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 as it happened. Bloomberg
Speaker 1: Business Week with Carol Messier and Bloomberg Quick Takes. Tim
Speaker 1: Stinovic on Bloomberg Radio. Hi, everyone, Welcome to the weekend
Speaker 1: edition of Bloomberg Business Week. We got another red hot
Speaker 1: inflation print for the month of June that has sparked
Speaker 1: talks of a possible one hundred basis point interest rate
Speaker 1: hike when the fo MC meets towards the end of July.
Speaker 1: Tim coming up on the broadcast today, We're going to
Speaker 1: explore the impact of those rising prices on the luxury
Speaker 1: goods market. We do that with the CEO of Sacks
Speaker 1: and then find Dining. We talked about that with chef
Speaker 1: Richard Sandoval. Plus our cover story details a five billion
Speaker 1: dollar calamity in the desert of Saudi Arabia just a
Speaker 1: mere half a trillion dollars. It is all of that
Speaker 1: to come first up. One big reason that consumer prices
Speaker 1: continue to soar steep energy prices and all they have
Speaker 1: come down from recent highs they're likely to remain elevated
Speaker 1: for months, if not years. Bloomberg's Will Kennedy writes about
Speaker 1: it in the Economic section a Business Week. Lyn Duan
Speaker 1: edited the piece. She's Bloomberg News Managing editor of Energy
Speaker 1: and Commodities here in the Americas. We spoke to Lynn
Speaker 1: on Wednesday, just as President Joe Biden was beginning his
Speaker 1: trip through the Middle East to meet with the region's leaders,
Speaker 1: with energy security high on the agenda. I don't know
Speaker 1: how you can look at the supply and demand fundamentals
Speaker 1: of this market and think that we can continue downward
Speaker 1: in either oil or gas. But the traders are thinking
Speaker 1: that right now. Traders. You know, we just had a
Speaker 1: story yesterday that I will highlight. It's a bit wonky,
Speaker 1: but if you read it, it's a scoop about the
Speaker 1: fact that traders are paying some of the highest premiums
Speaker 1: for physical barrels of oil in Europe than they have
Speaker 1: in years. So if you want to ask the traders,
Speaker 1: who probably know more about this than the economists and
Speaker 1: the politicians out there, they might tell you that oil
Speaker 1: is actually still very expensive. Here's the thing that I
Speaker 1: think about land and I think about supply demand, and
Speaker 1: I think okay, first of all, we continue to grow
Speaker 1: in terms of population, we continue to be a fossil
Speaker 1: fuel based economy globally, and yes, there's a lot of
Speaker 1: talk about alternatives, but we ain't there yet. So to me,
Speaker 1: that just says, of course, energy prices are going to
Speaker 1: stay high. That is correct. We're only halfway through the summer.
Speaker 1: We have hundreds of millions of people out there on
Speaker 1: the roads and in the air. We are so close
Speaker 1: to already passing pre pandemic demand levels, and the International
Speaker 1: Energy Agency is saying that we're only going to grow more.
Speaker 1: In Sure, a possible recession, Sure some inflation could could
Speaker 1: eat into demand growth, but I'm not sure there's anybody
Speaker 1: projecting that demand is going to fall well. And isn't
Speaker 1: that too like you were talking about traders, that we're
Speaker 1: talking about traders? I mean, isn't some of We were
Speaker 1: just talking about this with some other members of our
Speaker 1: Bloomberg team, and that what we've seen in terms of
Speaker 1: oil prices come down, that's just a trader's market because
Speaker 1: it concerns about a recession, but it's not necessarily the
Speaker 1: fundamental story. So we're talking about a difference between the
Speaker 1: macro and and and and market traders versus the physical
Speaker 1: oil traders, right, and so you know on a macro level, yes,
Speaker 1: there are recession fears. Yes, there is a fear that
Speaker 1: you know, a recession is going to drive the oil
Speaker 1: market lower because of a drop in demand. But remember that,
Speaker 1: aside from the pandemic lockdowns in and the demand that dropped,
Speaker 1: then the only economic downturn in modern history that is
Speaker 1: actually lowered oil demand was in two thousand eight. Every
Speaker 1: other recession has actually just slow demand growth. It's really
Speaker 1: interesting to hear Lynn. I wonder though, when it comes
Speaker 1: to what Mike McGlone of Bloomberg Intelligence tells us all
Speaker 1: the time, the cure for high prices is high prices.
Speaker 1: What about the ability of producers to come in and say, hey,
Speaker 1: we want to take advantage of these high prices, so
Speaker 1: we're gonna flood the market here? Not so right? So
Speaker 1: the question is if demand is inelastic and it's going
Speaker 1: to stay where it is, then where does supply budge?
Speaker 1: And that's a bigger question. And Will Kennedy actually does
Speaker 1: a good job of laying out the prospects of oil
Speaker 1: production growth. I mean, really, the power of rests in
Speaker 1: the hands of Saudi Arabia and the UAE, and they
Speaker 1: are the the only world producers who may be willing
Speaker 1: and have the capacity to raise it. And that's why
Speaker 1: you have Biden going out to Saudi Arabia for a visit,
Speaker 1: because he realizes that the world realizes that, and there
Speaker 1: is a lot of pressure on OPEC plus right now
Speaker 1: to be the saviors of the oil world. I love
Speaker 1: this line. It's it's not clear how much more cruise
Speaker 1: Saudi Arabia or the UAE has to give. As you said,
Speaker 1: a Ramco, Saudi Arabia state oil giant claims he can
Speaker 1: pump twelve million barrels a day. He has hit that
Speaker 1: rate only on so bring it back home. And we've
Speaker 1: heard from u S domestic producers in the big oil
Speaker 1: conglomerates that they're like, they've seen the booms and bust.
Speaker 1: They're not quick running to ramp up production and and
Speaker 1: Wall Street doesn't want to want them to. I mean, honestly,
Speaker 1: for two three years now, what Wall Street has been
Speaker 1: drilling into the shale drillers in Texas is that they
Speaker 1: need to stop spending so much money, stop going after growth,
Speaker 1: rain it in and try to make more money out
Speaker 1: of the production that they have on already. So something's
Speaker 1: got to give here, because this is not sustainable for
Speaker 1: not the world and not for American consumers. What gives?
Speaker 1: I mean, I've got to think that if we see
Speaker 1: a prolonged period of high oil prices in this way,
Speaker 1: supply gives before demand gives, because that's like a more
Speaker 1: permanent price signal that some of these industries and world
Speaker 1: producers can live off of and invest in. But also,
Speaker 1: you know, we we touch on the energy transition and
Speaker 1: say do we ramp up the alternatives? We exactly, I mean,
Speaker 1: we we we touch on it. It's you know, the
Speaker 1: argument that we make is a really huge surge, an
Speaker 1: abrupt one like this can actually be incredibly disruptive for
Speaker 1: the energy transition, not just because of you know, high
Speaker 1: oil prices raising inflation, thus prompting federal policymakers to raise
Speaker 1: interest right, but also because uh governments tend to buckle
Speaker 1: under the pressure of inflation and create a lot of
Speaker 1: subsidies for fossil fuel industries as opposed renewable energy. But
Speaker 1: if you see it for a prolonged amount of time,
Speaker 1: then you can really incentivize it. That was Linda on
Speaker 1: She's Bloomberg News Managing editor of Energy and Commodities. In
Speaker 1: the America's Coming Up, we hear from an executive at
Speaker 1: retail giant American Eagle on building a more responsive supply chain.
Speaker 1: When the pandemic hit us, it was also a route
Speaker 1: awakening that, like you know, the distribution centers were very fragile.
Speaker 1: You're listening to Bloomberg Busy this week. This is Bloomberg.
Speaker 1: This is Bloomberg Business Week with Carol Masser and Bloomberg
Speaker 1: Quick Takes. Tim Stinovik from Bloomberg Radio. We talked a
Speaker 1: lot about retail this past week. Even got an economic
Speaker 1: data point on retail. It's a sector, as you know,
Speaker 1: that went through a lot of disruption and innovation during
Speaker 1: the pandemic. With e commerce reigning supreme. Well today, retailers
Speaker 1: continue to face questions about consumer demand and of course
Speaker 1: those rough supply chains. One company is rethinking the way
Speaker 1: it distributes it's goods. Shaker not Rogen is executive vice
Speaker 1: president and Chief Supply chain Officer at American Eagle Outfitters.
Speaker 1: He joined us in the studio to help break down
Speaker 1: the company's collaborative approach. Even before like pandemic hitos. We
Speaker 1: started envisioning the future of the supply chain, how it's
Speaker 1: going to look very different and so um if you
Speaker 1: look at where there was a lot of costa escalation
Speaker 1: in you know, doing business, it was really like from
Speaker 1: what I call the middle mind the time the product
Speaker 1: enters into the country to the time it actually gets
Speaker 1: to the doorstep. And that was the fastest growing expense
Speaker 1: that we saw. And it's across the board. Like every industry,
Speaker 1: every retailer says that the shipping expenses, transportation, transportation expenses,
Speaker 1: they were like they were not leveraged. And so we
Speaker 1: wanted to change the game. We wanted to change the game,
Speaker 1: and we started thinking about what would the disruption look like,
Speaker 1: because we wanted to disrupt ourselves before the industry disrupts us, right,
Speaker 1: So we started laying out a strategy, and that strategy
Speaker 1: was all about getting the inventory closer to the end
Speaker 1: consumption point and doing it in an omni channel fashion
Speaker 1: so that you could you could maximize the value of
Speaker 1: the inventory, reduce the transportation cost. And the minds traveled
Speaker 1: hold on, how do you how do you get the
Speaker 1: inventory closer to the place of consumption, especially when this
Speaker 1: stuff is created half a world away. Yes, so what
Speaker 1: we talked about it is once it actually comes into
Speaker 1: the country, the time basically, like let's take an example, right,
Speaker 1: like if a pair of American Egan jeans was actually
Speaker 1: sold in a store, um, it would be sold on
Speaker 1: a Sunday, read on a Monday. The allocations would happen
Speaker 1: on a Wednesday, like you would actually pick back on
Speaker 1: a Thursday. It would show up like that, the trucks
Speaker 1: would leave on the following Monday. It would show up
Speaker 1: in the in the customers, in the stores like two
Speaker 1: weeks later pretty much. And so the time it takes
Speaker 1: was about like fourteen days the worst case scenario. And
Speaker 1: so what we wanted to do is how do we
Speaker 1: get to daily replenishment of the stores. And also, like
Speaker 1: you know, when you when you allocated the store, the
Speaker 1: product in the store is like literally like two and
Speaker 1: a half days away, right, So that like that compression
Speaker 1: of the time was what we were trying to aim for.
Speaker 1: And so what we did is basically we created a
Speaker 1: lot of decentralized locations. Instead of shipping from halfway across
Speaker 1: the country, we started putting distribution centers closer to where
Speaker 1: people live, started holding the inventory like the Amazon in
Speaker 1: terms of other distribution, absolutely like the Amazon model. And
Speaker 1: when we presented this, people thought I was crazy because
Speaker 1: it works for like you know, diapers and and soda,
Speaker 1: not necessarily for fashion because fashion change is pretty fast.
Speaker 1: And so what we had to do was really power
Speaker 1: our systems with a lot of advanced like thinking from
Speaker 1: a perspective, and that drove the inventory decisioning and the
Speaker 1: sciences associated with it, which really helped us like transformative.
Speaker 1: So basically, all of a sudden, tims really into yoga
Speaker 1: pants and they're like, you know, he lives in New York.
Speaker 1: You get kind of a spike there, you know, and
Speaker 1: others right, and the data says, we gotta get more
Speaker 1: yoga pants to New York. Yes, it's as simple as that.
Speaker 1: It's as simple as that, and like you know, creating
Speaker 1: a responsive supply chain. And when the pandemic hit us,
Speaker 1: it was also a rude awakening that like, you know,
Speaker 1: the distribution centers were very fragile, like you know, we
Speaker 1: have two distribution centers, one in Ottawa and one in Hazelton,
Speaker 1: and the population was was affected there, and so we
Speaker 1: were we were at the risk of actually like shutting
Speaker 1: down the business because if those two facilities go down
Speaker 1: and the stores are not available, then you run the
Speaker 1: risk of actually not having any any of these operations
Speaker 1: at all. You don't have the flexibility to move to
Speaker 1: something like one too. That's it, That's exactly the point.
Speaker 1: But even the increased overhead of having more logistics centers
Speaker 1: that makes effort by having them closer to where the
Speaker 1: demand is. What we did was actually addressed that increased overhead.
Speaker 1: So we went into a sharing model instead of us
Speaker 1: owning the facilities. We started like doing that with like
Speaker 1: fifteen other brands, fifty other brands, and that helped us
Speaker 1: like actually make the supply chain much more variabilized. As
Speaker 1: you said, you guys are doing more distribution centers more
Speaker 1: closer to where people are buying, and that's changing. How
Speaker 1: much of that has to do with carbon footprint, Well,
Speaker 1: it has everything to do with regenerative networks, because I
Speaker 1: I think, like people talk about sustainability, sustainability just acknowledges
Speaker 1: the fact that we have screwed up the world, right,
Speaker 1: and so we're saying that we want to be carbon
Speaker 1: neutral but what we intend to do with this new
Speaker 1: model that we're building out is to create a regenerative business,
Speaker 1: which means that giving it back, giving back to the society.
Speaker 1: So as an example example, so when we built out
Speaker 1: this distribution network that we did, American Eagle grew the
Speaker 1: business by right, but we reduced the number of parcels
Speaker 1: which are actually going to the doorstep by and it
Speaker 1: was less tough because exactly because instead of having stores
Speaker 1: like you know, do all of your shipments, we were
Speaker 1: consolidating them into fewer locations which could do the shipments.
Speaker 1: And so the number of packages which are ending up
Speaker 1: at the doorstep were much much lesser than what it was,
Speaker 1: though the volume grew. The second thing, it actually reduced
Speaker 1: the number of miles because like you're that much closer
Speaker 1: to the end consumer. So we reduced the number of
Speaker 1: parcel miles by billion miles. That's a number. What percentage
Speaker 1: is that, Well, it sounds like a lot, but you
Speaker 1: know what I mean. Like so for for for us itself,
Speaker 1: it was about right. And and then let's take like
Speaker 1: you know, the cost of doing business, because we were
Speaker 1: sharing our network with other brands through this, through the
Speaker 1: consolidations sharing economy models. So the cost was much lower,
Speaker 1: so we were able to deliver packages cheaper and a
Speaker 1: day and a half faster. Right, So it's better for
Speaker 1: the planet, it's better for profits, it's better basically because
Speaker 1: you're tapping into the local economy. Right, So it was
Speaker 1: better all the way around. And so we thought this
Speaker 1: is a fundamentally a good business model that we should
Speaker 1: now begin to scale and democratize access for everyone. And
Speaker 1: and that is the mission of this company. And to
Speaker 1: just to give you some context, I come from, and
Speaker 1: I'm proud to say that on radio that I come
Speaker 1: from slums in India where access to funerals, paying for
Speaker 1: funerals or paying for education, paying for electricity was a
Speaker 1: big thing. And all we know is how to share
Speaker 1: and supply chains is anything but going to be an
Speaker 1: abundant resource going forward. We don't have enough people. Where
Speaker 1: do we find all the people? Like it's going to
Speaker 1: the price escalation is here to stay from a supply
Speaker 1: chain perspective, right, And so so that and so the
Speaker 1: notion of sharing right opens up capacity everywhere in the network.
Speaker 1: That was Shaker, not Rogen. He's EBP and chief supply
Speaker 1: chain officer at American Eagle Outfitters. More later on retail
Speaker 1: when we talk to the SAX CEO. Coming up next,
Speaker 1: Why Wells Fargo is spending millions to help pring diversity
Speaker 1: to the housing development business. This is Bloomberg Broadcasting from
Speaker 1: the financial capital of the World, Bloomberg eleven Frio in
Speaker 1: New York to Washington, d C. Bloomberg one to Boston,
Speaker 1: Bloomberg one oh six one does San Francisco, Bloomberg Name
Speaker 1: sixty to the country Sirius xm Jeddo one nine team,
Speaker 1: and around the globe the Bloomberg Business app and Bloomberg
Speaker 1: Radio dot Com. This is Bloomberg Business Week. As you know,
Speaker 1: Wells Fargo has been dealing with a series of scandals
Speaker 1: and regulatory issues for years, and it's operating under a
Speaker 1: growth cap imposed by the Federal Reserve. A last week,
Speaker 1: we even had Congresswoman Maxie and Waters say that the
Speaker 1: bank should faced an investigation by US regulators into allegations
Speaker 1: at the bank denied black refinancing applicants and hosted mock
Speaker 1: interviews to fulfill diversity numbers. To be fair to signs
Speaker 1: to every coin, we should point out that Wells Fargo
Speaker 1: tim has been working to make some changes, including awarding
Speaker 1: a forty million dollar grant to help cultivate diverse housing developers.
Speaker 1: We've got with us Gina Marriott, whose principle at Northern
Speaker 1: Real Estate Urban Ventures. It's a community development organization that's
Speaker 1: engaged in a holistic approach to real estate development. Gina
Speaker 1: joins us from Washington, d C. Gina, how are you.
Speaker 1: I'm thank you. How are you all doing. We're doing well.
Speaker 1: Thanks so much for joining us. Talk to us about
Speaker 1: how you're gonna use this forty million dollar grant. It's
Speaker 1: called Growing Diverse Housing Developers. Well, the funds were awarded
Speaker 1: by Wells Fargo to three regional c d f ies
Speaker 1: community development Financing institutions, and they have selected a cohort
Speaker 1: of twenty seven diverse developers to provide funding support both
Speaker 1: for their enterprise as well as their real estate projects.
Speaker 1: Well and talked to us about a little bit about
Speaker 1: what kind of impact this could do, the money itself
Speaker 1: and really changing the system. And I know, Gina, you know,
Speaker 1: I kind of laid it out because Bloomberg viewers they
Speaker 1: know Wells Fargo and they're not alone in terms of
Speaker 1: the banking society and banking industry and leaving out, you know,
Speaker 1: minorities and being more inclusive, especially when it comes to housing.
Speaker 1: So tell us how you think this money can help
Speaker 1: move the needle. Well, this money is certainly going to
Speaker 1: help my organization. I've been in business for more than
Speaker 1: twenty years and have more than twenty seven years of
Speaker 1: experience developing affordable housing for other people, never having enough
Speaker 1: capital to be able to develop my own projects, and
Speaker 1: so the funds well Spargo has provided will allow me
Speaker 1: to one UM leverage their grants to hire people and
Speaker 1: to support my balance sheet and will it will also
Speaker 1: allow these c d I fies to create products that
Speaker 1: will help diverse developers UM develop their their projects. It's
Speaker 1: been very challenging going to conventional banks to try to
Speaker 1: get funds both early funding, the early stage funding for
Speaker 1: development projects as well as construction and permanent financing. So
Speaker 1: this this program helps provide the kind of support developers
Speaker 1: need in order to get their projects done on their own.
Speaker 1: If I can just follow us the word challenging, it's
Speaker 1: got to be even harder than challenge, right, is it? Okay? Listen?
Speaker 1: I was almost put out of business actually by one
Speaker 1: of these large institutions. UH, I was working with a
Speaker 1: smaller institution that was bought by a larger, you know,
Speaker 1: brand name financing organization, and that organization would not honor
Speaker 1: the deal that the smaller organization made to me. Right,
Speaker 1: smaller uh, smaller financing entity. So the the eight thousand
Speaker 1: pound guerilla basically took over this company and wouldn't honor
Speaker 1: the deal, almost put me out of business. So we
Speaker 1: need organizations like Wells Fargo to fund the c d
Speaker 1: fies that will provide financing for people like me, because
Speaker 1: the major institutions won't do it. GA, How how do
Speaker 1: you build affordable housing right now? I mean, construction costs
Speaker 1: are high, materials costs are high, land is high, interest
Speaker 1: rates are going up. How do you do it? It's
Speaker 1: very difficult. I mean I have a couple of projects
Speaker 1: right now in development UM that are about to close
Speaker 1: that just experience these kinds of things, both an increase
Speaker 1: in interest rate and an increase in construction costs. And
Speaker 1: you know, I would say, luckily, there was also luckily
Speaker 1: and not so luckily, there was an increase in the
Speaker 1: rental rates because HUD issues new rents every year for
Speaker 1: affordable housing, developments and those two went up, so that
Speaker 1: helped absorb some of the increase in interest rates and
Speaker 1: construction costs, but not all of it. So then what
Speaker 1: you have to do is really go back to these
Speaker 1: municipalities that provide what we call gap funding, which is,
Speaker 1: you know, all of the private money you can get,
Speaker 1: all of the low income housing tax credit investment you get,
Speaker 1: there's usually still a gap, right, There's still some some
Speaker 1: chunk of money that the private institutions can't fund. And
Speaker 1: so really what we look to now is those states
Speaker 1: and cities to provide additional support to these projects so
Speaker 1: they can get them done. Is this about also um
Speaker 1: genior creating projects? You know, if we're gonna really embrace
Speaker 1: as a world diversity inclusion, that means these kind of
Speaker 1: projects and maybe a traditionally white neighborhood. Is that part
Speaker 1: of this. Yes, especially in the district of Columbia. Actually
Speaker 1: UM the basically the financing programs that support affordable housing,
Speaker 1: UH give you a higher score if you're in a
Speaker 1: neighborhood that has higher incomes, and so you know that's
Speaker 1: just that just happens to be, you know, neighborhoods that
Speaker 1: are whiter in terms of its population. That was Jinna Merritt,
Speaker 1: principle at Northern Real Estate Urban Ventures on the Growing
Speaker 1: Diverse Housing Developers Grant program. You're listening to Bloomberg Business Week.
Speaker 1: Up next, the CEO of a robotic startup tells us
Speaker 1: about his vision for a human machine team and why
Speaker 1: savage droids don't mean you'll be out of a job.
Speaker 1: Still a little nervous Newsky, I'm not so sure about
Speaker 1: this one. All right, this is Bloomberg. You're listening to
Speaker 1: Bloomberg Business Week with Carol Messer and bloom were quick
Speaker 1: takes Tim Stinovik from Bloomberg Radio four. Robotics closed another
Speaker 1: round of funding earlier this week million dollars in a
Speaker 1: Series B funding led by Tiger Global that brought the
Speaker 1: company's total funding raise to over one million dollars. We
Speaker 1: sat down with Samuel Reeves. He's the company's founder and
Speaker 1: CEO for Robotics, it's a safety and security platform for
Speaker 1: autonomous machines. He told us how that money will be
Speaker 1: deployed in What it's like raising capital in a tough
Speaker 1: macro environment. It's certainly a challenge, but we're attached to
Speaker 1: a big macro trend. We're we're a part of the
Speaker 1: fourth Industrial Revolution, and regardless of what happens in in
Speaker 1: any momentary downturn um, this is a generational shift in
Speaker 1: the way the world works. So there's still a lot
Speaker 1: of money out there, and if you look at there's
Speaker 1: there's still a lot of dry powder, so there is
Speaker 1: But was it was it noticeably different raising this round
Speaker 1: in terms of how long it took, the conversations you
Speaker 1: had to have, the time it took from you know,
Speaker 1: talking to the x LPs to actually get him to
Speaker 1: sign on the dotted line. Give us some color there.
Speaker 1: I mean, I think automation is unique. So what what
Speaker 1: What was noticeably different for us is that the world
Speaker 1: is now bought into the idea that everything is going autonomous,
Speaker 1: So we're kind of special in in that way. Robotics
Speaker 1: funding is still going strong, so I think a lot
Speaker 1: of folks are seeing a turn down. But but we
Speaker 1: actually had had a lot of interest in the round
Speaker 1: and ultimately came on a set of partners we're really
Speaker 1: happy about. We'll tell us a little bit more about
Speaker 1: your business. You guys have been around, correct, so tell
Speaker 1: us because it's not like you're creating the cool elon
Speaker 1: Mosk Cuminoid robot. You're stuff, but you're controlling the devices
Speaker 1: and you're also playing into the security side of this.
Speaker 1: Explain a little bit about what you guys do. Who
Speaker 1: are some of your big customers? Sure, sure, we're a
Speaker 1: fork is a communications platform for smart machines. So we
Speaker 1: have this unique fusion between safety and security that enables
Speaker 1: us to deliver information to these machines that they can trust,
Speaker 1: and so that lets them address what what globally we
Speaker 1: term as the huge risk of the next generation of automation.
Speaker 1: So just come out and say it. They're they're going
Speaker 1: to kill us. They're not gonna kill us if they
Speaker 1: have the fourth platform. But this is the this is
Speaker 1: the you know, So it's nothing you're making the robots, right, No, no, no,
Speaker 1: we were to help other people make them. Yeah, you
Speaker 1: have the platform that helps people program them, communicate, communicate
Speaker 1: with them. Right. And And the fact is autonomous robotics
Speaker 1: are still is still a developing field. I mean, ai
Speaker 1: is has has reached a great point of development, but
Speaker 1: it's still in development. And these machines are still perceiving
Speaker 1: the world and and acting in the world in a
Speaker 1: way that UM is in progress, and so if they're
Speaker 1: going to be moving around in unstructured environments around people,
Speaker 1: that poses a huge amount of safety risk. Conversely, if
Speaker 1: they're connecting the internet, they're all connect to the internet
Speaker 1: and so they're all exposed to huge already risk. So
Speaker 1: whether it's safety risk or security risk, there's a lot
Speaker 1: of risk on this this mega trend. So that's that's
Speaker 1: what we're out here to help people address. Well, tell
Speaker 1: us a little bit about some of your major customers, right,
Speaker 1: you play in the O E M market. I mean,
Speaker 1: I'm thinking warehousing, agriculture, construction, manufacturing, mining, transportation, delivery. I mean,
Speaker 1: you play into so many aspects of our world. Tell
Speaker 1: us about some of the customers, what kind of demand
Speaker 1: you're seeing, and what it tells you maybe about our
Speaker 1: you know, our macroeconomic environment. Sure, so, so we have
Speaker 1: about three customers about those are really big, big companies.
Speaker 1: So fortunate with thousand sized customers. Um. Oh, so so
Speaker 1: you're when your public I'll be able to actually put
Speaker 1: up on Bloomberg function right. So, so, so it's interesting
Speaker 1: we're integrated into everybody's technology roadmap. So so we hold
Speaker 1: a lot of proprietary information about what all these companies
Speaker 1: are doing, so they get really touchy about us talking
Speaker 1: about them. But a few that have that have been
Speaker 1: public about about using forder. Toyota Material Handling. They're the
Speaker 1: biggest forkliff manufacturer in the world. Boston Dynamics. You probably
Speaker 1: seeing very YouTube friendly, right, So they did to sixty
Speaker 1: minutes where one of our products had a little cameo appearance. Hexagon,
Speaker 1: big Swedish conglomerate. They make control systems for pretty much
Speaker 1: every production environment like that. So tell me about the
Speaker 1: demand you know that you're seeing from such a cross
Speaker 1: section of so many different industries that play into our
Speaker 1: global economy. What's the demand that you're seeing and what
Speaker 1: does it tell you about We're all at this juncture
Speaker 1: right of trying to figure out, okay, recession, what's next.
Speaker 1: Europe's dealing with problems. Asia's dealing with problems. We are
Speaker 1: dealing with problems. What does the outlook and the demand
Speaker 1: based on what you're seeing, what does it tell you
Speaker 1: about the economic outlook? Well, I mean I think everybody, um,
Speaker 1: everybody that makes a machine and everybody that uses a
Speaker 1: machine is thinking about automating it um And this this
Speaker 1: came from the labor shortages that were that were pre COVID.
Speaker 1: I mean, there are a lot of discussions of labor
Speaker 1: shortages now in the post COVID world where you know,
Speaker 1: like Heathrow Airport today saying they're curtailing flights because they
Speaker 1: can have enough workers to move the luggage around, right,
Speaker 1: But this was a fact of life for people in
Speaker 1: farms and warehouses and factories, welders, you know, pre COVID.
Speaker 1: So the automation journey has been something that has been
Speaker 1: happening for decades, and so I think macroeconomically, people are
Speaker 1: still investing in this. They see it as a way
Speaker 1: to smooth production. They see it as a way to
Speaker 1: bring back production into their their home area. Talk to
Speaker 1: us about when you, you know, make your trip here
Speaker 1: today on the train from Philadelphia, and you look around
Speaker 1: and you see where are the areas that stick out
Speaker 1: for you that are just right for automation. So when
Speaker 1: you when you when you drive to the train station,
Speaker 1: you could be in an autonomous car. When you get
Speaker 1: on the train, you could be in an autonomous train.
Speaker 1: When you pass the warehouses on the way to New York,
Speaker 1: you you're passing autonomous warehouses. You're passing autonomous factories, you're
Speaker 1: passing autonomous farms, when you pass a golf course, turf
Speaker 1: care is going autonomous. When you're in an office, I
Speaker 1: bet your cleaning machines here are are either autonomous or
Speaker 1: thinking about become autonomous. Retail stores are becoming autonomous. And
Speaker 1: that's but that's, you know, before we get to the
Speaker 1: really visible things, like like the cars that have gotten
Speaker 1: a lot of attention lately. We hear robotics or we
Speaker 1: hear autonomous, and we're like, okay, what does that mean
Speaker 1: for global workforces? How do you see it in terms
Speaker 1: of what you're doing and how this might play out well.
Speaker 1: As we talked before the break, labor shortages. Labor shortages
Speaker 1: are nothing new to the economy. Um COVID accentuated it
Speaker 1: and made it, made labor shortages really on the front
Speaker 1: of a lot of people's minds. But farming and manufacturing
Speaker 1: and warehousing and retail have all been dealing with labor
Speaker 1: shortages for a really long time. So when we talk
Speaker 1: about this new generation of automation where machines are really
Speaker 1: thinking and acting on their own, what the promises is
Speaker 1: that you can create a human machine team where together
Speaker 1: the production is a lot more safe, and the corporation
Speaker 1: that uses this this human machine team is a lot
Speaker 1: more active. So we're not talking about replacing tons of workers.
Speaker 1: Were talking about taking an existing bunch of workers in
Speaker 1: any given scenaria and making them a lot more productive
Speaker 1: with the human machine team, which allows them to basically
Speaker 1: segregate what each party is good is good at. I mean,
Speaker 1: the humans are good at interacting with each other and
Speaker 1: interacting with other people and making critical thinking decisions and
Speaker 1: things like that, and so we should enable them to
Speaker 1: do the things that make them human. And then machines
Speaker 1: are very precise and predictable, and they should do things
Speaker 1: like that. But it's not only about productive right or
Speaker 1: the right mix. But you also, you know, it is
Speaker 1: interesting what you said to Tim and I in our
Speaker 1: break is that you know, this is a way of
Speaker 1: kind of leveling out labor costs globally, right, right, Absolutely so,
Speaker 1: So as as the cost of production rises in some
Speaker 1: of the global places where production goes now and automation
Speaker 1: over here automation capability increases, I think we'll be able
Speaker 1: to increasingly move production back to localize. There is in
Speaker 1: the United States where consumption can be right down the
Speaker 1: road from the factory and the warehouse that distributes the good.
Speaker 1: And what that could do is make companies more responsive
Speaker 1: to local populations. UH. Could create jobs UH in places
Speaker 1: where there there weren't jobs, could make our manufacturing and
Speaker 1: warehousing work um workforce a lot more competitive globally. And
Speaker 1: so I think we've just discovered how brittle supply chains
Speaker 1: are when they're spread stretched out globally, and we've just
Speaker 1: discovered that that their massive labor shortages. And I think
Speaker 1: automation really addresses both of those, Samuel, I want to
Speaker 1: get more into the technology here, and specifically, if you
Speaker 1: allow companies to operate robots in a safe and efficient way,
Speaker 1: how do you do that better than other companies? Like
Speaker 1: how do you create a system And I want to
Speaker 1: use the term unhackable because you never want to say that,
Speaker 1: but but how do you create a system that keeps
Speaker 1: out bad actors and that also allows these things to
Speaker 1: operate in a way that's safe to the people around them. Sure,
Speaker 1: so we've really focused on communications. So we've we've invented
Speaker 1: a way to fuse what's called functional safety and cybersecurity
Speaker 1: to create a way of that these machines can communicate
Speaker 1: in a way that they can trust the information that
Speaker 1: they're getting. So what they get on the safety side
Speaker 1: is super highly reliable information like ten nines of reliability,
Speaker 1: so that they can use that information to make decisions
Speaker 1: about how they move. And on the security side, you know,
Speaker 1: we start with identity. We started. We use the identity
Speaker 1: to create authentication and then make sure that they're authorized
Speaker 1: to talk with only certain parties. We borrow a lot
Speaker 1: of the techniques that have already been created in the
Speaker 1: human world. I mean a lot. A lot of these
Speaker 1: techniques have already been established to make humans secure in
Speaker 1: their activities on the Internet, but they haven't really been
Speaker 1: applied to machines yet. So we took we took that paradigm,
Speaker 1: we applied it to machines, We fused it with safety,
Speaker 1: and we created this unique fusion of safety and security
Speaker 1: so that all information that machines process can be trusted.
Speaker 1: Big thanks to Samuel Reeves, founder and CEO at First Robotics.
Speaker 1: That wraps up the first hour of the weekend edition
Speaker 1: of Bloomberg Business Week from Bloomberg Radio. I'm Carol Messer
Speaker 1: and I'm Tim Stanovic. Ahead in our next hour, a
Speaker 1: biotech startup thinks artificial intelligence can predict the next COVID variant.
Speaker 1: Bring it on. Plus the CEO of saxon why the
Speaker 1: market for luxury goods remains so strong despite soaring inflation
Speaker 1: in our Business Week cover story, It's all about Saudi
Speaker 1: Crown Prince Mohammed Ben Solomon's billion dollar desert disaster. That's
Speaker 1: some real money. Yuh, all right, that's coming up. This
Speaker 1: is Bloomberg. This is Bloomberg Business Week Inside from the
Speaker 1: reporters and editors who bring you America's most trusted business magazine,
Speaker 1: Plus global business, finance and tech news as it happened
Speaker 1: Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes
Speaker 1: Tim Stinovic on Bloomberg Radio. Plenty ahead in our second
Speaker 1: hour of the weekend edition of Bloomberg Business Week, including
Speaker 1: this week's cover story, how the Saudi Crown Prince's vision
Speaker 1: for a revolutionary new model of urban life is falling
Speaker 1: far short of his expectations. Plus the CEO of Sacks
Speaker 1: on why the luxury goods market remains so resilient and
Speaker 1: which demographic has been the driving force m Tick Tick
Speaker 1: Tic Dick, is it you so somewhat I have something
Speaker 1: to do with it? First, up this hour, some COVID
Speaker 1: news from this past week, and it's a bit sobering.
Speaker 1: The Biden administration is now urging more Americans to get
Speaker 1: their second coronavirus booster shot. This is the amicron B
Speaker 1: A five variant continues to spread across the country. Wouldn't
Speaker 1: it be great, though, Carol, if we could actually get
Speaker 1: ahead of the virus, get ahead of these variants, please
Speaker 1: please please, Well, someone who just recovered from her second
Speaker 1: coronavirus infection, I'm talking about me cases back to back,
Speaker 1: I would say, yes, let's get ahead of this and
Speaker 1: the next variant. Well, this story should give us a
Speaker 1: little bit of hope. It's in the Solution section of
Speaker 1: the magazine Bloomberg News. US healthcare reporter Riley Griffin reports
Speaker 1: on a startup that's using artist facial intelligence to help
Speaker 1: drug makers develop better vaccines and treatments. She and Business
Speaker 1: Week editor Joe Webber give us the details. The player
Speaker 1: at hand is a Priori Bio. They're actually backed by
Speaker 1: a company called Flagship Pioneering, which was the incubator behind Maderna.
Speaker 1: A name you might hear no UM, and they've developed
Speaker 1: this technology that they say can be used to vary
Speaker 1: improve vaccines and therapeutics, or provide an early warning to
Speaker 1: governments about the dangerous mutations are to come, just like
Speaker 1: a hurricane alert. UM. They've spent two years in stealth
Speaker 1: mode building out this technology and trying it against COVID,
Speaker 1: and they suggest it works UM, and they aim to
Speaker 1: partner not just with the pharmaceutical industry, but with public
Speaker 1: sector partners like the CDC. UM. So we still have
Speaker 1: to see what products they might bring to bear or
Speaker 1: what information they've been sharing. UM. But they launched just
Speaker 1: today with fifty million in funding from Flagship Riley. I
Speaker 1: gotta ask a path. Two years seems like a time
Speaker 1: that you might not have wanted to be so quiet
Speaker 1: about this. So you know, there's the pandemic that like,
Speaker 1: uh so, so why the why the the really long
Speaker 1: quiet period? Yeah, just to hone the technology. This has
Speaker 1: been something they've been looking at with each COVID nineteen variants.
Speaker 1: So basically they take the sequence of the virus and
Speaker 1: they can plug it in and assess what they describe
Speaker 1: as synthetic variants. So using the computer they're trying all
Speaker 1: these different potential variants out and assessing how they would
Speaker 1: bind to human antibodies. And as we know over the
Speaker 1: last two years, violence viruses are widely things they mutate
Speaker 1: order and to survive, and these mutations can evade the
Speaker 1: defenses we've either created via natural infection or by vaccines.
Speaker 1: So it's really important to not just know what viruses
Speaker 1: and variants could exist, but know how they will behave
Speaker 1: and that's how they ultimately will design these vari improve
Speaker 1: drugs and vaccines. Um why have they been operating installed
Speaker 1: to really ensure that that technology is up to the
Speaker 1: task and that they can apply it not just to
Speaker 1: COVID but to other viruses like HIV and influenza. So
Speaker 1: that's where there are at this point, correct, That's exactly
Speaker 1: where they're at at this point. They're certainly going to
Speaker 1: be looking for more funding down the line. But this
Speaker 1: is Flagships are really interesting company and they're known for
Speaker 1: doing this. They take uh, you know, twenty fifty million dollars,
Speaker 1: they deploy it to a company they've created, and then
Speaker 1: they watch it flourish. And we've seen that prove successful
Speaker 1: in the case of Maderna. I think now will be
Speaker 1: a test for a priority. We're gonna have to see
Speaker 1: where they go. But this is just the beginning. If
Speaker 1: this can be used for good to help us predict
Speaker 1: where viruses are going, could there be biosecurity threats with
Speaker 1: this type of technology as well? It's the very same
Speaker 1: question I had for the co founder and CEO. I
Speaker 1: think we all need to be a tuned to these
Speaker 1: questions of biosecurity risks. As we enter this biotech revolution
Speaker 1: with more information than ever and the ability to essentially
Speaker 1: come up with a synthetic variant that could be dangerous
Speaker 1: and damaging, You've got to wonder if that were in
Speaker 1: the hands of a nefarious actor, what what could happen?
Speaker 1: Um A Priori says that they've been focused on that
Speaker 1: question from the very beginning, since the time they realized
Speaker 1: they could make these biologically meaningful predictions, and that they've
Speaker 1: partnered with external experts to implement tests and stand up
Speaker 1: that security. And they caution to me again and again,
Speaker 1: remember we're not working with viral material. We're not in
Speaker 1: a lab with the literal virus itself. They are plugging
Speaker 1: these data points into a computer and assessing and modeling
Speaker 1: with machine learning. It feels like we've been playing from
Speaker 1: behind for oh, I don't know, two and a half
Speaker 1: years now. Is there a chance that the UM, this
Speaker 1: company couldn't maybe help us from ahead for once. I
Speaker 1: think that's the hope, And we got to see what
Speaker 1: the government does that as well, because at the end
Speaker 1: of the day, a lot of our response comes through
Speaker 1: public private partnership UM. Right now, we're seeing a stalling
Speaker 1: of interest from Congress in the immediate pandemic response UM.
Speaker 1: There's been quite a debacle between the White House and
Speaker 1: Congress over funding to do this kind of work really,
Speaker 1: pandemic prep, not immediate deploying of vaccines to people, but
Speaker 1: thinking through what could come next, and all the demands
Speaker 1: for billions in funding UM to do that longer term
Speaker 1: pandemic prep really hasn't gotten much UM momentum. So we're
Speaker 1: seeing UM efforts come out of the private sector. But
Speaker 1: I think we really got to ask ourselves is the
Speaker 1: public sector bought into That was Bloomberg News USL Care
Speaker 1: reporter Riley Griffin, joined there by Business Week editor Joe Weber.
Speaker 1: More variants are coming, huh. I mean that's like, you know,
Speaker 1: death taxes, invariants, oh no, all right, Well you're listening
Speaker 1: to Bloomberg Business Week coming up. Our cover story takes
Speaker 1: us to the Arabian Peninsula and the planned city Neom.
Speaker 1: It's the Saudi Crown Prince's grand vision for a so
Speaker 1: called smart city. Stick around to find out why it's
Speaker 1: still far from Finnish nearly five years after breaking ground.
Speaker 1: This is Bloomberg. This is Bloomberg Business Week with Carol
Speaker 1: Messer and Bloomberg Quick Takes Tim Stinovik from Bloomberg Radio.
Speaker 1: We turned out to our cover story, the tale of
Speaker 1: a half a trillion dollar mega project gone wrong. It
Speaker 1: began when Saudi Arabia's Crown Prince Mohammed bin Salmon set
Speaker 1: out to build the city of Naom in an effort
Speaker 1: to revolutionize urban life. But five years in, the project
Speaker 1: has been plagued by financial waste and setbacks, much of
Speaker 1: it because the prince is inner circle just won't tell
Speaker 1: him no. Bloomberg News Saudi Arabia correspondent Vivian near Rhyme
Speaker 1: and a Business Week editor Joel Weber join us now
Speaker 1: to help us understand this massive desert disaster. So Joel,
Speaker 1: I can just imagine the pitch here um tell us
Speaker 1: a little bit about what you wanted to know about
Speaker 1: this and how it laid out. Well, I mean, Vivian
Speaker 1: basically was like, hey, how about we go big on
Speaker 1: Niom and try and learn how to learn everything we can?
Speaker 1: And and you know, Neiom, if you followed the story
Speaker 1: at all, has been a huge curiosity ever since NBS
Speaker 1: first announced it, but then it's been pretty opique and
Speaker 1: it's been really hard to get meaningful information about it.
Speaker 1: So this basically is the most thorough story anyone's ever
Speaker 1: published about the project. So so, Vivian, what what is
Speaker 1: the project? And how far along or is it? Yeah? Well,
Speaker 1: I mean what is the project? It's a great question,
Speaker 1: and I think it's one that I went in thinking
Speaker 1: we might be able to answer. And then the sort
Speaker 1: of interesting thing was that even the people inside the
Speaker 1: project can't often answer that themselves. So it's become this
Speaker 1: sort of massive, brawling ambition that keeps going in different directions,
Speaker 1: and that was kind of what was really interesting to
Speaker 1: discover it. And essentially it's it's a new region now.
Speaker 1: It began its life as this idea to build a
Speaker 1: city from scratch, and now it's morphed into an entire
Speaker 1: semi autonomous region full of different cities and different towns,
Speaker 1: and there's a tourism component to it. There's an industrial
Speaker 1: city that's going to you know, float on the Red
Speaker 1: Sea according to the plans, and there's even a ski
Speaker 1: resort up in the mountains and what is essentially the
Speaker 1: middle of the desert. What is this area of Saudi
Speaker 1: Arabia like and who lived there before NBS set on
Speaker 1: on this ambitious project. Yes, I've been up to the
Speaker 1: area that they're calling them now maybe three times over
Speaker 1: the past few years. It is really remote. I mean
Speaker 1: you basically have to like from Ria, the capital, you
Speaker 1: take like a two hour plane ride and then you
Speaker 1: also drive for another two hours. So it's it's a
Speaker 1: place that most youse haven't been either. It's it's right
Speaker 1: on the border with Jordan's across the Red Sea from Egypt,
Speaker 1: very close to Israel, which is something a lot of
Speaker 1: people point out about this project. And it's very beautiful,
Speaker 1: like you know, there's this gorgeous sort of like you know,
Speaker 1: pristine beaches and these really dramatic mountains. But it wasn't
Speaker 1: super populated. There were, however, several towns along the coast
Speaker 1: where members of a tribe called the Choice Pot live
Speaker 1: and had been there for generations, So it wasn't an
Speaker 1: empty area, which is what sort of the crowd Prince
Speaker 1: and other people who promote NEOM have promoted as a
Speaker 1: sort of blank slate. To invent the blank slate, they
Speaker 1: essentially began to remove those people who had lived there.
Speaker 1: And there were initially a lot of investors, and then
Speaker 1: there was a killing of a prominent journalist. What happened
Speaker 1: to Neom's trajectory after that? Yeah, well so so Jamal Session.
Speaker 1: He was an American resident. He worked for the Washington Post,
Speaker 1: which is obviously a major American publication writing opinion column.
Speaker 1: And his murder Ineen was a huge shock to Saudi
Speaker 1: Arabia overall, to all of its projects and all of
Speaker 1: its plan NEO took a huge knock. There was this
Speaker 1: huge advisory board that they had basically um just announced
Speaker 1: that was like all these kind of high profile figures
Speaker 1: all the way from sort of starchitects like Norman Foster
Speaker 1: to you know, x US officials earnest monies sort of
Speaker 1: the former US Energy Secretary, and a lot of those
Speaker 1: people did actually pull out of the project after or
Speaker 1: the murder came to light essentially, and there was sort
Speaker 1: of a lot of pressure to back off of doing
Speaker 1: business with the crowd print doing business of Saudi Arabia.
Speaker 1: The really interesting thing that I found is I started
Speaker 1: looking into this, is that a lot of companies and
Speaker 1: architects and consultants are still doing business with Neo under
Speaker 1: the radar. You know, they're still doing plans, they're still
Speaker 1: doing projects, they're still working with them, and it's essentially
Speaker 1: almost the largest construction project in the world at this point.
Speaker 1: Like it's it's become quite massive. You know, they have
Speaker 1: ambitions to have four d fifty thousand laborers on on
Speaker 1: the site within a couple of year, which is basically
Speaker 1: the population of Miami. Just the scale of it must
Speaker 1: be something to behold. They you actually have been up
Speaker 1: there before, right, so so tell us about that. And also,
Speaker 1: you know, if foreign money is not involved anymore, this
Speaker 1: is all being done how exactly. I think that's something
Speaker 1: they're still trying to figure out itselves, you know. Is
Speaker 1: I think the five billion dollar number that they threw
Speaker 1: out there is like a starting budget. At this point.
Speaker 1: They still don't even know what a lot of this
Speaker 1: is going to cost They could end up costing more,
Speaker 1: and where is that money going to come from. They
Speaker 1: still wanted to come from outside, but right now it's
Speaker 1: pretty much fully backed by the Public Investment Fund, which
Speaker 1: is Saudi Arabia's sovereign wealth funds. So they're spending you know,
Speaker 1: they've already spent several billion on it. You know, they're
Speaker 1: spending pretty pretty prolifically. I did go up there and
Speaker 1: sort of do a tour of the site officially, you know,
Speaker 1: I went to visit their main camp, which is this
Speaker 1: very sort of strange place in the desert, surrounded by
Speaker 1: barbed wire, heavily secured, where they've got sort of hundreds
Speaker 1: and hundreds of you know, high powered executives and professionals
Speaker 1: from all over the world who are working on this
Speaker 1: camp essentially, which is like very much felt like a
Speaker 1: cross between like something from Silicon Valley and like maybe
Speaker 1: like a minimum security prison. Um And even the employees
Speaker 1: make a lot of jokes about that. They're like, oh,
Speaker 1: you know, the wall, We're not sure if it's to
Speaker 1: keep people out or to keep us in. So it's
Speaker 1: a very strange atmosphere. There's not a ton of visible
Speaker 1: construction going on now. It's a lot of preparatory work.
Speaker 1: It's like groundwork. You know, they're digging big tunnels, they're
Speaker 1: moothing out ground. But it's not like you can go
Speaker 1: there now and like see a city or see you know,
Speaker 1: any of the things that they've been planning. There's still
Speaker 1: a pretty big gap between what they're talking about and
Speaker 1: what's happening on the ground. It sounds like they start things,
Speaker 1: they start working on it, and they back off of it.
Speaker 1: It sounds like a lot of you know, starts and stops.
Speaker 1: Who does seem to be winning though, all in is
Speaker 1: if you're a consultant or anybody involved in the project.
Speaker 1: I love the line you talk about two buckets for
Speaker 1: those who work on the project, and one of it
Speaker 1: is a bucket just to hold all the money that
Speaker 1: they're making. Don't mention the other bucket. Bucket, Well, you
Speaker 1: can for number two. But people are making a ton
Speaker 1: of money off of this. Are a lot of people
Speaker 1: who have found this to be an incredibly lucrative project,
Speaker 1: and that is predominantly the consultant and the people who
Speaker 1: come from outside to work. There was was something that
Speaker 1: sort of came up again and again, and my conversations
Speaker 1: with people was that this is basically like a life
Speaker 1: changing job for a lot of people, Like they can
Speaker 1: come and make so much money that they can essentially,
Speaker 1: you know, it makes a easy difference to their life.
Speaker 1: They can finish putting their kids through college, they can
Speaker 1: you know, save up for retirement home. And so many
Speaker 1: of the people who come to do that are basically
Speaker 1: coming to earn that giant paycheck and they don't all
Speaker 1: necessarily actually have an investment. And what actually happens once
Speaker 1: they're gone, which of course is the recipe for disaster.
Speaker 1: You know, people who don't necessarily have a stake at
Speaker 1: the success of the project. Um sort of coming for
Speaker 1: a couple of years and then leaving, and there is
Speaker 1: quite a lot of turnover going on, and the atmosphere
Speaker 1: inside is pretty chaodding. Um. They've brought in, you know,
Speaker 1: pretty impressive talent from all over the world. You know,
Speaker 1: you have former executives from companies like Ge and Borrow, Happled,
Speaker 1: you know, working on the project. But there's also a
Speaker 1: lot of people leaving. Well. It's an incredible story. Vivian
Speaker 1: the overt story of this edition of Bloomberg Business Week
Speaker 1: Bloomberg New Saudi Arabia correspondent Vivian Knee Rhyme, also with
Speaker 1: US Business Week editor Joel Weber on this week's cover story.
Speaker 1: Check it out on newsstands, now online at Bloomberg dot com,
Speaker 1: slash business weekend of course on the Bloomberg terminal. All right,
Speaker 1: still to come on Bloomberg Business Week Epinadas tunas Vich
Speaker 1: and slow roasted Cornidas From New York City to Istanbul
Speaker 1: Chef Richard Sandoval telling us how he's kept cooking in
Speaker 1: a world of rising costs and slower supply chains. This
Speaker 1: is Bloomberg Broadcasting from the financial capital of the World,
Speaker 1: Bloomberg eleven Frio in New York to Washington, d C.
Speaker 1: Bloomberg to Boston, Bloomberg one O six one to San Francisco,
Speaker 1: Bloomberg nine sixty to the country Sirius XM Chado one
Speaker 1: nineteen and around the globe the Bloomberg Business app and
Speaker 1: Bloomberg Radio dot Com. This is Bloomberg Business Week, Biblio
Speaker 1: Teca Toro. Maya hear those names and you will think
Speaker 1: of our next guest, Chef Richards Sandoval. He is founder
Speaker 1: of the Sundaval hospitality group with more than fifty locations
Speaker 1: spanning four continents, ten countries and ten U s states.
Speaker 1: His company is facing the dual challenge of rising prices
Speaker 1: along with decreased foot traffic and the ones bustling urban
Speaker 1: areas where his restaurants are located. The renowned chef went
Speaker 1: in depth with us on the long road back to
Speaker 1: business as usual, a place that appeared unreachable back in March.
Speaker 1: He joined us from rural Tuscany, and you'll hear it
Speaker 1: in the cell phone connection. Obviously. You know, we had
Speaker 1: to furrow everybody when the pandemic hit. I mean, we
Speaker 1: closed every restaurant around the world, so it was very impactful.
Speaker 1: And as you know, luckily, you know, the government helped
Speaker 1: us with p P money, so it helps us stay afloat.
Speaker 1: And then all of a sudden, I mean, you know,
Speaker 1: as the pandemic started to go away, I mean just
Speaker 1: the numbers and people you know, wanting to get out
Speaker 1: into into the restaurants and get out of their homes
Speaker 1: with staggering so you know, our numbers just skyrocketed. Um
Speaker 1: as you were saying that, you know, we you know,
Speaker 1: we had our challenges with labor, with supply chains. So
Speaker 1: it's been you know, it's been a balancing act. But
Speaker 1: you know, luckily that the numbers are there. People are back,
Speaker 1: you know, going to the restaurants, and you know, the
Speaker 1: numbers are looking very good. Well, you've got a great
Speaker 1: view because you've got four different continents, more than fifty
Speaker 1: restaurants around the world. And I'm wondering what you can
Speaker 1: tell us about regional differences when it comes to the
Speaker 1: bounce back that you've seen in recent months, Chef, what
Speaker 1: are you seeing that? What are you seeing differences? And
Speaker 1: what are those differences? Right? Well, I think the biggest differences,
Speaker 1: you know, I mean the bigger cities were much more impacted.
Speaker 1: I mean, for example, in New York, you know was
Speaker 1: you know, it has been more challenging. I think a
Speaker 1: lot of people left the big cities. And also, you know,
Speaker 1: people are working from you know, these new uh you know,
Speaker 1: hybrids of you know, two days um, you know at
Speaker 1: the office, three days at home. So you're not seeing
Speaker 1: the density in the in the big city as far
Speaker 1: as you know, lunch business. But for example, I mean
Speaker 1: the tourist destinations, for example, the mountains, uh, you know,
Speaker 1: you know, the resources like for example, the rich Cross
Speaker 1: and Laguna. I mean, just I mean, we've never seen
Speaker 1: this kind of business. Richard. How much of your business
Speaker 1: is tourism? How much is business? I mean, I don't
Speaker 1: know how much of the demographics you guys are able
Speaker 1: to analyze. Well, I think it depends on the destination,
Speaker 1: right I said, I mean New York for example. You know,
Speaker 1: if you're in midtown, you obviously depend you know, their
Speaker 1: lunch business. How you dependent on on businessmen? But again
Speaker 1: for example, you know the risk Carlton, the mountains, um,
Speaker 1: you know it's it's mostly tourism, Denver, Um proper, Downtown.
Speaker 1: You know, you know, we haven't seen our lunch business
Speaker 1: come back as strong as we have our our business
Speaker 1: dinner business. So I think every you know, every area
Speaker 1: is different, um and for us, and we'll win so
Speaker 1: many different places that you know, we have different challenges
Speaker 1: in different locations. How did coming out of the pandemic,
Speaker 1: how did it, if at all kind of shape maybe
Speaker 1: what you wanted to do next? Well, you know, I
Speaker 1: mean I think it helped us, uh you know, I
Speaker 1: mean almost you know, like like sessions, I mean, it
Speaker 1: helps you make adjustin as you have to you know,
Speaker 1: react quicker. You know, we had a big problem with
Speaker 1: supply change, which was a big challenging challenge for openings
Speaker 1: that we had coming along. So a lot of our
Speaker 1: openings have been delayed. So you know, I think what
Speaker 1: what we did is, you know, we reacted and started
Speaker 1: going towards you know, more local products. For example, Marrakesh,
Speaker 1: you know are os and me which is our china.
Speaker 1: You know glass where silver where was on a boat?
Speaker 1: You know, it was three weeks delay, So we went
Speaker 1: actually to local marks and started by local products. And
Speaker 1: even in the US, I mean because of inflation, you know,
Speaker 1: we've had to go more towards you know, you know,
Speaker 1: local um, you know, seasonal products and to help you
Speaker 1: keep our costs costs down because you know, you can't
Speaker 1: you know, just cost you know, transferred all the costs
Speaker 1: to your to your guests. I mean, like I said,
Speaker 1: you know, we've also had to you know, work with
Speaker 1: smaller menus because of the labor issues that that that
Speaker 1: are happening in the country. So you know, we turned
Speaker 1: our menus down, um, you know, to be able to
Speaker 1: cut you know, some of our labor in the in
Speaker 1: the back of the house. Again, I think right now.
Speaker 1: It's very important to be very reactive to these things
Speaker 1: are going on because it's just too many things happening
Speaker 1: and very fast. You have to be very, very, very reactive. So, Chef,
Speaker 1: I'm wondering you mentioned inflation. Help us understand how much
Speaker 1: prices have gone up. It is very challenging. Um As
Speaker 1: you know, we've seen them Government party, I mean in
Speaker 1: place at nine So yeah, I mean two years ago.
Speaker 1: You know, we're seeing on some sort of products. So
Speaker 1: you know, the only way we're able to make up
Speaker 1: for that is and I'm sure you're seeing it wherever
Speaker 1: you're at, I mean restaurant. You know, many prices have
Speaker 1: significantly over the last two years, so I think what
Speaker 1: were we're being able to make it? Also adjustment is
Speaker 1: by using a lot more local, um, you know, purveyors,
Speaker 1: local farmers, you know, a lot of you know, more
Speaker 1: seasonal ingredients and and worked with that to be able
Speaker 1: to have some containment that. Chef Richard Sandoval, a pioneer
Speaker 1: in contemporary Latin cuisine and the founder of the Sandoval
Speaker 1: Hospitality Group. I'm hungry. Yeah, let's go, let's get in
Speaker 1: the cook Okay, I mean I think we'd have to
Speaker 1: go to one of the restaurants. All right, I'm in
Speaker 1: for that. All right. You're listening to Bloomberg Business Week.
Speaker 1: Coming up next beach trips, five star dining. The end
Speaker 1: of lockdowns have left luxury buyers in need of new clothes.
Speaker 1: That's meant some big bucks for Sacks. I'm glad for
Speaker 1: you to take a vacation because you're gonna buy a
Speaker 1: lot of stuff to wear on that vacation. I'm glad
Speaker 1: that you're going back to the theater. I'm glad that
Speaker 1: you're meeting friends and going to weddings. This is all
Speaker 1: good for SAX and for luxury. SAX CEO Mark Metrick
Speaker 1: joins us. On the other side, this is Bloomberg. You're
Speaker 1: listening to Bloomberg Business Week with Carol Messer and Bloomberg
Speaker 1: Quick Takes. Tim Stinovich from Bloomberg Radio, coming off Amazon's
Speaker 1: Prime Day or was it Days this week? Tim? Wasn't it?
Speaker 1: It was Days? It's an event, Carol's shopping event. Stopping
Speaker 1: is always an event, right, all right, Well, we figured
Speaker 1: we'd finish up our broadcast with a little bit of
Speaker 1: shopping and retail therapy, and we're talking about the high
Speaker 1: end of the market in two very distinct areas, fashion
Speaker 1: and personal transportation. First up, a Bloomberg Pursuits auto columnist
Speaker 1: Hannah Elliott always gets to test out the coolest new rides,
Speaker 1: and this week she only needs two wheels to bring
Speaker 1: us up to speed on a series of electric motorcycles
Speaker 1: that she says you need to know about. Electric means
Speaker 1: even less maintenance on your on your bike. I mean
Speaker 1: you don't have to change the oil, you don't have
Speaker 1: to worry about fears, you just go. Um. Also, there
Speaker 1: are a lot quieter I mean some people say it's
Speaker 1: a safety hazard to have a quiet bike, but actually
Speaker 1: you're more connected with nature. There's no sound, you're just
Speaker 1: out in nature, which is awesome. And then of course
Speaker 1: the efficiency thing. I mean, yes, motorcycles are very efficient already,
Speaker 1: but of course if you didn't have to buy gas
Speaker 1: at all, even better. Um, it's kind of a win win.
Speaker 1: So is it a combination of the establishment as well
Speaker 1: as startups that are really out there doing this? Hannah, Yeah,
Speaker 1: that's a great, uh, great observation. We have Harley Davidson,
Speaker 1: of course, which is probably the most well known motorcycle
Speaker 1: company that is now developing electric motorcycles. Um, they've started
Speaker 1: this new brand called live Wire, which is a separate
Speaker 1: brand that's mostly owned by Harley Davidson, which makes right
Speaker 1: now an electric motorcycle called the live Wire one that's
Speaker 1: about a twenty three thousand dollar bike. UM that I've
Speaker 1: written a couple of times, and I really like it.
Speaker 1: It's not gonna feel like a hob, you know, with
Speaker 1: the type. UM, but it does feel weighty, it does
Speaker 1: feel very cool. It's fast, it's powerful, it looks kind
Speaker 1: of like a Harley. And then you've got yeah, you've
Speaker 1: got other things. BMW is developing electric uh motorcycles. Of course,
Speaker 1: they've got electric scooters already on the market. UM. They've
Speaker 1: teased us with a couple a couple of concepts for
Speaker 1: electric motorcycles. We have yet to see that, but I
Speaker 1: think it's coming. Um. And Kawasaki of course, has also
Speaker 1: announced that they will be developing up to five new
Speaker 1: electric motorcycle models in the coming years. All right, So
Speaker 1: let's talk range and charge. What what are the stats
Speaker 1: that we're seeing on some of these So, first of all,
Speaker 1: the charging on electric motorcycles is awesome, where on electric
Speaker 1: cars you might have to wait a couple hours, even
Speaker 1: up to eight or ten hours to charge it. Electric
Speaker 1: motorcycles can charge to about in forty minutes on fast chargers,
Speaker 1: which is awesome. I mean that's like, you know, you
Speaker 1: can get a coffee somewhere in forty minutes. UM. That's
Speaker 1: about the going rate. And then for range, UM. One
Speaker 1: that I really like is the Zero the motorcycles from
Speaker 1: a company called Zero, which is a California company, and
Speaker 1: they can go a hundred twenty miles or so and
Speaker 1: combined riding UM city and highway. And that's a pretty
Speaker 1: good range for an electric bike. UM. Some of the
Speaker 1: smaller ones, like if we talk about electric vest Buzz,
Speaker 1: they might only get around fifty or sixty miles of
Speaker 1: riding on a charge. UM. But for the actual bike,
Speaker 1: if you can expect around a hundred miles of range.
Speaker 1: Some of the higher ones like Zero, like I said,
Speaker 1: we'll get up to one one thirty UM, and you
Speaker 1: know we have some for improvement. Are these things as
Speaker 1: as quick as their car counterparts? Yes, it's they feel awesome.
Speaker 1: It's it's the same as the car. It's instant towards
Speaker 1: the minute you twist the I'm going to call it
Speaker 1: the accelerator on the right side. The minute you twist
Speaker 1: you go, you're instantly off the line. Um, there's no
Speaker 1: waiting to put anything in gear because there are no gears,
Speaker 1: which is kind of awesome. It feels very futuristic and fun.
Speaker 1: That's Bloomberg Pursuits Autocolumn. This Tannah Elliott just the tip
Speaker 1: of the iceberg on these new e bikes. Check out
Speaker 1: her full piece online at Bloomberg dot com or on
Speaker 1: the Bloomberg terminal. Go online because the pictures are pretty amazing.
Speaker 1: I know this is radio, you're listening to our podcast,
Speaker 1: but man it is. You got to see these bikes.
Speaker 1: They're like futuristic. Like she said, they are quick. All right.
Speaker 1: Right now, we're going to turn their attention from ev
Speaker 1: motorcycles to luxury fashion. Mark Metric is the CEO of Sacks.
Speaker 1: It's the digital spinoff of the popular department store and
Speaker 1: upscale Shane. We're talking about Sax Fifth Avenue. The company's
Speaker 1: new Luxury Pulse survey has some surprising findings on its
Speaker 1: resilience in the face of inflation, as well as the
Speaker 1: demographics driving the business. I'm just gonna put it out there.
Speaker 1: Tim and his wife I think they're shopping. Yeah, but
Speaker 1: I mean that sex is expensive. All right, here's what
Speaker 1: he had to say. We feel very good about the
Speaker 1: core luxury consumer, just both from how they're showing up
Speaker 1: and how they're shopping, and and also they've indicated, you know,
Speaker 1: seventy of respondence to the survey that I would categorize
Speaker 1: in the in that core luxury consumer, uh said that
Speaker 1: they will they would spend the same if not more
Speaker 1: over the next three months in the prior three You're
Speaker 1: talking about people, just so we can have these definitions
Speaker 1: for our audience. These are people who have an income
Speaker 1: of two dollars per year plus yes, okay, so not
Speaker 1: so like a household income or an individual household. And
Speaker 1: are they younger, older? What are they? I love knowing
Speaker 1: the demos when it comes to retail. Well, it's about stage,
Speaker 1: not age. These are people that are luxury consumers that
Speaker 1: are they love fashion, they're aspirational their core Uh so
Speaker 1: you know, they're they're it all over. But if you
Speaker 1: if you really want to dig down and look at it,
Speaker 1: you're actually seeing a little bit on the response side,
Speaker 1: more positivity. And it's probably from a recency bias because
Speaker 1: the younger uh consumer hasn't seen one of these moments before.
Speaker 1: They're feeling a little bit more bullish than the boomers
Speaker 1: or the silent uh so UM interesting, but again, the
Speaker 1: overall response has been positive on on on what they're
Speaker 1: thinking from a luxury standpod. So, from a luxury standpoint,
Speaker 1: are they buying luxury clothes, luxury stuff for the house,
Speaker 1: luxury you know, cosmetically what specifically luxury can cover a lot? Yeah,
Speaker 1: So for us, it's really it's about it's about accessories
Speaker 1: and apparel. Okay, that's where we center. Now. They're they're
Speaker 1: they're still looking at home and and other UM and
Speaker 1: other types of luxury products inside of their lifestyle. But
Speaker 1: the core business for us UM is around that apparel
Speaker 1: and and accessories and leather good what kind of luxury
Speaker 1: apparel like is it? Have people moved away from all
Speaker 1: of the comfy where you know and listen, I love
Speaker 1: a great pair of yoga pants. They're not inexpensive, So
Speaker 1: I consider that kind of luxury as well. But are
Speaker 1: people trading up, They're going out, they're going to places,
Speaker 1: and so you can see that it reflected in what
Speaker 1: they're buying. Absolutely, and that's and you know what we're
Speaker 1: seeing in in A great indicator of that is sneakers
Speaker 1: became It's like you almost only wore sneakers for a while,
Speaker 1: and now we're seeing shoes make a big comeback. Uh
Speaker 1: and and that's been good. Guys are getting dressed up again. Um,
Speaker 1: she you know she's getting dressed up. It's a dressy sandal.
Speaker 1: It's not just a sandal, it's a shoe. It's not
Speaker 1: a sneaker. There's a lot of hell coming back. Um.
Speaker 1: Platform heels are going to be one of our biggest
Speaker 1: trends as we come into the next couple of months.
Speaker 1: So it is about getting dressed, it is about going out,
Speaker 1: it's about traveling, and it's good for business. Can I
Speaker 1: let's say I love me some platforms at the tim
Speaker 1: I'm just gonna put that out there, Okay, I got
Speaker 1: I got nothing to follow up on that, Carol. I
Speaker 1: do want to mar I want to know about how
Speaker 1: spending has shifted, because if I think about what we're
Speaker 1: you know, what we've been talking about for the past
Speaker 1: two plus years, the idea that people filled their homes
Speaker 1: with stuff and then it got stuck on ships so
Speaker 1: they couldn't do that then they started buying things as
Speaker 1: they got back to the office. But but now it
Speaker 1: seems like demand for vacations and experiences is back. This
Speaker 1: idea of stuff we were talking about back in twenty nineteen,
Speaker 1: especially when it comes to millennials spending their money on
Speaker 1: on not on stuff, but on doing things. How did
Speaker 1: that factor into your research? Yeah, so the research came
Speaker 1: back and look, you know, when asked, uh, respondence number
Speaker 1: one on their list is traveling leisure. And that's fine
Speaker 1: because with luxury and again being a goat, so being
Speaker 1: that go out and travel, I'm glad for you to
Speaker 1: take a vacation, um, because you're gonna buy a lot
Speaker 1: of stuff to wear on that vacation. I'm glad that
Speaker 1: you're going back to the theater. I'm glad that you're
Speaker 1: meeting friends and going to weddings. Uh. This is all
Speaker 1: good for SAX and for luxury. So that's okay. But
Speaker 1: right on the heels of that response again was leather
Speaker 1: goods and necessaries right there behind that UM for this
Speaker 1: you know, high end luxury consumer on where they and
Speaker 1: how they want to be spending Mark help me out here,
Speaker 1: because you know, when we talk retail and the consumer world.
Speaker 1: We constantly talk about and we often have heads of
Speaker 1: companies talk to us about this seamless omni channel experience.
Speaker 1: So you guys are focusing on e commerce, how do
Speaker 1: how do you guys do it? How do you make
Speaker 1: sure that you're covering how the consumer wants to shop? Yeah,
Speaker 1: you know and not We do focus on e commerce,
Speaker 1: but we focus on the consumer. And that's really you know,
Speaker 1: what we've been what we've done with this split is
Speaker 1: just enabled um my company to focus on the digital experience,
Speaker 1: but it's focusing on the brand experience. You know, first
Speaker 1: and foremost. We haven't stopped with the omni channel connected
Speaker 1: experience for our consumer. Our exclusive partnership with the s
Speaker 1: f A stores enables us to execute, uh, this all
Speaker 1: channel experience seamlessly. You can you know, the returns that
Speaker 1: came in from sacks dot com went into the stores
Speaker 1: just this past quarter. Uh, so you're still you can
Speaker 1: buy online, it can ship from a store. So what
Speaker 1: we've done is really just given ourselves the ability to
Speaker 1: build two strategies, but those two strategies connect through the consumer.
Speaker 1: Give us an update on the supply chain and give
Speaker 1: us an idea of if you're able to stock shelves,
Speaker 1: if you're able to actually get consumers what they want. Yeah,
Speaker 1: the luxury supply chain, you know, probably on a relative basis,
Speaker 1: hasn't been interrupted. I'm sure it's a little bit slower
Speaker 1: than people wanted to be, but comparatively to what we'll
Speaker 1: be hearing, we haven't had any issue with that. What's
Speaker 1: the last thing you bought in a retail environment, you're
Speaker 1: asking me? Yeah, I just bought a suit. How's that all? Right?
Speaker 1: Back to work? You go? That sounds yeah? That isn't
Speaker 1: like athleaser work at way? Is that? Is that? Is
Speaker 1: that for Mark? For for hanging out or for working?
Speaker 1: To be fair, it's a suit, but it's got draw
Speaker 1: string pants. How about that? A suit with draw string pants.
Speaker 1: I mean that sounds pretty nice, like luxury but casual,
Speaker 1: and I could wear that to the office that he
Speaker 1: was saying, comfy clothes. We're kind of going way. No,
Speaker 1: this is like a mix of formal and comfy. Party
Speaker 1: on party on the What is it like business on
Speaker 1: top party? I don't know. All I know is stretch,
Speaker 1: put stretch in everything. I'm down with that huge thanks
Speaker 1: to Mark Metric. He's CEO at SAX, and that raps
Speaker 1: up the weekend edition to Bloomberg Business Week from Bloomberg Radio.
Speaker 1: Thank you so much for joining us. I'm Carol Masser
Speaker 1: and I'm Tim Stanevik. Be sure to tune into Bloomberg
Speaker 1: Business Week Monday through Friday. It starts at two pm
Speaker 1: Wall Street Time on Bloomberg Radio. You can also watch
Speaker 1: our daily broadcast on YouTube. Just search Bloomberg Global News
Speaker 1: and check out our Bloomberg Business Week podcast. You can
Speaker 1: find that at Bloomberg dot com, Apple, or wherever you
Speaker 1: get your podcast. Bloomberg Business Week is available on newsstands now,
Speaker 1: at Bloomberg dot com and on the Bloomberg Terminal. Have
Speaker 1: a good and safe weekend everyone. This is Bloomberg