Speaker 1: This is Bloomberg Business Wait inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: bloom oall business finance and tech news. The Bloomberg Business
Speaker 1: Week podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 2: Says, f.
Speaker 3: Yes, indeed, we are living.
Speaker 4: Instagra.
Speaker 5: Good record.
Speaker 6: I remember listening to this record on my very first
Speaker 6: trip to Amsterdam.
Speaker 3: Oh yeah, was anything involved?
Speaker 5: No, well so I was nothing illegal there.
Speaker 3: That's so true, nicely said. We are living in strange time,
Speaker 3: strange days. This story we want to get to. It's
Speaker 3: in the Bloomberg BusinessWeek newsletter and you can read it.
Speaker 3: It's on the Bloomberg and of course at Bloomberg dot
Speaker 3: com slash newsletters. It is written by Joshua Green. Josh Green,
Speaker 3: National Coursepond at Bloomberg BusinessWeek, who's joining us right now
Speaker 3: on the phone from Washington, d C. And Josh, we
Speaker 3: want to get to it. Talk to us about.
Speaker 5: What is going on.
Speaker 3: Why are these people supporting the former president who hopes
Speaker 3: to be president again.
Speaker 7: Well, yeah, I was up in New Hampshire last week
Speaker 7: and one of the running themes, you know, at the
Speaker 7: various town halls and campaign stops for some of these
Speaker 7: candidates was that they were all either extolling Donald Trump
Speaker 7: or more likely attacking Joe Biden in the Justice Department
Speaker 7: for you know, for going after Trump for indicting him.
Speaker 7: And then of course at the scene in Miami where
Speaker 7: Trump was arrested yesterday was full of not just Trump protesters,
Speaker 7: but twenty twenty four presidential candidates or possible presidential candidates
Speaker 7: who are against him, and yet we're there to support him.
Speaker 7: So I wrote a little bit about the phenomenon of
Speaker 7: what I've come to think of as maga Swifties. Instead
Speaker 7: of being behaving like actual Republican political opponents trying to
Speaker 7: seek the Goop nomination, they're acting like craved Taylor Swift fans,
Speaker 7: fluffing up their hero and attacking his defenders. Have a
Speaker 7: I have a sixteen year old happens to be one
Speaker 7: of these Swifties, so I've I've studied the genotype.
Speaker 3: But my twenty year old daughters here, who's a Swiftie.
Speaker 3: She's going to be really embarrassed that I'm calling her
Speaker 3: out here. But yeah, totally get it when you.
Speaker 7: Make that aware.
Speaker 6: They're everywhere I just don't understandami. He's he's a little
Speaker 6: bit older. You know, he went to Harvard and then
Speaker 6: Yale Law School, So it's not like he completely lacks
Speaker 6: critical thinking skills or is totally ignorant. Why is he
Speaker 6: down here about in Miami, just like on his knee
Speaker 6: kissing up to former President Trump? Does he want to
Speaker 6: be on the ticket? Is there a romantic link we
Speaker 6: don't know about, Like, what's the deal? Joe Webber, by
Speaker 6: the ways, a great question.
Speaker 7: With the Veke who I saw in New Hampshire last week,
Speaker 7: he makes a point of mentioning that he is the
Speaker 7: only millennial Republican running for president. That might have something
Speaker 7: to do with the swift.
Speaker 5: Bragging about being a millennial.
Speaker 7: I think more likely is that these candidates are all
Speaker 7: looking at polls of who votes in Republican primaries, and
Speaker 7: we've seen a bunch of them since the indictment came out.
Speaker 7: And what Republican voters think is that Donald Trump got screwed,
Speaker 7: that the indictment is political. They don't like it. It's
Speaker 7: made Trump more popular, not less popular, and they're very,
Speaker 7: very angry at anybody who criticizes Trump over the indictment.
Speaker 7: And so I think a lot of these candidates who've
Speaker 7: been releasing supportive statements, or as the Vake did in Miami,
Speaker 7: mayor Francisco Suarez, who's rumored to baby beginning in the race,
Speaker 7: actually showed up to support Trump again, their opponent in
Speaker 7: the race. I think the way they're doing this is
Speaker 7: because they decided it's a way to get attention. It's
Speaker 7: a way to sort of like demonstrate their bona fides
Speaker 7: to Republican primary voters. But the problem in talking to
Speaker 7: Republican strategists, and I talked to Trump's old strategist Steve
Speaker 7: Bannon in this piece, is that if you're trying to
Speaker 7: run against Trump, ultimately, you need to have a strategy
Speaker 7: to beat it and going out there and saying what
Speaker 7: a great guy he is and have terrible his tormentors
Speaker 7: that the Justice Department are isn't doing anything to bring
Speaker 7: down Donald Trump. So Bannon told me for the piece
Speaker 7: he thinks the primary is already over and Trump's going
Speaker 7: to be the nominate. But it is a really bizarre
Speaker 7: kind of collective behavior that we see among these Republican candidates.
Speaker 7: Because while it may get them TV time, and while
Speaker 7: it may get them, you know, social media buzz or
Speaker 7: what have you, it's not getting them any closer to Trump.
Speaker 7: And the polls, who now has the biggest lead he's
Speaker 7: ever had in the twenty twenty four primary polls. You know,
Speaker 7: these guys are all falling further behind instead of catching
Speaker 7: up to him.
Speaker 8: But what if he can't run right? What if? What
Speaker 8: if he's actually not available, not on the playing field,
Speaker 8: and I'm allowed? And then and then I think the
Speaker 8: vex move becomes a little bit more clear, which is
Speaker 8: I'm the closest, most sympathetic guy that you have to
Speaker 8: that you have and I you know, basically in spirit,
Speaker 8: I am maga incarnate yet as a millennial.
Speaker 3: At your back.
Speaker 7: So I did a lot of calling around about that,
Speaker 7: talk to lawyers, talk to Republican strategists, talk to voters
Speaker 7: at these town halls in New Hampshire, and basically, you know,
Speaker 7: if it doesn't seem like the legal system is going
Speaker 7: to move quickly enough to hypothetically convict Trump before people
Speaker 7: start voting. But you know, he could get hit by lightning.
Speaker 7: He could, you know, I don't know, decide he'd rather
Speaker 7: spend his days on the golf course. I don't think
Speaker 7: anything is going to happen, but certainly it's possible that
Speaker 7: if you were somehow sidelined willingly or otherwise, then the
Speaker 7: field is ride open, and being the kind of you
Speaker 7: know Trump he also ran, becomes an actual emblem that
Speaker 7: could help you. In one of these new polls from CB,
Speaker 7: three quarters of Republican primary voters stead of Trump can't
Speaker 7: be president, they want somebody just like Trump. So all
Speaker 7: these guys are sort of scrambling role. I'm old enough
Speaker 7: to remember back in twenty sixteen when every candidate in
Speaker 7: the race wouldn't attacked Trump because they thought, oh, well,
Speaker 7: somehow he's going to get sidelined or his voters would
Speaker 7: just magically change their minds and lo and behold. That
Speaker 7: never happened, and it still hasn't happened. So I don't
Speaker 7: put a lot of stock in the kind of praying
Speaker 7: and hoping that he just bows out strategy, but that
Speaker 7: is that is what most Republican candidates seem to be
Speaker 7: doing at this point.
Speaker 8: Can we talk about the Nikki Haley approached a little bit,
Speaker 8: because I thought that one was an interesting one. What
Speaker 8: did she do?
Speaker 7: Yes, you know, Nicky Haley is sort of the Republican
Speaker 7: hamlet to cycle. When the indictment was first announced, she
Speaker 7: came out in the press and said it was terribly
Speaker 7: reckless to have done stuff like kept you know, classified
Speaker 7: nuclear documents in the mar Lago bathroom. But she got
Speaker 7: attacked so much that she she then pivoted yesterday and
Speaker 7: came out and said no, actually she was inclined to
Speaker 7: savor pardoning Trump if she were elected president. So she's
Speaker 7: managed to be on both sides of this issue. You know,
Speaker 7: she was she was four indicting him. I guess before
Speaker 7: she was against it.
Speaker 6: That was back when it was the party of law
Speaker 6: and order. They've decided they don't care about law and
Speaker 6: order anymore. By the way, can we well, can we stop.
Speaker 7: Only as far as it applies to Democrats. There was
Speaker 7: a lot you know, you ask about the Trump indictment,
Speaker 7: and you know, nine times out of ten the answer
Speaker 7: comes up being, well, why haven't they indicted Joe Biden
Speaker 7: or Hunter Biden? Which may, by the way, but but
Speaker 7: there's they're only the candidate of law. They're only the
Speaker 7: part of law and order in so far as it
Speaker 7: pertains Democrats, And I think for most Democrats that goes
Speaker 7: the other way to everybody's very interested in seeing Trump indicted.
Speaker 7: You know, not a lot of clamoring among the Democrats,
Speaker 7: I know to indict Hunter Hunter Biden.
Speaker 5: Well, that's not terribly unlikely, let's be honest, But I
Speaker 5: think we should. I think we should.
Speaker 6: We focused too much on he kept classified occupants in
Speaker 6: the bathroom, which doesn't matter because Biden kept classified documents
Speaker 6: in the garage next to his gorgeous nineteen sixty seven corvette.
Speaker 6: But the problem is the obstruction Yeah, the problem is
Speaker 6: the obstruction charge, right, And is anybody in the Republican
Speaker 6: Party obtuse enough to see beyond the irony of Donald
Speaker 6: Trump chanting or leading a chance of lock her up
Speaker 6: against Hillary Clinton? I mean, how do you These people
Speaker 6: went to Harvard and Yale. DeSantis and Vivek both went
Speaker 6: to both of those Ivy League institutions.
Speaker 5: Are they just they can't be just dumb.
Speaker 7: No, I don't think any of them are dumb. I
Speaker 7: think they're looking at the polls and reacting accordingly. And
Speaker 7: there is one candidate in the race, so I spent
Speaker 7: time with in New Hampshire when he made his announcement
Speaker 7: last weekend. Who isn't going along with us who's been
Speaker 7: very critical of Donald Trump, and that's Chris Christi, the
Speaker 7: former New Jersey governor. The problem, though, is, we see
Speaker 7: in one of these new polls, is that Republican voters
Speaker 7: don't want to hear Trump criticize Christy. As I wrote
Speaker 7: for Business Week last week, is very unpopular, not only
Speaker 7: among Republicans who like Trump, but even among Republicans who
Speaker 7: don't like Trump. And this new poll shows for Morning
Speaker 7: consult that Christie's favorability rating has actually fallen from thirty
Speaker 7: five percent down to twenty five percent since he got
Speaker 7: into the race last week. So the strategy of criticizing
Speaker 7: Trump doesn't seem to be helping Christie get ahead. But
Speaker 7: that being said, look, if any of these guys want
Speaker 7: to actually be the Republican nominee in twenty twenty four,
Speaker 7: and I'm less and less convinced that they actually do,
Speaker 7: they're going to have to figure out a way to
Speaker 7: lower Trump's favorability ratings with Republican voters or they're simply
Speaker 7: going to lose the GFP primary race and a blow.
Speaker 7: And that seems to be happening right now, which is
Speaker 7: why I do think that Canada like Vivek round Swami
Speaker 7: and maybe even Nikki Haley, whether or not they realize it,
Speaker 7: are really running for vice president, because that seems to
Speaker 7: be the only open spot this one. Trump, looking at
Speaker 7: the poll numbers, at least at this point, it seems
Speaker 7: to have the nomination all but wrapped up.
Speaker 3: And then there is the former vice president Mike Pence,
Speaker 3: who apparently said he cannot defend what is alleged in
Speaker 3: the most recent indictment against former President Donald Trump. I'm
Speaker 3: reading ABC News as a story. I guess. He did
Speaker 3: some interviews with other networks, but he talked about reading
Speaker 3: the full indictment. But he also is saying I'm going
Speaker 3: to wait until basically after he's had his day in court.
Speaker 6: He also was clearly afraid to really speak out right, Josh.
Speaker 6: I mean, this is a guy the former president sent
Speaker 6: an angry mob to essentially kill him, and he's never
Speaker 6: really said anything that bad about Donald Trump.
Speaker 5: But he's still saying I can't believe that politics.
Speaker 7: His campaign released a pretty tough kind of video ad,
Speaker 7: but Pence himself has more or less been kind of
Speaker 7: whimpering in the corner, you know, hoping this all goes away.
Speaker 7: Nobody I can find in Republican politics who isn't on
Speaker 7: Mike Pence's payroll or the payroll of his super pack
Speaker 7: can figure out why he's running for president, because it
Speaker 7: really does not seem to be any constituency at all
Speaker 7: that either respects him or is longing for him to
Speaker 7: be Indiana the White House, his unfavorability ratings are almost
Speaker 7: as high as Chris Christie's, and that's really saying something.
Speaker 7: So again, it's the strategy of kind of wanting to
Speaker 7: have it both ways, of not really wanting to attack
Speaker 7: or engage Trump and just hoping that somehow, by a
Speaker 7: stroke of magic, Trump disappears and voters crown either Pence
Speaker 7: or Hayley or one of these also want to be
Speaker 7: candidates in his place, and they kind of wind up
Speaker 7: with a nomination that way, because as we've seen throughout
Speaker 7: the indictment drama, Trump really isn't getting any pushback from
Speaker 7: the candidates that are running against them, and so voters
Speaker 7: don't seem to be under any pressure or have any
Speaker 7: interest in considering anyone but Donald Trump. And that is
Speaker 7: a recipe for Trump becoming the next nominee, whether or
Speaker 7: not he's indicted. A third or a fourth time, no
Speaker 7: matter what happens.
Speaker 8: But Matt, do you really think Pence could not not
Speaker 8: run like he kind of has to run even if
Speaker 8: I mean, I mean, you've got to put your foot out.
Speaker 6: I feel like Pence would have had a great shot
Speaker 6: at this had he immediately come out against his former
Speaker 6: boss and said, you know what, it doesn't work that
Speaker 6: way in America. You know, we don't attempt to overthrow Congress.
Speaker 6: We don't attempt to overturn an election. This is a democracy,
Speaker 6: and we're strong. If he had flexed at that point,
Speaker 6: it would have been awesome.
Speaker 3: I want to go back to you, Josh, because you
Speaker 3: wrote the book Devil's Bargain Steve Bannon, Donald Trump and
Speaker 3: the storming of the presidency. Really just you were there
Speaker 3: at the get go, at the beginning, watching Trump and
Speaker 3: his you know, his winning of the White House that
Speaker 3: first go round and the rise of the alt right.
Speaker 3: Having said that, what you were seeing at this time
Speaker 3: in place, do you see that indeed it's going to
Speaker 3: be trumped, depending on the legal cases play out a
Speaker 3: little bit, that he will be the Republican nomination. We're
Speaker 3: looking at the potential of Trump getting back to the
Speaker 3: White House.
Speaker 7: There's no real reason I can see, based on what's
Speaker 7: happening in Republican politics right now, to think that Trump
Speaker 7: is not going to be the nominee. Like obvious caveats,
Speaker 7: you know, he could drop de of a heart attack,
Speaker 7: he could somehow change his mind, the Earth could get
Speaker 7: hit by a meteor. But barring something like that, if
Speaker 7: you look at Republican voter sentiment, it's hugely favorable toward
Speaker 7: Donald Trump. In a new CBS News poll, Trump is
Speaker 7: leading his closest opponent, Rond De Santis by more than
Speaker 7: a three to one margin. Every time he gets indicted,
Speaker 7: his favorable numbers with Republican voters tick up. The one
Speaker 7: thing that Trump needs to worry about is that is
Speaker 7: popular with Republicans has grown, and as he's been indicted,
Speaker 7: you know, more and more times, he's become less popular
Speaker 7: with non Republicans. As far as Trump getting back to
Speaker 7: the White House, I think that's a pretty big hurdle.
Speaker 7: But Trump winning the nomination at this point seems far
Speaker 7: more likely than not. And especially when you see things
Speaker 7: like we saw in Miami, with all the sponents going
Speaker 7: down there to defend him, it's harder and harder to
Speaker 7: see him. Okay, losing to one of them?
Speaker 3: All right, we got to run great stuff as always.
Speaker 3: Josh Green, National correspond at Bloomberg Business Week, Joe Weber
Speaker 3: at the editor of Bloomberg BusinessWeek. Find this at Bloomberg
Speaker 3: dot com slash newsletters. This is Bloomberg.
Speaker 1: You're listening to the Bloomberg Business Week Podcast. Catch us
Speaker 1: live weekdays from two to five pm Eastern on Bloomberg Radio,
Speaker 1: the Bloomberg Business App, and you too. You can also
Speaker 1: listen live to our flagship New York station. Just say Alexa,
Speaker 1: play Bloomberg. You love them thirty.
Speaker 3: Bloomberg New Senior financial reporter Shrinanarajen here with Matt and
Speaker 3: myself in our Bloomberg Interactive Bookers studio. Were you a
Speaker 3: little fraid to walk in because Matt was a little heated?
Speaker 2: Of course.
Speaker 9: I've never seen anyone more excited about inflation than him.
Speaker 3: This is why we love Maddie's enthusiasm over all things,
Speaker 3: including FED meetings. FED meetings are fun. Also fun is
Speaker 3: watching firms navigate politics and kind of the global financial
Speaker 3: world and where business will be and where they need
Speaker 3: to focus their efforts. Talk us a little bit about
Speaker 3: gold Band and what they're doing in India. And you
Speaker 3: know this country right well born there, family there.
Speaker 5: Grew up there.
Speaker 9: Yes, I did know the country a little bit. It
Speaker 9: is fascinating the story and it is a mustreat. It
Speaker 9: is a window into Goldman in the fact that their
Speaker 9: biggest office outside of New York, their headquarters, happens to
Speaker 9: be in India and Bangalore. But equally it is a
Speaker 9: story about how India has become a attractive center for
Speaker 9: a large number of firms. Goldman might have eight thousand
Speaker 9: of it's roughly forty five thousand people there. JP Morgan
Speaker 9: has about fifty thousand people there, fifty thousand of about
Speaker 9: three hundred thousand. These are what they call these global
Speaker 9: capability centers, and so like when you.
Speaker 3: Call in like write a lot of the back office.
Speaker 9: That used to be the case. When you go back
Speaker 9: to the nineties, when you go back to the early
Speaker 9: two thousands, you will think about India. You will think
Speaker 9: about back office jobs. You will think about your you know,
Speaker 9: customer care centers, that's where most of your calls were
Speaker 9: getting answered. Then that was the stereotype associated with India
Speaker 9: about the kind of jobs. But what the story does
Speaker 9: a good job of explaining to us is how that
Speaker 9: has changed. It's not purely back office anymore. It's not
Speaker 9: just that companies are sitting around and saying, how can
Speaker 9: we lower costs? It has evolved into something more than that.
Speaker 9: We have Goldments, the head of India, the India business
Speaker 9: at Goldman Sachs talking about how they have a number
Speaker 9: of software engineers there now building and writing code for
Speaker 9: their trading platforms that quant firms here can use for
Speaker 9: their commodities analytics business. That is not back office by
Speaker 9: To me, it's a.
Speaker 6: No brainer, right if I look at the landscape in India,
Speaker 6: the universities, the educational system is so strong that you know,
Speaker 6: we see obviously some of our smartest analysts here Bloomberg
Speaker 6: Intelligence are from India.
Speaker 10: Right.
Speaker 6: You look across the banking landscape, You've got some of
Speaker 6: the big CEOs.
Speaker 5: Are from India, you know.
Speaker 6: To me, when I read this story, a light switch
Speaker 6: was flipped, like, oh, obviously you can hire pms, You
Speaker 6: can hire business heads there and you don't have to
Speaker 6: pay them, you know, ten million dollars a year. I
Speaker 6: would move a lot of my business to India.
Speaker 9: And move away from the banking landscape, and think about
Speaker 9: the tech landscape, Google, Microsoft, IBM, all of these places,
Speaker 9: a lot of their CEOs right now are products of
Speaker 9: the Indian educational system. And that's why it's important to
Speaker 9: sort of break down why it's so attractive. Right there
Speaker 9: is this vast pool of young talent. India just became
Speaker 9: the most populous country on Earth, just overtaking China. Yet
Speaker 9: the median age here and that is why this phrase
Speaker 9: has been associated with India for long, the demographic dividend,
Speaker 9: the median age. There's twenty eight in the US and China.
Speaker 9: That's thirty eight, Danias. Doesn't seem like a lot, but
Speaker 9: it is a lot. Yeah, twenty eight years old is
Speaker 9: sort of your average person in India.
Speaker 6: What I would give to be twenty eight, You could
Speaker 6: take my left arm if I can be twenty eight.
Speaker 9: We can easily rewind five years age if that's all
Speaker 9: you want.
Speaker 2: But not just that.
Speaker 9: There's an educational system that has this focus on science
Speaker 9: and technology. Right that again becomes a big thing in
Speaker 9: an attractive, attractive quality for a lot of these companies
Speaker 9: trying to set up these centers, and the most important thing,
Speaker 9: the unforeseen catalyst what happened with the pandemic. You learned
Speaker 9: that you could have your workers and your staff in
Speaker 9: distributed locations, in remote locations, and still do it seamlessly.
Speaker 9: Of course, that was a very dire example, and people
Speaker 9: working from their bedrooms and their living rooms and trying
Speaker 9: to get work done. And we were able to do that.
Speaker 9: Here you're talking about fully constructed, state of the art
Speaker 9: buildings with all the relevant technology that's needed. It just
Speaker 9: happens to be twelve thousand miles away that works, and
Speaker 9: companies are convinced that can happen. Of course, it's not
Speaker 9: all a plus. There are questions about the employability of
Speaker 9: many people who come through the booming education system. They
Speaker 9: have to make sure that a lot of time is
Speaker 9: spent on training. And I actually remember that around the pandemic.
Speaker 9: There was a phase when the pandemic struck the US
Speaker 9: that was March twenty twenty, and that's when we saw
Speaker 9: most of the impacts. But the peak pandemic impacts in
Speaker 9: a place like India was felt about a year later,
Speaker 9: and when you saw these national lockdowns. I remember having
Speaker 9: conversations with Goldman executives who were suddenly thinking we have
Speaker 9: moved a lot of our risk functions and some of
Speaker 9: the other critical operational functions to places like India. When
Speaker 9: suddenly the entire office is locked out, they had a
Speaker 9: moment of panic and they had to be sure, wait,
Speaker 9: are we too reliant on India. Of course it didn't
Speaker 9: cause any problems in the end, but it certainly sparked
Speaker 9: that conversation for them.
Speaker 3: Shri and I think about like China and what it
Speaker 3: developed into in terms of supporting the world, right versus
Speaker 3: what India is. I mean, it's really a very different story, right.
Speaker 3: This is these are highly educated workers that are becoming
Speaker 3: increasingly a really significant part of the global economy.
Speaker 9: China became a manufacturing powerhouse. It became the factory of
Speaker 9: the world. Looking at how this Indian ecosystem is developing,
Speaker 9: you're seeing more of a services exports system here, right,
Speaker 9: And that is what it is turning to. It is
Speaker 9: using the demographic dividend to its advantage. It is using
Speaker 9: its existent education system and the focus on science and
Speaker 9: technology or even the STEM fields if you may, to
Speaker 9: attract a lot of these companies and they're seeing the
Speaker 9: benefit in that. Goldman just Operate opened a second Global
Speaker 9: Capability Center India in Hyderabad because there is an infrastructure challenge.
Speaker 9: If all the big companies are flocking to the same city,
Speaker 9: it will cause problems. And anyone who's seen Bangalore realizes
Speaker 9: there are problems. So other cities are developing, So there
Speaker 9: are alternatives.
Speaker 6: What I wanted to ask, what is I know many
Speaker 6: Indians students actually end up at Harvard as well, but
Speaker 6: what is the Harvard of India?
Speaker 9: I believe how we call it the Harvard University for instance,
Speaker 9: is the I of the United States?
Speaker 11: Oh?
Speaker 5: I see, I love the way he did that he
Speaker 5: turned around.
Speaker 3: Ah, that is very interesting.
Speaker 5: It's god.
Speaker 3: You know what I wanted to quickly. We only got
Speaker 3: thirty thirty five seconds. So when you see the headlines
Speaker 3: about Tim Cook and Apple and India, are they behind
Speaker 3: what the financial firms have been doing, because it sounds
Speaker 3: like they've been entrenched on a much more sophisticated level
Speaker 3: in India for a while.
Speaker 9: No, remember the Apple headlines and the Tim Cook in
Speaker 9: India headlines recently were more about Apple opening a retail store.
Speaker 9: And as a completely different side of the question there,
Speaker 9: you realize that when you have one point to build
Speaker 9: in people and a very fast growing middle class and
Speaker 9: that still translates to a pretty significant number. You have
Speaker 9: a consumer market that is approachable in ways you did
Speaker 9: not think possible many years ago. It is a growing market.
Speaker 9: Even with big investing firms, they would look at India
Speaker 9: as the good with the growing Dennis markets, the possibility
Speaker 9: to find investing opportunities there.
Speaker 3: Group so glad to jump in and see mattx craziness
Speaker 3: and then do this story. Shrinata Rojan, thank you.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekdays from two to five pm Eastern on Bloomberg Radio,
Speaker 1: the Bloomberg Business App, and YouTube. You can also listen
Speaker 1: live to our flagship New York station, Just Say Alexa
Speaker 1: Play Bloomberg eleven thirty.
Speaker 2: All fly, Amram Baby, Ram baby.
Speaker 7: All right.
Speaker 6: I do want to fly, but not in a narrow
Speaker 6: body seven thirty seven Max.
Speaker 5: I'm still a little bit worried about flying on a
Speaker 5: seven thirty seven? Is it just me?
Speaker 2: No?
Speaker 12: I get that I don't know enough about planes to
Speaker 12: sort of suss out what aircraft.
Speaker 6: I know very little about planes, but I know this
Speaker 6: one tends to crash a lot. Those numbers seem yeah,
Speaker 6: and Apparently the Chinese. For a while, they were cool
Speaker 6: with it until the plane started to crash. They were
Speaker 6: buying a ton of Boeings. Uh Trump's trade war and
Speaker 6: then COVID, and all of a sudden, Boeing went from
Speaker 6: like the most beloved plane maker in China.
Speaker 5: To the biggest loser to air Bus.
Speaker 6: This duopoly is something we're going to talk about with
Speaker 6: Bloomberg BusinessWeek Editor in chief Joel Weber. He joins us
Speaker 6: here in the Interactive Broker studio, as well as Julie Johnson,
Speaker 6: the aerospace reporter, and Joel, I was telling Katie earlier,
Speaker 6: my love for this business has grown exponentially since I
Speaker 6: read Airframe by Michael Crichton.
Speaker 8: Okay, have you read it? No, man, I.
Speaker 6: Feel like this is one of the most novels he
Speaker 6: wrote Jurassic Park, and it's a great book.
Speaker 5: It touches on China.
Speaker 6: But everyone needs to read it. So how did how
Speaker 6: did Julie win? You overd this pitch?
Speaker 1: Then?
Speaker 8: Well, you know, we have this interest in airplanes and
Speaker 8: air lines and the people who are running those companies
Speaker 8: and also the people who manufacture them. There's this thing
Speaker 8: that happened in China where you know, they closed the
Speaker 8: borders for a really long time during COVID travel and
Speaker 8: demand went away internally, domestically in China internationally, and that
Speaker 8: had all kinds of implications for the global economy. It
Speaker 8: also had implications for people who make and sell airplanes,
Speaker 8: and that was sort of an interest of us, especially
Speaker 8: ahead of the Paris Air Show, which is just around
Speaker 8: the corner. And so we circled back to Julie to
Speaker 8: talk more about Boeing. So, what's happening with Boeing since
Speaker 8: China has been such a crucial market for the company
Speaker 8: for so long, Julie.
Speaker 13: Pretty fascinating, I mean for the last three or four years.
Speaker 13: The story had been pretty much the same until very recently,
Speaker 13: and it was one of frustration for Boeing. They were
Speaker 13: locked out of their largest international market, frozen out, whatever
Speaker 13: you want to call it, and and the they very
Speaker 13: much seemed to be caught in the middle of this,
Speaker 13: you know, trade war, and they were all kinds of
Speaker 13: other issues mixed in, including the fact that China was
Speaker 13: the first nation to ground the MAX after those two
Speaker 13: crashes and one of the last to unground it. So
Speaker 13: what's going on here is that market dynamics have overtaken
Speaker 13: politics there because of COVID and the MAX grounding, the
Speaker 13: global air mark market is thousands of planes short of demand,
Speaker 13: and so if you want a Boeing jet, you want
Speaker 13: a Max, you better get in line because they're sold
Speaker 13: out now into twenty twenty eight. We just saw Ryanair
Speaker 13: place this monster order that goes into the twenty thirties
Speaker 13: just to line up aircraft, and Airbus is sold out
Speaker 13: almost to twenty thirty. So it's pretty pretty fascinating to
Speaker 13: see suddenly, you know, there's all this activity in China.
Speaker 13: They need their planes, and things are starting to look
Speaker 13: good for Boeing.
Speaker 5: The numbers are striking.
Speaker 6: I mean, I took from the story that Boeing was
Speaker 6: like a big was beloved in China and was selling
Speaker 6: more planes than anybody else there. And then the geopolitical
Speaker 6: tensions I think are key, right, the Trump trade war
Speaker 6: plus COVID plus the MAX crashes. Since twenty twenty, Airbus
Speaker 6: has sold three hundred or delivered three hundred and eighty
Speaker 6: four planes to China.
Speaker 5: Boeing has delivered four why haven't bothered, and Ryanair has.
Speaker 6: Now put in an order for three hundred. United Like
Speaker 6: two hundred, and the Indians have ordered another one hundred,
Speaker 6: So you know, everybody wants these things, and I guess
Speaker 6: Boeing is now optimistic?
Speaker 5: Is Dave Calhoun, the guy who runs Boeing?
Speaker 6: Now he's optimistic that what the Chinese are going to
Speaker 6: start ordering him again because he had a backlog of
Speaker 6: like ten billion dollars of the planes that he was
Speaker 6: supposed to sell to them but had started already giving
Speaker 6: to other clients.
Speaker 8: You did it, that's firedough it.
Speaker 13: Yeah, so there's a lot of to unpack here. Boeing
Speaker 13: has one hundred and forty planes that they built for China,
Speaker 13: most of them in twenty twenty nineteen, that have been
Speaker 13: in storage because China was closed to the MAX and
Speaker 13: China has not resumed imports of the Max yet, but
Speaker 13: apparently that could happen. It's basically all they need is
Speaker 13: a stamp from the government for that to happen. The
Speaker 13: airlines want their planes. So so yeah, that's the ten
Speaker 13: billion dollars that's tied up. That's been very frustrating to Boeing.
Speaker 13: But if China, you know, Boeing kind of ran out
Speaker 13: of patients last year as the market started to heat
Speaker 13: up and Calhoun was not subtle at all in saying,
Speaker 13: you know, we're marketing these If you don't want these planes,
Speaker 13: they are going to be other buyers. And that's that's
Speaker 13: right around the time that China started reopening and this
Speaker 13: this relationship flipped and by the way, I mean it
Speaker 13: could flip again, Like the politics are crazy here. I mean,
Speaker 13: but it's looking good for Boeing.
Speaker 8: So how did Airbus manage to to really just continue
Speaker 8: to you know, sell planes. There's so much more dramatically
Speaker 8: than Boeing.
Speaker 13: Well, their plane wasn't grounded. I mean, this is so
Speaker 13: the Max. The global grounding was I think the longest
Speaker 13: in aviation history, certainly the longest for a really important aircraft,
Speaker 13: and Airbus Boeing had to shut down production during COVID.
Speaker 13: Airbus managed to keep their factories going and running semi
Speaker 13: semi hot. And then Airbus has also done a lot
Speaker 13: of direct investment in China and they've got they've you know,
Speaker 13: they're building their A three twenty NEOs in China that's
Speaker 13: the rival to the Max. So so they've managed they've
Speaker 13: got a really good relationship that they've you know, they've
Speaker 13: managed to foster through the trade tensions. And by the way,
Speaker 13: Washington's kind of irritated by some of the ordering that
Speaker 13: that's gone to Airbus's way.
Speaker 5: Oh well please, They've brought it upon themselves.
Speaker 6: I mean, you know, if you want to win a
Speaker 6: congressional campaign, dissing China.
Speaker 5: Is a great way to do that to get votes.
Speaker 6: And the Europeans have been courting the Chinese with the
Speaker 6: Belton Road initiative and letting him straight up in through Italy,
Speaker 6: right up into the heart of Europe. That's got to
Speaker 6: help a lot as well, doesn't it.
Speaker 5: Yeah?
Speaker 13: Yeah, absolutely so.
Speaker 6: I wonder why does China not have its own I
Speaker 6: was talking about airframe. I was talking about Airframe, the
Speaker 6: book by Michael Crichton, Julie, have you read it?
Speaker 13: Sorry?
Speaker 5: Okay, I thought it was popular anyway.
Speaker 6: Part of the book talks about how the airplane ip like,
Speaker 6: for example, how you make a wing is so heavily
Speaker 6: guarded in this country, and I'm sure air Bus guards
Speaker 6: theirs as well. But they have to outsource some of
Speaker 6: this manufacturing to China. As you know, the global economy
Speaker 6: became too intertwined. China knows how to make planes, now,
Speaker 6: why don't they make an uncomfortable narrow body jet.
Speaker 13: They have China just to make things even more complicated.
Speaker 13: So China has its rival, homegrown rival to the Max
Speaker 13: and to the A three twenty neo, and it just
Speaker 13: entered service last month and more than ten years behind schedule,
Speaker 13: by the way, and about I've seen estimates that around
Speaker 13: eighty percent of the technology in that plane, basically everything
Speaker 13: that you need to keep it aloft is Western made,
Speaker 13: and so manufacturing commercial jets is really, really, really difficult,
Speaker 13: and to build them on scale even tougher. So it's
Speaker 13: one thing to get it into the air, but then
Speaker 13: the next challenge for China is to start churning these out,
Speaker 13: and it's you know, they put a lot of resources
Speaker 13: into it. I wouldn't count them out at all, but
Speaker 13: it's going to be probably decades before they're a threat
Speaker 13: to Boeing an air bus. And that also works in
Speaker 13: Boeing's favor right now.
Speaker 8: Okay, Well, if Matt is reluctant to get on the Max, Katie,
Speaker 8: I'm curious the CET nine to nineteen, that's going to
Speaker 8: be China's answer to the Max. Matt, when you're gonna
Speaker 8: step on one of those.
Speaker 6: No, I mean no, it's like getting a Chinese COVID vaccine.
Speaker 5: No, thank you, ma'am.
Speaker 8: No, it could work.
Speaker 5: It could, yeah, it could.
Speaker 12: Okay, Julie, I have a question about the competitive landscape here,
Speaker 12: because again it seems like this dynamic maybe is shifting
Speaker 12: again in favor of Boeing. But I mean you also
Speaker 12: made the point that if you look at airbuses, waitless.
Speaker 12: I mean we're talking until the start of the next decade.
Speaker 12: So from a competitive standpoint, it still seems like when
Speaker 12: it comes to China, Boeing is far behind that of
Speaker 12: air Bus.
Speaker 2: Is that safe to say, Yeah, that's that's spot on.
Speaker 13: Yeah, that's exactly right on. The Airbus is clearly in
Speaker 13: the driver's seat. And frankly because they both Boeing and
Speaker 13: Airbus have struggled post COVID to get their factories back
Speaker 13: up and running smoothly. And when you're coordinating hundreds of
Speaker 13: thousands of planes or parts that go into a plane
Speaker 13: and they've got to arrive on schedule, you know, sometimes
Speaker 13: down time to the half hour, you can just see
Speaker 13: how quickly, you know, how difficult that is, and how
Speaker 13: quickly things things can go amiss. And so air buses
Speaker 13: inability to you know, to make good on their their
Speaker 13: schedule has kind of left Boing back into the game
Speaker 13: a little bit. But Airbus right now dominates. I mean
Speaker 13: there's just no question it's their market.
Speaker 8: Okay, Julie, I'm curious. Air show coming up soon Parish?
Speaker 8: Do you get to go? And if not, what are
Speaker 8: you going to be looking for from Afar?
Speaker 5: No, I'm I'm I'm gonna be there.
Speaker 13: I'm gonna be sleep deprived and you know, eating bread
Speaker 13: and cheese and sitting in traffic.
Speaker 6: Maybe truly, poor Julie, she's gonna be eating French cheese
Speaker 6: and drinking wine.
Speaker 8: What what are you most looking forward to there, Julie?
Speaker 5: You know it's on it.
Speaker 13: The excitement is palpable. So it's it's very cool to
Speaker 13: have the whole industry. I mean, tens of thousands of
Speaker 13: people jammed into an airfield for a few days and
Speaker 13: you run into I mean, like, oh my gosh, there's
Speaker 13: a you know, four star general walking by. I mean,
Speaker 13: it's just it's really really cool just and and as
Speaker 13: a as a I love airplanes, and so just just
Speaker 13: to see them up close, to see the flying displays,
Speaker 13: to run into people I know, it's it's like.
Speaker 2: It's very cool.
Speaker 8: Matt wants you to ask why Airframe wasn't a bigger hit.
Speaker 6: I feel like it was huge, But now you guys
Speaker 6: read it, I'm excited to I'm excited to see what
Speaker 6: they have. And Julie, we're going to have you back
Speaker 6: on out at the Paris Air Show because they always
Speaker 6: have the coolest new things, new products there and it'll
Speaker 6: be interesting to see.
Speaker 8: It's always an open question. Overrated, underrated? The book air
Speaker 8: Frame by Michael Creton, just putting it out there.
Speaker 6: The book apparently is under red, all right, Julie Johnson.
Speaker 6: There covers airlines for US or aerospace is more than
Speaker 6: just airlines, the makers of planes and defense.
Speaker 5: Stuff as well.
Speaker 6: Joel Ever, editor and chief at Bloomberg business Week.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekdays from two to five pm Eastern on Bloomberg Radio,
Speaker 1: the Bloomberg Business app and YouTube. You can also listen
Speaker 1: live to our flagship New York station, Just say Alexa,
Speaker 1: play Bloomberg You Love them thirty.
Speaker 3: First of all, just a little bit of a setup.
Speaker 3: Remember we caught up with more Keeshaw CEO at All Finance.
Speaker 6: Yess, I will never forget because he gave me that
Speaker 6: phrase that I use all the time, which is you.
Speaker 5: Need to put your greed above your bias.
Speaker 3: Yeah right, yeah, it makes so much sense. Well, and
Speaker 3: he is really specifically working on diversifying the all finance space,
Speaker 3: and he talked about All Finance having their first graduating
Speaker 3: class of HBCU students who are now headed to the
Speaker 3: investment world. So all about diversifying the financial space. And
Speaker 3: that's where we get to our next guest. It's our
Speaker 3: regular equality segment because June is Equality month. Harold Butler
Speaker 3: is City Group Global Markets head of Diverse Financial Institutions Group,
Speaker 3: joining us on site here at Bloomberg Headquarters. Although I
Speaker 3: will say that we try to delve into this all
Speaker 3: the time, I don't need a month to do it. Yes,
Speaker 3: and I'm looking forward to the time where I think
Speaker 3: it's really important, but that we don't have to talk
Speaker 3: about it because it's just done.
Speaker 8: Wouldn't it be wonderful?
Speaker 3: Why aren't we done already? I've been doing this a
Speaker 3: long time, yes, and Matt's been doing a long time.
Speaker 5: And it is funny.
Speaker 6: I was reading there was a story today about the
Speaker 6: Supreme Court backing black congressional district, and I think Alabama
Speaker 6: was in Alabama, Alabama, and I was thinking, how insane
Speaker 6: is it that we still have to deal with this
Speaker 6: kind of crap. If somebody a hundred years ago had
Speaker 6: read that headline, they would have been like, seriously, they
Speaker 6: haven't dealt with the racial problems in America yet.
Speaker 14: Seriously.
Speaker 5: Yeah, I mean exactly, it's just unbelievable, the right to.
Speaker 14: Vote other things. Absolutely, I agree.
Speaker 3: With you what's wrong with society?
Speaker 14: You know, if I had a crystal ball, I could
Speaker 14: probably give you that answer. Right.
Speaker 8: I think people need to relax.
Speaker 15: Quite frankly, what does that mean?
Speaker 16: What do you mean?
Speaker 14: I think people? I actually think folks are very uptight
Speaker 14: right in the US and general. And it's not necessarily
Speaker 14: just a financial markets. You know. I'll give you an example.
Speaker 14: You know, when you go my very first time to Europe,
Speaker 14: I had the pleasure of serving in the US Army
Speaker 14: and I got stationed at NATO Suppek and when I
Speaker 14: landed and this is back several years ago, with seventy
Speaker 14: years a long time, and when I landed in Belgium,
Speaker 14: I went to the installation and I said well, where
Speaker 14: is everybody this?
Speaker 8: Oh, it's CIEs the time.
Speaker 14: Where people are taking a lunch and taking a break
Speaker 14: so they can reset themselves for today, right, and communicy
Speaker 14: families or whatever. And then they come back to work
Speaker 14: and to work a couple of hours, and they're much
Speaker 14: more effective. And I said, in what's wrong with this picture?
Speaker 14: Come in?
Speaker 3: I'm in.
Speaker 5: I want to join that too.
Speaker 3: We sa a bit about Germany right, that there was
Speaker 3: more balance.
Speaker 6: I mean, you know what because of the social system,
Speaker 6: because of the safety nets. I think also, you know,
Speaker 6: people aren't as worried about how am I going to
Speaker 6: pay for if I have an accident, how I pay
Speaker 6: for health care? If I get fired, how am I
Speaker 6: going to afford to pay my rest right? Because there
Speaker 6: are so many more safety nets, and as a result,
Speaker 6: I think they need to use them less.
Speaker 3: To be honest, no, I get it, they get worried
Speaker 3: about it. So if we relax, yes, I like to relax.
Speaker 3: Why do you think how can that improve the situation
Speaker 3: in terms of diversification. I'm tired of hearing I love
Speaker 3: you Mackenzie, but tired of hearing about the studies. I
Speaker 3: get it. It's better to be diversified and there's a
Speaker 3: bottom line financial component to it. So tell me if
Speaker 3: we relax, how does that make things better?
Speaker 14: Well, I mean, let's use the financial component.
Speaker 1: Right.
Speaker 8: So, like you, I am.
Speaker 14: Oftentimes mind boggled at the same conversation around you know,
Speaker 14: why are we doing what we're doing?
Speaker 11: Right?
Speaker 14: Just recently, in fact, I was asked, so, why are
Speaker 14: we having the same conversation about equity?
Speaker 3: Yeah?
Speaker 14: Why are we still having this conversation? And you know,
Speaker 14: without having to go into a history lesson, which sometimes
Speaker 14: I don't mind doing, right and really helping that individual
Speaker 14: ask me the question, talk about helping them to understand
Speaker 14: why things are the way they are. I said, let's
Speaker 14: let's refocus your question and you ask yourself, right, if
Speaker 14: if the shoe were on the other foot, how would
Speaker 14: it be different for you?
Speaker 6: Right?
Speaker 14: And when I say the shoe of being on the
Speaker 14: other foot, you know he's talking about in this case,
Speaker 14: I'm kind of tired of hearing about diverse and equity
Speaker 14: and all this kind of stuff.
Speaker 3: Tired. Just no, no, no, I'm just saying repetition is why
Speaker 3: isn't it done right?
Speaker 14: That's just the whole point is that I think I
Speaker 14: think we and I hope this is where we're going now. Right,
Speaker 14: much of the work that's been done, certainly past the
Speaker 14: horrific events that took place several years ago. There's a
Speaker 14: lot of corporations that have come into the space that
Speaker 14: are putting capital in the spaceport George Murder, George Floyd.
Speaker 3: The conversation shifted dramatically.
Speaker 14: Dramatically, right yet, and yet I think I think progress
Speaker 14: is happening, but yet we're not there yet, right, And
Speaker 14: I think it's because it continues to be a difficult
Speaker 14: conversation for people to have. I think people some people
Speaker 14: don't really understand steal the what or what needs to happen.
Speaker 14: And I think some folks just get for Clint about
Speaker 14: the level of commitment that they need to make.
Speaker 11: Right.
Speaker 8: We over a.
Speaker 14: Lot of times financial institutions in general, because it's the
Speaker 14: nature of how we do business, you know, we think
Speaker 14: about it a lot, right, We put do you think
Speaker 14: about risk? And we think about this, and we think
Speaker 14: about that, and all this out of time.
Speaker 3: A trader's got to pull the button and make the trade.
Speaker 14: You got to do it right. If we weren't on
Speaker 14: radio live radio, I have a nice little term for
Speaker 14: them but it's.
Speaker 3: Probably it sounds like we got to get off the pot.
Speaker 8: I mean, really what we need to do.
Speaker 6: I think also it's just it's so hard for people
Speaker 6: to overcome their biases. Yes, when Marcus Shaw came on
Speaker 6: and he gave us this, uh, this term, you need
Speaker 6: to put your greed over your biases.
Speaker 14: Use.
Speaker 6: His point was, if you have that kind of diversity,
Speaker 6: you're going to be able to generate more revenue, better margins,
Speaker 6: You're going to be able to make money.
Speaker 5: And that's what we all want to do. So we
Speaker 5: all want ostensibly, right, So.
Speaker 3: Bias is that strong that people will give up making money?
Speaker 6: Yeah, let's talk about black banks versus surely because you
Speaker 6: said sometimes you don't mind giving people a history lesson,
Speaker 6: and I think people need that.
Speaker 15: Here.
Speaker 6: There are historically black banks. Are they still in operational
Speaker 6: the same sort of scale that they once were?
Speaker 14: Well, you know, since reconstruction. The black banks that are
Speaker 14: in existence today about seventeen of them, so that's not
Speaker 14: a big number. Across the country probably have more capital
Speaker 14: than they ever ever had. Right during the number of
Speaker 14: years prior to these events that we've talked about, such
Speaker 14: as the murder George Bloyd and how the whole industry
Speaker 14: sort of change. It was a tough world, right, and
Speaker 14: that's steal tough, but it is changing because the banks
Speaker 14: do have capital. Prior to you know, there wasn't capital
Speaker 14: to do things right, And so people oftentimes ask me, well,
Speaker 14: how come there are black financial institutions that have been
Speaker 14: around for one hundred years and they remain under a
Speaker 14: billion dollars in assets for example?
Speaker 7: Right?
Speaker 14: And then I like to say to the history lesson things,
Speaker 14: I well, if you were denied capital markets, if you
Speaker 14: couldn't play in the capital markets, you'd be the same way, right,
Speaker 14: because it's a vicious cycle, right. And if you don't
Speaker 14: have access to capital, you don't grow, right. And if
Speaker 14: you don't grow, you cannot offer the communities you serve
Speaker 14: services and things like that. So you know, it's it
Speaker 14: has been a.
Speaker 3: It gets exponential, it does, right if they're able to
Speaker 3: lend out and you keep going.
Speaker 14: It's just the growth, that's right, that's right.
Speaker 6: So what can be done about it? You are at city?
Speaker 6: Can you do you work with them? Or are you competitors?
Speaker 14: Definitely not competitors, right, So we've taken we're gigantic, We're
Speaker 14: not relative pect. We're not that I'm gigantic the waistline
Speaker 14: maybe a little bit.
Speaker 3: But you're what we considered one of the big banks.
Speaker 14: Well, we are a big bank, right, and I'm thankful
Speaker 14: we're a big bank because we're able to do things
Speaker 14: in a unique way and we're the first. Really maybe
Speaker 14: you didn't know this, I'm so I'm happy to tell
Speaker 14: you this. We're the only bank Steal on the street,
Speaker 14: the first to actually create a dedicated business unit, the
Speaker 14: Verse Financial Institutions group. This focused at the minority deposit institution.
Speaker 14: Are going to include broker dealers and asset managers because
Speaker 14: they're part of the equation as well. Absolutely right, And
Speaker 14: so our mission, our focus really has been to get
Speaker 14: to communities underrepresented, right, under invested communities through these financial
Speaker 14: institutions in a way that you know, we can help
Speaker 14: those banks attract investment to a community, to get rid
Speaker 14: of food deserts, which helps people eat more healthy so
Speaker 14: they don't go to the doctor. And you know, as
Speaker 14: much it's you said earlier, it's a vicious cycle.
Speaker 3: Yeah, all those things that keep people from moving ahead
Speaker 3: financially as well as just kind of personally stay in touch.
Speaker 3: Let's know, how things are.
Speaker 14: I'm happy to stay in touch. I've got so much
Speaker 14: to talk about you. If you have me back, will
Speaker 14: we get back. We can have all kinds of fun
Speaker 14: talking about this week.
Speaker 6: We will definitely have you back. Thank you for coming in,
Speaker 6: Thank you for your service.
Speaker 14: Thank you very much.
Speaker 3: By the way, thank your waistline is just fun.
Speaker 8: I'm just okay, I appreciate that.
Speaker 3: Harld Butler, who's Global Markets head of Diverse Financial Institutions
Speaker 3: Group at City Group.
Speaker 1: You're listening to the Bloomberg Business Week podcast. That's just
Speaker 1: live weekdays from two to five pm Eastern on Bloomberg Radio,
Speaker 1: the Bloomberg Business App and YouTube. You can also listen
Speaker 1: live to our flagship New York station Just Say Alexa
Speaker 1: play Bloomberg. You love them thirty.
Speaker 3: Well, got to say. Ruling the AI world right now
Speaker 3: without a doubt is Microsoft and the stock closing at
Speaker 3: an all time high today. It is up forty five
Speaker 3: percent year to date. Microsoft A lot of the reasons
Speaker 3: why investors excitement over the company's outfront moves when it
Speaker 3: comes to generative AI netnet. There is so much excitement
Speaker 3: in the markets over AI and so this week's issue
Speaker 3: Bloomberg Business Week really dedicated to big tech's market resurgence
Speaker 3: thanks to these new and constantly improving machine learning tools.
Speaker 3: So who's actually in the pack when it comes to
Speaker 3: the rapidly expanding AI hype cycle. Yes, it's Microsoft. So
Speaker 3: let's get to it and let's bring in Business Week
Speaker 3: editor Joel Weber, calumnist for the magazine, Max Chaffman Chaffkin,
Speaker 3: Excuse me, I always do that to you. Why do
Speaker 3: I do that? Obviously I need help.
Speaker 5: It's that human touch that you're providing.
Speaker 3: Max Chafkin and Bloomberg News Seattle bureau chief Dina Bess
Speaker 3: Joela Max in studio Dina on zoom and Seattle. This
Speaker 3: story also Bloomberg's Big Take, and it's in the new
Speaker 3: issue of Bloomberg Business Week, on newsstands, online, and on
Speaker 3: the Bloomberg terminal. So, Jill, Microsoft's kind of cool again.
Speaker 8: Yeah. The way that we've been talking about this is
Speaker 8: that Microsoft strikes back and Microsoft has been really, uh
Speaker 8: not a cool company h for a really long time.
Speaker 8: We've We've covered before how it became an absolute juggernaut
Speaker 8: in the cloud space and that was really a Sachi
Speaker 8: a Della move, and what we've seen recently this year
Speaker 8: ultimately has been this emergence, this unexpected move where they
Speaker 8: showed just how strong of a hand they had in
Speaker 8: the AI space, largely because of their investment in open ai.
Speaker 8: And what Max and Dina managed to do here is
Speaker 8: to show us how this this unlikely dominant place where
Speaker 8: it came from. And so Dina, I'm curious, let's start
Speaker 8: with you. What was the moment here that you that
Speaker 8: you learned that you know, Microsoft has really been at
Speaker 8: this AI stuff for a while, right, this is not
Speaker 8: their first fora did they what were some of those
Speaker 8: that about this.
Speaker 15: For more than two decades? And I think you know,
Speaker 15: some of the key moments that we talk about in
Speaker 15: this story took place around twenty nineteen, when you know,
Speaker 15: Satynadella and he had sort of deputized his CTO, Kevin
Speaker 15: Scott and trying to figure out why all this AI
Speaker 15: stuff they were doing wasn't really amounting new hill of beans.
Speaker 15: And so you know, they simultaneously, almost or very shortly
Speaker 15: one after the other, start you know two things. Kevin
Speaker 15: Scott looks at what they're doing and realizes that it's
Speaker 15: very diffuse. It's a bunch of interesting research at best,
Speaker 15: it's not getting into products, it's not having company wide impact,
Speaker 15: and he starts to take some steps to change that,
Speaker 15: including having a personally approved resource allocation in the form
Speaker 15: of AI chips for any AI product. At the same time,
Speaker 15: Scott has been asked by Satyannadella to conduct talks with
Speaker 15: open ai. Is Nadella and open Ai CEO Sam Altman
Speaker 15: had a very informal conversation about, you know, we should
Speaker 15: do something, and then they set Scott out to figure
Speaker 15: out what that was. And so shortly after the internal
Speaker 15: reforms that I just mentioned, Microsoft also announces that they're
Speaker 15: putting one billion dollars into open ai and you know,
Speaker 15: and there's been twelve billion more since then.
Speaker 2: And what that amounts to.
Speaker 15: Is that Microsoft, for pretty much the first time in history,
Speaker 15: is basically outsourced, you know, the underlying technology for one
Speaker 15: of the biggest platform shifts you know, in its history
Speaker 15: to another company, which is just huge for Microsoft.
Speaker 6: So score well, I have to say when I read
Speaker 6: this story for the first time, and Carol, you and
Speaker 6: I have been watching Microsoft stock for twenty five years together,
Speaker 6: for the first time.
Speaker 8: Is that true? Twenty five years together?
Speaker 11: Yeah?
Speaker 8: Wow?
Speaker 11: Yeah?
Speaker 6: For the first time I understood how the cloud business
Speaker 6: and Windows and I never understood Get Hub or the
Speaker 6: Open Eye investment. Now I get how they all fit
Speaker 6: together really well to form, uh, to make a buttload
Speaker 6: of money. As I think you guys wrote, right, tell
Speaker 6: us Max, the potential of these the sort of co
Speaker 6: pilots that they're now releasing, right.
Speaker 16: So a lot of the kind of when you've been
Speaker 16: sort of following the popular press on AI, right, a
Speaker 16: lot of it is focused on like will computers replace humans?
Speaker 16: Are they going to take over the world? Are they
Speaker 16: gonna are are they going to like usher in some
Speaker 16: crazy science fiction future? And at Microsoft, you know, as
Speaker 16: Nan and I heard when we you know, spend time
Speaker 16: talking to the company, right, they're not thinking about it
Speaker 16: that way, really, I mean they are, but the but
Speaker 16: the more immediate concern is basically, how do we plug
Speaker 16: this software into these incredibly lucrative, not necessarily beloved, but
Speaker 16: very widely used apps. You know, the probably the best
Speaker 16: known ones are the office apps, Word Excel.
Speaker 5: And so on.
Speaker 16: And you know, Microsoft is so good at extracting revenue
Speaker 16: from software, from very expensive software.
Speaker 2: It's something like four hundred.
Speaker 16: Million people pay for Office, which is now called Microsoft
Speaker 16: three sixty five. But the idea here is that they're
Speaker 16: going to charge users between say ten and twenty dollars
Speaker 16: a month. These these are not official numbers. These are
Speaker 16: numbers that you know that that are basically our best
Speaker 16: gas based on a reporting, and that's going to potentially
Speaker 16: create just an enormous revenue opportunity where where you're able
Speaker 16: to get something like forty percent more revenue out of
Speaker 16: this product that already generates a ton of revenue. And
Speaker 16: then on top of that, Microsoft has this cloud computing
Speaker 16: business that Joel brought up, and because of the open
Speaker 16: ai deal where they control This is underappreciated, but Microsoft
Speaker 16: basically owns the computers that that open AI's chatbots are
Speaker 16: run on. They're able to kind of rent that space
Speaker 16: to open ai but also to other companies, and because
Speaker 16: of that, they're in a really good position, a position
Speaker 16: where like all of a sudden, you know, we've been
Speaker 16: thinking about, Microsoft is kind of an also ran in
Speaker 16: the in the cloud space, or maybe second place after Amazon,
Speaker 16: where they could really threaten the other players on cloud
Speaker 16: as well, and so that could be a huge amount
Speaker 16: of money.
Speaker 8: It's like an AI flywheel there thanks, right, we should.
Speaker 15: Unless you think we're you know, we're calculating these numbers.
Speaker 15: Run like on Monday, Microsoft CFO so that this AI
Speaker 15: business is going to be their first you know, first business.
Speaker 3: To ten billion dollars.
Speaker 15: I don't completely know what that means because it's not
Speaker 15: one business, as Max was just saying, some of its office,
Speaker 15: some of it's azure, some of it's being but you know,
Speaker 15: at minimum we know that what they're thinking about is
Speaker 15: also in the many billions of dollars.
Speaker 8: So the person, one of the people who was behind
Speaker 8: the scenes at Microsoft here, you know, was Kevin Scott,
Speaker 8: and I'm curious tell us more about his role in
Speaker 8: this AI initiative.
Speaker 15: Wait, so Kevin Scott is a really interesting person. First
Speaker 15: of all, he is a very different background.
Speaker 5: He's the chief technology by the way, Yeah, he's their.
Speaker 15: Chief technology officer. He comes from Appalachia, very you know,
Speaker 15: he's not a you know, he did not go to Stanford,
Speaker 15: so a different different background. He basically, you know, comes
Speaker 15: to Microsoft via the open A excuse me, the LinkedIn acquisition.
Speaker 15: They did not acquire open a. I a little bit
Speaker 15: of a Freudian slip there. So he comes to the
Speaker 15: Microsoft via LinkedIn, and almost immediately Satianadella names him chief
Speaker 15: technology Officer. He's, you know, his interesting background. He spent
Speaker 15: a bunch of time at Google.
Speaker 13: Uh.
Speaker 15: He knows Sam Altman for many, many years, and so
Speaker 15: he has a he has an interesting perspective. And it's
Speaker 15: not a redmand Washington, Microsoft headquarters perspective. It's a Silicon
Speaker 15: value perspective. And so he gets put in charge of
Speaker 15: coming up with a way to rationalize Microsoft AI business,
Speaker 15: make it more impactful, make it add up to you know,
Speaker 15: a much more significant thing. And Nadela also puts him
Speaker 15: in charge of the relationship with Open Ai. So he
Speaker 15: ends up being the goal between and you know, and
Speaker 15: still is uh. And you know, he had to figure out,
Speaker 15: you know, how to balance those things because of course,
Speaker 15: you know, he while he's putting more constraints on the
Speaker 15: quality and quantity of Microsoft's internal AI work, he's you know,
Speaker 15: giving a lot of money, you know, to to Open AI.
Speaker 15: And you know, we reported some people inside Microsoft were
Speaker 15: not super comfortable with that. They felt like, you know,
Speaker 15: perhaps we could do this here. We we love that money,
Speaker 15: we could do this in house. And you know, it
Speaker 15: was a huge change for Microsoft is a huge change
Speaker 15: for Nedella to rely on an outside party for this
Speaker 15: kind of work.
Speaker 3: I'm so glad Bill Gates was like in it from
Speaker 3: the get go. So Max talked to us about Gates
Speaker 3: because he wasn't on board initially.
Speaker 16: Yeah, And I mean it's pretty interesting because you know,
Speaker 16: Gates has sort of been out of Microsoft in most
Speaker 16: official capacities since twenty twenty when he left the board,
Speaker 16: but he has continued, as we write in the stories,
Speaker 16: continue to advise company and on AI. You know, they
Speaker 16: listened to him because because this is an area of
Speaker 16: interest for Gates, and Gates you know, was against the
Speaker 16: open Ai deal, the original deal, the one that Dina
Speaker 16: mentioned for a billion dollars. And as Microsoft sort of
Speaker 16: started as things started to pick up momentum and and
Speaker 16: Microsoft is starting to think about like incorporating these chatbots
Speaker 16: into products, Gates was against it, and as Sam Altman
Speaker 16: and and and the Open Ai team essentially had to
Speaker 16: win him over. In this like presentation at Bill Gates's house,
Speaker 16: they they showed off basically a version of the kind
Speaker 16: of chatbot that we all saw, but it was with
Speaker 16: the more advanced UH technology behind at GPT four and Uh,
Speaker 16: they showed they proved to Bill Gates, or or they
Speaker 16: believe they proved. They showed what they said was the
Speaker 16: chatbot passing the ap bio exam, which was the the
Speaker 16: bar that Bill Gates had had set for the company.
Speaker 16: And and and kind of once they did that, once
Speaker 16: they had this kind of clear the hurdle with Gates,
Speaker 16: Microsoft went full steam and people, people forget this all
Speaker 16: happened very quickly. That that meeting was in you know,
Speaker 16: last summer, and and and the Being thing, the the
Speaker 16: the original being thing was only in February. And since then,
Speaker 16: you know, they've they've added it to basically like every
Speaker 16: product in their portfolio. Some of these are not public
Speaker 16: yet there's still pilots or whatever, but it's basically coming
Speaker 16: across the board. You know, risks complaints from ethesis all
Speaker 16: that be damned.
Speaker 8: Okay, so you hit on the ethical thing there. We
Speaker 8: I think all of us have spent a lot of
Speaker 8: time already talking about some of this. But the Prometheus bit,
Speaker 8: let's talk about that one.
Speaker 3: Yeah, come on.
Speaker 15: Indeed, So Prometheus was the code name for the underlying
Speaker 15: model and the big bot, so the big chatbot, and
Speaker 15: you know, when they announced it in February. I was
Speaker 15: kind of a little bit ranty at the event because
Speaker 15: I thought it was a really interesting code name choice,
Speaker 15: because you know, on the one hand, you know, Prometheus
Speaker 15: is the one who brings fire to humankind and and
Speaker 15: you know, dramatically changes.
Speaker 3: The future of human history.
Speaker 15: So you can see Microsoft, you know, and opening it
Speaker 15: to some extent perhaps seeing this this work is bringing
Speaker 15: this new superpower to humans. But you know, Prometheus punished
Speaker 15: for it, right you know, he's you know, has his
Speaker 15: livery eaten every day. And so I thought it was
Speaker 15: such an interesting quandary of you know, is this a superpower,
Speaker 15: is this a good thing that we're bringing it to humankind,
Speaker 15: or is it something that maybe you know, humans shouldn't
Speaker 15: be playing with, or that you know, are we you know,
Speaker 15: are we you know, opening up, you know, to grab
Speaker 15: another Greek metaphor of Pandora's box In some way, I
Speaker 15: thought it was a very interesting metaphor for you know,
Speaker 15: for them to grab that particular code that took me
Speaker 15: back to school.
Speaker 2: Man.
Speaker 6: This is, by the way, when Reto Grigory hired me
Speaker 6: in nineteen ninety nine, one of the first things he
Speaker 6: taught me was don't buy into the pr jargon, right,
Speaker 6: They're trying to spin the story by using phrases, and
Speaker 6: I wonder if we're doing that essentially when we call
Speaker 6: it artificial intelligence. Parmie Olsen wrote a great I think
Speaker 6: piece a couple months back saying calling it artificial intelligence
Speaker 6: basically abdicates them, you know, the Elon Musk's or the
Speaker 6: Sam Altman's of the world, of responsibility for when this
Speaker 6: software program starts doing bad things like you know, uh
Speaker 6: possibly yeah, well like potentially, like I think Dina pointed out,
Speaker 6: you know, it could be used to bar certain groups
Speaker 6: from getting mortgages or give them higher prices.
Speaker 15: You know, it could it is already doing. That's I
Speaker 15: think to me, this is the formulation. Right, So we
Speaker 15: are now whether it's artificial intelligence, you know, a term
Speaker 15: that's you know, even older than Microsoft word and work
Speaker 15: in the field, and we're going back to the you know,
Speaker 15: the sixties and for some of this, but we are
Speaker 15: now seeing people including Elon Musk, including you know, Jeff Hinton,
Speaker 15: you know, one of the founders of the current generation
Speaker 15: of technology that we're working on, talking about these existential
Speaker 15: questions these Sam Altman as well extinction, things like that,
Speaker 15: and the focus at this point, it's sucking all the
Speaker 15: air out of the room. We're not talking about the
Speaker 15: harms that these systems, and I'm not talking about being
Speaker 15: I'm talking about systems that have been around for a
Speaker 15: couple of years. These systems already cause harm to people.
Speaker 15: They're already mortgage algorithms. We can argue which ones are
Speaker 15: artificial intelligence and which ones aren't, but they do not equitably,
Speaker 15: you know, give people mortgages. There underrepresented populations, certain zip
Speaker 15: codes that are disadvantaged by that. You know, we've talked
Speaker 15: in the past on this program. We talked last week
Speaker 15: about bias in image recognition and policing. There are already
Speaker 15: harms before you go to the hey, we're we end
Speaker 15: up extate.
Speaker 16: And it's but it's great marketing, and I think that's
Speaker 16: part of one of well, it's one of the reasons
Speaker 16: they love talking about the apocalyptic stuff because if it's
Speaker 16: going to cause an apocalypse, that means it's working, right,
Speaker 16: and it assumes that it's working.
Speaker 8: Sure, I'll give you my favorite part of the story
Speaker 8: to as we wrap here, which is Microsoft executive saying
Speaker 8: this is a little bit like our Windows ninety five
Speaker 8: moment is just to bring it back of like how
Speaker 8: nerdy Microsoft can be.
Speaker 3: Check out the new issue of BusinessWeek. It's a killer.
Speaker 3: This is Bloomberg.
Speaker 1: You're listening to the Bloomberg Business Week podcast. That's just
Speaker 1: live weekdays from two to five pm Easter on Bloomberg Radio,
Speaker 1: the Bloomberg Business app and YouTube. You can also listen
Speaker 1: live to our flagship New York station Just say Alexa
Speaker 1: play Bloomberg.
Speaker 5: You love and Turty.
Speaker 8: I'm kicking what they gave in because I'm working for them.
Speaker 6: All right, we are, We've arrived at that point in
Speaker 6: my day. I have say it's my favorite point of
Speaker 6: the show. And we talk about one story from the
Speaker 6: Business business Week magazine. This is going to be the
Speaker 6: forthcoming issue of BusinessWeek magazine, and we typically talk to
Speaker 6: Joel Weber, the editor in chief, as well as the
Speaker 6: author of the story. We're fortunate enough to have Ellen
Speaker 6: Hewitt with us right now. She wrote the Layoffs and
Speaker 6: AI are Changing text once invincible job market story, and Ellen,
Speaker 6: I thought it was a fantastic job of reporting and
Speaker 6: a little bit of a bummer.
Speaker 5: Right because I.
Speaker 6: Had thought as well as probably many of the kids
Speaker 6: graduating college today that if you learn to code and
Speaker 6: you're like halfway good at it, then your set for
Speaker 6: a sweet job in Silicon Valley for like the rest
Speaker 6: of your life. And it now seems that's no longer
Speaker 6: the case.
Speaker 10: Yeah, I mean, this is kind of the big mood
Speaker 10: shift in Silicon Valley, which is the learning to code
Speaker 10: is not a guarantee of amazing forever employment anymore. To
Speaker 10: be clear, there's still a lot of people who want
Speaker 10: to hire software engineers, especially firms that are outside of tech,
Speaker 10: like in healthcare and finance. They're definitely looking for coders.
Speaker 10: But there is this noticeable shift that people are experiencing,
Speaker 10: which is this once infinite fountain of high paying jobs
Speaker 10: where you know, companies were just always always hiring, that's
Speaker 10: not happening anymore.
Speaker 6: One thing I saw is that there have been two
Speaker 6: hundred thousand layoffs in tech this year. You found a
Speaker 6: website that essentially aggregates all of the layoffs, but eighty
Speaker 6: thousand of those happened in January. So what I'm wondering is,
Speaker 6: are the layoffs kind of slowing down? Does it look
Speaker 6: like maybe it's not as bad as it was at
Speaker 6: the start of the year.
Speaker 10: Now, Yes, that's definitely what the numbers are showing, so
Speaker 10: our in our story. We have a wonderful chart. This
Speaker 10: data comes from layoffs at fyi, which is a hilarious site,
Speaker 10: very well run by just a startup founder who started
Speaker 10: during COVID collecting layoff numbers and putting them in this
Speaker 10: wonderful data website. So you see a bit of a
Speaker 10: peak right after the start of a pandemic, and then
Speaker 10: a drop, and then it really started to pick up
Speaker 10: mid last year and peaked in January, and now it's
Speaker 10: actually leveling out. So probably it seems like the worst
Speaker 10: is behind us, but it definitely has. You know, the
Speaker 10: repercussions of this are going to be felt for a
Speaker 10: very long time.
Speaker 8: What I was, what I've been thinking about ever since
Speaker 8: it felt like there was this real major mood shift,
Speaker 8: was just what that what that feels like in the valley? Ellen,
Speaker 8: And I'm curious, like being there feeling like you could
Speaker 8: do anything you wanted forever. How are from the sources
Speaker 8: you spoke with, how is that manifesting itself? This decision?
Speaker 10: Yeah, mood all sorts of ways. I mean, everyone knows,
Speaker 10: you know, a lot of people are just getting laid off,
Speaker 10: you know, in the way that people you know, generally
Speaker 10: you might have expected that recruiters or people who work
Speaker 10: in sales might be the first to go. This time,
Speaker 10: it's like senior engineers have worked at firms like Google
Speaker 10: for ten or fifteen years are getting laid off. And
Speaker 10: there are people who I know who just, yeah, I've
Speaker 10: worked at a company for you know, worked at Facebook
Speaker 10: for ten years, and are getting laid off and feeling
Speaker 10: this sense that you know, I also have a friend
Speaker 10: who considered leaving her job, but then was like, I
Speaker 10: just don't think I'm going to get another good one
Speaker 10: right now, so I'm going to stay at this job
Speaker 10: that I don't super like. It's just this kind of
Speaker 10: feeling that is suffusing everywhere in the industry. And then,
Speaker 10: you know, we had this wonderful conversation with this new
Speaker 10: grad Dylan, who just graduated from Cornell with a CS degree,
Speaker 10: had interned at all these great places Google, Facebook, Stripe, Figma,
Speaker 10: and had a Google off and then it was rescinded.
Speaker 10: And it's just this sense that this dependable thing isn't
Speaker 10: happening anymore, and you see it making people nervous, You
Speaker 10: make you see them nervous to switch jobs or just
Speaker 10: like you know, looking for jobs and not finding what
Speaker 10: they want. And there's actually a pretty sense, you know,
Speaker 10: a pretty big sense of fear among some people. Like Dylan. Again,
Speaker 10: this new grad was talking about how some of his
Speaker 10: peers are accepting multiple job offers because they're concerned that
Speaker 10: one of them is going to get rescinded, and they
Speaker 10: have reason to believe.
Speaker 2: That it might.
Speaker 8: That new grad phenomenon is the one that I find
Speaker 8: most interesting, because these were the people like you were
Speaker 8: just they were just getting swept up and money thrown
Speaker 8: at them. And especially like in Dylan's case, he had
Speaker 8: multiple internships at all the blue chip places. There's this
Speaker 8: helpless quality that it must feel like to be in
Speaker 8: that twenty something age. Ellen, And I'm curious when you
Speaker 8: who's the most freaked out. The twenty somethings are the
Speaker 8: people who been in the industry for a little bit
Speaker 8: and have you know, weather changed before.
Speaker 10: I mean, they're freaked out in different ways. The twenty
Speaker 10: somethings are like, wow, I really thought that I was
Speaker 10: picking the most obvious, most stable, most high paying career,
Speaker 10: and now it's none of those things. Or I might
Speaker 10: have to struggle to get a job. Meanwhile, you know,
Speaker 10: I talked to someone who's telling me stories about peers
Speaker 10: of his who are maybe in their forties or fifties,
Speaker 10: who have worked in Silicon Valley during these boom times,
Speaker 10: have gotten used to incredibly high cost of living in
Speaker 10: places like New York and San Francisco, and are now
Speaker 10: accustomed to a standard of living that may no longer
Speaker 10: be accessible to them. Like I talked to a VC
Speaker 10: who said his friend who had been laid off was
Speaker 10: looking for a new job and his minimum salary requirement
Speaker 10: was six hundred thousand dollars, and he was just like that,
Speaker 10: you may not be able to find that anymore. And
Speaker 10: if you're used, you know, if you have kids in
Speaker 10: private school, like you get these golden handcuffs, and those
Speaker 10: people are scared too. I think they're experiencing a shift
Speaker 10: in what they expected would be available.
Speaker 6: Well, the thing is, ellen, if you need to charge
Speaker 6: a jet for a fishing trip in Alaska, you know
Speaker 6: that's not cheap anymore.
Speaker 8: Yeah, it was never yeah, but now it's really not.
Speaker 10: I really did appreciate. You know, there's a wonderful part
Speaker 10: in the story where yeah, we kind of reminisce about
Speaker 10: what the boom times looked like in Silicon Valley in
Speaker 10: the mid twenty tens. It was out of control, right,
Speaker 10: We're talking about perks and salaries and stock grants and
Speaker 10: these kinds of things that were you know, these companies Facebook, Google,
Speaker 10: they were just throwing money at their employees. In fact,
Speaker 10: they would often hire promising workers simply to have them
Speaker 10: kind of in their corner without a specific job for them.
Speaker 10: So again I talked to this PC who had been
Speaker 10: a product manager at Instagram in twenty fourteen when it
Speaker 10: was owned by Facebook, and he said he was hired
Speaker 10: as a product manager. He didn't have a job yet.
Speaker 10: He was like going to be assigned to a team,
Speaker 10: but just spent three months getting trained, spending an hour
Speaker 10: every morning reading a novel over breakfast, and then having
Speaker 10: some casual meetings. And then at the end of the
Speaker 10: three months he was finally assigned a job. But he
Speaker 10: spent you know, and knew of people who had been
Speaker 10: hired just so that they wouldn't go work at a rival.
Speaker 10: And that was that sense of money that really created
Speaker 10: Silicon Valley for more than a decade.
Speaker 17: It sounds like sorry, Ellen, it just sounds like another
Speaker 17: one of those things that goes away, and when we
Speaker 17: don't have a zero interest rate environment, you get less
Speaker 17: of that kind of just getting brought on.
Speaker 8: Everything.
Speaker 5: I mean, that's a great.
Speaker 17: Actually, yeah, I'm just being smart, you know what I mean.
Speaker 17: But one thing that I'm curious about too is whether
Speaker 17: these companies are sort of blaming AI to be able
Speaker 17: to fire or lay off their employees and to kind
Speaker 17: of get away with it. Yeah, did you did you
Speaker 17: find that in your reporting?
Speaker 10: There's definitely a sense that AI is like the idea
Speaker 10: of the day, and so people are pointing to it
Speaker 10: for different reasons, one of which is, yes, there are
Speaker 10: some CEOs who over hired at the beginning of the
Speaker 10: pandemic when it looked like tech was going to have
Speaker 10: this boom time. Now they're seeing that that boom time
Speaker 10: is not around, they're going to lay people off, and
Speaker 10: they're citing not necessarily AI taking jobs, but just the
Speaker 10: need to maybe realign the company in order to be
Speaker 10: able to focus on AI, which then means that they
Speaker 10: can cut some jobs. So it's a bit of a
Speaker 10: face saving thing. It may also be a real thing
Speaker 10: that companies are investing more energy into it. Of course,
Speaker 10: in our story we also talked about how AI and
Speaker 10: machine learning specialists in software engineering are getting paid twelve
Speaker 10: percent on average more than other senior software engineers. There
Speaker 10: is genuinely a desire to hire these types of people.
Speaker 10: AI is not replacing jobs yet, but there is this
Speaker 10: feeling that it's going to shake things up, and that
Speaker 10: that shakeup may lead to some new hiring and areas
Speaker 10: and cuts in other places.
Speaker 17: All right, Ellen, well, thank you so much for joining us.
Speaker 17: We're going to have to leave it there so we
Speaker 17: can get back to this Trump news today, but really
Speaker 17: appreciate you joining us and the story, of course, which
Speaker 17: will be featured in the forthcoming issue of BusinessWeek magazine.
Speaker 3: You can read it.
Speaker 17: Now on the Bloomberg Term and at Bloomberg dot com
Speaker 17: slash BusinessWeek.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekdays from two to five pm Easter on Bloomberg Radio,
Speaker 1: the Bloomberg Business app, and you too. You can also
Speaker 1: listen live to our flagship New York station, just say
Speaker 1: Alexa play Bloomberg eleven thirty.
Speaker 3: We're going to talk DC because you've got the Washington Capitals,
Speaker 3: the Wizards, the Washington Mystics. She've got Team Liquid, You've
Speaker 3: got the Capital One Arena, You've got NBC Sports Washington,
Speaker 3: and so much more. Add it all up, you get Montaman,
Speaker 3: Monumental Sports and Entertainment, a four billion dollars sports empire
Speaker 3: headed by Ted Leonsis. He's a New Yorker, he's a
Speaker 3: businessman and more. But with us right now ahead of
Speaker 3: Tonight's episode of Chief Future Officer airing at nine thirty
Speaker 3: pm Wall Street Time on Bloomberg Television is Peter bsche
Speaker 3: He's the CFO of Monumental Sports and Entertainment. He joins
Speaker 3: us on Zoom from Washington, d C. Peter, it is
Speaker 3: really great to have you here on Bloomberg Business Week.
Speaker 3: First of all, you know, talk to us about your
Speaker 3: life on a daily basis and what it's like to
Speaker 3: be a CFO of Monumental sports. And I ask you
Speaker 3: on a day when we have been laser focused on
Speaker 3: something like the FED, and I'm curious about the macro.
Speaker 3: We're going to get into what you guys are doing
Speaker 3: and everything under the Monumental brand, But what is it
Speaker 3: on a macro basis that you guys talk about with
Speaker 3: you and your team.
Speaker 18: So we talk about our consumers, our customers. We talk
Speaker 18: about what's happening in the economy obviously, and whatever happens
Speaker 18: there in fact impacts our customers. We're in the media business,
Speaker 18: We're in the disposable income business. People have different ways
Speaker 18: to spend their money, so we are We think about
Speaker 18: that a lot. Jobs, inflation, interest rates, not so much
Speaker 18: impacting us directly, but impacting our customers.
Speaker 11: So that's something we talk a lot about.
Speaker 6: What does disposable income look like right now? You know,
Speaker 6: I often bring up the stats of excess savings left
Speaker 6: in consumers accounts right now. We to that about one
Speaker 6: point two trillion dollars essentially left over from stimulus. Now,
Speaker 6: a lot people strike back on Twitter. Let's say you're wrong.
Speaker 6: You know, we don't have any money, and I get
Speaker 6: that some people don't, but what does what does your
Speaker 6: client base have?
Speaker 11: Yeah, you know, we're in an interesting business.
Speaker 18: We're in the media business if you really think about it,
Speaker 18: and so again, disposable income. But we are also so
Speaker 18: much a part of the fabric of our community. People
Speaker 18: have grown up in sports, whether it's on the youth
Speaker 18: level of the high school collegiate professional level, so it's
Speaker 18: really part of their life in a way that a
Speaker 18: lot of businesses or products aren't. So coming out of
Speaker 18: for example COVID, where we were essentially shut down for
Speaker 18: two years, the demand back was phenomenal. We came back
Speaker 18: instantly again because I think people like sports, they like
Speaker 18: it live, they of course like it on their screens,
Speaker 18: where the vast majority of them to consume us. The
Speaker 18: other part of our business, and you mentioned all our teams,
Speaker 18: but we're really a live entertainment business, and that we
Speaker 18: have a lot of events here at the arena and our.
Speaker 11: Other facilities that aren't just our teams.
Speaker 18: Tonight we have a major wrestling event, So that that
Speaker 18: side of the business, that side of the live entertainment
Speaker 18: business that occupies our buildings came back very strong as well.
Speaker 11: The concert business.
Speaker 18: We all so what's happened recently with certain very high
Speaker 18: profile acts, so our businesses, I won't say with a
Speaker 18: recession proof that what impacts us more is our team performance.
Speaker 18: So if we have a downcycle on the teams, that's
Speaker 18: much more impactful than a downcycle into the economy.
Speaker 3: Peter, who want to get more deeper into sports, but
Speaker 3: when you look at the economic outlook, does it say
Speaker 3: to you recession? Does it say now we're going to
Speaker 3: skip it out?
Speaker 18: You know, I think that's what you all and your
Speaker 18: other guests down at Bloomber get paid.
Speaker 11: To a pine on that's not really my area.
Speaker 18: If you wanted to ask who we should pick in
Speaker 18: the next draft, which is coming up, I might have
Speaker 18: a view on that.
Speaker 6: I don't believe it. I don't believe Listen. We do
Speaker 6: spend a lot of time talking about J. Powell, but
Speaker 6: I guarantee that it's J. Powell ran into you. He
Speaker 6: would want to pick your brain to figure out what's
Speaker 6: going on in the economy because you're the kind of
Speaker 6: people he wants to talk to.
Speaker 11: Now, I think, as I said, we've done well.
Speaker 18: We are concerned, like many people are, with cities commercial
Speaker 18: real estate that impacts us here, particularly in a market
Speaker 18: like Washington, so we pay close attention to that. We
Speaker 18: have a lot of our corporate partners. Obviously we have
Speaker 18: people buy tickets, but we have sponsors and their businesses
Speaker 18: are impacted by what's going.
Speaker 11: On in the economy.
Speaker 18: Again, the commercial real estate world concerns us a little bit.
Speaker 18: We're downtown, we need fans comfortable coming here, their fan experience,
Speaker 18: fan safety, all those things are very important to us.
Speaker 18: I don't know whether mister Powell would focus on that,
Speaker 18: but that's what we focus on our fan experience. We
Speaker 18: think of it as driveway to driveway, when they leave
Speaker 18: their driveway to come here, and then when they return,
Speaker 18: we've got to make that a seamless and experience as possible. Obviously,
Speaker 18: we control what happens in the building here, but silly
Speaker 18: things like traffic and public transportation and all that that
Speaker 18: really matters to us.
Speaker 3: Well, we're just thinking he might. I don't know is
Speaker 3: the Grateful Dead playing at the Capitol Arena because he
Speaker 3: might come to see it because he does like the Dead.
Speaker 18: Well, the Dead no longer exists, but what do they
Speaker 18: call themselves?
Speaker 6: Dead and Company? I think they play Toctal City Music Theater.
Speaker 18: I don't know whether they're on tour or not. We're
Speaker 18: sort of the only game in town, so if they
Speaker 18: play in Washington, they would be playing here.
Speaker 6: They are on tour, they're playing city Field on next
Speaker 6: Wednesday and Thursday.
Speaker 18: So people play indoor buildings, particularly older acts tend to
Speaker 18: play indoor buildings like hours, they're an older act. But
Speaker 18: in the summertime, obviously, the football and baseball stadiums can
Speaker 18: hold a lot more people than we can with twenty
Speaker 18: thousand dollars. Here, become a rainy night or a cold
Speaker 18: November day, they'd be very happy to be inside with us, Peter.
Speaker 3: One thing that is certainly a great economic and market
Speaker 3: indicator is when companies are willing to expand grow their business,
Speaker 3: you know, take on debt, you build out their business,
Speaker 3: or possibly you know, expand their franchises. And I'm just
Speaker 3: wondering along those lines. The Washington Nationals are said to
Speaker 3: be coming up for sale, reports that you guys might
Speaker 3: be interested. Are you enthusiastic maybe about doing something like that?
Speaker 3: Is that a possibility?
Speaker 18: You know, there's there's been a lot of reports out there.
Speaker 18: The team was on the market. It's no longer technically
Speaker 18: on the market. We view ourselves here as having a platform.
Speaker 18: You've mentioned we have a couple of teams, we have,
Speaker 18: have a dozen venues. We now own our network. So
Speaker 18: for us, we have this platform and if we can
Speaker 18: add like businesses to it, it's tremendous.
Speaker 11: We have tremendous operating leverage in the business.
Speaker 18: Makes a lot of sense from a media point of view,
Speaker 18: we really are focused on the region now. For us,
Speaker 18: the region runs all the way up to Philadelphia and
Speaker 18: down into maybe even North Carolina and west from here.
Speaker 18: So adding to the platform, we're six hundred and fifty
Speaker 18: million dollars in revenue news revenues now Ted Chamer wants
Speaker 18: to get to a billion. We'll do some of that organically,
Speaker 18: just growing what we have. Some of it will also
Speaker 18: be adding businesses to the platform. I'm not going to
Speaker 18: name names.
Speaker 5: That there's no matter how hard you try here make
Speaker 5: a lot of sense.
Speaker 3: I tried to kind of weave it together and was hoping.
Speaker 6: A little bit of a slip. You wanted a little
Speaker 6: bit of a slip there from.
Speaker 3: Pete No, no, I respect. I respect Peter. Having said that,
Speaker 3: we did mention the teams. You know, you guys have
Speaker 3: esports gaming. As you said, you're a media Company's where's
Speaker 3: the growth. Where's the biggest amount of growth?
Speaker 18: You know, I think it really is on the media side.
Speaker 18: We can't really add seats here in the building. We
Speaker 18: can raise prices, but it's about getting eyeballs. We really
Speaker 18: need eyeballs, and as you all are very familiar with
Speaker 18: with the changing media's landscape and the regional sports network.
Speaker 11: Cord cutting, we need to be.
Speaker 18: Getting to our fans however they want to consume us,
Speaker 18: whether it's again on a traditional TV with a copper
Speaker 18: wire coming in, or it's on their hand held or whatever.
Speaker 18: So our growth is more eyeballs, but getting to them
Speaker 18: in ways that we haven't gotten to them in the past.
Speaker 11: One of the reasons where.
Speaker 18: In esports, particularly sports related to basketball and hockey, is
Speaker 18: that's a way of connecting with the younger fan, and
Speaker 18: we need to connect with the younger fans.
Speaker 11: So esports is that.
Speaker 18: One of the reasons where active and it's all over
Speaker 18: the country, all over the world and sports gaming is
Speaker 18: that's the way to connect with our fans. We have
Speaker 18: fans who have an interest in doing that. We need
Speaker 18: to have a product, whether it's a channel or distribution
Speaker 18: to reach those fans, younger fans, fans who have a
Speaker 18: very specific interest, whether it's gaming.
Speaker 11: That's where our growth is going to be. It's going
Speaker 11: to be more. That's where our organic growth will be
Speaker 11: is in more eyeballs.
Speaker 3: You know, Peter, I got to be honest, like you
Speaker 3: know this. You've been there for I think what two decades,
Speaker 3: I mean, coming off the financial crisis, we realized how
Speaker 3: important chief financial officers are in keeping businesses growing. I
Speaker 3: think we used to be for such a long time.
Speaker 3: It's the earnings call. They pop on the earnings call,
Speaker 3: they do the numbers, and then they go away. Being
Speaker 3: a CFO is so key in terms of the strategy
Speaker 3: that's deployed at companies today. And you talked earlier about
Speaker 3: you know, how you guys have really made a mark,
Speaker 3: you know, in the DC area. But does that mean
Speaker 3: that becoming even more national is not on the table
Speaker 3: or could you when you talk about growth and expansion
Speaker 3: and more eyeballs, you know, continue to think about building
Speaker 3: out your brands nationally.
Speaker 11: Well.
Speaker 18: Well, obviously our teams through the leagues have a national presence, right,
Speaker 18: the NBA.
Speaker 3: NHL, Right, But you know what I mean, you know
Speaker 3: what I supposed nationally.
Speaker 18: I think we've got a lot of work to do
Speaker 18: here at home, a lot of opportunity in our market,
Speaker 18: and there's a lot of value from our point of view.
Speaker 18: I used this word already on the platform. You can
Speaker 18: it expand perhaps, but we need to do what we
Speaker 18: need to do to get to a billion dollars and
Speaker 18: we think we can do it. And oh, by the way,
Speaker 18: Washington's a great place to do it in there. There
Speaker 18: are obviously other important cities in this country, but Washington
Speaker 18: is one of those, and so we're excited to be here.
Speaker 18: Not to knock other cities, but we think this is
Speaker 18: a great place to be.
Speaker 6: You can knock other cities. Washington is an awesome sports town.
Speaker 5: I gotta say.
Speaker 6: You know, people who live down there really root for
Speaker 6: their teams. They really get into it in a way
Speaker 6: that people in other cities sidetracked by other stuff really don't.
Speaker 3: But if you only had a baseball.
Speaker 18: Team, well, you know, we've had some success. We won
Speaker 18: the Stanley Cup a few years ago. Our women's team
Speaker 18: won the WNDA Championship. The Nationals, who you keep mentioning,
Speaker 18: won the World Series in twenty nineteen. So it's been
Speaker 18: a few years, but we've had a lot of recent
Speaker 18: success with our professional sports team.
Speaker 6: So is the NWNBA starting to pick up? You know,
Speaker 6: there's so much talk about pay parody, and to that,
Speaker 6: snarky men always say, well, if you want them to
Speaker 6: get paid the same, go see the game. You know,
Speaker 6: are people starting to fill up those seats.
Speaker 18: Yes, and I don't think it's I think it's in
Speaker 18: women's sports overall at the collegiate level, at the professional level,
Speaker 18: not just in this country, in Europe for example as well,
Speaker 18: when we see in the growth of women's professional soccer
Speaker 18: teams often sistering with an EPL team or a lot
Speaker 18: of legal team. So I think there's a rising tide
Speaker 18: raising all those boats. I think the WNBA was at
Speaker 18: the forefront of that twenty years ago when it first started.
Speaker 18: They've done some great things in terms of raising growth
Speaker 18: capital at the league level, which is a fairly unusual
Speaker 18: thing for professional sports leagues to do. So I think
Speaker 18: the future is very, very bright for women's sports, but
Speaker 18: also for the WNBA in particular, and particularly in Washington. Obviously,
Speaker 18: the mix of professionals here includes a lot of women
Speaker 18: in very very significant roles, so we're excited about that
Speaker 18: as well.
Speaker 3: Hey, listen, I want to ask you about something very
Speaker 3: serious if I may, because it certainly has been a
Speaker 3: high topic here at Bloomberg, certainly in the financial community.
Speaker 3: When this story crossed, I think it was the most
Speaker 3: read on the Bloomberg and stayed that way for the day.
Speaker 3: And this has to do with the PGA tour and
Speaker 3: live golf and the increasingly growing role of Saudi Arabia
Speaker 3: and their money when it comes to global sports. And
Speaker 3: I'm just curious what you what your opinion of that is.
Speaker 5: Yeah, I think is it good?
Speaker 11: Okay?
Speaker 18: There there have been sort of startup leagues that have
Speaker 18: grown in the past, whether it.
Speaker 4: Was the the old AFL or the the you know,
Speaker 4: competing NBA, wh and hockey, So that's been a common thing,
Speaker 4: perhaps not as much of resent people have tried with
Speaker 4: the XFL and others.
Speaker 18: So alternative leagues I think are always going to come up.
Speaker 18: Often they result in merging, as the AFL and NFL did,
Speaker 18: and the a BA the NBA, and so I'm sort
Speaker 18: of not surprised that followed that path, maybe a little
Speaker 18: quicker and people might have expected. As to the specific
Speaker 18: sources of funding, I'm really reluctant to comment on that.
Speaker 18: I think one thing I will say is sports teams.
Speaker 18: The sports business has gotten so much bigger, teams so
Speaker 18: much more valuable that opening up new pools of capital,
Speaker 18: as the number of the leagues have done to institutional
Speaker 18: investors and the like, is just going to be critical
Speaker 18: to grow the game. And we're international brands, particularly the NBA,
Speaker 18: so international sources of money I think are going to
Speaker 18: be required to get where we want to go.
Speaker 6: I want to ask about speaking of international William Hill,
Speaker 6: I think has spot in your arena there. What's the
Speaker 6: arrangement and how has that growth been? Because you know,
Speaker 6: I lived in London for a long time. British kids
Speaker 6: learn spread betting when they're like five years old and
Speaker 6: then they do it for the rest of their lives.
Speaker 6: Here in the US, it's starting to pick up. It's
Speaker 6: starting to really catch on as a form of entertainment. Well,
Speaker 6: what's your experience been?
Speaker 11: Yeah, so I got to just give a shout out.
Speaker 11: It's actually Caesar's Now.
Speaker 18: Caesar's acquired the US operations of William Hill and they
Speaker 18: are important partners.
Speaker 11: I got to get their name out there.
Speaker 18: No, I think it's always been out there, but it's
Speaker 18: been in the dark, it's been offshore, it's been unregulated,
Speaker 18: often not good people taking advantage of good people. So
Speaker 18: having light on it, sunshine on it, I think that
Speaker 18: we think is critical. I think it's critical. So we
Speaker 18: have a partnership with Caesars. We have no interest direct
Speaker 18: or indirect and the betting that happens there. They're a
Speaker 18: tenant in the building, they rent the space where the
Speaker 18: sports book is. They buy a lot of advertising, which
Speaker 18: is why I gave Caesars the shout out. But no leagues,
Speaker 18: no teams want to have any interest in the actual betting.
Speaker 18: For obviously it's not good for our integrity, it's not
Speaker 18: good for the fans thinking that these games are on
Speaker 18: the up and up. But again, I think we want
Speaker 18: to knowledge that's out there and bringing it into the
Speaker 18: light of day is a good thing. As I said earlier, though,
Speaker 18: it's also whay if our fans engage with the game,
Speaker 18: and we need to always be figuring out new ways
Speaker 18: to engage with our fans as they distracted by, you know,
Speaker 18: watching Yellowstone or whatever else they're TikTok or wherever else
Speaker 18: is going to be doing. So that's just another way
Speaker 18: of doing it.
Speaker 11: All right.
Speaker 3: One thing we didn't ask you, are you going to
Speaker 3: buy the Washington Nationals?
Speaker 11: Well, I think you did ask me that a couple
Speaker 11: of times.
Speaker 3: All right, have any easier question, Might you guys go public.
Speaker 18: Pools of capital? We need pools of capital at the
Speaker 18: right time. I think we need to be bigger, definitely,
Speaker 18: it's something we'd think about. Market's got to be ready.
Speaker 18: But there are advantages to having the liquidity, to having
Speaker 18: a currency for acquisition. All the reasons other companies are
Speaker 18: public would make sense for US. Liquidity, currency, that kind
Speaker 18: of thing, and someday perhaps.
Speaker 3: Well, Peter, you are and no pun intended. Truly a
Speaker 3: good sport. We really enjoyed this and we're looking forward
Speaker 3: to it. Be well. Have a good season seasons. Peter,
Speaker 3: Chief Financial Officer, Monumental Sports and Entertainment on Zoom from Washington,
Speaker 3: d C. He will be featured in tonight's episode of
Speaker 3: Chief Future Officer, airing at nine to thirty pm Wall
Speaker 3: Street Time on Bloomberg TV. I love talking sports.
Speaker 5: Yeah, and a very cool show, Chief Future Officer. Tune
Speaker 5: in for that.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekdays from two to five pm Eastern.
Speaker 8: On Bloomberg Radio, the Bloomberg.
Speaker 1: Business App, and YouTube. You can also listen live to
Speaker 1: our flagship New York station, Just Say Alexa, play Bloomberg
Speaker 1: You love Them thirty.
Speaker 15: At your mot alone on the way, all right, I
Speaker 15: don't even think I can introduce this one.
Speaker 3: I think this is all yours, buddy.
Speaker 6: All right, So Matt Chambers is a guy who became famous,
Speaker 6: or at least well known to me when he made
Speaker 6: Confederate motorcycles.
Speaker 5: They were, you know.
Speaker 6: Big display spent twins cruisers, and at one point he
Speaker 6: kind of made this really cool pivot to electric bikes
Speaker 6: and also changed the name to Curtis. And I was
Speaker 6: following along this whole saga on social media. I just
Speaker 6: thought it was so cool and the motorcycles are beautiful.
Speaker 6: And then one day I was sitting on my couch
Speaker 6: in Berlin and I saw that they were actually offering
Speaker 6: shares for sale to the public, not through like a
Speaker 6: Wall Street IPO, but kind of like a power to
Speaker 6: the people way to invest. And he did said yes,
Speaker 6: and Clickton bought shares in Curtis. So now I am
Speaker 6: full disclosure.
Speaker 3: Yes a shareholder, Matthew, come on in and tell us
Speaker 3: little bit about the business and to one of your
Speaker 3: shareholders and to our audience if you will.
Speaker 2: Well, that's that's great to hear. Thanks for having me on. Yeah,
Speaker 2: we spent twenty five years in this what I would
Speaker 2: call kind of the AMG aification of Harley wanting to
Speaker 2: if Harley was some Mercedes and motorcycles, we would soup
Speaker 2: them up a little bit. We did a really good
Speaker 2: job with that. We learned a lot. It was it
Speaker 2: was like an apprenticeship, and we kind of hit the
Speaker 2: end of the road in terms of being able to
Speaker 2: make a better IC. And on June twenty ninth of
Speaker 2: twenty sixteen, we made a firm pivot, got rid of
Speaker 2: everything to do with IC, cleansed our minds, and went
Speaker 2: one hundred percent into the dream of making the best
Speaker 2: motorcycle in the world and it would just happen to
Speaker 2: be electric. And we were wed. We did a lot
Speaker 2: of work on our own, with our own, with the
Speaker 2: team we had at the time. Then I got this
Speaker 2: gentleman JT to come back, who had done a bike. Matt.
Speaker 2: You probably know that bike the rate. It was a
Speaker 2: pretty interesting motorcycle that we conjured. It was very aircrafty.
Speaker 2: Then we did the Fighter. It had all this machine
Speaker 2: stuff going on and it's a very precise, a more
Speaker 2: precise way to make a bike. And then JT invented
Speaker 2: this patented idea, this idea of tapping the axle the
Speaker 2: shaft through the motor some actually making a motorcycle symmetrical,
Speaker 2: the dream of an inside out made organic machine. It
Speaker 2: just all came together. So now it's about two years
Speaker 2: later than I thought. But we're very close, Matt, and
Speaker 2: thank you for being the shareholder, and I believe we're
Speaker 2: going to do really, really, really well.
Speaker 15: Well.
Speaker 6: One thing, I one day, I would like to ride
Speaker 6: one of these bikes, because in so many ways you
Speaker 6: challenge the norms of you know, the peril twin, parallel forks,
Speaker 6: and the way a swing arm works and the drive
Speaker 6: shaft as you say, and how does it handle when
Speaker 6: you get out and ride this bike, or what is
Speaker 6: the feedback that you get from people who are testing
Speaker 6: these out?
Speaker 2: If you had the experience of being in the business
Speaker 2: for a long time like me, one of the things,
Speaker 2: one of the things that would be troublesome is all
Speaker 2: of the shunt from the first time I all one
Speaker 2: of our bikes, and our bikes were packaged better than
Speaker 2: the others. I mean, we we invented our own packaging
Speaker 2: with the ice and the V twin. It was better.
Speaker 2: We turned it into a monocoque. It was a far
Speaker 2: better way to make a motorcycle. But man, when you
Speaker 2: would when you would run that thing on a Dino,
Speaker 2: it was it was shunty and violent. With JT's invention
Speaker 2: and the symmetry, the bike is a little more balanced,
Speaker 2: it's a little more beautiful. But even even more importantly,
Speaker 2: I believe, is it has the way the way you
Speaker 2: access the power is just so sublime, and it gives
Speaker 2: the bike a little more fidelity, It gives you more confidence.
Speaker 2: So the experience of riding it is I believe the
Speaker 2: best that I've ever encountered on a motorcycle. I'm very
Speaker 2: confident that this is the best motor.
Speaker 3: So I'm just going to ask you some business questions.
Speaker 3: I mean, how much have you how many are you selling,
Speaker 3: what's the growth rate that you're seeing, and what do
Speaker 3: they cost?
Speaker 2: Well, the bike, the bike is a hyperluxury item and
Speaker 2: that plays into our deck. We have about thirteen hundred
Speaker 2: customers and those are pretty much all ultra high network,
Speaker 2: so we and we've we have enough to break even
Speaker 2: the first year. I believe it's about twenty five firm
Speaker 2: deals and we have another one hundred and five to sell.
Speaker 2: We're we're thinking really small, so we we believe we
Speaker 2: will ultimately be the most valuable American motorcycle company by
Speaker 2: say twenty thirty, more valuable than Live Wire, I mean
Speaker 2: electric motorcycle company. And the way we're going to do
Speaker 2: that is by doing by hitting a bogie of fifty
Speaker 2: million of sales around twenty seven to twenty eight, but
Speaker 2: bringing in a thirty but a thirty percent of the
Speaker 2: dof fifty percent gross margins, So we're we're right now.
Speaker 2: We're hitting about one hundred thousand of net revenue per unit,
Speaker 2: and our costs will be will be south of fifty thousands.
Speaker 2: We have a good margin, so it's kind of a
Speaker 2: Tesla coming at hyperluxury. Our next product will be sixty.
Speaker 2: We're very comfortable we can hit the thirty thousand dollars
Speaker 2: of cost of good sold on that product in twenty
Speaker 2: twenty seven. But the first thing is these one hundred
Speaker 2: and thirty initial customers, and we feel like we've got
Speaker 2: them already. We do have two thousand qualified expressions of
Speaker 2: interest along with our deck of owners, numerous of whom
Speaker 2: have said they will be buying a bike. But as Matt,
Speaker 2: you probably would agree that the transfer from ice to
Speaker 2: electric is it's something that an individual has to come
Speaker 2: up with in his own time. I worked with a
Speaker 2: guy named Treblanche for years and he pounded me out
Speaker 2: and he used to just beat me to death about it.
Speaker 2: We got to go electric and I was like, shut up, dude,
Speaker 2: I hate it. And then then one day a light
Speaker 2: went off, you know, I finally you know, he was
Speaker 2: right the whole time. But it's funny.
Speaker 8: I think you're right.
Speaker 6: Yeah, it takes I think it takes a long time,
Speaker 6: but then when it happens, it's like a switch is flipped,
Speaker 6: and then all of a sudden you kind of realize
Speaker 6: the benefits.
Speaker 5: Not to say that.
Speaker 6: You you know, throw away all of your love for the
Speaker 6: bikes you've ridden in the past. The internal combustion engines.
Speaker 6: But it's just a whole new experience. And I'm so excited.
Speaker 6: I'm so happy that you guys are doing this, and
Speaker 6: I'm so glad we could have had you on.
Speaker 7: Matt.
Speaker 2: Thank you so much. We really appreciate it, so appreciate.
Speaker 3: Wait, so, just because folks in our control are wondering,
Speaker 3: so how much does it? Say how much does one cost?
Speaker 3: And you said, hyper luxury.
Speaker 2: It's one hundred and twenty thousand that's where it starts
Speaker 2: and it can certainly go up from there. But if
Speaker 2: you see the bike, Carol, it's worth It's worth it.
Speaker 5: I say it.
Speaker 2: No one would see it. It's lovely.
Speaker 3: I said to Matt before we get started. I was
Speaker 3: on your website. They are gorgeous and they are unlike
Speaker 3: anything else you see when it comes to if you're
Speaker 3: looking at bikes.
Speaker 6: And the engineering is revolutionary and machining, it's so precise.
Speaker 5: It's just that it will last you for all of
Speaker 5: a turn.
Speaker 3: I was asking for our community. Matt, thank you so much.
Speaker 3: Come back soon. Matt Chambers. He's chief executive Officer, Chairman
Speaker 3: of the board of Curtis Motorcycle. Ticker is CMOT and
Speaker 3: he's joining us from Leeds, Alabama via zoom. Carol Masser,
Speaker 3: Matthew Miller, Matt's got a smile.
Speaker 8: This is Bloomberg.
Speaker 1: This is the Bloomberg Business Week podcast, available on Apple, Spotify,
Speaker 1: and anywhere else you get your podcast. Listen live each
Speaker 1: weekday is starting at two pm Eastern on Bloomberg dot Com,
Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business App.
Speaker 1: You can also watch us live on Bloomberg Quick take
Speaker 1: every weekday on YouTube and always on the Bloomberg terminal