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Speaker 2: This is Bloomberg business Week inside from the reporters and
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Speaker 2: global business, finance and tech news. The Bloomberg Business Week
Speaker 2: Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 1: Hi, everyone, Welcome to the Bloomberg Business Week Weekend Podcast. Yes,
Speaker 1: it's a big weekend Super Bowl fifty eight usher in
Speaker 1: the halftime show and betting on whether or not Taylor
Speaker 1: will be mentioned in the MVP speech, Assuming Tim of
Speaker 1: course it goes to her boyfriend Travis Kelsey of the
Speaker 1: Kansas City Chiefs, who we all know are playing the
Speaker 1: San Francisco forty nine ers in the Big Game. I mean,
Speaker 1: there's a lot of betting going on it.
Speaker 3: I'm making a lot of assumptions here, Carol, like, you
Speaker 3: know who wins. Who's there?
Speaker 1: MVP said? If?
Speaker 3: Okay? Said if okay, okay, okay. So we'll talk all
Speaker 3: about that beat on the Big Game. Of course, we're
Speaker 3: going to do that in the next hour with bet
Speaker 3: mgm CEO Adam Greenblatt. Also, because we're not done with
Speaker 3: earning season yet, we had quite a bit this week.
Speaker 3: We heard from Uber Win, got upside surprises from Disney Ford,
Speaker 3: a blockbuster surprise from arm Holdings. Check out all the
Speaker 3: details at Bloomberg dot com and of course on the
Speaker 3: Bloomberg terminal, and got to.
Speaker 1: Say they were coming fast and furious. We thought we
Speaker 1: were at the end of earning season, but not quite yet.
Speaker 1: And we also heard from a space that we all
Speaker 1: like to talk about food because you like to eat
Speaker 1: a lot.
Speaker 3: Tim, Yeah, all that talk of food makes me hungry.
Speaker 1: Surprise surprise, well, Tim, Like I said, we did get
Speaker 1: results from players in the fast casual and fast food
Speaker 1: space this week. McDonald's Young Brands and Chipotle Mexican Grill,
Speaker 1: also from a big healthcare name and from the maker
Speaker 1: of Barbie and hot wheels. And so we're going to
Speaker 1: kick off this hour with Chipotle Mexican Grill. The stocks
Speaker 1: storing to a record high, a lot of analysts upgrading
Speaker 1: their price targets following their quarterly update. It was a
Speaker 1: big report.
Speaker 3: It was a big report. I also had a hard
Speaker 3: time focusing because all I was thinking about was eating
Speaker 3: like a burrito bowl.
Speaker 1: Wait, wait up, the press is Tim is hungry again?
Speaker 1: All right?
Speaker 3: Fourth quarter sales and profit beat expectations as both transactions
Speaker 3: and check sizes rose, defying fears of waning consumer sentiment.
Speaker 3: Same store sales growth it's a gauge that tracks restaurants
Speaker 3: open for more than a year. That came into eight
Speaker 3: point four percent, whereas analysts expected seven point one percent,
Speaker 3: So a beat there as well. Revenue came in above
Speaker 3: expectations at two point five to two billion dollars.
Speaker 1: Yeah, investors like those numbers. Brian Nickel, chairman and CEO
Speaker 1: of Chipotle, dropped in again, joining from the company's headquarters
Speaker 1: in Newport Beach, California.
Speaker 4: Look, I think what we believe is happening is our
Speaker 4: operation is executing better than we ever have and frankly,
Speaker 4: we've just been on a journey to get back to
Speaker 4: executing this business to Chipotle standard. So you know, we
Speaker 4: feel great about our staffing, we feel great about our culinary,
Speaker 4: we feel great about our speed, and I think that's
Speaker 4: why we're being rewarded with customers coming in. And you
Speaker 4: saw the comp that we delivered that was driven by
Speaker 4: transaction growth, right, that eight percent plus com was driven
Speaker 4: by seven point four percent transaction growth, And I think
Speaker 4: that's a testament to what our teams are doing in
Speaker 4: our restaurants on all those areas that I just mentioned.
Speaker 1: Brian, great to be talking with you again. Dig a
Speaker 1: little bit deeper for us. First of all, that same
Speaker 1: story of sales growth really blown away analyst expectations. Is
Speaker 1: that sustainable you think in the current quarter and maybe
Speaker 1: throughout the year to see that kind of growth.
Speaker 4: You know, what we've guided is mid single digits for
Speaker 4: the year in twenty twenty four. And you know, the
Speaker 4: way we take this approach is we want to make
Speaker 4: sure we've got a strong value proposition, which based on
Speaker 4: all our data, we continue get feedback that the value
Speaker 4: proposition is really strong. And then we want to make
Speaker 4: sure that when customers come in, they get the experience
Speaker 4: that they want. And so what we've seen over the
Speaker 4: fourth quarter and as we walked into the first quarter
Speaker 4: is people are telling us they like what they see.
Speaker 5: You know, our teams are in position, our.
Speaker 4: Food is ready to go, the culinary is dialed in,
Speaker 4: it tastes delicious, and we're working really hard on the
Speaker 4: speed aspect so that people don't have to stand in
Speaker 4: line too long, so they get down the line, get
Speaker 4: to the business of enjoying their breed over bowl. I
Speaker 4: think we stay focused on that will continue to deliver
Speaker 4: really good results.
Speaker 1: You know, I'm curious. You know, others in the space,
Speaker 1: something like a McDonald's, they've talked about low income consumers
Speaker 1: pulling back on their spending. You guys, your consumer base,
Speaker 1: what do you expect in terms of us consumer behavior
Speaker 1: this year? What can you tell us about how the
Speaker 1: consumer is doing and how they are spending? Because you
Speaker 1: do talk about transactions up check size is rising, but
Speaker 1: what more can you give us in terms of how
Speaker 1: the consumer.
Speaker 4: Is Yeah, you know, so we look at this very
Speaker 4: closely as well. And first we start with what are
Speaker 4: people's perceptions of our brand? And the perceptions are really
Speaker 4: strong right now. You know, people are getting the idea
Speaker 4: that we're all about fresh food, we're all about food
Speaker 4: with integrity. They're getting the idea that, hey, this is
Speaker 4: a great value when I think about what I pay for,
Speaker 4: what I get, the customization, the speed. Okay, And so
Speaker 4: when we look at this among different income cohorts, so
Speaker 4: less than forty thousand, between forty thousand, one hundred thousand,
Speaker 4: over one hundred thousand, we're seeing we're making progress in
Speaker 4: every and so we've seen sales gains with every income group.
Speaker 5: One thing that I think is.
Speaker 4: Happening is especially the lowering consumer, they are saying, hey,
Speaker 4: we're going to be really choosy with the money that
Speaker 4: we choose to spend. You've got to give us what
Speaker 4: we want on our terms. And one of the things
Speaker 4: that's really great is Chipotle's able to do that.
Speaker 5: Right.
Speaker 4: We can get you the exact food experience that you want,
Speaker 4: hopefully at a speed that delights you, and then when
Speaker 4: you walk away, you feel like you know that was
Speaker 4: money well spent and I'm going to come do it again.
Speaker 1: Well, let me go back to comp sales in terms
Speaker 1: of your outlook that you guys put Brian, why do
Speaker 1: you think you see growth though continuing but at a
Speaker 1: slower slightly slower space I mean pace? Excuse you?
Speaker 5: I think, yeah, yeah, I Look.
Speaker 4: The way we think about this is we want to
Speaker 4: continue to focus on executing the basics. Obviously, January we
Speaker 4: had to deal with some bad weather across the country.
Speaker 4: The good news is the days where we haven't seen
Speaker 4: bad weather, the businesses strengthen right back up, and so
Speaker 4: we're optimist sick about where we can get to You know,
Speaker 4: we've switched back to what our pre pandemic practice was
Speaker 4: was just guiding for the full year. You know, Hopefully
Speaker 4: what happens is we're able to beat those expectations. That's
Speaker 4: always our goal, and we'll see how it all unfolds
Speaker 4: over the course of the year. But we're set up
Speaker 4: very well to open a lot of restaurants deliver I think,
Speaker 4: really strong in store experiences and digital experiences, which hopefully
Speaker 4: we'll build on the momentum that we've achieved thus far.
Speaker 3: Hey, Brian, let's talk more when it comes to labor.
Speaker 3: Fifteen percent of your restaurants are in California. You're joining
Speaker 3: us from Newport Beach right now. We saw California minimum
Speaker 3: wage raised this year to sixteen dollars per hour. It's
Speaker 3: going to continue to rise this year and over the
Speaker 3: next few years. How else, apart from raising prices, is
Speaker 3: Chipotle going to cope with California's new minimum wage law.
Speaker 5: Yeah.
Speaker 4: Look, I mean we're always working hard on what can
Speaker 4: we do to be more efficient so that we don't
Speaker 4: have to pull the pricing lever.
Speaker 5: You know, you've heard us talk about things.
Speaker 4: Like Autocato, where we're automating how we cut core scoop avocados.
Speaker 5: We're working on some things automating our digital make line.
Speaker 5: We're also exploring.
Speaker 4: Things on how we could potentially cut our onions peppers
Speaker 4: in the restaurants in a more efficient fashion. So we're
Speaker 4: going to invest in those things. The unfortunate fact is
Speaker 4: the wage increases moving much faster than these efficiencies that
Speaker 4: we're going to be able to find, So price will
Speaker 4: be part of the puzzle in order to handle the
Speaker 4: inflation that's looming. But we're going to do everything we
Speaker 4: can to avoid having to pull that pricing lever.
Speaker 5: And you know, you'll continue to see us.
Speaker 4: Innovate on what we're calling cobotics, so hopefully we can
Speaker 4: make the job more efficient, more effective.
Speaker 5: Team members like it and it gives.
Speaker 4: The great culinary output that our customers have come to expect.
Speaker 1: Totally get it. Other costs, other input costs, coren avocados,
Speaker 1: the cost of ingredients. What are we seeing on that front?
Speaker 1: Are you seeing prices actually going down or increases not
Speaker 1: as significant as they were before? What can you tell
Speaker 1: us there?
Speaker 5: Yeah, yeah, that's right.
Speaker 4: We're not seeing any deflation, but we've definitely seen a
Speaker 4: slowdown in the inflation. You know, it's more in the
Speaker 4: load to mid single digits. There's a couple of pockets
Speaker 4: where we're still watching things like on beef. We're always
Speaker 4: careful with where the avocado market might be moving. But
Speaker 4: for the most part, that's I would say started to normalize,
Speaker 4: with exception of a few pockets of inflation.
Speaker 5: That we're still dealing with.
Speaker 3: Brian, do you see yourself raising prices this year?
Speaker 4: You know, we always try to wait till we get
Speaker 4: to about the end of the year to assess what
Speaker 4: we think we need to do. You know, obviously this
Speaker 4: California minimum wage movement, we'll have to assess how that
Speaker 4: it really impacts the business and we'll take action accordingly.
Speaker 4: But for the bulk of the business, we usually wait
Speaker 4: till around the end of the year, see where all
Speaker 4: the inflation lands, see where our growth lands, see where
Speaker 4: our productivity lands, and then if we need to retake pricing,
Speaker 4: usually in that one two to three percent range.
Speaker 1: Hey, one thing I'm thinking about also, and we saw
Speaker 1: it play out with some others about the impact of
Speaker 1: the Middle East East conflict. You guys last year talked
Speaker 1: about entering Kuwait and the UAE this year. Has the
Speaker 1: conflict in the Middle East Brian impacted that timeline at all.
Speaker 5: Yeah, not yet.
Speaker 4: Our partner over there is the Alshinty Group, and they're
Speaker 4: a terrific operator. They have a lot of brands and
Speaker 4: a lot of experience of operating over there. So as
Speaker 4: of right now, we're still on schedule to open this year. Obviously,
Speaker 4: they will be the first ones to tell us that
Speaker 4: if we need to change that timeline. The good news
Speaker 4: is we think they're a great partner. We think they're
Speaker 4: a great operator, and I think the folks are going
Speaker 4: to love Chipotle when we're able to finally open our
Speaker 4: restaurant in that part of the world.
Speaker 1: Speaking of timelines, I've got two quick questions for you.
Speaker 1: You have been at the company for almost I think
Speaker 1: you're coming up on your six year anniversary. How are
Speaker 1: you thinking about that timeline? I mean, investors are happy
Speaker 1: stock is up almost one thousand percent in that time,
Speaker 1: So how are you thinking about kind of the next
Speaker 1: leg of that timeline for you? Because I've got to
Speaker 1: imagine there are people knocking at your door saying can
Speaker 1: you come do what you did for jibotlet for us?
Speaker 1: And I'm also curious if there's any timeline for stock
Speaker 1: split because it's an expensive stock.
Speaker 5: Yeah, yeah, sure.
Speaker 4: Look, what I hope is the next six years are
Speaker 4: like what these last six years were from a total
Speaker 4: performance standpoint. I could do without some of the macro shots.
Speaker 4: But you know, it's been a tremendous honor leading this brand.
Speaker 4: We've got wonderful people, We've got a terrific purpose and
Speaker 4: product that we provide, and I couldn't be happier to
Speaker 4: be leading this company.
Speaker 5: And I'm really excited about all the growth that's in
Speaker 5: front of us.
Speaker 4: You know, we're going to go from thirty five hundred
Speaker 4: restaurants to seven thousand restaurants. We're going after four million
Speaker 4: average unit volumes, so there's just tremendous growth in front
Speaker 4: of us, which I'm super excited about. Yeah, you know,
Speaker 4: everybody asked us about the stock split.
Speaker 5: We'll have to wait and see what city rated.
Speaker 1: It's now like a street high over three thou to
Speaker 1: get for you to split.
Speaker 3: Yeah, briefly, is there a level?
Speaker 5: You know what?
Speaker 4: We never have a defined level, but it's something we
Speaker 4: talk about and if it makes sense to do.
Speaker 6: We'll do.
Speaker 3: That was Brian nic Old chairman and CEO of Chipotle
Speaker 3: Mexican Grill. Other names and restaurants reporting recently include McDonald's
Speaker 3: and Young Brands. That was this last week, and we
Speaker 3: got Starbucks last week, and you can check it all
Speaker 3: out at Bloomberg dot com or on the Bloomberg terminal.
Speaker 3: Michelle Cosmos, CEO of the National Restaurant Association. It's the
Speaker 3: business group that represents the industry and includes about a
Speaker 3: million restaurant in food service outlets among its members. She's
Speaker 3: stopped by as well with an update on the overall
Speaker 3: restaurant industry.
Speaker 7: It's exciting actually in the restaurant industry right now. What
Speaker 7: we're looking at in our State of the Industry report
Speaker 7: for twenty twenty four is that the sales numbers should
Speaker 7: be above one point one trillion dollars, so a huge
Speaker 7: economic driver if you look at sales in the restaurant industry,
Speaker 7: which everybody's very excited about. Of course, the sales numbers
Speaker 7: don't tell the whole story correct much to what you're
Speaker 7: talking about.
Speaker 1: And we see and when you throw it at number
Speaker 1: like one point one trillion, is that above pre pandemic?
Speaker 1: Like give us a number a loan, But give us right.
Speaker 7: We are now above pre pandemic. Last year was the
Speaker 7: beginning of coming back to pre pandemic numbers, and so
Speaker 7: it's great to see that kind of growth in the
Speaker 7: restaurant industry. But again it's sales numbers that.
Speaker 1: We're talking about here.
Speaker 7: Is that because of higher prices, higher prices and of
Speaker 7: course we also see higher expenses.
Speaker 3: Well, I want to talk about that a little bit
Speaker 3: specifically when it comes to wages, because California, for example,
Speaker 3: is sixteen dollars minimum wage right now. A large portion
Speaker 3: of your members are working in restaurants or have restaurants
Speaker 3: where minimum wage is par For the course, what is
Speaker 3: your position when it comes to a national minimum wage
Speaker 3: and the increase that we're seeing in a lot of
Speaker 3: different states where there is a higher standard of living.
Speaker 7: At the National Restaurant Association, we really love to be
Speaker 7: engaged in that wage conversation because it's so important to
Speaker 7: our members because they're trying to find great workers at
Speaker 7: a great workforce. And part of how you do that
Speaker 7: is find that nice balance between trying to ensure profitability
Speaker 7: in an industry that has tremendously low margins three to
Speaker 7: five percent on average and then also trying to attract
Speaker 7: great workforce. And so what we found is that the
Speaker 7: wage question is really one that happens and the conversation
Speaker 7: happens at a local level, more at the state level,
Speaker 7: at the local level than at the federal level, without
Speaker 7: a doubt. And anytime you're in a place where you
Speaker 7: want to talk about what's going on with the minimum
Speaker 7: wage at the federal level or at the state local level,
Speaker 7: we want to be in that conversation.
Speaker 1: Is it problematic? Though? When it gets to twenty dollars
Speaker 1: an hour, I'm looking at that's what eight hundred dollars
Speaker 1: a week, right, that's thirty two hundred dollars a month.
Speaker 1: I mean we're not talking about you know, if you
Speaker 1: bring it out to the annual level, most folks would say, wow,
Speaker 1: that's just somebody maybe getting by barely. And if you
Speaker 1: have kids or something, it's going to be even more problematic.
Speaker 1: So I do wonder, you know, restaurants used to be
Speaker 1: kids in high school and kids you know, who weren't
Speaker 1: supporting families, that kind of thing. It's changed dramatically, So
Speaker 1: is that part of their thinking about the type of
Speaker 1: workers that they are essentially hiring, Like who are they.
Speaker 7: Well, it's interesting. We'd love to have more and more
Speaker 7: of those kids learning how to work in the restaurant industry.
Speaker 7: But the other thing that's true in the restaurant industry
Speaker 7: is people tend not to be in those minimum wage
Speaker 7: jobs very long. What we find is there's a lot
Speaker 7: of mobility. So if people are in the jobs that
Speaker 7: are the types that are at the lower wage levels,
Speaker 7: they usually are in those jobs because they like the
Speaker 7: convenience of the schedule. There's something else about that particular
Speaker 7: position that appeals to them. But those that have any
Speaker 7: kind of longevity in the industry will see those those
Speaker 7: individuals kind of go into other management types of roles
Speaker 7: where they are bringing in more money. And depending on
Speaker 7: the restaurant. If you look at a full service restaurant,
Speaker 7: especially in an environment where there's tipping, you can have
Speaker 7: very well compensated employees across the restaurant.
Speaker 3: What about when it comes to other expenses that we've
Speaker 3: seen rise over the last couple of years, inputs like dairy,
Speaker 3: inputs like meat, other food costs that have gone up.
Speaker 3: What are you hearing from members? Is that stabilized at
Speaker 3: this point?
Speaker 7: It's stabilized what's interesting about the varying food cost increases
Speaker 7: is that it's never consistent. So you see dairy prices
Speaker 7: or egg prices that will go up, meat prices that
Speaker 7: will go up, and they will often come back down.
Speaker 7: They chicken prices of chicken prices yep, have come down.
Speaker 7: So those things will vary over time depending on what
Speaker 7: those larger macro pressures are. But what they've found then,
Speaker 7: for a restaurant is that it's really important for them
Speaker 7: to be tremendously agile in the way that they're managing
Speaker 7: their food costs and the way that they're thinking about
Speaker 7: the menu that they're putting together for their customers.
Speaker 1: So they change the menu, they change the menu to
Speaker 1: it to either cut the costs right, the input costs
Speaker 1: right yep, And so they do that. That's interesting. Well,
Speaker 1: go back to McDonald's though for a moment, because you know,
Speaker 1: they specifically had warned about some of the concerns in
Speaker 1: the Middle East. They've been a target and some would
Speaker 1: say rightfully so, but nonetheless it hasn't had an impact
Speaker 1: on the bottom line, but growth in some of their
Speaker 1: other regions we can as well. We talked a little
Speaker 1: bit about the US market overall. Are people any of
Speaker 1: your members you sound very upbeat, Are any of them
Speaker 1: talking recession or slow down? In consumers? Consumers trading down?
Speaker 7: So what we hear about consumers is a desire for value,
Speaker 7: and we see that in trading town. It's not necessarily
Speaker 7: trading down. What they're interested in is a deal in
Speaker 7: many cases. So when we do our consumer surveys, what
Speaker 7: we found is that seven out of ten of consumers
Speaker 7: are looking for some kind of value. And you'll notice
Speaker 7: that a lot of restaurants now will use apps and
Speaker 7: loyalty programs where you get discounts in those apps and
Speaker 7: among those loyalty programs. And that's part of how restaurants
Speaker 7: are trying to appeal to consumers to come back to
Speaker 7: their restaurant time and again. Because we know that even
Speaker 7: though consumers are concerned about the bottom line and concerned
Speaker 7: about what's in their pocketbook, they still want to enjoy restaurants.
Speaker 7: And so the question is how do we want to
Speaker 7: make sure that they're coming into your particular restaurants.
Speaker 3: So how do restaurants do that? I mean, on one end,
Speaker 3: you have employees who are about to get paid twenty
Speaker 3: dollars an hour minimum wage in California in just a
Speaker 3: few months. On the other side, you want customers who
Speaker 3: want value, so they want their dollar to go further.
Speaker 3: Where does that leave your members?
Speaker 7: I think you figured out why the restaurant business is
Speaker 7: a tough business to manage. What our members are really
Speaker 7: doing is trying to balance bringing people in for that
Speaker 7: value and then knowing that there still has to be
Speaker 7: profitability in that menu. And so you're going to see
Speaker 7: You're going to see that change in pricing. But the
Speaker 7: other thing you're going to see is a change in
Speaker 7: technology coming to solve a lot of this problem. What
Speaker 7: we see is more and more restaurant operators using technology
Speaker 7: to solve both their operational efficiency.
Speaker 1: I was just going to say, right to like, we're
Speaker 1: kind of obsessed.
Speaker 3: I think that's part of it. I mean the other
Speaker 3: part that I think is when you walk into a
Speaker 3: fast food a fast food restaurant and you don't see
Speaker 3: people at the cash register, you see a screen that
Speaker 3: you take your order yourself.
Speaker 7: Right, It's a tough balance because everybody wants a smiling face.
Speaker 7: When you walk into a restaurant, you want to be
Speaker 7: greeted by a smiling face and there's no doubt that
Speaker 7: that's what we want. But we also want an affordable meal,
Speaker 7: and so there's a balance between having a technology that
Speaker 7: can provide really consistent, really quick service and having that
Speaker 7: hospitality that greets you. And even in the places where
Speaker 7: you see technology, with the kiosks coming in, you usually
Speaker 7: find that they're delivering your meal to your table, so
Speaker 7: you're getting a little bit more service, even though that
Speaker 7: first experience of the order may have been much more
Speaker 7: of a technological experience.
Speaker 1: All right, So if you think about we started with
Speaker 1: the overall view, just got ten seconds here. I mean
Speaker 1: a couple of words, is it glass half full? Glass
Speaker 1: half empty? A couple words to describe the industry and
Speaker 1: the outlook twelve months out.
Speaker 7: Always glass half full in the restaurant industry. This is
Speaker 7: an industry made up of entrepreneurs who are forever optimistic.
Speaker 7: And I think that the big story for us is
Speaker 7: that growth and driven by a desire for takeout and
Speaker 7: consumer demand.
Speaker 3: That's Michelle korsmo CEO the National Restaurant Association.
Speaker 1: Coming up, we stay on earnings at another stock that
Speaker 1: pop following its financial update this past week, a company
Speaker 1: that's dealing with rising medical costs, retail shrinkage, and safety
Speaker 1: at store.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 1: Another earnings related stock move this week came from CBS Health.
Speaker 1: Shares moved higher after the pharmacy chain and health insurer
Speaker 1: reported better fourth quarter results than Wall Street expected, relieving
Speaker 1: investor concerns about the impact of rising care expenses and
Speaker 1: It's ATNA insurance unit.
Speaker 3: As for the outlook, the drugstore chain now expects annual
Speaker 3: adjusted earnings at at least eight dollars and thirty cents
Speaker 3: a share, down from at least eight to fifty a share.
Speaker 3: Cash Flow from operations will be at least twelve billion dollars,
Speaker 3: down from an earlier outlook at least twelve point five
Speaker 3: billion dollars.
Speaker 1: You know, so, Tim, after the results, we just wanted
Speaker 1: to know more, and so we headed to CBS headquarters
Speaker 1: in Woonsocket, Rhode Island, and Karen Lynch, president and CEO
Speaker 1: of CVS Health.
Speaker 8: Yeah, in the fourth quarter, you know, we had strong
Speaker 8: results in our pharmacy benefit management company. We had very
Speaker 8: strong results in our pharmacy and Consumer Wellness segment, which
Speaker 8: essentially is our stores, and you know, we'd continue to
Speaker 8: demonstrate growth in our atina health and business. Where we
Speaker 8: had challenges in the quarter is really at the end
Speaker 8: of the year, we saw elevated trends in our medicare
Speaker 8: advantage business, where we saw you know, trends in outpatient
Speaker 8: services you know, think hips and knees. We also saw
Speaker 8: an increase in utilization and dental and vision. But overall,
Speaker 8: as you said, you know, we ended the year strong.
Speaker 8: We delivered on our financial commitments. We grew revenues of
Speaker 8: eleven and a half percent, and you know, we delivered
Speaker 8: EPs of eight point eight seventy four, which was a
Speaker 8: really strong result.
Speaker 1: Yeah, investors, kudos because they have set your stock hire today.
Speaker 1: The results really do suggest that your insurance unit, you
Speaker 1: were able to manage those costs and drive the quarterly results.
Speaker 1: Can you continue to do so? Talk to us about
Speaker 1: kind of the stress and strain from doing that.
Speaker 8: You know, obviously, you know, we have programs in place,
Speaker 8: whether it's the benefit designs that we put in place,
Speaker 8: whether it's our you know, care coordination programs that we
Speaker 8: have in place, you know, whether how we contract with
Speaker 8: our network and our physicians, so you.
Speaker 9: Know, you know, we we feel very confident.
Speaker 8: That we can continue to navigate this environment as we
Speaker 8: move into twenty twenty four. We haven't seen anything unusual
Speaker 8: in the early part of twenty twenty four, but things
Speaker 8: are you know, still emerging and will monitor it throughout
Speaker 8: the year.
Speaker 3: What was unusual about last quarter? You said hips and
Speaker 3: knees really dragged on the quarter at the end of
Speaker 3: the year. What was unusual about that and why why
Speaker 3: can't you really model for that moving forward?
Speaker 9: Yeah, well, we just what.
Speaker 8: We saw was just an elevated utilization and you know,
Speaker 8: we you know, I think part of it is, you know,
Speaker 8: there is there's been some pent up demand over a
Speaker 8: period of time. What we've also seen is more capacity
Speaker 8: in the healthcare system, so you know, more outpatients. Clinics
Speaker 8: are staffed now, so they can have more you know,
Speaker 8: they have more.
Speaker 9: Scheduling available to them. So there's a number of.
Speaker 8: Factors that you know that we wouldn't have seen that
Speaker 8: you know, started that elevated trend in the latter half
Speaker 8: of December.
Speaker 1: Actually, hey, Karen, some other health insurers Humanity United Health
Speaker 1: for instance, who obviously are in this field as well,
Speaker 1: they have worn that these rising costs will mean raising
Speaker 1: prices to increase profit margins. Will you have to do
Speaker 1: the same.
Speaker 8: Well, I think it all depends on the business that
Speaker 8: we're in. So for medicare, you know, CMS essentially sets
Speaker 8: the rates, and so we received our first rate notice
Speaker 8: this past week, and so what we said is, you know,
Speaker 8: we it was in line with expectations, relatively flat flat,
Speaker 8: but it didn't cover the overall rising medical trends. So
Speaker 8: we have the opportunity to go back to CMS and
Speaker 8: you know, give them comments, which we'll be doing in
Speaker 8: the upcoming weeks so that that price is really set,
Speaker 8: and then we design the benefits around the price that's
Speaker 8: set by CMS. So we'll be you know, modifying the
Speaker 8: benefits as we go, as we learn more about the
Speaker 8: final rate notice that comes out in April. And then
Speaker 8: in our commercial business, we obviously have the ability to
Speaker 8: adjust prices to rising trends and we've been doing that
Speaker 8: all along through twenty three and into twenty four.
Speaker 1: So this takes into account because I know you guys
Speaker 1: had warned. I think it was at the JP Morgan
Speaker 1: Healthcare conference that your medical benefit ratio could be higher
Speaker 1: than expected in the fourth quarter. So I'm just wondering.
Speaker 1: So you're feeling like that you'll be able to manage
Speaker 1: that in the in the rest of the year or
Speaker 1: this year specifically.
Speaker 8: Yeah, So yeah, so, Carol, in the fourth quarter, you know,
Speaker 8: we saw some of this emerging trend with medical benefit ratio.
Speaker 8: So as you saw, we were we expected original guideance
Speaker 8: it was eighty six percent at the end of the year,
Speaker 8: which we've just reported today was eighty six point two percent,
Speaker 8: so it was a little bit higher, but we had
Speaker 8: anticipated and talked about it at JP Morgan. As we
Speaker 8: turn the corner into twenty twenty four, we're watching these
Speaker 8: trends and we'll you know, well, we have lots of
Speaker 8: tools and techniques that we use to help people get
Speaker 8: the care they need when they need it, at the
Speaker 8: right at the right levels, at the appropriate sites of care,
Speaker 8: and you know, we help people navigate, you know, and
Speaker 8: coordinate their care.
Speaker 3: Hey, Karen, I want to talk about a different part
Speaker 3: of the business, the second biggest part of the business,
Speaker 3: that's the pharmacy and consumer wellness segment. Talk to us
Speaker 3: a little bit about how the retail environment is right now.
Speaker 3: What you're seeing out there from the consumer, is the
Speaker 3: consumer healthy? You have a great view on the American consumer,
Speaker 3: so share with us those thoughts.
Speaker 9: Yeah.
Speaker 8: So, well, first of all, you know, stepping back, those
Speaker 8: stores are really another avenue for healthcare delivery. When consumers
Speaker 8: are coming into CBS, more likely than not, they're coming
Speaker 8: in to fill a prescription.
Speaker 9: So we have seen an increase in.
Speaker 8: Our script volume over the course of twenty three and
Speaker 8: starting in twenty twenty four, we built an immunization franchise,
Speaker 8: so people are coming to our stores for their RS
Speaker 8: feed vaccine, for their COVID vaccines, for their flu vaccines,
Speaker 8: for their shingle vaccines. That's really creating, you know, additional
Speaker 8: revenue streams for us, an additional value to the consumer
Speaker 8: because it offers a convenient place for people to get
Speaker 8: their immunizations. It's right usually right around the corner from
Speaker 8: your home. We've built digital assets so that you have
Speaker 8: the ability to schedule online, so we've made it very
Speaker 8: convenient for those individuals. And what we're seeing in the
Speaker 8: front of the store, you know, we're obviously seeing consumer behavior.
Speaker 8: People are making choices for lower prices. We're seeing more
Speaker 8: of the CBS brand where so people are cost you know,
Speaker 8: just cost comparison, and we are starting to see people
Speaker 8: kind of leveraging the CBS brand products.
Speaker 3: Okay, so going to generics a little bit, it sounds like, hey,
Speaker 3: let's talk about shrinkage. It's a huge, a huge problem
Speaker 3: over the last couple of years.
Speaker 1: We all want products to be taken out of jail.
Speaker 1: But yeah, it's so frustrating retail.
Speaker 3: Jo it's crazy. Is it getting any better? Is it
Speaker 3: still a huge issue? Is there any improvement?
Speaker 8: Yeah, I would say it's a concern for ours and
Speaker 8: first and foremost, we're very concerned about the safety of
Speaker 8: our colleagues, and we put a number of measures in
Speaker 8: place to make sure that our colleagues are safe.
Speaker 9: And as you.
Speaker 8: Pointed out, we lock things up so that we can
Speaker 8: deter some of the thieves from coming into our stores
Speaker 8: and stealing our products. And you know, we've seen it
Speaker 8: somewhat moderate, but we're working very closely with attorney generals
Speaker 8: with local law enforcement to really have people prosecuted when
Speaker 8: there are stealing from our stores. And this is not
Speaker 8: just a CVS Health prom This is a retail problem,
Speaker 8: and you know, we all are coordinated to really work
Speaker 8: with law enforcement so that you know, we can deter
Speaker 8: the theft. It is very costly to us, and my
Speaker 8: you know, my big concern is making sure that our
Speaker 8: colleagues are safe in our stores.
Speaker 1: Totally get it, and I'm just curious. It sounds like
Speaker 1: you've answered her, but I want to ask you about
Speaker 1: pharmacist specifically walking out. How are you addressing those concerns
Speaker 1: and also just concerned about not having enough staff those
Speaker 1: pharmacists that have you know, talked about overlap and are
Speaker 1: not having enough overlap or just talking about burnout. How
Speaker 1: do you address that specifically because that's gonna be a
Speaker 1: big issue.
Speaker 9: Yeah.
Speaker 8: You know what I say is, you know, there's a
Speaker 8: lot of media coverage on the pharmacy walkouts. We actually
Speaker 8: didn't really have pharmacy walkouts. We didn't close any stores.
Speaker 9: We we're able to staff all the stores.
Speaker 8: But what you know, what we have been doing is
Speaker 8: making sure that you know, we and the pharmacists you know,
Speaker 8: have one common goal, and that's to make sure that
Speaker 8: we are caring for our patients and they're getting the
Speaker 8: prescriptions that they need. We have been investing, you know,
Speaker 8: a fair amount of wage investment for our pharmacies. We
Speaker 8: have also improved our technology, so we're making it more
Speaker 8: efficient and the operations more efficient, so the pharmacy pharmacists
Speaker 8: can actually do what they do best, and that's.
Speaker 9: Caring for the patients.
Speaker 8: We've been investing in recruiting and skill upskilling and skill development,
Speaker 8: and we've actually seen a reduction in overall you know,
Speaker 8: attrition for our pharmacists. So I think, you know, we've
Speaker 8: been making really good progress over the course of the
Speaker 8: latter half of last year.
Speaker 1: Karen, I feel like I'd be remiss if I didn't ask.
Speaker 1: You talked about script volume being up earlier. Is some
Speaker 1: of that because of the new weight loss the new
Speaker 1: class of weight loss drugs? I mean, what impact are
Speaker 1: you seeing kind of the activity are people paying for itself?
Speaker 1: Is it mostly be covered by insurers?
Speaker 8: And yeah, the weight loss drugs, you know, we have
Speaker 8: seen a lot of volume and the weight weight loss drugs.
Speaker 8: We know that they are effective for diabetes and.
Speaker 9: For weight management.
Speaker 8: There is a shortage and we're managing through those shortages,
Speaker 8: but they are you know, we are seeing you know
Speaker 8: some of the volume coming from the weight loss drugs
Speaker 8: across our entire business.
Speaker 1: Karen, a great snapshot of so much that is important
Speaker 1: to the economy. So thank you so much for carving
Speaker 1: some time out for us, really really appreciated. Karen Lynch, President,
Speaker 1: chief executive Officer CVS Health, joining us from company headquarters
Speaker 1: in Rhode Island. The stock still up about two point
Speaker 1: three percent.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Listen live
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Speaker 1: Come Barbie, Let's go party. All right, folks, we are
Speaker 1: talking about Home of Barbie and so much more. Mattel.
Speaker 1: The stock bouncing around today, up as high as nearly
Speaker 1: three percent, lower fractually as we speak, actually pretty flat now,
Speaker 1: the home of Barbie, hot wheels, and as we said,
Speaker 1: so much more. Reported sales as well as a just
Speaker 1: earnings per share for the fourth quarter did miss the
Speaker 1: average analyst estimate, but adjusted gross margin for the year
Speaker 1: it did be the analyst estament.
Speaker 3: Yeah, sales were up sixteen percent in the fourth quarter.
Speaker 3: Let's get to it with Enon Christ, chairman and CEO
Speaker 3: of Mattel. He joins us from El Segundo, California. Enon,
Speaker 3: good to see you. I got to tell you sometimes
Speaker 3: when we interview you, I just expect, like Will Ferrell
Speaker 3: to show up right there and it's not Enon Christ.
Speaker 3: But we are happy to see you this afternoon. How
Speaker 3: are you doing? How is you know? We heard from
Speaker 3: you guys yesterday. Stock bouncing around a little bit. Sales
Speaker 3: were up, but a couple things did not come in
Speaker 3: line with analyst estimates. How are you thinking about the
Speaker 3: quarter and in the year.
Speaker 6: Yeah, well, thank you for inviting me again. It's always
Speaker 6: good to be here with you. It was a very
Speaker 6: strong fourth quarter for Mattel, with double digit growth in
Speaker 6: top and bottom line with significant margin expansion. The year
Speaker 6: as a whole was a milestone year for the company.
Speaker 6: In addition to the incredible success of the Barbie Movie,
Speaker 6: which we could not be more proud of, we extended
Speaker 6: our leadership in key toy categories and gained significant share
Speaker 6: overall and continue to strengthen our financial position. You know,
Speaker 6: we talked on the call about the fact that we
Speaker 6: generated over seven hundred million dollars free cash flow, more
Speaker 6: than two and a half times of last year. We
Speaker 6: achieved an investment grade rating in the year, balance sheet
Speaker 6: is in the strongest we've had in years, and we
Speaker 6: just announced a one billion dollar share repurchase program and
Speaker 6: believe we're in an excellent position to continue to execute
Speaker 6: our strategy.
Speaker 1: So what else do you do with that strong cash
Speaker 1: flow and all that money? Where else do you want
Speaker 1: to invest it? Investors love when you give it back,
Speaker 1: but where else can you kind of invest it back
Speaker 1: in the business.
Speaker 6: Well, in terms of capital a, location priorities, the number
Speaker 6: one area that we focus on is organic growth, and
Speaker 6: we're looking to continue to invest in areas that can
Speaker 6: create value and position the company for long term, sustainable,
Speaker 6: profitable growth. We also look to maintain our investment grad
Speaker 6: uating and keep our leverage ratio between two to two
Speaker 6: and a half times that to Ibida, and of course
Speaker 6: there are m and a opportunities that we're looking to
Speaker 6: look at and consider. Will be very disciplined. We will
Speaker 6: make sure that whatever we do is thoughtful, strategic, and
Speaker 6: accreative to the company and continue to be in line
Speaker 6: with our strategy for value creation.
Speaker 1: All right in and you know as well, you say
Speaker 1: M and A opportunities are ears per cup So what
Speaker 1: might be some of those M and A opportunities? How
Speaker 1: are you thinking about it? Because who would I think
Speaker 1: maybe ten years ago, fifteen years ago that you guys
Speaker 1: would be creating content and creating a movie that was
Speaker 1: the highest in terms of gross buildings for twenty twenty three.
Speaker 1: So here you are. So when you think about M
Speaker 1: and A opportunities, where do you go or where should
Speaker 1: we be thinking when it comes to you guys.
Speaker 6: Or we can't be to early to be specific about opportunity.
Speaker 1: You could, but.
Speaker 6: Too early, too early. But as I said, you know
Speaker 6: we we have been very disciplined in the way we
Speaker 6: manage our balance sheet over the years, and and we
Speaker 6: remain very thoughtful and very strategic about any choice that
Speaker 6: we might make when it comes to capital deployment and
Speaker 6: on MINA opportunities. That said, we have the capital, we
Speaker 6: have the strength, we have a very strong platform that
Speaker 6: is scalable, and we would look for opportunities that would
Speaker 6: accelerate our strategy without putting the company under any any risk, uh,
Speaker 6: and make sure that it's a creative and strategic to
Speaker 6: the direction what we're heading if we.
Speaker 1: Can follow there. Is it more akin to an acquisition
Speaker 1: that gives you another toy to play with and build
Speaker 1: content off of it, or is it more on the
Speaker 1: content creation side that you guys in terms of M
Speaker 1: and A opportunities might be most interested in.
Speaker 6: Too early to be specific. And it's not to say
Speaker 6: that we don't have exciting organic opportunities. You know, we
Speaker 6: have a portfolio that proving itself within the toy side,
Speaker 6: and of course now we have template and showcase for
Speaker 6: what we can do outside of the toy isle. And
Speaker 6: you know, some of the important takeaways from the year
Speaker 6: was how our brands resonate outside of the toy isle,
Speaker 6: and that is a key part of our strategy to
Speaker 6: be successful within the toy part of the company and
Speaker 6: continue to evolve and grow in entertainment other verticals highly
Speaker 6: accreative and adjacent to the toy industry, but where we
Speaker 6: can create value from organic growth.
Speaker 3: Hey, you know, I want to talk a little bit
Speaker 3: about the twenty twenty four outlook we learned from you yesterday,
Speaker 3: and I think that some might say it's a little
Speaker 3: conservative because it calls for a third straight year of
Speaker 3: flat sales growth. How conservative are you being here?
Speaker 6: Well, we do expect the industry to be down in
Speaker 6: the year, and in that context, we expect to gain
Speaker 6: share and be ahead of the industry and continue the
Speaker 6: momentum that we have already with very strong gain market
Speaker 6: share gain in twenty twenty three. Our priority for twenty
Speaker 6: twenty four is on growth in profitability, expanding our growth
Speaker 6: margin and generate a strong cash flow, and this is
Speaker 6: something we've done successfully in twenty twenty three. We believe
Speaker 6: that we will grow in twenty twenty five both top
Speaker 6: and bottom line and with a strong market share gain
Speaker 6: and overall strong performance broad based performance within the toy industry.
Speaker 6: We see multiple drivers that will continue to put the
Speaker 6: company on the front foot as we execute our strategy
Speaker 6: in and I.
Speaker 1: Think though you know, I guess we're all wondering. You know,
Speaker 1: you guys do get a great vantage point when it
Speaker 1: comes to the consumer. I think a lot of us
Speaker 1: would say, if we want to, you know, get something
Speaker 1: for one of our kids, like that is a priority.
Speaker 1: So in terms of consumer and consumption spending, what are
Speaker 1: you seeing how would you describe the consumer from your.
Speaker 6: Perspective, Well, what we saw in twenty twenty three is
Speaker 6: a shift in consumer spending towards experiences and services, and
Speaker 6: we see it moderating. It will continue to moderate in
Speaker 6: twenty twenty four, and beyond twenty four, we believe that
Speaker 6: those trends will further improve in that the industry will
Speaker 6: return to growth and continue to grow over the long term.
Speaker 6: The toy industry as a whole has very strong fundamentals.
Speaker 6: It's an important part of consumers lives. It's a fundamental
Speaker 6: core human behavior. The toy isle is a strategic liver
Speaker 6: for retailers. It's experiential, it drives food traffic. Items are affordable,
Speaker 6: and especially when it comes to quality product and trusted brands,
Speaker 6: parents will always prioritize spending money on their children and
Speaker 6: and and and and cut on other things rather than
Speaker 6: quality toys for for their for their children.
Speaker 3: If you're just joining us, we're speaking right now to
Speaker 3: Eon Christ chairman and CEO of Mattel, joining us from
Speaker 3: El Segundo, California. You know, and I want to talk
Speaker 3: about specific brands and segments within Mittel's portfolio, specifically Fisher
Speaker 3: Price the brand had a great fourth quarter. Do you
Speaker 3: believe you can extend the momentum here? Do you expect
Speaker 3: to gain share when it comes to infant toddler in
Speaker 3: preschool market this year?
Speaker 6: Yes, Fisher Price did have a great quarter. It was
Speaker 6: up double digit, It was number one in the category
Speaker 6: and gain more share for the full year within Fisher Price,
Speaker 6: Little People form particularly strongly and expanded into a doubt
Speaker 6: collector line with some great product for the super Bowl.
Speaker 6: So look out for that.
Speaker 3: Okay, what about when it comes to Hot Wheel?
Speaker 1: Oh wait, go ahead, wait, so wait, how big? How
Speaker 1: much demand is there? Give us an idea?
Speaker 6: No, as you can imagine. Of course, it's in high demand.
Speaker 6: And Little People is such a great brand, and this
Speaker 6: is where we touch culture. This is our expertise and
Speaker 6: something we do so well. You have a product that
Speaker 6: is ever green. But here you know, we have moments
Speaker 6: and opportunities to touch societal moments like the super Bowl
Speaker 6: and create a special offering for this.
Speaker 1: Is there a tailor swift Little People? That's what we
Speaker 1: want to know.
Speaker 6: Anything is possible for people watch that space.
Speaker 3: All I know is my daughter likes to eat the
Speaker 3: Little People. Okay, what about Hot Wheels because it reached
Speaker 3: just one point six billion dollars in gross billing for
Speaker 3: twenty twenty three, surpassing Barbie. Do you see Hot Wheels
Speaker 3: staying the number one brand for this four future?
Speaker 6: Hot Wells is such an incredible brand. It's a huge
Speaker 6: canvas of ideas and innovation and product and opportunities. Hot
Speaker 6: Wells was up sixteen percent in the quarter. For the
Speaker 6: full year, it was sixteen percent for the full year,
Speaker 6: and it was the sixth consecutive record year for the
Speaker 6: brand after over fifty years of existence, so it's been
Speaker 6: on a real, real growth momentum. We gained almost three
Speaker 6: hundred basis points in the category. We have by far
Speaker 6: the largest market chare on record, and Hotwells continues to
Speaker 6: be the number one brand globally in vehicles per Circana.
Speaker 6: In twenty four we expect our vehicles category to grow
Speaker 6: driven by Hot Wheels and Hot Waves will grow yet
Speaker 6: again seven consecutive record year for the brand. And don't
Speaker 6: forget that we have a movie in development with the
Speaker 6: jj Abrams at Warner Brothers for Hot Wheels and another
Speaker 6: movie a Matchbooks movie with Skydance that produced Mission Impossible
Speaker 6: in TOPGA. So two of the most successful filmmakers in
Speaker 6: Hollywood are working on two very exciting brands as part
Speaker 6: of our vehicles portfolio.
Speaker 1: How profitable is that area becoming for you? You know, we
Speaker 1: talked about Barbie Heist grossing film of twenty twenty three
Speaker 1: generating and I hope I have this number right, something
Speaker 1: like one point four billion or so, give or take
Speaker 1: a little bit. What ultimately was the impact on Mittel's
Speaker 1: bottom line as a result of that movie. I'm just curious.
Speaker 6: Yes, we were happy to share that the Barbie movie
Speaker 6: generated for Mattel in twenty twenty three. Just that, just
Speaker 6: twenty twenty three, one hundred and fifty million dollars of
Speaker 6: revenue and about ninety million of operating income directly related
Speaker 6: to the movie. This is box office plus toys and
Speaker 6: consumer product directly associated with the movie. So this is
Speaker 6: one brand, one movie in one year. And the reason
Speaker 6: we share that is to illustrate the potential that we
Speaker 6: can that we can generate out of our growing entertainment business.
Speaker 6: And while we're not saying that every movie will be
Speaker 6: the next Barbie in the aggregate, this could become a
Speaker 6: meaningful part of our business. Our entertainment offering that includes film, television,
Speaker 6: live events, consumer product and merchandise, digital music. Location based
Speaker 6: entertainment in the aggregate across our portfolio can be an
Speaker 6: important business for Mattel and clearly we are on that
Speaker 6: path to capture that value. And the Barbie movie is
Speaker 6: really a showcase or a template to illustrate that.
Speaker 1: Well, it's a success story, right, I've got to imagine,
Speaker 1: you know, you talked about a couple of movies already
Speaker 1: based on Mattel products, toys, if you will, intellectual property,
Speaker 1: whatever you want to call it. But I do wonder
Speaker 1: how many people were knocking on your door after the
Speaker 1: success of Barbie, where many would probably have thought it
Speaker 1: never could happen, and it did. Are a lot of
Speaker 1: studios streaming and what have you knocking on your door
Speaker 1: about future collaborations.
Speaker 6: Well, you can imagine what the movie did in terms
Speaker 6: of showing that our brands resonate outside of the toy isle.
Speaker 6: And this was something that was not obvious before and
Speaker 6: clearly the Barbie Movie showed that with the right creative vision,
Speaker 6: with when you work with the best filmmakers in the
Speaker 6: world like Greta Gerway, Go Mango, Robbie Ryan Gosling. Great
Speaker 6: things happen, and perhaps the biggest evolution for us as
Speaker 6: a company was to realize that people who buy our
Speaker 6: product are not just consumer rumors. They're fans, right and
Speaker 6: in the aggregate, fans become an audience. And that's when
Speaker 6: you realize that you're actually speaking to an audience. That's
Speaker 6: where you see. That's when opportunities open up and you
Speaker 6: can capture and create significant value in other in other verticals.
Speaker 1: Hey, listen, twenty seconds last twenty five? Is it going
Speaker 1: to be a Barbie two? Does Alan get a movie?
Speaker 1: Does Can get a movie? You can make news right
Speaker 1: here with us.
Speaker 2: You know.
Speaker 6: We we always said we're looking to create and build
Speaker 6: and develop film franchises. We're not talking specifically about Barbie,
Speaker 6: but we have an incredible portfolio and we're looking to
Speaker 6: continue to excite and delight fans all over the world.
Speaker 1: I'm just going to say, Barbie's a doctor, an astronaut, president.
Speaker 1: She can be a tent pole.
Speaker 3: You know. In terms of Carol loved the movie, and
Speaker 3: Casey didn't know that by now. I think it's the
Speaker 3: second quarter in a row of interview, you know, and
Speaker 3: she's talked about how much she was.
Speaker 1: I thought Barbie, Barbie and merchandise alone.
Speaker 6: Carol, Thank you, Carol, thank you, thank you.
Speaker 1: You be well appreciate it. In on Christ He's chairman
Speaker 1: and chief executive Officer Mitchel Joenning usan zoom from Elskindo, California.
Speaker 1: You're listening and watching Bloomberg Business Week.
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Speaker 1: Plenty ahead in our second hour of the weekend edition
Speaker 1: of Bloomberg Business Week, including no joint bank accounts, husband
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Speaker 1: if it's Harvard or Stanford, and when it comes to
Speaker 1: investing basics, the one thing everyone must know about and
Speaker 1: our Bloomberg audience definitely does. For sure, We'll tell you
Speaker 1: what that is. We've got tips on how you can
Speaker 1: live a stress free financial life and build wealth for
Speaker 1: the future. This is something you and I both were like,
Speaker 1: where was this in high school? I needed it?
Speaker 3: Well, it's really unconventional. I think That's why it was
Speaker 3: so interesting, because it's not just about skipping that daily
Speaker 3: coffee run to save a few bucks. In fact, our
Speaker 3: next guest says, don't skip that daily coffee run. We're
Speaker 3: talking about Jared Dillion. He's the author of How to
Speaker 3: Live a Stress Free Financial Life. We're going to hear
Speaker 3: from him a little bit later in the program. Plus,
Speaker 3: speaking of stress, Carol from stress free to well actually
Speaker 3: stressful for high school students. At least the SAT and
Speaker 3: Act are making a comeback.
Speaker 1: Yeah, we knew they would.
Speaker 10: We knew Boo.
Speaker 1: Plus bet mgmco Adam Greenblatt on Super Bowl betting ahead
Speaker 1: of Sunday's big game.
Speaker 3: And hey, world, Valentine's Day is this Wednesday. US consumers
Speaker 3: are expected to spend nearly twenty six billion dollars this
Speaker 3: year on the holiday. The founder of farm Girl Flowers
Speaker 3: on the all important Valentine's Day flower rush and shifting
Speaker 3: supply chains and paying up for workers.
Speaker 1: Turns out tim making bouquets. It's a lot of work.
Speaker 3: Those flowers got to come from somewhere, they.
Speaker 1: Do, and sometimes it's overseas, sometimes it's in your own backyard.
Speaker 1: All right, First up, this hour We begin with our
Speaker 1: Bloomberg Business We cover story, the latest issue out on newsstands,
Speaker 1: now online and on the Bloomberg terminal and tim This
Speaker 1: story has a feel of Indiana Jones meets National Treasure.
Speaker 3: Yeah, though with less dangerous traps and fewer people chasing
Speaker 3: after you, although it does involve having access to ancient
Speaker 3: writings that could completely rewrite the history of key periods
Speaker 3: of the ancient world.
Speaker 1: These ancient writings include some two thousand year old scrolls
Speaker 1: that were buried by the same volcanic eruption in seventy
Speaker 1: nine AD that froze POMPEII in time. So how do
Speaker 1: we get to unlock? What they say Artificial intelligence? And
Speaker 1: thanks to AI, these ones illegible scrolls are now potentially legible.
Speaker 3: For more, we turned to the authors of the story,
Speaker 3: Bloomberg News Tech writer Ellen Hewitt and Bloomberg BusinessWeek features
Speaker 3: writer Ashley Vance, who begins by telling us how he
Speaker 3: came across these ancient scrolls.
Speaker 11: There's a guy named Matt Friedman who I've known for
Speaker 11: a while. He used to be the CEO of GitHub,
Speaker 11: which Microsoft acquired a few years ago, and he seems
Speaker 11: to get interested in strange things, and he had heard
Speaker 11: that years ago we knew that there were all these
Speaker 11: ancient Roman and Greek scrolls, that they were buried by Vesuvius,
Speaker 11: and we hadn't been able to read them. We knew
Speaker 11: the scrolls were there, they were just charred to a
Speaker 11: crisp and so nobody could unroll them and read them.
Speaker 11: And he heard about this, got obsessed with the Roman
Speaker 11: Empire and thought, well, maybe you know, somehow AI technology
Speaker 11: could read these scrolls, and so he last year he
Speaker 11: created a contest around this called the Vesuvious Challenge. And
Speaker 11: that's the heart of our story is following this contest
Speaker 11: over the last year and the astonishing results.
Speaker 3: Yeah. So Ellen, talk to us a little bit about
Speaker 3: about some of those results. Has AI actually been able
Speaker 3: to solve this puzzle that for hundreds of years people
Speaker 3: have worked on trying to unscroll these scrolls?
Speaker 12: Yeah, and it's been absolutely amazing because if you compare
Speaker 12: what we can see now to what people for hundreds
Speaker 12: of years have tried to get out of these scrolls,
Speaker 12: you know, doing things to the scrolls that I think
Speaker 12: has actually wrote in our story would make historians weep,
Speaker 12: you know, you know, in the seventeen hundreds. They tried
Speaker 12: to like unroll them an inch at a time, They
Speaker 12: cut them apart, they like try to you know, piece
Speaker 12: together these like tiny fragments of scrolls. What we haven't
Speaker 12: said is, you know, technology that uses these very powerful
Speaker 12: scanners to scan the entire scroll untouched, and then to
Speaker 12: use you know, to sort of virtually unscroll them, and
Speaker 12: you end up with these big segments of images that
Speaker 12: are you know, impossible to read to the human eye,
Speaker 12: but which these very pioneering and hardworking volunteers have you
Speaker 12: been competing to try to build the right AI models
Speaker 12: that can actually do ink detection and show the words
Speaker 12: that are on there. And yeah, the announcement is that
Speaker 12: there are there's a team that has won the grand
Speaker 12: prize of seven hundred thousand dollars for meeting the requirements
Speaker 12: of the contest, which was to have you know, a
Speaker 12: certain chunk of the script readable as deemed by this
Speaker 12: team of classicists and paparologists who have been looking at
Speaker 12: the results that the different teams have turned in.
Speaker 1: It is so cool and it's so interesting, you guys,
Speaker 1: because we are trying to figure out you know, AI.
Speaker 1: We talk about it a lot, and what it could
Speaker 1: maybe do or not do. We're all trying to figure
Speaker 1: it out. And here's kind of real life proof of
Speaker 1: what it could do in terms of unlocking some of
Speaker 1: the world's history. Actually, come on back in. We've been
Speaker 1: showing pictures of the scrolls and they, to be quite honest,
Speaker 1: they do look like logs.
Speaker 3: And I don't look like scrolls, okay, And I.
Speaker 1: Can see how someone as people did in the past,
Speaker 1: where just toss them out.
Speaker 3: Yeah, like this is like a burnt hot dog or
Speaker 3: something like. You know, these things do not look like
Speaker 3: they're ever going to be readable.
Speaker 1: No, but how much information tell us little bit more
Speaker 1: about what we know about them so far?
Speaker 11: Yeah, well, look, it could be astonishing. So the villa
Speaker 11: where these are found it belonged to Julius Caesar's father
Speaker 11: in law, and he was very wealthy and he had
Speaker 11: this huge villain and we've only excavated a tiny part
Speaker 11: of it. Basically, there's eight hundred scrolls that we found
Speaker 11: that come from a closet, and the thinking is that
Speaker 11: someone like this would have tens of thousands of more scrolls,
Speaker 11: and nobody's wanted to excavate them because we couldn't read
Speaker 11: them and they always broke whenever we handled them. But
Speaker 11: just to be clear to everyone, you know, if there
Speaker 11: are more scrolls and we can continue to read them
Speaker 11: like this, we will almost certainly get new works by Arizotle, Sophocles, Escalists, Sappho.
Speaker 11: This would multiply, you know, our collection of knowledge many times.
Speaker 11: What we found so far is text relating to this
Speaker 11: Epicurean name Philodemus, And what the contestants discovered was a
Speaker 11: writing about pleasure and how the stoics might be wrong
Speaker 11: and kind of boring and we should take joy in
Speaker 11: food and smell and senses in life.
Speaker 3: Heyl And take us into the technology here and how
Speaker 3: exactly the team was able to actually do this and
Speaker 3: use AI use X ray technology to get to what
Speaker 3: is written on.
Speaker 12: These right, So the underlying technology is similar to what
Speaker 12: you might find in medical imaging like CT scans, and
Speaker 12: they take these ultra powerful scans of the scrolls, and
Speaker 12: then there's all this work that has to happened before
Speaker 12: you can even start to try to apply these models
Speaker 12: to it. Basically, they have to flatten and segment the scroll.
Speaker 12: So they take these images and do this work digitally
Speaker 12: to try to get pages segments of pages, where then
Speaker 12: the contestants can start trying to use different models that
Speaker 12: they designed to try to figure out ink detection. The
Speaker 12: team that ended up winning the grand prize found this
Speaker 12: particular strategy that actually came from a different contestants unique insight,
Speaker 12: which was, you know, instead of just looking at you,
Speaker 12: instead of trying to build a model, he actually just
Speaker 12: spent time staring at the images of the pyrus and
Speaker 12: noticed at some point that there were these patterns, these
Speaker 12: very faint patterns that he called crackle, which are kind
Speaker 12: of looked like dried up mud, and the idea is
Speaker 12: that maybe this is like some sort of indication of ink. Anyway,
Speaker 12: this crackle insight led to some of the other contestants
Speaker 12: using those crackle letters to start a model, which they
Speaker 12: then use to reveal other letters, which they said back
Speaker 12: into the model, which revealed more letters, and built this
Speaker 12: very kind of you know, bespoke model specifically for this
Speaker 12: need and ended up, yeah, being able to reveal vast
Speaker 12: swaths of letters. It's pretty incredible.
Speaker 3: So actually, we know there are lots of scrolls that
Speaker 3: are yet to be unearthed at this point, or that's
Speaker 3: what we think. But what about this technology and this
Speaker 3: technique being used for other applications. How are analysts thinking
Speaker 3: about that?
Speaker 11: Well, I think, you know, definitely, this kind of technology
Speaker 11: seems like it could be useful for a lot of
Speaker 11: ancient texts that we've thought were you know, just untouchable
Speaker 11: in the past. It is, to Allen's point, very specific
Speaker 11: in this area. But I think the kind of cool
Speaker 11: thing is throughout this contest we've seen these kind of
Speaker 11: twenty something year old computer scientists, you know, teaming with
Speaker 11: these paparologists and classicists who tend to be a bit older,
Speaker 11: and there's just this like renewed excitement that wow, okay,
Speaker 11: this kind of technology could be applied to our field
Speaker 11: and maybe a lot of things that we thought just
Speaker 11: were impossible are now possible. And so I mean, I
Speaker 11: think Ellen would agree. We just there was so much
Speaker 11: enthusiasm around this from these generations coming together and these
Speaker 11: two disparate fields colliding.
Speaker 1: That's what I loved Ellen jump in on this because
Speaker 1: I thought, as I read this story, it's like folks
Speaker 1: watching YouTube vehicle videos to learn different things, and this
Speaker 1: idea of you know, there's a lot of criticism about
Speaker 1: everything that's out there in the world of social media,
Speaker 1: and probably understandably so and fairly so. But this story
Speaker 1: shows when different generations, different people in different fields, different
Speaker 1: people around the world start tapping and working together, what
Speaker 1: can potentially what can be the outcome.
Speaker 12: Yeah, I think it's just incredible. It's the story of
Speaker 12: you know, several different people just catching this bug where
Speaker 12: they became totally obsessed with the you know, the huge
Speaker 12: ramifications of maybe being able to read these scrolls and
Speaker 12: coming up with these innovative ideas of being like, Okay,
Speaker 12: we have this advanced technology, maybe we can do something
Speaker 12: that we really really.
Speaker 1: Could not do before.
Speaker 12: So Luke Ferreder, for example, was one of the three
Speaker 12: people in the winning team, talks to us about how, yeah,
Speaker 12: he was an intern at SpaceX happened to listen to
Speaker 12: a podcast in which Nat Freeman was describing the contest
Speaker 12: and he just had this thought like maybe I'm the
Speaker 12: one who could do this, and he's so enthusiastic about it,
Speaker 12: and he spent all this time and energy trying to
Speaker 12: work on it, you know, like sending images off to
Speaker 12: his model. In the middle of it, he was at
Speaker 12: like a college party and like, you know, sent sent
Speaker 12: the images off to this model, and then checked back
Speaker 12: a few hours later and saw these letters that had
Speaker 12: been revealed, And you know, I think his enthusiasm, like
Speaker 12: for something that is just not you know what you
Speaker 12: would expect to apply AI to. I think that has
Speaker 12: just been really inspiring.
Speaker 1: All Right, lots more to go, just about five percent
Speaker 1: of one scroll. They figured out there's a lot more
Speaker 1: work to be done, correct there.
Speaker 11: Is, and there's a new contest coming. So the goals
Speaker 11: get from five percent to ninety percent of the scroll
Speaker 11: and then that's pretty determined to raise the rest of
Speaker 11: the site if we can.
Speaker 3: Many thanks to Bloomberg BusinessWeek Features writer Ashley Vance and
Speaker 3: Bloomberg News Tech writer Ellen Hewitt for their work on
Speaker 3: this week's cover story. Ashley also the author of Elon Musk, Tesla,
Speaker 3: SpaceX and The Quest for a Fantastic Future and When
Speaker 3: the Heavens Went on Sale, The Misfits and Genius is
Speaker 3: Racing to put Space within reach.
Speaker 1: You're listening to Bloomberg business Week coming up, how to Purge,
Speaker 1: the urge to splurge, tips on how to get your
Speaker 1: finances in better shape. Say that five times fast.
Speaker 3: No, I'm gonna instead talk about the sat put your
Speaker 3: pencils down. Everybody, why standardized testing is coming back after
Speaker 3: their pandemic hiatus. This is Bloomberg.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Listen live
Speaker 2: each weekday starting at two pm Eastern on applecar Play
Speaker 2: and Android Auto with the Bloomberg Business Ad. You can
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Speaker 2: York station, Just say Alexa Play Bloomberg eleven thirty.
Speaker 1: Setting up a spreadsheet with your spouse or partner.
Speaker 3: Not setting up a joint bank account with.
Speaker 1: Them, Rocking up student debt okay, as long as it's Harvard,
Speaker 1: Stanford or another top tier school.
Speaker 2: Okay.
Speaker 3: Easier said than done, I guess. And definitely knowing what
Speaker 3: the Federal Reserve is up to, well, we know that
Speaker 3: Bloomberg listeners and viewers have that one down for sure.
Speaker 3: Do all of this and you may be on the
Speaker 3: way to living a stress free financial future.
Speaker 1: So says our next guest, Jared Dillion. He is the
Speaker 1: editor and publisher of The Daily Dirt napp, a market
Speaker 1: newsletter for investment professionals, and a former Bloomberg opinion columnist.
Speaker 3: His new book is entitled No Worries, How to live
Speaker 3: a stress free financial life, and in it, he outlines
Speaker 3: some pretty interesting strategies to get there, including how it's
Speaker 3: okay to buy that daily cup of coffee, don't sweat
Speaker 3: over it, okay, and when to worry, Well, it's the
Speaker 3: big purchases in your life. Oh, also who you marry,
Speaker 3: and keeping bank accounts separate when it comes to a relationship.
Speaker 13: So typically when a man and woman get together and
Speaker 13: they get married and they combine their finances, they have
Speaker 13: joint accounts. People are still mentally keeping track of whose
Speaker 13: money is who's I think, well, I put in five
Speaker 13: hundred bucks and I put in three hundred bucks. And
Speaker 13: if somebody spends the other person's money, like in their mind,
Speaker 13: what is the other person's money, then it can lead
Speaker 13: to arguments. And you know, I've known some couples, lots
Speaker 13: of couples that will get into knockdown, drag out fights
Speaker 13: over fifty bucks. And the easy solution to this is
Speaker 13: just keep your money separate. When I got married in
Speaker 13: nineteen ninety seven, I said to my wife, I was like,
Speaker 13: we are going to keep our money separate, and she agreed,
Speaker 13: And in twenty six years we have fought about a
Speaker 13: bunch of things. But we have never fought about money,
Speaker 13: and we basically just zell money back and forth to
Speaker 13: each other like that's that, yeah, all the time. Basically
Speaker 13: our deal is I pay two thirds of the groceries
Speaker 13: because I eat two thirds of the food. So if
Speaker 13: she pays for one hundred and twenty bucks for groceries,
Speaker 13: I'll zell her eighty bucks. And we do this all
Speaker 13: the time. Before zell it was a little hard. We
Speaker 13: literally wrote checks back and forth to each other.
Speaker 3: Okay, she loves you, right, yeah, okay, just making sure
Speaker 3: still there, I actually have somebody getting in touch right
Speaker 3: now saying does she love them?
Speaker 14: Like you know?
Speaker 3: Yeah? Okay, so confirment. Okay, you guys are in love.
Speaker 1: There's more questions we could ask, but we're not going
Speaker 1: to go there. What about things like college.
Speaker 13: The reason you will pay anything to go to someplace
Speaker 13: like Harvard, it's not because of the education. It has
Speaker 13: zero to do with the education. It has to do
Speaker 13: with the people that you're with, the network, the connections.
Speaker 13: You are going to school with people who will be president.
Speaker 13: You will go to school with people who will be CEOs.
Speaker 13: Your rolodex will be full of these people. Your unemployment
Speaker 13: rate will be zero. If you go to a lower
Speaker 13: tier school that costs ninety thousand dollars a year, you
Speaker 13: don't have those benefits. You're going to graduate with three
Speaker 13: hundred thousand dollars in debt and your earnings power won't
Speaker 13: be able to support the student loan payments.
Speaker 1: Is any student loan debt okay in your view?
Speaker 13: What I say in the book is that you should
Speaker 13: have no more unless you go to a top tier school.
Speaker 13: You should have no more than forty thousand dollars in debt.
Speaker 13: And the reason that is is.
Speaker 1: Have you looked at how much school costs a year?
Speaker 13: Oh yeah, right, you know, not to combination of scholarships
Speaker 13: and grants and stuff like that. If you owe more
Speaker 13: than forty thousand dollars, you have to be able to
Speaker 13: pay it off in five years. If you can't pay
Speaker 13: it off in five years, then you should go to
Speaker 13: a cheaper school, or maybe not even go at all.
Speaker 3: And I mean, and you go into detail in the
Speaker 3: book about why student debt is so troubling for so
Speaker 3: many people, and a lot of it has to do
Speaker 3: with the government and the way that government handles those
Speaker 3: student loan payments.
Speaker 13: Income based repayment plans are the worst thing in the world.
Speaker 13: This was passed in two thousand and nine, and basically
Speaker 13: the government means tests you and says, you know, you
Speaker 13: don't have to pay this twelve hundred dollars payment. You
Speaker 13: can pay this three hundred dollars payment. But then the
Speaker 13: balance is added to the back end of the loan.
Speaker 13: It's negatively amortizing. And that's why you have these people
Speaker 13: that go on Twitter. They said, you know, I borrowed
Speaker 13: seventy thousand dollars, I paid my student loans for twenty years,
Speaker 13: and now I owe one hundred How is this fair?
Speaker 3: By the way, in bankruptcy, it does not get a raise.
Speaker 13: It does not get a raised.
Speaker 3: Hey, a big takeaway that he died doesn't.
Speaker 1: Get erased, like it goes off to somebody else.
Speaker 3: Right, A big takeaway I had from your book is
Speaker 3: like conventional wisdom is okay, don't buy that Starbucks coffee
Speaker 3: every day, don't go out to lunch when you're at work,
Speaker 3: you argue, don't sweat the small stuff's stuff, Sweat the
Speaker 3: big stuff, sweat the house, sweat the car, sweat the partner,
Speaker 3: sweat college. Yep, don't worry about those small expenses.
Speaker 13: It's literally just math. Okay. I get a Dunkin Donuts
Speaker 13: every day when I drive to work. I get a
Speaker 13: nice coffee, even in the winter. So I'm a psycho, right.
Speaker 3: So but I think maybe people mightify you're a psycho
Speaker 3: with the spreadsheet and the marriage.
Speaker 13: But anyway, it's three dollars and eighty cents. If I
Speaker 13: do that two hundred and twenty five days a year,
Speaker 13: it comes out to nine hundred dollars a year. If
Speaker 13: I do that for forty years, it's thirty six thousand dollars. Okay.
Speaker 13: If I get a house that's five hundred square feet bigger,
Speaker 13: I will pay an extra one hundred and twenty thousand
Speaker 13: dollars an interest on a mortgage. So one decision costs
Speaker 13: me one hundred and twenty thousand dollars in interest versus
Speaker 13: thousands of decision costs me thirty six thousand dollars. The
Speaker 13: little things don't matter at all at all, And people
Speaker 13: can give up large luxuries. If you get a slightly
Speaker 13: smaller house, you're not sitting in the house saying this
Speaker 13: is terrible, I hate this house. But if you're forced
Speaker 13: to give up coffee every day for the rest of
Speaker 13: your life. It is miserable.
Speaker 1: I feel like I want to go there because we
Speaker 1: talk so much about it, But you say you got
Speaker 1: investment basics. It's a chapter that's purely educationally. You want
Speaker 1: to begin with something that's pooring, but you say it's
Speaker 1: for your own good. That means for all of you
Speaker 1: who are watching and listening the Federal Reserve, perhaps you
Speaker 1: have heard of it. We talk about it all the time.
Speaker 1: Why is it so important that people understand about the FED.
Speaker 1: We have a very smart audience. They know what they do.
Speaker 1: But why do you say generally it's important.
Speaker 13: I mean, just think about like very recent history. The
Speaker 13: SMP was at forty one fifty and and Christopher Waller
Speaker 13: gave a speech where he was hinting at rate cuts.
Speaker 13: Now the SMP is at forty eight to fifty and
Speaker 13: the FED hasn't even cut rates. It was just on
Speaker 13: this slight change in stance from the Fed, where you
Speaker 13: it eased financial conditions and unleashed a tunnel liquidity. You know,
Speaker 13: the Fed really has a huge amount of control over
Speaker 13: the stock market and the economy. So that's why I
Speaker 13: put that first in that chapter, because the average person
Speaker 13: on the street. They know who the president is, but
Speaker 13: they don't know who the chairman of the Federal Reserve is,
Speaker 13: And the chairman of the Fed has much more influence
Speaker 13: over their daily life than the president does. I tell
Speaker 13: people this all the time. I don't really you know,
Speaker 13: outside of like some huge change in tax rates, I
Speaker 13: don't really care who is president.
Speaker 3: I care whose chairman of the Fed. Okay, we have
Speaker 3: thirty seconds left. Controversial to have twenty percent of your
Speaker 3: net worth in cash again, you say this is for
Speaker 3: stress free financial life, not to become wealthy in life.
Speaker 3: Talk about it. Set allocation, just in the last thirty
Speaker 3: seconds that we have.
Speaker 13: You should be diversified across asset classes. If you invest
Speaker 13: in stocks, you're not diversified. If you invest in stocks
Speaker 13: and bonds, you're not diversified. You need to have a
Speaker 13: mix of financial assets and real assets. You need some commodities,
Speaker 13: real estate, and gold to be fully diversified.
Speaker 3: All right, you were hesitant to write about gold in
Speaker 3: the book, he wrote, But you know, because you unleash
Speaker 3: the gold bugs when you do that.
Speaker 13: It's super important.
Speaker 1: Okay, I love this house is not an investment.
Speaker 3: I know, scary stuff.
Speaker 1: Listen, there's so much there. We scratched this.
Speaker 3: Where was this when I was seventeen? When I was
Speaker 3: seventeen years old?
Speaker 1: Skip the like small liberal arts school and just pick
Speaker 1: up this book and figure it out.
Speaker 3: Jared, Thank you, Yeah, come back, Jared. This is a
Speaker 3: fun conversation. Jared Dillion is the author of No Worries,
Speaker 3: How to Live It a Stress Free Financial Life. That book,
Speaker 3: by the way, is out.
Speaker 5: Now.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 2: live weekday afternoons from two to five pm Eastern. Listen
Speaker 2: on Apple Cardplay and then brout auto with a Bloomberg
Speaker 2: Business act or watching us live on YouTube.
Speaker 1: Well, the most read story in the Bloomberg Today, but
Speaker 1: everyone's favorite topic not if you're a parent, your kids
Speaker 1: getting ready for college? Are a speaking about it? We're
Speaker 1: talking about standard or testing or if you even took
Speaker 1: the SATs or the ages. You know, I was kind
Speaker 1: of one of those people who actually liked kind of
Speaker 1: some of the standardized testing.
Speaker 3: Are you joking?
Speaker 1: Yeah, I'm a net king.
Speaker 3: Are you joking?
Speaker 9: Yeah?
Speaker 1: No, I'm not. I'm not.
Speaker 3: You like, okay, you like Saturday morning going to a
Speaker 3: classroom and taking out.
Speaker 1: I don't know, it's a little weird.
Speaker 6: I know.
Speaker 1: Yeah, I'm a nerd, yes, Elizabeth, one of our producers.
Speaker 1: I'm a nerd. But it's also become like a business. Anyway,
Speaker 1: let's get to jen. Let's get to Jennet.
Speaker 10: Yeah.
Speaker 3: Jenna Lauren is higher education finance reporter for Bloomberg News.
Speaker 3: She's here in the Bloomberg Interactive broker's studio. We're talking
Speaker 3: about this because as of today, Dartmouth College comes out
Speaker 3: with a statement that says it's again going to require
Speaker 3: standardized testing for applicants following MIT. This is a big
Speaker 3: reversal from what happened just a couple of years ago.
Speaker 14: Janet, Yes, it is a big reversal. During the pandemic,
Speaker 14: nobody could get.
Speaker 1: To test sites.
Speaker 14: They were closed, so everybody said, no, no testing is required.
Speaker 14: MIT two years ago about this time said we really
Speaker 14: need kids who can do well in.
Speaker 1: Math, and they reinstated it.
Speaker 14: And of course MIT has really difficult requirements. You know,
Speaker 14: two semesters of physics, two semesters of chemistry, lots of math.
Speaker 1: So it makes sense.
Speaker 14: So it was interesting when Dartmouth this morning said that
Speaker 14: they were they were also going that route, and you know,
Speaker 14: the chatter for decades has been the SAT is unfair,
Speaker 14: especially for low income students who can't afford test prep.
Speaker 14: And now you're hearing that is an argument to keep
Speaker 14: the dusk.
Speaker 3: What we don't understand, So explain that.
Speaker 14: So let's say you're in a school that is not
Speaker 14: familiar to Dartmouth. You know, of course they know the
Speaker 14: Scarsdale's and the Mamernicks and the New Treers of the world,
Speaker 14: but you know, they're trying to find kids. We did
Speaker 14: a story about rural recruiting. Perhaps high schools they don't
Speaker 14: really know well, and it helps them to know what
Speaker 14: their score is. It helps them to know what the
Speaker 14: high school is. So let's say you score twelve hundred
Speaker 14: in a high school where the average is a thousand.
Speaker 14: You've done really well in that high school, but of
Speaker 14: course you're far below the median at Dartmouth. But the
Speaker 14: information that the test is giving is you've actually really
Speaker 14: exceeded expectations in that high school.
Speaker 3: Oh sorry, I just no go go okay, this is
Speaker 3: just related to what Jenna said very briefly. I didn't
Speaker 3: know that schools could actually see that part of the
Speaker 3: data you're saying, they don't just see the raw score,
Speaker 3: they also see how you did compared to other folks
Speaker 3: at your school.
Speaker 14: So every high school has their own profile, and it's
Speaker 14: a lot of information.
Speaker 1: In tim This is a data world.
Speaker 14: When we did the story about rural recruiting that we
Speaker 14: talked about, we mentioned a school in Wichita, Kansas where
Speaker 14: the majority of students are on free and reduced lunch.
Speaker 14: So that tells you you're dealing with a very low
Speaker 14: income population. So if you see a student who has
Speaker 14: rocked the SATs and most of their peers have not
Speaker 14: done well, it gives them some information in that context.
Speaker 1: Jenna having said that, they still have parameters right of
Speaker 1: where they want you to hit in terms of score,
Speaker 1: like they're going to say, wow, tough environment, look what
Speaker 1: this individual did. Having said that an MIT where math
Speaker 1: is really important, right in that computational way of thinking,
Speaker 1: are they still going to have kind of minimums of
Speaker 1: like where they want someone to hit, you know what
Speaker 1: I mean? How they use it?
Speaker 14: So it depends on where you're coming from. If you're
Speaker 14: applying from andover or again a really wealthy school district
Speaker 14: and you have a twelve hundred that's not going to
Speaker 14: cut it. But if you're coming from a place where
Speaker 14: most kids are not going to college again, they're trying
Speaker 14: to find socioeconomic diversity, which is great, and they're trying
Speaker 14: to find you know, students. You know, Bill Fitzimmons, a
Speaker 14: dean of Harvard, you talk about the diamonds and the
Speaker 14: rough and that's why they mail to so many kids
Speaker 14: who might think of applying to Harvard, and that's they're
Speaker 14: trying to put it in that kind of context.
Speaker 1: So is this just the beginning, like the domino start
Speaker 1: to fall? I mean, I feel like there's so many
Speaker 1: things coming off the pandemic. Work from home right, Like
Speaker 1: we're all just like, yeah, okay, get back to work,
Speaker 1: and oh guess what standardized testing we're going back to?
Speaker 1: It is it also part of I was thinking about
Speaker 1: these schools, especially once testing went away. We're getting so
Speaker 1: many applications. It's got to be a difficult process to
Speaker 1: kind of go through them, especially if you don't have
Speaker 1: standardized testing to kind of help you and figure.
Speaker 3: You just arrange it by how much your parents gave.
Speaker 3: That's how you do it. Assions I care love.
Speaker 14: So Yes it is. Yes, they do get a lot
Speaker 14: of applications, and you can't really feel sorry for them,
Speaker 14: so because they did it to themselves.
Speaker 1: And they make money off of them. They every application
Speaker 1: they do.
Speaker 14: And they're also you know, they're also buying the names
Speaker 14: of of you know, kids who take the test to
Speaker 14: try to encourage them to apply. I mean that was
Speaker 14: our story like a decade ago, and believe it or not,
Speaker 14: nothing has changed.
Speaker 3: So Carol us about the Domino's following, Is it just
Speaker 3: MIT at this point and Dartmouth that are requiring standardized.
Speaker 9: Tests again, Well, we'll see.
Speaker 14: You know, other schools have have not you know, are
Speaker 14: still requiring them, like Georgia Tech. There's a bunch of
Speaker 14: SEC schools.
Speaker 3: The other schools they didn't remove them.
Speaker 14: I think pretty much everybody at the height of the
Speaker 14: pandemic didn't didn't require them, but well because you couldn't
Speaker 14: get to the testing sites. But you know, like the
Speaker 14: University of Florida, University of Georgia, they've still required them
Speaker 14: because they give away scholarship money based on your test
Speaker 14: score and they give you know, if you are a
Speaker 14: Georgia resident or Florida and you and you do well
Speaker 14: and you hit the parameters, you you can go for
Speaker 14: practically free.
Speaker 1: And I will say anecdotally during the pandemic, individuals who
Speaker 1: did file test scores did see like scholarships had you
Speaker 1: come yeah versus not? It's really interesting and just it
Speaker 1: was totally optional, and and a lot of advisors in
Speaker 1: high schools like, why would you do it? Why would
Speaker 1: you put it in even if you did good or
Speaker 1: even better than good? Right now, it's just interesting.
Speaker 14: But also keep in mind, so we've had a couple
Speaker 14: of years of them being optional. Who's going to submit
Speaker 14: the score?
Speaker 1: We did well, people who didn't, So what does that do?
Speaker 1: The average raises the average? All right, math, you know I.
Speaker 3: Should have done very well on my quantitative based on
Speaker 3: your questions just now that e chanet I should have
Speaker 3: done well on quantitative.
Speaker 9: I did not?
Speaker 1: I did? Okay, do you want to do anything more
Speaker 1: because there's more stories idea?
Speaker 3: Yeah, go ahead, all right.
Speaker 1: So you've got a couple of the story about Harvard's
Speaker 1: top governing board picks. Also though about governments looking to
Speaker 1: maybe tax endowments go where you want? Will we will
Speaker 1: bow to your brain and where you want to go here?
Speaker 14: Okay, So Harvard is a big target with fifty one
Speaker 14: billion dollars. It already pays taxes to the federal government.
Speaker 14: That happened in twenty seventeen with the Trump tax bill,
Speaker 14: and now Massachusetts is eyeing it. They would like a
Speaker 14: little piece of it too. There's two bills that may
Speaker 14: move forward this week. One would have a two point
Speaker 14: five percent excise tax on the value of the entire
Speaker 14: fund the federal. One is on the investment returns, and
Speaker 14: that could bring in Are you sitting a billion dollars
Speaker 14: in the state of Massachusetts and that would fund free
Speaker 14: college for everybody in almost thirty campuses.
Speaker 1: What a great thing.
Speaker 3: You can't move to Florida, Harvard?
Speaker 1: What great? That's good one the Florida.
Speaker 3: Answer to so much I can't do it?
Speaker 1: Is that likely going to go through?
Speaker 14: I don't know, but you know there's one thing that
Speaker 14: Harvard has done is it's in some ways the Republicans
Speaker 14: and Democrats are very upset with what's been going on
Speaker 14: anti Semitism on campus. I mean, what, what who would
Speaker 14: have expected that Harvard could in some way unify lawmakers?
Speaker 3: Yeah, that's really like It's like Harvard and social media companies,
Speaker 3: great are the things that unify members of Congress yeah,
Speaker 3: and China. Yeah, in China, so we'll.
Speaker 14: See if they go forward. The second one would would
Speaker 14: is also a tax for schools that have legacy admissions.
Speaker 14: In Massachusetts MIT does not, and that would but that
Speaker 14: would give money towards a community colleges.
Speaker 1: It just means you have to come back. It's already
Speaker 1: busy year for you. Not going on all right. Janet Lauren,
Speaker 1: thank you, Thank you. Higher education financial putter at Bloomberg News.
Speaker 1: Check her out on Twitter x at Janet Lauren and
Speaker 1: then Appleloomberg dot com.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Listen live
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Speaker 1: Well, you know, the big game is this week, and
Speaker 1: we're talking, of course, about the fifty eighth Super Bowl
Speaker 1: between the Kansas City Chiefs and the San Francisco forty
Speaker 1: nine Ers. The game held in the gambling capital of
Speaker 1: the United States, Las Vegas. Betting companies pushing out lots
Speaker 1: of ads ahead of the game, including this one from
Speaker 1: Bett MGM.
Speaker 4: BEDAMGM is for everyone that loves sports betting, everyone but
Speaker 4: Tom Brady.
Speaker 3: Wait, what did I do?
Speaker 5: The truth is you've won too much time. We let
Speaker 5: others have their turn.
Speaker 7: What if I be in game?
Speaker 3: Parley is and I'm not Tom Brady? You're of dog meat?
Speaker 4: All right?
Speaker 1: Well, MGM is for everyone that loves sports betting, everyone
Speaker 1: but Tom Brady. Way, what did I do here? All right?
Speaker 1: The truth is you want too much. It's just funny
Speaker 1: like you just kind of go through what they said.
Speaker 1: These are, though, the ads that we're seeing roll out
Speaker 1: ahead of it.
Speaker 3: I mean, it makes sense that we're seeing these ads
Speaker 3: because big money is expected to trade hands this year.
Speaker 3: According to the Gambling Industry National Trade Association, about twenty
Speaker 3: six percent of American adults are expected to place a
Speaker 3: wager on the Super Bowl. It's a thirty five percent
Speaker 3: increase from last year's Super Bowl. Bet is estimated to
Speaker 3: place wagers totally up to twenty three point one billion dollars,
Speaker 3: which is a seven billion dollar increase from twenty twenty three.
Speaker 3: We've got with us Adam mcgreen Blatt. He's the CEO
Speaker 3: of bet MGM, joining us now from Las Vegas. BETMGM
Speaker 3: is the sports betting operator jointly owned by MGM Resorts
Speaker 3: and the Isle of Man based gambling Company and Taine Adam.
Speaker 3: Good to have you, Good to see you. Give us
Speaker 3: an idea of what you're seeing on bettma GM's platform
Speaker 3: right now ahead of the Super Bowl this weekend.
Speaker 15: Firstie, thanks for having me. We are seeing interest that
Speaker 15: we've never seen before, cross section of wages, We're seeing
Speaker 15: the growth in prop bets, We're seeing the swift defect.
Speaker 15: We are seeing, as I say, a lot of interest.
Speaker 15: I think also because the event is taking place in Vegas,
Speaker 15: which really is is home to for us, so swift effect.
Speaker 1: Does that mean more women are stepping up and betting
Speaker 1: on the platform?
Speaker 15: Well, actually we're seeing It's what we're noticing is the
Speaker 15: nature of the bets that are being sought out has changed. So,
Speaker 15: for example, we now offer in Ontario, we now offer
Speaker 15: the likelihood of Taylor Swift being mentioned in the MVP speech,
Speaker 15: and that's an interestingly popular bet. We're also seeing a
Speaker 15: lot of support for Travis Kelcey's MVP and I think
Speaker 15: that's how the swiftffect is manifesting.
Speaker 1: Well, that's what I wonder too, Adam, is the kinds
Speaker 1: of bets that are being placed, the majority of bets
Speaker 1: that are being placed ahead of the big game. Is
Speaker 1: it just? Is it basically who wins ultimately? Or give
Speaker 1: us some idea because you really can now dice and
Speaker 1: slice in terms of how you bet on anything.
Speaker 15: So just to set the context, Betamgen will be offering
Speaker 15: more than a thousand different things to bet on come
Speaker 15: game day. In fact, the majority are available now. Historically,
Speaker 15: the majority of bets and majority of volume, we're behind
Speaker 15: what we call the six pack, which is really the
Speaker 15: bet fore and against who will win the game? The
Speaker 15: money line spread, so by what margin will the winner win?
Speaker 15: And total the total points. What we're seeing now is
Speaker 15: a shift, so sixty two percent of bets are not
Speaker 15: on that, so more than half the bets are on
Speaker 15: things called player props. The most popular player prop at
Speaker 15: the moment is a win that the Chiefs will win
Speaker 15: by seven to twelve points.
Speaker 3: Okay, hey, Adam, is this the way that you differentiate
Speaker 3: yourself from the competitors out there? Because there is no
Speaker 3: shortage of places to make bets, especially for the Super Bowl.
Speaker 3: I mean, we got DraftKings, we got FanDuel, we got Caesars.
Speaker 3: The list certainly goes on, how do you differentiate yourself
Speaker 3: in a crowded market?
Speaker 15: Well, look, the market's been crowded since the beginning, and
Speaker 15: I think we have betmgms proven that we know what
Speaker 15: it takes to win, and we continue to be a
Speaker 15: market leader. We have seventeen percent market share in online
Speaker 15: sports betting and eye gaming across North America, and so
Speaker 15: this puts us firmly in the top tier of competitors.
Speaker 15: And one of the things that is particularly in our
Speaker 15: favor this year is that the two leaders that we
Speaker 15: share the podium with are actually not available in the
Speaker 15: state of Nevada because of regulation. So this really is
Speaker 15: our moment to shine bed MGMs on home turf, leaning
Speaker 15: into what we call our omnichannel strategy, and given that
Speaker 15: we are by far and away the premier choice in town,
Speaker 15: we're expecting to see tremendous volume.
Speaker 1: All right, but how would you characterize, adam, the level
Speaker 1: of promotional competition in the online sports betting industry now
Speaker 1: compared to a year ago, It's got to be somewhat fierce.
Speaker 1: But tell us how you would characterize it.
Speaker 15: Well, it's interesting, that's what we're actually seeing. And I'm
Speaker 15: not sure whether it's as a result of some of
Speaker 15: the minnows, some of the smaller players actually leaving the market,
Speaker 15: leaving the market because the power and effectiveness of the
Speaker 15: leaders has become overwhelming. But we're actually seeing a rational
Speaker 15: recruitment environment. Our CPAs are cost to acquire a player
Speaker 15: are actually down a year on you over the last
Speaker 15: few weeks.
Speaker 3: Hey, I'm wondering about growth here because you're live right
Speaker 3: now in twenty eight different markets in North America. You
Speaker 3: mentioned the market share. You have access to just under
Speaker 3: half of the adult population in North America. When is
Speaker 3: a time that you think you will have access to
Speaker 3: every adult in North America.
Speaker 15: Well, that's an important question because that's about the you know,
Speaker 15: when does the music stop? And the good news is
Speaker 15: the music is not going to stop for a while.
Speaker 15: Our TAM our total Addressable Market anticipates that in the
Speaker 15: fullness of time. And there's a question mark on you
Speaker 15: know what that means, of course, but in the fullness
Speaker 15: of time, we expect fully eighty percent of the US
Speaker 15: adult population to have access to some form of sports betting.
Speaker 3: What do you think are the next two states to
Speaker 3: legalize or markets set to legalize over the next one
Speaker 3: or two years.
Speaker 15: Well, the first one I can answer with authority, because
Speaker 15: we're looking forward to launching in the state of North
Speaker 15: Carolina in the next four weeks. Okay, after that, it's
Speaker 15: less certain. We're seeing some positive movements from a number
Speaker 15: of states. I think the most like next one as
Speaker 15: we look at it today is the state of Georgia.
Speaker 15: But ultimately these become legislative decisions and subject to all
Speaker 15: the vagaries that go along with those.
Speaker 1: Would you say that the space is getting a bit
Speaker 1: crowded and that we're going to see some kind of
Speaker 1: additional maybe consolidation or more consolidation.
Speaker 15: But that we I think you're referring to a couple
Speaker 15: of the more recognized brands that have joined the space recently.
Speaker 15: I think there's probably space for three or four, maybe five.
Speaker 15: If we look at more mature international markets, perhaps the UK, Italy,
Speaker 15: the bigger markets, there's generally space for four or five
Speaker 15: leading major online players. In the US, it is more concentrated. Actually,
Speaker 15: to your question, is there space for consolidation potentially, But
Speaker 15: one of the factors weighing against consolidation in the US particularly.
Speaker 15: It's just the complexity of the operating environment, given that
Speaker 15: every state is its own regulated environment. So for a
Speaker 15: merger in the US, it's like an European operator that
Speaker 15: operates in all the European countries.
Speaker 3: Merging with another.
Speaker 15: Hey, Adam, we're figuring out the regulation that goes along
Speaker 15: with it.
Speaker 1: That's true.
Speaker 3: We only have about twenty seconds left. But are you
Speaker 3: looking to make any acquisitions?
Speaker 15: Gosh, straight for it. We're very, very happy with the tools,
Speaker 15: the assets, the relationships that we have. We believe we
Speaker 15: have what it takes to win, So we're not considering
Speaker 15: actively any acquisitions at this point.
Speaker 1: All right, twenty seconds so important that in terms of
Speaker 1: we talk about sports addiction, gambling addiction, you guys are
Speaker 1: thinking about that, and just really quickly about ten seconds here.
Speaker 15: This is a real issue. This is an issue of
Speaker 15: sustainability of our sector. We're making great strides individually as BEDMGM,
Speaker 15: but also in twenty twenty four and we'll see collective action
Speaker 15: in this regard.
Speaker 1: Adam, thank you so much. This is Bloomberg.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 2: Live weekday afternoons from two to five pm Eastern Listen
Speaker 2: on Apple car Play and then Brout Auto with a
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Speaker 3: Well, small businesses the backbone of the US economy. Government
Speaker 3: data shows that these companies account for two of every
Speaker 3: three jobs that have been added in the past twenty
Speaker 3: five years.
Speaker 1: Yeah, it's important and the most reading or the most
Speaker 1: recent reading, i should say, on the small business community.
Speaker 1: It found that US small business optimism ticked up to
Speaker 1: a five month high in December, largely reflecting less pessimism
Speaker 1: around sales, earnings trends and economic expectations. That reading just
Speaker 1: about one month ago. We're going to get another read
Speaker 1: a US small business optimism about one week from today.
Speaker 1: But we actually are going to get one in just
Speaker 1: about five seconds.
Speaker 3: That's because our next guest is a member of that
Speaker 3: all important engine of the US economy. Very pleased to
Speaker 3: at back with us. Christina Stembele's under farm Girl Flowers.
Speaker 3: It's a business that if you're a listener of viewer
Speaker 3: of the program, you certainly know it well. It's also
Speaker 3: a business that she bootstrapped some twelve years ago and
Speaker 3: is built into a thirty million dollar business. She's joining
Speaker 3: us here in the Bloomberg Interactive Broker's studio. Christina, Welcome
Speaker 3: back to New York.
Speaker 10: Thanks thanks for having me. I love talking about business,
Speaker 10: the business of flowers.
Speaker 1: Well, how is he here?
Speaker 3: How is the business of flowers? How is your world
Speaker 3: right now?
Speaker 9: Yeah?
Speaker 10: I mean we're gearing up for Valentine's Day, which is
Speaker 10: always a lot of pressure. You know, it's the second
Speaker 10: largest holiday of the year for us, so there's a
Speaker 10: lot of anticipation.
Speaker 3: Remind us what percentage of your revenue comes from just
Speaker 3: Valentine's Day.
Speaker 10: It's lower than you think. It's about fifteen percent, but
Speaker 10: Mother's Day goes up to about twenty percent.
Speaker 3: Okay, so that's five thirty five percent of all of
Speaker 3: your revenue from two different days.
Speaker 1: Yes, in two weeks. Basically, are those the two biggest holidays?
Speaker 8: Yes?
Speaker 1: Absolutely? All right, So okay, a favor like back out
Speaker 1: the holiday stuff because right there's expectations around that. But
Speaker 1: in general, when you look at the US consumer, how
Speaker 1: have they been ordering just kind of on every other
Speaker 1: day or just normal days, if you will.
Speaker 10: Normal days are down. I wish I had the optimism
Speaker 10: that the reports are showing right now, and I think
Speaker 10: I think I'm optimistic about next year, So I think
Speaker 10: maybe that's where someone's coming from. Like, you know, after COVID,
Speaker 10: post COVID, I think that there's been so much change constantly,
Speaker 10: and like, you know, where are we going to settle out?
Speaker 10: And I think, you know the economy right now, we're
Speaker 10: in a gifting market, so the gifting holidays are especially
Speaker 10: important for us. We have to do really well in
Speaker 10: those gifting holidays because the everyday consumer isn't isn't consuming
Speaker 10: as much, they aren't sending as many gifts since we're
Speaker 10: in the gifting space.
Speaker 3: When did you notice this change?
Speaker 10: I mean twenty twenty one. I mean we've been going
Speaker 10: since twenty twenty one on this, so you know, we
Speaker 10: were just.
Speaker 3: In size finding since twenty twenty one, Yes.
Speaker 10: We have, but intentionally so we could still intentional intentionally
Speaker 10: we're focusing. You know, I'm really excited to see the
Speaker 10: market change a bit from growth at all costs. You know,
Speaker 10: all like small businesses, startups, everything they arey was all
Speaker 10: about growth at all costs. Just have those top line
Speaker 10: revenue numbers grow exceedingly fast. And now we're focused on profitability.
Speaker 10: So and I feel like everybody's kind of changed the
Speaker 10: way a little bit since we're bootstrapped.
Speaker 4: What is it?
Speaker 1: Wait, what is it that Zuckerberg says the Year of efficiency?
Speaker 10: Yeah, but I mean it's carrying, it's bleeding into this
Speaker 10: definitely with layoffs you see still happening, you know, at
Speaker 10: a pretty rapid rate. People are you know, it's it's
Speaker 10: you have to be efficient. You have to run very
Speaker 10: efficiently to make you know, make any profit this year.
Speaker 1: Remind us about your staffing and your supply chain, Like,
Speaker 1: give us an idea of what that picture is.
Speaker 10: Our supply chain has changed four times since twenty twenty,
Speaker 10: so we are constantly changing it to adapt with what
Speaker 10: the market demands are and supply chain availability is. So
Speaker 10: twenty twenty we had a boom. You know, we're over
Speaker 10: sixty million, and twenty twenty is you know I.
Speaker 1: Send flowers during the pandemic.
Speaker 10: Yes, yeah, yeah, and we all probably did, and people
Speaker 10: to send you know, I know, you can.
Speaker 1: Make send flower bread, wait, bake bread.
Speaker 10: Baked bread, drink wine and send flowers wine, soured ough
Speaker 10: and flowers. It was kind of that was the year, right,
Speaker 10: So I think you know there was that, but supply
Speaker 10: chain was really hard, so then you have to shift
Speaker 10: and go closer to the flowers. We're buying a lot
Speaker 10: more in North America at that time. Now we still
Speaker 10: are buying more North America closer to home.
Speaker 3: Was that because planes weren't coming, so they're not These
Speaker 3: are not planes that are exclusively filled with flowers. These
Speaker 3: are planes that sometimes have people on them. Yes, and
Speaker 3: it's hard to ship this stuff if those planes aren't flying.
Speaker 10: Absolutely so unless you're going to charter a plane from Europe,
Speaker 10: you know, when there weren't as many planes going twenty twenty,
Speaker 10: you would have to figure out other ways to get flowers,
Speaker 10: you know, So we were literally in box trucks picking
Speaker 10: up flowers that time, you know.
Speaker 1: And then you know things have shifted.
Speaker 10: Supply chain's gotten better, but everything's gotten more expensive, so
Speaker 10: then you're also you know, outbound transportation, you know, went
Speaker 10: from about twenty six percent of our revenue to forty
Speaker 10: one percent spiked really just you know, I would let
Speaker 10: you know, I guess I don't know if I should
Speaker 10: say those, but I think it's also linked to stock
Speaker 10: prices for those companies in twenty twenty. If you look
Speaker 10: at those for you to.
Speaker 1: Go there, because I've got stations with some publicly held
Speaker 1: companies as well, and just talking about prices like why
Speaker 1: are they still so high, and smart people scratching their
Speaker 1: head and just wondering where their folk are keeping prices
Speaker 1: high because they can.
Speaker 10: I mean, I think that things have gotten more expensive.
Speaker 10: Labor is a lot more expensive, so I mean I
Speaker 10: know that personally for our company, so I can imagine
Speaker 10: at the transporation companies it's the same when you're paying
Speaker 10: a lot more than you were a couple of years ago,
Speaker 10: where you know, wages have inflated much quicker than they
Speaker 10: did in previous you know, decades, so you know that
Speaker 10: has to be reflected. And I think, you know, American
Speaker 10: consumers have been taught by certain large companies that shipping
Speaker 10: should be free, but it's not free. And you know
Speaker 10: that that good good has to pass a lot of
Speaker 10: people's hands and a lot of trucks and a lot
Speaker 10: of planes and all.
Speaker 3: Of gas, especially if you're shipping something that's perishable and
Speaker 3: that has to get to a destination within a certain
Speaker 3: amount of time or else it's not going to look
Speaker 3: or smell as good.
Speaker 1: Labor market can you find all the workers you want.
Speaker 10: No, you know I should say yes, but you pay more.
Speaker 10: You pay a lot more for the same same job.
Speaker 1: How much have wages gone up as a cost of
Speaker 1: doing business for you guys, I would say.
Speaker 10: About thirty percent Okay, you know, twenty five to thirty.
Speaker 3: Percent since twenty twenty.
Speaker 1: I think, yeah, it.
Speaker 10: Started in twenty twenty and it's continued to rise. I
Speaker 10: also think professional labor has gone up as well. It's
Speaker 10: not just wage level that's gone up in prices. Also,
Speaker 10: working from home, I think productivity is in question sometimes.
Speaker 1: A little bit.
Speaker 9: It's harder.
Speaker 10: It's just not that you know, people aren't working, it's
Speaker 10: just really it's not efficient. You have to have six
Speaker 10: meetings to get things done that would take one.
Speaker 3: Is that what you're doing at Farm Grow Flowers? Are
Speaker 3: you hybrid? Are you remote?
Speaker 10: We are remote mostly. I mean in facilities people are working,
Speaker 10: but remote for a professional level.
Speaker 3: Okay, oh go ahead.
Speaker 1: I'm just gonna say, while we're talking higher cost, how
Speaker 1: much of pricing or the pricing pressures you are feeling
Speaker 1: as a business owner, how much can you pass on
Speaker 1: to consumers or are you are you kind of swallowing
Speaker 1: a lot of it. It both.
Speaker 10: So we have raised our prices in some things, you know,
Speaker 10: our core product offerings. We haven't raised those prices in
Speaker 10: three years. We're probably going to need to because our
Speaker 10: margins are just so tight. But American consumers also, you know,
Speaker 10: they're hurting right now. When you it's eight dollars for
Speaker 10: a dozen eggs, you know they can't spend as much.
Speaker 10: So it's also making sure you don't.
Speaker 3: Price crisis have gone down the Yeah, okay.
Speaker 1: Seven ninety nine, but oh you got to stop somewhere else.
Speaker 10: Yeah, maybe the free range thing. I don't know.
Speaker 1: Yah, yeah, in the area I'm in Washington. Okay, eggs
Speaker 1: that were in prison. Like I'm just kidding, quitting Joe.
Speaker 1: I don't want the email that I'm going to get.
Speaker 3: Okay, now, okay, so let's talk a little bit about
Speaker 3: we were talking about your supply chain here, fast forward
Speaker 3: to twenty twenty four. Where are you getting your flowers now?
Speaker 10: All over North America, South America, Europe mostly. I would
Speaker 10: say I need to do an audit to see what
Speaker 10: the percentage is. I would say it's over fifty percent US,
Speaker 10: but slightly so, it's about half and half probably so you.
Speaker 1: Think just like kind of I mean, we talk about
Speaker 1: this with everybody, this idea of kind of pushing back
Speaker 1: against globalization or just having kind of near shoring unshoring.
Speaker 1: It makes sense and probably will continue. Do you think
Speaker 1: or if all of a sudden it makes sense to
Speaker 1: buy outside you will absolutely.
Speaker 10: I mean, you know, you can't get enough flowers in
Speaker 10: the US of all the type varieties you need, So
Speaker 10: it's just there's a sourcingne shortage of certain varieties. Also,
Speaker 10: you know, gas prices heating greenhouses in certain areas, especially
Speaker 10: you know on the East Coast, the heat of greenhouse
Speaker 10: is way more expensive than importing those flowers, and so
Speaker 10: the farmers know that and they just don't heat them
Speaker 10: through you know, certain months, and so you have to
Speaker 10: subsidize certain times of year.
Speaker 3: Hey, real quick, you bootstrapped this company. You have funded
Speaker 3: at yourself, partly because a lot of vcs passed on
Speaker 3: this company. What's the exit plan for you?
Speaker 10: That's a good question. We should talk about that for
Speaker 10: a lot of time. You know, I built it to sell.
Speaker 10: I don't know that that's the trajectory anymore for us.
Speaker 10: So we'll see, you know, building a long term sustainable business.
Speaker 10: There's nothing wrong with that though, and we don't talk
Speaker 10: about that. It's like the sexy, cool thing to talk
Speaker 10: about in all the magazines.
Speaker 3: But that's I think that's because so many of these
Speaker 3: businesses are venture backed and they have investors breathing down
Speaker 3: their neck saying, you know, we need our return.
Speaker 10: Absolutely. I actually feel like we're extremely fortunate right now
Speaker 10: to not have that happening. You know, a lot of
Speaker 10: my friends that are CEOs that have that same story.
Speaker 10: You know, they are being forced to show some growth
Speaker 10: numbers or at least a flat year, and our goal
Speaker 10: is a flat year this year with profit, you know,
Speaker 10: but there's no path to profitability. Like overnight, they were
Speaker 10: like expected to make mom jeans and the low writers
Speaker 10: again like right, you can't do that, right, and so
Speaker 10: they're like, you know, growth at all costs, growth at
Speaker 10: all costs. Now profitability, Well, you know, we've always had
Speaker 10: to be profit was it the.
Speaker 1: Owner of roone that we talked about that kind of
Speaker 1: had investor money come in and then kind of the
Speaker 1: business got away and then he got back yeah checks, well,
Speaker 1: nay check, it's more involved in it. So well, when
Speaker 1: you know or whatever or whatever, the next stage.
Speaker 3: Just come back, Yeah, come back to New York.
Speaker 1: I mean we might be a long term business. I
Speaker 1: might get here from many minutes, and I would say
Speaker 1: your workers and your supply chain would appreciate that, no
Speaker 1: doubt about it. Good luck on this Valentine's Day. Thank you,
Speaker 1: thank you so much, so appreciate it. Christina's Dempel, founder
Speaker 1: and CEO of Barn Girl Flowers.
Speaker 2: This is the Bloomberg Business Week Podcast Apple and Spotify
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