WEBVTT - Alphabet Earnings, Untuckit Launch, PE Creating Jobs

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<v Speaker 1>This is Bloomberg Business Week with Carol Messer and Jason

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<v Speaker 1>Kelly on Bloomberg Radio. Well, amid all of the earnings

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<v Speaker 1>that we're hearing about, a lot of folks focused on

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<v Speaker 1>alphabet Google as it is better known, Google's parent company,

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<v Speaker 1>and that stock Carol is trading off about two point

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<v Speaker 1>to five percent. We're following the headlines also our top

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<v Speaker 1>live blog. Let's understand what's behind those numbers. For that,

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<v Speaker 1>we bring in Tender World, senior Internet and consumer products

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<v Speaker 1>analysts for Bloomberg Intelligence, joining us on the phone from

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<v Speaker 1>San Francisco, and bab o'donald, president in chief analysts for

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<v Speaker 1>Technolysis Research, on the phone from not too far from

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<v Speaker 1>our San Francisco beer down in Foster City, California. J Tender,

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<v Speaker 1>I want to start with you what's driving these shares down?

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<v Speaker 1>So basically, it's a cost that's really wing wing on

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<v Speaker 1>the company right now. So you know it's going to

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<v Speaker 1>cost them to play in cloud. The marketing spending is

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<v Speaker 1>up nine sent are and these up. So what we're

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<v Speaker 1>seeing over here is they are finding success in enterprise cloud,

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<v Speaker 1>certainly as the Google other segment is continuing to report

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<v Speaker 1>strong revenue growth but it will cost to play um

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<v Speaker 1>and then then that's what sort of is is you're

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<v Speaker 1>seeing in terms of their expenses going up. But as

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<v Speaker 1>far as the core business is concerned, I mean there's

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<v Speaker 1>an interesting dynamic that's happening wherein the ad pricing imp

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<v Speaker 1>is improving why, whereas the number of our ad volumes

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<v Speaker 1>is decreasing. So what you're seeing over here is, you know,

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<v Speaker 1>as search gets more and more crowded, it's becoming more

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<v Speaker 1>and more valuable in terms of cost per click. And

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<v Speaker 1>that's what's driving the top line. So top line is fine.

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<v Speaker 1>I think it's the expenses while they push into cloud

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<v Speaker 1>and invest in machine learning. That's uh, that's affecting this

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<v Speaker 1>quarter and potentially common quarter as well. And I'm looking

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<v Speaker 1>at a live blog on the Alphabet earnings too. They

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<v Speaker 1>talk about advertising revenue growth up seventeen point two a

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<v Speaker 1>year over year last quarter was up only our mark

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<v Speaker 1>German Um, adding to the blog saying in an interview

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<v Speaker 1>with Blueberg News, Alphabet CFO report attributed two main negative

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<v Speaker 1>impacts and results. It's a legal settlement with France for

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<v Speaker 1>one billion dollar related to taxes and unspecified losses from

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<v Speaker 1>venture investments. So a lot of things, and they are

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<v Speaker 1>apparently declining to comment on what poor at called rumors

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<v Speaker 1>surrounding a Google bid for a fitbit. So, um, let's

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<v Speaker 1>talk to bab O'Donnell. What do you make of the

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<v Speaker 1>quarter and all the news surrounding Google alphabets. Well, you

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<v Speaker 1>know exactly right what your Tayver said in terms of

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<v Speaker 1>it's it's going to cost them to get into these businesses.

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<v Speaker 1>It's good to see Google called growing. We saw strength

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<v Speaker 1>from Microsoft on the Azure side, we saw it from

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<v Speaker 1>um Amazon on AWS, but at a slightly slower rate.

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<v Speaker 1>Google is actually sort of the up and comer in

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<v Speaker 1>the cloud business. Uh. And the Google Cloud business is

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<v Speaker 1>actually doing pretty well for them, And I think you're

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<v Speaker 1>going to see them start to grab some share in

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<v Speaker 1>the market that continues to grow, but it's slowing down

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<v Speaker 1>a bit. I think will see their rate of growth

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<v Speaker 1>probably continue for a while because they're they're building from

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<v Speaker 1>a smaller base, so I think that's important. I do

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<v Speaker 1>think as well this you know, if you look at

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<v Speaker 1>I quickly looked through right as the numbers came out,

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<v Speaker 1>this other income thing. They took a big hit on

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<v Speaker 1>equity securities, a big loss and so that seems to

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<v Speaker 1>be a big part of the number that caused that

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<v Speaker 1>earnings miss um in terms of the earnings for the quarter.

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<v Speaker 1>But we'll see obviously as they provide more details behind

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<v Speaker 1>that well. And tender also interesting sort of stat that

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<v Speaker 1>came out that their head count increasing to one fourteen

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<v Speaker 1>thousand in the past twelve months from nine four thousand.

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<v Speaker 1>That's a pretty meaningful jump. You know, obviously it's a

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<v Speaker 1>growing economy, but they're they're bringing to people on board. Yeah,

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<v Speaker 1>So basically, uh, the cloud business is you know, a

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<v Speaker 1>very primary focus at Google right now, and it's going

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<v Speaker 1>to be the sort of the deciding factor for the

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<v Speaker 1>next year as well. Uh. You they give you a

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<v Speaker 1>revenue run rate of eight billion plus. I think you know,

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<v Speaker 1>the growth is going to continue there, but that growth

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<v Speaker 1>is sort of driving the headcount but also investing a

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<v Speaker 1>lot in infrastructure. You know, with machine learning. You're seeing

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<v Speaker 1>some results in YouTube in terms of engagement. Uh, and

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<v Speaker 1>then the revenue growth there. And let's not forget the

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<v Speaker 1>regulatory issues impacting Internet in general, where you know, compliance

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<v Speaker 1>costs are going up, so you need more people for

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<v Speaker 1>that as well. So I think it's a combination of

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<v Speaker 1>pushing for growth, but also you know headcount um impacted

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<v Speaker 1>by regulations. So what do you want to know from

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<v Speaker 1>the company right now? Well, I want to obviously we

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<v Speaker 1>want to get a better understanding of the details of

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<v Speaker 1>this equity thing, which seems to have been a surprise,

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<v Speaker 1>a bit of a surprise. Also, the click rates were

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<v Speaker 1>seems as have been down much lower than people expected

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<v Speaker 1>than to be. So you know what's driving that click

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<v Speaker 1>rate uh decrease um. Yes, they're maintaining strong growth on

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<v Speaker 1>the revenue side, but it sounds like it's getting tougher

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<v Speaker 1>and tougher uh per click um. Like again, I think

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<v Speaker 1>the overhang of regulatory issues are going to be concerned.

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<v Speaker 1>I don't know that they can address that, but I

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<v Speaker 1>think explaining a little bit better more around what happened

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<v Speaker 1>with that click rate UM is going to be important.

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<v Speaker 1>And of course obviously a little bit more color on

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<v Speaker 1>exactly what happened with Google Cloud is if the other

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<v Speaker 1>big thing I'd like to see well, and interestingly just

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<v Speaker 1>reiterate something on paid clicks only up about eighteen percent.

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<v Speaker 1>Estimates there had been as high as thirty two percent,

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<v Speaker 1>So as you say, it's coming a lot harder in

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<v Speaker 1>terms of getting paid for people clicking through. All right,

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<v Speaker 1>we're gonna leave it there. Bob o'donnald, President and chief

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<v Speaker 1>analyst for Technolysis Research. He joined us on the phone

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<v Speaker 1>from Foster City, California, and to tender war. All senior

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<v Speaker 1>Internet and consumer products analysts for Bloomberg Intelligence joining us

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<v Speaker 1>on the phone from our San Francisco bureau, giving us

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<v Speaker 1>that instant analysis. Uh, those numbers and shares still down

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<v Speaker 1>will be interesting to see, you know how people sort

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<v Speaker 1>of synthesize what Ruth Porrett is saying in interviews as

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<v Speaker 1>well as what we hear from the company as they

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<v Speaker 1>talked to investors, and they're saying that Fitbit closed hired

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<v Speaker 1>by trimming some of that game after hours and down

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<v Speaker 1>about one point six percent, So one can assume, of course,

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<v Speaker 1>not getting any kind of commented confirmation, although you wouldn't

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<v Speaker 1>expect it. Yeah, we're doing it. Yeah, it's not how

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<v Speaker 1>it happens. How have we been doing this? Yeah? All right,

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<v Speaker 1>shares of alphabet Google's parents down two point three percently

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<v Speaker 1>after our certainly one of the names we'll be watching

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<v Speaker 1>in the Tuesday trade. Alright, So we talked a lot

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<v Speaker 1>about fashion, apparel retail here on this program, Carol Masster,

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<v Speaker 1>and so we're delighted to have Chris Rickabono here with us.

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<v Speaker 1>He's the founder of untucked. You've probably seen their ads,

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<v Speaker 1>you've probably seen their shirts. You might have seen their

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<v Speaker 1>store here in New York City, and you're about to

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<v Speaker 1>see it in the UK. Here's here with us in

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<v Speaker 1>our Bloomberg Interactor Broker studio. Chris, great to have you here.

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<v Speaker 1>Thanks for having me. All right, so tell us about

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<v Speaker 1>I mean, let's go back to the beginning, if we can,

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<v Speaker 1>just briefly, so to the creation, the creation story, the

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<v Speaker 1>creation myth. It's always interesting here. You are a corporate guy,

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<v Speaker 1>you're a Columbia business school guy. How do you get

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<v Speaker 1>into the shirt business? It was the greatest idea that

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<v Speaker 1>an entrepreneur can have, is that I needed it to

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<v Speaker 1>solve my personal problem. All my shirts were too long.

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<v Speaker 1>I remember going to Las Vegas and I had three

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<v Speaker 1>shirts and I wore the same one every single day

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<v Speaker 1>because it was the only one that fit me at

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<v Speaker 1>the right length, and it seemed to be an issue

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<v Speaker 1>for everyone I talked to. And the rest is history.

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<v Speaker 1>I mean, it was as simple as that. Right, solve

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<v Speaker 1>a problem, but tell me about it, because I'm just

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<v Speaker 1>trying to imagine the pitch to either investors or something.

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<v Speaker 1>They're like, yeah, we don't need that. The pitch to

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<v Speaker 1>investors was almost impossible because I would go to all

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<v Speaker 1>my dad's friends and people who typically invest in things.

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<v Speaker 1>This is ten years ago, and when I went in

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<v Speaker 1>and said, they said, you're gonna make a shorter shirt

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<v Speaker 1>and you want me to invest, you know, And I said,

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<v Speaker 1>all right, I'm gonna do it. I'm gonna do it

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<v Speaker 1>with the without you. And so how do you find?

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<v Speaker 1>Clearly the market is there, You've got a couple dozen

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<v Speaker 1>now a few dozen retail stores, but how did you

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<v Speaker 1>find the market? And maybe how did you find how

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<v Speaker 1>to get to that market? So we launched eCOM only

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<v Speaker 1>in two thousand and eleven, and at that time most

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<v Speaker 1>people said brick and mortar was going to slowly go away.

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<v Speaker 1>We found out right away that was not the case,

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<v Speaker 1>especially because our demographic is twenty five to seven years old.

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<v Speaker 1>It's massive and the older you are, you want to

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<v Speaker 1>touch and feel the product. So we opened up a

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<v Speaker 1>pop up in Soho in September two fifteen and the

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<v Speaker 1>response was just amazing. Um, everyone who had heard our

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<v Speaker 1>ads over and over but never went online to bias

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<v Speaker 1>would walk by the store and come in excited. So

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<v Speaker 1>we opened up twenty two thirty stores the following year,

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<v Speaker 1>twenty five the following year after that, so really fast expansion. Um,

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<v Speaker 1>we're profitable. Uh, the long term value of the customer

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<v Speaker 1>goes up when they come into a store, they get

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<v Speaker 1>more attached to the brand. And um, so the brick

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<v Speaker 1>and mortars slash eCOM omni experience is what has worked

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<v Speaker 1>for us. It's men and women, right, men and women.

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<v Speaker 1>We were men only, and when we had about fifty stores,

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<v Speaker 1>women would come in with your boyfriend or husband and say,

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<v Speaker 1>what are we supposed to look at? So we came

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<v Speaker 1>out with a women's line and it's actually one of

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<v Speaker 1>our fastest growing segments. So wait, so dig into the

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<v Speaker 1>numbers a little bit. I'd love to know if how

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<v Speaker 1>much you can share with us in terms of growth rate,

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<v Speaker 1>you're profitable, I'm assuming we're We've been profitable since day one,

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<v Speaker 1>which is much different than than the typical brand the

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<v Speaker 1>next because we didn't have a choice, we had we

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<v Speaker 1>raised a hundred thousand dollars friends and family money. We

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<v Speaker 1>had to be profitable. UM, so it kind of became

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<v Speaker 1>our d n A. We have eighty six plus stores.

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<v Speaker 1>We are doing we will do north of two hundred

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<v Speaker 1>million dollars this year. Um going into we have five

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<v Speaker 1>stores in Canada which have done very well and now

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<v Speaker 1>we're going into the UK. All right, So how much

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<v Speaker 1>do you worry about sort of the trend going away

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<v Speaker 1>from you? You know this notion that everybody's been like,

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<v Speaker 1>you know what, I'm thinking of my parents when I

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<v Speaker 1>was groat tuck in your shirt? You don't you look sloppy?

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<v Speaker 1>Tuck in your shirt? How do you sort of not

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<v Speaker 1>only against that? Yes, the first thing I did was

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<v Speaker 1>pull out old pictures of my father when I launched

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<v Speaker 1>back into the six season seventies, and guess what everyone's

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<v Speaker 1>shirts were on tuck. The difference where they were floral

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<v Speaker 1>patterns right with huge lapels and so it's a different style.

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<v Speaker 1>But you can only wear your shirt one way or

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<v Speaker 1>the other. There's about I don't know, five to ten

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<v Speaker 1>percent of men who just simply will not on tuck.

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<v Speaker 1>But at the end of the day, when there's only

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<v Speaker 1>two ways to do it, you're gonna be doing it.

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<v Speaker 1>Either on the weekend or during at some point, and

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<v Speaker 1>now everything looks so much nicer. Clothing in general. You

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<v Speaker 1>can wear really high end jeans, high end sneakers, a

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<v Speaker 1>sports jacket, and an untucked shirt and go into the

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<v Speaker 1>best restaurant in Manhattan and fit in. I gotta ask you,

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<v Speaker 1>because we talk a lot about this, We were talking

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<v Speaker 1>about it earlier in the show. This this backlash which

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<v Speaker 1>I think is good against fast fashion the way things

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<v Speaker 1>are made, uh, bad for the environment, labor laws, etcetera.

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<v Speaker 1>What's your story there and and how do you think

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<v Speaker 1>about making the product in a way that appeals to

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<v Speaker 1>those who care about sustainability, who care about where it

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<v Speaker 1>comes from. Sustain Ability is huge for I mean, in

0:10:56.640 --> 0:10:58.600
<v Speaker 1>order to exist these days, you have to be focused

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<v Speaker 1>on that. We only luckly, we only work with the

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<v Speaker 1>best factories in the world. And I say luckily because

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<v Speaker 1>we happened to come into the business when retail was struggling, right,

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<v Speaker 1>so as we grew, everyone wanted to work with us.

0:11:10.640 --> 0:11:12.640
<v Speaker 1>I always think about, what donce we came in and

0:11:12.800 --> 0:11:15.040
<v Speaker 1>and retail was humming. Would we even have been able

0:11:15.040 --> 0:11:16.679
<v Speaker 1>to get into these factories? So we kind of get

0:11:16.720 --> 0:11:19.120
<v Speaker 1>to choose which factories want to work with manufacturing I'm

0:11:19.120 --> 0:11:21.760
<v Speaker 1>assuming overseas as Yeah, we're in We're in China, We're

0:11:21.760 --> 0:11:25.199
<v Speaker 1>in Vietnam, We're in Mauritius, we're in Peru. We have

0:11:25.320 --> 0:11:27.360
<v Speaker 1>a small factory that we do work that we work

0:11:27.400 --> 0:11:30.200
<v Speaker 1>within the US, So we are everywhere and obviously now

0:11:30.360 --> 0:11:33.319
<v Speaker 1>we need as many options as possible. But our factories

0:11:33.440 --> 0:11:35.800
<v Speaker 1>are we check them, we visit them, they're they're the

0:11:35.880 --> 0:11:37.839
<v Speaker 1>best that there are. Chris, just thirty seconds. Is the

0:11:37.880 --> 0:11:41.480
<v Speaker 1>trade war impacting you, guys? Impacting in the fact that

0:11:41.520 --> 0:11:43.520
<v Speaker 1>we just have to be more strategic and we are

0:11:43.640 --> 0:11:47.559
<v Speaker 1>moving stuff around into different countries outside of China just

0:11:47.679 --> 0:11:49.280
<v Speaker 1>to be prepared. But it's not going to have a

0:11:49.360 --> 0:11:51.360
<v Speaker 1>major impact on us. But you do you believe you'll

0:11:51.360 --> 0:11:52.720
<v Speaker 1>stay in China or is there a day where you'll

0:11:52.760 --> 0:11:54.679
<v Speaker 1>be out of China? Potentially I think there could be

0:11:54.760 --> 0:11:56.800
<v Speaker 1>a day we'll be out of China. Okay, all right,

0:11:57.080 --> 0:11:59.559
<v Speaker 1>you'll have to come back and talk to us again.

0:11:59.679 --> 0:12:01.880
<v Speaker 1>This was great to catch up with you. A great

0:12:01.920 --> 0:12:04.800
<v Speaker 1>story and a product well known and clearly fast growing

0:12:05.280 --> 0:12:08.640
<v Speaker 1>into the UK, most notably in the near future. Chris

0:12:09.000 --> 0:12:11.800
<v Speaker 1>Ricabona is the founder of untucked here with us in

0:12:11.880 --> 0:12:14.480
<v Speaker 1>New York City today, idea, but I end up just

0:12:14.559 --> 0:12:17.280
<v Speaker 1>tying them, as you know, and I travel. That's right. Yeah,

0:12:17.280 --> 0:12:19.760
<v Speaker 1>I'm not sure this this exact thing would work for you.

0:12:20.160 --> 0:12:28.760
<v Speaker 1>Try it. I might try, all right. So we've been

0:12:28.800 --> 0:12:31.800
<v Speaker 1>talking a lot about private equity here on this program

0:12:31.960 --> 0:12:34.160
<v Speaker 1>here at Bloomberg. We've been talking a lot about private

0:12:34.200 --> 0:12:36.760
<v Speaker 1>equity across the country. And you know who else has

0:12:36.800 --> 0:12:40.840
<v Speaker 1>been talking about private equity. A lot of Democratic candidates

0:12:41.160 --> 0:12:43.280
<v Speaker 1>for president. Our next guest, he talks about it a

0:12:43.360 --> 0:12:46.920
<v Speaker 1>lot too. He's Drew Maloney, presidency of the American Investment Council,

0:12:47.280 --> 0:12:52.439
<v Speaker 1>the top guy for the industry in Washington, talking to lawmakers,

0:12:52.840 --> 0:12:55.760
<v Speaker 1>regulators and all of them. Drew, Great to have you

0:12:55.880 --> 0:12:59.480
<v Speaker 1>with us, Great to be with you this afternoon. All right.

0:12:59.640 --> 0:13:03.240
<v Speaker 1>So let's get to a new study that was just released,

0:13:03.400 --> 0:13:08.560
<v Speaker 1>because you guys are clearly hoping to get the message

0:13:08.679 --> 0:13:13.240
<v Speaker 1>out about the role that private equity plays in terms

0:13:13.280 --> 0:13:17.040
<v Speaker 1>of employment in the United States. What you find, Well,

0:13:17.080 --> 0:13:19.280
<v Speaker 1>it was a great study, as you said, that we

0:13:19.400 --> 0:13:21.559
<v Speaker 1>just put out last week, and I think the highlights

0:13:21.640 --> 0:13:26.000
<v Speaker 1>are that private equity supports more than twenty six million

0:13:26.200 --> 0:13:28.480
<v Speaker 1>US jobs and if you look at that and you

0:13:28.559 --> 0:13:31.320
<v Speaker 1>break it down, it's eight point eight million in direct jobs.

0:13:32.120 --> 0:13:34.400
<v Speaker 1>And then we also looked at the indirect jobs and

0:13:34.520 --> 0:13:37.280
<v Speaker 1>related consumer spending, and if you add that up to

0:13:37.360 --> 0:13:40.120
<v Speaker 1>get you another seventeen million jobs. I would say that

0:13:40.200 --> 0:13:43.440
<v Speaker 1>the other point of the two points of the study

0:13:43.640 --> 0:13:46.520
<v Speaker 1>is it shows a diversity of investment. I mean, we're

0:13:46.600 --> 0:13:52.839
<v Speaker 1>investing and everything from personal services, business services, manufacturing, information, construction.

0:13:53.520 --> 0:13:56.480
<v Speaker 1>We invest across the entire economy, and I think that's

0:13:56.480 --> 0:14:00.160
<v Speaker 1>a very important point that we're trying to make to

0:14:00.240 --> 0:14:03.520
<v Speaker 1>policy makers, as well as the last point, which is

0:14:03.640 --> 0:14:08.439
<v Speaker 1>the federal, state and tax revenue numbers that were contributing um.

0:14:08.600 --> 0:14:10.880
<v Speaker 1>I think that final number was a hundred and seventy

0:14:10.960 --> 0:14:15.920
<v Speaker 1>four billion dollars in tax revenue that private equity contributes.

0:14:16.600 --> 0:14:19.400
<v Speaker 1>So in terms of net net, I mean there are

0:14:19.560 --> 0:14:23.240
<v Speaker 1>some jobs lost right as a result of private equity

0:14:23.400 --> 0:14:26.800
<v Speaker 1>buying up firms, maybe in like industries, and consolidating them

0:14:26.840 --> 0:14:30.160
<v Speaker 1>and then ultimately selling them again. So there's that argument.

0:14:30.400 --> 0:14:32.280
<v Speaker 1>It's safe to say that there are some jobs though

0:14:32.320 --> 0:14:35.280
<v Speaker 1>that get lost in the process. Now, I mean, I

0:14:35.360 --> 0:14:38.200
<v Speaker 1>think you have to look at it as the whole,

0:14:38.360 --> 0:14:41.200
<v Speaker 1>and I think a recent study looked at this and

0:14:41.320 --> 0:14:44.240
<v Speaker 1>said it depends what kind of what kind of companies

0:14:44.720 --> 0:14:48.160
<v Speaker 1>that you're buying. If you're buying more mature public companies,

0:14:48.480 --> 0:14:52.840
<v Speaker 1>there may be some initial downsizing and restructuring of the

0:14:52.920 --> 0:14:55.600
<v Speaker 1>company in the first couple of years, but over time

0:14:56.080 --> 0:15:00.040
<v Speaker 1>those jobs grow. And if you're buying growth companies, you

0:15:00.080 --> 0:15:01.960
<v Speaker 1>know they're starting at a at a at a at

0:15:02.000 --> 0:15:04.360
<v Speaker 1>a smaller number and they're growing over time, or you're

0:15:04.360 --> 0:15:07.840
<v Speaker 1>adding other companies to it. Alright, So, Drew, you are

0:15:07.880 --> 0:15:10.960
<v Speaker 1>a veteran of Washington. You understand the way the town works,

0:15:11.000 --> 0:15:15.640
<v Speaker 1>You understand politics, you understand policy, and the all important

0:15:15.680 --> 0:15:21.000
<v Speaker 1>third pe, you understand perception. Why is this not resonating?

0:15:21.200 --> 0:15:25.280
<v Speaker 1>Why are people not really in as it sounds like

0:15:25.360 --> 0:15:29.520
<v Speaker 1>you're saying, sort of fully understanding the economic and especially

0:15:29.640 --> 0:15:32.560
<v Speaker 1>the job picture here because you are, I think it's

0:15:32.560 --> 0:15:35.760
<v Speaker 1>safe to say, right in the crosshairs of Elizabeth Warren

0:15:35.840 --> 0:15:38.280
<v Speaker 1>and a number of others who are running for president.

0:15:40.480 --> 0:15:43.560
<v Speaker 1>As you know, in Washington, there is a lot of

0:15:43.720 --> 0:15:45.840
<v Speaker 1>volume and a lot of noise, and I think one

0:15:45.880 --> 0:15:48.880
<v Speaker 1>of the things what we've found is that we have

0:15:49.080 --> 0:15:53.440
<v Speaker 1>to be a contributor to that conversation. So members of Congress,

0:15:53.560 --> 0:15:57.120
<v Speaker 1>members of the administration, every different industry is trying to

0:15:57.280 --> 0:16:01.600
<v Speaker 1>make their their cases to each of these different policymakers.

0:16:02.200 --> 0:16:05.200
<v Speaker 1>And that's why it's incumbent upon us to do a

0:16:05.280 --> 0:16:07.480
<v Speaker 1>better job of telling our story. And that's I think

0:16:07.560 --> 0:16:09.920
<v Speaker 1>exactly what we're doing with this e Y report that

0:16:10.040 --> 0:16:13.680
<v Speaker 1>just came out this week. And it's also a reason

0:16:13.760 --> 0:16:16.840
<v Speaker 1>why before every one of the presidential debate we put

0:16:16.920 --> 0:16:21.080
<v Speaker 1>out on social media we highlight the jobs, the investment,

0:16:21.240 --> 0:16:26.280
<v Speaker 1>and the pension returns in those states right before the debates. Yeah,

0:16:26.320 --> 0:16:28.400
<v Speaker 1>and to be fair, I was just doing some research. Um.

0:16:28.680 --> 0:16:31.640
<v Speaker 1>You know in Harvard Business School did a paper. Um.

0:16:31.720 --> 0:16:35.800
<v Speaker 1>I think they looked at target companies acquired from five

0:16:35.880 --> 0:16:39.840
<v Speaker 1>and they found that did destroy jobs initially, um, and

0:16:39.960 --> 0:16:42.680
<v Speaker 1>that they find that over the longer term, Um, the

0:16:42.800 --> 0:16:45.080
<v Speaker 1>net effect is that job losses are ultimately less than

0:16:45.200 --> 0:16:48.400
<v Speaker 1>a one percent of initial employment. So they are showing

0:16:48.480 --> 0:16:51.640
<v Speaker 1>that it's not as negative. UM. Okay, So you've got

0:16:51.720 --> 0:16:53.520
<v Speaker 1>this report you're putting out. I have to say, to

0:16:53.680 --> 0:16:56.400
<v Speaker 1>be fair, I feel like, you know, folks are gonna say, okay, yeah,

0:16:56.440 --> 0:16:58.920
<v Speaker 1>it's private equity putting out one of their own reports

0:16:58.960 --> 0:17:02.000
<v Speaker 1>saying hey, we saved jobs. How do you how do

0:17:02.120 --> 0:17:05.040
<v Speaker 1>you I don't know, you know, change that conversation even

0:17:05.080 --> 0:17:07.600
<v Speaker 1>more so that there are other entities, you know, looking

0:17:07.640 --> 0:17:11.239
<v Speaker 1>at the industry and really kind of telling the story. Well,

0:17:11.280 --> 0:17:13.480
<v Speaker 1>I would say two things. One, that's why we partnered

0:17:13.520 --> 0:17:16.480
<v Speaker 1>with e Y because they did the analysis to determine

0:17:16.520 --> 0:17:19.479
<v Speaker 1>the number of jobs and across what industries that were

0:17:19.520 --> 0:17:22.639
<v Speaker 1>supporting and looked at what the tax revenue base would be.

0:17:23.160 --> 0:17:26.080
<v Speaker 1>And I would say back to your Harvard study, that

0:17:26.240 --> 0:17:28.000
<v Speaker 1>was only one piece of the study, and that was

0:17:28.119 --> 0:17:31.240
<v Speaker 1>the piece that looked at the large public companies that

0:17:31.359 --> 0:17:33.880
<v Speaker 1>went private, and that's when you had some initial job

0:17:34.000 --> 0:17:36.600
<v Speaker 1>loss because as we all know, when those companies are

0:17:36.680 --> 0:17:40.199
<v Speaker 1>usually in a more distressed situation. If you look at

0:17:40.240 --> 0:17:42.840
<v Speaker 1>the rest of the study, when you're buying, you know,

0:17:42.960 --> 0:17:45.680
<v Speaker 1>taking private companies and you're and you're selling in private

0:17:45.760 --> 0:17:49.000
<v Speaker 1>to private, you saw job gains and the other interesting

0:17:49.040 --> 0:17:52.840
<v Speaker 1>aspect of it. Even with those big, large public companies

0:17:52.920 --> 0:17:56.640
<v Speaker 1>that needed to be restructured, you saw eight percent productivity

0:17:56.720 --> 0:18:00.760
<v Speaker 1>gains once they were owned by private equity. And so, Drew,

0:18:01.800 --> 0:18:05.480
<v Speaker 1>do you feel like you're starting to sort of get

0:18:05.640 --> 0:18:09.760
<v Speaker 1>some audiences that are that are changing minds because I

0:18:09.880 --> 0:18:13.560
<v Speaker 1>think back to just last week, you know, a really

0:18:13.680 --> 0:18:17.280
<v Speaker 1>terrific investigation by Bloomberger, chilling investigation in many ways into

0:18:17.320 --> 0:18:22.440
<v Speaker 1>home healthcare, where it really paints a picture of sort

0:18:22.480 --> 0:18:26.879
<v Speaker 1>of profits over people. And we're at this time where

0:18:27.600 --> 0:18:30.840
<v Speaker 1>folks are starting to say, look, I want companies to

0:18:30.880 --> 0:18:33.040
<v Speaker 1>make money. I want to make money as an investor.

0:18:33.600 --> 0:18:36.159
<v Speaker 1>But even the Business Roundtable is saying, we have to

0:18:36.320 --> 0:18:40.280
<v Speaker 1>think more holistically about this. How do you get that

0:18:40.440 --> 0:18:43.879
<v Speaker 1>message across that this is the approach, if indeed it

0:18:44.040 --> 0:18:48.520
<v Speaker 1>is that that private equity is ultimately taking well, I

0:18:48.600 --> 0:18:52.080
<v Speaker 1>would say that, um, you know, one of the aspects

0:18:52.119 --> 0:18:54.840
<v Speaker 1>and you wrote about it in your book is everywhere

0:18:54.920 --> 0:18:58.520
<v Speaker 1>you look there is private equity investment around you. But

0:18:58.640 --> 0:19:01.600
<v Speaker 1>I think that the channel with that is most policy

0:19:01.720 --> 0:19:05.560
<v Speaker 1>makers have no idea that private equity owns the Popeyees,

0:19:05.640 --> 0:19:09.760
<v Speaker 1>or private equity owns the Hearties, or private equity owned

0:19:09.760 --> 0:19:11.480
<v Speaker 1>a Hilton, which is now that you know, one of

0:19:11.520 --> 0:19:14.320
<v Speaker 1>the number one places in America to work. So I

0:19:14.600 --> 0:19:17.520
<v Speaker 1>think it's incumbent upon us to tell those stories because

0:19:17.600 --> 0:19:20.119
<v Speaker 1>you're right, you're always going to have a handful of

0:19:20.240 --> 0:19:24.840
<v Speaker 1>sensational stories and antidotes that paint a brush that's not

0:19:24.960 --> 0:19:28.600
<v Speaker 1>really true of the industry across the board. So, Drue,

0:19:28.760 --> 0:19:30.879
<v Speaker 1>I mean, have you had to sit down with Senator Warren,

0:19:31.160 --> 0:19:33.959
<v Speaker 1>you know, her criticism and the rules that she did,

0:19:34.000 --> 0:19:36.000
<v Speaker 1>the new rules she wants to impose on PE. Just

0:19:36.080 --> 0:19:38.000
<v Speaker 1>got about forty five seconds left. Have you had to

0:19:38.040 --> 0:19:41.480
<v Speaker 1>sit down with her to really talk about the industry. Well,

0:19:41.560 --> 0:19:44.280
<v Speaker 1>as you know, she's fairly busy on the presidential trail

0:19:44.440 --> 0:19:46.680
<v Speaker 1>right now, so uh, probably not a whole lot of

0:19:46.760 --> 0:19:50.159
<v Speaker 1>time to speak with us, um. But I think the

0:19:50.240 --> 0:19:54.600
<v Speaker 1>concern about her plan is that it would hurt jobs,

0:19:54.800 --> 0:19:58.879
<v Speaker 1>workers and retirees. And I think, as that Harvard study

0:19:58.920 --> 0:20:02.720
<v Speaker 1>you reference said, one size fits all legislation doesn't work

0:20:02.760 --> 0:20:05.520
<v Speaker 1>for private equity because of the diversity of our investment.

0:20:06.359 --> 0:20:09.679
<v Speaker 1>All right, we will continue this conversation in the future.

0:20:09.760 --> 0:20:12.040
<v Speaker 1>I know we will, Drew Maloney, we really appreciate it.

0:20:12.320 --> 0:20:13.920
<v Speaker 1>Good to catch up with you, President, CEO of the

0:20:14.000 --> 0:20:17.680
<v Speaker 1>American Investment Council. As we said, really on the front

0:20:17.760 --> 0:20:22.520
<v Speaker 1>lines there in a very important politics, political and policy

0:20:22.600 --> 0:20:25.080
<v Speaker 1>debate there in Washington and beyond. And I will say

0:20:25.160 --> 0:20:27.840
<v Speaker 1>the universe as well, as some other investors can take

0:20:28.080 --> 0:20:31.600
<v Speaker 1>a distress property and put the money in to revitalize

0:20:31.680 --> 0:20:36.240
<v Speaker 1>it and ultimately prevent a company from shutting down. Is important.

0:20:36.400 --> 0:20:38.400
<v Speaker 1>Is a great example of that. All right for Jason Kelly.

0:20:38.480 --> 0:20:41.240
<v Speaker 1>I'm Carol Master. This is Bloomberg Business Week, and you've

0:20:41.280 --> 0:20:42.800
<v Speaker 1>been listening to Bloomberg Radio.