Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is Bloomberg business Week inside from the reporters and
Speaker 2: editors who bring you America's most trusted business magazine, plus
Speaker 2: global business, finance and tech news. The Bloomberg Business Week
Speaker 2: Podcast with Carol Messer and Tim Stenebek from Bloomberg Radio.
Speaker 3: Hi, everyone, Welcome to the Bloomberg Business Week Weekend Podcast.
Speaker 3: Well that's it. Summer is officially over, though Carol Masser
Speaker 3: is out taking a nice September vacation. The kids are
Speaker 3: back in school, the leaves are starting to turn, the
Speaker 3: presidential campaigns are in a full sprint until November. The
Speaker 3: August payrolls report has come and gone, and the US
Speaker 3: Open is wrapping up after another exciting two weeks. And
Speaker 3: we were reminded early in the week that September has
Speaker 3: traditionally been a terrible month for traders. Will this September
Speaker 3: prove differently. We're going to have to wait and see.
Speaker 3: We begin, though, with news from the chip space. This week,
Speaker 3: Bloomberg reported that the Department of Justice subpoena chip giant
Speaker 3: in Nvidia over the company's acquisition of run Ai and
Speaker 3: other aspects of its chip business. Nvidia has since said
Speaker 3: that it's been in contact with the Justice Department, but
Speaker 3: has not been subpoenaed. The story still developing in other
Speaker 3: chip news, the Biden Harris Administration's big bet on Intel
Speaker 3: to lead a US chip making renaissance is in grave trouble.
Speaker 3: This as a result of the company's mounting financial struggles.
Speaker 3: It creates a potentially damaging setback for the country's most
Speaker 3: ambitious industrial policy in decades. We're talking about the twenty
Speaker 3: twenty two Chips and Science Act. Under the Act, Intel
Speaker 3: was set to receive eight and a half billion dollars
Speaker 3: in grants and eleven billion dollars in loans, but only
Speaker 3: if the chip maker meets key milestones. For more on
Speaker 3: Intel struggles, Emily GRIFFEO and I turned to Mackenzie Hawkins.
Speaker 3: She's Bloomberg News US Economic and Industrial policy reporter.
Speaker 4: So President Joe Biden to Intel's factory site in Arizona
Speaker 4: in March and announce this massive grant and loan package
Speaker 4: from the Chips ACKed and what could be and would
Speaker 4: be the program's largest award. And Intel, like more than
Speaker 4: a dozen other companies that are supposed to receive US
Speaker 4: government subsidies, is in the middle of a pretty intense
Speaker 4: due diligence process that comes after reaching that preliminary agreement
Speaker 4: earlier this year, and once the company signs a final
Speaker 4: term sheet and hits milestones on each of four projects
Speaker 4: that Intel's Chipsacked award is supposed to support, they could
Speaker 4: start to receive funding from the government in the form
Speaker 4: of a reimbursement for companies spending. But Intel has resisted
Speaker 4: certain due diligence requests from the Biden administration and had
Speaker 4: a pretty disastrous financial report early last month that calls
Speaker 4: into question whether the company will ever be able to
Speaker 4: reach the milestones that would trigger that disbursement in the
Speaker 4: first place.
Speaker 5: So what is the US really looking here when it's
Speaker 5: examining these milestones, Like, what exactly are the milestones that
Speaker 5: Intel has to meet?
Speaker 4: So the government has been actually pretty quiet on the milestones.
Speaker 4: They're very bespoke arrangements that go on not just a
Speaker 4: company by company basis, but a project by project one.
Speaker 4: So in Intel's portfolio, for example, you have everything from
Speaker 4: an R and D facility in organ to a small
Speaker 4: packaging project in New Mexico, and each of those facilities
Speaker 4: have different timelines, different milestones and different portions of Intel's
Speaker 4: grant that would fund those projects. But across the board,
Speaker 4: one of the key metrics for the Biden administration is
Speaker 4: general commercial viability, and the best way for a company
Speaker 4: to demonstrate that is by lining up major customers. So
Speaker 4: if you compare Intel to a company like Taiwan's TSMC,
Speaker 4: which is widely regarded to have the world's best semiconductor
Speaker 4: technology and has orders from pretty much every major tech
Speaker 4: name in the books, Intel doesn't actually have any major
Speaker 4: customers lined up for its US facilities. It has some
Speaker 4: interest from companies including Media Tech, Broadcomm, and Microsoft, but
Speaker 4: none of them have reached full production yet. The Commerce
Speaker 4: Secretary herself actually reached out to executives out in Nvidia
Speaker 4: and AMD and asked them to consider manufacturing it Intel's
Speaker 4: oh Hiho facility, which could become the world's largest chip
Speaker 4: making factory if it's fully built out, and neither company plans.
Speaker 6: To do so.
Speaker 3: Hey mackenzie, how did this story change just in the
Speaker 3: last month. Because of the beginning of August, Intel reported
Speaker 3: earnings and it was the worst single day in decades.
Speaker 3: As you note, two major credit raterers downgraded the firm's
Speaker 3: debt to just a few notches above junk. The chip
Speaker 3: maker also slashing about fifteen thousand jobs. How did this
Speaker 3: story change just in the last month.
Speaker 4: The process that Intel's going through right now, which is
Speaker 4: the preliminary agreement followed by months of due diligence ahead
Speaker 4: of a final award, was always the process that the
Speaker 4: company was going to go through. But of the entire
Speaker 4: chipsack portfolio, which includes companies like TSMC, Samsung, sk Heinex, Micron,
Speaker 4: Intel has perhaps seen the biggest change in the company
Speaker 4: position in the industry from when that preliminary agreement was
Speaker 4: announced to now. And so we're in a bit of
Speaker 4: a holding pattern. The Biden administration and just about everybody
Speaker 4: else else are waiting to see what the company will do,
Speaker 4: and they're set to evaluate options at a mid September
Speaker 4: board meeting. So if the company does something like split
Speaker 4: off its manufacturing division or scale back its global factory plans,
Speaker 4: that could have an impact on its negotiations with the
Speaker 4: Biden administration. And to put a finer point on it,
Speaker 4: if and there is an indication yet that this is happening,
Speaker 4: but if the company does decide to pair back any
Speaker 4: of its US plans specifically that would almost certainly cause
Speaker 4: a reduction in its overall chipsack.
Speaker 5: Toward I'm wondering if maybe we can zoom out, just
Speaker 5: for people who are just tuning in now, why has
Speaker 5: Intel not been able to kind of capture that frenzy
Speaker 5: that there is, at least in the market for semiconductors,
Speaker 5: you know in videas the top performing stock in the
Speaker 5: S and P five hundred. It's been a huge theme
Speaker 5: this year, and yet we have Intel, which is a
Speaker 5: very well known name, and it just hasn't been able
Speaker 5: to ride that wave. The stock is down something like
Speaker 5: sixty percent year to date. Just get us up to
Speaker 5: speed on exactly what they're missing.
Speaker 4: So you know, Intel is an American technological giant. This
Speaker 4: is the company that gave Silicon Valley its name, but
Speaker 4: there have been several years of strategic and technological blunders.
Speaker 4: That CEO Pat Gelsinger came into leadership of the company
Speaker 4: aiming to turn around with a massive bet on Intel's
Speaker 4: factory division for factories that are known as foundries in
Speaker 4: chips peak. But the foundry business has struggled. They posted
Speaker 4: a seven billion dollar loss last year and they missed
Speaker 4: out on a big AI wave that companies like TSMC
Speaker 4: have been able to ride, and so now Intel is
Speaker 4: sort of playing catch up against foreign competitors and their
Speaker 4: technology still lags several generations behind the cutting edge, and
Speaker 4: they've struggled to convince major other players in the industry,
Speaker 4: who get the bulk of their orders for AI chips
Speaker 4: from the industry leader TSMC, to take a bet on
Speaker 4: their factory processes. So it's a bit of a spiral
Speaker 4: for Intel right now as they're trying to convince investors,
Speaker 4: convince the gu government, and convince industry that their technology
Speaker 4: is worth taking a bet on.
Speaker 3: McKenzie on the US side of this, the US government
Speaker 3: side of this, the support that Intel was set to
Speaker 3: get from the US government is set to get from
Speaker 3: the US government. What does the US government want to see?
Speaker 3: Is this about jobs? Is about security? Is it about both?
Speaker 4: So if we go thirty thousand foot and look at
Speaker 4: the Chips Act overall, this was a landmark law that
Speaker 4: was that President Joe Biden signed just about two years ago,
Speaker 4: two years ago last month, and the goal is basically
Speaker 4: to bring manufacturing of these critical electronic components back to
Speaker 4: the US chips are in everything you could think of,
Speaker 4: from a microwave to a phone to a nuclear missile,
Speaker 4: and for decades the US has ceded manufacturing leadership to Asia.
Speaker 4: The pandemic revealed to everybody how important ships are. You know,
Speaker 4: it was a shortage of even less advanced ships that
Speaker 4: caused auto supply lines to shut down during COVID and
Speaker 4: governments around the world, not just the US, but from
Speaker 4: the EU to South Korea, to Japan to Taiwan too.
Speaker 4: Of course, China has decades of industrial policy in this area.
Speaker 4: Are really doubling down and trying to make sure that
Speaker 4: they have a stable and secure domestic manufacturing base for
Speaker 4: both economic and national security. The jobs, of course, are
Speaker 4: an added bonus, but this isn't a jobs program. The
Speaker 4: goal is to get the world's top chip makers, and
Speaker 4: the US has gotten commitments from all of them, including Intel,
Speaker 4: to build significant manufacturing presence on US soil so that
Speaker 4: the country can make a fifth of the world's most
Speaker 4: advanced processors by the end.
Speaker 7: Of the decade.
Speaker 3: But you say, you write your piece that this is
Speaker 3: a long process. I mean you go back to the
Speaker 3: Obama administration and Intel was talking with the Obama administration
Speaker 3: for something that they ended up building and touting during
Speaker 3: the Trump administration.
Speaker 4: That's right, and you know, one of the big difficulties
Speaker 4: facing the Biden administration is, you know, they're looking at
Speaker 4: point in time company financials and market conditions. But this
Speaker 4: is an intensely cyclical industry. And as much as companies
Speaker 4: would like to make promises to politicians, you know, they'd
Speaker 4: love to stand with Biden at a build signing or
Speaker 4: go to the Oval Office, the reality is that they're
Speaker 4: beholden to their shareholders and to their customers. And so
Speaker 4: you have a strategy employed not just by Intel but
Speaker 4: by other major companies as well, to build factory shells,
Speaker 4: do what has cost billions of dollars but is actually
Speaker 4: the cheap part of the process, and only outfit them
Speaker 4: with actual equipment when they can see, you know, six
Speaker 4: months down the line, nine months down the line, exactly
Speaker 4: what their demand picture is going to look like. And
Speaker 4: so right now you're starting to see a lot of
Speaker 4: the signs that you would want to see if the
Speaker 4: country were going to meet it's, you know, a decade
Speaker 4: end goal of making all of these chips at home,
Speaker 4: but that's in factory construction not in actual equipment purchases,
Speaker 4: and so there are a lot of other indicators to
Speaker 4: watch to see whether companies will actually make good on
Speaker 4: their production plans in the timelines that they have set
Speaker 4: out with the administration.
Speaker 5: I wanted to talk about that timeline. What do we
Speaker 5: know about what's next for Intel and how much time
Speaker 5: they do have before they would be set to receive
Speaker 5: those billions of dollars in grants.
Speaker 4: Intel would love to the answer to that question very
Speaker 4: active negotiation. You know, there are companies that are quite close,
Speaker 4: but we haven't actually seen any chips sacked money go
Speaker 4: out the door. All of the announcements, of which there
Speaker 4: are more than thirty billion dollars committed, have been in
Speaker 4: the form of these preliminary agreements like the one that
Speaker 4: I described Biden announcing for Intel in March, and so
Speaker 4: all of the companies are going through due diligence, actively
Speaker 4: hashing out the specific dollars and cents that are correlated
Speaker 4: with you know, X production milestone, X customer commitment, and
Speaker 4: it's you know, a very company by company basis, and
Speaker 4: so really what Intel is feeling right now is not
Speaker 4: necessarily like, oh, we're worried our chips ACKed award is
Speaker 4: going away. That would only happen if their US factories
Speaker 4: went away, and intil hasn't made any decision to that effect.
Speaker 4: But it's about the timing. Intel has a balance sheet
Speaker 4: that's in pretty dire strait and they want to get
Speaker 4: this money as quickly as possible. But that'll only happen
Speaker 4: if they cooperate with due diligence. They have resisted some
Speaker 4: requests from the Biden administration so far, and of course
Speaker 4: if the actually get their factories off the ground, which
Speaker 4: requires the company to invest billions of dollars itself.
Speaker 3: To what extent does the US government need Intel to succeed?
Speaker 3: I'm not asking if it's like too big to fail,
Speaker 3: but is it too important to fail?
Speaker 4: Intel's crucial to the overall Chips Act effort. There are
Speaker 4: only three companies that make the types of advanced processors
Speaker 4: that the US is really really focused on in this effort,
Speaker 4: and that's Intel, Samsung, and TSMC, And both of the
Speaker 4: latter companies are building factories on US soil. But to
Speaker 4: get to a fifth of the world's production, especially when
Speaker 4: governments around the globe are trying to do the same thing,
Speaker 4: you really need these large scale commitments like the ones
Speaker 4: that Intel is making. I mean they're planning multiple fabs
Speaker 4: in Ohio and multiple fab expansions in Arizona. So to
Speaker 4: potentially lose those projects or to see them delayed, which
Speaker 4: again we don't really know what's going to happen on
Speaker 4: that front, would be a pretty massive blow to the
Speaker 4: overall ambition of the program. Intel's also the only American
Speaker 4: maker of these chips, which the Pentagon has decided as
Speaker 4: really crucial for Department of Defense supply chains, and Intel's
Speaker 4: the sole intended beneficiary of a three and a half
Speaker 4: billion dollar program to stand up a secure facility to
Speaker 4: make semiconductors for military and intelligence purposes.
Speaker 8: So will the.
Speaker 4: Ships Act fail if Intel fails? No, there are hundreds
Speaker 4: of companies that were interested in the money. More than
Speaker 4: a dozen awards have already been announced. But it's impossible
Speaker 4: to overstate how critical Intel's investments are to not just
Speaker 4: the company's turnaround plan, but also the Biben administration's goals.
Speaker 3: Mackenzie Hawkins, Bloomberg News US Economic and Industrial Policy reporter.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 2: Live weekday afternoons from two to five pm Eastern Listen
Speaker 2: on Apple, card Play and and Broud Auto with a
Speaker 2: Bloomberg business act or want us live on YouTube.
Speaker 3: The US Open wrapping up in New York City this weekend,
Speaker 3: and this year the Grand Slam saw a record breaking attendance,
Speaker 3: cementing itself as a can't miss summer event for not
Speaker 3: only the casual fan, but celebrity influencers, well connected New Yorkers,
Speaker 3: some titans of finance, some of them there to watch
Speaker 3: incredible tennis, some there to see and be seeing. It's
Speaker 3: also perhaps my favorite sporting event of the year because
Speaker 3: not only do Carol and I get to take in
Speaker 3: the festivities and watch some of the sports American stars
Speaker 3: like Francis Tiaffo, Coco Goff, and Taylor Fritz, but we
Speaker 3: also have a chance to speak with someone who understands
Speaker 3: tennis elite athletes in the world of sports like pretty
Speaker 3: much nobody else. John Wertheim is executive editor and senior
Speaker 3: writer at Sports Illustrated and correspondent for The Tennis Channel.
Speaker 3: He joined us at the US Open.
Speaker 9: You know, Kennis, that's this weird point where Roger Feeder
Speaker 9: is retired Titan player, everyone loved him. Not here, Florida
Speaker 9: Williams Titan not here, Rolf and the Doll not here.
Speaker 9: And I think everybody worried, Oh man, after these legends retire,
Speaker 9: what does tennis look like? Is anyone going to care
Speaker 9: about the sport? And we've kind of made uncharacteristically great,
Speaker 9: you know, graceful pivot for tennis, and the grounds are
Speaker 9: more filful than ever. The the attendance is through the roof.
Speaker 9: It's going to set a record, and it's kind of
Speaker 9: strange because we have this deficit of stars compared to
Speaker 9: what we used to have. So that's that's a story
Speaker 9: I'm looking at.
Speaker 3: So do we have the deficit of stars or are
Speaker 3: is Cocoa Goff going to be there? Is Shelton going
Speaker 3: to be there? Is Alcoraz there?
Speaker 9: I mean Alcarez could have been there? Yeah, a last
Speaker 9: he's not in the tournament. Yeah, I mean, I think
Speaker 9: they're bright prospects. I think they're fans that they're players
Speaker 9: that fans are starting to build relationships with. But you know,
Speaker 9: we're not talking about guys, you know, twenty majors. Yeah,
Speaker 9: Coco Gov's wonderful, but just one And I kind of
Speaker 9: feel like fans kind of like the unpredictability of it all,
Speaker 9: and they don't mind that any of twenty players could win.
Speaker 9: And they don't mind that Carlos Alcaraz wins two tournaments
Speaker 9: and then loses in the second round here.
Speaker 3: So in a sense, is that better for the sport?
Speaker 9: It's funny because I think the conventional wisdom is you
Speaker 9: sort of need excellence to the top. But the NFL,
Speaker 9: which is the most successful sports league certainly in the US,
Speaker 9: how's this any given Sunday theory and parody is great?
Speaker 9: Did we want all fans to think their team could
Speaker 9: get to the Super Bowl? It's kind of worked out
Speaker 9: for them. And I think tennis is sort of pleasantly
Speaker 9: surprised how well things are going in the absence of stars.
Speaker 6: Why do you think it is that way?
Speaker 10: You know, We've been talking with various folks from the
Speaker 10: USTA and they talk about the Zendaya movie Challengers and
Speaker 10: how much money it made, and you're rolling your eyes.
Speaker 9: I didn't see it. Actually, Ida's Sandaya's rate is quite high,
Speaker 9: so I don't know, you know how much it I made,
Speaker 9: But no, I think you're I think tennis is having
Speaker 9: a bit of a moment, and I think instead of
Speaker 9: tethering itself to these stars Torena, Williams, Rogers, Cetter, Rofindo,
Speaker 9: I mean, it's kind of it's about the culture, it's
Speaker 9: about the fashion, it's about the the international aspects. I
Speaker 9: mean I think some of it too is just you
Speaker 9: and I could be playing and it would still be
Speaker 9: fun to come to the US Open and watch the
Speaker 9: tennis match. Yeah, I mean this is such a big event.
Speaker 9: It's almost sort of actually.
Speaker 10: John and if I was playing, No, it wouldn't.
Speaker 9: Be if they would have honey deuces and they would
Speaker 9: have music, and it's I mean it's almost sort of
Speaker 9: they're not player dependent here the way they used to be. No,
Speaker 9: I think there's a lot to recommend about tennis. I
Speaker 9: mean I have pet theories about I think I think
Speaker 9: pickleball maybe a bit of a help that all millions,
Speaker 9: millions of people are now sort of understanding what it
Speaker 9: means to hit a slice, or they have a more
Speaker 9: appreciation for tennis because they've been bopping around a wiffle
Speaker 9: ball in their in their yards.
Speaker 3: Yeah, it's been it's been really awesome to watch and
Speaker 3: least be able to cover it over the last few years,
Speaker 3: and even in those that little bit of times, see
Speaker 3: the growth.
Speaker 6: How many opens have you covered?
Speaker 9: I'm not trying, You're doing so well, and now you've
Speaker 9: kind of it's really depressing a lot. I mean, like
Speaker 9: since the nineties.
Speaker 3: Remember the nineties, remember it was, but that was a
Speaker 3: really important era for American men's tennis.
Speaker 9: Yeah, I mean I sort of caught the very very
Speaker 9: tail end of sampress agacy, and then I sort of
Speaker 9: came up, you know, I came up with like mack and.
Speaker 10: Roe and Connor's before, and they all looked at me
Speaker 10: like I was eve I.
Speaker 9: Nineties. Yeah exactly, Oh sorry, go ahead. No, It's just
Speaker 9: funny because the game sort of takes on different identities
Speaker 9: and and it was it was tampras Agasy, and then
Speaker 9: you had the Williams sisters and you sort of had
Speaker 9: this international. I mean, I was here when Andy Ronick
Speaker 9: won and you said, oh, there's this fresh American champion
Speaker 9: and then here comes Roger feder Rofnadal and Novak Djokovic
Speaker 9: that basically ate everyone else lunch for twenty years.
Speaker 3: Look how far we've come.
Speaker 9: So look how far we've But you knew exactly think
Speaker 9: about that.
Speaker 6: Just coming off the Olympics.
Speaker 10: I was a gymnast as a young kid, and I
Speaker 10: mean to look at Simone Biles, right, and normally you
Speaker 10: have a good season, maybe you're really young, but look
Speaker 10: at like I just think there's is there something happening
Speaker 10: in sports where yeah, people can go the distance.
Speaker 6: And why not?
Speaker 9: I have two theories. You want to real quick that
Speaker 9: One of them is just it's evolution, it's sports science.
Speaker 9: I also think it appropriate for a Bloomberg audience. Tom Brady,
Speaker 9: it's commerce, it's money, it's I mean these players have
Speaker 9: I mean, you know, Billy Jean King used to come
Speaker 9: in the back of a station wagon. Now you've got players,
Speaker 9: They've got their own messuses, they've got their own teams.
Speaker 9: They're not standing in line waiting for the Hurts rental
Speaker 9: car counter to.
Speaker 3: Oh, they're getting private judge, I think exactly.
Speaker 9: And I think that has the extensions a.
Speaker 3: Career hardly because they have deals with private jet companies.
Speaker 9: Well that too. It doesn't doesn't hurt when you have
Speaker 9: that endorsement.
Speaker 10: But if they didn't play well, I mean they're playing
Speaker 10: well though.
Speaker 9: They can avail themselves to all the cold plunges and
Speaker 9: the trainers and the physios, and I mean all is
Speaker 9: Tom Brady similar? And I think Lebron James is still
Speaker 9: going strong and yeah, twenty years into this career, and
Speaker 9: I think it's because they can afford career Extenis this one's.
Speaker 6: Done a cold plunge by the.
Speaker 3: Way, Yeah, very popular, They're very popular. I I mean,
Speaker 3: who knows it to scientists, But this might be a
Speaker 3: good time to talk doping, might be all right, what's
Speaker 3: the deal?
Speaker 9: I don't in this sport. I mean, I you want
Speaker 9: my honest opinion. I believe. I believe that incentives explained
Speaker 9: an awful lot of human behavior. And I get why
Speaker 9: some athletes will dope. I get why some athletes who
Speaker 9: might be trying to, you know, have this career resurgence
Speaker 9: laid in their career with dope. I can see how
Speaker 9: young athletes. I just I don't think. I mean, obviously
Speaker 9: we're we're talking about Jon Excenter and everyone given a
Speaker 9: tournament and we have this sort of strange story where
Speaker 9: he had failed to doping tests from about five months ago,
Speaker 9: but was essentially exonerated and found no negligence, no fault
Speaker 9: because the trainer essentially was careless and use the substance
Speaker 9: that was legal in Italy but is not is on
Speaker 9: the bad list, And I just I get the skepticism.
Speaker 9: I understand sort of. There are a lot of players
Speaker 9: who are very suspicious about this. I just i'm I
Speaker 9: always look at incentives. Why would a guy with one
Speaker 9: hundred and fifty million dollars Nike deal starting his career
Speaker 9: in March when there are no major tournaments for months
Speaker 9: and months. The amount was so minuscule. It wouldn't enhance performance.
Speaker 9: It just doesn't make sense that he would intentionally dope.
Speaker 9: That may sound naive. I think they're probably mean naive
Speaker 9: to say there's no doping in tennis, But I also
Speaker 9: think it's such a sport that depends on hand eye
Speaker 9: coordination and focus and mental toughness. It's not as though
Speaker 9: putting on five pounds of muscle is really where the
Speaker 9: action is. I think the doping probably might help with
Speaker 9: recovery and with some of the CARDI again, I don't
Speaker 9: think it's one hundred percent clean. I don't think any
Speaker 9: sport is. But in this case, I just the facts
Speaker 9: of the case that the process is disturbing. It's very strange.
Speaker 9: The usually you hear about this right away. Usually there's
Speaker 9: a strict liability standard, where hey, we don't care what happened.
Speaker 9: It's in your system. You're the CEO of your system, right,
Speaker 9: you're guilty. That wasn't the case. I mean, I think
Speaker 9: there are a lot of process questions.
Speaker 3: Does that give you pause? The lack of process questions?
Speaker 9: Yeah, I mean, I think the way this handled, people
Speaker 9: are gonna have to go back and really pick this
Speaker 9: apart and figure out why it was that this guy
Speaker 9: played for five and a half months. Why wasn't there
Speaker 9: the publicity that usually accompanies some of these announcements. There
Speaker 9: are a lot of players saying, boy, I wish you
Speaker 9: know I. I tested positive too, and I also was
Speaker 9: eventually exonerated, but I had to take the reputational hit, yeah,
Speaker 9: and or I couldn't play, or I couldn't play. So
Speaker 9: I think the way this was handled raises a lot
Speaker 9: of questions. But I just, I mean, everyone's speculating. I
Speaker 9: just don't think he don't.
Speaker 3: Your point about incentives is really interesting because I didn't
Speaker 3: think you were gonna got money exactly. I thought you're
Speaker 3: going the other way. And I come from a world
Speaker 3: of cycling, where you know doping is and has been
Speaker 3: rampant for years, and you know a tenth of a
Speaker 3: second or that much more power is what ends up
Speaker 3: mattering in the end of a race. And the idea.
Speaker 3: When you said incentives, I thought, oh, incentives to win.
Speaker 3: But no, you're saying that there's too much to lose
Speaker 3: for these players.
Speaker 9: Yeah, exactly. I mean you think about how much of
Speaker 9: these players income and networks had nothing to do with
Speaker 9: prize money. It's image, it's reputation, it's what they represent,
Speaker 9: it's how they carry themselves. You are jeopardizing all of
Speaker 9: that to win a couple of tennis matches in Indian Wells,
Speaker 9: California in March. I don't I mean again, I don't
Speaker 9: want to be naive here. Everyone's one thing that's interesting
Speaker 9: about this to me is that some very credible, very knowledgeable,
Speaker 9: very reasonable former players agree with me and sort of
Speaker 9: say it doesn't make sense. The amount was so minuscule.
Speaker 9: Very credible, very reasonable, very educated former players say something's
Speaker 9: really fishy here. The amount might just be that he
Speaker 9: was cycling off of it. Don't be seduced by sort
Speaker 9: of the fractional the sort of infantesimally small amount. Don't
Speaker 9: be naive. And the guy got caught twice, what more
Speaker 9: do you need? So so even within tennis, even in
Speaker 9: the sort of inner sanctum, there's they're very divergent opinions.
Speaker 9: I just think, like, you get to a point with
Speaker 9: your reputation and your net worth and how much sponsorship
Speaker 9: you have. I mean, these players can make four or
Speaker 9: five million dollars for being a worldwide brand ambassador. That's
Speaker 9: more than the US Open champion will make. Right, why
Speaker 9: would you jeopardize that in March over this infant? I again,
Speaker 9: he is a vanishingly small amount of banned substance.
Speaker 6: Wellthough, we see in.
Speaker 10: Our world very wealthy people, financiers who have tons of
Speaker 10: money and yet do something that breaks the law just
Speaker 10: to get a little bit more money, right, And you think.
Speaker 6: Really like why did you do that? But but I
Speaker 6: hear what you.
Speaker 9: Said, Yeah, no, it's a fair point. I mean, the
Speaker 9: risk reward calculus is not always you know, rated.
Speaker 6: You know, could have been the car, Like do you
Speaker 6: blame the coach?
Speaker 9: Yeah, I mean that's sort of where this falls. Is
Speaker 9: essentially that the trainer and again the substances, it's legal
Speaker 9: in Italy, but on the box it says it says doping,
Speaker 9: so I'm not sure where and I mean someone else
Speaker 9: is So listen, your job as a trainer, what are
Speaker 9: your big jobs that you.
Speaker 6: Put it down, get it away from me?
Speaker 9: You know what?
Speaker 11: Uh?
Speaker 9: You know asprend works pretty well too. I mean there
Speaker 9: are alternatives, but Basset Tracin will cover that that cut
Speaker 9: as well. It was a really strange set of circumstances
Speaker 9: and almost a look, if you're a trainer, your number
Speaker 9: one job basically is to get anything even potentially illegal
Speaker 9: or on the band list away from the athlete. And
Speaker 9: here's a guy putting it on his hand and then
Speaker 9: giving the athlete an ungloved massage. The flip side is,
Speaker 9: I don't people do dumb things. I don't. I mean,
Speaker 9: I don't know. It's it's definitely it's been. I mean
Speaker 9: inside these doors where we are now, it's still very
Speaker 9: much being discussed.
Speaker 3: You talk about that a little bit because what we're
Speaker 3: at the Bud Collins Media Center and you go inside here,
Speaker 3: this is where all the journalists are. What's the what's
Speaker 3: the vibe been like covering this with the other journalists.
Speaker 9: Is that the story in particular.
Speaker 3: Yeah, well is that I mean, this story is still dominating.
Speaker 9: Yeah, I mean the players his initial press release and
Speaker 9: I you know, whatever we all have, we're all familiar
Speaker 9: with press releases. I look forward to putting this issue
Speaker 9: behind me. And you want to say, oh, that's oh do.
Speaker 3: You Yeah, that's not really how it was one way
Speaker 3: to keep the issue front and center.
Speaker 9: Yeah, exactly right.
Speaker 6: We know this is what you would like.
Speaker 9: I just want to move on.
Speaker 3: But that's you know, but the other players have been
Speaker 3: really supportive of him. It sounds like some of them,
Speaker 3: some of them.
Speaker 9: Yeah, I'd say it's been very guarded. Actually you think so, Yeah,
Speaker 9: I mean I think given the range, I mean sometimes
Speaker 9: sort of my guilty pleasure is UFC is fixed martial arts.
Speaker 9: There anytime someone there's a doping violation, everybody piles on
Speaker 9: and sort of says, listen this, I knew this guy
Speaker 9: was cheating. This is much more guarded. But these are
Speaker 9: sort of these very sort of meticulously worded sense. Nobody
Speaker 9: is falling on the grenade and no one's a couple
Speaker 9: of former players. Nick Curious is here and he's made
Speaker 9: a numb were of sort of incendiary statements. It's been
Speaker 9: very I've sort of been surprised at how little support
Speaker 9: he's gone. There does seem to be real questions about
Speaker 9: the process, and everyone's got a friend, everyone's got a
Speaker 9: colleague who had a similar circumstance and didn't have the
Speaker 9: luxury of six or seven figures worth of legal representation,
Speaker 9: and sort of this this cakewalk just sort of get
Speaker 9: this thing buried five and a half months later.
Speaker 10: So the money that we continue to see in sports,
Speaker 10: it's a big thing that we cover a vertical, certainly
Speaker 10: at Bloomberg a business of sports.
Speaker 6: You know, you can go a lot of different places.
Speaker 10: But this was an interesting week where the NFL said, okay,
Speaker 10: private equity, you can own a certain amount of ownership.
Speaker 10: The money that continues to come into sports, good, bad
Speaker 10: and different, Like, how do you feel about it?
Speaker 6: How do you think about it? Gambling?
Speaker 9: We'll talk about that. I mean, I think that, but
Speaker 9: I think that's it. I think it depends on the sorts.
Speaker 9: Look any any industry we like money coming in and
Speaker 9: we like we like more investment and not less. I mean,
Speaker 9: I think sports are a pretty robut US sector. I
Speaker 9: think it depends what I mean, we can there's a
Speaker 9: sportswashing component to this. Do we like money when it
Speaker 9: comes from the golf region, Well, that comes with some
Speaker 9: strings attached. Do we like money when it comes through
Speaker 9: sports gambling? And that's been a huge infusion of cash
Speaker 9: for teams and leagues and media, not so much for athletes.
Speaker 9: We can talk about that. That's been a big topic
Speaker 9: among the players and the players lounge is a sports
Speaker 9: gambling we can we can talk about that. I think
Speaker 9: media money, you know, great if if ESPN wants to
Speaker 9: re up here. I mean very few properties are actually
Speaker 9: going to come up for renewal anytime soon. But look,
Speaker 9: if the NBA can make a million dollars a season
Speaker 9: from its media rights deal, like that's great, especially when
Speaker 9: there's a fifty to fifty split with the players. So right, Yeah,
Speaker 9: I think it depends. I think in the rule of thumb,
Speaker 9: you know, commerce good, But I think it depends on
Speaker 9: the source.
Speaker 10: Tell us about the conversations that players are that's been
Speaker 10: talked in terms of gambling, because they don't necessarily get
Speaker 10: a piece of it, do they No?
Speaker 9: I mean, in this sport it's really problematic and team sports,
Speaker 9: it says fifty to fifty revenue split, right, So if
Speaker 9: the NFL does a billion dollars with DraftKings, that's half
Speaker 9: of that and theory goes to the players. Tennis does
Speaker 9: not have revenue sharing like that. They also forbid the
Speaker 9: athletes from using the product, which is standard for most sports.
Speaker 9: And what happens to tennis is that the play a
Speaker 9: big gambling sport. I mean, tennis is like the third
Speaker 9: most gambled on sport. There are millions of matches, there's
Speaker 9: flipantory all over the world. I mean it's crazy using
Speaker 9: there are two guys playing in a parking lot and
Speaker 9: there are three fans. Wi We're not talking about the
Speaker 9: US Open here. I mean there are all these low
Speaker 9: level events and they're you know, three fans watching, but
Speaker 9: they're tens of thousands of dollars being wagered on this match.
Speaker 9: It is ripe for corruption. But the what's really problematic
Speaker 9: to the players is that they get a lot of
Speaker 9: abuse from losing. Gambio. You you cow, I just lost
Speaker 9: one hundred dollars because you can't hold your serve. And
Speaker 9: the players are saying, wait a second, we don't get
Speaker 9: the revenue. We can't even use the product. That's a
Speaker 9: little problematic. I mean, you guys are getting all this
Speaker 9: endorsement money into problem. You know, the product itself forbidden
Speaker 9: from using. You guys can sell the signage and you
Speaker 9: can get the data rights deal, which basically just means
Speaker 9: selling data to bookies. And not only do we not
Speaker 9: get any revenue, we open up our phone and we
Speaker 9: have a stream of messages that are just the most
Speaker 9: vile thing you've ever heard from, you know, from aggrieved gamblers.
Speaker 3: Right, this seems very problematic.
Speaker 9: It's really problematic.
Speaker 6: You've tweeted on this.
Speaker 9: Yeah, I mean it's it's really I mean, tennis needs
Speaker 9: a lot more player representation. It's probably I mean, I
Speaker 9: think it's problematic across the board for any of a
Speaker 9: hundred reasons. But at least football players and basketball players
Speaker 9: are seeing some of that money. These players get all
Speaker 9: the downside, you know, they open their phone and they
Speaker 9: get death threats because they missed a forehand. And the
Speaker 9: tournaments are the ones that can put the signage on
Speaker 9: the back wall saying you know, DraftKings and fanduels.
Speaker 3: And it's such a solitary sport too, so it's not
Speaker 3: like a team is getting the hatred. It's this individual,
Speaker 3: and everything is riding on this this one individual. So
Speaker 3: what's the solution there?
Speaker 9: I mean, I think it's it's nice Eve to say.
Speaker 9: I mean, in a perfect world, maybe Tennis says listen,
Speaker 9: not for us. We're not going to give you our data.
Speaker 9: I mean, there are ways to turn off the spigott.
Speaker 9: I don't think that's realistic. A bit more revenue to
Speaker 9: the players would at least give them some some skin
Speaker 9: in the game. At least they're essentially getting paid for
Speaker 9: the abuse they're taken. I also think you have to
Speaker 9: monitor this. I mean, when I can't wrap my brain
Speaker 9: around with you, guys can help me with this. I
Speaker 9: can't order an uber and say my name is you know,
Speaker 9: Moscow Mule eleven seventeen. I can't. I mean, the anonymity
Speaker 9: I think would end a lot of this. Why why
Speaker 9: is it that I can send a player a death
Speaker 9: threat and bear no consequence when they lose a tennis match,
Speaker 9: But I can't. I can't go on Amazon and use
Speaker 9: a pseudonym.
Speaker 3: I mean, there might be somebody who launches rockets. You
Speaker 3: might want to talk to you about this. Oh, yeah,
Speaker 3: you could exact question. Yeah, that's what I'm.
Speaker 10: Thinking No, it's like there's a whole social world try
Speaker 10: to put the responsibility or are they verified.
Speaker 3: Accounts that are you know, just pay ten bucks a
Speaker 3: month or whatever. It doesn't matter who you are.
Speaker 6: A I is probably just gonna make it all worse
Speaker 6: in terms.
Speaker 9: Of you know, and AI. When AI and sports gambling intersecond,
Speaker 9: my issue with sports gamling right now, we are at
Speaker 9: the uh remember when you know, you had Joe Cammell
Speaker 9: kids magazines, you had vending machines in high school selling cigarettes.
Speaker 9: This is a smoking set, really the smoking section on
Speaker 9: the airplane, as if the smoke knew when to stop
Speaker 9: it did? I bet we're I think we're at that
Speaker 9: phase with sports gambling. We're gonna look back and we're
Speaker 9: gonna say what you were allowed to do this?
Speaker 3: The players got banned out of the bag. Now I
Speaker 3: mean there's no.
Speaker 9: Yeah, I think there's regulation and I think there's some
Speaker 9: I mean, I think whatever the cliche you to TOOTHPAS
Speaker 9: isn't going back into two. But I think we're gonna
Speaker 9: look back at this period and say, was there no
Speaker 9: regulation whatsoever?
Speaker 10: I mean, would you expect at some point there's going
Speaker 10: to be some big blow up of something whether.
Speaker 9: That's a great point because I think I think the
Speaker 9: way the leagues and again, this is one of the
Speaker 9: great about faces of sports. I mean ten years ago,
Speaker 9: the leagues would say that this is the most sinister thing.
Speaker 9: They all, you know, every everybody went into Capitol Hill
Speaker 9: to say, why PASSPA the you know, the legislation should
Speaker 9: be overturned and why And then they ever in the
Speaker 9: league essentially did it about face and said, yeah, you
Speaker 9: know what, you know, this is a lot of revenue
Speaker 9: we're passing up and we need sunlight. We need legal
Speaker 9: legal gambling is better than illegal gambling. And the one
Speaker 9: thing the league said was that the threat of corruption
Speaker 9: is going to be lessened when it's public, right, We're
Speaker 9: gonna have all this data, we have all this access.
Speaker 9: It's like marijuana. It's sort of gonna decriminalize. And I
Speaker 9: think in a very short amount of time this started out.
Speaker 9: There are a couple of college scandals, and there was
Speaker 9: a baseball coach who tip someone off. And then now
Speaker 9: all of a sudden, we have the Sho Heo Tani.
Speaker 9: You know, the MVP of reigning mvpated Well he wasn't. Yeah,
Speaker 9: I mean, I think it looks pretty clear he wasn't corrupt,
Speaker 9: but someone very close to him was siphoning money out
Speaker 9: of his account to pay his dance. We have them
Speaker 9: someone on the Toronto Raptors is now banned from basketball
Speaker 9: globally because I think the water levels get very high,
Speaker 9: and I feel like we're we are one Black Sox
Speaker 9: type scandal away from this thing really imploding. I think
Speaker 9: right now there are a lot of people who are
Speaker 9: wringing their hands and it's it's great. We love this
Speaker 9: infusion of revenue. And some stadiums have sports books. You know,
Speaker 9: I'm I'm you know, Sports Illustrated, Tennis Channel, CBS, ESPN, I.
Speaker 6: Mean ESPN and Vegas does it.
Speaker 9: I mean every sports media exactly.
Speaker 6: I'm sure Mickey is not into this.
Speaker 9: You don't think uh no, I mean again, like on ESPN,
Speaker 9: you couldn't mention points spreads a few years ago. That
Speaker 9: my favorite, my favorite story of all these is that
Speaker 9: the Vegas Chamber of Commerce wanted to buy a Super
Speaker 9: super Bowl at about twenty years ago and in the
Speaker 9: NFL said no because it's too adjacent to gambling.
Speaker 3: It was just Las Vegas and the Super Bowl.
Speaker 9: Yeah, it was in the Chamber of commerce exactly. And
Speaker 9: now the Super Bowl is in Las Vegas, the announcers
Speaker 9: are telling you what the points spread is, and pretty
Speaker 9: soon we're just gonna go to NFL dot com and
Speaker 9: bet on football games on the NFL's website. I mean,
Speaker 9: the the about face on this is, uh, it's pretty dramatic.
Speaker 6: Everybody in the pool like, it's totally.
Speaker 10: I feel like we'd be remiss because I you earlier
Speaker 10: this year, you did something on CBS Sunday Morning, and
Speaker 10: it was about defending Sports Illustrated.
Speaker 6: It's relevance. And you know, our.
Speaker 10: Producer Paul Brennan, faithful reader for forty five years, starting
Speaker 10: when he was a kid, loved the magazine version, you know,
Speaker 10: and we were confused if there is a print version
Speaker 10: there still is, right, what does the world dose.
Speaker 6: By not having print versions?
Speaker 9: First of all, I'd say that, surprisingly and against all odds,
Speaker 9: there seems to be a very happy resolution here. I
Speaker 9: did that piece for I don't know what that was,
Speaker 9: maybe February. I did that piece for CBS Sunday Morning,
Speaker 9: and it was really a problematic time for Sports Illustrating.
Speaker 9: We sort of had this white night. This company Minute
Speaker 9: Media stepped up and you know, we're knocking on plywood
Speaker 9: and so far, so good. It's sort of a miraculous
Speaker 9: happy media story. I mean to me, it's not so
Speaker 9: much that the print versus digital mean, you know, candidly,
Speaker 9: print is a lot. Yeah, there's a smaller part of
Speaker 9: our life than it was just a few years ago.
Speaker 9: To me, it's just sort of the independence of it
Speaker 9: all and the fact that you don't have to you know,
Speaker 9: it's it's fear and favor, and it's writing about things
Speaker 9: without a partnership with the league, and there's no conflict
Speaker 9: of interest. I mean to me, that's what's lost with
Speaker 9: this changing media landscape. And my attitude is like I
Speaker 9: don't care if it's TV or digital or the phone
Speaker 9: or print or wherever it is, as long as it's
Speaker 9: getting to consumer. To me, it's just the independence, and
Speaker 9: I think that's that's that's sort of what my great
Speaker 9: fear was at the time, that this is just another
Speaker 9: media anthony that's going to be swallowed up. And now
Speaker 9: everything's sort of mediated through a league, a team and
Speaker 9: athlete themselves, which is great, but you also need some
Speaker 9: sort of objectivity and uh agreed, Happily Sports Illustrated kind
Speaker 9: of sort of a comeback story in twenty twenty four.
Speaker 9: I'm happy to tell you very cool.
Speaker 6: I'm glad to hear that. I also, I love that
Speaker 6: you love Trader Joe's.
Speaker 9: Where did you hear that? I love Trader Joe? Ah? Oh,
Speaker 9: I love Trader Chair. I love to say that he's
Speaker 9: got a conflict of interest. I'm an unpached folks.
Speaker 6: It's out there.
Speaker 9: It's good stuff.
Speaker 6: Thank you, thank you so much.
Speaker 9: Pleasure.
Speaker 6: This is a pleasure.
Speaker 10: We always feel like it's just such a smart.
Speaker 3: Guy and he's in the flesh.
Speaker 9: This year is a flash. He's here. Zoom.
Speaker 6: The tennis chant is going to be calling.
Speaker 9: Like, hey, yeah right, good back to no pleasure, No, no.
Speaker 10: Don't, don't don't John worthim of course, as we said,
Speaker 10: he is covering the US Open for the Tennis Channel.
Speaker 10: He's executive editor, senior writer at Sports Illustrated UH and
Speaker 10: of course correspondent for sixty minutes.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Listen live
Speaker 2: each weekday. He's starting at two pm Eastern on Apple
Speaker 2: car Play and Android Auto with the Bloomberg Business app.
Speaker 2: You can also listen live on Amazon Alexa from our
Speaker 2: flagship New York station Just Say Alexa playing Bloomberg eleven thirty.
Speaker 3: Wrapping up this hour with one more taste of our
Speaker 3: US Open coverage on Bloomberg BusinessWeek. The tennis stars at
Speaker 3: the US Open have trained much of their lives to
Speaker 3: achieve peak performance on one of the biggest stages in sports.
Speaker 3: Our next guest says that achieving success is about the
Speaker 3: journey and not always about the end reward. She's a
Speaker 3: former athlete, and she's represented athletes and negotiating deals, and
Speaker 3: now she's helping others, including non athletes, perform at their
Speaker 3: very best. Molly Fletcher is founder and CEO of the
Speaker 3: talent development company game Changer Performance Group. She's also the
Speaker 3: author of the new book Dynamic Drive, The Purpose Fueled
Speaker 3: Formula for Sustainable Success.
Speaker 12: Well, you know, for almost twenty years, I was a
Speaker 12: sports agent, and so I had an opportunity to see
Speaker 12: so early in my career. I mean, it was sort
Speaker 12: of a front row seat to peak performance. And what
Speaker 12: I saw is that at the end of their careers,
Speaker 12: the things that gave them the most satisfaction was actually
Speaker 12: not the trophies, right, It wasn't the rings on their fingers,
Speaker 12: but it was the at some level, the knowledge that they.
Speaker 8: Left it all out there for where you are. They
Speaker 8: left it all out on the court. They gave it
Speaker 8: everything they had.
Speaker 12: And so yeah, the book that I have it is
Speaker 12: all about how do we align our pursuits and our
Speaker 12: outcomes at some level in service of who are we
Speaker 12: becoming in the pursuit? Who are we becoming in the
Speaker 12: journey as much as the achievements, the trophies, the outcomes.
Speaker 12: Right when we think about the guy or the gall
Speaker 12: that's about to hoist a trophy over their head after
Speaker 12: winning the Open, I think when you see those tiers
Speaker 12: of joy, it's anchored more in the pursuit than in
Speaker 12: fact the achievement itself.
Speaker 3: So interesting that you say that, I think about that
Speaker 3: with amateur athletes too, who you know, might work a
Speaker 3: full time job, but they're also have athletic goals and
Speaker 3: maybe those athletic goals that they have they don't achieve.
Speaker 3: But what they did was they trained for that marathon,
Speaker 3: they trained for that one hundred mile bike race. They
Speaker 3: might not have finish in the time that they wanted to,
Speaker 3: but maybe it was the training leading up to that
Speaker 3: that experience that actually is fulfilling.
Speaker 8: One hundred percent.
Speaker 12: I mean, I think sometimes when we think about you know,
Speaker 12: drive is such an amazing thing, right, like the drive
Speaker 12: to run a marathon, the drive to achieve something. It's
Speaker 12: such an awesome thing, and it's amazing. But to me,
Speaker 12: so much of why I'm so passionate about dynamic drive
Speaker 12: as I define it, is because our lives are so transformative.
Speaker 12: They're so dynamic right at some level. In other words,
Speaker 12: it's not about reaching the summit or finishing or running
Speaker 12: that marathon, per saye to your point, and you know,
Speaker 12: because at some level, the interesting thing is what do
Speaker 12: you do when you're when you're done right?
Speaker 8: Like you guys probably.
Speaker 12: See it and have seen it, and I know I
Speaker 12: saw it as a sports agent. I mean, when you
Speaker 12: when you finish the marathon, when you win the US Open,
Speaker 12: when you win, uh, you know, a world championship, what
Speaker 12: do you do next? And if you're in the pursuit
Speaker 12: of better every day, if you're working on your mindset,
Speaker 12: if you're working inside of discipline and resilience, and you're
Speaker 12: anchoring all of it in something bigger, right, a bigger
Speaker 12: why at some level to me it makes the journey
Speaker 12: worth the time.
Speaker 10: So what do you do, like, how do you work
Speaker 10: with someone or how do you train someone? I think
Speaker 10: you and I STONI as you'll feel like we'll come
Speaker 10: off of something and it's like so great and yeah,
Speaker 10: and then you got to remember.
Speaker 3: That there's the flip side of that too. We come
Speaker 3: up with something, we come off with something and you're like,
Speaker 3: you know what, it could have been a lot better,
Speaker 3: and here's why, right, So, how do you like, we're
Speaker 3: pretty harsh critics of ourselves.
Speaker 10: Absolutely, so how do you get your mindset to be like, okay,
Speaker 10: you know, or maybe that was a bad one, or so,
Speaker 10: how do we make it better or how do we
Speaker 10: not let that kind of throw us off?
Speaker 6: Course?
Speaker 12: Well, and and you hit on it right there with
Speaker 12: that word mindset, because it's everything right and you guys
Speaker 12: see it out there on the courts right there. I mean,
Speaker 12: the difference between the guys and gals that are that
Speaker 12: are that are competing and continuing to make progress so often, right,
Speaker 12: it's their.
Speaker 8: It's their mindset. It's not talent.
Speaker 12: It is at some level that gets them there, but
Speaker 12: it's the discipline and the resilience in the mindset that
Speaker 12: keeps them winning. And so to your question, I mean,
Speaker 12: I think you know, we have like something like seventy
Speaker 12: thousand thoughts a day, which is kind of insane when
Speaker 12: you think about it, right, And so if we aren't
Speaker 12: intentional about reframing our thoughts right, like really intentional about saying,
Speaker 12: am I telling myself something right now that is taking
Speaker 12: me where I want to go? Or am I telling
Speaker 12: myself something that that isn't right? And so I teach
Speaker 12: something in dynamic drive called a total mindset reset, which is,
Speaker 12: how do we recognize when we're telling ourselves something that
Speaker 12: isn't going to take us where we want to go
Speaker 12: or give us the outcome or the make.
Speaker 8: Us show up as the best version of ourselves? How
Speaker 8: can I recognize that?
Speaker 12: How can I then replace it with something different and
Speaker 12: better that in fact is driving toward the outcome that
Speaker 12: we want?
Speaker 8: And how do I reinforce it? Right? You know, you
Speaker 8: see athletes. I've certainly got the open yd right.
Speaker 12: You see athletes looking at notebooks right and cards, and
Speaker 12: they're getting their mind right and reinforcing the kind of
Speaker 12: self talk they need when they're out on the court.
Speaker 3: What is that self talk? And how can we take
Speaker 3: what they do on the court and apply it to
Speaker 3: our own lives when it comes to either professionally or personally.
Speaker 8: Yeah, for sure.
Speaker 12: I mean, you know, Dyna drive has seven keys to it,
Speaker 12: right that I unpack in detail. Of course, it's all
Speaker 12: foundationally anchored in purpose. But I would say the first
Speaker 12: step fundamentally is saying, where am I playing.
Speaker 8: Small in my life?
Speaker 10: Right?
Speaker 12: Like, where am I Where am I maybe not showing
Speaker 12: up in a way that aligns with the legacy that
Speaker 12: I would want to leave. And that was really what
Speaker 12: got me to this point right now, which is pulling
Speaker 12: back and saying do I want to be an agent
Speaker 12: and negotiate two billion, three billion, five billion contracts?
Speaker 8: What am I chasing? Right?
Speaker 2: So?
Speaker 12: I think to answer your question, it's pulling back and saying,
Speaker 12: where am I playing small? Where could I have an
Speaker 12: opportunity to level up a little bit in service of
Speaker 12: the legacy I want to leave, in service of what
Speaker 12: I want on my tombstone, right in service of me
Speaker 12: showing up both personally and professionally and living into my
Speaker 12: four values. And then I think we have to say
Speaker 12: what am I really chasing?
Speaker 8: Right? I think sometimes in life.
Speaker 12: Whether you're a you know, stay at home parent, whether
Speaker 12: you're a pastor whether you're a professional tennis player, whether
Speaker 12: you're a media talent like you. It's pulling back and
Speaker 12: saying what am I chasing? Right, Like, at some level,
Speaker 12: what is all of this for? And who am I
Speaker 12: becoming as a result of the pursuit this.
Speaker 3: Those are tough.
Speaker 10: Those are the kid drive you a little crazy and
Speaker 10: you're not your best you or maybe I feel like
Speaker 10: that I'm not my best me sometimes.
Speaker 6: Because it makes you a little crazy.
Speaker 10: Hey, Mollie, one thing we do want to ask you
Speaker 10: and love hearing kind of your perspective on how to
Speaker 10: help people be their best if you if you will,
Speaker 10: you mentioned twenty years representing three hundred plus of the
Speaker 10: world's top NFL, MLB, NBA, NCAA athletes, coaches, So Drew Brees,
Speaker 10: Tom Brady, Aaron Andrews.
Speaker 6: I could go on and on and on.
Speaker 10: What was the fun part of that? The good part
Speaker 10: of that? What was the maybe not so fun part
Speaker 10: of it? And why did you stop?
Speaker 8: Yeah? Awesome question?
Speaker 12: And uh, you know, I mean the fun part is
Speaker 12: being around peak performers, right, being around people who live
Speaker 12: into and want to pursue better every day. Right, that
Speaker 12: have the kind of mindset and resilience and discipline and
Speaker 12: that that was and is so magnetic and so fulfilling
Speaker 12: and so fun.
Speaker 10: Is there anybody that in particular that stands out that
Speaker 10: you were just like, oh my god, they're just on
Speaker 10: a different plane.
Speaker 9: You know.
Speaker 12: John Smoltz was a picture for the for the Atlanta Braves.
Speaker 12: To me, he he got it from the perspective that
Speaker 12: he would step out on the mounta and give it
Speaker 12: all all he had all the time. He wasn't a
Speaker 12: frey to change. It wasn't really about him. It was
Speaker 12: about the other guys in the clubhouse more than him, right.
Speaker 12: And and I think you know Ernie Johnson Junior. You
Speaker 12: guys know EJ's name, given the work that you do.
Speaker 12: I mean just you know, we'd go from the set
Speaker 12: where he's between Kenny and and Barkley, right, and then
Speaker 12: we'd get in a mini man and drive to go
Speaker 12: have lunch with his his sensed past son, Michael, who
Speaker 12: is severely disabled, and have lunch and j would rub
Speaker 12: his head and feed Michael.
Speaker 9: And you know, so I.
Speaker 12: Think it's it's the it's the people that recognize the
Speaker 12: the opportunity and the uniqueness of it and also recognize
Speaker 12: the blessings in it and and at some level don't
Speaker 12: get too self absorbed in their sort of in the
Speaker 12: in the seat that are that they're in and you
Speaker 12: guys see it there right, Like it's easy to do
Speaker 12: that when everywhere you turn, everybody stands up and moves
Speaker 12: and follows you, right and so small cej Doc Rivers,
Speaker 12: Tom Izzo. These are people, and the list goes on
Speaker 12: and on and on, but they're great human beings who
Speaker 12: obviously had an unbelievable had unbelievable careers too.
Speaker 10: In terms of the stuff that maybe wasn't so fun
Speaker 10: being an agent and why you stick.
Speaker 12: Yeah, I was hoping you forget that part of the question, girl,
Speaker 12: and you're back.
Speaker 6: With it, I said to tim I Waite. I'm like,
Speaker 6: I want to follow up.
Speaker 9: Hey, yeah, yeah, yeah, I know.
Speaker 12: I was just so you know, the the I would
Speaker 12: say that not so fun is when is when you
Speaker 12: you know, the eleven o'clock call when a player gets
Speaker 12: traded and they didn't want to. You know, the player
Speaker 12: that just gets up to the big leagues and then
Speaker 12: they get injured. You know, the golfer that's right there
Speaker 12: and they're about to win their first tournament and they
Speaker 12: sort of don't get it done for whatever reason.
Speaker 8: On the back nine on a Sunday.
Speaker 12: You know those because the love and the connection. I mean,
Speaker 12: these are people that you're at their wedding, right, you're
Speaker 12: there when their kids are born, and so when they're
Speaker 12: disappointed and their heartbreaks or their family's heartbreaks, man.
Speaker 8: That hurts. You know that hurts.
Speaker 12: And so I would say, I would say that was
Speaker 12: the hardest part truly, or the or the the other
Speaker 12: component I would actually say is.
Speaker 8: The ones who had just an enormous amount.
Speaker 12: Of talent but didn't have candidly what I break down
Speaker 12: in the dynamic drive, the discipline, the resilience, the mindset.
Speaker 12: So they had all the talent, the talent isn't enough, right,
Speaker 12: Like you need talent plus yeah, resilience, talent plus discipline
Speaker 12: plus mindset. So that was always sad to see that
Speaker 12: at some of the wasted talent, knowing the gap that existed,
Speaker 12: and you know that that hurts your heart too.
Speaker 6: Yeah, I could see that.
Speaker 3: What would you say to somebody who's feeling a little
Speaker 3: burned out right now? I'm not talking about a pro athlete,
Speaker 3: but somebody who's feeling just like really really tired.
Speaker 8: Here's what I would tell them.
Speaker 12: I would say, burnout is usually a result of chasing
Speaker 12: the wrong things. In other words, it's putting your energy
Speaker 12: towards the things that don't matter to you.
Speaker 8: Right.
Speaker 12: So, and when we operate into dynamic drive, because the
Speaker 12: foundation is that we're plugged into our purpose in everything
Speaker 12: that we do, burnout is actually at bay. In other words,
Speaker 12: for somebody who's feeling burned out, what I would encourage
Speaker 12: them to do, pull back and do is ask themselves
Speaker 12: some tough questions.
Speaker 8: Right, what am I chasing? What matters most to me?
Speaker 12: What legacy do I want to leave? What at some
Speaker 12: level are the things, the people, the relationships, the values,
Speaker 12: the beliefs that are most important to me? And how
Speaker 12: am I living and pouring my energy into those things
Speaker 12: in service of creating alignment and in turn offsetting burnout.
Speaker 12: Because I think where people find themselves burned out is
Speaker 12: they're misaligned, right, Like, they're misaligned.
Speaker 8: In other words, they're spending great time and energy. Yeah, right, totally,
Speaker 8: I'm glad that.
Speaker 9: Yeah.
Speaker 12: I mean, it is spending your time and energy doing
Speaker 12: things that don't ladder up to what in fact matters
Speaker 12: most to you. And so that's why I'm so passionate
Speaker 12: about this approach to drive into life and at some
Speaker 12: level what can become really an identity in which we
Speaker 12: approach our lives because it keeps burnout at bain.
Speaker 8: It doesn't focus on the competition.
Speaker 12: It's an inside out approach to living, to living our
Speaker 12: lives in fullness without regret and leaving the legacy that
Speaker 12: we really want to leave.
Speaker 10: Now. It's a deeper think and thought, as you said,
Speaker 10: mindset and just thinking about right when we all ultimately
Speaker 10: will leave this world, like how you leave it right?
Speaker 10: And do you feel kind of good.
Speaker 6: On the way out?
Speaker 9: To be quite owing?
Speaker 10: No, I really I think about the relation as I
Speaker 10: get older, As I get older. Molly Fletcher, thank you
Speaker 10: so much for all this time, Founder and chief executive
Speaker 10: officer at game Change, Change your Performance Group, and of
Speaker 10: course her new book is called Dynamic Drive.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 2: live weekday afternoons from two to five pm Eastern Listen
Speaker 2: on Apple car Play and Andbroud Auto with a Bloomberg
Speaker 2: Business app, or watch us live on YouTube.
Speaker 3: Plenty ahead in our second hour of the weekend edition
Speaker 3: of Bloomberg Business Week, including the CEO of Ziggy's Coffee
Speaker 3: on managing economic challenges in the specialty coffee space and
Speaker 3: how sometimes smaller is better. We'll explain. Plus we talk
Speaker 3: a lot about this on Bloomberg Business Week, the lack
Speaker 3: of racial representation when it comes to finance. A little
Speaker 3: later on in the program, we're going to chat with
Speaker 3: the co founder of East Chop Capital, it's a black
Speaker 3: owned private equity firm, on how they're working to eliminate
Speaker 3: this disparity and grow the world of private equity. First
Speaker 3: up this hour, before entering the financial services sector, students
Speaker 3: must learn the tools to succeed in the field by
Speaker 3: going to school for minorities. The challenge of admission into
Speaker 3: some of the top B schools in the nation are great.
Speaker 3: According to the Bloomberg BusinessWeek Best B Schools Diversity Index,
Speaker 3: only two MBA programs have a greater non white majority.
Speaker 3: Those are Howard and FIU. Last month, we learned that
Speaker 3: the share of black students in the incoming class at
Speaker 3: MIT plummeted after the Supreme Court effectively banned considering race
Speaker 3: as a factor in undergraduate admissions. Last year, the university
Speaker 3: said the class of twenty twenty eight is five percent black.
Speaker 3: That's down from an average of thirteen percent in recent years.
Speaker 3: The share of Hispanic students in the class is eleven percent,
Speaker 3: that's down from fifteen percent. Ed Smith Lewis is senior
Speaker 3: vice president of Strategy at UNCF. It's the United Negro
Speaker 3: College Fund, which supports sixty thousand plus students and thirty
Speaker 3: seven HBCUs, historically black colleges and universities. He spoke with
Speaker 3: Carol and Bloomberg's Matt Miller on how the UNCF is
Speaker 3: providing a pipeline of students from HBCU's entering finance.
Speaker 13: When I hear those MIT statistics, I think, where's the
Speaker 13: opportunity and all of it. How do we start to
Speaker 13: sort of maybe reposition sort of the deficit or the
Speaker 13: change in the percentage of individuals that may or may
Speaker 13: not enroll in our mits of the world and start
Speaker 13: to think more intentionally about how do we create more
Speaker 13: robust institutions that compare to MIT and such as such
Speaker 13: as not a conversation about who got into the Ivy League,
Speaker 13: but how is our higher education system really serving the
Speaker 13: needs of all of our students, regardless of which sort
Speaker 13: of medallion institution they may have gone to. How do
Speaker 13: we think about investing the resources of MIT and the
Speaker 13: opportunities that MIT provide and really start developing those in
Speaker 13: the other spaces and places where our students have been enrolled.
Speaker 14: I mean, ideally, any higher education institution is going to
Speaker 14: want to have a diverse class that benefits everybody in
Speaker 14: the class, right, and you want it to be somewhat
Speaker 14: representative of the society in which you live. So if
Speaker 14: there's a deficit of black students, are a deficit of
Speaker 14: Hispanic students, admissions Admissions is going to have to try
Speaker 14: and fix that. How can they fix it if they
Speaker 14: can't take, you know, race or ethnicity into account.
Speaker 13: A race may be one indicator of whether or not
Speaker 13: a student has or has not had the right set
Speaker 13: of opportunities, or scored the right test, or scored the
Speaker 13: right score on the right test. But the reality is
Speaker 13: if we look at other differentiating factors, like lived experience,
Speaker 13: where people are born, what high schools they've gone to,
Speaker 13: and really look at the institutional context around an individual's experience,
Speaker 13: you can likely get to some of the same results whatever,
Speaker 13: without ever really having to say race. And while that's
Speaker 13: a good how do you do it?
Speaker 10: How do you do it well?
Speaker 13: Will you do it by looking at what schools individuals
Speaker 13: go to?
Speaker 2: Right?
Speaker 13: How about we move away from the idea that we're
Speaker 13: going to take the highest SAT score from the number
Speaker 13: one prep school as an admission requirement and say, well,
Speaker 13: if we want diversity, let's ensure that we're pulling students
Speaker 13: from all the types of institutions public, public high schools,
Speaker 13: private high schools, rural high schools. And you'll likely get
Speaker 13: to the same place if you diversify your geographic approach
Speaker 13: or your institutional type.
Speaker 10: So is this about looking at somebody who's maybe at
Speaker 10: a school system that isn't so great but did really
Speaker 10: well compared to their peers. Is that what you're talking
Speaker 10: about or something else or just being much more diverse
Speaker 10: in terms of where you look for students.
Speaker 13: Well, I think it's where you look and what you're
Speaker 13: looking for. At present, we're putting a lot of energy
Speaker 13: into test scores, and we all know, or at least
Speaker 13: higher education knows, that test scores actually are an indicator
Speaker 13: of success. You can look at what other opportunities was
Speaker 13: the student engaged and based on his or her contexts. Now,
Speaker 13: is it great that you have a high test score
Speaker 13: and someone who played the piano and an orchestra. Perhaps,
Speaker 13: But maybe that student who come from a rural area
Speaker 13: where they didn't have access to the same types of
Speaker 13: oppertunities but led a student organization or participated in community
Speaker 13: service heavily has the same type of tenacity and desire
Speaker 13: to grow and learn, maybe without the opportunities. And so
Speaker 13: what you're looking for is trying to write size expectations
Speaker 13: on outcomes with expectations or inputs or opportunities those those
Speaker 13: individuals have had.
Speaker 10: So are you like you're talking about the standardized testing?
Speaker 10: Is that in particular you're thinking is not a good thing?
Speaker 9: For sure?
Speaker 10: Yeah?
Speaker 13: I think standardized testing is just rooted in sort of
Speaker 13: a systematic approach to getting an understanding of one's aptitude.
Speaker 13: And I think we've learned through differentiated approaches in K
Speaker 13: twelve that not everyone learns the same and if you
Speaker 13: don't learn the same, you likely don't test the same.
Speaker 13: And so how do we start to think about differentiated
Speaker 13: models of assessing a student's readiness to learn? And that's
Speaker 13: what we're saying we're just looking for differentiated approaches. Here
Speaker 13: at UNCF, we're a scholarship organization, we're actually looking at
Speaker 13: more cognitive opportunities and we're moving away from sort of
Speaker 13: raw quantitative understand it to a qualitative one where we're
Speaker 13: educating our readers or our scholarship application scores on what
Speaker 13: can you look for and how a student thinks about
Speaker 13: his or her lived experience, what opportunities they had, how
Speaker 13: do they think about loss and failure as well as
Speaker 13: their wins in their writing, and how they communicate their
Speaker 13: experience and less about the test score.
Speaker 14: I know, I went to some public school graduations in
Speaker 14: the Midwest this year, and I noticed that each of
Speaker 14: these schools, with classes of two or three hundred kids,
Speaker 14: had one or two in the IVY leagues. And if
Speaker 14: you go to graduations here at you know, Nightingale, Bamford
Speaker 14: School or Collegiate, if you look at you know, graduating
Speaker 14: classes at Deerfield or and over private schools, they're they're
Speaker 14: putting dozens of kids into the IVY leagues. And I
Speaker 14: think that's part of their admissions process, and maybe the
Speaker 14: ivs need to rethink that and years some.
Speaker 10: Of it though is. I will also say it's you know, generational,
Speaker 10: you know, families and legacies, legacies in a big way.
Speaker 7: Right.
Speaker 14: Well, I mean, if these Ivy League schools really want diversity,
Speaker 14: they're going to have to really rethink that admissions process
Speaker 14: because you can't always take a dozen kids from the
Speaker 14: most expensive boarding schools in the country and then ignore
Speaker 14: all these private schools in Flyover Country and talk to
Speaker 14: us about a CLAIM Accelerated Learning in Asset Investment Management.
Speaker 14: You're working to get a robust pipeline of students from
Speaker 14: historically black colleges and universities from HBCUs, so talk to
Speaker 14: us about this program and how you're doing it.
Speaker 13: No, we're really excited about the support from at its capital,
Speaker 13: at phil Growth and its investment in Project ACCLAIM, where
Speaker 13: we are fundamentally focused on providing the right opportunities to
Speaker 13: our students to take advantage of the robust economy that
Speaker 13: we have in our country. Project ACCLAIM has three simple objectives.
Speaker 13: Think number one, provide student experiences from an academic perspective
Speaker 13: that really enables them to understand and through hands on experience,
Speaker 13: what does it mean to be an asset manager in
Speaker 13: this country? For many HBCUs. Seventy five percent of our
Speaker 13: students are low income or come from low income families.
Speaker 13: Sixty percent of first in their generation in their family
Speaker 13: to go to college, their first generation students, and so
Speaker 13: the idea that you would have exposure to asset management
Speaker 13: careers are few and far between for many of the students.
Speaker 13: More importantly than having that exposure to asset management is
Speaker 13: that real hands on experience. Because you can learn from
Speaker 13: the textbook all day, but until you had a real experience,
Speaker 13: an opportunity to sort of touch the opportunity. We know
Speaker 13: that our students don't do as well with sort of
Speaker 13: been thrown into the defense. And so the question becomes,
Speaker 13: how can we move upstream in the asset management pipeline
Speaker 13: and start to invest heavily in real experience. That's what
Speaker 13: Project Acclaim is set to do. It will invest four
Speaker 13: million dollars into an investment fund that's managed by students
Speaker 13: on the campuses of Morehouse and how are you university
Speaker 13: in our pilot years, this real investment opportunity to understand
Speaker 13: what does it take to ensure the risk profile of
Speaker 13: your investment are appropriate, to do the due diligence necessary
Speaker 13: to make an investment to track, monitor and assess the
Speaker 13: progress against your portfolio. Is a real opportunity just going
Speaker 13: to be provided to these institutions, and with the support
Speaker 13: of Atage Capital, an opportunity to scale that to many
Speaker 13: more HBCUs over time. We're excited about this program not
Speaker 13: just because of that hands on experience, but the approach
Speaker 13: we're taken to do it. UNCF is leveraging a shared
Speaker 13: fund approach where Howard students and Morehouse students will operate
Speaker 13: under the same approach to understand what can we do
Speaker 13: to build the capacity of our institution stuff provide these
Speaker 13: kind of high relevant programs, and so that also has
Speaker 13: the potential.
Speaker 7: To scale well.
Speaker 14: And I mean the idea ultimately is to get them
Speaker 14: basically on Wall Street or in global Wall Street. I
Speaker 14: wonder if what I'm watching is especially industrial companies in
Speaker 14: the Midwest, you know, John d or Harley Davidson, a
Speaker 14: Jack Daniels are shying away from their DEI initiatives. But
Speaker 14: I feel like Wall Street and American you know, the
Speaker 14: American public still embraces these de I initiatives. Is that
Speaker 14: what you're seeing as well.
Speaker 13: Well to your earlier point to have diversity of perspectives
Speaker 13: is actually to have an organization that's well functioning and efficient.
Speaker 13: As you might imagine, when it comes to investment, it's
Speaker 13: always knowing where is the put going, And to have
Speaker 13: different perspectives sitting around the table means your due diligence
Speaker 13: is just better. And we've seen from minority asset managers
Speaker 13: sometimes one, two, three x outcomes compared to market rates.
Speaker 13: And that's just because sometimes you're asking a different question
Speaker 13: which also leads to a different answer. And so that
Speaker 13: diversity of perspectives, we think is a benefit to all companies,
Speaker 13: not just our asset management.
Speaker 10: Tons of research right over decades have like pointed that
Speaker 10: out the importance of diversity in the boardroom, diversity to company.
Speaker 10: But having said that, you know, as companies, I do
Speaker 10: wonder at as companies increasingly or rolling back their DEI
Speaker 10: plans and strategies. As Matt just pointed out, you know,
Speaker 10: Harley Davidson, you had Jack Daniel's Maker Brown Foreman Deer
Speaker 10: in company, how does it make it more difficult for
Speaker 10: maybe what you're trying to do to get that pipeline
Speaker 10: that is more diverse, whether it's going into financial services
Speaker 10: or somewhere else.
Speaker 13: No, it's always been a difficult struggle, to say the least.
Speaker 13: We are trying to close systemic gaps and opportunity within organizations.
Speaker 13: But the reality is for those that are taking a
Speaker 13: step back at this moment, we're focusing our attention on
Speaker 13: those who are leaning in. We fundamentally believe if we
Speaker 13: can find the coalition of the willing prove the value,
Speaker 13: that it becomes a market differentiator than those who may
Speaker 13: have stepped back for the moment might realize the business
Speaker 13: opportunity associated with this and come on board and eventually
Speaker 13: realize not only is it beneficial to the business, beneficial
Speaker 13: to inclusion generally in our country.
Speaker 10: All right, well, listen, super good to get some time
Speaker 10: with you. I really appreciate it. Good luck with your pursuits.
Speaker 9: There.
Speaker 10: Ed Smith lewis a's senior VP of Strategy at the
Speaker 10: United Negro College Fund. Joining us here on Bloomberg Business Week.
Speaker 2: You're listening to the Bloomberg Business Week Podcast. Listen live
Speaker 2: each weekday starting at two pm Eastern ont applecar Play
Speaker 2: and Android Auto with the Bloomberg Business app. You can
Speaker 2: also listen live on Amazon Alexa from our flagship New
Speaker 2: York station just say Alexa play Bloomberg eleven thirty.
Speaker 3: Here's some not so surprising data around race and asset management.
Speaker 3: Not surprising if you've been paying any attention to what
Speaker 3: we talk about here on Bloomberg Business Week. I found
Speaker 3: this article in the Harvard Business Review, and it says
Speaker 3: that back in twenty twenty one, this is research from
Speaker 3: Josh Lerner at Harvard Business School, of all assets owned,
Speaker 3: only one point four percent we're managed by minority owned firms.
Speaker 3: And back in twenty twenty one, minorities made up more
Speaker 3: than forty percent of the population. As I mentioned Josh
Speaker 3: Lerner at Harvard Business School, He's got a ton of
Speaker 3: research around this. There's a huge disparity between who has
Speaker 3: and who manages these assets based on what our population
Speaker 3: in the United States actually looks like. Somebody who's trying
Speaker 3: to address that is Calvin Butz Junior. He's co founder
Speaker 3: and general partner at East Chop Capital. He joins us
Speaker 3: here in the Bloomberg studio. Good to have you with us, Calvin,
Speaker 3: how are you.
Speaker 15: I'm doing well. Thanks for having me.
Speaker 3: Yeah, thanks so much for having us. I want to
Speaker 3: get to what you're doing at East Chop but we'd
Speaker 3: be remiss if we didn't. And look, you know, one
Speaker 3: of the benefits of being in private equity is you
Speaker 3: don't necessarily have to mark to market every day and understand,
Speaker 3: you know, the value of how your assets have changed.
Speaker 3: But you see a day like this in the equity markets,
Speaker 3: what do.
Speaker 16: You think, Well, I mean it's September, right, I mean,
Speaker 16: SMP's normally down in September. Obviously, you know, still looking
Speaker 16: forward to the job report later this week. So it's
Speaker 16: a lot going on. I mean, it's a first of
Speaker 16: the month, is four month left in the year. It's
Speaker 16: just that time of year. It's that time of year
Speaker 16: for a lot of voliday ye season.
Speaker 3: Talk about seasonality. Let's talk a little bit about the
Speaker 3: assets over at Eastchop Capital, because you guys are doing
Speaker 3: some really interesting stuff. When we talk about real estate
Speaker 3: private equity, you're not just doing real estate, but you're
Speaker 3: also doing art investing. Talk take me through the assets
Speaker 3: that you have under management and where you're looking to grow.
Speaker 16: Yeah, so eas Shop Capital. Starting twenty eighteen, we have
Speaker 16: two major verticals. The first one's real estate and the
Speaker 16: second one was angel investing. From real estate perspective, we
Speaker 16: operate the largest minority owned luxury vacation home portfolio right now.
Speaker 16: We own and operate assets as far north as Martha's Vineyard,
Speaker 16: as far as south as Orlando, and we have homes
Speaker 16: being built in Orlando, Florida, as well as Cinnamon Shore, Texas.
Speaker 16: And we have homes in Gallinburg, Tennessee, et cetera.
Speaker 3: When you say luxury, how do you define that?
Speaker 16: So we have anywhere from four to twelve bedroom homes
Speaker 16: that are completely renovated with in room master suites, opportunities
Speaker 16: for multiple families that come in rent and stay.
Speaker 15: We have homes with indoor bowling.
Speaker 3: Alleys, so you own and manage the home correct correct,
Speaker 3: rent them out through a platform such as Airbnb.
Speaker 16: Airbnb, Verbal Innovation, dot com, a lot of a lot
Speaker 16: of different platforms.
Speaker 1: Twelve bedrooms that is yeah, that's luxury. And I mean
Speaker 1: we talk about the luxury market all the time when
Speaker 1: it comes to accessories, handbag, shoes, et cetera. What does
Speaker 1: the luxury market in real estate rentals look like right now?
Speaker 1: We know that the housing market in general has been
Speaker 1: pretty frozen. You think about the effect of higher interest
Speaker 1: rates that structural under supply of housing when it comes
Speaker 1: to luxury real estate, what's the vibe there?
Speaker 16: So I think the vibe is, you know, you have
Speaker 16: to make sure you have the right amenities for folks,
Speaker 16: and I think it's not going to be if folks
Speaker 16: are not going to travel. It's just how they're going
Speaker 16: to travel, and the difference in how they travel. People
Speaker 16: are traveling with more families. They're bringing their in laws,
Speaker 16: So you need more space, more rooms, more amenities, more
Speaker 16: living spaces, larger pools, and et cetera. So we've been
Speaker 16: able to provide that across our portfolio.
Speaker 3: What about the art investing side of this.
Speaker 16: Well, so, I mean I'm a personal investor in art.
Speaker 16: So I've been collecting art for about five years now.
Speaker 16: We've gotten our investors from the shot capital into such
Speaker 16: things like Broadway plays and other investments, but the art
Speaker 16: side has really much me personally, been just just trying
Speaker 16: to give back. And I have a long term vision
Speaker 16: of donating my our collection and Hampton University and you know,
Speaker 16: help us litify one of the historic uh Black collegists
Speaker 16: in their museum and our collecting.
Speaker 3: Okay, so it's not just real estate in our You're
Speaker 3: also thinking about sports, media, beverage. You mentioned entertainment too.
Speaker 16: That's absolutely correct. So we have different verticals that we've
Speaker 16: invested in. So from a sports perspective, we've invested in
Speaker 16: a MLS Next Pro team in Connecticut.
Speaker 15: We're very excited about that.
Speaker 16: That's the minor league version of soccer, and so we're
Speaker 16: looking forward to being a part of that. Andre Swatson
Speaker 16: his team has put together a dynamic opportunity for our
Speaker 16: investors to be a part of a minor league team
Speaker 16: and hopefully lead to MLS expansion over over the course
Speaker 16: of time with the with the plans there in that league.
Speaker 16: From a Spirits perspective, we're the largest minority investors and
Speaker 16: Uncle Nearest, which will in the fastest growing whiskey brands
Speaker 16: in the world right now. So we're very excited to
Speaker 16: be a part of that group.
Speaker 1: And I want to talk a little bit more about
Speaker 1: your investor base because reading through the details, So you
Speaker 1: closed your first fund in December twenty twenty at four
Speaker 1: million dollars. You recently closed your second fund at eleven
Speaker 1: million dollars in April twenty twenty four. Just give us
Speaker 1: more details on who is investing in your funds.
Speaker 15: Sure, so we have.
Speaker 16: About two hundred and fifty investors across the real estate
Speaker 16: and angel investing. About ninety percent of them are African
Speaker 16: American and folks of color, and we have about twenty
Speaker 16: three percent women. Our first fund, we went door to door, friends, family, fraternity,
Speaker 16: brothers and sisters and you know, kind of going around
Speaker 16: and you know, just kind of going door to door.
Speaker 16: And the second fund because of word of mouth, because
Speaker 16: of track record and the success of the real estate,
Speaker 16: it was it was easier to raise four x return,
Speaker 16: you know, and almost a third of the time.
Speaker 3: Wow, you talked about the composition of your investors. I
Speaker 3: started out our segment by talking to uh, the lack
Speaker 3: of diversity when it comes to money management of small
Speaker 3: fraction one point four percent again going back to that
Speaker 3: Harvard Business School research by Professor Josh Lerner there, how
Speaker 3: does that change? How How did you change that? How
Speaker 3: have you changed that?
Speaker 16: Well, I mean, we need to see more folks like
Speaker 16: myself actually managing assets, and so our our goals to
Speaker 16: grow at you in to a bigion dollars over time
Speaker 16: with different vertical sports, media, real estate, and then from
Speaker 16: that to bring folks along with us. That's part of
Speaker 16: closing the wealth gap, you know, because you know, we
Speaker 16: want to educate folks and find all the credit investors
Speaker 16: that are that look like us and give them opportunity
Speaker 16: to invest in private markets where the returns are greater.
Speaker 3: How do you find those accredited and investors? And a reminder,
Speaker 3: those are people with over a million dollars in net
Speaker 3: worth in their primary.
Speaker 16: Including primary residents, two undred k single income through j
Speaker 16: K combined with your spouse or partner. You know, we're
Speaker 16: gonna it's It's really been word of mouth for us
Speaker 16: right now. We've been you know, speaking at different events
Speaker 16: and you know, kind of doing our own road show
Speaker 16: or really it's about education, right So we want to
Speaker 16: educate folks on their status and once they understand that
Speaker 16: they are credit investors and they have access to private
Speaker 16: deal flow and private markets, it's an excitement.
Speaker 15: And a need to be educated and learn how to
Speaker 15: get into those deals.
Speaker 1: So I have to imagine that, you know, for some
Speaker 1: of those accredited investors that you're linking up with, that
Speaker 1: maybe there is their first time investing in a VC
Speaker 1: fund and I mean talk.
Speaker 9: Us through that.
Speaker 1: What does that education process look like? It's a lot different.
Speaker 1: I would imagine than just clicking by on an index
Speaker 1: tracking ETF for example.
Speaker 15: It's been great.
Speaker 16: I mean we've had a chance to really educate folks
Speaker 16: from A to Z right, so not only identifying their
Speaker 16: status and what they're able to invest in, but also
Speaker 16: educating on them on how.
Speaker 15: To evaluate deal flow.
Speaker 16: You know, what to look for, what questions ask, how
Speaker 16: to set up you know, capital calls, and how to
Speaker 16: commit to wires and I mean we really have done
Speaker 16: it from start to finish and kind of have a
Speaker 16: handhelding approach for our first time investors. Now we have
Speaker 16: other investors who have a little more savvyer and have
Speaker 16: done different private market stuff on their own, but for
Speaker 16: the majority our investors, this was their first investment into
Speaker 16: a private equity fund and then now into other ventures
Speaker 16: that we've got them in via our SPVs, our special
Speaker 16: purpose vehicles.
Speaker 3: You say that you are looking to grow assets into
Speaker 3: a billion dollars, what's the timeline for that.
Speaker 16: Well, we want to do it in the next you know,
Speaker 16: three to five years, and we probably have a two
Speaker 16: hundred and fifty million dollar real estate pipeline that we're
Speaker 16: excited to kind of roll out over the next couple
Speaker 16: of months that will be introducing to our investors into
Speaker 16: the world. But then also you know, we continue to
Speaker 16: seek you know, deal flow. A lot of unique private
Speaker 16: market deal flow is starting to flow down to the
Speaker 16: community level, and we want to be one of those
Speaker 16: firms that curate that that deal flow for our investor base.
Speaker 3: A lot of the real estate that you have acquired
Speaker 3: over the last few years has been during a you know,
Speaker 3: uncharacteristically in recent years, high interest rate environment. How did
Speaker 3: you finance those?
Speaker 15: So we did very well pre COVID.
Speaker 16: We bought a lot of our real estate and we
Speaker 16: held it during COVID, managed it very well. And then
Speaker 16: recently we've been paying cash for houses because of the
Speaker 16: you know, current interest rate environment. A goal is to
Speaker 16: watch their rates drop and then you know, refinance those
Speaker 16: out and have favorable lending terms and then give money
Speaker 16: back to our investors as well.
Speaker 1: And taught us about the geography a little bit. I mean,
Speaker 1: we talked a little bit about the luxury market, but
Speaker 1: I also see, you know, looking through your talking points
Speaker 1: this focus on B plus cities that are growing. Talk
Speaker 1: to us about who falls into that category when you
Speaker 1: look around the map.
Speaker 16: Sure, sure, so from the luxury vacational perspective. We look
Speaker 16: at lakes, beaches, mountain resorts for the rest of the
Speaker 16: real estate perspective. Yes, we love fast growing B plus
Speaker 16: cities Columbus, Ohio, Austin, Texas, Nashville.
Speaker 15: You know, we're very excited to kind of be a
Speaker 15: part of their growth.
Speaker 16: You see these teams that are starting to look at
Speaker 16: you know, additional sports franchises, look at their urban airbnb
Speaker 16: markets expanding, and just really just the overall just entertainment
Speaker 16: of what's happening in these in these local cities.
Speaker 15: We want to be a part of that growth.
Speaker 3: Your investors are unique in the sense that they don't
Speaker 3: necessarily look like a lot of other private equity investors.
Speaker 3: You have two hundred more than two hudred investors. Ninety
Speaker 3: percent of them are black, twenty three percent of them
Speaker 3: are women. Do you think you'll be able to keep
Speaker 3: those that demographic data as you grow?
Speaker 16: Well, No, I mean we're open to all investment. I mean,
Speaker 16: you know, that's just where we focus on it. That's
Speaker 16: been our relationship, that's been our network as we grow.
Speaker 16: I mean, we're excited to welcome capital, you know, from
Speaker 16: from all different walks of life as long as it's
Speaker 16: good money, you know, and you know, folks are understanding
Speaker 16: what we're trying to accomplish and they have the same
Speaker 16: values as us.
Speaker 15: You know, we'll be excited for that.
Speaker 16: But it'd be it'd be great to continue to get
Speaker 16: Black dollars into into the private market space.
Speaker 3: Where do you see other areas for growth? We mentioned
Speaker 3: a lot of the different assets that you own right now,
Speaker 3: the types that you have your eye on. Where where
Speaker 3: what's interesting to you right now?
Speaker 15: I say, I mean sports is great, I mean ownership.
Speaker 16: You're starting to see a lot of the professional teams
Speaker 16: open up little packets or pieces of ownership. We'd like
Speaker 16: to be a part of those in all the major
Speaker 16: cities and even some of the up and coming, uh
Speaker 16: you know, minor league teams that are growing. Kind of
Speaker 16: start there and build into owning a professional team one day. Media,
Speaker 16: we've gotten a lot of interest from our investor base
Speaker 16: around Broadway plays. We want at Lesha keys Is Health's
Speaker 16: Kitchen did really well with that, and we've got some
Speaker 16: other opportunities come in the pipeline, you know. And then
Speaker 16: you know, obviously real estate, I mean looking at supporting
Speaker 16: our HBCUs with housing and you know, some of the
Speaker 16: needs that are there, and we want to address those
Speaker 16: gaps and make money doing it and.
Speaker 1: Keeping the focus on the future. Before we let you go,
Speaker 1: I want to talk a little bit more about the
Speaker 1: investor base. So the goal is to build the AUM
Speaker 1: to a billion dollars. Right now, you have two hundred
Speaker 1: plus investors. What do you think your sweet spot is
Speaker 1: in terms of investors. Are you looking for ultra high
Speaker 1: net worth individuals eventually are you happy with just you know,
Speaker 1: accredited investors, Like where do you see that going when
Speaker 1: it comes to your investor makeup?
Speaker 16: So I think it's a blend. I think our sweet
Speaker 16: spot is folks who are making their first or second
Speaker 16: private market investment, who have just identified themselves as a
Speaker 16: credit investors who want to get into wealth building, want
Speaker 16: to get a little more aggressive around, you know, building
Speaker 16: well for themselves and their family. But I mean, we
Speaker 16: also have great deal flow, so we'll open to family
Speaker 16: offices and other institutions that may want to support us
Speaker 16: in our ventures. I mean, you know, we are doing
Speaker 16: real estate, which is a hard asset which traditionally does well,
Speaker 16: and luxury real estate has been proven to be strong.
Speaker 15: Over the course of the years.
Speaker 1: Well, Calvin so enjoyed this conversation. Really fascinating perspective on
Speaker 1: the private markets on of course, private equity investing. That
Speaker 1: is Calvin Budz Junior. He is the co founder and
Speaker 1: general partner over at East Chop Capital.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 2: live weekday afternoons from two to five pm Eastern Listen
Speaker 2: on Apple car Play and then Brout Auto with a
Speaker 2: Bloomberg Business app, or watch us live on YouTube.
Speaker 3: Twenty years ago, the first Ziggi's Coffee opened up in Longmont, Colorado,
Speaker 3: just northeast of Boulder. The idea behind it from the
Speaker 3: husband and wife team was, in the words of the company,
Speaker 3: to create quote a space where people could gather and
Speaker 3: feel right at home. Fast forward to today, they've got
Speaker 3: ninety six stores open, the vast majority of them are franchised,
Speaker 3: and they're set to pass one hundred by the end
Speaker 3: of this year, when they're said to be in twenty
Speaker 3: two states. They've sold more than eleven million drinks, and
Speaker 3: they've done it all by bootstrapping. For more on what's
Speaker 3: led to their success, we spoke with the CEO and
Speaker 3: co founder of Ziggy's Coffee Brandon Nudsen.
Speaker 7: Yeah, it really goes back to college. My wife and
Speaker 7: I were kind of lost in school and she got
Speaker 7: a job at a little drive through coffee shop, and
Speaker 7: I had the great idea that, you know, hey, let's
Speaker 7: just drop out of school and you know, we could
Speaker 7: do this. How hard it be? And I did convince her.
Speaker 7: Her parents didn't love that, but I did convince her
Speaker 7: to drop We're doing drop out of school and pursue
Speaker 7: our dream of open and drive through coffee shop.
Speaker 3: But it is hard, and like we're you know, you
Speaker 3: kind of run into like whatever the psychological phenomenon is
Speaker 3: when you're toly talking to people who've done it successfully
Speaker 3: that you know, it sounds like it's easier than it is.
Speaker 3: But there are a lot of people like you who
Speaker 3: aren't still doing this because what they did did not succeed.
Speaker 3: What made it work for Ziggy.
Speaker 7: When we opened our first it's actually called Gizzies. At first,
Speaker 7: I quit my job and we're living out of the
Speaker 7: tip jar, living out of the you know, whatever little
Speaker 7: money we could make, and we're just a position where,
Speaker 7: no matter how hard it get, we didn't have a choice,
Speaker 7: and so we fought through it and listen to customers
Speaker 7: and just grinded away.
Speaker 10: But it's interesting, right, like I think I certainly in
Speaker 10: New York there's a million places you can go get coffee,
Speaker 10: well known big chains, no ziggies, not yet, smaller places.
Speaker 10: I tend to like kind of local places, small coffee shops.
Speaker 3: But there's so more of a third wave coffee person.
Speaker 10: I am more of a third wave or make it
Speaker 10: at home because there's so many great devices. How in
Speaker 10: two decades has the market changed?
Speaker 7: Well, I mean drive through is huge now, and you know,
Speaker 7: you know, give a lot of credit to Dutch Bros.
Speaker 7: They really put drive through coffee on the map. I
Speaker 7: know Starbucks has done a great job with that as well.
Speaker 7: You know, I think it's become you know, if you
Speaker 7: look at the product makes you know. I think we
Speaker 7: first started, we were probably eighty percent hot coffee and
Speaker 7: twenty percent cold, and it switched. It's like seventy cold
Speaker 7: between energy drinking.
Speaker 3: Smoothie those That's what Starbucks is too.
Speaker 7: Yeah, It's it's just what people are looking for. It's
Speaker 7: very interesting.
Speaker 3: You know, it's funny that you're the drive through so
Speaker 3: big for you because when you started this company, it
Speaker 3: wasn't about drive through. It was about creating a space,
Speaker 3: similar to what Howard Schultz has talked about when he
Speaker 3: expanded Starbucks into the so called third place. Have you
Speaker 3: been able to kind of keep to the core of
Speaker 3: creating this space for people to gather and hang out
Speaker 3: even with drive through.
Speaker 7: Yeah, I think it's kind of one of those unanswered prayers.
Speaker 7: We wanted a drive through. We did not want to
Speaker 7: do a cafe. We just couldn't afford it. We were
Speaker 7: broke college dropouts and moving into a new state where
Speaker 7: it just knew my sister, and so the only thing
Speaker 7: we could really afford to do was we got really
Speaker 7: lucky and got this brick and mortar place in downtown Longmont.
Speaker 7: What we learned there was, you know, we're really in
Speaker 7: the service business and no matter I joke, I made
Speaker 7: horrible coffee back then, but I had great relationship with customers.
Speaker 7: So we learned that first and then translated that into
Speaker 7: the drive through.
Speaker 10: Were there moments? I mean, I feel like whenever we
Speaker 10: talk to an entrepreneur, even super successful ones like yourself,
Speaker 10: you know, are those who are now co founders and
Speaker 10: heads of you know, publicly held companies or used to be.
Speaker 10: There's always a moment where you're like, I'm not sure
Speaker 10: we're going to make it. I am curious how many
Speaker 10: times you felt that way?
Speaker 7: For twelve years? Probably ten years?
Speaker 14: Wow.
Speaker 7: And the thing with us is every time, you know,
Speaker 7: every time we made it. If you got our first
Speaker 7: store really running and making some money, then I beg
Speaker 7: my wife to do a second one, and then we
Speaker 7: went back to, oh my gosh, what did we do
Speaker 7: whenever we're going to make it? And then we got there,
Speaker 7: we open a third and it's it's kind of it's
Speaker 7: been an ongoing battle for sure.
Speaker 3: So talk a little bit about growth, because Carolin, I
Speaker 3: do talk to a lot of folks who are in
Speaker 3: the franchise business, and you know, the idea that it's
Speaker 3: really asset light is I think appealing to a lot
Speaker 3: of folks because they are able to grow without actually
Speaker 3: taking on that risk. They can offload that risk.
Speaker 10: I think it's an interesting business model. I mean, how
Speaker 10: does that make it so much easier for you guys
Speaker 10: to grow without the risk. But you've also got to
Speaker 10: make sure the brand doesn't get tarnished.
Speaker 7: Yeah exactly. I mean it comes down to training. We
Speaker 7: have a team of over fifty people here for you know,
Speaker 7: ninety seven locations because it's all about support and I
Speaker 7: think of every store as our store from the standpoint
Speaker 7: of not wanting to fail and from a risk standpoint.
Speaker 7: We're very close with all of our franchisees. So again,
Speaker 7: yes it's capital, it's a lot easier on the balance sheet,
Speaker 7: but we still fill the burden and we take every
Speaker 7: store seriously as if it were our home.
Speaker 10: Brandon, how do you decide where you grow and how
Speaker 10: you grow the rate with you which you grow? Like,
Speaker 10: you know, we want to ask you a little bit
Speaker 10: about Starbucks, do you and kind of where they are?
Speaker 10: It feels like they're always the one everybody is measured against.
Speaker 10: But having said that, it felt like it got to
Speaker 10: a point where there's one on every corner and how
Speaker 10: could it not be eating into the business of one
Speaker 10: or the other. So, how do you guys proceed with
Speaker 10: growth in a smart and thoughtful way that really pays
Speaker 10: off in the bottom and top lines.
Speaker 7: Well, there's two areas that we have success, and the
Speaker 7: first one is people. We need to find great franchise ease,
Speaker 7: great operators. At the end of the day. We're in
Speaker 7: the service business, and employees look up to their owners
Speaker 7: and they need to respect them, like them, and that's
Speaker 7: when they'll do a really, really good job, is when
Speaker 7: they really care about the owners and so the people are.
Speaker 7: We're not like targeting, you know, a certain wave across
Speaker 7: the country. We don't care if we're in Maine or
Speaker 7: if we're in southern California. We have a great operator.
Speaker 7: We feel really good. The next piece is like we
Speaker 7: love bids small markets fifteen thousand person, towns fifty getting over.
Speaker 7: We love those smart small.
Speaker 3: Markets like meaed where you're joining us from.
Speaker 7: Yeah, we have thirty five hundred people and this is
Speaker 7: one of the best stores in the company. We're plugged
Speaker 7: in the community. We have community events, We sponsor high
Speaker 7: school things. My kids go to high school and middle
Speaker 7: school and elementary school here, and so people just buy in.
Speaker 7: We are the coffee shop.
Speaker 3: How much capital does somebody need to start at ziggis.
Speaker 7: It's a wide range. We say, you know, on the
Speaker 7: low in maybe one hundred, one hundred and fifty thousand
Speaker 7: on cash all if you're going to buy land and
Speaker 7: build and develop three fifty four hundred thousand, If you're
Speaker 7: gonna buy the land with down payment and those sort
Speaker 7: of things.
Speaker 10: How quickly does that initial investment get paid off? How
Speaker 10: quickly is the return?
Speaker 7: It depends on what year we're talking about. Now, you
Speaker 7: know interest rates, it's such a wide variety for folks,
Speaker 7: it'd be hard to even tell you what that is.
Speaker 10: It's okay, So it's obviously been harder in a higher
Speaker 10: rate environment. Correct.
Speaker 7: Oh, it's tough. I mean, you know, between interest rates
Speaker 7: and labor and cost of goods and those sort of things.
Speaker 7: It's it's it's always moving and we're just just trying
Speaker 7: to adjust as it goes.
Speaker 3: What about franchise fees that get paid to you, I mean,
Speaker 3: that's how you guys end up making the money. How
Speaker 3: do those sort of tabulate?
Speaker 7: Yeah, so franchise fees are really the upfront fees to
Speaker 7: buy the rights of the license, and that money gets
Speaker 7: used to open stores and train. We're big believers in
Speaker 7: heavy training. We send a team of six people out
Speaker 7: for at least two weeks to open stores wherever they
Speaker 7: are because it's really importantly open, really strong, where the
Speaker 7: money is made on our end, where the revenue comes
Speaker 7: in to support our team. That supports our franchises is
Speaker 7: a royalty of six percent on the kind of adjusted growth.
Speaker 10: Okay, so let's go to you know, we mentioned Starbucks before,
Speaker 10: and it's certainly a story that has been front and
Speaker 10: center for us as it's getting a new CEO, very
Speaker 10: well known in the fast casual space, well known to
Speaker 10: you too. Yeah, Brian Nicol, you've known him for years.
Speaker 10: We've you know, known him for a while.
Speaker 3: Yeah, you've interviewed him a lot.
Speaker 10: You and I have also both talked to him, and yeah,
Speaker 10: and followed him because he came in, you know, just
Speaker 10: as the pandemic was getting underway, a tough time with
Speaker 10: a well known chain that was you know, certainly had
Speaker 10: its issues and really got deep into digital in terms
Speaker 10: of automating some things at the chain. Starbucks fighting off
Speaker 10: slumping demand. Uh, you know, customers are having to make choices,
Speaker 10: and I wonder what you think about price point. They're
Speaker 10: also dealing with some concerns in the Chinese market. They're
Speaker 10: looking to you know, cut weight times, They've got activist investors.
Speaker 10: There's a lot going on. What do you make of
Speaker 10: starbucks woes? How do you think about where they are?
Speaker 10: And I understand you operate in a very different space.
Speaker 10: But I'm just curious what you watch in terms of
Speaker 10: their woes.
Speaker 7: I mean, it's crazy to, you know, put ourselves up
Speaker 7: next to Starbucks, and they are. They are the reason
Speaker 7: that we're all in this business. They educate to the consumer,
Speaker 7: and we all shall be saying thank you, and so
Speaker 7: I'll never ever speak poorly on them.
Speaker 15: I think a little bit.
Speaker 7: It's just a little bit of tiredness of the brand.
Speaker 7: I mean, I think people are excited about new brands.
Speaker 7: Like I said, dus Rose and Siggies, it's new. I
Speaker 7: think the comparisons with us from them. We have a
Speaker 7: big food menu, our food mixes twenty five percent, and
Speaker 7: which makes this different than a lot of other brands.
Speaker 7: I just think that it's hard to stay on top.
Speaker 7: I think everyone's trying to knock you down, and I
Speaker 7: think they'll figure it out. They always seem to, you know,
Speaker 7: we try to stay out of all the things that
Speaker 7: are polarizing. We just focus on giving great, authentic service
Speaker 7: to our customers. And I could see them going back
Speaker 7: to that. But honestly, we're head down focus on our franchisees,
Speaker 7: just trying to help them be successful and you know,
Speaker 7: it's a tough market out there. We want to really
Speaker 7: spend our time just focusing on our customers.
Speaker 3: What do you find when it comes to loyalty, Brandon, Like,
Speaker 3: when people find out about the shop, do they come back?
Speaker 3: How do you have loyalty programs that track that?
Speaker 7: Yeah, yeah, we have a Lloyds are We're in the
Speaker 7: mid to high fifty percent as far as our in
Speaker 7: our app usage, So those are our loyal members. You know,
Speaker 7: right now people are not frequent in stores as much,
Speaker 7: and that's definitely our goal. But it's all about regulars
Speaker 7: for us.
Speaker 3: What about like app ordering and stuff.
Speaker 7: Yeah, we do some app order and it's not a
Speaker 7: ton it's single digits order ahead. We're working on that.
Speaker 7: We just released our new app about a year ago
Speaker 7: and working through some kings there, but it's definitely a
Speaker 7: big part of it.
Speaker 10: So what's next for you guys? And I am curious.
Speaker 10: You say, you know, it's fun to kind of put
Speaker 10: yourself in the league of Starbucks. Having said that, is
Speaker 10: there a growth that you want to stay at, our
Speaker 10: size that you want to stay at. Do you think
Speaker 10: about going public? Like, what's what's the future.
Speaker 7: I couldn't think of anything worse than Gwen public. For
Speaker 7: me personally, it looks like it doesn't look like a
Speaker 7: whole lot of fun to me. You know, we're going
Speaker 7: to open I mean, we'd love it. We're targeting forty
Speaker 7: five fifty stores a year. We're going to let the
Speaker 7: franchise de dictate that if we can find awesome people
Speaker 7: to open one hundred stores a year, will do that.
Speaker 7: But you can't force it. And that's what's great about
Speaker 7: not being public. We can grow at a pace that
Speaker 7: makes sense for us, and it makes sense for franchisees
Speaker 7: and make sure we're putting them in positions to be successful.
Speaker 3: Well, it doesn't necessarily you don't necessarily have the pressure
Speaker 3: on you to go public or have an exit because
Speaker 3: you haven't accepted any outside financing right correct, Nope.
Speaker 7: Our goal is to just help every franchise e make
Speaker 7: as much money as possible right now, and there's no
Speaker 7: pressures outside of that.
Speaker 3: So profitable I assume you are given that you haven't
Speaker 3: had to take on any venture fundraising or private equity funds.
Speaker 7: Yeah, yes, it's we've really invested in our team and
Speaker 7: so that's been the biggest challenge for us as a
Speaker 7: company is you know, we have fifty people for our headcounts,
Speaker 7: over fifty for you know, ninety seven stores. It's a
Speaker 7: big number. But we really believe, especially right now with
Speaker 7: how tough it is out there, that we need to
Speaker 7: provide a ton of support and a ton of train
Speaker 7: and information and we need to be relevant with ltos
Speaker 7: and those sort of things, which is why we have
Speaker 7: just an amazing creative team and operations team here which
Speaker 7: does cut into that. But we're looking down the line.
Speaker 3: How do you figure out operations and logistics at your
Speaker 3: scale given that there needs to be a consistent customer
Speaker 3: experience at stores that are several states away from where
Speaker 3: you are in Mead, Colorado.
Speaker 7: Yeah, technology is great. I think twenty years ago this
Speaker 7: would have been really really hard. But we have tons
Speaker 7: of metrics from you know, zoom timers that measure how
Speaker 7: along the cars in line to you know, obviously online reviews,
Speaker 7: but we use you know, a mystery shops and we
Speaker 7: do that on a regular basis, like once a week
Speaker 7: for three months with a new store opens, we have
Speaker 7: a mystery shopper every week that goes in and just
Speaker 7: takes pictures and of their cup and make sure that
Speaker 7: the drink is right, the food is hot, and all
Speaker 7: of those things that really helps us keep tabs on
Speaker 7: how people are feeling.
Speaker 3: Yeah, I mean this is an undercover customer basically that
Speaker 3: you know, provides the report to the franchise owner. So,
Speaker 3: and what about actually like making sure the coffee is consistent?
Speaker 3: Do you roast the coffee all in one place and
Speaker 3: then ship it out to the different stores?
Speaker 7: Yeah? Absolutely, So we have an incredible partner, Dolana's Coffee
Speaker 7: Roasters out of Seattle. They roast the coffee there, they
Speaker 7: put on a semi and send it to lovel In,
Speaker 7: Colorado to our distribution company, and then we send it
Speaker 7: from there after our franchise ease.
Speaker 10: I love getting into the nitty gritty. Having said that,
Speaker 10: a place like you and kind of the towns it
Speaker 10: sounds like, or the markets that you are serving, can
Speaker 10: give us a really great idea about what's up with
Speaker 10: the consumer. And we have numerous stories that we've been
Speaker 10: reporting out here at Bloomberg about consumers making choices and
Speaker 10: trading down or not buying one thing so that they
Speaker 10: can do something else. So what are you seeing with
Speaker 10: the consumer? What noticeable trends that tell you whether or
Speaker 10: not the consumer's starting to feel some stress.
Speaker 7: Yeah, it's frequency, right, Someone that used to come fur
Speaker 7: days a week come they come twice now, and you
Speaker 7: know we're there. You know, we're two years ago that
Speaker 7: you know, five bucks was nothing. Now it does matter.
Speaker 7: And we talked to our burisas franchises all the time
Speaker 7: about just you know, don't don't take that for granted.
Speaker 7: You know, when you do get them those one or
Speaker 7: two times a week, you know, make sure it's a
Speaker 7: great experience because they're they're there for the coffee, but
Speaker 7: they're there more for the relationships and talking to someone
Speaker 7: on the way to work or after school and and
Speaker 7: so so it's really important that we take care of
Speaker 7: them that way.
Speaker 10: And getting workers labor, labor, costs, supply chains, all of
Speaker 10: that stuff something that we obsessed about, you know, right
Speaker 10: after the pandemic, has all of that calmed down.
Speaker 7: Yeah, labor has gotten much much better. I mean it's
Speaker 7: very expensive now, but as far as application might get
Speaker 7: four applications for brest to you know, a year ago,
Speaker 7: and now it's fifty and so there's definitely, you know,
Speaker 7: definitely a larger labor pool. And then certainly supply chain.
Speaker 7: We're not We're not fighting over getting products anymore. It's
Speaker 7: it's it's still expensive, but it's but it's much more available.
Speaker 3: That seems a little concerning.
Speaker 7: No.
Speaker 3: Fifth, up from four applications for a burst up to fifty?
Speaker 3: Is that consistent across markets?
Speaker 7: You know? You know, I'm at checking my franchise. He's
Speaker 7: on that, you know, I don't know. I would assume so,
Speaker 7: but but again I don't have that data in front
Speaker 7: of me.
Speaker 3: Yeah, because that would I mean, that would show that
Speaker 3: there are a lot of people out there looking for work,
Speaker 3: all right.
Speaker 10: I feel like the million billion, trillion dollar question is
Speaker 10: how the heck did you guys do this on your own?
Speaker 10: We talked about bootstrapping it and Tim and I know
Speaker 10: in preparing for it, and you talked about it that
Speaker 10: you didn't did you tap family friends at all? But like,
Speaker 10: how did you do that? Or was it just a
Speaker 10: case of I don't know, how.
Speaker 13: Did you do it?
Speaker 7: No? I appreciate asking the question. My mother in law
Speaker 7: gave us the first initial loan of fifty thousand dollars
Speaker 7: that we paid off right about when we paid our
Speaker 7: student loans off, which took about fourteen years, so that
Speaker 7: really helped. And then my dad kicked in some money
Speaker 7: to help a little bit about seventy grand. Other than that,
Speaker 7: it's been floating, begging the you know, on our early days,
Speaker 7: begging the sales tax department not not to close our
Speaker 7: doors and let us have some time to pay it off.
Speaker 7: And it's just grinding. And I have an amazing wife
Speaker 7: who is just knows how to figure things out. And
Speaker 7: then just some key hires along the way. We just
Speaker 7: got really lucky and hired some amazing baristas that are
Speaker 7: you know, one of this now our vice president. And
Speaker 7: so we've just had a ton of support and help
Speaker 7: and it's been hard, but man, it's been wonderful.
Speaker 3: Hey, because there's isn't available to in many places, at
Speaker 3: least not yet where our listeners and our viewers are.
Speaker 3: Give us an idea of price point and sort of
Speaker 3: how it compares to other coffee places that people would
Speaker 3: go to. How much is a cup of coffee?
Speaker 7: That's a great question. It depends on what you all
Speaker 7: like a drip property. I even had my notes here
Speaker 7: because I know you might aswer those questions.
Speaker 11: I mean, we're priced right at probably Starbucks, if not
Speaker 11: on some items even a little bit more, and you
Speaker 11: might kind of scratch your head a little bit, but
Speaker 11: you know, our taste is a big part of what
Speaker 11: makes it East great is when you go from a
Speaker 11: twelve ounce to a twenty ounce, that the flavor profile
Speaker 11: is very much the same.
Speaker 7: But in order to do that, you really got to
Speaker 7: up your shots of espress. So you've got up your flavor.
Speaker 7: I think a lot of competitors kind of just add
Speaker 7: a little bit more milk to it. And so in
Speaker 7: order for us to do that, like in a twenty ounce,
Speaker 7: getting three shots or four shots versus maybe two a competitor,
Speaker 7: we have to account for that. But considering those things,
Speaker 7: I would say we're a little bit less expensive. But
Speaker 7: if you were to look at sixty ounce, you know,
Speaker 7: Latte versus say Starbucks, I'd say we're right there, even
Speaker 7: maybe even a tid bit more.
Speaker 10: All right, I've been popping in some zip codes.
Speaker 6: One last question.
Speaker 10: Definitely not in New York City, not right outside New
Speaker 10: York City. What's the closest ziggies to New York City? Oh,
Speaker 10: my gosh, New Hampshire.
Speaker 7: Maybe New Hampshire. Yeah, we got North Carolina, New Hampshire. Yeah,
Speaker 7: that's probably as close as you're going to get there.
Speaker 7: You can make that maybe a day trip over there.
Speaker 10: Yeah, we could do a day trip.
Speaker 3: Yeah, your coffee is going to be cold by the
Speaker 3: time you bring it back to New York, Carrol. Maybe
Speaker 3: the ice, maybe the ice will be melted. Hey, real quick,
Speaker 3: before we let you go.
Speaker 9: Food.
Speaker 10: You're not going to ask me are you coming to
Speaker 10: New York anytime soon?
Speaker 7: Nothing in New York. We're working on New Jersey just
Speaker 7: from a drive from standpoint, just challenging real estate market.
Speaker 7: But at the end of the day, we're just haven't
Speaker 7: found the right franchise yet.
Speaker 3: All right, challenging, challenging real estate market is a good
Speaker 3: way to describe New York City. I think that's an understatement.
Speaker 10: Tim is always hungry, So ask your food questions.
Speaker 3: Yeah, how much of revenue is from food? Because I
Speaker 3: know that you're increasingly making a food menu part of.
Speaker 7: This twenty five percent, believe it or not. So the
Speaker 7: first open we were three to five, and we've grown it.
Speaker 7: We've done a great job with you know, we just
Speaker 7: breakfast burritos and we do a lot of gluten free stuff.
Speaker 7: It's really really My son is Celiac and so we
Speaker 7: just started carrying that stuff and have really grown and
Speaker 7: people love it, so tons and tons of food options.
Speaker 10: Well, listen, this was really fun. Good luck and look
Speaker 10: forward to check in with you maybe down the road again.
Speaker 10: Be well, enjoy the rest of your summer and have
Speaker 10: a good fall.
Speaker 7: I appreciate you having me.
Speaker 10: You bet Brandon Knutsen. He is a founder chief executive
Speaker 10: officer of Ziggy's Coffee.
Speaker 6: Joining us for me Colorado.
Speaker 3: Yeah, enjoy your summer. I mean he's working twenty four
Speaker 3: to seven, Carol, there's no break for this guy.
Speaker 10: Do you can tell what did he say at the
Speaker 10: twenty years that they've done twelve?
Speaker 5: Like?
Speaker 10: Yes, was struggling and stressless and stressful.
Speaker 2: This is the Bloomberg Business Week podcast, available on Apple, Spotify,
Speaker 2: and anywhere else you get your podcasts. Listen live weekday
Speaker 2: afternoons from two to five pm Eastern on Bloomberg dot Com,
Speaker 2: the iHeartRadio app, tune In, and the Bloomberg Business App.
Speaker 2: You can also watch us live every weekday on YouTube
Speaker 2: and always on the Bloomberg terminal