WEBVTT - Palantir Is Bad-Mouthing Big Tech While Taking Its Tech Public: Chafkin 0:00:01.400 --> 0:00:04.120 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along 0:00:04.120 --> 0:00:06.200 with my co host of Bonnie Quinn. Every business day 0:00:06.240 --> 0:00:10.400 we bring you interviews from CEOs, market pros, and Bloomberg experts, 0:00:10.440 --> 0:00:13.600 along with essential market moving news. Kind the Bloomberg Markets 0:00:13.600 --> 0:00:17.000 Podcast on Apple Podcasts or wherever you listen to podcasts, 0:00:17.000 --> 0:00:21.520 and on Bloomberg dot com. Well, another big tech I 0:00:21.720 --> 0:00:26.160 p O is coming Palentteer Technologies, a widely anticipated IPO 0:00:26.520 --> 0:00:29.920 is making its way through the process. Here. It's a 0:00:29.920 --> 0:00:34.839 fascinating story, fascinating company, fascinating founders and names as well. 0:00:34.880 --> 0:00:36.960 To help us bring us up to speed on all 0:00:36.960 --> 0:00:40.120 things Paloteer, we welcome Max Chaffkin, Features editor for Bloomberg 0:00:40.120 --> 0:00:42.400 Business Week. Max, thanks so much for joining us here. 0:00:42.440 --> 0:00:45.000 I thought I saw your piece and I love the headline. 0:00:45.800 --> 0:00:49.680 Paloteers really no friend to Silicon Valley, are they? Well, 0:00:49.840 --> 0:00:52.280 it's kind of interesting, and I have to correct you 0:00:52.320 --> 0:00:54.400 here that it's actually a direct list thing, which is 0:00:54.600 --> 0:00:56.920 that's right, I mean, very similar to an I p O. 0:00:57.120 --> 0:00:59.920 But but but they're not issuing new shares and the 0:01:00.800 --> 0:01:03.640 shares have sold somewhat differently. Um kind of new hot 0:01:03.640 --> 0:01:06.679 phenomena in Silicon Valley. You know, it's interesting the question 0:01:06.720 --> 0:01:12.360 because Palentteer for years was basically the Silicon Valley defense contractor. 0:01:12.480 --> 0:01:15.399 That was kind of a pitch. You know. Peter Thiel, uh, 0:01:15.520 --> 0:01:19.600 the the venture capitalist entrepreneur, founder of PayPal, uh was 0:01:19.640 --> 0:01:22.039 that you know, basically came up with the idea and 0:01:22.040 --> 0:01:24.440 and and this company was pitching you know, the US 0:01:24.520 --> 0:01:26.880 government for a long time as the like we're gonna 0:01:26.880 --> 0:01:29.959 bring kind of Silicon Valley thinking, um and try to 0:01:30.000 --> 0:01:33.520 display some of these entrenched defense contractors, you know, like 0:01:33.680 --> 0:01:38.000 names like Raypeon. Now, um, what's happened is Palanteer is 0:01:38.040 --> 0:01:41.280 now one of those defense contractors and we're seeing sort 0:01:41.319 --> 0:01:44.520 of a pivot where where as Silicon Valley has sort 0:01:44.560 --> 0:01:47.560 of uh as things have become polarizing Silicon Valley. You know, 0:01:47.600 --> 0:01:50.400 obviously a lot of liberals, um, who are who are 0:01:50.480 --> 0:01:53.120 very against Trump are are work at work at the 0:01:53.160 --> 0:01:55.880 Silicon Valley companies, Palentteers kind of trying to chart a 0:01:55.920 --> 0:02:01.280 slightly different path. Is there enough for somebody to get involved, 0:02:01.360 --> 0:02:05.760 so private equity or one of these SPACs that's roaming 0:02:05.760 --> 0:02:09.120 around the place. So it's talent here. I mean the 0:02:09.160 --> 0:02:12.160 direct list thing is happening. Although they did today just 0:02:12.680 --> 0:02:14.359 uh you know update the day it was supposed to 0:02:14.360 --> 0:02:16.560 happen on in September twenty three. It looks like now 0:02:16.680 --> 0:02:19.400 the stock will begin listing on the twenty nine. But 0:02:19.400 --> 0:02:23.760 but this is happening in the next you know, this month. Um, So, 0:02:23.760 --> 0:02:26.400 so there's definitely not a not a spack situation or 0:02:26.400 --> 0:02:29.440 although I suppose, you know, anything could happen. I mean, 0:02:29.560 --> 0:02:32.480 one thing that is interesting here is Talent here is 0:02:32.560 --> 0:02:35.720 kind of typically described as a startup, but it's been 0:02:35.760 --> 0:02:37.240 around for a really long time. It's been around for 0:02:37.240 --> 0:02:39.880 seventeen years um, which is again another way in which 0:02:39.960 --> 0:02:42.760 is not not exactly a conventional Pilicon Valley company. And 0:02:42.800 --> 0:02:45.760 they've raised you know, a turn of late stage capital. 0:02:45.880 --> 0:02:48.720 So so it's not it's it's a little bit different 0:02:48.720 --> 0:02:50.720 than than a conventional startup. And that's actually one of 0:02:50.720 --> 0:02:54.800 the reasons we've seen some skepticism from investors an analysts 0:02:54.840 --> 0:02:57.239 because they've been around for a really long time um 0:02:57.360 --> 0:03:01.320 and are still not making any money. So, Max, what's 0:03:01.320 --> 0:03:04.240 the feeling on the street as to this company? We've 0:03:04.280 --> 0:03:08.880 seen some really well received technology uh new issues Uh 0:03:09.000 --> 0:03:11.200 this year, is there a sense that this is a 0:03:11.240 --> 0:03:15.639 stock that big tech investors need to own. Well, you 0:03:16.000 --> 0:03:20.040 have a really wide range of sort of expectations and valuations, 0:03:20.040 --> 0:03:24.400 which is part of a feature of these direct listings. UM. 0:03:24.520 --> 0:03:28.600 But but what what kind of what's driving the conversation? Uh, 0:03:28.960 --> 0:03:33.840 it was basically COVID. So Palentteer in many ways COVID 0:03:33.960 --> 0:03:37.080 is a great opportunity for this company. What what Palentteer 0:03:37.120 --> 0:03:40.680 does is data integration. They take UM numbers from all 0:03:40.720 --> 0:03:44.400 different parts of businesses or or governments and they make 0:03:44.400 --> 0:03:47.040 it easy for companies, governments to make sense of them. 0:03:47.040 --> 0:03:49.600 So if you think about, you know, the typical things 0:03:49.640 --> 0:03:52.080 that these these large corporations are dealing with with COVID 0:03:52.120 --> 0:03:54.920 in terms of like looking at where are the outbreaks, 0:03:55.240 --> 0:03:57.360 what kind of PPE do I have? How do I 0:03:57.400 --> 0:04:00.640 allocate that PP? How do I know project sale? That's 0:04:00.720 --> 0:04:05.080 all stuff that palent here Um can do. So so 0:04:05.160 --> 0:04:07.080 that and and so that's kind of like a new 0:04:07.160 --> 0:04:09.320 source of demand. And as we report in our story, 0:04:09.640 --> 0:04:12.400 you know, they've done a lot of new deals over 0:04:12.440 --> 0:04:15.760 the last six months or so. And you know, cost 0:04:15.800 --> 0:04:18.520 has been a huge thing for this company, where they 0:04:18.560 --> 0:04:21.200 were spending huge amounts of money flying these um you 0:04:21.240 --> 0:04:23.920 know sort of pseudo sales people that they call them 0:04:23.920 --> 0:04:27.720 forward to Floyd engineers all around the world pitching the software, 0:04:28.040 --> 0:04:30.600 you know, spending a portion basically selling this stuff. And 0:04:30.640 --> 0:04:32.760 now they're doing that you know obviously over zoom like 0:04:32.760 --> 0:04:34.359 like the rest of us. So that's kind of a 0:04:34.480 --> 0:04:37.520 huge um sort of change in the business. Now it's 0:04:37.560 --> 0:04:41.080 not totally clear how sustainable it is, how big those 0:04:41.120 --> 0:04:44.360 deals are gonna be. And you have this big wild 0:04:44.360 --> 0:04:47.520 card in the election. Palanteers a company that has done 0:04:47.640 --> 0:04:50.760 very well um over the last four years with the 0:04:50.800 --> 0:04:54.200 current administration, and you know, obviously no guarantees that that 0:04:54.200 --> 0:04:58.120 that continues UM past November. Peter t obviously owns a 0:04:58.120 --> 0:05:02.080 lot of it, max is they suggestion that he will 0:05:02.120 --> 0:05:05.320 sell some of what he owns UM. I don't think 0:05:05.320 --> 0:05:08.440 we know exactly how how that's all going to shake out. 0:05:08.600 --> 0:05:11.400 There is an immediate lock up where where the investors 0:05:11.400 --> 0:05:14.200 are are prevented from selling you know, most of their 0:05:14.520 --> 0:05:17.960 stock within the first couple of months. Um. You know, 0:05:18.160 --> 0:05:20.400 I think the nature of the direct list thing is 0:05:20.440 --> 0:05:25.080 you would expect existing investors, especially these big investors, and 0:05:25.120 --> 0:05:27.800 Peter Teel owns a lot of this stock as you say, uh, 0:05:27.839 --> 0:05:31.159 to to start, you know, pering down their their holdings, 0:05:31.279 --> 0:05:33.719 especially if we see it, you know, open up with 0:05:33.760 --> 0:05:37.040 a big valuation because you know it'll that will suddenly 0:05:37.160 --> 0:05:40.040 be like a lot of Peter Teel's net worth UM. 0:05:40.120 --> 0:05:42.680 And And the other thing that's kind of interesting is 0:05:42.720 --> 0:05:47.440 Palanteer has a very unusual structure. So it's it's it's 0:05:47.480 --> 0:05:51.400 there's um, there's a trust, and that trust has has 0:05:51.640 --> 0:05:54.080 three sort of main shareholders, one of whom is Peter Teal. 0:05:54.360 --> 0:05:57.840 This group can basically control the company even if they 0:05:57.880 --> 0:06:02.040 start paring down UM their shares. So so so there 0:06:02.040 --> 0:06:03.880 are a lot of reasons why why you would think 0:06:03.920 --> 0:06:06.760 that some of these large shareholders will at least start 0:06:06.839 --> 0:06:08.680 to pair back if not, if not sell kind of 0:06:08.720 --> 0:06:11.280 a substantial amount UM in the next year or so. 0:06:11.279 --> 0:06:14.200 So Max, I hate to ask a nitpicky question, but 0:06:14.279 --> 0:06:19.320 does this company make any money? No? As I said, uh, 0:06:19.440 --> 0:06:23.480 the loss, uh, the loss that have been huge. You know, 0:06:23.680 --> 0:06:25.279 on the top of my head, I think, you know, 0:06:25.640 --> 0:06:28.880 something like four million dollars last year, four hundred five 0:06:28.920 --> 0:06:32.360 hundred million dollars last year on seven eight million in 0:06:32.440 --> 0:06:36.480 revenue UM. Uh. But the crucial thing is the losses 0:06:36.480 --> 0:06:38.520 have gotten a lot better. If you look at it, 0:06:38.520 --> 0:06:42.120 their their revenue went has gone way up first half 0:06:42.279 --> 0:06:47.559 of compared to losses have gone way down. And that's 0:06:47.800 --> 0:06:52.040 because of of partly because of COVID and partly because 0:06:52.880 --> 0:06:54.920 other parts of their business were doing really well. They've 0:06:54.960 --> 0:06:57.880 got this huge contract um with the army and and 0:06:57.920 --> 0:06:59.920 that money is starting to come in. So the bet, 0:07:00.040 --> 0:07:02.560 the long term bet for investors is that you know, 0:07:02.640 --> 0:07:04.880 this is just the beginning and these trends are going 0:07:04.920 --> 0:07:07.960 to continue. And of course the kind of bear case 0:07:08.279 --> 0:07:11.320 is that, look is a quote unquote startup that's been 0:07:11.320 --> 0:07:13.600 around for seventeen years and it's still losing huge amounts 0:07:13.600 --> 0:07:15.560 of money. You know what makes us think that this 0:07:15.640 --> 0:07:17.240 is gonna that this is gonna get any better in 0:07:17.240 --> 0:07:19.720 the future. Max, It's a great read, and thanks for 0:07:19.760 --> 0:07:23.000 coming on and explaining all about Volunteered to us. Looking 0:07:23.040 --> 0:07:25.760 forward to hearing more from you on that score. Max Chafkin, 0:07:26.120 --> 0:07:28.960 author of Volunteer is bad mouthing Big Tank while taking 0:07:28.960 --> 0:07:32.720 its tech public. He's also Bloomberg business Week Features editor 0:07:33.240 --> 0:07:35.280 and you can follow him on Twitter as well. Very 0:07:35.360 --> 0:07:40.720 interesting guy to follow on Twitter. Well. The markets have 0:07:40.800 --> 0:07:44.080 certainly taken their cue from the Federal Reserve. The feed 0:07:44.120 --> 0:07:48.680 has been pumping liquidity into this marketplace, providing a backstop 0:07:48.720 --> 0:07:52.320 for risk assets across the board, particularly the equity assets. 0:07:52.520 --> 0:07:54.400 The question is where do we go from here? Is 0:07:54.720 --> 0:07:58.200 fiscal stimulus needed for a next move up? How at 0:07:58.320 --> 0:08:01.760 risk is this market? Useef A Bassi, global market strategist 0:08:01.800 --> 0:08:05.280 for stone X Group, joins us uh. You said, thanks 0:08:05.320 --> 0:08:07.000 so much for joining us here. I mean, there's so 0:08:07.040 --> 0:08:10.240 many variables for investors to discount here just over the 0:08:10.280 --> 0:08:13.080 next couple of months. We've got the elections, We've got 0:08:13.080 --> 0:08:16.600 potential fiscal stimulus, and of course we have the path 0:08:16.760 --> 0:08:20.520 of the pandemic and potential vaccines. How do you put 0:08:20.560 --> 0:08:24.440 all that together into a market call? Yeah, I mean 0:08:24.880 --> 0:08:29.080 it's it's incredibly difficult, right you. You've highlighted several factors, 0:08:29.120 --> 0:08:31.560 and some of which you're exogenists and we're not used 0:08:31.600 --> 0:08:33.760 to really dealing with, so it does become a little 0:08:33.800 --> 0:08:37.439 bit challenging. Now we are fairly cautious into year end. 0:08:37.840 --> 0:08:40.640 We understand that most of the market risks have really 0:08:40.640 --> 0:08:43.280 been dulled by the FED and the level of stimulus 0:08:43.320 --> 0:08:46.960 that has been conducted but at the same time, there 0:08:47.040 --> 0:08:49.400 is a rebasing going on in the market currently, and 0:08:49.440 --> 0:08:51.400 you have to listen to what the market is currently 0:08:51.400 --> 0:08:53.959 telling you. The NASDAC is poised to have its worst 0:08:54.040 --> 0:08:57.679 months since uh December two eighteen, and who can forget 0:08:57.720 --> 0:09:00.679 that massive unwined stuff off we've experienced end, So you 0:09:00.760 --> 0:09:03.520 have to listen to this market right now and from 0:09:03.559 --> 0:09:06.880 where sentiment is lying, we are searching for leadership. Unfortunately 0:09:06.960 --> 0:09:10.120 we haven't found it. So in terms of moving forward 0:09:10.520 --> 0:09:13.560 with regards to a vaccine, with regards to a second wave, 0:09:14.000 --> 0:09:17.360 you really don't understand exactly where they are and prognosticators 0:09:17.360 --> 0:09:19.800 can try to predict which comes first, but the reality 0:09:19.920 --> 0:09:22.720 is right now, the best way to play this is 0:09:22.760 --> 0:09:25.480 to be cautious, have some cash ready on the sidelines, 0:09:25.520 --> 0:09:28.600 and probably take a barbell approach to your investment. Right now, 0:09:29.120 --> 0:09:32.520 what would the other side of the barbell be, So, 0:09:32.679 --> 0:09:35.160 if you are looking at how we would want to 0:09:35.160 --> 0:09:37.520 play this barbell, we think that you should be taking 0:09:37.520 --> 0:09:40.680 advantage of looking at some of the very high quality 0:09:40.760 --> 0:09:44.360 tech names that have seen pullbacks that have basically given 0:09:44.360 --> 0:09:47.400 back almost the entire Q three move. And if you're 0:09:47.440 --> 0:09:49.800 looking at those franchises. We think that there are interesting 0:09:49.840 --> 0:09:52.480 opportunities to buy them on weakness and that will position 0:09:52.520 --> 0:09:55.200 you well on the growth side. On the value side, 0:09:55.559 --> 0:09:58.240 we think that you cannot ignore the fact the the 0:09:58.440 --> 0:10:01.640 materials and industrials have really been the sectors that haven't 0:10:01.640 --> 0:10:03.960 really broken trend while the rest of the market seem 0:10:04.000 --> 0:10:06.080 to be risking, and that's in a large part due 0:10:06.080 --> 0:10:08.160 to the fact that there is still an overwhelming demand 0:10:08.600 --> 0:10:11.920 for hard commodities and hard assets. So gold, copper, or 0:10:11.960 --> 0:10:15.200 silver continue to act well, and those materials names continue 0:10:15.200 --> 0:10:16.360 to be a play we want to be in in 0:10:16.440 --> 0:10:19.760 value also in value. We'd like to complement that by 0:10:19.760 --> 0:10:23.160 looking at them aligned banks. The sector is unloved, under owned, 0:10:23.679 --> 0:10:26.000 obviously going through a round two of a stress test, 0:10:26.440 --> 0:10:29.320 but we think most financial investors understand the capital returns 0:10:29.320 --> 0:10:33.400 aren't going to return anyway, and we think that if 0:10:33.440 --> 0:10:36.719 we do get a vaccine, these banks will be poised 0:10:36.920 --> 0:10:39.680 to come back to be able to maybe even unwind 0:10:39.720 --> 0:10:41.680 some of the reserves they've built and put those back 0:10:41.720 --> 0:10:47.000 into earnings usef we have elections coming up November three, 0:10:47.080 --> 0:10:49.559 there's a lot of concern, I would say, some growing 0:10:49.600 --> 0:10:52.480 concern in the marketplace that to the extent that this 0:10:52.559 --> 0:10:55.000 is a contested election, in an election that could be 0:10:55.000 --> 0:10:58.880 contested for a long period of time heading into next year, 0:10:58.920 --> 0:11:01.560 that that could be a really real issue for the market. 0:11:01.559 --> 0:11:04.800 How do you figure that into your calculus. Yeah, So 0:11:05.000 --> 0:11:08.600 consensus thought right now is that this will be a 0:11:08.600 --> 0:11:12.520 contested election, right, So, considering the fact that we've seen 0:11:12.559 --> 0:11:14.439 the market kind of understand that for at least a 0:11:14.440 --> 0:11:18.000 few weeks now and start to digest it, We've seen investors, 0:11:18.080 --> 0:11:20.800 rather than really taking risk off dramatically in the market, 0:11:21.040 --> 0:11:24.959 attempt to hedge by going along, you know, vix options 0:11:25.640 --> 0:11:28.520 out of the money. Vixed calls were a popular way 0:11:28.559 --> 0:11:30.400 to hedge. We saw sizeable trades in that over the 0:11:30.440 --> 0:11:32.640 past two weeks. So I would say, you know, people 0:11:32.640 --> 0:11:36.319 are thinking about a volatility move rather than taking money 0:11:36.320 --> 0:11:38.679 off the table for equities. And I think to some 0:11:38.760 --> 0:11:41.160 extent that speaks to the fact that people do believe 0:11:41.440 --> 0:11:44.360 that the FED has dubed some of the impacts of 0:11:44.400 --> 0:11:47.040 these risks. So yes, at this point, I think everyone 0:11:47.080 --> 0:11:48.680 on the street or the majority of the street, is 0:11:48.679 --> 0:11:52.040 expecting a contested election. I think the aftermath is certainly 0:11:52.040 --> 0:11:55.160 going to be interesting. Smooth transition of powers, and question 0:11:55.559 --> 0:11:58.480 potential civil unrest is in question. You can argue that 0:11:58.559 --> 0:12:02.560 some of these could potentially be inflationary factors. So in 0:12:02.600 --> 0:12:05.000 the calculus, this is why one of the reasons we 0:12:05.040 --> 0:12:07.000 do want to keep that Barbell approach. We want to 0:12:07.080 --> 0:12:09.800 keep you exposed to tech and growth in case we 0:12:09.880 --> 0:12:13.880 see those disinflationary or deflationary factors, which should help multiples, 0:12:14.240 --> 0:12:16.760 And we want you exposed to value because if there 0:12:16.840 --> 0:12:21.120 is any semblance, even transitory inflation, you could see multiples 0:12:21.120 --> 0:12:22.840 start to come in and you can see values start 0:12:22.840 --> 0:12:27.960 to out. For one, where do you see inflation coming from? 0:12:27.960 --> 0:12:29.960 So this is a great question, right because the FED 0:12:30.040 --> 0:12:34.440 has been an apt at impacting inflation. So the real 0:12:34.480 --> 0:12:37.520 potential for inflation comes from fiscal stimulus. Right, So we 0:12:37.600 --> 0:12:41.400 do get another fiscal stimulus package that could be inflationary. Now, 0:12:41.440 --> 0:12:45.319 the odds of one happening before an election have dwindled dramatically. 0:12:45.760 --> 0:12:48.440 But we think about stimulus in another way, and I 0:12:48.480 --> 0:12:49.960 think this is how people have to think about it 0:12:50.000 --> 0:12:53.560 as well. Corporates are going to want to control their 0:12:53.600 --> 0:12:56.520 supply chains more adequately. On the back of COVID nineteen. 0:12:56.840 --> 0:12:59.240 We are going to see a move with regards to 0:12:59.280 --> 0:13:02.640 re onshore, we are going to see a shift in 0:13:02.679 --> 0:13:05.400 the economy and rein shoring is going to be one 0:13:05.440 --> 0:13:08.040 of those places where we see more investment in the U. 0:13:08.120 --> 0:13:11.079 S economy and we could potentially start to see inflation 0:13:11.360 --> 0:13:13.440 from that. Now, that's not to say that we're not 0:13:13.480 --> 0:13:16.800 already seeing inflation and hard asset prices. Right, food prices, 0:13:16.840 --> 0:13:19.560 for example, We're already seeing signs of inflation. So it 0:13:19.679 --> 0:13:23.320 just depends on if that inflation hits the real economy 0:13:23.360 --> 0:13:26.880 significantly enough. What will the FED do then? Right? And 0:13:26.920 --> 0:13:30.880 I understand average inflation targeting clearly tempers expectations and they 0:13:30.880 --> 0:13:34.319 can point to transitory inflation, but still the impact to 0:13:34.360 --> 0:13:37.440 asset prices might be real. All right, Well, thank you 0:13:37.559 --> 0:13:41.240 very much, much appreciated there. From a stone X group, 0:13:41.400 --> 0:13:46.000 we were talking to Youth of Embassy, whose global market strategist. 0:13:46.080 --> 0:13:48.200 This on a day we're we're not seeing too much 0:13:48.200 --> 0:13:50.680 movement in the markets, but what movement we are seeing 0:13:50.760 --> 0:13:53.680 is lower and as Dave Wilson said earlier on really 0:13:53.679 --> 0:13:56.000 wait till the close of trading today to see all 0:13:56.000 --> 0:14:01.400 that action. It is time for Boomberg opinion we're joined 0:14:01.400 --> 0:14:05.240 by Sarah Howzac Bloomberg Opinion retail columnists out with a 0:14:05.400 --> 0:14:10.319 fascinating uh column just recently talking about or comparing Amazon 0:14:11.120 --> 0:14:15.280 to Walmart, and these companies are increasingly looking a lot 0:14:15.440 --> 0:14:17.400 like each other. I think back to the news where 0:14:17.400 --> 0:14:21.920 Amazon's opening up a thousand small delivery facilities and suburbs 0:14:21.920 --> 0:14:24.200 and cities and kind of putting out a kind of 0:14:24.240 --> 0:14:27.480 a footprint that is replicating in some respects Amazon, and 0:14:27.520 --> 0:14:30.680 of course Amazon getting into a Walmart, getting into a 0:14:30.800 --> 0:14:33.880 kind of a prime like business. Sarah, thanks so much 0:14:33.920 --> 0:14:36.360 for joining us here, talk to us about your column 0:14:36.440 --> 0:14:38.960 here and how these two companies are starting to kind 0:14:38.960 --> 0:14:42.680 of look like mirror images of one another exactly. So 0:14:42.800 --> 0:14:45.520 with these many warehouses that Amazon is rolling out, they're 0:14:45.560 --> 0:14:49.200 effectively making a concession to a premise that Walmart has 0:14:49.240 --> 0:14:52.240 held for a long time, which is that it matters 0:14:52.280 --> 0:14:54.720 to be close to your consumer when it comes to 0:14:54.840 --> 0:14:58.200 delivery speed. So Walmart has four thousand stores around the 0:14:58.240 --> 0:15:01.280 country and they've been using those in particular to deliver 0:15:01.520 --> 0:15:06.000 groceries quickly. And they have stores the U S population 0:15:06.040 --> 0:15:08.520 lives within ten minutes of a Walmart. You can see 0:15:08.560 --> 0:15:10.800 the benefit of being close to the consumer right in 0:15:10.840 --> 0:15:12.760 the towns where they live, as opposed to in some 0:15:12.920 --> 0:15:16.080 far flung warehouse, uh far down the highway. And so 0:15:16.200 --> 0:15:19.640 by making these mini warehouses, Amazon is kind of agreeing 0:15:19.680 --> 0:15:22.720 with that as a business model and embracing it. How 0:15:22.800 --> 0:15:26.640 much development of technology has Walmart been doing behind the scenes, Sarah, 0:15:26.640 --> 0:15:29.560 because it seems to me that suddenly it's trying to 0:15:29.640 --> 0:15:32.520 be and is being, a technology company. It also made 0:15:32.560 --> 0:15:35.200 a bid for a part of the TikTok Us operations, 0:15:35.200 --> 0:15:40.600 remember exactly. So digital advertising in particular has been a 0:15:40.600 --> 0:15:43.800 big focus for Walmart recently. They believe that they have 0:15:43.880 --> 0:15:46.560 a big trove of data on their customers both they's 0:15:46.560 --> 0:15:48.920 done what they do in stores and online. A hundred 0:15:48.960 --> 0:15:51.680 sixty million people trapped with Walmart every week. That's a 0:15:51.720 --> 0:15:55.120 lot of data. And they see how Amazon has become 0:15:55.360 --> 0:15:58.400 a really big force in the digital advertising space based 0:15:58.400 --> 0:16:00.960 on the data and information they have with out their customers, 0:16:01.160 --> 0:16:04.680 and so Walmart wants to replicate something similar, become a 0:16:04.720 --> 0:16:08.040 digital advertising jugger not and in turn have this more 0:16:08.120 --> 0:16:11.800 profitable revenue stream that helps offset some of the expense 0:16:11.840 --> 0:16:13.880 that they're incurring. Is more and more of their business 0:16:13.880 --> 0:16:18.280 moves online. So Walmart's business Sarah, it's it's amazing they're 0:16:18.320 --> 0:16:21.080 digital business. I started really following closely several years ago, 0:16:21.120 --> 0:16:23.960 and they really after some fits and starts, they've really 0:16:24.000 --> 0:16:28.200 seem to get their uh dot com platform really ramping up, 0:16:28.280 --> 0:16:31.840 putting up you know, solid plus kind of growth. Um 0:16:31.880 --> 0:16:34.200 where do they think their digital business is going to 0:16:34.280 --> 0:16:38.640 ultimately end up? They haven't offered a lot of specifics 0:16:38.680 --> 0:16:41.280 on that, but I think that they see grocery as 0:16:41.320 --> 0:16:44.320 the key to winning in that space. It's an area 0:16:44.360 --> 0:16:46.760 where they really feel like they have an advantage to Amazon. 0:16:47.000 --> 0:16:49.840 And it's also an area they really simply cannot afford 0:16:49.920 --> 0:16:53.800 to lose on fift of Walmart US businesses grocery, so 0:16:53.920 --> 0:16:56.880 they cannot seed market share there to Amazon. And that's 0:16:56.880 --> 0:16:59.280 where this Walmart Plus membership that they just rolled out 0:16:59.320 --> 0:17:02.280 comes into way. Grocery is sort of the centerpiece of it. 0:17:02.320 --> 0:17:05.160 For ninety eight dollars a year, you get unlimited free 0:17:05.200 --> 0:17:09.200 grocery deliveries, and that is clearly a bid to, among 0:17:09.240 --> 0:17:12.199 other things, hang on to their grocery shopping customers and 0:17:12.240 --> 0:17:17.680 continue to be the leader in in that space. Will 0:17:17.720 --> 0:17:21.480 the other companies be able to stave off the Walmart advance. 0:17:21.680 --> 0:17:26.080 And I'm talking about Amazon, I suppose mainly, I think 0:17:26.119 --> 0:17:29.239 so look at Walmart Plus. I suspect what it's not 0:17:29.320 --> 0:17:31.760 going to do is make a dent in Prime membership. 0:17:32.040 --> 0:17:34.520 But one d fifty million people who already have Prime 0:17:34.560 --> 0:17:38.440 memberships are locked into that ecosystem, and of course that 0:17:38.520 --> 0:17:41.040 ecosystem is loaded up with all sorts of other goodies, 0:17:41.080 --> 0:17:43.399 you know, TV programming, music, that kind of thing. So 0:17:43.400 --> 0:17:45.040 I don't think Walmart Plus is going to have that 0:17:45.080 --> 0:17:48.000 much sick stuss peeling away prime members I think it's 0:17:48.119 --> 0:17:50.879 key function is going to be hanging onto the people 0:17:50.880 --> 0:17:53.920 who already shop at Walmart and giving them a real 0:17:54.000 --> 0:17:56.639 value play. Also, the pandemic has brought a lot of 0:17:56.680 --> 0:17:59.480 new people to online shopping, or at least mean people 0:17:59.480 --> 0:18:03.040 who are in frequent online shoppers into more frequent online shoppers, 0:18:03.200 --> 0:18:05.280 and those people are just now considering some kind of 0:18:05.320 --> 0:18:09.359 membership set up. Walmart has a good chance of getting 0:18:09.359 --> 0:18:12.760 those shoppers business. It's interesting Walmart, you know, I see 0:18:12.800 --> 0:18:17.800 they're kind of raising the pay for some of their employees, 0:18:18.080 --> 0:18:21.760 and of course Walmart's a huge, huge employer in the US. 0:18:21.800 --> 0:18:22.960 What do you make of that is that kind of 0:18:22.960 --> 0:18:26.119 a competitive response to what's going on in the marketplace. 0:18:26.760 --> 0:18:29.760 M I think so. I think that UH and Walmart 0:18:29.760 --> 0:18:31.720 has found over the years. Look a number of years 0:18:31.720 --> 0:18:34.879 ago in the economy was first starting to turn and 0:18:34.920 --> 0:18:38.000 they made a decision to raise their minimum wage. They 0:18:38.119 --> 0:18:41.840 clearly saw the benefits of that in terms of talent retention. 0:18:42.080 --> 0:18:45.359 And they had this big focus at that time called clean, fast, friendly, 0:18:45.640 --> 0:18:49.160 trying to make their stores that are stopped and trying 0:18:49.160 --> 0:18:52.400 to make them less messy, and it really worked when 0:18:52.400 --> 0:18:54.880 they started paying people more. They really saw the results 0:18:54.880 --> 0:18:56.920 of that and it showed up in their comparable sales 0:18:56.920 --> 0:18:59.040 growth numbers. And I think that lesson from a few 0:18:59.080 --> 0:19:01.280 years ago, it's fresh in their mind. And so as 0:19:01.280 --> 0:19:04.080 they approach this kind of unprecedented time as the pandemic 0:19:04.119 --> 0:19:06.520 and are trying to address all this demand in their 0:19:06.560 --> 0:19:09.120 stores and their website, they see pay as a way 0:19:09.920 --> 0:19:12.320 to get the best out of their employees. Right. But 0:19:12.600 --> 0:19:14.679 is it not a little bit more complicated, Sarah, in 0:19:14.680 --> 0:19:17.879 the sense that they are taking out complete layers of 0:19:17.920 --> 0:19:21.000 management by doing this. So they're going to have teams 0:19:21.040 --> 0:19:23.720 and stores, you know, pods if you like, of workers 0:19:24.200 --> 0:19:28.560 and everybody will have to do various different tasks, whereas 0:19:28.600 --> 0:19:31.399 I'm sure before if you reach managerial level, there were 0:19:31.440 --> 0:19:34.320 certain tasks that you wouldn't have to do. Uh, and 0:19:34.320 --> 0:19:38.760 presumably they if there are certain fewer ranks of managers, 0:19:38.800 --> 0:19:44.680 that's the potential right there for lower salaries across the board. Sure, 0:19:44.800 --> 0:19:46.360 that's a good point, And I think it's also worth 0:19:46.400 --> 0:19:49.199 pointing out that these pay increases they just announced, I 0:19:49.200 --> 0:19:51.560 think it only affects something like a hundred thousand workers 0:19:51.560 --> 0:19:55.639 of one and a half exactly exactly, So you know, 0:19:55.720 --> 0:19:58.400 this is this is not we shouldn't be loby posed 0:19:58.400 --> 0:20:00.760 in rainbows about it. Um, they're you know, clearly, it 0:20:00.840 --> 0:20:03.239 is only affecting a small portion of the workforce. And 0:20:03.320 --> 0:20:06.040 I think what you pointed out, and and the relatively 0:20:06.080 --> 0:20:08.359 small pool of workers that are being effected here is 0:20:08.400 --> 0:20:11.840 worth pointing out to Sarah. Any feedback already color on 0:20:11.960 --> 0:20:14.840 how back to school was or is in terms of 0:20:14.880 --> 0:20:20.040 retail sales. Yeah, so I think what we've heard anecdotally 0:20:20.080 --> 0:20:23.760 from retailers is that it seems like it's happening later. 0:20:24.080 --> 0:20:25.800 And that makes a lot of sense because there was 0:20:25.840 --> 0:20:28.159 so much uncertainty right about what school was going to 0:20:28.240 --> 0:20:30.040 look like, was your kid going to be going back 0:20:30.080 --> 0:20:32.160 in person? Were they going to be going back digitally? 0:20:32.400 --> 0:20:34.720 And clearly that effect whether you need to buy, say 0:20:34.800 --> 0:20:37.400 a lunch box or a laptop um. And so the 0:20:37.400 --> 0:20:40.280 theory is that something that spending it typically would have 0:20:40.280 --> 0:20:43.840 happened in July or August was moving to late August 0:20:43.960 --> 0:20:47.919 or perhaps September UM. So that was that was certainly different. 0:20:47.960 --> 0:20:50.760 And I think now we get into this strange time 0:20:50.800 --> 0:20:54.639 period where retailers are really trying to encourage people to 0:20:54.640 --> 0:20:57.520 do their holiday shopping early by trying to move holiday 0:20:57.560 --> 0:21:00.440 shopping more into October in order to able to fin 0:21:00.480 --> 0:21:03.080 out crowds and make people feel comfortable social distancing in 0:21:03.080 --> 0:21:06.240 their stores. And so now I feel like we're approaching 0:21:06.280 --> 0:21:08.040