WEBVTT - Bloomberg Businessweek Weekend - February 14th, 2025 0:00:00.280 --> 0:00:07.240 Bloomberg Audio Studios, Podcasts, radio news. 0:00:08.760 --> 0:00:12.800 This is Bloomberg Business Week Insight from the reporters and 0:00:12.960 --> 0:00:16.960 editors that bring you America's most trusted business magazine, plus 0:00:17.160 --> 0:00:20.959 global business, finance and tech news. The Bloomberg Business Week 0:00:20.960 --> 0:00:25.919 Podcast with Carol Masser and Tim Stenovek on Bloomberg Radio. 0:00:26.560 --> 0:00:29.480 Hi, everyone, Welcome to the Bloomberg Business Week Weekend Podcast. 0:00:29.800 --> 0:00:33.239 This past week brought US tariff talk too hot, inflation 0:00:33.360 --> 0:00:36.400 prints fetchier, J Powell saying that the US Central Bank 0:00:36.479 --> 0:00:39.040 is in no rush to lower interest rates as there 0:00:39.159 --> 0:00:42.239 is still more work to do on inflation, and an 0:00:42.280 --> 0:00:45.240 AI summit in Paris where Vice President j. D Vance 0:00:45.240 --> 0:00:48.159 said artificial intelligence chips need to be made in the 0:00:48.240 --> 0:00:52.279 United States. That sent higher shares of Intel and Global Founderies. 0:00:52.640 --> 0:00:55.240 Investors took their cues from that and really from the 0:00:55.240 --> 0:00:57.520 comments out of the Oval Office and President Trump and 0:00:57.520 --> 0:01:01.000 his Head of Government Efficiency Elon Musk, on that we 0:01:01.040 --> 0:01:03.480 look at what critics say is the chaos caused by 0:01:03.480 --> 0:01:06.440 his DOGE office that may threaten many safety nets. 0:01:06.520 --> 0:01:08.640 Plus we get a read on the all important housing 0:01:08.680 --> 0:01:11.319 market with the CEO of Zillo, and to look at 0:01:11.440 --> 0:01:14.720 tech spend in the business application software space with the 0:01:14.760 --> 0:01:16.600 co founder and CEO of IT, Lassian. 0:01:17.000 --> 0:01:19.440 He also had news to announce in the world of 0:01:19.520 --> 0:01:22.279 auto racing. All that to come, we begin with Elon 0:01:22.360 --> 0:01:26.640 Musk's attemp set a government makeover via his DOGE team. 0:01:26.840 --> 0:01:29.759 President Trump earlier in the week signed an executive order 0:01:29.800 --> 0:01:33.240 with Elon standing by his side, directing federal agencies to 0:01:33.360 --> 0:01:37.000 coordinate and consult with DOGE to cut jobs and limit hiring, 0:01:37.400 --> 0:01:40.600 essentially giving the billionaire more power within the US government. 0:01:40.880 --> 0:01:44.440 On January thirty, first, Doze acquired access to payment systems 0:01:44.480 --> 0:01:48.760 inside the Department of the Treasury. Musk has targeted certain organizations, 0:01:48.800 --> 0:01:52.360 including Lutheran charities, one of which we've talked to here 0:01:52.400 --> 0:01:55.360 on Bloomberg business Week. He suggested that they are involved 0:01:55.400 --> 0:01:58.720 in illegal activities, leading to fears that their funding will 0:01:58.720 --> 0:01:59.320 be cut off. 0:01:59.400 --> 0:02:01.640 Now, this too is about what some say is the 0:02:01.680 --> 0:02:04.640 DOGE chaos and that it threatens the safety net of many. 0:02:05.080 --> 0:02:08.000 Writing all about it is Bloomberg Business Week columnist and 0:02:08.040 --> 0:02:10.880 co host of the Elon Inc. Podcast Max Chafkin. 0:02:11.200 --> 0:02:13.919 Over the weekend that Elon Musk got access to the 0:02:13.960 --> 0:02:15.079 Treasury payment. 0:02:14.840 --> 0:02:17.720 System, which was basically right when Trump became president. 0:02:17.800 --> 0:02:19.160 Yeah, it was. I think it was about a week 0:02:19.280 --> 0:02:22.119 after Trump became president. You had all these doze employees 0:02:22.120 --> 0:02:25.359 fan onto the government. They're all kind of finding stuff, right, 0:02:25.520 --> 0:02:27.560 and it's like some of this stuff is sort of 0:02:27.560 --> 0:02:30.800 big stuff, some of it's small stuff. A lot of 0:02:30.840 --> 0:02:33.960 it is outrageous, at least from the perspective of Elon Musk. 0:02:34.240 --> 0:02:39.120 And during this sort of flurry of activity, Mike Flynn, 0:02:39.160 --> 0:02:42.320 who was the National security advisor to President Trump briefly 0:02:42.600 --> 0:02:46.360 in like twenty seventeen, he had a whole back legal 0:02:46.400 --> 0:02:48.280 back and forth or whatever. He's now kind of a 0:02:48.320 --> 0:02:52.360 right wing activist. He tweets this spreadsheet containing the names 0:02:52.400 --> 0:02:56.000 of about a dozen charities. These are small, These are 0:02:56.000 --> 0:02:59.320 basically mostly local charities, a lot of them in the Midwest, 0:02:59.800 --> 0:03:02.120 and all affiliated with the Lutheran Church, or most of 0:03:02.160 --> 0:03:05.200 them were affiliated with the Lutheran Church. And says, basically, 0:03:05.360 --> 0:03:07.840 this is money laundering. Someone should do something about it. 0:03:08.000 --> 0:03:11.680 Elon Musk tweets, all right, we're shutting it down. And 0:03:12.440 --> 0:03:17.799 that kind of just throws this whole part of business 0:03:17.840 --> 0:03:19.840 of the world into a kind of chaos, right. And 0:03:20.240 --> 0:03:23.040 I spent some time talking to some of these Lutheran 0:03:23.120 --> 0:03:25.920 charities about what it was like, and what you hear is, 0:03:26.440 --> 0:03:31.440 you know, confusion, anger, frustration. You know, they don't in 0:03:31.480 --> 0:03:35.920 a lot of cases know exactly why they're being targeted, 0:03:36.000 --> 0:03:38.480 what it's about. And when you actually look at the 0:03:38.480 --> 0:03:41.760 work they're doing, they're doing it's like basic. It's a 0:03:41.800 --> 0:03:43.880 lot of it is like just basic social safety and 0:03:43.920 --> 0:03:47.000 that stuff. The main kind of character in this piece 0:03:47.480 --> 0:03:53.720 runs a charity in Ohio. They operate food pantries, homeless shelters, 0:03:53.720 --> 0:03:58.760 domestic violence shelters, They rent out affordable housing, nursing homes. 0:03:58.920 --> 0:04:01.400 And you start to think about it like this is 0:04:01.720 --> 0:04:04.880 a big part of the American social safety net, these 0:04:05.120 --> 0:04:07.840 charitable organizations that get money from the federal government. It's 0:04:07.880 --> 0:04:10.680 it's like how we take care of the needy in 0:04:10.680 --> 0:04:14.200 this country? And and and I think the point here 0:04:14.360 --> 0:04:17.680 is that you know, while Musk is doing all this stuff, 0:04:17.839 --> 0:04:21.240 you're seeing groups that are getting getting caught up in 0:04:21.279 --> 0:04:24.640 the drag net, and there's damage being done potentially to 0:04:25.440 --> 0:04:29.160 the infrastructure of how we I mean, in this case, 0:04:29.200 --> 0:04:33.320 how we provide healthcare and housing to poor people. But 0:04:33.360 --> 0:04:35.040 I think you're going to see this across the government 0:04:35.160 --> 0:04:39.000 where there are there are aspects of the DOGE transformation 0:04:39.080 --> 0:04:41.640 that really speak to government efficiency, But then you have 0:04:41.800 --> 0:04:45.120 all of this kind of collateral damage and or is 0:04:45.160 --> 0:04:48.159 it collateral damage. It's it's it's really unclear what Elon 0:04:48.279 --> 0:04:49.920 Musk thinks or what Donald Trump thinks. 0:04:49.960 --> 0:04:52.159 I gotta say when this story, you know, kind of 0:04:52.200 --> 0:04:55.159 hit and we were trying to understand these organizations. We 0:04:55.240 --> 0:04:58.800 actually caught up with one Chris Amara Vignaraja. She's president 0:04:58.880 --> 0:05:02.599 and CEO of Global Refuse, a recipient of funding from USA. 0:05:02.760 --> 0:05:05.800 She shared with us what it means not to receive 0:05:05.839 --> 0:05:06.359 the funding. 0:05:07.200 --> 0:05:10.440 These are individuals who had gone through every hoop in 0:05:10.560 --> 0:05:13.080 order to come because we had made a military promise 0:05:13.400 --> 0:05:15.440 to them that they were going to risk their lives 0:05:15.480 --> 0:05:17.800 to protect US troops and that we wouldn't leave them 0:05:17.839 --> 0:05:22.680 behind to face Taliban retribution. So we've been impacted in 0:05:22.720 --> 0:05:25.040 the fact that we no longer can serve them, but 0:05:25.279 --> 0:05:27.479 they can no longer even get off the military base 0:05:27.600 --> 0:05:30.640 because the stop work order that we're talking about also 0:05:30.720 --> 0:05:33.640 affects UN agencies, So they're not even able to get 0:05:33.640 --> 0:05:36.200 off the military base to travel, even if they were 0:05:36.880 --> 0:05:40.039 able to afford their own flight to come here to 0:05:40.080 --> 0:05:44.400 the US, so it is paralyzing. We operate across the country. 0:05:44.480 --> 0:05:47.240 We partner with local nonprofits right in the redit of 0:05:47.320 --> 0:05:49.440 red states and the bluest of blue states. None of 0:05:49.480 --> 0:05:52.120 them receive funding because we are not able to receive funding. 0:05:52.640 --> 0:05:56.400 Okay again, that's Krishamara Vignaraja, Presidency E of Global Refuge. 0:05:56.440 --> 0:05:58.920 She started off with talking about how we haven't been 0:05:58.960 --> 0:06:01.000 able to help our Afghan allies, but talks a little 0:06:01.000 --> 0:06:04.159 bit about kind of almost the supply chain of groups 0:06:04.240 --> 0:06:07.640 in terms of helping others. I mean, what more are 0:06:07.680 --> 0:06:10.440 we getting about exactly where this aid in this money goes. 0:06:10.760 --> 0:06:14.039 I mean, the thing is we don't even know what's 0:06:14.120 --> 0:06:16.559 been cut off. And what was so interesting about getting 0:06:16.560 --> 0:06:18.800 into the story is these organizations don't know. I mean, 0:06:18.839 --> 0:06:22.920 they have not been paid in many cases, but it's 0:06:22.960 --> 0:06:24.719 not like it's been a huge it's not like there's 0:06:24.720 --> 0:06:26.880 been a lot large delay or something. So they don't 0:06:26.920 --> 0:06:30.720 know if Elon Musk was just spouting off, if he 0:06:30.839 --> 0:06:33.560 just was tweeting a thing, or if what he tweeted 0:06:33.839 --> 0:06:36.760 kind of had the full force of the federal government. 0:06:37.040 --> 0:06:39.160 And it's it's a lot of this this has been 0:06:39.200 --> 0:06:41.440 this is kind of a microcosm of what's been happening 0:06:41.680 --> 0:06:44.040 across the government. You know, you have Elon Musk go 0:06:44.080 --> 0:06:48.400 on Twitter and say we fed we fed USAID into 0:06:48.440 --> 0:06:51.600 the wood chipper last night, and and and on one hand, 0:06:51.680 --> 0:06:53.760 like there is truth to that, right, like the Trump 0:06:53.800 --> 0:06:59.280 administration is trying to substantially cut down USI AID, arguably 0:06:59.600 --> 0:07:02.280 to shut it down, but that is being challenged in court. 0:07:02.400 --> 0:07:05.080 So these employees are still getting paid, like they haven't 0:07:05.120 --> 0:07:08.440 actually done the thing that Elon Musk said they had done, 0:07:08.520 --> 0:07:10.680 at least not yet because the courts have intervened. So 0:07:10.680 --> 0:07:12.560 you have a lot of this where where Musk is 0:07:12.560 --> 0:07:15.520 saying something or Trump is saying something, and then the 0:07:15.560 --> 0:07:18.720 reality on the ground is maybe a little bit more muddied. 0:07:19.040 --> 0:07:22.760 And as it becomes clear, right, that could lead to 0:07:22.800 --> 0:07:26.720 some cost savings, it could also lead to pain. You know, 0:07:26.920 --> 0:07:29.400 in the case of this Ohio charity, we're talking about 0:07:29.440 --> 0:07:33.760 seven hundred people. You know, the human services industry, it 0:07:33.840 --> 0:07:36.559 employees a lot of people, and including in red states 0:07:36.560 --> 0:07:38.160 and blue states and so on, and so you're going 0:07:38.240 --> 0:07:43.200 to see political pain that I think will be something 0:07:43.240 --> 0:07:46.400 that the Trump administration has to contend with. This is 0:07:46.400 --> 0:07:48.440 the kind of thing where like if you voted for 0:07:48.520 --> 0:07:51.000 Elon Musk and Donald Trump. I mean, no one voted 0:07:51.040 --> 0:07:52.720 for Elon Musk, but if you voted for Donald Trump 0:07:52.840 --> 0:07:55.560 to clean up the government, you may not be thinking, yeah, 0:07:55.560 --> 0:07:59.080 that would be great if they defund my local Lutheran 0:07:59.400 --> 0:08:01.880 nursing home or something like that. And so I think 0:08:01.920 --> 0:08:04.360 that's the I think there's I think there's real real 0:08:04.520 --> 0:08:08.119 risk here for the Trump administration and frankly for Elon 0:08:08.200 --> 0:08:09.720 Musk because he's the face of this. 0:08:09.960 --> 0:08:11.560 It sounds like, in other words, there's a risk of 0:08:11.560 --> 0:08:14.440 throwing the baby out with the bathwater here, because I 0:08:14.440 --> 0:08:16.080 think it's fair to say a lot of people do 0:08:16.160 --> 0:08:20.240 think there is, to quote President Trump, waste fraud and 0:08:20.320 --> 0:08:23.160 abuse when it comes to government spending. It's not hard 0:08:23.160 --> 0:08:24.080 to find examples of that. 0:08:24.240 --> 0:08:27.160 Yeah, I mean the issue is that our deficit is 0:08:27.200 --> 0:08:29.320 you know that this two trillion dollar deficit that was 0:08:29.440 --> 0:08:32.240 and that was the goal that Elon Musk promised to cut. 0:08:33.120 --> 0:08:35.199 It seems like wishful thinking to think you're going to 0:08:35.240 --> 0:08:37.480 get there by cutting waste, fraud and abuse. Even you 0:08:37.520 --> 0:08:40.040 know he can, he could keep himself very busy cutting 0:08:40.040 --> 0:08:42.160 waste fraud, and abuse, and he's not going to be 0:08:42.360 --> 0:08:45.560 that far along in terms of meeting his goal. And 0:08:45.600 --> 0:08:47.960 that's you hear that both when you talk to critics 0:08:47.960 --> 0:08:50.600 on the right and critics on the left. People essentially 0:08:50.840 --> 0:08:53.760 on the left, they're saying, there's no constitutional authority to 0:08:53.760 --> 0:08:55.640 do this. This is a crisis. You know, you saw 0:08:55.679 --> 0:08:59.960 Elizabeth Warren giving kind of a really a press con 0:09:00.240 --> 0:09:02.520 conference presenting this is kind of a catastrophe. And on 0:09:02.559 --> 0:09:05.680 the right you have people saying, like, look, this is 0:09:05.760 --> 0:09:08.360 not that big a deal. The Defense Department is a 0:09:08.360 --> 0:09:10.319 big deal. Social Security is a big deal. If you 0:09:10.320 --> 0:09:12.960 talked to like fiscal hops and stuff. So there is 0:09:13.000 --> 0:09:17.200 this kind of gap between between reality and then and 0:09:17.240 --> 0:09:20.480 then the hopes and dreams. And in that gap are 0:09:20.520 --> 0:09:24.680 a bunch of programs where that have constituencies and you know, 0:09:24.720 --> 0:09:27.079 you think about like NIH. Right, they do this big 0:09:27.120 --> 0:09:31.360 announcement essentially saying that anyone who gets an NIH grant 0:09:31.360 --> 0:09:33.679 has to have a lower amount of overhead. And when 0:09:33.679 --> 0:09:35.800 you hear Elon Musk talk about it, right, he's saying 0:09:35.800 --> 0:09:38.319 that some of these programs have sixty percent overhead. We're 0:09:38.360 --> 0:09:41.880 making you know, we're making it fifteen percent overhead. That gap, 0:09:41.960 --> 0:09:44.400 that cutting that funding is going to mean jobs in 0:09:44.440 --> 0:09:47.800 a lot of states, and those and those congress people 0:09:47.800 --> 0:09:50.560 and senators, some of them Republicans, some of them Democrats, 0:09:50.760 --> 0:09:54.200 are going to be either loudly trying to change it 0:09:54.400 --> 0:09:57.680 or quietly, in the case of Republicans, trying to adjust things. 0:09:57.640 --> 0:10:00.200 Right because midterms are just two years away. Having said that, 0:10:00.240 --> 0:10:02.280 where is Congress and all of this and where is 0:10:02.320 --> 0:10:05.240 that argument about Congress controls you know, the power of 0:10:05.280 --> 0:10:07.960 the purse that in terms of when they're spending it's 0:10:07.960 --> 0:10:10.440 got the approval of it or the cut pack of 0:10:10.480 --> 0:10:12.720 it somehow has to go through US lawmakers. 0:10:12.760 --> 0:10:15.280 Well, I mean, you know, Republicans control Congress right now, 0:10:15.360 --> 0:10:19.320 and they are for the They are either being you know, 0:10:19.440 --> 0:10:22.640 sort of quietly grumbling or being super supportive. There's no 0:10:22.800 --> 0:10:26.400 there's no real there's no Republican opposition right now. The 0:10:26.440 --> 0:10:29.800 closest thing you can you see toward Republicans sort of 0:10:29.840 --> 0:10:33.160 like feeling uncomfortable, would be like, you know, maybe there's 0:10:33.160 --> 0:10:35.920 a tweet or whatever. Senator Bill Cassidy tweeted about pep 0:10:35.960 --> 0:10:37.400 FAR a couple of weeks back. 0:10:37.640 --> 0:10:40.720 This is the AIDS program exactly the same in Africa, 0:10:40.760 --> 0:10:42.679 that Anthony Fatchi had actually had a big part in 0:10:42.720 --> 0:10:44.320 it during the George W. Bush administration. 0:10:44.520 --> 0:10:47.320 And it's a Republican program. It's it's seen by many 0:10:47.400 --> 0:10:51.520 as like a pro life program. So there's that. Katie 0:10:51.520 --> 0:10:54.720 Britt the other day, senator from Alabama, gave an interview 0:10:54.760 --> 0:10:58.480 with her local newspaper sort of not quite complaining about 0:10:58.480 --> 0:11:01.000 these nh NIH cuts, but sort of saying, we're going 0:11:01.040 --> 0:11:03.240 to need to make sure we negotiate so that there's 0:11:03.280 --> 0:11:06.160 not we don't get huge cuts to the university hospital 0:11:06.200 --> 0:11:08.640 system in Alabama that employs a ton of people. 0:11:08.679 --> 0:11:11.640 But this is exactly what has prevented government cuts in 0:11:11.720 --> 0:11:14.120 the past. The idea that and I'm not calling it 0:11:14.160 --> 0:11:18.400 all pork, but the idea that constituencies are affected. And 0:11:18.440 --> 0:11:21.439 you have these lawmakers in Congress saying, don't touch stuff 0:11:21.440 --> 0:11:23.440 in my district. And I do think this is where 0:11:23.559 --> 0:11:26.480 the Defense Department, in the defense contracting for example. 0:11:26.240 --> 0:11:28.760 Well, the defense is an interesting issue because because Elon 0:11:28.840 --> 0:11:31.240 Musk is a major defense contractor, he may not be 0:11:31.320 --> 0:11:34.080 the you know, he's got obvious conflicts and interests may 0:11:34.120 --> 0:11:37.600 be difficult. But leaving that aside, people who like this, 0:11:37.720 --> 0:11:39.640 I think what they liked is that Elon Musk is 0:11:39.679 --> 0:11:44.280 an amazing marketer. Yes, good governance types on the right 0:11:44.320 --> 0:11:45.960 and the left have tried to do this stuff before, 0:11:46.000 --> 0:11:49.680 and they always fail because politics intervenes, because because cutting 0:11:49.679 --> 0:11:52.120 these programs, each of these programs, you can they sound 0:11:52.200 --> 0:11:54.959 ridiculous maybe on a spreadsheet, but when you really get 0:11:55.000 --> 0:11:58.320 down to it, there are people benefiting and those people vote. Now. Musk, 0:11:58.360 --> 0:12:00.760 of course is kind of like a transformer marketer, a 0:12:00.760 --> 0:12:03.880 transformative storyteller, and so I think the bull case would 0:12:03.920 --> 0:12:07.480 be like he is able to tell a story that 0:12:07.559 --> 0:12:10.000 causes people to go along with this. But again I 0:12:10.000 --> 0:12:12.280 do think you when you start reading about some of 0:12:12.320 --> 0:12:15.679 these cases of defunding or some of the stuff that's 0:12:15.679 --> 0:12:19.360 happening in the civil service, like even Elon Musk, the 0:12:19.679 --> 0:12:22.640 great electric car salesman, may not be able to sell 0:12:22.760 --> 0:12:24.559 some of these cuts to the American people. 0:12:24.760 --> 0:12:27.360 All Right, great read, and great you know, kind of 0:12:27.400 --> 0:12:29.280 pulling it all together in terms of the headlines that 0:12:29.320 --> 0:12:31.440 have been coming us, coming at us in terms of 0:12:31.480 --> 0:12:34.600 doge over the last week or two. Max Chakin, thank 0:12:34.600 --> 0:12:37.160 you so much, Bloomberg Business Week columnist. You can catch 0:12:37.200 --> 0:12:39.480 a story, you can find it at Bloomberg dot com 0:12:39.520 --> 0:12:41.680 and also on the Bloomberg Terminal. Max by the Way, 0:12:41.679 --> 0:12:44.240 co host of the elon Inc Podcast, where you can 0:12:44.280 --> 0:12:46.240 also find on the Bloomberg and at Bloomberg dot com 0:12:46.240 --> 0:12:49.120 slash elon Ink. He is also author of The Contrariant 0:12:49.120 --> 0:12:52.000 Peter Tiel and Silicon Valley's Pursuit of Power. 0:12:56.480 --> 0:12:59.960 You're listening to the Bloomberg Business Week podcast. Catch us 0:13:00.160 --> 0:13:03.559 live weekday afternoons from two to five pm Eastern. Listen 0:13:03.600 --> 0:13:07.160 on Apple CarPlay and Android Auto with the Bloomberg Business app, 0:13:07.320 --> 0:13:09.920 or watch us live on YouTube. 0:13:10.760 --> 0:13:13.800 This week's shares of Zillo tumbled after delivered a revenue 0:13:13.800 --> 0:13:16.760 forecast for the first quarter that fell short of analyst estimates, 0:13:17.000 --> 0:13:19.400 and the company said it also expects a more challenging 0:13:19.480 --> 0:13:21.200 housing market in the first quarter. 0:13:21.480 --> 0:13:23.640 For more on Zillo's business and the outlook of the 0:13:23.720 --> 0:13:27.080 US housing market, we spoke to Zillo CEO Jeremy Waxman. 0:13:27.400 --> 0:13:29.040 The housing market remains challenged. 0:13:29.080 --> 0:13:31.840 It was challenged in twenty twenty four, and we're expecting 0:13:31.840 --> 0:13:32.760 it to be so again. 0:13:32.800 --> 0:13:33.800 In twenty twenty five. 0:13:34.520 --> 0:13:38.040 Zillo reported great results Q four revenue up seventeen percent, 0:13:38.400 --> 0:13:40.960 and we hit our goals of growing revenue double digits 0:13:41.040 --> 0:13:43.960 last year and expanding our margins, and we also guided 0:13:44.000 --> 0:13:46.040 yesterday that we expect to continue to do that again 0:13:46.080 --> 0:13:48.880 this year with revenue growth in the low to mid teens, 0:13:49.440 --> 0:13:52.160 more margin expansion, and positive GAT and income for the 0:13:52.200 --> 0:13:53.959 first time in a long time. And as you said, 0:13:54.160 --> 0:13:57.600 that's against a persistently challenged housing market. So we're able 0:13:57.640 --> 0:14:00.400 to grow and gain share both in twenty four and 0:14:00.400 --> 0:14:02.160 we plan do you it again in twenty twenty five, 0:14:02.600 --> 0:14:07.880 while the market remains depressed for volume and challenging for buyers. 0:14:08.040 --> 0:14:10.400 Jeremy, do you think investors have it wrong in terms 0:14:10.440 --> 0:14:13.480 of pushing your share price down a lot in reaction 0:14:13.679 --> 0:14:16.880 to what they got on the quarter and the outlook? 0:14:17.040 --> 0:14:19.320 We don't really focus on the day to day voting 0:14:19.400 --> 0:14:21.600 machine of the stock market. If you zoom out and 0:14:21.600 --> 0:14:23.880 look over the long the long couple quarters, a couple 0:14:23.840 --> 0:14:27.240 of years, we made great progress on our integrated super 0:14:27.240 --> 0:14:31.000 apps strategy. We're growing revenue nicely, we're out growing the category, 0:14:31.360 --> 0:14:33.280 and we can plan to continue to do that in twenty 0:14:33.280 --> 0:14:36.160 twenty five, and so over time, the stockcacre of itself, 0:14:36.240 --> 0:14:39.040 the company grows in value as we really deliver on 0:14:39.080 --> 0:14:42.200 our promise of helping more buyers and sellers get home. 0:14:42.640 --> 0:14:45.120 That's really our goal at Zillo is to help more 0:14:45.200 --> 0:14:47.080 of our audience turn into transactions. 0:14:47.160 --> 0:14:48.560 Yeah, and I will point out the stock was up 0:14:48.600 --> 0:14:50.800 about twenty eight percent last year and up about almost 0:14:50.840 --> 0:14:53.440 eighty percent and twenty twenty three. In terms of the 0:14:53.640 --> 0:14:56.720 stress though, or maybe you're you know, kind of cautious 0:14:56.720 --> 0:14:58.720 outlook in terms of the housing market, is it all 0:14:58.760 --> 0:15:01.160 about mortgage rate to higher mortgage rates. 0:15:01.480 --> 0:15:04.160 Yeah, the challenge or the housing market starts with mortgage rates, 0:15:04.160 --> 0:15:08.560 but it's really about availability and supply. We are expecting 0:15:08.760 --> 0:15:11.960 flat ish total dollar value housing market in Q one 0:15:12.160 --> 0:15:14.280 and load to mid single digit growth for the year. 0:15:14.560 --> 0:15:16.400 And as you said, if you look, it's not like 0:15:16.440 --> 0:15:18.920 twenty twenty four was that much better from a volume standpoint. 0:15:19.080 --> 0:15:22.200 The real challenge is with mortgage rates. Saying Hi, affordability 0:15:22.200 --> 0:15:24.440 is a challenge for buyers, but that really locks a 0:15:24.440 --> 0:15:26.480 lot of sellers into their homes as well. Right a 0:15:26.560 --> 0:15:28.280 seller is thinking about do they want to trade out 0:15:28.320 --> 0:15:30.920 of that mortgage? Do they feel locked into that mortgage? 0:15:30.960 --> 0:15:34.320 And many are foregoing listing their home and making that move. 0:15:34.400 --> 0:15:38.680 So you're seeing still very low inventory. Inventory is up 0:15:38.800 --> 0:15:42.120 eighteen percent from last year, but it's still down sharply 0:15:42.520 --> 0:15:46.600 from pre pandemic norms, and so lack of supply really 0:15:46.600 --> 0:15:49.520 makes a challenging for buyers. And then you add elevated 0:15:49.600 --> 0:15:51.320 rates and what they can afford of what there is 0:15:51.320 --> 0:15:51.680 to buy. 0:15:52.000 --> 0:15:55.200 Jemmy, the cost of housing certainly a theme on and 0:15:55.400 --> 0:16:00.040 last year's presidential race. I'm wondering if you think that 0:16:00.120 --> 0:16:04.760 the federal government will be able to achieve bringing more 0:16:04.760 --> 0:16:06.880 supply of housing online. This came up with the vice 0:16:06.880 --> 0:16:11.040 presidential debate when Jade Vance talked about using federal lands 0:16:11.280 --> 0:16:13.600 to build homes. Do you think the federal government will 0:16:13.640 --> 0:16:15.920 have a meaningful effect on housing supply? 0:16:16.400 --> 0:16:17.680 The real challenge was supply. 0:16:17.760 --> 0:16:20.400 We talked about existing home inventory and what sellers are doing, 0:16:20.680 --> 0:16:24.680 but we are chronically under built right we. Zilo estimates 0:16:24.720 --> 0:16:27.040 about four and a half million homes have not been 0:16:27.080 --> 0:16:29.280 built to keep up with the demand needed since the 0:16:29.280 --> 0:16:32.640 global financial crisis. And the solution of those problems really 0:16:32.720 --> 0:16:35.880 is at the state and local level. You need things 0:16:36.000 --> 0:16:39.680 like permitting reform and removing red tape in the process 0:16:39.720 --> 0:16:42.800 to get starts done quickly. You need tax incentives and 0:16:42.880 --> 0:16:45.880 financing options so that builders can get their projects online 0:16:45.920 --> 0:16:49.080 more quickly. So the totality of the problem, you know, 0:16:49.160 --> 0:16:51.360 all nearly five million homes that we need to catch 0:16:51.400 --> 0:16:53.360 up on. We're not going to do that overnight, but 0:16:53.880 --> 0:16:56.280 slow and steady will definitely bring more supply to the market. 0:16:56.400 --> 0:16:58.640 I do wonder though, too, you know, Jeremy, how much 0:16:58.720 --> 0:17:01.400 the YEP I get that permitting. I mean, these are 0:17:01.520 --> 0:17:04.200 problems that have played certainly the housing market I feel 0:17:04.200 --> 0:17:07.520 like forever in terms of supply. But having said that, 0:17:08.000 --> 0:17:10.600 how much too, is there some cautiousness on the part 0:17:10.600 --> 0:17:13.720 of home builders who still everybody still remembers two thousand 0:17:13.720 --> 0:17:16.280 and eight and the over bills. So is there also 0:17:16.880 --> 0:17:19.919 a part of that as some of the components in 0:17:19.960 --> 0:17:20.639 terms of supply. 0:17:21.160 --> 0:17:23.440 Well, you're seeing places where it works well, right, I 0:17:23.480 --> 0:17:26.160 mean Austin, Texas is one good example that we've highlighted 0:17:26.200 --> 0:17:28.760 where a lot of multi family inventory and the rental 0:17:28.800 --> 0:17:31.160 market has come online and you've actually seen rent prices 0:17:31.200 --> 0:17:34.719 come down even with the population growth in Austin, And 0:17:34.760 --> 0:17:36.560 so you know, you have to remember, if you zoom out, 0:17:36.600 --> 0:17:38.919 there are still the counter forces of for sale and 0:17:38.960 --> 0:17:42.240 rentals working together, and you know, when folks can't get 0:17:42.280 --> 0:17:44.359 it done and find the home to buy, they end 0:17:44.440 --> 0:17:47.240 up re renting, and you're seeing you know, rental inventory, 0:17:48.280 --> 0:17:50.040 you know, grow to satisfy that demand as well. So 0:17:50.800 --> 0:17:53.560 it is, as you said, it's a local issue. But 0:17:53.680 --> 0:17:55.639 there are places where it's working well and there are 0:17:55.640 --> 0:17:56.960 places where it can work even better. 0:17:57.040 --> 0:17:59.919 We got a hotter than expected CPI print earlier today, 0:18:00.200 --> 0:18:04.280 and my question is about how that changes the outlook 0:18:04.400 --> 0:18:07.080 for rates for the year, and then in turn, how 0:18:07.080 --> 0:18:09.200 that affects your business. Does your outlook for twenty twenty 0:18:09.200 --> 0:18:11.240 five change if rates don't come down. 0:18:12.000 --> 0:18:15.320 No, our outlook assumes a pretty lousy housing market. We 0:18:15.359 --> 0:18:19.240 are expecting flatish housing market in Q one and load 0:18:19.280 --> 0:18:20.960 of mid single digits for the year. And I think 0:18:20.960 --> 0:18:22.920 we were maybe a little bit more embarrassed than most 0:18:23.000 --> 0:18:25.199 heading into the year on how the housing market's going 0:18:25.240 --> 0:18:25.439 to do. 0:18:25.520 --> 0:18:25.639 Now. 0:18:25.680 --> 0:18:27.840 The good news for Zillo is we're out growing the 0:18:27.880 --> 0:18:30.040 category and we're gaining share. We did that in twenty 0:18:30.080 --> 0:18:32.560 twenty four and we expected it again in twenty twenty five, 0:18:32.800 --> 0:18:35.200 and that's in our for sale business, where we're helping 0:18:35.240 --> 0:18:38.560 more buyers meet their agents. We're helping originate more mortgages. 0:18:38.840 --> 0:18:41.320 That's also when our rentals business. Our rentals business grew 0:18:41.359 --> 0:18:43.800 twenty five percent in Q four. We expect that to 0:18:43.880 --> 0:18:47.680 accelerate in Q one as we bring more rental inventory 0:18:47.720 --> 0:18:49.840 to more renters across slow Hey. 0:18:49.880 --> 0:18:52.600 One thing I do wonder in our conversation coming off 0:18:52.640 --> 0:18:56.240 of the hot CPI print Jeremy, is that maybe we 0:18:56.280 --> 0:18:58.800 so certainly the rates market, the US rates market, the 0:18:58.840 --> 0:19:02.199 treasury market reacts and move up today, but now the 0:19:02.280 --> 0:19:05.520 talk has moved to maybe even the next move we 0:19:05.560 --> 0:19:09.000 need to start thinking about the Fed raising rate. If 0:19:09.000 --> 0:19:11.200 we see the Fed start to raise rates, what does 0:19:11.240 --> 0:19:13.320 that do in your view to the housing market and 0:19:13.320 --> 0:19:15.240 how might that impact your business? 0:19:16.000 --> 0:19:16.639 Long term? 0:19:16.720 --> 0:19:20.040 Real estate is a growth industry. You see volumes and 0:19:20.119 --> 0:19:23.840 total value grow. Right now you're seeing depressed volumes because 0:19:23.840 --> 0:19:26.359 of all the challenges, especially in the financial market with 0:19:26.359 --> 0:19:29.280 affordability for buyers. But folks are getting it done and 0:19:29.320 --> 0:19:31.359 they will get it done. And what we're here at 0:19:31.400 --> 0:19:34.200 ZILLA to do is help them. Buyers who need to buy, 0:19:34.600 --> 0:19:37.960 many of them are starting that conversation with financing rather 0:19:38.000 --> 0:19:41.640 than just dreaming. We now see about as many buyers 0:19:41.640 --> 0:19:43.760 start with what can I afford and can I even 0:19:43.760 --> 0:19:46.320 buy right now? As they do dreaming, shopping and going 0:19:46.359 --> 0:19:49.400 media an agent. So we've brought online tools like Buyability 0:19:49.680 --> 0:19:54.119 to help them truly understand their personalized payment information. What 0:19:54.160 --> 0:19:56.960 can they actually afford for themselves given their financial information, 0:19:57.240 --> 0:19:59.560 so they can have confidence, go get a pre approval letter, 0:20:00.240 --> 0:20:02.199 go make an offer and win a house. So it 0:20:02.280 --> 0:20:05.040 is tough out there, it will remain challenging in twenty 0:20:05.080 --> 0:20:07.480 twenty five, but folks can get it done. We're there 0:20:07.520 --> 0:20:09.840 to help, and that's exactly what's driving the results you 0:20:09.880 --> 0:20:11.960 saw from US in Q four and why we expect 0:20:11.960 --> 0:20:13.639 to continue to grow and not go the category in 0:20:13.640 --> 0:20:14.400 twenty twenty five. 0:20:14.600 --> 0:20:17.119 Jeremy, you mentioned those buyability tools that you guys have 0:20:17.200 --> 0:20:19.480 on your platform. What does that show you about? Is 0:20:19.480 --> 0:20:21.920 it the first time home buyer that continues to find 0:20:21.960 --> 0:20:24.080 it really difficult? Is it the trade up home buyer? 0:20:24.240 --> 0:20:26.440 What does it tell you about kind of the home 0:20:26.480 --> 0:20:29.080 buyer and in essence, the US consumer out there when 0:20:29.080 --> 0:20:30.119 it comes to buying a house. 0:20:30.400 --> 0:20:32.320 Yeah, I mean the demand and desire to buy a 0:20:32.320 --> 0:20:36.200 home still persists and exists across all demographics. You're seeing 0:20:36.240 --> 0:20:38.800 folks having to wait longer, save up more to make 0:20:38.840 --> 0:20:41.080 that down payment, and so it gets tougher. 0:20:41.400 --> 0:20:43.000 But you see, the strong. 0:20:42.800 --> 0:20:45.480 Desire to buy a home really persist across all demographics, 0:20:45.480 --> 0:20:47.120 and we see that in folks who are using Zillo. 0:20:47.440 --> 0:20:47.640 Again. 0:20:47.680 --> 0:20:49.920 As I said, one of the things that is interesting 0:20:49.920 --> 0:20:53.359 to us is how much more financing and total cost 0:20:53.359 --> 0:20:56.240 of ownership is front and center for a buyer before 0:20:56.280 --> 0:20:59.480 they even start. You know, five ten years ago, everyone 0:20:59.520 --> 0:21:02.639 wanted to start by shopping, by touring, by virtual touring, 0:21:02.680 --> 0:21:05.000 by going into open houses, and now it's kind of 0:21:05.000 --> 0:21:07.919 a balance as many folks want to start in that state, 0:21:08.000 --> 0:21:10.040 as they want to start with just the reality of 0:21:10.400 --> 0:21:11.480 what's my budget look like? 0:21:11.520 --> 0:21:13.200 How do I set my budget. 0:21:12.800 --> 0:21:14.920 And work with an agent to make sure the homes 0:21:14.920 --> 0:21:16.760 I fall in love with the ones that can actually buy. 0:21:17.000 --> 0:21:17.200 Hey. 0:21:17.240 --> 0:21:19.960 One thing we also learned recently from you guys is 0:21:19.960 --> 0:21:24.280 that Redfinn is teaming up with Zillo for rental listings. 0:21:24.280 --> 0:21:27.159 This partnership, to me, it sort of looks like frenemies 0:21:27.200 --> 0:21:30.480 teaming up. Like you guys are competitors here. Redfinn's market 0:21:30.560 --> 0:21:33.440 cap is about two billion dollars. You're about eighteen billion dollars. 0:21:34.320 --> 0:21:37.359 Do you end up buying Redfinn at a certain point. 0:21:37.760 --> 0:21:40.600 We're really excited about this partnership we just announced with Redfinn. 0:21:40.840 --> 0:21:44.320 It's a big step in our overall rental strategy. It's 0:21:44.359 --> 0:21:47.960 important to zoom out and remember, unlike the for sale marketplace, 0:21:48.000 --> 0:21:50.840 there's no national database for rentals. The big challenge a 0:21:50.920 --> 0:21:53.359 renter has is they can't find all the supply. They 0:21:53.359 --> 0:21:55.960 have a very short timeframe to find a place to rent, 0:21:55.960 --> 0:21:58.639 and so they scour the internet, they scour offline looking. 0:21:58.680 --> 0:21:59.720 So that's zilla strategy. 0:21:59.720 --> 0:22:02.960 Can we organize more and more of the rental listings 0:22:02.960 --> 0:22:06.040 out there nationwide so that renters on Zillo and on 0:22:06.080 --> 0:22:07.600 our partner sites can find them. 0:22:08.080 --> 0:22:09.480 That strategy is working great. 0:22:09.560 --> 0:22:12.919 That's what's driving having the leading audience and growing audience 0:22:12.920 --> 0:22:16.040 of renters, and that's bringing more property managers to Zillo 0:22:16.160 --> 0:22:18.960 and our partner sites to want to advertise that audience. 0:22:19.000 --> 0:22:22.240 So this partnership with Redfinn to power their rentals business 0:22:22.320 --> 0:22:24.840 is just the next step in that strategy. Adding on 0:22:24.880 --> 0:22:27.040 to this great partnership we forged with realter dot com 0:22:27.119 --> 0:22:30.800 last year, it allows advertisers to come to Zilo and 0:22:30.880 --> 0:22:34.199 get advertising in front of Zillo sites, redfin sites and 0:22:34.280 --> 0:22:36.600 realtor sites to reach an even bigger set of renters. 0:22:36.680 --> 0:22:39.760 And then renters get more choice, right, they see more inventory, which, again, 0:22:39.800 --> 0:22:42.240 as I started, that's the big problem in rentals is 0:22:42.280 --> 0:22:43.920 you cannot find all the inventory. 0:22:44.240 --> 0:22:46.320 And forgive me that Redfinn market cap about one point 0:22:46.320 --> 0:22:48.760 one billion dollars, so shy of two billion dollars. I 0:22:48.760 --> 0:22:50.680 didn't hear a yes or a no, and no answer 0:22:50.720 --> 0:22:52.000 to my question about whether or not. 0:22:52.080 --> 0:22:55.480 Oh, no, no plans, now, no plans. We're very excited 0:22:55.480 --> 0:22:57.240 about the partnership. We've worked with them on some other 0:22:57.240 --> 0:23:00.120 things before and we love how culturally align they are 0:23:00.119 --> 0:23:02.120 and just digitizing the transaction in real estate. 0:23:02.200 --> 0:23:05.040 Well, along those lines, how are real estate companies holding 0:23:05.119 --> 0:23:07.600 up through this extended housing market trough? I mean, any 0:23:07.600 --> 0:23:10.919 opportunities for you guys to do some acquisitions as a result, 0:23:11.000 --> 0:23:13.639 along maybe the lines of I don't know, partnerships, but 0:23:13.840 --> 0:23:14.960 maybe even acquisitions. 0:23:15.359 --> 0:23:15.560 Yeah. 0:23:15.600 --> 0:23:18.159 The bright side of a challenge real estate market is 0:23:18.200 --> 0:23:21.760 it really allows the best professionals to gain share. Right 0:23:21.800 --> 0:23:24.360 when it's rainy and cloudy outside, those that do best 0:23:24.400 --> 0:23:27.119 sometimes come out ahead. And what's great about that is 0:23:27.119 --> 0:23:30.119 that aligns so nicely with Zillo strategy, right. Zillo strategy 0:23:30.200 --> 0:23:33.200 is to partner with the best agents and agent teams 0:23:33.240 --> 0:23:36.000 in the industry. Eighty percent of the agents that we 0:23:36.080 --> 0:23:39.440 partner with are in that top twenty percent of producers nationwide. 0:23:39.480 --> 0:23:43.240 So these are the folks that are operating businesses at scale, 0:23:43.440 --> 0:23:47.359 training great agent teams to help delight customers. So even 0:23:47.400 --> 0:23:50.080 when there's less transactions to do, and even when it's 0:23:50.080 --> 0:23:53.159 a challenging conversation with many buyers and sellers, those folks 0:23:53.440 --> 0:23:56.280 command great price, hold share and grow their business. And 0:23:56.320 --> 0:23:59.520 so in some ways having a choppier or a depressed 0:23:59.520 --> 0:24:01.960 housing market can advantage some of the best professionals. 0:24:02.160 --> 0:24:04.919 Hey, we're asking every CEO we talked to these days 0:24:05.119 --> 0:24:09.160 a couple of different questions about politics, about AI. Politics 0:24:09.160 --> 0:24:11.000 is where I want to go and just hear from 0:24:11.040 --> 0:24:14.840 you about how you view this new Trump administration in 0:24:14.960 --> 0:24:17.360 terms of changes that you've made at the company as 0:24:17.359 --> 0:24:20.120 a result, or what it means for you as a business. 0:24:20.840 --> 0:24:22.520 One of the things you will focuses a lot on 0:24:22.760 --> 0:24:25.919 is AI and AI as it comes to the list industry. Right, 0:24:26.000 --> 0:24:30.240 both for us as employees, but more so for our customers. 0:24:30.280 --> 0:24:33.200 And our partners, our agents, our loan officers, and we've 0:24:33.240 --> 0:24:37.639 been investing in and innovating around AI for decades and 0:24:37.680 --> 0:24:40.000 so now as general of AI comes to the forefront, 0:24:40.240 --> 0:24:44.000 you know, we've been really advocating for responsible regulation around 0:24:44.040 --> 0:24:46.840 AI that encourages and supports innovation so that companies like 0:24:46.920 --> 0:24:49.720 Zilo can continue to innovate on behalf of the customer. 0:24:49.960 --> 0:24:52.119 So one thing we're very excited about is to continued 0:24:52.200 --> 0:24:56.119 progress on the ability to progress with AI. And you know, 0:24:56.200 --> 0:24:59.040 AI for us is a feature, it is a tool 0:24:59.080 --> 0:25:01.280 for our customers, for our employees, but in the real 0:25:01.359 --> 0:25:04.600 estate industry, it's really about making the professionals more efficient 0:25:04.640 --> 0:25:05.240 and effective. 0:25:05.320 --> 0:25:07.800 Right, there's so much wasted. 0:25:07.400 --> 0:25:11.600 Work, busy work, paperwork, back office work, and when you 0:25:11.680 --> 0:25:13.520 talk to a great real estate agent or a great 0:25:13.520 --> 0:25:15.200 loan officer, that's not what they want to be doing. 0:25:15.359 --> 0:25:17.520 They want to be delighting customers, they want to be 0:25:17.560 --> 0:25:20.240 winning more business, they want to be getting more transactions done. 0:25:20.320 --> 0:25:21.840 So we're really excited about the. 0:25:21.840 --> 0:25:24.399 Ability to continue to lean in and innovate not just 0:25:24.440 --> 0:25:27.960 on our tech platform generally, but on AI specifically, to 0:25:28.119 --> 0:25:31.239 really bring more of this transaction into your smartphone, make 0:25:31.280 --> 0:25:33.280 it more delightful and faster for the customer. 0:25:33.400 --> 0:25:36.040 All right, Jeremy, One last question is also a question 0:25:36.119 --> 0:25:39.679 we are asking to heads of company CEOs and a 0:25:39.920 --> 0:25:42.480 like anything that could come out of Washington and the 0:25:42.520 --> 0:25:45.119 new administration that could help or hurt your business. 0:25:45.640 --> 0:25:49.320 Zillow is really focused on ensuring that real estate stays 0:25:49.440 --> 0:25:54.160 accessible for the customer. We've outlined our principles for the consumer, 0:25:54.200 --> 0:25:59.680 which are around transparency, access, and affordability, and any policies 0:25:59.680 --> 0:26:01.920 that come we look to help make sure they push 0:26:02.000 --> 0:26:04.600 forward and ensure that consumers have access to all the 0:26:04.600 --> 0:26:07.800 information that's out there, have access to great professionals, and 0:26:07.880 --> 0:26:09.880 have better education on how the real estate industry works. 0:26:09.880 --> 0:26:12.280 Real estate is one of the largest industries that there 0:26:12.359 --> 0:26:15.400 is and it's the single biggest decision that most individuals 0:26:15.440 --> 0:26:18.160 are going to make. So making sure that people understand 0:26:18.160 --> 0:26:21.199 how it works, making sure that they have access to 0:26:21.520 --> 0:26:24.080 hiring the best professionals, that's one of the things we're 0:26:24.160 --> 0:26:26.199 very focus on Zilla, and we continue we will continue 0:26:26.200 --> 0:26:26.800 to be so you're. 0:26:26.720 --> 0:26:29.119 Hopeful that the administration the policies will be supportive of 0:26:29.160 --> 0:26:29.760 the housing market. 0:26:29.920 --> 0:26:32.680 Yeah, We've been around for twenty years and have been 0:26:32.720 --> 0:26:35.919 fortunate to work with both both administrations, and again, as 0:26:35.920 --> 0:26:37.800 we talked about earlier, one of the real challenges in 0:26:37.840 --> 0:26:39.720 our industry is so much is done at the state 0:26:39.760 --> 0:26:42.879 and the local level to make sure that real estate 0:26:42.880 --> 0:26:45.160 can flow for the benefit of the buyer and seller. 0:26:45.280 --> 0:26:47.160 Really good point, Jeremy, Thank you for all this time. 0:26:47.240 --> 0:26:50.560 Jeremy Waxman. He's chief executive officer of Zilo, joining us. 0:26:51.200 --> 0:26:54.760 You're listening to the Bloomberg Business Week Podcast. Catch us 0:26:54.840 --> 0:26:58.280 live weekday afternoons from two to five pm Eastern Listen 0:26:58.320 --> 0:27:01.879 on Apple, CarPlay and Android with the Bloomberg Business app, 0:27:02.000 --> 0:27:06.080 or watch us live on YouTube at Lassian. 0:27:06.160 --> 0:27:08.960 It's the more than eighty billion dollar market cap enterprise 0:27:09.000 --> 0:27:13.280 software company behind Jira, Confluence, Trello, and more. It has 0:27:13.359 --> 0:27:16.679 more than three hundred thousand customers all over the world, 0:27:17.040 --> 0:27:18.600 so it's got a great view on the health of 0:27:18.640 --> 0:27:21.439 tech spending and businesses both big and small. 0:27:21.640 --> 0:27:24.400 The company was co founded by Mike cannon Brooks, who's 0:27:24.400 --> 0:27:28.320 also CEO. The billionaire invests in renewable energy and efforts 0:27:28.359 --> 0:27:31.320 to combat climate change. He joined us to talk about 0:27:31.359 --> 0:27:35.400 his company, current macro issues, yes, tariffs, and some news 0:27:35.400 --> 0:27:37.480 he had this week. In the world of F one. 0:27:37.400 --> 0:27:40.000 Racing, there's no doubt it's a busy world at the moment, 0:27:40.080 --> 0:27:43.919 and it there's a lot going on. My strategy has 0:27:44.000 --> 0:27:46.679 been almost ridiculously simple most of the time, which is 0:27:47.440 --> 0:27:50.600 just to work out what the business needs. And normally 0:27:50.640 --> 0:27:52.160 the best way you can figure out what we should 0:27:52.160 --> 0:27:53.639 spend our time on a new given day is to 0:27:53.920 --> 0:27:56.040 look at your customers and go talk to them. And 0:27:56.080 --> 0:28:00.320 that doesn't mean it's simple. They are facing low, different 0:28:00.320 --> 0:28:03.480 global effects in parts of the world, and so you know, 0:28:03.720 --> 0:28:05.879 if we work out how we can help them. That 0:28:06.400 --> 0:28:10.520 usually is our simplest way to gain some focus in 0:28:10.520 --> 0:28:12.520 an otherwise highly confusing world when. 0:28:12.400 --> 0:28:13.199 There's a lot going on. 0:28:13.359 --> 0:28:15.119 To what extent, though, do you have to increase your 0:28:15.200 --> 0:28:18.480 value to them because their margins get squeezed as the 0:28:18.480 --> 0:28:21.760 result of tariffs, as the result of a potential trade war. 0:28:21.920 --> 0:28:23.480 What do you have to do to prove to them 0:28:23.520 --> 0:28:24.879 that you're worth spending money on? 0:28:25.480 --> 0:28:25.720 Sure? 0:28:25.720 --> 0:28:30.080 Look at Lastian's products are all about collaboration and efficiency 0:28:30.080 --> 0:28:33.600 for companies. Right We help teams of people. Our mission 0:28:33.640 --> 0:28:36.560 is to unleash the potential of every team has been 0:28:36.640 --> 0:28:40.360 for decades and our job is to make sure that 0:28:40.360 --> 0:28:42.680 we explain to customers how our software can do that, 0:28:43.640 --> 0:28:46.600 then have those customers adopt the software. Whether they're running projects, 0:28:46.640 --> 0:28:50.600 whether they're looking at their strategic plans, whether they're building technology, 0:28:50.640 --> 0:28:53.080 whatever it is that they're doing. We help them make 0:28:53.120 --> 0:28:56.520 their technology teams work better with their business teams. And 0:28:56.840 --> 0:29:00.960 we have always been an incredibly value conscious offering. You 0:29:01.000 --> 0:29:03.920 get an incredible amount of value from Alastin for a 0:29:04.040 --> 0:29:08.560 very low price, and that helps in tricky economic times. 0:29:08.560 --> 0:29:11.720 But fundamentally we have to justify with the customers and 0:29:12.040 --> 0:29:15.920 have them demonstrate to themselves ideally the value of our 0:29:15.960 --> 0:29:18.200 software and how it makes them more efficient and work together. 0:29:19.080 --> 0:29:21.480 And that's where I think we've kept a pretty clear 0:29:21.560 --> 0:29:23.360 north star for a long time and why we have, 0:29:24.000 --> 0:29:27.000 you know, three hundred thousand customers and it's still growing 0:29:27.000 --> 0:29:28.480 strongly at the size we are today. 0:29:28.520 --> 0:29:31.560 Well those three hundred customers, three hundred thousand customers, excuse me, 0:29:31.640 --> 0:29:34.280 all over the world when you hear updates from your 0:29:34.280 --> 0:29:37.960 global salesforce, are you hearing from that about any particular 0:29:38.080 --> 0:29:40.920 concern in different regions of the world that could be 0:29:40.960 --> 0:29:45.080 affected by tariffs, that are seeing weakness for other reasons 0:29:45.160 --> 0:29:46.840 what's the read that you have on the globe from 0:29:46.880 --> 0:29:47.600 your salesforce. 0:29:48.240 --> 0:29:50.520 Look, there's always challenges in different parts of the world. 0:29:50.840 --> 0:29:52.640 This is not new. 0:29:54.000 --> 0:29:56.800 I think in any given small slice of time, we 0:29:56.840 --> 0:29:59.520 see that we have very global companies, we have very 0:29:59.560 --> 0:30:03.560 local companies in that three hundred thousand. Our customer base 0:30:03.560 --> 0:30:07.720 has always spanned small businesses through to very very large businesses, 0:30:07.720 --> 0:30:08.600 some of the largest. 0:30:08.320 --> 0:30:09.360 Companies in the world. 0:30:09.800 --> 0:30:11.640 In fact, we have like eighty five percent of the 0:30:11.680 --> 0:30:15.680 Fortune five hundred as customers. You have a lot of 0:30:15.680 --> 0:30:17.880 issues going on for a lot of different companies. Our 0:30:17.960 --> 0:30:20.200 job is to make those companies more efficient. They still 0:30:20.240 --> 0:30:22.240 have to deal with those issues. They have to run 0:30:23.120 --> 0:30:27.520 projects and collaborate and communicate with each other. We help 0:30:27.560 --> 0:30:30.120 them do that. We always have, and so whatever issues 0:30:30.160 --> 0:30:32.240 they're dealing with, whether it's an issue of growth, whether 0:30:32.240 --> 0:30:35.640 it's an issue with the tariff or a challenge Atlastian's 0:30:36.360 --> 0:30:38.840 trying to help their teams deal with that issue more efficiently. 0:30:39.600 --> 0:30:41.360 If we can't demonstrate their value, we're not going to 0:30:41.400 --> 0:30:44.240 be around. So again, just sticking to that as the 0:30:44.280 --> 0:30:46.280 north Star has been a very simple principle for a 0:30:46.320 --> 0:30:46.680 long time. 0:30:46.720 --> 0:30:49.080 But so Mike you're not seeing any signs of any 0:30:49.120 --> 0:30:51.960 kind of slow down or pullback by some of your 0:30:52.000 --> 0:30:54.840 customers as they kind of wait for the desk to settle. 0:30:54.880 --> 0:30:57.360 I mean, we certainly feel like we're in it, you know, 0:30:57.400 --> 0:30:59.640 as we have kicked off a new administration here and 0:31:00.160 --> 0:31:03.240 every day are dissecting different headlines that come out of 0:31:03.280 --> 0:31:06.200 the White House. But you know, there's geopolitical turbulence, as 0:31:06.240 --> 0:31:08.880 you well know, around the world, and I think there's 0:31:08.960 --> 0:31:11.200 you know, dust that needs to settle in different places. 0:31:11.240 --> 0:31:15.000 So is there any signs of any hesitation that you're 0:31:15.040 --> 0:31:17.000 seeing among customers or not yet? 0:31:17.160 --> 0:31:18.000 Look from up one of you. 0:31:18.280 --> 0:31:21.800 We continue to see you know, really good growth across 0:31:21.880 --> 0:31:24.080 our customer base and especially. 0:31:23.720 --> 0:31:24.640 In the enterprise segment. 0:31:24.720 --> 0:31:29.120 So our largest customers those organizations with you know, more 0:31:29.120 --> 0:31:32.320 than a thousand people around the world. We have more 0:31:32.320 --> 0:31:34.720 than five hundred customers that spend more than a million 0:31:34.760 --> 0:31:36.719 dollars a year now with at Lassian, and that is 0:31:37.360 --> 0:31:41.240 our fastest growing customer segment. So I'm sure that those 0:31:41.240 --> 0:31:43.840 businesses are having to deal with all of that dust 0:31:43.920 --> 0:31:46.480 in the air as you talked about, but at the 0:31:46.480 --> 0:31:48.400 same time they have their own customers to deal with. 0:31:48.440 --> 0:31:51.160 They still have their business to run, and whatever the 0:31:51.240 --> 0:31:53.280 problems are, they have to deal with it, and so 0:31:53.440 --> 0:31:56.920 our software helps their teams deal with whatever it is 0:31:56.960 --> 0:31:59.360 that they need to do, how they handle their customers, 0:31:59.560 --> 0:32:01.920 and also how do they handle whatever is going on 0:32:02.040 --> 0:32:04.520 in whichever part of the world. As long as we 0:32:04.640 --> 0:32:07.960 keep that value ratio great for our customers. We invest 0:32:08.120 --> 0:32:10.120 very heavily in R and D and continue to develop 0:32:10.160 --> 0:32:13.560 and build our software every single day. We have a 0:32:13.600 --> 0:32:17.640 fantastic team. I'm not sure focusing on all that sort 0:32:17.680 --> 0:32:19.880 of thing is very helpful for us all for our customers. 0:32:19.920 --> 0:32:21.760 To be honest, they have their own customers to do 0:32:21.840 --> 0:32:22.120 with and. 0:32:22.080 --> 0:32:24.040 I should put out last month, you guys reported second 0:32:24.080 --> 0:32:27.520 quarter results that beat expectations to raise your full your forecast, 0:32:27.560 --> 0:32:31.200 and investors have definitely rewarded you big time. The ADRs 0:32:31.240 --> 0:32:32.880 that trade in the United States are at more than 0:32:32.880 --> 0:32:34.840 fifty percent tim in the past year. 0:32:35.160 --> 0:32:37.880 Mike, I do want to talk a little bit about 0:32:37.880 --> 0:32:40.480 different industries that you serve. We talk a lot about AI. 0:32:40.560 --> 0:32:42.160 I know you guys are doing a lot with AI 0:32:42.480 --> 0:32:46.840 as far as customers go, Customers that are using your product, 0:32:46.880 --> 0:32:49.320 customers that are leaning into AI right now, are you 0:32:49.360 --> 0:32:52.600 seeing more growth on the tech side of your business 0:32:52.600 --> 0:32:55.400 in terms of those types of customers, given what we're 0:32:55.400 --> 0:32:57.400 seeing come from the tech community over the last couple 0:32:57.440 --> 0:32:57.920 of years. 0:32:58.480 --> 0:33:01.040 Great question, I know as a huge topic among our 0:33:01.080 --> 0:33:05.600 customer base. From a Lastian's point of view, we certainly believe. 0:33:05.840 --> 0:33:08.680 All of the progress making in AI every week, in 0:33:08.720 --> 0:33:12.760 every quarter at the moment is fantastic for our ability 0:33:12.840 --> 0:33:16.160 to achieve our mission right. We can build better and 0:33:16.200 --> 0:33:18.840 better products that more tailor and our. 0:33:18.800 --> 0:33:21.880 Customized to the work that our customers are trying to do. 0:33:22.640 --> 0:33:25.840 There's no doubt our core customer base what we like 0:33:25.880 --> 0:33:30.000 to call technology driven companies, So companies that believe like 0:33:30.360 --> 0:33:31.520 Williams Racing. 0:33:31.480 --> 0:33:34.200 Or like a financial services company, they. 0:33:34.160 --> 0:33:38.400 Both be the same that believe technology is their source 0:33:38.440 --> 0:33:40.920 of competition. It's the way that they are going to 0:33:41.280 --> 0:33:45.480 get an edge, survive or thrive in their industry. Any 0:33:45.520 --> 0:33:49.000 of those businesses are deeply investing in AI in lots 0:33:49.000 --> 0:33:51.240 of different ways. They are trying to work out how 0:33:51.240 --> 0:33:54.760 this technology makes them more efficient, how it helps them 0:33:55.160 --> 0:33:59.600 to compete. Fundamentally, at Lassian's role there is to invest 0:33:59.680 --> 0:34:01.280 very heavy is we have done in the R and 0:34:01.360 --> 0:34:05.040 D of actually bringing AI to our customers. So we're 0:34:05.040 --> 0:34:07.680 a big believer that if we don't ship software that 0:34:07.760 --> 0:34:09.799 people can use, the rest of it doesn't matter. 0:34:09.840 --> 0:34:11.120 It's all just kind of talk. 0:34:11.640 --> 0:34:15.399 So our investment has been in taking those AI innovations 0:34:15.920 --> 0:34:20.760 and developments every week, every month, incredibly rapidly and getting 0:34:20.800 --> 0:34:22.759 them to our customers in a form that they can use. 0:34:23.680 --> 0:34:25.200 We have done that, and it's one of the things 0:34:25.239 --> 0:34:27.480 it's one of the things that last and Williams raising 0:34:27.520 --> 0:34:29.160 teams most excited about it. It's one of the things that 0:34:29.239 --> 0:34:30.880 all our customers are talking about is how they can 0:34:30.960 --> 0:34:33.880 make their businesses more efficient, especially as you mentioned in 0:34:34.160 --> 0:34:36.320 the Current Times, which is a big challenge. 0:34:36.440 --> 0:34:38.480 One last question about AI before we talk about some 0:34:38.520 --> 0:34:40.840 of the news you guys had this week. Our Bloomberg 0:34:40.840 --> 0:34:44.600 Intelligence team, our in house group of analysts noting that 0:34:44.640 --> 0:34:47.920 it may threaten your seat based sales model. They say 0:34:47.960 --> 0:34:53.000 deep seeks, cost effective model of training llms can bolster 0:34:53.080 --> 0:34:55.840 AI adoption, driving a shift of work to digital agents 0:34:55.840 --> 0:34:58.440 from humans, and so they say that's a risk for 0:34:58.480 --> 0:35:02.560 some of the enterprise software players with CP based revenue models, 0:35:02.600 --> 0:35:06.440 including yourself and some others. So will it could the 0:35:07.000 --> 0:35:09.160 deep seek have an impact like that on your business. 0:35:09.640 --> 0:35:12.840 Look, we certainly deeply believe in the fact that agents 0:35:12.960 --> 0:35:15.240 are going to make a huge difference to businesses around 0:35:15.239 --> 0:35:19.520 the world. We're already seeing that we are very much 0:35:19.560 --> 0:35:22.120 on the leading edge of that technology. We shipped our 0:35:22.160 --> 0:35:25.160 product Rovo a year and almost a year and a 0:35:25.200 --> 0:35:27.319 half ago now and have continued to update it and 0:35:27.400 --> 0:35:30.799 have now more than a million users waking up and 0:35:30.880 --> 0:35:35.000 using Lassian AI technologies, including all of our agents every day. 0:35:35.480 --> 0:35:39.600 You know, we take the position that AI fundamentally is 0:35:39.800 --> 0:35:42.400 about unleashing some form of human creativity. 0:35:42.480 --> 0:35:42.680 Right. 0:35:42.680 --> 0:35:46.919 It lets people do more with less. It helps them 0:35:47.000 --> 0:35:52.640 to be creative. It's a fantastical tool. That tool, there's 0:35:52.680 --> 0:35:55.239 no doubt, makes people able to do more. You can 0:35:55.280 --> 0:35:57.920 write more software, you can answer more emails, you can 0:35:57.960 --> 0:35:59.520 do whatever it is that you want to do, and 0:35:59.560 --> 0:36:01.640 you can do it more creatively and at a higher level. 0:36:02.320 --> 0:36:04.560 The thing with most of the industries that we work in, 0:36:04.640 --> 0:36:07.240 right we sell to knowledge workers around the world, people 0:36:07.239 --> 0:36:09.320 that spend the day sitting at a laptop or behind 0:36:09.320 --> 0:36:13.880 a computer and using fundamentally brain creativity to try to 0:36:13.920 --> 0:36:17.120 improve whatever business they're working in. Those are usually not 0:36:17.680 --> 0:36:21.960 supply limited by human creativity. If you take software engineering 0:36:21.960 --> 0:36:24.960 as a field, if we made all software engineers in 0:36:24.960 --> 0:36:27.560 the world twice as effective, the question is would we 0:36:27.600 --> 0:36:29.680 have half as many software engineers or would we build 0:36:29.680 --> 0:36:32.439 twice as much software. I think we'd end up building 0:36:32.480 --> 0:36:35.160 twice as much software, not the other way around, because 0:36:35.520 --> 0:36:37.480 we don't have a shortage of ideas of what we 0:36:37.480 --> 0:36:40.640 would like to build. In the world, most businesses don't 0:36:40.640 --> 0:36:42.280 get everything they need to get done. 0:36:42.800 --> 0:36:44.640 All our agents are doing is helping. 0:36:44.360 --> 0:36:47.640 Those businesses to achieve more, and they'll all be competitive 0:36:47.640 --> 0:36:50.160 with each other as well, so there's a natural are 0:36:50.440 --> 0:36:52.960 of conservation of profits there as well. 0:36:53.080 --> 0:36:55.640 Hey, Mike, I want to talk about some news you 0:36:55.640 --> 0:36:58.200 had this week, and this is your partnership with Williams 0:36:58.239 --> 0:37:01.280 Racing the F one team. Tell us about this partnership 0:37:01.320 --> 0:37:02.440 and what you guys are going to be doing and 0:37:02.440 --> 0:37:03.920 why you wanted to do it. 0:37:03.920 --> 0:37:05.839 It's an incredibly exciting partnership for us. 0:37:06.520 --> 0:37:09.400 It's from an Elastian point of view, it's the first 0:37:09.440 --> 0:37:11.719 major brand deal. From the Williams point of view, it's 0:37:11.760 --> 0:37:15.279 the first time it's the largest deal they've done. It 0:37:15.400 --> 0:37:18.560 is the first time they've had a title partner and 0:37:18.600 --> 0:37:24.840 a technology partner. Look, obviously, Williams is an amazing, storied 0:37:24.920 --> 0:37:27.520 race team, right, one of the winningest teams of all 0:37:27.520 --> 0:37:34.080 time and has had a challenging you know, last decade. However, 0:37:34.400 --> 0:37:37.839 there is huge renewal going on in the Elasti Williams team. 0:37:37.920 --> 0:37:38.160 Right. 0:37:38.400 --> 0:37:42.000 This partnership is just one step new partnership, new driver, 0:37:42.200 --> 0:37:47.120 new principles, new ownership, huge investment in digital transformation and 0:37:47.200 --> 0:37:50.000 technology as a way to catch up and to win. 0:37:50.520 --> 0:37:53.719 We are you know, I think eighty percent of the 0:37:53.760 --> 0:37:56.239 teams on the Greed or more are Elassian customers and 0:37:56.280 --> 0:37:57.680 have been for decades. 0:37:57.719 --> 0:38:01.239 So this is a sport where technologies really important. It 0:38:01.320 --> 0:38:02.600 is a sport where. 0:38:02.880 --> 0:38:07.239 Technology teams, those building you know, fluidynamics models and wind 0:38:07.280 --> 0:38:10.840 tunnels and cars and all of the monitoring technology that 0:38:10.880 --> 0:38:13.000 goes into it, have to meet with the business teams, 0:38:13.040 --> 0:38:17.560 those in the sponsorship groups. So our fundamental system of 0:38:17.560 --> 0:38:22.120 work is what the company, well what at LASSI Williams 0:38:22.200 --> 0:38:25.040 is trying to do and trying to embody we. 0:38:25.040 --> 0:38:27.360 Then, obviously it's a global sport. 0:38:27.400 --> 0:38:30.080 We have customers all around the world, but more importantly, 0:38:30.120 --> 0:38:31.960 you know, having spent a lot of time now over 0:38:31.960 --> 0:38:35.040 the last six months with the Williams team. This is 0:38:35.080 --> 0:38:37.400 a really great cultural fit for Alassian. This is a 0:38:37.400 --> 0:38:40.839 team of people who are working incredibly hard every day 0:38:41.000 --> 0:38:45.000 to use technology to try to change their fundamental outcome. 0:38:45.880 --> 0:38:50.120 They're on a massive journey of rebuild the culture. The 0:38:50.160 --> 0:38:53.839 palpability of getting back to the Winner's circle is phenomenal, 0:38:54.960 --> 0:38:57.280 and we just we fell in love with the story 0:38:57.280 --> 0:38:58.759 and we're like, okay, we can help you do this. 0:39:00.080 --> 0:39:03.839 Leaning very heavily into technology partnership, we have a lot 0:39:03.880 --> 0:39:06.040 of things we can help them with to make their 0:39:06.040 --> 0:39:10.160 business far more efficient and hopefully change the results of 0:39:10.200 --> 0:39:14.279 the team, which is a mission that at Lastian now 0:39:14.280 --> 0:39:15.600 has thousands of people working on. 0:39:15.680 --> 0:39:16.720 So it's a sad. 0:39:16.520 --> 0:39:18.640 About that it's a long term deal. It's been described 0:39:18.640 --> 0:39:21.319 as a record breaking deal. Just for context. Can you 0:39:21.320 --> 0:39:23.319 give us some of the numbers behind this deal, how 0:39:23.400 --> 0:39:24.239 much it costs? 0:39:24.560 --> 0:39:26.759 I can, Unfortunately, I can tell you that it is 0:39:26.920 --> 0:39:30.240 certainly a long term deal. We're on the at Lastian 0:39:30.239 --> 0:39:33.920 William's journey right and we are trying to use all 0:39:33.960 --> 0:39:35.920 of our software and all of our technology in all 0:39:35.960 --> 0:39:39.200 of our culture and our practices of how we work 0:39:39.680 --> 0:39:42.919 to show fundamentally our customers and to show the world 0:39:43.000 --> 0:39:45.960 that we can make a massive difference in what is 0:39:45.960 --> 0:39:50.759 obviously an incredibly competitive industry. Right, it comes down to 0:39:51.480 --> 0:39:55.560 hundreds of milliseconds. The gap between first and last on 0:39:55.600 --> 0:39:57.600 the grid in the last race of last year was 0:39:57.600 --> 0:39:58.600 the smallest it's ever been. 0:39:59.360 --> 0:40:02.200 Is Okay, So we don't have the details on the 0:40:02.280 --> 0:40:05.960 exact figures, but how do you justify ROI on this 0:40:06.400 --> 0:40:10.000 given that it's such a big deal, and you know, 0:40:10.239 --> 0:40:13.000 it's kind of hard to measure how many people will 0:40:13.040 --> 0:40:16.160 become lass and customers as a result of this title sponsorship. 0:40:16.600 --> 0:40:20.920 Look, we're we always have been an incredibly metric focused organization. 0:40:22.200 --> 0:40:24.960 As a large bootstrap company. You don't get that way 0:40:25.000 --> 0:40:30.120 without a numbers quickly. Look, we have a number of 0:40:30.200 --> 0:40:31.200 success metrics here. 0:40:31.280 --> 0:40:35.319 Firstly, always from a brand point of view, Formula one 0:40:35.360 --> 0:40:38.440 is a very fast growing and global sport, and we have, 0:40:38.520 --> 0:40:41.360 as I mentioned, customers in almost every country on the planet. 0:40:41.400 --> 0:40:44.719 So we need to continue to have our brand and 0:40:44.760 --> 0:40:46.719 our presence and our story told in a larger and 0:40:46.800 --> 0:40:48.960 larger way around the world. But that's obviously worth a 0:40:48.960 --> 0:40:53.239 lot of money to us. Secondly, as an enterprise opportunity, 0:40:54.040 --> 0:40:58.040 the Formula one is you know, it's like a mobile 0:40:58.200 --> 0:41:01.440 executive briefing center, right. It takes it's business. This is 0:41:01.480 --> 0:41:04.239 a fantastical customer of it. Lastly, that we can take 0:41:04.280 --> 0:41:06.719 to twenty four cities around the world, and in those 0:41:06.719 --> 0:41:09.840 twenty four cities we can bring our biggest customers to 0:41:09.880 --> 0:41:12.759 show them how Williams works, what we are doing to 0:41:12.760 --> 0:41:15.560 help the team. And this is incredibly powerful in the 0:41:15.600 --> 0:41:20.600 enterprise to be able to show real world examples of 0:41:21.040 --> 0:41:21.520 what we can. 0:41:21.440 --> 0:41:22.360 Do to help a customer. 0:41:22.520 --> 0:41:26.759 Mike, just real quick. One last question the Formula one, 0:41:26.840 --> 0:41:29.759 the FW four to seven car forty seven car that's 0:41:29.760 --> 0:41:32.200 going to have your branding. I guess it gets unveiled. 0:41:33.280 --> 0:41:34.960 I don't know really soon. Are you going to be 0:41:35.000 --> 0:41:36.560 able to take it around the track? Have you been 0:41:36.640 --> 0:41:37.520 told that you're good or. 0:41:39.840 --> 0:41:41.640 Look, my driving skills might need a little bit of 0:41:41.760 --> 0:41:45.120 work for that one. I've certainly sat in the car 0:41:45.280 --> 0:41:47.600 and let me tell you that that is a challenging 0:41:47.680 --> 0:41:52.359 job that is not as comfortable as my daily driver. 0:41:52.440 --> 0:41:53.000 That's for sure. 0:41:53.880 --> 0:41:56.600 It does get unveiled on Tuesday, and we're certainly really 0:41:56.640 --> 0:42:00.720 exciting we've done some really innovative actually, I think for 0:42:00.719 --> 0:42:04.040 for Formula one design work between the Elassin design team 0:42:04.040 --> 0:42:07.480 and the Williams design team. So super excited to show 0:42:08.560 --> 0:42:12.279 the world the car on Tuesday, and super excited to 0:42:12.400 --> 0:42:16.799 show how we're trying to bring our collaboration and teamwork practices, 0:42:17.440 --> 0:42:19.600 you know, right into that into that car in fact, 0:42:20.160 --> 0:42:23.040 and into the garage, into all the mechanics and all 0:42:23.040 --> 0:42:24.600 the strategist that work on the race as well. 0:42:24.680 --> 0:42:28.160 So we're not just a digital company you'll see on Tuesday. 0:42:28.239 --> 0:42:30.880 Don't totally need a AI for that, right, You just 0:42:30.960 --> 0:42:33.880 need a really cool car, just going to say. 0:42:34.680 --> 0:42:36.640 A lot of things to compete in the sport. 0:42:36.719 --> 0:42:39.480 So we're on there, We're on the journey, we're learning 0:42:39.520 --> 0:42:41.680 a lot, and we're putting our shoulder behind it. 0:42:41.840 --> 0:42:43.239 Carol, I do feel like if you signed the check, 0:42:43.280 --> 0:42:44.080 you can drive the car. 0:42:44.200 --> 0:42:44.399 Yeah. 0:42:44.440 --> 0:42:46.279 I'm just gonna say, Mike, you know, you do get 0:42:46.280 --> 0:42:48.560 some leverage with all of this. I'm just gonna you know, 0:42:48.640 --> 0:42:50.399 and the company name is going to be on the car, 0:42:50.480 --> 0:42:52.160 so you should be able to take it out for 0:42:52.160 --> 0:42:52.479 a spin. 0:42:52.760 --> 0:42:54.320 Look, I would also say it might not be a 0:42:54.360 --> 0:42:56.680 good idea for the Williams team or the Elassin team. 0:42:56.680 --> 0:43:00.520 I'm not sure my team would think that's a great 0:43:00.560 --> 0:43:02.800 idea for me to be driving. It's a three hundred 0:43:03.040 --> 0:43:05.399 or more guys an hour round the track. 0:43:05.640 --> 0:43:08.360 I hear, I hear you listen. 0:43:08.400 --> 0:43:10.200 Thank you so much for notes later where you are, 0:43:10.239 --> 0:43:13.600 but we so appreciate you joining us on this Thursday, 0:43:13.680 --> 0:43:16.120 really really appreciating. Good luck with that partnership. 0:43:24.120 --> 0:43:27.879 This is the Bloomberg Business Week Podcast. Listen live each 0:43:27.920 --> 0:43:30.879 weekday starting at two pm Eastern on Apple car Play 0:43:31.000 --> 0:43:33.640 and the Android Auto with the Bloomberg Business App. You 0:43:33.680 --> 0:43:36.800 can also listen live on Amazon Alexa from our flagship 0:43:36.920 --> 0:43:41.000 New York station, Just say Alexa Play Bloomberg eleven thirty. 0:43:42.480 --> 0:43:44.439 Plenty ahead in our second hour of the weekend edition 0:43:44.480 --> 0:43:48.520 oft Bloomberg Business Week, including how technology can humanize classrooms 0:43:48.560 --> 0:43:50.000 with the founder of con Academy. 0:43:50.200 --> 0:43:52.920 Plus Valentine's Day may now be in the rear view mirror, 0:43:53.040 --> 0:43:56.160 which means those in the flower industry are already thinking 0:43:56.160 --> 0:43:59.880 about their next big push. Mother's Day, The CEO of 0:43:59.880 --> 0:44:03.200 the online flower delivery company Urban Stem stops by to 0:44:03.239 --> 0:44:07.360 talk growth, tariffs, margins, and collaborations with the NFL. 0:44:07.640 --> 0:44:10.800 And when Harry met Sally Sleeveless in Seattle, The Notebook 0:44:10.840 --> 0:44:13.720 notting Hill, Bridget Jones, you know, Tim, those movies. 0:44:14.000 --> 0:44:15.840 I cannot believe there's another Bridget Jones. 0:44:15.840 --> 0:44:18.560 Can I just say that, I know, I know, Well, 0:44:18.600 --> 0:44:21.000 I gotta tell you the Romance movie apparently is getting 0:44:21.040 --> 0:44:23.040 a bit of a makeover, and it might go in 0:44:23.080 --> 0:44:27.440 a direction you uh probably weren't expecting. Also getting a 0:44:27.480 --> 0:44:30.840 makeover gaming PCs. We're going to tackle Bloomberg pursuits a 0:44:30.840 --> 0:44:32.480 little bit later on this hour. 0:44:32.680 --> 0:44:35.560 First up, though, as the US Department of Education maybe 0:44:35.600 --> 0:44:38.880 on the chopping block in the new administration, US Education 0:44:39.000 --> 0:44:42.480 gets its annual report card, and let's just say it's 0:44:42.560 --> 0:44:43.560 not great. That's right. 0:44:43.640 --> 0:44:45.919 Reading scores for eighth graders have hit a record low, 0:44:46.040 --> 0:44:49.760 math performance is struggling, and achievement gaps are whining despite 0:44:49.880 --> 0:44:51.480 major federal investments. 0:44:51.760 --> 0:44:54.360 Focusing on these gaps is Salcon, founder and CEO of 0:44:54.440 --> 0:44:58.320 Cohn Academy, the nonprofit that provides free lessons in math, history, economics, 0:44:58.360 --> 0:45:01.960 computer programming, and more. We started asking him if the 0:45:02.000 --> 0:45:03.359 bad results surprised him. 0:45:03.840 --> 0:45:04.480 Unfortunately not. 0:45:05.239 --> 0:45:08.520 You know, we've and the Nate folks made this clear. 0:45:08.560 --> 0:45:11.200 Also in their report. I think we still have the 0:45:11.200 --> 0:45:16.160 effects of the pandemic nationwide. The scores nationally, both in 0:45:16.239 --> 0:45:18.680 math and reading, both in fourth and eighth grade, still 0:45:18.680 --> 0:45:21.640 haven't recovered from the twenty nineteen level. This is true 0:45:21.640 --> 0:45:25.279 in almost every state as well. And it's you know, 0:45:25.360 --> 0:45:28.160 we had big gaps then a lot of kids kind 0:45:28.160 --> 0:45:30.640 of fell off the rails then and haven't fully gotten 0:45:30.680 --> 0:45:31.040 back on. 0:45:31.440 --> 0:45:33.640 And then there's just a lot of you. 0:45:33.600 --> 0:45:38.080 Know, complexity in serving different groups of students and demographic mix, etc. 0:45:38.320 --> 0:45:40.520 That probably has made it even harder. You know. 0:45:40.560 --> 0:45:45.319 What's worrying too, is that I think some would say 0:45:45.360 --> 0:45:51.000 it's it's the pandemic, yes, but we've had problems with 0:45:51.120 --> 0:45:54.840 our education system right across the country for a while here, 0:45:55.680 --> 0:45:57.719 and it feels like the gaps are widening. I mean, 0:45:57.920 --> 0:45:59.919 I want to ask you, I am curious, so because 0:45:59.880 --> 0:46:02.920 you've been in this world for a long time, I mean, 0:46:03.520 --> 0:46:05.560 what's happening with American education? 0:46:06.280 --> 0:46:06.480 You know? 0:46:06.680 --> 0:46:09.680 Unfortunately it's kind of a tale of two cities is 0:46:09.680 --> 0:46:13.400 the right metaphor here? But and the NAPE scores validated 0:46:13.440 --> 0:46:16.720 that the higher performing students actually started to pull further 0:46:16.760 --> 0:46:18.799 and further ahead, and a lot of times when you 0:46:18.800 --> 0:46:20.560 look at some of these Pieza rankings, when we compare 0:46:20.600 --> 0:46:22.960 ourselves to other countries, et cetera. If you were to 0:46:23.000 --> 0:46:27.160 separate some of the higher performing, wealthier schools and the suburbs, 0:46:27.160 --> 0:46:30.399 et cetera, they actually can compete with anyone in the world, 0:46:30.520 --> 0:46:32.320 actually do better than anyone in the world. But I 0:46:32.320 --> 0:46:37.760 think you have other large chunks of America where they're 0:46:37.840 --> 0:46:40.759 really really lagging, And these NAPE scores only only validated 0:46:41.040 --> 0:46:43.360 you had a third of eighth graders didn't even have 0:46:43.480 --> 0:46:47.520 basic reading comprehension. I just visited a school yesterday out 0:46:47.520 --> 0:46:52.400 here in northern California, and I met two English language 0:46:52.440 --> 0:46:55.759 learners who, you know, not only are they you know 0:46:55.840 --> 0:46:58.560 obviously can't speak English, but they haven't gone to school before, 0:46:58.600 --> 0:47:00.920 they haven't read before, or they can't read at all, 0:47:00.960 --> 0:47:04.239 even in their native language. So I think when you 0:47:04.640 --> 0:47:08.279 I think those types of difficulties are some of what 0:47:08.320 --> 0:47:10.759 you're seeing here on top of on top of the pandemic. 0:47:11.080 --> 0:47:14.160 And unfortunately I don't I don't think just doing more 0:47:14.200 --> 0:47:15.960 of the same is actually the solution here. This is 0:47:15.960 --> 0:47:18.040 something that we've always talked about at Kin Academy, is 0:47:18.320 --> 0:47:20.400 how do we personalize education more, you know, And I 0:47:20.400 --> 0:47:22.839 saw that teacher that that same teacher that had these 0:47:22.840 --> 0:47:25.799 two students who couldn't read, who are fifth graders, also 0:47:25.880 --> 0:47:27.959 had some students who are ready for ninth grade math. 0:47:28.480 --> 0:47:30.640 So they had a huge spread in that same classroom. 0:47:30.680 --> 0:47:32.520 And you can't just do one thing for all of 0:47:32.520 --> 0:47:35.640 those thirty students. And that's where we think technology can 0:47:35.719 --> 0:47:38.600 help that teacher address the needs of each each individual student. 0:47:38.680 --> 0:47:43.360 You know, the President has has cited how the US 0:47:43.560 --> 0:47:48.640 lags behind other Western nations despite federal spending on students, 0:47:48.800 --> 0:47:53.319 and you know, he is looking to potentially dismantle the 0:47:53.360 --> 0:47:57.960 Department of Education. Do you think that would be helpful? 0:47:58.719 --> 0:48:01.600 You know, it's it. We'll need to see how it 0:48:01.640 --> 0:48:04.359 all evolves. A lot of folks have been asking me this. 0:48:04.400 --> 0:48:06.520 Even in our own team. We work obviously with a 0:48:06.560 --> 0:48:09.600 lot of school districts. The Department of Education does a 0:48:09.640 --> 0:48:12.440 lot of things, but they aren't a major major funder 0:48:12.600 --> 0:48:15.200 of schools. Depending on what year you look at and 0:48:15.200 --> 0:48:18.920 what schools, anywhere between three and ten percent of funding 0:48:18.960 --> 0:48:21.360 in a given year comes from the federal Department of Education, 0:48:22.239 --> 0:48:25.120 and it tends to be tied to certain programs so 0:48:25.160 --> 0:48:28.080 some of those might suffer. Some of those are there 0:48:28.120 --> 0:48:30.239 by law. One of our board members is a for 0:48:30.920 --> 0:48:33.040 under Secretary of Education, and he was explaining to me 0:48:33.120 --> 0:48:35.799 yesterday a day before yesterday at our board meeting, that 0:48:36.120 --> 0:48:37.640 there are certain things in there that are just part 0:48:37.640 --> 0:48:40.680 of law that even if the Department of Education were dismantled, 0:48:40.880 --> 0:48:42.840 someone else would have to take it over the Department 0:48:42.880 --> 0:48:45.560 of the Treasury, Department or Health and Human Services, etc. 0:48:45.920 --> 0:48:49.359 So it's too early to tell exactly what the implications are, 0:48:49.360 --> 0:48:53.560 but most of education spending and policy actually does happen 0:48:53.560 --> 0:48:54.600 at the state and local level. 0:48:54.680 --> 0:48:57.600 Yeah, so this is where you think about like state taxes, right, 0:48:57.719 --> 0:49:00.440 or city taxes and so on and so forth that 0:49:00.480 --> 0:49:04.400 really are the determining factor. How can AI help with 0:49:04.400 --> 0:49:06.400 all of this? This is something you guys are certainly in 0:49:06.400 --> 0:49:09.720 the middle of and improve the gaps that we see 0:49:09.960 --> 0:49:12.560 within education across the United States. 0:49:12.880 --> 0:49:15.280 Yeah, this is something that we're definitely leaning into. 0:49:15.400 --> 0:49:17.680 And it's very easy to get enamored with technology, but 0:49:17.719 --> 0:49:19.839 I remind everyone this isn't about the technology. It's about 0:49:19.840 --> 0:49:22.200 the core problem you're trying to solve, And the problem 0:49:22.239 --> 0:49:23.919 we're trying to solve is The one we started talking 0:49:23.960 --> 0:49:26.000 about is you have a teacher in a classroom. Before 0:49:26.040 --> 0:49:28.759 the pandemic, your average teacher had three grade levels in 0:49:28.800 --> 0:49:30.960 the same classroom. They're all fifth graders, but some are 0:49:31.200 --> 0:49:33.120 operating in a second or third grade level. Some of 0:49:33.120 --> 0:49:34.719 them are ready to operate at a sixth or seventh 0:49:34.760 --> 0:49:37.360 grade level. It's gotten worse since the pandemic, as we 0:49:37.440 --> 0:49:39.359 just talked about. So if you're a teacher, how do 0:49:39.400 --> 0:49:41.160 you address all of those needs? How do you make 0:49:41.160 --> 0:49:42.560 sure some of the kids aren't bored and all some 0:49:42.560 --> 0:49:44.960 of the kids aren't lost. And so the opportunity is, well, 0:49:45.000 --> 0:49:47.520 what if you could personalize? In world class education has 0:49:47.560 --> 0:49:50.000 always looked like one to one. I always point out 0:49:50.000 --> 0:49:52.840 Alexander the Great had Aristotle as his personal tutor. We 0:49:52.840 --> 0:49:55.399 couldn't afford to give every student that. But what kind 0:49:55.440 --> 0:49:57.520 academy has been trying to do over the last fifteen 0:49:57.560 --> 0:50:00.320 twenty years is well, maybe we could approximate element of 0:50:00.360 --> 0:50:04.080 that with on demand video, with software and now generative AI. 0:50:04.400 --> 0:50:05.959 I write a lot about it in my book Brave 0:50:06.000 --> 0:50:09.160 New Words. We think generative AI. It's it's not going 0:50:09.200 --> 0:50:11.239 to do everything, it's not on a silver bullet, but 0:50:11.440 --> 0:50:13.239 Over time, it's going to get better and better at 0:50:13.280 --> 0:50:15.840 being able to provide even more personalized support, not just 0:50:15.880 --> 0:50:17.960 for students, but also also for teachers with things like 0:50:18.040 --> 0:50:20.600 lesson plans and grading papers and writing progress reports. 0:50:20.719 --> 0:50:24.080 Sally had you on back in May when Brave New 0:50:24.239 --> 0:50:27.239 Words came out how AI will revolutionize education and why 0:50:27.280 --> 0:50:29.520 that's a good thing. I spoke to someone yesterday who 0:50:29.520 --> 0:50:32.600 talked about the pace of development when it comes to 0:50:32.640 --> 0:50:36.000 AI is just unbelievable. Like he says, the world changes 0:50:36.040 --> 0:50:39.200 every few months as a result of this technology. How 0:50:39.239 --> 0:50:40.840 much has it changed since you wrote the book. 0:50:41.280 --> 0:50:42.480 It was actually one of my fears when I was 0:50:42.480 --> 0:50:43.280 writing the book. 0:50:43.120 --> 0:50:45.000 Write a book by AI, I will to be outdated 0:50:45.000 --> 0:50:46.080 of the day it comes out. 0:50:46.480 --> 0:50:48.040 Luckily, I still think it's pretty you know. 0:50:48.040 --> 0:50:51.000 I tried to make it pretty general, and even a 0:50:51.080 --> 0:50:53.440 year ago, when when you know, I was finishing up 0:50:53.440 --> 0:50:55.520 the writing, it was pretty clear how fast this was moving, 0:50:55.520 --> 0:50:57.040 so I tried to make a little bit more evergreen. 0:50:57.239 --> 0:51:00.000 But yeah, it's been mind blowingly fast. Not even every 0:51:00.040 --> 0:51:02.720 few months, I would say, sometimes on a daily basis. 0:51:02.480 --> 0:51:04.680 Things are things are evolving. A lot of what I 0:51:04.800 --> 0:51:07.720 challenged the con Academy team is what can we uniquely 0:51:07.760 --> 0:51:09.920 do as a nonprofit that other people aren't going to 0:51:09.920 --> 0:51:12.400 have the horizon or the motivation to work on? And 0:51:12.440 --> 0:51:14.720 what are we going to do that's really AI proof? 0:51:14.760 --> 0:51:16.440 And we think a lot of it is how do 0:51:16.480 --> 0:51:18.799 we connect humans together? Maybe using AI, but how do 0:51:18.800 --> 0:51:20.520 we for more human connections? 0:51:20.640 --> 0:51:20.879 Maybe? 0:51:20.880 --> 0:51:22.759 How do how do people create proof that they know 0:51:22.840 --> 0:51:26.279 something credentially? Once again, how do you how do you 0:51:26.320 --> 0:51:28.960 make sure it's pedagogically sound as opposed to just you know, 0:51:29.000 --> 0:51:30.520 throwing an AI in front of people. 0:51:31.040 --> 0:51:32.759 But yes, it is definitely. 0:51:32.480 --> 0:51:35.000 Something my head has spins almost on a daily basis. 0:51:35.320 --> 0:51:37.000 But you know everyone feels that way. 0:51:37.800 --> 0:51:38.480 You know, it's funny. 0:51:38.920 --> 0:51:41.040 Forgive me for doing this, but I guess because it's 0:51:41.080 --> 0:51:43.440 been front and center. You know, we're talking AI and 0:51:43.480 --> 0:51:46.600 we've been watching what's been going on in the US government, 0:51:46.640 --> 0:51:52.160 and The Washington Post had said representatives from Elon Musk's 0:51:52.280 --> 0:51:55.400 Dose Service have had sensitive data from across the Education 0:51:55.520 --> 0:51:59.280 Department into AI software to look into the agency's programs 0:51:59.280 --> 0:52:04.480 and spending to people familiar AI being used to investigate 0:52:04.719 --> 0:52:10.880 where there's personal data possibly accessed? You are in this world? 0:52:11.440 --> 0:52:14.759 Is that something we should be concerned about whether it's 0:52:14.840 --> 0:52:17.000 Department of Education or the Treasury Department. 0:52:17.520 --> 0:52:19.359 Well, you know, I don't I'm not an expert on 0:52:19.440 --> 0:52:21.160 exactly what has happened. 0:52:22.000 --> 0:52:24.080 But yes, anytime we're talking about. 0:52:24.239 --> 0:52:27.279 Data, data related to education in particular, you have to 0:52:27.280 --> 0:52:29.360 be super cautious about how it's being used, especially if 0:52:29.360 --> 0:52:32.120 it's potentially student data. This is something where we as 0:52:32.560 --> 0:52:34.440 we take this very seriously as a nonprofit, and when 0:52:34.440 --> 0:52:36.239 we go work with school districts we point out like 0:52:36.640 --> 0:52:39.080 not every for profit company has the same incentives. 0:52:38.719 --> 0:52:40.680 That we do. You have to be very cautious here 0:52:41.200 --> 0:52:42.040 on how you use it. 0:52:42.360 --> 0:52:44.759 Now if it's all on the up and up, and 0:52:44.800 --> 0:52:48.840 I don't know, I don't know what the fine print 0:52:48.880 --> 0:52:51.520 is on this data. You know, there could be uses 0:52:51.560 --> 0:52:53.759 of AI where you can use it to make sense 0:52:53.800 --> 0:52:56.520 of large amounts of information that otherwise, of you know, 0:52:56.520 --> 0:52:58.799 an individual human being would never be able to sift through. 0:52:59.080 --> 0:53:02.160 But yeah, I don't know details of how they're using it. 0:53:02.320 --> 0:53:03.120 No, that's fair. Hey. 0:53:03.160 --> 0:53:05.399 One other news thing that obviously we've been obsessed about 0:53:05.440 --> 0:53:07.960 the last couple of weeks Deep Seek, you know, and 0:53:08.000 --> 0:53:12.200 the prospect of AI maybe being less expensive to do, 0:53:13.120 --> 0:53:15.319 and the models to be able to do. When I 0:53:15.320 --> 0:53:18.600 think about education, might that make it even more accessible 0:53:20.040 --> 0:53:21.360 for students around the globe? 0:53:21.560 --> 0:53:23.759 Yeah, I mean I thought it was great news from 0:53:23.960 --> 0:53:26.160 from our point of view. The costs have already come 0:53:26.200 --> 0:53:29.120 down even before deep Seek by a factor of ten, 0:53:29.239 --> 0:53:31.319 and so I expected that to continue. And then deep 0:53:31.320 --> 0:53:33.080 Seek and some of their techniques I think is only 0:53:33.080 --> 0:53:33.960 going to accelerate it. 0:53:34.520 --> 0:53:35.160 But you know, I. 0:53:35.080 --> 0:53:37.719 Also point out there's an unending amount of things that 0:53:37.760 --> 0:53:41.360 we can use AI for. You know, basic chat bots 0:53:41.400 --> 0:53:45.040 are going to become close to free, very cheap. But 0:53:45.120 --> 0:53:48.200 now if the compute or if the if the applications 0:53:48.280 --> 0:53:50.640 use less compute and the compute gets cheaper, we're going 0:53:50.680 --> 0:53:52.760 to be able to do more real time, more audio, 0:53:52.880 --> 0:53:55.920 more visual things. And yes, in education in other places, 0:53:55.920 --> 0:53:57.400 I think that's only that's only a win for the 0:53:57.440 --> 0:53:58.320 application developers. 0:53:58.400 --> 0:54:00.880 What's the balance of technology in the classroom. It's a 0:54:00.880 --> 0:54:03.080 discussion that we had with you last time, but it 0:54:03.120 --> 0:54:06.200 seems like it's only becoming more and more of a thing. 0:54:06.760 --> 0:54:08.920 How do you use technology as a tool but not 0:54:08.960 --> 0:54:09.719 as a distraction. 0:54:10.120 --> 0:54:12.640 Yeah, And we have a school out here in Northern 0:54:12.680 --> 0:54:14.760 California's where my kids go to school con Lab School, 0:54:14.800 --> 0:54:16.640 and you know, if you were to visit the school, 0:54:16.680 --> 0:54:18.920 people say, oh, so sociocon Academy must be technology all 0:54:18.960 --> 0:54:19.200 the time. 0:54:19.239 --> 0:54:20.920 No, you'd actually see more human to. 0:54:20.960 --> 0:54:23.040 Human interaction than you would see I think at almost 0:54:23.080 --> 0:54:25.600 any other school. And I think it's all about I 0:54:25.640 --> 0:54:28.959 would say maybe depending on the age as you get older, 0:54:29.000 --> 0:54:31.440 middle school, high school, college, you could get up to 0:54:31.560 --> 0:54:34.839 thirty forty fifty percent leveraging technology. You're going to code, 0:54:34.880 --> 0:54:36.760 you're going to write a paper, you're going to edit video, 0:54:36.840 --> 0:54:39.920 you're going to do personalized practice on con academy to 0:54:39.960 --> 0:54:41.880 fill in your gaps. And then what that does is 0:54:41.920 --> 0:54:43.920 that liberates the class time so that you don't have 0:54:43.960 --> 0:54:45.839 to give the lectures anymore. You don't have a bunch 0:54:45.880 --> 0:54:48.160 of kids with their fingers on their lips just passively listening. 0:54:48.320 --> 0:54:50.080 You can have the kids work on harder problems. You 0:54:50.120 --> 0:54:52.040 can they can do simulations, they can do games, and 0:54:52.040 --> 0:54:53.759 that's what we try to do. And you know, I 0:54:53.760 --> 0:54:55.879 always point out, even without technology, you can have very 0:54:55.880 --> 0:54:58.680 dehumanizing classrooms, but if you use technology, well you could 0:54:58.719 --> 0:55:00.000 have very humanizing classrooms. 0:55:00.440 --> 0:55:00.640 Yeah. 0:55:00.719 --> 0:55:02.560 Right, You just think about kind of where it could go. 0:55:02.600 --> 0:55:05.640 And especially the idea of personalization in terms of teaching 0:55:05.680 --> 0:55:06.879 could be really a cool thing. 0:55:07.080 --> 0:55:07.200 You know. 0:55:07.239 --> 0:55:08.920 The other thing I think about with teaching and AI 0:55:09.040 --> 0:55:11.080 is I just think about if you're I was a 0:55:11.080 --> 0:55:13.799 pretty shy kid and hard to believe, but like might 0:55:13.840 --> 0:55:16.560 be afraid to like offer up an answer or something 0:55:16.560 --> 0:55:18.360 because you think it's silly. But maybe if you're working 0:55:18.400 --> 0:55:22.680 with an AI teacher or ta oh, like just think 0:55:22.719 --> 0:55:25.120 about what you can maybe get out of that. 0:55:25.200 --> 0:55:28.520 I think du Lingo said that they have these AI 0:55:29.520 --> 0:55:32.640 educators rather than live people because they find that people 0:55:32.640 --> 0:55:35.200 who are learning languages want to interact with that tech. Yeah, 0:55:35.200 --> 0:55:35.640 that makes. 0:55:35.560 --> 0:55:37.759 Completely sense on because you feel embarrassed about like your 0:55:37.800 --> 0:55:39.120 pronunciations or something. 0:55:39.960 --> 0:55:43.520 You're listening to the Bloomberg Business Week podcast. Catch us 0:55:43.600 --> 0:55:47.080 live weekday afternoons from two to five pm Eastern Listen 0:55:47.080 --> 0:55:50.600 on Apple CarPlay and Android Auto with the Bloomberg Business app, 0:55:50.800 --> 0:55:53.440 or watch us live on YouTube. 0:55:54.040 --> 0:55:57.360 Valentine's Day and the time around it among the biggest 0:55:57.400 --> 0:56:00.400 times a year when it comes to the flower industry, 0:56:00.440 --> 0:56:04.800 So needless to say, Minakhi Lala is pretty busy right now. 0:56:05.080 --> 0:56:08.960 She's the CEO at the online flower delivery company, Urban Stems. 0:56:09.320 --> 0:56:13.120 She joins us from one of those facilities. Minakshi, thanks 0:56:13.160 --> 0:56:15.200 so much for joining us. How's business? 0:56:15.480 --> 0:56:18.000 Thank you so much for having me. It's busy, It's 0:56:18.040 --> 0:56:19.280 our super Bowl weekend. 0:56:19.760 --> 0:56:22.320 I mean contextualize that a little bit for us, Like, okay, 0:56:22.400 --> 0:56:25.439 super Bowl sounds big. We know Mother's Day is big 0:56:25.480 --> 0:56:28.400 also in terms of your revenue, Like how big is 0:56:28.440 --> 0:56:29.640 this time period for the company? 0:56:30.120 --> 0:56:33.840 So Urban Stems will ship about one point eight million 0:56:33.920 --> 0:56:37.400 floral stems to people across forty eight states this weekend. 0:56:38.280 --> 0:56:41.879 This holiday is our second peak bite cycle. Like you said, 0:56:41.920 --> 0:56:45.520 Mother's Day is definitely our peak. But what has changed 0:56:45.520 --> 0:56:49.560 this year is we are seeing consumers spend more than 0:56:49.600 --> 0:56:52.600 they have in years prior on this holiday. Consumers are 0:56:52.640 --> 0:56:55.439 expected to spend a record of twenty seven point five 0:56:55.640 --> 0:56:59.960 billion dollars this year versus twenty five point eight billion 0:57:00.040 --> 0:57:03.960 in last year. This is just slightly or cozy now 0:57:04.000 --> 0:57:07.160 for slightly above the record breaking twenty seven point four 0:57:07.200 --> 0:57:10.239 billion that was set in twenty twenty during COVID times. 0:57:10.440 --> 0:57:13.120 Hey, so is that because things are costing more or 0:57:13.160 --> 0:57:16.160 that there are actually more individual transactions? 0:57:16.520 --> 0:57:19.360 They are more individual transactions. But what we are seeing 0:57:19.560 --> 0:57:24.880 is that our customer is responding to higher value product. 0:57:25.360 --> 0:57:29.360 If they see better design, better quality product that is 0:57:29.920 --> 0:57:32.520 meaningful to them, they are investing dollars in It. 0:57:33.040 --> 0:57:36.200 Remind us where you play in the ecosystem of flowers, 0:57:36.240 --> 0:57:39.080 because the cost really runs the gamut. I mean, you 0:57:39.080 --> 0:57:41.760 can spend as much as you want to spend to 0:57:41.760 --> 0:57:44.560 get ab okay of flowers delivered to somebody. Where does 0:57:44.640 --> 0:57:46.600 urban Where's Urban stems sweet spot? 0:57:46.920 --> 0:57:49.760 So Urban Stems takes a lot of pride in saying 0:57:49.800 --> 0:57:53.240 that we are we play in the higher average order 0:57:53.320 --> 0:57:57.200 value in the higher AOV game, and our average basket 0:57:57.240 --> 0:58:00.480 size is one hundred and twenty five dollars, already high 0:58:00.480 --> 0:58:04.640 for flowers and for flowers that are shipped like flowers 0:58:05.160 --> 0:58:09.640 for an e commerce business. And also to your point earlier, yes, 0:58:09.680 --> 0:58:13.560 the cost of product has gone up. However, we have 0:58:13.680 --> 0:58:17.400 seen that our customers tend to resonate towards the special. 0:58:17.440 --> 0:58:20.560 They want uniqueness, they want differentiation, they want special product. 0:58:20.800 --> 0:58:25.560 They don't want the conventional, the predictable, the standard one 0:58:25.600 --> 0:58:28.760 dozen roses for Valentine's Day. They want something above and 0:58:28.800 --> 0:58:32.240 beyond that. And we have seen ten percent growth in 0:58:32.280 --> 0:58:35.200 our AOV year over year, and we are also seeing 0:58:35.200 --> 0:58:38.200 our higher priced arrangements are selling ahead of plan with 0:58:38.240 --> 0:58:41.240 a thirteen percent growth in average. 0:58:41.400 --> 0:58:43.720 So you've been doing this for a while. Year after year, 0:58:43.800 --> 0:58:46.520 You've gone through, right, some difficult times. I think about, 0:58:46.720 --> 0:58:48.840 you know, so many of the businesses that we've talked 0:58:48.880 --> 0:58:50.880 to you that had to kind of get themselves through 0:58:50.880 --> 0:58:53.720 the pandemic, although I sent a fair amount of flowers 0:58:53.760 --> 0:58:57.400 sometimes during the pandemic, and just you know, give us 0:58:57.440 --> 0:59:00.680 an idea of how this business cycle is feeling versus 0:59:00.680 --> 0:59:02.840 what we've seen maybe over the last few years, which 0:59:02.840 --> 0:59:05.240 has you know, included some regular cycles and some very 0:59:05.360 --> 0:59:06.480 unusual cycles. 0:59:06.880 --> 0:59:10.600 Yeah, there was definitely a post pandemic adjustment in this business. 0:59:10.600 --> 0:59:13.360 But our customers are opting in for more premier gift 0:59:13.400 --> 0:59:16.560 options and they continue to be really focused on uniqueness 0:59:16.560 --> 0:59:20.560 and value. When we talk about people celebrating, whether it's 0:59:20.600 --> 0:59:24.280 Valentine's dates, birthdays, or anniversaries, they are coming to us 0:59:24.280 --> 0:59:27.920 for unique product offerings and our partnership strategy. If we 0:59:28.000 --> 0:59:30.800 give them reasons to buy, they are coming to us 0:59:30.800 --> 0:59:33.240 and price does not seen to be a barrier. And hence, 0:59:33.360 --> 0:59:36.200 you know, the metric I quoted earlier ten percent ao 0:59:36.240 --> 0:59:39.360 we growth year over year. For a business like ours 0:59:39.360 --> 0:59:43.000 that plays in the premium space, it's quite extraordinary. 0:59:43.320 --> 0:59:46.000 We got to talk about what's happening in Washington right 0:59:46.040 --> 0:59:48.240 now in the idea of tariffs, because we know that 0:59:48.440 --> 0:59:52.840 so many flowers that come to the United States come 0:59:52.920 --> 0:59:55.160 well that's sort of in the definition, they come from 0:59:55.200 --> 0:59:58.720 around the world, these flowers. Where do you get your flowers? 0:59:59.320 --> 1:00:02.920 So we get our flowers from eight countries around the world, 1:00:03.280 --> 1:00:07.480 but a large percentage comes from Colombia and Ecuador and Europe. 1:00:07.760 --> 1:00:09.600 So you must have been breathing a huge sigh of 1:00:09.600 --> 1:00:13.240 relief when Columbia and the United States decided not to 1:00:13.560 --> 1:00:16.920 impose tariffs and retaliatory tariffs on one another just a 1:00:16.920 --> 1:00:17.560 few weeks ago. 1:00:17.840 --> 1:00:18.360 That's right. 1:00:18.400 --> 1:00:20.560 That was a close call, and that could have had 1:00:20.840 --> 1:00:24.320 massive ripple effects on the industry, not just for floral 1:00:24.360 --> 1:00:29.080 businesses like ours, but also for consumers, wholesalers, logistics partners, 1:00:29.120 --> 1:00:32.520 and even local florists. You know, the floral industry is 1:00:32.560 --> 1:00:36.040 a three point eight billion dollar market within the United States. 1:00:36.080 --> 1:00:39.920 There are tons of jobs tied to this industry, and 1:00:40.040 --> 1:00:44.400 eighty percent of US flower imports come from Columbia. A 1:00:44.600 --> 1:00:49.200 tariff so close to a peak cycle would have drastically 1:00:49.240 --> 1:00:51.959 increased costs across the entire floral supply chain. 1:00:52.040 --> 1:00:53.840 Well, it could have been a twenty five percent tariff 1:00:53.960 --> 1:00:57.280 on goods from Colombia. We don't know all the details. 1:00:57.280 --> 1:00:59.560 Of course, we're speaking kind of hypothetically at this point 1:00:59.560 --> 1:01:03.000 because it laid out and was resolved before it actually happened. 1:01:03.440 --> 1:01:05.720 But what would that mean for your margins and what 1:01:05.720 --> 1:01:07.520 would it mean for your prices? Can you give us 1:01:07.520 --> 1:01:10.520 some numbers about how that would increase prices for you? 1:01:10.920 --> 1:01:13.479 Yeah, even a temporary tariff to your point, we don't 1:01:13.480 --> 1:01:16.160 have the specifics. Twenty five percent was a number that was, 1:01:16.760 --> 1:01:18.040 you know, in being discussed. 1:01:19.080 --> 1:01:19.920 But even a. 1:01:19.880 --> 1:01:24.800 Temporary tariff increase could have increased our prices overnight. It 1:01:24.840 --> 1:01:29.120 could have taken consumer It would have hit the consumer 1:01:29.960 --> 1:01:34.040 average retail value by ten to fifteen percent, and that's 1:01:34.080 --> 1:01:38.200 a huge swing. During the peak cycles like Valentine's Day 1:01:38.280 --> 1:01:42.160 or Mother's Day, supply chain costs are very high during 1:01:42.160 --> 1:01:45.280 peak seasonality. We work with perishable product, so we are 1:01:45.280 --> 1:01:48.920 dealing with scale ten x, fifteen x twenty x scale 1:01:49.000 --> 1:01:53.040 during these holidays. So in an environment when your supply 1:01:53.120 --> 1:01:57.280 chain costs are high because you're catching time, you're matching speed, 1:01:57.320 --> 1:02:02.480 you're building scale in the same timeframe. Additional tariffs would 1:02:02.480 --> 1:02:05.680 have really impacted the end consumer, you. 1:02:05.600 --> 1:02:06.080 Know, M two. 1:02:06.160 --> 1:02:10.800 When you think about the flower industry, your industry, it's 1:02:10.840 --> 1:02:13.800 not like it's so easy to just flip a switch 1:02:13.920 --> 1:02:16.360 right and get us farmers to all of a sudden 1:02:16.400 --> 1:02:18.840 be growing what you need. It's just it's not how 1:02:18.880 --> 1:02:21.840 it works. It wouldn't be easy. There's not necessarily the 1:02:21.920 --> 1:02:23.360 ability maybe to even do that. 1:02:23.920 --> 1:02:28.840 No, it's not our projections. You know, it is very 1:02:28.840 --> 1:02:32.120 difficult for consumers to appreciate what they have in front 1:02:32.160 --> 1:02:34.040 of them and what the cycle of that looks like. 1:02:34.080 --> 1:02:36.480 The flowers that are sitting in your homes, on your 1:02:36.480 --> 1:02:39.680 coffee table or your dining table, the planning and forecasting 1:02:39.720 --> 1:02:42.360 cycle for those florals is a year ahead, So we 1:02:42.400 --> 1:02:46.680 forecast Valentine's Day or Mother's Day or Easter or holiday 1:02:46.760 --> 1:02:49.840 volumes a year ahead, so our farms know what to 1:02:49.960 --> 1:02:54.800 plant and what to offer businesses out there, and each 1:02:54.840 --> 1:02:57.320 business is different. But for urban stems, we play in 1:02:57.320 --> 1:03:01.320 the premium space, so we do not necessarily work with 1:03:01.360 --> 1:03:04.640 commodity stems. That are grown in bulk. We build projections 1:03:04.680 --> 1:03:06.960 with our farms for the unique stems that we put 1:03:07.000 --> 1:03:09.800 out in our assortments, and we source from eight countries 1:03:09.840 --> 1:03:13.320 around the world and create bookquets that have stems from 1:03:13.320 --> 1:03:16.320 eight countries around the world. It's a very very complex 1:03:16.320 --> 1:03:19.880 supply chain and pivoting at that scale so close to 1:03:20.600 --> 1:03:23.800 a large volume week, which is ten, you know, ten 1:03:24.000 --> 1:03:26.760 x of our average week, it's quite a challenge and 1:03:27.400 --> 1:03:29.480 candidly almost impossible to pull off. 1:03:29.720 --> 1:03:32.000 I am also curious, you know, is it like the 1:03:32.040 --> 1:03:35.520 fashion industry where there are trends every year or there 1:03:35.600 --> 1:03:38.680 might be I don't know, certain you know, suppliers that 1:03:38.720 --> 1:03:42.320 are designing certain types of you know, fabric or designs. 1:03:42.400 --> 1:03:45.720 In the floral industry, are you guys, can you kind 1:03:45.720 --> 1:03:48.160 of do whatever you want every year? Or is it like, listen, 1:03:48.680 --> 1:03:51.240 you know, this is a crop of flowers that basically 1:03:51.280 --> 1:03:53.520 really came in good or we're expecting it to be good, 1:03:53.720 --> 1:03:54.600 Like how does it work? 1:03:54.720 --> 1:03:56.960 Yeah, so that's a very interesting question. So I spent 1:03:57.000 --> 1:03:59.200 twenty two years of my life in fashion retail before 1:03:59.280 --> 1:04:02.520 coming to earth Ms and running this business. There are 1:04:02.320 --> 1:04:05.000 there are a lot of similarities between fashion retail and 1:04:05.080 --> 1:04:08.080 floral trends. You know, when we look at trends beyond 1:04:08.120 --> 1:04:10.600 Valentine's Day into Mother's Day into the spring summer cycle 1:04:10.640 --> 1:04:13.680 of this year, we're seeing customers lean into a lot 1:04:13.720 --> 1:04:17.680 of color, more brighter colors, and more whimsical florals. We 1:04:17.760 --> 1:04:23.240 have also seen shorter arrangements, centerpiece style arrangements. That category 1:04:23.280 --> 1:04:26.800 has exploded as home entertaining trends continued to rise in popularity. 1:04:27.480 --> 1:04:30.080 Our customers are asking for the unexpected, and a lot 1:04:30.120 --> 1:04:33.760 of our design process does take, you know, a nod 1:04:33.880 --> 1:04:36.960 from the fashion trends, the color palettes, the color of 1:04:36.960 --> 1:04:40.520 the years, the messaging around you know, big trends happening 1:04:40.600 --> 1:04:44.600 in the business we do. We do work very closely 1:04:45.160 --> 1:04:47.800 with those forecasts and with those trend predictions to build 1:04:47.800 --> 1:04:52.160 our collection. What makes this business, you know, what's a 1:04:52.200 --> 1:04:54.880 blessing and a curse for us is the perishability aspect 1:04:54.920 --> 1:04:57.280 of the product. So weather plays a huge factor. So 1:04:57.320 --> 1:05:00.840 we can plan ahead, we can design the product, but 1:05:01.040 --> 1:05:04.040 if the you know, if there's too much rain in 1:05:04.120 --> 1:05:07.040 Ecuador or there's too much rain in Holland like they 1:05:07.080 --> 1:05:10.720 have been experiencing this year, the productivity changes and in 1:05:10.720 --> 1:05:13.520 in weeks of production, we have to pivot. We have 1:05:13.600 --> 1:05:17.640 to alter our designs, pivot and strategize on ensuring that 1:05:17.680 --> 1:05:20.440 we're still bringing that uniqueness and that premium flavor to 1:05:20.480 --> 1:05:21.160 our customers. 1:05:21.280 --> 1:05:23.919 And actually, forgive me, because I know that nobody wants 1:05:23.920 --> 1:05:26.040 to hear about competitors when they're in an interview, but 1:05:26.360 --> 1:05:28.959 I can't believe you're doing I'm doing it. We spoke 1:05:29.040 --> 1:05:32.160 recently to Christina Stembelover at farm Girl Flowers and she 1:05:32.240 --> 1:05:35.920 was pretty candid with us about the margin pressure that 1:05:36.000 --> 1:05:38.760 the company that you know, they that the industry experiences. 1:05:38.800 --> 1:05:40.240 Despite the fact that you know you could spend over 1:05:40.280 --> 1:05:43.000 one hundred dollars on a bouquet, the margins are really 1:05:43.040 --> 1:05:45.960 tough to make work between the cost of the product, 1:05:46.160 --> 1:05:49.280 the labor, and then of course the shipping. How are 1:05:49.320 --> 1:05:49.960 your margins? 1:05:50.440 --> 1:05:52.680 Look, Christina has a great business, and we love a 1:05:52.680 --> 1:05:55.560 healthy competition, and she's definitely one of the best in 1:05:55.600 --> 1:05:59.520 the business. But I believe our margins have grown stronger 1:05:59.640 --> 1:06:02.120 over the years. We have driven high amount of efficiency 1:06:02.120 --> 1:06:06.040 in our operations, in supply chain planning, but also you know, 1:06:06.160 --> 1:06:10.880 our our unique differentiators. We bring sheet stylish arrangements designed 1:06:10.880 --> 1:06:13.520 in New York by our in house floral designers. We 1:06:13.600 --> 1:06:16.680 design with unique florals and botanicals from around the world. 1:06:16.760 --> 1:06:19.800 You will not find that anywhere else. They're hands selected 1:06:19.800 --> 1:06:22.600 from the farms around the world, and the designs are 1:06:22.600 --> 1:06:26.760 created in partnership with our farms. And we we you know, 1:06:26.800 --> 1:06:30.320 we stand by what we ship and what we design 1:06:30.400 --> 1:06:32.120 and when you put out on our site, you will 1:06:32.160 --> 1:06:35.320 see you will get what you see on urbanstems dot com. 1:06:35.560 --> 1:06:39.240 It's a very transparent, trusted farm to door delivery with 1:06:39.400 --> 1:06:42.360 next day service, with same day service. The product is 1:06:42.520 --> 1:06:45.120 you know handled. We have eyes on it end to end, 1:06:45.160 --> 1:06:48.520 and our differentiator is really important for our customer. They 1:06:48.720 --> 1:06:51.840 value that white glove service and hence, you know, the 1:06:51.880 --> 1:06:55.520 AOV increases. We hear, we hear our competitors on the 1:06:55.560 --> 1:06:59.280 margin pressure, but we believe our differentiator is what stands 1:06:59.280 --> 1:07:01.600 out to our customer and they continue to work with 1:07:01.720 --> 1:07:03.520 you know, they continue to come to us for that 1:07:03.600 --> 1:07:04.680 higher EOEI product. 1:07:04.720 --> 1:07:07.040 Hey just to wrap up here, So as people are 1:07:07.120 --> 1:07:12.560 enjoying their Valentine's debouquets throughout the weekend. 1:07:12.640 --> 1:07:14.240 Is it mostly going to be roses? Like? 1:07:14.360 --> 1:07:17.000 Is that a should we assume it's roses or is 1:07:17.040 --> 1:07:18.120 it a lot of other stuff? 1:07:18.400 --> 1:07:21.320 Well, there's a lot of other stuff, especially at Urban Stams. 1:07:21.640 --> 1:07:23.840 We as I said, we believe in bringing florals and 1:07:23.880 --> 1:07:27.520 botanicals from all around the world, so your arrangements are special. 1:07:28.320 --> 1:07:32.320 We have, you know, sixty five varieties of floral arrangements 1:07:32.360 --> 1:07:35.720 on our side. We have the plans. We have a 1:07:35.760 --> 1:07:38.760 wide assortment for you to pick from. But I think 1:07:39.000 --> 1:07:42.560 what highlights this holiday and the future holidays to come 1:07:42.560 --> 1:07:45.440 in the future. Collections to come on Urban Stams is 1:07:45.960 --> 1:07:49.320 including bundles. We have bundles with iconic partners. We have 1:07:49.360 --> 1:07:51.960 a partnership with eight and H Bagels where you can 1:07:52.200 --> 1:07:56.880 enjoy Valentine's weekend with a dozen bagels and Urban Stems flowers. 1:07:57.800 --> 1:08:01.120 We also have a bouquet designed by NFL Ravens Wide 1:08:01.160 --> 1:08:05.480 Receivers Dave Flowers, who's serving as our chief flowers this season. 1:08:06.480 --> 1:08:08.880 So yeah, so we have a bunch of fun partnerships. 1:08:08.880 --> 1:08:11.000 So when you come to Urban Stems, you come for 1:08:11.080 --> 1:08:15.000 that premium gift option and you come for you know, 1:08:15.080 --> 1:08:16.559 come and have fun with it. There are a lot 1:08:16.600 --> 1:08:18.920 of highlights. There are a lot of fun partnerships coming up. 1:08:18.920 --> 1:08:22.520 We also did you have skews around mod sexual products? 1:08:22.520 --> 1:08:25.080 You know, so there's there's all kinds of fun offerings. 1:08:25.080 --> 1:08:25.800 They're not just. 1:08:25.880 --> 1:08:29.759 Roses Manactually, La La ceo of the online flower delivery 1:08:29.760 --> 1:08:32.320 company Urban Stems. 1:08:31.479 --> 1:08:34.320 Still ahead on Bloomberg Business Week, putting the horror in 1:08:34.479 --> 1:08:39.440 romance movies and iconic Swiss swashmaker's latest mega creation, customized 1:08:39.479 --> 1:08:42.560 gaming pieces in the all inclusive getting an upgrade. 1:08:42.680 --> 1:08:44.400 Bloomberg Pursuits is up next. 1:08:44.720 --> 1:08:45.760 This is Bloomberg. 1:08:51.840 --> 1:08:55.439 You're listening to Bloomberg Business Week with Carol Masser and 1:08:55.560 --> 1:08:57.639 Tim Steneveek on Bloomberg Radio. 1:08:57.800 --> 1:09:00.240 Watches out most of the time perceived as a time. 1:09:00.120 --> 1:09:01.719 So it's very chic and posh. 1:09:01.840 --> 1:09:04.040 The most powerful car made in the US. 1:09:04.120 --> 1:09:06.960 You get the beautiful interior or the iconic design here. 1:09:07.040 --> 1:09:09.360 Now it's time to take a look at luxury with 1:09:09.520 --> 1:09:10.680 Bloomberg Pursuits. 1:09:11.400 --> 1:09:14.479 How does an iconic Swiss watchmaker celebrate it's two hundred 1:09:14.479 --> 1:09:17.439 and seventieth anniversary. Or romance movies get a. 1:09:17.400 --> 1:09:21.840 Refresh can you call it a refresher or we'll talk 1:09:21.840 --> 1:09:22.679 about that at the moment. 1:09:22.960 --> 1:09:26.160 Or gaming pieces get a reboot as users think literally 1:09:26.200 --> 1:09:27.439 outside the gray box. 1:09:27.600 --> 1:09:29.920 All that more, it's time for Bloomberg Pursuits and some 1:09:30.000 --> 1:09:32.839 of the stories featured in the February issue of Bloomberg 1:09:32.880 --> 1:09:36.200 BusinessWeek magazine, out on newsstands, now online, and always on 1:09:36.280 --> 1:09:40.000 the Bloomberg terminal. With us is the editor of Bloomberg Pursuits, 1:09:40.439 --> 1:09:43.439 Chris Rouser. Chris, two hundred and seventy years. It doesn't 1:09:43.439 --> 1:09:47.880 feel like a typical milestone for any sort of anniversary. 1:09:48.040 --> 1:09:51.200 Yeah, that's a good point. So Vastron Constantine is one 1:09:51.240 --> 1:09:55.120 of the oldest watchmaking brands, and they've been in continual 1:09:55.200 --> 1:09:57.160 existence for two hundred and seventy years, so they've been 1:09:57.200 --> 1:09:59.559 making pocket watches and clocks and watches for that long. 1:09:59.640 --> 1:10:01.519 A lot of brands that you know that are very 1:10:01.520 --> 1:10:03.760 old went away, came back, people bought the rights to 1:10:03.840 --> 1:10:06.880 the brand. So I think they feel like any five 1:10:06.960 --> 1:10:09.360 year milestone is like a big celebration because we've been oh, 1:10:09.400 --> 1:10:10.479 we've been doing this a long time. 1:10:10.640 --> 1:10:13.200 What does one do for a two hundred and seventieth celebration. 1:10:13.320 --> 1:10:15.879 They're throwing a bunch of parties, they're releasing some new watches. 1:10:15.880 --> 1:10:18.000 But the big thing that we wrote about this month 1:10:18.240 --> 1:10:21.760 is that they released this watch which has been very 1:10:22.520 --> 1:10:26.080 anticipated by its clients. It's called the Historieks two to 1:10:26.080 --> 1:10:29.479 two and it's in steel and it is a steel 1:10:29.520 --> 1:10:32.679 sports watch with an integrated bracelet. It looks very seventies 1:10:32.720 --> 1:10:35.519 because it was originally a watch in the seventies and 1:10:35.520 --> 1:10:38.479 then they revived it, and they revived it a couple 1:10:38.479 --> 1:10:40.479 of years ago in gold and it became like the 1:10:40.600 --> 1:10:43.320 watch that everybody talked about for a while, but people 1:10:43.320 --> 1:10:45.719 were waiting for a steel version. And the steel version 1:10:45.760 --> 1:10:47.639 came out this year in honor of the two hundred 1:10:47.640 --> 1:10:51.080 and seventieth anniversary, and it costs less than the gold version, 1:10:51.080 --> 1:10:53.599 but it's still thirty two thousand dollars, which is a lot. 1:10:55.080 --> 1:10:57.040 Can I ask you, you know, I've read this story and 1:10:57.280 --> 1:10:58.760 I don't know if we ask you this all the time, 1:10:58.800 --> 1:11:00.880 why do they cost so much? I mean, is the 1:11:00.920 --> 1:11:04.560 margins just off the charts or I know they're complicated. 1:11:04.880 --> 1:11:08.120 Yeah, so this watch is actually not very not very complicated. 1:11:08.200 --> 1:11:08.320 Right. 1:11:08.520 --> 1:11:11.200 It tells the time and it tells the date. And 1:11:11.400 --> 1:11:13.759 you know, this company is one of the holy Trinity 1:11:13.760 --> 1:11:17.960 of Swiss watch making. Everybody really revers it and they 1:11:18.000 --> 1:11:20.880 make only about thirty five thousand watches a year, they 1:11:20.880 --> 1:11:24.400 average like forty two thousand dollars, and it's because people 1:11:24.439 --> 1:11:28.120 want them, honestly, like supply demand. Yeah, they're very beautifully made, 1:11:28.160 --> 1:11:32.760 they're handcrafted, and they just they look very cool. They're 1:11:32.840 --> 1:11:34.360 very hard to get and people are willing to pay 1:11:34.400 --> 1:11:36.479 that much. And that's what the margin is on watches 1:11:36.520 --> 1:11:37.080 at that level. 1:11:37.640 --> 1:11:40.240 You mentioned. They've been in continual existence for two hundred 1:11:40.280 --> 1:11:43.280 and seventy years, whereas many other companies and brands have not. 1:11:44.000 --> 1:11:45.400 How have they been able to pull that off? 1:11:45.680 --> 1:11:51.200 Well, they're Swiss, so they're very patient and they are 1:11:51.640 --> 1:11:55.360 and diligent and careful and they just have not messed 1:11:55.400 --> 1:11:58.559 around with quality. And they you know, during the Court's 1:11:58.680 --> 1:12:02.320 watch crisis, when a lot of brands started making electric 1:12:02.360 --> 1:12:06.920 watches basically with batteries, they they didn't go too far 1:12:06.960 --> 1:12:10.000 down that road and they continue to focus on mechanical 1:12:10.080 --> 1:12:10.920 precision and stuff. 1:12:10.920 --> 1:12:12.920 And you know, the story kicks off with the so 1:12:13.040 --> 1:12:17.200 called holy Trinity of Swiss watchmakers and these guys are 1:12:17.200 --> 1:12:19.400 among them. Is that just three brands that have just 1:12:19.439 --> 1:12:23.120 been around forever or just the kind of iconic ones protect. 1:12:22.880 --> 1:12:27.840 Leap and yeah, yeah, they're they're called that. It's called 1:12:27.840 --> 1:12:31.280 that because they're really focused on craftsman ship and quality. 1:12:31.240 --> 1:12:32.599 And they are. 1:12:32.720 --> 1:12:36.040 They don't make that many watches, So rolex Is probably 1:12:36.120 --> 1:12:39.759 is the most powerful watch company and it and people 1:12:39.760 --> 1:12:42.120 love it and it's maybe the most coveted certain models. 1:12:42.160 --> 1:12:43.480 But they make a million watches. 1:12:43.240 --> 1:12:45.080 A year and get one on Fifth Avenue for like 1:12:45.120 --> 1:12:45.679 thirty bucks. 1:12:45.760 --> 1:12:50.000 Yeah, yes, canals. I don't say that. 1:12:50.000 --> 1:12:52.200 I don't know, police might come after you. 1:12:52.800 --> 1:12:54.120 I don't know if that's a real roll. 1:12:55.160 --> 1:12:55.519 It's not. 1:12:56.240 --> 1:12:56.840 I'm just kidding. 1:12:56.880 --> 1:12:58.280 Go ahead, So you're just saying they're just. 1:12:58.320 --> 1:13:01.639 Yeah, they're rare, they're hard to get, and they're very beautiful. 1:13:01.880 --> 1:13:02.600 I love it. I love it. 1:13:02.640 --> 1:13:03.200 I love the clean. 1:13:03.360 --> 1:13:04.640 I got to go to the romance. 1:13:04.360 --> 1:13:07.600 Story because I'm like reading this, Jack Quad. 1:13:10.120 --> 1:13:10.439 This. 1:13:13.800 --> 1:13:16.160 Tell us about what's going on with romance movies. 1:13:16.360 --> 1:13:19.800 So for a while now, romance like rom coms have 1:13:19.920 --> 1:13:22.439 not succeeded at the box office. People have been have 1:13:22.680 --> 1:13:24.880 had a hard time doing big budget rom comms. So 1:13:24.920 --> 1:13:26.680 a lot of times what you'll see is they'll do 1:13:26.920 --> 1:13:30.160 like you'll watch Netflix and like a huge like rom 1:13:30.200 --> 1:13:31.760 com that you think of as like a big deal 1:13:31.800 --> 1:13:34.040 with like Channing Tatum and Sandra Bullock or something will 1:13:34.080 --> 1:13:38.160 be on netflixkisty, yeah, and not and not any judge me, 1:13:39.000 --> 1:13:41.960 because people are just aren't going to theaters for that. 1:13:42.600 --> 1:13:45.280 They are going to theaters for horror. And so now 1:13:45.320 --> 1:13:49.080 you're seeing a bunch of tours and directors making romance 1:13:49.120 --> 1:13:52.960 movies that are also horror films. So you mentioned Jack Quade, 1:13:52.960 --> 1:13:55.200 He's in Companion, which came out at the end of January, 1:13:55.479 --> 1:13:59.200 which is about Jack Quade who gets a like a 1:13:59.280 --> 1:14:02.639 love robot, and it's sort of a romance slash horror 1:14:03.479 --> 1:14:06.880 about her name is Iris. Her name is Iris, so 1:14:06.960 --> 1:14:08.400 he kind of programs. 1:14:07.880 --> 1:14:09.920 Her right to like love him, love him. 1:14:10.040 --> 1:14:12.400 Yeah, and then things go awry. 1:14:12.800 --> 1:14:16.200 Bridget Jones is back. Yes, Bridgitte Jones, this is news 1:14:16.200 --> 1:14:18.479 to me. Maybe I live under a rock. 1:14:18.560 --> 1:14:21.479 No Bridget to I love bridge Jones. So Bridget Jones 1:14:21.520 --> 1:14:25.080 mad about the boy coming out around Valentine's Day and 1:14:25.400 --> 1:14:28.240 it is not a horror, it's not horror. It's still 1:14:28.240 --> 1:14:31.599 like kind of a oh poor Bridget Jones. But it's 1:14:31.600 --> 1:14:35.000 based on the premise that Mark Darcy died and so 1:14:35.040 --> 1:14:38.320 she has to find love in her fifties poor Colin 1:14:38.360 --> 1:14:40.839 Firth and do you know find in Love in your fifties? 1:14:40.880 --> 1:14:42.439 Nothing's more horrifying than that. 1:14:42.600 --> 1:14:45.400 But it sad but true. 1:14:45.520 --> 1:14:48.200 Kids only it's on streaming. You know that movie was 1:14:48.200 --> 1:14:50.320 a huge movie in theaters when it originally came out, 1:14:50.320 --> 1:14:53.400 the first one, and now theater it's just direct to streaming. 1:14:53.520 --> 1:14:55.960 There's a great quote in here. I guess is it 1:14:56.000 --> 1:14:57.280 by the guy who did. 1:14:57.120 --> 1:14:57.439 I don't know. 1:14:57.520 --> 1:14:58.840 He doesn't know which one you're gonna say. 1:14:58.920 --> 1:15:00.800 It says, I was just like, I want to see 1:15:00.800 --> 1:15:03.679 a movie where Meg Ryan gets decapitate. It says Hard 1:15:03.680 --> 1:15:06.840 Eyes co writer Christopher Landon. I mean, I get it. 1:15:06.840 --> 1:15:09.240 It's just a changing thing. But who knew that? I mean, 1:15:09.240 --> 1:15:11.280 we talk about right the rise of Horror. We've talked 1:15:11.280 --> 1:15:14.800 about that. I feel like our screen screen Time team 1:15:14.800 --> 1:15:15.240 of Time. 1:15:15.120 --> 1:15:18.000 Because it's very creative. It's a very very creative field now. 1:15:18.120 --> 1:15:21.639 And even Honora, which everybody really likes from last year 1:15:22.040 --> 1:15:24.559 is starts out as a love story and then is 1:15:24.680 --> 1:15:27.439 really not that all right? 1:15:27.560 --> 1:15:28.200 Where do you want to go? 1:15:28.280 --> 1:15:28.559 Kids? 1:15:28.720 --> 1:15:30.160 I want to go to Mexico. Where do you want 1:15:30.200 --> 1:15:30.320 to go? 1:15:30.400 --> 1:15:32.880 I want to go to me three. 1:15:33.800 --> 1:15:37.360 So there's this thing I like about what's written about 1:15:37.400 --> 1:15:41.240 in Pursuits this this edition, Chris, where it's the idea 1:15:41.280 --> 1:15:44.040 that you have this all inclusive resort and you're not 1:15:44.120 --> 1:15:46.960 surrounded by students from business school. 1:15:47.560 --> 1:15:48.519 They say children. 1:15:50.160 --> 1:15:53.360 There are children in a certain extent, little people. They're 1:15:53.400 --> 1:15:55.120 there for the all you can eat, all you can drink, 1:15:55.600 --> 1:15:58.559 stay up all night partying and getting wasted. 1:15:58.880 --> 1:16:02.200 Yeah, so Mary and a bunch of other hotel companies 1:16:02.280 --> 1:16:05.800 are really prioritizing all inclusive resorts over the next few 1:16:05.840 --> 1:16:08.080 years and not what you think of as like spring 1:16:08.120 --> 1:16:10.040 break places like I went to the Dominican Republic for 1:16:10.040 --> 1:16:12.760 spring break and stated and all you can eat and 1:16:12.920 --> 1:16:17.360 drink resort and it was a problem. Now you recently 1:16:17.360 --> 1:16:21.240 did this no the first break and you bore a 1:16:21.280 --> 1:16:23.320 bracelet and it was all you can eat buffets, and 1:16:23.360 --> 1:16:24.799 you were always kind of like, ill. 1:16:25.520 --> 1:16:26.960 I don't want to hear about that. 1:16:27.800 --> 1:16:29.000 That's like a red passage. 1:16:29.120 --> 1:16:32.400 But people, it's actually the vibe of an all inclusive 1:16:32.439 --> 1:16:35.160 resort can be nice because you're not signing, you know, 1:16:35.280 --> 1:16:37.320 very expensive bills all the time. You're just going in 1:16:37.439 --> 1:16:39.640 and out. And so Marriott thinks they can create a 1:16:39.680 --> 1:16:43.280 line of hotels where it's adults only, so there's no children, 1:16:43.760 --> 1:16:47.720 and it's uh, it's not buffets, it's meals for lunch 1:16:47.760 --> 1:16:50.519 and dinner at fancy restaurants. And you're just not paying 1:16:50.520 --> 1:16:52.240 bills all the time. You're just walking around as if 1:16:52.240 --> 1:16:54.040 it's like your house, but your house is like this big, 1:16:54.040 --> 1:16:56.840 beautiful resort. And so we sent Lily on our team 1:16:56.960 --> 1:16:59.519 to go to al Mare, which is on Elam Harris 1:16:59.520 --> 1:17:01.760 in mex and she checked it out and it was 1:17:01.800 --> 1:17:04.760 like mostly people in their forties. It was not a 1:17:04.760 --> 1:17:07.120 party party scene. You could hear the parties at the 1:17:07.160 --> 1:17:10.960 neighboring resorts. I love that, but this one like you 1:17:11.000 --> 1:17:12.880 couldn't get a drink at the bar after ten pm. 1:17:12.920 --> 1:17:14.639 And it was very much wake up in the morning, 1:17:14.760 --> 1:17:17.880 go to the beach, go to the pool, workshops, do workshops. 1:17:18.080 --> 1:17:20.200 But she did right that some of the things that 1:17:20.240 --> 1:17:23.720 she did, the excursions that sound great, we're kind of 1:17:23.760 --> 1:17:24.760 sparsely attended. 1:17:25.080 --> 1:17:28.639 Yeah, so they're trying to also add this layer which 1:17:28.640 --> 1:17:30.280 a lot of hotels are doing now, which is to 1:17:30.439 --> 1:17:32.800 connect you with the community around the resort so you 1:17:33.040 --> 1:17:37.040 more conscious travel. Right, So money goes back into more 1:17:37.080 --> 1:17:39.080 people in businesses that live around resorts, and also you 1:17:39.160 --> 1:17:40.760 just become aware of a space and you have a 1:17:40.800 --> 1:17:44.200 better experience of that space and in community. And so 1:17:44.200 --> 1:17:46.040 she went to like a ceramics class and she went 1:17:46.080 --> 1:17:48.920 to some other like a run hiking run kind of thing, 1:17:49.360 --> 1:17:51.080 and she thought, Oh, I'll beat like other people at 1:17:51.120 --> 1:17:53.439 the resort. And people turns out I want to hang 1:17:53.479 --> 1:17:57.120 out by the pool, yeah, which I get, which I 1:17:57.160 --> 1:17:57.559 totally can. 1:17:57.760 --> 1:17:59.720 Hey listen, we only got about a minute or so left. 1:18:00.160 --> 1:18:02.240 I just want to Carol, I'm gonna blow up your 1:18:02.240 --> 1:18:08.080 spot here. She's Carol's like looking at these gaming PCs 1:18:06.640 --> 1:18:09.760 and what is this? 1:18:10.840 --> 1:18:12.040 What are these things? 1:18:12.200 --> 1:18:13.280 We have said, they're beautiful. 1:18:13.360 --> 1:18:16.000 We have a story by Cecilia on the by Cecilia 1:18:16.360 --> 1:18:19.799 Donasasio on the Tech Team, which is about gaming PCs, 1:18:19.800 --> 1:18:21.840 which are computers like the computer that you would have 1:18:21.880 --> 1:18:24.840 in your house that people use to play video games. 1:18:25.120 --> 1:18:27.760 So it's not a console like an Xbox that you 1:18:27.880 --> 1:18:30.000 play specifically for games. It's a computer that you've used 1:18:30.000 --> 1:18:32.599 it for games. And people have taken these old gray 1:18:32.640 --> 1:18:35.479 boxes like that you used to get from HP and 1:18:35.840 --> 1:18:39.080 really kitted them out with like additional processing power and 1:18:39.280 --> 1:18:44.560 visual visually beautiful stuff. So you know, like pink chords 1:18:44.760 --> 1:18:47.960 fans that are Neon lights and they have glass sides, 1:18:48.000 --> 1:18:50.360 like it's an old Ferrari where you can see the 1:18:50.360 --> 1:18:53.920 engines through the glass roof. And so we we shot 1:18:53.960 --> 1:18:55.519 a bunch of them and they're very cool. And you 1:18:55.520 --> 1:18:57.920 can either do it yourself, which seems insane to me, 1:18:58.240 --> 1:19:01.200 or you can buy it from a company that will. 1:19:01.000 --> 1:19:01.599 Do it for you. 1:19:01.680 --> 1:19:04.400 So like the average like PC costs like six hundred 1:19:04.400 --> 1:19:06.840 and seven hundred dollars and these ones cost more like 1:19:06.960 --> 1:19:08.240 sixteen hundred twenty. 1:19:08.880 --> 1:19:11.639 To call him like hot rod PC builders. Right, it's 1:19:11.640 --> 1:19:14.320 like how you kind of like, I guess trick up 1:19:14.360 --> 1:19:15.120 a car or something. 1:19:15.320 --> 1:19:17.799 I will say, my cousin who's a bit of a gamer, 1:19:17.920 --> 1:19:22.519 actually for Christmas got his dad my uncle uh a 1:19:22.720 --> 1:19:25.639 like kit and they built this together. And that they've 1:19:25.680 --> 1:19:27.679 done this, it's very cool. It was like their gift. 1:19:27.680 --> 1:19:28.400 It was pretty cool. 1:19:28.720 --> 1:19:29.000 Yeah. 1:19:29.040 --> 1:19:31.559 And gaming is I mean three billion people gamed during 1:19:31.560 --> 1:19:34.000 the pandemic, Like it's a huge thing obviously, and it's 1:19:34.000 --> 1:19:36.640 a many many billion dollar industry. And so some of 1:19:36.680 --> 1:19:38.880 these companies that make these kid it out PCs are 1:19:38.880 --> 1:19:40.160 making a billion more than a billion a. 1:19:40.120 --> 1:19:41.960 Year I'll be honest. Sometimes I walk by Carol's desk 1:19:41.960 --> 1:19:43.920 in the middle of the day and she's just playing Fortnite, 1:19:44.040 --> 1:19:47.439 and I'm like Carol, Like, Carol's have to get to work. 1:19:47.560 --> 1:19:50.280 We ever showed you a lot of these that don't 1:19:50.280 --> 1:19:51.320 stop gaming. 1:19:51.080 --> 1:19:53.120 Yeah, mine would have like, you know, be pink and 1:19:53.400 --> 1:19:54.720 have Barbie's probably. 1:19:54.360 --> 1:19:57.200 All over it, and these billions of views on TikTok, 1:19:57.200 --> 1:19:57.799 by the way. 1:19:58.000 --> 1:20:00.360 And have the most advanced and video chips. That was 1:20:00.400 --> 1:20:02.719 also kind of cool that these these people are lining 1:20:02.760 --> 1:20:04.479 up for you know, the n video We think about 1:20:04.560 --> 1:20:06.280 Nvidia and AI, but the gaming. 1:20:06.040 --> 1:20:09.000 Chips, well, that's that's in videos, uh in DNA, that's 1:20:09.040 --> 1:20:11.320 like you know, I know, I know that's what they were. 1:20:11.240 --> 1:20:13.680 Doing because without it you can't the games are so 1:20:13.800 --> 1:20:17.240 crazy beautiful now that they render. Without that kind of compute, 1:20:17.280 --> 1:20:21.400 you can't render like individual hairs on Link's head, you know. 1:20:23.120 --> 1:20:25.160 So people want to want all of that experience. 1:20:25.720 --> 1:20:26.160 I am not. 1:20:26.439 --> 1:20:28.479 Playing what do you play? If you're not playing Fortnite, 1:20:28.520 --> 1:20:29.160 then what are you doing? 1:20:29.479 --> 1:20:30.280 World of Warcraft? 1:20:30.360 --> 1:20:30.519 Oh? 1:20:30.560 --> 1:20:33.160 World of Craft that's what it is. But unlike Elon 1:20:33.280 --> 1:20:36.920 Musk who allegedly had someone else play for him, Carol's 1:20:36.920 --> 1:20:38.160 getting the high scores herself. 1:20:38.360 --> 1:20:40.639 Yes, I know, I didn't know that either. 1:20:40.720 --> 1:20:42.280 You're just full of like lots of information. 1:20:43.960 --> 1:20:45.559 Okay, we're a little wacky on this. 1:20:45.800 --> 1:20:46.200 Uh. 1:20:46.240 --> 1:20:49.400 This edition of Bloomberg Pursuits good stuff as always, Chris, 1:20:49.400 --> 1:20:50.000 thank you so much. 1:20:50.040 --> 1:20:50.960 We really appreciate it. 1:20:51.080 --> 1:20:54.000 That is the editor of Bloomberg Pursuits, Chris Rouser, and that. 1:20:54.000 --> 1:20:56.000 Wraps up the weekend edition of Bloomberg Business Week from 1:20:56.000 --> 1:20:58.040 Bloomberg Radio. Thank you so much for joining us. 1:20:59.439 --> 1:21:04.320 This is the Bloomberg Business Week podcast, available on Apple, Spotify, 1:21:04.400 --> 1:21:08.160 and anywhere else you get your podcasts. Listen live weekday 1:21:08.160 --> 1:21:12.200 afternoons from two to five pm Eastern on Bloomberg dot com, 1:21:12.240 --> 1:21:16.120 the iHeartRadio app, tune In, and the Bloomberg Business App. 1:21:16.360 --> 1:21:19.160 You can also watch us live every weekday on YouTube 1:21:19.360 --> 1:21:21.519 and always on the Bloomberg terminal.