WEBVTT - OpenAI Valuation Soars to $500 Billion, Topping Musk’s Space X 0:00:02.720 --> 0:00:10.600 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.640 --> 0:00:14.600 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:14.640 --> 0:00:17.880 Eastern on Apple, Cocklay and Android Auto with the Bloomberg 0:00:17.960 --> 0:00:21.080 Business App. Listen on demand wherever you get your podcasts, 0:00:21.400 --> 0:00:23.520 or watch us live on YouTube. 0:00:23.960 --> 0:00:26.640 Another big trade happened today. I mean, the AI valuation 0:00:26.760 --> 0:00:28.760 story just gets bigger. Every single day. 0:00:28.760 --> 0:00:31.320 There's a new impressive and it's because of this guy, 0:00:31.440 --> 0:00:35.440 Ed Ludlow, Bloomberg Tech co host, joining us a live. 0:00:35.320 --> 0:00:37.600 Here in our Bloomberg Interactive Brokers studio. He's based in 0:00:37.640 --> 0:00:39.879 San Francisco. We've got him on East coast here for 0:00:39.920 --> 0:00:42.159 a little while. So, Ed, what happened? 0:00:42.440 --> 0:00:45.560 What's the deal that just put evaluation of five hundred 0:00:45.600 --> 0:00:46.960 million dollars on open ASP. 0:00:47.240 --> 0:00:49.280 So, actually, the mechanics of it are the one of 0:00:49.320 --> 0:00:52.760 the most interesting parts. It's a secondary or an employee tender. 0:00:52.760 --> 0:00:56.120 In other words, if you are a existing employee or 0:00:56.120 --> 0:01:00.320 even a former employee, you can sell your shares in 0:01:00.400 --> 0:01:03.880 open AI. The eligibility requirements were that you held them 0:01:04.000 --> 0:01:06.760 or you had a vesting period of two years. But 0:01:06.800 --> 0:01:10.679 the reason I say that's interesting is that this is 0:01:11.120 --> 0:01:16.320 a valuation dictated by a third party group of investors 0:01:16.400 --> 0:01:18.880 buying those shares from employees. So the company doesn't raise 0:01:18.880 --> 0:01:21.560 any new money, but there has to be a valuation 0:01:21.680 --> 0:01:24.160 set because a price has to be set. And so 0:01:25.160 --> 0:01:28.240 these investors wanted even more. They wanted like ten billion 0:01:28.280 --> 0:01:30.920 dollars worth of employee shares. In the end they got 0:01:30.959 --> 0:01:33.119 six point six billion dollars. So what does that tell you. 0:01:33.600 --> 0:01:37.000 There's probably a load of open a employees that were like, 0:01:37.040 --> 0:01:39.560 you know what, I'm not going to sell. I'm holding 0:01:39.640 --> 0:01:42.640 on because if I'm at the five hundred billion dollar valuation, 0:01:43.360 --> 0:01:45.680 you know, and there's still a corporate restructures go through, 0:01:45.920 --> 0:01:49.200 you know, a future IPO, maybe, then then hold. So 0:01:49.240 --> 0:01:51.640 I thought that was really fascinating. But I would just 0:01:51.680 --> 0:01:55.080 point out that Sharin Gafari, really talented colleague of mine 0:01:55.720 --> 0:01:58.480 out in San Francisco Bloomberg Newsroom. She did break this 0:01:58.520 --> 0:02:00.960 story in August six, just the close of the round. 0:02:01.160 --> 0:02:03.720 Okay, So now that open ai is valued at five 0:02:03.800 --> 0:02:07.680 hundred billion dollars, that puts it over SpaceX, which is 0:02:07.760 --> 0:02:09.520 valued at four hundred billion. And I bring this up 0:02:09.520 --> 0:02:12.280 because there's a common thread between open ai and SpaceX 0:02:12.320 --> 0:02:16.560 and that is Elon Musk is part of open Ai 0:02:16.680 --> 0:02:19.280 before leaving under some clouds. 0:02:19.639 --> 0:02:23.560 Yep, he has a fractious relationship specifically with some Altman, 0:02:23.840 --> 0:02:27.080 you know, the the other founder and now CEO of 0:02:27.120 --> 0:02:30.480 open Ai. You know what I've written a lot about 0:02:30.560 --> 0:02:33.480 in Bloombot BusinessWeek magazine and in some of the reporting 0:02:33.639 --> 0:02:37.320 is present day. Musk has kind of a little bit 0:02:37.320 --> 0:02:40.839 of a chip on his shoulder. I think, well, specifically 0:02:40.880 --> 0:02:44.720 about the idea that Xai, his ai company, should have 0:02:44.880 --> 0:02:49.440 a valuation that is near to open ayes so, and 0:02:49.680 --> 0:02:54.840 you know there's been litigation. You know, there's a public forum, 0:02:55.800 --> 0:02:58.600 slinging match on social media between the two. Sam Altman 0:02:58.639 --> 0:03:01.760 gets asked about it a lot. But you know, I 0:03:01.760 --> 0:03:06.720 think the main thing is that remember also that Xai has, 0:03:06.919 --> 0:03:09.200 as we've reported it sought to raise money at two 0:03:09.240 --> 0:03:12.440 hundred million dollar valuation this year. You know, it's tides 0:03:12.480 --> 0:03:13.959 and rising ships in that field. 0:03:14.000 --> 0:03:16.920 Really, so do we know who was selling here in 0:03:16.919 --> 0:03:17.440 this round? 0:03:17.560 --> 0:03:17.760 No? 0:03:18.000 --> 0:03:22.000 I mean all I know about the eligibility rules. You know. 0:03:22.080 --> 0:03:24.320 The one thing I've reflected on reading the story and 0:03:24.400 --> 0:03:28.760 speaking to sources that the company is Remember in November 0:03:28.760 --> 0:03:31.600 of twenty twenty two when Sam Outman was briefly ousted 0:03:31.720 --> 0:03:34.560 from open ai. There was just a few hundred people 0:03:34.560 --> 0:03:37.440 that worked there at that time. You know, so that 0:03:37.480 --> 0:03:40.400 was three years ago and almost three years ago, and 0:03:40.440 --> 0:03:43.880 now there are thousands of people that work there. So yeah, 0:03:44.000 --> 0:03:46.440 some tenure would probably be a factor here. 0:03:46.640 --> 0:03:49.240 Okay, So now the world's biggest startup worth half a 0:03:49.280 --> 0:03:51.800 trillion dollars, but open ai is not making money. 0:03:51.840 --> 0:03:52.920 It's not part ofable. Yeah. 0:03:53.360 --> 0:03:56.960 So on Monday, open ai has its dev day, its 0:03:56.960 --> 0:03:59.480 developers day in San Francisco, and are we going? And 0:04:00.280 --> 0:04:02.840 it's a good opportunity to ask hard questions like these. 0:04:03.200 --> 0:04:06.120 There's a data point that's going around right now, which 0:04:06.160 --> 0:04:10.200 is that open ai is only converting two percent of 0:04:10.240 --> 0:04:14.840 its free users to paid subscribers. Now, that for me 0:04:14.920 --> 0:04:17.440 is an interesting data point. So it's been on that 0:04:17.600 --> 0:04:19.520 is that there's a lot of room for growth, right, 0:04:19.600 --> 0:04:23.560 and so you know software, you know, this is core 0:04:23.640 --> 0:04:27.240 bi analysis, right, Software is traditionally a higher margin business. 0:04:27.720 --> 0:04:30.560 But the problem is that because of compute expenses and 0:04:30.640 --> 0:04:34.600 op X now talent compensation, even the revenue they are 0:04:34.640 --> 0:04:36.760 making probably ain't that high margin, is it. You know, 0:04:36.800 --> 0:04:40.080 if it's all. So the big question is, Okay, if 0:04:40.160 --> 0:04:42.719 we know that you're not really doing a lot to 0:04:42.760 --> 0:04:45.560 convert the consumers from free to paid, what do your 0:04:45.680 --> 0:04:48.599 enterprise business look like? And that's probably the domain where 0:04:48.640 --> 0:04:52.200 we'll focus. Hey, when you even do a secondary or 0:04:52.200 --> 0:04:54.600 attender with employees, you've got to put a deck together 0:04:54.920 --> 0:04:58.880 that justifies evaluation. So those group of investors, they will 0:04:58.880 --> 0:05:01.200 have seen something in the data room that would say 0:05:01.200 --> 0:05:03.279 this is a five hundred billion dollar company. Like, of 0:05:03.279 --> 0:05:04.440 course they would, that's how it works. 0:05:04.520 --> 0:05:06.160 Well, how come you don't. You haven't gotten your hands 0:05:06.160 --> 0:05:06.599 on that deck? 0:05:06.960 --> 0:05:09.800 You know, a trepid reporter, you know, No, I'll be 0:05:09.800 --> 0:05:12.159 honest about this, Like Sharena has been smashing this story. 0:05:12.279 --> 0:05:14.479 She covers a covery so deeply. And I was on 0:05:14.560 --> 0:05:17.839 vacation for most of August, so you know, I've not 0:05:17.960 --> 0:05:21.960 tracked it as closely for me. You know, the big 0:05:22.000 --> 0:05:25.400 story to focus on with open ai is the corporate restructure, 0:05:25.760 --> 0:05:28.279 you know, from where you have a not for profit 0:05:28.320 --> 0:05:31.480 board that owns the for profit company. That's going to change. 0:05:31.520 --> 0:05:35.400 Okay, So that's where I'm focused. Stay with us. More 0:05:35.440 --> 0:05:37.599 from Bloomberg Intelligence coming up after this. 0:05:41.240 --> 0:05:44.960 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:05:45.040 --> 0:05:48.120 weekdays at ten am Eastern on Apple, Corplay and Android 0:05:48.120 --> 0:05:51.440 Otto with the Bloomberg Business App. Listen on demand wherever 0:05:51.480 --> 0:05:54.600 you get your podcasts, or watch us live on YouTube. 0:05:55.640 --> 0:05:57.839 Let's talk a little bit about Tessa right now, because 0:05:57.960 --> 0:06:01.600 it reported global vehicle delivery and it was a surprise 0:06:01.640 --> 0:06:03.560 to the upside, so that means we need to bring 0:06:03.600 --> 0:06:06.520 in Craig Trudell. He is our Global autos editor for 0:06:06.520 --> 0:06:10.200 Bloomberg News, joining us from London right now. Craig, not 0:06:10.320 --> 0:06:13.479 a surprise insofar as there was this expiration of the 0:06:13.480 --> 0:06:17.160 federal tax credits for evs coming up, so people were 0:06:17.240 --> 0:06:20.000 kind of rushing to make good use of those tax 0:06:20.040 --> 0:06:21.279 credits before they went away. 0:06:21.680 --> 0:06:24.840 Yeah, that's exactly right. I think there was a widespread 0:06:24.880 --> 0:06:27.479 expectation that, you know, given that the clock was ticking 0:06:27.520 --> 0:06:29.800 on those tax credits, that we were going to see 0:06:29.839 --> 0:06:33.520 a strong third quarter. But this this was even better 0:06:33.600 --> 0:06:36.799 than was you know, expected by by analysts that follow 0:06:36.839 --> 0:06:39.840 the company. I think, you know, we did get indications 0:06:39.880 --> 0:06:42.279 as the month of September was coming to a close 0:06:42.360 --> 0:06:45.119 that more and more analysts were much higher than where, 0:06:45.520 --> 0:06:48.479 you know, where the average was the consensus, if you will, 0:06:49.240 --> 0:06:52.000 And also I should add two just on the energy 0:06:52.000 --> 0:06:54.640 side of the business. It was another record quarter of 0:06:55.200 --> 0:06:59.040 energy storage product deployments. So you know that that is 0:06:59.480 --> 0:07:03.159 still a much smaller portion of of Tesla's you know, 0:07:03.240 --> 0:07:06.160 top and bottom lines, but it was a business that 0:07:06.279 --> 0:07:09.159 you know, was growing pretty rapidly that you know, along 0:07:09.240 --> 0:07:12.040 with the car business was struggling in the first half 0:07:12.080 --> 0:07:14.880 of this year. So to see see that tick up 0:07:14.920 --> 0:07:17.200 as well is another positive for the company. 0:07:17.480 --> 0:07:19.120 Craig, can you give us an update where we are 0:07:19.160 --> 0:07:22.880 in the US in terms of charging capabilities? I mean, 0:07:23.280 --> 0:07:24.880 that's I know, that's a gating issue for a lot 0:07:24.880 --> 0:07:26.680 of people that just don't feel like there's enough charging 0:07:27.240 --> 0:07:28.239 capacity in this country. 0:07:28.280 --> 0:07:29.560 Where are we now and what are some of the 0:07:29.560 --> 0:07:30.240 goals do you think? 0:07:30.560 --> 0:07:33.280 Yeah, I mean, Tesla, you have to give them credit 0:07:33.320 --> 0:07:35.600 for still being you know, really sort of ahead of 0:07:35.600 --> 0:07:37.840 the curve in that regard and to the extent that 0:07:37.920 --> 0:07:41.840 other manufacturers have had, you know, some progress in charging 0:07:42.320 --> 0:07:46.680 getting getting better, it's because Tesla made this decision, you know, 0:07:46.800 --> 0:07:48.880 not that long ago to open up its network to 0:07:48.920 --> 0:07:52.920 other manufacturers. I think that that also is you know 0:07:53.000 --> 0:07:55.760 something that you know, perhaps you know, if you look 0:07:55.760 --> 0:07:59.040 at in hindsight, you know, maybe sort of created something 0:07:59.040 --> 0:08:01.760 of an opening for for other carmakers that you know, 0:08:01.800 --> 0:08:04.400 have made Tesla's life a little bit more difficult in 0:08:04.600 --> 0:08:07.160 the US because they went from having a network that 0:08:07.280 --> 0:08:10.760 was you know, really intuitive and easy to use, that 0:08:10.760 --> 0:08:13.680 that was all to themselves, to opening that to others. 0:08:13.800 --> 0:08:17.440 They of course, you know, that that's become something of 0:08:17.440 --> 0:08:20.360 of a you know business for them to be able 0:08:20.400 --> 0:08:27.360 to you know, charge non Tesla drivers for those charging sessions. 0:08:27.440 --> 0:08:29.720 But that is you know, sort of a drop in 0:08:29.760 --> 0:08:32.800 the bucket relative to to the car business for them. 0:08:32.920 --> 0:08:36.080 Stay with us. More from Bloomberg Intelligence coming up after this. 0:08:40.000 --> 0:08:43.680 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:08:43.760 --> 0:08:46.440 weekdays at ten a m. Eastern on Apple, Cocklay and 0:08:46.440 --> 0:08:49.720 Android Auto with the Bloomberg Business App. Listen on demand 0:08:49.800 --> 0:08:53.360 wherever you get your podcasts, or watch us live on YouTube. 0:08:54.240 --> 0:08:57.240 There was a deal today in this space petrochemical space. 0:08:58.160 --> 0:09:01.000 Warren Buffet's Berkshire Hathway reached a deal to buy Occidental 0:09:01.000 --> 0:09:05.640 Petroleum Corporation's petro chemical business for about nine point seven 0:09:05.880 --> 0:09:09.120 billion dollars. Let's break that down with Matthew Pathlosola, senior 0:09:09.120 --> 0:09:13.160 analys covering the insurance business, has been covering Berkshire Hathaway 0:09:13.200 --> 0:09:16.760 and Warren Buffett for many, many years. He's so Bloomberg 0:09:16.800 --> 0:09:20.520 Intelligence joining us via zoom. Here Matthew talk to us 0:09:20.520 --> 0:09:25.559 about what a deal like this means for Berkshire Hathaway. 0:09:25.920 --> 0:09:28.800 Hey, Paul, Yeah, I think it's a good deal for 0:09:28.840 --> 0:09:31.920 Berkshire Hathaway. When you really break it down, the nine 0:09:31.960 --> 0:09:34.800 point seven billion dollars is three percent of the cash 0:09:34.800 --> 0:09:38.320 that Berkshire has on hand, So it's funny to say it, 0:09:38.400 --> 0:09:40.920 but kind of a low stakes deal for Berkshire. I 0:09:40.960 --> 0:09:45.360 think this deal helps Occidental. They really need to de lever, 0:09:45.520 --> 0:09:47.640 so they're going to use six point five billion dollars 0:09:47.679 --> 0:09:50.720 with that cash to de lever, which could help their stock, 0:09:50.760 --> 0:09:53.800 which then could also have hel help Berkshire's eleven billion 0:09:53.840 --> 0:09:56.520 dollar steak in Occidental. So I think it's kind of 0:09:56.880 --> 0:09:59.000 a multi layered win for Berkshire Hathaway. 0:10:00.160 --> 0:10:03.480 What does it say about Warren Buffett's willingness to buy 0:10:03.559 --> 0:10:06.400 right now when the market is trading at much higher 0:10:06.440 --> 0:10:10.360 valuations than historically it has been, And I get that 0:10:10.400 --> 0:10:12.640 most of that is because of the tech industry. But 0:10:12.760 --> 0:10:16.400 even beyond that, overall valuation is not low. 0:10:18.120 --> 0:10:23.360 Yeah, Scarlett, I would say Buffett's inclination to be buying 0:10:23.440 --> 0:10:27.200 anything is probably low. At the moment. Berkshire has not 0:10:27.240 --> 0:10:29.320 been buying back their own stock, which is up ten 0:10:29.360 --> 0:10:33.080 percent year to date, so their buybacks are essentially nil. 0:10:33.559 --> 0:10:38.040 They and their equity portfolio they've sold about eleven billion 0:10:38.120 --> 0:10:41.560 dollars net year to date. So you're a spot on 0:10:41.679 --> 0:10:45.280 to say valuations are high and Berkshi is probably not 0:10:45.360 --> 0:10:46.960 buying a lot of stuff. I think this was probably 0:10:47.000 --> 0:10:52.120 just a unique opportunity. The deal valuation is pretty good, 0:10:52.160 --> 0:10:54.200 the terms are pretty good, so I think this was 0:10:54.520 --> 0:10:58.560 Berkshire taking advantage of their relationship with Occidental and doing 0:10:58.600 --> 0:11:01.440 something that could help both. This is some sort of 0:11:01.520 --> 0:11:05.440 statement on wanting to buy more in the market, all right. 0:11:05.480 --> 0:11:08.280 Well, on the same day that Bircher Hathaway spends ten 0:11:08.280 --> 0:11:13.200 billion dollars on a petrochemical business, Open Ai, some employees 0:11:13.200 --> 0:11:17.480 there sold some stock to private equity at a five 0:11:17.640 --> 0:11:23.679 hundred billion dollar valuation, how does Bircher Hathaway think about tech? 0:11:23.720 --> 0:11:27.080 Because if you want to put money to work, there's 0:11:27.080 --> 0:11:29.680 some big evaluations out there in the world of tech technology, 0:11:29.679 --> 0:11:31.240 But how did they generally think about tech? 0:11:32.600 --> 0:11:37.760 Yeah, Paul generally been tech adverse, right. I think Buffett 0:11:38.880 --> 0:11:42.400 has tended to invest in things that he has a 0:11:42.440 --> 0:11:45.920 deep understanding of. He has said it was a mistake 0:11:46.000 --> 0:11:49.079 to not invest in Amazon sooner, which you call it 0:11:49.240 --> 0:11:54.000 tech or retail, but he lamented that obviously big investor 0:11:54.040 --> 0:11:56.920 in Apple, which though he kind of sees as a 0:11:57.040 --> 0:12:00.760 retail consumer company versus more than tech. So they have 0:12:00.960 --> 0:12:05.480 very little in the way of cutting edge tech plays 0:12:05.600 --> 0:12:11.679 or AI investments. The investment managers will probably be a 0:12:11.720 --> 0:12:13.920 little more inclined to do that, and maybe Greg Abel. 0:12:14.000 --> 0:12:15.960 So Buffett has only got a couple of months left 0:12:16.080 --> 0:12:19.120 totally at the HELM, I'm sure he'll be involved kind 0:12:19.120 --> 0:12:23.640 of tangentially, but you might see a shift in the 0:12:23.720 --> 0:12:25.959 upcoming years towards more tech investments. 0:12:26.520 --> 0:12:29.480 I'm so glad you mentioned Greg Gable because this latest 0:12:29.480 --> 0:12:32.680 purchase of oxy can nine point seven billion dollars. You 0:12:32.679 --> 0:12:34.560 were saying that Berksher is not making a lot of 0:12:34.559 --> 0:12:38.040 purchases right now. Is this being spearheaded by Warren Buffett 0:12:38.200 --> 0:12:39.640 or is this a Greg Abel call? 0:12:41.040 --> 0:12:43.440 So we don't really know. I mean the press release 0:12:43.480 --> 0:12:47.440 that came out had a quote from Greg Gable only 0:12:47.640 --> 0:12:51.560 in it. I would suspect that Greg probably did most 0:12:51.640 --> 0:12:53.600 of the work on this. Buffett has been saying for 0:12:53.640 --> 0:12:56.080 a while now that he's stepped back from the day 0:12:56.120 --> 0:12:58.800 to day operations of the company, and Greg is kind 0:12:58.800 --> 0:13:01.040 of doing a lot of that leg I would think 0:13:01.120 --> 0:13:03.800 on something of this size, even though I just said 0:13:03.800 --> 0:13:06.040 it was three percent of Burcher's cash, it's still almost 0:13:06.040 --> 0:13:08.120 ten million dollars in a lot of money. I think 0:13:08.720 --> 0:13:11.079 Buffett was probably involved, but if I had to guess, 0:13:11.080 --> 0:13:13.079 I would think Abel probably did a lot of the 0:13:13.160 --> 0:13:14.120 legwork on this deal. 0:13:14.480 --> 0:13:16.680 It was a beautiful afternoon yesterday at the Jersey shore. 0:13:16.679 --> 0:13:19.080 I hopped on the Vestpa went to the beach and 0:13:19.120 --> 0:13:21.000 I could not believe how rough. 0:13:20.880 --> 0:13:21.600 The surf is. 0:13:21.720 --> 0:13:25.000 And apparently there's a couple of hurricanes and storms out 0:13:25.120 --> 0:13:27.280 at sea that's really churning things up, which got me 0:13:27.320 --> 0:13:30.960 thinking about you, Matt, talk to us about the hurricane 0:13:31.000 --> 0:13:33.520 season from the insurance perspective. Has it been so far 0:13:33.559 --> 0:13:34.040 this season? 0:13:34.920 --> 0:13:38.000 Yeah, thanks Paul. Whenever you think of hurricanes, please think 0:13:38.040 --> 0:13:42.760 of this natural disasters. It was exactly so. It's been 0:13:42.800 --> 0:13:45.600 a very mild hurricane season in terms of land falls, right, 0:13:45.640 --> 0:13:47.360 you haven't. You haven't talked to me much, right, so 0:13:48.280 --> 0:13:50.520 we haven't seen a lot. What actually happened was there 0:13:50.520 --> 0:13:52.480 was a hurricane coming and it was headed right towards 0:13:52.480 --> 0:13:56.080 the Carolinas, and then another hurricane, which is a category 0:13:56.120 --> 0:13:59.280 five completely over the ocean, sucked it away and kind 0:13:59.280 --> 0:14:02.360 of pulled it away way from the US coast, kind 0:14:02.360 --> 0:14:05.320 of saved the day for it. They are impacting Bermuda. 0:14:05.400 --> 0:14:08.680 Now I don't expect major insured losses from that, but 0:14:10.040 --> 0:14:13.920 so pretty benign season, good for reinsurance companies, Paul, your 0:14:13.960 --> 0:14:18.040 favorite stocks, and we do have something. The National Hurricane 0:14:18.040 --> 0:14:25.320 Center is identified another system that is brewing up and 0:14:25.360 --> 0:14:27.600 could develop into something next week, so we'll stay tuned 0:14:27.600 --> 0:14:29.080 for that. But mile season so far. 0:14:29.400 --> 0:14:31.640 Yeah, I feel like I never want to talk about 0:14:31.640 --> 0:14:33.960 this because the minute you'd be talking about how quiet 0:14:34.000 --> 0:14:36.640 it is is when things really gear up and you 0:14:36.680 --> 0:14:38.440 get a massive storm like the next week. 0:14:38.600 --> 0:14:43.480 Yeah, like, and that happens so real quick, Matt. Just overall, 0:14:43.520 --> 0:14:46.479 how your stock's performing this year? The property and casually insures. 0:14:47.240 --> 0:14:50.840 Not great, the underperforming year to date. We've got tower 0:14:50.880 --> 0:14:54.960 of pressure. Everything can costs more to repair. Lower interest 0:14:55.040 --> 0:14:56.440 rates are not a good thing for the P and 0:14:56.480 --> 0:14:59.760 C names. So Bircher's actually stand out, you know, not 0:14:59.800 --> 0:15:02.920 being an actual peer play P and C company that 0:15:02.920 --> 0:15:04.840 that stocked up ten percent year to date, but the 0:15:04.880 --> 0:15:06.720 rest of the group is down here to date, So 0:15:07.720 --> 0:15:11.080 we're probably looking at peak ros and evaluations got peaked 0:15:11.080 --> 0:15:12.720 before that, So I think that's what we're seeing with 0:15:12.760 --> 0:15:14.040 the P and C stocks. 0:15:14.680 --> 0:15:17.760 Stay with us. More from Bloomberg Intelligence coming up after this. 0:15:21.280 --> 0:15:24.960 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:15:25.040 --> 0:15:28.160 weekdays at ten am Eastern on Apple, Cocklay and Android 0:15:28.160 --> 0:15:31.480 Auto with the Bloomberg Business app. Listen on demand wherever 0:15:31.520 --> 0:15:34.640 you get your podcasts, or watch us live on YouTube. 0:15:35.600 --> 0:15:36.120 We were just. 0:15:36.080 --> 0:15:38.760 Talking about McDonald's and how we don't get a chance 0:15:38.760 --> 0:15:40.760 to go very often, even though there is a McDonald's 0:15:40.760 --> 0:15:43.400 Paul just across the street from US at Worldwide Headquarters. 0:15:43.440 --> 0:15:45.200 Well, I should go to McDonald's fast food when I 0:15:45.240 --> 0:15:46.800 was traveling in airports that would meet by. 0:15:46.880 --> 0:15:49.960 Oh that'd be my one time, I'll goo. Yeah, it's 0:15:50.000 --> 0:15:50.960 just all high end stuff. 0:15:51.080 --> 0:15:52.840 Well, I think we need to move to northern Texas 0:15:52.920 --> 0:15:55.680 because that is where McDonald's is focused on in terms 0:15:55.720 --> 0:15:58.840 of expanding and building out restaurants. This is actually our 0:15:58.880 --> 0:16:02.520 big Take story of the day. Christina Peterson is Bloomberg's 0:16:02.520 --> 0:16:04.800 food reporter and she was the author of the story. 0:16:05.000 --> 0:16:07.840 And Christina, this is about how McDonald's is looking to 0:16:08.120 --> 0:16:12.520 build out fifty thousand restaurants overall. Where are we in 0:16:12.600 --> 0:16:14.560 terms of that goal to get to fifty thousand or 0:16:14.600 --> 0:16:16.720 is it like a third of the way there, halfway there, 0:16:16.880 --> 0:16:18.920 three quarters of the way there. 0:16:18.640 --> 0:16:22.240 They're more than that. They are in the forty thousand range. 0:16:22.560 --> 0:16:24.720 I think it was forty one thousand about a year ago, 0:16:24.760 --> 0:16:27.960 so steadily getting closer. That actually will not make them 0:16:27.960 --> 0:16:30.760 the biggest restaurant train in the world. That has mixed 0:16:30.760 --> 0:16:34.000 you the Chinese bubble team makers at fifty three thousand, 0:16:34.040 --> 0:16:36.120 but they will definitely be closer. 0:16:35.760 --> 0:16:36.280 To that goal. 0:16:36.920 --> 0:16:41.040 Hey, Subway, I bet you's up there too, because they're everywhere. Christina, 0:16:41.160 --> 0:16:43.920 So what's going on here with Donald's. I would have 0:16:43.960 --> 0:16:45.200 if you had to ask me how, I would have said, 0:16:45.200 --> 0:16:48.560 there's some McDonald's on every corner in every city USA. 0:16:48.880 --> 0:16:50.400 Why are they going on this expansion? 0:16:51.520 --> 0:16:51.720 Right? 0:16:52.000 --> 0:16:55.240 Well, for years they were actually shuddering more restaurants than 0:16:55.280 --> 0:16:58.480 they were opening. Between twenty fifteen and twenty twenty one, 0:16:58.600 --> 0:17:01.920 they closed a net of nine hundred sum stores, some 0:17:02.000 --> 0:17:06.080 of them were inside walmarts. But since twenty twenty two, 0:17:06.200 --> 0:17:10.560 they have been reversing that strategy and expanding, opening new locations, 0:17:10.920 --> 0:17:13.280 and they've really been trying to follow where the population 0:17:13.480 --> 0:17:16.720 is going. So, for example, North Texas is a place 0:17:16.760 --> 0:17:20.000 where people are just flooding. Texas in general has seen 0:17:20.040 --> 0:17:23.199 two million people move there since twenty twenty, So they 0:17:23.280 --> 0:17:26.560 are chasing those new diners, trying to get as close 0:17:26.600 --> 0:17:28.719 to where people are living now as they can. And 0:17:29.040 --> 0:17:31.199 McDonald says that its goal is to be within a 0:17:31.240 --> 0:17:34.199 five minute drive from as many people as possible, So 0:17:34.240 --> 0:17:36.240 they're just trying to go where those people are now. 0:17:36.600 --> 0:17:39.040 Yeah, we were just talking earlier about how Dallas has 0:17:39.119 --> 0:17:41.879 really exploded in terms of population growth, in terms of 0:17:41.920 --> 0:17:44.600 being a place where folks want to move to because 0:17:44.640 --> 0:17:47.760 of the lower cost of living. Is McDonald's an early 0:17:47.800 --> 0:17:51.400 bird or a latecomer to the population boom in Northern 0:17:51.600 --> 0:17:53.359 Dallas Northern Texas? 0:17:53.640 --> 0:17:53.840 Is it? 0:17:53.960 --> 0:17:56.960 You know, the master planned communities are building out, but 0:17:57.440 --> 0:18:00.000 are there stores or brands that are ahead of McDonald 0:18:00.240 --> 0:18:02.640 in that effort to populate it. 0:18:02.640 --> 0:18:05.960 It's such an interesting point because they are still earlier 0:18:06.000 --> 0:18:09.040 than many other brands, but they are not as early 0:18:09.080 --> 0:18:11.800 in these spots as they once would have otherwise been. 0:18:12.359 --> 0:18:15.399 Oftentimes McDonald's is one of the first businesses to open 0:18:15.840 --> 0:18:19.240 in places like this. They aren't the earliest. We see 0:18:19.560 --> 0:18:22.160 forty some McDonald's in the Dallas area in the past 0:18:22.240 --> 0:18:25.880 few years, but the population there has been absolutely exploding, 0:18:26.359 --> 0:18:30.080 so they're still ahead of the full wave. But they 0:18:30.119 --> 0:18:34.520 were not the very earliest pioneers in these places where 0:18:34.680 --> 0:18:36.320 many people would have expected them to be. 0:18:36.800 --> 0:18:37.200 Christina. 0:18:37.240 --> 0:18:39.439 I know you traveled to North Texas for this story. 0:18:39.680 --> 0:18:42.760 My question is, where's Texas putting all these people? Are 0:18:42.800 --> 0:18:45.240 they just building houses in the middle of the desert somewhere. 0:18:45.840 --> 0:18:48.080 The houses are just popping up. When I was there, 0:18:48.080 --> 0:18:49.720 I would talk to people who had moved to the 0:18:49.760 --> 0:18:54.399 area weeks or even days earlier. They're an enormous number 0:18:54.400 --> 0:18:57.840 of houses being built, and they're expanding. The Dallas North Tollway, 0:18:58.200 --> 0:19:02.040 which goes north from Dallas. Slina, where I went, was 0:19:02.040 --> 0:19:05.200 about fifty minutes away, and that highway is going to 0:19:05.240 --> 0:19:07.680 reach there by twenty twenty seven. So you see, as 0:19:08.080 --> 0:19:11.240 transit gets easier, as it's faster to get to these places, 0:19:11.359 --> 0:19:12.600 more and more people are moving there. 0:19:14.000 --> 0:19:17.920 So a company like McDonald's is massive, and I imagine 0:19:17.960 --> 0:19:20.840 that a goal to get to fifty thousand restaurants takes 0:19:20.840 --> 0:19:24.560 some time to play out. So the fact that it's 0:19:24.680 --> 0:19:27.679 doing all this, is this a move now to expand 0:19:27.760 --> 0:19:30.119 in response to conditions that it spotted. I don't know, 0:19:30.200 --> 0:19:32.680 a year ago, or three years ago or five years ago. 0:19:32.720 --> 0:19:35.560 I'm just wondering how quickly McDonald's can decide on something 0:19:35.840 --> 0:19:37.359 and then execute on it. 0:19:38.720 --> 0:19:41.080 Yeah, I mean this is definitely years in the making. 0:19:41.840 --> 0:19:44.800 Being convenient as a cornerstone of their strategy, and I 0:19:44.840 --> 0:19:48.679 think they've just had to reconfigure where that convenience is, 0:19:48.840 --> 0:19:52.280 where the people are. They have a very extensive team 0:19:52.320 --> 0:19:55.399 that follows demographics other people in the industry watch to 0:19:55.440 --> 0:19:59.120 see where McDonald's open. We spoke to an executive who 0:19:59.200 --> 0:20:01.600 had previously been at Chipotle, and she said she knew 0:20:01.600 --> 0:20:03.720 when there were three McDonald's in an area, they were 0:20:03.720 --> 0:20:07.320 ready for other restaurants. So they're very sophisticated with these 0:20:07.400 --> 0:20:08.480 kinds of calculations. 0:20:09.160 --> 0:20:12.479 Any early feedback on how some of these new stores 0:20:12.480 --> 0:20:12.920 are doing. 0:20:13.880 --> 0:20:16.399 Yeah, we looked at third party data that showed that 0:20:16.440 --> 0:20:20.000 these stores are not quite as busy as more established 0:20:20.000 --> 0:20:24.240 stores and denser areas. McDonald's told us it typically takes 0:20:24.280 --> 0:20:26.480 two or three years for a new location to catch 0:20:26.560 --> 0:20:31.000 up on traffic with older stores, and they see positive signs. 0:20:31.320 --> 0:20:34.280 So it could be that as these cities become more populous, 0:20:34.359 --> 0:20:38.520 these McDonald's will become more frequently visited. And it was 0:20:38.600 --> 0:20:42.359 interesting other businesses in these Texas towns said they weren't 0:20:42.400 --> 0:20:45.800 being cannibalized by McDonald's opening. There's just a lot of 0:20:45.800 --> 0:20:48.520 business for everyone where cities are growing as fast as 0:20:48.520 --> 0:20:48.920