Speaker 1: This is Bloomberg Business Week Inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: gloom Ole Business Finance and tech news. The Bloomberg Business
Speaker 1: Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 2: Hi, everyone, Welcome to the Bloomberg Business Week Weekend Podcast. Well,
Speaker 2: a lot going on, and this week we found ourselves
Speaker 2: at Schwab Impact twenty twenty three. It's a gathering of
Speaker 2: investment professionals catering to the advisory world in Philadelphia. So
Speaker 2: we were really surrounded by registered investment advisors trying to
Speaker 2: assess today's market environment as geopolitical conflicts in global economic
Speaker 2: uncertainty just seemed to be deepening. It was such a
Speaker 2: great environment to be dropped into with so much going on,
Speaker 2: trying to figure out the way forward for the world broadly,
Speaker 2: but certainly for the investment world.
Speaker 3: Carol.
Speaker 4: It was also the biggest earnings week of the quarter,
Speaker 4: now behind us, as we saw nearly forty percent of
Speaker 4: S and P five hundred companies were And at this
Speaker 4: hour we're going to talk to a pair of CEOs
Speaker 4: about their latest results and what they tell us about
Speaker 4: the health of the American consumer. We're going to talk
Speaker 4: to the heads of Mattel and Whirlpool in just a
Speaker 4: few minutes.
Speaker 2: Before we get there, we do want to start with
Speaker 2: a look at what's going on in Israel, Gaza and
Speaker 2: in Europe as well. The war between Israel and Hamas
Speaker 2: is now into its fourth week, while the war in
Speaker 2: Ukraine is now staggering twenty months old, and our first
Speaker 2: guest helps us understand the historical significance of what is
Speaker 2: playing out overseas.
Speaker 4: Ed Price is a former British trade official who represented
Speaker 4: the UK government to Wall Street, who has also now
Speaker 4: advised members of the European and British parliaments, and who
Speaker 4: now serves as principal for Geopolitical Forecasting at Ergo. It's
Speaker 4: a global intelligence consulting and forecasting firm, and it correctly
Speaker 4: predicted a Russian invasion back in early twenty twenty two.
Speaker 4: We spoke with him Monday from New York.
Speaker 5: I've been thinking about the First World War, and whenever
Speaker 5: you study the First World War, of course you have
Speaker 5: to remember that people were surprised and that the alliances
Speaker 5: that were underpinning the relationships between states were invisible before
Speaker 5: nineteen fourteen, before the conflict began, but then very rapidly
Speaker 5: became clear. And so what I'm thinking about is what
Speaker 5: are the alliances? What are the fault lines between powers?
Speaker 5: And if you go around your mental mapp of the
Speaker 5: Middle East, Israel is in a bit of a pickle.
Speaker 1: Right.
Speaker 5: You've got Oman and Yemen. I don't think that they're friendly.
Speaker 5: You've got Lebanon, You've got Syria, You've got above that Turkey,
Speaker 5: who knows what they'll do in this situation. They don't
Speaker 5: seem like they want to do anything to offend wider
Speaker 5: Muslim opinion. You've got Saudi Arabia now, which of course
Speaker 5: has said that it's not going to do this deal
Speaker 5: or we hear that it might not want to do
Speaker 5: this deal with Israel. And then of course behind everything Iran.
Speaker 4: So what's the question with Iran? I mean, how does
Speaker 4: the US navigate.
Speaker 5: That US has to look at Iran now as essentially
Speaker 5: a franchise of Russia, because the way that the Iranians
Speaker 5: have timed their support for Hamas and who knows also
Speaker 5: possibly his BLA can only be something that benefits Putin
Speaker 5: and the Kremlin and their endeavors in Ukraine. I mean,
Speaker 5: let's look at this rationally, all of our attention has
Speaker 5: shifted away from the European to the theater in the
Speaker 5: Middle East. And whilst I can't prove any collaboration between
Speaker 5: Russia and Iran, I would bet my bottom dollar that
Speaker 5: there is one.
Speaker 2: I want to go to this piece you did in Barns,
Speaker 2: which you've you've touched on some of this, but this
Speaker 2: idea of this democracy trap and talk to us a
Speaker 2: little bit about it, because it sounds like what happens
Speaker 2: is then we kind of really do miss either the
Speaker 2: development of certain strategic alliances, and it can obviously run
Speaker 2: a foul as maybe we're already seeing as it's played
Speaker 2: out in this world, and then maybe the last couple
Speaker 2: of years or so.
Speaker 5: Well, you know me, Carol, I'm always desperately seeking some
Speaker 5: sort of analytical fame and make furtive efforts at catchy
Speaker 5: articles and titles and so on. The democracy trap is
Speaker 5: simply the idea that you're damned if you do and
Speaker 5: you're damned if you don't. When you're a democracy, if
Speaker 5: you do not punish your enemies in a way that
Speaker 5: other empires and other autocracies in the past have shown
Speaker 5: as effective. Then you are, on the one hand, maintaining
Speaker 5: your morality as democracy, but on the other hand, you're
Speaker 5: letting them go. You're letting them get away with things.
Speaker 5: And flip that around. If democracies do go ahead and
Speaker 5: apply firepower to their blood enemies, people turn around, as
Speaker 5: I said before, and say, well, what kind of democracy
Speaker 5: are you if you don't care about human rights? And
Speaker 5: I'm afraid we've now tangled ourselves up, as the West,
Speaker 5: as democracies more generally, into a position. And perhaps this
Speaker 5: is a legacy of the Vietnam War. Perhaps it's a
Speaker 5: legacy of the Afghan Afghanistan War. I don't know, but
Speaker 5: we don't seem willing to really hit our enemies hard.
Speaker 5: Now that's a problem because at some point we're going
Speaker 5: to have to, and very unfortunately, it appears that the
Speaker 5: next time that we're going to have to will be
Speaker 5: her mass Har mass has edit itself in a civilian population.
Speaker 5: Some of those people support Hamas, a lot of them don't,
Speaker 5: and half of them are children. So again let's go
Speaker 5: back to Putin. He would like nothing more than to
Speaker 5: see Israel, the US, the UK and others, whether in
Speaker 5: reality or in perception, doing things that he is doing
Speaker 5: in Ukraine so that he can point to us and
Speaker 5: say there's no difference.
Speaker 2: So here I want to take the step of you
Speaker 2: know some of your past history where you represent represented
Speaker 2: the UK government to Wall Street and the US, and
Speaker 2: I think about ed the tricky relationship of global companies
Speaker 2: to China, to the Middle East, Saudi Arabia. Right, we
Speaker 2: know the atrocities that have happened, and yet we continue
Speaker 2: to do business. And I understand the thinking of well,
Speaker 2: if we're involved, we can help make things better, Okay,
Speaker 2: but that doesn't often happen. So I'm thinking about our
Speaker 2: investment audience who are listening to you, and I'm just thinking, okay,
Speaker 2: So are companies doing what they should be in terms
Speaker 2: of standing up for democracy if we really believe in it?
Speaker 2: Or will they never because they have business interests in
Speaker 2: so many of these difficult regions of the world.
Speaker 5: Well, I don't know if they will or not ever,
Speaker 5: but right now they're not. And sometimes I scratch my
Speaker 5: head in the wee hours when I think about the blood,
Speaker 5: sweat and tears that's gone into ESG and wonder to
Speaker 5: your point, Carol, about where the equivalent is for human
Speaker 5: rights and democracy. I mean human rights and democracy scores, right,
Speaker 5: we have that around the edges. We have a sort
Speaker 5: of center left tradition of protests in some Western countries.
Speaker 5: We have Amnesty International. A lot of business leaders themselves,
Speaker 5: regardless of their politics upright, have integrity and want to
Speaker 5: do the right thing. But we are exposed to countries
Speaker 5: that mistreat their populations. We purchase things that were possible
Speaker 5: made in circumstances that we shouldn't really accept. That's the
Speaker 5: old Nami climb book no logo. But moving on from that,
Speaker 5: we now know about the wigas and other egregious human
Speaker 5: rights issues in the world. So but look, it's very difficult.
Speaker 5: I mean, if we've got, for example, Western financial services
Speaker 5: positively exposed to Chinese growth, if we've got other firms
Speaker 5: in the world, I mean, look at semiconductors that are
Speaker 5: essentially just trying to do business to keep them modern
Speaker 5: economy running. I imagine that they're hoping that the international
Speaker 5: geopolitical outlook will calm down somehow. My fear is that
Speaker 5: it won't, Carol.
Speaker 4: Yeah, I mean I think that's a valid fear given
Speaker 4: what we're seeing, Carol.
Speaker 2: Yeah, it feels like it's just going to get work.
Speaker 2: When you talk about, you know, some similarities from the
Speaker 2: First War World War, like, I just think we're just
Speaker 2: at this very what go ahead to me?
Speaker 4: Well, I was just going to say, and just to
Speaker 4: piggyback on that, Carroll, I mean, it seems like the US.
Speaker 4: You know, some people would argue that the US is
Speaker 4: engaged in a proxy war with Russia. I've heard that,
Speaker 4: and again not necessarily my view, but I've heard that argument,
Speaker 4: and then I would I've heard the argument too, that
Speaker 4: the US is finding itself drawn into this latest conflict
Speaker 4: in the Middle East by actually having a carrier, I
Speaker 4: should say, a military presence there just off the coast, right.
Speaker 5: Right, you are, So maybe we should be talking about Bush, right,
Speaker 5: and both Bush. It's the point because you go for
Speaker 5: War three, maybe just throughround the corner.
Speaker 4: Do you believe that though are you are you being
Speaker 4: facetious or do you believe that.
Speaker 5: I'm not being facetious at all? Now I'm sitting here
Speaker 5: on your radio show. I think that that's absolutely possible.
Speaker 5: I'm very concerned, and you know, you have to be
Speaker 5: careful with these things because like I said in these articles,
Speaker 5: if you're someone who worries, then you're going to get
Speaker 5: accused of crying wolf, and rightly so if you know,
Speaker 5: if things don't go the way that they look, they
Speaker 5: might be going. But let's play it out quickly. You know,
Speaker 5: Israel goes into Gaza, Hisbrala thrusts into the North. There's
Speaker 5: a second, third, four whatever anti fighter it is in
Speaker 5: the West Bank. At the same time, Iran decides, now's
Speaker 5: a good time for some sort of global activation of
Speaker 5: any terror networks they have. Bob's your uncle, right Immediately,
Speaker 5: you've got to get the only real cop in town,
Speaker 5: the only real cop in the world, which is the
Speaker 5: United States involved somehow in the Middle East. Now again,
Speaker 5: if I was an adversary of the United States, I'd
Speaker 5: be thinking, well, all I need to do is a
Speaker 5: third one someplace, and you know I can go and
Speaker 5: take Taiwan.
Speaker 4: That was that Bracey's principle of geopolitical forecasting at ERGO.
Speaker 2: As we mentioned and as you can probably hear from
Speaker 2: the background. This week we broadcast from the Schwab Impact
Speaker 2: twenty twenty three conference in Philadelphia. Coming up, investors juggling
Speaker 2: geo politics with earnings this week, and on that front,
Speaker 2: we talk quarterly results with the CEO of Mattel Inon Crist,
Speaker 2: who also had some thoughts about his native Israel.
Speaker 4: You're listening to Bloomberg Business Week. This is Bloomberg.
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Speaker 2: All right, everybody, as promised, we do have the Mattel's CEO,
Speaker 2: in On Christ, joining us from El Segundo, California. On
Speaker 2: zoom in On, Let's get Barbie because I bet she
Speaker 2: could fix zoom, don't you think so? How are you
Speaker 2: all right?
Speaker 3: Carol's great to be with you.
Speaker 2: It's so great to be with you. I feel like
Speaker 2: I have a million questions. I feel like I want
Speaker 2: to go to a bar, I have a drink with
Speaker 2: you and just sit and talk. I want to start
Speaker 2: with the Israel Hamas conflict. You're born in Israel, studied
Speaker 2: at Tel Aviv University before heading to the West Coast
Speaker 2: of the United States of America. I hope your family
Speaker 2: and friends are safe. I pray that they are safe.
Speaker 2: How are you thinking about all of this right now
Speaker 2: in this conflict? And is there a way to peace
Speaker 2: in that region?
Speaker 3: Yeah, thank you for asking my family. My family is okay.
Speaker 3: My immediate family is okay. But and you know of
Speaker 3: courses in Israeli. This is very personal to me and
Speaker 3: I know too many people who lost loved ones or
Speaker 3: have relatives that have been kidnapped and are now being
Speaker 3: held hostage in Gaza. You know, on behalf of Mattel,
Speaker 3: we condemn the terrorism and atrocities perpetrated by Hamas and
Speaker 3: stand against hate and violence in all forms. We express
Speaker 3: hope for the safety of Israelis and Palestinian children and
Speaker 3: families part in the Israeli Hamas war. As a company.
Speaker 3: Since the Hamas attacks on October seventh, the Mattel Children's
Speaker 3: Foundation has been focused on who many arian work, including
Speaker 3: cash and toy donations with shelters and hospitals who support
Speaker 3: children who are suffering. And we're sitting here all wishing
Speaker 3: for a swift resolution to the war and more peaceful
Speaker 3: times in the future.
Speaker 4: Well, you know, and it's something that you know, people
Speaker 4: who are wow, gosh I mean up to eighty years
Speaker 4: old at this point have dealt with their entire lives
Speaker 4: in that area of the world. And I'm wondering to
Speaker 4: you and not speaking on behalf of Mattel, but just
Speaker 4: getting your thoughts personally, how this ends, if a two
Speaker 4: state outcome is the only solution to ending the conflict
Speaker 4: there once and for all.
Speaker 3: You know, it's a complicated conflict, and we're now sitting
Speaker 3: at a time that is very volatile. We see risk
Speaker 3: of escalation and we just hope for a swift, swift
Speaker 3: resolution and wishing peace for everybody as soon as we can.
Speaker 2: I want to talk about Mattel. I have one more
Speaker 2: questions for you. Do you think Prime Minister Benjamin Netanyah,
Speaker 2: who is not going to be the leader that brings
Speaker 2: lasting peace.
Speaker 3: And this is not the time to get into the
Speaker 3: political discussion right now. Everyone is focused on resolving the situation.
Speaker 3: Israel articulated its priorities. We're all really looking forward for
Speaker 3: the release of the hostages. There are thirty children under
Speaker 3: the edge of sixteen that are being held a captive
Speaker 3: right now, about half the hostages of women, and we
Speaker 3: really believe that this should be resolved as soon as possible,
Speaker 3: and we pray for the release, safety and release of
Speaker 3: all the hostages that are now being held captives.
Speaker 2: You are absolutely right, but we do appreciate you weighing
Speaker 2: in on this because we have talked to you about
Speaker 2: serious issues in the past, so really appreciate this. No
Speaker 2: easy segue, but I do want to talk about the
Speaker 2: business of Mattel. Talk to us about last quarter and
Speaker 2: the outlook. It was a tough day in the equity
Speaker 2: market for you guys. You did talk about tougher industry conditions.
Speaker 2: What are those tougher industry conditions that you guys are
Speaker 2: worried about?
Speaker 3: Or we did see the industry being shot in the
Speaker 3: third quarter and year to date, and as a result,
Speaker 3: we adjusted our expectations and expect and believe the industry
Speaker 3: will decline midst in a digit for the full year.
Speaker 3: But don't you need to remember that this is after
Speaker 3: the industry was up twenty two percent from twenty nineteen
Speaker 3: to twenty twenty two, reaching an all time high. So
Speaker 3: coming off after such a strong increase, especially in a
Speaker 3: challenging microeconomic environment, we believe that this is a reasonable
Speaker 3: situation and doesn't reflect on the strength and resilience of
Speaker 3: the industry long term. This to industry has been growing
Speaker 3: for over ten years and it's a growth category. So
Speaker 3: we feel very good about the industry needs to growth process,
Speaker 3: and even in that environment, even in a softer market,
Speaker 3: Mattel performed very strongly. Our quarter exceeded, our quarterly results
Speaker 3: exceeded expectations. We showed manyful sales boat margin expansion with
Speaker 3: very strong free cash intercourse, we saw consumer dement increasing
Speaker 3: and we continue to outfress the industry.
Speaker 4: I think a lot of investors today, at least sending
Speaker 4: shares down about seven percent, were concerned that you guys
Speaker 4: maintained your full year sales outlook despite all of the
Speaker 4: success of the Barbie movie. So what would have to
Speaker 4: happen inon to bring in more than the one hundred
Speaker 4: and twenty five million dollars expected from the Barbie movie
Speaker 4: and related products? What needs to happen at MATEL or
Speaker 4: in the industry for that to happen or for the consumer?
Speaker 3: I should say, well, while we maintain the top line expectations,
Speaker 3: we increased our outpook for a gross margin for our
Speaker 3: EPs and EBIDA and still expect a very strong free
Speaker 3: cash flows to float through. What the change is that
Speaker 3: relative to our initial expectation at the start of the
Speaker 3: year is that the industry we believe will now decline
Speaker 3: amidst of the digits, but the fundamentals are strong. We
Speaker 3: do expect an accelerated growth rate in the fourth quarter
Speaker 3: and significant expansion and growth margin compared to the prior year,
Speaker 3: and for consumer demands to be positive for Mattel in
Speaker 3: the holiday season, in the fourth quarter.
Speaker 5: And the full year.
Speaker 3: So we are performing strongly. We're heading into the fourth
Speaker 3: quarter seeing stronger support from retailer, more shelf space, more
Speaker 3: representation in major holiday catalogs, and overall a strong position
Speaker 3: with a very broad based offering, a product across pay patterns,
Speaker 3: fresh points, and we believe we're very well positioned competitiors.
Speaker 2: So just to follow up there, the one hundred and
Speaker 2: twenty five million that you put out there, the estimate
Speaker 2: from the Barbie movie and related products, would you say
Speaker 2: it might be even conservative.
Speaker 6: A little bit?
Speaker 3: You know, Well, we did say it's at least one
Speaker 3: hundred and twenty five million dollars revenue at sixty percent
Speaker 3: operating income margin. But the takeaway from this is that
Speaker 3: this is one movie in one year, and as we
Speaker 3: continue to scale our strategy and have more movies, more executions,
Speaker 3: and not just in film, but also in television, in
Speaker 3: location based entertainment, them parts, consumer products, digital experiences, music,
Speaker 3: and other verticals in some cases that are actually bigger
Speaker 3: than the toy industry. We believe that we have opportunity
Speaker 3: to capture significant value from our franchises. And we're not
Speaker 3: saying that everything. So let's go there A successful as Barbie, yeah,
Speaker 3: but we absolutely believe that in the aggregate there's a
Speaker 3: meaningful opportunity for us.
Speaker 2: Well let's go there. And I've got to say, you know,
Speaker 2: I remember when we started talking to you or you
Speaker 2: was it the early days of the Barbie movie or
Speaker 2: you started filming. So it was kind of fun to
Speaker 2: be along for that process. But it was a movie
Speaker 2: that made us laugh, made us cry, and like I said,
Speaker 2: it appealed to a lot of different ages, which was
Speaker 2: pretty pretty wild. So what are the key brands that
Speaker 2: you think have life beyond a kid's toy chest and
Speaker 2: that you think we should be all kind of waiting for.
Speaker 2: I don't know whether it's six months, twelve months, the
Speaker 2: next couple of years that are going to be brought
Speaker 2: to life in different ways.
Speaker 3: Well. The division of Mattel's Films is to collaborate with
Speaker 3: leading filmmakers to create stand out quarterly movies based on
Speaker 3: our iconic brand that will resonate in culture and appeal
Speaker 3: to global audience. And the Barbie movie and I'm glad
Speaker 3: you you you enjoyed it as much as you did,
Speaker 3: is a clear show dead and.
Speaker 2: We have brought me back to the theater for the
Speaker 2: first time.
Speaker 3: I'd love to hear that. And we have fourteen other
Speaker 3: movies in development right now, different demographics, different genres. We
Speaker 3: have Hot Wheels in development with j. J. Abrams as
Speaker 3: Warner Brothers, Matchbox in development with sky Dams, which, as
Speaker 3: you know, produced the Mission Impossible movie that did very well,
Speaker 3: and Topdan We have a movie in development with Vin
Speaker 3: Diesel around Rocking Stock and Robots, Uh, Polly Pocket with
Speaker 3: Lena Danham and Lily Collins. We have Wishbone in development
Speaker 3: with Pitt Farley major Matt Mason with Tom Hanks as
Speaker 3: a star, Thomas the Tank with Mark four there as director,
Speaker 3: and the list goes on and on. So we really.
Speaker 4: Well, you know, it's very good that you're so close
Speaker 4: to Hollywood out there. Yeah, it's good that you're so
Speaker 4: close to Hollywood out there. Nel Segundo. Hey, we only
Speaker 4: have about thirty seconds left. I'd love to hear comments
Speaker 4: on the consumer going into the holiday season. Are you
Speaker 4: seeing signs of weakness in the consumer.
Speaker 3: Well, we expect the strong holiday season for Mattel. We
Speaker 3: believe our retail partners and the industry as a whole
Speaker 3: is well prepared for this season, and we're very excited
Speaker 3: to be able to cater consumers of all ages with
Speaker 3: a great product for in the holiday.
Speaker 2: I'm going to get yelled at, but I'm going to
Speaker 2: ask twenty seconds, what's the hot toy for Christmas and
Speaker 2: the holidays and for Hanukah? What is the hot toy?
Speaker 3: Well, anything Barbie is a hot toy, especially even before
Speaker 3: the holiday. For the spirit Halloween Barbie costume, watch out
Speaker 3: for that. But of course the hot Wheels is always
Speaker 3: the winner. The basic car assortment and the five car
Speaker 3: pack assortment, and look out for the Monster High four
Speaker 3: Daughter assortment, and you know that will it will be
Speaker 3: very will be hot selling toys for the holiday season.
Speaker 2: God, you're speaking my language. I love Uno and I
Speaker 2: love Barbie in on christ Thank you so much. Truly,
Speaker 2: your friends and your family are on our minds and
Speaker 2: our thoughts. Cheering see have Mittel.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 1: Just Say Alexa, playing Bloomberg eleven thirty.
Speaker 7: World Fool and on the last seventy five years becoming
Speaker 7: laundry experts. No, that make it easy for everybody, all.
Speaker 2: Right, who doesn't have a vintage commercial a whirlpool, of course,
Speaker 2: and they are front and center today we're watching the
Speaker 2: share price down about fourteen percent here. What we love
Speaker 2: about these kinds of companies is they can tell us
Speaker 2: so much about what's going on, certainly in the minds
Speaker 2: of the US consumer and what's going on in the
Speaker 2: US economy. And this is a great conversation, especially tim
Speaker 2: if you think about it. On a day where we
Speaker 2: got GDP, we expected it to be hot, and it
Speaker 2: came in even hotter than expected.
Speaker 4: In fact, Dreasury Secretary Jenny Yellen just in the last
Speaker 4: couple of hours telling Bloomberg exclusively that the surge that
Speaker 4: we're seeing in longer term bond yields in recent months,
Speaker 4: that's a reflection of the strong US economy, not of
Speaker 4: a jump in government borrowing driven by that widening fiscal deficit.
Speaker 2: All right, so good to know. And that GDP report
Speaker 2: for the third quarter, it was fueled by surge and
Speaker 2: consumer spending. So let's get to our guests worl Pool Corporation,
Speaker 2: Mark Bitzer, he is with us. He is chairman, he
Speaker 2: is president and CEO of Worldpool, and he joins us
Speaker 2: on Zoom from Benton Harbor, Michigan. Mark, it is good
Speaker 2: to have you back with us. Your company. You came
Speaker 2: out and you trimmed your full year profit outlook, amen,
Speaker 2: and uptick in promotions. Investors noticed, and the stock is
Speaker 2: down the most and to the lowest since twenty twenty.
Speaker 2: So investors definitely, you know, are upset about what they
Speaker 2: heard from you guys. First of all, let's take the
Speaker 2: big picture. What's it like operating in today's environment right now?
Speaker 8: Yeah, first of all, Krolyn and thanks for having me
Speaker 8: back on the show. I mean, what we basically communicate.
Speaker 8: Today is a third quarter which I would still describe
Speaker 8: as pretty solid results that we year were year we.
Speaker 9: Grew our business.
Speaker 8: We hadn't grown our business for six quarters in a row,
Speaker 8: and now we grew our business movement three percent revenue growth,
Speaker 8: We expanded market share, and we expanded our marchs and
Speaker 8: by about one hundred basis points. But yes, we trimmed
Speaker 8: our forecast. Technically not on my ongoing EPA because we
Speaker 8: also had some text benefits, but we as opposed to
Speaker 8: seven point seven and a quarter EBIT margin, we lowered
Speaker 8: it to six and a quarter to six and a half.
Speaker 8: So that is trimming the EBIT margin, and the market reacted.
Speaker 8: You could in many ways argue probably overacted, but it
Speaker 8: is what it is. But I think that's the essentially
Speaker 8: what happened. The underlying results which we had I would
Speaker 8: still consider very solid and particularly compared to the pre
Speaker 8: COVID levels and also compared to Q two where we
Speaker 8: essentially went sideways. But in all transparency, we expected our
Speaker 8: margins to continue to improve and instead of that, by
Speaker 8: basic move sideways. And I think that's what we see today.
Speaker 8: A lot of reactions out there underneath that that's probably
Speaker 8: getting to your broader question about the consumer. You know,
Speaker 8: the consumer right now in our industry we see strong
Speaker 8: replacement demand I even products breakdown and you have more
Speaker 8: applients usage to post COVID. But the discretionary side of
Speaker 8: a consumer, which is so much driven by consumer confidence,
Speaker 8: that is the soft part of a business. That is
Speaker 8: also the inherently more attractive part of a business because
Speaker 8: it comes with higher march in the higher mix. So
Speaker 8: we see right now a pretty heavy shift of consumer
Speaker 8: spending towards replacement side and lesser to a big discretionary purchase.
Speaker 4: That's interesting and that that makes sense given you know
Speaker 4: what else we're hearing with the economy mark. Where else
Speaker 4: are you seeing when it comes to the consumer in
Speaker 4: the US weakness when it comes to consumer spending? Is
Speaker 4: there certain categories that you can outline for us where
Speaker 4: you're seeing weakness? Are there geographies? Is it the higher
Speaker 4: end consumer that's that's actually struggling more than a consumer
Speaker 4: you know in the middle or lower end. Tell us,
Speaker 4: tell us what you're learning and what you're seeing.
Speaker 8: Yeah, and again it comes back to my early comment
Speaker 8: about replacement demand. You know, a replacement demand, just put
Speaker 8: yourself in consumer shoes, if you have a washer or
Speaker 8: refugeral breaking down, you want to have it replaced with
Speaker 8: two days. You don't do a big shopping around. Then
Speaker 8: a mix up you want to replace. So that is
Speaker 8: just one on one sale, which again is typically not
Speaker 8: a very mixed or margin tractive business. The discretionary side,
Speaker 8: where people plan for a new kitchen or remodel house,
Speaker 8: is the soft part right now, and that's the much
Speaker 8: richer part of it. So in general terms, you could say, yeah,
Speaker 8: there's a little bit of a trading down on a
Speaker 8: consumer landscape. There's a segment of call it a premium consumer,
Speaker 8: which is pretty resilient, but it's kind of a big
Speaker 8: mass in between where you just don't see trading up.
Speaker 8: If it all right now, you just see more trading
Speaker 8: down coupled with, you know, a promotion environment which we
Speaker 8: described as return back to pre COVID levels.
Speaker 2: Well, as a consumer, I'm saying, yay, promotion it, Mark,
Speaker 2: I'm going to be quite honest with you, but it
Speaker 2: does say something to kind of move the needle right
Speaker 2: to get consumers kind of off the thinking area into
Speaker 2: the actual you know, buying of something. So how aggressive
Speaker 2: are your promotions, and are you anticipating that in terms
Speaker 2: of maybe some weakness and the need for promotions, that
Speaker 2: this continues into well into twenty twenty four.
Speaker 8: Yeah, And Inurnes called what we refer to is we
Speaker 8: consider a promotion environment as having normalized, ie call it
Speaker 8: past tense, which also implies we expected stabilized going forward.
Speaker 8: So in terms of the depth of a duration of promotion,
Speaker 8: this is not any different from pre COVID and frankly,
Speaker 8: it is something which we expected, but it happened and
Speaker 8: occurred maybe one or two quarters early when we were
Speaker 8: originally anticipated. And that again comes fully back to the
Speaker 8: discretionary side of the demand, post mortgage rate increases, post
Speaker 8: abvious horrible world news messages that tumbled pretty much call
Speaker 8: it in Q two, and consumer confidence ultimately drove that
Speaker 8: lower discretion of demand, which in turn drove a higher
Speaker 8: promotion intensity and the environment.
Speaker 4: What about the other part of your business, the part
Speaker 4: about workers attracting and retaining talent costs that you have
Speaker 4: in terms of buying the equipment necessary to build these machines.
Speaker 4: How are wages for whirldpool workers right now? Are they
Speaker 4: up yere overy year?
Speaker 2: Yeah?
Speaker 8: So, first of all do to put in a broader context.
Speaker 8: As you know, over the last three years, we were
Speaker 8: not only concerned about costs, we were also concerned about
Speaker 8: resilience and the strength of our supply chain. The latter
Speaker 8: part we basically have I would say pretty much fully resolved.
Speaker 8: Our supply chain is intact. We don't have major availability
Speaker 8: issues to that make a check mark behind it. On
Speaker 8: the cost site, Over the last couple of years, we
Speaker 8: saw the biggest increase of cost on basically raw material
Speaker 8: and transport. Transport has come down quite a bit, and
Speaker 8: raw materials are starting to trend down and that is
Speaker 8: a favorable trend which we observe particular second half of ISSUA,
Speaker 8: and we also expect into next year well wage side,
Speaker 8: and again that is more driven by of our US factories.
Speaker 8: One is unitize me once are non unitied, we basically
Speaker 8: have every year wage adjustment, and we in phase of
Speaker 8: a labor shortage.
Speaker 9: In particular in.
Speaker 8: Twenty one and twenty two, we did already fairly significant
Speaker 8: moves on that wage side. So I would say this
Speaker 8: year we're not confronted with a massive wage increase. We
Speaker 8: still of course do year we year increases and that
Speaker 8: kind of helps us dealing with a labor shortage, and
Speaker 8: right now, I would say across the board, maybe with
Speaker 8: some fewer region exception, we're pretty well staffed. And the
Speaker 8: labor shortage it's a lot less of a nasue than
Speaker 8: it was, for example, two years ago.
Speaker 2: Hey, Mark, So what do you make of when we
Speaker 2: get the retail sales numbers that come out and it
Speaker 2: shows a really strong consumer and which kind of surprises
Speaker 2: everybody because we keep talking about student loan payments or
Speaker 2: car payments that are going to slow down the consumer.
Speaker 2: I see what you said about replacement versus discretionary, But
Speaker 2: does that retail sales data sometimes surprise you? Do you
Speaker 2: when people say resilient consumer, does it kind of say, well, resilient,
Speaker 2: but maybe not so much.
Speaker 8: Yeah, And Carol, I mean I would say, I think
Speaker 8: you need to move from a headline into the details.
Speaker 8: And yeah, with consumer spending, and that's confirmed. The question
Speaker 8: is on what is with consumer spending? And we saw
Speaker 8: there's a lot of spending on services. Restaurant courts have
Speaker 8: gone up, traveler has gone up quite a bit.
Speaker 9: Our part of a business consumer durable.
Speaker 8: And again I'm talking about discretionary side, not the replacement site.
Speaker 8: For most families, buying a washing machine or remodeling kitchen
Speaker 8: is a very significant part of a disposable income. You
Speaker 8: only do this expenditure if you have confidence in your
Speaker 8: economic future and a broader environment and consumer confidence, and
Speaker 8: you can look at whatever index that is one which
Speaker 8: kind of call it. April may dropped off pretty sharply.
Speaker 8: So yes, I do CBO for consumer spending. I think
Speaker 8: more durable categories is a slightly different picture on the
Speaker 8: long term, big disposable items of big ticket items, where's
Speaker 8: some reluctance of the discretionary side. Again, replacement site is
Speaker 8: very solid, but on a discretionary side is soft.
Speaker 2: Do you guys talk a lot about a recession coming,
Speaker 2: you know, it's been you know, coming for two years,
Speaker 2: and some would say, listen, we've already had you know,
Speaker 2: certain parts of the market have seen you know, or
Speaker 2: certain parts of our economy have seen it. But what's
Speaker 2: your best guess as someone who runs a company, You've
Speaker 2: seen so many different you know, we've gone through a
Speaker 2: very tough market cycle, certainly coming off the pandemic that
Speaker 2: was bad and then.
Speaker 10: It was actually pretty good.
Speaker 2: People were doing things, especially on their homes. So do
Speaker 2: you think a recession is likely in the United States,
Speaker 2: your biggest market here, certainly by revenue.
Speaker 9: Yeah.
Speaker 8: First of all, I would start with a cabin There's
Speaker 8: probably a lot more people more confident about that subject
Speaker 8: than I am. So the way I would look at it,
Speaker 8: our company in many ways is a cannery in the
Speaker 8: coal mine, or we see certain trends earlier.
Speaker 9: What I mean with that, we saw the.
Speaker 8: Cost inflation in our business a lot earlier when most
Speaker 8: companies saw it the same time. We saw the beginning
Speaker 8: the cost deflation a little bit earlier, and we probably
Speaker 8: also see the kind of a normalized consumer promotion environment
Speaker 8: a little bit early. So most of the broad economy
Speaker 8: sees we tend to see maybe call it three to
Speaker 8: six months earlier. With that in mind, you know, it's
Speaker 8: kind of I think broader terms, the US economy is
Speaker 8: more resilient that most people thought. So from that perspective,
Speaker 8: I personally do not see as an air for deep recession.
Speaker 8: Couper be is something shallow. Yes, I think the key
Speaker 8: element will be going forward to is you know, when
Speaker 8: when will the FED signal kind of a stabilization of
Speaker 8: a plateau of interest rates that is a big element.
Speaker 8: And then, of course, what is a little bit more
Speaker 8: difficult to answer when do you when do all the
Speaker 8: horrible world news become a little bit more less or
Speaker 8: or are we getting number against it? So that's for
Speaker 8: consumer confidence part of it. But again from a person perspective,
Speaker 8: we don't expect a big boom, but we don't expect
Speaker 8: the scenario for deeper sessions. We're prepared to very small,
Speaker 8: modest growth in our industry, but we're also prepared to
Speaker 8: deal with a shallow recession.
Speaker 4: Mark on that subject of everything that's happening around the world,
Speaker 4: our focus certainly not nom Yeah, and our focus certainly
Speaker 4: on the Middle East in addition to other parts of
Speaker 4: the world. But there's also the business side of this,
Speaker 4: which is oil prices. And I'm wondering how you're watching
Speaker 4: energy markets, how you're watching oil prices, and if we
Speaker 4: do see a spike in oil price, is what that
Speaker 4: does to your business?
Speaker 9: Yeah?
Speaker 8: And then and let me maybe a radio cause maybe
Speaker 8: not a perfect form to comment on this horrific attax,
Speaker 8: and the subject can subsequent human tragedy coming out of
Speaker 8: this one. So it's kind of difficult to move from
Speaker 8: that to economic impact.
Speaker 9: Having said that, of course varies.
Speaker 8: You know, the entire Middle East situation if it would
Speaker 8: further escalate, has some risk on the oil prices. Again,
Speaker 8: where's a big if it further escalates in an uncontrolled manner,
Speaker 8: as you've seen the last two days the oil price
Speaker 8: from initial spike that came down a little bit and
Speaker 8: right now in our internal forecast. But again there's people
Speaker 8: who probably know a lot more about it. We expect
Speaker 8: also stabilization sideway to move off the oil, but it's
Speaker 8: a lot depends on will there be stability in what
Speaker 8: is an extremely difficult Middle East environment.
Speaker 2: No, absolutely, Mark, We so appreciate your time. You've always
Speaker 2: been so generous, especially throughout the pandemic coming off of it,
Speaker 2: trying to help make sense of that cycle. And we
Speaker 2: really appreciate your time trying to understand what's going on
Speaker 2: and really appreciate it. Mark Bitzer. He is chairman, president
Speaker 2: and CEO of World Fool, joining us on Zoom from
Speaker 2: Benton Harbor, Michigan. A great gauge on what's going on
Speaker 2: in the economy at a time when there is so
Speaker 2: much heavy news, so much on really appreciate wat's more
Speaker 2: to come. Right here on BusinessWeek.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 2: It's a gift go to Schwab because this is where
Speaker 2: we find ourselves at Impact twenty twenty three. There's so
Speaker 2: much going on, a good reason why investors are maze
Speaker 2: that something hasn't broken in the economy yet because the
Speaker 2: last time US government bond yields climb so far, so fast,
Speaker 2: the nation plunged into back to back recession. So that
Speaker 2: is part of kind of our backdrop. Let's get to
Speaker 2: it though. We are here at Philadelphia, at the Philadelphia
Speaker 2: Convention Center, at Schwab Impact twenty twenty three and with
Speaker 2: us as Rick Worster, he's president of Charles Schwab. I
Speaker 2: want to say thank you for joining us, but thank
Speaker 2: you for having us.
Speaker 10: Welk, thank you for having me on. It so delightful
Speaker 10: to be here.
Speaker 2: It's great to have you here in a day where
Speaker 2: I kind of laugh with you. It's a shame nothing's
Speaker 2: going on, but it's a really interesting environment geo. Politically,
Speaker 2: obviously we're front and center watching what's going on around
Speaker 2: the world, but also within the investment environment, how do
Speaker 2: you make sense you and your team back at SWAB
Speaker 2: about kind of how to prioritize what investors are going
Speaker 2: to care most about and what's going to impact your
Speaker 2: world specifically.
Speaker 10: Sure well, certainly when we think about the global events,
Speaker 10: the first thing I think about is the human suffering
Speaker 10: and the difficulties that a lot of people have had
Speaker 10: to endure recently. From a market standpoint, we want that
Speaker 10: volatility can be challenging to clients, and one of the
Speaker 10: things that we say in an environment like this is
Speaker 10: seek out an advisor. And we're sitting here, of course,
Speaker 10: at our thirty third annual Impact Conference for advisors, and
Speaker 10: they help clients thrive through environments like this. So it
Speaker 10: is a challenging environment for the world. Certainly, it creates
Speaker 10: uncertainty and some volatility, but I think advisors can help
Speaker 10: a lot of our clients through periods like this.
Speaker 4: What are you hearing from advisors right now about the
Speaker 4: questions that their clients have. I mean, we're not only
Speaker 4: in a challenging world for financial markets, but we're in
Speaker 4: a challenge world for advisors. They're robo advisors. I mean,
Speaker 4: SCHWAP has its own robo advisor with shrob intelligence portfolio.
Speaker 4: What are you hearing from these people whose businesses are
Speaker 4: being challenged right now?
Speaker 10: Well, the thing I would say about the advisor market
Speaker 10: is that there's a bull market for advice more and
Speaker 10: more clients because of everything that's going on in the world,
Speaker 10: because of what's happening in markets, because people are trying
Speaker 10: to integrate markets into taxes and their trusts, their states,
Speaker 10: passing wealth along. There is a bull market for help
Speaker 10: and guidance, and so it's a market in which advisors
Speaker 10: are thriving and the area is really growing.
Speaker 2: Rick, what's the most interesting demographic in terms of the
Speaker 2: investing public right now for you guys, Well.
Speaker 10: To me, it's got to be the baby boomers. The
Speaker 10: baby boomers have amassed a lot of wealth, and more
Speaker 10: and more are retiring every day, and they want that
Speaker 10: help and guidance to help them get through retirement and
Speaker 10: navigate all the things in front of them. So, to me,
Speaker 10: that's the most interesting demographic. But at SCHWAB, we want
Speaker 10: to meet the needs of every demographic. Whether it's a
Speaker 10: young investor, a baby boomer, we need to be exceptional
Speaker 10: at meeting the needs of all of those different demographics.
Speaker 2: Yeah, it's kind of interesting, right for like a younger investor.
Speaker 2: We talk a lot about We had a guest on
Speaker 2: this past week of just you know, trying to assess
Speaker 2: are we in a recession? And you know, while technically
Speaker 2: the numbers that we've got growth in the US, you know,
Speaker 2: strong consumer spending numbers, still, retail sales numbers, employment is strong,
Speaker 2: employment is strong. Having said that, she said, you know,
Speaker 2: I'm coming from Wisconsin again, somebody who manages money. She said, Yep,
Speaker 2: they're working, but folks can't buy a home because they
Speaker 2: can't afford it with the mortgage rates. They've got a
Speaker 2: thousand dollars a month car payments. So they in essence
Speaker 2: feel like it's a recession for them. So I'm just
Speaker 2: curious from your people who want to invest with you
Speaker 2: guys and work on your platforms. You know, what is
Speaker 2: it that they're doing looking to save money, conserve principle,
Speaker 2: or be more aggressive in this environment because they see
Speaker 2: some opportunities amid the volatility.
Speaker 10: Well, first, the first part of the question there's no
Speaker 10: question this environment has been difficult called for investors and
Speaker 10: difficult for people trying to live in the world. There's
Speaker 10: been a lot of inflation the uh you know, the
Speaker 10: FED has raised interest rates dramatically and quickly, but that
Speaker 10: was after letting inflation run a little bit, and so
Speaker 10: it has squeezed individuals. At the same time, markets are
Speaker 10: not that far away, particularly the S and P or
Speaker 10: the NASTAK not far away from all time high. So
Speaker 10: there is a lot of wealth being created along the way.
Speaker 10: And from our perspective, we're here to solve to serve
Speaker 10: all investors. Our goal is to help clients navigate their
Speaker 10: financial life, to make them better off and help them
Speaker 10: get to where they want to be.
Speaker 2: Do they want to be more conservative in this like,
Speaker 2: I'm just curious in an environment where we talk, you know,
Speaker 2: a money market pays you, you know what everybody keeps.
Speaker 4: Saying more than five percent?
Speaker 2: Why not put it there right without the risk? I'm
Speaker 2: just curious what you're seeing in terms of those trends.
Speaker 10: I would say that the call volumes on our fixed
Speaker 10: income line have gone up ten times what they were
Speaker 10: about eighteen months ago. So there's no question that there's
Speaker 10: a lot of interest in yield right now, and why
Speaker 10: not you can get a two and a half percent
Speaker 10: really on the twenty year now on I think you
Speaker 10: have to go back quite a while before that was
Speaker 10: the case.
Speaker 4: Kind of folts perfectly into my next question, which is
Speaker 4: about the business and about cash in the business. Schwab
Speaker 4: recently reported earnings deposits down twenty eight percent in the
Speaker 4: third quarter, was better than analysts forecast, still though a
Speaker 4: drop of more than two hundred and eighty four billion dollars.
Speaker 4: How much money do you see staying in the Schwap
Speaker 4: ecosystem right now, even if you know cash sleep is occurring,
Speaker 4: but people can get you know, more than five percent
Speaker 4: in money markets.
Speaker 10: Well, what I would say is we want clients to
Speaker 10: do the right thing for them in their situation. We
Speaker 10: bring all you know, the clients leave cash in their accounts,
Speaker 10: We leave it there until we know what they want
Speaker 10: to do with it, and so they make a decision
Speaker 10: that they want more yield, they should go and do that.
Speaker 10: So the money leaving our bank, it's staying at SCHWAP,
Speaker 10: it's going and buying government bonds, or it's going into
Speaker 10: a money market fund. But that money is staying at
Speaker 10: Schwab and it's going to places where it can earn
Speaker 10: a higher yield.
Speaker 4: Then why were deposits down so much if it's staying
Speaker 4: at Schwab.
Speaker 10: Because it's coming out of our bank and finding it's
Speaker 10: into higher yielding money market funds or fixed income investments.
Speaker 10: And that's exactly what we would want for clients. It's
Speaker 10: not the best thing for our profits, but we want
Speaker 10: the best thing that's for our clients, and so that
Speaker 10: money movement is healthy for our clients.
Speaker 2: Great banking key to revenue. Right, we know that right
Speaker 2: from the last earnings report, is money still continuing to
Speaker 2: come out of that unit?
Speaker 10: Well, what I would say is that if you think
Speaker 10: about what's happening, clients are looking at you know, if
Speaker 10: you went back to when interest rates were quite low,
Speaker 10: they would have a lot of cash in their portfolios
Speaker 10: and they would say, there's no need to move this cash.
Speaker 10: I'm just going to leave it here. It's going to
Speaker 10: earn zero here, it's going to earn zero anywhere else.
Speaker 10: As the Fed has lifted interest rates and yields are
Speaker 10: now more attractive, people have looked at their balances and said, well, gosh,
Speaker 10: why would I leave it here earning earning less unless
Speaker 10: they need it to transact or they know they're going
Speaker 10: to spend it on something. But for the portion of
Speaker 10: their cash that they know is longer term cash, they
Speaker 10: can get a better they can get more yields somewhere else.
Speaker 10: So it's moved. And I would just wrap up by saying,
Speaker 10: we think a lot of the movements occurred because that
Speaker 10: yield's been high for a while, so people have made
Speaker 10: that transition, and we're starting to see a strong deceleration
Speaker 10: of the pace of cash realignment.
Speaker 2: So it's still coming out, but at a slower pace,
Speaker 2: much slower pace.
Speaker 10: And in fact, last month was the first month where
Speaker 10: in our bank sweep we saw a positive growth in
Speaker 10: bank some more money coming into the bank than leaving
Speaker 10: the bank for the first time in a while. So
Speaker 10: from a business standpoint, that's positive. But again, what we
Speaker 10: want is clients to find the right investment for them.
Speaker 2: Does it make you nervous though, as we get ready
Speaker 2: for a GDP report that's backward looking, mind you another
Speaker 2: read on inflation that in terms of what that could
Speaker 2: mean for monetary policy, we do think we're getting close
Speaker 2: to our peeking rates. But nonetheless, whether again, if we
Speaker 2: see signs of inflation, if we see more signs of growth,
Speaker 2: whether or not that that means ultimately you're going to
Speaker 2: see more money coming out because the money markets just
Speaker 2: kind of get more and more attractive.
Speaker 10: Yeah, it could be we're back in one of these
Speaker 10: cycles where bad news is good news. You know, I
Speaker 10: feel like we might be back in that because good
Speaker 10: news may lead to the higher rate environment. That could
Speaker 10: be you know, it could hurt the economy certainly.
Speaker 4: Okay, So what about creating new products that help people
Speaker 4: keep their cash at SCHWAB. I'm wondering if there are
Speaker 4: so many high yield accounts available at other financial institutions
Speaker 4: right now, what are the conversations happening behind the scenes
Speaker 4: about creating those sorts of products at Schwab.
Speaker 10: Now, what I would say is we have all kinds
Speaker 10: of cash products for clients, and we're not having an
Speaker 10: issue with cash leaving the firm. We've we've brought in
Speaker 10: over two hundred billion dollars of net new assets to
Speaker 10: the firm, and a lot of it has found its
Speaker 10: way into fixed income or money funds. The issue is
Speaker 10: just where they're saving it. But it's not leaving the firm.
Speaker 10: So I think there's no better place and no broader
Speaker 10: array of fixed income and money funds than we have
Speaker 10: at Schwab. So that certainly we always want to bring
Speaker 10: out new and relevant products, but we're doing a really
Speaker 10: nice job today of keeping those clients here at Schwab Impacts.
Speaker 2: The top line growth happy with this environment is.
Speaker 10: Over well, I don't two and a half percent, really.
Speaker 10: I feel like you know that's that's not a bad
Speaker 10: deal for savers and investors.
Speaker 2: I want to ask you about your tenures so far. Right,
Speaker 2: you came in around twenty seventeen, twenty eighteen. I'm just
Speaker 2: thinking about kind of where the world was at that point.
Speaker 2: Not too shabby, right, and then all of a sudden,
Speaker 2: we move into a FED starts to raise rates, the
Speaker 2: pandemic hits. It's a whole other world, right, The FED
Speaker 2: cuts dramatically, we have the economy, everything just shuts down,
Speaker 2: and then we see markets bounce back in a big way.
Speaker 2: I mean, how do you think about kind of our
Speaker 2: visibility going forward in terms of the market environment. Do
Speaker 2: we really have a good grasp or is it hard
Speaker 2: to considering that trajectory and trying to figure out kind
Speaker 2: of what happens after a pandemic and all of the
Speaker 2: stimulus and crazy activity that went on.
Speaker 10: Well, we've certainly seen a lot in the last five
Speaker 10: or six years, haven't we. Yeah, you know, a pandemic.
Speaker 10: Timing was good, Yeah, all kinds of different market environments.
Speaker 10: Our advice to clients at SCHWAB is to come up
Speaker 10: with a plan, stick to that plan, and if you
Speaker 10: need to help, seek the help of an advisor who
Speaker 10: can help guide you through it. But we believe it's
Speaker 10: hard to time the markets to outthink you know, what's
Speaker 10: going to happen. Are we going to be in a recession?
Speaker 10: Not in recession? Of course we have an opinion on
Speaker 10: those things, but we're not always right, and we want
Speaker 10: investors to stay the course, have a plan, stick to it,
Speaker 10: and work with an advisor if that makes sense for them.
Speaker 4: What's your opinion on where we're going.
Speaker 10: On the on the markets. Yeah, I mean, I think
Speaker 10: at some point monetary policy has to lead to a
Speaker 10: more restrictive economy.
Speaker 2: But ressie recession or soft landing.
Speaker 10: I am not an economist. I'm not going to make
Speaker 10: that call. But you know, listen to Liz Anne Saunders
Speaker 10: or Jeff clientob they do a really nice job of
Speaker 10: calling the markets and the economy as someone.
Speaker 2: Who manages though it is very part of the c
Speaker 2: suite right here, who covers you know, and runs this company.
Speaker 2: What's top of mind for you guys, whether it's employees,
Speaker 2: whether it's cost cutting, what is it to be?
Speaker 10: It's opportunity. We have so much opportunity to light our
Speaker 10: to delight our clients and make them better off in
Speaker 10: their financial life. But what I worry about at night
Speaker 10: is are we doing enough? And are we doing it
Speaker 10: fast enough? I just think we are blessed to have
Speaker 10: thirty five million clients that we serve on a daily basis,
Speaker 10: and I want to make sure we do everything in
Speaker 10: our power to make them as well off as they
Speaker 10: can be.
Speaker 4: Can you talk a little bit about customer service? I have,
Speaker 4: you know, full disclosure. I'm a Schwab client, so I've experience.
Speaker 4: Thank you for your business, and one thing that is notable.
Speaker 4: It's like to me, it's like Carol, when we talk
Speaker 4: about American Express. You call Schwab and the person answers.
Speaker 4: You call American Express and a person answers. Can you
Speaker 4: talk about the investments that you make in customer service
Speaker 4: so people have those interactions just in the last minute
Speaker 4: that we have.
Speaker 10: Yeah, client service is critical to us. It's one of
Speaker 10: the things that really differentiates Schwab from some of our
Speaker 10: Vermar competitors. We've answered the phone this year, on average
Speaker 10: in less than thirty seconds. I can't get anyone to
Speaker 10: pick up my phone call in thirty seconds, certainly not
Speaker 10: my teenage daughters. So we ext her.
Speaker 2: Yeah, we make it.
Speaker 10: It's really important to us that we answer the phones,
Speaker 10: that we're there for the clients and that we're delivering
Speaker 10: what they need. We are a client focused business. We
Speaker 10: only succeed when our clients succeed.
Speaker 2: So nowhere about AI taking over.
Speaker 10: Hey, it's going to be really helpful to all those
Speaker 10: people answering the phones. I think they're going to make
Speaker 10: a more fish They're going to help them get an answer.
Speaker 2: This assist as an.
Speaker 10: Assist, they're going to help you get an answer more quickly.
Speaker 10: They're going to help you get a better answer. But
Speaker 10: they'll be in the background supporting that person you're talking to.
Speaker 2: All right, love to hear that, rather than taking over, Rick,
Speaker 2: thank you so much, really appreciate it.
Speaker 10: Thanks for having me on.
Speaker 2: Thank you for having us. Rick Wurster, He's a president
Speaker 2: of course of Charles schwab onsite at Schwab Impact. We're
Speaker 2: just getting started though. On this Wednesday, Carol Mass along
Speaker 2: with Tim Stenevick, and you're listening and watching Bloomberg Business Week.
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Speaker 4: this winter with the annual Bloomberg Pursuits Ski special.
Speaker 2: I've never seen Tim sohack. That's a fun one, all right.
Speaker 2: We mentioned earlier that we are coming to you from
Speaker 2: the Schwab Impact twenty twenty three conference in Philadelphia this week.
Speaker 2: Plenty of talk about the US economy and inflation, and
Speaker 2: first up this hour, we look at a prime example
Speaker 2: of rising prices in the auto sector, a one hundred
Speaker 2: thousand dollars jeep suv.
Speaker 4: Bloomberg News Auto reporter Gabrielle Coppola writes about the unusual
Speaker 4: stalantist offering in the current double issue of the magazine.
Speaker 4: It's down now on newsstands, it's online and of course
Speaker 4: on the Bloomberg terminal. Gabby and Bloomberg BusinessWeek Assistant Managing
Speaker 4: editor Jim Ellis have more.
Speaker 11: We've been talking about the affordability issue for a while now,
Speaker 11: that cars continue to go up despite the pandemic, despite
Speaker 11: the fact that a lot of people seem to be
Speaker 11: worried about employment, and despite interest rates which has made
Speaker 11: financing cards much more expensive than even just a year ago.
Speaker 11: And so I would have thought that means that anybody
Speaker 11: who's out there, you know, sort of hawking vehicles, was
Speaker 11: having a hard time doing anything with pricing. And it
Speaker 11: turns out and talking to one of our reporters in Detroit,
Speaker 11: you know, Gabby Coppola, that that's not the case. That actually,
Speaker 11: you know, Jeep has been extremely aggressive at raising prices
Speaker 11: and that's been great news for Stilantis, which used to be,
Speaker 11: as you said, you know, a sort of an also ran.
Speaker 11: It's the parent of what used to be Chrysler. It's
Speaker 11: part of Fiat Chrysler, and sort of people thought forever
Speaker 11: that they were sort of behind the guys like GM
Speaker 11: and Ford, and instead now they are a profit leader
Speaker 11: and they have basically done what I wouldn't have thought
Speaker 11: was possible, which was to basically raise prices. And people
Speaker 11: still want you so much more that they're willing to
Speaker 11: pay not only higher prices, but prices that are going
Speaker 11: up faster than the overall already super charts auto market.
Speaker 2: So you mentioned Gabby Coppola, and she is with us.
Speaker 2: She is auto reporter at Plomberg New She's there with
Speaker 2: us in our Detroit bureau. Gabby, come on in on
Speaker 2: your story. I can't tell you how much we've all
Speaker 2: been talking about it throughout the day because we're like,
Speaker 2: what one hundred thousand dollars for Jeep. Help me, help
Speaker 2: me build on what Jim has been saying about the
Speaker 2: story that you wrote.
Speaker 12: The interesting thing about Jeep as a brand is that
Speaker 12: it's always been like this incredibly coveted thing in the
Speaker 12: auto industry because people love their Jeeps. The only other
Speaker 12: thing you can compare it to in terms of a
Speaker 12: brand and like a transportation brand that has a real
Speaker 12: authentic community around it would be like Harley Davidson or something.
Speaker 12: So yeah, so like that's always been this great thing,
Speaker 12: but the question is, well, how do you milk that?
Speaker 12: You know, how do you make more money off that?
Speaker 12: And Jeep decided to say, you know, like like I
Speaker 12: honestly all of Detroit did, let's get out of these
Speaker 12: like loan margin commodity cars. They'll focus on, you know,
Speaker 12: the most profitable trucks and SUVs and Jeep. You know,
Speaker 12: they've added to their lineup to do that. They added
Speaker 12: the Gladiator, which is like a Jeep truck, like a
Speaker 12: mid sized truck. And then they did this sort of
Speaker 12: extension of the brand, which was they brought back the
Speaker 12: wagon ear, you know, which is a nameplate people identify
Speaker 12: with from the Pascal on nostalgia. But they made it
Speaker 12: this super luxury you know car that starts out or
Speaker 12: you know, just under one hundred thousand dollars.
Speaker 2: Like mind blowing. But but you writing your story that
Speaker 2: overall unit sales for the Jeep brand fell four percent
Speaker 2: in the third quarter, of the ninth consecutive quarterly decline. Uh,
Speaker 2: this is coming from the company reporting out numbers earlier
Speaker 2: this month. That can't be good. That's not a good
Speaker 2: trick line.
Speaker 12: That is not a good trend line. And you know,
Speaker 12: Jep will say that they're starting to turn it around
Speaker 12: and that they're sensitive to this, and you know, they're
Speaker 12: also a brand in transition, because it is true they
Speaker 12: discontinued the Cherokee, which is kind of like that's the
Speaker 12: biggest segment that that size suv and they basically have
Speaker 12: a big hole right there. So sure there's some you know,
Speaker 12: temporary things, but I'm not so sure it's just temporary.
Speaker 12: You know, the most interesting conversation I had reporting the
Speaker 12: story is with this guy Alexander Edwards, who's like a
Speaker 12: brand researcher, and he said the most fascinating things to
Speaker 12: me about Jeep. You know, when you look at car companies,
Speaker 12: there are really any brand you're thinking about what is
Speaker 12: that company doing to build equity in that brand. He
Speaker 12: gave the example of say, you know, Hyundai has like
Speaker 12: this warranty, you know, ten years, whatever it is. You know,
Speaker 12: we are so confident in our quality. If you buy
Speaker 12: our car, we're going to deliver that quality to you.
Speaker 12: Wrangler brings authenticity, you know, great capability, handling, all that
Speaker 12: kind of stuff. But they feel he feels like they've
Speaker 12: been kind of resting on their laurels a bit. And
Speaker 12: I think that is why you see them their sales
Speaker 12: suffering more than others in the industry because everybody's raised
Speaker 12: their prices, right, everybody. We had the tip shortages of pandemic,
Speaker 12: So why is the jeep brand suffering? And there's some
Speaker 12: interesting kind of psychology brand dynamics going there. It's just
Speaker 12: really interesting, like a corporate strategy aspect and like a
Speaker 12: brand strategy aspect.
Speaker 11: So Gabby is that the in the end is that
Speaker 11: the price one has to pay to get higher earnings
Speaker 11: is basically to say, maybe I'm not going to think
Speaker 11: as much about maintaining my volumes and instead, you know,
Speaker 11: raise prices while I can and basically just work about margins,
Speaker 11: which makes Wall Street happy, but might not be the
Speaker 11: best thing longer term for.
Speaker 2: A brand, which is so interesting on a moment where
Speaker 2: we're talking so much about Tesla marg Margins after they
Speaker 2: report it's obviously something we also come on in get it.
Speaker 12: Yeah, no, you're that's a great point, Carol, Like Tesla
Speaker 12: is kind of doing the opposite. They're saying, we're going
Speaker 12: to go the auto industry. You know, I've talked to
Speaker 12: a former Chrysler executive. We said this funny thing to me.
Speaker 12: He said, uh, let's see. He said, market share is vanity,
Speaker 12: profitability is sanity is like, this is like the choice
Speaker 12: that every auto executive, every car company has to make
Speaker 12: do you go for volume or do you go for profits?
Speaker 12: And it's kind of like a dial you have to
Speaker 12: adjust to keep a healthy brand and a healthy company.
Speaker 12: And I think Jeep has gone very far into the
Speaker 12: profitability dial. I don't think I seriously did. Reporting the
Speaker 12: story was like guys, this is this the plan? Like
Speaker 12: is this on purpose? And they're like no, no, no,
Speaker 12: no no, like they do they don't like obviously they
Speaker 12: don't like what's happening, and they want to bring it back.
Speaker 2: And nobody likes nobody likes a lower, downward moving trend line.
Speaker 12: Come on, like, get real right, and you can't say, oh, yeah,
Speaker 12: we don't care, like you can't say that yeah.
Speaker 4: I mean, Gabby, I have to say I love this
Speaker 4: story because I was pretty shocked a little over a
Speaker 4: year ago when I saw the Grand Wagoneer. And you know,
Speaker 4: it's funny because my grandparents had one of these Wagoneers
Speaker 4: back in the day, and like, I have memories of
Speaker 4: when I was a kid being in this wood paneled
Speaker 4: like nineteen eighties Wagoneer. I mean, it looks nothing like
Speaker 4: the Grand Wagoneer today. When you approach ninety one thousand
Speaker 4: dollars is the base price and get up, you know,
Speaker 4: easily over one hundred thousand dollars when you do add ons.
Speaker 4: What's the competition on the on an suv basis that
Speaker 4: starts to come in that could pull away potential buyers?
Speaker 12: Well, so that segment, you know, it's not like Jeep
Speaker 12: invented this idea, Okay, Like look at the Cadillac Escalade
Speaker 12: that you know, Ford U or has the Lincoln brand,
Speaker 12: the Lincoln Navigator. They're going up and get like a
Speaker 12: Mercedes G wagon. You know these are so it's really
Speaker 12: like Jeep was. You know, the company was trying to
Speaker 12: get in on some of that. They're late to the party.
Speaker 12: They have, you know, the merger happened, they have more resources.
Speaker 12: They wanted to say, why were we leaving this money
Speaker 12: on the table, Let's do this.
Speaker 9: But the question is they put.
Speaker 12: It under the Jeep brand because that is their most popular,
Speaker 12: right That's that was kind of the easy way to
Speaker 12: go to the point that Alexander Edwards made was was
Speaker 12: that the right place to put a vehicle like that
Speaker 12: because it has to live in the same tent with
Speaker 12: the wrangler, with the people who are all about authenticity,
Speaker 12: all about realness, all about you know, get out there
Speaker 12: in the woods or on an off road trail and
Speaker 12: you know, screw your boss and.
Speaker 2: Your crabby job.
Speaker 12: You go out there with your wrangler, like you know,
Speaker 12: it's a Jeep thing.
Speaker 10: It's a it's a deep thing.
Speaker 12: I mean I was going through like social media looking
Speaker 12: at like Reddit threads of communities around Jeep and the
Speaker 12: community is very strong. People put these little rubber ducks
Speaker 12: on their cars, you see, even to try I see
Speaker 12: people a Jeep will have a bunch of rubber ducks
Speaker 12: on the It's like this kindness, it's this community. It's
Speaker 12: like we're all the same tribe kind of thing. Again,
Speaker 12: it's like a Harlowe group of harlet It transcends class,
Speaker 12: right like I think it's the same with her.
Speaker 2: One of the things that really surprised Gabby uh Stillenttis
Speaker 2: is calling and they'd like you to write their next
Speaker 2: commercial off the Jeep because that was like prices anyway, jip, go.
Speaker 11: Ahead, Gebby. One of the things that I found really
Speaker 11: interesting in your story was that even though you know
Speaker 11: Jeep is trying to sort of deal with this issue
Speaker 11: by coming out with some lower priced offerings, the starting price,
Speaker 11: the price that we all see on websites and whatever,
Speaker 11: is not what people pay for a Wrangler for example.
Speaker 11: I mean, there are just it's sort of like a
Speaker 11: Chinese menu. There's so many add ons here that really
Speaker 11: make these cars very expensive.
Speaker 12: That's exactly right. So when they say, oh, but we
Speaker 12: have an entry level two door ragtop Wrangler for only
Speaker 12: thirty two thousand, you know that is very very basic
Speaker 12: in the stuff you're going to I mean, Jim and
Speaker 12: I were going through some of these options last night
Speaker 12: and we were putting the story together. You know, Oh, okay,
Speaker 12: you want to have a color other than white on
Speaker 12: your wrangler. Okay, that's another six hundred books. You know,
Speaker 12: the stuff, you know, and it's fine. It's the wrangler
Speaker 12: is a toy. It's a big toy for people.
Speaker 4: That was Bloomberg News Auto reporter Gabrielle Coppola and Bloomberg
Speaker 4: Business Week Assistant Managing editor Jim Ellis.
Speaker 2: As we mentioned, as you can probably hear from the background.
Speaker 2: This week, we broadcast from the Schwab Impact twenty twenty
Speaker 2: three conference in Philadelphia. You're listening to Bloomberg Business Week
Speaker 2: coming up creating a new niche in the health and
Speaker 2: wellness space with the CEO of New York City's Forward Space,
Speaker 2: Kristin Sudeikis. This is Bloomberg.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from read Is six Eastern Listen on
Speaker 1: Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app,
Speaker 1: or wants us live on YouTube.
Speaker 2: Well, the fitness market few starts to throw out at
Speaker 2: you from various research groups virtual the virtual fitness market
Speaker 2: to be worth about one hundred and six point four
Speaker 2: billion by twenty thirty and then you got Gym membership
Speaker 2: that market to reach over seventy billion globally by twenty
Speaker 2: thirty two. People work at you love working out?
Speaker 4: I do, yeah, when I can certainly find the time.
Speaker 4: It's good for us. We have to do it as people.
Speaker 4: I mean, this is like es Central stuff in general.
Speaker 4: The fitness sector roared back after being devastated by the pandemic.
Speaker 4: It also changed a lot during the pandemically the virtual
Speaker 4: stuff people working out at home. It continues to provide
Speaker 4: different offerings as a way to work out. Enter Forward
Speaker 4: Space Carol about five years ago. That was back in
Speaker 4: twenty eighteen.
Speaker 2: And great to have with us on zoom in New York.
Speaker 2: Kristin Sadeikas she's found her CEO and creative director of
Speaker 2: Forward Space. Kristin, so great to have you here on
Speaker 2: Bloomberg Business Week. First of all, how are you? And
Speaker 2: tell us about your world and Forward Space and how
Speaker 2: it all came to be.
Speaker 13: Thank you for having me. How did it come to be?
Speaker 13: Human connection?
Speaker 14: Very much in the business of human connection by way
Speaker 14: of movement and music. So I've been doing that as
Speaker 14: a choreographer and artistic director for a lot of my
Speaker 14: life and started to really notice a high demand and
Speaker 14: high just request of me personally. Where can I just
Speaker 14: go move, go dance connect myself? And there just wasn't
Speaker 14: quite a space that merged the serious side of dance,
Speaker 14: technical side of dance, the social side of dance that's
Speaker 14: so essential to human connection and to what we're needing
Speaker 14: as social beings, you know, to be in a room together,
Speaker 14: the resurgence of how potent that is that people want
Speaker 14: to be in a room with other people working out
Speaker 14: and not just at home. And then the sweat side,
Speaker 14: which is the cardio workout side.
Speaker 13: So it bridges the three together.
Speaker 14: The serious side of dance or this technical side that
Speaker 14: a lot of people really want, the training of how
Speaker 14: can I be better at dancing but in an accessible,
Speaker 14: non intimidating way, the social side, which is, you know,
Speaker 14: people are probably out doing somewhere right now, and then
Speaker 14: the sweat side where people could get a workout and
Speaker 14: not just for their bodies, but for their minds and
Speaker 14: their emotional health and their energetic health.
Speaker 2: What's interesting, and we talked over the summer. You know,
Speaker 2: I am from a large family we love to dance,
Speaker 2: whether it's a wedding whatever, it's like it's such a
Speaker 2: great workout, but you know, throw some music on and
Speaker 2: we're like all over the place.
Speaker 4: I want to go to one of these you see
Speaker 4: the master plan, do the thing.
Speaker 2: But it sounds like that's what you you know, you've
Speaker 2: really kind of you know, tapped into something of you know,
Speaker 2: you throw in some great music, you post your playlist,
Speaker 2: you curate them, and then you combine it with a
Speaker 2: workout like it's just I can I can get it?
Speaker 1: Yes?
Speaker 14: Yes, And the human connection part of it all, you know,
Speaker 14: I mean, that's really the genesiss of it is creating
Speaker 14: a space where people could connect not just to others,
Speaker 14: first to themselves, then to those around them, be it
Speaker 14: at a wedding, that same feeling where you you know,
Speaker 14: you meet people on the dance floor, but then also
Speaker 14: the greater world around us in that order again again
Speaker 14: and again in a dark room, should I should you know,
Speaker 14: share that part because we keep the lights very low
Speaker 14: because many people are very very nervous coming in. They
Speaker 14: have wanted a space to try to dance or use
Speaker 14: some have There's one class that's a fire class, so
Speaker 14: there's free weights and a lot of sculpting exercises with
Speaker 14: little mini dance breaks in between. And that's for people
Speaker 14: that are all the way backed up, you know, all
Speaker 14: our style.
Speaker 4: Yes, so you guys have an actual physical space in
Speaker 4: Soho here in New York, but you can also do
Speaker 4: this virtually. How do you create recreate virtually what you
Speaker 4: create in the space and Soho? How do you actually
Speaker 4: do that?
Speaker 14: Yeah, yeah, great question. It's similar to what we're doing
Speaker 14: right here right now. While we're not in the same room.
Speaker 14: It feels different, yet I can feel connected to you all.
Speaker 14: It to create a precise, precise portal going through the
Speaker 14: camera so that people receive the information in their homes.
Speaker 14: I think there's something really special about the fact that
Speaker 14: we have now expanded into the virtual and the many
Speaker 14: people that are doing it that also have a physical space,
Speaker 14: those of us.
Speaker 13: That have the boats and because people either come.
Speaker 14: To our home if you will, and Soho, and then
Speaker 14: we also have the opportunity to be in people's homes,
Speaker 14: you know. And that that's a key element I talk
Speaker 14: about when we're getting ready to film and things like that.
Speaker 14: It's to just take a moment and know that we're
Speaker 14: entering their space now, But how do you do it
Speaker 14: where it still feels electric? And it's in the delivery,
Speaker 14: it's in the professionalism, it's in the training of it all,
Speaker 14: it's and making it look effortless and the music.
Speaker 2: You know, it's really kind of interesting. I love the
Speaker 2: workout space and we've covered a lot here at Bloomberg
Speaker 2: and certainly at Bloomberg Business Week, and it really has
Speaker 2: taken off in so many different iterations. How do you
Speaker 2: think about differentiating yourself. I mean, you've laid it out,
Speaker 2: but it's a competitive field. I'm just curious if that's
Speaker 2: the top of mind that understand that you're competing for
Speaker 2: people's time how they want to work out. I get
Speaker 2: the component, but how do you think about that? Because
Speaker 2: you do think about growing your business and throwing some
Speaker 2: business metrics, because we are curious about how much the
Speaker 2: business has grown in the past five years.
Speaker 14: Sure, twenty twenty three alone, in our one flagship space,
Speaker 14: we've seen twenty three hundred new clients. Wow, okay, and
Speaker 14: we have very minimal I'm just giving.
Speaker 13: Kind of makes my chest still address a bit because.
Speaker 14: It's just affirming the demand that I saw traveling in
Speaker 14: the country and outside of the country creating dance concepts.
Speaker 14: But that's just in our soho space, in the physical space,
Speaker 14: and absolutely to the expansion. And do I worry about
Speaker 14: the competition apps? I mean no, you know, absolutely no,
Speaker 14: because this is the grace of being a working dancer
Speaker 14: and choreographer first and foremost, you know, professionally starting to
Speaker 14: teach when I was thirteen.
Speaker 13: I was given the opportunity to do so.
Speaker 14: In even moving to New York from Kansas City, people
Speaker 14: would say, You're worried about the competition, you know, in
Speaker 14: the arts and things, and no, I was driven by
Speaker 14: the connection and how it shifts people's worlds individually and collectively.
Speaker 13: So the competition, like you know, kind of fires me up.
Speaker 13: I'm good to go with all that.
Speaker 2: As you know, we are Bloomberg. So I am curious about,
Speaker 2: you know, are you profitable, what's the plan? Like, do
Speaker 2: you want to how do you want to grow the business?
Speaker 2: Do you want to stay private? I'm just curious because
Speaker 2: you do have investors, you know AVC, You've got able partners,
Speaker 2: You've got G nine Ventures, You've got a bunch of
Speaker 2: people who've definitely ponied up money to back you.
Speaker 14: They did, they did, and brilliant people and we are
Speaker 14: very intentional with who we said yes to being a
Speaker 14: part of this with Forward Space, how do we plan
Speaker 14: to expand? Soho's our flagship space, will continue to do activations.
Speaker 14: We've done them in London and out east in the
Speaker 14: Hamptons for five six weeks. We've got our eyes on
Speaker 14: the Upper east Side West Hollywood, LA. So these are
Speaker 14: the other physical spaces that will open. Chicago's in the mix. Yeah,
Speaker 14: and then partnerships. Brand partnerships has been one of the
Speaker 14: large lanes, you know, if you think of Ford Space.
Speaker 14: Obviously in the center here we've got our virtual our
Speaker 14: flagship space are varying spaces that will open around ten
Speaker 14: or twelve in the next five years.
Speaker 13: And then the brand partnerships.
Speaker 14: We've done things with a number of notable brands, large brands,
Speaker 14: and so building those relationships out further six K relationships,
Speaker 14: you know six.
Speaker 4: What about potentially franchising like Orange theory is.
Speaker 14: Done right, I don't think we'll go that route, and
Speaker 14: that was early on when we were first building out
Speaker 14: the plan and doing as doing the first round of investment,
Speaker 14: a non a convertible for good convertible note, and so
Speaker 14: in the convertible note. That was a large conversation I
Speaker 14: had in a few of our key investors.
Speaker 13: We had some really strong meetings.
Speaker 14: About knowing this fload will explode in all the ways,
Speaker 14: wanting to be intentional with it and to not Some
Speaker 14: of them had taken the franchise route and learned, and
Speaker 14: we don't think that would be the route for Ford Space.
Speaker 13: It's not an absolute no, but it's likely not.
Speaker 2: Kristen really quickly thirty seconds, your brother is Jason Sudeikis,
Speaker 2: so did you ever give him advice on Ted Lasso?
Speaker 2: Does he ever give you advice on a playlist?
Speaker 14: And just quickly, oh gosh, I mean we're passing music
Speaker 14: back all the time and talking life and talking all
Speaker 14: the things. But I mean, I know, never gave him
Speaker 14: advice on his body of work, his show I called
Speaker 14: the body of work that's been exhaled, that's brought such
Speaker 14: joy and talk about connection, human connection. But I mean,
Speaker 14: he's an amazing big he's an older brother, you know,
Speaker 14: my only brother, very close and feel very lucky to
Speaker 14: talk music and playlists and life and all these things.
Speaker 2: It's a yes, Well, listen so much fun. Next time,
Speaker 2: come join us. We'd love to have you in studio.
Speaker 10: Come back.
Speaker 2: We'll talk a little bit more about the business too. Dancing, Yeah,
Speaker 2: I do some dancing. Christ And Zadaikas she's found her
Speaker 2: CEO and creative director of Forward Space.
Speaker 1: You're listening to the Bloomberg Business Week Podcast. Catch us
Speaker 1: live weekday afternoons from three to six Eastern on Bloomberg Radio,
Speaker 1: the Bloomberg Business App, and YouTube. You can also listen
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Speaker 1: Just Say Alexa playing Bloomberg eleven thirty time Now for.
Speaker 2: A bit of luxury with our friends from Bloomberg Pursuits
Speaker 2: and This week's issue of Bloomberg Business Week Magazine includes
Speaker 2: the long awaited return of the annual ski special.
Speaker 15: Tim.
Speaker 2: It's almost ski season and you're pretty excited.
Speaker 4: I'm excited, but you know, thinking back to my glory
Speaker 4: days of living in the mountains after college, skiing is
Speaker 4: just not the same when you have two kids, and
Speaker 4: you know in New.
Speaker 16: York City there are places that will take them all day,
Speaker 16: so you have to You know.
Speaker 2: That cub med all right, club mad, That's true, It's true,
Speaker 2: all right. You guys doing your club med though you
Speaker 2: guys are hearing shelps were hearing the voices of Bloomberg
Speaker 2: Pursuits editor Chris Rouser and Bloomberg News travels are Nikki Eckstein.
Speaker 2: So let's get into it, all right. I always like
Speaker 2: to ask, We like to ask, how do you guys
Speaker 2: approach this? Like, yeah, I mean there's people who have kids,
Speaker 2: there's people who like So how did you approach it
Speaker 2: this time around?
Speaker 16: Well, we do this every year and Nicki and I
Speaker 16: are both skiers, so we love working on this section.
Speaker 16: And what we try to do is combine news like
Speaker 16: stuff that you may not know about, So developments in
Speaker 16: hotels or resorts, news ki terrain, along with service. So
Speaker 16: what's some of the gear you might need? Where are
Speaker 16: some of the places you might want to stay? Like
Speaker 16: newsplus fun.
Speaker 17: I was gonna say, I think we're like very much
Speaker 17: guided by our own hearts, right, since we care about
Speaker 17: this industry, we always try to feature the things that
Speaker 17: are really exciting to us because we think that that's
Speaker 17: what we'll excite other people too.
Speaker 1: Well.
Speaker 4: Speaking of the industry, it's undergone some serious consolidation over
Speaker 4: the last decade or so, Nikki. When we think about
Speaker 4: independent ski resorts, we think about those that aren't owned
Speaker 4: by the big players Bell Resorts and Altera, which own
Speaker 4: almost half the ski areas here in the US, and
Speaker 4: they're continuing to buy more. You dedicate a big section
Speaker 4: of this issue to what you call the independent resorts.
Speaker 17: Yeah, you know, we're thinking about the trends for the
Speaker 17: year ahead, and this is something where for the last
Speaker 17: I don't know, ten years, maybe we've been seeing the
Speaker 17: demise of independent resorts. They all get scooped up by
Speaker 17: the corporate companies that strip them of character and flavor
Speaker 17: and make them, you know, available to people on epic
Speaker 17: passes and so on and so forth, which is its
Speaker 17: own service. But this year we're seeing something different. We're
Speaker 17: seeing independent mountains come into their own. Many of them
Speaker 17: are actually being acquired by major entrepreneurs and people from
Speaker 17: the finance world, not from the ski industry itself.
Speaker 2: I have to say, I love this. I had no idea.
Speaker 2: I feel like for years we're like, isn't this great?
Speaker 2: These like big corporate groups creating these passes where you
Speaker 2: scause of these give places. It helps users for sure, right, Okay,
Speaker 2: so but talk to us about these the independence here,
Speaker 2: Chris and who's doing some of the who's getting involved
Speaker 2: because there are names that certainly our audience is going
Speaker 2: to know.
Speaker 10: Yes.
Speaker 16: So with like a lot of things that you want
Speaker 16: to survive and love, sometimes it does require, like media
Speaker 16: for example, it does require a billionaire to come in
Speaker 16: and invest, well said, and in some of these places
Speaker 16: that's exactly what happens. So read Hastings, who is the
Speaker 16: co founder of Netflix, who we all know, came in
Speaker 16: and bought Powder Mountain and has announced one hundred million
Speaker 16: dollars in commitment to improving it. And that's the kind
Speaker 16: of thing is going to keep Powder Mountain independent. And
Speaker 16: he says he's going to keep the appeal that that
Speaker 16: mountain has for the current users and maybe bring in
Speaker 16: some new people.
Speaker 2: What's interesting is about how he found it. So it
Speaker 2: sounds like he found this mountain after being kind of
Speaker 2: frustrated by some of the more populated and it sounds
Speaker 2: like he wants to keep it that way for.
Speaker 15: Himself as others.
Speaker 17: So the story is that he lived in Park City,
Speaker 17: he had a house there, he had his kids.
Speaker 15: Were living there.
Speaker 17: You know, they all would go skiing as a family
Speaker 17: in Park City all the time, and one day it
Speaker 17: dumped snow. He piled his family into the car, was like,
Speaker 17: let's all go powder chasing at Park City and they
Speaker 17: get to the mountain and it's all been packed over.
Speaker 17: He says it was like skiing on a sugar cube,
Speaker 17: as on a sugar pants on a sugar cube. Yeah,
Speaker 17: that was the exact quote. And so he got fed
Speaker 17: up and he literally put his family back in the car.
Speaker 17: The same day, He's like, I heard of this place
Speaker 17: ninety minutes north driving let's go. Let's see what happens.
Speaker 17: They were there by lunchtime at Powdered Mountain, and within
Speaker 17: like weeks he ends up buying a house there. Later
Speaker 17: on buying the resort, he wants to preserve it. He
Speaker 17: wants to preserve his own special place.
Speaker 4: I mean, who hasn't gone on vacation somewhere and then
Speaker 4: him and decided to buy it. I will say I
Speaker 4: was surprised to read that about Read Hastings, because you know,
Speaker 4: you think, okay, it's Read Hastings. He's worth more than
Speaker 4: four billion dollars according to Bloomberg Billionaires Index, and he
Speaker 4: skis just like normal people, Like I thought he'd be,
Speaker 4: you know, helicopter skiing and you know, going to these
Speaker 4: resorts all over the world. But I guess he piles
Speaker 4: the kids in the car and does his thing and millionaire.
Speaker 15: Sort billionaires us.
Speaker 2: The other one who got involved, which I thought was interesting,
Speaker 2: was a former City of City group.
Speaker 4: Yeah, Mike Corbett.
Speaker 15: Yeah, so Jackson Hole is another one.
Speaker 17: So this is another funny story where quite a few
Speaker 17: years ago, a bunch of people who make these like
Speaker 17: indieeski ski videos out of Jackson Hole posted something saying
Speaker 17: that Veil had bought Jackson Hole, and the entire internet
Speaker 17: goes a flame.
Speaker 15: Saying, not my mountain, April fools. It was a literal
Speaker 15: April fools.
Speaker 17: But the family that owned that resort, the Kemer family, decided,
Speaker 17: you know, we have to take this seriously. We're not
Speaker 17: going to sell Jackson Hole unless it's to another independ
Speaker 17: an entity. And they spent years and years debating whether
Speaker 17: they should keep it sell it after they proudly built
Speaker 17: it up to what it is now, and finally after
Speaker 17: the pandemic, the Khmer family decided maybe now is the
Speaker 17: time to back out.
Speaker 15: They approached Mike Corbett.
Speaker 17: Love It, and he said yes, and as of August,
Speaker 17: the resort has new ownership. I don't think it had
Speaker 17: been previously reported actually, at least the terms of the deal.
Speaker 15: So we are very I feel.
Speaker 2: Like it's a story we would have done. Is like
Speaker 2: one of our you know, like, hey, did you see
Speaker 2: this story? Because it's just kind of interesting. Yeah, these
Speaker 2: big names, I just want to just real quickly do Windham.
Speaker 2: I had a sister who taught on Wyndham for a
Speaker 2: long time. It was such a family mountain. Yes, but
Speaker 2: it's really gone a makeover. I love that, you know it,
Speaker 2: I used to ski.
Speaker 17: There are a lot too, and people have been really
Speaker 17: up in arms in recent years because in order to
Speaker 17: make the economics of that mountain work, the day passes
Speaker 17: have gone as high as one hundred and seventy five
Speaker 17: dollars a day, which for East Coast skiing is ludicrous.
Speaker 17: But now the proposition is that the family that owns
Speaker 17: BlackBerry Farm in Tennessee and credible, culinary driven, five star
Speaker 17: super lux resort has taken over Windom along with another family,
Speaker 17: and they are hoping to bring that same sensibility of
Speaker 17: like four seasons, great food, you know, operate ski.
Speaker 2: Culture, wait one hundred and seventy five thousand initiation fee.
Speaker 1: Yeah.
Speaker 2: Yeah, there's a little aspect of a little right.
Speaker 15: Skiing is still going to be open to the public.
Speaker 17: Okay, there has been uproar because they're turning it into
Speaker 17: a member's club as well, but skiing will remain.
Speaker 4: Open to Okay, I'm just going to say, you know,
Speaker 4: and I think it's like Sesame Street, one of these
Speaker 4: things does not belong Windom, along with Jackson Hole out
Speaker 4: of the Mountains.
Speaker 15: Kay, you're not wrong.
Speaker 4: I know what I'm talking about. It's a crazy number.
Speaker 16: No, No, it is a crazy number. And you know, we're
Speaker 16: not there yet, Like they're just starting this now. So
Speaker 16: what they're trying to do is really build up the amenities,
Speaker 16: make it like feel maybe as posh as a Yellowstone
Speaker 16: Club silo Ridge, but not you don't have to buy
Speaker 16: a house to be there. So we don't really know
Speaker 16: what they're going to offer to try to make that
Speaker 16: scene valuable.
Speaker 17: Make it you around too, right, Yeah, and there's actually
Speaker 17: they're opening they're talking about opening a property in the
Speaker 17: Catskills as well for summertime.
Speaker 15: So it could really be an.
Speaker 17: Asset to New Yorkers who want that kind of BlackBerry
Speaker 17: farm experience closer to home.
Speaker 2: All Right, I don't ski as much as you guys.
Speaker 2: I used to ski, but I don't as much, so
Speaker 2: I kind of got into some of the gear. Can
Speaker 2: I be quite honestly, let's talk about the gear, Chris.
Speaker 16: So, you know when you go backcountry skiing, especially if
Speaker 16: you're going helly skiing, you need to take certain things
Speaker 16: with you in case there's an avalanche, and so you
Speaker 16: have to have a beacon, a shovel of probe so
Speaker 16: people can track where you are. Yeah, but now there's
Speaker 16: a lot of stuff that takes that safety to the
Speaker 16: next level. This is not something that I personally do.
Speaker 16: So I also read this and was like, yeah, give
Speaker 16: me all of this.
Speaker 3: Do any of you do this?
Speaker 1: I do.
Speaker 4: I have an avalong in my clock.
Speaker 9: I do.
Speaker 10: Yeah.
Speaker 4: But the technology, it's interesting, is about fifteen years old.
Speaker 4: And this the product that I have is a backpack
Speaker 4: with like a breathe ability thing built into it. It's
Speaker 4: a lot different than what's available now where you have airbags,
Speaker 4: you have assisted breathing. Best it's essential stuff if you're
Speaker 4: going into the back country.
Speaker 17: Nikky, I wouldn't know, but I'm really glad to hear
Speaker 17: this because I find this to be so terrifying and
Speaker 17: I want people to stay safe.
Speaker 16: Anythink that has gear that you need to take that
Speaker 16: has the word lung in it, the trees, the.
Speaker 2: Tree oxygen in like it like a couple of minutes.
Speaker 4: Just going with people who know what they're doing. I mean,
Speaker 4: these are people who know how to read snow and
Speaker 4: understand where it's safe to ski and where it's not
Speaker 4: safe to ski.
Speaker 16: And some of this gear.
Speaker 17: And one of the things that I think is actually
Speaker 17: really cool about this is that there's this app. And
Speaker 17: you know, when we were working on the story, Chris
Speaker 17: was really skeptical about this and we really had to
Speaker 17: dig in and figure out what the deal was. But
Speaker 17: there's this app that uses light our mapping technology which
Speaker 17: basically scans the Earth's surface for evenness of snowpack, for density,
Speaker 17: for tree cover, for how foot traffic affects the snowpack,
Speaker 17: and the other factors believe and uses all that combines
Speaker 17: it into historical data to predict which which weighs down
Speaker 17: the mountain will have greater avalanche risk than others, also
Speaker 17: factoring the day's forecast, the day's avalanche forecast all of it,
Speaker 17: and it makes predictive recommendations to you.
Speaker 2: Really smart. Right, it's in the self driving vehicle.
Speaker 1: It's really cool.
Speaker 2: I'm just gonna say, I want to go to the
Speaker 2: puff puffer coats. I will upset you didn't bring any
Speaker 2: for us to try on, because you've done that in
Speaker 2: the past.
Speaker 4: You would take a monk cler.
Speaker 2: I would ors are a pretty cool brand. Anything we
Speaker 2: should know about that.
Speaker 16: If you want something that's like so hot that you're
Speaker 16: like a furnace, Nobus is really the brand for you.
Speaker 16: We also say Patagonia is you can't go wrong with
Speaker 16: Patagonia if you don't want to spend a crazy amount
Speaker 16: of money.
Speaker 2: Guys, thank you so much. Often running for the new
Speaker 2: ski season our thanks to Bloomberg Pursuits editor Chris Rouser.
Speaker 4: And of course Bloomberg News Travels are Nikki ck Stein
Speaker 4: looking forward to hitting the slopes a safe I think
Speaker 4: I'll go check it out this year. Bring the little guy,
Speaker 4: take the little critters, take the critters.
Speaker 2: All right, you're listening to Bloomberg Business Week, guys, thank
Speaker 2: you so much. And if you're traveling abroad for your
Speaker 2: next ski trip or any sort of trip, for that matter,
Speaker 2: you might want to stick around for our next guest,
Speaker 2: Julie Hansen, us CEO of Babbel, the world's best selling
Speaker 2: language learning platform. She stops by next. This is Bloomberg.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from three to six Eastern Listen on
Speaker 1: Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app,
Speaker 1: or watch us live on YouTube.
Speaker 4: We've got with us Julie Hansen. She's US CEO of Babel.
Speaker 4: It's a privately held company, and it's a role that
Speaker 4: she's had since twenty seventeen. Julie also we should notice
Speaker 4: the former COO and president at Business Insider. She was
Speaker 4: there when Axel Springer bought BI in a deal that
Speaker 4: valued the company for four hundred and fifty million dollars
Speaker 4: back in twenty fifteen. Julie joins us on Zoom from
Speaker 4: New York. Julie, good to have you with us this afternoon.
Speaker 6: How are you good, Thanks Jim, Thanks Cheryl, thanks for
Speaker 6: having me.
Speaker 4: Yeah, it's good to have you with us. Talk to
Speaker 4: us a little bit about the growth that you've seen
Speaker 4: on the platform, because I got to tell you there
Speaker 4: is no shortage of places where you can go online
Speaker 4: to learn languages.
Speaker 6: True, but we've seen I mean, Babel was the originator
Speaker 6: of the category of online language learning some seventeen years
Speaker 6: ago when it was founded in Germany. And we've seen
Speaker 6: double digit growth growth really boom during the pandemic, but
Speaker 6: then it's stayed at very elevated double digit rates ever since,
Speaker 6: and we've been able to sustain that growth. And part
Speaker 6: of what drives it is what you said at the
Speaker 6: top of the program that you know, multi language families
Speaker 6: are growing in this country, but it's also just become
Speaker 6: something that's somehow more appealing to do in our culture
Speaker 6: and we're benefiting from that.
Speaker 2: So Jillie, wait, help me out here. You said obviously
Speaker 2: makes sense. Right, A boom during the pandemic, Right people
Speaker 2: are at home. They wanted to learn to knit, learn
Speaker 2: to make sour dough bread, and learned to speak another language.
Speaker 2: Like that's what it was about and stay healthy, no
Speaker 2: doubt about that during the pandemic. But you've held on
Speaker 2: to those levels of growth as well as subscribers give us.
Speaker 2: Are you saying that you've maintained those levels in the gains.
Speaker 6: Yeah, I mean not quite at the pandemic levels, but
Speaker 6: we've grown double digit ever since the pandemic, so very
Speaker 6: strong growth. I mean, Babel is the most sold language
Speaker 6: learning platform ever. We've sold more than sixteen million subscriptions
Speaker 6: over time. So so yeah that I don't I can't
Speaker 6: tell you all the reasons why, but it just seems
Speaker 6: like something about the language learning boom during the pandemic
Speaker 6: validated that as an activity, and people have stayed with it.
Speaker 2: I'm curious, like, how does it work if you become
Speaker 2: you know, you sign on and you become a customer
Speaker 2: of your services, do you become a repeat customer? Is
Speaker 2: that what often? Or is it all about new customer acquisition?
Speaker 6: That so interesting? Actually, in Europe, especially in Germany, we
Speaker 6: do see quite a bit of repeat purchases, whether people
Speaker 6: are coming back to a language after a pause or
Speaker 6: often there like learning the next language, which of course
Speaker 6: is very impressive.
Speaker 4: Who are these people very languages?
Speaker 6: Over Here in the US we tend to see that
Speaker 6: people take a pause and then come back. But language
Speaker 6: learning is, you know, a long term activity. You can
Speaker 6: make progress in a short time period, but you don't
Speaker 6: become fluent without you know, a considerable long term effort,
Speaker 6: so people know that, and there's actually one of the
Speaker 6: reasons why lifetime subscription is a very popular option.
Speaker 4: Talk to me about the strategy here with Babel in
Speaker 4: terms of learning and how Babel teaches in a way
Speaker 4: that's different from other platforms and compare with dual Lingo.
Speaker 4: I know, doual Lingo is a company, it's publicly traded,
Speaker 4: it's got a market cap of about six point nine
Speaker 4: billion dollars. It went public just a couple of years ago,
Speaker 4: and that one certainly gets a lot of mind share
Speaker 4: with especially millennials and gen z yep.
Speaker 6: Definitely different learning approaches. You know, at Babel, we use
Speaker 6: a lot of learning science and frankly a lot of
Speaker 6: AI embedded in the product. But we do believe that
Speaker 6: human led teaching. We have something like one hundred and
Speaker 6: fifty didactics experts on staff who've created our courses that
Speaker 6: we need.
Speaker 5: We need to.
Speaker 6: Marry their knowledge with technologies basically the essence of what
Speaker 6: we do. We also believe that, you know, you're not
Speaker 6: going to become perfectly fluent from any app, so that's
Speaker 6: why we've created other products to support and round out
Speaker 6: the language learning experience. So it might be a bunch
Speaker 6: of podcasts. I think we're up to twenty three different podcasts,
Speaker 6: but we also have live teacher led you know, virtual classes,
Speaker 6: and those are an important part of you know, really
Speaker 6: we care about learner success, so we believe that to
Speaker 6: get learners to succeed, you have to combine learning methods.
Speaker 6: I mean, there's scientific research behind that. It's not just
Speaker 6: our belief. So so it's that combination of human and technology,
Speaker 6: especially AI, but other technologies too, and the idea of
Speaker 6: creating a whole surround sound of learning experiences.
Speaker 2: It's really interesting how much of your business is B
Speaker 2: to B business to business I'm always curious about or
Speaker 2: is a lot of it just individuals who want to
Speaker 2: learn a language.
Speaker 6: Well, the B to B is the fastest growing segment
Speaker 6: of our business by far. It's the newest compared to
Speaker 6: the consumer though, so it's not nearly as big, but
Speaker 6: growing fast. And those are very interesting use cases.
Speaker 13: We started that business in Europe.
Speaker 6: We found, you know, international companies, multinational companies needed help.
Speaker 6: And then we came to the US and it took
Speaker 6: a while to sort for the use case to become clear.
Speaker 10: Here but we.
Speaker 6: Believe the growth opportunity is massive in the US based
Speaker 6: on just migration patterns, because often babble is brought in
Speaker 6: for language teaching in situations where there's workplace safety at risk. Yeah,
Speaker 6: we have a very diverse group of clients here from
Speaker 6: a bunch of MLB teams. Maybe safety isn't quite the
Speaker 6: thing there, it's excellence. But you know, down to meat packers, landscapers,
Speaker 6: I mean places where that where language barriers create safety
Speaker 6: issues and there's a big opportunity in that.
Speaker 4: Talk to me about mobile versus desktop right now? What's
Speaker 4: the share on mobile?
Speaker 6: You know, when I started here, if you can imagine people,
Speaker 6: actually there was a lot of desktop usage. That was
Speaker 6: just six years ago, and I thought it was really peculiar,
Speaker 6: frankly coming from the US.
Speaker 2: But now it's we're a mobile app.
Speaker 6: There are still some people who use the product on
Speaker 6: their desktop or maybe their iPad, but it's a mobile world.
Speaker 2: What is it typically cost for somebody who wants to
Speaker 2: subscribe or learn a language.
Speaker 6: I mean, you can start in the US if you
Speaker 6: want to just try a one month subscription for about
Speaker 6: fifteen bucks. If you want to subscribe for the year,
Speaker 6: more like ninety dollars, you can pick up a lifetime
Speaker 6: subscription for call it three hundred bucks. So in that range.
Speaker 2: And your biggest market or biggest or fastest growing market,
Speaker 2: is it the US? Just got about thirty seconds left here.
Speaker 9: Yes to both.
Speaker 6: The US was late, the last one that we were
Speaker 6: found success in and it took a very dedicated approach.
Speaker 6: But it's now the biggest market, the fastest growing. You know,
Speaker 6: it's all about learning Mexican Spanish in the US market,
Speaker 6: but we teach all of our fourteen languages, but that's
Speaker 6: the popular language here.
Speaker 2: Really interesting. Thanks for the insight, really fascinating. Julie Hansen,
Speaker 2: US CEO Babbel and joining us of course on zoom
Speaker 2: in New York City.
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