WEBVTT - OpenAI Drama Casts a Shadow on Tech Industry 0:00:00.080 --> 0:00:02.360 Hey, it's Carol and Tim and we have something new 0:00:02.360 --> 0:00:03.160 and exciting for you. 0:00:03.400 --> 0:00:06.680 Everything you love about Bloomberg Radio is now in your car. 0:00:06.880 --> 0:00:10.160 The new Bloomberg Business App now featuring Apple CarPlay and 0:00:10.160 --> 0:00:10.800 Android Auto. 0:00:10.920 --> 0:00:14.400 Listen to your favorite Bloomberg Radio stations anytime. 0:00:13.840 --> 0:00:17.280 Plus every Bloomberg podcast, the latest news, and more, all 0:00:17.320 --> 0:00:18.360 at the click of a button. 0:00:18.520 --> 0:00:21.560 It's free and simple to use. Just download the Bloomberg 0:00:21.600 --> 0:00:24.079 Business App on your smartphone and connect your phone to 0:00:24.160 --> 0:00:24.680 your car. 0:00:24.880 --> 0:00:27.880 The Bloomberg Business App now with Apple CarPlay and Android 0:00:27.920 --> 0:00:30.720 Auto features. Download it free in the Apple App Store 0:00:30.800 --> 0:00:31.920 or on Google Play. 0:00:32.040 --> 0:00:36.519 Presented by our sponsor, Interactive Brokers, this. 0:00:36.840 --> 0:00:40.960 Is Bloomberg Business Week inside from the reporters and editors 0:00:41.000 --> 0:00:44.680 who bring you America's most trusted business magazine, plus global 0:00:44.800 --> 0:00:49.080 business finance and tech news. The Bloomberg Business Week Podcast 0:00:49.320 --> 0:00:53.720 with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:54.800 --> 0:00:57.240 Hey, back with the season tech View to help us 0:00:57.280 --> 0:00:59.760 kind of make sense of all this with Lash is 0:01:00.080 --> 0:01:03.400 through McAfee, Principal research scientist at MIT. He's the author 0:01:03.400 --> 0:01:05.640 of a new book, The Geek Way, The Radical mindset 0:01:05.680 --> 0:01:09.560 that drives Extraordinary Results. He joined us last week, but 0:01:09.640 --> 0:01:11.920 we wanted to have him back on after the news 0:01:11.959 --> 0:01:15.040 of Sam Altman happened on Friday. He's also a visiting 0:01:15.080 --> 0:01:18.080 Fellow in Technology and Society at Google, that is Andrew McAfee, 0:01:18.160 --> 0:01:20.120 where he's working with Google on research related to the 0:01:20.200 --> 0:01:23.080 societal impacts of generative AI. And Andrew joins us on 0:01:23.160 --> 0:01:24.120 Zoom from Boston. 0:01:24.319 --> 0:01:27.120 Andrew, great to have you back with us. Radical Mindsets 0:01:27.160 --> 0:01:30.959 your book, you write about that in it. Sam Altman 0:01:31.000 --> 0:01:32.840 and open EI do they kind of fit into that 0:01:32.880 --> 0:01:33.440 in your view? 0:01:34.720 --> 0:01:37.959 You know, they were certainly operating like a fast charging, 0:01:38.120 --> 0:01:42.679 high performing geek company, and then this very strange episode 0:01:42.680 --> 0:01:44.680 started to unfold on Friday. 0:01:45.120 --> 0:01:50.120 So what how do you from someone who has watched technology, 0:01:50.480 --> 0:01:54.440 has seen trends, seen innovation, how are you looking at 0:01:54.720 --> 0:01:58.600 this and what's the significant thing kind of longer term, 0:01:58.680 --> 0:02:01.000 especially as we all expect of AI to be a 0:02:01.040 --> 0:02:03.240 part of our lives forever. 0:02:03.400 --> 0:02:08.440 Probably I absolutely expect that, and I think this is 0:02:08.760 --> 0:02:12.800 just a crystal clear case study of the importance of 0:02:13.160 --> 0:02:18.280 good old fashion, boring corporate governance and running a good board. 0:02:18.480 --> 0:02:21.480 This feels like a huge enforced error on the part 0:02:21.520 --> 0:02:23.919 of the Open AI board and I still don't quite 0:02:23.960 --> 0:02:24.520 understand it. 0:02:24.880 --> 0:02:26.480 Yeah, I think you're not the only one who doesn't 0:02:26.520 --> 0:02:30.600 quite understand it. We don't even know why he initially 0:02:30.760 --> 0:02:33.320 was fired at this point, and we're kind of following 0:02:33.600 --> 0:02:36.640 every move of will here, won't he go back to 0:02:36.880 --> 0:02:40.280 open AI. It doesn't sound like even Satinadella at Microsoft 0:02:40.440 --> 0:02:42.480 Carol knows why he was fired. 0:02:42.680 --> 0:02:44.000 Yeah, I mean that's what's interesting. 0:02:44.040 --> 0:02:46.480 I mean, is it important in your view, Andrew, that 0:02:46.520 --> 0:02:50.400 we know every detail in terms of how this ends, 0:02:50.560 --> 0:02:55.040 or what is ultimately the important thing that we get 0:02:55.080 --> 0:02:56.720 out of this, or how it ends? 0:02:56.720 --> 0:02:59.400 In your view, I don't think we're ever going to 0:02:59.480 --> 0:03:03.320 know all the details, but we do know that if 0:03:03.360 --> 0:03:09.760 you have an extraordinarily popular, very effective CEO at growing 0:03:09.880 --> 0:03:14.240 a tech company, the board might not want to fire 0:03:14.280 --> 0:03:18.440 that person with almost with no notice, really without apparently 0:03:18.520 --> 0:03:20.600 engaging on a lot of back and forth with him, 0:03:21.120 --> 0:03:24.800 not for any fraud or misconduct or malfeasance, but because 0:03:24.800 --> 0:03:28.239 of some other kind of vague problem. If the board 0:03:28.400 --> 0:03:31.399 is going to take that fairly rash step, they probably 0:03:31.440 --> 0:03:35.520 want to alert their major investors, their biggest business partners, 0:03:35.640 --> 0:03:38.680 their employee base, and give them time to get ready 0:03:38.680 --> 0:03:40.920 for all that, they didn't appear to do any of that, 0:03:41.480 --> 0:03:44.600 and when they were frantically negotiating over the weekend to 0:03:44.680 --> 0:03:47.680 try to bring him back, that all fell apart, and 0:03:47.680 --> 0:03:50.480 it fell apart to the extent that the huge majority 0:03:50.560 --> 0:03:53.400 of the employees of the company have signaled that they 0:03:53.440 --> 0:03:57.120 will walk away. Whatever you think the board's duty is, 0:03:57.400 --> 0:04:01.400 I can't see how it includes destroying that much value, 0:04:01.720 --> 0:04:04.520 hollowing out the employee base of the company. And if 0:04:04.520 --> 0:04:07.640 the mission of the Open Ai Foundation is to advance 0:04:07.800 --> 0:04:11.000 safe AGI for humanity, I do not see how these 0:04:11.000 --> 0:04:12.880 actions support that mission at all. 0:04:12.960 --> 0:04:15.080 Hey, Business School, this is a case study of how 0:04:15.160 --> 0:04:16.880 not to do things. Basically, there are. 0:04:16.839 --> 0:04:19.359 Plenty of examples of that. By the way, there is plenty. 0:04:19.440 --> 0:04:21.920 They're all that right often usually. 0:04:23.240 --> 0:04:26.240 You know, I'm wondering. You know, Tim was really smart 0:04:26.279 --> 0:04:28.719 in terms of our discussions that we've been having around 0:04:28.720 --> 0:04:32.000 this about what seems to be maybe at odds, and 0:04:32.040 --> 0:04:35.279 that is this debate about a need for balance of 0:04:35.360 --> 0:04:40.560 pushing generative AI, this technology, expanding, exploring it to reach 0:04:40.600 --> 0:04:44.719 its potential, but with also having an ethical line because 0:04:44.760 --> 0:04:48.640 of the potential of it to do wrong. Although I 0:04:48.680 --> 0:04:51.680 would go back to you know, the Cold War and 0:04:51.760 --> 0:04:54.920 missiles and the battle to have the greatest and best 0:04:54.920 --> 0:04:57.479 in terms of military and how that could bring the 0:04:57.560 --> 0:05:00.560 end to civilization. So I'm trying to kind of figure 0:05:00.560 --> 0:05:04.039 out what is at risk if we get this wrong. 0:05:05.200 --> 0:05:09.000 Help me hear, Yeah, whatever is at risk? If your 0:05:09.120 --> 0:05:13.280 organization organization's mission is safe AI, and you believe apparently 0:05:13.320 --> 0:05:15.280 that a for profit company is not the right way 0:05:15.360 --> 0:05:18.800 to accomplish that mission, then doing things that let your 0:05:18.920 --> 0:05:22.640 CEO and again, almost all of the employees wind up 0:05:22.680 --> 0:05:25.680 at an AI building for profit company. They appear right 0:05:25.720 --> 0:05:27.880 now to be a lot of them to heading to Microsoft. 0:05:28.040 --> 0:05:30.640 That is not accomplishing the goals of your mission. I 0:05:30.720 --> 0:05:35.840 personally am not worried about the existential the alignment risk 0:05:35.920 --> 0:05:39.440 of AI. All very powerful tools bring risks and harms 0:05:39.480 --> 0:05:41.440 with them, and they demand vigilance, and we got to 0:05:41.440 --> 0:05:44.159 be careful about it. I don't think AI is any 0:05:44.240 --> 0:05:47.400 big exception to that trend or requires us to do 0:05:47.520 --> 0:05:50.599 radically different things. We just have to be vigilant stop 0:05:50.640 --> 0:05:51.320 the bad uses. 0:05:51.480 --> 0:05:55.200 That is really really surprising for me to hear from you, Andrew, 0:05:55.320 --> 0:05:59.039 because I hear from you know the worst case scenario 0:05:59.080 --> 0:06:00.839 when it comes to this stuff as Okay, what if 0:06:01.160 --> 0:06:05.960 AI developed some sort of super bug or biological weapon, 0:06:06.200 --> 0:06:08.080 or in fact, you know in the Elon Musk school, 0:06:09.120 --> 0:06:12.800 essentially become sentient and more powerful than human beings. Why 0:06:12.839 --> 0:06:13.800 does that not worry you? 0:06:14.600 --> 0:06:17.040 I mean, I read a lot of science fiction as 0:06:17.080 --> 0:06:20.800 a kid, too. I think terminator sci fi scenarios are 0:06:20.839 --> 0:06:23.719 not great guides to policy, are not great guides to 0:06:24.760 --> 0:06:28.479 using this very powerful, very beneficial toolkit. I do think 0:06:28.480 --> 0:06:31.000 that there is a risk that AI, for example, could 0:06:31.000 --> 0:06:34.880 be used to as part of an effort to engineer 0:06:35.040 --> 0:06:38.400 bad bugs or bioweapons. Great, why are we focusing on 0:06:38.480 --> 0:06:42.880 a AI and not gene editing and not gene sequencing technologies? 0:06:43.040 --> 0:06:46.120 And why are we letting anybody apply to molecular biology 0:06:46.120 --> 0:06:49.800 and genetics doctoral programs and distributing that knowledge very freely? 0:06:50.040 --> 0:06:52.960 There are, again, there are risks in the modern world. 0:06:53.040 --> 0:06:56.400 Let's not be naive about that. But singling out AI 0:06:56.640 --> 0:06:59.159 as the lynchpin that's going to make everything bad happen, 0:06:59.480 --> 0:07:01.880 I just think that's wrong. I think that's a misallocation 0:07:01.960 --> 0:07:05.920 of our effort demonizing technologies that will be super beneficial 0:07:05.960 --> 0:07:07.679 to us. I think as allows the idea. 0:07:07.760 --> 0:07:10.560 Well, let's move away from the superbug concern and more 0:07:10.640 --> 0:07:13.240 to the concern that it will become a sentient being 0:07:13.280 --> 0:07:15.680 that is more powerful and smarter than us and essentially 0:07:16.800 --> 0:07:22.200 a higher order being over us. Essentially, Yeah, why does 0:07:22.240 --> 0:07:24.160 that not concern you? 0:07:24.160 --> 0:07:27.240 You know, my friend and colleague Andrew Ing, who is 0:07:27.320 --> 0:07:32.320 himself a fantastic AI researcher, says it's theoretically possible. I 0:07:32.360 --> 0:07:35.520 love his phrasing. He said, it's like worrying about overpopulation 0:07:35.800 --> 0:07:39.280 on Mars. We have so many more important things to 0:07:39.280 --> 0:07:41.880 worry about. We have to accomplish an energy transition in 0:07:41.920 --> 0:07:44.880 the twenty first century. We have too high a disease burden. 0:07:44.920 --> 0:07:47.679 There are too many people in dire poverty around the world. 0:07:47.920 --> 0:07:50.640 I believe that AI might be the most powerful tool 0:07:50.920 --> 0:07:53.360 that we've ever come up with to help us solve 0:07:53.480 --> 0:07:58.120 these global planetary challenges facing humanity. And we're sitting around 0:07:58.160 --> 0:08:00.440 worried about the terminator when there's not a shred of 0:08:00.480 --> 0:08:03.880 evidence that AI has become sentient or taking control of 0:08:03.920 --> 0:08:06.120 anything that we don't want it to. I think it's 0:08:06.200 --> 0:08:09.560 like bad sci fi mixed bad policy. 0:08:09.840 --> 0:08:11.240 Andrew full transparency. 0:08:11.240 --> 0:08:13.840 You're working with Google on research related to the societal 0:08:13.880 --> 0:08:15.160 impacts of generative AI. 0:08:15.600 --> 0:08:16.680 I am curious that what. 0:08:16.720 --> 0:08:19.520 Is the balance you all at Google are pursuing when 0:08:19.520 --> 0:08:23.760 it comes to reach AI, generative AI, reaching its potential, 0:08:23.800 --> 0:08:26.400 but also being smart about it and careful with it. 0:08:27.280 --> 0:08:28.920 Yeah. Thanks for that, because I really want to make 0:08:29.000 --> 0:08:32.400 clear here I am just talking about my own personal views. 0:08:32.440 --> 0:08:35.560 I am not representing Google's views on this. I actually 0:08:36.080 --> 0:08:38.640 am not on top of everything that Google believes. What 0:08:38.760 --> 0:08:40.520 I do know because I read the statement like the 0:08:40.559 --> 0:08:42.920 rest of the public did, that Google stance is that 0:08:42.960 --> 0:08:45.920 we need to be bold and responsible. I think we 0:08:46.000 --> 0:08:49.600 are in danger of walking away from the bold part 0:08:49.920 --> 0:08:53.960 in an overabundance of not just caution, but fear about 0:08:54.040 --> 0:08:56.880 things that we just don't have any evidence for. I 0:08:56.920 --> 0:08:59.400 want to say this again, this is my view, not 0:08:59.480 --> 0:09:00.880 necessary Google's view. 0:09:01.040 --> 0:09:04.360 I think andrew everything that we've talked about in terms 0:09:04.400 --> 0:09:08.120 of fears. Personally, again, I'm speaking personally in terms of this, 0:09:08.280 --> 0:09:10.520 and I'm almost a lay person when it comes to 0:09:10.520 --> 0:09:14.480 this stuff. The thing that most concerns me about generitive 0:09:14.480 --> 0:09:18.960 AI is misinformation and the ability for bad actors to 0:09:19.840 --> 0:09:23.000 use that misinformation at scale to control. 0:09:22.640 --> 0:09:24.400 Outcomes like happens in social. 0:09:24.120 --> 0:09:27.040 Media exactly, not that different than a lot of accusations 0:09:27.040 --> 0:09:28.959 that we saw fly in the wake of twenty sixteen 0:09:28.960 --> 0:09:31.280 and twenty twenty elections here in the US. But if 0:09:31.280 --> 0:09:35.400 you thought a bot army of people, you know, in 0:09:35.480 --> 0:09:39.199 Eastern Europe with social media were scary, then what about 0:09:39.240 --> 0:09:43.200 an actual bought army of generative AI that's able to 0:09:43.320 --> 0:09:45.240 you know, do this stuff at scale. 0:09:45.280 --> 0:09:48.439 Andrew, Now that's a harm that we should be worrying about. 0:09:48.480 --> 0:09:52.240 Because I got fooled by that picture, that photo alleged 0:09:52.240 --> 0:09:54.440 photo of the Pope and the puffy white coat. 0:09:54.559 --> 0:09:55.080 He looked good. 0:09:55.080 --> 0:09:56.960 I thought the Pope was wearing a puffy white coat. Look, 0:09:57.000 --> 0:09:59.240 I really did got I got taken in by a 0:09:59.240 --> 0:10:03.000 photo realist deep fake. These are actual challenges, and like 0:10:03.040 --> 0:10:06.640 you say, bad actors are going to weaponize generative AI 0:10:06.960 --> 0:10:10.000 to do all kinds of harm or try to do 0:10:10.080 --> 0:10:12.319 all kinds of harm. This is a real risk, it's 0:10:12.320 --> 0:10:15.960 a real harm. I have faith in our ability to 0:10:16.120 --> 0:10:20.040 deal with the harms that technology brings us. I think 0:10:20.160 --> 0:10:23.720 we can find ways to have trusted sources that will 0:10:23.800 --> 0:10:25.760 verify whether a thing is a deep fake or not. 0:10:26.080 --> 0:10:27.880 All of us have the new sources that we run 0:10:27.880 --> 0:10:29.640 to when we see something that might be true or 0:10:29.679 --> 0:10:31.920 might not be true. We can strengthen those kinds of 0:10:31.960 --> 0:10:35.280 institutions and those kinds of responses. We can also educate 0:10:35.320 --> 0:10:39.880 people to be more discerning consumers of the news. These 0:10:39.920 --> 0:10:42.360 are all things that we can and should do sitting 0:10:42.360 --> 0:10:45.200 around worrying about the terminator instead, As I said, it's 0:10:45.240 --> 0:10:47.160 just a huge misallocation of our attention. 0:10:47.360 --> 0:10:50.599 I think the terminator coming to life is more realistic 0:10:50.640 --> 0:10:54.880 than educating the large populace with news judgment. But I'm 0:10:54.880 --> 0:10:55.679 a cynical person. 0:10:55.760 --> 0:10:57.400 I guess that's a little cynical. 0:10:57.600 --> 0:10:58.400 Yeah, I know. 0:10:58.840 --> 0:11:00.000 All right, everybody. 0:11:00.160 --> 0:11:02.920 What's interesting too, though, is you know you talk about 0:11:03.240 --> 0:11:04.920 you know, you have faith to deal with the harms 0:11:04.960 --> 0:11:08.040 of this technology maybe will ultimately bring us, should there 0:11:08.080 --> 0:11:12.920 there be some guardrails in place, you know, shamy once 0:11:13.160 --> 0:11:14.920 you know full you know, shame or fully one. 0:11:14.960 --> 0:11:17.280 Shame on you for me twice, shame on you know. 0:11:17.559 --> 0:11:18.719 You know what I mean. You know what I mean. 0:11:18.760 --> 0:11:21.640 Okay, George W. Bush Rich shut. 0:11:23.440 --> 0:11:26.120 But I guess my point is, whether it's social media, 0:11:26.240 --> 0:11:28.319 whether it's crypto, there's a lot of things out there 0:11:28.360 --> 0:11:30.079 that it's like, oh, I guess we should have. 0:11:30.040 --> 0:11:30.680 Been doing this. 0:11:31.240 --> 0:11:34.920 Is there something we should have in place at this 0:11:35.040 --> 0:11:36.880 point when it comes to generative AI. 0:11:38.080 --> 0:11:40.559 I think what we should have in place is a 0:11:40.679 --> 0:11:43.600 very agile system for becoming aware of the harms and 0:11:43.640 --> 0:11:46.640 dealing with the harms as they crop up. For example, 0:11:46.760 --> 0:11:49.360 after smartphones were out for a while, we learned that 0:11:49.400 --> 0:11:52.320 a bunch of losers were using them to take pictures 0:11:52.320 --> 0:11:54.240 of the skirts of women, you know, as they commuted 0:11:54.320 --> 0:11:56.319 to work on the subway. We didn't not a love 0:11:56.360 --> 0:11:59.400 the smartphone. We didn't make smartphone makers apply for a 0:11:59.440 --> 0:12:02.240 license to use a camera. We didn't make all of 0:12:02.320 --> 0:12:06.520 us apply for a license to have a camera equipped smartphone. 0:12:06.960 --> 0:12:10.880 Around the states anyway, lots of legislatures acted really quickly 0:12:11.080 --> 0:12:14.400 to make that particular use of the phone illegal. The 0:12:15.200 --> 0:12:18.080 best response to the harms that come up is my 0:12:18.240 --> 0:12:20.880 preferred approach for dealing with these. I don't trust me 0:12:21.160 --> 0:12:24.200 or you or anybody else to sit around right here 0:12:24.400 --> 0:12:27.960 and correctly anticipate all of the things that will happen 0:12:28.040 --> 0:12:30.079 and all of the effective ways to head that off. 0:12:30.120 --> 0:12:30.679 I just don't. 0:12:30.880 --> 0:12:32.439 All right, We're going to leave it on that note. 0:12:32.520 --> 0:12:34.160 I'm so glad we got some more time with you. 0:12:34.200 --> 0:12:37.240 Andrew McAfee, principal research scientist at MIT, author of a 0:12:37.280 --> 0:12:41.160 new book, The Geekway, The radical mindset that drives extraordinary results. 0:12:41.440 --> 0:12:44.760 Also the visiting fellow and Technology and Society over at Google. 0:12:44.840 --> 0:12:47.400 Joining us on zoom from Boston. Andrew, thank you so 0:12:47.480 --> 0:12:48.120 much for be well. 0:12:49.040 --> 0:12:52.600 You're listening to the Bloomberg Business Week podcast. Catch us 0:12:52.640 --> 0:12:56.000 live weekday afternoons from three to six Eastern Listen on 0:12:56.040 --> 0:13:00.000 Bloomberg dot com, the iHeartRadio app and the Bloomberg Business app, 0:13:00.360 --> 0:13:02.680 or want us live on YouTube. 0:13:05.800 --> 0:13:09.400 It's the most wonderful time. 0:13:12.840 --> 0:13:14.960 With the kids, all right, everybody. 0:13:15.000 --> 0:13:17.880 So, there are a lot of retail earnings that have 0:13:17.960 --> 0:13:20.280 crossed the Bloomberg terminal, but we do want to go 0:13:20.360 --> 0:13:22.280 to there, and those were earlier in the session, but 0:13:22.360 --> 0:13:24.760 we do want to mention. We just talked about Nordstrum, 0:13:24.760 --> 0:13:27.120 and really what is kind of freaking investors out here 0:13:27.160 --> 0:13:30.360 in the aftermarket is the company's outlook seeing fiscal year 0:13:30.440 --> 0:13:33.040 just at EPs of a dollar ninety to two ten. 0:13:33.120 --> 0:13:35.640 They had seen one eighty to two twenty and Tim, 0:13:35.679 --> 0:13:37.640 we've been covering it, but the stock. Let me just 0:13:37.720 --> 0:13:38.199 pull it up. 0:13:38.240 --> 0:13:40.359 It is down well now, it's. 0:13:40.480 --> 0:13:43.440 Just actually a little higher, up about nine tenths of 0:13:43.480 --> 0:13:45.440 a percent in the aftermarket, but it's bouncing around. It 0:13:45.480 --> 0:13:47.560 was selling off earlier, but we had a lot of 0:13:47.640 --> 0:13:49.200 retail earlier today as well. 0:13:49.320 --> 0:13:51.120 Yeah, Low's shares took a hit after the company cut 0:13:51.120 --> 0:13:54.600 it's annual forecast. Best Buy slumped after reporting third quarter 0:13:54.640 --> 0:13:57.360 comp sales that trailed the average analyst estimate. Coals tanked 0:13:57.400 --> 0:14:01.120 earlier today after the company reported third quarter sales. Dick's 0:14:01.120 --> 0:14:02.920 Sporting Goods. It was kind of mixed bag, although I 0:14:02.960 --> 0:14:04.720 guess you could say kind of Dix was the outlier here. 0:14:04.720 --> 0:14:06.040 It raised its profit forecast. 0:14:06.679 --> 0:14:06.800 Uh. 0:14:07.000 --> 0:14:08.920 You know, and I mentioned that story that richer Americans 0:14:08.960 --> 0:14:10.600 are starting to pull back on their spending. There's a 0:14:10.600 --> 0:14:12.760 lot of questions and a lot to get to when 0:14:12.800 --> 0:14:14.520 it comes to the strength of the American consumer. 0:14:14.559 --> 0:14:16.040 I think that's a really important one because we talk 0:14:16.040 --> 0:14:19.000 about trading down. Mary Lou Gardner has a lot to 0:14:19.040 --> 0:14:21.640 say about the retail sector. She's Associate Partner for Consumer 0:14:21.680 --> 0:14:25.680 Packaged Goods, Retail and Logistics at Inphosis Consulting. She joins 0:14:25.760 --> 0:14:29.200 us on Zoom from Naples Florida, Mary Lou how's the 0:14:29.240 --> 0:14:32.440 retail group doing? And I know it's not oranges to orange, 0:14:32.480 --> 0:14:35.000 not everybody has the same story, but how would you 0:14:35.040 --> 0:14:37.680 sum up the retail sector and how is the US 0:14:37.760 --> 0:14:38.600 consumer doing? 0:14:39.720 --> 0:14:39.920 Well? 0:14:40.080 --> 0:14:42.760 You know, the US consumer is still feeling that tremendous 0:14:42.800 --> 0:14:46.800 pressure from three areas, the rising interest rates, the credit 0:14:46.840 --> 0:14:50.800 card debt has gone through the roof, and the savings 0:14:50.800 --> 0:14:54.600 that they had coming out of the pandemic has you know, 0:14:54.640 --> 0:14:59.120 really decreased or deflated, and so they're getting more anxious 0:14:59.120 --> 0:15:02.240 every day what to spend, where to spend it, and 0:15:02.360 --> 0:15:07.400 their decisions in terms of discretionary spending are getting more 0:15:07.520 --> 0:15:08.960 regimented every single day. 0:15:09.280 --> 0:15:11.040 So does any of this surprise you what we heard 0:15:11.080 --> 0:15:13.800 from these companies not just in the last ten minutes, 0:15:13.840 --> 0:15:17.120 but in the last twenty four hours, Dick sort of experience. 0:15:17.160 --> 0:15:17.200 No. 0:15:17.320 --> 0:15:19.800 I mean, I think we had some leading indicators with 0:15:19.840 --> 0:15:22.480 Target and Walmart last week as well. Right, they saw 0:15:22.520 --> 0:15:26.520 that in October spending really started to slow down in 0:15:26.560 --> 0:15:31.240 the back half, which gets everyone nervous for the holiday 0:15:31.320 --> 0:15:35.080 selling season where retail you know, that's their bread and butter. 0:15:35.440 --> 0:15:39.520 And right now, the forecast for the retail selling season 0:15:39.760 --> 0:15:43.760 is that it's going to be the slowest in the 0:15:43.800 --> 0:15:47.720 slowest growth in the past five years, only expected to 0:15:47.760 --> 0:15:50.720 be up three to four percent. So I think, you know, 0:15:50.800 --> 0:15:54.440 what you're starting to see is they're looking forward for 0:15:54.480 --> 0:15:56.560 the next three months based off of even what they've 0:15:56.600 --> 0:15:59.560 seen in October and said this could be a little 0:15:59.560 --> 0:16:01.560 bit of a year for us. We're not going to 0:16:01.600 --> 0:16:04.920 get the profits we thought, and we're not going to 0:16:04.920 --> 0:16:07.120 see the salts or they're going to be spread out 0:16:07.320 --> 0:16:07.920 over time. 0:16:08.040 --> 0:16:12.240 What does holiday hiring trends tell us about the holiday season? 0:16:13.040 --> 0:16:16.360 Well, I mean, the NRF also has said that they 0:16:16.400 --> 0:16:19.120 expect that trend to be down about forty percent, and 0:16:19.200 --> 0:16:19.760 what we've. 0:16:19.600 --> 0:16:22.240 Seen so far, we said forty percent. 0:16:22.520 --> 0:16:25.280 Forty percent from from twenty twenty one, which was that 0:16:25.440 --> 0:16:29.200 recent high. So Walmart's a perfect example. They have not 0:16:29.480 --> 0:16:31.479 hired any seasonal hires. 0:16:31.800 --> 0:16:35.200 Wow, so I remember seeing Amazon hiring tens of thousands, 0:16:35.240 --> 0:16:36.800 But that's typically what. 0:16:36.720 --> 0:16:39.480 It does, right, That's what it typically does. 0:16:39.800 --> 0:16:43.280 You know what it's mostly You know, we haven't heard 0:16:43.400 --> 0:16:47.160 from Amazon that they haven't been hiring. Macy's cut down 0:16:47.200 --> 0:16:51.760 their hiring significantly across the board. There are just less 0:16:51.800 --> 0:16:54.520 there's you know, three hundred and forty five thousand to 0:16:54.520 --> 0:16:56.920 four hundred and forty five thousands what they're predicting, which 0:16:57.000 --> 0:16:59.600 is forty percent down from twenty twenty one. 0:17:01.200 --> 0:17:03.520 So you mentioned it to the peak of twenty twenty one. 0:17:03.560 --> 0:17:05.800 How does this compare to twenty nineteen, because I'm trying 0:17:05.840 --> 0:17:08.440 to figure out how much is just getting back to normal, 0:17:08.840 --> 0:17:13.160 how much is there's something going on consumers are feeling pressured, 0:17:13.160 --> 0:17:15.120 which certainly seems to be the case at this point 0:17:15.160 --> 0:17:17.080 because it feels like there's more and more evidence of that. 0:17:17.359 --> 0:17:19.760 But give me an idea of how this what we 0:17:19.840 --> 0:17:23.160 are seeing and how it compares to twenty nineteen pre pandemic. 0:17:23.720 --> 0:17:28.280 I don't have the exact twenty nineteen numbers, but this 0:17:28.560 --> 0:17:33.240 slowdown is so significant in the hiring, and you know, 0:17:33.840 --> 0:17:36.600 there's the combination of the shift to e commerce, so 0:17:36.640 --> 0:17:39.479 there's probably maybe more hiring there less right in the 0:17:39.480 --> 0:17:43.440 retail brick and mortar, you know, with you know, using 0:17:43.440 --> 0:17:46.719 Amazon as one of the examples, but it still is. 0:17:47.000 --> 0:17:51.320 It's concerning in a couple of ways that if you 0:17:51.359 --> 0:17:56.040 think about how retailers have spread, like kind of the 0:17:56.080 --> 0:17:58.520 importance of the holiday season and they keep pulling it 0:17:58.600 --> 0:18:01.880 forward and pulling it forward. I think the consumer's got 0:18:01.920 --> 0:18:07.280 some fatigue and along with the pressures. So if retailers 0:18:07.320 --> 0:18:09.600 are not hiring, which is what we've seen, and I 0:18:09.640 --> 0:18:11.959 don't know the exact numbers to twenty nineteen, I can 0:18:12.040 --> 0:18:16.560 get them for you another time, but it would show 0:18:16.720 --> 0:18:19.679 to me that this that drop of thirty up to 0:18:19.880 --> 0:18:23.920 forty percent is nothing we've ever seen before. It would 0:18:23.960 --> 0:18:27.600 shift by ten to fifteen percent over the years depending 0:18:27.640 --> 0:18:30.199 what was happening in the economy. But we have that, 0:18:30.800 --> 0:18:33.679 like I said that, you know, triangulation of that pressure 0:18:33.760 --> 0:18:36.600 on the consumer, and you know, I know a lot 0:18:36.640 --> 0:18:38.640 of people that have said that they're pulling back as well, 0:18:38.680 --> 0:18:41.000 and people who can well afford to were just there's 0:18:41.040 --> 0:18:45.159 so much economic uncertainty, as we all know, and it 0:18:45.320 --> 0:18:46.440 just makes people nervous. 0:18:46.680 --> 0:18:48.399 You know. I got to ask you, and I know 0:18:48.480 --> 0:18:50.840 you're not a markets person, I know you cover retail, 0:18:50.920 --> 0:18:52.800 but there is this there does seem to be this 0:18:52.920 --> 0:18:55.080 disconnect from what we're seeing in equity in the bond 0:18:55.119 --> 0:18:58.080 markets in terms of the way that people are thinking 0:18:58.359 --> 0:19:00.280 where we are in the economy and where the feed 0:19:00.440 --> 0:19:03.160 is based on what you know and what you see 0:19:03.160 --> 0:19:06.320 in your work as a consultant who covers retail, would 0:19:06.400 --> 0:19:10.360 you say that we're in a recession or a recession 0:19:10.400 --> 0:19:11.520 is on the horizon. 0:19:13.760 --> 0:19:16.760 And maybe like a consumer like consumer spending. 0:19:16.400 --> 0:19:19.040 Recession, consumer economy. 0:19:19.440 --> 0:19:24.800 Correct, but the consumers are on the brink of I 0:19:24.840 --> 0:19:26.760 think the consumer spending is on the brink of a 0:19:26.840 --> 0:19:29.920 recession based off of all of the concerns and all 0:19:29.920 --> 0:19:33.359 the noise we hear about, you know the fact that 0:19:33.600 --> 0:19:37.760 debt has gone up significantly and people have lost their savings. 0:19:37.760 --> 0:19:39.640 They have to stop spending at some point. 0:19:40.520 --> 0:19:42.840 Right, we talked about yesterday people tapping into the four 0:19:42.920 --> 0:19:43.560 oh one ks. 0:19:44.240 --> 0:19:48.480 Today wealthier people, you know, training down essentially. 0:19:48.800 --> 0:19:51.880 So what does this mean in terms of retail names, 0:19:51.960 --> 0:19:55.159 more fallout, more consolidation. I don't know, how do you 0:19:55.200 --> 0:19:55.880 think about that? 0:19:56.600 --> 0:19:59.320 Yeah, I definitely think we're going to see some fallout. 0:19:59.359 --> 0:20:01.520 I mean, it was listen to you earlier about the 0:20:01.560 --> 0:20:06.879