WEBVTT - Bloomberg Businessweek Weekend - February 21st, 2025 0:00:00.280 --> 0:00:07.240 Bloomberg Audio Studios, Podcasts, radio news. 0:00:08.760 --> 0:00:12.799 This is Bloomberg Business Week Insight from the reporters and 0:00:12.960 --> 0:00:17.320 editors that bring you America's most trusted business magazine, plus. 0:00:17.160 --> 0:00:19.439 Global business, finance and tech news. 0:00:19.560 --> 0:00:23.520 The Bloomberg Business Week Podcast with Carol Masser and Tim 0:00:23.520 --> 0:00:25.919 Stenoveek on Bloomberg Radio. 0:00:26.480 --> 0:00:29.320 Hi, everyone, Welcome to the Bloomberg Business Week Weekend Podcast. 0:00:29.560 --> 0:00:31.960 This past week a flurry of developments in the world 0:00:32.000 --> 0:00:35.600 of AI, including open ai co founder ilias At Skiver 0:00:35.800 --> 0:00:38.680 with another fundraise for his AI startup, giving it a 0:00:38.720 --> 0:00:42.919 valuation of over thirty billion dollars. Open AI's former CTO 0:00:43.040 --> 0:00:46.240 unveiling plans of her own for her new AI startup 0:00:46.520 --> 0:00:49.360 and more. And we also got the latest FED minutes 0:00:49.360 --> 0:00:51.559 which confirmed Cheer J. Powell and company are in no 0:00:51.680 --> 0:00:55.440 hurry to cut rates, citing concerns President Trump's proposed tariffs 0:00:55.440 --> 0:00:59.640 and deportations could drive inflation higher. Speaking of the President, 0:00:59.720 --> 0:01:02.200 it was another week with more executive orders and comments 0:01:02.200 --> 0:01:05.600 on Tariff's geopolitics, doge, and a lot more our take 0:01:05.640 --> 0:01:08.720 on DC. This week, Silicon Valley shift from the political 0:01:08.840 --> 0:01:12.000 left and now how it seems eager to move fast 0:01:12.000 --> 0:01:14.080 and break things in Washington, while more on that in 0:01:14.200 --> 0:01:15.080 just a moment. 0:01:15.000 --> 0:01:18.400 Plus the chief economist who went against the grain correctly 0:01:18.440 --> 0:01:23.080 predicting a non recession using good old fashioned data. Also 0:01:23.120 --> 0:01:27.399 how sustainability technology and yeah, garbage collection come together from 0:01:27.440 --> 0:01:30.399 the CFO of waste Management. And a little later on 0:01:30.440 --> 0:01:34.560 in our second hour, John Taffer of bar Rescue on immigrants, 0:01:34.920 --> 0:01:38.360 tariffs and starting a small business radio show. It's coming 0:01:38.400 --> 0:01:39.319 for your job, Carol. 0:01:39.800 --> 0:01:42.320 I think we're safe maybe for now, all of that 0:01:42.360 --> 0:01:45.120 to come. We begin with Washington and the prominent role 0:01:45.160 --> 0:01:47.800 of tech titans in President Trump's second term. Yes, of 0:01:47.800 --> 0:01:51.440 course Elon Musk, but there are others too, which raises 0:01:51.480 --> 0:01:54.680 the question, how did Silicon Valley, known for its liberal 0:01:54.760 --> 0:01:58.040 leanings and political backings for so many years, swing on 0:01:58.120 --> 0:02:00.720 over to Donald Trump? And is report publican. 0:02:00.480 --> 0:02:04.600 Party writing about exactly that is Bloomberg BusinessWeek national correspondent 0:02:04.800 --> 0:02:07.920 Josh Green. Josh, it's a question that we've certainly been 0:02:07.960 --> 0:02:10.359 asking ourselves quite a bit over the past few months. 0:02:10.360 --> 0:02:14.440 How did this sort of bastion of liberal leaning Silicon Valley, 0:02:14.480 --> 0:02:16.760 which backed President Obama? 0:02:17.320 --> 0:02:18.000 What happened? 0:02:18.040 --> 0:02:20.160 How did it move to backing Trump? 0:02:20.560 --> 0:02:22.760 Yeah, you know, It's a great question my editor asked 0:02:22.800 --> 0:02:24.520 me for this issue. You know, what was new about 0:02:24.560 --> 0:02:27.239 Trump two point zero? What's different this time than Trump 0:02:27.320 --> 0:02:28.040 one point zero? 0:02:28.600 --> 0:02:28.760 You know? 0:02:28.800 --> 0:02:31.000 And the obvious answer is that there's this new power 0:02:31.040 --> 0:02:34.960 center of Elon Musk in Silicon Valley, tech and crypto 0:02:35.000 --> 0:02:38.640 folks who really seemed to be the dominant force, at 0:02:38.720 --> 0:02:41.320 least in the early years of the second Trump presidency. 0:02:41.440 --> 0:02:44.400 To me, that was particularly striking because back in two 0:02:44.400 --> 0:02:46.720 thousand and seven two thousand and eight, I spent a 0:02:46.760 --> 0:02:49.680 lot of time in Silicon Valley as a political reporter 0:02:50.720 --> 0:02:55.800 because techgative and venture capitalists back then were really the 0:02:55.919 --> 0:02:59.919 strongest force behind Barack Obama and helped fuel his row 0:03:00.200 --> 0:03:02.720 first to defeat Hillary Clinton and then ultimately they kind 0:03:02.760 --> 0:03:05.400 of win the White House. So to me, the really 0:03:05.440 --> 0:03:08.720 interesting thing to look at from a historical perspective is 0:03:08.760 --> 0:03:12.560 why so many folks in Silicon Valleys switched. And I 0:03:12.560 --> 0:03:14.600 think there are number of reasons for that. You know, 0:03:14.680 --> 0:03:18.600 One is the kind of utopian idea of tech, the 0:03:18.680 --> 0:03:22.600 idea that it was an unalloyed force for good. Americans 0:03:22.600 --> 0:03:24.520 have come to understand that there are a lot of 0:03:24.560 --> 0:03:29.200 downsides to technology. Also, and so tech leaders aren't quite 0:03:29.320 --> 0:03:32.600 viewed culturally as the historic, as the heroic figures that 0:03:32.639 --> 0:03:35.040 they might have been fourteen fifteen years ago. But I 0:03:35.040 --> 0:03:38.160 think the other big factor is that the Biden administration 0:03:38.960 --> 0:03:43.040 has just been particularly aggressive and cutting down on tech 0:03:43.360 --> 0:03:46.720 and regulating and even trying to snuff out new technologies 0:03:46.760 --> 0:03:48.920 like cryptocurrency. And so for a lot of folks, there 0:03:48.960 --> 0:03:52.960 was a combination of really frustration drove them to support 0:03:53.000 --> 0:03:56.040 Donald Trump, which which would have been all but unimaginable 0:03:56.480 --> 0:03:58.720 even as recently as like five or ten years ago. 0:03:58.880 --> 0:04:00.000 Yeah, you know, it's kind of interesting. 0:04:00.040 --> 0:04:01.680 And I feel like we've all listened to podcasts too 0:04:01.680 --> 0:04:04.920 with Mark Andresen and you know, even bringing up artificial 0:04:04.960 --> 0:04:07.720 intelligence and having meetings with the Biden administration or so 0:04:07.800 --> 0:04:10.360 they say, and just you know, feeling like there was 0:04:10.400 --> 0:04:14.200 gonna Silicon Valley and business was going to have no 0:04:14.280 --> 0:04:17.479 real say in the oversight of AI. 0:04:18.160 --> 0:04:18.400 You know. 0:04:18.520 --> 0:04:22.080 Having said that, the tech titans that we did see 0:04:22.800 --> 0:04:26.000 in the capital at the inauguration, you know, people like 0:04:26.080 --> 0:04:30.720 Mark Zuckerberg or Jeff Bezos, just all of them, it 0:04:30.800 --> 0:04:32.960 was it was a little surprising. 0:04:33.920 --> 0:04:35.719 Yeah, I think so. And you know, the other factor 0:04:35.760 --> 0:04:37.520 I touch on this in my piece. I think the 0:04:37.560 --> 0:04:40.240 other factor at play here is a simple fear of 0:04:40.320 --> 0:04:44.760 Trump and what he might do to those those CEOs 0:04:44.800 --> 0:04:48.120 and their companies if they fall into his crosshairs. And 0:04:48.160 --> 0:04:50.800 so there was a lot of kind of showing up 0:04:50.800 --> 0:04:54.480 at the inauguration to kind of pay your respects. Many, 0:04:54.520 --> 0:04:57.680 if not all of them donated to the inaugural committee. 0:04:58.320 --> 0:05:00.120 You know, you want to show up and try and 0:05:00.160 --> 0:05:03.320 get on inside of the new president. I think that's 0:05:03.360 --> 0:05:04.440 what you're. 0:05:04.040 --> 0:05:05.080 Seeing, Josh. 0:05:05.120 --> 0:05:08.360 Is it an illusion that Silicon Valley is a liberal 0:05:08.400 --> 0:05:10.680 place or is traditionally a liberal place. I think there's 0:05:10.680 --> 0:05:15.159 this idea that you know, you have San Francisco, the 0:05:15.200 --> 0:05:18.040 big gay rights movement, sort of like what happened in 0:05:18.080 --> 0:05:23.000 the nineteen sixties, being an area like against the Vietnam War, 0:05:23.160 --> 0:05:24.719 that sort of stuff was like looked at as a 0:05:24.760 --> 0:05:26.920 real liberal place. Is that kind of an illusion? Is 0:05:26.920 --> 0:05:28.680 it much more libertarian? 0:05:29.720 --> 0:05:32.840 You know, it's a great question. I think that it's 0:05:32.960 --> 0:05:35.920 liberal in a social sense, you know, when I was 0:05:35.960 --> 0:05:40.080 out there ten years ago. More recently, most tech folks 0:05:41.120 --> 0:05:44.880 believe in global warming, they believe in multiculturalism, They want 0:05:44.920 --> 0:05:48.160 to help the poor, But they're also capitalists, and you know, 0:05:48.240 --> 0:05:50.440 back in the Obama era, you could kind of beat 0:05:50.480 --> 0:05:53.520 both things, and I think that's become much more difficult, 0:05:54.000 --> 0:05:57.880 partly because the Democratic Party has really shifted in the 0:05:57.960 --> 0:06:03.120 direction toward regulation, and Biden famously was very anti monopoly. 0:06:03.520 --> 0:06:05.560 That put pressure on a lot of the tech companies. 0:06:06.279 --> 0:06:08.520 And as you guys had alluded to early, they are 0:06:08.560 --> 0:06:13.000 new emerging technologies like AI, like crypto that a lot 0:06:13.040 --> 0:06:17.880 of Democrats seen intent on regulating, maybe overulating, or in 0:06:17.880 --> 0:06:21.080 the case of Crypto, maybe even stopping. So I think 0:06:21.080 --> 0:06:24.520 that there were also just forces in the government and 0:06:24.560 --> 0:06:27.800 the country and the culture that helped push some of 0:06:27.839 --> 0:06:31.000 these tech founders toward Republicans. Even if some of them 0:06:31.640 --> 0:06:33.920 are a lot of them still have the same values 0:06:34.080 --> 0:06:37.240 that they did, the same personal values that they did, 0:06:37.320 --> 0:06:37.920 you know, ten. 0:06:37.920 --> 0:06:40.520 Twelve years ago. I think it's also worth pointing out too, 0:06:40.560 --> 0:06:45.159 that the tech folks aren't necessarily embracing all of Donald 0:06:45.200 --> 0:06:47.960 Trump's policies. One of the big fights we've had early 0:06:48.040 --> 0:06:52.520 on in Washington is Elon Musk pushing to expand the 0:06:52.680 --> 0:06:55.560 H one V visa program, which allows him to bring 0:06:55.600 --> 0:06:57.960 in kind of foreign engineers, and that goes very much 0:06:58.000 --> 0:07:01.600 against the MAGA one point, I know, beliefs of people 0:07:01.680 --> 0:07:06.080 like Steve Bannon, Steven Miller who are dead set against 0:07:06.120 --> 0:07:10.120 any foreign immigration coming into the US. And so it 0:07:10.240 --> 0:07:13.160 really has produced attention that I think has been overshadowed 0:07:13.160 --> 0:07:16.680 by a lot of other things that Elon and tech 0:07:16.720 --> 0:07:19.280 folks have been doing in the early Trump years. So 0:07:19.360 --> 0:07:21.840 I'm not sure it's so much a difference as just 0:07:22.080 --> 0:07:26.800 change in circumstance, in a realization that, look, we can't 0:07:26.840 --> 0:07:30.960 simply act on our personal values or our social beliefs. 0:07:31.200 --> 0:07:33.160 You know, we've got to protect our businesses. We want 0:07:33.160 --> 0:07:36.040 to grow AI, we want to grow crypto, and therefore 0:07:36.160 --> 0:07:38.200 we're going to get right with Trump and the Republican Party. 0:07:38.280 --> 0:07:40.160 You know what's kind of interesting. I also in terms 0:07:40.200 --> 0:07:44.320 of the tech CEOs we know with Elon, and I 0:07:44.360 --> 0:07:46.720 know this has been used to describe Trump a lot 0:07:46.920 --> 0:07:50.920 being a transactional president, and for Elon, I think it's 0:07:50.920 --> 0:07:53.440 safe to say, to some extent it felt very transactional. 0:07:53.480 --> 0:07:56.000 We know how much you spent to support President Trump 0:07:56.080 --> 0:07:59.200 on the campaign trail, and Republicans, it does feel like 0:07:59.520 --> 0:08:02.280 some would say that that is kind of what you're seeing. Also, 0:08:02.320 --> 0:08:04.800 from those in the tech industry. As you said, they 0:08:04.800 --> 0:08:08.640 ponied up a million dollars for his inauguration, right, yeah, absolutely. 0:08:08.640 --> 0:08:11.440 I mean to me, that's why the shift isn't so 0:08:11.520 --> 0:08:12.080 much a mystery. 0:08:12.080 --> 0:08:13.440 I mean, if you can kind of lift up the 0:08:13.440 --> 0:08:14.120 hood and look. 0:08:14.040 --> 0:08:16.280 Below the surface, there are all sorts of factors that played. 0:08:16.280 --> 0:08:18.600 One of the things I write about in the piece 0:08:18.640 --> 0:08:21.520 that I think is interesting. You know, campaign finance can 0:08:21.600 --> 0:08:24.200 often be boring and make the eyes glazed over, But 0:08:24.240 --> 0:08:26.800 there were two interesting developments in Silicon Valley in the 0:08:26.840 --> 0:08:30.960 last twenty years that completely reshaped Washington politics. In seven 0:08:30.960 --> 0:08:35.160 and eight, the McCain fine Gold Law was in effect, 0:08:35.360 --> 0:08:38.560 which made it difficult to make big donations, and so 0:08:38.720 --> 0:08:41.959 the real currency in politics was networking and all this 0:08:42.080 --> 0:08:46.160 small dollar online money, hundreds and hundreds of millions of 0:08:46.160 --> 0:08:49.840 dollars that helped to get Barack Obama elected. What tech 0:08:49.880 --> 0:08:53.199 executives and Elon Musk in particular, though, realized, was that 0:08:53.240 --> 0:08:56.760 after twenty fourteen, the Supreme Court knocked down a lot 0:08:56.800 --> 0:08:59.400 of those laws and suddenly opened it up so where 0:08:59.600 --> 0:09:04.960 people could make very large, unlimited donations to candidates, to 0:09:05.360 --> 0:09:09.600 party committees. But nobody really took advantage of that to 0:09:09.640 --> 0:09:12.800 the extent that Elon must did until this past year. 0:09:12.800 --> 0:09:15.040 And Musk went in with so much force, I mean, 0:09:15.280 --> 0:09:18.120 almost three hundred million dollars on behalf of Trump and 0:09:18.120 --> 0:09:21.920 Republican and it absolutely moved the needle in a way 0:09:22.120 --> 0:09:26.640 that has entirely reshaped Washington politics. It has also reshaped, 0:09:26.679 --> 0:09:29.800 you know, Musk's relationship to the federal government, the way 0:09:29.920 --> 0:09:32.360 his companies are going to be regulated. I mean, he 0:09:32.480 --> 0:09:35.079 himself is going in there, you know, tearing out agencies, 0:09:35.120 --> 0:09:38.800 putting allies in place. So it really shows you kind 0:09:38.800 --> 0:09:42.079 of what kind of influence money can buy in Washington, 0:09:42.120 --> 0:09:43.600 and especially in Trump's Washington. 0:09:44.040 --> 0:09:46.880 Josh, there was an interesting moment in the first Trump 0:09:46.880 --> 0:09:50.559 administration when a lot of business leaders who had been 0:09:50.600 --> 0:09:55.240 part of a essentially a business council advising the president, 0:09:55.679 --> 0:10:01.480 they stepped away after Charlottesville. And I'm wondering how, I guess, 0:10:01.559 --> 0:10:05.000 Sticky these business leaders are to supporting the president this 0:10:05.120 --> 0:10:05.760 time around. 0:10:06.280 --> 0:10:09.319 It's interesting. I've thought about this and nothing really sort 0:10:09.360 --> 0:10:12.079 of jumps to mind. I mean, Trump has not done 0:10:12.160 --> 0:10:16.080 or said anything quite as inflammatory is the comments that 0:10:16.120 --> 0:10:18.160 he made after some of the you know, the White 0:10:18.200 --> 0:10:21.880 supremacist marches and Charlottesville. But on the other hand, I 0:10:21.880 --> 0:10:24.520 think I think the kind of US social culture and 0:10:24.559 --> 0:10:28.280 also the culture around business and politics has shifted distinctly 0:10:28.320 --> 0:10:32.360 to the right, where comments and controversies of the sort 0:10:32.360 --> 0:10:34.920 that came up often in the first Trump administration just 0:10:34.960 --> 0:10:39.640 don't really land or resonate as controversies anymore. Maybe that's 0:10:39.640 --> 0:10:43.439 because Trump has become normalized. Maybe that's because people are 0:10:43.440 --> 0:10:47.440 just sort of exhausted of resisted and resisting and fighting back. 0:10:47.520 --> 0:10:52.040 But you could see across the administration both during the 0:10:52.080 --> 0:10:54.720 campaign and especially after Trump was elected, there's just a 0:10:54.800 --> 0:10:57.839 different relationship to Trump now and business leaders right. 0:10:57.880 --> 0:11:00.440 We have heard from folks like the Ford CEO on 0:11:00.480 --> 0:11:03.680 the impact of tariff, certainly on his industry. Hey, one thing, though, 0:11:03.760 --> 0:11:07.160 I wanted to ask you, because you wrote Devil's Bargain 0:11:07.200 --> 0:11:09.360 Steve Bannon, Donald Trump, and the Stormy of the Presidency, 0:11:09.360 --> 0:11:12.720 I must read in terms of understanding how Trump got 0:11:13.000 --> 0:11:16.000 to the White House in the first term, where is 0:11:16.000 --> 0:11:19.199 Steve Bannon? We know he's at odds in a big 0:11:19.240 --> 0:11:22.600 way with Elon Musk, But has President Trump left him 0:11:22.600 --> 0:11:23.680 behind completely? 0:11:24.080 --> 0:11:25.760 No? I don't think he has. I mean I know 0:11:26.000 --> 0:11:28.439 just just from talking to people around Washington that they're 0:11:28.480 --> 0:11:31.559 still in touch. They still talk. Bannon has tried at 0:11:31.600 --> 0:11:35.520 several points to start fights with Musks in hope of 0:11:36.040 --> 0:11:40.080 taking him down a peg and weakening his influence with Trump. 0:11:40.520 --> 0:11:44.000 I don't see any sign yet that Bannon is succeeding, 0:11:44.160 --> 0:11:48.200 but he certainly has a large grassroots following in the 0:11:48.240 --> 0:11:51.520 Mangi universe that Trump really does care about. I mean, 0:11:51.600 --> 0:11:54.880 his podcast and a lot of his allies helped set 0:11:54.920 --> 0:11:58.280 the agenda, and as Bannon himself told me for this 0:11:58.400 --> 0:12:00.160 story and others, you know, on a lot of on 0:12:00.200 --> 0:12:02.760 a lot of issues, he and Musk actually are aligned. 0:12:02.800 --> 0:12:06.240 Ian Bannon is eager to tear apart much of the 0:12:06.280 --> 0:12:09.360 government is Elon is and so while they do differ 0:12:09.679 --> 0:12:14.440 on certain issues like immigration, Bannon's desire to tax billionaires, 0:12:14.440 --> 0:12:16.400 I don't think Elon Musk would agree with that one 0:12:16.440 --> 0:12:18.880 at all. You know, Bannon is still around, but he's 0:12:19.120 --> 0:12:22.400 nowhere near the kind of ov like figure that he 0:12:22.640 --> 0:12:24.880 was in the early years of the first of administration. 0:12:25.360 --> 0:12:27.920 He's just one of many people around Trump trying to 0:12:27.960 --> 0:12:30.920 influence him and trying to figure out how to maneuver 0:12:31.000 --> 0:12:33.880 around Elon Musk, who is the main figure in the 0:12:33.920 --> 0:12:36.640 second Trump presidency today, safe to. 0:12:36.600 --> 0:12:39.560 Say interesting times that we are all living in, all right, Josh, 0:12:39.640 --> 0:12:41.079 thank you so much, really appreciate it. 0:12:41.240 --> 0:12:44.640 That's Josh Green, Bloomberg BusinessWeek National correspondent, the author of 0:12:44.720 --> 0:12:47.920 several books, including Devil's Bargain, Steve Mann and Donald Trump 0:12:47.960 --> 0:12:49.720 and The Storming of the Presidency. 0:12:49.960 --> 0:12:53.520 Coming up, how Apollos Torsten Slock saw the Sherlock Holmes 0:12:53.559 --> 0:12:56.359 Economic Mystery. You're listening to Bloomberg BusinessWeek. 0:12:56.480 --> 0:12:57.559 This is Bloomberg. 0:13:04.400 --> 0:13:07.920 You're listening to the Bloomberg Business Week Podcast. Catch us 0:13:08.000 --> 0:13:11.480 live weekday afternoons from two to five pm Eastern. Listen 0:13:11.480 --> 0:13:15.040 on Apple CarPlay and Android Auto with the Bloomberg Business app, 0:13:15.200 --> 0:13:17.400 or watch us live on YouTube. 0:13:18.320 --> 0:13:19.520 Our inboxes get. 0:13:19.320 --> 0:13:22.680 His daily research. It's called the Daily Spark. His weekend readings. 0:13:22.679 --> 0:13:23.559 We get that as well. 0:13:23.600 --> 0:13:26.680 We care because he is chief economist of an asset 0:13:26.720 --> 0:13:30.720 manager that sits atop more than seven hundred billion dollars. 0:13:30.960 --> 0:13:33.800 He's also the person who, when others thought a recession 0:13:33.880 --> 0:13:38.439 was inevitable, he did not, and instead correctly predicted more growth. 0:13:38.960 --> 0:13:43.080 His secret looking at the data. Data like restaurant bookings, 0:13:43.120 --> 0:13:46.360 air travel stats, jet fuel demand, visits to movie theaters, 0:13:46.720 --> 0:13:49.920 and yes, even Lady Liberty herself. 0:13:49.600 --> 0:13:50.120 What to thunk? 0:13:50.240 --> 0:13:50.440 Right? 0:13:50.640 --> 0:13:52.560 All right, Well, that kind of data is key to 0:13:52.800 --> 0:13:56.720 Apollo's chief economist, Torston Slock. He joined us alongside Bloomberg 0:13:56.720 --> 0:14:00.520 News wealth reporter Ben Steverman, who profiled Torston for Bloomberg 0:14:00.600 --> 0:14:01.520 Markets Magazine. 0:14:02.200 --> 0:14:05.080 We're in a moment where you look out ahead and 0:14:05.120 --> 0:14:08.040 it's just like uncertainty as far as the eye can see. 0:14:08.520 --> 0:14:12.400 And this is a moment when economists have really been 0:14:12.559 --> 0:14:16.360 caught wrong footed, flat footed, whatever term you want to use, 0:14:17.040 --> 0:14:20.920 for years like so basically every prominent economist you can 0:14:20.960 --> 0:14:25.240 think of got something wrong over the last several years. 0:14:25.440 --> 0:14:27.840 And I wanted to go to Torston because he's been 0:14:27.920 --> 0:14:31.320 right about at least one thing, which is this this 0:14:31.480 --> 0:14:35.280 higher rates for longer narrative. So many people were predicting 0:14:35.280 --> 0:14:39.840 a recession last year. He kept pointing out, where's the slowdown, 0:14:39.880 --> 0:14:44.360 where's the slowdown? Why hasn't it shown up yet? The 0:14:44.440 --> 0:14:48.120 economic models say it's supposed to. And the other reason 0:14:48.880 --> 0:14:51.680 wanted to profile him is that it's really interesting that 0:14:51.720 --> 0:14:55.160 Apollo has a chief economist in the first place, and 0:14:55.280 --> 0:14:56.520 we can talk more about that too. 0:14:56.720 --> 0:14:56.920 Well. 0:14:57.000 --> 0:15:00.240 Torsted calls make and break up people, that's for sure. 0:15:00.480 --> 0:15:02.440 We are so quick at Bloomberg to point it out 0:15:03.080 --> 0:15:04.600 when they get it right and when they get it wrong. 0:15:04.680 --> 0:15:07.600 That March twenty twenty second call, why were you so 0:15:07.760 --> 0:15:09.120 clear that there was no recession? 0:15:09.160 --> 0:15:11.720 Why and why do you think so many others got 0:15:11.720 --> 0:15:12.120 it wrong? 0:15:12.440 --> 0:15:14.960 Well, what was really interesting about the last few years 0:15:15.000 --> 0:15:18.040 is that you look at the economics textbook and you 0:15:18.120 --> 0:15:21.600 see the filleral reserve raising interest rates. You would expect 0:15:21.760 --> 0:15:24.080 that when interest rates go up, and interest rates went 0:15:24.160 --> 0:15:27.480 up faster that they have done in decades from twenty 0:15:27.520 --> 0:15:30.160 twenty two to the middle of twenty twenty four, and 0:15:30.200 --> 0:15:33.600 that speed with which interest rates went up, everyone concluded, well, 0:15:33.600 --> 0:15:36.560 when interest rates go up, car sales start to slow down, 0:15:36.880 --> 0:15:40.320 home prizes start to fall, capex spending start to slow down. 0:15:40.320 --> 0:15:41.560 But we didn't see any of that. 0:15:41.920 --> 0:15:45.119 Instead, the economy continued to be, as Ben said, remarkably 0:15:45.120 --> 0:15:48.560 strong and resilient. So they really raised a very fundamental 0:15:48.680 --> 0:15:50.400 question in the forecasting community. 0:15:50.920 --> 0:15:53.400 What was wrong with the textbook? Why wasn't it. 0:15:53.360 --> 0:15:55.840 The case that when interustrates went up that the economy 0:15:55.880 --> 0:15:57.800 slowed down, and that's what was. 0:15:57.760 --> 0:15:59.280 The main basis for the discussion. 0:15:59.280 --> 0:16:02.520 And still today even is a very fundamental debate about 0:16:02.680 --> 0:16:05.600 should we still expect interest rate to slow the economy. 0:16:05.240 --> 0:16:06.840 Down or not should we? 0:16:07.480 --> 0:16:09.400 So the answer is now the FED has been cutting 0:16:09.400 --> 0:16:11.480 since the September of last year, and now we have 0:16:11.560 --> 0:16:15.600 had some very unique tailwinds. Namely, we've had significant tailwinds 0:16:15.600 --> 0:16:19.280 coming from components of GDP that are not sensitive to 0:16:19.400 --> 0:16:23.240 interest rates. Those include, of course, defense spending that's not 0:16:23.320 --> 0:16:26.440 sensitive to whether they're fed is raising rates. That's been unusual. 0:16:26.600 --> 0:16:29.280 We also have an AI boom. We all talk about 0:16:29.320 --> 0:16:33.000 the significant spending by the Magnificent seven that's not sensitive 0:16:33.040 --> 0:16:34.160 to interest rates going up. 0:16:34.280 --> 0:16:35.640 We have a data center boom. 0:16:35.720 --> 0:16:39.640 We have associated energy sensition that's also not sensitive to 0:16:39.760 --> 0:16:42.200 interest rates going up. And finally, we also have in 0:16:42.240 --> 0:16:45.880 the US, there's very unique feature that consumers have locked 0:16:45.920 --> 0:16:49.080 in interest rates at very low levels through their mortgages. 0:16:49.480 --> 0:16:51.960 Ninety five percent of mortgages in the US are thirty, 0:16:51.960 --> 0:16:54.920 a fixed rate that is very different from literally any 0:16:54.920 --> 0:16:57.760 other g seven of that matter. OECD country where the 0:16:57.800 --> 0:17:00.520 interest rates sensitivity for consumers is a lot higher so 0:17:00.560 --> 0:17:03.680 because consumers didn't have to pay more in interest expenses, 0:17:03.880 --> 0:17:06.760 consumers did have also more money to consume. So when 0:17:06.800 --> 0:17:09.480 these tailwinds in twenty twenty four, I would expect these 0:17:09.480 --> 0:17:11.760 tailwinds to still be here in twenty twenty five. 0:17:12.600 --> 0:17:15.679 Touristen, do you think that economists have learned the lesson 0:17:16.000 --> 0:17:19.480 of the last few years or maybe the last decade 0:17:19.680 --> 0:17:22.479 or so? Is there a little bit more humility in 0:17:22.520 --> 0:17:27.240 your profession? And what lessons like big picture lessons do 0:17:27.240 --> 0:17:30.119 you think k economists should be learning going forward. 0:17:30.280 --> 0:17:31.879 Yeah, this is a very important question. 0:17:32.200 --> 0:17:35.040 So if you type ECFC go and your Blueberg screen 0:17:35.040 --> 0:17:36.640 and look at the upper right hand color, you could 0:17:36.680 --> 0:17:39.879 see what is the consensus thinking is the probability of 0:17:39.920 --> 0:17:42.240 a recession over the next twelve months. And if you 0:17:42.320 --> 0:17:44.119 go back and look at when did that begin to 0:17:44.160 --> 0:17:46.040 go up, when did the market and when did the 0:17:46.080 --> 0:17:49.640 consensus begin to expect the recession was coming. It exactly 0:17:49.720 --> 0:17:52.520 happened in March of twenty twenty two, when the Federal 0:17:52.520 --> 0:17:55.639 Reserve began to raise interst rates. Then the probability was 0:17:55.760 --> 0:17:58.000 very elevated for a long time at sixty seventy percent. 0:17:58.200 --> 0:17:59.760 Now it's come down to twenty percent. 0:18:00.119 --> 0:18:02.639 But I still think that the narrative that is in 0:18:02.680 --> 0:18:06.040 the market, including also from Chairman Paul, is still that 0:18:06.440 --> 0:18:09.040 we expect the economies are slow and we expect inflation 0:18:09.119 --> 0:18:11.560 to come down, and then suddenly we get inflation data 0:18:11.560 --> 0:18:14.399 where you certainly have Well, maybe that narrative is still 0:18:14.560 --> 0:18:16.159 not the right way of looking at things. So I 0:18:16.200 --> 0:18:18.359 think the short answer Ben to your question is I 0:18:18.440 --> 0:18:21.119 still think that there's a lot of things going on 0:18:21.200 --> 0:18:24.760 that are tailwinds that are not sensitive to interest rates 0:18:24.880 --> 0:18:28.280 staying higher for longer that is indeed still providing support 0:18:28.320 --> 0:18:31.080 to the economy. So yes, the economics professions should still 0:18:31.160 --> 0:18:34.639 remain very humble, because it's not only about the academic 0:18:34.680 --> 0:18:37.200 concepts of our star and the level of interest rates. 0:18:37.200 --> 0:18:38.760 There's a lot of other things that are going on 0:18:38.800 --> 0:18:39.480 that are important. 0:18:39.640 --> 0:18:41.120 So does it just mean Torsten? 0:18:41.240 --> 0:18:42.920 You know, I always think about well, so maybe it's 0:18:42.920 --> 0:18:44.880 different this time around, and then everyone's like, no, it's 0:18:44.880 --> 0:18:46.040 not different this time around. 0:18:46.160 --> 0:18:47.560 Is it different this time around? 0:18:47.960 --> 0:18:51.520 Well, I will say, and in the spirit of Ben's 0:18:51.600 --> 0:18:54.520 article here that is coming out in the magazine, I mean, 0:18:55.080 --> 0:18:57.040 it really depends on where do you put your weight. 0:18:57.680 --> 0:18:59.960 If you put your weight on the simple idea that 0:19:00.200 --> 0:19:03.119 interest rates went up, so people should be buying fewer cars, 0:19:03.160 --> 0:19:05.520 people should be buying fewer washers and dryers, as you 0:19:05.680 --> 0:19:06.880 be buying fewer iPhones. 0:19:06.960 --> 0:19:09.280 Well, then you would expect if you only look. 0:19:09.160 --> 0:19:12.200 At that argument in isolation, that things should be slowing down. 0:19:12.359 --> 0:19:14.160 But if you then look at the other things that 0:19:14.200 --> 0:19:16.920 I spoke about earlier, namely the tailwinds that are less 0:19:16.960 --> 0:19:20.000 sensitive to interest rates, you put that up on the scale, 0:19:20.080 --> 0:19:22.119 and maybe it is different in the sense that the 0:19:22.240 --> 0:19:25.600 interest rate sensitivity of the US economy is just a 0:19:25.640 --> 0:19:28.280 lot lower than what it's been used to, and also, 0:19:28.320 --> 0:19:30.119 for that matter, than what the text work will predict, 0:19:30.240 --> 0:19:33.160 simply because we have these other tailwinds again, defense spending, 0:19:33.440 --> 0:19:37.720 AI spending, data center spending, energy transition spending, things that 0:19:37.800 --> 0:19:41.120 are all powering the economy ahead. And now we still 0:19:41.160 --> 0:19:43.119 also have by the way the Chips Act, the Inflation 0:19:43.320 --> 0:19:45.639 arch and Act, the Infrastructure Act, that is also powering 0:19:45.680 --> 0:19:47.439 the economy ahead. So if I put that up on 0:19:47.440 --> 0:19:50.160 the scale, I still think that, yes, it is true 0:19:50.280 --> 0:19:52.760 that high interest rates are weighing on some interest rate 0:19:52.800 --> 0:19:56.199 sensitive components. But politicians, and for other reasons, we have 0:19:56.320 --> 0:19:59.720 these sources of growth, data centers, AI defense spending that 0:19:59.800 --> 0:20:01.880 are still providing significant tailwinds. 0:20:02.000 --> 0:20:03.439 Also here in twenty twenty five. 0:20:03.280 --> 0:20:06.359 Tours of those tailwinds continue to exist. If we see 0:20:06.600 --> 0:20:10.520 reciprocal tariffs across the world and tariffs on our closest 0:20:10.560 --> 0:20:13.119 neighbors and biggest trading partners, including. 0:20:12.800 --> 0:20:15.200 That's exactly right, Tima one hundred percent. 0:20:15.280 --> 0:20:18.520 This is exactly the uncertainty factor that's beginning to appear. 0:20:18.560 --> 0:20:21.280 So if you look at measures of trade policy uncertainty. 0:20:21.560 --> 0:20:23.719 So there are three academics back of bloom and Davis 0:20:23.960 --> 0:20:25.840 that have quantified you can also find this on your 0:20:25.880 --> 0:20:30.359 Bloomberg screen quantify trade policy uncertainty, and that is totally 0:20:30.359 --> 0:20:33.200 through the roof at levels that we just have higher 0:20:33.240 --> 0:20:35.960 than what we saw in twenty eighteen nineteen. So the question, 0:20:36.080 --> 0:20:38.720 tim to your question is exactly, given all the positive 0:20:38.760 --> 0:20:40.960 things that we're just talking about, how do you then 0:20:41.080 --> 0:20:43.920 put weight now on this risk that maybe business planning 0:20:44.080 --> 0:20:46.280 is beginning to worry a bit about what are my 0:20:46.400 --> 0:20:49.600 input costs? Can I even source the inputs that I'm 0:20:49.680 --> 0:20:53.000 using for my production? What about the things I'm selling abroad? Remember, 0:20:53.119 --> 0:20:55.040 forty percent of the revenue in the S and P 0:20:55.200 --> 0:20:58.120 five hundred comes from abroad. So if Apple sells fewer 0:20:58.160 --> 0:21:01.720 iPhones in Europe, if Coca Cola sales fuel cocaines in Canada, 0:21:01.880 --> 0:21:04.800 it will have negative implications, especially for this and P. 0:21:05.160 --> 0:21:08.080 So that is why trade wall uncertainty and trade policy 0:21:08.119 --> 0:21:11.600 uncertainty is indeed something that we're watching very very carefully. 0:21:11.680 --> 0:21:13.919 But the conclusion up to so to this point is 0:21:13.960 --> 0:21:16.200 that yes, retail sales was a little bit weaker month 0:21:16.359 --> 0:21:18.320 or a month, but year what year, it still looks 0:21:18.359 --> 0:21:21.359 quite strong. Kept expending is still strong, jobless claims are 0:21:21.400 --> 0:21:23.560 still strong, the Libor market report, the unployment rate. 0:21:23.480 --> 0:21:24.040 Is still falling. 0:21:24.200 --> 0:21:26.480 So up to this point it doesn't look like trade 0:21:26.480 --> 0:21:29.679 policy uncertainty has been weighing on the incoming data, but 0:21:29.720 --> 0:21:30.920 we're watching it very carefully. 0:21:31.160 --> 0:21:33.679 Tourist in when we were hanging out and talking, the 0:21:33.720 --> 0:21:36.000 thing that blew me away the most was your schedule 0:21:36.040 --> 0:21:39.520 and first all the travel that you do around the world, 0:21:39.560 --> 0:21:42.080 but then also just like you're hour by hour, you're 0:21:42.119 --> 0:21:46.400 talking to Middle Eastern sovereign debt funds and then you're 0:21:46.440 --> 0:21:51.240 talking to family office groups and they really keep you, 0:21:51.320 --> 0:21:54.239 keep you moving and they're using you sort of as 0:21:54.280 --> 0:21:57.360 a weapon to bring in these assets. That has been 0:21:57.400 --> 0:21:59.439 it's sort of the big the big goal of the 0:21:59.440 --> 0:22:03.440 firm of Apollo to basically double assets over the next 0:22:03.480 --> 0:22:05.600 several years. And that's in a very ambitious goal. And 0:22:05.680 --> 0:22:08.640 you seem like a key part of talking to all 0:22:08.640 --> 0:22:13.280 these these investors. And I wonder what you're hearing from 0:22:13.320 --> 0:22:16.879 folks when you have those conversations right now. You mentioned 0:22:16.960 --> 0:22:20.520 trade war, uncertainty, anything else that's rising up in terms 0:22:20.520 --> 0:22:24.240 of anxiety or worries or questions that that you know 0:22:24.320 --> 0:22:25.080 might be interesting. 0:22:25.359 --> 0:22:27.639 Well, it is. It is a busy job I have. 0:22:27.760 --> 0:22:31.360 I'm literally flying to Dubai Monday morning, so last week 0:22:31.400 --> 0:22:33.879 I was in Europe. So it is a There's a 0:22:33.880 --> 0:22:36.880 lot of people that I talked to and we talked 0:22:36.880 --> 0:22:39.640 to at Apollo about the economic outlook. But I think 0:22:39.680 --> 0:22:42.080 then to your question that there are certainly a lot 0:22:42.080 --> 0:22:44.959 of different, if I mentions to things that people are 0:22:44.960 --> 0:22:48.159 worried about at the moment. Trade polosy does take up 0:22:48.280 --> 0:22:50.480 a lot of my time at the moment. People have, 0:22:50.560 --> 0:22:53.080 of course trying to sit with their spreadsheets or the 0:22:53.200 --> 0:22:55.560 mosaic as we talked about and figure out How does 0:22:55.600 --> 0:22:58.800 this fit into the bigger picture. Which countries is it 0:22:58.840 --> 0:23:01.320 that's being hit, Which industries in the US is that 0:23:01.359 --> 0:23:02.320 that's being impacted? 0:23:02.440 --> 0:23:04.280 What will it mean for inflation? What will it mean 0:23:04.320 --> 0:23:04.760 for GDP? 0:23:04.920 --> 0:23:08.479 There are various simulations, including from the Tax Foundation, from 0:23:08.520 --> 0:23:11.520 the Peterson Institute, from CATO, from Look at the Minutes, 0:23:11.520 --> 0:23:13.920 from the FED in twenty nineteen and eighteen. There's also 0:23:14.119 --> 0:23:17.959 some quantifications, so that part takes up a significant amount 0:23:18.080 --> 0:23:21.479 of my time at the moment. More broadly, this issue 0:23:21.520 --> 0:23:24.080 around the US being good and the rest of the 0:23:24.080 --> 0:23:27.040 world being bad is really also taking up a lot 0:23:27.040 --> 0:23:30.040 of discussion at the moment, simply because my job for 0:23:30.080 --> 0:23:32.240 many years has been really easy when the US is good, 0:23:32.440 --> 0:23:34.920 Europe is good. When the US is bad, Europe is bad. 0:23:34.960 --> 0:23:37.680 But that's simply not how things are at the moment now. 0:23:37.680 --> 0:23:40.360 The US is unusually good for the tailwinds we spoke 0:23:40.400 --> 0:23:43.320 about earlier, but the rest of the world is unfortunately 0:23:43.359 --> 0:23:45.639 unusually bad for a number of different reasons that in 0:23:45.680 --> 0:23:47.919 my view, start with the weakness in China and the 0:23:47.920 --> 0:23:50.720 problems that China is facing for demographic reasons, because of 0:23:50.720 --> 0:23:53.040 the housing bubble bursting, and because of the trade Wall. 0:23:53.280 --> 0:23:56.120 All those things are weighing on German exports and European exports, 0:23:56.160 --> 0:23:57.880 and also weighing on the global outlooks. 0:23:57.880 --> 0:23:58.800 I would say, in. 0:23:58.800 --> 0:24:02.280 Short, it really is US policy, where is it going, 0:24:02.560 --> 0:24:05.080 how significant will be, what will actually be implemented, what 0:24:05.080 --> 0:24:08.119 will not be implemented. And then there's other challenge that 0:24:08.240 --> 0:24:10.640 is that the US is pretty good, but the rest 0:24:10.640 --> 0:24:12.960 of the world is unfortunately unusually weak. 0:24:13.160 --> 0:24:14.800 And can that diversion continue. 0:24:15.080 --> 0:24:17.520 Hey, Torsten, you started your career at the IMF, you 0:24:17.720 --> 0:24:22.280 spend time at Deutsche Bank, some short stints at BFA. 0:24:22.840 --> 0:24:25.240 I am just curious, you know, and now at Apollo. 0:24:25.880 --> 0:24:29.119 What's the difference in being an economist that maybe kind 0:24:29.119 --> 0:24:32.040 of a traditional bank, big bank, versus being it at 0:24:32.560 --> 0:24:34.800 something like Apollo, a big asset management firm. 0:24:34.880 --> 0:24:36.240 Yeah, that's a very important question. 0:24:36.280 --> 0:24:38.320 So with Deutsche I used to spend almost all my 0:24:38.440 --> 0:24:41.640 time going to clients and also traveling around the world, 0:24:41.680 --> 0:24:44.720 but discussing with people in markets of course, customers of 0:24:44.760 --> 0:24:49.160 Deutsche Bank, in rates, equities, FX, all types of areas 0:24:49.160 --> 0:24:51.640 for business. We were having a discussion about what's going 0:24:51.640 --> 0:24:54.360 on in Apollo. I spent a significant amount of time 0:24:54.400 --> 0:24:57.560 internally talking to deal teams. That's why there's more internal 0:24:57.600 --> 0:24:59.119 focus here than what I had before. 0:24:59.400 --> 0:25:01.880 Very cool staff, great story. Great to get some time 0:25:01.920 --> 0:25:04.520 with you. We love reading your research. Torsten Slock, chief 0:25:04.560 --> 0:25:07.480 economist partner at Apollo Global Management, and our own Ben Stevermann, 0:25:07.520 --> 0:25:08.680 Welf reporter at Bloomberg News. 0:25:08.760 --> 0:25:10.639 Check his story out on the Bloomberg. 0:25:12.840 --> 0:25:16.600 This is the Bloomberg Business Week Podcast. Listen live each 0:25:16.640 --> 0:25:19.920 weekday starting at two pm Eastern on Applecarplay and the 0:25:20.000 --> 0:25:22.840 Android Auto with the Bloomberg Business App. You can also 0:25:23.000 --> 0:25:26.040 listen live on Amazon Alexa from our flagship New York 0:25:26.040 --> 0:25:31.400 station Just Say Alexa played Bloomberg eleven thirty Waste Management. 0:25:31.480 --> 0:25:33.200 It's the top US garbage haller. 0:25:33.320 --> 0:25:35.520 It is one of the Bloomberg fifty Companies to Watch 0:25:35.560 --> 0:25:38.880 this year, identified by our Bloomberg Intelligence team who did 0:25:38.880 --> 0:25:42.000 the research identifying this company as one of the firms 0:25:42.040 --> 0:25:44.800 with a catalyst. In twenty twenty five, the ninety one 0:25:44.800 --> 0:25:47.400 billion dollar market cap company made a seven billion dollar 0:25:47.440 --> 0:25:48.760 acquisition of Stereocycle. 0:25:48.880 --> 0:25:49.840 That was last year. 0:25:50.160 --> 0:25:52.400 Shares of the company are right now up about thirteen 0:25:52.440 --> 0:25:55.280 percent year to date. So let's get into it because 0:25:55.320 --> 0:25:58.680 lucky for us, we have Bloomberg News Senior editor Nina Trentman, 0:25:58.880 --> 0:26:02.280 along with Waste Management CFO Divina Rankin, who joins us 0:26:02.280 --> 0:26:05.960 from the company's headquarters in Houston, Texas. Divina, so great 0:26:06.000 --> 0:26:09.520 to have you here. Let's just quickly start with the macro. 0:26:09.920 --> 0:26:14.880 President Trump just talking about autotarps may come in early April. 0:26:15.280 --> 0:26:18.840 The macro, the news from Washington, the global environment, the 0:26:18.960 --> 0:26:22.640 US environment, tell us how it could impact your business. 0:26:23.320 --> 0:26:26.159 Sure, and happy to be here with you. You know, 0:26:26.200 --> 0:26:29.159 when we think about WM, we really think about a 0:26:29.320 --> 0:26:34.480 resilient organization that performs well in any economic environment and 0:26:34.600 --> 0:26:37.840 under any administration, and we don't expect this one to 0:26:37.840 --> 0:26:42.000 be any different. We're optimistic as a North American, largely 0:26:42.080 --> 0:26:47.160 North American company that with the current administration being really 0:26:47.200 --> 0:26:51.760 bullish on growing the US economy, that will continue to 0:26:51.760 --> 0:26:56.480 do well and we're well positioned to serve what's coming next. 0:26:56.800 --> 0:26:59.520 We have our eye on things like tariff's interest rates 0:27:00.280 --> 0:27:03.680 the workforce, just like everyone else does. But we are 0:27:03.720 --> 0:27:08.280 really optimistic that we're well positioned to continue to grow 0:27:08.320 --> 0:27:11.000 and execute upon our strategic priorities in the year ahead. 0:27:11.640 --> 0:27:14.840 Divina, you mentioned tariffs. Can you walk us through where 0:27:14.880 --> 0:27:17.680 you could see a potential impact on the business. 0:27:17.760 --> 0:27:20.640 You know, we really are focused on two places, one 0:27:20.800 --> 0:27:26.399 being our trucks, and there are inputs from renewable energy 0:27:26.800 --> 0:27:32.840 production equipment that we also source from other markets. 0:27:33.119 --> 0:27:35.280 And the other place for us. 0:27:35.040 --> 0:27:38.800 Really would be about the commodities that we sell. We 0:27:39.560 --> 0:27:44.439 sell recycling commodity price or recycled commodities, and some of 0:27:44.480 --> 0:27:48.840 that goes across US borders, and so if there's restrictions 0:27:48.880 --> 0:27:51.879 on our ability to move that product outside of the US, 0:27:51.960 --> 0:27:55.760 we could see some restrictions and limitations that could have 0:27:55.840 --> 0:27:56.840 short term disruption. 0:27:56.920 --> 0:27:59.160 But what I have to tell you is when we 0:27:59.200 --> 0:28:00.000 look back. 0:27:59.800 --> 0:28:02.680 At the strength of this business and how we were 0:28:02.720 --> 0:28:06.879 able to move product during the COVID era, it really 0:28:06.920 --> 0:28:10.960 does speak to our ability to move product even domestically. 0:28:11.200 --> 0:28:14.200 There's short term disruption, Devin, I'm. 0:28:14.119 --> 0:28:17.600 Wondering if there's anything that has come from Washington yet, 0:28:17.640 --> 0:28:20.119 that's come from the White House that has led you 0:28:20.160 --> 0:28:23.320 to change your supply chain, led you to make changes 0:28:23.320 --> 0:28:26.159 when it comes to commodities, led you to make changes 0:28:26.200 --> 0:28:29.639 to your business as a result of policies or proposed policies, 0:28:29.720 --> 0:28:31.720 or what you think could come from the White house. 0:28:33.080 --> 0:28:35.560 You know, I think about that in two ways, one 0:28:35.720 --> 0:28:39.800 being the renewable natural gas business. WM has made a 0:28:39.960 --> 0:28:45.400 very public investment in our sustainability growth, and we're investing 0:28:45.440 --> 0:28:48.680 about three billion dollars of capital over about a five 0:28:48.760 --> 0:28:52.560 year period in sustainability growth investments in both recycling and 0:28:52.640 --> 0:28:56.680 renewable natural gas. On the renewable natural gas front, it 0:28:56.720 --> 0:29:00.360 really could come down to EPA mandates and decisions that 0:29:00.480 --> 0:29:04.920 could impact the value of the wrens that we sell 0:29:04.960 --> 0:29:09.440 out of that business. That being said, the returns on 0:29:09.760 --> 0:29:14.440 these investments are really strong. They are three year payback periods, 0:29:14.480 --> 0:29:17.960 and so we don't expect any disruption to the quality 0:29:17.960 --> 0:29:20.880 of this investment, and we see demand from customers being 0:29:20.960 --> 0:29:24.960 strong enough to make this business as resilient as our 0:29:25.000 --> 0:29:29.760 core through the administration decision making processes. The other place's 0:29:29.800 --> 0:29:33.920 interest rates, and you mentioned the Stereocycle acquisition. We closed 0:29:33.920 --> 0:29:36.959 on that in November. What I'm really excited about is 0:29:37.080 --> 0:29:39.680 we financed that transaction at a great time. 0:29:40.440 --> 0:29:44.560 I just heard you speaking about its feel good. It 0:29:44.720 --> 0:29:45.760 feels wonderful. 0:29:46.040 --> 0:29:49.800 Yeah, are all in Borrowing costs are currently hovering just 0:29:49.880 --> 0:29:52.720 north of four percent for the total enterprise, so we're 0:29:52.760 --> 0:29:54.880 in a great position, Devin. 0:29:54.960 --> 0:29:57.600 Now, one thing to follow up on this, talk to 0:29:57.680 --> 0:30:00.000 us a little bit about what's driving costs for you. 0:30:00.480 --> 0:30:03.200 Yeah, it's another great question, And what I would tell 0:30:03.240 --> 0:30:07.240 you is we are a human capital intensive business. At WM, 0:30:07.320 --> 0:30:11.120 We're more than sixty thousand strong, and so labor inflation 0:30:11.240 --> 0:30:13.520 is certainly the place that we watch the most, and 0:30:13.600 --> 0:30:16.719 we continue to expect labor inflation will be in the 0:30:16.760 --> 0:30:20.200 four to five percent range. We had planned for that 0:30:20.320 --> 0:30:24.080 coming into twenty twenty five. In addition to thinking about 0:30:24.160 --> 0:30:27.280 labor inflation, we worked really hard to ensure that we're 0:30:27.760 --> 0:30:31.040 more and more efficient every day. So our cost to 0:30:31.080 --> 0:30:34.440 serve is not just about cost inflation. It's about our 0:30:34.520 --> 0:30:38.440 ability to drive automation and efficiency across work streams. 0:30:38.920 --> 0:30:40.400 One of the things I wanted to ask you about 0:30:40.400 --> 0:30:43.000 the acquisition just going back there, and you guys have 0:30:43.080 --> 0:30:46.280 talked about increased synergies of two hundred and fifty million. 0:30:46.080 --> 0:30:48.080 Dollars that could be realized in three years. 0:30:49.280 --> 0:30:52.480 Some are concerned that there aren't isn't that much overlap, 0:30:52.920 --> 0:30:55.720 and that those synergies will be tough to realize. What 0:30:55.800 --> 0:30:58.240 could you give us or tell us in terms of 0:30:58.520 --> 0:31:00.239 the progress you have made on that. 0:31:01.360 --> 0:31:04.959 You know, for us, we're really optimistic about realizing that 0:31:05.000 --> 0:31:08.040 two hundred and fifty million dollars over the three year period. 0:31:08.440 --> 0:31:09.600 It's in three buckets. 0:31:09.880 --> 0:31:14.760 One is internalization, two is operating effectiveness and efficiency, and 0:31:14.880 --> 0:31:18.200 three is back office or SGNA. 0:31:18.320 --> 0:31:19.360 The place that we're. 0:31:19.240 --> 0:31:22.400 Most bullish is in the back office and SGNA part 0:31:22.440 --> 0:31:26.000 of the cost equation for stair Cycle. Today they're running 0:31:26.120 --> 0:31:28.880 at SGNA is a percentage of revenue of over twenty 0:31:28.920 --> 0:31:33.000 four percent. WM is approaching nine percent. There's a lot 0:31:33.040 --> 0:31:35.840 of headroom between those two numbers, and we know that 0:31:35.880 --> 0:31:38.360 we're going to be able to move the dial on 0:31:38.400 --> 0:31:40.640 that pretty effectively over the next three years. 0:31:40.800 --> 0:31:43.280 To follow up on that, you mentioned that being happy 0:31:43.280 --> 0:31:46.800 with the financing you did for the Statocycle acquisition a 0:31:46.800 --> 0:31:49.440 few months ago. What about M and A moving forward? 0:31:49.480 --> 0:31:52.880 Are there more opportunities for M and A for waste management. 0:31:53.920 --> 0:31:54.080 There? 0:31:54.160 --> 0:31:54.800 Certainly are. 0:31:54.960 --> 0:31:56.840 You know, we are a roll up. 0:31:57.280 --> 0:32:01.840 That really is the roots of WM, and we invest 0:32:01.880 --> 0:32:04.160 one hundred to two hundred million dollars a year on 0:32:04.240 --> 0:32:08.080 tuck and acquisitions. Larger scale strategic M and A is 0:32:08.160 --> 0:32:11.680 really facts and circumstances driven, but we are committed to 0:32:11.760 --> 0:32:14.880 always having the balance sheet that is needed in order 0:32:14.920 --> 0:32:16.680 to be able to execute on the right deal at 0:32:16.720 --> 0:32:19.800 the right time. So in twenty twenty five, we'll focus 0:32:19.840 --> 0:32:21.960 on returning our leverage to where we need it to 0:32:22.000 --> 0:32:26.080 be to give us strategic flexibility in the future. Right now, 0:32:26.160 --> 0:32:30.000 we're focused on the organic growth story at WM. 0:32:30.440 --> 0:32:32.840 Organic growth of double. 0:32:32.560 --> 0:32:36.840 Digits percentage increases in ebitdah is just fantastic in this 0:32:37.000 --> 0:32:40.680 kind of an economy. We've done that now for we 0:32:40.760 --> 0:32:44.560 expect to do it for two consecutive years, and we're 0:32:44.600 --> 0:32:48.120 going to focus on building out those sustainability businesses and 0:32:48.200 --> 0:32:52.360 integrating the Stereocycle acquisition. So I don't expect any transformational 0:32:52.480 --> 0:32:55.240 M and A in the year ahead because we've got 0:32:55.240 --> 0:32:58.360 our plate full in terms of serving those three things. 0:32:59.360 --> 0:33:02.760 You mentioned the economy, Divina, just looking at your business, 0:33:02.760 --> 0:33:04.880 you're cutting a lot of waste from A to B. 0:33:05.440 --> 0:33:08.560 What does the waste that you're transporting tell you about 0:33:08.600 --> 0:33:10.040 the state of the US economy. 0:33:11.840 --> 0:33:14.600 We look at the state of the economy really in 0:33:14.680 --> 0:33:15.800 a couple of places. 0:33:16.680 --> 0:33:16.920 You know. 0:33:16.960 --> 0:33:19.719 We can think about our collection business, so where we 0:33:19.840 --> 0:33:22.480 use our trucks to go pick up waste from the 0:33:22.520 --> 0:33:24.560 customers where. 0:33:24.320 --> 0:33:25.960 They where they're generating it. 0:33:26.480 --> 0:33:29.080 You know, we pick up homes, we pick up small 0:33:29.080 --> 0:33:32.280 and medium businesses, and then we pick up large scale 0:33:33.360 --> 0:33:36.640 multilocation companies as well. What I would tell you that 0:33:36.720 --> 0:33:39.120 we have seen a small and medium business in the 0:33:39.160 --> 0:33:45.160 consumer are thriving and they're continuing to pursue you know, 0:33:45.240 --> 0:33:48.600 good strong economic growth and contribute to the health of 0:33:48.600 --> 0:33:50.800 the economy. Where we've seen a little bit of a 0:33:50.880 --> 0:33:54.320 lag in that is in the industrial economy. So we 0:33:54.480 --> 0:33:59.640 have seen a mild reduction in industrial revenue in the 0:33:59.680 --> 0:34:01.840 collect and part of our business, and we have our 0:34:01.880 --> 0:34:03.080 eye on that for the year ahead. 0:34:03.280 --> 0:34:04.800 Hey, you know, Jiva, one of the things we talked 0:34:04.800 --> 0:34:07.800 about tariffs and you know, other policies coming out of Washington. 0:34:07.880 --> 0:34:11.560 But in the newsletter, the CFO Briefing Newsletter which comes 0:34:11.560 --> 0:34:14.160 out on Sunday, and you are featured in it, one 0:34:14.160 --> 0:34:16.239 of the things that you highlight and think about is 0:34:16.320 --> 0:34:20.440 population growth being a longtime driver for your business. So 0:34:20.560 --> 0:34:24.880 how concerned are you about changes to immigration under President 0:34:24.920 --> 0:34:26.399 Trump and how that plays into it. 0:34:27.760 --> 0:34:31.040 Now, what I would say there is that we are 0:34:31.400 --> 0:34:35.360 a great business that is resilient in any economic environment, 0:34:35.760 --> 0:34:39.480 and while population growth is certainly a contributor to volume, 0:34:40.040 --> 0:34:43.480 what we are proud of is that our earnings growth 0:34:43.560 --> 0:34:47.160 long term, and we've always targeted a five to seven 0:34:47.200 --> 0:34:51.560 percent organic growth in EVA DAH on an annual basis, 0:34:51.640 --> 0:34:54.680 and we've exceeded that target over the last five years. 0:34:55.320 --> 0:34:59.640 We think that that comes from strong execution, from pricing 0:34:59.680 --> 0:35:05.000 dis len operating excellence, automation of the business where we can, 0:35:05.680 --> 0:35:09.520 and ensuring that we are customer centric and people centric, 0:35:09.760 --> 0:35:14.000 and those things have created strong success even in the 0:35:14.080 --> 0:35:17.960 tough days of COVID environment and it speaks to the 0:35:18.000 --> 0:35:21.280 resilience of our business model and we expect that to continue. Okay, 0:35:21.320 --> 0:35:24.000 only because we ask everybody AI, how does that play 0:35:24.040 --> 0:35:24.920 into your business? 0:35:24.960 --> 0:35:28.040 Does it just real quickly? Yes, certainly. 0:35:28.040 --> 0:35:31.439 We've got great things happening across the board, whether it's 0:35:31.440 --> 0:35:34.600 how we engage with our customers through chatbots, whether it's 0:35:34.719 --> 0:35:39.480 how we code. But the more exciting parts are the 0:35:39.520 --> 0:35:43.359 optical sorders within our recycling facilities. It's amazing what we've 0:35:43.360 --> 0:35:45.680 been able to do to automate that part of the business, 0:35:45.680 --> 0:35:48.480 and so we're going to continue to focus on using 0:35:48.520 --> 0:35:52.480 technology to be a better operator and provide better solutions 0:35:52.640 --> 0:35:53.440 for our customers. 0:35:53.520 --> 0:35:56.160 Divina, thank you so much, really appreciate it. 0:35:56.200 --> 0:35:59.320 Divina. Of course, Rank and she's the CFO of Waste Management, 0:35:59.600 --> 0:36:02.120 joining us there from Houston, which is where of course. 0:36:02.200 --> 0:36:03.080 They are based. 0:36:03.120 --> 0:36:05.800 And of course our own Bloomberg News Senior editor Nina Trentman. 0:36:05.920 --> 0:36:08.600 Do be sure to check out the Bloomberg CFO Briefing newsletter. 0:36:08.800 --> 0:36:11.200 You can find it at Bloomberg dot com slash CFO 0:36:11.320 --> 0:36:14.719 slash Briefing and also find it on the Bloomberg. 0:36:19.440 --> 0:36:23.000 You're listening to the Bloomberg Business Week podcast. Catch us 0:36:23.080 --> 0:36:26.520 live weekday afternoons from two to five pm Eastern. Listen 0:36:26.560 --> 0:36:30.080 on Applecarplay and Android Auto with the Bloomberg Business app, 0:36:30.239 --> 0:36:32.920 or watch us live on YouTube. 0:36:33.280 --> 0:36:35.399 Plenty Ahead in our second hour of the weekend edition 0:36:35.440 --> 0:36:39.400 of Bloomberg Business Week, including bar Rescues, John Taffer on tips, 0:36:39.440 --> 0:36:43.400 tariffs and tough immigration policies shaking up the restaurant industry. 0:36:43.719 --> 0:36:46.839 Plus speaking of tariffs, how those imposed on China might 0:36:46.880 --> 0:36:50.840 affect some American tech companies, The CEO of software company 0:36:50.920 --> 0:36:54.800 Ignite on that and the race to being the best LM. 0:36:55.160 --> 0:36:58.600 First up this hour, speaking of LM's large language models, 0:36:58.800 --> 0:37:01.560 big news in the world of our official intelligence, from 0:37:01.640 --> 0:37:05.880 Google's AI powered coscientist on its Gemini two point zero system, 0:37:06.320 --> 0:37:09.600 and Elon Musk's boasts about Grock three chatbot taking on 0:37:09.719 --> 0:37:13.879 chat GPT to former Open Ai executives starting their own 0:37:14.000 --> 0:37:17.560 valuable startups. There's a lot going on in the AI race. 0:37:18.000 --> 0:37:20.600 Covering some of the headlines this week with us Bloomberg 0:37:20.600 --> 0:37:24.600 Intelligence senior tech industry analyst Mandeep Singh and Bloomberg News 0:37:24.600 --> 0:37:26.640 technology reporter Jackie Devalos. 0:37:27.040 --> 0:37:30.840 Let's start with Grock here, because this is Elon Musk's XAI. 0:37:30.920 --> 0:37:34.000 It's their latest model. It's supposed to have advanced reasoning 0:37:34.440 --> 0:37:37.839 and capability is just around math and science. It says 0:37:37.840 --> 0:37:40.120 that it's already performing better than some of the leading 0:37:40.520 --> 0:37:44.040 models coming from Open ai and Thropic and Google. Obviously, 0:37:44.080 --> 0:37:46.719 we have to independently verify those claims, but it's a 0:37:46.760 --> 0:37:50.720 really hard task to do because there's no real way. 0:37:50.640 --> 0:37:51.120 To do it. 0:37:51.239 --> 0:37:53.120 You have a lot of different tools out there that 0:37:53.160 --> 0:37:55.400 can kind of give you a good sense of just 0:37:55.480 --> 0:37:58.040 how they're performing against each other. But let's just take 0:37:58.080 --> 0:38:00.799 some of those claims with a grain of the other 0:38:00.920 --> 0:38:03.720 thing as you mentioned ilias at skever that's a huge 0:38:03.800 --> 0:38:08.680 name open in artificial intelligence. He was formally at open AI, 0:38:08.960 --> 0:38:11.920 as you remember, had a really big role there in 0:38:11.960 --> 0:38:15.000 developing this technology. So there's not a whole ton that 0:38:15.040 --> 0:38:18.080 we know about his venture just yet other than its 0:38:18.200 --> 0:38:22.280 name super Safe Intelligence. And this is this is really 0:38:22.280 --> 0:38:26.320 important though, because there's a broader conversation going on about 0:38:26.600 --> 0:38:31.040 where does all this talk about innovation leave safety, you know, 0:38:31.120 --> 0:38:32.880 and responsible. 0:38:32.200 --> 0:38:33.799 And I think it goes into what it's called super 0:38:33.840 --> 0:38:36.880 safe intelligence, right, super safe trail. Notice every super super 0:38:36.920 --> 0:38:38.240 sife right, super safe. 0:38:38.680 --> 0:38:41.200 But to your point, this has already gotten a lot 0:38:41.200 --> 0:38:43.680 of attention from investors, and the reason for that is 0:38:43.719 --> 0:38:47.640 because there's a lot of confidence that anything ILIA does 0:38:48.120 --> 0:38:49.440 is going to be a game changer. 0:38:49.920 --> 0:38:51.600 Okay, man, deep, come on in here. I want to start. 0:38:51.680 --> 0:38:53.160 Jackie made a lot of points. I want to start 0:38:53.160 --> 0:38:56.759 with the XAI point and just this idea that there 0:38:56.760 --> 0:39:00.080 are indeed some lms that are better than others. There 0:39:00.080 --> 0:39:02.560 are some models out there that are better than others. 0:39:02.719 --> 0:39:04.560 How do you think about in you from your Perchet 0:39:04.560 --> 0:39:07.040 Bloomberg intelligence measuring that claim? 0:39:07.600 --> 0:39:09.560 Yeah, I mean when you compare it to the deep 0:39:09.600 --> 0:39:12.680 Seek moment, which really was the big one this year. 0:39:13.280 --> 0:39:16.120 I think this wasn't like a big leap in terms 0:39:16.160 --> 0:39:19.640 of the LLM race. This was more like OpenAI has 0:39:19.680 --> 0:39:22.920 got a reasoning model. We have one two in terms 0:39:22.920 --> 0:39:26.680 of Xai. And look, all these companies so far were 0:39:26.719 --> 0:39:31.200 competing on the size of the cluster. So Xai built 0:39:31.200 --> 0:39:35.440 the largest GPU cluster, over one hundred thousand GPUs that 0:39:35.480 --> 0:39:38.800 they use for pre training. Now, one would have expected 0:39:38.840 --> 0:39:41.799 their model to be far better, given this was like 0:39:41.840 --> 0:39:44.399 almost two to five times bigger than all the other 0:39:44.480 --> 0:39:47.680 clusters that we know of, at least publicly. So from 0:39:47.680 --> 0:39:50.560 that perspective, I think it wasn't that big of a leap. 0:39:50.640 --> 0:39:53.759 But at the same time they kept houting that, you know, 0:39:53.880 --> 0:39:57.760 in certain type of tasks like math encoding, their model 0:39:57.800 --> 0:40:01.160 performed better. Now, how much better. It's within the plus 0:40:01.160 --> 0:40:04.200 minus five percent. So that's where I think the deep 0:40:04.239 --> 0:40:07.600 Seak moment. The fact that it focused on efficiency, that 0:40:07.840 --> 0:40:10.600 to me was a big deal in this case. They 0:40:10.600 --> 0:40:13.959 didn't out efficiency or any other metric. It was more 0:40:14.000 --> 0:40:16.840 that there our model performed better than the other models. 0:40:16.960 --> 0:40:19.600 Well, explain that to me, Mandy, when a model performs 0:40:19.680 --> 0:40:20.839 better what does that mean? 0:40:20.880 --> 0:40:24.440 The answers come up quicker, they are more thorough like 0:40:24.640 --> 0:40:25.600 how do we. 0:40:25.560 --> 0:40:28.600 Get the turnus the latter and look, I think these 0:40:28.640 --> 0:40:32.600 companies use different types of benchmarks so they know what 0:40:32.719 --> 0:40:35.480 to optimize for. I mean, when Grog three was trading, 0:40:35.800 --> 0:40:38.640 they know all the benchmarks, how they are rated. So 0:40:38.719 --> 0:40:42.360 I feel the latest version of the models are optimized 0:40:42.400 --> 0:40:46.800 for improving on the benchmarks and the latest known metrics 0:40:46.800 --> 0:40:49.160 that we have. But at the same time, there wasn't 0:40:49.160 --> 0:40:52.040 a novel approach where suddenly like Deep Sea came out 0:40:52.080 --> 0:40:55.520 with that mixture of experts approach where they optimize so 0:40:55.640 --> 0:40:59.879 many things. In this case, one, their release wasn't as 0:41:00.080 --> 0:41:02.719 detailed as the deep Seak release, right, So there isn't 0:41:02.760 --> 0:41:05.240 a paper where I can read the paper and say, wow, 0:41:05.280 --> 0:41:07.920 this is something new, And I think that's what's missing. 0:41:08.000 --> 0:41:09.400 Devil's in the details always. 0:41:09.480 --> 0:41:11.920 Hey, Jackie, come on in here, because I want to 0:41:11.960 --> 0:41:15.520 go to this idea of thirty billion dollars for evaluation 0:41:15.600 --> 0:41:18.120 for a company that we don't really know that much about. 0:41:18.360 --> 0:41:21.560 I mean, it's a pretty mind blowing figure, even for 0:41:21.680 --> 0:41:24.319 an AI company, even for Silicon Valley, even with this 0:41:24.400 --> 0:41:27.960 excitement around the space right now? Are are we starting 0:41:28.000 --> 0:41:30.200 to see some fraud one? 0:41:31.040 --> 0:41:33.719 I think even investors would say that there's froth. But 0:41:33.760 --> 0:41:35.200 at the end of the day, they want to get 0:41:35.200 --> 0:41:39.240 into the AI plays that are backed by the best talent. 0:41:39.520 --> 0:41:42.600 That's really what this is about. You also saw the 0:41:42.640 --> 0:41:45.960 former CTO of Open Ai kind of announced more plans 0:41:46.000 --> 0:41:50.600 around her own competing AI startup called Thinking Machines Labs. 0:41:50.960 --> 0:41:54.319 So Mira Muradi obviously you know, on par with an 0:41:54.320 --> 0:41:59.560 Ilius ascover. Here you have these two really respected artificial 0:41:59.600 --> 0:42:03.120 and tell diligence minds kind of bringing their own project 0:42:03.120 --> 0:42:04.920 to the table. One thing I do want to point 0:42:04.960 --> 0:42:07.320 out about GROC though, is that I found it interesting 0:42:07.320 --> 0:42:09.640 that in the live stream that Elon Musk did with 0:42:09.680 --> 0:42:12.680 a couple of XAI engineers, they said that the goal 0:42:12.920 --> 0:42:16.320 for XAI and for Grock was to understand the nature 0:42:16.719 --> 0:42:19.440 of the universe. This is a little fluffy obviously when 0:42:19.480 --> 0:42:22.200 you think about just kind of the practical applications we 0:42:22.239 --> 0:42:24.960 want to see out of artificial intelligence, but perhaps it 0:42:25.000 --> 0:42:28.120 gives us a window into, you know, the different angles 0:42:28.120 --> 0:42:30.839 that some of these AI models can take. Maybe they 0:42:30.840 --> 0:42:33.600 don't have to be the best at everything. Well, but 0:42:33.640 --> 0:42:37.040 perhaps kind of the more focused applications are the ones 0:42:37.080 --> 0:42:37.520 to get more. 0:42:37.480 --> 0:42:39.960 Traction, like cable going niche or YouTube channels, like, is 0:42:40.000 --> 0:42:40.719 that what's going to happen? 0:42:40.800 --> 0:42:40.920 Man? 0:42:40.960 --> 0:42:45.319 People, there'd be like a great AI chatbot for medicine, Well, 0:42:45.320 --> 0:42:46.560 there'll be one for retail. 0:42:46.719 --> 0:42:49.000 Like is that where it breaks down or not? 0:42:49.480 --> 0:42:51.440 I mean, you have to look at the data. When 0:42:51.480 --> 0:42:54.680 it comes to the differences between the foundation models, it 0:42:54.719 --> 0:42:57.680 will come down to the data. Now, what xai has 0:42:57.800 --> 0:43:01.040 is the Twitter real time streaming data no one else has. 0:43:01.239 --> 0:43:03.520 I don't think they want other model providers to have 0:43:03.560 --> 0:43:06.839 access to the data everyone else has open in data. 0:43:06.880 --> 0:43:10.200 But then what is unique with the other foundational models 0:43:10.239 --> 0:43:10.960 is in the case of. 0:43:10.880 --> 0:43:13.640 Hold on, yeah, is what's on Twitter actually good? You 0:43:13.640 --> 0:43:16.919 know you made me nervous? Garbage in garbage out right? 0:43:17.000 --> 0:43:18.360 And I don't know if you spend much time on 0:43:18.520 --> 0:43:21.440 x lately, but my experience has certainly shifted on the platform. 0:43:21.520 --> 0:43:23.400 Is that data worth it? It's not Reddit. 0:43:23.520 --> 0:43:26.719 I mean, if he's talking about understanding the universe using 0:43:26.760 --> 0:43:29.839 Twitter data, I don't think there is a connection. But look, 0:43:29.880 --> 0:43:32.880 there are certain real time elements when it comes to 0:43:32.960 --> 0:43:36.680 breaking news and stuff like that people expressing their opinion. 0:43:36.719 --> 0:43:38.920 A lot of these models were trained on Reddit data. 0:43:39.360 --> 0:43:43.600 The reason why everyone used Reddit is because it's how people, 0:43:43.920 --> 0:43:46.759 you know, speak English language, and that's how the user 0:43:47.120 --> 0:43:50.280 data is generated. So that was a good representation of data. 0:43:50.360 --> 0:43:53.480 If you want knowledge, then that's your Wikipedia data. So 0:43:53.600 --> 0:43:56.400 from that perspective, I can see a connection. But at 0:43:56.440 --> 0:43:58.560 the same time, you're not going to understand the universe 0:43:58.600 --> 0:44:01.720 by using Twitter data at least that's not what is unique. 0:44:01.880 --> 0:44:03.640 Well, and Mandy, let me just ask you though, Like 0:44:03.880 --> 0:44:06.719 when we talk about this kind of AI explosion, I mean, 0:44:06.760 --> 0:44:10.959 I think about search and there's like dominant search engines, right, 0:44:11.000 --> 0:44:13.439 there's Google like that we all really use, and there's 0:44:13.440 --> 0:44:15.840 other search engines. But I mean, is there going to 0:44:15.920 --> 0:44:21.279 be one you know, chat GPT or one chat aichat 0:44:21.320 --> 0:44:22.640 that's going to dominate? 0:44:22.800 --> 0:44:24.719 Like do you is that the same model I'm trying 0:44:24.760 --> 0:44:25.359 to think about. 0:44:25.480 --> 0:44:28.480 That's chat ChiPT right now. Look at the roughly active 0:44:28.560 --> 0:44:30.839 users and that's where you know, the fact that they 0:44:31.480 --> 0:44:34.279 vent you know, from the ground up, created this new 0:44:34.360 --> 0:44:37.640 app where they have three hundred million plus monthly active users. 0:44:38.040 --> 0:44:41.400 They clearly have the best model. Now Google has overlaid 0:44:41.440 --> 0:44:44.840 their model across their family of apps, so has Meta, 0:44:44.880 --> 0:44:48.080 but chat Chip created it from scratch, and so that's 0:44:48.160 --> 0:44:50.720 the distribution is the most important thing when it comes 0:44:50.760 --> 0:44:55.440 to proliferating large angrid models. I mean, xai clearly is 0:44:55.480 --> 0:44:58.080 there on Twitter, and Twitter has you know, fifty million 0:44:58.160 --> 0:45:01.080 daily active users. So they be interesting to see how 0:45:01.080 --> 0:45:04.239 many people actually are willing to pay a thirty dollars subscription, 0:45:04.680 --> 0:45:08.840 because that's a chat GPT's business model. It's all subscription based. 0:45:08.960 --> 0:45:12.360 People actually pay a twenty dollars or two hundred dollars subscription. 0:45:13.600 --> 0:45:15.840 Let's talk about the price there, because I was super 0:45:15.880 --> 0:45:20.160 surprised to see the differential between grock and open Ai. Obviously, 0:45:20.160 --> 0:45:22.279 for the latest reasoning model out of open Ai, you. 0:45:22.239 --> 0:45:23.600 Have to be two hundred dollars. 0:45:23.960 --> 0:45:26.040 Thankfully, you know, we're able to test it out on 0:45:26.520 --> 0:45:29.680 Bloomberg's dime over here on the technology team, But if 0:45:29.680 --> 0:45:32.719 you're a regular person trying to really test some of 0:45:32.719 --> 0:45:34.640 these out, it's going to cost you. And you know, 0:45:34.719 --> 0:45:37.520 one of the advantages I think that groc has compared 0:45:37.560 --> 0:45:39.200 to them is that it's forty bucks a month if 0:45:39.200 --> 0:45:41.759 you're already a premium plus subscriber. 0:45:41.200 --> 0:45:43.960 On X So what are you doing, Jackie playing with 0:45:44.040 --> 0:45:48.440 the reasoning model of chat GPT lay that out for us. 0:45:49.640 --> 0:45:52.720 I like to kind of, you know, show it how 0:45:52.840 --> 0:45:56.640 I think when it comes to you know, even crafting 0:45:56.760 --> 0:46:00.279 questions for an interview or you know, brainstorming. This is 0:46:00.320 --> 0:46:02.680 really important for me as a reporter because sometimes I 0:46:02.719 --> 0:46:05.680 have a hunch about something I have, you know, a 0:46:05.680 --> 0:46:07.080 way that I want to frame it, but I just 0:46:07.120 --> 0:46:09.800 can't really get it going. And what it does, I 0:46:09.840 --> 0:46:12.239 think is provide you kind of a good structure. What 0:46:12.320 --> 0:46:14.520 it's seen on the internet is like a good way 0:46:14.560 --> 0:46:17.879 to you know, start a paragraph, start an email, those 0:46:17.920 --> 0:46:19.799 things that sometimes you just need a little bit of 0:46:19.840 --> 0:46:20.920 help getting started. 0:46:21.880 --> 0:46:24.239 Well, can I just say you were in our studio was. 0:46:24.239 --> 0:46:25.680 It last week, a couple weeks ago? 0:46:25.719 --> 0:46:26.479 Couple weeks ago? 0:46:26.560 --> 0:46:29.120 And you were like talking about Gemini, you were talking 0:46:29.120 --> 0:46:29.880 about TCHATCHYPT. 0:46:29.960 --> 0:46:31.200 You're pointing a deep right now. 0:46:31.239 --> 0:46:32.879 I am pointing at man deep for those we're listening 0:46:32.920 --> 0:46:33.319 on radio. 0:46:33.680 --> 0:46:35.920 And then I had to do a panel and I 0:46:35.960 --> 0:46:37.680 had plans, I did my own research, and then I 0:46:37.680 --> 0:46:41.440 played around with CHATCHYPT and was blown away with what 0:46:41.520 --> 0:46:43.560 it came up. With similar to what I was thinking, 0:46:43.960 --> 0:46:45.200 but all organized. 0:46:45.239 --> 0:46:47.880 I mean, just look at the length of the prompt 0:46:48.080 --> 0:46:51.000 that you can give to chatchipt. You can have such 0:46:51.040 --> 0:46:53.959 a detailed prompt. Then with the search engine, the moment 0:46:54.040 --> 0:46:57.160 you start typing, after you know ten words, you're going 0:46:57.239 --> 0:46:59.680 to just lose the query because it's not going to understand. 0:47:00.120 --> 0:47:02.960 You can pass, you know, thousands of words, and the 0:47:03.000 --> 0:47:05.640 more words you pass, the better your answer is going 0:47:05.680 --> 0:47:08.320 to be. So it is very powerful from that perspective, 0:47:08.320 --> 0:47:10.360 and that's why I think some people are willing to 0:47:10.400 --> 0:47:11.840 pay two hundred dollars a month for that. 0:47:11.960 --> 0:47:15.160 I guess thirty seconds, Jackie, do we need Claude, do 0:47:15.200 --> 0:47:18.600 we need chat GPT, do we need Groth? Do we 0:47:18.640 --> 0:47:20.200 need Lama? Do we need all of these? 0:47:21.239 --> 0:47:23.680 I think it depends on what you do, and if 0:47:23.680 --> 0:47:26.919 you're a writer, if you're creative, each one is going 0:47:27.000 --> 0:47:30.320 to appeal to you in a different way. General purpose 0:47:30.400 --> 0:47:33.040 right now is really popular, but going forward, I think 0:47:33.080 --> 0:47:35.840 we're going to start to see those applications really narrow 0:47:35.920 --> 0:47:38.319 down and you're going to get quite a you know, 0:47:38.440 --> 0:47:40.719 quite a few picks to choose from. 0:47:40.560 --> 0:47:42.560 Man deep same question to you in terms of the 0:47:42.640 --> 0:47:43.719 variety that are out there. 0:47:43.960 --> 0:47:47.160 I mean, the this model costs it, you know, almost 0:47:47.480 --> 0:47:50.279 three hundred four hundred million dollars for one training run. 0:47:50.480 --> 0:47:53.160 Imagine how many companies can afford to do that. So 0:47:53.239 --> 0:47:55.400 that's why I think this will narrow because of the 0:47:55.440 --> 0:47:57.400 costs involved in training these models and. 0:47:57.440 --> 0:48:00.920 Pretty amazing stuff, Man Deep Saying Bloomberg Intelligence and industry analyst, 0:48:01.040 --> 0:48:03.960 along with Bloomberg News Technology reporter Jackie Devallis are thanks 0:48:04.000 --> 0:48:04.880 to you. 0:48:07.000 --> 0:48:10.799 This is the Bloomberg Business Week podcast. Listen live each 0:48:10.800 --> 0:48:13.799 weekday starting at two pm Eastern up on applecar Play 0:48:13.920 --> 0:48:16.560 and the Android Auto with the Bloomberg Business app. You 0:48:16.600 --> 0:48:19.760 can also listen live on Amazon Alexa from our flagship 0:48:19.840 --> 0:48:23.600 New York station Just Say Alexa played Bloomberg eleven thirty. 0:48:24.719 --> 0:48:27.920 Tarriff's definitely in focus again this week, with autos, pharmaceuticals, 0:48:27.920 --> 0:48:31.160 and semiconductors grabbing the spotlight. And while the levies talked 0:48:31.160 --> 0:48:33.840 about so far may not impact all, companies in the 0:48:33.920 --> 0:48:38.040 United States, c suites are watching these developments very closely. 0:48:38.480 --> 0:48:42.239 That includes Vinite. Jaynees, CEO of Egnite. It makes software 0:48:42.280 --> 0:48:45.800 for enterprise companies to secure and manage massive amounts of data. 0:48:46.239 --> 0:48:48.600 The company has raised one hundred and forty million dollars 0:48:48.640 --> 0:48:52.120 in venture capital from Google Ventures, Kleiner Perkins, Goldman Sachs 0:48:52.200 --> 0:48:55.480 and others and accounts companies such as Red Bull, Steve 0:48:55.520 --> 0:48:59.359 Madden and Beyontech as clients. We talked tariffs and how 0:48:59.360 --> 0:49:01.320 the AIRAATE is shaping. 0:49:01.000 --> 0:49:03.520 Up in my world, you know, I'm talking about We 0:49:03.600 --> 0:49:06.680 are a software as a service provider, So anything that 0:49:06.760 --> 0:49:11.239 impacts IET systems, whether it's servers, networking gear, data center components, 0:49:12.280 --> 0:49:14.120 those would be the ones that I would be most 0:49:14.280 --> 0:49:17.960 interested in, not the autos or pharmaceuticals, although there's always 0:49:17.960 --> 0:49:23.120 a cascading impact if there's a general inflation. Now I 0:49:23.200 --> 0:49:26.399 know the numbers on the tariff side keep ratcheting up. 0:49:26.680 --> 0:49:29.400 New announcements are coming out regularly. So a couple of 0:49:29.480 --> 0:49:31.520 tuesdays back, I think there was a ten percent tariff 0:49:31.520 --> 0:49:36.120 announced for this class of hardware. So the question is 0:49:36.800 --> 0:49:41.120 if the underlying data center equipment becomes more expensive, and 0:49:41.200 --> 0:49:43.200 keep in mind a lot of it, a lot of 0:49:43.239 --> 0:49:46.600 it is made in China, will that have an impact 0:49:46.680 --> 0:49:50.520 on the ultimate end user solutions that companies like ourselves provide. 0:49:50.719 --> 0:49:53.440 I don't think so. 0:49:52.680 --> 0:49:58.359 Because these costing freases can be absorbed by the providers, 0:49:58.480 --> 0:50:02.040 including companies like ourselves, with some impact to the gross margin, 0:50:02.600 --> 0:50:06.320 but it's not significant yet unless these numbers start crossing 0:50:06.400 --> 0:50:10.080 into twenty five percent or higher territory. Until then, I 0:50:10.080 --> 0:50:12.040 would say I'm pretty sanguine about it. 0:50:12.160 --> 0:50:16.200 Is the concern, though, compounded when you think about your customers. 0:50:16.200 --> 0:50:18.560 I mentioned Red Bull, Steve madd and Beyoncek just a 0:50:18.600 --> 0:50:21.960 few of your customers. Steve Madden a company that I 0:50:21.960 --> 0:50:25.920 would imagine makes products in China. If they're hit with 0:50:25.960 --> 0:50:29.080 bigger tariffs, then what happens to the amount that they're 0:50:29.080 --> 0:50:30.840 able to spend on services such as yours? 0:50:31.320 --> 0:50:31.440 Oh? 0:50:31.480 --> 0:50:34.719 Absolutely, I think you actually use the right word compounding, 0:50:34.760 --> 0:50:39.759 because ultimately any cost increases for our own customers. Steve 0:50:39.800 --> 0:50:42.440 Madden is a great example. I mean, the fact remains 0:50:42.440 --> 0:50:45.440 that despite all the effort to move manufacturing out of 0:50:45.560 --> 0:50:48.960 China to countries like Vietnam, to Malaysia and even to 0:50:49.000 --> 0:50:52.320 some in India, China is still the factory of the world. 0:50:52.560 --> 0:50:56.440 So it's absolutely normal to assume that if they are 0:50:56.480 --> 0:51:00.279 going to experience cost increases, they being the company needs 0:51:00.320 --> 0:51:03.439 that you mentioned Steve Madden or whoever else they will 0:51:03.480 --> 0:51:05.680 pass it down to the customers. If they can't, it 0:51:05.719 --> 0:51:08.680 eats up in the gross margin. If they don't want 0:51:08.719 --> 0:51:11.719 to pass the cost down, then they'll squeeze supplies like ourselves. 0:51:11.719 --> 0:51:14.760 So there is absolutely a trickle down or rather compounding effect, 0:51:14.800 --> 0:51:16.000 as you eloquently put it. 0:51:16.320 --> 0:51:19.719 Fi, what about global supply chains do you think that 0:51:19.800 --> 0:51:23.799 they will be potentially changed forever? Again, devil in the 0:51:23.840 --> 0:51:27.160 details when it comes to the particulars around tariff's what 0:51:27.200 --> 0:51:29.399 they are on, how large they are, and how long 0:51:29.440 --> 0:51:32.680 they last. But having said that, I do wonder about 0:51:32.680 --> 0:51:36.479 the psyche that's changing within the business environment, thinking we. 0:51:36.400 --> 0:51:37.600 Need to get out of this mess. 0:51:37.680 --> 0:51:40.760 Who knows, whether it's this administration or what's to come, 0:51:41.200 --> 0:51:43.239 that maybe we need to have our global supply chains 0:51:43.320 --> 0:51:46.240 or our supply chain in the same market that we're selling. 0:51:46.239 --> 0:51:47.480 And is that even possible? 0:51:48.719 --> 0:51:50.960 Carol, That's a very interesting thing. One is the aspiration 0:51:51.040 --> 0:51:53.839 and there is the ground reality. The fact is, for 0:51:53.920 --> 0:51:56.920 decades and decades we have been relying no matter what 0:51:56.960 --> 0:52:00.000 the industry is, whether it's furniture or pharmaceutical or bul drugs, 0:52:00.520 --> 0:52:02.720 China is, as I said, the factory of the world, 0:52:03.320 --> 0:52:06.160 and to try to shift out of China will take 0:52:06.680 --> 0:52:10.799 a lot longer than what we might assume. Now, there's 0:52:10.800 --> 0:52:13.240 certain things which are fairly fungible that you can switch 0:52:13.239 --> 0:52:16.239 out quite quickly, but the entire supply chain, all the 0:52:16.280 --> 0:52:19.719 way from component suppliers, if I'm talking about manufacturing to 0:52:19.840 --> 0:52:23.880 subassembly makers to the final product makers, they're all in China, 0:52:24.600 --> 0:52:27.520 and you can take piece meals of that out over time. 0:52:27.560 --> 0:52:31.279 But we're looking at a multi decade effort across the board, 0:52:31.320 --> 0:52:34.400 across all industries, if I were to generalize. So we'll 0:52:34.400 --> 0:52:37.000 have to live with the fact that our dependence on 0:52:37.160 --> 0:52:42.640 China is not getting dialuted or reduced in the foreseeable future. 0:52:42.680 --> 0:52:44.560 And when I say forcable future, I'm talking about at 0:52:44.600 --> 0:52:45.800 least for the next five years. 0:52:46.160 --> 0:52:48.839 You know, while we have you Vanit, you guys are 0:52:48.880 --> 0:52:49.920 all about data. 0:52:50.080 --> 0:52:51.240 You have been. 0:52:51.120 --> 0:52:56.080 Invested, You've received venture capital from Google Ventures, Kleiner Perkins, 0:52:56.080 --> 0:52:58.840 Goldman Sachs, kind of a who's who when it comes 0:52:58.840 --> 0:53:03.799 to tech investing, impressive investors. The AI craze that we 0:53:03.840 --> 0:53:09.520 are in year two in counting CHATCHYPT Deep Seek, you know, 0:53:09.640 --> 0:53:12.319 everyone's still talking about AI, but it is also kind 0:53:12.360 --> 0:53:16.279 of interesting how deep seek has maybe disrupted the conversation 0:53:16.440 --> 0:53:19.759 around AI. If you will tell us about the demands 0:53:19.760 --> 0:53:23.239 for your services and what insight you have in this 0:53:23.360 --> 0:53:28.279 kind of build out two l MS and AI this 0:53:28.480 --> 0:53:30.560 next way that's been you know, as I said two 0:53:30.600 --> 0:53:31.680 years in counting. 0:53:32.880 --> 0:53:35.360 My first statement would be is a little radical. 0:53:35.640 --> 0:53:37.200 I would promply. 0:53:36.880 --> 0:53:40.480 Say that the hype cycle on AI is the highest 0:53:40.719 --> 0:53:43.160 of any tech trend that I've ever seen. And just 0:53:43.200 --> 0:53:45.120 to remind you, I've been in the valley for thirty 0:53:45.160 --> 0:53:49.600 two years. I've seen fads come and go, crypto web three, oh, 0:53:49.880 --> 0:53:52.920 you name it, right, But right now the crescendo in 0:53:52.960 --> 0:53:55.239 the news, and in fact the joke is, you know, 0:53:55.400 --> 0:53:57.840 we get these daily newsletters about investments today. I was 0:53:57.880 --> 0:54:00.719 looking at one each of them led I'd driven this 0:54:00.880 --> 0:54:03.799 AI driven that AI driven something. So you clearly know 0:54:03.880 --> 0:54:05.640 that we are the peak of the hype cycle. But 0:54:05.800 --> 0:54:08.920 if you leave aside the high aspect of it, the 0:54:09.000 --> 0:54:12.800 reality is customers. To be very simple, there is a 0:54:12.880 --> 0:54:15.480 huge value to be delivered with a slew of these 0:54:15.480 --> 0:54:17.840 generative AI. Capability is open ey, it's just one of 0:54:17.880 --> 0:54:21.440 the providers. But the big problem is the value expectation 0:54:21.560 --> 0:54:25.239 that your customers have today versus the value delivery i e. 0:54:25.320 --> 0:54:27.960 The capabilities we are providing. There is a big gap, 0:54:28.719 --> 0:54:32.360 and therefore people are wanting that gap to diminish before 0:54:32.400 --> 0:54:35.520 it becomes commonplace. But I still maintain all the AI 0:54:35.600 --> 0:54:38.360 capabilities that we are talking about that are being invented 0:54:38.400 --> 0:54:40.319 as we speak, or will be rolled out in the 0:54:40.360 --> 0:54:43.600 next two years. Take my word for it, they'll become commoditized. 0:54:43.640 --> 0:54:46.200 People would expect that to be included. 0:54:45.719 --> 0:54:46.400 In your product. 0:54:46.840 --> 0:54:50.000 Over time, what differentiates you or the premium they're willing 0:54:50.040 --> 0:54:52.520 to pay, will be a much higher value stack of services. 0:54:52.800 --> 0:54:55.319 But it's a journey and we are on that. So 0:54:55.480 --> 0:54:57.920 the problem is real, the solutions are real, but the 0:54:58.000 --> 0:55:00.840 hype cycle is absolutely at the zen more than anything 0:55:00.880 --> 0:55:01.560 I've seen before. 0:55:01.680 --> 0:55:04.480 It sounds like, though, this time is different words I 0:55:04.480 --> 0:55:07.000 should never say, so I'm trying to get you to 0:55:07.040 --> 0:55:10.800 say them. Yes, this time than the dot com bubble. 0:55:11.800 --> 0:55:14.600 Yeah, I would not say that. You know you've heard 0:55:14.600 --> 0:55:17.920 that phrase before. This time is different. 0:55:18.120 --> 0:55:21.720 No, it's just like you know, you hear about companies 0:55:21.760 --> 0:55:24.400 being formed in the last week or so with illustrious names. 0:55:24.480 --> 0:55:26.799 They don't have a business model defined yet, but people 0:55:26.880 --> 0:55:30.200 are planking billions of dollars in their fundraise just because 0:55:30.200 --> 0:55:32.759 of the pedigree of some of these individuals, and not 0:55:32.800 --> 0:55:35.759 to take anything away from them, This is a classical 0:55:36.280 --> 0:55:41.040 hype cycle where anything ai especially when you're talking about LMS, 0:55:41.200 --> 0:55:44.680 if you're talking about big data centers. The amount of 0:55:44.719 --> 0:55:48.200 money being poured into this is crazy. Now, will it 0:55:48.239 --> 0:55:50.719 have its value, of course it will, but it will 0:55:50.719 --> 0:55:53.520 not be commensurate with the expectations that are being created 0:55:53.600 --> 0:55:54.040 right now. 0:55:54.640 --> 0:55:59.319 Wait, so, okay, is it just because it's not there 0:55:59.440 --> 0:56:02.640 yet and that the hype will become a reality in 0:56:02.920 --> 0:56:05.440 maybe two years, or is it that the hype is 0:56:05.560 --> 0:56:06.120 just hype? 0:56:06.360 --> 0:56:07.920 Yeah, so it's a very good question. 0:56:08.800 --> 0:56:12.799 I still maintain that the value that these technologies will 0:56:12.840 --> 0:56:16.560 provide are absolutely insane. My belief is that a lot 0:56:16.600 --> 0:56:20.640 of these technologies will become commonplace. They'll become commoditized, So 0:56:20.800 --> 0:56:24.120 expecting people to pay premium prices is going to be 0:56:24.200 --> 0:56:27.040 a chimera. People will say, hey, I get it from 0:56:27.040 --> 0:56:29.000 this vendor and that vendor, so why are you charging 0:56:29.040 --> 0:56:31.200 me extra four dollars six dollars eight dollars by user 0:56:31.239 --> 0:56:35.839 per month? That will go away, But also the expectation 0:56:36.000 --> 0:56:39.200 that customers are having about AI delivering and being a 0:56:39.239 --> 0:56:42.120 panacea for all the problems they're dealing with without human 0:56:42.200 --> 0:56:45.720 interaction or the classical word is AGI. We are years 0:56:45.719 --> 0:56:47.880 and years away from that, So that is where the 0:56:47.920 --> 0:56:50.719 hype cycle and the gap between what we deliver is 0:56:50.840 --> 0:56:53.800 very high at what I'm alluding to, But I think 0:56:54.440 --> 0:56:57.560 this technology is here to stay. I mean, Web three 0:56:57.600 --> 0:57:00.160 oo has its renaissance. You can see the crypto is 0:57:00.200 --> 0:57:03.000 back again with the vengeance. So I'm saying that AI 0:57:03.160 --> 0:57:06.960 will be there, generate a AI, but the value hype 0:57:07.280 --> 0:57:10.400 versus the value delivery, that gap will diminish. 0:57:10.480 --> 0:57:11.920 And also the. 0:57:11.920 --> 0:57:14.480 Price expectation we have as vendors that you'll pay me 0:57:14.520 --> 0:57:17.240 this much. We'll have to get grounded into reality that 0:57:17.400 --> 0:57:20.280 people will pay, but not as what we're expecting. So 0:57:20.320 --> 0:57:23.080 all the investments we are making right now in order 0:57:23.080 --> 0:57:26.800 to get the return, there'll be some let's say realignment. 0:57:27.320 --> 0:57:31.160 What makes you say that we're so far from AGI? 0:57:31.920 --> 0:57:36.640 Very simply stated. Having technology today which can reduce the 0:57:36.720 --> 0:57:40.800 human interaction for low level task in accounting or generating 0:57:40.840 --> 0:57:44.760 memos or creating a media brief or even an advertisement, 0:57:45.520 --> 0:57:48.920 that's there. But having it to the point where no 0:57:49.080 --> 0:57:52.560 human curation is needed or human interaction is needed, and 0:57:52.640 --> 0:57:55.400 have the faith and belief between you as a provider 0:57:55.680 --> 0:57:58.840 to say I can just let the machine or the 0:57:58.960 --> 0:58:02.760 gen AI capability deliver the end product that is not 0:58:02.880 --> 0:58:04.959 going to be there. It's not there today, it won't 0:58:05.000 --> 0:58:07.560 be there for a long time. So lights out automation 0:58:07.720 --> 0:58:10.480 is possible in certain industries, But for the kind of 0:58:10.520 --> 0:58:14.000 things I'm talking about, where can you invent or have 0:58:14.080 --> 0:58:19.240 a protein marker for some disease, run through a complete 0:58:19.240 --> 0:58:22.480 AI related pipeline and not have a human intervened impossible. 0:58:22.760 --> 0:58:25.320 Of course there'll be clinical trials for that. But even 0:58:25.360 --> 0:58:28.040 in our world of software, I don't think our software 0:58:28.040 --> 0:58:29.760 is at a point today or two years from now 0:58:29.760 --> 0:58:32.400 where somebody could say, let's use the soft software and 0:58:32.640 --> 0:58:35.200 let it solve the problem the complete workflow with no 0:58:35.320 --> 0:58:38.040 human looking into it. So that's my reference about AGI. 0:58:38.080 --> 0:58:40.480 To be honest, hey, listen, I really appreciate this, We 0:58:40.560 --> 0:58:41.360 really appreciate this. 0:58:41.480 --> 0:58:42.680 I'm getting your perspective. 0:58:42.960 --> 0:58:47.480 One last question, then, so if everything may take a 0:58:47.520 --> 0:58:50.400 few years to work out in terms of the investments 0:58:50.440 --> 0:58:55.080 that have gone into an Nvidia and others, is it 0:58:55.120 --> 0:58:58.120 a case that that may not make sense or that 0:58:58.160 --> 0:59:00.440 will make sense because that's part of the infrat structure 0:59:00.480 --> 0:59:03.160 build that will still be there in years to come. 0:59:03.640 --> 0:59:06.480 But whether it's an open AI or someone else who 0:59:06.600 --> 0:59:09.800 leads in this what you say might be a commoditized 0:59:09.840 --> 0:59:13.440 business going forward, that's TBD to be determined. 0:59:13.960 --> 0:59:15.520 Yeah, you know, this is a little bit about my 0:59:15.560 --> 0:59:18.120 pay grade because you're bringing into the pick and shovel 0:59:18.120 --> 0:59:21.120 business of Nvidia versus you know, the gold Yeah, from 0:59:21.160 --> 0:59:25.440 the other guys. The relevance of Nvidia I don't see diminishing, 0:59:25.480 --> 0:59:27.680 except that they will be more competitors. It's a nature 0:59:27.720 --> 0:59:29.640 of the beast, right, they cannot have this market all 0:59:29.680 --> 0:59:33.640 to themselves. But also the providers, whether it's you say, 0:59:33.640 --> 0:59:37.040 open AI or Anthropic or Mistral or so many there, 0:59:37.440 --> 0:59:41.400 Google Gemini, they will of course keep up leveling the 0:59:41.560 --> 0:59:45.200 value delivery of what they're providing or the value chain 0:59:45.200 --> 0:59:48.960 of what they're delivering. But a lot of technology that 0:59:49.040 --> 0:59:52.840 they are investing in today compared to what the other 0:59:52.880 --> 0:59:56.040 party is developing, they'll become almost similar and therefore commoditized. 0:59:56.520 --> 0:59:59.320 So the arms raised to be the best of providing 0:59:59.320 --> 1:00:03.280 the best l that's going to be very expensive, and 1:00:03.360 --> 1:00:06.480 at some point there'll be some I keep scrambling for 1:00:06.520 --> 1:00:09.840 the right word, there'll be some realignment or readjustment on expectations, 1:00:09.840 --> 1:00:11.320 even from the investor perspective. 1:00:12.320 --> 1:00:15.080 Hey, Carol said it was the last question. But I 1:00:15.160 --> 1:00:16.640 can't come on our air and I can't ask you 1:00:16.640 --> 1:00:18.320 this question. When's the IPO happening? 1:00:19.480 --> 1:00:22.840 I can go there, I can't go, Well, you could. 1:00:24.880 --> 1:00:27.560 One thing I can say is I've done this company 1:00:27.640 --> 1:00:30.680 very differently coming from the valley. So you mentioned I've 1:00:30.720 --> 1:00:32.760 raised one hundred and forty two million, but also I 1:00:32.800 --> 1:00:36.480 would like to add the last round came in twenty eighteen. Yes, 1:00:36.560 --> 1:00:40.600 any raised years Yeah, and we don't plan to raise 1:00:40.680 --> 1:00:43.840 any private financing in that way because we have been 1:00:43.880 --> 1:00:46.640 cashflow positive with improving EBIT of margins. But at the 1:00:46.680 --> 1:00:49.400 same time, I take a lot of pride in saying 1:00:49.440 --> 1:00:53.280 that I've never built a company which is insanely high 1:00:53.280 --> 1:00:57.000 growth with insanely high losses. The very high losses, it's predictable, 1:00:57.080 --> 1:01:02.240 durable growth with improving cash flow mechanics, improving even the margin, 1:01:02.320 --> 1:01:06.240 so more sustainable and hopefully the markets will reward us 1:01:06.640 --> 1:01:09.440 in whatever the outcome. Is ip of being one of them. 1:01:09.840 --> 1:01:13.800 Well, we certainly appreciate your time and the expertise and 1:01:14.240 --> 1:01:16.880 kind of industry knowledge that comes with thirty years in 1:01:16.920 --> 1:01:17.640 Silicon Valley. 1:01:18.040 --> 1:01:18.800 Thank you so much. 1:01:18.880 --> 1:01:22.280 Vanite Jane, co founder and CEO of Ignite, joining us 1:01:22.280 --> 1:01:23.600 there from Mountain View, California. 1:01:23.640 --> 1:01:24.280 In the thick of it. 1:01:30.840 --> 1:01:34.600 This is the Bloomberg Business Week Podcast. Listen live each 1:01:34.640 --> 1:01:37.600 weekday starting at two pm Eastern on Apple car Play 1:01:37.720 --> 1:01:40.360 and the Android Auto with the Bloomberg Business App. You 1:01:40.400 --> 1:01:43.600 can also listen live on Amazon Alexa from our flagship 1:01:43.640 --> 1:01:47.440 New York station Just Say Alexa played Bloomberg eleven thirty. 1:01:48.560 --> 1:01:51.520 The great American egg shortage is getting worse, with prices 1:01:51.560 --> 1:01:54.600 surging more than fifteen percent in January from a month earlier. 1:01:54.840 --> 1:01:57.720 That's the biggest jump in a decade, indicating that inflation 1:01:57.880 --> 1:01:59.720 is still very much an issue in the food and 1:01:59.720 --> 1:02:00.440 bever space. 1:02:00.520 --> 1:02:01.240 Really for us. 1:02:01.120 --> 1:02:04.240 All, that's something that's close to the world of John Taffer. 1:02:04.400 --> 1:02:07.720 He's spent thirty plus years in the hospitality business and 1:02:07.840 --> 1:02:10.760 is well known from his hit Paramount Network reality series 1:02:10.800 --> 1:02:14.240 Bar Rescue. He's never shy a yell, shut it down. 1:02:14.440 --> 1:02:16.360 How was that well okay, thank you. 1:02:16.680 --> 1:02:19.360 In a failing bar or restaurant. John also the author 1:02:19.400 --> 1:02:22.280 of several books, including the Power of Conflict, Speak your 1:02:22.280 --> 1:02:24.080 Mind and Get the results you want. 1:02:24.200 --> 1:02:27.680 He's at Byers Studio to talk tariffs, immigration, inflation, and 1:02:27.720 --> 1:02:28.320 a lot more. 1:02:28.480 --> 1:02:31.640 We had what we called escalating costs. Now we have 1:02:31.720 --> 1:02:34.800 creeping costs, so it's a little slower. But you know, 1:02:34.840 --> 1:02:37.439 the restaurant business is such that food costs can't really 1:02:37.440 --> 1:02:40.200 exceed thirty percent thirty three percent. So for every dollar 1:02:40.240 --> 1:02:41.840 that my costs go up, I have to raise it 1:02:41.880 --> 1:02:43.040 three dollars to the consumer. 1:02:43.120 --> 1:02:43.440 Wow. 1:02:43.800 --> 1:02:46.040 Now there's only a certain amount of elasticity in that. 1:02:46.560 --> 1:02:49.240 So let's say my hamburger prices go up three dollars, 1:02:49.720 --> 1:02:51.800 I got to increase them by nine dollars. Now the 1:02:51.800 --> 1:02:54.880 consumer's not going to accept that nine dollars, So maybe 1:02:54.920 --> 1:02:57.080 I can push it to three or four dollars. Right, 1:02:57.240 --> 1:03:00.800 So I can recover half of the inflationary impact on 1:03:00.800 --> 1:03:03.520 my business, but in many cases I can't recover all 1:03:03.600 --> 1:03:07.400 of it. So that's where it's eroding on our operating costs. 1:03:07.520 --> 1:03:08.240 So what do you do, John? 1:03:08.280 --> 1:03:09.880 Do you like make the burger smaller? 1:03:10.000 --> 1:03:10.160 Do you? 1:03:10.320 --> 1:03:11.840 Well, you have a couple of choices. You can make 1:03:11.840 --> 1:03:15.200 the burger smaller, that's one choice, or you can raise 1:03:15.240 --> 1:03:18.160 your prices, or you can try to redesign your menu. So, 1:03:18.240 --> 1:03:21.760 for example, and this is interesting, psychological pricing and eye 1:03:21.760 --> 1:03:24.880 tracking with laser movement tells me that if I box 1:03:24.880 --> 1:03:27.000 an item on a menu, sales of that item will 1:03:27.000 --> 1:03:29.880 go up by twenty percent unbelieved. If I shadow or 1:03:30.000 --> 1:03:33.080 chef specially goes up by about fourteen percent. People have 1:03:33.120 --> 1:03:36.000 a six percent propensity to order the bottom two items 1:03:36.000 --> 1:03:38.240 on a list. So what I'll do is, I'll take 1:03:38.280 --> 1:03:41.680 my most profitable item in dollars and cents, not percentage. 1:03:41.880 --> 1:03:44.960 I'll box that one, take my second, most, shadow it, 1:03:45.040 --> 1:03:47.440 third and fourth, put them on the list properly. I 1:03:47.480 --> 1:03:50.400 won't price anything other than ninety five cents. There's no 1:03:50.440 --> 1:03:53.040 such thing as eight twenty five, eight fifty, eight seventy five. 1:03:53.080 --> 1:03:55.120 It's eight ninety five. When I need to raise my price, 1:03:55.160 --> 1:03:58.160 it goes to nine ninety five. Psychological pricing, If you 1:03:58.200 --> 1:04:00.440 price at eight fifty, you leaving forty five sense on 1:04:00.480 --> 1:04:02.920 the table every time. It means nothing at that point. 1:04:03.360 --> 1:04:07.120 So understanding these elements, I want to move you through 1:04:07.160 --> 1:04:10.080 boxing I'm going to move you to different menu items. 1:04:10.360 --> 1:04:10.680 Wow. 1:04:10.760 --> 1:04:14.000 So for example, waffle House is infusing a fifty, I 1:04:14.040 --> 1:04:17.120 would also run eggs. I would run a special on 1:04:17.160 --> 1:04:19.880 waffles because that doesn't use eggs. So I'm telling my 1:04:19.880 --> 1:04:24.080 friends in the breakfast business, run pancake specials, run corn 1:04:24.120 --> 1:04:26.560 beef hash specials. Do everything you can to move the 1:04:26.600 --> 1:04:28.360 consumer away from the eggs consumtion. 1:04:28.920 --> 1:04:30.800 Do that you didn't mention automation, which you see the 1:04:30.920 --> 1:04:34.080 chain's doing a lot right now. Are are mom and 1:04:34.160 --> 1:04:36.360 pop shops able to use automation? 1:04:36.760 --> 1:04:38.160 Well, you know a lot of them are a little 1:04:38.160 --> 1:04:39.960 intimidated by I tell you the truth, just like they're 1:04:39.960 --> 1:04:43.760 intimidated by sophisticated accounting systems. And so my research tells 1:04:43.800 --> 1:04:46.919 me that about seventy percent of the independent operators don't 1:04:46.920 --> 1:04:50.640 even have monthly p and ls. So we're asking them 1:04:50.680 --> 1:04:53.680 to look at a capital investment or a long term 1:04:53.800 --> 1:04:57.680 lease program, you know, to buy technology a little intimidating 1:04:57.720 --> 1:05:00.960 for them. So I find that they're not as eager 1:05:01.040 --> 1:05:02.800 to move into it. And interestingly, if you go to 1:05:02.840 --> 1:05:06.560 the restaurant convention the National Restaurant Association five years ago, 1:05:06.600 --> 1:05:09.360 there may be two robotic boots. Now there's probably close 1:05:09.400 --> 1:05:12.920 to one hundred robotic boots, everything from French fry robots 1:05:12.920 --> 1:05:15.720 to hamburger flipping robots, everything you can possibly that BT. 1:05:15.800 --> 1:05:17.280 But Mom and Pops aren't doing that yet. 1:05:17.320 --> 1:05:17.760 That's like. 1:05:19.600 --> 1:05:21.720 And the Chipotle's got you know, they've got the autocado 1:05:22.680 --> 1:05:26.320 with which helps with peeling and you know, coring avocados 1:05:26.360 --> 1:05:28.520 and freeze people up to do other things. But we're 1:05:28.520 --> 1:05:29.720 not seeing that yet. 1:05:29.720 --> 1:05:31.960 From I think McDonald's is one of the leaders in 1:05:32.240 --> 1:05:35.160 some of the robotic French fry equipment and such. But certainly, 1:05:35.200 --> 1:05:36.959 you know, it costs a lot less, it doesn't get sick, 1:05:37.360 --> 1:05:39.400 and it's the future of our industry. And look, we're 1:05:39.400 --> 1:05:42.760 struggling with labor as you know still, and we think 1:05:42.760 --> 1:05:44.840 that the no tax on tips might really make a 1:05:44.840 --> 1:05:47.840 difference for us as an industry, really really could solve 1:05:47.880 --> 1:05:50.760 that problem. It happens, Oh, we think it's going to happen. Yeah, 1:05:50.920 --> 1:05:51.880 I believe it's going to happen. 1:05:51.920 --> 1:05:53.120 Why do you think it's a good idea? 1:05:53.160 --> 1:05:55.120 Because I think for those of us who pay taxes 1:05:55.120 --> 1:05:58.600 on all of our income are wondering, well, wait a minute, 1:05:58.680 --> 1:06:00.760 how is that fair? And I guess the other side 1:06:00.800 --> 1:06:04.280 is that let's pay those workers a living wage. And 1:06:04.360 --> 1:06:07.880 so it's not you know, because I feel like increasingly 1:06:08.160 --> 1:06:10.000 we're tipping everybody also who. 1:06:09.800 --> 1:06:10.760 Declares their tips. 1:06:11.200 --> 1:06:12.840 Well, I don't like it when I go into a 1:06:12.880 --> 1:06:16.280 coffee store, yeah, and you know, I'm asked to tip 1:06:16.480 --> 1:06:19.000 the batista. I mean, it's a little out of line. Sometimes. 1:06:19.280 --> 1:06:21.080 I went to a dry cleaner the other day and 1:06:21.120 --> 1:06:22.680 I went in to pick up my dry cleaning, and 1:06:22.680 --> 1:06:24.520 it asked me if I wanted to tip the dry cleaning. 1:06:25.440 --> 1:06:27.920 It's a little outrageous. Now, every guy out of control. 1:06:28.880 --> 1:06:31.320 So what you think within the hotel or the restaurant industry, 1:06:31.600 --> 1:06:32.320 let me tell you why. 1:06:32.360 --> 1:06:35.120 Because they get an employee tip credit. So many in 1:06:35.160 --> 1:06:37.360 many states, they don't make minimum wage. They make two 1:06:37.400 --> 1:06:38.439 and three dollars an hour. 1:06:38.640 --> 1:06:39.040 No I know. 1:06:39.560 --> 1:06:42.920 So by not tipping them on you, by not taxing 1:06:42.920 --> 1:06:44.760 them on their tips, we're giving them a chance at 1:06:44.800 --> 1:06:45.760 that living wage. 1:06:46.000 --> 1:06:49.240 It's really im Why don't we make the institution in 1:06:49.320 --> 1:06:52.040 the restaurant pay them that living wage? 1:06:52.120 --> 1:06:53.120 Why don't we do it there? 1:06:53.320 --> 1:06:54.800 Well, we could do it there, but that's going to 1:06:54.800 --> 1:06:57.520 increase costs. So if we look at inflation in those costs. 1:06:57.560 --> 1:06:59.680 Here's the problem in the restaurant industry. It's it's an 1:06:59.680 --> 1:07:03.840 industry that we manage by percentage. Occupancy costs cannot exceed 1:07:03.880 --> 1:07:06.000 twelve percent of revenue every month or every year. It 1:07:06.120 --> 1:07:09.160 just cannot. Okay, Labor costs cannot exceed thirty percent, them 1:07:09.240 --> 1:07:11.800 up to forty five percent already. Yeah, food costs can 1:07:11.960 --> 1:07:14.480 exceed thirty percent, them up to seventy five percent. Now 1:07:14.760 --> 1:07:17.640 I have my ang my insurance, my utilities, all my 1:07:17.680 --> 1:07:20.360 other costs, I have waste and supplies. By the time 1:07:20.400 --> 1:07:23.200 I move that up, guys, I'm at twelve fifteen percent margins. 1:07:23.200 --> 1:07:23.880 That's all I got. 1:07:23.920 --> 1:07:26.520 But what if we didn't have tips, like you know, 1:07:26.560 --> 1:07:28.200 and I know who was it that tried to do it? 1:07:28.240 --> 1:07:28.439 Here? 1:07:28.600 --> 1:07:29.360 Was it Danny Meyer? 1:07:29.480 --> 1:07:30.160 Was it Danny Meyer? 1:07:30.440 --> 1:07:31.240 Est Lego? 1:07:31.320 --> 1:07:31.560 Tips? 1:07:31.600 --> 1:07:31.680 Like? 1:07:31.720 --> 1:07:34.080 Do you don't think we would think, Okay, I'm paying 1:07:34.080 --> 1:07:36.600 more because I'm not tipping that that would make it 1:07:36.720 --> 1:07:38.560 even it out and then possibly. 1:07:38.200 --> 1:07:40.320 But there's some fear in that. As an operator, Okay, 1:07:40.360 --> 1:07:42.040 you know, I have to educate the customer, and I 1:07:42.080 --> 1:07:43.960 must tell you anytime somebody tells me I'm going to 1:07:44.000 --> 1:07:46.560 start a business and educate the consumer, they tend not 1:07:46.600 --> 1:07:47.840 to be very successful at it. 1:07:48.800 --> 1:07:49.160 That's fair. 1:07:49.200 --> 1:07:50.960 That's fair, use tight margins. 1:07:51.040 --> 1:07:52.640 Also, I got to share with you that the restaurant 1:07:52.680 --> 1:07:56.960 industry is the largest non government employer in America. And 1:07:57.000 --> 1:08:00.200 when the restaurant industry hurts, America hurts. Right, There's a 1:08:00.240 --> 1:08:03.480 lot of consumers work for us. So keeping that industry 1:08:03.520 --> 1:08:06.960 healthy is our largest consumer, is very very important. And 1:08:07.000 --> 1:08:09.880 I look at the buyouts the car companies have gotten 1:08:10.040 --> 1:08:12.720 and other industries have gotten. The restaurant industry hasn't gotten that. 1:08:13.120 --> 1:08:16.400 So I think providing this relief makes sense for that industry. 1:08:17.000 --> 1:08:18.839 Of course, I'm an advocate for it, but I do. 1:08:19.080 --> 1:08:21.400 Hey, Johnny, you mentioned the no tax on tips as 1:08:21.439 --> 1:08:24.840 one of the policies forthcoming from this administration. How are 1:08:24.840 --> 1:08:27.600 you looking at other policies in terms of growth, in 1:08:27.680 --> 1:08:31.400 terms of helping the restaurant industry, in terms of potentially 1:08:31.600 --> 1:08:33.960 hurting the restaurant industry if prices go up as a 1:08:33.960 --> 1:08:37.160 result of tariffs and people have less disposable income, how 1:08:37.160 --> 1:08:38.599 are you looking at what's coming out of Washington. 1:08:38.600 --> 1:08:40.040 I mean, I've done a lot of work on tariffs. 1:08:40.240 --> 1:08:41.880 I've read a lot of white papers, and I've really 1:08:41.920 --> 1:08:43.679 tried to do my homework on it, and it's tough 1:08:43.680 --> 1:08:45.800 to come down with a hard position on knowing how 1:08:45.800 --> 1:08:47.800 it's really going to have an impact. I look at 1:08:47.840 --> 1:08:50.280 it this way. A German car company is charging a 1:08:50.320 --> 1:08:52.519 German is charging is ten percent tariff to bring our 1:08:52.560 --> 1:08:55.280 cars there. We're charging two and a half percent. Let's 1:08:55.280 --> 1:08:57.160 say we bumped that two and a half percent to 1:08:57.200 --> 1:09:00.000 ten percent. So now the German car comes into America 1:09:00.160 --> 1:09:03.160 at a base costs point in theory, ten percent higher 1:09:03.160 --> 1:09:07.080 than an American competitor. They can't compete that way, so 1:09:07.120 --> 1:09:09.600 they're going to have to make adjustments and distribution and 1:09:09.640 --> 1:09:12.680 operating costs in some way to be competitive again. So 1:09:12.760 --> 1:09:15.400 it's hard for me to accept that every tariff that 1:09:15.479 --> 1:09:17.720 ten points is going to make it to our pockets. 1:09:18.040 --> 1:09:20.439 I think there's competitive influences and a whole bunch of 1:09:20.439 --> 1:09:22.960 factors that play upont And then what could BMW they 1:09:22.960 --> 1:09:24.400 built the factory in America. You can tell you what 1:09:24.400 --> 1:09:26.439 they built the factory in America. So I think that 1:09:26.479 --> 1:09:28.400 we have to look at this as a longer play. 1:09:28.680 --> 1:09:30.479 Well, look at Ford and GM they built cars in 1:09:30.479 --> 1:09:33.559 Canada and Mexico, and then they'll get hit with tariffs 1:09:33.560 --> 1:09:35.400 when they bring those cars in and when the car 1:09:35.400 --> 1:09:38.120 components cross the border multiple times as a result of 1:09:38.160 --> 1:09:39.200 the manufacturing process. 1:09:39.320 --> 1:09:40.880 It's but I would say, you know who was sitting 1:09:40.880 --> 1:09:43.320 at who was controlling our government? And we allowed Ford 1:09:43.360 --> 1:09:46.240 Motor Company to start building plants in Canada and Mexico, 1:09:46.439 --> 1:09:48.960 Why didn't we incentivize them to build them here? Then? 1:09:49.640 --> 1:09:52.200 So now I think we're backing into it. We have 1:09:52.320 --> 1:09:55.879 these these international companies that we want to make residents. 1:09:55.960 --> 1:09:58.360 Well, some of it is like, you know, the globalization 1:09:58.520 --> 1:10:01.040 right of our world, and so we we've got allies, 1:10:01.080 --> 1:10:03.639 and we've got alliances, and we invest in your country 1:10:03.680 --> 1:10:05.680 and you invest in our country. Right, That's kind of 1:10:05.680 --> 1:10:08.080 how it's all happened. Is it bad if we kind 1:10:08.080 --> 1:10:09.200 of back off of all. 1:10:09.080 --> 1:10:09.920 Of that in your view? 1:10:10.000 --> 1:10:11.720 I don't know if we're backing off on all of that. 1:10:11.880 --> 1:10:14.840 Is understanding that in the post COVID world, every country 1:10:14.920 --> 1:10:17.719 is in a different economic place. Today, it's a different 1:10:17.840 --> 1:10:21.120 we're talking about environment, there's a very different environment now. 1:10:21.120 --> 1:10:24.360 America is operating at a significant deficit with significant debt. 1:10:24.960 --> 1:10:28.000 We have to fix this. The world knows we have 1:10:28.080 --> 1:10:30.360 to fix it. The world doesn't want us to cave in. 1:10:30.439 --> 1:10:33.479 We're the largest marketplace in the world, so it seems 1:10:33.520 --> 1:10:36.479 to me that the world has to accept that these 1:10:36.600 --> 1:10:40.200 changes have to be made to eliminate the deficits that 1:10:40.240 --> 1:10:42.840 we all have to make us all healthy. So can 1:10:42.880 --> 1:10:45.160 we do this together in a constructive way, That's what 1:10:45.240 --> 1:10:46.240 remains to be seen to me. 1:10:46.439 --> 1:10:49.080 What about in your world at the bar world, where 1:10:49.479 --> 1:10:53.160 tariffs could affect the liquor market Mexican tequila, which coming 1:10:53.160 --> 1:10:54.160 from Canada. 1:10:54.040 --> 1:10:57.080 That concerns me, but you know that Mexican tequila needs 1:10:57.120 --> 1:11:00.000 to compete, you know, with other brands and other prim 1:11:00.320 --> 1:11:01.920 I don't have to sell as much to Kiel. I 1:11:01.920 --> 1:11:05.000 can move my menu and sell more bourbon. So you know, 1:11:05.040 --> 1:11:07.280 we do have options in the industry. And I think 1:11:07.320 --> 1:11:09.880 that the marketplace is a challenge. The liquor industry is 1:11:09.880 --> 1:11:12.280 in the toilet right now, so the marketplace is a 1:11:12.360 --> 1:11:14.320 challenge for them. I think they need to be aggressive 1:11:14.320 --> 1:11:15.880 and I don't think they're going to allow a tariff 1:11:15.920 --> 1:11:16.519 to take them down. 1:11:16.640 --> 1:11:20.080 Yeah, increasingly, there's a lot of interesting dynamics the. 1:11:20.400 --> 1:11:22.320 Liquor als not saying I know this to be a fact, 1:11:22.320 --> 1:11:23.760 but this is just how I feel with this. I 1:11:23.800 --> 1:11:25.240 think time will tell on Well. 1:11:25.240 --> 1:11:27.120 In terms of policies, you talked about, you know, a 1:11:27.160 --> 1:11:30.559 shortage of workers in terms of immigration, and I know 1:11:30.600 --> 1:11:33.960 there's illegal versus legal, but you know, the hospitality industry 1:11:34.000 --> 1:11:36.720 got really hurt, you know, after the pandemic, a lot 1:11:36.720 --> 1:11:40.160 of people left that industry found better jobs, better paying jobs. 1:11:40.560 --> 1:11:41.679 What's your view on immigration? 1:11:42.160 --> 1:11:44.880 Well, I think legal immigration is important, but I think 1:11:44.920 --> 1:11:46.639 we need immigrants to come in first. Well, I don't 1:11:46.680 --> 1:11:48.639 want to hire somebody who I can't do a background 1:11:48.720 --> 1:11:51.439 check on. I can't do that. There's too much liability today, 1:11:51.520 --> 1:11:54.280 especially in the hotel industry, So I have to hire 1:11:54.280 --> 1:11:57.000 people that I can do background checks on, that I 1:11:57.000 --> 1:11:59.559 can have confidence in hiring them, that they're safe, they're 1:11:59.560 --> 1:12:02.200 not thieves, my employees are safe, et cetera. And right 1:12:02.240 --> 1:12:04.600 now we don't have that. So when I look at 1:12:04.640 --> 1:12:06.800 the immigrants, the illegal immigrants that have come across that 1:12:06.840 --> 1:12:09.799 I can track their background, they have no value to me. Interesting, 1:12:09.840 --> 1:12:11.679 I'm not sure there are of much value to America 1:12:11.680 --> 1:12:13.200 if we can't track their backgrounds. 1:12:13.520 --> 1:12:16.160 I would say that someone might someone might push back 1:12:16.200 --> 1:12:19.600 and say, well, if there's fewer people to do the 1:12:19.680 --> 1:12:23.080 labor that illegal immigrants do right now, that might pull 1:12:23.120 --> 1:12:26.080 from your labor labor force of legal immigrants working at 1:12:26.080 --> 1:12:28.880 restaurants and then cause your cost to go higher. 1:12:28.920 --> 1:12:31.240 Well, I didn't use the term. I'm trying to focus 1:12:31.280 --> 1:12:34.120 on criminals. There are legal immigrants that do have backgrounds 1:12:34.120 --> 1:12:36.040 and you can verify who they are. I don't have 1:12:36.080 --> 1:12:37.840 an issue with that. I have an issue with the 1:12:37.880 --> 1:12:40.760 criminals or the people whose backgrounds we can check. The 1:12:40.800 --> 1:12:43.200 ones that have gang tattoos, et cetera. They're of no 1:12:43.320 --> 1:12:47.200 use to the hospitality industry. So that doesn't solve our problem. 1:12:47.240 --> 1:12:49.880 The good ones do, the ones that have backgrounds that 1:12:50.000 --> 1:12:51.120 came here with well, good. 1:12:52.200 --> 1:12:54.080 Whoever comes in, like, You've got to make sure you 1:12:54.200 --> 1:12:55.240 understand exactly. 1:12:55.040 --> 1:12:56.720 So we have to understand that people that come here 1:12:56.720 --> 1:12:59.800 with good intentions could be valuable contributors to our society. 1:12:59.800 --> 1:13:01.920 Seven tune in. What is that about? 1:13:02.240 --> 1:13:04.639 Oh? You know, I'm doing a small business radio show. 1:13:05.000 --> 1:13:07.439 You know, with all my experience in dealing with failure 1:13:07.439 --> 1:13:09.640 and the things, I have new entrepreneurs, I want to 1:13:09.680 --> 1:13:10.760 talk to them, you know. 1:13:11.640 --> 1:13:11.960 Nur. 1:13:13.880 --> 1:13:17.120 John Tooker Le help out you do. 1:13:17.320 --> 1:13:19.040 It's a way for well, you guys are doing it 1:13:19.040 --> 1:13:21.160 in a little more sophisticated I want to really help 1:13:21.200 --> 1:13:24.200 those small entrepreneurs, those people starting out in those family businesses. 1:13:24.240 --> 1:13:27.880 There's so many out there. John Taffer, congratulations on a 1:13:27.960 --> 1:13:30.120 tenth season. So appreciate you coming in, of course, the 1:13:30.200 --> 1:13:32.240 hosting recorded producer of Bar Rescue. 1:13:32.280 --> 1:13:33.000 This is Bloomberg. 1:13:33.840 --> 1:13:38.720 This is the Bloomberg Business Week podcast, available on Apple, Spotify, 1:13:38.800 --> 1:13:42.559 and anywhere else you get your podcasts. Listen live weekday 1:13:42.560 --> 1:13:46.599 afternoons from two to five pm Eastern on Bloomberg dot com, 1:13:46.640 --> 1:13:50.519 the iHeartRadio app, tune In, and the Bloomberg Business App. 1:13:50.760 --> 1:13:53.519 You can also watch us live every weekday on YouTube 1:13:53.760 --> 1:13:55.919 and always on the Bloomberg terminal