WEBVTT - Bloomberg Businessweek Weekend - March 1st, 2024 0:00:02.920 --> 0:00:07.280 Bloomberg Audio Studios, Podcasts, radio news. 0:00:09.039 --> 0:00:13.399 This is Bloomberg business Week Inside from the reporters and 0:00:13.560 --> 0:00:17.120 editors who bring you America's most trusted business magazine, plus 0:00:17.200 --> 0:00:21.360 global business, finance and tech news. The Bloomberg Business Week 0:00:21.400 --> 0:00:26.560 Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:27.720 --> 0:00:30.560 Hi, everyone, Welcome to the Bloomberg Business Week Weekend Podcast. 0:00:30.840 --> 0:00:34.480 A deluge of US economic reports this past week, including 0:00:34.560 --> 0:00:38.880 durable goods orders falling more than forecast, consumer confidence decreasing 0:00:38.920 --> 0:00:41.600 for the first time in four months, the US economy 0:00:41.680 --> 0:00:44.240 expanding at a slower rate at the end of last year, 0:00:44.400 --> 0:00:47.639 as consumer spending grew at a faster pace that initially estimated, 0:00:47.960 --> 0:00:50.120 and inflation was revised higher. 0:00:50.360 --> 0:00:52.200 And then we got the big report of the week. 0:00:52.400 --> 0:00:55.480 The Fed's favored inflation gauge rose in January at the 0:00:55.520 --> 0:00:58.080 fastest pace in nearly a year, although it did come 0:00:58.120 --> 0:01:02.080 in exactly this forecast. Inflation adjusted consumer spending dropped for 0:01:02.120 --> 0:01:04.560 the first time in five months after a robust holiday 0:01:04.600 --> 0:01:08.520 shopping season, and real disposable income, the main supporter of spending, 0:01:08.800 --> 0:01:11.640 was little changed. More on that latest inflation print and 0:01:11.680 --> 0:01:15.120 the US economic backdrop in just a moment, Carol, you 0:01:15.120 --> 0:01:17.920 were not joking when you said at deluge with economic data. 0:01:17.840 --> 0:01:20.440 It was hard to keep up, all right. Also this hour, 0:01:20.600 --> 0:01:22.880 we got another check on the US economy and really 0:01:23.000 --> 0:01:26.960 US consumers thanks to Whirlpool CEO Mark Bitzer, who continues 0:01:27.000 --> 0:01:30.280 to see consumers changing their shopping ways post pandemic. 0:01:30.440 --> 0:01:33.360 Plus, as US home buying demand nears its worst level 0:01:33.560 --> 0:01:37.040 since nineteen ninety five, as mortgage rates hold above seven percent, 0:01:37.200 --> 0:01:39.679 we got a check at the housing market with Kate Kaminski, 0:01:39.880 --> 0:01:43.479 COO at the real estate investment company Walton Global, and. 0:01:43.440 --> 0:01:45.160 Folks, yes we may be a couple of months in, 0:01:45.280 --> 0:01:47.880 but there are still those who are making calls for 0:01:47.960 --> 0:01:50.760 the new year. We have the ten outrageous predictions for 0:01:50.800 --> 0:01:52.480 private equity in twenty twenty four. 0:01:52.680 --> 0:01:55.560 And speaking of that, we check out the Peback studio 0:01:55.600 --> 0:01:58.760 behind everything from a tour driven oscar bait such as 0:01:58.840 --> 0:02:02.680 uncut Gems to Theman Award winning hit Beef. It's the 0:02:02.720 --> 0:02:03.840 BusinessWeek cover story. 0:02:03.920 --> 0:02:05.880 All of that to come. We begin with the NonStop 0:02:06.000 --> 0:02:08.799 US economic data this week, and in particular the report 0:02:08.840 --> 0:02:10.760 that was the big one and the latest read on 0:02:10.880 --> 0:02:14.200 US inflation, which also happens to be the Fed's preferred 0:02:14.240 --> 0:02:18.000 inflation gauge. We're talking about the core Personal Conception Expenditures 0:02:18.040 --> 0:02:21.079 gauge or CORE PCE, which increased by the most in 0:02:21.120 --> 0:02:21.480 a year. 0:02:21.919 --> 0:02:24.799 For more, we checked in with Bloomberg News International Economics 0:02:24.800 --> 0:02:26.840 and Policy correspondent Michael McKee. 0:02:27.120 --> 0:02:30.960 The sigh of relief was it wasn't worse. The numbers 0:02:31.000 --> 0:02:33.400 came in on a month over month basis higher than 0:02:33.440 --> 0:02:36.480 they had in previous months. The core rate was up 0:02:36.520 --> 0:02:38.640 on a month over month basis four tenths, which was 0:02:38.680 --> 0:02:41.400 the highest in a year. And it sounds terrible, but 0:02:41.800 --> 0:02:44.240 because of base effects in the progress they've made on 0:02:44.280 --> 0:02:47.560 disinflation on the year over year basis, we continued to 0:02:47.600 --> 0:02:51.079 see the PCE and the CORE go down, and that's 0:02:51.080 --> 0:02:53.080 what people want to see, because that's what the Fed 0:02:53.160 --> 0:02:56.840 wants to see. We're still a ways from two percent 0:02:57.320 --> 0:02:59.960 if you're using CORE as sort of your measuring stick, 0:03:00.800 --> 0:03:03.760 at two point eight percent, but there was progress and 0:03:03.800 --> 0:03:05.120 the economy is not doing badly. 0:03:05.160 --> 0:03:05.440 People. 0:03:05.600 --> 0:03:10.160 What personal income went up one percent and wages still 0:03:10.160 --> 0:03:12.360 went up four tents on a percent, which is healthy. 0:03:13.360 --> 0:03:15.640 Spending was a little weak, but remember there was a 0:03:15.639 --> 0:03:18.120 lot of storms in January, people didn't go out. We 0:03:18.160 --> 0:03:21.400 know they didn't buy cars and things like that. So overall, 0:03:21.800 --> 0:03:26.280 this is the Goldilocks soft landing story continues. 0:03:25.840 --> 0:03:27.040 So break up in the Champagne. 0:03:27.040 --> 0:03:29.240 In other words, I knew you'd get around it. 0:03:29.840 --> 0:03:33.000 So Mike remind us why this is the Fed's preferred 0:03:33.040 --> 0:03:36.160 measure of inflation. Why do we care so much about 0:03:36.200 --> 0:03:37.720 pc and over CPI. 0:03:37.840 --> 0:03:41.560 For well, basically, the PCE is a bit broader, but 0:03:41.640 --> 0:03:45.000 it also is a little bit more reflective of what 0:03:45.080 --> 0:03:49.240 people are spending on. It includes a lot of imputed data, 0:03:49.320 --> 0:03:53.560 which is data that they try to figure out by 0:03:53.600 --> 0:03:56.920 measuring parts of the economy rather than just prices, because 0:03:57.160 --> 0:04:02.480 they don't have prices on things like financial portfolio management 0:04:02.640 --> 0:04:05.480 was one of the biggest movers, up five percent of 0:04:05.520 --> 0:04:07.800 the month because the markets are doing so well. So 0:04:07.840 --> 0:04:09.440 they're looking at the markets and they're looking at the 0:04:09.440 --> 0:04:11.320 gain in the markets, and they're guessing sort of what 0:04:11.360 --> 0:04:15.040 the commissions would be, etc. And the fees, and they 0:04:15.200 --> 0:04:18.080 impute a number from that, but that's not counted in 0:04:18.120 --> 0:04:24.360 the CPI. And for example, the CPI will measure what 0:04:24.440 --> 0:04:29.640 you pay for your monthly car insurance, whereas the pc 0:04:29.960 --> 0:04:34.159 will measure what you pay, and it also measures what 0:04:34.279 --> 0:04:36.560 value you get, In other words, how much will your 0:04:36.880 --> 0:04:40.039 policy pay if you're in an accident. And of course 0:04:40.279 --> 0:04:43.120 that has to keep likely going up because cars keep 0:04:43.160 --> 0:04:44.120 getting more expensive. 0:04:44.520 --> 0:04:46.400 So that's the kind. 0:04:46.279 --> 0:04:48.760 Of thing that's the difference between them, and so the 0:04:48.800 --> 0:04:52.239 FED just prefers it. They normally don't run very far apart, 0:04:52.320 --> 0:04:54.880 but they have been running far apart over the last year. 0:04:55.120 --> 0:04:55.280 Well. 0:04:55.320 --> 0:04:58.080 As an economist, I mean, what do you trust as 0:04:58.120 --> 0:05:00.840 really kind of telling the true picture of of inflation, 0:05:00.880 --> 0:05:02.039 Because I do feel like there's a bit of a 0:05:02.040 --> 0:05:03.960 debate when it comes to some of the economic statistics 0:05:03.960 --> 0:05:06.280 that are out there about whether they not, you know, 0:05:06.440 --> 0:05:09.360 accurately reflect what's going on in the US economy. How 0:05:09.360 --> 0:05:10.760 do you see because I feel like, Mike, you're so 0:05:10.760 --> 0:05:13.760 good at kind of pulling in yes, government statistics, real words, 0:05:13.960 --> 0:05:15.280 real world statistics. 0:05:15.440 --> 0:05:18.400 There are so many different measures, and even though there's 0:05:18.440 --> 0:05:22.000 a wedge between the PCE and CPI, it's about one 0:05:22.080 --> 0:05:25.280 hundred basis points now, it's normally somewhere between thirty five 0:05:25.320 --> 0:05:29.440 and fifty, so it's not very wide. And really we 0:05:29.520 --> 0:05:33.560 can't say, given all the different measures, exactly what inflation 0:05:33.839 --> 0:05:38.120 is so the CPI has the most categories, it's the 0:05:38.160 --> 0:05:42.880 most up to date. The PPI and the CPI feed 0:05:42.920 --> 0:05:46.480 into PCE, so PCE depends on CPI. So I guess 0:05:46.480 --> 0:05:48.880 I would go with the CPI. That doesn't mean I 0:05:48.880 --> 0:05:52.479 think that three point nine percent is where we should be. 0:05:53.720 --> 0:05:55.760 There's a lot of talk of the FED maybe changing 0:05:55.800 --> 0:05:59.279 its inflation target to maybe three percent or something like that, 0:05:59.600 --> 0:06:02.479 but overall maybe the CPI. 0:06:03.200 --> 0:06:04.480 You know, that's just talk. 0:06:05.160 --> 0:06:06.800 The FED has denied that they're going to do that 0:06:06.839 --> 0:06:08.200 many many times over the last year. 0:06:08.240 --> 0:06:10.200 Well, they're denying it now because if you do it 0:06:10.240 --> 0:06:12.479 now when you have you're moving the euation, You're moving 0:06:12.520 --> 0:06:13.080 the goalposts. 0:06:13.200 --> 0:06:13.320 Right. 0:06:13.760 --> 0:06:16.320 They do now have a procedure so that every five 0:06:16.400 --> 0:06:19.440 years they look at their monetary policy framework, and that's 0:06:19.440 --> 0:06:20.920 coming up in twenty twenty five. 0:06:21.000 --> 0:06:23.040 So do you think that given what we've had we've 0:06:23.080 --> 0:06:26.280 seen over the last eighteen months with the data MIC, 0:06:26.680 --> 0:06:29.880 that they would consider actually changing it when there is 0:06:29.920 --> 0:06:30.720 a time to do that. 0:06:30.839 --> 0:06:34.840 I think they would. Two percent was never a number 0:06:34.880 --> 0:06:37.800 written in stone. It was what the New Zealand Central 0:06:37.839 --> 0:06:41.159 Bank adopted number of years ago, and it sort of 0:06:41.160 --> 0:06:44.080 became a de facto standard, and the idea was basically, 0:06:44.120 --> 0:06:47.839 what's not too high and not too low, because if 0:06:47.880 --> 0:06:51.680 you're too number, you have no way to lower rates 0:06:51.720 --> 0:06:56.320 if you're at zero, and if you're too high, then 0:06:56.360 --> 0:06:59.000 people get mad because you have inflation. So they picked 0:06:59.000 --> 0:07:02.159 two percent they could eat usually pick three percent, and 0:07:02.360 --> 0:07:04.440 people have been urging that on them for years, so 0:07:04.480 --> 0:07:06.600 it's something I'm sure they'll talk about, all right. 0:07:06.720 --> 0:07:09.280 So the data this week, we all were kind of 0:07:09.400 --> 0:07:11.080 leading up, I feel like in a big way to 0:07:11.720 --> 0:07:15.800 this Thursday report of pc core and the read on 0:07:15.840 --> 0:07:19.000 inflation that the Fed follows the narrative if you put 0:07:19.000 --> 0:07:21.160 it all together, including some of the other data points, 0:07:21.240 --> 0:07:24.240 is there one clear narrative or a bit of a 0:07:24.280 --> 0:07:25.000 mixed narrative. 0:07:25.960 --> 0:07:28.520 It's a mostly clear narrative that the economy is doing well. 0:07:28.640 --> 0:07:31.240 Interesting number we haven't mentioned and didn't get a lot 0:07:31.240 --> 0:07:34.040 of attention because of the PCEE was pending home sales 0:07:34.080 --> 0:07:37.240 really tanked in the last month, and that's maybe a 0:07:37.320 --> 0:07:41.400 sign that we're seeing the higher mortgage rates bite, which 0:07:41.480 --> 0:07:45.800 is despite Elizabeth Warm's desires, that's what the FED wants 0:07:45.840 --> 0:07:49.600 to see. So we seem to be doing and getting 0:07:49.920 --> 0:07:52.120 what the FED is looking for. 0:07:52.560 --> 0:07:56.360 That was Bloomberg News International Economics and Policy correspondent Michael McKee, 0:07:56.440 --> 0:07:59.520 and staying with the US economy data great for reading 0:07:59.520 --> 0:08:02.360 the temperature on how the economy and consumers are doing. 0:08:02.800 --> 0:08:05.480 So too, is going straight to the CEOs of companies 0:08:05.600 --> 0:08:07.760 that sell directly to US shoppers. 0:08:07.840 --> 0:08:09.960 Yeah, we get great reads right and what's going on? 0:08:09.960 --> 0:08:13.080 One such company as Whirlpool, which saw explosive demand as 0:08:13.080 --> 0:08:14.920 you know, during the pandemic when we were all stuck 0:08:14.920 --> 0:08:17.440 at home, and has really been going through a reset 0:08:17.520 --> 0:08:20.200 like so many other consumer facing companies as the world 0:08:20.280 --> 0:08:23.120 has moved back to pre pandemic levels of activity and 0:08:23.200 --> 0:08:25.080 wanting to kind of get out and do things. 0:08:25.280 --> 0:08:30.040 Mark Bitzer is the chairman, president, CEO and COO of Whirlpool. 0:08:30.400 --> 0:08:32.440 We asked him how the consumer is doing following this 0:08:32.520 --> 0:08:35.360 week's US consumer confidence which decreased for the first time 0:08:35.360 --> 0:08:38.760 in four months, as Americans used deteriorated about the outlook 0:08:38.760 --> 0:08:41.839 for the economy, the job market, and financial conditions. 0:08:41.960 --> 0:08:46.079 I mean, obviously, our purchase, like endurable appliance, is heavily 0:08:46.160 --> 0:08:49.880 driven by consumer confidence and housing general. So what we 0:08:50.000 --> 0:08:53.360 did see already the last here is that actually our 0:08:53.440 --> 0:08:57.400 replacement side of a business where people just replace a 0:08:57.440 --> 0:08:59.840 product under the rest. But it has been very strong 0:09:00.120 --> 0:09:03.640 even up. But the discretionary side we actually already lost 0:09:03.720 --> 0:09:07.880 year saw coming back coming down large as a result 0:09:07.880 --> 0:09:10.920 of if interest rates rising, housing kind of being very 0:09:10.920 --> 0:09:14.240 slow and slowing down throughout the year. That ultimately depressed 0:09:14.480 --> 0:09:15.520 the discretionary side. 0:09:15.559 --> 0:09:16.480 So what you're. 0:09:16.320 --> 0:09:20.120 Describing we saw already last year, and we probably I 0:09:20.160 --> 0:09:22.319 mean in our earnings call also we said it's probably 0:09:22.360 --> 0:09:23.920 going to be around us, certainly for Q one and 0:09:24.000 --> 0:09:26.680 Q two, and then we need to see what happens 0:09:26.679 --> 0:09:29.120 if interest and mortgage rates and everything else. But I 0:09:29.120 --> 0:09:31.160 think where we need to be a catalyst from wet 0:09:31.240 --> 0:09:32.720 side to really lift consumer seentering. 0:09:32.920 --> 0:09:34.800 Well, what would that catalyst be, Mark, Like, what are 0:09:34.800 --> 0:09:36.720 you looking for at the perch of worldpool? 0:09:37.000 --> 0:09:39.320 Yeah, I mean in particularly our North American business, which 0:09:39.400 --> 0:09:42.320 you know, there's a strong correlation with existing home sales 0:09:42.360 --> 0:09:43.560 and housing market in general. 0:09:44.720 --> 0:09:46.240 We always we shouldn't forget that. 0:09:46.440 --> 0:09:49.559 You know, the average mortgage rates which are right now 0:09:49.559 --> 0:09:52.400 locked in with homeowners is three point seven percent. So 0:09:52.440 --> 0:09:55.000 I think to really bring supply on the market and 0:09:55.040 --> 0:09:57.880 get people ready to sell their existing homes. I think 0:09:57.880 --> 0:09:59.880 you need to see mortgage rates, you know, a certain 0:10:00.040 --> 0:10:01.840 those six percent, probably more like five and a half 0:10:01.840 --> 0:10:05.240 percent to really kind of unfreeze the market again, because 0:10:05.280 --> 0:10:07.120 you know what we saw the last two years is 0:10:07.640 --> 0:10:09.800 the market pretty much dropped from six point four million 0:10:09.840 --> 0:10:12.760 existing home sales to three point eight That's a dramatic drop. 0:10:13.640 --> 0:10:17.480 We call it a shot freeze. And it takes that momentum. 0:10:16.960 --> 0:10:19.120 Of a catalyst on the interest rates side to kind 0:10:19.120 --> 0:10:21.960 of unfreeze a fall the market. And that's what we 0:10:22.040 --> 0:10:23.920 I mean, we don't see it short term. I mean, 0:10:24.080 --> 0:10:26.080 and of course, well everybody's got to watch what the 0:10:26.120 --> 0:10:29.560 FED will do, but I think over time it will 0:10:29.640 --> 0:10:31.400 kind of be a key catalyst for growth. 0:10:31.440 --> 0:10:34.480 So make that connection for our investor audience about that 0:10:34.559 --> 0:10:37.400 key catalyst here and why a person who is sitting 0:10:37.440 --> 0:10:39.520 at a three point five US three point seventy five 0:10:39.520 --> 0:10:42.559 percent mortgage won't necessarily go out and buy a new 0:10:42.559 --> 0:10:45.000 appliance from Whirlpool. But if they were to sell that 0:10:45.120 --> 0:10:48.000 home to somebody at a favorable mortgage rate, that person 0:10:48.040 --> 0:10:50.960 moving in would then buy a new appliance from Whirlpool. 0:10:50.960 --> 0:10:53.160 Why would't the person who lives there now end up 0:10:53.160 --> 0:10:54.679 buying it if it actually need if they actually need 0:10:54.679 --> 0:10:55.839 a new washer dryer. 0:10:55.760 --> 0:10:57.360 Yeah, so so again I mean if it just needs 0:10:57.360 --> 0:10:58.839 a new wash and dryer, we would see a better 0:10:58.880 --> 0:11:01.280 a replacement market. And you know it's again if you 0:11:01.320 --> 0:11:03.120 break down and let me zoom out a little bit, 0:11:03.160 --> 0:11:06.520 break down our fundamental demand. Our demand has, replacement has 0:11:06.600 --> 0:11:09.680 discretionary and new homes. These are basically our fundamental free demand. 0:11:09.760 --> 0:11:12.719 Driver replacement is very strong because of what we've seen 0:11:12.720 --> 0:11:16.280 in post COVID and of certainly during COVID, people spend 0:11:16.320 --> 0:11:19.040 more time at home, so the appliant's usage is higher. 0:11:19.400 --> 0:11:22.400 High usage rates drive early replacements. So that side of 0:11:22.440 --> 0:11:25.680 business is very strong we see by today. But what 0:11:25.840 --> 0:11:28.640 is right now soft is the discretionary side, which particularly 0:11:28.679 --> 0:11:32.040 comes with existing home scenes and over many decades, what 0:11:32.120 --> 0:11:35.640 we typically saw kind of the month before and the 0:11:35.679 --> 0:11:38.440 month after people buying a new home or existing home. 0:11:38.679 --> 0:11:39.400 That's when you have. 0:11:39.400 --> 0:11:43.000 Increased purchase and appliance and everything. So because of what 0:11:43.000 --> 0:11:45.360 we typically see were people moving in, one of the 0:11:45.400 --> 0:11:47.480 first things we might do is replace the kitchen or 0:11:47.480 --> 0:11:50.319 at least replace the appliances, so that part of the 0:11:50.360 --> 0:11:53.440 demand is today missing And again it's think about yourself. 0:11:53.440 --> 0:11:55.240 If you're a homeowner, you're locked in at three point 0:11:55.240 --> 0:11:58.959 seven rate. I mean, it's are you willing to kind 0:11:58.960 --> 0:12:01.840 of refine and buy a new home mortgage rate right 0:12:01.840 --> 0:12:03.560 now on six point eight or six point nine percent? 0:12:04.400 --> 0:12:06.640 The chances I know, okayts right now what we see 0:12:06.640 --> 0:12:08.280 in the market, and you can't blame a consumer for 0:12:08.360 --> 0:12:08.880 that mark. 0:12:08.880 --> 0:12:10.720 I feel like you're describing me. You know, we bought 0:12:10.720 --> 0:12:13.000 a new hot water heater because we had to. We 0:12:13.040 --> 0:12:16.360 didn't have a choice, right that was replacement. We thought 0:12:16.360 --> 0:12:19.079 about maybe purchasing something else new that we didn't need 0:12:19.160 --> 0:12:21.360 to end discretion, and we said, you know, we're going 0:12:21.440 --> 0:12:23.640 to not do it right now. So like, I totally 0:12:23.640 --> 0:12:27.000 get what you say is going on. Having said that, 0:12:27.080 --> 0:12:30.040 then let's talk a little bit about your investor day 0:12:30.400 --> 0:12:32.840 and some of what you're doing. Our team writing up 0:12:32.920 --> 0:12:35.800 how you guys are going to focus or are focusing 0:12:35.840 --> 0:12:38.360 on smaller appliances. It seems to be maybe what consumers 0:12:38.360 --> 0:12:40.960 are willing to spend money on the margins are better. 0:12:40.960 --> 0:12:42.679 Talk to us little bit about that strategy and how 0:12:42.679 --> 0:12:44.760 it can move the needle, especially when it comes to 0:12:44.760 --> 0:12:46.240 top line growth and margin growth. 0:12:47.040 --> 0:12:49.560 Yeah, so so Carol, what we what we spoke about is, 0:12:49.720 --> 0:12:51.800 you know, as a company, we've been in a multi 0:12:51.880 --> 0:12:54.480 year what we call portfolio transformation and what base you 0:12:54.559 --> 0:12:58.000 men do is over past decades we've had a fairly 0:12:58.200 --> 0:13:02.360 dispersed global business. We were from China to Chile, in 0:13:02.400 --> 0:13:05.360 all places of the world. And what we've decided on 0:13:05.400 --> 0:13:07.520 the major's business, but we want to focus on the 0:13:07.559 --> 0:13:11.400 markets where we have an undeniable strong position, which offer 0:13:11.480 --> 0:13:14.439 us the America's North America, South America. We have good 0:13:14.440 --> 0:13:16.440 business in India and that's what we'll focus on. So 0:13:16.559 --> 0:13:19.520 we over the years, we sold off the majority of 0:13:19.520 --> 0:13:22.319 our China business, we sold off Russia, and right now 0:13:22.320 --> 0:13:24.240 we're just in the kind of final weeks before we 0:13:24.240 --> 0:13:26.720 can close our European transaction where we would only have 0:13:26.920 --> 0:13:29.640 a smaller portion of a business. So with that we 0:13:29.720 --> 0:13:33.520 have a fundamentally different business portfolio. One essentially of it's 0:13:33.640 --> 0:13:37.120 the major business in America's in India and we have 0:13:37.200 --> 0:13:40.320 our small domestic appliance business that was in some ways 0:13:40.320 --> 0:13:42.000 we could describe it as a hidden gem from the 0:13:42.040 --> 0:13:45.320 past because it was hidden in a segmentaryport results of 0:13:45.360 --> 0:13:47.840 all the different regions, but if you look at that, 0:13:47.840 --> 0:13:52.200 that is probably it's our strongest brands. It has passion 0:13:52.400 --> 0:13:56.280 across all demographics and age groups, and we feel we 0:13:56.280 --> 0:13:59.400 have a license of robot business certainly from a consumer perspective, 0:14:00.400 --> 0:14:02.400 and a lot of our resources going forward will go 0:14:02.440 --> 0:14:04.840 into our small domestic appliance business because it's certain one 0:14:04.840 --> 0:14:09.240 which we love, strong margins and an exceptionally strong consumer precision. 0:14:09.440 --> 0:14:13.360 How small what percentages? Is the smaller appliance business mark 0:14:13.679 --> 0:14:16.560 right now in terms of revenues and how big do 0:14:16.559 --> 0:14:18.440 you think it could become if we look at the 0:14:18.679 --> 0:14:19.880 kind of revenue pie? 0:14:20.640 --> 0:14:23.320 Yeah, so today it is quote unquote only a one 0:14:23.320 --> 0:14:26.680 billion dollar business, but it has fifty and ebit margins, 0:14:26.680 --> 0:14:30.640 so it's a very marg attractive business. But you know, 0:14:30.760 --> 0:14:33.960 our presence in if you look at the categories of 0:14:34.000 --> 0:14:37.200 small domestic clianes, it's largely small. It's large stamp mixers 0:14:37.240 --> 0:14:40.120 and associated products. But we have so much opportunity to 0:14:40.120 --> 0:14:42.280 grow in coffee and we just announced that day also 0:14:42.320 --> 0:14:45.160 we will bring a fully automatic expresso maker in maybe 0:14:45.160 --> 0:14:48.440 this year. In other parts of business, so we strongly 0:14:48.480 --> 0:14:50.800 believers ample opportunity to grow at business. 0:14:51.120 --> 0:14:52.880 Hey, I want to talk a little bit about the 0:14:53.440 --> 0:14:55.960 cost cutting that you're targeting right now across the different 0:14:56.280 --> 0:14:59.840 business lines. After incurring significant increases back in twenty twenty 0:14:59.840 --> 0:15:02.840 two and in twenty twenty one, mark where within the 0:15:02.880 --> 0:15:04.960 business are you finding these savings. 0:15:06.040 --> 0:15:07.800 Yeah, So, first of all, to put it in context 0:15:08.080 --> 0:15:12.080 is you know, in the COVID years, we basically had 0:15:12.120 --> 0:15:15.000 more two and a half billion of additional costs. That 0:15:15.200 --> 0:15:17.600 was a big inflation with not only raw materials in 0:15:17.640 --> 0:15:21.040 all parts of a business. Last year we clawed back 0:15:21.040 --> 0:15:23.720 eight hundred million of that and we see we're targeting 0:15:23.800 --> 0:15:26.240 number five hundred million, so we're not even fully back 0:15:26.280 --> 0:15:29.800 to pre COVID cost levels. The opportunities which we see 0:15:29.880 --> 0:15:32.280 this year, and that's a little bit different from last year. 0:15:32.320 --> 0:15:34.560 We don't see a lot of tailwinds from raw materials, 0:15:34.560 --> 0:15:36.840 so we pretty much expect steel and oil and everything 0:15:36.920 --> 0:15:39.440 else to remain rather stable for us. But we do 0:15:39.480 --> 0:15:42.600 see opportunity on cost takeout on products. We do see 0:15:42.640 --> 0:15:45.560 further opportunities to reduce logistic costs because it's it's a 0:15:45.600 --> 0:15:48.760 massive cost element for us because we're shipping big, bulky 0:15:48.800 --> 0:15:51.680 products and just drive a lot of cost and logistics side, 0:15:52.240 --> 0:15:56.359 but we're also looking at our overall overhead and infrastructure. 0:15:56.360 --> 0:15:58.680 And what I mean with that is, you know, global 0:15:58.680 --> 0:16:02.400 business required a fairly complex global organization. If we're more 0:16:02.440 --> 0:16:05.160 focus on our Americas, we have an opportunity to radically 0:16:05.200 --> 0:16:07.880 also simplify how we organize and that also drive some 0:16:07.920 --> 0:16:08.880 cost savings. 0:16:09.640 --> 0:16:11.320 I do wonder too, looking at your balance sheet. We 0:16:11.360 --> 0:16:14.040 have this really great story at Bloomberg Exclusive today. It's 0:16:14.040 --> 0:16:16.640 among our most read about how companies who have been 0:16:16.640 --> 0:16:20.720 so addicted to debt are now seeking equity, so thinking 0:16:20.760 --> 0:16:24.600 about selling shares rather than tapping the debt markets if 0:16:24.600 --> 0:16:27.600 they need money. You, guys, what's your plan to do 0:16:27.640 --> 0:16:30.680 you leverage your balance sheet specifically, which has grown as 0:16:30.720 --> 0:16:33.880 you've done some acquisitions. And I do wonder if investors 0:16:33.920 --> 0:16:36.320 can kind of still count on the dividend going forward, 0:16:36.360 --> 0:16:38.600 the sustainability of the dividend market. And just got about 0:16:38.600 --> 0:16:39.680 a minute or so left. 0:16:39.880 --> 0:16:43.320 Yes, so let me first start start straight away from dividend. 0:16:43.400 --> 0:16:46.040 We paid our dividend for sixty nine years sixty nine 0:16:47.080 --> 0:16:48.880 and in none of the sixty nine years we ever 0:16:48.880 --> 0:16:53.040 had a dividend reduction, actually out of the last of 0:16:53.080 --> 0:16:54.760 the last ten years, and eight years we had a 0:16:54.800 --> 0:16:55.960 dividend increase. 0:16:55.640 --> 0:16:57.080 So we we are. 0:16:57.120 --> 0:17:00.600 So that's yes, that is well, of course that every 0:17:00.600 --> 0:17:03.320 single dividend payment requires a board approval, but I would 0:17:03.400 --> 0:17:05.680 I would say this statement publicly if I don't feel 0:17:05.680 --> 0:17:07.360 the board feels very strong about it. 0:17:07.800 --> 0:17:10.240 So we are. We strong believe in dividend. We have 0:17:10.280 --> 0:17:11.560 a funds to pay the dividend, and. 0:17:13.040 --> 0:17:15.639 More importantly, we have a basic guideline internal where we 0:17:15.680 --> 0:17:18.439 say over the last three years, we look at the 0:17:18.480 --> 0:17:20.880 average EPs and we took pay out thirty thirty five 0:17:20.880 --> 0:17:22.560 percent of at the EPs over the last three years 0:17:22.600 --> 0:17:25.679 and we're pretty much on track on this one. So 0:17:25.680 --> 0:17:27.760 so more to a balance sheet is first of all, 0:17:27.800 --> 0:17:29.640 keeping our in mind, we have one point six billion 0:17:29.680 --> 0:17:33.320 dollars for cash on hand, that's public number. So what 0:17:33.440 --> 0:17:35.560 we do want to do, and you know, we knew 0:17:35.600 --> 0:17:39.400 exactly when we acquired the insincorator business in Wisconsin, which 0:17:39.480 --> 0:17:42.120 is usually margin attractive of a strong position. We knew 0:17:42.160 --> 0:17:44.119 of course it's it's a heavily ODN boundar sheet. And 0:17:44.119 --> 0:17:47.119 with two or three years to kind of digest that 0:17:47.200 --> 0:17:50.040 acquisition related that we paid last year down five on 0:17:50.160 --> 0:17:52.760 ared million, we'll pay down this year five on a million. 0:17:53.119 --> 0:17:55.359 So what we guided today in midmester today is kind 0:17:55.400 --> 0:17:57.560 of yeah, by twenty six we want to be roughly 0:17:57.600 --> 0:18:01.000 in a two times that leverage. We feel I'm a 0:18:01.040 --> 0:18:03.520 right path and on the risk if you want to 0:18:03.520 --> 0:18:06.760 say so, and us with boundary to whatever. 0:18:06.800 --> 0:18:07.600 It's what we want to have it. 0:18:07.880 --> 0:18:10.199 So appreciate it covered so much ground, as you always do. 0:18:10.280 --> 0:18:13.640 Mark bitzer Be well, look forward to always our next conversation, 0:18:13.800 --> 0:18:14.880 Chief executive Officer. 0:18:14.640 --> 0:18:22.879 At World Quoth. You're listening to the Bloomberg Business Week podcast. 0:18:23.080 --> 0:18:26.040 Catch us live weekday afternoons from two to five pm 0:18:26.080 --> 0:18:28.800 Eastern Listen on Apple car Play and then brought auto 0:18:28.880 --> 0:18:32.720 with a Bloomberg Business app, or watch us Live on YouTube. 0:18:33.560 --> 0:18:36.359 We did get a batch of economic news earlier, but 0:18:36.480 --> 0:18:40.359 one report that we wanted to check out was what 0:18:40.400 --> 0:18:42.760 happened with sales that previously owned US homes rising in 0:18:42.840 --> 0:18:45.520 January by the most and nearly a year. Buyer's taking 0:18:45.560 --> 0:18:48.800 advantage of lower mortgage rates at the start of the 0:18:48.840 --> 0:18:50.000 new year of twenty twenty four. 0:18:50.040 --> 0:18:52.480 Okay, at the start of the year, because just yesterday 0:18:52.520 --> 0:18:55.320 we reported how US mortgage rates jumped above seven percent 0:18:55.640 --> 0:18:58.840 for the first time since early December that delta blow 0:18:58.880 --> 0:19:02.320 to the housing markets and recovery. So the rates issue 0:19:02.400 --> 0:19:03.920 is certainly sticking with us. 0:19:04.040 --> 0:19:06.480 Yeah, So let's get to it and what it all means. 0:19:06.560 --> 0:19:09.480 Ka Kaminski is chief operating officer of the privately owned 0:19:09.840 --> 0:19:13.560 and asset and real estate investment company. It is Walton Global. 0:19:13.600 --> 0:19:16.159 They've got about three point six billion in assets and 0:19:16.200 --> 0:19:18.800 over ninety four thousand acres under management here in the 0:19:18.840 --> 0:19:22.520 United States. She joins us. Kate does from Scottsdale, Arizona. Kate, 0:19:22.680 --> 0:19:25.080 Welcome to Bloomberg Business Week. Nice to have you here 0:19:25.080 --> 0:19:27.680 with Tim and me. How are you and talk to 0:19:27.800 --> 0:19:30.840 us about your world, because you guys do commercial, industrial, 0:19:31.240 --> 0:19:35.480 residential real estate. Give us kind of an overview of 0:19:35.560 --> 0:19:38.320 how things are going better than the last year, better 0:19:38.359 --> 0:19:40.400 than the last six months. What can you tell us? 0:19:40.720 --> 0:19:44.600 Yeah, we're pretty excited about twenty twenty four. Here at Walton. 0:19:44.880 --> 0:19:48.439 We really focus on the land space, where we're buying 0:19:48.560 --> 0:19:51.520 land in the path of growth, predominantly to sell to 0:19:52.480 --> 0:19:58.040 public new homebuilders. But we also, as you noted, have industrial, commercial, 0:19:58.440 --> 0:20:01.840 and retail holdings. So the numbers that came out today, 0:20:02.240 --> 0:20:05.399 you know, really important in terms of what we're seeing 0:20:05.600 --> 0:20:08.240 in the resale market, which has a direct impact on 0:20:08.840 --> 0:20:12.880 the new home building space, which is where we focus 0:20:13.720 --> 0:20:19.600 with with the resale figures. Seeing you know, the slowest 0:20:19.680 --> 0:20:22.520 year for the last three decades in twenty twenty three, 0:20:22.560 --> 0:20:26.760 we're excited that January was finally an uptick in terms 0:20:26.880 --> 0:20:31.200 of the resale market, and you know that continued increase 0:20:31.240 --> 0:20:34.000 in value. I think we were at about five percent 0:20:34.160 --> 0:20:38.119 and in increase in existing home sale value year over years, 0:20:38.200 --> 0:20:42.600 So strong numbers on the resale market, but you know, 0:20:42.760 --> 0:20:47.440 still seeing a continued push for buyers to that that 0:20:47.560 --> 0:20:51.240 new home market because of a lot of the lock 0:20:51.320 --> 0:20:53.879 in effect that we're seeing from those mortgage rates, which, 0:20:53.960 --> 0:20:56.280 as you noted, are creeping up a bit. 0:20:56.480 --> 0:21:00.200 He Ky, how would you characterize demand from the home 0:21:00.240 --> 0:21:03.680 builders right now? Because you guys have property all over 0:21:03.840 --> 0:21:06.359 the United States. You've got a lot in Colorado, a 0:21:06.359 --> 0:21:10.760 lot in California, Oklahoma, Texas, Florida, Georgia. How would you 0:21:10.920 --> 0:21:14.000 characterize the demand that you're seeing from home builders who 0:21:14.160 --> 0:21:16.320 want to buy that land and then build homes on it. 0:21:16.560 --> 0:21:20.159 I mean, home builder sentiment is up. I think it 0:21:20.280 --> 0:21:27.080 was at forty four percent. We're seeing more transactions go 0:21:27.160 --> 0:21:32.600 under contract right now than we did is certainly a 0:21:32.680 --> 0:21:35.480 year ago, which twenty twenty three was a good year. 0:21:35.520 --> 0:21:38.399 Here at Walton, we've got around two point eight billion 0:21:38.480 --> 0:21:43.760 in deal volume that's at various stages, hoping to move 0:21:43.800 --> 0:21:48.240 that towards closing. So we're still seeing a lot of demand, 0:21:49.040 --> 0:21:53.280 but certainly builders are looking to take positions right now. 0:21:54.119 --> 0:21:57.840 Permits are up just across the board. 0:21:58.000 --> 0:22:02.760 We've seen a year of month over month increases. I 0:22:02.800 --> 0:22:05.520 think right now we're sitting at just over a million 0:22:06.680 --> 0:22:10.119 units at an annualized rate, which is up thirty five 0:22:10.200 --> 0:22:14.240 percent year over year. So you know, permits showing us 0:22:14.320 --> 0:22:17.600 what we can expect for the future, what our forecasts 0:22:17.600 --> 0:22:18.400 are looking like. 0:22:18.359 --> 0:22:21.320 What's land prices look like right now, so you. 0:22:21.280 --> 0:22:26.200 Know, like everything else, we continue to see that increase, 0:22:27.000 --> 0:22:32.680 but it's remaining somewhat consistent and where we're really seeing 0:22:32.720 --> 0:22:36.359 a lot of our negotiations take places working with builders 0:22:36.400 --> 0:22:40.280 on understanding what development costs are going to be, timelines 0:22:40.400 --> 0:22:45.520 and working to ensure that everyone's margins are really remaining 0:22:45.560 --> 0:22:47.800 consistent and hitting those targets. 0:22:47.359 --> 0:22:47.960 That they're looking for. 0:22:48.280 --> 0:22:51.040 But for you, for the acquisition costs, our land price 0:22:51.119 --> 0:22:53.439 is going up, and I'm curious if there's I'm assuming 0:22:53.440 --> 0:22:55.639 there are geographical differences. I mean, I know, I've got 0:22:55.640 --> 0:22:57.679 a lot of family down south, and it's kind of 0:22:57.720 --> 0:22:59.840 on fire right now. So if you can give us 0:22:59.840 --> 0:23:04.160 some context as you look across the United States where 0:23:04.200 --> 0:23:07.440 you're seeing land values go up a lot, because that's 0:23:07.520 --> 0:23:08.880 that's your bread and butter. 0:23:08.760 --> 0:23:14.520 Right Yeah, you know, our assets are really focused in 0:23:14.560 --> 0:23:18.080 the southern half of the United States. Uh. If if 0:23:18.080 --> 0:23:21.520 I were to pull our acquisitions team or or talk 0:23:21.560 --> 0:23:24.600 to any of the builders, I mean, land prices are 0:23:24.600 --> 0:23:27.000 going up right across the board, and it's it's getting 0:23:28.000 --> 0:23:31.359 more and more difficult to find to find any deals. 0:23:31.400 --> 0:23:35.200 I would say they're they're few and far between right now. 0:23:35.960 --> 0:23:42.000 The markets that we're really focusing on continue to be Florida, Texas, Georgia, 0:23:42.040 --> 0:23:44.520 and the Carolinas and and then you know, of course 0:23:45.320 --> 0:23:49.240 in in the Southwest and West as well. But but 0:23:49.760 --> 0:23:53.199 definitely seeing increases and land values, and a lot of 0:23:53.200 --> 0:23:55.480 that has to do with the lack of supply of 0:23:55.680 --> 0:24:00.720 development ready land. We continue to see significant challengees right 0:24:00.760 --> 0:24:04.720 across the country as it retains to land getting approved 0:24:04.800 --> 0:24:09.359 for development. This is a challenge that that builders and 0:24:09.800 --> 0:24:13.080 landowners are basing across the board as we have more 0:24:13.200 --> 0:24:19.160 municipalities really restricting especially that that identity residential. 0:24:19.240 --> 0:24:23.040 You're listening to the Bloomberg Business podcast Country listening live 0:24:23.160 --> 0:24:28.520 each week starting at two pm Eastern. Yeah, we could listen. 0:24:28.960 --> 0:24:31.760 You can also listen live on Amazon Alexa from our 0:24:31.800 --> 0:24:33.359 flagship New York State and. 0:24:34.920 --> 0:24:39.840 Bloomberg as sort of a middle person in this market 0:24:39.920 --> 0:24:42.239 because perhaps some of them are asking themselves, well, why 0:24:42.400 --> 0:24:46.440 why doesn't the landowner go directly to the developer h 0:24:46.560 --> 0:24:49.199 and actually make more money when they sell that. What 0:24:49.280 --> 0:24:50.800 is the what's the value that you bring to the 0:24:50.800 --> 0:24:53.639 transaction by holding onto the land from the landowner to 0:24:53.720 --> 0:24:54.320 the developer. 0:24:54.600 --> 0:24:59.359 Well, that's a great question, and our entire business is 0:24:59.800 --> 0:25:04.680 really focused right now on feeding builders. You know, demand 0:25:04.800 --> 0:25:08.359 for just in time inventory. Just in time inventory is 0:25:08.760 --> 0:25:13.560 as simple as you know builders post Great Recession where 0:25:13.720 --> 0:25:18.040 we're penalized significantly for holding long term land assets that 0:25:18.080 --> 0:25:21.160 were not income generating that they weren't going to turn 0:25:21.440 --> 0:25:25.960 in call it a two year timeframe. So Walton comes in, 0:25:26.440 --> 0:25:29.199 We buy these land assets and we sell them to 0:25:29.280 --> 0:25:32.760 builders typically you know, on a phase by phase basis 0:25:33.200 --> 0:25:36.399 over time as they're ready to take it down and 0:25:37.560 --> 0:25:39.880 start development and ultimately build a home. 0:25:40.240 --> 0:25:41.880 And so we're we're. 0:25:41.720 --> 0:25:45.040 Kind of in that land banking space for those of 0:25:45.119 --> 0:25:48.360 you familiar with the term, which is something that we're 0:25:48.359 --> 0:25:51.200 seeing right across the board. Every builder is really being 0:25:51.280 --> 0:25:54.480 forced to utilize that tool in their toolbox, right. 0:25:54.400 --> 0:25:56.040 So it's not kind of stuck on their balance sheet, 0:25:56.119 --> 0:25:58.720 especially if there's any kind of downturn. Kate got thirty 0:25:58.720 --> 0:26:01.640 seconds left here in terms of what you are seeing. 0:26:02.160 --> 0:26:05.920 Are you setting up for a US economy that's recovering, 0:26:06.119 --> 0:26:08.879 that's growing, that might have a recession, And just real 0:26:08.960 --> 0:26:10.320 quickly twenty five seconds if you. 0:26:10.320 --> 0:26:13.000 Could definitely looking at growth. I mean, if you just 0:26:13.119 --> 0:26:16.080 look at the population numbers from last year alone, I 0:26:16.080 --> 0:26:19.640 think it was the largest one year population increase in history. 0:26:20.080 --> 0:26:24.040 That plus you know, the builders continuing to buy down 0:26:24.520 --> 0:26:27.760 rates for new home buyers. I think we're going to 0:26:27.760 --> 0:26:31.320 see really strong figures in the balance of this year 0:26:31.640 --> 0:26:33.159 and in the economy in general. 0:26:33.280 --> 0:26:34.640 All Right, going to leave it on that note, Kate, 0:26:34.680 --> 0:26:37.160 thank you so much, really appreciate it. Kai Kaminski, Chief 0:26:37.160 --> 0:26:40.520 operating officer of the privately owned asset and real estate 0:26:40.560 --> 0:26:44.520 investment company Walton Global joining us from Scottsdale Arizona Homebuilders. 0:26:44.560 --> 0:26:46.680 As a group, they're up about one and a half 0:26:46.720 --> 0:26:50.920 percent here in twenty twenty four, and we're seeing yeah, 0:26:51.080 --> 0:26:53.080 them up a little bit higher as well. Today this 0:26:53.160 --> 0:26:53.760 is Bloomberg. 0:26:56.640 --> 0:27:00.920 You're listening to the Bloomberg Business Week podcast live weekday 0:27:00.960 --> 0:27:03.919 afternoons from two to five pm Eastern Listen on Apple 0:27:03.960 --> 0:27:06.560 car Play and then brout Auto with a Bloomberg Business 0:27:06.600 --> 0:27:09.120 act or want us live on YouTube. 0:27:09.480 --> 0:27:11.879 Well, this past week we learned that Leon Black sold 0:27:11.920 --> 0:27:14.919 Apollo Global Management stock for the first time, making the 0:27:15.000 --> 0:27:18.639 move almost three years after he exited the giant that 0:27:18.640 --> 0:27:20.840 made him one of Wall Street's richest billionaires. 0:27:21.160 --> 0:27:24.080 Black unloaded nearly one hundred and seventy three million dollars 0:27:24.119 --> 0:27:26.160 of stock in the New York based firm last week. 0:27:26.359 --> 0:27:29.080 That's according to a regulatory filing. It's almost two percent 0:27:29.119 --> 0:27:31.520 of his stake in the alternative asset manager, which has 0:27:31.560 --> 0:27:33.959 seen it shares rise about four hundred and eighty percent 0:27:34.320 --> 0:27:36.120 since going public thirteen years ago. 0:27:36.240 --> 0:27:39.000 So Timmy might recall, after a tumultuous period, Leon Black 0:27:39.080 --> 0:27:41.840 retired as Apollo's chief executive officer. That was in March 0:27:41.840 --> 0:27:44.679 of twenty twenty one, after three decades a top one 0:27:44.680 --> 0:27:47.440 of the world's most powerful investment firms, which is now 0:27:47.520 --> 0:27:49.560 run by fellow co founder Mark Rowan. 0:27:50.040 --> 0:27:53.080 Private equity it's a huge part of how money moves 0:27:53.119 --> 0:27:54.800 around today, which is why it was a lot of 0:27:54.800 --> 0:27:57.040 fun to catch up with Anton Dream, founder and chairman 0:27:57.080 --> 0:27:59.960 of Triago. It's a placement agent that's best known for 0:28:00.200 --> 0:28:03.960 assisting private equity firms with fundraising. Since nineteen ninety two, 0:28:04.160 --> 0:28:06.320 the company has raised and advised clients on more than 0:28:06.359 --> 0:28:09.400 fifty billion dollars in capital. That's a going to its website. 0:28:09.480 --> 0:28:11.720 Antwan joined us from our New York studios to talk 0:28:11.720 --> 0:28:14.399 about the private equity backdrop, and here's some of its 0:28:14.440 --> 0:28:17.480 outrageous predictions for PE in twenty twenty four. 0:28:17.680 --> 0:28:21.960 We are going back to reality right after qees, zero 0:28:22.040 --> 0:28:26.440 interest rates, etcetera, etcetera. We're going back to flight to quality. Mostly, 0:28:27.240 --> 0:28:30.880 it's obviously tougher out there. It's tougher for exits, as 0:28:30.920 --> 0:28:34.720 you've been saying. It's also tougher on the investment side 0:28:34.720 --> 0:28:38.040 because credit is lacking. So we are I think going 0:28:38.120 --> 0:28:41.040 to what I was what private equity was in the 0:28:41.080 --> 0:28:44.680 early nineties, right, adding value to businesses and being smart 0:28:44.720 --> 0:28:45.480 about investing. 0:28:45.840 --> 0:28:50.120 So does private equity thrive in an environment like that? 0:28:50.480 --> 0:28:53.640 Not all of it. Some of it was just you know, 0:28:53.720 --> 0:28:56.640 riding the wave, I guess, And these guys are in 0:28:56.680 --> 0:29:00.440 trouble because things are now tougher for these who know 0:29:00.520 --> 0:29:04.920 their way within the difficult environments. It's obviously great times. 0:29:05.960 --> 0:29:10.080 They can buy great assets at cheaper prices, they can 0:29:10.160 --> 0:29:14.240 have less competition, and they can think about, you know, 0:29:14.280 --> 0:29:15.240 great growth bands. 0:29:15.360 --> 0:29:17.840 How are you thinking about using leverage when it comes 0:29:17.880 --> 0:29:20.600 to buyouts right now, just because interest rates are so 0:29:20.680 --> 0:29:21.320 much higher. 0:29:21.440 --> 0:29:25.440 I think it's it's obviously part of the game, you know, leverage. 0:29:25.480 --> 0:29:28.080 It can leverage and can make people rich. It can 0:29:28.120 --> 0:29:31.360 also hurt or kill. I think you have to use 0:29:31.400 --> 0:29:35.280 it with a lot of you know, skill, and that's 0:29:35.320 --> 0:29:37.120 what most of these guys are doing right now. 0:29:37.280 --> 0:29:39.160 What do you make of though, kind of it's all 0:29:39.200 --> 0:29:42.440 about private credit right now? Do we continue to see 0:29:42.720 --> 0:29:45.040 I feel like you know, traditional Wall Street is saying, wait, 0:29:45.120 --> 0:29:48.040 I increasingly want a piece of that. How does that 0:29:48.080 --> 0:29:50.480 impact the market, How does that, you know, impact some 0:29:50.520 --> 0:29:52.560 of the conversations that you're having with the clients. 0:29:52.360 --> 0:29:52.800 You deal with. 0:29:53.120 --> 0:29:57.120 Most LPs are indeed interested in credit, then I mean 0:29:57.160 --> 0:29:59.400 you go to them, they don't really want to know 0:29:59.400 --> 0:30:02.720 about private equity, nor VC growth, et cetera. They're all 0:30:02.760 --> 0:30:05.120 interested in credit. I guess up to a point. At 0:30:05.120 --> 0:30:08.240 some point there will be probably too much available. 0:30:08.360 --> 0:30:10.840 And when you've tracing too many things. 0:30:10.880 --> 0:30:13.440 Of course, unlike everything, you know, it's supply and demand. 0:30:13.520 --> 0:30:16.040 And when there's a you know, too much supply and 0:30:16.120 --> 0:30:17.360 not enough demand, you're in. 0:30:17.400 --> 0:30:17.680 You're in. 0:30:17.800 --> 0:30:18.960 You're in. You're in trouble. 0:30:19.160 --> 0:30:20.760 When you say trouble, though, does it mean that it 0:30:20.800 --> 0:30:24.000 results in that we see assets being build up in 0:30:24.080 --> 0:30:26.560 terms of valuations, and so there's going to be fallout. 0:30:26.920 --> 0:30:29.400 Yeah, and it's going to mean less less. I mean, 0:30:29.440 --> 0:30:31.840 performance is probably going to be hit. I think it's 0:30:31.840 --> 0:30:34.280 not there yet, right, There's going to be a few 0:30:34.320 --> 0:30:37.480 years where the asset class is going to thrive. But 0:30:37.760 --> 0:30:39.680 at some point, I mean, things will go back to 0:30:39.760 --> 0:30:40.080 the mean. 0:30:40.280 --> 0:30:42.920 Hey, we should know for everybody who has not necessarily 0:30:43.000 --> 0:30:45.800 been keeping up. Hulhan Loki is acquiring Triogra. The deal 0:30:45.880 --> 0:30:48.520 is expected to close in the first half of the year. 0:30:48.760 --> 0:30:50.600 What does this look like for for your life. What 0:30:50.640 --> 0:30:52.320 does it look like for the business? I mean, this 0:30:52.400 --> 0:30:52.960 is a big deal. 0:30:53.040 --> 0:30:53.760 Do you go on vacation. 0:30:55.200 --> 0:30:58.040 I'm not yet dealing close. I'm not yet going on vacation. 0:30:58.400 --> 0:31:01.720 The deal is not closed yet. Are we have signed 0:31:01.720 --> 0:31:05.040 an agreement. We are basically done, except that we're waiting 0:31:05.080 --> 0:31:10.320 for regulatory approvals. So we're now much much stronger. I mean, 0:31:10.360 --> 0:31:11.640 we will be much much stronger. 0:31:11.640 --> 0:31:13.719 But there is something to write being bigger, like I 0:31:13.720 --> 0:31:15.760 think at some point, because there is so much competition 0:31:15.800 --> 0:31:18.280 that when you can be a house that offers a lot, 0:31:18.880 --> 0:31:21.880 there's power in that. And there's there's something about increasing 0:31:21.920 --> 0:31:23.840 your presence physically that makes it easier. 0:31:23.880 --> 0:31:27.680 Absolutely, absolutely, I think is this There's going to be 0:31:27.720 --> 0:31:31.200 more consolidiation in this space for that same reason. You 0:31:31.280 --> 0:31:33.480 want to be a giant or nothing. 0:31:33.680 --> 0:31:35.560 Right, And I'm asuming clients come to you they want 0:31:36.080 --> 0:31:37.760 a lot of things that they can play with or 0:31:37.800 --> 0:31:40.760 work with. Hey, you have shared with us your ten 0:31:40.760 --> 0:31:43.440 outrageous predictions for private equity in twenty and twenty four. 0:31:43.440 --> 0:31:44.760 What's your most outrageous? 0:31:44.760 --> 0:31:46.800 So I've seen that some of them, you know, in 0:31:46.840 --> 0:31:48.760 the past, some of them did happen. 0:31:49.480 --> 0:31:51.520 So maybe not so outrageous. 0:31:51.000 --> 0:31:54.840 You know, I guess the most outrageous is probably Karla 0:31:54.920 --> 0:31:58.560 i Can and Nelson Pels buying all the distressed funds 0:31:58.560 --> 0:32:01.880 out there. I think I put the forty billion number 0:32:01.920 --> 0:32:06.560 in there. There will be lots of fallout from funds. 0:32:07.520 --> 0:32:11.280 There has to be some some cleanup, and there aren't 0:32:11.320 --> 0:32:14.640 many players doing that already, So these guys or similar 0:32:14.960 --> 0:32:17.680 entities could probably do a lot in that space. 0:32:17.960 --> 0:32:19.920 Hey, one thing I was really surprised to see on 0:32:19.960 --> 0:32:22.920 your predictions for twenty twenty four was Amazon creating an 0:32:22.920 --> 0:32:26.640 online private equity exchange, this so called category killer. 0:32:26.680 --> 0:32:27.280 Carol and I've. 0:32:27.160 --> 0:32:29.760 Spoken about the past couple of years the idea of 0:32:29.800 --> 0:32:33.320 private equity. You know, private equity providers want to access 0:32:33.360 --> 0:32:35.320 to people's farrow one case, they want to make this thing, 0:32:35.480 --> 0:32:37.640 you know that just not just high net worth individuals 0:32:37.640 --> 0:32:40.040 have access to. What do you mean by Amazon doing this? 0:32:40.600 --> 0:32:43.680 I think the asset class needs fluidity. A few a 0:32:43.680 --> 0:32:46.840 few years ago, it wasn't really needed because the retail 0:32:47.040 --> 0:32:49.640 investors were not playing in that game. Today it's a 0:32:49.680 --> 0:32:54.360 complete different story and they I think these people especially 0:32:55.040 --> 0:32:57.640 need to know that there is a way out right. 0:32:58.040 --> 0:32:59.760 But that's one of the reasons why returns have been 0:32:59.760 --> 0:33:03.720 good is because you get that high return in exchange 0:33:03.720 --> 0:33:06.280 for locking up your money for you know, ten twelve years. 0:33:06.360 --> 0:33:08.760 Yeah, but you can still get a very decent return 0:33:08.880 --> 0:33:10.800 even if you leave the show, you know, in the 0:33:10.640 --> 0:33:14.840 in the in between, right, And that's that's an option, 0:33:14.960 --> 0:33:18.200 it's not. I guess that most people stay where they are, 0:33:18.240 --> 0:33:21.960 and ninety nine percent of the paper, the private equity paper, 0:33:22.080 --> 0:33:26.360 stays where it is. Trades account for roughly one percent. 0:33:26.920 --> 0:33:31.120 My bet is that, especially if such tool exists, you know, 0:33:31.160 --> 0:33:32.440 we may go to five percent. 0:33:32.560 --> 0:33:33.080 I love this one. 0:33:33.080 --> 0:33:36.120 They're about Michael Jordan, Serena Williams and Blue Owl consolidate 0:33:36.120 --> 0:33:39.520 private equity sports investments, I mean sports private equity. 0:33:39.520 --> 0:33:40.360 Man, it's a love affair. 0:33:40.680 --> 0:33:41.040 Prediction. 0:33:41.960 --> 0:33:46.160 Prediction like this one could happen. I don't know about 0:33:46.160 --> 0:33:48.200 the names, I don't know about the people, but but 0:33:48.280 --> 0:33:51.960 there's private equity and sports, as you said, is a 0:33:52.000 --> 0:33:53.960 love affair, and there's a lot to be done in 0:33:54.000 --> 0:33:57.400 the space. And it's still pretty you know, it's it's 0:33:57.520 --> 0:33:59.080 I mean, there's much more to be done. 0:33:59.280 --> 0:34:01.840 Thanks to Antoine, founder and chairman at Triago. 0:34:02.040 --> 0:34:05.040 Okay, so Antwan just now talking about private equities involvement. 0:34:05.080 --> 0:34:08.399 They're so called love affair with sports. Private equity also 0:34:08.480 --> 0:34:11.920 well known when it comes to content and Hollywood at 0:34:12.000 --> 0:34:15.640 least now. That brings us to the Bloomberg BusinessWeek cover story. 0:34:15.680 --> 0:34:18.680 It's about the masters of hipster cringe that now have 0:34:18.800 --> 0:34:21.200 hardware and some Wall Street cash. 0:34:21.280 --> 0:34:23.920 Love the story and in fact it is available in 0:34:23.960 --> 0:34:26.120 the new issue of Bloomberg Business Week, which is available 0:34:26.120 --> 0:34:29.880 on newstands, now online and on the Bloomberg terminal. It 0:34:29.960 --> 0:34:33.560 gets inside A twenty four, the indie film company behind 0:34:33.560 --> 0:34:36.560 the film's uncut Gems and Ladybird and the award winning 0:34:36.600 --> 0:34:40.200 TV hits Euphoria and Beef. In twenty twenty two, A 0:34:40.360 --> 0:34:43.080 twenty four rays two hundred and twenty five million dollars 0:34:43.120 --> 0:34:46.360 from a group of investors, including private equity firm Stripes, 0:34:46.840 --> 0:34:49.680 that value the company at two and a half billion dollars, 0:34:49.719 --> 0:34:52.400 a staggering amount in the indie film world. 0:34:52.640 --> 0:34:55.920 Felix Gillette wrote the story. He's Media, Entertainment and Telecom 0:34:56.000 --> 0:34:59.279 editor for Bloomberg BusinessWeek. He's also the author of It's 0:34:59.320 --> 0:35:03.200 Not TV, The Spectacular Rise Revolution in Future of HBO. 0:35:03.719 --> 0:35:06.719 Felix began by talking about a twenty four bolstered now 0:35:06.800 --> 0:35:09.600 by Wall Street riches as it's making a run, it's 0:35:09.600 --> 0:35:11.200 scaling up its indianess. 0:35:11.600 --> 0:35:13.840 Yeah, it's kind of a fascinating time for the company. 0:35:13.880 --> 0:35:17.279 They've had this amazing run over the past year. They 0:35:17.360 --> 0:35:21.040 started as an indie film distributor, which is a very 0:35:21.120 --> 0:35:25.160 unglamorous role, and just by having good taste and picking 0:35:25.200 --> 0:35:28.520 good movies and doing a really good job of hyping movies, 0:35:29.080 --> 0:35:32.440 you know, small budget movies that they picked up at festivals, 0:35:32.880 --> 0:35:37.440 they've grown into this force somewhat of an outsider in Hollywood. 0:35:37.480 --> 0:35:39.600 And yet this year, if you look at the Academy 0:35:39.600 --> 0:35:43.760 Award nominations, they again have two nominations for Best Picture, 0:35:44.080 --> 0:35:48.000 Zone of Interest and Past Lives. They've kind of mastered 0:35:48.400 --> 0:35:51.560 the art of these small, you know, five to ten 0:35:51.640 --> 0:35:56.200 million dollars budget movie, you know, original voices, aw tar 0:35:56.360 --> 0:35:59.080 driven and the problem with that is. 0:35:59.040 --> 0:36:01.480 Those movies don't make a ton of money. 0:36:02.400 --> 0:36:05.239 And so, you know, they raised all this money, they 0:36:05.239 --> 0:36:07.920 have this high valuation and the next step in their 0:36:07.960 --> 0:36:12.759 evolution is really to grow into you know, what you 0:36:12.840 --> 0:36:15.680 might call a mini major in Hollywood and try and 0:36:16.080 --> 0:36:20.480 basically start making bigger movies. Maybe not like you know, 0:36:20.680 --> 0:36:23.319 Marvel sized movies, but in that range of you know, 0:36:23.440 --> 0:36:27.200 thirty forty fifty sixty seventy million dollar budget movies. 0:36:27.600 --> 0:36:30.000 And to do that, you know, you have to take 0:36:30.040 --> 0:36:30.880 bigger risks. 0:36:31.600 --> 0:36:33.600 It's not as easy. You have to move into. 0:36:33.440 --> 0:36:37.719 New genres, which they're really trying right now a lot 0:36:37.719 --> 0:36:39.719 of different things. I mean, it's kind of fascinating to 0:36:39.760 --> 0:36:43.520 see all the different intellectual property they're buying up. They're 0:36:43.520 --> 0:36:46.200 working with bigger stars, they have their first movie with 0:36:46.280 --> 0:36:48.080 the Rock is in development. 0:36:48.520 --> 0:36:50.680 Felix companies like this, I'm always like, I mean, who 0:36:50.680 --> 0:36:52.560 are the people behind it? Like, how did you know? 0:36:52.600 --> 0:36:54.799 Tell us a little bit about kind of their origins 0:36:54.880 --> 0:36:56.800 and how it all came up on your radar. 0:36:57.040 --> 0:36:59.319 I think the one thing that really distinguishes them from 0:36:59.360 --> 0:37:01.520 a lot of the indie film companies we've seen rise 0:37:01.560 --> 0:37:04.160 and fall over years is that they do have very 0:37:04.200 --> 0:37:07.880 strong roots on Wall Street. So Daniel Katz, who's the 0:37:07.920 --> 0:37:11.719 CEO of the company, before he started A twenty four, 0:37:12.080 --> 0:37:14.920 he did a stint at Guggenheim and he was running 0:37:14.920 --> 0:37:20.920 their entertainment investment division. And also but just like not 0:37:21.239 --> 0:37:25.520 talking about their business very often and letting this kind 0:37:25.560 --> 0:37:28.920 of mystery void and filling it with you know, they 0:37:28.960 --> 0:37:32.480 have these, they have a peril that sells for a 0:37:32.480 --> 0:37:35.040 lot of money online. They can do these like sneaker 0:37:35.120 --> 0:37:37.680 drops for like a twenty four hats and a twenty 0:37:37.680 --> 0:37:38.879 four Totacs, which is. 0:37:38.840 --> 0:37:42.440 It's all right, So I kind of want to go 0:37:42.480 --> 0:37:44.719 a couple of different directions with this. You mentioned the 0:37:44.760 --> 0:37:48.440 New York angle here, Felix, and I'm wondering how geography 0:37:48.440 --> 0:37:51.360 plays a part in this, because when we think of Hollywood, 0:37:51.400 --> 0:37:55.399 we think of literally Hollywood. Does that geographical distinction matter. 0:37:55.680 --> 0:37:56.399 I think it does. 0:37:56.440 --> 0:38:00.120 I mean, I think they play up their outsider status 0:38:00.160 --> 0:38:01.520 and they have a lot They've had a lot of 0:38:01.560 --> 0:38:03.840 success with that. I mean, in some ways, the business 0:38:03.880 --> 0:38:07.480 model is very similar to what Mirrormax did in the eighties. 0:38:07.840 --> 0:38:09.880 It reminds me of yeah. 0:38:09.400 --> 0:38:12.040 Yeah, it's very similar, and I think they did, you know, 0:38:12.200 --> 0:38:16.200 consciously model themselves after that. You know, if you look 0:38:16.239 --> 0:38:18.920 at their mix of movies, it's always been kind of 0:38:18.960 --> 0:38:21.280 like a mix of really high brow kind of oscar 0:38:21.360 --> 0:38:24.160 bait movies and then at the same time they do 0:38:24.320 --> 0:38:27.200 horror films and if you look at a twenty four, yeah, 0:38:27.239 --> 0:38:30.880 they have these two Best Picture nominees this year with 0:38:30.880 --> 0:38:33.800 a zone of interest in past lives, but they also 0:38:33.920 --> 0:38:36.160 their top you know, probably the most lucrative film that 0:38:36.200 --> 0:38:39.120 they had this year was a horror movie Talk to Me. 0:38:39.680 --> 0:38:41.880 So having that kind of high brow mix is very 0:38:41.920 --> 0:38:45.880 much like Mirromax. The difference, obviously, is that Mirrormax with 0:38:45.960 --> 0:38:48.879 the Weinstein brothers. You know, they were very out there 0:38:48.920 --> 0:38:51.960 in the press always throughout their rise before they sold 0:38:51.960 --> 0:38:55.400 to Disney, and A twenty four very much took an 0:38:55.440 --> 0:38:59.480 opposite approach in terms of their company culture and how 0:38:59.480 --> 0:39:00.840 they present themselves of the world. 0:39:01.080 --> 0:39:01.640 Well, the first. 0:39:01.520 --> 0:39:03.800 Paragraph alone, we've had been fun reading in the newsroom. 0:39:03.800 --> 0:39:05.319 I'm not going to tell anything more because there's a 0:39:05.360 --> 0:39:07.520 movie they made. It was a musical, but it maybe 0:39:07.640 --> 0:39:09.640 isn't for the family, so can't read it on there. 0:39:11.080 --> 0:39:13.799 I always love the stuff you do, Felix. Thanks so much. 0:39:14.120 --> 0:39:16.960 Felix de Lap, Media Entertainment and Telecom editor for Bloomberg 0:39:16.960 --> 0:39:25.239 Business Week. This is the cover story of the new issue. 0:39:26.280 --> 0:39:30.120 You're listening to the Bloomberg Business Week podcast. Listen live 0:39:30.200 --> 0:39:33.440 each weekday starting at two pm Eastern on applecar Play 0:39:33.440 --> 0:39:36.319 and androyd Auto with the Bloomberg Business App. You can 0:39:36.320 --> 0:39:39.560 also listen live on Amazon Alexa from our flagship New 0:39:39.640 --> 0:39:43.239 York station. Just say Alexa play Bloomberg eleven. 0:39:42.960 --> 0:39:46.279 Thirty Plenty ahead in our second hour of the weekend 0:39:46.440 --> 0:39:50.520 edition of Bloomberg Business Week, including Elon Musk's underground tunnel 0:39:50.520 --> 0:39:52.800 project that was supposed to be the next generation of 0:39:52.880 --> 0:39:56.440 hyperspeed mass transit and instead has hit a muddy and 0:39:57.160 --> 0:40:01.200 dare we say toxic roadblock, while boring companies tiny Las 0:40:01.280 --> 0:40:05.040 Vegas Loop is less hyperloop and more stories of chemical burns, 0:40:05.080 --> 0:40:08.000 broken promises, and a puddle of toxic sludge. 0:40:08.120 --> 0:40:10.520 Also ahead well on the topic of Elon Musk, We've 0:40:10.560 --> 0:40:13.839 got everything you need to know about driving Tesla's polarizing 0:40:14.160 --> 0:40:16.760 electric pickup. You know it, it's the cyber truck. Elon 0:40:16.800 --> 0:40:19.080 and Detroit Automaker's got a break this week on the 0:40:19.120 --> 0:40:22.400 Bloomberg exclusive news of the demise of Apple's car program. 0:40:22.680 --> 0:40:25.200 We got the details from Bloomberg's Mark German, who broke 0:40:25.239 --> 0:40:25.640 the story. 0:40:25.840 --> 0:40:27.840 Yeah, so We've got a lot on cars in Elon 0:40:28.080 --> 0:40:30.919 and Apple in the next sixty minutes. First up, though 0:40:30.960 --> 0:40:34.399 this hour, Tim, here's a surprising stat almost fifty two 0:40:34.560 --> 0:40:37.719 percent of recent college grads are working jobs that do 0:40:37.840 --> 0:40:41.240 not require a college degree. This is what is referred 0:40:41.239 --> 0:40:42.640 to as underemployment. 0:40:42.680 --> 0:40:45.000 It's kind of staggering, it is, and I think that's 0:40:45.360 --> 0:40:47.560 why people are questioning whether or not it's worth it 0:40:47.600 --> 0:40:48.200 to go to college. 0:40:48.280 --> 0:40:50.239 Yeah, it's a really good question. And for those who 0:40:50.320 --> 0:40:53.919 do find themselves underemployed after graduation, it can be incredibly 0:40:53.920 --> 0:40:56.600 difficult to get career earnings on track. It all just 0:40:56.680 --> 0:40:57.600 kind of builds from there. 0:40:57.719 --> 0:40:59.480 Okay, So on that theme, and with the cost of 0:40:59.480 --> 0:41:01.920 attending a time top ranked US college now pushing close 0:41:01.960 --> 0:41:05.319 to ninety thousand dollars a year, Yeah, you heard that right, 0:41:05.800 --> 0:41:07.840 it does have many people wondering if a college degree 0:41:07.840 --> 0:41:10.239 is still worth it. Our next guest, well, he says 0:41:10.239 --> 0:41:12.680 it is. Jim Keyes is the former CEO of two 0:41:12.760 --> 0:41:16.680 Fortune five hundred companies, Blockbuster and A seven eleven. Also 0:41:16.760 --> 0:41:19.960 the founder of the nonprofit Education Is Freedom Foundation. He's 0:41:20.000 --> 0:41:22.480 got a new book out. It's called Education Is Freedom. 0:41:22.680 --> 0:41:25.520 The Future Is in Your Hands. He joined Carol in 0:41:25.560 --> 0:41:26.440 our New York studio. 0:41:26.560 --> 0:41:28.600 We're in a unique bubble right now with three and 0:41:28.600 --> 0:41:30.719 a half percent unemployment and there are a lot of 0:41:30.880 --> 0:41:34.319 jobs out there that don't require a college degree, that 0:41:34.560 --> 0:41:38.359 are very well paying jobs. The question is where will 0:41:38.360 --> 0:41:41.720 we be when we have seven eight percent unemployment? Because 0:41:42.200 --> 0:41:44.560 of course, these things are cycles and it will happen 0:41:44.600 --> 0:41:47.759 at some point in the future, and that degree will 0:41:47.800 --> 0:41:50.640 help you differentiate yourself. Think of it as your brand. 0:41:51.320 --> 0:41:53.080 At some point, you're gonna have to raise money, You're 0:41:53.080 --> 0:41:55.400 gonna have to apply for a job, and not having 0:41:55.440 --> 0:41:59.160 that degree will make it difficult to compete with others who. 0:41:59.000 --> 0:42:00.960 Do you know the story about the amount of student 0:42:00.960 --> 0:42:04.040 debt that's out there, and kids who've gotten college degrees, 0:42:04.560 --> 0:42:07.440 they're indebted and it's taking them years to pay it 0:42:07.480 --> 0:42:10.960 back because they haven't gotten necessarily a job that has 0:42:10.960 --> 0:42:12.439 made it easy to manage that debt. 0:42:12.480 --> 0:42:15.319 Well, I'm going to give you a classic business example. Yeah, 0:42:15.520 --> 0:42:19.799 you would never invest in a company based on today's returns. 0:42:20.760 --> 0:42:23.240 You basically run a net present value of future earning 0:42:23.280 --> 0:42:27.000 streams and discount it back for today's dollars. I'm not 0:42:27.040 --> 0:42:30.040 sure why we don't look at college as an investment 0:42:30.080 --> 0:42:32.880 in ourselves, because it's not going to pay back in 0:42:32.960 --> 0:42:36.440 today's dollars, but it will pay back over time. If 0:42:36.440 --> 0:42:38.680 you look at all of the statistics about having a 0:42:38.719 --> 0:42:42.040 degree versus not having a degree. Now, this doesn't hold 0:42:42.080 --> 0:42:45.000 for every degree that you get or every job that 0:42:45.040 --> 0:42:48.200 you have, but on balance, that degree does give you 0:42:48.320 --> 0:42:50.800 far more earning power over your life. And here's the 0:42:50.800 --> 0:42:52.880 way I like to look at it. Getting a college 0:42:52.920 --> 0:42:56.480 degree is an investment in yourself that pays dividends for 0:42:56.520 --> 0:42:58.520 the rest of your life. Right, So think of it 0:42:58.560 --> 0:43:00.680 as a business investment in yourself. 0:43:00.960 --> 0:43:04.000 It's interesting because you are so all in on education. 0:43:04.200 --> 0:43:04.839 Oh yeah, And. 0:43:04.840 --> 0:43:07.560 It's interesting when you've got schools now that are sixty 0:43:07.680 --> 0:43:12.000 seventy eighty ninety thousand dollars a year that automatically make 0:43:12.080 --> 0:43:15.359 it kind of problematic for some people to afford them. 0:43:15.400 --> 0:43:17.920 And again they have to tack on a pile of 0:43:17.960 --> 0:43:19.840 debt that doesn't go away so easily. 0:43:20.520 --> 0:43:23.439 I had to address the same thing because I've had 0:43:23.440 --> 0:43:25.880 people Now I'm out there on social media, I've got 0:43:25.960 --> 0:43:28.000 kids going, yeah, it's easy for you to say, Boomer, 0:43:28.080 --> 0:43:31.600 you know you had it easy. College was cheap, so 0:43:32.080 --> 0:43:35.360 I ran the numbers and when I graduated from college, 0:43:35.400 --> 0:43:38.360 my tuition was seven five hundred dollars a year in 0:43:38.400 --> 0:43:41.799 today's dollars is fifty five thousand a year. So yes, 0:43:41.880 --> 0:43:46.080 it's a little bit more today, but not extraordinarily higher. 0:43:46.600 --> 0:43:49.960 And this is a really important point. Endowments have been 0:43:50.160 --> 0:43:54.560 massively improved today versus twenty thirty, forty fifty years ago. 0:43:54.920 --> 0:43:57.960 And college discount rates, this is a really important factor 0:43:58.000 --> 0:44:01.000 that no one takes into consideration, are as high as 0:44:01.040 --> 0:44:05.040 forty five, fifty, sometimes sixty percent discount rate. In other words, 0:44:05.080 --> 0:44:08.760 the amount of scholarship money that they provide. So beware 0:44:09.480 --> 0:44:13.439 being intimidated by the sticker price because the actual price 0:44:13.480 --> 0:44:14.320 may be significant. 0:44:14.360 --> 0:44:16.319 The thing I will say about scholarships having gone through 0:44:16.360 --> 0:44:19.279 the college route with my own daughter, and that there's 0:44:19.320 --> 0:44:22.120 not a ton of academic scholarships anymore. There's a lot 0:44:22.160 --> 0:44:24.480 on the sports side of things, and then there's a 0:44:24.520 --> 0:44:28.000 lot on depending on your economic well being or not 0:44:28.120 --> 0:44:30.920 so well being. And I'm so glad it's there for that, 0:44:31.000 --> 0:44:33.200 but there's a lot of people in the middle that 0:44:33.280 --> 0:44:35.200 kind of get stuck with that debt load there is. 0:44:35.239 --> 0:44:37.880 The middle is tough, and it's always been tough, and 0:44:37.920 --> 0:44:41.719 I guess if you look back at history, this is 0:44:41.800 --> 0:44:45.520 not unique to today. We've always had that challenge of 0:44:45.960 --> 0:44:48.000 kids that really can't afford it are in a much 0:44:48.080 --> 0:44:51.080 better position to get scholarships. The kids who can afford 0:44:51.120 --> 0:44:54.480 it almost doesn't matter. Is that middle group that are challenged. 0:44:54.760 --> 0:44:57.719 But again, I can't stress enough from two perspectives. From 0:44:57.760 --> 0:45:01.520 the individual's perspective, right, it's critical important to differentiate yourself 0:45:01.560 --> 0:45:05.320 down the road and make that investment. But for a corporation, 0:45:05.800 --> 0:45:08.560 you know you remember from from a bio I ran 0:45:08.640 --> 0:45:11.400 two fortune five hundred companies, right, we had a hard 0:45:11.440 --> 0:45:16.520 time in employing an educated workforce at that store manager level, 0:45:16.800 --> 0:45:19.560 and that's even more challenging today with three and a 0:45:19.600 --> 0:45:22.919 half percent unemployment. So if we're going to be competitive, 0:45:22.960 --> 0:45:26.360 if our corporations are going to be competitive twenty thirty 0:45:26.400 --> 0:45:29.759 forty years from now, we better step up and recognize 0:45:29.800 --> 0:45:31.200 the importance we'll go there. 0:45:31.239 --> 0:45:34.160 Because I do feel like before the pandemic, and very 0:45:34.239 --> 0:45:37.520 much so after the pandemic, the role of the corporation 0:45:37.680 --> 0:45:39.680 and kind of taking care of employees. What do you 0:45:39.719 --> 0:45:43.200 think should be the role of employers when it comes 0:45:43.280 --> 0:45:45.520 to helping to educate their workforce. 0:45:45.600 --> 0:45:47.000 Here's the way I look at it. It's a it's 0:45:47.040 --> 0:45:50.080 a classic can turn everything into a classic business problem. 0:45:50.080 --> 0:45:53.160 It supply and demand, right, Yeah, we're the demand. Businesses 0:45:53.160 --> 0:45:56.560 are the demand for an educated workforce, and yet we 0:45:56.960 --> 0:46:00.279 very rarely make the investment in that education state and 0:46:00.320 --> 0:46:04.600 local government that trains public school kids. And so today 0:46:04.760 --> 0:46:07.200 my recommendation in the book, it's a bit of a 0:46:07.200 --> 0:46:10.440 call to action to corporations to see the need for 0:46:10.719 --> 0:46:14.239 investing and how do we do that through technology? You know, 0:46:14.320 --> 0:46:18.719 we've we've got such an opportunity to transform education with 0:46:18.800 --> 0:46:19.840 things like AI. 0:46:20.120 --> 0:46:20.759 How we do it? 0:46:20.920 --> 0:46:25.319 Yeah, digital learning, there's so much opportunity, but that's not 0:46:25.400 --> 0:46:27.440 going to happen at a state and local government level. 0:46:27.600 --> 0:46:28.560 So who needs to do it? 0:46:28.680 --> 0:46:31.879 The companies? I think corporation should, and ultimately I think 0:46:31.880 --> 0:46:34.760 they will once they've realized that this supply and demand 0:46:34.800 --> 0:46:36.640 problem is a problem. 0:46:36.800 --> 0:46:38.040 I'm want to kind of go back to some of 0:46:38.040 --> 0:46:39.799 the stuff you and I were just talking about on air. 0:46:40.040 --> 0:46:43.160 Peter Thiel, who has said, eh, you don't have to 0:46:43.160 --> 0:46:48.040 go to college wrongs. If Peter was here right now, 0:46:48.120 --> 0:46:49.040 what would you say to him? 0:46:49.080 --> 0:46:52.440 I would say, please stop. And here's why. If you 0:46:52.880 --> 0:46:56.000 give a young person an excuse and say you don't 0:46:56.000 --> 0:46:57.759 need to go to college, they're going to take it. 0:46:57.920 --> 0:47:00.560 They're gonna take it. So just step back from this 0:47:00.640 --> 0:47:04.880 and think about global competitiveness. The United States since about 0:47:04.880 --> 0:47:09.160 twenty twelve twenty fifteen has gone from high fifties and 0:47:09.239 --> 0:47:13.160 graduates post secondary graduation rates down to forty. Now COVID 0:47:13.320 --> 0:47:16.360 contributed to that, to climb, but we're going in the 0:47:16.360 --> 0:47:20.239 wrong direction. Meanwhile, China has gone exactly opposite. They have 0:47:20.320 --> 0:47:22.960 gone from the forty percent range up to nearly sixty 0:47:23.080 --> 0:47:26.400 and climbing. They're doubling down on the importance of an 0:47:26.480 --> 0:47:31.719 educated populist and an educated workforce. And this issue is 0:47:31.800 --> 0:47:35.719 critically important to corporate America if we dial forward and 0:47:36.040 --> 0:47:40.440 our ability to sustain competitiveness will depend on an educated 0:47:40.440 --> 0:47:44.879 workforce demand for the supply that is lagging right now? 0:47:44.920 --> 0:47:46.799 What's the answer? And I think about I mean, I'm 0:47:46.840 --> 0:47:50.160 one of seven kids and my parents it was all 0:47:50.160 --> 0:47:52.400 about getting a college education. That was so important. My 0:47:52.480 --> 0:47:55.240 dad came out of World War two a GI GI 0:47:55.280 --> 0:47:58.359 bill went to like, this was from the get go, 0:47:58.680 --> 0:48:00.560 you can do whatever you want after you to college 0:48:00.640 --> 0:48:02.680 was kind of the mission here. How have we gotten 0:48:02.719 --> 0:48:04.400 away from it? In your view, Yeah. 0:48:04.280 --> 0:48:09.040 We're in this weird bubble of the availability of technology, 0:48:09.120 --> 0:48:12.120 but not the application of technology. And some of it 0:48:12.160 --> 0:48:14.240 comes down to how are we funded state and local 0:48:14.280 --> 0:48:17.400 governments the challenges of that. So we spend a lot 0:48:17.440 --> 0:48:19.240 of money, and we are spending a lot of money, 0:48:19.280 --> 0:48:22.719 but we can spend it far more efficiently. I don't 0:48:22.760 --> 0:48:25.279 think the solution will happen leaving it up to state 0:48:25.280 --> 0:48:26.080 and local governments. 0:48:26.120 --> 0:48:26.759 I hope that. 0:48:26.719 --> 0:48:30.160 Corporations will see that they are ultimately the demand and 0:48:30.239 --> 0:48:33.880 want to step up because the technology is available today 0:48:34.160 --> 0:48:37.000 to completely transform the way we teach and the way 0:48:37.040 --> 0:48:38.840 we learn. We saw a little you know and I 0:48:38.880 --> 0:48:41.600 were talking about, you know during cool the pandemic. Yeah, yeah, 0:48:41.640 --> 0:48:44.120 during the pandemic wasn't so great for some. It wasn't 0:48:44.120 --> 0:48:45.880 so great for some. But here's what happened. It was 0:48:46.640 --> 0:48:52.239 a massive improvement in the availability and access that wasn't there, 0:48:52.280 --> 0:48:55.920 particularly for the underprivileged. It's there now. What we haven't 0:48:56.000 --> 0:49:01.840 done is integrated those platforms, upgraded the user content to 0:49:01.880 --> 0:49:05.240 make it eye popping. So those kids that were hating 0:49:05.280 --> 0:49:07.440 their online class with then play video games for four 0:49:07.560 --> 0:49:10.880 or five hours, right, So you can make school just 0:49:10.960 --> 0:49:13.719 as engaging. That's the challenge, and that will come, that's 0:49:13.719 --> 0:49:14.440 our next step. 0:49:14.840 --> 0:49:18.799 But do we have to be careful about technology? Yay, great, right, Jim. 0:49:18.840 --> 0:49:22.319 But I mean I also think about the importance of 0:49:22.480 --> 0:49:26.840 part of school is social skills, learn to communicate, like. 0:49:27.440 --> 0:49:30.279 Exactly what's the balance here? Well, and that's too. You 0:49:30.360 --> 0:49:33.880 just made my point. That's why a formal education still 0:49:33.960 --> 0:49:36.280 is and will be important for quite some time because 0:49:36.280 --> 0:49:40.760 it's more than just learning. You can learn online virtually anything, right, 0:49:40.800 --> 0:49:43.960 But it's those meta rights. Yeah, yeah, but it's those 0:49:44.000 --> 0:49:47.000 meta skills, it's those soft skills that I've outlined in 0:49:47.040 --> 0:49:54.080 the book, things like curiosity, creative, creativity, critical thinking. Those 0:49:54.120 --> 0:49:58.440 skills are things that you hone in a classroom working 0:49:58.440 --> 0:49:59.000 with others. 0:49:59.280 --> 0:50:01.840 If there's one thing, one thing you could change, or 0:50:01.880 --> 0:50:04.040 one step that you think and I'm assuming it sounds 0:50:04.080 --> 0:50:05.680 like what you're saying is it's on the side of 0:50:05.880 --> 0:50:09.040 corporations to really step up here. What would be the 0:50:09.080 --> 0:50:12.319 step that the world needs to take to improve this? 0:50:12.640 --> 0:50:14.960 Well, the first step I think is we've got to 0:50:15.000 --> 0:50:18.200 get beyond fear, because I think fear is the big 0:50:18.239 --> 0:50:21.160 culprit here right about that In the book, right about 0:50:21.160 --> 0:50:23.480 a whole chapter on fear and a chapter on confidence, 0:50:23.520 --> 0:50:28.239 because confidence is so important for learning and preparation. But 0:50:28.520 --> 0:50:30.960 fear is the killer because we're afraid of so much. 0:50:31.040 --> 0:50:33.240 We're afraid of some of us are afraid of teachers, unions. 0:50:33.280 --> 0:50:36.000 We're afraid that kids are being indoctrinated. We're afraid of 0:50:36.520 --> 0:50:38.359 you know, this and that and this and that, all 0:50:38.360 --> 0:50:41.319 these horrible things that are buzzing around, and it's contributing 0:50:41.400 --> 0:50:44.840 to this narrative that maybe you don't even need school. Well, 0:50:45.080 --> 0:50:47.759 if we can reverse that fear, and you think about 0:50:47.760 --> 0:50:51.239 the antecdote to fear its knowledge. So if we can, ironically, 0:50:51.560 --> 0:50:54.759 if we can reverse the fear replace it with not 0:50:55.080 --> 0:50:59.800 knowledge and understanding and confidence, then I believe that will 0:51:00.280 --> 0:51:04.279 help us recognize the opportunity because we are there right 0:51:04.320 --> 0:51:07.960 on the cusp of being able to completely transform the 0:51:08.000 --> 0:51:08.839 way we teach and learn. 0:51:08.920 --> 0:51:10.440 If we don't do this, what do you think is 0:51:10.480 --> 0:51:12.480 the outcome or the impact in our country. 0:51:12.840 --> 0:51:16.879 I am concerned both for our corporations and global competitiveness 0:51:16.880 --> 0:51:19.360 of America, but also for the country itself. All the 0:51:19.440 --> 0:51:23.560 way back to Jefferson, Alexis Dtopfel came from France and 0:51:23.600 --> 0:51:28.000 said with Jefferson that the sustainability of a democracy depends 0:51:28.080 --> 0:51:29.320 on an educated populace. 0:51:29.440 --> 0:51:30.960 And you get into this, this whole idea of the 0:51:31.000 --> 0:51:33.960 polarization that we see. You believe that this is going 0:51:34.000 --> 0:51:35.560 to be the way that we get rid of some 0:51:35.640 --> 0:51:35.879 of that. 0:51:35.920 --> 0:51:39.120 Right, I do. I believe it's ultimately the solution because 0:51:39.160 --> 0:51:42.759 so much of this polarization is fear and going back 0:51:42.800 --> 0:51:48.319 to FDRs and in doctrination speech all we have nothing 0:51:48.360 --> 0:51:51.359 to fear of but fear itself, right, and we are 0:51:51.719 --> 0:51:54.880 in the grips of fear, and it's just taking us down. 0:51:55.239 --> 0:51:59.560 It's just distracting us from so much potential to move 0:51:59.600 --> 0:52:00.800 forward as a people. 0:52:01.160 --> 0:52:03.759 Our thanks to Jim Keyes, former CEO of Blockbuster and 0:52:03.880 --> 0:52:06.560 seven eleven and the founder of the nonprofit Education Is 0:52:06.640 --> 0:52:07.360 Freedom Foundation. 0:52:07.560 --> 0:52:10.200 You're listening to Bloomberg BusinessWeek coming up. It was meant 0:52:10.200 --> 0:52:13.799 to provide fast and convenient transportation to the Las Vegas community. 0:52:14.400 --> 0:52:18.520 Instead it's racking up safety violations. How Elon Musk's Vegas 0:52:18.520 --> 0:52:21.520 tunnel project is causing chemical burns to its workers. That 0:52:21.640 --> 0:52:22.800 story is next. 0:52:22.960 --> 0:52:23.759 This is Bloomberg. 0:52:24.840 --> 0:52:28.359 You're listening to the Bloomberg Business Week podcast. Catch us 0:52:28.400 --> 0:52:31.640 live weekday afternoons from two to five pm Eastern. Listen 0:52:31.680 --> 0:52:33.840 on Apple car Play and then Brout Auto with a 0:52:33.840 --> 0:52:39.600 Bloomberg Business act or watch us live on YouTube Jimmy, Elon. 0:52:39.440 --> 0:52:43.280 Musk and EBS check Elon Muskin, satellites and space exploration 0:52:43.400 --> 0:52:47.560 via SpaceX A check. Then there's the brain Elon's neuralleak project. 0:52:47.719 --> 0:52:49.560 Okay, some news there recently too, so we can go 0:52:49.600 --> 0:52:51.239 ahead and say check I think at this point, but 0:52:51.280 --> 0:52:51.920 don't sign me. 0:52:51.920 --> 0:52:52.279 Up for it. 0:52:52.880 --> 0:52:54.640 What we haven't earned much about in a while is 0:52:54.719 --> 0:52:57.719 Elon's toneling venture the Boring Company, that is, until. 0:52:57.719 --> 0:53:00.319 I think it's fair to say uncheck on this one. 0:53:00.280 --> 0:53:02.480 Exactly well, which is why our Bloomberg Business Week team 0:53:02.840 --> 0:53:05.960 had to take do some digging around no pun intended. 0:53:06.239 --> 0:53:09.080 They found out that the Boring Company's tiny Las Vegas 0:53:09.120 --> 0:53:12.279 loop is all that's come of Musk's promise and his 0:53:12.440 --> 0:53:16.480 promises overall to build super fast mass transit hyperloops. Workers 0:53:16.520 --> 0:53:19.759 say it's tunnels, meantime, are packed with chemical sludge. This 0:53:19.800 --> 0:53:22.160 is a story by Max Chafkin and Sarah McBride of 0:53:22.160 --> 0:53:23.120 our Bloomberg News team. 0:53:23.239 --> 0:53:25.640 Max is Bloomberg Business Week columnists also contributor to the 0:53:25.640 --> 0:53:28.759 Elon Inc Podcast a new episode dropping tomorrow onto the 0:53:28.760 --> 0:53:31.719 Bloomberg Terminal and on bloomberg dot com slash elon Ing 0:53:32.200 --> 0:53:33.440 maxis here in Art's. 0:53:33.200 --> 0:53:34.560 It called the Sludge Episode. 0:53:35.040 --> 0:53:36.840 Yeah, it's a sludge special. 0:53:37.440 --> 0:53:39.000 Since we talked about the sledge, we got to start 0:53:39.000 --> 0:53:41.640 with the sludge because it's actually kind of serious, pretty 0:53:41.640 --> 0:53:45.480 serious laughing but causes some pretty bad health effects. 0:53:45.600 --> 0:53:45.799 Yeah. 0:53:45.840 --> 0:53:48.600 So, I mean, the genes of this story are these 0:53:48.719 --> 0:53:51.840 documents that we obtained that Sarah McBride and I obtained 0:53:52.560 --> 0:53:56.520 from the state OSHA, that's the Occupational Health and Safety Administration, 0:53:57.320 --> 0:54:00.759 and it basically shows lots of complaints from workers about 0:54:00.840 --> 0:54:05.560 unsafe conditions, including this issue of like these toxic muck, 0:54:06.120 --> 0:54:09.120 which the workers say they've had to wade through. The 0:54:09.120 --> 0:54:12.160 reason it's toxic, it's it's not necessarily like they're doing 0:54:12.200 --> 0:54:16.760 something that's totally outside the norms of tunneling. These chemicals 0:54:16.840 --> 0:54:19.080 are are sort of standard chemicals that are used. But 0:54:19.200 --> 0:54:22.400 the allegation from the workers is that corners are being cut, 0:54:22.600 --> 0:54:24.520 they're trying to move too fast, they're doing it on 0:54:24.560 --> 0:54:26.640 the cheap, you know. And the funny thing about this, 0:54:26.719 --> 0:54:29.000 or it's not really funny but these are the things 0:54:29.000 --> 0:54:31.640 that Elon Musk has set out to do to some extent, 0:54:31.680 --> 0:54:34.600 Like the whole point of the Boring Company, like many 0:54:34.640 --> 0:54:38.799 of Musk's companies, has been to cut unnecessary costs. The 0:54:38.880 --> 0:54:42.000 thing that we're hearing with this story, however, and I 0:54:42.000 --> 0:54:44.480 think you see echoes of this elsewhere in Elon Musk's empire, 0:54:44.440 --> 0:54:48.960 actually is that they're not necessarily finding lots of innovations there. 0:54:49.080 --> 0:54:52.440 They're ultimately ending up with a normal tunneling company essentially 0:54:53.160 --> 0:54:54.719 that happens to have. 0:54:54.640 --> 0:54:56.640 A safety record that some would say is troubling. 0:54:56.680 --> 0:54:58.759 Okay, So here's here's what's a little puzzling to me. 0:54:58.840 --> 0:55:01.560 Max Elon Musk is guy who's literally putting chips in 0:55:01.560 --> 0:55:05.680 people's heads. He's doing something that only until SpaceX did it, 0:55:06.280 --> 0:55:11.239 governments taking a whole of government approach could do. We've 0:55:11.239 --> 0:55:14.080 been able to dig tunnels for transportation purposes for over 0:55:14.080 --> 0:55:16.399 a century. Why is he running into so much trouble here? 0:55:16.480 --> 0:55:17.520 So I think I. 0:55:17.480 --> 0:55:19.400 Wrote one of the first stories about this back in 0:55:19.520 --> 0:55:22.040 early twenty seventeen, talked to Elon Musk at the time 0:55:22.080 --> 0:55:24.839 about this, and just to put a slightly different spin 0:55:24.880 --> 0:55:27.480 on what you just said, and which relates to this, 0:55:27.480 --> 0:55:30.279 which is that SpaceX is not the first company, not 0:55:30.360 --> 0:55:33.880 the first private company to build rockets, right, the shuttle, 0:55:34.080 --> 0:55:36.960 all the things that NASA done were built by government contractors. 0:55:37.239 --> 0:55:37.319 Right. 0:55:37.360 --> 0:55:39.120 Well, what I guess what I'm saying is he's doing 0:55:39.120 --> 0:55:41.040 it in a way that is really innovative anything well 0:55:41.080 --> 0:55:43.799 yeh one hundred percent very much reusable stuff is that 0:55:43.840 --> 0:55:44.400 was a really. 0:55:44.200 --> 0:55:45.840 Innovative contracting process. 0:55:45.880 --> 0:55:48.479 They used contracts, They sold him directly the government at 0:55:48.520 --> 0:55:51.560 a fixed price, which was new. But one of the 0:55:51.560 --> 0:55:53.640 core things that SpaceX did was like go out and 0:55:53.680 --> 0:55:56.800 look for existing technology and find a way to improve 0:55:56.840 --> 0:55:59.480 on it and do it cost effectively. Now, there are 0:55:59.520 --> 0:56:02.920 a lot of potential inefficiencies in the world of aerospace, 0:56:03.280 --> 0:56:05.879 and Musk has had a much harder time in some 0:56:05.920 --> 0:56:10.000 other fields finding similar sort of levels of inefficiency, just 0:56:10.040 --> 0:56:12.400 sort of low hanging fruit. And I think the tunneling 0:56:12.440 --> 0:56:15.200 example is one you know, he talked about back in 0:56:15.200 --> 0:56:17.880 twenty seventeen. He talked, you know, it costs a billion 0:56:17.920 --> 0:56:21.319 dollars a year, and it takes a mile. It takes 0:56:21.360 --> 0:56:23.360 a year to dig a mile, and it costs like 0:56:23.400 --> 0:56:25.600 a billion dollars a mile. Or some some very large 0:56:25.640 --> 0:56:28.400 figure like that, and now Boring is doing maybe a 0:56:28.440 --> 0:56:30.400 little better on cost, although it's hard to know, but 0:56:30.480 --> 0:56:32.760 when you look at the actual pace that they're going, 0:56:32.840 --> 0:56:35.600 it's basically a mile a year. It's it's not that 0:56:35.840 --> 0:56:40.520 much faster than existing tunneling projects. And when you look 0:56:40.520 --> 0:56:42.960 at the end result, we're not talking about mass transit. 0:56:42.960 --> 0:56:45.759 We're not talking about you know, big subway cars full 0:56:45.800 --> 0:56:46.640 of people, which. 0:56:46.480 --> 0:56:48.239 Is actually what many people in Las Vegas, you know, 0:56:48.239 --> 0:56:50.719 would have hoped for, because traffic there is really bad. 0:56:50.760 --> 0:56:53.280 We're talking about are Tesla's. 0:56:53.000 --> 0:56:56.680 Just normal cars that can take three people and a driver. 0:56:56.719 --> 0:57:00.600 They're not even driverless, and they're limited to forty miles 0:57:00.600 --> 0:57:03.520 an hour. So we're so far away from the kind 0:57:03.560 --> 0:57:04.560 of grand visions. 0:57:04.560 --> 0:57:05.760 And just to remind. 0:57:05.400 --> 0:57:09.239 People what Elon Musk originally promised here was New York 0:57:09.280 --> 0:57:12.919 to DC in twenty nine minutes San Francisco, Los Angeles. Yeah, 0:57:13.040 --> 0:57:15.680 in thirty five sounds awesome. You could commute from you know, 0:57:15.680 --> 0:57:19.480 you could like commute halfway across the country, and you know, 0:57:19.720 --> 0:57:23.000 it just hasn't gone that way. And I think, you know, 0:57:23.080 --> 0:57:26.080 in all sorts of different ways across Elon Musk's empire. 0:57:26.080 --> 0:57:30.120 You're seeing maybe fissures, cracks, ways in which the promises 0:57:30.160 --> 0:57:32.240 are not necessarily matching up. 0:57:32.280 --> 0:57:35.480 You know, we saw this ruling with pay in Delaware. 0:57:35.840 --> 0:57:39.320 You know, of course, lots of problems documented at x 0:57:39.400 --> 0:57:42.440 slash Twitter, and here you just have like a very 0:57:43.120 --> 0:57:46.600 visceral way where you have these grand promises and the 0:57:46.720 --> 0:57:49.960 end what you have is basically a glorified shuttle bus system. 0:57:50.000 --> 0:57:51.840 It doesn't take you, you know, from one end of 0:57:51.840 --> 0:57:53.720 the country to the other. It takes you from one 0:57:53.800 --> 0:57:56.080 end to the Las Vegas Convention Center to the other. 0:57:56.240 --> 0:57:58.120 Is it just a case of that's all I can 0:57:58.200 --> 0:58:00.480 do so far there? 0:58:00.760 --> 0:58:03.439 Yeah, I mean to some extent, Yes, I mean the 0:58:03.520 --> 0:58:06.880 thing that if you squint and I think the reason 0:58:07.400 --> 0:58:11.680 that this was approved it's partly that was approved because 0:58:11.800 --> 0:58:15.720 Las Vegas is a low regulation city. These are mostly 0:58:15.720 --> 0:58:18.280 on private property. There isn't a ton of oversight from 0:58:18.320 --> 0:58:21.400 the government as there might be in other places. But also, 0:58:21.520 --> 0:58:24.680 you know, they're talking about opening these stations throughout the city, 0:58:24.880 --> 0:58:26.280 but you know, when we talk to people on the 0:58:26.280 --> 0:58:29.240 ground there, it is a long way from happening. It's 0:58:29.280 --> 0:58:31.520 also hard to see how this is going to make 0:58:31.600 --> 0:58:35.000 a huge impact on traffic. Again, when you're talking about 0:58:35.120 --> 0:58:37.240 you know, moving people three at a time, very very slowly, 0:58:37.280 --> 0:58:39.440 a lot of things would have to happen, and there 0:58:39.440 --> 0:58:41.160 are lots of reasons for skepticism. I mean, you know, 0:58:41.200 --> 0:58:44.960 digging underground is hard. There's a reason it costs so 0:58:45.040 --> 0:58:46.959 much money. It costs so much money because there's stuff 0:58:47.000 --> 0:58:50.320 you can run into, complicated property rights, and of course. 0:58:50.120 --> 0:58:52.200 So the company is not going to create a trillion jobs. 0:58:52.920 --> 0:58:55.560 Well yeah, which is what Elon Musk told me back 0:58:55.600 --> 0:58:57.439 in twenty seventeen. They were going to create a trillion jobs. 0:58:57.440 --> 0:58:59.520 I'd say it's a long way from that. 0:59:00.920 --> 0:59:01.280 To put it. 0:59:01.320 --> 0:59:04.600 To put it mildly, I mean, there there was sort 0:59:04.640 --> 0:59:07.240 of flirtations or talk of various projects. There was one 0:59:07.240 --> 0:59:09.840 in Maryland, one in Los Angeles, one in Chicago. And 0:59:09.960 --> 0:59:12.240 in all these cases, you know, he was bringing along 0:59:12.280 --> 0:59:15.120 some of the most famous politicians in the United States. 0:59:15.120 --> 0:59:17.440 So it was Larry Hogan, you know, governor of Maryland, 0:59:17.440 --> 0:59:19.640 who former governor Maryland, who was you know, at the time, 0:59:19.640 --> 0:59:21.080 a big star of the Republican Party. 0:59:21.920 --> 0:59:23.920 You know Rama Manuel, you know. 0:59:23.920 --> 0:59:26.560 Former chief of staff to President Obama, mayor of Chicago, 0:59:26.880 --> 0:59:29.120 Eric Garcetti, star Mayor of Los Angeles, like a lot 0:59:29.160 --> 0:59:31.840 of people went for this and they just you know, 0:59:31.920 --> 0:59:34.160 they haven't been able to deliver. And I think there's 0:59:34.200 --> 0:59:37.880 probably some element of distraction. Obviously Musk has a lot 0:59:37.920 --> 0:59:41.439 going on. And also I think just tunneling this is hard. 0:59:41.520 --> 0:59:43.240 You're dealing with dirt. 0:59:42.920 --> 0:59:45.280 And a lot of people up in space and stuff 0:59:45.280 --> 0:59:49.400 in space is really hard. Tapping into the autorway industry. 0:59:49.680 --> 0:59:51.760 I mean, this is like going back to Tim's point, right, 0:59:52.440 --> 0:59:54.280 how many times were like, you know, you count out 0:59:54.320 --> 0:59:56.400 Elon Musk or whatever, and then he's like, whoa, look 0:59:56.440 --> 0:59:58.240 what he did. And I understand there's a lot on 0:59:58.240 --> 1:00:00.920 his plate right now and that's to be distracting. But 1:00:01.040 --> 1:00:03.120 should we not rule him out? Has he not found 1:00:03.120 --> 1:00:04.280 the right boring tool? 1:00:04.480 --> 1:00:04.560 Is? 1:00:04.640 --> 1:00:05.520 What is it? Max? 1:00:06.160 --> 1:00:09.800 Well, I would say, I mean, I think it's there's 1:00:09.920 --> 1:00:11.760 probably a bunch of different factors going on. 1:00:11.840 --> 1:00:13.600 I mean, one thing that was different. 1:00:13.320 --> 1:00:16.520 With SpaceX is you had a very interested buyer, which 1:00:16.560 --> 1:00:19.880 was NASA. You had the US government wanting to finance 1:00:19.920 --> 1:00:23.040 this thing, right looking for somebody just like Elon Musk, 1:00:23.040 --> 1:00:26.200 and Elon Musk sort of finding a way to fit himself, 1:00:26.760 --> 1:00:28.840 you know, to sort of make himself look like the 1:00:28.880 --> 1:00:30.040 thing that the US government want. 1:00:30.120 --> 1:00:31.520 Elon Musk is really good at this. 1:00:31.600 --> 1:00:34.560 We're seeing this with Starlink as well, where like, you know, 1:00:34.600 --> 1:00:37.439 he's this what would seem like a civilian technology, these 1:00:37.480 --> 1:00:39.840 these internet services for as Musks I told it to 1:00:39.880 --> 1:00:41.640 Walter Isaacson, I think he said, you know, it's to 1:00:41.680 --> 1:00:42.520 Netflix and chill. 1:00:42.800 --> 1:00:46.000 Increasingly, this looks like a potential military tool. This is 1:00:46.040 --> 1:00:47.080 gonna this is gonna. 1:00:46.920 --> 1:00:49.760 Lead to government contracts and and could be a big 1:00:49.800 --> 1:00:52.920 line of business for SpaceX. You know, I think what 1:00:53.080 --> 1:00:56.320 happened is in twenty sixteen, twenty seventeen. 1:00:56.000 --> 1:00:57.280 Donald Trump becomes president. 1:00:57.680 --> 1:01:00.680 There's a lot of talk about infrastructure, and in general, 1:01:00.720 --> 1:01:02.680 there's been a lot of talk about wanting to spend 1:01:02.680 --> 1:01:05.520 public money on infrastructure, but there hasn't been a ton 1:01:05.560 --> 1:01:08.320 of delivery, right, And I think a big part of 1:01:08.320 --> 1:01:12.000 this was predicated on this, you know, trillion dollar the 1:01:12.000 --> 1:01:13.600 thing that Trump was saying, which is like a trillion 1:01:13.640 --> 1:01:18.000 dollar infrastructure plan. And you know, ultimately infrastructure, whether it's 1:01:18.000 --> 1:01:21.240 Elon Musk or anyone else, is very expensive. It's politically 1:01:21.280 --> 1:01:23.560 dicey because you have land rights and so on, and 1:01:23.840 --> 1:01:26.680 it it just hasn't come together with the speed that 1:01:26.760 --> 1:01:27.720 SpaceX came together. 1:01:27.920 --> 1:01:28.160 Max. 1:01:28.560 --> 1:01:30.400 I want to dig into something that you said, that 1:01:30.480 --> 1:01:32.680 you mentioned a little earlier, which is the idea that 1:01:32.960 --> 1:01:36.120 back in twenty seventeen twenty eighteen, a lot of politicians 1:01:36.200 --> 1:01:38.120 were kind of jumping up and down with the idea 1:01:38.120 --> 1:01:41.520 of collaborating with Elon Musk. What I noticed in your 1:01:41.520 --> 1:01:44.640 piece is that that tone has totally shifted and they 1:01:44.640 --> 1:01:47.680 are now local politicians who are saying hey, thanks, but 1:01:47.760 --> 1:01:48.120 no thanks. 1:01:48.240 --> 1:01:51.000 Yeah, including the mayor of Las Vegas, who is you know, 1:01:51.920 --> 1:01:54.720 Las Vegas is an interesting place because the city of 1:01:54.760 --> 1:01:57.360 Las Vegas actually doesn't contain most of the Strip, so 1:01:57.400 --> 1:01:59.760 it's not like she has oversight overall this. As I said, 1:01:59.800 --> 1:02:01.920 a lot lot of it is on public property. But 1:02:01.920 --> 1:02:05.240 with Caroline Goodman, the mayor, longtime mayor, her husband was 1:02:05.280 --> 1:02:06.840 a long time Mayriorg. She's like one of the probably 1:02:06.840 --> 1:02:11.040 the most famous politician in Las Vegas, is essentially criticizing 1:02:11.040 --> 1:02:14.200 it and criticizing it on the grounds that it's unpractical. She, 1:02:14.680 --> 1:02:17.800 you know, from the start, has raised these safety concerns 1:02:17.840 --> 1:02:20.120 which I think look prescient when you look at this 1:02:20.680 --> 1:02:24.320 oh shut thing and yeah, and she's essentially saying, you know, 1:02:24.480 --> 1:02:26.320 this would be great if it could actually happen, but 1:02:26.840 --> 1:02:29.800 I don't see it. And that again, is that does 1:02:29.880 --> 1:02:32.040 represent a bit of a departure for Elon Musk. You 1:02:32.080 --> 1:02:34.840 do feel like in Las Vegas at least, you know, 1:02:34.960 --> 1:02:37.160 some of the magic, some of that kind of Elon 1:02:37.240 --> 1:02:40.400 Musk stardust. It just doesn't feel quite you know, shine 1:02:40.480 --> 1:02:42.200 quite as brightly. Maybe that's the lights of the strip 1:02:42.280 --> 1:02:44.680 drowning it out. I don't know, but it definitely feels 1:02:44.720 --> 1:02:46.200 like there's something different going. 1:02:46.040 --> 1:02:46.919 On there all right. 1:02:47.000 --> 1:02:49.960 Back to the workers though and their conditions. Is this 1:02:50.040 --> 1:02:53.200 something unusual in terms of infrastructure projects? And I'm always 1:02:53.200 --> 1:02:54.959 a little wary when there's a line in your story. 1:02:54.960 --> 1:02:56.840 Although no one has been killed at a boring company 1:02:57.880 --> 1:03:01.440 work site so far in Vegas, it doesn't just speak 1:03:01.480 --> 1:03:02.960 to how tricky it is. 1:03:03.040 --> 1:03:05.360 Yeah, as I said, these are not like no one's 1:03:05.360 --> 1:03:08.520 saying they're using chemicals that are worse than anybody else. 1:03:09.000 --> 1:03:11.120 What what the workers are saying, what you see in 1:03:11.120 --> 1:03:14.480 these ocean complaints are sort of like little things that 1:03:14.520 --> 1:03:17.280 maybe add up to a dangerous situation. And you know, 1:03:17.360 --> 1:03:21.320 we have seen similar stories like this around Tesla's car 1:03:21.520 --> 1:03:24.640 factories around there. You know, Reuter's had a great piece 1:03:25.080 --> 1:03:28.320 some weeks ago about you know, death at a SpaceX site. 1:03:28.480 --> 1:03:31.880 So you know, I mean when you're when you're radically. 1:03:31.360 --> 1:03:33.800 Trying to cut costs, when you're going around telling people 1:03:33.880 --> 1:03:37.240 that the only law that matters are the laws of physics, right, 1:03:37.280 --> 1:03:39.760 I think I think to some extent they're going to 1:03:39.800 --> 1:03:42.680 be costs of that, and we're seeing that, and and 1:03:42.800 --> 1:03:45.880 but we should say, like this isn't This is probably 1:03:45.960 --> 1:03:48.959 more an indictment of boring company being less innovative rather 1:03:49.000 --> 1:03:51.600 than it's like the most dangerous place in the you. 1:03:51.520 --> 1:03:53.960 Know, there's just hasn't been proof rock three yet Max. 1:03:54.120 --> 1:03:56.600 And that, by the way, is the tunnel boring machine. 1:03:56.680 --> 1:03:58.400 Read the story you'll find out more. 1:03:58.600 --> 1:04:01.840 Yeah, which is you know, promise, over promising and under delivery. 1:04:01.960 --> 1:04:05.360 They have good names of home ts Eliot would be crouded. 1:04:06.480 --> 1:04:08.560 All right, Max, Thank you so much. Max Chapkin. Here 1:04:08.600 --> 1:04:10.720 is Bloomberg Business Week column a store featured in the 1:04:10.720 --> 1:04:13.480 new episode of the Elon Inc. Podcast on the Bloomberg 1:04:13.480 --> 1:04:15.720 and ap Bloomberg dot Com slash elon Inc. 1:04:21.840 --> 1:04:25.680 You're listening to the Bloomberg Business Week podcast. Listen live 1:04:25.760 --> 1:04:28.600 each weekday starting a two pm Easter on Apple Car 1:04:28.720 --> 1:04:31.680 Play and Androyd Auto with the Bloomberg Business App. You 1:04:31.720 --> 1:04:35.000 can also listen live on Amazon Alexa from our flagship 1:04:35.040 --> 1:04:38.840 New York station, Just Say Alexa Play Bloomberg eleven thirty. 1:04:40.320 --> 1:04:43.320 Big News this past week. By big, I mean really 1:04:43.360 --> 1:04:45.880 big in the tech space, in the car space. It 1:04:45.920 --> 1:04:49.080 was a Bloomberg exclusive by Bloomberg's Mark German. And what 1:04:49.240 --> 1:04:52.080 Mark found out. Apple is abandoning plans for a self 1:04:52.120 --> 1:04:55.560 driving car, giving up on billions in potential revenue and 1:04:55.640 --> 1:04:58.440 the dream of selling what one executive called the ultimate 1:04:58.520 --> 1:04:59.280 mobile device. 1:05:00.160 --> 1:05:02.920 Reached this crossroads Tuesday when I told employees it was 1:05:02.960 --> 1:05:05.680 winding down the car project and reassigned some of the 1:05:05.720 --> 1:05:08.880 staff to its AI efforts. The decision followed months of 1:05:08.920 --> 1:05:12.200 frenzied meetings between top executives and the company's board over 1:05:12.280 --> 1:05:12.840 how to proceed. 1:05:13.160 --> 1:05:15.959 The sudden demise of Apple's car program is another bleak 1:05:16.040 --> 1:05:19.000 sign for the electric vehicle market. It's also a welcome 1:05:19.040 --> 1:05:23.520 boon for automakers Detroit. Those in Detroit and Tesla perhaps 1:05:23.600 --> 1:05:26.520 breathing a sigh of relief. As Apple's exit eliminates a 1:05:26.560 --> 1:05:30.000 potential threat in an EV market that is slowing and 1:05:30.120 --> 1:05:32.320 frees up a pool of talented engineers who may be 1:05:32.360 --> 1:05:33.000 out of a job. 1:05:33.480 --> 1:05:37.240 Tesla's CEO, Elon Musk, wasn't shy about commenting, celebrating the 1:05:37.280 --> 1:05:40.520 move by sharing a post on his ex platform with 1:05:40.560 --> 1:05:43.920 a saluting emoji and a cigarette. For more on the 1:05:43.960 --> 1:05:47.400 Apple news, we spoke to Mark German, Bloomberg News chief 1:05:47.440 --> 1:05:51.120 technology correspondent, who broke the story exclusively on Bloomberg. 1:05:51.440 --> 1:05:56.480 Apple officially canceled work on a self driving electric car. 1:05:56.920 --> 1:06:01.000 Jeff Williams, the company's chief operating officer in Kevin Lynch, 1:06:01.040 --> 1:06:04.640 the company's vice president of technology, who was foremost in 1:06:04.760 --> 1:06:07.840 charge of the car project, announced to the team it's 1:06:07.880 --> 1:06:11.960 about two thousand people that the project, called Titan internally, 1:06:12.360 --> 1:06:15.560 is winding down. There will be layoffs of some hardware people. 1:06:15.920 --> 1:06:19.120 Hardware people will have the opportunity to apply to other teams. 1:06:19.640 --> 1:06:21.880 Other people working on the project are being shifted to 1:06:21.960 --> 1:06:25.920 Apple's AI and Machine Learning division to work on generative 1:06:26.000 --> 1:06:30.800 AI products, a key future component of the company. There 1:06:30.840 --> 1:06:32.840 will some There will be some people moved to the 1:06:32.920 --> 1:06:36.360 Vision pro as well, with that focus on spatial computing. 1:06:37.000 --> 1:06:38.880 But this is a bombshell development. 1:06:39.320 --> 1:06:42.080 This is a very rare retreat for Apple. 1:06:42.520 --> 1:06:45.880 This is a project that they've invested over ten billion 1:06:45.920 --> 1:06:49.160 dollars in. They've worked on it for over ten years. 1:06:49.360 --> 1:06:53.000 It's had many fits and starts, It's had many directional changes. 1:06:53.400 --> 1:06:56.240 About a month ago, we reported that Apple had reached 1:06:56.280 --> 1:06:58.840 a make or break point for the car project. We 1:06:58.880 --> 1:07:02.440 reported at the latest incarnation of the project after several 1:07:02.480 --> 1:07:05.200 meetings with the company's board of directors, was a new 1:07:05.600 --> 1:07:08.920 budget around a Level two plus car that was a 1:07:09.040 --> 1:07:11.680 downgrade from the original vision of a Level four or 1:07:11.720 --> 1:07:15.560 a Level five fully autonomous vehicle, and they also pushed. 1:07:15.200 --> 1:07:16.160 Back and delayed that. 1:07:16.960 --> 1:07:20.600 Since then, there have been more discussions and executives made 1:07:20.800 --> 1:07:24.840 the final decision earlier this month. I'm told to completely 1:07:24.880 --> 1:07:28.800 shutter the project. So again, this is Apple canceling work 1:07:28.800 --> 1:07:32.600 on an electric car. This is a significant development for 1:07:32.680 --> 1:07:35.600 one of the company's most ambitious attempts at a new 1:07:35.640 --> 1:07:39.480 product category in its history. So this is a very 1:07:39.520 --> 1:07:41.240 significant day for the company. 1:07:41.400 --> 1:07:43.560 Yeah, very significant. It's not like it's just you know, 1:07:43.600 --> 1:07:45.320 an idea on the back of a napkin. I mean 1:07:45.360 --> 1:07:47.640 they had been pursuing, as you said, Mark, for over 1:07:47.720 --> 1:07:51.160 ten years. The road was rough though, in Apple's pursuit 1:07:51.560 --> 1:07:53.680 in terms of bringing a car to market. I mean, 1:07:53.720 --> 1:07:56.360 you know this company, for them to step up the 1:07:56.400 --> 1:07:59.200 amount of time, money, people, effort that they have put 1:07:59.240 --> 1:08:02.680 into something like this, I don't know. How do you 1:08:02.680 --> 1:08:05.360 get your head around it. Does it mean just completely done? 1:08:05.640 --> 1:08:07.680 Does it mean that they could buy into something in 1:08:07.720 --> 1:08:10.120 the future, or they're just saying this isn't a market 1:08:10.160 --> 1:08:10.520 for us. 1:08:11.800 --> 1:08:15.920 Certainly there are considerations on the table to acquire an 1:08:16.000 --> 1:08:19.360 existing car maker. Obviously, you've seen what's happened in the 1:08:19.360 --> 1:08:23.639 car industry lately. Rivian has not been doing so hot. 1:08:24.320 --> 1:08:28.360 You've seen other car companies struggling, Lucid being one. Tesla 1:08:28.439 --> 1:08:31.360 has had its own ups and downs. It's a very 1:08:31.520 --> 1:08:34.960 very thin profit margin business. It's not the typical business 1:08:34.960 --> 1:08:37.080 that Apple likes to get into. But there is some 1:08:37.240 --> 1:08:41.240 risk in abandoning this project. What if Alphabet, Google, Waimo, 1:08:41.680 --> 1:08:44.599 Amazon with Zookes, some of these other big technology companies, 1:08:44.600 --> 1:08:49.599 certainly the Chinese phonemakers, they're all getting into cars. What 1:08:49.640 --> 1:08:51.479 if one of these companies comes up with a great 1:08:51.479 --> 1:08:54.800 car idea One day and successfully creates a new ecosystem 1:08:55.040 --> 1:08:58.320 of its own to rival Apples, and they can risk 1:08:58.520 --> 1:09:01.760 pulling people away from Apple into a Google car or 1:09:01.800 --> 1:09:04.439 an Amazon car and getting them on their other products 1:09:04.439 --> 1:09:07.200 in the ecosystem. So there's certainly some very long term 1:09:07.280 --> 1:09:10.360 risk here, But in the short term this may be 1:09:10.400 --> 1:09:13.320 a good thing for Apple being able to focus resources 1:09:13.360 --> 1:09:16.920 towards perhaps more promising areas in the short term like 1:09:17.240 --> 1:09:19.599 spatial computing and generative artificial intelligence. 1:09:19.640 --> 1:09:21.280 Well, that's exactly where I wanted to go with you 1:09:21.320 --> 1:09:23.799 next mark to you. Is this more about Apple saying 1:09:23.960 --> 1:09:27.040 no to a car and less about Apple focusing resources 1:09:27.040 --> 1:09:28.960 on AI? Or is it the other way around here? 1:09:29.080 --> 1:09:31.960 Is it all about Apple saying wait a second, the 1:09:32.040 --> 1:09:34.519 rise in interest in generative AI over the last eighteen 1:09:34.560 --> 1:09:36.479 months has just been massive, and we need to go 1:09:36.680 --> 1:09:39.160 all in on this such that we need to actually 1:09:39.160 --> 1:09:41.479 cancel our work on the car in order to do that. 1:09:42.520 --> 1:09:46.040 It's certainly not the latter tim This is Apple making 1:09:46.080 --> 1:09:48.800 a decision to wind down the car project because they 1:09:48.800 --> 1:09:51.799 weren't getting anywhere. It kept getting delayed, it kept getting 1:09:51.800 --> 1:09:56.720 more expensive. They have these hundreds and thousands of employees 1:09:57.439 --> 1:10:01.519 that are brilliant people, and we have places for them. 1:10:01.680 --> 1:10:04.920 Generative AIS a key area, let's throw them there. There's 1:10:04.960 --> 1:10:09.880 a lot of artificial intelligence machine learning overlap between work 1:10:09.920 --> 1:10:11.880 on an autonous vehicle and what needs to be done 1:10:12.240 --> 1:10:15.519 for the future of AI on phones and watches and 1:10:15.560 --> 1:10:18.200 earbuds and glasses and such, so it makes sense to 1:10:18.240 --> 1:10:21.519 reallocate those resources. But don't be mistaken, this is a 1:10:21.560 --> 1:10:24.840 decision all about canceling the car. They just happen to 1:10:24.880 --> 1:10:28.800 have an excellent soft landing for the resources that have 1:10:28.880 --> 1:10:31.520 been invested in the vehicle project. 1:10:31.280 --> 1:10:34.480 Our thanks to Mark German, Bloomberg News Chief Technology correspondent. 1:10:34.600 --> 1:10:37.360 All right, Tim, so, no Apple cars hitting the road, 1:10:37.520 --> 1:10:40.320 and yet look around, after a two year delay that 1:10:40.400 --> 1:10:44.360 began with a smashed window gaff, the most anticipated vehicle 1:10:44.360 --> 1:10:46.559 of the year is out and about in the United States. 1:10:46.800 --> 1:10:48.559 It's not easy to get your hands on one, but 1:10:48.600 --> 1:10:52.320 our own Hannah Elliott sure did. She's Bloomberg Pursuits autocolumnist, 1:10:52.400 --> 1:10:54.559 and she spent a full day driving the cyber truck 1:10:54.680 --> 1:10:57.920 all around Hollywood, and needless to say, she got plenty 1:10:58.040 --> 1:11:01.360 of attention. She joined Carol Los Angeles to tell all 1:11:01.400 --> 1:11:04.439 of us why she was surprised that Tesla's futuristic electric 1:11:04.479 --> 1:11:07.240 pickup truck might actually be worth the hype. 1:11:07.439 --> 1:11:10.519 I was surprised because we've been talking and hearing about 1:11:10.560 --> 1:11:14.879 this truck since twenty nineteen when it debuted, and really before, 1:11:15.920 --> 1:11:17.880 So you know, it's just kind of I roll my 1:11:17.920 --> 1:11:20.280 eyes and think, can it really be that great? And 1:11:20.640 --> 1:11:23.639 by now is it even outdated? We've been waiting for years, 1:11:24.160 --> 1:11:28.160 And yes it is polarizing. Yes the brutalist looks may 1:11:28.240 --> 1:11:31.599 not be for you, but I have to say it 1:11:31.680 --> 1:11:35.840 was surprisingly nice. I enjoyed it. It was fun, and 1:11:35.920 --> 1:11:39.160 I loved seeing all of the positive reactions that people 1:11:39.320 --> 1:11:41.160 had to it, because you don't get that very often 1:11:41.200 --> 1:11:41.719 these days. 1:11:41.800 --> 1:11:44.040 I have to say, your pictures which are going out 1:11:44.160 --> 1:11:47.840 on YouTube and also on Bloomberg Streaming, when you shared 1:11:47.840 --> 1:11:51.719 them with our YouTube producer Elizabeth, I'm like, those are sick. 1:11:51.800 --> 1:11:53.960 First of all, the pictures you took are just gorgeous 1:11:53.960 --> 1:11:56.519 in how you set them. But it is a crazy, 1:11:56.600 --> 1:11:59.719 crazy car and really interested interesting. So tell us about 1:11:59.760 --> 1:12:02.360 kind of the outside and then take us inside. 1:12:02.560 --> 1:12:05.840 So the cyber truck, as I'm sure you've heard, is 1:12:05.960 --> 1:12:09.600 a stainless steel truck and you know, this again is 1:12:09.640 --> 1:12:12.639 not new technology. You might remember the DeLorean from Back 1:12:12.640 --> 1:12:14.080 to the Future in the eighties. 1:12:14.360 --> 1:12:16.560 Did it feel like a DeLorean in many ways? I 1:12:17.439 --> 1:12:18.479 mean not on the inside. 1:12:18.560 --> 1:12:22.559 The inside actually feels really modern and nice, but certainly 1:12:22.600 --> 1:12:25.040 on the outside. It's like if the Dolorian was a truck, 1:12:25.200 --> 1:12:28.320 it would be that. You know, one cool thing I 1:12:28.360 --> 1:12:30.519 really loved about it is that the back of the 1:12:30.520 --> 1:12:34.080 truck bed there's a rolling cover that you can lock, 1:12:34.200 --> 1:12:35.800 and that is really it comes. 1:12:35.520 --> 1:12:36.080 With the truck. 1:12:36.120 --> 1:12:38.400 You deploy it at the push of a button, so 1:12:38.439 --> 1:12:40.519 you can lock the truck bed, which is really great 1:12:40.520 --> 1:12:45.840 and practical, and the inside is really modern, clean, very 1:12:45.880 --> 1:12:48.280 well thought out. I have to give props to Tesla. 1:12:48.360 --> 1:12:51.559 Of course we've heard reports about some poor craftsmanship, but 1:12:51.720 --> 1:12:55.080 this particular cyber truck I drove, I didn't detect any 1:12:55.120 --> 1:12:55.840 of that, all right. 1:12:56.080 --> 1:12:58.040 You were kind of renting it for the day, so 1:12:58.120 --> 1:12:59.920 you had to be probably careful at how much you 1:13:00.040 --> 1:13:02.519 good push it because I know you like to check 1:13:02.560 --> 1:13:04.400 it out on like different terrain. But tell us a 1:13:04.400 --> 1:13:05.960 little bit about the ride and what it was like. 1:13:06.479 --> 1:13:10.040 So I wanted to have a very la day with 1:13:10.160 --> 1:13:13.320 this truck, which as you might imagine, would involve a 1:13:13.360 --> 1:13:16.880 photo shoot, a coffee run, maybe a lunch, you know, 1:13:17.000 --> 1:13:20.360 somewhere a little bit fancy in West Hollywood. I even 1:13:20.400 --> 1:13:24.080 went to home depot with it and was practically swarmed there. 1:13:24.640 --> 1:13:26.800 The owner of the truck from Touro did ask that 1:13:26.840 --> 1:13:29.000 I not take it off road, and that's that's fair. 1:13:29.280 --> 1:13:31.400 So this truck admittedly was coddled. 1:13:31.479 --> 1:13:34.320 We don't actually know how it will do over the 1:13:34.360 --> 1:13:36.639 long term, and we certainly don't know how it would 1:13:36.680 --> 1:13:39.880 do off road in a real rugged environment. This truck 1:13:39.920 --> 1:13:42.599 weighs almost seven pounds, so it's a lot of weight, 1:13:42.600 --> 1:13:45.640 but also a six hundred horsepower and instant torque, so 1:13:45.880 --> 1:13:49.479 it does feel really fast. Of course, it's silent. The 1:13:49.560 --> 1:13:53.080 brakes are really great, and the rear wheel steering makes 1:13:53.080 --> 1:13:56.160 it actually pretty easy to park and gives it some 1:13:56.200 --> 1:14:00.360 great turning radiuses when you're parking. And the valets I know, 1:14:00.439 --> 1:14:02.880 when I had them park it at the Chateau Marmont. 1:14:02.840 --> 1:14:06.400 I don't believe you went there. They appreciated it. I 1:14:06.479 --> 1:14:09.599 love it. Listen, you pop into a lot of different cars, 1:14:09.720 --> 1:14:12.080 a lot of you know, similar kind of I don't know, 1:14:12.280 --> 1:14:14.479 trucks with a lot of hef I think about the 1:14:14.560 --> 1:14:16.479 Hummer ev You're right about this in the story the 1:14:16.840 --> 1:14:19.800 Rolls Royce specter. I mean, how did it compare to 1:14:19.920 --> 1:14:21.559 some of the other ones that you might put in 1:14:21.560 --> 1:14:22.280 this category. 1:14:22.720 --> 1:14:27.240 Very comparable in terms of driving range, in terms of power, 1:14:27.640 --> 1:14:31.719 in terms of driveability, I would say very comparable. I 1:14:31.840 --> 1:14:35.320 actually back to the driving range. You know, Tesla says 1:14:35.360 --> 1:14:37.839 about three hundred and forty miles on a single charge. 1:14:37.920 --> 1:14:39.840 Probably in real life driving it's going to be less 1:14:39.880 --> 1:14:43.960 than that. But you know, comparable to the Rivian R 1:14:44.080 --> 1:14:48.960 one t about the same horse power. But I will 1:14:49.000 --> 1:14:53.679 say again back to this nimble maneuverability in small clothes sections. 1:14:53.720 --> 1:14:57.720 I actually felt the cyber truck, for its size, really excelled. 1:14:57.760 --> 1:14:59.880 I really did think they did a great job with that. 1:15:00.080 --> 1:15:01.639 All right, But if you're sitting in the rear seat, 1:15:01.680 --> 1:15:03.519 it ain't so comfortable, right because I mean, if you 1:15:03.560 --> 1:15:06.040 look at the roof, the pitch is pretty rough. 1:15:06.600 --> 1:15:09.160 Yes, as with any truck, the rear seat is a 1:15:09.200 --> 1:15:12.479 little bit compromised. And with the cyber truck, you've got 1:15:12.520 --> 1:15:16.679 this steep roofline that is almost like a triangle shaped 1:15:17.040 --> 1:15:20.840 and it does compromise the rear headroom a little bit, 1:15:21.000 --> 1:15:24.120 especially if you're really tall, you might notice it. So 1:15:24.160 --> 1:15:26.120 you're not going to want to put your tallest friend 1:15:26.280 --> 1:15:28.160 or your kid brother in the back if he's a 1:15:28.160 --> 1:15:32.800 big guy. But you know, it wasn't horrible. I would 1:15:32.880 --> 1:15:35.880 say it wasn't horrible. It's a three person bench seat 1:15:35.880 --> 1:15:37.520 in the back. It's doable. 1:15:37.960 --> 1:15:39.920 Favorite thing about it, Hannah. 1:15:39.479 --> 1:15:43.720 You know, I actually loved how it really caused an 1:15:43.760 --> 1:15:46.800 emotional reaction for people. And like I said at the 1:15:46.800 --> 1:15:51.080 start of this conversation, so many things look safe and 1:15:51.200 --> 1:15:54.920 ubiquitous and they all just look the same. And whatever 1:15:54.960 --> 1:15:57.240 you think of the cyber truck, at least they have 1:15:57.320 --> 1:15:59.680 a strong point of view and a strong design, and 1:16:00.120 --> 1:16:03.040 least in Los Angeles, people got really excited about it. 1:16:03.080 --> 1:16:05.840 I love seeing the enthusiasm. Really cool, and I love 1:16:05.840 --> 1:16:08.040 how you finish up your story that when your time 1:16:08.160 --> 1:16:09.639 was up and you had to deliver it, you got 1:16:09.680 --> 1:16:11.400 up early because you wanted, what one more cup of 1:16:11.400 --> 1:16:13.240 coffee in LA Are you ready to give it back? 1:16:14.040 --> 1:16:14.240 Yeah? 1:16:14.280 --> 1:16:14.920 I have to say. 1:16:14.960 --> 1:16:17.639 You know, some cars I'm actually glad to give get 1:16:17.720 --> 1:16:19.599 rid of and give back this cyber truck. 1:16:19.640 --> 1:16:21.679 I would have kept it for the weekend. At least 1:16:21.800 --> 1:16:24.280 it's fun. I love it. Hey, how much does it cost? 1:16:24.280 --> 1:16:24.839 For quickly? 1:16:25.640 --> 1:16:28.559 So the one I drove costs around one hundred thousand dollars. 1:16:29.000 --> 1:16:32.680 Cheaper versions cost about seventy six thousand, and then we're 1:16:32.680 --> 1:16:35.160 going to have some higher performance versions coming out later 1:16:35.479 --> 1:16:37.120 for one hundred and twenty or so. 1:16:37.320 --> 1:16:40.120 Such great stuff. Love it, love the photos, Love you, 1:16:40.360 --> 1:16:43.400 Love your story. Bloomberg pursuits auto columnist Hannah Elliott out 1:16:43.400 --> 1:16:45.080 there in La Hannah, take care. 1:16:45.560 --> 1:16:48.800 This is the Bloomberg Business Week podcast. I've a little 1:16:48.800 --> 1:16:51.479 lot of Apple and Spotify and anywhere else you get 1:16:51.560 --> 1:16:55.479 your podcast. Listen live weekday afternoons from two to five 1:16:55.560 --> 1:16:59.559 pm Easter on Bloomberg dot Com, the iHeartRadio app, tune In, 1:16:59.640 --> 1:17:02.240 and the Bloomberg Business And you can also watch us 1:17:02.280 --> 1:17:05.840 live every weekday on YouTube and always on the Bloomberg 1:17:05.920 --> 1:17:06.280 terminal