Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Hello and welcome to another episode of the Authoughts podcast.
Speaker 2: I'm Tracy Alloway.
Speaker 3: And I'm Joe Wisenthal.
Speaker 2: Joe, it's nearly the end of the year we made it.
Speaker 3: This is like year nine, isn't it.
Speaker 4: No for real?
Speaker 2: No, it's true. Next year is going to be our
Speaker 2: ten year anniversary, so we'll have to throw some sort
Speaker 2: of ad thoughts event.
Speaker 3: Yeah, nothing big right now for nine. But another year,
Speaker 3: another fascinating year, another year of learning new stuff. I'm
Speaker 3: really enjoying it. I hope we keep doing it for
Speaker 3: a while.
Speaker 2: Yeah, and I think we both did learn quite a lot,
Speaker 2: and in fact, that is what we are going to
Speaker 2: talk about today. So we have compiled a list of
Speaker 2: the ten most interesting things that we learned over the
Speaker 2: past year. So you want to dive into it, let's
Speaker 2: do it.
Speaker 3: Let's revisit them, because you know, we do so many
Speaker 3: episodes in the year, and I forget about some and
Speaker 3: in the compilation of this episode, they're like, oh, yeah,
Speaker 3: I totally forgot about that particular episode. So let's use
Speaker 3: this time to sort of revisit the odd lots. In
Speaker 3: twenty twenty four.
Speaker 2: This will see at least ten factoids into your mind forever, Joe.
Speaker 3: That's correct, all right.
Speaker 2: So first on the list, we wanted to do an
Speaker 2: episode on price pack architecture for a long time. This
Speaker 2: idea that companies are getting more sophisticated in the prices
Speaker 2: that they're charging for, you know, different people and different things.
Speaker 2: From our episode with Lindsay Owens, executive director of the
Speaker 2: Groundwork Collaborative and David Dian, the executive editor of The
Speaker 2: American Prospect, we learned that McDonald's knows when you get paid.
Speaker 5: So the McDonald's app is put together by a company
Speaker 5: called Plecure, and Plecture works with Ikea, they work with
Speaker 5: seven eleven, they work with White Castle. And the reason,
Speaker 5: as you correctly said, Tracy, that McDonald's gives discounts on
Speaker 5: the app is because they want to get on your phone.
Speaker 5: They want to get on your phone and be able
Speaker 5: to figure out what you're doing on that phone, where
Speaker 5: you are at particular times of day, what your food
Speaker 5: preferences are, what you're ordering habits are, potentially, what you're
Speaker 5: using to pay for those things, and your financial behaviors.
Speaker 5: Through that, they're aggregating a bunch of data about you,
Speaker 5: And we had one of the slides from this presentation
Speaker 5: that Flexure put together that shows how they are using
Speaker 5: this data. And one of the things that they were
Speaker 5: using to make predictions about what people would be willing
Speaker 5: to pay was their payday. So you can imagine how
Speaker 5: you can use this. If the app knows that you
Speaker 5: get paid every other Friday, it might give you a
Speaker 5: three dollars McMuffin on Thursday, but when you have some
Speaker 5: money in your pocket, it might raise it to four dollars.
Speaker 6: Right.
Speaker 5: If it knows that it's cold out, it might raise
Speaker 5: the price of hot coffee. If it knows it's hot out,
Speaker 5: it might raise the price of a mcflurry. Often, Plecture
Speaker 5: combines this data that's within the app, like what they
Speaker 5: call first party data, with additional data about you through
Speaker 5: what is called an identity graph that aggregates both you know,
Speaker 5: stuff you're doing on the app, with your email, with
Speaker 5: your social media, with your browser, with your subscriptions, with
Speaker 5: your other app downloads, with your travel history, with your
Speaker 5: retail history, all of these other things. And the predictive
Speaker 5: power of that is such that you can pinpoint what
Speaker 5: you're going to buy maybe before you even know, and
Speaker 5: therefore you can target prices accordingly. So I think we're
Speaker 5: at the beginning of this where they're trying to discount
Speaker 5: things and get people on the app and get people
Speaker 5: used to ordering on the app.
Speaker 2: Joe, has this scared you off the McDonald's app forever?
Speaker 3: No, I still feel stupid for not having downloaded the
Speaker 3: McDonald's app, if I'm being honest, because I do go
Speaker 3: to McDonald's from time to time and my kids really
Speaker 3: like it. You know, it's still a treat. But yes,
Speaker 3: this reminds me actually that I need to download the
Speaker 3: McDonald's app because and just thinking about this episode, I
Speaker 3: remember there are deals to be had even with sophisticated pricing.
Speaker 3: There are deals to be had from a regular person
Speaker 3: like me that just goes in and pays my credit card.
Speaker 2: There are definitely deals to be had on the McDonald's app.
Speaker 2: But I think this kind of taps into a lot
Speaker 2: of the frustration that people have with inflation, where it
Speaker 2: feels like companies might be charging different prices for different
Speaker 2: people or depending on the specific way you pay. And
Speaker 2: let's face it, no one wants to do all this
Speaker 2: like homework and all this like work just to get
Speaker 2: a slightly cheaper, you know, hamburger.
Speaker 3: I agree, I'm still going to download the app, and
Speaker 3: in twenty twenty five, I'm going to download the app.
Speaker 7: Okay, all right.
Speaker 3: Here is another clip fascinating conversation that we recently had
Speaker 3: with Jetson leader Luis. He's an economist at Boston University.
Speaker 3: We're talking about the existence of Medicare fraud and how
Speaker 3: to detect it. I had not realized just how big
Speaker 3: kidney dialysis specifically is as part of the federal budget.
Speaker 8: Take a listen dialysis patients. There are about half a
Speaker 8: million of them. We actually spend I think you know this,
Speaker 8: one percent of the federal budget on the dialysis program. Incredible, set,
Speaker 8: not one percent of Medicare. One percent of the federal
Speaker 8: budget is the dialysis program. We do not, in general,
Speaker 8: pay for ambulance rides or taxi rides for these people
Speaker 8: to go to and from the visits. They are responsible
Speaker 8: for getting themselves to the clinic every day, three times
Speaker 8: a week, generally for a few hours, and that's in perpetuity.
Speaker 8: It's very challenging to get a kidney and therefore to
Speaker 8: get off of dialysis. So we had this system, and
Speaker 8: this is sort of the canonical Medicare fraud. We build
Speaker 8: in a little thing for the few people who need it,
Speaker 8: and that turns into a loophole through which bad actors
Speaker 8: drive a truck. So we built in this provision, which is,
Speaker 8: if the only safe way that you can get to
Speaker 8: the dialysis clinic is in an ambulance, Medicare will pay
Speaker 8: for an ambulance, and they pay for it at a
Speaker 8: competitive rate for the ambulance companies, at say two hundred
Speaker 8: and fifty dollars for a one way ride. Now that's
Speaker 8: not that much money for a real ambulance, but it's
Speaker 8: a heck of a lot of money for a taxi.
Speaker 8: And what happened is thousands of firms around the country
Speaker 8: opened with the express intention not of giving people serious
Speaker 8: medical care, but of becoming an expensive ambulance taxi and
Speaker 8: build the government. We have one hundred percent data from
Speaker 8: the dialysis system. We can see all of these payments
Speaker 8: more than seven billion dollars for non emergency ambulance transportation
Speaker 8: over the following ten years.
Speaker 3: Tracy, that episode certainly convinced me that, setting aside everything else,
Speaker 3: there still appears to be a lot of waste. I
Speaker 3: don't mean that dialysis specifically, because people need dialysis, et cetera.
Speaker 3: But the fact that you know there's all this fraud
Speaker 3: associated with it. The taxi is apparently that's been cracked
Speaker 3: down on, but there's a lot of money coming out
Speaker 3: of the federal government and clever people find ways to
Speaker 3: get it for not delivering a service.
Speaker 2: That's true. I think Look, I think most people would
Speaker 2: agree that stamping out fraud is probably a good thing.
Speaker 2: I guess the question is is that going to be
Speaker 2: the entirety of it? But Elon Musk saw saw this episode, yeah,
Speaker 2: and reacted to it on Twitter slash x he.
Speaker 3: Did, so there's that, So maybe that'll move the dial
Speaker 3: all right.
Speaker 2: Next up in our list of the top ten most
Speaker 2: interesting things we learned from All Blots, we have the
Speaker 2: fact that Boeing hasn't built a clean sheet design in
Speaker 2: about twenty years, and Boeing's recently departed CEO Calhoun. He
Speaker 2: basically said the company doesn't have any plans to do
Speaker 2: so for the next ten years, all of which means
Speaker 2: it might be more than a thirty year gap between
Speaker 2: Boeing bill an entirely new aircraft, which is just kind
Speaker 2: of mind blowing, like one full adults lifespan. And this
Speaker 2: is from Richard Abulafia. He is a managing director of
Speaker 2: Aerodynamic Advisory.
Speaker 7: This looks like a glide slope towards oblivion. Because remember,
Speaker 7: it's not just the loss of market share, it's also
Speaker 7: the demographics. You know, engineering workforces have that muscle memory
Speaker 7: that needs to be maintained. And it's been since two
Speaker 7: thousand and four that they've launched, since they've last launched
Speaker 7: a clean sheet design. They've done some good work since,
Speaker 7: but again you're talking about an aging engineering workforce that's
Speaker 7: not attracting new people. Well, they have the kind of
Speaker 7: core skills needed to create a new jet in the
Speaker 7: twenty thirties. I have no idea. You need something to
Speaker 7: dream for, you need something that represents the future. And
Speaker 7: you know, Dave Calhoun, the CEO at the top of
Speaker 7: the heap, said about oh a year and four months
Speaker 7: ago that don't worry, we won't be launching anything new
Speaker 7: for at least another decade. Other than sheer demoralization and
Speaker 7: encouraging the competition. I mean, the only way to explain
Speaker 7: it is that he's the best CEO Airbus could ask for.
Speaker 7: If you're an engineer, you hear that what are you
Speaker 7: working for exactly? You're coming up with work packages on
Speaker 7: the basis of I don't know, minor tweaks of existing products,
Speaker 7: stuff that's already in the pipeline. You know, it's a
Speaker 7: tight market for technical labor. You're probably going to be
Speaker 7: pretty interested in going to work for somebody else. So
Speaker 7: you might also notice that the demographics are changing because
Speaker 7: the young and enthusiastic folks who have a future are
Speaker 7: leaving or not joining, and that too, of course, is
Speaker 7: a significant change in the fabric of your workplace.
Speaker 2: So that was from our conversation with Richard Abulafia, one
Speaker 2: of the best aerospace analysts around that I know, And
Speaker 2: it's just kind of yeah, it's kind of mind blowing
Speaker 2: a thirty year gap between America's premier aerospace company actually
Speaker 2: designing a clean sheet aircraft.
Speaker 3: I think it's chilling. That might have been to my mind,
Speaker 3: that stuck with me all year, and maybe the most
Speaker 3: chilling thing we've learned, because you know, we talk, for example,
Speaker 3: in other industries about knowledge and talent loss. Nuclear comes
Speaker 3: up a lot, for example, building a nuclear station, what
Speaker 3: happens when America's one commercial maker of civil aviation jets
Speaker 3: doesn't have very many people that know how to design
Speaker 3: a jet like I actually find it to be a
Speaker 3: chilling fact.
Speaker 2: No, absolutely.
Speaker 3: Our next clip comes from Igor Smelansky. He's the CEO
Speaker 3: of the Ukraine Postal Service and he talks to us.
Speaker 3: You know, they used to talk about technological leapfrogging and
Speaker 3: how ems went to wireless before they ever had wirelines.
Speaker 3: Something similar going on with a post office there.
Speaker 9: Take a listen when we talk about the occupied areas,
Speaker 9: Russians destroy the entire infrastructure, which means when Ukraine the
Speaker 9: occupies these villages for about five to six weeks, you
Speaker 9: don't have mobile connection, you don't have electricity, but we
Speaker 9: have to work because you cannot leave people in the vacuum.
Speaker 9: Not to mention, they would operate in Russian rubles, and
Speaker 9: we want to bring them back to Ukraine, so you
Speaker 9: have to bring them Ukrainian currency, and we at the
Speaker 9: first company they see. We're trying the best we can
Speaker 9: to implement automatic sorting lines. Our goal for the c
Speaker 9: I know it sounds weird during the war, but we
Speaker 9: want to be one hundred percent digital even when there's
Speaker 9: no digital meaning we build a system where in the
Speaker 9: morning our mail carriers will download through startlingk and generators
Speaker 9: the data worker during the day and then upload the
Speaker 9: data at night, which means again we are not dependent
Speaker 9: on the infrastructure if Russians, you know, shut down the
Speaker 9: electricity or mobile or anything. This starlink has been really
Speaker 9: a sabor to us be able to run internet cables
Speaker 9: in those areas, right, I mean, it just will be
Speaker 9: millions of dollars. Probably it will run through the field
Speaker 9: which you need to demine, and then Russians can bumm
Speaker 9: it again and it can go off, et cetera. So
Speaker 9: via Startling you're flexible enough. Then you well, when you
Speaker 9: combine startling and a generator, when you combine the two,
Speaker 9: you're basically no longer dependent on the central infrastructure and
Speaker 9: you can provide civil height services right away, not you know,
Speaker 9: not five months after the occupation, not three months after
Speaker 9: Russian destroyed the buildings today, like for example it was
Speaker 9: in our case, So we rebuilt it, we put up
Speaker 9: the Startling generator, and we get back to work. So
Speaker 9: you know, it's like a sory of broken windows. You
Speaker 9: cannot have that you should have the services, and the
Speaker 9: startling allows you to have that connection to the world.
Speaker 3: Yeah, that was a really extraordinary fact, just thinking about
Speaker 3: how quickly you can rebuild a service that would have
Speaker 3: taken weeks and weeks or months and months of infrastructure.
Speaker 3: We did another episode also this year, now that I
Speaker 3: think about it, about a sort of Elon Musk's dominance
Speaker 3: of the skies and satellites, and it really is fascinating.
Speaker 3: I guess the consequence of that, but one very interesting
Speaker 3: one is that you can have a whole infrastructure that
Speaker 3: probably took years to develop and maintain and now in
Speaker 3: some places replicated least some of those services almost overnight.
Speaker 2: You know what the best part of this episode was,
Speaker 2: uh what I think afterwards? You uh started ordering a
Speaker 2: couple things from Ukraine, Right.
Speaker 10: That's right.
Speaker 3: I started buying things on eBay and a number of
Speaker 3: them did come through Ukraine, including some used books recently.
Speaker 2: Yeah, I know, it's kind it's kind of crazy. Yeah,
Speaker 2: you can order stuff from a war zone, but there
Speaker 2: we are. The postal service in Ukraine is still working.
Speaker 2: We'll see whether or not they go one hundred percent digital. Yeah,
Speaker 2: all right, next, Uh, this was a pretty fun episode,
Speaker 2: we spoke with Isaac rose Berman, who's a professional sports
Speaker 2: gambler and the author of How Gambling Works newsletter. He
Speaker 2: talked about how professional sports betters basically have to trick
Speaker 2: betting platforms into thinking they're stupid. Take a listen.
Speaker 4: So another thing that a lot of people do, obviously
Speaker 4: is you bet on other people's accounts. You know, you
Speaker 4: go and you get your roommate's account, your mom's account,
Speaker 4: your friend's account, and you're just constantly cycling through different accounts.
Speaker 4: I'm not advocating for that, that's against the terms and
Speaker 4: conditions of these sites, but that's just a reality. And
Speaker 4: that's how a lot of betters are able to get
Speaker 4: down a sufficient amount of volume, especially when they're constantly
Speaker 4: getting kicked out. And the real thing is that, you know,
Speaker 4: you're just you have to disguise your bets in a
Speaker 4: way that they don't they don't see or they don't
Speaker 4: realize that what you're doing. And so one of the
Speaker 4: common ways that sportsbooks identify and profile their customers is
Speaker 4: based on the first few bets that you place. So
Speaker 4: one thing that a lot of people do that's really
Speaker 4: quite silly, in my opinion, is no you go into
Speaker 4: a book and you bet a bunch of stuff that's
Speaker 4: pretty obviously a really smart bet. You know, if you
Speaker 4: open up an account and you're betting the maximum amount
Speaker 4: out on you know, Bulgarian table tennis, and you keep winning,
Speaker 4: and then you know, I have friends who come to
Speaker 4: me and they're like, Isaac, you know, why did I
Speaker 4: get kicked out of this book? And I look at
Speaker 4: their bet history and they're betting on the most obscure
Speaker 4: stuff at like random times for very large amounts, and
Speaker 4: it's like, yeah, you know, these these companies aren't dumb.
Speaker 4: So the main way is, you know, you when you
Speaker 4: open up an account, you place a bunch of bets
Speaker 4: which look kind of normal. You bet on some NBA
Speaker 4: Maybe these bets won't have a positive expression. Bet for
Speaker 4: the home team exactly exactly. You know, you're in New York,
Speaker 4: you want to bet on the Yankees. You place a
Speaker 4: bunch of bets which in the short run they might
Speaker 4: lose a little bit of money, but in the long
Speaker 4: run they'll make you money because they're kind of putting
Speaker 4: the sportsbook off your scent.
Speaker 2: Jarre, that was pretty funny, and I got to say,
Speaker 2: I feel like I don't have much promise in terms
Speaker 2: of actually making money from sports betting, So maybe I
Speaker 2: should be selling my account to someone.
Speaker 3: You opened some accounts and rent that out. But seriously,
Speaker 3: that was a really disturbing episode because I already knew
Speaker 3: that there's all these problems with online gambling, addiction and
Speaker 3: so forth, but then the fact that essentially you can't
Speaker 3: really win because if you're good at it, they'll constrain
Speaker 3: you so much, and that if you're bad at it
Speaker 3: sort of deeply, deeply disturbing episode to me.
Speaker 2: Yeah, well, you know, they set the odds, they set
Speaker 2: the terms.
Speaker 11: Yeah.
Speaker 3: So one of the things that's come up a lot
Speaker 3: as a theme on the podcast this year and the
Speaker 3: year before and etcetera, is with the energy transition, other
Speaker 3: commodities besides oil are of deep importance and deep geostrategic importance,
Speaker 3: et cetera. And there are various commodities that go into
Speaker 3: batteries and other things like that, and so we sort
Speaker 3: of have to rethink our world map of where the
Speaker 3: important spots are. And a really crucial area is Indonesia,
Speaker 3: which has a dominant grip on the global nickel market
Speaker 3: in partnership to some extent with China, and we had
Speaker 3: a great conversation with Michael Widmer, head of Metals Research
Speaker 3: at Bank of America on what's going on.
Speaker 11: When you're looking at the biggest players in the space.
Speaker 11: It has actually changed a lot, and you mentioned it
Speaker 11: already in the at the outset. Historically, when you're looking
Speaker 11: at it, you had Russia as a big nickel producer,
Speaker 11: Australia as a big nickel producer, the Philippines were in
Speaker 11: the fold as well, Canada to some extent too. But
Speaker 11: what's happened recently is as the energy transition started to
Speaker 11: take off, market participants were really focused on increasing nickel
Speaker 11: supply quickly. And there's one country that just jumped at
Speaker 11: the industry. In that country is Indonesia. It has the
Speaker 11: weather type of war, but it has that in abundance,
Speaker 11: so it's very easy to actually take it out of
Speaker 11: the ground. And the Chinese went into Indonesia, were very
Speaker 11: innovative also in the production technologies and managed to take
Speaker 11: the nickel out that they then needed to drive the
Speaker 11: ev battery industry. And one of the things that the
Speaker 11: Chinese government realized very early on is if you have
Speaker 11: a strong demand growth for evs. You also need the romatiers,
Speaker 11: and particularly the battery roma tiers. Without batteries, TVs don't
Speaker 11: go very fon. So the Chinese government looked at where
Speaker 11: where some of those battery romatials are. They did it
Speaker 11: in lithium, another battery romatial, they did in cobalt, and
Speaker 11: they did also in nickel. And in twenty thirteen the
Speaker 11: two presidents of China and Indonesia effectively set together and
Speaker 11: the discussion pretty much went like that. The Chinese said,
Speaker 11: look beneath the nico. The Dnetian said, well, we have
Speaker 11: the nickel. The Chinese said, well, can be invested, and
Speaker 11: then he said, yeah, do. Let's developed that industry together.
Speaker 11: And so the Indonesian government then, together with the Chinese,
Speaker 11: set up industrial parks, and through that industrial park, supported
Speaker 11: by Chinese money, the nickel industry and then developed very
Speaker 11: very quickly.
Speaker 3: Tracy, you know, when I listen to these conversations about
Speaker 3: the sort of global supply chains, global hold and key commodities,
Speaker 3: let's just put this way, we have some catching up
Speaker 3: to There's a lot of talk in this country about
Speaker 3: things right now, and maybe there are ways to sort
Speaker 3: of buffer some of the economic or national security concerns
Speaker 3: about some of this stuff, but other places have been
Speaker 3: thinking about this stuff for a long time.
Speaker 2: No, it's true, and China here has been incredibly strategic
Speaker 2: about basically, you know, helping to set up Indonesia's nickel
Speaker 2: industry and making sure that they're sort of first in
Speaker 2: line to get that metal. So yeah, quite a long
Speaker 2: ways to go, all right. Next up, we have Harvard
Speaker 2: Law School professor Jared Elias and Duke University School of
Speaker 2: Law professor Elizabeth Defont. Today they're talking about how private
Speaker 2: credit has swallowed the economy, and I think the takeaway
Speaker 2: from this is that private credit is basically already changing
Speaker 2: the world of debt and the way finance works.
Speaker 12: So you can have concerns both for the investors themselves
Speaker 12: and for sort of the broader economy or the broader market.
Speaker 12: And that's the issue with private credit. We have heard
Speaker 12: a lot from people about concerns about the marks that
Speaker 12: people are carrying these private credit loans at, and that
Speaker 12: they might be entirely stale, they might be largely overstated.
Speaker 12: There's really no way to know until exit that investment.
Speaker 12: And that's exactly how it is on the private equity
Speaker 12: side that you know, if a private equity fund buys
Speaker 12: a portfolio company, who on earth knows what that company
Speaker 12: is worth until they actually finally exit that and there
Speaker 12: is some misvaluation and so on. That's the question is
Speaker 12: can we have that both on the equity side and
Speaker 12: on the debt side? What does that mean for our
Speaker 12: economy if we are suddenly just very liquid for almost
Speaker 12: all of the companies.
Speaker 13: Yeah, and so something to think about is the broadly
Speaker 13: syndicated debt world and the high yield world of debt
Speaker 13: in created this benefit for all of us. And that
Speaker 13: benefit was we could follow the trading crisis of debt
Speaker 13: and real time and get a sense of where are
Speaker 13: their problems in our economy, what sectors are in trouble?
Speaker 13: Like I think about COVID nineteen, So COVID nineteen hits.
Speaker 13: We're all watching, like, what are the debt prices of
Speaker 13: the big hotel companies telling us about the likelihood those
Speaker 13: hotel companies.
Speaker 14: Go into bankruptcy.
Speaker 13: Congress and regulators can look at those signals and say, Okay,
Speaker 13: we've got to do something really special for the airlines.
Speaker 13: We've got to do something really special here. And when
Speaker 13: the airlines go to Congress and say we need something special.
Speaker 14: They can point to their debt prizes and say.
Speaker 13: Look what is going on regulators, Look what's going on
Speaker 13: in Congress. Our debt is trading down to zero, like please,
Speaker 13: we need special treatment. Investors looking for a deal and say,
Speaker 13: the debt of this company is trading at a really
Speaker 13: low level. I think I could do really well if
Speaker 13: I owns that asset. I'm going to go make that
Speaker 13: board and offer. And so all of those price signals
Speaker 13: just disappear from the allocation of capital from policymaking, and
Speaker 13: I think it poses a real challenge to what are
Speaker 13: you a really well functioning set of capital markets to
Speaker 13: lose those signals.
Speaker 2: Yeah, so I think this is absolutely fascinating because a
Speaker 2: lot of the concerns that you hear at nauseum nowadays
Speaker 2: are this idea that private credit is in a bubble, right, like, yeah,
Speaker 2: private credit is going to burst and there's going to
Speaker 2: be this big crash and people are sort of worried
Speaker 2: about that scenario sometime in the future. But in the
Speaker 2: meantime there's already been an impact on things like transparency
Speaker 2: about you know, who actually owns corporations, And then the
Speaker 2: price signals that Jared was talking about.
Speaker 3: It occurred to me listening to that that there's sort
Speaker 3: of a this is adjacent to the question about passive
Speaker 3: investing and who is putting in the work to setting
Speaker 3: to setting prices, because prices, as our guests talked about,
Speaker 3: are very useful. But it does feel as though the
Speaker 3: sort of people who are working to set prices that
Speaker 3: everyone can look at are shrinking because you have all
Speaker 3: this money going to passive investing, and then you have
Speaker 3: some other pool of money going to private market investments
Speaker 3: in which the marks are really not very known, and
Speaker 3: so it does sort of make you wonder, like, you know,
Speaker 3: there's a lot of free writing going on, and at
Speaker 3: some point you got to wonder if it'll actually be
Speaker 3: problematic that there isn't more publicly available pricing. Anyway, it's
Speaker 3: just something, just something I thought of it. It's an
Speaker 3: interesting sort of theoretical problem to think about.
Speaker 2: I'm not sure price makers are the real victim. Is
Speaker 2: going to be a strong populist platform here, but there
Speaker 2: is definitely something there. There is that free writing problem.
Speaker 3: We are all we are all the victims of fewer
Speaker 3: and fewer price makers.
Speaker 2: Is high play okay, fair enough.
Speaker 3: Speaking of prices, it turns out, and this is something
Speaker 3: that we learned during our three part series called Beak Capitalism.
Speaker 3: Everyone needs chicken wings, we all love. It turns out
Speaker 3: that chicken wing prices, for various reasons, are extremely volatile
Speaker 3: because by and large, the chicken industry does not price
Speaker 3: around the wing itself. Take a listen to this part
Speaker 3: of our conversation that we had with Michael Skipworth, the
Speaker 3: CEO of Wingstop.
Speaker 10: Now, the reason you see so much volatility in the
Speaker 10: price of wings is the reality of the fact that
Speaker 10: these poultry companies, they are not growing these chickens for
Speaker 10: the wings. They're setting the size of the flock, how
Speaker 10: many birds they're going to harvest based on breast meat demand.
Speaker 10: The chicken wings themselves represent six to eight percent of
Speaker 10: the bird It's a fall off product. And so why
Speaker 10: you see so much volatility in the price of wings.
Speaker 10: It clearly is a supply and demand dynamic, but the
Speaker 10: demand is not what's driving the supply. It's really centered
Speaker 10: around the overall market for breast meat, and so that's
Speaker 10: what's created a lot of volatility in that commodity. And
Speaker 10: there can be years where that spot market hits below
Speaker 10: one dollar a pound. And then take a year like
Speaker 10: twenty twenty one, after the pandemic or every single brand
Speaker 10: out there added chicken wings to their menu, you saw
Speaker 10: that spot market hit an all time high of three
Speaker 10: dollars and twenty one cents a pound.
Speaker 3: Tracy, I love the idea that you know, there's financial
Speaker 3: instruments exist and in a way, you know, you get
Speaker 3: this price of a chicken, and then it's almost like
Speaker 3: the wing is a derivative of a chicken, right, A
Speaker 3: wing is sort of a chicken derivative itself, because that's
Speaker 3: not really where the supply and demand is happening directly
Speaker 3: with most of the bird, and so then you can
Speaker 3: get these weird swings in the fall off part.
Speaker 14: Of the bird.
Speaker 2: Yeah, you know, technology needs to solve this with chickens
Speaker 2: with I don't know, multiple pairs of wings. Then we'll
Speaker 2: have plenty of cheap chicken.
Speaker 3: You're right, this is the solution. We need to innovate
Speaker 3: our way out of it.
Speaker 2: All right, Definitely check out Beat Capitalism if you haven't,
Speaker 2: because that was one of my favorite series of the year.
Speaker 2: Up next, Oh, speaking of favorite series of the year,
Speaker 2: this is from Richmond. FED President Tom Barkin on the
Speaker 2: road with him in North Carolina, and we learned a lot,
Speaker 2: including you know what a FED president learns when he
Speaker 2: actually goes on all these business trips. But we also
Speaker 2: learned that Surrey County is the carport manufacturing capital of
Speaker 2: North America.
Speaker 6: My brother and I've been to this industry over close
Speaker 6: to twenty four to twenty five years, so almost since
Speaker 6: it first started back in ninety nine and ninety seven,
Speaker 6: actually ninety eight ninety nine, the beginnings of this industry,
Speaker 6: but it kind of grew in this area. So Surrey
Speaker 6: County is pretty much the home town or home place,
Speaker 6: so the birthplace of this type of structure. Now there's
Speaker 6: been other structures made out of different you know tubing,
Speaker 6: like round tubes all that that's you know on the
Speaker 6: West coast, but to be square tubing and to go
Speaker 6: into what we're doing now is different. So it started
Speaker 6: off and you probably drove by even where you live,
Speaker 6: you see the little tops and people park their cars,
Speaker 6: or you drive by some kind of dealer that sells
Speaker 6: outdoor equipment or something you see a little signed this
Speaker 6: as a price. Well that's how it pretty much started.
Speaker 12: All right.
Speaker 2: Did that surprise you, Joe, to learn that there's a
Speaker 2: sort of carport hub in North Carolina.
Speaker 3: It surprised me, But then it's like these days, it's
Speaker 3: agglomeration effects in everything.
Speaker 11: Yeah.
Speaker 3: Right, So you think of any industry where they make anything,
Speaker 3: and there's probably one area that dominates it. But I
Speaker 3: think both of us had the same reaction when we
Speaker 3: were driving through Surrey County.
Speaker 2: Which is carport.
Speaker 3: Yeah, it was really incredible, and I sort of when
Speaker 3: we were going to a carport business, I thought it
Speaker 3: would be really obvious, you know which one we were
Speaker 3: going to, but we probably passed like five on the
Speaker 3: way before we got to the one that we were visiting.
Speaker 2: Yeah, it's true, all right.
Speaker 3: Our last clip of the year comes from an episode
Speaker 3: we did with John Coogan. He's the CEO and founder
Speaker 3: of Lucy Nicotine. We sort of talked about the modern
Speaker 3: history of nicotine because obviously nicotine consumption sort of fell
Speaker 3: off as cigarettes got less popular, but then it's been
Speaker 3: surging again obviously over the last decades, first with jewels,
Speaker 3: then other vapes like elf bars, the disposable vapes, and
Speaker 3: now obviously the pouches. Anyway, turns out that these disposable vapes,
Speaker 3: These very tasty flavored vapes, in part exist because of
Speaker 3: the FDA's crackdown unjewels. So take a listen to John.
Speaker 14: It's hard to explain exactly what elf bar is because
Speaker 14: it's kind of a hydra of companies. Like the IP
Speaker 14: has been sold so many times, they've rebranded a million times.
Speaker 14: There's also puff bar and puff stick, and essentially what
Speaker 14: these companies do broadly, I'm not speaking about any particular company,
Speaker 14: but broadly, the strategy has been to instead of engage
Speaker 14: with the FDA directly and file the PMTA, wait for approval,
Speaker 14: then market your product. They've just said, let's push this
Speaker 14: product as many places as possible, get it into every
Speaker 14: independent store that maybe doesn't care about the regulatory status
Speaker 14: of these products. Let's just flood the market with these products.
Speaker 14: And if we get shut down, what's going to happen
Speaker 14: is that we're essentially just have a front company that's
Speaker 14: just a couple random American citizens that are acting as
Speaker 14: a front for us in the US. The FDA is
Speaker 14: not really going to be able to shut them down.
Speaker 14: They're going to try and shut us down at the ports.
Speaker 14: All we need to do then is just set up
Speaker 14: a new company structure and import under a different label.
Speaker 14: So that's how you see the evolution of these things,
Speaker 14: where like I don't even think elf bar is on
Speaker 14: the market anymore. I think it might be called like
Speaker 14: elf tax.
Speaker 3: Yeah no, there's like what they all look the same
Speaker 3: under like different names, and I'm like, is it exactly?
Speaker 14: So they're all made in the same Shenjen like the
Speaker 14: core company behind elf Bar's shenzen I Miracle company. Just
Speaker 14: hilarious name, but it's like the miracle. But then also
Speaker 14: I which I think is like an Apple reference. It's
Speaker 14: very convoluted. But the Shenjin a miracle company. They have
Speaker 14: a massive facility where they make this stuff, and then
Speaker 14: they just find a new front man. And I get
Speaker 14: emails every single day from a new random Gmail account
Speaker 14: that says like puff bar five hundred puffs, like would
Speaker 14: you like to white label this? Because they're looking for
Speaker 14: someone that has American citizenship distribution lines and can order
Speaker 14: their products and then get them into stores.
Speaker 3: Tracy, I love learning about the history of nicotine. I
Speaker 3: have to say I have a friend of mine who
Speaker 3: totally separately happens to be kind of a friend guy
Speaker 3: in the neighborhood who can hear this? He might it's
Speaker 3: all right, a neighbor who's in the nicotine business, and
Speaker 3: he showed me these Gmail emails that.
Speaker 2: Oh, so he gets them too.
Speaker 3: Yeah, but a lot of the ones that he gets
Speaker 3: are from companies offering straight up counterfeit zo or things
Speaker 3: like that, and they say, oh, we can make this packet.
Speaker 3: It looks just like zen we there's the same nicotine,
Speaker 3: et cetera. So I actually think at twenty twenty five,
Speaker 3: there's more to do on the sort of the nicotine
Speaker 3: and drug supply chain, because I think there's actually a
Speaker 3: lot more to fascinating stuff.
Speaker 2: And I also think it's such a perverse regulatory outcome
Speaker 2: where you know, jewel kind of went through the process
Speaker 2: like it was supposed to and then got basically shut down.
Speaker 2: But alf bars have just evaded most of the regulation.
Speaker 3: And they taste like cotton candy.
Speaker 12: Yeah, and you can.
Speaker 2: Find them everywhere, and they're in these like bright colors.
Speaker 2: I stopped after listening to this episode.
Speaker 3: I'm very impressed.
Speaker 2: Yeah, thanks, We're all impressed. Thank you. All right, shall
Speaker 2: we leave it there, Let's leave it there. This has
Speaker 2: been another episode of the Authoughts podcast. I'm Tracy Alloway.
Speaker 2: You can follow me at Tracy Alloway.
Speaker 3: And I'm Jill Wisenthal. You can follow me at the Stalwart.
Speaker 3: Follow our producers Carmen Rodriguez at Carmen Ermann, dash Ol
Speaker 3: Bennett at dashbot in Kilbrooks at Kilbrooks. Thank you to
Speaker 3: our producer Moses Ondam. For more odd Lags content, go
Speaker 3: to Bloomberg dot com slash odd Lots, where we have transcripts,
Speaker 3: a blog and a newsletter and you can chat about
Speaker 3: all of these topics, all ten of these topics and
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