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Speaker 2: This is Bloomberg Business Week Insight from the reporters and
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Speaker 2: Podcast with Carol Masser and Tim Stenovek on Bloomberg Radio.
Speaker 3: Hi, everyone, Welcome to the Bloomberg Business Week Weekend Podcast.
Speaker 3: This past week brought US tariff talk too hot, inflation
Speaker 3: prints fetchier, J Powell saying that the US Central Bank
Speaker 3: is in no rush to lower interest rates as there
Speaker 3: is still more work to do on inflation, and an
Speaker 3: AI summit in Paris where Vice President j. D Vance
Speaker 3: said artificial intelligence chips need to be made in the
Speaker 3: United States. That sent higher shares of Intel and Global Founderies.
Speaker 1: Investors took their cues from that and really from the
Speaker 1: comments out of the Oval Office and President Trump and
Speaker 1: his Head of Government Efficiency Elon Musk, on that we
Speaker 1: look at what critics say is the chaos caused by
Speaker 1: his DOGE office that may threaten many safety nets.
Speaker 3: Plus we get a read on the all important housing
Speaker 3: market with the CEO of Zillo, and to look at
Speaker 3: tech spend in the business application software space with the
Speaker 3: co founder and CEO of IT, Lassian.
Speaker 1: He also had news to announce in the world of
Speaker 1: auto racing. All that to come, we begin with Elon
Speaker 1: Musk's attemp set a government makeover via his DOGE team.
Speaker 3: President Trump earlier in the week signed an executive order
Speaker 3: with Elon standing by his side, directing federal agencies to
Speaker 3: coordinate and consult with DOGE to cut jobs and limit hiring,
Speaker 3: essentially giving the billionaire more power within the US government.
Speaker 1: On January thirty, first, Doze acquired access to payment systems
Speaker 1: inside the Department of the Treasury. Musk has targeted certain organizations,
Speaker 1: including Lutheran charities, one of which we've talked to here
Speaker 1: on Bloomberg business Week. He suggested that they are involved
Speaker 1: in illegal activities, leading to fears that their funding will
Speaker 1: be cut off.
Speaker 3: Now, this too is about what some say is the
Speaker 3: DOGE chaos and that it threatens the safety net of many.
Speaker 3: Writing all about it is Bloomberg Business Week columnist and
Speaker 3: co host of the Elon Inc. Podcast Max Chafkin.
Speaker 4: Over the weekend that Elon Musk got access to the
Speaker 4: Treasury payment.
Speaker 1: System, which was basically right when Trump became president.
Speaker 4: Yeah, it was. I think it was about a week
Speaker 4: after Trump became president. You had all these doze employees
Speaker 4: fan onto the government. They're all kind of finding stuff, right,
Speaker 4: and it's like some of this stuff is sort of
Speaker 4: big stuff, some of it's small stuff. A lot of
Speaker 4: it is outrageous, at least from the perspective of Elon Musk.
Speaker 4: And during this sort of flurry of activity, Mike Flynn,
Speaker 4: who was the National security advisor to President Trump briefly
Speaker 4: in like twenty seventeen, he had a whole back legal
Speaker 4: back and forth or whatever. He's now kind of a
Speaker 4: right wing activist. He tweets this spreadsheet containing the names
Speaker 4: of about a dozen charities. These are small, These are
Speaker 4: basically mostly local charities, a lot of them in the Midwest,
Speaker 4: and all affiliated with the Lutheran Church, or most of
Speaker 4: them were affiliated with the Lutheran Church. And says, basically,
Speaker 4: this is money laundering. Someone should do something about it.
Speaker 4: Elon Musk tweets, all right, we're shutting it down. And
Speaker 4: that kind of just throws this whole part of business
Speaker 4: of the world into a kind of chaos, right. And
Speaker 4: I spent some time talking to some of these Lutheran
Speaker 4: charities about what it was like, and what you hear is,
Speaker 4: you know, confusion, anger, frustration. You know, they don't in
Speaker 4: a lot of cases know exactly why they're being targeted,
Speaker 4: what it's about. And when you actually look at the
Speaker 4: work they're doing, they're doing it's like basic. It's a
Speaker 4: lot of it is like just basic social safety and
Speaker 4: that stuff. The main kind of character in this piece
Speaker 4: runs a charity in Ohio. They operate food pantries, homeless shelters,
Speaker 4: domestic violence shelters, They rent out affordable housing, nursing homes.
Speaker 4: And you start to think about it like this is
Speaker 4: a big part of the American social safety net, these
Speaker 4: charitable organizations that get money from the federal government. It's
Speaker 4: it's like how we take care of the needy in
Speaker 4: this country? And and and I think the point here
Speaker 4: is that you know, while Musk is doing all this stuff,
Speaker 4: you're seeing groups that are getting getting caught up in
Speaker 4: the drag net, and there's damage being done potentially to
Speaker 4: the infrastructure of how we I mean, in this case,
Speaker 4: how we provide healthcare and housing to poor people. But
Speaker 4: I think you're going to see this across the government
Speaker 4: where there are there are aspects of the DOGE transformation
Speaker 4: that really speak to government efficiency, But then you have
Speaker 4: all of this kind of collateral damage and or is
Speaker 4: it collateral damage. It's it's it's really unclear what Elon
Speaker 4: Musk thinks or what Donald Trump thinks.
Speaker 3: I gotta say when this story, you know, kind of
Speaker 3: hit and we were trying to understand these organizations. We
Speaker 3: actually caught up with one Chris Amara Vignaraja. She's president
Speaker 3: and CEO of Global Refuse, a recipient of funding from USA.
Speaker 3: She shared with us what it means not to receive
Speaker 3: the funding.
Speaker 5: These are individuals who had gone through every hoop in
Speaker 5: order to come because we had made a military promise
Speaker 5: to them that they were going to risk their lives
Speaker 5: to protect US troops and that we wouldn't leave them
Speaker 5: behind to face Taliban retribution. So we've been impacted in
Speaker 5: the fact that we no longer can serve them, but
Speaker 5: they can no longer even get off the military base
Speaker 5: because the stop work order that we're talking about also
Speaker 5: affects UN agencies, So they're not even able to get
Speaker 5: off the military base to travel, even if they were
Speaker 5: able to afford their own flight to come here to
Speaker 5: the US, so it is paralyzing. We operate across the country.
Speaker 5: We partner with local nonprofits right in the redit of
Speaker 5: red states and the bluest of blue states. None of
Speaker 5: them receive funding because we are not able to receive funding.
Speaker 3: Okay again, that's Krishamara Vignaraja, Presidency E of Global Refuge.
Speaker 3: She started off with talking about how we haven't been
Speaker 3: able to help our Afghan allies, but talks a little
Speaker 3: bit about kind of almost the supply chain of groups
Speaker 3: in terms of helping others. I mean, what more are
Speaker 3: we getting about exactly where this aid in this money goes.
Speaker 4: I mean, the thing is we don't even know what's
Speaker 4: been cut off. And what was so interesting about getting
Speaker 4: into the story is these organizations don't know. I mean,
Speaker 4: they have not been paid in many cases, but it's
Speaker 4: not like it's been a huge it's not like there's
Speaker 4: been a lot large delay or something. So they don't
Speaker 4: know if Elon Musk was just spouting off, if he
Speaker 4: just was tweeting a thing, or if what he tweeted
Speaker 4: kind of had the full force of the federal government.
Speaker 4: And it's it's a lot of this this has been
Speaker 4: this is kind of a microcosm of what's been happening
Speaker 4: across the government. You know, you have Elon Musk go
Speaker 4: on Twitter and say we fed we fed USAID into
Speaker 4: the wood chipper last night, and and and on one hand,
Speaker 4: like there is truth to that, right, like the Trump
Speaker 4: administration is trying to substantially cut down USI AID, arguably
Speaker 4: to shut it down, but that is being challenged in court.
Speaker 4: So these employees are still getting paid, like they haven't
Speaker 4: actually done the thing that Elon Musk said they had done,
Speaker 4: at least not yet because the courts have intervened. So
Speaker 4: you have a lot of this where where Musk is
Speaker 4: saying something or Trump is saying something, and then the
Speaker 4: reality on the ground is maybe a little bit more muddied.
Speaker 4: And as it becomes clear, right, that could lead to
Speaker 4: some cost savings, it could also lead to pain. You know,
Speaker 4: in the case of this Ohio charity, we're talking about
Speaker 4: seven hundred people. You know, the human services industry, it
Speaker 4: employees a lot of people, and including in red states
Speaker 4: and blue states and so on, and so you're going
Speaker 4: to see political pain that I think will be something
Speaker 4: that the Trump administration has to contend with. This is
Speaker 4: the kind of thing where like if you voted for
Speaker 4: Elon Musk and Donald Trump. I mean, no one voted
Speaker 4: for Elon Musk, but if you voted for Donald Trump
Speaker 4: to clean up the government, you may not be thinking, yeah,
Speaker 4: that would be great if they defund my local Lutheran
Speaker 4: nursing home or something like that. And so I think
Speaker 4: that's the I think there's I think there's real real
Speaker 4: risk here for the Trump administration and frankly for Elon
Speaker 4: Musk because he's the face of this.
Speaker 1: It sounds like, in other words, there's a risk of
Speaker 1: throwing the baby out with the bathwater here, because I
Speaker 1: think it's fair to say a lot of people do
Speaker 1: think there is, to quote President Trump, waste fraud and
Speaker 1: abuse when it comes to government spending. It's not hard
Speaker 1: to find examples of that.
Speaker 4: Yeah, I mean the issue is that our deficit is
Speaker 4: you know that this two trillion dollar deficit that was
Speaker 4: and that was the goal that Elon Musk promised to cut.
Speaker 4: It seems like wishful thinking to think you're going to
Speaker 4: get there by cutting waste, fraud and abuse. Even you
Speaker 4: know he can, he could keep himself very busy cutting
Speaker 4: waste fraud, and abuse, and he's not going to be
Speaker 4: that far along in terms of meeting his goal. And
Speaker 4: that's you hear that both when you talk to critics
Speaker 4: on the right and critics on the left. People essentially
Speaker 4: on the left, they're saying, there's no constitutional authority to
Speaker 4: do this. This is a crisis. You know, you saw
Speaker 4: Elizabeth Warren giving kind of a really a press con
Speaker 4: conference presenting this is kind of a catastrophe. And on
Speaker 4: the right you have people saying, like, look, this is
Speaker 4: not that big a deal. The Defense Department is a
Speaker 4: big deal. Social Security is a big deal. If you
Speaker 4: talked to like fiscal hops and stuff. So there is
Speaker 4: this kind of gap between between reality and then and
Speaker 4: then the hopes and dreams. And in that gap are
Speaker 4: a bunch of programs where that have constituencies and you know,
Speaker 4: you think about like NIH. Right, they do this big
Speaker 4: announcement essentially saying that anyone who gets an NIH grant
Speaker 4: has to have a lower amount of overhead. And when
Speaker 4: you hear Elon Musk talk about it, right, he's saying
Speaker 4: that some of these programs have sixty percent overhead. We're
Speaker 4: making you know, we're making it fifteen percent overhead. That gap,
Speaker 4: that cutting that funding is going to mean jobs in
Speaker 4: a lot of states, and those and those congress people
Speaker 4: and senators, some of them Republicans, some of them Democrats,
Speaker 4: are going to be either loudly trying to change it
Speaker 4: or quietly, in the case of Republicans, trying to adjust things.
Speaker 3: Right because midterms are just two years away. Having said that,
Speaker 3: where is Congress and all of this and where is
Speaker 3: that argument about Congress controls you know, the power of
Speaker 3: the purse that in terms of when they're spending it's
Speaker 3: got the approval of it or the cut pack of
Speaker 3: it somehow has to go through US lawmakers.
Speaker 4: Well, I mean, you know, Republicans control Congress right now,
Speaker 4: and they are for the They are either being you know,
Speaker 4: sort of quietly grumbling or being super supportive. There's no
Speaker 4: there's no real there's no Republican opposition right now. The
Speaker 4: closest thing you can you see toward Republicans sort of
Speaker 4: like feeling uncomfortable, would be like, you know, maybe there's
Speaker 4: a tweet or whatever. Senator Bill Cassidy tweeted about pep
Speaker 4: FAR a couple of weeks back.
Speaker 1: This is the AIDS program exactly the same in Africa,
Speaker 1: that Anthony Fatchi had actually had a big part in
Speaker 1: it during the George W. Bush administration.
Speaker 4: And it's a Republican program. It's it's seen by many
Speaker 4: as like a pro life program. So there's that. Katie
Speaker 4: Britt the other day, senator from Alabama, gave an interview
Speaker 4: with her local newspaper sort of not quite complaining about
Speaker 4: these nh NIH cuts, but sort of saying, we're going
Speaker 4: to need to make sure we negotiate so that there's
Speaker 4: not we don't get huge cuts to the university hospital
Speaker 4: system in Alabama that employs a ton of people.
Speaker 1: But this is exactly what has prevented government cuts in
Speaker 1: the past. The idea that and I'm not calling it
Speaker 1: all pork, but the idea that constituencies are affected. And
Speaker 1: you have these lawmakers in Congress saying, don't touch stuff
Speaker 1: in my district. And I do think this is where
Speaker 1: the Defense Department, in the defense contracting for example.
Speaker 4: Well, the defense is an interesting issue because because Elon
Speaker 4: Musk is a major defense contractor, he may not be
Speaker 4: the you know, he's got obvious conflicts and interests may
Speaker 4: be difficult. But leaving that aside, people who like this,
Speaker 4: I think what they liked is that Elon Musk is
Speaker 4: an amazing marketer. Yes, good governance types on the right
Speaker 4: and the left have tried to do this stuff before,
Speaker 4: and they always fail because politics intervenes, because because cutting
Speaker 4: these programs, each of these programs, you can they sound
Speaker 4: ridiculous maybe on a spreadsheet, but when you really get
Speaker 4: down to it, there are people benefiting and those people vote. Now. Musk,
Speaker 4: of course is kind of like a transformer marketer, a
Speaker 4: transformative storyteller, and so I think the bull case would
Speaker 4: be like he is able to tell a story that
Speaker 4: causes people to go along with this. But again I
Speaker 4: do think you when you start reading about some of
Speaker 4: these cases of defunding or some of the stuff that's
Speaker 4: happening in the civil service, like even Elon Musk, the
Speaker 4: great electric car salesman, may not be able to sell
Speaker 4: some of these cuts to the American people.
Speaker 3: All Right, great read, and great you know, kind of
Speaker 3: pulling it all together in terms of the headlines that
Speaker 3: have been coming us, coming at us in terms of
Speaker 3: doge over the last week or two. Max Chakin, thank
Speaker 3: you so much, Bloomberg Business Week columnist. You can catch
Speaker 3: a story, you can find it at Bloomberg dot com
Speaker 3: and also on the Bloomberg Terminal. Max by the Way,
Speaker 3: co host of the elon Inc Podcast, where you can
Speaker 3: also find on the Bloomberg and at Bloomberg dot com
Speaker 3: slash elon Ink. He is also author of The Contrariant
Speaker 3: Peter Tiel and Silicon Valley's Pursuit of Power.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 2: or watch us live on YouTube.
Speaker 3: This week's shares of Zillo tumbled after delivered a revenue
Speaker 3: forecast for the first quarter that fell short of analyst estimates,
Speaker 3: and the company said it also expects a more challenging
Speaker 3: housing market in the first quarter.
Speaker 1: For more on Zillo's business and the outlook of the
Speaker 1: US housing market, we spoke to Zillo CEO Jeremy Waxman.
Speaker 6: The housing market remains challenged.
Speaker 7: It was challenged in twenty twenty four, and we're expecting
Speaker 7: it to be so again.
Speaker 6: In twenty twenty five.
Speaker 7: Zillo reported great results Q four revenue up seventeen percent,
Speaker 7: and we hit our goals of growing revenue double digits
Speaker 7: last year and expanding our margins, and we also guided
Speaker 7: yesterday that we expect to continue to do that again
Speaker 7: this year with revenue growth in the low to mid teens,
Speaker 7: more margin expansion, and positive GAT and income for the
Speaker 7: first time in a long time. And as you said,
Speaker 7: that's against a persistently challenged housing market. So we're able
Speaker 7: to grow and gain share both in twenty four and
Speaker 7: we plan do you it again in twenty twenty five,
Speaker 7: while the market remains depressed for volume and challenging for buyers.
Speaker 3: Jeremy, do you think investors have it wrong in terms
Speaker 3: of pushing your share price down a lot in reaction
Speaker 3: to what they got on the quarter and the outlook?
Speaker 7: We don't really focus on the day to day voting
Speaker 7: machine of the stock market. If you zoom out and
Speaker 7: look over the long the long couple quarters, a couple
Speaker 7: of years, we made great progress on our integrated super
Speaker 7: apps strategy. We're growing revenue nicely, we're out growing the category,
Speaker 7: and we can plan to continue to do that in twenty
Speaker 7: twenty five, and so over time, the stockcacre of itself,
Speaker 7: the company grows in value as we really deliver on
Speaker 7: our promise of helping more buyers and sellers get home.
Speaker 7: That's really our goal at Zillo is to help more
Speaker 7: of our audience turn into transactions.
Speaker 3: Yeah, and I will point out the stock was up
Speaker 3: about twenty eight percent last year and up about almost
Speaker 3: eighty percent and twenty twenty three. In terms of the
Speaker 3: stress though, or maybe you're you know, kind of cautious
Speaker 3: outlook in terms of the housing market, is it all
Speaker 3: about mortgage rate to higher mortgage rates.
Speaker 7: Yeah, the challenge or the housing market starts with mortgage rates,
Speaker 7: but it's really about availability and supply. We are expecting
Speaker 7: flat ish total dollar value housing market in Q one
Speaker 7: and load to mid single digit growth for the year.
Speaker 7: And as you said, if you look, it's not like
Speaker 7: twenty twenty four was that much better from a volume standpoint.
Speaker 7: The real challenge is with mortgage rates. Saying Hi, affordability
Speaker 7: is a challenge for buyers, but that really locks a
Speaker 7: lot of sellers into their homes as well. Right a
Speaker 7: seller is thinking about do they want to trade out
Speaker 7: of that mortgage? Do they feel locked into that mortgage?
Speaker 7: And many are foregoing listing their home and making that move.
Speaker 7: So you're seeing still very low inventory. Inventory is up
Speaker 7: eighteen percent from last year, but it's still down sharply
Speaker 7: from pre pandemic norms, and so lack of supply really
Speaker 7: makes a challenging for buyers. And then you add elevated
Speaker 7: rates and what they can afford of what there is
Speaker 7: to buy.
Speaker 1: Jemmy, the cost of housing certainly a theme on and
Speaker 1: last year's presidential race. I'm wondering if you think that
Speaker 1: the federal government will be able to achieve bringing more
Speaker 1: supply of housing online. This came up with the vice
Speaker 1: presidential debate when Jade Vance talked about using federal lands
Speaker 1: to build homes. Do you think the federal government will
Speaker 1: have a meaningful effect on housing supply?
Speaker 6: The real challenge was supply.
Speaker 7: We talked about existing home inventory and what sellers are doing,
Speaker 7: but we are chronically under built right we. Zilo estimates
Speaker 7: about four and a half million homes have not been
Speaker 7: built to keep up with the demand needed since the
Speaker 7: global financial crisis. And the solution of those problems really
Speaker 7: is at the state and local level. You need things
Speaker 7: like permitting reform and removing red tape in the process
Speaker 7: to get starts done quickly. You need tax incentives and
Speaker 7: financing options so that builders can get their projects online
Speaker 7: more quickly. So the totality of the problem, you know,
Speaker 7: all nearly five million homes that we need to catch
Speaker 7: up on. We're not going to do that overnight, but
Speaker 7: slow and steady will definitely bring more supply to the market.
Speaker 3: I do wonder though, too, you know, Jeremy, how much
Speaker 3: the YEP I get that permitting. I mean, these are
Speaker 3: problems that have played certainly the housing market I feel
Speaker 3: like forever in terms of supply. But having said that,
Speaker 3: how much too, is there some cautiousness on the part
Speaker 3: of home builders who still everybody still remembers two thousand
Speaker 3: and eight and the over bills. So is there also
Speaker 3: a part of that as some of the components in
Speaker 3: terms of supply.
Speaker 7: Well, you're seeing places where it works well, right, I
Speaker 7: mean Austin, Texas is one good example that we've highlighted
Speaker 7: where a lot of multi family inventory and the rental
Speaker 7: market has come online and you've actually seen rent prices
Speaker 7: come down even with the population growth in Austin, And
Speaker 7: so you know, you have to remember, if you zoom out,
Speaker 7: there are still the counter forces of for sale and
Speaker 7: rentals working together, and you know, when folks can't get
Speaker 7: it done and find the home to buy, they end
Speaker 7: up re renting, and you're seeing you know, rental inventory,
Speaker 7: you know, grow to satisfy that demand as well. So
Speaker 7: it is, as you said, it's a local issue. But
Speaker 7: there are places where it's working well and there are
Speaker 7: places where it can work even better.
Speaker 1: We got a hotter than expected CPI print earlier today,
Speaker 1: and my question is about how that changes the outlook
Speaker 1: for rates for the year, and then in turn, how
Speaker 1: that affects your business. Does your outlook for twenty twenty
Speaker 1: five change if rates don't come down.
Speaker 7: No, our outlook assumes a pretty lousy housing market. We
Speaker 7: are expecting flatish housing market in Q one and load
Speaker 7: of mid single digits for the year. And I think
Speaker 7: we were maybe a little bit more embarrassed than most
Speaker 7: heading into the year on how the housing market's going
Speaker 7: to do.
Speaker 8: Now.
Speaker 7: The good news for Zillo is we're out growing the
Speaker 7: category and we're gaining share. We did that in twenty
Speaker 7: twenty four and we expected it again in twenty twenty five,
Speaker 7: and that's in our for sale business, where we're helping
Speaker 7: more buyers meet their agents. We're helping originate more mortgages.
Speaker 7: That's also when our rentals business. Our rentals business grew
Speaker 7: twenty five percent in Q four. We expect that to
Speaker 7: accelerate in Q one as we bring more rental inventory
Speaker 7: to more renters across slow Hey.
Speaker 3: One thing I do wonder in our conversation coming off
Speaker 3: of the hot CPI print Jeremy, is that maybe we
Speaker 3: so certainly the rates market, the US rates market, the
Speaker 3: treasury market reacts and move up today, but now the
Speaker 3: talk has moved to maybe even the next move we
Speaker 3: need to start thinking about the Fed raising rate. If
Speaker 3: we see the Fed start to raise rates, what does
Speaker 3: that do in your view to the housing market and
Speaker 3: how might that impact your business?
Speaker 6: Long term?
Speaker 7: Real estate is a growth industry. You see volumes and
Speaker 7: total value grow. Right now you're seeing depressed volumes because
Speaker 7: of all the challenges, especially in the financial market with
Speaker 7: affordability for buyers. But folks are getting it done and
Speaker 7: they will get it done. And what we're here at
Speaker 7: ZILLA to do is help them. Buyers who need to buy,
Speaker 7: many of them are starting that conversation with financing rather
Speaker 7: than just dreaming. We now see about as many buyers
Speaker 7: start with what can I afford and can I even
Speaker 7: buy right now? As they do dreaming, shopping and going
Speaker 7: media an agent. So we've brought online tools like Buyability
Speaker 7: to help them truly understand their personalized payment information. What
Speaker 7: can they actually afford for themselves given their financial information,
Speaker 7: so they can have confidence, go get a pre approval letter,
Speaker 7: go make an offer and win a house. So it
Speaker 7: is tough out there, it will remain challenging in twenty
Speaker 7: twenty five, but folks can get it done. We're there
Speaker 7: to help, and that's exactly what's driving the results you
Speaker 7: saw from US in Q four and why we expect
Speaker 7: to continue to grow and not go the category in
Speaker 7: twenty twenty five.
Speaker 3: Jeremy, you mentioned those buyability tools that you guys have
Speaker 3: on your platform. What does that show you about? Is
Speaker 3: it the first time home buyer that continues to find
Speaker 3: it really difficult? Is it the trade up home buyer?
Speaker 3: What does it tell you about kind of the home
Speaker 3: buyer and in essence, the US consumer out there when
Speaker 3: it comes to buying a house.
Speaker 7: Yeah, I mean the demand and desire to buy a
Speaker 7: home still persists and exists across all demographics. You're seeing
Speaker 7: folks having to wait longer, save up more to make
Speaker 7: that down payment, and so it gets tougher.
Speaker 6: But you see, the strong.
Speaker 7: Desire to buy a home really persist across all demographics,
Speaker 7: and we see that in folks who are using Zillo.
Speaker 1: Again.
Speaker 7: As I said, one of the things that is interesting
Speaker 7: to us is how much more financing and total cost
Speaker 7: of ownership is front and center for a buyer before
Speaker 7: they even start. You know, five ten years ago, everyone
Speaker 7: wanted to start by shopping, by touring, by virtual touring,
Speaker 7: by going into open houses, and now it's kind of
Speaker 7: a balance as many folks want to start in that state,
Speaker 7: as they want to start with just the reality of
Speaker 7: what's my budget look like?
Speaker 6: How do I set my budget.
Speaker 7: And work with an agent to make sure the homes
Speaker 7: I fall in love with the ones that can actually buy.
Speaker 8: Hey.
Speaker 1: One thing we also learned recently from you guys is
Speaker 1: that Redfinn is teaming up with Zillo for rental listings.
Speaker 1: This partnership, to me, it sort of looks like frenemies
Speaker 1: teaming up. Like you guys are competitors here. Redfinn's market
Speaker 1: cap is about two billion dollars. You're about eighteen billion dollars.
Speaker 1: Do you end up buying Redfinn at a certain point.
Speaker 7: We're really excited about this partnership we just announced with Redfinn.
Speaker 7: It's a big step in our overall rental strategy. It's
Speaker 7: important to zoom out and remember, unlike the for sale marketplace,
Speaker 7: there's no national database for rentals. The big challenge a
Speaker 7: renter has is they can't find all the supply. They
Speaker 7: have a very short timeframe to find a place to rent,
Speaker 7: and so they scour the internet, they scour offline looking.
Speaker 6: So that's zilla strategy.
Speaker 7: Can we organize more and more of the rental listings
Speaker 7: out there nationwide so that renters on Zillo and on
Speaker 7: our partner sites can find them.
Speaker 6: That strategy is working great.
Speaker 7: That's what's driving having the leading audience and growing audience
Speaker 7: of renters, and that's bringing more property managers to Zillo
Speaker 7: and our partner sites to want to advertise that audience.
Speaker 7: So this partnership with Redfinn to power their rentals business
Speaker 7: is just the next step in that strategy. Adding on
Speaker 7: to this great partnership we forged with realter dot com
Speaker 7: last year, it allows advertisers to come to Zilo and
Speaker 7: get advertising in front of Zillo sites, redfin sites and
Speaker 7: realtor sites to reach an even bigger set of renters.
Speaker 7: And then renters get more choice, right, they see more inventory, which, again,
Speaker 7: as I started, that's the big problem in rentals is
Speaker 7: you cannot find all the inventory.
Speaker 1: And forgive me that Redfinn market cap about one point
Speaker 1: one billion dollars, so shy of two billion dollars. I
Speaker 1: didn't hear a yes or a no, and no answer
Speaker 1: to my question about whether or not.
Speaker 7: Oh, no, no plans, now, no plans. We're very excited
Speaker 7: about the partnership. We've worked with them on some other
Speaker 7: things before and we love how culturally align they are
Speaker 7: and just digitizing the transaction in real estate.
Speaker 3: Well, along those lines, how are real estate companies holding
Speaker 3: up through this extended housing market trough? I mean, any
Speaker 3: opportunities for you guys to do some acquisitions as a result,
Speaker 3: along maybe the lines of I don't know, partnerships, but
Speaker 3: maybe even acquisitions.
Speaker 6: Yeah.
Speaker 7: The bright side of a challenge real estate market is
Speaker 7: it really allows the best professionals to gain share. Right
Speaker 7: when it's rainy and cloudy outside, those that do best
Speaker 7: sometimes come out ahead. And what's great about that is
Speaker 7: that aligns so nicely with Zillo strategy, right. Zillo strategy
Speaker 7: is to partner with the best agents and agent teams
Speaker 7: in the industry. Eighty percent of the agents that we
Speaker 7: partner with are in that top twenty percent of producers nationwide.
Speaker 7: So these are the folks that are operating businesses at scale,
Speaker 7: training great agent teams to help delight customers. So even
Speaker 7: when there's less transactions to do, and even when it's
Speaker 7: a challenging conversation with many buyers and sellers, those folks
Speaker 7: command great price, hold share and grow their business. And
Speaker 7: so in some ways having a choppier or a depressed
Speaker 7: housing market can advantage some of the best professionals.
Speaker 1: Hey, we're asking every CEO we talked to these days
Speaker 1: a couple of different questions about politics, about AI. Politics
Speaker 1: is where I want to go and just hear from
Speaker 1: you about how you view this new Trump administration in
Speaker 1: terms of changes that you've made at the company as
Speaker 1: a result, or what it means for you as a business.
Speaker 7: One of the things you will focuses a lot on
Speaker 7: is AI and AI as it comes to the list industry. Right,
Speaker 7: both for us as employees, but more so for our customers.
Speaker 7: And our partners, our agents, our loan officers, and we've
Speaker 7: been investing in and innovating around AI for decades and
Speaker 7: so now as general of AI comes to the forefront,
Speaker 7: you know, we've been really advocating for responsible regulation around
Speaker 7: AI that encourages and supports innovation so that companies like
Speaker 7: Zilo can continue to innovate on behalf of the customer.
Speaker 7: So one thing we're very excited about is to continued
Speaker 7: progress on the ability to progress with AI. And you know,
Speaker 7: AI for us is a feature, it is a tool
Speaker 7: for our customers, for our employees, but in the real
Speaker 7: estate industry, it's really about making the professionals more efficient
Speaker 7: and effective.
Speaker 6: Right, there's so much wasted.
Speaker 7: Work, busy work, paperwork, back office work, and when you
Speaker 7: talk to a great real estate agent or a great
Speaker 7: loan officer, that's not what they want to be doing.
Speaker 7: They want to be delighting customers, they want to be
Speaker 7: winning more business, they want to be getting more transactions done.
Speaker 6: So we're really excited about the.
Speaker 7: Ability to continue to lean in and innovate not just
Speaker 7: on our tech platform generally, but on AI specifically, to
Speaker 7: really bring more of this transaction into your smartphone, make
Speaker 7: it more delightful and faster for the customer.
Speaker 3: All right, Jeremy, One last question is also a question
Speaker 3: we are asking to heads of company CEOs and a
Speaker 3: like anything that could come out of Washington and the
Speaker 3: new administration that could help or hurt your business.
Speaker 7: Zillow is really focused on ensuring that real estate stays
Speaker 7: accessible for the customer. We've outlined our principles for the consumer,
Speaker 7: which are around transparency, access, and affordability, and any policies
Speaker 7: that come we look to help make sure they push
Speaker 7: forward and ensure that consumers have access to all the
Speaker 7: information that's out there, have access to great professionals, and
Speaker 7: have better education on how the real estate industry works.
Speaker 7: Real estate is one of the largest industries that there
Speaker 7: is and it's the single biggest decision that most individuals
Speaker 7: are going to make. So making sure that people understand
Speaker 7: how it works, making sure that they have access to
Speaker 7: hiring the best professionals, that's one of the things we're
Speaker 7: very focus on Zilla, and we continue we will continue
Speaker 7: to be so you're.
Speaker 3: Hopeful that the administration the policies will be supportive of
Speaker 3: the housing market.
Speaker 7: Yeah, We've been around for twenty years and have been
Speaker 7: fortunate to work with both both administrations, and again, as
Speaker 7: we talked about earlier, one of the real challenges in
Speaker 7: our industry is so much is done at the state
Speaker 7: and the local level to make sure that real estate
Speaker 7: can flow for the benefit of the buyer and seller.
Speaker 3: Really good point, Jeremy, Thank you for all this time.
Speaker 3: Jeremy Waxman. He's chief executive officer of Zilo, joining us.
Speaker 2: You're listening to the Bloomberg Business Week Podcast. Catch us
Speaker 2: live weekday afternoons from two to five pm Eastern Listen
Speaker 2: on Apple, CarPlay and Android with the Bloomberg Business app,
Speaker 2: or watch us live on YouTube at Lassian.
Speaker 3: It's the more than eighty billion dollar market cap enterprise
Speaker 3: software company behind Jira, Confluence, Trello, and more. It has
Speaker 3: more than three hundred thousand customers all over the world,
Speaker 3: so it's got a great view on the health of
Speaker 3: tech spending and businesses both big and small.
Speaker 1: The company was co founded by Mike cannon Brooks, who's
Speaker 1: also CEO. The billionaire invests in renewable energy and efforts
Speaker 1: to combat climate change. He joined us to talk about
Speaker 1: his company, current macro issues, yes, tariffs, and some news
Speaker 1: he had this week. In the world of F one.
Speaker 9: Racing, there's no doubt it's a busy world at the moment,
Speaker 9: and it there's a lot going on. My strategy has
Speaker 9: been almost ridiculously simple most of the time, which is
Speaker 9: just to work out what the business needs. And normally
Speaker 9: the best way you can figure out what we should
Speaker 9: spend our time on a new given day is to
Speaker 9: look at your customers and go talk to them. And
Speaker 9: that doesn't mean it's simple. They are facing low, different
Speaker 9: global effects in parts of the world, and so you know,
Speaker 9: if we work out how we can help them. That
Speaker 9: usually is our simplest way to gain some focus in
Speaker 9: an otherwise highly confusing world when.
Speaker 10: There's a lot going on.
Speaker 1: To what extent, though, do you have to increase your
Speaker 1: value to them because their margins get squeezed as the
Speaker 1: result of tariffs, as the result of a potential trade war.
Speaker 1: What do you have to do to prove to them
Speaker 1: that you're worth spending money on?
Speaker 10: Sure?
Speaker 9: Look at Lastian's products are all about collaboration and efficiency
Speaker 9: for companies. Right We help teams of people. Our mission
Speaker 9: is to unleash the potential of every team has been
Speaker 9: for decades and our job is to make sure that
Speaker 9: we explain to customers how our software can do that,
Speaker 9: then have those customers adopt the software. Whether they're running projects,
Speaker 9: whether they're looking at their strategic plans, whether they're building technology,
Speaker 9: whatever it is that they're doing. We help them make
Speaker 9: their technology teams work better with their business teams. And
Speaker 9: we have always been an incredibly value conscious offering. You
Speaker 9: get an incredible amount of value from Alastin for a
Speaker 9: very low price, and that helps in tricky economic times.
Speaker 9: But fundamentally we have to justify with the customers and
Speaker 9: have them demonstrate to themselves ideally the value of our
Speaker 9: software and how it makes them more efficient and work together.
Speaker 9: And that's where I think we've kept a pretty clear
Speaker 9: north star for a long time and why we have,
Speaker 9: you know, three hundred thousand customers and it's still growing
Speaker 9: strongly at the size we are today.
Speaker 1: Well those three hundred customers, three hundred thousand customers, excuse me,
Speaker 1: all over the world when you hear updates from your
Speaker 1: global salesforce, are you hearing from that about any particular
Speaker 1: concern in different regions of the world that could be
Speaker 1: affected by tariffs, that are seeing weakness for other reasons
Speaker 1: what's the read that you have on the globe from
Speaker 1: your salesforce.
Speaker 10: Look, there's always challenges in different parts of the world.
Speaker 10: This is not new.
Speaker 9: I think in any given small slice of time, we
Speaker 9: see that we have very global companies, we have very
Speaker 9: local companies in that three hundred thousand. Our customer base
Speaker 9: has always spanned small businesses through to very very large businesses,
Speaker 9: some of the largest.
Speaker 10: Companies in the world.
Speaker 9: In fact, we have like eighty five percent of the
Speaker 9: Fortune five hundred as customers. You have a lot of
Speaker 9: issues going on for a lot of different companies. Our
Speaker 9: job is to make those companies more efficient. They still
Speaker 9: have to deal with those issues. They have to run
Speaker 9: projects and collaborate and communicate with each other. We help
Speaker 9: them do that. We always have, and so whatever issues
Speaker 9: they're dealing with, whether it's an issue of growth, whether
Speaker 9: it's an issue with the tariff or a challenge Atlastian's
Speaker 9: trying to help their teams deal with that issue more efficiently.
Speaker 9: If we can't demonstrate their value, we're not going to
Speaker 9: be around. So again, just sticking to that as the
Speaker 9: north Star has been a very simple principle for a
Speaker 9: long time.
Speaker 3: But so Mike you're not seeing any signs of any
Speaker 3: kind of slow down or pullback by some of your
Speaker 3: customers as they kind of wait for the desk to settle.
Speaker 3: I mean, we certainly feel like we're in it, you know,
Speaker 3: as we have kicked off a new administration here and
Speaker 3: every day are dissecting different headlines that come out of
Speaker 3: the White House. But you know, there's geopolitical turbulence, as
Speaker 3: you well know, around the world, and I think there's
Speaker 3: you know, dust that needs to settle in different places.
Speaker 3: So is there any signs of any hesitation that you're
Speaker 3: seeing among customers or not yet?
Speaker 10: Look from up one of you.
Speaker 9: We continue to see you know, really good growth across
Speaker 9: our customer base and especially.
Speaker 10: In the enterprise segment.
Speaker 9: So our largest customers those organizations with you know, more
Speaker 9: than a thousand people around the world. We have more
Speaker 9: than five hundred customers that spend more than a million
Speaker 9: dollars a year now with at Lassian, and that is
Speaker 9: our fastest growing customer segment. So I'm sure that those
Speaker 9: businesses are having to deal with all of that dust
Speaker 9: in the air as you talked about, but at the
Speaker 9: same time they have their own customers to deal with.
Speaker 9: They still have their business to run, and whatever the
Speaker 9: problems are, they have to deal with it, and so
Speaker 9: our software helps their teams deal with whatever it is
Speaker 9: that they need to do, how they handle their customers,
Speaker 9: and also how do they handle whatever is going on
Speaker 9: in whichever part of the world. As long as we
Speaker 9: keep that value ratio great for our customers. We invest
Speaker 9: very heavily in R and D and continue to develop
Speaker 9: and build our software every single day. We have a
Speaker 9: fantastic team. I'm not sure focusing on all that sort
Speaker 9: of thing is very helpful for us all for our customers.
Speaker 10: To be honest, they have their own customers to do
Speaker 10: with and.
Speaker 3: I should put out last month, you guys reported second
Speaker 3: quarter results that beat expectations to raise your full your forecast,
Speaker 3: and investors have definitely rewarded you big time. The ADRs
Speaker 3: that trade in the United States are at more than
Speaker 3: fifty percent tim in the past year.
Speaker 1: Mike, I do want to talk a little bit about
Speaker 1: different industries that you serve. We talk a lot about AI.
Speaker 1: I know you guys are doing a lot with AI
Speaker 1: as far as customers go, Customers that are using your product,
Speaker 1: customers that are leaning into AI right now, are you
Speaker 1: seeing more growth on the tech side of your business
Speaker 1: in terms of those types of customers, given what we're
Speaker 1: seeing come from the tech community over the last couple
Speaker 1: of years.
Speaker 10: Great question, I know as a huge topic among our
Speaker 10: customer base. From a Lastian's point of view, we certainly believe.
Speaker 9: All of the progress making in AI every week, in
Speaker 9: every quarter at the moment is fantastic for our ability
Speaker 9: to achieve our mission right. We can build better and
Speaker 9: better products that more tailor and our.
Speaker 10: Customized to the work that our customers are trying to do.
Speaker 9: There's no doubt our core customer base what we like
Speaker 9: to call technology driven companies, So companies that believe like
Speaker 9: Williams Racing.
Speaker 10: Or like a financial services company, they.
Speaker 9: Both be the same that believe technology is their source
Speaker 9: of competition. It's the way that they are going to
Speaker 9: get an edge, survive or thrive in their industry. Any
Speaker 9: of those businesses are deeply investing in AI in lots
Speaker 9: of different ways. They are trying to work out how
Speaker 9: this technology makes them more efficient, how it helps them
Speaker 9: to compete. Fundamentally, at Lassian's role there is to invest
Speaker 9: very heavy is we have done in the R and
Speaker 9: D of actually bringing AI to our customers. So we're
Speaker 9: a big believer that if we don't ship software that
Speaker 9: people can use, the rest of it doesn't matter.
Speaker 10: It's all just kind of talk.
Speaker 9: So our investment has been in taking those AI innovations
Speaker 9: and developments every week, every month, incredibly rapidly and getting
Speaker 9: them to our customers in a form that they can use.
Speaker 9: We have done that, and it's one of the things
Speaker 9: it's one of the things that last and Williams raising
Speaker 9: teams most excited about it. It's one of the things that
Speaker 9: all our customers are talking about is how they can
Speaker 9: make their businesses more efficient, especially as you mentioned in
Speaker 9: the Current Times, which is a big challenge.
Speaker 3: One last question about AI before we talk about some
Speaker 3: of the news you guys had this week. Our Bloomberg
Speaker 3: Intelligence team, our in house group of analysts noting that
Speaker 3: it may threaten your seat based sales model. They say
Speaker 3: deep seeks, cost effective model of training llms can bolster
Speaker 3: AI adoption, driving a shift of work to digital agents
Speaker 3: from humans, and so they say that's a risk for
Speaker 3: some of the enterprise software players with CP based revenue models,
Speaker 3: including yourself and some others. So will it could the
Speaker 3: deep seek have an impact like that on your business.
Speaker 9: Look, we certainly deeply believe in the fact that agents
Speaker 9: are going to make a huge difference to businesses around
Speaker 9: the world. We're already seeing that we are very much
Speaker 9: on the leading edge of that technology. We shipped our
Speaker 9: product Rovo a year and almost a year and a
Speaker 9: half ago now and have continued to update it and
Speaker 9: have now more than a million users waking up and
Speaker 9: using Lassian AI technologies, including all of our agents every day.
Speaker 9: You know, we take the position that AI fundamentally is
Speaker 9: about unleashing some form of human creativity.
Speaker 10: Right.
Speaker 9: It lets people do more with less. It helps them
Speaker 9: to be creative. It's a fantastical tool. That tool, there's
Speaker 9: no doubt, makes people able to do more. You can
Speaker 9: write more software, you can answer more emails, you can
Speaker 9: do whatever it is that you want to do, and
Speaker 9: you can do it more creatively and at a higher level.
Speaker 9: The thing with most of the industries that we work in,
Speaker 9: right we sell to knowledge workers around the world, people
Speaker 9: that spend the day sitting at a laptop or behind
Speaker 9: a computer and using fundamentally brain creativity to try to
Speaker 9: improve whatever business they're working in. Those are usually not
Speaker 9: supply limited by human creativity. If you take software engineering
Speaker 9: as a field, if we made all software engineers in
Speaker 9: the world twice as effective, the question is would we
Speaker 9: have half as many software engineers or would we build
Speaker 9: twice as much software. I think we'd end up building
Speaker 9: twice as much software, not the other way around, because
Speaker 9: we don't have a shortage of ideas of what we
Speaker 9: would like to build. In the world, most businesses don't
Speaker 9: get everything they need to get done.
Speaker 10: All our agents are doing is helping.
Speaker 9: Those businesses to achieve more, and they'll all be competitive
Speaker 9: with each other as well, so there's a natural are
Speaker 9: of conservation of profits there as well.
Speaker 3: Hey, Mike, I want to talk about some news you
Speaker 3: had this week, and this is your partnership with Williams
Speaker 3: Racing the F one team. Tell us about this partnership
Speaker 3: and what you guys are going to be doing and
Speaker 3: why you wanted to do it.
Speaker 10: It's an incredibly exciting partnership for us.
Speaker 9: It's from an Elastian point of view, it's the first
Speaker 9: major brand deal. From the Williams point of view, it's
Speaker 9: the first time it's the largest deal they've done. It
Speaker 9: is the first time they've had a title partner and
Speaker 9: a technology partner. Look, obviously, Williams is an amazing, storied
Speaker 9: race team, right, one of the winningest teams of all
Speaker 9: time and has had a challenging you know, last decade. However,
Speaker 9: there is huge renewal going on in the Elasti Williams team.
Speaker 10: Right.
Speaker 9: This partnership is just one step new partnership, new driver,
Speaker 9: new principles, new ownership, huge investment in digital transformation and
Speaker 9: technology as a way to catch up and to win.
Speaker 9: We are you know, I think eighty percent of the
Speaker 9: teams on the Greed or more are Elassian customers and
Speaker 9: have been for decades.
Speaker 10: So this is a sport where technologies really important. It
Speaker 10: is a sport where.
Speaker 9: Technology teams, those building you know, fluidynamics models and wind
Speaker 9: tunnels and cars and all of the monitoring technology that
Speaker 9: goes into it, have to meet with the business teams,
Speaker 9: those in the sponsorship groups. So our fundamental system of
Speaker 9: work is what the company, well what at LASSI Williams
Speaker 9: is trying to do and trying to embody we.
Speaker 10: Then, obviously it's a global sport.
Speaker 9: We have customers all around the world, but more importantly,
Speaker 9: you know, having spent a lot of time now over
Speaker 9: the last six months with the Williams team. This is
Speaker 9: a really great cultural fit for Alassian. This is a
Speaker 9: team of people who are working incredibly hard every day
Speaker 9: to use technology to try to change their fundamental outcome.
Speaker 9: They're on a massive journey of rebuild the culture. The
Speaker 9: palpability of getting back to the Winner's circle is phenomenal,
Speaker 9: and we just we fell in love with the story
Speaker 9: and we're like, okay, we can help you do this.
Speaker 9: Leaning very heavily into technology partnership, we have a lot
Speaker 9: of things we can help them with to make their
Speaker 9: business far more efficient and hopefully change the results of
Speaker 9: the team, which is a mission that at Lastian now
Speaker 9: has thousands of people working on.
Speaker 10: So it's a sad.
Speaker 1: About that it's a long term deal. It's been described
Speaker 1: as a record breaking deal. Just for context. Can you
Speaker 1: give us some of the numbers behind this deal, how
Speaker 1: much it costs?
Speaker 9: I can, Unfortunately, I can tell you that it is
Speaker 9: certainly a long term deal. We're on the at Lastian
Speaker 9: William's journey right and we are trying to use all
Speaker 9: of our software and all of our technology in all
Speaker 9: of our culture and our practices of how we work
Speaker 9: to show fundamentally our customers and to show the world
Speaker 9: that we can make a massive difference in what is
Speaker 9: obviously an incredibly competitive industry. Right, it comes down to
Speaker 9: hundreds of milliseconds. The gap between first and last on
Speaker 9: the grid in the last race of last year was
Speaker 9: the smallest it's ever been.
Speaker 1: Is Okay, So we don't have the details on the
Speaker 1: exact figures, but how do you justify ROI on this
Speaker 1: given that it's such a big deal, and you know,
Speaker 1: it's kind of hard to measure how many people will
Speaker 1: become lass and customers as a result of this title sponsorship.
Speaker 9: Look, we're we always have been an incredibly metric focused organization.
Speaker 10: As a large bootstrap company. You don't get that way
Speaker 10: without a numbers quickly. Look, we have a number of
Speaker 10: success metrics here.
Speaker 9: Firstly, always from a brand point of view, Formula one
Speaker 9: is a very fast growing and global sport, and we have,
Speaker 9: as I mentioned, customers in almost every country on the planet.
Speaker 9: So we need to continue to have our brand and
Speaker 9: our presence and our story told in a larger and
Speaker 9: larger way around the world. But that's obviously worth a
Speaker 9: lot of money to us. Secondly, as an enterprise opportunity,
Speaker 9: the Formula one is you know, it's like a mobile
Speaker 9: executive briefing center, right. It takes it's business. This is
Speaker 9: a fantastical customer of it. Lastly, that we can take
Speaker 9: to twenty four cities around the world, and in those
Speaker 9: twenty four cities we can bring our biggest customers to
Speaker 9: show them how Williams works, what we are doing to
Speaker 9: help the team. And this is incredibly powerful in the
Speaker 9: enterprise to be able to show real world examples of
Speaker 9: what we can.
Speaker 10: Do to help a customer.
Speaker 3: Mike, just real quick. One last question the Formula one,
Speaker 3: the FW four to seven car forty seven car that's
Speaker 3: going to have your branding. I guess it gets unveiled.
Speaker 3: I don't know really soon. Are you going to be
Speaker 3: able to take it around the track? Have you been
Speaker 3: told that you're good or.
Speaker 9: Look, my driving skills might need a little bit of
Speaker 9: work for that one. I've certainly sat in the car
Speaker 9: and let me tell you that that is a challenging
Speaker 9: job that is not as comfortable as my daily driver.
Speaker 10: That's for sure.
Speaker 9: It does get unveiled on Tuesday, and we're certainly really
Speaker 9: exciting we've done some really innovative actually, I think for
Speaker 9: for Formula one design work between the Elassin design team
Speaker 9: and the Williams design team. So super excited to show
Speaker 9: the world the car on Tuesday, and super excited to
Speaker 9: show how we're trying to bring our collaboration and teamwork practices,
Speaker 9: you know, right into that into that car in fact,
Speaker 9: and into the garage, into all the mechanics and all
Speaker 9: the strategist that work on the race as well.
Speaker 10: So we're not just a digital company you'll see on Tuesday.
Speaker 3: Don't totally need a AI for that, right, You just
Speaker 3: need a really cool car, just going to say.
Speaker 10: A lot of things to compete in the sport.
Speaker 9: So we're on there, We're on the journey, we're learning
Speaker 9: a lot, and we're putting our shoulder behind it.
Speaker 1: Carol, I do feel like if you signed the check,
Speaker 1: you can drive the car.
Speaker 2: Yeah.
Speaker 3: I'm just gonna say, Mike, you know, you do get
Speaker 3: some leverage with all of this. I'm just gonna you know,
Speaker 3: and the company name is going to be on the car,
Speaker 3: so you should be able to take it out for
Speaker 3: a spin.
Speaker 9: Look, I would also say it might not be a
Speaker 9: good idea for the Williams team or the Elassin team.
Speaker 9: I'm not sure my team would think that's a great
Speaker 9: idea for me to be driving. It's a three hundred
Speaker 9: or more guys an hour round the track.
Speaker 8: I hear, I hear you listen.
Speaker 3: Thank you so much for notes later where you are,
Speaker 3: but we so appreciate you joining us on this Thursday,
Speaker 3: really really appreciating. Good luck with that partnership.
Speaker 2: This is the Bloomberg Business Week Podcast. Listen live each
Speaker 2: weekday starting at two pm Eastern on Apple car Play
Speaker 2: and the Android Auto with the Bloomberg Business App. You
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Speaker 2: New York station, Just say Alexa Play Bloomberg eleven thirty.
Speaker 3: Plenty ahead in our second hour of the weekend edition
Speaker 3: oft Bloomberg Business Week, including how technology can humanize classrooms
Speaker 3: with the founder of con Academy.
Speaker 1: Plus Valentine's Day may now be in the rear view mirror,
Speaker 1: which means those in the flower industry are already thinking
Speaker 1: about their next big push. Mother's Day, The CEO of
Speaker 1: the online flower delivery company Urban Stem stops by to
Speaker 1: talk growth, tariffs, margins, and collaborations with the NFL.
Speaker 3: And when Harry met Sally Sleeveless in Seattle, The Notebook
Speaker 3: notting Hill, Bridget Jones, you know, Tim, those movies.
Speaker 1: I cannot believe there's another Bridget Jones.
Speaker 3: Can I just say that, I know, I know, Well,
Speaker 3: I gotta tell you the Romance movie apparently is getting
Speaker 3: a bit of a makeover, and it might go in
Speaker 3: a direction you uh probably weren't expecting. Also getting a
Speaker 3: makeover gaming PCs. We're going to tackle Bloomberg pursuits a
Speaker 3: little bit later on this hour.
Speaker 1: First up, though, as the US Department of Education maybe
Speaker 1: on the chopping block in the new administration, US Education
Speaker 1: gets its annual report card, and let's just say it's
Speaker 1: not great. That's right.
Speaker 3: Reading scores for eighth graders have hit a record low,
Speaker 3: math performance is struggling, and achievement gaps are whining despite
Speaker 3: major federal investments.
Speaker 1: Focusing on these gaps is Salcon, founder and CEO of
Speaker 1: Cohn Academy, the nonprofit that provides free lessons in math, history, economics,
Speaker 1: computer programming, and more. We started asking him if the
Speaker 1: bad results surprised him.
Speaker 8: Unfortunately not.
Speaker 11: You know, we've and the Nate folks made this clear.
Speaker 11: Also in their report. I think we still have the
Speaker 11: effects of the pandemic nationwide. The scores nationally, both in
Speaker 11: math and reading, both in fourth and eighth grade, still
Speaker 11: haven't recovered from the twenty nineteen level. This is true
Speaker 11: in almost every state as well. And it's you know,
Speaker 11: we had big gaps then a lot of kids kind
Speaker 11: of fell off the rails then and haven't fully gotten
Speaker 11: back on.
Speaker 8: And then there's just a lot of you.
Speaker 11: Know, complexity in serving different groups of students and demographic mix, etc.
Speaker 8: That probably has made it even harder. You know.
Speaker 3: What's worrying too, is that I think some would say
Speaker 3: it's it's the pandemic, yes, but we've had problems with
Speaker 3: our education system right across the country for a while here,
Speaker 3: and it feels like the gaps are widening. I mean,
Speaker 3: I want to ask you, I am curious, so because
Speaker 3: you've been in this world for a long time, I mean,
Speaker 3: what's happening with American education?
Speaker 9: You know?
Speaker 11: Unfortunately it's kind of a tale of two cities is
Speaker 11: the right metaphor here? But and the NAPE scores validated
Speaker 11: that the higher performing students actually started to pull further
Speaker 11: and further ahead, and a lot of times when you
Speaker 11: look at some of these Pieza rankings, when we compare
Speaker 11: ourselves to other countries, et cetera. If you were to
Speaker 11: separate some of the higher performing, wealthier schools and the suburbs,
Speaker 11: et cetera, they actually can compete with anyone in the world,
Speaker 11: actually do better than anyone in the world. But I
Speaker 11: think you have other large chunks of America where they're
Speaker 11: really really lagging, And these NAPE scores only only validated
Speaker 11: you had a third of eighth graders didn't even have
Speaker 11: basic reading comprehension. I just visited a school yesterday out
Speaker 11: here in northern California, and I met two English language
Speaker 11: learners who, you know, not only are they you know
Speaker 11: obviously can't speak English, but they haven't gone to school before,
Speaker 11: they haven't read before, or they can't read at all,
Speaker 11: even in their native language. So I think when you
Speaker 11: I think those types of difficulties are some of what
Speaker 11: you're seeing here on top of on top of the pandemic.
Speaker 11: And unfortunately I don't I don't think just doing more
Speaker 11: of the same is actually the solution here. This is
Speaker 11: something that we've always talked about at Kin Academy, is
Speaker 11: how do we personalize education more, you know, And I
Speaker 11: saw that teacher that that same teacher that had these
Speaker 11: two students who couldn't read, who are fifth graders, also
Speaker 11: had some students who are ready for ninth grade math.
Speaker 11: So they had a huge spread in that same classroom.
Speaker 11: And you can't just do one thing for all of
Speaker 11: those thirty students. And that's where we think technology can
Speaker 11: help that teacher address the needs of each each individual student.
Speaker 3: You know, the President has has cited how the US
Speaker 3: lags behind other Western nations despite federal spending on students,
Speaker 3: and you know, he is looking to potentially dismantle the
Speaker 3: Department of Education. Do you think that would be helpful?
Speaker 11: You know, it's it. We'll need to see how it
Speaker 11: all evolves. A lot of folks have been asking me this.
Speaker 11: Even in our own team. We work obviously with a
Speaker 11: lot of school districts. The Department of Education does a
Speaker 11: lot of things, but they aren't a major major funder
Speaker 11: of schools. Depending on what year you look at and
Speaker 11: what schools, anywhere between three and ten percent of funding
Speaker 11: in a given year comes from the federal Department of Education,
Speaker 11: and it tends to be tied to certain programs so
Speaker 11: some of those might suffer. Some of those are there
Speaker 11: by law. One of our board members is a for
Speaker 11: under Secretary of Education, and he was explaining to me
Speaker 11: yesterday a day before yesterday at our board meeting, that
Speaker 11: there are certain things in there that are just part
Speaker 11: of law that even if the Department of Education were dismantled,
Speaker 11: someone else would have to take it over the Department
Speaker 11: of the Treasury, Department or Health and Human Services, etc.
Speaker 11: So it's too early to tell exactly what the implications are,
Speaker 11: but most of education spending and policy actually does happen
Speaker 11: at the state and local level.
Speaker 3: Yeah, so this is where you think about like state taxes, right,
Speaker 3: or city taxes and so on and so forth that
Speaker 3: really are the determining factor. How can AI help with
Speaker 3: all of this? This is something you guys are certainly in
Speaker 3: the middle of and improve the gaps that we see
Speaker 3: within education across the United States.
Speaker 8: Yeah, this is something that we're definitely leaning into.
Speaker 11: And it's very easy to get enamored with technology, but
Speaker 11: I remind everyone this isn't about the technology. It's about
Speaker 11: the core problem you're trying to solve, And the problem
Speaker 11: we're trying to solve is The one we started talking
Speaker 11: about is you have a teacher in a classroom. Before
Speaker 11: the pandemic, your average teacher had three grade levels in
Speaker 11: the same classroom. They're all fifth graders, but some are
Speaker 11: operating in a second or third grade level. Some of
Speaker 11: them are ready to operate at a sixth or seventh
Speaker 11: grade level. It's gotten worse since the pandemic, as we
Speaker 11: just talked about. So if you're a teacher, how do
Speaker 11: you address all of those needs? How do you make
Speaker 11: sure some of the kids aren't bored and all some
Speaker 11: of the kids aren't lost. And so the opportunity is, well,
Speaker 11: what if you could personalize? In world class education has
Speaker 11: always looked like one to one. I always point out
Speaker 11: Alexander the Great had Aristotle as his personal tutor. We
Speaker 11: couldn't afford to give every student that. But what kind
Speaker 11: academy has been trying to do over the last fifteen
Speaker 11: twenty years is well, maybe we could approximate element of
Speaker 11: that with on demand video, with software and now generative AI.
Speaker 11: I write a lot about it in my book Brave
Speaker 11: New Words. We think generative AI. It's it's not going
Speaker 11: to do everything, it's not on a silver bullet, but
Speaker 11: Over time, it's going to get better and better at
Speaker 11: being able to provide even more personalized support, not just
Speaker 11: for students, but also also for teachers with things like
Speaker 11: lesson plans and grading papers and writing progress reports.
Speaker 1: Sally had you on back in May when Brave New
Speaker 1: Words came out how AI will revolutionize education and why
Speaker 1: that's a good thing. I spoke to someone yesterday who
Speaker 1: talked about the pace of development when it comes to
Speaker 1: AI is just unbelievable. Like he says, the world changes
Speaker 1: every few months as a result of this technology. How
Speaker 1: much has it changed since you wrote the book.
Speaker 8: It was actually one of my fears when I was
Speaker 8: writing the book.
Speaker 11: Write a book by AI, I will to be outdated
Speaker 11: of the day it comes out.
Speaker 8: Luckily, I still think it's pretty you know.
Speaker 11: I tried to make it pretty general, and even a
Speaker 11: year ago, when when you know, I was finishing up
Speaker 11: the writing, it was pretty clear how fast this was moving,
Speaker 11: so I tried to make a little bit more evergreen.
Speaker 11: But yeah, it's been mind blowingly fast. Not even every
Speaker 11: few months, I would say, sometimes on a daily basis.
Speaker 11: Things are things are evolving. A lot of what I
Speaker 11: challenged the con Academy team is what can we uniquely
Speaker 11: do as a nonprofit that other people aren't going to
Speaker 11: have the horizon or the motivation to work on? And
Speaker 11: what are we going to do that's really AI proof?
Speaker 11: And we think a lot of it is how do
Speaker 11: we connect humans together? Maybe using AI, but how do
Speaker 11: we for more human connections?
Speaker 8: Maybe?
Speaker 11: How do how do people create proof that they know
Speaker 11: something credentially? Once again, how do you how do you
Speaker 11: make sure it's pedagogically sound as opposed to just you know,
Speaker 11: throwing an AI in front of people.
Speaker 8: But yes, it is definitely.
Speaker 11: Something my head has spins almost on a daily basis.
Speaker 11: But you know everyone feels that way.
Speaker 4: You know, it's funny.
Speaker 3: Forgive me for doing this, but I guess because it's
Speaker 3: been front and center. You know, we're talking AI and
Speaker 3: we've been watching what's been going on in the US government,
Speaker 3: and The Washington Post had said representatives from Elon Musk's
Speaker 3: Dose Service have had sensitive data from across the Education
Speaker 3: Department into AI software to look into the agency's programs
Speaker 3: and spending to people familiar AI being used to investigate
Speaker 3: where there's personal data possibly accessed? You are in this world?
Speaker 3: Is that something we should be concerned about whether it's
Speaker 3: Department of Education or the Treasury Department.
Speaker 11: Well, you know, I don't I'm not an expert on
Speaker 11: exactly what has happened.
Speaker 8: But yes, anytime we're talking about.
Speaker 11: Data, data related to education in particular, you have to
Speaker 11: be super cautious about how it's being used, especially if
Speaker 11: it's potentially student data. This is something where we as
Speaker 11: we take this very seriously as a nonprofit, and when
Speaker 11: we go work with school districts we point out like
Speaker 11: not every for profit company has the same incentives.
Speaker 8: That we do. You have to be very cautious here
Speaker 8: on how you use it.
Speaker 11: Now if it's all on the up and up, and
Speaker 11: I don't know, I don't know what the fine print
Speaker 11: is on this data. You know, there could be uses
Speaker 11: of AI where you can use it to make sense
Speaker 11: of large amounts of information that otherwise, of you know,
Speaker 11: an individual human being would never be able to sift through.
Speaker 11: But yeah, I don't know details of how they're using it.
Speaker 4: No, that's fair. Hey.
Speaker 3: One other news thing that obviously we've been obsessed about
Speaker 3: the last couple of weeks Deep Seek, you know, and
Speaker 3: the prospect of AI maybe being less expensive to do,
Speaker 3: and the models to be able to do. When I
Speaker 3: think about education, might that make it even more accessible
Speaker 3: for students around the globe?
Speaker 11: Yeah, I mean I thought it was great news from
Speaker 11: from our point of view. The costs have already come
Speaker 11: down even before deep Seek by a factor of ten,
Speaker 11: and so I expected that to continue. And then deep
Speaker 11: Seek and some of their techniques I think is only
Speaker 11: going to accelerate it.
Speaker 8: But you know, I.
Speaker 11: Also point out there's an unending amount of things that
Speaker 11: we can use AI for. You know, basic chat bots
Speaker 11: are going to become close to free, very cheap. But
Speaker 11: now if the compute or if the if the applications
Speaker 11: use less compute and the compute gets cheaper, we're going
Speaker 11: to be able to do more real time, more audio,
Speaker 11: more visual things. And yes, in education in other places,
Speaker 11: I think that's only that's only a win for the
Speaker 11: application developers.
Speaker 1: What's the balance of technology in the classroom. It's a
Speaker 1: discussion that we had with you last time, but it
Speaker 1: seems like it's only becoming more and more of a thing.
Speaker 1: How do you use technology as a tool but not
Speaker 1: as a distraction.
Speaker 11: Yeah, And we have a school out here in Northern
Speaker 11: California's where my kids go to school con Lab School,
Speaker 11: and you know, if you were to visit the school,
Speaker 11: people say, oh, so sociocon Academy must be technology all
Speaker 11: the time.
Speaker 8: No, you'd actually see more human to.
Speaker 11: Human interaction than you would see I think at almost
Speaker 11: any other school. And I think it's all about I
Speaker 11: would say maybe depending on the age as you get older,
Speaker 11: middle school, high school, college, you could get up to
Speaker 11: thirty forty fifty percent leveraging technology. You're going to code,
Speaker 11: you're going to write a paper, you're going to edit video,
Speaker 11: you're going to do personalized practice on con academy to
Speaker 11: fill in your gaps. And then what that does is
Speaker 11: that liberates the class time so that you don't have
Speaker 11: to give the lectures anymore. You don't have a bunch
Speaker 11: of kids with their fingers on their lips just passively listening.
Speaker 11: You can have the kids work on harder problems. You
Speaker 11: can they can do simulations, they can do games, and
Speaker 11: that's what we try to do. And you know, I
Speaker 11: always point out, even without technology, you can have very
Speaker 11: dehumanizing classrooms, but if you use technology, well you could
Speaker 11: have very humanizing classrooms.
Speaker 6: Yeah.
Speaker 3: Right, You just think about kind of where it could go.
Speaker 3: And especially the idea of personalization in terms of teaching
Speaker 3: could be really a cool thing.
Speaker 4: You know.
Speaker 3: The other thing I think about with teaching and AI
Speaker 3: is I just think about if you're I was a
Speaker 3: pretty shy kid and hard to believe, but like might
Speaker 3: be afraid to like offer up an answer or something
Speaker 3: because you think it's silly. But maybe if you're working
Speaker 3: with an AI teacher or ta oh, like just think
Speaker 3: about what you can maybe get out of that.
Speaker 1: I think du Lingo said that they have these AI
Speaker 1: educators rather than live people because they find that people
Speaker 1: who are learning languages want to interact with that tech. Yeah,
Speaker 1: that makes.
Speaker 3: Completely sense on because you feel embarrassed about like your
Speaker 3: pronunciations or something.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 1: Valentine's Day and the time around it among the biggest
Speaker 1: times a year when it comes to the flower industry,
Speaker 1: So needless to say, Minakhi Lala is pretty busy right now.
Speaker 1: She's the CEO at the online flower delivery company, Urban Stems.
Speaker 1: She joins us from one of those facilities. Minakshi, thanks
Speaker 1: so much for joining us. How's business?
Speaker 12: Thank you so much for having me. It's busy, It's
Speaker 12: our super Bowl weekend.
Speaker 1: I mean contextualize that a little bit for us, Like, okay,
Speaker 1: super Bowl sounds big. We know Mother's Day is big
Speaker 1: also in terms of your revenue, Like how big is
Speaker 1: this time period for the company?
Speaker 12: So Urban Stems will ship about one point eight million
Speaker 12: floral stems to people across forty eight states this weekend.
Speaker 12: This holiday is our second peak bite cycle. Like you said,
Speaker 12: Mother's Day is definitely our peak. But what has changed
Speaker 12: this year is we are seeing consumers spend more than
Speaker 12: they have in years prior on this holiday. Consumers are
Speaker 12: expected to spend a record of twenty seven point five
Speaker 12: billion dollars this year versus twenty five point eight billion
Speaker 12: in last year. This is just slightly or cozy now
Speaker 12: for slightly above the record breaking twenty seven point four
Speaker 12: billion that was set in twenty twenty during COVID times.
Speaker 3: Hey, so is that because things are costing more or
Speaker 3: that there are actually more individual transactions?
Speaker 12: They are more individual transactions. But what we are seeing
Speaker 12: is that our customer is responding to higher value product.
Speaker 12: If they see better design, better quality product that is
Speaker 12: meaningful to them, they are investing dollars in It.
Speaker 1: Remind us where you play in the ecosystem of flowers,
Speaker 1: because the cost really runs the gamut. I mean, you
Speaker 1: can spend as much as you want to spend to
Speaker 1: get ab okay of flowers delivered to somebody. Where does
Speaker 1: urban Where's Urban stems sweet spot?
Speaker 12: So Urban Stems takes a lot of pride in saying
Speaker 12: that we are we play in the higher average order
Speaker 12: value in the higher AOV game, and our average basket
Speaker 12: size is one hundred and twenty five dollars, already high
Speaker 12: for flowers and for flowers that are shipped like flowers
Speaker 12: for an e commerce business. And also to your point earlier, yes,
Speaker 12: the cost of product has gone up. However, we have
Speaker 12: seen that our customers tend to resonate towards the special.
Speaker 12: They want uniqueness, they want differentiation, they want special product.
Speaker 12: They don't want the conventional, the predictable, the standard one
Speaker 12: dozen roses for Valentine's Day. They want something above and
Speaker 12: beyond that. And we have seen ten percent growth in
Speaker 12: our AOV year over year, and we are also seeing
Speaker 12: our higher priced arrangements are selling ahead of plan with
Speaker 12: a thirteen percent growth in average.
Speaker 3: So you've been doing this for a while. Year after year,
Speaker 3: You've gone through, right, some difficult times. I think about,
Speaker 3: you know, so many of the businesses that we've talked
Speaker 3: to you that had to kind of get themselves through
Speaker 3: the pandemic, although I sent a fair amount of flowers
Speaker 3: sometimes during the pandemic, and just you know, give us
Speaker 3: an idea of how this business cycle is feeling versus
Speaker 3: what we've seen maybe over the last few years, which
Speaker 3: has you know, included some regular cycles and some very
Speaker 3: unusual cycles.
Speaker 12: Yeah, there was definitely a post pandemic adjustment in this business.
Speaker 12: But our customers are opting in for more premier gift
Speaker 12: options and they continue to be really focused on uniqueness
Speaker 12: and value. When we talk about people celebrating, whether it's
Speaker 12: Valentine's dates, birthdays, or anniversaries, they are coming to us
Speaker 12: for unique product offerings and our partnership strategy. If we
Speaker 12: give them reasons to buy, they are coming to us
Speaker 12: and price does not seen to be a barrier. And hence,
Speaker 12: you know, the metric I quoted earlier ten percent ao
Speaker 12: we growth year over year. For a business like ours
Speaker 12: that plays in the premium space, it's quite extraordinary.
Speaker 1: We got to talk about what's happening in Washington right
Speaker 1: now in the idea of tariffs, because we know that
Speaker 1: so many flowers that come to the United States come
Speaker 1: well that's sort of in the definition, they come from
Speaker 1: around the world, these flowers. Where do you get your flowers?
Speaker 12: So we get our flowers from eight countries around the world,
Speaker 12: but a large percentage comes from Colombia and Ecuador and Europe.
Speaker 1: So you must have been breathing a huge sigh of
Speaker 1: relief when Columbia and the United States decided not to
Speaker 1: impose tariffs and retaliatory tariffs on one another just a
Speaker 1: few weeks ago.
Speaker 4: That's right.
Speaker 12: That was a close call, and that could have had
Speaker 12: massive ripple effects on the industry, not just for floral
Speaker 12: businesses like ours, but also for consumers, wholesalers, logistics partners,
Speaker 12: and even local florists. You know, the floral industry is
Speaker 12: a three point eight billion dollar market within the United States.
Speaker 12: There are tons of jobs tied to this industry, and
Speaker 12: eighty percent of US flower imports come from Columbia. A
Speaker 12: tariff so close to a peak cycle would have drastically
Speaker 12: increased costs across the entire floral supply chain.
Speaker 1: Well, it could have been a twenty five percent tariff
Speaker 1: on goods from Colombia. We don't know all the details.
Speaker 1: Of course, we're speaking kind of hypothetically at this point
Speaker 1: because it laid out and was resolved before it actually happened.
Speaker 1: But what would that mean for your margins and what
Speaker 1: would it mean for your prices? Can you give us
Speaker 1: some numbers about how that would increase prices for you?
Speaker 12: Yeah, even a temporary tariff to your point, we don't
Speaker 12: have the specifics. Twenty five percent was a number that was,
Speaker 12: you know, in being discussed.
Speaker 3: But even a.
Speaker 12: Temporary tariff increase could have increased our prices overnight. It
Speaker 12: could have taken consumer It would have hit the consumer
Speaker 12: average retail value by ten to fifteen percent, and that's
Speaker 12: a huge swing. During the peak cycles like Valentine's Day
Speaker 12: or Mother's Day, supply chain costs are very high during
Speaker 12: peak seasonality. We work with perishable product, so we are
Speaker 12: dealing with scale ten x, fifteen x twenty x scale
Speaker 12: during these holidays. So in an environment when your supply
Speaker 12: chain costs are high because you're catching time, you're matching speed,
Speaker 12: you're building scale in the same timeframe. Additional tariffs would
Speaker 12: have really impacted the end consumer, you.
Speaker 8: Know, M two.
Speaker 3: When you think about the flower industry, your industry, it's
Speaker 3: not like it's so easy to just flip a switch
Speaker 3: right and get us farmers to all of a sudden
Speaker 3: be growing what you need. It's just it's not how
Speaker 3: it works. It wouldn't be easy. There's not necessarily the
Speaker 3: ability maybe to even do that.
Speaker 12: No, it's not our projections. You know, it is very
Speaker 12: difficult for consumers to appreciate what they have in front
Speaker 12: of them and what the cycle of that looks like.
Speaker 12: The flowers that are sitting in your homes, on your
Speaker 12: coffee table or your dining table, the planning and forecasting
Speaker 12: cycle for those florals is a year ahead, So we
Speaker 12: forecast Valentine's Day or Mother's Day or Easter or holiday
Speaker 12: volumes a year ahead, so our farms know what to
Speaker 12: plant and what to offer businesses out there, and each
Speaker 12: business is different. But for urban stems, we play in
Speaker 12: the premium space, so we do not necessarily work with
Speaker 12: commodity stems. That are grown in bulk. We build projections
Speaker 12: with our farms for the unique stems that we put
Speaker 12: out in our assortments, and we source from eight countries
Speaker 12: around the world and create bookquets that have stems from
Speaker 12: eight countries around the world. It's a very very complex
Speaker 12: supply chain and pivoting at that scale so close to
Speaker 12: a large volume week, which is ten, you know, ten
Speaker 12: x of our average week, it's quite a challenge and
Speaker 12: candidly almost impossible to pull off.
Speaker 3: I am also curious, you know, is it like the
Speaker 3: fashion industry where there are trends every year or there
Speaker 3: might be I don't know, certain you know, suppliers that
Speaker 3: are designing certain types of you know, fabric or designs.
Speaker 3: In the floral industry, are you guys, can you kind
Speaker 3: of do whatever you want every year? Or is it like, listen,
Speaker 3: you know, this is a crop of flowers that basically
Speaker 3: really came in good or we're expecting it to be good,
Speaker 3: Like how does it work?
Speaker 12: Yeah, so that's a very interesting question. So I spent
Speaker 12: twenty two years of my life in fashion retail before
Speaker 12: coming to earth Ms and running this business. There are
Speaker 12: there are a lot of similarities between fashion retail and
Speaker 12: floral trends. You know, when we look at trends beyond
Speaker 12: Valentine's Day into Mother's Day into the spring summer cycle
Speaker 12: of this year, we're seeing customers lean into a lot
Speaker 12: of color, more brighter colors, and more whimsical florals. We
Speaker 12: have also seen shorter arrangements, centerpiece style arrangements. That category
Speaker 12: has exploded as home entertaining trends continued to rise in popularity.
Speaker 12: Our customers are asking for the unexpected, and a lot
Speaker 12: of our design process does take, you know, a nod
Speaker 12: from the fashion trends, the color palettes, the color of
Speaker 12: the years, the messaging around you know, big trends happening
Speaker 12: in the business we do. We do work very closely
Speaker 12: with those forecasts and with those trend predictions to build
Speaker 12: our collection. What makes this business, you know, what's a
Speaker 12: blessing and a curse for us is the perishability aspect
Speaker 12: of the product. So weather plays a huge factor. So
Speaker 12: we can plan ahead, we can design the product, but
Speaker 12: if the you know, if there's too much rain in
Speaker 12: Ecuador or there's too much rain in Holland like they
Speaker 12: have been experiencing this year, the productivity changes and in
Speaker 12: in weeks of production, we have to pivot. We have
Speaker 12: to alter our designs, pivot and strategize on ensuring that
Speaker 12: we're still bringing that uniqueness and that premium flavor to
Speaker 12: our customers.
Speaker 1: And actually, forgive me, because I know that nobody wants
Speaker 1: to hear about competitors when they're in an interview, but
Speaker 1: I can't believe you're doing I'm doing it. We spoke
Speaker 1: recently to Christina Stembelover at farm Girl Flowers and she
Speaker 1: was pretty candid with us about the margin pressure that
Speaker 1: the company that you know, they that the industry experiences.
Speaker 1: Despite the fact that you know you could spend over
Speaker 1: one hundred dollars on a bouquet, the margins are really
Speaker 1: tough to make work between the cost of the product,
Speaker 1: the labor, and then of course the shipping. How are
Speaker 1: your margins?
Speaker 12: Look, Christina has a great business, and we love a
Speaker 12: healthy competition, and she's definitely one of the best in
Speaker 12: the business. But I believe our margins have grown stronger
Speaker 12: over the years. We have driven high amount of efficiency
Speaker 12: in our operations, in supply chain planning, but also you know,
Speaker 12: our our unique differentiators. We bring sheet stylish arrangements designed
Speaker 12: in New York by our in house floral designers. We
Speaker 12: design with unique florals and botanicals from around the world.
Speaker 12: You will not find that anywhere else. They're hands selected
Speaker 12: from the farms around the world, and the designs are
Speaker 12: created in partnership with our farms. And we we you know,
Speaker 12: we stand by what we ship and what we design
Speaker 12: and when you put out on our site, you will
Speaker 12: see you will get what you see on urbanstems dot com.
Speaker 12: It's a very transparent, trusted farm to door delivery with
Speaker 12: next day service, with same day service. The product is
Speaker 12: you know handled. We have eyes on it end to end,
Speaker 12: and our differentiator is really important for our customer. They
Speaker 12: value that white glove service and hence, you know, the
Speaker 12: AOV increases. We hear, we hear our competitors on the
Speaker 12: margin pressure, but we believe our differentiator is what stands
Speaker 12: out to our customer and they continue to work with
Speaker 12: you know, they continue to come to us for that
Speaker 12: higher EOEI product.
Speaker 3: Hey just to wrap up here, So as people are
Speaker 3: enjoying their Valentine's debouquets throughout the weekend.
Speaker 13: Is it mostly going to be roses? Like?
Speaker 3: Is that a should we assume it's roses or is
Speaker 3: it a lot of other stuff?
Speaker 12: Well, there's a lot of other stuff, especially at Urban Stams.
Speaker 12: We as I said, we believe in bringing florals and
Speaker 12: botanicals from all around the world, so your arrangements are special.
Speaker 12: We have, you know, sixty five varieties of floral arrangements
Speaker 12: on our side. We have the plans. We have a
Speaker 12: wide assortment for you to pick from. But I think
Speaker 12: what highlights this holiday and the future holidays to come
Speaker 12: in the future. Collections to come on Urban Stams is
Speaker 12: including bundles. We have bundles with iconic partners. We have
Speaker 12: a partnership with eight and H Bagels where you can
Speaker 12: enjoy Valentine's weekend with a dozen bagels and Urban Stems flowers.
Speaker 12: We also have a bouquet designed by NFL Ravens Wide
Speaker 12: Receivers Dave Flowers, who's serving as our chief flowers this season.
Speaker 12: So yeah, so we have a bunch of fun partnerships.
Speaker 12: So when you come to Urban Stems, you come for
Speaker 12: that premium gift option and you come for you know,
Speaker 12: come and have fun with it. There are a lot
Speaker 12: of highlights. There are a lot of fun partnerships coming up.
Speaker 12: We also did you have skews around mod sexual products?
Speaker 12: You know, so there's there's all kinds of fun offerings.
Speaker 4: They're not just.
Speaker 1: Roses Manactually, La La ceo of the online flower delivery
Speaker 1: company Urban Stems.
Speaker 3: Still ahead on Bloomberg Business Week, putting the horror in
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Speaker 13: Watches out most of the time perceived as a time.
Speaker 4: So it's very chic and posh.
Speaker 1: The most powerful car made in the US.
Speaker 11: You get the beautiful interior or the iconic design here.
Speaker 2: Now it's time to take a look at luxury with
Speaker 2: Bloomberg Pursuits.
Speaker 3: How does an iconic Swiss watchmaker celebrate it's two hundred
Speaker 3: and seventieth anniversary. Or romance movies get a.
Speaker 1: Refresh can you call it a refresher or we'll talk
Speaker 1: about that at the moment.
Speaker 3: Or gaming pieces get a reboot as users think literally
Speaker 3: outside the gray box.
Speaker 1: All that more, it's time for Bloomberg Pursuits and some
Speaker 1: of the stories featured in the February issue of Bloomberg
Speaker 1: BusinessWeek magazine, out on newsstands, now online, and always on
Speaker 1: the Bloomberg terminal. With us is the editor of Bloomberg Pursuits,
Speaker 1: Chris Rouser. Chris, two hundred and seventy years. It doesn't
Speaker 1: feel like a typical milestone for any sort of anniversary.
Speaker 13: Yeah, that's a good point. So Vastron Constantine is one
Speaker 13: of the oldest watchmaking brands, and they've been in continual
Speaker 13: existence for two hundred and seventy years, so they've been
Speaker 13: making pocket watches and clocks and watches for that long.
Speaker 13: A lot of brands that you know that are very
Speaker 13: old went away, came back, people bought the rights to
Speaker 13: the brand. So I think they feel like any five
Speaker 13: year milestone is like a big celebration because we've been oh,
Speaker 13: we've been doing this a long time.
Speaker 1: What does one do for a two hundred and seventieth celebration.
Speaker 13: They're throwing a bunch of parties, they're releasing some new watches.
Speaker 13: But the big thing that we wrote about this month
Speaker 13: is that they released this watch which has been very
Speaker 13: anticipated by its clients. It's called the Historieks two to
Speaker 13: two and it's in steel and it is a steel
Speaker 13: sports watch with an integrated bracelet. It looks very seventies
Speaker 13: because it was originally a watch in the seventies and
Speaker 13: then they revived it, and they revived it a couple
Speaker 13: of years ago in gold and it became like the
Speaker 13: watch that everybody talked about for a while, but people
Speaker 13: were waiting for a steel version. And the steel version
Speaker 13: came out this year in honor of the two hundred
Speaker 13: and seventieth anniversary, and it costs less than the gold version,
Speaker 13: but it's still thirty two thousand dollars, which is a lot.
Speaker 3: Can I ask you, you know, I've read this story and
Speaker 3: I don't know if we ask you this all the time,
Speaker 3: why do they cost so much? I mean, is the
Speaker 3: margins just off the charts or I know they're complicated.
Speaker 13: Yeah, so this watch is actually not very not very complicated.
Speaker 4: Right.
Speaker 13: It tells the time and it tells the date. And
Speaker 13: you know, this company is one of the holy Trinity
Speaker 13: of Swiss watch making. Everybody really revers it and they
Speaker 13: make only about thirty five thousand watches a year, they
Speaker 13: average like forty two thousand dollars, and it's because people
Speaker 13: want them, honestly, like supply demand. Yeah, they're very beautifully made,
Speaker 13: they're handcrafted, and they just they look very cool. They're
Speaker 13: very hard to get and people are willing to pay
Speaker 13: that much. And that's what the margin is on watches
Speaker 13: at that level.
Speaker 1: You mentioned. They've been in continual existence for two hundred
Speaker 1: and seventy years, whereas many other companies and brands have not.
Speaker 1: How have they been able to pull that off?
Speaker 13: Well, they're Swiss, so they're very patient and they are
Speaker 13: and diligent and careful and they just have not messed
Speaker 13: around with quality. And they you know, during the Court's
Speaker 13: watch crisis, when a lot of brands started making electric
Speaker 13: watches basically with batteries, they they didn't go too far
Speaker 13: down that road and they continue to focus on mechanical
Speaker 13: precision and stuff.
Speaker 3: And you know, the story kicks off with the so
Speaker 3: called holy Trinity of Swiss watchmakers and these guys are
Speaker 3: among them. Is that just three brands that have just
Speaker 3: been around forever or just the kind of iconic ones protect.
Speaker 13: Leap and yeah, yeah, they're they're called that. It's called
Speaker 13: that because they're really focused on craftsman ship and quality.
Speaker 9: And they are.
Speaker 13: They don't make that many watches, So rolex Is probably
Speaker 13: is the most powerful watch company and it and people
Speaker 13: love it and it's maybe the most coveted certain models.
Speaker 13: But they make a million watches.
Speaker 3: A year and get one on Fifth Avenue for like
Speaker 3: thirty bucks.
Speaker 1: Yeah, yes, canals. I don't say that.
Speaker 3: I don't know, police might come after you.
Speaker 1: I don't know if that's a real roll.
Speaker 3: It's not.
Speaker 4: I'm just kidding.
Speaker 3: Go ahead, So you're just saying they're just.
Speaker 13: Yeah, they're rare, they're hard to get, and they're very beautiful.
Speaker 3: I love it. I love it.
Speaker 7: I love the clean.
Speaker 8: I got to go to the romance.
Speaker 1: Story because I'm like reading this, Jack Quad.
Speaker 11: This.
Speaker 3: Tell us about what's going on with romance movies.
Speaker 13: So for a while now, romance like rom coms have
Speaker 13: not succeeded at the box office. People have been have
Speaker 13: had a hard time doing big budget rom comms. So
Speaker 13: a lot of times what you'll see is they'll do
Speaker 13: like you'll watch Netflix and like a huge like rom
Speaker 13: com that you think of as like a big deal
Speaker 13: with like Channing Tatum and Sandra Bullock or something will
Speaker 13: be on netflixkisty, yeah, and not and not any judge me,
Speaker 13: because people are just aren't going to theaters for that.
Speaker 13: They are going to theaters for horror. And so now
Speaker 13: you're seeing a bunch of tours and directors making romance
Speaker 13: movies that are also horror films. So you mentioned Jack Quade,
Speaker 13: He's in Companion, which came out at the end of January,
Speaker 13: which is about Jack Quade who gets a like a
Speaker 13: love robot, and it's sort of a romance slash horror
Speaker 13: about her name is Iris. Her name is Iris, so
Speaker 13: he kind of programs.
Speaker 3: Her right to like love him, love him.
Speaker 13: Yeah, and then things go awry.
Speaker 1: Bridget Jones is back. Yes, Bridgitte Jones, this is news
Speaker 1: to me. Maybe I live under a rock.
Speaker 13: No Bridget to I love bridge Jones. So Bridget Jones
Speaker 13: mad about the boy coming out around Valentine's Day and
Speaker 13: it is not a horror, it's not horror. It's still
Speaker 13: like kind of a oh poor Bridget Jones. But it's
Speaker 13: based on the premise that Mark Darcy died and so
Speaker 13: she has to find love in her fifties poor Colin
Speaker 13: Firth and do you know find in Love in your fifties?
Speaker 13: Nothing's more horrifying than that.
Speaker 8: But it sad but true.
Speaker 13: Kids only it's on streaming. You know that movie was
Speaker 13: a huge movie in theaters when it originally came out,
Speaker 13: the first one, and now theater it's just direct to streaming.
Speaker 3: There's a great quote in here. I guess is it
Speaker 3: by the guy who did.
Speaker 4: I don't know.
Speaker 1: He doesn't know which one you're gonna say.
Speaker 3: It says, I was just like, I want to see
Speaker 3: a movie where Meg Ryan gets decapitate. It says Hard
Speaker 3: Eyes co writer Christopher Landon. I mean, I get it.
Speaker 3: It's just a changing thing. But who knew that? I mean,
Speaker 3: we talk about right the rise of Horror. We've talked
Speaker 3: about that. I feel like our screen screen Time team
Speaker 3: of Time.
Speaker 13: Because it's very creative. It's a very very creative field now.
Speaker 13: And even Honora, which everybody really likes from last year
Speaker 13: is starts out as a love story and then is
Speaker 13: really not that all right?
Speaker 3: Where do you want to go?
Speaker 4: Kids?
Speaker 1: I want to go to Mexico. Where do you want
Speaker 1: to go?
Speaker 13: I want to go to me three.
Speaker 1: So there's this thing I like about what's written about
Speaker 1: in Pursuits this this edition, Chris, where it's the idea
Speaker 1: that you have this all inclusive resort and you're not
Speaker 1: surrounded by students from business school.
Speaker 10: They say children.
Speaker 1: There are children in a certain extent, little people. They're
Speaker 1: there for the all you can eat, all you can drink,
Speaker 1: stay up all night partying and getting wasted.
Speaker 13: Yeah, so Mary and a bunch of other hotel companies
Speaker 13: are really prioritizing all inclusive resorts over the next few
Speaker 13: years and not what you think of as like spring
Speaker 13: break places like I went to the Dominican Republic for
Speaker 13: spring break and stated and all you can eat and
Speaker 13: drink resort and it was a problem. Now you recently
Speaker 13: did this no the first break and you bore a
Speaker 13: bracelet and it was all you can eat buffets, and
Speaker 13: you were always kind of like, ill.
Speaker 1: I don't want to hear about that.
Speaker 6: That's like a red passage.
Speaker 13: But people, it's actually the vibe of an all inclusive
Speaker 13: resort can be nice because you're not signing, you know,
Speaker 13: very expensive bills all the time. You're just going in
Speaker 13: and out. And so Marriott thinks they can create a
Speaker 13: line of hotels where it's adults only, so there's no children,
Speaker 13: and it's uh, it's not buffets, it's meals for lunch
Speaker 13: and dinner at fancy restaurants. And you're just not paying
Speaker 13: bills all the time. You're just walking around as if
Speaker 13: it's like your house, but your house is like this big,
Speaker 13: beautiful resort. And so we sent Lily on our team
Speaker 13: to go to al Mare, which is on Elam Harris
Speaker 13: in mex and she checked it out and it was
Speaker 13: like mostly people in their forties. It was not a
Speaker 13: party party scene. You could hear the parties at the
Speaker 13: neighboring resorts. I love that, but this one like you
Speaker 13: couldn't get a drink at the bar after ten pm.
Speaker 13: And it was very much wake up in the morning,
Speaker 13: go to the beach, go to the pool, workshops, do workshops.
Speaker 1: But she did right that some of the things that
Speaker 1: she did, the excursions that sound great, we're kind of
Speaker 1: sparsely attended.
Speaker 13: Yeah, so they're trying to also add this layer which
Speaker 13: a lot of hotels are doing now, which is to
Speaker 13: connect you with the community around the resort so you
Speaker 13: more conscious travel. Right, So money goes back into more
Speaker 13: people in businesses that live around resorts, and also you
Speaker 13: just become aware of a space and you have a
Speaker 13: better experience of that space and in community. And so
Speaker 13: she went to like a ceramics class and she went
Speaker 13: to some other like a run hiking run kind of thing,
Speaker 13: and she thought, Oh, I'll beat like other people at
Speaker 13: the resort. And people turns out I want to hang
Speaker 13: out by the pool, yeah, which I get, which I
Speaker 13: totally can.
Speaker 3: Hey listen, we only got about a minute or so left.
Speaker 1: I just want to Carol, I'm gonna blow up your
Speaker 1: spot here. She's Carol's like looking at these gaming PCs
Speaker 1: and what is this?
Speaker 6: What are these things?
Speaker 1: We have said, they're beautiful.
Speaker 13: We have a story by Cecilia on the by Cecilia
Speaker 13: Donasasio on the Tech Team, which is about gaming PCs,
Speaker 13: which are computers like the computer that you would have
Speaker 13: in your house that people use to play video games.
Speaker 13: So it's not a console like an Xbox that you
Speaker 13: play specifically for games. It's a computer that you've used
Speaker 13: it for games. And people have taken these old gray
Speaker 13: boxes like that you used to get from HP and
Speaker 13: really kitted them out with like additional processing power and
Speaker 13: visual visually beautiful stuff. So you know, like pink chords
Speaker 13: fans that are Neon lights and they have glass sides,
Speaker 13: like it's an old Ferrari where you can see the
Speaker 13: engines through the glass roof. And so we we shot
Speaker 13: a bunch of them and they're very cool. And you
Speaker 13: can either do it yourself, which seems insane to me,
Speaker 13: or you can buy it from a company that will.
Speaker 9: Do it for you.
Speaker 13: So like the average like PC costs like six hundred
Speaker 13: and seven hundred dollars and these ones cost more like
Speaker 13: sixteen hundred twenty.
Speaker 3: To call him like hot rod PC builders. Right, it's
Speaker 3: like how you kind of like, I guess trick up
Speaker 3: a car or something.
Speaker 1: I will say, my cousin who's a bit of a gamer,
Speaker 1: actually for Christmas got his dad my uncle uh a
Speaker 1: like kit and they built this together. And that they've
Speaker 1: done this, it's very cool. It was like their gift.
Speaker 1: It was pretty cool.
Speaker 10: Yeah.
Speaker 13: And gaming is I mean three billion people gamed during
Speaker 13: the pandemic, Like it's a huge thing obviously, and it's
Speaker 13: a many many billion dollar industry. And so some of
Speaker 13: these companies that make these kid it out PCs are
Speaker 13: making a billion more than a billion a.
Speaker 1: Year I'll be honest. Sometimes I walk by Carol's desk
Speaker 1: in the middle of the day and she's just playing Fortnite,
Speaker 1: and I'm like Carol, Like, Carol's have to get to work.
Speaker 1: We ever showed you a lot of these that don't
Speaker 1: stop gaming.
Speaker 3: Yeah, mine would have like, you know, be pink and
Speaker 3: have Barbie's probably.
Speaker 13: All over it, and these billions of views on TikTok,
Speaker 13: by the way.
Speaker 3: And have the most advanced and video chips. That was
Speaker 3: also kind of cool that these these people are lining
Speaker 3: up for you know, the n video We think about
Speaker 3: Nvidia and AI, but the gaming.
Speaker 1: Chips, well, that's that's in videos, uh in DNA, that's
Speaker 1: like you know, I know, I know that's what they were.
Speaker 13: Doing because without it you can't the games are so
Speaker 13: crazy beautiful now that they render. Without that kind of compute,
Speaker 13: you can't render like individual hairs on Link's head, you know.
Speaker 13: So people want to want all of that experience.
Speaker 3: I am not.
Speaker 1: Playing what do you play? If you're not playing Fortnite,
Speaker 1: then what are you doing?
Speaker 13: World of Warcraft?
Speaker 8: Oh?
Speaker 1: World of Craft that's what it is. But unlike Elon
Speaker 1: Musk who allegedly had someone else play for him, Carol's
Speaker 1: getting the high scores herself.
Speaker 3: Yes, I know, I didn't know that either.
Speaker 8: You're just full of like lots of information.
Speaker 3: Okay, we're a little wacky on this.
Speaker 4: Uh.
Speaker 3: This edition of Bloomberg Pursuits good stuff as always, Chris,
Speaker 3: thank you so much.
Speaker 13: We really appreciate it.
Speaker 1: That is the editor of Bloomberg Pursuits, Chris Rouser, and that.
Speaker 3: Wraps up the weekend edition of Bloomberg Business Week from
Speaker 3: Bloomberg Radio. Thank you so much for joining us.
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