WEBVTT - Bloomberg Businessweek Weekend - November 30th, 2019 0:00:02.520 --> 0:00:06.200 This is Bloomberg Business Week from Bloomberg Radio. Hi, I'm 0:00:06.280 --> 0:00:08.879 Jason Kelley and I'm Carol Masser. Welcome to the Bloomberg 0:00:08.920 --> 0:00:12.840 Business Week Weekend podcast. As you know, it's a double issue, 0:00:12.960 --> 0:00:15.680 so we've got some more stories from the issue that's 0:00:15.680 --> 0:00:19.119 currently on newsstands and online. I love it. There's so 0:00:19.160 --> 0:00:21.480 many deep dives into different companies. One has to do 0:00:21.600 --> 0:00:24.439 with Amazon. What's going on at that company. They're spending 0:00:24.560 --> 0:00:27.440 a ton of money on lobbying efforts in the nation's 0:00:27.480 --> 0:00:31.560 capital also locally, but it's not necessarily having the impact 0:00:31.600 --> 0:00:33.199 that they thought it might. Also going to talk a 0:00:33.240 --> 0:00:36.320 little bit about Warby Parker. It's a company that we 0:00:36.440 --> 0:00:39.880 followed for a long time. Austin Carr wrote that story. 0:00:39.960 --> 0:00:43.519 We had an interesting conversation with him, and so it's 0:00:43.520 --> 0:00:46.479 another thing for you to feast on. In this post 0:00:46.600 --> 0:00:49.080 Thanksgiving edition, they're eyeing a new business. How do you 0:00:49.120 --> 0:00:51.760 like that? Oh boy, the puns. The puns are fast 0:00:51.800 --> 0:00:54.279 and furious. Also one of my favorite stories. You might 0:00:54.360 --> 0:00:58.720 be thinking about traveling. You may be traveling right now, amtrack. Uh, 0:00:58.760 --> 0:01:01.800 They've got a Channel Jing road ahead of them. As 0:01:01.800 --> 0:01:05.679 it were. A new CEO man, he means business plus 0:01:05.720 --> 0:01:08.600 Google at war. It's the cover story. The search giant 0:01:08.640 --> 0:01:11.679 wants the military business, but many of his employees do not. 0:01:12.000 --> 0:01:14.280 All right, that's a great story and a very good 0:01:14.280 --> 0:01:17.880 deep dive. But first up, private equity continuing to look 0:01:17.880 --> 0:01:20.399 for ways to put massive amounts of money to work 0:01:20.760 --> 0:01:24.240 could lead to the biggest leverage buyout of all time. 0:01:24.480 --> 0:01:28.080 We're talking about KKR and Walgreens. Twenty nineteen has been 0:01:28.080 --> 0:01:29.680 an interesting one when it comes to deals in the 0:01:29.680 --> 0:01:32.240 public and private markets, and there's one that's out there 0:01:32.240 --> 0:01:34.759 in the news that combines both markets. We're talking about 0:01:34.840 --> 0:01:38.920 KKR approaching drugstore giant Walgreen's Boots Alliance about a deal 0:01:38.959 --> 0:01:41.120 to take the company private. It would be the biggest 0:01:41.160 --> 0:01:44.000 ever leveraged buyout. Well, as you know, I'm obsessed with 0:01:44.040 --> 0:01:47.319 this story for so many reasons, and very proud of 0:01:47.360 --> 0:01:50.920 the team here at Bloomberg for breaking news on this continuously. 0:01:51.240 --> 0:01:53.760 It's a fast moving story, we should point out, but 0:01:53.840 --> 0:01:56.400 we wanted to take a step back with Nabilla Ahmed 0:01:56.520 --> 0:01:59.320 because she has some great insights in the magazine this 0:01:59.360 --> 0:02:02.200 week about how this all came about and maybe what 0:02:02.280 --> 0:02:04.560 it means for the broader market. She's here where us 0:02:04.600 --> 0:02:11.640 in New York City? So wow, this is potentially a 0:02:11.720 --> 0:02:14.520 huge deal. The fact that we're even talking about it 0:02:14.560 --> 0:02:17.400 seems important. How did this all? How do we get here? 0:02:17.520 --> 0:02:19.320 I think we traveled back in time and it's two 0:02:19.360 --> 0:02:22.920 thousand and seven. Guys, we've gone back in time. Look, 0:02:22.960 --> 0:02:25.000 how did we get here? As we know, private equity 0:02:25.040 --> 0:02:28.079 has so much money to put to work. I think 0:02:28.080 --> 0:02:31.000 it's something like more than two trillion now. Just in 0:02:31.040 --> 0:02:34.400 the past couple of years, it's doubled so much money. 0:02:34.440 --> 0:02:37.960 So they're looking at increasingly bigger and more complicated deals 0:02:38.480 --> 0:02:40.640 to sort of have a bit of an edge, looking 0:02:40.639 --> 0:02:43.560 at industries that they know about, looking at companies they 0:02:43.600 --> 0:02:46.880 have already worked with. And this is Westefano Pissina comes in. 0:02:47.120 --> 0:02:49.560 He is a CEO of Walgreens and he is an 0:02:49.560 --> 0:02:54.320 incredible maverick, an incredible dealmaker. He started off with a struggling, 0:02:54.560 --> 0:02:58.760 one single, struggling drug wholesaler in Naples in nineties seventies. 0:02:59.040 --> 0:03:01.120 It's a shop that his dad gave him to fix it. 0:03:01.600 --> 0:03:03.560 And he fixed that business, and he went on to 0:03:03.600 --> 0:03:07.240 fix his dad's friends businesses. Then he expanded to Spain 0:03:07.280 --> 0:03:10.160 and France and in the UK and now he is 0:03:10.280 --> 0:03:14.200 leading the biggest drug store retailer in the world. How 0:03:14.200 --> 0:03:16.600 did you get there? Though? That's interesting. She talked about 0:03:16.600 --> 0:03:20.120 really starting kind of at you know, ground level, the 0:03:20.120 --> 0:03:21.960 ground level here, and how did he get there to 0:03:22.000 --> 0:03:25.120 the point where he was involved with Walgreens and also Boots. 0:03:25.639 --> 0:03:29.000 So he sold his UK company to Alliance Boots and 0:03:29.040 --> 0:03:31.240 then he did a deal with KKR to take that 0:03:31.320 --> 0:03:35.560 company private. Eventually they went on to buy Walgreens here 0:03:35.560 --> 0:03:38.200 in the US and they have actually made over the 0:03:38.280 --> 0:03:42.240 nine year association, him and KKR out of that deal 0:03:42.560 --> 0:03:45.400 have made three times their money. They started off with 0:03:45.480 --> 0:03:48.360 two point one billion dollars, they made seven billion for 0:03:48.360 --> 0:03:52.120 their investors. It's gone really, really well. And so it's 0:03:52.160 --> 0:03:55.800 no surprise then that when KKR dealmakers are looking around 0:03:55.840 --> 0:03:58.000 and saying, no, what's out there to buy? We got 0:03:58.040 --> 0:04:01.800 this part of money. What do we know what might 0:04:01.840 --> 0:04:05.800 be a little bit undervalued, maybe not distressed quite but 0:04:05.920 --> 0:04:10.920 certainly not distressed exactly. If not distressed, a little bit stressed. Uh. 0:04:10.960 --> 0:04:13.600 And this is a guy we know. K CA are 0:04:13.680 --> 0:04:17.600 well known for sort of cultivating these managers. I guess 0:04:18.480 --> 0:04:20.240 now that we've dealt with the equity side. Let's go 0:04:20.279 --> 0:04:23.200 to the debt side, because the leverage and the leverage 0:04:23.200 --> 0:04:26.760 buyout means you've got to borrow in this case tens 0:04:26.800 --> 0:04:29.720 and tens of billions of dollars. Is that even possible? 0:04:30.080 --> 0:04:31.760 That's the thing. Analysts is saying that you're going to 0:04:31.880 --> 0:04:35.720 need about fifty billion dollars zero five zero of debt 0:04:35.880 --> 0:04:38.520 for this company. Not for no reason? Is it the 0:04:38.560 --> 0:04:42.280 biggest buyout in history? Would it be? And there are 0:04:42.360 --> 0:04:45.240 questions about whether that can actually be raised in the 0:04:45.320 --> 0:04:47.960 leverage loan market, which has traditionally been the market where 0:04:48.080 --> 0:04:51.200 M and A buyouts are funded. Because people are starting 0:04:51.200 --> 0:04:53.960 to kind of push back. In the past few months, 0:04:53.960 --> 0:04:56.599 you've seen the single B rated, which is where most 0:04:56.720 --> 0:04:59.599 M and A loans are rated. People are selling those 0:04:59.640 --> 0:05:01.599 off because people are starting to get a bit worried 0:05:01.640 --> 0:05:06.200 about riskier assets and they're gravitating more towards investment grade. 0:05:06.320 --> 0:05:08.400 So if they were to do this deal, they would 0:05:08.440 --> 0:05:11.920 have to do some kind of financial engineering, some kind 0:05:11.960 --> 0:05:14.800 of cool clever things to make it happen. Well, and 0:05:14.880 --> 0:05:17.040 I do wonder do they have to pull in somebody 0:05:17.080 --> 0:05:19.120 else to help get that deal done? You know what 0:05:19.160 --> 0:05:21.279 it was so that maybe pulls in something on the 0:05:21.320 --> 0:05:23.760 equity side or something like would they need to could 0:05:23.760 --> 0:05:26.919 they pull in another person beyond KKR. We know that 0:05:27.000 --> 0:05:29.760 other private equity firms had also looked at all Greens, 0:05:30.000 --> 0:05:32.560 so there are probably others out there who could potentially 0:05:32.600 --> 0:05:36.040 partner with them, as I mean they would exactly there. Also, 0:05:36.160 --> 0:05:38.760 we know have been talking to their LPs so their 0:05:38.760 --> 0:05:41.479 fund investors about going in with them, because you know, 0:05:41.520 --> 0:05:44.240 pension funds and sovereign well funds also have a lot 0:05:44.320 --> 0:05:46.800 of money to put to work, So there are a 0:05:46.839 --> 0:05:48.760 lot of people looking at this deal. You know. I 0:05:48.800 --> 0:05:51.640 think they would need about thirty billion dollars of equity 0:05:51.680 --> 0:05:54.880 as well as the fifty billion dollars of debt. Yes, 0:05:55.080 --> 0:05:56.960 the other thing I think about is what happens to 0:05:57.040 --> 0:06:00.120 Walgreens even if this deal doesn't work out, right, they 0:06:00.160 --> 0:06:01.960 need to do something. It seems like, Yeah, they are 0:06:02.040 --> 0:06:05.040 definitely stressed. They are under so much pressure on a 0:06:05.120 --> 0:06:07.640 number of different fronts. They tried to do this buy 0:06:07.640 --> 0:06:10.080 out of Wright Aid a couple of years ago. They 0:06:10.080 --> 0:06:11.919 weren't able to do the deal at full scale that 0:06:11.960 --> 0:06:14.920 they wanted to do, so they're now closing some stores. 0:06:15.120 --> 0:06:16.920 They said that they're going to cut about one point 0:06:17.000 --> 0:06:19.760 eight billion dollars over the next couple of years. That's 0:06:19.760 --> 0:06:23.080 an annual save. So they're having to really scramble to 0:06:23.160 --> 0:06:25.880 figure out what's next. And that's Nobilla. I'med great to 0:06:25.920 --> 0:06:27.880 catch up with her. She's on the M and A beat, 0:06:27.920 --> 0:06:30.920 the Deal's beat, and man, this one has really caught 0:06:30.960 --> 0:06:34.480 people's attention. The size, the scope, the names involved, fascinating, 0:06:34.520 --> 0:06:37.520 pretty remarkable. We'll see how it ends up. Spending heavily 0:06:37.600 --> 0:06:41.080 unlobbing efforts in Washington Check lobbing more US government entities 0:06:41.080 --> 0:06:43.760 than any other technology company. Yet they've got that one covered. 0:06:43.800 --> 0:06:46.120 To lobbing locally, Jason, they're doing that as well. They're 0:06:46.120 --> 0:06:48.479 doing it all well. Amazon. Were used to them being 0:06:48.640 --> 0:06:52.280 ubiquitous and comprehensive in many ways. Eric Newcomer is here 0:06:52.320 --> 0:06:54.919 with us. He's got a great story in this week's 0:06:55.040 --> 0:06:59.240 edition of the magazine. It's about Amazon on K Street, 0:06:59.360 --> 0:07:04.480 the famous abbying corridor there hasn't gone so well. They 0:07:04.520 --> 0:07:07.160 also hasn't gone so well in some of these local races, right, 0:07:07.160 --> 0:07:09.920 So they spend a ton of money on lobbying, you know, 0:07:10.000 --> 0:07:12.960 four million dollars in a quarter. I think they lobbied 0:07:13.040 --> 0:07:16.440 more than on more issues than any tech company. Last year, 0:07:16.840 --> 0:07:19.280 they spent about one point five million just on their 0:07:19.360 --> 0:07:23.880 local Seattle race. So Amazon is flooding politics with money. 0:07:23.920 --> 0:07:26.360 But then you know, as I documented, the story has 0:07:26.400 --> 0:07:29.600 a lot of problems, like issue to issue, just really 0:07:29.640 --> 0:07:32.600 struggling sort of with this tech lash and to to 0:07:32.720 --> 0:07:35.080 win the political battles with all that money. So is 0:07:35.080 --> 0:07:36.840 it the company at large has problems or there are 0:07:36.760 --> 0:07:39.160 a few individuals who really have some problems. Well, the 0:07:39.200 --> 0:07:41.680 company is a business obviously is doing great. But then 0:07:42.040 --> 0:07:46.240 you know Jay Karney runs, you know, former Obama Press secretary, 0:07:46.440 --> 0:07:49.520 runs this huge policy shop with his deputy, this guy 0:07:49.800 --> 0:07:54.720 Brian Hughesman, former Publican Administration, Federal Trade Commission lawyer, and 0:07:54.720 --> 0:07:56.800 and together they've really tried to staff up so they're 0:07:56.840 --> 0:07:58.720 ready to fight and so on a lot of issues, 0:07:58.840 --> 0:08:01.200 you know, whether it's like trade wars. You know they 0:08:01.240 --> 0:08:04.120 have somebody in talking to the administration trying to lobby. 0:08:04.200 --> 0:08:06.720 But then on some of these bigger, more iconic issues, 0:08:06.720 --> 0:08:08.480 you know, we talked about the move to New York, 0:08:08.520 --> 0:08:11.480 We could talk about Seattle, We could talk about this 0:08:11.680 --> 0:08:15.360 huge Jedi contract where Amazon was competing to win a 0:08:15.440 --> 0:08:19.400 ten billion dollar government contract, and then Microsoft came out 0:08:19.400 --> 0:08:22.040 of nowhere and took it from them. So so Amazon 0:08:22.080 --> 0:08:24.480 has had just a lot of trouble on the policy front. Well, 0:08:24.480 --> 0:08:28.080 and it's interesting too, because you document very well a 0:08:28.160 --> 0:08:31.520 number of these cases which you which you just described 0:08:32.679 --> 0:08:37.280 in brief. But what strikes me too is that on paper, 0:08:37.320 --> 0:08:38.960 it looks like they did all the right things. They 0:08:39.040 --> 0:08:41.599 hire a big time Democrat, they hire a big time Republican, 0:08:41.800 --> 0:08:44.199 they've got the team in place, and then and this 0:08:44.240 --> 0:08:47.640 feels very twenty nineteen, it's a bunch of unforced errors 0:08:47.679 --> 0:08:49.800 in a lot of ways that ultimately sort of set 0:08:49.840 --> 0:08:51.560 them back. Tell us about that, right, So if we 0:08:51.640 --> 0:08:55.679 take you know, Jay Carney, this very polished communicator, I 0:08:55.679 --> 0:08:58.440 think coming you know, he's hired during the Obama administration 0:08:58.440 --> 0:09:00.840 when it seems like Hillary Clinton might win. And again 0:09:01.320 --> 0:09:04.440 Amazon takes, you know, responding to Trump tweets, a sort 0:09:04.480 --> 0:09:10.080 of almost hostile posture towards Trump, then Trump exactly during 0:09:10.080 --> 0:09:13.480 the campaign, and then Trump selected and so they Bezos 0:09:13.559 --> 0:09:18.320 and Trump have this very negative relationship, partially because Bezos 0:09:18.360 --> 0:09:21.320 owns the Washington Post. Then they have a Democrat as 0:09:21.320 --> 0:09:23.840 their chief sort of spokesman. So that's a challenge, and 0:09:23.880 --> 0:09:27.800 then time passes and Carney has now more recently given 0:09:27.840 --> 0:09:31.120 an interview where he suggested that there weren't any patriots 0:09:31.200 --> 0:09:35.120 working in the Trump administration unlike the Obama and Bush administrations, 0:09:35.160 --> 0:09:38.880 which he apologized for. He made this really bad tweet 0:09:38.920 --> 0:09:42.360 about umpires during the National Games, which so he's just 0:09:42.600 --> 0:09:46.200 had some challenges as sort of the public voice of Amazon. 0:09:46.640 --> 0:09:49.560 And then the other character is this guy, Brian Hughesman, 0:09:49.559 --> 0:09:53.560 who's sort of the inside operator and he staffed up 0:09:53.600 --> 0:09:55.760 this team. But there's just been a lot of drama 0:09:55.800 --> 0:09:59.280 internally well. And that's what's interesting because right you're seeing 0:09:59.280 --> 0:10:01.400 the drama player within the company as well. So they've 0:10:01.440 --> 0:10:05.360 done apologies externally as well as having to apologize to 0:10:05.360 --> 0:10:08.560 everybody inside as well. Right, so with people questioning what 0:10:08.600 --> 0:10:11.760 they're doing exactly, you know, with Carney, he wrote an 0:10:11.800 --> 0:10:15.680 email titled self criticism to his staff just talking about 0:10:15.679 --> 0:10:19.000 the umpire tweets, reflecting that he's not just some you 0:10:19.040 --> 0:10:23.400 know guy out on Twitter. He reflects this global powerhouse 0:10:23.400 --> 0:10:25.720 of a company. And when can I just can I 0:10:25.800 --> 0:10:28.880 read that tweet um calling the umpires quote a bunch 0:10:28.920 --> 0:10:32.280 of overweight, diabetic, half blind geriatrics. He ended his tweet 0:10:32.320 --> 0:10:35.480 with a call to bring in the machines, right, And 0:10:35.720 --> 0:10:37.880 you know, obviously the first half is what everyone is 0:10:37.920 --> 0:10:40.760 upset about. But then for a company that's accused all 0:10:40.760 --> 0:10:43.760 the time of automation, it's just very strange to be 0:10:43.840 --> 0:10:47.000 hitting a message of you know, automating out the umpire 0:10:47.080 --> 0:10:49.480 Like in every way the tweet is just odd. Where's 0:10:49.520 --> 0:10:51.400 Jeff Bezos and all of this? I mean, these are 0:10:51.440 --> 0:10:54.600 his key people here. I mean, he's you know, very 0:10:54.640 --> 0:10:56.959 behind the scenes, and I think, given his ownership of 0:10:57.000 --> 0:11:00.520 The Washington Post, has wanted to take a more or 0:11:01.320 --> 0:11:04.560 you know, confrontational or at least sort of strong position 0:11:04.559 --> 0:11:07.600 against Trump. And and you know that that he's picked 0:11:07.600 --> 0:11:09.800 Carney to sort of be a guide. But the basis 0:11:09.840 --> 0:11:12.040 is very behind the scenes. I mean, it's it's hard 0:11:12.080 --> 0:11:15.440 to know exactly what the CEO is thinking about, you know, 0:11:15.480 --> 0:11:17.600 the small sort of the in fighting within in his 0:11:17.720 --> 0:11:20.720 DC office. And so Eric White the aperture for us 0:11:20.800 --> 0:11:23.680 a little bit because you look across the tech landscape 0:11:24.080 --> 0:11:27.280 you understand how these companies work, not just Amazon, but 0:11:27.559 --> 0:11:32.199 you know the whole array. I guess of social media companies, 0:11:32.240 --> 0:11:34.880 tech companies who all of a sudden really have to 0:11:34.880 --> 0:11:37.760 care more about Washington, in part because Washington is all 0:11:37.800 --> 0:11:39.960 of a sudden caring a lot about them, and maybe 0:11:40.000 --> 0:11:41.480 not in a good way. Yeah, I'm growing tired of 0:11:41.480 --> 0:11:43.280 the phrase. But we're in a tech clash, right, That's what. 0:11:43.520 --> 0:11:46.480 And there's you know, an anti trust investigations, the Federal 0:11:46.559 --> 0:11:49.360 Trade Commission, the Department of Justice, that was, judiciary committee, 0:11:49.600 --> 0:11:53.000 state attorneys general, you know, everybody is investigating big tech companies, 0:11:53.040 --> 0:11:58.600 including Amazon, into ant trust. They're the punching bag. And 0:11:58.679 --> 0:12:02.160 so that's the situation Amazon faces. You know, in my story, 0:12:02.240 --> 0:12:05.600 I talk about a lobbyists who uh, you know, has 0:12:05.600 --> 0:12:08.559 a generally positive view of Amazon, sort of defending them, saying, 0:12:08.760 --> 0:12:10.480 you know, some of the problems are just they've you know, 0:12:10.920 --> 0:12:13.560 grown so much. I think they doubled sort of the 0:12:13.559 --> 0:12:16.719 lobby staff over the last three years, so that's part 0:12:16.760 --> 0:12:19.000 of the reason. But he says Amazon might have trouble, 0:12:19.040 --> 0:12:21.520 but they're doing better than Google and Facebook, and I 0:12:21.559 --> 0:12:23.520 think that is a sort of fair defense. You know, 0:12:23.600 --> 0:12:25.920 I don't dig in to Google and Facebook. That has 0:12:25.960 --> 0:12:28.800 a whole another dive, but there is a general sense 0:12:28.840 --> 0:12:31.920 that the tech companies in general are struggling to respond 0:12:32.360 --> 0:12:35.920 because as much as the President himself has gone after 0:12:36.080 --> 0:12:39.679 Jeff Bezos, we haven't seen Jeff Bezos testifying on Capitol Hill. 0:12:39.960 --> 0:12:42.200 We have seen Mark Zuckerberg and Charles sand you know, 0:12:42.280 --> 0:12:45.920 so there is this element that despite some of the 0:12:45.960 --> 0:12:51.360 headwinds that you describe, that maybe they're doing okay. Yeah, well, 0:12:51.440 --> 0:12:54.719 and some of the problems are relative. Yeah, I think 0:12:54.800 --> 0:12:57.760 definitely when it comes to testifying front of Congress in general, 0:12:58.120 --> 0:13:03.000 sort of uh, sort of congress men animosity towards the CEO, 0:13:03.679 --> 0:13:06.840 Mark Zuckerberg is winning that fight in Bezos looks a 0:13:06.840 --> 0:13:09.440 lot better. But you know, Amazon has a lot of 0:13:09.559 --> 0:13:12.560 has had a lot of problems, like in Seattle, in 0:13:12.840 --> 0:13:15.280 New York, so they're not all sort of the federal 0:13:15.840 --> 0:13:18.360 like election type problems that Facebook has had. But I 0:13:18.400 --> 0:13:20.400 do think about as these big tech companies look to 0:13:20.440 --> 0:13:23.840 broaden out their revenue streams, you know, the cloud and 0:13:23.840 --> 0:13:27.479 particularly playing into those government contracts. Those are big deal contracts, 0:13:27.760 --> 0:13:30.679 And I mean I think about our audience investors. I mean, 0:13:30.679 --> 0:13:33.200 they're watching this to see whether or not they're able 0:13:33.240 --> 0:13:35.960 to make some inroads, right, and you know, Jedi, This 0:13:36.040 --> 0:13:40.560 Defense Department contra isn't just about that ten billion dollar deals. 0:13:40.559 --> 0:13:43.200 It's sort of that's what's getting you in deeper with 0:13:43.240 --> 0:13:45.880 the Defense Department. And so I don't think it's just 0:13:46.280 --> 0:13:49.840 that amount of money. It's significant, but Amazon is a 0:13:49.960 --> 0:13:53.800 eight seventies something billion dollar market cap company, you know. 0:13:53.800 --> 0:13:56.800 But it's about the long term relationship that deerk newcomer 0:13:56.960 --> 0:13:59.640 love this story about what Amazon is up to. Their 0:13:59.679 --> 0:14:02.240 spending heavily and lobbing efforts in Washington. They're lobbing more 0:14:02.320 --> 0:14:05.920 US government entities at any other tech company. But it's interesting, Jason. 0:14:06.000 --> 0:14:08.319 It doesn't seem to be paying off. It's not working 0:14:08.320 --> 0:14:10.280 at all. You're exactly right, Carol. And this is coming 0:14:10.280 --> 0:14:13.480 at a time where the relationship between Washington and Silicon 0:14:13.600 --> 0:14:16.400 Valley and the words of Facebook, it's complicated, Jason. You 0:14:16.440 --> 0:14:19.760 had me at You're exactly right. So, Carol, I caught 0:14:19.880 --> 0:14:22.760 up with the co founders of Adams you see me 0:14:22.800 --> 0:14:25.200 where they're I have. I wanted to know the story 0:14:25.440 --> 0:14:28.200 underneath it, and I have to say it is even 0:14:28.240 --> 0:14:31.240 more fascinating than I thought. It's a husband and wife team. 0:14:31.360 --> 0:14:34.920 What Kassa Ali and Sidra Kassim. They met in their 0:14:35.000 --> 0:14:39.440 village in Pakistan. They came to Brooklyn via y Combinator. 0:14:39.640 --> 0:14:42.400 It's so cool. Here's your conversation, all right, So this 0:14:42.480 --> 0:14:45.320 is a shoe that I really like. I have to say, 0:14:45.360 --> 0:14:48.040 I'm a bit of a sneaker head and I love 0:14:48.200 --> 0:14:51.960 the different feel and just the whole different vibe of 0:14:51.960 --> 0:14:54.360 this shoe. So I'm a little bias coming into this interview. 0:14:54.760 --> 0:14:59.320 What I want to start with you because the story 0:14:59.800 --> 0:15:08.440 of this company Pakistan, y Combinator, Brooklyn. How did that happen? Um? 0:15:08.480 --> 0:15:10.640 It's it is a kind of crazy story and we 0:15:10.680 --> 0:15:13.320 did not intended it to be like this when we 0:15:13.320 --> 0:15:16.160 were starting off, We had no idea. We started our 0:15:16.200 --> 0:15:20.160 first two company in in our hometown in Pakistan, Kada, 0:15:20.680 --> 0:15:24.240 and then we kept going. It was a small project, 0:15:24.320 --> 0:15:28.000 became a kick Starter project. Then we applied into y Combinator. 0:15:28.280 --> 0:15:30.960 First shoe company to get into y Combinator, first company 0:15:31.000 --> 0:15:34.440 from Pakistan to get into y Combinator, and we moved 0:15:34.480 --> 0:15:39.160 to the US in San Francisco and So Sidro. Why 0:15:39.200 --> 0:15:41.400 do you think the pitch resonated so much? There are 0:15:41.400 --> 0:15:44.320 a lot of first there. What was it about this 0:15:44.360 --> 0:15:47.600 particular company? That you think caught the interests of Y 0:15:47.640 --> 0:15:51.080 Combinator and ultimately a lot of big name investors. Yeah, 0:15:51.120 --> 0:15:53.920 so this company is not part of Y Combinator. Our 0:15:54.000 --> 0:15:58.320 previous shoe company was part of Y Combat. But I 0:15:58.320 --> 0:16:02.040 think the exciting thing is that these shoes is not 0:16:02.200 --> 0:16:04.720 just a shoes. This is a very very personal shoes, 0:16:04.800 --> 0:16:09.600 like very comfortable, very durable, very breathable and as well 0:16:09.640 --> 0:16:13.760 as the fit is very precise for you. And uh, 0:16:13.840 --> 0:16:17.400 like when we were inviting our friends to try on 0:16:17.480 --> 0:16:21.080 the first sample, and I still remember like their impressions, 0:16:21.120 --> 0:16:24.200 like they were super super excited to try on the shoes. 0:16:24.560 --> 0:16:27.400 And we started this as a very small project and 0:16:28.200 --> 0:16:30.840 somehow like it started becoming bigger and bigger, and so 0:16:30.880 --> 0:16:34.600 what was the inspiration recast for this particular ship. So 0:16:34.600 --> 0:16:37.840 we were making and selling dress shoes already, we we 0:16:38.000 --> 0:16:39.960 and when we were in Pakistan, we had no idea 0:16:40.040 --> 0:16:43.760 that people are actually more mainly were sneakers every day. 0:16:43.800 --> 0:16:46.160 They don't wear dress shoes as much. Even that trend 0:16:46.240 --> 0:16:49.000 is declining, even you're wearing your atoms right now. Absolutely, 0:16:49.080 --> 0:16:51.200 so we noticed that and then we were like, hey, 0:16:51.280 --> 0:16:54.560 we weren't We both are very passionate about product, particularly 0:16:54.600 --> 0:16:57.560 in shoes. It's one of the hardest products to ever make. Shoes, 0:16:57.840 --> 0:17:00.720 very difficult, and we were like, hey, can we make 0:17:00.760 --> 0:17:03.240 a shoe that people would want to wear every day? 0:17:03.440 --> 0:17:05.919 Not that we want to sell. Can we build a 0:17:06.000 --> 0:17:08.720 shoe that people would want to wear every day? And 0:17:08.760 --> 0:17:12.199 that is where this idea of a casual very very simple. 0:17:12.359 --> 0:17:14.800 All the products we wear every single day, they tend 0:17:14.840 --> 0:17:18.520 to be very simple, still extremely extremely comfortable. We were 0:17:18.560 --> 0:17:21.240 going after the best of the bast in the industry 0:17:21.280 --> 0:17:24.439 after Nike, and it it doesn't comfort uh, And we 0:17:24.520 --> 0:17:26.720 only make one shoes, so we put a lot of 0:17:26.760 --> 0:17:30.680 effort into the precision sizing, the quarter sizing, the comfort 0:17:30.720 --> 0:17:33.919 of the shoes. The lace says how how high or 0:17:33.960 --> 0:17:38.840 how house small something is like this Midso it took 0:17:38.920 --> 0:17:41.040 us six months to work on that to just make 0:17:41.080 --> 0:17:43.480 it more comfortable than it does six months on the 0:17:44.080 --> 0:17:46.560 mids Earlieah, it was very It was one of the 0:17:46.600 --> 0:17:49.000 hardest things because if you only make one shoes and 0:17:49.040 --> 0:17:51.160 your pitch is that you're going to wear it every 0:17:51.200 --> 0:17:53.760 day when you make this one product, you can't just 0:17:53.920 --> 0:17:55.760 like compromise on that. You have to get it right. 0:17:55.800 --> 0:17:58.640 Otherwise you have no business, right of course, And so 0:17:58.760 --> 0:18:02.359 why is manufacturing so difficult for shoes? Because this is 0:18:02.400 --> 0:18:04.960 something you've worked on for a long time, You've worked 0:18:05.000 --> 0:18:08.919 in Korea, I believe on that particular aspect of the business. 0:18:09.000 --> 0:18:11.439 Why are shoes so difficult? I think one of the 0:18:11.480 --> 0:18:16.200 most important reason is you have all your body weight 0:18:16.480 --> 0:18:20.040 on the shoes, and then she would actually go into 0:18:20.080 --> 0:18:23.280 different environment like you sit in the office, with different 0:18:23.280 --> 0:18:27.040 sitting positions. Some people they stand a lot, some people 0:18:27.080 --> 0:18:30.560 they walk a lot. So basically shoes is not just 0:18:30.640 --> 0:18:34.520 like a simple product like your handbag where you store things. 0:18:35.080 --> 0:18:37.639 She was as something which basically you carry on throughout 0:18:37.680 --> 0:18:40.159 the day from morning to evening. So that's why, like 0:18:40.240 --> 0:18:44.080 making a product which is basically accommodate your throughout the 0:18:44.160 --> 0:18:47.080 day and as well as super comfortable, it is very 0:18:47.119 --> 0:18:48.760 hard to make. I guess I've never really thought about that. 0:18:48.760 --> 0:18:51.040 I mean, there's a lot of physics involved, I guess 0:18:51.040 --> 0:18:53.000 in our interaction with shoes in a way that we 0:18:53.080 --> 0:18:55.640 don't have with a lot of other products. So why 0:18:55.680 --> 0:18:57.960 do you think, especially having been in the dress shoe 0:18:57.960 --> 0:19:00.960 business and now in the sneaker business, why are sneakers 0:19:01.000 --> 0:19:04.560 having such a moment. Mainly it is because of a 0:19:04.560 --> 0:19:07.960 lot of cultural icons are the face of this movement. 0:19:08.200 --> 0:19:11.399 That is one part America especially and world in general 0:19:11.480 --> 0:19:13.399 is becoming more and more passionate because we have so 0:19:13.400 --> 0:19:15.760 many young people coming into the world these days, and 0:19:15.800 --> 0:19:19.680 they are they are not hesitant. They're not hesitant about ideas, 0:19:19.680 --> 0:19:22.680 they're not hesitant about movement, They're not hesitant about their 0:19:22.920 --> 0:19:26.720 interest or passion about certain celebrities or icons or whatever 0:19:26.760 --> 0:19:28.479 we want to call them. So that is like what 0:19:28.560 --> 0:19:30.320 we we learned. We actually have a name for our 0:19:30.359 --> 0:19:33.240 customer called the new creative, and these are people who 0:19:33.240 --> 0:19:36.320 are very considerate about what they buy, where they buy 0:19:36.359 --> 0:19:39.439 it from, what things look like. And every brand like 0:19:39.520 --> 0:19:42.440 Nike and ADI does they championed with sportsmanship. And now 0:19:42.480 --> 0:19:46.840 we're seeing a lot more uh entertainment, a lot more lifestyle. 0:19:47.080 --> 0:19:50.320 And that's wakas Ali and Sidric has seen the husband 0:19:50.359 --> 0:19:54.000 and wife team behind Adams. It was so cool to 0:19:54.040 --> 0:19:55.560 catch up with them. I have to say, I love 0:19:55.560 --> 0:19:58.639 their sneakers. I wanted to meet them. I really didn't 0:19:58.640 --> 0:20:01.200 know what to expect and it was an amazing story, 0:20:01.280 --> 0:20:04.440 great story, Jason and I love the backstory to about 0:20:04.520 --> 0:20:07.240 this company and these two individuals. It's this week's Bloomberg 0:20:07.240 --> 0:20:10.520 Business Week Extra podcast, So check it out. Everyone. Google 0:20:10.600 --> 0:20:12.959 the early years, all about the company's search engine, all 0:20:13.000 --> 0:20:16.720 about online advertising, and yet the company hitting middle age Jason, 0:20:16.720 --> 0:20:19.199 so it's looking for some different revenue streams. Well, we 0:20:19.359 --> 0:20:23.359 talk a lot about sort of existential questions around companies. 0:20:23.520 --> 0:20:26.919 I feel like this story hits at Google's in a 0:20:26.960 --> 0:20:29.280 lot of ways. Don't be evil that was back in 0:20:29.320 --> 0:20:32.160 the day and now in the business with the military 0:20:32.200 --> 0:20:34.040 trying to figure out what they're going to be, as 0:20:34.040 --> 0:20:36.560 you say, in middle ages, and that they get grow 0:20:36.680 --> 0:20:39.160 more and more grown up. Joshua Brucine here with us. 0:20:39.200 --> 0:20:42.240 It's a terrific story and I love the headline it 0:20:42.359 --> 0:20:45.320 had me from that Google and the general tell us 0:20:45.359 --> 0:20:49.159 about this intersection that this tech company Silicon Valley is 0:20:49.200 --> 0:20:54.000