WEBVTT - Bloomberg Businessweek Weekend - December 1st, 2023 0:00:01.360 --> 0:00:05.720 This is Bloomberg business Week Inside from the reporters and 0:00:05.880 --> 0:00:09.440 editors who bring you America's most trusted business magazine, plus 0:00:09.520 --> 0:00:13.680 global business, finance and tech news. The Bloomberg Business Week 0:00:13.720 --> 0:00:19.000 Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:20.120 --> 0:00:23.080 Hi, everyone, Welcome to the Bloomberg Business Week Weekend Podcast. 0:00:23.520 --> 0:00:26.240 We've officially wrapped up the month of November, and the 0:00:26.280 --> 0:00:28.800 health of the US consumer is in focus during the 0:00:28.840 --> 0:00:32.159 all important holiday shopping season. Well ahead this hour, we'll 0:00:32.200 --> 0:00:34.920 speak with the founder and CEO of payments platform Chime 0:00:35.360 --> 0:00:37.640 on meeting the needs of millions of Americans who are 0:00:37.680 --> 0:00:41.160 living paycheck to paycheck, and our Bloomberg Business Week cover 0:00:41.240 --> 0:00:44.800 story explores how unprepared many of us are for AI's 0:00:44.960 --> 0:00:49.040 next frontier, especially when it comes to our kids. All 0:00:49.040 --> 0:00:51.080 of that to come, We begin with the story that 0:00:51.200 --> 0:00:54.720 made us stop for a moment this past week. Charlie Munger, 0:00:54.880 --> 0:00:58.080 the Alter Ego sidekick and foyle to Warren Buffett for 0:00:58.120 --> 0:01:01.960 almost sixty years as they transformed Berkshire Hathaway from a 0:01:02.080 --> 0:01:05.880 failing textile maker into an empire, has died. He was 0:01:05.959 --> 0:01:09.560 ninety nine. He passed away on Tuesday at a California hospital, 0:01:09.560 --> 0:01:12.680 according to a company's statement in which Warren Buffett said 0:01:12.720 --> 0:01:15.640 that quote, Berkshire Hathaway could not have been built to 0:01:15.680 --> 0:01:21.200 its present status without Charlie's inspiration, wisdom, and participation. Tim 0:01:21.240 --> 0:01:24.000 and I spoke with Bloomberg News reporter Noah Bouhier, who 0:01:24.080 --> 0:01:27.280 covered and wrote about Monger's passing, and Bill Smead, the 0:01:27.319 --> 0:01:30.640 founder and CIO of Smeed Capital Management and a longtime 0:01:30.680 --> 0:01:31.600 Berkshire investor. 0:01:31.800 --> 0:01:32.280 I wrote a. 0:01:32.360 --> 0:01:38.560 Letter to Buffett probably five years ago, just thanking him 0:01:38.680 --> 0:01:42.240 for how incredibly generous that him and Manger have been 0:01:42.319 --> 0:01:46.000 with all of us. I mean, it literally changed our lives. 0:01:46.040 --> 0:01:46.760 What do you mean by that? 0:01:46.880 --> 0:01:47.160 Yeah? 0:01:47.200 --> 0:01:53.480 Oh, by communicating the discipline that they practiced. They shared 0:01:54.680 --> 0:01:57.200 why they were doing what they're doing all these years 0:01:57.480 --> 0:02:00.680 in the writing, in the annual meetings, stay there taking 0:02:00.760 --> 0:02:03.960 questions for six hours all the way up, way up 0:02:04.000 --> 0:02:08.400 into their nineties. It's like a gold mine of wisdom. 0:02:09.080 --> 0:02:12.399 I used to get irritated because I kind of wish 0:02:12.480 --> 0:02:15.519 they would restrict the questions to better questions, because as 0:02:15.520 --> 0:02:17.480 the years went by, there were a lot of goofy 0:02:18.000 --> 0:02:19.040 questions that came. 0:02:18.919 --> 0:02:21.680 Up because sometimes they got some goofy answers, which were fun. 0:02:21.800 --> 0:02:22.320 Yeah, but. 0:02:24.080 --> 0:02:29.840 Here was this incredible resource, right. Charlie Munger was the 0:02:29.880 --> 0:02:33.720 Solomon of our era. He was the wisest man in 0:02:33.760 --> 0:02:36.720 the investment business. He was the what he was a 0:02:36.760 --> 0:02:40.480 cal Tech grad, Harvard law educated, started a law firm 0:02:40.520 --> 0:02:44.320 in Los Angeles, had a successful career in real estate, 0:02:44.440 --> 0:02:49.959 successful career in making common stock choices, and the right 0:02:50.000 --> 0:02:53.680 hand guide to the most successful investment selector and asset 0:02:53.720 --> 0:02:57.800 allocator of all time. I mean he is, he is. 0:02:59.760 --> 0:03:02.360 You know, we just admired him so much. And then, 0:03:02.400 --> 0:03:05.760 of course we admired him immensely because he'd say exactly 0:03:05.800 --> 0:03:07.919 what he was thinking and didn't really care very much 0:03:07.960 --> 0:03:09.600 Bill who he might have fended the process. 0:03:09.680 --> 0:03:12.480 You mentioned that you've been doing this for over forty years. 0:03:12.720 --> 0:03:16.320 What are some lessons that you've incorporated from Charlie Munger 0:03:16.600 --> 0:03:19.800 over these decades into the way that you manage portfolios 0:03:19.840 --> 0:03:21.880 and you allocate assets. 0:03:22.120 --> 0:03:24.680 Yeah, when we're talking to people, I'm here in New 0:03:24.760 --> 0:03:28.840 York talking to some possible new customers, and we tell 0:03:28.880 --> 0:03:31.560 them when it comes to value people, we hold our 0:03:31.600 --> 0:03:36.320 winners to a fault because compounding is the eighth wonder 0:03:36.360 --> 0:03:39.280 of the world. So if you can find a business, 0:03:39.480 --> 0:03:41.960 let's just right off the top of our head, pick 0:03:42.400 --> 0:03:46.680 Occidental Petroleum, who Munger and Buffett started buying in the 0:03:46.720 --> 0:03:49.920 last year and a half or two years. They're generating 0:03:50.000 --> 0:03:52.840 massive free cash flow, they're paying down debt with it, 0:03:52.880 --> 0:03:55.520 but then they're also buying backstock. So, like Buffett says, 0:03:55.880 --> 0:03:58.840 over the years, if it's a company generating high returns 0:03:58.880 --> 0:04:02.000 on equity, high free cast flow, buying back their stock, 0:04:02.480 --> 0:04:06.040 he ends up owning a larger and larger and larger 0:04:06.080 --> 0:04:08.560 part of the business as the years go by. That's 0:04:08.600 --> 0:04:10.360 what he did with Coke, That's what he did in 0:04:10.360 --> 0:04:13.080 the Iraq Express, That's you know what he did with 0:04:13.120 --> 0:04:15.880 a lot of different companies and holding your winners. The 0:04:15.960 --> 0:04:20.599 fault is a key component of alpha. As I explained 0:04:20.640 --> 0:04:22.760 to people, you buy a stock at thirty and pay cash, 0:04:23.000 --> 0:04:25.279 the worst thing happened is it goes to zero. You 0:04:25.360 --> 0:04:28.239 lose thirty points of alpha. If you buy a stock 0:04:28.279 --> 0:04:30.400 at thirty and it goes to ninety and you sell 0:04:30.440 --> 0:04:32.799 it it goes to two ten, you lose one hundred 0:04:32.800 --> 0:04:36.120 and twenty points. And Buffett Monger taught that to people 0:04:36.880 --> 0:04:39.719 as a powerful thing. It's it's much better to get 0:04:39.760 --> 0:04:44.120 a less spectacular company that you can hold all the 0:04:44.120 --> 0:04:47.000 way through a ten or fifteen times your money than 0:04:47.040 --> 0:04:50.000 it is a spectacular company that you might make five 0:04:50.040 --> 0:04:51.920 times in five years, but you've got to be smart 0:04:52.000 --> 0:04:53.720 enough to sell it and go to another project. 0:04:53.800 --> 0:04:55.920 Well, and you're you're you know something. I want to 0:04:56.040 --> 0:04:58.279 ask you a little bit more too, about what Charlie 0:04:58.320 --> 0:05:00.840 Munger was to Warren Buffett, what he what he brought out, 0:05:00.880 --> 0:05:02.520 and Warren Buffett having said that, I want to bring 0:05:02.560 --> 0:05:05.200 Noah Bouhier into this because you know, Noah, it's one 0:05:05.240 --> 0:05:07.680 of those things where you think, as we're hearing from Bill, 0:05:07.880 --> 0:05:11.719 you know, these are both brilliant men, successful men, and 0:05:11.760 --> 0:05:13.920 would have been on their own, but something about them 0:05:13.960 --> 0:05:16.920 together brought out even so much more. 0:05:18.200 --> 0:05:20.599 Yeah, I think that's a that's a critical point here, 0:05:21.000 --> 0:05:24.720 is there. The combination of talents that they they they 0:05:24.760 --> 0:05:28.880 brought to bear really was was deeply important in the 0:05:28.880 --> 0:05:32.320 evolution of Berkshire. The other thing, just just speaking as 0:05:32.360 --> 0:05:37.520 a journalist, the thing that I always found so incredibly 0:05:37.839 --> 0:05:41.440 amazing about Charlie Munger was his directness and his willingness 0:05:41.480 --> 0:05:46.960 to speak, his mind, even if his opinion wasn't necessarily 0:05:47.000 --> 0:05:50.320 a popular one. You know, as a as a as 0:05:50.360 --> 0:05:56.560 a business reporter and someone writing about investing, you you 0:05:56.720 --> 0:05:58.880 always knew that Charlie was not just going to give 0:05:58.880 --> 0:06:01.760 you the piffy quote, but something that actually had some 0:06:01.760 --> 0:06:05.440 real substance behind it. And I think that's, you know, 0:06:05.560 --> 0:06:07.760 in large part, what has resonated with a lot of 0:06:07.800 --> 0:06:11.160 investors over time. I mean, people would go One of 0:06:11.240 --> 0:06:15.280 the things that's underappreciated about Charlie Munger is is that 0:06:16.360 --> 0:06:20.520 deep into his nineties, people would go to Los Angeles 0:06:20.560 --> 0:06:23.320 to hear him speak at the annual meeting of a 0:06:23.360 --> 0:06:27.880 small publishing company called The Daily Journal. This was Buffett 0:06:27.880 --> 0:06:30.159 had nothing to do with this thing. They would just 0:06:30.360 --> 0:06:35.159 go to hear Munger alone. And I remember the first 0:06:35.160 --> 0:06:37.040 time I went to this thing, that were maybe one 0:06:37.080 --> 0:06:40.080 hundred or two hundred people, and you know, three or 0:06:40.080 --> 0:06:42.440 four years later word had gotten out and a couple 0:06:42.560 --> 0:06:46.880 thousand were going. I mean, you have to understand, Charlie 0:06:46.960 --> 0:06:50.719 Munger was respected in his own right. It wasn't you know, 0:06:50.800 --> 0:06:54.240 He's often known for his affiliation with with Buffett, but 0:06:54.920 --> 0:06:56.200 he really did have his own. 0:06:56.080 --> 0:06:58.719 Loyal following to back up Noah on that. One of 0:06:58.760 --> 0:07:02.520 our favorite things is when it comes to climate change. 0:07:02.640 --> 0:07:05.760 He just said, why don't we just build a sea wall? 0:07:07.880 --> 0:07:08.040 Right? 0:07:08.120 --> 0:07:11.119 That was his opinion. It's like, okay, if it's real, 0:07:11.880 --> 0:07:13.720 let's do what they did in Amsterdam and just build 0:07:13.760 --> 0:07:18.280 a sea wall in California and New York. And that's 0:07:18.360 --> 0:07:22.920 so simple and logical and less expensive. But that's Charlie Munger. 0:07:23.000 --> 0:07:27.320 It was always common sense, always won. The difference between 0:07:27.360 --> 0:07:32.760 the two men is Warren. Warren wants to die without 0:07:32.800 --> 0:07:36.720 any enemies. He has more of an urge to be liked. 0:07:36.840 --> 0:07:40.040 It's a wonderful man, and he wants to be liked, 0:07:40.320 --> 0:07:44.840 whereas Charlie could care less if he's liked, right, he 0:07:45.680 --> 0:07:48.600 wants to share wisdom, share truth. 0:07:49.040 --> 0:07:51.560 What was it like from the different meetings you went 0:07:51.600 --> 0:07:53.480 to and just kind of seeing them up on stage, 0:07:53.520 --> 0:07:55.480 things that kind of stood out for you. 0:07:55.400 --> 0:08:00.480 Well, there's hardly any better comedy routine that's ever been done, 0:08:00.600 --> 0:08:04.440 the back and forth. Of course, Munger had lots of 0:08:04.480 --> 0:08:07.880 the singers, but Buffett had plenty himself. And yeah, they 0:08:07.880 --> 0:08:12.040 played off fantastically. It was I had a next door 0:08:12.040 --> 0:08:14.200 neighbor that was four years ahead of me in school. 0:08:15.440 --> 0:08:17.840 And I had no brothers, three sisters, and he was 0:08:17.880 --> 0:08:21.040 one of four brothers. And here are extremely close friends. 0:08:21.040 --> 0:08:22.960 But he's four years older than me in the same 0:08:23.000 --> 0:08:26.280 way that that Munger was six or seven years older 0:08:26.320 --> 0:08:29.800 than six years older than Warren. But yet you know, 0:08:31.000 --> 0:08:33.720 we met and we were finishing each other sentences. And 0:08:33.760 --> 0:08:36.319 that's the way these guys were. They were finishing each 0:08:36.320 --> 0:08:38.440 other sentences. They'd say the first part of the sentence 0:08:38.440 --> 0:08:39.880 and they didn't have to continue because the other guy 0:08:39.880 --> 0:08:41.640 already knew what the rest of the sentence was going 0:08:41.720 --> 0:08:41.880 to be. 0:08:41.920 --> 0:08:43.760 Which is that kind of relationship. 0:08:43.360 --> 0:08:45.520 We know, Bouhire, I'm so glad you're with us because 0:08:45.520 --> 0:08:48.679 we've been reading from your obituary NonStop for the last 0:08:48.720 --> 0:08:52.320 hour here. And you know, to Bill's point about this 0:08:52.480 --> 0:08:55.920 idea of common sense and not you know, not always 0:08:56.000 --> 0:09:00.480 needing to be liked. You mentioned this some of his donations, 0:09:00.520 --> 0:09:03.000 and this one's this one's at the top of mind 0:09:03.000 --> 0:09:06.760 from him because it's it's relatively recent, forty five person 0:09:06.800 --> 0:09:10.640 dorm on UCSB's campus, which actually got a lot of 0:09:10.640 --> 0:09:14.640 people interested in dormitory architecture who didn't think that they 0:09:14.640 --> 0:09:17.480 would actually be interested in dormitory architecture. But you know, 0:09:17.520 --> 0:09:20.520 here Munger is trying to solve this problem of student housing, 0:09:20.960 --> 0:09:22.880 and he got a lot of blowback to this idea 0:09:22.920 --> 0:09:24.480 and ultimately they canceled it. 0:09:24.720 --> 0:09:29.800 What happened, Yeah, I mean, look, in his later years, 0:09:30.920 --> 0:09:33.800 Munger used these donations that he gave the universities to 0:09:34.440 --> 0:09:38.439 play architect I mean, he was deeply, deeply interested in architecture, 0:09:38.640 --> 0:09:45.320 and you know, he had some pretty unconventional ideas that 0:09:46.360 --> 0:09:49.880 I think really bothered people and it became its own 0:09:50.240 --> 0:09:53.280 you know, subplot. It's all right, But like you have 0:09:53.360 --> 0:09:59.920 to understand, for Munger, he was a incredibly wide widely 0:10:00.080 --> 0:10:05.720 read person. He wasn't as narrowly interested in investing and 0:10:06.520 --> 0:10:08.520 you know, how to make money. Obviously he spent a 0:10:08.559 --> 0:10:11.000 lot of time doing that, but he had an interest 0:10:11.040 --> 0:10:13.679 outside of it. The other thing I wanted to add 0:10:13.720 --> 0:10:15.800 and the stakes within a slightly different direction. But like 0:10:16.360 --> 0:10:19.319 you know, for all that Munger would you know, sit 0:10:19.440 --> 0:10:21.960 up on stage and sort of act as the skold 0:10:22.040 --> 0:10:27.000 and the curmudgeon next to Buffet. He did have a 0:10:27.160 --> 0:10:30.200 you know, a generous heart, and you know, when you 0:10:30.240 --> 0:10:34.000 talk to people who spent time with Charlie. You know 0:10:34.240 --> 0:10:39.280 he was He was a deeply nice and caring person 0:10:39.440 --> 0:10:42.439 and you know, on some level this sort of curmudgeon 0:10:44.120 --> 0:10:46.480 stance he would take on stage and in public sometimes 0:10:46.600 --> 0:10:49.080 was was a bit of an act, but like you know, 0:10:49.360 --> 0:10:51.040 it helped him make his points. 0:10:51.920 --> 0:10:55.160 So, Bill, how do you think about you know, Berkshire 0:10:55.160 --> 0:10:57.960 hath the way going forward? They've obviously thought about succession 0:10:58.120 --> 0:11:01.800 and there's Augy, Jane and Greg, but I do think 0:11:01.840 --> 0:11:05.160 about you know, Warren without Charlie, yes, and what the 0:11:05.200 --> 0:11:06.320 impact that might be. 0:11:07.040 --> 0:11:07.480 Yeah, So. 0:11:10.320 --> 0:11:18.880 Charlie and Warren have set a team together to to 0:11:19.160 --> 0:11:21.640 kind of come in. They've got two talented stock pickers 0:11:21.640 --> 0:11:25.760 in the wings. I'm guessing that this will be when 0:11:26.040 --> 0:11:29.839 when they begin to emerge at the annual meeting. Greg 0:11:29.840 --> 0:11:33.520 Abel runs the operating businesses, and Todd Combs and Ted 0:11:33.559 --> 0:11:38.320 Westlers are running about thirty billion dollars other important that's 0:11:38.400 --> 0:11:41.520 who we think bought the home builders for example, because 0:11:41.559 --> 0:11:45.760 it was smaller quantities than buff Advice, and so that 0:11:45.840 --> 0:11:53.719 will cause their emergence. But Charlie's acerbic common sense and sensibility, 0:11:54.600 --> 0:11:57.400 there's just not going to be any replacing that talent. 0:11:57.760 --> 0:12:06.960 He was a genius in that uh his uh he he. 0:12:06.960 --> 0:12:11.440 He would look at the situation and hit it only 0:12:11.720 --> 0:12:16.640 with the best logic right, each situation, regardless of who 0:12:16.720 --> 0:12:19.560 might be offended by the logic of it. So he'd 0:12:19.640 --> 0:12:25.439 quote scripture and and then he'd support abortion rights right. So, 0:12:26.000 --> 0:12:29.720 but logically, you know, he was trying to solve a 0:12:29.800 --> 0:12:34.839 problem with money. And the architecture thing just brings back 0:12:34.880 --> 0:12:38.679 to mind that he graduated from Harvard Law School and 0:12:38.840 --> 0:12:45.080 cal Tech and was an architect and and he was 0:12:45.440 --> 0:12:48.760 the most he was the renaissance man. 0:12:48.960 --> 0:12:50.240 Kind of different sides of the brain. 0:12:50.559 --> 0:12:59.080 Oh, just unbelievable mixture of mental model talent, just amazing, 0:12:59.400 --> 0:13:02.680 uh he he. His family called him a book of 0:13:02.800 --> 0:13:06.400 with legs because he's always reading. Our podcast is called 0:13:06.400 --> 0:13:08.640 a book with legs because my son Cole is a 0:13:08.679 --> 0:13:12.320 gigantic Charlie Munger fan, and that's what that's what we 0:13:12.400 --> 0:13:15.360 call the podcast. We interview authors of books, so we 0:13:15.440 --> 0:13:16.800 call it a book with legs. 0:13:16.920 --> 0:13:21.000 And he's quoted in Noah's story. Noah. We'll obviously be 0:13:21.040 --> 0:13:26.360 talking this all week and then some another thought, you know, 0:13:26.400 --> 0:13:30.600 as you were putting together Charlie's story, you know, for 0:13:30.600 --> 0:13:33.199 for Bloomberg, what jumps. 0:13:32.920 --> 0:13:36.560 Out for you here, Well, I think you know, to 0:13:36.640 --> 0:13:40.480 your point of what's next for Berkshire, it's a fundamentally bigger, 0:13:40.640 --> 0:13:43.720 different place than you know where he and Buffett started. 0:13:44.160 --> 0:13:49.720 So while you know, a mini levels manger is not replaceable, 0:13:49.800 --> 0:13:53.319 there are a lot of things that he and Buffett 0:13:53.320 --> 0:13:56.600 pioneered together that that you know, there's a lot of 0:13:56.920 --> 0:13:59.240 there's a lot of that's been written, there's a lot 0:13:59.360 --> 0:14:02.240 that has been and passed on based in the way 0:14:02.280 --> 0:14:07.840 that these guys did thing. And you know, again, Berkshire 0:14:07.920 --> 0:14:15.360 is a huge company now with different needs, but a 0:14:15.360 --> 0:14:19.200 lot of the ways that Munger and Buffett think about 0:14:19.200 --> 0:14:22.200 the company are you know, certainly going to live on. 0:14:22.280 --> 0:14:25.640 Right exactly what Munger said in late twenty twenty one 0:14:26.160 --> 0:14:30.400 that this was the largest financial euphori episode in his career, 0:14:30.880 --> 0:14:33.520 which was seventy five years. And then at the annual 0:14:33.520 --> 0:14:37.440 meeting this year he said, I really don't think stocks 0:14:37.440 --> 0:14:39.360 are going to do very well the next ten years, 0:14:39.640 --> 0:14:43.240 and then Buffett, I love this. Buffett chimes in he goes, well, 0:14:43.400 --> 0:14:45.400 if I was running smaller amounts of money, I think 0:14:45.480 --> 0:14:49.680 I still think I could do really well, which was 0:14:49.720 --> 0:14:54.360 heartening to us because our five billion dollars is smaller 0:14:54.400 --> 0:14:55.200 amounts of money. 0:14:55.280 --> 0:14:58.080 So you're like, okay, okay, we got a chance. 0:14:59.280 --> 0:15:01.840 Priceless and thank you for coming back. Bill Smeeaed. We've 0:15:01.840 --> 0:15:04.120 talked to you over the years. We've heard you talk 0:15:04.160 --> 0:15:07.200 about Berkshire, Warren Buffett and Charlie Munger. So great to 0:15:07.200 --> 0:15:08.920 get you to wag and be well. Bill Smeaed of 0:15:08.960 --> 0:15:12.440 Smeed Cappel Investment and of course our no boohire read 0:15:12.520 --> 0:15:15.160 his story on Charlie Munger. It's on the terminal and 0:15:15.160 --> 0:15:17.520 at Bloomberg dot com. Noah, thank you so much of 0:15:17.560 --> 0:15:19.640 Bloomberg News. This is Bloomberg Radio. 0:15:20.520 --> 0:15:24.080 You're listening to the Bloomberg Business Week Podcast. Catch us 0:15:24.120 --> 0:15:27.480 live weekday afternoons from three to six Eastern Listen on 0:15:27.520 --> 0:15:31.560 Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app, 0:15:31.840 --> 0:15:33.520 or watch us live on YouTube. 0:15:34.480 --> 0:15:38.640 Some big news and financial services we talked about Apple 0:15:38.760 --> 0:15:41.240 and Goldman Sachs credit card partnership might be coming to 0:15:41.240 --> 0:15:44.760 an end. Apple recently sending a term sheet to the 0:15:44.760 --> 0:15:47.320 financial giant that would be a first step towards severing 0:15:47.360 --> 0:15:49.960 the contract. This is going to a person familiar with 0:15:50.000 --> 0:15:53.360 the matter. Apple, you know this right among those, But 0:15:53.440 --> 0:15:55.320 this is one of the big players looking to disrupt 0:15:55.360 --> 0:15:59.200 financial services by offering its own high yield savings account product, 0:15:59.200 --> 0:16:02.800 financing a credit card, Apple cash, and more. Yep, they 0:16:02.840 --> 0:16:05.120 know fintech disruption. There's a lot out there. 0:16:05.240 --> 0:16:05.440 Yeah. 0:16:05.440 --> 0:16:07.720 Well, someone else who's looking at disrupt financial services is 0:16:07.800 --> 0:16:11.280 Chris Britt, founder and CEO of the privately held fintech Chime. 0:16:11.720 --> 0:16:14.880 Chime offers consumers checking accounts with no monthly fees. They've 0:16:14.880 --> 0:16:17.640 got savings accounts, products such as secured credit card that 0:16:17.640 --> 0:16:20.280 helps users build credit and more. Chime says it has 0:16:20.360 --> 0:16:23.520 quote millions of members and back in twenty twenty one, Carol, 0:16:23.520 --> 0:16:26.280 when Chime last raised money, it was valued at twenty 0:16:26.400 --> 0:16:27.400 five billion dollars. 0:16:27.400 --> 0:16:29.520 Well, Chris joins us on Zoom from San Francisco. The 0:16:29.560 --> 0:16:32.720 company officially to launching the Chime scholars Foundation, which we 0:16:32.720 --> 0:16:35.320 will get to in a moment. Chris, great to have 0:16:35.400 --> 0:16:38.760 you here with Tim and myself. Hope you're well. Tell 0:16:38.840 --> 0:16:40.640 us a little bit about the environment for your business, 0:16:40.680 --> 0:16:43.120 because it sounds like you guys have a very front 0:16:43.160 --> 0:16:45.080 row seat if you will, to what's going on with 0:16:45.120 --> 0:16:46.120 the consumer right now. 0:16:46.360 --> 0:16:48.240 Yeah, sure, thanks for having me in the thrill to 0:16:48.360 --> 0:16:52.040 announce the foundation. But in terms of the consumer trends 0:16:52.080 --> 0:16:54.800 that we're seeing, Yeah, you know, we serve millions of consumers, 0:16:54.840 --> 0:16:56.120 and I think the. 0:16:57.800 --> 0:16:59.000 Relationship that we have with. 0:16:58.960 --> 0:17:01.320 Our members is is that they use Chime as their 0:17:01.320 --> 0:17:05.239 primary bank account and primary way that they do their 0:17:05.320 --> 0:17:08.159 day to day spending. So we actually do, you know, 0:17:08.200 --> 0:17:09.719 see a lot of we do have a front row 0:17:09.760 --> 0:17:14.480 seat to transaction activity balances. You know, I'd say we're 0:17:14.520 --> 0:17:17.480 starting to see a little bit of a weakening among 0:17:17.520 --> 0:17:22.119 the consumer that we see. You know, we've seen balances 0:17:22.160 --> 0:17:25.000 declined slightly, probably down about five percent year over year, 0:17:25.359 --> 0:17:28.240 but at the same time, we're still seeing spending that's 0:17:28.280 --> 0:17:29.600 been really solid. 0:17:29.640 --> 0:17:33.400 It's up you know, six seven percent year over year. 0:17:33.640 --> 0:17:36.439 And again, you know, our members mostly use Chime for 0:17:36.480 --> 0:17:40.920 their everyday sort of non discretionary purchases, so in many ways, 0:17:40.920 --> 0:17:43.640 we're insulated from you know, you know, ups and downs 0:17:43.640 --> 0:17:46.320 of the economy because people use our cards for their 0:17:46.320 --> 0:17:50.840 everyday you know, grocery transactions and daily habits that you know, 0:17:50.920 --> 0:17:52.800 really help you know, fuel our business. 0:17:52.920 --> 0:17:56.200 Chris, are you seeing their spending patterns change, like what 0:17:56.240 --> 0:17:59.439 they're actually spending money on this year versus what they 0:17:59.440 --> 0:18:02.360 were spending money on in twenty twenty twenty twenty one 0:18:02.560 --> 0:18:05.080 in twenty twenty two. Has that mix changed. 0:18:05.200 --> 0:18:06.080 Oh for sure. 0:18:06.240 --> 0:18:09.280 I mean we're seeing more and more just a normalization 0:18:09.560 --> 0:18:12.679 of the economy and where spend is happening. So you're 0:18:12.680 --> 0:18:15.840 seeing things like ride share at uber and Lyft is 0:18:15.920 --> 0:18:19.520 up pretty, you know, pretty significantly year over year. You're 0:18:19.520 --> 0:18:23.920 seeing more spending for you know, concerts and restaurants and 0:18:24.160 --> 0:18:28.040 and and those sorts of activities, and I you know, 0:18:28.160 --> 0:18:31.000 it's it's a well needed, you know, sort of normalization 0:18:31.320 --> 0:18:35.520 of you know, just getting back to post post COVID 0:18:35.560 --> 0:18:38.040 transaction activity and that's been really healthy, you know. At 0:18:38.040 --> 0:18:40.840 the same time, you know, we still see unemployment rates 0:18:40.880 --> 0:18:44.480 that are really really low. So and you know, we 0:18:44.520 --> 0:18:46.639 serve consumers that make up to about one hundred thousand 0:18:46.640 --> 0:18:48.800 dollars is just generally the sweet spot. 0:18:48.560 --> 0:18:49.080 That we serve. 0:18:49.320 --> 0:18:52.920 And those consumers can generally get jobs and they sign 0:18:53.000 --> 0:18:55.960 up for Chime accounts, they get direct deposit, and they 0:18:56.040 --> 0:18:57.560 use us for everyday transaction. 0:18:57.720 --> 0:19:00.840 So you know, I wouldn't say our business is countercyclical. 0:19:00.920 --> 0:19:03.719 But it's very resilient to you know, be able to 0:19:03.760 --> 0:19:05.840 withstand you know, ups and downs in the economy. 0:19:05.960 --> 0:19:08.720 Chris, are you because people use this for direct reposit 0:19:09.000 --> 0:19:14.800 for their salaries, for their paychecks, are you seeing are 0:19:14.840 --> 0:19:17.840 you seeing people lose jobs? Are you seeing them jump 0:19:17.840 --> 0:19:21.440 around more, jump around less? What can what can your 0:19:21.520 --> 0:19:25.560 data tell us about job hopping and the strength of 0:19:25.880 --> 0:19:27.720 the economy for those chime users? 0:19:28.280 --> 0:19:32.119 Well, look as you as you move down the income spectrum, 0:19:32.400 --> 0:19:36.880 there certainly is more turnover and more change in how 0:19:36.920 --> 0:19:40.240 and where people work and receive direct deposits. So we 0:19:40.320 --> 0:19:44.399 naturally we always see a little bit more turnover. You know, 0:19:44.520 --> 0:19:47.280 then you might if if the consumers that you served 0:19:47.280 --> 0:19:49.520 made hundreds of thousands of dollars a year a year, 0:19:51.400 --> 0:19:53.920 But like I said, it's still very healthy people. Can 0:19:54.080 --> 0:19:56.679 you know, there's jobs out there for people, they're readily 0:19:56.720 --> 0:20:00.159 available and and a lot of people have you know, 0:20:00.200 --> 0:20:05.560 multiple sources of income. That trend hasn't that's been pretty consistent. 0:20:05.600 --> 0:20:07.560 I would say, you know, where people might have a 0:20:07.600 --> 0:20:10.439 little bit of gig gig work for a side hustle, 0:20:10.480 --> 0:20:12.880 but still you know, the primary wages you know come 0:20:12.880 --> 0:20:17.960 from a corporation or you know office job that they have. 0:20:19.400 --> 0:20:21.280 You know, people are particularly. 0:20:20.920 --> 0:20:23.760 In our in our portfolio of members that we serve, 0:20:23.840 --> 0:20:31.760 they're just amazing, amazing people that are resilient and you know, 0:20:32.520 --> 0:20:35.080 can can go out and hustle and and you know, 0:20:35.119 --> 0:20:37.439 get the work and get the job that they that 0:20:37.480 --> 0:20:40.840 they need to help their families and move their financial 0:20:40.880 --> 0:20:41.399 lives forward. 0:20:41.480 --> 0:20:43.520 Hey, Chris, for those who might not be familiar though, 0:20:43.520 --> 0:20:45.439 with time, just remind us how it all kind of 0:20:45.480 --> 0:20:47.800 works and how what is the business of time and 0:20:47.800 --> 0:20:48.919 how you guys make money. 0:20:49.359 --> 0:20:53.639 So Chime exists to unite everyday people to help unlock 0:20:53.680 --> 0:20:57.199 their financial progress. And we do that by starting with 0:20:57.320 --> 0:21:00.480 offering a core checking account, a deposit account that you know, 0:21:00.560 --> 0:21:04.240 China is not a bank. We partner with primarily two 0:21:04.560 --> 0:21:07.720 fd I C insured banks that hold the deposits. What 0:21:07.720 --> 0:21:11.399 we're really good at is creating you know, really easy 0:21:11.440 --> 0:21:15.960 to use, intuitive, low fee services and a tech you know, 0:21:16.080 --> 0:21:18.639 end to end tech technology stack and and sort of 0:21:18.680 --> 0:21:22.840 operate all aspects of the consumer interaction, primarily through an app. 0:21:22.920 --> 0:21:25.280 So we don't you know, have the cost burden of 0:21:25.400 --> 0:21:27.960 a heavy you know, sort of branch infrastructure we're able 0:21:28.000 --> 0:21:31.399 to operate at a very low cost structure. And then 0:21:31.440 --> 0:21:34.160 what we do is we deliver to these to these 0:21:34.200 --> 0:21:37.920 members that we serve fee free checking accounts, so there's 0:21:37.960 --> 0:21:40.159 no there's no fee associated with you know, having the 0:21:40.200 --> 0:21:43.239 core underlying depositive account. We give them access to their 0:21:43.280 --> 0:21:45.800 paycheck a few days early. We give them free overdraft 0:21:45.840 --> 0:21:49.359 services and other services to help them with liquidity, and 0:21:49.400 --> 0:21:52.000 we also help them with credit building. So that combination 0:21:52.080 --> 0:21:54.520 of services has really resonated with millions of people. 0:21:54.400 --> 0:21:56.720 That rely on But you make money by getting a 0:21:56.760 --> 0:21:59.240 fee on what every transaction that they do off that account. 0:21:59.280 --> 0:21:59.800 Is that correct? 0:22:00.000 --> 0:22:01.600 You know, we have a few sources of income, but 0:22:01.680 --> 0:22:03.920 that is a very large part of our of our 0:22:03.960 --> 0:22:07.480 revenue is the interchange that is earned when consumers use 0:22:07.680 --> 0:22:10.720 their Chime cards for their everyday purchases. And what we 0:22:10.840 --> 0:22:13.479 like about that model is that it's very aligned with 0:22:13.520 --> 0:22:16.840