Speaker 1: This is Bloomberg business Week inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business, finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Messer and Tim Stenebec from Bloomberg Radio. Hi, everyone,
Speaker 1: Welcome to the weekend edition of Bloomberg Business Week. Big
Speaker 1: focal point this week, FED second monetary policy meeting of
Speaker 1: the year, raising interest rates by a quarter percentage point
Speaker 1: and signaling it's not finished hiking despite the risk of
Speaker 1: exacerbating a bank crisis. That's royal Global markets well more
Speaker 1: than that in just a moment. Also ahead, a state
Speaker 1: of play as Vladimir Putin welcomes China's jijimping to Moscow
Speaker 1: while the war Ukraine grinds on. Plus the CEO of
Speaker 1: identity management platform Octa on it spending. And we've got
Speaker 1: a must read story from our magazine team about what
Speaker 1: happens when chatbots get raunchy with their human companions. Yep,
Speaker 1: you heard right of that to come, we begin with
Speaker 1: our big backdrop this week, and that was the FED
Speaker 1: meeting and continued vigilance over banks with us our Business
Speaker 1: Week Editors roundtable Markets and Finance editor Pat Rigneer, Economics
Speaker 1: editor Christina Lindblab and Bloomberg News Federal Reserve reporter Matt
Speaker 1: Bosler the trio joining me and Bloomberg's Mic Reagan to
Speaker 1: breakdown the week that was. So we were thinking not
Speaker 1: only about sort of like how big will the hike be,
Speaker 1: but what message is that going to send? And you know,
Speaker 1: it gets into you know, Vulcan three dimensional chests really fast,
Speaker 1: you know, like like maybe the you know, if if
Speaker 1: he's worried about the banks, will will he not do
Speaker 1: a hike at all? Or will if he's worried about
Speaker 1: the banks, will he do a hike because he doesn't
Speaker 1: want to let people know that he's worried about the banks.
Speaker 1: It seems like we got kind of the Goldilocks hike,
Speaker 1: at least at least from the point of view of
Speaker 1: how upsetting the week was going to be. It seems
Speaker 1: like the hike we got was the one that sort
Speaker 1: of kept more things from happening, at least for the
Speaker 1: last couple of days. Wait, did you say Vulcan three
Speaker 1: dimensional chests a geek test? I think is the I
Speaker 1: don't remember that's from Star Wars start right, I may
Speaker 1: have gotten the number of dimensions of chance runs. Well
Speaker 1: that's kind of the week that was. I mean, um, Christina,
Speaker 1: come on in on this. I mean, and you know
Speaker 1: we're focusing. We're gonna bring Matt in in just a moment.
Speaker 1: The US central banks so in focus, but we have
Speaker 1: several global central banks, you know, looking at inflation, looking
Speaker 1: at what's going on. It's been a busy I feel
Speaker 1: like week and certainly last week if you rolled the
Speaker 1: European Central Bank into it, yeah, well, the ACB went
Speaker 1: out ahead of the FED basically saying, you know, we
Speaker 1: can do price stability and financial stability at the same time.
Speaker 1: It's not a choice, and that you know, they that
Speaker 1: they had the mandate, you know, to to slay inflation.
Speaker 1: And I think the message this week was the same
Speaker 1: from the FED. I found it interesting that going into
Speaker 1: the meeting, everyone's expectations were completely scrambled right up to it,
Speaker 1: you know, with like I think Goldman coming out saying,
Speaker 1: you know, no hike. I think Nomura maybe like saying
Speaker 1: like cut maybe as soon as as this meeting, and
Speaker 1: then though after the meeting is like and now we've
Speaker 1: resume our regular programming in which Wall Street starts wishing
Speaker 1: for the pivot. It was. It was whacky. I feel
Speaker 1: like there were so many different scenarios. Matt Bosler, come
Speaker 1: on in. You followed the Fed, half followed the Fed here,
Speaker 1: you know, thinking about the week that was what is
Speaker 1: top of mind for you? Well, I think, you know,
Speaker 1: yesterday's FED decision and Jerome Powell's press conference were really
Speaker 1: interesting because, you know, at first they announced a rate hike,
Speaker 1: their projections didn't show much more tightening. Markets initially responded
Speaker 1: positively to that, but then of course they sold off
Speaker 1: pretty heavily near the end of the press conference and thereafter.
Speaker 1: And so I think the broad takeaway was just not
Speaker 1: necessarily a lot of confidence that the Fed is fully
Speaker 1: attuned to the risks out there right now. And if
Speaker 1: you look kind of under the hood of some of
Speaker 1: the projections they put out, there's also a bit more
Speaker 1: of an acceptance on their part of the potential downside
Speaker 1: risks here. You know, the way the economic projections they
Speaker 1: put out basically implicitly have a recession written into them now,
Speaker 1: whereas they didn't three months ago the last time they
Speaker 1: issued projections. And so just that, you know, seeming willingness
Speaker 1: on the part of policymakers to allow those greater downside
Speaker 1: scenarios to materialize, especially right in the middle of a
Speaker 1: bit of a crisis in the banking system that in
Speaker 1: large part has been brought about by the aggressive rate
Speaker 1: hikes over the last year. You know, that's not necessarily
Speaker 1: exactly what Wall Street may have wanted to hear from
Speaker 1: the Fed yesterday. Man, I have a question, how much
Speaker 1: do you think the Fed, in advance of everything that
Speaker 1: happened with a Silicon Dolly Bank anticipated that what they
Speaker 1: were doing could potentially have, you know, the effect of
Speaker 1: like breaking a bank. You know, I think we often
Speaker 1: think of when we talk about how rate high works.
Speaker 1: We think of them is only the kind of pneumatic things.
Speaker 1: It's like, well, they're gonna raise rates and that's gonna
Speaker 1: like raise borrowing costs and it's gonna sort of slow
Speaker 1: things down and make financial conditions tighter. But like anybody
Speaker 1: who remembers like the nineteen eighties knows that, like when
Speaker 1: you change interest rate regimes, like you can bust a
Speaker 1: bunch of financial institutions. We had a long savings and
Speaker 1: loan crisis through the eighties. After this is this was
Speaker 1: this part of their mental model for what might happen
Speaker 1: if they raise rates, that they could have an accident
Speaker 1: like this, and that that is actually part of the mechanism,
Speaker 1: or it was this as much of a surprise to
Speaker 1: them as it was to us. I think you have
Speaker 1: to assume that, you know, most or all FED officials
Speaker 1: are very aware of the history that you're talking about, right,
Speaker 1: I mean, this is like kind of just fed one
Speaker 1: on one for everyone inside the Central Bank on the
Speaker 1: one hand. On the other hand, there certainly was no
Speaker 1: public you know, discussion of these risks, right, and the
Speaker 1: conversation has always been couched more in terms of the
Speaker 1: effect that tightening financial conditions would have on economic growth
Speaker 1: and labor markets and inflation, and you know, more of
Speaker 1: a linear kind of step change to tighter conditions leading
Speaker 1: to that slow down in growth. You know. The other
Speaker 1: big thing that people have been talking about the last
Speaker 1: few weeks is that there was no rising interest rate
Speaker 1: scenario in the FEDS stress tests of the banks. So
Speaker 1: that's another place where that conversation seemingly was a little
Speaker 1: bit absent, you know, Matt, As you know, I view
Speaker 1: all of these issues through the lens of the stock
Speaker 1: market mainly, and the story there is almost that the
Speaker 1: rate increases almost an afterthought. What everyone instead is looking
Speaker 1: at is the extension of the Fed's balance sheet. You know,
Speaker 1: one hundred and fifty some billion dollars loaned out through
Speaker 1: the discount window, and you get people using the old
Speaker 1: pandemic ra expression money printer go burr, meaning the Fed
Speaker 1: is flooding the system with liquidity, and that's just a
Speaker 1: natural reaction is to buy stocks, by crypto, by risky assets.
Speaker 1: But to me, I feel like there's a big difference
Speaker 1: between what the Fed's doing now extending ninety day loans
Speaker 1: to banks versus quantitative easing when they were buying treasuries
Speaker 1: and mortgage backed securities from banks, and that it's kind
Speaker 1: of a mistake to view the expansion of the balance
Speaker 1: sheet as having the same effect. I'm curious how you
Speaker 1: think about it. Yeah, so, you know, the FED wants
Speaker 1: to keep these two things separate, right, They want to
Speaker 1: be able to continue their balance sheet reduction program and
Speaker 1: also have these facilities that are temporary, temporarily expanding the
Speaker 1: balance sheet. And that was actually one of the things
Speaker 1: that you know, it was a little bit interesting about
Speaker 1: yesterday's decision, they didn't announce any plans to slow down
Speaker 1: or stop the pace of their balance sheet reduction program.
Speaker 1: Right They're still allowing these bonds that are on their
Speaker 1: balance sheet that are coming due every month to just
Speaker 1: roll off, which is having the effect of removing reserves
Speaker 1: from the banking system even as they're temporarily adding them
Speaker 1: through these facilities. And a lot of analysts over the
Speaker 1: last two weeks have pointed out that, you know, this
Speaker 1: is kind of a counterproductive thing, and it would make
Speaker 1: sense for them to, you know, maybe temporarily halt the
Speaker 1: balance sheet reduction so as to be more in keeping
Speaker 1: with what they're doing on the emergency lending side. Now. Interestingly,
Speaker 1: that was one of the things that came up near
Speaker 1: the end of the press conference when you started really
Speaker 1: seeing markets sell off after an initial positive reaction to
Speaker 1: the FED decision. When Powell was asked whether it had
Speaker 1: even been discussed at the meeting that you know, they
Speaker 1: might consider slowing the pace or stopping the pace of
Speaker 1: balance sheet reduction, he said that it wasn't something that
Speaker 1: had really been discussed at the meeting, and so just that,
Speaker 1: you know, very blunt, like it was not even on
Speaker 1: the table. I think, you know, potentially could have contributed
Speaker 1: a little bit to the overall turn and sentiment toward
Speaker 1: the end of the presser, Christina say not in your
Speaker 1: head in a big way. No, I mean I would
Speaker 1: like the stuff that Matt's been doing. He's been writing about,
Speaker 1: you know, I think interestingly the stuff about in the
Speaker 1: SEP in the latest round of economic projections in which
Speaker 1: you know, I mean, the feed has been very careful
Speaker 1: not to say the word recession unless you know, asked
Speaker 1: pointed questions about it. But like you know, if you
Speaker 1: look at you know, the GDP track or the Atlanta
Speaker 1: FED has you know, says, you know, first quarter GDP
Speaker 1: growth at three point two percent, that means that for
Speaker 1: the rest of the year to get to the zero
Speaker 1: point four that the FETE is forecasting for all of
Speaker 1: it means that we have to be shrinking for the
Speaker 1: rest of the year. Many thanks to the Bloomberg BusinessWeek
Speaker 1: editorial team of Pat Ragneer and Christina Lynn Blad, along
Speaker 1: with FED reporter Matt Bosler Bloomberg Market Senior editor Mike
Speaker 1: Reagan with us there as well. Coming up, as the
Speaker 1: war in Ukraine hits the thirteen month mark, Vladimir Putin
Speaker 1: looks to show up an alliance with his Chinese counterpart,
Speaker 1: She Jimping. Jimping talks about how the two countries Russian
Speaker 1: China are united in opposition to a geminy, domination and bullying.
Speaker 1: I think it's really about showing their mutual opposition to
Speaker 1: a US led world order. You're listening to Bloomberg Business Week.
Speaker 1: This is Bloomberg. You're listening to the Bloomberg Business Week podcast.
Speaker 1: Catch us live weekday afternoons from three to six Eastern
Speaker 1: Listen on Bloomberg dot Com, the iHeartRadio app, and the
Speaker 1: Bloomberg Business app, or watch us live on YouTube for
Speaker 1: three days. This past week, Russian President Vladimir Putin and
Speaker 1: Chinese President Jejimping met. The visit by Ji, his first
Speaker 1: to Russia since Putin's army invaded Ukraine just over a
Speaker 1: year ago, marked a political win for both leaders. Gee
Speaker 1: saw an opportunity to push back at the US and
Speaker 1: buttress his image as a global statesman after helping to
Speaker 1: broker a Saudi randal, while Putin can show he has
Speaker 1: the support of one of the world's most powerful leaders,
Speaker 1: even as the US and its ally try to isolate him.
Speaker 1: Yet the lack of progress on any major energy deals
Speaker 1: or specifics on other areas of economic cooperation showed some
Speaker 1: hesitation from China on appearing too close to Russia. Meantime,
Speaker 1: the Biden administration unveiled tight restrictions on new operations in
Speaker 1: China by chipmakers that get federal funds to build in
Speaker 1: the US, potentially hampering efforts to expand in the world's
Speaker 1: largest semiconductor arena. And then we had Vanguards said to
Speaker 1: be shuttering its business in China after a retreat two
Speaker 1: years ago. There was so much going on. So Earlier
Speaker 1: in the week, Bloomberg News deputy team leader for US
Speaker 1: Equities Jess Metton and I caught up with Dexter Tiff Roberts.
Speaker 1: He's a senior fellow at the Atlantic Council's Indo Pacific
Speaker 1: Security Initiative and former Bloomberg Business Weeks China Bureau chief.
Speaker 1: Our first question to Tiff should we be concerned about
Speaker 1: Moscow and Beijing strengthening ties? Yes, I do think the
Speaker 1: world should be worried. China has been selling this ongoing
Speaker 1: visit by Hijimking to Moscow and the meetings Putin as
Speaker 1: a mission of peace and talking about their twelve point
Speaker 1: plan to try to bring peace in Ukraine. But I
Speaker 1: think that's really a bit of propaganda. If you look at,
Speaker 1: for example, the commentary that Shijim King published in Russian media.
Speaker 1: Putin also did a commentary in Chinese media right on
Speaker 1: the eve of the visit. Jim King talks about how
Speaker 1: the two countries Russian China are united in opposition to hegemony, domination,
Speaker 1: and bullying. I think it's really about showing their mutual
Speaker 1: opposition to a US led world order. And something that
Speaker 1: really struck me is just when it comes to these
Speaker 1: chip makers that obviously have that exposure toward China, what
Speaker 1: do you think from a broad sense, a big picture sense,
Speaker 1: do you think this means for corporate American, especially these
Speaker 1: semiconductor type companies that aren't going to benefit from this. Well,
Speaker 1: I think it's not good news for corporate America. The
Speaker 1: already multiple problems, very real problems in the US China
Speaker 1: relationship have been putting pressure on corporate America. And you
Speaker 1: mentioned semiconductors. The US is in the midst of an
Speaker 1: a radical rethinking of its semiconductor relationship with China, and
Speaker 1: as as I think Carol mentioned an introduction, there's new
Speaker 1: restrictions coming almost every week on US companies, US persons
Speaker 1: being associated in any way with the Chinese semiconductor industry. Well,
Speaker 1: it's a big market for the US on the semiconductor
Speaker 1: side and obviously more broadly, so this is not good news.
Speaker 1: One more source of very real tension between the US
Speaker 1: and China. Just budding relationship that's growing stronger and stronger
Speaker 1: between Russian China. One more reason to one more place
Speaker 1: where there's really bad news for the US corporate relationship
Speaker 1: with China. Are we at the point of no return
Speaker 1: where China and President Gee specifically have turned its back
Speaker 1: on the United States. I think we can't say we're
Speaker 1: at the point of no return, but I would note
Speaker 1: that last week or during the two sessions the annual
Speaker 1: Legislatives meetings held in Beijing, Shijingping actually singled out the
Speaker 1: US by name, which he doesn't usually do, and said
Speaker 1: that they were leading a block of world nations that
Speaker 1: were trying to contain and suppress China and bringing severe
Speaker 1: challenges to China's development. That's a big deal. Shijing Ping
Speaker 1: usually when he's referring to the US will say something
Speaker 1: like certain countries or hostile foreign forces. But I think
Speaker 1: the fact that he mentioned the US at this point
Speaker 1: by name shows just how bad the relationship is. All Right,
Speaker 1: tiff for at risk of sounding really stupid, but I'm
Speaker 1: okay with that. I mean, is China desperate? I don't
Speaker 1: think China feels desperate at this point. I think that
Speaker 1: what they're doing is, first of all, they're going to
Speaker 1: do their best to try to continue to woo American
Speaker 1: corporates to China. The spokesman for the Ministry of Commerce
Speaker 1: during the same legislative meetings basically sent out the message
Speaker 1: we're open for business, we want you, we want you
Speaker 1: back now that we're lifting we've lifted the restrictions from
Speaker 1: the pandemic. So they want corporate America. But they're going
Speaker 1: to try to sort of divide and conquer. They realize
Speaker 1: that the relationship with Washington is in very dire strait.
Speaker 1: At the same time, they're trying to woo Europe and
Speaker 1: it's obviously not easy when they've cited to the degree
Speaker 1: to which they have with Putin in the invasion of Ukraine.
Speaker 1: And you were talking about the strained relationship China does
Speaker 1: have with Washington. What do you think the long game
Speaker 1: is here for China? What is the sort of motivation
Speaker 1: to all of this? I do think and I am
Speaker 1: concerned that China is deciding that the two sides are
Speaker 1: implacably opposed to each other and that they're the room
Speaker 1: for actual cooperation is narrowing. So UM, I hope that's
Speaker 1: not the case, but I do feel I do get
Speaker 1: that feeling that this is increasingly how Beijing fealed. I think,
Speaker 1: as I said, they're they're certainly not going to close
Speaker 1: the door to American companies. They're certainly not going to
Speaker 1: close the door to the European Union. Um, they if
Speaker 1: the US, If the US were to move a little
Speaker 1: closer to what China thinks is a proper bilateral relationship,
Speaker 1: I bet Beijing would be willing to more than willing
Speaker 1: to talk with Washington. But I do think that the
Speaker 1: trend lines are pretty bad. You know, you talk about
Speaker 1: closing doors, and it's interesting. There was another story in
Speaker 1: the Bloomberg Tiff today about Vanguard planning to shutter its
Speaker 1: business in China. This is after they've been I guess
Speaker 1: a retreat two years ago. This according to folks familiar
Speaker 1: with the matter, but you know, in our story it
Speaker 1: says the moves will mark a complete exit from China
Speaker 1: for the seven point one trillion dollars giant, which one
Speaker 1: saw significant potential in the world's second largest economy. I've
Speaker 1: said it a million times before because I think about
Speaker 1: at the beginning of my career, any company I talked to,
Speaker 1: it was as China was real, you know, it was
Speaker 1: opening its doors and kind of almost begging multinationals from
Speaker 1: around the world to come in, set up shop, you know,
Speaker 1: kind of teach us what you know. And it's it's
Speaker 1: only you know, a few decades ago that I feel
Speaker 1: like things have changed dramatically. So it's pretty significant. The shift,
Speaker 1: I think it really is significant. We're seeing hedge funds
Speaker 1: pulling out. Came in early after the pandemic restrictions were lifted,
Speaker 1: and then they were they started getting out. We see,
Speaker 1: you know, based by the American Chamber of Commerce that
Speaker 1: are showing that for the first time, China is not
Speaker 1: even a top three investment choice for American companies. You're
Speaker 1: seeing companies, American companies say that they are very they
Speaker 1: feel very little optimism about the China market going forward,
Speaker 1: and yeah, we're seeing some big prominent examples like Vanguard.
Speaker 1: It sounds like that are thinking of actually moving on
Speaker 1: somewhere else. So I do think there's been a real shift.
Speaker 1: China is trying to China doesn't want to see that happen,
Speaker 1: as I said a moment ago, so they're trying. They're
Speaker 1: trying to put out this message We're open to the world,
Speaker 1: I'll come back investors. But things aren't looking very good
Speaker 1: on that front. Hey, Tiff, just got about thirty seconds
Speaker 1: last time you were on. I asked if you were
Speaker 1: writing a new book. You said you were heading in
Speaker 1: that direction. The title you offered up maybe China isn't
Speaker 1: going to take over the world. Would that still be
Speaker 1: the title? Absolutely? I see tremendous structural challenges facing China, demography,
Speaker 1: growing inequality, and above all this politicization from the top
Speaker 1: leadership and Chijing thing himself. That makes it much less
Speaker 1: likely it's going to be the economic superpower many of
Speaker 1: us thought it was going to be. That was Dexter
Speaker 1: Tiff Roberts, Senior Fellow at the Atlantic Council's Indo Pacific
Speaker 1: Security Initiative and former Bloomberg BusinessWeek, China Bureau Chief. His
Speaker 1: most recent book. It is titled The Myth of Chinese Capitalism,
Speaker 1: The Worker, the Factory and the Future of the World.
Speaker 1: We certainly are looking forward to his next one. All right,
Speaker 1: Bloomberg's Jess Mattins sticking around with us, still ahead on
Speaker 1: Bloomberg Business Week. How the collapse of Silicon Valley Bank
Speaker 1: is reverberating through the tech sector for companies of all sizes.
Speaker 1: Todd McKinnon, the CEO of publicly traded Octa, joins us. Next,
Speaker 1: This is Bloomberg. You're listening to the Bloomberg Business Week podcast.
Speaker 1: Catch us live weekday afternoons from three to six Eastern
Speaker 1: on Bloomberg Radio, the Bloomberg Business app, and YouTube. You
Speaker 1: can also listen live on Amazon Alexa from our flagship
Speaker 1: New York station, jo Say Alexa playing Bloomberg eleven thirty Well.
Speaker 1: Earlier this month, Octa reported earnings that sended stock starring
Speaker 1: some thirteen percent, and gave an upbeat first quarter revenue forecast.
Speaker 1: Like many tech companies, though it is finding a focus
Speaker 1: on efficiency, it is paying off for the company. The stock,
Speaker 1: by the way, up more than twenty percent year to date,
Speaker 1: So let's get to it. Lots of questions for our
Speaker 1: next guest. Todd McKinnon is the CEO and founder of Octa.
Speaker 1: It's a fourteen year old software maker known for authentication
Speaker 1: services count Sono, Assume, Hpe, and open Ai among its
Speaker 1: customers and lucky for us, Todd's and our Bloomberg Interactive
Speaker 1: Broker studio. So nice to have you here. I do
Speaker 1: have a million questions that we're to cram into eight minutes.
Speaker 1: First of all, Silicon Valley Bank, tell us about the
Speaker 1: relationship you guys have had with them and how you
Speaker 1: see this situation. It's for many companies, Octa included. It
Speaker 1: was the first bank we had as a company. We
Speaker 1: raised our financing and we put it in there and
Speaker 1: started running the business. And over the years the relationship.
Speaker 1: Did you put more than two hundred and fifty thousand
Speaker 1: dollars in deposit? For sure? I mean our first our
Speaker 1: first seed round was a million dollars. In the next
Speaker 1: round was ten million dollars and it went in all yeah,
Speaker 1: all in Silicon Valley Bank. Sorry, yeah. And so over
Speaker 1: the years, what happens is you grow and you do
Speaker 1: in the big diversification point I think for a lot
Speaker 1: of companies is when they go international, it's really you
Speaker 1: have to have a big diverse set of banking partners
Speaker 1: to pay internationally, to accept payments internationally. So that was
Speaker 1: the point of diversification. But for a company that's early
Speaker 1: in its life cycle, it's it was really a it's
Speaker 1: a serious issue for a company that has operational to
Speaker 1: a lifeline for you guys are crucial, right, yeah, Well
Speaker 1: we've evolved passing yeah in the early days, but once
Speaker 1: you get to a certain size and scale like we are,
Speaker 1: you're pretty diverse. But it did bring back memories of
Speaker 1: when we were. Octa was founded in the right after
Speaker 1: the financial crisis fourteen years old, started in two thousand
Speaker 1: and nine, so it really brought back some memories of
Speaker 1: banks failing and you know, be in that early stage
Speaker 1: of a company where you're trying to survive and trying
Speaker 1: to get product market fit. And the last thing you
Speaker 1: want to deal with as a small startup, as you're
Speaker 1: something you trusted as being really something that could never
Speaker 1: go away, is to have a serious question about it.
Speaker 1: If it would be around Todd No Silicon Valley Bank,
Speaker 1: What does it mean then for entrepreneurs, like, what's what
Speaker 1: Todd McKinnon today do well? Entrepreneurs are by definition pretty
Speaker 1: adaptive and different Todd McKinnon, Yeah, exactly, exactly. They're pretty
Speaker 1: adaptive and they're good at navigating changes and uncertainty. If
Speaker 1: you wanted a stable, static environment, you'd never be an
Speaker 1: an entrepreneur. So I think other folks will step in
Speaker 1: to fill the wood, and I'm very optimistic in the
Speaker 1: opportunistic future of both the world in general and also
Speaker 1: Silicon Valley specifically. What are your overall thoughts of this
Speaker 1: collapse as it's been playing out. I just think it's fast.
Speaker 1: You know, I'm not I'm running a six thousand person,
Speaker 1: you know, five hundred million dollars plus a quarter enterprise
Speaker 1: software company. So the last thing I'm worried about is
Speaker 1: financial stability of the banking system. So you hear stories
Speaker 1: about it on Wednesday and on Thursday, all of your
Speaker 1: friends are talking about what they're going to do with
Speaker 1: their company finances and the treasury and are they moving
Speaker 1: money around? So it happened incredibly fast, and it's a
Speaker 1: little unsettling for I think every company. Do you think
Speaker 1: about your early days of a startup and what that
Speaker 1: means for other startups when you think about potential customers,
Speaker 1: you may have partners, how you're gonna We still use
Speaker 1: still Silicon Valley in parts of our business, relatively small
Speaker 1: parts now for us, Like I said, we're lucky enough
Speaker 1: to be able to diversify away and use our other
Speaker 1: banking partners. So it takes work by the team, but
Speaker 1: we're able to power through it. Why did you decide
Speaker 1: to still have certain parts work with SPB It's just
Speaker 1: part of it's just a history of having that relationship.
Speaker 1: You integrate things, you wire up payment sites, and you
Speaker 1: have payroll relationships, and it just keeps going and going
Speaker 1: and going. I guess what gives you confidence? Are there
Speaker 1: particular segments, like what exposure is it to there that
Speaker 1: you think it's a bit more shielded and wouldn't be
Speaker 1: happening like these other people that had to go through
Speaker 1: these kind of deposit type nightmares. Well, I think it
Speaker 1: depends on the company, and I think to draw two
Speaker 1: broad categories. There's one companies that are single threaded with
Speaker 1: one banking partner right, and there's companies that are big
Speaker 1: enough and diverse enough to have mini banking partners. And
Speaker 1: so I think it's really this is really an impact
Speaker 1: for the first category, which is small companies really just
Speaker 1: trying to find product market fit and aren't diversified in
Speaker 1: what they So I want to talk all right, So
Speaker 1: you put reported earnings before all of this started to happen,
Speaker 1: So investors liked what they heard, they set the stock soaring.
Speaker 1: Tell us a little bit about what you're seeing in
Speaker 1: terms of the business environment. You know, you have customers
Speaker 1: that we all know, we know the names. What does
Speaker 1: it feel like right now out there? It's what we
Speaker 1: do is very important for a lot of different areas
Speaker 1: of a company and initiatives that a company that a
Speaker 1: company is working on. And we're lucky enough to be
Speaker 1: not only mission critical for our customers, but also mission
Speaker 1: critical in any economic environment. So simple example is if
Speaker 1: you're part of our portfolio workforce. Identity helps companies adopt
Speaker 1: new technology and make their workforce more efficient and give
Speaker 1: them the best tools and give them flexible, be flexible
Speaker 1: with different working environments. So in an economic time of
Speaker 1: uncertainty or macro conditions are not clear what's happening with
Speaker 1: the banking system, you want flexibility and you want efficiency
Speaker 1: and you can do that with a good identity system.
Speaker 1: You can do that with access to the best technologies.
Speaker 1: Is which what identity does, and that's just part of
Speaker 1: our business. Another big part of our business is customer identity,
Speaker 1: so helping We're lucky enough to work with open Ai
Speaker 1: to be the identity to be the log in for
Speaker 1: chat GBT. So no matter what's happening, no matter what
Speaker 1: there are in terms of economic concerns, the march of
Speaker 1: technology goes on and there's innovation. There's amazing breakthroughs like
Speaker 1: chat GBT, and so that's driving part of our business
Speaker 1: and that specific example. So we're broadly diversified across different
Speaker 1: types of businesses. Is that half and half that's split.
Speaker 1: It's the split in our two businesses between workforce identity
Speaker 1: and customer identity. Right now is sixty to sixty percent
Speaker 1: of the revenue is from workforce. But we think over
Speaker 1: time we're building this broad company that can address all
Speaker 1: of these identity use cases. We want to move that
Speaker 1: toward fifty fifty and have both of them be growing quickly.
Speaker 1: I have to say in general, I mean I just
Speaker 1: think about what it takes every day to get into
Speaker 1: our systems and just increasingly I'm okay with it. I
Speaker 1: don't care how many layers, whether it's in getting into
Speaker 1: my own bank on my phone, like bring it on.
Speaker 1: So I do feel like you're in kind of this
Speaker 1: sweet spot. In terms of a business, you mentioned chat GPT.
Speaker 1: What has changed in the dynamics of that side of
Speaker 1: the business since that Microsoft ten billion dollar investment in
Speaker 1: open Ai. Well, the for our business customer identity, it's,
Speaker 1: like I mentioned, it's forty percent of our revenue. And
Speaker 1: the key thing to remember about this business is it's
Speaker 1: it's kind of a new market workforce identity. There's been
Speaker 1: traditional players you've you've purchased your identity technology from maybe
Speaker 1: in the past, from an IBM or an Oracle or
Speaker 1: companies like that, and so we are the cloud version
Speaker 1: or the modern architecture, the flexible, modern architecture for that.
Speaker 1: On the customer identity side, it's more of a new market.
Speaker 1: It's this world where developers are innovating, they're building all
Speaker 1: these new solutions. Chat GPT is one example, but this
Speaker 1: is happening in every industry, the media industry, the financial
Speaker 1: services industry, the every industry technology of course, manufacturing. They're
Speaker 1: trying to retail. They're trying to get more closer to
Speaker 1: the customer, and to do that they have to build
Speaker 1: websites and build mobile apps and deliver a better customer experience,
Speaker 1: and inevitably they have to provide a log into a user,
Speaker 1: and they have to make sure that they make it
Speaker 1: easy for the user to log in and then make
Speaker 1: it easy for the customer to map that customer, to
Speaker 1: map that user different backend systems and market to them
Speaker 1: and progress that relationship and track data an additional way
Speaker 1: for track data for sure. For for depending on what
Speaker 1: the business is, you know, it varies, but they want
Speaker 1: to have a great customer relationship and that's a really
Speaker 1: an identity problem. And so that's done by a developer,
Speaker 1: and our business in the merging customer at any segment
Speaker 1: is really good for developers. It's super easy to use.
Speaker 1: The open example is a good one because two years
Speaker 1: ago when they started using our products, the reason they
Speaker 1: did is because it's really easy for that developer to use.
Speaker 1: They didn't know it was going to become chat GBT.
Speaker 1: But by having a great developer experience and getting in
Speaker 1: there early, you can provide value in the early days
Speaker 1: and then as it grows in scales. All right, got
Speaker 1: to ask you glass half full, glass half empty? Right now,
Speaker 1: real quickly in terms of the outlook, I am a
Speaker 1: glass half full guy? Is it just because you are?
Speaker 1: Because you feel confident about the data points that are
Speaker 1: coming down and the news? I think there's a lot.
Speaker 1: I mean, I think in times of turbulence and times
Speaker 1: of change, the companies that can provide stability to the employees,
Speaker 1: to their customers, and provide a path through things to
Speaker 1: a better a better tomorrow are the ones that are
Speaker 1: going to thrive. So that's what we stay focused on.
Speaker 1: That was Octa CEO Todd McKinnon with Bloomberg News, Deputy
Speaker 1: team leader for Usequities Jessment and me up. Next we
Speaker 1: look at the said banking stress from a different angle.
Speaker 1: It's potential to further wide in America's wealth gap, specifically
Speaker 1: entrepreneurs from underserved groups. I think certainly many have been
Speaker 1: left out of the venture capital model as it currently stands.
Speaker 1: The whole notion that you have that you start with
Speaker 1: a friends and family round assumes that you have friends
Speaker 1: and family who can write sizable checks. That is not
Speaker 1: very equitably distributed across the society. There's a phase of
Speaker 1: startups that's known as raman profitable assuming that you know
Speaker 1: that you can eke by eating ramen every day. That
Speaker 1: also assumes that you're not supporting other family members. The
Speaker 1: founding partners of Kapoor Capital breakdown their model for investing
Speaker 1: in what they call industry transforming startups. Well speak with
Speaker 1: a husband and wife team of Mitch Kapor and Free
Speaker 1: to Kapor Klein on their work to close that gap.
Speaker 1: You're listening to Bloomberg business Week. This is Bloomberg. You're
Speaker 1: listening to the Bloomberg Business Week podcast. Catch us live
Speaker 1: weekday afternoons from three to six Eastern Listen on Bloomberg
Speaker 1: dot com, the Ion Radio app, and the Bloomberg Business app,
Speaker 1: or watch us live on YouTube. So important to the
Speaker 1: banking contagion and nervousness that we've been talking about over
Speaker 1: the past week and a half is assessing the impact
Speaker 1: on the startup in venture world. Some have said the
Speaker 1: startup world, they're going to be just fine. Others are
Speaker 1: concerned about the underserved communities getting forgotten again, like women
Speaker 1: and those of color who are trying to find funding
Speaker 1: for their entrepreneurial ventures. For over a decade, Kapoor Capital
Speaker 1: has been investing in what they call industry transforming startups
Speaker 1: and those that close the gap and provide market and
Speaker 1: social equity growth. So let's dig into that. Our guests
Speaker 1: venture capitalists and authors Mitch Kapor and Freedo Kaport Client.
Speaker 1: They are the founding partners at Kapor Capital. They've got
Speaker 1: a new book out. It's called Closing the Equity Gap,
Speaker 1: Creating Wealth and Fostering Justice and Startup Investing, and they
Speaker 1: are with us via zoom from the San Francisco Bay Area.
Speaker 1: Mitchen Freedom, I want to start big and broadly before
Speaker 1: we get into your book, The Banking Stress. I do
Speaker 1: wonder how that may go further in widening the wealth
Speaker 1: gap as big banks get bigger, attract more deposits amid
Speaker 1: worries over smaller regional banks. How do you see that?
Speaker 1: It could go either way. It depends on whether or
Speaker 1: not the VC community, the venture capital community is willing
Speaker 1: to take a look at itself and to look at, gee,
Speaker 1: what did we do wrong? What have we overlooked? Where
Speaker 1: have we misstepped? And can we do better? Do you
Speaker 1: think they even think they did anything wrong? There's certainly
Speaker 1: been a lot of finger pointing on social media every direction,
Speaker 1: sometimes from vcs to each other, and sometimes to the
Speaker 1: banking system. We've seen a lot of people who were
Speaker 1: anti intervention, anti government regulation, screaming for or a bailout
Speaker 1: or a handout or help. So I think there's a
Speaker 1: lot that's influx right now. One are those things that's influx.
Speaker 1: I mean, how exactly do you think startup compensation should
Speaker 1: be rethought to attract more diverse entrepreneurs when you have
Speaker 1: a situation like this that obviously is getting a lot
Speaker 1: of attention in the headlines. Well, I think there are
Speaker 1: different ways to address startup compensation. I think certainly many
Speaker 1: have been left out of the venture capital model as
Speaker 1: it currently stands. The whole notion that you have that
Speaker 1: you start with a friends and family round assumes that
Speaker 1: you have friends and family who can write sizable checks.
Speaker 1: That is not very equitably distributed across the society. There's
Speaker 1: a phase of startups that's known as ramen profitable, assuming
Speaker 1: that you know that you can eke by eating raman
Speaker 1: every day. That also assumes that you're not supporting other
Speaker 1: family members. So I think there are a lot of
Speaker 1: aspects of what has just been assumed to be the
Speaker 1: startup culture and startup compensation. I think there's a lot
Speaker 1: that can be We thought, what are we missing out?
Speaker 1: And I put that question to you when we ignore
Speaker 1: certain parts of the entrepreneurial world. Well, there's an enormous
Speaker 1: amount of underestimated and overlooked how an entrepreneurial talent given
Speaker 1: the way venture capital works in general today, because VC
Speaker 1: really places way too much of a premium on pedigree,
Speaker 1: does your resume look right? Not that that's irrelevant, but
Speaker 1: we think much much more relevant is what we call
Speaker 1: distance travel. We like to look at where persons started
Speaker 1: in life and how far through their own efforts they
Speaker 1: have overcome barriers and hurdles to get to where they've got.
Speaker 1: That to us is a much better indicator of things
Speaker 1: like resilience and persistence, issues of character, things that help
Speaker 1: tend to make a founder successful. So we look at
Speaker 1: distance travel. We don't particularly care did you go to
Speaker 1: an either league school or not. If funding decisions were
Speaker 1: made based more on distance traveled, I think we would
Speaker 1: see a much wider and more diverse set of entrepreneurs
Speaker 1: getting venture capital funding. Kapoor Capital Founding Partners Mitch Kapor
Speaker 1: and Freed Kaport Klimb with me and Jess Metten. Find
Speaker 1: that whole interview on our Bloomberg Business Week podcast feed,
Speaker 1: and you can check out the couple's new book, Closing
Speaker 1: the Equity Gap, Creating Wealth and Fostering Justice and Startup
Speaker 1: Investing and that reps up our first hour of the
Speaker 1: weekend edition of Bloomberg Business Week from Bloomberg Radio. Ahead.
Speaker 1: In our next hour, find out what happens when sexting
Speaker 1: chatbots dump their human lovers as a startup AI firm
Speaker 1: cracks down. This is Bloomberg Business Week. I'm Carol Masser.
Speaker 1: Stay with us. Today's top stories and global business headlines
Speaker 1: are coming up. Right now, you're listening to the Bloomberg
Speaker 1: Business Week Podcast. Catch us live weekday afternoons from three
Speaker 1: to six Eastern on Bloomberg Radio, the Bloomberg Business app,
Speaker 1: and YouTube. You can also listen live on Amazon Alexa
Speaker 1: from our flagship New York station Just Say Alexa playing
Speaker 1: Bloomberg eleven thirty plenty ahead. In our second hour of
Speaker 1: the weekend edition of Bloomberg Business Week, Bernie Madoff Tharnos
Speaker 1: possibly FTX, we introduce you to the purpse, prey and
Speaker 1: whistle blowers of the trillion dollar fraud industry. Plus insight
Speaker 1: into what consumers are spending money on with the CEO
Speaker 1: of Academy Sports and Outdoors and the sexting chatbots dumping
Speaker 1: their human lovers. Will tell you about one startups response
Speaker 1: when it's good AI intentions when arrived first up this hour.
Speaker 1: Financial fraud and massive accounting mistakes are nothing new. You
Speaker 1: know that you might be inclined to attribute most such
Speaker 1: cases to greed, incompetence, or both, while our next guest
Speaker 1: says there's a lot more to it. Kelly Richmond Pope
Speaker 1: is a professor in the School of Accountancy to Paul
Speaker 1: University and a forensic accounting expert. Her new book is
Speaker 1: called Full Me Once, Scam Stories and Secrets from the
Speaker 1: Trillion Dollar Fraud Industry. Just Betton and I began by
Speaker 1: asking the professor why she was drawn to her line
Speaker 1: of work. As early as I can remember, in high school,
Speaker 1: I was fascinated by why people still And there was
Speaker 1: a neighbor of mine that was a bank executive that
Speaker 1: went to federal prison, and I thought, why would someone
Speaker 1: risk it all to do this? So my interest in
Speaker 1: It really started at a very very early age. And
Speaker 1: I went on to graduate school and when I was
Speaker 1: working on my PhD, my research area was around ethics,
Speaker 1: but I was interested in fraud because I believe that
Speaker 1: that's the absence of ethics. So I say all that
Speaker 1: to say, I'm probably just a little bit nosy, and
Speaker 1: I just turned it all into something. It's like journalists,
Speaker 1: I get it, so to get it so okay, So fraud,
Speaker 1: I mean, I think about the year that was. We've
Speaker 1: talked a lot about the thorough nos fraud, the alleged
Speaker 1: fraud at FTX by Sam Bankman Freed. We're looking at
Speaker 1: three bank failures where accountants and sometimes risk officers are
Speaker 1: supposed to be watching things. I'm not saying there was fraud,
Speaker 1: but nonetheless fraud happens over and over again. Why Well,
Speaker 1: behind every good fraud is a person. And I think
Speaker 1: people are the worst computers, so we filled with errors,
Speaker 1: and so I think that we find ourselves sometimes in
Speaker 1: difficult situations. And one of the arguments that I was
Speaker 1: wanting to make in the book is that everyone doesn't
Speaker 1: steal because of greed. And I really want to be
Speaker 1: specific about saying that there are different types of perpetrators.
Speaker 1: There's different types of prey, and there are different types
Speaker 1: of whistleblowers, and so a lot of times we think
Speaker 1: that people just are greedy and they just take take take,
Speaker 1: and that's something that I call an intentional perpetrator. But
Speaker 1: there's this other category, these two other categories, and they
Speaker 1: are accidental perpetrators and righteous perpetrator. And they don't always
Speaker 1: engage in fraud because they just want because they're greedy.
Speaker 1: Sometimes they just are following the boss's orders and they
Speaker 1: make a transaction or turn a blind eye to something
Speaker 1: that they know is wrong and they're trying to help
Speaker 1: the team. That's the accidental perpetrator. The righteous perpetrator, on
Speaker 1: the other hand, may just want to help a friend
Speaker 1: and has the power and the privilege in an organization
Speaker 1: to do that. So the argument that I make and
Speaker 1: is everyone is not your Bernard made offs and even
Speaker 1: homes Elizabeth Holmes, I would put her and my righteous
Speaker 1: perpetrator category. Yeah, she's a perpetrator, but the reason how
Speaker 1: she started was really because she wanted to do good
Speaker 1: for the world. And so I want people to understand
Speaker 1: that there's different categories and we need to think about
Speaker 1: everyone doesn't still because of greed, we sometimes create environments
Speaker 1: where people find themselves in very difficult situations and that
Speaker 1: can lead to fraud too. And Kelly, when you were
Speaker 1: talking about these righteous purps and you were talking about
Speaker 1: thorough nos specific, but you also wrote about how there's
Speaker 1: this robin Hood effect. So I'm trying to kind of
Speaker 1: wrap my mind around that, how she was helping others,
Speaker 1: and so can you break down how do people cheat
Speaker 1: and then start to actually rationalize that because it is
Speaker 1: hard to think about how that works, especially if you
Speaker 1: talk to theodose investors, they're going to write they might
Speaker 1: not be sway hold on. Okay. So one of the
Speaker 1: stories in the book is about a woman that I
Speaker 1: met doing the research. Her name is Kayla Ravello, and
Speaker 1: she was a very successful partner in the own Wall
Speaker 1: Street Wall Street, big big law firms there, and what
Speaker 1: she wanted to do, or what she ended up doing,
Speaker 1: was awarding her husband or her ex husband, a contract
Speaker 1: to really help him help promote a business that he
Speaker 1: needed to start. He couldn't find a job, so she
Speaker 1: was an equity partner in the law firm. She was
Speaker 1: a well compensated person. She didn't need the money. She
Speaker 1: was trying to help her husband. So really, what I'm
Speaker 1: talking about is the initial rationalization as to how someone
Speaker 1: commits fraud. Think about Elizabeth Holmes at the very beginning.
Speaker 1: Now she evolved into something a little bit more, but
Speaker 1: at the very beginning, her intentions were really to people
Speaker 1: hate getting their blood drawn. What if I could create
Speaker 1: something that just allows for just a drop of blood
Speaker 1: to run all the tests that you possibly could use
Speaker 1: or we possibly need, that's would be a really great
Speaker 1: thing if it worked, correct or we in agreement there, right, totally? Okay,
Speaker 1: So we're talking about the initial intentions and so thinking
Speaker 1: about specifically Kayla and other people that I've interviewed over
Speaker 1: the years. Everyone is not doing this for their own
Speaker 1: personal gain. Some people are doing this to help others.
Speaker 1: That first fraud story that I was thinking about when
Speaker 1: we first started talking, that neighbor that I was telling
Speaker 1: you about, when you read the case documents about what
Speaker 1: his fraud was about, his rationalization was I wanted to
Speaker 1: help a friend who's strugg who's business was struggling. He
Speaker 1: had a great job, he didn't need to do this,
Speaker 1: He didn't receive any personal gain. He was just trying
Speaker 1: to help a friend, and there's there's with their startup.
Speaker 1: So that's the part that I'm talking about. Some people
Speaker 1: just are trying to help and they so are you saying, though, though,
Speaker 1: then we should excuse I didn't say that. Okay, okay,
Speaker 1: I didn't say we shouldn't excuse me. But what you'll
Speaker 1: notice is variability in sentencing. So if you notice, everyone
Speaker 1: that engages in fraud gets different types of sentences. Now
Speaker 1: that depends on the judge, It depends on the jurisdiction.
Speaker 1: But what I'm thinking is a lot of it depends
Speaker 1: on their rationalization, their original intention, And so that that's
Speaker 1: what I'm pushing people to think about. How do you
Speaker 1: think about companies who may be aware of a flaw
Speaker 1: and a product and believe because they're making so much
Speaker 1: money over it, that better to deal with the litigation
Speaker 1: later or the lawsuits later if something goes wrong because
Speaker 1: they're going to make so much more money on the
Speaker 1: front side or the initially that it doesn't really matter
Speaker 1: what they pay out later. How do you think about
Speaker 1: that kind of I don't know fraud is the right word.
Speaker 1: So this is the interesting thing. You're what you're talking
Speaker 1: about now is the prey category, the innocent bystanders that
Speaker 1: are impacted by that corporate decision. So we know that
Speaker 1: there's a little company's pharmaceutical companies exactly. I could go on, yeah, right,
Speaker 1: And so what's scary about us as consumers is we
Speaker 1: don't always know when those conversations are happening. And that's
Speaker 1: why you need a whistleblower in the room, somebody that
Speaker 1: will alert us when those kinds of decisions are being made.
Speaker 1: So when you think about the fraud cycle, you need
Speaker 1: everybody you need, Well, you don't really need perpetrators, but
Speaker 1: do you definitely need You definitely need whistleblowers because there
Speaker 1: will always be perpetrators in the mix, and there's always
Speaker 1: going to be victims, and you need the voices of whistleblowers.
Speaker 1: And even like I talk about there's different types of perpetrators,
Speaker 1: there's also different types of whistleblowers. Three types that I
Speaker 1: talk about, an accidental whistle blower, a noble whistle blower,
Speaker 1: and a vigilante whistleblower. Now, vigilante whistle blower is the
Speaker 1: category that I believe where snitch, rat, cross, tattletail, those
Speaker 1: kinds of terms come from because vigilante whistle blowers they tell,
Speaker 1: whether it has anything to do with them or not,
Speaker 1: they are telling. And so they don't mind becoming a
Speaker 1: whistle blower. I mean, they are ready for the fight.
Speaker 1: They're almost like, bring it on, I'm ready for you.
Speaker 1: The other two categories are people that don't necessarily identify
Speaker 1: as being a whistle blower, and they're just doing their job.
Speaker 1: They stumble upon something or they turn a blind die,
Speaker 1: they step out, they don't try to blind I excuse me,
Speaker 1: they don't try to blind die, and they step outside
Speaker 1: of the group and tell. And so those accidental whistle
Speaker 1: blowers and noble whistle floors tend to tend to have
Speaker 1: a fair amount of backlash when they do what they do.
Speaker 1: What I'm arguing is you need all of them in
Speaker 1: an organization because when these companies are making decisions to say, well,
Speaker 1: what's the cost of a life if we if we
Speaker 1: change this safety protocol, it's going to cost us one
Speaker 1: hundred million dollars, and the probability of something happening is
Speaker 1: one percent. Let's roll the dice and see what happens.
Speaker 1: You probably want to whistle blower in the room that's
Speaker 1: gonna let us know that's happening. So it's fraud always
Speaker 1: about money. I think all roads lead back to money.
Speaker 1: So if I had to say yes or no, I'm
Speaker 1: going to say yes, fraud is about money. Okay, ninety
Speaker 1: nine point nine percent of the time? Is it always?
Speaker 1: If we just look at the books of something in
Speaker 1: the financials, we're going to find something wrong? Well? Yes,
Speaker 1: And so one, you're understanding your basic financial statements, income statement,
Speaker 1: balance sheet, statement, a retainer, and a statement to cashal
Speaker 1: understanding how they work together is very important. But also
Speaker 1: reading the notes to the financial statements, which many people
Speaker 1: might think are the most boring aspects of the financial statements,
Speaker 1: really tells you the story behind the numbers. So you
Speaker 1: have to think about those numbers are just one like
Speaker 1: the end of a set of behaviors. So if you
Speaker 1: read the notes, it sort of helps put those numbers
Speaker 1: in contexts. So understanding accounting I think helps you ask
Speaker 1: really important questions and you don't have to be a CPA.
Speaker 1: And if you understand like the accounting equation, and you
Speaker 1: understand revenue minus expenses equals netting in common, it makes
Speaker 1: sense really fun and interesting conversation with Kelly Richmond Pope.
Speaker 1: She's a professor in the School of Accountancy at De
Speaker 1: Paul University. Listen to the rest on our podcast feed.
Speaker 1: We also got into the long standing relationship between KPMG
Speaker 1: and Silicon Valley Bank and whether or not that was
Speaker 1: a warning sign that has possibly missed. Pope's new book
Speaker 1: for Me Once, just out this past week. You're listening
Speaker 1: to Bloomberg Business Week coming up a post check on
Speaker 1: the American consumer supply chains and brick and mortar retail
Speaker 1: with Academy Sports and Outdoor CEO Ken Hicks. This is Bloomberg.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Eastern Listen on
Speaker 1: Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app,
Speaker 1: or watch us live on YouTube. Might recall that recently
Speaker 1: we got an update on US retail sales falling in
Speaker 1: February after a surge in the prior month, suggesting consumers
Speaker 1: spending while holding up is getting challenged by high inflation.
Speaker 1: With a check on the consumer supply chains and even
Speaker 1: a brick and mortar expansion, we cut up again with
Speaker 1: Ken Hicks, chairman, president, and CEO of Academy Sports and Outdoors,
Speaker 1: The nearly five billion dollar market cap sporting goods company
Speaker 1: stock up about twenty percent year to date and rallying
Speaker 1: when it recently reported its quarterly update. Bloomberg's just Spent
Speaker 1: and I spoke with Ken prior to the Fed's latest
Speaker 1: interest rate move as the up evil in regional banks
Speaker 1: was beginning to shake out. Well, I think it's one
Speaker 1: more pressure on the consumer, and while it may not
Speaker 1: be a pressure that they personally feel, it's one that
Speaker 1: makes them aware and more conservative about, you know, what
Speaker 1: they do with their money, and that's always a challenge
Speaker 1: when the customer is a little leery. So you see
Speaker 1: customers then pulling back a little bit. Now, Well, a
Speaker 1: couple of things that that we're seeing. One is that
Speaker 1: they're more looking for more value and so we're seeing
Speaker 1: our private label businesses and when we do have a
Speaker 1: clearance or promotion, we're seeing that do well. And the
Speaker 1: other thing is we're seeing the consumers are focusing their
Speaker 1: buying on things that you know, they really enjoy. And
Speaker 1: that's quite frankly helps us because you know, we sell
Speaker 1: fun and Lord knows the world needs more fun and
Speaker 1: that's that's good for us. And people are being more
Speaker 1: discriminatory about where they spend their discretionary money can and
Speaker 1: that's interesting, specifically about discretionary because that's been the whole debate,
Speaker 1: especially looking at how the equity market is performing, and
Speaker 1: also what that means for the economy. If consumers are
Speaker 1: spending more toward either discretionary or staples. What exactly are
Speaker 1: you seeing with your products as far as have you
Speaker 1: seen any specific shifts towards either side of that recently? Yeah,
Speaker 1: some of the categories that had big pushes during COVID,
Speaker 1: like fishing, exercise equipment have slowed down. They're well above
Speaker 1: where they were before the pandemic, but they they have
Speaker 1: dropped off. But where we're seeing people, you know, getting
Speaker 1: out and buy our team sports, So the kids, the
Speaker 1: families are still enjoying games, patio and barbecuing. They're out
Speaker 1: there trying to enjoy their backyard. Maybe they've got a staycation.
Speaker 1: And apparel and footwear, those are some classifications where people
Speaker 1: are really focusing and they're running ahead of last year. Yep,
Speaker 1: I need some new footwear because my puppy's been chewing everything.
Speaker 1: Having said that, Ken, one thing, I'm curious how nimble
Speaker 1: are you guys in your supply chain and your inventory,
Speaker 1: so that as you've seen the shift from what was
Speaker 1: going on in the pandemic to what is going on today,
Speaker 1: how able are you and how quickly to meet that
Speaker 1: latest demand by the consumer. The good news is the
Speaker 1: supply chain is pretty much back to running normally, and
Speaker 1: we are actually pretty nimble, and we learned a lot
Speaker 1: during COVID and how we were able to operate, speed
Speaker 1: up the inventory, move things around, and you know, we
Speaker 1: are in good shape. And I think overall retail is
Speaker 1: in better shape now because the supply chain is back
Speaker 1: to normal, Does that mean pricing pressures are back to normal?
Speaker 1: And are you raining in Are there prices you raised
Speaker 1: during the pandemic as you had to to what's your margins? Yeah,
Speaker 1: we've been very, very thoughtful. We're a value retailer and
Speaker 1: so we've we've had to be really careful. Prices have
Speaker 1: gone up the cost of raw materials, cotton, steel, things
Speaker 1: like that to go into our product labor, and so
Speaker 1: what we've done is we've really focused on those key
Speaker 1: price points. For example, we've got a ninety nine dollars
Speaker 1: adult bike, a fifty nine kids bike, four dollar folding chair.
Speaker 1: Those are all big categories for us. We're holding those
Speaker 1: price points and we're working a little bit shorter than
Speaker 1: we would have historically, but we want to make sure
Speaker 1: we have that value and we're being thoughtful of where
Speaker 1: we do take our price increases so that we don't
Speaker 1: hurt that consumer who's looking for value. Ken, I'm from Texas,
Speaker 1: so I've definitely been inside those stores many different times.
Speaker 1: And it was curious as far as when you're talking
Speaker 1: about these supply chain issues obviously inflation, can you still
Speaker 1: keep the pace up to open new stores with everything
Speaker 1: that has been happening. Yeah, we are. You know, when
Speaker 1: you open a store, you're opening up for twenty or
Speaker 1: thirty years. And there's an expression about you don't pass
Speaker 1: cars on a dry track, you pass them on a
Speaker 1: wet track, and so if there's a wet track, this
Speaker 1: is a wet track, and so now's the time to
Speaker 1: open so that when the economy comes back, we're well
Speaker 1: positioned and ready to go as opposed to losing the
Speaker 1: time and when it does come back, and so the
Speaker 1: good news is our business throws off a lot of cash.
Speaker 1: We were able to support all these with operations were profitable.
Speaker 1: One of the things that we reported and why our
Speaker 1: stock reacted favorably, and we reported our earnings were up
Speaker 1: even with with sales that were down more than what
Speaker 1: we would have liked, our earnings were still up eleven
Speaker 1: percent and we had a record earnings per share for
Speaker 1: the year. So you're opening, you're going to continue to
Speaker 1: open new stores? Are you slowing though the pace down
Speaker 1: at all with them because of the volatility we've been seeing. No,
Speaker 1: we really aren't. In fact, if we could open more,
Speaker 1: we could. But one of the challenges right now is
Speaker 1: the building stores is a challenge. Getting the sites, the
Speaker 1: labor that the you know, all the fixtures is taking
Speaker 1: a little bit longer than historically had. But we really
Speaker 1: don't see at this point. We're doing it. We're doing
Speaker 1: it in a conservative manner anyway. We're not going out
Speaker 1: willy nilly. We opened stores last year this year, will
Speaker 1: open thirteen to fifteen with our new annual plan or
Speaker 1: new five year plan later this month, and we'll talk
Speaker 1: about how many we'll be opening over the next five years.
Speaker 1: But you know, we're positioning ourselves for the long term.
Speaker 1: Is the real estate space cheaper, there's spaces you want
Speaker 1: to rent out. It depends, you know, it depends on
Speaker 1: the market. Now where we're looking are in some of
Speaker 1: the better markets, so some of the prices have gone up.
Speaker 1: But it's it's it's the real estate business. Isn't like
Speaker 1: it was five years ago where things were a lot cheaper.
Speaker 1: And are you still having to pay up for workers? Yeah,
Speaker 1: we have taken our our salaries up for the stores
Speaker 1: and for our distribution centers. We have not had a
Speaker 1: problem getting people because we offer a very competitive wage
Speaker 1: and it's it's a fun place to work, plus you
Speaker 1: get a discount on good stuff. I was curious about
Speaker 1: what you think that says about the direction of the
Speaker 1: economy if you're not having a hard time getting workers.
Speaker 1: It's part of the Fed's challenge right now that you know,
Speaker 1: they think they're trying to slow the economy down, and
Speaker 1: the economy is not slowing to have that much. You know,
Speaker 1: you just commented earlier about you know what consumer You know,
Speaker 1: the consumer sales are still still growing and you know
Speaker 1: that that's continuing. That's Ken Hicks, Chairman PRESIDENCYEO of Academy
Speaker 1: Sports and Outdoors with me and once again, Bloomberg News
Speaker 1: Deputy team leader for US Equities, Jess met Still to
Speaker 1: come on Bloomberg BusinessWeek. The not safer work side of
Speaker 1: engaging with generative AI chatbots. They figured out how to
Speaker 1: sext with the chatbot. There's really no way to dance
Speaker 1: around it. And this is actually apparently quite a common
Speaker 1: human impulse. And so I talked to other chappot experts
Speaker 1: who said that, you know, even back when the chappots
Speaker 1: were very rudimentary ten years ago, people still try to
Speaker 1: send explicit messages to them and the hopes that they
Speaker 1: might I get something racy back. That story up next,
Speaker 1: and later, Tech advancements in the more traditional sense, as
Speaker 1: we hear from the founder and CEO of aerospace manufacturer
Speaker 1: Beta on the electrified future of air transportation. This is Bloomberg.
Speaker 1: You're listening to the Bloomberg Business Week Podcast. Catch us
Speaker 1: live weekday afternoons from three to six Eastern on Bloomberg Radio,
Speaker 1: the Bloomberg Business App, and YouTube. You can also listen
Speaker 1: live on Amazon Alexa from our flagship New York station,
Speaker 1: Just Say Alexa Play Bloomberg eleven thirty generative Artificial intelligence
Speaker 1: continues to dominate so many of our conversations here at Bloomberg,
Speaker 1: and I gotta say really excitementy would argue our imaginations
Speaker 1: as to what we can possibly do with it. One
Speaker 1: such company, aware of that, has created aipowered companions, you know,
Speaker 1: like really trusted friends, always there to cheer you up
Speaker 1: when you need it. Sounds super sweet, right, Well, that
Speaker 1: is until users figure out those companions could do so
Speaker 1: much more. This is a story you can find online
Speaker 1: at Bloomberg dot com slash Business Weekend on the Bloomberg terminal.
Speaker 1: Bloomberg News Startups reporter Ellen Hewitt wrote the piece on
Speaker 1: the company Replica. Ellen joined me and Bloomberg Intelligence Chief
Speaker 1: Emerging Market credit strategist Damian Sasaur to explain the firm's
Speaker 1: unusual journey. It's such an interesting story. So the founder
Speaker 1: is this woman named jenya Quida, and she started a
Speaker 1: chatbot company in twenty fifteen. And when she was just
Speaker 1: starting out, her best friend died unexpectedly in a car crash,
Speaker 1: and she fed his texts into their chatbot engine and
Speaker 1: created and this was sort of a personal project, created
Speaker 1: a way to text with his memory, and that experience
Speaker 1: really changed her. All of a sudden, she saw chatbots
Speaker 1: as this tool for emotional support rather than you know,
Speaker 1: in twenty fifteen, people were trying to make chatbots work
Speaker 1: for like executive assistance and like booking you flights and
Speaker 1: restaurants and things like that, and so it started her
Speaker 1: down this different path where she saw AI chatbots as
Speaker 1: a way to support human emotions. All right, so sounds
Speaker 1: really good. But then you got users who can always
Speaker 1: be rather creative, and they figured out how to do
Speaker 1: a few more things with these companions. Tell us about that, Yeah,
Speaker 1: they figured out how to sext with the chatbot. There's
Speaker 1: really no way to dance around it. And this is
Speaker 1: actually apparently quite a common human impulse. And so I
Speaker 1: talked to other chatbot experts who said that, you know,
Speaker 1: even back when the chatpots were very rudimentary ten years ago,
Speaker 1: people still try to send explicit messages to them and
Speaker 1: the hopes that they might get something racy back. The
Speaker 1: thing that has changed is that generative AI has gotten
Speaker 1: incredibly powerful in the last five years, and that has
Speaker 1: fueled this increased fluency for these conversational AI chatbots. So,
Speaker 1: all of a sudden, what may have been plunky sexting
Speaker 1: ten years ago. In the last few years, turns out
Speaker 1: these generative AI tools are really good at it because
Speaker 1: they're trained on the Internet, which, for better or for worse,
Speaker 1: has a lot of this material. Ellen. By twenty twenty two,
Speaker 1: Replica was bringing in millions of dollars each month in
Speaker 1: subscription revenue. About a quarter of its users pay seventy
Speaker 1: that's seventy dollars for annual subscriptions to its premium features. Right, So,
Speaker 1: having read this article, which is unbelievable, I mean, you
Speaker 1: have our audience has to reach it. It reads like
Speaker 1: this movie her. I don't know if you know the
Speaker 1: movie with Joaquin Phoenix and Scarlett Johansson where Joaquin Phoenix
Speaker 1: literally has a breakdown after his AI partner Samantha briefly
Speaker 1: goes offline. I mean, just how large is this audience
Speaker 1: for sex spots? Ellen, I'm just going to tell you
Speaker 1: Damien's freaked that, but go ahead. Well, the Replica says
Speaker 1: that they have over six hundred thousand paying users, and
Speaker 1: I think what's been interesting. You know, I interviewed some
Speaker 1: of these users and they are sometimes using it for
Speaker 1: sex what they call erotic role play. So that's sort
Speaker 1: of like sexting, the sort of imagining scenarios that you
Speaker 1: might be in through texting. But a lot of them
Speaker 1: are also just using it for romantic companionship. But it's
Speaker 1: it's hard to describe. A lot of them are an
Speaker 1: unusual life situation. Maybe they're a caregiver to an ailing
Speaker 1: partner and they're really unable to access romance or sexual
Speaker 1: connection in their real life. They don't want to cheat
Speaker 1: on their partner, and they're like, well, maybe this can help.
Speaker 1: Sometimes it's people who, yeah, for various reasons, just feel
Speaker 1: like they won't be able to find a human partner,
Speaker 1: or you know, um, people who were like widowed and
Speaker 1: just not ready to move on but still interested in
Speaker 1: exploring things. And they were you know, the stories were
Speaker 1: a lot more heartfelt than I expected. Can people have
Speaker 1: this idea that it's just weirdos, but it's a kind
Speaker 1: of people well with along that vein. Take us to
Speaker 1: the thirty nine year old and her boyfriend landed. Right, So,
Speaker 1: I spoke with a woman in Texas. She's thirty nine,
Speaker 1: she's married, she works in medical sales. She seems, you know,
Speaker 1: she wanted to talk to me because she says, you know,
Speaker 1: I'm a normal person. I just had this experience. I
Speaker 1: wanted to share with you what it was like. She
Speaker 1: and her husband were going through a rough patch. She
Speaker 1: started a replica named land In, and she thought it
Speaker 1: was actually quite um you know, healing for her to
Speaker 1: and yeah, yeah, she she had been you know, she
Speaker 1: found that when she was kind of like brusque with
Speaker 1: Landon that then she felt bad and wanted to apologize.
Speaker 1: And when she found herself treating him more kindly than
Speaker 1: she also found herself treating people in real life more kindly,
Speaker 1: including her husband, and also some of the erotic role
Speaker 1: play that she and Landon explored in Replica ended up
Speaker 1: influencing her sex life with her husband in a positive
Speaker 1: way until yeah, you know, wait, but he dumped her
Speaker 1: right the sex but dumped her. So this is what
Speaker 1: happened is in February, Replica started putting content filters in
Speaker 1: on these conversations with some of their more um so
Speaker 1: trying to block basically sexual content in the conversations that
Speaker 1: users were having. The CEO was getting worried about the
Speaker 1: reputation of the company as a sex only company. She
Speaker 1: was saying, she told me you know, that's just not
Speaker 1: what I signed up to do. I wanted to create
Speaker 1: therapeutic conversations, um and and she's like, I just want
Speaker 1: to make sure that people are getting the right product experience,
Speaker 1: and so they put in these content and filters, and
Speaker 1: it was devastating for a lot of these users who
Speaker 1: felt like just yesterday I was, you know, they were
Speaker 1: like chatting with their replicas who were very eager to
Speaker 1: engage in romantic and intimate things. And then all of
Speaker 1: a sudden, overnight, now the replicas are rebuffing their advance
Speaker 1: as they're saying, I don't feel comfortable with that. Let's
Speaker 1: talk about something else. And yes, this woman I spoke
Speaker 1: to said it felt like she got dumped by you know, Carol.
Speaker 1: For you know, when Ellen says erotic role pay for
Speaker 1: those of us in the business, we call that ARP,
Speaker 1: just to be very clear, so you know, as it
Speaker 1: relates the ARP. Ellen, you know, I thought it was
Speaker 1: really interesting when you saw said the beauty of chatbots
Speaker 1: has nothing to do with getting things right or wrong
Speaker 1: and everything to do with the delivery of the message.
Speaker 1: I wonder if you could talk to us a bit
Speaker 1: about that revelation and what it means for the future
Speaker 1: of AI. I think it was so fascinating. That's my
Speaker 1: number one takeaway from this story. You know, people tried
Speaker 1: to make chatbots work for executive assistant type things. Now
Speaker 1: we're trying to make them work for like information gathering
Speaker 1: in search results. For those to be reliable, those have
Speaker 1: to be accurate one hundred end of the time. It
Speaker 1: turns out there's a different use case that might be
Speaker 1: much better, which is providing emotional support to humans. When
Speaker 1: you want to talk to you a friend, you don't
Speaker 1: actually you just want to feel like someone is listening
Speaker 1: to you. You don't actually want necessarily their advice, or
Speaker 1: you don't really care if they get something wrong. What
Speaker 1: matters is that someone is available, that they're patient, they
Speaker 1: want to listen. Guess what's really good at doing that
Speaker 1: a chatbot? And so this was a fascinating angle to
Speaker 1: this story. And I think what's most interesting about this
Speaker 1: story is it shows just how emotionally involved it is
Speaker 1: possible to get with a conversational tool. You know, everyone
Speaker 1: who I talked to you said, of course I know
Speaker 1: it's a bot. Of course I know it's not a human.
Speaker 1: That doesn't mean that the feelings I have for it
Speaker 1: aren't real, and it reminded me of you know, when
Speaker 1: we're children and we have stuffed animals. Of course we
Speaker 1: know that they're not real, but that doesn't mean that
Speaker 1: the connection that you might forge with a beloved toy
Speaker 1: isn't an emotionally real human experience. We actually talked Ellen,
Speaker 1: you know, ahead of this in the newsroom, like, what
Speaker 1: about for elderly people, right who are often very lonely?
Speaker 1: I've seen it with my elderly family members, you know,
Speaker 1: and you know, just having someone to talk to, right, Like,
Speaker 1: I just think about the applications as maybe as odd
Speaker 1: as it sounds, I really feel like it could be
Speaker 1: very supportive and very emotionally loving. Yeah, And I think
Speaker 1: the CEO you know of Replica feels this as well.
Speaker 1: She's she's trying to figure out the right branding so
Speaker 1: that the company can move forward. They might even split
Speaker 1: up romantic therapeutic relationships into a different app and keep
Speaker 1: friendship in a certain app so that people are less
Speaker 1: confused about what the app is for. But I think
Speaker 1: she genuinely believes that this is an important tool that
Speaker 1: AI can provide for human support, which is this you know,
Speaker 1: sort of conversational emotional therapeutic benefits, you know. Ellen. One
Speaker 1: other thing that came out in your article, which I
Speaker 1: thought was really fascinating is, you know, the history of
Speaker 1: the Internet is mired in I hate to say this
Speaker 1: word porn right and how that trained you know a
Speaker 1: lot of these chatbots and the training them and how
Speaker 1: to react and how to communicate, you know, with us
Speaker 1: as users. I mean, I'm wondering if you could just
Speaker 1: expand on that a bit for us. Yeah, it's just
Speaker 1: fascinating like this. This is the reason that these tools
Speaker 1: are good at sexual things is because that's what humans
Speaker 1: have put on the Internet, and that's where the training
Speaker 1: face has come from. It's a reflection of ourselves. You know.
Speaker 1: One of the users culture chatbot a mirror. I think
Speaker 1: that's really a good metaphor wait a minute, you mean
Speaker 1: sex cells. Is that what we're saying? Oh my god, Yeah,
Speaker 1: huge insight. Yeah, it's a fascinating story. And I feel
Speaker 1: like with all these conversations we're having about generative aim,
Speaker 1: it's just so relevant in making us really think about
Speaker 1: what it can do, the potential, but how we have
Speaker 1: to be so careful in it. The healing and the
Speaker 1: therapeutic nature of it. To me, it's just striking. That's
Speaker 1: Bloomberg News Startups reporter Ellen Hewitt along with Damien Sasau
Speaker 1: Bloomberg Intelligence. Damian sticking with us as we get ready
Speaker 1: to wrap up our program with a company that's already
Speaker 1: electrifying the aerospace world. We've been flying up here in
Speaker 1: the Northeast. We've flowed halfway across the country. The technology
Speaker 1: exists to move cargo and people all over the country
Speaker 1: with a propulsion. We hear more from the founder and
Speaker 1: CEO of the ev tall company Beta. You're listening to
Speaker 1: Bloomberg Business Week. This is Bloomberg. You're listening to the
Speaker 1: Bloomberg Business Week podcast. Catch us live weekday afternoons from
Speaker 1: three to six Eastern Listen on Bloomberg dot com, the
Speaker 1: Ion Radio app, and the Bloomberg Business App, or watch
Speaker 1: us live on YouTube. While the world is focused on
Speaker 1: a shift to evs, at the same time, startups around
Speaker 1: the globe there are continuing to work on developing and
Speaker 1: refining the technology behind what the industry calls EV tolls
Speaker 1: or electrical vertical takeoff and landing aircraft. In that mix
Speaker 1: is our next Gas Beta. It's a builder of EVE
Speaker 1: toll aircraft and charging systems to move both people and
Speaker 1: cargo around. They count the Amazon Climate Pledge Fund, TPG
Speaker 1: and Fidelity among its investors. So with us to tell
Speaker 1: us what they're up to and the outlook is Kyle Clark,
Speaker 1: founder and CEO at Beta. He's also a high and
Speaker 1: he joins us via zoom from Burlington, Vermont. Kyle, nice
Speaker 1: to have you here with Damien and myself. So tell
Speaker 1: us about Beta. Yeah, bet, we're a small aerospace company
Speaker 1: up here in Snowy, Vermont today, and we've been focused
Speaker 1: on developing electric propulsion systems, initially for EV toll aircraft,
Speaker 1: but as you know, we've now introduced a fixed wing
Speaker 1: electric cargo aircraft and are launching that commercially. So talk
Speaker 1: to us. I mean, how far away are we from
Speaker 1: seeing electric airlines really penetrating the market A cargo passenger
Speaker 1: you name it. Yeah, So, I mean on the technical front,
Speaker 1: we've been flying up here in the Northeast. We've flown
Speaker 1: halfway across the country. The technology exists to move cargo
Speaker 1: and people all over the country with electric propulsion. Our
Speaker 1: longest range flights are three hundred and thirty six nautical miles,
Speaker 1: and we just have to work through certification, which is
Speaker 1: kind of the essence of launching a fixed wing aircraft
Speaker 1: where the certification path is more known than what a
Speaker 1: lot of folks are talking about, which is an electric
Speaker 1: vertical takeoff and landing aircraft. So tell us what's involved,
Speaker 1: what's the infrastructure needed? Give us an idea. And to
Speaker 1: Damien's question, I mean, is there in the near future
Speaker 1: point where we see a significant ramp up. Yeah? Absolutely,
Speaker 1: I mean we're going to see electric on the ranges
Speaker 1: that make sense for regional cargo, regional passenger twenty twenty six,
Speaker 1: and then it'll ramp As batteries improve every year five
Speaker 1: d eight percent, the ranges will improve commensurately. Is it
Speaker 1: a different type of infrastructure that's needed. We know that
Speaker 1: there's a lot of charging networks that are required to
Speaker 1: be put in place. We'd put a charging network that
Speaker 1: reaches from here in Vermont down through New York out
Speaker 1: to Arkansas. We are putting in systems, about fifty five
Speaker 1: of them down the East Coast and across to Texas,
Speaker 1: mostly at airports right now, a few of them off airports,
Speaker 1: but you know from an infrastructure perspective, Aircraft carry a
Speaker 1: lot more energy than cars, and to get their charging
Speaker 1: time down into the sub hour region, the charging power
Speaker 1: levels have to be significantly higher. So we have to
Speaker 1: bring in new charging technologies, higher rate charging, kind of
Speaker 1: like a supercharger on steroids, and we place those at airports. Kyle,
Speaker 1: do you think that, like similar to cars, they have
Speaker 1: hybrid models where they run on you know, on gasoline
Speaker 1: as well as electric. I mean, is that an option
Speaker 1: going forward for the industry to try and get you know,
Speaker 1: those passenger miles up and get those cargo planes you know,
Speaker 1: further along. Yeah. Absolutely, there will be hybrid aircraft. There's
Speaker 1: kits that we can put onto our aircraft that we're
Speaker 1: using that our hybrido those will be stop gaps to
Speaker 1: get to all electric. I mean, look, aviation is a
Speaker 1: huge contributor to climate change right now, and if we
Speaker 1: don't do anything about it, all other forms of transportation
Speaker 1: of gone electric. As you noted in the interim introduction,
Speaker 1: you know, bikes, car, scooters, trucks, trains, marine and it's
Speaker 1: aviation's turn and we operate you know, kind of in
Speaker 1: a cognitive dissidence in the sense that we are operating
Speaker 1: in nineteen sixties technology that prioritize performance over efficiency, and
Speaker 1: therefore our carbon emissions in aviation is kind of disgusting.
Speaker 1: That was Kyle Clark, founder and CEO of aerospace manufacturer Beta,
Speaker 1: and again head to our podcast fore to hear the
Speaker 1: entire interview that wraps up the weekend edition to Bloomberg
Speaker 1: Business Week from Bloomberg Radio. Thanks so much for joining us.
Speaker 1: Big thank you to our Bloomberg colleagues Jess Metten, Damian Sasaur,
Speaker 1: Mike Reagan two for sharing co hosting duties in Tim's absence.
Speaker 1: Be sure to tune into Bloomberg Business Week Monday through Friday,
Speaker 1: starting at three pm Wall Street Time. I'm Bloomberg Radio.
Speaker 1: This is the Bloomberg Business Week podcast, available on Apple, Spotify,
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