Speaker 1: This is Bloomberg Business Week Inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business, finance and tech news as it happened. Bloomberg
Speaker 1: Business Week with Carol Messer and Bloomberg Quick Takes Tim
Speaker 1: Stinovic on Bloomberg Radio. Hi, everyone, welcome to the weekend
Speaker 1: edition of Bloomberg Business Week. We've got a special installment
Speaker 1: of our show. This week. We're gonna bring you highlights
Speaker 1: from our coverage of the Milk and Institute Global Conference
Speaker 1: in Beverly Hills. It's an annual convening of global leaders
Speaker 1: in government, finance, health, academia and philanthropy. Last year's event
Speaker 1: it was scaled down and completely remote due to COVID nineteen.
Speaker 1: But this year we were there once again on the
Speaker 1: ground at the Beverly Hilton Hotel and it was a
Speaker 1: reduced crowd size, about half of the attendees as usual
Speaker 1: and Carol, everybody was wearing masks, vaccinated and tested. This
Speaker 1: year's event it centered on the theme of charting a
Speaker 1: new course. We spent three jam pack days examining the
Speaker 1: disruptions and innovation brought on by the global pandemic along
Speaker 1: with social crises, economic hardships that we've seen developed over
Speaker 1: the past year and a half. Some of those hardships
Speaker 1: spurred on by ongoing supply chain shortages. That was something
Speaker 1: that came into so many of our conversations at MILK
Speaker 1: and we're gonna get into that and specifically what the
Speaker 1: White House is doing to relieve some of those pressures.
Speaker 1: Will do that with the seamen's USA President and CEO,
Speaker 1: Barbara Humptons. I have to say, overall, Tim, it was
Speaker 1: just so many of the main macro themes, whether it's
Speaker 1: supply chains, whether it's tensions with China, whether it's finding
Speaker 1: enough UM employees the workforce. You know that that was
Speaker 1: really top of mind for everybody at MILK and one
Speaker 1: of the highlights of the conference, at least for me,
Speaker 1: and I know it was for you as well, was
Speaker 1: when you got to sit down for forty minutes with
Speaker 1: none other than Ark Invests. Cathy would Yeah, she's the founder,
Speaker 1: she's the CEO, she's the c i O of really
Speaker 1: one of the e t f S funds that in
Speaker 1: the last seven years has just taken the world on
Speaker 1: big time with her disruptive and innovative investing strategy. We
Speaker 1: had a wide ranging discussion, everything from China to test
Speaker 1: love course. She says ARCS base case is three thousand
Speaker 1: dollars a share. We even did a little bit of
Speaker 1: crypto talk as well. It was timely because we sat
Speaker 1: down on the day that the new pro Shares Bitcoin
Speaker 1: e t F made its debut, and I asked her
Speaker 1: about that. Speaking of crypto, Toro calls itself the world's
Speaker 1: largest social trading network and it is seeing explosive growth
Speaker 1: in the crypto space. We talked to Toro co founder
Speaker 1: and CEO Yonia. He still expects to go public with
Speaker 1: a spack in the fourth quarter of the year. We
Speaker 1: also talked some politics. Former Labor and Transportation Secretary Lane
Speaker 1: Chaw she stopped by to talk infrastructure, the job market,
Speaker 1: and the shadow cast by former President Donald Trump over
Speaker 1: the Republican Party, particularly in the wake of the January
Speaker 1: six riote at the U S. Capitol Building. Plus, the
Speaker 1: woman behind one of the biggest E s G stories
Speaker 1: of the year, Engine Number One, CEO, Jennifer Grancio, shed
Speaker 1: light on her company's impact investing rategy and the company's
Speaker 1: new Total Value Framework, which establishes forward valuations of public
Speaker 1: companies based on their progress with E s G initiatives.
Speaker 1: You heard about the story with x On Mobile. I
Speaker 1: mean it really truly was that David versus Goliath story.
Speaker 1: I gotta say, I'm a fan girl. Can I say that?
Speaker 1: You can say it? I'll allow it. Okay, thank you
Speaker 1: all of that. More to come. We begin with Orlando Bravo.
Speaker 1: He is founder and managing partner at Tomo Bravo. He
Speaker 1: joined us to talk about the state of specs and
Speaker 1: he could not have been more excited to get back
Speaker 1: to doing business in person after a year and a
Speaker 1: half of Zoom's and virtual meetings. You could just feel
Speaker 1: how much happiness he had to be there in person
Speaker 1: at millkne The conference is awesome. Think about it. We're
Speaker 1: here in l A. A lot of it is outside.
Speaker 1: The weather's perfect. I've gotten to see some of our
Speaker 1: limited partners that I haven't seen in two to three years,
Speaker 1: so some of the old friends, and also meet a
Speaker 1: lot of new people. So it's just been great, one
Speaker 1: eating after the other, right fifteen minute meetings and then
Speaker 1: trying to see as many people face to face, like
Speaker 1: it's remarkable, right, unbelievable. So okay, let's talk about SPACs
Speaker 1: because I was looking at some of the indexes. They're
Speaker 1: down as as a group about ten percent so far
Speaker 1: this year. They're down about if you look at certain
Speaker 1: indexes from the mid February high. Where are we because
Speaker 1: people are talking about the death of SPACs um and
Speaker 1: as to mentioned earlier, I mean, these are cycles that
Speaker 1: things go through. SPACs are not a new investment vehicle exactly.
Speaker 1: Sparks are going to come back. They are They've been
Speaker 1: around for whatever five or thirty years. But why do
Speaker 1: why do we think that there was this incredible craze
Speaker 1: to SPACs. It's because technology companies. There's so much innovation
Speaker 1: and so much new business creation and so many tech
Speaker 1: companies being performed that are getting to scale that the
Speaker 1: financial markets are trying to adapt of how can we
Speaker 1: absorb all these new assets into the market because we're
Speaker 1: not seeing a lot of I I mean, we saw
Speaker 1: the I p O market fall off a little bit,
Speaker 1: right it didn't now it's now it's back. But I'm
Speaker 1: just saying that you know that there's alternatives for going
Speaker 1: public here, and the alternatives are great. Direct list things
Speaker 1: are great, and The spact provides a great alternative because
Speaker 1: it really really does is it allows a company to
Speaker 1: be able to openly talk about its projections with its investors.
Speaker 1: Every investor think about it. If you're looking to buy
Speaker 1: a company, if you're if we are together going to
Speaker 1: buy a private company, wouldn't we like to sit down
Speaker 1: with management and say, let's see what you've done in
Speaker 1: the past, and how do you think about next year
Speaker 1: and the following year, and how does your operating plan
Speaker 1: and strategic plan aligned with that financial plan that you have.
Speaker 1: It gives you so much insights as to how management
Speaker 1: thinks about their own business. But are you concerned at
Speaker 1: all that there is a lack of quality companies to
Speaker 1: be acquired by SPACs that are out there looking for
Speaker 1: targets right now, I'm always concerned about quality. What ended
Speaker 1: up happening as well with this pac boom is a
Speaker 1: number of companies went public through spacts or merged with
Speaker 1: SPACs that are venture capital companies that are really young
Speaker 1: companies now. Retail investors in particular participated in that because
Speaker 1: the regulatory environment doesn't allow them to participate in venture
Speaker 1: capital and private equity, so they rushed to this market,
Speaker 1: and then the regulators get worried that, oh, they're gonna
Speaker 1: lose money, or these companies have lack of a track record,
Speaker 1: or they're going to miss their numbers. Now we'll see
Speaker 1: what ultimately happens. But one of the things you said
Speaker 1: at the beginning is SPACs are out of favor. Now,
Speaker 1: of course nobody likes bacs, but the trading should be
Speaker 1: the underlying company. Forget of whether it was a SPAC
Speaker 1: or I p O or direct listing. It's what matters
Speaker 1: is the underlying business. That was Orlando Bravo, the founder
Speaker 1: and managing partner at Toma. Bravo obviously enthusiastic about the
Speaker 1: spack market, and look, he's undeterred with the recent struggles
Speaker 1: that we've seen. Yeah, definitely, all right, coming up a
Speaker 1: close look at the U S. Labor market and the
Speaker 1: need for a bipartisan infrastructure spending bill. Look at that
Speaker 1: from someone with deep knowledge of both areas. Former Labor
Speaker 1: and Transportation Secretary A Lane chall Plus, she weighs in
Speaker 1: on whether or not she'd support Donald Trump in if
Speaker 1: she runs. You're listening to Bloomberg Business Week. This is Bloomberg.
Speaker 1: This is Bloomberg Business Week with Carol Messer and Bloomberg
Speaker 1: Quick Takes Tim Stinovik from Bloomberg Radio. Two of the
Speaker 1: hottest political topics of the nation these days. Yeah, they
Speaker 1: seem to be infrastructure and the job market, rightfully, So
Speaker 1: really specifically, we're talking about the tug of war between
Speaker 1: employers who want people back in the office and the
Speaker 1: millions of workers who want more flexibility in the wake
Speaker 1: of the pandemic. Well, our next guest has expert knowledge
Speaker 1: in both issues. Her career in public service has spanned
Speaker 1: it nearly four decades. She's worked in three different presidential administrations,
Speaker 1: including as Secretary of Labor under George W. Bush and
Speaker 1: most recently, as Transportation Secretary under President Donald Trump. Were,
Speaker 1: of course talking about eline show. She took part in
Speaker 1: a panel discussion surrounding the future of work at this
Speaker 1: year's Milk and Institute Global Conference, and then she joined
Speaker 1: us to break down how companies are approaching America's labor
Speaker 1: landscape and what sort of work patterns they can expect
Speaker 1: from employees going forward. They're taking polling more, they're asking
Speaker 1: their employees more, and clearly some kind of hybrid working
Speaker 1: environment arrangement will be much more accepting two employees. And
Speaker 1: I think employers are trying to work this out right.
Speaker 1: And you know, at first they were going to come
Speaker 1: back to work. The workforce is going to come back
Speaker 1: to work lass September. Then it was lost December, then
Speaker 1: it was the spring, then it was going to be September,
Speaker 1: and now people are talking about spring of So clearly
Speaker 1: we're all feeling our way as to how to come
Speaker 1: back at that. There is this imbalance happening though right
Speaker 1: now when we look at the labor market, there is
Speaker 1: an oversupply of workers, and but they are not actually
Speaker 1: returning to the workforce. Do you think we ever get
Speaker 1: back to a workforce that looks like it looked before
Speaker 1: the pandemic? Like is it really from those numbers? Yeah,
Speaker 1: it's even more. Before the pandemic. When I was Labor secretary,
Speaker 1: the labor participation rate was about sixty with the workforce
Speaker 1: of about hundred and fifty seven million people. And then
Speaker 1: we have a great recession and then the labor participation
Speaker 1: rad dropped to about sixty three and it kind of
Speaker 1: never recovered. And with the COVID then it went from
Speaker 1: sixty three point you know, three or four down to
Speaker 1: sixty one point seven sixty one point one. So we're
Speaker 1: continuing to see declines in labor participation, which is terrible
Speaker 1: because we need these workers to come back to fuel
Speaker 1: a full recovery. But there's also another factor, another dynamic
Speaker 1: at play here, and that is the skills gap. Well,
Speaker 1: we had tired of this for years, a lame just
Speaker 1: like and I'm gonna throw in another problem. We've been
Speaker 1: talking about infrastructure for years. How many administrations, right, and
Speaker 1: this is something that has had bipartisan support. What ultimately,
Speaker 1: from your perspective, do we have to start spending on
Speaker 1: when it comes to infrastructure, Well, look at the supply
Speaker 1: chains on four obviously, you know, investing in transportation infrastructure.
Speaker 1: The reason that the Trump administration was never able to
Speaker 1: succeed in the infrastructure propos so was because there was
Speaker 1: a big debate about whether there should be one dollar
Speaker 1: or for one dollar of investment spending. And the Republicans
Speaker 1: believe that there can be leverage, that we can use
Speaker 1: public private partnerships and leverage you know, existing government dollars,
Speaker 1: and the Democrats felt that they wanted one dollar for
Speaker 1: one dollar deficits spending, which obviously the pros and const
Speaker 1: to both, so we were never able to galvanize enough
Speaker 1: consensus around public private partnerships this time around. You know,
Speaker 1: I think there could be there. I think there's an
Speaker 1: infrastructure bill, a transportation infrastructure bill to be had. Unfortunately
Speaker 1: now it's being held hostage to the Budget Reconciliation Bill.
Speaker 1: If it were to be standard alone, there is a
Speaker 1: deal to be made and passed on the infrastructure bill,
Speaker 1: and I'm hopeful that it would be passed before your end.
Speaker 1: I feel like politics. I mean, I want to ask
Speaker 1: you because you've been in politics or I'm not in politics.
Speaker 1: I am a public servant. I've always viewed myself as
Speaker 1: being in public service. Did say you are? We're a
Speaker 1: long time public servant. Um the Republican Party, the You know,
Speaker 1: if I think about the January six Capital riot, you
Speaker 1: resigned after that. I left the Trump administration. You were there,
Speaker 1: you know, almost to the to the to the end. Um,
Speaker 1: do you regret being part of that administration. I'm very
Speaker 1: grateful for the opportunity to serve my country. I'm an
Speaker 1: immigrant to this country. I came when I was eight
Speaker 1: years old. I didn't get my citizenship until nineteen and
Speaker 1: it used to be that. If the president asked, the
Speaker 1: only answer you can give is yes, I didn't know
Speaker 1: the president very well, but I also believe that the
Speaker 1: American people deserve to have a functioning government. But going
Speaker 1: back to the infrastructure bill, the real drama is on
Speaker 1: the Democrats side, because, as I mentioned, there's a bill
Speaker 1: to be had. There was bipartisan support. Republicans signed on
Speaker 1: to this infrastructure bill. But the Speaker, and you know
Speaker 1: she and I share birthday, by the way, Uh, she's
Speaker 1: in a tough Yes, she's in a tough spot because
Speaker 1: she's got moderates who want to hold back on the spending. Well,
Speaker 1: she's got progressive that want to spend more. So she's
Speaker 1: trying to balance that. But if left alone, that infrastructure
Speaker 1: bill can move on its own. Many all the drama
Speaker 1: is on the Democrats side. And you know this, you
Speaker 1: know you follow what's been going on the economy, certainly
Speaker 1: in the pandemic milk and covers this left and right,
Speaker 1: the inequities that we have seen and it's not new,
Speaker 1: and there are people who have not shared in the
Speaker 1: wealth creation and so that softer infrastructure that the presidents
Speaker 1: team are trying to get through. I mean, this is
Speaker 1: part of the battle. And I think for those people
Speaker 1: that are questioned that they're not saying that these social
Speaker 1: infrastructure proposals are unworthy. What they're saying basically is should
Speaker 1: they be included? You know, what was originally going to
Speaker 1: be called a transportation infrastructure politics works that, you know,
Speaker 1: but therastructure done, We're done. So it was originally the
Speaker 1: original infrastructure bill had only six percent of what is
Speaker 1: traditionally defined as transportation infrastructure. If you expand the explanation
Speaker 1: and the description a bit more generously, you get up
Speaker 1: to thirty of the dollars. But clearly there's a need
Speaker 1: for transportation infrastructure. Rhodes bridges, transports, airports, drive around New York. Absolutely.
Speaker 1: I mean the governor got elected on this. We've got
Speaker 1: her slogan. We have to ask because we have about
Speaker 1: I know you consider yourself a public servant, but we
Speaker 1: got to ask more politics. Oh shoot, why are you talking?
Speaker 1: I heard from Donald Trump at all. Uh, we have
Speaker 1: not spoken, not at all. So but I'm not you know,
Speaker 1: like I'm out of politics the public policy. You served
Speaker 1: in three administrations. Do you consider President Trump is the
Speaker 1: leader right now of the Republican party. Well, I think
Speaker 1: that is in the process of being decided and sorted out.
Speaker 1: There's still some time to go. There's two coming up,
Speaker 1: and then there's should he be the leader of the
Speaker 1: Republican Party. That's up to the people. You know. I
Speaker 1: think for those who wonder about his appeal, they should
Speaker 1: be asking what is it that prompts so many Americans
Speaker 1: to support him? And I think that's a very the
Speaker 1: answer will be very, very revealing, and you and it's
Speaker 1: a teaching you know, it's it's something that I think, um,
Speaker 1: you know, the leadership should unders. But as somebody who's
Speaker 1: came to this country as an immigrant, um and became
Speaker 1: a citizen, do you think a voting citizen that he
Speaker 1: should be president leader of the repeblic? I will support
Speaker 1: the nominee. I mean, I'm a Republican, so I will
Speaker 1: support whoever the nominee is. That was former Labor and
Speaker 1: Transportation Secretary Elaine Show an important conversation, especially for lawmakers
Speaker 1: gearing up for mid term elections next year. Also, fiscal
Speaker 1: spending will continue to be a source of contention between
Speaker 1: now and next November. I thought her comments about not
Speaker 1: necessarily considering herself a politician were particularly interesting. Yeah, I
Speaker 1: agree with you, considering how much time she spend in Washington.
Speaker 1: I mean a ton of time, and she still spends
Speaker 1: a lot of time in Washington. She is, of course
Speaker 1: the wife have SENTI Minority Leader Mitch McConnell. We'll dig
Speaker 1: into the labor side of things a bit more. We're
Speaker 1: gonna catch up with the CEO of a company called
Speaker 1: Bright Machines. He says automation might actually be a good thing. Yes,
Speaker 1: a good thing, you heard right for workers. Coming up
Speaker 1: next on Bloomberg Business Week, Etro calls itself the world's
Speaker 1: largest social trading network. The company is ready to go public.
Speaker 1: It is, indeed the CEO of e Touro joining us next.
Speaker 1: This is Bloomberg broadcasting from the financial capital of the World,
Speaker 1: Bloomberg eleven Frio in New York to Washington, d C.
Speaker 1: Bloomberg to Boston, Bloomberg one O six one to San Francisco,
Speaker 1: Bloomberg nine sixty to the country Sirius XM Chado one
Speaker 1: nineteen and around the globe the Bloomberg Business app and
Speaker 1: Bloomberg Radio dot Com. This is Bloomberg Business Week. Retail investors.
Speaker 1: They have become a dominant market moving force over the
Speaker 1: last year and a half, and those investors are also
Speaker 1: trending younger with platforms like robin Hood and wee bull.
Speaker 1: Those platforms give millions of novice traders easy access to
Speaker 1: public markets just through their smartphones. Toro has also been
Speaker 1: working on this for more than a decade, building its
Speaker 1: user base, and it since grown into what it says
Speaker 1: is the world largest social trading network. It previously delayed
Speaker 1: its planned ten point for billion dollars back public listing
Speaker 1: due to the secs increased scrutiny of such deals. They've
Speaker 1: been looking very deeply into the transparency of SPACs. We
Speaker 1: know that well now. E Toro's i p O back
Speaker 1: on track. That's thanks in part to storing interest and
Speaker 1: investment in bitcoin and other cryptocurrencies. That's at least according
Speaker 1: to the company's co founder and CEO, who expects that
Speaker 1: trend to continue. You see A traveled to the Milk
Speaker 1: and Institute Global Conference all the way from Israel, where
Speaker 1: his company is based. He told us it was his
Speaker 1: first visit to l A in about twenty five years
Speaker 1: as first company. He was very optimistic. We've seen explosive
Speaker 1: growth over the past eighteen months really starting as we
Speaker 1: talked about before, UH with the beginning of the pandemic,
Speaker 1: just at inflection point in the rise of retail investors,
Speaker 1: with a whole new generation across the world, millennials realizing
Speaker 1: that they want to invest in the markets, whether it's
Speaker 1: stock markets, whether it's US stock markets, or whether it's
Speaker 1: crypto markets, just increased interest all around the world. We
Speaker 1: founded the company in two thousand seven with a vision
Speaker 1: of opening the global markets for everyone to trade investments
Speaker 1: simpler and transparent way. And up until twenty twenty, beginning
Speaker 1: of twenty twenty, we had about twelve million registered users,
Speaker 1: and since then we added more than eleven a new
Speaker 1: million registered users by the end of the first half
Speaker 1: twenty one, so basically we doubled the company, more than
Speaker 1: double the company. So twenty three million registered users worldwide
Speaker 1: grew by five point six million mergisitry users the first
Speaker 1: six month this year, after growing about five million registered
Speaker 1: users the entire of last year. We've so we've grown
Speaker 1: significantly our business, and we've seen the shift from the
Speaker 1: first crypto rally in two thousand and seventeen, we've seen
Speaker 1: our business grow rapidly from sixty million dollar commission to
Speaker 1: three nine million dollars from two thousand and sixteen to eighteen,
Speaker 1: really driven by the first Crypto Rally, and then we
Speaker 1: saw Crypto Winter, and then Crypto Winter we sort of drove,
Speaker 1: We drove our customers who came to it or to
Speaker 1: trade back. Then you know, x RAP three ariam to
Speaker 1: diversify into equities through the social network where they can
Speaker 1: actually see what other people are trading and see each
Speaker 1: other's performance and copy the most successful investors. And and
Speaker 1: then we saw Crypto Winter, shifted the business into equities
Speaker 1: and commission free stock trading worldwide, and then started this
Speaker 1: year with Crypto Rally two point which is just an
Speaker 1: amazing rally. Only I hear what you're saying, and imagine
Speaker 1: some of our listeners are thinking of themselves. Wait a second.
Speaker 1: This is a similar story as to what propelled robin
Speaker 1: Hood to the public markets in a relatively short time
Speaker 1: into such massive growth in one But we are seeing
Speaker 1: that robin Hood shairs are down more partly due to
Speaker 1: some softness with the company referred to as seasonality earlier
Speaker 1: this year. Are you seeing any of that decline in activity,
Speaker 1: any of that seasonality that we heard from Robin Hood,
Speaker 1: so sensitive to the fact that during the process of
Speaker 1: transforming from a private company to a public company, I
Speaker 1: can only share company's data relevant for the first six
Speaker 1: month which we published, which were very good. We did
Speaker 1: update the markets that Q three. And this is something
Speaker 1: you can look at exchange data. So equities have been
Speaker 1: software in Q three if you look just an exchange data,
Speaker 1: options data, volumes and equities and volatility September have gone
Speaker 1: down generally in the markets. Uh. And now we're seeing
Speaker 1: obviously crypto rally two point oh the longest crypto rally
Speaker 1: in crypto history in Q four, sort of returning with
Speaker 1: a roar. So hoping to see Bitcoin reach all time high.
Speaker 1: Already peaked and touched actually market cap all time high
Speaker 1: over the last forty eight hours. So very interesting to
Speaker 1: see what's happening in crypto in Q four. Um, you
Speaker 1: who are you competing against? Is it Robin Hood? Is it?
Speaker 1: All of the online trading platforms, even the establishment? Who
Speaker 1: is it? So the way we see it, and again
Speaker 1: we're very global and we have our businesses Europe, US, Asia,
Speaker 1: Latin America, Middle East, were regulated across the world and
Speaker 1: in I single country. What we see is the discount
Speaker 1: brokerage one point was very much consolidated by the local banks.
Speaker 1: So here you know schwab Bot t D. Morgan Stanley
Speaker 1: bought the trade and we see the same in Germany
Speaker 1: and Italy and Spain, in the UK everywhere. But who
Speaker 1: were really competing in against is those super apps, right,
Speaker 1: apps like Toro, who are attractive to a new audience,
Speaker 1: new customers, customers that are beginning their trading activity are
Speaker 1: looking for new tools for ways to engage and learn
Speaker 1: how to trade the markets, how to participate in the markets.
Speaker 1: And there's a lot of great companies just expending the
Speaker 1: audience and expending the markets. That's only a c He's
Speaker 1: the co founder and CEO already Toro. You're listening to
Speaker 1: Bloomberg business Way coming up next. One of the headliners
Speaker 1: at Milk in this year. Our audience very familiar with her.
Speaker 1: Our invest founder CEO and ce IO Cathy would and
Speaker 1: not surprisingly Carol her biggest bets. Well, they're continuing to
Speaker 1: pay off. Her commitments to Asslin Bitcoin as strong as ever.
Speaker 1: She also explains the rold Jack Mo played in her
Speaker 1: China investment strategy. This is Bloomberg. You're listening to Bloomberg
Speaker 1: Business Week with Carol Messer and Bloomberg Quick Takes Tim
Speaker 1: Stinovik from Bloomberg Radio. When you want to talk innovation, disruption,
Speaker 1: how to place your bets on the future. If there's
Speaker 1: one person you need to hear from, it's Kathy would Tim.
Speaker 1: The Arc invest founder, CEO and ce IO, is known
Speaker 1: for her foresight on game changing technology, and so far
Speaker 1: she's proving to be right on a number of those
Speaker 1: big bets, specifically Tesla and e VS, as well as
Speaker 1: of course Bitcoin. I sat down with her for a
Speaker 1: wide ranging discussion at Milk and she was one of
Speaker 1: the headliners, and it happened just ahead of Tesla's latest
Speaker 1: earnings release. The company would report third quarter revenue that
Speaker 1: fell short of Wall Street estimates, but it did manage
Speaker 1: to beat profit projections. In this actrap, Kathy began by
Speaker 1: explaining her initial attraction to investing in what is now
Speaker 1: the world's pre eminent EV maker, Tesla. We actually took
Speaker 1: our cues from a value investor who said to us,
Speaker 1: I would never buy one stock in your portfolio, but
Speaker 1: I like your research and you might be right, So
Speaker 1: I'm going to just put five, there's a value investor
Speaker 1: five as a hedge, and as did our first institutional
Speaker 1: investor UM, which is value oriented. Uh, and kind of
Speaker 1: thought we were behaving like a value manager, long term
Speaker 1: time horizon and looking for extreme values. Well, value investors
Speaker 1: are using price to book and dividend yield and that
Speaker 1: sort of thing. We're using growth, you know, we're using
Speaker 1: spectacular growth rates that no one is expecting. And Tesla
Speaker 1: was our first proof of concept, I would say, a
Speaker 1: very visible one where people are saying, what are they
Speaker 1: talking about? And all we had done was used rights law,
Speaker 1: which is the centerpiece of our our research, to try
Speaker 1: and figure out how quickly cost would decline in battery
Speaker 1: pack systems and therefore how how much prices would fall
Speaker 1: for electric vehicles and how quickly the uptake would be.
Speaker 1: And we saw Elon Musk magnificent things happening into it. It
Speaker 1: It wasn't so easy to be invested in Tesla early on.
Speaker 1: For us, it was easy because you just believe the
Speaker 1: story or we well, the most important call that we
Speaker 1: made initially with Tesla was all right, Tesla's battery technology,
Speaker 1: who is unlike any other auto manufacturers battery technology. Tesla
Speaker 1: was riding down the cost curve of the consumer electronics industry.
Speaker 1: So laptop, cell phones, image volumes, right, and you get
Speaker 1: a scaling like that, cost come down. It's called a
Speaker 1: learning curve in in the tech industry. So, Elen, you
Speaker 1: have auto manufacturers and auto analysts laughing at him. Ellen
Speaker 1: is building his car on top of cell phone batteries,
Speaker 1: isn't that funny? And what they didn't believe was that
Speaker 1: the engineering was possible, right, So there was a It
Speaker 1: wasn't that they just didn't think it was possible, and
Speaker 1: he did. Uh, And so even today, Uh, these cylindrical
Speaker 1: batteries that he's been using, relative to lithium ion pouch
Speaker 1: lower cost and will remain lower cost for at least
Speaker 1: three years, we think, which means that any other auto
Speaker 1: manufacturer who wants the same performance and the same range
Speaker 1: at the same price, we'll have to lose money on
Speaker 1: every car sold. So it keeps him in a really
Speaker 1: great position. And that's only one of four. Barrywte Entry. Well,
Speaker 1: but that was the first call we had to make,
Speaker 1: so elon Musk and Tesla. So there is a point
Speaker 1: that you would get out, I know, there's a story
Speaker 1: you've talked about. You've put a mark on the stock price.
Speaker 1: I think it was three thousand. Yeah, three thousand is
Speaker 1: our base case, not our bull case, but our base case. Okay,
Speaker 1: so there is a point where you could say, okay,
Speaker 1: I'm moving on. You've gotten out of Apple. I mean,
Speaker 1: these are backward looking companies or technologies that you don't
Speaker 1: think are or not necessary, not necessarily. They are very
Speaker 1: well understood. Uh, their dynamics are well understood. They are
Speaker 1: the fangs, They're well owned, and we just want our
Speaker 1: clients to be exposed to the next fangs, which are
Speaker 1: not going to be in the fang category, but the
Speaker 1: next fangs and Tesla, Tesla is becoming a fang. You know.
Speaker 1: I think I end up in that grouping at some point.
Speaker 1: So yeah, we would sell. So our minimum hurdle rate
Speaker 1: of return expectation for a stock is fifteen at an
Speaker 1: annual and ALAS rate over five years, so doubling over
Speaker 1: five years UM. Tesla is about nearly a quadrupling over
Speaker 1: five years, so well within our range. So you know,
Speaker 1: we we have been taking profits and uh, and that's
Speaker 1: because Tesla in here. I think it's becoming very obvious
Speaker 1: now that electric vehicles are taking massive share from traditional
Speaker 1: gas powered vehicles. So we've talked Tesla, we've talked a
Speaker 1: little bit. Tell me a bit more about bitcoin and
Speaker 1: where you see. I mean, I've never seen anything so debated. Obviously,
Speaker 1: we're seeing more legitimization as we see regulators, certainly in
Speaker 1: the US and around the world moving forward. Um, what
Speaker 1: is the long term play when it comes to something
Speaker 1: like cryptocurrencies in bitcoin? So Bitcoin specifically. Um, we we
Speaker 1: got involved when it was a six billion dollar market cap.
Speaker 1: And here's Art Laugher again in In My Life and
Speaker 1: in arcs Life. Um, it was a six billion dollar cap. Fan.
Speaker 1: Now it's over a trillion, which is But we were
Speaker 1: asking the question, this was two thousand fifteen. Could bitcoin
Speaker 1: serve the three rules of money? And we came to
Speaker 1: the conclusion that it was possible. Art Laugher collaborated. He
Speaker 1: tore our original paper up and as we were going
Speaker 1: through it, he said, this is the first this is
Speaker 1: the rules based monastery monetary system I've been waiting for
Speaker 1: since we left the gold exchange standards, right, And I
Speaker 1: said to him, oh, how big could this be? And
Speaker 1: he said, well, how big is the U S monetary
Speaker 1: base and back then, remember this is six billion dollar cap.
Speaker 1: Back then it was a four and a half trillion
Speaker 1: dollar monetary base. Today where it eight and a half trillion.
Speaker 1: China have been in, you've been out, and sometimes we're
Speaker 1: trying to understand. So, so how are we supposed to
Speaker 1: look at China right now and the clamptowns that we've
Speaker 1: seen in the government, certainly on different sectors that have
Speaker 1: just decimated those sectors in terms of the value of that.
Speaker 1: So what is what is what do you expect kind
Speaker 1: of to be your involvement. Yes, our first move away
Speaker 1: from China was when China was you had a very
Speaker 1: strong move and what you know, the innovation there was
Speaker 1: being deeply appreciated while ours was not. So that was
Speaker 1: that kind of move. Um. The second time we moved
Speaker 1: or then then we moved in why we saw the
Speaker 1: reaction to COVID and we got more interested because it
Speaker 1: was the most disciplined country in terms of both monetary
Speaker 1: and fiscal policy UH during the crisis, and I thought
Speaker 1: that China had the possibility of becoming the Germany and
Speaker 1: Switzerland of the world, you know, in terms of discipline
Speaker 1: monetary UM. As soon as jack MA was banished effectively
Speaker 1: last November, we started pulling back because what we're doing,
Speaker 1: and especially during February through May, where our strategy. Just
Speaker 1: to give you a sense how volatile it is. Our
Speaker 1: strategy from mid February through mid May. Most people wouldn't
Speaker 1: admit this, maybe, but this, this is how volatile. Transparency
Speaker 1: was down thirty peak to trough. So we have come back.
Speaker 1: But during that period what we do, as we always do,
Speaker 1: we concentrated our portfolio towards our highest conviction names. China
Speaker 1: was moving away because almost every week and month there
Speaker 1: was a new regulatory move, crackdown and uh so, so
Speaker 1: it was easy to do that. It was great because
Speaker 1: I'm always scrambling looking for cash during a correction. Okay,
Speaker 1: where is the confidence lower? Where? Where? Where Let's buy
Speaker 1: into some of our favorites here, uh now, common prosperity.
Speaker 1: So what have we done? No China in our flagship.
Speaker 1: We do own some China in UM. A few of
Speaker 1: our portfolio is the ones focused on autonomous technology and robotics.
Speaker 1: But we're very particular, very low margin companies because margin
Speaker 1: is clearly not appreciated by the government. Anymore common prosperity.
Speaker 1: Uh and uh and very beneficially beneficial to Tier three
Speaker 1: tier four cities common prosperity so j D Logistics, JD
Speaker 1: dot Com, Pindo. Does it stay this way? Do you
Speaker 1: think in China for a while? Well, I mean it's
Speaker 1: hard to say, but China is a certainly country. When
Speaker 1: they make a decision, it's long longer term, it's longer
Speaker 1: term planning to President g certainly seems to be on
Speaker 1: this mission, and I think he is very unsettled that
Speaker 1: the three child policy is not working, and so there's
Speaker 1: a big social engineering um. And by the way, this
Speaker 1: is all very forecastable, right, I mean demographics, he knew,
Speaker 1: they knew fifty years ago what was going to happen, right,
Speaker 1: So I think that that's part of it. And uh,
Speaker 1: you know, there there is, there is, There are the
Speaker 1: halves and the have nots in China like there are
Speaker 1: like there is around the world. I think China is
Speaker 1: taking it more seriously because there's probably more social unrest
Speaker 1: than we now appreciate. What I don't understand is they're
Speaker 1: going after real estate, which is seventy of the consumer
Speaker 1: savings in China that was Ark invest CEO c I
Speaker 1: O and of course founder Cathy Wood from the Milk
Speaker 1: and Institute Global Conference. Check out the full interview on
Speaker 1: the Bloomberg terminal and at Bloomberg dot com. And that
Speaker 1: wraps up the first hour of the weekend edition of
Speaker 1: Bloomberg Business Week from Bloomberg Radio, a special edition the
Speaker 1: West Coast l a cool Beverly Hills edition. I'm Carol
Speaker 1: Masser and I'm Tim Staniver. I had in our next
Speaker 1: hour more heavyweights for milk. We'll talk supply chain troubles
Speaker 1: and the buying administration's planned to ease the pain. Siemens
Speaker 1: USA President and CEO Barbara Humpton takes us inside the
Speaker 1: White House. She was there talking about some of the problems.
Speaker 1: Plus we'll hear from one executive who sees a parallel
Speaker 1: between current market conditions and the post World War two economy.
Speaker 1: Tim and I were talking about this a lot after
Speaker 1: this conversation. And then we've got another one who expects
Speaker 1: increased automation to be a potential net positive for the workforce.
Speaker 1: You heard that right, And one of the biggest names
Speaker 1: in the growing field of impact investing, Engine Number one CEO,
Speaker 1: Jennifer grants. She got Excen's attention and everyone else's. It's
Speaker 1: a David and Goliath story. You know it. This is Bloomberg.
Speaker 1: This is Bloomberg Business Week inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business, finance and tech news as it happened, Sloomberg
Speaker 1: Business Week with Carol Messer and Bloomberg Quick Takes Tim
Speaker 1: Stinovic on Bloomberg Radio. I am Carol Messer and I'm
Speaker 1: Tim Stanovick. Plenty ahead in our second hour of the
Speaker 1: weekend edition of Bloomberg Business Week, as we bring back
Speaker 1: some of our favorite conversations from the Milk and Institute
Speaker 1: Global Conference, back in full force this year after the
Speaker 1: event was completely remote due to the COVID pandemic and
Speaker 1: just a bit in fact, we'll here from Barbara Humpton,
Speaker 1: PRESIDENTCY of Siemens USA, who says the White House has
Speaker 1: a good plan to help relieve certain supply chain bottlenecks.
Speaker 1: She should know being involved in a meeting at the
Speaker 1: White House. Plus we'll talk with Bright Machine CEO Amar
Speaker 1: Hans Ball on what the next wave of automation and
Speaker 1: AI technology means for the modern worker. Maybe it's not
Speaker 1: all bad. Also it Scott minored of Guggenheim investments on
Speaker 1: Modern Monetary Theory MMT becoming a reality hashtag MMT. It's happening.
Speaker 1: First up this hour, let's focus on impact investing. Earlier
Speaker 1: this year, a company called Engine number one. You know
Speaker 1: who we're talking about, Well, they scooped up three seats
Speaker 1: on Exon's board of directors. It was a big, big
Speaker 1: win for investors who are demanding that their profits come
Speaker 1: with a greater purpose. The Small Activist Fund now is
Speaker 1: the world's attention as it pushes for more emphasis on
Speaker 1: sustainability at the oil giant, and it's touting what it
Speaker 1: calls a total value framework. It ties progress on E
Speaker 1: S G initiatives directly to the financial value creation. The
Speaker 1: company CEO, Jennifer Grantsio explains, we've set out with Engine
Speaker 1: number one to do things in a different way, and
Speaker 1: so instead of what we all think of as slightly
Speaker 1: older school E S and G. People aren't sure if
Speaker 1: it works, people aren't sure. I think it returns. We
Speaker 1: built Engine number one to take the data, the environmental
Speaker 1: or the climate or the governments data and use it
Speaker 1: to drive returns, and so as I've watched and talked
Speaker 1: with lots of people over the last couple of days,
Speaker 1: large pools of assets as well as younger people. People
Speaker 1: are ready, but they're ready because the performance is there,
Speaker 1: or they're just ready because it's the right thing to do.
Speaker 1: What is it they're they're ready, they're ready to have
Speaker 1: impact in their investments, but they're not willing to do
Speaker 1: it with giving up returns. So the way they think
Speaker 1: about it is, we care. We care about people and
Speaker 1: wages and workers would care about climate, but we need
Speaker 1: investors to do it for us in a way where
Speaker 1: we don't give up returns. So, Jennifer, is it harder
Speaker 1: though for a company that is delivering their returns to
Speaker 1: kind of get them to make the changes? And investors
Speaker 1: are We're not going to be so supportive because they're like, listen,
Speaker 1: I like these returns. So give me an idea. Yeah,
Speaker 1: we think it's all We think it's all about using
Speaker 1: the data on climate or environment people using it to
Speaker 1: drive returns over time. So to take an example, let's
Speaker 1: take General Motors. Um. So, Mary bar has got up
Speaker 1: a great business, she's a great CEO, she's got a
Speaker 1: strong board um, but they can actually make more money
Speaker 1: if they get to an e V transition faster, longer term.
Speaker 1: Longer term. But if you think about it from a
Speaker 1: scale perspective, So what's the you know, the what's the
Speaker 1: multiple of GM today compared to Tesla. Let's take that example.
Speaker 1: If you can get to an e V transition sooner
Speaker 1: and you're doing nine million electric cars a year, that's
Speaker 1: a huge increase in multiple for GM, and we get
Speaker 1: to the climate transition sooner. So yes, it takes more
Speaker 1: than a quarter, but it's the way to do it
Speaker 1: at scale. Hey talked to us about your investing framework
Speaker 1: and how you think about potential targets. Our audience absolutely
Speaker 1: familiar with what Engine number one has done and did
Speaker 1: earlier the here at x on Mobile and also of
Speaker 1: course at General Motors too, But how do you think
Speaker 1: about your next potential targets. Yeah, we think about it
Speaker 1: as being active owners in all these companies, as opposed
Speaker 1: to target or old school activism. And so what does
Speaker 1: that mean. That means we're running with all the public companies,
Speaker 1: every single one. We run through their wages, their workers,
Speaker 1: their social impact, and their climate and environmental impact. We
Speaker 1: do it in dollar sense, and then we forecast how
Speaker 1: does that change their evaluation over time. And so we
Speaker 1: will work with both companies that are laggards where we
Speaker 1: think they're not managing the business as well as they could,
Speaker 1: and we'll do that constructively. We won't try to do it,
Speaker 1: uh you know the way we did with that Exon
Speaker 1: better to do it working constructively with companies. And so
Speaker 1: we're working with a number of companies now. But behind
Speaker 1: the scenes, we don't talk about that as much. Tim
Speaker 1: was doing. You know, we're doing some research. Tim shared
Speaker 1: a story with me and we've been following this down. Jones,
Speaker 1: you know, had reported that X and x On is
Speaker 1: debating abandoning some of its biggest oil and gas projects.
Speaker 1: Do you feel like when Well, I think the first
Speaker 1: win is get the right people on the board. So
Speaker 1: that was a big victory in getting three people with
Speaker 1: great energy transition experience UM and the second win we're
Speaker 1: looking for is what's the long term capital all occasion strategy.
Speaker 1: And if X and we're not in the boardroom, they're
Speaker 1: independent directors. But if X in with the new people
Speaker 1: on the board, comes to a decision to rethink long
Speaker 1: term petroleum development, we think that's very smart for business
Speaker 1: and the environment and the environment. Well, what does that
Speaker 1: Excel mobile look like to you? I mean, help us
Speaker 1: understand that, because I think people think of ex On
Speaker 1: mobile is like the opposite of a It's think about
Speaker 1: the business that it's in, right, it drills for fossil fuels. Uh,
Speaker 1: it's an energy company. And so if you think about
Speaker 1: the expertise that Exon has, they have, you know, they
Speaker 1: have huge I p in great technologies and lithium batteries.
Speaker 1: Traditionally they were a founder pioneer from research perspective, and
Speaker 1: then they have an ability to execute things at huge scale.
Speaker 1: If you want to do energy, even a new kind
Speaker 1: of energy at scale, think about the engineering capability of
Speaker 1: a Chevron or an Exxon to do that. So they're
Speaker 1: an energy company. They don't only have to be an
Speaker 1: oil company ten and twenty years in the future. So
Speaker 1: in terms of industries, I know you can't probably reveal
Speaker 1: I don't want to say the word targets. I know
Speaker 1: that's what we keep thinking. But I mean, what are
Speaker 1: the industries that you think you are going to be
Speaker 1: looking at or are currently looking at pretty um aggressively.
Speaker 1: When it comes to doing the research that you know
Speaker 1: are transitioning, need to be transitioning for the better of
Speaker 1: all mankind. Yeah, I think. I think the heavy fossil
Speaker 1: fuel industries are definitely, I mean definitely, That's an obvious one,
Speaker 1: which is why you see us talking about energy and
Speaker 1: talking about transportation. That's a place where you transform and
Speaker 1: companies can be much more profitable and you get to
Speaker 1: climate better, climate impacts sooner. They're also financial services Squares
Speaker 1: an example where Squares business is cash app in particular
Speaker 1: serving underserved communities. It's driving financial inclusion that has huge
Speaker 1: positive benefit. That was Jennifer Grancio, the CEO of Engine
Speaker 1: Number One, the activist hedge fund. She joined us earlier
Speaker 1: this week at the milk In Institute Global Conference. You're
Speaker 1: listening to Bloomberg Business Week coming up more of our conversations.
Speaker 1: You know, the Biden administration pulling out all the stops
Speaker 1: to relieve bottlenecks at the nation's most critical ports of entry,
Speaker 1: and industrial executives definitely taken notice. Siemens USA President and
Speaker 1: CEO Barbara Humpton takes us inside the White House's blueprint
Speaker 1: to fix America's fractured supply chains. This is Bloomberg. This
Speaker 1: is Bloomberg Business Week with Carol Messer and Bloomberg Quick
Speaker 1: Takes Tim Stinovik from Bloomberg Radio. So, supply chains, that
Speaker 1: was definitely one of the topics we talked about a
Speaker 1: lot at Milk in this past week. Supply chains, they
Speaker 1: connect nearly every component of the global economy, and even
Speaker 1: the world's wealthiest and most powerful companies are proving vulnerable
Speaker 1: to shocks. Among those. As Semens, the engineering and manufacturing company,
Speaker 1: it focuses on areas of electrification, automation, digitization, transportation, all
Speaker 1: of those being hit by the global semiconductor shortage. Right.
Speaker 1: We've seen a play out a lot of the earnings
Speaker 1: reports as well that have been coming out fast and
Speaker 1: furiously well. We spoke with Siemens USA President and CEO
Speaker 1: Barbara Humpton at this week's Milk and Institute Global Conference.
Speaker 1: She was among a group of executives tapped by the
Speaker 1: White House to help figure out how to remove the
Speaker 1: roadblocks to critical US imports. While we're a net exporter
Speaker 1: in the US, we actually do rely on supplies coming
Speaker 1: from elsewhere in the world. Our supply chain team that
Speaker 1: maybe they became unsung here heroes of our pandemic time frame,
Speaker 1: where they just came forward with all kinds of creative workarounds,
Speaker 1: risk management, UM, diversifying our supply chain, making sure that
Speaker 1: we could be on station for our customers. Well, give
Speaker 1: us some examples of that, Barbara, and how the team
Speaker 1: has been able to do that, because how do you
Speaker 1: diversify of supplies are just not there. Well, what we
Speaker 1: are finding is that this is a moment when the
Speaker 1: supply chain is becoming very creative. You know that there
Speaker 1: are certain things like some conductors, where it will literally
Speaker 1: take years for us to increase supply in the US.
Speaker 1: But meanwhile, you know you're seeing this. I'm sure companies
Speaker 1: all over the world are doing the same thing, aggregating
Speaker 1: chips from multiple suppliers and then understanding priorities across the business.
Speaker 1: In our case, it's making sure that our customers who
Speaker 1: are most critical to the societies they serve. We're in
Speaker 1: the backbone of economies around the world, and so we
Speaker 1: really do have to prioritize where are these chips going.
Speaker 1: We have to stay with chips. Because you were at
Speaker 1: the White House right or you were in that meeting,
Speaker 1: tell us about that. The conversations and what are the
Speaker 1: expectations coming out of it. Yeah, well, kudos to the
Speaker 1: White House and Department of Commerce for bringing together players
Speaker 1: all along the supply chain, those who are you know,
Speaker 1: end users putting chips into end products, all the way
Speaker 1: back to fabs, etcetera. And and really what they're what
Speaker 1: the White House and and Commerce are looking for is
Speaker 1: how can they remove roadblocks? How can they help set
Speaker 1: up set up systems so that we improve the supply
Speaker 1: chain all long. One of the big things is transparency.
Speaker 1: It's very much like cyber chips. I'll tell you and
Speaker 1: you know how in cybersecurity, what we've committed as an
Speaker 1: industry is to tell each other when we encounter issues,
Speaker 1: and it keeps everybody else alert and aware. We know
Speaker 1: that a threat to one is a threat to all.
Speaker 1: Same things with chips, where are we encountering bottlenecks? Where
Speaker 1: what types of chips are we having issues with? And
Speaker 1: by sharing that information, then where the federal government can
Speaker 1: help is if there's anything they can do, regulatory or
Speaker 1: otherwise to unblock those blockades, then they'll get involved. Has
Speaker 1: that happened yet? Have you been able to see anything
Speaker 1: changed since that meeting just a couple of weeks ago. Well,
Speaker 1: the number one thing is we've just started the reporting,
Speaker 1: so you know, yes, and and I do know that
Speaker 1: this is a very open administration. They're taking phone calls
Speaker 1: incessantly from folks who are dealing with issues. It's easy
Speaker 1: to get to the White House right now in this
Speaker 1: absolutely a top top issue for when you talk about
Speaker 1: chips and like just the problems. What is the problem.
Speaker 1: Is it just that there's just not enough being manufact Actually,
Speaker 1: like what is the real nut that we're trying to crack? Here?
Speaker 1: Here's where we are. We were absolutely we had a
Speaker 1: global supply chain that was tuned to just in time.
Speaker 1: And when folks looked at forecasts of what's going to
Speaker 1: be the demand post COVID, right midst of code, I
Speaker 1: could say, con COVID and post COVID, you know what's
Speaker 1: the demand going to be, and they reduced their orders
Speaker 1: when they did that. What that meant is there was
Speaker 1: going to be a surge, when in fact demand came
Speaker 1: surging back and now there's huge demand everywhere for those parts.
Speaker 1: He is just in time over was COVID the end
Speaker 1: of just in time. I've heard a lot of things
Speaker 1: I've heard just in time, just in case, right, But
Speaker 1: but actually one of the things we're looking at is glocalization.
Speaker 1: What I think is actually localization localization, taking global technologies
Speaker 1: and then manufacturing making them in regions all around the
Speaker 1: world so that there can be more immediate sources of supply.
Speaker 1: Easier said than done, though it can take three years
Speaker 1: to build a chet manufacturing facilities, well it can. I mean,
Speaker 1: what I've been doing is talking to adiences everywhere about
Speaker 1: the idea of a smart investment these days would be
Speaker 1: in flex factories. By the way, this is something the
Speaker 1: US government can do. Some people don't know that there's
Speaker 1: a organic industrial base maintained by the Department of Defense.
Speaker 1: They have the ability to put new automation technology in
Speaker 1: that will make them more flexible. This is so interesting
Speaker 1: because you go back several decades, right, and the government
Speaker 1: got so involved in the semi the U S semi
Speaker 1: industry because we were falling behind. The government has to
Speaker 1: play a much more active role in your view, Well,
Speaker 1: what we're seeing is things like the Chips Act. We
Speaker 1: are such fans of this idea of the government actually
Speaker 1: making an investment to help jump start chip production. The
Speaker 1: demand will be there. You know that as we go
Speaker 1: from the Internet of people right into this next decade
Speaker 1: where it will be people creating the Internet of things,
Speaker 1: that there's going to be demand for semi conductors everywhere.
Speaker 1: We need to talk about people. Yeah, I want to
Speaker 1: get an update because a few months ago, You're did
Speaker 1: an interview with Bloomberg TV said there were two thousand
Speaker 1: open roles at Semens US. Give us an update. There
Speaker 1: are you able to fill those roles. We are constantly,
Speaker 1: constantly working to fill open jobs, and I will tell
Speaker 1: you today we still have about two thousand open jobs. Yes,
Speaker 1: we're experiencing growth, and we are also experiencing what so
Speaker 1: many companies are, with people saying, hey, I'd like to
Speaker 1: do something different. So a couple of things I want
Speaker 1: to do. I want to change the great resignation to
Speaker 1: the great reassignment. Get managers thinking about you know what,
Speaker 1: I may lose an employee, but I'd rather lose them
Speaker 1: to one of my colleagues and semens if there's somebody
Speaker 1: who wants to do something different, so let's keep them
Speaker 1: in the family. I'm really hoping a lot of folks
Speaker 1: are will be coming back as well, because We've got
Speaker 1: this vibrant, growing business. Meanwhile, we're putting a ton of
Speaker 1: investment into creating programs that will bring young people into
Speaker 1: the fields we and our customers are engaged in. Most recently,
Speaker 1: working with Wake techn Wake Technical Community College in North Carolina,
Speaker 1: we've created an apprenticeship program for eleventh graders to come
Speaker 1: out learn the tools of the trade for building electric
Speaker 1: vehicle starting earlier and earlier. High school apprenticeship is the
Speaker 1: new wave of the future. What is the thing that
Speaker 1: keeps you up at night? Because I think about all right,
Speaker 1: supply chain, we talked about it, chips. I mean, these
Speaker 1: are still issues. We're not over COVID yet, there are
Speaker 1: still some questions about the economy trying to fill all
Speaker 1: these jobs. What is it that really kind of stresses
Speaker 1: you out right? Yeah? Now, Carol, I I sleep well
Speaker 1: because I've got a great I've got a great team.
Speaker 1: But the thing we focus on as a number one priority,
Speaker 1: we use the term sustainability. It means a lot of
Speaker 1: things to a lot of people. But look at where
Speaker 1: we are right now. We're entering a winter where there's
Speaker 1: a real question about where will the power come from?
Speaker 1: So we're doing our part at Siemens to make sure
Speaker 1: that utilities are prepared, that communities are prepared. We've been
Speaker 1: installing micro grids, nano grids, helping people get ready and
Speaker 1: so that they'll have greater flexibility control on how they
Speaker 1: use power. That Semens USA President and CEO Barbara Humpton
Speaker 1: a nice follow on to our discussion with Jennifer Granzio
Speaker 1: of Engine Number One. Sustainability not just key to fighting
Speaker 1: climate change, but also to maintaining supply chains and sources
Speaker 1: of energy. We did see these common threads through all
Speaker 1: of our conversations. Barbara Hampton of Siemens also touched on
Speaker 1: something that we'll get into with our next guest, giving
Speaker 1: workers the skills they need to succeed and stay viable
Speaker 1: in the post pandemic economy. Coming up on Bloomberg Business Week,
Speaker 1: the CEO of Bright Machines, mar Hants Ball on the
Speaker 1: next level of industrial automation. As we continue our coverage
Speaker 1: from the Milk and Institute Global Conference, this is Bloomberg
Speaker 1: broadcasting from the financial capital of the World Bloomberg eleven
Speaker 1: Frio in New York to Washington, d C. Bloomberg to
Speaker 1: Boston Bloomberg one oh six one to San Francisco, Bloomberg
Speaker 1: nine sixty to the country, Sirius XM Chado one nineteen
Speaker 1: and around the globe the Bloomberg Business app and Bloomberg
Speaker 1: Radio dot com. This is Bloomberg Business Week. So Bright
Speaker 1: Machines was founded back in just a few years ago.
Speaker 1: It's an industrial company that's leveraging a software first of
Speaker 1: approach to help reimagine how we manufacture various goods. The
Speaker 1: company is set out to bring automation to assembly lines
Speaker 1: around the world, essentially giving eyes and brains two machines
Speaker 1: to help speed up the production process. The company's CEO, Mr.
Speaker 1: Haunts Ball stop By are set at the Milk and
Speaker 1: Global Conference this past week to talk about the potential
Speaker 1: for the tools his company provides and the net effect
Speaker 1: on the global labor force. Look at the products surrounding us,
Speaker 1: So you think think of the network infrastructure that's connecting
Speaker 1: our computers to the Internet. You think of the electric vehicles,
Speaker 1: all the components that go in them, all those pieces.
Speaker 1: So let's take a piece of network infrastructure. You look
Speaker 1: at a modern day router. Assembling that router used to
Speaker 1: be done by hand in a place like China or Mexico.
Speaker 1: That's the thing that we have replaced using our autonomous
Speaker 1: assembly lines or robots and other machines are basically putting
Speaker 1: all the pieces in place and building network boxes. And
Speaker 1: we're doing that. I think that's what was kind of
Speaker 1: surprising and kind of reading in for this is that
Speaker 1: I think I had thought so much was all ready automated.
Speaker 1: Give us you are snaps out of what you see.
Speaker 1: I mean, the reality is less than eight percent of
Speaker 1: the assembly lines in the world are automated. And you
Speaker 1: see all you know, robots moving around for forty years.
Speaker 1: But the reality has been that to set up these
Speaker 1: systems takes so much time and cost so much and
Speaker 1: requires the level of expertise that only you know, the
Speaker 1: big automotive or the big aerospace companies that have lots
Speaker 1: of money and a five year product cycles have been
Speaker 1: able to automate. You look at the you know, any
Speaker 1: kitchen appliance in your house that's not automated because it
Speaker 1: takes too long to configure or cost too much. You're saying,
Speaker 1: my bullet that I used to make my shake good example,
Speaker 1: Really it's not automated. It's the again, the like you
Speaker 1: look at that bullet pieces of the steel and the
Speaker 1: plastic are made by machines, but they're all assembled by hand.
Speaker 1: And that's the kind of thing that when you you know,
Speaker 1: and and you bring it, you bring technology like arts
Speaker 1: to bear, you can you know, assemble that using a
Speaker 1: modern When if ultimately we reached the point where humans
Speaker 1: are replaced on automation, knew were going to go there,
Speaker 1: then it creates a massive it's a transformational shift when
Speaker 1: it comes to labor market. It's something we talked about
Speaker 1: earlier with David hunting Piga. Right, you know, this is
Speaker 1: the type of thing that that can actually prevent inflation
Speaker 1: from getting out of control exactly. But yeah, when does
Speaker 1: that happen and what is what is the massive shifts?
Speaker 1: So let me give you three parts of the ends.
Speaker 1: First of all, this kind of high level of automation
Speaker 1: has happened in other industries and bank banks are a
Speaker 1: great example. When a t m S came, it didn't
Speaker 1: result in like unemployment for all the people that you know,
Speaker 1: you automated the most repetitive and kind of mind taxing
Speaker 1: um work. And that's what's happening in manufacturing. If you
Speaker 1: think about people and this is it's not meant to
Speaker 1: be dystopian. But when you go into factories today, there
Speaker 1: are robots everywhere, but the robots are humans, and you
Speaker 1: see humans in factories doing the same operation a hundred
Speaker 1: thousand times a day. Literally insert screws, you know, four
Speaker 1: screws into a box and screw like that is my
Speaker 1: numbing work, right, And so that's the kind of thing
Speaker 1: that the systems like us replaces. But you're right, when
Speaker 1: we do that, there is somebody that's affected. But what
Speaker 1: we've seen our customers do is that this they look
Speaker 1: at automation as an augmentation exercise, that they're increasing the
Speaker 1: ability of a single person to do multiple, you know,
Speaker 1: more work, or have them do more valuable work like
Speaker 1: better customer service, to better engineering, do better design. And
Speaker 1: that's what I think will happen. It will take definitely
Speaker 1: you go through a curve where people need to be retrained,
Speaker 1: but on the other side of it, it's a much
Speaker 1: better experience for everybody. Aymar, how do you future prove
Speaker 1: these assembly lines? If the customer makes a big purchase,
Speaker 1: it's a good point. It automates it. How do they
Speaker 1: know two years from now it's going to be so
Speaker 1: glad you ask that questions. Software is a secret sauce
Speaker 1: because what we do through software is make our lines
Speaker 1: programmable so effectively, since our our secret sources, we use
Speaker 1: software to configure and run these machines. That software can
Speaker 1: be used to modify the same line to build a
Speaker 1: different product. So it's so we can upgrade. The software
Speaker 1: doesn't impact the hardware, the existing hardware if you completely
Speaker 1: change the product. Let's say you're building your bullet and
Speaker 1: now you're going to build a network rowder. Yes, you
Speaker 1: need to change the end of armed grippers and some
Speaker 1: of the feeding systems. But if you're you know, you're
Speaker 1: upgrading the bullet or you're doing a second model of that,
Speaker 1: then you don't need to do this. So you're public
Speaker 1: this year. That is the plan. We announced ours transaction,
Speaker 1: yeah and uh seventeenth of May or a SPAC merger,
Speaker 1: and we are in the process of these packing. We
Speaker 1: filed our s for today and you know, when the
Speaker 1: SEC gives us to go ahead, then we shall be
Speaker 1: a public company. That's our haunts ball to see of
Speaker 1: Bright Machines. Looking forward to speaking with him again once
Speaker 1: his company hits the public markets. Definitely you're listening to
Speaker 1: Bloomberg Business Week. Coming up more from Milk In We're
Speaker 1: gonna wrap up our coverage with Scott Minored. He's the
Speaker 1: ce IO over at Guggenheim Investments, very well known to
Speaker 1: the Bloomberg audience. Yeah he is. He's going to tell
Speaker 1: us why the search for value has never been more
Speaker 1: difficult and why the US is starting to resemble a
Speaker 1: post war economy. This is Bloomberg. You're listening to Bloomberg
Speaker 1: Business Week with Carol Messer and Bloomberg Quick Takes. Tim
Speaker 1: Stinovich from Bloomberg Radio. All Right, everybody, it's the question
Speaker 1: of one inflation, transitory or perpetual. We're gonna put a
Speaker 1: buck in the jar. Who's doing that? Bostick? Afael Bostick
Speaker 1: of the Atlanta Fette. Every time somebody in the office
Speaker 1: says transitory inflation, they have to put a buck in
Speaker 1: the jar. Well, anyway, the never ending question came up
Speaker 1: a lot at the Milk and Global conference this past
Speaker 1: week out on the West coast. It's getting to a
Speaker 1: point where even market experts are really kind of unsure
Speaker 1: where to find value. As a result, that's the story
Speaker 1: we heard from Scott Minor, the CEO over at Googenheim Investments.
Speaker 1: He's a familiar name, of course to the Bloomberg audience,
Speaker 1: and he told us the upward movements and asset prices
Speaker 1: are unlike any he's seen in his career, and then
Speaker 1: he sees modern monetary theory MMT becoming a reality. I
Speaker 1: have never seen a time like this where there is
Speaker 1: nothing that I can point to that I can call cheap.
Speaker 1: You know, historically, I remember being interviewed on Bloomberg in
Speaker 1: two thousand and six and telling, uh, the interviewer that
Speaker 1: the cheap thing was ten year treasury notes at five
Speaker 1: and a quarter and I said, want who would want
Speaker 1: ten year treasury notes? Well, you know, I was concerned
Speaker 1: about the housing crisis. Today, I can't point to anything
Speaker 1: that I think that if we got ourselves into trouble
Speaker 1: that would actually be cheap to buy today that has value.
Speaker 1: So you're left in this world, which I'm not comfortable in,
Speaker 1: where you have to find things that are expensive, they
Speaker 1: are probably going to become more expensive. And so you know,
Speaker 1: you know, well, I mean cryptocurrency, right, you know, I
Speaker 1: mean Sheba If you'd invested in Sheba coin back in
Speaker 1: the first quarter of this year, A thousand dollars today
Speaker 1: would be worth two point one million, right, I mean,
Speaker 1: can I find another sheba coin? I don't know, but okay,
Speaker 1: but we're talking about I mean that a lot of
Speaker 1: people think it's a joke. Well sheba coin was a
Speaker 1: joke created to mimic doze coin, which was a joke, right,
Speaker 1: So I mean, yeah, well I don't know it's it's
Speaker 1: a second derivative joker cryptocurrency. But you know, it just
Speaker 1: shows you how much cash is out there, how it's
Speaker 1: lifting asset prices. Like I was asked that the Federal
Speaker 1: Reserve to do a thing on bubbles and what markets
Speaker 1: did I think we're in bubbles? And I went through
Speaker 1: every market I could think of, and the one, I uh,
Speaker 1: sports memorabilia isn't a bubble. Baseball cards are clearly in
Speaker 1: a bubble, right, Um? But you know you look at stocks, right,
Speaker 1: are they in a bubble? Well? Not with interest rates
Speaker 1: where they're at. It isn't it? And isn't it so
Speaker 1: much of it's got kind of bounced back from falling
Speaker 1: off a cliff and things recovering or do you think
Speaker 1: you know we've done that? And then we've gone a
Speaker 1: little bit more. Well, I think, you know, normally at
Speaker 1: this point in a recovery, I would say, oh, you know,
Speaker 1: we're kind of in the second or third ending, right
Speaker 1: like when the Dodgers are winning the World Series. But
Speaker 1: uh that you know, this is like we went right
Speaker 1: to the fifth ending, you know, the immedately, the incredible
Speaker 1: rally that we've got coming out of the pandemic and
Speaker 1: the amount of stimulus. You know, people compare this to uh,
Speaker 1: a war, right, the pandemic was a war. And so
Speaker 1: I've gone back and I've studied wars, and when you
Speaker 1: get what's there is an interesting corollarya is you you
Speaker 1: you have a major war, like the First World War,
Speaker 1: the Second World War. Right after the war is over
Speaker 1: and there's been all this stimulus from defense spending and
Speaker 1: money printing, you get a spike in inflation, which is transitory.
Speaker 1: So when people talk to me about is this transitory,
Speaker 1: which I'm always like, everything's transitory. Life is transitory. But
Speaker 1: but you know, is you know, is this something that
Speaker 1: is permanent and should we be worried about it in
Speaker 1: the long run? And I think today the answer is no. Well,
Speaker 1: if you look at all the things that have gone
Speaker 1: up in price that have that are in the CPI components.
Speaker 1: You've got hospitality industries to hotels, airlines, automobiles, right, which
Speaker 1: are due to the supply chain interruption. Um, you know,
Speaker 1: it's really a bounce back from what we had in
Speaker 1: the decline. And you can say, wait a minute's got autos. Well,
Speaker 1: the supply chain interruption to me looks like the retooling
Speaker 1: that occurred at the end of the Second World War. Right,
Speaker 1: all of every all output auto plants, everything had been
Speaker 1: converted to wartime production. There was a transition period in
Speaker 1: the in the earl in the mid forties, and during
Speaker 1: that transition period, people who had saved all this money
Speaker 1: from the stimulus from the war wanted to spend it,
Speaker 1: and so auto prices went up. But you know it's
Speaker 1: interesting is there was one one period in there, I
Speaker 1: think it was in forty six or forty seven where
Speaker 1: inflation actually was at twenty but bond yields never went
Speaker 1: above two and a quarter, which doesn't quite make sense,
Speaker 1: does it. Well, I think we're living in it today,
Speaker 1: So that's interesting. So so what's the interest rate environment?
Speaker 1: Can we make a projection here? Scott longer term. Is
Speaker 1: there's something different about the relationships here? Well, you know,
Speaker 1: I love the the phrase is there's something different? You know,
Speaker 1: I'm a great had I loved the Ken Rogue Off
Speaker 1: and Carmen Ryknocks book. This time it's different. And when
Speaker 1: I met Ken Rogoff, I had to ask him where
Speaker 1: did this title come from? I guess it's never different, right,
Speaker 1: So you know, to to your point, I don't think
Speaker 1: it's different from the standpoint of what I just talked
Speaker 1: about in the periods of time that we're talking about,
Speaker 1: where you had lots of government spending, lots of money printing,
Speaker 1: and then you transition, your transition, but there is something
Speaker 1: fundamentally different in it. We now have socialized credit. We
Speaker 1: have now made the central bank the backstop for everything,
Speaker 1: and this is really unusual because central banks were never
Speaker 1: designed for this. The Federal Reserve was created after the
Speaker 1: Panic of n to provide some short term elasticity to
Speaker 1: money to avoid periods of time where you had spikes
Speaker 1: and interest rates because of exogenous events like the earthquake
Speaker 1: in San Francisco right so um that of course ended
Speaker 1: up setting off a financial crisis. So the idea was Okay,
Speaker 1: we had this, this temporary elasticity of credit. This is permanent.
Speaker 1: I mean, this is MMT. No, no matter what any
Speaker 1: rhetoric ors out there, we are living in MMT. Well.
Speaker 1: You know, as I tell people, the history of money
Speaker 1: is checkered. Right, Kings would scrape the engine edges of
Speaker 1: silver coins so they could build palaces or flight wars,
Speaker 1: and they slowly debase their currency. Right. Well, the history
Speaker 1: of paper money is a more. Right, there has never
Speaker 1: been a paper money regime that doesn't ultimately end in
Speaker 1: some sort of hyper inflation. Right. And if you go
Speaker 1: back and you look at Rogos work on this subject,
Speaker 1: he says, you get three options. Right. You default if
Speaker 1: you're a government, Okay, not likely, right, unless we can't
Speaker 1: get a budget ceiling pass. You can you can restructure,
Speaker 1: but that's what people like Argentina do, right, Or you
Speaker 1: can inflate your way out of it, and so ultimately,
Speaker 1: And it's interesting because you know, people say, oh, you know,
Speaker 1: all this money is inflationary, and I agree with that,
Speaker 1: but you know, Milton Friedman famously said that, you know,
Speaker 1: inflation is always in everywhere a monetary phenomenon. It isn't
Speaker 1: based on the size of the budget deficit. It isn't
Speaker 1: based on physical spending. It's a monetary phenomenon. But the
Speaker 1: thing that people forget is the rest of the statement,
Speaker 1: which is inflation is always in everywhere a monetary phenomenon
Speaker 1: subject to long and variable lags, right, and we're living
Speaker 1: in the age of a long and variable leg thirty seconds?
Speaker 1: What then do investors do? How do they need to
Speaker 1: approach the market? You said there's a lot of bubbles
Speaker 1: out there just well, you know, it's interesting because every
Speaker 1: investor I have is a long term investor, and after
Speaker 1: about three months I find out what the definition of
Speaker 1: the long terms. If you're truly a long term investor,
Speaker 1: what you really need to do is buy things that
Speaker 1: will perform them well in the long run. Real estate,
Speaker 1: residential real estate, despite everything people say, is still more
Speaker 1: affordable than any other period except right after the Great
Speaker 1: Financial Crisis. The difference today is there's financing available, you know,
Speaker 1: uh there exactly, and you get the option to prepay
Speaker 1: in our country. So you know, there are a lot
Speaker 1: of things out there like that. I like. Also, you
Speaker 1: know a lot of the unicorn stocks that are out there.
Speaker 1: I don't want to mention anything names because we're invested
Speaker 1: in some of them. But you know, this is gonna
Speaker 1: be like the Internet, this is gonna be transformational. We
Speaker 1: will probably go through a washout. So if you're a
Speaker 1: short term investor, you know, if you're worried about the
Speaker 1: next year or two, maybe you don't want to go there.
Speaker 1: But the reality is, intend to twenty years, it'll be
Speaker 1: There are the companies out there today that are that
Speaker 1: are Amazon, and I was a genius. I bought Amazon
Speaker 1: at nine dollars of share and I sold it at fourteen.
Speaker 1: So you know, so there's a big opportunity out there
Speaker 1: for people who who want to wait for the crash.
Speaker 1: But you know, ultimately, if you're in it for the
Speaker 1: long run, it's Mary Meeker pointed out back in the
Speaker 1: Internet bubble, by a broad portfolio of these companies and
Speaker 1: at the end of the day, you're going to do
Speaker 1: really well. That was Scott Minor, the ce IO over
Speaker 1: at googen Him Investments. Well, a ton of great conversations.
Speaker 1: It was so much fun to be back live and
Speaker 1: in person there at the Beverly Hilton. Um it was
Speaker 1: it was your first time, right, my first time being
Speaker 1: at the Milk and Institute Global Conference, and it was fun.
Speaker 1: It was a lot of fun. What it's what's great
Speaker 1: about it? It is really um across section of obviously
Speaker 1: the financial community, but there's wellness, there's technology, there's media,
Speaker 1: there's entertainment. It's just you know what business week is
Speaker 1: all about, right, a snapshot of our world. Right, you
Speaker 1: can be walking around in the hotel and bump into
Speaker 1: a movie star, the governor. I didn't. I didn't either,
Speaker 1: but I could have. She was there. She was there
Speaker 1: as well as were many others. All Right. That reps
Speaker 1: up the weekend edition of Bloomberg Busines this week from
Speaker 1: Bloomberg Radio. If you missed any of our interviews or
Speaker 1: want to hear the full interviews, just from milk and
Speaker 1: just go to the Bloomberg terminal also at Bloomberg dot com.
Speaker 1: Thanks so much for joining us. I'm Carol Masser and
Speaker 1: I'm Tim Stanavak. Be sure to tune into our Bloomberg
Speaker 1: Business Week Daily show Monday through Friday. It starts at
Speaker 1: two pm Wall Street Time on Bloomberg Radio. You can
Speaker 1: also watch our daily broadcast on YouTube. Just search Bloomberg
Speaker 1: Global News. Also check out our Bloomberg Business Week podcast
Speaker 1: You can find it at Bloomberg dot com, Apple, or
Speaker 1: wherever you get your podcast. Bloomberg Business Week is available
Speaker 1: on newsstands now. It's the special Double Persuasion issue, so
Speaker 1: check that out. Lots of great stories there. Find it
Speaker 1: at Bloomberg dot com, business Week dot com, and on
Speaker 1: the Bloomberg terminal, and you can also see me on
Speaker 1: Bloomberg Quick Take available on Bloomberg dot com, slash Qt,
Speaker 1: and streaming platforms like Roku, Apple TV, Samsung TV and more.
Speaker 1: Have a great weekend. Stay safe everyone. This is Bloomberg