WEBVTT - Carnival CEO Sees Records and Strong Demand 0:00:02.920 --> 0:00:10.719 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business 0:00:10.720 --> 0:00:13.960 Wait inside from the reporters and editors who bring you 0:00:14.000 --> 0:00:18.360 America's most trusted business magazine, plus global business, finance and 0:00:18.400 --> 0:00:22.880 tech news. The Bloomberg Business Week Podcast with Carol Messer 0:00:23.040 --> 0:00:25.800 and Tim Stenebeck from Bloomberg Radio. 0:00:26.800 --> 0:00:28.640 Hey, we want to get to one company, definitely on 0:00:28.640 --> 0:00:31.720 our radar. We're talking about Carnival. Shares were down as 0:00:31.760 --> 0:00:33.520 much as six and a half percent, the most intra 0:00:33.600 --> 0:00:37.600 day since early August. The cruise line operator forecasted adjusted 0:00:37.600 --> 0:00:39.480 EBIT up for the fourth quarter of about one point 0:00:39.479 --> 0:00:44.560 fourteen billion, slightly below consensus estimates of one point fifteen billion. 0:00:44.760 --> 0:00:47.720 Earning support also reflected a weaker outlook for netfields in 0:00:47.760 --> 0:00:50.480 the current quarter, although I will say analysts seem pretty 0:00:50.520 --> 0:00:53.080 upbeat about the outlook for this company, and I should 0:00:53.080 --> 0:00:55.920 say shares of Carnival right now, Tim just down about 0:00:55.920 --> 0:00:56.960 one point two percent. 0:00:57.040 --> 0:00:58.319 Well, great to be back with us. 0:00:58.400 --> 0:01:02.440 Josh Weinstein, President CEO, Chief Climate Officer of Carnival Corporation 0:01:02.720 --> 0:01:05.840 with us from Carnival HQ down in Miami. Josh, good 0:01:05.840 --> 0:01:08.720 to have you with us this afternoon. I want to 0:01:08.720 --> 0:01:12.920 talk about the bottom line. Eighth quarter of bottom line 0:01:12.920 --> 0:01:15.800 beats for you all, investors, still focusing on that slightly 0:01:15.800 --> 0:01:19.119 blow consensus outlook for adjusted IBAD stock not as down, 0:01:19.680 --> 0:01:21.640 not down as much now as it was earlier in 0:01:21.640 --> 0:01:23.760 the day. As Carol just mentioned, tell us about the 0:01:23.840 --> 0:01:26.960 quarter that was and perhaps most importantly, the outlook. 0:01:27.000 --> 0:01:27.600 What are you seeing? 0:01:28.840 --> 0:01:30.839 Yeah, hi, thanks for thanks for having me. I don't 0:01:30.959 --> 0:01:34.320 usually follow the fit chairman. This is a big this 0:01:34.360 --> 0:01:36.920 is a big thrill home to go check out Jack White, 0:01:37.400 --> 0:01:38.200 White and Nashville. 0:01:38.440 --> 0:01:40.679 Thank you for your patience. We so appreciate it. 0:01:41.720 --> 0:01:42.600 That always interesting. 0:01:43.400 --> 0:01:46.360 Well, we'll talk about the third quarter first, and as 0:01:46.400 --> 0:01:48.640 I've been able to say for the last several quarters, 0:01:48.680 --> 0:01:52.160 it's record you know, we just hit a record for revenues, 0:01:52.200 --> 0:01:58.040 for revenue, yields, for operating income, customer deposits, bookings two 0:01:58.120 --> 0:02:02.120 years out, so right up and down our business. It's 0:02:02.320 --> 0:02:05.800 it's records and strong demand. So we ended the third 0:02:05.880 --> 0:02:09.519 quarter up about eight point seven percent in our yield 0:02:09.919 --> 0:02:14.239 year over year, which was strong. And the same time, 0:02:14.280 --> 0:02:16.840 we held our cost flat, which was which is also 0:02:16.880 --> 0:02:19.560 good to note, and that resulted in, like I said, 0:02:19.600 --> 0:02:22.560 a record quarter. And as we were able to adjust 0:02:22.960 --> 0:02:25.120 our full year guidance. We did that for the third 0:02:25.160 --> 0:02:27.960 time this year, and it's going to take us up 0:02:27.960 --> 0:02:31.240 to about six billion dollars of EBITDA, which again, to 0:02:31.320 --> 0:02:35.200 use a broken record word, it's a record, and so 0:02:35.320 --> 0:02:37.680 we're expecting much more as we get into the fourth 0:02:37.760 --> 0:02:39.120 quarter and then beyond. 0:02:39.639 --> 0:02:40.320 You know, Ja. 0:02:40.480 --> 0:02:43.480 Powell Fed chair obviously that you just listened to. I 0:02:43.520 --> 0:02:48.440 am curious, Josh if in terms of macro, what matters 0:02:48.480 --> 0:02:50.280 in terms of FED policy for you and what's going 0:02:50.320 --> 0:02:52.359 on in terms of the interest rate environment. He did 0:02:52.400 --> 0:02:56.320 also talk about the savings rate, suggesting consumers can continue spending, 0:02:56.320 --> 0:02:58.000 which we want to get into too in terms of 0:02:58.280 --> 0:03:00.919 it seems like consumers are certainly still spending on cruises. 0:03:00.960 --> 0:03:03.880 But give us macro, give us consumer spending. How you 0:03:03.880 --> 0:03:04.799 would describe it all? 0:03:06.200 --> 0:03:08.919 Well, for us, the word's going to be robust, you know. 0:03:09.000 --> 0:03:11.880 I mean, we've been living through this cycle with everybody else. 0:03:11.960 --> 0:03:13.959 We've lived through the high inflation, We've lived in the 0:03:14.000 --> 0:03:17.360 high interest rate environment, and now we see inflation down, 0:03:17.480 --> 0:03:20.880 we see the FED taking action to start reducing that 0:03:20.919 --> 0:03:23.960 interest rate environment. And through all of it, what we've 0:03:24.000 --> 0:03:27.760 been seeing is robust demand, and because of our business. 0:03:27.840 --> 0:03:29.960 You know, first of all, it's a global business. As 0:03:30.000 --> 0:03:32.160 you know, we have a portfolio of brands that are 0:03:32.200 --> 0:03:35.040 really world class all over the all over the world. 0:03:35.960 --> 0:03:39.760 And what we see is strong demand depending no matter 0:03:39.800 --> 0:03:43.400 how you slice it, whether it's geographic, whether it's contemporary 0:03:43.520 --> 0:03:47.680 versus more premium. We're seeing that strength and we see 0:03:47.680 --> 0:03:49.680 it in the results. We see it in the on 0:03:49.760 --> 0:03:52.200 board spending levels. You know, as part of our third 0:03:52.240 --> 0:03:54.839 quarter results. It's not just about the ticket revenue which 0:03:54.920 --> 0:03:57.880 was taken anywhere from you know, six months to up 0:03:57.920 --> 0:04:00.120 to two years in advance, but what's the actual on 0:04:00.160 --> 0:04:02.760 board spending environment, which is much more real time. 0:04:03.200 --> 0:04:05.640 And the fact is our onboard spending. 0:04:05.200 --> 0:04:08.960 For this past quarter was up over six percent year 0:04:09.000 --> 0:04:12.480 over year, and that's actually an acceleration because in the 0:04:12.520 --> 0:04:14.800 second quarter it was up closer to four percent year 0:04:14.840 --> 0:04:15.280 over year. 0:04:15.640 --> 0:04:16.440 So what we're. 0:04:16.279 --> 0:04:19.560 Seeing is is consumers that are healthy, that still want 0:04:19.560 --> 0:04:21.400 to spend on experiences. 0:04:21.640 --> 0:04:24.280 And as you've probably heard me say before, we. 0:04:24.200 --> 0:04:28.040 Are an unparalleled value, right, we are a better value 0:04:28.080 --> 0:04:29.880 to land. I remember being in the offices with you 0:04:29.920 --> 0:04:33.440 in December talking about my hotel stay. Not only are 0:04:33.480 --> 0:04:37.000 we unparalleled in the value. We are unparalleled in the 0:04:37.120 --> 0:04:40.520 experience that we give to people. You get value for 0:04:40.600 --> 0:04:43.280 what you pay for, and we deliver on that guest 0:04:43.320 --> 0:04:44.520 experience like nobody else. 0:04:44.680 --> 0:04:47.679 So, Josh, are you seeing any weakness across any part 0:04:47.800 --> 0:04:51.000 of the portfolio of brands right now from any segment. 0:04:50.600 --> 0:04:51.240 Of the consumer? 0:04:52.360 --> 0:04:56.560 Now, we're really not no pullback whatsoever now, you know. 0:04:56.640 --> 0:04:58.000 I mean, as a matter of fact, if you look 0:04:58.000 --> 0:05:02.000 at our twenty twenty five booked position, it's higher in 0:05:02.120 --> 0:05:04.640 price and occupancy than it's ever been at the same 0:05:04.680 --> 0:05:07.400 point in time. When you look at twenty twenty five, 0:05:07.560 --> 0:05:11.440 we're higher in every single quarter price and occupancy. So 0:05:11.520 --> 0:05:15.960 things are moving in continuing to move in the right direction. 0:05:16.080 --> 0:05:18.200 And I think it's I think you know, cruise is 0:05:18.640 --> 0:05:19.560 cruises tiny. 0:05:19.920 --> 0:05:21.680 Right at the end of the day, we're the biggest 0:05:21.720 --> 0:05:23.560 cruise company in the world, but if you take the 0:05:23.600 --> 0:05:26.159 whole cruise industry, it's only about two percent of the 0:05:26.160 --> 0:05:27.479 overall vacation market. 0:05:27.920 --> 0:05:28.600 So we are a. 0:05:28.680 --> 0:05:32.920 Very tiny segment in a huge market with a lot 0:05:32.920 --> 0:05:35.240 of room to grow. Because we're getting the word out, 0:05:35.560 --> 0:05:39.080 we are being more effective in communicating the value and 0:05:39.080 --> 0:05:44.040 communicating the experience and really differentiating our brands so that 0:05:44.240 --> 0:05:46.520 they get a cut through and it means something to people, 0:05:46.640 --> 0:05:48.279 and that's paying dividends. 0:05:48.320 --> 0:05:49.960 Talk to us about the cost side of the equation, 0:05:50.080 --> 0:05:52.080 as you just said, and I read too that nearly 0:05:52.120 --> 0:05:54.640 half of twenty twenty five bookings are done at record 0:05:54.640 --> 0:05:58.560 ticket prices. The cost equation. You guys are a floating 0:05:58.600 --> 0:06:01.640 city once you're at on the water, are food you know, 0:06:01.800 --> 0:06:04.280 meals labor. Tell us what you're seeing in terms of 0:06:04.320 --> 0:06:05.600 the cost side of the equation. 0:06:05.320 --> 0:06:09.240 Josh, yeah, So it's good news there too. You know, 0:06:09.279 --> 0:06:12.760 we are seeing that deacceleration of deceleration part of me 0:06:12.800 --> 0:06:16.080 of inflation, and we're actually just today able to take 0:06:16.120 --> 0:06:19.760 our cost guidance for the full year down from up 0:06:19.920 --> 0:06:22.039 four and a half percent on a unit basis to 0:06:22.200 --> 0:06:24.760 up three and a half percent on a unit basis, 0:06:24.960 --> 0:06:27.240 So we're making good progress there. We are seeing the 0:06:27.279 --> 0:06:30.560 benefit of a lot of hundreds and hundreds of activities 0:06:30.560 --> 0:06:34.400 that we're doing across our brands, taking little bits of efficiency, 0:06:34.880 --> 0:06:37.520 better sourcing savings when we can, and it adds up 0:06:37.560 --> 0:06:40.880 given our scale, So all things are starting to move 0:06:40.920 --> 0:06:43.440 in the right direction on the cost side, which is 0:06:43.520 --> 0:06:46.159 very different, obviously than what we've been experiencing along with 0:06:46.200 --> 0:06:48.800 everybody else as we went through that inflationary cycle. 0:06:49.040 --> 0:06:51.800 Speaking of the inflationary cycle, I'm wondering about the pricing 0:06:51.880 --> 0:06:54.200 power from your perspective. If you're going to be able 0:06:54.279 --> 0:06:57.560 to continue to raise prices in your view next year 0:06:57.600 --> 0:06:58.560 and year after year. 0:07:00.279 --> 0:07:02.320 You know, that's certainly the goal. You know, at the 0:07:02.320 --> 0:07:04.840 beginning of this year, when we were talking about our 0:07:04.880 --> 0:07:07.159 guidance for the first time, there were a lot of 0:07:07.160 --> 0:07:08.720 folks that were saying, oh, yeah, but you know, when 0:07:08.760 --> 0:07:11.240 you get to the fourth quarter of twenty twenty four. 0:07:11.640 --> 0:07:14.200 You took your pricing up in twenty twenty three ten 0:07:14.240 --> 0:07:17.360 and a half percent. That was our results last fourth quarter. 0:07:18.360 --> 0:07:19.920 You're not going to be able to top that. And 0:07:19.960 --> 0:07:21.880 we just came out with guidance today for the fourth 0:07:21.920 --> 0:07:25.080 quarter where our yields are going to be up five percent, 0:07:25.160 --> 0:07:28.920 the majority of which is more price. So we feel 0:07:29.040 --> 0:07:31.200 very good about what we're doing in our ability to 0:07:31.280 --> 0:07:34.960 manage the booking curve, increase our demand profile, and ultimately 0:07:34.960 --> 0:07:36.520 deliver on board as we always do. 0:07:36.840 --> 0:07:41.960 What keeps you up at night, barring another global pandemic, No, 0:07:42.120 --> 0:07:45.320 but seriously, you've been rosy for a while, and I'm 0:07:45.360 --> 0:07:48.000 just curious. It does sound like some really strong metrics, 0:07:48.000 --> 0:07:50.280 And I said, reading some of the analysts commentary, they 0:07:50.320 --> 0:07:52.760 feel the same way. But I'm just curious, what's the 0:07:52.880 --> 0:07:55.360 difficult part of what you guys do. I mean, you're 0:07:55.480 --> 0:07:58.160 ordering new ships, you're adding to that. Tell us, Josh, like, 0:07:58.280 --> 0:08:00.800 where is it that you get concerns? Is it the 0:08:00.840 --> 0:08:02.640 election outcome? I'm just curious. 0:08:03.960 --> 0:08:06.120 No, I think those types of things are temporal. 0:08:06.240 --> 0:08:08.880 And you know, I mean, truthfully, after living through what 0:08:08.960 --> 0:08:11.840 we lived through in twenty twenty and twenty twenty one 0:08:11.880 --> 0:08:16.720 and getting getting back from literally a pause to where 0:08:16.760 --> 0:08:20.640 we are today, there's really not much that that keeps 0:08:20.680 --> 0:08:24.080 me up at night. Truthfully, that's within our control. I mean, 0:08:24.120 --> 0:08:25.760 at the end of the day, you know, in a 0:08:25.800 --> 0:08:29.880 two year period we went from negative ibadata up over 0:08:29.960 --> 0:08:34.920 six billion in EVA da Son. I don't see much 0:08:35.600 --> 0:08:38.800 within our control that we can't we can't push forward, 0:08:39.160 --> 0:08:40.880 and you know that's showing. I mean, just just in 0:08:40.920 --> 0:08:43.880 this year alone, we came out with guidance in December 0:08:43.920 --> 0:08:45.679 for the first time and we said our yields will 0:08:45.679 --> 0:08:47.600 be up about eight and a half percent. Now we're 0:08:47.600 --> 0:08:49.840 saying up close to ten and a half percent. We 0:08:49.880 --> 0:08:51.640 said costs would be up four and a half percent, 0:08:51.679 --> 0:08:53.760 now they're going to be up three and a half percent. 0:08:53.840 --> 0:08:56.040 We said our return on investing capital will be up 0:08:56.160 --> 0:08:58.160 nine percent, and now we're saying, no, it's ten and 0:08:58.200 --> 0:09:01.360 a half percent, which is a five improvement year over year. 0:09:01.920 --> 0:09:04.600 So I think we're making real good decisions. We've got 0:09:04.640 --> 0:09:07.719 an amazing team all over the world with all of 0:09:07.760 --> 0:09:11.040 our world class brands really driving the business forward, and 0:09:11.200 --> 0:09:13.600 you know, I just think we're just starting to scratch 0:09:13.640 --> 0:09:17.480 that potential. We are really focused on just doing the 0:09:17.520 --> 0:09:20.480 basics better and better, and it's working. 0:09:21.120 --> 0:09:24.760 Hey, Josh, you're also chief Climate Officer at Carnival Corporation. 0:09:25.240 --> 0:09:27.240 You mentioned things that we're in your control. One thing 0:09:27.240 --> 0:09:31.360 that's not in your control is the weather. Is the climate. 0:09:31.559 --> 0:09:34.200 The connection between weather and climate. The two are not 0:09:34.200 --> 0:09:38.120 the same, but the two are certainly linked. Many Americans, 0:09:38.160 --> 0:09:41.760 millions of Americans are still cleaning up after Helene in 0:09:41.840 --> 0:09:44.240 multiple states. It's killed more than one hundred people. Many 0:09:44.320 --> 0:09:46.839 are still missing at this point. How do you think 0:09:46.880 --> 0:09:49.439 about climate change in your role? How do you think 0:09:49.480 --> 0:09:51.640 about planning for an uncertain future. 0:09:53.000 --> 0:09:56.360 Well, first of all, our heart, our sympathy goes out 0:09:56.360 --> 0:09:58.920 to all those impacted by Helene. I mean, it is 0:09:58.920 --> 0:10:02.320 a tragedy unfolding, and we have a lot of connections 0:10:02.320 --> 0:10:03.760 to a lot of those local communities. 0:10:03.800 --> 0:10:06.480 So that's first and foremost. 0:10:06.400 --> 0:10:08.839 As far as the bigger picture goes, you know, we 0:10:08.920 --> 0:10:12.560 understand that the world is evolving rapidly. We need to 0:10:12.640 --> 0:10:14.640 do our part, and we need to plan for the future. 0:10:14.960 --> 0:10:17.079 And when it comes to doing our part, we are 0:10:17.400 --> 0:10:21.600 we are steadfast in our in our in our drive 0:10:21.800 --> 0:10:25.200 to reduce our own carbon footprint and do what we 0:10:25.240 --> 0:10:27.240 can to make the world. 0:10:27.080 --> 0:10:27.680 A better place. 0:10:27.920 --> 0:10:31.640 We have We are thirty five percent bigger today than 0:10:31.640 --> 0:10:35.080 we were in twenty eleven, and we admit this year 0:10:35.160 --> 0:10:39.200 we will emit ten percent less absolute greenhouse gas emissions 0:10:39.440 --> 0:10:41.520 than we did in twenty eleven. Even though we are 0:10:41.520 --> 0:10:44.400 thirty five percent bigger today, it's because we understand the 0:10:44.440 --> 0:10:49.000 importance of doing what we can to drive that sustainability agenda. 0:10:49.280 --> 0:10:52.240 And as far as preparing for the future, that goes 0:10:52.280 --> 0:10:54.280 into all of our decision making. You know, when we're 0:10:54.280 --> 0:10:56.679 talking about the ships that we're building, when we're talking 0:10:56.679 --> 0:10:59.240 about the destinations that we develop, how can we develop 0:10:59.280 --> 0:11:02.800 them in a way that they can deal with whatever 0:11:02.880 --> 0:11:07.600 that environmental landscape is not five years from now, but 0:11:07.720 --> 0:11:09.920 twenty years from now, in thirty years from now, And 0:11:10.320 --> 0:11:13.320 keep leaning into technology, keep doing our part to figure 0:11:13.320 --> 0:11:16.200 out how we can we can we can reduce our 0:11:16.200 --> 0:11:17.800 consumption every single year. 0:11:17.880 --> 0:11:18.400 That's the goal. 0:11:18.480 --> 0:11:21.120 And I'm assuming that's incorporated to when you guys build out, 0:11:21.120 --> 0:11:23.360 whether it was Grand Turk or I'm thinking about Celebration 0:11:23.480 --> 0:11:26.480 Key right that opens up in summer of twenty twenty five. 0:11:27.240 --> 0:11:30.120 Just the revenue and cost impact of that debut tell 0:11:30.200 --> 0:11:32.080 us attle bit about the dynamics around that one. 0:11:33.240 --> 0:11:35.079 Yeah, it is going to be It is going to 0:11:35.120 --> 0:11:38.160 be pretty special, you know, twenty twenty five. We open 0:11:38.280 --> 0:11:41.000 up in July of twenty twenty five, and then we atause. 0:11:41.000 --> 0:11:43.480 You go through a ramp up phase as we as 0:11:43.520 --> 0:11:45.880 we learn and we figure out what works, what doesn't work, 0:11:45.880 --> 0:11:47.839 and how we tweak and it really is going to 0:11:47.920 --> 0:11:50.720 bear fruit in a significant way in twenty twenty six 0:11:50.800 --> 0:11:54.560 when we have nineteen Carnival Cruise Line ships that are 0:11:54.600 --> 0:11:57.920 going to be a reaching celebration key from I think 0:11:57.960 --> 0:12:01.400 about ten different homeports in the Night States, so not 0:12:01.440 --> 0:12:03.360 only is that going to be a boost to our 0:12:03.400 --> 0:12:05.200 ticket revenue, is going to be a boost to the 0:12:05.360 --> 0:12:06.559 spending and the destination. 0:12:06.960 --> 0:12:08.880 And then to the point we were just talking about, 0:12:09.240 --> 0:12:09.600 you know. 0:12:10.000 --> 0:12:14.000 The proximity to the United States is phenomenal from a 0:12:14.040 --> 0:12:17.480 fuel spend and carbon emission standpoint. Because it's so close, 0:12:17.600 --> 0:12:19.840 we can go slower and shorter distances to get there. 0:12:20.160 --> 0:12:23.720 So we are very much looking forward to its introduction. 0:12:23.920 --> 0:12:25.840 All right, great stuff. As always, you're a gem for 0:12:25.920 --> 0:12:29.080 being so patient, So appreciate it, Josh, look forward to 0:12:29.080 --> 0:12:31.920 next time. Josh Weinstein. He's the president, CEO, and chief 0:12:31.920 --> 0:12:35.800 Climate Officer of Carnival Corporation, joining us from Carnival's headquarters 0:12:35.880 --> 0:12:36.720 in Miami. 0:12:37.559 --> 0:12:42.400 Okay, well from a Carnival too, well Harvard, because right 0:12:42.440 --> 0:12:45.240 now we got a conversation about Harvard's endowment. It's a 0:12:45.400 --> 0:12:49.360 kind of in house hedge fund. It's been long revered, envied, 0:12:49.640 --> 0:12:52.360 and at fifty point seven billion dollars that's as of 0:12:52.440 --> 0:12:55.280 June of last year, it remains the biggest and higher ed, 0:12:55.800 --> 0:12:57.680 but it may not be for long. A big reason 0:12:57.720 --> 0:13:01.360 why carol It's money managers have under performed and lost 0:13:01.520 --> 0:13:02.600 its investing. 0:13:02.280 --> 0:13:04.440 Edge all right, so let's get to this Bloomberg exclusive. 0:13:04.440 --> 0:13:06.480 It also is today's Bloomberg Big Take. It's among the 0:13:06.480 --> 0:13:08.920 most read on the Bloomberg terminal as we speak. Let's 0:13:08.920 --> 0:13:12.200 get into it. Bloomberg News Higher education finance reporter Janet Louren. 0:13:12.480 --> 0:13:15.440 She is with us in studio. Jenet, great story. First 0:13:15.440 --> 0:13:20.880 step though, the Harvard Endowment. It's place among university endowments historically. 0:13:21.080 --> 0:13:23.199 Let's just set the scene. I mean, this has been 0:13:23.480 --> 0:13:25.000 a big one, an iconic one. 0:13:25.240 --> 0:13:28.360 Yes, it's definitely an iconic one. It's still the largest 0:13:28.400 --> 0:13:32.200 college fund in America and it will be probably for 0:13:32.240 --> 0:13:36.120 a bit. It was built up with donations that started 0:13:36.160 --> 0:13:38.240 at the founding of Harvard, and it goes back to 0:13:38.280 --> 0:13:42.040 sixteen thirty six. You think of the principle of compounding interests. 0:13:42.200 --> 0:13:44.880 You know, they've had these gifts for hundreds of years. 0:13:45.400 --> 0:13:50.120 They've you know, accumulated and grown. And in nineteen seventy four, 0:13:50.200 --> 0:13:53.200 Harvard decided to create a separate management company called the 0:13:53.240 --> 0:13:57.840 Harvard Management Company or HMC, that runs the endowment. They're 0:13:57.880 --> 0:14:01.280 in the Boston fed it's actually a few isles from campus. 0:14:01.920 --> 0:14:06.560 And really when they started thinking about how should we 0:14:06.600 --> 0:14:10.680 invest our money. It traditionally had always been stocks and bonds, 0:14:10.679 --> 0:14:13.120 and they really weren't the envy of the world at all. 0:14:13.160 --> 0:14:15.959 They were just sort of kind of playing vanilla. And 0:14:16.800 --> 0:14:19.960 later a guy by the name of Jack Meyer decided, 0:14:20.480 --> 0:14:23.200 you know, we had this very long term horizon, we 0:14:23.240 --> 0:14:25.480 could invest in things that are a little bit more 0:14:25.640 --> 0:14:29.360 risky and a liquid and they built up a staff. 0:14:29.440 --> 0:14:33.960 He hired the best managers. They had outstanding performance, and 0:14:34.000 --> 0:14:37.360 they paid them for this outstanding performance. In some years, 0:14:37.640 --> 0:14:41.240 you know, managers were paid twenty five million dollars because 0:14:41.520 --> 0:14:44.840 you know, they were beating everybody. Yeah, and then there 0:14:44.880 --> 0:14:49.680 were some complaints that this is unseemly for a nonprofit university, 0:14:50.440 --> 0:14:55.040 and the class of sixty nine famously complained, and Jack 0:14:55.120 --> 0:14:58.160 Meyer ended up leaving a lot of people left. They 0:14:58.240 --> 0:15:01.840 created their own spinoffs, and it really hasn't been the 0:15:01.920 --> 0:15:02.880 same since then. 0:15:03.240 --> 0:15:06.000 We can't talk about Ivy League endowments without talking about 0:15:06.160 --> 0:15:09.920 Yale's endowment and the legendary David Swinson, who died back 0:15:09.920 --> 0:15:12.080 in twenty twenty one. Talk a little bit about the 0:15:12.080 --> 0:15:14.720 differences between the Yale Endowment and the Harvard Endowment and 0:15:14.920 --> 0:15:16.280 why you illustrate that in the piece. 0:15:16.600 --> 0:15:20.080 So Harvard hired their own staff and the more than 0:15:20.120 --> 0:15:24.880 two hundred traders worked there, and they did amazing. They 0:15:24.880 --> 0:15:29.080 were amazing investors. And Yale, David Swinson came around in 0:15:29.120 --> 0:15:32.680 eighty six. Jack came in nineteen ninety, and David Swinson 0:15:32.720 --> 0:15:35.040 had it at a different model. They didn't have hundreds 0:15:35.080 --> 0:15:38.080 of employees. They had a small number of employees, but 0:15:38.160 --> 0:15:42.560 they farmed their money out to outside managers and they 0:15:42.560 --> 0:15:45.360 were paying those fees you've heard the famous two and twenty, 0:15:46.800 --> 0:15:49.520 but they weren't paying them to their staff. And they 0:15:49.560 --> 0:15:53.880 built these long relationships with outside investment firms and they 0:15:53.920 --> 0:15:57.960 seeded some of them. And as you know, private equity 0:15:58.000 --> 0:16:00.400 takes a long time to make money. Not going to 0:16:00.400 --> 0:16:02.600 put money in a fund and expect a huge return 0:16:02.640 --> 0:16:05.560 next year. There's this thing called the Jay curve where 0:16:05.600 --> 0:16:07.880 you're not going to be making money for years and years. 0:16:08.360 --> 0:16:11.680 And then you know LinkedIn. Yale had this famous LinkedIn 0:16:11.840 --> 0:16:14.360 investment where they put in eight million dollars and they 0:16:14.840 --> 0:16:17.840 earned like eighty four million dollars. But it takes time. 0:16:18.240 --> 0:16:21.080 And while Yale was doing their thing, Harvard was doing 0:16:21.120 --> 0:16:26.840 their thing. And Harvard changed their model and now in 0:16:26.880 --> 0:16:31.040 some ways, they've adopted what Yale and Princeton and MIT 0:16:31.280 --> 0:16:34.640 have has did for years and years and years before, 0:16:35.280 --> 0:16:37.680 and they're kind of playing catch up. And now they've 0:16:37.720 --> 0:16:41.440 increased their allocation to private equity. It was sixteen percent 0:16:41.600 --> 0:16:46.760 around twenty seventeen. Today in the most recent report thirty 0:16:46.840 --> 0:16:49.560 nine percent. We know it's not a great time to 0:16:49.600 --> 0:16:53.680 be expecting returns from private equity, right, So and at 0:16:53.680 --> 0:16:57.280 the same time, Harvard decreased their allocation to us you know, 0:16:57.320 --> 0:16:58.640 to public equities. 0:16:59.000 --> 0:17:01.240 So just got that forty five seconds left here. So, 0:17:01.520 --> 0:17:04.040 I mean, is it a case of because you contrast 0:17:04.080 --> 0:17:05.960 what happened at Yale that David Swenson was there for 0:17:06.000 --> 0:17:07.760 such a long time, Harvard had a lot of different 0:17:07.760 --> 0:17:10.480 managers popping in and out. I mean, what's our net 0:17:10.480 --> 0:17:12.119 takeaway or like what happens next? 0:17:12.200 --> 0:17:12.400 Now? 0:17:12.760 --> 0:17:14.239 Well, what are you watching for? 0:17:14.240 --> 0:17:16.199 We're waiting for their returns when they come out in 0:17:16.200 --> 0:17:18.440 a few weeks and we'll see. I mean, they're very 0:17:18.480 --> 0:17:21.120 dependent on the endowment. About thirty seven percent of their 0:17:21.160 --> 0:17:24.879 budget comes from the endowment, and we're expecting, you know, 0:17:24.920 --> 0:17:26.760 potentially lower fundraising this year. 0:17:27.440 --> 0:17:29.560 Yeah, it's pretty fascinating. I feel like all of the 0:17:29.600 --> 0:17:34.200 financial The finance is really of universities right now on 0:17:34.280 --> 0:17:36.400 everybody's radar in a big way. We'd even get into 0:17:36.480 --> 0:17:37.960 the role of politics because. 0:17:37.680 --> 0:17:40.200 How much a cost to go there factor? Yeah, well, that's. 0:17:40.560 --> 0:17:42.560 That's what kind of blows my mind when it's almost 0:17:42.560 --> 0:17:44.879 forty percent of the endowment is for the budget, and 0:17:44.960 --> 0:17:47.320 yet we know costs in terms of tuition keep going 0:17:47.400 --> 0:17:49.679 up and up and up. So it's just, you know, 0:17:49.760 --> 0:17:51.960 the math on all of this is kind of mind blowing. 0:17:52.119 --> 0:17:55.679 Jet Lauren Killer story again, higher education financial reporter at 0:17:55.680 --> 0:17:57.760 Bloomberg News. As we said, it's the Bloomberg Big Take. 0:17:58.400 --> 0:18:01.960 It's among our most read on the Bloomberg terminal on 0:18:02.000 --> 0:18:03.800 this Monday. It's also a Bloomberg exclusive. 0:18:04.840 --> 0:18:08.360 You're listening to the Bloomberg Business Week podcast. Catch us 0:18:08.400 --> 0:18:11.639 live weekday afternoons from two to five pm Eastern Listen 0:18:11.680 --> 0:18:13.840 on Apple, card Play and and Brout Auto with a 0:18:13.840 --> 0:18:17.959 Bloomberg Business act or watch us live on YouTube. 0:18:18.280 --> 0:18:19.720 How think you can say this every day? 0:18:20.000 --> 0:18:20.119 Right? 0:18:20.280 --> 0:18:22.680 Lots going on in the world today, Yeah, just a 0:18:22.720 --> 0:18:25.359 little bit. I think it's fair to say SoftBank's Vision 0:18:25.359 --> 0:18:28.000 Fund planning to invest five hundred million dollars in open Ai. 0:18:28.200 --> 0:18:30.280 This is part of a larger funding round. This is 0:18:30.320 --> 0:18:33.680 according to the information citing a person familiar with the deal, 0:18:34.160 --> 0:18:37.240 that's part of a rays of six point five billion dollars. 0:18:37.280 --> 0:18:39.480 It would value open Ai at one hundred and fifty 0:18:39.640 --> 0:18:44.280 billion dollars of Bloomberg previously reported. Also, California Governor Gavin 0:18:44.320 --> 0:18:46.879 Newsom has vetoed what would have become one of the 0:18:46.880 --> 0:18:50.880 most comprehensive policies governing the safety of AI in the US. 0:18:50.880 --> 0:18:54.480 For all Things AI and technology, we turned to Max chafter. 0:18:54.280 --> 0:18:55.840 His name Max Aichapter. 0:18:56.280 --> 0:18:58.680 He is really he knows it all. He's Bloomberg Business 0:18:58.680 --> 0:19:01.720 Week columnist. He's also contributed to the Elinink podcast. He's 0:19:01.720 --> 0:19:04.359 the author of the contrarian Peter Teel and Silicon Valley's 0:19:04.400 --> 0:19:07.679 Pursuit of Power. He's here in the Bloomberg Interactive Brokers studio. 0:19:08.080 --> 0:19:10.239 I'll go back to Carol's comment on our planning call 0:19:10.240 --> 0:19:13.160 a little earlier today, when Paul said, our producer, Paul 0:19:13.200 --> 0:19:14.679 said six point five billion dollars. 0:19:14.680 --> 0:19:17.400 She said, what six point five billion dollars. 0:19:17.480 --> 0:19:20.560 We're not talking about evaluation, We're talking about actual cash 0:19:20.640 --> 0:19:21.480 that they're going to be using. 0:19:21.720 --> 0:19:23.600 That's the money that they are trying to raise, and 0:19:23.640 --> 0:19:26.280 they need it. And that is what is so interesting 0:19:26.359 --> 0:19:29.159 about both about this business and about the field in general. 0:19:29.480 --> 0:19:32.240 It's this is in a situation where open a I 0:19:32.240 --> 0:19:34.560 mean part of the situations investors really want wanted in 0:19:34.640 --> 0:19:36.760 on this company. But this is a company that's burning 0:19:37.080 --> 0:19:42.399 huge amounts of cash to run CHATCHYPT and to and 0:19:42.480 --> 0:19:44.960