WEBVTT - Google Sees ‘Sunnier Days’ Coming to an End 0:00:01.800 --> 0:00:04.440 This is Bloomberg Business Week. I'm Carol Masser and I'm 0:00:04.440 --> 0:00:07.280 Bloomberg Quick Takes Tim Stanibek. We're here every day bringing 0:00:07.280 --> 0:00:09.799 you the latest news from the worlds of business and finance, 0:00:09.840 --> 0:00:13.640 plus technology, politics, economics, all purtnising the power of Business 0:00:13.640 --> 0:00:17.119 Week reporters and editors, not to mention our journalists and 0:00:17.160 --> 0:00:19.640 analyst in more than one and twenty countries. You can 0:00:19.640 --> 0:00:23.239 download Bloomberg Business Week and iTunes, SoundCloud, or Bloomberg dot com. 0:00:23.400 --> 0:00:25.160 You can also listen to our radio show at two 0:00:25.160 --> 0:00:27.840 pm Eastern Time on Bloomberg Radio, or watch us on 0:00:27.880 --> 0:00:32.080 YouTube search Bloomberg Global News. Well, Inflation front and center. 0:00:32.159 --> 0:00:34.320 You know that we've got another read that CPI print 0:00:34.360 --> 0:00:37.120 for June. It's also one of the two mandates managed 0:00:37.159 --> 0:00:39.479 by the Fed. The other, of course, is jobs, and 0:00:39.520 --> 0:00:43.040 we heard Tim something about that and specifically the labor 0:00:43.080 --> 0:00:46.080 market and hiring from the parent of Google. We're talking 0:00:46.080 --> 0:00:49.159 about alphabet. Yeah. Mark Bergen is all over at Marcus 0:00:49.200 --> 0:00:52.000 Technology reporter for Bloomberg News. He joins us on the 0:00:52.040 --> 0:00:54.800 phone from San Francisco. Mark, you and the team got 0:00:54.880 --> 0:00:58.680 your hands on an email. Uh that alphabet CEO Sunder 0:00:58.720 --> 0:01:04.399 Pachai to his employees. It's entitled high Googlers. What's the 0:01:04.440 --> 0:01:07.880 takeaway here about about hiring? What do we need to know? Yeah, 0:01:07.920 --> 0:01:09.039 this is sort of a it's a bit of a 0:01:09.080 --> 0:01:12.080 call to arms. Uh. The takeaway is that they're going 0:01:12.120 --> 0:01:14.479 to slow down. And this is pretty Uh it's fairly 0:01:14.560 --> 0:01:17.679 rare for Google, which is historically added like thousands and 0:01:17.720 --> 0:01:21.160 not tens of thousands of employees every quarter. U is 0:01:21.200 --> 0:01:22.679 that they're gonna split on the hiring for the rest 0:01:22.720 --> 0:01:26.920 of the year, for two and three for they focusing 0:01:27.000 --> 0:01:30.760 on technical and engineering hiring. Um. You know, I could 0:01:30.760 --> 0:01:33.240 say certainly certitude that they don't they don't share these 0:01:33.360 --> 0:01:35.720 kind of disclosures, but exactly who they've been hiring was 0:01:35.720 --> 0:01:37.760 they've been I've got a lot for their cloud business, 0:01:37.800 --> 0:01:41.000 which is in third place for Amazon and behind Amazon 0:01:41.000 --> 0:01:44.039 and Microsoft, and a lot of the sales file on that. 0:01:44.120 --> 0:01:45.880 So I think that that's something the investors are probably 0:01:46.040 --> 0:01:48.040 keep it close tabs on. Is this is going to 0:01:48.200 --> 0:01:51.560 affect and dent um the growth of their cloud business. 0:01:52.040 --> 0:01:54.080 How do we as investors? And I'm looking at the 0:01:54.080 --> 0:01:57.120 stock is down about two percent, so it's a bigger 0:01:57.240 --> 0:02:00.080 hit than the overall broader market. I'm just like that 0:02:00.200 --> 0:02:03.200 the indusseries. How are we as investors supposed to read this? 0:02:03.280 --> 0:02:06.360 Is this a manager saying, Okay, things are a little 0:02:06.360 --> 0:02:08.320 bit different, and this is what we do. We make changes, right, 0:02:08.360 --> 0:02:10.799 we adapt to the environment. Or is there something bigger, 0:02:11.480 --> 0:02:14.040 a bigger message, whether it's about more broadly about the 0:02:14.320 --> 0:02:17.040 economy or more broadly about what's going on at Alphabet. 0:02:18.160 --> 0:02:19.960 I assume this is more about the economy. I mean 0:02:20.560 --> 0:02:22.920 it's you know, they're not they're not sharing numbers. As 0:02:22.919 --> 0:02:25.720 far as we know, Google hasn't done any layoffs. You know, 0:02:25.800 --> 0:02:29.639 Microsoft has trimmed up some jobs, a small number of jobs. 0:02:29.680 --> 0:02:33.760 I said, Facebook and Meta UM seems to be moving 0:02:33.800 --> 0:02:38.320 in a pretty dramatic um becoming a smaller company. Google 0:02:38.360 --> 0:02:42.600 Alphabet isn't doing that. UM. I think this is historically 0:02:42.639 --> 0:02:47.640 than a company that has probably hiring more people than necessary. Right. UM. 0:02:47.760 --> 0:02:51.040 They're sort of famous for throwing uh people and staff 0:02:51.080 --> 0:02:54.720 and resources at projects that are unprofitable and will be 0:02:54.800 --> 0:02:58.960 for years. Uh. And the memo is is pretty consistent 0:02:59.000 --> 0:03:01.200 with with within ore, which I said in the past, 0:03:01.200 --> 0:03:03.160 like a strategy is kind of double down on AI. 0:03:03.280 --> 0:03:06.280 And so we're a long term that's uh. And we've 0:03:06.280 --> 0:03:09.360 seen in the past several years that Google has stop 0:03:09.400 --> 0:03:13.200 spending as lavishly on on some of their maybe biotech 0:03:13.280 --> 0:03:15.440 and healthcare projects. I thought you were going to say 0:03:15.440 --> 0:03:17.720 no more free massages on your birthday at the office 0:03:17.840 --> 0:03:22.720 or balls for interns. That's very well. Maybe you know 0:03:22.760 --> 0:03:25.480 Facebook has has cut back on that. I think Google, 0:03:26.440 --> 0:03:29.680 I'm you know, they have committed and doubled down on 0:03:29.760 --> 0:03:32.920 real estate and on this hybrid WORKFORCET model. I think 0:03:32.919 --> 0:03:35.880 there's a real sense that they want employees in the office, 0:03:35.920 --> 0:03:38.040 and so I actually don't think they're going to cut 0:03:38.080 --> 0:03:41.200 back on those perks, in part because they want people 0:03:41.200 --> 0:03:44.360 coming in um and that could change depending on on 0:03:45.320 --> 0:03:48.360 the direction of the economy, but my sense is that 0:03:48.440 --> 0:03:50.839 they find it. I think they just believe that their 0:03:50.840 --> 0:03:53.000 staff is so much either the staff is so much 0:03:53.000 --> 0:03:55.600 more productive in the office or their real estates which 0:03:55.600 --> 0:03:58.119 more valuable when they have people coming in well in perspective, 0:03:58.160 --> 0:04:00.600 and you said this mark in the set quarter loan 0:04:01.000 --> 0:04:03.600 uh cinder pitch I puts out in this memo that 0:04:03.680 --> 0:04:06.720 they added approximately ten thousand Googlers and have a strong 0:04:06.800 --> 0:04:09.839 number of commitment commitments for the third quarter start dates, 0:04:09.880 --> 0:04:13.280 which reflects in part this seasonal college recruiting calendar. Again, 0:04:13.280 --> 0:04:16.799 I'm quoting from this letter. How often does um soonder 0:04:16.880 --> 0:04:20.160 pitch I put out a note to employees and say hi, Googlers. 0:04:20.880 --> 0:04:23.320 How often, like I'm trying to I'm trying to engage. 0:04:23.880 --> 0:04:27.320 How unusual? Yeah, I mean they filed this note today 0:04:27.320 --> 0:04:29.760 in their eight K. So it's certainly unusual because it's 0:04:29.800 --> 0:04:35.280 like four um uh information for investors, So that's pretty unusual. Right, 0:04:35.279 --> 0:04:37.200 you don't typically see that. I mean, I think you 0:04:37.240 --> 0:04:40.320 know Sara will will send a note on on big 0:04:40.320 --> 0:04:42.440 events like this. I don't. It's certainly not as far 0:04:42.480 --> 0:04:46.640 as I know, it's not a daily occurrence. Um, And 0:04:47.839 --> 0:04:50.800 it's I think. I mean, I don't. I don't have 0:04:50.880 --> 0:04:53.359 the storical data. But you know there was Google pause 0:04:53.720 --> 0:04:57.040 it's hiring, right, that's at the financial crisis and uh 0:04:57.360 --> 0:04:59.119 kind of tighten the belt a little bit. That certainly 0:04:59.200 --> 0:05:02.320 wasn't hit as as as a financial sector and um, 0:05:02.760 --> 0:05:05.240 but even during the Google story right before the dot 0:05:05.279 --> 0:05:08.800 com bust, and since it's very beginning, it's just had 0:05:08.839 --> 0:05:13.560 this phenomenal searchise business that powering it for over two decades. 0:05:14.480 --> 0:05:17.960 So it is rare to see them move with such caution. 0:05:19.480 --> 0:05:22.480 What it's It's one another one of those stories, you know. 0:05:22.640 --> 0:05:25.120 I mean, we see the data each month of job 0:05:25.200 --> 0:05:27.480 hiring going down, but it's still we're still adding jobs 0:05:27.520 --> 0:05:29.200 in this economy. It's just the anecdotal data that we're 0:05:29.200 --> 0:05:31.960 getting from Silicon Valley. I think about what Yeah Goldman 0:05:32.000 --> 0:05:34.000 has pointed out that you keep hearing from companies about 0:05:34.040 --> 0:05:37.240 slowing and hiring or letting workers go. Mark Bergen Great Stuff, 0:05:37.279 --> 0:05:40.920 Technology reporter at Bloomberg News. You're listening to Bloomberg Business 0:05:41.000 --> 0:05:44.839 Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic 0:05:45.320 --> 0:05:48.279 on Bloomberg Radio. It's been called the most important hedge 0:05:48.279 --> 0:05:51.480 fund in crypto. It's undoing, the biggest domino to fall 0:05:51.520 --> 0:05:53.800 in the crypto carnage. It's a story in the upcoming 0:05:53.800 --> 0:05:56.360 new issue of Bloomberg Business Week out tomorrow news stands 0:05:56.440 --> 0:05:59.359 already online ap Bloomberg dot Com, slash business Week on 0:05:59.400 --> 0:06:01.480 the Bloomberg and it happens to be the Bloomberg Big 0:06:01.520 --> 0:06:04.560 Take Today. The story written by a great team including 0:06:04.600 --> 0:06:08.320 Justina Lee, Muya Shann and Bennett Bartonstein. Justina Lee's market 0:06:08.360 --> 0:06:10.400 s reporter for Bloomberg New She joins us on the 0:06:10.440 --> 0:06:15.280 phone from London the collapse of Three Arrows Capital, how 0:06:15.320 --> 0:06:18.360 it became a crypto contagion. Justina, great, great to have 0:06:18.520 --> 0:06:23.599 you with us. First of all, what is Three Arrows Capital? Yes, 0:06:23.680 --> 0:06:26.760 Three Arrows Capital is this hedge fund based in Singapore 0:06:26.880 --> 0:06:30.600 that was started by two high school friends, Suju and 0:06:30.720 --> 0:06:34.159 Kyle Davies. And it's not really clear how much money 0:06:34.160 --> 0:06:37.279 they managed. They say it's about three billion dollars, which 0:06:37.360 --> 0:06:40.719 might sound, you know, not particularly significant to our Wall 0:06:40.760 --> 0:06:43.400 Street listeners. And in crypto it was sort of like 0:06:43.480 --> 0:06:45.960 this o g hedge fund. It was always one of 0:06:46.000 --> 0:06:49.200 the biggest. It was like an investor in a lot 0:06:49.240 --> 0:06:52.400 of the biggest d by project, so kind of like 0:06:52.440 --> 0:06:54.320 all know, it was like, as a lot of people 0:06:54.360 --> 0:06:57.479 called it, like the Archigo Capital of crypto. It just 0:06:57.560 --> 0:06:59.960 had a lot of cloud and when it collapsed, every 0:07:00.040 --> 0:07:03.160 one was really shocked. Well, Justina laying out exactly who 0:07:03.240 --> 0:07:05.000 these guys are, and I gotta say, you look at 0:07:05.000 --> 0:07:07.440 the website and you're like, how did they ever get 0:07:07.480 --> 0:07:11.440 to amass so much? Jill Weber's with the editor of 0:07:11.480 --> 0:07:13.480 Business Week, So what was it about this one that 0:07:13.520 --> 0:07:16.720 you wanted to know about. Hell, you know, the crypto 0:07:16.880 --> 0:07:20.520 um contagion has been just a source of ongoing interest 0:07:20.600 --> 0:07:23.760 as we try and figure out what's happening, where it 0:07:23.880 --> 0:07:27.400 might go. In the moment that Justina uh and company 0:07:27.480 --> 0:07:29.560 kind of came to us with this one, we were like, well, 0:07:29.640 --> 0:07:31.560 tell us everything you know, and then we get this story. 0:07:31.640 --> 0:07:35.240 I was like, well, that's everything, I guess. I think 0:07:35.280 --> 0:07:37.880 one of the things that's been really interesting here Justina, though, 0:07:37.920 --> 0:07:41.240 is sort of the echoes to you know, crypto being 0:07:41.440 --> 0:07:44.200 sort of a parallel universe, but in many ways having 0:07:44.200 --> 0:07:47.960 these echoes of you know, what happens in you know, 0:07:48.080 --> 0:07:52.280 normal markets, regular markets, regulated markets. Uh. So walk us 0:07:52.280 --> 0:07:54.600 through some of those similarities, because that's that's the thing 0:07:54.640 --> 0:07:57.440 that everyone that you talked to and quoted in the 0:07:57.480 --> 0:08:02.120 story has also sort of echo yeah exactly. I mean 0:08:02.160 --> 0:08:05.160 I've reread it, brought it like the Archiegos analogy, and 0:08:05.200 --> 0:08:07.880 how that's relevant here is that in that story, you know, 0:08:08.040 --> 0:08:11.080 everyone on Wall Street was lending to this hedge fund, 0:08:11.440 --> 0:08:14.119 and when it collapsed, everyone was surprised that was the case, 0:08:14.160 --> 0:08:17.600 and so they all started unwinding their positions and those 0:08:17.640 --> 0:08:20.120 stoffs kind of fell further and you have this vicious 0:08:20.120 --> 0:08:22.920 cycle and that was this is sort of what happened here. 0:08:23.040 --> 0:08:25.400 So it turns out because um, what we call three 0:08:25.520 --> 0:08:27.680 h C was such a big fund, a lot of 0:08:27.720 --> 0:08:31.400 the biggest crypt brokers had given it leverage, and so 0:08:31.480 --> 0:08:34.199 when it started losing money, because all of crypt was 0:08:34.280 --> 0:08:37.000 losing money at that time, a lot of these lenders 0:08:37.040 --> 0:08:39.960 had to you know, liquidate their collateral and then three 0:08:40.040 --> 0:08:42.280 so you couldn't pay them back. And so you know, 0:08:42.400 --> 0:08:45.840 one broker broker has already like declared bankruptcy, and so 0:08:45.920 --> 0:08:49.160 you kind of see this like contagious effect that's very 0:08:49.240 --> 0:08:53.000 familiar in traditional finance and and it's kind of like 0:08:53.120 --> 0:08:55.679 playing out in the cryptal world. Right now. You have 0:08:55.800 --> 0:09:00.280 Voyager Digital the one that has declared bankruptcy. At this point, 0:09:00.480 --> 0:09:03.400 I'm wondering about companies like block Fire and blockchain dot com. 0:09:03.640 --> 0:09:05.680 What were they or what did they get out of 0:09:05.800 --> 0:09:07.920 lending to three a C that they then turned around 0:09:07.920 --> 0:09:10.840 and provided to their clients, Like explain how this actually 0:09:10.840 --> 0:09:14.920 works in it from an ecosystem perspective. Yeah, for a 0:09:14.920 --> 0:09:17.840 long time, a lot of crypto lenders were offering these 0:09:17.840 --> 0:09:21.520 savings accounts with you know, ten to twenty percent yields, 0:09:21.559 --> 0:09:24.040 which sounds absolutely crazy, you know at a time when 0:09:24.640 --> 0:09:26.920 you know, putting money in your regular bank account was 0:09:26.960 --> 0:09:30.319 building basically zero percent. And the way they were generating 0:09:30.320 --> 0:09:33.520 these fields where they were lending UM these deposits in 0:09:33.520 --> 0:09:36.480 a way to a lot of crypto speculators who could 0:09:36.480 --> 0:09:39.120 afford to pay higher interest rates because they were making 0:09:39.160 --> 0:09:42.040 a lot of money, you know, going long crypto or 0:09:42.080 --> 0:09:46.400 maybe you know, staking their coins and so you know, 0:09:46.480 --> 0:09:48.880 three a C Was a very attractive borrower in that 0:09:48.960 --> 0:09:51.960 sense because they were huge and they really needed leverage, 0:09:52.440 --> 0:09:55.320 and you know, they had this great reputation and so 0:09:55.360 --> 0:09:57.040 you can see why, you know, a lot of people 0:09:57.080 --> 0:09:59.080 wanted to lend to them. But as it turns out, 0:09:59.120 --> 0:10:02.160 they were far less solid and everybody expected. So the 0:10:02.200 --> 0:10:05.600 other thing, you know, all of this happens online. Everyone's 0:10:05.720 --> 0:10:09.000 very vocal and has been very bullish, and the the 0:10:09.800 --> 0:10:13.080 fact the co founders UM you know, have have basically 0:10:13.080 --> 0:10:15.200 stuck to their guns and then they kind of went 0:10:15.400 --> 0:10:19.840 quiet for a really long time. Uh where where where 0:10:19.840 --> 0:10:21.720 do things stand now on that front? Because they happen 0:10:21.800 --> 0:10:25.920 to just resurface, didn't the Yeah, I mean, it's kind 0:10:25.920 --> 0:10:28.920 of like all gone down really quickly. I mean basically 0:10:29.000 --> 0:10:32.480 admit June they started missing margin calls and then like 0:10:32.679 --> 0:10:35.880 by I think July first they had to clared bankruptcy 0:10:36.080 --> 0:10:38.680 and now they're going through this you know, very long 0:10:38.800 --> 0:10:43.400 liquidation process um and recently their liquidators have accused them 0:10:43.440 --> 0:10:46.839 of not cooperating with the process and kind of being 0:10:47.280 --> 0:10:50.160 you know, nobody knows where they are. And after that 0:10:50.360 --> 0:10:52.959 violing you know, sud you tweet it. You know, they 0:10:53.080 --> 0:10:57.040 actually has incorporating, but it's the liquidators who are baiting them, 0:10:57.080 --> 0:10:59.520 and so no one really knows where they are at 0:10:59.520 --> 0:11:02.640 the moment. And and you know, the liquidation process um 0:11:02.679 --> 0:11:04.600 in the courts, it's gonna it's gonna take a while. 0:11:04.760 --> 0:11:06.880 I love the line in your story in retrospect. Three 0:11:06.880 --> 0:11:08.760 a C has always been a mystery. The fund itself 0:11:08.840 --> 0:11:11.000 is in the British Virgin Islands and the company's license 0:11:11.040 --> 0:11:13.520 in Singapore to manage other people's money, and then these 0:11:13.559 --> 0:11:16.280 two individuals behind it have always maintained that the pot 0:11:16.720 --> 0:11:19.880 all three billion is entirely there. It's like, yeah, I'm 0:11:19.920 --> 0:11:24.439 all in on that, Like who are these dudes? I mean, 0:11:24.520 --> 0:11:28.600 in a way, they had a very typical Wall Street background. 0:11:28.640 --> 0:11:31.160 I mean they went to Phillips Academy, they went to 0:11:31.240 --> 0:11:34.840 Columbia together, and then they both worked at Credit Swist. 0:11:34.880 --> 0:11:37.840 They were trading derivatives, and when they start started their 0:11:37.840 --> 0:11:40.840 hedge funds, they were only around twenty five years old, 0:11:40.960 --> 0:11:44.200 and they started just trading them, you know, emerging market 0:11:44.320 --> 0:11:47.600 effex derivatives, and they kind of quickly realized that that 0:11:47.720 --> 0:11:49.760 was you know, a very small pie, and then they 0:11:49.800 --> 0:11:53.080 got into crypto, which was how they became you know, huge, 0:11:54.000 --> 0:11:55.800 and so in a way, I think this is almost 0:11:55.840 --> 0:11:59.280 kind of surprising because they had this traditional finance background, 0:11:59.400 --> 0:12:02.280 but as one interview we told me they turned out 0:12:02.320 --> 0:12:04.080 to be de gents, you know, which is like the 0:12:04.120 --> 0:12:11.560 crypto term for being a degenerous gambler. You know, no comment, um, okay. So, 0:12:11.760 --> 0:12:15.240 you know, as somebody who watches this really closely and 0:12:15.600 --> 0:12:20.400 especially you know, just the kind of continued fallout in crypto, 0:12:20.440 --> 0:12:23.440 what are sort of the unanswered questions that that sort 0:12:23.440 --> 0:12:25.920 of remained to you in the three A C. SAKA. 0:12:27.720 --> 0:12:30.480 I mean, in a way, it's kind of interesting and 0:12:30.520 --> 0:12:34.440 frustrating as a reporter to to kind of ultimately realize 0:12:34.480 --> 0:12:37.079 that A very fundamental question of whether you know they 0:12:37.120 --> 0:12:40.079 even had external money is a bit of a mystery. 0:12:40.080 --> 0:12:42.800 I mean there's been a lot of debate over that 0:12:42.960 --> 0:12:45.760 and kind of how exactly you know, are they structured 0:12:46.559 --> 0:12:49.760 and and kind of I think another question, um that's 0:12:49.760 --> 0:12:51.720 been kind of interesting is a lot of people have 0:12:51.840 --> 0:12:54.200 come out of this and kind of said that it 0:12:54.280 --> 0:12:57.560 actually is a vindication of crypto because the problem with 0:12:57.600 --> 0:12:59.920 crypto is that it started to look too much like 0:13:00.080 --> 0:13:03.160 the financial industry, and so what we really should have 0:13:03.320 --> 0:13:07.240 is all transactions on the blockchains, everything is transparent, and 0:13:07.320 --> 0:13:10.760 everyone is you know, liquidated based on code rather than 0:13:10.840 --> 0:13:13.840 you know, relationships, and that would have fixed everything. Um, 0:13:13.880 --> 0:13:15.920 I'm not so sure about that, but I think there 0:13:16.000 --> 0:13:17.959 there is a bit of a point there. But we're 0:13:18.000 --> 0:13:20.560 definitely still very far from that world. Right. It wasn't 0:13:20.880 --> 0:13:23.520 just to provide like this incredible transparency, Right, you can 0:13:23.640 --> 0:13:27.000 kind of track things to some extent and well, you know, 0:13:27.000 --> 0:13:28.480 it's all there on the block chain if you know 0:13:28.480 --> 0:13:31.480 where to look. Except you know, there's still some questions, right, 0:13:31.640 --> 0:13:35.040 Just a few, just a few regulators are working on that. Justina, 0:13:35.280 --> 0:13:37.400 this is a great story and it really does play 0:13:37.440 --> 0:13:39.840 into the carnage we've seen this year. Justina Lee, she's 0:13:39.880 --> 0:13:42.760 Markets reporter at Bloomberg News on the phone from London. 0:13:42.760 --> 0:13:45.199 This story in the upcoming new issue of Bloomberg Business Week, 0:13:45.200 --> 0:13:47.560 out tomorrow on newsstands, but you can already find it 0:13:47.720 --> 0:13:50.040 on the Bloomberg and also at Bloomberg dot Com. It's 0:13:50.040 --> 0:13:52.400 also the Bloomberg Big Take and our thanks to Joel Webber, 0:13:52.520 --> 0:13:56.400 the editor at Bloomberg Business Week magazine. This is Bloomberg 0:13:56.440 --> 0:13:59.839 Business Week with Carol Masser and Bloomberg Quick Takes to 0:14:00.120 --> 0:14:04.800 m Stovich on Bloomberg Radio. So Sax Fifth Avenue spun 0:14:04.840 --> 0:14:07.640 off its digital business, that e commerce business now known 0:14:07.640 --> 0:14:10.240 as Sacks and is headed up by our next guest, 0:14:10.360 --> 0:14:13.160 Mark Metrick, is CEO of Sacks. Mark joins us from 0:14:13.160 --> 0:14:15.200 on zoom from New York City. Mark, good to have 0:14:15.240 --> 0:14:17.679 you with us. How are you. I'm great? How are 0:14:17.720 --> 0:14:19.560 you guys? We're doing well. Hey. You know, we're thinking 0:14:19.560 --> 0:14:22.520 a lot about inflation, about the macro economic environment right now. 0:14:23.760 --> 0:14:25.640 I think you ever think about so really eager to 0:14:25.680 --> 0:14:28.200 get your thoughts on on the state of the American 0:14:28.200 --> 0:14:31.000 consumer right now. We got this hotter than expected inflation number, 0:14:31.000 --> 0:14:34.240 the highest and more than forty years. How is your 0:14:34.520 --> 0:14:37.680 how is your consumer doing it? Sacks? Yeah, I think 0:14:38.520 --> 0:14:40.560 I want to just focus on the luxury consumer. And 0:14:40.640 --> 0:14:42.480 as you guys mentioned, we were out in the field 0:14:42.480 --> 0:14:46.720 with research and uh two things you know we're seeing 0:14:47.200 --> 0:14:49.920 in the response of our business. Uh. You know, we 0:14:49.960 --> 0:14:53.200 feel very good about the core luxury consumer, just both 0:14:53.200 --> 0:14:55.640 from how they're showing up and how they're shopping, and 0:14:55.640 --> 0:15:00.200 and also they've indicated, you know, seventy of responded to 0:15:00.240 --> 0:15:02.840 the survey that I would categorize in the in that 0:15:03.000 --> 0:15:06.480 core luxury consumer, uh said that they were they would 0:15:06.520 --> 0:15:09.760 spend the same if not more over the next three 0:15:09.760 --> 0:15:11.920 months in the prior three You're talking about people just 0:15:11.960 --> 0:15:14.360 so we can have these definitions for our audience. These 0:15:14.360 --> 0:15:17.240 are people who have an income of two dollars per 0:15:17.320 --> 0:15:20.840 year plus yes okay, so not so like a household 0:15:20.840 --> 0:15:25.560 income or an individual household. And are they younger? Older? 0:15:25.720 --> 0:15:27.640 What are they? I love knowing the demos when it 0:15:27.640 --> 0:15:31.080 comes to retail. Well, it's about stage, not age. These 0:15:31.080 --> 0:15:33.920 are people that are luxury consumers that are they love fashion, 0:15:34.400 --> 0:15:38.240 They're aspirational their core Uh so you know, they're they're 0:15:38.240 --> 0:15:39.840 a bit all over but if you, if you really 0:15:39.880 --> 0:15:42.880 want to dig down and look at it, you're actually 0:15:42.920 --> 0:15:46.800 seeing a little bit on the response side, more positivity. 0:15:46.920 --> 0:15:49.880 And it's probably from a recency bias because the younger 0:15:50.480 --> 0:15:54.800 consumer hasn't seen one of these moments before. They're feeling 0:15:54.800 --> 0:15:57.360 a little bit more bullish than the boomers or the 0:15:57.480 --> 0:16:02.240 silence uh so um int sting. But again, the overall 0:16:02.800 --> 0:16:05.840 response has been positive on on on what they're thinking 0:16:06.280 --> 0:16:08.640 from a luxury stamps. So from a luxury standpoint, are 0:16:08.640 --> 0:16:12.800 they buying luxury clothes, luxury stuff for the house, luxury 0:16:12.840 --> 0:16:17.560 you know, cosmetically what specifically luxury can cover a lot? Yeah, 0:16:17.600 --> 0:16:21.640 So for US, it's really it's about it's about accessories 0:16:22.040 --> 0:16:25.080 and apparel. Okay, that's where we center now. They're they're 0:16:25.200 --> 0:16:29.200 they're still looking at home and other UM and other 0:16:29.240 --> 0:16:32.040 types of luxury products inside of their lifestyle. But the 0:16:32.160 --> 0:16:36.400 core business for us UM is around that apparel and 0:16:36.400 --> 0:16:39.560 and accessories and leather goods. What kind of luxury apparel 0:16:39.600 --> 0:16:41.720 like is it? Have people moved away from all of 0:16:41.800 --> 0:16:44.600 the comfy where you know and listen, I love a 0:16:44.640 --> 0:16:47.640 great para yoga pants. They're not inexpensive, so I consider 0:16:47.680 --> 0:16:52.200 that kind of luxury as well. But are people trading up, 0:16:52.240 --> 0:16:54.400 They're going out, they're going to places, and so you 0:16:54.400 --> 0:16:57.760 can see that it reflected in what they're buying. Absolutely, 0:16:57.800 --> 0:16:59.800 And that's and you know what we're seeing in a 0:17:00.240 --> 0:17:03.640 indicator of that is sneakers became It's like you almost 0:17:03.680 --> 0:17:06.080 only wore sneakers for a while, and now we're seeing 0:17:06.119 --> 0:17:09.320 shoes make a big comeback. Uh and and that's been good. 0:17:09.480 --> 0:17:12.320 Guys are getting dressed up again. Um, she you know 0:17:12.600 --> 0:17:14.720 she's getting dressed up. It's a dressy sandal. It's not 0:17:14.800 --> 0:17:16.800 just a sandal, it's a shoe. It's not a sneaker. 0:17:16.840 --> 0:17:20.560 There's a lot of hell coming back. Um. Platform heels 0:17:20.600 --> 0:17:22.600 are going to be one of our biggest trends as 0:17:22.600 --> 0:17:25.800 we come into the next couple of months. So it 0:17:25.960 --> 0:17:28.280 is about getting dressed, it is about going out, it's 0:17:28.320 --> 0:17:31.000 about traveling, and it's good for business. Can I let's say, 0:17:31.040 --> 0:17:33.000 I love me some platforms, but him, I'm just gonna 0:17:33.000 --> 0:17:35.040 put that out there, Okay, I got I got nothing 0:17:35.080 --> 0:17:37.000 to follow up on that, Carol. I do want to know, Mark, 0:17:38.480 --> 0:17:41.600 I want to know about how spending has shifted, because 0:17:41.640 --> 0:17:43.560 if I think about what we're you know what we've 0:17:43.600 --> 0:17:45.760 been talking about for the past two plus years, the 0:17:45.800 --> 0:17:47.760 idea that people filled their homes with stuff and then 0:17:47.760 --> 0:17:49.439 it got stuck on ships so they couldn't do that. 0:17:49.680 --> 0:17:51.320 Then they started buying things as they got back to 0:17:51.359 --> 0:17:53.679 the office. But but now it seems like demand for 0:17:53.800 --> 0:17:56.639 vacations and experiences is back, this idea of stuff we 0:17:56.640 --> 0:17:59.080 were talking about back in twenty nineteen, especially when it 0:17:59.080 --> 0:18:02.399 comes to millennials spending their money on on not on stuff, 0:18:02.440 --> 0:18:06.920 but on doing things. How did that factor into your research? Yeah, 0:18:06.960 --> 0:18:10.240 so the research came back and look, you know, when asked, uh, 0:18:10.400 --> 0:18:13.760 respondence number one on their list is traveling leisure. And 0:18:13.840 --> 0:18:17.920 that's fine because with luxury and again being a goat, 0:18:18.000 --> 0:18:20.119 so being that go out and travel, I'm glad for 0:18:20.160 --> 0:18:23.000 you to take a vacation, um, because you're gonna buy 0:18:23.040 --> 0:18:25.120 a lot of stuff to wear on that vacation. I'm 0:18:25.160 --> 0:18:27.720 glad that you're going back to the theater. I'm glad 0:18:27.760 --> 0:18:30.560 that you're meeting friends and going to weddings. Uh. This 0:18:30.640 --> 0:18:33.600 is all good for sax and for luxury. So that's okay. 0:18:33.600 --> 0:18:36.960 But right on the heels of that response again was 0:18:37.080 --> 0:18:40.359 leather goods and accessories were right there behind that UM 0:18:40.440 --> 0:18:43.160 for this you know, high end luxury consumer on where 0:18:43.160 --> 0:18:45.240 they and how they want to be spending. Mark help 0:18:45.280 --> 0:18:48.160 me out here because you know, when we talk retail 0:18:48.359 --> 0:18:50.879 and the consumer world, we constantly talk about and we 0:18:50.920 --> 0:18:53.639 often have heads of companies talk to us about this seamless, 0:18:53.960 --> 0:18:57.800 eternal experience. So you guys are focusing on e commerce, 0:18:57.840 --> 0:18:59.399 how do how do you guys do it? How do 0:18:59.480 --> 0:19:03.840 you make sure you're covering how the consumer wants to shop? Yeah, 0:19:03.960 --> 0:19:06.560 you know, and we do focus on e commerce, but 0:19:06.560 --> 0:19:09.479 we focus on the consumer and that's really you know, 0:19:09.520 --> 0:19:11.439 what we've been what we've done with this split is 0:19:11.480 --> 0:19:15.840 just enabled UM my company to focus on the digital experience, 0:19:15.880 --> 0:19:19.160 but it's focusing on the brand experience, you know, first 0:19:19.200 --> 0:19:23.760 and foremost. Uh and you know we haven't stopped with 0:19:23.800 --> 0:19:27.480 the omni channel connected experience for our consumer. Our exclusive 0:19:27.480 --> 0:19:30.399 partnership with the s f A stores enables us to 0:19:30.480 --> 0:19:35.439 execute uh, this all channel experience seamlessly. You can you know, 0:19:36.280 --> 0:19:39.040 the returns that came in UM from SAXS dot com 0:19:39.040 --> 0:19:42.320 went into the stores just this past quarter. Uh. So 0:19:42.680 --> 0:19:44.879 you're still you can buy online, you it can ship 0:19:44.920 --> 0:19:47.199 from a store you can do almost anything you can 0:19:47.240 --> 0:19:49.400 buy online have it altered in the store. We haven't 0:19:49.440 --> 0:19:52.560 stopped that. So what we've done is really just given 0:19:52.600 --> 0:19:56.400 ourselves the ability to build two strategies. But those two 0:19:56.400 --> 0:20:00.800 strategies connect through the consumer, which makes omniche antal. I'm 0:20:00.880 --> 0:20:05.040 still a big and important part of the sax ecosystem. Mark, 0:20:05.119 --> 0:20:06.840 just last thirty seconds we have with you, give us 0:20:06.840 --> 0:20:09.000 an update on the supply chain and give us an 0:20:09.040 --> 0:20:11.800 idea of if you're able to stock shelves, if you're 0:20:11.800 --> 0:20:14.919 able to actually get consumers what they want. Yeah, the 0:20:14.960 --> 0:20:18.000 luxury supply chain, you know, probably on a relative basis, 0:20:18.280 --> 0:20:20.720 hasn't been interrupted. I'm sure it's a little bit slower 0:20:20.720 --> 0:20:22.640 than people wanted to be back comparatively to what we'll 0:20:22.680 --> 0:20:25.560 be hearing, we haven't had any issue with that. What's 0:20:25.560 --> 0:20:29.680 the last thing you bought in a retail environment? You're 0:20:29.720 --> 0:20:34.640 asking me? Yeah, I just bought a suit. How's that all? Right? 0:20:34.640 --> 0:20:38.080 Back to work? You go? That sounds yeah? That isn't 0:20:38.119 --> 0:20:40.919 like athleaser work at way? Is that? Is that? Is 0:20:40.960 --> 0:20:43.320