WEBVTT - Bloomberg Businessweek Weekend - July 21st, 2023 0:00:01.360 --> 0:00:05.720 This is Bloomberg business Week inside from the reporters and 0:00:05.880 --> 0:00:09.440 editors who bring you America's most trusted business magazine, plus 0:00:09.520 --> 0:00:13.680 global business finance and tech news. The Bloomberg Business Week 0:00:13.720 --> 0:00:19.000 Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:19.840 --> 0:00:22.680 Hi, everyone, Welcome to the weekend edition of Bloomberg Business Week. 0:00:22.720 --> 0:00:26.040 Carol Masser, along with Matt Miller in for Tim. Earnings 0:00:26.079 --> 0:00:29.760 kicked into full gear this week. Banks, Airlines, Tesla, Netflix, 0:00:29.800 --> 0:00:33.199 and a lot more. WW, the company formerly known as 0:00:33.240 --> 0:00:36.760 Weight Watchers, reports early next month, and investors will be 0:00:36.800 --> 0:00:39.080 watching out for more on what some say is the 0:00:39.080 --> 0:00:42.440 company's big gamble. That is our cover story this week. 0:00:42.560 --> 0:00:45.560 More in a moment. Also ahead, the gaping hole in 0:00:45.600 --> 0:00:48.880 the FDA supervision of over the counter medicines that killed 0:00:48.960 --> 0:00:52.880 Americans and then a buddy of Elon Musks that could 0:00:52.880 --> 0:00:55.800 have been put out of business thanks to Musk's massive 0:00:55.840 --> 0:00:58.840 price cuts. And speaking of Elon, we're going to speak 0:00:58.840 --> 0:01:03.600 with ARC investors, would on, Tesla, Twitter, threads, Coinbase, Bitcoin, 0:01:03.760 --> 0:01:06.040 and a lot more. All of that to come. We 0:01:06.080 --> 0:01:09.640 begin with this week's cover story on WW and it's 0:01:09.720 --> 0:01:13.480 high hopes for trendy obesity drugs. In fact, the company CEO, 0:01:13.560 --> 0:01:16.920 Sema Sistani, discussed the move with our Bloomberg TV colleagues 0:01:17.160 --> 0:01:17.760 this week. 0:01:18.000 --> 0:01:20.920 What stood out most is that obesity is a chronic condition. 0:01:21.400 --> 0:01:25.400 It still hasn't been addressed truly in that matter, when 0:01:25.400 --> 0:01:28.360 in fact, for over ten years it's been scientifically recognized 0:01:28.360 --> 0:01:30.920 as a chronic condition, and so we wanted to enter 0:01:30.959 --> 0:01:35.560 the space and be able to extend our toolkit to 0:01:35.680 --> 0:01:39.880 not only behavior change and functional but also clinical interventions. 0:01:40.120 --> 0:01:43.640 That's the CEO of ww Cimasstani all in on new 0:01:43.680 --> 0:01:47.240 medications to combat obesity. She's betting that new products such 0:01:47.240 --> 0:01:49.560 as ozembic and we goo v can help lift the 0:01:49.600 --> 0:01:52.520 sixty year old company to new heights if they don't 0:01:52.560 --> 0:01:54.880 kill it first. With more return to the team of 0:01:54.880 --> 0:01:59.040 Bloomberg News healthcare reporter Emma Court and Startups reporter Ellen Hewitt, 0:01:59.400 --> 0:02:01.920 also with us Bloomberg Business Week editor Jill Weber. 0:02:02.400 --> 0:02:07.200 So, Weight Watchers ended up essentially acquiring this telemedicine company 0:02:07.240 --> 0:02:11.280 that prescribes these medications. And one of the really interesting 0:02:11.320 --> 0:02:13.120 things that I think Ellen and I kind of honed 0:02:13.160 --> 0:02:16.480 in on in our story was the sort of backlash 0:02:16.560 --> 0:02:20.400 that this sparked among members, right, like weight Watchers has 0:02:20.440 --> 0:02:26.240 this enviable community, this enviable fan base. Right there are 0:02:26.280 --> 0:02:28.800 weight Watchers fans who have been on and off this 0:02:28.880 --> 0:02:32.040 program for their whole lives. And they were saying, wait 0:02:32.080 --> 0:02:34.880 a second, this is not what weight Watchers stands for. 0:02:35.040 --> 0:02:38.600 Weight Watchers stands for making changes to your lifestyle. What's 0:02:38.680 --> 0:02:42.440 this shot you're talking about? And so we tried to 0:02:42.480 --> 0:02:45.920 sort of tell this story of, you know, the new CEO, 0:02:46.160 --> 0:02:50.079 Sema Sistani, who's a sort of classic Silicon Valley type 0:02:50.120 --> 0:02:53.800 who comes in leads this vague acquisition, and about the 0:02:53.840 --> 0:02:56.280 way members are responding to it, and some of the 0:02:56.360 --> 0:02:59.079 big questions too about sort of what does this mean 0:02:59.200 --> 0:03:01.720 for this business model? Is this gonna work? 0:03:02.200 --> 0:03:04.760 So Ellen bring in a little bit of the Sema backstory. 0:03:04.760 --> 0:03:06.880 Who is she and what's been her approach? 0:03:07.880 --> 0:03:10.600 Yeah, she has a really interesting resume. She's you know, 0:03:10.639 --> 0:03:14.320 she had worked at CIA, she worked at Tumblr and 0:03:14.400 --> 0:03:17.040 Yahoo in the time that Yahoo was buying Tumblr, and 0:03:17.080 --> 0:03:19.440 then she's most known in Silicon Valley. Actually remember meeting 0:03:19.480 --> 0:03:21.240 her five or six years ago in this role in 0:03:21.280 --> 0:03:25.480 which she had co founded this very buzzy group video 0:03:25.600 --> 0:03:29.000 chat app called House Party. It's kind of in the 0:03:29.080 --> 0:03:32.320 era before group FaceTime that was really popular with college 0:03:32.360 --> 0:03:35.720 students and gamers who were interested in chatting while they 0:03:35.720 --> 0:03:38.440 played games. And so house Party was eventually sold to 0:03:38.640 --> 0:03:42.400 Epic and its service became integrated and part of Fortnite, 0:03:42.960 --> 0:03:47.040 and then Epic shut down house Party the service, as 0:03:47.240 --> 0:03:49.440 you know, a couple of years ago, and Sema had 0:03:49.520 --> 0:03:53.520 stayed there as an executive at Epic for a while, 0:03:53.560 --> 0:03:56.760 and then when she left that role, her next role 0:03:56.880 --> 0:03:59.800 was you know, she kind of phased out at Epic 0:03:59.840 --> 0:04:02.000 and then it took this job at weight Watchers, and 0:04:02.080 --> 0:04:04.560 I think what's so interesting about her, and something that 0:04:04.600 --> 0:04:06.480 came up when em and I were reporting the story 0:04:07.200 --> 0:04:11.280 is how much she's angling herself as like taking this 0:04:11.440 --> 0:04:14.160 very bold bet. Like when they talked about this decision 0:04:14.560 --> 0:04:20.279 to go into weight loss drugs, they talked about how 0:04:20.360 --> 0:04:24.040 it pulled very well with people who had never tried 0:04:24.040 --> 0:04:27.400 weight Watchers and people who had tried weight Watchers but lapsed, 0:04:27.760 --> 0:04:30.440 but it did not pull well with their current customers, 0:04:30.760 --> 0:04:33.880 many of whom, as Emma described, were feeling emotionally, I think, 0:04:33.960 --> 0:04:37.880 quite betrayed by the move. You know, Joel, as you said, 0:04:37.920 --> 0:04:40.840 it's weight loss is a really emotional thing. It's very personal, 0:04:40.880 --> 0:04:44.080 it's very intimate. It's very emotionally hot. 0:04:44.240 --> 0:04:46.920 I mean, especially if you go at it the way 0:04:46.960 --> 0:04:50.720 weight Watchers people do, right, they go to meetings and 0:04:51.839 --> 0:04:54.240 it works, but you've you have to stay in it 0:04:54.279 --> 0:04:56.760 for like ever, right, So it's kind of a I 0:04:56.760 --> 0:04:58.360 don't want to say it's a cult, but it's like 0:04:58.400 --> 0:05:01.200 you work at it well and you spend right, it's 0:05:01.240 --> 0:05:04.760 a community. But with ozempic you don't spend time. You 0:05:04.800 --> 0:05:06.760 don't have a community, and you don't work at it. 0:05:06.800 --> 0:05:08.320 You just give your shelve a shot every week. 0:05:08.360 --> 0:05:10.200 A billionaire named Elon Mustard. 0:05:10.200 --> 0:05:12.599 So I don't understand. And this is what Carol and 0:05:12.600 --> 0:05:15.679 I were talking about. How is that a good business model? 0:05:15.720 --> 0:05:17.680 There's one hundred places I can get a zepic. 0:05:17.800 --> 0:05:22.320 Well, if I'm a health reporter. Here the weight Watchers line, 0:05:22.400 --> 0:05:25.479 the company line here is Look, these are drugs that 0:05:25.480 --> 0:05:29.200 are supposed to be used alongside lifestyle change. Like this 0:05:29.240 --> 0:05:32.839 doesn't make the weight Watchers model defunct. And they're telling right, 0:05:33.400 --> 0:05:35.719 you are supposed to take these drugs and change the 0:05:35.720 --> 0:05:37.839 weight you eat and exercise and do all this stuff 0:05:37.920 --> 0:05:41.400 because when you lose weight, you can lose muscle, you 0:05:41.400 --> 0:05:45.200 could run nutritional deficits, like there are other things involved 0:05:45.240 --> 0:05:48.279 than just weight in your health obviously, So that's the 0:05:48.320 --> 0:05:51.440 company line. I think, you know, at a philosophical level, though, 0:05:51.480 --> 0:05:55.000 you're talking about. The thing that excites people about ozempic 0:05:55.160 --> 0:05:57.560 is not oh, I want to get on ozempic and 0:05:57.680 --> 0:06:00.480 change my diet, right, Like, people don't get excited about that. 0:06:00.560 --> 0:06:03.680 People get excited because it feels like a magic pill 0:06:03.800 --> 0:06:06.359 or a shot in this case. Right, people are excited because, 0:06:06.480 --> 0:06:08.640 oh my god, maybe I don't have to like sweat 0:06:08.640 --> 0:06:10.520 it out and go to my weight watchers meetings and 0:06:10.520 --> 0:06:13.200 count my points, like maybe I can just lose lose 0:06:13.279 --> 0:06:14.640 weight magically, you know. 0:06:14.760 --> 0:06:17.719 Well, and by the way, people I know who use ozempic, 0:06:17.800 --> 0:06:20.400 that's exactly how it works. I know people who change 0:06:20.400 --> 0:06:23.800 their lifestyle zero percent. They use ozepic and they look 0:06:23.880 --> 0:06:26.240 a million times better. So I'm not saying they're not 0:06:26.279 --> 0:06:28.039 going to die of cancer twenty years in the future. 0:06:28.040 --> 0:06:29.720 I have no idea what side effects it's going to have, 0:06:29.920 --> 0:06:31.599 but it seems like a magic shot. 0:06:32.360 --> 0:06:34.960 I was going to say that, you know, Emma had 0:06:35.000 --> 0:06:37.400 interviewed this woman who who took you know, had been 0:06:37.440 --> 0:06:40.160 a weight Watcher's customer and actually became a Sequence customer 0:06:40.200 --> 0:06:42.520 as well. That's the company that weight Watchers are acquired. 0:06:43.279 --> 0:06:44.760 And she did go on some of these weight loss 0:06:44.800 --> 0:06:46.720 drugs and what was so interesting and she's the end 0:06:46.720 --> 0:06:49.960 of our story. She talks about how that sense of community, 0:06:50.000 --> 0:06:52.200 which as we all know, weight Watchers really managed to 0:06:52.200 --> 0:06:55.080 monetize quite well. She was finding that sense of community 0:06:55.360 --> 0:06:58.800 on TikTok. It was like trading tips with other users 0:06:58.920 --> 0:07:01.560 who are sharing what it's like to go on ozembic 0:07:01.640 --> 0:07:05.799 or manjar or goovi. And and she's finding that community elsewhere, 0:07:05.839 --> 0:07:08.839 which I thought was an interesting like example kind of 0:07:08.839 --> 0:07:09.640 our digital age. 0:07:09.720 --> 0:07:11.200 That's my weight Watchers meeting. 0:07:11.400 --> 0:07:13.360 Go back to WeightWatchers. So are they getting rid of 0:07:13.360 --> 0:07:15.040 all the meetings? Are they shutting down? 0:07:15.240 --> 0:07:18.600 Weight Watchers will still have meetings, they're you know, in 0:07:18.640 --> 0:07:21.160 person meetings, and then they're doing online meetings now, but 0:07:21.200 --> 0:07:23.840 they have fewer in person meetings now obviously. And then 0:07:23.840 --> 0:07:26.200 they're also still doing the points thing. And I think 0:07:26.200 --> 0:07:28.520 they want to get people on ozempic on like a 0:07:28.560 --> 0:07:31.840 new program that will like help people with ozembic do 0:07:31.920 --> 0:07:33.680 their like diet and lifestyle thing. 0:07:33.920 --> 0:07:36.640 Okay, so let's talk about the money, because there have 0:07:36.760 --> 0:07:40.120 been really interesting investors in weight Watchers over time. What's 0:07:40.120 --> 0:07:41.920 been going down? What were the ones that jumped down? 0:07:41.960 --> 0:07:45.560 You'll get an ozempic, you get an yeah, I would 0:07:45.640 --> 0:07:47.840 I would really kill to know what Oprah thinks about 0:07:47.840 --> 0:07:51.080 the ozembic, but we didn't get very far on that. 0:07:51.200 --> 0:07:54.080 Unfortunately, she's still an investor though, right, Oprah, if you're 0:07:54.080 --> 0:07:55.240 out there, call me. 0:07:55.960 --> 0:07:57.480 But she still owns shares. 0:07:57.520 --> 0:08:01.080 She's still owns shares, though she's reduced her steak in 0:08:01.120 --> 0:08:03.679 the recent years, and she is still on the board 0:08:03.800 --> 0:08:06.640 as of now. But yeah, So, way Watchers has gone 0:08:06.640 --> 0:08:08.880 through all kinds of iterations over the years. It was 0:08:08.920 --> 0:08:12.560 owned at one point by the ketchup making company Hines. 0:08:13.600 --> 0:08:16.960 It was taken private by a group called Artel that 0:08:17.120 --> 0:08:21.080 was until recently its largest shareholder. They actually exited earlier 0:08:21.200 --> 0:08:24.040 this year, which kind of raises some questions too about 0:08:24.240 --> 0:08:26.240 you know, a company, a stakeholder that's been in the 0:08:26.240 --> 0:08:29.840 game since nineteen eighty nine exiting when you have this 0:08:29.880 --> 0:08:30.640 big acquisition. 0:08:31.880 --> 0:08:32.760 They also. 0:08:34.720 --> 0:08:37.920 They yeah, so that's that's been kind of a series 0:08:38.000 --> 0:08:40.680 of different weight Watchers chapters and of course, Oprah came 0:08:40.720 --> 0:08:45.319 on board in about twenty fifteen and purchased a ten percent. 0:08:45.040 --> 0:08:52.000 Steak Hallmark BusinessWeek story under Joel Weber. In my opinion, 0:08:52.160 --> 0:08:56.480 because look, you have a story brand that is being 0:08:56.520 --> 0:09:00.240 disrupted by some force, right, what's the brand going to 0:09:00.320 --> 0:09:03.040 do about it? And you know, say what you want, Matt, 0:09:03.120 --> 0:09:06.200 but like there's this force out there and you can 0:09:06.280 --> 0:09:08.600 either stay with the ways that you've always been doing 0:09:08.640 --> 0:09:11.000 it or you can attempt to find a way to 0:09:11.160 --> 0:09:13.560 address it. And if you don't address it, what do 0:09:13.600 --> 0:09:14.120 you got then? 0:09:14.880 --> 0:09:16.880 And you know, look, look like she makes that point 0:09:16.920 --> 0:09:20.240 as well, talking about one business that definitely saw another 0:09:20.320 --> 0:09:25.920 one coming right in the story. 0:09:26.240 --> 0:09:29.560 And look like Kodak had digital cameras. You know, like 0:09:29.840 --> 0:09:32.080 this is an example of a type of story. And 0:09:32.760 --> 0:09:34.680 usually we talk about this in a world where there's 0:09:34.840 --> 0:09:37.760 a technology company. But what interests me, especially about this 0:09:37.800 --> 0:09:40.960 category of drug now is you know, this is pharma 0:09:41.000 --> 0:09:44.240 and like pharma, we have loved to villainize pharma, like 0:09:44.640 --> 0:09:46.079 Zima will tell you. I mean, like this is an 0:09:46.080 --> 0:09:49.959 industry that, like pre covid, it was like everybody's least favorite, 0:09:50.000 --> 0:09:52.839 and they've got a little momentum here post COVID, saving 0:09:52.840 --> 0:09:54.400 a bunch of lives. And now it's like, hey, by 0:09:54.400 --> 0:09:56.640 the way, there's this thing that might make you, you know, 0:09:56.800 --> 0:09:58.160 lose that beer belly. 0:09:58.400 --> 0:10:00.600 But it only there a month. 0:10:00.640 --> 0:10:04.240 That's for the dollars a month. 0:10:04.800 --> 0:10:09.720 Well, and look click, there are people here with obesity 0:10:09.760 --> 0:10:12.560 and we have not as a society really talked about that. 0:10:12.760 --> 0:10:14.320 And this is a wonder drug. 0:10:14.520 --> 0:10:17.040 Our thanks to Bloomberg News healthcare reporter Emma Cord and 0:10:17.200 --> 0:10:21.080 startups reporter Ellen Hewitt. They co wrote this week's cover story, 0:10:21.440 --> 0:10:24.520 Joe Weber sticking around for our next segment Coming up, 0:10:24.559 --> 0:10:28.880 our magazine team investigates how a deadly antibiotic resistant superbug 0:10:29.280 --> 0:10:33.640 slip past the FDA inside small fials of generic eye drops. 0:10:33.920 --> 0:10:35.800 Two brands of artificial tiers have been linked by the 0:10:35.840 --> 0:10:39.400 CDC to the superbug, drug resistant superbug that's. 0:10:39.240 --> 0:10:40.720 Never been seen before in the US. 0:10:40.880 --> 0:10:43.800 That FDA miss led to blindness and deaths, and you 0:10:44.000 --> 0:10:47.000 likely pass the product on a store shelf. More on 0:10:47.040 --> 0:10:49.520 this story when we come back. You're listening to Bloomberg 0:10:49.559 --> 0:10:51.559 Business Week. This is Bloomberg. 0:10:54.480 --> 0:10:58.079 You're listening to the Bloomberg Business Week podcast. Catch us 0:10:58.080 --> 0:11:01.559 Live Weekday afternoons from three six Eastern Listen. 0:11:01.320 --> 0:11:04.800 On Bloomberg dot com, the iHeartRadio app and the Bloomberg 0:11:04.840 --> 0:11:07.480 Business app, or watch us live on YouTube. 0:11:08.400 --> 0:11:11.199 All right, everybody, wait until you hear this next story. 0:11:11.600 --> 0:11:14.440 You may never go into a drugstore again. It's about 0:11:14.480 --> 0:11:18.720 the untested bacteria tainted eye drops that blinded and killed Americans, 0:11:19.120 --> 0:11:21.880 and it all happened to slip by the FDA. The 0:11:21.920 --> 0:11:24.000 story was among our most read this past week. It 0:11:24.000 --> 0:11:26.960 was also a Bloomberg Big Take. It is also featured 0:11:27.000 --> 0:11:30.439 in this week's issue at Bloomberg BusinessWeek, available now on newstands, 0:11:30.520 --> 0:11:32.880 online at Bloomberg dot com, Slash BusinessWeek, and of course 0:11:32.880 --> 0:11:36.439 always on the Bloomberg terminal. Bloomberg News Projects and Investigations 0:11:36.480 --> 0:11:39.960 reporter Peter Robison co wrote the piece. He and Bloomberg 0:11:39.960 --> 0:11:43.160 BusinessWeek editor Joel Weber joined me and Matt Miller with more. 0:11:43.880 --> 0:11:47.000 So little of the stuff that comes from abroad and 0:11:47.160 --> 0:11:52.280 ends up being sold as medicine is actually no one's 0:11:52.320 --> 0:11:55.400 actually checking anything. So Peter, walk us through what you 0:11:55.520 --> 0:11:59.840 learned about this particular instance, which is incredibly frightening. 0:12:01.000 --> 0:12:02.520 Well you summed it up really well. 0:12:02.720 --> 0:12:06.760 What's happened is that a system that the FDA designed 0:12:07.360 --> 0:12:11.600 fifty years ago for the domestic market hasn't kept pace 0:12:11.720 --> 0:12:16.800 with an international market where really all comers can enter. 0:12:17.000 --> 0:12:23.160 And what we found is that the FDA's requirements through 0:12:23.200 --> 0:12:26.040 the OTC system are generally very broad. They really are 0:12:26.080 --> 0:12:28.640 just a recipe book that says, you know, these are the. 0:12:28.559 --> 0:12:30.199 Improved ingredients you can use. 0:12:30.440 --> 0:12:34.960 And the assumption has been that OTC products are generally safe. 0:12:35.040 --> 0:12:37.840 Even if those don't meet the requirements, they probably won't 0:12:37.920 --> 0:12:39.880 kill anyone. But but what happened in this case is 0:12:39.880 --> 0:12:42.800 that a very small manufacturer in India that had never 0:12:43.280 --> 0:12:46.960 sold sterile medicines before in the US produced an eye 0:12:47.040 --> 0:12:51.280 drop that contained bacterial contamination that hasn't been definitively identified 0:12:51.280 --> 0:12:53.280 by the FDA as pseudamonis. 0:12:52.720 --> 0:12:54.520 But it has been tied. 0:12:55.679 --> 0:12:57.520 Two brands of artificial tiers have been linked by the 0:12:57.559 --> 0:13:01.280 CDC to the superbug drug the superbug that's never been 0:13:01.320 --> 0:13:02.440 seen before in the US. 0:13:03.040 --> 0:13:06.000 So what was the problem. I mean, I see that 0:13:06.080 --> 0:13:10.360 these eye drops were marketed as preservative free, and for 0:13:10.440 --> 0:13:12.840 some reason, I guess people want their eye drops not 0:13:12.920 --> 0:13:16.400 to have preservatives. I don't get that, But is that 0:13:17.000 --> 0:13:19.080 what allowed this bug to survive. 0:13:20.000 --> 0:13:22.480 The manufacturers I've talked to say that preservative free is 0:13:22.480 --> 0:13:25.520 actually a trend in eye drops because if people are 0:13:25.600 --> 0:13:29.240 using them consistently, the preservative is actually a toxin. So 0:13:30.120 --> 0:13:33.000 the established manufacturers have come up with a couple of 0:13:33.000 --> 0:13:36.120 ways to sell preservative free drops. One is to use 0:13:36.360 --> 0:13:39.760 single use files and the other is these, you know, 0:13:39.840 --> 0:13:43.880 specially produced bottles that have a valve to prevent contamination. 0:13:44.400 --> 0:13:45.959 But those both cost a lot more. 0:13:46.080 --> 0:13:49.200 And in this case, these eye drops were marketed as 0:13:49.240 --> 0:13:52.040 preservative free, but they came in in regular bottles, and 0:13:52.360 --> 0:13:55.480 that was something, as we explained in the story, was 0:13:55.480 --> 0:13:59.079 not caught during the listing process by the FDA because 0:13:59.080 --> 0:14:04.400 it is this the largely automated system that conforms to 0:14:04.679 --> 0:14:07.400 a recipe book set down decades ago. 0:14:07.880 --> 0:14:11.319 I wonder also about the country of origin. There was 0:14:11.360 --> 0:14:14.760 a big take story about poisoned cough syrup that was 0:14:14.880 --> 0:14:18.600 killing kids in Africa, and the cough syrup was made 0:14:18.679 --> 0:14:23.680 in an Indian factory where oversight was virtually nil. In fact, 0:14:24.040 --> 0:14:29.080 when whistleblowers you know, called officials to other factories that 0:14:29.120 --> 0:14:34.680 were making medicines there, they decided not even to look this. 0:14:34.880 --> 0:14:37.160 These eye drops were also made in India. Is that 0:14:37.200 --> 0:14:38.040 part of the problem. 0:14:39.200 --> 0:14:44.000 It is in India just causes self pharmacy to the world. 0:14:44.120 --> 0:14:46.840 It's it's producing, you know, one fifth of the world's 0:14:46.840 --> 0:14:51.400 shnari drugs, adding increasing share of manufacturing is based there. 0:14:51.440 --> 0:14:55.760 But at the same time, India has had repeated problems 0:14:55.880 --> 0:15:01.040 with quality and there have been multiple, multiple inspection reports 0:15:01.080 --> 0:15:05.600 showing very hair raising problems. And when the FDA did 0:15:05.600 --> 0:15:09.960 finally get to this factory after the eye drops were recalled, 0:15:10.040 --> 0:15:14.640 the list of deficiencies ran fourteen pages. And it was 0:15:15.160 --> 0:15:18.200 you know, not testing the filters to ensure that they 0:15:18.200 --> 0:15:22.360 could sterilize you know, these eye drops. It was workers 0:15:22.400 --> 0:15:24.880 wearing you know, sort of dirty re used booties, the 0:15:24.920 --> 0:15:30.360 clean room, you know, having nail holes and sealant when 0:15:30.560 --> 0:15:34.280 it's supposed to be this incredibly sterile room where even 0:15:34.320 --> 0:15:38.880 the airflow is unidirectional. So that is a problem, and 0:15:38.920 --> 0:15:41.040 that's another thing that the FDA has to wrestle with. 0:15:41.440 --> 0:15:43.440 But Peter, this is where I have a hard time. 0:15:43.520 --> 0:15:46.280 I mean, and in your story that these over the 0:15:46.320 --> 0:15:49.240 counter medicines are sold on the outer system, what does 0:15:49.280 --> 0:15:52.920 that even mean? And I'm thinking baby aspirin cold medicines, 0:15:53.040 --> 0:15:56.200 all kinds of air, you know, eye care, stomach ailments. 0:15:56.640 --> 0:15:59.760 Is all of this stuff not? Is there no oversight 0:15:59.880 --> 0:16:01.040 or what is the oversight? 0:16:02.760 --> 0:16:06.280 The oversight is, as the FDA describes it, risk based, 0:16:06.440 --> 0:16:12.760 and it's often after problems are found. So in our 0:16:12.800 --> 0:16:17.400 reporting it's it's not just this company in India. There 0:16:17.480 --> 0:16:21.480 was a there's a manufacturer in Phoenix that the f 0:16:21.560 --> 0:16:24.040 D a of eydrops that the FDA went into and 0:16:24.080 --> 0:16:27.880 this manufacturer said that they weren't aware that eye drops. 0:16:27.640 --> 0:16:29.760 Were supposed to be produced sterile. 0:16:29.840 --> 0:16:32.320 So, as it's been described by some people we talked to, 0:16:32.920 --> 0:16:36.400 the FDA has strayed from his fundamental emission of guaranteeing 0:16:36.440 --> 0:16:38.080 that that what's supposed to be in. 0:16:38.000 --> 0:16:39.520 The bottle is actually in the bottle. 0:16:39.600 --> 0:16:42.800 That if if we wanted to be assured, we should 0:16:42.840 --> 0:16:45.680 be testing lots of drugs as they enter the country. 0:16:46.320 --> 0:16:48.720 Peter, I'm curious, since you started working on this story, 0:16:48.760 --> 0:16:51.360 which is thorough, and you've been been working on this 0:16:51.440 --> 0:16:54.000 for months, what's it like to go to the drug store. 0:16:56.120 --> 0:16:59.200 I that's a really good question, and I have I 0:16:59.240 --> 0:17:02.120 look more carefully at the box and I don't go 0:17:02.280 --> 0:17:06.240 for deals, you know, I think that you just have 0:17:06.320 --> 0:17:10.959 to be very careful in this environment. And so I 0:17:11.000 --> 0:17:13.760 do look very carefully and if someone hands me and 0:17:13.800 --> 0:17:16.920 I drop at it anyway says try this. 0:17:17.040 --> 0:17:19.960 I'm gonna do my due diligence to give you. 0:17:19.880 --> 0:17:23.080 A sense of of how scary this can get. Peter like, 0:17:23.160 --> 0:17:24.919 walk us through. You talked to a couple of people 0:17:25.480 --> 0:17:28.320 in the story who are also alarmed at what they've 0:17:28.359 --> 0:17:32.840 found on shelves and talk to us about what they've done. 0:17:33.119 --> 0:17:33.359 Yeah. 0:17:33.400 --> 0:17:37.640 This this is it's a nonprofit based out here in Seattle, 0:17:37.840 --> 0:17:39.880 and it's called the Dry Eye Foundation. 0:17:40.600 --> 0:17:42.720 And they had because there were. 0:17:42.680 --> 0:17:45.440 So many like us, Matt with dry eyes, there's a 0:17:45.480 --> 0:17:46.360 foundation for us. 0:17:46.520 --> 0:17:49.600 I mean, sometimes my eyes get red, so I need 0:17:50.119 --> 0:17:51.000 a different foundation. 0:17:52.280 --> 0:17:55.840 It is National dry Eye Awareness Month this month also. 0:17:55.960 --> 0:18:01.639 But so this this foundation had been getting concerned because 0:18:01.680 --> 0:18:05.960 they had found drops that were listed through the OTC 0:18:06.119 --> 0:18:11.280 system that they found did not they were not what 0:18:11.320 --> 0:18:13.760 they claimed to be that they claimed, you know, all 0:18:13.800 --> 0:18:18.359 sorts of miraculous benefits, but they seemed to just contain 0:18:18.400 --> 0:18:20.440 glycerine and who knows what else. And they were also 0:18:20.520 --> 0:18:23.560 not packaged in any of these specially designed bottles. So 0:18:23.600 --> 0:18:26.400 they really started trying to engage with the FDA, and 0:18:27.440 --> 0:18:29.159 just as we laid out in this story that this 0:18:29.320 --> 0:18:32.120 nonprofit became concerned about how easy it is to gain 0:18:32.240 --> 0:18:37.640 the electronic listing system, so they made up their own 0:18:38.040 --> 0:18:42.160 eye drops. They created a company, an LLC, They got 0:18:42.280 --> 0:18:46.000 a business identifier that the FDA requires to list drugs, 0:18:46.040 --> 0:18:50.480 and they created a listing for something called Mermaid Tears, 0:18:51.040 --> 0:18:53.920 which they said would on the label, which looks like 0:18:53.960 --> 0:18:56.199 a very official label, seems to conform to all the 0:18:56.240 --> 0:19:00.400 FDA's guidelines, but it says it will like to see 0:19:00.440 --> 0:19:04.080 like a mermaid underwater if you swallow. It has an 0:19:04.080 --> 0:19:08.440 aquarium for help, and also declares very clearly, this is 0:19:08.480 --> 0:19:11.960 a non preserved eye drop in an improperly designed bottle. 0:19:12.400 --> 0:19:14.719 Do not allow this to touch your eyes approof. 0:19:14.800 --> 0:19:18.600 And that's listing right. That listing sailed directly through the 0:19:18.680 --> 0:19:19.560 FDA system. 0:19:20.000 --> 0:19:23.200 That was Bloomberg News Projects and Investigations reporter Peter Robison 0:19:23.480 --> 0:19:26.359 along with the editor Bloomberg BusinessWeek, Joel Weber. More of 0:19:26.359 --> 0:19:29.919 that conversation available on our podcast feed Still Ahead on 0:19:29.920 --> 0:19:33.400 Bloomberg Business Week. Luckheed Martin making news this past week 0:19:33.440 --> 0:19:36.120 relating to its massive and much delayed F thirty five 0:19:36.160 --> 0:19:39.239 fighter jet program. We have the inside story of the 0:19:39.280 --> 0:19:40.760 so called lightning tube. 0:19:41.080 --> 0:19:43.919 So they not only did was it moving into the 0:19:44.000 --> 0:19:47.679 spelt regime, it was also moving into the highly integrated 0:19:47.720 --> 0:19:51.600 sensors and the information the information age in the battle space, 0:19:51.680 --> 0:19:52.200 so to speak. 0:19:52.560 --> 0:19:54.520 The promise and the problems with one of the world's 0:19:54.520 --> 0:19:57.800 most advanced aircraft. That's next. This is Bloomberg. 0:20:01.400 --> 0:20:04.959 You're listening to the Bloomberg Business Week podcast. Catch us 0:20:05.000 --> 0:20:09.120 live weekday afternoons from three to six Easter on Bloomberg Radio, 0:20:09.200 --> 0:20:12.480 the Bloomberg Business app and YouTube. You can also listen 0:20:12.600 --> 0:20:15.720 live on Amazon Alexa from our flagship New York station, 0:20:16.160 --> 0:20:19.200 Just say Alexa Play Bloomberg eleven thirty. 0:20:20.440 --> 0:20:23.160 Lucky Martin reporting earnings this past week, raising its full 0:20:23.200 --> 0:20:26.480 year outlook, signaling a return to sales growth after battling 0:20:26.480 --> 0:20:29.679 supplier disruptions at crimped deliveries of some of its biggest 0:20:29.680 --> 0:20:33.360 weapons programs. That includes delays on the F thirty five 0:20:33.400 --> 0:20:37.080 fighter jet due to problems with a critical software upgrade. 0:20:37.160 --> 0:20:39.960 As a result, Bloomberg reported the Pentagon will withhold back 0:20:40.040 --> 0:20:43.520 ten percent of the jets price until the contractor demonstrates 0:20:43.520 --> 0:20:46.800 that the new software works properly, potentially delaying more than 0:20:46.800 --> 0:20:50.760 four hundred million dollars in payments through December. There is 0:20:51.000 --> 0:20:54.000 a new book out about the massive fighter jet program 0:20:54.160 --> 0:20:57.280 entitled F thirty five, The Inside Story of the Lightning Two. 0:20:57.840 --> 0:21:01.280 Its lead authors are Tom Burbage and Betsy Clark. Betsy's 0:21:01.280 --> 0:21:04.199 a director at the Independent Project Review Institute, and she 0:21:04.400 --> 0:21:07.320 participated in a US Department of Defense review of the 0:21:07.440 --> 0:21:10.720 F thirty five program. Tom he is a former general 0:21:10.760 --> 0:21:13.720 manager at Lockheed. They joined us to shed some light 0:21:13.760 --> 0:21:15.960 on the most expensive weapon in history. 0:21:16.560 --> 0:21:19.480 It was one that reshaped the aerospace industry. If you 0:21:19.600 --> 0:21:22.720 recalled back about twenty years ago, there was a number 0:21:22.800 --> 0:21:25.760 of major prime contractors and they were all teamed and 0:21:25.800 --> 0:21:30.960 competing for the project, and the winners was clearly realigned 0:21:31.200 --> 0:21:34.200 the industry going forward. And that's exactly what happened. 0:21:35.080 --> 0:21:39.960 So, how difficult was this to work with so many 0:21:40.000 --> 0:21:44.560 different countries, so many different you know, cooks in the kitchen. 0:21:45.160 --> 0:21:49.040 Was that something that caused major delays and you know, 0:21:49.520 --> 0:21:51.879 made the project more expensive? 0:21:53.400 --> 0:21:57.119 No, Actually, the concept was quite simple. You know, in 0:21:57.160 --> 0:22:01.000 the past, we'd had single service initiatives to develop airplanes 0:22:01.000 --> 0:22:03.560 that were unique to the single service missions. But the 0:22:03.600 --> 0:22:06.840 reality was that we don't fight wars that way, and 0:22:07.320 --> 0:22:09.880 the joint Command structure was set up and we basically 0:22:09.880 --> 0:22:13.760 fight as a three service entity. Unfortunately, none of the 0:22:13.800 --> 0:22:18.280 three services operated interoperably or with the same type of aircraft. 0:22:18.960 --> 0:22:21.880 And then we went to the you know, the nine 0:22:21.920 --> 0:22:24.159 one one activity where we formed the Coalition of the 0:22:24.200 --> 0:22:26.679 Willing and we were fighting with our allies. So we 0:22:26.720 --> 0:22:29.760 had the US, all three services and allies all combined 0:22:30.440 --> 0:22:34.639 as a group, but a wide variety of aircrafts and 0:22:34.680 --> 0:22:38.479 capabilities that were difficult to operate as a unit. So 0:22:38.520 --> 0:22:41.080 the concept sort of emerged out of that. It was 0:22:41.119 --> 0:22:45.400 that could we in fact develop the platform where the 0:22:45.440 --> 0:22:51.080 service requirements for operational capability were independent of the capabilities 0:22:51.119 --> 0:22:54.800 of the platform and the allies could join with us 0:22:54.840 --> 0:22:57.600 those that fly and fight with our aircraft in the past. 0:22:57.640 --> 0:23:00.720 So that was the concept behind the five and that's 0:23:00.720 --> 0:23:04.399 a huge leveraging opportunity if you think about it, because 0:23:04.400 --> 0:23:06.439 it doesn't matter where you come from, whether it's one 0:23:06.440 --> 0:23:09.600 of the Allied countries or a long runway or a 0:23:09.640 --> 0:23:12.240 ship at sea. Once you get together, you're all in 0:23:12.280 --> 0:23:13.040 the same airplane. 0:23:13.200 --> 0:23:16.760 Tell us about this vehicle though, this fighter jet, what 0:23:16.800 --> 0:23:19.960 it's like. I mean, there's a lot of technology, there's 0:23:20.000 --> 0:23:23.320 a lot of mechanics. It's like pretty incredible. Talk to 0:23:23.359 --> 0:23:26.120 us about it. You're a pilot as well. 0:23:26.359 --> 0:23:30.240 Well. The point you Raptor was designed basically ten years 0:23:30.240 --> 0:23:32.119 The designed Bridgeon was ten years prior to the F 0:23:32.160 --> 0:23:36.640 thirty five, and in that ten year evolution, a lot 0:23:36.640 --> 0:23:41.760 of technologies were developed, a lot of computer processing capability 0:23:41.880 --> 0:23:45.840 was advanced, and we were able to put a whole 0:23:45.840 --> 0:23:49.720 different set of requirements into the F thirty five. Government 0:23:49.800 --> 0:23:52.879 establishes the requirements by looking at what they think the 0:23:52.920 --> 0:23:57.439 future is going to require need. And basically, if you 0:23:57.520 --> 0:23:59.440 were in an F thirty five and you were looking 0:23:59.480 --> 0:24:01.520 at the screen in front of you, you would be looking 0:24:01.560 --> 0:24:04.800 at a at a movie of what's going on around 0:24:04.800 --> 0:24:07.280 you. You wouldn't be looking at a bunch of individual dials 0:24:07.280 --> 0:24:09.480 and trying to integrate them in your head. So one 0:24:09.520 --> 0:24:12.679 of the great advantages from a software standpoint was the 0:24:12.680 --> 0:24:15.879 ability to fuse all the various sensors in the F 0:24:15.920 --> 0:24:19.600 thirty five and present one coherent fixture to the pilot 0:24:20.200 --> 0:24:22.480 and the information that comes from that can be shared 0:24:22.520 --> 0:24:27.879 across multiple domains, not just aircraft but others. So they 0:24:28.119 --> 0:24:31.240 not only did was it moving into the stealth regime, 0:24:31.760 --> 0:24:34.840 it was also moving into the highly integrated sensors and 0:24:34.960 --> 0:24:38.159 the information it's the information age in the battlespace, so 0:24:38.240 --> 0:24:38.639 to speak. 0:24:39.960 --> 0:24:43.880 Let's go to Betsy Clark and ask her for her take. 0:24:43.960 --> 0:24:47.399 Betsy, we should just point out she's director at the 0:24:47.440 --> 0:24:51.200 Independent Project Review Institute. They participated in a US Department 0:24:51.200 --> 0:24:53.720 Defense review of the F thirty five program. 0:24:53.920 --> 0:24:56.480 As I understand it, Betsy, what you came up with 0:24:56.480 --> 0:25:01.720 the idea because this project was highly criticized to document 0:25:01.760 --> 0:25:04.280 the whole process, and initially didn't you want to just 0:25:04.840 --> 0:25:06.840 put out a paper that turned into a book? 0:25:08.440 --> 0:25:12.000 Yes, yes, that's right. So actually my first review of 0:25:12.200 --> 0:25:15.680 the thirty five program was for the US Department of Defense. 0:25:16.800 --> 0:25:18.840 I did several of those, and then I've done a 0:25:18.880 --> 0:25:24.560 number of reviews for Australia. And what I noticed over time, 0:25:24.720 --> 0:25:27.959 if you read the headlines on the program, it sounded 0:25:28.000 --> 0:25:31.440 like a disaster. All you would hear about is cost, overruns, 0:25:31.800 --> 0:25:36.120 trouble plague programs. And yet I did eight different reviews 0:25:36.160 --> 0:25:38.879 over time, and I could see what was happening on 0:25:38.960 --> 0:25:41.960 the program in Fort Worth, and I just felt that 0:25:42.520 --> 0:25:47.200 there's not, first of all, an understanding of the extreme 0:25:47.280 --> 0:25:51.040 complexity of this program in terms of the technology, in 0:25:51.119 --> 0:25:54.800 terms of the stakeholder management. There were nine partner countries, 0:25:55.359 --> 0:25:57.560 and so I just felt there needed to be a 0:25:57.600 --> 0:26:00.840 book that really went into how complex this program is 0:26:00.880 --> 0:26:05.359 and the amazing accomplishments that were being done. Was it 0:26:05.480 --> 0:26:08.439 done perfectly? No, there were missteps. There was you know, 0:26:08.520 --> 0:26:11.000 whenever you have a lot of new technologies, et cetera, 0:26:11.359 --> 0:26:13.679 they're going to be But it just seemed like a 0:26:13.720 --> 0:26:16.320 basic unfairness to me, and so that is how the 0:26:16.359 --> 0:26:17.080 book started. 0:26:17.760 --> 0:26:22.200 So Betsy get into some of the struggles, the cyber attacks. 0:26:22.240 --> 0:26:25.800 I mean, I can only imagine the cyber attax on 0:26:25.880 --> 0:26:27.000 a program like this. 0:26:29.200 --> 0:26:32.960 Yeah, certainly you would have the Russians, you would have 0:26:33.520 --> 0:26:36.800 the Chinese, I think the North Koreans. They've all worked 0:26:36.800 --> 0:26:41.200 on trying to hack into the program. So that was certainly, 0:26:41.720 --> 0:26:46.439 you know, it's very classified secure, so that that was 0:26:46.520 --> 0:26:48.680 all going on because they all really want to know 0:26:49.720 --> 0:26:53.400 more about it. So yeah, that was that was certainly. 0:26:53.240 --> 0:26:54.840 How do you keep them from doing that? I mean, 0:26:54.880 --> 0:26:59.080 when you've got nine partner countries. You know, surely somebody 0:26:59.160 --> 0:27:01.480 has a week attache. 0:27:02.359 --> 0:27:03.399 Tom, What was that like? 0:27:03.680 --> 0:27:03.920 Tom? 0:27:03.920 --> 0:27:06.399 What was that like? You guys working on this project. 0:27:06.440 --> 0:27:08.159 I can only imagine the clearance. 0:27:09.760 --> 0:27:13.800 Well, there's classified areas on their project and some very 0:27:13.800 --> 0:27:17.640 classified in some unclassified, so there's quite a spectrum, and 0:27:17.760 --> 0:27:22.399 the international partners are all closest allies, at least the 0:27:22.400 --> 0:27:24.800 first batch were, and then the second batch are now 0:27:26.000 --> 0:27:29.280 occurring through the foreign military sales process. But the fundamental 0:27:29.800 --> 0:27:33.440 initial partners all flying fight with the United States as 0:27:33.480 --> 0:27:38.399 a joint coalition force. They've operated our airplanes and the 0:27:38.400 --> 0:27:41.199 best of our airplanes for a long time, so joining 0:27:41.200 --> 0:27:46.800 the project was part of their national objective. They all 0:27:46.840 --> 0:27:50.040 participated in funding the development of the program, so in 0:27:50.160 --> 0:27:54.400 return for that, they were allowed to participate industrially where 0:27:54.440 --> 0:27:57.959 they could compete on the best avalue basis. You know, 0:27:58.080 --> 0:28:02.359 it's all taking place with several different layers of security. 0:28:03.480 --> 0:28:06.320 The very classified areas are of course closed to US 0:28:06.359 --> 0:28:11.320 only and are very compartmented and protected from any kind 0:28:11.320 --> 0:28:15.200 of cyber activity. And then it goes down to building 0:28:15.400 --> 0:28:18.720 metal parks for the airplane, which all the different countries 0:28:18.760 --> 0:28:20.200 can certainly participate in. 0:28:20.480 --> 0:28:22.720 Betsy, who gets to use these? Which countries? 0:28:22.920 --> 0:28:23.080 Is? 0:28:23.480 --> 0:28:26.040 Do all members of NATO get some who put in orders? 0:28:26.280 --> 0:28:27.960 And have we lost to other yet? 0:28:28.119 --> 0:28:32.600 Yeah? No, no. So the way this is Turkey is 0:28:32.640 --> 0:28:36.480 the only one that was basically outed of the program 0:28:36.520 --> 0:28:40.240 because when they bought the Russian I think it was 0:28:40.280 --> 0:28:44.719 the s S four four hundred your defense system that 0:28:44.840 --> 0:28:47.880 became a whole State Department thing. But the others have 0:28:47.960 --> 0:28:52.760 stayed in and so right from the beginning, this plane 0:28:52.920 --> 0:28:56.959 was set up for Allied joint warfare, so it was 0:28:57.080 --> 0:28:59.840 to fight with our partners. So a big part of 0:28:59.840 --> 0:29:05.400 it is sharing information across our allied partners and then 0:29:05.480 --> 0:29:10.080 also across our services, so the US Air Force, the Marines, 0:29:10.120 --> 0:29:12.560 and the Navy, and I'm sure Tom we talked about 0:29:12.800 --> 0:29:16.160 the different variants they can do that. And that's really 0:29:16.200 --> 0:29:20.120 the power of it because we have not fought any 0:29:20.240 --> 0:29:23.680 combat alone since I believe World War One. You know, 0:29:23.720 --> 0:29:27.920 it's the way that we do combat now and to 0:29:28.040 --> 0:29:32.200 share information and everything, and this aircraft was designed right 0:29:32.240 --> 0:29:34.680 from the beginning to be able to do that, and 0:29:34.720 --> 0:29:37.720 that is so so powerful and so we have not 0:29:37.920 --> 0:29:40.640 I believe right now, there's nineteen different countries that have 0:29:40.720 --> 0:29:45.520 signed up to get the F thirty five. So it's 0:29:45.560 --> 0:29:49.160 the NATO countries, it is the Asia Pacific countries, very 0:29:49.200 --> 0:29:54.400 strong coalitions. It's really changing the way we do combat now. 0:29:54.520 --> 0:29:56.920 Our thanks to Tom Burbage and Betsy Clark for catching 0:29:56.960 --> 0:29:58.800 up with me and Matt Miller. Head over to our 0:29:58.840 --> 0:30:01.960 podcast feed for the comp conversation, and you can check 0:30:01.960 --> 0:30:04.680 out the book again. The title F thirty five The 0:30:04.720 --> 0:30:07.000 Inside Story of the Lightning Tube. It is out now. 0:30:07.360 --> 0:30:09.680 You're listening to Bloomberg Business Week. Up next, how a 0:30:09.720 --> 0:30:12.480 slew of price cuts among electric vehicle makers nearly put 0:30:12.520 --> 0:30:15.200 a friend of Elon Musk's out of business. 0:30:15.520 --> 0:30:16.320 This is Bloomberg. 0:30:19.520 --> 0:30:23.080 You're listening to the Bloomberg Business Week podcast. Catch us 0:30:23.120 --> 0:30:26.560 live weekday afternoons from three to six Eastern Listen. 0:30:26.360 --> 0:30:29.840 On Bloomberg dot com, the iHeartRadio app, and the Bloomberg 0:30:29.880 --> 0:30:32.520 Business app, or watch us live on YouTube. 0:30:33.440 --> 0:30:35.520 Another story that was recently a most read on the 0:30:35.640 --> 0:30:39.040 terminal comes to us from Bloomberg News EV reporter Sean o'caine. 0:30:39.320 --> 0:30:42.080 The story profiled a friend of Elon Musk's. He's named 0:30:42.080 --> 0:30:46.080 Scott Painter, well known in the auto industry. The serial entrepreneur, 0:30:46.120 --> 0:30:49.719 founded the auto fintech startup Fair, the auto pricing service 0:30:49.760 --> 0:30:53.680 True Car, and the auto shopping portal Cars Direct. Painter 0:30:53.800 --> 0:30:56.880 is also the founder of Autonomy, a subscription car service 0:30:57.000 --> 0:31:00.880 offering up Tesla's and Chevy Bolts, and he himself got 0:31:00.880 --> 0:31:04.240 a jolt when Elon started slashing the prices of Tesla's. 0:31:04.600 --> 0:31:06.800 Matt Miller and I asked Scott what the EV market's 0:31:06.840 --> 0:31:09.360 fast changing dynamics mean for his business. 0:31:09.840 --> 0:31:14.640 In reality, this shift didn't represent a real change in 0:31:14.680 --> 0:31:17.200 the value of the assets that we owned, but it 0:31:17.320 --> 0:31:20.280 did represent a real shock to how our lenders thought 0:31:20.280 --> 0:31:22.920 about it. And today, on the other side of that, 0:31:23.320 --> 0:31:26.360 we're much more prepared. We're a much more durable business. 0:31:26.680 --> 0:31:29.400 We do anticipate that Tesla is not going to be 0:31:29.440 --> 0:31:31.960 the only one that's going to be discounting and up 0:31:32.040 --> 0:31:35.240 and until this time, everybody who's entered the EV market 0:31:35.280 --> 0:31:38.640 has enjoyed wait lists. It's clear that consumers want to 0:31:38.720 --> 0:31:42.480 drive electric cars, but up and until now, most OEMs 0:31:42.480 --> 0:31:46.360 felt they would never have to entertain a discounting type strategy. 0:31:46.640 --> 0:31:49.440 And given that Tesla's gone there, what we're seeing with 0:31:49.640 --> 0:31:54.640 all of the other new entrants from Rivian, Lucid, Fisker, Polestar, 0:31:55.120 --> 0:31:59.040 even new foreign entrants like VinFast and BYD are all 0:31:59.080 --> 0:32:01.880 thinking about what is their fleet policy going to look 0:32:01.920 --> 0:32:05.360 like and what is their discounting strategy. But we're also 0:32:05.880 --> 0:32:09.440 really confronted with this new sort of reality with the 0:32:09.440 --> 0:32:13.880 Inflation Reduction Act. The federal government is offering seven five 0:32:13.960 --> 0:32:17.480 hundred dollars of additional tax credit, which as a commercial 0:32:17.480 --> 0:32:21.400 buyer we qualify for on every single car. That's not 0:32:21.520 --> 0:32:23.080 the case for traditional consumers. 0:32:23.240 --> 0:32:27.760 So Scott, how do you pass that on to consumers? 0:32:28.240 --> 0:32:30.000 Is it something that you do pass on or is 0:32:30.040 --> 0:32:31.880 it something that you just get to keep as the 0:32:31.920 --> 0:32:32.520 business owner. 0:32:33.040 --> 0:32:35.560 We're about flexible term access, so we're not a rental. 0:32:35.800 --> 0:32:37.800 Rentals typically cost about one hundred dollars a day for 0:32:37.880 --> 0:32:40.239 a Model three. That's three thousand dollars a month. Our 0:32:40.320 --> 0:32:42.720 typical monthly payment is somewhere between five hundred and one 0:32:42.760 --> 0:32:45.440 thousand dollars a month. We are focused on making sure 0:32:45.520 --> 0:32:47.600 that out of pocket we are cheaper than a Tesla 0:32:47.600 --> 0:32:50.440 Model three lease, and we do not come with that commitment. 0:32:50.800 --> 0:32:53.360 We do pass on all of those savings because the 0:32:53.480 --> 0:32:55.680 less we pay for a car, the less we have 0:32:55.720 --> 0:32:58.480 to charge our customers, and so we are not just 0:32:58.560 --> 0:33:02.520 being faced with the Tesla discount, which turns what was 0:33:02.760 --> 0:33:05.840 a forty nine, four hundred dollars car for us to 0:33:05.920 --> 0:33:09.320 buy today, that same vehicle can be purchased for just 0:33:09.440 --> 0:33:12.280 under forty thousand dollars from Tesla. You add to that 0:33:12.640 --> 0:33:16.200 the Inflation Reduction Act tax credit of seven five hundred dollars. 0:33:16.400 --> 0:33:18.640 You're all of a sudden looking at the low thirties. 0:33:18.800 --> 0:33:21.240 The sort of takeaway here is that the name of 0:33:21.280 --> 0:33:23.680 the game is what is our total out of pocket capital? 0:33:23.720 --> 0:33:26.040 Because we buy these cars, we run them for between 0:33:26.040 --> 0:33:28.720 four and eight years, and so if we have less 0:33:28.720 --> 0:33:31.480 money out of pocket, it's a much more efficient business. 0:33:31.520 --> 0:33:34.160 We have a much lower cost of capital, and we 0:33:34.200 --> 0:33:36.800 pay less interest expense, and we can pass all of 0:33:36.840 --> 0:33:37.280 that along. 0:33:37.520 --> 0:33:39.800 Did you have a conversation with Elon though after he 0:33:39.840 --> 0:33:42.440 made his moves? I know you're explaining the dynamics more broadly, 0:33:42.520 --> 0:33:44.320 but have you talked with you about this. 0:33:44.640 --> 0:33:47.440 I've been a long time advisor to Tesla. I've known 0:33:47.480 --> 0:33:51.080 Elon since he first evaluated investing in Tesla and really 0:33:51.120 --> 0:33:53.600 building this business, and so I've been a long time 0:33:53.640 --> 0:33:57.120 proponent of affordability being the key to scaling, And obviously 0:33:57.120 --> 0:33:58.800 it's not just what you pay for the car, it's 0:33:58.840 --> 0:34:01.160 also the monthly payment because because most people who get 0:34:01.160 --> 0:34:03.680 a Tesla do not pay cash for that car, they 0:34:03.720 --> 0:34:07.800 finance that car. Right now, auto lending is almost shut 0:34:07.840 --> 0:34:10.920 down entirely because with rising interest rates, paying ten percent 0:34:11.000 --> 0:34:13.279 interest on a car loan doesn't make any sense, So 0:34:13.840 --> 0:34:16.120 subscriptions and leasings are really going to be the name 0:34:16.160 --> 0:34:18.960 of the game. I believe that Elon does agree with 0:34:19.640 --> 0:34:23.799 the affordability angle, and really the Tesla discounting strategy has 0:34:24.120 --> 0:34:26.600 not been driven by companies like US at all. Of course, 0:34:26.640 --> 0:34:28.839 Tesla made their decision based on wanting to make sure 0:34:28.880 --> 0:34:31.320 that every trim level of the Tesla Model three and 0:34:31.360 --> 0:34:35.319 Model Y qualified for every available incentive, credit, discount or 0:34:35.360 --> 0:34:38.080 rebate available just to make that car more affordable. And 0:34:38.120 --> 0:34:40.440 they've done a brilliant job at doing that. So it 0:34:40.480 --> 0:34:43.560 does represent some headwinds for US, but it also represents 0:34:43.600 --> 0:34:46.120 a real tailwind because it does result in a discount 0:34:46.160 --> 0:34:49.040 and it's created an environment where other OEMs are willing 0:34:49.080 --> 0:34:49.640 to do the same. 0:34:49.760 --> 0:34:52.080 That was Scott Painter, serial entrepreneur and founder of the 0:34:52.080 --> 0:34:55.480 ev subscription service Autonomy. That wraps up the first hour 0:34:55.480 --> 0:34:58.280 of the weekend edition of Bloomberg Business Week from Bloomberg Radio. 0:34:58.680 --> 0:35:02.360 Ahead in our next hour, Hallijin Ventures founder Jesse Draper 0:35:02.440 --> 0:35:05.320 on smashing through the glass ceiling in the VC space, 0:35:05.880 --> 0:35:08.960 and Kathy Wood on Crypto elon Musk's plans for a 0:35:09.040 --> 0:35:12.760 super app and AI's potential impact on the labor market. 0:35:13.080 --> 0:35:16.160 This is Bloomberg BusinessWeek. I'm Carol Masser. Stay with us. 0:35:16.200 --> 0:35:18.960 Today's top stories in global business. Headlines are coming up 0:35:19.280 --> 0:35:20.840 right now. 0:35:23.400 --> 0:35:26.960 You're listening to the Bloomberg Business Week Podcast. Catch us 0:35:27.000 --> 0:35:31.120 live weekday afternoons from three to six Easter on Bloomberg Radio, 0:35:31.200 --> 0:35:34.520 the Bloomberg Business app, and YouTube. You can also listen 0:35:34.600 --> 0:35:37.720 live on Amazon Alexa from our flagship New York station 0:35:38.160 --> 0:35:40.920 Just Say Alexa Play Bloomberg eleven thirty. 0:35:42.400 --> 0:35:44.600 Welcome back Carol Masser along with Matt Miller in for 0:35:44.760 --> 0:35:47.080 tim plenty Ahead in our second hour of the weekend 0:35:47.160 --> 0:35:50.440 edition of Bloomberg Business Week, including an interview with venture 0:35:50.440 --> 0:35:54.240 capitalist Jesse Draper on her unusual entry into the business 0:35:54.600 --> 0:35:57.200 and how she's finding value in women led and women 0:35:57.239 --> 0:35:59.840 focused startups. In fact, she's sold several of them to 0:36:00.080 --> 0:36:03.280 some very well known companies. First up this hour, another 0:36:03.320 --> 0:36:06.360 investor seeking out the disruptors and innovators of this world. 0:36:06.600 --> 0:36:09.919 We're talking about the founder, CEO, and CIO of ARC 0:36:09.920 --> 0:36:13.560 invest Kathy Wood. Her Arc Innovation ETF is up around 0:36:13.640 --> 0:36:16.879 sixty percent year to date, still down nearly seventy percent 0:36:16.960 --> 0:36:19.799 from a peak back in February twenty twenty one. Matt 0:36:19.840 --> 0:36:21.800 Miller and I caught up with Kathy ahead of Tesla's 0:36:21.880 --> 0:36:24.560 latest earnings to find out where she is putting her 0:36:24.600 --> 0:36:26.759 money and whether the market may be getting a bit 0:36:26.840 --> 0:36:28.120 too exuberant. 0:36:28.400 --> 0:36:32.560 You know, what's interesting is to see funds having nice 0:36:32.680 --> 0:36:36.600 moves and flows not follow I think there's a wall 0:36:36.680 --> 0:36:40.240 of worry up out there. It is about further interest 0:36:40.320 --> 0:36:44.560 rate increases. What's going to break next, It's about a 0:36:44.640 --> 0:36:49.080 hard landing in the context of now China and Europe 0:36:50.239 --> 0:36:56.520 really struggling, and how will that reverberate. So we actually 0:36:56.560 --> 0:36:59.200 think that, and we've been saying this for some time, 0:36:59.719 --> 0:37:02.839 that deflation is the bigger risk out here. And I 0:37:02.880 --> 0:37:06.160 do believe. I just heard your conversation about autos. I 0:37:06.160 --> 0:37:09.160 think we're going to see an unwinding of auto prices. 0:37:09.239 --> 0:37:13.000 That the Ford f one point fifty lightnings price decline 0:37:13.200 --> 0:37:16.880 is going to be the first of many, many auto 0:37:17.239 --> 0:37:19.359 cuts that we'll see. And if you remember, during the 0:37:19.400 --> 0:37:24.560 early stage of COVID and the supply shocks, at one 0:37:24.600 --> 0:37:28.680 point the combination of used cars and new cars accounted 0:37:28.719 --> 0:37:32.200 for a third of the increase in inflation. I think 0:37:32.280 --> 0:37:35.440 you'll see that on the downside here, and we're going 0:37:35.480 --> 0:37:38.080 to get to two percent inflation, I think, much faster 0:37:38.239 --> 0:37:43.520 than many people think, with perhaps a harder landing, more 0:37:43.560 --> 0:37:47.040 for corporate margins than anything else, because if you see 0:37:47.080 --> 0:37:52.520 these discounting and you see consumers respond to discounts, maybe 0:37:52.719 --> 0:37:55.880 real growth kind of. I still think we'll have a 0:37:55.880 --> 0:38:00.080 harder landing, but maybe with price declines will stave that 0:38:00.280 --> 0:38:01.480 off that hard landing. 0:38:01.920 --> 0:38:04.640 For a while, well, we were hearing investors today say 0:38:04.680 --> 0:38:08.600 that inflation is no longer concern number one. Growth is 0:38:08.640 --> 0:38:12.680 really what the market is concerned about now. And so 0:38:12.719 --> 0:38:16.840 you think we're going to have a recession, Kathy. 0:38:16.040 --> 0:38:21.160 Yeah, If you look at real corporate revenue growth, it's 0:38:21.280 --> 0:38:24.319 down one point one percent your over year as of 0:38:25.320 --> 0:38:28.759 that was as of the first quarter. That is consistent 0:38:29.040 --> 0:38:34.200 with gross domestic income down one point one percent. This 0:38:34.280 --> 0:38:37.120 is real gross domestic income down one point one percent. 0:38:37.200 --> 0:38:41.640 You're over year gross domestic income and gross domestic product 0:38:41.800 --> 0:38:45.759 over time equal one another. It's an identity, but the 0:38:45.800 --> 0:38:49.520 information flows are different. And income you get a lot 0:38:49.560 --> 0:38:55.480 from the IRS, a lot of income data. The product data, 0:38:55.560 --> 0:38:59.200 product and service data is a little bit more sampled 0:38:59.440 --> 0:39:03.680 and erratic, but over time, so we could already be 0:39:04.080 --> 0:39:08.040 in that downturn. And the GDP numbers we'll just catch 0:39:08.080 --> 0:39:08.640 up later on. 0:39:08.760 --> 0:39:11.279 What about the inflation numbers. I mean, we come down 0:39:11.320 --> 0:39:14.120 over the last year from nine point one percent CPI 0:39:14.360 --> 0:39:17.960 to three that's pretty quick. And you know, I've talked 0:39:17.960 --> 0:39:19.799 to you a couple of times in the last couple 0:39:19.840 --> 0:39:22.480 of years and you've mentioned a concern about deflation rather 0:39:22.520 --> 0:39:24.520 than inflation. Do you think we're going to start to 0:39:24.520 --> 0:39:27.279 see that coming as we see it in other major economies, 0:39:27.360 --> 0:39:28.400 most notably China. 0:39:29.360 --> 0:39:33.760 Yes, it's very interesting. The Chinese deflation prices are down 0:39:34.000 --> 0:39:37.680 according to the PPI five point four percent year over year, 0:39:37.719 --> 0:39:40.200 and I do believe they are going to export it 0:39:41.239 --> 0:39:44.520 over time. So yes, we do think we're going to 0:39:44.520 --> 0:39:47.760 see price deflation. But there are two flavors of deflation. 0:39:47.840 --> 0:39:51.239 There's good and there's bad. The good deflation has to 0:39:51.280 --> 0:39:55.320 do with innovation, and we have centered our research around 0:39:55.360 --> 0:40:00.440 five major platforms, all of which are technologically enabled and deflationtionary, 0:40:00.800 --> 0:40:04.560 and they're becoming a bigger part of the pie electric 0:40:04.640 --> 0:40:09.200 vehicle sales. For example, Tesla's making sure that it's passing 0:40:09.239 --> 0:40:14.280 along the cost declines from its drive electric drive trains 0:40:15.120 --> 0:40:19.600 to consumers so that it can sustain demand. Anything having 0:40:19.640 --> 0:40:23.920 to do with innovation, the best companies are going to 0:40:24.000 --> 0:40:27.680 pass those costs along to the consumers. And so I 0:40:27.680 --> 0:40:30.640 think you're going to see much broader based deflation in 0:40:31.560 --> 0:40:37.560 not only the transportation sector, but perhaps everywhere because artificial 0:40:37.719 --> 0:40:43.520 intelligence training costs AI training costs are dropping. Get this, 0:40:44.200 --> 0:40:48.799 seventy percent per year. Seventy percent per year. Now, that's 0:40:48.800 --> 0:40:53.120 the good deflation is causing booms in activity. But we 0:40:53.239 --> 0:40:57.799 do know that disruptive innovation will disturb or disintermediate the 0:40:57.840 --> 0:41:02.680 traditional world order electric vehicles and gas powered vehicles. You know, 0:41:02.719 --> 0:41:06.480 these auto companies ninety to ninety five percent of their 0:41:06.520 --> 0:41:10.680 revenues are still tied to the internal combustion engine. 0:41:10.920 --> 0:41:14.680 So, Kathy, when people talk about AI. Do you think 0:41:14.719 --> 0:41:18.120 it's going to upend the labor market substantially? 0:41:19.160 --> 0:41:23.040 The history of technology over time is that it's a 0:41:23.080 --> 0:41:27.879 net job creator. In the short term, you'll see some displacement, 0:41:27.960 --> 0:41:32.600 You'll need some retraining. But I like to remind people 0:41:32.640 --> 0:41:35.080 about the Internet. In the early days of the Internet, 0:41:35.160 --> 0:41:36.719 when we were trying to figure out what it was 0:41:36.840 --> 0:41:39.640 and how it was going to work, we had no 0:41:40.000 --> 0:41:47.120 idea about Uber or Airbnb businesses that could not exist 0:41:47.640 --> 0:41:50.279 without the Internet. And I think the same is going 0:41:50.320 --> 0:41:53.440 to be true in the AI world as well. I 0:41:53.440 --> 0:41:56.800 think it's going to be a tremendous boon to productivity. 0:41:57.120 --> 0:42:03.799 It is the equivalent for college workers of the assembly 0:42:03.880 --> 0:42:08.520 line in the industrial age. This is the new assembly line. 0:42:08.960 --> 0:42:13.640 And you know what happened because of the original assembly line, Well, 0:42:13.680 --> 0:42:15.920 a lot of people left the farms. There are a 0:42:15.960 --> 0:42:20.960 lot of farmers then and moved into businesses and activities 0:42:21.000 --> 0:42:23.640 that they didn't dream were possible before that. And I 0:42:23.680 --> 0:42:25.000 think the same will prove true now. 0:42:25.200 --> 0:42:27.160 Heye it love it, little Henry Ford henory there. 0:42:27.200 --> 0:42:27.759 I like it. 0:42:28.239 --> 0:42:30.600 Love love, love No, But it's like this big picture. 0:42:30.840 --> 0:42:32.680 One thing I want to ask you kind of whittling 0:42:32.719 --> 0:42:34.480 it down a little bit. You know, one of the 0:42:34.520 --> 0:42:36.520 things in the in the headlines today has to do 0:42:36.680 --> 0:42:38.560 about Dad Jones. You did an interview and you talked 0:42:38.600 --> 0:42:41.400 about Twitter and writing down your stake in Twitter by 0:42:41.400 --> 0:42:44.560 I think about forty seven percent since Elon took it over. 0:42:44.640 --> 0:42:47.840 You're still bullish long term, So help me understand that 0:42:48.040 --> 0:42:50.279 right down against a long term bullish view. 0:42:51.080 --> 0:42:54.960 Sure that we have no choice in this. This is 0:42:55.400 --> 0:43:00.360 we have a pricing committee. We calculate our net asset 0:43:00.440 --> 0:43:05.360 value for the ARC Venture Fund every day and we 0:43:05.400 --> 0:43:08.040 get a lot of markers. There's trading on the secondary 0:43:08.120 --> 0:43:11.760 market less. So with Twitter, we are trying to find 0:43:11.800 --> 0:43:14.360 some Twitter. We love to buy some at this level. 0:43:15.040 --> 0:43:17.880 But while a Fidelity has marked it down in some 0:43:17.960 --> 0:43:24.640 of the other large managers have marked their positions down 0:43:24.840 --> 0:43:29.680 dramatically based on Yes, we are still getting information about 0:43:29.680 --> 0:43:33.719 advertising sales not picking up dramatically yet, but they're in 0:43:33.920 --> 0:43:39.080 very early stage. With Linda joining the team, we'd love 0:43:39.160 --> 0:43:42.799 to buy it. We think longer term. We think that 0:43:43.960 --> 0:43:47.960 Elon understands what a super app is. After all, he 0:43:48.120 --> 0:43:51.600 did get started in the payment space and sold his 0:43:51.680 --> 0:43:57.120 company to PayPal in the last week. Twitter has gotten 0:43:57.680 --> 0:44:02.440 money transmitter licenses from three or four states and they're 0:44:02.480 --> 0:44:06.840 going to cover the land and we chat pay taught 0:44:06.920 --> 0:44:10.920 us a lot about what a super app is in 0:44:11.000 --> 0:44:17.680 terms of not only information flow, but financial activities and commerce. 0:44:18.640 --> 0:44:22.120 So we think Elon has grand plans, and you know, 0:44:22.160 --> 0:44:25.520 it's also been interesting. I think some of these markdowns 0:44:25.719 --> 0:44:28.799 may be a result of Threads. I don't know. I 0:44:28.840 --> 0:44:32.840 don't get involved in that decision making, but if you 0:44:32.880 --> 0:44:38.080 look at Threads already, the engagement activity is plummeting. I 0:44:38.120 --> 0:44:41.720 think people know that Threads is no Twitter. 0:44:42.200 --> 0:44:45.040 You still have to love meta though, right you were buying, right, 0:44:45.080 --> 0:44:49.040 you were buying some Meta, yes, and not for Threads 0:44:49.080 --> 0:44:49.439 at all. 0:44:49.840 --> 0:44:52.719 We have bought, you know, as Tesla went up two 0:44:52.800 --> 0:44:56.480 and a half fold in six to seven months. As 0:44:56.520 --> 0:44:59.480 we always do, we take profits. It's still the largest 0:44:59.640 --> 0:45:03.520 stock in our portfolio. We have our wish list out there, 0:45:03.800 --> 0:45:10.120 what companies are doing better than we expected. So Meta Platforms, 0:45:10.160 --> 0:45:13.880 you know, was disintermediated to some extent by TikTok. We 0:45:13.960 --> 0:45:17.359 had expected that, and we pulled away and avoided all 0:45:17.400 --> 0:45:20.360 of that loss. Now that doesn't mean we avoided losses 0:45:20.400 --> 0:45:25.680 in innovation because innovation was trounced broadly in twenty one 0:45:25.840 --> 0:45:29.680 and twenty two. But what we are intrigued by is 0:45:30.120 --> 0:45:37.359 the shift in focus and priorities from metaverse to artificial intelligence. 0:45:38.160 --> 0:45:41.080 That's the first thing. And what has also been quite 0:45:41.160 --> 0:45:47.279 astonishing to us is the engagement levels among all of 0:45:47.320 --> 0:45:53.680 their properties, Facebook, Instagram, WhatsApp. They're pretty astonishing, very sticky, 0:45:54.560 --> 0:45:58.280 and so we can see why advertisers are coming back. 0:45:58.360 --> 0:46:03.480 That's kind of a say play. They're leaving linear TV 0:46:03.680 --> 0:46:08.400 and finding other ways to advertise, and so we do 0:46:08.520 --> 0:46:12.799 think meta is now back again gaining more share in advertising. 0:46:12.960 --> 0:46:15.839 That's Kathy Wood of our invest more of our conversation 0:46:16.040 --> 0:46:19.759 straight ahead, including her unwavering belief in bitcoin. Following a 0:46:19.880 --> 0:46:23.279 couple of key legal winds for Coinbase. 0:46:22.960 --> 0:46:27.080 It's going to be we think, a major institutional on 0:46:27.320 --> 0:46:30.160 ramp into the DeFi space. 0:46:30.239 --> 0:46:33.160 And they're listening to Bloomberg Business Week. This is Bloomberg. 0:46:36.280 --> 0:46:39.839 You're listening to the Bloomberg Business Week podcast. Catch us 0:46:39.880 --> 0:46:43.360 live weekday afternoons from three to six Eastern Listen. 0:46:43.120 --> 0:46:46.120 On Bloomberg dot com, the iHeartRadio app, and the. 0:46:46.080 --> 0:46:49.280 Bloomberg Business app, or watch us live on YouTube. 0:46:50.239 --> 0:46:53.400 Let's pick up with our conversation with Kathy Wood, Matt Miller, 0:46:53.400 --> 0:46:56.040 and I speaking with the founder's CEO and CIO of 0:46:56.040 --> 0:46:59.480 our co invest She overseed about fifteen point one billion 0:46:59.520 --> 0:47:02.160 in equity holdings at least at the end of June. 0:47:02.160 --> 0:47:04.320 That is way down from a peak of about sixty 0:47:04.360 --> 0:47:07.440 billion a few years ago. Her Arc Innovation ETF has 0:47:07.520 --> 0:47:09.920 been on a tear though this year, as have some 0:47:09.960 --> 0:47:12.960 of her investments in digital assets, including bitcoin. 0:47:13.840 --> 0:47:17.960 I wonder about crypto in terms of things still to materialize. 0:47:17.960 --> 0:47:20.120 It seems like a lot more people are getting on 0:47:20.200 --> 0:47:24.040 board with you. Who was Larry Fink was on Fox 0:47:24.120 --> 0:47:26.920 Business and he was saying, you know, basically everything's going 0:47:26.960 --> 0:47:29.360 to be tokenized. This is going to help the finance 0:47:29.520 --> 0:47:33.000 be more frictionless, and it was I think a fascinating 0:47:33.040 --> 0:47:36.760 to hear, you know, someone who controls the biggest firm 0:47:36.920 --> 0:47:39.960 in the financial industry globally to say things like that. 0:47:41.400 --> 0:47:44.160 We know that you're in coinbase, that's one of the 0:47:44.160 --> 0:47:45.920 stocks has done so well for you this year, But 0:47:46.000 --> 0:47:48.759 where else do you see good opportunities here? Given the 0:47:48.800 --> 0:47:52.280 regulatory scrutiny it's had under Gary Gensler. 0:47:53.080 --> 0:47:56.000 Well, I think what's happening first with crypto that is 0:47:56.800 --> 0:48:00.759 wonderful in terms of the United State. While we were 0:48:00.880 --> 0:48:08.080 very unhappy with Chairman Gensler's direction, we're very happy that 0:48:08.160 --> 0:48:13.160 the judicial and legislative branches of our government are questioning 0:48:13.680 --> 0:48:16.880 the power that he seems to have seized and are 0:48:17.000 --> 0:48:21.640 questioning whether he should have a right to do and 0:48:21.680 --> 0:48:24.880 say some of the things that he's doing. So that's good. 0:48:25.320 --> 0:48:29.200 I think the Ripple ruling last week was a big 0:48:29.239 --> 0:48:33.520 win for crypto. Another juditial branch weighing in. So we 0:48:33.600 --> 0:48:37.680 own coinbase, as you know. We bought it when we 0:48:37.760 --> 0:48:41.680 saw the Wells notice and the sec suit because we 0:48:41.760 --> 0:48:44.239 believed and it turned out to be correct, that the 0:48:44.320 --> 0:48:48.560 judicial and legislative branches would start to weigh into this discussion. 0:48:49.360 --> 0:48:54.600 We also own Square, which has a business dedicated to bitcoin, 0:48:54.640 --> 0:48:58.719 and it's going to be the trojan horse to get 0:48:58.719 --> 0:49:03.680 into other other economies, especially emerging markets. This is cash 0:49:03.680 --> 0:49:08.880 app to get into those markets. So those two names. 0:49:08.880 --> 0:49:12.960 But one of the reasons you are I think hearing 0:49:13.480 --> 0:49:18.200 Larry I think whacks more eloquently on the crypto space 0:49:18.280 --> 0:49:20.960 when at one point he I think was calling bitcoin 0:49:22.000 --> 0:49:27.319 ponzi scheme, is that there are now Bitcoin filings at 0:49:27.360 --> 0:49:33.040 the SEC and we have one Blackrock as one. So 0:49:33.360 --> 0:49:38.080 I think that's another reason we're hearing more from these 0:49:38.080 --> 0:49:44.719 more traditional players. You know, defied decentralized financial services is 0:49:45.120 --> 0:49:49.640 a risk for these centralized players, so they're trying to 0:49:49.680 --> 0:49:53.839 play ball and actually use the technology to lower their 0:49:53.880 --> 0:49:57.560 own cost base. But they as a centralized institution, do 0:49:57.680 --> 0:50:01.120 not have the DNA we think will take to really 0:50:01.160 --> 0:50:04.800 succeed in a decentralized financial services. 0:50:04.840 --> 0:50:06.960 So, Kathy, does coinbase in your view, become kind of 0:50:07.000 --> 0:50:11.319 a bridge between traditional finance and the DeFi worlds. 0:50:11.400 --> 0:50:18.160 Yes, it is. It's developing something called base and definitely 0:50:18.280 --> 0:50:22.360 understands both worlds. It's going to be, we think, a 0:50:22.480 --> 0:50:28.719 major institutional on ramp into the DeFi space. And you know, 0:50:28.800 --> 0:50:33.360 we're hearing more and more where there's smoke, there's fire. 0:50:33.640 --> 0:50:37.840 Sometimes certainly was true with Ta Luna and FTX, but 0:50:38.040 --> 0:50:41.360 you know we're hearing more turmoil when it comes to 0:50:41.400 --> 0:50:46.200 binance as well, with Australia and the Netherlands basically banning 0:50:46.200 --> 0:50:49.120 it as effectively we have done here in the United States. 0:50:49.160 --> 0:50:52.680 So think about the share gains that as an on 0:50:52.960 --> 0:50:58.680 ramp that Coinbase will enjoy if anything do ntoward does 0:50:58.760 --> 0:50:59.960 happen to binance. 0:51:00.080 --> 0:51:02.319 So when you sell coinbase, like, is it just again 0:51:02.400 --> 0:51:05.439 taking some money off the table because of the incredible run. 0:51:06.280 --> 0:51:11.160 Yes, this is its portfolio management. You know, when something 0:51:11.320 --> 0:51:15.319 is up fourfold from you know where we had been 0:51:15.320 --> 0:51:18.200 buying it, we will take some profits. It's now the 0:51:18.280 --> 0:51:22.400 number two position in the flagship strategy ARKK, it's number 0:51:22.440 --> 0:51:27.000 one in ar K f our FinTechs fintech strategy. So 0:51:27.920 --> 0:51:31.879 we are we become opportunistic at those moments in time, 0:51:31.920 --> 0:51:34.840 and very often you'll see us buy something as you 0:51:34.880 --> 0:51:38.560 saw we talked about Meta that is also up a lot, 0:51:39.440 --> 0:51:43.360 but in which our conviction has increased because again in 0:51:43.400 --> 0:51:46.920 the case of Meta, change in priorities. 0:51:47.000 --> 0:51:49.319 So don't you think that's what investors are doing with 0:51:49.400 --> 0:51:51.799 the flows as well, Kathy, because you know last year 0:51:52.520 --> 0:51:56.280 ARKK came down a lot in terms of its price action, 0:51:56.680 --> 0:52:01.160 but the flows were just piling in. Investors were still buying, buying, buying, 0:52:01.680 --> 0:52:05.040 And so this year your funds have done very well. 0:52:05.040 --> 0:52:07.839 They're up fifty sixty, seventy percent depending on which one 0:52:07.880 --> 0:52:09.920 you look at. And I get that people would take 0:52:09.960 --> 0:52:11.239 money off the table. 0:52:11.400 --> 0:52:13.880 And so do we, so do we, and they're taking 0:52:13.920 --> 0:52:18.240 money off the table, you know, in many, many of 0:52:18.280 --> 0:52:22.840 the funds that we're compared against and that we measure 0:52:22.880 --> 0:52:28.200 ourselves against. And yet the focus on ARC alone is interesting. 0:52:28.440 --> 0:52:32.160 It's it's a phenomenon, and it makes sense. Yes, have 0:52:32.239 --> 0:52:34.920 had a big run. Now, one thing that's happened recently 0:52:35.520 --> 0:52:40.680 for us is we had seen a basing we'll use 0:52:40.920 --> 0:52:43.480 arkk but it's true of all of our strategies, a 0:52:43.600 --> 0:52:47.080 basing inner range mid thirties to mid forties, mid thirties, 0:52:48.000 --> 0:52:52.120 and so we saw, you know, profit taking a forty 0:52:52.160 --> 0:52:55.040 five and moving back into mid thirties. Well, we just 0:52:55.120 --> 0:52:58.400 broke out of that forty five range. So actually, in 0:52:58.440 --> 0:53:01.399 the last it seems like a lot of I don't 0:53:01.400 --> 0:53:05.520 know if they're technicians or investors who use technical analysis, 0:53:05.840 --> 0:53:08.600 basically are saying, oh, it broke out of the range. 0:53:09.360 --> 0:53:12.320 And I do think that's why our flows are now 0:53:12.440 --> 0:53:14.000 back in in July. 0:53:14.640 --> 0:53:17.200 So, Kathy, you know the reporting, We've done it, Dad 0:53:17.280 --> 0:53:20.600 Jones has done it others about outflows in your fund 0:53:20.640 --> 0:53:24.719 since October. So you're saying that money's coming in at 0:53:24.760 --> 0:53:26.120 this point turn around. 0:53:26.800 --> 0:53:29.360 Yeah, and you can see you can see our ETFs. 0:53:29.400 --> 0:53:32.560 We report them every day. The flows are reported every day. 0:53:32.960 --> 0:53:36.560 So I think for the flagship it's around two hundred 0:53:36.560 --> 0:53:41.560 and fifty million dollars just thus far in July. So yes, 0:53:41.640 --> 0:53:45.719 and before that we understood people were taking profits just 0:53:45.760 --> 0:53:49.320 like we take profits in our stocks. As you were saying, Matt, 0:53:50.320 --> 0:53:54.560 this is nothing new. However, there's there's another There's something 0:53:54.560 --> 0:53:57.520 else that could be going on here, and that is, 0:53:57.560 --> 0:54:00.359 if you look at the Nasdaq and the cues, they're 0:54:00.400 --> 0:54:04.040 not too far from their all time highs, whereas our 0:54:04.200 --> 0:54:09.640 strategies and let's take the flagship ARKK, the all time 0:54:09.719 --> 0:54:14.240 high was close to one sixty, and we're still below fifty. 0:54:15.239 --> 0:54:18.680 And sure, maybe the one sixty was a bit too far, 0:54:19.200 --> 0:54:22.560 but I think our funds were disadvantaged because they don't 0:54:22.600 --> 0:54:27.200 look like the Nasdaq or the Nasdaq one hundred. And 0:54:27.280 --> 0:54:31.000 as the markets were selling off last year, more people, 0:54:32.280 --> 0:54:36.319 more investors, tried to get closer to their benchmarks, and 0:54:36.360 --> 0:54:40.759 they were selling our stocks and buying the big megacap 0:54:40.840 --> 0:54:44.520 texts and so forth. I think that might be changing. 0:54:44.560 --> 0:54:51.040 I think real active management is starting to evolve here 0:54:51.160 --> 0:54:54.360 or have more of an impact because even though we 0:54:54.480 --> 0:54:58.400 don't own most of the megacap techs in terms of 0:54:58.400 --> 0:55:02.640 the magnificent seven, really Tesla's are major holding, and we 0:55:02.719 --> 0:55:05.480 do have twenty five percent exposure to healthcare, which is 0:55:05.640 --> 0:55:09.479 negative you're to date for the sector, but for us, 0:55:09.640 --> 0:55:13.800 it's somewhere in the twenty five to thirty percent appreciation range. 0:55:14.000 --> 0:55:16.800 This is active management at work as well as smid 0:55:16.880 --> 0:55:21.680 We're much more tilted towards smidcap smaller and cap stocks, 0:55:21.960 --> 0:55:25.560 and those have underperformed the mega cap texts, but our 0:55:25.719 --> 0:55:30.840 strategies are outperforming the Nasdaq one hundred. So it's saying 0:55:30.960 --> 0:55:35.759 something to us about true active management beginning to make 0:55:35.800 --> 0:55:36.640 a difference. Again. 0:55:36.840 --> 0:55:40.400 That was our convest founder, CEO and CIO, Kathy Wood. 0:55:40.400 --> 0:55:42.799 Even more from Kathy available at our Bloomberg Business Week 0:55:42.840 --> 0:55:45.200 podcast feed. Head there to find out what she thinks 0:55:45.239 --> 0:55:48.879 Crypto offers investors that no other asset can and which 0:55:48.960 --> 0:55:51.080 company she believes will be the next source of market 0:55:51.080 --> 0:55:55.120 shifting innovation. It's kind of her newest big bet still 0:55:55.120 --> 0:55:58.000 to come on Bloomberg BusinessWeek. A different sort of female 0:55:58.120 --> 0:56:00.440 entrepreneur who's looking to leave her mark on the venture 0:56:00.480 --> 0:56:04.360 capital business Halojen Venture's founding partner Jesse Draper, joins us 0:56:04.360 --> 0:56:06.960 on the other side, and if her name sounds familiar, 0:56:07.400 --> 0:56:08.880 it should well. 0:56:08.840 --> 0:56:10.280 When we come back, This is Bloomberg. 0:56:14.160 --> 0:56:17.719 You're listening to the Bloomberg Business Week podcast. Catch us 0:56:17.760 --> 0:56:21.880 live weekday afternoons from three to six Easter on Bloomberg Radio, 0:56:21.960 --> 0:56:25.280 the Bloomberg Business app, and YouTube. You can also listen 0:56:25.360 --> 0:56:28.480 live on Amazon Alexa from our flagship New York station, 0:56:28.920 --> 0:56:31.680 Just Say Alexa Play Bloomberg eleven thirty. 0:56:33.160 --> 0:56:36.319 Bloomberg News recently reporting on the venture capital space, noting 0:56:36.320 --> 0:56:38.800 that climate tech, which has been an investing bright spot 0:56:38.800 --> 0:56:42.279 since twenty twenty one, is not so hot anymore. In fact, 0:56:42.320 --> 0:56:44.320 the first half of twenty twenty three so a decrease 0:56:44.360 --> 0:56:46.799 in climate venture funding, according to a new report from 0:56:46.840 --> 0:56:51.279 Climate Tech VC. That change, though, really reflects an overall 0:56:51.440 --> 0:56:55.760 broader slow down in VC investments, driven by larger macroeconomic 0:56:55.880 --> 0:56:58.600 forces such as higher interest rates as well as sector 0:56:58.640 --> 0:57:01.879 specific issues. Well, our next guest is making her own 0:57:02.000 --> 0:57:05.640 early stage investments. We're talking about La based Halogen Ventures 0:57:05.640 --> 0:57:09.680 founding partner and fourth generation venture capitalist, Jesse Draper. Some 0:57:09.719 --> 0:57:12.120 of her investments have already been acquired by the likes 0:57:12.120 --> 0:57:15.120 of P and G, Twitter, and Walmart. She sat down 0:57:15.160 --> 0:57:18.480 in studio with me and her childhood friend, my co host, 0:57:18.640 --> 0:57:19.280 Matt Miller. 0:57:19.600 --> 0:57:23.840 I've also always admired her dad, not just because I 0:57:23.880 --> 0:57:29.320 know him from growing up, because he's because the whole 0:57:29.320 --> 0:57:33.439 family is so deep into venture capital. But Tim and 0:57:34.280 --> 0:57:37.120 Jesse's brother Adam got deep into bitcoin right when I 0:57:37.160 --> 0:57:39.560 started covering it, so about ten years ago. 0:57:39.600 --> 0:57:41.800 I guess it is what's that what's that environment like 0:57:41.840 --> 0:57:43.960 growing up that way? Or just do you guys like 0:57:44.000 --> 0:57:46.200 get together and just talk about opportunities, like what's it 0:57:46.280 --> 0:57:47.240 like you pitch each other? 0:57:47.480 --> 0:57:47.640 Oh? 0:57:47.720 --> 0:57:50.120 Yeah, of course. I mean my mom calls it like 0:57:50.280 --> 0:57:52.880 our dinners are board of directors meetings. You know, we're 0:57:52.920 --> 0:57:56.200 talking about deals. And I'm the oldest of four, and 0:57:56.960 --> 0:58:00.320 I have two brothers and a sister. There is an 0:58:00.360 --> 0:58:04.200 incredible artist l But my two brothers run venture funds, 0:58:04.200 --> 0:58:06.400 and then my dad has an active venture fund as well, 0:58:06.840 --> 0:58:08.640 and so we do we share deals. I have great 0:58:08.640 --> 0:58:11.520 advisors around me all the time, you know, I have 0:58:11.560 --> 0:58:14.400 great people to call. We've all had very different experiences. 0:58:14.440 --> 0:58:17.480 We all have very separate venture capital funds focused on 0:58:17.520 --> 0:58:20.320 different things, but I think in terms of what I'm 0:58:20.360 --> 0:58:23.800 focused on growing up there, my dad was always super 0:58:23.840 --> 0:58:26.080 supportive of women, and he made me feel like I 0:58:26.080 --> 0:58:31.920 could do absolutely anything. But my mom would say things like, Okay, 0:58:31.960 --> 0:58:34.680 you're going on another business trip, Tim, well, you need to. 0:58:34.680 --> 0:58:35.320 Take a kid. 0:58:35.560 --> 0:58:37.760 And I was the oldest. So I traveled around the 0:58:37.760 --> 0:58:40.440 world with my dad. It was this amazing thing, and 0:58:40.480 --> 0:58:43.480 I got to go to China and all these Ukraine 0:58:43.600 --> 0:58:45.880 and all of these incredible countries and see what their 0:58:46.000 --> 0:58:51.240 kind of startup world was like. But what I realized 0:58:51.560 --> 0:58:55.360 was that I was different because I was female, and 0:58:55.400 --> 0:58:58.760 so being a fourth generation venture capitalist comes with a 0:58:58.760 --> 0:59:00.800 lot of preconceived notions, and so I used to kind 0:59:00.800 --> 0:59:02.640 of shy away from that. But now I'm like, no, 0:59:02.800 --> 0:59:05.320 you know, that's a really huge part of my story. 0:59:05.360 --> 0:59:07.360 And I didn't think I could be in these rooms. 0:59:07.360 --> 0:59:10.000 I'd be in China meeting with diplomats and I'd be 0:59:10.040 --> 0:59:12.520 sort of shunned outside of the room. And I kept 0:59:12.520 --> 0:59:15.040 trying to explain to my dad, you know, like they 0:59:15.160 --> 0:59:16.960 just don't want me here. I really feel like it's 0:59:17.000 --> 0:59:19.120 because I'm a woman, and he just no, no, no, 0:59:19.240 --> 0:59:22.040 I don't know what you're talking about and so I 0:59:22.200 --> 0:59:25.080 was just like, so it was so important to me 0:59:25.280 --> 0:59:27.800 to support women in whatever I did. I ended up 0:59:27.840 --> 0:59:31.000 going after a career in entertainment, like any young girl. 0:59:31.040 --> 0:59:35.680 I looked to Hollywood because my aunt, Polly Draper is 0:59:35.680 --> 0:59:39.320 a fairly successful actress, a very successful actress actually, and 0:59:39.360 --> 0:59:41.400 she is currently on a show called The Company You 0:59:41.520 --> 0:59:45.280 Keep Shameless plug for my aunt, who's awesome, and she 0:59:46.240 --> 0:59:50.680 ran on thirty seven and she always really inspired me. 0:59:50.720 --> 0:59:52.600 So I said, oh, well, this is what women do. 0:59:52.680 --> 0:59:55.200 This is a traditional job for a woman. As a 0:59:55.200 --> 0:59:56.920 young girl, you know, they say you can be what 0:59:56.960 --> 0:59:58.880 you can see. So I kind of went after her. 0:59:59.640 --> 1:00:03.880 My mom worked incredibly hard raising four children and went 1:00:03.920 --> 1:00:06.840 into entertainment. I had so many I had a lot 1:00:06.880 --> 1:00:10.520 of great success. Was on a Nickelodeon show. I was 1:00:10.560 --> 1:00:13.000 in a bunch of movies, NA The Naked Brothers Man. 1:00:14.120 --> 1:00:17.440 But it was also I had so many cattle calls. 1:00:17.480 --> 1:00:20.240 And there was this very memorable one where I was 1:00:20.280 --> 1:00:23.480 in Los Angeles, somewhere on Sunset Boulevard going to a 1:00:23.480 --> 1:00:28.680 cattle call, where you know, there's five hundred women much 1:00:28.680 --> 1:00:30.919 more beautiful, much more talented than I am. I wait 1:00:31.080 --> 1:00:34.280 five hours. It was for like Transporter two or something, 1:00:34.920 --> 1:00:37.280 and Jason Staveum, I get in the room. I have 1:00:37.400 --> 1:00:40.120 my little sides prepared and I'm like, Hi, I'm Jesse 1:00:40.160 --> 1:00:43.640 either like no, don't speak, turn around, turn around, and 1:00:43.760 --> 1:00:46.320 I and like click click, and I leave, and I 1:00:46.440 --> 1:00:49.960 just felt like gross, you know, And then I realized 1:00:49.960 --> 1:00:52.120 I'd been sent to this thing called it through an 1:00:52.200 --> 1:00:55.400 organization called Charlie's Bodies, so they were literally just looking 1:00:55.400 --> 1:00:57.800 for bodies. And I walked out of there. And because 1:00:57.800 --> 1:00:59.960 I was a zealous celebrity who was like on a 1:01:00.080 --> 1:01:03.240 Nickelodeon show, I had been invited to the first Twitter 1:01:03.280 --> 1:01:06.080 conference and it was the very first one two thousand 1:01:06.080 --> 1:01:09.240 and eight something like that at the Skirball Center, and 1:01:09.280 --> 1:01:11.000 I went and I was like, you know, I'm one 1:01:11.040 --> 1:01:13.240 of the only women in this room. But it's a 1:01:13.240 --> 1:01:16.120 reminder that this is where, like I know this business, 1:01:16.160 --> 1:01:19.000 and there's something really cool happening here with social media. 1:01:19.440 --> 1:01:21.800 And so I ended up combining these two kind of 1:01:21.840 --> 1:01:24.720 worlds created one of the first tech talk shows, if 1:01:24.720 --> 1:01:26.919 you guys can believe it, back in two thousand and eight. 1:01:27.280 --> 1:01:28.919 And I know it was the first because I had 1:01:28.960 --> 1:01:32.000 elon Musk and the former CEO of Google, Eric schmid On, 1:01:32.080 --> 1:01:34.040 and nobody cared because they. 1:01:33.880 --> 1:01:36.880 Want to have I will say that I watched it. 1:01:36.760 --> 1:01:39.240 It was It was a terrible show. When I look back, 1:01:39.320 --> 1:01:42.440 I'm like horrified, But I thought my career started. It 1:01:42.520 --> 1:01:45.160 was called The Valley Girls Show, took it to TV, 1:01:45.320 --> 1:01:47.640 we were nominated for an Emmy. We built out a 1:01:47.640 --> 1:01:50.600 whole tech news blog around it, and through that show, 1:01:50.680 --> 1:01:54.160 I realized I was only interviewing men in technology. So 1:01:54.200 --> 1:01:57.400 I made an initiative to interview fifty percent women in tech, 1:01:57.920 --> 1:02:01.240 and they came. I still today called the Batwoman's signal. 1:02:01.360 --> 1:02:03.840 I started getting pitched all of these incredible deals. I 1:02:03.880 --> 1:02:06.560 had Sheryl Sandberg on the show before she'd written Lean 1:02:06.600 --> 1:02:09.600 In and Jessica album when she was just starting on 1:02:09.760 --> 1:02:13.280 his company, and then wanted to help women in tech 1:02:13.320 --> 1:02:16.760 by giving them media exposure. And then I made that initiative, 1:02:16.800 --> 1:02:19.360 and then realized they also needed funding. So first I 1:02:19.440 --> 1:02:22.280 was sourcing deals like paperless posts, finding them their first 1:02:22.280 --> 1:02:27.800 investors in numerous others, and then started writing tiny angel checks. 1:02:28.040 --> 1:02:32.560 Sold my first company for twenty six x return on 1:02:32.640 --> 1:02:36.280 the secondary market. Benchmark had come in marked it up significantly. 1:02:36.440 --> 1:02:39.840 I had this great opportunity to sell, and then everyone 1:02:39.840 --> 1:02:42.000 else lost their money, so I had this nice little 1:02:42.000 --> 1:02:44.160 track record. I feel badly, but I was really happy 1:02:44.200 --> 1:02:49.520 I sold and then not that badly, and then I 1:02:49.600 --> 1:02:52.280 had a track record, went and raised my first fund 1:02:52.320 --> 1:02:54.280 from a lot of the guests on my show. And 1:02:54.320 --> 1:02:56.760 now we're going out for our third right now, which 1:02:56.800 --> 1:02:58.640 I can legally say because we're a five o six. 1:02:58.920 --> 1:02:59.760 What a cool story. 1:03:00.440 --> 1:03:03.440 That is pretty amazing. That's great, that's a book. But 1:03:03.560 --> 1:03:05.160 talk to us, make sense, talk to us about what 1:03:05.200 --> 1:03:08.560 guides you in terms of where you want to invest. 1:03:08.920 --> 1:03:12.200 So right now, we So we were more generalists when 1:03:12.200 --> 1:03:15.000 we started because we were consumer tech early stage and 1:03:15.240 --> 1:03:16.560 kind of there had to be a female in the 1:03:16.560 --> 1:03:20.480 founding team of five. And uh, it's funny when you 1:03:20.520 --> 1:03:23.360 say that to people. You get a lot of questions like, well, 1:03:23.360 --> 1:03:26.920 what if a guy works there? And I'm like, oh, 1:03:26.960 --> 1:03:29.000 so lots of men work at our companies, and so 1:03:29.040 --> 1:03:31.200 I always like to say, we have seventy two companies 1:03:31.280 --> 1:03:33.800 and we have three male CEOs, So we love men. 1:03:34.840 --> 1:03:36.920 It's about everybody. We just want to make sure there's 1:03:36.920 --> 1:03:39.680 a female in the founding team. But I think right now, 1:03:39.680 --> 1:03:41.440 when I'm supers. 1:03:40.800 --> 1:03:43.440 Women, if the whole idea is the research there's diversity 1:03:43.480 --> 1:03:45.800 is good, we have to also be ye all in 1:03:45.840 --> 1:03:47.480 on diversity is it is a little. 1:03:47.280 --> 1:03:47.880 Bit are okay? 1:03:48.200 --> 1:03:50.440 Men are good. Men are good, but it is frustrating. 1:03:50.480 --> 1:03:52.919 I get a lot of questions about that, like there's 1:03:52.960 --> 1:03:55.520 a lot of technicalities, like it'll be thirty I'll pitch 1:03:55.840 --> 1:03:57.560 my fund and be like, yeah, I have this company, 1:03:57.640 --> 1:04:00.760 baby List doing a billion GMV you know, And then 1:04:00.760 --> 1:04:01.520 they're like, okay, but. 1:04:01.480 --> 1:04:02.320 What if a guy works there. 1:04:02.360 --> 1:04:04.760 Okay, but what if he's you know, the co founder, 1:04:04.840 --> 1:04:06.920 you still will invest. But what if I'm like, we're 1:04:06.920 --> 1:04:11.720 building billion dollar businesses, if not trillion dollar businesses. So yes, 1:04:12.040 --> 1:04:15.400 but our companies are doing so incredibly well. We're looking 1:04:15.960 --> 1:04:20.960 right now at this category Future of Families, which we 1:04:21.000 --> 1:04:23.360 went out for childcare, and I said, I want this 1:04:23.440 --> 1:04:25.680 third fund to be like the childcare Fund because we 1:04:25.720 --> 1:04:29.480 have these incredible companies like Hop Skip Drive, which is 1:04:29.560 --> 1:04:33.640 tackling getting kids too and from school. We have week Care, 1:04:33.680 --> 1:04:37.480 which is the largest childcare network a technology in the country. 1:04:37.520 --> 1:04:41.720 They oversee sixty six thousand in home vetted childcare locations, 1:04:42.560 --> 1:04:45.880 this is the largest childcare network and the most affordable 1:04:46.280 --> 1:04:50.400 childcare opportunity for families of children under the age of six. 1:04:51.640 --> 1:04:54.160 And then you know a company called Binti that's putting 1:04:54.200 --> 1:04:58.000 adoption online. And so we realized these companies were doing really, 1:04:58.040 --> 1:05:00.919 really well, and we had such an op opportunity. It's 1:05:00.920 --> 1:05:04.800 such an underinvested market and it's been broken for so 1:05:05.200 --> 1:05:07.800 many years. Agreed, and so I said, I want this 1:05:07.880 --> 1:05:11.240 to be the Childcare Fund. And a lot of people said, well, 1:05:11.360 --> 1:05:13.400 is that a big enough market? And I said, well, 1:05:13.400 --> 1:05:16.680 it's five hundred and twenty billion. But you know, challenge accepted. 1:05:16.760 --> 1:05:17.840 I love a good challenge. 1:05:17.920 --> 1:05:22.160 Yep. It is commonly known, at least on this show, 1:05:22.160 --> 1:05:23.840 because we talk about it all the time, that very 1:05:23.840 --> 1:05:26.360 little money in VC goes to women funded businesses. I 1:05:26.400 --> 1:05:29.560 think two percent is the number we're working with that, which, 1:05:30.040 --> 1:05:33.400 on the one hand is horrible. You know, we should 1:05:33.400 --> 1:05:35.840 be investing more on women obviously. On the other hand, 1:05:35.880 --> 1:05:38.720 it's a great opportunity for you. I mean, there's just 1:05:38.760 --> 1:05:41.040 a huge green field where you can go out and 1:05:41.080 --> 1:05:45.560 grow money. So what are to you the most exciting 1:05:45.600 --> 1:05:48.400 businesses that you run or that you invest in? 1:05:48.400 --> 1:05:49.560 I should say, I guess you heard it. 1:05:49.600 --> 1:05:52.840 Do your favorite many, Matt, There's so many, but you're right. 1:05:52.880 --> 1:05:55.800 There's only two percent of venture capital funding is going 1:05:55.800 --> 1:05:57.840 towards women, and actually last year it was less, it 1:05:57.840 --> 1:06:00.520 was one point nine percent. And I'm so happy you're 1:06:00.560 --> 1:06:03.240 talking about it. I'm so happy you talk about it regularly. 1:06:03.280 --> 1:06:06.760 I've realized in VC we talk about it. In female 1:06:06.800 --> 1:06:08.840 focused VC, we talk about it all the time. And 1:06:08.880 --> 1:06:12.280 we actually just did this big campaign and featured a 1:06:12.280 --> 1:06:15.800 bunch of our portfolio companies to raise awareness about this 1:06:15.920 --> 1:06:18.120 because we want people to realize that women are starting 1:06:18.120 --> 1:06:19.640 companies in every industry. 1:06:19.840 --> 1:06:23.040 That's Halogen Ventures founding partner Jesse Draper. More of our 1:06:23.040 --> 1:06:26.000 discussion on the VC landscape is straight Ahead, including her 1:06:26.080 --> 1:06:29.040 expectations for deal flow in the near term. You're listening 1:06:29.080 --> 1:06:31.280 to Bloomberg Business Week. This is Bloomberg. 1:06:34.680 --> 1:06:38.240 You're listening to the Bloomberg Business Week podcast. Catch us 1:06:38.280 --> 1:06:41.600 live weekday afternoons from three to six Eastern Listen on 1:06:41.680 --> 1:06:45.720 Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app, 1:06:46.000 --> 1:06:47.640 or watch us live on YouTube. 1:06:48.840 --> 1:06:50.919 So with Matt Miller and me is Jesse Draper. She's 1:06:50.920 --> 1:06:53.280 the founding partner of Vallet based Halogen Ventures and a 1:06:53.360 --> 1:06:57.240 fourth generation venture capitalist. Here, Jesse is explaining the hurdles 1:06:57.240 --> 1:07:00.960 facing many female led early stage companies. Jesse says they 1:07:01.000 --> 1:07:04.120 often have trouble securing investments due to an over concentration 1:07:04.200 --> 1:07:07.360 of venture funding among a small handful of firms, which 1:07:07.360 --> 1:07:10.160 are often hesitant to get in on the ground floor. 1:07:10.400 --> 1:07:13.040 They follow on later once you prove yourself. But I 1:07:13.040 --> 1:07:15.360 think it's the early stage capital is really where we 1:07:15.400 --> 1:07:17.920 have to make change. Like men have passed the pocketbooks 1:07:17.920 --> 1:07:20.560 down for generation to generation, so you're dealing. 1:07:20.280 --> 1:07:21.080 With that also. 1:07:22.120 --> 1:07:25.120 But women are starting great companies and we do. You know, 1:07:25.200 --> 1:07:28.040 I saw ten thousand deals last year. I was just 1:07:28.120 --> 1:07:31.480 telling you because you were asking, you know, well, do 1:07:31.520 --> 1:07:33.520 you even see enough deals? And I can't tell you 1:07:33.600 --> 1:07:36.680 how often I get that question. And because I'm a 1:07:36.720 --> 1:07:39.720 female looking for women led deals, I see more deals 1:07:39.720 --> 1:07:42.880 than traditional venture capitalists because women are looking for women, 1:07:43.360 --> 1:07:45.680 and I'm innundated. I don't even know how to get 1:07:45.720 --> 1:07:49.320 through it all. You know, it's we will eventually have 1:07:49.400 --> 1:07:51.959 billions of dollars to invest in all of these incredible women. 1:07:52.040 --> 1:07:54.080 But I see so many deals that I can't do 1:07:54.240 --> 1:07:58.000 because you know, we don't get enough funding just as 1:07:58.040 --> 1:08:03.400 an entire eco system of female led managers. And then 1:08:03.560 --> 1:08:06.400 also I think there's something around the female partners at 1:08:06.400 --> 1:08:09.280 the larger funds have trouble getting a deal across the table. 1:08:10.280 --> 1:08:13.480 I think you need more than one woman at the table. 1:08:13.640 --> 1:08:16.040 Well, and we did the stories of at a Silicon 1:08:16.080 --> 1:08:19.519 valley that even women venture capitalists at prominent firms, we're 1:08:19.600 --> 1:08:21.400 not investing in women led companies. 1:08:21.479 --> 1:08:24.240 It was just like they can't always get them across 1:08:24.280 --> 1:08:26.400 the table. They'll tell me exactly. 1:08:25.960 --> 1:08:29.600 But that's more opportunity for you, So totally. Yeah. So, 1:08:29.760 --> 1:08:31.800 I mean it's, as I say, it's message. 1:08:31.560 --> 1:08:33.240 Changing, but we're changing it. 1:08:33.280 --> 1:08:34.400 We are changing it. 1:08:34.960 --> 1:08:37.920 So currently, what are exits like right now? 1:08:38.400 --> 1:08:41.800 It's such a good question, Matt. You know, right now 1:08:41.880 --> 1:08:44.720 I sit on quite a few boards and we're all 1:08:44.760 --> 1:08:46.519 talking about M and A. I mean, I think any 1:08:46.560 --> 1:08:49.080 good board is constantly talking about M and A as 1:08:49.120 --> 1:08:52.400 an option at some point or IPO or just some 1:08:52.439 --> 1:08:55.559 sort of liquidity event down the road. But I'd say 1:08:55.880 --> 1:08:58.160 your company in the next six to nine months, if 1:08:58.200 --> 1:09:00.800 you have to sell, it is not a time people 1:09:00.880 --> 1:09:04.920 are just freaking out about liquidity about the markets. They 1:09:05.000 --> 1:09:09.879 feel like in stable and they're just kind of scared 1:09:09.960 --> 1:09:14.080 right now. All the consumer businesses I'm seeing the ones 1:09:14.080 --> 1:09:16.840 that are selling. We're selling one business right now. Everything's 1:09:17.760 --> 1:09:21.040 for about half of what it should be worth, unfortunately, 1:09:21.160 --> 1:09:23.400 and so you're only selling if you're really in a jam. 1:09:23.560 --> 1:09:27.240 So if you have businesses that you want liquidity from, 1:09:27.280 --> 1:09:29.160 I would not sell it right now. I would wait, 1:09:29.520 --> 1:09:32.960 start getting to know some acquirers or you know, just 1:09:33.040 --> 1:09:37.040 build the business. But also the coolest thing about investing 1:09:37.040 --> 1:09:40.320 in women is the majority of our companies are profitable. 1:09:40.479 --> 1:09:43.519 And that's like this unheard of term in the past 1:09:43.560 --> 1:09:48.240 ten years. So you know, get profitable, like create, take 1:09:48.280 --> 1:09:51.200 this time to build a much better business, and your 1:09:51.240 --> 1:09:53.639 exit down the road will be much better. 1:09:53.800 --> 1:09:55.280 We wanted to ask you just real quick, like the 1:09:55.320 --> 1:09:57.960 collapse of Silicon Valley Bank. Did you feel an impact 1:09:58.040 --> 1:09:58.240 of that? 1:09:58.560 --> 1:10:00.960 Oh my god, yes, yeah, that was the scariest weekend 1:10:01.000 --> 1:10:04.240 of my life. Over fifty percent of my portfolio banked there. 1:10:04.360 --> 1:10:07.200 I banked there. I couldn't even support my companies who 1:10:07.200 --> 1:10:10.519 couldn't make payroll because of it. While I'm super sensitive 1:10:10.520 --> 1:10:12.320 to the people who lost their jobs and all our 1:10:12.320 --> 1:10:15.120 friends at Silicon Valley Bank. This is a great time 1:10:15.160 --> 1:10:17.639 to invest in fintech. We're going to see new banks, 1:10:17.720 --> 1:10:21.160 We're going to see new products, insurance products that protect 1:10:21.160 --> 1:10:23.960 your money. Crypto's going to be on the rise. I mean, 1:10:24.000 --> 1:10:27.160 it's a really exciting time. But I mean, yes, I 1:10:27.160 --> 1:10:29.760 think we're going to see some more of those, unfortunately our. 1:10:29.640 --> 1:10:31.960 Thanks to Jesse Draper of Hallijen Ventures. You can listen 1:10:32.000 --> 1:10:34.960 to the full conversation find it under podcast feed. And 1:10:35.000 --> 1:10:37.080 that wraps up the weekend edition of Bloomberg Business Week 1:10:37.080 --> 1:10:39.599 from Bloomberg Radio. Thank you so much for joining us. 1:10:39.880 --> 1:10:42.080 Be sure to tune into Bloomberg Business Week Monday through 1:10:42.080 --> 1:10:44.799 Friday starting at three pm Wall Street Time on Bloomberg 1:10:44.920 --> 1:10:48.320 Radio and on Series XM Channel one nineteen. 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