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Speaker 3: Hi, everyone, Welcome to the Bloomberg Business Week Weekend Podcast.
Speaker 3: This past week it was largely about the newsflow from
Speaker 3: Washington to Wall Street, and that included shifts on US
Speaker 3: trade policy with global allies, and renewed pressure on the
Speaker 3: FED to the White House fast tracking its AI infrastructure
Speaker 3: build out, and oh right, a busy and big earnings week.
Speaker 4: On that this first hour, what you need to know
Speaker 4: about results from two members of the mag seven, We
Speaker 4: talk Alphabet and Tesla. One traded on earnings, the other
Speaker 4: initially sold off only to Rally.
Speaker 3: And speaking of Tesla, we get into the relationship between
Speaker 3: Elon and the President, recently feuding and yet this past
Speaker 3: week President Trump perhaps offering an olive branch, as he
Speaker 3: put out on social that he wanted Elon to thrive
Speaker 3: Elon's Universe is the cover story of the upcoming new
Speaker 3: issue of Bloomberg Business Week.
Speaker 4: Plus one real estate investor finding opportunities in Solar. We'll
Speaker 4: explain all that to come. We begin with two of
Speaker 4: the big earnings this week. First up, Alphabet, which said
Speaker 4: demand for AI products boosted quarterly sales and now requires
Speaker 4: an extreme increase in capital spending, heightening pressure on the
Speaker 4: company to justify the cost of keeping up in the
Speaker 4: AI race.
Speaker 3: To help break down Alphabet's quarter reelaned on Laura Martin,
Speaker 3: senior analyst at Needeman Company, who has a buy rating
Speaker 3: on Alphabet, the.
Speaker 5: Single most important number to offset the bears is the
Speaker 5: search number. So search revenue up twelve percent, was well
Speaker 5: above the whisper A number of ten percent growth and
Speaker 5: above the Wall Street census number of nine percent growth.
Speaker 5: And they also had four percent click volume, which basically
Speaker 5: is the same as last year, and that's up from
Speaker 5: two percent you know, click through rate in the first quarter,
Speaker 5: which is positive because people of the bare case here
Speaker 5: is that generative of AI answers lower than the economics
Speaker 5: of Google Search, which is the big money engine here.
Speaker 5: So the single most important number was that search grew
Speaker 5: AD revenue twelve percent, which was three hundred basis points
Speaker 5: above consensus view.
Speaker 6: The second most important number is cloud.
Speaker 5: Right, there's still out of capacity with Cloud, but their
Speaker 5: cloud business grew thirty two percent and a twenty percent margin,
Speaker 5: So that's fantastic, So they're really pricing up now that
Speaker 5: they have capacity constraints. And the third most important numbers
Speaker 5: YouTube YouTube grew thirteen percent of revenue, and we think
Speaker 5: it's worth seventy three dollars a share here if it
Speaker 5: was separately tradable and not confined within the alphabet conglomerate.
Speaker 5: So but I would say those are the three most
Speaker 5: important segments that people are talking about. But the barecase
Speaker 5: really is highly focused on the search revenue.
Speaker 4: Ground, and that's exactly where I want to go right now.
Speaker 4: Going into this print, there was so much concern about
Speaker 4: the cannibalization of traditional Google search. Why aren't we seeing that?
Speaker 5: So what they're saying is that what happens when you
Speaker 5: have those answers, when you put in a Google search
Speaker 5: and then you get an answer, is that people are
Speaker 5: spending ten times more time, ten percent more time asking
Speaker 5: the next question, asking the next question, and that the
Speaker 5: shortfalling clicks per query is made up by the fact
Speaker 5: that people spend ten percent longer, which then lets Google
Speaker 5: serve more queries or more ads. So that's what they're saying,
Speaker 5: is that the demometization is about equal. That's their words,
Speaker 5: about equal. But I think part of it is the
Speaker 5: extra time people spend using the answer format is offsetting
Speaker 5: the actual you know, the downdraft in the economics per query.
Speaker 3: Hey, the extra spend the up again CAPEX. Initially everyone
Speaker 3: was saying, well, that's why the stock traded down in
Speaker 3: the aftermarket. It made some folks, or at least some
Speaker 3: investors it felt like initially nervous. What is your take
Speaker 3: on that. I think our own man Deep Singh was saying, well, listen,
Speaker 3: it sounds like they're getting the demand and they're spending
Speaker 3: to meet that demand.
Speaker 6: Yeah, I mean I would say that.
Speaker 5: I would say the other thing that's going on is
Speaker 5: that I think one of the reasons the stock was
Speaker 5: a little volatile is the operating income grew fourteen percent,
Speaker 5: The top line grew fourteen percent, thirteen fourteen percent, and
Speaker 5: it sort of looked like there was minimal operating leverage.
Speaker 5: But what they told us on the call that was
Speaker 5: buried in the financial statements is those costs included one
Speaker 5: four point four billion dollar fine legislative fine, regulatory fine.
Speaker 5: So if you subtract that just to look at costs,
Speaker 5: the most important point we would make that I think
Speaker 5: largely is being missed. It doesn't have to do with revenue,
Speaker 5: has to do with the fact that by integrating generative
Speaker 5: AI into every aspect of their business, they've got really
Speaker 5: accelerating revenue, which everyone's focused on. But their costs are
Speaker 5: going down.
Speaker 6: Okay, that's not fair.
Speaker 5: Their costs are just not going up as fast. There's
Speaker 5: a lot more operating leverage here if you exclude the fine.
Speaker 5: So I think that's why I think once they said
Speaker 5: there was this big fine and the costs, people realize
Speaker 5: that jenerator of AA is really lowering or increasing the
Speaker 5: productivity here, and so the operating leverage is at margin
Speaker 5: expansion is faster than people think at a time when
Speaker 5: revenue is also accelerating. Over consensus view.
Speaker 3: One thing I loved in your research, and you put
Speaker 3: this right up top, Laura, as you said, we like
Speaker 3: Google's strong strategic position as number one in search, number
Speaker 3: one in streaming YouTube number two in mobile, Android, number
Speaker 3: three in claud, number one in autonomous driving. Weimo, which
Speaker 3: Tim and I are both in love with. And you
Speaker 3: say lms make data more valuable and Google's data is
Speaker 3: best in class. Again, your view is alphabet in many
Speaker 3: ways the one to beat. And why hasn't the stock
Speaker 3: been I don't know, doing more this year?
Speaker 5: You know, I think I think Google, So I would
Speaker 5: say their execution has been very haphazard.
Speaker 6: It's not.
Speaker 5: And Wall Street really prefers leaders that lead from the front,
Speaker 5: like Meta, like Mark Zuckerberg. We like, you know, visible, clear,
Speaker 5: visionary leaders, and that's not what's going on here at Google.
Speaker 5: But you know, Google just sort of despite itself, really
Speaker 5: does have the human capital and culture and financial resources
Speaker 5: to fund what will be a retooling of American business,
Speaker 5: which is the generative AI backbone infrastructure that they're building.
Speaker 5: And they're leading by executing within their own They're showing
Speaker 5: what's possible by executing implementing generative AI and everything they do,
Speaker 5: every product they have, and every cost center they have.
Speaker 5: So this is what's about to happen to America over
Speaker 5: the next decade is companies that follow Google's lead will
Speaker 5: have increasing margins and accelerating revenue. And if you don't,
Speaker 5: which requires a cloud. By the way, you can't do
Speaker 5: this without cloud. If you don't, you will go out
Speaker 5: of business. Because, in my opinion, because the guys, the
Speaker 5: companies that use generative AI to increase productivity and margins
Speaker 5: and increase revenue will get higher multiples from Wall Street.
Speaker 4: I know you said search, search, streaming, search, cloud, and
Speaker 4: YouTube are the three most important numbers, but we'd be
Speaker 4: remiss if we didn't ask you about weimo and the
Speaker 4: expansion that the company said is coming in the quote
Speaker 4: near future. Here's what they said. Alphabet hopes to expand
Speaker 4: weimo to all cities in the near future. How do
Speaker 4: you look at this as an analyst on this company stock,
Speaker 4: as an analyst for the company and material contribution.
Speaker 5: So you guys love the service you just said, so,
Speaker 5: so I don't like it in this sense that right now,
Speaker 5: I think the most strategy is what you say no to.
Speaker 5: And what Google should be saying no to is anything
Speaker 5: that isn't generative AI related. Because this is a race
Speaker 5: and a war, and they are spending a fortune on
Speaker 5: jenerative AI. Good for them, But Weimo is another huge
Speaker 5: sunk cost or financial commitment, and I would like them
Speaker 5: figure out a way to do Wei moh. They are ahead,
Speaker 5: they are number one in autonomous driving. I would like
Speaker 5: them to keep the data because I think data in
Speaker 5: the real world plus the virtual world, is worth more
Speaker 5: than either world standalone. So I like the data aspect
Speaker 5: of WEIMO, but I do not like the capital commitments,
Speaker 5: which compete right now with the generative AI capital.
Speaker 4: What are the capital commitments? They haven't been totally clear
Speaker 4: about that. What do you to view them?
Speaker 7: Ass?
Speaker 5: Well, they sit in other bets, and I think other
Speaker 5: bets I'm forgetting, but it like it loses typically three
Speaker 5: to five billion dollars a quarter, so it's like twenty
Speaker 5: billion a year, and a lot of that is WAYMO
Speaker 5: and it's their healthcare initiatives, and so I just think
Speaker 5: that that money. You know, they just upped CAPEX by
Speaker 5: ten billion. I would like to see him take it
Speaker 5: out of other bets.
Speaker 6: But the primary other bet is WEYMO.
Speaker 5: So I think they're unwilling to relinquish their pole position
Speaker 5: because now.
Speaker 6: Tesla's coming after them.
Speaker 5: So I think I think, Look, they are number one
Speaker 5: in all of these strategic segments. Because they get there early,
Speaker 5: and so they're early to Weimo. I just wish it
Speaker 5: wasn't as capital intensive, the losses weren't as big at
Speaker 5: a time when Google should be spending all of its
Speaker 5: focus and resources on Jenerator ai Ura.
Speaker 3: We really, really, really like Weymo. I'm just gonna tell you. Really,
Speaker 3: I even close my eyes in a Weymo. That's uncomfortable.
Speaker 2: I know.
Speaker 3: Hey, listen, we've got about three minutes left. There's so
Speaker 3: many different places we would love to go with you,
Speaker 3: but you pick because you've got Apple reporting next week,
Speaker 3: Meta reporting next week, Amazon reporting next week, uh, Disney
Speaker 3: in early August, Netflix already out, and then there's the
Speaker 3: Late Night Wars. What's interesting to you right now that
Speaker 3: you think the Bloomberg audience and investors really need to
Speaker 3: be paying attention and it could be something else beyond that.
Speaker 5: Let's do Apple because it used to be the biggest
Speaker 5: company in the world now. I guess the videos, But
Speaker 5: what I would say about Apple, we have a hold
Speaker 5: here on Apple, whereas we have a buy on on
Speaker 5: Alphabet Google. You know, I think I think Apple isn't
Speaker 5: really a box because when you listen, for sure, when
Speaker 5: we hear Meta who's spending hundreds of millions of dollars
Speaker 5: per person to create a super intelligence generative AI group.
Speaker 5: And yesterday there was no sentence on the Google earnings
Speaker 5: called it didn't have AI in it.
Speaker 6: So you know, these companies are really talking.
Speaker 5: Amazon will also because that's being run Amazon now is
Speaker 5: being run by the AWS you know founder. Essentially, he's
Speaker 5: talks a lot generative AI a lot. So the you know,
Speaker 5: the one that's not the same is Apple, and people
Speaker 5: really want to see what's happening with their generative AI
Speaker 5: strategy and how is it. How is Apple either sixteen iOS,
Speaker 5: sixteen iOS, seventeen iOS going to keep up with Android,
Speaker 5: which is Google, who last night told us they're integrating
Speaker 5: jenerave I tools into everything including androids. So I do
Speaker 5: think there's a bigger threat to Apple's only business, which
Speaker 5: is this iPhone business. We think it's a single product
Speaker 5: company with upsells to other devices. We think the anchor
Speaker 5: ten that there is the iPhone. So we really want
Speaker 5: to hear how they think they can compete when they
Speaker 5: are saying nothing about jenerative AI and they're spending twelve
Speaker 5: billion dollars on Capex, which is the same number at
Speaker 5: Apple for the last three years, when we just every
Speaker 5: single quarter we show up on the Amazon call, the
Speaker 5: meta call that Google called they're raising capex by ten
Speaker 5: billion dollars.
Speaker 4: At a time or with order thirty seconds on Apples,
Speaker 4: Tim Cook the right leader to guide them through the
Speaker 4: AI era.
Speaker 5: Ough, so harsh. I'm gonna go with no, but so harsh. No,
Speaker 5: I don't think so. I think we need a wartime CEO.
Speaker 5: And I think Tim Cook is great at a lot
Speaker 5: of things, but I don't think he's been He's not
Speaker 5: proven great at this this technological disruption called generator.
Speaker 3: They I got someone else in mind that you think
Speaker 3: she'd lead it ten seconds?
Speaker 5: It's an impossible job. So no, I have no idea
Speaker 5: in mine for who could replace him.
Speaker 3: You you rock come back soon, and I think you
Speaker 3: are coming back soon, which we're looking forward to already.
Speaker 6: Laura be well.
Speaker 3: Laura Martin, senior alys at Niedem and Company, knows this
Speaker 3: space like no other. So glad we could get some time.
Speaker 2: You're listening to the Bloomberg Business Weekdaily Podcast. Catch us
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Speaker 3: All right, let's stay with earnings and from another mag
Speaker 3: seven we're talking about Tesla, which it shares fell after
Speaker 3: Elon Musk warned of difficult times ahead for the company
Speaker 3: following one of its work stretches since it first started
Speaker 3: producing electric sedans over a dozen years ago. Tesla will
Speaker 3: be in a transition period for the next year or more,
Speaker 3: losing electric vehicle incentives in the United States and needing
Speaker 3: time to roll out autonomous vehicles. That according to the
Speaker 3: chief executive Elon Musk.
Speaker 4: Ross Gerber is a longtime investor in Tesla and owner
Speaker 4: of Tesla cars, including the cyber truck. He's the CEO
Speaker 4: of gerber Kawasaki Wealth and Well. He's been a longtime
Speaker 4: Tesla advocate. More recently, he's been a vocal critic of
Speaker 4: Elon Musk. He joined us to reflect on his cautious optimism.
Speaker 8: I think probably my biggest issue is that what I
Speaker 8: believe is best for Tesla isn't actually the strategy being
Speaker 8: employed by Elon, And what I think is best for
Speaker 8: Tesla is to be focused on selling great evs that
Speaker 8: can drive themselves versus completely pivoting into this robot and
Speaker 8: robotaxi business because they're struggling to sell cars. Because what
Speaker 8: we're seeing now, which I suspected to be true earlier,
Speaker 8: is that the deterioration of the EV business is really
Speaker 8: really bad for Tesla, and it essentially is an EV business,
Speaker 8: and so hoping that robotaxi robotics is going to be
Speaker 8: a revenue stream or let alone profitable anytime soon is
Speaker 8: really just not going to happen. And so, as Elon said,
Speaker 8: Tesla's in for some pretty tough quarters ahead, and with
Speaker 8: the ending of the tax credits and all this kind
Speaker 8: of stuff, I mean, this is all bad news.
Speaker 4: When you say it's not gonna happen anytime soon. What
Speaker 4: do you mean by that? Give us your own timeline here.
Speaker 8: Well, you know, we follow WEIMO very closely, and we
Speaker 8: think that Tesla is two years behind Weimo as far
Speaker 8: as the development of their robotaxi and now Weaimo is
Speaker 8: scaling and being quite successful at charging you know, the
Speaker 8: right amount for rides and generating enough revenue that it's meaningful.
Speaker 9: So I think it's at least two years right.
Speaker 8: So where Tesla's at for them to generate any revenue
Speaker 8: at all, all of meaningful ability will take a couple
Speaker 8: of years. And then from a profitability standpoint, we don't
Speaker 8: even know if that business is going to be profitable
Speaker 8: with all of the competition that's coming into the robo
Speaker 8: taxi business.
Speaker 3: So you said you've been selling shares of Tesla. I
Speaker 3: think there are reports to in June that you sold
Speaker 3: about sixty million dollars worth of Tesla's shares and you
Speaker 3: cited the waiting confidence as you're laying out here in
Speaker 3: the company's future. Are you selling more? What's your exposure
Speaker 3: at this point?
Speaker 8: Yeah, you know, we still have you know, on my
Speaker 8: last thirteen haf we had over two hundred thousand shares.
Speaker 8: You know, right now we're we're holding a little less
Speaker 8: than two hundred thousand shares. So we continue to sell
Speaker 8: the stock. We have a lot of diehard Tesla clients
Speaker 8: that you have huge gains because we bought the stock
Speaker 8: at you know, like two dollars and so, you know,
Speaker 8: people aren't that excited to pay taxes. And there's still
Speaker 8: this possibility that Elon could change course and really do
Speaker 8: the things necessary to fix Tesla because fundamentally, Tesla is
Speaker 8: a great company. Most if not all, of Tesla's problems
Speaker 8: are self created because of the CEO Elon Musk. It's
Speaker 8: not that Tesla's core business has some big problem. It's
Speaker 8: actually the opposite, that CEO is the problem, which is
Speaker 8: super unique. So so that's what why I'm loath to
Speaker 8: just be like completely out of Tesla. But on the
Speaker 8: other side of the coin, with the valuation where it's at,
Speaker 8: and basically we think they're not going to be profitable
Speaker 8: next year. You know, the stock needs to move meaningful
Speaker 8: the lower in my mind before I would buy it.
Speaker 4: Hello, what's meaningful?
Speaker 8: Well, you know, I don't know if any of the
Speaker 8: analyst estimates for next year are right. I think they're
Speaker 8: all vastly overstated. But even if you did three dollars
Speaker 8: of earnings next year at fifty times earnings, which is
Speaker 8: in Nvidia's multiple, you'd be at one hundred and fifty dollars.
Speaker 8: And then you put some premium on the Elon Musk
Speaker 8: robot premium, maybe you put on fifty one hundred dollars,
Speaker 8: so you're at you know, two hundred to two hundred
Speaker 8: and fifty dollars.
Speaker 9: A shares where I think Tesla should be.
Speaker 4: Hey, Ross, in the past when we've spoken to you,
Speaker 4: really critical of Tesla's board, even critical of it on
Speaker 4: social media as well. The board does include folks such
Speaker 4: as Kimball Musk, It includes James Murdoch. Most recently, it
Speaker 4: added Chipotle's Jack Hartung to the board. Are you any
Speaker 4: less critical of the board now? Do you think the
Speaker 4: board is doing its job?
Speaker 9: No? I mean I think there is no board.
Speaker 8: I think the board is Elon Musk, and so the
Speaker 8: board is just, you know, it's like a weekend at Bernie's.
Speaker 8: You know, it's like a bunch of bodies that they
Speaker 8: put at a desk and Elon tells them what to do,
Speaker 8: and they do it. This Jack guy they just put
Speaker 8: on probably had no idea what it's getting himself into.
Speaker 9: And he's in deep now, you know.
Speaker 8: So I don't actually think the board of directors cares
Speaker 8: about anybody but Elon Musk, and I think investors in
Speaker 8: Tesla know that at this point, and that's why we're
Speaker 8: ultimately sellers is nobody actually represents retail investors, which own
Speaker 8: you know, still own eighty seven percent of Tesla. So
Speaker 8: it's really a unique situation, and I expect Tesla to
Speaker 8: buy Xai at some point for probably two hundred billion
Speaker 8: dollars some outrageous price, and I think that's the next
Speaker 8: thing that will happen. So there's no question that the
Speaker 8: merging of these businesses seems to be on the horizon.
Speaker 3: Hey, before you go, definitely want you to get Have
Speaker 3: you weigh in ross on what President Trump put out
Speaker 3: on social that he denied he was seeking to ruin
Speaker 3: Elon Musk's business empire as retribution for the dispute over
Speaker 3: the President's signature tax law. What's your reading, Arnest? Might
Speaker 3: this be helpful to Elon and tell us that we
Speaker 3: just got about a minute ten?
Speaker 8: No, you know, Trump, Trump's just being the bigger man
Speaker 8: here and trying to, you know, act like he doesn't
Speaker 8: have a tiff with Elon, you know, because he's so
Speaker 8: mature or something. But the truth of the matter is
Speaker 8: he's already done what needs to be done to destroy
Speaker 8: Tesla by taking away all the subsidies and making evs
Speaker 8: much more expensive, and so you know, he doesn't have
Speaker 8: to say anything anymore. It's Elon's dug his own grave
Speaker 8: and he's going to have to figure out a way
Speaker 8: out of it.
Speaker 9: So so you know, Trump, Trump doesn't have any reason.
Speaker 8: To look bad or grind an axe, you know, and
Speaker 8: he's playing Trump's playing Elon like he has the whole time.
Speaker 3: Thirty seconds. We have talked with you about your cyber truck.
Speaker 3: We talked about others you know that you have owned.
Speaker 3: Would you buy another Tesla? Do you still like the cars?
Speaker 3: Just quickly, I do?
Speaker 8: You know, this is the whole issue, you know, I've
Speaker 8: looked at so many other cars to buy, and I
Speaker 8: want an electric car, and I want a great electric car.
Speaker 9: And I still think Tesla makes the best cars, and Rivian.
Speaker 8: I have a Rivian too, so I think they're a
Speaker 8: close second, and they make a great vehicle as well.
Speaker 8: But I just haven't been compelled by any of the
Speaker 8: other vehicles EV vehicles out there, and and so you know,
Speaker 8: I still kind of like my cyber truck, and I know.
Speaker 9: You know, I can't sell it anyways.
Speaker 8: But Tesla makes great vehicles and it's a great time
Speaker 8: to buy an EV before the discounts go away.
Speaker 3: Bus Gerbert, You're incredible of Gerbert Kawasaki. Well, we're so
Speaker 3: appreciate it.
Speaker 2: This is the Bloomberg business Week Daily Podcast. Listen live
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Speaker 2: New York station Just Say Alexa played Bloomberg eleven thirty.
Speaker 3: Safe to Say So Many called it that the romance
Speaker 3: would last between the world's richest person and the US President.
Speaker 3: The breakup happening after disruptions to the US government under
Speaker 3: what some say was the guise of efficiency and data foraging.
Speaker 4: We are talking, of course, about Elon Musk and how
Speaker 4: his companies, specifically Tesla, SpaceX, and Xai, are struggling in
Speaker 4: the wake of his feud with President Trump. This past week,
Speaker 4: Bloomberg reported that a risk factor statement was sent to
Speaker 4: SpaceX investors, including Elon's desire to get back into politics.
Speaker 3: Certainly a whirlwin for those invested in Elon's empire. Writing
Speaker 3: all about it as the cover story for the upcoming
Speaker 3: issue of Bloomberg Business Week is Bloomberg's Max Chafkin and
Speaker 3: Ed Ludlow.
Speaker 4: Max is Bloomberg BusinessWeek Senior reporter, also the co host
Speaker 4: of The Everybody's business and Elon Inc. Podcasts. He joined
Speaker 4: us to break down how Elon's empire may be creaking
Speaker 4: under the strain of his antics.
Speaker 7: He's the wealthiest guy in the world, and investors to
Speaker 7: date have essentially allowed him to do whatever he wants
Speaker 7: and to do things that most CEOs, most entrepreneurs would
Speaker 7: would never be able to essentially get away.
Speaker 9: With that said, there are i'd.
Speaker 7: Say bigger challenges facing these companies today than he's experienced
Speaker 7: in a very long time. You know, of course, Elon
Speaker 7: Musk has a history of sort of flirting with disaster,
Speaker 7: and you look at the history of Tesla. There were
Speaker 7: some very dicey moments in the two thousand, same thing
Speaker 7: with SpaceX, but you haven't had this situation that we
Speaker 7: have today where you have essentially three companies SpaceX, Tesla,
Speaker 7: and Xai. I'm going to leave off this sort of
Speaker 7: small smaller ones, but those are there too. And then
Speaker 7: in the foreground you have this potential fight with Donald Trump,
Speaker 7: and so you know, everyone's focused on the fight. But
Speaker 7: those three companies, each in their own way, have very
Speaker 7: significant challenges.
Speaker 6: So let's get to it.
Speaker 3: Because you do, right, there are many more weapons President
Speaker 3: Trump could deploy against Elon Musk's business interests where he's
Speaker 3: so motivated so so much as like does he or
Speaker 3: doesn't ty, let's start. I love the way you guys
Speaker 3: do this. You do basically like these case studies of
Speaker 3: each of these three businesses. So let's talk about Tesla.
Speaker 3: He makes promises sometimes it takes longer we have all
Speaker 3: gone along from the ride that we eventually get this stuff.
Speaker 3: And to be fair, when it comes to EV, certainly
Speaker 3: in the United States, he moved the needle.
Speaker 7: Yeah, absolutely, And that's what's made I'd say the events
Speaker 7: of the last couple of years so surprising because Elon
Speaker 7: Musk is attempting this very dramatic pivot away from it
Speaker 7: and towards robotaxis, which kind of strange because the EV
Speaker 7: market is still growing very quickly. Tesla, on the other hand,
Speaker 7: is not growing. I mean, their deliveries have been falling
Speaker 7: for the last two quarters, had a down year in
Speaker 7: twenty twenty four.
Speaker 4: We'll see what this latest quarter looks like.
Speaker 7: When they report earnings. But they are selling fewer cars
Speaker 7: each quarter than they than they did a year ago,
Speaker 7: and that is kind of surprising for a company that
Speaker 7: is trading at just this insane multiple, trading at a
Speaker 7: value that is way, way, way richer than you know,
Speaker 7: a normal car company. Now, of course, the reason investors
Speaker 7: are going for this, the reason they're you know, continuing
Speaker 7: to buy the stock at a relatively high price, is
Speaker 7: because of robotaxis, this belief that Elon Musk is gonna
Speaker 7: revolutionize transportation. The issue is that's been this kind of
Speaker 7: thing that Musk was able to point ahead in the
Speaker 7: future and say, look, this is going to be great.
Speaker 7: Don't focus on the now, focus on the future. And
Speaker 7: we're now we have the now. Now, now we have
Speaker 7: some robotaxis on roads, and it's really a very small number.
Speaker 7: It's something like ten to twenty robotaxis in a very
Speaker 7: small part of Austin. Meanwhile, you got Weimo, and we've
Speaker 7: talked about this before, but there is this obvious competitor, Weimo,
Speaker 7: which has way way more robotaxis and more markets and
Speaker 7: is not getting valued the way that Elon Musk, the
Speaker 7: way that Tesla is getting valued. So you do wonder,
Speaker 7: you know, how long is it before investors start to
Speaker 7: look at that, and you know, how many quarters of
Speaker 7: sort of declining deliveries, declining car sales are they really
Speaker 7: going to tolerate.
Speaker 4: These companies have sort of always Elon Musk's companies have
Speaker 4: always kind of used one another and shared engineers at
Speaker 4: certain points. Now we're getting to appoint max where Elon
Speaker 4: wants more investment from one company to another company, specifically Tesla,
Speaker 4: to invest in Xai, which is a challenging thing to
Speaker 4: do because Tesla's a public company, Xai is not. Shareholders
Speaker 4: might not love this idea. Explain the sort of borders
Speaker 4: or lack thereof when it comes to this counting.
Speaker 7: I mean, the thing is from the point of view
Speaker 7: of Tesla investors, and I think this is true of
Speaker 7: most of the investors in most of Elon musk companies,
Speaker 7: They're not investing in a particular product. They're just investing
Speaker 7: in Elon Musk. And that's one of the reasons why,
Speaker 7: you know, even when Musk does something that seems on
Speaker 7: its face a little bit foolish or crazy, for instance,
Speaker 7: the the on again, off again purchase of x at
Speaker 7: a ridiculous you know, overvalued at the time, investors go
Speaker 7: along with because they just think, Okay, Elon Musk wants this,
Speaker 7: he's a he's a brilliant guy, and so you have
Speaker 7: this thing where the companies, although they are nominally independent,
Speaker 7: are sharing resources, sharing management of course, not just Elon Musk,
Speaker 7: but other folks, you know, sort of bouncing between them
Speaker 7: or doing work on the side. And now even you
Speaker 7: have Xai, which is desperately trying to raise money, raising
Speaker 7: money from Elon Musk's other companies, SpaceX, according to Elon Musk,
Speaker 7: putting two billion dollars into Xai. And then Musk has
Speaker 7: said he's going to ask Tesla for money for a
Speaker 7: year ago he suggests the number will be five billion,
Speaker 7: So you're talking about significant amount of money. Tesla of
Speaker 7: course has a lot of cash at the moment, so
Speaker 7: it's not like it can't afford it. But you got
Speaker 7: to ask yourself what is the rationale, Like, what's the
Speaker 7: business rationale if you're a Tesla investor to you know,
Speaker 7: move money from from Tesla to x especially when X
Speaker 7: and Tesla are sort of in competition, you know, they're
Speaker 7: both AI companies, and so so that's an issue. I mean,
Speaker 7: what I think it shows is that as much as
Speaker 7: these companies you know, add up to this big empire,
Speaker 7: they're interlocking and if one struggles, the others are going
Speaker 7: to struggle. If Tesla's value were to decline dramatically, that
Speaker 7: would hurt Elon Musk's empire in a big way because
Speaker 7: Tesla shares are a big source of his wealth, the
Speaker 7: way he finances things, and beyond that, there's this aura
Speaker 7: of success that he has used to sort of promote
Speaker 7: himself and promote these companies, and as that has i'd say,
Speaker 7: come into some question, you know, I think that hurts
Speaker 7: some of these other companies.
Speaker 3: So he did post on x that he's back to
Speaker 3: working seven days a week and sleeping in his office
Speaker 3: if my little kids are away.
Speaker 9: Yay. But I'm just.
Speaker 3: Wondering which part of his empire is the most interested.
Speaker 3: You guys talk about Xai that that's what he seems
Speaker 3: to be super interested.
Speaker 7: In, right, Yeah, And you get different answers depending on
Speaker 7: who you talk to within the empire, because, of course
Speaker 7: Tesla also feels like Tesla h employees board members also
Speaker 7: feel like they are in the middle of this really
Speaker 7: unique opportunity with Robotaxis. But yeah, I mean, Musk has
Speaker 7: spent it seems, at least over the last couple of weeks,
Speaker 7: a lot of time on with Xai and Grock. Now,
Speaker 7: of course AI chatbots, that's that's an area that a
Speaker 7: lot of investors are excited about. On the other hand,
Speaker 7: this is a very expensive company to finance. We've Bloomberg
Speaker 7: has reported that they're losing a billion dollars a month.
Speaker 7: So like that, you know, five billion dollars from Tesla,
Speaker 7: that's gonna they're gonna burn through that, you know, pretty quickly.
Speaker 7: And and you know, I think I think from the
Speaker 7: sort of bull cases, Hey, these large language models are
Speaker 7: really expensive to finance, so we need to you know,
Speaker 7: put as much into them now catch up to open AI.
Speaker 7: But of course the other side of the coin is
Speaker 7: like why, you know, why does this very successful car
Speaker 7: company that's worth a trillion dollars by market cap, you know,
Speaker 7: what does it have to do with AI chatbots? I
Speaker 7: don't think that the answer is a whole lot.
Speaker 3: Yeah.
Speaker 4: Elon Musk claimed without evidence that President Trump wasn't accomplice
Speaker 4: in the crimes of Jeffrey Epstein and alleged that the
Speaker 4: president had covered them up. This was sort of the
Speaker 4: nadir in their relationship. I think if we look back
Speaker 4: over the last six weeks, is there any recovering from that? Like,
Speaker 4: do they get back together, do they become allies again?
Speaker 9: I think it is very hard to see.
Speaker 7: I mean, obviously those are very serious charges, I mean
Speaker 7: sort of like the most serious charges in Republican politics.
Speaker 7: And it's led to a news cycle right that that
Speaker 7: happened at you know, as their feud was kicking off
Speaker 7: at the beginning of June. Now we're in you know,
Speaker 7: mid late July, and Republicans are still talking about Epstein
Speaker 7: quite a lot. So so yeah, I mean it's it's
Speaker 7: been a bad that's a thing that's going to really
Speaker 7: throw a wrench in any kind of you know, potential makeup. Now,
Speaker 7: I will say Trump and Musk are both this is
Speaker 7: going to sound weird, but they're both kind of forgiving.
Speaker 7: They both although they like to cultivate this, both of them,
Speaker 7: you know, Alpha image or whatever they have. You know,
Speaker 7: Trump has done this where people have been on the
Speaker 7: outside and then they find their way in. Steve Bannon,
Speaker 7: of course, famously was very much on the outs. Now
Speaker 7: he's no longer on the outs.
Speaker 9: Musk is the same. Musk.
Speaker 7: You know, we we'll get very mad at people and
Speaker 7: and you know, find a way to get them back in.
Speaker 9: So I wouldn't.
Speaker 7: Discount it entirely just because, and I've said this on
Speaker 7: your show before, there are reasons each of them has
Speaker 7: an interest in being on good terms with the other.
Speaker 7: That said, I mean it is it has seemed very difficult.
Speaker 7: And you're seeing now, and we get into this in
Speaker 7: the story, there are lots of sign if you're looking
Speaker 7: closely for ways in which this relationship is hurting Elon
Speaker 7: Musk today. Now I'm not just talking about Jared Isaacman,
Speaker 7: the you know, the person that Trump originally nominated to
Speaker 7: head NASA, the Space Agency, who is close to Elon Musk,
Speaker 7: who's out now. But there are lots of little regulatory moves,
Speaker 7: policy moves, and just to give you one example, the
Speaker 7: guy who's going to run NITSA, you know, at his
Speaker 7: confirmation hearing suggested that we need to have more oversight
Speaker 7: of autonomous vehicles.
Speaker 4: So if you're Elon Musk, you don't want to hear
Speaker 4: that when robotax trying to get on the roads.
Speaker 7: Yeah, you absolutely don't. And and so or you know
Speaker 7: Sean Duffy running NASA now, who's he.
Speaker 6: Was, according at least some reporting from inside the.
Speaker 7: White House, was one of the people who was really
Speaker 7: upset about Doge. So you're seeing these little things that
Speaker 7: are potentially troubling if you're Elon Musk and certainly cut
Speaker 7: against the sort of bull thesis around the time of
Speaker 7: the election, which was like, these guys are perfectly aligned.
Speaker 7: This is going to be amazing. I mean, that's what
Speaker 7: sent stock up to its you know, crazy heights in
Speaker 7: mid December, and it's fallen. I think last I looked
Speaker 7: around thirty three percent since then, as that that argument
Speaker 7: has sort of fallen apart.
Speaker 3: It's, you know, as you guys say, you know, you
Speaker 3: can't count out Elon ever, but it is curious to
Speaker 3: see how this ultimately plays out and whether or not
Speaker 3: he becomes a target of the administration potentially. Hey Max,
Speaker 3: thank you so much, really appreciate it. Bloomberg Business Week
Speaker 3: Senior reporter Max Chafkin, Max and Ed Ludlow writing this story.
Speaker 3: It's an upcoming issue of Bloomberg Business weeket is the
Speaker 3: cover story already on the Bloomberg and at Bloomberg dot com.
Speaker 2: You're listening to the Bloomberg Business Weekdaily podcast. Catch us
Speaker 2: live weekday afternoons from two to five pm Eastern Listen
Speaker 2: on Applecarplay and the Android Auto with the Bloomberg Business app,
Speaker 2: or watch us live on YouTube.
Speaker 10: Who would also unleash you just by lowering the interest rates.
Speaker 9: If the Fed would lower the rates, we wouldn't even
Speaker 9: have to do that. But we are thinking about no
Speaker 9: tax on capital games on.
Speaker 3: That was President Trump this past week with a statement
Speaker 3: that caught our attention. The President taking questions in the
Speaker 3: Oval Office during a prece event that he is considering
Speaker 3: a proposal to end capital gains taxes on home sales,
Speaker 3: and I got to say, caught my attention and sign
Speaker 3: me up.
Speaker 4: Are you planning to sell your home anytime soon?
Speaker 3: Not anytime soon, but you know, when you've been in
Speaker 3: a home for a long time and it was a
Speaker 3: market that was pretty dead, there's been a fair amount of appreciation.
Speaker 4: So yeah, but then, but can't you also have you
Speaker 4: been keeping track of all the improvements that you've made
Speaker 4: over the years.
Speaker 3: Yeah, I don't know how good the files are, but yes.
Speaker 4: I'm sure they're on your desk somewhere.
Speaker 9: Carrol I.
Speaker 3: Actually, you know it's so funny that you say, because
Speaker 3: I'm always liketed my husband or give me like the receipt,
Speaker 3: give me the like. So yeah, yeah, just some bank statements.
Speaker 4: Just keep track of that and then it becomes your
Speaker 4: accountants problem.
Speaker 2: Yeah, exactly.
Speaker 4: Hey, it's still a developing story, so nothing official yet.
Speaker 4: But under current laws, single filers are exempt from paying
Speaker 4: taxes on capital gains of two hundred and fifty thousand
Speaker 4: dollars or less for the sale of their primary residence.
Speaker 4: Well married couples filing jointly are exempt on up to
Speaker 4: five hundred thousand dollars. This new proposal would eliminate that cap.
Speaker 3: To white cut our attention, legislation that, if passed, could
Speaker 3: impact millions of homeowners. For the latest on this and
Speaker 3: the latest on housing, head to Bloomberg dot com or
Speaker 3: check out the Bloomberg terminal.
Speaker 4: You know, I've been thinking about this, and it's one
Speaker 4: of those things first you'd have to find where you'd
Speaker 4: offset that revenue loss when it comes to capital gains.
Speaker 4: But it's also one of those things, Carol, that I
Speaker 4: think would again disproportionately affect the wealthier people in this
Speaker 4: country because it's homeowners who own their homes for a
Speaker 4: very long time, so they would see the benefit, not
Speaker 4: necessarily the folks who the President has talked about wanting
Speaker 4: to be able to afford homes. Those first time home
Speaker 4: buyers that he's talked about not being able to get
Speaker 4: into those homes the way they were like their parents
Speaker 4: were able to. I mean, we even talked to a
Speaker 4: real estate agent this week who talked about first time
Speaker 4: home buyers being in their forties now as a result
Speaker 4: of high prices and high rates.
Speaker 3: Also, she talked about multi generational home buying, so older folks,
Speaker 3: you know, either passing on their homes or helping out
Speaker 3: their kids and then living with them. With the understanding,
Speaker 3: I agree, it doesn't necessarily get to the housing affordability
Speaker 3: problem that has persisted, to be fair, not just this year,
Speaker 3: not just last year, but has been around for many,
Speaker 3: many years. We have a great voice though on housing
Speaker 3: that we like to talk to plays into the multi
Speaker 3: family very much in the South of the United States.
Speaker 3: We're talking about Thomas Carroll. He's founder and chief executive
Speaker 3: officer ballast Rock Asset Management. The firm has about six
Speaker 3: hundred million dollars in assets under management, and as we said,
Speaker 3: focuses on multi family real estate and private equity.
Speaker 10: The industry as a whole has been white knuckling. I
Speaker 10: would say with an expectation of rates coming down, they've
Speaker 10: been white knuckling the sale of assets. We're primarily in
Speaker 10: the secondary market rather than developing specifically in multi family.
Speaker 4: But you still have to do a lot of work
Speaker 4: to those multi family.
Speaker 10: Absolutely, we're doing massive renovations and so inflationary costs around
Speaker 10: that material, et cetera. But yes, the rates environment has
Speaker 10: had a tremendous effect on the multifamily market, and until
Speaker 10: rates come significantly lower or sellers reprice in a material way,
Speaker 10: then it's tough for the market to get started again.
Speaker 3: That's what I want to ask you. If we just know,
Speaker 3: all right, the Fed's on hold because this is what's
Speaker 3: the policy that makes sense for the next six to
Speaker 3: twelve months, then folks are going to do deals.
Speaker 6: Right.
Speaker 3: It's like having some clarity because historically we're still at
Speaker 3: a lower rate environment. We've had much higher rates. And
Speaker 3: I guess my point is, are people just looking for
Speaker 3: clarity on what the policy is and there's just between
Speaker 3: the back and forth between the White House and pressure
Speaker 3: on Fetcher J. Powell and maybe folks thinking that that
Speaker 3: could ultimately lead to high lower rates. I mean that
Speaker 3: uncertainty essentially, and at the same time tariffs, which are
Speaker 3: putting another layer of uncertainty. So we just the FED
Speaker 3: doesn't know exactly what the environment's going to be, so
Speaker 3: they're on hold. So if at some point we have
Speaker 3: more clarity in the FED says nope, economy growing, we're
Speaker 3: doing good, Thomas that, then people say, well, this is
Speaker 3: the environment, so we'll reprice and we can do stuff
Speaker 3: one move ahead. I sorry, there's a long way of
Speaker 3: saying clarity.
Speaker 10: Yes, indeed, clarity would be extremely helpful, and perhaps you
Speaker 10: would have some owners be willing to transact again. However,
Speaker 10: a lot of owners still you know, asset holders still
Speaker 10: have twenty twenty one and peak pricing in mind, and
Speaker 10: so it's hard to let go. It's hard to reprice
Speaker 10: an asset lower, especially an income generating asset. So because
Speaker 10: they're income generating, you can hold on to them far, far,
Speaker 10: far longer than you would be able to otherwise, even
Speaker 10: if pricing theoretically should be lower if you were to sell,
Speaker 10: but you don't sell, you just hold onto it for
Speaker 10: years longer. But yes, hopefully greater clarity would be useful,
Speaker 10: But I would not say we're in a particularly clear environment.
Speaker 4: Right now.
Speaker 10: Is not there, and so volumes in terms of secondary
Speaker 10: market volume four commercial real estate in general is substantially
Speaker 10: lower than it was at the peak.
Speaker 4: So what are you doing? Are you not buying anything
Speaker 4: right now?
Speaker 10: So we are not buying a lot right now. No,
Speaker 10: the only deals that we're doing are situations where the
Speaker 10: seller is genuinely in distress. So if there's not outright distress,
Speaker 10: it's very very hard to make the numbers pencil. And
Speaker 10: what we're focusing on instead is actually where the big
Speaker 10: beautiful bill has created a short term window of opportunity,
Speaker 10: which is solar development.
Speaker 4: Interestingly enough, this is what I'm glad we were talking
Speaker 4: about this. It was in the notes and our producer
Speaker 4: already said this on the phone, and I was thinking
Speaker 4: ABOUTLF solar because the concern, and we saw this play
Speaker 4: out in the public markets, was that solar companies would
Speaker 4: get hit hard as a result of this bill, and
Speaker 4: they've been under a lot of pressure. Where are you
Speaker 4: seeing opportunity?
Speaker 10: They have been hit hard, and there is really very
Speaker 10: limited window for opportunity. So it's not great if you're
Speaker 10: full time in that business. But for us, we're a
Speaker 10: private credit lender to solar developers that might have a
Speaker 10: twenty or thirty development pipeline of projects, and it enables
Speaker 10: us as a lender to step in on a senior
Speaker 10: secured basis and identify and cherry pick really the best,
Speaker 10: most actionable, immediately actionable projects where we can get shovel
Speaker 10: in the ground right now and and bring these projects
Speaker 10: to fruition because very shortly any investment tax credits are
Speaker 10: going to disappear. So it is about a short term
Speaker 10: window and for us the opportunity is as a lender.
Speaker 10: Absolutely this bill has been extremely problematic for the development
Speaker 10: industry and for generation of solar power in the United States.
Speaker 3: How short term and what are the terms looking like?
Speaker 10: So we need shovels in the ground this year or
Speaker 10: by the middle of next year if there is no
Speaker 10: foreign content, and we need completion of the project by
Speaker 10: the end of twenty twenty seven. Some of the rules
Speaker 10: are still to be finalized. Actually, the Big Beautiful Bill
Speaker 10: obviously passed on the fourth of July, but a week later,
Speaker 10: the Trump administration issued in executive order that the IRS
Speaker 10: has forty five days to clarify the rules. So, interestingly enough,
Speaker 10: we're playing by a rule book that we don't fully
Speaker 10: have the details for.
Speaker 3: You talked about lack of clarity, correctly, it hits a
Speaker 3: lot of different areas, that's right.
Speaker 10: But there is opportunity there in the short to medium
Speaker 10: term for us to help those small to medium size
Speaker 10: developers bring those rapidly deployable projects where we can get
Speaker 10: energy to the grid before the end of twenty twenty
Speaker 10: seven online immediately. But they need capital and they're very
Speaker 10: profitable when you do it, and that's where we see
Speaker 10: the short term opportunity in development.
Speaker 4: Then do these product projects go poof?
Speaker 10: Well, no, the project will last for twenty that's it.
Speaker 10: If you have a thirty project pipeline, you might have
Speaker 10: five that you can bring to fruition. You might have
Speaker 10: twenty five go.
Speaker 4: Poof all because of tax credits.
Speaker 10: Correct Now, there will be major changes that are going
Speaker 10: to occur. The cost of construction for solar projects. The
Speaker 10: EPC construction costs are highly likely over time to come
Speaker 10: down because if there's less development going on, those construction
Speaker 10: companies will reduce their costs. So there'll be opportunities there.
Speaker 10: There will also be opportunities for states that want to
Speaker 10: continue to incentivize solar to step in and provide credits
Speaker 10: where the federal government steps out. And then finally the
Speaker 10: utilities themselves, which at the moment use the interconnection fee
Speaker 10: and other aspects of solar development to make money, they
Speaker 10: will probably compress their margins as well. So there are
Speaker 10: a number of different moving levers, and then ultimately the
Speaker 10: cost of electricity is going to go up. Well that's
Speaker 10: and that's going to be a huge driver of value.
Speaker 3: This is what I wanted to ask you. What are
Speaker 3: the projects that you are investigat.
Speaker 10: So the projects that we're lending money to are lending
Speaker 10: to forgive me exactly for clarity, we're a private credit
Speaker 10: and the lens money rather than investing equity. But those
Speaker 10: projects are below utility grade. They're what are called community solar,
Speaker 10: so they're usually in the five to fifty megawatt project size,
Speaker 10: whereas community solar really kicks excuse me, utility grade kicks
Speaker 10: in above about one hundred megawatts. Those projects, because they
Speaker 10: are much more challenging and time consuming to execute. A
Speaker 10: lot of those who have gone to use your words,
Speaker 10: who because they can't be delivered in that timeframe. So
Speaker 10: there is a massive change in the demand. As we
Speaker 10: know for solar as a result of AI for electricity
Speaker 10: in general, but now there's a material change in supply
Speaker 10: for the negative.
Speaker 4: Before we let you go back to your focus on
Speaker 4: multifamily in the past, you've been on with us and
Speaker 4: you've spoken excitedly about the Sun Belt. Where geographically are
Speaker 4: you thinking for opportunity now?
Speaker 10: We continue to see a lot of opportunity in small
Speaker 10: to medium sized cities across the southeast, the Carolinas, Georgia,
Speaker 10: where these right to work states where we're seeing a
Speaker 10: lot of new battery factories and and other new factories
Speaker 10: being built. It's those small to medium sized markets where
Speaker 10: we continue to see a growth in demand, an increase
Speaker 10: in wages, an increase in job opportunities, and we're there
Speaker 10: to do our best to support that with housing.
Speaker 3: How would you describe the economy just real quickly, kind.
Speaker 10: Of strong jobs market, but a lot of lack of
Speaker 10: clarity around issues such as tariffs and rates that have
Speaker 10: that make it challenging for long term deployment of capital.
Speaker 3: All right, interesting, So it sounds like potentially a lot
Speaker 3: of stuff sitting on the sidelines just waiting we see clarity. Certainly,
Speaker 3: all right, good to check in with you. Thank you
Speaker 3: for coming in. Thank you, Yeah, appreciate it. Thomas Carrol,
Speaker 3: He's founder and chief executive officer of ballast Rock Asset Management,
Speaker 3: joining us right here in our Bloomberg Interactive Broke Studio.
Speaker 2: This is the Bloomberg Business Week Daily Podcast. Listen live
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Speaker 2: York station, Just Say Alexa. Played Bloomberg eleven.
Speaker 3: Thirty plenty ahead in our second hour of the weekend
Speaker 3: edition at Bloomberg Business Week, including the luxury brand facing
Speaker 3: questions about how far is too far when it comes
Speaker 3: to exclusivity.
Speaker 4: Plus really excited for this one because we get to
Speaker 4: speak to our Bloomberg Food editor, Kate Crator. She's stopping by.
Speaker 4: She's talking about the boom in YouTube chefs. New York
Speaker 4: influence also pervades the food and drink scene in London.
Speaker 4: Apparently you can get a pretty good burger there these
Speaker 4: days if you want it. Pizza too, pizza yeah. Kate's
Speaker 4: also going to share how CEOs optimize their sleep routine.
Speaker 4: I was surprised to see some of these CEOs are
Speaker 4: not doing a very good job. And I was too.
Speaker 3: I was amazed how many I expected, like all these
Speaker 3: great like lie about it.
Speaker 4: If you're not doing a good job, CEOs, come on
Speaker 4: you a good example.
Speaker 3: This part of your brand, all right. And while on
Speaker 3: the subject of food in chefs in nineteen sixties, diner
Speaker 3: is one of the scenes in a new high tech
Speaker 3: immersive show on Elvis Presley that unfortunately failed to impress.
Speaker 3: Elvis has left the building, and it sounds like maybe
Speaker 3: our reviewer wanted to do so as well. We'll explain
Speaker 3: it's all in Bloomberg Pursuits.
Speaker 4: First up this hour, the Starbucks Pumpkins spice latte is
Speaker 4: set to return to stores in just about a month. Nuts,
Speaker 4: that's nuts. Come on, Togs twenty.
Speaker 3: Six, get over.
Speaker 4: I think it's a little cheating to think about you.
Speaker 3: I'll have listen a pumpkin spice latte.
Speaker 4: I stay away from it. Okay, I do too, no
Speaker 4: matter what time of year it is. Speaking of the
Speaker 4: Pumpkins spice lattes, one of the most read stories over
Speaker 4: the last week is about the CEO who turned around
Speaker 4: Taco Bell and then turned around Chipotle, can he now
Speaker 4: do the same for Starbucks? For Bloomberg Business Week, Danielle
Speaker 4: Story interviewed investors, baristas, and Brian Nicol Well, the Newish
Speaker 4: CEO who has lured to Starbucks with the pay package
Speaker 4: valued at about one hundred million dollars. He's been on
Speaker 4: the job for a few months since September, so it's
Speaker 4: almost been a year. Actually. The ceramic cups, a handful
Speaker 4: of madeover stores, and condiment bars are some of the
Speaker 4: changes he's betting on. Oh, and protein too. Doniella sr.
Speaker 4: Torri is Bloomberg News restaurant reporter. She joins us from
Speaker 4: our Chicago bureau. She spent a lot of time with
Speaker 4: Brian Nichol. She did a lot of traveling for this story.
Speaker 4: Doniella tell us a little bit about how Brian Nichol
Speaker 4: is doing and turning this company around.
Speaker 11: So there's definitely been some progress, you know. The Starbucks
Speaker 11: has already made some changes, like bringing back the Continent
Speaker 11: bar so people don't have to, you know, complain to
Speaker 11: baristas about their drink being.
Speaker 12: Too sweet or too dark or too light.
Speaker 11: They've also started renovating some stores, you know, they started
Speaker 11: redesigning the menu, So definitely things that are going to
Speaker 11: make a difference. And you know, they do say that
Speaker 11: people are hanging out in stores more because they want
Speaker 11: to bring back that feeling of you know, it being
Speaker 11: like a coffee house and that they're ording a more
Speaker 11: coffee centric drain. But some of the big things, you know,
Speaker 11: in terms of operations, which is such a boring word
Speaker 11: but it matters so much when it comes to getting
Speaker 11: your drink quickly, are still being developed. Like, for example,
Speaker 11: the company is in the process of putting more workers
Speaker 11: in stores, which they are hoping will you know, speed
Speaker 11: up service. And then also you know, give Braces a
Speaker 11: little time to you know, have a chat with you.
Speaker 11: But some of these big changes are still are still
Speaker 11: in the works and so you know, it's definitely working progress.
Speaker 12: And Brian himself has said.
Speaker 4: That, well, let's we'll get to Brian. More on Brian
Speaker 4: in a second. But one thing that I really liked
Speaker 4: about your piece was it did a good job of
Speaker 4: laying out the challenges that Starbucks has faced in recent years.
Speaker 4: Can you talk a little bit about how it lost
Speaker 4: its way?
Speaker 11: Absolutely, so you know, we can look back at a
Speaker 11: sort of the pandemic, one of the things that happened
Speaker 11: was the company moved a lot to sort of that convenienced,
Speaker 11: convenience focused model, right, a lot of us wearing go
Speaker 11: into the store stores weren't even open, and so Starbucks
Speaker 11: actually started removing seats from stores. At the same time,
Speaker 11: you know, there was this unionization movement ignited by several things,
Speaker 11: you know, like very says, feeling that there was understaffing.
Speaker 11: All of that led to slower service at the company.
Speaker 11: Lines just have gone very long. At the same time,
Speaker 11: people are like, well, this doesn't feel like a cafe anymore.
Speaker 11: And then you know, we also have some issues outside
Speaker 11: of the US, right, So, for example, China has been
Speaker 11: very slow to recover because of the companies sorry, because
Speaker 11: of the country's economic situation, and also just competitors that
Speaker 11: have undercut Starbucks. And so there are challenges on multiple
Speaker 11: fronts that the company has to confront right now.
Speaker 3: You know, it's interesting I try to think about what
Speaker 3: it is that Starbucks has to deal with. They really
Speaker 3: kicked off, right kind of the coffee craze, right, and
Speaker 3: you know, not just getting a cup of coffee from
Speaker 3: a deli, but made it so much more. But the
Speaker 3: market that they really created is now a really crowded market,
Speaker 3: So is it just that? But it can't be just
Speaker 3: about coffee anymore, and that Starbucks has to mean something
Speaker 3: beyond that, like food, a cafe you hang around and
Speaker 3: you bring the family, Like what is it that it
Speaker 3: may be? What do industry folks say it needs to be?
Speaker 3: Is it or is it just painting the cafes and
Speaker 3: making them cozier?
Speaker 7: What is it?
Speaker 11: No, that's absolutely right. I mean in Starbucks created this
Speaker 11: idea of sort of the third place right beyond you know,
Speaker 11: your work and your home, where you could hang out,
Speaker 11: and also making coffee a little bit premium here in
Speaker 11: the US, but there's been a lot of competition that
Speaker 11: has undercut the company in terms of price, in terms
Speaker 11: of speed, and also in terms of new products. You know,
Speaker 11: if you look at places like Dutch Bros.
Speaker 12: They just have these.
Speaker 11: Drinks like protein coffee, drinks that really appeal to demographics
Speaker 11: like gen Z and at the same time, you know,
Speaker 11: they've kind of pioneered a model of convenience. So it
Speaker 11: is almost like all of the above, right, Like one
Speaker 11: of the things that when you talk to Brian Nicol,
Speaker 11: he wants to make sure Starbucks stands out is by
Speaker 11: having the space, you know, having the coffee shop where
Speaker 11: you can hang out. That is something that you know,
Speaker 11: those drive through concepts like Dutch Bros. Don't really have
Speaker 11: because by definition they are drive through. But at the
Speaker 11: same time, they also need to make sure that they
Speaker 11: have stuff that actually gets people in the door. And
Speaker 11: so that's why they've been also redesigning the menu. They
Speaker 11: are trying to focus on coffee because that's their heritage,
Speaker 11: and so they think that they can sort of distinguish
Speaker 11: themselves that way. But at the same time they are
Speaker 11: adding those twists like that vanilla latte with the protein
Speaker 11: cult foam.
Speaker 12: I actually got to try it in Vegas. It's quite
Speaker 12: it's quite interesting.
Speaker 11: But you know, it's like they can't they can't go
Speaker 11: super focused on like purest coffee. They also recognize they
Speaker 11: need to have stuff that actually like catches people's eye,
Speaker 11: if that makes.
Speaker 3: Sense, Daniella. I'm curious too about Brian Nicol. He has
Speaker 3: been so quiet. I mean, Tim and I have talked
Speaker 3: to him a lot. When he was at Chipotle, he
Speaker 3: was very accessible. I've done some deep dives too with
Speaker 3: him for BusinessWeek magazine and for Bloomberg. I'm just curious,
Speaker 3: why is he kind of laying low.
Speaker 11: It's interesting the perception that he's laying low. I mean,
Speaker 11: I guess from my perspective. You know, since Brian joined,
Speaker 11: he's been pretty clear about his vision and his plan.
Speaker 11: So I remember he joined September nine, September ten, he
Speaker 11: actually came out with like the broad outlines of his plan,
Speaker 11: and by October, you know, they were putting him on
Speaker 11: the phone, you know, to talk to reporters about what
Speaker 11: was happening at the company. I do think that part
Speaker 11: of what's happening is that while his vision is clear
Speaker 11: in terms of what he wants to accomplish, I mean,
Speaker 11: he knows he wants to bring back the coffee house,
Speaker 11: he wants to focus on coffee, he wants to speed
Speaker 11: up service, sometimes the underlying tactics are changing a little bit,
Speaker 11: and so you know, the.
Speaker 12: Sort of direction of travel is clear.
Speaker 11: But just to give you an example, earlier this year,
Speaker 11: Starbucks said that they were going to bring more staffing
Speaker 11: to about a third of US company operated stores. So
Speaker 11: that excludes stuff like airports, it excludes targets. Then later
Speaker 11: they were like, no, actually it's coming to all stores.
Speaker 11: Probably part of it was a little bit of pressure from
Speaker 11: investors being like, all right, man, when are we going
Speaker 11: to start seeing your results? But the tactics and sort
Speaker 11: of like the speed are changing a little bit, even
Speaker 11: though everyone knows like the direction of travel.
Speaker 4: If that makes sense, yeah, it does. You mentioned the
Speaker 4: changing menu and to get people into the door. What
Speaker 4: I learned from your story is that's a big part
Speaker 4: of Tressie Lieberman's job. Tell us about her.
Speaker 11: So Tresie worked with Brian at Chipotle and a Tacko Bill. Actually,
Speaker 11: she told us that she's been working with Brianston. She
Speaker 11: was in like her twenties, so she knows Brian quite
Speaker 11: a bit, and so she came over right before Starbucks.
Speaker 11: She was actually a chief marketing officer at Yahoo, so
Speaker 11: she has brought experience and so her rema is marketing.
Speaker 11: So how the company presents itself to customers, including the
Speaker 11: sort of rebranding as Starbucks Coffee Company, but also the
Speaker 11: menu because I think they recognize that. Yes, the company
Speaker 11: has had some hits like for example, cold foam, things
Speaker 11: like shake and espresso. One of the thing ways to
Speaker 11: know if something's been ahead is if competitors have copied
Speaker 11: it and if you go to any coffee shop, any
Speaker 11: coffee shop has those things. But at the same time,
Speaker 11: there were things they launched, like for example, energy drinks
Speaker 11: last year that they've discontinued because they just didn't think
Speaker 11: we're apt to par and so that's kind of what
Speaker 11: Tressie's doing, and she's described wanting to make the menus
Speaker 11: sort of modern and premium, and so one of some
Speaker 11: of the things they're looking at is like the protein
Speaker 11: latte and also bringing fresh baking to Starbucks because I
Speaker 11: don't know if this is common knowledge, but pastries of
Speaker 11: Starbucks coming up plastic bag that then gets reheated in
Speaker 11: an oven. So that doesn't really fit a definition of premium,
Speaker 11: which is, you know, they're trying to justify the prices
Speaker 11: that they are that they are charging, and they're trying
Speaker 11: to justify the experience.
Speaker 12: So that's sort of the direction that they're moving.
Speaker 3: We'll say, their littlegg bites I think are something my
Speaker 3: daughter really like.
Speaker 4: People love these popular I know, right, yeah, they're kind
Speaker 4: of nice.
Speaker 11: And if you see that, it's another example of Starbucks
Speaker 11: setting a trends that has caught on, like even Costco
Speaker 11: seales X bite egg bites.
Speaker 1: So can I ask you something?
Speaker 3: Wait, because I would say that we're a couple of different,
Speaker 3: three different generations. Do you go to Starbucks?
Speaker 11: I do, but I also cover it, so sometimes I
Speaker 11: just go to see how things are okay?
Speaker 3: So okay, Tim, Tim doesn't go.
Speaker 4: I will not go unless I don't falling asleep at
Speaker 4: the wheel. And it's the only place, right.
Speaker 12: So I think, why you do go?
Speaker 4: You do?
Speaker 3: No, I don't go.
Speaker 4: I don't like the coffee.
Speaker 3: And would you go if you didn't? I mean, this
Speaker 3: might be uncomfortable, but would you go just between the
Speaker 3: three of us if you didn't cover it?
Speaker 11: Just between the three of us in front of everyone.
Speaker 11: I think I'm gonna refrain from answering that question.
Speaker 4: You're the smartest one getting yourself in trouble.
Speaker 3: There's lots of choices.
Speaker 4: But I will say I I it's why I only
Speaker 4: have one cup of coffee a day. I know, and
Speaker 4: I have to have it at home because I can't
Speaker 4: do anything.
Speaker 3: It's a little bit of a prima.
Speaker 4: Well, the thing is, I don't know. I mean I
Speaker 4: used to drink. I used to drink the coffee, but
Speaker 4: then you move to New York, and you're like the
Speaker 4: options for coffee here it's nuts or unbelievable.
Speaker 3: So many Yeah, I like to press at home.
Speaker 4: But don't you know people go Charlie Pelleck goes every day.
Speaker 4: I know Katie Greifeld goes every day.
Speaker 3: I think you now like that.
Speaker 12: I think that's that's a question.
Speaker 6: Right.
Speaker 11: There is a loyal base of customers and some of
Speaker 11: the moves that Starbucks has made, you know in recent months,
Speaker 11: you know they changed their rewards program, they've did they
Speaker 11: just changed a lot about the experience. Does that keep
Speaker 11: the loyal customers or not? And then at the same time,
Speaker 11: does it bring new people?
Speaker 12: Like you know, maybe Brian will do something that will
Speaker 12: actually get Tim to come in the door. He's just
Speaker 12: not going to happen.
Speaker 4: If it's like a Chipotle or if it's like a
Speaker 4: Chipotle Bowl or Dorito's Locos talker, then maybe.
Speaker 11: Maybe, I don't know, what, what if he improves the food,
Speaker 11: that is also part of life.
Speaker 3: I know I was trying to do in Zac right,
Speaker 3: like you go in and right you increase that like
Speaker 3: individual purchase. Hey, twenty five seconds China.
Speaker 11: They are looking at us selling a stake there. That
Speaker 11: is the latest information that we have because recovery has
Speaker 11: been tough and they want a local partner there to
Speaker 11: help them figure out what to do.
Speaker 3: Because that's an important part of growth, right for.
Speaker 11: Them, second largest market after North America, and they say
Speaker 11: they believe in it.
Speaker 3: So see final question Pumpkin spice latte too early. August
Speaker 3: twenty six, too early, right.
Speaker 11: I don't know if it's earlier than other years, but
Speaker 11: it's not fall. It's definitely not fall. But I think
Speaker 11: it's earlier and earlier because it does give them a
Speaker 11: big sales pump.
Speaker 12: So maybe that's why definitely not fall.
Speaker 3: Danielle Sitory joining us Bloomberg News Restaurant Reporter. A great
Speaker 3: story on the Starbucks CEO. It's a BusinessWeek story. Check
Speaker 3: it out.
Speaker 2: You're listening to the Bloomberg Business Weekdaily Podcast. Catch us
Speaker 2: live weekday afternoons from two to five pm Eastern. Listen
Speaker 2: on Apple CarPlay and Android Auto with the Bloomberg Business app,
Speaker 2: or watch us live on YouTube.
Speaker 3: Tiffany's salespeople call them the watch monsters. Oh my god.
Speaker 3: Salespeople always have words for the customers, the obsessives of
Speaker 3: the ultra wealthy shoppers who were sure they would be
Speaker 3: among the chosen few to get their hands on the rare,
Speaker 3: limited edition Protect Philippe timepiece.
Speaker 4: But what began is a celebration of the iconic jeweler
Speaker 4: and watchmaker has evolved into a cautionary tale, a lesson
Speaker 4: in how exclusivity, if mishandled, can dim the glow of luxury.
Speaker 3: Jeanette Newman is Bloomberg News consumer reporter. She wrote all
Speaker 3: about how Tiffany turned their best customers into their loudest critics.
Speaker 3: She joined Tim and Bloomberg News equities reporter Noura Melnda.
Speaker 1: This watch was particularly coveted and particularly special, So if
Speaker 1: let's say you wanted to just go in and buy
Speaker 1: the watch, you couldn't just walk in off the street
Speaker 1: and say, you know, I love Protect philip I want
Speaker 1: this very special watch. There were only one hundred and
Speaker 1: seventy of them made. You would express interest in the watch,
Speaker 1: and then you would be told, okay, we'll, we'll Tiffany.
Speaker 1: Tiffany salespeople would tell you we'll, we'll get back to you.
Speaker 1: And that's because this watch was very highly, very highly desired,
Speaker 1: and so there were many people who were who were
Speaker 1: trying to get it and it was ultimately, as we report,
Speaker 1: at the discretion of Tiffany executives who ended up getting
Speaker 1: the one hundred and seventy watches.
Speaker 4: And that discretion is really where things got complicated for
Speaker 4: some of the folks who were argue, at least in lawsuits,
Speaker 4: that they were longtime customers of Tiffany and spent quite
Speaker 4: a bit of money at Tiffany. What did you find
Speaker 4: in your reporting?
Speaker 1: So in the reporting, what I found is that and
Speaker 1: I think it would it would also be helpful of
Speaker 1: you if you find it helpful to just to kind
Speaker 1: of situate, you know, this moment. So we have to
Speaker 1: go back in time a little bit just to understand
Speaker 1: why this watch was the watch at the time and
Speaker 1: why now even a couple of years later, we're talking
Speaker 1: about it. I'm I'm reporting on it because it's the
Speaker 1: sale of the watch is still having repercussions today. So
Speaker 1: this this watch that was made by Ptec Philip was started,
Speaker 1: was went on sale in December twenty twenty one. And
Speaker 1: if you'll remember that at that time, we many people
Speaker 1: were feeling, you know flush, we had you know, extra
Speaker 1: pandemic savings. Some people still had some money left over
Speaker 1: from the stimulus checks, a lot of people were buying
Speaker 1: luxury goods. Demand for luxury goods was going through the roof.
Speaker 1: That included luxury watches. Some said at the time there
Speaker 1: was actually a bit of a watch bubble. People who
Speaker 1: you know, maybe hadn't been interested in watches before, all
Speaker 1: of a sudden got very interested in spending their pandemic
Speaker 1: savings on these luxury watches, like Pateech philip So at
Speaker 1: this time, Pateech Philippe says, okay, actually we're going to
Speaker 1: discontinue one of the most beloved watches in the world,
Speaker 1: their fifty seven eleven model, which is the Nautilus fifty
Speaker 1: seven eleven model. They said, we're going to discontinue it.
Speaker 1: At that time, the watch world freaked out. It was
Speaker 1: it was a huge deal that amid this kind of
Speaker 1: watch bubble, one of the biggest, one of the most
Speaker 1: important watchmakers in the world says we're no longer going
Speaker 1: to sell the watch that everybody, that everybody loves. And
Speaker 1: then they said, okay, So that caught everybody off guard.
Speaker 1: And then they caught people off guard again by saying, actually,
Speaker 1: there's going to be one final swan Swan song for
Speaker 1: the fifty seven eleven line. We're going to make one
Speaker 1: hundred and seventy of these very special edition watches to
Speaker 1: honor the one hundred and seventy years that patech Philly
Speaker 1: and Tiffany had been working together, So an incredibly long
Speaker 1: standing relationship in the luxury world. So Patek made one
Speaker 1: hundred and seventy of these watches. And what was different was,
Speaker 1: as you said, the dial was in that kind of
Speaker 1: in that signature Tiffany Tiffany Blue, which is actually a
Speaker 1: patented color. If you go to the stores, everyone knows
Speaker 1: that the Tiffany boxes are in are in that color. Now,
Speaker 1: PTech doesn't have that many retail stores, so it relies
Speaker 1: on Tiffany and other jewelers to sell its watches. So
Speaker 1: in the case of this blue dial watch, it was
Speaker 1: Tiffany that was tasked with with selling with selling the watches,
Speaker 1: and as you said, that's where that's where things got
Speaker 1: a little bit complicated. So there was basically Tiffany. Tiffany
Speaker 1: executives realized that there was so much demand for these
Speaker 1: watches that they could encourage clients to spend between two
Speaker 1: to three million dollars on jewelry in order to even
Speaker 1: get a shot at buying watch.
Speaker 4: And this is called as you as I learned reading
Speaker 4: your piece, this is called bundling, and it's something that
Speaker 4: is typically done, but there are no it's they're not
Speaker 4: real rules around it. It's kind of like understood, but
Speaker 4: not always in writing. It's typically done in high end
Speaker 4: stores with with luxury items. Explain that.
Speaker 1: Exactly, it's not, it's all. It's all very informal. I think,
Speaker 1: you know, talk talking to some people for this story,
Speaker 1: people would often mention, oh, right, that's kind of what
Speaker 1: you have to do if you want to get simply,
Speaker 1: you can't walk off the street and just buy a
Speaker 1: burken bag. Often what customers will say is you have
Speaker 1: to You're encouraged to buy other other goods in order
Speaker 1: to then get access to that, to that, to that
Speaker 1: burken bag. And that's again what some people in the
Speaker 1: industry called bundling, other people other people call it call
Speaker 1: it tying. I would say one one potential difference with
Speaker 1: that is, you know, if you walk into an air
Speaker 1: med store and they're telling you to you know, potentially
Speaker 1: telling you to consider buying some other goods in order
Speaker 1: to be considered be considered for a burke, And that's
Speaker 1: kind of all within the confines of one store, right
Speaker 1: one and one brand. I think the difference here is
Speaker 1: that you had Tiffany, which was selling Protect Protect watches,
Speaker 1: encouraging its clients to buy Tiffany jewelry in order to
Speaker 1: get access to the to the Protect watch.
Speaker 4: So explain the alienation of some customers, these wealthy customers
Speaker 4: who expected to be able to buy this watch after
Speaker 4: spending money at Tiffany, but according to your reporting, ultimately
Speaker 4: weren't able to do that.
Speaker 2: Right.
Speaker 1: And there was definitely some frustration based on our reporting,
Speaker 1: based on sources that we talked to with the sale,
Speaker 1: with the sale of this watch, and I think I
Speaker 1: mean one kind of specific element that might be interesting
Speaker 1: to listeners is so there was a charity auction of
Speaker 1: the watch in December twenty twenty one, and the watch
Speaker 1: went for a staggering six point five million dollars, which
Speaker 1: is about one hundred times its retail value. The watch
Speaker 1: itself will need obviously a lot for so many of us,
Speaker 1: but the watch itself only cost around fifty three thousand
Speaker 1: dollars and it sold for six point five million dollars.
Speaker 1: That initial sale fell through. The watch ultimately exchange hands
Speaker 1: for six point two million dollars, still a lot of money.
Speaker 1: People who were interested in the watch saw that sale
Speaker 1: and said, well, this is a no brainer investment. If
Speaker 1: I can get access to something that costs fifty three
Speaker 1: thousand dollars and then potentially sell it for the market
Speaker 1: is showing that there's demand of up to six million dollars, well,
Speaker 1: that seems like a no brainer investment. So what some
Speaker 1: of our sources said is that some people again saw
Speaker 1: that as a no brainer investment and said, okay, well,
Speaker 1: if I'm being encouraged to spend two to three million
Speaker 1: dollars on jewelry, that might be worth it, because I
Speaker 1: think that I can resell I can resell watch. Now,
Speaker 1: the thing about that auction is, in general charity auctions,
Speaker 1: longtime collectors will look at charity auctions with a bit
Speaker 1: of a skeptical eye because sometimes, for example, the watchmakers
Speaker 1: themselves are involved in the bidding. So seeing that six
Speaker 1: point five million dollar price as kind of a market
Speaker 1: price versus a price that's you know, maybe more marketing oriented,
Speaker 1: I think was part of the issue. According to our
Speaker 1: According to our sources and according to our reporting, and
Speaker 1: then what happened to answer to answer your question, is
Speaker 1: people thinking the watch was worth this much, some of
Speaker 1: them did get the watch, and then over time, over
Speaker 1: the over twenty twenty twenty twenty two and into twenty
Speaker 1: twenty three, the value of the watch really fell. And
Speaker 1: now the watch sells in the secondary market for around
Speaker 1: one point two million dollars. So obviously a very a
Speaker 1: very big drop. Still a very expensive, a very expensive,
Speaker 1: very valuable watch, but not what people who were encouraged
Speaker 1: to you know, spend spend money on jewelry, were expecting
Speaker 1: for this, for this investment, and also to be to
Speaker 1: be fair. And I'm sure if you have, you know,
Speaker 1: friends who buy watches, there's there's all kinds, right, I mean,
Speaker 1: some people buy watches, you know, it's it's buy and
Speaker 1: hold or and there's some people who want to buy
Speaker 1: and sell. Other people bought the watch and never even
Speaker 1: intend didn't see it as a no brainer investment or
Speaker 1: or otherwise because they didn't see it as an investment, right,
Speaker 1: They saw it as I want to buy and hold
Speaker 1: this because I love this watch and I want to
Speaker 1: have it. Others, the ones who were disappointed by the
Speaker 1: decline in the price. We're seeing it as more of
Speaker 1: an investment that they could potentially flip at least have
Speaker 1: the option to flip Janette. Based on your experience covering
Speaker 1: the luxury space, is this normal? Are mishaps, mishandlings like
Speaker 1: this common? I think you know in in this story.
Speaker 1: At the end of this story, we mentioned I spoke
Speaker 1: to an anesthesiologist who what he what he told us.
Speaker 1: He told a story of how he was trying to
Speaker 1: buy some Ferraris. He had one Ferrari that he really wanted,
Speaker 1: and he bought several Ferraris in order to try to
Speaker 1: get that Ferrari and he never he never got that Ferrari.
Speaker 1: To kind of decline to comment on his kind of specific,
Speaker 1: specific experience and said, you know it, it doesn't encourage
Speaker 1: that kind of behavior. This anesthesiologist said that he's come
Speaker 1: across that game in the luxury world, and honestly, he's
Speaker 1: the way he said it is, he's kind of he's
Speaker 1: kind of sick of it. So I think that is
Speaker 1: a potential risk in the in the luxury world that
Speaker 1: some people, some people like to engage in this game,
Speaker 1: and I think others find it tiring. I would say,
Speaker 1: speaking to some people who sell watches on the on
Speaker 1: the secondary market, one of the things that they say
Speaker 1: is they find that some of their clients come to
Speaker 1: them because they just want to be able to like,
Speaker 1: what's tell me the price and then I'll buy it,
Speaker 1: or I won't. I don't want to get involved in
Speaker 1: trying to spend money on X, Y and Z that
Speaker 1: I might not even want in order to get what
Speaker 1: I actually what I actually do want. So I do
Speaker 1: think it definitely happens in the luxury world, and you know,
Speaker 1: people can choose to continue to engage with it or
Speaker 1: or say, you know, that's that's not for me.
Speaker 4: Janett a great story. I learned a ton including maybe
Speaker 4: I should have considered a career in anesthesiology. Sounds like
Speaker 4: it considering that this anesthesiologist has bought what five ferraris
Speaker 4: or something hie er really really good stuff. Check out
Speaker 4: this story. It is the most read story on the
Speaker 4: Bloomberg terminal. The headline you really can't beat it Tiffany
Speaker 4: Anger's rich clients who wanted to buy a rare the
Speaker 4: tech watch.
Speaker 2: This is the Bloomberg Business Week Daily podcast. Listen live
Speaker 2: each weekday starting at two pm Eastern on Applecarplay and
Speaker 2: the Android Auto with the Bloomberg Business app. You can
Speaker 2: also listen live on Amazon Alexa from our flagship New
Speaker 2: York station, Just Say Alexa played Bloomberg eleven thirty.
Speaker 3: Julia Child, Gordon Ramsay, and Rolla Gassi, Rachel Ray. These
Speaker 3: are just some of the many celebrity chefs that make
Speaker 3: a living cooking on television. Well now, the next generation
Speaker 3: of chefs are turning to YouTube even TikTok to learn
Speaker 3: new skills and establish their culinary reputations.
Speaker 4: Plus New York vibes and London restaurants. That and a
Speaker 4: lot more from the Bloomberg Pursuits team with us right now.
Speaker 4: The editor of Bloomberg Pursuits, Chris Rouds, are also Bloomberg
Speaker 4: Pursuits Food editor Kate Crater. She is not in London.
Speaker 4: She's here in New York City in the studio with us.
Speaker 3: Carol, I can't even tell you how much we've been
Speaker 3: talking about this all week.
Speaker 4: We're like, we've all done, We've all donegy we group
Speaker 4: hugs already, like we spent a bunch of time catching
Speaker 4: up and supposed to.
Speaker 6: Work.
Speaker 3: We do all right, We're going to talk a lot
Speaker 3: of food in a moment because there's so many stories
Speaker 3: that we want to get to. But first of Chris,
Speaker 3: we just want to talk a little bit about green watches.
Speaker 13: The most important news. There's a new color on watches.
Speaker 3: You guys, how does this happen? How does like the
Speaker 3: watch industry levels then go green?
Speaker 13: That's you know, it's funny watches. There are not that
Speaker 13: many trends that can take over watches. There's like different
Speaker 13: styles of watches, different metals, sometimes different colors. And then
Speaker 13: every once in a while there's like a big blue
Speaker 13: year or big green year, and there's lots of stories
Speaker 13: and and sort of collects these certain things. And this
Speaker 13: year there is a wave of pistachio colored watches. And
Speaker 13: this is interesting only because or it's interesting because there's
Speaker 13: it's not that bold of a color. It's kind of
Speaker 13: a subtle color. It doesn't pop off your wrists, and
Speaker 13: it's not traditionally a color that people like in watches.
Speaker 13: But we've seen everything from Rolex to Hugh Blow to
Speaker 13: Parmesiani to Oris all have watches this year in this color.
Speaker 13: And it's like they talk to each other, but they didn't.
Speaker 3: That's what That's what I find crazy.
Speaker 4: Kate.
Speaker 3: Would you hear a green watch?
Speaker 14: I absolutely would, especially if Chris told me which one
Speaker 14: to wear. And I want to know which of those
Speaker 14: Pistasia watches you have.
Speaker 9: Christ Well, I have.
Speaker 4: Good news for you, Kate. They is a price range
Speaker 4: and it ranges from about six thousand dollars per watch
Speaker 4: all the way up to two point three million dollars
Speaker 4: per watch.
Speaker 14: Just help me make night, You help me make night decision?
Speaker 3: Could you have a twenty four thousand dollars watch with
Speaker 3: a rubber strap? I'm just asking, Yeah, that's a good question.
Speaker 4: Some people we hold on rub What about a two
Speaker 4: point three million dollar watch with a rubber strap?
Speaker 7: Exactly?
Speaker 4: There is one of those.
Speaker 13: Yeah, So that's a Reshard Meal watch, and that's kind
Speaker 13: of a that's sort of what these things caught that.
Speaker 13: These resharp Meal watches are the billionaire's handshake, they call them.
Speaker 13: And this one is a flying Turbion Sapphire. It's a
Speaker 13: big chunky thing. It's a kind of watch that Kendall
Speaker 13: Roy watches on succession wears on succession. The most popular
Speaker 13: one will be the Rolex Oyster Perpetual, which everyone's killing
Speaker 13: themselves to get this pistachio green color. My favorite is
Speaker 13: a Parmegiani watch, which is a skeleton and a beautiful
Speaker 13: slate green color. It is not affordable. I will not
Speaker 13: derying it.
Speaker 4: It's affordable to some people.
Speaker 13: It's seventy thousand dollars, but it's extremely beautiful and you
Speaker 13: should look at the story online to check it out.
Speaker 13: But there's there's more inexpensive ones like Orris has a
Speaker 13: cool one for four thousand dollars, and nor Caine, which
Speaker 13: is a very cool, sporty new company that we've covered,
Speaker 13: has one for six thousand.
Speaker 3: All right, all right, when I think of green and
Speaker 3: when you said pistacio, I thought of ice cream and
Speaker 3: other things. So let's go to food now YouTube. Yay,
Speaker 3: I have to say there are I can't tell you
Speaker 3: how many times we are when we're looking to cook something,
Speaker 3: we go to YouTuber or social to figure out. Sounds
Speaker 3: like there's a whole new generation of chefs.
Speaker 14: I was going to say, you could be a professional
Speaker 14: chef right now, Carol, the way you're talking, I could not. Well,
Speaker 14: let's see you know what you never know? Just watch
Speaker 14: a couple more videos. No, it's kind of. It's like
Speaker 14: this seismic shift. A couple decades ago. You know, people
Speaker 14: would would professional chefs or want to be professional chefs,
Speaker 14: would want to train in a kitchen like a Thomas
Speaker 14: Keller kitchen or a Bobby Flay kitchen, And now they
Speaker 14: don't even need to do that. They just turn on
Speaker 14: their computer and watch some videos and sooner or later
Speaker 14: they can actually open up their own place. It's been
Speaker 14: to me it's a seismic shift.
Speaker 3: It's amazing.
Speaker 4: You have this great anecdote about James Low and wanting
Speaker 4: to I don't even know what the right term is,
Speaker 4: but like filet a tuna, is.
Speaker 9: That what it is?
Speaker 14: Butcher, I think you would say Butcher sit home, Tim. Yeah, Butcher,
Speaker 14: I think I think he would be.
Speaker 4: Butcher Easier said than done.
Speaker 7: Truth, total truth.
Speaker 14: Yeah, No, he's a He's a very British chef and
Speaker 14: there hadn't been tuna in his neck of the woods
Speaker 14: since he'd started cooking, had like a thirty year career,
Speaker 14: and then all of a sudden or whatever, because of
Speaker 14: because of the way that the government was able to
Speaker 14: manage the waters, tune it became available in Cornwall, and
Speaker 14: all of a sudden, it became a sort of local
Speaker 14: ingredient for him, and so he bought one and then realized,
Speaker 14: now what, because he'd never ever butchered one before. And
Speaker 14: so he and his team sat there and watched YouTube
Speaker 14: and then carried a four hundred pound piece of fish
Speaker 14: or a whole fish into their kitchen. Like it took
Speaker 14: over their dining room. They'd watched hours and hours, and
Speaker 14: he said it was a process that took He said,
Speaker 14: it was a process that took hours. But there is
Speaker 14: a picture if you look at this story, there's this
Speaker 14: crazy like that literally took over five tables of their
Speaker 14: dining room. Like that's how big the fish is. They
Speaker 14: didn't have the knives to do it. You know, it's
Speaker 14: an amazing story.
Speaker 3: Maybe because it's the fiftieth anniversary of Jaws. But I
Speaker 3: saw this and it looked like a shark. Like all
Speaker 3: I could think about was the shark and Jaws. It's massive.
Speaker 4: So thirty years ago, he would have had to fly
Speaker 4: to Japan or buy cookbooks or make a lot of mistakes.
Speaker 14: Yeah no, exactly, expensive mistakes. Precisely. Yeah no, I think
Speaker 14: you or he would have just brought somebody in who
Speaker 14: knew how to do it. But yeah, no, just think
Speaker 14: about like, even if you're looking at the most detailed
Speaker 14: manual of a cookbook, it only takes you so far
Speaker 14: when you're presented with his fish.
Speaker 9: I don't know.
Speaker 4: I do this all the time, not for cooking, for
Speaker 4: anything that I have to build that comes with an
Speaker 4: instruction booklet. I'm not good with the diagrams the instruction booklets.
Speaker 4: I gotta watch YouTube video. Unfortunately those exist for everything.
Speaker 14: Tim you can open up a restaurant with Carol.
Speaker 4: I was more thinking about assembling children's toys, which is
Speaker 4: why I was looking at Chris because I know he
Speaker 4: does the same thing.
Speaker 3: You know what's crazy. I don't cook. I'm not a
Speaker 3: great cook. It's a joke in my complete family. But
Speaker 3: I'll be on Instagram and like people making things and
Speaker 3: I just find it really relaxing.
Speaker 14: And transfix thing.
Speaker 3: Yeah, it's pretty amazing.
Speaker 6: Yeah, I was just.
Speaker 14: Gonna say it's actually cool because in London, where I'm
Speaker 14: based right now, these pizza chefs, there was this whole
Speaker 14: thing during the pandemic. A couple people who weren't so
Speaker 14: happy with their jobs started watching pizza videos because there
Speaker 14: were all those US style pizza all of a sudden available,
Speaker 14: or like it became there were all these videos from
Speaker 14: like Dave Portnoy barstool and stuff like that. And now
Speaker 14: there's a couple newly minted pizza makers in London thanks to.
Speaker 13: YouTube, and they're very hot, very popular people.
Speaker 14: Very popular.
Speaker 3: Pizza perfect against pizza.
Speaker 4: Perfect segway to talk about pizza in London, Usually we
Speaker 4: talk about pizza in New York City, But Kate, You've
Speaker 4: got a story out that's talking about a kind of
Speaker 4: vibe of New York City taking over London restaurants. When
Speaker 4: I think of food in London, I think of really
Speaker 4: good Indian food, and then of course the classics fish
Speaker 4: and chips and the like. But apparently you can get
Speaker 4: a good pizza there now.
Speaker 14: Yeah, no, you are, You're absolutely right, And it's it's
Speaker 14: it feels a bit ironic because you know, the US
Speaker 14: brand isn't so so hot over over in the UK
Speaker 14: and Europe, and tourism is way down here. I think
Speaker 14: it's down, and it's going to be down by two
Speaker 14: point five million people they estimate in New York City
Speaker 14: by the end of the year. And yet New York
Speaker 14: vibes are super hot in London, and it's got to
Speaker 14: do with state. Like you, if you go somewhere now
Speaker 14: you'll see a cheeseberg on an ambitious menu which you
Speaker 14: never would have seen before, and steaks and oysters.
Speaker 3: But it's also an energy.
Speaker 14: Which is the part that I think is really fascinating.
Speaker 14: The Brits aren't used to being spontaneous. If you know
Speaker 14: any Brits like you will probably co.
Speaker 3: Sign on that we love all of you who watch it.
Speaker 14: We love yes, yay you, yeah, you guys. But now
Speaker 14: so they traditionally haven't had walkins at restaurants, and now
Speaker 14: now a lot of these cool, super cool London restaurants
Speaker 14: have places for walkins.
Speaker 3: But it's also an energy.
Speaker 14: It's the way they arrange their tables, so instead of
Speaker 14: there being like rows and rows of tables and chairs,
Speaker 14: they turn the chairs in different directions and that literally
Speaker 14: changes the energy in the room.
Speaker 13: Okay, many people, multiple two people forwarded me this story
Speaker 13: and asked me, does that mean that the martinis are
Speaker 13: bigger or are they still? Are they still thimble sized?
Speaker 14: You know, they're they're pretty modest. I think if your
Speaker 14: friends who are like doing a measurement, they will they
Speaker 14: will say that, but there's a big I think the
Speaker 14: most The thing that this story inspired the most debate
Speaker 14: on is where the martinis from because technically and historically
Speaker 14: or not technically, but the history is a bit fuzzy.
Speaker 14: But it's supposedly from the Nickerbocker Hotel in New York
Speaker 14: City and that makes Brits very very mad.
Speaker 3: You can get a Cosmo in London now, yes you can. Wow,
Speaker 3: I'm just saying true story. Hu to thunk? Who to thunk?
Speaker 7: Just?
Speaker 3: Uh, where do we want to go?
Speaker 4: Where do we want to go?
Speaker 6: This story?
Speaker 3: Both Tim and I talked about this were like, okay,
Speaker 3: there were some good strategies, but there are a lot
Speaker 3: of CEOs who don't seem like they've got this under control.
Speaker 13: So we do this feature every month in Business Week
Speaker 13: where we call it the Ceo Diet. We talked to
Speaker 13: a bunch of CEOs. Hate is in charge of it,
Speaker 13: thankless task, and she talks a bunch of CEOs about
Speaker 13: their habits and what they do, what they eat, what
Speaker 13: they drink, what they do in the morning. And so
Speaker 13: this month we did how to optimize your Sleep, which
Speaker 13: CEOs are everyone wants to know and they have a
Speaker 13: lot of thoughts.
Speaker 14: About Yeah, they do know, it's it is. It's kind
Speaker 14: of amazing. The CEO of Dogfish says he takes a
Speaker 14: bath underneath a picture of Andre.
Speaker 3: Three thousand playing a flute, playing a flute.
Speaker 6: Sorry, yeah, thanks for that.
Speaker 14: Wi Fi scree breaks is white out and that's why
Speaker 14: they have separate bathrooms. The CEO of Uber, which is
Speaker 14: a very famously data oriented company, says he used to
Speaker 14: be obsessed with data and like compete against himself every night,
Speaker 14: and now he just puts away all of his screens
Speaker 14: and goes to sleep. And that to me is super ironic.
Speaker 3: That is so telling. My husband is obsessed with data too,
Speaker 3: and he'd be like, I got a sixty seven, had
Speaker 3: a seventy five. I'm like, well, how do you feel?
Speaker 3: It's like, I don't know, I got a seventy five.
Speaker 3: But what was amazing? There were so many folks that
Speaker 3: I thought, who was it?
Speaker 4: Peter McGinnis, No, Shabonni Well formerly of Tabonni Carol and
Speaker 4: I have spoken to him quite a bit. Now he's
Speaker 4: that impossible foods. Yeah, he's basically says, maybe I should
Speaker 4: get more sleep. He's not good at it.
Speaker 13: Yeah, that doesn't surprise you though, right like CEOs you
Speaker 13: think of like never sleeping and not maybe just.
Speaker 4: Like but that was like ten or fifteen years ago.
Speaker 4: Now now sleeping is cool, like like now sleeping is cool.
Speaker 4: Being healthy is like in right now, that's what it
Speaker 4: feels like.
Speaker 14: That's exactly right. I think you used to brag about
Speaker 14: the minimal amount of sleep you needed, and now you're like,
Speaker 14: look at me sixty seven, seventy five or now. If
Speaker 14: you don't get a good night's sleep, if you're changing
Speaker 14: time zones too many times, it's something you know that
Speaker 14: you sort of agonize over and say, like, I need
Speaker 14: to get better at it.
Speaker 3: Yeah, I love the guy was at the head of
Speaker 3: Vito Coco. I think he talked about napping a lot.
Speaker 13: Yeah, yeah, forty minutes nap, a forty minute nap every
Speaker 13: single day.
Speaker 3: Hey, Tim, before we start our show, we'll just tell everybody, Hey,
Speaker 3: we're going to take a.
Speaker 4: Nap that I don't know, Chris, when was the last
Speaker 4: time you got to take a bath for thirty minutes?
Speaker 13: No, I haven't taken a bath in years. I mean,
Speaker 13: I think about it makes me want to cry thinking
Speaker 13: about it. The Rainy Williams from Beverly Hills estates of
Speaker 13: the CEO. I thought had good advice. It was like,
Speaker 13: usable a lot of it. Yeah, I take magnesium, zinc
Speaker 13: and ATP along with a cortisol bouncer to help regulate
Speaker 13: stress levels, which I would really like.
Speaker 9: I don't know.
Speaker 13: I have to find out what that is. And that's
Speaker 13: just the start, she says, And.
Speaker 3: Then she takes a relaxing shower, full skin care and
Speaker 3: self care regimen.
Speaker 13: She's doing it right, and a red light mask.
Speaker 3: Right to be.
Speaker 14: Kind's like her answer was twice as long as this.
Speaker 14: This is an edited version of what she does, Like,
Speaker 14: she's doing it right.
Speaker 3: Can I just tell you I went down a rabbit
Speaker 3: hole on those red lights.
Speaker 4: Here's my return before I go to bed, clean up
Speaker 4: everything that my kids have taken out that day. Yeah,
Speaker 4: clean up all, do all the dishes, start making lunches
Speaker 4: for them for the next day.
Speaker 7: Uh.
Speaker 4: And then look at my phone.
Speaker 13: Yeah that's about what mine is.
Speaker 3: Yeah, all right? Or maybe no sound bath, you know,
Speaker 3: Or maybe what you should do is go see this
Speaker 3: new Elvis show in London and only got about a
Speaker 3: minute or so. Here Sarah Rapperport, she did a review,
Speaker 3: didn't seem like she liked it.
Speaker 13: Chris, there's a show called Elvis Evolution in London right
Speaker 13: now which everybody is loving to hate. Only fools rush in.
Speaker 13: Audiences are not all show up. Sorry, So Sarah went,
Speaker 13: and we have been excited about this show because it
Speaker 13: was supposed to be AI. It was supposed to be
Speaker 13: like the abb of Voyage, so like there you were
Speaker 13: going to see Elvis, you know, like a new incarnation
Speaker 13: of Elvis interacting with the audience. And that's not what
Speaker 13: it is. It's like you walk in. It's an immersive experience.
Speaker 13: It's a tour. So you start in a diner and
Speaker 13: then there's actors and then you go to a like
Speaker 13: a bar, and then at the end you see a
Speaker 13: video of Elves on stage and people are Sarah says,
Speaker 13: it's quite disappointing. People are asking for their money back.
Speaker 13: It's three hundred pounds for VIP tickets. One old older
Speaker 13: guy got really mad during the show and started complaining loudly,
Speaker 13: and then security tackled him and took him out and
Speaker 13: he canceled the rest of the shows from the evening.
Speaker 13: It is, yeah, it's.
Speaker 3: Not how can you make Elvis bad?
Speaker 9: Well?
Speaker 13: I guess there's probably the reason they started.
Speaker 4: Carol, and I know you can, Kate, you got it.
Speaker 13: You're gonna have to go see it.
Speaker 3: Really just for work.
Speaker 9: We'll take that.
Speaker 3: We'll take that as a Now, this has been such
Speaker 3: a treat. You guys made our week. Thank you so much,
Speaker 3: so appreciate it.
Speaker 14: Thank you, guys, thank you.
Speaker 4: Oh thanks to Chris Rouser, the editor of Bloomberg Pursuits,
Speaker 4: and to Bloomberg Pursuits Food editor Kate Creator.
Speaker 3: And that wraps up the weekend edition of Bloomberg Business
Speaker 3: Week from Bloomberg Radio. Thank you so much for joining us.
Speaker 3: I'm Tim Stunbeck and I'm Carol Mass. Have a good
Speaker 3: and safe weekend. Be sure to check out Pursuits. Just
Speaker 3: to see the big VI was it is tuna? It
Speaker 3: was it tuner, It was a tuna. Just to see
Speaker 3: that picture a little pretty wild.
Speaker 2: This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,
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