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Speaker 2: All right, everybody check it out. Shares a Peloton Man
Speaker 2: investors peddling fast to snap them up. The stock soaring
Speaker 2: the most ever, although shares, I should point out, still
Speaker 2: down about thirty percent year to date. They're off about
Speaker 2: ninety seven percent from their all time high that was
Speaker 2: back in January of twenty twenty one. Let me just
Speaker 2: put it up on the Bloomberg because the stock is
Speaker 2: right now up thirty six percent. Let's get to it, though,
Speaker 2: because there's stuff going on. Bloomberg News Chief Technology correspondent
Speaker 2: Mark German is with us in the La Bureau.
Speaker 3: Mark.
Speaker 2: We're usually talking Apple and we might get there. Peloton
Speaker 2: the latest results earnings beat. It seems significant. This is
Speaker 2: a company that has continued to struggle since the pandemic.
Speaker 2: What's your take on kind of what we got and
Speaker 2: does it mean that a corner has turned for Peloton.
Speaker 4: Investors clearly are happy about the showcase of some better profitability, right,
Speaker 4: more free cash flow, more savings. But let's not forget
Speaker 4: last quarter their CEO resigned because clearly he didn't like
Speaker 4: the road he was seeing ahead of him. You had
Speaker 4: another fifteen percent of jobs cut. That followed three or
Speaker 4: four rounds of layoffs in the prior two years. They've
Speaker 4: completely destroyed this business, right, They've taken it from this
Speaker 4: hardware darling that made these popular bikes and treadmills and
Speaker 4: have re architected it into an app business. I know
Speaker 4: investors are seeing the potential of profit here, and they
Speaker 4: saw that beat in this in this fourth quarter, But
Speaker 4: if you look ahead to the first quarter, you're going
Speaker 4: to see a dramatic revenue tanking on paid app subscriptions
Speaker 4: as well as their hardware purchases. So I'm not entirely
Speaker 4: sure why investors are so optimistic about this company. I
Speaker 4: personally think that a long term future for Peloton is
Speaker 4: far fetched. I think that the best approach for them
Speaker 4: would be to try to sell themselves to a Netflix
Speaker 4: or an Amazon and convince Netflix or Amazon for a
Speaker 4: few billion dollars to buy their very strong arsenal of
Speaker 4: content right and their application in that brand and make
Speaker 4: that part of a Netflix subscription an Amazon Prime subscription
Speaker 4: to make that more valuable and get more people to
Speaker 4: sign up for their monthly services.
Speaker 3: I mean, the whole company is worth less than what
Speaker 3: Apple paid for Beats headphones that you don't even see
Speaker 3: anymore because Apple decided they don't even care about the brand.
Speaker 3: It's got to be the smallest company that I've ever
Speaker 3: heard you, Mark German talk about. They only grew revenue
Speaker 3: one percent, and as you said, it's expected to fall.
Speaker 3: The only reason they're getting fatter margins is because they're
Speaker 3: cutting costs at the same time. It kind of reminds
Speaker 3: me of Apple in the sense that the market is
Speaker 3: just saturated for these very expensive devices and they need
Speaker 3: to find other ways to get revenue. Do they have
Speaker 3: any other leads?
Speaker 5: Yeah?
Speaker 4: I wouldn't be surprised if Peloton, as one last ditch effort,
Speaker 4: winds down their Harbor business completely right, tries to take
Speaker 4: a loss on that on their balance sheet and completely
Speaker 4: gets rid of it. There's nothing proprietary about their hardware.
Speaker 4: If I'm being completely honest, right, this is something that
Speaker 4: any company in America or China or wherever can probably
Speaker 4: replicate really quickly. It burns a hole in their pockets
Speaker 4: and their margins. They've destroyed this business. Barry McCarthy drove
Speaker 4: this business into the ground. He really had no choice
Speaker 4: after what John Foley did to it, thinking that this
Speaker 4: was going to become a trillion dollar company out of
Speaker 4: COVID and that people would never leave the house again.
Speaker 4: So I certainly think that the saving grace here is
Speaker 4: their content and their application, and I wouldn't be surprised
Speaker 4: in two to three years from now if Peloton hasn't
Speaker 4: sold itself that it's an app only business, and you
Speaker 4: could have a nice business as an application. We've seen
Speaker 4: so many companies be app driven businesses.
Speaker 5: You have Uber.
Speaker 4: Netflix obviously is an app in many respects built around content.
Speaker 4: So the potential is there. But to your point, the
Speaker 4: only reason they're showing better profitability and cost savings is
Speaker 4: because they keep firing people and cutting costs. Now back
Speaker 4: to my harbor point for a second. When their chief
Speaker 4: product officer, this was one of their few co founders,
Speaker 4: left about a year and change ago, he was not
Speaker 4: replaced by a hardware person. He was replaced someone with
Speaker 4: someone who's an expert in software and content and server infrastructure,
Speaker 4: And I think that gives you some sort of indicator
Speaker 4: where this company is going all in on that app.
Speaker 4: If they can turn that strong brand into a strong application,
Speaker 4: they have the future. But that's not a multi billion
Speaker 4: dollar public company mark.
Speaker 2: Where did they go wrong? Where was the Because they
Speaker 2: came out of the gate a hardware company, right, and
Speaker 2: there was a lot of fanfare, there was a lot
Speaker 2: of ads. I know, we as a media organization did
Speaker 2: multiple stories and conversations. I know you you were covering them.
Speaker 2: Where did they go wrong? Is it that they just
Speaker 2: thought too big the spend? What was it?
Speaker 3: Or was it just coming out of COVID. I mean,
Speaker 3: everybody was riding this bike in COVID.
Speaker 2: But what I'm trying to understand is COVID did I've
Speaker 2: got one? I canceled my membership just recently because I'm
Speaker 2: just you know, it's a cote rack. But I had
Speaker 2: it exactly, but I had it before COVID. Having said that,
Speaker 2: though if COVID hadn't happened, would they have still had
Speaker 2: problems and issues?
Speaker 4: Potentially they were this nice high end brand, small company
Speaker 4: prior to COVID. COVID hit, they exploded. Everyone wanted one, right.
Speaker 4: They were growing so quickly. They continued to hire, they
Speaker 4: made major investments, they rolled out new products, they doubled
Speaker 4: down on their content. But the worst thing they did
Speaker 4: was try to open this facility in Ohio to manufacture
Speaker 4: their own equipment in the United States. And they spent
Speaker 4: billions of dollars to do this. Right, they're only now
Speaker 4: writing that all down, and they really, you know, put
Speaker 4: themselves in a bad position. Fundamentally. They made a terrible
Speaker 4: bet that COVID would last for the foreseeable future, maybe forever. People,
Speaker 4: and I hate to be exaggerating here, but this is
Speaker 4: really what they thought. People weren't going to leave the
Speaker 4: house again. People weren't going to go to gym's again.
Speaker 4: They were going to only work out from home. And
Speaker 4: they didn't double down. They quadrupled down on that idea,
Speaker 4: spent too much money, Jim started reopening. The world returned
Speaker 4: to some semblance of normalcy, and they were stuck with
Speaker 4: all this excess inventory that nobody was buying because people
Speaker 4: wouldn't need it. On top of that, they had crisis
Speaker 4: after crisis, including launching a treadmill that didn't have proper
Speaker 4: safety protections that ended up killing a baby, hurting pets,
Speaker 4: and hurting people. And then they're bike had issues too
Speaker 4: where people were falling off of the bike, so their
Speaker 4: harbor wasn't safe and their harbor wasn't very good. So
Speaker 4: it was just this multitude of issue after issue after
Speaker 4: issue on top of really bad bets that drove this
Speaker 4: company to a place where a new CEO had to
Speaker 4: come in. Fire half the company wind down much of
Speaker 4: the harbor business, and now they're left with an application
Speaker 4: that then ran into marketing issues that then ran into
Speaker 4: cost issues. So they're not really in a great place
Speaker 4: right now. Despite the new profitability they're showing.
Speaker 2: Kind of sounds like next stop. You know, the CEO
Speaker 2: has to be an expert and how to sell a company.
Speaker 3: Right, to be fair, Maybe at the time, many of
Speaker 3: us thought nobody would leave the home again, right, and
Speaker 3: a lot of workers are still working from home.
Speaker 2: You didn't think you'd go back to work.
Speaker 3: No, I'd never spent a day at home. Yeah, I
Speaker 3: was in the office every day. But there were people
Speaker 3: who thought, you know, this was a structural change, not
Speaker 3: that we wouldn't literally leave the home, but that we
Speaker 3: would work from home, we would exercise from home, we
Speaker 3: would only watch movies at home. And a lot of
Speaker 3: that has happened.
Speaker 4: Yeah, there's a balance, yes, But Matt, and you've seen
Speaker 4: so many other companies face this, right, You've seen other
Speaker 4: companies like the tech giants over investing and having to
Speaker 4: pull back. But what Peloton should have done right with
Speaker 4: scale as needed? They refuse to scale as needed. They
Speaker 4: went from zero to one hundred to prepare for demand
Speaker 4: that they were anticipating that never came. The smarter thing
Speaker 4: would have been to follow the Dell and Apple model
Speaker 4: of supply chain and build to a necessary degree. Now
Speaker 4: under this new leadership, they've done a lot of smart
Speaker 4: things to unwind the troubles of the prior management team. Okay,
Speaker 4: and they could have a pretty good app. But and
Speaker 4: one last thing I will say on this, because.
Speaker 2: It's just quick.
Speaker 4: Yeah, there's no stronger brand in fitness than Peloton. So
Speaker 4: there is something still interesting.
Speaker 2: There, right, It's a value you say, Peloton people know,
Speaker 2: all right, interesting And we figure they'll at least be
Speaker 2: at least one more chapter to this and he'll be
Speaker 2: covering a Bloomberg News chief technology correspondent Marker out there
Speaker 2: on the West coast, you're.
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Speaker 2: I got some numbers for you. A Bloomberg News team
Speaker 2: put this out that wellness it's a big global business.
Speaker 2: It's about five point six trillion in rev revenue back
Speaker 2: in twenty twenty two. This is from the Global Wellness Institute.
Speaker 2: It's a big industry group, and they say research from
Speaker 2: the nonprofit organization says the industry has grown from three
Speaker 2: point four trillion in twenty thirteen. I'm throwing a lot
Speaker 2: of numbers, and by twenty twenty seven it's expected to
Speaker 2: grow an additional fifty seven percent to eight point five trillion,
Speaker 2: about twice's largess Germany's gross domestic product.
Speaker 3: Okay, there'll be a test.
Speaker 6: Year's end of this.
Speaker 3: Well do you know that seventy six point one percent
Speaker 3: of stats are made up?
Speaker 2: Why do you say that?
Speaker 3: I mean, how do you classify what people spend on
Speaker 3: wellness or not well by? By water is it wellness.
Speaker 2: Every time you buy something, you know, there's data collection,
Speaker 2: like there's stuff. Anyway, let's get to somebody who's got
Speaker 2: their own report on wellness and health and what consumers
Speaker 2: are actually thinking about their own state of health. The
Speaker 2: Carney Institute Consumer Institute has done somewhere. Katie Thomas is
Speaker 2: with us. She's lead at the Carnee Consumer Institute with
Speaker 2: us from Pittsburgh, Pennsylvania. I don't know if you have
Speaker 2: some comments on data, but let's go to your research.
Speaker 2: How are you.
Speaker 7: I'm doing well, Carol? How are you? Matt already scooped?
Speaker 7: You know, basically my whole brief by saying that is
Speaker 7: water wellness or not? Those are the exact kind of
Speaker 7: questions we were asking.
Speaker 3: So I played pickle wall the last two nights and
Speaker 3: it was fifteen dollars a session. Was that thirty dollars
Speaker 3: spent on wellness this week?
Speaker 6: Yes?
Speaker 1: Right?
Speaker 7: Well, yes, yes, I would say so. Yeah. So I
Speaker 7: think you're asking the exact right questions, which is, you know,
Speaker 7: our motivation going into this was to understand a little
Speaker 7: bit more how actual people talk about health and wellness
Speaker 7: as opposed to how we tend to bucket it when
Speaker 7: we talk about it from sort of a consumer trend
Speaker 7: or spend perspective. Well, when we talk to people about health,
Speaker 7: it's a lot more higher order than these like simple
Speaker 7: decisions that we're talking about here. Whether it's pickleball or
Speaker 7: even GLP ones or the sober curious movement, people have
Speaker 7: much heavier ways of thinking about health. But they also
Speaker 7: feel like they know how to make healthy decisions. So
Speaker 7: that's an area where as we look at these health
Speaker 7: and wellness trends and we keep kind of hammering home
Speaker 7: the communication of this is how to be healthier. Most
Speaker 7: people don't actually need that messaging. They either are defining
Speaker 7: it for themselves or they already know how to do it.
Speaker 2: Wait, so why did you do this?
Speaker 1: What?
Speaker 2: Like, how do you guys take this and then I
Speaker 2: either help your clients or find productive material and you know,
Speaker 2: help to make productive decisions out of it.
Speaker 7: Yeah, So what we really do is, honestly, it's in
Speaker 7: response to the fact that everyone feels like they have
Speaker 7: to kind of jump at every little blip you see
Speaker 7: on the radar. So whether it's electrolyte powders or you know,
Speaker 7: gut health or like, oh I've got to move and
Speaker 7: make these small shifts to all these little tiki taki
Speaker 7: health and wellness trends. And what we found is if
Speaker 7: you have a better understanding of a consumer's overall lifestyle,
Speaker 7: that will be a lot more impactful. So I think
Speaker 7: a great recent example of this is McDonald's actually taking
Speaker 7: salads off the menu right because they realize that when
Speaker 7: people go there, they're probably not looking for a salad,
Speaker 7: and there may just be other ways they define health
Speaker 7: from McDonald So it's not going all the way to
Speaker 7: a salad. Maybe it's grilled chicken tenders things like that.
Speaker 7: So it's really starting to kind of translate some of
Speaker 7: the overall lifestyle considerations and where people make trade offs
Speaker 7: and kind of couch things as health, like we said,
Speaker 7: as opposed to feeling like you have to overcorrect just
Speaker 7: because some small health and wellness, you know, little trend
Speaker 7: is bubbling up.
Speaker 3: I've been buying asa e bowls lately, Aggie loves My
Speaker 3: daughter loves assabols.
Speaker 5: Although they're packed with sugar.
Speaker 3: So I'm not sure that it's much different than I I've.
Speaker 2: Known you for such a long time when you weren't
Speaker 2: an asaya ball kind of guy.
Speaker 3: Yes, well, I mean, look, I'm leaning more into it
Speaker 3: because I'm getting older.
Speaker 2: Is that why you've done it out of it?
Speaker 3: I mean, yeah, of course I want to live longer,
Speaker 3: you know, I don't want to die of a heart
Speaker 3: attack and get diabetes. And but you know what, I'm
Speaker 3: in a very large cohort, right, I mean we're seeing
Speaker 3: I was talking to Alan Patrick Hov today, famous VC.
Speaker 2: Investor invests in longevity.
Speaker 3: In longevity his new company, Prime Time invest In trying
Speaker 3: to make life better for people who are older. And
Speaker 3: there are more people over sixty than there are under eighteen,
Speaker 3: So we're definitely directionally that's where we're headed, right, Katie.
Speaker 7: Yeah, absolutely, And that's part of what we're seeing here
Speaker 7: is just like a preference for preventative health as opposed
Speaker 7: to some of the other, again smaller things we've seen
Speaker 7: as a response to health lately. And then also of
Speaker 7: course factoring in mental health, and that's where some of
Speaker 7: this really starts to blur. And sometimes there's this inherent
Speaker 7: conflict with health of what's traditionally physically healthy as it
Speaker 7: relates to perhaps diet and exercise, and then what's sort
Speaker 7: of that self care bucket, right, Like, oh, I you know,
Speaker 7: having ice cream once a week or a glass of
Speaker 7: wine is sort of taking care of myself. It's good
Speaker 7: for my mental health. And so it's really that's part
Speaker 7: of the journey is figuring out for consumers and each
Speaker 7: brand's individual consumers, what are those trade offs people are making,
Speaker 7: how are they defining health, What is what matters most
Speaker 7: to them, like where they're gonna kind of make a sacrifice,
Speaker 7: Like a lot of people still don't eat healthy things
Speaker 7: because simply they don't taste good. And then there's a
Speaker 7: lot of products like some of those electrolyte powders that
Speaker 7: that's exactly why they're doing well is because people don't
Speaker 7: like plain water. So it's really just like trying to
Speaker 7: bring all those things together and strike the right balance
Speaker 7: to figure out what health really means to consumer.
Speaker 3: I mean, I spend six dollars, at least six dollars
Speaker 3: a week on a twelve pack of flavored Seltzer water,
Speaker 3: Like the flavored seltz water section that my grocery is
Speaker 3: now an entire aisle.
Speaker 2: I know, I know, it's like kind of crazy. I
Speaker 2: am just kind of blown away. I mean, and I
Speaker 2: feel like all we should do is be drinking water.
Speaker 3: To be quite honest, I actually quit drinking Katie too
Speaker 3: years ago. I've been California sober for two years. What
Speaker 3: do you think about weed?
Speaker 7: I mean, I think that's that's a great example of
Speaker 7: one way a consumer. Some consumers would claim that's not healthy,
Speaker 7: and some would say it is healthy. I think sort
Speaker 7: of in a similar vein Matt, we asked in our
Speaker 7: study what people think about GOP one's versus like having
Speaker 7: more of a body positivity self acceptance message. Ninety percent
Speaker 7: of people said self acceptance was actually healthier body positivity
Speaker 7: messages as compared to GLP one. So I mean, I
Speaker 7: think you see all these trade offs. Same goes with weed.
Speaker 7: Some people would say, hey, sober sober, not California sober.
Speaker 7: Others would say, do what you got to do that
Speaker 7: works for your lifestyle. All right.
Speaker 2: So we're in an economy that some would say that
Speaker 2: there are a lot of I think it's not even some.
Speaker 2: I think it's safe to say that there are a
Speaker 2: lot of Americans out there that are just struggling to
Speaker 2: kind of get by month to month. So having said that,
Speaker 2: you know, I don't know if something came up in
Speaker 2: your survey about you know, when the economies toky, it's
Speaker 2: harder to make those smarter, healthier decisions.
Speaker 7: Yeah, absolutely so some of what we saw about one
Speaker 7: in three consumers said that finances are one of the
Speaker 7: things that stand in the way of them being healthier,
Speaker 7: and then one and four said access, so maybe not
Speaker 7: being able to you know, get to the right foods
Speaker 7: or get to a gym or what have you. So
Speaker 7: there certainly are trade offs that happen there. But part
Speaker 7: of the other challenge that we're calling out with this
Speaker 7: brief is the issue with health washing, which is sort
Speaker 7: of similar to greenwashing, where everyone's throwing every claim on
Speaker 7: pack that they can it's just ultimately confusing consumers when
Speaker 7: really we should be looking at you know, public health
Speaker 7: and public policy for more consistent messages on like you know,
Speaker 7: fresh fruits and vegetables and all of that, and just
Speaker 7: like being thoughtful about what the whole lifestyle looks like
Speaker 7: and where consumers can kind of make those trade offs.
Speaker 3: You got your undergrad and ann arbor, right, you got
Speaker 3: your MBA in Chicago, You're in Pittsburgh right now, You're
Speaker 3: like a solidly Midwest That's right.
Speaker 5: Is it easier?
Speaker 3: Is it easier there because you're closer to the farms
Speaker 3: and natural food, or do you think on the coasts,
Speaker 3: I mean, is there a difference between like flyover Country
Speaker 3: and New York and LA.
Speaker 7: You know, just to clarify, those of us from Pittsburgh
Speaker 7: don't actually consider ourselves midwestern. So I never grew up
Speaker 7: being Midwestern. But no, just you know, just a nitpick,
Speaker 7: but no, but I am, well, let's be honest, No,
Speaker 7: I think you know, you do get a little bit
Speaker 7: of both. So it depends on what you're looking access to.
Speaker 7: The nice thing about you know, middle of the countries
Speaker 7: there it does tend to be a little bit more affordable,
Speaker 7: but it really just kind of depends on Again, it
Speaker 7: goes back to what people define as healthy. So is
Speaker 7: healthy local versus organic? And there are arguments to be
Speaker 7: made in either way. If you're getting meat that's organic
Speaker 7: versus something that's maybe not organic, But like hasn't you know,
Speaker 7: the supply chain is a lot shorter, so I think
Speaker 7: once again you get into those same sort of base.
Speaker 7: And that's the whole challenge with health and wellness is
Speaker 7: you can kind of call anything health and wellness.
Speaker 2: All right, Well, this was fun California's sober.
Speaker 3: I liked it.
Speaker 2: I know people are.
Speaker 3: I'm a Midwestern boy as well. I will point out
Speaker 3: go buck Eyes. I thought you were good.
Speaker 7: Oh no, I was gonna say go Blue. I haven't
Speaker 7: Jim Horba bobble Head behind me. Sorry, disagree the bane.
Speaker 5: Of my existence.
Speaker 3: They're good lately, you know I love it.
Speaker 2: Katie Thomas, thanks so much.
Speaker 5: Be well.
Speaker 2: Let She's a lead at the Carney Consumer Institute, joining
Speaker 2: us there in Pittsburgh. Organic natural, what do you buy?
Speaker 5: You know what? I will be honest.
Speaker 3: I was all about organic uh for years until I
Speaker 3: moved here and had kids and like money got tight.
Speaker 3: I used to have so much disposable income as a
Speaker 3: single guy. And now that I'm married and diffay Westchester
Speaker 3: taxes and I'm paying like you know, college administration prices
Speaker 3: for preschool. I just buy whatever's cheapest.
Speaker 2: I know it changes, right when you have everything's expensive.
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Speaker 2: All right, so from the Magic Kingdom to the platform
Speaker 2: formerly known as Twitter, ya hear thisss leader, there's a
Speaker 2: few things.
Speaker 3: Well, and Silicon Valley at large, right, I mean, there's
Speaker 3: so much going on out there, especially with Elon Musk's companies,
Speaker 3: not just Tesla and Twitter, but also Neurlink. Max Chafkin
Speaker 3: covers a lot of this stuff for us. And but
Speaker 3: before we get to all of that, I want to
Speaker 3: throw them a curveball.
Speaker 6: What I'm ready.
Speaker 3: I just ordered The Contrarian, so I think you'll see
Speaker 3: a bump in your in your revenue there. Max wrote
Speaker 3: The Contrarian, which is a story about Peter Tile and
Speaker 3: Silicon Valley. Right, No, and it's because he was on
Speaker 3: the Joe Rogan Experience. Did you listen to Peter Teal
Speaker 3: on the Rogan Experience?
Speaker 6: You know it's it's three hour it's three hours long.
Speaker 6: I actually have not a confession, have not made it
Speaker 6: through the whole thing. And it's been you're sort of
Speaker 6: hinting at this, but the but the appearance has been memed.
Speaker 6: There's a lot of stumbling, a lot of sort of
Speaker 6: amusing back and forth between Rogan floating various i'd say
Speaker 6: rogan interests and Teal attempting kind of graciously to sidestep those.
Speaker 3: It was amazing. First of all, you get a real
Speaker 3: read on how deep Rogan is into any right wing
Speaker 3: conspiracy theory. I mean, he's all in on all of them,
Speaker 3: and then Peter Teal seems to kind of debunk them
Speaker 3: one by one. On the other hand, Rogan asks Peter
Speaker 3: Teal like a couple in three hours, two tough questions,
Speaker 3: and both times Teal is just absolutely frozen. He says,
Speaker 3: how come climate science isn't real science? And Teal's like, uh,
Speaker 3: well uh and doesn't have a great answer for it.
Speaker 3: He also asks, you know why these left wing philanthropy
Speaker 3: businesses are suspicious? And Teal also freezes there. So I
Speaker 3: just thought it was just such a fascinating waste of
Speaker 3: three hours. I feel like I need.
Speaker 2: To know more, all right, Well, I want to know
Speaker 2: more from Max because there is a story on the
Speaker 2: Bloomberg about those that are financing Twitter or formerly known
Speaker 2: as Twitter, now known as x So there is that
Speaker 2: story Dana Hall and Rachel Met's putting it out. What
Speaker 2: do we need to know about that? And what's interesting
Speaker 2: for you.
Speaker 3: Peter til is not an investor in X.
Speaker 6: Not no, no, Peter Teal. Although plenty of friends of
Speaker 6: Elon Musk, Peter tele and Musk have a sort of
Speaker 6: fraught relationship, they're more like frenemies. This list, though, a
Speaker 6: lot of these names are going to be known to
Speaker 6: people who have who have followed either X or the
Speaker 6: whole saga. It's it's a lot of people who have
Speaker 6: close ties to Musk. So Larry Ellison, uh, the you know,
Speaker 6: software billionaire, Bill Ackman of Pershing Square Capital, a Saudi
Speaker 6: prince and recent Horowitz Sequoia venture capital firms, both both
Speaker 6: of whom have sort of are tied closely with stuff
Speaker 6: that Musk is doing. Now. The biggest surprise is that
Speaker 6: Sean Combs Diddy was an investor in the in the buyout.
Speaker 3: So it's interesting to me that. First of all, I
Speaker 3: love to say Prince Al Walid bin Tlal's name, so
Speaker 3: I wanted to do that one time.
Speaker 5: It's super fun.
Speaker 3: And uh, Bill Ackman is an investor as well, and
Speaker 3: he has been so heavy, such a heavy, super user
Speaker 3: on Twitter. He even thought he could, I guess, raise
Speaker 3: and market a closed end fund with all of his followers,
Speaker 3: but that was not so successful. Do you get any
Speaker 3: interesting insight from this list other than kind of the
Speaker 3: gossipy side of it.
Speaker 6: I mean, I think, like, like I said, we knew
Speaker 6: a lot of these names because because of other last
Speaker 6: suits and so on had shown. Some of these people
Speaker 6: came up in Elon Musk's text messages, you know, back
Speaker 6: in twenty twenty two, and when he was discussing the buyout,
Speaker 6: I'd say this the acquisition of X and Elon Musk's
Speaker 6: you know, running it has always been a bit of
Speaker 6: a head scratcher. It's never totally made sense. Like as
Speaker 6: a business he overpaid for the company, which is part
Speaker 6: of the reason he tried to get out of it,
Speaker 6: and for the investors has always been a head scratcher.
Speaker 6: I think really like a lot of these guys who
Speaker 6: are in this company are just like the banks that
Speaker 6: loaned him the money to do the buyout, are hoping
Speaker 6: for further connections to Elon Musk, you know, to be
Speaker 6: involved in whatever the next deal is.
Speaker 2: Well, maybe they should get a chip put into their brain.
Speaker 2: No easy segue only got about forty five seconds. I'm sorry, Max,
Speaker 2: because the little Rogan thing ate up some time. What
Speaker 2: do we need to know though about this second implantation?
Speaker 6: So yeah, Neuralink, that's Elon Mus's brain implant company, announced
Speaker 6: they put a chip in a second patient. Now I
Speaker 6: should say this. The chip essentially allows the patients who
Speaker 6: are paralyzed, you know, unable to move a mouse, a
Speaker 6: cursor mouser type. Before this, they're able to basically use
Speaker 6: a computer. It's exciting, but very very very early days.
Speaker 6: I mean, this is like the earliest kind of clinical trial.
Speaker 6: It's not even a clinical trial, it's like a preliminary investigation.
Speaker 6: So it's gonna be many years before we see any
Speaker 6: of this commercially, at least for Elon Musk, although certainly
Speaker 6: good news for Musk and for his company, Neuralink.
Speaker 2: Always pretty cool stuff. Listen, Max, thank you so much,
Speaker 2: and thanks for putting up with Matt Miller.
Speaker 5: I think you know what.
Speaker 3: I'm so excited to read this book because you're going
Speaker 3: to learn more. You need to learn more about somebody
Speaker 3: who essentially is trying to buy himself into the.
Speaker 2: White We actually had Max on to talk about the
Speaker 2: book a lot.
Speaker 3: I missed that episode.
Speaker 1: You're listening to the Bloomberg Business Week Podcast. Listen live
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Speaker 2: M Broommack.
Speaker 3: Journal, Now about you? Let me drive?
Speaker 2: No, no, no, no, alright please, I'll do gravels.
Speaker 7: Let's wait.
Speaker 2: I want to drive.
Speaker 7: It's a question time.
Speaker 1: This is the drive to the clothes do for me? Well,
Speaker 1: yelling on Bloomberg Radio.
Speaker 2: All right, he's definitely dancing a little bit. We're getting
Speaker 2: closer to the closing eighteen minutes away. Here, got stocks
Speaker 2: pretty much near their lows of the session. Charlie, of course,
Speaker 2: just breaking down the numbers. I do feel like Matt,
Speaker 2: we're kind of all waiting for.
Speaker 3: At one point, we were just half a percent away
Speaker 3: from another record high, right, we're looking for fifty six
Speaker 3: sixty seven. We got closer and closer that on the
Speaker 3: S and P five hundred, and then we just fell away.
Speaker 2: Yeah, I think we're kind of running out of steam,
Speaker 2: but maybe just waiting for Jay Powell tomorrow. Let's see
Speaker 2: what our to the closed guest has to say about
Speaker 2: it all. Hamilton Lane is co CEO. He is, actually,
Speaker 2: I should say Hamilton Lane co CEO. Eric Hirsh and
Speaker 2: he joins us from Pennsylvania. Good to have you here
Speaker 2: with us. Eric, How are you? And just let's start
Speaker 2: big and broad. When you look at the market environment,
Speaker 2: what are the kind of things that you are focusing on?
Speaker 2: Is it Jay Powell tomorrow? Is it something else?
Speaker 8: So it's not Powell tomorrow. And again, happy to be here.
Speaker 8: So I think we know what we're going to hear tomorrow.
Speaker 8: I think we're going to clearly start to see rates
Speaker 8: coming down. But I think sort of from our perspective
Speaker 8: sort of the concerns of recession or hard landing are
Speaker 8: sort of just.
Speaker 5: Grossly overstated right now.
Speaker 8: We're just not seeing the consumer spending in the areas
Speaker 8: that really matter and drive the economy.
Speaker 5: We're not seeing those let up.
Speaker 3: I mean, all of the sort of standout consumer issues
Speaker 3: and earnings reports have been down arrow stories right like
Speaker 3: they're not booking enough at trip Advisor or at Airbnb.
Speaker 3: We're not saying growth to Disney's parks. Even you know,
Speaker 3: people at Walmart if they're buying more stuff, but it's
Speaker 3: actually sort of people, wealthy people coming down from you know,
Speaker 3: higher end stories.
Speaker 2: I've done that. I'd like I've traded down on brands,
Speaker 2: like for things like, you know, plastic bags or something.
Speaker 2: I'm like, a, you know, I'm.
Speaker 3: Okay, buy plastic bags. I know you're an evil person.
Speaker 5: Care right, so you can't be buying plastic bags. Yeah, seriously.
Speaker 3: Now, on the other hand, if you look at the
Speaker 3: retail sales numbers, they're good.
Speaker 5: You know.
Speaker 3: If you look at GDP numbers, they're good.
Speaker 5: So, uh, you know the.
Speaker 8: Issue, Matt, I think I think we got to be
Speaker 8: careful to not sort of conflate pieces here. Just because
Speaker 8: Disney's theme parks aren't growing is very different than saying
Speaker 8: Disney's theme parks aren't still pretty full. And so to me,
Speaker 8: when we talk about recession hard landing, we need to
Speaker 8: see Disney theme parks coming way down. We need to
Speaker 8: see airline travel coming way down. We need to see
Speaker 8: restaurants empty, we need to see restaurant pricing way down,
Speaker 8: and that we're just not seeing. I think what we
Speaker 8: have is a real bifurcation in the consumer. There is
Speaker 8: no question that the bottom end of the consumer is
Speaker 8: getting hit hard. There is some social issues around that,
Speaker 8: there are some tragic issues around that, but they are
Speaker 8: truly struggling. The middle class and the upper class, however,
Speaker 8: are continuing to crank away and again for a lot
Speaker 8: of them, higher rates have actually been a real benefit
Speaker 8: to cash in the pocket.
Speaker 2: So you guys have what about nine hundred and forty
Speaker 2: billion dollars in assets under management and supervision. So I'm
Speaker 2: just curious. I know you focus a lot on the
Speaker 2: private markets. You know, what are you doing with your
Speaker 2: client money? And by the way, I do buy a
Speaker 2: few ziplocks, but I use a lot of I've all
Speaker 2: usable bags. I don't use plastic bags in the supermarket
Speaker 2: or anything anymore. Before I get a lot of mail,
Speaker 2: although I might get some hate mail for ziplocks. So,
Speaker 2: having said that, what do you do with client money?
Speaker 5: So we've been active, We are deploying.
Speaker 8: We have a lot lot of capital, Our clients have
Speaker 8: a lot of capital, and we are deploying a lot
Speaker 8: of capital. The private markets, I think, very different than
Speaker 8: kind of the public market dynamic are continuing to expand.
Speaker 8: There are just more and more private companies getting created.
Speaker 8: And whether it's here in the US or outside the US,
Speaker 8: whereas on the public market side, the number of publicly
Speaker 8: traded companies around the globe that is not a big
Speaker 8: growing group of companies, and so that is generally shrinking
Speaker 8: in most markets. As being public is challenging, it's expensive,
Speaker 8: it's time consuming. We know we are public, and so
Speaker 8: I think for a lot of investors, they want to
Speaker 8: get access to the sort of the broader, growing part
Speaker 8: of the economy, and that tends to be the private side. Specifically,
Speaker 8: There's been a couple of areas that I think are
Speaker 8: attracting a lot of the capital in a good way.
Speaker 8: One private credit, So regional banks really kind of hamstrung
Speaker 8: in this environment out of the lending business. Private credit
Speaker 8: has sort of stepped in and filled that gap. Infrastructure,
Speaker 8: whether it's here in the US or in Europe, there
Speaker 8: is real need for major infrastructure spending, and so private
Speaker 8: infrastructure really is going to be the gap filler relative
Speaker 8: to what the governments are doing. So those are two
Speaker 8: interesting areas with interesting returning characteristics.
Speaker 3: I wonder what you think about the aging population and healthcare,
Speaker 3: because we've had investor after investor on my show Bloomberg
Speaker 3: Open interest mornings from nine to eleven on Bloomberg Television.
Speaker 3: Who are saying, you know what, the demographics are so compelling,
Speaker 3: and you know, pricing power is definitely there when it
Speaker 3: comes to saving your life. I mean, look, how many
Speaker 3: people are willing to pay one thousand dollars a month
Speaker 3: for GLP ones? Is that trade still not too crowded?
Speaker 8: Well, we know, Matt, that osa E balls are not
Speaker 8: going to be the only solution for healthcare, so right
Speaker 8: to more than just that, and I think that is
Speaker 8: an interesting trade. So healthcare, whether it's in the pharma space,
Speaker 8: whether it's in the service provider space. So again, aging
Speaker 8: population of boomers with a lot of capital, I don't
Speaker 8: expect that we're going to see all of them heading
Speaker 8: into kind of group run facilities. There's going to be
Speaker 8: an awful lot of care at home and that is
Speaker 8: going to create an incredible growth in private nursing. That's
Speaker 8: been a big area for the private markets. Private healthcare
Speaker 8: providers and sort of general home help. Those are other
Speaker 8: big areas for good capital absorption.
Speaker 2: Hey, one thing I want to ask you though about
Speaker 2: private credit specifically, And listen, the last few years at
Speaker 2: Milkin and I've been there. It's like that's all anybody
Speaker 2: ever talks about. It's not the public markets, it's private credit.
Speaker 2: Having said that, you have increasingly more and more big
Speaker 2: firms that have gotten involved in private credit. You've got
Speaker 2: new market entrants, and so that extra competition has definitely
Speaker 2: pushed down some of those returns. What are you seeing
Speaker 2: on your private credit return investments?
Speaker 8: So I would say a couple of things can be true.
Speaker 8: We can see more capital coming in.
Speaker 5: We are. We can see more entrants coming in. We are.
Speaker 8: We can see the big getting big. They are that
Speaker 8: gap and that void that the banks have left very large,
Speaker 8: and the amount of dry capital that's sort of sitting
Speaker 8: there in the private markets that needs to be deployed.
Speaker 8: And oh, by the way, leverage buyouts they're going to
Speaker 8: largely get financed by private credit. They're not going to
Speaker 8: go into the bond market to do that. That game
Speaker 8: is largely moved away again from not only the regional banks,
Speaker 8: but sort of the big bracket banks are not the
Speaker 8: big providers anymore of kind of the the the lending
Speaker 8: capital inside of a leverage buyout. And so we're still
Speaker 8: seeing the returns being very resilient. You got to be
Speaker 8: careful again not to say that every private credit manager
Speaker 8: is fantastic and no one's going to have any issues.
Speaker 8: That's not true. But again this is kind of picking
Speaker 8: and choosing. But if I'm painting with the broadbrush, I
Speaker 8: ud say, returns there look very good, very good as
Speaker 8: what sixteen Yeah, I would say again we're talking about credit, yeah,
Speaker 8: you know, with credit protection. So I think what you're
Speaker 8: talking about is kind of a nine to thirteen percent
Speaker 8: rate to return. And again on a relative basis to
Speaker 8: what you're sort of seeing in the public markets for
Speaker 8: credit risk with very low leverage ratios, I think a
Speaker 8: lot of investors are really happy to go take home
Speaker 8: a ten percent rate to return.
Speaker 6: All right.
Speaker 2: Going to leave it on that note, Hey, Eric, thank
Speaker 2: you so much. Appreciate it.
Speaker 3: Eric Hirsch.
Speaker 2: He's the co chief executive officer at Hamilton Lane. Joining
Speaker 2: us there from Pennsylvania.
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