Speaker 1: This is Bloomberg Business Wait inside from the reporters and
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Speaker 1: global business, finance and tech news. The Bloomberg Business Week
Speaker 1: podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 2: Hey, check out shares of Apple. We'll then hire up
Speaker 2: about nine tens an percent. Up thirty percent though so
Speaker 2: far here in twenty twenty three, company definitely on a radar.
Speaker 2: You got CEO Tim Cook officially opening up Apple's first
Speaker 2: store in India. You had Apple introducing a long promised
Speaker 2: hoy Yield savings account with Goldman, and then a Bloomberg
Speaker 2: exclusive courtesy of our Mark German about Apple's coming arsenal
Speaker 2: of new headset apps. Yep, we knew we wanted to
Speaker 2: learn more. Mark is, of course Bloomberg News technology reporter.
Speaker 2: He joins us on zoom in our La bureau. So
Speaker 2: much going on here, Mark, among the ton of news
Speaker 2: on Apple today, including your exclusive What's first and foremost?
Speaker 3: Yeah, I would say Apple's headset, right, That's on the
Speaker 3: minds of everyone at Apple. That's on the minds of
Speaker 3: everyone watching Apple at this point. This is going to
Speaker 3: be a big deal.
Speaker 1: Right.
Speaker 3: When Apple launches new product categories, all eyes are on
Speaker 3: the company.
Speaker 4: Right.
Speaker 3: The last time they did something like this was the
Speaker 3: Apple Watch at the end of fourteen, ended up releasing
Speaker 3: it in April twenty fifteen. Before that was the iPad,
Speaker 3: and then the phone, and then the iPod and the.
Speaker 4: Mac before that.
Speaker 3: Right, So this Apple headset will join a string of
Speaker 3: major blockbusters at the company is built around, right, and
Speaker 3: so people are clamoring for more info on this device.
Speaker 3: What's it going to do, what's it going to look like,
Speaker 3: how much will it cost? Why would you even want
Speaker 3: this thing?
Speaker 4: Right?
Speaker 3: And so I think the headset is at the forefront
Speaker 3: for me at least. Right now, Mark, talk.
Speaker 5: To us about the motivation behind rolling this out, because,
Speaker 5: like you were mentioning, it's been a while since they've
Speaker 5: had something like this as far as their product categories.
Speaker 3: Yeah, Right, Mixed reality is something that Apple see is
Speaker 3: potentially it's bridge to a post iPhone era or an
Speaker 3: era where the iPhone becomes less important, just like when
Speaker 3: the iPhone came out, the Mac, you know, became a
Speaker 3: bit less important in terms of what consumers are using
Speaker 3: right as their go to tech product, And so This
Speaker 3: is the beginning of what's going to probably be maybe
Speaker 3: a twenty year journey for the company. You know, they'll
Speaker 3: start off with this high end headset, probably called the
Speaker 3: Reality One or the Reality Pro this year, and then
Speaker 3: they'll go to a cheaper model at the end of
Speaker 3: twenty five, as well as a new high end model
Speaker 3: at the end of twenty five. The eventual holy grail,
Speaker 3: which I don't think they're going to get to until
Speaker 3: maybe the end of the decade or even the beginning
Speaker 3: of next decade, will be lightweight augmented reality glasses. And
Speaker 3: that's really where you see you know, mixed reality and
Speaker 3: augmented reality picking up steam and eventually replacing the need
Speaker 3: to have something like a phone.
Speaker 2: And listen, you need to have infrastructure and apps to
Speaker 2: support it, right, I mean, it's great to have, you know,
Speaker 2: a headset, right Mark, which got to be able to
Speaker 2: do stuff with it. And that's what's interesting about your story,
Speaker 2: your exclusive story, that this is what they're getting ready
Speaker 2: to really roll out.
Speaker 3: So the Apple headset's going to take a scattershot approach
Speaker 3: to functionality, similarly to the original Apple Watch.
Speaker 1: Right.
Speaker 3: That means Apple is going to try everything from the
Speaker 3: get go. They're gonna throw everything at this device, right,
Speaker 3: and then over time consumers will you know, show Apple
Speaker 3: and show the market what features they really want out
Speaker 3: of the device.
Speaker 1: Right.
Speaker 3: The Apple Watch was filled with a ton of features
Speaker 3: at the beginning, and they eventually paired that down a
Speaker 3: bit and focused on a few core areas. I think
Speaker 3: Apple's going to do something similar with the headset. So
Speaker 3: if you have an iPad, you're already familiar with what
Speaker 3: an Apple headset is going to be able to do.
Speaker 3: It's gonna have every iPad app you can imagine, from
Speaker 3: notes to pages, to iMovie to the camera to sort
Speaker 3: of FaceTime and zoom on steroids where you'll be able
Speaker 3: to really feel like you're in a meeting room with
Speaker 3: another person in virtual reality. So I think this is
Speaker 3: going to be an astonishingly cool and high tech device.
Speaker 3: The question is do people really want to use these
Speaker 3: types of features that they already have in a new
Speaker 3: environment instead of the environment they're already using them in,
Speaker 3: such as on their iPad or on their phone or mac.
Speaker 2: Well, do we like it? Like right exactly? You know,
Speaker 2: you could have had a laptop and then all of
Speaker 2: a sudden you had an iPad. I mean, Apple is
Speaker 2: incredible about saying you need to kind of continue to
Speaker 2: build out your tech infrastructure with another device to be
Speaker 2: able to use kind of the same apps. Are people saying,
Speaker 2: do they believe that the headset has the potential to
Speaker 2: be I don't know what size of a business for Apple?
Speaker 2: What are they like in it too? That's already at Apple.
Speaker 3: I believe the headset is the computer of the future, right,
Speaker 3: the idea where instead of you're using your laptop or
Speaker 3: instead of using your iPad, you're doing everything you were
Speaker 3: doing already on your face, right, And I think Carol,
Speaker 3: you summed it up perfectly. All these Apple devices, they're
Speaker 3: all a means to the same end. They all do
Speaker 3: the same stuff, right. It's all about running the same
Speaker 3: apps but in different user interfaces and at different moments. Right,
Speaker 3: So maybe you're using your Mac at your desk, but
Speaker 3: you're using your iPad on an airplane or in your
Speaker 3: living room, or your iPhone while you're out and about,
Speaker 3: or your watch when you need to do the same
Speaker 3: thing you could do and all those other devices very quickly. Right,
Speaker 3: they all do the same thing. It's just a different
Speaker 3: user interface.
Speaker 5: Mark something you also had in your story you were
Speaker 5: talking about how Apple is also working on a version
Speaker 5: of its Fitness Plus service for the headset. This was
Speaker 5: something that Meta or Facebook, however you want to call it,
Speaker 5: that they had also tried to get into their VR headsets,
Speaker 5: which that's obviously a big player in this space. How
Speaker 5: do you think Apple could stand out from when you
Speaker 5: have another competitor like Meta trying to already do something
Speaker 5: like that.
Speaker 3: Yeah, I mean the virtual workouts will be a big
Speaker 3: part of the product, and I think Apple has the
Speaker 3: infrastructure there already. Right Fitness Plus launch at the end
Speaker 3: of twenty twenty. They have quite a bit a number
Speaker 3: of users, and they have lots of content already pre
Speaker 3: programmed there. They have lots of content film, lots of
Speaker 3: classes they already have in there. It's just about converting
Speaker 3: it and playing it in virtual reality, right, And so
Speaker 3: given their content library on the fitness front, I think
Speaker 3: they're way headed from day one on anything that Facebook
Speaker 3: could offer, Right, Apple has it all ready to go already.
Speaker 2: How big is sports a part of this? And you
Speaker 2: think that's going to really be a reason why people
Speaker 2: are like.
Speaker 3: I'm in I don't think anyone's going to buy it,
Speaker 3: particularly for the sports features. But now you'll be able
Speaker 3: to watch a game, and you know, the idea is
Speaker 3: you can make you feel like you're sitting courtside and
Speaker 3: watching Lebron take over the Grizzlies game.
Speaker 2: All right, Right, I know a few people who would
Speaker 2: like that. Hey, Mark, while we have you there, we'd
Speaker 2: be remiss talk to us about the story that's on
Speaker 2: the Bloomberg about Apple, you know, opening up its first
Speaker 2: retail store in India. You've got that out there. You've
Speaker 2: got Apple and Goldman, this new savings account. I'm just,
Speaker 2: you know, trying to make sense of it all as
Speaker 2: increasingly Apple becomes a bigger and bigger part or at
Speaker 2: least wants to be of our world.
Speaker 3: Yeah, the India situation is interesting because I think the
Speaker 3: retail stores are not going to add much to Apple
Speaker 3: spot of line there. It's only two stores, but it's
Speaker 3: representative of this bigger push. It's representative Apple pudding. It's
Speaker 3: sort of flag in the ground in India.
Speaker 1: Right.
Speaker 3: The real story there is production and diversification and moving
Speaker 3: more iPhone supply out of China into India. So I
Speaker 3: think that's going to be a big deal. Apple's penetration
Speaker 3: in the Indian market is essentially zero. It's a rounding
Speaker 3: era on the larger market, and there's obviously a billion
Speaker 3: plus there in India, right. There is a growing economy
Speaker 3: in India right, a growing middle class, and I think
Speaker 3: that is the growth story for Apple. You're looking for
Speaker 3: places where Apple's going to grow, it's going to be
Speaker 3: India because you know right now they're at zero percent,
Speaker 3: not zero percent a couple percentage points, right, but very slow,
Speaker 3: very low. And you can look at that as a
Speaker 3: bad thing, and it is certainly a bad thing. They've
Speaker 3: done nothing there, but it also is a huge opportunity
Speaker 3: and it shows how much room still Apple has to
Speaker 3: still grow, which I think is appealing to investors. On
Speaker 3: the Goldman situation that was announced a few months ago,
Speaker 3: it's now finally rolling out. People like this new four
Speaker 3: point one percent apy, which is a quarter for percent
Speaker 3: higher than when Goldman offers on Marcus if you were
Speaker 3: to do it online. This is about people stuck to
Speaker 3: their iPhones. If you put fifty grand in your savings
Speaker 3: account on your iPhone, it's going to be a lot
Speaker 3: more difficult for you to switch to a Samsung phone, right, Yeah,
Speaker 3: and so Apple was just wanting to add more and
Speaker 3: more features to keep the iPhone sticky and make the
Speaker 3: iPhone more useful.
Speaker 2: All right, we got to ask you. Just got about
Speaker 2: forty five seconds left here, Microsoft and Vidia, Alphabet, Amazon,
Speaker 2: four of the world's top seven most valuable companies. They
Speaker 2: are all in seemingly so when it comes to chat gibt,
Speaker 2: when does Apple make some news on this front? And again,
Speaker 2: just got about thirty forty seconds.
Speaker 3: You know, Apple's approach to AI is a bit different.
Speaker 3: They're wanting to apply AI to real world problems and
Speaker 3: situations rather than do a chatbot, right, and so you
Speaker 3: see that as their self driving car, that's a very
Speaker 3: AI heavy based products to enable that. Likewise, a lot
Speaker 3: of the futures are going to get on this headset,
Speaker 3: so they look at it a bit differently. But I
Speaker 3: still think there's room for them to do more in
Speaker 3: the chat GPT like style.
Speaker 2: All right, Well, around the Apple world in about nine
Speaker 2: ten minutes. Courtesy of Mark German, as only he can
Speaker 2: do it. Hey Mark, thank you, Thank you Mark. He
Speaker 2: has Bloomberg News Technology Reporter. Check out his exclusive It
Speaker 2: is on the Bloomberg terminal at Bloomberg dot com and
Speaker 2: of course you can check them out on Twitter at
Speaker 2: Mark German.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 6: I always be.
Speaker 2: All right, books, We're going to stay with Netflix because
Speaker 2: we want to and because we should. Stock is still
Speaker 2: down about six and a half percent down as we
Speaker 2: were just breaking down a little little hectic on as
Speaker 2: we're getting warmed up to doing earning season again. But
Speaker 2: Netflix is certainly a big one. Also tracking it is
Speaker 2: John Erleckman, Bloomberg Markets anchor on Bloomberg Television. Very familiar
Speaker 2: as you know with that tech space. John all right through,
Speaker 2: are just talking about that second quarter revenue outlook, missing estimates.
Speaker 2: Netflixing second quarter revenue eight point twenty four billion, the
Speaker 2: estimate was eight point forty seven billion. We've been obsessed
Speaker 2: a little bit too with that first quarter streaming paid
Speaker 2: net change of one point seventy five million versus an
Speaker 2: estimate that was two point forty one million. Break it
Speaker 2: down for us, what's jumping out for you.
Speaker 4: Well, I think it's expectations, Carol.
Speaker 7: When we last talked about Netflix quarterly results, the first
Speaker 7: set of results this year, the fourth quarter, the final
Speaker 7: quarter for last year, I think there was more skepticism
Speaker 7: in the air, and that was you might recall the
Speaker 7: time when the company announced that the founder of the business,
Speaker 7: Read Hastings, would be shifting out of the co CEO role,
Speaker 7: and it was seen as sort of this new era
Speaker 7: where not only we're going to be watching what was
Speaker 7: happening with subscriber numbers, but with these new initiatives including
Speaker 7: password sharing, crackdowns and the advertising tier, and the fact
Speaker 7: that they had what ended up being expected subscriber numbers.
Speaker 7: Really Wall Street, you might remember we saw in that
Speaker 7: last quarter like an eight percent pop in stock, and
Speaker 7: I think the view on technology stocks more broadly speaking
Speaker 7: coming into earning season was did these names go too.
Speaker 4: Far, too fast?
Speaker 7: So far in twenty twenty three, if there's still some
Speaker 7: uncertainty in the air, now, you're absolutely right.
Speaker 4: I mean, I think the reality is.
Speaker 7: You're just noting a sign of subscriber growth that we
Speaker 7: came to expect with a Netflix, and maybe investors lose
Speaker 7: sight of that when they get excited for these quarterly numbers.
Speaker 4: We'll see what happens in the after our session.
Speaker 7: Overall, but it is really shifting to be a business
Speaker 7: that in many ways has already told us they are transitioning.
Speaker 7: There are cost controls right now. Shutting down their DVD
Speaker 7: by mail business is one example of cost controls. Password
Speaker 7: sharing crackdowns is another. I mean, arguably that could bring
Speaker 7: in more subscribers, but even looking at Bloomberg's breakdown in
Speaker 7: markets like Latin America, maybe that's the kind of development
Speaker 7: that loses you some subscribers. And then that advertising story,
Speaker 7: while interesting to Wall Street, the company has already told
Speaker 7: us it's not really going to be a meaningful story
Speaker 7: for twenty twenty three. So we're kind of lingering through
Speaker 7: here and everything you just highlighted before, Carroll the competitive
Speaker 7: realities right now this has turned out. I think for
Speaker 7: all the other industry players, maybe are rude awakening that
Speaker 7: the streaming business dynamics are not as robust as what
Speaker 7: they had expected. Netflix probably knew that. It's just that
Speaker 7: they've had to deal with all those other competitors in
Speaker 7: the landscape as well.
Speaker 6: These last twelve to twenty four months, and John.
Speaker 5: You're bringing up the competitors. We were just talking about
Speaker 5: how Disney Roku Tho stalks down more than one percent
Speaker 5: in after hours trading. What do you think is the
Speaker 5: sort of broad read through as far as how this
Speaker 5: is going to affect these other giants that are also
Speaker 5: in the streaming space at this point, Well.
Speaker 7: Jess, I mean, it's clearly the kind of thing where
Speaker 7: if Netflix can't satisfy Wall Street, can other players get
Speaker 7: the check mark that they're hoping for now? You know,
Speaker 7: Disney's an interesting one to zero in on because one
Speaker 7: of the things that we've heard and Bloomberg's report pretty
Speaker 7: extensively on this over the last few months is not
Speaker 7: a story of everybody fighting over subscribers, but in many
Speaker 7: ways a return to the movie theater. I mean, Bloomberg's
Speaker 7: own reporting has told us about you know, Amazon doing
Speaker 7: theatrical releases, Apple doing theatrical releases, Disney as that arm.
Speaker 7: But I think even for Disney, cost controls is a
Speaker 7: very front and center focus for them too. So it
Speaker 7: almost tells you that if there's an economic storyline of
Speaker 7: maybe consumers being a little bit more cautious, or whether
Speaker 7: it's just a competitive environment. If you can't, if Netflix
Speaker 7: can't set the tone with big subscriber growth, maybe we're
Speaker 7: going to be in for a bit of a media
Speaker 7: industry reality check.
Speaker 4: As we rolled through running season here.
Speaker 2: Hey, John, you know these two areas the password sharing,
Speaker 2: which they just launched in four territories Canada, New Zealand,
Speaker 2: Spain and I forget the last one Portugal, and then
Speaker 2: the ad tire which made its debut in November, but
Speaker 2: we know yet to contribute a material number of subscribers.
Speaker 2: Companies said both advertising and password sharing will only offer
Speaker 2: modest contribute contributions excuse me, in the first quarter of
Speaker 2: the year, but would pick up in the current period.
Speaker 2: I guess what we want is a little bit more
Speaker 2: of a feel on the analyst call to get an
Speaker 2: idea of could these two areas be significant revenue drivers?
Speaker 2: I mean, does the analyst community, do the investor community
Speaker 2: think that they these two areas could really be drivers
Speaker 2: for the company. And the stock has certainly popped on
Speaker 2: the expectations of such.
Speaker 7: Yeah, I mean they've become these add ons and again
Speaker 7: I think this is we're talking about the maturation of
Speaker 7: and Netflix saw the writing on the wall. It seemed like,
Speaker 7: you know, there would not be endless streaming growth going forward,
Speaker 7: and so start of these some of these business steps
Speaker 7: are starting to take hold. Now on your question about
Speaker 7: the advertising business, I don't think there are any expectations
Speaker 7: inside the company that this can be a huge business
Speaker 7: by comparison of just having all those traditional streaming subscribers.
Speaker 7: But there is a general sense inside the company that
Speaker 7: they can get to let's say ten percent of their
Speaker 7: revenue coming from the ad tier. So you know, could
Speaker 7: that end up being on an annual basis, like a
Speaker 7: three billion dollar revenue business for Netflix. Most of Wall
Speaker 7: Street things that is very much attainable. But again that's
Speaker 7: part of the overall story. You're still constantly looking for
Speaker 7: that growth narrative to the password sharing. You know, look,
Speaker 7: I think that's just the reality of the transition from Hey,
Speaker 7: we're going to not pay attention to that because we've
Speaker 7: got so much subscriber growth too. Well, now we actually
Speaker 7: have to make sure we've got those subscribers accounted for.
Speaker 7: And I think, Carol, this is just going to continue
Speaker 7: to be a transition time for Netflix. What do they
Speaker 7: want to be I mean, aside from business developments like
Speaker 7: an add to your or password crackdowns even with the
Speaker 7: content itself. You know, people see these headlines about live streaming,
Speaker 7: right fliks never used to do live streaming. They had
Speaker 7: kind of a big snapoo with that this week. But
Speaker 7: they're starting to live stream SAG Awards. They're sort of
Speaker 7: testing that. They're testing partnerships with the Lake of Nike
Speaker 7: on training videos. I think you're going to continue to
Speaker 7: see Netflix trying to figure out some on the margin
Speaker 7: changes under their new leadership.
Speaker 2: You've seen it a lot with YouTube channels. We follow
Speaker 2: my husband and I follow a couple of different people,
Speaker 2: and like they do those live channels and it's popular.
Speaker 2: It's fascinating to see that streaming which is all for
Speaker 2: the most part, like taped produced series, thinking about oh wait,
Speaker 2: we have to go back to live destination viewing, which
Speaker 2: is oh wait, that was linear television. It's really kind
Speaker 2: of fascinating. What's the number one ask you think on
Speaker 2: the analys call.
Speaker 7: How optimistic they are and actually, you know, these are
Speaker 7: some of the more robust conference calls. We talked about
Speaker 7: how Reday seems it has sort of moved upstairs and transition.
Speaker 4: Out of the co CEO role.
Speaker 7: To go and apparently buy a ski resort in Utah,
Speaker 7: which he announced this week. But I think that the
Speaker 7: management there, Greg Peters, Ted Sarandos, I mean I think
Speaker 7: they can I can't think they can.
Speaker 4: Help the tone.
Speaker 7: But the numbers themselves tell us that maybe the storyline
Speaker 7: has changed, especially after run of the tech stocks we've
Speaker 7: seen this year.
Speaker 2: All right, John, always good to check in with you,
Speaker 2: and just fyi everybody. Netflix still down, but only down
Speaker 2: about three point four percent, so no longer like a
Speaker 2: ten percent decline which we saw right after the number,
Speaker 2: So you know, investors kind of settling in maybe reading
Speaker 2: through more of the texture, if you will, of that
Speaker 2: quarterly earning's release. John Erlikman, thank you, Bloomberg Markets anchor
Speaker 2: on Bloomberg TV, joining us via zoom from Toronto. So yeah,
Speaker 2: I mean, this is what's interesting about Ernie. You really
Speaker 2: got to go through all the details, right.
Speaker 5: And what John alluded to at the beginning when we
Speaker 5: were talking to him, the pain that Netflix went through
Speaker 5: at the beginning of last year. But if you look
Speaker 5: at stock for the past twelve months, down just one
Speaker 5: percent before we got today's numbers.
Speaker 2: Carol, Yeah, exactly, So something to keep in mind you're.
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Speaker 2: It does seem like the stress is starting to ease,
Speaker 2: certainly how investors see it based on what we are
Speaker 2: getting from the big banks and more importantly from those regionals.
Speaker 2: And our next guest knows a lot about stress, writes
Speaker 2: about it in a new book. Karen Dylan is editorial
Speaker 2: director at the Family Business Advisory firm Banyan Global Family
Speaker 2: Business Advisor's former editor of the Harvard Business Review. She
Speaker 2: just got a new book out, The micro Stress Effect,
Speaker 2: How little things pile up and become big problems and
Speaker 2: what to do about it. She is on Zoom in Boston. Karen,
Speaker 2: I feel like it's a timely topic, considering the stress
Speaker 2: that seems to come at investors on a daily basis.
Speaker 2: Having said that, tell us about the book, what are
Speaker 2: micro stresses and some of the research you did specifically
Speaker 2: for to figure it out? And what we can do
Speaker 2: to manage it.
Speaker 6: Sure, I'm glad to be here.
Speaker 8: So even just listening to the pre evil before it
Speaker 8: came on is stressful. There's no question we're all kind
Speaker 8: of swimming in the sea of stress all the time.
Speaker 8: But what we're talking about with our research is something
Speaker 8: a little bit different that.
Speaker 6: Most of us don't notice. We don't even know how
Speaker 6: to talk about it.
Speaker 8: We know how to talk about stock market stress and
Speaker 8: political stress and things like that, but we don't know
Speaker 8: how to talk about what we ended up calling micro stress.
Speaker 8: And this is a pick thing that we observed in
Speaker 8: research with high performers were Originally the research was intended
Speaker 8: to look at what did they do better than the
Speaker 8: rest of us, How do they work more effectively with
Speaker 8: other people? How do they maintain their status as high performers?
Speaker 8: And we interviewed three hundred men and women equal numbers
Speaker 8: who were dubbed high performers by their organizations to try
Speaker 8: to get at those best practices. And then early on
Speaker 8: in our research we started to notice, after a bit
Speaker 8: of the veneer had gone off in the interview, that
Speaker 8: little by little became clear that even these high performers
Speaker 8: were kind of barely hanging on. They were swimming on
Speaker 8: what we ultimately called microstress, things that are so brief
Speaker 8: and so invisible to us that we barely notice them.
Speaker 8: What cumulatively they add up?
Speaker 5: And what specifically, can you give us a few examples,
Speaker 5: how does that sort of permeate in our day to
Speaker 5: day lives? Like what specifically would be an example of
Speaker 5: a microstress?
Speaker 8: Sure, so we put them in three buckets, and I
Speaker 8: think you'll relate to all three of them, but in
Speaker 8: three categories. One are micro stresses that drain your personal capacity,
Speaker 8: your ability to get things done. And a really good
Speaker 8: example of that is having unpredictable behavior from a person
Speaker 8: in authority, a boss or a manager, not a toxic
Speaker 8: boss or a jerk, but maybe a boss who stops
Speaker 8: you in the hallway to say he's got a new idea,
Speaker 8: and are you supposed to be pursuing that or not?
Speaker 6: Are you putting other things aside or not?
Speaker 8: Just not one hundred percent always knowing what's expected of
Speaker 8: you from the person above, or having a surgeon responsibility
Speaker 8: as a worker at home. That's category one personal capacity
Speaker 8: or another one that I think most of us experience
Speaker 8: in some way or microstresses that deplete our emotional reserve. So,
Speaker 8: for example, if you work around people who are just
Speaker 8: always stressed out, even if you're not stressed out, the
Speaker 8: secondhand stress from them is going to affect you. Micro
Speaker 8: Stresses are things that happen in our interactions with other
Speaker 8: people that are so brief and so baked into our
Speaker 8: day that you literally barely remember them. And individually they're
Speaker 8: all manageable, but what happens is they layer up over
Speaker 8: the day, over the week, over the month, and they
Speaker 8: actually take a really big toll on you.
Speaker 2: All Right, So media can be a very stressful world
Speaker 2: because it's just the way it is. So what is
Speaker 2: the connection? And some of us thrive on it? I
Speaker 2: mean I kind of like it when it's fast and furious,
Speaker 2: but not that isn't always the case, and you can't
Speaker 2: do that for one hundred percent of the time otherwise
Speaker 2: you're just going to kind of pass out. But having
Speaker 2: said that, what is the relationship between stress and productivity?
Speaker 2: There's got to be probably this interesting balance, right, because
Speaker 2: a little bit of stress gets the adrenaline going and
Speaker 2: can kind of, in some ways maybe make you more productive.
Speaker 2: But I'm guessing too much and that's not good.
Speaker 6: Too much of that is definitely not good.
Speaker 8: And again we started with high performers, So we started
Speaker 8: with people who were already seen why we seen as being.
Speaker 6: Better than the rest of us.
Speaker 8: They were just really good at doing a lot of work,
Speaker 8: being effective collaborators. But as we started to peel back,
Speaker 8: we realized even they really were almost overwhelmed by all
Speaker 8: this warm micro stress, to the point where it potentially
Speaker 8: threatened to derail their careers. What happens is you're always
Speaker 8: in reactive mode. You're always you know, you open your
Speaker 8: email first thing in the morning, and you're already feeling
Speaker 8: overwhelmed and behind as opposed to any of us trying
Speaker 8: to shape and plant our day, and we're thinking about
Speaker 8: which balls can we get away with dropping, rather than
Speaker 8: how do I do my best work today?
Speaker 6: Or what do I actually want to focus on today?
Speaker 8: It just it makes you in a reactive posture rather
Speaker 8: than a proactive posture, and none of us do our
Speaker 8: best work when we're always trying to figure out again
Speaker 8: which balls can we get away with dropping?
Speaker 6: Because we can't do it all.
Speaker 5: What are the financial repercussions for letting micro stresses add up.
Speaker 4: Well?
Speaker 8: Financially, it's it's not good for who you are. You're
Speaker 8: not going to be at your best, most effective you are.
Speaker 8: Potentially even one of the micro stresses that we identified
Speaker 8: is pressure to pursue goals that are out of sync
Speaker 8: with your personal value.
Speaker 5: And also career wise work that could be a detriment
Speaker 5: correct career.
Speaker 8: Correct it could indeed, if you are always sort of
Speaker 8: pursuing what someone else's version of success is and it's
Speaker 8: never feeling comfortable to you, or it's never who you are,
Speaker 8: you're never going to thrive.
Speaker 6: Really in the long run. You may you may have
Speaker 6: a good run five or seven years, but at some.
Speaker 8: Point you're going to realize this is not who I
Speaker 8: want to be. So you're not going to be your best.
Speaker 8: You're probably career wise not going to thrive in the
Speaker 8: way that you want to thrive.
Speaker 6: And the most.
Speaker 8: Importantly of all, you're going to you're not gonna like
Speaker 8: who you are. Eventually, it's going to kind of either way,
Speaker 8: you just small ways. So none of us are our
Speaker 8: best when microstress is overwhelming us.
Speaker 2: And I like Karen, how you make the distinction, certainly
Speaker 2: the book between stress, microstress and secondary micro stresses thirty seconds.
Speaker 2: One piece of advice for those folks who are listening
Speaker 2: to this.
Speaker 8: One piece of advice is to actually stop and have
Speaker 8: five minute clarification conversations with the people that you work with.
Speaker 6: So many of us were.
Speaker 8: Moving so quickly, and we're working with ever shifting cast
Speaker 8: of characters, people who are new at colleagues and things
Speaker 8: like that. We don't know how to work together very well,
Speaker 8: and we assume things, and that can lead to all
Speaker 8: kinds of micro stresses, just misalignments or small performance misses.
Speaker 6: So literally take.
Speaker 8: Five minutes at the end of meetings and just clarify who, when,
Speaker 8: what's the next step. Don't that simple step can make
Speaker 8: a really big difference in your work.
Speaker 2: Michrostrogical. We do that sometimes in the newsroom where you're
Speaker 2: having conflicting stories. It's like, hey, everybody, get over here,
Speaker 2: and for three minutes, like set everything straight. Karen Thanks
Speaker 2: in a very timely conversation. Karen Dylan, editorial director and
Speaker 2: the micro stress Effect her book.
Speaker 1: This is Bloomberg Business. Wait inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine plus
Speaker 1: global business finance and tech news. The Bloomberg Business Week
Speaker 1: podcast with Karen Messer and Tim Stenebek from Bloomberg Radio.
Speaker 2: Yeah, thank you generative AI and chat ChiPT You've given
Speaker 2: us all a lot to talk about and to talk to.
Speaker 2: I actould say I was actually playing with it this weekend.
Speaker 2: The world definitely all in on AI, specifically generative artificial intelligence,
Speaker 2: you know, AI algorithms that generate new outputs based on
Speaker 2: the data that they have been trained on. That's being
Speaker 2: used to come up with meal plans, create art, write essays,
Speaker 2: term papers, future robots, and as during the upcoming issue
Speaker 2: of Bloomberg BusinessWeek points out for therapy as well. So
Speaker 2: let's get to it. This story in the new issue
Speaker 2: that will be on newstands later on this week, already
Speaker 2: online at Bloomberg dot com, slash BusinessWeek on the Bloomberg terminal.
Speaker 2: Let's get into it. Let's talk therapy entering the era
Speaker 2: of chatbots with us. Is Bloomberg News AI reporter Rachel
Speaker 2: Metz here in studio along with the editor of Bloomberg BusinessWeek,
Speaker 2: Joel Weber. It is every Are you real? Are you
Speaker 2: a chat gp teape? I am?
Speaker 9: I am real as far as I know. But the
Speaker 9: conversations that people are having with chet tvt's also real.
Speaker 9: Would you like that transition? The conversations are real, and
Speaker 9: you can ask it anything, and people are and they're
Speaker 9: making all kinds of stuff, and you know, there's all
Speaker 9: kinds of questions about anxieties of what's going to happen
Speaker 9: to jobs and all kinds of other stuff. But the
Speaker 9: thing that I was really drawn to with Rachel's story,
Speaker 9: which reminded me a little bit of a Ellen Hewitt
Speaker 9: story that we did not so long go, also a
Speaker 9: little bit about what where AI can go unexpected places?
Speaker 9: This was one of those as well. So what's happening
Speaker 9: because people are actually starting to use it in some
Speaker 9: very deeply personal places.
Speaker 10: Yeah, No, it's it's been interesting to watch people are
Speaker 10: finding all kinds of ways to use chat GPT, And
Speaker 10: one thing that some people are trying out right now
Speaker 10: that I started to notice is using it not really
Speaker 10: I haven't seen people really replacing therapy with it, like
Speaker 10: if you're seeing a human therapist, but using it to
Speaker 10: solve occasional problems, or realizing that for them there's something
Speaker 10: about it that seems to be helpful to them, at
Speaker 10: least with the people that I spoke to, which I
Speaker 10: thought was really neat.
Speaker 9: So was this an intended use for what chat gpt
Speaker 9: do this?
Speaker 10: This is not an intended use case. It is a
Speaker 10: general use chatbot. It is not meant for that specifically.
Speaker 10: And in fact, if you look at open aies terms
Speaker 10: of us, they don't want it to be used for
Speaker 10: very specific medical use cases like diagnosing an illness or
Speaker 10: something like that.
Speaker 2: Shame on them. I mean Google doctor, I mean, like
Speaker 2: how many times writes up that goes up? I mean
Speaker 2: they know people are gonna go all these crazy places.
Speaker 10: Right, I mean I think that if you're able to
Speaker 10: use it and find it helpful, that I think that
Speaker 10: that's interesting and that I was actually a little surprised
Speaker 10: because initially my first thought was this sounds like a
Speaker 10: really scary, bad idea, But then as I talked to people,
Speaker 10: it was it's much more nuanced than that did help them. Yeah,
Speaker 10: in a couple cases, although there was one. There's one
Speaker 10: person I spoke to who said, you know, it was
Speaker 10: like saying the right things, but I just couldn't get
Speaker 10: into it because I knew I wasn't talking to a person.
Speaker 10: But I also think it's really important to not think
Speaker 10: of it as an either or situation, Like it's not
Speaker 10: like you might one day have a human therapist or
Speaker 10: a robotherapist. It's possible this could be used, as Margaret
Speaker 10: Mitchell what hockey Face said, Perhaps it could be used
Speaker 10: to help train people that answer phones for crisis lines
Speaker 10: that could help them to help more people at a time,
Speaker 10: And those kinds of people are vital and you could
Speaker 10: totally use more of them. This could be a way
Speaker 10: to make them more able to help people, which I
Speaker 10: thought was kind of cool.
Speaker 9: It feels like the there's like some empathy. It's like
Speaker 9: built into this of like I know what you're going through.
Speaker 9: Like there's got to be like a chat GBT training
Speaker 9: course in terms of just like making sure people feel
Speaker 9: like they're being heard. Right, But so, what did you
Speaker 9: hear from the people that you spoke to, and like
Speaker 9: what led them to hear And are they doing it
Speaker 9: instead of humans or in addition to real therapy.
Speaker 10: Not instead of the One of the people that I
Speaker 10: spoke to, Milo has a therapist, happened to miss a
Speaker 10: therapy appointment and had seen somebody on Twitter saying it
Speaker 10: was really helpful to them, and Milo was like, hey,
Speaker 10: I'll just give this a try, and then found it
Speaker 10: really helpful and has used it repeatedly since then. Not
Speaker 10: everybody will I feel that way, obviously.
Speaker 2: I love in your story that you talked to us
Speaker 2: tell us about that one of the earliest chatbots, Eliza. Right,
Speaker 2: so this takes us back to what the nineteen sixties.
Speaker 9: This was new to me. I did not have this.
Speaker 6: I didn't know.
Speaker 10: Oh so Eliza was a supposed to mimic like a
Speaker 10: Rogerian style therapy, which is like, I guess, very like
Speaker 10: self reflective you know who, why do you think that?
Speaker 10: Or you know those kinds of like reflective questions. That
Speaker 10: was a much much simpler style of chatbot, which you
Speaker 10: would you would say something and it would be looking
Speaker 10: at or you would type something in that case and
Speaker 10: it would be looking specifically for keywords that could be
Speaker 10: tied to certain types of answers.
Speaker 2: You know what makes me That's the other thing. Like
Speaker 2: nineteen sixties, we keep thinking this chatbot is kind of
Speaker 2: this whole big new thing, and I keep googling and
Speaker 2: trying like origins of artificial intelligence, like I want to
Speaker 2: know more because I'm trying to Rachel get my head around, like,
Speaker 2: why all of a sudden, are we just this is
Speaker 2: such an explosion, right, Because it doesn't sound like it's
Speaker 2: totally new.
Speaker 10: It's not new. I think some of what's new is
Speaker 10: the style. You can think of AI as having like
Speaker 10: different kinds of architecture. I think of it, and architecture
Speaker 10: is a word you'll see a lot in a lot
Speaker 10: of academic papers. So architecture with buildings, there's all different
Speaker 10: kinds of buildings, right. Similarly, in AI, you have different
Speaker 10: styles of putting these AI systems together, and this generative
Speaker 10: style is newer, and being able to do that is
Speaker 10: a newer thing, and it gets us closer to it
Speaker 10: makes it makes these systems better at mimicking human speech, right,
Speaker 10: But it doesn't it's not actually, you know, it isn't
Speaker 10: human in any way. It's essentially using math in a
Speaker 10: way that gets you to look at it the answer
Speaker 10: and say, oh, you know that looks like something a
Speaker 10: person could say.
Speaker 4: Kind of close.
Speaker 2: Yeah, man, that's the creepy part of it.
Speaker 9: Another thing that I learned in this story is that
Speaker 9: there are chatbots that focus on mental health, yes, as
Speaker 9: opposed to chat gibt that can can do whatever it does, right,
Speaker 9: but so wobot weissa, what are those and what are
Speaker 9: they doing?
Speaker 10: Those do exist, they've been out for a while in
Speaker 10: this space, and people can pay for them, and that
Speaker 10: those can potentially also be helpful to people. So it
Speaker 10: is kind of interesting, right that those things already exist,
Speaker 10: but people are saying, let me try this. I mean,
Speaker 10: this is very easy to access. It's exciting in many
Speaker 10: ways because it's new. So I think it's going to
Speaker 10: be like a lot of different applications of chat cheept
Speaker 10: where we kind of have to see how the dust
Speaker 10: settles and if people actually are using it for this
Speaker 10: and other things.
Speaker 5: Carol brought up the nineteen sixties. It made me also
Speaker 5: think of in the nineteen nineties with ask Jeeves, which
Speaker 5: was obviously right, people kind of forget about that.
Speaker 2: But it was sort of this whole don't forget about it.
Speaker 5: People don't forget about Jeeves. But interesting during these other
Speaker 5: time periods where we've seen different things like this, when
Speaker 5: we think this is like something very new but interesting,
Speaker 5: that we've kind of had different irradiations in a way,
Speaker 5: and in the past, Yeah, I mean, I think people
Speaker 5: like to personalize and anthropomorphize technology and sometimes sometimes that
Speaker 5: can be totally fine.
Speaker 10: Sometimes that can go a little bit awry, like Rumba
Speaker 10: for instance, Like people treat them a little bit like
Speaker 10: pets perhaps, you know, and that's.
Speaker 2: Obviously it is a pet part of the family. I
Speaker 2: have one that has a name, so you we're not
Speaker 2: all crazy, no, But it is interesting about you know this.
Speaker 2: I am curious how effective or what are the medical community,
Speaker 2: like are people weighing in about because I just think
Speaker 2: that there's some very serious illnesses out there and I'm
Speaker 2: just wondering, can a chat g BT pick up some
Speaker 2: of the nuances of somebody who obviously needs some serious help.
Speaker 10: I talked to a professor who is also a clinical psychologist.
Speaker 10: He can he can imagine a future in which this
Speaker 10: might be useful for helping people along with human therapy.
Speaker 10: Right now, he was like, no, no, like this. You know,
Speaker 10: this is not for somebody who's got a serious mental
Speaker 10: health condition. This is not the way to go like solo.
Speaker 10: But he also but at the same time he was
Speaker 10: saying that he could understand why people would find it
Speaker 10: helpful to talk to or at least or pleasant. I
Speaker 10: can't remember.
Speaker 2: Exactly what he's working right potentially.
Speaker 10: Well unless, I mean it depends. If you want to
Speaker 10: talk to a chatbot like GPT four, you're gonna have
Speaker 10: to pay for it.
Speaker 2: And that's true, right business.
Speaker 9: So are you only curious about some of the privacy
Speaker 9: implications here, because I would think if I were letting
Speaker 9: my chatbot talk to people, I'd want to know how
Speaker 9: that chatbot was doing in a situation like this. And
Speaker 9: and also you know, obviously that opens up a can
Speaker 9: of worms for what the privacy implications looks like on
Speaker 9: the AI front as well. So has anybody been talking
Speaker 9: about or looking into.
Speaker 4: Any of that?
Speaker 10: Yeah, I mean I think that one of the people
Speaker 10: I spoke with, Margaret Mitchell also, she's from Hugging Face.
Speaker 10: That was something that she mentioned to me. And it's
Speaker 10: something that as like as a reporter, but also as
Speaker 10: a human who likes to use a lot of different
Speaker 10: technology products. I also think about a lot when I
Speaker 10: use chat GBT myself, I try to avoid giving it
Speaker 10: any kinds of personally identifying information, and I think I've
Speaker 10: told many people the same. I just I don't feel
Speaker 10: comfortable doing that. I know that open AI reviews users conversations.
Speaker 10: You can delete your account if you don't want them
Speaker 10: to have your data, but that can take up to
Speaker 10: four weeks according to their terms of service.
Speaker 2: Doesn't this feel like all the tech CEOs are like, yeah, no,
Speaker 2: my kids, I don't let them play with computers. Rachel
Speaker 2: says that, yeah, I don't do this. What's interesting too, though,
Speaker 2: in terms of data though, right, because if you put
Speaker 2: anything personal down there, that's how this all works, right,
Speaker 2: uses the data to kind of get smarter and smarter
Speaker 2: if you will.
Speaker 10: Yeah, your data is helping could help train future iterations
Speaker 10: of this.
Speaker 2: Sure, so you have to remember it's in there.
Speaker 3: It's sticky, sticky, you could describe it.
Speaker 10: I actually did use it myself, like a week ago
Speaker 10: to I haven't I haven't told anyone in my family this.
Speaker 10: I used it to to sort of talk through an argument,
Speaker 10: and I didn't give it any personally identifying details. I
Speaker 10: feel like you can if you spend a minute thinking
Speaker 10: about it, you can totally do that.
Speaker 2: Or is it helpful?
Speaker 6: Yeah?
Speaker 5: Actually it was.
Speaker 10: I mean in the way that can.
Speaker 9: I help you reason with a seven year old?
Speaker 10: No, I haven't tried it with anything about my kids.
Speaker 2: That's like you write it in and then like you
Speaker 2: don't get a response we don't have enough data on that's.
Speaker 10: Yeah, it was helpful to be reflective, but you know
Speaker 10: what Eliza might have been able to be similarly help
Speaker 10: me be similarly reflective.
Speaker 6: I don't know right.
Speaker 9: When the answer is, when did you go let it down?
Speaker 1: Yeah?
Speaker 6: Why do you think that?
Speaker 2: You know, I have to I feel like this has
Speaker 2: been an interesting week. There are sixty minutes to another
Speaker 2: couple of pieces, and they were really leaning into and
Speaker 2: obviously talking to the head of Alphabet Sundar Pichai about
Speaker 2: what they are doing. And it's interesting, Like on Twitter,
Speaker 2: I was getting you know, I put out those pieces
Speaker 2: and people are like, wait, you know, everybody's like, oh
Speaker 2: my god, it's the end of the world. How do you,
Speaker 2: as somebody who is obviously in a whole other plane
Speaker 2: when it comes to AI understanding talking to the voices
Speaker 2: who are in it, how do you see it? Because
Speaker 2: it does feel like headlines are coming out as fast
Speaker 2: and furiously, whether it's on therapy, whether it's on something else.
Speaker 10: I try to remember to take a deep breath and like, honestly,
Speaker 10: like just kind of okay, and let's kind of look
Speaker 10: at the reality of what these things can do. On
Speaker 10: the one hand, we have AI systems that are increasingly
Speaker 10: powerful and can do some really interesting things, or perhaps
Speaker 10: in the near future, could do some really interesting things.
Speaker 10: Various cool medical applications like helping detect certain kinds of cancer.
Speaker 10: Things like that I think many people can agree are great.
Speaker 10: On the other hand, there's a lot of things we
Speaker 10: need to keep an eye out for, and some harms
Speaker 10: that are already here. I don't think that this is
Speaker 10: agi artificial general intelligence. We are not there. And also
Speaker 10: a lot of these things aren't an inevitability. I think
Speaker 10: we have artificial.
Speaker 2: General intelligence like creating up stuff like creating another Jeel,
Speaker 2: creating another me kind of thing.
Speaker 10: No, that's not happening.
Speaker 2: Well, okay, okay, that's okay, okay.
Speaker 4: No.
Speaker 10: I think I think a lot of it is trying
Speaker 10: to keep into perspective where are we which is it's
Speaker 10: still this is still early days, even though AI in
Speaker 10: various forms has existed for many decades.
Speaker 9: At this point, where else are you interested in watching
Speaker 9: chat GBT go into and sort of you know, maybe
Speaker 9: let's say disrupt That word.
Speaker 10: Disrupt interesting, I mean it has it has a bit
Speaker 10: of a honesty problem. We we need systems like this
Speaker 10: that can be a little bit more reliable as far
Speaker 10: as you ask it a question and you get an
Speaker 10: answer that you then don't have to spend a really
Speaker 10: long time like confirming checking. Yeah, and that gets harder
Speaker 10: as it's funning, right, Yeah, well yeah, if you're googling,
Speaker 10: and if you're asking a complicated question, you might have
Speaker 10: a whole bunch of different things. Then that you're like, okay.
Speaker 10: If you're asking it for like a list of things,
Speaker 10: for instance, then you're like, okay, I have to run
Speaker 10: down everything on this list to make sure you know
Speaker 10: it's all accurate. So if we can get in that direction,
Speaker 10: I think it could be really interesting for maybe there's
Speaker 10: some interesting finance applications.
Speaker 9: I love that it lies. It's sometimes that's useful.
Speaker 5: Though you can things.
Speaker 10: I am just a simple a.
Speaker 2: It's a fascinating world and we are all obsessed with
Speaker 2: it and obsessed with you and really your take on
Speaker 2: it and reporting. So thank you so much, Rachel Mettz.
Speaker 2: She's aar reporter here at Bloomberg News in our interactive
Speaker 2: Brokers studio along with the editor of Bloomberg business Week,
Speaker 2: Jill Weber. This story talk therapy entering the era of chatbots.
Speaker 2: It's going to be the new issue of Bloomberg Business Week,
Speaker 2: add on newsstands, online already at Bloomer dot Cosage business
Speaker 2: Week and of course on the Bloomberg terminal. Check it out.
Speaker 2: This is Bloomberg.
Speaker 11: Unbrotherly mark a.
Speaker 4: Journal.
Speaker 1: Now about you.
Speaker 6: Let me drive?
Speaker 9: No, no, no, no, drive honey please, how did the rider gravels?
Speaker 1: Let's mate, I want to drive.
Speaker 8: It's a good question times.
Speaker 1: This is the drive to the Globe dot com for me.
Speaker 4: I think we'll buy around yelling.
Speaker 1: I'm on Bloomberg Radio.
Speaker 2: All right, everybody, just about seventeen and a half minutes
Speaker 2: left in today's trading day. Taking a look. As Charlie mentioned,
Speaker 2: you've got a bit of a mixed market, but kind
Speaker 2: of tight range, certainly on the equity side of things
Speaker 2: and the treasury trade as we heard still with that
Speaker 2: to your about four point ten year note with the
Speaker 2: yield of three point fifty seven, So just a little
Speaker 2: bit of a set up here. Let's get to it though,
Speaker 2: with our market guests, our drive to the closed guest
Speaker 2: on this Tuesday, Jeanette Garrity, Principal and Managing director and
Speaker 2: chief Economist over at the San Francisco based Robertson Stevens.
Speaker 2: She's on the phone in Chicago, Jeanette. Great to have
Speaker 2: you here with Jess Manton and myself. First of all,
Speaker 2: before we get into some of the big macro think
Speaker 2: about our market environment, I want to ask you about
Speaker 2: the San Francisco area. Roberts and Stevens definitely known, certainly
Speaker 2: because it's based in San Francisco, understanding kind of the
Speaker 2: tech community, the entrepreneurial community. What are you hearing from
Speaker 2: your colleagues that are based there.
Speaker 11: A great question, and it's noticeable, I think for those
Speaker 11: of us located in the San Francisco Bay area. The
Speaker 11: impact of some of the tech layoffs that everybody's read about,
Speaker 11: as well as just probably a general slowdown in the
Speaker 11: expansion of that sector. That is what really drove the
Speaker 11: downtown San Francisco economy in particular. That's where it's most noticeable,
Speaker 11: and we see it coming back, and there's many there's
Speaker 11: a lot of talk in the community about how that
Speaker 11: business community, that localized business community, goes forward. Given that
Speaker 11: a lot of jobs have been lost. You can get
Speaker 11: outside of San Francisco, there's not much of a slow
Speaker 11: down just yet showing up the shopping center, parking lots
Speaker 11: are all full, and nightlife in San Francisco is robust.
Speaker 11: So it's a little bit of a mixed bag.
Speaker 5: And something that has stood out to me just kind
Speaker 5: of more broadly, when we're thinking about the economy. If
Speaker 5: you look in the terminal, there's a function ECFC that
Speaker 5: looks at the economic forecast, and as of now, when
Speaker 5: we came into this year, there was this expectation we'd
Speaker 5: see growth contract in the second third quarters. You're not
Speaker 5: necessarily seeing that now. So can you kind of break
Speaker 5: down to us as far as the forecast for the
Speaker 5: economy moving forward and why we're beginning to see a
Speaker 5: sh shift there when we have so many people who
Speaker 5: are debating whether or not we're going to have a
Speaker 5: recession in the coming quarters.
Speaker 8: Yeah.
Speaker 11: Yeah, it's sort of like if you if you forecast
Speaker 11: it long enough, I guess you know, somebody will be
Speaker 11: right here. And I've actually just recently gone into the
Speaker 11: camp of saying that I would advise preparing for a
Speaker 11: downturn in the third and fourth quarter of this year.
Speaker 11: I think things are kind of coming together in that way.
Speaker 11: Watching the labor market watching what the impact is on
Speaker 11: the financial sector, of the banking sector in particular. Things
Speaker 11: have settled down there, but clearly their costs of operation
Speaker 11: that have risen, and there's going to be an impact
Speaker 11: from that. But you are absolutely right that right now
Speaker 11: there's not much of a slowdown, and I think Gee's
Speaker 11: first quarter economic growth is likely to come in at
Speaker 11: two percent, maybe even a little bit above two percent.
Speaker 11: It is not normal for the US economy to go
Speaker 11: into a recession, you know, hitting a brick wall going
Speaker 11: sixty five miles per hour or ninety miles per hour.
Speaker 11: So what everybody's looking at this quarter is to see
Speaker 11: whether economic growth, economic activity will slow down more into
Speaker 11: the one percent range, which would certainly set up a
Speaker 11: situation where we could get a mild recession driven by
Speaker 11: a slowdown in consumer spending and a rise in the
Speaker 11: unemployment rate, kind of classic behavior for the US economy.
Speaker 2: Well, that's what I wanted to ask you, right So,
Speaker 2: April three point five percent for the unemployment rate. Are
Speaker 2: you assuming that by the third quarter or fourth quarter
Speaker 2: that wear well above that or could we get a slowdown?
Speaker 2: Could we get a recession, which is a part of
Speaker 2: our narrative right now, Jeanette, and I think this is why,
Speaker 2: you know, the financial markets are trying are having a
Speaker 2: tough time figuring out what kind of environment do we
Speaker 2: truly have in the second half of this year. Could
Speaker 2: we have a recession with a tight labor market?
Speaker 11: Well, I think the answer to that is yes. But
Speaker 11: let's talk about the numbers. There was a time that
Speaker 11: a tight labor market was defined by an unemployment rate
Speaker 11: of four and a half percent, not necessarily fore and
Speaker 11: a half percent. But I don't think we're going to
Speaker 11: get that recession without the unemployment rate going up and
Speaker 11: the impact that that would have on consumer spending. Can
Speaker 11: we get a mild economic recession that the FED might
Speaker 11: choose to cause call a soft landing, albeit with an
Speaker 11: unemployment rate of four point one, four point two something
Speaker 11: like that. Maybe you get it a little bit higher
Speaker 11: than even that by the end of the year. Yeah,
Speaker 11: I think that could come together, can I as it
Speaker 11: very much will depend on the service sector.
Speaker 2: By the way, Meildetta emailing of Renaissance macro weighing in
Speaker 2: and he says, take a look at homebuilders today. Ask
Speaker 2: people about this because the S and P supercomposite or
Speaker 2: Composite fifteen hundred home building index is up almost three
Speaker 2: percent in today's session. Some of our write through is
Speaker 2: because at least our team is saying, that's because you
Speaker 2: got the ten year yield falling back to three point
Speaker 2: five to eight percent. How can we how do you
Speaker 2: explain that if we're going to move into a recessionary environment,
Speaker 2: does the market I mean home builders are up like
Speaker 2: twenty five percent year today, Yeah.
Speaker 11: You know, there's there's a timing issue here. At the
Speaker 11: same time, then the number you didn't bring up is
Speaker 11: that also building permits they'll sell more fell to a
Speaker 11: level lower level, fell to a lower level than was
Speaker 11: expected in today's numbers. So you know what's what's happening there. Well,
Speaker 11: I think the major builders, my sense has been that
Speaker 11: for quite some time they're looking long term. They're saying,
Speaker 11: we need to have land, we need to have developments
Speaker 11: in progress, if you will, so that we can be
Speaker 11: there to supply what is a still a chronically undersupplied
Speaker 11: demand for housing in the knife stay.
Speaker 2: Right, because those housing starts multi family dropped almost six percent.
Speaker 2: Single family home building increased two point seven percent to
Speaker 2: a three month high. So it's really the multi and
Speaker 2: I know in my neighborhood it's an urban environment. There's
Speaker 2: been so many apartment buildings and multi family units that
Speaker 2: have gone up. I'm not surprised that there might be
Speaker 2: a little bit of a slowdown. Would you buy home
Speaker 2: building stocks? Just got five seconds.
Speaker 11: I am married to a home builder.
Speaker 9: I would have.
Speaker 2: Well said well, said Jenet Carrety over at Robertson Steven
Speaker 2: Chief Economist and more right here on Bloomberg BusinessWeek.
Speaker 3: Jenett.
Speaker 2: Thanks.
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