WEBVTT - Bloomberg Businessweek Weekend - October 8th, 2021 0:00:01.080 --> 0:00:05.440 This is Bloomberg Business Week inside from the reporters and 0:00:05.600 --> 0:00:09.200 editors who bring you America's most trusted business magazine, plus 0:00:09.240 --> 0:00:13.160 global business finance and tech news As it happened. Bloomberg 0:00:13.240 --> 0:00:16.759 Business Week with Carol Messier and Bloomberg Quick Takes. Tim 0:00:16.800 --> 0:00:21.320 Stinovic on Bloomberg Radio. Hi, everyone, Welcome to the weekend 0:00:21.440 --> 0:00:23.919 edition of Bloomberg Business Week. It was another week of 0:00:23.960 --> 0:00:27.760 volatility in the equity trade. Stocks whipsode by debt ceiling 0:00:27.760 --> 0:00:30.640 and fiscal spending negotiations to him and also, oh yeah, 0:00:30.720 --> 0:00:33.240 we talked about inflation. We even talked about stack lation. 0:00:33.600 --> 0:00:36.160 It does seem like investors for the Q four really 0:00:36.200 --> 0:00:39.160 need to buckle up right, Yeah, exactly, but it really 0:00:39.600 --> 0:00:42.760 has created more uncertainty and volatility in the markets. We 0:00:42.840 --> 0:00:44.639 are a lot going on this broadcast. Yeah, really big 0:00:44.640 --> 0:00:46.600 show coming your way. We have the founder, chairman and 0:00:46.680 --> 0:00:49.480 CEO of Dell Technology is none other than Michael Dell. 0:00:49.800 --> 0:00:52.360 He's gonna talk all about price pressures and supply chains 0:00:52.400 --> 0:00:54.600 in the tech sector along with his new book It's 0:00:54.640 --> 0:00:57.800 called Plain Nice. But when a CEO's journey from founder 0:00:57.880 --> 0:00:59.520 to leader? Can I be fair? Tim? And I have 0:00:59.560 --> 0:01:00.800 to look at a lot of books. We talked to 0:01:00.800 --> 0:01:02.760 a lot of authors. Sometimes we can read some of 0:01:02.760 --> 0:01:04.679 the books. Sometimes we read Don't get Tory too much. 0:01:04.680 --> 0:01:08.080 Don't tell everybody this book. We read and loved it. 0:01:08.080 --> 0:01:11.400 It's really good. Yeah, and it really details I mean, 0:01:11.560 --> 0:01:14.800 he is a tech whiz kid created this company. I 0:01:14.800 --> 0:01:16.880 mean he was working on computers when he was a 0:01:16.959 --> 0:01:21.000 kid in high school. Um, you know, years old, he's 0:01:21.000 --> 0:01:24.200 building out this company remarkable well, and also details the 0:01:24.280 --> 0:01:27.360 take private element of the company and the way the 0:01:27.360 --> 0:01:29.520 company was able to transform as a private company and 0:01:29.560 --> 0:01:32.480 come back bigger and better create a company. Take it public, 0:01:32.600 --> 0:01:35.080 take it private, take it public again. Really cool, We 0:01:35.160 --> 0:01:37.000 get into that. Hey. Also this week, Tim and I 0:01:37.080 --> 0:01:40.520 participated in Bloomberg invest Global. It's an event highlighted by 0:01:40.520 --> 0:01:44.600 a number of financial heavyweights, including Gray Scale CEO Michael Sonnenschein, 0:01:44.640 --> 0:01:46.440 who will hear from later on when it comes to 0:01:46.480 --> 0:01:49.880 the crypto landscape. The someone also highlighted the analytical power 0:01:49.920 --> 0:01:53.280 of Bloomberg Intelligence and Bloomberg Global Data, and I spoke 0:01:53.280 --> 0:01:56.960 with Bloomberg Intelligence chief equity strategist Gina Martin Adams, who 0:01:57.040 --> 0:02:00.000 said that rising prices, well, they're really something that invests 0:02:00.080 --> 0:02:02.520 just cannot afford to ignore. I think we need to 0:02:02.520 --> 0:02:04.440 pay attention to it for a number of reasons, but 0:02:04.560 --> 0:02:06.640 most profoundly in the short run. We need to pay 0:02:06.640 --> 0:02:09.560 attention to it because even though policymakers are telling us 0:02:10.000 --> 0:02:12.800 it's not going to be around forever, it is still 0:02:13.280 --> 0:02:16.040 sticking around for a little longer than anyone had anticipated, 0:02:16.480 --> 0:02:18.200 at least in the short run. And we're saying that 0:02:18.240 --> 0:02:22.799 reflected an analyst expectations. So far, roughly half of SMP 0:02:23.480 --> 0:02:27.000 company estimates for operating margins, which is the manifestation of 0:02:27.040 --> 0:02:30.760 inflation pressures in the earning stream, those estimates have dropped 0:02:30.800 --> 0:02:33.960 for third quarter and for fourth quarter season. We've not 0:02:34.120 --> 0:02:36.799 yet seen a down draft in the forward twelve month 0:02:36.840 --> 0:02:38.280 that look which I think we want to watch for. 0:02:38.840 --> 0:02:42.120 That was Bloomberg Intelligence Chief equity strategist Gina Martin Adams. 0:02:42.360 --> 0:02:44.880 And speaking of earning scroll, we are also going to 0:02:44.960 --> 0:02:48.040 hear from chip Burg, president and CEO of Levi Strauss, 0:02:48.040 --> 0:02:51.960 the data maker, coming off of a really strong third quarter. Yeah. Absolutely, 0:02:51.960 --> 0:02:54.079 also talking about a buyback, So we'll get to that 0:02:54.360 --> 0:02:56.280 a little bit later. On all of that to come, 0:02:56.360 --> 0:02:58.880 we begin with a look at this week's issue of 0:02:58.880 --> 0:03:01.359 Bloomberg Business Week mag zine, and to him, let's start 0:03:01.400 --> 0:03:03.880 with the cover story. It's all about tether, the world's 0:03:03.919 --> 0:03:06.760 most popular stable coin. So for those who don't know, 0:03:06.800 --> 0:03:09.320 it's a type of cryptocurrency favored by traders because it's 0:03:09.360 --> 0:03:12.359 backed by real U S dollars. So every tether it's 0:03:12.400 --> 0:03:15.600 well supposed to be worth one dollar and backed by 0:03:15.639 --> 0:03:19.560 one dollar, right, and so with sixty nine billion tethers 0:03:19.600 --> 0:03:22.440 now in circulation, stay with me, everyone, there should be 0:03:22.639 --> 0:03:26.040 sixty nine billion dollars in real money to back those coins. Right. Well, 0:03:26.080 --> 0:03:28.520 the thing is, nobody seems to know exactly where that 0:03:28.560 --> 0:03:30.840 money is, and that's part of the reason U S 0:03:30.880 --> 0:03:34.400 regulators are taking notice. Another important story that we discussed 0:03:34.440 --> 0:03:36.360 comes from the business section of the magazine, and it 0:03:36.360 --> 0:03:38.720 turns out that racial and gender diversity at elite law 0:03:38.760 --> 0:03:41.480 firms is lacking to the point where some big name 0:03:41.520 --> 0:03:44.560 clients they're actually dock in legal fees. It's so interesting. 0:03:44.600 --> 0:03:47.240 It's a story by our Ellen Milligan and Todd Gillespie, 0:03:47.320 --> 0:03:49.760 and it details the pressure that's being put on these 0:03:49.800 --> 0:03:52.800 mega firms, mega law firms to include more women and 0:03:52.840 --> 0:03:56.080 people of color on their teams. So we're talking about 0:03:56.280 --> 0:03:59.880 companies putting pressure on these law firms. Companies like Facebook, 0:04:00.880 --> 0:04:03.800 HP and of artists. They're all spending billions on outside 0:04:03.800 --> 0:04:07.400 council and they say diverse legal teams deliver more creative 0:04:07.440 --> 0:04:11.760 and well rounded advice. Ironically, though, these are the company's 0:04:11.840 --> 0:04:15.120 jim that are working on diversity, but they have a 0:04:15.120 --> 0:04:17.520 long way to go. So it's just kind of funny. 0:04:17.560 --> 0:04:21.839 It's like wait a minute, glass houses, etcetera. Exactly. I 0:04:21.839 --> 0:04:24.080 do think it's interesting though, because we did talk about 0:04:24.080 --> 0:04:25.960 this in the context of Facebook and Facebook more than 0:04:26.000 --> 0:04:27.720 you know, one billion dollars in legal fees that have 0:04:27.720 --> 0:04:29.919 paid last year, and how that's not going to go 0:04:30.080 --> 0:04:32.480 down anytime soon if we look at what's happening with Facebook. 0:04:32.520 --> 0:04:36.000 So these huge law firms want to keep these big clients. 0:04:36.000 --> 0:04:38.840 They're so important to them. It's also a challenge when 0:04:38.839 --> 0:04:41.600 it comes to the pipeline because even though there's real 0:04:41.680 --> 0:04:45.120 lack of diversity, it's hot. Yeah, it starts, you know, 0:04:45.160 --> 0:04:47.359 lower down. It starts with those first year associates and 0:04:47.360 --> 0:04:49.520 even goes as far back as law school and making 0:04:49.520 --> 0:04:51.839 sure to increase diversity in law school. So that pipeline 0:04:51.880 --> 0:04:54.520 is created. Also this week, we talked about a couple 0:04:54.520 --> 0:04:57.279 of things that some of our listeners might enjoy on 0:04:57.360 --> 0:05:00.880 occasion in their spare time. Potent b an interesting story 0:05:00.920 --> 0:05:04.080 from Bloomberg News Toronto bureau chief Danielle Boco of on 0:05:04.240 --> 0:05:07.000 Canadian pot farmers. They bought up a bunch of land 0:05:07.040 --> 0:05:08.520 and they really hope to get in on the ground 0:05:08.520 --> 0:05:12.520 floor of a nascent cannabis tourism industry. But it's harder 0:05:12.560 --> 0:05:15.719 than it sounds. But it turns out the country's complex 0:05:15.720 --> 0:05:18.360 series of regulations are hampering business in a big way. 0:05:18.920 --> 0:05:22.000 So that's a story we chuckled a little bit about it, 0:05:22.000 --> 0:05:24.719 had some fun with puns, but nonetheless it just shows 0:05:24.880 --> 0:05:27.200 again this is an industry that's trying to find its 0:05:27.200 --> 0:05:29.279 way forward, but it's not so easy, and it depends 0:05:29.360 --> 0:05:33.320 on geography, country, rules, regulations. It's a really interesting tension though, 0:05:33.320 --> 0:05:35.520 because there are a lot of proponents of the industry 0:05:35.520 --> 0:05:37.920 who say, hey, this is not just good for the industry, 0:05:37.960 --> 0:05:39.799 but it's good for the country. It's good for tourism, 0:05:40.080 --> 0:05:42.360 it's good for the economy. But if we can't get 0:05:42.400 --> 0:05:45.200 past these rules and regulations and actually allowed to flourish, 0:05:45.240 --> 0:05:47.520 similar to the way that the wine industry in California, 0:05:47.560 --> 0:05:50.600 for example, even the wine industry just outside of Toronto 0:05:51.680 --> 0:05:54.039 is flourishing. Then it's it's not going to get off 0:05:54.080 --> 0:05:56.440 the ground. And then there's also in the magazine the 0:05:56.480 --> 0:05:58.680 so called M I T. Beer game. We're not talking 0:05:58.680 --> 0:06:01.240 about pong beer pong, know what it's about. I thought 0:06:01.240 --> 0:06:03.400 it was when I first saw that, which is why 0:06:03.440 --> 0:06:05.200 Tim's like, yeah, okay, I'll put this at the top 0:06:05.240 --> 0:06:08.039 of my reading list. That story from our economics team, 0:06:08.040 --> 0:06:11.720 all about a decades old business school simulation exercise illuminating 0:06:11.760 --> 0:06:14.240 how human error can snag up supply chains. We talked 0:06:14.240 --> 0:06:17.320 about supply chains a lot. That story you can find 0:06:17.400 --> 0:06:20.559 in the magazine, which is on newstands online and also 0:06:20.680 --> 0:06:23.000 on the Bloomberg terminal. And you want to stick around 0:06:23.080 --> 0:06:25.520 for the whole show, because later on a Bloomberg Business 0:06:25.560 --> 0:06:28.039 we contribute or details his findings as part of the 0:06:28.120 --> 0:06:31.839 staff at Walt Disney World. And guess what, it wasn't 0:06:31.839 --> 0:06:34.599 all magical, though it was certainly colorful. You do not 0:06:34.760 --> 0:06:37.000 want to miss this Eleven things I never knew about 0:06:37.000 --> 0:06:39.560 Disney World until I worked there. I love this story. 0:06:39.760 --> 0:06:41.880 All that and more straight ahead coming up though. Next 0:06:42.080 --> 0:06:44.680 Levi strauss out with third quarter earnings. They were better 0:06:44.720 --> 0:06:48.320 than expected. The company's president and CEO, Chipberg, joining us 0:06:48.320 --> 0:06:51.000 to talk about the quarter, the outlook, and how he 0:06:51.040 --> 0:06:53.680 plans to keep the nearly one seventy year old company 0:06:53.680 --> 0:06:57.200 and iconic brand moving forward. You're listening to Bloomberg Business Week. 0:06:57.400 --> 0:07:10.600 This is Bloomberg. This is Bloomberg Business Week with Carol 0:07:10.640 --> 0:07:14.880 Messer and Bloomberg Quick Takes Tim Spinovik from Bloomberg Radio. 0:07:17.720 --> 0:07:20.840 Levi Strausson company this past week posted third quarter sales 0:07:20.840 --> 0:07:24.360 at top Wall Street expectations. It's a sign that consumers 0:07:24.400 --> 0:07:27.800 are still willing to shop for apparel despite ongoing uncertainty 0:07:28.200 --> 0:07:30.160 around COVID nineteen, or at least they're willing to shop 0:07:30.160 --> 0:07:31.720 for Levi's. Let's just put it up. I mean, at 0:07:31.720 --> 0:07:34.200 the beginning of the pandemic, I wore Jeanes NonStop and 0:07:34.200 --> 0:07:37.160 actually wore through some of them. Did you really took 0:07:37.440 --> 0:07:39.800 this is? It actually took weeks to get a new pair. 0:07:39.920 --> 0:07:41.480 This was like the beginning when I didn't realize that 0:07:41.520 --> 0:07:44.400 the supply chain French would be there. That is really funny. Well, 0:07:44.400 --> 0:07:47.200 the dnamaker also boosted its full year profit outlook, but 0:07:47.280 --> 0:07:50.440 there are still challenges ahead. The president and CEO Chitberg 0:07:50.480 --> 0:07:53.000 stopped by to talk to us about supply chain bottlenecks, 0:07:53.040 --> 0:07:56.480 the competitive landscape, and of course, the company's recent strong 0:07:56.520 --> 0:07:59.840 earnings report. We're really pleased with the quarter, especially when 0:07:59.840 --> 0:08:04.800 you're consider the macro economic headwinds that we've been facing, 0:08:04.840 --> 0:08:08.800 supply chain challenges and everything else. Our team around the 0:08:08.800 --> 0:08:13.000 world is just doing an exceptional job executing. We've delivered 0:08:13.440 --> 0:08:18.760 sales growth at versus last year, but importantly we were 0:08:18.840 --> 0:08:24.320 up three versus pre pandemic, and um you know, we 0:08:24.400 --> 0:08:27.880 expect to be up versus in the fourth quarter as well. 0:08:28.000 --> 0:08:32.880 So really good quarter, strong profit delivery. But you know, 0:08:32.960 --> 0:08:36.200 we've we've just done a great job navigating all of 0:08:36.320 --> 0:08:40.080 the challenges that are facing the industry. I can hear 0:08:40.120 --> 0:08:41.599 it in your voice. I think both Tim and I 0:08:41.640 --> 0:08:43.880 are looking at them. So tell us about the challenges. 0:08:44.080 --> 0:08:46.480 I mean, what is it that you can't get, what 0:08:46.640 --> 0:08:48.240 is it that you have to pay a lot more for? 0:08:48.440 --> 0:08:51.040 Tell us about that? Well, I think you know, UH 0:08:51.200 --> 0:08:53.640 supply chain challenges have been in the news and have 0:08:53.960 --> 0:08:58.040 affected really all of the soft line UH and apparel 0:08:58.120 --> 0:09:01.800 stocks over the last three three months or so. UH. 0:09:02.080 --> 0:09:06.240 Pork challenges are obviously an issue. COVID is impacting a 0:09:06.320 --> 0:09:09.839 number of countries in Asia. Many factories are shut down. 0:09:10.440 --> 0:09:13.240 But what we've got going for us is I actually 0:09:13.240 --> 0:09:17.239 believe our global supply chain is a competitive advantage. UM. 0:09:17.320 --> 0:09:20.560 We have a huge amount of scale. UM. We source. 0:09:20.800 --> 0:09:23.320 We made a decision a long long time ago that 0:09:23.360 --> 0:09:24.920 we were not going to put all of our eggs 0:09:24.920 --> 0:09:29.079 in one basket. UM. We source from twenty four different countries. 0:09:29.160 --> 0:09:34.240 No country represents more than our total volume UM. And 0:09:34.280 --> 0:09:38.079 we also cross source. About half of all of our 0:09:38.160 --> 0:09:42.640 volume is crosssourced, meaning we could make that same product 0:09:43.360 --> 0:09:46.679 in different factories in different countries, which gives us an 0:09:46.720 --> 0:09:50.280 incredible amount of agility. So that if a factory shuts 0:09:50.280 --> 0:09:53.640 down unfortunately because of COVID, we've can quickly move that 0:09:53.760 --> 0:09:59.000 production to somewhere else that's still operating. So that's given 0:09:59.080 --> 0:10:01.360 us a ton of of agility. I mean, just to 0:10:01.480 --> 0:10:06.640 dimensionalize that the atnouncement in the news a lot here lately, UM, 0:10:06.840 --> 0:10:09.920 we're importing less than four percent of our product right 0:10:09.960 --> 0:10:14.880 now from Vietnam um uh, and so that's that's big. 0:10:15.160 --> 0:10:18.120 We've also been really agile on the on the shipping front. 0:10:18.840 --> 0:10:22.120 In fact, we've locked up about seventy of our shipping 0:10:22.120 --> 0:10:26.160 through the first half of next year of the capacity 0:10:26.320 --> 0:10:30.040 that we need. Uh and we've been able to you know, 0:10:30.160 --> 0:10:33.600 ship deliveries from the West coast to the East coast 0:10:33.679 --> 0:10:38.400 given the West coast court challenges. So our diversified supply 0:10:38.520 --> 0:10:40.400 chain and the team that we've got really is a 0:10:40.440 --> 0:10:43.160 big competitive advantage. We left you know, we did one 0:10:43.160 --> 0:10:45.360 and a half billion dollars of revenue in the quarter. 0:10:45.559 --> 0:10:47.880 We left ten million dollars of revenue on the table 0:10:48.120 --> 0:10:52.240 from unfilled orders. Really a great really, a great job. 0:10:53.040 --> 0:10:55.960 Common prices have surge year over a year, according to 0:10:56.080 --> 0:11:00.000 Bloomberg Intelligence, Shipping prices, I know for you have increased. 0:11:00.040 --> 0:11:03.160 You did say yesterday, levis indicated that you have pricing 0:11:03.200 --> 0:11:04.960 power and you're able to pass on some of these 0:11:05.000 --> 0:11:08.200 increased costs that you face two consumers. How much pricing 0:11:08.240 --> 0:11:11.400 power do you have? How much more our customer is 0:11:11.480 --> 0:11:14.040 going to pay for their levis? Well, A couple of 0:11:14.040 --> 0:11:17.320 things to first of all, um, you know, there's it's 0:11:17.400 --> 0:11:21.200 clear inflation is here. And it's not just cotton, it's everything. 0:11:21.200 --> 0:11:24.880 It's labor, costs, it's shipping costs, it's truck costs, it's 0:11:24.920 --> 0:11:28.800 it's really everywhere. UM. We saw it coming over a 0:11:28.880 --> 0:11:32.160 year ago, and we took pricing. We've been taking pricing 0:11:32.240 --> 0:11:34.360 for the last year. Are au r s are up 0:11:34.400 --> 0:11:38.360 pretty significantly over the last two years, and it's because 0:11:38.360 --> 0:11:41.000 we saw inflation coming and we've been pricing ahead of 0:11:41.040 --> 0:11:45.600 inflation and have been successful. It's sticking and so a 0:11:45.640 --> 0:11:47.120 lot of that, and that's part of the reason you're 0:11:47.120 --> 0:11:49.920 seeing such high gross margins fifty seven and a half 0:11:49.960 --> 0:11:52.520 percent gross margins this past quarter. We've been in the 0:11:52.559 --> 0:11:56.160 fifty seven's for the last three quarters, UM, and it's 0:11:56.200 --> 0:12:01.199 because we've successfully passed on pricing. We don't buy cotton, 0:12:01.320 --> 0:12:06.480 We buy fabric from mills, and we've already negotiated our 0:12:06.559 --> 0:12:11.640 cost of good soul through the first half of with 0:12:12.120 --> 0:12:16.040 a slow single digit one cost inflation built into our 0:12:16.120 --> 0:12:19.880 cost of goods. We're in the midst of negotiating the 0:12:19.960 --> 0:12:23.040 second half. I expect that's going to be higher. Obviously, 0:12:23.120 --> 0:12:26.480 given what's happening to cotton, we're expecting it's gonna be 0:12:26.559 --> 0:12:30.120 somewhere in the mid single digit area. If it's more 0:12:30.160 --> 0:12:32.560 than that, we may have to take additional pricing, but 0:12:33.480 --> 0:12:35.520 priced ahead of inflation, and feel that we're in a 0:12:35.559 --> 0:12:38.720 pretty good place right now. We're also confident in the 0:12:38.720 --> 0:12:40.480 strength of the brand that if we need to take 0:12:40.559 --> 0:12:44.400 more pricing, we can do that very surgically and and 0:12:44.640 --> 0:12:48.160 you know, and recover the higher costs to maintain your margins. 0:12:48.200 --> 0:12:51.640 Basically exactly. Hey, listen, you said, I thought it was 0:12:51.679 --> 0:12:55.400 interesting tip you said, um, that you saw inflation coming 0:12:55.480 --> 0:12:57.679 about two years ago. Are you saying that there were 0:12:58.080 --> 0:13:01.480 problems in the supply chain prepare endemic? Because I think 0:13:01.480 --> 0:13:03.920 this speaks to we are trying to figure out inflation 0:13:03.960 --> 0:13:07.000 transitory or not. Right, it's the big big question of 0:13:07.120 --> 0:13:09.840 the day. What would you say someone who has to 0:13:10.040 --> 0:13:13.080 manage your supply chain so carefully? Is this a bigger 0:13:13.120 --> 0:13:16.200 deal that lasts, that stays with us longer. Yeah, it 0:13:16.320 --> 0:13:18.400 wasn't really two years ago we saw coming. It was 0:13:18.440 --> 0:13:23.560 about right, kind of coincidental with the pandemic and the lockdowns. Um, 0:13:24.080 --> 0:13:26.280 we knew that there was already going to be pressure 0:13:26.360 --> 0:13:28.880 from a labor standpoint. We were seeing that here in 0:13:28.880 --> 0:13:33.000 the US in particular. Um, you know, I know there's 0:13:33.000 --> 0:13:36.240 a lot of debate about whether inflation is transitory or not, 0:13:36.480 --> 0:13:39.960 I personally believe it's here to stay. And that's why 0:13:40.000 --> 0:13:45.200 we started taking pricing action early. Is you know, instead 0:13:45.200 --> 0:13:48.720 of a big huge leap and prices, it's it's better 0:13:48.800 --> 0:13:52.880 to get the consumer there slowly over a series of 0:13:52.920 --> 0:13:56.439 price increases and and and so we got going on 0:13:56.480 --> 0:13:59.080 it early. And I think we're out ahead of the curve. 0:14:00.240 --> 0:14:02.720 Are au r s are up kind of in the 0:14:02.760 --> 0:14:05.800 mid to high single digit area versus a year ago 0:14:05.880 --> 0:14:09.920 and two years ago. UM, so I believe it's here 0:14:09.960 --> 0:14:14.360 to say. I mean we're looking at higher late labor 0:14:14.480 --> 0:14:18.920 cost wage wages are going up pretty significantly around the world. 0:14:18.960 --> 0:14:23.080 There's shortage of of labor for different types of skills. 0:14:23.840 --> 0:14:26.400 So I think we're looking at this for at least 0:14:26.440 --> 0:14:29.520 the next couple of years. That was Levi Stross, president 0:14:29.560 --> 0:14:33.320 and CEO Chipburg the stock hire by so far this year, 0:14:33.520 --> 0:14:35.880 we'll still ahead. On Bloomberg Business Week, bain and Company 0:14:35.880 --> 0:14:39.280 out with its annual technology report, and as you might imagine, 0:14:39.520 --> 0:14:42.120 the rift between the United States and China looming over 0:14:42.240 --> 0:14:45.160 the entire tech sector. The head of Baines Technology and 0:14:45.160 --> 0:14:48.120 Cloud Services practice in the America's joins US to discuss 0:14:48.160 --> 0:14:58.920 the impact of the great decoupling. This is Bloomberg broadcasting 0:14:59.000 --> 0:15:02.800 from the financial capital of the world Bloomberg eleven Frio 0:15:02.840 --> 0:15:06.840 in New York to Washington, d C. Bloomberg to Boston, 0:15:06.920 --> 0:15:10.360 Bloomberg one oh six one, to San Francisco, Bloomberg nine 0:15:10.440 --> 0:15:13.680 sixty to the country Sirius XM Chado one nineteen and 0:15:13.760 --> 0:15:17.120 around the globe the Bloomberg Business app and Bloomberg Radio 0:15:17.240 --> 0:15:22.520 dot com. This is Bloomberg Business Week. Late last month, 0:15:22.520 --> 0:15:25.760 Bade and Company put out its Technology REPORTE TIM. It 0:15:25.840 --> 0:15:28.760 was ninety two pages of the new Technology economy. It 0:15:28.800 --> 0:15:31.480 provides insights and trends on everything from big tech, m 0:15:31.560 --> 0:15:34.920 and A venture capital, software, hybrid cloud, the talent wars, 0:15:35.000 --> 0:15:38.320 and yes, of course chip shortages and supply chains. But 0:15:38.400 --> 0:15:41.640 layering over it all, well, it's the ongoing spat between 0:15:41.640 --> 0:15:43.720 the U S and China. Absolutely, and that was also 0:15:43.760 --> 0:15:46.240 in our news flow this week. Ann Hecker is head 0:15:46.240 --> 0:15:49.680 of Baynes Technology and Cloud Services practice in the America. 0:15:49.800 --> 0:15:51.840 She joined us to break down the report really talk 0:15:51.880 --> 0:15:54.400 about the impact of that widening rift between the world's 0:15:54.680 --> 0:15:59.400 superpowers and the world's two biggest economies. It really has accelerated, 0:15:59.440 --> 0:16:02.360 I think over the last couple of years. So when 0:16:02.400 --> 0:16:04.680 we think of this and decoupling, even you know, two 0:16:04.800 --> 0:16:06.600 or three years ago, we used to lay out three 0:16:06.640 --> 0:16:08.840 scenarios that you know, we used to be in a 0:16:08.880 --> 0:16:11.560 world is more globalization, and then we moved to one 0:16:11.880 --> 0:16:14.440 of globalization, which is a term I think the economist 0:16:14.520 --> 0:16:17.480 coined where there would still be global trade, but there'll 0:16:17.520 --> 0:16:20.600 be more tariffs, more sanctions that would flow some things down. 0:16:21.320 --> 0:16:23.120 And then the third would be do we moved into 0:16:23.120 --> 0:16:25.480 a more decoupled world where you really do start to 0:16:25.520 --> 0:16:29.960 see the development of independent economies and supply cheeses that 0:16:30.000 --> 0:16:33.680 really just have fewer linkages across those And we used 0:16:33.680 --> 0:16:35.640 to debate up how fast would you be moving towards 0:16:35.680 --> 0:16:39.240 that more decoupled scenario, and I think we've moved faster 0:16:39.320 --> 0:16:42.200 than anyone expected. Um. I don't think it's going to 0:16:42.240 --> 0:16:44.560 be linear. I think will probably move some to the 0:16:44.640 --> 0:16:46.760 left sum to the right over time. But a few 0:16:46.840 --> 0:16:49.280 data points that have really I think show this is 0:16:49.600 --> 0:16:53.040 if you look at foreign direct investments, UM tech related 0:16:53.040 --> 0:16:58.080 foreign direct investment has dropped from who do you think 0:16:58.080 --> 0:17:01.080 are ultimately based on the latest tech report that you 0:17:01.080 --> 0:17:04.440 guys put out, who are the winners and losers? Yeah, 0:17:04.720 --> 0:17:07.359 that's a great question when we look at it. UM 0:17:07.560 --> 0:17:09.199 part of the report we looked at was just how 0:17:09.280 --> 0:17:13.679 much technology has really UM broadened in its impact across 0:17:13.720 --> 0:17:16.359 all industry. So sometimes we look at, you know, the 0:17:16.359 --> 0:17:19.359 tech companies, but we also looked in this report about 0:17:19.800 --> 0:17:24.240 how companies outside of traditional tech channels, so your retail companies, 0:17:24.240 --> 0:17:28.119 financial service, healthcare, consumer products, and the research there we 0:17:28.200 --> 0:17:32.000 showed that companies across all industries that take a more 0:17:32.119 --> 0:17:36.280 tech driven strategy or have a lot of UM tech 0:17:36.760 --> 0:17:40.800 as an underpinning in their business model are actually outperforming 0:17:41.000 --> 0:17:43.400 others in their own industry. So, while we can think 0:17:43.440 --> 0:17:47.119 of technology companies as a vertical in and of itself, 0:17:47.640 --> 0:17:52.240 the UM enabling aspect of technology and embracing that across 0:17:52.280 --> 0:17:55.959 all different industries, companies that have successfully done that are 0:17:56.000 --> 0:17:59.360 outperforming their peers that haven't done that yet. And can 0:17:59.359 --> 0:18:01.840 you give us for the sake of case study or 0:18:02.080 --> 0:18:05.040 or or so so people understand examples, can you share 0:18:05.080 --> 0:18:08.120 historical examples where where one company has embraced that type 0:18:08.119 --> 0:18:11.360 of shift and one hasn't and we've seen out performance. Well, sure, 0:18:11.400 --> 0:18:13.200 so you can see some of some of the examples 0:18:13.240 --> 0:18:16.119 would be would be on your listeners are very aware 0:18:16.160 --> 0:18:18.800 of like companies like an Amazon or an Ali Baba 0:18:18.960 --> 0:18:21.399 kind in the consumer space that it really just a 0:18:21.560 --> 0:18:23.359 kind of what we would call born check right, that 0:18:23.400 --> 0:18:26.720 they were born with the technology underpinning. And then I 0:18:26.800 --> 0:18:29.440 think you can see some examples in industrials and financial 0:18:29.480 --> 0:18:33.680 services where more traditional companies have really embraced technology, either 0:18:34.080 --> 0:18:36.000 whether it be payments or how do they think about 0:18:36.119 --> 0:18:39.720 telehealth where they've now added new lines of business or 0:18:39.760 --> 0:18:43.199 new ways of delivering their goods to the consumers that 0:18:43.240 --> 0:18:46.040 they've kind of embedded technology into their delivery even if 0:18:46.040 --> 0:18:48.399 they weren't kind of a born in the cloud type 0:18:48.440 --> 0:18:51.800 company we do. It is really such an interesting time 0:18:51.840 --> 0:18:54.240 and I guess we just keep wondering, you know, what 0:18:54.400 --> 0:18:57.159 is the next big thing in terms of our world 0:18:57.200 --> 0:19:00.960 and what happens um If there is a decoupling, I 0:19:01.040 --> 0:19:02.920 want to go back to that because that's where we started. 0:19:03.240 --> 0:19:06.320 If we have that decoupling, uh, And it does seem 0:19:06.359 --> 0:19:08.560 like we're moving towards that because we are already seeing 0:19:08.640 --> 0:19:11.119 just a strained relationship, but we've been there before re 0:19:11.200 --> 0:19:15.200 China before. If we are in terms of the tech world, 0:19:15.320 --> 0:19:18.800 it just means kind of too tech development verticals. That's 0:19:18.840 --> 0:19:21.240 how we it plays at and that's okay because there's 0:19:21.240 --> 0:19:22.920 still a lot of money to go around and still 0:19:22.960 --> 0:19:25.480 big markets to play in. That's where this a whole 0:19:25.600 --> 0:19:28.320 coupling gets very challenging because if you actually look at 0:19:28.359 --> 0:19:31.520 the technology value chain, UM, no one country can do 0:19:31.560 --> 0:19:33.680 it alone. Right now, we are still a very global 0:19:33.720 --> 0:19:37.560 supply chain, and there's um it's a very unique value chain, 0:19:37.600 --> 0:19:41.160 and that it is very segmented and highly specialized. So 0:19:41.240 --> 0:19:44.159 each country has areas where they're quite strong, and then 0:19:44.200 --> 0:19:46.800 also key competencies or parts of the value chain that 0:19:46.840 --> 0:19:51.280 they're missing. So for example, UM, China really needs semiconductor 0:19:51.320 --> 0:19:54.960 capital equipment that's nicefully in the U S or Europe. 0:19:55.200 --> 0:19:59.160 They need access to leading edge manufacturing process technology for semiconductors, 0:19:59.240 --> 0:20:02.879 which is strong, and the US, Korea and Taiwan. The 0:20:03.000 --> 0:20:07.880 US really is needs o d in capacity um PCB capacity, 0:20:07.920 --> 0:20:10.680 which is very heavily in China right now. The US 0:20:10.760 --> 0:20:14.200 also needs more leading edge silicon capacity, which again you 0:20:14.240 --> 0:20:15.760 know the US has some, but a lot of it's 0:20:15.800 --> 0:20:18.639 in Taiwan, a lot of it's in Korea, and then 0:20:18.680 --> 0:20:21.200 if you keep going down the value chain, there's different 0:20:21.520 --> 0:20:24.760 areas where different countries have quite a bit, but everyone 0:20:24.840 --> 0:20:27.000 is still very dependent on each other, which is what 0:20:27.480 --> 0:20:30.159 one thing that just makes the coupling so tricky is 0:20:30.200 --> 0:20:32.720 it's very hard to do. Right now, that's Anne Hecker. 0:20:32.800 --> 0:20:35.680 She's head of Baines America's Technology and Cloud services practice 0:20:36.080 --> 0:20:38.320 in the America's We should know that President Joe Biden 0:20:38.359 --> 0:20:43.000 and Chinese counterpart are planning a virtual bilateral meeting by 0:20:43.040 --> 0:20:45.600 the end of the year. You're listening to Bloomberg Business Week. 0:20:45.760 --> 0:20:48.240 Coming up next one of the most successful investors of 0:20:48.280 --> 0:20:51.520 all time. That's founder, chairman, and CEO of Dell Technologies, 0:20:51.640 --> 0:20:55.560 Michael Dell. Is joining us great and wide ranging conversation. 0:20:55.840 --> 0:21:08.000 This is Bloomberg. Yeah, you're listening to Bloomberg Business Week 0:21:08.160 --> 0:21:12.000 with Carol Messer and Bloomberg Quick takes Tim Stinovik from 0:21:12.080 --> 0:21:16.399 Bloomberg Radio. Well to call our next guest, one of 0:21:16.400 --> 0:21:19.400 the biggest names in technology. Yeah, it would be an understatement. 0:21:19.400 --> 0:21:21.840 When he first incorporated the company he founded back in 0:21:22.680 --> 0:21:25.600 four it was known as Dell Computer Corporation. At the time, 0:21:25.640 --> 0:21:28.080 Michael Dell was just nineteen years old, and nearly four 0:21:28.119 --> 0:21:30.639 decades later, he's detailing his climb to the top of 0:21:30.720 --> 0:21:33.000 his industry and new book it's called a plain, Nice 0:21:33.040 --> 0:21:36.160