WEBVTT - Bloomberg Businessweek Weekend - August 19, 2022 0:00:01.040 --> 0:00:05.400 This is Bloomberg Business Week Inside from the reporters and 0:00:05.600 --> 0:00:09.200 editors who bring you America's most trusted business magazine, plus 0:00:09.240 --> 0:00:13.160 global business, finance and tech news as it happened. Bloomberg 0:00:13.240 --> 0:00:16.759 Business Week with Carol Messer and Bloomberg Quick Takes. Tim 0:00:16.800 --> 0:00:21.360 Stinovic on Bloomberg Radio. Hi, everyone, Welcome to the weekend 0:00:21.520 --> 0:00:24.840 edition of Bloomberg Business Week. Retail earnings and sales data 0:00:24.920 --> 0:00:27.160 this past week gave us more clues on the health 0:00:27.240 --> 0:00:30.640 of the US consumer. Tim. Evidently we're all still spending 0:00:30.680 --> 0:00:33.040 the opening our wallets, that's for sure. And the latest 0:00:33.080 --> 0:00:35.479 FED minutes tell us that officials agreed last month on 0:00:35.520 --> 0:00:38.960 the need to eventually quote unquote at some point. Right, 0:00:39.000 --> 0:00:41.640 that's an important phrase. We're gonna obsess over that. Yeah, 0:00:41.720 --> 0:00:44.040 dial back the pace of interest rate hikes even as 0:00:44.040 --> 0:00:46.840 they continue to gauge how monetary policy tightening is working 0:00:46.840 --> 0:00:49.800 towards curbing inflation. Coming up, we're gonna look at how 0:00:49.920 --> 0:00:53.600 rising costs are affecting a key line item in corporate budgets, 0:00:54.000 --> 0:00:57.000 I T spending. It's great read on the economy. Also 0:00:57.040 --> 0:01:00.400 ahead on the broadcast, two players in the alt energy space. 0:01:00.800 --> 0:01:04.080 One is profiled in this week's international cover story will 0:01:04.120 --> 0:01:07.520 explore how China's electric automaker b y D became the 0:01:07.560 --> 0:01:12.400 world's third most valuable automaker by going against Tesla's playbook. 0:01:13.000 --> 0:01:15.760 And what about turning your e V into a backup 0:01:15.800 --> 0:01:17.760 power source? What do you think to him? Yeah, I 0:01:17.760 --> 0:01:18.960 mean if I had an e V, if I had 0:01:19.000 --> 0:01:22.680 a garage, if I had a house. Details details. Well, 0:01:22.720 --> 0:01:24.440 we're going to check in with the founder and CEO 0:01:24.560 --> 0:01:27.680 of Decibel. He'll be stopping by. Plus our domestic cover 0:01:27.800 --> 0:01:31.240 story on a mc CEO, Adam Aaron's quest to keep 0:01:31.319 --> 0:01:34.360 his company a meme forever. All of that to come. 0:01:34.440 --> 0:01:36.319 We begin with an up close look at the state 0:01:36.319 --> 0:01:38.640 of the I T market. We got some insight into 0:01:38.720 --> 0:01:42.200 corporate spending on computing infrastructure from Cisco out with an 0:01:42.240 --> 0:01:44.880 earnings beat and an upbeat forecast on Wednesday, and then 0:01:44.959 --> 0:01:47.800 right after Cisco reported, we checked it with Crawford del Prette. 0:01:48.000 --> 0:01:50.840 He is president at International Data Corporation i d C. 0:01:51.160 --> 0:01:54.760 They are a global market and advisory analysis firm. They 0:01:54.840 --> 0:01:58.440 check in on technology, telecom and consumer tech markets, just 0:01:58.680 --> 0:02:01.600 all that's going on there. Crawford joined us in studio 0:02:01.640 --> 0:02:03.360 with a look at the big picture for i T. 0:02:03.840 --> 0:02:05.760 What we see is that even though we're sort of 0:02:05.800 --> 0:02:08.680 getting closer and closer to a global recession, we're gonna 0:02:09.000 --> 0:02:12.400 likely see the scenario where in past cycles, i T 0:02:12.639 --> 0:02:16.359 drops below the rate of GDP, so people sort of 0:02:16.400 --> 0:02:18.920 snap back and they just clamped down on spending. In general, 0:02:19.320 --> 0:02:22.400 we expect, like we saw in the last downturn, which 0:02:22.440 --> 0:02:24.520 was in that you know, let's just say we get 0:02:24.520 --> 0:02:27.640 GDP down to about maybe two percent this year, we 0:02:27.720 --> 0:02:30.160 expect i T we should be in the five to 0:02:30.240 --> 0:02:32.760 six percent range. So what that kind of says is 0:02:32.840 --> 0:02:36.359 that unlike these past historical cycles were all the way 0:02:36.400 --> 0:02:39.640 back to the mid eighties, i always was slammed lower 0:02:39.639 --> 0:02:42.440 than GDP, we're going to see people lean into tech 0:02:42.639 --> 0:02:45.720 and invest in tech in order to modernize their business 0:02:45.800 --> 0:02:49.079 and frankly get through these down cycles. And I think 0:02:49.120 --> 0:02:51.080 what you saw in someone to be more productive or 0:02:51.120 --> 0:02:54.079 just because they have to happen because there's a disruptor 0:02:54.120 --> 0:02:56.640 around every corner, because they have to keep their business 0:02:56.720 --> 0:02:59.600 models modern and um oh, by the way, you know, 0:02:59.600 --> 0:03:02.880 they're stomers are demanding it. Um so there's just no 0:03:03.480 --> 0:03:05.880 check is really your only way out. It reminds me 0:03:05.919 --> 0:03:08.040 of I think you know what we've heard from Goldman 0:03:08.080 --> 0:03:12.560 Sachs right right, Katie Kotch at Goldman Success that management. 0:03:12.560 --> 0:03:14.360 When we're at milk In, It's like in a downturn, 0:03:14.400 --> 0:03:17.559 people will cut back on things perhaps that are discretionary, 0:03:17.639 --> 0:03:22.399 like marketing people, if they're not going to pull back 0:03:22.440 --> 0:03:24.880 on tech, Crawford, I mean, is that the difference between 0:03:25.360 --> 0:03:28.680 this potential downturn and downturns of past. I think where 0:03:28.760 --> 0:03:31.280 tech is and how tech is the central nervous system 0:03:31.360 --> 0:03:33.640 of a company is a big, big part of how 0:03:33.680 --> 0:03:38.440 this downturn could be different. You can't uncommit or decommit 0:03:38.480 --> 0:03:41.120 from software as a service right once you're in, it 0:03:41.240 --> 0:03:44.480 becomes a core part of your business. So fine, the 0:03:44.560 --> 0:03:47.960 incremental pack you might buy on a SAS platform that 0:03:48.000 --> 0:03:49.680 can be up for debate, but you're not going to 0:03:49.840 --> 0:03:52.960 rip your instance of salesforce, your your instance of work day. 0:03:53.120 --> 0:03:55.800 You're not going to take those things out of the organization. 0:03:55.840 --> 0:03:59.000 So they become very, very sticky. And that's why we 0:03:59.120 --> 0:04:02.920 see stained demand and we're gonna see double digit demand 0:04:02.960 --> 0:04:05.240 for things like SASS. Software is a service or a 0:04:05.280 --> 0:04:08.800 platform is a service. Now talk about personal computers, those 0:04:08.840 --> 0:04:10.280 are one of the first things you can say, you 0:04:10.280 --> 0:04:13.080 know what, workforce, go an extra year, go an extra 0:04:13.120 --> 0:04:15.680 eighteen months. We'll clamp down on that stuff. But the 0:04:15.720 --> 0:04:17.600 stuff that tends to be really sticky is that as 0:04:17.600 --> 0:04:20.440 a service. But if a company is faced with making 0:04:20.440 --> 0:04:24.719 a decision of hiring more, paying more, versus spending doing 0:04:24.760 --> 0:04:27.279 the I T spend, my gut from what you're saying 0:04:27.320 --> 0:04:29.080 is that they're going to do the spend. They're gonna 0:04:29.120 --> 0:04:31.440 do the parts of the I T span that are 0:04:31.720 --> 0:04:34.320 critical to the business. And what's changed in the last 0:04:34.360 --> 0:04:38.239 decade is more and more and more services are critical 0:04:38.520 --> 0:04:41.320 to inventing those new services that your customers are going 0:04:41.360 --> 0:04:43.839 to depend upon. Given the choice, you've got to spend 0:04:43.839 --> 0:04:46.440 on core I are we seeing, Crawford, any of this 0:04:46.520 --> 0:04:48.400 being pulled forward, And we talked about this being pulled 0:04:48.400 --> 0:04:49.960 forward during the pandemic, But are we see any of 0:04:49.960 --> 0:04:52.400 it pulled forward right now for reasons over concerns of 0:04:52.440 --> 0:04:54.720 inflation When companies are saying, Okay, I don't want to 0:04:54.720 --> 0:04:56.000 wait a year to do this because if we wait 0:04:56.040 --> 0:04:58.440 a year, it's gonna cost ten percent more. We saw 0:04:58.520 --> 0:05:01.279 some of that in the software Older people basically said look, 0:05:01.360 --> 0:05:04.240 software prices are very, very high, and companies are passing 0:05:04.240 --> 0:05:07.480 those those expenses down to end customers, so people did 0:05:07.520 --> 0:05:09.760 tend to do a little forward buying. Probably the best 0:05:09.760 --> 0:05:13.200 example of forward buying we saw was during the pandemic work. 0:05:13.320 --> 0:05:15.520 We believe we pulled, you know, maybe a quarter of 0:05:15.520 --> 0:05:18.360 a year a PC shipments forward when people went home 0:05:18.400 --> 0:05:21.400 and we saw, yeah, that was more hardware based, software based. 0:05:21.440 --> 0:05:23.680 It's a little bit harder to say some of the 0:05:23.720 --> 0:05:27.080 project based work in the services world, there's a little 0:05:27.080 --> 0:05:28.560 bit of that where we've seen some of the service 0:05:28.640 --> 0:05:31.080 of our you know, able to pass those costs onto 0:05:31.120 --> 0:05:34.840 customers and customers having to accept them. How how is 0:05:34.880 --> 0:05:37.520 inflight inflation impacted by I T spending? Is it a 0:05:37.520 --> 0:05:39.520 pressure or is it a reliever? There was a lot 0:05:39.520 --> 0:05:41.720 of cynicism over the last few years about the productivity 0:05:41.760 --> 0:05:44.520 gains associated with tech um. I think what we learned 0:05:44.600 --> 0:05:49.039 during COVID was that they're absolute, massive productivity gains associated 0:05:49.080 --> 0:05:51.120 with tech So I would say that in a lot 0:05:51.200 --> 0:05:54.880 of ways, it isn't a relief valve for companies to 0:05:54.920 --> 0:05:57.240 be able to say I can serve my customers in 0:05:57.279 --> 0:06:01.640 a new way. Now having said that, the costs. Inflation 0:06:01.680 --> 0:06:04.920 costs are absolutely being passed on to customers in the cycle, 0:06:05.040 --> 0:06:08.080 whether that's in supply chain constraints and availability of parts, 0:06:08.279 --> 0:06:10.720 or whether that's in pure labor costs in the professional 0:06:10.720 --> 0:06:13.880 services space, or the software costs have been passed on. 0:06:14.000 --> 0:06:15.840 And we've seen that right down the line. Okay, so 0:06:15.880 --> 0:06:17.800 we're on the verge, as you said, potentially of a 0:06:17.839 --> 0:06:19.920 global recession. What are the data points that you're looking 0:06:19.960 --> 0:06:21.960 at so so so what we're spending a lot of 0:06:22.000 --> 0:06:24.560 time on is basically what's happening in China right now. 0:06:24.600 --> 0:06:26.400 China is you know, one of the second largest I 0:06:26.760 --> 0:06:29.800 T markets. We're clearly seeing a cool down there. Are 0:06:29.839 --> 0:06:31.760 we going to continue to see sustained spend? Is the 0:06:31.800 --> 0:06:36.239 government frankly more okay with reduced spend and it reduced 0:06:36.240 --> 0:06:39.480 spend going forward and reduced outlook for the overall economy. 0:06:39.520 --> 0:06:42.800 And we think that that is absolutely a possibility. That 0:06:42.839 --> 0:06:45.920 was Crawford del Predd, President at I d C International 0:06:46.000 --> 0:06:48.440 Data Corporation. Up next, we turn our attention to the 0:06:48.440 --> 0:06:51.039 gender gap in the C suite, where men still far 0:06:51.120 --> 0:06:54.120 outnumber women. Our next guest has a plan to level 0:06:54.160 --> 0:06:57.520 the playing field. You're listening to Bloomberg Business Week. This 0:06:57.880 --> 0:07:10.960 is Bloomberg. This is Bloomberg Business Week with Carol Messer 0:07:11.040 --> 0:07:16.200 and Bloomberg Quick Takes Tim Stinnoby from Bloomberg Radio. Well, 0:07:16.240 --> 0:07:18.200 our next guest is on a mission to centralize the 0:07:18.280 --> 0:07:22.400 role of women as economic, environmental and social change makers 0:07:22.600 --> 0:07:25.760 who are creating a high growth future. Patients. Merrimai Ball 0:07:25.880 --> 0:07:28.600 is founder and CEO of Women of the World Endowment. 0:07:28.840 --> 0:07:31.960 It's a global endowment focused on what's known as gender 0:07:32.040 --> 0:07:35.440 lens investing. She currently leads the fixed income business with 0:07:35.520 --> 0:07:38.480 a current portfolio of more than three billion dollars. Her 0:07:38.480 --> 0:07:42.080 new book is called The Double X Edge, Unlocking higher 0:07:42.080 --> 0:07:44.280 returns and Lower Risk and of course to him that 0:07:44.320 --> 0:07:48.000 double X represents the two chromosomes, the two X chromosomes, 0:07:48.040 --> 0:07:50.760 noting the female gender. Now, Patients help build out the 0:07:50.760 --> 0:07:54.040 banking on a women platform at the International Finance Corporation, 0:07:54.280 --> 0:07:55.800 which is a member of the World Bank Group that 0:07:55.840 --> 0:07:59.400 works to accelerate private sector growth in developing countries. She's 0:07:59.440 --> 0:08:03.240 also a member of Apollo Global Management's Impact Advisory Committee. 0:08:03.280 --> 0:08:06.440 Carol and Bloomberg Market Senior editor Mike Reagan recently caught 0:08:06.480 --> 0:08:08.800 up with Patients and They began by asking why she 0:08:08.880 --> 0:08:12.720 thinks the world undervalues one of its greatest resources women. 0:08:13.040 --> 0:08:15.760 So we know that nine eight percent of capital is 0:08:16.200 --> 0:08:19.520 that is under management today is managed by men. Yet 0:08:19.960 --> 0:08:22.720 we also know that when you have gender diverse teams 0:08:22.800 --> 0:08:26.760 allocating capital or making any decision, you're twenty one percent 0:08:26.880 --> 0:08:30.680 more likely to actually get out performance in profitability. You'd 0:08:30.680 --> 0:08:34.120 likely to mitigate downside this better, you're likely to have 0:08:34.679 --> 0:08:36.760 your dollar doing more than one thing at any given 0:08:36.760 --> 0:08:40.400 time because women prioritize, yes, making financial returns that are 0:08:40.440 --> 0:08:43.560 really important, but also the opportunity to drive for other 0:08:43.600 --> 0:08:46.600 types of changes. And so why do we not see 0:08:46.679 --> 0:08:49.320 change to get to a point where we're talking about 0:08:49.360 --> 0:08:53.440 current what has been happening in legislation currently, for instance, 0:08:53.440 --> 0:08:57.400 the Inflation Reduction Act, it's looking to solve inflationary problems 0:08:57.440 --> 0:09:00.400 that are leading to potential for recession in et cetera. 0:09:00.480 --> 0:09:03.960 But it's also looking to so climate climate issues, climate 0:09:04.000 --> 0:09:07.439 related issues. And here we know that when women are 0:09:07.440 --> 0:09:11.480 in these decision making rooms, whether it's ceased with positions 0:09:11.600 --> 0:09:15.439 or on boards, we actually get better upcomes all around. 0:09:15.520 --> 0:09:20.360 Companies have better policies and standards to adea to we 0:09:20.440 --> 0:09:23.920 have better disclosures with better tracking, and we also have 0:09:24.520 --> 0:09:30.040 better performance. It is interesting that with the numbers telling 0:09:30.160 --> 0:09:33.640 us that it is you are going to make more money. 0:09:33.640 --> 0:09:37.040 And mckinson did a study in which show that if 0:09:37.080 --> 0:09:40.920 we just if we had every every country in the 0:09:40.960 --> 0:09:44.600 study that they had of ninety countries just doing better 0:09:44.960 --> 0:09:48.840 to improve gender gender diversity in in decision making, the 0:09:48.880 --> 0:09:52.959 world could actually have a twenty five trillion dollar gained 0:09:52.960 --> 0:09:56.920 to global GDP, even their conservative studies pointed to twelve 0:09:57.160 --> 0:10:01.640 trillion dollar games. But it's true though, I think, you know, 0:10:02.040 --> 0:10:04.560 if you want to affect change in the world through 0:10:04.600 --> 0:10:07.280 the capital markets, you have to go hand in hand 0:10:07.320 --> 0:10:10.600 with positive change and uh something on the P and 0:10:10.679 --> 0:10:14.480 L state, you know, good returns uh to back it up. 0:10:14.520 --> 0:10:16.920 And so the focus a lot of times patients obviously 0:10:16.960 --> 0:10:20.280 goes to E s G. We're investing through a sort 0:10:20.320 --> 0:10:25.040 of environmental, social and governance lens. What's kind of alarming 0:10:25.080 --> 0:10:27.520 this year's we've seen a big backlash to that from 0:10:27.559 --> 0:10:30.680 a lot of politicians, you know, the quote unquote anti 0:10:30.679 --> 0:10:33.920 woke type of politicians. Do you think it's leaving a 0:10:34.000 --> 0:10:36.640 mark on the industry? Is is there any damage being 0:10:36.679 --> 0:10:38.640 done to the notion of e S g from all 0:10:38.679 --> 0:10:42.000 this backlash we've seen. Well, unfortunately, yes there is a 0:10:42.240 --> 0:10:46.680 backlash and it is resulting in some headwinds. But here's 0:10:46.679 --> 0:10:49.680 what I have to say. Nature, Mother nature is doing 0:10:49.679 --> 0:10:52.319 what it needs to do. We have fires in California, 0:10:52.840 --> 0:10:55.959 you know, floods in Australia, fires in Europe, etcetera. Nature 0:10:56.040 --> 0:10:59.839 is telling us that we need to do something and 0:11:00.080 --> 0:11:03.000 e S investing has a place and it is a 0:11:03.040 --> 0:11:07.720 place that can be both financial and impact related. One 0:11:07.720 --> 0:11:10.520 of the things I wonder is the role of women, 0:11:10.600 --> 0:11:13.960 Like what do we lose by not doing so incorporating 0:11:14.000 --> 0:11:17.120 more women into our world in terms of growth, opportunity, 0:11:17.160 --> 0:11:20.240 political progress, climate change, I mean, some of the it's amazing. 0:11:20.360 --> 0:11:22.640 These are the things we talked to on a daily 0:11:22.640 --> 0:11:24.720 basis with so many of our guests. So what are 0:11:24.760 --> 0:11:27.720 we losing by not bringing more women into the fold? 0:11:28.040 --> 0:11:30.280 You know, in the book that we just wrote, we 0:11:30.320 --> 0:11:33.160 looked at what it is that makes men and women different. 0:11:33.559 --> 0:11:36.920 They're not an equal unit of productivity and what are 0:11:37.000 --> 0:11:39.560 those things that are different? And it is one the 0:11:39.600 --> 0:11:42.960 long view. Women tend to prioritize the long view over 0:11:43.000 --> 0:11:46.800 short term gains. They tend to have collaborative leadership styles 0:11:47.200 --> 0:11:49.720 and tend to be more risk aware when it comes 0:11:49.760 --> 0:11:52.880 to the challenges that we're facing. They also tend to 0:11:52.880 --> 0:11:56.960 be more approximate to those challenges. That's an opportunity set 0:11:57.000 --> 0:11:59.720 that we're losing when we don't have them in decision 0:11:59.760 --> 0:12:02.920 makes rooms, because that ability to see around the corners 0:12:03.040 --> 0:12:06.160 is just as needed as the ability to you know, 0:12:06.200 --> 0:12:09.600 to six short term gains. What it leads to is 0:12:09.640 --> 0:12:13.000 really a loss in you know, art performance over time 0:12:13.240 --> 0:12:17.320 in terms of profitability, but also the ability to mitigate 0:12:17.480 --> 0:12:21.680 risk in a much more structured and thoughtful way. If 0:12:21.520 --> 0:12:24.959 if you had a few minutes to talk to my daughters, uh, 0:12:25.320 --> 0:12:29.240 based on your twenty plus years, I believe of experience 0:12:29.280 --> 0:12:33.800 in capital markets UM in a very competitive, male dominated field. 0:12:33.800 --> 0:12:37.720 I know my one daughter is thinking about majoring in 0:12:37.760 --> 0:12:40.800 finance and maybe getting into the industry. What's the secret 0:12:40.920 --> 0:12:44.040 to success for a woman? So so, Mike, the first 0:12:44.040 --> 0:12:46.400 thing that I would actually say is a conversation with you, 0:12:46.520 --> 0:12:48.160 and then I would have a conversation with your daughters. 0:12:48.440 --> 0:12:51.880 Conversation with you would go like this, that you know, 0:12:52.400 --> 0:12:54.560 the way that you believe your daughters are rock stars 0:12:55.400 --> 0:12:58.120 at home, whether it's your wife, Um, and the fact 0:12:58.120 --> 0:13:00.560 that you're very comfortable with this decision is being made 0:13:00.559 --> 0:13:03.280 by them and you following. You know, we need to 0:13:03.280 --> 0:13:06.520 have men taking that into the workplace. It is incredibly 0:13:06.559 --> 0:13:09.360 interesting how men are very comfortable with women taking over 0:13:09.640 --> 0:13:12.200 all kinds of things in one realm of their lives, 0:13:12.240 --> 0:13:16.760 but not as comfortable in another realm and in the workplace. 0:13:16.800 --> 0:13:20.000 That is that's part of the opportunity that the world loses. 0:13:20.559 --> 0:13:23.120 You know that your your daughter has all the traits 0:13:23.160 --> 0:13:26.600 that I just um elaborated on, why would you know 0:13:26.640 --> 0:13:29.760 a business not want that in the room? And to 0:13:29.800 --> 0:13:32.000 your daughter, I would say that if she wants to 0:13:32.000 --> 0:13:33.920 come into financial markets, you know I've been in it 0:13:33.920 --> 0:13:36.000 for more more than twenty five years, and you know 0:13:36.000 --> 0:13:38.839 I'm now in my fifties. The world is so much 0:13:38.880 --> 0:13:41.840 better today. Where we need to be in capital markets 0:13:41.920 --> 0:13:45.680 is to create spaces where we're not just sticking boxes. 0:13:45.720 --> 0:13:48.040 So we have this many women come in and and 0:13:48.040 --> 0:13:51.280 we take that box, but really be very intentional about 0:13:51.320 --> 0:13:53.640 what seats we're putting them in. The case we make 0:13:53.640 --> 0:13:55.920 in our book, the ex ext edge is that when 0:13:55.960 --> 0:13:58.760 you put them in acid allocation seats. When you put 0:13:58.800 --> 0:14:01.559 them in those decision making seats, you actually are going 0:14:01.640 --> 0:14:05.160 to have our performance and over time greater economic pie 0:14:05.200 --> 0:14:07.960 for ever for everybody. That's what you That's the magic 0:14:08.040 --> 0:14:10.160 that your daughter will bring to whatever company she ends 0:14:10.200 --> 0:14:13.280 up joining. That was patients marrymi Ball, founder and CEO 0:14:13.440 --> 0:14:15.760 of Women of the World Endowment, her new book, The 0:14:15.800 --> 0:14:19.320 Double X Edge, Unlocking Higher Returns and Lower Risk. Well, 0:14:19.360 --> 0:14:20.960 I'm just gonna put out for you, tim women we 0:14:20.960 --> 0:14:23.880 can solve the problems that els at this point. I 0:14:23.920 --> 0:14:26.840 know I'm not arguing with it, okay, but you know, 0:14:26.880 --> 0:14:28.720 I don't know why I got so defensive. I don't 0:14:28.720 --> 0:14:31.360 know either or thanks to Mike Reagan for joining us 0:14:31.400 --> 0:14:34.680 on that conversation as well. Still ahead of Bloomberg Business Week, 0:14:34.680 --> 0:14:38.520 the company looking to shake up the global electric vehicle landscape. 0:14:38.720 --> 0:14:40.840 Most people sort of think that the way Tesla has 0:14:41.000 --> 0:14:44.960 developed itself is the model for auto companies of the future, 0:14:45.320 --> 0:14:48.040 and by d sort of stands an example of it 0:14:48.120 --> 0:14:50.040 doesn't have to be that way. More on why a 0:14:50.160 --> 0:14:54.080 Chinese TV giant is steering clear of Testla's tactics. This 0:14:54.280 --> 0:15:05.000 is Bloomberg broadcasting from the financial capital of the World, 0:15:05.120 --> 0:15:08.560 Bloomberg eleven Frio in New York to Washington, d C. 0:15:08.760 --> 0:15:13.479 Bloomberg to Boston, Bloomberg one oh six one to San Francisco, 0:15:13.560 --> 0:15:17.000 Bloomberg nine sixty to the country Sirius XM Chado one 0:15:17.080 --> 0:15:20.000 nine team, and around the globe the Bloomberg Business app 0:15:20.160 --> 0:15:24.520 and Bloomberg Radio dot Com. This is Bloomberg business Week. 0:15:25.480 --> 0:15:27.960 Earlier this week, President Joe Biden signed into law the 0:15:28.000 --> 0:15:32.160 Inflation Reduction Act, committing four hundred thirty seven billion dollars 0:15:32.440 --> 0:15:35.720 to a range of initiatives from combating climate change to 0:15:35.840 --> 0:15:39.560 learning the cost of prescription drugs. One major beneficiary the 0:15:39.600 --> 0:15:43.680 electric transportation industry are Bloomberg business Week International cover story 0:15:43.720 --> 0:15:47.000 this week examines China's ev giant b y D and 0:15:47.080 --> 0:15:50.280 why it's being very un Tesla as it makes waves 0:15:50.280 --> 0:15:53.360 in the international market. Business Week Assistant Managing editor Jim 0:15:53.360 --> 0:15:56.040 Allis is here to break it down. Most people sort 0:15:56.080 --> 0:15:58.320 of think that the way Tesla has sort of developed 0:15:58.320 --> 0:16:01.760 itself is the is the model for um, you know, 0:16:01.920 --> 0:16:04.680 auto companies of the future, and by D sort of 0:16:04.720 --> 0:16:08.000 stands in as an example of it doesn't have to 0:16:08.000 --> 0:16:09.720 be that way. I mean, b by D is not 0:16:09.880 --> 0:16:13.400 just a startup and it's a very successful company. It's 0:16:13.440 --> 0:16:16.480 the largest EV maker in China. It's also the third 0:16:16.880 --> 0:16:20.320 most valuable by market cap auto company in the world, 0:16:20.520 --> 0:16:23.720 after Tesla and Toyota, though a lot of people here 0:16:23.760 --> 0:16:26.400 probably don't know it much other than that it's a 0:16:26.440 --> 0:16:31.240 big investment by who else, Warren Buffett, who bought into 0:16:31.280 --> 0:16:35.000 this company back in the you know, early two thousands 0:16:35.480 --> 0:16:38.520 and put in with two eight million dollars. It's now 0:16:38.600 --> 0:16:41.880 a stake worth eight billion dollars. And um, this is 0:16:41.880 --> 0:16:45.320 a company very that believes in vertical integration. They've come 0:16:45.320 --> 0:16:48.280 in and they've said, everybody's talking about chips shortages, and 0:16:48.280 --> 0:16:51.240 everybody's talking about battery deals. They make their own batteries. 0:16:51.280 --> 0:16:54.000 They're now the third largest maker of EV batteries in 0:16:54.000 --> 0:16:57.240 the world. They also make their own chips. They use 0:16:57.280 --> 0:16:59.480 them in their cars. They are probably going to be 0:16:59.520 --> 0:17:02.800 a battery supplier to Tesla. They're already a battery supplier 0:17:02.840 --> 0:17:05.840 to Toyota. They also, um, you know now I've invested 0:17:05.880 --> 0:17:08.800 in lithium, minds, all the things you need for batteries. 0:17:09.080 --> 0:17:12.120 They are just very different. The other thing that's really 0:17:12.160 --> 0:17:15.680 different is that they are making cars for the sort 0:17:15.720 --> 0:17:18.879 of middle class person. I think that's huge, and that's 0:17:18.920 --> 0:17:21.600 that's a big market. But it's a very different approach 0:17:21.680 --> 0:17:24.520 with the Tesla came in and Tesla said they were 0:17:24.520 --> 0:17:28.040 doing Model three at what thirty k, right, and the 0:17:28.119 --> 0:17:32.600 average price for that it's now about forty six. So 0:17:32.800 --> 0:17:34.600 what would it be y D set you back? Right now? 0:17:35.080 --> 0:17:36.359 You can't get one, and you can't get one in 0:17:36.359 --> 0:17:38.000 the you can't get one in the US. But it 0:17:38.000 --> 0:17:43.680 would probably be about a third less than comparable Tesla 0:17:44.000 --> 0:17:48.080 in China where they sell Hit to Hit. Their Otto 0:17:48.280 --> 0:17:53.120 three um was about half the price of the Tesla 0:17:53.320 --> 0:17:56.840 Model Why, which would be comparable? It should be sort 0:17:56.880 --> 0:18:00.600 of e V car. It's a different marketplace though, because 0:18:00.680 --> 0:18:02.920 when you're saying I'm going to make cars for I 0:18:02.920 --> 0:18:05.040 don't wanna call it Middle America, it's Middle China and 0:18:05.119 --> 0:18:09.280 Middle Asia. You're not going to be able to charge 0:18:09.280 --> 0:18:11.200 as much, but you're also not going to be able 0:18:11.200 --> 0:18:14.159 to have the same sort of level of profitability. And 0:18:14.280 --> 0:18:18.760 right now, about two percent of every of revenues goes 0:18:18.800 --> 0:18:21.240 to profit at b y D, about ten percent of 0:18:21.280 --> 0:18:25.119 profit goes to um UM. You know, a revenue goes 0:18:25.160 --> 0:18:28.240 to profit at Tesla. Ultimately we will be able to 0:18:28.280 --> 0:18:30.879 get these cars in the United States and and I 0:18:30.920 --> 0:18:33.040 do think about what that means for some of the 0:18:33.080 --> 0:18:36.600 competition and specifically, Yeah, I mean that that is the 0:18:36.640 --> 0:18:38.720 goal there. I mean one of the big things about 0:18:38.880 --> 0:18:42.160 the ideas it's been expanding global. It means in Australia 0:18:42.240 --> 0:18:45.520 now they're they've got deals now for Germany. They view 0:18:45.600 --> 0:18:49.080 themselves as a global company. They just got then they're 0:18:49.080 --> 0:18:52.280 going to use this period now when everybody wants to 0:18:52.280 --> 0:18:55.840 have evs but everybody doesn't have the capacity to produce 0:18:55.960 --> 0:18:58.200 enough evs. They're using that as an opportunity to sort 0:18:58.240 --> 0:19:01.679 of build into the market. Also, Um they have UM, 0:19:01.720 --> 0:19:04.159 you know, they're they're doing something that China wants to do, 0:19:04.200 --> 0:19:07.199 which is to become more of a producer, global producer 0:19:07.240 --> 0:19:10.920 of autos and um. Just this morning, um, the Chinese 0:19:10.920 --> 0:19:15.159 Premier Leko King went to be at b y d 0:19:15.280 --> 0:19:18.240 S headquarters and to say, you guys, hey at a 0:19:18.320 --> 0:19:20.160 boy you know, get out there and you know, sort 0:19:20.160 --> 0:19:21.879 of do this for us for the future. I mean, 0:19:22.119 --> 0:19:26.320 they view that as one of the big potential consumer 0:19:26.400 --> 0:19:29.000 products of the future. And China must have a much 0:19:29.000 --> 0:19:31.159 bigger piece of that and a company like b y 0:19:31.280 --> 0:19:33.919 D gives them a beachhet than that. And I just 0:19:33.920 --> 0:19:35.440 want to point out, I mean, the eight rs do 0:19:35.600 --> 0:19:37.800 trade on the New York Stock Exchange. They're up for 0:19:37.840 --> 0:19:39.639 the year just shy of ten percent. But I do 0:19:39.720 --> 0:19:43.000 think about, you know, the access for investors ultimately, especially 0:19:43.000 --> 0:19:45.639 when you're President ge it feels like, you know, really 0:19:46.400 --> 0:19:50.439 honing in, homing in on certain industries and either restricting 0:19:50.440 --> 0:19:52.119 what they can do or whether they can be listed 0:19:52.119 --> 0:19:54.440 on the New York Stock you know, on US exchanges. 0:19:54.480 --> 0:19:57.040 And I do wonder what the futures are, how investors 0:19:57.119 --> 0:19:59.680 ultimately will continue to be able to tap into this well, 0:19:59.720 --> 0:20:04.240 I mean, the the idea at least the Chinese would like, um, 0:20:04.280 --> 0:20:05.640 you know, the rest of the world to be able 0:20:05.680 --> 0:20:09.600 to help them fund this transition. But um, a lot 0:20:09.680 --> 0:20:13.480 of countries increasingly reviewing, you know, sort of the auto 0:20:13.560 --> 0:20:17.240 business as it's a potentially protected industry something because it's 0:20:17.240 --> 0:20:20.200 going to be one of the biggest consumer products forever. 0:20:20.240 --> 0:20:23.040 I mean, it's it's trans transit is just that, and 0:20:23.119 --> 0:20:26.320 so's It'll be interesting to see just how dependent do 0:20:26.400 --> 0:20:30.080 we want to become on foreign automakers who aren't German 0:20:30.600 --> 0:20:32.760 or Japanese. I gotta say it does feel like the 0:20:32.800 --> 0:20:35.320 EV market there's gonna be a lot more competition to him, 0:20:35.320 --> 0:20:37.200 and things could be changing, not just here in the 0:20:37.320 --> 0:20:39.840 US with Ford, you know in GM, but also with 0:20:39.880 --> 0:20:42.480 the international companies a lot more players. All right. That 0:20:42.520 --> 0:20:44.919 was Business Week Assistant Managing editor Jim Ellis. On this 0:20:44.960 --> 0:20:48.320 week's international cover story are Bruce Eronhorn and Dentedly put 0:20:48.359 --> 0:20:50.760 it all together out of Hong Kong. You're listening to 0:20:50.840 --> 0:20:54.280 Bloomberg Business Week. Coming up next, evs from a different angle. 0:20:54.560 --> 0:20:58.040 Find out how your electric vehicle can actually help power 0:20:58.119 --> 0:21:10.439 your house. This is Bloomberg. You're listening to Bloomberg Business 0:21:10.520 --> 0:21:14.280 Week with Carol Messer and Bloomberg Quick Takes Tim Stinovich 0:21:14.520 --> 0:21:18.679