Speaker 1: This is Bloomberg Business. Wait inside from the reporters and
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Speaker 1: global business finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 2: Well, we did see shares of big tech kind of
Speaker 2: mixed today. Apple was lower, Amazon was higher. More than
Speaker 2: twenty tech in civil society leaders, including the CEOs of
Speaker 2: five of the ten biggest US companies, appeared at a
Speaker 2: closed door Senate meeting today to shape how artificial intelligence
Speaker 2: is regulated. The meeting was organized by Senate Majority leader
Speaker 2: Chuck Schumer. It included a mix of personalities with diverging
Speaker 2: views on how to write the rules for AI. We're
Speaker 2: talking about people like the CEOs of Alphabet, Microsoft, Meta,
Speaker 2: and Open Ai, all invited to appear alongside rivals in
Speaker 2: industry critics to discuss possible guardrails for AI that balance
Speaker 2: the risks and rewards of this tech. Kaylee Lyons is
Speaker 2: the co host of Bloomberg Sound on weekdays at one
Speaker 2: pm one Street time, right here on Bloomberg Radio. She
Speaker 2: joins us from our Washington d C Bureau and Anna
Speaker 2: Edgerton is technology reporter at Bloomberg.
Speaker 3: Now.
Speaker 2: She joins us on the phone from Washington, d C.
Speaker 2: So Anna talked to us a little bit about what
Speaker 2: happened behind closed doors this afternoon.
Speaker 4: Yeah, you know, it was a pretty crazy scene. We
Speaker 4: were able to go in at the beginning of the meeting,
Speaker 4: but then it was not open to the public, and
Speaker 4: there's a lot of complaints about that from senators like
Speaker 4: Elizabeth Warren of Massachusetts saying, you know, we shouldn't be
Speaker 4: giving these tech CEOs the chance to basically lobby senators
Speaker 4: behind closed doors. But from talking to people who are
Speaker 4: actually in the room, they said, you know, it was
Speaker 4: mostly kind of surface level statements at the beginning, and
Speaker 4: then got into a more interesting discussion involving, you know,
Speaker 4: the security risks of open source research, you know, things
Speaker 4: about like should there be a new agency to regulate AI.
Speaker 4: So there was some discussion and it'll be interesting to
Speaker 4: see how that continues into the afternoon.
Speaker 5: I want to bring you just quickly, a red headline
Speaker 5: crossing the Bloomberg terminal right now. Arm the chip designer
Speaker 5: whose IPO is so being so closely watched by the market.
Speaker 5: According to Wall Street, Journal is set to price it's
Speaker 5: IPO at fifty two dollars a share. That would give
Speaker 5: it a valuation of fifty five point five billion dollars
Speaker 5: a share, or fifty five point five billion dollars overall
Speaker 5: on a fully diluded basis. That's seemsingly a little bit
Speaker 5: more than they were looking for initially, but roughly around
Speaker 5: that the outline that they had given. But we'll bring
Speaker 5: you more on this story in just a few minutes. Guys,
Speaker 5: I want to understand from these discussions that happened today,
Speaker 5: what do you think, Kaylee, what do you think, if anything,
Speaker 5: will be the sort of policy implications going forward for
Speaker 5: these discussions.
Speaker 6: Well, this really was just a start. That's what the
Speaker 6: organizer of the summit today, the Senate Majority Leader Chuck Schumer,
Speaker 6: said he would like to see many more of these summits.
Speaker 6: He would like to see committees in the Senate working
Speaker 6: up legislation. He said he would like to see AI
Speaker 6: regulation in a matter of months, not years. But what
Speaker 6: we know is that Congress is a pretty slow moving body,
Speaker 6: and this technology is moving very quickly. So it's kind
Speaker 6: of a race here between policymakers who all seem to
Speaker 6: agree today that they do want to get their arms
Speaker 6: around this technology, that there is a role for the
Speaker 6: federal government to play in setting guardrails around it, and
Speaker 6: then actually doing so is going to be another story.
Speaker 6: So this was really just the beginning and we'll see
Speaker 6: how things progress from here.
Speaker 2: It was quite a crew in Washington today. Tech tycoons
Speaker 2: with a combined networth of roughly five hundred and fifty
Speaker 2: billion dollars gathered in the same room Wednesday to talk
Speaker 2: about AI and how it's regulated. One of the people
Speaker 2: there was none other than On Tesla CEO x CEO
Speaker 2: SpaceX the C I guess he's not x CEO. That's
Speaker 2: a good point, thank you. Ex owner Elon Musk. Check
Speaker 2: out what he had to say to reporters.
Speaker 7: The reason that I've been souching to have people AI
Speaker 7: safety in advance of sort of anything terrible happening is
Speaker 7: that I think the consequences of AI going wrong are severe,
Speaker 7: so we have to be proactive rather they're reactive.
Speaker 2: That was none other than Elon Musk saying that we
Speaker 2: have to be proactive rather than reactive regarding AI. Kaylee.
Speaker 2: This is not anything new that he said. I mean,
Speaker 2: he's been talking about the threat of AI for years.
Speaker 2: My question for you is do lawmakers understand AI?
Speaker 6: Excellent question, Tim Well. Part of today was framed as
Speaker 6: an educational effort. The reason they were having, as Anna said,
Speaker 6: what was a kind of controversial decision to have a
Speaker 6: closed door meeting, was that they wanted these people to
Speaker 6: be candid. Knowing that you had more than twenty people
Speaker 6: there who were going to have about three minutes to speak,
Speaker 6: at least to the beginning, they were trying to get
Speaker 6: out as much information from them as they possibly could.
Speaker 6: Understanding is largely what they were seeking, in addition to,
Speaker 6: you know, potential guidance or ideas as to how to
Speaker 6: move forward on a regulatory basis. But this is the
Speaker 6: US Senate we're talking about, guys. They're not necessarily the
Speaker 6: most technologically savvy individuals that are out there.
Speaker 2: It's an understatement, so true.
Speaker 5: Yeah, I think I've heard some discussions of theirs about
Speaker 5: the Internet, and that's been around for a little while,
Speaker 5: longer than some of this artificial technology.
Speaker 8: But Ana, are there.
Speaker 5: Any areas where you know, the participants in this meeting
Speaker 5: that you understand from your sources, you know, came to
Speaker 5: some sort of agreement that maybe didn't exist before.
Speaker 8: Yeah.
Speaker 4: Two themes that kind of emerged from at least the
Speaker 4: executives in the room, if not kind of the civil
Speaker 4: society actors, were that the US should play a role
Speaker 4: in setting kind of the global governance discussion about AI.
Speaker 4: It's there's going to be the.
Speaker 9: Broad agreement that the US needs to have something to
Speaker 9: contribute to this discussion, if not in the form of legislation,
Speaker 9: then you know, these voluntary commitments that the White House
Speaker 9: has been talking about has the shared from several.
Speaker 4: Companies, So you know, that was one area of agreement.
Speaker 4: And then there was also kind of a broad understanding
Speaker 4: that regulations should focus on the end use of this technology,
Speaker 4: like how AI tools are used, rather than the actual
Speaker 4: systems themselves. Now, the civil society participants might have a
Speaker 4: different view about that because these systems are going to
Speaker 4: be powerful in ways that we don't understand. So it's
Speaker 4: not like, you know, just put cars on the road and.
Speaker 10: Let people use them as they will know. You regulate
Speaker 10: seat belts, you regulate airbags, so you know, what's the
Speaker 10: equivalent for AI. That's still going to be the task
Speaker 10: for Congress to kind of pash out one person.
Speaker 2: Who was there Anna, who doesn't necessarily have the name
Speaker 2: recognition yet among a wide group of people, I would
Speaker 2: argue with Sam Altman, the founder of Open Ai, and
Speaker 2: I'm wondering what you heard from him. He's definitely someone
Speaker 2: who I think we can at this point credit with
Speaker 2: shaping a lot of the interests that we've seen in
Speaker 2: AI since the launch of chat GPT and since the
Speaker 2: interest around it.
Speaker 10: You know, it was so.
Speaker 4: Interesting when he spoke to Congress several months ago because
Speaker 4: it was kind of the first time that this conversation
Speaker 4: really first onto the scene on Capitol Hill, and you
Speaker 4: have this kind of boyish looking doe ied CEO and
Speaker 4: very earnestly saying we need to be regulated, you know,
Speaker 4: if AI goes wrong, if you go very wrong. And
Speaker 4: so you see this kind of plea from this CEO
Speaker 4: of this new innovative company that sounded very different than
Speaker 4: what we had heard from Mark Zuckerberg and hearings past. However,
Speaker 4: in the month since then, when it comes to actual regulation,
Speaker 4: like we're seeing an EU with their AI Act, we've
Speaker 4: heard pushback from Sam Altman. So you know, he is
Speaker 4: kind of emerging as another CEO who wants to be regulated,
Speaker 4: so to speak, but only on his turn.
Speaker 5: Yeah, Kayla, you actually spoke to him on his way in.
Speaker 11: I think yeah.
Speaker 6: I yelled at him as he was getting out of
Speaker 6: his suv heading out to the Center building, and I asked,
Speaker 6: you know, what are you planning to tell senators? What's
Speaker 6: your message in your opening remarks? And he says sort
Speaker 6: of that this is an important, urgent and in some
Speaker 6: ways precedented moment. There was really kind of a theme here.
Speaker 6: It wasn't just Sam Oltman, but Senator Chuck Schumer, others
Speaker 6: as well, everyone trying to convey a sense of urgency
Speaker 6: in trying to get something done in regard to AI.
Speaker 6: And part of that conversation I thought was really interesting
Speaker 6: was about competition with China. How you don't want to
Speaker 6: have the Chinese Communist Party being the ones that are
Speaker 6: setting the rules of the road and kind of the
Speaker 6: groundwork here that the United States should be doing it.
Speaker 6: And it seems like that kind of competitive drive was
Speaker 6: in part what is really driving a lot of the
Speaker 6: desire on the part of lawmakers to do something and
Speaker 6: do something quickly here. And this is something that we
Speaker 6: know the likes of Elon Musk Raised and the Hearing
Speaker 6: today as well.
Speaker 2: Kaylee Lyons, co host of Bloomberg Sound on weekdays at
Speaker 2: one pm Wall Street Time on Bloomberg Radio from our
Speaker 2: Washington DC bureau, and Adgerton Technology Report at Bloomberg News
Speaker 2: on the phone from Washington, DC. A big thank you
Speaker 2: to both of you for beginners, the latest from Washington
Speaker 2: and AI.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Eastern Listen on
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Speaker 12: Well it's the.
Speaker 5: Big news after hours certainly, but perhaps the big news
Speaker 5: for tomorrow as well. Arm Holdings pricing its IPO at
Speaker 5: fifty two dollars per share, and that's according to the
Speaker 5: Wall Street Journal. This is set to be the largest
Speaker 5: listing this year. It had intended to price forty seven
Speaker 5: to fifty one dollars per share, but Bloomberg News had
Speaker 5: reported that the company was even looking to potentially exceed
Speaker 5: those valuations, and it does appear they have. This would
Speaker 5: put this price, according to Wall Street Journal sources, would
Speaker 5: put the overall valuation of the company at fifty five
Speaker 5: point five billion dollars and it's of course start set
Speaker 5: to start trading tomorrow. Here to break down the price
Speaker 5: the IPO and the IPO market is Jane Tier. She's
Speaker 5: the senior data editor at crunch Base and joins us
Speaker 5: from Palo Alto to discuss we just got this news. Janey,
Speaker 5: what what are your thoughts here? Is this surprising to
Speaker 5: you that we kind of saw the pricing come in
Speaker 5: just ahead of the target.
Speaker 3: I think over the last few days there's been indications
Speaker 3: as the company has been doing its roadshow with institutional
Speaker 3: investors that there is a lot of interest in the armstock.
Speaker 3: They as you said, they said forty seven to fifty one,
Speaker 3: and they're pricing a little higher at fifty two, not
Speaker 3: too much higher, you know, I've seen reports of this
Speaker 3: is five to ten times oversubscribed, So definitely a lot
Speaker 3: of investor interest. And I think, you know, as we've
Speaker 3: led into this month of three companies planning to IPO,
Speaker 3: three very strong companies which we have not seen in
Speaker 3: the last eighteen months, I think all the questions have
Speaker 3: been around what are the right valuations in the market.
Speaker 3: We've seen valuations come down massively in the last eighteen months,
Speaker 3: and so where are these valuations going to sit? Is
Speaker 3: their investor interest? I think there's been a lot of
Speaker 3: questions around that, and I think it's certainly interesting to
Speaker 3: see that they're pricing a little higher than their guidance.
Speaker 2: Yeah, it is. It is interesting to see that. And
Speaker 2: one thing that's also interesting to see is just since
Speaker 2: arms US one came out, we saw Instacart, we saw Birkenstock.
Speaker 2: Is the IPO drought over at this point?
Speaker 13: Janey?
Speaker 3: I think it's a little early to say. I think
Speaker 3: everyone wants to watch these tech stocks. You know, we
Speaker 3: run a billion dollar exit board. What we try to
Speaker 3: do is track the venture back companies that have the
Speaker 3: highest valuations that go out on the public markets. And
Speaker 3: we've seen a complete dearth in twenty twenty two. It
Speaker 3: was largely spas, and I think those deals were done
Speaker 3: in twenty twenty one, and then in twenty twenty three
Speaker 3: things have completely dried up, and so I think this
Speaker 3: is really a testing to see of three very different companies.
Speaker 3: The companies we're really tracking as Instacart, Clavio, which is
Speaker 3: an email automation company largely in the e commerce space,
Speaker 3: and obviously the ARM listing. Three very very different companies
Speaker 3: who are seeking to go out in September, and I
Speaker 3: think they each have very different stories to tell, but
Speaker 3: it'll be it'll be interesting for us to watch. Is
Speaker 3: their investor appetite for each of these very different companies,
Speaker 3: How are they going to price in this market? And
Speaker 3: what do they look like three months to six months
Speaker 3: down the road. It's not only about the IPO and
Speaker 3: the IPO pop, but it's really about how these companies
Speaker 3: do in the markets in the months ahead, because we
Speaker 3: saw so many twenty twenty one and twenty twenty and
Speaker 3: twenty twenty two listings have gone down massively from their
Speaker 3: IPO price, So I think it's a test.
Speaker 5: Yeah. One of the questions here as well is whether
Speaker 5: or not ARM is pitching itself as just like we are,
Speaker 5: an AI company, or whether it's doing something else and
Speaker 5: trying to talk about its fundamentals in some way. Jenny,
Speaker 5: where do you see it's having the most success?
Speaker 3: And I think what's interesting about this IPO is that
Speaker 3: there is obviously it's on it's coming out on the
Speaker 3: backdrop of Nvidia, and you know, and that start going
Speaker 3: up incre massively I think also as part of this IPO,
Speaker 3: there are a number of companies who want to invest
Speaker 3: in the IPO. I think Apple is one of them,
Speaker 3: there's a few others. So I think there's a lot
Speaker 3: of investor interest in the chip space right now. In
Speaker 3: a AI, there's certainly a huge demand. And what was
Speaker 3: interesting in looking at their IPO filing is year of
Speaker 3: a year revenue has been pretty flat, but I think
Speaker 3: their expectation, and I think Bloomberg reported this that there
Speaker 3: is an expectation that in the next year. We're already
Speaker 3: into that because they're just reported in March for fiscal
Speaker 3: twenty to twenty three, but for the next year they're
Speaker 3: expecting revenue to be up around eleven percent and then
Speaker 3: even higher than that in the year of following. So
Speaker 3: I think they're anticipating a lot of demand for their
Speaker 3: chip designs, and so I think because of that, there
Speaker 3: is a lot of investor Investor interest is based on
Speaker 3: growth for these companies being profitable as companies but also
Speaker 3: showing growth, and even though in the last fiscal year
Speaker 3: they haven't really shown revenue growth, I think there is
Speaker 3: expectation that they will going forward. Nonetheless, this price is still,
Speaker 3: you know, many are still saying it's.
Speaker 2: A rich price, are you? How are you thinking about
Speaker 2: China's exposure excuse me, arms exposure to China. As we
Speaker 2: reported last month, ARM runs most of its China business
Speaker 2: through an independent unit called ARM Technology, which is its
Speaker 2: single largest customer and accounted for about twenty four percent
Speaker 2: of its sales in the year ended March. Does that
Speaker 2: raise any flags for you? And this isn't you know?
Speaker 2: I mean to be fair, I mean, Apple gets about
Speaker 2: twenty percent of its revenue each year from the Greater
Speaker 2: China area. But I'm wondering how you think about that
Speaker 2: as an analyst.
Speaker 3: Yeah, I think there is. I mean, there's so much
Speaker 3: demand for trips globally. China is a very very big market.
Speaker 3: They've been they've been investing in the space in order
Speaker 3: to create more independence. So I'm not quite sure what
Speaker 3: the outlook is for China, but certainly the demand globally
Speaker 3: is so big and China is a very big market,
Speaker 3: but they are seeking to create some independence, although the
Speaker 3: China market at this point is behind.
Speaker 5: What if this IPO tomorrow doesn't go that well? I mean,
Speaker 5: I remember the Facebook experience back of twenty twelve. Would
Speaker 5: it say something about AI? Would it say something about
Speaker 5: the IPO market? Speculate a little bit for.
Speaker 3: Us, Yeah, I think it will definitely say something about
Speaker 3: both of those, about the AI market specifically and about
Speaker 3: the IPO market. I think the you know, in going
Speaker 3: through this process and looking at these companies like Instacart,
Speaker 3: you know, Instacart is coming in way below even if
Speaker 3: it's internal valuation set. Recently, I think ARM has been
Speaker 3: very careful. You know, we know that SoftBank bought its
Speaker 3: own shares at a sixty four billion valuation just a
Speaker 3: month ago, and they're coming in, you know, almost ten
Speaker 3: billion below that amount. So I think there is a
Speaker 3: lot of sensitivity in the market right now around pricing,
Speaker 3: partly because of how badly tech stocks have performed in
Speaker 3: the last two years. But I also think because from
Speaker 3: many of these investors in Instacart and in ARM and
Speaker 3: in Clavio, it's not really just about these three companies
Speaker 3: about it's the opening up of the markets, and it's
Speaker 3: the ten fifty one hundred some even say two hundred
Speaker 3: companies who were looking at listing and were thinking about
Speaker 3: listing in twenty twenty one and missed the mark. There
Speaker 3: might not be quite that many who could go out
Speaker 3: in this market or into twenty twenty four, But for
Speaker 3: many of those investors, it's about these companies that are
Speaker 3: going to be going out after these IPOs, and they
Speaker 3: don't want to price this too high and have that
Speaker 3: impact the markets. And you know, interestingly, I spoke to
Speaker 3: a lawyer who worked on the Facebook IPO in twenty twelve.
Speaker 3: There was so much anticipation around the Facebook IPO. It
Speaker 3: was priced at the highest level that it could and
Speaker 3: the stock came down after it when public, The stock
Speaker 3: came down and kind of dampened the whole IPO market
Speaker 3: because it was such a big listing for about nine
Speaker 3: months after that. And so I think, given this is
Speaker 3: one of the biggest listings certainly since twenty twenty one
Speaker 3: when Revine went public, I think investors are focused on
Speaker 3: arm but they're also focused on the next set of
Speaker 3: companies to come out and don't want this, do not
Speaker 3: want the stock to collapse.
Speaker 2: Yeah, it's pretty interesting. You bring up meta Facebook now
Speaker 2: known as Meta Platforms and Rivian companies that have performed
Speaker 2: in completely different ways after hitting the public markets. Facebook's
Speaker 2: early problems notwithstanding, so I want to take a step back,
Speaker 2: and just in the last ninety seconds we have with you, Janey,
Speaker 2: talk about a completely different stage of a company, and
Speaker 2: that's of course venture capital, way before the founders are
Speaker 2: even thinking about an IPO. You do a lot of
Speaker 2: analysis on the state of venture capital. Where are things
Speaker 2: right now in terms of fundraising and in terms of
Speaker 2: availability of funds.
Speaker 3: Yeah, I think what we've seen is a huge pullback
Speaker 3: in the venture capital markets in twenty twenty two, from
Speaker 3: the second quarter and into twenty twenty three. And if
Speaker 3: you look back twenty twenty, there was north of three
Speaker 3: hundred billion globally that went into private venture back companies
Speaker 3: from seed all the way through to late stage. In
Speaker 3: twenty twenty one that doubled. It was north of six
Speaker 3: hundred billion. And what we're seeing possibly for this year
Speaker 3: in the pullback, it's going to be half of that.
Speaker 3: It'll be less than three hundred billion again. And I
Speaker 3: think the you know, the late stage market has largely evaporated,
Speaker 3: and that's because of the IPO markets that there aren't
Speaker 3: companies on a pipeline to go public. All of that
Speaker 3: money went in at the very late stage in anticipation
Speaker 3: of companies going public and that did not happen, and
Speaker 3: so that massively pulled back but ended up affecting actually
Speaker 3: every single stage pulled back as a result.
Speaker 5: Yeah, that's right. I mean, and you know, you point
Speaker 5: out that a lot of these companies have brought down
Speaker 5: their valuations here in this final stage. Janey's here, senior
Speaker 5: data editor at Crunchbase. Thank you so much for your
Speaker 5: insight on this really momentous and interesting IPO coming out tomorrow.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 2: Well, a few months ago, my brother sent me a TikTok.
Speaker 2: It just blew my mind. It was a demonstration of
Speaker 2: someone using photoshop. I mean, okay, like that sounds you know,
Speaker 2: why would I watch a TikTok of someone using photoshop? Well,
Speaker 2: it started with the picture of a locker room with
Speaker 2: sports equipment was strown everywhere, and then the person doing
Speaker 2: the demo was able to expand the borders of the image,
Speaker 2: and it seemed to magically grow to include other pieces
Speaker 2: of sporting equipment, more lockers. It just matched the scene perfectly.
Speaker 2: It actually looked like it was part of the original photo,
Speaker 2: even though it wasn't. It was a demonstration of the
Speaker 2: generative AI capabilities that Adobe, the maker of Photoshop Illustrated More,
Speaker 2: has built into its full suite of products. Well, today
Speaker 2: Adobe unveiling pricing for its new generative AI imaging tool Firefly.
Speaker 2: It's going to cost less than open AI's ca competitive
Speaker 2: competing service, Dolly, and you're to give us all the details.
Speaker 2: Is a Neil chakra Coffie President excuse me, a Neil Chakravati,
Speaker 2: President of Digital Experience Business at Adobe. He joins us
Speaker 2: on Zoom from San Jose, California, and Neil, good to
Speaker 2: have you with us this afternoon. So we were talking
Speaker 2: about AI a lot throughout the program today, and I
Speaker 2: think a lot of the credit to the interest in
Speaker 2: AA has to go to open ai and chat GPT
Speaker 2: just about a year ago. How long have you guys
Speaker 2: at Adobe you been working on these generative AI capabilities?
Speaker 13: Well, thanks for having me on the show. We've been
Speaker 13: working on AI what we call sense for well over
Speaker 13: ten years. And the kind of example that you just
Speaker 13: shared in your leadia in which we call generative phill,
Speaker 13: which is you take an image and then you can
Speaker 13: expand it and it'll fill it in for you. That
Speaker 13: is based on set of generative AI technologies has really
Speaker 13: come together in the last two years or so. But
Speaker 13: we'll put it all together with our knowledge of graphics vision,
Speaker 13: all the expertise we have around.
Speaker 5: M Yeah, Neil, I want to be clear as well.
Speaker 5: I have seen these TikTok's or these these reels, et cetera.
Speaker 5: They're amazing. I also neitsarily thought I was going to
Speaker 5: see a really boring video and it was very cool.
Speaker 2: It's like a whole like they like go viral. It's
Speaker 2: like a whole thing if you type it into TikTok
Speaker 2: and you.
Speaker 5: Shared one this morning, Tim, one with an iguana. You
Speaker 5: changed the setting. It's a forest, it's a beach.
Speaker 8: So cool.
Speaker 5: But what do people use this for? What's the commercial
Speaker 5: application here?
Speaker 12: Yeah? The commercial application.
Speaker 13: So if you think of any big brand, and if
Speaker 13: you think of how much content they produce for their
Speaker 13: marketing requirements, and you think of a TV campaign that
Speaker 13: they run, or when you think of content that they
Speaker 13: run in their digital campaigns, all these personalized campaigns where
Speaker 13: they have small segments of audiences that they.
Speaker 12: Want to reach.
Speaker 13: They might want to reach them via email, or through
Speaker 13: a mobile app, or through social media. So there's a
Speaker 13: lot of content that gets produced by virtually every big
Speaker 13: brand the world, and how they do it today is
Speaker 13: often it's a messy process. It's an expensive process, and
Speaker 13: they are not happy with you know, how long it
Speaker 13: takes or the kind of content that they produce, because
Speaker 13: it needs to be on brand, it needs to reflect
Speaker 13: their values, but also it needs to be appealing and beautiful.
Speaker 12: And that's really what we've focused on is how do.
Speaker 13: You take this power of this generative AI technology around
Speaker 13: Firefly make it available to marketers. And that's what we
Speaker 13: announced a product called gen Studio for brands to be
Speaker 13: able to take advantage of all of this technology and
Speaker 13: open the power of content creation to everybody in their
Speaker 13: marketing departments.
Speaker 2: One of the criticisms with AI has been, okay, well,
Speaker 2: a lot of what the generative AI relies on has
Speaker 2: been content created by people throughout the course of history,
Speaker 2: whether those are images, whether that is just text. In
Speaker 2: the case of chat GPT, it's always citing something that
Speaker 2: was created by a person. How do you make sure
Speaker 2: in this product that people are getting credit for images
Speaker 2: that they produced.
Speaker 13: Exactly, So you know, that's one of the big areas
Speaker 13: of focus for w right from the beginning, all of
Speaker 13: our products are designed to be commercially safe, which means
Speaker 13: that all of the training that we have done for
Speaker 13: Firefly and our generative AI technologies is with licensed content
Speaker 13: or content that's already in the public domain, and so
Speaker 13: that really enables us to be able to assure brands
Speaker 13: and marketers around the world that the content that's generated
Speaker 13: by this is commercially for safe and they can use.
Speaker 12: It in their campaigns.
Speaker 13: The other thing that we've done, in fact, our General
Speaker 13: con Chief Trust Officers spoke about it yesterday in Washington
Speaker 13: is really focused on what we call fair which is
Speaker 13: the Federal Anti Impersonation Right our support for making sure
Speaker 13: that artists get due credit for the intellectual property they'll
Speaker 13: produced that then gets used to.
Speaker 12: Train these AI models.
Speaker 13: That kind of transparency and making sure that there is
Speaker 13: benefit for everybody in the ecosystem is very important to us.
Speaker 5: That it will be Do you see AI products like
Speaker 5: this replacing the illustrators at Hollywood Studios for example? I mean,
Speaker 5: just considering the strikes that are going on there, do
Speaker 5: you see them replace you know, replacing the graphic designers
Speaker 5: that a lot of these companies would hire to make
Speaker 5: this kind of content.
Speaker 13: We see this AI as a copilot. We've often talked
Speaker 13: about the creative copilot that you get. This is if
Speaker 13: you think of, for example, how photoshopping the example that
Speaker 13: you use, how that people would use it. Usually they
Speaker 13: would start out with an image that they already had,
Speaker 13: and then they add layers to it, filters to it,
Speaker 13: and they make it more beautiful. So it's one way
Speaker 13: of starting the processes through this kind of genetic BAI
Speaker 13: where you can say you enter a prompt, it gives
Speaker 13: you a set of images, but then that's not the
Speaker 13: finished product. That's what you start with, and then the
Speaker 13: artist or the creative professional then goes on to use
Speaker 13: our tools and to make it on brand or make
Speaker 13: it much more visually appealing. So it's really the starting point.
Speaker 13: It's an iterative process and that's why it's really a copilot.
Speaker 13: It is not a replacement.
Speaker 2: And Neil I always like to ask people who are
Speaker 2: in your position what they visualize five ten years down
Speaker 2: the road. I mean, what we're seeing right now is
Speaker 2: pretty cool, and like I describe it, it is mind blowing.
Speaker 2: But if you could snap your fingers and create a
Speaker 2: product or create a feature, what does that look like?
Speaker 12: You know, five ten years around the road.
Speaker 13: When you think of how brands produce content, content will
Speaker 13: be individualized, personalized, the right content at the right time
Speaker 13: for every individual. Today, when companies or brands produce content,
Speaker 13: usually they produce one hero asset for example, as they
Speaker 13: call it, and then they use it in every campaign.
Speaker 12: They won't need to do that.
Speaker 13: You know, if you look out a few years from now,
Speaker 13: what they'll be able to do is produce beautiful content
Speaker 13: that's really personalized and appealing to every single individual. So
Speaker 13: if you and I are seeing a campaign from a brand,
Speaker 13: we might be seeing completely different images, completely different videos,
Speaker 13: but it'll be personalized to us and that will be
Speaker 13: made possible through this technology. O.
Speaker 2: Neil, thanks so much for taking the time and joining
Speaker 2: us this afternoon, especially on such a busy day for Adobe.
Speaker 2: That's a Neil Chakravati, President of Digital Experience Business at Adobe.
Speaker 2: Joining us on zoom from San Jose, California.
Speaker 1: You're listening to the Bloomberg Business Week Podcast. Catch us
Speaker 1: live weekday afternoons from three to six Eastern on Bloomberg Radio,
Speaker 1: the Bloomberg Business App, and YouTube. You can also listen
Speaker 1: live on Amazon Alexa from our flagship New York station,
Speaker 1: Just Say Alexa playing Bloomberg eleven thirty.
Speaker 2: Well, it's hard to believe it's already that time of
Speaker 2: year when Bloomberg Business Week on bils The Business Week
Speaker 2: B School Rankings. This is an assessment of one hundred
Speaker 2: and ten full time graduate MBA programs around the globe.
Speaker 2: It's based on data provided by participating schools, as well
Speaker 2: as responses historic questions about students nine had employers. The
Speaker 2: survey's gauge the participants level of satisfaction with learning, networking,
Speaker 2: career opportunities, skill development, and more. The person who has
Speaker 2: the herculean task of putting this all together each year
Speaker 2: is Dimitra Cassanidas, senior editor at Bloomberg Business Week. She
Speaker 2: joins us here in the Bloomberg Interactive Brokers Studio. You
Speaker 2: can read Dimetra's story on the Bloomberg Terminal and at
Speaker 2: Bloomberg dot com slash business Week and look for it
Speaker 2: next week in Bloomberg magazine, Bloomberg BusinessWeek magazine. Excuse me.
Speaker 2: Also with this is Joel Webber, the editor of Bloomberg
Speaker 2: business Week. Joel in our business they call an introduction
Speaker 2: like that bearing the lead. So come on.
Speaker 11: Five straight years again, Yeah again, they've done it again.
Speaker 11: What's in the water out there?
Speaker 8: Demitra something very special, lots of money, but.
Speaker 11: Don't choke them.
Speaker 8: The thing that makes you make money create businesses. No,
Speaker 8: I mean we're joking. There's a lot of you know,
Speaker 8: there's a lot of really important stuff that happens in
Speaker 8: a place that's right next to Palo Alto, that's in
Speaker 8: Silicon Valley, that's next to big tech companies and startups
Speaker 8: and entrepreneurs and whatever the hits are that those industries
Speaker 8: have taken this past year. It still really matters to
Speaker 8: a lot of people out there, and they it's just
Speaker 8: top class. So they are doing something right.
Speaker 12: So we do this every year.
Speaker 11: We've done this for many years. BusinessWeek has, yes, thirty
Speaker 11: six years us counting. And what's amazing is we it's
Speaker 11: all survey based, right, So how walk us through a
Speaker 11: little bit of the methodology about what goes into this
Speaker 11: so that eventually we have a ranking. In this particular instance,
Speaker 11: Stanford comes out on top of them.
Speaker 8: I mean we some of the other schools. It's survey
Speaker 8: based and it's data that is submitted based. B schools
Speaker 8: are required to submit a lot of data to other
Speaker 8: entities out there that deal with like compensation and various
Speaker 8: other things jobs and such. We require some of that
Speaker 8: same information from schools about the composition of their classes
Speaker 8: and how how much they're earning when they get out,
Speaker 8: how many students they have, and so on and so forth.
Speaker 8: And then at the same time, the key people that
Speaker 8: we think are most important in this whole universe are
Speaker 8: the recent grads. There's current students that are about to
Speaker 8: graduate alumnia over the past ten or so years, different
Speaker 8: classes and employers, and we ask them, you know, different
Speaker 8: questions to gauge whether they're satisfied with what they're learning
Speaker 8: in class, whether they think they're really being exposed to
Speaker 8: the kind of networking that you expect to get when
Speaker 8: you go to business school. That's a major one, you know.
Speaker 8: And then they also weigh in on some of the
Speaker 8: other factors that we get the data from the schools
Speaker 8: on and that all combines in a magical way with
Speaker 8: the work of Tim. You mentioned that I have the
Speaker 8: herculean task. I am not alone.
Speaker 2: I thought you did it all.
Speaker 8: We have an amazing team and the data visualization team,
Speaker 8: and the two analysts that are primarily responsible for this,
Speaker 8: Alex McIntyre and Matt Banamu, are the ones that really
Speaker 8: like pull that all together in a way that gives
Speaker 8: us this fantastic See still, still are you.
Speaker 2: Just saying their names? So they got hate too.
Speaker 8: I'm getting a hate mail, I'm hoping, Yeah.
Speaker 2: From Chicago, Darmouth, and Virginia.
Speaker 11: Okay, well let's get to those other schools, right, Yeah,
Speaker 11: So who else?
Speaker 8: Well, we've seen some consistencies, you know. Somebody just asked
Speaker 8: me a few minutes ago, like, come on, don't the schools, like,
Speaker 8: isn't it the same every year? And I'm like, no,
Speaker 8: it's not the same every year. I mean, Stanford's the
Speaker 8: same for five years, but six years ago it wasn't Stanford.
Speaker 8: We have the University of Virginia. This year jumped quite
Speaker 8: a bit because it's recent. Alumni reported starting you know,
Speaker 8: salaries and so their media and starting salary was significantly higher,
Speaker 8: like almost thirty thousand dollars higher than what had been
Speaker 8: reported by survey takers last year and the year before.
Speaker 8: Compensation does matter to people who go to business school
Speaker 8: might not be the primary factor, but it's an important one.
Speaker 8: You're going to pay all that money, You're going to
Speaker 8: do all that time for two years. You want to
Speaker 8: earn some good money. You want to pay back your
Speaker 8: student loans. You want to just know you're going to
Speaker 8: be okay. So UVA did very well this year. Several
Speaker 8: other schools moved up. Columbia moved up some. You see
Speaker 8: Berkeley has moved up. You know, you see across the
Speaker 8: board there are different factors that are boosting those scores.
Speaker 8: Whether it has to do again with the satisfaction they
Speaker 8: feel they got because of the job outcomes that they
Speaker 8: that worked out for them, or the comp or really
Speaker 8: sincerely feeling that they were just exposed to fantastic classes, teachers,
Speaker 8: learning and research. And you know, from year to year,
Speaker 8: that's what changes, and you do. You might not see
Speaker 8: it at the very top of the list, or maybe
Speaker 8: even at the very bottom, but you see movement in
Speaker 8: the list that's meaningful.
Speaker 5: Is there one category that really sets Stanford apart as
Speaker 5: opposed consistently?
Speaker 8: Well, we've seen, you know, we have these five key
Speaker 8: indexes and they're you know, compensation, learning, networking, entrepreneurship is
Speaker 8: the one that year in year out they are coming
Speaker 8: in first on among all the schools that we survey.
Speaker 8: And again that's not surprising, right given where they are,
Speaker 8: given the part of the country they're in the industry
Speaker 8: that they're very closely aligned with. It's it's an important
Speaker 8: one for them.
Speaker 12: Okay.
Speaker 11: The other thing to keep in mind here is that
Speaker 11: this isn't just a US ranking.
Speaker 12: It is not.
Speaker 8: It is an international ranking. Yes, now, we don't produce
Speaker 8: a global list, by the way, just to clarify, sometimes
Speaker 8: people think, oh, well, how come there's not one list
Speaker 8: with all the schools. Certain factors like our diversity index
Speaker 8: is really only for US schools. The way that we're
Speaker 8: able to measure that is not something we can apply
Speaker 8: to the international schools. The minute you introduce something like that,
Speaker 8: and then you can't really mix and match all the
Speaker 8: scores and say, well, what's the big long list. We
Speaker 8: look at schools in Europe, very strong, healthy market for
Speaker 8: business education Europe. We know right the ncads of the world,
Speaker 8: but there are schools that are up and coming that
Speaker 8: are doing great, like the number one school in Europe
Speaker 8: this year, Bouconi, which is a big school in Milan, Italy.
Speaker 8: You see other lots of schools in Spain. So our
Speaker 8: Europe rankings are part of this. Are Asia rankings, which
Speaker 8: are growing. We're really pushing because there's been a push
Speaker 8: that we know. It's not reflected in how many schools
Speaker 8: we have yet, but like India, another very healthy market
Speaker 8: for business education, and then Canada, so that's what we've got.
Speaker 2: Each year we do a broadcast from the number one
Speaker 2: business school in the US. We've been to Stanford for
Speaker 2: the past few years, but Joel, we haven't been to Milat.
Speaker 11: There's the ask.
Speaker 2: I'm just wondering if we're going to do an international broadcast.
Speaker 11: You put a ticket in, just don't subscribe me to it.
Speaker 12: We'll see.
Speaker 2: That's internal parlance for don't bother.
Speaker 7: Me about it.
Speaker 8: But I think I'll join you on that ticket. Yeah,
Speaker 8: I have a little bit of Italian I can draw
Speaker 8: that we'll be good, will be good.
Speaker 11: It's funny. I can already see it being like an
Speaker 11: extended stay, like we have to do a little dispatch
Speaker 11: and some research I have.
Speaker 5: We have to figure out why the business community there
Speaker 5: is so successful for these graduates.
Speaker 8: Of course Milan, Trada, Gucci, you know, fashion, Italian style
Speaker 8: and design, and it's not all that actually, no, it's
Speaker 8: not though. Lots of manufacturing, lots of consumer jobs to
Speaker 8: technology also coming out of schools like that. So you know,
Speaker 8: there are both of things you might immediately recognize in
Speaker 8: a place like Mulan, and then if you stop and
Speaker 8: you pull back, you know there are others that you
Speaker 8: might be a little surprised by.
Speaker 11: But okay, so the whole point of doing an NBA
Speaker 11: is that maybe it opened some doors that wouldn't otherwise open,
Speaker 11: and you have a new appreciation about how business works.
Speaker 11: You get some skills. What do people do when they graduate?
Speaker 8: They do lots of different things.
Speaker 7: What do you mean by jobs?
Speaker 11: Yeah, what industries are there?
Speaker 12: I mean, you know changing.
Speaker 8: We have been on the story this year on jobs
Speaker 8: and we all know this. Jobs have been tough this year.
Speaker 8: We know what's going on in the tech sector and
Speaker 8: what was going on really in the beginning of the
Speaker 8: year into the second quarter and beyond the consulting. So
Speaker 8: the top three industries are finance, consulting and tech. Finance had,
Speaker 8: you know, challenging industry this year. Cutbacks, contraction, consulting, same
Speaker 8: thing consulting unheard of in the past, started pulling back
Speaker 8: start dates and maybe even contemplating pulling back job. We
Speaker 8: have lots of students that we were in touch with
Speaker 8: on various questions where we have a back and forth.
Speaker 8: They give us their emails to just communicate and clarify answers.
Speaker 8: There were lots of responses and there were lots of
Speaker 8: things that were shared with us about the degree to
Speaker 8: which the consulting firms really had spooked lots of business
Speaker 8: school students across the country with jobs and technology, of course,
Speaker 8: but you know, the upside is we're seeing that at
Speaker 8: the same time that we're seeing a lot of new
Speaker 8: and interesting opportunities emerge. And AI is very scary for people,
Speaker 8: or something like chat GPT, which dominated the conversation, but
Speaker 8: it's not the only thing. The healthcare industry has a
Speaker 8: lot going on. There's a lot going on actually and
Speaker 8: consumer goods and even in media and entertainment. So there
Speaker 8: are ways in which the jobs are going to start
Speaker 8: to evolve. I think I don't think we're ever going
Speaker 8: to knock those three off the top three perches, you know, finance, consulting,
Speaker 8: and technology. But I think that the way that MBAs
Speaker 8: are taking the education, applying it, incorporating aspects of you know,
Speaker 8: climate change and how they're going to manage through challenging
Speaker 8: periods like what we see it every day in the news,
Speaker 8: I think the kinds of jobs are evolving and becoming
Speaker 8: just richer and more about, like it's not just that
Speaker 8: you lead a company. You lead a company in this
Speaker 8: world in these challenging times with many people that work
Speaker 8: for you, who have very different needs and what have you.
Speaker 8: So you know, it's it's becoming a much it's just
Speaker 8: many more pieces to it.
Speaker 5: Well, I guess one of the questions people ask is
Speaker 5: do you need to go to business school because I
Speaker 5: think there's this feed thought that you know, a lot
Speaker 5: of the results you're going to get from it are
Speaker 5: the people you're with, potentially, Sure, And it's interesting to
Speaker 5: see you we break down the learning component of these
Speaker 5: rankings and you'll notice that, with the exception of Virginia,
Speaker 5: the other ones in the top five are not there
Speaker 5: William and mary Georgia and Maryland Georgia Tech are the
Speaker 5: actually the top four. Would you say to someone who's saying,
Speaker 5: I don't know that I'm not necessary I'm necessarily going
Speaker 5: to learn very much from business school, And why are
Speaker 5: these folks doing it better? Maybe even than the top dogs.
Speaker 8: You know, I don't know that they're necessarily doing it better.
Speaker 8: I think respondence from those schools are giving them higher
Speaker 8: marks because it's just an area that isn't really dominating
Speaker 8: kind of the ethos and the discussion as much at
Speaker 8: the school in question. I think it's very simplistic to
Speaker 8: say that you're not going to learn something at business school.
Speaker 8: There are a lot of things you can learn at
Speaker 8: business school today when you really get into a school
Speaker 8: and just go and spend some time talking to people
Speaker 8: about the way their curriculum has evolved, how science isn't
Speaker 8: entering into it, the interdisciplinarity of it and all. There's
Speaker 8: a great deal that's changing and that you can really
Speaker 8: learn if you want to take advantage of it. It
Speaker 8: might not be for you, depending on what your goals are.
Speaker 8: Are you very happy in the job that you have
Speaker 8: right now? Do you see a path forward that doesn't
Speaker 8: require you to step off the path and maybe you
Speaker 8: get some more education. Are you achieving compensation wise what
Speaker 8: you want or are you at a point where you're
Speaker 8: really ready for a big cha. You always thought you
Speaker 8: had the makings of a manager or a leader of
Speaker 8: a business. You want to start your own company, So
Speaker 8: you have to really examine very carefully what you want.
Speaker 8: And there are so many ways that business schools today
Speaker 8: then are tailoring their programs. We measure full time MBA programs,
Speaker 8: but what you're seeing is there there's a drop off
Speaker 8: in applications and there's a concern about enrollment in these
Speaker 8: programs too, and there are a lot of reasons for it.
Speaker 8: And one of the reasons is because coming out of
Speaker 8: the pandemic. But even earlier, there are many ways that
Speaker 8: you sitting in your job, I Dimitri could decide, Hey,
Speaker 8: I'm gonna ask Bloomberg to assign me to a different beat,
Speaker 8: so there's no conflict because I'd like to go to
Speaker 8: business school, but I don't want to give up my job.
Speaker 8: And I love this program at UCLA, but I don't
Speaker 8: live in Los Angeles. But you know what, I can
Speaker 8: do it remotely and in three years, I can have
Speaker 8: a specialization in something that is really going to move
Speaker 8: me in a direction in whichever industry it is that
Speaker 8: I think is going to be most sort of suitable
Speaker 8: for me. And there's a lot of that happening. Data
Speaker 8: analytics is the most popular specialization in business school programs
Speaker 8: right now. So it's those kinds of things, and you
Speaker 8: have to look beyond just like full time MBA two year,
Speaker 8: which is what we measure, okay, but there's a lot
Speaker 8: going on in ways that can really enhance what somebody
Speaker 8: is going to do.
Speaker 2: I think one question you'd have to ask yourself, simone,
Speaker 2: is how much do you like partying and trips to
Speaker 2: Cancre because that was a big part of my business
Speaker 2: school experience. Is if that's further and further in the
Speaker 2: rear view.
Speaker 8: There are great parties in it, right.
Speaker 2: The parties are ridiculous, Demitra. We only have about a
Speaker 2: minute left, but I want to talk about that diversity
Speaker 2: index here. It's not new this year necessarily, but there
Speaker 2: are parts of it that are that are new. Talk
Speaker 2: a little bit about just the rankings there and lack
Speaker 2: of overlap between the top tens or what you're seeing.
Speaker 8: It continues to be a challenging area. It's tough to
Speaker 8: sail out right now because I think there's a lot
Speaker 8: also that we're not gonna that we're not quite clear
Speaker 8: on how it's evolve. For the schools that are going
Speaker 8: to be most directly affected by the Supreme Court decision,
Speaker 8: the affirmative Action decision. You know, some schools, like California schools,
Speaker 8: for example, will not be affected. So it's really tough.
Speaker 8: I what I can say is that schools are very concerned.
Speaker 8: Schools have been very focused on trying and working at
Speaker 8: it's a it's a tough nut to crack. I historically,
Speaker 8: you know, used to work covering big law firms. I
Speaker 8: don't I think that there's a ways to go. We're
Speaker 8: going to keep doing our index, We're going to keep
Speaker 8: trying to build on that, and schools are going to
Speaker 8: have to find a way to really kind of level
Speaker 8: the playing field, I guess, and open it up to more.
Speaker 2: Dimitro Cassini's at Bloomberg BusinessWeek and Joe Weber, the editor
Speaker 2: of the magazine, This is bloombergmark.
Speaker 12: A journal.
Speaker 11: How about you let me drive no, no, honey, please,
Speaker 11: I want to drive.
Speaker 2: It's a good question time.
Speaker 1: This is good drive to the clothes on Bloomberg Radio.
Speaker 2: It's hard to believe we're already there, just shy at
Speaker 2: eighteen minutes until the close of US markets here, Yes,
Speaker 2: I shouldn't say US equity markets. We're very pleased at
Speaker 2: back with us. Amanda Agatti, chief investment officer at PNC
Speaker 2: Asset Management Group. She joins us once again on Zoom
Speaker 2: from Philadelphia. Amanda, whenever you join us, I always think
Speaker 2: of the twelve Days of Christmas that you guys do
Speaker 2: each and every year. But it's it's full, it's not
Speaker 2: winter yet, so we're not quite there yet.
Speaker 14: Are we We're not quite there, but we're starting the
Speaker 14: work to put the analysis together. So it's going to
Speaker 14: be here before we know it. We're talking about back
Speaker 14: to school shopping, but we'll be ready for the holiday
Speaker 14: shopping season just a few short months.
Speaker 2: Okay, that sounds good. In the meantime, what do things
Speaker 2: look like in the markets between now and then when
Speaker 2: it comes to equities and what comes to fixed income.
Speaker 14: We think it's going to be kind of a choppy
Speaker 14: second half here. I think if you think about all
Speaker 14: of twenty twenty three. We really feel like it's going
Speaker 14: to be very different in the second half, almost a
Speaker 14: tale of two halves. I think, you know, based on
Speaker 14: what you're seeing today in terms of the CPI report
Speaker 14: coming in a little hotter than expected, a little bit
Speaker 14: of an acceleration there, that's kind of setting the tone
Speaker 14: for what we're likely to see in the balance of
Speaker 14: the year.
Speaker 7: Here.
Speaker 14: We think the market's just going to continue to be
Speaker 14: a little choppy, if not range bound, until we can
Speaker 14: get a little bit of clarity on some of the
Speaker 14: trajectory of key data points to tell us whether we're
Speaker 14: heading for that soft landing or we're just going to
Speaker 14: power right through that no landing scenario.
Speaker 5: Were there any bits and pieces of today's CPI report
Speaker 5: that really stuck out, struck stood out to you? Excuse me,
Speaker 5: so now to you. One of the things that Mike,
Speaker 5: that's Stuart Paul, our us economist here at Bloomberg Economics,
Speaker 5: was saying, was new car prices were his, what's yours?
Speaker 14: Well, we certainly we saw rents move in the right direction,
Speaker 14: aka a bit lower. We're seeing a little bit of
Speaker 14: a frothiness come out of auto. So that's great to
Speaker 14: see but there's still a lot of stickiness on the
Speaker 14: services side of the equation. It's notorious in terms of
Speaker 14: being sticky here, and so I think for us, it's
Speaker 14: not necessarily one data point that's confirming a trend. I
Speaker 14: think we need to see a few more of these
Speaker 14: CPI reports of a similar tone overall, that the stickiness
Speaker 14: is here and that there's still a little bit of
Speaker 14: acceleration likely ahead. But I think the CPI reports are
Speaker 14: just going to continue to be a little choppy here.
Speaker 14: I don't think that this one data point confirms what
Speaker 14: the FED should do next. We don't think that they're
Speaker 14: going to take action at the September meeting, but I
Speaker 14: do think there's still potentially at least one more rate
Speaker 14: hike in play. We're not at the fed's long term target,
Speaker 14: so they still have plenty of ammo to take another
Speaker 14: step if they feel like they need to.
Speaker 1: Is there.
Speaker 2: Are you concerned that they have over tightened or they
Speaker 2: could over titan.
Speaker 14: Well, we're certainly in restrictive territory. From a policy perspective,
Speaker 14: there's no question that financial conditions are tight here. But
Speaker 14: I think what's surprising is that the consumers hanging in there,
Speaker 14: we're starting to see some weakness. We're starting to see
Speaker 14: a little bit in terms of cracks around consumer behavior,
Speaker 14: but labor market continues to be strong. Wage growth is
Speaker 14: on a real tear here, even with a lagged effect,
Speaker 14: So there's still a decent amount of underlying strength even
Speaker 14: as growth overall is slowing here. And so I don't
Speaker 14: think we can talk too much about policy error misstep
Speaker 14: just yet because we're still in positive, though decelerating growth territory.
Speaker 14: I think the question is much more not whether they
Speaker 14: take one more step to tighten policy or not, but
Speaker 14: how long they keep rates at these fairly restrictive levels.
Speaker 14: We continue to say we're in a longer for longer dynamic.
Speaker 14: This whole process is just going to take a lot
Speaker 14: longer than what any of us investors would like to see,
Speaker 14: and so I think that's probably more important for the
Speaker 14: market's path forward than whether it's one hike in the
Speaker 14: balance of the year or not.
Speaker 5: You guys mentioned back to school just a few seconds ago.
Speaker 8: What are you sake with back to school?
Speaker 14: Well, I guess we're going to get a pretty important
Speaker 14: retail sales report tomorrow, so I guess I could tell
Speaker 14: you more after I see that report, but I think
Speaker 14: it's going to be a very important indicator for the
Speaker 14: health of the consumer and what you know, consumer behavior
Speaker 14: consumption trends look like. I think we're seeing a pretty
Speaker 14: significant shift away from a lot of big ticket discretionary spending.
Speaker 14: That's not new news. We've been on that trend for
Speaker 14: a while, but I think more recently we're starting to
Speaker 14: see the more consumer staples, you know, essentials be the
Speaker 14: area of focus. And then I think the wild card
Speaker 14: that's not getting a ton of attention out there is
Speaker 14: student loan payments coming back online here. It's going to
Speaker 14: put a lot of pressure on consumers at a time
Speaker 14: where they're already feeling the pinch.
Speaker 2: Well, could that have the effect of doing the Fed's
Speaker 2: work for it?
Speaker 14: Oh? Absolutely, it could, Yes, yes, and we do think
Speaker 14: that it will. And we also think that all of
Speaker 14: the FED policy tightening that we've seen so far hasn't
Speaker 14: fully been born out in the economy here, that there's
Speaker 14: this long lagged effect and so some of it certainly
Speaker 14: is having an impact, but there's still a decent amount
Speaker 14: of room to go. And that's why I'm saying, at
Speaker 14: the end of the day, what matters most is how
Speaker 14: long they keep rates at these levels, as to what
Speaker 14: happens with the markets path forward, and certainly whether we
Speaker 14: ultimately tip into contraction or not. But that's an underappreciated risk. Certainly,
Speaker 14: the student loan payment you know situation as it relates
Speaker 14: to consumers very much an underappreciated risk going in a
Speaker 14: bounce of the year.
Speaker 2: Yeah, I'm really interested in this, So talk a little
Speaker 2: bit about where the risks are and who would see
Speaker 2: the result of those payments increasing apart from the apart
Speaker 2: from the people who have to pay those student loans back.
Speaker 14: Well, I think it's just a general pressure on the
Speaker 14: US consumer in general. I mean, seventy percent of consumption,
Speaker 14: you know, seventy percent of GDP growth and GDP related
Speaker 14: activity in this country is tied to consumption. And so
Speaker 14: the consumer's been the lifeline over the course of the cycle,
Speaker 14: but much better shape given how late in the innings
Speaker 14: we are this time around relative to past cycles. And
Speaker 14: so this, you know, student loan debt coming back online,
Speaker 14: these payments coming do is hitting very very late in
Speaker 14: the innings, and so I think it does have the
Speaker 14: potential to zap a lot of consumer health here and
Speaker 14: may put the brakes on consumer spending and consumer behavior
Speaker 14: much faster than I think what the market's no landing
Speaker 14: scenario is pricing for this.
Speaker 5: Year, we've only got about minute left, But how do
Speaker 5: you position for the coming environment, this longer for longer
Speaker 5: scenario that you've described.
Speaker 14: Well, we have been leaning very hard into quality exposures
Speaker 14: all year, which has certainly served us well. But in general,
Speaker 14: we've been very focused on running a defensive playbook. To us,
Speaker 14: that doesn't mean raising a ton of cash and moving
Speaker 14: to the sidelines. It's staying very well diversified, leaning into quality,
Speaker 14: as I said, not taking big bets, staying pretty close
Speaker 14: to longer term strategic targets. And then what we haven't
Speaker 14: really talked about too much is what's going on the
Speaker 14: fixed income side. We're absolutely dialing back a lot of
Speaker 14: below investment grade credit oriented exposures in this environment, investors
Speaker 14: aren't being paid to take on that kind of risk
Speaker 14: at these credit spread levels, and so leaning on that
Speaker 14: side of the equation into investment grade as well.
Speaker 2: Amanda Gotti, we love it when you join us, and
Speaker 2: we've got to come back at least one time between
Speaker 2: now and the holidays. To give us an update on
Speaker 2: how you're looking at the rest of the year until
Speaker 2: we do get too hard to births September talking about
Speaker 2: yet spooky Amanda Gotti's chief investment officer at the PNC
Speaker 2: Asset Management Group, joining us once again on Sale's from Philadelphia.
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