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Speaker 2: This is Bloomberg business Week inside from the reporters and
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Speaker 3: Hi, everyone, welcome to the weekend edition of Bloomberg Business Week.
Speaker 3: We are just a few days out from election day
Speaker 3: in the US, and the presidential contest between Donald Trump
Speaker 3: and Kamala Harris could not be any closer. But it's
Speaker 3: not just the election that we're focused on. We're in
Speaker 3: the midst of earning season. In this past week, five
Speaker 3: of the most valuable companies in the S and P
Speaker 3: five hundred reported results. We also got three key economic
Speaker 3: indicators GDP, an inflation print, and the October jobs report.
Speaker 3: Needless to say, it's been a busy week. Oh and
Speaker 3: let's not forget another rate decision from the Fed in
Speaker 3: the coming days. For the latest information on the election
Speaker 3: and the economy, head on over to Bloomberg dot Com
Speaker 3: or the Bloomberg Terminal. This hour, we'll break down some
Speaker 3: of the megacap earnings we got this week, we're talking
Speaker 3: meta Amazon, Apple, Microsoft, and Alphabet, plus the importance of
Speaker 3: leadership in times of crisis. The president and CEO of
Speaker 3: the nine to eleven Memorial and Museum stops by to
Speaker 3: teach us about leading through challenges. All of that to come, though,
Speaker 3: we begin with the so called Trump trade. Bloomberg opinion
Speaker 3: columnist John Authurs writes that the Trump trade is quote
Speaker 3: back in full sway, and many believe we're heading for
Speaker 3: a repeat of twenty sixteen, when Donald Trump's surprised markets
Speaker 3: by upsetting Hillary Clinton. John joined us this time to
Speaker 3: point out some important differences.
Speaker 4: You could argue about whether the move in the market
Speaker 4: has influenced what people are expecting, but I think it's
Speaker 4: fairly clear that most Wall Street, most financial markets are
Speaker 4: now working on the assumption that a Trump victory is
Speaker 4: about a two in three shot, so clearly more likely
Speaker 4: than a Harris victory, but not something anybody would want
Speaker 4: to bet their entire life savings on, because the markets
Speaker 4: still think that there's a one time in every three
Speaker 4: Kamala Harris in the election.
Speaker 5: But that's roughly where we are.
Speaker 4: That means that that's the huge difference this time compared
Speaker 4: to Donald Trump's first electoral victory assumeing he's going to
Speaker 4: get a second eight years ago, was that at that
Speaker 4: time it was generally regarded as highly unlikely, depending on
Speaker 4: which prediction market you looked at. In fact, it was
Speaker 4: not as big a surprise as some people remember it
Speaker 4: to be. It was about a thirty percent shot. So
Speaker 4: if you're a Democrat out there, the prediction market to
Speaker 4: think Camela's chance is good now as Donald Trump's were
Speaker 4: eight years ago, So that might be something cheery if
Speaker 4: you're a Democrat, but it plainly came as a very
Speaker 4: big surprise. Even if those were the odds, people hadn't
Speaker 4: banked on it. So you or first of all, a
Speaker 4: very sharp rise in bond heels. That's lastly, what we've
Speaker 4: had in the last month. People have perceived to be
Speaker 4: shifting in Donald Trump's favor, and you also had a
Speaker 4: rally in stocks that got a big second wins a
Speaker 4: year later when it became clear that the Trump tax
Speaker 4: cuts really were going to happen. So you can explain
Speaker 4: quite a lot of there other strange things that have
Speaker 4: been going on. This is the best year for the
Speaker 4: stock market of the S and P five hundred at
Speaker 4: this point in the year in over a decade, I
Speaker 4: think I'm right in saying, despite all the angst, and
Speaker 4: despite the fact that you normally have a fairly torrid
Speaker 4: time of it the last few weeks before the election,
Speaker 4: simply because of the uncertainty whatever people think is going
Speaker 4: to happen, you're nervous about chancing your arm ahead of
Speaker 4: the election. I would say that the reason that's different
Speaker 4: this time around, one of the prime reasons that's different
Speaker 4: this time around is that people have got it into
Speaker 4: their heads in the last few weeks that Trump is
Speaker 4: going to win, and that that will be good for
Speaker 4: stocks and also bad the bonds, but not so bad
Speaker 4: for bonds that he gets in the way stocks.
Speaker 6: John, One thing I first want to get kind of
Speaker 6: where we started. I mean, the financial markets in guessing
Speaker 6: presidential election outcomes, as you said, kind of the predictive
Speaker 6: market last time around for Donald Trump's first term. I mean,
Speaker 6: they got it wrong. They didn't expect them to get
Speaker 6: it right, and so I guess I don't know how
Speaker 6: you know, someone like yourself, someone like a lot of
Speaker 6: us who've seen market cycles and election cycles, you know,
Speaker 6: are we not wise to do the cause and effect
Speaker 6: or make a correlation between the two. Are investors smart
Speaker 6: in terms of, you know, playing out their expectations in
Speaker 6: the financial markets?
Speaker 4: I mean, investors are usually pretty smart because they've got
Speaker 4: money on the line and because it matters. Generally speaking,
Speaker 4: most of the time, the market is pretty darn difficult
Speaker 4: to beat. That said, markets do overshoot. They always do that.
Speaker 4: It's part of the physics of markets.
Speaker 5: At this point.
Speaker 4: And it's precisely because it's difficult to talk in these
Speaker 4: terms because so many of us do care so much
Speaker 4: about who is going to win this election. At this point,
Speaker 4: I'm inclined to agree that I think Donald Trump is
Speaker 4: more likely to win than Kamala Harris. And I also
Speaker 4: think at the current odds, I would bet on Kamala Harris.
Speaker 4: Why do you say that you only get one hundred
Speaker 4: You're going to get two hundred percent for your money.
Speaker 5: She's gonna triple your money for you. If you put
Speaker 5: a dollar on her now in the.
Speaker 4: Prediction markets, you'll get three dollars back next Wednesday if
Speaker 4: they manage to call the election.
Speaker 6: That wait, wait, so you're not looking into some crystal
Speaker 6: political crystal ball and making a prediction you're just saying
Speaker 6: in terms of a bet. It makes more sense.
Speaker 4: In terms of a bet in terms of the way
Speaker 4: people think about the NFL or Baseball these days. Who's
Speaker 4: going to beat the spread? With the spread I'm currently
Speaker 4: being offered, I'll take Kamela. If you get what I mean,
Speaker 4: I get it. And in terms of where I see
Speaker 4: the bond and stock markets at this moment, I would
Speaker 4: also be inclined to get ready for a surprise Camela trend,
Speaker 4: which would be good for bonds and bad for stocks
Speaker 4: in the short term.
Speaker 3: Sonically, talk a little bit about that, because we haven't
Speaker 3: seen the bond market. Yes, has shifted in the last month,
Speaker 3: but the stock market has continued to move higher, and
Speaker 3: it's continued a trend that was kind of interrupted, that
Speaker 3: was not interrupted, excuse me, despite the fact that these
Speaker 3: prediction markets seemed to change, John, when you look at
Speaker 3: the index level.
Speaker 4: I'm not sure I agree with that totally. I think
Speaker 4: you had two months in August and September when they
Speaker 4: were really quite sharp sell offs on the wave of data,
Speaker 4: normal economic data. At the beginning of the month, you
Speaker 4: did get the unemployment data which were surprisingly strong, surprisingly
Speaker 4: good for stock surprisingly bad for bonds, suggesting that we
Speaker 4: weren't going to need so many rate cuts after all.
Speaker 4: Then you have Elon Musk rally with Donald Trump, e
Speaker 4: tweets to everybody to look at polymarket because it's so good,
Speaker 4: and then Polymarket mysteriously, thanks to some French based whale,
Speaker 4: leaps forward. So I personally would say that the trends
Speaker 4: had largely broken down during August and September. People were
Speaker 4: getting nervous, and then a combination of oh, the unemployment
Speaker 4: market isn't a sluggish as we thought, and oh, we
Speaker 4: are going to get Donald Trump and Donald Trump means
Speaker 4: growth has led to this big, continued rally in the
Speaker 4: last few weeks. You wouldn't normally expect this to happen
Speaker 4: in an election year. This is not the right, This
Speaker 4: is not right. According to the seasonals, they've got their
Speaker 4: post election rally in before the election.
Speaker 5: This time, I would.
Speaker 6: Argue, I also do remember was it election night when
Speaker 6: Donald Trump won his first term?
Speaker 7: Right?
Speaker 6: Didn't we see futures initially sell off and then we
Speaker 6: saw a turnaround?
Speaker 5: It was right, it was.
Speaker 4: This was the other fascinating thing was that, yes, for
Speaker 4: months ahead of that result, anytime it looked as though
Speaker 4: Trump might somehow win.
Speaker 5: There was a huge sell off. Huge There was.
Speaker 2: A sell off right.
Speaker 4: When on election night, Tokyo and the Asian markets tank
Speaker 4: on the news, the S and P futures tank on
Speaker 4: the news. Everything has come back within a matter of hours.
Speaker 4: The stock market opens up the following morning, once once
Speaker 4: the cash market opens. So yes, that that was a
Speaker 4: remarkably swift response. Everybody did what they had been planning
Speaker 4: to do in reaction to a Trump victory, and then
Speaker 4: they had time to think, Actually, am I so negative
Speaker 4: about this? Donald Trump was relatively magnanimous, one of the
Speaker 4: most magnanimous speeches he's made that election night eight years ago,
Speaker 4: if you remember, so people were soothed that he wasn't
Speaker 4: going to be quite so mad, and then they suddenly thought,
Speaker 4: hang on, he's talking about big corporate tax cuts. Those
Speaker 4: are good for stocks and use and the market wasn't
Speaker 4: priced for such a thing. And you saw a remarkable rebound,
Speaker 4: and thanks to Trump delivering on those tax cuts a
Speaker 4: year on. It was more than a year before that
Speaker 4: rally broke down in twenty eighteen. So yes, that was
Speaker 4: a classic example. Though I didn't seeming either to be clear.
Speaker 4: Everything seemed to be gooar that. Oh my god, if
Speaker 4: Trump does somehow when the stocks are going to set off.
Speaker 4: Paul Cruitman, if you remember, was asked to predict when
Speaker 4: the Republic when the stock market would recover, and his
Speaker 4: reply was how about never?
Speaker 3: That was Bloomberg opinion columnist John Authors sticking with the election.
Speaker 3: It's close, needless to say, and that has some political
Speaker 3: analysts fueling visions of a sequel to the two thousand election.
Speaker 3: If you're of a certain age, you know exactly what
Speaker 3: I'm talking about. When it comes to the state of Florida,
Speaker 3: the Supreme Court determining the outcome, remember the Hanging Chad.
Speaker 3: Despite potential election litigation in various states, the Supreme Court
Speaker 3: is not likely to determine the winner this time around.
Speaker 3: Bloomberg New Supreme Court reporter Greig Store lays down the
Speaker 3: reasons why.
Speaker 7: One of them is legal and one of them is mathematical.
Speaker 7: The legal issue is that the Supreme Court in recent
Speaker 7: years has sort of narrowed the scope, narrowed the universe
Speaker 7: of issues that might actually get there. So there was
Speaker 7: a case last year, you may recall. It had to
Speaker 7: do with the power of state legislatures and in particular,
Speaker 7: whether the Supreme Court could overrule state supreme courts in
Speaker 7: interpreting their own election laws. And what the Supreme Court
Speaker 7: said was, we're not going to adopt this theory that
Speaker 7: says state supreme courts don't have any role here, and
Speaker 7: so that to some degree limited the Supreme Court's future involvement.
Speaker 8: And then the second thing is math.
Speaker 7: So I am old enough to remember the hanging chads
Speaker 7: in Bushtigor and that was a fight over five hundred
Speaker 7: and thirty seven votes in a single state that was
Speaker 7: going to determine the outcome of the election. And unless
Speaker 7: you have that sort of dynamic, then there's not the
Speaker 7: opportunity for the Supreme Court if it wants to get involved,
Speaker 7: to resolve a single legal issue and effectively resolve the election.
Speaker 3: But greg at the same time, it doesn't mean there
Speaker 3: isn't going to be legal challenges regardless of the outcome here.
Speaker 3: And you write about that the wow, more than one
Speaker 3: hundred lawsuits already that are shaping the twin twenty four
Speaker 3: US presidential election. So just because it won't be decided
Speaker 3: or I won't say won't, it's unlikely to be decided
Speaker 3: by the Supreme Court. Doesn't mean the lawyers will not
Speaker 3: be getting paid.
Speaker 7: They will be getting paid, and we'll get some things
Speaker 7: going to the Supreme Court, much like we did in
Speaker 7: twenty twenty. If you recall, there were a lot of
Speaker 7: things that came to the Supreme Court. Now, some of
Speaker 7: those were pandemic related, particular issues involving voting by mail
Speaker 7: that we hadn't dealt with before. But even after the election,
Speaker 7: he had that effort and really an unusual effort by
Speaker 7: Texas to try to overturn the results in four other states,
Speaker 7: and the Trump campaign, through its weight behind that, the
Speaker 7: Supreme Court had no interest in that. We've already got
Speaker 7: a couple things that had made it to the Supreme Court.
Speaker 7: Now there was something filed today having to do with
Speaker 7: efforts by Virginia, and of course that's not a swing state,
Speaker 7: but Virginia is trying to remove about sixteen hundred people
Speaker 7: from their voter rules and there's a dispute over that
Speaker 7: that is now at.
Speaker 8: The Supreme Court.
Speaker 7: What at this point is probably unlikely is one of
Speaker 7: these election determining fights like versus Gore.
Speaker 6: So this is good, we're so concerned or so much
Speaker 6: has been written about the politicization of the US Supreme Court.
Speaker 6: So is this a good thing in your view as
Speaker 6: you watch what may happen and what is expected to
Speaker 6: be potentially a fair amount of litigation after the election results,
Speaker 6: depending on the outcome.
Speaker 7: I think certainly from the standpoint of the Supreme Court's
Speaker 7: institutional standing, having them not be involved in the case
Speaker 7: is a good thing. The Supreme Court took a hit
Speaker 7: with Bush versus Gore, and of course the Court's been
Speaker 7: under enormous scrutiny the last few years. You've got the
Speaker 7: three Trump appointees have joined the court, made it much
Speaker 7: more conservative, some really far reaching rulings like the abortion one,
Speaker 7: and then all these ethical scandals that have.
Speaker 8: Surrounded the court.
Speaker 7: And you know, the court, every justice likes to say,
Speaker 7: we don't do politics here, we do law. But any
Speaker 7: decision that they issue that determines or significantly shapes the
Speaker 7: outcome of the presidential election undoubtedly is going to look political,
Speaker 7: and that's not the kind of thing they want.
Speaker 3: So it raises the question about how the campaigns are
Speaker 3: dealing with this ahead of time. Given that, and we
Speaker 3: spoke a couple of weeks ago to reporters who around
Speaker 3: the big take about the way that you know, Greg,
Speaker 3: this isn't really how the founders envisioned democracy, working the
Speaker 3: idea of votes then being litigated or elections being litigated.
Speaker 3: What are their campaigns doing to prepare for the scenarios here.
Speaker 7: Well, certainly they are laying legal groundwork. Yes, there are
Speaker 7: scores of cases that are out there now that potentially
Speaker 7: could just be, you know, one step away from the
Speaker 7: Supreme Court. If it turns out that I'm wrong in
Speaker 7: one of those cases, is enough to shift the balance here.
Speaker 7: So that's one thing they're making, making themselves ready. And
Speaker 7: then the second thing is both sides have these incredible
Speaker 7: legal teams that have tried to think through and brief
Speaker 7: in advance every issue under the sun, so that if
Speaker 7: it turns out a particular issue is something that they
Speaker 7: need in a Supreme Court filing that they need to
Speaker 7: get in within.
Speaker 8: Forty eight hours, they already have it at the ready.
Speaker 7: So both sides are ready to go in the event
Speaker 7: we end up with a Supreme Court showdown.
Speaker 8: What we won't know is whether that's going to be necessary.
Speaker 6: You know, you finish the piece with a quote and
Speaker 6: forgive me, I'm just trust to you who said this.
Speaker 6: And what you get into the quote is you need
Speaker 6: one state being a tipping point and a very narrow
Speaker 6: margin of victory, and then you need some kind of
Speaker 6: hook that gets the Supreme Court's attention. And I do
Speaker 6: think about that, greg, about what would ultimately get the
Speaker 6: Supreme Court's attention here.
Speaker 7: Yeah, and so just going back to to thousand, you
Speaker 7: mentioned those hanging chads. That was something that got the
Speaker 7: Supreme Court's attention. It got everybody's attention, this notion that
Speaker 7: around the state of Florida, it wasn't clear whether these
Speaker 7: votes were going to counter or not, and it was
Speaker 7: they were being judged by individuals who didn't have clear standards,
Speaker 7: and so that got their attention. And then you add
Speaker 7: into it the fact that there was at least officially
Speaker 7: a five hundred and thirty seven vote.
Speaker 8: Margin, and so you would need something like that.
Speaker 7: And you know, it doesn't necessarily necessarily have to be
Speaker 7: just one issue, just one hook. It could be a
Speaker 7: couple of them that add up, but something where there's
Speaker 7: some dispute where one side can say, hey, those whatever
Speaker 7: two thousand votes shouldn't have counted, and that might have
Speaker 7: been enough to shift the balance. That would be the
Speaker 7: sort of thing where the Supreme Court pretty much would
Speaker 7: have to get involved.
Speaker 6: Hey, one thing I want to ask you. I think
Speaker 6: we constantly just default to that the litigation would come
Speaker 6: from the Trump team, But there is potential that there
Speaker 6: could be litigation on each side, especially if it's super close.
Speaker 8: Yes, yeah, absolutely.
Speaker 7: I mean if if you know, imagine a world where
Speaker 7: you know, Donald Trump, Pennsylvania is the key state and
Speaker 7: Donald Trump wins it by a few hundred votes, absolutely,
Speaker 7: the Harris campaign will be looking for ways to challenge.
Speaker 7: And I mean part of you know, most states have
Speaker 7: provisions if an election there is exceptionally close, like it
Speaker 7: was in Florida, there's a provision there that says the
Speaker 7: loser can challenge the result, and there's a whole process there,
Speaker 7: and al Gore's campaign followed that process and it eventually
Speaker 7: led to the US Supreme Court. So if there's a
Speaker 7: state like that that is really close, no matter who's
Speaker 7: on the losing side, you can bet they will ask
Speaker 7: for a recount if that's allowed, you know, challenge any
Speaker 7: votes that might be questionable, and you know, ultimately though,
Speaker 7: when it gets to the Supreme Court, you know, the
Speaker 7: question will be in part you know, is this a
Speaker 7: court that's gonna you know, see our side of the
Speaker 7: issue on one of those things.
Speaker 3: Okay, so how are you how sharp is your pencil
Speaker 3: in terms of how you're thinking about your job after
Speaker 3: election day?
Speaker 7: Well, you know, as the Supreme Court reporter, I have
Speaker 7: a little bit of a luxury that almost everything goes
Speaker 7: through a couple of lower courts beforehand. So you know,
Speaker 7: some other colleagues will be following cases at the lower
Speaker 7: court level. That's where it will start to play out,
Speaker 7: and the Supreme Court probably will stay its hand.
Speaker 5: Now.
Speaker 7: You know, you mentioned how long bushby Gore went along.
Speaker 7: You know, that was decided on December the twelfth. The
Speaker 7: Supreme Court agreed to take that particular case up on
Speaker 7: December the ninth, so you know, quite a lot had
Speaker 7: happened between you know, when the last vote was cast
Speaker 7: on election day and when the Supreme Court jumped in
Speaker 7: in that case.
Speaker 8: And so there's you know.
Speaker 7: Different cases, different elections will play out different ways. But
Speaker 7: it's certainly very very possible that any Supreme Court involvement,
Speaker 7: should it happen in this election, won't happen for a
Speaker 7: number of weeks.
Speaker 6: Interesting stuff, Like I said, how many times have we
Speaker 6: said interesting the US election?
Speaker 3: Do we talk about Elon Musk at all? And the
Speaker 3: must giveaways?
Speaker 9: Oh?
Speaker 10: Go ahead, Greg, Yeah, we should get Greg.
Speaker 3: I'm curious how you're thinking about this, you know, from
Speaker 3: a legal standpoint, from your perch, How are you watching
Speaker 3: these giveaways?
Speaker 7: Well, there are certainly questions about those. I'm not going
Speaker 7: to pretend like I know what the answer is. But
Speaker 7: to the extent money is going to people, because they
Speaker 7: are only to people who have registered to vote, there
Speaker 7: are questions about whether that is legal. Now that being said,
Speaker 7: I'm not yet sure how that would translate to something
Speaker 7: that would determine who wins or who loses in this case,
Speaker 7: into something that is, you know, Trump v. Harris like,
Speaker 7: but it is certainly an issue worth while watching. I
Speaker 7: am quite sure that the Harris campaign is thinking about
Speaker 7: this and how they might use it if if they
Speaker 7: need you to make an argument in court.
Speaker 3: That was Bloomberg News Supreme Court reporter Greg Store coming
Speaker 3: up leadership any Time of Crisis with the President and
Speaker 3: CEO of the Nine to eleven Memorial and Museum. You're
Speaker 3: listening to Bloomberg Business Week This is Bloomberg.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 6: All right, Tim, So, you know, we often look at
Speaker 6: history and past market cycles, past economic cycles to really
Speaker 6: understand where we are today and where we may be going.
Speaker 6: It's not a given, as shocks like the Great Financial
Speaker 6: Crisis and the global pandemic showed us, but the past
Speaker 6: can help in gaming out the possible scenarios that investors
Speaker 6: and all of us may be dealing with. And that
Speaker 6: is something that the nine to eleven Memorial Museum thinks about.
Speaker 6: As they note on their website, nearly a quarter century
Speaker 6: after nine to eleven, the lessons learned have emerged with
Speaker 6: deeper clarity, highlighting key elements of crisis response and continuity
Speaker 6: that resonate deeply with a new generation of professionals at companies, agencies,
Speaker 6: and a range of organizations.
Speaker 3: With more with us here in the studio, the President
Speaker 3: and CEO of the nine to eleven Memorial and Museum,
Speaker 3: Beth Hellman. The Memorial and museum. It is supported by
Speaker 3: Michael R. Bloomberg, founder of Bloomberg Philanthropies and at Bloomberg LP.
Speaker 6: Yeah, very involved in the nine to eleven memorial and museum.
Speaker 3: Beth.
Speaker 6: Great to have you here with us. We've kind of
Speaker 6: been talking about the environment before we got going. Nine
Speaker 6: to eleven for me always makes me kind of stop
Speaker 6: and think about where we are in terms of, first
Speaker 6: of all, what happened that day and how we as
Speaker 6: Americans began to think very different differently. I think it's
Speaker 6: safe to say about what national security means and the
Speaker 6: role of geopolitics in it all. How do you guys
Speaker 6: continue to think about what security means here for Americans?
Speaker 1: For you, Carol and for me, nine to eleven brings
Speaker 1: up those memories. There were a hundred million Americans born
Speaker 1: since we're too young to remember nine to eleven for themselves. Yet,
Speaker 1: there's so many crises upon us now and ahead of
Speaker 1: us environmental, geopolitical health that will need the kind of
Speaker 1: leadership that helped us respond to nine to eleven in
Speaker 1: order to get through. So for us, we've realized the
Speaker 1: crisis leadership programs that we've built over time are responsive
Speaker 1: to that tremendous need out there right now for people
Speaker 1: at all levels of leadership within an organization, public and
Speaker 1: private sectors to figure out how they can respond to
Speaker 1: crises they didn't anticipate.
Speaker 3: For me, it's hard to think about this as being
Speaker 3: history because it didn't happen to It didn't feel like
Speaker 3: it happened that long ago. And I think for many
Speaker 3: of us who were alive and old enough to remember
Speaker 3: what happened, it's still so vivid and the images are
Speaker 3: still so vivid in our heads. But how at the
Speaker 3: museum and at the memorial do you convey what happened
Speaker 3: that day and what happened after to a generation that
Speaker 3: didn't live it well.
Speaker 1: I think the value of visiting the Memorial in the
Speaker 1: in person is really unmatched in helping to convey what
Speaker 1: happened because of the power of the design, of the text,
Speaker 1: of the images, of the care that went into virtually
Speaker 1: every decision about how our visitors encounter the memorial and
Speaker 1: then the museum itself. We have work, though to reach
Speaker 1: the people who can't come in person to the memorial
Speaker 1: and to the museum, So we now have programs that
Speaker 1: actually translate some of those lessons outside. But I do
Speaker 1: think you're right that there's a lot of people who
Speaker 1: that's so vivid for they have a hard time unpacking it.
Speaker 1: Yet it's distant enough in time that we've had time
Speaker 1: to study and to actually understand what happened, and we
Speaker 1: realize that people came from across New York, the country,
Speaker 1: the world to respond to those terrorist attacks and to
Speaker 1: help New York and the other and the Pentagon, and
Speaker 1: then in Shanksville, Pennsylvania, the other sites and the people
Speaker 1: who were affected start to heal, to recover and to rebuild,
Speaker 1: and to make sure we remember what was lost that
Speaker 1: day too.
Speaker 9: Beth.
Speaker 6: We always talk about the Great Financial Crisis and how
Speaker 6: the role of CFO changed dramatically, right because they had
Speaker 6: to figure out how to keep companies their company around.
Speaker 6: Same thing for the global pandemic nine to eleven. In
Speaker 6: terms of what is needed in leaders today, how has
Speaker 6: that impacted it?
Speaker 3: You hit it.
Speaker 1: The security function that we didn't really realize was at
Speaker 1: the center of what every organizational leader has to reckon
Speaker 1: with after nine to eleven was certainly on the table,
Speaker 1: and our Summit on Security brings together private and public
Speaker 1: sector leaders in the security fields who are working to
Speaker 1: make sure their employees are safe, their customers, their clients,
Speaker 1: their communities are safe because without that baseline of knowing
Speaker 1: what to expect and how you'd respond when something goes wrong,
Speaker 1: because we do know it will go wrong. It's that
Speaker 1: ability to respond in a crisis that nine to eleven
Speaker 1: taught us we all really have to have from the
Speaker 1: top to the bottom of our organizations.
Speaker 6: Well, I was going to ask you, because when you
Speaker 6: came in, I was like, okay, underachiever. You have a
Speaker 6: BS in electrical engineering from Duke An MA in history
Speaker 6: from the University of Pennsylvania, a jd from Yale Law School,
Speaker 6: PhD in history from Yale University, and I feel like
Speaker 6: it just gives you what an incredible view on kind
Speaker 6: of the world and how we look at things. What
Speaker 6: are the specific skills that you think a leader needs
Speaker 6: today in order to deal with threats that may come
Speaker 6: from all different places.
Speaker 1: I think that being empathetic and understanding the impact that
Speaker 1: any crisis has on the people who are experiencing it,
Speaker 1: Realizing that they're already responding and their contributions have to
Speaker 1: be recognized. Being able to communicate effectively. It's so important today,
Speaker 1: you can't communicate too often or too much and then
Speaker 1: being calm and decisive. And that's really what some of
Speaker 1: the iconic leaders that speak actually in our new Leading
Speaker 1: Through Crisis program like who like Mike Bloomberg, Bob Eiger, Kenshinal,
Speaker 1: Bill McRaven. There are in many others, including first responders
Speaker 1: and private sector leaders, principles of schools who were actually
Speaker 1: on that day figuring out what to do. And as
Speaker 1: they reflect on and they talk about that, it really
Speaker 1: honestly gives you hope that people can figure out what
Speaker 1: to do and they can come together when a crisis hits.
Speaker 3: The thing is, though, is security has changed a lot
Speaker 3: in terms of what threats are in you know, a
Speaker 3: quarter of a century. We have this whole element of
Speaker 3: what foreign states are bad actors could do online targeting, infrastructure, cybersecurity,
Speaker 3: ransomware and the like. How have you seen the conversations
Speaker 3: around that shift from those types of targets to perhaps,
Speaker 3: you know, not a stadium necessarily full of people, right.
Speaker 1: It's interesting. One of the speakers in this year's Summit
Speaker 1: on Security is the NFL head of Security. So, Kathy Lanier,
Speaker 1: you know, no one who's taking care of people at
Speaker 1: a stadium thinks they don't have to worry about cybersecurity.
Speaker 1: They realize there's a connection between the virtual and the real.
Speaker 1: That means that their preparedness in all of those arenas
Speaker 1: that you just described as essential to the actual physical
Speaker 1: security of people. Protecting our water safety, for instance, isn't
Speaker 1: a technical challenge as well as a physical challenge. So
Speaker 1: I think what we've realized is that the proliferation of
Speaker 1: different threats has just broadened the scope of the security
Speaker 1: professionals responsible and the leaders responsible for keeping all those
Speaker 1: different elements of our basic security in place.
Speaker 6: Jamie Diamond said something about it being like the most
Speaker 6: threats in terms of geopolitics that he can remember of
Speaker 6: his career, and forgive me if I'm not quoting it,
Speaker 6: you know exactly. I mean, he's Jp Morgan has hired
Speaker 6: someone on climate, but he's looking at the world and
Speaker 6: where the threats are coming from is the world? I
Speaker 6: don't know, how do you how do you assess it?
Speaker 6: How dangerous is it? I mean, I know I asked
Speaker 6: for the panel I did for you guys in the
Speaker 6: upcoming summit, and it was NICKI Haley and it was
Speaker 6: Tom nyd's former US Ambassador to Israel, Nikki Haley, of course,
Speaker 6: former US Ambassador to the UN. They both I think
Speaker 6: it was Nicki who said eight, and I think Tom
Speaker 6: said incredibly dangerous. I mean, these are people who understand
Speaker 6: it from the inside, and I just wonder, do you
Speaker 6: feel like we're getting better information? Do you feel like
Speaker 6: leaders are feeling more stressed? Like, how do you see it?
Speaker 1: I think that eternal vigilance is always the lesson of
Speaker 1: people trying to keep others safe and protect our communities
Speaker 1: and our nation in the world. I think that we
Speaker 1: didn't realize how dangerous the world was on September tenth.
Speaker 6: We never thought something.
Speaker 9: Like that thousand one.
Speaker 1: You know, we felt differently on the twelfth, and then
Speaker 1: we responded since.
Speaker 3: You know you were talking about this, Carol, and you
Speaker 3: brought this up too. We never thought it would happen.
Speaker 3: I can remember January sixth, twenty twenty one. I think
Speaker 3: a lot of Americans never thought that would happen. And
Speaker 3: that type of attack actually happening from within the United States.
Speaker 3: What do you hear from executives at a time when
Speaker 3: there's serious political turmoil in our country? Just a few
Speaker 3: days away from the election, how they're navigating this idea that, yes,
Speaker 3: there's tension within our country too.
Speaker 1: I think that a sense of community, creating the kind
Speaker 1: of culture within an organization that can hold people through
Speaker 1: difficult times, and also remembering I'm trained as a historian.
Speaker 1: I think we've seen a lot before. We've forgotten about
Speaker 1: a lot of what we've seen. The nine to eleven
Speaker 1: Memorial Museum is committed to making sure we don't forget
Speaker 1: what happened on nine to eleven, but we have forgotten
Speaker 1: many of the tremendous challenges and periods of turmoil that
Speaker 1: we've been through in the United States. They're communicated in
Speaker 1: a different way now and they feel more and less immediate,
Speaker 1: I think, than they have in the past. Two different
Speaker 1: sectors of our world. But it's really important to remember
Speaker 1: we've been through a lot, and people are resilient, and
Speaker 1: there's rarely one point in time that determines winning or losing,
Speaker 1: and you know, so continuing regardless of the consequences, I
Speaker 1: think is important to every agency and organization and company
Speaker 1: out there.
Speaker 6: You know, it's interesting I think about that a lot.
Speaker 6: Bath I think, you know, my dad and his three
Speaker 6: brothers all thought in World War Two, and I wish
Speaker 6: they were still around because I'm like, how did I
Speaker 6: want to pick their brain about the stresses they felt
Speaker 6: at that time versus what we feel today. I think
Speaker 6: about with all the college campus protests around the war
Speaker 6: between Israel and Hamas, and how we had with a
Speaker 6: David Western or somebody who came in and said, you know,
Speaker 6: during the sixties, right race riots and the protesting over
Speaker 6: Vietnam War and so on and so forth, We've seen
Speaker 6: these times before, but we didn't have social media as much,
Speaker 6: and the velocity of information and maybe inaccurate information, false information,
Speaker 6: And I just wonder how leaders are grappling with all
Speaker 6: of that, you know, whether they're managing their institutions, their
Speaker 6: employees and just trying to figure it out.
Speaker 1: I think you're right, it's definitely different conditions the when
Speaker 1: we face these challenges in the past. But we also
Speaker 1: have a lot more muscle than we used to in
Speaker 1: terms of During World War Two, it was a time
Speaker 1: when most women didn't contribute to the economy, to the polity,
Speaker 1: to the intellectual life of the nation, as well as
Speaker 1: many other marginalized groups. That's a lot more intellectual firepower.
Speaker 1: That's a lot more people who can help. It's a
Speaker 1: lot more literal muscle that's out there. So are there
Speaker 1: are a lot of to have a hope notwithstanding the
Speaker 1: challenges that are out there.
Speaker 6: The summit is coming up.
Speaker 1: On launches on the twelfth, November twelfth, it launches and
Speaker 1: we're very excited. Is a set of virtual programs with
Speaker 1: the top leaders across the public and private sector, the
Speaker 1: nation's top law enforcement official, the director of the FBI,
Speaker 1: Christopher Ray. There's just there's a tremendous number of people
Speaker 1: to learn from and to listen to, the director of
Speaker 1: an agency, the administrator of an agency created after nine
Speaker 1: to eleven. The tsall will help teach us how we
Speaker 1: can respond to what's out there right now.
Speaker 8: Is it amazing?
Speaker 6: Like you think there was a time when there was
Speaker 6: no TSA right remember when we also walk right up
Speaker 6: to the gate.
Speaker 3: Did you have to take your shoes off when you
Speaker 3: were going through airport security?
Speaker 6: Meet our families coming right off the plane. It's great
Speaker 6: stuff and we participate in some of the panels and
Speaker 6: definitely learn a lot. So thank you so much for
Speaker 6: joining us, for your support.
Speaker 11: Thank you.
Speaker 3: That was Beth Hillman, President and CEO of the nine
Speaker 3: to eleven Memorial and Museum, and a reminder. The Memorial
Speaker 3: and Museum is supported by Michael R. Bloomberg and Bloomberg Philanthropies.
Speaker 3: Michael Bloomberg is founder and majority owner of Bloomberg LP,
Speaker 3: the parent company of Bloomberg Radio. Still ahead on Bloomberg
Speaker 3: Business Week, a roundup of this week's earnings from me
Speaker 3: mag seven's heavy hitters. This is Bloomberg.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Listen live
Speaker 2: each weekday starting at two pm Eastern on Apple car
Speaker 2: Play and Android Auto with the Bloomberg Business App. You
Speaker 2: can also listen live on Amazon Alexa from our flagship
Speaker 2: New York station, Just say Alexa Play.
Speaker 3: Bloomberg eleven thirty Thursday wrapped up the biggest week of
Speaker 3: tech earnings for the quarter, with names like Amazon, Apple,
Speaker 3: and Intel reporting after the bell. James Chokmonk, technology analyst
Speaker 3: at Clockwise Capital, joined Emily GRIFFEO and me right as
Speaker 3: the results were crossing the terminal. We started off with Amazon.
Speaker 3: Total third quarter revenue increased eleven percent to one hundred
Speaker 3: and fifty eight point nine billion dollars. That exceeded estimates.
Speaker 3: An operating profit was seventeen point four billion dollars, demolishing
Speaker 3: the average estimate of fourteen point seven billion dollars.
Speaker 12: I think it's just what Andy Jassey has laid out
Speaker 12: basically about a year ago, that the path of profitability
Speaker 12: on the retail side of the business will continue and
Speaker 12: continue in a in a bigger and bigger way as
Speaker 12: as they achieve the efficiencies across their fulfillment network and
Speaker 12: and and further optimized for for shorter duration delivery time.
Speaker 12: So I think you're seeing what you want to see
Speaker 12: on the bottom line. The top line continues to perform
Speaker 12: more of on a status quo basis, so you know,
Speaker 12: we continue to like the name and uh and pretty please.
Speaker 10: With the core.
Speaker 13: You know, one big theme that we were looking at
Speaker 13: is whether these big tech companies are seeing the results
Speaker 13: in their earnings from all of the capex that they've
Speaker 13: done on AI. What does this Amazon earnings tell us
Speaker 13: about whether Amazon is able to kind of show all
Speaker 13: of the investments the fruit of their investments.
Speaker 12: Yeah, I haven't gone through it with a fine tooth
Speaker 12: thoe to change the NSS kind of the returns this quarter,
Speaker 12: but I think that from a bigger picture perspective, you know,
Speaker 12: you're not going to see a lot of trickle down
Speaker 12: to the bottom lane or or accretion to revenue on
Speaker 12: a short term basis. I think that these are much
Speaker 12: longer term investment cycles that will bear fruit over a
Speaker 12: longer term. So you know, that is a question that
Speaker 12: comes up repeatedly with investors. You know, where's ROI you're
Speaker 12: spending all these cappex But I think it just helps
Speaker 12: reinforce the competitive modes and crew over time. The way
Speaker 12: that we're looking at Big Peck more broadly is that
Speaker 12: you know, a lot of these names have run up.
Speaker 12: You know, we've been rotating out of these names for
Speaker 12: the last couple of weeks, now rotating into smaller cap names,
Speaker 12: more value oriented names, because you know, you have expanded
Speaker 12: multiple's high expectations, as you saw with Microsoft Meta. You know,
Speaker 12: I think the correction helped Amazon to a certain extent
Speaker 12: that the expert the bar had been lowered. But I
Speaker 12: think that big tech should likely remain choppy at least
Speaker 12: for the interim, as we you know, have uncertain teens
Speaker 12: around geopolitics, the election, and just the sovereign debt situation.
Speaker 3: So let's let's zoom out a little bit and talk
Speaker 3: specifically about AWS, because this is the number that you know,
Speaker 3: everybody cares about. It was pretty amazing to see net
Speaker 3: sales up nineteen percent year over year. We heard from
Speaker 3: Alphabet earlier this week in Google Cloud. We also heard
Speaker 3: from Microsoft Amazon with AWS James, they're the company that
Speaker 3: started at all. What's their competitive advantage? How do they
Speaker 3: continue to win business or compete again the second and
Speaker 3: third place Azure and Alphabet. How do they maintain their
Speaker 3: position when there is so much competition out there.
Speaker 12: Yeah, I think it's going to be more of a
Speaker 12: rising tide lifts all boat situation. You know, obviously is
Speaker 12: the number one scale player in the space, and all
Speaker 12: companies that are looking to the cloud, you know, will
Speaker 12: utilize them in some capacity. I think that the spend
Speaker 12: over AI and the shift from analog to digital will
Speaker 12: only get stronger and get faster, So all three of
Speaker 12: these companies will benefit. It's really for us, it's around
Speaker 12: what are the expectations around those growth rates and are
Speaker 12: those reasonable? Like, for example, with Amazon, throughout the course
Speaker 12: of this year, you know, we were expecting that that
Speaker 12: growth rate to keep notching up toward the twenty percent number,
Speaker 12: which it has. So long as you know the growth
Speaker 12: rates from an investment standpoint, are you know the bars
Speaker 12: are at achievable. We think that, you know, as you
Speaker 12: look into the medium and longer term, all three will
Speaker 12: benefit from it. But as far as you know Amazon
Speaker 12: specific competitive advantages, obviously they're they're the biggest player. They
Speaker 12: continue to iterate and provide more and more services more
Speaker 12: once stops shop solutions, so they're going to have an
Speaker 12: edge there. Obviously Microsoft and Google are not standing still.
Speaker 12: But you know, I think for us, it's as long
Speaker 12: as the overall industry trends toward capex spend and the
Speaker 12: cloud spend continue to move in the right directions on
Speaker 12: a secular basis, then all three should be fine.
Speaker 13: We've spoke to a number of guests about the Mag
Speaker 13: seven and whether this is a time to hold or
Speaker 13: to buy the Mag seven or to kind of play
Speaker 13: tech and AI in different names. What do you think
Speaker 13: when you're looking at you know, how to play the
Speaker 13: MAG seven.
Speaker 2: We think that it's good to be there.
Speaker 12: For us, it's a question of what size, Uh, you know,
Speaker 12: these companies were our top weight a couple of quarters
Speaker 12: ago five six seven percent weights in the portfolio, you know,
Speaker 12: but now we've trimmed those back between two and four
Speaker 12: and we've all been we've exited Google for example, we
Speaker 12: no longer hold that, and you know which much smaller
Speaker 12: in Tesla, much smaller in Amazon Microsoft. So for us,
Speaker 12: you know, the trends continue to be the friend of
Speaker 12: these companies, but given how much they run, we think
Speaker 12: that you hold them, but just at lower weights and
Speaker 12: reallocate that to areas that have more opportunity. Like we
Speaker 12: like software for example. You know, we established positions some
Speaker 12: time ago and new tanics get lab and data. Do
Speaker 12: you know, we think those could do well. You look
Speaker 12: at confluence results. We think that there's a lot of
Speaker 12: opportunity there.
Speaker 3: You know.
Speaker 12: We're going into value names at the same time, like
Speaker 12: the commodities. You know, we're not sure that the inflation
Speaker 12: trade is off the table.
Speaker 3: That's interesting. Yeah, I see Alcoa in here.
Speaker 12: So yeah, we have our CoA US steel we think
Speaker 12: could be a real winner.
Speaker 8: You know.
Speaker 12: We also like gold, you know, so we are you know,
Speaker 12: we're betting on that. We added General Motors, for example,
Speaker 12: so I think that that could be a great stock
Speaker 12: for as we look into twenty twenty five.
Speaker 3: That was James Chockmack, technology analyst at Clockwise Capital. Keeping
Speaker 3: with Tech earnings, we moved now to Intel, which saw
Speaker 3: share surge after the company gave a revenue forecast slightly
Speaker 3: above estimates, fueling investor hopes that a turnaround could be
Speaker 3: in store for the chip maker. For more on the
Speaker 3: report and the comments from Intel CEO, we spoke with
Speaker 3: Bloomberg Technology co host ed lud though.
Speaker 11: And there's a lot to unpick here. It's not straightforward
Speaker 11: because in the quarter gone, Intel which was previously like
Speaker 11: one of the world's leading chip makers, has given us
Speaker 11: a mixed bag. It's data center chips business did better
Speaker 11: than expected, but it's PC business, where it has historically
Speaker 11: been the lead, did worse. The answer to that is
Speaker 11: customers had inventories and they worked through backlogs, and that
Speaker 11: the almost three billion dollars of impairment charges that Intel
Speaker 11: took relating to headcount reduction canceled projects. And what's so
Speaker 11: interesting about that is if you look at the estimates
Speaker 11: going into this quarter, and lists on Wall Street had
Speaker 11: not factored that in. So it's a surprise, a negative surprise,
Speaker 11: and even so, the top line of the story is
Speaker 11: maybe there's some hope here for Intel.
Speaker 3: They're reducing headcount by sixteen five hundred employees. Is that
Speaker 3: on top of the other headcount productions this year.
Speaker 11: This is a confirmation of the previously stated plan for
Speaker 11: headcount reduction and that the literal update is that the
Speaker 11: Audit Committee of Intel, a section of its board, has
Speaker 11: approved that plan. So the number is final sixteen five
Speaker 11: hundred staff to be cut. And again I go back
Speaker 11: to the impairment charges. If you look at the adjusted
Speaker 11: loss per chare in the quarter gone much much wider
Speaker 11: than anyone on the wall street had anticipated. And a
Speaker 11: part of that was that the impairment charges it disclosed
Speaker 11: relative to headcount reduction, But there's other things in there.
Speaker 11: They just hadn't factored that in for this quarter. Intel
Speaker 11: wasn't able to guide for it into this quarter. So
Speaker 11: it's a timing and an accounting issue, which sometimes can
Speaker 11: be a bit dry. But there's much more to discuss.
Speaker 3: Okay, well' speina much more to discuss. The Intel CEO
Speaker 3: Pat Gelsinger saying in a statement that he intends to
Speaker 3: keep the company together. Yeah, he says that distinct but
Speaker 3: better together is the strategy. The context for this is
Speaker 3: is reporting from earlier this year that said they were
Speaker 3: exploring a separation of parts of the company.
Speaker 11: So it's complicated. And first off, the headlines from Pat
Speaker 11: Gelsinger were a part of a brief conversation that our
Speaker 11: colleaguey and King had with him on the phone, and
Speaker 11: the context is, yes, Intel is a chip company. It
Speaker 11: offers chip products processors that go into computers and data
Speaker 11: centers and other business areas, but it also has a
Speaker 11: manufacturing business, which historically the reason that Intel was so
Speaker 11: good at chips is it manufactured them for itself. As
Speaker 11: many of your listeners have learned in the last two
Speaker 11: or three years, there's a company in Taiwan called TSMC
Speaker 11: that has basically taken over the vast majority of cutting
Speaker 11: edge chip manufacturing on a contract basis for everyone else,
Speaker 11: and it Intel had really fallen behind. But Intel's ambition
Speaker 11: is to have a company where it has its own products,
Speaker 11: it manufactures its own products, but it also wants to
Speaker 11: manufacture chips for others, just like TSMC does. And that's
Speaker 11: a long answer, but the short of it is, this
Speaker 11: is Pat Gelsinger saying, yes, we're going to run the
Speaker 11: company that way to separate divisions, but no, we're not
Speaker 11: going to sell off one part to a third party
Speaker 11: or be acquired by a third party. That's kind of
Speaker 11: reading between the lines because he was not explicit.
Speaker 14: Ed.
Speaker 13: You have to wonder how much patience investors have right
Speaker 13: now to see this turnaround play out, because, like Tim
Speaker 13: had mentioned, Intel stock is down almost sixty percent year
Speaker 13: to date. So what do we know right now about
Speaker 13: just how urgent the need for the turnaround is. When
Speaker 13: you think about the share price, I.
Speaker 11: Mean, do we have to wait? What Intel told us
Speaker 11: for the final three months of this year is here's
Speaker 11: a range of revenues we think we're going to have.
Speaker 11: At the midpoint of that range, it was just slightly
Speaker 11: ahead of consensus estimates. But the market is you know,
Speaker 11: what's the saying, you guys that the investors vote with
Speaker 11: their feet, right, and you know, I think that's the
Speaker 11: read here. They look at the commentary from Intel and say,
Speaker 11: you've done some really painful things in the course is gone.
Speaker 11: You've let go of a lot of people, canceled a
Speaker 11: lot of projects. You had a pretty rough quarter in
Speaker 11: your PC business, where you were once a leader and
Speaker 11: you've fallen behind. But as we look to the next
Speaker 11: three months and beyond that, there are signs that you
Speaker 11: might be turning a corner.
Speaker 3: Here our thanks to Bloomberg Technology co host ed Ludlow.
Speaker 3: Also big thank you to Emily Graffeo stepping in while
Speaker 3: Carol Masser was out this week. And that wraps up
Speaker 3: the first hour of the weekend edition of Bloomberg Business
Speaker 3: Week from Bloomberg Radio. Coming up in our next hour,
Speaker 3: we are all in on AI. We explore the notions
Speaker 3: of thinking and intelligence in large language models with the
Speaker 3: author of the Deep Learning Revolution. Plus calling all Swifties
Speaker 3: or swifters, the immersive indoor cycling gaming company is using
Speaker 3: AI to try to get ahead of the competition. This
Speaker 3: is Bloomberg BusinessWeek.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Listen live
Speaker 2: each weekday starting at two pm Eastern on applecar Play
Speaker 2: and Android Auto with the Bloomberg Business App. You can
Speaker 2: also listen live on Amazon Alexa from our flagship New
Speaker 2: York station Just Say Alexa play Bloomberg eleven thirty.
Speaker 3: Plenty ahead in our second hour of the weekend edition
Speaker 3: of Bloomberg Business Week, including a new cycling craze harnessing
Speaker 3: the power of AI, plus the tequila brand co founded
Speaker 3: by Michael Jordan and counting stars such as Derek Jeter,
Speaker 3: Serena Williams, and Michael Strahan as investors. The story of
Speaker 3: sin Quodo Tequila coming up first up this hour. We
Speaker 3: cannot seem to stop talking about AI, and perhaps for
Speaker 3: good reason. Just look at what's happened to the companies
Speaker 3: that are in the space. Alphabet's investments in AI seem
Speaker 3: to be paying off. Microsoft's GitHub has agreed to bake
Speaker 3: AI models from Anthropic and Google into a coding assistant
Speaker 3: used by millions of software developers, and earlier this week,
Speaker 3: The Wall Street Journal reported that Elon Musk's Exai is
Speaker 3: in talks to raise funding at a value of forty
Speaker 3: billion dollars. But as investors reward companies use of AI,
Speaker 3: others are ringing alarm bells about getting the tech under
Speaker 3: control before it controls US. Doctor Terrence Sinowski is Francis
Speaker 3: Krikchair at the Salk Institute for Biological Studies, also Distinguished
Speaker 3: Professor at the University of California at San Diego. He's
Speaker 3: also president of the Neural Information Processing Systems Foundation. His
Speaker 3: dual expertise in AI and neuroscience led him to write
Speaker 3: the book Chat, GPT and the Future of AI, The
Speaker 3: Deep Language Revolution.
Speaker 9: I think that what's happening right now is really unbelievable.
Speaker 9: I was there at the beginning. Jeffrey Hinton and I
Speaker 9: collaborated in the nineteen eighties. All the learning algorithms that
Speaker 9: are being used today for these large language models and
Speaker 9: deep learning were developed by us back in that era.
Speaker 9: And of course what we didn't have back then were
Speaker 9: computers that were fast enough that could scale up these
Speaker 9: models to be you know, be able to solve these
Speaker 9: very difficult problems and artificial intelligence. But the Neural Information
Speaker 9: Processing Systems Foundation, I'm the president, re organized the biggest
Speaker 9: AI meeting December. Were expecting sixteen thousand researchers to descend
Speaker 9: on Vancouver after By the way, Taylor Swift, she's the
Speaker 9: big headliner on Sunday, but we have the rest of
Speaker 9: the week.
Speaker 6: So I want to ask you, how did you think
Speaker 6: about neural networks in large language models in the nineteen eighties,
Speaker 6: How do you think about them today?
Speaker 9: Well, we actually had a premonition that these large language models,
Speaker 9: they were small language models back were really good at language.
Speaker 9: And that was a particular project, a summer project for
Speaker 9: a gratitude in my lap called net talk, which was
Speaker 9: trained on a dictionary to be able to pronounce English text.
Speaker 9: You know, if you give it an article from the
Speaker 9: Wall Street Journal and they would pronounce it in an
Speaker 9: understandable way. And this in linguistics is a very difficult
Speaker 9: problem because English is so irregular. There are a lot
Speaker 9: of regularities, but you also have irregularities, and then you
Speaker 9: have rules for the irregularities. But it really was amazing
Speaker 9: that a small, tiny network with just a few hundred
Speaker 9: units and tens of thousands of weights, the parameters, the
Speaker 9: connections between the units could do that. It was like
Speaker 9: an amazing compression of complexity. And now we know that
Speaker 9: these large language models, that deep learning networks, they love
Speaker 9: language and they are capable of things that we never
Speaker 9: could have imagined.
Speaker 3: That's really what I wanted to talk about the idea
Speaker 3: of super intelligent AI. What are we not thinking about?
Speaker 3: What's the threat out there?
Speaker 9: My good friend Jeff is very concerned, and I think
Speaker 9: he's one of the smartest people I've ever met. And
Speaker 9: if he's worried about it, then there's some as a concern. However,
Speaker 9: I think that even if you're concerned, it's very difficult
Speaker 9: to know when that's going to happen, if it ever
Speaker 9: will happen. And there are super forecasters out there and
Speaker 9: this is from the Economist magazine, who are much better
Speaker 9: at people who are experts at predicting you know, if
Speaker 9: and when there may be a catastrophic or existential threat,
Speaker 9: and it turns out that in fact they're not as
Speaker 9: concerned as the experts in AI. I'm happy that someone
Speaker 9: is thinking about the worst case outcome because if not,
Speaker 9: then if it ever happens, we're in trouble. But right
Speaker 9: now I'm more concerned about trying to understand how they
Speaker 9: work mathematically, and also to learn more from the brain.
Speaker 9: After all these were designed Back then, Jeff and I
Speaker 9: looked at the brain the only existence proof you could
Speaker 9: solve any problem in AI, and you know, we tried
Speaker 9: to build something that was based on similar principles. So
Speaker 9: now we can continue. There's a lot more in the
Speaker 9: brain we can learn from.
Speaker 3: But paint that picture for us, because I think a
Speaker 3: lot of people are worried about doomsday scenarios here and
Speaker 3: if Jeffrey Hinton is worried about that stuff, I mean,
Speaker 3: should we we should be worried about it?
Speaker 15: You're saying, I think that we should be cautious, that
Speaker 15: is to say we we should be constantly thinking along
Speaker 15: the lines that Jeff is in terms of what could
Speaker 15: possibly happen, and you know, be cautious and put in
Speaker 15: precautions so that it can't happen.
Speaker 9: What I'm really concerned about are the unintended consequences, things
Speaker 9: that you cannot predict. Something may happen that you know,
Speaker 9: no one thought.
Speaker 5: Of, even Jeff.
Speaker 6: Yeah, and like you know, we have learned certainly right,
Speaker 6: great financial crisis, pandemic like the un the unthinkable can happen,
Speaker 6: and you throw technology into it and you just kind
Speaker 6: of don't know where it's going to go exactly. I
Speaker 6: got to ask you because I am still trying to understand,
Speaker 6: and I get worried that we throw these words around.
Speaker 6: Certainly not you, but we as we try to understand this,
Speaker 6: not having full comprehension of what artificial intelligence, the large
Speaker 6: language mind that we're talking about today, where it takes us.
Speaker 6: Is it as subtle and evolving in life changing as
Speaker 6: the Internet was for us.
Speaker 9: So this is something that is emerging, and I have
Speaker 9: since the book was sent to press in the summer,
Speaker 9: I have a sub stack where I have tried to
Speaker 9: fill in with, you know, the new things that are happening.
Speaker 9: And I'm preparing something a new twelfth version the blog
Speaker 9: on the question of whether AI is overhyped or under hyped,
Speaker 9: And you know, I've thought a lot about this, and
Speaker 9: you know, I think that it depends on the timescale.
Speaker 9: I think that on the short timescale it is overhyped.
Speaker 9: There's no doubt about it. There's just so much out there.
Speaker 9: I mean, every day the newspapers are filled with AI
Speaker 9: and your program. But I think in the long run
Speaker 9: it's actually under hyped. I think the real change in
Speaker 9: the Internet, for example, didn't occur within the first ten years.
Speaker 9: It was much later. Again, unintended applications that marriage that
Speaker 9: you know, have enormous impact on our lives, like social media.
Speaker 9: So I think the same thing's going to happen with AI.
Speaker 6: But is it is it different? Like the Internet is
Speaker 6: not I wanted to say comfortable, but it's not because
Speaker 6: there's some really bad things that happen and we know that,
Speaker 6: right and that's the battle we have with social media,
Speaker 6: and we want to talk to you about kind of
Speaker 6: regulatory oversight of AI in a moment. But I just
Speaker 6: I'm just trying to understand. You know, it does feel
Speaker 6: so seamless and just such a part of everything we do.
Speaker 6: But it hasn't necessarily replaced a ton of jobs. It's
Speaker 6: created jobs, it's replaced some jobs. I guess you could say,
Speaker 6: I'm just trying to understand, Like on what scale do
Speaker 6: you put it? You mentioned the internet, So is it
Speaker 6: apples to apples or is it something else?
Speaker 9: No, Well, first of all, it uses the Internet, so
Speaker 9: I mean that's like the the machinery that you need
Speaker 9: to reach to scale up and reach a large population.
Speaker 9: But it's more intimate than the Internet in the following
Speaker 9: sense that it talks to us, right, I mean, it's
Speaker 9: as if an alien landed on the Earth and could
Speaker 9: talk to us in English and it knew everything about
Speaker 9: you know, what humans, history, everything, and the only thing
Speaker 9: we can be sure if it's not human. But it's
Speaker 9: really quite remarkable. Let me give you one example of
Speaker 9: something that I was really surprised at when they did
Speaker 9: a study of whether people who needed cognitive therapy preferred
Speaker 9: real humans or AI. They preferred AI, which was really
Speaker 9: quite remarkable. I didn't expect that. And then part of
Speaker 9: the reason is that the AI is not judgmental like humans.
Speaker 6: Well wait, but doesn't it depends on the data like
Speaker 6: we talk about.
Speaker 3: It wasn't getting trained on judgmental data.
Speaker 9: It was you know, actually, it's a good question, what
Speaker 9: was it trained on. I think that it was fine
Speaker 9: tuned with data from real subjects that we're talking with
Speaker 9: a doctor. But even without that, I'll tell you again,
Speaker 9: it's shocking is that it is actually empathy. These large
Speaker 9: language models can empathize with humans. And why is it?
Speaker 9: How is that? Well, it actually absorbed a lot of
Speaker 9: text out there, novels, letters, and read it and so forth,
Speaker 9: and where empathy was being part of the discussion, and
Speaker 9: so it absorbed that too.
Speaker 3: Well. I wanted to hear a little bit of your
Speaker 3: thoughts on what we heard from Elon Musk. He actually
Speaker 3: participated in a surprise conversation at the Future Investment Initiative
Speaker 3: to discuss the future of AI.
Speaker 16: It's most likely going to be great, and there's this
Speaker 16: some chance which could be tense twenty percent, that it
Speaker 16: goes bad. The chances on zero, it goes bad. But overall,
Speaker 16: at one point, what you said, the covers eighty percent
Speaker 16: full is one positive way to look at it. Maybe
Speaker 16: ninety percent.
Speaker 3: Okay, eighty or ninety percent positive. The question I have
Speaker 3: for you is do we need an international regulatory body
Speaker 3: to ensure or help ensure that this goes the right way?
Speaker 9: Well, as you know, in the UK they have passed
Speaker 9: an ai Act which is like one hundred pages long
Speaker 9: and you know, incredibly detailed, and it's already absolute. I
Speaker 9: just moving blasting forward and you know you're trying to
Speaker 9: catch up with it. But I do believe that it's
Speaker 9: absolutely essential that it be regulated, and it should be
Speaker 9: regulated by people who are building it. The government, okay,
Speaker 9: is the business of protecting people. And we'll see how
Speaker 9: that plays out. But in for example, genetics, this happened,
Speaker 9: you know, back in the sixties seventies. They had a
Speaker 9: where they came together at a solomar and they came
Speaker 9: up with rules and regulations for doing experiments under the
Speaker 9: careful protection so that nothing leaks out, nothing gets out.
Speaker 9: And I think we need to do the same.
Speaker 6: Okay, So when does as you said, ten years for
Speaker 6: the Internet to really kind of make its impact and
Speaker 6: presence really known and maybe, you know, integrated into our lives.
Speaker 6: So is it a decade before we see LMS and
Speaker 6: AI at this level integrated into our lives.
Speaker 9: We are at a stage that aviation was at when
Speaker 9: at Kitty Hawk the Wright Brothers made the first flight.
Speaker 9: It was ten feet up and one hundred feet long.
Speaker 9: And that really was the you know, something that then
Speaker 9: took decades and decades to build. And the most difficult thing,
Speaker 9: by the way that airplanes, you know, design of airplaces
Speaker 9: had to solve was control. How you how do you
Speaker 9: make a go where you want to go without crashing?
Speaker 9: And that's something that again it's like we're going through
Speaker 9: right now with AI, And yes, it will take decades,
Speaker 9: it's not going to happen overnight.
Speaker 3: That was doctor Terrence Sanowski Francis krik Cher at the
Speaker 3: Salk Institute for Biological Studies and Distinguished Professor at the
Speaker 3: University of California at San Diego. His new book chat
Speaker 3: GPT in the Future of AI, The Deep Language Revolution
Speaker 3: is out.
Speaker 5: Now.
Speaker 3: You're listening to Bloomberg Business Week coming up from the
Speaker 3: Road to the Web. How one app is harnessing the
Speaker 3: power of AI to improve your cycling routine. 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 car Play and then brout Auto with a
Speaker 2: Bloomberg Business app, or watch us live on YouTube.
Speaker 3: Well full disclosure, People who know me know I ride
Speaker 3: bikes a lot.
Speaker 14: You certainly do.
Speaker 3: I'm a big swifter too. Zwift is well known among
Speaker 3: cyclists as a way to train or compete when it's
Speaker 3: too cold or rainy to go on your bike outside,
Speaker 3: or if you want to get a quick workout. In
Speaker 3: the app, connect cyclists riding their bikes inside to real
Speaker 3: time races in virtual worlds through a mobile device, a computer,
Speaker 3: or an Apple TV. Think about it like kind of
Speaker 3: like gaming with your bike. The company is raised six
Speaker 3: hundred and twenty million dollars from backers including KKR, Premiere Holdings,
Speaker 3: Amazon's Alexa Fund, and more, giving it a market value
Speaker 3: of more than a billion dollars. We've got with us,
Speaker 3: Eric min, the co founder and CEO of Swift. A
Speaker 3: lot has happened since you last joined us on Bloomberg Katie.
Speaker 3: I don't know if you saw this, we got to
Speaker 3: do this virtual ride together.
Speaker 14: No, I remember it well.
Speaker 3: It was pretty cool.
Speaker 14: Yeah, I thought you were going to wear the outfit.
Speaker 3: I'm not wearing that.
Speaker 14: You got your helmet over there.
Speaker 3: I got the helmet here. Don't need that for swift.
Speaker 3: But there's a lot has happened. There was a there
Speaker 3: was a round of layoffs earlier this year, a big
Speaker 3: hardware pivot. But I think you being back as sole
Speaker 3: CEO of the company is sort of among the biggest news.
Speaker 3: Give us an update. How's the business going.
Speaker 17: The business is doing really well. I mean it's doing
Speaker 17: better than we expected. We've had some change earlier this year,
Speaker 17: and we've pivoted and really the focus for the business
Speaker 17: has been really around like what can we do to
Speaker 17: supercharge our community, I think, which is the most valuable
Speaker 17: asset that we have. So we are a leaner team
Speaker 17: and we're finding that we're moving faster. Of course we're
Speaker 17: doing less, but we're you know, we get to focus
Speaker 17: on the things that I think we'll really move the
Speaker 17: needle for us. So the business is doing great, and
Speaker 17: you know, we launched new hardware this year. It's surprising,
Speaker 17: doing very very well, and you know, over the next
Speaker 17: few months is really the height of our season.
Speaker 3: I do want to explain to people who might not
Speaker 3: know what Swift is. When Eric says new hardware, we're
Speaker 3: talking about an actual like bike that Zwift has released.
Speaker 3: It's called the Swift Right smart bike. And typically the
Speaker 3: way that people use Swift as they hook up their
Speaker 3: own bike to what's called a trainer and one that
Speaker 3: can be hooked up to a virtual world using Bluetooth
Speaker 3: or another type of connection. So instead of using or
Speaker 3: you're using a you're still using a trainer with the
Speaker 3: smart bike. But what's the idea behind a thirteen hundred
Speaker 3: dollars bike.
Speaker 17: Yeah, I mean the price point is an important one.
Speaker 17: It's probably less than half or third of what you
Speaker 17: would typically pay for a smart bike. So we've i
Speaker 17: think innovated on price. We've also developed and designed it
Speaker 17: in a way that you can leverage existing hardwad that
Speaker 17: you've already invested in. So what you have is essentially
Speaker 17: a bike frame that slides onto a trainer that you
Speaker 17: probably already purchased. The other piece of innovation that we
Speaker 17: pushed about a year ago is what we call the ziftcog.
Speaker 17: And you know, for non cyclis, it's very complicated to understand,
Speaker 17: like what kind of gears you need to put on
Speaker 17: these trainers.
Speaker 3: We got rid of all that.
Speaker 17: With a single cog and then what we layered on
Speaker 17: top of that is a little device that can control
Speaker 17: and create the gears virtually. And you know, our goal
Speaker 17: is to of course bring down the cost of the
Speaker 17: hardware to get ontos with, but also just to simplify
Speaker 17: the onborne experience, and that is how we open up
Speaker 17: the market. All our studies have suggested that those are
Speaker 17: the two drivers for holding us back from growing even more.
Speaker 14: Well, let's talk a little bit more about your business.
Speaker 14: I assume you make money off of a subscription based
Speaker 14: sort of membership. There where are you when it comes
Speaker 14: to membership. I think the last time you guys spoke,
Speaker 14: you said around a million members. How has that number changed?
Speaker 17: We're over a million. I think the pandemic that wonders
Speaker 17: for us, it also had it was a double edged
Speaker 17: sword because you know, of course, like many companies, we
Speaker 17: thought the growth would continue forever. But what we're finding
Speaker 17: today is that it's these these are we're growing. We're
Speaker 17: certainly growing on a number of different level, both revenue
Speaker 17: and subscribers. But I think, you know, to double your
Speaker 17: business like we did during the pandemic is just an
Speaker 17: unrealistic expectation. So we've adjusted our business to that.
Speaker 3: One thing that you've also done within the last year
Speaker 3: is actually increased prices. I believe since the first time,
Speaker 3: since twenty seventeen. So for years it costs about fifteen
Speaker 3: bucks a month. Now it's twenty dollars per month. If
Speaker 3: not an annual membership, that's a monthly membership. How did
Speaker 3: members respond? What has churn been like?
Speaker 17: Well, you know, I don't think anyone likes price increases,
Speaker 17: let's be honest, right, but I think I certainly we
Speaker 17: feel very good about it. The value that we offer
Speaker 17: to our community at twenty dollars a month and two
Speaker 17: hundred for the year, is is really good value given
Speaker 17: you know, all the other products that are out there
Speaker 17: and the experiences that we offer. But things have gotten
Speaker 17: more expensive since since twenty seventeen, we've not raised the prices,
Speaker 17: and I remember reading from community members saying, hey, you
Speaker 17: should have just increased rice is incrementally Well, we would
Speaker 17: have actually collected more revenues had you done that, But
Speaker 17: we felt that the timing was right for us to
Speaker 17: increase the price. And I think the customers have largely
Speaker 17: voted with their wallets.
Speaker 3: Any more price shikes on the horizon.
Speaker 17: Look, you know things, I would never say that there
Speaker 17: will never be future price hikes. I you know, I
Speaker 17: think the five dollars move on a relative basis is big.
Speaker 17: If we do have future price rise, I think we
Speaker 17: should do it more incrementally, like I see from Netflix
Speaker 17: almost every year.
Speaker 14: Well, i'd love to talk about, you know what went
Speaker 14: into that? Like Tim mentioned first price sikes since twenty seventeen,
Speaker 14: what did that decision try look like? Because you think
Speaker 14: about everything that's happened since twenty seventeen, it's exhausting and
Speaker 14: it's been a really strange economic moment.
Speaker 17: Well, we delayed and delayed our price increase, and we've
Speaker 17: done this twice before, every time we've done a rice increase.
Speaker 17: The you know how we feel about it is we
Speaker 17: should have done it much earlier. And you know, look,
Speaker 17: things do get more expensive. Our costs have gone up,
Speaker 17: and we haven't passed that on to our customers. The
Speaker 17: product is vastly improved since twenty and seventeen. So we
Speaker 17: feel really good about it and we stand behind it
Speaker 17: when we you know, we were committed to making that change.
Speaker 3: Yeah, that's actually one thing that I that I haven't
Speaker 3: talked about the heads of display the worlds. There's been
Speaker 3: a lot of changes to the gaming environment since I
Speaker 3: started swifting, which was during the pandemic. Personally, I don't
Speaker 3: see myself. That's the main way I actually ride and
Speaker 3: get exercised because I have two little kids and going
Speaker 3: on a five hour bike ride on a Saturday like
Speaker 3: I used to do.
Speaker 14: Your wife isn't into that.
Speaker 3: She's just not feasible right now. So Swift is where
Speaker 3: I do it. You run a lot here I do.
Speaker 3: Are you a Strava person? No, okay, that's interesting. She's
Speaker 3: a garment person.
Speaker 14: I feel like I killed a line of questioning you
Speaker 14: were about to go.
Speaker 3: That's fine, I'm going to turn this way. I'll talk
Speaker 3: to Eric about it.
Speaker 5: You did.
Speaker 3: One thing I know just recently with Strava is the
Speaker 3: AI sort of integration that they're experimenting with. How are
Speaker 3: you using AI? You recently launched for me recently virtual
Speaker 3: ride Partners, which I find a really helpful thing.
Speaker 16: For me.
Speaker 3: So this is like a pacer that will kind of
Speaker 3: go at a specific speed that you can keep up with,
Speaker 3: and it's really helpful for training and for riding. How
Speaker 3: are you thinking about AI?
Speaker 17: So we already use AI in our engineering development, so
Speaker 17: that's already been happening. I think in terms of how
Speaker 17: we can expose these types of technology for consumer related features,
Speaker 17: we're absolutely thinking about that. And the two obvious places
Speaker 17: will be the conversational you know AI experience that you know,
Speaker 17: for example, Strava is doing, and I think that's going
Speaker 17: to be table mistakes for many many products. You know,
Speaker 17: it's not going to be something you know so innovative,
Speaker 17: it's we have to offer it. And I think the
Speaker 17: other opportunity for us and others is just using machine
Speaker 17: learning to.
Speaker 3: To figure out exactly.
Speaker 17: What to offer in terms of content and when and
Speaker 17: with whom. That I think is the next innovation that's.
Speaker 3: More like an Instagram timeline approach, where it like serves
Speaker 3: you what you think you are, yes.
Speaker 17: Yes, yes, And I think you know it can factor
Speaker 17: into you know your usage behavior, who your friends are,
Speaker 17: when you know what kind of events you like, what
Speaker 17: kind of fitness you have today and we can serve
Speaker 17: up the right content at the right time. I think
Speaker 17: that that is innovation that no one has really, you know,
Speaker 17: produced yet, But that's an exciting opportunity for us.
Speaker 14: What about AI and coaching, I asked, because I think
Speaker 14: about myself, you know, my world revolves around me, and
Speaker 14: the thing that I miss about college is having a coach.
Speaker 14: And I was part of a running club, but it
Speaker 14: was just too much, so I sort of like making
Speaker 14: up my own trains. I could see a lot of
Speaker 14: value in having an AI coach be able.
Speaker 10: To see your SATs, see.
Speaker 14: What you're doing, and suggest workouts.
Speaker 17: Let's face it, if you can afford it, you'd rather
Speaker 17: have a human coach right right, because they will motivate
Speaker 17: you more than any any tool that you have in
Speaker 17: front of you. But I think the two pieces that
Speaker 17: I just mentioned to you, which is like a conversation
Speaker 17: about how you did with your workout, and then the
Speaker 17: AI to tell you exactly what you should recommend next,
Speaker 17: those two pieces should in theory represent you know, a
Speaker 17: replacement for an expensive coach, and that I think is
Speaker 17: a solution for you know, the ninety five percent of
Speaker 17: the customer base. Yeah, the five percent should and will
Speaker 17: continue to invest in, you know, human coaches.
Speaker 3: Two hundred to two hundred and fifty dollars three hundred
Speaker 3: dollars a month or more, by the way, for a coach,
Speaker 3: for a coach that you've never met, and just like puts,
Speaker 3: you know, yeats in Swift.
Speaker 14: And so I mean, I just I you know, I'm
Speaker 14: not like I'm not going to the Olympics. You did
Speaker 14: go to the Olympics, then I didn't compete with the
Speaker 14: devastated to say, it feels like a steep bill for
Speaker 14: my ambitions.
Speaker 3: Eric, I'm wondering about competition here because you guys were
Speaker 3: pretty much the only game in town for a while
Speaker 3: with what you did. At least Copy Trainer was around before.
Speaker 3: But Training Peaks bought Indie Vello and now they have
Speaker 3: Training Peaks Virtual. I remember before I joined Strava, I
Speaker 3: used Training Peaks and I quit Training Peaks during the
Speaker 3: pandemic or to go to Swift. Excuse me, not Strava.
Speaker 3: How are you thinking about competition right now?
Speaker 17: Well, we have a lot of competition, it's not surprising
Speaker 17: and we've had it all along. I think the Training
Speaker 17: Peaks and indievelopment makes absolute sense. For Training Peaks. I
Speaker 17: mean we are partners with many different training platforms that
Speaker 17: are out there. We launched something called the Training API,
Speaker 17: and we've onboarded multiple training apps. So we continue to
Speaker 17: will continue to be a platform where coaches and these
Speaker 17: coaching apps can push activities and event you know, activities
Speaker 17: where you can actually do the event ons with. So
Speaker 17: that won't change. It'll be really and I don't know
Speaker 17: the strategy behind Training Peaks and what they'll do with
Speaker 17: in development doesn't really change what we need to focus on.
Speaker 17: And our focus is really to do everything to continue
Speaker 17: to add value and features for a community. That's really
Speaker 17: the important asset that we have.
Speaker 14: Let's talk a little bit more about the future. This
Speaker 14: is something I love to ask private companies. Are you
Speaker 14: thinking about IPO? Would you be open to either acquiring
Speaker 14: a business or being acquired? What are you thinking about
Speaker 14: along those lines.
Speaker 17: I think we should always look at opportunities to acquire, merge.
Speaker 17: Those are opportunities we should be looking at all the time.
Speaker 17: In terms of you know, you know, what is our
Speaker 17: end go in terms of like a liquidity event, I
Speaker 17: think that just will take some time. But I think
Speaker 17: we all have aspirations of being a public listed company.
Speaker 17: Whether that happens you know, in three years or five years,
Speaker 17: I don't know whether you know we do that alone
Speaker 17: or we do it with with others. You know, these
Speaker 17: are all I think things. Time will only tell and
Speaker 17: how that unfolds. But absolutely, our board, my co founders,
Speaker 17: my management team, and investors have big aspirations for this business.
Speaker 17: So that hasn't changed. It's just timing, is everything right?
Speaker 3: I mentioned that you raised more than six hundred million
Speaker 3: dollars since inception. Last time you and I spoke, you
Speaker 3: said you didn't need to raise money in the near future. Yeah,
Speaker 3: how's the cash balance looking right now?
Speaker 17: We're very fortunate we we didn't spend all that capital,
Speaker 17: so we have a pretty strong balance sheet. I don't
Speaker 17: think we need to raise any more capital. That's helpful,
Speaker 17: and that gives us ever ever, I just yeah, ever,
Speaker 17: which is great. It gives us a lot of optionality.
Speaker 17: But you know, look, having just a lot of cash
Speaker 17: doesn't help either. We need to deploy it and smartly,
Speaker 17: and we need to think of how we can leverage
Speaker 17: that to build a business.
Speaker 3: Last question, how do you you know the cycling business?
Speaker 3: There's a ceiling there there are only so many people
Speaker 3: who want to be riding bikes in their basement. How
Speaker 3: do you get people like Katie?
Speaker 17: Well, first you have to get rid of the basement
Speaker 17: or the garage thing.
Speaker 3: And that's why we launched the ride.
Speaker 17: It's beautiful, it's it's in white. We deliberately picked white
Speaker 17: instead of black because in our testing it resonated really
Speaker 17: well with women.
Speaker 3: It's interesting.
Speaker 17: Yeah, and I think you know, we're not just going
Speaker 17: after cyclist. We're going after people who want to exercise
Speaker 17: and who want to get fit and cycling just the
Speaker 17: indoor bike and cycling in general happens to be just
Speaker 17: it's a great activity. You can do it for a
Speaker 17: long time, it's low impact, and you have access with
Speaker 17: your hands, and you can get engaged with an experience
Speaker 17: like Swift. So it's not just recyclists. We hope that
Speaker 17: the bike really opens up the addressable market for us.
Speaker 3: Our thanks to Eric Mann, co founder and CEO of Swift,
Speaker 3: still adad on Bloomberg Business Week five rival NBA owners
Speaker 3: meet for dinner and craft a premium tequila the story
Speaker 3: of Sincoto Tequila. On the other side, 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, car Play and and Broud Auto with a
Speaker 2: Bloomberg Business at or watch us live on YouTube.
Speaker 3: Okay, Carol Masser, I'm with you. Picture this. Yes, Michael
Speaker 3: Jordan cool, Yes.
Speaker 2: That's Michael Jordan.
Speaker 6: Really, that's what I thought.
Speaker 3: Genie Buss of the La Lakers, Cool West Edens of
Speaker 3: the Milwaukee Oh, my bos, god Wick Grausebeck, and Amelia
Speaker 3: Fessalari of the Celtics. They all get together for dinner. No,
Speaker 3: it's not the start of some sort of you know,
Speaker 3: NBA on her joke.
Speaker 6: No, it's sort of a really cool company.
Speaker 3: Tequila company, Sinkora Tequila.
Speaker 6: Right and company lore has it that the dinner happened
Speaker 6: back in twenty sixteen. This is like, you can almost
Speaker 6: feel like it should be a streaming series already. Fast
Speaker 6: forward to today and sin Koro Tequila has sold more
Speaker 6: than two and a half million bottles. It's won more
Speaker 6: than two dozen awards. Investors now include Serena Williams, Derek Jeter,
Speaker 6: who was just in our studio a couple.
Speaker 10: Of weeks ago.
Speaker 3: He wasn't drinking tequila.
Speaker 6: He was not No, also Michael Strahan and more. Amelia
Speaker 6: Fazzalari is co founder and executive chairperson of Sincoro Tequila.
Speaker 6: She joins us here in our Bloomberg studio.
Speaker 9: Amelia, it is.
Speaker 6: So good to see you.
Speaker 9: How are you great?
Speaker 10: And it's great to be back in the building.
Speaker 3: What do you think?
Speaker 10: I love it. I missed bringing back some good memories
Speaker 10: one hundred percent. I was here twenty three years.
Speaker 9: It's a long time.
Speaker 3: You did everything from head of marketing for Bloomberg TV,
Speaker 3: you ran the trading system department, you led the product
Speaker 3: strategy department, and this by tequila tequila.
Speaker 17: I know.
Speaker 6: Well, you know, we always love like someone's journey and
Speaker 6: how they get to something like what is it about
Speaker 6: kind of your background and the things that you did
Speaker 6: got you to where you are to be.
Speaker 10: Well, actually, that's really interesting because there is a connection
Speaker 10: because most of my time at Bloomberg I was involved
Speaker 10: in startups and involved in starting new businesses. And so
Speaker 10: when and I remember Mike Bloomberg saying to me a
Speaker 10: long time ago, it doesn't really matter what the subject
Speaker 10: matter is. It's your approach to starting and running a
Speaker 10: business that matters because you can learn the subject matter right.
Speaker 10: And so I did remember that when when we were
Speaker 10: starting the tequila company, because it was very different than
Speaker 10: commodities or anything else I was involved in. But it worked,
Speaker 10: you know. It was it was a focus on trying
Speaker 10: to do things at the very highest level. And you know,
Speaker 10: my partners are incredible and they're incredibly competitive, and so
Speaker 10: there's a very high bar.
Speaker 3: So it's interesting because you know the story that dinner
Speaker 3: goes back at twenty sixteen is company law, right, But
Speaker 3: you didn't launch for a few years because you just
Speaker 3: celebrated your five year anniversary.
Speaker 10: True, I'm glad you're asking that.
Speaker 3: Why did it take so long? Is that normal for tequila?
Speaker 3: I don't know.
Speaker 10: I don't think that is normal for tequila, but it
Speaker 10: was the norm for us. And the reason for that
Speaker 10: is and one of the unique aspects about Sincoro is
Speaker 10: we created this tequila. We literally created the recipe and
Speaker 10: the liquid was our north star from day one. Nothing
Speaker 10: else mattered. We had to get the liquid right. And
Speaker 10: when from that first famous dinner now in the summer
Speaker 10: of twenty sixteen, you know, Michael was a true tequila
Speaker 10: Commosseewer in the group, and.
Speaker 3: He told me Michael Jordan.
Speaker 10: Michael Jordan, that would be mj that would be Michael Jordan,
Speaker 10: and he taught us how to drink tequila, and we
Speaker 10: realized we had a shared love for tequila and that
Speaker 10: really was the you know, we had to make the
Speaker 10: most delicious tequila. That's what we talked about. We wanted
Speaker 10: a tequila that was super smooth and had a long,
Speaker 10: beautiful finish, like a fine cognac or bourbon. And so
Speaker 10: it took us three year. We created a thousand tequilas
Speaker 10: over a three year period, and to this day, Michael
Speaker 10: and I taste every batch before we wor Jordan Michael
Speaker 10: Juran to ensure that it is the best. What did
Speaker 10: he teach you about how to taste to kill? Yeah,
Speaker 10: that's great, great question. So we looked for four things
Speaker 10: and first being color, even the crystal even the blanco.
Speaker 10: It's clear, but it needed to be a crystal clear
Speaker 10: blanco and obviously our aged expressions. And then there is
Speaker 10: the nose, like what does it smell like? You wanted
Speaker 10: to have a beautiful aroma. And then the taste, which
Speaker 10: needed to be smooth on the palette. And then a long,
Speaker 10: beautiful finish like a fine Coniak or Bourbon. So that's
Speaker 10: what we looked for.
Speaker 6: That was the cork popping.
Speaker 10: Yeah, that in the moment, keep going, keep going.
Speaker 3: What I think is so interesting about this is when
Speaker 3: you look at especially celebrity backed alcohol companies, oftentimes they
Speaker 3: sort of go with, Okay, what is the hot spirit
Speaker 3: of the moment. And it seems like you guys were
Speaker 3: a little ahead of tequila becoming such a big part
Speaker 3: of American culture, at least because in the last few
Speaker 3: years you've had some huge exits when it comes to tequila.
Speaker 3: But you guys had this idea close to a decade ago.
Speaker 17: We did.
Speaker 10: And for us, you know, Michael Jordan's part of the group,
Speaker 10: and now we've got other incredible celebrities part of the group.
Speaker 10: But it was never about the celebrity for us. And
Speaker 10: if you notice in our marketing, we're not celebrity focused
Speaker 10: or you know, there's no one standing up saying please,
Speaker 10: you know, buy this tequila because of me. We want
Speaker 10: people that you may hear about Sincoro because of Michael
Speaker 10: Jordan or Derek Jeter, Serena Williams. But you're going to
Speaker 10: buy your first bottle, your second, your third, and hopefully
Speaker 10: many cases thereafter. Because you love the tequila, you love Cincoro,
Speaker 10: and that's really important to us. It's about being super authentic. Actually,
Speaker 10: there's a ring around the neck of our bottle that
Speaker 10: says share truth, and that is our truth. It is
Speaker 10: about being you know, authentic and true to our north star.
Speaker 10: This delicious liquid. Your bottles alone are just stunning. There's
Speaker 10: a whole story there too. What is the story? So
Speaker 10: during that three year period where we're focused on making
Speaker 10: the liquid, Michael called Mark Smith, who was the vice
Speaker 10: president of Special Projects and Innovation at Nike at the
Speaker 10: time and had done everything Jordan and Michael called Mark
Speaker 10: Smith and asked him to create a designed tekuill a
Speaker 10: bottle for him. And so the story is that Mark
Speaker 10: said to Michael, close your eyes and describe what you
Speaker 10: see using three words, and Michael said, sleek, contemporary, and unique,
Speaker 10: And that was the brief for the bottle. And the
Speaker 10: bottle like a piece of crystal or something like. You
Speaker 10: could have a bottles stunning. It's it looks like a
Speaker 10: trophy and if you feel the bottom of the bottle,
Speaker 10: it actually slants twenty three degrees as a non Jay's
Speaker 10: jersey number. The stopper slants down on twenty three degrees.
Speaker 10: And then get this. If you take twenty three bottles
Speaker 10: exactly and you line them up head to toe, they
Speaker 10: form a perfect circle and the diameter of that circle
Speaker 10: is the same as a tip off circle on an
Speaker 10: NBA court.
Speaker 6: Oh my god, it's a lot of thought went into that.
Speaker 16: Oh my god.
Speaker 6: One thing I want to take me back to because
Speaker 6: you said with Michael Jordan that you sampled about a
Speaker 6: thousand tequilas that process. Were you down in Mexico, because
Speaker 6: we've did a lot of reporting on you know, kind
Speaker 6: of where all the tequila comes from and talked about it.
Speaker 10: Tell us about that process. Yeah, so I did go
Speaker 10: down to Mexico a ton Wes and Wick joined me
Speaker 10: on a few of those trips, and we actually started
Speaker 10: with more than one distillery because we actually had them
Speaker 10: compete and we wanted to really refine the taste profile.
Speaker 10: And then we finally landed on one and we would
Speaker 10: get samples, bring them back and we would meet as
Speaker 10: a group and taste through a whole table of tequila.
Speaker 6: Was there a lot of like debate and disagreement, like
Speaker 6: as you went through the process. I'm just curious about that.
Speaker 10: I think, you know, not really honestly, And that's been
Speaker 10: an incredibly magical thing about my partners and I. We
Speaker 10: we have been really aligned from day one. They're true
Speaker 10: collaborators and incredible team players. But we did align on
Speaker 10: the taste profile from the second. You know, from right
Speaker 10: out of the.
Speaker 3: Gate, what do you see as the market for this?
Speaker 9: Who?
Speaker 5: Who?
Speaker 3: Who do you think wants it? Who has been buying it?
Speaker 3: How do you grow it?
Speaker 7: Yeap?
Speaker 10: So the great thing about Cincoro is that the taste
Speaker 10: profile is a very is appealing to a very wide audience.
Speaker 10: We don't have that traditional Gabi burn. So if you
Speaker 10: had that bad tequila experience, you love cincorro. If you
Speaker 10: like whiskey, I've had that bad tequila, You're gonna love
Speaker 10: Cincoro and college. The one word that everybody uses to
Speaker 10: describe Cincoro is delicious. And so it's a high end tequila.
Speaker 10: It's a high end sipping tequila. You know, we gravitate
Speaker 10: towards the you know, more affluent consumer.
Speaker 3: Is that more is the price point aligned with that? Yeah,
Speaker 3: I've heard horror stories about liquor distribution, and I'm wondering
Speaker 3: how competitive is how you make sure to get in
Speaker 3: with the right I've talked to owners of local stores
Speaker 3: who are like, I'm not allowed to carry this one
Speaker 3: brand because my distributor is this distributor and carries this
Speaker 3: one brand. Like it's a really tough it's really tough
Speaker 3: for independence in some cases. How do you navigate that
Speaker 3: hard work?
Speaker 10: There's that's possible, well, one hundred percent, you know, you've.
Speaker 3: Got to I mean, I've heard the words like cartel,
Speaker 3: mafia like to describe.
Speaker 10: The industry, right right, I think that it starts with
Speaker 10: having an amazing product, and we want the product to
Speaker 10: speak to for itself. And so there are difficult accounts,
Speaker 10: and there are you know, it's a super competitive market
Speaker 10: in the United States, but you grind through it, and
Speaker 10: you know, we have a product that we are so
Speaker 10: out of and that when people taste it, they are
Speaker 10: so proud to have it on their backbar.
Speaker 6: You know, sports, it's pretty amazing. Bloomberg spends so much
Speaker 6: time on the business of sports, and it does feel
Speaker 6: like investor interest, the value of teams. There's so much
Speaker 6: interesting stuff going on. And my understanding is that your
Speaker 6: husband's thinking of selling. Yeah, I mean, I know.
Speaker 10: You put your way, but I.
Speaker 3: Mean it's just interesting.
Speaker 6: I don't know if there's anything about timing or you know,
Speaker 6: owned it for a while and you just move on,
Speaker 6: like like what is it?
Speaker 4: Yeah?
Speaker 10: No, well I think that's for Wick to talk about.
Speaker 10: But you know it's he's got two families, a Celtics
Speaker 10: family and his family, and his family's interested in selling.
Speaker 10: So that's what's going on.
Speaker 9: We find too.
Speaker 6: We have a lot of guests, whether it comes to
Speaker 6: the Spirits world, whether it comes to tequila, tell us
Speaker 6: about because there's two options, tell us about the second
Speaker 6: one that you brought us.
Speaker 10: Yes, So the second one is our brand new Crystallino.
Speaker 10: This is a limited addition. It's this beautiful platinum silver
Speaker 10: bottle and this Crystallino is it's really actually a super
Speaker 10: hot category for tequila right now. They're staying that the
Speaker 10: category will be about six percent of the tequila market
Speaker 10: by twenty twenty eight and it's a really key driver
Speaker 10: of premisation. The liquid is our Nyeho liquid and it's
Speaker 10: charcoal filtered to remove the color and it's absolutely delicious.
Speaker 10: We just had our five year anniversary party where we
Speaker 10: celebrated the launch of Crystallino and people tasted it for
Speaker 10: the first time and absolutely loved it. So definitely try
Speaker 10: to find a bottle because they're going to run out.
Speaker 3: What are you thinking in terms of product growth and
Speaker 3: product category growth? You obviously have these two different lines,
Speaker 3: but how do you.
Speaker 10: So this is a different yeah taste, It is a
Speaker 10: different taste. So we actually have a Blanco a repisodo,
Speaker 10: which is slightly less age than the Nyeh. We also
Speaker 10: have an Extra and Yeh which is aged forty four
Speaker 10: months and that's in a black crystal bottle and that's
Speaker 10: really our halo expression. That's about seventeen hundred dollars a bottle.
Speaker 10: It's Michael Jordan's favorite. And we have a Sincoro Gold
Speaker 10: and it's in a gold metallic bottle. And that gold
Speaker 10: is a combination of our Blanco Repo and a Yaho
Speaker 10: and Extra and Ah. It has a ton of Extra
Speaker 10: and Yaho in it. So, yes, we have a beautiful
Speaker 10: portfolio of five expressions. This is our sixth. Then we're
Speaker 10: doing some super exciting innovations next year.
Speaker 6: So how much do you expand it? Because that's a
Speaker 6: lot of choices already. When you think about the portfolio,
Speaker 6: how do you think about where you want to go?
Speaker 10: Yeah, so innovation is really in our DNA. We've been
Speaker 10: innovating the brand since we launched. We've come out with
Speaker 10: either interesting bottle or you know, for example, a limited
Speaker 10: edition new expression. So where we're going next year is,
Speaker 10: like I said, we're going to do three different innovations
Speaker 10: to our collaboration with some super cool people. So I'll
Speaker 10: be back to tell you about those. Yeah, and you
Speaker 10: know that's how we're going to stay current and really
Speaker 10: in the news.
Speaker 6: How do you think about who you want to partner
Speaker 6: in or partner with or bring in as additional business
Speaker 6: partners on this, because it sounds like Michael Jordan has
Speaker 6: a very specific vision. It sounds like you do as well, right,
Speaker 6: So I'm just curious how you figure that out.
Speaker 7: Yeah.
Speaker 10: The first thing is you got to love it authentically
Speaker 10: and just really live the brand and then really embody
Speaker 10: the ethos of the brand, which is doing things right,
Speaker 10: working hard, and striving for greatness.
Speaker 6: What's the hardest part of this because I do think
Speaker 6: you know, it's a crowded space, but it sounds like
Speaker 6: you guys are trying to carve out a certain space.
Speaker 6: What's the hardest part of.
Speaker 10: This, it's you know, it's a long game. Yeah, this
Speaker 10: is not the business is not something that you do.
Speaker 10: It's not a quick in and out. We're in this
Speaker 10: for the long term, you know, we really want what's
Speaker 10: happening internationally is really exciting because I think in many
Speaker 10: of these markets we're in the first or second inning
Speaker 10: of the game, and so it's going to be really
Speaker 10: exciting to watch it grow and have people have an appetite.
Speaker 3: For this tough to import or once you figure it out,
Speaker 3: you figured it out.
Speaker 10: You figure it out. I mean, there's definitely teething pains
Speaker 10: of doing all of that, and there's a lot of
Speaker 10: legalities around the liquor business on a global scale, but
Speaker 10: it's not insurmountable.
Speaker 3: That was Amelia Fazalari, co founder and executive chairperson of
Speaker 3: sin Quota a Tequila, And that wraps up the weekeet
Speaker 3: edition of Bloomberg Business Week from Bloomberg Radio. Thanks so
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