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Speaker 1: Hi, everyone, welcome to the Bloomberg Business Wee Weekend Podcast.
Speaker 1: We are coming off a FED meeting that played out
Speaker 1: as many investors expected, with FED officials lowering their benchmark
Speaker 1: interest rate by a quarter percentage point and penciling in
Speaker 1: two more rate reductions this year. Policymakers pointed to growing
Speaker 1: signs of weakness in the labor market, while also acknowledging
Speaker 1: that inflation has quote moved up and remained somewhat elevated.
Speaker 1: End quote. For the latest on that FED decision and
Speaker 1: all the analysis that we did here at Bloomberg and
Speaker 1: post market action, head to the Bloomberg or Bloomberg dot Com.
Speaker 3: Also happening this week, President Trump's second state visit as
Speaker 3: president to the UK, bringing along with him the CEOs
Speaker 3: of Apple, Nvidia, and Microsoft, among many others, to an
Speaker 3: ounce deals and spend tens of billions of dollars on
Speaker 3: tech infrastructure in the UK.
Speaker 1: We meantime, focused on the data center build out and
Speaker 1: spend in the United States. We did that with the
Speaker 1: CEO of the seventy seven billion dollar market cap reate Equinis.
Speaker 3: Plus the CMBs pioneer who's thrown his hat into the
Speaker 3: California governor's race.
Speaker 1: All that to come, we begin with a big story
Speaker 1: in the chip world, and Vidia agreed to invest five
Speaker 1: billion dollars in Intel and said the two will co
Speaker 1: develop chips for PCs and data centers, a surprise move
Speaker 1: to help prop up an ailing arch rival that sent
Speaker 1: Intel shares soaring on the news.
Speaker 3: For more on this, we were joined by Chris Miller,
Speaker 3: professor at the Fletcher School at Tufts University. He's also
Speaker 3: non resident Senior Fellow at the American Enterprise Institute and
Speaker 3: advises businesses and more at the consultancy Green Mantle. He
Speaker 3: of course, also is the author of the book Chipwar,
Speaker 3: The Fight for the World's Most Critical Technology.
Speaker 4: I think from the perspective of ten years ago, this
Speaker 4: would have been a pretty surprising pair up, but today
Speaker 4: there's a real logic for it. In Vidia is a
Speaker 4: leader in AI chips. Intel has been trying to catch
Speaker 4: up when it comes to AI. But also Intel's got
Speaker 4: a lot of unique know how when it comes to
Speaker 4: building processor chips, which AI servers still require. So certainly
Speaker 4: on the chip design side, there's differing areas of expertise
Speaker 4: that both of these companies can bring together, all.
Speaker 1: Right, but just all of it together. The US taking
Speaker 1: that ten percent, approximately ten percent stake in Intel over
Speaker 1: this summer, You've got SoftBank, there are two billion dollar
Speaker 1: investment now in Nvidia. What is this? I mean, is
Speaker 1: this what you thought would happened need to happen to
Speaker 1: ensure us remain a dominant player in the semi space.
Speaker 4: Well, I think we're going to need to wait and
Speaker 4: see what implication this announcement has, if any, for Intel's
Speaker 4: manufacturing business. I think there's no doubt that Intel's going
Speaker 4: to be an important chip designer in the future, perhaps
Speaker 4: smaller than it used to be, but they've got a
Speaker 4: unique position in the market on the chip design side.
Speaker 4: But from a national perspective, what really matters is Intel's
Speaker 4: manufacturing arm and that's where Intel has really struggled the
Speaker 4: last couple of years to stay at the cutting edge
Speaker 4: technologically and also to win customers away from TSMC, the
Speaker 4: Taiwanese market rival, and today in Vidia produces almost all
Speaker 4: of its most advanced ships with TSMC. There's been a
Speaker 4: big push from Washington to get companies like in Nvidia
Speaker 4: to diversify their supply and to try to help Intel
Speaker 4: become a more successful manufacturer of chips for other companies.
Speaker 4: The announcement doesn't really say anything about that, but I
Speaker 4: think a lot of people will ask whether this is
Speaker 4: a stepping stone for other US companies in video or
Speaker 4: some of its peers to bring more of their manufacturing
Speaker 4: business to Intel's manufacturing arm.
Speaker 1: So tip war it is on? Or where are we?
Speaker 1: Is it the beginning of the chip war? And I'm
Speaker 1: just curious, are you starting to think about I don't know,
Speaker 1: another book and where it goes from here? Give us
Speaker 1: your thought here?
Speaker 4: Why I think we're in the thick of the chip
Speaker 4: war right now? Next to this news about in Nvidia
Speaker 4: and Intel, there's a big debate going on in Beijing
Speaker 4: and in Washington about which company should be allowed to
Speaker 4: buy which type of the AI accelerators that Nvidia specializes
Speaker 4: in designing that are almost exclusively today produced in Taiwan.
Speaker 4: And so you've got these competitive commercial dynamics intersecting with
Speaker 4: high geopolitics, and today you can't really separate the chip
Speaker 4: industry from the decisions of President Trump or from Chairman
Speaker 4: she Well.
Speaker 3: That's a really good point and kind of brings me
Speaker 3: to my question about Intel specifically in the US taking
Speaker 3: this unprecedented stake in this chip maker earlier this year.
Speaker 3: What did you think of that, Chris.
Speaker 4: Well, I think the US has been pretty clear in
Speaker 4: its desire, going all the way back to the first
Speaker 4: Trump administration through the Bide administration, as well as both
Speaker 4: houses at Congress, both parties that it sees Intel's success
Speaker 4: in manufacturing as important for US national security. Right now,
Speaker 4: most of the world's advanced processor chips are produced by
Speaker 4: one company in one country, Taiwan, and the US wants
Speaker 4: a more diversified base of manufacturing these ultra critical chips
Speaker 4: that are key both for smartphones and computers, but especially
Speaker 4: for ai and Intel is one of the three companies
Speaker 4: in the world, alongside Samsung and TSMC, that can produce
Speaker 4: these cutting edge chips, and it's the only US company,
Speaker 4: the only company with a major US footprint, at least
Speaker 4: right now. And so that's why the US government has
Speaker 4: been trying to find ways to help Intel out. So
Speaker 4: what wouldations get going?
Speaker 3: Well, what would it take for Intel to be able
Speaker 3: to compete with TSMC? I mean it got money from
Speaker 3: the US government. It got money. It's getting money from
Speaker 3: Intel here. As Carol always says, the devil's in the details.
Speaker 3: And you said, we need to see exactly where this
Speaker 3: money goes. But what do we need to see to say, Okay,
Speaker 3: this company, this US company, is now competing with TSMC.
Speaker 4: So there's no doubt that Intel needs money, and it's
Speaker 4: raised some money from soft Bank and the US government,
Speaker 4: But the key thing that it needs is customers for
Speaker 4: its advanced manufacturing processes. You'd only prove whether or not
Speaker 4: they work if you've got at least medium sized, but
Speaker 4: ideally large scale customers that are going to let you
Speaker 4: produce thousands, tens of thousands, eventually millions of chips on
Speaker 4: your manufacturing process. You can't scale up without customers, and
Speaker 4: right now, Intel's got a couple of smaller customers for
Speaker 4: its manufacturing business, but it's thus far failed to win
Speaker 4: a very large scale customer, and Nvidia's one example of
Speaker 4: a company. There are others that could provide a really
Speaker 4: large contract that would let Intel test out its cutting
Speaker 4: edge manufacturing. And right now I think the entire ecosystem
Speaker 4: is waiting to see will it win some big customers
Speaker 4: that lets it complete that scale out and testing of
Speaker 4: its cutting edge manufacturing.
Speaker 1: All right, so we're talking abou Chris Miiler, professor of
Speaker 1: International History at the Fletcher School at Tufts University, author
Speaker 1: of Chip War, The Fight for the World's Most Critical Technology. Hey, Chris,
Speaker 1: one thing I want to ask you, and I want
Speaker 1: to go back to China. There was a story I
Speaker 1: was reading by our Javi R. Bloss an opinion police piece,
Speaker 1: and was asking why is China stockpiling so much surp
Speaker 1: plus oil? And one of there were like five or
Speaker 1: six different reasons, and one of it was does China
Speaker 1: fear an interruption and supply beyond US and European sanctions?
Speaker 1: Oil traders who traffic and intrigue at are only one
Speaker 1: word Taiwan. Do you believe that there is a strong
Speaker 1: possibility that there will be a conflict involving Taiwan? And
Speaker 1: what does that mean for TSMC, who is so crucial
Speaker 1: in terms of the global chip supply chain, what could
Speaker 1: that potentially mean for the United States the global economy?
Speaker 1: I mean, can you play that out and what the
Speaker 1: likelihood is?
Speaker 4: Well, there's no doubt it's a possibility. Nobody knows for
Speaker 4: certain what the likelihood is. But I think the magnitude
Speaker 4: of impact is so large that even if you think
Speaker 4: it's only five or ten percent likely, you've got to
Speaker 4: take steps to prepare. All of the biggest, most valuable
Speaker 4: companies in the United States require silicon that today can
Speaker 4: in some cases only be sourced from Taiwan. That's true
Speaker 4: for Nvidia, Troop, for Apple Group, for Google Trooper, Microsoft Proof,
Speaker 4: for Meta. The entire US tech ecosystem relies on Taiwan's expertise.
Speaker 4: And that's why there's been this push for the last
Speaker 4: couple of years to find ways to diversify the US
Speaker 4: from being so centrally exposed to China's decisions about war
Speaker 4: and peace and the Taiwan Straits.
Speaker 1: And the reality is that the US is still very,
Speaker 1: very exposed, correct because of how much TSMC still produces.
Speaker 4: That's right. I think the US has made a bit
Speaker 4: of progress, but there's still a long way to go.
Speaker 4: And it's a long way to go because TSMC is
Speaker 4: an extraordinarily capable company and the entire Taiwan's ecosystem is
Speaker 4: just so central to producing the semiconductor hardware that our
Speaker 4: tech firms and aifirms beend on.
Speaker 3: What do you think of the politics of this and
Speaker 3: the fact that TSMC, you know, has this facility in
Speaker 3: Arizona and is working to increase its presence here in
Speaker 3: the United States, does it put that at risk?
Speaker 4: No, I don't think so. I think TSMC has got
Speaker 4: a strong signal from its customers that they want US
Speaker 4: space production. Its uncertainty created by the tariffs that incentivizes
Speaker 4: more investment in the United States, and it's got a
Speaker 4: signal from the US government again across multiple administrations both parties,
Speaker 4: that they're going to keep pushing for a bigger US footprint.
Speaker 4: But I think the challenge that TSMC faces is twofold. First,
Speaker 4: all of its keyr and D remains in Taiwan and
Speaker 4: will be in Taiwan as far as we can see
Speaker 4: in the future. So Arizona is helpful and diversifying today's manufacturing,
Speaker 4: but it doesn't really get you diversification of the next generation.
Speaker 4: The second thing is that the ecosystem in Arizona is
Speaker 4: still less developed than it is in Taiwan, and so
Speaker 4: sourcing the gases and the materials and all the spare
Speaker 4: parts and specialized equipment you need for a cutting edge
Speaker 4: chip plant, it's still harder and more expensive in Arizona
Speaker 4: than in Taiwan. And that's going to be the case
Speaker 4: for some time until we keep building out the scale
Speaker 4: of Arizona. And all of that means that Taiwan's going
Speaker 4: to stay very, very important were our techie ecosystem for
Speaker 4: many years to come.
Speaker 1: Chris really quickly thirty seconds here, I mean, was President
Speaker 1: Trump wright in his increasing tensions on China. It started
Speaker 1: in his first term and wrapped up in the second.
Speaker 1: Was he right, especially when you think about semiconductors, and
Speaker 1: just quickly if you could.
Speaker 4: Well, I think the key driver of tensions in this
Speaker 4: sector is actually China's desire to become self sufficient. We
Speaker 4: were in a pretty stable gulibrium in twenty fifteen before
Speaker 4: the Made in China twenty twenty five plan was released.
Speaker 4: That happened before any of the US policies to support
Speaker 4: its own chip industry, and that was really the catalyst
Speaker 4: for introducing geopolitical tension as a central facet in the
Speaker 4: chip industry.
Speaker 1: All right, So glad we could get some time with you,
Speaker 1: So relevant as always, Chris Miller, author of Chip War
Speaker 1: and professor of international history at the Fletcher School at
Speaker 1: Tufts University.
Speaker 2: You're listening to the Bloomberg Business Weekdaily podcast. Catch us
Speaker 2: live weekday afternoons from two to five pm Eastern. Listen
Speaker 2: on Apple CarPlay and Android Auto with the Bloomberg Business app,
Speaker 2: or watch us live on YouTube. Hey.
Speaker 1: Over the summer, one of the things that caught our
Speaker 1: attention Bloomberg News reporting the world's largest technology companies that
Speaker 1: we're talking Microsoft, Amazon, Google, all of them planning to
Speaker 1: spend billions of dollars more than three hundred and forty
Speaker 1: four billion dollars on capital expenditures, with much of it
Speaker 1: tim going to data centers for AI models.
Speaker 3: According to Bloomberg intelligence analyst Amandy saying, companies have quote
Speaker 3: basically tripled capex investment in cloud due to AI, with
Speaker 3: executives emphasizing they need to invest quickly to get ahead.
Speaker 3: Our next guests is helping those hyper scalers scale up
Speaker 3: when it comes to AI with a in studio as
Speaker 3: a dere Fox Martin presidency of Equinix, the nearly seventy
Speaker 3: six billion dollar market cap data center readA trades under
Speaker 3: ticker EQIX down so far this year about eighteen percent.
Speaker 5: Dear, welcome, good to see.
Speaker 6: You, Thank you so much, Thank you for having me.
Speaker 1: Nice to have you.
Speaker 5: So, how's business?
Speaker 6: Business is very good?
Speaker 5: Like the best you've seen it.
Speaker 6: Like we're in the middle of a very strong cyclical
Speaker 6: demand cycle for you know, the products and services that
Speaker 6: we offer.
Speaker 3: When you say we're in the middle, help us understand
Speaker 3: how long that means of a runway there is to
Speaker 3: go here?
Speaker 6: Sure? You know, at Equinos we see a very significant
Speaker 6: trend from the training of models in the AI economy
Speaker 6: that you refer to in your opening there with the hyperscalters,
Speaker 6: to the deployment of those models in enterprise systems, and
Speaker 6: that deployment is called imprints. And we see that opportunity
Speaker 6: as potentially double the size of the training opportunity. And
Speaker 6: at our company, we feel we we're built for this moment.
Speaker 1: Has that happened faster than everybody anticipated? Because I do
Speaker 1: feel like the converse. Although we've been talking about AI
Speaker 1: of now almost two and a half years, well or
Speaker 1: well into two and a half years, but we are
Speaker 1: now increasingly talking about all this stuff starting to be
Speaker 1: put to work.
Speaker 6: Right, you can certainly seek organizations. We have ten thousand
Speaker 6: customers across the world moving from proof of concepts into
Speaker 6: production systems and applications of the technology.
Speaker 1: One of the things I think we're curious about is,
Speaker 1: as you know that the news flow is fast and
Speaker 1: furious from the White House and out of Washington, and
Speaker 1: there have been some announcements out of Trump administration about
Speaker 1: AI infrastructure initiatives specifically, So I'm curious, a dare have
Speaker 1: you seen any impact of that on your existing properties
Speaker 1: leasing effort? And I'm curious how you compete with how
Speaker 1: does that kind of compete their program with your own
Speaker 1: development program.
Speaker 6: Look, we very much welcome the focus that the current
Speaker 6: administration has on data centers and the importance and the
Speaker 6: recognition of data centers and their important role in the
Speaker 6: infrastructure of any economy. And we certainly are looking at,
Speaker 6: you know, some of the the properties that have been
Speaker 6: you know, identified as potential for RFPs, and we would
Speaker 6: choose based on locations that would be a creative to
Speaker 6: our business because we're very focused in cities, in metro
Speaker 6: areas close to where humans are who will use this technology.
Speaker 1: Are you getting pushed back from cities and humans who
Speaker 1: don't necessarily want.
Speaker 6: Those data is interesting, not hugely. I mean, we're very
Speaker 6: conscious of the role that we play and you know,
Speaker 6: the role that we play with communities where we have
Speaker 6: data centers, and we're very considered about our approach there.
Speaker 3: What makes a good location for a data center because
Speaker 3: it doesn't actually apart from the construction, it doesn't actually
Speaker 3: involve that many people to keep it up and running
Speaker 3: relative to the amount of money that's spent on it
Speaker 3: and what actually happens in there.
Speaker 6: Yeah, it's really interesting because I think you know, when
Speaker 6: you think about the operations of a data center, you
Speaker 6: tend in your mind to go immediately to technicians and technology,
Speaker 6: but actually there's a whole series of unsung heroes in
Speaker 6: the operation of a data center, which are the craftsmen
Speaker 6: and the tradesmen and women, you know, the plumbers, the electricians,
Speaker 6: the engineers who basically keep the Internet up and running,
Speaker 6: you know, through this data center infrastructure.
Speaker 1: So difficulties in finding those workers. We've done some reporting
Speaker 1: about that that there's you know, okay, yay, great the
Speaker 1: spend and the build, but there's not enough workers to diet.
Speaker 6: So I think, you know, the constraints that the industry
Speaker 6: are facing, or you know, are around energy and power,
Speaker 6: around skilled workforce, and then into the supply chain for
Speaker 6: the equipment. That's that's part and parcel of a data center.
Speaker 1: So that's structuring the build that you guys are trying
Speaker 1: to do and meet the demand.
Speaker 6: It is something that you have to actively manage as
Speaker 6: you are looking to build. You know, for example, in
Speaker 6: our case, around some of our supply chain portfolio, we've
Speaker 6: pre purchased in order to ensure that we can have
Speaker 6: the delivery dates that we need to bring capacity online.
Speaker 3: We talked about the three hundred and forty four billion
Speaker 3: dollars that some of the world's largest tech companies are
Speaker 3: planning to spend. When it comes to CAPEX, it's like
Speaker 3: the thing we look for now quarterly when a company
Speaker 3: reports results, how much of hyperscalers Capex budgets actually flow
Speaker 3: through your company.
Speaker 6: We have a very significant approach on a part of
Speaker 6: the data center industry that we call co location because
Speaker 6: not all data centers are the same, and so colocation
Speaker 6: is where enterprise customers businesses sixty percent of the Fortune
Speaker 6: five hundred for instance, would locate their workloads or their
Speaker 6: machinery with us and the inner shared facility. We have
Speaker 6: a JV structure that works with the hyperscalers to build
Speaker 6: to suit for the hyperscalers, and so that's how we
Speaker 6: service the Hyperscaler opportunity and maintain that very important partnership
Speaker 6: that we have with I mean, I guess we're.
Speaker 1: Trying to figure out your exposure. I think your top
Speaker 1: ten customers represent about sixteen percent of monthly recurring revenue,
Speaker 1: so your exposure to the hyperscalers is pretty big, right idea?
Speaker 1: Is it manageable?
Speaker 6: It's manageable. You know, the hyperscaltors, for example, when they
Speaker 6: operate in our retail facilities, they do so because of
Speaker 6: the connectivity of ex X. So that's going to be
Speaker 6: a requirement, you know, for inferencing and for the actual
Speaker 6: activation of these AI workloads. So it is for us
Speaker 6: about connectivity. Connectivity is the secret source of as a
Speaker 6: data center p I don.
Speaker 1: Means specifically by that because I think we can use
Speaker 1: the word connectivity to mean a lot of different things.
Speaker 1: Certainly in the business world, what does it mean specifically
Speaker 1: for us?
Speaker 6: So in our world, it essentially means we're located in
Speaker 6: two hundred and seventy three data centers right across the planet.
Speaker 6: Inside those data centers, we have ecosystems of customers, customers
Speaker 6: whose value chains are connected to each other, and we
Speaker 6: physically connect them, you know, literally internect interconnect those customers
Speaker 6: one to the other. That's the first part of interconnection.
Speaker 6: So that allows for low latency transactions to happen, say
Speaker 6: for example, on a trading floor. That allows for that
Speaker 6: to happen in real times.
Speaker 3: Yeah right, we're speaking right now with the dere Fox
Speaker 3: Martin presidency of Equinex joining us here. In the Bloomberg
Speaker 3: Business Week studio, you mentioned the difference between training and.
Speaker 5: In inference. Thank you.
Speaker 3: When you think about this, like a company like corwe
Speaker 3: for example, where does that fit into this, Well, a.
Speaker 6: Core Weave is a neo cloud. They're a company you know,
Speaker 6: that provides GPU capability to companies who want to train
Speaker 6: their models, so they fit into the ecosystem in the
Speaker 6: same way for us as.
Speaker 3: Other cloud like a GPU as a service correct, okay,
Speaker 3: So what are the average lease terms for an agreement
Speaker 3: with GPU as a service comorganization?
Speaker 6: It would depend, you know, they can be relatively short.
Speaker 6: For us are leasing in our wholesale side is ten
Speaker 6: years plus.
Speaker 7: Okay.
Speaker 1: Now, one of the things I think is interesting is
Speaker 1: I think we're all trying to figure out the boom
Speaker 1: and bust of this. And there was an investor, Jack Selby.
Speaker 1: He is a z VC founder managing partner. He's longtime
Speaker 1: managing director of billionaire entrepreneurs Peter Tiele's family office, and
Speaker 1: he said the euphoria around AI may have led to
Speaker 1: the biggest bubble yet in private technology, and so sounding
Speaker 1: warning bells that a correction startup valuations is in the cards. Now,
Speaker 1: we understand when you throw AI there's a lot of
Speaker 1: different players, but behind it all is the data center spend.
Speaker 1: And we have had a lot of conversations about the
Speaker 1: hyperscalers making you know, multiple duplicate arrangements with power providers
Speaker 1: that they're not going to use all of them, but
Speaker 1: they just want to make sure they've got the power
Speaker 1: where they need it. Is there any signs to you
Speaker 1: that there's exuberance that the spend is slowing down, starting
Speaker 1: to will start to slow down. Maybe next year you're
Speaker 1: seeing it. You've got a front row seat.
Speaker 6: Yeah, I guess we believe in the enduring nature of
Speaker 6: the transformation that AI and the technology associated with it
Speaker 6: can bring and can bring to businesses. I mean, as
Speaker 6: I said, we support moneyfold workloads of our customers, you know,
Speaker 6: not just AI workloads, but you know, standard business process workloads,
Speaker 6: and we really are about that, being that connectivity and
Speaker 6: and so you know, I think in many ways our
Speaker 6: business model is you know, somewhat protected from any any potential.
Speaker 5: Before we let you go.
Speaker 3: As I mentioned some headlines on TikTok from the Wall
Speaker 3: Street Journal, the deal would create a new US entity
Speaker 3: Oracle and recent horror with silver Lake.
Speaker 5: Are you involved in this at all?
Speaker 6: Well, we partner very closely with Oracles, so it would
Speaker 6: be through that partnership that we would be supporting.
Speaker 5: So you think you will support an independent TikTok.
Speaker 6: Potentially with Oracle with Oracle, yes, I very key partner.
Speaker 1: One last question, your stocks down? Why if it's so,
Speaker 1: I mean, I know there's also an incredible spend in
Speaker 1: what you are doing. You've got to spend in order
Speaker 1: to meet the demand, you know, and so maybe that
Speaker 1: is why there isn't some reward from some of your investors.
Speaker 1: Is it kind of a conflict.
Speaker 6: Well, we're very focused on long term value creation for
Speaker 6: our shareholders, and you know, we announced that we are
Speaker 6: going to bring on as much capacity in the next
Speaker 6: five years we have done in the previous twenty seven
Speaker 6: years of our operations, and so we're very focused on
Speaker 6: executing against our strategy. We believe in the opportunity that
Speaker 6: we see in the market and hope to deliver proof
Speaker 6: points to that to our investor community very soon.
Speaker 3: That was a Deare Fox Martin, President and CEO of Aquinix.
Speaker 1: We should point out that we talked to a Dare
Speaker 1: that was ahead of President Trump's visit to the UK,
Speaker 1: where we know a lot was talked about when it
Speaker 1: came to the tech CEOs that was with him, that
Speaker 1: were with him, excuse me, and that also talked about
Speaker 1: investments over there in the UK. When it comes to
Speaker 1: the tech world, we should also point out that it
Speaker 1: was also before we got news of Nvidia's big investment
Speaker 1: in Intel. So have to say when it comes to
Speaker 1: the tech world, semi world. There's a lot going on,
Speaker 1: but nonetheless an interesting conversation because it really plays into
Speaker 1: the bigger sex, bigger story, if you will, of why
Speaker 1: all of this is going on, because of the AI
Speaker 1: spend and then the spend on data centers, it's all
Speaker 1: kind of connected.
Speaker 5: Yeah too.
Speaker 3: That and Carol. Something else that's connected is the news
Speaker 3: that we got on Thursday morning and that Huawei is
Speaker 3: unveiled new technology from memory chips to AI accelerators, outlining
Speaker 3: publicly for the first time, it's multi your plan to
Speaker 3: challenge in video's dominance in a growing market.
Speaker 1: Yeah, Huawei's approach seen as a significant milestone in China's
Speaker 1: AI chipset industry, reflecting breakthroughs in system design and interconnect technologies,
Speaker 1: and it really signals a stronger push toward self reliance
Speaker 1: and resilience in the face of export restrictions. This again
Speaker 1: reporting all done by our team on the ground at
Speaker 1: Bloomberg News, but it's just you know, this is what
Speaker 1: it's all about. It really we go back to I
Speaker 1: feel like when we talk so much about the war
Speaker 1: that's out there, it's not just geopolitical, it's really a
Speaker 1: tech war, right, and tech dominance, and you're seeing China
Speaker 1: making some moves. You and I talk about the EV
Speaker 1: space and how advanced China has really become in that
Speaker 1: world and dominating it feels like electric vehicles.
Speaker 3: I think one thing that's important to keep in mind
Speaker 3: is where Huawei sits in the tech sphere in China
Speaker 3: and globally. It's actually China's most advanced chip designer. It's
Speaker 3: the strongest contender to build alternatives too in Vidia's industry
Speaker 3: leading AI hardware, and as you mentioned, Carol, it also
Speaker 3: is part of a bargaining chip when it comes to
Speaker 3: trade negotiations between the US and China. And to that end,
Speaker 3: we did get news Thursday morning as well when we're
Speaker 3: recording this that the call between President Trump and Shijin
Speaker 3: Ping is set to happen at nine am on Friday.
Speaker 5: So before we put this to bed.
Speaker 1: Yeah, and what's interesting too, I want to just say
Speaker 1: from a market perspective, Chinese tech stocs have surged in
Speaker 1: past weeks, driven by a perception that the nation's industry
Speaker 1: leaders are making steady progress and developing homegrown AI and chips.
Speaker 1: So Ali, Baba by Do are among the companies that
Speaker 1: have secured important clients for their in house designs and others.
Speaker 1: But we've just seen kind of a big spend there.
Speaker 3: For the latest, head on over to Bloomberg dot com
Speaker 3: and check out everything on the Bloomberg terminal. Still ahead
Speaker 3: on Bloomberg BusinessWeek. He's a trader who helped transform the
Speaker 3: way commercial property our finance.
Speaker 1: And now he's launched a bid to become California's next governor.
Speaker 1: Ethan Penner is next. This is Bloomberg.
Speaker 2: This is the Bloomberg Business Week Daily Podcast. Listen live
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Speaker 1: The gubernatorial race in California definitely picking up momentum just
Speaker 1: a little bit more than a year away. We featured
Speaker 1: a few possible candidates on air, and our next guest
Speaker 1: launched his own bid to become California's next governor, Targeting
Speaker 1: voters disillusioned with Democratic rule but tim not ready to
Speaker 1: vote Republican.
Speaker 3: Our next guest launch his bid to become California's next governor.
Speaker 3: He's here in the studio with us Ethan Penner. As
Speaker 3: we mentioned, he's twenty twenty six candidate for governor of California,
Speaker 3: also founder and managing partner of Mosaic Real Estate Investors.
Speaker 5: Ethan Welcome. How are you.
Speaker 7: I'm I'm very busy.
Speaker 3: Well you're you're going to run for governor of California. Yeah,
Speaker 3: but you're in New York. Why are you in New York?
Speaker 7: Hmmm, because you're.
Speaker 5: Here talking to us. Well, why do you want to run?
Speaker 7: Well?
Speaker 8: I really didn't see anyone who was qualified to do
Speaker 8: the job raising their hand, and so I decided I
Speaker 8: would do it. I feel that we're in a desperate place.
Speaker 8: I think that California has been so grossly mismanaged for
Speaker 8: so long. All the statistics bear that out. The quality
Speaker 8: of life has deteriorated so amazingly over the last decade
Speaker 8: and even two, and it's time for somebody with the
Speaker 8: real qualifications to do this job to step up.
Speaker 7: And that's what I decided I would do.
Speaker 1: What would you do differently? What don't you like? What
Speaker 1: needs to be changed that you think would change the
Speaker 1: course of California? In what you would perceive as a
Speaker 1: good way.
Speaker 8: There are a number of things, but the most obvious thing,
Speaker 8: the starter, is that we've repelled people. So we've been
Speaker 8: last in net migration for five consecutive years, which means
Speaker 8: people in the United States have preferred to live anywhere
Speaker 8: but California, which is shocking considering it's California, right gorgeous,
Speaker 8: And I think that we need to be more welcoming
Speaker 8: and inviting to businesses. We need to grow our economy.
Speaker 8: Our economy is important for everyone. It's important to create
Speaker 8: opportunities for our young people, but it's also important so
Speaker 8: that we have the funds to make good on the
Speaker 8: retirement benefit promises that people are counting on.
Speaker 7: So I would do.
Speaker 8: The first thing I would do is change our tax policy.
Speaker 1: Well, let's talk about this, because our understanding is you
Speaker 1: are releasing a tax plan that would turn California from
Speaker 1: one of the least friendly tax dates to one of
Speaker 1: the top five. So what details. That's a big broad statement.
Speaker 1: The devil's always in the details. So what's specific?
Speaker 8: So the Tax Foundation ranks all fifty states by their
Speaker 8: tax policy. We're currently ranked forty ninth, and pro form
Speaker 8: on my policy would move us to third according to
Speaker 8: the Tax Foundation.
Speaker 6: How do you do that?
Speaker 1: How do you do that well? And what do you
Speaker 1: do specific because you also talked about needing revenues for things,
Speaker 1: so I'm just curious.
Speaker 8: How you get Yeah, so it would be importantly, Carol.
Speaker 8: It will be a revenue neutral to revenue growth plan.
Speaker 8: So everyone else on everyone that talks about changing our
Speaker 8: tax plan talks about cutting taxes, and I understand kind
Speaker 8: of the intuitive appeal to some people, but of course
Speaker 8: that that really doesn't the math doesn't work. We need
Speaker 8: to actually pay for the things we need in California
Speaker 8: to support our society. So mine is a revenue neutral
Speaker 8: that will ultimately be a revenue growth idea. It's about
Speaker 8: replacing income tax with a consumption tax.
Speaker 5: Fun mentally, that's the plant, so explain the details there.
Speaker 8: We will eliminate all state income tax, both corporate and personal. Wow, amazing.
Speaker 8: We will replace all state sales tax, including our horrible
Speaker 8: gasoline tax, and all of that will be replaced by
Speaker 8: a single fifteen percent consumption tax on goods and search.
Speaker 3: But does California Okay, So you're coming at this from
Speaker 3: the angle where California has been a net loss when
Speaker 3: it comes to migration, Yes, do you want can California
Speaker 3: handle more people because the real estate price is there
Speaker 3: well in so many places and very desirable places to
Speaker 3: live are out of.
Speaker 7: Controls a phenomenal question.
Speaker 3: But the challenge is on a local level because you
Speaker 3: have all these people that say, yes, we want more
Speaker 3: affordable housing, but do not build that multi family house
Speaker 3: right here.
Speaker 8: Our problem has really nothing to do with having too
Speaker 8: many people. It has to do with too few housing units.
Speaker 8: So the RAND Corporation published a paper last year that
Speaker 8: showed that it costs one hundred and ten thousand dollars
Speaker 8: more to build an apartment unit in the state of
Speaker 8: California than in the neighboring state of Arizona or most
Speaker 8: other states.
Speaker 5: For regulatory reasons.
Speaker 8: That's all driven by regulatory red tape. That's the second
Speaker 8: thing I would have to do is really streamline our
Speaker 8: regulatory approval processes. So the tax plan is stage one.
Speaker 8: Stage two is the mining of regulatory processes.
Speaker 1: How do you think about it against a backdrop or
Speaker 1: climate change is certainly impacting California neighborhoods in a big way,
Speaker 1: and so the build back has also got to think
Speaker 1: about how do you make it safer.
Speaker 8: So environmental greatness is really at the foundation of California.
Speaker 8: I mean, you're from California and you know this. I
Speaker 8: I take all of my vacations hiking in the nature
Speaker 8: of California. It's amazing, right, And so first trip to
Speaker 8: I'm a few months ago for Carol, it's incredible.
Speaker 1: Gorgeous, everything exactly right, I really, and passing a massive
Speaker 1: wind farm to get there. So it's certainly embracing.
Speaker 8: So I think that we we have to be as
Speaker 8: vigilant as we've ever been about protecting our natural beauty
Speaker 8: and our resources. But but we don't need nineteen different
Speaker 8: organizations that a developer of an apartment has to go
Speaker 8: through an approval process for. We need one, one very
Speaker 8: good one powered by AI with great responsiveness. Rather than
Speaker 8: five years, how about five days to get your feedback,
Speaker 8: how about fifteen minutes to get your feedback. There's no
Speaker 8: reason that we can't use technology intelligently, and there's no
Speaker 8: reason we can't have both both the things. We can
Speaker 8: have environmental beauty and environmental soundness and make it easy
Speaker 8: for people to build the units that we actually need
Speaker 8: to drop costs and make living more affordable.
Speaker 1: One of the thing you're talking about too, when it
Speaker 1: comes to housing, and tim see it. You know, we
Speaker 1: see it when we've been to Seattle. We live in
Speaker 1: New York City. Go any place where it's warm, the.
Speaker 5: Heart its warm, and there's a high cost of living, high.
Speaker 1: Cost, but the homeless populations and it's you know, I
Speaker 1: went to college here in New York many many years
Speaker 1: ago and it was a homeless problem. And here we
Speaker 1: are again in twenty twenty five and we haven't figured
Speaker 1: this out. What you are looking to build some communities
Speaker 1: from my understanding in rural areas for homeless people to
Speaker 1: live in, how would you fund that? How long do
Speaker 1: you would you expect it to take to get that done?
Speaker 1: How do you roll that all up?
Speaker 8: So it gets back to the original question of bringing
Speaker 8: true competence, the required competence to lead the state at
Speaker 8: this moment. We need the skills that I bring to
Speaker 8: the table. We need an understanding of how to build things.
Speaker 8: We need an understanding and appreciation for how to have transparency.
Speaker 8: It's not that we don't have the money. We've spent
Speaker 8: twenty five billion dollars in the last state money in
Speaker 8: the last four years and all that's gotten us is
Speaker 8: nothing but twenty five percent more homeless. So nothing's been solved.
Speaker 8: We have systems that don't work. We have a management
Speaker 8: system that's failing us. We don't know where the money is,
Speaker 8: there's no accountability, So how do you do this?
Speaker 1: Then you're saying that with this consumption to actually have
Speaker 1: the money to do this, and how do you get
Speaker 1: how quickly can you get it built?
Speaker 7: Well, so it's a combination of things.
Speaker 8: One is, yes, the money is there, although we've squandered
Speaker 8: so much money ready, the money is there for this.
Speaker 8: Second of all, we have to use smart building. We
Speaker 8: don't have government. We need public private partnerships and my
Speaker 8: government will lean very heavily on private excells to work
Speaker 8: in tandem with public oversight to get things done fast.
Speaker 7: And I think that.
Speaker 8: Modular housing is definitely one of the answers. Yeah, but
Speaker 8: we have to combine competence, a commitment to safety, and
Speaker 8: a love for our fellow people. Right especially I'm proud
Speaker 8: to be in California. We care for our most vulnerable neighbors.
Speaker 8: That will never change, but we need to do it
Speaker 8: the right way. These people, unfortunately, with all the money
Speaker 8: we've spent still sleep on the pavement.
Speaker 3: We're speaking with Ethan Penner, twenty twenty six, candidate for
Speaker 3: Governor of California and also the founder and managing partner
Speaker 3: of Mosaic Real Estate Investors, on the homelessness question. It
Speaker 3: obviously has to do with housing, it has to do.
Speaker 5: With mental health.
Speaker 3: There's no easy solution, as we've learned on the regulatory
Speaker 3: side of things. You said, for building housing, you want
Speaker 3: to streamline regulations, get rid of red tape. But how
Speaker 3: specifically do you do that? Because it's an easy thing
Speaker 3: to say. But as we're learning in the wake of
Speaker 3: the fires in Pacific palac aids and the waste removal
Speaker 3: going to New Calabasas and the landfill there, people are
Speaker 3: not happy about that, Like, how do you do this
Speaker 3: in a way that satisfies these constituents.
Speaker 8: Well, I think it's top down, actually, So I think
Speaker 8: we have to set a standard from the from the
Speaker 8: Governor's office and Sacramento, and that standard has to be Look,
Speaker 8: if I get elected, it will be with a mandate
Speaker 8: for change.
Speaker 9: Right.
Speaker 8: I'm the consummate outsider. I don't belong to either of
Speaker 8: the main parties. I've never had a day in political office.
Speaker 8: So I'm running for a mandate for change with specific
Speaker 8: policies in mind, and I believe the people's will will
Speaker 8: be heard through me, and that will that will empower
Speaker 8: me to actually make change.
Speaker 1: But you understand, I mean.
Speaker 7: I do understand me.
Speaker 8: I understand bureaucracy very well, have worked in big companies.
Speaker 1: But I'm just thinking about Elon musk Doze even in
Speaker 1: the federal government, and yes, USA dismantled other offices or
Speaker 1: other built departments. But it's not easy to kind of
Speaker 1: you know, all of these regulatory checkpoints. I mean, how
Speaker 1: do you really do it when it gets down to it, how.
Speaker 3: Do you do it?
Speaker 8: In you know, I'll tell you two things. One, I
Speaker 8: am not willing to accept that it's hard or impossible
Speaker 8: to do. And I'm going to commit myself fully to
Speaker 8: doing that. And I know for sure, if people like
Speaker 8: you and I don't commit ourselves to positve change, the
Speaker 8: answer is one hundred percent bad. So I'm going to
Speaker 8: commit myself and I'm going to do as as good
Speaker 8: a job as I can. Second, I really do believe
Speaker 8: that most people in government, in state government in California
Speaker 8: go into their jobs wanting to do the right thing
Speaker 8: for their people. I really do believe that, and I
Speaker 8: think that as a non partisan and a non career
Speaker 8: politician who's not trying to advance my career at all,
Speaker 8: I think I'm going to be very uniquely well received
Speaker 8: by the legislature because I won't be viewed as oppositional
Speaker 8: in any way.
Speaker 3: We got to talk property taxes. Do you think something
Speaker 3: has to change with property taxes in California? And the
Speaker 3: context is that somebody like my parents, who've lived in
Speaker 3: the same house since the nineteen nineties, pay basically nothing
Speaker 3: in property taxes thanks to the passing of a certain
Speaker 3: proposition many years ago. But if somebody were to buy
Speaker 3: that house, like you know, the next family to own
Speaker 3: that house, the property taxes would be debilitating. And it
Speaker 3: makes it so people stay in homes for a very
Speaker 3: long time and contributes to the housing crisis. Some critics say, you.
Speaker 7: Know what, I don't believe that's true. Well, I don't
Speaker 7: accept that.
Speaker 8: I think that I think that we our society, our
Speaker 8: community is served well by continuity, and I think that
Speaker 8: having people be forced out of their homes because of
Speaker 8: appreciation it detegrates our community. It denigrates the continuity of
Speaker 8: our community. So I would I would not try to
Speaker 8: change that policy. I think that's a wonderful policy.
Speaker 1: Got to ask you, Aback, Governor Newsom, his feed with
Speaker 1: the President, the President's attention on California on many states,
Speaker 1: how we would you posture yourself toward President Trump?
Speaker 7: Well, I think that.
Speaker 8: Both parties are busy fighting with each other about the
Speaker 8: president pro or against the President, and I feel that
Speaker 8: it's a gigantic distraction from the incompetence that they've brought
Speaker 8: to the table in actually doing their job for the
Speaker 8: citizens of California. I will not be engaged in that distraction.
Speaker 8: For me, I'm laser focused on serving the needs of
Speaker 8: the people in California who would be electing.
Speaker 7: Me, who I care for.
Speaker 1: But what do you do, though, Ethan? If President Trump
Speaker 1: you do a policy and you are a social media
Speaker 1: post at seven am in the morning of something he
Speaker 1: doesn't like, and he says, maybe we're going to go
Speaker 1: down to California and talk to Governor Penner, Well, what
Speaker 1: do you do?
Speaker 8: I think that every leader Carol has to approach their
Speaker 8: job with humility, and I don't see that as often
Speaker 8: as I would like, so Governor Penner would remember that
Speaker 8: Governor Penner is a servant for the people, and Governor
Speaker 8: Penner would understand that whatever he says or does he
Speaker 8: has to take in mind. Is this in the best
Speaker 8: interests of the people who he's serving and fighting with
Speaker 8: the President of the United States, It's not in the
Speaker 8: best interests of the people. Okay, this is definitely not.
Speaker 8: So I would try to have a workable relationship with
Speaker 8: both the legislatives, the legislature that I would need to
Speaker 8: work with, but also the federal government, because, as you
Speaker 8: point out, that's a very important relationship. Whether it's this
Speaker 8: president or another president. It's not about my personality and
Speaker 8: the personality of another, which I think, unfortunately we see
Speaker 8: today becoming the story. I don't need to be the story.
Speaker 8: My personality is not that important to me. My job
Speaker 8: as serving the needs of the people who elected me
Speaker 8: is the only thing I care about.
Speaker 1: Well, stay in touch as this year progresses. I love
Speaker 1: to see how things are going. Ethan, thank you so much.
Speaker 7: Thanks for having me.
Speaker 1: Yeah, I really appreciate Ethan Penner twenty twenty six, candidate
Speaker 1: for Governor of California, Founder and managing director of mosaic
Speaker 1: real estate investors. We did not get to talk about
Speaker 1: the CMBs markets. May be next time around. Next time Ethan.
Speaker 7: Thank you.
Speaker 2: You're listening to the Bloomberg Business Weekdaily Podcast. Catch us
Speaker 2: live weekday afternoons from two to five pm Eastern Listen
Speaker 2: on Applecarplay and Android Auto with the Bloomberg Business app,
Speaker 2: or watch us live on YouTube.
Speaker 1: Plenty ahead on our second hour of the weekend edition
Speaker 1: of Bloomberg Business Week, including how artificial intelligence is making
Speaker 1: the grade big time with the Dean of the ko
Speaker 1: Good School of Business.
Speaker 3: Plus speaking of AI is AI helping or herding the
Speaker 3: language learning business at Babbel. The CEO joins us later
Speaker 3: on First Up this hour.
Speaker 1: You might recall a story earlier this month from our
Speaker 1: Bloomberg News team. It was about Apollo Global Management being
Speaker 1: poised to launch a five billion dollar strategy to invest
Speaker 1: in sports deals, marking another major asset manager target the
Speaker 1: booming sector.
Speaker 3: It's about long term lending of strategic capital with sports
Speaker 3: leagues and clubs. Apollo's strategy is set to specialize in
Speaker 3: lending long term strategic capital to sports leagues and clubs.
Speaker 3: It will also consider owning stakes and teams, though this
Speaker 3: wouldn't be a priority and may hire new staff. Our
Speaker 3: next guest, too, is investing in sports teams for his investors.
Speaker 1: He is, indeed, Jeff Luno is CEO Blue Crow Sports Group.
Speaker 1: He's also former Houston Astros President of baseball Operations. He
Speaker 1: joined us from our Dallas News bureau alongside Bloomberg News
Speaker 1: Texas Bureau chief Julie fine Well.
Speaker 10: You rightly pointed out there's a lot of interest in sports.
Speaker 10: A lot of American investors are investing in European football, etc.
Speaker 10: We started as a startup four years ago. We wanted
Speaker 10: to pick our niche. Our niche is to find own
Speaker 10: and operate clubs in desirable locations that have big growth opportunities.
Speaker 10: So we invested in KANKUNFC and Mexico Glub Deportivo GOSS
Speaker 10: in the suburbs of Madrid and luav in the Normandy
Speaker 10: area of France. And those are the three teams, one
Speaker 10: in first division and two in second division. And the
Speaker 10: key for us is to operate those clubs well and
Speaker 10: allow them to make money and to win games.
Speaker 11: Jeff, you talk about the key is to operate them
Speaker 11: well and to win money in games but really, what's
Speaker 11: the long term plan? Are you looking at other sports?
Speaker 11: Do you want to stay in the in the soccer world,
Speaker 11: what's next?
Speaker 10: Well, we've got a lot of work to do in football.
Speaker 10: We want Leganes to get back to first Division. We
Speaker 10: want LUOV to establish itself in second Division, and now
Speaker 10: that promotion relegation is coming back to Mexico, we'd like
Speaker 10: KANCUNFC to get into LEGAMX. So I think our to
Speaker 10: do list for the next five years is pretty busy
Speaker 10: and pretty filled, but I think over time we will
Speaker 10: certainly look at other sports, where right now our focus
Speaker 10: is football.
Speaker 11: I want to talk a little bit. You were with
Speaker 11: the Houston Astros. You were fired after a baseball scandal.
Speaker 11: You have denied any wrongdoing, but you are going now
Speaker 11: and asking people for money. Has there been any issue
Speaker 11: when it comes to.
Speaker 2: Trust now, Not at all.
Speaker 10: In fact, many of the investors in Blue Crow are
Speaker 10: people that were either investors in the Astros or knew
Speaker 10: me from that time. If anything, it's been an advantage
Speaker 10: because people knew of what happened with the Astros after
Speaker 10: we got involved in getting the World Series in twenty
Speaker 10: seventeen and reaching it in twenty nineteen, and you know,
Speaker 10: making money for the club and its investors. So we
Speaker 10: have a very diverse group of investors, people from private equity, entrepreneurs, technologists,
Speaker 10: et cetera, and they're all very bullish on what we're building.
Speaker 1: Does it ever come up though? I am curious, Jeff,
Speaker 1: Like I know, we all have our past and histories,
Speaker 1: and I just think, you know, sometimes when it comes
Speaker 1: to money, people do at least be like, well, just
Speaker 1: let me just talk to you a little bit about
Speaker 1: this before maybe I think about investing.
Speaker 10: Well, I think a lot of people want to know
Speaker 10: about my time in baseball and what we did and
Speaker 10: how it relates to football.
Speaker 5: It's never come up as a negative.
Speaker 10: I was telling Julie earlier that in Europe, base is
Speaker 10: not a very big sport, so people don't even know
Speaker 10: who the astros are or who josel To is, so
Speaker 10: they really just care about whether we're going to win
Speaker 10: on Sunday and whether we're going to get three points
Speaker 10: or one.
Speaker 1: Hey. One thing I want to ask you too, though, Jeff,
Speaker 1: when it comes to owning a team, is it a
Speaker 1: buy and hold strategy or because you have investors, is
Speaker 1: it buy hold, build up and then sell for a
Speaker 1: premium so that there are returns to your investors. I'm
Speaker 1: just curious.
Speaker 5: That's a great question.
Speaker 10: And the way to make money and football, as you noticed,
Speaker 10: is you can either hold and sell for more than
Speaker 10: you bought, but you usually have to cover losses in
Speaker 10: the meantime. But we're trying to run these clubs to
Speaker 10: win and grow revenue and eventually be profitable so that
Speaker 10: we can potentially return some money to our investors as
Speaker 10: we go along. We're not looking to buy and flip.
Speaker 10: A lot of the things that we do in our
Speaker 10: clubs require three or four years, five years for them
Speaker 10: to start working, and that's why for us, we're talking
Speaker 10: about more long term holds.
Speaker 1: Talking about long term and working.
Speaker 11: We talked earlier about technology and analytics.
Speaker 1: What role is AI playing in.
Speaker 7: All of that.
Speaker 10: Well, the world of football has lagged baseball and basketball
Speaker 10: and other major sports in terms of the use of
Speaker 10: analytics and technology, but that's changing. And part of the
Speaker 10: reason it's changing is in football, you have eleven v eleven,
Speaker 10: so there's a ton of data, and there's a ton
Speaker 10: of games all over the world, and it's hard to
Speaker 10: analyze that with just a few data scientists, So AI
Speaker 10: allows you to analyze a much much larger volume of
Speaker 10: data and to generate insights from it. So I think
Speaker 10: it's going to be increasingly important in our world.
Speaker 3: Jeff, we talk a lot here in the US about
Speaker 3: ballooning sports team valuations. I mean, you're certainly familiar with this.
Speaker 3: We just had the deal news about the New York Giants,
Speaker 3: for example, with American football, and I'm curious if you
Speaker 3: think the growth here in the US will start to
Speaker 3: slow down and the real opportunity for valuations to grow
Speaker 3: as they did here in the US in the last
Speaker 3: two decades. That opportunity is outside of the US now.
Speaker 10: I think that, well, first of all, I've always been
Speaker 10: skeptical about valuations of major US sports, but I've always
Speaker 10: been wrong. I've been saying that things are overvalued for
Speaker 10: the last thirty years, and they keep selling for more
Speaker 10: and more down the road. So I'm not good at
Speaker 10: predicting that. I do think that buyer beware on European
Speaker 10: football because there is relegation and promotion and you have
Speaker 10: to do things well in order to increase value, and
Speaker 10: there's a lot of investors that are losing money in
Speaker 10: this sector as well. So we're hoping to be one
Speaker 10: of the winners, but we're being very cautious about what
Speaker 10: we invest in and how.
Speaker 1: We do it.
Speaker 3: What makes you skeptical about US team valuations? It's a
Speaker 3: supply and demand question, right Is it more complicated than that?
Speaker 10: Well, I think that generally the revenue is driven from
Speaker 10: TV contracts for most of the sports, and I just
Speaker 10: can't see those continuing to grow at the rate that
Speaker 10: they've grown. But I know it's happened, so, like I said,
Speaker 10: I'm not a good predict sure of that, but I
Speaker 10: think ultimately everybody's going to want to consume sports on
Speaker 10: their mobile or on their you know, their handheld, and
Speaker 10: that that changes the dynamic a little bit, and some
Speaker 10: of these bigger contracts, you know, may not get renewed
Speaker 10: at the increases that have happened in the past.
Speaker 11: This is going to be a very big time for
Speaker 11: football coming up with the World Cup. We have here
Speaker 11: in Dallas, we have the most matches. Houston, your hometown
Speaker 11: has a lot of matches as well. What do you
Speaker 11: think this attention on the sport in the United States
Speaker 11: will do for it overall?
Speaker 10: I think it's going to be great for all of
Speaker 10: North America, Mexico, United States, and Canada. I'm very bullish
Speaker 10: on North American football. I have been since the beginning
Speaker 10: when we invested in Cancun. And you know, I lived
Speaker 10: through the ninety four World Cup and everybody who's expecting
Speaker 10: football to suddenly become one of the big four sports.
Speaker 10: I think it has grown, but I think it's poised
Speaker 10: to continue to grow. It's never going to beat NFL,
Speaker 10: it's never going to beat MLB or NBA, but I
Speaker 10: think it can continue to grow its fan base and
Speaker 10: I think it can continue to produce good results.
Speaker 12: You know you are now in soccer, you came from baseball.
Speaker 12: I want to know what your future is. Well, like
Speaker 12: I said, we're just at the beginning. We've been doing
Speaker 12: this for four years. We've got a lot on our
Speaker 12: to do list. I'm going to be focused on building
Speaker 12: Blue Crow for the foreseeable future.
Speaker 1: Is there an investor that you would love to have
Speaker 1: with you for the ride? Is there a team that
Speaker 1: you would love to go after? And I know who's
Speaker 1: going to talk, right because you don't want to kick
Speaker 1: up the valuation, But I am just curious because and
Speaker 1: anything you can share on your investors or who else
Speaker 1: you'd like to have with you.
Speaker 10: Well, we have a great cap table. We've got some
Speaker 10: people that have in the NBA, in the NFL and MLB, etc.
Speaker 10: I don't like to disclose who they are because that's
Speaker 10: their business. But we're well funded. All of our investors
Speaker 10: have offered to put more money in if they need to.
Speaker 10: So really, at this point, I think we have an
Speaker 10: all star cap table. We've got a plan and now
Speaker 10: it's just a matter of going out and continue execute.
Speaker 1: Jeff twenty seconds. Women's sports. How does that play into it?
Speaker 1: It's kind of popular. I don't know if you've heard
Speaker 1: that really quickly.
Speaker 10: It is, and there's a lot of money going into
Speaker 10: women's sports. We have a female team in Spain. We're
Speaker 10: looking at the sector very closely and trying to figure
Speaker 10: out what our strategy is. But it's growing in the
Speaker 10: US a lot, and it's growing in Europe quite a lot,
Speaker 10: and I think it's going to continue to grow.
Speaker 1: All right, Well, you're always welcome to come back and
Speaker 1: share some more, Jeff, thank you so much. Jeff Leno,
Speaker 1: CEO Blue Crow Sports Group, along with our Bloomberg News
Speaker 1: Texas Bureau Chief Julie Fine. This is Bloomberg Business Weekdaily.
Speaker 2: This is the Bloomberg Business Week Daily Podcast. Listen live
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Speaker 1: All right, So we've talked a bit about the resistance
Speaker 1: to artificial intelligence and classrooms here on Business Week, with
Speaker 1: some educators raising concerns on how to effectively integrate AI
Speaker 1: into their teaching practices, students overly relying on AI for homework,
Speaker 1: and of course the effect that AI is going to
Speaker 1: have on the labor market. There's a lot of play here. Tim,
Speaker 1: our next.
Speaker 3: Guest, is looking to infuse more AI across the classroom
Speaker 3: by helping students collaborate with the technology. David Marchik is
Speaker 3: dean of the co God School of Business at American University.
Speaker 3: He also served in different capacities in the Biden and
Speaker 3: Clinton administrations, as well as spending a dozen years at
Speaker 3: the private equity giant Carlisle Group.
Speaker 9: So I'm not a techie person, but we had the
Speaker 9: president of Google, Kent Walker, who basically said that AI
Speaker 9: was going to be as profound as fire or electricity.
Speaker 9: And I said, well, that seems like a strong statement,
Speaker 9: but even if it's zero point one percent true, it's big.
Speaker 9: Then we had a fellow named Brett Wilson, who's a
Speaker 9: CEO of an AI venture capital firm, and a student
Speaker 9: raised his hand and said, am I going to be
Speaker 9: replaced by AI? And Brett said, you likely won't be
Speaker 9: replaced by AI, but you could be replaced by someone
Speaker 9: who knows AI if you don't. So at that moment,
Speaker 9: I said, we need to infuse AI into everything we
Speaker 9: do to prepare our students for an AI workforce. And
Speaker 9: we've done that over the last three years.
Speaker 5: So what does that actually look like in the classroom.
Speaker 9: So when you start at co God School of Business,
Speaker 9: if you're an eighteen year old, the first day is
Speaker 9: you do you undergrad, undergrad and grad. The first day
Speaker 9: of orientation, we tell you you're going to use AI
Speaker 9: every day. Most students were prohibited from using AI in
Speaker 9: high school, but they did it anyway. So we want
Speaker 9: to teach students how to use it properly. We actually
Speaker 9: start by teaching what's wrong with AI before we teach
Speaker 9: them what's right with AI, and then over the four
Speaker 9: years or if you're getting an MBA, we want them
Speaker 9: to learn how to underwrite an investment, how to do
Speaker 9: fundamental research, how to develop a marketing plan, how to
Speaker 9: learn to negotiate, all using AI because they'll be expected
Speaker 9: to use AI in the workforce.
Speaker 1: That's what we keep hearing increasingly is the people who
Speaker 1: know and understand how to use it as a tool
Speaker 1: will really do well going forward. Okay, so talk to
Speaker 1: us little bit more though about because I think one
Speaker 1: of the things that we're playing around with David is
Speaker 1: that we use it too and then it's like okay,
Speaker 1: but then we kind of check it out because we
Speaker 1: just don't totally trust all of it. So tell us
Speaker 1: how you guys teach that aspect of it, like what
Speaker 1: to trust, what not to how do you fact check
Speaker 1: some of this information that comes across Still, so we.
Speaker 9: Have a professor Ed Walsall who teaches advanced Data Management
Speaker 9: data analytics. His whole class is used to show how
Speaker 9: AI comes up with wrong answers in correct information. So
Speaker 9: he has students analyze data sets come up with predictive analytics,
Speaker 9: and he shows that AI makes mistakes all the time.
Speaker 9: That's as valuable as learning what's right with AI. So
Speaker 9: AI can be a powerful tool, but you need to
Speaker 9: be skeptical. You need to test it, you need to probe,
Speaker 9: and you need to be able to shape it to
Speaker 9: produce the right answers.
Speaker 3: You know, I want to talk about your background a
Speaker 3: little bit and then talk more about AI and perhaps
Speaker 3: why you approach it this way. You have a really
Speaker 3: interesting background a lawyer. You served in the Clinton and
Speaker 3: Biden administrations in very different capacities. You did more than
Speaker 3: a dozen years as a managing director and member of
Speaker 3: the management committee at Carlisle. You've written a book, a
Speaker 3: co author to book on presidential transition transitions. You don't
Speaker 3: have the traditional background of a dean, like traditional academic
Speaker 3: background of a dean.
Speaker 9: I also had poor grades and was not the best student.
Speaker 3: That wasn't in the bio that I read. But I'm
Speaker 3: glad you're bringing us that color. How does that perhaps
Speaker 3: make you think differently about the workforce and what they
Speaker 3: need to be prepared to do once they leave the
Speaker 3: academic world.
Speaker 9: So I had the best boss ever who actually hosts
Speaker 9: a show at Bloomberg David Rubinstein. David also was probably
Speaker 9: the least likely person to run an equity firm, he
Speaker 9: had no private equity background. What I learned from David
Speaker 9: is surround yourself with people that are better and smarter
Speaker 9: than you in each of their areas and empower them
Speaker 9: and you can do anything. So what we're basically focused
Speaker 9: on is ensuring that our students are prepared for the
Speaker 9: AI workforce, the AI economy, which is changing rapidly. Stanford
Speaker 9: just put out a study that shows that AI exposed
Speaker 9: jobs for twenty two to twenty five year olds are
Speaker 9: shrinking between thirteen and twenty percent.
Speaker 1: It's terrifying.
Speaker 9: It's a very hard time. My daughter graduated last year.
Speaker 9: It was very hard for her to get a job.
Speaker 9: We see it every day, and so what we're trying
Speaker 9: to do is make sure that our students have a
Speaker 9: leg up when they apply for jobs, which means you
Speaker 9: need to have the fundamentals of a business education marketing, accounting, management, finance,
Speaker 9: et cetera, plus know how to use AI and everything
Speaker 9: you do. And we're also doubling down on what used
Speaker 9: to be considered soft skilled communication teamwork, the ability to
Speaker 9: think on your feet. Those skills are more important today
Speaker 9: than in an AI economy. Look at your jobs. You
Speaker 9: have to think on your feet every day, react to.
Speaker 5: News from times.
Speaker 1: It works, sometimes it doesn't, But.
Speaker 9: Having an entrepreneur mindset and being able to think and
Speaker 9: create is essential for today's economy.
Speaker 1: How do you, as an educator but also somebody from
Speaker 1: the business world think about how important it is? Though?
Speaker 1: When somebody their first couple of jobs or their first
Speaker 1: job at they're learning so much. The learning curve is
Speaker 1: so much, but it teaches their brain to think in
Speaker 1: maybe different ways that they maybe didn't get when they
Speaker 1: were at university or at college. And so I'm just wondering, like,
Speaker 1: are we cutting that out of younger generations, that ability
Speaker 1: to mess up learn I learned so much from mistakes
Speaker 1: I made in kind of my first couple of jobs,
Speaker 1: and I'm just wondering, are we getting rid of that?
Speaker 9: So I think we are getting rid of at and
Speaker 9: ways because AI will replace some jobs. In my view,
Speaker 9: is incumbent on universities and educational institutions to be able
Speaker 9: to foresee that and to give students the skills that
Speaker 9: you may have learned in your first job. We're trying
Speaker 9: to give them those skills at the university through in
Speaker 9: classroom and out of classroom experiences. So we have a
Speaker 9: lot of competitions for students to learn how to pitch,
Speaker 9: where they have to answer questions on their feet. We
Speaker 9: have investment clubs where students are investing actual money and
Speaker 9: they need to present and defend and investment ideas. The
Speaker 9: ability to give a pitch, to communicate orally, to work
Speaker 9: in teams is as important as ever.
Speaker 3: How do you have to think about the admissions process
Speaker 3: differently as a result of what happens now or what
Speaker 3: you want to have happen in a school right now.
Speaker 9: Traditionally, and maybe this is why I wasn't a great student,
Speaker 9: a teacher stands in front of a classroom and communicates,
Speaker 9: disseminates information, which is student absorbs, and then the student
Speaker 9: is assessed on how good they are by how much
Speaker 9: they can retain and regurgitate AI replaces all that. You
Speaker 9: can get any piece of information on your fingertips. So
Speaker 9: now the best students are going to be ones that
Speaker 9: are most curious, that have an entrepreneurial mindset. They're going
Speaker 9: to be able to take risk they're going to be
Speaker 9: able to figure out stuff on their own, and so
Speaker 9: we're looking for that in the admissions process.
Speaker 3: You know, it's funny, Karl and I talked about this
Speaker 3: a lot because one of the things that we found
Speaker 3: these lllms are so good at is if you prompt
Speaker 3: it properly, it can essentially write you a paper to
Speaker 3: answer question and that a teacher. I mean, I'm not
Speaker 3: giving anyone any news here that they don't already know who.
Speaker 9: Students starre way ahead of us.
Speaker 5: You are ahead of us here.
Speaker 3: I mean for me, as somebody who graduated from what
Speaker 3: like twenty ish years ago, this is like kind of crazy.
Speaker 3: But I think back to my own experience in college.
Speaker 3: I went to a liberal arts school, and some of
Speaker 3: those aha moments that occurred for me were like late
Speaker 3: at night when I was trying to write a term
Speaker 3: paper or trying to write some sort of analysis of
Speaker 3: a book I read, And those are the moments that
Speaker 3: stuck with me. Those are the moments where I learned
Speaker 3: how to make those connections. Do we lose the ability
Speaker 3: to make those connections because of this technology.
Speaker 9: I don't think so. I think it actually aids you.
Speaker 9: So you were probably a better student than I was.
Speaker 9: But when I was writing an essay, I had a
Speaker 9: hard time figuring out topic sentences, structuring an essay, structuring
Speaker 9: an argument. AI can help you do that. It's a collaborator,
Speaker 9: and so those aha moments are still there, they're just different. Also,
Speaker 9: the ability to work in teams is going to be
Speaker 9: much more important today than it was when we were
Speaker 9: growing up. And I have students come to me all
Speaker 9: the time and say, boy, this team work is hard.
Speaker 9: This one student is a show off, this one doesn't
Speaker 9: do their work, this one has views that I can't understand,
Speaker 9: and they don't change. And I'm like, welcome to the
Speaker 9: real world. I have that every day in my job,
Speaker 9: and I've had it every day in my job for
Speaker 9: the last forty years. So teaching students not only the
Speaker 9: fundamental basic skills that you learn reading right now, reasoning,
Speaker 9: plus AI skills and these soft skills which I call
Speaker 9: power skills, that's the future of education in my view.
Speaker 1: But are we also losing though, the ability of people
Speaker 1: kind of struggling David through something and like maybe having
Speaker 1: to work a little bit hard and understanding the idea
Speaker 1: that Okay, maybe spend a little bit more time with it,
Speaker 1: dig a little bit deeper, I don't know, look at
Speaker 1: some different sources and like figure something out versus going
Speaker 1: like I'm blown away by some of the stuff that
Speaker 1: you get off of chat, GPT and other chatbots, if
Speaker 1: you will, And I'm just kind of wondering, are we
Speaker 1: losing something?
Speaker 9: Maybe they're still struggling. But let's say I were a
Speaker 9: twenty two year old and I wanted to be your
Speaker 9: research assistant. You would expect me to be able to
Speaker 9: find any piece of information at my fingertips any day
Speaker 9: and deliver it to you. You'd expect me to have
Speaker 9: much more advanced skills today than if I were applying
Speaker 9: twenty years ago or in my case, forty years ago.
Speaker 9: So it's just a different type of struggle, and the
Speaker 9: students today need to learn how to do the stuff
Speaker 9: that's required in an AI economy.
Speaker 1: Can I ask you about teachers how they've had to
Speaker 1: rethink how they teach, because that's something you guys have
Speaker 1: had to deal with as well.
Speaker 9: That is a great question. Faculty traditionally are very resistant
Speaker 9: to change. We have faculty that have taught the same
Speaker 9: thing over and over again for we've actually created a
Speaker 9: very arentrepreneural culture among our faculty, where we started with
Speaker 9: a few early adopters, then we had some others that
Speaker 9: we dragged along. Today, ninety percent of our faculty are
Speaker 9: infusing AI and in their classroom. At the end of
Speaker 9: the spring semester it was fifty. So over the summer
Speaker 9: there was just a cultural change where everybody said, the
Speaker 9: parades leaving, either need to get in front of it
Speaker 9: or I'm going to be left behind.
Speaker 1: So what do you think David is constructive for we
Speaker 1: as communicators and having guests and we're talking about A
Speaker 1: I feel like every conversation somehow, you know, all roads
Speaker 1: lead back to AI.
Speaker 3: Are you trying to get him to give us advice
Speaker 3: about how we AI prove our no no, because I
Speaker 3: would be open to that too.
Speaker 1: Just thinking about the smart way to deal with it,
Speaker 1: because I think it's really easy to get caught up
Speaker 1: in the exuberance around it. There's so much spending that's
Speaker 1: going on and we're trying to Like we even today
Speaker 1: did kind of a reality check about where we are
Speaker 1: in AI.
Speaker 3: Like it's kind of a wild world where we're talking
Speaker 3: about two hundred million dollar salaries for people who are
Speaker 3: poached and brought to metaplatforms for specific technology, just trying.
Speaker 1: To understand what do you think is constructive based on
Speaker 1: kind of the experience you have had reorienting your approaches there.
Speaker 9: So I think what we're seeing is a technology revolution
Speaker 9: in a much more abbreviated version than we've seen it before.
Speaker 9: It's the fastest technology ever to be adopted. So chat
Speaker 9: GPT has acquired the same number of users. They you know,
Speaker 9: five times as fast as Netflix or Amazon, twenty times
Speaker 9: as fast as Facebook. So when the mobile revolution took place,
Speaker 9: which we all live through, it took thirty years for
Speaker 9: us to really use the phone for everything. AI is
Speaker 9: changing that in a matter of months. So I do
Speaker 9: think this is a transformational change that we're seeing. It's
Speaker 9: going to change everything in the economy faster than any
Speaker 9: technology change that ever has happened to.
Speaker 1: Do you think we know if yet it's good for
Speaker 1: the economy.
Speaker 9: I don't think we know. I think there's big pluses
Speaker 9: and I think there's big minuses. My view is that
Speaker 9: there will be winners and losers, and my focus is
Speaker 9: taking care of the students that are at my school
Speaker 9: to help them prepare well.
Speaker 3: Let's talk a little bit about the outcomes that you've
Speaker 3: seen thus far. You're really still early into this experiment.
Speaker 3: Three years ago, as Carol mentioned, was when you set
Speaker 3: out to become the first AI first business school in
Speaker 3: the country. What can you tell us about graduates who
Speaker 3: are finding full time employment on the undergrad side, then
Speaker 3: also on the MBA side.
Speaker 9: It's helping them. It's helping them have a leg up
Speaker 9: in me or be more competitive. One of the things
Speaker 9: I'm most excited about this year is we're offering an
Speaker 9: AI minor to non business schools. So let's say you're
Speaker 9: a student that wants to go to med school. You've
Speaker 9: done what traditionally as student does, taking a biodegree, you
Speaker 9: have some labs, you're applying to med school. If you
Speaker 9: have an AI minor, you're going to be much more
Speaker 9: attractive because AI is going to transform healthcare more than
Speaker 9: perhaps any other field. If you want to be a
Speaker 9: policy major and go work for a United States senator,
Speaker 9: and that senator the chief of staff says, Okay, you're
Speaker 9: a policy major from a good school and you have
Speaker 9: an AI minor, I know you're going to be able
Speaker 9: to do research for me for any hearing for any
Speaker 9: questions for anything, I need to know much faster, and
Speaker 9: you're going to be able to analyze data much better
Speaker 9: than others. So I think it's a huge leg up
Speaker 9: for both business students and non business students.
Speaker 1: Do you ever envision a class where it's just someone
Speaker 1: talking to you like chat, GPT or whatever version might
Speaker 1: ultimately come out, like you just think about the We
Speaker 1: always talk about a great conversation, how much we can
Speaker 1: learn if you need to ask the right questions. But
Speaker 1: I think about that back and forth.
Speaker 3: I think duelingo CEO has said that AI could replace teachers.
Speaker 9: AI could disintermediate the whole education system. Okay, and we're experimenting.
Speaker 9: I'll give you an example. We have a professor named
Speaker 9: Tommy White. He runs our entrepreneurship program. He's incredible, one
Speaker 9: of those popular professors. He created a class this year
Speaker 9: using all AI to create the class. It has no books,
Speaker 9: no reading. The only assignments are prompts prompts plus teamwork.
Speaker 9: We'll see how it goes.
Speaker 5: Will it work?
Speaker 9: I don't know, but we're trying so maybe so maybe.
Speaker 9: I mean, we're experimenting, and that's one of the things
Speaker 9: that we've done to create this AI first culture is
Speaker 9: We've told our faculty it's okay to fail because nobody
Speaker 9: really knows what's going on or what we're doing because
Speaker 9: it's so new. So try something. It doesn't work, try
Speaker 9: something else, really interesting stuff.
Speaker 1: Hopefully you'll find some time to come back to us
Speaker 1: in case with lot of conversation. Love love. Maybe we
Speaker 1: talked to some students at some point.
Speaker 9: That'd be great. We have some incredible students.
Speaker 1: Yeah, I think that would be a lot of fun.
Speaker 5: Get on the road.
Speaker 1: I'm happy to do that.
Speaker 5: Come to teach a class.
Speaker 1: Try that good stuff. Thank you, David. Thanks really appreciate
Speaker 1: David Marcheck. He is the dean of the co God
Speaker 1: School of Business at American University. Really fascinating conversation. If
Speaker 1: you've missed any of it, but please be sure to
Speaker 1: check out our podcast. You can download it whether they are.
Speaker 2: You're listening to the Bloomberg Business Weekdaily Podcast. Catch us
Speaker 2: live weekday afternoons from two to five pm Eastern. Listen
Speaker 2: on Apple CarPlay and Android Auto with the Bloomberg Business app,
Speaker 2: or watch us live on YouTube.
Speaker 1: All Right, so, earlier we talked about AI's role as
Speaker 1: a tool in academia and how it can help students
Speaker 1: better prepare for the future of work. On the other hand,
Speaker 1: certain AI tools can be seen as a real competitive
Speaker 1: threat to companies in the language learning space.
Speaker 3: Apple unveiled its new AirPods three with a live translation feature,
Speaker 3: giving us a glimpse into a future where global communication
Speaker 3: might be seamless. What does that mean though, for the
Speaker 3: way we actually learn languages and how does AI fit
Speaker 3: into that picture.
Speaker 1: So to help us answer some of those questions, we
Speaker 1: were joined by the CEO of Babbel, Tim Allen.
Speaker 13: You know, language learning is the oldest software known demand,
Speaker 13: so it's not going anywhere. What I love about what
Speaker 13: Apple and Google have done is it actually generates more
Speaker 13: interest in the space. So what we find interesting, especially
Speaker 13: on our product Babble, is when users or learners go
Speaker 13: to take a trip or go into a foreign country,
Speaker 13: they actually come back and they're more interested in learning
Speaker 13: the language. So we see all of this as a
Speaker 13: tailwind because we think that ultimately, you know, I think
Speaker 13: the technology is really cool as well, Right, it's so
Speaker 13: interesting put in AirPods you can go from one to
Speaker 13: the other. But what people will then do is adopt
Speaker 13: and go Oh, I really want to get into the language.
Speaker 13: I really want to belong to the language.
Speaker 3: That's happening right now because it's volume. Well, so Tim,
Speaker 3: I get that that's happening right now because that technology
Speaker 3: isn't widespread. But I can just imagine in a few years,
Speaker 3: you know, we won't even need maybe we won't even
Speaker 3: need another device.
Speaker 7: We'll have it.
Speaker 3: It'll be a wearable and then it'll be even more seamless.
Speaker 3: Do you see that continuing to drive demandin.
Speaker 13: What's interesting about that is, like I think, short of
Speaker 13: a neural implant, people are going to always be learning languages, right,
Speaker 13: so that in a universal language, those are the two
Speaker 13: things that could disrupt the market. So what will end
Speaker 13: up happening is that the iPhone when it came out,
Speaker 13: everyone declared the death of language learning, right because you
Speaker 13: could hold up your phone you could do the same
Speaker 13: translation that the AirPods are offered today. Even a wearable
Speaker 13: can do it. The difference is that people actually want
Speaker 13: to live and breathe inside of the language. In fact,
Speaker 13: we just launched a part of our new technology that
Speaker 13: explores AI that brings both the pedagogy and the human
Speaker 13: learning aspect of it together with AI called babble Speak,
Speaker 13: and what that does. It allows people to actually practice
Speaker 13: the language of learning with with an AI coach, an
Speaker 13: AI tuner, So there's pre defined conversations you can practice with.
Speaker 13: It does small corrections, but we see this as a compliment.
Speaker 13: We see this as a way for people to actually
Speaker 13: learn and accelerate the transmission of the language. I think
Speaker 13: the new technies are really going to allow for dabbling
Speaker 13: inside of the language. It's going to be great on
Speaker 13: the go, it's going to be great for those one
Speaker 13: time use cases, but people will always want to learn
Speaker 13: and live inside of a language themselves.
Speaker 1: How do you do them? More generally? Tim kind of
Speaker 1: the landscape of learning apps With the introduction of GPT five,
Speaker 1: we saw the team create a custom language learning app
Speaker 1: in minutes during the demos. I mean, it's kind of
Speaker 1: amazing how quickly all this is happening and how quickly
Speaker 1: you can do things. Do you view AI products like
Speaker 1: this is a real competitive threat and what can you
Speaker 1: do to keep your user base and sustain growth?
Speaker 7: Yeah?
Speaker 13: I watched the same demonstration. It was a cool friendship
Speaker 13: that they had created. It has limitation.
Speaker 7: Is it cool?
Speaker 1: Are you like, oh, my god, this is going to
Speaker 1: be what was difficult for us?
Speaker 13: It was cool. No, definitely not in Oh my god.
Speaker 13: It was a cool because it was created so quickly.
Speaker 13: And what I think is so cool about it is
Speaker 13: people are starting to learn on demand. What the difference
Speaker 13: is though, is I think that people will want want pedagogy,
Speaker 13: they'll want lessons, they'll want content. They'll want to be
Speaker 13: able to actually know that they're getting a trusted guide
Speaker 13: through the language learning process. Large language models, as you know,
Speaker 13: are good at many things. They're good everywhere. They've been
Speaker 13: declaring for now almost two years that they're going to
Speaker 13: take away all of the jobs and just really disrupt
Speaker 13: all the markets. But I think what ends up happening
Speaker 13: is when you start to get into really narrow spaces
Speaker 13: such as language learning, people want to know that they
Speaker 13: have a real lesson plan, that they have really the
Speaker 13: transmission of the language in a way that's going to
Speaker 13: adapt to them. And that's what we think AI is
Speaker 13: going to empower. Inside of babble, we think it's really
Speaker 13: going to allow for the personalization of your individual learning plan,
Speaker 13: but with the content, the pedagogy, the transmission, so you
Speaker 13: retain you're able to speak it, you feel fluent and
Speaker 13: you actually feel comfortable with it. So I think from
Speaker 13: a build perspective, it's really interesting. We look at it
Speaker 13: as a tool to really help facilitate and go to
Speaker 13: market a lot faster. I think for a transmission and
Speaker 13: a trusted content, it'll actually end up being niche markets
Speaker 13: with real players such as ourselves.
Speaker 1: All Right, So the truth I'll probably be in usage
Speaker 1: or the stickiness. And I'm assuming then you're signing up
Speaker 1: more and more people. You're very enthusiastic amid all of
Speaker 1: this potential competition. So give us an idea of customers, usership,
Speaker 1: people sticking to the platform. Give us some metrics.
Speaker 13: We're growing, we're going on, we have large demand. In fact,
Speaker 13: September is one of our larger months. Just give it
Speaker 13: back to school and back to office after the summertime
Speaker 13: that in New Year's as you can tell, the New
Speaker 13: Year's resolutions tend to be really heavy periods for us.
Speaker 13: What I can say is we have millions of subscribing customers.
Speaker 13: We're signing up thousands every single day. Demand has not
Speaker 13: waned on this side of the equation. We're really excited
Speaker 13: about the future. I actually get more excited about more
Speaker 13: of the players showing interest and actually saying, hey, look,
Speaker 13: this is cool. Understand a language. Play with a language.
Speaker 13: But when you want to go really learn a language,
Speaker 13: go to the providers you trust to.
Speaker 1: TAMU say millions, it'd be great if you get one millions,
Speaker 1: a lot different than ten million or twenty million. So
Speaker 1: just give us an idea if you could. And how
Speaker 1: much is corporate versus kind of individual and what are
Speaker 1: folks paying for a subscription and how long do they
Speaker 1: stay with you?
Speaker 7: Yeah?
Speaker 13: No, probably have over two thousand business clients B to
Speaker 13: B clients. So I can tell you that we just
Speaker 13: signed Inner Miami Football Club. They're using it for their players,
Speaker 13: their coaches, their teams in order to teach them the
Speaker 13: languages and what they need to be. We've created custom
Speaker 13: content for them as well, which gets really exciting. But
Speaker 13: I can tell you it's millions of consumer customers. And
Speaker 13: I can tell you it's more than one million, and
Speaker 13: it's more than two million, and it's more than three million,
Speaker 13: So it goes on up from there.
Speaker 1: Yeah. So, and what do people pay corporate versus individuals?
Speaker 7: Yeah?
Speaker 13: Yeah, So on individuals, there's a variety of packages. As
Speaker 13: you can imagine, there's a variety of price points. We
Speaker 13: have a lifetime price point that we can that users
Speaker 13: can subscribe for a life and they get all of
Speaker 13: the features and all of the things that we actually
Speaker 13: upsell to and then you know, there's monthly plans. It
Speaker 13: is the normal subscription model for what users want from
Speaker 13: any moment of time.
Speaker 1: All right, but give me an idea. So Tim wants
Speaker 1: to learn what language, Spanish? Spanish?
Speaker 5: Practice my Spanish better.
Speaker 1: He just wants to kind of learn Spanish, So give
Speaker 1: us an idea. So he signs up, and what would
Speaker 1: he be paying, like on a monthly basis or if
Speaker 1: you wanted the lifetime yes, yeah.
Speaker 13: Yeah, So if Tim you came to the site and
Speaker 13: signed up and downloaded the app, you could pay one
Speaker 13: hundred and ninety nine for the lifetime and then there's
Speaker 13: also disicates available, as all good subscription sites have. But
Speaker 13: then there's the monthly fee of twenty nine ninety nine
Speaker 13: that you could be paying as well.
Speaker 5: So okay, so why could do one n nine for life?
Speaker 3: Yeah, that's a lot less expensive than competitors such as
Speaker 3: du Lingo, which is you know that plus sum I
Speaker 3: think per year so no catch.
Speaker 1: Come on, no catch, So Tim signs up. I mean,
Speaker 1: and that's provided you stick around. No, I'm not trying
Speaker 1: to say, but right like you got to be around, right.
Speaker 7: Yeah.
Speaker 13: Look, with any language learning, there has to be a
Speaker 13: real commitment to it and you have to actually practice
Speaker 13: and utilize it.
Speaker 10: Right.
Speaker 13: But we see the life happens right the families.
Speaker 7: You know, I have kids.
Speaker 13: I'm learning German right now, right, I've moved to Berlin
Speaker 13: for the job. I knew very little German altogether. But
Speaker 13: what I could tell you is I have life about
Speaker 13: the kids of school. The kids have activities. I will
Speaker 13: pick up, I will put down. I will pick up
Speaker 13: and put down.
Speaker 3: But the one nine nights at life, okay, interesting. We
Speaker 3: I'm curious about do a lingo in the competition that
Speaker 3: you see there. I'm wondering if you've considered moving outside
Speaker 3: of languages. We use dual linguo at home, but more
Speaker 3: so for chess and reading with our kids.
Speaker 5: I don't know if it works, but it's great.
Speaker 3: The six year old has fun than we do for
Speaker 3: Spanish right now.
Speaker 13: Yeah, you hit the core market there, which is the
Speaker 13: games are great and the great learning transmission, especially for
Speaker 13: the younger audiences right now. Our specialty is language learning,
Speaker 13: where we're we really focus on that. We focus on
Speaker 13: the transmission of language learning. We want to make sure
Speaker 13: that you have the most effective means in order to
Speaker 13: go from a zero to one conversation. And the way
Speaker 13: we look at that is you feel confident walking into
Speaker 13: a room and being able to know that you're speaking
Speaker 13: the language in which you're looking to speak. So we
Speaker 13: focus all of our our linguistics, all of our teachers,
Speaker 13: all of the human centric pieces, and then we actually
Speaker 13: use AI as the tool to facilitate that in order
Speaker 13: to help make that happen faster. So that Will Speak
Speaker 13: is a good example of that, where we continue to
Speaker 13: allow you to practice speaking, continue to allow you the conversations.
Speaker 13: But we're hyper focused there. We really think that the
Speaker 13: games are going to lead to other people. We're focused
Speaker 13: on the languages you are.
Speaker 1: Okay, So that's a note like moving outside of languages.
Speaker 13: Okay, Yeah, languages are sweet spot.
Speaker 1: When it comes to the AI spend and something we
Speaker 1: talk about a lot, right, I'm curious about what you
Speaker 1: guys are spending. What are you spending it on? Is
Speaker 1: it on engineering? Talent? Is a data centers, is it content,
Speaker 1: is it something else?
Speaker 13: Yeah, we've been cashful positives since twenty eleven. It's a
Speaker 13: private company, so we're not out there raising capital. We
Speaker 13: are well funded. We're doing very well. Where we reinvest
Speaker 13: on our capex is. We look for engineers, we're looking
Speaker 13: on AI talent, We're looking at the infrastructure. We're investing
Speaker 13: in what's going to actually transmit and actually forward the future.
Speaker 13: We actually think that this is an exciting time to
Speaker 13: be really looking looking at product features with our proprietary
Speaker 13: data set and our proprietary motes that we have inside
Speaker 13: of our ecosystem. You know, we have hundreds of millions
Speaker 13: of lessons completed a year. That's very rich data to
Speaker 13: be taking into proprietary llms and data models and really
Speaker 13: working inside of the AI to work towards the most
Speaker 13: effective products in terms of transmitting the language.
Speaker 3: Are you at this point able to use AI to
Speaker 3: create language courses? Are you able to use AI to
Speaker 3: do what humans used to do in recent years?
Speaker 13: We actually married the two. You know, where the real
Speaker 13: sweet spot was is not in removing people from creating
Speaker 13: the languages. It's a facilitating the people to create the languages.
Speaker 10: So we do.
Speaker 13: Just answer your question directly, we do use AI, but
Speaker 13: we use it with the human centric piece. We've always
Speaker 13: found that our linguists and are also our teachers are
Speaker 13: the best to formulate all of the content so it
Speaker 13: can transmit better than anyone else and more effective. And
Speaker 13: so what we find is we marry the human with
Speaker 13: the AI tools, so we're using the blend of both roles.
Speaker 13: We haven't replaced jobs in order just to replace jobs.
Speaker 1: All right, I got one really really important last question
Speaker 1: for you, Tim, how's the German going? Sure, how's the
Speaker 1: German going?
Speaker 13: You know, I'm beschinspec and de Deutsch so babel every
Speaker 13: day very little, but I'm learning very slowly.
Speaker 3: So okay, maybe next time he's on we do the
Speaker 3: interview in German, we get Matt Miller in here.
Speaker 13: Oh I'm on, I'm game.
Speaker 1: Matt would definitely do that really really well. All right, Tim,
Speaker 1: thanks so much. Fun to talk with you and get
Speaker 1: some time and hear what you guys are doing, especially
Speaker 1: when it comes to AI to incorporated and get in
Speaker 1: Tim allan, chief executive officer of Babbel, joining us from Berlin, Germany.
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Speaker 7: Mm hmm