WEBVTT - US Business Owners Have Mostly Optimistic Outlook

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News. You're listening to Bloomberg

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<v Speaker 1>Business Week with Carol mess Here and Tim Steneveek on

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<v Speaker 1>Bloomberg Radio. On the economic data front, we got data

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<v Speaker 1>today that showed US labor costs jumped the most in

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<v Speaker 1>a year as productivity gains slowed, adding risks to inflation

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<v Speaker 1>that it's going to remain elevated. It comes after the

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<v Speaker 1>loud and clear message from Jay Powell yesterday that rates

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<v Speaker 1>will indeed be higher for longer. What do things look

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<v Speaker 1>like though, on the ground for America's businesses? Tell us

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<v Speaker 1>answer that question. We've got back with us Sharon Miller,

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<v Speaker 1>President of Business Banking over at Bank of America. The

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<v Speaker 1>bank out with an update to its annual Business Owner Report.

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<v Speaker 1>It's a survey of fourteen hundred at business owners, including

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<v Speaker 1>businesses of one hundred thousand dollars through up to fifty

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<v Speaker 1>million dollars in revenue. Sharon, welcome back. Taking a look

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<v Speaker 1>at the report, I got to tell you, certainly there's

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<v Speaker 1>some concerns here inflation, geopolitics, but I got to tell

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<v Speaker 1>you it looks like overall things are going pretty well

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<v Speaker 1>for these business owners. They're optimistic they.

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<v Speaker 2>Are and thanks for having me back. I appreciate the

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<v Speaker 2>time today. And we did find that as we surveyed

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<v Speaker 2>clients that their revenue expectations, at least for the next

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<v Speaker 2>twelve months, you know, sixty five percent of business owners

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<v Speaker 2>told us that they expect their revenues to increase. So

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<v Speaker 2>an overall optimistic tone coming from the small business community,

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<v Speaker 2>I would say.

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<v Speaker 3>Is this pretty much across all industries. I'm not quite

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<v Speaker 3>sure how you disin slice the data, I'm Sharon, but

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<v Speaker 3>is it kind of everybody?

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<v Speaker 4>It is?

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<v Speaker 2>I mean, we hear from our clients and certainly we

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<v Speaker 2>talk to clients every single day, and what we're hearing,

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<v Speaker 2>you know, there are some concerns certainly, you know, the

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<v Speaker 2>political environment. We're operating in inflation. I heard that as

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<v Speaker 2>we were leading up to this segment. But all in all,

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<v Speaker 2>business owners, and especially smaller business owners, they really have

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<v Speaker 2>control over their business in spite of what's going on

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<v Speaker 2>around them, and so they have confidence that whatever the

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<v Speaker 2>you know, economic environment is, they will over And so

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<v Speaker 2>that's what we heard in the survey result and that's

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<v Speaker 2>what we're hearing every single day across the desk.

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<v Speaker 3>Well, that's interesting because and listen. Sixty five percent business

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<v Speaker 3>owners expect their revenues to grow this year. Fifty five

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<v Speaker 3>percent report they've made more money in twenty twenty three

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<v Speaker 3>than in twenty twenty two. Good numbers, strong percentages. But

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<v Speaker 3>did seventy percent of business owners last time the survey

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<v Speaker 3>was done expected, you know, the revenues to grow this year.

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<v Speaker 3>Give us like I'm always I'm always curious. I know

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<v Speaker 3>tim is too in terms of trend lines and how

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<v Speaker 3>this difference is maybe from the last data set, So

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<v Speaker 3>is it improving? Is it the same?

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<v Speaker 2>It stayed steady, So it was steady from our last

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<v Speaker 2>report twelve months ago, and so it's right in line.

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<v Speaker 2>So we haven't seen a dramatic increase nor a big decrease.

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<v Speaker 2>And I will tell you what's interesting as the segment

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<v Speaker 2>from twenty to fifty million, so.

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<v Speaker 4>The mid size businesses, they.

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<v Speaker 2>Were eighty percent plus saying that their revenue was going

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<v Speaker 2>to increase over the next twelve months, which to me,

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<v Speaker 2>that is something that is very good for the economy.

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<v Speaker 2>Normally we see the inverse where the smaller businesses are

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<v Speaker 2>more optimistic versus the mid size and this time we

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<v Speaker 2>saw exactly the opposite. I mean, they're both very optimistic.

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<v Speaker 2>But I would say the twenty to fifty million dollar

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<v Speaker 2>businesses in the mid size category, we're eighty plus percent

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<v Speaker 2>told us that, you know, I expect my revenue to

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<v Speaker 2>increase over the next twelve months, and I expect to

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<v Speaker 2>start accessing some capital, which we haven't seen quite as

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<v Speaker 2>much of in that segment.

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<v Speaker 1>Okay, how are they going to access this capital? Because

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<v Speaker 1>this is something we talk about all the time when

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<v Speaker 1>it comes to private credit, when it comes to rates.

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<v Speaker 1>What are you seeing as the source for capital for

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<v Speaker 1>these businesses right now?

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<v Speaker 2>Well, I mean you have your traditional bank loans, lines

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<v Speaker 2>of credit. Certainly we're seeing in the smaller segment where

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<v Speaker 2>business owners are accessing credit cards, and you know, with

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<v Speaker 2>that credit card, when we look at our data here

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<v Speaker 2>at Bank of America, we see that it's on par

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<v Speaker 2>with two thousand nine nineteen. We have seen an increase

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<v Speaker 2>in the amount of credit card balances. But what I

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<v Speaker 2>would say is when you adjust that for inflation, we're

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<v Speaker 2>right on par with twenty nineteen. So I do feel

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<v Speaker 2>go ahead.

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<v Speaker 1>Well just going anything concerning to you about that about

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<v Speaker 1>the mix of financing right now?

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<v Speaker 2>No, I mean I feel that you know, we're in

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<v Speaker 2>a very strong position with our clients, and certainly, you know,

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<v Speaker 2>when you see that people are starting to access their

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<v Speaker 2>lines of credit, they're feeling better. We've seen, you know,

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<v Speaker 2>that that trend line be sort of stable, where we

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<v Speaker 2>weren't seeing as much coming through in the mid sized segment.

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<v Speaker 2>And I do think that based on this survey and

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<v Speaker 2>what we're hearing from clients, there's a tone of optimism

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<v Speaker 2>out there that they're ready to get out there, they're

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<v Speaker 2>ready to expand or you know, take on an acquisition,

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<v Speaker 2>and certainly some activity going on in the business in

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<v Speaker 2>business lands.

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<v Speaker 3>What color can you give us in terms of default

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<v Speaker 3>rates on either their business credit cards, personal credit cards

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<v Speaker 3>or anything that kind of ties back to it? Sounds

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<v Speaker 3>like you sound very optimistic on many levels, So I'm

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<v Speaker 3>just curious what are you seeing in terms of default

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<v Speaker 3>rates or any signs of stress and for some of those.

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<v Speaker 2>Businesses, Yeah, I would say within within our portfolio at least.

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<v Speaker 4>I mean, we're very you know, we work with every.

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<v Speaker 2>Client and we certainly are very strong on our clients

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<v Speaker 2>selection and making sure that it makes sense for the loan,

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<v Speaker 2>and so we are at historically low levels on you

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<v Speaker 2>know our credit losses, and so I do feel good

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<v Speaker 2>about our portfolio and what's happening with the health of

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<v Speaker 2>our business.

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<v Speaker 1>Again, I kind of go back to this idea that

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<v Speaker 1>you know, the data in this are so good in

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<v Speaker 1>this report, I was I was struck by that. But

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<v Speaker 1>we do hear over and over again surveys of folks

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<v Speaker 1>and look, this is limited. You're talking to business owners

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<v Speaker 1>here about how how well things are going, but we

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<v Speaker 1>hear from folks out there, especially ahead of the election,

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<v Speaker 1>that they are dissatisfied with parts of the economy. And

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<v Speaker 1>I'm wondering if you can help explain, not politically or anything,

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<v Speaker 1>but the disconnect between what you see in the survey

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<v Speaker 1>and what you see in the other types of surveys.

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<v Speaker 1>When you know voters are asked ahead of elections about how.

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<v Speaker 2>They're feeling, right, and I think you know even in

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<v Speaker 2>this survey, and I've I've been in President of Small

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<v Speaker 2>Business for seven years and we've been doing the survey

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<v Speaker 2>before I even got your ten years in the making

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<v Speaker 2>for this survey. So we've got a long track record

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<v Speaker 2>of history and going through election cycles.

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<v Speaker 4>And what we find is that you'll see.

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<v Speaker 2>A dip in the in the confidence because of you know,

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<v Speaker 2>what's happening in the political.

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<v Speaker 4>Landscape and that and the headlines.

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<v Speaker 2>But what happens following that election is that there's certainty

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<v Speaker 2>and so there's you know, whether it's a Democrat or

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<v Speaker 2>Republican doesn't really matter. There's certainty in what's going to

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<v Speaker 2>happen going forward, and so you do see the economy

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<v Speaker 2>start to move again. So you know, it's it's a

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<v Speaker 2>typical cycle that we do see as we look back

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<v Speaker 2>at our data, and you'll you know, it's it's it's

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<v Speaker 2>kind of going through it again right now we're in

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<v Speaker 2>the election year. And so i'd also say that, you know,

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<v Speaker 2>business owners where we surveyed are more optimistic about their

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<v Speaker 2>own business and their revenue prospects versus the national or

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<v Speaker 2>the local economy.

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<v Speaker 4>And so I think that has a lot to do

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<v Speaker 4>with especially.

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<v Speaker 2>In the smaller businesses, they have control over their business

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<v Speaker 2>in spite of what's going on around them. They can

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<v Speaker 2>control their activity, they can control what they're doing, and

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<v Speaker 2>they can tip it because they're small.

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<v Speaker 3>Sharon, what's the demographics the diversity of these statistics. I'm

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<v Speaker 3>wondering if you can break it down, because BFA did

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<v Speaker 3>a survey. I guess this was back in October. About

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<v Speaker 3>forty four percent of black owners have had challenges accessing capital,

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<v Speaker 3>according to a survey done by b of A last fall,

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<v Speaker 3>with more than a third of those respondents saying they

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<v Speaker 3>didn't have a relationship with a lender. Some thirty five

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<v Speaker 3>percent said they don't think they will ever have equal

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<v Speaker 3>access to capital. And this is a story that Bloomberg

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<v Speaker 3>has out today about, you know, after the pandemic, and

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<v Speaker 3>they were so much entrepreneurial spirit and businesses, including black

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<v Speaker 3>owned businesses, being created, and yet now here we are

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<v Speaker 3>in twenty twenty three and just thirty two percent of

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<v Speaker 3>black owners were fully approved for a loner line of

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<v Speaker 3>credit compared to fifty six percent of white entrepreneurs. This

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<v Speaker 3>was a March report from the twelve Regional Fed Bank.

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<v Speaker 3>So I'm just curious, what color can you give us

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<v Speaker 3>in terms of the diversity or the demographics of some

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<v Speaker 3>of this data.

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<v Speaker 2>Well, this business owner report was from all different demographics,

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<v Speaker 2>and we do release a survey on women owned businesses,

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<v Speaker 2>Black owned businesses, Hispanic owned businesses, So we do have

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<v Speaker 2>other reports that follow this. One was very broad in

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<v Speaker 2>nature and so we didn't dive into specific races or

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<v Speaker 2>age demographics. This is across the board, and we do

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<v Speaker 2>put out other surveys like that, and I'll tell you

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<v Speaker 2>we find the same results in women owned businesses and

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<v Speaker 2>Hispanic owned businesses. And those are all the things that

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<v Speaker 2>we are doing here at the bank to make sure

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<v Speaker 2>that people understand how to access capital, how to have

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<v Speaker 2>those conversations before you need capital, so that you can

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<v Speaker 2>prepare and get ready.

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<v Speaker 4>So absolutely, those.

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<v Speaker 2>Are reports we put out and those are concerned that

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<v Speaker 2>we want to address every single day.

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<v Speaker 4>Absolutely.

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<v Speaker 3>Sharon Miller, President of Business Banking at Bank of America,

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<v Speaker 3>joining us from San Antonio, Texas.

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<v Speaker 1>Okay, this was news to me, Carol.

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<v Speaker 5>Yes.

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<v Speaker 1>Last year, GM decided it would ditch support for Apple's

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<v Speaker 1>enfotainment hub Applecarplay, which by the way, you can get

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<v Speaker 1>Bloomberg BusinessWeek from Applecarplay and Android Auto and it's new

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<v Speaker 1>evs so it could bolster GM's in house platform, it's

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<v Speaker 1>called Ultify. Perhaps not that surprising to those who followed

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<v Speaker 1>consumer tech over the last decade or so. Doing something

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<v Speaker 1>like that is easier said than done. Is the role

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<v Speaker 1>out of the new software has been well flawed. Austin

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<v Speaker 1>kr and David Welch right about it in the forthcoming

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<v Speaker 1>issue of BusinessWeek magazine. You can read it now on

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<v Speaker 1>the Bloomberg and at Bloomberg dot com slash BusinessWeek. Austin

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<v Speaker 1>is Bloomberg News technology reporter. He joins us from our

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<v Speaker 1>Boston bureau. I gotta say, Austin, I had no idea

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<v Speaker 1>that GM made this move until I read this, and

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<v Speaker 1>my first reaction was, why would the company do something

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<v Speaker 1>like this? I mean, CarPlay is seamless. I think a

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<v Speaker 1>lot of people would argue that it's really easy to use,

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<v Speaker 1>and when it comes to consumer tech, I mean, I

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<v Speaker 1>think it's fair to say that nobody really does it

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<v Speaker 1>better than Apple. But then I started reading your story.

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<v Speaker 1>It turns out that car companies give up a lot

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<v Speaker 1>when they give up that dashboard space.

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<v Speaker 5>Yeah, I mean, that's totally right. In addition to being

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<v Speaker 5>totally seamless, Apple car Play is also super popular, and

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<v Speaker 5>you can imagine the more popular it grows, the more data,

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<v Speaker 5>the more controls that Apple wants access to, the more

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<v Speaker 5>unlikely it is that they're going to use GMS software

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<v Speaker 5>to use GM's infotainment apps or to interact with their

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<v Speaker 5>digital hub and how it controls the car or interacts

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<v Speaker 5>with their EV batteries, and this became a sort of

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<v Speaker 5>a major concern for General motors in recent years, especially

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<v Speaker 5>as Apple signaled that they want to expand with the

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<v Speaker 5>next version of CarPlay into way more screens in the

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<v Speaker 5>car to control everything from this phenometer to fuel levels

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<v Speaker 5>to basically how you interact with the vehicle. And so

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<v Speaker 5>GM basically decided last year that enough is enough. They

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<v Speaker 5>wanted it not to be. They wanted to be a

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<v Speaker 5>GM car, not an iPhone that you're driving, is one

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<v Speaker 5>GEM executive put it to me.

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<v Speaker 3>So wait, how deep was Apple already going in terms

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<v Speaker 3>of its access to information about our cars?

0:11:22.000 --> 0:11:24.320
<v Speaker 5>So right now, if you have CarPlay, if you get

0:11:24.320 --> 0:11:28.120
<v Speaker 5>in a Ford or sort of any major automaker's car,

0:11:28.320 --> 0:11:30.600
<v Speaker 5>it's a plug and play process. So they project it

0:11:31.000 --> 0:11:33.720
<v Speaker 5>onto the screen. It's just sort of an overlay on

0:11:33.880 --> 0:11:36.360
<v Speaker 5>top of the infotainment hub that you have in the

0:11:36.440 --> 0:11:39.319
<v Speaker 5>vehicle already. So it's a version of the iPhone interface

0:11:39.360 --> 0:11:42.079
<v Speaker 5>that you have that's modified for a car. But Apple

0:11:42.080 --> 0:11:44.160
<v Speaker 5>announced in mid twenty twenty two that it wants to

0:11:44.320 --> 0:11:47.120
<v Speaker 5>branch out into a lot more features of the vehicle

0:11:47.520 --> 0:11:50.360
<v Speaker 5>and regardless of whether it's tapping into those data sources

0:11:50.440 --> 0:11:53.480
<v Speaker 5>or just syncing with them. It's essentially taking over the

0:11:53.520 --> 0:11:57.280
<v Speaker 5>interface of the vehicle from not just the console center screen,

0:11:57.360 --> 0:12:00.480
<v Speaker 5>but all the gauge clusters that you have behind the

0:12:00.480 --> 0:12:03.000
<v Speaker 5>the steering wheel. So that's sort of what you know.

0:12:03.040 --> 0:12:06.679
<v Speaker 5>These car companies like GM consider miss mission critical components,

0:12:06.840 --> 0:12:09.800
<v Speaker 5>and they were getting really wary of how deep that

0:12:09.840 --> 0:12:13.240
<v Speaker 5>Apple was expressing its interest in reaching its tentacles into

0:12:13.280 --> 0:12:15.120
<v Speaker 5>the car. And so that's why you see GM and

0:12:15.160 --> 0:12:16.760
<v Speaker 5>Mercedes sort of dripped away from this.

0:12:16.920 --> 0:12:19.360
<v Speaker 1>Okay, so you say, Carol says, she gets it. At

0:12:19.360 --> 0:12:20.959
<v Speaker 1>the same time, though, Austin, as you point out in

0:12:21.000 --> 0:12:22.320
<v Speaker 1>your story, and look, you got to look at where

0:12:22.320 --> 0:12:24.440
<v Speaker 1>the data is coming from. It turns out that, at

0:12:24.480 --> 0:12:29.760
<v Speaker 1>least according to Apple, people take very seriously whether or

0:12:29.800 --> 0:12:33.280
<v Speaker 1>not the car has Apple car Play when they're thinking

0:12:33.280 --> 0:12:34.240
<v Speaker 1>about purchasing it.

0:12:36.000 --> 0:12:39.520
<v Speaker 5>Yeah, according to Apple's research, about seventy nine percent of

0:12:39.920 --> 0:12:43.920
<v Speaker 5>US car buyers will only consider a car that's cart Play.

0:12:43.720 --> 0:12:45.120
<v Speaker 1>Compatible, again from Apple.

0:12:46.400 --> 0:12:49.040
<v Speaker 5>From Apple, but they also say, according to Apple's research,

0:12:49.120 --> 0:12:52.679
<v Speaker 5>it's also ninety eight percent of all new new cars

0:12:52.679 --> 0:12:55.120
<v Speaker 5>in the US come with car Play. So that's sort

0:12:55.120 --> 0:12:58.520
<v Speaker 5>of an addiction. You cannot escape that habit forming just

0:12:58.800 --> 0:13:01.480
<v Speaker 5>with you know, the few cars that are not CarPlay compatible,

0:13:01.480 --> 0:13:04.040
<v Speaker 5>which is Tesla and Rivian, and that's about it. Every

0:13:04.040 --> 0:13:07.319
<v Speaker 5>other car that's on the road that's new is CarPlay compatible.

0:13:07.440 --> 0:13:09.600
<v Speaker 5>And GM said, we're going to take that risk because

0:13:09.600 --> 0:13:11.760
<v Speaker 5>we believe in our own software and we're going to

0:13:12.200 --> 0:13:14.880
<v Speaker 5>invest in our own native platform to try to get

0:13:14.920 --> 0:13:17.480
<v Speaker 5>people to use GM software rather than Apples.

0:13:18.080 --> 0:13:20.960
<v Speaker 3>Well, I mean, how does GM internals. I mean, obviously

0:13:20.960 --> 0:13:22.560
<v Speaker 3>we know what Mary Barr and team feel like, but

0:13:22.640 --> 0:13:24.920
<v Speaker 3>I mean, do they all think that this is the

0:13:25.000 --> 0:13:29.160
<v Speaker 3>right move. That Apple can do things very well? And

0:13:29.240 --> 0:13:32.880
<v Speaker 3>as you write about Michael Waldron who got a new

0:13:32.960 --> 0:13:35.800
<v Speaker 3>Chevy Blazer, but he wasn't so happy about not having

0:13:35.840 --> 0:13:36.240
<v Speaker 3>car Play.

0:13:37.960 --> 0:13:40.360
<v Speaker 5>Yeah, we talked to a bunch of the first car

0:13:40.440 --> 0:13:43.360
<v Speaker 5>that's being rolled out with this new embedded software platform

0:13:43.400 --> 0:13:47.240
<v Speaker 5>that's completely CarPlay free, is called the Chevy Blazer EV

0:13:47.720 --> 0:13:49.920
<v Speaker 5>and it rolled out last year. We talked to a

0:13:49.920 --> 0:13:53.360
<v Speaker 5>bunch of owners, including iPhone users, who tried to adopt

0:13:53.720 --> 0:13:55.880
<v Speaker 5>adapt to this car, and they had a lot of trouble.

0:13:55.920 --> 0:13:58.920
<v Speaker 5>In fact, the software and displays ran into so many

0:13:59.000 --> 0:14:01.880
<v Speaker 5>glitches that a lot of these systems became rick. They

0:14:01.960 --> 0:14:05.280
<v Speaker 5>just blacked out altogether. They wouldn't work to turn on, apps,

0:14:05.360 --> 0:14:08.120
<v Speaker 5>kept crashing, screens, kept flickering, to the point that GM

0:14:08.160 --> 0:14:10.920
<v Speaker 5>actually had to issue a stop sale and a recall

0:14:10.960 --> 0:14:14.040
<v Speaker 5>in late December to fix all these software. So far

0:14:14.080 --> 0:14:16.720
<v Speaker 5>from a great rollout, not a very Apple like sort

0:14:16.760 --> 0:14:19.840
<v Speaker 5>of onboarding process. But then again, some of the customers

0:14:19.840 --> 0:14:22.200
<v Speaker 5>that we have talked to said, once they got used

0:14:22.200 --> 0:14:24.600
<v Speaker 5>to it and sort of got over that habit and

0:14:24.680 --> 0:14:27.320
<v Speaker 5>ripped the band aid, they actually kind of like GMS software.

0:14:27.320 --> 0:14:28.920
<v Speaker 5>And I can walk you through some of the seatures,

0:14:28.920 --> 0:14:31.800
<v Speaker 5>but please do are upsides to those? Yeah? I mean,

0:14:31.880 --> 0:14:35.760
<v Speaker 5>just as an example, so if you enter an address

0:14:35.840 --> 0:14:39.880
<v Speaker 5>right now on the Chevy Blazer, because it's integrated with

0:14:39.960 --> 0:14:42.240
<v Speaker 5>the hardware components in the car, which is something that

0:14:42.280 --> 0:14:44.920
<v Speaker 5>Apple Car Play cannot do. So if I enter an

0:14:44.960 --> 0:14:49.200
<v Speaker 5>address in this ev it can automatically predict battery capacity

0:14:49.560 --> 0:14:53.280
<v Speaker 5>along their way of that route and suggest charging stations accordingly.

0:14:53.560 --> 0:14:57.680
<v Speaker 5>So if I'm I'm plotting a trip from from Boston

0:14:57.720 --> 0:14:59.480
<v Speaker 5>to New York from where I am to you guys,

0:15:00.120 --> 0:15:03.080
<v Speaker 5>it can suggest charging stations along the way automatically, whereas

0:15:03.120 --> 0:15:05.520
<v Speaker 5>Applecarplay would have no idea what the battery life in

0:15:05.560 --> 0:15:07.600
<v Speaker 5>your car is. So that's just one example of the

0:15:07.640 --> 0:15:12.040
<v Speaker 5>type of embedded native software integration can sort of benefit

0:15:12.080 --> 0:15:15.000
<v Speaker 5>consumers who just are used to getting a projection interface

0:15:15.040 --> 0:15:17.640
<v Speaker 5>from Apple right now and not realizing there are better

0:15:17.720 --> 0:15:18.560
<v Speaker 5>options out there.

0:15:18.800 --> 0:15:21.840
<v Speaker 1>When it works, Austin, when it works, yes, that is key.

0:15:22.000 --> 0:15:23.800
<v Speaker 1>This is a great story, Austin. I couldn't put it

0:15:23.840 --> 0:15:26.080
<v Speaker 1>down once I started reading it. Austin car Bloomberg News

0:15:26.080 --> 0:15:28.640
<v Speaker 1>technology reporter joining us from our Boston bureau. Check out

0:15:28.840 --> 0:15:31.160
<v Speaker 1>Austin Carr story. He wrote it along with David Welch

0:15:31.800 --> 0:15:33.920
<v Speaker 1>in the forthcoming issue of BusinessWeek magazine. It's on the

0:15:33.960 --> 0:15:37.000
<v Speaker 1>Bloomberg terminal. It's at Bloomberg dot com slash BusinessWeek