WEBVTT - Bloomberg Businessweek Weekend - January 26th, 2024 0:00:01.360 --> 0:00:05.680 This is Bloomberg business Week Inside from the reporters and 0:00:05.880 --> 0:00:09.440 editors who bring you America's most trusted business magazine, plus 0:00:09.520 --> 0:00:13.680 global business finance and tech news. The Bloomberg Business Week 0:00:13.720 --> 0:00:19.000 Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:20.040 --> 0:00:23.479 Hi, everyone, Welcome to the Bloomberg Business Week Weekend Podcast. Yes, 0:00:23.520 --> 0:00:26.279 another round in US politics thanks to the New Hampshire 0:00:26.320 --> 0:00:29.760 primary and an easy win for former President Donald Trump. 0:00:30.040 --> 0:00:32.320 And yet what was most on the minds of investors 0:00:32.320 --> 0:00:36.000 this past week? The big megacap tech companies as Alphabet, Meta, 0:00:36.000 --> 0:00:39.239 and Microsoft all hit record highs either intry day or 0:00:39.400 --> 0:00:42.519 at the close, Microsoft, by the way, hitting a historic 0:00:42.560 --> 0:00:46.360 three trillion dollar market evaluation at one point, Meta hitting 0:00:46.360 --> 0:00:48.440 the one trillion dollar mark for the first time since 0:00:48.440 --> 0:00:51.640 twenty twenty one. Irrational exuberance, anyone? What do you think? 0:00:52.159 --> 0:00:55.040 I have no idea, but no way. It's a term 0:00:55.120 --> 0:00:57.160 that Eddie or Danny used in a recent note, So 0:00:57.200 --> 0:01:00.120 who knows. Hey, those megacap tech fang names were ord 0:01:00.120 --> 0:01:02.520 earnings in the coming weeks. This past week we got 0:01:02.520 --> 0:01:05.840 results from Netflix and Tesla. Netflix sitting it out of 0:01:05.840 --> 0:01:09.240 the streaming ballpark on a key Metric and Tesla a 0:01:09.240 --> 0:01:11.560 bit more down to earth for Elon and Company. More 0:01:11.600 --> 0:01:13.280 on both of those in just a moment. 0:01:13.440 --> 0:01:16.440 Also the first FED meeting chickick calendars. It's just around 0:01:16.440 --> 0:01:18.880 the corner. It is this coming week, and we have 0:01:19.080 --> 0:01:21.440 a FED insider on what the US Central Bank may 0:01:21.480 --> 0:01:24.479 be thinking when it comes to monetary policy this year. 0:01:25.080 --> 0:01:27.280 And speaking of the new year, after a few rough ones, 0:01:27.280 --> 0:01:30.000 why twenty twenty four maybe the year to ride high 0:01:30.040 --> 0:01:30.960 on cannabis. 0:01:31.040 --> 0:01:31.920 I saw what you did there. 0:01:31.959 --> 0:01:34.720 That's kind of name, isn't it. Cure Leaf's executive chairman, 0:01:34.760 --> 0:01:36.960 Boris Jordan, stops by in our next hour. 0:01:37.120 --> 0:01:39.000 Twenty twenty four is off to a good start for 0:01:39.040 --> 0:01:42.160 Spelman College, the recipient of the largest gift in the 0:01:42.200 --> 0:01:45.160 school's history. What one hundred million dollars means with the 0:01:45.160 --> 0:01:48.600 Spelman President, doctor Helene Gail, and how a morning meditation 0:01:48.720 --> 0:01:51.680 starts his day. From the creator of several publicly held 0:01:51.760 --> 0:01:54.040 billion dollar and multi billion dollar companies. 0:01:54.080 --> 0:01:55.960 All right, tim, Well, all of that to come, but 0:01:56.120 --> 0:01:58.760 first to two earnings reports that definitely got our attention 0:01:58.840 --> 0:02:02.320 this past week and Tesla. First up, Netflix out with 0:02:02.360 --> 0:02:05.320 a blockbuster fourth quarter as the streaming service blew away 0:02:05.360 --> 0:02:08.919 Wall Street estimates for new subscribers, reporting its best quarter 0:02:08.960 --> 0:02:12.399 since the early days of the pandemic, sales to topping estimates. 0:02:12.680 --> 0:02:15.239 Just ahead of earnings, Netflix announced its first big move 0:02:15.240 --> 0:02:18.200 into live events with a five billion dollar purchase of 0:02:18.240 --> 0:02:21.960 exclusive rights to raw and other programming from WWE, that, 0:02:22.040 --> 0:02:24.760 of course, is World Wrestling Entertainment. To put it all 0:02:24.800 --> 0:02:27.480 in context, we caught up with Michael Pactor, managing director 0:02:27.480 --> 0:02:30.600 and entertainment analyst at Webbush Securities, who was among the 0:02:30.639 --> 0:02:33.639 analysts raising their price target on the stock. Michael, good 0:02:33.680 --> 0:02:35.359 to have you with us. Good to talk to you again. 0:02:35.400 --> 0:02:37.240 I mean, this is a company even covering for more 0:02:37.240 --> 0:02:39.440 than a decade, and your view has certainly shifted. Let's 0:02:39.440 --> 0:02:41.000 talk about where your view is right now. You've got 0:02:41.000 --> 0:02:43.440 an outperform on the stock. You've up your twelve month 0:02:43.520 --> 0:02:46.399 price target to six hundred and fifteen dollars from five 0:02:46.480 --> 0:02:48.920 hundred and twenty five. Not quite a street high, but 0:02:48.960 --> 0:02:51.320 you're among the highest according to the analysts that are 0:02:51.360 --> 0:02:57.079 tracked by Bloomberg. Why the upgrade, Well, you know, we 0:02:57.400 --> 0:02:58.880 I've covered it for twenty years. 0:02:58.880 --> 0:03:03.000 In August, actually we had to sell on it from 0:03:03.080 --> 0:03:07.079 roughly ten dollars to six ninety, so wrong for ten 0:03:07.160 --> 0:03:12.520 years out and then I upgraded at one eighty. We 0:03:12.560 --> 0:03:14.680 put on the Best Ideas list at three point thirty. 0:03:14.760 --> 0:03:18.399 So what I'm seeing is what I criticized ten years ago, 0:03:18.720 --> 0:03:22.240 thirteen years ago on the downgrade to sell. I'm seeing 0:03:22.240 --> 0:03:24.040 them do what I said they needed to do, which 0:03:24.080 --> 0:03:27.840 is stop being fixated on adding subs at all costs 0:03:27.880 --> 0:03:32.000 and start focusing on profitable subs. They're doing everything right. 0:03:32.040 --> 0:03:36.240 They're managing their spend properly. They're shifting their their budget 0:03:36.360 --> 0:03:39.560 more toward television away from movies. You saw Scott stuper 0:03:39.680 --> 0:03:43.160 left the other day. They are shifting their their budget 0:03:43.400 --> 0:03:46.680 more toward international production, which costs about half as much 0:03:46.720 --> 0:03:50.880 as domestic. They are far more international. And what you're 0:03:50.880 --> 0:03:53.760 seeing now is that subscribers are coming in at very 0:03:53.840 --> 0:03:58.120 very high margins. You're seeing operating profits expand materially literally 0:03:58.160 --> 0:04:00.800 three hundred basis points a year, which means they're going 0:04:00.840 --> 0:04:03.240 to make a lot more money than anybody thinks in 0:04:03.280 --> 0:04:05.760 the next several years. So they created, you know, a 0:04:05.880 --> 0:04:08.880 twenty something multiple. We have a thirty multiple price target. 0:04:08.920 --> 0:04:11.320 Could I be at forty or fifty or sixty. Sure, 0:04:11.320 --> 0:04:12.640 it really depends on how fast. 0:04:13.280 --> 0:04:14.880 Hey, Michael, we want to bring up a chart for 0:04:15.040 --> 0:04:17.960 all of our viewers, and it shows just the blowout 0:04:18.200 --> 0:04:22.719 number of subscribers added in that last quarter. It looks 0:04:22.720 --> 0:04:24.360 like it could, you know, pull back a little bit 0:04:24.360 --> 0:04:26.360 in the next quarter in a big way. But as 0:04:26.360 --> 0:04:29.480 you are saying, it's not just the net number of subscribers, 0:04:29.520 --> 0:04:31.800 it's that the folks that they are signing up, they're 0:04:31.800 --> 0:04:33.600 making more money off of them. 0:04:34.000 --> 0:04:36.680 Absolutely. And you know, if you see that thirteen million 0:04:36.760 --> 0:04:40.719 number new subscribers, forty percent are signing up for the 0:04:40.760 --> 0:04:44.799 six ninety nine ad supported tier, but they're generating about 0:04:44.839 --> 0:04:48.240 sixteen dollars because the ad load is about ten bucks. 0:04:48.560 --> 0:04:51.400 So you know, they've shown that by lowering price and 0:04:51.440 --> 0:04:56.240 adding advertising, they're attracting people that couldn't afford fifteen dollars before. 0:04:57.000 --> 0:05:00.400 The balance of those people are largely coming from asword 0:05:00.480 --> 0:05:04.240 sharing crackdown, and you know there are people whose kids, 0:05:04.240 --> 0:05:06.560 their adult children or their parents. 0:05:06.320 --> 0:05:08.880 Tim's brother included. We're just going to share that. We've 0:05:08.880 --> 0:05:11.960 shared that several times on it. I'm sorry Tim's brother again. 0:05:12.240 --> 0:05:14.159 That has a double whimmy. You know, the people who 0:05:14.200 --> 0:05:16.400 shouldn't be using it or signing up on their own, 0:05:16.560 --> 0:05:19.040 people who you want to pay for. My kids who 0:05:19.080 --> 0:05:21.640 are college grads, I'm paying for them. I pay for 0:05:21.680 --> 0:05:24.680 their cell phone. I'll pay for their Netflix subscription. So 0:05:24.720 --> 0:05:29.239 that expands average revenue per member, and it expands new members. 0:05:29.480 --> 0:05:32.960 You're seeing it all just dovetail nicely. And now they're 0:05:32.960 --> 0:05:36.400 doing something clever. They're adding gaming they got they finally 0:05:36.400 --> 0:05:38.839 have figured out how to do it, and that makes 0:05:38.839 --> 0:05:42.400 the service stickier. You're less likely to quit if you've 0:05:42.400 --> 0:05:45.800 been on the network personal last month. Stuff like Grand Theft, 0:05:45.839 --> 0:05:47.640 Auto Trilogy gets people coming back. 0:05:47.839 --> 0:05:49.920 Hey, Michael, I mean you're also a gaming analyst. We 0:05:49.920 --> 0:05:53.680 should note so you covered this stuff really closely. What 0:05:53.760 --> 0:05:58.080 is Netflix doing that the other companies are not doing that? 0:05:58.120 --> 0:06:00.800 You know, the Disney's aren't doing the Parents aren't doing 0:06:00.839 --> 0:06:04.039 the Peacocks aren't doing Like, why is Netflix executing so 0:06:04.160 --> 0:06:04.640 much better? 0:06:05.360 --> 0:06:08.760 First mover advantage is the biggest thing. They've kind of 0:06:08.960 --> 0:06:13.800 created the fund that would buy licensed property, would license 0:06:13.839 --> 0:06:17.599 things like suits from the other networks. The other guys. 0:06:17.640 --> 0:06:20.120 We're trying to go all proprietary all the time. So 0:06:20.240 --> 0:06:25.520 CBS Content State on Paramount and NBC content, State on Peacock, ABC, 0:06:25.600 --> 0:06:28.159 State on Disney Plus, and they didn't have the critical 0:06:28.240 --> 0:06:32.520 mass to actually support giving away all that content without 0:06:32.520 --> 0:06:36.479 collecting subscription revenues. Netflix has two hundred and sixty million subscribers. 0:06:36.680 --> 0:06:39.640 They can pay up. They did this for WWE. It's 0:06:39.640 --> 0:06:42.919 a perfect example of something that took away from USA 0:06:42.960 --> 0:06:46.359 network and now they're going global with it. Their idea is, 0:06:46.440 --> 0:06:48.719 we're taking something that has an audience of fewer than 0:06:48.760 --> 0:06:51.120 a million people a week, and we're going to expand 0:06:51.160 --> 0:06:53.320 that to five million people. And when they do that, 0:06:53.680 --> 0:06:57.400 they leverage their subscriber base they can afford to pay more. 0:06:57.880 --> 0:07:01.039 The network or in this case, WWE says, of course, 0:07:01.080 --> 0:07:04.679 I'm taking more money. So the other guys are being dumb. 0:07:04.720 --> 0:07:07.520 You know Peacock Okay, one hundred and ten million dollars 0:07:07.560 --> 0:07:09.920 for one game, so we can all see Taylor Swift 0:07:09.960 --> 0:07:12.760 one game? Dumb, really dumb. I know they got three 0:07:12.760 --> 0:07:15.400 million subscribers. All those people are going to quit another 0:07:15.400 --> 0:07:15.760 two weeks. 0:07:15.800 --> 0:07:19.000 Hey, noticeant on Taylor Swift here. Hey, having said that, Michael, 0:07:20.360 --> 0:07:22.520 that's fair we all do. Hey, listen, we've got just 0:07:22.520 --> 0:07:25.560 about a minute left here so you obviously are a beat. 0:07:25.600 --> 0:07:28.640 You like the WWE deal that they just did and 0:07:28.720 --> 0:07:31.160 the kind of front ran earnings yesterday in a big way. 0:07:31.400 --> 0:07:34.480 Having said that, what would make you turn bearish again 0:07:34.480 --> 0:07:38.400 on Netflix? And again just got about thirty forty seconds valuation? 0:07:38.640 --> 0:07:41.120 I mean, if the stock gets to you know, much 0:07:41.200 --> 0:07:44.160 much more than it's worth, of course I would downgrade. 0:07:44.320 --> 0:07:47.920 I am very comfortable at six fifteen. I probably could 0:07:48.000 --> 0:07:50.360 be comfortable at a higher number if I see greater 0:07:50.440 --> 0:07:53.600 earnings growth that we have forecasts. But you know, if 0:07:53.640 --> 0:07:55.800 the stock ran to two thousand or five thousand, of 0:07:55.840 --> 0:07:56.920 course that would doubgrade. 0:07:57.040 --> 0:07:59.640 Michael Pactor, Hey, you know what, it's okay that you 0:07:59.640 --> 0:08:02.120 pay for your kids Netflix. Okay, I'm just throwing it 0:08:02.120 --> 0:08:04.520 out there, like that's fine. You're not the only one. 0:08:04.440 --> 0:08:06.480 But two kids are older and you're paying for everything. 0:08:06.680 --> 0:08:08.320 I just, you know, I'm just wondering if the other 0:08:08.360 --> 0:08:10.880 streaming services are going to wise up soon to you know, 0:08:10.920 --> 0:08:13.160 crack down on passwords sharing the way Netflix has. Let's 0:08:13.160 --> 0:08:15.360 get the sense they are, but it's going to create 0:08:15.400 --> 0:08:16.640 a lot of changes in households. 0:08:16.680 --> 0:08:19.160 Well, you know, talk with our Geeta ringing Athon yesterday. 0:08:19.240 --> 0:08:21.120 I mean this whole idea that Netflix has figured out 0:08:21.160 --> 0:08:22.920 how to pivot right from when they used to be 0:08:22.960 --> 0:08:24.720 what the little red boxes and that you put them 0:08:24.720 --> 0:08:25.160 in the box. 0:08:25.280 --> 0:08:29.360 The DVDs you're talking about the little red fix bhs's. 0:08:29.640 --> 0:08:30.400 They did never do it. 0:08:30.480 --> 0:08:31.160 They did never do it. 0:08:31.680 --> 0:08:32.439 They were all DVDs. 0:08:32.440 --> 0:08:33.400 It just feels like they did. 0:08:33.559 --> 0:08:34.560 They love it a lot. 0:08:34.640 --> 0:08:36.800 All Right, You've got Netflix shares folks up almost twelve 0:08:36.800 --> 0:08:38.360 percent in the session. This is Bluemberg. 0:08:39.160 --> 0:08:42.679 You're listening to the Bloomberg Business Week podcast. Can't us 0:08:42.720 --> 0:08:45.959 Live weekday afternoons from two to five pm Eastern Listen 0:08:46.000 --> 0:08:48.160 on Apple car Play and then brought auto with a 0:08:48.200 --> 0:08:52.319 Bloomberg Business act or want just live on YouTube? 0:08:53.120 --> 0:08:53.440 All right? 0:08:53.480 --> 0:08:56.120 Tesla to start in a next generation platform production at 0:08:56.120 --> 0:08:58.520 its Giga factory in Texas. Teams to work in a 0:08:58.559 --> 0:09:01.360 launch of a next generation vehicle at Tech Texas and 0:09:01.440 --> 0:09:03.960 continue to make progress on a next generation platform. So 0:09:04.640 --> 0:09:06.280 a lot of stuff that that is to come. So 0:09:06.360 --> 0:09:08.400 let's get to it, because we've got a great roundtable. 0:09:08.440 --> 0:09:10.760 Red Brown is Bloomberg News Earnings reporter. He covers the 0:09:10.840 --> 0:09:13.600 numbers and we'll give us some more insight into what 0:09:13.600 --> 0:09:15.880 we just got Ross Gerber is with US President CEO 0:09:15.880 --> 0:09:18.760 of Gerber Kawasaki Wealth and Investment Management. They have about 0:09:18.760 --> 0:09:21.920 two point two billion in assets under management, including about 0:09:21.960 --> 0:09:24.600 eighty four million dollars worth of Tesla stock. You folks 0:09:24.600 --> 0:09:27.640 know him well. He owns Tesla's, he invests in the company, 0:09:27.679 --> 0:09:30.760 he sells at times. I do want to start with you, Ross, 0:09:31.640 --> 0:09:33.920 are you concerned stock still doubt about two point seven 0:09:33.960 --> 0:09:36.360 percent in the aftermarket. But when Tesla says twenty twenty 0:09:36.360 --> 0:09:39.760 four volume growth maybe notably lower than twenty twenty three, 0:09:40.600 --> 0:09:42.360 I don't know, does it worry you a little bit? 0:09:42.360 --> 0:09:43.880 Does it make you want to sell any stock? 0:09:44.240 --> 0:09:46.480 Well, I don't want to talk about our training because 0:09:46.480 --> 0:09:48.199 I'm not allowed to. But if you look at our 0:09:48.960 --> 0:09:52.200 you know my fund GK, we've been selling the stock 0:09:52.440 --> 0:09:55.440 over the last several months, as well as if you 0:09:55.440 --> 0:09:58.079 look at our public filings, we've been lowering our position 0:09:58.520 --> 0:09:59.800 over the last several months. 0:10:00.280 --> 0:10:01.120 So there's a lot of. 0:10:01.040 --> 0:10:02.760 Clients of mine who are very upset with some of 0:10:02.800 --> 0:10:04.960 the things Elon said and sold their stock in the 0:10:04.960 --> 0:10:07.520 two two hundred and fifty dollars range that are probably 0:10:07.520 --> 0:10:08.440 pretty happy they did that. 0:10:08.520 --> 0:10:08.800 Today. 0:10:09.440 --> 0:10:12.320 Russ Stick with this for a minute, because you've been 0:10:12.600 --> 0:10:16.360 pretty critical of Elon Musk lately, which has been a marked, 0:10:17.080 --> 0:10:19.600 a marked difference from how you've been over the past 0:10:19.640 --> 0:10:21.600 few years. I mean, you were among the biggest Tesla 0:10:21.840 --> 0:10:25.320 bulls out there, but now you're concerned. You write that 0:10:25.360 --> 0:10:30.120 Elon's becoming the Kanye of business. Is this what's hitting 0:10:30.520 --> 0:10:33.680 the company's stock or is this a bigger question about 0:10:33.720 --> 0:10:37.280 what we were talking about earlier with evs, EV demand 0:10:37.520 --> 0:10:39.400 falling and what we're seeing from Ford, what we're seeing 0:10:39.440 --> 0:10:42.120 from GM. Is it a bigger issue outside of Elon's control. 0:10:42.360 --> 0:10:45.080 I think Elon's created the issue for EV's across the 0:10:45.120 --> 0:10:49.520 board more than like it's an EV issue. But you know, 0:10:49.600 --> 0:10:51.839 the bottom line is, and you see it in the numbers, 0:10:51.880 --> 0:10:53.560 and this is what we were kind of waiting to see, 0:10:53.640 --> 0:10:57.240 is that margins continued to go lower. They're like basically 0:10:57.280 --> 0:11:00.440 not able to sell cars unless they lower prices because 0:11:00.679 --> 0:11:04.760 Elon refuses to advertise. And then the advertising he's doing 0:11:04.880 --> 0:11:09.160 are trips with his child to Auschwitz and you know, 0:11:09.720 --> 0:11:13.960 anti Semitic and racist comments all the time, and him 0:11:14.120 --> 0:11:18.240 you know, basically using X as a platform for every 0:11:18.640 --> 0:11:21.800 political debate possible that he could get himself into, which 0:11:21.840 --> 0:11:25.840 is exactly how you not sell cars. So god forbid, 0:11:25.880 --> 0:11:28.880 they actually got him off Twitter and advertised maybe Tesla's 0:11:28.880 --> 0:11:29.880 problems would be solved. 0:11:30.480 --> 0:11:32.439 Interesting, Hey, I want to bring you in red brown 0:11:33.320 --> 0:11:35.439 things that you're seeing and noticing. We've been breaking down 0:11:35.480 --> 0:11:38.480 the earnings with our TV colleagues. The key point that 0:11:38.520 --> 0:11:40.120 you're focusing on, well, I. 0:11:40.040 --> 0:11:44.040 Think obviously the production target notably lower volumes for next year. 0:11:45.080 --> 0:11:48.240 It does raise some questions about this strategy of continuing 0:11:48.240 --> 0:11:51.240 to lower prices. They lowered prices just last week again 0:11:51.440 --> 0:11:53.440 in Europe, so it seems like that is going to 0:11:53.480 --> 0:11:56.240 be the strategy going forward, but it doesn't seem to 0:11:56.280 --> 0:11:59.120 be kind of paying dividends in the company's view going 0:11:59.160 --> 0:12:01.360 forward in terms of actually selling cars. 0:12:01.400 --> 0:12:04.400 Still yeah, and Tesla les bullishaw it's cyber truck, noting 0:12:04.400 --> 0:12:06.560 in the investor deck that it's ramp time will be 0:12:06.679 --> 0:12:10.000 longer than for the other models given its manufacturing complexity. 0:12:10.080 --> 0:12:14.559 So it's also adding that, all right, Ross, so can definitely, 0:12:14.640 --> 0:12:19.240 you know, respect your different tone here in Tesla. So 0:12:19.640 --> 0:12:21.680 I don't know, how how do you think about this 0:12:21.760 --> 0:12:25.880 company going forward? Is it a case that it's hard 0:12:25.920 --> 0:12:29.199 to kind of remove the man and the creator from 0:12:29.280 --> 0:12:31.200 kind of the company. But how do you do that, 0:12:31.400 --> 0:12:32.679 or do you do that at some point? 0:12:33.200 --> 0:12:35.480 Well, what I've been saying is that the Tesla story 0:12:35.520 --> 0:12:37.760 has just changed from what the story was a few 0:12:37.800 --> 0:12:41.320 years ago before Twitter, And as long as investors are 0:12:41.840 --> 0:12:45.560 comfortable with that story, then the long term for Tesla, 0:12:45.720 --> 0:12:48.439 the story is still intact, whether it be charging energy 0:12:48.679 --> 0:12:52.520 ev you know, Tesla's the prime player in this climate 0:12:52.800 --> 0:12:56.800 change revolution that they began. And the real issue is 0:12:56.840 --> 0:12:59.920 the company is being mismanaged now by the CEO who's 0:13:00.000 --> 0:13:03.400 demanding a massive compensation package but won't do any of 0:13:03.440 --> 0:13:06.280 the things that the company needs to really like resolve 0:13:06.360 --> 0:13:09.480 their sales and margin issues. So I think as we 0:13:09.520 --> 0:13:12.480 move forward as investors, it's really about what is the 0:13:12.600 --> 0:13:16.560 right valuation for Tesla, Because Tesla has been the highest 0:13:16.640 --> 0:13:19.440 value of the mag seven or one of the highest 0:13:19.480 --> 0:13:22.880 value tech stocks for years, you know, and before he 0:13:22.960 --> 0:13:25.920 bought Twitter, you know, it traded one hundred times multiple 0:13:26.200 --> 0:13:30.040 of future earnings. Today it's treading at sixty times multiple 0:13:30.120 --> 0:13:33.840 future earnings. But now that future earnings number is definitely 0:13:34.000 --> 0:13:37.840 in doubt, And does it really deserve a higher multiple 0:13:37.840 --> 0:13:40.600 than Nvidia and Microsoft, and I think that's what's hurting 0:13:41.120 --> 0:13:41.760 the stock. 0:13:42.400 --> 0:13:44.199 Irrelevant of the company. 0:13:44.000 --> 0:13:46.840 Stock still down about two percent. Hey, Tesla also noting 0:13:47.240 --> 0:13:49.600 ross that they have reached the quote natural limit of 0:13:49.640 --> 0:13:52.079 cost town of our existing electric vehicle lineup. 0:13:52.360 --> 0:13:54.000 It's goint a corporate to be But what does that 0:13:54.040 --> 0:13:56.280 mean euphemism for we can't lower prices anymore? 0:13:56.600 --> 0:14:00.280 Right, It's like we have reached maximum efficient see a 0:14:00.360 --> 0:14:03.760 production and so basically every time we discount, it's just 0:14:03.800 --> 0:14:06.800 going to cost shareholders more. Now, the good news is 0:14:06.840 --> 0:14:09.720 this is great for Earth because people are getting cheaper 0:14:09.720 --> 0:14:13.160 and cheaper you know, evs, which you know are great. 0:14:13.520 --> 0:14:16.760 The bad news is it's coming from shareholders pockets. And 0:14:16.800 --> 0:14:20.320 so if you're a shareholder, you know it's time to 0:14:20.360 --> 0:14:24.040 really assess, like does this company deserve a sixty multiple 0:14:24.040 --> 0:14:26.600 afford earnings? And I think that's what investors are going 0:14:26.680 --> 0:14:28.040 to be doing over the next several months. 0:14:28.080 --> 0:14:29.520 Okay, I want to bring back in red round because 0:14:29.520 --> 0:14:31.200 he's been watching the numbers come out red what else 0:14:31.200 --> 0:14:33.400 sticks out to you? I know, the looking at the 0:14:33.680 --> 0:14:37.560 production numbers certainly sticks out any anything else in these 0:14:37.600 --> 0:14:39.840 numbers here we're seeing shares down about two percent as 0:14:39.840 --> 0:14:40.320 we speak. 0:14:41.320 --> 0:14:44.840 Yeah, I mean, it's just it's I think everything that 0:14:44.840 --> 0:14:46.920 we're seeing right here from the numbers is that this 0:14:47.080 --> 0:14:48.720 is kind of the cost you pay for the game 0:14:48.760 --> 0:14:52.280 that they're playing. Of continuing to cut these prices. They 0:14:52.480 --> 0:14:55.560 you're seeing a bigger and bigger disconnect between their top 0:14:55.600 --> 0:14:57.160 line growth and their earnings growth. 0:14:57.200 --> 0:14:57.400 Right. 0:14:57.560 --> 0:14:59.600 They did hit record revenue that's going to get lost 0:14:59.600 --> 0:15:03.120 in the shop here today, but it came at the 0:15:03.160 --> 0:15:05.840 expense of over forty percent drop in their earnings, right, 0:15:05.920 --> 0:15:10.160 So it's not it doesn't seem like it's the path forward. 0:15:10.720 --> 0:15:12.800 I think. I think Ross is hitting on some interesting 0:15:13.080 --> 0:15:15.360 topics here as well as kind of where does the 0:15:15.400 --> 0:15:18.800 growth come from a lot of the share price is 0:15:18.840 --> 0:15:21.640 predicated on some of these sort of pie in the 0:15:21.680 --> 0:15:25.240 sky initiatives. Be it ai huge question marks over that 0:15:25.600 --> 0:15:27.880 with whether or not Elon does that inside the company 0:15:27.960 --> 0:15:29.960 or not. So hopefully get some more insights on that 0:15:30.000 --> 0:15:32.080 when the call, when the call goes later today, Ross, 0:15:32.080 --> 0:15:32.440 what is the. 0:15:32.480 --> 0:15:35.120 Number one question on that call today? In your view? 0:15:35.840 --> 0:15:38.760 I think from my perspective, it's kind of what we're 0:15:38.800 --> 0:15:42.360 hitting on right now, which is where's the growth I 0:15:42.360 --> 0:15:45.600 mean from If you're not going to grow cars by 0:15:45.600 --> 0:15:48.080 a lot, you know, like this is not a good thing. 0:15:48.440 --> 0:15:51.080 So I think my concern is forty six eighty. And 0:15:51.120 --> 0:15:53.880 this is the story behind the story, which is one 0:15:53.880 --> 0:15:57.800 of the scaling issues they're having with cyber and Semi 0:15:58.000 --> 0:16:00.360 is that forty six eighty is just not working quickly 0:16:00.400 --> 0:16:02.640 as they had hoped. And they planned all of production 0:16:02.720 --> 0:16:06.040 in Texas around forty six eighty originally, and they've now 0:16:06.080 --> 0:16:09.400 had to pivot and so this has caused extra costs, 0:16:09.560 --> 0:16:12.440 lots of complexity issues, and I don't think they've mastered 0:16:12.440 --> 0:16:15.640 forty six eighty y at or even close for scaling 0:16:15.960 --> 0:16:18.560 in any mass level. And this is a huge detriment 0:16:18.840 --> 0:16:21.240 to Tesla moving forward because they have to get this 0:16:21.320 --> 0:16:24.440 technology right to ramp cyber and some which is where 0:16:24.440 --> 0:16:25.280 growth will come from. 0:16:25.400 --> 0:16:27.080 Hey, what do you mean forty six eighty? 0:16:27.200 --> 0:16:30.800 These are the new cells that OK that they built 0:16:30.840 --> 0:16:34.840 for EVS and these new cells are seven times more powerful, 0:16:35.040 --> 0:16:38.400 much more efficient, charge faster and they're wonderful, but they 0:16:38.440 --> 0:16:40.760 haven't been able to scale them as quickly as they 0:16:40.760 --> 0:16:41.120 had hoped. 0:16:41.240 --> 0:16:43.360 All right, good stuff, as always, so appreciate it. I 0:16:43.360 --> 0:16:45.640 know you've had a busy day. Our thanks to Ross Gerber, 0:16:45.720 --> 0:16:48.560 presidents at you of Gerber Kawasaki Wealth and Investment Management, 0:16:48.960 --> 0:16:50.320 and then of course our thanks as well to our 0:16:50.360 --> 0:16:53.160 Red Brown, He's Bloomberg News Earnings reporter right here in studio, 0:16:53.200 --> 0:16:56.320 Tesla shares back down about three point seven percent. We're 0:16:56.360 --> 0:16:58.600 seeing in the stock fall here in the aftermarket. 0:17:01.480 --> 0:17:05.320 You're listening to the Bloomberg Business Week podcast. Listen live 0:17:05.440 --> 0:17:08.359 each weekday starting at two pm Eastern on Apple car 0:17:08.359 --> 0:17:11.320 Play and Android Auto with the Bloomberg Business Ad. You 0:17:11.359 --> 0:17:14.639 can also listen live on Amazon Alexa from our flagship 0:17:14.680 --> 0:17:17.720 New York station just say Alexa playing Bloomberg. 0:17:17.760 --> 0:17:18.480 Eleven thirty. 0:17:19.960 --> 0:17:21.960 We do have a headline crossing the Bloomberg terminal, the 0:17:22.000 --> 0:17:26.840 Fed Inspector General issuing its report on two former members 0:17:26.960 --> 0:17:29.879 of the Federal Reserve System. And we're talking about Boston 0:17:29.880 --> 0:17:34.000 Fed Chief Eric Rosengren and also Dallas President Robert Caplan. 0:17:34.040 --> 0:17:36.560 Remember they stepped down in September of twenty twenty one. 0:17:36.640 --> 0:17:39.760 So we're getting that report crossing. Having said that, let's 0:17:39.760 --> 0:17:42.439 bring in Bloomberg's Mike McKee because he's also seen these 0:17:42.440 --> 0:17:43.720 headlines as they cross. 0:17:43.840 --> 0:17:46.639 Well, I've just been reading the report, and according to 0:17:46.680 --> 0:17:50.800 the Inspector General, with regard to mister Kaplan, he says, 0:17:50.920 --> 0:17:55.080 we did not find that his trading activities violated laws, rules, 0:17:55.160 --> 0:18:01.320 regulations or policies related to trading activities. His twenty twenty 0:18:01.359 --> 0:18:05.840 form A Federal Reserve Bank Confidential Financial Disclosure Report did 0:18:05.880 --> 0:18:09.600 not publicly disclose the specific dates of his trading activities, 0:18:09.880 --> 0:18:12.679 nor did it specify transactions that involved the selling of 0:18:12.720 --> 0:18:17.240 stock option contracts, and that lack of information, in the 0:18:17.720 --> 0:18:21.240 Inspector General's opinion, did not support public confidence in the 0:18:21.280 --> 0:18:26.560 impartiality and integrity of the policymakers. As far as Eric Rosengrin, 0:18:27.160 --> 0:18:30.720 the Inspector General found that he did not report multiple 0:18:30.760 --> 0:18:35.240 trades on his twenty twenty form A. Additionally, they found multiple 0:18:35.280 --> 0:18:39.560 discrepancies between the transactions reflected in his brokerage statements and 0:18:39.720 --> 0:18:43.800 trading data and what he reported on that form A. Moreover, 0:18:43.920 --> 0:18:47.440 in the Inspector General's opinion, they say mister Rosengren's trading 0:18:47.480 --> 0:18:50.960 activities in real estate investment trusts during a time of 0:18:51.240 --> 0:18:55.200 financial market volatility that prompted the Federal Reserve to authorize 0:18:55.200 --> 0:18:59.119 the purchase of agency mortgage backed securities created a quote 0:18:59.320 --> 0:19:02.480 appearance of a conflict of interest that could cause a 0:19:02.520 --> 0:19:06.879 reasonable person to question mister Rosengren's impartiality under the Federal 0:19:06.920 --> 0:19:09.840 Reserve Boards Code of Conduct. They go on to say 0:19:10.160 --> 0:19:13.840 that the rules in effect at the time did not 0:19:13.880 --> 0:19:18.880 sufficiently support confidence in the impartiality and integrity of the policymakers. 0:19:18.920 --> 0:19:21.040 Those rules have been changed. 0:19:20.720 --> 0:19:25.199 So Net Mike, I know this is just your first reaction, 0:19:25.359 --> 0:19:28.240 but was it a conflict of an interest or merely 0:19:28.240 --> 0:19:31.240 an appearance of a conflict of interest? What's the report saying. 0:19:31.440 --> 0:19:35.000 It's hard to say exactly with regard to Eric Rosengren, 0:19:35.080 --> 0:19:37.520 because it sounds like there may have been a conflict 0:19:37.520 --> 0:19:40.919 of interest, but the Inspector General does not highlight the 0:19:40.960 --> 0:19:45.400 fact that there is one. But it could appear that way. 0:19:45.480 --> 0:19:48.560 In Kaplan's case, there wasn't a conflict of interest and 0:19:48.600 --> 0:19:50.679 he didn't violate the rules, but the fact that he 0:19:50.720 --> 0:19:55.600 didn't completely dot every eye and cross every te suggests 0:19:55.640 --> 0:19:58.800 that it could have had an impact on how people 0:19:58.840 --> 0:20:02.119 think about the FED. And that's kind of what this report, 0:20:02.160 --> 0:20:05.360 I think is going to be saying. When you read 0:20:05.400 --> 0:20:08.000 it all twenty four pages, I'll get to. 0:20:07.880 --> 0:20:10.199 It, but basic if we can help it. 0:20:10.240 --> 0:20:12.960 Well, basically it's a question of can you trust the FED? 0:20:13.200 --> 0:20:19.560 And that this seems to sort of say there were problems. 0:20:19.160 --> 0:20:20.760 Well, and we have a great voice on this. Former 0:20:20.760 --> 0:20:23.040 New York Fed President Bill Dudley is with us. He's also, 0:20:23.080 --> 0:20:26.439 of course a Bloomberg opinion columnist. Bill is joining us 0:20:26.440 --> 0:20:27.919 on zoom in New York. Feel so great to have 0:20:27.960 --> 0:20:31.879 you here across our Bloomberg platforms. Can we trust the FED? 0:20:31.960 --> 0:20:35.760 Based on what the Inspector General the report that they 0:20:35.920 --> 0:20:40.720 just released. Do you feel confident about the US Central Bank? 0:20:41.280 --> 0:20:41.480 Yes? 0:20:41.520 --> 0:20:41.720 I do. 0:20:41.840 --> 0:20:45.280 I think the change in procedures as far as reporting 0:20:45.320 --> 0:20:47.439 and trading what you're allowed to do from a trading 0:20:47.440 --> 0:20:51.240 perspective has been tightened up considerably in light of what happened, 0:20:51.240 --> 0:20:51.840 And I think. 0:20:51.720 --> 0:20:54.280 That the regime today is far better than what we 0:20:54.359 --> 0:20:54.960 had before. 0:20:55.240 --> 0:20:57.960 Bill, how damaging overall over the last couple of years 0:20:58.400 --> 0:21:00.560 was this to the Federal Reserve, or at least the 0:21:00.840 --> 0:21:03.679 appearance of the Federal Reserve? 0:21:04.080 --> 0:21:07.280 Well, I mean any thing that caused to question the 0:21:07.640 --> 0:21:10.640 impartiality of the FED or the idea that the FED 0:21:10.720 --> 0:21:14.159 was somehow people were trading on information that wasn't public. 0:21:14.840 --> 0:21:16.000 Obviously, that's terrible. 0:21:16.640 --> 0:21:18.560 The good thing is it sounds like this report, which 0:21:18.560 --> 0:21:20.800 I haven't had a chance yet to read, sounds like 0:21:20.840 --> 0:21:25.520 that there were no actual violations of rules and regulations. 0:21:26.080 --> 0:21:28.360 But certainly the appearance of a conflict is a bad 0:21:28.359 --> 0:21:30.399 thing because it can undercut to the credibility in the 0:21:30.400 --> 0:21:32.280 Central Bank bill. 0:21:32.320 --> 0:21:36.080 Mike McKee here, I'm just wondering if you if you 0:21:36.200 --> 0:21:38.400 felt at the time, if anybody felt at the time 0:21:38.880 --> 0:21:43.480 that either President Rosingrad or President Kaplan had done anything wrong. 0:21:44.480 --> 0:21:46.919 The stories we have at the time suggested there was 0:21:46.920 --> 0:21:49.920 no pressure from the Federal Reserve for them to resign, 0:21:50.520 --> 0:21:52.360 but was it the right thing for them to do. 0:21:52.760 --> 0:21:54.639 I'm not going to appine on that. 0:21:55.400 --> 0:21:57.320 What I will appint on is that you need to 0:21:57.359 --> 0:22:00.119 have a regime in place that creates confidence in the 0:22:00.160 --> 0:22:01.720 Federal Reserve system, and. 0:22:01.600 --> 0:22:03.160 That regime needs to be robust. 0:22:03.840 --> 0:22:06.080 I mean, I think the thing that's sort of remarkable 0:22:06.080 --> 0:22:08.480 about this, frankly, is how long it's taken for the 0:22:08.520 --> 0:22:11.159 Expector General to come out with these findings. I mean, 0:22:11.160 --> 0:22:12.880 it seems to me like this was something that could 0:22:12.880 --> 0:22:14.920 have been expedited much more quickly. So I'm not really 0:22:14.920 --> 0:22:17.280 sure why this took so long to become public. 0:22:17.400 --> 0:22:19.080 That's a fair question. I also do wonder is it 0:22:19.080 --> 0:22:20.920 a fair question to say, or a fair kind of 0:22:20.960 --> 0:22:22.960 assessment to say this should never have happened, It should 0:22:22.960 --> 0:22:25.800 have never even been a concern or cause for worry about. 0:22:25.920 --> 0:22:29.040 Well, I think there's always you know, with the manefes hindsight, 0:22:29.080 --> 0:22:31.440 everything you know, you know, it looks, it looks obvious. 0:22:31.840 --> 0:22:32.560 I'll get you an example. 0:22:32.560 --> 0:22:34.760 When I was the president of the Near Fed or 0:22:34.760 --> 0:22:37.560 when I was the heead the Marketsprice Near Fed, there 0:22:37.560 --> 0:22:41.200 were very few restrictions on the trading activities of people 0:22:41.760 --> 0:22:45.240 within it, within the bank, and you know, you couldn't 0:22:45.280 --> 0:22:47.520 do things around FOC meetings. But you know, people were 0:22:47.560 --> 0:22:51.040 in possession of non public information at other times, and 0:22:51.080 --> 0:22:53.000 the regime just wasn't very robust. And so when I 0:22:53.040 --> 0:22:55.159 became president, I changed that. I put it in a 0:22:55.240 --> 0:22:58.000 much to a tougher regime because I didn't think that 0:22:58.080 --> 0:23:00.240 the regime that we had in place was you know, 0:23:00.359 --> 0:23:03.879 robust to you know, you know, people were behaving on 0:23:03.920 --> 0:23:06.240 their own, but you want something, you want governance and 0:23:06.240 --> 0:23:07.520 controls above that. 0:23:07.800 --> 0:23:11.719 I think the key headline here at The bottom line 0:23:11.760 --> 0:23:14.960 is that, according to the Inspector General, Rob Kaplan and 0:23:15.119 --> 0:23:19.480 Eric Rosengren did not do anything legally wrong. So it's 0:23:19.520 --> 0:23:21.240 more of an appearance of a conflict. 0:23:21.440 --> 0:23:21.600 Now. 0:23:21.600 --> 0:23:25.240 We also had issues at the same time with j 0:23:25.440 --> 0:23:30.000 Powell and Richard Clareda. Is that do you think behind 0:23:30.040 --> 0:23:32.879 the FED now? Is this you mentioned how long it 0:23:32.920 --> 0:23:34.960 took to get this report. Is this sort of ancient 0:23:35.040 --> 0:23:36.560 history and the Fed's moved on? 0:23:36.880 --> 0:23:39.240 Well, I think it's ancient history in the sense that 0:23:39.280 --> 0:23:41.640 the FED has changed all their rules. You can't do 0:23:41.720 --> 0:23:44.800 these things now that you could have done before. That's 0:23:44.800 --> 0:23:46.800 the same thing that I did want as a president 0:23:46.840 --> 0:23:48.880 of r FEDI said, this is a regime in place 0:23:48.920 --> 0:23:52.399 that allows too many things that could potentially happen that 0:23:52.600 --> 0:23:55.440 could create create the appearance of conflict. Let's just tighten 0:23:55.480 --> 0:23:56.240 this up a lot. 0:23:56.359 --> 0:23:59.120 So there's no question, there's no question, there's no risk, 0:23:59.200 --> 0:24:00.919 and I think that's what the FED Reserve is done. 0:24:01.000 --> 0:24:03.240 So I don't think there's much risk of anything happening 0:24:03.280 --> 0:24:04.040 in the future. 0:24:04.800 --> 0:24:06.160 But you know, it would be nice if you would 0:24:06.160 --> 0:24:08.120 tighten up the regime before this happened, rather than that. 0:24:08.640 --> 0:24:10.320 All right, we're going to pivot a little bit, because 0:24:10.320 --> 0:24:12.520 the reason we really initially wanted to talk to you 0:24:12.760 --> 0:24:14.760 was about what the FED does next. And we're looking 0:24:14.800 --> 0:24:16.840 at the markets where we had another record on the 0:24:16.920 --> 0:24:21.960 S and P five hundred. Investors continuing to embrace maybe 0:24:21.960 --> 0:24:24.520 this risk on trade on expectations build that we're going 0:24:24.560 --> 0:24:27.040 to have a pretty aggressive FED and they're pricing in 0:24:27.160 --> 0:24:29.320 or it seems to be pricing in a fair amount 0:24:29.320 --> 0:24:31.800 of FED rate cuts this year. What are you seeing 0:24:31.840 --> 0:24:33.440 when you look at the markets and what do you 0:24:33.480 --> 0:24:36.280 think FED officials are thinking and seeing when they see 0:24:36.280 --> 0:24:38.159 the move up, especially on the equity side of things. 0:24:38.520 --> 0:24:40.600 Well, I think the reason why the markets are doing 0:24:40.640 --> 0:24:43.120 well is because the probability of a soft landing has 0:24:43.160 --> 0:24:45.520 gone up. I mean, what basically happened is the comments 0:24:45.520 --> 0:24:47.320 continued to grow. 0:24:48.440 --> 0:24:50.639 And that's kept the labor market type. But the tightness 0:24:50.680 --> 0:24:51.639 of the labor market. 0:24:51.440 --> 0:24:55.760 Is not leading to acceleration and wage inflation or an 0:24:55.800 --> 0:24:59.160 increase in ongoing prices for goods and services. So it's 0:24:59.160 --> 0:25:01.240 sort of like the best of all world. So we've 0:25:01.600 --> 0:25:04.679 had we brought inflation down without much there. 0:25:04.720 --> 0:25:07.320 Are you saying goldilocks? Are you saying definitely a soft 0:25:07.400 --> 0:25:07.920 landing here. 0:25:09.000 --> 0:25:10.000 No, not at all. 0:25:10.119 --> 0:25:13.040 So far so good, So I don't think the story 0:25:13.040 --> 0:25:14.920 has been fully written yet, and we'll have to see 0:25:14.920 --> 0:25:17.280 where we go. I mean, it's very difficult for the 0:25:17.280 --> 0:25:19.600 Fed to generate a soft landing because you basically need 0:25:19.640 --> 0:25:22.399 growth weak enough to keep the comming from overheating, but 0:25:22.480 --> 0:25:24.440 strong enough to keep the commy out of recession. 0:25:24.560 --> 0:25:27.600 And that margin for aerois right now is very very small. 0:25:27.840 --> 0:25:30.880 So I think it's really too soon to conclude that 0:25:30.920 --> 0:25:33.240 we're on this golden path. 0:25:34.000 --> 0:25:36.919 But the chances of a soft landing definitely have gone up, 0:25:36.920 --> 0:25:38.280 and that's what the market's reacting to. 0:25:38.480 --> 0:25:40.439 A month ago, you wrote a colum for Bloomberg Opinion 0:25:40.560 --> 0:25:43.280 that said that the pivot is a pretty big gamble 0:25:43.320 --> 0:25:45.679 and that there's a significant chance there won't be a 0:25:45.760 --> 0:25:48.680 soft landing. Would you say there's still a significant chance 0:25:49.160 --> 0:25:51.320 or if not, what data has come in to show 0:25:51.359 --> 0:25:53.920 you that there is a better a soft landing. 0:25:54.160 --> 0:25:55.600 Well, I think there's risks on both sides. 0:25:55.720 --> 0:25:57.959 Number One, mantary policy might not be as tight as 0:25:58.000 --> 0:25:59.600 the Fed thinks it is. And if that's the case, 0:25:59.640 --> 0:26:02.400 the kim keeps growing, the labor market stays tight, and 0:26:02.440 --> 0:26:04.719 we don't get inflation all the way back to two percent, 0:26:05.400 --> 0:26:06.399 and so the Fed reserve. 0:26:06.480 --> 0:26:08.200 That's that's sort of the no landing scenario. 0:26:09.040 --> 0:26:11.879 The other scenario, course, is that if it keeps manitary 0:26:11.920 --> 0:26:14.680 policy a little too tight for too long, the labor 0:26:14.720 --> 0:26:18.200 market deteriorates. And once the labor market starts to deteriorate, 0:26:18.240 --> 0:26:21.080 that usually tends to be fairly sizable. 0:26:20.680 --> 0:26:21.439 Rather than small. 0:26:22.080 --> 0:26:24.040 The sum rule says, every time the unemploy rate goes 0:26:24.080 --> 0:26:26.000 up by more than a half a percent, you have 0:26:26.040 --> 0:26:27.120 a full blown recession. 0:26:27.520 --> 0:26:29.840 So you know, the Fed is trying to find the 0:26:29.920 --> 0:26:31.560 exactly right guidepath. 0:26:31.920 --> 0:26:34.399 And you know when polls, you know, does this press conference, 0:26:34.480 --> 0:26:36.119 I think everyone's going to ask the questions about what 0:26:36.160 --> 0:26:36.480 are you going. 0:26:36.440 --> 0:26:37.640 To do in March? What are you gonna do to May? 0:26:37.640 --> 0:26:39.600 And the answer is they don't know at this point. 0:26:39.320 --> 0:26:43.760 Because the economic information is going to tell them whether they're. 0:26:43.560 --> 0:26:45.560 In the on the right guidepath or not. 0:26:46.240 --> 0:26:48.440 If the economy is weaker than expected, the labor market 0:26:48.440 --> 0:26:50.560 has more slack than expected than the Federal Reserve will 0:26:50.560 --> 0:26:52.840 cut rates sooner and by more. If the economy is 0:26:52.840 --> 0:26:56.480 stronger than expected and inflation stays a little bit higher 0:26:56.520 --> 0:26:59.320 than expected, then the federally deserve will keep monitary policy 0:26:59.359 --> 0:27:02.800 on hold, and relatively small differences in the growth trajectory 0:27:02.840 --> 0:27:05.040 right now are going to have pretty big implications for 0:27:05.080 --> 0:27:07.679 the interest rate path. That's why the market's very molatile, 0:27:07.720 --> 0:27:10.800 is reacting to each piece of incoming information, because each 0:27:10.800 --> 0:27:15.360 piece of incoming information affects the probability of these three 0:27:15.359 --> 0:27:16.120 different outcomes. 0:27:16.240 --> 0:27:18.520 Well, we're talking a lot about politics these days, with 0:27:18.760 --> 0:27:23.119 the primaries and caucuses underway, and I'm wondering I question. 0:27:23.200 --> 0:27:25.719 I know the answer to your basic answer to if 0:27:25.760 --> 0:27:28.720 I ask you, will politics of the selection your play 0:27:28.720 --> 0:27:30.639 into FED decision making, You're going to tell me no, 0:27:30.760 --> 0:27:34.240 the Fed doesn't let that happen. But we know from 0:27:34.280 --> 0:27:37.399 the transcripts that it gets talked about. And given the 0:27:37.440 --> 0:27:40.920 fact that one of the candidates has said a lot 0:27:40.960 --> 0:27:44.880 of nasty things about the Federal Reserve, would the FED prefer, 0:27:45.560 --> 0:27:49.000 if it knows it's going to be cutting interest rates 0:27:49.119 --> 0:27:53.000 to do it before the September meeting to sort of 0:27:53.119 --> 0:27:55.280 stay out of the headlines and politics. 0:27:56.000 --> 0:27:57.399 I think at the end of the day, the Federal 0:27:57.359 --> 0:27:59.879 Reserve will set monitary policy on what they think is 0:28:00.160 --> 0:28:04.280 right formula to generate the best possible combination of full 0:28:04.280 --> 0:28:08.199 employment and price stability. The FED can't take pay attention 0:28:08.280 --> 0:28:11.520 to politics because if they start to pay attention to politics, 0:28:11.680 --> 0:28:15.080 that politicizes the FED and makes the FED vulnerable to attack. 0:28:15.359 --> 0:28:18.240 This is why Cherpaul, when he's asked about fiscal policy, 0:28:18.320 --> 0:28:20.520 tax cuts, and things of that sort, he never. 0:28:20.359 --> 0:28:22.439 Wants to talk about any of those things because he 0:28:22.480 --> 0:28:25.440 doesn't want the FED involved in the political debate. And 0:28:25.520 --> 0:28:28.520 so I think the FED will stay very apolitical. 0:28:29.119 --> 0:28:30.840 My own experience, I was at the Federal Reserve for 0:28:30.880 --> 0:28:34.280 eleven and a half years around the FMC table. Never 0:28:34.480 --> 0:28:36.679 what did politics come up as a reason to adjust 0:28:36.760 --> 0:28:39.960 manentary policy, either more slowly or more quickly. 0:28:41.280 --> 0:28:43.720 I just as did you ever feel any sort of 0:28:43.840 --> 0:28:47.600 internal pressure as a human being thinking about what your 0:28:47.640 --> 0:28:50.640 decision might mean in the context of how voters react. 0:28:51.120 --> 0:28:52.680 I think at the end of the day, you just 0:28:53.080 --> 0:28:55.280 have to be blind to that. 0:28:55.360 --> 0:28:57.160 I mean, I think the only way it might come 0:28:57.240 --> 0:28:59.840 up is there are there are having cases in the past, 0:29:00.080 --> 0:29:03.000 or the election has been right after the right after 0:29:03.040 --> 0:29:04.000 an FMC meeting. 0:29:04.440 --> 0:29:05.840 So maybe that f C. 0:29:06.000 --> 0:29:08.280 Meeting that's a couple of days before the election. You know, 0:29:08.360 --> 0:29:10.959 maybe that's one that you take a pass on. But 0:29:11.320 --> 0:29:13.920 you know that onlyccurs every once in a while because 0:29:13.920 --> 0:29:16.120 a lot of times the meeting happens after the election. 0:29:16.480 --> 0:29:20.240 You know, election is the first Tuesday in November, and 0:29:20.680 --> 0:29:23.360 FED has an FMC meeting around that time, and where 0:29:23.360 --> 0:29:26.320 that fit FMC meeting falls could maybe have a very 0:29:26.520 --> 0:29:30.040 very very very marginal FED. But I think beyond that, 0:29:30.240 --> 0:29:32.520 I think there's just nothing there because if the FED 0:29:32.560 --> 0:29:34.360 starts going down this path, where. 0:29:34.160 --> 0:29:34.680 Does it end? 0:29:35.000 --> 0:29:37.480 Then the FED gets accused of being political. Then people 0:29:37.520 --> 0:29:39.680 start to talk about, well, maybe we need to rein 0:29:39.760 --> 0:29:43.040 in the Fed's independence. FED loses independence, then it loses 0:29:43.120 --> 0:29:46.440 ability to conduct monetary policy in a way best designed 0:29:46.480 --> 0:29:49.640 to achieve it's two mandate objectives. So it's a slippery slope. 0:29:49.680 --> 0:29:51.680 You don't want to start going down that slippery slope. 0:29:51.720 --> 0:29:53.680 But safe to say Donald Trump, if he is and 0:29:53.760 --> 0:29:57.280 everything is pointing to him being the Republican presidential candidate again, 0:29:57.680 --> 0:30:00.600 if he you know, he has not been shy is feelings, 0:30:00.640 --> 0:30:04.480 certainly about the FED and Jay Palace specifically, should Jay 0:30:04.520 --> 0:30:07.240 powellin FED officials worry though possibly about becoming part of 0:30:07.240 --> 0:30:08.640 the campaign, whether they like it or not. 0:30:09.280 --> 0:30:11.160 Well, wouldn't surprise me at all. 0:30:11.240 --> 0:30:17.000 If you know, the candidate Trump started to you know, 0:30:17.160 --> 0:30:19.920 attack the FED for cutting interest rates, arguing that that 0:30:20.080 --> 0:30:24.760 was somehow eating the Biden, you know, reelection chances, So 0:30:24.880 --> 0:30:26.160 that certainly could come up. 0:30:26.240 --> 0:30:27.760 I mean, that wouldn't surprise me at all. 0:30:28.120 --> 0:30:31.000 But the FED reserve would be No, We're doing what 0:30:31.040 --> 0:30:33.720 we think is appropriate to achieve our dual mandate objectives. 0:30:33.960 --> 0:30:35.880 All right, So your best bet and we totally get 0:30:35.880 --> 0:30:38.440 it data dependent. We're going to move from data point 0:30:38.440 --> 0:30:42.440 to data point. Having said that our investors' markets not 0:30:42.480 --> 0:30:46.040 being smart and not and not including in their thinking 0:30:46.080 --> 0:30:48.560 that the FED could actually raise rates again or how 0:30:48.720 --> 0:30:49.800 how do you think about that? 0:30:50.680 --> 0:30:53.400 Well, I think that the likelihood of the FED raising 0:30:53.480 --> 0:30:55.560 rates from her is very low, and I think the 0:30:55.600 --> 0:30:59.720 reason is that FED already thinks monetary policy is quite restrictive, 0:31:00.200 --> 0:31:02.400 so they would have to be convinced that mantra policy 0:31:02.440 --> 0:31:04.640 is not restrictive. I think if if it turns out 0:31:04.640 --> 0:31:06.960 that the economy is stronger than expected, inflation is higher 0:31:07.000 --> 0:31:09.640 than expected, it's more likely to just just stay at 0:31:09.680 --> 0:31:12.520 the current level for longer as opposed to move to 0:31:12.600 --> 0:31:14.800 actually start to hype rates again, I think the bar 0:31:14.920 --> 0:31:17.000 to raising rates at this point is pretty high. 0:31:17.200 --> 0:31:20.440 Why does it seem to you that the dot plot 0:31:20.680 --> 0:31:23.200 kind of shows that FED officials are all over the 0:31:23.240 --> 0:31:26.000 place over the next couple of years. What kind of 0:31:26.480 --> 0:31:29.600 uncertainty does that suggest? It does suggest that there are 0:31:29.640 --> 0:31:31.240 real camps of doves and hawks. 0:31:31.680 --> 0:31:34.360 I think that this is just a very uncertain outlook. 0:31:34.360 --> 0:31:36.120 I mean, how many times have we had recoveries from 0:31:36.200 --> 0:31:39.680 pandemics and the economy having lots of inflation with the 0:31:39.720 --> 0:31:43.040 Federals are being very slow to tighten mantarc policy and that. 0:31:43.200 --> 0:31:44.440 So that's sort of the bad news, and then the 0:31:44.440 --> 0:31:47.960 good news. It seems like it's working out pretty well 0:31:48.520 --> 0:31:50.959 so far. So the FED is caught up, economy has 0:31:51.000 --> 0:31:54.680 slowed a bit, inflation has come down. So I think 0:31:54.960 --> 0:31:57.360 you know the reason why, you know, it's just a 0:31:57.480 --> 0:31:59.280 very tricky and tricky environment. 0:31:59.440 --> 0:32:02.560 I think that you know, FED officials probably disagree mostly. 0:32:02.280 --> 0:32:05.239 About the economic outlook. You know that it's certain it's 0:32:05.240 --> 0:32:07.640 about the economic outlook. I think in terms of how 0:32:07.640 --> 0:32:10.560 they would respond to the same economic outlook, I probably 0:32:10.880 --> 0:32:14.000 imagine the reaction function how they would respond probably doesn't 0:32:14.040 --> 0:32:15.960 vary as much so I think it's mostly uncertained about 0:32:15.960 --> 0:32:16.800 the economic outlook. 0:32:17.000 --> 0:32:19.160 Hey, Bill, just got about one minute left here. We're 0:32:19.160 --> 0:32:22.840 getting ready for read on GDP here in the United 0:32:22.880 --> 0:32:25.440 States that's later on this week, and then of course 0:32:25.480 --> 0:32:26.840 the FED meeting next week. What do you think is 0:32:26.840 --> 0:32:29.960 the smart conversation, smart thought mark, or smart metric that 0:32:30.000 --> 0:32:32.560 you think investors should be watching ahead of all of 0:32:32.560 --> 0:32:34.440 that to kind of figure out where we go from here? 0:32:34.880 --> 0:32:37.360 Well, I think the GDP news this is sort of 0:32:37.360 --> 0:32:37.880 old news. 0:32:37.880 --> 0:32:40.320 It's like describing what happened in the fourth quarter, and 0:32:40.360 --> 0:32:43.520 that's really not really that important from the FEDS perspective. 0:32:43.520 --> 0:32:45.680 It's really where are we going from here? 0:32:45.880 --> 0:32:46.120 Right? 0:32:46.200 --> 0:32:47.840 So, I don't think the GDP news is going to 0:32:47.840 --> 0:32:50.120 be very very important in terms of influencing the Fed. 0:32:50.160 --> 0:32:52.600 I think what's really going to be important is number one, 0:32:52.720 --> 0:32:55.040 what happens to the labor market, what's having to pay 0:32:55.080 --> 0:32:57.480 all employment, what's having to the unemployer rate, what's having 0:32:57.480 --> 0:33:01.960 to wages? And number two, what's happening to inflation? Is 0:33:02.000 --> 0:33:04.600 the hot final mile on inflation actually going to be 0:33:04.600 --> 0:33:08.000 harder or not so hard? That's really the cool question 0:33:08.080 --> 0:33:08.560 on the table. 0:33:08.680 --> 0:33:10.720 All right, Well, Bill, Dudley, so appreciate your time on 0:33:10.800 --> 0:33:12.600 this Monday with the breaking news and then of course 0:33:12.800 --> 0:33:15.760 getting your outlook and thoughts on the US Central Bank. 0:33:15.760 --> 0:33:18.680 Bill Dudley, of course, former president of the New York Fed, 0:33:18.680 --> 0:33:21.120 Bloomberg opinion columnist, and of course our Michael McKee, who 0:33:21.160 --> 0:33:23.720 covers the Fed and everything going on with interest rates. Bill, 0:33:23.760 --> 0:33:25.640 by the way, will be part of the Bloomberg Radio 0:33:25.640 --> 0:33:28.000 and TV special on the Fed Decides. That's on Wednesday, 0:33:28.040 --> 0:33:30.520 January thirty first, that starts at one thirty pm Wall 0:33:30.520 --> 0:33:31.080 Street Time. 0:33:32.120 --> 0:33:35.640 You're listening to the Bloomberg Business Week podcast. Catch us 0:33:35.680 --> 0:33:38.920 Live weekday afternoons from two to five pm Eastern Listen 0:33:38.960 --> 0:33:41.120 on Apple car Play and then brought Auto with a 0:33:41.120 --> 0:33:45.320 Bloomberg Business act or want us Live on YouTube. 0:33:46.120 --> 0:33:46.320 Well. 0:33:46.360 --> 0:33:48.840 A billionaire couple is giving one hundred million dollars to 0:33:48.880 --> 0:33:52.520 Atlanta's Spelman College, which the women's school says is the 0:33:52.640 --> 0:33:56.200 largest ever single donation to historically black college or university. 0:33:56.640 --> 0:33:59.800 The donation announced yesterday by Roonda Striker and her husband William. 0:34:00.880 --> 0:34:03.320 She is the billionaire granddaughter of the founder of medical 0:34:03.320 --> 0:34:06.600 device maker Striker Corporation. He is the chairman of money 0:34:06.600 --> 0:34:09.280 management firm green Leaf Trust. They live in Michigan. 0:34:09.480 --> 0:34:11.759 Spelman said it would use seventy five million dollars to 0:34:11.840 --> 0:34:14.480 endowt scholarships. The rest of the money will be used 0:34:14.480 --> 0:34:17.920 for other purposes, including developing an academic focus on public 0:34:17.960 --> 0:34:21.959 policy and democracy and improving student housing, a sore point 0:34:21.960 --> 0:34:24.160 in recent years among Spelman's students. 0:34:24.239 --> 0:34:25.799 We are so delighted to have with us to talk 0:34:25.800 --> 0:34:28.440 about this historic gift in what it is a historic 0:34:28.440 --> 0:34:32.520 here for Spelman. Doctor Helene Gail, she's president of Spelman College. 0:34:32.560 --> 0:34:34.719 She is on Zoom from Atlanta and also with us, 0:34:34.760 --> 0:34:37.960 delighted to have here. Bloomberg News Higher Education Finance reporter 0:34:38.040 --> 0:34:43.600 Janet Lauren in our Bloomberg Interactive Brokers studio, Doctor Gail, congratulations, 0:34:43.640 --> 0:34:46.319 Thank you for giving us some time here. Can you 0:34:46.400 --> 0:34:48.120 talk to us a little bit about how this gift 0:34:48.120 --> 0:34:50.400 came up, how did Rhonda Striker come to be a 0:34:50.440 --> 0:34:53.520 trustee at Spelman, and what's it like to receive the 0:34:53.560 --> 0:34:55.440 news of a gift of this magnitude. 0:34:56.520 --> 0:34:59.839 Well, thank you and thanks for having me on. 0:35:00.520 --> 0:35:00.680 Well. 0:35:00.760 --> 0:35:04.320 Rodes Striker is one of our longest serving trustees. She 0:35:04.560 --> 0:35:10.120 was brought on by one of my predecessors, over. 0:35:09.080 --> 0:35:13.240 Twenty years ago, and over the years, she and her. 0:35:13.160 --> 0:35:18.040 Husband have continued to contribute to Spelman, and you know, 0:35:18.120 --> 0:35:22.080 have been incredibly generous donors, but this is clearly the 0:35:22.200 --> 0:35:23.560 largest single. 0:35:23.280 --> 0:35:24.640 Gift that they have ever given. 0:35:24.680 --> 0:35:27.000 And as you said in the run up to this, 0:35:27.120 --> 0:35:30.280 it's the largest single gift that Spelman has ever received, 0:35:30.480 --> 0:35:34.920 and the largest gift to any HBCU. So it's pretty 0:35:34.920 --> 0:35:40.160 exciting and you know, truly a transformational gift that I 0:35:40.200 --> 0:35:43.520 think can make such a huge difference for Spelman, not 0:35:43.600 --> 0:35:45.440 only now but bar into the future. 0:35:46.600 --> 0:35:49.000 So thank you again for coming. So tell us how 0:35:49.040 --> 0:35:54.279 does this donation impact your endowments long longjectivity, especially when 0:35:54.320 --> 0:35:55.760 it comes to scholarships. 0:35:56.360 --> 0:36:00.000 Yeah, so, you know, we plan to use seventy five 0:36:00.160 --> 0:36:06.040 percent of it or endowing scholarships. We will obviously put 0:36:06.080 --> 0:36:09.759 that money to work immediately, and you know, in a 0:36:09.840 --> 0:36:13.160 year or so there will be returns that we can 0:36:13.280 --> 0:36:17.880 use to start increasing our scholarships already. But you know, 0:36:18.239 --> 0:36:22.719 as you know, endowments really really what you can do 0:36:22.760 --> 0:36:27.200 with an endowment is to think about future generations, and 0:36:27.280 --> 0:36:29.160 so you know, we look at this as the way 0:36:29.160 --> 0:36:33.959 that we can secure the future for right talented young 0:36:34.040 --> 0:36:37.880 women who want to get us an education but oftentimes 0:36:38.960 --> 0:36:42.160 are not able to because of financial barriers. So you know, 0:36:42.200 --> 0:36:44.040 we think this is going to make a difference for 0:36:44.120 --> 0:36:47.560 our students today but also for the students of tomorrow. 0:36:48.120 --> 0:36:50.279 Well, and I was looking at your most recent value 0:36:50.320 --> 0:36:52.839 of June twenty twenty two. It was less than five 0:36:52.920 --> 0:36:55.520 hundred million dollars. And then this gives you a huge 0:36:55.520 --> 0:36:58.440 amount of money more to invest. Can you talk about 0:36:58.480 --> 0:37:02.600 what that means for having you know, having that in 0:37:02.680 --> 0:37:05.120 the fund and to be able to build on it 0:37:05.160 --> 0:37:07.759 and to be able to do things like help students 0:37:08.320 --> 0:37:12.799 graduate and boost those rates and help them return the 0:37:12.840 --> 0:37:14.320 next semester of there's trouble. 0:37:15.400 --> 0:37:19.440 Yeah, no, totally, that's exactly what you know, we hope 0:37:19.440 --> 0:37:22.960 to be able to do. As you stated, you know, 0:37:23.000 --> 0:37:27.520 we have an endowment that's just under five hundred million dollars. 0:37:27.840 --> 0:37:30.960 You know, that's that is large for an age for 0:37:31.080 --> 0:37:34.560 many of our h PCU colleagues. But you know, when 0:37:34.560 --> 0:37:39.800 we compare ourselves to similar schools, similar size, type, and 0:37:40.239 --> 0:37:46.880 similar types of populations, you know, our endowment is trails 0:37:46.920 --> 0:37:50.080 many of our peer institutions. And so you know, we 0:37:50.160 --> 0:37:53.960 think that this which is a huge increase in our 0:37:54.120 --> 0:37:58.200 endowment will be able to provide scholarships for students. 0:37:58.600 --> 0:38:01.200 As you know, we have a high need population. 0:38:01.360 --> 0:38:06.600 We've got brilliant students grade point averages to range three 0:38:06.640 --> 0:38:10.839 point nine and above, but we also have a high 0:38:11.160 --> 0:38:15.160 need population. Forty percent of our students are PAL eligible. 0:38:15.600 --> 0:38:18.200 About eighty percent of our students get some sort of 0:38:18.320 --> 0:38:20.440 need based financial aid. 0:38:20.719 --> 0:38:22.560 So, you know, we want to be able. 0:38:22.320 --> 0:38:25.120 To bridge that gap between the talent that we see 0:38:25.239 --> 0:38:29.919 walking through the door and the you know, real gap. 0:38:29.600 --> 0:38:31.160 In financial resources. 0:38:31.480 --> 0:38:35.880 You know, when you can take this incredible talent pool 0:38:36.160 --> 0:38:38.840 and match it with the resources that allow them to 0:38:38.880 --> 0:38:42.120 have this kind of life changing education, you know, I 0:38:42.160 --> 0:38:46.360 think we can make a huge contribution through this gift, 0:38:46.400 --> 0:38:48.680 and you know, hopefully many more. We hope that this 0:38:48.760 --> 0:38:51.400 is the kind of gift that will inspire others to 0:38:51.560 --> 0:38:55.120 invest not only in Spellman, but other HBCUs. 0:38:55.680 --> 0:38:57.840 So, you know, I want to talk a little bit 0:38:57.840 --> 0:39:00.239 about more about the cost of higher education because because 0:39:00.440 --> 0:39:03.120 we got some news earlier today that the President Biden 0:39:03.200 --> 0:39:05.840 is continuing with his efforts to try to reduce the 0:39:05.880 --> 0:39:08.880 debt load that Americans have. Whether or not that is 0:39:08.920 --> 0:39:12.360 successful remains to be seen. But the cost of higher 0:39:12.440 --> 0:39:15.000 education at your school is forty six thousand dollars a 0:39:15.080 --> 0:39:17.200 year for a student living on campus. I got to 0:39:17.200 --> 0:39:19.600 tell you that's a relative bargain in this day and age. 0:39:19.640 --> 0:39:24.560 We were talking with a colleague recently who about another school, 0:39:24.600 --> 0:39:26.640 not an Ivy League school, a small liberal arts college, 0:39:26.920 --> 0:39:31.920 over ninety thousand dollars a year. Why does the cost 0:39:31.960 --> 0:39:35.839 of higher education continue to be so high, doctor Gale. 0:39:35.680 --> 0:39:37.800 Well, you know, every school is different. 0:39:38.560 --> 0:39:41.399 We've tried very hard to keep our costs as low 0:39:41.440 --> 0:39:45.760 as possible. In fact, we reset our tuition and fees 0:39:46.560 --> 0:39:49.120 a couple of years ago to be able to try 0:39:49.160 --> 0:39:52.400 to make our education as affordable as possible. 0:39:52.680 --> 0:39:56.800 But you know, costs continue to rise. Employment costs continues 0:39:56.840 --> 0:39:57.280 to rise. 0:39:57.360 --> 0:40:00.600 You know, we have to be able to the kind 0:40:00.600 --> 0:40:06.080 of high caliber faculty that attracts, you know, the student 0:40:06.160 --> 0:40:09.520 population that comes to Spellman. We've got to make sure 0:40:09.560 --> 0:40:13.520 that we pay our staff and administrative support the kinds 0:40:13.520 --> 0:40:15.719 of resources and so you know, a lot of the 0:40:15.760 --> 0:40:20.040 cost of a college or university are the personnel costs 0:40:20.080 --> 0:40:22.560 that continue to go up. But we also know the 0:40:22.640 --> 0:40:28.799 construction costs, other supply costs have all continued to go up. 0:40:29.080 --> 0:40:31.359 So you know, we try as hard as we can 0:40:31.480 --> 0:40:36.120 to manage those costs to not have to increase tuition 0:40:36.200 --> 0:40:38.840 and fees. But we also have to be competitive in 0:40:38.880 --> 0:40:39.680 today's market. 0:40:39.760 --> 0:40:41.600 But does it feel a little crazy when it's almost 0:40:41.600 --> 0:40:45.120 one hundred thousand dollars? I'm just you understand this world? 0:40:45.440 --> 0:40:47.520 Well, you know, I think we've got to work on 0:40:48.840 --> 0:40:49.480 both sides. 0:40:49.480 --> 0:40:53.880 We have to work on making education more and more affordable, 0:40:54.320 --> 0:40:56.440 but we also have to look at how are we 0:40:56.520 --> 0:40:59.920 making sure that students do have the kind of resources, 0:41:00.080 --> 0:41:05.000 access to scholarships, access to low cost loans to be 0:41:05.040 --> 0:41:08.120 able to afford education. So we've got you know, we've 0:41:08.120 --> 0:41:11.360 got to work on both ends, and you know, we've got. 0:41:11.200 --> 0:41:11.680 Work to do. 0:41:12.239 --> 0:41:14.640 So I write a lot about fundraising, and I would 0:41:14.719 --> 0:41:17.279 love to hear how does a gift like this come about? 0:41:17.320 --> 0:41:19.719 It must have you must have been working on it 0:41:19.760 --> 0:41:22.319 for years and years. If you could take us through that, 0:41:22.440 --> 0:41:24.720 And also, what's it like to get the nod? Yes, 0:41:25.040 --> 0:41:28.040 we're giving you one hundred million dollars? 0:41:28.080 --> 0:41:31.719 Well, you know, as I mentioned, Ronda Striker has been 0:41:31.760 --> 0:41:36.360 a long serving board member and she has seen the 0:41:36.800 --> 0:41:42.319 transformative nature of a Spellman Education. You know, we we 0:41:42.480 --> 0:41:45.920 have young women who walk through the door, you know 0:41:46.840 --> 0:41:53.160 without you know, as young women, and whose lives are transformed. 0:41:52.440 --> 0:41:54.600 By the education that they get here. 0:41:55.480 --> 0:41:59.680 She has seen the economic value that occurs when a 0:41:59.719 --> 0:42:03.799 young grow comes in the door leaves ready to get 0:42:04.000 --> 0:42:06.560 go out into the workforce. You know, if you look 0:42:06.600 --> 0:42:11.319 at the statistics, HBCUs like Spelman have punched above their 0:42:11.320 --> 0:42:14.480 weight for so many years. And I think she has 0:42:14.520 --> 0:42:18.799 seen that the value of investing can make such a 0:42:18.880 --> 0:42:23.440 huge difference. And so, you know, gifts come because people 0:42:23.480 --> 0:42:27.040 believe in your mission. People who have resources who believe 0:42:27.080 --> 0:42:30.960 in your mission have the opportunity to experience why it's 0:42:31.000 --> 0:42:34.640 so important to invest. So Ronda Striker has had the 0:42:34.640 --> 0:42:38.080 opportunity to see what it means when you can match 0:42:38.160 --> 0:42:40.600 the talent pool that we have with the kind of 0:42:40.640 --> 0:42:44.640 resources that can be transformational and change lives. You know, 0:42:44.719 --> 0:42:51.319 Spelman College has the. 0:42:48.719 --> 0:42:52.319 The product of Spelman College is obvious. You know, we 0:42:52.400 --> 0:42:53.239 can rattle. 0:42:53.000 --> 0:42:56.440 Off the names of the important leaders in business, in 0:42:57.440 --> 0:43:02.080 policy and politics and arts, entertainment, entrepreneurship, and so we 0:43:02.200 --> 0:43:05.680 know that there's a product from Spelman that changes lives. 0:43:05.920 --> 0:43:09.480 Well, thank you so much for finding time for us. Congratulations. 0:43:09.560 --> 0:43:11.680 We know it's also an important anniversary for you guys 0:43:11.680 --> 0:43:14.440 in the official naming of the school, So congratulations on that, 0:43:14.880 --> 0:43:17.520 doctor Helene Gail, President of Spelman College, and of course, 0:43:17.520 --> 0:43:18.880 Bloomberg's own Janet Lawren. 0:43:24.080 --> 0:43:27.920 You're listening to the Bloomberg Business Week podcast. Listen live 0:43:28.000 --> 0:43:30.839 each weekday starting at two pm Easter on Apple car 0:43:30.960 --> 0:43:33.920 Play and Android Auto with the Bloomberg Business app. You 0:43:33.960 --> 0:43:37.200 can also listen live on Amazon Alexa from our flagship 0:43:37.280 --> 0:43:41.400 New York station, Just say Alexa play Bloomberg eleven thirty. 0:43:42.600 --> 0:43:44.480 Plenty ahead in our second hour of the weekend edition 0:43:44.520 --> 0:43:47.719 of Bloomberg Business Week, including time to get high on 0:43:47.760 --> 0:43:50.520 the cannabis industry. I'm asking, and I'm really sorry. 0:43:50.360 --> 0:43:50.680 I had to go. 0:43:50.760 --> 0:43:51.880 How many of these punts do you have? 0:43:52.560 --> 0:43:54.440 It's the only one I have with cannabisiness. 0:43:55.360 --> 0:43:57.920 What you did one earlier meantime, plain old booze do 0:43:58.040 --> 0:44:00.000 and just fine, it seems, especially if you want to 0:44:00.000 --> 0:44:01.360 delivered right to your doorstep. 0:44:01.440 --> 0:44:01.960 Who doesn't. 0:44:02.080 --> 0:44:04.960 Derek Ray is CEO of Reserve Bar. He'll join us 0:44:04.960 --> 0:44:08.000 with a business update and adapting to changing drinking habits 0:44:08.280 --> 0:44:10.799 as younger generations are drinking less and older ones are 0:44:10.880 --> 0:44:13.359 drinking more, and a lot of people Carol just seem 0:44:13.440 --> 0:44:15.400 to be taking part in dry January. 0:44:15.400 --> 0:44:17.240 I'm amazed that people like who come into our studio 0:44:17.320 --> 0:44:18.040 like it. I'm part of it. 0:44:18.840 --> 0:44:20.239 You offer somebody like, oh, let's go for a drink, 0:44:20.280 --> 0:44:21.520 They're like, no, I'm doing dragging anyway. 0:44:21.600 --> 0:44:23.279 A lot of them work here, By the way, what 0:44:23.320 --> 0:44:23.799 does that say? 0:44:23.960 --> 0:44:24.440 I don't know. 0:44:24.840 --> 0:44:27.640 First up this hour the CEO who meditates before getting 0:44:27.640 --> 0:44:29.799 down to business, and he does have a lot of 0:44:29.840 --> 0:44:32.600 business going on. Brad Jacobs is the founder and chairman 0:44:32.640 --> 0:44:34.440 at freight services provider XPO. 0:44:34.680 --> 0:44:37.799 He's a serial entrepreneur. Brad has started five companies and 0:44:37.840 --> 0:44:39.680 he's the author of a new book just out this week, 0:44:39.960 --> 0:44:42.520 How to Make a few Billion dollars. A lot to 0:44:42.560 --> 0:44:44.640 talk about, and we kicked off Brad being back in 0:44:44.640 --> 0:44:47.480 our studio by getting his take on today's business environment. 0:44:47.960 --> 0:44:51.279 I think we've started to see the economy slowing down 0:44:51.480 --> 0:44:54.400 for sure here and in Europe. I think it's going 0:44:54.440 --> 0:44:57.480 to continue to slow down, and depending on what the 0:44:57.480 --> 0:45:00.239 Fed does, it could start picking up. But and what 0:45:00.320 --> 0:45:01.600 the Fed does is that. 0:45:01.560 --> 0:45:04.200 More an issue of what the FED does versus the 0:45:04.239 --> 0:45:06.560 war's overseas and we're looking at the Red Sea and 0:45:06.840 --> 0:45:09.640 ships not being able to go through. We're worried about 0:45:09.719 --> 0:45:12.280 does a supply chain already you know, have some problems 0:45:12.320 --> 0:45:14.960 in it and maybe it even gets worse. Is the 0:45:15.000 --> 0:45:17.840 FED more important? And really global central banks? 0:45:18.040 --> 0:45:20.239 The FED is more important than what the hoodies are doing. 0:45:20.719 --> 0:45:23.200 The hoodies are driving hooties if you want to look 0:45:23.200 --> 0:45:25.680 at an economic terms or inflationary because they're driving up 0:45:25.719 --> 0:45:28.640 shipping costs which will pass we will be passed along 0:45:28.640 --> 0:45:30.080 to consumers in the end. 0:45:30.520 --> 0:45:31.359 But the FED is. 0:45:31.280 --> 0:45:34.440 The overall stimulator or slower downer of. 0:45:34.200 --> 0:45:36.680 The economy, so that more important. 0:45:36.760 --> 0:45:37.720 Yeah, well there. 0:45:37.600 --> 0:45:39.040 Is a big I mean the big debate that we 0:45:39.080 --> 0:45:41.840 talk about every day is like, will they or won't 0:45:41.840 --> 0:45:47.080 they in March cut rates? You say, the economies depending 0:45:47.120 --> 0:45:49.040 on what the FED does. What do you think the 0:45:49.120 --> 0:45:49.759 Fed should do? 0:45:50.320 --> 0:45:51.959 I think the Fed should keep looking at the data 0:45:52.320 --> 0:45:55.720 and do what ignore everything else and go buy the data. 0:45:56.120 --> 0:46:00.200 If inflation cools down more, yeah, it may make sense 0:46:00.280 --> 0:46:03.839 to start lowering rates. If inflation continues to rear its 0:46:04.000 --> 0:46:06.760 ugly head, then it's not the time to be lowering rates. 0:46:06.800 --> 0:46:10.239 Are you seeing in your various businesses, what you're hearing 0:46:10.320 --> 0:46:15.919 from colleagues, what you're hearing from associates, is inflation wearing 0:46:15.920 --> 0:46:18.560 it's ugly head again or does the Fed have this tamed. 0:46:19.360 --> 0:46:22.840 It's more slowing down and having slowed down than inflation 0:46:22.920 --> 0:46:25.239 coming back. So I look at wages a lot, since 0:46:25.239 --> 0:46:28.399 it's a big part of all of our businesses. Wage 0:46:28.440 --> 0:46:31.719 growth has slowed. Input costs are still going up, but 0:46:31.760 --> 0:46:35.719 they've slowed. Rents at least has gone up, but they're 0:46:35.760 --> 0:46:38.439 going up slower. So it does feel it's slowed down 0:46:38.480 --> 0:46:38.920 quite a bit. 0:46:39.080 --> 0:46:40.400 Brad. Are you holding on to workers? 0:46:40.840 --> 0:46:40.960 Are? 0:46:41.360 --> 0:46:43.239 Yeah? Much more than Well, first of all, we couldn 0:46:43.239 --> 0:46:44.560 even find workers a couple of years. 0:46:44.400 --> 0:46:46.239 Ago, right, But I'm just curious, are you still worried 0:46:46.239 --> 0:46:48.200 about like losing someone and not being able to or 0:46:48.239 --> 0:46:50.839 letting somebody go. If you're starting to see some softness, 0:46:51.400 --> 0:46:53.400 would you rather hold on to a worker at this point? 0:46:54.320 --> 0:46:56.480 Well, you always want to hold on to your talent, 0:46:57.000 --> 0:46:58.520 and in the book I talk to you about that 0:46:58.520 --> 0:47:02.040 at this your number one asset are your people, and 0:47:02.040 --> 0:47:03.280 you've got to make sure you have a plus. 0:47:03.360 --> 0:47:05.080 You know what I'm saying that when you when you 0:47:05.160 --> 0:47:08.440 run a publicly held company, and if you're worried about 0:47:08.480 --> 0:47:10.360 any kind of slow down, you've got to start to 0:47:10.400 --> 0:47:13.040 look at your costs again and work certainly playing. 0:47:12.800 --> 0:47:14.479 And you should be looking at your costs in every 0:47:14.480 --> 0:47:17.120 part of the cycle. Should be managing your costs intelligently. 0:47:17.920 --> 0:47:21.840 All right. So having said that, when you think about 0:47:21.880 --> 0:47:25.160 capital expenditures, you're comfortable to move ahead. 0:47:25.520 --> 0:47:28.400 Yeah. Absolutely, I'm about to start a new company. 0:47:28.480 --> 0:47:31.160 You have started a well almost are almost? 0:47:31.280 --> 0:47:31.360 Well? 0:47:31.400 --> 0:47:33.040 Where are you that? Help us out with that because 0:47:33.040 --> 0:47:35.040 we've talked about it with you last year. We're talking 0:47:35.040 --> 0:47:38.640 about QXO, right, tell us about where you are and 0:47:38.680 --> 0:47:41.560 you're looking to buy businesses. From what I understand, it's 0:47:41.560 --> 0:47:44.120 all about kind of moving businesses and materials around in 0:47:44.120 --> 0:47:46.160 North America. So where are you in the process. 0:47:45.880 --> 0:47:46.840 North America and Europe? 0:47:46.840 --> 0:47:47.480 And Europe? 0:47:47.840 --> 0:47:50.160 So it's exactly I did exactly what I said I 0:47:50.200 --> 0:47:51.399 was going to do when I sell you last time. 0:47:51.560 --> 0:47:55.800 So we've agreed to put a billion dollar pipe equity 0:47:55.800 --> 0:47:58.719 investment into a very small cap company where they going 0:47:58.760 --> 0:48:01.799 to spin that company back to its legacy owners, give 0:48:01.840 --> 0:48:04.239 them a two and a half million dollar dividend, give 0:48:04.280 --> 0:48:07.960 them a small less than one half percent of equity 0:48:07.960 --> 0:48:10.040 ownership in our new company, QXO, and we'll have a 0:48:10.080 --> 0:48:14.120 pure play called QXO, which will consolidate the eight hundred 0:48:14.120 --> 0:48:16.880 billion dollar building products distribution industry. 0:48:17.080 --> 0:48:18.720 So where are you in the process. 0:48:18.719 --> 0:48:22.320 Where a couple months or so away from finishing that. Yeah, 0:48:22.360 --> 0:48:24.759 and depending on various approvals we have to get from 0:48:24.760 --> 0:48:27.799 the SEC and so forth, and then we'll be off 0:48:27.840 --> 0:48:28.280 to the races. 0:48:28.320 --> 0:48:31.319 So you haven't acquired anything yet, correct, But do you 0:48:31.360 --> 0:48:32.839 have like a list that you're ready to go? Oh? 0:48:32.880 --> 0:48:35.040 Yeah, we're talking to lots of companies. Okay, well, we 0:48:35.080 --> 0:48:36.719 have a lot of discussions going on privately held. 0:48:36.760 --> 0:48:39.319 I'm assuming smaller players. 0:48:38.520 --> 0:48:41.080 Right now because our budget is only a billion dollars. 0:48:41.480 --> 0:48:42.200 They're all private. 0:48:43.640 --> 0:48:46.720 How are you going to make one plus one equal 0:48:46.760 --> 0:48:50.040 three with these acquisitions? Like, how will you bring operational efficiency? 0:48:50.120 --> 0:48:52.759 I'm going to follow the same exact playbook that I've 0:48:52.760 --> 0:48:56.279 done for the last few decades. I'm going to buy 0:48:56.320 --> 0:49:00.680 companies that are good companies but can be better. I'm 0:49:00.680 --> 0:49:03.400 going to buy companies. When you put them together, you 0:49:03.440 --> 0:49:08.279 find synergies, particularly in procurement, which is the biggest line 0:49:08.280 --> 0:49:12.080 item in billing products distribution. I'm going to apply technology 0:49:12.120 --> 0:49:15.040 to be the most tech forward building products distributor in 0:49:15.080 --> 0:49:18.520 the world. And I'm going to do all that together 0:49:18.600 --> 0:49:21.440 and get economies of scale as we get bigger and 0:49:21.440 --> 0:49:23.719 bigger and bigger. And now I've put the numbers out there, 0:49:23.719 --> 0:49:25.839 I expect to be at at least a billion dollar 0:49:25.960 --> 0:49:28.919 revenue run rate after year one, at least a five 0:49:28.920 --> 0:49:30.319 billion dollar revenue run rate. 0:49:30.440 --> 0:49:31.279 You're sticking to that. 0:49:31.560 --> 0:49:35.400 Absolutely, and most importantly, tens of billions of dollars of 0:49:35.440 --> 0:49:36.840 revenue over the decade. 0:49:36.880 --> 0:49:39.359 Why is this such a smart bet right now? This 0:49:39.880 --> 0:49:42.200 of distributing building materials in North America and Europe? You 0:49:42.239 --> 0:49:44.680 said specifically, what's the trend that you are seeing? Is 0:49:44.680 --> 0:49:45.600 it infrastructure? 0:49:45.640 --> 0:49:49.880 What is it long term? There is a there's three drivers. 0:49:50.239 --> 0:49:54.959 In residential construction. Houses are old, they are average age 0:49:54.960 --> 0:49:58.600 of a house is over forty years is old. So 0:49:58.680 --> 0:50:01.040 and there's repair remodeling going on, and there's more construction 0:50:01.120 --> 0:50:05.680 that will be driven by that. They're on the non 0:50:05.719 --> 0:50:09.480 residential construction, they're even older. Non residential buildings are over 0:50:09.480 --> 0:50:13.320 fifty years old on average. On the infrastructure, there's about 0:50:13.320 --> 0:50:16.040 two trillion dollars of infrastructure spend that needs to be 0:50:16.120 --> 0:50:18.440 done over the next twenty years. So there's a lot 0:50:18.480 --> 0:50:20.040 of activity that has to happen here. 0:50:21.120 --> 0:50:23.480 Why not just relax? 0:50:27.640 --> 0:50:27.920 Why not? 0:50:30.200 --> 0:50:32.080 I mean, like, what motivates you to keep doing this? 0:50:32.200 --> 0:50:35.040 Like you love to create times over and over again, 0:50:35.080 --> 0:50:36.120 and I mean. 0:50:36.880 --> 0:50:39.040 I love the job. I've been to CEO since I've 0:50:39.040 --> 0:50:41.680 been twenty three years old. It's just a fantastic job. 0:50:41.920 --> 0:50:44.680 You get to be very creative, you get to think big, 0:50:44.920 --> 0:50:47.640 you get to dream these large, large business plans. You 0:50:47.640 --> 0:50:50.360 get to recruit people you love to work with. You 0:50:50.480 --> 0:50:53.319 design compensation program so everybody's in it to win it. 0:50:53.880 --> 0:50:55.640 And you come to work every day and you just 0:50:56.080 --> 0:50:58.279 knock down the list and make it happens, and you 0:50:58.320 --> 0:51:01.320 create huge amount some money, not just for the employees 0:51:01.320 --> 0:51:04.120 but for the shareholders. You know, our companies over the 0:51:04.200 --> 0:51:07.200 years have really excelled at shareholder value creation. If you 0:51:07.239 --> 0:51:10.920 looked at at Expo Logistics, our initial investors made thirty 0:51:10.920 --> 0:51:14.040 two times in the money. If you look at United Rentals, 0:51:14.200 --> 0:51:17.120 United Rentals, we started it was three dollars and fifty 0:51:17.160 --> 0:51:20.040 cents a share. Today it's over five hundred and fifty 0:51:20.040 --> 0:51:22.560 dollars a share. So it's a lot of values to 0:51:22.640 --> 0:51:24.200 be created for a lot of people, and I just 0:51:24.239 --> 0:51:25.399 love that. I take a lot of pride in. 0:51:25.320 --> 0:51:28.040 That this value creation of maybe a billion, you say, 0:51:28.040 --> 0:51:30.480 of annual revenue in the first year and then five 0:51:30.480 --> 0:51:32.719 billion within three years. Can you do that if there's 0:51:32.760 --> 0:51:35.440 any weakness in the global economy or in the US. 0:51:35.239 --> 0:51:37.920 At I can do this business plan regardless of what 0:51:37.920 --> 0:51:39.919 happens in the economy. If it's strong, if it's weak, 0:51:40.200 --> 0:51:42.120 if it's flat, I can still do this business Why 0:51:42.719 --> 0:51:46.240 Because there's seven thousand distributors to buy in the United States. 0:51:46.560 --> 0:51:49.799 In North America in cluding Canada, there's thirteen thousand to buy. 0:51:49.920 --> 0:51:52.520 In Europe, there's a lot of them are owned by 0:51:52.680 --> 0:51:55.480 private equity, and private equity will have a choice. Private 0:51:55.480 --> 0:51:58.200 equity can dribble out over a number of years through 0:51:58.239 --> 0:52:01.600 an IPO and the secondary and so forth at a discount, 0:52:01.880 --> 0:52:04.120 or they can sell to me on a win win 0:52:04.320 --> 0:52:06.440 deal where I pay them a premium. 0:52:06.480 --> 0:52:08.480 So like when you wake up in the morning, what's 0:52:08.520 --> 0:52:09.600 the first thing you think about? 0:52:09.719 --> 0:52:11.640 The first thing I think about is how to get 0:52:11.640 --> 0:52:13.680 my head in a good place. Okay, before I start 0:52:13.680 --> 0:52:16.360 getting into business. How do I center myself? 0:52:16.520 --> 0:52:16.759 Really? 0:52:16.920 --> 0:52:19.800 Yeah, I try. I do a series of meditation exercises 0:52:20.120 --> 0:52:23.280 to expand my mind and to think about very large 0:52:23.440 --> 0:52:25.960 areas of space, and then I try to shrink it 0:52:26.000 --> 0:52:28.880 into very small likeking down into atoms. And I have 0:52:28.880 --> 0:52:30.960 a whole spiritual exercise I do in the morning. I 0:52:31.480 --> 0:52:32.960 get in the zone. I like to get in the zoo. 0:52:33.280 --> 0:52:34.840 Is that different than when you were twenty three and 0:52:34.880 --> 0:52:37.040 you were a CEO or you do. 0:52:37.160 --> 0:52:38.840 Now a little more now I wasn't doing anything. 0:52:38.920 --> 0:52:42.560 Yeah, that's interesting because I do feel like the you know, 0:52:43.000 --> 0:52:46.279 it would these days to hear an executive say that, 0:52:46.320 --> 0:52:49.840 it's not that surprising. It's widely accepted that is a 0:52:49.840 --> 0:52:52.520 way to actually closet from that. 0:52:52.640 --> 0:52:55.120 But but you have the meditation stuff quiet. Yeah, but 0:52:55.160 --> 0:52:56.080 at the beginning of your career. 0:52:56.719 --> 0:52:57.920 Yeah, that's interesting. 0:53:00.080 --> 0:53:02.080 That is interesting. How did you Why did you start then? 0:53:02.440 --> 0:53:02.759 Like what? 0:53:03.680 --> 0:53:06.440 I started transcendental meditation when I was a teenager in 0:53:06.719 --> 0:53:09.799 high school, and then I did that for decades for 0:53:09.840 --> 0:53:12.680 a long time, and then I started experimenting with other 0:53:12.719 --> 0:53:19.719 forms of meditation. I studied Milton Ericsonian neuro hypnotherapy, and 0:53:19.800 --> 0:53:24.360 I studied psychotherapy, the different mindfulness techniques, the cognitive therapy techniques, 0:53:24.360 --> 0:53:26.800 and I kind of blended them all together and picked 0:53:26.800 --> 0:53:29.520 and choosed, and I made my own think, well why 0:53:30.040 --> 0:53:32.360 because I think, as I say in the very first chapter, 0:53:32.719 --> 0:53:36.040 you need to rearrange your brain in order to accomplish 0:53:36.120 --> 0:53:36.720 big stuff. 0:53:36.760 --> 0:53:38.200 But what was the awareness that you had in high 0:53:38.200 --> 0:53:42.040 school to actually do that? I sort meet high school posters. 0:53:41.520 --> 0:53:44.160 Of Maharshi Meshiogi up on a screen. It said something 0:53:44.160 --> 0:53:46.840 like life is bliss. That's interesting. I think I'll go 0:53:46.840 --> 0:53:47.160 to the election. 0:53:47.320 --> 0:53:48.200 Do you do yoga too? 0:53:48.239 --> 0:53:48.799 I do yoga? 0:53:48.840 --> 0:53:49.319 Yea, yeah? 0:53:49.440 --> 0:53:50.160 Yeah? 0:53:50.200 --> 0:53:54.719 Interesting? That is really fascint all right, so I'm like 0:53:54.719 --> 0:53:57.640 getting my head around that love that. So with this book, 0:53:57.680 --> 0:53:59.759 and I know we've talked about it before, I mean, 0:54:00.040 --> 0:54:02.719 what are you trying to inspire another people? Knowing what 0:54:02.760 --> 0:54:04.520 you've done so far and kind of laying this out 0:54:04.520 --> 0:54:07.359 because you make it. The title makes it feel like, hey, 0:54:07.400 --> 0:54:09.239 anybody can do this. I don't know that anybody can 0:54:09.239 --> 0:54:10.719 do it. Are you saying anybody can do this? 0:54:11.280 --> 0:54:11.799 What this is? 0:54:12.080 --> 0:54:13.959 I don't think anybody can make a few billion dollars 0:54:14.320 --> 0:54:17.400 because that's just mathematically, there's only a few people who 0:54:17.400 --> 0:54:20.480 do that, but I think anybody can rearrange their brain 0:54:20.880 --> 0:54:25.040 to think in a different way. That's big, that's confident, 0:54:25.160 --> 0:54:29.760 that's strong, that's very off the beaten track, and accomplish 0:54:29.800 --> 0:54:31.920 great stuff. Now that doesn't have to be making money. 0:54:32.000 --> 0:54:33.960 That can be all kinds of stuff. That could be 0:54:34.000 --> 0:54:36.200 just being a great mom or dad. That can be 0:54:36.239 --> 0:54:38.239 a great artist, That can be a great musician, It 0:54:38.280 --> 0:54:41.400 can be a great anything. But yes, I think what 0:54:41.440 --> 0:54:44.040 I've shared in the book are the techniques that have 0:54:44.040 --> 0:54:49.319 work for me in order to attract great people and 0:54:49.360 --> 0:54:52.520 to organize those people in a way to accomplish big things. 0:54:52.560 --> 0:54:53.720 And I think that can be taught. 0:54:54.200 --> 0:54:56.759 One of the things I think about is to be fair. 0:54:56.880 --> 0:54:58.440 Like a lot we'll have a lot of leaders in 0:54:58.480 --> 0:55:00.920 and talk about great people, But what is it that 0:55:00.960 --> 0:55:03.160 you think? Really people have to understand what does that mean? 0:55:03.880 --> 0:55:06.360 Is it allowing them like we talked about the Smucker 0:55:07.200 --> 0:55:09.279 CEO and that company is allowing people to come to 0:55:09.320 --> 0:55:11.560 work what Tuesday to Thursday every other week? 0:55:11.920 --> 0:55:16.360 Like, that's not my culture at all, But what is it. 0:55:16.200 --> 0:55:18.520 To create great people? 0:55:18.640 --> 0:55:18.719 Like? 0:55:18.760 --> 0:55:20.440 What does that mean? How do you do that? 0:55:20.719 --> 0:55:23.319 You need to think in your mind very clearly who 0:55:23.400 --> 0:55:26.240 you're trying to attract. What are the traits and qualities 0:55:26.280 --> 0:55:28.640 and characteristics that you're looking for. I know what those 0:55:28.680 --> 0:55:29.280 are very clearly. 0:55:29.320 --> 0:55:29.560 For me. 0:55:29.719 --> 0:55:32.200 I look for people who are super smart. They've got 0:55:32.239 --> 0:55:35.080 to be smarter than me. Why do I want to 0:55:35.120 --> 0:55:36.560 depend on people less smart? 0:55:36.600 --> 0:55:36.719 Thing? 0:55:36.800 --> 0:55:38.239 I want to depend on people smarter than me. So 0:55:38.239 --> 0:55:40.799 I always try to get people who are hopefully significantly 0:55:40.800 --> 0:55:42.520 smarter than I am. They may not have this. I 0:55:42.920 --> 0:55:46.000 bring certain business talents and commercial sense to the table, 0:55:46.200 --> 0:55:48.759 leadership talents, But in terms of row IQ, I like 0:55:48.800 --> 0:55:51.680 smart people. I really really enjoy that. I want people 0:55:51.680 --> 0:55:53.640 with grit. I want people want or hungry, who want 0:55:53.680 --> 0:55:57.239 to work really hard, who actually like working with enjoyable. 0:55:58.360 --> 0:56:00.200 And then I want people who are honest as the 0:56:00.280 --> 0:56:03.359 day as long. I definitely want people who I'm trying 0:56:03.400 --> 0:56:04.919 to analyze what they what. 0:56:04.800 --> 0:56:05.480 Do they really mean? 0:56:05.880 --> 0:56:06.120 I want? 0:56:06.160 --> 0:56:08.759 I want people who are collegial and collaborative and team 0:56:08.800 --> 0:56:11.319 players and play well in the sandbox with each other 0:56:11.560 --> 0:56:14.000 so that you can create well. If you're an ant 0:56:14.080 --> 0:56:16.960 or you're a super organism, I talk about that in 0:56:17.000 --> 0:56:18.960 the book. You want to create a culture that's say 0:56:19.320 --> 0:56:22.319 super organism, not just a bunch of people, but a 0:56:22.360 --> 0:56:24.520 collect a highly integrated group of people. 0:56:24.840 --> 0:56:26.000 Is there a leader you admire? 0:56:26.680 --> 0:56:27.440 Oh, lots of people. 0:56:27.640 --> 0:56:28.600 Is there one that you would share? 0:56:29.400 --> 0:56:35.000 I admire Jeff Bezos, I admire. I admire Elon Musk, 0:56:35.040 --> 0:56:37.160 even though you know he has certain traits I don't admire, 0:56:37.239 --> 0:56:39.880 but I do admire his ability to think huge. 0:56:40.280 --> 0:56:41.880 You brought up Elon Musk. So I want to go 0:56:41.960 --> 0:56:44.080 somewhere that Carol and I go each and every day, 0:56:44.120 --> 0:56:47.399 which is some people. Are you the biggest revolution when 0:56:47.400 --> 0:56:49.800 it comes to technology right now? And that's what's happening 0:56:49.800 --> 0:56:52.799 with AI. Certainly a lot has changed when it comes 0:56:52.800 --> 0:56:55.560 to computers and AI over your career. How do you 0:56:55.600 --> 0:56:58.839 think about harnessing AI, using it in your businesses and 0:56:58.880 --> 0:57:01.040 even concerns that you might have about the technology. 0:57:01.440 --> 0:57:04.880 I've always used technology to my advantage. All my companies 0:57:04.920 --> 0:57:06.840 have been TechEd forward right from the very first one. 0:57:06.960 --> 0:57:08.839 So when I was in the oil business, way before 0:57:08.880 --> 0:57:13.000 the Internet, our main edge was to have a rudimentary 0:57:13.040 --> 0:57:17.720 technology system to collect information globally about buyers and sellers 0:57:17.920 --> 0:57:21.160 of crude oil and refined products. When I was in 0:57:21.280 --> 0:57:23.840 the waste management business, we'd be the first ones to 0:57:23.920 --> 0:57:28.320 pioneer very advanced route optimization software, so the trucks weren't 0:57:28.360 --> 0:57:32.400 just randomly driving around. We were efficiently optimized what the 0:57:32.440 --> 0:57:34.760 routes were going to be. When I was in the 0:57:35.480 --> 0:57:39.440 construction equipmental business, one of the first acquisitions we made, 0:57:39.440 --> 0:57:41.880 and we made hundreds of acquisitions was a company called 0:57:41.960 --> 0:57:43.120 wind Systems, which. 0:57:43.080 --> 0:57:43.280 Was a. 0:57:45.240 --> 0:57:47.840 Way to record where all the equipment is and we 0:57:47.880 --> 0:57:50.680 had billions of dollars of equipment where everything was at 0:57:50.680 --> 0:57:53.160 any one point in time, and to predict it and 0:57:53.320 --> 0:57:56.400 monitor its utilization so that we could replenish the fleet 0:57:56.400 --> 0:57:58.520 where we needed it, where there was demand, and we'd 0:57:58.520 --> 0:58:01.760 know where to lower prices or raise prices depending on demand. 0:58:02.400 --> 0:58:05.439 XPO is all about technology. One of the first few 0:58:05.440 --> 0:58:09.200 people I hired was Mario Harrik, now the CEO of XPO, 0:58:09.240 --> 0:58:12.960 who as my CIO because the vision was to automate 0:58:13.080 --> 0:58:16.240 truck brokerage. And fast forward to today, we've spun that 0:58:16.320 --> 0:58:20.480 off as RXO. Drew Wilkinson runs it and ninety eight 0:58:20.520 --> 0:58:23.520 percent of their orders are either sourced or cover electronic, 0:58:23.520 --> 0:58:25.680 and that was zero percent when we started the company. 0:58:25.720 --> 0:58:28.040 So yeah, I've always embraced technology. I think it's really 0:58:28.080 --> 0:58:28.760 important to do that. 0:58:28.920 --> 0:58:30.720 Only have about thirty forty seconds left here, so I'm 0:58:30.720 --> 0:58:33.520 going to ask you, but you say, bigger is better 0:58:33.560 --> 0:58:35.400 in business most of the time, but not always. And 0:58:35.440 --> 0:58:37.920 I think in a world where we're always wanting more, 0:58:38.400 --> 0:58:40.640 we even talk about companies. Look at this market cap, 0:58:40.680 --> 0:58:43.240 they're number one. Why is this an important concept? And 0:58:43.280 --> 0:58:45.600 forgive me abrep because we only have about thirty seconds. 0:58:46.680 --> 0:58:49.880 So over the last year, I've looked at dozens of 0:58:49.920 --> 0:58:54.920 industries and hundreds of companies and I had a checklist 0:58:54.960 --> 0:58:58.960 of everything I wanted, size, growth, fragmentation. One of them 0:58:59.040 --> 0:59:02.280 was Bigger is better. That means there's economies of scale. 0:59:02.520 --> 0:59:05.560 In the case of QXO, the big economy of scale 0:59:05.600 --> 0:59:10.560 is purchasing power procurement because if you buy lots of materials, 0:59:10.600 --> 0:59:11.680 you going to get a cheaper price. 0:59:12.440 --> 0:59:14.480 Promise you'll come back and as you build out your 0:59:14.520 --> 0:59:15.080 new business. 0:59:15.400 --> 0:59:17.560 I always like to come on here because it seems 0:59:17.600 --> 0:59:18.360 like it was one minute. 0:59:18.720 --> 0:59:20.480 I agree, I agree, and we learned something new about 0:59:20.520 --> 0:59:23.320 you which was really fascinating. Project ups, Thank you so much, 0:59:23.480 --> 0:59:26.880 good luck with everything. Founder and chairman of XPO. Of course, 0:59:26.960 --> 0:59:28.360 We've talked about his new book, How to Make a 0:59:28.360 --> 0:59:31.760 Few Billion dollars in looking forward already to the future conversation. 0:59:32.200 --> 0:59:33.240 Feeback, Thank you. 0:59:33.400 --> 0:59:35.120 You are listening and watching Bloomberg Radio. 0:59:37.640 --> 0:59:41.160 You're listening to the Bloomberg Business Week podcast. Catch us 0:59:41.200 --> 0:59:44.400 live weekday afternoons from two to five pm. Easter Listen 0:59:44.480 --> 0:59:46.640 on Apple card Play and then brought auto with a 0:59:46.680 --> 0:59:56.960 Bloomberg Business app, or watch us live on YouTube. 0:59:58.000 --> 0:59:58.560 All right, everybody. 0:59:58.680 --> 1:00:01.680 Investors not so key on the cannabis sector. Last year. 1:00:01.680 --> 1:00:05.040 The Advisor Shares Pure US Cannabis ETF little changed in 1:00:05.120 --> 1:00:07.800 twenty twenty three, after dropping seventy three percent in twenty 1:00:07.840 --> 1:00:10.080 twenty two. This year, however, as a whole tim the 1:00:10.080 --> 1:00:13.000 group is up about twenty percent as measured by that ETF. 1:00:13.120 --> 1:00:15.040 We have seen the group pop this year as investors 1:00:15.080 --> 1:00:19.800 seem optimistic about a possible reclassification and potential regulatory changes 1:00:19.840 --> 1:00:22.560 that could benefit the cannabis industry after the Department of 1:00:22.600 --> 1:00:25.200 Health and Human Services released some two hundred and fifty 1:00:25.240 --> 1:00:29.120 two pages of documents asking the DEA and to ease 1:00:29.120 --> 1:00:31.040 its position on cannabis. We're talking, of course, about the 1:00:31.080 --> 1:00:34.400 Drug Enforcement Agency. This according to Bloomberg News over the summer. 1:00:34.520 --> 1:00:36.120 Yeah, a lot of pages. What's key and for the 1:00:36.120 --> 1:00:39.960 first time, the HHS recommending that the DEA reschedule cannabis 1:00:39.960 --> 1:00:42.080 from Schedule one to Schedule three. It gets a little 1:00:42.080 --> 1:00:45.480 wonky under the Controlled Substances Act, but it's significant. To 1:00:45.560 --> 1:00:49.000 do this, HHS had to find that cannabis had acceptable 1:00:49.320 --> 1:00:52.680 medical uses and relatively low potential for abuse and dependence. 1:00:53.640 --> 1:00:56.080 Many people reporting the Wall Street Journal kind of noting 1:00:56.080 --> 1:00:59.040 this out specifically as to why this is so significant. 1:00:59.320 --> 1:01:03.320 Yeah, the AHHS recommending sweeping changes to federal marijuana laws, 1:01:03.320 --> 1:01:07.160 and yet we've seen this industry high before PAPA and 1:01:07.200 --> 1:01:10.360 then societal norms and politics have their say. Politics a 1:01:10.400 --> 1:01:11.040 big part of. 1:01:10.960 --> 1:01:13.360 This, absolutely, So let's get more on the industry. We 1:01:13.360 --> 1:01:16.560 welcome back Boris Jordan. He's executive chairman at cure Leaf 1:01:16.760 --> 1:01:19.080 here with us in our Bloomberg Interactive Brokers studio cure 1:01:19.160 --> 1:01:21.560 Leaf shares. By the way, they're up about seventeen percent 1:01:21.600 --> 1:01:24.200 year to date after three down years with the stock 1:01:24.240 --> 1:01:27.320 losing more than seventy percent. It's a high on February tenth, 1:01:27.360 --> 1:01:30.600 twenty twenty one. We know it's been tough going, but 1:01:30.880 --> 1:01:33.439 much different tone this week and this year. I should 1:01:33.480 --> 1:01:35.560 say boris. First of all, Happy new year. Good to 1:01:35.640 --> 1:01:36.480 have you back in the studio. 1:01:36.520 --> 1:01:38.120 You're right to be back in the studio, walked. 1:01:38.280 --> 1:01:39.480 This is the first time since COVID. 1:01:39.560 --> 1:01:41.720 Right, yep, first time since COVID back in the studio. 1:01:41.760 --> 1:01:43.400 All right, talk to us about the mood this year. 1:01:43.440 --> 1:01:45.640 We got a little wonky in terms of what is 1:01:45.680 --> 1:01:48.920 going on with regulators, the DEA and HHS. But this 1:01:49.000 --> 1:01:50.320 is significant potentially. 1:01:50.880 --> 1:01:53.880 This is literally a game changer. I think that in 1:01:53.920 --> 1:01:56.120 many ways if you read it, and I actually spent 1:01:56.200 --> 1:01:58.960 the all paple of days reading two hundred and fifty pages, 1:01:59.240 --> 1:02:00.680 and the thing that I took out of it the 1:02:00.720 --> 1:02:03.840 most is this was largely an apology almost by the 1:02:03.880 --> 1:02:07.720 federal government about cannabis we for the last fifty years. 1:02:07.880 --> 1:02:10.640 Well because if you look back at it when they rescheduled, 1:02:10.800 --> 1:02:13.280 when they scheduled cannabis to schedule one, you know, there 1:02:13.320 --> 1:02:15.600 was a tremendous amount of papers written on how awful 1:02:15.600 --> 1:02:17.320 it was, how terrible it was for your health, that 1:02:17.360 --> 1:02:19.600 there were no medical benefits, that this was the root 1:02:19.600 --> 1:02:21.600 of all evil. And if you think about it today, 1:02:21.760 --> 1:02:26.800 not even drugs like cocaine or fenton or our scheduled 1:02:26.800 --> 1:02:29.480 one right, things that actually kill people. I mean alcohol 1:02:29.600 --> 1:02:32.520 isn't even scheduled, which has a lot worse effects on 1:02:32.560 --> 1:02:35.280 the human body than cannabis. Books classification right of these, 1:02:35.520 --> 1:02:38.240 it's a classification, and I think in many ways that 1:02:38.240 --> 1:02:40.760 also not only are they following the people in the country, 1:02:40.960 --> 1:02:43.120 you know the fact that you know eighty percent of 1:02:43.160 --> 1:02:45.520 the country now has access to either medical or recreational 1:02:45.520 --> 1:02:48.000 cannabis and is frankly using it, but also you have 1:02:48.040 --> 1:02:51.720 major countries like Canada and Germany. Germany on the twenty 1:02:51.760 --> 1:02:54.720 second of February is going to be voting to take 1:02:54.760 --> 1:02:58.080 cannabis off their narcotics list, not rescheduling from scheduling too 1:02:58.080 --> 1:03:00.880 schedule three, but taking it off completely. So you have 1:03:01.040 --> 1:03:04.520 major countries around the world that are starting to recognize 1:03:04.520 --> 1:03:06.840 the medical benefits of cannabis and are taking it off 1:03:06.880 --> 1:03:07.240 the lists. 1:03:07.240 --> 1:03:09.520 As Germany's approached the right approach in your opinion. 1:03:09.640 --> 1:03:12.120 I personally think, you know, every country has its own approach. 1:03:12.160 --> 1:03:14.080 I think for Germany, they have decided that that's the 1:03:14.160 --> 1:03:15.800 right approach. They want to take it off and what 1:03:15.840 --> 1:03:17.880 that allows them to do in Germany at least is 1:03:17.920 --> 1:03:20.320 that all doctors will now be able to prescribe cannabis. 1:03:20.360 --> 1:03:22.840 And more importantly, today in Germany, under their current law, 1:03:23.200 --> 1:03:26.280 you have to try other drugs before you can try cannabis. 1:03:26.520 --> 1:03:28.640 So now that won't be the case. You can go 1:03:29.320 --> 1:03:32.120 use cannabis as a primary drug and you can have 1:03:32.200 --> 1:03:34.840 any doctor prescribe it under that the new legislation. 1:03:34.960 --> 1:03:38.040 So what about the timing for the potential dea rescheduling 1:03:38.040 --> 1:03:40.600 of marijuana burs How are you thinking about it? And 1:03:40.640 --> 1:03:42.200 so it was a timing, do you have any clarity 1:03:42.200 --> 1:03:45.439 on that because I'm hearing reading upbeat stuff, but they're 1:03:45.440 --> 1:03:47.160 also saying slow it down, everybody. 1:03:47.240 --> 1:03:51.440 Yeah, I think what you said in your introduction was right. 1:03:51.440 --> 1:03:53.800 I think this is very political now we are going 1:03:53.800 --> 1:03:57.720 into political season. This is something particularly with the Democratic 1:03:57.760 --> 1:04:00.240 Party to get out the younger vote, the younger vote. 1:04:00.240 --> 1:04:02.280 It's very much pro cannabis. We all know they're using 1:04:02.320 --> 1:04:04.560 a lot more cannabis than they are alcohol. Alcohol sales 1:04:04.640 --> 1:04:07.120 in all states or cannabis is now legal are downs, 1:04:07.320 --> 1:04:09.560 you know, ten to fifteen percent. So this is a 1:04:09.600 --> 1:04:12.680 real real vote getter potentially, And so I think this 1:04:12.880 --> 1:04:15.120 is going to be tied to politics. If that's the case, 1:04:15.160 --> 1:04:17.400 if we're right on that, then the latest they can 1:04:17.560 --> 1:04:20.120 really come out with this is mid April. And the 1:04:20.200 --> 1:04:21.880 reason for that is you have to have a sixty 1:04:21.960 --> 1:04:24.680 day common period after the recommendation, right, and then you 1:04:24.680 --> 1:04:28.120 have to have sixty day legislative period. Sixty legislative under 1:04:28.160 --> 1:04:32.960 our calculations, about three months before it can be before 1:04:32.960 --> 1:04:35.320 it become active. And so that means if they want 1:04:35.320 --> 1:04:38.080 it active before the election, if this is really political 1:04:38.160 --> 1:04:40.720 in nature, then they really hit The latest they can 1:04:40.760 --> 1:04:43.200 do this is really April. However, if it's not political, 1:04:43.560 --> 1:04:45.560 then they can you know, they can take it out 1:04:45.640 --> 1:04:47.080 nine years. I mean, we've seen that before. 1:04:47.600 --> 1:04:48.600 Which one do you think they'll do? 1:04:49.000 --> 1:04:50.960 I personally think that they wouldn't do all of this 1:04:51.160 --> 1:04:53.120 if this was going to be, you know, a nine 1:04:53.160 --> 1:04:55.560 year thing. I think that they are going to probably 1:04:55.600 --> 1:04:58.080 make the recommendation reschedule sometime in the next three months. 1:04:58.120 --> 1:04:59.560 All right, So if that happens, what does it mean 1:04:59.600 --> 1:05:00.960 for cure specifically? 1:05:01.000 --> 1:05:02.400 What's the securely? 1:05:02.400 --> 1:05:05.160 If it's an absolute game changer for a variety of reasons. 1:05:05.160 --> 1:05:08.920 For instance, on twenty twenty four numbers, we would pay 1:05:08.920 --> 1:05:13.480 an extra two hundred million cash in taxes to the 1:05:13.520 --> 1:05:16.160 federal government over and above our normal corporate tax rate, 1:05:16.160 --> 1:05:19.080 which would be equal to everybody else's, so largely the 1:05:19.120 --> 1:05:21.640 cannabis industry, and one of the reasons that these stocks 1:05:21.640 --> 1:05:23.720 have been down is people have realized that the cannabis 1:05:23.760 --> 1:05:26.800 industry is working for the federal government. Anything we make 1:05:26.880 --> 1:05:28.840 goes gets paid out in taxes to the federal government. 1:05:28.880 --> 1:05:32.240 So we can virtually not produce positive numbers on the 1:05:32.240 --> 1:05:36.960 bottom line. Explain that because we our effective tax rate 1:05:37.080 --> 1:05:39.560 is over seventy percent, and the reason for that is 1:05:39.560 --> 1:05:42.960 we cannot write off any expenses, which is, by the way, 1:05:43.000 --> 1:05:46.480 really bad for benefits for employees. Anything we try to 1:05:46.480 --> 1:05:48.360 do for employees is not we can't have irais we 1:05:48.400 --> 1:05:50.960 can't do anything because of this tax system. And so 1:05:51.880 --> 1:05:53.960 you know today we can't write off any expenses. So 1:05:54.000 --> 1:05:56.360 that brings us to an effective tax rate of seventy 1:05:56.400 --> 1:05:57.640 plus percent is what we're paying. 1:05:57.680 --> 1:05:58.920 How do you run a business like that? 1:05:59.160 --> 1:06:01.560 If that's the case, that shows you how well these 1:06:01.560 --> 1:06:04.520 companies are actually run. The fact that they can actually 1:06:04.560 --> 1:06:07.760 survive in an atmosphere where we're paying seventy plus percent taxes. 1:06:07.760 --> 1:06:09.840 Okay, beyond the tax benefits, which I know you've talked 1:06:09.840 --> 1:06:12.240 about in the past and have been well documented. How 1:06:12.280 --> 1:06:15.840 do you pivot your business into new areas? Do you 1:06:15.840 --> 1:06:18.680 start selling things differently? Do you start doing things differently 1:06:18.880 --> 1:06:19.560 unrelated to tax? 1:06:19.760 --> 1:06:22.200 So a lot will depend and this is the big unknown. 1:06:22.240 --> 1:06:25.640 A lot will depend on what the DOJ says after 1:06:25.680 --> 1:06:29.439 this rescheduling. So we're expecting a DOJ memo. The code 1:06:29.440 --> 1:06:32.000 word for it is called the Garland Memo that's going 1:06:32.040 --> 1:06:34.320 to come out, very similar to the Cole Memo under Obama, 1:06:34.440 --> 1:06:38.240 which will then describe what they mean by this reschedule, 1:06:38.360 --> 1:06:40.320 like what are the rules going to be in the marketplace. 1:06:40.480 --> 1:06:42.960 And there's a lot of unknowns because at the moment, 1:06:43.000 --> 1:06:46.520 the states control the regulation of cannabis. Right it's still 1:06:46.520 --> 1:06:49.840 federally legal. Rescheduling doesn't make it federally legal. It just 1:06:49.880 --> 1:06:52.880 rescheduled from Schedule one to Schedule three. So now we 1:06:52.960 --> 1:06:55.120 need to see what is the DOJ going to say 1:06:55.160 --> 1:06:57.520 on the back of that. We also have safer banking 1:06:57.600 --> 1:07:01.640 that's going through Congress right now. It's now in joint committee. 1:07:01.720 --> 1:07:03.240 Many people don't realize. 1:07:02.840 --> 1:07:04.600 That my entire career, I'm just. 1:07:04.560 --> 1:07:07.080 Going to say, right, but It's been a big since 1:07:07.080 --> 1:07:08.040 we've been talking about this. 1:07:08.480 --> 1:07:10.440 It's literally I've been looking at this for ten years. 1:07:10.480 --> 1:07:12.240 I'm just as frustrated. But I will tell you what 1:07:12.280 --> 1:07:15.720 I learned last Friday. This is absolutely enjoint committee between 1:07:15.720 --> 1:07:17.919 the Senate and the House that's never happened before. Since 1:07:17.960 --> 1:07:20.920 the beginning, they are now negotiating aspects of that bill, 1:07:21.200 --> 1:07:24.120 and they're looking to bring it in March. I believe 1:07:24.160 --> 1:07:25.720 that's also part of the coordination. 1:07:25.840 --> 1:07:27.960 So you're not worried about November elections in terms of 1:07:27.960 --> 1:07:29.480 how that plays out and could affect this, because do 1:07:29.480 --> 1:07:30.919 you think a lot of it's going to be done 1:07:30.960 --> 1:07:31.680 prior to that. 1:07:31.960 --> 1:07:33.640 I think they're going to try to get a lot 1:07:33.680 --> 1:07:35.000 of it done prior to that. I mean, we have 1:07:35.080 --> 1:07:37.560 two candidates right now that are front runners that are 1:07:37.560 --> 1:07:40.120 both anti cannabis. Let's be honest, both Trump and Biden 1:07:40.200 --> 1:07:43.200 are not necessarily pro cannabis, and so a lot of 1:07:43.200 --> 1:07:47.000 this that's happening today is happening by the Biden campaign 1:07:47.720 --> 1:07:51.360 and by pressure because of the political situation. You know, 1:07:51.440 --> 1:07:54.440 even against all the lobbying by pharma and interest groups 1:07:54.440 --> 1:07:56.800 that are against cannabis, this thing is really starting a 1:07:56.840 --> 1:07:57.440 great traction. 1:07:58.080 --> 1:08:00.720 So tell us a little bit about your business and 1:08:00.760 --> 1:08:04.800 what people are buying. You know, are we moving beyond 1:08:05.120 --> 1:08:07.680 flower and buds? Are we moving into vaping product? 1:08:07.720 --> 1:08:07.760 Like? 1:08:09.360 --> 1:08:11.320 What are you selling the most of I have. 1:08:11.240 --> 1:08:14.160 To say, the industry is really matured, you know, if 1:08:14.160 --> 1:08:16.880 you take a look, and it's different in the US 1:08:16.920 --> 1:08:19.280 and Europe. Purely if is the only company that's got 1:08:19.400 --> 1:08:21.479 US company that has a very substantial presence in Europe. 1:08:21.520 --> 1:08:24.680 We're selling cannabis in four different countries in Europe, and 1:08:24.720 --> 1:08:27.880 in Europe it's very medical, it's almost pharmaceutical in nature. 1:08:28.240 --> 1:08:31.320 So we're selling a lot of formulated pills. We're selling 1:08:31.360 --> 1:08:34.320 a lot of products, but also flour and flour is 1:08:34.400 --> 1:08:36.600 very popular with doctors in Europe as well. In the 1:08:36.720 --> 1:08:38.960 United States has a much broader array of products. It's 1:08:39.040 --> 1:08:41.720 much less regulated in Europe, and so we sell a 1:08:41.720 --> 1:08:44.800 whole assortment the product. One product that's really gaining, and 1:08:44.840 --> 1:08:48.120 I said this a year ago, is drinks. Drinks are 1:08:48.160 --> 1:08:50.920 really starting seltzer waters are really starting to gain iced 1:08:50.960 --> 1:08:52.160 teas with cannabis. 1:08:52.160 --> 1:08:53.360 That's where the growth is bores. 1:08:53.479 --> 1:08:55.640 But what is the growth is definitely in products. But 1:08:55.840 --> 1:08:57.719 flour is still the door opener. 1:08:57.760 --> 1:08:58.719 The bulk of your business. 1:08:58.800 --> 1:09:01.120 The fifty percent of our business is flour and for 1:09:01.160 --> 1:09:04.479 all cannabis company. But when I started it was ninety 1:09:04.520 --> 1:09:08.400 percent and today it's fifty. So that forty percent has 1:09:08.479 --> 1:09:11.160 largely been formulated products, so it stayed constant. 1:09:11.240 --> 1:09:12.200 Everything else has grown. 1:09:12.360 --> 1:09:13.960 That's right, or that's gone down. 1:09:14.040 --> 1:09:15.680 I think the whole industry has been expanding, so I 1:09:15.680 --> 1:09:16.479 would say that's right. 1:09:16.560 --> 1:09:16.800 Okay. 1:09:16.880 --> 1:09:19.679 I'm wondering about your thoughts on the rising concerns over 1:09:19.760 --> 1:09:25.280 high potency THHC products, addiction and associated with that psychosis 1:09:25.320 --> 1:09:28.280 associated with that high potency. Is there any sort of 1:09:28.400 --> 1:09:32.000 threat when it comes from a regulatory perspective in certain 1:09:32.000 --> 1:09:34.120 states about potency caps. 1:09:34.640 --> 1:09:37.599 So I'm going to get criticized from the industry by 1:09:37.600 --> 1:09:40.640 my comments. I'm fully in agreement that there needs to 1:09:40.680 --> 1:09:43.720 be regulation around potency. That's my view. I mean, we 1:09:43.800 --> 1:09:45.880 run the largest company in the world in this area. 1:09:45.920 --> 1:09:47.800 We want to be the responsible company to push this. 1:09:47.880 --> 1:09:51.960 I personally think that there should be potency caps. I 1:09:52.040 --> 1:09:55.679 actually think that the THC is not the most important 1:09:55.720 --> 1:09:57.559 part of the product. I think a lot of the 1:09:57.680 --> 1:10:00.000 terpenes on these products are actually more important. Terms of 1:10:00.160 --> 1:10:02.559 entourage effect than THHC. 1:10:02.120 --> 1:10:04.120 Meaning those other things are the things that make people 1:10:04.160 --> 1:10:05.240 have the feelings. 1:10:04.840 --> 1:10:08.680 Of DAH or relaxed or working with anxiety. Like we're 1:10:08.720 --> 1:10:10.680 doing a lot of R and D right now, and 1:10:10.800 --> 1:10:13.679 cannabinoids outside of THHC that are in the cannabis plant. 1:10:14.479 --> 1:10:16.559 I think that. I mean, for the most part, the 1:10:16.760 --> 1:10:20.120 evidence of addiction on THHC is really anecdotal. There's no 1:10:20.240 --> 1:10:23.200 real evidence that THHD is addictive. Psychosis part though, but 1:10:23.280 --> 1:10:25.880 the psychosis part is a problem. And so in my 1:10:26.080 --> 1:10:29.360 personal opinion, as we need to do science and what 1:10:29.520 --> 1:10:32.400 rescheduling will allow. By the way, that's probably the biggest 1:10:32.400 --> 1:10:35.839 benefit of rescheduling. It will allow federal dollars to finally 1:10:35.880 --> 1:10:38.840 flow into R and D around the cannabis plan because 1:10:38.840 --> 1:10:41.360 today there is no federal dollars around R and D. 1:10:41.520 --> 1:10:43.960 This is going to be a game changer because we 1:10:44.040 --> 1:10:46.400 can now openly do R and D working with the 1:10:46.400 --> 1:10:48.439 government on issues like potency. 1:10:50.080 --> 1:10:52.519 I am curious. We've been talking a lot about elections, 1:10:52.560 --> 1:10:53.640 and I want to go back there. I know we 1:10:53.640 --> 1:10:55.479 talked a little bit about it with you already, but 1:10:55.880 --> 1:10:59.719 does the industry like one candidate over another? And let's 1:10:59.760 --> 1:11:04.599 just zoom that it is a repeat of the Trump 1:11:04.680 --> 1:11:09.200 Biden matchup. Is there one candidate that the industry likes. 1:11:09.040 --> 1:11:14.280 Going into this, I'll tell you because the industry, the 1:11:14.320 --> 1:11:16.760 industry is just like all of us were Americans and 1:11:16.800 --> 1:11:19.840 we're all tired of the political part. 1:11:20.040 --> 1:11:21.600 I can tell you we're just getting started. I know 1:11:22.400 --> 1:11:25.759 you ask is there one that is. 1:11:25.840 --> 1:11:31.080 There's no question. Historically the Democrats have been more favorable, 1:11:31.439 --> 1:11:34.440 but for the most part through lip service, not necessarily 1:11:34.560 --> 1:11:37.920 through action, but at least on the political side, the 1:11:38.040 --> 1:11:41.000 Democrats have been more open to try and push through 1:11:41.439 --> 1:11:44.400 regulatory change on cannabis. So yes, I think the industry 1:11:44.400 --> 1:11:46.599 would err on the side of Democrats for the most 1:11:46.600 --> 1:11:47.920 part over the Republican body. 1:11:48.160 --> 1:11:52.160 I always like to ask about actually using the product. 1:11:52.280 --> 1:11:56.360 CEOs and executives of companies, how do you use cannabis? 1:11:56.360 --> 1:11:57.160 What products do you use? 1:11:57.320 --> 1:12:00.280 So I'm a user every day. I use it for sleep, 1:12:00.680 --> 1:12:02.200 So I travel a lot, I've got a lot of 1:12:02.240 --> 1:12:04.320 jet lag, a lot of stress, anxiety. Being in the 1:12:04.320 --> 1:12:10.559 cannabis industry and having five children definitely adds that. I 1:12:10.640 --> 1:12:12.960 use it every single evening for sleep, and it has 1:12:13.080 --> 1:12:13.920 changed my life. 1:12:13.960 --> 1:12:15.960 Okay, I don't want to blow up your spot or anything, 1:12:15.960 --> 1:12:17.080 but how do you travel with it? 1:12:18.439 --> 1:12:20.960 You know, I just put it in my necessary and 1:12:21.040 --> 1:12:21.760 I travel with it. 1:12:21.800 --> 1:12:24.080 Okay, Sorry, sorry for blowing up your spot. 1:12:26.080 --> 1:12:27.760 You know. In the United States, the worst thing that 1:12:27.840 --> 1:12:30.600 the TSX will do to you, is TSA will do 1:12:30.640 --> 1:12:33.439 to you is actually have you throw it out. That's 1:12:33.479 --> 1:12:35.840 what they'll do, right And for the most part though, 1:12:36.040 --> 1:12:37.599 when it comes to edibles, they are our problem. If 1:12:37.600 --> 1:12:39.519 you're traveling with flour or something like that, they may 1:12:39.560 --> 1:12:41.759 have an issue with it. I have found that edibles 1:12:41.760 --> 1:12:43.479 are not something that they really have an issue with. 1:12:43.680 --> 1:12:46.479 Really interesting, very quickly, what's the one risk to all 1:12:46.520 --> 1:12:49.400 of this since we have been here before, we've had 1:12:49.439 --> 1:12:51.880 a lot of optimism only to kind of have the 1:12:51.960 --> 1:12:52.599 rug pulled. 1:12:52.400 --> 1:12:53.760 Out for There's two things that I would say at 1:12:53.800 --> 1:12:56.360 risk because first of all, political will will they actually 1:12:56.479 --> 1:12:59.320 is this again lip service for politics, But they won't 1:12:59.640 --> 1:13:01.759 take it to the finish line. Because what this industry 1:13:01.840 --> 1:13:04.680 is all about now is show me. It's about show me. 1:13:04.720 --> 1:13:07.000 I mean, if you look at Cure Leaf when public 1:13:07.000 --> 1:13:09.599 in twenty eighteen at a four billion dollar market cap 1:13:10.200 --> 1:13:12.320 at that time, we were doing seventy million dollars in revenue. 1:13:12.360 --> 1:13:14.479 We're going to do over one point five billion this 1:13:14.560 --> 1:13:16.519 year and we're trading at a market cap of three 1:13:16.520 --> 1:13:19.120 point six billion, so we're actually down on our IPO 1:13:19.320 --> 1:13:22.480 five years ago, even though we've grown the business fifteen times, 1:13:22.840 --> 1:13:24.720 all right, right, so it's an amazing thing. 1:13:25.120 --> 1:13:26.479 Is there any other risks or did you get them 1:13:26.479 --> 1:13:26.680 all in? 1:13:27.360 --> 1:13:29.519 I think that the main risk is a political one 1:13:29.760 --> 1:13:31.439 as well, they'll do it. And two is you know 1:13:31.479 --> 1:13:34.000 the lobbying, you know by the pharmaceutical industry that doesn't 1:13:34.000 --> 1:13:36.920 want to see cannabis because it is a replacement product 1:13:36.920 --> 1:13:39.040 for a lot of the pain medicines. We're doing a 1:13:39.080 --> 1:13:40.599 lot of R and D in that area in Europe, 1:13:40.680 --> 1:13:43.080 and I can tell you we're about to launch a 1:13:43.160 --> 1:13:46.400 drug that will address pain medication out of it. We're 1:13:46.400 --> 1:13:48.559 working together with the Imperial College of London on this 1:13:48.960 --> 1:13:50.840 and it's a game changer and that will be a 1:13:50.840 --> 1:13:52.480 big competitor to opiates. 1:13:52.520 --> 1:13:54.479 We'll come back and talk more about that. With that 1:13:55.320 --> 1:13:57.479 and love to hear more about what's to come on 1:13:57.560 --> 1:14:00.160 Boris Jordan, thank you so much. Happy new year to 1:14:00.200 --> 1:14:01.519 have you back, ready. 1:14:01.320 --> 1:14:03.679 To be and it's good to be back in the studio. 1:14:03.760 --> 1:14:06.080 Good to get to know, like the personal loadown on 1:14:06.120 --> 1:14:09.080 how you use your products. He's founder an executive chairman 1:14:09.360 --> 1:14:13.320 of Curely. Joining us here in our interactive Brokers studio. 1:14:17.280 --> 1:14:20.800 You're listening to the Bloomberg Business Week podcast. Catch us 1:14:20.840 --> 1:14:24.040 live weekday afternoons from two to five pm Eastern Listen 1:14:24.120 --> 1:14:24.880 on Apple. 1:14:24.600 --> 1:14:26.240 Car Play and then brought auto with. 1:14:26.240 --> 1:14:30.560 A Bloomberg Business app, or watch us live on YouTube. 1:14:31.600 --> 1:14:33.679 I don't know if you saw this news earlier this week, 1:14:33.720 --> 1:14:34.240 did you, Tim? 1:14:34.280 --> 1:14:38.360 I did, yeah, axios recording that Uber was shutting down Drizzly. 1:14:38.800 --> 1:14:41.080 You remember Drizzly. It's the alcohol delivery service it shelled 1:14:41.080 --> 1:14:43.439 out more than a billion dollars for back in twenty 1:14:43.479 --> 1:14:46.759 twenty one. You can still order alcohol using the Uber app, 1:14:47.240 --> 1:14:49.679 but Drizzly will stop taking orders in March. 1:14:49.880 --> 1:14:52.599 Ah done, that's it all right, well, dob despair. There 1:14:52.600 --> 1:14:54.559 are other ways to get alcohol deliveredy if you're over 1:14:54.600 --> 1:14:57.040 twenty one. Of course. One of those ways is using 1:14:57.080 --> 1:15:00.599 Reserve Bars Minibar Delivery, which has been delivering booze for 1:15:00.680 --> 1:15:01.719 more than a decade. 1:15:01.880 --> 1:15:04.240 We've got Derek Correa on with us. He's CEO of 1:15:04.280 --> 1:15:06.960 Reserve Bar. It's an e commerce company specializing in rare 1:15:06.960 --> 1:15:09.000 and high end spirits and also of course the company 1:15:09.000 --> 1:15:12.240 that runs mini bar delivery. Derek joins us on Zoom 1:15:12.520 --> 1:15:15.200 from Bedford, New York. Derek, good to have you with 1:15:15.280 --> 1:15:17.519 us this afternoon. We made a joke earlier in the 1:15:17.560 --> 1:15:20.519 day about dry January and giving up your phone for January, 1:15:20.600 --> 1:15:22.719 but of course, drive January is when people tend. 1:15:22.479 --> 1:15:25.639 To give up booze. How is business? 1:15:25.640 --> 1:15:27.080 Do you notice a drop off when it comes to 1:15:27.160 --> 1:15:28.879 January as a result of dry January? 1:15:29.680 --> 1:15:29.800 Hi? 1:15:29.840 --> 1:15:33.439 Tim? Yeah, thanks for having me on. Yeah, definitely. In fact, 1:15:34.000 --> 1:15:37.240 starting about five or six years ago, it started to 1:15:37.280 --> 1:15:40.320 be a noticeable thing. And I would actually say that 1:15:40.400 --> 1:15:43.599 it seems that dry January is becoming more popular, which 1:15:43.640 --> 1:15:47.120 is a great thing. There's a lot more beverages available 1:15:47.160 --> 1:15:51.040 to satisfy, you know, a not drinking situation where you 1:15:51.040 --> 1:15:55.200 can still drink a quality non alcohol beer or a mocktail. 1:15:55.520 --> 1:15:57.599 So there's a lot better options in the market now. 1:15:57.760 --> 1:16:00.479 So how much of that you're Tim? You're into mocktails. 1:16:00.520 --> 1:16:04.200 Oh yeah, and I'm all about that alcoholoholic beer. The mocktails. 1:16:04.200 --> 1:16:05.880 It's like, yeah, it's kind of funny. I mean I 1:16:06.040 --> 1:16:07.880 drink more of that than the actual real stuff. 1:16:07.920 --> 1:16:09.280 So Derek, you tell that as well. 1:16:09.320 --> 1:16:13.000 Correct, Yeah, we do, and increasingly so. So we have 1:16:13.040 --> 1:16:16.320 those products on our platform as well. And in fact, 1:16:16.600 --> 1:16:18.920 you know, even on an everyday basis, if you're using 1:16:18.920 --> 1:16:21.559 our platform to provision because you're having a party or 1:16:21.920 --> 1:16:25.000 you're getting stuff for your own home, we always encourage 1:16:25.000 --> 1:16:28.240 people to buy non alcohol product as well. If you're 1:16:28.240 --> 1:16:30.679 a host, that's the way to be a good host 1:16:30.800 --> 1:16:33.360 is to serve a great variety of beer, wine, and 1:16:33.400 --> 1:16:37.080 spirits and cocktails, but also have non olt drinks available 1:16:37.120 --> 1:16:39.920 for your guests, many of them who don't drink even 1:16:40.120 --> 1:16:41.120 when it's not January. 1:16:41.120 --> 1:16:42.800 I see this at restaurants all over the city. Kill 1:16:42.840 --> 1:16:44.040 Do you see this where you look at the wine 1:16:44.080 --> 1:16:46.600 list or you look at the beer list and it 1:16:46.640 --> 1:16:50.200 always includes in this in twenty twenty three, twenty twenty four, 1:16:50.360 --> 1:16:52.719 a list of mocktails or non alcoholic options. 1:16:52.760 --> 1:16:53.240 Totally see. 1:16:53.240 --> 1:16:54.240 It hasn't always been like that. 1:16:54.360 --> 1:16:56.840 No, it hasn't. So this is where I want to go. Derek. 1:16:56.880 --> 1:16:58.519 You guys correct me if I'm wrong. I think you 1:16:58.560 --> 1:17:01.040 started back in twenty thirty, is that correct? 1:17:01.320 --> 1:17:03.519 Yeah? Pretty much right around the same time as Drizzly. 1:17:03.680 --> 1:17:05.960 All right, all right, so tell us about that. That's 1:17:06.000 --> 1:17:08.240 a good look at kind of this market. So a 1:17:08.280 --> 1:17:11.680 decade in, how has the market changed and what are 1:17:11.720 --> 1:17:13.479 the trends that we were seeing today when it comes 1:17:13.479 --> 1:17:15.120 to ordering this way. 1:17:15.560 --> 1:17:18.840 Yeah, so the market grew pretty steadily and you know, 1:17:18.920 --> 1:17:22.960 relatively conservative conservatively for a lot of that time. Then, 1:17:23.000 --> 1:17:26.200 of course COVID came along and shut down bars and 1:17:26.280 --> 1:17:30.120 restaurants and to a certain extent even shut down retail 1:17:30.160 --> 1:17:33.519 because people weren't out, and that really accelerated the e 1:17:33.560 --> 1:17:36.120 commerce adoption rate. When you know, for the most part, 1:17:36.120 --> 1:17:38.840 it was the only way to get beveridge alcohol, So 1:17:39.320 --> 1:17:42.599 that accelerated all the businesses, including Reserve Bar and Drizzly 1:17:43.120 --> 1:17:45.400 and Mini Bar at the time was not owned by us, 1:17:45.439 --> 1:17:49.000 and we acquired Mini Bar Delivery during the midst of 1:17:50.320 --> 1:17:53.639 the pandemic. And since then, you know, now the restaurants 1:17:53.640 --> 1:17:55.280 and bars are open, there's been a little bit of 1:17:55.280 --> 1:17:58.639 a cooling off. People are going back out and enjoying 1:17:59.040 --> 1:18:02.639 restaurants and bars and their favorite cocktails and drinks out. 1:18:02.720 --> 1:18:06.280 But e commerce, in addition to the platforms, is happening 1:18:06.360 --> 1:18:09.559 in a lot of new ways. So when we saw 1:18:09.840 --> 1:18:13.240 that Uber acquired Drizzley, we fully expected them at some 1:18:13.360 --> 1:18:17.960 point to ingest it into the Uber Eats platform. That 1:18:18.040 --> 1:18:21.519 makes sense, But people are buying on platforms like Mini 1:18:21.520 --> 1:18:23.760 Bar Delivery, which can get you most products you could 1:18:23.760 --> 1:18:26.439 ever want in an hour. On Reserve Bar, where we 1:18:26.479 --> 1:18:32.120 offer a little bit more curated, higher end, information rich experience, 1:18:32.160 --> 1:18:34.720 that's better for people who are enthusiasts and want to 1:18:34.720 --> 1:18:39.200 explore new bourbons and scotches and so forth. But increasingly 1:18:39.240 --> 1:18:42.920 people are buying. They're not just shopping intentionally. That only 1:18:42.920 --> 1:18:45.639 happens about fifteen or twenty minutes a day. That's when 1:18:45.680 --> 1:18:47.680 you end up on a platform like Reserve Bar and 1:18:47.720 --> 1:18:50.719 Mini Bar Delivery. But when you're reading an article about 1:18:51.080 --> 1:18:54.719 great spirits, or you're out and you're watching a video 1:18:54.800 --> 1:18:59.400 and it includes a great cocktail. We're creating shoppable moments 1:18:59.400 --> 1:19:02.880 in all of those instances, because even though you weren't shopping, 1:19:03.280 --> 1:19:05.680 if you're exposed to the right product at the right 1:19:05.760 --> 1:19:09.519 moment and you can buy it right, then people are 1:19:09.640 --> 1:19:11.559 and that's really the future of e commerce. 1:19:11.880 --> 1:19:15.280 Hey, Derek, So I want to go back to this 1:19:15.360 --> 1:19:17.439 idea of what Carol was talking about in the trend 1:19:17.720 --> 1:19:20.360 of what you're just seeing on the platform. I was 1:19:20.479 --> 1:19:22.800 doing some research ahead of this, and it turns out 1:19:22.840 --> 1:19:25.920 that I'm not alone, Carol when it comes to, you know, 1:19:26.040 --> 1:19:31.639 not drinking alcohol anymore. So Gallup says that younger adults 1:19:31.680 --> 1:19:33.479 these days, oh, I don't know if I'm considered younger 1:19:33.479 --> 1:19:37.160 adult anymore anyway, are less likely to drink than those 1:19:37.400 --> 1:19:40.599 of the same age two decades ago. So that's happening. However, 1:19:40.760 --> 1:19:45.559 older adults are drinking more. So is there this shift 1:19:45.600 --> 1:19:47.400 happening where young people aren't drinking as much and they're 1:19:47.439 --> 1:19:49.559 going to continue not drinking as much, or they're going 1:19:49.600 --> 1:19:51.759 to actually start to drink more as they get older. 1:19:52.160 --> 1:19:54.639 You know, that's a really interesting question. What we're seeing 1:19:54.680 --> 1:19:59.000 is people are drinking differently. I think the older people 1:19:59.200 --> 1:20:04.080 have more disposed income are drinking better. And especially during 1:20:04.080 --> 1:20:07.800 the pandemic, we saw a lot of premiumization of you know, 1:20:07.800 --> 1:20:10.439 people weren't spending money at restaurants or bars, they were 1:20:10.560 --> 1:20:13.280 not going on vacation. They had more money, so they 1:20:13.320 --> 1:20:16.559 started to explore higher end marks. If they liked scotch, 1:20:16.600 --> 1:20:20.280 they started drinking nicer scotches. Drank gin, they drank nicer ones. 1:20:20.320 --> 1:20:23.559 The younger people, I think when I say they're drinking differently, 1:20:23.600 --> 1:20:27.720 they're drinking more mindfully, They're thinking more about how and 1:20:27.800 --> 1:20:31.680 when they drink. They're more dialed into calories and wellness 1:20:31.720 --> 1:20:37.120 in general. They actually drink cocktails more frequently than younger 1:20:37.160 --> 1:20:40.599 people did, even as recently as four or five years ago, 1:20:40.600 --> 1:20:44.599 when young people mostly drank beer and wine. So the 1:20:44.640 --> 1:20:47.599 things are changing, and you know, the nice thing about 1:20:47.600 --> 1:20:51.479 our platforms is we have an immediate view, literally day 1:20:51.479 --> 1:20:54.440 by day, minute by minute, as to what the consumer 1:20:54.560 --> 1:20:58.000 is doing, and can constantly adapt our product assortment and 1:20:58.040 --> 1:21:00.000 our tactics to those changes. 1:21:00.160 --> 1:21:02.040 You know, we do a beach house typically we have 1:21:02.160 --> 1:21:04.880 with kind of our family and extended family, so it's 1:21:05.320 --> 1:21:07.600 you know, the kids have grown up. They're all teenagers 1:21:07.680 --> 1:21:09.719 or in their twenties and thirties, and it's just interesting. 1:21:09.800 --> 1:21:11.360 It's not beer. It's a lot of wine, but it's 1:21:11.360 --> 1:21:13.599 also a lot of cocktails that we increasingly are making 1:21:13.680 --> 1:21:16.559 and that's what they want to make as well. Having 1:21:16.600 --> 1:21:20.000 said that, is there a core consumer that is doing 1:21:20.040 --> 1:21:22.760 the most business on your platform? 1:21:22.800 --> 1:21:26.280 Derek, Yeah, So you know, we have different platforms and 1:21:26.640 --> 1:21:30.280 different people use them for different occasions and for different things. Right, 1:21:30.400 --> 1:21:34.439 Mini bar delivery is perfect for provisioning your everyday products. 1:21:34.520 --> 1:21:37.040 You have some friends coming over, you realize you're out 1:21:37.080 --> 1:21:39.240 of beer, or you need some vodka. You can get 1:21:39.280 --> 1:21:41.800 that brought to your house in an hour. Reserve bar 1:21:41.960 --> 1:21:44.880 is more. You know, you're maybe sort of just kind 1:21:44.920 --> 1:21:48.280 of flexing yourself into knowing about bourbon, and so you're 1:21:48.320 --> 1:21:51.080 coming because you can learn more about bourbon. You can 1:21:51.400 --> 1:21:55.759 you know, immerse yourself in deep information about distillation methods 1:21:55.840 --> 1:21:59.879 and ingredients, and that becomes, especially for the younger consumer, 1:22:00.400 --> 1:22:03.519 not only valuable on that path to purchase and that 1:22:03.600 --> 1:22:07.599 customer journey and providing that, but increasingly, you know, beverage 1:22:07.600 --> 1:22:10.720 ago is a very social thing and there's kind of 1:22:10.760 --> 1:22:14.799 social currency and knowing about tequila and knowing about bourbon 1:22:14.840 --> 1:22:18.000 and knowing how to make a great Manhattan or boulevardier. 1:22:18.240 --> 1:22:21.280 So younger people are often coming to our platform not 1:22:21.479 --> 1:22:24.439 just to buy, but also because it has the content 1:22:24.600 --> 1:22:28.799 they need to continue their journey of education and knowledge. 1:22:28.840 --> 1:22:31.080 Hey, Derek, we only have thirty seconds left and then 1:22:31.080 --> 1:22:32.400 we're going to come back. We'll do some news and 1:22:32.439 --> 1:22:34.839 come back with you, but are you seeing more growth 1:22:34.840 --> 1:22:37.880 on Mini Bar Delivery or on Reserve Bar. 1:22:38.720 --> 1:22:41.880 You know, they both again because they serve as different customers, 1:22:41.880 --> 1:22:45.360 they grow differently at different times. Reserve Bar does a 1:22:45.360 --> 1:22:48.599 lot of gifting business and corporate gifting, so it has 1:22:48.640 --> 1:22:53.759 a tremendous you know, October, November, December. Mini Bar actually 1:22:53.840 --> 1:22:57.120 pops other times a lot of times for parties like 1:22:57.200 --> 1:23:01.200 Halloween for instance. Is not a big deal for Reserve Bar, 1:23:01.320 --> 1:23:03.439 but it is a big deal for many bar. So 1:23:03.479 --> 1:23:06.000 they both grow, and they grow in different ways at 1:23:06.000 --> 1:23:08.719 different times for different occasions and needs. 1:23:08.840 --> 1:23:10.120 That's going to be a good for you though, Like 1:23:10.120 --> 1:23:11.800 you're kind of covering, you know, if you can cover 1:23:11.880 --> 1:23:14.559 most of the year with these two different businesses. But 1:23:14.640 --> 1:23:16.400 I want to get to some of the brands because 1:23:16.520 --> 1:23:18.760 Tim and I have been kind of all over your platforms, 1:23:18.800 --> 1:23:21.640 both minibar and Reserve Bar, and it's really quite a 1:23:21.800 --> 1:23:24.840 range and quite a variety. So talk to us about 1:23:24.880 --> 1:23:26.680 some of what you want to make sure is out 1:23:26.720 --> 1:23:27.640 there for customers. 1:23:29.000 --> 1:23:32.240 Yeah. So the great thing about these two platforms is 1:23:32.520 --> 1:23:35.519 another difference as Mini Bar Delivery as over thirty five 1:23:35.600 --> 1:23:39.000 hundred retailers and you can buy essentially all of the 1:23:39.040 --> 1:23:42.519 products that are available from those retailers, so that's kind 1:23:42.600 --> 1:23:46.280 of a max assortment, which is great. You can search 1:23:46.320 --> 1:23:50.720 for and find anything. Products are merchandised within categories. The 1:23:50.720 --> 1:23:53.680 shopping journeys are easy. All of your favorite brands are 1:23:53.720 --> 1:23:57.400 going to be there, whether it's Tito's vodka or Bullet Bourbon, 1:23:58.520 --> 1:24:01.400 and you can find some unique stuff to Reserve Bar 1:24:01.560 --> 1:24:04.400 is more curated, so we've actually spent the time with 1:24:04.479 --> 1:24:08.680 our experts to find really the best stuff to have 1:24:08.720 --> 1:24:12.559 a lot more information and education and intrigue in those 1:24:12.560 --> 1:24:15.599 shopping journeys for people who are more passionate to find 1:24:15.720 --> 1:24:19.439 rare and limited products. We are the main platform in 1:24:19.479 --> 1:24:23.519 this industry for launching new products, which includes new products 1:24:23.560 --> 1:24:26.639 from all of the brands and the companies that create 1:24:26.720 --> 1:24:28.720 new brands, as well as a lot of celebrity. We 1:24:28.840 --> 1:24:31.960 just launched The Rolling Stones have a new rum called 1:24:32.040 --> 1:24:35.280 Crossfire Hurricane Cool and that was just launched on our platform. 1:24:35.320 --> 1:24:38.200 So oftentimes you can get products on Reserve Bar that 1:24:38.280 --> 1:24:43.120 really aren't available anywhere else, and including our own cask selections. 1:24:43.120 --> 1:24:46.480 For those of you who are really into bourbon and tequila, 1:24:46.200 --> 1:24:50.439 we go to distilleries and pick tasks specifically for us 1:24:50.479 --> 1:24:53.160 that we bottle off and have very limited quantity. 1:24:53.520 --> 1:24:56.960 Derek, how does fulfillment work with Reserve Bar? Do you 1:24:57.000 --> 1:25:00.880 actually have the inventory and you guys are responsible for 1:25:01.320 --> 1:25:03.200 shipping it out or do you do you outsource that 1:25:03.240 --> 1:25:05.559 like you do with Mini bar delivery? 1:25:06.280 --> 1:25:08.880 Yeah, that's a good question. Tim. None of our platforms 1:25:08.880 --> 1:25:11.240 and we as a company do not hold a license, 1:25:11.280 --> 1:25:14.720 so we never touch any bottles of alcohol. We don't 1:25:14.720 --> 1:25:17.800 have any inventory. We're really a technology company wow, that 1:25:17.840 --> 1:25:22.160 has very deep technology to comply with beverage alcohol laws 1:25:22.479 --> 1:25:25.240 and to connect with our network of retailers to match 1:25:25.320 --> 1:25:27.960 you as a as a customer who's interested in buying 1:25:28.000 --> 1:25:30.760 something with a retailer that so as that product that 1:25:30.840 --> 1:25:31.400 a good price. 1:25:31.439 --> 1:25:31.840 So if that. 1:25:32.000 --> 1:25:33.600 Overhead, yeah, so if you. 1:25:33.720 --> 1:25:36.120 But if you want to buy something that is exclusively 1:25:36.120 --> 1:25:39.040 available on your platform, who then ends up fulfilling that order? 1:25:39.880 --> 1:25:43.439 Yeah, there's certain retailers in our network that benefit from 1:25:43.560 --> 1:25:46.800 being associated with us and our relationships with the distributors 1:25:46.840 --> 1:25:49.160 and the brands, so we know that they're going to 1:25:49.200 --> 1:25:51.960 be the ones that are getting that product, and we're 1:25:51.960 --> 1:25:54.040 then able to route the orders. 1:25:53.880 --> 1:25:56.200 Or these, But are these retailers like mom and pop 1:25:56.200 --> 1:25:58.720 liquor stores. I mean, I remember ordering a bottle of 1:25:58.800 --> 1:26:01.360 bourbon from my mom that she liked, and the closest 1:26:01.360 --> 1:26:04.000 place it was available was somewhere in Long Island. 1:26:04.320 --> 1:26:05.400 Nice missus Stentevik. 1:26:05.560 --> 1:26:06.439 Yeah, yes, she. 1:26:06.520 --> 1:26:11.560 Liked it, but it was it was something that was 1:26:11.640 --> 1:26:14.160 kind of hard to find, but it came from essentially 1:26:14.160 --> 1:26:16.280 a local store on Long Island that just had it. 1:26:16.320 --> 1:26:16.720 I don't even know. 1:26:16.800 --> 1:26:19.280 Maybe I used reserve bar, I don't remember. But is 1:26:19.320 --> 1:26:21.040 that how it works? Like they're the ones who then 1:26:21.080 --> 1:26:23.360 ship it and you guys don't you guys don't ever 1:26:23.439 --> 1:26:23.760 touch it. 1:26:24.160 --> 1:26:27.600 Yeah. Right, So, for widely available products that were available 1:26:27.680 --> 1:26:29.800 near you, if you were wanting it for yourself or 1:26:30.200 --> 1:26:33.360 near your mom, it would come from that local retailer 1:26:33.400 --> 1:26:36.800 and be delivered locally, but you'd get to shop a 1:26:36.800 --> 1:26:39.960 more interesting assortment that might not be available near you 1:26:40.080 --> 1:26:43.040 or a gift recipient, and we'll then ship that product 1:26:43.040 --> 1:26:47.280 to them in a compliant fashion, very packaged, very nicely 1:26:47.320 --> 1:26:50.519 and safely. So that's how you can access a more 1:26:50.800 --> 1:26:53.560 compelling product assortment that you might otherwise be able to 1:26:53.600 --> 1:26:54.160 get locally. 1:26:54.280 --> 1:26:56.360 So then for as the business model. We're Bloomberg and 1:26:56.360 --> 1:26:58.280 we're always interested in this kind of stuff, so kind 1:26:58.280 --> 1:27:00.600 of getting in the weeds. So do you guys just 1:27:00.680 --> 1:27:03.519 get a percentage of the order or do you just 1:27:03.560 --> 1:27:06.080 get a set fee on every order that's made? How 1:27:06.080 --> 1:27:06.639 does it work? 1:27:06.720 --> 1:27:09.879 Yeah, that's exactly right. So we're basically a marketing service 1:27:09.960 --> 1:27:12.559 for the retailers in our network, and the reason they 1:27:12.600 --> 1:27:15.920 sign up with us is because we're sending them incremental orders. 1:27:16.320 --> 1:27:19.240 So in exchange for that, they give us a small 1:27:19.320 --> 1:27:22.880 fee associated with sourcing that order because it's incremental to 1:27:22.960 --> 1:27:25.920 their business and they wouldn't have otherwise. Got it, all right? 1:27:25.960 --> 1:27:27.800 Tell us two about pricing strategy, and I'm going to 1:27:27.800 --> 1:27:29.599 pour a little bit of wine. You guys have been 1:27:29.680 --> 1:27:30.799 kind enough to send. 1:27:30.840 --> 1:27:32.840 Which God knew I would have had my own wine 1:27:32.840 --> 1:27:33.200 as well. 1:27:33.320 --> 1:27:34.200 I wish you had. 1:27:34.800 --> 1:27:35.599 I feel terrible. 1:27:36.040 --> 1:27:37.880 I'm not quite drinking alone, but it would be nice 1:27:37.880 --> 1:27:40.120 to have you as a part of this. You shared 1:27:40.160 --> 1:27:42.679 with us a bottle of Josh Seller's legacy Red Bland 1:27:43.040 --> 1:27:47.759 Red Bland. Excuse me looking on the website Mini bar delivery, 1:27:48.000 --> 1:27:50.720 it's about fourteen dollars a bottle. But you guys have 1:27:51.000 --> 1:27:55.320 quite a range of stuff that's out there. How do 1:27:55.400 --> 1:27:58.120 you think about price point in terms of I'm going 1:27:58.200 --> 1:27:58.639 to share it. 1:27:59.200 --> 1:28:00.880 Like this, I'm going to share this one is a meme? 1:28:00.920 --> 1:28:01.680 Now did you know that? 1:28:02.240 --> 1:28:03.160 I know it is a meme? 1:28:03.280 --> 1:28:05.800 Our producer was talking about one of our producers. How 1:28:05.840 --> 1:28:08.160 do you think about price point? Is there any strategy 1:28:08.200 --> 1:28:08.559 behind that? 1:28:08.960 --> 1:28:09.200 Yeah? 1:28:09.240 --> 1:28:11.919 So, you know, one of the hardest things about operating 1:28:11.920 --> 1:28:16.240 in this industry is the regulations federal, state, county, city, 1:28:16.840 --> 1:28:20.280 and one of those that's very clear is that retailers 1:28:20.320 --> 1:28:24.599 have to be the ones that sell you beverage alcohol, wine, spirits, beer, 1:28:24.640 --> 1:28:26.400 and they have to set the price for it. That 1:28:26.560 --> 1:28:30.519 is a universal regulatory situation. So the prices that you 1:28:30.640 --> 1:28:34.120 see on our platforms are actually the prices from the 1:28:34.120 --> 1:28:37.679 retailers in our network, and so our technology is seeing 1:28:38.240 --> 1:28:41.680 is the product you want available, which retailer has the 1:28:41.720 --> 1:28:44.519 best price, which one is closest to you, and kind 1:28:44.520 --> 1:28:47.120 of doing all of that hard work for you as 1:28:47.160 --> 1:28:50.080 a shopper to match you with a retailer and a 1:28:50.120 --> 1:28:52.320 product that can get to you quickly at a good price. 1:28:52.400 --> 1:28:54.719 Derek, what was the strategy of getting all these retailers 1:28:54.760 --> 1:28:57.240 on the platform. Was it old fashioned shoe leather? Was 1:28:57.240 --> 1:28:59.720 it picking up the phones like it's a one off thing? 1:29:00.040 --> 1:29:00.920 I mean, this is tough to do. 1:29:01.439 --> 1:29:04.439 Yeah, it's all of those things. And in the early days, 1:29:04.640 --> 1:29:06.759 it was a slog you know, when you were calling 1:29:07.160 --> 1:29:09.040 you were telling me you were calling from reserve bar, 1:29:09.080 --> 1:29:12.559 and they'd say who what and you'd have to explain 1:29:12.800 --> 1:29:16.400 the entire concept of e commerce. Nowadays, I think it's 1:29:16.400 --> 1:29:21.320 pretty universally understood. And the retailers. We are still you know, 1:29:21.400 --> 1:29:23.880 reaching out to retailers, but many are coming to us 1:29:24.400 --> 1:29:27.200 curious about the benefits to them and the commercial terms 1:29:27.200 --> 1:29:31.120 of joining our platform. And it is open to you know, expansion, 1:29:31.160 --> 1:29:33.439 and we are still in the process of adding more 1:29:33.479 --> 1:29:34.280 throughout the country. 1:29:34.320 --> 1:29:36.519 Hey, Derek just got about twenty seconds left here, twenty 1:29:36.560 --> 1:29:39.519 five seconds. What's next for you guys, as we are 1:29:39.520 --> 1:29:41.479 going to sample the wine and because it is Josha 1:29:41.560 --> 1:29:44.800 clock somewhere, but what's next for you guys? 1:29:44.960 --> 1:29:47.720 Well, what's next is what's right now actually, which is 1:29:47.760 --> 1:29:50.840 because we don't hold license a license, we're able to 1:29:50.880 --> 1:29:54.040 syndicate our technology and all kinds of interesting places, like 1:29:54.360 --> 1:29:56.599 if you were to read an article on Whiskey Advocate 1:29:56.640 --> 1:29:59.680 about the twenty best Scotches. You could buy any of 1:29:59.720 --> 1:30:04.160 those gotches right there without leaving Whiskey Advocate and continue 1:30:04.400 --> 1:30:07.840 consuming that content and also buy whatever you wanted. And 1:30:07.880 --> 1:30:11.160 we're also powering the websites of brands because lots of 1:30:11.160 --> 1:30:14.080 people go to visit sites like Hennessee dot com or 1:30:14.120 --> 1:30:17.000 the McAllen dot com and they can't sell you about 1:30:17.040 --> 1:30:19.840 of alcohol directly because of the three tier system. But 1:30:19.920 --> 1:30:23.120 our technology enables you to shop and buy because you 1:30:23.240 --> 1:30:26.160 actually are buying from a license retailers, You're going to 1:30:26.240 --> 1:30:28.040 take a lot more innovation at that time. 1:30:28.160 --> 1:30:30.240 Yeah, it's interesting you guys are doing. Hey listen, come 1:30:30.280 --> 1:30:32.840 back soon and hopefully then we can share a drink together. 1:30:32.960 --> 1:30:35.759 But I'd love to kind of hear as you continue 1:30:35.760 --> 1:30:39.040 on in this business. Derek Correa, who's CEO Reserve Bar 1:30:40.000 --> 1:30:42.280 and also of course to the company that runs Manibar Delivery. 1:30:42.960 --> 1:30:47.600 This is the Bloomberg Business Week podcast, available on Apple, Spotify, 1:30:47.760 --> 1:30:51.479 and anywhere else you get your podcasts. Listen live weekday 1:30:51.479 --> 1:30:55.120 afternoons from two to five pm Eastern on Bloomberg dot com, 1:30:55.160 --> 1:30:58.479 the iHeartRadio app tune In, and the Bloomberg Business app. 1:30:58.520 --> 1:31:01.479 You can also watch us live every weekday on YouTube 1:31:01.720 --> 1:31:03.679 and always on the Bloomberg Terminal 1:31:10.400 --> 1:31:10.799 MHM