Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along
Speaker 1: with Jonathan Ferrell and Lisa Brownwitz. Daily we bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com,
Speaker 1: and of course, on the Bloomberg terminal. We are thrilled
Speaker 1: to bring you the former Governor of the Federal Reserve System,
Speaker 1: Randall Krosner, of the University of Chicago Boost School, Holding
Speaker 1: Court in London as well. Randy, we are staggering step
Speaker 1: by step through the tangible data through a new FED
Speaker 1: policy dovetail the mystery around the table at the Eccles building.
Speaker 1: They have a new FED theory, a new FED construction,
Speaker 1: but we've got the same old data. How do they fit?
Speaker 1: Uh yeah, same old data, but but a new framework
Speaker 1: that's exactly right. So we have this uh average inflation
Speaker 1: targeting framework that says, rather than well, when we see
Speaker 1: inflation coming, we're gonna act now proactively, it says, no, No,
Speaker 1: we're not going to do that. We're gonna wait until
Speaker 1: inflation gets to at least to our target or maybe
Speaker 1: moving above, before we start to Act, and obviously we've
Speaker 1: seen that because inflation has been very high over the
Speaker 1: last few months. But the feed is said, hey, we're
Speaker 1: not moving until Randy. Are there any hulks left at
Speaker 1: the Federal Reserve? Oh? Yes, I think you see some
Speaker 1: of them, because it sounds like to me there are
Speaker 1: doves and then there are super doves, doves and super doves,
Speaker 1: and I see no hulks right now. Who are they? Well,
Speaker 1: I guess that also changes in context too. So you
Speaker 1: have someone like Governor Waller who just spoke recently, we
Speaker 1: said we've got to get moving, We got to start
Speaker 1: to to start tapering a little bit more rapidly because
Speaker 1: we see the economy coming back. Rich Clarada had a
Speaker 1: fairly optimistic view of where the economy was going, seemed
Speaker 1: to be discounting the role of the delta variant, although
Speaker 1: he is certainly much more on the wish side of
Speaker 1: waiting til end of two before starting to raise rates.
Speaker 1: Do you agree with Eddie Blanche Flower, who was on
Speaker 1: the show earlier today, who is basically saying it's correct
Speaker 1: for all of these doves to be dove and dovish
Speaker 1: because basically the fact that we have this very low
Speaker 1: participation rate in the US labor market is really a
Speaker 1: result of failed policy. Do you agree with that assessment.
Speaker 1: I'm not so sure it's exactly the results of failed policy.
Speaker 1: I mean, I think there are a lot of people
Speaker 1: who have decided that that, especially the older people who
Speaker 1: had come back into the labor market, who said, gosh,
Speaker 1: with all these uncertainties around health, maybe this is a
Speaker 1: good time for me to stay out of the labor market,
Speaker 1: to to retire. So I'm not quite sure that it's
Speaker 1: just policy. I think there are a lot of other things,
Speaker 1: like the pandemic that you know, it's just a shock
Speaker 1: that we really can't do. I mean, we can, we
Speaker 1: can respond with vaccines and such, but it just fundamentally
Speaker 1: changed is the way people think about going to work,
Speaker 1: going going shopping. Professor Krausner, you you represent the land
Speaker 1: of microeconomics. Macro is just more microeconomics of Chicago. Professor Krausner.
Speaker 1: How do you address the dynamics forward of our immense
Speaker 1: demand and supply imbalance. So this is a really interesting
Speaker 1: question where policy has a very large role to play. Obviously,
Speaker 1: we've seen extraordinarily easy monetary policy and a commitment for
Speaker 1: that for a long time. Unbelievable fiscal policy, just unprecedented
Speaker 1: for the term a billion times, but it really is true.
Speaker 1: Or either have spent or planning to spend on the
Speaker 1: order fift of GDP within an eighteen month time period.
Speaker 1: That's just absolutely extraordinary. Plus you had all the pent
Speaker 1: up demand, high savings of people or the savings that
Speaker 1: people have built up when they could go out, So
Speaker 1: that's all being unleashed. And so obviously we're seeing that
Speaker 1: in terms of lots of lots of price pressure combined
Speaker 1: with someone off factors like the chip shortage that we're
Speaker 1: talking about, like other supply chain disruptions. So we're going
Speaker 1: to see a lot of a lot of price increases
Speaker 1: in the short run. The key question is are those
Speaker 1: transitory or are those sustained? Um. I think we're gonna
Speaker 1: see them transitory for a while. I don't think they're
Speaker 1: necessarily going to be sustained over the year to two
Speaker 1: year horizon, But over six months horizon, I think certainly. Randy,
Speaker 1: I don't want to talk about projections. I want to
Speaker 1: talk about how we'd respond to outcomes. So help me
Speaker 1: understand this from a Federal Reserve perspective. If a higher
Speaker 1: rate of inflation persists, and it's primarily attributed to supply
Speaker 1: side constraints, but those supply side constraints also persist, how
Speaker 1: long before you have to take notice of that? Yeah,
Speaker 1: that's exactly. That's a very important issue because now it's
Speaker 1: sort of described as one off. You know, there's some
Speaker 1: supply chain disruptions, but within six months to a year
Speaker 1: they will be eased. High demand for used cars. There
Speaker 1: are a lot of particular explanations each each month, But
Speaker 1: if those accumulate over time, and in particular, if those
Speaker 1: start to change people's expectations so that people are expecting that, well,
Speaker 1: g I need to get paid more in order to
Speaker 1: UM in order to UH consume, And companies say, well,
Speaker 1: I can push price increases in a way that I
Speaker 1: haven't been able to do in a decade or two
Speaker 1: to accommodate this higher wage increases. UM, you can get
Speaker 1: into this this cycle where inflation starts to to take
Speaker 1: off and become become more permanent. That's really the key.
Speaker 1: Can they keep inflation expectations well anchored. We'll see Randy
Speaker 1: gotta leave it that Randy Croys and now University Chicago,
Speaker 1: both school economics professor and former Fed Convernor. We need
Speaker 1: to stop the show, I said last night, and you know,
Speaker 1: as we put the show together, I said, stop, We
Speaker 1: need to talk to somebody and calm down about what
Speaker 1: to do into September and for that matter, into September
Speaker 1: of two thousand twenty two. See, Misha is perfect with
Speaker 1: principal global investors their chief strategies today seem it can
Speaker 1: you own banns. Well, Look, it's so challenging right now.
Speaker 1: I mean, you know one eighteen whatever it is now,
Speaker 1: it's it's it's very difficult to go long bonds at
Speaker 1: this kind of level now looks of course, momentum can
Speaker 1: take you lower. But if we're looking at the fundamental
Speaker 1: story with strong growth, strong earnings um and affect, which
Speaker 1: you know, I agree, it's it's hardly you can hardly
Speaker 1: call it a hawk ish but also me, they're moving
Speaker 1: to a point that they can start normalizing. I think
Speaker 1: it's a really difficult argument make to own treasury seem
Speaker 1: a global opportunities Beckon heard that a few times over
Speaker 1: the last few months. In fact, to be fair, I've
Speaker 1: heard it throughout the whole of this year. Why do
Speaker 1: they beckon now? Well, I mean there's a couple of reasons.
Speaker 1: You've got a global recovery and play. I think the
Speaker 1: most interesting part of this, though, is that you've seen
Speaker 1: it kind of a move from region to region to
Speaker 1: region through the progress of the vaccination um So we
Speaker 1: started for the US, you're how had a fantastic couple
Speaker 1: of months and to what Although em is looking really
Speaker 1: dice at the moment, there are still opportunities going forward.
Speaker 1: And then in this kind of environment where it's really
Speaker 1: difficult to make any decent return, you need to be
Speaker 1: looking at where's the next thing which hasn't yet been
Speaker 1: tapped for that vaccine progress. I've heard it from US
Speaker 1: based investors they're like the UK, the foot seas up
Speaker 1: ten percent this year, I'm told They're like Japan. Japan
Speaker 1: has done nothing for me this year. It's up about
Speaker 1: one percent on the n K. Do you like those
Speaker 1: markets too? Right now? See, there's a reason to pivot
Speaker 1: away from the wonderfulness of the USA COUDI market that
Speaker 1: we're seeen for the year so far, towards the UK
Speaker 1: towards Japan. Yeah, And it gives a really good question.
Speaker 1: I think, like you said Japan has been such a
Speaker 1: disappointment with the global recovery. Typically Japan should do well,
Speaker 1: it just doesn't seem to perform. But we do think
Speaker 1: that those again as opportunities there for vaccine progress, a
Speaker 1: kind of a jump start again in Japan. But you know,
Speaker 1: I agree, it's it's difficult to stay excited about Japan.
Speaker 1: With the UK, I do wonder if they've had a
Speaker 1: bit of their heyday already over the last six months. Um,
Speaker 1: we need to see more actions from the government. Was
Speaker 1: stimulus plans? What are they going to do from the
Speaker 1: fiscal side to keep this rally going? But certainly, you know,
Speaker 1: the US does look good, but there are always opportunities globally,
Speaker 1: you know, we know you need to be diversified, and
Speaker 1: there are other opportunities, UM, Europe, e M which is
Speaker 1: still beckoning for US. We're talking about the US. Do
Speaker 1: you agree with David Carston's view over a Goldman Sachs
Speaker 1: that we're looking at a fort on the SMP at
Speaker 1: the end of the year and are by year end
Speaker 1: two we are still very much risk on. We still
Speaker 1: think there's a lot to play for with within excuse
Speaker 1: and for the same reason that that David's been pointing out,
Speaker 1: which is you look at the fundamentals, earning scross has
Speaker 1: been fantastic. UM. You know, we're seeing companies showing real
Speaker 1: pricing power, which does fill off with some positivity going forward. UM.
Speaker 1: I think the big question marks I said, there is
Speaker 1: a correspond deals, UM, and if we're going to get
Speaker 1: to that two percent level that some people still um
Speaker 1: pinning down for the end of the year, that's going
Speaker 1: to make it much more difficult. We we don't think
Speaker 1: two percent is likely. It's a slightly lower level. UM.
Speaker 1: And in that kind of environment, yes, uf excs can
Speaker 1: continue to perform well. Seem can you walk us through
Speaker 1: a scenario in which bond yields get two percent and
Speaker 1: the reaction function in equities? I mean, I'm personally confused
Speaker 1: by the scenario that will lead to two percent yields
Speaker 1: and then how that will trickle into equities. Yeah. Look,
Speaker 1: if if put like this two months ago, if we've
Speaker 1: then seen US yields need two that would have been
Speaker 1: a steady rise through the rest of the year, and
Speaker 1: I think exles could have digested that at this point
Speaker 1: where yields are for them to hit two percent now
Speaker 1: by the end of the year. That would be a
Speaker 1: very very sharp move. It would be very disruptive and
Speaker 1: I don't think XS could cope with it. But to
Speaker 1: get us there, you need to have the growth boom
Speaker 1: really once again taking off. You need to have the
Speaker 1: FED clearly indicating that tapering is on the agenda, and
Speaker 1: you just need that momentum to be there now. Positioning
Speaker 1: to ask tells us that it could. It could shift right,
Speaker 1: that momentum could come through where you get a huge
Speaker 1: overshooting of on whatever your fair value perspective is. But
Speaker 1: we need a lot of the start to align. It
Speaker 1: seem that the challenge here is our history of e
Speaker 1: M is the history of I'm guessing Ecuador, Mexico came
Speaker 1: along in ninety four and on and on. Is the
Speaker 1: great surprise out there that e M falls apart is
Speaker 1: the developed countries are just over the next twenty four months,
Speaker 1: I think. So, you know, I think a lot of investors,
Speaker 1: including US, we look at it as look at the
Speaker 1: M as a long term opportunity to where your long
Speaker 1: term growth forecasts are going to come through. And once
Speaker 1: you know we've got COVID behind us, especially for those
Speaker 1: countries and then we would expect a lot of those
Speaker 1: benefits to come through so um. But you know, particularly
Speaker 1: with themergy market, it's simply it's just not a homogeneous market.
Speaker 1: You have to be picking your country, is yourffective very
Speaker 1: very carefully because there is a lot of differences, and
Speaker 1: as we'll know, policy politics becomes really a far more
Speaker 1: important issue for E. M. SEA. We've gotta leave it there.
Speaker 1: It's gonna catch up. Appreciate principal Globe and Investors, chief
Speaker 1: strategists out of London. What's more important? Que or race?
Speaker 1: Let's bring it Steve a studio for more on that
Speaker 1: from a zoo. Security is the chief US economists, Steve,
Speaker 1: let's start there. You think that QUI is actually the
Speaker 1: more important tool here? When someone and I sit, someone
Speaker 1: like I sit to myself, sits here and says, you
Speaker 1: know what, I think, QUI doesn't really matter. A hundred
Speaker 1: twenty billion, a hundred eighty that doesn't make a difference.
Speaker 1: Do you think it does make a difference, Steve White?
Speaker 1: Do you think it does? Because I believe you know
Speaker 1: you're living in a world of excess supply and therefore
Speaker 1: what you need to do is you need to create
Speaker 1: the liquidity that allows inflation rate to actually not get
Speaker 1: sucked into a deflationary bias. And this has been the
Speaker 1: feds ongoing risk by continuing to fall back into their
Speaker 1: preemptive ways. And this is the thing that worries me
Speaker 1: the most. You know, the interest rate dynamic, how it
Speaker 1: affects the currency is not having any impact whatsoever on
Speaker 1: the currency. You know, a difference between a year zero
Speaker 1: interest rate level or you know, a five to ten
Speaker 1: basis point negative isn't going to cause people to move
Speaker 1: assets around globally and therefore affect the currency and then
Speaker 1: expose US global import prices. But que does QUE one
Speaker 1: worked very very well at avoiding the deflation initially during
Speaker 1: the financial crisis. Q E two worked very very well
Speaker 1: to do exactly the same thing. And it worked very
Speaker 1: very well. And here until the FED began the process
Speaker 1: of backing away from being preemptive, backing away from being
Speaker 1: reactive to being preemptive, by laying out forecasts of when
Speaker 1: they thought it would be appropriate to exe q E.
Speaker 1: I don't think they should ever exec QI. I think
Speaker 1: they have to trim it back to the pace of
Speaker 1: nominal GDP growth and leave it an automatic pilot. This
Speaker 1: is a huge call. They should never exit que and
Speaker 1: the follow on here is they should never shrink their
Speaker 1: balance sheet. The idea here that an a point two
Speaker 1: trillion dollar FED balance sheet is not big enough. How
Speaker 1: big should it be? Steve Well, I don't think there's
Speaker 1: an answer to how big it should be. Let's take
Speaker 1: a look. Five point four trillion of the big expansion
Speaker 1: here was done under the environment of offsetting the huge
Speaker 1: drag on the economy as a result of the COVID
Speaker 1: nineteen lockdown mitigation strategy. That is, a one time, permanent
Speaker 1: increase in the balance sheet, allowing the balance sheet to
Speaker 1: then continue to grow at the pace of nominal GDP
Speaker 1: suggests primarily that you're continuing to support the economy. You
Speaker 1: want that level of nominal GDP to be consistent with
Speaker 1: let's say a five percent nominal GDP growth, so you
Speaker 1: can get a growth rate that's somewhere between two and
Speaker 1: a half percent and an inflation of two to two
Speaker 1: and a half percent, and therefore it gives you an
Speaker 1: environment where you're supporting that inflationary bias in the economy
Speaker 1: to avoid the bigger risk of falling into deflation, which
Speaker 1: Japan has been done in for thirty years. Europe is
Speaker 1: arguably in there now with thirty year ones trading in
Speaker 1: the negative territory ten year ones down a mine is
Speaker 1: fifty uh. Europe has gone on the deflation path. There's
Speaker 1: arguments that China has gone down the deflation path or
Speaker 1: is going down the deflation path. That's thirty percent of
Speaker 1: global g d P A. They're all net creditors. We're
Speaker 1: a net debtor. If we have deflation, it's a real problem.
Speaker 1: Stephen Shuto, have you extended out this glide path from
Speaker 1: a boom economy back to some form of normal? Have you,
Speaker 1: in the last weeks, even the months, extended that out
Speaker 1: into and indeed even twenty four Well, I mean you have.
Speaker 1: I mean the reality is the stimulus that we're providing
Speaker 1: is transfer me and to to a great extent, has
Speaker 1: been a one sign transfer of wealth because households have
Speaker 1: been allowed de leverage, which is good, increase their savings,
Speaker 1: which is good. So we've taken wealth from the public
Speaker 1: sector and we've given it to the private sector. That's
Speaker 1: good as sure as you a longer sustained expansionary environment.
Speaker 1: It doesn't tell you the rate of growth that you're
Speaker 1: going to get. And I think in a globe deflationary
Speaker 1: world where we have a trade deficit of seventy five
Speaker 1: point seven billion dollars, where basically we've leaked a lot
Speaker 1: of the stimulus transfer payments, the demand that was created overseas,
Speaker 1: and yet they still can't get out of a deflationary bias.
Speaker 1: You know, we're in an environment where we're gonna rapidly
Speaker 1: turn back to that two to two and a quarter
Speaker 1: percent growth rate in our forecast, or we get there
Speaker 1: by stay just quickly plain rolls tomorrow seven see the estimate?
Speaker 1: What are you looking for? Well, I'm slightly below that.
Speaker 1: I'm in the seven fifty area. The reason for it, look,
Speaker 1: even one of those numbers is great. Um. I just
Speaker 1: think the seasonal factors are probably a little bit screwed
Speaker 1: up given the volatility last year. And again, I don't
Speaker 1: know how many of the seasonal workers relating to education
Speaker 1: because a lot of the southern schools have already gone
Speaker 1: back to uh to the classroom. Whether or not that
Speaker 1: athmatic and manifests itself, especially in the Northeast area where
Speaker 1: people are being a little bit more reluctant to start
Speaker 1: bringing people back, not knowing what's gonna happen. Is we
Speaker 1: go into the September school year, Steve, gotta cash up.
Speaker 1: Let's get your thoughts, especially going into tomorrow, Steve, a
Speaker 1: shoot out like that looking for eight seventy that's yourmmedian estimate.
Speaker 1: The range is wide, wide, wide. It is always wide,
Speaker 1: white white, these tys right now what I'm hearing from
Speaker 1: so many people anecdotally thank you for the tweets and
Speaker 1: the emails. We love getting them in. Is you really
Speaker 1: like that we talked to experts on your fears of
Speaker 1: the variants? Gig Gronville, Senior scholar at Johns Hopkins Center
Speaker 1: for Health Security, and what are some so important to
Speaker 1: your folks is? Dr Gronville is one of the nation's
Speaker 1: leading protein chemists, where they work at Memorial Sloane Cuttering
Speaker 1: over the years. G g I'm gonna cut to the chase.
Speaker 1: We're not gonna make this leningers one oh one. There's
Speaker 1: delta variant, there's lambda variant, and there's the spike protein.
Speaker 1: What do our listeners and viewers need to fear, Well,
Speaker 1: they don't need to fear variants. They're not magic. Um,
Speaker 1: it's they from a from a broader perspective, from public health,
Speaker 1: and these variants are making the disease harder to to end,
Speaker 1: just making the pandemic harder to end. But all the
Speaker 1: things that you can do for DELTA, all the things
Speaker 1: that you should have been doing for alpha, they still work.
Speaker 1: You still need to get vaccinated, UM, use a mask
Speaker 1: of in areas of high transmission. UM, really pay attention
Speaker 1: to air quality, get air hepa filtration devices for classrooms
Speaker 1: and public spaces, and you know, and you should be
Speaker 1: okay within the spike. And let's not get into d NA,
Speaker 1: m r NA and the rest of it and the
Speaker 1: very fancy Greek letters of your world. Do the vaccines
Speaker 1: that we have now do they have a confidence to
Speaker 1: carry over to these other variants or should we worry
Speaker 1: about it like we worry about say, steph lecocca in
Speaker 1: the bacteria world. Right, Yeah, so it is a concern,
Speaker 1: but it's not something we've seen yet, and so people
Speaker 1: don't need to worry that their vaccines are not effective
Speaker 1: right now. What we're seeing is that UM, you know,
Speaker 1: some there might be some fewer antibody responses from one
Speaker 1: variant or another, but you're the vaccines are good. Thankfully,
Speaker 1: your immune system is a little more complicated than just
Speaker 1: one way of measuring it, and um, your immune system,
Speaker 1: We've were involved, creatures. We've been going to war against
Speaker 1: infectious diseases for a very long time. So, UM, you
Speaker 1: know we're gonna be okay as long as you get
Speaker 1: the vaccine. And if we need to have an updated one, um,
Speaker 1: that will happen at some point in the future. But
Speaker 1: things look good right now. We're evolved creatures. I like
Speaker 1: that some of us are. Dr Gronville. There is a
Speaker 1: question also about the booster shots, because, especially as we
Speaker 1: hear from MODERNA that there m R and a vaccine
Speaker 1: remains effective six months after the second the idea here
Speaker 1: of nine efficacy basically being nearly the same as initially
Speaker 1: does this basically remove the need for near term boosters
Speaker 1: and lengthen the recovery time that we could potentially have
Speaker 1: economically and socially. So just to clarify, so they saw
Speaker 1: that efficacy six months out, that that doesn't mean that
Speaker 1: the vaccine only last for six months. We think that
Speaker 1: the vaccines will last potentially for years before you might
Speaker 1: need a booster. And yes, you're right that that probably
Speaker 1: means that for most people they will not need a booster.
Speaker 1: I think most people are thinking boosters might be necessary
Speaker 1: or probably will be necessary for people who have um
Speaker 1: IM you know, compromise it. You position there's uh conditions
Speaker 1: like they might have had a liver transplant, or they
Speaker 1: are very elderly, or they have some other condition that
Speaker 1: is going to lead to them needing to have a
Speaker 1: booster shot. Meanwhile, that's good news. On the bad news,
Speaker 1: the vaccine has not prevented the spread of the delta variant.
Speaker 1: Is it a feudal goal to try to eliminate the
Speaker 1: circulation entirely of these viruses? We're not, um So, any
Speaker 1: talk of eradication just put that out of your mind.
Speaker 1: Um it's not going to happen. Um This is a
Speaker 1: virus that's very It called a generalist virus. It infects
Speaker 1: other animals. People have gotten infected from animals from there,
Speaker 1: from mink, it's gone to mank and back, and it
Speaker 1: probably has gone to two pets and back too. But
Speaker 1: we haven't seen that yet. Um So, I that's not
Speaker 1: going to happen. But we can make it something that
Speaker 1: is not going to cause people from the hospital and
Speaker 1: that's really you know, what we need to to be
Speaker 1: focused on. We need to prevent morbidity and mortality. Dr
Speaker 1: Granville John Ferrald is really focused on China, the dynamics
Speaker 1: of this pandemic in China, and we've had reports from
Speaker 1: experts there that this time is different. How do you
Speaker 1: interpret the size, the scope, the scale of China and
Speaker 1: their ability to contain to diminish hospitalizations and deaths UM.
Speaker 1: China has some uh, some ability to move in different
Speaker 1: directions and require things that other places do not. UM.
Speaker 1: But humans are the same everywhere and UM. I think
Speaker 1: people UM have a natural tendency to congregate and UM.
Speaker 1: So that's going to be a challenge in combating any
Speaker 1: infectious disease UM that has passed from person to person
Speaker 1: and UM, and it can be counterproductive if you're not
Speaker 1: fully getting all the information that you need. UM. But yes,
Speaker 1: this variant is definitely more challenging than others because people
Speaker 1: have a lot more virus in their nose UM, and
Speaker 1: they're breathing more out and so they're in they're infectious
Speaker 1: for longer. And so that's UH, that's why it's going
Speaker 1: to be a challenge for even countries that have done
Speaker 1: very well with the with the disease so far. Doctor,
Speaker 1: always enjoy catching up with you. Thanks for your time
Speaker 1: this morning. Sitia Scola's Health Can Center for Health Security
Speaker 1: at the Bloomberg School of Public Health. Yeah, we all
Speaker 1: have our litmus paper of a daily pricing. Long ago
Speaker 1: and far away it used to be a court of
Speaker 1: melk and for so many today it is what does
Speaker 1: an uber cost, what does a lift cost? And all
Speaker 1: the rest of it, the transportation for our offspring, our
Speaker 1: own transportation, get out sometimes, Lisa Bramwood says, and add
Speaker 1: up the bill. It becomes big. Big is the word
Speaker 1: we would operate on. That's very true. Right now with
Speaker 1: a big interview, with the definitive interview on all this
Speaker 1: right hailing our Emily Chang with the Uber CEO. Here's
Speaker 1: Emily Chang. Welcome to our Bloomberg television and radio audiences.
Speaker 1: I'm Emily Chang in San Francisco and joining us now
Speaker 1: Uber CEO. Dara Cosra shahy Dar. Great to have you
Speaker 1: back here on the show. Of course we're following earnings
Speaker 1: be on the top and bottom lines, but losses five
Speaker 1: million dollars I know you say that will narrow significantly
Speaker 1: in the next quarter, but the delta variant is ripping
Speaker 1: up the playbook yet again. How are you seeing this
Speaker 1: play out on the roads? What markets are struggling the most. Yeah,
Speaker 1: I think it's interesting to see the effective delta. Overall,
Speaker 1: we're really happy with the results the top line beat.
Speaker 1: We knew that we needed to get more drivers out
Speaker 1: driving and couriers delivering because the demand was growing so quickly,
Speaker 1: so we leaned in to really increased courier supply and
Speaker 1: driver supply, and we added four hundred twenty thousand couriers
Speaker 1: UH and drivers UH. During the quarter between kind of
Speaker 1: June and February, UH added another hundred ten thousand with
Speaker 1: mostmates curiers as well. So we're really getting the earner
Speaker 1: force out there, and it's resulted in top line volumes
Speaker 1: that are very very strong UH, and it's putting us
Speaker 1: on a path where Q three losses are going to
Speaker 1: come down significantly in Q four, we're gonna hit epidot
Speaker 1: profitability as well. As far as the delta goes, it's
Speaker 1: did fel cool to tell what the effect is except
Speaker 1: for markets that have closed down, So Sydney, for example,
Speaker 1: has really shut down the mobility business comes down, but
Speaker 1: our delivery business grows very significantly, and we ned out,
Speaker 1: for example on Sydney at ahead of of nineteen volumes.
Speaker 1: So overall we have this great hedge between mobility and delivery.
Speaker 1: But when we look at city by city, you look
Speaker 1: at the New York, you look at the Paris, you
Speaker 1: look at an l A, etcetera, it's very hard to
Speaker 1: discern any patterns. As far as delta bills, we'll be
Speaker 1: watching very closely. We're gonna talk about eats in a second,
Speaker 1: but you know, in terms of right hailing, look, I've
Speaker 1: taken about ten Uber's in the last month after not
Speaker 1: taking any for a year and a half. Sometimes it's
Speaker 1: their intu and it's sometimes it's there in twenty minutes.
Speaker 1: Sometimes you're welcome, Sometimes I get canceled on. So when
Speaker 1: do you foresee a more consistent balance of supply and demand.
Speaker 1: So Emily, this is exactly why we really meaned it
Speaker 1: in Q two. We wanted to at the Uber service
Speaker 1: back to predictable prices that you can expect, e T
Speaker 1: s that you can expect, and e T s and
Speaker 1: prices are coming back to historical levels. UH in states
Speaker 1: like Texas, Florida, et cetera. They're getting there faster. New
Speaker 1: York is in better shape. So it's really location by location,
Speaker 1: but we are consistently seeing e t as and prices
Speaker 1: come down. I think that by September, October November, you're
Speaker 1: gonna get that magical uber experience that you've all you've
Speaker 1: always been used to. And we're leaning as a as
Speaker 1: a company to get there as quickly as possible. And
Speaker 1: you're spending a lot to get drivers back out there,
Speaker 1: two million dollars in the last quarter. But you've said
Speaker 1: you can taper incentives through the rest of the year
Speaker 1: lifts as they're amping up their insensives. So what makes
Speaker 1: you so confident you can win drivers back if you
Speaker 1: whittle years down. Well, because we're seeing the drivers come back.
Speaker 1: Four came came back uh in just a couple of months.
Speaker 1: And what we're seeing in Joe I is, you know,
Speaker 1: we started with incentives to really get drivers out there,
Speaker 1: but we're moving from essentially incentives to improving our onboarding processing.
Speaker 1: We reduced onboarding time by nine with a new much
Speaker 1: smoother onboarding process. We're reaching out to drivers who had
Speaker 1: stopped driving to resurrect them to get back on the road.
Speaker 1: That has been enormously successful as well. So in July,
Speaker 1: for example, we were able to tap our incentives. We're
Speaker 1: targeting them much more specifically in the cities where we needed,
Speaker 1: when we needed. And at the same time, new drivers
Speaker 1: who signed up in July were up thirty month on
Speaker 1: month from from Julia. So we're seeing the numbers. They're
Speaker 1: really encouraging, and we're not assuming that we're going to
Speaker 1: get any better, even though based on our technology and
Speaker 1: the systems that we have in place, we do think
Speaker 1: we can get more targeted and better in terms of
Speaker 1: onboarding drivers and couriers and obviously no profitability really important milestone.
Speaker 1: You've promised you're still going to hit that before the
Speaker 1: end of the year, but what are the chances that
Speaker 1: Delta could shake that up to What are the chances
Speaker 1: you don't hit that milestone? You know? The good news
Speaker 1: for us is that we we have the head right
Speaker 1: so if if mobility gets hit because of Delta, we
Speaker 1: see the delivery business growing, and we've also say that
Speaker 1: the delivery business is going to get bit up profitable
Speaker 1: by Q four as well, so we think we're reasonably protected. Obviously,
Speaker 1: it's a very very uncertain environment. But we're the only
Speaker 1: company out there that's leading in mobility on a global
Speaker 1: basis outside of China, that's leading in delivery on a
Speaker 1: global global basis outside of China. These businesses are now
Speaker 1: strengthening each other, and actually customers who use both mobility
Speaker 1: and delivery count for nearly fifty of our growth spookings
Speaker 1: on a global basis. So if you stay home, you're
Speaker 1: gonna use Eats, If you want to get out to
Speaker 1: a restaurant, you're gonna use classic Umber. Uh. That is
Speaker 1: a strength and the unique strength that we burn. Now,
Speaker 1: last time we spoke, you talked about how you've basically
Speaker 1: built another Uber. There's Uber ridesharing and Uber eats. When
Speaker 1: you look five years at which Uber is bigger. You know,
Speaker 1: you're obviously expanding into grocery, you're expanding into instant delivery.
Speaker 1: Um but but but how do the two Are the
Speaker 1: two Uber still twins or or something else? Emily, you're
Speaker 1: making me choose between my kids. I'd much rather have
Speaker 1: them compete. You've got a team that's growing our Uber business.
Speaker 1: We've got a team that's growing our eats business. They're
Speaker 1: going to compete with each other. Uh, and you know,
Speaker 1: we'll see who wins. I do think that the delivery
Speaker 1: total addressable market. You know, we've expanded delivery from just
Speaker 1: restaurants now to grocery. We're getting into alcohol delivery, we're
Speaker 1: delivering for Apple, will deliver a and an iPhone to
Speaker 1: your home. So the total addressable market for the delivery
Speaker 1: business is probably bigger. But as it relates to Uber,
Speaker 1: we're getting into transit. We're wiring up taxi cabs, two wheelers,
Speaker 1: three wheelers. So it's gonna be a great competition and
Speaker 1: I'm going to be bushing both of them to grow
Speaker 1: as fast as possible. You are doubling down on freight
Speaker 1: bought Transplace last month two point five billion dollars that
Speaker 1: make software that helps companies manage their supply chains, manage logistics.
Speaker 1: What's the vision to own that? What's the vision to
Speaker 1: own supply and logistics? Well, I think you hear all
Speaker 1: the time now how supply chain has become a problem
Speaker 1: for a lot of companies and it's becoming a much
Speaker 1: more important part of how they operate. Fift of Uber
Speaker 1: Freights customers are actually a consumer package of goods makers, brands,
Speaker 1: et cetera, the same brands that were delivering for you know,
Speaker 1: corner shop into your home. So we think with Transplace,
Speaker 1: we're going to be helping these brands actually managed our
Speaker 1: supply chain. With Uber Freight, we are connecting them to
Speaker 1: the shippers that can get the food or the water,
Speaker 1: or the sodas or the beer from the warehouse to
Speaker 1: the store. And with eats we can get uh that
Speaker 1: that soda or food from the store to the home. Uh.
Speaker 1: It is There's no one else that is building this
Speaker 1: kind of end to end logistics infrastructure powered by machine
Speaker 1: learning that understands where you are, when you are and
Speaker 1: can make that chain the most efficient. That's really what
Speaker 1: we're building. Uh. And the Translats team is just dynamite,
Speaker 1: so we would be very happy to have them as
Speaker 1: part of that. We were family. You've pushed back your
Speaker 1: return to work. You're mandating vaccines for your corporate employees.
Speaker 1: You did have a COVID exposure at a board meeting,
Speaker 1: and and look that delta is real. It is scary.
Speaker 1: You're not mandating vaccines for drivers. How are you thinking
Speaker 1: about this? Instat cart CEO just told me they're debating
Speaker 1: it for shoppers, is it at all on the table?
Speaker 1: It's it's you know, these are subjects that we talk
Speaker 1: about all the time. I do think that is different
Speaker 1: when you're talking about employees are spending eight hours a
Speaker 1: day in an office. And remember, for us UM the
Speaker 1: big issues if we mandated for drivers, I think we'd
Speaker 1: have to mandate it for riders as well. And when
Speaker 1: you have a company that has a has essentially a
Speaker 1: hundred million riders and drivers using the service every single month,
Speaker 1: I don't think that UH. To have a company have
Speaker 1: the power to mandate vaccinations over a hundred thousand, a
Speaker 1: hundred million people who are moving around UM is probably
Speaker 1: the right call. So we are going to work with
Speaker 1: governments based on government mandates, local mandates, we're going to
Speaker 1: follow them. And at the same time, we're pushing very
Speaker 1: very hard to help drivers, couriers, riders get vascinated, often
Speaker 1: providing vaccinations for free or transportation to vascinations for free.
Speaker 1: So we're absolutely doing your park. We are coming up
Speaker 1: on your four year uber versary, so congratulations on that.
Speaker 1: The New York Times recently called you the dad of
Speaker 1: Silicon Valley, a start contrast to your predecessor. As you
Speaker 1: look out on the next four years from a cultural perspective,
Speaker 1: what are your priorities, you know, especially when it comes
Speaker 1: to diversity and building uh, you know, a more inclusive workforce.
Speaker 1: What's the company and the culture that you want to build? Well,
Speaker 1: I think the kind of company that we want to
Speaker 1: build are full of entrepreneurs who want to have impact
Speaker 1: and impact in the broadest way but in real life. Right.
Speaker 1: The service that we are building essentially will allow people
Speaker 1: to go anywhere, get anything into their homes and and
Speaker 1: and millions of people learned that comes with a lot
Speaker 1: of responsibilities. So we want entrepreneurs who want to build,
Speaker 1: but they want to build responsibly, and diversity is a
Speaker 1: big part of that. We need to have that diversity
Speaker 1: in our workforce because we certainly have that diversity in
Speaker 1: our earner base and our courier base. Uh. And ultimately
Speaker 1: that is going to help us build a better product.
Speaker 1: But it's all about impact in the real world, and
Speaker 1: we've got a lot of people who are incredibly excited
Speaker 1: to build our go get vision uber CEO dark Hosra Shall,
Speaker 1: thanks so much for joining us today. Great to have you.
Speaker 1: Thank you. Emily Chang in conversation with a gentleman running
Speaker 1: a dynamic business as well. This is the Bloomberg Surveillance Podcast.
Speaker 1: Thanks for listening. Join us live weekdays from seven to
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Speaker 1: Keene and this is Bloomberg