Speaker 1: This is Bloomberg Business Wait inside from the reporters and
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Speaker 1: global business, finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Messer and Tim Stenebek from Bloomberg Radio.
Speaker 2: And when we're talking about China being the world's second
Speaker 2: largest economy, and also when you're looking at Bloomberg Economics,
Speaker 2: really thinking that when you're thinking at the trajectory of
Speaker 2: its growth not quite holding up as much as obviously
Speaker 2: economists we're anticipating. And then also when you're thinking about
Speaker 2: Tim the liquidity crunch it's going under, when you're thinking
Speaker 2: about some of those property developers and the pressure that
Speaker 2: they have been under so significantly, what this could really
Speaker 2: mean when you're looking at global economic growth and obviously
Speaker 2: the US economy, which has proven to be pretty resilient.
Speaker 3: Here, Yeah, just doing a great job of laying out
Speaker 3: all the challenges when we do look at China, the
Speaker 3: world's second largest economy, to get an idea of where
Speaker 3: China's economy is headed in its effect on global growth.
Speaker 3: I'm very pleased to have with us this afternoon. Leland
Speaker 3: at Miller CEO at China page book International. Leland joining
Speaker 3: us on a zoom from Washington, D C. Leland, How
Speaker 3: are you good?
Speaker 4: Well?
Speaker 3: Thank you well, thanks so much for joining us. You
Speaker 3: might have heard us mentioned earlier this morning that we
Speaker 3: actually saw Bloomberg Economics cut its long term forecast as
Speaker 3: the post COVID rebound has run out of steam. This
Speaker 3: for China, it's pretty remarkable to see this. Just a
Speaker 3: couple of weeks ago, Carol and I we're talking to
Speaker 3: some folks who said, you know what, it's no longer
Speaker 3: a growth story the same way that it has been
Speaker 3: in China for years, and in fact we could see
Speaker 3: higher growth here in the US. That's just not something
Speaker 3: we talked about a few years ago. Where do you fall, Leland?
Speaker 4: Well, it was something we were talking about for the
Speaker 4: past ten years, but you know, nobody really wanted to
Speaker 4: hear about it, because you know, the idea was China
Speaker 4: was growing at eight percent, or they were going at
Speaker 4: close to eight percent, and most people didn't really see
Speaker 4: a reason why the economic magic couldn't continue. The growth
Speaker 4: model had worked up to that point, why couldn't they
Speaker 4: still crank out another twenty years at eight percent? I
Speaker 4: think that was the mindset up until relatively recently when
Speaker 4: people realize that, look, no one in Beijing is an
Speaker 4: economic magician anymore than anywhere else in the world. You know,
Speaker 4: there's subject to the laws of economics. And when they
Speaker 4: have the system that they have, it's it is structurally
Speaker 4: pumped up growth for a while, but there's going to
Speaker 4: be a much more precipitous slowdown on the way down.
Speaker 4: So I think, first of all, we have to be
Speaker 4: ready for very for a future of significant slowdown going forward,
Speaker 4: a structural slowdown. And second, when you're looking at whether
Speaker 4: the United States can pass, whether China can pass the
Speaker 4: United States, or whether it does or not, I think
Speaker 4: that the issue here is that if Chijin pain falls
Speaker 4: victim to the mindset that he has to pass the
Speaker 4: United States, and they do everything that's needed in order
Speaker 4: to pass the United States in GDP growth, then China
Speaker 4: will be going the wrong direction. I think they'll you know,
Speaker 4: Sheijin Ping will be reversing some of the stuff he's
Speaker 4: been doing for the past you know, the past several years.
Speaker 4: It's caused a lot of you know, pressure on the economy,
Speaker 4: but has been towards the idea of getting dead under control.
Speaker 4: So to the extent that China passed the United State,
Speaker 4: which looks unlikely. It's always looked unlikely. But if it
Speaker 4: does happen, it means Chi Jinping is doing the wrong things,
Speaker 4: not the right things.
Speaker 2: Why is it that the post COVID rebound just didn't hold.
Speaker 4: That's a great question. I mean, you know, we were
Speaker 4: very cautious, particularly early in the year, saying, look, there's
Speaker 4: a lot that China has to get over. You have
Speaker 4: to break down the COVID zero administrative state. You know,
Speaker 4: businesses have been frozen in place for a year now.
Speaker 4: But even we were surprised at how tepid the recovery
Speaker 4: was in the second quarter. I think it all comes
Speaker 4: down to confidence. When you look at what's happening in
Speaker 4: the economy. Firms didn't like what they were coming out of.
Speaker 4: They didn't know what was happening, and so there wasn't
Speaker 4: a sense of confidence the economy. If you don't have confidence,
Speaker 4: then you're not borrowing, you're not hiring, you're not spending.
Speaker 4: There was some of this, but not enough of it,
Speaker 4: and so you had a sequential recovery and month to
Speaker 4: month to month throughout twenty twenty three, but it was
Speaker 4: nowhere near what people were expecting or hoping for, and
Speaker 4: so people have become very very despondent on what they're
Speaker 4: seeing in the economy right now.
Speaker 3: So Leland, what does this all mean for American investors
Speaker 3: and American companies that do business or want to do
Speaker 3: business in China.
Speaker 4: Well, I think this is, you know, peace by piece.
Speaker 4: We have been opening the eyes of foreign investors. I mean,
Speaker 4: you know, a long time ago, it was it was
Speaker 4: first it was gepolitics, and then it was the trade war,
Speaker 4: and then it was you know, COVID, and then it
Speaker 4: was COVID zero, and now it's you know, low growth
Speaker 4: after COVID zero, and with with the foreign foreign crackdown
Speaker 4: on business, crackdown on foreign businesses. So there hasn't been
Speaker 4: one thing that convinced foreign investors, foreign businesses that they
Speaker 4: had to be more careful about going into China. Maybe
Speaker 4: they didn't want to go there, maybe they had to
Speaker 4: pull their supply chains out. It's been incremental, but I
Speaker 4: think when we got to COVID zero, finally, I think
Speaker 4: a lot of foreign businesses they just said, enough is enough.
Speaker 4: We can't operate here. It's not worth it. And you know,
Speaker 4: we can't be susceptible to having our supply chains severed
Speaker 4: because somebody decides to do a nationwide lockdown.
Speaker 3: But so if you're Nike, if you're Disney, you're not
Speaker 3: gonna throw in the towel. If you're Apple, yeah, sure
Speaker 3: you're gonna move your supply chains a little bit. I mean,
Speaker 3: but that company is just so intertwined with China.
Speaker 4: That's exactly right. So what you're gonna do is you're
Speaker 4: gonna bifurcate your operations. So you're gonna have a China operations,
Speaker 4: You're gonna have an X Chine operations that allows you
Speaker 4: not to have supply chains that are that are tangled up.
Speaker 4: You produce in China for Chinese consumers, if you think
Speaker 4: that's a great market, then you stay in there and
Speaker 4: you need to ramp it up. But if you're if
Speaker 4: you're mostly ramping up for for for for foreign consumers,
Speaker 4: maybe you don't run your supply chains through China anymore. So, yes, absolutely,
Speaker 4: there's companies that don't have that absolutely don't want to
Speaker 4: pull themselves out of China and won't, but I think
Speaker 4: they're they're they're changing their approach and how they treat
Speaker 4: the China part of the equation.
Speaker 2: How concerned are you about China's property debt crisis.
Speaker 4: I'll be real provocative here and I'll say I'm not
Speaker 4: concerned at all. Not that things aren't a mess. I
Speaker 4: just look, we spent all of August. Everyone supposed to
Speaker 4: be a VACA. We've spent all of August listening to
Speaker 4: people say that China's collapsing. Emitt hard Landing. We had
Speaker 4: a lot of people worried about that, had a lot
Speaker 4: of notes going out saying, look, China is not collapsing.
Speaker 4: Here's what's actually happening. It's not that the property sector
Speaker 4: isn't a mess. The property sector is a mess. You've
Speaker 4: got a big shadow bank that's wobbling right now in
Speaker 4: Country Garden, which you had two years ago in Evergrand.
Speaker 4: It freaked everybody out. A lot of problems the property sector.
Speaker 4: But China is not a typical economic system. It is
Speaker 4: a non commercial financial system, which means they're much less
Speaker 4: susceptible to things like a limit moment, like an acute crisis.
Speaker 4: So you have the ability to do things in a
Speaker 4: non commercial financial system you can't do in the West.
Speaker 4: You can't do in the US can't do in Europe.
Speaker 4: And so the idea that this is going to create
Speaker 4: some sort of sense of financial contagion and just roll
Speaker 4: every everybody over very very unlikely. But it does cause
Speaker 4: stresses to the system. And I think that it's happening
Speaker 4: right now because the Chinese government is allowing it to happen.
Speaker 4: When it starts looking like guess could go out of control,
Speaker 4: then they step in and and and they ease conditions
Speaker 4: a bit.
Speaker 3: What are they going to do in terms of stepping in?
Speaker 3: I mean, are you talking the question of moral hazard here,
Speaker 3: like they're not going to let anything fail?
Speaker 4: Well, I think they want to. They want to. They
Speaker 4: know that they are creating very very difficult conditions inside
Speaker 4: the inside the property sector. What they want to keep
Speaker 4: the problems inside of property. So you want to make
Speaker 4: sure that financial contagent is it's spreading to other areas
Speaker 4: of economy. You want to make sure that cash flow
Speaker 4: doesn't completely freeze up. Uh, And so that's why you're
Speaker 4: seeing easing measures right now. So, I mean, we have
Speaker 4: a fiscal activity index we track and monetary stimulus index
Speaker 4: we track, and we could see that as they are
Speaker 4: pushing harder on some of these issues, like you know,
Speaker 4: the resolution on these shadow banks, and and and and
Speaker 4: as property continues to deteriorate, then they step in and
Speaker 4: they give it a little bit of juice on the side.
Speaker 4: And so there is there is a you know, a
Speaker 4: push and pull on these things. But in terms of
Speaker 4: a bank, a big shadow bank falling in it causing
Speaker 4: the system to fall apart in a domino effect like
Speaker 4: we saw with Lehman, that's not going to happen in China.
Speaker 2: So what are their corners within the economy have been
Speaker 2: able to offset those concerns when you're talking about when
Speaker 2: you're looking at what's happening with the property debt crisis
Speaker 2: not being as big of an issue as maybe people
Speaker 2: are thinking at this point.
Speaker 4: Well, one of the problems is you haven't had real
Speaker 4: strength anywhere else to compensate. So if the conversation right
Speaker 4: now is you know, are things going greater are they
Speaker 4: going not that great? Then a difficult you know, it's
Speaker 4: a difficult thing to hash out. But you know, luckily
Speaker 4: for us it's been very easy because the question is
Speaker 4: is China growing or is it China collapsing? And China's
Speaker 4: clearly not collapsing. I think the whole thing is ludicrous.
Speaker 4: That that is the sentiment people have right now. If
Speaker 4: you look at what's happening in the manufacturing sector, it's
Speaker 4: actually held up much more impressively this year than we
Speaker 4: thought it would. You've got enormous headwinds. You're coming off
Speaker 4: three years of gangbusters growth. It's manufacturings holding its own.
Speaker 4: Is it doing great? Is it doing twenty twenty two?
Speaker 5: Low?
Speaker 4: It's not doing It's not what it was, but it's
Speaker 4: doing okay. It's not a huge weak point. The consumption
Speaker 4: parts of the e conoity. We look retail and services,
Speaker 4: are they doing great?
Speaker 6: Well?
Speaker 4: Parts of services are, but overall doing okay, you know,
Speaker 4: very uneven. So they're not a real bright spot. It's
Speaker 4: just you know, you're not seeing great stuff out of China.
Speaker 4: You're not seeing good data, but you're just not seeing
Speaker 4: anywhere near as negative a story as a lot of
Speaker 4: people think is happening inside inside the walls of the economy.
Speaker 3: Well, hey, just before we let you go, Leland, talk
Speaker 3: about political implications here she as president for life, as
Speaker 3: said in the past, any political implications in thirty seconds.
Speaker 4: This is she's show. So we can you know we
Speaker 4: spend a lot of time talking about how you know,
Speaker 4: four investors say, oh, Shei Jinping would never do this
Speaker 4: because dot dot dot. I think after a year of
Speaker 4: COVID zero we have we should be coming to the
Speaker 4: conclusion that there is nothing Chijin Ping won't do simply
Speaker 4: because we don't think he'll do it. It can be
Speaker 4: very humble in in evaluating where he's taking the economy,
Speaker 4: and it's in a very different direction than than he
Speaker 4: ran in the past.
Speaker 3: All right, we're gonna have to leave it there. Thank
Speaker 3: you so much for taking the time this afternoon. That's
Speaker 3: Leland Miller, CEO at China beij International, joining us this
Speaker 3: afternoon on zoom from Washington, DC.
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Speaker 2: We all know how much AI is all the hype.
Speaker 3: I mean, just look different. Vidia is here to date
Speaker 3: increase of two hundred percent or.
Speaker 2: More exactly, though questions do remain about what this all
Speaker 2: means for cybersecurity, particularly in the workplace, especially since generative
Speaker 2: AI applications continue to evolve. So we have Dana simbercov
Speaker 2: chief Risk, Privacy and Information Security Officer at a Point,
Speaker 2: joining us on Zoom from New Hampshire to explain why
Speaker 2: the cybersecurity industry isn't ready for the AI boom and
Speaker 2: what guardrails companies should use to protect their employees. Dana,
Speaker 2: thanks so much for joining us. As always, I want
Speaker 2: to get your thoughts on that because when we are discussing,
Speaker 2: like Tim and myself about this AI boom, why is
Speaker 2: it that cybersecurity companies may not be ready for this
Speaker 2: just yet.
Speaker 6: Well, thanks Jess and Tim for having me this afternoon.
Speaker 6: Great to be with you. I think AI is just
Speaker 6: yet another obstacle in the road to looking for that
Speaker 6: perfect security solution that just doesn't exist out there. Honestly, so,
Speaker 6: artificial intelligence and sort of the leap learning that is
Speaker 6: coming through technologies like that GBT really puts cyber professionals
Speaker 6: on edge because this is just one more ripple in
Speaker 6: the world we live in where cyber professionals have to
Speaker 6: be right one hundred percent of the time and bad
Speaker 6: guys only have to be right once in order to
Speaker 6: get inside of your defenses.
Speaker 3: And there's a shortage of bad guys out there, Dana,
Speaker 3: as we as we certainly know. So what's the worst
Speaker 3: case scenario here? I mean, describe for us what kind
Speaker 3: of keeps you up at night, makes you scared.
Speaker 6: Well, I think that really the secret to building a
Speaker 6: good program and addressing this is really to go back
Speaker 6: to cyber hygiene basics, doing what we do every day,
Speaker 6: which is making sure that we have good data governance
Speaker 6: in place within our companies and across our partner ecosystems.
Speaker 6: Because if you know what information you're handling, if you
Speaker 6: know what it is, where it is, who can access it,
Speaker 6: and how it's being shared, then you can largely mitigate
Speaker 6: some of the risks that are associated with AI. So
Speaker 6: at the end of the day, it does oh no, continue, Well,
Speaker 6: I was just going to say, at the end of
Speaker 6: the day, it does come down to people, policy and technology.
Speaker 6: So there really is no bad technology, just bad use
Speaker 6: of technology.
Speaker 2: And when you're talking about cybersecurity, are there particular sub
Speaker 2: industries or companies that you think might potentially be more
Speaker 2: vulnerable than others?
Speaker 6: Well, I certainly think that the ability for or again
Speaker 6: those malicious bad actors to use AI to potentially perpetrate cybercrime,
Speaker 6: take advantage of insiders inside of a company to really
Speaker 6: accelerate the process of cyber attacks. We've already seen through
Speaker 6: phishing and smishing, where somebody receives a phone call or
Speaker 6: a text message saying that they are an executive that
Speaker 6: need help right away. Just imagine that amplified with the
Speaker 6: ability to actually, you know, fake person over video, these
Speaker 6: deep fakes that we've been hearing about where a person's
Speaker 6: image or voice could be easily replicated data.
Speaker 3: You said phishing. We all know about phishing. Did you
Speaker 3: say smishing?
Speaker 6: Smishing, Yes, that's smishing is using a text message or
Speaker 6: some kind of social media. So whether it's WhatsApp, your phone,
Speaker 6: or you know, just pretending to be somebody that you're
Speaker 6: not and using technology to get to an intended target.
Speaker 6: And this is really common. We see it a lot
Speaker 6: both inside of our company is you know, as we
Speaker 6: build our own cyber defenses, but also across our customer ecosystem,
Speaker 6: where it really isn't just what you know, but who
Speaker 6: you are that makes you a target potentially within a company.
Speaker 3: Yeah, I didn't know that what it was. That's what
Speaker 3: it was called. We had a great cover story an
Speaker 3: excerpt from Zeke Fox's forthcoming book Number Go Up that
Speaker 3: talked all about where those text messages actually come from.
Speaker 3: I also encourage everybody listening who's interested to go check
Speaker 3: that one out. It was just a couple of weeks ago. Okay, So, Dana,
Speaker 3: what about when it comes to I mean, when I
Speaker 3: think about the worst case scenario, I mean, I understand, like,
Speaker 3: I consider myself pretty savvy when it comes to, uh
Speaker 3: not answering those phishing emails, And we certainly get trained
Speaker 3: pretty well here at Bloomberg, and I think a lot
Speaker 3: of companies do that in this day and age.
Speaker 2: Even do some trick emails at times just to see
Speaker 2: if we get caught.
Speaker 3: Yeah, they do. You got to you got to be vigilant.
Speaker 3: I think my concern though, is is is how generative
Speaker 3: AI sort of changes that, and it makes it so
Speaker 3: it's like really not possible to distinguish what is real
Speaker 3: and what isn't real. So so let's say that the
Speaker 3: weakest link is always the person. Where do companies like
Speaker 3: afpoint come in to try to stop that from happening?
Speaker 6: Well, I think at the end of the day, it
Speaker 6: really is going to come down to not only identity,
Speaker 6: but also technology and what we allow individuals to do.
Speaker 6: So just in the same way we've been talking over
Speaker 6: the last really couple of years with COVID about now
Speaker 6: the borderless office, where employees are working really from anywhere
Speaker 6: in the world, they're home, Starbucks, you know, the office.
Speaker 6: That means that there's no perimeter around the office that
Speaker 6: you can protect, and so identity really has become that
Speaker 6: new perimeter to a great extent, and making sure that
Speaker 6: you know who you're talking to and who you are
Speaker 6: is going to be critical. And limiting the ability for
Speaker 6: somebody to move either horizontally or vertically within a company
Speaker 6: if they are impersonated, is going to really help sort
Speaker 6: of fill that gap and protect against that kind of risk.
Speaker 2: We actually did hear from z Scaler after the bell.
Speaker 2: They did report earnings and there are forecasts for EPs
Speaker 2: to beat estimates. But of course, when it comes to
Speaker 2: a cloud cybersecurity company like this, and I have to
Speaker 2: note it stocks up more than five percent, and after
Speaker 2: I was treating how does cloud play into this? And
Speaker 2: when it comes to AI as well, in some of
Speaker 2: your concerns.
Speaker 6: Well, cloud is both an opportunity and a risk. That
Speaker 6: certainly a point as a as a cloud first company
Speaker 6: providing services to you know, millions of our customers around
Speaker 6: the world, takes advantage of a lot of the build
Speaker 6: in security controls that exist through our partners like Microsoft
Speaker 6: and others. There's also real opportunity with AI and the
Speaker 6: cloud to benefit from you know, the kind of machine
Speaker 6: learning and intelligence that could also be used to fight cybercrime.
Speaker 6: So I think there are tremendous opportunities that the cloud
Speaker 6: brings a really at the end of the day at
Speaker 6: somebody else's computer, and so that good data hygiene data
Speaker 6: governance is going to be critical to making sure that
Speaker 6: whether you're in the cloud or on premise, that you're
Speaker 6: really doing the right things to protect your business and
Speaker 6: your data.
Speaker 3: Is there a future for on premise or is it
Speaker 3: all in the cloud?
Speaker 6: Well, hard to say. I think, you know, the cloud
Speaker 6: is certainly the future. It's it's the wave, it's the
Speaker 6: direction that we see companies moving more and more. I
Speaker 6: think that there will likely always be some hybrid environments
Speaker 6: and depending on your industry, depending on the kind of
Speaker 6: information you have, cloud is not always possible, but we'll see.
Speaker 7: Now.
Speaker 6: You never say never, and I think it's always good
Speaker 6: to head your bets.
Speaker 2: Whenever you speak to companies, what is their biggest concern
Speaker 2: right now?
Speaker 6: Well, again, I think it is knowing where that data is.
Speaker 6: It's that unknown, that risk of not knowing is never better.
Speaker 6: And so you know, the challenge for AI is clearly
Speaker 6: that you can have a machine outpacing you rapidly. We
Speaker 6: now see that our computers regularly are asking us to
Speaker 6: prove that we're human by answering thinks like captures when
Speaker 6: you go to websites, Will computers outpace humans at some point? Maybe?
Speaker 6: I think again, for cybersecurity and privacy professionals, it's building
Speaker 6: accounted into the way that we use data, making sure
Speaker 6: that there's good transparency with our customers, and making sure
Speaker 6: that we're really, you know, doing the right thing to
Speaker 6: maximize the opportunity for businesses to do what they should
Speaker 6: be doing while protecting the rights of individuals and data subjects.
Speaker 3: I don't know, just do you have any ever have
Speaker 3: a problem with those captures. I feel like they're they're
Speaker 3: already the captures have already outsmarted me. I mean, you know,
Speaker 3: what I'm talking about. Write those things.
Speaker 4: Yeah, come on, I.
Speaker 2: Mean, I mean, I honestly like one time I got
Speaker 2: one of those Bloomberg emails and accidentally clicked it on something.
Speaker 2: Then I had to go back through and do all
Speaker 2: of the training. So I'm super vigilant now.
Speaker 3: And not to busted. You only make that mistake once.
Speaker 2: I know, exactly, so never again after doing that.
Speaker 6: Well, that's that's good. That's good hyber training.
Speaker 2: It really is.
Speaker 3: Yeah, we have we have some pretty uh you know,
Speaker 3: and you gotta it takes a while to do those
Speaker 3: trainings too. Exactly for the last day, Dana, I'll tell
Speaker 3: you that Data Simberkoff really appreciate you taking the time.
Speaker 3: She's chief Risk, Privacy and Information Security officer at a
Speaker 3: point joining us on Zoom from New Hampshire this afternoon.
Speaker 3: I think there's a lot of questions about what the
Speaker 3: future of sort of the hybrid cloud is, Jess, And
Speaker 3: you know whether or not what's on premise and what's
Speaker 3: not on premise, especially with the multinational companies where those
Speaker 3: servers are based. You see that certainly with you know,
Speaker 3: tech companies that right you know, required to co locate
Speaker 3: servers in certain countries and then those servers and that
Speaker 3: information is under the jurisdiction of that area, so it
Speaker 3: gets really complicated.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 7: Tim.
Speaker 2: As you know we discussed earlier in Today's Big Take
Speaker 2: with Bloomberg's Matt Boyle, workers in Asia and Europe have
Speaker 2: largely returned to offices at a faster pace then their
Speaker 2: American counterparts more than three years after COVID shifted corporate life. Now,
Speaker 2: US employers are demanding a workplace reset, and they want
Speaker 2: it now on everything from action on societal issues and
Speaker 2: work life boundaries per Edelman's latest trust Barometer reports. So
Speaker 2: who better to walk us through this latest report back
Speaker 2: with us again is Richard Edelman's chief executive officer at
Speaker 2: the firm, who is joining us on zoom in New
Speaker 2: York City to discuss these latest fightings. Thanks so much
Speaker 2: Richard for chatting with us again. Walk us through what
Speaker 2: you think are the biggest takeaways from these latest figures
Speaker 2: that you have.
Speaker 7: I think the first important finding is that my employer
Speaker 7: is substantially trusted more than any other institution. So trust
Speaker 7: is local in my CEO and in my company's ability
Speaker 7: to make change twenty five points higher than the other institution,
Speaker 7: sixty points higher than government in terms of ethics. The
Speaker 7: second big finding is the trust gap for so called
Speaker 7: deustless workers. In other words, people who are either on
Speaker 7: the factory floor are operating as sort of independent contractors,
Speaker 7: they have substantially less trust in institutions. The third big finding,
Speaker 7: which you led the broadcast with, is workers want a reset.
Speaker 7: Two thirds of people say I want to change my
Speaker 7: work life balance. This is a three years after COVID
Speaker 7: kind of reaction saying, you know, I'm not so fast, folks.
Speaker 3: Are they? Richard still in control though? I mean, yes,
Speaker 3: we're still adding over one hundred thousand jobs each month
Speaker 3: here in the United States, but we're not hearing from
Speaker 3: executives to the same extent that we were in the
Speaker 3: last couple of years how much trouble they're having finding
Speaker 3: employees who's in the driver's seed.
Speaker 7: So employees think that they are because they're saying, by
Speaker 7: six to one, seven to one, I want my CEO
Speaker 7: to speak up on societal issues. I expect that, in fact,
Speaker 7: you're going to listen to me when I want to
Speaker 7: make change. I expect in a sense sort of a
Speaker 7: partnership as opposed to a class employer employee relationship. But
Speaker 7: this is being sorted out because the employer has the
Speaker 7: tightrope also of don't get into politics and you know,
Speaker 7: be careful on especially in the US, on steering clear
Speaker 7: of you know, electro politics or you know, things that
Speaker 7: will get you into trouble.
Speaker 2: When you're talking about work life boundaries, what specifically are
Speaker 2: employees looking for.
Speaker 7: Employees are looking for, in a sense, a new compact
Speaker 7: that says you'll listen to me, you'll come visit me
Speaker 7: on the factory floor and get my input.
Speaker 3: In fact, the.
Speaker 7: Deskless worker who actually feels very disconnected is connected if
Speaker 7: the company trusts them, so that that matter of going
Speaker 7: out and listening. But also we want to hear in
Speaker 7: the halls of power the voice of our CEO expressing
Speaker 7: our views.
Speaker 3: Does this change based on the type of industry that
Speaker 3: the company's in, like you know, if you're working for
Speaker 3: one company and in one sector versus a company and
Speaker 3: another sector, is it is it different?
Speaker 7: I think in tech and financial services it's sort of
Speaker 7: the counter positions. But where financial companies are really ordering
Speaker 7: employees back. The CEOs of tech companies because they have
Speaker 7: you know, talents and or remote programmers theoretically can work solo.
Speaker 3: But sorry, Richard, I mean in terms of trust.
Speaker 7: But what we found in our own company, trust is
Speaker 7: made up of four things ability, dependability, integrity, and purpose
Speaker 7: and the ability to come together in the office I
Speaker 7: think gives some sense of culture and also some sense
Speaker 7: of shared purpose. So you know, we're encouraging the hybrid structure,
Speaker 7: and several of our clients are following suit.
Speaker 2: Huh, Tim and I have been discussing a lot this
Speaker 2: afternoon with this theme about especially when we're talking about
Speaker 2: the US and employers trying to get their employees back
Speaker 2: into the office. What do you think is the catalyst
Speaker 2: that change? That is that a potential because we don't
Speaker 2: see a recession on the horizon, but at a particular
Speaker 2: point in the business cycle, if you do see that
Speaker 2: shift with the slowing economy and then job cuts are
Speaker 2: coming is that the shift that employers think could potentially
Speaker 2: shift the power there.
Speaker 7: The power struggle is a standoff, and the smart company
Speaker 7: will find a way between and move gradually if that's
Speaker 7: the direction. But what employees really want is to feel
Speaker 7: as if they're getting value from their employer, that the
Speaker 7: employer's listening, that it's not going to go back to
Speaker 7: the pre twenty twenty method of talk down to me.
Speaker 7: I want to be represented, I want to be heard.
Speaker 7: I want to feel as if I'm making change. By
Speaker 7: eight to one, people say I'm prepared to come to
Speaker 7: work for a company if that company stands up on
Speaker 7: human rights, or on sustainability, or on race and diversity.
Speaker 7: So that matters.
Speaker 3: So when it comes to thinking about what this what
Speaker 3: the takeaways are for leaders who are listening to our program,
Speaker 3: who are watching our program right now, you what have
Speaker 3: you learned in the years that you've been doing the
Speaker 3: trust barometer and how it's changed, because I got to
Speaker 3: tell you, you know, last couple times we've had you on
Speaker 3: it's been similar findings, Richard, that the company is the
Speaker 3: one where people, you know, people trust as an institution
Speaker 3: more than government. So what's the big takeaway for executives listening.
Speaker 7: My employer is so much more trusted than any other institution.
Speaker 7: There are huge expectations of you in satisfying what an
Speaker 7: employee wants from a societal point of view, work life balance.
Speaker 7: It's complicated by the reality of politics in today's world.
Speaker 7: So I would identify the three or four key issues
Speaker 7: on which I'm going to speak which have to do
Speaker 7: with your own values and your core competencies, and they're
Speaker 7: probably in the area of sustainability, diversity and inclusion, geopolitics
Speaker 7: when it matters like getting out of Russia, and lastly
Speaker 7: wages and reskilling. On the other issues, talk with your employees,
Speaker 7: talk internally, but be careful about what you say in
Speaker 7: a public sense as an advocate, because again you'll get
Speaker 7: right into the R versus D and the differences could
Speaker 7: not be more stark.
Speaker 3: Yeah, that's certainly an area where I mean, you know,
Speaker 3: you don't want to bring that up when you're with
Speaker 3: new people you meet her or in the workplace. Right
Speaker 3: religion and politics, right topics. Richard Edelman, we love it
Speaker 3: when you joined us CEO of Edelman joining us on
Speaker 3: Zoom from New York City. Some really interesting findings in
Speaker 3: this and you know we have Richard join us. We
Speaker 3: haven't joined us. Several times a year often he joins
Speaker 3: us from Davos where he is the World Economic Forum,
Speaker 3: and you know, talking to these leaders, Jess, who are
Speaker 3: making these decisions about the ways that they run their business.
Speaker 1: The journal. No, no, no, j honey, Please, I'll travel.
Speaker 4: I want to drive.
Speaker 5: It's good question.
Speaker 3: This is the drive to the clothes.
Speaker 1: On Bloemberg Radio.
Speaker 3: Well, it is that time time for us to drive
Speaker 3: to the clothes. We are just shy at eighteen minutes
Speaker 3: until the US markets closed here in New York. Very
Speaker 3: please to add back with us this afternoon. Abbe Deschaponde,
Speaker 3: Founder and chief investment Officer at center Stone Investors. Abbe
Speaker 3: joining us on zoom from New York City. Abbe, how
Speaker 3: are you.
Speaker 5: I'm doing well. Unfortunately summer's over.
Speaker 3: But is it? Though it's still so hot and it
Speaker 3: doesn't seem like everyone's back to work, does it? Is
Speaker 3: this summer over?
Speaker 7: Oh?
Speaker 3: Covid era, right, yeah, exactly. We've talked a lot about
Speaker 3: that this afternoon.
Speaker 2: Uh.
Speaker 3: Hey, we love talking to you because you always come
Speaker 3: with some great picks. We're gonna get to those in
Speaker 3: just a minute. But first I want to start with
Speaker 3: with Mac because you're kind of in a different different camp.
Speaker 3: You're not really talking about a soft landing. You argue
Speaker 3: that a mild recession could be coming.
Speaker 5: Yeah, I mean very functionally similar though. I mean I'm
Speaker 5: not looking for like a huge two thousand and eight
Speaker 5: or nine or even twenty twenty ish decline and economic activity.
Speaker 5: But I mean it's hard to argue that with the
Speaker 5: kinds of interest rate changes that we've had and the
Speaker 5: wild sort of spending spree that we were on that
Speaker 5: that there shouldn't be a period of retrenchment. I think
Speaker 5: there definitely will be, seems to be already started, have
Speaker 5: already started. But whether that evolves into something, you know,
Speaker 5: that's the end of the world, I just don't believe it.
Speaker 5: But I guess, as a famous person once said, the
Speaker 5: future is uncertain.
Speaker 2: So what would be the catalyst to have growth slow down?
Speaker 2: I'm looking at the ECFC function in the tournament that
Speaker 2: obviously looks at the aggregate for economists, and they don't
Speaker 2: have a quarter of for quarter contraction anymore for the
Speaker 2: remaining quarters this year.
Speaker 5: So so this is one of the issues is that
Speaker 5: when we talk about the economy we're talking about. You know, well,
Speaker 5: in the United States, a twenty trillion dollars behemoth. Economies
Speaker 5: are adaptable, they're you know, they're that they're they're dynamic organisms, right,
Speaker 5: So it's very rare for the entire economy just to
Speaker 5: just implode. It's just too big. They're twenty pieces and
Speaker 5: to twenty slices. So what we're I think the nuances
Speaker 5: parts of the economy can slow down enough to give
Speaker 5: the impression of a from a macro standpoint, a slowdown
Speaker 5: that would qualify as a recession. That would be like
Speaker 5: a zero percent, you know kind of growth rate. Where
Speaker 5: where I have trouble, like most people seeing a major
Speaker 5: problem is you know, is employment. Well that really turn
Speaker 5: out with all these shortages and labor shortages we've had
Speaker 5: we have, it's hard to see like a huge, uh,
Speaker 5: you know, labor problem. And then at the same time,
Speaker 5: you have a lot of stimulus and a lot of
Speaker 5: the that five hundred billion dollars really hasn't gone through
Speaker 5: the system yet from the i RA. So there's plenty
Speaker 5: of stimulus. There's you know, the at least fiscal stimulus.
Speaker 5: The monetary stimulus has obviously been tightened. But I mean,
Speaker 5: you know, anecdotally many many, if not most, households refinanced
Speaker 5: at very low rates just just a couple of years ago.
Speaker 5: I mean, there's there's not as much of a direct
Speaker 5: impact like this was a four or five year economic cycle.
Speaker 5: I think interest rates would have much more of a
Speaker 5: kind of impact. But households are turned out where it's
Speaker 5: where you can see the slowdown occurring. It's in this
Speaker 5: it's in the lower end. And we see this, and
Speaker 5: you know the results from companies like a Dollar General,
Speaker 5: which we recently began to purchase, where that consumer is
Speaker 5: hurting from the interest rate increases. But you know, it's
Speaker 5: a smaller segment. It's a lot of people obviously, but
Speaker 5: it's a smaller segment for me as a proportion of
Speaker 5: the total you know, spend in the economy. But you know,
Speaker 5: you can definitely see that there's there's slow down here
Speaker 5: and there. It's just I don't and most people probably
Speaker 5: don't believe that there's going to be a direct hit
Speaker 5: to the entire economy. Those types of you know, where
Speaker 5: the economy quote unquote like uniformly succumbs to weakness, that's
Speaker 5: that tends to be led by a financial you know issue,
Speaker 5: you know, like a banking crisis like we had fifteen
Speaker 5: years ago.
Speaker 3: Just what about what about a regional banking crisis?
Speaker 5: I mean I had had an issue for a brief
Speaker 5: moment of time in that region. But I was just
Speaker 5: talking to some mortgage brokers the other day, and the
Speaker 5: banks are lending. The banks are lending freely, even to
Speaker 5: the distressed homeowners for doing the home equity by lines
Speaker 5: of credit, for instance, to pay off higher interest car loans.
Speaker 5: I mean people are getting by somehow.
Speaker 3: Okay, I'll be I want to talk about some of
Speaker 3: the picks that that you brought with you. I want
Speaker 3: to start with a company that I don't get to
Speaker 3: tell about much, but I'm a cyclist and I saw
Speaker 3: Shamano on your list and some people might know it
Speaker 3: as a fishing tackle company, some as a bicycle component manufacturer.
Speaker 3: Why is Shamano one of your picks?
Speaker 5: You know, that's the like. So a lot of companies
Speaker 5: went through COVID and had a huge you know, biking
Speaker 5: became very popular during COVID because of an outdoor activity,
Speaker 5: and so that a big spike in demand. And now
Speaker 5: you're seeing the other side of that. You know a
Speaker 5: lot of businesses have too much inventory. Retailers have a
Speaker 5: lot of inventory a lot of different things, and especially bikes.
Speaker 5: So there is a you know, this this issue kind
Speaker 5: of cycling through quote unquote the industry, and Shamano's not
Speaker 5: immune to that. Now that said, Chamano's a one of
Speaker 5: really two brands in their space. They kind of more
Speaker 5: or less dominate the bike parts business. These are derailers,
Speaker 5: brake parts and things that you see in a bicycle,
Speaker 5: and typically people suspect the bike with the parts. The
Speaker 5: parts are actually more important than the bike in a
Speaker 5: lot of cases. So it's a it's a branded good,
Speaker 5: it's a it's a franchise. And where there's been technological
Speaker 5: development like electronics, shifting, shifting and whatnot, no, Shamano's led that.
Speaker 5: So to me, it has all the hallmarks of a franchise.
Speaker 5: And in addition, which is somewhat still unusual for Japanese businesses,
Speaker 5: they're very shared work oriented. They buy back stock, they
Speaker 5: be a dividend, They understand what intrinsic value is for
Speaker 5: their own business. And as a consequence, we have a
Speaker 5: great deal of faith and management to be able to
Speaker 5: manage through this type of cycle, and since it's a franchise,
Speaker 5: we're more than willing to give them time.
Speaker 2: We have about a minute left. But Ryanair and Porsche
Speaker 2: also on your list. What do you like about them?
Speaker 5: Well, right here, these are both I'll tyke yiner first.
Speaker 5: Or like Shamano, is a brand is a brand?
Speaker 4: Uh?
Speaker 5: Now? Unlike Shimano, Ryanair's developed their brand by being the
Speaker 5: lowest cost provider and basically commodity industry, which is airlines.
Speaker 5: And they've done that by logging in gates and routes
Speaker 5: to two airports that are off set out the outside
Speaker 5: the city center. And they've done that and have been
Speaker 5: able to provide the lowest cost airline ticket for for
Speaker 5: European travelers. That's a business that, because of the cost
Speaker 5: advantages that they have, seems to gain market share every
Speaker 5: time there's a weakness, and then when things rebound, they
Speaker 5: have emerged with greater number of gates and their routes expand.
Speaker 5: As a results, they just continue to gain market share.
Speaker 5: As much as you can be a franchise in the
Speaker 5: airline industry, they've got them and it's very unlikely that
Speaker 5: anyone can displace them. So let's you know prime the
Speaker 5: primary reasons and again good management, good business model, and
Speaker 5: the balance sheet is very solid to They own all
Speaker 5: the airplanes, which gives me se comfort. They're not sitting
Speaker 5: their releasing them.
Speaker 3: We love it when you join us. That's Bish Bonde
Speaker 3: joining us from Centerstone Investors. He's the founder in CIO
Speaker 3: at the company. Joining us on zoom from New York City.
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