Speaker 1: This is Bloomberg Business Wait inside from the reporters and
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Speaker 1: global business finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 2: All right, we want to kind of ship back to
Speaker 2: the markets if we may, because one name that's certainly
Speaker 2: been front and center and that has balent here soaring
Speaker 2: more than twenty percent. We saw it in the aftermarket,
Speaker 2: we saw it in today's trade. I was just going
Speaker 2: to pull it up on the Bloomberg and see where
Speaker 2: we are. Were up twenty three percent, so pretty much
Speaker 2: holding on to its gains. A lot of it is
Speaker 2: because they talk so much about AI on the call
Speaker 2: with analysts. So let's get to it with our guest,
Speaker 2: Bloomberg News VC and Startups reporter Lisette Chapman in our
Speaker 2: San Francisco bureau, and Andrew McAfee, MIT scientist and work Helix,
Speaker 2: co founder at the MIT Sloan School of Management. He
Speaker 2: joins us via zoom in Boston. Folks, Thanks so much
Speaker 2: for being here with Matt and myself, Lazette. First off,
Speaker 2: just brief Lee kind of what we heard from Palenteer,
Speaker 2: in particular the excitement and narrative around AI. Tell us
Speaker 2: kind of what we got from the company.
Speaker 3: Yeah.
Speaker 4: Sure. Palunteer, of course is a you know, tech company
Speaker 4: that's been unprofitable for two decades up until this past quarter.
Speaker 4: So that was another thing that's been driving the surge
Speaker 4: and the stock price. They did a surprise profit, and
Speaker 4: then they pivoted very quickly to talking about this AI
Speaker 4: platform that they say that they've been working on for
Speaker 4: the past several months. They will be releasing to select
Speaker 4: customers they didn't say who a little later this month,
Speaker 4: and then it'll be available more broadly for their hundreds
Speaker 4: of customers in the months to come. Of course, their
Speaker 4: customers include some of the largest branches of the military
Speaker 4: here in the US, as well as that of our allies,
Speaker 4: along with a bunch of commercial customers. So that's driving
Speaker 4: the news.
Speaker 3: So and Andy, let me ask you about you know
Speaker 3: what kind of worry this could be. When I read
Speaker 3: the Palenteer story and I saw that they deal with
Speaker 3: very sensitive data, criminal databases, DMV records, phone data, and
Speaker 3: that they would be providing solutions AI solutions to the
Speaker 3: military to bring to dig through this data as well
Speaker 3: as you know other institutions. I thought it's a little
Speaker 3: bit scary, and then I saw the CEOs quote Alex
Speaker 3: Carpi says the machine must remain subordinate to its creator,
Speaker 3: as if the alternative is even a possibility. You and
Speaker 3: he wrote the book Raise Against the Machine with my
Speaker 3: buddy John Brynielsen's brother Eric, So it's great to have
Speaker 3: you on the program. Should we be worried about this AI,
Speaker 3: especially in the hands of a company like Palenteer.
Speaker 5: We should always be mindful when extraordinarily powerful new technologies
Speaker 5: come out, and generative AI is an extremely powerful new technology.
Speaker 5: One way to think about it is, we have finally
Speaker 5: built a technology that understands this that is fluent in
Speaker 5: human languages. This is kind of wild and we were
Speaker 5: and expecting it, and Matt, like you point out, it
Speaker 5: can be used for all kinds of purposes.
Speaker 6: I'm actually optimistic.
Speaker 5: I think Palenteer has a pretty long preck record of
Speaker 5: safeguarding the sensitive information that it's given and of building
Speaker 5: very powerful technologies that normal human beings can work effectively with.
Speaker 5: I think it's an ideal match for this new category
Speaker 5: of generative AI, which is all about letting us do
Speaker 5: this and interact with with huge amounts of data.
Speaker 2: Well, well, ways like Liz that and Andy, this is
Speaker 2: why I wanted also to talk to you because I
Speaker 2: feel like we need to be rationalble rational as we
Speaker 2: talk about AI, because I feel like there's a lot
Speaker 2: of folks out there saying, oh my god, you know
Speaker 2: the world's coming to an end. Andy, what is the
Speaker 2: smart conversation? As you say, you know, there's lots of
Speaker 2: data and information in the hands of a lot of
Speaker 2: companies already, I would say and argue just about every
Speaker 2: company that's out there on all of us. So what
Speaker 2: is the smart, rational conversation to have around AI and
Speaker 2: a company like Palenteer.
Speaker 5: And what's not going to happen is that chat GPT
Speaker 5: is inadvertently or with Palanteer's help, going to take all
Speaker 5: the things that the NSA knows about it and tell
Speaker 5: the Internet about all that sensitive information.
Speaker 6: That's so unlikely. We don't need to spend a lot
Speaker 6: of time on that.
Speaker 5: What it's going to do instead is let an analyst
Speaker 5: at the NSA use different techniques to interact with huge
Speaker 5: amounts of information and draw conclusions with it. Now again,
Speaker 5: there are risks associated with that, but I think it's
Speaker 5: fundamentally a quantum jump in productivity and in our ability
Speaker 5: to deal with machines and huge amounts of information.
Speaker 7: Well, you could, I mean see AI, Lizette.
Speaker 3: You could see the AI using for example, the way
Speaker 3: back machine and digging into Carol's old social media profiles.
Speaker 3: Maybe she posted a picture that wasn't very flattering on
Speaker 3: friends to her back in the day.
Speaker 2: And not all Facebook, and now.
Speaker 7: Someone could go and find it. Isn't this a concern?
Speaker 3: I mean, you could find it anyway, but this is
Speaker 3: a giant machine helping you to do that kind of things.
Speaker 2: That kind of stuff come on in Lizet.
Speaker 4: Yeah, I was just going to say, I think it's
Speaker 4: really worth keeping some sense of context around this. This
Speaker 4: is information and data that Palenters software has allowed, has aggregated,
Speaker 4: cleaned and integrated for you know, the intelligence communities, for
Speaker 4: the IRS, for the veterans affairs, for all sorts of
Speaker 4: military operations of ourselves and our and our allies for
Speaker 4: over a decade, if not more. The AI tweaked to it,
Speaker 4: if you will, is simply applying that data against large
Speaker 4: language models to go ahead and make it more accessible
Speaker 4: to more users that have the permissions to access this
Speaker 4: different information, this different data sets. You're not allowed to
Speaker 4: access it, you're not allowed to use it without it
Speaker 4: being logged in. Pallenteer software, which they say is going
Speaker 4: to make them more secure or already more secure than
Speaker 4: some of the alternatives on the market.
Speaker 2: But Andy my understanding, there was a great thing. I
Speaker 2: think it was in the times of just kind of
Speaker 2: a very big understanding of how generative AI works and
Speaker 2: how it like initially it's kind of code and gobblygook,
Speaker 2: and then it gets smarter and smarter the more information
Speaker 2: that's kind of put into it, So something like whatever
Speaker 2: Palanteer is using or anybody out there, gets better and
Speaker 2: smarter and more accurate the more data that goes into it.
Speaker 2: So two mats concerns and sentient. He's freaking out here,
Speaker 2: he's heading for the hills.
Speaker 8: I'm amazing.
Speaker 7: Let me use that word.
Speaker 6: That's the traperator worry that we don't need to discovers.
Speaker 2: What's the balance of making our next level of AI
Speaker 2: maybe incredible for our world and smarter and safer, and
Speaker 2: also securing that it doesn't get into the wrong hands.
Speaker 5: Well, I think, like we just heard, companies like Pealantry
Speaker 5: have a long trek record of segregating the data and
Speaker 5: making sure that it can't jump over those walls very easily.
Speaker 5: So that's not a thing that I'm worried about. You
Speaker 5: point out, Carol correctly, that these large language models tend
Speaker 5: to get better, they get more fluent, they get more
Speaker 5: nuanced as we give them more data.
Speaker 6: Great.
Speaker 5: I would like to interact with an extraord narrowly fluent, nuanced,
Speaker 5: very flexible technology. I spend a lot of time filling
Speaker 5: out spreadsheets, making budgets, doing stuff like that. I would
Speaker 5: love to be able to say to a piece of technology, hey,
Speaker 5: give me the first draft of.
Speaker 6: This and let me tweak it from there. That's what
Speaker 6: I think is the real innovation here.
Speaker 3: Well, and you know the limit on that is going
Speaker 3: to be the ip that the large language model has
Speaker 3: access to, right, Lizette. So I mean, for example, I
Speaker 3: would love to generate an AI chatbot that can comb
Speaker 3: through all the different used car sites and find me
Speaker 3: the exact nineteen eighty five nine to eleven sc that
Speaker 3: I want without us on roof, please, But it can't
Speaker 3: because Auto Trader, car Gurus classic cars, Hemmings. They don't
Speaker 3: allow these large language models to come in and look
Speaker 3: at all of their pictures. If they don't have the IP,
Speaker 3: they really can't do business, can they exactly?
Speaker 4: And so that's what we're going to be seeing and
Speaker 4: that's what they're working on now at Pallenteer. In the
Speaker 4: weeks and in the months to come, they talked about
Speaker 4: refocusing the engineering resource of their three thousand plus mostly
Speaker 4: engineers on staff. They have a very small sales team
Speaker 4: and they're looking right now to build you know, this
Speaker 4: platform on somewhat of a bespoke basis for customer after
Speaker 4: customer because like everyone has mentioned before me, it really
Speaker 4: comes down to each individual use case, what data they
Speaker 4: have access to and what you know, how they can
Speaker 4: bring that forward with AI to too larger use cases
Speaker 4: that are that are generative.
Speaker 2: Hey, you guys, I want to put this to both
Speaker 2: of you. What's the company to watch when it comes
Speaker 2: to AI right now? Is it feels like everybody that's right,
Speaker 2: any earnings call, that's the words that have been dropped.
Speaker 7: It's obviously not IBM.
Speaker 3: It's because Peers is we have new AI and the
Speaker 3: stuff goes up twenty three percent ibs.
Speaker 7: We have new AI and the stock falls person.
Speaker 2: To both of you was that you first is polunteer.
Speaker 2: The company to watch is it Microsoft? Who is it?
Speaker 4: Let's see how they do and their results. Okay, you
Speaker 4: know this is a platform that they still haven't figured
Speaker 4: out a pricing strategy, Carp Alex CEO Alex Karp said,
Speaker 4: our strategy is to take the whole market. They're building
Speaker 4: it on the fly. They are pricing it as well
Speaker 4: on the fly, and we'll have to see how that
Speaker 4: works out in earnings. They have a big event coming
Speaker 4: up at June first to say more about it, but
Speaker 4: proof's going to be in the pudding.
Speaker 2: Andy, who are you watching? Who's the company that all
Speaker 2: of us here at Bloomberg should be watching when it
Speaker 2: comes to AI?
Speaker 1: Is it?
Speaker 2: Can we whittle it down to one person or one company?
Speaker 5: No, But the company that I'm going to be watching
Speaker 5: very closely is Google. Because a team at Google wrote
Speaker 5: the paper in twenty seventeen that presented the architecture that
Speaker 5: OpenAI is now using.
Speaker 6: For GPT four and chat GPT. That was a Google innovation.
Speaker 5: They published it openly and another company has taken the
Speaker 5: first steps with it now I don't have any inside information,
Speaker 5: but I'm pretty sure that Google is very keenly aware
Speaker 5: of that and would like to get the momentum back
Speaker 5: in the AI space, the generative AI space.
Speaker 6: They also have an extraordinarily deep.
Speaker 5: Bench of talent here, So that's the company that I'm
Speaker 5: really watching with keen interest.
Speaker 3: I just wanted to ask what you and Eric are
Speaker 3: up to now, you know, you know, what are you doing?
Speaker 6: Andy, Eric and I talked about this stuff all day.
Speaker 5: We are the co founders of a startup that is
Speaker 5: working in the generative AI space. We are plotting our
Speaker 5: next book and our next research that Matt. These are
Speaker 5: fascinating times. We haven't seen progress this fast with an
Speaker 5: important technology in my career, and my career is long
Speaker 5: enough to encompass the web and the smartphone and the
Speaker 5: social web. This stuff is crazy, and it's getting better
Speaker 5: so quickly, and more capable so quickly.
Speaker 2: Bigger than the Internet, bigger engine.
Speaker 6: Compare it to I don't quite know.
Speaker 2: Okay, it's up there, it's up there, pretty.
Speaker 7: Much just developed so quickly.
Speaker 2: I know, well, well, actually AI has been around for
Speaker 2: a long time. This is just a whole other level
Speaker 2: and it just keeps getting right exactly.
Speaker 5: And we weren't expecting this particular leap this quickly. And
Speaker 5: then the companies have demonstrated who are leading the charge
Speaker 5: here how quickly their technologies get better. If you go
Speaker 5: look at the images that AI can generate and you
Speaker 5: go back just twelve months, you will see these staggering
Speaker 5: improvements in the kinds of images they can generate in
Speaker 5: response to a prompt.
Speaker 2: Sounds like it called them off guard as well as
Speaker 2: the world.
Speaker 3: I actually saw AI make a trailer for a new
Speaker 3: Wes Anderson version of Star Wars, and it's pretty impressive.
Speaker 2: It is pretty amazing what we lost, Andy, Andy, come
Speaker 2: back soon. We want to continue this conversation, both of you.
Speaker 2: Incredible Annie McPhee McAfee excuse me, co director, as we said,
Speaker 2: am I yes, yes, yes, MIT scientist and work Helix
Speaker 2: co found I just want to get it right at
Speaker 2: the MIT Slow School of Management and then of course
Speaker 2: our thanks to our Lyzit Chapman VC and Startups Supporter.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 1: wants us live on YouTube looking at the.
Speaker 2: Global fresh fruits and veggie's market over one hundred and
Speaker 2: forty four billion last year, forecast to grow to some
Speaker 2: two hundred eleven billion by twenty twenty eight. So we're
Speaker 2: talking about a lot of stuff.
Speaker 3: It's also something I haven't really thought about it before.
Speaker 3: But this is something that I buy almost every day,
Speaker 3: and you know, at least every other day, I find
Speaker 3: myself at the supermarket down the street buying fresh fruit
Speaker 3: and vegetables because you know, that's the stuff that you
Speaker 3: have to You can't buy it and keep it for
Speaker 3: a week or two like I do with like salami
Speaker 3: for example, you know, or bread. So is this something
Speaker 3: you have to keep going and getting all the time. Well,
Speaker 3: I've never really thought about that.
Speaker 2: Well, we take it for granted, it's just going to
Speaker 2: be there. Our next guest, though, doesn't take it for granted.
Speaker 2: He's got a company that is working with buyers and
Speaker 2: sellers in the fruit and veggie market, the fresh fruit
Speaker 2: and veggie markets. Let's get to it with Patrick McCulla,
Speaker 2: CEO of the Digital Marketplace for the Global produce industry.
Speaker 2: We're calling and talking about produce pay he's here in
Speaker 2: our studio. I'm good to have you here with Matt myself.
Speaker 2: Tell us about your company and what you guys are doing.
Speaker 9: Thanks Carol. Yeah, we're trying to solve a big waste problem.
Speaker 9: So this is a one point three trillion dollar industry.
Speaker 9: It's analog still, it's push supply, and we're attacking sixty
Speaker 9: six zero percent economic waste. Most people don't know this,
Speaker 9: but forty percent of the harvested fruit and vegetables perishes
Speaker 9: before it's consumed. How much forty percent?
Speaker 3: I imagine if I buy a box of grapes, more
Speaker 3: often than not they go bad before I finish them,
Speaker 3: you know. And that's just at my home. So if
Speaker 3: you talk about from the farm into the truck, ship
Speaker 3: to the store and then to me, it's got to
Speaker 3: be I mean, obviously it's very big.
Speaker 9: It is, and if you think about what can be
Speaker 9: done about this. We offer access to market, access to
Speaker 9: financial products, trade protection. So we're trying to help starting
Speaker 9: with the farm, the ability to pull through for the
Speaker 9: US consumerster fresher riper, healthier produce.
Speaker 7: So where do you where do you start?
Speaker 3: I mean, such a how do you do a huge
Speaker 3: fragmented market, and you know, do you go to every
Speaker 3: farm out there?
Speaker 7: That seems like a very difficult communication.
Speaker 10: That makes us unique.
Speaker 9: We started with the farm. A lot of people attack
Speaker 9: the middle, the wholesale distribution or some people think, oh,
Speaker 9: the answers in retail grocery, and there's certainly problems to
Speaker 9: be solved there. We believe the farm makes key decisions
Speaker 9: and how they produce, how they grow. There's human rights,
Speaker 9: there's water rights, and there's carbon footprint consequences, but they
Speaker 9: also make decisions whether to let let's say, a grape
Speaker 9: hang and become a Tier one grade a premium grape,
Speaker 9: or if they don't crop thin and they take weight
Speaker 9: to market and they do that through the open market,
Speaker 9: then you've got speculators brokers that might be playing for
Speaker 9: arbitrage who might hold onto those grapes try to corner
Speaker 9: the market weight for prices to come up at the
Speaker 9: expense of the US consumer.
Speaker 2: So how do you get to this? How do you
Speaker 2: fix this? Because it sounds to me like to some
Speaker 2: extent we need to MA Maybe I don't know, do
Speaker 2: we need to reduce supply so there's not so much
Speaker 2: out there that ultimately ends up as waste, Like how
Speaker 2: do we fix this?
Speaker 9: So you know, there's there's always an argument about, you know,
Speaker 9: world hunger and is it a distribution problem? And I
Speaker 9: can tell you looking at the path to the US consumer,
Speaker 9: one of the healthiest things we put in our mouths
Speaker 9: has one of the dirtiest paths there. So if you
Speaker 9: think about four to eight middle people actually touching produce
Speaker 9: that don't always add value. There are some that add
Speaker 9: great value if you're bringing capital to a farm or
Speaker 9: to a distributor, if the distributor is packing, shipping with
Speaker 9: quality control, brand recognition. But we're trying to lean out
Speaker 9: the beginning and the end. We're trying to take out
Speaker 9: the arbitrage specialists in the middle, these brokers that don't
Speaker 9: add real value for the benefit of speed to the consumer.
Speaker 9: If you can shorten that journey, how do you do that.
Speaker 9: You do that by redesigning the whole vertical.
Speaker 2: So in other words, it goes from farmer Joe or Jane.
Speaker 9: Straight to the idea is bring retail, grocers and farmers
Speaker 9: together through our marketplace, through our financial and trade assurance products.
Speaker 9: A lot of what's happened in this industry is because
Speaker 9: it's been rampant with speculators and a lot of volatility,
Speaker 9: worth the changes in our world, think weather, there's a
Speaker 9: lot of inefficiencies built in a lot and a lack
Speaker 9: of trust. We're trying to bridge the beginning and the
Speaker 9: end for the benefit of efficiency and attacking that sixty
Speaker 9: percent economic ways.
Speaker 3: So first of all, do you always wash fruit before.
Speaker 2: You eat it? Yees? Well, most of the time.
Speaker 3: My wife tells me to do it, but I feel
Speaker 3: like most of the time I have a stronger immune
Speaker 3: system because I don't.
Speaker 10: I cater to that belief myself.
Speaker 9: I don't wash my fruit either.
Speaker 3: So a lot of this is about financing, right right,
Speaker 3: because I look on your website says three billion plus
Speaker 3: in fresh produce financed.
Speaker 7: What does that count?
Speaker 2: I'm finding counterparties correct.
Speaker 10: That's right.
Speaker 9: So the biggest problem farms have is there if they
Speaker 9: have tremendous input costs labor, seed, fertilizer, and they're waiting
Speaker 9: for harvest five or six months later. We bridge that
Speaker 9: working capital gap. That's our primary product today. But by
Speaker 9: doing that super well and doing that with the best
Speaker 9: farms in the world, we're able to then take them
Speaker 9: to the right distributor marketer partners who will introduce us
Speaker 9: to the right retailers. And then we can take the
Speaker 9: speculative spot market out by creating programmatic negotiations where we
Speaker 9: tell the farm.
Speaker 2: Great, So you are kind of, to some extent become
Speaker 2: a financial middleman, but you take out the physical middleman.
Speaker 10: That's right?
Speaker 2: Is that that's right? Kind of what you do.
Speaker 9: We're redesigning how the industry works. We're asking retail come
Speaker 9: earlier with fixed pricing so that farmers can plant and
Speaker 9: take risks and breed the right programs that might perish
Speaker 9: buying an EV.
Speaker 2: You got to put the money up front, right.
Speaker 7: So talk to us about the market.
Speaker 3: I mean, I'm interested to know about price fluctuation shortages.
Speaker 3: Do you see you know our strawberry is gonna shoot
Speaker 3: through the roof in terms of the price. Are we
Speaker 3: going to be able to get grapes cheaper? What do
Speaker 3: you see out there?
Speaker 9: Fires and chill a recently floods in California impact of
Speaker 9: the strawberry market. So grapes and strawberries, Yes, supply and
Speaker 9: demand is upset right now. So in the new term,
Speaker 9: we're gonna have premiums on those products.
Speaker 7: Do nuts count as produced? Do you do nuts?
Speaker 9: We don't do nuts today, but it's in our future.
Speaker 2: But patrick aren't we always going to have, you know,
Speaker 2: disruptions in terms of prices because climate change. It's real,
Speaker 2: that's right.
Speaker 9: It is climate change, and it's the global nature of
Speaker 9: what the US consumers asking for. We're asking for twelve
Speaker 9: months a year organic blueberries. Well, we don't grow organic
Speaker 9: blueberries in North America twelve months a year, so we
Speaker 9: have to go to South America or South Africa to
Speaker 9: fill in those voids.
Speaker 2: Do we stop that?
Speaker 9: That's the question.
Speaker 3: Well do you stop that? You want fresh blueberries? You
Speaker 3: probably go buy fresh blueberries or whatever you want.
Speaker 1: Okay.
Speaker 9: The dilemma is the out of seasoned blueberries hold a
Speaker 9: premium because they're scarcer, so there's more money to be
Speaker 9: made there. So I think this is a trend that continues.
Speaker 10: Yeah.
Speaker 3: Also you've got to ship them from wherever they come
Speaker 3: dirty diesel, cold stored into cold stories, so terrible for
Speaker 3: the enviro produce.
Speaker 9: Yeah, think about I love the example of a tomato
Speaker 9: at your farmer's market in the summer, right, just quickly
Speaker 9: ripe and red the thing in the grocery store, Orange
Speaker 9: and Heart agree.
Speaker 2: It's like different, It's just not the same. Come back
Speaker 2: love too interesting. Certainly, we talked about the food space.
Speaker 2: There needs to be some disruption, innovation. Patrick McCullough, CEO
Speaker 2: at Produce Page, joining us here in studio, Carol Master,
Speaker 2: Matt Miller. Matt loves is blueberries all the time, all
Speaker 2: the time. This is Bloomberg all right, Yeah, come on,
Speaker 2: us and China, why can't you be friends? This story
Speaker 2: is in the upcoming new issue of Bloomberg Business Week.
Speaker 2: It's actually the remarks of the upcoming new issue, which
Speaker 2: will be on newsstands later this week, already online at
Speaker 2: Bloomberg dot com slash Business Weekend on the Bloomberg It
Speaker 2: really gets to the decoupling that has been going on
Speaker 2: between the US and China and.
Speaker 7: What hey, don't call it decoupling.
Speaker 2: What I'm going to call it decoupling. But Biden officials
Speaker 2: are saying, whoa, whoa, whoa slow your role on decoupling.
Speaker 2: Let's get into it with Bloomberg Sean Donn and he's
Speaker 2: senior economics writer at Bloomberg News with us on zoom
Speaker 2: in Washington, d C. And then we've got the editor
Speaker 2: of Bloomberg Business Week, Jill Weber, here in our interactive
Speaker 2: broker's studio. Jill, whatever you call it, it's kind of
Speaker 2: a little bit dysfunctional.
Speaker 3: It is.
Speaker 8: I think it's like maybe the Great American Walk back.
Speaker 8: What do you what do you think, Sean? Is that
Speaker 8: is that accurate?
Speaker 3: You know?
Speaker 10: The coupling is a word that I've hated for years.
Speaker 10: It's it's a word that is it implies like a divorce.
Speaker 10: And I think the US and China are you always
Speaker 10: going to be kind of neighbors that try to get along,
Speaker 10: that have a relationship, and they just try and put
Speaker 10: up fences here and there.
Speaker 2: Are they staying together for the kids? That's what we
Speaker 2: want to know, Sean. Are they staying together for the kids?
Speaker 5: Jill?
Speaker 10: I mean the coupling feels a little bit like that, right.
Speaker 10: I mean, it's kind of it's it's it's one of
Speaker 10: those hard ones. Look, do you US in China have
Speaker 10: this immense economic relationship. They are among each other's top
Speaker 10: trading partners. They will continue to be among each each
Speaker 10: other's top trading partners for some years to come. I
Speaker 10: think what the US has been trying to do in
Speaker 10: recent years has been to try and cut off certain
Speaker 10: strategic parts of the relationship. You know, we've all been
Speaker 10: reading about semiconductors. There's this big competition over electric vehicles
Speaker 10: and so on. In the US wants to try and
Speaker 10: get ahead of China and compete. It's tired of having
Speaker 10: its intellectual property stolen. That's something we've seen in recent
Speaker 10: years or recent decades really, and so it's a dysfunctional relationship.
Speaker 10: The US is trying to reset it. It's trying to
Speaker 10: put some boundaries there, and the Chinese are saying, well,
Speaker 10: if you're trying to do that, you're trying to contain us,
Speaker 10: and that's really impolite and that's awful. And so there's
Speaker 10: a terrible shouting match that's going on. The problem for
Speaker 10: all of us and for the global economy. These are
Speaker 10: the world's two largest economies, and if they can't get along,
Speaker 10: if they can't find a floor for their relationship, then
Speaker 10: it really is going to be a terrible bust up.
Speaker 10: And it's not just the kids that are going to
Speaker 10: get hurt, it's the whole neighborhood.
Speaker 8: That neighborhood being the world so interesting.
Speaker 11: We've heard Janet Yellen and Jake Sullivan recently kind of
Speaker 11: say as much in their remarks and speeches and whatnot.
Speaker 11: Wondering what was the language that jumped out to you
Speaker 11: that sort of attempted to reset with this narrative is Yeah,
Speaker 11: So look, I.
Speaker 10: Mean it's it's there's two things. One, US officials have
Speaker 10: been trying with increasing frequency to get out there and
Speaker 10: say we are not trying to decouple. We're not trying
Speaker 10: to have this big rerupture with with the Chinese economy.
Speaker 10: We're trying to have a sensible, strategic and focused change
Speaker 10: in the relationship. And then something interesting happened when Janet
Speaker 10: Yellen talking that she took that a step further and
Speaker 10: talked about the relationship between national security and the economy.
Speaker 10: And then a week later, Jake Sullivan, the National Security Advisor,
Speaker 10: came out and he started using a term that the
Speaker 10: Europeans have been using and said, rather than the cup,
Speaker 10: when we're looking for a de risking of the economy,
Speaker 10: which is kind of a more polite Yeah, and it's
Speaker 10: a very European term.
Speaker 7: It makes perfect sense to me, as Jean.
Speaker 3: Let me first say that I think it's an incredibly
Speaker 3: well written story I loved it. I breathed through from
Speaker 3: start to finish, which isn't that I always do with
Speaker 3: my attention span on exactly.
Speaker 7: I have the problems learning disabilities.
Speaker 3: But I think it's right in this you know, black
Speaker 3: and white world where everybody's either in bed together or
Speaker 3: at war, to acknowledge that there can be nuance. Right,
Speaker 3: We're not kind of completely decouple. We're not going to
Speaker 3: totally isolate China. We just want to de risk and diversify.
Speaker 3: And that makes sense because we've been so concentrated in
Speaker 3: terms of the supply chain. We found out over COVID nineteen,
Speaker 3: over the pandemic, that we had way too many eggs
Speaker 3: in that basket and we need to move a few out.
Speaker 3: But that doesn't mean we're totally leaving.
Speaker 10: Right, and that totally makes sense. We all get that
Speaker 10: there's a problem, though, and that is that the world
Speaker 10: is more complicated and that there aren't these simple levers
Speaker 10: that you pull the kind of d risk or decouple.
Speaker 10: The fact is is that you and I have been
Speaker 10: buying a whole lot of Chinese goods in recent years,
Speaker 10: and even though you know we've had the trade wars
Speaker 10: of the trunk years, that we all remember the trade
Speaker 10: between US and China last year was at a record
Speaker 10: level in part because of our appetite for Chinese goods
Speaker 10: and a lot of companies, a lot of big American
Speaker 10: companies still want to do business in China. Tesla still
Speaker 10: wants to sell cars in China. In fact, it's adding
Speaker 10: to its factories there. So you know, the relationship is
Speaker 10: we can try and have this kind of Washington Beltway
Speaker 10: conversation about the risking and so on, but in some
Speaker 10: ways it's not just the governments that get to choose companies,
Speaker 10: and consumers are going to affect that decision in a
Speaker 10: lot of ways. And the problem is that people are
Speaker 10: worried not just about an economic conflict, right, people are
Speaker 10: worried that you get this rhetoric building and building, and
Speaker 10: it gets into things like Taiwan and worries about a
Speaker 10: move on Taiwan by mainland China and how the US
Speaker 10: might respond and a more belligerent world, and that gets
Speaker 10: out of hand, and then it's going to be an
Speaker 10: even the uglier world.
Speaker 3: So we also don't want to encourage slave labor. We
Speaker 3: don't want to support the Russians and their war in Ukraine.
Speaker 3: You know, there are things that we definitely need to
Speaker 3: be conscious of and make decisions based on those.
Speaker 12: I find this to be a tricky pass for American
Speaker 12: leadership to walk, you know, because it's like they can't
Speaker 12: go maybe full Trump here, because we know what that
Speaker 12: looks like. And there's some version of backpedaling that is happening.
Speaker 12: But they can't backpedal too much because then if it's
Speaker 12: going to be Biden in the election, like you know,
Speaker 12: we've got.
Speaker 3: Back pedaling on China and on Saudi Arabia come on
Speaker 3: the rematch.
Speaker 10: And I think that's and I think that's one of
Speaker 10: the big issues that we have right now, and it's
Speaker 10: why we're seeing this language now. The administration is trying
Speaker 10: very hard to tamp down the relationship, to tamp down
Speaker 10: the rhetoric, because it knows that in the next year,
Speaker 10: as we go into a presidential cycle, things are going
Speaker 10: to ratchet up again and it's going to get even
Speaker 10: more heated. So let's try and bring things down for
Speaker 10: earth a little bit now, because we know what's what's
Speaker 10: coming ahead, and we also you know, it's a relationship
Speaker 10: that's not going to go away. And I think, you know,
Speaker 10: you're trying to set these new guardrails for the relationship.
Speaker 10: The administration has worked very hard to try and keep
Speaker 10: it focused, but the rest of the world is really
Speaker 10: worried about this, And as much as the language which
Speaker 10: is aimed towards Beijing coming out of Washington right now
Speaker 10: to try and reduce the temperature there, it's also about
Speaker 10: telling allies that, look, we're not trying to get into
Speaker 10: a conflict here. We're not trying to have a major
Speaker 10: rupture between the world's two largest economies. We know that
Speaker 10: this is an important economic relationship and it's one that's
Speaker 10: going to endure no matter what we do, and we
Speaker 10: don't want the rest of the world to suffer as
Speaker 10: a result of us going down a chaotic path.
Speaker 8: Sean, do you think the Biden administration would have wanted
Speaker 8: to have had this out in the open like this
Speaker 8: earlier if not for spy balloons entering the lexicon?
Speaker 10: Yeah, so, I mean, we know, you know, one of
Speaker 10: the things I heard from from folks as I was
Speaker 10: reporting this piece was a desire to get back to
Speaker 10: Bali and that's the phrase that they use, and Bali
Speaker 10: is where last November, as an a Biden and ches.
Speaker 8: This really is a romantic comedy.
Speaker 6: We got to get back.
Speaker 10: They shot down, and they had their you know, they
Speaker 10: had their rot had to promise more engagement. They were
Speaker 10: going to get along better. Anthony Blincoln was going to
Speaker 10: head over there earlier this year, and then of course
Speaker 10: that balloon drifted over uh and everything uh went the
Speaker 10: pot And and you know what what people in administration
Speaker 10: are trying to do now is to get things back
Speaker 10: into a place where we can start getting that engagement again.
Speaker 10: There can be a frank conversation and and you can
Speaker 10: talk through your issues rather than yell at each other.
Speaker 10: It's completely unclear whether that's actually going to happen.
Speaker 2: Yeah, But at the same time, and I'm going to
Speaker 2: bring up something Matt you shared, but it's also shown
Speaker 2: in your story that you know, it's not just the
Speaker 2: Biden administration in the US, you know, with a delicate
Speaker 2: balance when it comes to a relationship with China. And
Speaker 2: I understand that these two are the biggest superpowers out there,
Speaker 2: and I understand why it's so important. But Matt, you
Speaker 2: shared earlier that Italy has signaled to the US that
Speaker 2: it tends to pull out of an investment packed with
Speaker 2: China before the end of the year. We're talking about
Speaker 2: Belt Road, which has been such a big Chinese initiative.
Speaker 2: There's a bigger, broader global thing going on where everybody's
Speaker 2: being very delicate. It feels like slowly when it comes
Speaker 2: to China and their relationship, even Apple as they pivot
Speaker 2: to India a little bit, there's still like, you know,
Speaker 2: Tim Cooks over there, I love you, I love you,
Speaker 2: China present shit, you know what I mean. Like it's
Speaker 2: this delicate balance.
Speaker 10: Yeah, and look, the rest of the world hates where
Speaker 10: it's stuck right now, right because they're stuck in between
Speaker 10: these two quarreling parents, and it has they have important
Speaker 10: relationships with both.
Speaker 13: But the world.
Speaker 2: But isn't it like the whole world kind of stepping
Speaker 2: back a little bit from China.
Speaker 10: Yeah, the whole world is everyone's reconsidering their their relationship
Speaker 10: with China, you know, and for all the reasons he
Speaker 10: talked about, whether it's slave labor in Hinjiang or whether
Speaker 10: it's just an over reliance on everything from semiconductors to
Speaker 10: antibiotics coming out of China. At the same time, I
Speaker 10: think if you talk to allies of the US, a
Speaker 10: lot of them are also have their concerns about US
Speaker 10: industrial policy right now and what they feel like is
Speaker 10: a more selfish economic policy coming out of the United
Speaker 10: States and the potential consequences for them there. And they
Speaker 10: also are more broadly concerned about a world that will
Speaker 10: become more fragmented and what that might mean. And IMF
Speaker 10: came about, you know, a few weeks ago, so that
Speaker 10: was going to mean slower growth in the world, which
Speaker 10: no one wants.
Speaker 3: So it's you know, I would just I want to
Speaker 3: talk about what's going to dead ceiling, but I do
Speaker 3: want to tell our listeners to encourage them to go
Speaker 3: to the website, read your story because it's a great piece,
Speaker 3: and even better, buy the magazine because I like the
Speaker 3: actual paper copy.
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Speaker 2: All right, everybody, we've got just about just under eighteen
Speaker 2: minutes left in today's trading session. A lot going on here,
Speaker 2: stocks bouncing around, little change. Uh, it does feel like
Speaker 2: we're focusing on the debt ceiling. What's going on ultimately
Speaker 2: in those talks later that are expected between President Biden
Speaker 2: and congressional leaders. Having set that, curious Matt would on
Speaker 2: the mine of Nancy Tangler. We were both excited that
Speaker 2: she was going to join as chief investment officer at
Speaker 2: Laffer Tangler Investments on Zoom from Scottsdale, Arizona. Nancy, how
Speaker 2: are you, Caeryl?
Speaker 13: I'm well, thank you, sunshine. As far as the I
Speaker 13: can see.
Speaker 2: Well, speaking of those, as far as we can see,
Speaker 2: what kind of visibility do you feel like you have
Speaker 2: on this financial market environment right now?
Speaker 13: Like see what I like to It was very sweet,
Speaker 13: very sweet. Yeah, so it is a little challenging. I mean,
Speaker 13: for the last year I've been saying this is the
Speaker 13: most complex investing environment of my long career. It, and
Speaker 13: it remains so. But I do think we're starting to
Speaker 13: kind of come out of the fog. The FED is,
Speaker 13: if not done, almost done. We have seen better earnings
Speaker 13: than we're advertised. The economy still seems pretty decent, the
Speaker 13: consumers in good shape. I think you're starting to see
Speaker 13: a crack in the job market, which in the labor market,
Speaker 13: so I think that will help things as well. So
Speaker 13: we're we're starting I mean, we've been adding risk back
Speaker 13: in October and adding to technology and consumer discretionary, and
Speaker 13: we're continuing in this volatility. We expected me to be volatile,
Speaker 13: and so we are actually in the markets today and tomorrow.
Speaker 13: So I can't talk about some of the names.
Speaker 2: But no selling may, no selling may and go away.
Speaker 13: Huh No, absolutely not.
Speaker 3: Let me go back to your crack in the labor
Speaker 3: market comment, because even though I know what you're talking about,
Speaker 3: having read your notes to the listener, the listener is
Speaker 3: going to say, what, we had a bang up jobs
Speaker 3: number on Friday, Like there's no problem. Is there's no
Speaker 3: crack in the labor market. Three point four percent unemployment.
Speaker 3: That's lower than you know, we've any of the three
Speaker 3: of us has ever seen.
Speaker 2: This is why Nancy is there, Matt, you are here? Okay,
Speaker 2: see why?
Speaker 13: Well, because of the revisions, So most people weren't talking
Speaker 13: about the reviision provisions to the previous month and the
Speaker 13: previous months before that. And separately, we have a labor
Speaker 13: force participation rate problem, particularly in the fifty five and
Speaker 13: older age cohort. So the baby boomers, I think I'm
Speaker 13: the last one still working, and they're not coming back.
Speaker 13: And I think that's important to note. They are not
Speaker 13: going to come back. Their financial assets are at higher
Speaker 13: levels than they were pre pandemic, even with the bear
Speaker 13: market last year, and they're settled down into retirement. And
Speaker 13: I think that's one of the reasons that you're seeing
Speaker 13: restaurant sales continue to be strong. You're seeing services sales
Speaker 13: continue to be strong. That's the baby boomers who have
Speaker 13: retired for good.
Speaker 3: Well, then how do we get to how do we
Speaker 3: get this inflation down? I mean, even if there is
Speaker 3: a crack in the labor market, we're still looking at
Speaker 3: a lot of people having jobs, right, A lot of
Speaker 3: people can afford what they're doing. So how do we
Speaker 3: get prices to budge wages are still way too high?
Speaker 13: Well, real wages though Matt aren't. And that's been part
Speaker 13: of the problem is that, you know, after inflation and
Speaker 13: most of the sort of blue collar segment of the
Speaker 13: economy and even the white collarme have experienced real wage declines.
Speaker 13: And so I think one of the ways we do
Speaker 13: this is some of it's already started, like housing has
Speaker 13: already rolled over. It just hasn't shown up in the
Speaker 13: numbers yet. It's a lagging indicator. But you get companies
Speaker 13: that are spending on productivity, so they're buying our investment theme,
Speaker 13: which is the digitization of old economy companies and the
Speaker 13: suppliers of those arms that are needed to run a
Speaker 13: digital business.
Speaker 2: Well, I want to pick up on that because Matt
Speaker 2: and I were talking earlier about Pallanteer, which is just
Speaker 2: off like a rocket today at more than twenty percent.
Speaker 2: I know you can't talk about necessarily what you're buying today,
Speaker 2: tomorrow or yesterday, but I am curious about the generative
Speaker 2: AI play, Nancy, because this is certainly going to factor
Speaker 2: into the productivity of workers at some point. We're just
Speaker 2: kind of figuring it out. Is there a play for
Speaker 2: you here?
Speaker 13: Yes, And that's what we were adding to I can
Speaker 13: talk about what we own and what we've purchased, I
Speaker 13: just can't talk about what we're buying today. So what
Speaker 13: we were doing in the fall was we were adding
Speaker 13: to names like Microsoft, We were adding to Palo Alto Networks,
Speaker 13: We added to Adobe, which is sort of on the
Speaker 13: fringes of this AI boom, and we added across the
Speaker 13: board in technology. So the reason for that was that
Speaker 13: we didn't think. We think there's a secular tailwind to
Speaker 13: this whole narrative of not just cloud adoption but also AI,
Speaker 13: and that is where we're going to continue to be
Speaker 13: adding as we get presented with great opportunities. Another name
Speaker 13: we added in January was Tesla, and that you know
Speaker 13: that has its own sort of interesting dynamics, but we're
Speaker 13: pretty happy with that investment, even with the stock coming
Speaker 13: off recently. You can't fight this trend and robotics AI.
Speaker 13: You know, the digital economy is now ten and a
Speaker 13: half percent of GDP, it's growing every year. Robotics installations
Speaker 13: or we're up twenty two percent last year. I mean,
Speaker 13: this is going to be the solution. And you know,
Speaker 13: you hear the handbringers saying, well, AI is going to
Speaker 13: take away jobs. I mean, every technology that we've introduced
Speaker 13: since the Industrial Revolution has taken away a certain kind
Speaker 13: of job and provided for a new kind of job.
Speaker 13: And so that's what we're in the midst of, I think,
Speaker 13: kind of the fourth Industrial Revolution, if you will.
Speaker 7: I'm curious what you like about Tesla.
Speaker 3: Do you think that the new technology is going to
Speaker 3: be able to bring down.
Speaker 7: Costs at Tesla?
Speaker 3: Because in terms of demand, it seems as though they
Speaker 3: have a little problem at least they've had to goose
Speaker 3: it with prices. And you know, Elon Musk, you know,
Speaker 3: all of a sudden sort of in a way, kind
Speaker 3: of outing himself as a Trump Republican on Twitter can't
Speaker 3: be good for his Tesla customer base, right.
Speaker 13: I like the CEO. He is so entertaining. No, but
Speaker 13: one of the names I also should have mentioned, sorry, Carol,
Speaker 13: was Service. Now that's one of our largest holdings. Yeah.
Speaker 13: So I think a couple of things. He's either the
Speaker 13: smartest pricing meister around. I mean, he's forced Forward to
Speaker 13: have to cut prices twice this year, where his whereas
Speaker 13: his margins, though they've come down, are still four times
Speaker 13: that of Ford's. So I think he's using pricing as
Speaker 13: a hammer to get people into the ecosystem. Think of
Speaker 13: kind of like Apple, which is another one of our holdings.
Speaker 13: You know, it's not really about the handset, it's about
Speaker 13: the ecosystem. And and so I think that's what I
Speaker 13: just stated myself. I should have said the iPhone hands on.
Speaker 7: I love that.
Speaker 2: That's okay, you're allowed.
Speaker 3: You're allowed.
Speaker 7: It is a handset. That's not wrong.
Speaker 13: Yeah, So I think he's he's using this as an opportunity. Yes,
Speaker 13: demand has slowed somewhat, but if you look at combustble
Speaker 13: engine vehicles, they were flat year over year, and evs
Speaker 13: are still growing in the you know, the high double
Speaker 13: digits teams yea teen percent of sales.
Speaker 2: I think it's pretty wild.
Speaker 13: Yeah, I would say, I mean, I don't want one,
Speaker 13: But I get why people, Why don't you want one? Well,
Speaker 13: because I drive from Scottsdale to Incline Village and betake
Speaker 13: eout four weeks and might have to stomp and and
Speaker 13: charge up every wood.
Speaker 10: Well, we're getting in there.
Speaker 2: Hey, Nancy, this was fun.
Speaker 13: I'm smart.
Speaker 2: Nancy Tanglar, she's chief investment officer at Laughter Tangler Investments.
Speaker 2: On Zoom from Scottsdale, Arizona.
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