WEBVTT - China Hits Pause on Giant Chip Spending 0:00:01.840 --> 0:00:04.440 This is Bloomberg Business Week. I'm Carol Masser and I'm 0:00:04.480 --> 0:00:06.840 Tim Stanevik. We're here every day bringing you the latest 0:00:06.840 --> 0:00:11.000 news from the world's of business and finance, plus technology, politics, economics, 0:00:11.039 --> 0:00:14.040 all harnessing the power of Business Week reporters and editors, 0:00:14.160 --> 0:00:17.000 not to mention our journalists and analyst in more than 0:00:17.040 --> 0:00:21.160 one twenty countries. You can download Bloomberg Business Week on iTunes, SoundCloud, 0:00:21.239 --> 0:00:23.320 or Bloomberg dot com. You can also listen to our 0:00:23.360 --> 0:00:26.119 radio show at two pm Eastern Time on Bloomberg Radio 0:00:26.320 --> 0:00:31.040 or stream us live on YouTube and Bloomberg dot com. 0:00:31.080 --> 0:00:32.960 All right, right now, we want to get to another 0:00:32.960 --> 0:00:35.800 story that caught our attention, certainly earlier in the day, 0:00:35.920 --> 0:00:38.120 and that is what's going on in the chip space. 0:00:38.440 --> 0:00:41.159 Some news out of China pausing massive investments aimed at 0:00:41.200 --> 0:00:43.559 building a chip industry to compete with the US as 0:00:43.560 --> 0:00:46.879 a nationwide COVID resurgence strains the world's number two economy 0:00:47.240 --> 0:00:50.520 and Beijing's finances. Tim, we have a great voice when 0:00:50.520 --> 0:00:53.239 it comes to what's going on in global Semis very 0:00:53.240 --> 0:00:55.360 pleased to have back with us. Chris Miller. He's the 0:00:55.360 --> 0:00:58.480 author of Chip War. It's the fight for the World's 0:00:58.520 --> 0:01:02.880 most critical Technology. Chris's associate professor of international history at 0:01:02.880 --> 0:01:05.559 Tufts University. He joins us once again via zoom for Boston. 0:01:05.560 --> 0:01:07.240 I do want to note that Chris's book was recently 0:01:07.319 --> 0:01:10.120 highlighted in a selection of the best business books of 0:01:10.160 --> 0:01:11.960 the year from the New York Times. Chris, good to 0:01:12.000 --> 0:01:15.800 have you back with us. Uh, this exclusive from our 0:01:15.840 --> 0:01:18.800 team here at Bloomberg News. How should our investing audience 0:01:18.880 --> 0:01:23.200 understand China potentially scaling back its investments to compete with 0:01:23.319 --> 0:01:27.920 international ship manufacturers. Well, I would say first off that 0:01:27.959 --> 0:01:32.680 we need to wait for more information and corroboration from 0:01:32.800 --> 0:01:36.280 China to see how true uh this is. I don't 0:01:36.319 --> 0:01:40.000 doubt the report itself, but the Chinese policy making process 0:01:40.120 --> 0:01:45.800 works in complicated ways, and focusing on domesticating semiconductor technology 0:01:45.840 --> 0:01:48.800 has been a core goal of the Chinese government since 0:01:50.440 --> 0:01:52.440 and so it would really be a dramatic shift if 0:01:52.520 --> 0:01:56.520 overnight China where to really scale back ship making. Somebodies, 0:01:56.640 --> 0:01:59.640 especially because it would only about a month ago when 0:01:59.760 --> 0:02:03.400 China announced over a hundred billion dollars of new subsidies 0:02:03.440 --> 0:02:05.240 for the chip industry. So I think we need to 0:02:05.720 --> 0:02:08.600 wait for some more information to understand what exactly does 0:02:08.680 --> 0:02:11.560 this new report mean in the context of what China's 0:02:11.560 --> 0:02:13.920 policy has been for almost a decade. Chris, that's a 0:02:13.919 --> 0:02:16.320 great point. I do feel like sometimes I'm getting smacked 0:02:16.320 --> 0:02:18.400 in many directions when it comes to China policy and 0:02:18.400 --> 0:02:20.680 trying to make sense of what are they really doing, 0:02:21.000 --> 0:02:23.200 especially for a country that we know lays out long 0:02:23.320 --> 0:02:27.120 term policy. Chips are in everything chip. You know, China 0:02:27.160 --> 0:02:29.560 has come out very clearly and said it wants to 0:02:29.600 --> 0:02:34.079 dominate on a higher technology level, right, So I mean 0:02:34.200 --> 0:02:37.360 having said that, you know, we're seeing the socks you know, 0:02:37.680 --> 0:02:39.799 a little bit of a rally today. Again, we kind 0:02:39.800 --> 0:02:41.880 of have to wait longer term, but doesn't it I mean, 0:02:42.360 --> 0:02:45.000 just using our brains say that China is gonna have 0:02:45.080 --> 0:02:49.480 to invest in this space because this is the future. Well, 0:02:49.520 --> 0:02:52.040 I certainly think that's been what China's signaled over the 0:02:52.080 --> 0:02:56.080 path decade, both from officials with high up the changing 0:02:56.120 --> 0:02:59.200 paying all the way down until local level. We've heard 0:02:59.240 --> 0:03:02.160 all sorts of uh Chinese visual talk about the industry 0:03:02.200 --> 0:03:05.440 being important, and if you look at the Chinese economy, um, 0:03:05.480 --> 0:03:09.519 whether it's manufacturing or the tech sector, there's deep reliance 0:03:09.560 --> 0:03:12.520 on sem conductors, and today China has been more money 0:03:12.560 --> 0:03:15.600 importing chips that's been importing oil. So there's a really 0:03:15.680 --> 0:03:19.120 strong rationale for China to want to domesticate. Uh. Some 0:03:19.200 --> 0:03:22.000 of that it has to import from abroad. On the 0:03:22.000 --> 0:03:25.000 other hand, though, it is the case that the restrictions 0:03:25.040 --> 0:03:28.680 the US imposed on China late last year are really 0:03:28.800 --> 0:03:31.120 top and it will just be really expensive to get around, 0:03:31.200 --> 0:03:34.240 So it would be economically rational I think for China 0:03:34.400 --> 0:03:37.160 to recognize the ways it's just going to have to 0:03:37.240 --> 0:03:41.040 remain reliant on important technology. But it hasn't in the 0:03:41.080 --> 0:03:47.200 past focused on economic issues when national security is in play. Hey, Chris, Uh, 0:03:47.760 --> 0:03:51.080 We've been talking over the last few months about investments 0:03:51.120 --> 0:03:55.200 that companies including Intel, TSMC, and more have made in 0:03:55.240 --> 0:03:58.320 the US in places like Ohio, Arizona, and more. When 0:03:58.320 --> 0:04:01.520 it comes to building facility, these that perhaps one day 0:04:01.520 --> 0:04:04.440 will build chips or parts of chips up on the 0:04:04.440 --> 0:04:07.080 supply chain. Uh. What more do you think the American 0:04:07.120 --> 0:04:10.560 government needs needs to do in order to uh spur 0:04:10.720 --> 0:04:14.040 innovation manufacturing here at home? How would you advise policymakers 0:04:14.040 --> 0:04:16.960 if you were doing that. I think the first thing 0:04:16.960 --> 0:04:19.480 the US needs to do and is doing is implement 0:04:19.640 --> 0:04:22.960 the policies that have already been passed. The Congress pass 0:04:23.000 --> 0:04:24.839 the chip stacked last year, but it's still in the 0:04:24.920 --> 0:04:28.000 really early stages of implementation, and it's going to take 0:04:28.040 --> 0:04:30.839 a couple of years to have all of the changes 0:04:30.920 --> 0:04:33.800 that were put into that law actually enacted and the 0:04:33.800 --> 0:04:38.040 incentive programs dispersed. The other fact of this is that 0:04:38.120 --> 0:04:42.000 a key input the company's decisions about where to UH 0:04:42.040 --> 0:04:45.120 where to invest is tact policy, and in the past, 0:04:45.279 --> 0:04:48.560 US tact policy has been much less favorable to UH 0:04:48.600 --> 0:04:52.080 some anconductor investment and then in places like Taiwan or 0:04:52.120 --> 0:04:55.120 in China, and so right now that the key area 0:04:55.200 --> 0:04:57.839 of focus is making sure that the US has the 0:04:57.839 --> 0:05:01.320 best tax policy UH in terms of providing deductions for 0:05:01.880 --> 0:05:05.600 manufacturing investment in low tax rates to make it viable 0:05:05.680 --> 0:05:09.560 to operate a semi facility here relative to other countries 0:05:09.560 --> 0:05:12.000 that have lower taxes. I mean, Chris in some ways, 0:05:12.040 --> 0:05:15.039 like as you say, you know microchips, semis, you know 0:05:15.080 --> 0:05:17.080 the new oil. So I do wonder do we think 0:05:17.080 --> 0:05:19.320 about kind of the model of the Middle East, right 0:05:19.720 --> 0:05:24.320 and their dominance and control and hold over most of 0:05:24.320 --> 0:05:27.680 the world, certainly the developed world for decades, you know, 0:05:27.839 --> 0:05:31.679 is that the model could you know essentially, if one player, 0:05:31.839 --> 0:05:34.880 whether it's China, whether it's the US, is a dominant 0:05:34.880 --> 0:05:36.600 player when it comes to semis is that how we 0:05:36.640 --> 0:05:40.200 need to think about it. Well, the chip industry is 0:05:40.200 --> 0:05:43.880 actually much more concentrated than even the oil industry. We 0:05:43.920 --> 0:05:47.200 think of Thoudy as being really important, but the study 0:05:47.360 --> 0:05:50.560 produced only fifteen or so percent of the world oil, 0:05:50.680 --> 0:05:56.599 whereas Taiwan produces of the world's most advanced processor chips. 0:05:56.360 --> 0:06:00.039 But even more concentration and therefore even more risk of 0:06:00.080 --> 0:06:04.000 to your political disruption when it comes to semiconductors relative 0:06:04.760 --> 0:06:07.520 uh to oil. And that's why the concept of a 0:06:07.600 --> 0:06:09.800 chip war is is so important, not just for the 0:06:09.839 --> 0:06:14.520 security implications, but also for the economic implications, because it's 0:06:14.520 --> 0:06:16.960 far worse in terms of it's not kind of effect 0:06:17.600 --> 0:06:19.800 than just the disruptions to the oil larks that we've 0:06:19.839 --> 0:06:22.800 seen with the Russia stactions this year. You would imagine, 0:06:23.360 --> 0:06:26.720 for example, a disruption to its high want ability to 0:06:26.720 --> 0:06:30.760 exupport chips. Does the world outside of China have what 0:06:30.839 --> 0:06:33.920 it takes to actually cut China out of the process 0:06:34.040 --> 0:06:37.720 at any point in the next decade, Well, China is 0:06:37.720 --> 0:06:40.960 already far cut off, cut out of the process of 0:06:40.960 --> 0:06:43.839 making advanced chips. China can't make the most advanced ships 0:06:43.880 --> 0:06:45.920 and because of the latest U S controls, it won't 0:06:45.960 --> 0:06:48.960 be able to make the second generation most advanced ships 0:06:49.320 --> 0:06:53.840 going forward. China can make fairly low TEX chips and 0:06:53.920 --> 0:06:56.120 it will be able to UH for some time. But 0:06:56.200 --> 0:06:58.279 China is really not a major player when it comes 0:06:58.279 --> 0:07:00.960 to advanced ships. Where things stand today, what does it 0:07:01.000 --> 0:07:04.080 mean to you? We know t SMC, what investing some 0:07:04.160 --> 0:07:08.160 forty billion UH in that US plant here, giant US 0:07:08.200 --> 0:07:11.040 planted in the United States. Um, is that a new 0:07:11.080 --> 0:07:14.920 t SMC going forward in terms of being here, having 0:07:14.960 --> 0:07:18.440 a physical presence and just got about thirty seconds. Well, 0:07:18.560 --> 0:07:21.600 it's a big change for t SNC to have major 0:07:21.640 --> 0:07:25.320 facilities outside of Taiwan. Before this year, t SMC had 0:07:25.360 --> 0:07:28.320 almost volve its manufacturing in Taiwan and just a little 0:07:28.320 --> 0:07:31.160 bit in China. So t SMC becoming a more globalized 0:07:31.400 --> 0:07:34.480 company as it invests in the US and also in Japan, 0:07:34.520 --> 0:07:37.400 maybe down the road in Europe too. Yeah, that investment 0:07:37.400 --> 0:07:39.360 by t SMC one of the largest foreign investments in 0:07:39.360 --> 0:07:41.800 the United States and the largest I believe in the 0:07:41.840 --> 0:07:44.080 State of Arizona. So pretty big deal, Chris Miller, you 0:07:44.120 --> 0:07:46.560 are a big deal. Associate Professor of International History at 0:07:46.560 --> 0:07:49.080 Tufts University. Check out his book Chip Or The Fight 0:07:49.120 --> 0:07:52.320 for the World's Most Critical Technology as to mention, recently 0:07:52.360 --> 0:07:54.600 winning the Book of the Year award from The Financial Times. 0:07:54.760 --> 0:07:58.720 This is Bloomberg Radio. This is Bloomberg Business Week with 0:07:58.880 --> 0:08:03.600 Carol Messer and Tim Stanovic on Bloomberg Radio. Well McDonald's 0:08:03.600 --> 0:08:05.880 commitment to Russia a long and deep, nothing short of 0:08:05.880 --> 0:08:09.560 a revolution to make it all happen, officially creating a 0:08:09.640 --> 0:08:12.720 restaurant from the ground up more than three decades ago. Well, 0:08:12.720 --> 0:08:16.720 the upcoming new issue of Bloomberg business Week, Bloomberg's Clint Rainy, 0:08:16.760 --> 0:08:19.560 a contributor to the magazine, takes us throughout the iconic 0:08:19.600 --> 0:08:22.600 fast foods journey that changed the way Russia did business 0:08:22.600 --> 0:08:25.000 and how it all came to an end. We've got 0:08:25.040 --> 0:08:27.680 with us this afternoon. Bloomberg Business Week editor Joel Weber, 0:08:27.760 --> 0:08:31.640 who's in our Bloomberg Interactive Broker's studio. Jeremy Keane joins 0:08:31.720 --> 0:08:33.640 us as well. These Business Week Features editor on the 0:08:33.640 --> 0:08:36.400 phone from New York City, Joel, I want to start 0:08:36.400 --> 0:08:38.200 with you just give us an idea of how this 0:08:38.200 --> 0:08:41.040 story came together, because it's a real deep dive into 0:08:41.040 --> 0:08:44.559 sort of McDonald's history. And really, you know, when when 0:08:44.640 --> 0:08:47.720 the Russia's invasion of Ukraine happened, McDonald's did something that 0:08:47.760 --> 0:08:51.680 it's never done in its history. Yeah. So the story 0:08:51.760 --> 0:08:56.040 begins thirty three years ago, in three weeks and that's 0:08:58.240 --> 0:09:02.160 that's um the day that McDonald's opened up in Pushing 0:09:02.200 --> 0:09:08.360 Square in Moscow and basically brought capitalism to Russia. And boy, 0:09:08.400 --> 0:09:12.160 that's a really interesting, uh storyline to be thinking about 0:09:12.400 --> 0:09:14.400 over the past year. And I think actually one of 0:09:14.440 --> 0:09:18.280 the big business stories of last year was to watch 0:09:18.920 --> 0:09:22.600 business russell with what to do with Russia's invasion of Ukraine. 0:09:22.600 --> 0:09:26.360 And a lot of companies immediately left, others got stuck 0:09:26.360 --> 0:09:28.240 in the middle for a while, and some are still 0:09:28.280 --> 0:09:30.160 there and quietly kind of trying to figure out what 0:09:30.200 --> 0:09:32.960 their moves are. McDonald's was one that got called out 0:09:32.960 --> 0:09:37.040 early and then walked away. Um and that was um 0:09:37.440 --> 0:09:41.920 no doubt of really trying business conversation within the company 0:09:41.960 --> 0:09:44.920 because of this kind of amazing history story. Is that 0:09:45.080 --> 0:09:47.000 to me, this is the kind of story that we 0:09:47.040 --> 0:09:49.160 do every once in a while. It feels like the 0:09:49.200 --> 0:09:50.719 kind of thing of business school is going to talk 0:09:50.720 --> 0:09:53.439 about forever, which is, boy, you have a success story 0:09:53.559 --> 0:09:56.240 and then you know, maybe a situation out of your 0:09:56.280 --> 0:09:59.160 control makes you have to reevaluate what you're doing. And 0:09:59.280 --> 0:10:01.840 you know, in this case, Russia um ended up walking 0:10:01.840 --> 0:10:04.920 away from from this. McDonald's end up walking away from 0:10:04.920 --> 0:10:09.600 this really interesting story. Um. But you know, Jeremy, the 0:10:09.600 --> 0:10:12.080 thing that I found that was so interesting here was 0:10:12.120 --> 0:10:17.000 that the raw ingredients that you need to make uh 0:10:17.280 --> 0:10:21.520 for McDonald's, Russia has them, but they weren't. They weren't 0:10:21.520 --> 0:10:24.480 really you know, turning it into Big Max to start with. 0:10:24.520 --> 0:10:28.640 But you think, you know, dairy potatoes, meat bread, those 0:10:28.679 --> 0:10:31.760 are all like raw ingredients that you would need to 0:10:31.800 --> 0:10:34.360 make McDonald's happen. So what was the magic that allowed 0:10:34.440 --> 0:10:38.600 McDonald's to crack Russia initially? Yeah, so, I mean they 0:10:38.640 --> 0:10:42.920 had a first mover advantage because the George Collen, a 0:10:43.000 --> 0:10:45.680 longtime executive McDonald has kind of made it his mission 0:10:45.760 --> 0:10:49.199 to get into the Soviet Union. That took him a 0:10:49.320 --> 0:10:51.880 very long time to kind of work through the communist 0:10:51.880 --> 0:10:55.880 bureaucracy and get permission to do that. And then you know, 0:10:55.920 --> 0:10:59.520 they were sort of the first of these Western companies 0:10:59.520 --> 0:11:02.120 to me in there. UM and you know, a bunch 0:11:02.160 --> 0:11:06.360 of others uh followed over over the nineties and into 0:11:06.360 --> 0:11:10.400 the two thousand's UM, but you know McDonald's initially it 0:11:10.480 --> 0:11:14.480 caught on quickly because it was a symbol of capitalism. 0:11:14.480 --> 0:11:17.320 It was something that I think Russians were hungry for 0:11:17.440 --> 0:11:20.760 at that moment, that terrible pun sorry, uh, at that 0:11:20.840 --> 0:11:25.280 moment in history and UM and then and then it 0:11:25.559 --> 0:11:28.000 kind of worked that advantage, you know, it built on it. 0:11:28.360 --> 0:11:31.920 They what old talking about is UM over the two 0:11:31.960 --> 0:11:34.600 thousands in particular, you know that they developed they realized 0:11:34.640 --> 0:11:38.120 that they needed to do a better job of working 0:11:38.160 --> 0:11:41.680 with Russian ingredients, that they had everything available, and started 0:11:42.440 --> 0:11:45.839 building this this big supply chain to complement the the 0:11:46.600 --> 0:11:49.599 operation that they that they developed to you know, to 0:11:49.720 --> 0:11:53.360 service the restaurants themselves. And they built it out and 0:11:53.360 --> 0:11:56.040 built it out to the point that you know, by 0:11:56.040 --> 0:12:00.599 the time Putin came along, UM and and now nationalism 0:12:00.640 --> 0:12:03.520 increased in Russia, they were able to say like, well, 0:12:03.600 --> 0:12:07.040 look like we're already very Russian in terms of you 0:12:07.080 --> 0:12:09.520 look at our supply chain and and the way that 0:12:09.559 --> 0:12:12.560 we do you know, even the potatoes for their fries, 0:12:12.640 --> 0:12:16.240 which they know they struggled to find. Really, even the 0:12:16.280 --> 0:12:18.559 Russia produces a lot of potatoes, they struggled to find 0:12:18.600 --> 0:12:20.960 the ones that would produce the Christmas that they were 0:12:21.000 --> 0:12:23.520 after with surprise, and you know, after a long time 0:12:23.559 --> 0:12:26.440 they eventually figured that out too. So you know, for them, 0:12:26.480 --> 0:12:29.000 they had they had invested and kind of built deep 0:12:29.080 --> 0:12:31.599 roots in the country by the time the envision of 0:12:31.720 --> 0:12:35.680 Ukraine happened, and you know they yah, it's pretty incredible. Jeremy, 0:12:35.720 --> 0:12:38.800 just to share, well, actually, before I get to these numbers, Clint, 0:12:38.840 --> 0:12:41.520 did you know, go a few years ago and actually 0:12:41.720 --> 0:12:43.680 eat at the restaurant and pushkin square and he does, 0:12:43.800 --> 0:12:46.520 right that it actually seems like a big mac or 0:12:46.880 --> 0:12:49.360 you know what they call it there. You know, I 0:12:49.360 --> 0:12:51.440 actually don't even know what they call it in Russia. 0:12:52.600 --> 0:12:56.600 Helped me out, y'all um, but it's it's the Jeremy, 0:12:56.640 --> 0:13:00.720 what is it? The mac uh? What macdac is McDonald's that. Yeah, 0:13:00.720 --> 0:13:02.680 but it's pretty you know, he said it did actually 0:13:02.679 --> 0:13:05.920 taste better there, and you know they said, oh, well, 0:13:05.920 --> 0:13:08.280 that's because all the ingredients come come locally. But I 0:13:08.280 --> 0:13:10.400 want to talk about the economic impact of the restaurant 0:13:10.440 --> 0:13:13.600 on the country. H In the chain purchased about four 0:13:13.600 --> 0:13:16.440 percent of Russia's potatoes, two percent of its cheese, paid 0:13:16.440 --> 0:13:19.320 a billion dollars in taxes h during the years of 0:13:19.320 --> 0:13:24.679 this study, so between roughly by it accounted for seven 0:13:24.679 --> 0:13:27.920 percent of all Russian restaurants sales. So what's going on 0:13:27.960 --> 0:13:30.840 now with sort of the I don't want to call 0:13:30.840 --> 0:13:34.160 it a reinvention, but a rebrand of the existing McDonald's, 0:13:34.160 --> 0:13:37.480 which they were close to a thousand. Yeah, so they 0:13:37.600 --> 0:13:41.040 basically sold, they suspended operations and then sold all their 0:13:41.080 --> 0:13:47.520 assets to Alexander go our Um Mining Executive and he 0:13:48.000 --> 0:13:55.480 Um spent Um. They rebranded it of Crucial which tasty 0:13:55.600 --> 0:13:59.440 period and kind of continued along the way that they were. 0:14:00.000 --> 0:14:02.800 And you know, Clint gets into the story. It's kind 0:14:02.800 --> 0:14:04.880 of a sub sub theme of the story that there 0:14:04.960 --> 0:14:07.240 was sort of a long tradition of Russian imitators of 0:14:07.360 --> 0:14:09.280 McDonald's who would pop up and try and do what 0:14:09.320 --> 0:14:13.160 they were doing. Sometimes the the rip offs boiled down 0:14:13.200 --> 0:14:17.640 to even using essentially the same menus um and so 0:14:17.760 --> 0:14:20.320 you know, and and also over the years, like Russian 0:14:20.320 --> 0:14:25.080 competitors responds, there are companies like Terra Mock, who speaks 0:14:25.120 --> 0:14:27.320 with the CEO of that company, and they make their 0:14:27.320 --> 0:14:30.080 BLEMI chain and they really followed McDonald's textbook too, so 0:14:30.440 --> 0:14:32.880 you know that the market I guess has become more 0:14:32.960 --> 0:14:35.800 mature and there's more local options and that sort of thing. 0:14:35.920 --> 0:14:38.520 So there, you know, there there's local operators who are 0:14:38.520 --> 0:14:41.040 they're kind of doing what was going on before. And 0:14:41.040 --> 0:14:43.280 I think they also, I found not mistake and retained 0:14:43.280 --> 0:14:46.360 a fair bit of the staff um from before, so 0:14:46.480 --> 0:14:48.680 that you know they they have to some degree, I believe, 0:14:48.760 --> 0:14:53.720 continued the operations and the brand. It's pretty incredible when 0:14:53.720 --> 0:14:56.800 you think about it, because it's like, wow, like McDonald's 0:14:56.800 --> 0:14:59.320 came in, there's no mistaken McDonald's, Like anywhere you go 0:14:59.400 --> 0:15:01.320 in the world, every body knows what double Archers look like. 0:15:01.360 --> 0:15:04.400 And then all of a sudden, like kind of almost overnight, 0:15:04.440 --> 0:15:09.280 it's like this huge geopolitical catastrophe happens and then they're gone, 0:15:09.680 --> 0:15:12.680 but yet the brand has been rebranded and like is 0:15:12.720 --> 0:15:15.880 in new ownership now and yet sort of sort of 0:15:15.960 --> 0:15:20.000 still there. It's it's wild. It's a really interesting story 0:15:20.160 --> 0:15:24.240 that I think, um, you know, before we totally wrap up, 0:15:25.320 --> 0:15:28.240 it's worth mentioning like how how big of a business? 0:15:28.920 --> 0:15:31.320 Uh deal? This was? You do think about how peace 0:15:31.320 --> 0:15:34.280 schools too? Will like use that. It's like a case study, right, 0:15:34.320 --> 0:15:36.640 and like as a CEO of this, you know, hey, 0:15:37.360 --> 0:15:39.720 your business is being impacted by events that you don't like. 0:15:39.760 --> 0:15:41.400 What are you gonna do about it? All right? Thanks 0:15:41.400 --> 0:15:43.520 to Joe Weber, Editor Bloomberg Business Week. This story in 0:15:43.520 --> 0:15:46.120 the upcoming issue of Bloomberg Business Week magazine. Jeremy Keane, 0:15:46.120 --> 0:15:49.840 Features editor Bloomberg Business Week. This is Bloomberg Radio. You're 0:15:49.920 --> 0:15:53.240 listening to Bloomberg Business Week with Carol Messer and Tim 0:15:53.280 --> 0:15:56.960 Stenovic on Bloomberg Radio. We'll get into a Tessa and 0:15:57.000 --> 0:15:59.160 you can definitely be in the fast lane and it 0:15:59.200 --> 0:16:01.680 can even use all up pilot, but be careful. She 0:16:01.720 --> 0:16:03.400 got to stay awake in hands on the wheel. I 0:16:03.440 --> 0:16:05.280 was wondering where that was going. We learned that lesson 0:16:05.520 --> 0:16:07.440 Tesla for a long time was in the Fascela in 0:16:07.480 --> 0:16:09.080 terms of the share price. But it's been a very 0:16:09.120 --> 0:16:12.080 different story in the last year or so. Stock though 0:16:12.200 --> 0:16:15.240 up today after twelve sell off yesterday, stuck still down 0:16:15.280 --> 0:16:19.080 about from it's November one high. But Tim and I 0:16:19.160 --> 0:16:21.720 talked about this earlier, Tesla shares getting a boost thanks 0:16:21.760 --> 0:16:24.720 to Kathy Wood of our investment. She's been on a 0:16:24.760 --> 0:16:26.960 buying spree really in the last couple of months as 0:16:26.960 --> 0:16:29.760 Tesla has really tanked and doing some big buying yesterday 0:16:29.800 --> 0:16:31.360 as well. And why wouldn't she, I mean back in 0:16:32.240 --> 0:16:35.600 carried her to triple digit a triple digit returns and 0:16:35.640 --> 0:16:39.200 really brought our invest to the forefront of Benny investors 0:16:39.360 --> 0:16:42.360 mind with more on Tesla. Let's bring in Bloomberg News 0:16:42.400 --> 0:16:44.960 technology reporter Dana Hole. She's a go to voice for 0:16:45.040 --> 0:16:47.000 us on all things Tesla. She joins us on the 0:16:47.040 --> 0:16:50.560 phone from San Francisco. Danna, good to have you with us. 0:16:50.920 --> 0:16:54.320 What the conversation about Tesla in recent days, recent months 0:16:54.680 --> 0:16:57.440 has really been about, well, a few things. One, supply 0:16:57.480 --> 0:16:59.760 and demand. We learned that, you know over the weekend 0:17:00.040 --> 0:17:02.760 when we learned that deliveries for the most recent quarter 0:17:03.040 --> 0:17:05.639 for the third time in a row, missed expectations. But 0:17:05.680 --> 0:17:07.760 it's also been one about Elon Musk and his focus 0:17:07.920 --> 0:17:10.160 and where that focus has been of late. What's top 0:17:10.160 --> 0:17:12.680 of mind for you and indeed for Tesla investors too, 0:17:12.760 --> 0:17:14.960 is they kind of determined, Well, Hey, where's this company 0:17:14.960 --> 0:17:17.919 going to go in Yeah, I mean I think for 0:17:17.960 --> 0:17:21.760 a long time, you know, Tesla under promised and over delivered. 0:17:21.920 --> 0:17:24.439 Now it's kind of the opposite where they're over promising 0:17:24.520 --> 0:17:27.959 and under delivering, and that has investors really rattled. I mean, 0:17:27.960 --> 0:17:31.240 if you'll remember, in the third quarter, Musk said that 0:17:31.280 --> 0:17:33.600 there was going to be this epic year end, and 0:17:33.640 --> 0:17:36.359 then they ended the year like missing not only like 0:17:36.440 --> 0:17:39.479 Wall Street consensus for delivery figures, but their own company 0:17:39.520 --> 0:17:44.240 compiled consensus and thirty four cars were like still in transit, 0:17:44.280 --> 0:17:46.600 which begs all these questions about like why can't they 0:17:46.600 --> 0:17:49.800 figure out their logistical issues? Um? And then here we 0:17:49.840 --> 0:17:53.200 are heading into three. Musk still seems to be very 0:17:53.240 --> 0:17:56.679 focused on Twitter, the company that he bought in October. Um. 0:17:56.800 --> 0:17:59.280 He has said that he'll eventually name him a new 0:17:59.440 --> 0:18:02.960 CEO Twitter, but it's not clear who actually wants that job. 0:18:03.080 --> 0:18:06.280 Twitter doesn't even have a board of directors. At Tesla, 0:18:06.400 --> 0:18:09.840 there's only three named executive officers. Like, there's no clear 0:18:09.840 --> 0:18:12.400 secession plan at Tesla, So it's sort of like how 0:18:12.520 --> 0:18:14.600 stretched thin can this guy be? I mean, he already 0:18:14.680 --> 0:18:18.000 runs SpaceX, so now he's basically running three companies and 0:18:18.560 --> 0:18:22.080 no one company has his full attention. Well, sorry, Carolin, 0:18:22.080 --> 0:18:23.920 I want to cop in here. Is SpaceX a little 0:18:23.960 --> 0:18:27.040 different because it has you know, Gwen Shotwell who sort 0:18:27.040 --> 0:18:29.360 of seems to be running day to day operations there 0:18:29.359 --> 0:18:31.600 And could that be some sort of model for what 0:18:31.800 --> 0:18:35.840 Tesla could be if he does indeed install some number two. Yes, 0:18:35.920 --> 0:18:37.639 I mean I think I think SpaceX is very different 0:18:37.640 --> 0:18:40.120 when is the clear number two has been for quite 0:18:40.200 --> 0:18:43.280 some time? And space X is a private company, um, 0:18:43.320 --> 0:18:46.840 you know, and its customers are like the military and NASA, 0:18:46.960 --> 0:18:49.520 whereas well you're saying the government gives money to Elon 0:18:49.600 --> 0:18:53.919 musk Oh, Yeah, has just want to confirm, like Tesla, 0:18:54.000 --> 0:18:56.879 Tesla sells a consumer facing product, and I mean you 0:18:56.920 --> 0:19:00.359 know that. The two other named officers are Zach kirk Corn, 0:19:00.440 --> 0:19:04.320 the highly regarded CFO, and Drew Biglino, who is basically 0:19:04.359 --> 0:19:07.000 the CTO. But it's not like there's no clear number 0:19:07.000 --> 0:19:09.960 two there. And then we've had a lot of reporting 0:19:09.960 --> 0:19:13.240 here in Bloomberg recently about Tom Zoo, who's kind of ascendant. 0:19:13.320 --> 0:19:16.560 He has been the guy overseeing Tesla China. He has 0:19:16.600 --> 0:19:18.840 been brought in recently to kind of help with production 0:19:18.920 --> 0:19:21.520 in Texas and he seems to be like a rising 0:19:21.520 --> 0:19:23.840 star at the company, but there has been no press 0:19:23.880 --> 0:19:28.480 release or eight K or any announcement like promoting Tom officially. 0:19:28.760 --> 0:19:31.119 So it's like, well, so what's up with that? Like, 0:19:31.240 --> 0:19:33.399 I mean, it's just kind of time for Tesla to 0:19:33.440 --> 0:19:35.960 fill out its bench and give some clarity as to 0:19:36.080 --> 0:19:40.119 like what is Elon's Like, what is how is Elon 0:19:40.160 --> 0:19:43.240 spending his time? I mean, um, so, yeah, it's and 0:19:43.240 --> 0:19:45.960 people are just very rattled. I mean, beat beat is 0:19:45.960 --> 0:19:47.960 a beat, a miss as a miss. They were promising 0:19:48.000 --> 0:19:50.480 fifty year of rear growth and this year it was 0:19:51.160 --> 0:19:54.200 I mean, that's that's a significant off the market. Tart, 0:19:54.320 --> 0:19:56.760 That's that's significantly off the market from what they promised. 0:19:56.840 --> 0:20:01.040 So growing pains for Tesla distracted el On, you know, 0:20:01.760 --> 0:20:06.159 and investors just not willing to give Ellen some space 0:20:06.400 --> 0:20:08.399 and a break because we used to all the time, 0:20:08.400 --> 0:20:10.399 Our investors used to all the time. So how do you, 0:20:10.760 --> 0:20:13.719 from someone who has really watched the trajectory of this 0:20:13.800 --> 0:20:16.640 company and of this individual, how do we assess it 0:20:16.720 --> 0:20:18.840 Like at this moment of time of the company's history. 0:20:19.080 --> 0:20:21.520 I think that we just have to remember the kind 0:20:21.520 --> 0:20:24.920 of larger macroeconomic picture, which is that Tesla was born 0:20:25.000 --> 0:20:28.240 in the last recession, got through the recession thanks to 0:20:28.560 --> 0:20:32.240 funding from the Recovery Act and the Obama administration, and 0:20:32.280 --> 0:20:34.800 then kind of ran wild in this era of low 0:20:34.840 --> 0:20:37.520 interest rates. That era is over, like the FED rates 0:20:37.560 --> 0:20:40.840 are high, we are we are in an inflationary environment 0:20:40.920 --> 0:20:45.560 and Tesla cars still cost luckily sixty and you know, 0:20:45.640 --> 0:20:47.720 so it's just a very different scenario. And I mean 0:20:47.720 --> 0:20:50.600 Ellen himself basically keeps bashing the said, you know, for 0:20:50.640 --> 0:20:53.320 all of his problems, and um, so I don't want to. 0:20:53.320 --> 0:20:55.600 I don't so, I just want to It's like when 0:20:55.640 --> 0:20:58.240 the when the era of free money and low interest 0:20:58.359 --> 0:21:01.199 rates and the you know it, it does change the 0:21:01.200 --> 0:21:03.320 equations for cars as a whole. I mean, I think 0:21:03.320 --> 0:21:06.520 we're just sort of entering an environment where, um, you know, 0:21:06.560 --> 0:21:09.199 people are thinking quite carefully about making a big purchase 0:21:09.280 --> 0:21:12.199 like a vehicle. And you know, for a decade, Tesla 0:21:12.240 --> 0:21:14.960