WEBVTT - Goldman Compensation Ratio Hits Decade High 0:00:01.880 --> 0:00:04.440 This is Bloomberg Business Week. I'm Carol Masser and I'm 0:00:04.480 --> 0:00:06.840 Tim Stanevik. We're here every day bringing you the latest 0:00:06.840 --> 0:00:11.000 news from the world's of business and finance, clus technology, politics, economics, 0:00:11.039 --> 0:00:14.040 all harnessing the power of Business Week reporters and editors, 0:00:14.160 --> 0:00:17.000 not to mention our journalists and analyst in more than 0:00:17.040 --> 0:00:21.160 one and twenty countries. You can download Bloomberg Business Weekend iTunes, SoundCloud, 0:00:21.239 --> 0:00:23.320 or Bloomberg dot com. You can also listen to our 0:00:23.360 --> 0:00:26.160 radio show at two pm Eastern Time on Bloomberg Radio 0:00:26.280 --> 0:00:31.120 or stream us live on YouTube and Bloomberg dot com. Alright, 0:00:31.160 --> 0:00:33.600 the guys, the team, they have been talking about the 0:00:33.600 --> 0:00:35.520 big bank earnings. We got a bunch of last week, 0:00:35.560 --> 0:00:37.680 we got some this morning, some key ones kind of 0:00:37.720 --> 0:00:40.160 getting ready to really wrap up this sector and start 0:00:40.200 --> 0:00:42.199 to look forward at other earnings. But we've got to 0:00:42.240 --> 0:00:44.920 talk a bit more about Goldman Sachs having their worst 0:00:45.000 --> 0:00:47.720 day in terms of the stock price since this after 0:00:47.720 --> 0:00:50.000 the bank reported worse than expected net revenue for the 0:00:50.040 --> 0:00:54.720 fourth quarter. It's compensation ratio hitting a decade high. Tim, Yeah, well, 0:00:54.760 --> 0:00:57.640 let's see how Alison Williams, a senior global bank analysts 0:00:57.600 --> 0:01:00.400 for Bloomberg Intelligence characterizes the quarter. She's here in our 0:01:00.400 --> 0:01:03.240 Bloomberg Interactive at Broker's studio. Allison, good to have you 0:01:03.320 --> 0:01:05.440 with us. Now you've been up since the early hours 0:01:05.680 --> 0:01:09.080 following these Can you say whatever Core I called? Oh yeah, 0:01:09.120 --> 0:01:10.959 I did. I did have this in the intro. Ever 0:01:11.000 --> 0:01:13.560 Core I s I. Analyst Glenn Shore called the results 0:01:13.560 --> 0:01:17.880 they quote un characteristic dud. Do you agree? I listen. 0:01:18.240 --> 0:01:20.520 I mean, I think I think there are some positive 0:01:20.720 --> 0:01:24.360 in the results. I think the main negative is costs 0:01:24.600 --> 0:01:28.240 and saw them and had sort of signaled this. UM. 0:01:28.280 --> 0:01:30.440 You know, obviously, as the markets have been tougher this year, 0:01:30.640 --> 0:01:35.319 analysts have been expecting, including myself, some of the competitive 0:01:35.440 --> 0:01:38.839 compensation pressures to ease a bit, and that just has 0:01:38.880 --> 0:01:40.959 not happened as much as we would have thought. I 0:01:40.959 --> 0:01:45.920 think part of that is the boutiques are hiring. I 0:01:45.959 --> 0:01:48.360 think that Wall Street has been slow to throw in 0:01:48.400 --> 0:01:52.040 the towel on UM invested banking fees, even though we've 0:01:52.080 --> 0:01:55.559 had UM it was like the worst equities year since 0:01:55.720 --> 0:01:59.440 in twenty years. UM. It was a tough it was 0:01:59.240 --> 0:02:03.600 that was a characteristic UM. But it doesn't. Yeah, And 0:02:03.640 --> 0:02:06.840 so when I look at the revenue line. They're trading. 0:02:07.040 --> 0:02:08.639 We you know, we look at their trading just to 0:02:08.680 --> 0:02:11.480 see how their market share is going. That they still 0:02:11.480 --> 0:02:14.520 earn more from trading than anyone else. That's a for business. 0:02:14.600 --> 0:02:17.600 It's they've stuck to that franchise even when others have 0:02:17.720 --> 0:02:21.359 pulled back, they're continuing to gain chair and their advisory revenue. 0:02:21.400 --> 0:02:24.120 As as we said, fees are down, like you know, 0:02:24.120 --> 0:02:27.959 they're about half, but within fees, Goldman is the advisory 0:02:28.360 --> 0:02:32.760 fee leader and revenue there was much more resilient. We thought. 0:02:32.800 --> 0:02:35.559 So those are the two positives that they are overwhelmed 0:02:35.600 --> 0:02:39.040 by the cost side of things and the returns um 0:02:39.080 --> 0:02:43.520 you know, single digit returns is not something that investors 0:02:43.520 --> 0:02:44.880 want to say some One of the things I always 0:02:44.880 --> 0:02:46.960 wondered too is, you know, we had Morgan Stanley right 0:02:47.000 --> 0:02:49.840 that seemed to do really well. Today. I think of JP, 0:02:49.919 --> 0:02:52.560 Morgan b of A, Wells like last week. They're not 0:02:52.639 --> 0:02:55.200 all apples to apples. We know that. So I guess, 0:02:55.280 --> 0:02:57.960 how do you look at Goldman's say yeah, they were 0:02:58.040 --> 0:03:01.720 just fine, or like, how do you characterize it? So 0:03:01.760 --> 0:03:04.160 I would say it's kind of the bigger, broader backdrop. 0:03:04.280 --> 0:03:07.920 So so if we look across the core themes. Uh, 0:03:08.120 --> 0:03:11.080 you know, in general, trade fees were very weak. Goldman 0:03:11.120 --> 0:03:14.000 did better on that UM and Goldman did better on 0:03:14.040 --> 0:03:16.280 the trading side of things. So those are their core businesses. 0:03:16.360 --> 0:03:19.840 So UM fixed strong equities week, fees week are the 0:03:19.840 --> 0:03:22.959 themes of the quarter. Relative to that UM, I would 0:03:23.000 --> 0:03:25.799 say Goldman did a little bit better. JP, Morgan did 0:03:25.800 --> 0:03:29.080 what worse? Morgan Stanley mixed UM as I said, the 0:03:29.120 --> 0:03:31.359 costs were really the big negative for Goldman. That that's 0:03:31.360 --> 0:03:33.240 really negative. We're gonna want to hear more about that 0:03:33.240 --> 0:03:37.480 investor day, Morgan Stanley. UM, it was really about their 0:03:37.520 --> 0:03:40.360 wealth business and that interest income, which was really disappointing 0:03:40.440 --> 0:03:43.520 last week, holding up better than expected. And of course 0:03:43.560 --> 0:03:46.800 we know it's all about the act. You know, how 0:03:46.840 --> 0:03:50.280 are they how do they do versus expectations? And so 0:03:50.440 --> 0:03:52.800 I think a lot of that is also the setup 0:03:52.920 --> 0:03:55.200 also relates to how the stocks are reacting. How are 0:03:55.280 --> 0:03:57.760 costs still such an issue right now? Allison, because I 0:03:57.760 --> 0:03:59.560 thought we were at a point where you know, these 0:03:59.560 --> 0:04:04.320 companies are you know, they're saying okay, well Goldman for example, 0:04:05.040 --> 0:04:09.200 people right, people getting laid off, and then you know 0:04:09.280 --> 0:04:11.720 you have other companies out there doing layoffs as well, 0:04:11.800 --> 0:04:15.600 So it's not exactly you know, end of one in 0:04:15.680 --> 0:04:18.760 terms of the fight for talent, So it's not. But 0:04:18.839 --> 0:04:21.200 we also did see, um, you know, we saw the 0:04:21.200 --> 0:04:24.880 competitive cost parcture. Pressure is also at JP Morgan, um 0:04:24.920 --> 0:04:28.480 also at Morgan Stanley. We're seeing it, just not as acute. 0:04:28.839 --> 0:04:32.960 And I think it is because um, as I said, so, 0:04:33.040 --> 0:04:36.919 we heard a lot about the Goldman job cuts that 0:04:37.240 --> 0:04:40.760 did not happen until this year, So that's event they 0:04:40.839 --> 0:04:45.360 did say, Um, you know, it's something like uh, you know, 0:04:46.360 --> 0:04:48.440 I want to say four hundred or five hundred million 0:04:48.560 --> 0:04:51.560 of severance expenses. I don't recall the exact number of hand, 0:04:51.880 --> 0:04:54.520 but adding to some cost saves and all of that 0:04:54.560 --> 0:04:57.760 will come into effect this year. They're having an investor 0:04:57.839 --> 0:04:59.440 day at the end of February. I think we'll hear 0:04:59.560 --> 0:05:03.039 a lot more on that and then, um, it's just that, 0:05:03.160 --> 0:05:05.840 even though there are some pressures using right, the the 0:05:06.640 --> 0:05:11.400 hiring pressure from fintech is not as acute. Obviously, they're 0:05:11.400 --> 0:05:13.320 their cost of capital has gone up a lot. Things 0:05:13.320 --> 0:05:15.320 are tougher there. It's like almost every other day we're 0:05:15.320 --> 0:05:18.479 hearing about fintech layoffs, right, But macro hedge funds did 0:05:18.560 --> 0:05:21.320 very well last year, so there's still competition from from 0:05:21.360 --> 0:05:23.320 those firms. And then, as I said, if you look 0:05:23.360 --> 0:05:26.480 at the boutique carring firms and there's a lot more 0:05:26.520 --> 0:05:29.880 of those companies that are public now. Um, the pressure 0:05:29.920 --> 0:05:31.839 is still on and it's not like you know, crypto 0:05:31.839 --> 0:05:34.200 firms are coming out stealing workers like they were a 0:05:34.200 --> 0:05:35.960 couple of years ago. But I do think about you 0:05:36.040 --> 0:05:38.560 got an MBA Columbia, like I I think about do 0:05:38.640 --> 0:05:41.120 people still get an m b A and say I 0:05:41.120 --> 0:05:42.320 want to go to Goldman, I want to go to 0:05:42.400 --> 0:05:46.320 JP Morgan or maybe maybe not? Like is it different 0:05:46.400 --> 0:05:48.240 so that they do have to compete that much more? 0:05:48.600 --> 0:05:51.599 I think they. I think they do. But I would 0:05:51.640 --> 0:05:55.479 say that, you know, perhaps versus a couple of years 0:05:55.480 --> 0:05:57.520 ago we talked about you know, you talked about crypto, 0:05:58.040 --> 0:06:02.000 maybe the job opportunity is intact, might not seem so lucrative. 0:06:02.520 --> 0:06:06.440 Stock options are a little less attractive. Um coming off 0:06:06.480 --> 0:06:10.200 a year like last year. Um, And certainly the past 0:06:10.240 --> 0:06:13.719 doesn't guarantee the future. But um, but but I think 0:06:13.760 --> 0:06:16.480 that that does, you know, the most recent performance does 0:06:16.520 --> 0:06:19.840 tend to stick into people's heads. Goldman and JP Morgan 0:06:19.880 --> 0:06:22.960 will always give statistics about how competitive it is to 0:06:23.040 --> 0:06:28.440 work for their firms, and certainly across Wall Street, it's 0:06:28.839 --> 0:06:31.680 the numbers like, yeah, I think, I think, but I 0:06:31.720 --> 0:06:34.080 do think it might be Goldman or it was it's 0:06:34.080 --> 0:06:36.080 one of the firms that has given that staff that 0:06:36.120 --> 0:06:38.279 they're harder to get into than some of the IVY leagues. 0:06:38.600 --> 0:06:41.600 So we've heard from four banks last week, two big 0:06:41.600 --> 0:06:45.360 banks today. How would you characterize in a few sentences 0:06:45.880 --> 0:06:49.320 the commonalities between how these companies are seeing three in 0:06:49.320 --> 0:06:52.280 the environment, costs are going to continue to be a 0:06:52.320 --> 0:06:56.520 pressure and something that has to matter and not just compensation. 0:06:56.600 --> 0:06:58.680 So we talked a lot about in the last few 0:06:58.680 --> 0:07:02.960 men's competition but compensation, but there's also inflation and there's 0:07:03.000 --> 0:07:06.920 also technology spending. Um, you know, banks have to invest 0:07:06.960 --> 0:07:11.360 to compete. But then there is this question of business mixed. 0:07:11.360 --> 0:07:13.840 So net interest income, even though there was some disappointment 0:07:13.920 --> 0:07:17.280 in the guidance, some people were disappointed, still growth, they're 0:07:17.280 --> 0:07:20.000 still expecting very good growth in net interest income after 0:07:20.520 --> 0:07:26.040 amazing growth that we saw. So yeah, so there's there's sorry, 0:07:26.840 --> 0:07:29.000 Like there's a pretty big top line to fund that 0:07:29.200 --> 0:07:33.320 bottom line. But I think the differences who has you know, 0:07:33.400 --> 0:07:36.440 the companies that are more Main Street versus Wall Street. Right, 0:07:36.520 --> 0:07:39.440 so mainStreet interest income, there's a lot more to fund 0:07:39.480 --> 0:07:42.760 those costs. That makes your overall profitability look better. JP 0:07:42.800 --> 0:07:46.640 Morgan had huge costs increases last year, huge investments and 0:07:46.720 --> 0:07:49.960 still managed to meet their over the cycle return on 0:07:50.040 --> 0:07:54.000 equity tangile equity target, whereas Goldman Sachs, which is much 0:07:54.040 --> 0:07:57.120 more focused on the markets. Um. You know, they kept 0:07:57.120 --> 0:07:59.320 saying on their call several times today, it's it's the 0:07:59.320 --> 0:08:01.200 first time in a few years that we saw equity 0:08:01.240 --> 0:08:05.120 and bonds both get hit like this, you know. Morgan 0:08:05.200 --> 0:08:07.920 Stanley CEO also say talking about like how many years 0:08:07.920 --> 0:08:10.080 has offend since we saw this inflation, since we saw war. 0:08:10.200 --> 0:08:13.400 So tough time for capital markets, tougher time for the 0:08:13.440 --> 0:08:15.920 two that we reported today. So smart. Alison Williams, Senior 0:08:15.920 --> 0:08:19.240 Global Banks analyst for Bloomberg Intelligence. Right here in studio 0:08:19.800 --> 0:08:23.640 these is Bloomberg Business Week with Carol Messer and Tim 0:08:23.720 --> 0:08:27.680 Stenavic on Bloomberg Radio. Well, the forty one year old 0:08:27.800 --> 0:08:33.040 Winkelvoss twins I believe it's pronouncer Win also known as 0:08:33.120 --> 0:08:36.400 Camera and Cameron and Tyler Uh. They went head to 0:08:36.440 --> 0:08:38.920 head with Facebook founder Mark Zuckerberg, and they are now 0:08:39.000 --> 0:08:42.040 part of the crypto collapse conversation. Now they're going after 0:08:42.120 --> 0:08:44.480 a lot of others. I feel like this story just 0:08:44.520 --> 0:08:46.720 as a reminder tim of kind of all the cryptic 0:08:46.800 --> 0:08:48.559 kids out there saying I didn't do it, I didn't 0:08:48.559 --> 0:08:52.400 do it. Well, that's exactly what Max Chafkin, Bloomberg Business 0:08:52.440 --> 0:08:54.800 We calumnist writes about it. He notes that the winkel 0:08:54.840 --> 0:08:57.839 By are the latest crypto founders to dodge blame. Let's 0:08:57.840 --> 0:08:59.960 get into the story. We got Max on zoom along 0:09:00.000 --> 0:09:02.240 with the editor of Bloomberg Business Week, Joel Webber. Joel's 0:09:02.280 --> 0:09:05.600 with us in our Bloomberg Interactive Broker's studio. Joel. It's 0:09:05.640 --> 0:09:08.960 it's all good in crypto when the price keeps going up. 0:09:09.320 --> 0:09:12.240 All good, all good, and then it gets just more entertaining, 0:09:12.280 --> 0:09:15.920 I guess. Uh. And and look the winkle Vye plural 0:09:16.200 --> 0:09:19.840 um boy. They just I love them so much, like 0:09:19.880 --> 0:09:23.439 it never gets old. Uh And obviously um yeah they 0:09:23.679 --> 0:09:26.800 we we know them for for their Facebook days, but 0:09:26.880 --> 0:09:29.320 the crypto stuff. They went all in on crypto. They 0:09:29.320 --> 0:09:33.360 went talking their band, Well there's the band too, And 0:09:33.880 --> 0:09:37.600 but they you know what Max, Max right, fall off 0:09:37.600 --> 0:09:41.240 your chair. They're laughing. Um, is that you know they're 0:09:41.360 --> 0:09:44.840 in a they're in the spotlight. Now they've got um 0:09:45.280 --> 0:09:47.960 uh sec breathing down them and they have chosen to 0:09:48.520 --> 0:09:52.400 go scorched earth on everyone. Yeah, and we're seeing this 0:09:52.480 --> 0:09:56.439 a lot from from the world of crypto basically, uh, 0:09:56.480 --> 0:09:59.280 you know, starting starting with standbank than free to of 0:09:59.280 --> 0:10:02.800 course dropped aw sub stack uh last week Uh, kind 0:10:02.800 --> 0:10:07.120 of going down the line and the winkelvye uh bosses it. 0:10:07.280 --> 0:10:09.760 It is kind of one of the richer ones, just 0:10:09.840 --> 0:10:13.520 because they spent you know, basically the last few years 0:10:13.520 --> 0:10:17.280 when they weren't rocking out in their band um, which 0:10:17.400 --> 0:10:21.640 is topic we should we should, we should explore. UM. 0:10:21.800 --> 0:10:24.720 They were talking about just how sober minded they were. 0:10:24.760 --> 0:10:27.960 You know, they had these ads um that that you know, 0:10:28.000 --> 0:10:30.600 we're all over New York that said the revolution needs rules. 0:10:30.800 --> 0:10:33.359 They were talking about how they were the only regulated 0:10:33.400 --> 0:10:37.679 crypto exchange UM, which was true, um, although they weren't 0:10:37.679 --> 0:10:41.520 regulated in every aspect. And this product Gemini Earn, which 0:10:41.760 --> 0:10:45.559 you know we Business Week wrote about this and similar 0:10:45.600 --> 0:10:48.800 things two years ago as as a potential area of 0:10:49.160 --> 0:10:52.840 you know, exposure regulatory risk and so on, and you know, 0:10:52.880 --> 0:10:56.040 the SEC has been investigating, and of course they finally 0:10:56.360 --> 0:11:00.280 moved Cameron and Tyler, the two Winkle boss Brow There's 0:11:00.480 --> 0:11:02.520 are acting as if this was sprung on them. This 0:11:02.600 --> 0:11:05.160 was some kind of uh you know, political act by 0:11:05.160 --> 0:11:07.160 the SEC, which I'm sure you know, I'm sure on 0:11:07.160 --> 0:11:10.320 some levels political. You know, we're talking about the government here, um, 0:11:10.320 --> 0:11:12.240 But this is something that was a long time coming. 0:11:12.280 --> 0:11:14.760 This is not a surprise. The SEC had gone after 0:11:15.440 --> 0:11:18.960 very similar groups, including one that the Winkelvoss you know, 0:11:19.000 --> 0:11:21.120 had invested in. Uh So, so I don't think we 0:11:21.120 --> 0:11:22.840 should be surprised by this at all. Okay, So, Jim 0:11:22.840 --> 0:11:26.560 and I earn actually is the root of where the 0:11:26.600 --> 0:11:29.800 current ire is directed. Right, So, so what what's going 0:11:29.840 --> 0:11:31.959 on there? What? What do they what do the government 0:11:32.000 --> 0:11:37.480 say they were doing? Well, the government has gone after Gemini, 0:11:37.640 --> 0:11:40.880 which is the Winkel Bross Voss brothers, and Genesis, which 0:11:41.000 --> 0:11:43.920 is Barry Silbert's digital currency group is the is the 0:11:43.960 --> 0:11:48.480 parent um and they together, according to the government, we're 0:11:48.679 --> 0:11:51.559 basically offering on registered securities. What they were doing is 0:11:51.600 --> 0:11:54.600 offering this product that kind of looked like a bank account. 0:11:54.600 --> 0:11:56.720 They would sort of talk about it as interest rate 0:11:56.880 --> 0:11:59.400 and and talk about it as a you know, competitor 0:11:59.480 --> 0:12:01.760 to like your savings account. Of course the interest rates 0:12:01.760 --> 0:12:04.199 were much higher. It was not a bank, and as 0:12:04.200 --> 0:12:06.640 the SEC is saying, you know, it was not security either, 0:12:06.800 --> 0:12:09.640 and and so that's that's where we are now. So 0:12:09.679 --> 0:12:12.400 I guess the question is what happens since all these 0:12:12.480 --> 0:12:14.280 folks are kind of like, you know, I don't even 0:12:14.280 --> 0:12:17.040 want to call them frenemies anymore. They're they're really going 0:12:17.080 --> 0:12:19.680 after one another. And these are people who were, you know, 0:12:19.760 --> 0:12:21.719 in the world of in the context of crypto, you know, 0:12:21.760 --> 0:12:24.360 quote unquote longtime partners, Max. How do you see this 0:12:24.440 --> 0:12:26.080 kind of thing shaking out? And it's also is this 0:12:26.160 --> 0:12:29.359 kind of when in the early life cycle of new technologies, 0:12:29.400 --> 0:12:31.640 because you've written about this this a lot in your 0:12:31.640 --> 0:12:35.200 books and other things, is this kind of how things work? Well? 0:12:35.240 --> 0:12:37.400 I do think they're parallels here in terms of the 0:12:37.600 --> 0:12:40.120 like the approach that that these crypto guys followed to 0:12:40.200 --> 0:12:43.240 two Silicon Valley um. You know, when I think back 0:12:43.280 --> 0:12:46.240 to Uber right where Uber basically rolled out this um 0:12:46.520 --> 0:12:49.560 service that was largely illegal, uh, you know in most 0:12:49.559 --> 0:12:54.000 localities and essentially dared regulators to make it legal. Um. 0:12:54.040 --> 0:12:57.120 And I think the crypto guys, including the Winklevoss brothers, 0:12:57.360 --> 0:12:59.920 basically did the same thing. And and they have been 0:13:00.000 --> 0:13:04.120 in for years kind of maneuvering and trying to create 0:13:04.360 --> 0:13:08.600 basically trying to romance uh DC while also maybe putting 0:13:08.600 --> 0:13:11.160 pressure on d C, playing regulators off, you know, off 0:13:11.200 --> 0:13:12.800 one another. We saw a lot of this from Sam 0:13:12.840 --> 0:13:15.559 bankmun Freed. And now that the music has stopped, now 0:13:15.600 --> 0:13:19.120 that we've seen some serious issues, we have a real slowdown. 0:13:19.160 --> 0:13:22.000 We have you know, you know, investor pain that you know, 0:13:22.040 --> 0:13:25.720 people lost money that who probably didn't deserve it. Um. 0:13:25.760 --> 0:13:29.000 Now that story is getting harder, and I think that's 0:13:29.040 --> 0:13:32.040 part of why they're getting more aggressive, basically looking you know, 0:13:32.200 --> 0:13:34.400 hopefully the government will focus on the other guy. That's 0:13:34.480 --> 0:13:36.920 that's the basic idea here. You know what, Matt, I'm 0:13:36.960 --> 0:13:40.360 curious Max, rather, is there something generational you think going 0:13:40.400 --> 0:13:42.960 on in terms of kind of a younger bunch of 0:13:42.960 --> 0:13:46.160 folks in this industry and and very involved in developing it. 0:13:46.360 --> 0:13:50.800 Is there something like I said, generational that causes so 0:13:50.800 --> 0:13:52.680 many to say I didn't do it, you did it, 0:13:52.760 --> 0:13:57.600 or or just point the finger and it wasn't. I mean, 0:13:58.440 --> 0:13:59.920 I don't know if it's I don't know if it 0:14:00.080 --> 0:14:03.240 is generational, or if it's just a response to like, 0:14:03.600 --> 0:14:06.400 this looks bad. I mean, you know, you've got I 0:14:06.679 --> 0:14:09.839 don't really know. The Winklevoss brothers kind of frame their 0:14:09.840 --> 0:14:12.560 company as this super safe, super secure thing, and now 0:14:12.600 --> 0:14:15.640 you have customers, hundreds of thousands of customers who can 0:14:15.720 --> 0:14:19.600 access their money, and so I don't I think maybe strategically, 0:14:20.040 --> 0:14:21.960 you know, this is their their only option is to 0:14:21.960 --> 0:14:24.120 try to try to pin it on somebody else. We've 0:14:24.200 --> 0:14:25.480 you know, we I've talked about this, I think on 0:14:25.520 --> 0:14:28.160 this show earlier. You know, maybe it's this SECS fault. 0:14:28.160 --> 0:14:29.760 Maybe it's Sam Meg than Free. It's fault. It's gotta 0:14:29.760 --> 0:14:31.800 be somebody's fault, as long as it's not me, um. 0:14:31.840 --> 0:14:34.760 And I think really that's to deal with the brand 0:14:34.800 --> 0:14:37.440 damage that they've caused themselves. And and you know, and 0:14:37.440 --> 0:14:39.880 this is of course some of this stuff Um the 0:14:39.880 --> 0:14:43.120 Winkle boss Uh brothers could not control. However, when you 0:14:43.200 --> 0:14:46.840 promote something as safe and which which I think they did, 0:14:47.120 --> 0:14:49.000 and you and your customers lose your money, I mean, 0:14:49.040 --> 0:14:51.720 I think it's reasonable ask you know what happened. Okay, 0:14:51.720 --> 0:14:53.720 what I really want to know, Max has how much 0:14:53.880 --> 0:14:57.320 of their bands music you listen to to to report 0:14:57.360 --> 0:15:01.600 on this story? You know, I did not suffer that much, 0:15:01.600 --> 0:15:04.440 I'll say, but although I have listened listen to some tunes, 0:15:04.960 --> 0:15:07.560 I guess this was part of a you know, n 0:15:07.640 --> 0:15:10.880 f T promotion scheme. I tried to figure out, like, 0:15:10.920 --> 0:15:13.920 were they paying their uh the audiences because the music 0:15:13.960 --> 0:15:16.280 sounds so bad. It's hard to imagine somebody like going 0:15:16.360 --> 0:15:19.120 to you know, you know, going to the show on purpose. 0:15:21.600 --> 0:15:25.000 They're they're billionaires and and maybe it's possible I guess 0:15:25.040 --> 0:15:26.800 that the allure here was like, Wow, we're going to 0:15:26.880 --> 0:15:30.000 see these like cryptomobiles pretend to be rock stars, and uh, 0:15:30.200 --> 0:15:32.360 it's hard to imagine that would draw huge crowds. But 0:15:32.600 --> 0:15:35.600 either way, I mean, it really feels unfortunate. It feels 0:15:35.640 --> 0:15:37.640 like at a time when they really should have been 0:15:37.680 --> 0:15:41.000 paying attention, you know, to things like risk and and 0:15:41.080 --> 0:15:42.440 you know what they were doing their money. They were 0:15:42.480 --> 0:15:44.560 you know, rocking out, and we all need to rock 0:15:44.600 --> 0:15:48.400 out sometimes, I guess, But but again it's not the 0:15:48.440 --> 0:15:51.000 best look at this. Okay, if I was going to 0:15:51.160 --> 0:15:56.440 rock out, which cover would you recommend uh that I 0:15:56.520 --> 0:16:01.240 check out first, just quickly the journey. Don't stop. Believe 0:16:01.880 --> 0:16:04.960 I was hoping. It's a little it's it's a little bit. 0:16:05.000 --> 0:16:09.520 I'll be back in, but we'll put We're gonna put 0:16:09.520 --> 0:16:12.600 out the link alright. This, by the way, is today's 0:16:12.640 --> 0:16:16.120 Bloomberg Business Week daily newsletter. In the newsletter, it's also 0:16:16.520 --> 0:16:19.320 in the upcoming new issue of Bloomberg Business Week. Thanks 0:16:19.360 --> 0:16:22.760 to Max and to Joel. You're listening to Bloomberg Business 0:16:22.800 --> 0:16:26.680 Week with Carol Messer and Tim Stenovic on Bloomberg Radio. 0:16:27.280 --> 0:16:30.600 One is raising money at an ever rising valuation, the 0:16:30.640 --> 0:16:32.680 other has been pummeled by the market. One as a 0:16:32.760 --> 0:16:35.640 highly capable number two exact keeping it on track, the 0:16:35.720 --> 0:16:39.200 other under fire about succession planning, What are we talking about? 0:16:39.280 --> 0:16:41.840 SpaceX and Tesla. First of all, that's what we're talking about, 0:16:41.840 --> 0:16:45.440 and they both count elon Musk CEO. Here's here's the thing, though, 0:16:45.480 --> 0:16:48.240 Whereas Tesla has withered since the Boss embarked on his 0:16:48.320 --> 0:16:52.160 takeover of Twitter, SpaceX is flourishing. Some even suggest this 0:16:52.240 --> 0:16:55.120 is because of, rather than in spite of its CEO 0:16:55.200 --> 0:16:58.560 playing a less active role. These are all the words 0:16:58.560 --> 0:17:01.360 of Lauren Grush she's a blue Berg News space reporter. 0:17:01.680 --> 0:17:04.080 She's got any feature out today, it's a fantastic one, 0:17:04.119 --> 0:17:07.040 talking all about what's going on at SpaceX and the 0:17:07.080 --> 0:17:10.400 success that the company has had of late and even 0:17:10.480 --> 0:17:12.360 over the last few years. She joins us now via 0:17:12.440 --> 0:17:15.280 zoom from Austin, Texas. Lauren, good to have you with 0:17:15.400 --> 0:17:21.520 us this afternoon. So why is SpaceX doing so well? Well? 0:17:21.560 --> 0:17:24.719 I think the biggest thing is that, you know, SpaceX 0:17:24.720 --> 0:17:28.200 has really well positioned executives. They have a very capable 0:17:28.359 --> 0:17:32.320 president and CEO, Gwen Shotwell, and they also have a 0:17:32.320 --> 0:17:34.840 lot of vps that are already in place with these 0:17:35.000 --> 0:17:38.320 various big projects that they're working on. I make a 0:17:38.359 --> 0:17:41.720 note of Mark Jenkoza recently took over Starship, which is 0:17:42.000 --> 0:17:46.520 SpaceX is big, big program to create a massive new 0:17:46.600 --> 0:17:49.840 vehicle to send humans to the Moon and Mars. And 0:17:49.840 --> 0:17:52.080 it's not just Mark. There are other vps that are, 0:17:52.240 --> 0:17:56.600 you know, in key positions that that standardize the workflow 0:17:56.920 --> 0:18:01.000 and make sure the company is running and Elon isn't 0:18:01.320 --> 0:18:04.199 isn't around, you know. It's so this is such an 0:18:04.200 --> 0:18:06.760 interesting story because I do feel like is this almost 0:18:06.840 --> 0:18:09.040 a b school case study of like Okay, here's what 0:18:09.119 --> 0:18:11.480 Ellen can do when he puts you to certain people 0:18:11.480 --> 0:18:14.280 in charge, because he has so much under you know, 0:18:14.520 --> 0:18:18.240 his umbrella at this point, Um, what is interesting about 0:18:18.280 --> 0:18:23.200 the executives who brought them in? Was it all Ellen's doing? Yeah? 0:18:23.240 --> 0:18:26.000 I mean these are handpicked by Elon and and let's 0:18:26.080 --> 0:18:28.560 let's be clear here. I mean this isn't to say 0:18:28.560 --> 0:18:31.960 that Ellen doesn't have a profound influence on SpaceX and 0:18:32.040 --> 0:18:35.200 SpaceX culture. I mean he is the one at the 0:18:35.240 --> 0:18:38.160 set it in the article, He sets the long term vision, 0:18:38.200 --> 0:18:41.159 the long term goals. I mean the express purpose of 0:18:41.240 --> 0:18:44.040 SpaceX is to get some Mars right, that is still 0:18:44.200 --> 0:18:48.119 very much the long term goal of the company. And 0:18:48.240 --> 0:18:52.080 when it comes to various design design decisions, you know 0:18:52.200 --> 0:18:56.200 Ellen makes puts his stamp on those things as well. Um, 0:18:56.240 --> 0:18:59.800 you know the push to reuse rockets, um, you know, 0:19:00.040 --> 0:19:02.879 even he and that, and it also has a lasting 0:19:03.000 --> 0:19:06.120 impact on the design of certain vehicles. Right. One former 0:19:06.160 --> 0:19:08.840 employee was telling me that, you know, there there were 0:19:08.880 --> 0:19:12.919 plans to propulsively land the Crew Dragon, and while that 0:19:13.040 --> 0:19:15.840 was scrapped, those plans are still in the bones of 0:19:15.880 --> 0:19:19.960 that vehicle. So space So Ellen still is very critical 0:19:19.960 --> 0:19:22.879 when it comes to guiding the company and also the 0:19:22.920 --> 0:19:25.080 people that he puts in charge. But when it comes 0:19:25.080 --> 0:19:28.320 to the day to day interactions the design and you know, 0:19:28.640 --> 0:19:32.600 scheduled decisions, that's where um, you know, he's not as 0:19:32.640 --> 0:19:36.040 necessary to make move those things forward. So how is 0:19:36.119 --> 0:19:38.240 And I know this is a story about SpaceX more 0:19:38.280 --> 0:19:41.119 so than it is about about Tesla or about Twitter, 0:19:41.200 --> 0:19:44.840 but but how does that management style differ from what 0:19:44.960 --> 0:19:47.439 Musk shows at the other companies that he's at the 0:19:47.440 --> 0:19:50.920 helm of. Well, I'm not as well versed in Tesla, 0:19:51.000 --> 0:19:53.000 but I have been following the Twitter stuff, and a 0:19:53.080 --> 0:19:56.680 lot of the company employees that I spoke to say that, 0:19:56.880 --> 0:19:59.600 you know, watching the Twitter stuff play out online, and 0:19:59.640 --> 0:20:02.920 the me feels very similar to some of the things 0:20:02.920 --> 0:20:05.920 that happened at SpaceX. Is a lot of chaos when 0:20:05.920 --> 0:20:11.000 it comes to meetings being scheduled and then canceled. Also, um, 0:20:11.040 --> 0:20:16.120 you know, just him inserting himself into things and making demands. 0:20:16.160 --> 0:20:18.040 You know, there was a lot of talk about how 0:20:18.080 --> 0:20:23.320 he likes to make design decisions that you know, create 0:20:23.359 --> 0:20:25.920 all of this work, like something might have too many wires. 0:20:26.119 --> 0:20:30.080 He's always in service of simplifying design, whether or not 0:20:30.160 --> 0:20:32.520 that that is actually helpful to the design at the 0:20:32.720 --> 0:20:35.560 in the long term is up for debate. But you know, 0:20:35.640 --> 0:20:37.280 he likes to come in and say, you know, let's 0:20:37.320 --> 0:20:40.240 get rid of this part, let's get rid of this component, 0:20:40.320 --> 0:20:42.960 let's get rid of these wires, and then that creates 0:20:42.960 --> 0:20:45.560 a lot of work for people. And then sometimes that 0:20:45.600 --> 0:20:47.800 stuff needs to be added back in at the end 0:20:47.800 --> 0:20:50.760 of the day, and and that work will have all 0:20:50.800 --> 0:20:53.840 been kind of reversed in the law. So Lord, can 0:20:53.880 --> 0:20:56.439 we go as far as to say, um, the folks 0:20:56.440 --> 0:20:58.239 at space X are kind of happy that he's been 0:20:58.280 --> 0:21:01.760 distracted with Twitter right now. Obviously didn't speak to every 0:21:01.800 --> 0:21:06.160 single employee at SpaceX, but of the people I spoke with, yes, 0:21:06.160 --> 0:21:09.119