Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is Bloomberg Business Week Insight from the reporters and
Speaker 2: editors that bring you America's most trusted business magazine, plus
Speaker 2: global business, finance and tech news. The Bloomberg Business Week
Speaker 2: Podcast with Carol Masser and Tim Stenoveek on Bloomberg Radio.
Speaker 1: Hi, everyone, Welcome to the Bloomberg Business Week Weekend Podcast.
Speaker 1: Another busy week with investors contemplating the impact of US
Speaker 1: tariffs against its biggest trading partners, end of the role
Speaker 1: of Elon in the US government. It was a week
Speaker 1: two with a lot of earnings as Alphabet, Amazon, AMDARM,
Speaker 1: quoncom Ford, and Uber were among those that reported it
Speaker 1: kept us pretty busy.
Speaker 3: We also got another big read Friday on the US
Speaker 3: jobs market. All of the details can be found on
Speaker 3: the Bloomberg terminal and at Bloomberg dot com. You add
Speaker 3: it up and you've got a lot coming at financial
Speaker 3: markets and at leaders. So this hour we're going to
Speaker 3: get an update on trust of government, business media, and
Speaker 3: more with the CEO of the global pr and communications
Speaker 3: company Edelman.
Speaker 1: Plus we mentioned Elon a look at how his government
Speaker 1: takeover has been as swift as it has been chaotic,
Speaker 1: and understanding the possible land and resource grabs of President
Speaker 1: Trump's geopolitical plays.
Speaker 3: All of that to come. We begin, though, with the
Speaker 3: importance of trust, as political polarization and growing class divisions
Speaker 3: have led to a widespread loss of trust in large institutions.
Speaker 3: According to the Edelman Trust Barometer, now in its twenty
Speaker 3: fifth year, sixty one percent of respondents now hold grievances
Speaker 3: against government, business, and the rich.
Speaker 1: To help us understand the report's findings, we spoke with
Speaker 1: Edelman CEO, Richard Edelman, who had just returned from the
Speaker 1: World Economic Form in Davas, and there he got the
Speaker 1: pulse of global business leaders.
Speaker 4: So I think the American CEOs were quite bullish. They felt,
Speaker 4: you know, deregulation, lower taxes, a chance to you know,
Speaker 4: increase investment. Meanwhile, the European CEOs felt deeply depressed and
Speaker 4: they were nervous about trade, they were nervous about regulation.
Speaker 4: I heard one CEO tell me he has thirty five
Speaker 4: thousand data points to give to the EU on environmental
Speaker 4: regulation every year, and that's a huge burden. So also
Speaker 4: I would say it was a very business like Davos,
Speaker 4: you know, Other than Trump's last day appearance and Malay
Speaker 4: of Argentina. There were very few government leaders, so it
Speaker 4: was a much more business like Davos.
Speaker 3: It's interesting that you say that you're probably the second
Speaker 3: person to tell us that the mood of European CEOs
Speaker 3: was pretty gloomy.
Speaker 4: Well, they're gloomy because I think they feel trapped between
Speaker 4: the US and China. They have big sales in China, cars,
Speaker 4: et cetera. Their energy costs are high, their regulation is high,
Speaker 4: and frankly, they're nervous about the German economy, the French economy,
Speaker 4: both of them wobbling along. So they don't have domestic
Speaker 4: demand like the US does.
Speaker 1: So it's interesting, as you know, we navigate from day
Speaker 1: to day, hour to hour the headlines that come out
Speaker 1: of the White House in the Oval Office, and so
Speaker 1: I am curious was there a perspective among the global
Speaker 1: CEOs are more importantly the American CEOs, that it's kind
Speaker 1: of a wait and see that we think some of
Speaker 1: it is a lot of talk, and that ultimately, as
Speaker 1: you said, policies will make business sense and they might
Speaker 1: not be as extreme as some of the conversations around
Speaker 1: them are.
Speaker 5: I think you can tell me I'm wrong.
Speaker 4: No, no, look, I think our trust barometer came out
Speaker 4: in time for Davos. And the thing that was so noteworthy, Carol,
Speaker 4: is that we see the world slipping into grievance, and
Speaker 4: then sixty percent of the world's moderate or high grievance,
Speaker 4: and especially in Germany, thirty five percent of people highly
Speaker 4: agrieve just before their elections. And why is that? It's inflation,
Speaker 4: it's the sense that my family won't be better off
Speaker 4: in the next generation, lack of hope, fear of job loss,
Speaker 4: to AI and so I think business has every way
Speaker 4: to solve this. You know, give me a good job,
Speaker 4: reskill me, have affordable products. That's the playbook. And CEOs
Speaker 4: need to make sure that it's about their business.
Speaker 3: Why do you think we see this happening around the world?
Speaker 3: You know, it's not This idea of grievance is not
Speaker 3: particular to one single country or one single region. What's
Speaker 3: Is this a post COVID phenomenon? Is it a rise
Speaker 3: of the cost of living phenomenon? Is it a globalization phenomenon?
Speaker 3: Is it all of the above?
Speaker 4: What is it? It's absolutely it's like dominoes, and so
Speaker 4: you know, you start with the mass class divide, and
Speaker 4: you have a battle for truth, and you have this
Speaker 4: problem of COVID five years on, where people mental health
Speaker 4: and other things, and then you have all the geopolitical
Speaker 4: issues and so all of this is a lot, and
Speaker 4: people feel continuously punched, and so I think they used
Speaker 4: to take it and just have fears, and then now
Speaker 4: they're aggrieved and they're prepared to fight back, and whether
Speaker 4: it's misinformation or even violence, this is what we start
Speaker 4: to see. And business has every reason to be concerned
Speaker 4: about this because business is distrusted by the highly aggrieved.
Speaker 4: It's different than most because business is the most component
Speaker 4: and most ethical except for the highly aggrieved. So business
Speaker 4: has to try to pull people back from this cliff
Speaker 4: and make people feel as if they have good jobs,
Speaker 4: they can get well paid, they will be reskilled and
Speaker 4: can compete.
Speaker 1: So what's the problem. Is it that workers aren't sharing
Speaker 1: in the profits? I mean, you know, we're an earning season,
Speaker 1: we see it. I mean companies are doing well, and
Speaker 1: is it a case that they're not sharing all of
Speaker 1: those with their workers.
Speaker 4: Well, here's an example. In Japan, there hasn't been really
Speaker 4: a raise for workers for thirty years, okay, and so
Speaker 4: you get the idea of why people in the lowest
Speaker 4: coretile of income feel deeply aggravated relative to the higher.
Speaker 1: So why aren't CEOs appreciating those workers at that level?
Speaker 4: I think that they are in the sense that they
Speaker 4: use them, they put them in jobs. But the truth is,
Speaker 4: there's been outsourcing, there's been globalization, there's now AI. All
Speaker 4: of this is towards cost and effectiveness, and so CEOs
Speaker 4: are balancing a lot of these factors. But they do
Speaker 4: want employees to work hard and be satisfied, and the
Speaker 4: key to that is pay.
Speaker 3: We saw CEOs stand behind the president at the inauguration,
Speaker 3: some exactly, not all. We saw many prominent ones there.
Speaker 3: In general, we have seen some CEOs share their views politically,
Speaker 3: more so in recent weeks, in recent months than we're
Speaker 3: sort of accustomed to. You said, there's this idea that
Speaker 3: they're cheering deregulation, they're cheering lower taxes. But what about
Speaker 3: the chaos that's associated with the administration thus far. Is
Speaker 3: it a distraction to them? Is it what you get
Speaker 3: with Donald Trump because we knew that in the first term,
Speaker 3: or is it something that concerns them because they need
Speaker 3: to make decisions about their businesses in China, in Canada,
Speaker 3: in Mexico.
Speaker 4: I think CEOs need to argue for agenda items that
Speaker 4: suit their business. So, for example, if trade is a
Speaker 4: key part of your business, you should go out and
Speaker 4: advocate for a free trade and say this is going
Speaker 4: to cause inflation, or it's going to make my supply
Speaker 4: chain inefficient, or it's actually going to cost jobs in America.
Speaker 4: But also the non American companies need to make the
Speaker 4: case for investing in the US, putting more manufacturing here,
Speaker 4: making sure that it's aligned to the president's agenda. It's both.
Speaker 4: But I don't believe that ceo should stick their heads
Speaker 4: up and be very political. I think they should do
Speaker 4: their businesses.
Speaker 1: But you know, I want to go back to what
Speaker 1: you said, sixty one percent globally have a moderate or
Speaker 1: high sense of grievance, which is defined by a belief
Speaker 1: that government and business make their lives harder and serve
Speaker 1: narrow interests and wealthy people benefit unfairly from the system.
Speaker 1: I'm waiting for like the deluge of emails of like
Speaker 1: yeah we got that, Carol, Like that explains politics that
Speaker 1: are going on, But like Richard, how do. Is it
Speaker 1: just a case of paying workers more. I'm not saying
Speaker 1: just I don't mean that, but I mean, is that
Speaker 1: the fix? Because there are a lot of disillusioned individuals
Speaker 1: here in the United States and around the globe, I
Speaker 1: think just feel completely left behind.
Speaker 4: So inflation is corrosive. Got to get inflation under control
Speaker 4: so that people feel as if when they run hard,
Speaker 4: they're not running into the wind. Second, they got to
Speaker 4: feel as if they have a chance for the future
Speaker 4: rescaling upskilling core. And then third is pay and continuous
Speaker 4: ability to get to a better place.
Speaker 1: It seems like such an easy fix. Why then aren't
Speaker 1: we getting there? Like paying workers more. We've had guests
Speaker 1: on right talking about a living wage, and then some
Speaker 1: why aren't we Why isn't it being done?
Speaker 4: Because we're not taking full advantage of what's possible. AI
Speaker 4: is actually an enhancement tool for workers to be able
Speaker 4: to produce more. I mean, in my business, can see
Speaker 4: how much faster people turn out press releases and message
Speaker 4: points and things like this. Everyone's got to put AI
Speaker 4: into their workflows. Also, we've got to be sure this
Speaker 4: reskilling thing so that everyone feels as if he or
Speaker 4: she can compete, not just the twenty two year old
Speaker 4: is just out of school.
Speaker 1: I feel like we've talked reskilling for years.
Speaker 4: Yeah, true, but we've never done it. We've never done
Speaker 4: it in an effective way. And also, business can't do
Speaker 4: this alone. Business should do this with government and NGOs.
Speaker 4: And the secret here is NGOs non governmental organizations. They're local.
Speaker 4: They're also actually believable for the high grievance people business
Speaker 4: is not. So business should partner with community organizations.
Speaker 3: We were supposed to see reskilling after NAFTA, and obviously
Speaker 3: that didn't happen to the extent that many people thought
Speaker 3: it would or were told that it would. How do
Speaker 3: these workers use AI if they're not in part of
Speaker 3: the knowledge economy, or if they're not writing press releases,
Speaker 3: if they're not writing message points like what is the
Speaker 3: way that for people to embrace AI rather than be
Speaker 3: scared of it.
Speaker 4: So one of our clients, Honeywell, is using AI on
Speaker 4: the factory floor and making their workers more productive. That's
Speaker 4: the key to the future. And actually blue collar workers
Speaker 4: have much less job risk than white collar in insurance
Speaker 4: and other things where they're repetitive skills. So blue collar
Speaker 4: workers could thrive This is a very important message that
Speaker 4: most people haven't absorbed, and we need to keep telling this.
Speaker 4: And we also need optimism back in this country. We
Speaker 4: need to make sure that people believe again that the
Speaker 4: country can do better, because in the moment there's this
Speaker 4: inundation of negativity. And I think competence and ethics will
Speaker 4: get you so far. But if you want to run
Speaker 4: an eight minute mile, it's aspirational for me these days,
Speaker 4: but I have to believe that I can.
Speaker 1: Yeah, I think it's I think it's fascinating that we
Speaker 1: also at the same time, I've been talking about American exceptionalism,
Speaker 1: like in comparison to what's going on in Europe and
Speaker 1: so on and so forth, But there's so many people
Speaker 1: in our society that don't feel that. Talk about stock market, well,
Speaker 1: well not everybody's in the market.
Speaker 4: Only half the people are in the market, correct.
Speaker 1: And I look in my world people I talk to
Speaker 1: a younger generation of like, I'm not going to have kids.
Speaker 1: How am I going to afford kids? I can't even
Speaker 1: buy a house, Like it's just crazy.
Speaker 4: But again, the chance to get to optimism is based
Speaker 4: on specific actions, and if there's a national reskilling campaign
Speaker 4: or even by cities. I think this is interesting, Carol.
Speaker 4: The trust has gone local. Trust in my mayor my company.
Speaker 4: My CEO is much higher than anybody else. So this
Speaker 4: is a channel that companies should use.
Speaker 3: There you have it, Edelman CEO, Richard Edelman.
Speaker 1: Coming up on Bloomberg Business Week, Elon Musk's Doze disruption
Speaker 1: and his impact in just a few short weeks.
Speaker 3: That's next. This is Bloomberg.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 2: live weekday afternoons from two to five pm Eastern. Listen
Speaker 2: on Apple CarPlay and Android Auto with the Bloomberg Business app,
Speaker 2: or watch us live on YouTube.
Speaker 1: Now to two well known tech companies, both with government
Speaker 1: contracts and huge tech billionaires connected to each. We are
Speaker 1: talking about Palenteer and SpaceX.
Speaker 3: Palenteer share soaring to a record following earnings this past
Speaker 3: week after the company gave a full year revenue forecast
Speaker 3: that exceeded analyst estimates, driven by quote untamed organic growth
Speaker 3: and demand for its AI software.
Speaker 1: And then they're SpaceX and its founder Elon Musk and
Speaker 1: his Doze teams seemingly taking over of the US government.
Speaker 1: It's a move that sparked concern among various unions now
Speaker 1: urging the courts to block Doze from getting treasury and
Speaker 1: labor data.
Speaker 3: We knew we needed a roundtable on this, and so
Speaker 3: we caught up with a Bloomberg Business Week columnist Max
Speaker 3: Chafkin and Bloomberg News technology reporter Kurt Wagner. Max kicking
Speaker 3: it off with Palenteer and why it's garnering so much
Speaker 3: interest from investors.
Speaker 6: So two things.
Speaker 7: One is AI. This is a company that has sort
Speaker 7: of made its embrace of AI sort of central to
Speaker 7: how it talks about what it does. This is a
Speaker 7: company that makes software that helps governments and big companies
Speaker 7: organized data. So so part of it is that this
Speaker 7: general sense that big companies and the government are going
Speaker 7: for AI. And the second part is related to the
Speaker 7: other thing you mentioned, which is Elon Musk Donald Trump,
Speaker 7: this sense that the Trump administration is likely to embrace
Speaker 7: things like Palenteer. I think both because you have Doge
Speaker 7: and you have Elon Musk saying we need to make
Speaker 7: things more efficient. Palanteer has a value proposition there. But also,
Speaker 7: of course there is a political connection. You know, Palenteer
Speaker 7: co founded by Peter Teel Peter Teel still a major
Speaker 7: shareholder in this company. You know, they are going to
Speaker 7: have you would think at least some kind of inside
Speaker 7: lane in terms of trying to get additional contracts, both
Speaker 7: because of the relationships with the Teal network, because of
Speaker 7: their AI stuff, and because of Teal himself.
Speaker 3: Okay, speaking of government contractors, Palentteer is a government contractor,
Speaker 3: so too is SpaceX. SpaceX founder Tesla, the guy who
Speaker 3: built Tesla Co'm fair to say, Elon Musk they have
Speaker 3: or had relationships with President Trump. So that's where we
Speaker 3: want to go, and we want to bring in Kurt Wagner.
Speaker 3: What do we know about all that Elon and his
Speaker 3: team of engineers and others linked to his own company
Speaker 3: and the DOGE team. What exactly they're doing at what
Speaker 3: parts of the US government, what they're asking, and what
Speaker 3: they're trying to accomplish.
Speaker 8: Generally, what you can assume is that Elon and his
Speaker 8: team are are taking a bit of a forceful approach, right.
Speaker 8: I Mean, we saw stories come out about them, you know,
Speaker 8: essentially bullying their way into having full access to the
Speaker 8: Treasury Department's payment system. We saw them, you know, single
Speaker 8: handedly closed USAID right, like this idea that they could
Speaker 8: go in and just sort of say, hey, this agency,
Speaker 8: this this federal agency, we don't think they're doing a
Speaker 8: good job, and we're just gonna you know, shut them
Speaker 8: down right then and there. And we hear these sort
Speaker 8: of horror stories come out from employees of these you know,
Speaker 8: different agencies, sort of saying, hey, we're trying to maybe
Speaker 8: stop this this group of people, We're trying to make
Speaker 8: sure that they have appropriate you know, access levels to
Speaker 8: read this classified information, and essentially they're just forcing.
Speaker 9: Their way through.
Speaker 8: And so what I wrote about was just sort of
Speaker 8: the parallels between what we're seeing there and what we
Speaker 8: saw with the Twitter takeover, right, which was obviously a
Speaker 8: very brute force effort as well. Elon shows up, he
Speaker 8: brings his crew of people who are loyal to him
Speaker 8: and sort of just span out and start causing chaos
Speaker 8: and recon havoc. And I think we're seeing that now,
Speaker 8: but on the government scale, which is obviously a very
Speaker 8: different and I think a bit of a scarier situation
Speaker 8: for people.
Speaker 1: Max, I want to bring you in, I mean, in
Speaker 1: terms of when you guys talk about you know, Elon
Speaker 1: on the podcast and just you know, the coverage that
Speaker 1: you have done.
Speaker 6: That.
Speaker 1: On one hand, I think Elon's probably like this is
Speaker 1: pretty cool to ask, like, oh my god, I want
Speaker 1: to like.
Speaker 5: Fix this right.
Speaker 1: And on the other hand, I'm like, wait a minute,
Speaker 1: he's got to be like, look at what I have
Speaker 1: access too, Like, what do you think.
Speaker 10: Is his goal?
Speaker 1: What is you know he learning or wanting to learn
Speaker 1: in this process? Is it altruistic or is it.
Speaker 7: Well, I think you have a swirrel.
Speaker 5: It's probably both, right.
Speaker 7: I got both out, both a sense of altruism and
Speaker 7: a profit motivation, and I think for someone like Elon Musk,
Speaker 7: those two things are tangled up. You know, Elon Musk
Speaker 7: he believes, and I think this is a genuine belief,
Speaker 7: not a cynical belief put on to make money. But
Speaker 7: he believes that yes, humanity needs.
Speaker 10: To get to Mars.
Speaker 7: He needs we should spend tens of billions of dollars,
Speaker 7: you know, as a country put on a Mars mission,
Speaker 7: and that Elon Musk, having the market leading rocket, should
Speaker 7: get a large chunk of that money. Now, of course,
Speaker 7: like that raises some significant questions in terms of conflict
Speaker 7: of interest. And I'd say in addition to being a
Speaker 7: guy who's very motivated by these kind of big picture things.
Speaker 7: He is also a guy who tends not to pause
Speaker 7: much for concerns about conflict of interest, and that's kind
Speaker 7: of what we're seeing in some of these incidents over
Speaker 7: the past couple of weeks that Kurt's talking about. You know,
Speaker 7: so this actual like almost a physical confrontation between Musk's
Speaker 7: sort of representatives at DOGE going into USID and attempting
Speaker 7: to get access to these classified documents, and you had
Speaker 7: USAID personnel trying to stop them.
Speaker 2: Kurt.
Speaker 3: One thing that's unique about this situation, and it's not
Speaker 3: the you know it, certainly there are a lot of
Speaker 3: parallels as you write about between what happened at TESLA
Speaker 3: and what's happening right now with DOGE. He does report
Speaker 3: to the president ultimately in this and I'm wondering if
Speaker 3: that changes things at all for the Elon Musk playbook.
Speaker 3: What do you make of it?
Speaker 8: I mean, it feels like we haven't seen him, you know,
Speaker 8: slowed down at all to this point, right. I presume
Speaker 8: perhaps behind the scenes he's saying, Hey, I really want
Speaker 8: to cut this thing, and President Trump is saying no, no, no,
Speaker 8: don't touch that. I don't really see that maybe playing
Speaker 8: out in that way.
Speaker 6: Right.
Speaker 8: It feels like Trump has certainly given him a wide
Speaker 8: you know, birth or to go out and do this thing,
Speaker 8: and to do it in the way that he thinks
Speaker 8: he should. I think the point that I was trying
Speaker 8: to make earlier in the Tech column was that, you know,
Speaker 8: with Twitter, that was a private company that was purchased
Speaker 8: with private money, Right, Like, if he wants to sort
Speaker 8: of run that thing, aggressively, run it into the ground
Speaker 8: in certain cases, and deal with the consequences, that's his choice.
Speaker 8: The issue here is that all these decisions he is
Speaker 8: making and making them at an incredibly fast speed, have
Speaker 8: impact on you know, every US citizen, including nobody who
Speaker 8: voted for him, because he wasn't voted, he wasn't elected
Speaker 8: to this role, right, And so I think the distinction
Speaker 8: there is like, okay, private business, private ownership versus public funds,
Speaker 8: public you know impact. And that's I think the big
Speaker 8: thing that we need to keep in mind.
Speaker 3: That was Bloomberg Business we call him this Max Chafkin
Speaker 3: and Bloomberg News technology reporter Kurt Wagner. We should note,
Speaker 3: after our conversation with Max and Kurt. The White House
Speaker 3: said Elon Musk will determine himself if there are conflicts
Speaker 3: of interest between his own work reviewing federal spending and
Speaker 3: his overlapping empire of six companies.
Speaker 1: All right, We're going to stay with tech for a moment.
Speaker 1: We shift a little bit thanks to the world of
Speaker 1: social media and how our digital footprints are providing more
Speaker 1: information about ourselves, probably more than we realize.
Speaker 3: Columbia Business School professor Sandra Motts writes about this in
Speaker 3: her new book mind Masters, The Data Driven Science of
Speaker 3: Predicting and Changing Human Behavior. She went in on Meta's
Speaker 3: recent decision in January to end third party fact checking
Speaker 3: and what it means for user engagement and the fight
Speaker 3: against misinformation.
Speaker 9: Frankly, I think misinformation is just such a small piece
Speaker 9: of the entire puzzle because a lot of the information
Speaker 9: that's out there is not necessarily fake and not true,
Speaker 9: but it's just slant in so it's not necessarily that
Speaker 9: it's actually inaccurate, but it has like a certain angle
Speaker 9: and a certain spin that speaks to what we want
Speaker 9: to hear. And for me, that's even a bigger problem
Speaker 9: because it's much harder to regulate right. It's much harder
Speaker 9: to take down from contum model or as metas trying
Speaker 9: to do now just from a consensus among users. Right,
Speaker 9: that's an even higher bar when we think about these
Speaker 9: news that are maybe not factually inaccurate, but certainly tailored
Speaker 9: to a certain opinion.
Speaker 3: Is this the way of the future though? Are we
Speaker 3: sort of moving past this idea of a fact based
Speaker 3: society and one that's more based on interpreting what you
Speaker 3: see that's thrown at you. And I think it takes
Speaker 3: on a different The question takes on something different when
Speaker 3: you know, as I'm asking, I'm thinking about AI generated
Speaker 3: content and what we do know is real and what
Speaker 3: we don't know is not real.
Speaker 9: Yeah, I think it's a risky gamble to think about
Speaker 9: this moving post or pastly what I think of shared reality, Right,
Speaker 9: it's the idea that as a society, as people living together, frankly,
Speaker 9: we can make sense of the world in a way
Speaker 9: that at least offers us the opportunity to have a discussion.
Speaker 9: And I think the moment that we entered this world
Speaker 9: where I have a completely different reality than you and
Speaker 9: we're not even discussing it because we're cut in in
Speaker 9: these echo chain online right where I don't even see
Speaker 9: what you see. I think that's a really risky gamble
Speaker 9: because it's not even out there anymore. We don't have
Speaker 9: the public square anymore where we can say, well, this
Speaker 9: is something that you've seen. I've seen this, Well, what
Speaker 9: do you think is actually true? How should we be
Speaker 9: moving forward? I think that is what is missing.
Speaker 1: Well, it's so funny. I think we thought social media
Speaker 1: it's been great sparking all these conversations, but it's really
Speaker 1: kind of a one one, you know, pathway dump if
Speaker 1: you will, right, and then you kind of have to
Speaker 1: deal with it. What I want to ask you is
Speaker 1: your book Mind Masters, The Data Driven Science of Predicting
Speaker 1: and Changing Human Behavior. I want to get into the predictability.
Speaker 1: Do you say that if we had really monitored social
Speaker 1: media we would have been able to predict the January
Speaker 1: sixth uprising? Could we have predicted some other things, you know,
Speaker 1: in terms of what has happened in society?
Speaker 9: Yeah, So what I'm mostly interested in is actually trying
Speaker 9: to understand individuals. So what you're talking about is like
Speaker 9: predicting these macro level trends, right, It's like, how is
Speaker 9: the collective acting, and I do think that you might
Speaker 9: have been able to pret that right, because it's this
Speaker 9: is all coming down to sentiment. It's like people are angry,
Speaker 9: people want to change, So the fact that people hands
Speaker 9: it's like what we call social listening. It's trying to
Speaker 9: see what is it that people care about.
Speaker 1: And you talk specifically about something called psychological targeting, which
Speaker 1: I don't know that tim have we kind of really
Speaker 1: I don't know that I've heard that terminology.
Speaker 7: What is that?
Speaker 9: Yeah, So psychological targeting is the way in which algorithms
Speaker 9: can translate your data into psychological constructs. So it's really
Speaker 9: trying to make sense of you as a person.
Speaker 6: Right.
Speaker 9: If I told you what, I can get access to
Speaker 9: everything you post on social media to maybe your credit
Speaker 9: card spending, your Google searches, the sensors that I embedded
Speaker 9: in your smartphone which keep track youration via the GPS.
Speaker 5: Sensor, for example.
Speaker 9: It doesn't seem that intimate, but once I can tell you, well,
Speaker 9: I can translate these traces into and understanding of whether
Speaker 9: you might be extroverted, impulsive, neurotic, whether you vote for
Speaker 9: a certain Candada, your political orientation, your sexual identity. Those
Speaker 9: are all really intimate insights, and that is the cracks
Speaker 9: of psychological targeting. It's making use of AI and machine
Speaker 9: learning to translate data into human understandable profile.
Speaker 3: Do you have to use AI and data? Because your
Speaker 3: book opens up talking about your own personal experience, the
Speaker 3: first eighteen years of your life spent in a very
Speaker 3: small village of what five hundred people, and an accident
Speaker 3: that you had that then immediately everybody knew about what's
Speaker 3: the connection between that and where technology is today and
Speaker 3: what tech can do?
Speaker 9: Yeah, So I think it's absolutely right, and that the
Speaker 9: fact that we oftentimes observe people's behavior and make inferences
Speaker 9: about who they are isn't new. Right in this village
Speaker 9: that I grew up and people observe what I was doing,
Speaker 9: They saw me running to the bus every morning, and
Speaker 9: they probably figured out that I wasn't the most organized
Speaker 9: person in the world. And so the incident that you
Speaker 9: were referring to is essentially I had this motorcycle crash
Speaker 9: and the whole village knew about it. So in an instance,
Speaker 9: those new spread and it's not just like an isolated
Speaker 9: while this is what happened. It's like, Okay, I'm gonna
Speaker 9: now understand who Sandra is, and I'm going to use
Speaker 9: that knowledge moving forward to maybe push her in certain directions.
Speaker 9: But maybe if she's not organized, maybe she's not the
Speaker 9: one that I want to rely on when I have
Speaker 9: to move my stuff and when I have to organize
Speaker 9: something that has to be perfectly done. So I think
Speaker 9: that the shift to the digital world just means that
Speaker 9: we have neighbors all around us, and they're not really
Speaker 9: physical neighbors. They're neighbors that are algorithms, and they observe
Speaker 9: everything we do based on the data and then make
Speaker 9: very similar inferences.
Speaker 3: That was Columbia Business School professor Sandra Motts on her
Speaker 3: new book Mind Masters. The full conversation can be found
Speaker 3: on our podcast feed.
Speaker 1: Still Ahead on Bloomberg Business Week, President Trump's plans for
Speaker 1: Gaza and Ukraine.
Speaker 2: Maybe this is Bloomberg. This is the Bloomberg Business Week podcast.
Speaker 2: Listen live each weekday starting at two pm Eastern on
Speaker 2: Apple CarPlay and the Android Auto with the Bloomberg Business app.
Speaker 2: You can also listen live on Amazon Alexa from our
Speaker 2: flagship New York station, Just Say Alexa played Bloomberg eleven.
Speaker 1: Thirty a lot coming our way from the White House
Speaker 1: when it comes to gel politics and I guess foreign policy.
Speaker 1: Perhaps there was President Trump's idea of depopulating and taking
Speaker 1: over Gaza, which he mentioned following a meeting with Israeli
Speaker 1: Prime Minister Benjamin Netanyahu at the White House, and then
Speaker 1: was toned down by President Trump's aides.
Speaker 3: The president's idea was broadly welcomed in Israel, with officials
Speaker 3: praising the surprise proposal as a means to beef up
Speaker 3: security following the war with mos In the Arab world,
Speaker 3: though the suggestion was taken differently. Saudi Arabia called the
Speaker 3: plan quote an infringement on the legitimate rights of the
Speaker 3: Palestinian people. It's a position echoed by governments across the
Speaker 3: Middle East.
Speaker 1: For some insight on the region and the difficult relationships there,
Speaker 1: we talked with Bloomberg Opinion International affairs columnist Mark Champion
Speaker 1: and Dana Stroll, Senior Fellow and research director at the
Speaker 1: Washington Institute for Near East Policy think tank. Dan is
Speaker 1: also a recent former Deputy Assistant Secretary of Defense for
Speaker 1: the Middle East, the Pentagon's top civilian official with responsibility
Speaker 1: for the region.
Speaker 10: What worries me slightly is that you know, here, you
Speaker 10: are at a juncture. You're you know, you're in a
Speaker 10: peace process that's in several stages. The second one is
Speaker 10: going to come up faster and when we you know,
Speaker 10: then think and it will require the kind of further
Speaker 10: forward looking strategy and planning in order to get that
Speaker 10: through that has not been there until now because Israel
Speaker 10: has not been willing and certainly Hamas has not been
Speaker 10: willing to you know, to engage. So you know what
Speaker 10: worries me is that, you know, the the administration will
Speaker 10: be you know, thinking of and talking in these terms
Speaker 10: right which really aren't going to go anywhere, and in
Speaker 10: the meantime, we have an unsolved problem that will simply
Speaker 10: return to fighting.
Speaker 3: Dana, come on here, I'm wondering if, given your experience
Speaker 3: in the region, your experience when it comes to diplomatic affairs,
Speaker 3: if you see this as having any weight to it,
Speaker 3: or maybe perhaps an off the cuff re mark or
Speaker 3: something that doesn't necessarily or should not necessarily be taken seriously,
Speaker 3: how are you looking into it?
Speaker 11: Well, first of all, I don't think it's an off
Speaker 11: the cuff remark. I think it's quite consistent with the
Speaker 11: negotiating strategy we've seen from President Trump and just his
Speaker 11: first weeks in office here, which is to create a crisis,
Speaker 11: mostly with words and threats, animate his team to then
Speaker 11: have backchannel negotiations which de escalate a situation, and then
Speaker 11: largely if you look at Columbia or Mexico or Canada,
Speaker 11: each government has come with modest or moderate reactions that
Speaker 11: appear to address Trump's concerns, and then all of a
Speaker 11: sudden there's a delay in what he has promised in
Speaker 11: terms of a harsh response. In this case, Netanyahu was
Speaker 11: about to face a fork in the road if the
Speaker 11: Gaza ceasefire moves to phase to Israel would have had
Speaker 11: to end this war. And we've seen with all of
Speaker 11: these hostage releases Hamas come out in their uniforms. It
Speaker 11: certainly doesn't look like the total victory that Prime Minister
Speaker 11: and Nathan Yahoo promised the Israeli people. Now, rather than
Speaker 11: talk about what Israel's going to do, or the Palestinians
Speaker 11: or the region, all the talk is about what the
Speaker 11: United States is going to do. It's totally shifted the
Speaker 11: dynamics and the focus of this conversation, and I think
Speaker 11: Trump knows exactly what he's doing here.
Speaker 1: Well, and that's a really good point. And you know, Mark,
Speaker 1: come on back in, because I think some of what
Speaker 1: we've been hearing is that, you know, this is about
Speaker 1: President Trump taking the focus of what really matters, what
Speaker 1: is the next phases of the ceasefire between Hamas and Israel,
Speaker 1: and really figuring that out.
Speaker 5: Do you agree that it's.
Speaker 1: Kind of like the flashy thing, you know, look over here,
Speaker 1: but it kind of gets everybody off the hook of
Speaker 1: thinking about what's the next phase of this ceasefire?
Speaker 10: I think it is. I do think that's part of
Speaker 10: what he's doing. It's simply the don't believe he has
Speaker 10: a thought through strategy that he's trying to you know,
Speaker 10: unlike with the trade, where you know, he had things
Speaker 10: that he could get. I simply don't think that he
Speaker 10: has a strategy that will be able, you know, to
Speaker 10: to get a movement forward, to get the Israelis to
Speaker 10: on board, to to to you know, get to a
Speaker 10: place where you can have a serious proposal. And therefore,
Speaker 10: you know, this kind of real estate talk and so on.
Speaker 10: I think it is serious in the sense that it's
Speaker 10: a real distraction, you know, you know, I take it
Speaker 10: that he knows what he's doing when he's doing making,
Speaker 10: you know, throwing up all these you know, balls of
Speaker 10: fire in the air. So everybody's looking a different way.
Speaker 10: But you need to have something underneath there that you
Speaker 10: can realistically get people to do, and that I think
Speaker 10: it's missing, you know, Dana.
Speaker 1: One of the things I think we keep thinking about
Speaker 1: as we watch, you know, what's been going on in
Speaker 1: terms of threats of tariffs, then maybe a little bit
Speaker 1: of a rollback and you know, or things change or
Speaker 1: they're postponed in terms of their enactment. Having said that,
Speaker 1: you know, we thought about with tariffs, what's the goal
Speaker 1: here in your view of President Trump in terms of
Speaker 1: meeting with Benjamin Nett Yahoo and what his real aim is.
Speaker 1: President Trump's aim is for Israel and for the Palestinians.
Speaker 11: Well, first of all, what Trump wants is Israel's security,
Speaker 11: and he doesn't want to see Homos return to a
Speaker 11: position of governance. And right now, the Arab leaders of
Speaker 11: the rest of the Middle East aren't really cooperating. They're
Speaker 11: unwilling to commit any sort of security presence or boots
Speaker 11: on the ground, meaningful resources beyond humanitarian aid. Pressure on
Speaker 11: the Palestinian authority in terms of what its leadership could
Speaker 11: look like in God's or reconstruction or an actual day
Speaker 11: after planned for Gaza. All he's heard from Arab leaders
Speaker 11: is mostly know what they're unwilling to bring to the table.
Speaker 11: And now you see the dynamics sort of shifting. And
Speaker 11: of course, next week the table is set for King
Speaker 11: of Dullah of Jordan, followed by perhaps Egyptian President c
Speaker 11: c All coming to Washington, and this is going to
Speaker 11: be the focus. So you see a lot of movement
Speaker 11: because of what Trump has said.
Speaker 3: Mark, does it threaten relationships that the US has in
Speaker 3: the region, such as President Trump's relationship with the Kingdom
Speaker 3: of Saudi Arabia for.
Speaker 10: Example, Well not at this point. I do think that
Speaker 10: there's a huge difference in the situation between his first
Speaker 10: term and this his second term. You know, in his
Speaker 10: first term, the interests of the Gulf States and Israel
Speaker 10: were more or less aligned. Their biggest concern was Iran,
Speaker 10: the threat from Iran. And you know, so he was
Speaker 10: able then to get the Abrams Accords, and after that
Speaker 10: the Biden administration was able to talk to the Saudi
Speaker 10: a lot about similar deals because there was no real impediment.
Speaker 10: And this time around since October twenty three, when you've
Speaker 10: got the you know, you've had the war in Gaza
Speaker 10: in between, and also the sort of interests of Saudi
Speaker 10: Arabian particular have changed much more focused on the economy
Speaker 10: and stability, less worried about Iran. You now have a
Speaker 10: different situation, and I just think it's going to be
Speaker 10: quite difficult to bring these different interests together where you've
Speaker 10: got the domestic political concerns of Saudi Arabia and the
Speaker 10: Gulf State's now focused on their own populations and their
Speaker 10: view of Gaza, and it just makes it harder to
Speaker 10: bring everybody together. And I'm not clear that you know,
Speaker 10: he's got a plan for that.
Speaker 1: Dana, when we think about what is the plan though
Speaker 1: for Palestinians, you know, Mar's column gets into you know,
Speaker 1: Gaza is a demolition site. You know, it's a mess,
Speaker 1: and to think about the Palestinians going back there, I mean,
Speaker 1: how do they live. There's no infrastructure, so there needs
Speaker 1: to be some kind of rebuild. And you do wonder how,
Speaker 1: you know, how this happens going forward, how do you
Speaker 1: see it playing out in terms of Yeah.
Speaker 11: First of all, The estimates for the cost of rebuilding
Speaker 11: Gaza are upwards of eighty billion dollars and we're probably
Speaker 11: talking about decades to clear out the rubble and rebuild Gaza,
Speaker 11: so there's not really a temporary relocation of Palestinians. And
Speaker 11: based on past US experiences for example, post conflict reconstruction
Speaker 11: in Iraq and then Afghanistan, the difference in Gaza is
Speaker 11: how concentrated the destruction is and the closed nature of
Speaker 11: the border, so civilians can't move around when we're trying
Speaker 11: to get ordnance, unexploded mines and bombs and the rubble
Speaker 11: cleared out. So this was always going to be a
Speaker 11: huge challenge just on the on the remarks about the region,
Speaker 11: what's totally different from Trump's first term is the strategic
Speaker 11: needs of the Middle East. Iran is more vulnerable today
Speaker 11: than it ever has been because of Israel's military strikes
Speaker 11: that have taken out its air defenses, but charl Ossad
Speaker 11: has gone in Syria. There's also a ceasefire in Lebanon
Speaker 11: and a chance an opportunity to reimagine Lebanon without a
Speaker 11: stranglehold of Hazbolah governance. And the same thing in Hamas
Speaker 11: in Gaza. Trump can't do this alone. He needs the Europeans,
Speaker 11: he needs the Arab leaders, and I think there's an
Speaker 11: opportunity here for different leaders to bring things to the table.
Speaker 5: It's not only about Gaza.
Speaker 3: Well, sticking on Gaza does raise the question of what
Speaker 3: the future of Gaza is. What is the plan for Gaza?
Speaker 3: If the United States does not go through with the
Speaker 3: plan that President Trump said ye at the White House.
Speaker 11: On the current trajectory, without anything other than what we
Speaker 11: see right now, Gaza is probably going to become something
Speaker 11: like Mogadishu on the Mediterranean. There's no non Hamas alternative
Speaker 11: to governing Gaza. We've seen that there's plenty of Hamas
Speaker 11: guys who have come out of the time, put their
Speaker 11: uniforms back on, are distributing humanitarian aid and telling people
Speaker 11: we're going to help you get back to your homes
Speaker 11: and we're going to help you rebuild. So that means
Speaker 11: that Hamas reconstitutes, it regains governance over Gaza, and its
Speaker 11: remaining leaders have already threatened to do October seventh, over
Speaker 11: and over and over.
Speaker 1: Hey, Mark, before we wrap up with you, we did
Speaker 1: want to ask you about Russia and Ukraine. The role
Speaker 1: of the US and President Trump will play in what
Speaker 1: happens next. We know US allies expect the Trump administration
Speaker 1: to present a long awaited plan to end Russia's war
Speaker 1: in Ukraine at the Munich Security Conference in Germany next week.
Speaker 1: This according to folks in the know, You've got a
Speaker 1: second column out about President Trump saying he wants some
Speaker 1: of Ukraine's resources in return for continuing aid. You note
Speaker 1: that this is a price worth paying.
Speaker 10: Why well, first of all, is something that presidents Zelensky
Speaker 10: of Ukraine offered. So he put out this victory plan
Speaker 10: last year, and one of the five baskets in there
Speaker 10: was incentives for the West. But you know, it's quite
Speaker 10: clear that he had a transactional Donald Trump in mind,
Speaker 10: incentives to say, look, you're not just helping us. You know,
Speaker 10: you're helping yourselves after the war. We have a lot
Speaker 10: of resources, and you know, we're willing to open them
Speaker 10: up and you know, make them available to you. So
Speaker 10: there's lithium, there's you know, magnesium, there's you know a
Speaker 10: number of different resources that would be useful in industry
Speaker 10: and the ev industry and so on. So you know,
Speaker 10: he was just it's already there offered. Trump has taken
Speaker 10: up the offer. It's exactly what Zelensky was trying to do.
Speaker 10: And you know, given Europe's weakness militarily, its failure to
Speaker 10: really build military capabilities, you know what's became clear that
Speaker 10: the peace devon of the Coal War was over. It
Speaker 10: really is able to do it on its own. So
Speaker 10: Ukraine needs the US and Europe. You could describe this
Speaker 10: as the price that Europe should be willing to pay
Speaker 10: allowing the US unto Trump to have access to some
Speaker 10: of these materials. Just keep quiet about it because they
Speaker 10: need the American military. They need Trump.
Speaker 3: That was Bloomberg Opinions Mark Champion and Dana Stroll, Senior
Speaker 3: Fellow and Research director at the Washington Institute for Nearest Policy.
Speaker 1: And that wraps up our first hour of the weekend
Speaker 1: edition of Bloomberg Business Week from Bloomberg Radio Head on
Speaker 1: our next hour, why almost everything we are told about
Speaker 1: business is wrong.
Speaker 3: Plus the founder and CEO of farm Girl Flowers, Christina
Speaker 3: Stembul on getting ready for the big day next week
Speaker 3: and navigating everything from tariffs to turmoil.
Speaker 1: And Tovago CEO on travel demand in twenty twenty five.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 2: live weekday afternoons from two to five pm Eastern Listen
Speaker 2: on Apple CarPlay and Android Auto with the Bloomberg Business
Speaker 2: or watch us live on YouTube.
Speaker 1: Plenty ahead in our second hour of the weekend edition
Speaker 1: of Bloomberg Business Week, including the Corporation in the twenty
Speaker 1: first century, Why almost everything we are told about business
Speaker 1: is wrong?
Speaker 3: Plus Trevago's CEO on whether or not we are all
Speaker 3: still traveling, and the founder and CEO of farm Girl
Speaker 3: Flowers on Valentine's Day, and Ai.
Speaker 1: First up this hour, the so called Magnificent Seven. We
Speaker 1: talk about them each and every day. You know, Apple, Microsoft, Alphabet,
Speaker 1: Amazon and VideA, Metaplatforms and Tesla. As a group, they
Speaker 1: were up nearly seventy percent last year and one hundred
Speaker 1: and seven percent in twenty twenty three.
Speaker 3: Yet our next guest writes in his new book that
Speaker 3: quote the dominance of the seven is likely to be
Speaker 3: as transitory is that of the large businesses of earlier generations.
Speaker 3: And he offers US Steel, General Motors and IBM as
Speaker 3: examples of companies who shares investors once clamored to buy.
Speaker 1: Sir John k is a writer, professor, economist, economic consultant,
Speaker 1: fellow at Saint John's College, Oxford and more. He has
Speaker 1: spent years studying the interplay between business economics and finance,
Speaker 1: and his new book is The Corporation in the twenty
Speaker 1: first Century Why almost everything we are told about business
Speaker 1: is wrong. Sir John joined us from London.
Speaker 6: There are two kinds of business books and bookshops right.
Speaker 6: One of the ones that are five tips is how
Speaker 6: I run my ho have to run my business better
Speaker 6: on Monday, and the others are how awful capitalism is
Speaker 6: and how terrible these tech titans are, and how they
Speaker 6: ought to be cut down to size, if not put
Speaker 6: in jail. And I want to write for intelligent people
Speaker 6: who take a view somewhere in between the two, or
Speaker 6: I just want to know about business the way people
Speaker 6: want to know about history or science.
Speaker 1: Well, when you look at business works, Sir John, when
Speaker 1: you look at businesses today, it does feel like increasingly,
Speaker 1: even though a few years ago it was all about
Speaker 1: multiple stakeholders, employees, customer companies, so on and so forth,
Speaker 1: it does feel like it is not necessarily the case,
Speaker 1: and increasingly it's about profitability and the c suite.
Speaker 5: Many would say this.
Speaker 1: Is that fair, and I mean would be right.
Speaker 6: Yeah, well it would be partly right. And the truth
Speaker 6: is that business is about creating great businesses and we
Speaker 6: were striking example of that at the moment. We have many,
Speaker 6: but one that is absolutely on your lips at the
Speaker 6: moment is Boeing. And in the second half of the
Speaker 6: twentieth century, people at Boeing built a great business, the
Speaker 6: world's dominant aviation producer, and they were clear that that
Speaker 6: was what they were doing. Bill Hallan, who was CEO
Speaker 6: of Boeing for some time, said we were here to live,
Speaker 6: eat and breathe the world about aeronautics. That was what
Speaker 6: his Boeing was about, and it built planes that came
Speaker 6: to dominate the world. Then in turn of the twentieth century,
Speaker 6: there was a takeover or a merger rather which was
Speaker 6: effectively a cultural although not a financial takeover by McDonald
Speaker 6: douglas of Boeing and Harvest sow In Cipher, who was
Speaker 6: CEO of it, became CEO of Boeing. He had been
Speaker 6: a McDonald douglas executive. He became CEO of Boeing, and
Speaker 6: he said, people say, this is a great engineering company
Speaker 6: it is, but people invest in a company because they
Speaker 6: want to make money. And we know the things that
Speaker 6: followed from that, the seven three seven Max which ended
Speaker 6: in disaster, and now we have this part of astronauts
Speaker 6: have stranded in the International Space Station waiting for Elin
Speaker 6: Musk ironically to come and rescue them. So John set
Speaker 6: up the great business. They did then they emphasized shareholder
Speaker 6: value and they're destroyed in the aird, not only the
Speaker 6: business but the shareholder value.
Speaker 3: Well, it sounds like that's a case of incentives not
Speaker 3: necessarily being aligned here. And I know as an economist
Speaker 3: you study incentives. Are the incentives of the structure that
Speaker 3: we have that exists today, are they misaligned? Because companies
Speaker 3: are rewarded for what they're able to do on the
Speaker 3: top line and what they're able to do on the
Speaker 3: bottom line, that's what they're rewarded for. Is that the
Speaker 3: wrong thing for them to be rewarded for.
Speaker 6: We're not really rewarded on what they do in the
Speaker 6: top line. They're rewarded on a basis of some three
Speaker 6: year metrics and what happens to the stock price. They're
Speaker 6: not rewarded for creating shareholder value in the long run,
Speaker 6: which is what these twentieth century Boeing executives actually did.
Speaker 6: The way you create shareholder value actually is you build
Speaker 6: a great business, and if you build a great business,
Speaker 6: shareholder sharehold of value follows from that. It's that way round.
Speaker 6: I was interested that one of the reviewers of my
Speaker 6: book was someone who had been an English Test international cricketer,
Speaker 6: and he drew my attention to the book by football
Speaker 6: coach Bill Walsh that says the score takes care of itself,
Speaker 6: and that's the message. If you build a great business,
Speaker 6: sharehold of value follows from that. Maybe the guys who
Speaker 6: took over Boeing in the twenty first century created shareholder value.
Speaker 6: They certainly paid it quite a lot back to shareholders
Speaker 6: in the twenty tens, but they did a damage, irrevocably,
Speaker 6: the reputation of the business.
Speaker 1: So John's part of the problem. You know, My husband
Speaker 1: and I talk about this all the time, is that we
Speaker 1: don't make a lot of stuff anymore. We're such a
Speaker 1: service led economy. And I don't know if that has
Speaker 1: changed the dynamics within companies and leaders and so on
Speaker 1: and so forth.
Speaker 5: Is that part of the problem.
Speaker 6: It certainly has happened, but I don't think it's part
Speaker 6: of the problem, and it's almost the opposite of the problem.
Speaker 6: Because it used to be that businesses were created by capitalists,
Speaker 6: by rich men who spent some of their fortunes on
Speaker 6: building seal mills and textile plants and so on, and
Speaker 6: employed typically rather unskilled workers to work in them. The
Speaker 6: great businesses now are groups of highly qualified, technically proficient people,
Speaker 6: and the business of running the business is to put
Speaker 6: together the right combinations of people. So we've had that
Speaker 6: change which has happened so that the means of production
Speaker 6: are now the people, not the plant.
Speaker 3: So what is the purpose of a company.
Speaker 6: The purpose of a company is to satisfy a whole
Speaker 6: range of stakeholders. The reason we allow companies to exist
Speaker 6: is that they do a lot of things we want done,
Speaker 6: to produce a great product, to give people satisfying jobs,
Speaker 6: to make money for shareholders. It isn't any one of
Speaker 6: these things. And if you try to make any emphasize
Speaker 6: any one of these things, you do so at the
Speaker 6: expense of totality. And the people who break built great businesses.
Speaker 6: Whether we're talking about Sloan at General Motors, whether we're
Speaker 6: talking about alan others are Boeing, or whether we're talking
Speaker 6: about the people who built the Magnificent Seven, the tech
Speaker 6: companies we all talk about now. They didn't set out,
Speaker 6: I want to make as much money as possible. I
Speaker 6: want to make They certainly didn't say it's set out
Speaker 6: to say I want to make a lot of money
Speaker 6: for shareholders. They said I want to build a great business,
Speaker 6: and they did, and the course of doing that, they
Speaker 6: made a lot of money for shareholders. And that's the
Speaker 6: way round it is, the sure the score takes care
Speaker 6: of itself.
Speaker 3: So let's go back to the Magnificent Seven into the
Speaker 3: way that we open this, because you do argue in
Speaker 3: the introduction of the book that the mag seven, even
Speaker 3: though people are clamoring to buy the shares of those companies,
Speaker 3: they're going to be just as transient as some of
Speaker 3: those large businesses of earlier generations.
Speaker 6: Why is that, Well, they maybe even be more transient
Speaker 6: because there's strength lies in their people rather than their plant.
Speaker 6: Whereas a Carnegie or Ford or General Motives it was
Speaker 6: the plant that determined the business. These dominances are always,
Speaker 6: almost always transient. Thirty years ago, when people understood that
Speaker 6: information technology was going to be a big thing. It
Speaker 6: was IBM who as sure as they bought, they made
Speaker 6: that the most valuable company in the world. Now Facebook
Speaker 6: and Meta are top of many people's lists. I know
Speaker 6: that Facebook. My grandchildren now think that's something for people
Speaker 6: of my age.
Speaker 3: That's not something we maybe not Instagram and that's and WhatsApp,
Speaker 3: and that's what has been their saving grace.
Speaker 6: Right well, and there's an issue there that we need
Speaker 6: to talk about, which is the nature of antitrust policy.
Speaker 6: And we allowed, mistakenly, in my view, companies like Meta
Speaker 6: to take over Instagram and WhatsApp, whereas the whole strength
Speaker 6: of the market economy comes from people devising new things
Speaker 6: to take the place of the things that went before. Actually,
Speaker 6: Facebook took over from MySpace, which was the predecessor of
Speaker 6: Facebook in providing the kind of space services that Facebook does.
Speaker 6: People have forgotten about MySpace now. Interestingly, MySpace and I
Speaker 6: talked to executives there as to why things had gone wrong.
Speaker 6: They said because it was bought by News Corp. And
Speaker 6: read group of murder were mainly interested in creating shareholder value.
Speaker 1: Your title is why almost everything we are told about
Speaker 1: business is wrong. So if that's the case. If we're
Speaker 1: getting it wrong, what's the outcome of that? And if
Speaker 1: we don't get it right, If we don't maybe perhaps
Speaker 1: change the academic research about how we think about companies.
Speaker 1: If we don't do that, what's the outcome.
Speaker 6: I think the outcome is that we get things wrong
Speaker 6: in a pretty fundamental way. And in the first half
Speaker 6: of the twentieth century, people saw themselves as trying to
Speaker 6: create a profession of management, which was a respected profession
Speaker 6: like me law or medicine or the priesthood or whatever.
Speaker 6: When people were called to do that and derived a
Speaker 6: lot of the satisfaction of their job, not just from
Speaker 6: what they were paid, but from the feeling that they
Speaker 6: were doing contributing something worthwhile to society. We've lost a
Speaker 6: lot of that, and I think it's made business a
Speaker 6: good deal worse as a result. And we can see
Speaker 6: the kind of loss of legitimacy that has followed. The
Speaker 6: murder of Brian Thompson three or four weeks ago is
Speaker 6: a pretty good example of that. The fact that almost
Speaker 6: forty percent of respondents to a poll suggested that that
Speaker 6: murder was at least partly they were justified. It seems
Speaker 6: a terrible commentary on the way business is now regarded
Speaker 6: among a large section of the population, particularly the young population.
Speaker 3: That was Sir John k a fellow at Saint John's College,
Speaker 3: Oxford and the author of The Corporation in the twenty
Speaker 3: first century, Why almost everything we are told about business
Speaker 3: is wrong?
Speaker 1: Still ahead On Bloomberg Business Week. It's the most wonderful
Speaker 1: and one of the busiest times of the year for
Speaker 1: the founder and CEO of farm Girl Flowers.
Speaker 3: We talk Valentine's Day, tariffs, and the stickiness of the
Speaker 3: flower supply chain.
Speaker 2: This is Bloomberg. You are listening to the Bloomberg Business
Speaker 2: Week podcast. Catch us live weekday afternoons from two to
Speaker 2: five pm Eastern. Listen on Apple CarPlay and Android Auto
Speaker 2: with the Bloomberg Business app, or watch us live on YouTube.
Speaker 1: Not sure Tim if you're aware, but fun Wednesday? Does
Speaker 1: your wife give you answer?
Speaker 3: Is it a big We're not big with that stuff.
Speaker 3: It's like, it's actually kind.
Speaker 1: Of great, to be honest, we aren't too either. We
Speaker 1: knew though, because Christina Stemble often joins usdoring big months
Speaker 1: for the flower industry, so I think Mother's Day and yes,
Speaker 1: of course, Valentine's Day, which is this coming Friday. However,
Speaker 1: a little box from my husband is always welcome.
Speaker 10: Yeah, I think I even got like I.
Speaker 1: Think I have One year, I got a toaster, which
Speaker 1: sounds so boring, but it was this really cool old
Speaker 1: fashioned toaster because I was making like waffles every morning
Speaker 1: and I still have it and I love it. It's like
Speaker 1: a duel lit or something.
Speaker 3: Also, like you look at it every day you remember.
Speaker 1: It's like so sweet, It's so sweet.
Speaker 9: I love it.
Speaker 7: Well.
Speaker 3: Christina is founder and CEO of farm Girl Flowers. It's
Speaker 3: a company that she bootstrapped into a thirty five million
Speaker 3: dollar business. She was in from Seattle and she stopped
Speaker 3: by our studio.
Speaker 10: This is good.
Speaker 12: I mean, we're in our second busiest time of year.
Speaker 5: We're holding study with exactly where we thought we'd be.
Speaker 3: Where did the flowers come from? And how do you
Speaker 3: think about tariffs?
Speaker 12: Yeah, so most of the flowers that everyone purchases in the
Speaker 12: United States come from South America. So Colombia was the
Speaker 12: first one that put everybody on edge in the floral industry.
Speaker 12: It would been too late to really impact Valentine's Day numbers,
Speaker 12: but by Mother's Day our prices would increase dramatically with Columbia.
Speaker 12: So that's on pause right now as well, which is
Speaker 12: really wonderful. Canada in Mexico differently, so Mexico is going
Speaker 12: to impact us all as well. About eighty percent of
Speaker 12: all the flowers that are sold in the United States
Speaker 12: come from other countries.
Speaker 5: Ours is less.
Speaker 12: We're about fifty five to sixty percent domestic right now,
Speaker 12: but that's going to increase. That's our domestic production is
Speaker 12: going to be increased because everyone's going to be fighting
Speaker 12: for it because they're not going to be able to
Speaker 12: get the same prices elsewhere.
Speaker 1: You think, you know, how much you know in anticipation
Speaker 1: of this impacting how much does it, like when do
Speaker 1: people start to change in terms of growing more here
Speaker 1: in the United States? How much more can you grow
Speaker 1: in the United States because you're competing for land against
Speaker 1: everything else. So I'm just curious how quickly can the
Speaker 1: model change from importing to having it grown domestically.
Speaker 5: I don't even know if it's possible to change it.
Speaker 12: I mean, following, you know, the CEO four, I feel
Speaker 12: very similarly to him. We don't have the infrastructure here,
Speaker 12: you know, there's not a lot of succession planning in
Speaker 12: farming in general. You know, in agriculture of any kind.
Speaker 12: Flowers are the same way. So you know, there's I mean,
Speaker 12: the land has been sold. You know, the grandfathers that
Speaker 12: started farms, their grand children have already sold a lot
Speaker 12: of the farmland. Almost everything that was written I should
Speaker 12: say everything, but a large percentage of what was grown
Speaker 12: in California, which is the largest growing state in the
Speaker 12: United States, is now in Baja Mexico, so they call
Speaker 12: it Baja California. We know that's not true. So the
Speaker 12: Turffs are going to you know, definitely impact that. There's
Speaker 12: not the land. Also, the labor, I mean there's not
Speaker 12: for agriculture jobs.
Speaker 5: There's not the labor availability.
Speaker 12: The infrastructure costs too much, the insurance, you know, it
Speaker 12: just people aren't going to spend three hundred dollars on
Speaker 12: a bouquet. And you know, in order to turn around
Speaker 12: the ship, it's going to require American consumers to be
Speaker 12: willing to spend a lot more on sending a gift,
Speaker 12: and that isn't probably going to happen.
Speaker 5: So it's scary to think about all these things.
Speaker 3: So if you if we were to see tariffs go
Speaker 3: into effect on on Mexico. And you know if obviously
Speaker 3: the President has used this as a way to negotiate,
Speaker 3: at least he did that with Columbia a few weeks ago.
Speaker 3: Where would the prices increase, you said, it would increase
Speaker 3: for you. You would have to pass those along to the consumer.
Speaker 3: Wouldn't be able to absorb those.
Speaker 12: Plural industry is notoriously low margin. You know, I'm very
Speaker 12: proud of the single digit profit margins that we have
Speaker 12: at farm Real Flowers. They are hard fought for that.
Speaker 12: We work a lot of hours. We work really hard
Speaker 12: for that single digits. You know, the largest companies in
Speaker 12: our industry that are you know, public companies, so you
Speaker 12: can go look at their earnings have single digit profits
Speaker 12: when they have profits. So there's no way for us
Speaker 12: not to pass it on to consumers. We're already subsidizing
Speaker 12: shipping by a large percentage, you know, now if we
Speaker 12: have to subsidize our you know, our gross margins are
Speaker 12: tiny compared to almost every other industry.
Speaker 5: I joke a lot I have with you guys before.
Speaker 5: I wish we sold sweaters, right we don't, so, you know, yeah,
Speaker 5: exactly perfew something with like very large.
Speaker 12: You know us you considered developing exactly exactly well, so
Speaker 12: I mean it's all going to have to be passed on.
Speaker 12: You know, we are you know, because we have that
Speaker 12: little bit of profit that we've focused on in the
Speaker 12: last two years, we're able to supplement a small amount,
Speaker 12: you know, like the CEO Ford said, like he has
Speaker 12: a couple of weeks, like we can supplement it a bit,
Speaker 12: but not you know, it's also.
Speaker 1: Not like you guys can buy ahead in stock pilot
Speaker 1: and warehouse right there. You know, flowers just last just
Speaker 1: a certain amount of time.
Speaker 5: Five days. We have five days, you have five five So.
Speaker 1: Like it's wild. You know, I do wonder about this
Speaker 1: whole idea of globalization that has happened over the last
Speaker 1: couple of decades, right and global supply chains. And then
Speaker 1: we feel like we've talked a lot about nearshoring and onshoing.
Speaker 1: It sounds like for the flower industry it's not even
Speaker 1: like financially.
Speaker 5: It won't work.
Speaker 1: It's even if we do it, or it might not
Speaker 1: even be doable because there might not be the land
Speaker 1: or farm farming.
Speaker 5: To do it. Absolutely.
Speaker 12: I mean, when we first started talking, we had a
Speaker 12: large you know, pre COVID, we had a large manufacturing
Speaker 12: facility in San Francisco, so forty thousand square feets. We
Speaker 12: had three hundred teamers there and we were losing our shirts.
Speaker 12: I'll just say we were not We were just breaking
Speaker 12: even enough to pay paychecks.
Speaker 5: With that, we can't even do it.
Speaker 12: Not growing the flowers, just designing them into bouquets. At
Speaker 12: that scale, there's not enough workers and with you know,
Speaker 12: I mean costco just raising them in a wage of
Speaker 12: thirty two dollars, which is wonderful, we wouldn't have that
Speaker 12: ability to So we're trying to all compete with a
Speaker 12: workforce an hourly workforce that we can't. So there's just
Speaker 12: so many reasons why this is going to have a
Speaker 12: ripple effect much greater than what most consumers would think.
Speaker 3: So what do you do for assembly?
Speaker 9: Now?
Speaker 12: We have a very diversified models, so we use farm
Speaker 12: partners that we teach them how to design them and
Speaker 12: ship them out. We have boquet production facilities. We have
Speaker 12: very little owned ourself. It's been smarter for us.
Speaker 3: So you've essentially outsourced the design or assemblage of the bouquets.
Speaker 12: Yes, we do it different than our competitors in a
Speaker 12: way that we control the design aspect of it, and
Speaker 12: so that way we could keep our quality where we
Speaker 12: need it to be. But it's not how it used
Speaker 12: to be pre COVID.
Speaker 3: So when you say you've done, you've outsourced it to farmers.
Speaker 3: So if it comes from South America on a plane,
Speaker 3: it's already in a bouquet.
Speaker 12: Yes, now most of ours are with US farmers, but
Speaker 12: we do have some in Columbia where just we have
Speaker 12: one in Ecuador, so we do have facilities elsewhere. Some
Speaker 12: of them are designed there, some of them are shipped
Speaker 12: raw materials to other facilities in the US. We diversify
Speaker 12: to get closer to the end consumer to help with
Speaker 12: our shipping costs. We're killing us before when we first
Speaker 12: started talking as well, in order to be able to
Speaker 12: compete with lower price points that we need to have
Speaker 12: to compete with our competitive set.
Speaker 1: Is it getting easier or harder to do this? How
Speaker 1: long have you been doing this now?
Speaker 5: Fourteen? This our fifteenth year, and.
Speaker 1: I thought it was a god so you know, and
Speaker 1: it's you who has been doing it. So I'm just curious,
Speaker 1: as a small business owner who has seen pandemics and
Speaker 1: you name it like some really incredible things kind of
Speaker 1: test your ability to keep it going, Like is it
Speaker 1: an easier business environment? And I'm curious to what you're
Speaker 1: anticipating from the new administration in terms of small business policy,
Speaker 1: if at all.
Speaker 5: Yeah, I'm worried.
Speaker 12: I'm worried about this administration and what it's going to
Speaker 12: mean for us as a company. I mean because those
Speaker 12: the tariffs and things that and the uncertainty, like I've
Speaker 12: gotten used to. The easier part has been I've gotten
Speaker 12: used to more uncertainty. I understand now that there is
Speaker 12: should be a line item in my budget every year,
Speaker 12: which there is now for unplanned expenses things I didn't
Speaker 12: understand before. And I think my mindset shifting from you know,
Speaker 12: growth at all cost to profitability has helped us tremendously.
Speaker 12: But I had to sacrifice something for that. You know,
Speaker 12: I wanted the Silicon Valley dream. I wanted to build
Speaker 12: a company. I wanted to be the you know, cover
Speaker 12: of Entrepreneur magazine.
Speaker 5: I wanted all.
Speaker 12: Those things, and that now I have a very different reality,
Speaker 12: and I'm happy with that reality.
Speaker 5: I'm happy that I can provide good jobs.
Speaker 12: That are more stable, but the level of uncertainty with
Speaker 12: things I can't control right now, you know, definitely keeps
Speaker 12: me up at night.
Speaker 1: So is it easier in general?
Speaker 12: I think because I have it's easier because the education
Speaker 12: that I've reept from doing it. If it's harder, it's
Speaker 12: definitely more complex. But because I'm wiser now, it's it's
Speaker 12: a bit easier.
Speaker 13: I guess.
Speaker 9: Yeah.
Speaker 3: Yeah, you bootstrap the company, so you don't have the
Speaker 3: same pressure that a lot of startups. And I'm not
Speaker 3: even considering you a startup because you've been around for
Speaker 3: fifteen years at this point that small businesses have after
Speaker 3: they raise outside funding, and that's for an exit. Last
Speaker 3: time we spoke with you, you said you were in
Speaker 3: this for the long pull. I'm sure there are companies
Speaker 3: that come by who want to acquire you. How are
Speaker 3: you thinking about that?
Speaker 12: Yeah, absolutely so. I feel I actually used to think
Speaker 12: this is my biggest curse. I actually owned the unfundable
Speaker 12: Christina stumble dot com by.
Speaker 5: The way, and the unfundable.
Speaker 12: I used to think I would complain about it, you know,
Speaker 12: to you, but I would been playing constantly and be like,
Speaker 12: nobody will give me any money, Like do I not
Speaker 12: look justworthy.
Speaker 5: You know, look at our numbers, and now.
Speaker 12: I think it's the greatest gift because I see all
Speaker 12: of my friends that have you.
Speaker 5: Know, startups are not startups anymore, but.
Speaker 12: Have you know board meetings every three months that they
Speaker 12: are just in so much pain about and everybody is
Speaker 12: expecting them to work miracles in an economy that's not
Speaker 12: it's not possible, you know, And you know I right now,
Speaker 12: I'm just you know, really happy that it happened.
Speaker 5: I think it's a big gift I was given.
Speaker 12: And how I'm looking at it for the long run now,
Speaker 12: is you know, doing some smart strategic things that I
Speaker 12: think will help us in five to ten years, not
Speaker 12: thinking about the next quarter, not thinking even this year,
Speaker 12: like you know, it's a building year for us. I'm
Speaker 12: I'm you know, will comp last year and have the
Speaker 12: same you know, single digits profit hopefully, but that single
Speaker 12: digit profit is allowing us to do things like lockdown
Speaker 12: some supply chain, We're vertically integrating, we're growing some flowers
Speaker 12: for the first time. We're doing things like that that
Speaker 12: I think will help us five to ten years from now.
Speaker 1: Where do you think you will be in five to
Speaker 1: ten years?
Speaker 5: Hopefully? Still here talking to you. We hope so too.
Speaker 12: That's my dream and you know, hopefully, you know, we'll
Speaker 12: do sustainable growth, so we'll be bigger five to ten,
Speaker 12: you know, ten years from now, but we'll done it
Speaker 12: the right way in a way that we could be
Speaker 12: here fifty years if we wanted to.
Speaker 1: Yeah, when you say sustainable growth, you're talking about financial
Speaker 1: sustainable growth. I'm also I'm curious about, like, you know,
Speaker 1: the impact on the environment and how your approach and
Speaker 1: stuff like that can be challenging.
Speaker 12: Absolutely can be challenging. You know, it's always wayne, what's
Speaker 12: the best thing we can do in our opinion, right,
Speaker 12: Like we're very careful not to call ourselves like an eco,
Speaker 12: you know, like we get this title a lot and
Speaker 12: more always like no, no, no, don't Like there's nothing.
Speaker 5: Sustainable about flowers.
Speaker 12: Really, there's lots of transportation back and forth inbound outbound there.
Speaker 12: You know. They bring joy to people's lives and we
Speaker 12: love that. But we do the best we can. We
Speaker 12: always make the right decision, even if it impacts the
Speaker 12: bottom line in a negative way for us. We spend
Speaker 12: more money to do it the right way, but we
Speaker 12: don't ever tout our you know, environmental consciousness.
Speaker 3: How has what people want changed? Like, how has what
Speaker 3: you offer changed you to change the consumer taste? So
Speaker 3: I was talking to somebody who's way younger than I am,
Speaker 3: and she just got engaged. She has a huge diamond
Speaker 3: and it's a lab grown diamond, and she was saying,
Speaker 3: all my friends who are getting engaged right now are
Speaker 3: getting these lab grown diamonds, and we're seeing that kill
Speaker 3: diamond industry and kill some of these retailers out there.
Speaker 3: Is that happening with flowers? Like, are there changing consumer
Speaker 3: tastes for younger people?
Speaker 12: I don't think it's taste really, It is price points though, Yeah,
Speaker 12: what consumers will spend. I mean Valentine's is the only
Speaker 12: exception to this rule. People are looking for deals right now.
Speaker 12: People are looking for a good value. So that does
Speaker 12: you know, I'm still had a product. I make every
Speaker 12: bouquet you see on our site. And when we're doing it,
Speaker 12: we are, you know, always weighing like we need to.
Speaker 5: Keep our AOV our average order value up.
Speaker 12: You know, as high as possible, but we need to
Speaker 12: not you know, right now we have kind of a
Speaker 12: gap in the good customer. We have better and best
Speaker 12: but we're working on creating a better, you know, offering
Speaker 12: for the good customer that is more price sensitive. Especially
Speaker 12: going into next year, I think it's going to be
Speaker 12: even more and more necessary. And also people are looking
Speaker 12: for to feel like they got a deal. So discount codes.
Speaker 12: We used to be like anti We're like, we give
Speaker 12: you the best deal we can, and now we're like, okay,
Speaker 12: here's a discount code.
Speaker 5: You know, here's a free ship shop.
Speaker 12: So it looks like you're getting free shipping, but shipping
Speaker 12: costs a lot of money, so it's not free shipping.
Speaker 5: No such thing as free shipping, such free shipping.
Speaker 1: So I feel like shark tank what your customer acquisition costs,
Speaker 1: Like is it expensive or do you find like most
Speaker 1: of your customer base their repeat you know, buyers and
Speaker 1: so on and so forth, Like give us an idea.
Speaker 12: Yeah, so about half are our repeat and half or not.
Speaker 12: We do not exceed twenty five dollars in customer acquisition costs, okay,
Speaker 12: because we can't, right So that's why we're smaller than
Speaker 12: we want to be right now. But we're doing that
Speaker 12: because if we go over that, we know that we
Speaker 12: are paying more money than we can afford to be
Speaker 12: financially healthy, so we just cut it off. There.
Speaker 3: That's Christina Stambul, founder and CEO of farm Girl Flowers.
Speaker 3: You're listening to Bloomberg business Week. Coming up, more of
Speaker 3: our conversation with Christina, looking at how AI is lending
Speaker 3: a helping hand.
Speaker 1: Yeah, she's using it. We're trying to still figure out
Speaker 1: how to use it, but she is on it. You're
Speaker 1: listening to Bloomberg Business Week.
Speaker 2: This is Bloomberg. You're listening to the Bloomberg Business Week podcast.
Speaker 2: Catch us live weekday afternoons from two to five pm Eastern.
Speaker 2: Listen on Apple CarPlay and the Android Auto with the
Speaker 2: Bloomberg Business app, or watch us live on YouTube.
Speaker 1: We're back with Christina Stambule, founder and CEO farm Girl Flowers,
Speaker 1: who created her business fifteen years ago from the ground up.
Speaker 1: She did it all, putting in long hours, dealing with
Speaker 1: supply chain crunches and a global pandemic, and today is
Speaker 1: getting an assist from AI. We use looking everybody's brands
Speaker 1: because we're not using it as probably and everybody's like
Speaker 1: you should be, and we're like, all right, so how
Speaker 1: are you doing it?
Speaker 12: I mean, I use it a lot personally for writing,
Speaker 12: do you know, Yeah, absolutely, I have it. It knows
Speaker 12: my tone now.
Speaker 5: Like every job description.
Speaker 12: I have it writing for me now and the tone
Speaker 12: that I everything is. So I use it a lot
Speaker 12: personally for that. In emails as well, I'm always like,
Speaker 12: make this take off the emotion in this email.
Speaker 5: Things like. That's why I use it a lot for
Speaker 5: that personally.
Speaker 12: And it helps from business, you know, because I can
Speaker 12: get my soapbox out and stuff I need to not sometimes.
Speaker 5: So I use it for that. We use it a
Speaker 5: little bit in customer service.
Speaker 12: There's even like with the platform I use, there's a
Speaker 12: make it Nicer button that you know that uses AI
Speaker 12: to make our you know, after customer service, you know,
Speaker 12: but they're getting hit with a snowstorm.
Speaker 3: So you have a button you get it. You like,
Speaker 3: when you're sending an email to a customer, you have
Speaker 3: a button you press that says make.
Speaker 5: It nicer, You're nicer, Wow, thank you.
Speaker 11: Glas.
Speaker 3: Is it in an LLM.
Speaker 12: It's it's Gladly, which is a software program for customer service,
Speaker 12: which we love, and you know, I was all of
Speaker 12: our team was in customer service last Monursday when we
Speaker 12: had a big snowstore Valentine's Day and we had a
Speaker 12: big you know, delay because of that, and we were
Speaker 12: all like, at the end of the day, make.
Speaker 5: It nicer, make it nicer, you know, because it gets hard.
Speaker 1: So what's hard about running a small business right now?
Speaker 5: Yeah? I think, But do you if.
Speaker 1: You need funding, can you get it?
Speaker 9: Yeah?
Speaker 12: Absolutely? Like you know, you can only get it when
Speaker 12: you don't need it. I mean, I you know, that's
Speaker 12: a good point. That's a good point.
Speaker 6: Well do you like?
Speaker 5: Yeah, So how do you manage?
Speaker 1: Like, I don't know what's the economic backdrop that you
Speaker 1: think about for the United States right now? As you said,
Speaker 1: there's a lot of questions, there's a lot coming at us.
Speaker 1: I mean I'm just curious, how are you managing for
Speaker 1: Like what kind of a consumer, a consumer that's going
Speaker 1: to constantly look for a value? Like give us some idea.
Speaker 12: I think marketing is actually the hardest thing by far,
Speaker 12: like getting traffic to your site in an affordable way,
Speaker 12: cutting through all the noise. I mean you see your inbox,
Speaker 12: people are sending emails, some companies get me three a date.
Speaker 5: It's annoying, Yeah, it is, right.
Speaker 12: And one of those people that's once to day. I'm sorry,
Speaker 12: we won't go for that, but you know, it's trying
Speaker 12: to cut through that noise with like I said, our
Speaker 12: customer acquisition costs, Like if we could spend sixty or
Speaker 12: seventy dollars, but why would we for one hundred and
Speaker 12: four dollars? AOV like that doesn't make any sense and
Speaker 12: a you know one point seven to two point two
Speaker 12: LTV like you know, like we know how it's not
Speaker 12: worth it.
Speaker 5: It's just not worth it.
Speaker 12: So I think the hardest thing is trying to figure
Speaker 12: out creative ways with limited team members because you also
Speaker 12: have to run really lean right now, so you don't
Speaker 12: have a ton of team members to be able to
Speaker 12: do like lots more partnerships or things like that that
Speaker 12: will actually help you with the customer acquisition cost.
Speaker 3: Have you had a chance while you've been in New
Speaker 3: York City to see any of the bodega flower displays?
Speaker 1: No?
Speaker 7: I have not.
Speaker 3: How do they do this because it's such a low
Speaker 3: margin business, but you can still get ocy of flower? Yeah, yeah,
Speaker 3: how do they do that?
Speaker 5: They're all imported?
Speaker 12: Okay, they're imported from you know, and the flower types
Speaker 12: that are there are ones that will hold up for
Speaker 12: a very long time. So like if I'm going to
Speaker 12: use button chrysanthemums, you know, those can be outside of
Speaker 12: that deli or vedega, you know, for you know, you
Speaker 12: can buy it for twenty dollars and it can sit
Speaker 12: there for three weeks.
Speaker 5: David Austin Rose. You can't. David Austin Rose is.
Speaker 12: Going to cost you two dollars at wholesale, you know,
Speaker 12: a dollar fifty to two dollars at wholesale price, which
Speaker 12: means going to cost you six dollars for that, David
Speaker 12: Austin Rose, and you have about three days. So it's
Speaker 12: a type of flowers they use. It's where it's coming from.
Speaker 12: It's the colors that a lot of people don't, you know.
Speaker 12: If we like peaches and pinks and things like that,
Speaker 12: you're gonna get bright purples and bright yellows and things
Speaker 12: like that that are the kind of the leftovers people
Speaker 12: don't want.
Speaker 5: They cut deals to them.
Speaker 1: It's not always the greatest colors. There's a lot of carnations,
Speaker 1: a lot of foundation.
Speaker 10: Not just gonna say no.
Speaker 1: It's interesting to hear though, with the wholesale prices of
Speaker 1: like a great rose or something is because you realize,
Speaker 1: like when when you're doing a bouquet and you're like,
Speaker 1: oh my god, but you realize that your cost is expensive.
Speaker 5: Really expensive.
Speaker 12: I mean King Prote's are my favorite flowers and we
Speaker 12: get them for about seven dollars.
Speaker 5: King Proteos. They're awesome.
Speaker 12: They're from like Australia, New Zealand area, South Africa. Normally,
Speaker 12: like we have a lot of buying power, but if
Speaker 12: you were smaller'd be like twelve to.
Speaker 5: Fifteen dollars per stem, you know.
Speaker 12: So, I mean you, if you're going to a local
Speaker 12: flower shop, it's going to cost you forty five dollars
Speaker 12: a stem for it.
Speaker 3: Our thanks to farm Girl Flowers founder and CEO Christina stambol.
Speaker 1: So flowers work for Valentine's Day, so too does a
Speaker 1: surprise trip to say, hey, honey, I bought tickets to
Speaker 1: the Caribbean.
Speaker 5: Or to Europe.
Speaker 3: Just to clarify. My wife would be very into that.
Speaker 5: On it, on it all right.
Speaker 1: This past week, the global hotel and accommodation search platform
Speaker 1: Travago reported fourth quarter revenue that beat the average analyst estimate.
Speaker 1: The stock, however, traded down on the results, but it
Speaker 1: has soared this year.
Speaker 3: Travago CEO Johannes Thomas joined us from Dusseldorf, Germany to
Speaker 3: talk about the business and the outlook.
Speaker 13: I think based customer is the travel world. It's a
Speaker 13: one point five trillion market in size, so pretty exciting.
Speaker 13: It's also growing five to ten percent a year, so
Speaker 13: a big and growing business. And Travago's a leading brand
Speaker 13: across the globe in travel and we have been working
Speaker 13: on the last one and a half years to re
Speaker 13: establish the brand after a new death experience, during near
Speaker 13: death experience during the pandemic.
Speaker 3: How's that refresh going right now? What can you point
Speaker 3: to to show a recovery from that near death experience
Speaker 3: as you described it.
Speaker 13: Yeah, I was returning to the company one and a
Speaker 13: half years ago together with a leadership team, and we
Speaker 13: all have been folks that we were at Trivago for
Speaker 13: a decade, brought it to the IPO, and then during
Speaker 13: the pandemic we left basically and then out of the
Speaker 13: pandemic the company didn't come strong, and we think a
Speaker 13: result that is a result of low investment during the pandemic.
Speaker 13: Travago's built as a brand, so brand investment is important.
Speaker 13: If you invest into a brand during a period where
Speaker 13: nobody's traveling is pretty inefficient, so there was not a
Speaker 13: good place to invest in brand. And then after the
Speaker 13: pandemic stopped around the beginning of twenty twenty two, Travago
Speaker 13: was pretty conservative and investing in an inter brand. Other
Speaker 13: companies basically recovered in size other travel companies, Sravago didn't,
Speaker 13: and that's one one of the founders gave me another
Speaker 13: as a call if we want to come back to
Speaker 13: bring back a blueprint that has proven successful. And the
Speaker 13: last one and a half years we worked hard on
Speaker 13: getting the company back on track. When we arrived in
Speaker 13: Q two twenty twenty three, we were a shrinking fourteen percent.
Speaker 13: Now we've stabilized and brought the business back into growth
Speaker 13: last quarter, and we see a strong double digit growth
Speaker 13: in Q one, which we are very excited about.
Speaker 1: So talk to us about what you are seeing in
Speaker 1: terms of travel demand specifically and how that compares with
Speaker 1: the year ago. So, in other words, is travel up.
Speaker 1: You guys just reported your numbers, and you did break
Speaker 1: it down into various regions of the world, So give
Speaker 1: us some perspective, a little bit more insight into those
Speaker 1: earnings because investors seem a little bit disappointed here, But
Speaker 1: talk to us about what you are seeing and how
Speaker 1: that plays into your business, whether it's more upbeat than
Speaker 1: a year ago, or if you're seeing you know, consumer
Speaker 1: where as travelers being a little bit more cautious.
Speaker 13: Yeah, so I think last year was the year where
Speaker 13: we exceed at twenty nineteen levels quite upset here. So
Speaker 13: travel is hot. People want to travel, it's exciting, they
Speaker 13: want to spend and experience the world. It's the number
Speaker 13: one discretionary expense people have, and that is what continues
Speaker 13: to be true. We see the travel strong across all segments,
Speaker 13: being at a US, being at a Europe, rest of
Speaker 13: the world, Asia, a pretty strong travel demand. We see
Speaker 13: prices slightly up, but I think at fairly fairly consistent levels.
Speaker 13: So travel is strong and we expect it to be
Speaker 13: a strong year, maybe an even stronger year than last year.
Speaker 3: Hey, you' honest curious about sentiment just across Europe right
Speaker 3: now and what you're seeing As a European CEO or CEO,
Speaker 3: I should say, in Europe, we've spoken quite a bit
Speaker 3: to folks in the last couple of weeks who've returned
Speaker 3: from Davos and two of them have told us that
Speaker 3: there is just a feeling of optimism when it comes
Speaker 3: to American CEOs and CEOs of American companies, but a
Speaker 3: feeling of pessimism when it comes to the way that
Speaker 3: CEOs of European companies feel. Certainly there's some generalizations in there,
Speaker 3: but I'm curious about your view.
Speaker 13: Yeah, I'm skeptical about the level of bureaucracy and the
Speaker 13: pace of execution of German companies as well and European
Speaker 13: companies as well. There's just a lot of regulations and
Speaker 13: things that make companies slow here. I think we try
Speaker 13: to be very different, having a growth mindset, fanatic learning mindset.
Speaker 13: As a company, we are in the digital space, we
Speaker 13: are operating at global scale. We do TV marketing campaigns
Speaker 13: in more than twenty markets, we operate in more than
Speaker 13: forty markets. So it's not for us a European or
Speaker 13: German game for all. I think Europe has to endbup
Speaker 13: and have has to put a mindset in place where
Speaker 13: hard and smart work is needed to be successful. And
Speaker 13: I think there needs to be a mindset, mindset shift
Speaker 13: in Europe otherwise it will be a decade that is
Speaker 13: difficult for the region.
Speaker 1: But are you seeing so you're not seeing that weakness
Speaker 1: across your platforms or you are seeing it.
Speaker 13: We are not seeing it in our developed European segment
Speaker 13: that travel is weak. I mean people have money. It's
Speaker 13: not that there's no money in this region. It's more
Speaker 13: a question of can you keep growing or will you
Speaker 13: be outgrown from other regions over time? They have still
Speaker 13: good budget to invest into travel, but what destinations will
Speaker 13: you go to in the future. Hotels are thirty percent
Speaker 13: up compared to pre pandemic, and people are feeling that.
Speaker 13: The number one struggle for it for travel for travelers
Speaker 13: is security and safety. Number one geopolitical issues, people stay
Speaker 13: closer to home, and number two is price. They increased
Speaker 13: expensive and that's also true across across the world. A
Speaker 13: price pressure because travel became so expensive is a big
Speaker 13: challenge for travelers.
Speaker 10: So Europe even.
Speaker 3: More the apologies. What would you say is the way
Speaker 3: for European regulators to sort of decrease bureaucracy, to encourage innovation,
Speaker 3: to create real competition, so there isn't this last decade.
Speaker 13: You know, I'm not an expert in this topic. I
Speaker 13: just think less rules, more freedom to people. So they
Speaker 13: can actually take decisions themselves. If I have somebody that's
Speaker 13: taking decisions for me all the time, you know, I
Speaker 13: stopped taking decisions myself, and I think that's where a
Speaker 13: lot of you know, collective intelligence is being lost. So
Speaker 13: I think that would be a good start just to
Speaker 13: for every rule or legislat as you put in place,
Speaker 13: you kill five and then you may get to a
Speaker 13: way where where it's less wild of regulation.
Speaker 1: Now, Johannes, before you go, just got about thirty thirty
Speaker 1: five seconds here, geopolitics, trade wars, tariffs, all of this
Speaker 1: plays out in global financial markets, plays out in the
Speaker 1: FX market, which can certainly impact whether or not a
Speaker 1: consumer feels like their currency will go further along. How
Speaker 1: is all of this impacting travel demand if at all?
Speaker 1: And again only got about thirty seconds.
Speaker 13: So I think travel hugely correlates with GDP. So it
Speaker 13: depends where the economy is going and whether level will
Speaker 13: be well off or not, and it's rather reacting quickly
Speaker 13: on it. People delay demand, delay investments. Otherwise, we see
Speaker 13: that people already walk early in advance to make sure
Speaker 13: they get a good deal. They compare prices, and that's
Speaker 13: where our product fits pretty well into the proposition that
Speaker 13: you use are looking.
Speaker 3: For our thanks to Trevago Si Johannes Thomas that.
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