.920 --> 0:10:48.880 it was also a rude awakening that like, you know, 0:10:49.160 --> 0:10:53.120 the distribution centers were very fragile, like you know, we 0:10:53.160 --> 0:10:56.199 have two distribution centers, one in Ottawa and one in Hazelton, 0:10:56.679 --> 0:11:00.080 and the population was was affected there, and so we 0:11:00.120 --> 0:11:02.280 were we were at the risk of actually like shutting 0:11:02.280 --> 0:11:05.400 down the business because if those two facilities go down 0:11:05.559 --> 0:11:07.880 and the stores are not available, then you run the 0:11:07.960 --> 0:11:11.119 risk of actually not having any any of these operations 0:11:11.160 --> 0:11:12.760 at all. You don't have the flexibility to move to 0:11:12.840 --> 0:11:15.960 something like one too. That's it, That's exactly the point. 0:11:16.040 --> 0:11:18.920 But even the increased overhead of having more logistics centers 0:11:19.840 --> 0:11:22.480 that makes effort by having them closer to where the 0:11:22.520 --> 0:11:26.720 demand is. What we did was actually addressed that increased overhead. 0:11:27.040 --> 0:11:30.319 So we went into a sharing model instead of us 0:11:30.320 --> 0:11:33.520 owning the facilities. We started like doing that with like 0:11:33.559 --> 0:11:36.720 fifteen other brands, fifty other brands, and that helped us 0:11:36.760 --> 0:11:39.920 like actually make the supply chain much more variabilized. As 0:11:39.960 --> 0:11:42.920 you said, you guys are doing more distribution centers more 0:11:42.920 --> 0:11:46.760 closer to where people are buying, and that's changing. How 0:11:46.840 --> 0:11:49.600 much of that has to do with carbon footprint, Well, 0:11:49.679 --> 0:11:53.000 it has everything to do with regenerative networks, because I 0:11:53.240 --> 0:11:57.559 I think, like people talk about sustainability, sustainability just acknowledges 0:11:57.600 --> 0:12:00.600 the fact that we have screwed up the world, right, 0:12:00.960 --> 0:12:02.920 and so we're saying that we want to be carbon 0:12:02.960 --> 0:12:06.439 neutral but what we intend to do with this new 0:12:06.480 --> 0:12:09.360 model that we're building out is to create a regenerative business, 0:12:09.800 --> 0:12:12.680 which means that giving it back, giving back to the society. 0:12:13.040 --> 0:12:17.640 So as an example example, so when we built out 0:12:17.679 --> 0:12:22.120 this distribution network that we did, American Eagle grew the 0:12:22.200 --> 0:12:28.120 business by right, but we reduced the number of parcels 0:12:28.120 --> 0:12:33.800 which are actually going to the doorstep by and it 0:12:33.880 --> 0:12:38.679 was less tough because exactly because instead of having stores 0:12:38.760 --> 0:12:41.439 like you know, do all of your shipments, we were 0:12:41.440 --> 0:12:44.960 consolidating them into fewer locations which could do the shipments. 0:12:45.000 --> 0:12:47.160 And so the number of packages which are ending up 0:12:47.160 --> 0:12:49.920 at the doorstep were much much lesser than what it was, 0:12:50.520 --> 0:12:53.160 though the volume grew. The second thing, it actually reduced 0:12:53.160 --> 0:12:55.480 the number of miles because like you're that much closer 0:12:55.480 --> 0:12:58.360 to the end consumer. So we reduced the number of 0:12:58.440 --> 0:13:03.200 parcel miles by billion miles. That's a number. What percentage 0:13:03.240 --> 0:13:05.240 is that, Well, it sounds like a lot, but you 0:13:05.240 --> 0:13:08.320 know what I mean. Like so for for for us itself, 0:13:08.559 --> 0:13:13.600 it was about right. And and then let's take like 0:13:13.640 --> 0:13:15.640 you know, the cost of doing business, because we were 0:13:15.679 --> 0:13:19.680 sharing our network with other brands through this, through the 0:13:19.920 --> 0:13:24.120 consolidations sharing economy models. So the cost was much lower, 0:13:24.160 --> 0:13:28.080 so we were able to deliver packages cheaper and a 0:13:28.160 --> 0:13:31.200 day and a half faster. Right, So it's better for 0:13:31.240 --> 0:13:35.040 the planet, it's better for profits, it's better basically because 0:13:35.080 --> 0:13:38.040 you're tapping into the local economy. Right, So it was 0:13:38.360 --> 0:13:41.120 better all the way around. And so we thought this 0:13:41.200 --> 0:13:45.080 is a fundamentally a good business model that we should 0:13:45.080 --> 0:13:51.080 now begin to scale and democratize access for everyone. And 0:13:51.080 --> 0:13:53.520 and that is the mission of this company. And to 0:13:53.600 --> 0:13:55.800 just to give you some context, I come from, and 0:13:55.800 --> 0:13:58.079 I'm proud to say that on radio that I come 0:13:58.080 --> 0:14:02.040 from slums in India where access to funerals, paying for 0:14:02.080 --> 0:14:05.320 funerals or paying for education, paying for electricity was a 0:14:05.360 --> 0:14:08.079 big thing. And all we know is how to share 0:14:08.400 --> 0:14:11.679 and supply chains is anything but going to be an 0:14:11.720 --> 0:14:14.960 abundant resource going forward. We don't have enough people. Where 0:14:15.000 --> 0:14:17.199 do we find all the people? Like it's going to 0:14:17.400 --> 0:14:20.760 the price escalation is here to stay from a supply 0:14:20.840 --> 0:14:24.160 chain perspective, right, And so so that and so the 0:14:24.200 --> 0:14:28.440 notion of sharing right opens up capacity everywhere in the network. 0:14:28.680 --> 0:14:31.640 That was Shaker, not Rogen. He's EBP and chief supply 0:14:31.720 --> 0:14:34.880 chain officer at American Eagle Outfitters. More later on retail 0:14:34.920 --> 0:14:37.120 when we talk to the SAX CEO. Coming up next, 0:14:37.200 --> 0:14:40.280 Why Wells Fargo is spending millions to help pring diversity 0:14:40.440 --> 0:14:53.320 to the housing development business. This is Bloomberg Broadcasting from 0:14:53.320 --> 0:14:57.080 the financial capital of the World, Bloomberg eleven Frio in 0:14:57.200 --> 0:15:00.960 New York to Washington, d C. Bloomberg one to Boston, 0:15:01.080 --> 0:15:04.480 Bloomberg one oh six one does San Francisco, Bloomberg Name 0:15:04.560 --> 0:15:07.760 sixty to the country Sirius xm Jeddo one nine team, 0:15:07.760 --> 0:15:10.920 and around the globe the Bloomberg Business app and Bloomberg 0:15:11.000 --> 0:15:16.360 Radio dot Com. This is Bloomberg Business Week. As you know, 0:15:16.480 --> 0:15:19.480 Wells Fargo has been dealing with a series of scandals 0:15:19.480 --> 0:15:22.360 and regulatory issues for years, and it's operating under a 0:15:22.360 --> 0:15:24.840 growth cap imposed by the Federal Reserve. A last week, 0:15:24.880 --> 0:15:27.880 we even had Congresswoman Maxie and Waters say that the 0:15:27.880 --> 0:15:31.880 bank should faced an investigation by US regulators into allegations 0:15:31.920 --> 0:15:35.240 at the bank denied black refinancing applicants and hosted mock 0:15:35.320 --> 0:15:39.840 interviews to fulfill diversity numbers. To be fair to signs 0:15:39.840 --> 0:15:42.120 to every coin, we should point out that Wells Fargo 0:15:42.360 --> 0:15:45.120 tim has been working to make some changes, including awarding 0:15:45.160 --> 0:15:49.160 a forty million dollar grant to help cultivate diverse housing developers. 0:15:49.320 --> 0:15:51.880 We've got with us Gina Marriott, whose principle at Northern 0:15:52.040 --> 0:15:55.320 Real Estate Urban Ventures. It's a community development organization that's 0:15:55.480 --> 0:15:59.320 engaged in a holistic approach to real estate development. Gina 0:15:59.400 --> 0:16:01.880 joins us from Washington, d C. Gina, how are you. 0:16:03.120 --> 0:16:05.480 I'm thank you. How are you all doing. We're doing well. 0:16:05.520 --> 0:16:07.640 Thanks so much for joining us. Talk to us about 0:16:07.720 --> 0:16:10.640 how you're gonna use this forty million dollar grant. It's 0:16:10.680 --> 0:16:15.560 called Growing Diverse Housing Developers. Well, the funds were awarded 0:16:15.560 --> 0:16:19.200 by Wells Fargo to three regional c d f ies 0:16:19.280 --> 0:16:24.240 community development Financing institutions, and they have selected a cohort 0:16:24.320 --> 0:16:29.320 of twenty seven diverse developers to provide funding support both 0:16:29.400 --> 0:16:32.920 for their enterprise as well as their real estate projects. 0:16:33.920 --> 0:16:36.360 Well and talked to us about a little bit about 0:16:36.720 --> 0:16:39.280 what kind of impact this could do, the money itself 0:16:39.680 --> 0:16:42.160 and really changing the system. And I know, Gina, you know, 0:16:42.280 --> 0:16:45.000 I kind of laid it out because Bloomberg viewers they 0:16:45.000 --> 0:16:48.000 know Wells Fargo and they're not alone in terms of 0:16:48.040 --> 0:16:52.880 the banking society and banking industry and leaving out, you know, 0:16:52.960 --> 0:16:56.400 minorities and being more inclusive, especially when it comes to housing. 0:16:56.480 --> 0:16:58.320 So tell us how you think this money can help 0:16:58.360 --> 0:17:01.840 move the needle. Well, this money is certainly going to 0:17:01.880 --> 0:17:05.280 help my organization. I've been in business for more than 0:17:05.440 --> 0:17:08.240 twenty years and have more than twenty seven years of 0:17:08.280 --> 0:17:12.920 experience developing affordable housing for other people, never having enough 0:17:12.960 --> 0:17:16.359 capital to be able to develop my own projects, and 0:17:16.440 --> 0:17:20.040 so the funds well Spargo has provided will allow me 0:17:20.160 --> 0:17:25.440 to one UM leverage their grants to hire people and 0:17:25.520 --> 0:17:28.399 to support my balance sheet and will it will also 0:17:28.440 --> 0:17:32.080 allow these c d I fies to create products that 0:17:32.119 --> 0:17:37.080 will help diverse developers UM develop their their projects. It's 0:17:37.119 --> 0:17:40.679 been very challenging going to conventional banks to try to 0:17:40.720 --> 0:17:44.720 get funds both early funding, the early stage funding for 0:17:44.800 --> 0:17:48.320 development projects as well as construction and permanent financing. So 0:17:48.600 --> 0:17:52.879 this this program helps provide the kind of support developers 0:17:52.880 --> 0:17:55.600 need in order to get their projects done on their own. 0:17:56.200 --> 0:17:58.400 If I can just follow us the word challenging, it's 0:17:58.400 --> 0:18:03.040 got to be even harder than challenge, right, is it? Okay? Listen? 0:18:03.280 --> 0:18:05.880 I was almost put out of business actually by one 0:18:05.920 --> 0:18:09.520 of these large institutions. UH, I was working with a 0:18:09.600 --> 0:18:12.280 smaller institution that was bought by a larger, you know, 0:18:12.400 --> 0:18:17.080 brand name financing organization, and that organization would not honor 0:18:17.240 --> 0:18:20.560 the deal that the smaller organization made to me. Right, 0:18:20.720 --> 0:18:24.480 smaller uh, smaller financing entity. So the the eight thousand 0:18:24.560 --> 0:18:27.560 pound guerilla basically took over this company and wouldn't honor 0:18:27.600 --> 0:18:30.320 the deal, almost put me out of business. So we 0:18:30.359 --> 0:18:33.760 need organizations like Wells Fargo to fund the c d 0:18:33.960 --> 0:18:36.640 fies that will provide financing for people like me, because 0:18:36.720 --> 0:18:39.520 the major institutions won't do it. GA, How how do 0:18:39.560 --> 0:18:42.720 you build affordable housing right now? I mean, construction costs 0:18:42.760 --> 0:18:45.840 are high, materials costs are high, land is high, interest 0:18:45.920 --> 0:18:48.600 rates are going up. How do you do it? It's 0:18:48.720 --> 0:18:50.960 very difficult. I mean I have a couple of projects 0:18:51.080 --> 0:18:54.240 right now in development UM that are about to close 0:18:54.480 --> 0:18:57.640 that just experience these kinds of things, both an increase 0:18:57.720 --> 0:19:01.240 in interest rate and an increase in construction costs. And 0:19:01.480 --> 0:19:04.400 you know, I would say, luckily, there was also luckily 0:19:04.440 --> 0:19:08.080 and not so luckily, there was an increase in the 0:19:08.200 --> 0:19:11.359 rental rates because HUD issues new rents every year for 0:19:11.440 --> 0:19:15.320 affordable housing, developments and those two went up, so that 0:19:15.440 --> 0:19:19.040 helped absorb some of the increase in interest rates and 0:19:19.400 --> 0:19:21.880 construction costs, but not all of it. So then what 0:19:21.960 --> 0:19:23.400 you have to do is really go back to these 0:19:23.440 --> 0:19:27.720 municipalities that provide what we call gap funding, which is, 0:19:28.080 --> 0:19:30.360 you know, all of the private money you can get, 0:19:30.440 --> 0:19:33.359 all of the low income housing tax credit investment you get, 0:19:33.760 --> 0:19:37.040 there's usually still a gap, right, There's still some some 0:19:37.119 --> 0:19:40.679 chunk of money that the private institutions can't fund. And 0:19:40.720 --> 0:19:44.000 so really what we look to now is those states 0:19:44.040 --> 0:19:47.600 and cities to provide additional support to these projects so 0:19:47.760 --> 0:19:50.320 they can get them done. Is this about also um 0:19:50.400 --> 0:19:54.880 genior creating projects? You know, if we're gonna really embrace 0:19:54.960 --> 0:19:57.720 as a world diversity inclusion, that means these kind of 0:19:57.720 --> 0:20:02.520 projects and maybe a traditionally white neighborhood. Is that part 0:20:02.520 --> 0:20:06.640 of this. Yes, especially in the district of Columbia. Actually 0:20:07.000 --> 0:20:12.160 UM the basically the financing programs that support affordable housing, 0:20:13.280 --> 0:20:16.359 UH give you a higher score if you're in a 0:20:16.400 --> 0:20:20.120 neighborhood that has higher incomes, and so you know that's 0:20:20.200 --> 0:20:22.600 just that just happens to be, you know, neighborhoods that 0:20:22.640 --> 0:20:26.639 are whiter in terms of its population. That was Jinna Merritt, 0:20:26.680 --> 0:20:29.360 principle at Northern Real Estate Urban Ventures on the Growing 0:20:29.400 --> 0:20:33.280 Diverse Housing Developers Grant program. You're listening to Bloomberg Business Week. 0:20:33.560 --> 0:20:36.119 Up next, the CEO of a robotic startup tells us 0:20:36.160 --> 0:20:39.040 about his vision for a human machine team and why 0:20:39.080 --> 0:20:41.400 savage droids don't mean you'll be out of a job. 0:20:41.680 --> 0:20:45.280 Still a little nervous Newsky, I'm not so sure about 0:20:45.280 --> 0:20:56.760 this one. All right, this is Bloomberg. You're listening to 0:20:56.880 --> 0:21:00.480 Bloomberg Business Week with Carol Messer and bloom were quick 0:21:00.520 --> 0:21:05.760 takes Tim Stinovik from Bloomberg Radio four. Robotics closed another 0:21:05.800 --> 0:21:08.720 round of funding earlier this week million dollars in a 0:21:08.760 --> 0:21:11.760 Series B funding led by Tiger Global that brought the 0:21:11.800 --> 0:21:15.080 company's total funding raise to over one million dollars. We 0:21:15.119 --> 0:21:17.560 sat down with Samuel Reeves. He's the company's founder and 0:21:17.640 --> 0:21:21.399 CEO for Robotics, it's a safety and security platform for 0:21:21.440 --> 0:21:24.639 autonomous machines. He told us how that money will be 0:21:24.680 --> 0:21:27.440 deployed in What it's like raising capital in a tough 0:21:27.520 --> 0:21:31.879 macro environment. It's certainly a challenge, but we're attached to 0:21:32.040 --> 0:21:36.080 a big macro trend. We're we're a part of the 0:21:36.080 --> 0:21:40.000 fourth Industrial Revolution, and regardless of what happens in in 0:21:40.040 --> 0:21:44.320 any momentary downturn um, this is a generational shift in 0:21:44.320 --> 0:21:46.560 the way the world works. So there's still a lot 0:21:46.560 --> 0:21:49.720 of money out there, and if you look at there's 0:21:49.760 --> 0:21:51.879 there's still a lot of dry powder, so there is 0:21:51.920 --> 0:21:54.800 But was it was it noticeably different raising this round 0:21:54.960 --> 0:21:57.199 in terms of how long it took, the conversations you 0:21:57.280 --> 0:21:59.399 had to have, the time it took from you know, 0:21:59.440 --> 0:22:01.399 talking to the x LPs to actually get him to 0:22:01.440 --> 0:22:03.440 sign on the dotted line. Give us some color there. 0:22:03.480 --> 0:22:06.440 I mean, I think automation is unique. So what what 0:22:06.440 --> 0:22:10.240 What was noticeably different for us is that the world 0:22:10.320 --> 0:22:12.959 is now bought into the idea that everything is going autonomous, 0:22:13.000 --> 0:22:16.440 So we're kind of special in in that way. Robotics 0:22:16.480 --> 0:22:19.680 funding is still going strong, so I think a lot 0:22:19.680 --> 0:22:22.520 of folks are seeing a turn down. But but we 0:22:22.560 --> 0:22:24.440 actually had had a lot of interest in the round 0:22:24.800 --> 0:22:26.680 and ultimately came on a set of partners we're really 0:22:26.680 --> 0:22:28.359 happy about. We'll tell us a little bit more about 0:22:28.359 --> 0:22:31.480 your business. You guys have been around, correct, so tell 0:22:31.560 --> 0:22:34.359 us because it's not like you're creating the cool elon 0:22:34.400 --> 0:22:40.400 Mosk Cuminoid robot. You're stuff, but you're controlling the devices 0:22:40.440 --> 0:22:42.399 and you're also playing into the security side of this. 0:22:42.760 --> 0:22:45.119