WEBVTT - Bloomberg Businessweek Weekend - May 19th, 2023 0:00:01.360 --> 0:00:05.680 This is Bloomberg Business Wait inside from the reporters and 0:00:05.880 --> 0:00:09.440 editors who bring you America's most trusted business magazine, plus 0:00:09.520 --> 0:00:13.680 global business, finance and tech news, the Bloomberg Business Week 0:00:13.720 --> 0:00:19.360 Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:20.079 --> 0:00:22.680 Well as the debt ceiling and budget negotiations continue in 0:00:22.720 --> 0:00:24.680 the US this week. In the new issue of Bloomberg 0:00:24.720 --> 0:00:27.680 Business Week, out on newsstands, online at Bloomberg dot com, 0:00:27.720 --> 0:00:30.800 slash BusinessWeek, and of course, on the Bloomberg Terminal, the 0:00:30.840 --> 0:00:33.880 cover story is this week's remarks. It's about king dollar 0:00:33.920 --> 0:00:36.400 and how the crown is slipping on the US green 0:00:36.440 --> 0:00:39.240 back and dollar denominated assets thanks to a few things 0:00:39.280 --> 0:00:42.879 going on, including that debt sealing standoff, regional bank failures, 0:00:42.960 --> 0:00:45.000 and a few other things. So let's get into it 0:00:45.159 --> 0:00:48.960 and to explain really the implications of America's self inflicted 0:00:49.000 --> 0:00:52.240 policy wounds with US. Is Bloomberg News Global Economy reporter 0:00:52.320 --> 0:00:55.840 Enda current on cam in our DC bureau. BusinessWeek Global 0:00:55.840 --> 0:00:59.080 Economics editor Christina Lindblad to my left, and the editor 0:00:59.120 --> 0:01:02.360 of Bloomberg This Week Magazine, Joel Weber to my right, 0:01:02.440 --> 0:01:05.480 both in our Bloomberg Interactive Brokers Studio Jiel I feel 0:01:05.520 --> 0:01:09.000 like the mighty US dollar. It's still rained supreme, but 0:01:09.520 --> 0:01:10.679 it's getting a bit tattered. 0:01:10.800 --> 0:01:13.520 Yeah, And as we were kind of talking about this story, 0:01:13.600 --> 0:01:16.199 it was like, wow, you just start to think about 0:01:16.240 --> 0:01:19.360 all the things that are poised to go wrong in 0:01:19.400 --> 0:01:21.160 the US. And I told my art department, I was like, 0:01:21.480 --> 0:01:23.600 just imagine this house where the floorboards are coming in, 0:01:23.640 --> 0:01:26.400 the walls are caving in, the debt ceiling, the ceiling 0:01:27.240 --> 0:01:31.320 caving in. Sounds like Matt Miller's house, right, And that 0:01:31.520 --> 0:01:34.280 led us to, you know, take a look at this 0:01:34.319 --> 0:01:39.319 story from from uh Celeia Mosen and the Current, and boy, 0:01:39.319 --> 0:01:42.440 it just felt very of the moment as all eyes 0:01:42.560 --> 0:01:45.840 continue to kind of like go towards DC and you know, 0:01:45.920 --> 0:01:49.800 this debt thing Matt is is bad, yes, and there's 0:01:49.800 --> 0:01:50.800 no resolution yet. 0:01:51.000 --> 0:01:54.640 It's got to be worry worrisome to our allies. 0:01:54.800 --> 0:01:58.360 And when you do this again and again and again. 0:01:58.160 --> 0:01:59.920 It makes I think a lot of people around the world, 0:02:00.080 --> 0:02:03.760 So you know, maybe this America thing isn't what we 0:02:03.880 --> 0:02:06.360 need as the gold standard here. 0:02:06.520 --> 0:02:11.760 Absolutely. I also wonder about something like the Russian invasion 0:02:11.760 --> 0:02:16.600 of Ukraine and the resultant American sanctions, you know, and 0:02:16.639 --> 0:02:19.639 the demands that we put on our allies and our 0:02:19.680 --> 0:02:22.440 other trading partners. Christina, how important is that because I 0:02:22.520 --> 0:02:26.520 noticed right around the time that started, the Saudis started 0:02:26.560 --> 0:02:30.400 selling their oil to China in un and so you know, 0:02:30.440 --> 0:02:33.000 for example, I talk about the Bloomberg Dollar index, that's 0:02:33.040 --> 0:02:35.960 probably not the deciding factor, right, the actual value of 0:02:36.000 --> 0:02:41.800 the currency, but what people choose to use in transactions 0:02:41.840 --> 0:02:42.799 is far more important. 0:02:42.919 --> 0:02:46.080 Yeah, there's been a big push since the invasion for 0:02:46.200 --> 0:02:49.000 some countries, you know, to start using more of their 0:02:49.000 --> 0:02:51.840 own currencies or the currencies of their trading partners. And 0:02:51.919 --> 0:02:54.359 I think it is definitely a result of the US 0:02:54.480 --> 0:02:58.760 trying to weaponize its leadership. It's it's basically, it's fingerprints 0:02:58.760 --> 0:03:01.720 are all over the worldinancial system, not just the use 0:03:01.720 --> 0:03:03.800 of the dollar, but the way it was designed, going 0:03:03.840 --> 0:03:07.919 back to Breton Woods, right, And I think you know, well, Russia, 0:03:08.040 --> 0:03:11.040 this was the first time a central bank was targeted directly, 0:03:11.120 --> 0:03:15.079 which with sanctions. So you know, Russia central bank, it's 0:03:15.160 --> 0:03:18.280 offshore reserves were cut off. And I think other countries 0:03:18.280 --> 0:03:20.920 looked at this and said, oh no, you know, we 0:03:20.960 --> 0:03:23.480 don't want to be in a similar situation. But aside 0:03:23.480 --> 0:03:26.640 from de dollarization and the aspirations other countries have about 0:03:26.680 --> 0:03:29.560 their own currencies, I mean, I think it's it's it's 0:03:29.600 --> 0:03:33.320 the self inflicted wounds that we really wanted to focus on, right, 0:03:33.600 --> 0:03:36.600 Like even small things that add up, like the app 0:03:37.200 --> 0:03:42.040 improprieties with stock trading amongst you know, central bank officials, 0:03:42.800 --> 0:03:46.040 you know, ethics questions in the Supreme Court. People sort 0:03:46.040 --> 0:03:48.240 of seem to think, oh, you can brush these things off, 0:03:48.280 --> 0:03:51.080 but they start adding up to the idea that you know, 0:03:51.160 --> 0:03:54.800 the US has this prestige right, and it's wearing down. 0:03:55.760 --> 0:04:00.120 So Inda, you you you're uniquely capable having been in 0:04:00.160 --> 0:04:02.560 Hong Kong for a while, and now you're on this 0:04:02.600 --> 0:04:06.120 side of the pond. What does it bring that international 0:04:06.160 --> 0:04:10.080 perspective to this? How vulnerable is US prestige in the 0:04:10.120 --> 0:04:10.880 American down. 0:04:11.640 --> 0:04:14.560 So even if a dead ceiling agreement has reached over 0:04:14.600 --> 0:04:16.960 the next week or so, the uptics of this are 0:04:17.120 --> 0:04:19.960 just horrible for the US economy globally, and for US 0:04:20.120 --> 0:04:23.040 leadership and for US influence. And you know, one side 0:04:23.080 --> 0:04:26.320 subplot from this death ceiling drama was that President Biden 0:04:26.320 --> 0:04:28.760 couldn't go to Port Moresby and Papua New Guinea for 0:04:28.800 --> 0:04:33.240 an unprecedented meeting with Pacific Island leaders. That might not 0:04:33.320 --> 0:04:34.920 send much to person on the street in the US, 0:04:34.960 --> 0:04:37.760 but those Pacific Islands are one of the fault lines 0:04:37.760 --> 0:04:39.960 for the tussle beween China and US for influencing that 0:04:40.040 --> 0:04:40.760 part of the world. 0:04:40.880 --> 0:04:44.240 And the month right, it's Asian American Pacific Islanders. 0:04:43.880 --> 0:04:47.239 Month right, and they have a summer going on for Moresby, 0:04:47.279 --> 0:04:49.359 and the US President couldn't go there, and that's the 0:04:49.360 --> 0:04:51.599 director result of what's going on. The other point is 0:04:51.920 --> 0:04:54.480 I have never seen a frenzy like we've seen over 0:04:54.520 --> 0:04:57.920 the past few weeks about talk of deed dollarization, both 0:04:58.000 --> 0:05:02.000 from the investment community, the community, and the policy world. 0:05:02.040 --> 0:05:04.240 Now we all know the obvious counterpoint as well, there's 0:05:04.240 --> 0:05:06.719 no alternative. Everybody knows there's no alternative for the moment. 0:05:07.000 --> 0:05:08.719 But I can tell you it's a talking point like 0:05:08.760 --> 0:05:11.559 it never has been before. And that reflects, I think, 0:05:11.839 --> 0:05:14.440 on the internalist function that we're seeing in US policy making. 0:05:14.560 --> 0:05:16.560 I have to say, and you know, you know, go back. 0:05:16.640 --> 0:05:18.359 I don't know how many years, or I feel like 0:05:18.440 --> 0:05:20.919 even a year ago that the thought of the US 0:05:21.120 --> 0:05:24.680 really defaulting on their debt like that was just non existent. 0:05:25.040 --> 0:05:26.600 But it does feel like that there's a lot more 0:05:26.640 --> 0:05:29.520 momentum based on kind of these self inflicted wounds that 0:05:29.560 --> 0:05:31.680 we keep seeing that you just wonder what the heck 0:05:31.760 --> 0:05:33.120 is going on in this country. 0:05:33.720 --> 0:05:35.360 Yeah, and by the way, if you just go back 0:05:35.400 --> 0:05:38.960 a few steps the blame game over inflation, there were 0:05:39.040 --> 0:05:41.359 rights and wrongs that story, But the point is the 0:05:41.480 --> 0:05:44.200 US missed the development inflation, and of course that's spread 0:05:44.240 --> 0:05:47.760 globally because US monitor policy goes globally because the dollar 0:05:47.800 --> 0:05:49.520 is what's used to buy and paid for stuff all 0:05:49.560 --> 0:05:52.360 around the world. So there was US inflation. Secondly, there 0:05:52.400 --> 0:05:55.160 was the US banking shock, the biggest shock since the 0:05:55.200 --> 0:05:57.679 financial crisis, that toppled one of the world's biggest banks 0:05:57.680 --> 0:06:00.080 over in Switzerland Credit Sweet And now, of course you 0:06:00.160 --> 0:06:02.880 have this row over the debt ceiling where the US 0:06:02.960 --> 0:06:04.839 government is having to come out and tell people, actually, 0:06:04.839 --> 0:06:07.480 we're not going to default something really you never thought 0:06:07.520 --> 0:06:10.279 you'd have to hear them say. So, as we try 0:06:10.279 --> 0:06:13.240 to articulate in the piece, nobody's arguing that there will 0:06:13.240 --> 0:06:15.480 be a default. Nobody's saying that it is the end 0:06:15.480 --> 0:06:17.320 of the dollar. But you'd have to say the optics 0:06:17.320 --> 0:06:18.360 of this are not good at all. 0:06:18.480 --> 0:06:18.680 Yeah. 0:06:19.120 --> 0:06:23.520 The quote from Sarah House of Wells Fargo definitely cut 0:06:23.560 --> 0:06:25.839 my attention because she says, you don't even need to 0:06:25.920 --> 0:06:27.640 actually default in the debt for there to be real 0:06:27.720 --> 0:06:30.200 damage to the economy. So walk through that, because, like 0:06:30.279 --> 0:06:32.200 I mean, obviously, the worst case in here here is 0:06:32.240 --> 0:06:35.320 that somehow we do default, the US does default. But 0:06:35.440 --> 0:06:38.560 even if we don't, all of this could be really bad, right, 0:06:38.839 --> 0:06:42.680 and maybe worth mentioning some of the Bloomberg economics data 0:06:42.760 --> 0:06:45.120 that you guys were able to incorporate into the story too. 0:06:46.320 --> 0:06:48.960 Yeah, I mean, obviously, at the very least, will prompt 0:06:49.720 --> 0:06:51.599 governments and central banks around the world to look for 0:06:51.600 --> 0:06:54.239 alternatives in terms of managing their investments. It might start 0:06:54.279 --> 0:06:56.760 to look away from the US government bonds, and that 0:06:56.839 --> 0:06:59.360 in itself might start to drive up US boring costs 0:06:59.880 --> 0:07:02.080 or time, and as we discussed earlier, it might start 0:07:02.120 --> 0:07:05.719 to accelerate the use of alternatives, pushing other trading partners 0:07:05.720 --> 0:07:08.040 into other camps. I mean, China seems to be out 0:07:08.040 --> 0:07:10.200 there every day of the week offering swap lines and 0:07:10.280 --> 0:07:12.720 trying to get people to buy and sell in their 0:07:12.760 --> 0:07:15.600 currency for example. So the fact that we're in this 0:07:15.720 --> 0:07:19.640 space at all is just corrosive and eroodes the US 0:07:19.720 --> 0:07:20.840 influents that we're talking about. 0:07:21.280 --> 0:07:23.480 So where do they go though, because in your story 0:07:23.520 --> 0:07:26.480 you talk about treasuries, right, twenty four trillion dollar market, 0:07:26.840 --> 0:07:30.280 You talk about central banks their official currency reserves still 0:07:30.320 --> 0:07:33.679 sixty percent. It's down certainly from a peak, but there's 0:07:33.760 --> 0:07:36.720 still so much that's you know, in demand when it 0:07:36.720 --> 0:07:38.360 comes to dollar denominated assets. 0:07:38.400 --> 0:07:41.200 Specifically, get what had treasurey eleven when we had our 0:07:41.240 --> 0:07:44.760 credit rating. Yeah, cut everyone poorting that treasure exactly. 0:07:44.800 --> 0:07:46.960 And we actually pointed that out in the story because 0:07:46.960 --> 0:07:49.520 there was a Bloomberg survey that came out this week 0:07:49.560 --> 0:07:52.200 that said, like, you know, I think they asked people where, 0:07:52.280 --> 0:07:55.480 you know, after gold I think it was like, treasure 0:07:55.600 --> 0:07:57.120 is worth the number I mean, and that is this 0:07:57.280 --> 0:07:59.920 irony right like that it's it's still the safe haven. 0:08:00.240 --> 0:08:02.240 But we were looking in the story at the long 0:08:02.280 --> 0:08:05.040 sweep of history too, and there was this great Golden 0:08:05.120 --> 0:08:08.720 Report that looked at how the British pound lost its reign, 0:08:09.160 --> 0:08:10.880 you know, and it talked about how there are these 0:08:10.960 --> 0:08:15.760 dynamics where one country over takes another in economic size. 0:08:15.960 --> 0:08:19.080 That doesn't automatically cause, like you know, for it to 0:08:19.200 --> 0:08:21.920 lose its status if it already has sort of world 0:08:21.960 --> 0:08:25.000 dominant status as its currency. Then but ALON can come 0:08:25.040 --> 0:08:27.160 a financial crisis, Alon can come. 0:08:27.040 --> 0:08:29.160 A world war, and that can be enough. 0:08:29.480 --> 0:08:33.079 So yeah, I think we're saying is you know, there 0:08:33.160 --> 0:08:35.720 is nothing right now as an alternative, But I don't 0:08:35.800 --> 0:08:38.840 the US should not be complacent. There are many many 0:08:38.920 --> 0:08:42.920 people who are actively engaged in wanting to find Altama. 0:08:43.080 --> 0:08:47.120 What do you think an alternative could be? You know, China, 0:08:47.320 --> 0:08:51.040 the Chinese Ue has talked about often. I'm not sure 0:08:51.040 --> 0:08:53.439 how likely that is because when it comes to censorship 0:08:53.600 --> 0:08:57.880 of currencies, you know, China would be right there with 0:08:57.920 --> 0:09:02.559 the US. Is it possible that a decentralized currency wouldever 0:09:02.679 --> 0:09:04.800 actually be a contender? 0:09:04.920 --> 0:09:07.280 Well, I think more than that, we could go back 0:09:07.320 --> 0:09:10.319 to a system before Bretton Woods, where there was many, 0:09:10.400 --> 0:09:14.520 many different currencies, right, yes, right, it's like Maynard, you know, 0:09:14.600 --> 0:09:17.200 John Maynard Keynes had won the debate, like you know, 0:09:17.559 --> 0:09:20.120 you know, so there, maybe we don't have a dominant 0:09:20.120 --> 0:09:22.199 currency anymore, but we have a more you know, sort 0:09:22.240 --> 0:09:23.800 of evenly spread, you know. 0:09:24.000 --> 0:09:25.800 And to command in on this right, you do have 0:09:25.880 --> 0:09:28.640 this great global perspective, and you've been overseas in Asia. 0:09:28.760 --> 0:09:31.560 I mean, the US economy is still larger than China's, 0:09:31.559 --> 0:09:34.720 and I do wonder what the thinking is realistically about 0:09:34.720 --> 0:09:38.120 who could be, you know, could relay replace the US 0:09:38.640 --> 0:09:39.880 as kind of the world's currency. 0:09:40.800 --> 0:09:42.360 Look, it's going to be a long road for the 0:09:42.400 --> 0:09:45.880 YU one. That's because China has really strict rules on 0:09:46.040 --> 0:09:48.640 moving money into and out of China. They've got like 0:09:48.640 --> 0:09:51.040 a closed capital count that's very different to the US. 0:09:51.120 --> 0:09:52.880 It's obviously there's got a long way to do on 0:09:52.960 --> 0:09:56.000 that respect. But nonetheless, every like I said, every day 0:09:56.000 --> 0:10:00.960 we get announcements Bangladesh, countries in Central Europe, Argentina talking 0:10:01.000 --> 0:10:04.040 about using either sloop lines or other facilities to trade 0:10:04.280 --> 0:10:06.800 and use the one for settlement. That doesn't mean the 0:10:06.800 --> 0:10:08.640 dollar will be toppled overnight, but it starts to add 0:10:08.679 --> 0:10:11.000 to Chana's influence over the global trading system and the 0:10:11.000 --> 0:10:14.080 global economy. And that's of course comming at a critical 0:10:14.080 --> 0:10:16.360 time when the US is right pushing back right against 0:10:16.400 --> 0:10:18.839 that influence. So the one doesn't have to become the 0:10:18.880 --> 0:10:21.600 world's number one currency overnight for China to gain more 0:10:21.640 --> 0:10:23.240 influence over the global trading system. 0:10:23.240 --> 0:10:26.120 But the fact that we're even having this conversation is 0:10:26.360 --> 0:10:28.800 part of what's insane about this, right, Like, the US 0:10:28.840 --> 0:10:31.520 has put itself in a situation where people are willing 0:10:31.600 --> 0:10:34.880 to like start having other conversations, and that all goes 0:10:34.960 --> 0:10:37.839 back to how America has not been able to kind 0:10:37.880 --> 0:10:40.120 of shore up its act time and time again. 0:10:40.320 --> 0:10:42.720 Yeah, and by the way, if I could just say ironically, 0:10:42.800 --> 0:10:44.680 the US has a very strong economy at the month. 0:10:44.720 --> 0:10:46.400 I mean again, you can argue about that, is there 0:10:46.800 --> 0:10:48.400 is there a slow downcoming or not. But we had 0:10:48.400 --> 0:10:50.440 another piece of Business Week this week with Reid Picker 0:10:50.480 --> 0:10:53.040 and mcllleague making the point that all these economis keep 0:10:53.040 --> 0:10:55.439 calling you sessions, but every time the data comes out 0:10:55.440 --> 0:10:58.360 every month, they're pushing those receession calls back. So the 0:10:58.480 --> 0:11:00.800 US is in a position of strength right now, but 0:11:00.840 --> 0:11:02.000 they're just pushing. 0:11:01.679 --> 0:11:06.400 These because of our world currency reserve status. Right, It's 0:11:06.440 --> 0:11:08.360 pretty easy to have a strong economy if you run 0:11:08.400 --> 0:11:12.120 trillion dollar deficits. I could do it myself. But let's 0:11:12.120 --> 0:11:15.200 talk about what's at stake here, Christina. What benefit do 0:11:15.240 --> 0:11:18.520 we get by having the world reserve currency? 0:11:18.640 --> 0:11:22.079 Well, right, we have a twenty four trillion dollar market 0:11:22.160 --> 0:11:24.880 of debt that everybody wants to buy, and that is 0:11:24.920 --> 0:11:27.800 the biggest thing we can finance, you know. I mean 0:11:28.280 --> 0:11:30.959 if you look at the you know, deficits forever and 0:11:31.320 --> 0:11:34.240 the and up to recently, the calculus was like that 0:11:34.400 --> 0:11:37.439 was okay because actually, even going into the pandemic, our 0:11:37.480 --> 0:11:41.079 service our debt service costs were falling, right, so we 0:11:41.080 --> 0:11:43.520 were like we had I mean, sorry, after the pandemic, 0:11:43.520 --> 0:11:46.120 we have this huge increase in debt, like and the 0:11:46.240 --> 0:11:49.000 debt servicing costs were falling. It would not take a 0:11:49.200 --> 0:11:52.760 much of an increase in those costs, this financing costs, 0:11:53.080 --> 0:11:55.239 you know, to go up for us to be completely 0:11:55.240 --> 0:11:56.600 different dynamics in this country. 0:11:56.600 --> 0:11:58.800 And talking about austerity, which is something we have. 0:11:58.960 --> 0:12:00.560 Yeah, right now, I think the way to average cost 0:12:00.600 --> 0:12:02.440 is about two and a half percent. But as long 0:12:02.440 --> 0:12:04.520 as we have nominal growth of seven, that's cool. 0:12:04.640 --> 0:12:05.920 Yeah, we can still carry it. 0:12:06.000 --> 0:12:09.360 Right, But you know, if this was another country to 0:12:09.440 --> 0:12:11.920 have the current account deficit that we have to have, 0:12:12.040 --> 0:12:15.040 like the like the net balance that we have, the 0:12:15.080 --> 0:12:18.720 investment position that we had, you know, investment investors would 0:12:18.760 --> 0:12:21.320 be going bonkers, you know and saying Oh my god. 0:12:21.400 --> 0:12:23.280 You know, this is a thing that's waiting to. 0:12:23.200 --> 0:12:25.920 Blow and what are the implications. So let's play it 0:12:25.920 --> 0:12:28.439 out here. So let's say the dollar is no longer 0:12:28.440 --> 0:12:32.360 the world's reserve currency. What are the implications, because I 0:12:32.360 --> 0:12:34.520 think about our investor audience and what they're thinking. 0:12:35.080 --> 0:12:37.400 Yeah, well, so, Christina Leeda, it will make things more 0:12:37.440 --> 0:12:40.319 expensive for the US in the globe. But also, by 0:12:40.320 --> 0:12:43.080 the way it perversely, it would be a knock to 0:12:43.160 --> 0:12:46.600 emerging economies as well, because even though they complain about 0:12:46.600 --> 0:12:49.280 the US dollar, the US dollar is a channel for 0:12:49.320 --> 0:12:51.520 them to raise finance. Because if there are a lot 0:12:51.559 --> 0:12:53.400 of emerging governments around the world, who if they went 0:12:53.440 --> 0:12:55.640 out to the public bond market to sell a bond 0:12:55.679 --> 0:12:58.040 in their own currency, nobody would touch it. But when 0:12:58.080 --> 0:13:00.120 they go to the global market and selling dollars, they 0:13:00.160 --> 0:13:02.440 can raise financing. So there is by the way, I 0:13:02.520 --> 0:13:04.680 just perverse angle to all of this that there's obviously 0:13:04.679 --> 0:13:07.360 anock to US influence. There could be a direct hit 0:13:07.520 --> 0:13:10.440 US funding costs by extension and the economic impact of that. 0:13:11.200 --> 0:13:13.480 But you know, perversely, I think some of those marging 0:13:13.480 --> 0:13:16.240 economies around the world you can't boor in their own currency, 0:13:16.240 --> 0:13:19.160 and need investors to trade dollars with them. They would 0:13:19.160 --> 0:13:20.040 also get a knock from this. 0:13:20.320 --> 0:13:22.960 But if you want to know what the real near 0:13:23.080 --> 0:13:25.480 term implications would be, you look at what happened in 0:13:25.520 --> 0:13:30.079 the UK when Teresa May proposed a budget that was unfounded, unfunded. 0:13:30.200 --> 0:13:31.120 How that rights you? 0:13:31.880 --> 0:13:34.760 That is the kind of freak out moment that we 0:13:35.000 --> 0:13:37.560 risk having if people do not want to buy, you know, 0:13:37.600 --> 0:13:39.920 if they lose some of their appetite for US. 0:13:39.840 --> 0:13:43.200 Treasures jump in interest and you know, as long as 0:13:43.200 --> 0:13:44.600 you're talking about the UK, one of the things I 0:13:44.640 --> 0:13:47.640 was telling Christina was like, like, let's not forget like 0:13:48.120 --> 0:13:51.200 Brexit shows what a real self inflicted wound can look like, 0:13:51.240 --> 0:13:54.600 and the US keep doing this, like, you know, can 0:13:54.679 --> 0:13:57.240 show you what what the worst case scenario could look like. 0:13:57.920 --> 0:14:02.679 Yeah, all right, guys, that is a wrap, so appreciate it. 0:14:02.679 --> 0:14:04.360 It is the cover story of the new issue of 0:14:04.360 --> 0:14:07.680 Bloomberg Business Week, as we said, out on newsstands, on 0:14:07.720 --> 0:14:10.199 the Bloomberg Tervel at Bloomberg dot com, slash BusinessWeek or 0:14:10.240 --> 0:14:12.880 thanks to end. A current global economy reporter at Bloomberg 0:14:12.920 --> 0:14:15.959 News in our DC Bureau, and Christina Limblack, global economics 0:14:16.040 --> 0:14:18.800 editor at Bloomberg BusinessWeek here in studio along with Jill Weber, 0:14:19.000 --> 0:14:21.800 the editor of Bloomberg Business Week. Here in our interactive 0:14:21.800 --> 0:14:22.560 Broker studio. 0:14:23.240 --> 0:14:26.800 You're listening to the Bloomberg Business Week podcast cats US 0:14:26.840 --> 0:14:30.520 live weekdays from two to five pm Easter on Bloomberg Radio, 0:14:30.720 --> 0:14:33.600 the Bloomberg Business App, and you too. You can also 0:14:33.680 --> 0:14:37.000 listen live to our flagship New York station, Just Say 0:14:37.120 --> 0:14:39.520 Alexa play Bloomberg eleven thirty. 0:14:40.840 --> 0:14:42.680 I feel like you know, every day we get a 0:14:42.680 --> 0:14:45.120 bunch of headlines out of China, and the most recent 0:14:45.200 --> 0:14:47.560 or at least every night, China's economic recovery losing some 0:14:47.680 --> 0:14:50.760 momentum after we saw an initial burst and consumer and 0:14:50.800 --> 0:14:53.480 business activity early in the year, so it's been prompting 0:14:53.520 --> 0:14:55.800 some calls from our policy stimulus to bolster growth. But 0:14:55.800 --> 0:14:58.120 I do feel like Matt, on any given day, we're 0:14:58.160 --> 0:15:01.120 either seeing the Chinese gu get more involved in a 0:15:01.160 --> 0:15:05.120 sector or there's concerns again about transparency or just figuring 0:15:05.120 --> 0:15:07.000 out China's role going forward. 0:15:07.120 --> 0:15:10.120 Yeah, I mean, I also think the next chapter. Investors 0:15:10.240 --> 0:15:15.600 are hungry for more information on China. Right Investors here, 0:15:16.840 --> 0:15:19.800 I think would like to know as much as possible 0:15:20.000 --> 0:15:23.960 and would like to get more insight on and understanding 0:15:24.000 --> 0:15:25.560 on how China. 0:15:25.400 --> 0:15:27.920 Works, right, And I think we thought we had the playbook, 0:15:27.960 --> 0:15:30.120 and there's actually our next guest has written a book 0:15:30.120 --> 0:15:33.600 that's called The New China Playbook, Beyond Socialism and Capitalism. 0:15:33.840 --> 0:15:36.320 Kayu Jin is the author. She's also professor of economics 0:15:36.320 --> 0:15:38.320 at the London School of Economics. She joins Matt and 0:15:38.360 --> 0:15:41.160 me here in studio. Kay, you really good to have 0:15:41.240 --> 0:15:42.840 you here with us. We only have six minutes. I 0:15:42.840 --> 0:15:45.840 wish we had like twenty because I love this subject. 0:15:45.840 --> 0:15:48.600 But our Adam Minta wrote a story about what the 0:15:48.600 --> 0:15:51.760 West gets wrong about China. What do we get wrong 0:15:51.920 --> 0:15:55.840 in our conversations, our questions and thinking about what China 0:15:55.880 --> 0:15:56.720 is up to right now? 0:15:57.040 --> 0:15:59.280 Well, first of all, that there's only one model that 0:15:59.320 --> 0:16:02.880 can work, Western style capitalism where China. 0:16:02.640 --> 0:16:04.080 Has that we believe that's the only thing. 0:16:04.120 --> 0:16:06.520 That that's the word, and that China has a centralized 0:16:06.560 --> 0:16:08.960 approach domined by an almighty state. It's not at all 0:16:09.080 --> 0:16:13.600 like that. It's the decentralized economic mechanisms, the mayor economy 0:16:13.640 --> 0:16:17.680 which I wrote about, that has galvanized creativity, innovation, pushing 0:16:17.680 --> 0:16:19.800 for reforms and even protecting the environment. 0:16:20.680 --> 0:16:24.840 So how I mean, aside from reading your book, which 0:16:24.840 --> 0:16:27.880 I'm sure is a great step, right, how can investors 0:16:28.320 --> 0:16:33.640 better understand the Chinese economy how it works when we're 0:16:33.720 --> 0:16:39.320 constantly looking at headlines that are rife with missin I 0:16:39.320 --> 0:16:42.880 don't know if misinformation is too strong, but definitely they're biased. 0:16:42.640 --> 0:16:46.960 Right, It's really important to separate hype from reality and 0:16:47.040 --> 0:16:50.080 the macro versus micro And even if the great leaders 0:16:50.120 --> 0:16:52.520 of any country, US and China say a lot of things, 0:16:52.720 --> 0:16:54.800 you might want not to read too much into the 0:16:54.840 --> 0:16:57.360 message and see what's actually going on on the ground. 0:16:57.600 --> 0:16:59.720 People who visit China will have a better view. People 0:16:59.760 --> 0:17:02.360 who look at data, which my book does and systematic 0:17:02.440 --> 0:17:06.360 evidence will understand better. But right now there's a coexistence 0:17:06.440 --> 0:17:10.160 of irreconciliable things that the West beliefs that can actually 0:17:10.560 --> 0:17:12.080 coexist at the same time in China. 0:17:12.119 --> 0:17:14.000 But getting on the ground is kind of what I 0:17:14.119 --> 0:17:17.760 was where I was going. Do you tell your students 0:17:18.040 --> 0:17:21.320 go to China? I mean, you can read my book, right, 0:17:21.440 --> 0:17:24.040 and you can study the country all you like, but 0:17:24.080 --> 0:17:26.359 if you don't go there, you're never going to really 0:17:26.440 --> 0:17:28.399 understand how this society works. 0:17:28.520 --> 0:17:30.680 If people can go there, they'll form a much more 0:17:30.720 --> 0:17:33.920 positive impression than if they won't. But it's also important 0:17:33.960 --> 0:17:37.600 to suspend this cultural and historical lens and this bias 0:17:37.600 --> 0:17:39.639 that we inherently have and look at China in a 0:17:39.680 --> 0:17:42.520 different perspectives, see it for its own, see through a 0:17:42.520 --> 0:17:43.120 different lens. 0:17:43.280 --> 0:17:45.119 Well, all right, slow down for a second, because what 0:17:45.560 --> 0:17:48.280 I mean many would say, you know, what is it 0:17:48.520 --> 0:17:53.119 in terms of China about human rights and restrictions. That's true, 0:17:53.200 --> 0:17:55.600 right in terms of what's at on social media. But 0:17:55.760 --> 0:18:00.760 are you saying and that folks in China coomfortable with 0:18:00.800 --> 0:18:04.760 that and that protectionism that their leaders are giving them. 0:18:05.000 --> 0:18:09.040 There's an implicit contract historically, since history between the people 0:18:09.040 --> 0:18:11.920 and the government that there's some level of deference, although 0:18:11.960 --> 0:18:16.879 not blind submission, in exchange for security, government accountability, responsibility, 0:18:16.880 --> 0:18:19.960 and economic delivery. That still holds today. They should talk 0:18:20.000 --> 0:18:22.880 to people on the ground and Chinese people ask them 0:18:22.920 --> 0:18:24.440 what they feel about these politicals. 0:18:24.440 --> 0:18:26.800 Everybody, though, help me out here with a younger generation, 0:18:26.920 --> 0:18:31.399 Like there's differently stories about unemployment rate in China surging 0:18:31.400 --> 0:18:33.840 to a record of twenty percent, tell me that there 0:18:33.840 --> 0:18:36.720 aren't younger Chinese individuals are like this isn't working for me. 0:18:37.320 --> 0:18:40.000 The new generation is super important for China's future. It's 0:18:40.000 --> 0:18:42.560 going to shape it, and it's meaning a relationship with 0:18:42.600 --> 0:18:45.520 the world. They're a positive force because look, they like 0:18:45.560 --> 0:18:48.159 to spend and borrow, not as save as much, and 0:18:48.200 --> 0:18:51.480 they're quite open minded and their values converge with the West. 0:18:51.480 --> 0:18:54.760 But today the pressing problem is that education has raised 0:18:54.800 --> 0:18:57.640 ahead of the economy, and many of the highly educated 0:18:57.680 --> 0:18:59.440 are not productively deployed. 0:19:00.160 --> 0:19:05.280 We do see an opaqueness though, right when jack Ma 0:19:05.560 --> 0:19:09.879 disappears or when a Bloomberg journalist is arrested and not 0:19:10.000 --> 0:19:13.600 heard from for a year, that's difficult for us to 0:19:13.640 --> 0:19:16.600 wrap our heads around. Is that something that Chinese people 0:19:16.640 --> 0:19:19.520 grow up understanding? Is that something that Chinese people accept? 0:19:19.760 --> 0:19:22.040 And what are we getting wrong about that? Because that's happening. 0:19:22.119 --> 0:19:25.880 Yeah, that spooks people, That spooks investors and confidence, which 0:19:25.920 --> 0:19:28.560 is what is missing the Chinese economy today. But look, 0:19:28.600 --> 0:19:31.879 you know the old playbook, it was about building factories, industrialization. 0:19:31.960 --> 0:19:33.680 You didn't need that much in. 0:19:34.280 --> 0:19:37.520 Go back to ye like missing journalists or missing jack Ma. 0:19:38.160 --> 0:19:40.000 Jackimad is called back now he's good. 0:19:39.880 --> 0:19:42.040 A year later. But it was really odd, right and 0:19:42.119 --> 0:19:45.840 here's a very prominent, you know, technology global figure and 0:19:46.119 --> 0:19:48.359 someone that China was proud of in terms of what 0:19:48.440 --> 0:19:50.760 he had built. So how do what did we get 0:19:50.800 --> 0:19:52.280 wrong about that? Or how do you? 0:19:52.600 --> 0:19:57.639 In the In the US, capital can arguably rises above politics. 0:19:57.680 --> 0:19:59.359 In China that can never be the case. This is 0:19:59.400 --> 0:20:04.080 why China's not a capitalist society. Jack Maw, without going 0:20:04.119 --> 0:20:07.160 to his exceptional case, is now needed very much entrepreneurs 0:20:07.240 --> 0:20:09.720 like him because the economy is needed. And so important 0:20:09.760 --> 0:20:13.639 thing to know is that policy can swift radically, change dramatically. 0:20:13.680 --> 0:20:15.160 Never read anything as permanent. 0:20:15.520 --> 0:20:19.760 But are you saying that it's okay for a government 0:20:19.800 --> 0:20:23.080 to just disappear people and that makes investors? That not 0:20:23.119 --> 0:20:25.560 make you uncomfortable even as a citizen, That would worry 0:20:25.560 --> 0:20:26.480 me as a person. 0:20:26.560 --> 0:20:29.840 It's not okay at all. And the government is learning 0:20:29.880 --> 0:20:32.920 the painful lesson of by by seeing that the economy 0:20:32.960 --> 0:20:35.760 hasn't rebound as quickly, that investors are not rushing back 0:20:35.800 --> 0:20:39.640 to look into China, that private entrepreneurs might be holding back. 0:20:39.680 --> 0:20:41.639 It's all happening today. That's a lesson. 0:20:42.000 --> 0:20:46.080 K you, what is the global value chain going forward? 0:20:46.800 --> 0:20:50.119 In China's role in that? Because it's been the manufacturer 0:20:50.200 --> 0:20:51.920 to the world and we were all we all benefited 0:20:51.920 --> 0:20:54.000 by it. Right, goods cost very little, But what is 0:20:54.680 --> 0:20:56.600 you know, their value chain going forward? 0:20:56.760 --> 0:21:00.679 China's aspiration is not really to compete become like us. 0:21:01.040 --> 0:21:04.200 It wants to be a bigger, smarter Germany. That means 0:21:04.200 --> 0:21:07.240 bolstered by the triangle of AI, communications and data. They 0:21:07.320 --> 0:21:10.040 want to think themselves as a technical industrial power, not 0:21:10.119 --> 0:21:12.000 a knowledge financialized economy like the youth. 0:21:12.119 --> 0:21:14.040 But can they get there with the concerns and kind 0:21:14.040 --> 0:21:17.760 of nervousness that many other worlds feel right now? 0:21:17.760 --> 0:21:19.560 Now you see comes to Chinese is why it's so 0:21:19.600 --> 0:21:21.679 hard to lead China. Right, it's so hard to If 0:21:21.720 --> 0:21:24.080 you step from outside, you're thinking, oh, this environment can 0:21:24.119 --> 0:21:25.040 never foster innovation. 0:21:25.119 --> 0:21:25.360 I don't. 0:21:25.400 --> 0:21:28.280 I don't agree necessarily with that, because on the ground, 0:21:28.520 --> 0:21:32.280 the domestic innovation system is all encompassing. This is a 0:21:32.320 --> 0:21:34.880 massive market form. Companies think that this is the fitness 0:21:34.920 --> 0:21:38.280 ground to train their own their own companies. And there's 0:21:38.320 --> 0:21:42.560 a close proximity proximity between AI, autonomous vehicles and chip 0:21:42.600 --> 0:21:47.159 industries that stimulate demands. I want to underestimate China's central 0:21:47.560 --> 0:21:49.800 advantages in technology. 0:21:50.160 --> 0:21:50.720 Ran out of time. 0:21:50.760 --> 0:21:51.680 Come back, we need more time. 0:21:51.720 --> 0:21:53.399 I'd love to. I wish we had great to be 0:21:53.480 --> 0:21:55.280 with you. I wish we had more time. So come 0:21:55.280 --> 0:21:57.919 back and let's continue this wonderful I would love it. 0:21:58.160 --> 0:22:01.040 Kenyu Jin, Professor Economics. That let's see the London School 0:22:01.040 --> 0:22:03.240 of Economics. Her book is called The New China Playbook 0:22:03.240 --> 0:22:06.600 Beyond Socialism and Capitalism. It is out now. This is Bloomberg. 0:22:08.440 --> 0:22:12.000 You're listening to the Bloomberg Business Week podcast. That's us 0:22:12.040 --> 0:22:15.720 live weekdays from two to five pm Eastern on Bloomberg Radio, 0:22:15.920 --> 0:22:18.800 the Bloomberg Business App, and you too. You can also 0:22:18.880 --> 0:22:22.200 listen live to our flagship New York station. Just say 0:22:22.320 --> 0:22:24.720 Alexa play Bloomberg. You love them, Turty. 0:22:26.480 --> 0:22:28.880 All right, let's get to our guests, because I'm so delighted. 0:22:29.080 --> 0:22:31.520 We are so delighted to have back with us Marketshow 0:22:31.560 --> 0:22:35.280 President CEO at Aart finance here in our studio. So 0:22:35.400 --> 0:22:36.160 great to have you here. 0:22:36.160 --> 0:22:39.400 How are you, Carol? I'm doing fantastic. Thank you, Good 0:22:39.400 --> 0:22:40.000 to see you again. 0:22:40.119 --> 0:22:41.360 Yeah, it's great to see you. What I was thinking 0:22:41.359 --> 0:22:42.879 about it, I kind of was going back. It was 0:22:42.880 --> 0:22:45.199 about a year ago or so, the Equality Summit. You 0:22:46.040 --> 0:22:48.720 and John O'Brien and we talked about, you know, more diversity, 0:22:48.800 --> 0:22:51.200 certainly in the financial world. There were some really dismal 0:22:51.240 --> 0:22:54.119 statistics that are out there, and I think I shared 0:22:54.160 --> 0:22:57.199 them with you and everybody who was there. Are we 0:22:57.240 --> 0:22:59.840 getting better? You have some good news we're going to 0:22:59.840 --> 0:23:01.600 get into but are we getting better? 0:23:02.119 --> 0:23:04.600 We are getting better at the margin, But I do 0:23:04.680 --> 0:23:08.560 believe we can't take solace in just getting better, right, 0:23:08.640 --> 0:23:12.320 We've got to continue to improve. What we're really working 0:23:12.359 --> 0:23:17.840 towards is improving several generations of deficit that we've built 0:23:17.840 --> 0:23:23.600 in terms of investment, acumen, wealth building, and really creating 0:23:23.600 --> 0:23:26.600 new opportunities for generations that come after us. So we're 0:23:26.640 --> 0:23:28.919 working doubly as hard to try to make up for 0:23:28.960 --> 0:23:29.440 lost time. 0:23:29.840 --> 0:23:33.679 Yeah, I think it's incredibly important, and you know, we've 0:23:33.720 --> 0:23:37.520 covered this story for a long time. What you're doing 0:23:37.880 --> 0:23:41.400 now is you're helping kids that graduate from historically black 0:23:41.440 --> 0:23:46.240 colleges and universities to get jobs in finance. And as 0:23:46.320 --> 0:23:51.119 Carol pointed out, they're drastically underrepresented. Underrepresented even when you 0:23:51.160 --> 0:23:54.960 look at you know, the breakdown of wherever you are locally. 0:23:54.600 --> 0:23:58.119 Statistic here's one Yeah, diverse owned financial firms control just 0:23:58.160 --> 0:24:00.680 one point four percent of the eighty two trillion dollars 0:24:00.720 --> 0:24:03.800 of US investment fund assets. This was a foundation as 0:24:03.840 --> 0:24:05.600 of late twenty twenty one. 0:24:05.920 --> 0:24:07.800 I mean, it's even a problem if you just look 0:24:07.840 --> 0:24:11.359 at the breakdown of employees that make banks right, especially 0:24:11.440 --> 0:24:14.760 on the like on the levels where people earn real money, 0:24:15.080 --> 0:24:16.480 like investment bankers. 0:24:16.640 --> 0:24:22.520 And it's critical because in this economy, in our economic system, 0:24:22.560 --> 0:24:25.440 investing of capital and the return that you benefit from 0:24:25.440 --> 0:24:27.800 that is one of the critical ways to build wealth. 0:24:27.840 --> 0:24:29.800 I mean, there's a statistic that I heard at a 0:24:29.840 --> 0:24:31.399 conference a couple of weeks ago. It said, if you 0:24:31.440 --> 0:24:33.720 go back to nineteen seventy and you look at real 0:24:33.760 --> 0:24:36.440 GP growth since nineteen seventy, you're talking two to three 0:24:36.480 --> 0:24:40.320 percent annualized. If you look at return on investments or 0:24:40.359 --> 0:24:42.560 return on equity in that same period of time, you're 0:24:42.600 --> 0:24:45.399 talking five to six maybe seven percent, depending on how 0:24:45.400 --> 0:24:49.000 you're accounting for it. The punchline here is you cannot 0:24:49.080 --> 0:24:52.520 work your way to wealth in this country. Investing has 0:24:52.560 --> 0:24:55.320 to be a part of your strategy for building wealth. 0:24:55.520 --> 0:24:58.280 And if you're not involved in the investment economy, if 0:24:58.280 --> 0:25:01.320 you're not making those investments direct you can work your 0:25:01.359 --> 0:25:04.400 butt off for years and you will just get by right. 0:25:04.560 --> 0:25:06.919 Education helps, it helps you get a better job. But 0:25:07.000 --> 0:25:10.040 once you're in that better job, the growth rate for 0:25:10.119 --> 0:25:12.480 your personal wealth and the wealth of your family will 0:25:13.000 --> 0:25:15.840 likely not outpace growth in this country. 0:25:16.040 --> 0:25:18.400 Well, tell us about this program that you guys are 0:25:18.400 --> 0:25:21.000 doing at your company, and you've got the you know 0:25:21.119 --> 0:25:24.840 or your institution, your organization. You've got backing from some 0:25:24.880 --> 0:25:27.920 really well known firms, certainly in the alt investment space. 0:25:27.960 --> 0:25:30.440 We're talking about Apollo, We're talking about areas, we're talking 0:25:30.440 --> 0:25:33.320 about oak, oak tree, oak tree. 0:25:33.359 --> 0:25:35.480 Rather oak power markets powers. 0:25:36.720 --> 0:25:39.600 But I'm just thinking about you know, they want a 0:25:39.640 --> 0:25:42.840 more diverse group. They've talked about it. How has their 0:25:42.920 --> 0:25:44.280 involvement made a difference. 0:25:44.720 --> 0:25:47.000 Well, it's critically important that you have some of the 0:25:47.000 --> 0:25:50.600 biggest names in the industry making a commitment to this 0:25:50.720 --> 0:25:53.240 issue of diversity in the workplace in the investment world. 0:25:53.600 --> 0:25:57.280 I believe what's most critical is that these three firms 0:25:57.600 --> 0:26:00.600 that are competitive in many elements of this business have 0:26:00.720 --> 0:26:04.240 recognized that this is a systemic problem. Therefore, we need 0:26:04.240 --> 0:26:08.320 a systemic solution. They have to work together, all of 0:26:08.359 --> 0:26:11.159 those firms all the way from leadership down to analysts 0:26:11.400 --> 0:26:14.879 have been a part of volunteering, mentoring, and creating networks 0:26:14.880 --> 0:26:18.240 for students who are incredibly bright. But these schools had 0:26:18.280 --> 0:26:21.639 not had these companies on campus previously, so we hadn't 0:26:21.640 --> 0:26:26.880 built multiple generations recruiting. You're for recruiting these students through 0:26:26.920 --> 0:26:30.000 all finance. We've got seventy three students in our program 0:26:30.000 --> 0:26:32.959 and eight historically black colleges and universities across the country 0:26:33.280 --> 0:26:36.240 that have built the skills, the networks, and most importantly, 0:26:36.280 --> 0:26:39.120 the confidence that they can be successful in this industry. 0:26:39.280 --> 0:26:41.400 And we're graduating fourteen of them this year. 0:26:41.480 --> 0:26:43.640 But one of the things it's tricky, and you talked 0:26:43.680 --> 0:26:45.760 about this when we did the panel a year ago, 0:26:46.200 --> 0:26:52.480 is being at an organization where you are rare and 0:26:52.520 --> 0:26:55.800 one of the lone individuals, a black individual among companies 0:26:55.800 --> 0:26:59.000 that are still largely white. So how do you think 0:26:59.000 --> 0:27:03.840 about that? Folks ready to be in that environment? You 0:27:03.840 --> 0:27:05.040 yourself were in that environment. 0:27:05.119 --> 0:27:07.320 I was in that very environment when I came out 0:27:07.320 --> 0:27:09.720 of business school in two thousand and five. I was 0:27:09.760 --> 0:27:12.879 an equity research analyst, and I was one of the 0:27:12.920 --> 0:27:15.480 only black people in the entire division Bank of America, 0:27:15.520 --> 0:27:18.359 A Bank of America. And you know, times have changed, 0:27:18.640 --> 0:27:21.160 but that was less than twenty years ago, almost twenty 0:27:21.160 --> 0:27:23.080 I'm not that old yet, but almost twenty years ago. 0:27:24.119 --> 0:27:25.840 Easy, right, Not not easy at all. 0:27:26.760 --> 0:27:31.679 It requires a level of self assuredness that I think 0:27:31.960 --> 0:27:34.439 people don't fully appreciate. Right to be able to go 0:27:34.480 --> 0:27:37.119 into work in a place where you're the only person 0:27:37.119 --> 0:27:39.960 that looks like you, there's not a ton of shared experience, 0:27:40.000 --> 0:27:42.600 and to be able to perform and outperform every day 0:27:42.720 --> 0:27:46.600 requires a level of grit that's not rewarded all the time. 0:27:46.880 --> 0:27:49.120 And so one of the things that we're working with 0:27:49.160 --> 0:27:52.919 in all finances, we're creating a community of students that 0:27:52.960 --> 0:27:57.480 are coming from similar schools HBCUs that have incredible academic 0:27:57.520 --> 0:28:02.960 performance intellectual acumen, and building a network of them so 0:28:03.000 --> 0:28:05.480 that when they go out into the workforce, they have 0:28:05.520 --> 0:28:07.479 people that they can call and talk to, and then 0:28:07.520 --> 0:28:10.120 that gives them even greater confidence to operate when they're 0:28:10.119 --> 0:28:11.960 the only person that looks like them in the room. 0:28:12.040 --> 0:28:13.760 That's brilliant. And it's got to be a huge jump 0:28:13.760 --> 0:28:17.680 also from an HBCU into one of these private equity firms. 0:28:17.920 --> 0:28:22.080 Like you went to Duke for your MBA, right, so 0:28:22.400 --> 0:28:25.800 that must have also been a pretty you must have 0:28:25.840 --> 0:28:29.120 also been pretty lonely in that MBA program, right, Well. 0:28:29.000 --> 0:28:32.440 I will say that, And this comes full circle around 0:28:32.480 --> 0:28:35.800 what's happening in alternative investments. There are other industries that 0:28:35.920 --> 0:28:40.080 have tried to recognize the importance of diversity and inclusion 0:28:40.120 --> 0:28:42.760 early on, and I think the banks started this really 0:28:42.800 --> 0:28:46.000 back in the late eighties early nineties, and the investment 0:28:46.080 --> 0:28:48.680 banks did. Business schools have done well. My experience at 0:28:48.760 --> 0:28:52.480 Duke was actually pretty diverse. They did a great job. 0:28:53.080 --> 0:28:55.120 Dean Breeden, who's the dean during my time in Dean 0:28:55.120 --> 0:28:57.200 Bolding now have done a great job at the Fucal 0:28:57.200 --> 0:29:00.640 School of Business in terms of building diverse classes. Education, 0:29:01.160 --> 0:29:03.800 I think was leading the private sector and a lot 0:29:03.840 --> 0:29:07.280 of these places. And the reality is the alternative investment 0:29:07.320 --> 0:29:10.520 industry is, give or take, really forty or fifty years old. 0:29:10.520 --> 0:29:12.920 I mean, the main principles are still alive, the founders 0:29:12.920 --> 0:29:16.080 of firms are still alive. So it's you know, we 0:29:16.080 --> 0:29:18.960 were in the early stages of the industry. I think 0:29:19.000 --> 0:29:21.840 what's happening now and this is where you know, Howard 0:29:21.920 --> 0:29:25.040 and Tony and Mark Rowan from from oak Tree Areas 0:29:25.040 --> 0:29:27.440 and Apollo respectively, and Mike Herregetty and all the guys 0:29:27.680 --> 0:29:30.280 at those firms have said, we want to fix this 0:29:31.320 --> 0:29:33.600 while we're still here, right, and we want to take 0:29:33.600 --> 0:29:35.920 an active role in doing that, and we want that 0:29:36.040 --> 0:29:39.280 to permeate throughout our companies. So I can say in 0:29:39.320 --> 0:29:42.280 full honesty that these firms have made a commitment from 0:29:42.280 --> 0:29:44.479 the top all the way down to the analyst class, 0:29:44.800 --> 0:29:45.960 that diversity. 0:29:45.480 --> 0:29:47.040 Has got to be a part of their by the way, 0:29:47.080 --> 0:29:51.200 and not entirely out of altruistic reasons, I assume, right, 0:29:51.240 --> 0:29:54.760 because if you have more diversity, you can also make 0:29:54.840 --> 0:29:58.120 more money. You can generate more revenue, you can fatten 0:29:58.160 --> 0:30:00.640 your margins. You need have people who think think differently. 0:30:00.720 --> 0:30:04.720 The basic tenon of capitalism. Okay, more people doing good 0:30:04.760 --> 0:30:08.080 work creates more profit, right, And if you believe in 0:30:08.280 --> 0:30:12.479 GDP growth right totally, more people being productive increases GDP. 0:30:12.920 --> 0:30:16.240 So it's to the benefit of these companies, is to 0:30:16.280 --> 0:30:19.520 the benefit of this country that every man, woman and 0:30:19.640 --> 0:30:22.800 child that's in this country operates at their highest potential 0:30:23.080 --> 0:30:24.600 and their highest place of potential. 0:30:24.760 --> 0:30:26.600 Diversity of thought is one thing, but this is what 0:30:26.640 --> 0:30:28.440 you and I were talking about, and because I get 0:30:28.440 --> 0:30:30.240 a little you know, cranky that we've got these really 0:30:30.280 --> 0:30:33.640 wealthy companies and yet not everybody is benefiting in terms 0:30:33.640 --> 0:30:36.280 of workers that are there. Well, I know we'll get 0:30:36.280 --> 0:30:40.240 into this little bit later. You raise everyone up, you 0:30:40.280 --> 0:30:43.040 think about you grow the economy. There's more people who 0:30:43.080 --> 0:30:44.920 have money to put to work, right. 0:30:44.840 --> 0:30:45.960 And as part as society. 0:30:46.960 --> 0:30:48.320 I want to throw it over to you, Matt, because 0:30:48.320 --> 0:30:52.400 I feel like you had you were thinking about financial literacy. 0:30:52.000 --> 0:30:54.160 You were thinking so I think they're two separate things, right. 0:30:54.360 --> 0:30:56.680 One thing that the market is that you've done is 0:30:56.680 --> 0:31:00.200 you've got fourteen kids from these HBCU schools that are 0:31:00.200 --> 0:31:03.000 now going to advance into private equity. 0:31:02.840 --> 0:31:04.760 First graduating class, first graduating. 0:31:04.360 --> 0:31:07.760 Class, which I think is amazing. So you're you're placing 0:31:07.840 --> 0:31:12.600 these kids. Another thing that's separate is financial literacy, which 0:31:12.800 --> 0:31:15.560 may not just be, you know, a racial inequality problem. 0:31:15.600 --> 0:31:17.600 I never learned anything about right how to run my 0:31:17.640 --> 0:31:20.680 money and tell us forty and as a result, I 0:31:20.720 --> 0:31:22.360 have a lot less than I probably should. But we 0:31:22.480 --> 0:31:26.720 just But so are you doing both because you're helping 0:31:26.760 --> 0:31:30.040 these kids also in a sense, be financially literate by 0:31:30.240 --> 0:31:32.680 getting them ready to recruit for these jobs. And that's 0:31:32.720 --> 0:31:34.360 you know, going to an interview is something that a 0:31:34.360 --> 0:31:35.920 lot of kids aren't just aren't ready to do if 0:31:35.960 --> 0:31:37.520 they haven't gone to business school like you have. 0:31:37.800 --> 0:31:40.440 Right, So I will say for the kids that are 0:31:40.480 --> 0:31:43.960 in our program directly, we want to imbue them all 0:31:44.000 --> 0:31:47.480 with a sense of investment acumen and a healthy sense 0:31:47.520 --> 0:31:50.520 of where they feel comfortable taking risk. Right, That's what 0:31:50.800 --> 0:31:54.680 largely I believe twenty first century financial literacy is about. 0:31:54.880 --> 0:31:56.520 It's no longer about how to set up a checking 0:31:56.560 --> 0:31:59.719 account in a savings account, but it's about you know, 0:31:59.760 --> 0:32:03.080 how do you think about managing your tax liabilities? 0:32:03.160 --> 0:32:03.320 Right? 0:32:03.320 --> 0:32:06.520 How do you think about establishing your retirement accounts? You know, 0:32:06.520 --> 0:32:08.240 if you're five twenty nine counts, if you want to 0:32:08.280 --> 0:32:10.920 have kids, how do you think about financial planning and 0:32:11.040 --> 0:32:13.480 managing your risk? Knowing when to be liquid, knowing when 0:32:13.520 --> 0:32:16.640 to be illiquid. All of that just comes with comfort 0:32:16.680 --> 0:32:19.200 and confidence. And so it goes back to the investment point. 0:32:19.240 --> 0:32:22.080 You're investing earlier. You can't really build wealth through work. 0:32:22.480 --> 0:32:24.400 I was just walking down the street and I saw 0:32:24.440 --> 0:32:27.200 a sign for a certificate of a deposit that earns 0:32:27.200 --> 0:32:29.000 you five and a half percent and then I got 0:32:29.040 --> 0:32:30.880 back to my computer and saw that wage growth is 0:32:30.920 --> 0:32:34.240 only four and a half percent, So you can money 0:32:34.240 --> 0:32:35.320 makes more money than what. 0:32:36.040 --> 0:32:38.640 You got to invest. You know, the point that we're 0:32:38.640 --> 0:32:41.960 talking about is it's very hard to earn your way 0:32:42.040 --> 0:32:44.800 to wealth. You can, you know, get different levels of 0:32:44.880 --> 0:32:48.560 education and you make these step function increases. Right, you 0:32:48.560 --> 0:32:50.320 get an undergrad degree, you're going to have a better 0:32:50.400 --> 0:32:52.600 job than you did if with a high school diploma. 0:32:52.640 --> 0:32:54.560 You get a graduate degree, hopefully you'll have a better 0:32:54.640 --> 0:32:57.040 job than you would with an undergrad degree. But as 0:32:57.080 --> 0:32:59.920 you stay in that role, the growth of your way 0:33:00.240 --> 0:33:02.240 is over time is not going to allow you to 0:33:02.240 --> 0:33:05.440 earn real wealth. You've got to find ways to invest. 0:33:05.480 --> 0:33:08.280 You've got to find ways to increase your personal returns. 0:33:08.560 --> 0:33:11.160 And so the first step is getting comfortable with having 0:33:11.200 --> 0:33:14.280 that conversation. One of my favorite things with our fellows 0:33:14.920 --> 0:33:17.360 is just you know, we'll invite them to dinner and 0:33:17.400 --> 0:33:20.080 we'll have conversations about everything. We'll talk about music, we'll 0:33:20.080 --> 0:33:22.360 talk about sports, we'll talk about politics, and then the 0:33:22.640 --> 0:33:26.400 same level of confidence, we start having discussions about investing 0:33:26.960 --> 0:33:29.440 and things that they're thinking about doing, things that they're 0:33:29.480 --> 0:33:32.400 seeing in there in the workplace, during internships, for full time. 0:33:32.640 --> 0:33:33.480 And so if you can. 0:33:33.360 --> 0:33:37.280 Create a dialogue right where students feel is comfortable talking 0:33:37.320 --> 0:33:40.640 about the best new album from Beyonce or Drake, or 0:33:40.920 --> 0:33:43.600 you know what's happening in the National Football League or 0:33:43.800 --> 0:33:46.280 you know what piece of art they like, as they 0:33:46.320 --> 0:33:49.719 have about the financial decisions they're making, then you have 0:33:49.840 --> 0:33:52.400 true ownership and true confidence. And that's what it takes 0:33:52.400 --> 0:33:55.480 to build true you know, personal financial literacy. 0:33:55.600 --> 0:33:58.720 By the way, the best financial literacy conversation I ever 0:33:58.720 --> 0:34:00.840 had was an interview with ray Lewis on the floor 0:34:00.880 --> 0:34:03.160 of the New York Stock Exchange during the draft. He 0:34:03.280 --> 0:34:06.920 was in town to help these kids not blow you know, 0:34:07.000 --> 0:34:09.279 the millions of dollars they were getting there, which a 0:34:09.320 --> 0:34:11.640 surprising number of them actually do, right. 0:34:11.760 --> 0:34:14.239 I mean, I look at Tom Brady. Tom Brady's made 0:34:14.239 --> 0:34:16.440 a small mint playing football. Yeah, he is going to 0:34:16.480 --> 0:34:20.120 make more money being a broadcaster than he ever made 0:34:20.120 --> 0:34:23.719 playing football. But that conversation started with what do I 0:34:23.760 --> 0:34:27.200 do next? How do I properly price myself in that market? 0:34:27.560 --> 0:34:29.480 Is that something that I can only return on? And 0:34:29.560 --> 0:34:31.520 ray lewis a great job, I mean, one of my 0:34:31.600 --> 0:34:34.759 favorite all time football players, but he's also built a 0:34:34.800 --> 0:34:37.919 brand for himself, you know, as part of a part 0:34:37.920 --> 0:34:39.759 of color commentating for the NFL. 0:34:39.520 --> 0:34:42.719 And what's and he's in a hugely successful investor, right. 0:34:43.920 --> 0:34:46.560 No, but it's tragic how many athletes, professional athletes, to 0:34:46.640 --> 0:34:49.279 end up with no money ultimately. And so that's a 0:34:49.280 --> 0:34:52.279 whole other other chapter. What I'm curious is going back 0:34:52.360 --> 0:34:55.680 to the firms Apollo, Aras, Oatree that are involved, why 0:34:55.760 --> 0:34:59.120 weren't they reaching out beforehand helped me out there? Because 0:34:59.480 --> 0:35:01.719 they underst stood the importance of diversity of thought or 0:35:01.800 --> 0:35:04.560 diversity investments, Why weren't they doing it beforehand? 0:35:05.239 --> 0:35:06.120 It's a great question. 0:35:06.280 --> 0:35:07.759 It's a conversation around. 0:35:07.480 --> 0:35:09.760 That, and I think it's rooted in a couple of things. 0:35:10.280 --> 0:35:13.719 Number One, these firms grew very very fast. And so 0:35:14.160 --> 0:35:17.520 again they started off small, largely in the nineties, right, 0:35:17.600 --> 0:35:21.080 started off small, did not have full fledged HR departments, right, 0:35:21.120 --> 0:35:25.440 They were recruiting from schools that their current employees and 0:35:25.480 --> 0:35:29.400 investors went. Right. So, you know, when you're working at 0:35:29.400 --> 0:35:32.520 an investment firm, and I've been there, you don't want 0:35:32.520 --> 0:35:34.880 to spend a ton of time on hiring because you 0:35:34.920 --> 0:35:37.080 need to get people in place, trained up, so that 0:35:37.080 --> 0:35:39.600 they can, you know, put money at risk and they 0:35:39.600 --> 0:35:44.080 can earn returns. And so if you can say, look, 0:35:44.160 --> 0:35:47.920 i've had four people from this school, go back to 0:35:47.960 --> 0:35:50.879 your school and recruit some more people like you, right, 0:35:50.960 --> 0:35:53.640 Because if I can minimize the risk around who the 0:35:53.680 --> 0:35:56.520 investor is, I can maximize the value of some of 0:35:56.560 --> 0:35:59.040 the returns that I would expect to get. I think 0:35:59.080 --> 0:36:03.520 where that fail is number one, you don't fully understand 0:36:03.600 --> 0:36:06.200 what you're leaving on the table because guess what, there 0:36:06.200 --> 0:36:08.759 could be a better class of investors out there. 0:36:09.120 --> 0:36:09.279 Right. 0:36:09.320 --> 0:36:11.680 They could be kids at HBCUs, they could be women, 0:36:11.880 --> 0:36:15.120 they could be folks overseas. So at a certain point 0:36:15.160 --> 0:36:18.239 in time, once you scale, you say I need to 0:36:18.280 --> 0:36:21.160 find the best talent that I can find, even if 0:36:21.200 --> 0:36:22.480 it takes a little bit more. 0:36:22.360 --> 0:36:25.240 Effort after you scale, after you start. 0:36:25.440 --> 0:36:28.399 And so the key is right, that's the generation where 0:36:28.400 --> 0:36:31.120 we are now what I do believe, and I see 0:36:31.160 --> 0:36:33.680 it in new firms that are starting up. People are 0:36:33.719 --> 0:36:36.400 starting to think right off the bat, I'm going to 0:36:36.440 --> 0:36:39.200 spend a little bit more time and effort in building 0:36:39.239 --> 0:36:41.680 my team more diverse so that I don't have to 0:36:41.680 --> 0:36:43.640 do it down the line. And that's just part of evolution. 0:36:43.800 --> 0:36:44.000 Right. 0:36:44.120 --> 0:36:46.200 We went through generations where people said, I'm going to 0:36:46.239 --> 0:36:47.840 start a team and it's not going to be diverse, 0:36:48.040 --> 0:36:49.600 and I'm going to grow it as fast as I 0:36:49.600 --> 0:36:51.920 can and it's not going to be diverse, and I'm 0:36:51.920 --> 0:36:53.960 gonna end up with ex returns. And I'm happy with 0:36:54.000 --> 0:36:56.640 that because all I'm benchmarking and against is people doing 0:36:56.680 --> 0:36:57.200 the same thing. 0:36:57.360 --> 0:36:57.560 Right. 0:36:57.640 --> 0:36:59.240 Exactly now, we're in an. 0:36:59.080 --> 0:37:02.480 Era where it's been proven you bring a diverse workforce in. 0:37:02.719 --> 0:37:04.520 I mean, Mackenzie's done the STADI, it's a lot of 0:37:04.520 --> 0:37:07.480 the consultants and academia has done the studies. More diverse 0:37:07.520 --> 0:37:11.600 teams generate higher risk adjusted returns. It's the bedrock of 0:37:11.640 --> 0:37:17.440 investing diversification. It's right there. And so what people realize 0:37:17.480 --> 0:37:20.239 is now now that we've kind of stabilized and we 0:37:20.280 --> 0:37:21.719 know what the firm is going to survive and we 0:37:21.760 --> 0:37:24.040 know where it's going, we need to make sure that 0:37:24.120 --> 0:37:26.400 as we move into the next generation that we have 0:37:26.480 --> 0:37:29.400 the most competitive workforce imaginable. 0:37:28.800 --> 0:37:32.040 And they need to be greedy enough to overcome their biases. 0:37:31.520 --> 0:37:32.880 Greedy enough to overcome their bias. 0:37:32.920 --> 0:37:33.759 That's exactly right. 0:37:34.040 --> 0:37:35.359 We're gonna get t shirts printed out. 0:37:35.400 --> 0:37:35.839 I like it. 0:37:35.920 --> 0:37:37.880 No, it's like it's brilliant. Like you think about the 0:37:37.920 --> 0:37:42.040 biaseness that's been in recruiting, right, and you've really change 0:37:42.040 --> 0:37:44.720 it dramatically. We've run out of time. You're always welcome, 0:37:44.960 --> 0:37:47.600 erl thank you. Love to hear more as the graduates 0:37:47.640 --> 0:37:49.400 continue and how they're doing, so come back soon. 0:37:49.480 --> 0:37:52.440 Yeah, a lot want to follow their careers. It's so exciting. 0:37:52.520 --> 0:37:53.399 It is pretty cool stuff. 0:37:53.440 --> 0:37:55.319 Hopefully you'll have some of them on in years to come. 0:37:55.400 --> 0:37:56.319 Actually that would be great. 0:37:56.360 --> 0:37:59.200 I think they'll there'll be folks that are moving the 0:37:59.239 --> 0:38:01.080 needle in this industry of finance. 0:38:01.120 --> 0:38:03.279 I agree. All right, Marcus, thank you, be wow, thank 0:38:03.280 --> 0:38:05.279 you so much. Markus Shaw, his chief executive officer at 0:38:05.320 --> 0:38:07.439 All Finance. Here in our interactive broker's. 0:38:07.120 --> 0:38:11.319 Studio, you're listening to the Bloomberg Business Week podcast. Catch 0:38:11.400 --> 0:38:14.200 us live weekdays from two to five pm Eastern on 0:38:14.320 --> 0:38:17.799 Bloomberg Radio, the Bloomberg Business App, and you too. You 0:38:17.880 --> 0:38:20.759 can also listen live to our flagship New York station 0:38:21.360 --> 0:38:24.240 Just say Alexa, play Bloomberg. You Love Them thirty. 0:38:25.800 --> 0:38:29.520 We've had a lot when it comes to artificial intelligence 0:38:29.520 --> 0:38:32.399 and certainly the next level AI We heard Pellant here 0:38:32.760 --> 0:38:35.239 earlier in the week, the CEO saying in terms of 0:38:35.560 --> 0:38:37.759 their strategy, they said, they're just going to take the 0:38:37.760 --> 0:38:40.000 whole market. We just talked about it with Ed Ludlow 0:38:40.400 --> 0:38:41.960 about Alphabet and Google. 0:38:41.960 --> 0:38:43.439 IBM has brought Watson back. 0:38:44.239 --> 0:38:45.640 IBM has brought Watson back. 0:38:45.719 --> 0:38:47.640 I mean to no fair fan fair at all. 0:38:47.760 --> 0:38:49.400 Hey, I's been around for a long time. We's just 0:38:49.440 --> 0:38:52.359 getting a lot smarter and we can actually talk to 0:38:52.440 --> 0:38:54.759 it if you will, or talk with it. So let's 0:38:54.760 --> 0:38:58.680 get another take on AI with us is Favorite Shaithe. 0:38:58.719 --> 0:39:01.440 He is co founder and CEO at the conversational messaging 0:39:01.480 --> 0:39:04.640 platform for commerce, marketing and support there called gup shop, 0:39:04.880 --> 0:39:07.719 and he's here in our Bloomberg Interactive Brokers studio Berry. 0:39:07.840 --> 0:39:10.200 Good to have you here with Matt and myself. Tell 0:39:10.280 --> 0:39:12.480 us a little bit. You guys are all in on AI. 0:39:12.600 --> 0:39:15.560 What specifically is it just about when we call a 0:39:15.600 --> 0:39:19.680 company you can be behind it in terms of your platform. 0:39:19.920 --> 0:39:22.160 Yeah, first, lead Carol, Matt, thanks for having me here. 0:39:22.520 --> 0:39:26.520 That's exactly right, right, helping businesses and brands build these 0:39:26.560 --> 0:39:30.719 conversational experiences or chatbots through which they can engage with customers. 0:39:31.080 --> 0:39:34.080 So for a consumer. The consumer experiences that chatting with 0:39:34.120 --> 0:39:36.120 the business is just as easy as chatting with a 0:39:36.160 --> 0:39:38.680 friend or family member. You ask them questions, and through 0:39:38.719 --> 0:39:45.399 those conversations you can get deals, offers, shopping payments, customer support, troubleshooting, 0:39:45.440 --> 0:39:45.879 and so on. 0:39:46.040 --> 0:39:47.239 Like so or not. 0:39:48.880 --> 0:39:53.480 About Matt Well, I have used some chatbots recently with 0:39:53.600 --> 0:39:56.520 a couple of your clients, for example Verizon, and the 0:39:56.640 --> 0:39:59.640 experience I had was nothing like a conversation. In fact, 0:40:00.800 --> 0:40:02.640 I thought it might have been the dumbest piece of 0:40:02.640 --> 0:40:06.400 technology that I've ever interacted with. Now, I was also 0:40:06.480 --> 0:40:10.160 angry at the time, to be fair about Verizon, nothing 0:40:10.160 --> 0:40:13.319 to do with the chatbot. But are you saying that 0:40:13.360 --> 0:40:16.040 your technology is able to do that stuff now, or 0:40:16.080 --> 0:40:18.320 that you know, five to ten years down the road 0:40:18.719 --> 0:40:20.200 they should be able to do that. 0:40:20.600 --> 0:40:23.080 No, I think it's more like six to twelve months now, right. 0:40:23.160 --> 0:40:25.839 What's changed, Okay, what's fundamentally changed a few months ago 0:40:25.960 --> 0:40:28.400 is that these large language models got It was a 0:40:28.480 --> 0:40:31.880 huge step function in capability, meaning it just dramatic improvement, 0:40:32.480 --> 0:40:35.520 and all of those are now trickling into these experiences. 0:40:35.600 --> 0:40:38.680 So it takes a little bit of time, but in 0:40:38.719 --> 0:40:40.600 the next few it's a matter of months because the 0:40:40.640 --> 0:40:43.560 hard part is done. It just has to be integrated. 0:40:43.960 --> 0:40:46.520 But the fact that they can handle these conversations in 0:40:46.560 --> 0:40:51.160 a natural way, understand, interpret, sense what the query is 0:40:51.200 --> 0:40:54.400 and then provide good responses, etc. It takes a little 0:40:54.440 --> 0:40:57.480 bit of work to optimize it for a particular enterprise. 0:40:57.520 --> 0:40:58.800 It's a big jump. What was it all of a 0:40:58.840 --> 0:41:01.480 sudden because AI, as we said, right, this has been around. 0:41:01.480 --> 0:41:03.480 But what happened? What was the big jump in particular? 0:41:03.560 --> 0:41:04.640 Yeah, now that's a great question. 0:41:04.680 --> 0:41:05.160 See AI. 0:41:05.480 --> 0:41:07.960 I mean I did my graduate research twenty thirty years 0:41:08.000 --> 0:41:10.080 ago in AI, and it's been going around for seventy 0:41:10.120 --> 0:41:13.319 eighty years, right, AA has been making constant progress out 0:41:13.320 --> 0:41:15.880 of the limelight. I think what happened literally over the 0:41:15.960 --> 0:41:19.640 last six months was it reached a point and basically 0:41:19.640 --> 0:41:22.120 three things came together, right. One is on the software 0:41:22.280 --> 0:41:26.000 algorithm side, there was ideas around deep learning and the transformer, 0:41:26.200 --> 0:41:29.280 which was amazing. The other is More's law, right, hardware 0:41:29.320 --> 0:41:32.160 getting better and faster. And then the third is data. Right, 0:41:32.280 --> 0:41:35.600 Internet data, the volume of data available for training has 0:41:35.960 --> 0:41:39.560 become available. So these three things together and then I 0:41:39.560 --> 0:41:41.880 guess it just a numeric thing which is at a 0:41:41.920 --> 0:41:44.560 certain number of parameters. Right at one hundred million, it 0:41:44.680 --> 0:41:48.839 wasn't good. But at one hundred billion parameters, suddenly it. 0:41:48.840 --> 0:41:51.080 Understands landing tipping point where all of the six became 0:41:51.120 --> 0:41:52.120 actually really productive. 0:41:52.160 --> 0:41:54.279 So from a media standpoint, it looks like it went 0:41:54.320 --> 0:41:58.279 from nothing to something. But you know, AI research has 0:41:58.320 --> 0:41:59.960 been going on making steady progress. 0:42:00.120 --> 0:42:04.360 But I mean when I talk to a chat bot 0:42:04.840 --> 0:42:07.840 online at any of these big companies, or if I 0:42:07.880 --> 0:42:12.000 get a computer on the hotline, it's just a horribly 0:42:12.040 --> 0:42:15.480 frustrating experience. And your business is very impressive a cup shop, 0:42:16.040 --> 0:42:19.840 you have a ton of clients, you have marquee investors. 0:42:20.320 --> 0:42:22.960 You know, you have a huge one point four billion 0:42:23.000 --> 0:42:25.640 dollar valuation. So I have a lot of respect for that. 0:42:25.840 --> 0:42:28.319 But I have to guess when you talk to people 0:42:28.360 --> 0:42:31.920 who interact with chatbots, they're all as frustrated as I am, 0:42:31.960 --> 0:42:35.440 because I'm finding myself saying agent, agent, agent, get me 0:42:35.480 --> 0:42:38.799 to a human because I can't get anything done with 0:42:38.960 --> 0:42:42.239 the I hate to call it AI because there's nothing 0:42:42.239 --> 0:42:44.120 intelligent about the current services. 0:42:44.560 --> 0:42:47.680 So I'll answer there are two aspects to it, right. 0:42:47.719 --> 0:42:49.919 Once is if you just step away from the US 0:42:50.000 --> 0:42:52.479 for a second, and the rest of the world where 0:42:52.520 --> 0:42:54.839 you don't have as many customer support agents as many 0:42:54.920 --> 0:42:58.760 businesses investing in these things. For consumers, if the baseline 0:42:58.800 --> 0:43:01.320 is zero, A chatbot it works half the time is 0:43:01.360 --> 0:43:03.800 a miracle, right, because it solves a lot of problems. 0:43:03.840 --> 0:43:05.440 You don't have to wait on hold, you don't have 0:43:05.480 --> 0:43:08.439 to wait in long queues, and so on. So there's 0:43:08.480 --> 0:43:09.800 a lot of people around the world. 0:43:09.680 --> 0:43:12.400 If your problem is solved, But if your problem isn't solved, 0:43:12.440 --> 0:43:14.680 then there's another two or three minutes that you've wasted 0:43:14.719 --> 0:43:15.760 talking to What you're. 0:43:15.600 --> 0:43:17.680 Saying is this is what we're finding. The more information 0:43:17.719 --> 0:43:19.800 that goes into it, it's going to get better customs. 0:43:19.960 --> 0:43:24.279 Fair we've all been in that point where we're so you're. 0:43:24.200 --> 0:43:27.160 Saying it's going to improve something, but now now we 0:43:27.200 --> 0:43:29.120 are on the cusp of it. Okay, because of what 0:43:29.280 --> 0:43:31.719 open ai and there's just one example, but there are 0:43:31.719 --> 0:43:34.319 many other models, you know, Meta and Google and even 0:43:34.360 --> 0:43:37.040 the open source community is just driving it. So it's 0:43:37.040 --> 0:43:39.440 solve the hard part of understanding language, which is the 0:43:39.440 --> 0:43:42.840 hardest thing. The second bit is packaging it into specific 0:43:42.880 --> 0:43:46.000 business conversations. That's remaining, but that's now like weeks or 0:43:46.000 --> 0:43:48.799 months away. We're doing that for a whole bunch of enterprises, 0:43:48.880 --> 0:43:50.960 you know, and you kind of have to handcraft the 0:43:51.080 --> 0:43:55.239 integration a little bit. But but we are even productizing that. 0:43:55.760 --> 0:43:58.840 How do you protect the accuracy and the purity of 0:43:58.880 --> 0:44:01.560 the information. It's not a case of we're doing something 0:44:01.640 --> 0:44:04.080 that we're googling, you know later on and we're trying 0:44:04.080 --> 0:44:04.920 to do our own research. 0:44:05.200 --> 0:44:07.319 And that's that's exactly what takes time. 0:44:07.400 --> 0:44:07.560 Right. 0:44:07.640 --> 0:44:11.560 These general language models are simple word prediction, meaning they 0:44:11.719 --> 0:44:14.319 just make up their generative right, so they kind of 0:44:14.360 --> 0:44:17.040 make up an answer. It may not be accurate. So 0:44:17.080 --> 0:44:19.520 but in a business context, you need accurate information, so 0:44:19.560 --> 0:44:22.560 we do. There's a process called fine tuning, there's something 0:44:22.600 --> 0:44:26.640 called prompt engineering, and then you also link it to 0:44:26.800 --> 0:44:30.280 plugins which give you the actual data. Right, so for example, 0:44:30.320 --> 0:44:32.440 what's the interest rate on a checking account? I mean, 0:44:32.440 --> 0:44:34.799 you can't make up an answer, even though AI will, 0:44:35.239 --> 0:44:37.840 so there it looks up the right answer from the 0:44:37.920 --> 0:44:38.879 right place, or. 0:44:38.880 --> 0:44:41.279 It's we're going to know as users that it's the 0:44:41.360 --> 0:44:42.000 right answer. 0:44:42.120 --> 0:44:44.759 Well, so the business, the business has the responsibility and 0:44:44.800 --> 0:44:47.040 the owners to make sure because they also have the 0:44:47.080 --> 0:44:50.239 liability for what the bought says, right, So I think 0:44:50.280 --> 0:44:52.680 they are. This is exactly where we work with them 0:44:52.760 --> 0:44:56.160 to make sure that the conversations are precise, that are accurate, 0:44:56.239 --> 0:44:59.319 the information works, and so on, and then there's a 0:44:59.320 --> 0:45:01.479 lot of deba and so on. Right, it was Look, 0:45:01.760 --> 0:45:05.600 the web wasn't built overnight, and neither will these chat bots. 0:45:06.120 --> 0:45:08.920 But I think as they get optimized and refined, I 0:45:08.920 --> 0:45:10.960 think it'll be it'll be good enough for you, Matt. 0:45:11.200 --> 0:45:14.000 I'm excited. I'm looking forward to the future. I'm just 0:45:14.080 --> 0:45:17.360 saying you have a little time, a little bit hurt. 0:45:17.480 --> 0:45:20.040 She's going to learn her language. It takes some time. 0:45:20.160 --> 0:45:22.440 Exactly how busy are you? Just ten seconds? Are people 0:45:22.440 --> 0:45:24.239 calling you off the phone or just give me an idea? 0:45:24.360 --> 0:45:26.720 Yeah, this is accelerating. I mean we are doubling business 0:45:26.760 --> 0:45:28.799 here over year, and it's accelerating even more. 0:45:28.960 --> 0:45:31.120 All right, well, come on back so we can you know, 0:45:31.400 --> 0:45:36.680 make Matt happy. That is future chat GBT experiences will 0:45:36.719 --> 0:45:37.320 be better. 0:45:37.280 --> 0:45:39.120 Even better. The next time I'm here, you'll talk to 0:45:39.160 --> 0:45:39.720 my chatbot. 0:45:39.960 --> 0:45:42.719 Ye, all right, here he'll do the interviews for you. 0:45:42.800 --> 0:45:43.680 All Right, we get a run. 0:45:48.280 --> 0:45:51.839 You're listening to the Bloomberg Business week podcast. Catch us 0:45:51.880 --> 0:45:55.560 live weekdays from two to five pm Eastern on Bloomberg Radio, 0:45:55.760 --> 0:45:58.640 the Bloomberg Business App, and you too. You can also 0:45:58.719 --> 0:46:01.719 listen live to our flag Ship New York station Just 0:46:01.800 --> 0:46:04.560 Say Alexa play Bloomberg You Love Them. Thirty. 0:46:06.080 --> 0:46:08.279 Something we wanted to get to yesterday and got kind 0:46:08.280 --> 0:46:12.920 of thrown off course course course because of the budget negotiations, 0:46:13.120 --> 0:46:16.320 is just kind of doing a deep dive into Apple 0:46:16.360 --> 0:46:19.840 because it's definitely been an outperformer, easily outperforming the Nasdaq 0:46:19.880 --> 0:46:21.680 one hundred this year. Just a little bit higher in 0:46:21.680 --> 0:46:25.239 today's session, but it's up more than thirty percent here 0:46:25.320 --> 0:46:28.319 this year. So a lot of news that has been 0:46:28.360 --> 0:46:32.239 going on Berkshire Hathaway up being its current holdings. We 0:46:32.320 --> 0:46:35.080 got that over the weekend, but we wanted to check 0:46:35.080 --> 0:46:37.640 in with our own Mark German, who follows this company 0:46:37.640 --> 0:46:42.120 inside and out breaks exclusives. He's Bloomberg News Chief Technology correspondent, 0:46:42.680 --> 0:46:44.200 and Mark Joints is from our LA bureau. 0:46:44.280 --> 0:46:44.480 Mark. 0:46:44.520 --> 0:46:46.200 It is good to have you here with us, and 0:46:46.239 --> 0:46:48.560 one of the reasons we kind of wanted to dig 0:46:48.600 --> 0:46:51.520 into it is there are some questions about the valuation, 0:46:52.239 --> 0:46:54.560 you know, of Apple and what are the catalysts that 0:46:54.640 --> 0:46:57.000 kind of get this there. When you look at this company, 0:46:57.520 --> 0:46:59.719 what does the next six to twelve months look like? 0:47:00.840 --> 0:47:02.520 Well, the next six to twelve months is going to 0:47:02.560 --> 0:47:06.840 be almost entirely about the upcoming reality headset. 0:47:07.160 --> 0:47:07.359 Right. 0:47:07.440 --> 0:47:10.040 Apple will be announcing this new mixed reality product which 0:47:10.080 --> 0:47:10.880 uses both. 0:47:11.239 --> 0:47:12.200 AR and VR. 0:47:12.719 --> 0:47:15.279 AR meaning that you can see your real world through 0:47:15.280 --> 0:47:19.000 the lenses, right VR meaning you're all encompassed, all surrounded 0:47:19.000 --> 0:47:20.040 by your three D content. 0:47:20.160 --> 0:47:21.160 Right, so a mix of both. 0:47:21.560 --> 0:47:23.880 They're going to announce that product on June fifth, so 0:47:23.960 --> 0:47:26.560 in about three weeks from now at their Developers conference. 0:47:27.080 --> 0:47:29.320 This is going to be their first major new product 0:47:29.360 --> 0:47:32.160 since the Apple Watch was announced almost eight years ago, 0:47:32.520 --> 0:47:34.640 right or went on sale, I should say eight years ago. 0:47:34.719 --> 0:47:37.040 The product is alf was announced in twenty fourteen, and 0:47:37.120 --> 0:47:38.880 so this is going to be one of Tim Cook's 0:47:38.960 --> 0:47:42.160 last big swings as CEO, and the company believes that 0:47:42.200 --> 0:47:45.399 this can set the foundation for a post iPhone era. Right, 0:47:45.480 --> 0:47:47.120 So all the talk is going to be about that 0:47:47.200 --> 0:47:49.920 headset for the next year or so, and the company 0:47:49.920 --> 0:47:51.480 hopes for many years beyond that. 0:47:51.719 --> 0:47:54.480 So the difference between this and the Watch, and a 0:47:54.520 --> 0:47:57.680 lot of people are making that comparison mark because you know, 0:47:57.719 --> 0:48:00.759 the watch at first had kind of lackluster take up, 0:48:01.160 --> 0:48:03.839 but it wasn't nearly as clunky as this thing is. 0:48:03.960 --> 0:48:07.080 I mean, is it going to have a separate battery pack? 0:48:07.200 --> 0:48:08.960 Is it going to be a whole helmet or just 0:48:09.080 --> 0:48:12.359 the goggles? You know, it's gonna be difficult to keep 0:48:12.440 --> 0:48:14.600 on your head. Can you walk around with it? 0:48:14.680 --> 0:48:14.879 On? 0:48:15.040 --> 0:48:16.520 What's the story with this product? 0:48:17.560 --> 0:48:19.640 So the goal is for this product to be as 0:48:19.800 --> 0:48:22.520 portable as possible. Right, So this is going to be 0:48:22.560 --> 0:48:26.520 a standalone headset, all in one, as you mentioned, save 0:48:26.600 --> 0:48:29.879 for the battery. The battery will be external, right, It'll 0:48:29.960 --> 0:48:32.839 last about two to three hours per battery pack. You'll 0:48:32.880 --> 0:48:35.080 be able to swap those out if you want throughout 0:48:35.120 --> 0:48:39.160 the day or charge over a connection to a power adapter. 0:48:39.640 --> 0:48:41.439 And the idea is you will be able to walk 0:48:41.480 --> 0:48:42.120 around with it. 0:48:42.400 --> 0:48:42.520 Right. 0:48:42.600 --> 0:48:44.800 This is not something that you're necessarily going to have 0:48:44.960 --> 0:48:47.080 to be. It's not necessary something you'll have to be 0:48:47.080 --> 0:48:49.000 stationary to use. 0:48:49.239 --> 0:48:49.439 Right. 0:48:49.640 --> 0:48:52.239 The idea is that you could wear it in one 0:48:52.320 --> 0:48:54.160 room in your home or in your office. And let's 0:48:54.160 --> 0:48:58.560 say you're playing a game right in your living room, right, 0:48:58.760 --> 0:49:00.800 and so you're in your living room, knows the game 0:49:01.160 --> 0:49:03.040 was being played in your living room, and then you 0:49:03.080 --> 0:49:06.400 walk to your kitchen and it will open Safari because 0:49:06.600 --> 0:49:09.040 the last time you were in your kitchen, you were 0:49:09.080 --> 0:49:11.880 browsing the web. So the headset has special sensors to 0:49:12.000 --> 0:49:14.839 know where you are in space, right, so you can 0:49:14.880 --> 0:49:16.600 pick up where you left off depending on where you 0:49:16.600 --> 0:49:19.120 were using the device in physical space. So to answer 0:49:19.200 --> 0:49:21.960 your question, yes, this is something you could walk around wearing, 0:49:22.239 --> 0:49:24.680 but not necessarily something that you're probably gonna want to 0:49:24.760 --> 0:49:26.880 walk around wearing outside. 0:49:27.000 --> 0:49:27.680 You know, it's funny. 0:49:27.719 --> 0:49:31.960 One demo internally, one presentation about the product talked about 0:49:32.160 --> 0:49:35.200 wearing this thing to a party. Right, That's not something 0:49:35.239 --> 0:49:36.759 anyone is ever going to do. 0:49:37.000 --> 0:49:39.239 I feel like a person that where's this thing? Won't 0:49:39.239 --> 0:49:42.400 be invited to any parties there You're hanging out mom's 0:49:42.440 --> 0:49:45.720 basement is more likely. Dave Lee wrote an opinion column 0:49:45.760 --> 0:49:50.480 on this, suggesting that Apple aim it more to the 0:49:50.560 --> 0:49:53.759 peloton crowd than the PlayStation crowd. What do you think 0:49:53.800 --> 0:49:57.600 about that mark? Because Apple has really embraced the healthcare market. 0:49:59.000 --> 0:50:02.680 I think this product is going to take a scattershot approach, 0:50:02.880 --> 0:50:04.759 and so I don't think that's correct in terms of 0:50:04.800 --> 0:50:07.040 where they're going to market it towards. I think that 0:50:07.120 --> 0:50:10.000 they see this as a multipurpose device that could do 0:50:10.160 --> 0:50:12.640 essentially whatever you want it to do, right, Like so 0:50:12.719 --> 0:50:14.920 the iPad, right, you can do anything on the iPad 0:50:15.080 --> 0:50:18.560 for making FaceTime calls, to writing software, to using software, 0:50:18.640 --> 0:50:21.719 to playing games to watching movies. Everyone knows all the 0:50:21.800 --> 0:50:24.040 use cases you can have with an iPad, same with 0:50:24.120 --> 0:50:26.640 every other Apple device, right. So I don't think they're 0:50:26.640 --> 0:50:29.000 cornering theirselves in here. So there's going to be features 0:50:29.000 --> 0:50:31.759 for working out probably coming next year. There's going to 0:50:31.760 --> 0:50:35.000 be meditation features, right, but there's also going to be 0:50:35.080 --> 0:50:40.120 movie watching, gaming, productivity, content consumption. One of the big 0:50:40.160 --> 0:50:43.600 ones is FaceTime, so facetiming in virtual reality using a 0:50:43.680 --> 0:50:46.600 virtual avatar that the device is able to create based 0:50:46.640 --> 0:50:50.280 on scanning your body with its twelve to sixteen external 0:50:50.280 --> 0:50:51.320 cameras and sensors. 0:50:51.360 --> 0:50:53.840 How it makes improvements, right. 0:50:53.680 --> 0:50:56.040 And that that's going to be a core part of 0:50:56.040 --> 0:50:58.960 the product, as well as being able to work with 0:50:59.040 --> 0:51:02.839 people remotely and do co presence and collaboration remotely. Right, 0:51:03.120 --> 0:51:06.279 So me and you right in some universe could both 0:51:06.360 --> 0:51:07.600 have this headset. 0:51:07.320 --> 0:51:09.840 That's terrifying right there, But go ahead, Mark. 0:51:09.960 --> 0:51:12.319 It's terrifying if Mad has the headset. But like you know, 0:51:12.440 --> 0:51:14.640 he could be using the headset in New York, I 0:51:14.640 --> 0:51:16.279 could be using in LA and we can be working 0:51:16.320 --> 0:51:19.880 on a presentation together remotely while facetiming all on virtual reality. 0:51:20.000 --> 0:51:22.200 So right, I'm not and I say it could be. 0:51:22.280 --> 0:51:23.359 I'm not saying we'll want to. 0:51:23.520 --> 0:51:27.080 Right, So Mark, I'm curious, like what kind of product 0:51:27.600 --> 0:51:30.560 does this become in terms of, you know, revenue size. 0:51:30.600 --> 0:51:33.320 I'm looking at right. iPhone revenue for the second quarter 0:51:33.400 --> 0:51:36.560 was what over fifty one billion dollars. If I look 0:51:36.600 --> 0:51:39.000 at wearables, it was about an eight point seven six 0:51:39.000 --> 0:51:42.200 billion dollar business. I mean, how big a business are 0:51:42.239 --> 0:51:45.320 folks thinking that this could become? For Apple? 0:51:46.160 --> 0:51:49.040 So they're anticipating selling about nine hundred k units in 0:51:49.080 --> 0:51:51.759 the first year, right at a price point around three 0:51:51.760 --> 0:51:55.600 thousand dollars, So in terms of revenue, you're talking about 0:51:55.640 --> 0:51:57.080 three billion dollars per year. 0:51:57.360 --> 0:51:58.560 That's at the get go. 0:51:59.160 --> 0:52:03.400 But the company does anticipate or hope that this becomes 0:52:03.520 --> 0:52:06.920 about the size of the Apple Watch or the iPad 0:52:07.239 --> 0:52:09.560 right at some point, and that could be a twenty 0:52:09.600 --> 0:52:12.919 to thirty billion dollar a year annual business. Now will 0:52:12.960 --> 0:52:15.640 that ever happen? I don't know, right, that's their hope. 0:52:15.640 --> 0:52:18.960 Those are their internal projections. But I am quite optimistic 0:52:19.000 --> 0:52:20.960 about this device. I think it's going to follow a 0:52:20.960 --> 0:52:24.319 similar similar trajectory to the Apple Watch, where the get 0:52:24.360 --> 0:52:27.960 go the Apple Watch was sluggish. The app situation was, 0:52:28.200 --> 0:52:31.280 I would say terrible still is to be honest, Actually, 0:52:32.360 --> 0:52:35.280 there was a lot of confusion about what the product 0:52:35.360 --> 0:52:38.080 was for. It was really all over the place. Apple 0:52:38.160 --> 0:52:40.759 actually pitched the first one. There were three things they 0:52:40.760 --> 0:52:44.280 pitched the first Apple Watch for telling the time, health, 0:52:44.960 --> 0:52:48.040 as well as what they call intimate communication, sending your 0:52:48.040 --> 0:52:51.960 heartbeat to people. Right, nobody uses the Apple Watch to 0:52:52.000 --> 0:52:54.560 tell the time as a primary use case. Right, I 0:52:54.680 --> 0:52:56.600 wear an Apple Watch, and I can tell you I 0:52:56.680 --> 0:52:59.560 only check the time on my phone. Still, right, healthcare 0:52:59.560 --> 0:53:03.080 they nail, Yeah, okay, but this communication stuff, nobody uses 0:53:03.200 --> 0:53:03.919 similar ways. 0:53:03.960 --> 0:53:06.359 And they like, don't judge Matt and me, but we're 0:53:06.400 --> 0:53:08.319 both are saying, well, I use my watch to check 0:53:08.360 --> 0:53:08.680 the time. 0:53:08.840 --> 0:53:11.359 I mean, we're twice Mark's age, but yeah, I use it. 0:53:11.440 --> 0:53:13.759 Like when I'm cooking, I have the timer right here 0:53:13.800 --> 0:53:16.279 and I just bang, you know, three minutes, aside of 0:53:16.360 --> 0:53:19.520 him frying some chicken steaks. And so that's probably the 0:53:19.560 --> 0:53:21.960 main thing I use it for other than healthcare stuff, right, 0:53:22.360 --> 0:53:25.080 tracking my sleep, tracking my heart, I can text. 0:53:25.120 --> 0:53:27.239 Though it's a really cool I don't know, I can 0:53:27.280 --> 0:53:29.600 see how it becomes a bigger part. Can I ask 0:53:29.640 --> 0:53:30.759 you something I want to go back to how you 0:53:30.800 --> 0:53:33.920 started that? Is this really Tim Cook's last hurd And 0:53:34.000 --> 0:53:36.160 do we need to start thinking about a Apple post 0:53:36.160 --> 0:53:36.960 Tim Cook? Already? 0:53:38.160 --> 0:53:38.359 Uh? 0:53:38.360 --> 0:53:40.080 No, one, No, I don't think it's his last. 0:53:40.239 --> 0:53:42.160 It's one of his last. 0:53:42.400 --> 0:53:45.600 I think the last will probably be the car. And 0:53:45.680 --> 0:53:48.040 so no, I'm not already thinking. Of course, Actually I 0:53:48.040 --> 0:53:50.520 am thinking about a post Tim Cook Apple, But this 0:53:50.640 --> 0:53:52.839 is not something that's going to happen in the near term, right, 0:53:53.000 --> 0:53:55.480 I mean, he's in his early sixties, ball bikers in 0:53:55.480 --> 0:53:57.880 his early seventies, and he's still at Disney, And you 0:53:57.960 --> 0:54:00.239 get the sense that they're built kind of similar in 0:54:00.360 --> 0:54:02.160 terms of, you know, their desire to be part of 0:54:02.200 --> 0:54:02.680 the company. 0:54:02.719 --> 0:54:02.919 Right. 0:54:03.000 --> 0:54:04.760 I would guess that. 0:54:04.680 --> 0:54:07.040 If Tim Cook, you know, does eventually step down, or 0:54:07.040 --> 0:54:10.200 when Tim Cook eventually steps down, he'll probably still you know, 0:54:10.280 --> 0:54:12.640 be on the board maybe they'll make him chairman or something. 0:54:12.440 --> 0:54:14.480 Right, and they'll come back after a successor fails. 0:54:15.320 --> 0:54:17.400 Oh, I don't know if his successor will fail. I 0:54:17.400 --> 0:54:20.719 don't know who successor for sure will be. But I 0:54:20.760 --> 0:54:22.799 think that I would just guess that Tim Cook would 0:54:22.800 --> 0:54:24.560 do a better job than Bob Ayger in terms of 0:54:24.600 --> 0:54:27.040 planning out, you know, a succession plan there, right. I 0:54:27.080 --> 0:54:29.839 mean it felt like the Bob Iger transition in his 0:54:29.920 --> 0:54:34.680 departure at at the height of COVID right was extraordinarily abrupt. 0:54:35.480 --> 0:54:38.239 I would imagine that Apple's succession plan will not be 0:54:38.360 --> 0:54:39.279 as abrupt. 0:54:38.960 --> 0:54:41.799 As who do you think, one mark? Who are the 0:54:41.800 --> 0:54:44.120 people in the running to be his successor? 0:54:44.960 --> 0:54:47.520 Yeah, you know there's four people right now that I 0:54:47.560 --> 0:54:49.520 have my eye on. Number one is Jeff Williams. 0:54:49.560 --> 0:54:50.640 He's the COO. 0:54:50.920 --> 0:54:53.959 He's in charge of all the health initiatives company wide 0:54:53.960 --> 0:54:57.239 operations in the design team reports to him now, and 0:54:57.280 --> 0:54:59.480 he led engineering for the Apple Watch, and he's quite 0:54:59.560 --> 0:55:02.720 intimately involved with this headset project as well, and he's 0:55:02.880 --> 0:55:06.480 essentially the chief decision maker on new products at Apple, right, 0:55:06.600 --> 0:55:08.759 And so he would be if Tim Cook were to 0:55:08.760 --> 0:55:10.719 step down the next three years, or if something were 0:55:10.719 --> 0:55:13.520 to happen or they needed to do an emergency succession plan. 0:55:14.440 --> 0:55:17.600 You don't look further than Jeff Williams as the next CEO, right. 0:55:17.719 --> 0:55:20.120 A few other options on the executive team right now 0:55:20.160 --> 0:55:22.920 are Greg Joswiak. He's an Apple lifer, been there for 0:55:22.960 --> 0:55:27.319 three decades, Head of marketing, head of product management, a 0:55:27.400 --> 0:55:29.799 real key player, probably a top three or four key 0:55:29.840 --> 0:55:33.520 player on Apple right now. Tirdre O'Brien. She's been at 0:55:33.520 --> 0:55:36.120 Apple also for over three decades. She's been in many 0:55:36.200 --> 0:55:39.120 roles across the company, from head of retail to head 0:55:39.120 --> 0:55:42.680 of human resources to a senior executive on the operations team. 0:55:43.000 --> 0:55:45.440 She's also someone that I wouldn't be shocked if she 0:55:45.520 --> 0:55:46.720 were the new CEO. 0:55:47.520 --> 0:55:48.160 And then there's. 0:55:48.040 --> 0:55:51.520 John John Turnas. He comes up because he's the youngest 0:55:51.520 --> 0:55:54.080 member of the Apple executive team. So Tim Cook weren't 0:55:54.120 --> 0:55:56.719 to retire for eight more years. You want someone a 0:55:56.719 --> 0:55:58.640 bit younger, and he's head of hardware engineering. 0:55:58.640 --> 0:56:00.759 All right, Mark love this. I was so sure Matt 0:56:00.800 --> 0:56:02.680 was going to go into the Apple car, but I 0:56:02.680 --> 0:56:03.319 guess that'll be. 0:56:03.320 --> 0:56:06.239 Well, I'm waiting. Mark comes up with, all. 0:56:06.200 --> 0:56:09.920 Right, Markerman, we love it. Chief Technology Coursepond at Bloomberg News. 0:56:09.960 --> 0:56:11.720 Thank you, Thank you from our La bureau. 0:56:12.200 --> 0:56:15.759 You're listening to the Bloomberg Business Week podcast. Catch us 0:56:15.800 --> 0:56:19.480 live weekdays from two to five pm Eastern on Bloomberg Radio, 0:56:19.680 --> 0:56:22.960 the Bloomberg Business App and YouTube. You can also listen 0:56:23.040 --> 0:56:26.600 live to our flagship New York station, Just Say Alexa, 0:56:26.760 --> 0:56:30.879 Play Bloomberg, e Love and thirty Last Mom. 0:56:31.280 --> 0:56:35.560 Bloomer News putting out a story reporting that an international 0:56:35.600 --> 0:56:38.279 developer backed by Tiger Woods and justin Timberlake, We're joining 0:56:38.280 --> 0:56:41.520 an effort to build a sprawling residential community with stores 0:56:41.560 --> 0:56:45.880 and a revamped golf course in Wellington. It's a South 0:56:46.120 --> 0:56:49.799 Florida equestrian town near Palm Beach. It's also Wellington has 0:56:49.840 --> 0:56:54.120 been I guess home to Microsoft co founder Bill Gates' 0:56:54.200 --> 0:56:57.160 heard of Tommy Lee Jones, Bruce Springsteen. 0:56:57.360 --> 0:56:59.960 Tommy Lee Jones, the actor, that's the actor. 0:57:00.040 --> 0:57:02.279 They've owned homes there apparently. I don't know if they 0:57:02.280 --> 0:57:03.040 still do, but they have. 0:57:04.120 --> 0:57:06.480 That is interesting, kind of I guess. 0:57:06.600 --> 0:57:06.959 I guess. 0:57:07.040 --> 0:57:10.359 So I'm not really a South Florida guy like the. 0:57:10.400 --> 0:57:12.760 Keys, you know, Palm Beach kind of nice. 0:57:13.239 --> 0:57:16.480 Yeah, it's okay, I've been there. Okay, you know the 0:57:16.600 --> 0:57:18.400 state of the breakers. Did the whole golf thing. 0:57:18.360 --> 0:57:20.280 Kind of a kind of a New york A kind of. 0:57:20.600 --> 0:57:22.640 Yeah, it was pretty good. I mean, if I have 0:57:22.800 --> 0:57:26.200 vacation time, I'm going to go somewhere different, Okay, if 0:57:26.240 --> 0:57:28.960 I want to go to the beach, to a secluded beach. 0:57:29.280 --> 0:57:31.440 If I want to move somewhere like, you know, I 0:57:31.440 --> 0:57:34.000 would rather have the mountains. I'm more of a Montana person. 0:57:35.040 --> 0:57:37.520 I have seen you wear a cowboy hates actually around 0:57:37.800 --> 0:57:39.400 cowboy boots. Do you have cowboy boots? 0:57:39.480 --> 0:57:41.440 I have a few pairs of cowboys every time I 0:57:41.440 --> 0:57:43.920 go to Dallas, you know, and I tend to buy 0:57:43.920 --> 0:57:45.680 a pairent. My goddaughter lives in Dallas, so I go 0:57:45.720 --> 0:57:47.760 there occasionally. I have to go watch the Giants play 0:57:47.760 --> 0:57:48.320 the Cowboys. 0:57:48.360 --> 0:57:50.280 We want to talk South Florida with someone who knows 0:57:50.320 --> 0:57:52.000 a lot about what's going on when it comes to 0:57:52.040 --> 0:57:54.800 South Florida real estate. Daniel de la Vega, president of 0:57:54.800 --> 0:57:58.920 One Southby's International Realty, joins us on Zoom from Miami. Daniel, 0:57:59.000 --> 0:58:01.960 good to be talking with you and great to have 0:58:02.000 --> 0:58:04.080 you here with Matt myself. Hey, talk to U a 0:58:04.080 --> 0:58:07.000 little bit about South Florida. And what's going on. What 0:58:07.040 --> 0:58:09.240 are we seeing in terms of prices and valuations. 0:58:10.240 --> 0:58:13.440 You know, South Florida is in an incredible place right now. 0:58:13.760 --> 0:58:16.280 First quarter was incredible. I want to talk about the numbers. 0:58:16.320 --> 0:58:18.480 I want to give you all the information that the 0:58:18.560 --> 0:58:22.080 viewers want. But first, Matt, what a segue into talking 0:58:22.120 --> 0:58:23.000 about South Florida. 0:58:23.040 --> 0:58:24.880 We got to get you down here. Maybe you have 0:58:24.960 --> 0:58:26.680 not experienced it with me yet, so. 0:58:27.040 --> 0:58:28.200 I think you know part of it. 0:58:28.280 --> 0:58:30.040 Daniel's gonna have a place that you love. 0:58:30.280 --> 0:58:34.040 I'm a little bit bitter because, to be honest, a 0:58:34.080 --> 0:58:37.280 lot of my friends from the Upper West Side, previously 0:58:37.520 --> 0:58:39.680 from the Upper West Side of New York City, are 0:58:39.720 --> 0:58:42.200 now living down in West Palm Beach, and it's like 0:58:42.360 --> 0:58:46.280 one after the other after the other, and now it's 0:58:46.320 --> 0:58:47.760 like I don't know anyone else up here. 0:58:48.360 --> 0:58:51.440 Yeah, I mean, listen, we're representing Peer sixty six in 0:58:51.520 --> 0:58:55.880 Fort Lauderdale, which is Tavistock Development Group, which you previously 0:58:55.960 --> 0:59:00.040 mentioned in regards to the development in Wellington, and that 0:59:00.160 --> 0:59:03.720 is just the epitome of South Florida living with a marina, 0:59:03.800 --> 0:59:06.919 with a hotel with residences. So they do a really, 0:59:06.920 --> 0:59:09.400 really great job and I'm sure Wellington is going to 0:59:09.400 --> 0:59:12.880 be spectacular as well. But look, South Florida is doing 0:59:13.080 --> 0:59:15.640 incredibly well. Guys from an you see. 0:59:15.480 --> 0:59:17.280 You keep saying yeah, give us some numbers because you 0:59:17.360 --> 0:59:18.360 keep saying incredible. 0:59:19.160 --> 0:59:24.160 We saw we saw a major increase in closed sales, 0:59:24.240 --> 0:59:28.000 average sales price, new pending sales, months of inventory, yes, 0:59:28.120 --> 0:59:28.400 is up. 0:59:28.440 --> 0:59:33.200 But in closed sales in all of South Florida Q four. 0:59:33.080 --> 0:59:35.760 Twenty two over Q one, we saw fourteen point seven 0:59:35.840 --> 0:59:37.320 percent increase. 0:59:37.200 --> 0:59:39.400 Average sales price. We saw a. 0:59:39.320 --> 0:59:43.160 Six point six percent increase. New pending sales were up 0:59:43.320 --> 0:59:47.760 sixty six percent. I mean, that's an incredible statistic, right, 0:59:47.800 --> 0:59:51.560 And again, months of inventory in both single family homes 0:59:51.600 --> 0:59:57.280 and condominiums are up on average twenty percent. So that's 0:59:57.320 --> 1:00:00.680 good because as we see people moving to South Florida, 1:00:01.120 --> 1:00:03.360 we want them to feel like it's an affordable place 1:00:03.360 --> 1:00:06.400 for them to live. So as I see the increase 1:00:06.440 --> 1:00:08.640 in inventory as a positive for our market. 1:00:09.040 --> 1:00:12.120 I mean, one of my best friends is a I 1:00:12.120 --> 1:00:15.040 won't say his name, but Morgan Stanley guy. He was 1:00:15.160 --> 1:00:18.320 up here now he's moved down there. His office is, 1:00:18.400 --> 1:00:20.360 he says, just a couple of blocks away from his 1:00:20.400 --> 1:00:23.160 place in West Pond Beach, and he says the restaurants 1:00:23.240 --> 1:00:26.400 and the bars that he and his you know, click 1:00:26.560 --> 1:00:29.760 Noe love from up here all operate down there as well. 1:00:29.800 --> 1:00:32.440 So is it really just like a slice of Manhattan, 1:00:33.520 --> 1:00:34.760 you know in Florida. 1:00:35.880 --> 1:00:36.080 Yeah. 1:00:36.120 --> 1:00:38.600 I mean, look, we've always said Manhattan South, but I 1:00:38.640 --> 1:00:42.200 think we're becoming Manhattan more and more. I mean, we 1:00:42.240 --> 1:00:46.240 had one hundred and thirty new companies moved to Miami alone. 1:00:46.280 --> 1:00:49.200 We had we had twelve percent of the five point 1:00:49.240 --> 1:00:54.200 eight million new business application filed nationally happen in the 1:00:54.320 --> 1:00:57.680 state of Florida. A lot of that happening in South Florida. 1:00:57.760 --> 1:01:00.360 You just heard the numbers from Miami. So we've got 1:01:00.400 --> 1:01:03.080 twelve hundred and seventeen people moving here a day. I 1:01:03.080 --> 1:01:06.280 don't see those numbers slowing down. And to your point, right, 1:01:06.320 --> 1:01:08.800 it's not just the jobs that are moving, it's the 1:01:08.840 --> 1:01:12.360 families that are moving. And we've seen a new influx 1:01:12.440 --> 1:01:13.960 of the kind of person. 1:01:13.680 --> 1:01:14.240 That moves here. 1:01:14.280 --> 1:01:17.600 I mean traditionally saw we traditionally, we saw flight capital, 1:01:17.920 --> 1:01:20.920 we saw a lot of Latin America. We're seeing fifty 1:01:20.920 --> 1:01:25.200 percent more domestic now over the last call it twenty 1:01:25.200 --> 1:01:27.840 four months. So it's people living here to live here, 1:01:27.880 --> 1:01:29.800 so they want those things that you're talking about, man, 1:01:29.840 --> 1:01:31.959 and we're delivering them. I mean, look, just think West 1:01:32.040 --> 1:01:35.400 Palmer had lunch at the Bar at Alicia, an incredible restaurant. 1:01:35.560 --> 1:01:37.400 It's a sister restaurant, the st Ambrose. 1:01:37.400 --> 1:01:40.840 So everybody's thinking creatively how they can bring new brands 1:01:40.840 --> 1:01:41.440 to our market. 1:01:41.600 --> 1:01:44.600 Daniel, how much of it is finance and financial types 1:01:44.640 --> 1:01:45.439 that are moving there? 1:01:46.040 --> 1:01:48.600 Eighty percent of our transactions. 1:01:47.800 --> 1:01:51.880 Are cash that was happening during the pandemic and we're 1:01:52.000 --> 1:01:53.360 still seeing that happen now. 1:01:53.400 --> 1:01:55.280 No, no, no, no, I mean how much of it is 1:01:55.440 --> 1:01:58.000 people from the financial sector, because we've done those stories 1:01:58.000 --> 1:02:00.680 a lot. How much that's okay, that's okay, Yeah. 1:02:00.600 --> 1:02:04.320 It's it's you know, I would say it's about fifty 1:02:04.360 --> 1:02:06.800 percent of the people moving in South Florida from the sector. 1:02:08.760 --> 1:02:12.120 Yeah, it really is. Like Wall Street has moved down, 1:02:12.680 --> 1:02:15.080 not just New York, right, but Chicago is one of 1:02:15.120 --> 1:02:20.200 the big Citadel offices, Ken Griffin's company moving down there? 1:02:20.880 --> 1:02:21.040 Is it? 1:02:22.160 --> 1:02:25.520 Is it just pushing property values up in the surrounding 1:02:25.520 --> 1:02:27.960 communities as well. I imagine, you know, I'm from a small 1:02:27.960 --> 1:02:32.160 town in Ohio, Grandville, right outside of Columbus. Intel build 1:02:32.160 --> 1:02:35.600 a fabric a factory near us, and all of a sudden, 1:02:35.720 --> 1:02:38.800 everybody's property values have like doubled. Do you see that 1:02:38.880 --> 1:02:39.760 as well down there? 1:02:40.240 --> 1:02:43.160 Yeah, it's the same here, and it's the secondary and 1:02:43.280 --> 1:02:46.000 tertiary markets as well within South Florida, not just the 1:02:46.040 --> 1:02:48.040 waterfront ultra luxury markets. 1:02:48.800 --> 1:02:51.320 We have to deal with affordability. We are dealing with 1:02:51.360 --> 1:02:52.960 it with affordability. 1:02:53.000 --> 1:02:55.760 There's some new legislation that's come down which allows for 1:02:55.800 --> 1:02:58.680 more density. For certain I'm not an affordable guy, but 1:02:58.800 --> 1:03:00.600 you know, it's it's very to do it for our 1:03:00.600 --> 1:03:03.480 markets because I think it's something that's needed so we 1:03:03.520 --> 1:03:05.000 can really service every sector. 1:03:05.440 --> 1:03:07.760 Daniel, I'm curious. I'm looking at your website. There are 1:03:07.800 --> 1:03:10.480 properties below a million dollars, and then there's properties that 1:03:10.520 --> 1:03:13.000 are for tens of millions of dollars or twenty five 1:03:13.000 --> 1:03:15.400 million dollars. So give me an idea in terms of 1:03:16.240 --> 1:03:19.520 the type of activity you have. What types of properties 1:03:19.520 --> 1:03:22.280 are selling the most. 1:03:22.920 --> 1:03:26.400 The ultra luxury market is probably trading for the highest 1:03:26.400 --> 1:03:30.560 prices per square foot. We're seeing the most activity in 1:03:30.600 --> 1:03:33.840 the one to five million dollar price point. That's where 1:03:33.880 --> 1:03:36.800 you're seeing a lot of the inventory increases as well, 1:03:37.040 --> 1:03:39.160 whether you look at the Florida numbers or just the 1:03:39.160 --> 1:03:40.800 South Florida numbers or the. 1:03:40.880 --> 1:03:43.200 Entire East Coast of Florida numbers where we operate. 1:03:43.440 --> 1:03:47.040 So I would say that that's been the segment where 1:03:47.080 --> 1:03:49.800 you're seeing the most amount of transactions, definitely. 1:03:49.400 --> 1:03:51.120 And that's where you said how much what was the 1:03:51.120 --> 1:03:53.280 percentage that most of these are done in cash? Though 1:03:53.320 --> 1:03:54.520 most of this is done in cash. 1:03:54.800 --> 1:03:57.440 Yeah, eighty percent of our transactions are done in cash. 1:03:57.560 --> 1:04:00.880 And we're still seeing that Q one, you know, with 1:04:01.000 --> 1:04:03.080 interest rates going up the way they are, which has 1:04:03.120 --> 1:04:04.400 definitely affected the market. 1:04:04.400 --> 1:04:07.160 I think Q four saw it, you know. 1:04:07.240 --> 1:04:11.160 I mean, we companies across the country were down, you know, 1:04:11.240 --> 1:04:12.080 over forty percent. 1:04:12.160 --> 1:04:13.560 Think Guide you didn't have me on then. 1:04:13.840 --> 1:04:15.840 But if people are doing mostly cash, right, they don't 1:04:15.880 --> 1:04:16.920 care about the interest rates. 1:04:17.120 --> 1:04:18.959 They don't care about the interest rates so much. 1:04:19.240 --> 1:04:21.400 In a lot of our new development products, whether it's 1:04:21.400 --> 1:04:23.960 Peer sixty six that I just mentioned, if we're lauderd 1:04:24.120 --> 1:04:27.720 or the Saint Regis residences here in Miami on brickles, these. 1:04:27.520 --> 1:04:30.920 Buyers have a longer sort of horizon as to when 1:04:30.960 --> 1:04:33.360 they're going to move in, right, So it's a three year, 1:04:33.440 --> 1:04:36.440 four year cycle, and they're okay because they know that 1:04:36.480 --> 1:04:37.840 interest rates are temporary. 1:04:38.120 --> 1:04:42.120 Little footnote here when the hurricanes come in, this is 1:04:42.120 --> 1:04:45.000 not where they go, right is Miami is West Palm Beach. 1:04:45.080 --> 1:04:48.640 Those those people are safer than like Naples. 1:04:48.760 --> 1:04:48.920 Right. 1:04:49.920 --> 1:04:53.320 Well, I would say that we're all in harm's way 1:04:53.880 --> 1:04:57.160 when mother Nature wants to have their. 1:04:57.040 --> 1:04:59.160 Way, but it's more up towards the Gulf. 1:05:00.120 --> 1:05:02.640 Happening traditionally, Yeah, net that traditionally. 1:05:02.680 --> 1:05:05.040 What's happened over the last five years is most of 1:05:05.080 --> 1:05:08.760 them have been going through the golf or missing us 1:05:08.800 --> 1:05:13.400 here in South Florida and up the eastern, up. 1:05:13.320 --> 1:05:16.000 The East coast. So we've been very lucky, and I 1:05:16.080 --> 1:05:17.520 pray that we continue to do luck. 1:05:17.960 --> 1:05:19.800 All right, got to leave it on that note. Hey, Daniel, 1:05:20.120 --> 1:05:22.400 great to check in with. You appreciate it. Daniel de 1:05:22.480 --> 1:05:25.480 la Fega, president of Once Southeby's Internet, calling to come 1:05:25.480 --> 1:05:27.280 down on zoom from Miami. 1:05:31.920 --> 1:05:35.480 You're listening to the Bloomberg Business Week podcast. Catch us 1:05:35.520 --> 1:05:39.200 live weekdays from two to five pm Eastern on Bloomberg Radio, 1:05:39.400 --> 1:05:42.280 the Bloomberg Business app and you too. You can also 1:05:42.360 --> 1:05:45.680 listen live to our flagship New York station, Just say 1:05:45.800 --> 1:05:48.200 Alexa play Bloomberg eleven thirty. 1:05:49.720 --> 1:05:51.880 Well, the new issue, as you know, Bloomberg Business Week 1:05:52.000 --> 1:05:53.680 is out and that means we've got the latest and 1:05:53.760 --> 1:05:56.520 greatest from our Pursuits team. Chris Rouser is the editor 1:05:56.560 --> 1:05:58.040 of Pursuits and he joins us now with a look 1:05:58.040 --> 1:06:01.000 at the section and Chris this week, I gotta say, 1:06:01.000 --> 1:06:05.000 Elon Musk said working from home is morally wrong, and 1:06:05.040 --> 1:06:07.080 I got to stay. Based on the Pursuits opener, maybe 1:06:07.080 --> 1:06:09.320 there are more folks working that we realized because the 1:06:09.360 --> 1:06:12.200 world is what lining up once again for the neckties. 1:06:12.360 --> 1:06:14.120 Neckties are back. What's up with that? 1:06:14.240 --> 1:06:17.240 And this is not something that I expected. And then 1:06:17.360 --> 1:06:19.800 I was invited to like a cool dinner at the 1:06:19.800 --> 1:06:23.480 Odeon in New York by Romez for the necktie. They 1:06:23.480 --> 1:06:26.400 were like, everyone's buying neckties. Our necktie sales are back 1:06:26.560 --> 1:06:29.800 to where they were before the pandemic, and people are 1:06:29.800 --> 1:06:31.840 really into it, even though can I just say you. 1:06:31.800 --> 1:06:33.520 Don't have a necktie and I know you have an 1:06:33.520 --> 1:06:34.560 important meeting coming out? 1:06:34.880 --> 1:06:36.560 Well, I mean, I don't know if you remember, but 1:06:36.600 --> 1:06:38.480 before the pandemic I would wear a tie every day. 1:06:38.560 --> 1:06:39.720 You de bow tie. 1:06:39.480 --> 1:06:42.000 Often and in a lot of people in this office, 1:06:42.000 --> 1:06:45.120 would you know, in there's no doubt that offices are 1:06:45.200 --> 1:06:50.120 less formal like across America the world, if in finance 1:06:50.120 --> 1:06:52.640 were usually there's sustrict rules. Here at Bloomberg used to 1:06:52.680 --> 1:06:55.000 be all the guys were in suits with ties, and 1:06:55.320 --> 1:06:59.280 now it's definitely not that way. But nonetheless, people are 1:06:59.320 --> 1:07:01.480 still shopping for ties and hiat. 1:07:01.280 --> 1:07:03.560 Ties, and they also want quality, which you know, there's 1:07:03.560 --> 1:07:05.560 a line in the story and I feel like my 1:07:05.600 --> 1:07:08.440 mom is always like there was always quality over quantity, 1:07:08.560 --> 1:07:11.400 and that is certainly something you know. Amez is certainly 1:07:11.400 --> 1:07:13.160 a brand where it's not a tie for fifty bucks 1:07:13.240 --> 1:07:14.360 or thirty bucks or. 1:07:14.800 --> 1:07:17.400 Right so an entry necktie like straight ties two hundred 1:07:17.400 --> 1:07:19.880 and forty dollars at Rmez. That's a barrier to entry 1:07:19.880 --> 1:07:21.240 for a lot of people. It's a lot of money. 1:07:21.880 --> 1:07:24.160 But they're special ties and they're handmade and the quality 1:07:24.200 --> 1:07:27.240 is incredible, and it reflects the fact that people want 1:07:27.280 --> 1:07:30.520 to buy ties that feels special, that are a special occasion. 1:07:30.600 --> 1:07:32.200 You know, maybe they're not wearing them to the office, 1:07:32.240 --> 1:07:34.000 like I got to go to the office every day 1:07:34.120 --> 1:07:36.960 they're wearing them to a cool party, they're wearing them 1:07:37.040 --> 1:07:40.480 out on a date, you know, they're wearing them to 1:07:41.080 --> 1:07:43.120 like a movie premiere or something. A lot of celebrities 1:07:43.120 --> 1:07:44.160 are getting into this now. 1:07:44.200 --> 1:07:45.640 It's like a great accessory again. 1:07:45.880 --> 1:07:48.240 Yes, yeah, I mean it's something that you choose that 1:07:48.280 --> 1:07:50.439 speaks about you. A lot of the people we talked 1:07:50.480 --> 1:07:52.479 to said, you know, if you want to seal the deal, 1:07:52.600 --> 1:07:53.960 you have to wear a tie, and it has to 1:07:53.960 --> 1:07:54.560 be something cool. 1:07:54.720 --> 1:07:56.440 You know, there used to be rules, right, like you 1:07:56.440 --> 1:07:58.160 don't wear a striped tie with a striped shirt. But 1:07:58.240 --> 1:08:00.360 people are just mixing it up and having some fun. 1:08:00.480 --> 1:08:02.280 Yeah, And I think that's part of why people are 1:08:02.280 --> 1:08:04.200 coming back to ties, because if no one wants to 1:08:04.240 --> 1:08:06.760 go back to something that feels really strict and restrictive 1:08:06.800 --> 1:08:10.040 and old fashioned. But people are wearing ties in different ways. 1:08:10.200 --> 1:08:13.880 Like you said, you know, stripes with stripes, people are 1:08:13.920 --> 1:08:15.440 there's now a thing where you'll see what you'll see 1:08:15.440 --> 1:08:18.000 on TikTok and stuff where people were the back end 1:08:18.000 --> 1:08:21.120 of the tie longer than the front end, the skinny end, 1:08:21.360 --> 1:08:24.439 which just looks more casual and relaxed and like you 1:08:24.479 --> 1:08:28.519 threw it on as just just another accessory to sort 1:08:28.560 --> 1:08:30.000 of speak about your style. 1:08:30.520 --> 1:08:32.519 I can I ask you, is really the knit tie? 1:08:32.560 --> 1:08:35.920 Possibly back to listen, I have always been in favor 1:08:35.960 --> 1:08:38.040 of the knick tie. I'm a big knit tie wear. 1:08:38.439 --> 1:08:41.519 And yes, so Todd Snyder, which is a men'swear brand 1:08:41.520 --> 1:08:44.120 which I love and they often win awards. Is very cool. 1:08:44.400 --> 1:08:48.639 They started doing ties in earnest like two years ago, 1:08:48.720 --> 1:08:50.280 you know, after the start of the pandemic, when we 1:08:50.280 --> 1:08:52.280 were coming back to the office, and they said that 1:08:52.360 --> 1:08:54.960 knit ties are very strong for them, and yeah, Charles Sherbot, 1:08:55.000 --> 1:08:57.400 which is a much more entry level price point, they've 1:08:57.520 --> 1:09:00.360 their ties sales have grown each year for the past years, 1:09:00.400 --> 1:09:02.840 and they said pocket squares are growing, which I did 1:09:02.840 --> 1:09:03.439 not expects. 1:09:04.120 --> 1:09:06.479 We missed one really big element. And there's some great 1:09:06.520 --> 1:09:10.040 pictures as a part of this story about women also 1:09:10.080 --> 1:09:12.040 wearing ties. Oh yeah, this which I love. 1:09:12.280 --> 1:09:14.000 This is great. I mean, you know, there was the 1:09:14.080 --> 1:09:17.400 met Gala which honored Carl Lagerfeld this year, and so 1:09:17.479 --> 1:09:19.559 a lot of that kind of Chanelle look does have 1:09:19.640 --> 1:09:22.240 like a lot of bow kind of like seet kind 1:09:22.280 --> 1:09:24.439 of looks. So it wasn't surprising to see that we 1:09:24.479 --> 1:09:27.640 saw a bunch of tie type things there, but just generally, 1:09:27.840 --> 1:09:32.200 like you know, Kristin Stewart, Florence Pugh wore a tie 1:09:32.280 --> 1:09:35.240 recently to a screening in New York, and Lizzie Kaplan 1:09:35.400 --> 1:09:37.720 wore this really great big suit and fat tie to 1:09:37.760 --> 1:09:40.320 an appearance on a morning show. Like women are wearing 1:09:40.360 --> 1:09:43.800 them too, and very cool young celebs like BTS war 1:09:43.880 --> 1:09:46.479 ties to the Grammys last year. We're just kind of 1:09:46.479 --> 1:09:47.200 seeing it everywhere. 1:09:47.520 --> 1:09:49.200 I got to finish on one point only because a 1:09:49.200 --> 1:09:51.120 big part of our audience here at Bloomberg, as you 1:09:51.160 --> 1:09:54.160 well know and at Pursuits is the finance world. And 1:09:54.200 --> 1:09:56.679 you guys did talk to a managing director wealth management 1:09:56.680 --> 1:10:00.559 advisor at Merrill who lives in Delray Beach, Florida, and 1:10:00.960 --> 1:10:01.800 he's ruined ties. 1:10:02.080 --> 1:10:02.320 Yeah. 1:10:02.360 --> 1:10:05.960 We talked to this great guy who said, you know, 1:10:06.840 --> 1:10:08.559 you don't see ties as much at work, but if 1:10:08.560 --> 1:10:10.599 you want to seal a deal and you're there really 1:10:10.600 --> 1:10:12.599 to do business, you have to wear a tie. And 1:10:12.720 --> 1:10:14.280 a lot of people said, you know, we talked to 1:10:14.360 --> 1:10:16.280 real estate brokers who said the same thing, like, if 1:10:16.320 --> 1:10:18.160 you're there to get serious, you gotta wear a tie. 1:10:18.240 --> 1:10:19.439 I love that you guys always talk to the folks 1:10:19.479 --> 1:10:22.160 over at million dollar listing is because they like to talk. 1:10:23.040 --> 1:10:25.080 It's funny how it works that way. All right, So 1:10:25.240 --> 1:10:28.000 from Ties to Lamborghini, I have no easy transition, but 1:10:28.320 --> 1:10:31.720 I have to say, Hannah Elliott, our car columnist, your 1:10:31.800 --> 1:10:35.479 car columnist, she was like, kind of it felt like 1:10:35.479 --> 1:10:36.559 she really didn't want to like this. 1:10:37.040 --> 1:10:37.320 Yeah. 1:10:37.360 --> 1:10:39.920 So Hannah drives incredible cars all the time, and the 1:10:39.920 --> 1:10:42.760 thing about reviewing incredible cars is that they're mostly incredible, 1:10:42.840 --> 1:10:47.120 so it's a lot of the reviews are positive. But 1:10:47.320 --> 1:10:49.160 here in this case, she went to test drive the 1:10:49.200 --> 1:10:52.080 Lamborghini Strato, which is a two hundred and seventy three 1:10:52.120 --> 1:10:55.120 thousand dollars car. It's kind of part of the last 1:10:55.160 --> 1:10:58.080 run of the Hurrican line of cars for a Lambeau, 1:10:58.680 --> 1:11:02.040 and it's an off road car. And she went into 1:11:02.080 --> 1:11:04.880 this thinking this is not gonna work. You know, Lamborghini 1:11:04.920 --> 1:11:08.959 does not enter off road rally competitions. Their cars traditionally 1:11:08.960 --> 1:11:11.400 are like five inches off the ground. Like you can't 1:11:11.400 --> 1:11:13.160 even you can't drive them in New York without wrecking 1:11:13.200 --> 1:11:16.800 the bottom of the car. It's terrifying and really yeah, yeah, 1:11:16.960 --> 1:11:19.960 so like for driving it through gravel, dirt ravines, forget 1:11:19.960 --> 1:11:22.800 about it. But they clambed this car in all this armor, 1:11:22.840 --> 1:11:25.679 including they elevated it so it's higher off the ground. 1:11:25.840 --> 1:11:29.000 They also had they have big knobby wheels, there's undercar armor, 1:11:29.040 --> 1:11:33.040 there's a dust duct, and it really is ready for 1:11:33.040 --> 1:11:34.679 the off road. So they sent So she went out 1:11:34.720 --> 1:11:37.000 and she drove around on a track that was like 1:11:37.080 --> 1:11:39.880 half normal racetrack and then like or actually almost two 1:11:39.880 --> 1:11:42.599 thirds off road. And she said, okay, I'm gonna rip 1:11:42.640 --> 1:11:44.840 this car up. Like they're telling me I can do it, 1:11:44.840 --> 1:11:46.800 I'm just gonna do it. And she said it was 1:11:46.840 --> 1:11:49.960 so great. It was really fun to have that rip 1:11:50.040 --> 1:11:53.360 roaring sound and that power. But the off road, she 1:11:53.360 --> 1:11:55.799 she scraped the bottom, she banged it up. It was fine. 1:11:55.880 --> 1:11:58.559 I mean, I'm sure they were dense, but it was 1:11:58.640 --> 1:12:00.519 you know, that's sort of the point. And she drove 1:12:00.560 --> 1:12:02.840 around with the driving instructor who literally said, you know 1:12:02.920 --> 1:12:05.000 you you can do whatever you want. 1:12:05.200 --> 1:12:05.519 I love. 1:12:05.520 --> 1:12:07.320 At the end of it, she's like, I just wanted 1:12:07.360 --> 1:12:09.719 another ride. So she was definitely convinced. What a great 1:12:09.760 --> 1:12:13.040 like one eighties From the beginning, where do you want 1:12:13.040 --> 1:12:16.040 to go? We can talk wines, we can talk shelves. 1:12:16.120 --> 1:12:17.719 You know, we could talk just a little about shelves. 1:12:17.720 --> 1:12:19.080 This is a very visual story. 1:12:19.200 --> 1:12:21.640 How did this come on? Because I'm like, Chris, I 1:12:21.680 --> 1:12:26.280 got this idea literally, So there's a story we have 1:12:26.320 --> 1:12:27.320 about wall shelves. 1:12:28.040 --> 1:12:30.559 And when we do these market stories about home decor, 1:12:30.920 --> 1:12:33.000 sometimes we shoot them, sometimes we use the art from 1:12:33.000 --> 1:12:36.120 the companies. And we were like, what is who is 1:12:36.160 --> 1:12:39.960 making really cool stuff in what format? And we were 1:12:40.000 --> 1:12:41.640 looking at all the new stuff from this yere and 1:12:41.680 --> 1:12:44.479 there's just so many cool shelves, and shelves are such 1:12:44.520 --> 1:12:48.439 an afterthought, that's true, and architects and designers are doing 1:12:48.520 --> 1:12:50.840 industrial designers are doing really great jobs with them. So 1:12:50.920 --> 1:12:52.680 you got to check out this in the magazine. My 1:12:52.680 --> 1:12:54.439 favorite one is called it is called the Blue Bey 1:12:54.520 --> 1:12:54.880 Doo Bee. 1:12:55.120 --> 1:12:57.960 I love that line that I wrote. It's so cool and. 1:12:57.880 --> 1:13:01.000 It's by this New York artist, Margaret DeMarco. And it 1:13:01.760 --> 1:13:03.840 looks like you made a sort of a drip castle. 1:13:03.920 --> 1:13:06.960 It's a drip sand castle but out of wood, and 1:13:07.000 --> 1:13:09.360 you use it as a shelf, and it's just if 1:13:09.360 --> 1:13:10.880 you walked into someone's room and they had a couple 1:13:10.880 --> 1:13:12.320 of those, you'd be like, oh my gosh, I love it. 1:13:12.360 --> 1:13:14.200 Here can I just say there's one in there, and 1:13:14.320 --> 1:13:15.560 you guys are going to just have to read it 1:13:15.680 --> 1:13:17.120 or go online and check it out. But at first, 1:13:17.160 --> 1:13:19.160 I'm like, is that my ciest bully's shelf? Did they 1:13:19.200 --> 1:13:21.439 actually put that in there? You know what I'm talking about? 1:13:21.680 --> 1:13:21.800 Oh? 1:13:21.880 --> 1:13:23.720 Yes, yeah, yeah, yah yeah, But it's not it's not. 1:13:23.920 --> 1:13:25.880 It's because it floats on your wall, so you kind 1:13:25.880 --> 1:13:26.559 of put it up there. 1:13:27.240 --> 1:13:29.800 It's definitely not the bully shoe. Yeah, but it looks 1:13:29.880 --> 1:13:32.240 like that. Just quickly, we're running out of time, but 1:13:32.439 --> 1:13:37.640 I have to say, I love your wine reviewer, and 1:13:37.720 --> 1:13:40.960 she just talks about a new area in California where 1:13:41.000 --> 1:13:42.519 they're coming up with some great reds. 1:13:42.640 --> 1:13:44.800 Allen wrote this great piece, which has been very very 1:13:44.800 --> 1:13:47.040 popular online because I think it really resonates with people. 1:13:47.120 --> 1:13:50.360 The hottest area of wine in California in terms of 1:13:50.360 --> 1:13:53.519 buzz and newness isn't Napa or Sonoma. It's Passo Roebules 1:13:53.600 --> 1:13:56.559 who also, who knew that it was pronounced Passo Robles. 1:13:56.560 --> 1:13:59.080 I did not thank you for the pronunciation. 1:14:00.160 --> 1:14:02.479 And it's just they're making really great cavernets. There's a 1:14:02.520 --> 1:14:04.919 lot of really exciting stuff at all price points and 1:14:04.920 --> 1:14:07.960 Allen really tells the story of how it came to be, 1:14:08.240 --> 1:14:10.160 and it's a great story. And now I want to 1:14:10.160 --> 1:14:11.400 go out and get a bunch of these bottles. 1:14:11.400 --> 1:14:12.680 I saw the same thing. I looked at the list, 1:14:12.720 --> 1:14:14.240 and I also love what she said about the era. 1:14:14.360 --> 1:14:16.840 That part of it is this great you know. You 1:14:16.880 --> 1:14:18.960 they go from like warm days to cold nights and 1:14:19.000 --> 1:14:20.519 it makes for like the perfect grape. 1:14:20.560 --> 1:14:23.960 It has a very like French like soil. It's like Bordeaux. 1:14:24.040 --> 1:14:27.280 And they also that, yeah, that exchange between day and night, 1:14:27.320 --> 1:14:29.560 the big temperature changes really tightens up the flavors and 1:14:29.600 --> 1:14:29.920 the grapes. 1:14:30.000 --> 1:14:32.400 Yeah, there's a bunch of rowned varieties which are among 1:14:32.400 --> 1:14:34.880 my favorite. There's also a great wine cork which I've 1:14:34.920 --> 1:14:35.840 never seen or. 1:14:35.840 --> 1:14:37.120 Wine wine opener yet. 1:14:37.040 --> 1:14:39.839 Wine opener and just real quickly like thirty. 1:14:39.880 --> 1:14:42.960 Yeah, so the Durand is not new. Occasionally for our 1:14:43.080 --> 1:14:45.599 the one feature we do stuff that's just the best. 1:14:45.760 --> 1:14:48.280 And it has these two prongs that go outside the 1:14:48.320 --> 1:14:50.240 cork that hold the cork together because a lot of 1:14:50.240 --> 1:14:54.200 times an old cork will be crumbly. And Ellen has 1:14:54.200 --> 1:14:56.479 corked and seen thousands of bottles of wine on corked 1:14:56.520 --> 1:14:58.519 and she's never seen it fail. So one hundred and 1:14:58.520 --> 1:15:00.240 thirty five dollars the durand. 1:15:00.000 --> 1:15:02.519 All right, next time, I expect a necktie on anybuddy, Okay, 1:15:02.640 --> 1:15:05.519 or at least about time. All Right, We love Chris Rauser. 1:15:05.520 --> 1:15:07.559 He is the editor of Bloomberg Pursuits. Chris, thank you 1:15:07.640 --> 1:15:10.200 as always. You are listening to Bloomberg Business Week. Coming up, 1:15:10.320 --> 1:15:13.280 an international fast food player says it's making real progress 1:15:13.320 --> 1:15:16.760 and it's push for sustainability. How Wendy's is reducing its 1:15:16.800 --> 1:15:20.559 carbon footprint within the ultra competitive quick service restaurant space. 1:15:20.680 --> 1:15:22.280 That's coming up. This is Bloomberg. 1:15:23.000 --> 1:15:26.599 You're listening to the Bloomberg Business Week Podcast. Catch us 1:15:26.640 --> 1:15:30.280 live weekdays from two to five pm Easter on Bloomberg Radio, 1:15:30.520 --> 1:15:33.759 the Bloomberg Business app and YouTube. You can also listen 1:15:33.880 --> 1:15:37.480 live to our flagship New York station, Just Say Alexa 1:15:37.600 --> 1:15:41.160 play Bloomberg eleven thirty. 1:15:41.240 --> 1:15:43.200 Carol Master along with Matt Miller. Are you a chocolate 1:15:43.280 --> 1:15:45.240 or strawberry frosty kind of guy? Uh? 1:15:45.760 --> 1:15:48.680 My chocolate? This is an odd question because when I 1:15:48.720 --> 1:15:50.839 was a kid, there was only one kind of frosty 1:15:51.080 --> 1:15:53.320 right what there was? I didn't know if it was 1:15:53.360 --> 1:15:55.920 any specific flavor. It was just a frosty. So now 1:15:56.000 --> 1:15:57.920 when I go to Wendy's and I ask for a frosty, 1:15:57.960 --> 1:15:59.479 they asked me what flavor. I'm like, come on, there's 1:15:59.520 --> 1:16:01.759 only one flavor. But apparently you can get multiple flavors. 1:16:01.760 --> 1:16:03.400 You could get the flavor you don't want. All right, 1:16:03.439 --> 1:16:05.559 We are, of course talking about Wendy's. They do report 1:16:05.600 --> 1:16:09.200 earnings on Wednesday before the open. Something they've been doing 1:16:09.200 --> 1:16:11.839 and really other companies generally have been incorporating for years 1:16:11.880 --> 1:16:15.599 into their strategy and how they make financial decisions is ESG. 1:16:15.680 --> 1:16:18.400 We're talking about environmental, social and governance issues, which we 1:16:18.439 --> 1:16:21.040 know is going through its own little reckoning. Weighing in 1:16:21.120 --> 1:16:24.240 though on that for us this afternoon is Liliana Esposito, 1:16:24.320 --> 1:16:27.519 chief Corporate Affairs and Sustainability Officer, over at Wendy's, joining 1:16:27.600 --> 1:16:30.800 us on zoom from Dublin, Ohio. Lilliana, good to have 1:16:30.840 --> 1:16:33.800 you here with Matt and myself. We do want to 1:16:33.800 --> 1:16:36.439 talk about ESG. You've worked, though, in the food industry 1:16:36.479 --> 1:16:38.839 for a long time, You've worked at Dean Foods Mars. 1:16:39.600 --> 1:16:41.639 What's top of mind of you when you think about 1:16:41.880 --> 1:16:43.439 ESG and what needs to be done. 1:16:44.120 --> 1:16:45.600 Yeah, great to be with both of you. And I 1:16:45.640 --> 1:16:48.080 will say, Matt, if you haven't tried a strawberry frosty yet, 1:16:48.120 --> 1:16:50.360 they came back to our restaurants and you're missing out, 1:16:50.439 --> 1:16:51.960 So definitely definitely give that. 1:16:51.920 --> 1:16:52.479 One a try. 1:16:53.479 --> 1:16:58.240 And look, I think that even the letters ESG are 1:16:58.280 --> 1:17:01.679 relatively new in terms of this area. But obviously companies 1:17:01.680 --> 1:17:05.200 Wendy's and others have been operating responsibly for decades. But 1:17:05.280 --> 1:17:08.519 I think what has changed is really the demands that 1:17:08.680 --> 1:17:11.960 those efforts really be formalized and that they be very 1:17:12.040 --> 1:17:14.600 goal based. And so you know, at Wendy's, we you know, 1:17:14.640 --> 1:17:17.800 we organize our ESG portfolio under the platform of good 1:17:17.800 --> 1:17:20.599 Done Right, and we've got some some i think, pretty 1:17:20.680 --> 1:17:25.160 aggressive public facing commitments around food, people in footprint and 1:17:25.160 --> 1:17:27.800 what we're trying to accomplish that we would essentially say 1:17:27.840 --> 1:17:30.599 is doing our fair share or more than our fair 1:17:30.640 --> 1:17:34.120 share too, to really demonstrate that we are operating our 1:17:34.160 --> 1:17:35.559 business in a responsible fashion. 1:17:36.040 --> 1:17:40.040 It seems to be a difficult business. I mean, like, 1:17:40.160 --> 1:17:42.560 if you want to do ESG, you don't want to 1:17:42.560 --> 1:17:47.519 be working at an oil producer or a hamburger seller, 1:17:47.720 --> 1:17:51.479 because you know that's one of the leading causes of 1:17:51.520 --> 1:17:54.360 climate change is raising beef, So how can you change that? 1:17:55.400 --> 1:17:57.120 Yeah, it's it's got to be a partnership. 1:17:57.160 --> 1:18:00.439 And so what you're referring to clearly are around greenhouse 1:18:00.439 --> 1:18:02.559 gas emissions. You know, we have set a science based 1:18:02.560 --> 1:18:06.200 target for greenhouse gas emissions productions and that will include 1:18:06.280 --> 1:18:08.760 Scope one, two, and three. So Scope one and two 1:18:08.760 --> 1:18:11.639 are the about four hundred restaurants that the company owns 1:18:11.640 --> 1:18:15.640 and operates ourselves, and then Scope three is our franchise restaurants, 1:18:15.680 --> 1:18:20.240 which generally look and operate like a company restaurant, they're 1:18:20.280 --> 1:18:23.040 just owned by a franchise e. But the biggest part 1:18:23.040 --> 1:18:25.920 of our footprint is of our greenhouse gas emissions foot 1:18:25.920 --> 1:18:27.640 print is our supply chain, and the biggest part of 1:18:27.680 --> 1:18:31.200 that is proteins and specifically beef. And so you know, 1:18:31.240 --> 1:18:33.920 the encouragement is that, you know, many of our suppliers 1:18:33.960 --> 1:18:37.360 have already started down this path, even in advance of us, 1:18:37.439 --> 1:18:40.479 of setting their own science based targets. But we know 1:18:40.520 --> 1:18:42.720 that we'll have to work together. It's not going to 1:18:42.760 --> 1:18:48.600 be just Wendy's changing that landscape, but substantially improving the footprint, 1:18:49.040 --> 1:18:52.880 the environmental footprint of agricultural production and with a heavy 1:18:52.880 --> 1:18:55.559 focus on protein, is is definitely going to be necessary 1:18:55.600 --> 1:18:56.559 to achieve these targets. 1:18:56.720 --> 1:18:59.240 Leanda, what about garbage? And I think about food waste 1:18:59.240 --> 1:18:59.799 in particular. 1:19:00.280 --> 1:19:01.560 I mean it's. 1:19:01.360 --> 1:19:03.360 It's oh, food waste or plastic. 1:19:03.120 --> 1:19:05.960 Food waste in particular that ends up in dumps and 1:19:06.040 --> 1:19:08.280 the methane that's produced off of that and other which 1:19:08.320 --> 1:19:09.440 is more problematic. 1:19:09.439 --> 1:19:11.960 Food waste goes into your compost. Do you not compost that? 1:19:12.320 --> 1:19:14.120 No, people throw out a lot of stuff and it 1:19:14.240 --> 1:19:19.200 ends up in the dump. That's apparently compost I do 1:19:19.280 --> 1:19:19.639 at home. 1:19:19.720 --> 1:19:22.160 I I actually am fortunate to live in a community 1:19:22.160 --> 1:19:25.000 that has curbside food waste pickup. But that is unusual, 1:19:25.040 --> 1:19:27.519 and that's that's a really key piece is that I 1:19:27.560 --> 1:19:30.840 will say for Wendy's Restaurants, we actually waste very little. 1:19:30.840 --> 1:19:34.160 And I think that's not unusual for a company of 1:19:34.240 --> 1:19:36.720 our type because it's just a small footprint. And so 1:19:36.960 --> 1:19:39.519 you know, our operators get very good and have gotten 1:19:39.640 --> 1:19:42.160 very good over the years of only ordering what we're 1:19:42.160 --> 1:19:45.040 going to prepare and only preparing what we're going to 1:19:45.040 --> 1:19:45.719 be able to serve. 1:19:45.760 --> 1:19:47.160 And really, guys are that. 1:19:47.120 --> 1:19:49.000 Tight, so you're not throwing out a lot of stuff, 1:19:49.600 --> 1:19:51.439 and we we've actually done some audits on that and 1:19:51.439 --> 1:19:53.800 have found that but there's always opportunities to, you know, 1:19:53.880 --> 1:19:55.720 to be better. But certainly as you look at the 1:19:55.760 --> 1:19:59.360 supply chain, that's where a lot of that that waste 1:19:59.360 --> 1:20:02.280 may be occurring, particularly in agricultural products, and so it 1:20:02.320 --> 1:20:05.760 absolutely is a it's absolutely a focus for us. It's 1:20:05.760 --> 1:20:07.960 interesting and you you know, you mentioned plastics and maybe 1:20:08.000 --> 1:20:10.320 we'll get to packaging as well. One of the things 1:20:10.320 --> 1:20:13.160 we're doing right now in some of our Chicago area 1:20:13.280 --> 1:20:17.800 restaurants is we've actually got some initially two stream trash receptacles, 1:20:17.800 --> 1:20:20.800 so you know, landfill and recycling, and over time we 1:20:20.840 --> 1:20:23.559 may add composting to it. We did kind of a 1:20:23.640 --> 1:20:26.879 video study essentially of the waste produced by the restaurant, 1:20:27.160 --> 1:20:30.599 then did some education with our team members as well 1:20:30.640 --> 1:20:33.799 as with with customers, showing them what of our packaging 1:20:33.840 --> 1:20:36.320 in particular, and then for our our team members what 1:20:36.400 --> 1:20:39.280 of our backup house packaging could be recycled. And then 1:20:39.280 --> 1:20:40.960 on the back end of the pilot, we'll look a 1:20:41.360 --> 1:20:43.479 look at that same kind of video technology and see 1:20:43.520 --> 1:20:45.920 whether we were actually able to change behavior. 1:20:45.920 --> 1:20:47.640 Do we need to get rid of plastic. 1:20:47.360 --> 1:20:49.479 Then well straws. What do you do about straws? 1:20:49.520 --> 1:20:51.759 Why'd you know? Haven't you gotten rid of straws already? 1:20:52.760 --> 1:20:52.920 Uh? 1:20:53.080 --> 1:20:55.040 No, we still we still have We still have straws. 1:20:55.040 --> 1:20:57.080 And I will say, you know, one of the commitments 1:20:57.080 --> 1:20:59.519 that we've made is that by twenty twenty six, one 1:20:59.560 --> 1:21:02.880 hundred percent of our customer facing packaging will be sustainably sourced. 1:21:02.920 --> 1:21:07.000 And so we're defining that as either recyclable, compostable, or reusable. 1:21:07.040 --> 1:21:09.719 And so we just put out our Corporate Responsibility Report 1:21:09.720 --> 1:21:12.120 a couple of weeks ago and reported that we're now 1:21:12.320 --> 1:21:15.160 more than halfway towards that goal. A big part of 1:21:15.160 --> 1:21:17.519 that progress over the last year for US was actually 1:21:17.520 --> 1:21:21.960 transitioning our beverage cups from our former kind of paper 1:21:22.000 --> 1:21:26.719 based cups that had limited recyclability into a plastic format 1:21:26.760 --> 1:21:30.719 that is recyclable. And then we're also incorporating post consumer 1:21:30.760 --> 1:21:33.920 recycled content into those cups. Will do that over time, 1:21:33.960 --> 1:21:37.080 and so you know, one piece of the puzzle is 1:21:37.160 --> 1:21:39.439 the material. Making sure that you have a material that 1:21:39.560 --> 1:21:43.160 is recyclable or compostable, and then but then also making 1:21:43.200 --> 1:21:43.599 sure that you. 1:21:43.479 --> 1:21:44.320 Have the infrastructure. 1:21:44.320 --> 1:21:47.439 And we certainly don't control that, you know, at Wendy's, 1:21:47.479 --> 1:21:51.000 but certainly that's a great need of ensuring that there 1:21:51.120 --> 1:21:54.200 is infrastructure to be able to recycle or compost these 1:21:54.240 --> 1:21:56.519 materials when they're made available. And then the third piece 1:21:56.560 --> 1:21:58.880 is educating the consumer so that they know what to do, 1:21:59.640 --> 1:22:02.720 you know, with the packages that they have full disclosure. 1:22:02.760 --> 1:22:05.280 I'm from Columbus, right, so I love Wendy's with all 1:22:05.320 --> 1:22:07.639 my heart. I mean I used to go and eat 1:22:07.680 --> 1:22:10.439 at store number one on Broad Street with my grandmother 1:22:10.840 --> 1:22:14.280 growing up, so I have a very special connection. But 1:22:14.960 --> 1:22:17.720 you definitely don't want to be giving out straws, do you. 1:22:17.840 --> 1:22:20.880 Isn't that the worst kind of possible c s R, 1:22:21.040 --> 1:22:23.000 sin ESG sin straws. 1:22:23.960 --> 1:22:24.240 I don't. 1:22:24.280 --> 1:22:26.200 I don't think i'd agree with that. And and really, 1:22:26.280 --> 1:22:28.960 I mean, in in the in the grand scheme of 1:22:29.800 --> 1:22:34.080 total packaging, you know, certainly items like you know, cups 1:22:34.120 --> 1:22:38.479 and wrappers and containers produce more more product challenge with 1:22:38.560 --> 1:22:41.839 straws and and and it's it's not unique to straws, 1:22:41.880 --> 1:22:44.760 but they're small, and so even if the material is 1:22:45.240 --> 1:22:49.120 technically recyclable, uh, you know, most facilities won't won't accept that. 1:22:49.200 --> 1:22:51.680 And so we've got some locations that have alternatives to 1:22:51.680 --> 1:22:55.240 plastic straws, and and certainly are looking at at other 1:22:55.320 --> 1:22:57.880 alternatives as well. But but a lot of consumers, you know, 1:22:57.960 --> 1:23:00.960 really prefer to, you know, to to I have a little. 1:23:00.800 --> 1:23:03.280 I don't know, actually I walk around with a metal straw. 1:23:03.360 --> 1:23:05.360 I got my own little like reusable as wash them. 1:23:05.400 --> 1:23:06.040 That's what we do. 1:23:06.520 --> 1:23:09.719 Liliana, thank you so much. Liliana Esposito, Chief Corporate Affairs 1:23:09.720 --> 1:23:13.360 and Sustainability Officer at Wendy's On zoom from Dublin, Ohio. 1:23:14.160 --> 1:23:18.800 This is the Bloomberg Business Week podcast, available on Apple, Spotify, 1:23:18.960 --> 1:23:22.439 and anywhere else you get your podcast. 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