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Speaker 2: This is Bloomberg business Week inside from the reporters and
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Speaker 2: Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 3: Now, let's get to a stock that is definitely really
Speaker 3: a company that's on our mind today.
Speaker 4: Tim, Yeah, sure's Apple right now, hired by about three
Speaker 4: tenths of one percent. It's a company we uh one.
Speaker 4: We all hit on in the headlines yesterday when this
Speaker 4: Bloomberg exclusive crossed. We talked about it and talked about
Speaker 4: it and talked about it and what might be could
Speaker 4: be perhaps the next big thing in Apple. Carol, we're
Speaker 4: talking personal robots that maybe could follow you around the house.
Speaker 4: They do the long other things.
Speaker 3: If they do work, I'm in all right. We wanted
Speaker 3: to know more. Back with us on at exclusive is
Speaker 3: Bloomberg News Chief technology correspondent Mark German. He's out there
Speaker 3: in our la be k. Mark so laid out for
Speaker 3: us what exactly is Apple exploring and how far along
Speaker 3: are they in this process?
Speaker 1: Yeah, thank you both so much for having So let
Speaker 1: me take you back to twenty nineteen Doug Field, who
Speaker 1: now runs the electric vehicle division at Ford. He joins
Speaker 1: Apple to run its electric car project, and one secret
Speaker 1: team within the larger electric car group is a team
Speaker 1: dedicated to robotics devices. They were working on drones that
Speaker 1: essentially were silent. That was a really cool thing they
Speaker 1: looked at. They ended up mixing that and then they
Speaker 1: were also looking at personal robotics. Now that took a
Speaker 1: back went to the back burner for many years, but
Speaker 1: now the company is seriously looking at personal robotics in
Speaker 1: the home. Two main devices that they've been looking at,
Speaker 1: one that originated many years ago is a tabletop device.
Speaker 1: It's essentially a gigantic ipadcted to a robotic arm, and
Speaker 1: it can follow the head movements of someone you're on
Speaker 1: a FaceTime call with. So if I nod my head
Speaker 1: or shake my head or laugh haha, right, the iPad display,
Speaker 1: you can move on the robotic arm. Yes, iPad display
Speaker 1: will move on the robotic arm to mimic those movements.
Speaker 1: If I was on a FaceTime call with the other person,
Speaker 1: to make them feel like I'm, you know, maybe in
Speaker 1: the room with them, even though it is an iPad
Speaker 1: mimicking my head. The other thing, perhaps more interesting, is
Speaker 1: the idea of a robot, a humanoid robot, even that
Speaker 1: can follow you around your home, can be a video
Speaker 1: conferencing telepresence device, and even one pie in the sky
Speaker 1: idea that maybe will never come to fruition or maybe
Speaker 1: a decade or two from now, could actually do chores
Speaker 1: for you, such as cleaning the dishes before you put
Speaker 1: the dishwasher.
Speaker 3: Yes, yeah, I thinking Jetsons. That's what I'm thinking that robot.
Speaker 4: I would I would argue that, you know, of all
Speaker 4: the things that you mentioned in terms of use cases,
Speaker 4: the one I think that would be most compelling to
Speaker 4: people would be an assistant around the house to actually
Speaker 4: help with those things that we have to do each
Speaker 4: and every day, like unloading the dishwasher, doing dishes, cooking.
Speaker 5: And the like.
Speaker 4: That seems to me, I mean, I don't want to
Speaker 4: dismiss anything that Apple's working on outright, but that seems
Speaker 4: to me pretty far fetched in years away. Here. What's
Speaker 4: the timeline that we're talking about here?
Speaker 1: Well, One it is far fetched. Two, it may never happen.
Speaker 1: Three These are ideas that are being floated around. They're
Speaker 1: looking what is the technology landscape look like ten years
Speaker 1: from now. You see Tesla with Optimist Prime, you see
Speaker 1: other companies doing early explorations into the robot space, and
Speaker 1: so that's what they're doing.
Speaker 6: Right.
Speaker 1: These are research projects. These are not formal consumer product
Speaker 1: development processes. These are still in the very early infant
Speaker 1: research phases. So if these ever come to fruition, this
Speaker 1: could be a decade from now. Don't forget the length
Speaker 1: of the car project was really a decade long before
Speaker 1: they ended up killing it. They did make a lot
Speaker 1: of headway in the last couple of years or so,
Speaker 1: I'd say, so I think this is pipe dream stuff,
Speaker 1: but certainly the market is interesting. What Apple's looking at
Speaker 1: and what it's exploring, and they're sort of planting a
Speaker 1: flag in the robotic space.
Speaker 3: Now gotta say, Mark love my room to love that
Speaker 3: it cleans up the floors. I already talked to a
Speaker 3: digital home assistant like this just feels like from somebody
Speaker 3: I could see that if it really could do stuff,
Speaker 3: how people would adopt it. But it also I also
Speaker 3: wonder kind of about the cost of it and how
Speaker 3: expensive it would be.
Speaker 5: I mean, I don't know.
Speaker 1: I mean it could be anything. It could be ten
Speaker 1: thousand dollars, it could be twenty thousand dollars, right, I
Speaker 1: mean the robotics equipment to create a device that can
Speaker 1: be a human and act like a human, those things
Speaker 1: are going to be extraordinarily expensive. If the Apple headsets
Speaker 1: thirty five hundred dollars, the amount of technology that goes
Speaker 1: into this could be tens of thousands of dollars. Now,
Speaker 1: the thing to note here, I mean this is basically
Speaker 1: a semi diluted version of the engine they were working
Speaker 1: on for the car. If you think about it as
Speaker 1: self driving car is the ultimate robot would be a
Speaker 1: robot that's not going to be on city streets. This
Speaker 1: is going to be a robot that's going to be
Speaker 1: in your home. And if you think about it, repurposing
Speaker 1: that technology at much lower stakes makes sense. Profit margins
Speaker 1: are different in the home versus on the road. The safety,
Speaker 1: more importantly, is very different. You're not at risk of
Speaker 1: this so called robot running someone over or getting you killed.
Speaker 1: You're at risk of the robot running into your new
Speaker 1: chair and damaging maybe the bottom of your chair or
Speaker 1: a new couch or something.
Speaker 4: That dogs dogs and cats, maybe Mark, until it starts
Speaker 4: throwing plates at you and it gets frustrated.
Speaker 6: Hey.
Speaker 4: Mark. The backdrop of this, though, of course, is looking
Speaker 4: for the next big revenue generator for Apple. And you
Speaker 4: write about this, and you write about the different products
Speaker 4: and how much revenue they've brought in based on the
Speaker 4: year that they were introduced. So talk a little bit
Speaker 4: about how Apple is looking for something to essentially augment
Speaker 4: revenue from the iPhone as iPhone sales slow down and
Speaker 4: people upgrade slower.
Speaker 1: You know, I would say that Apple really only has
Speaker 1: one ecosystem today, It's the iPhone. Everything is built around
Speaker 1: the iPhone. I would argue even the Mac and the
Speaker 1: iPad are part of the iPhone universe. Right, You probably
Speaker 1: own a Mac and an iPad or a Vision Pro
Speaker 1: or whatnot because you own an iPhone. You can take
Speaker 1: out the word probably for the Apple Watch and AirPods
Speaker 1: because those really only work with the iPhone. So it's
Speaker 1: one hundred percent if you own an Apple Watch or
Speaker 1: in AirPods, it's because you own an iPhone. All these
Speaker 1: Apple services that exist, Apple Music, Fitness Plus, Arcade, et cetera,
Speaker 1: it's because you own an iPhone. What they need to
Speaker 1: do is create subsequent ecosystems, new ecosystems.
Speaker 6: They don't have one other than the iPhone, so they
Speaker 6: need to.
Speaker 1: Find that the car would have been that. It's unclear
Speaker 1: what else could create its own ecosystem other than a car,
Speaker 1: and robots in the home could be the closest thing.
Speaker 1: And so that's why it's a particularly interesting area.
Speaker 3: Hey, Mark, just thirty seconds here. How much of this
Speaker 3: is kind of part of their focus another focus at
Speaker 3: the company, which is artificial intelligence. This kind of what
Speaker 3: folds into this and plays into this a little bit.
Speaker 1: Well, if you think about it, a robot is the
Speaker 1: ultimate expression in terms of hardware of artificial intelligence. A
Speaker 1: robot is an AI powered device. A self driving car
Speaker 1: would be an AI powered device. So if this comes
Speaker 1: to market, whether it's the tabletop device sooner or a
Speaker 1: personal robot fifteen years from now, those are AI devices,
Speaker 1: and those would essentially be the first from Apple.
Speaker 3: Bottom line, though it may never happen. Ten seconds.
Speaker 1: Bottom line, it may never happen, but it's interesting that
Speaker 1: they're looking at it. And I will say I do
Speaker 1: think maybe the personal robot may not happen, but there
Speaker 1: will be an Apple robotic based device happen in the
Speaker 1: next five to ten.
Speaker 6: Years for sure.
Speaker 3: Right, well, cool stuff as always, Bloomberg News Chief technology
Speaker 3: correspondent Markerman on his exclusive you can read more. Just
Speaker 3: head to the Bloomberg terminal or a Bloomberg dot com.
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Speaker 5: All right, ti, So when you think of Nvidia and Microsoft,
Speaker 5: definitely the poster childs when it comes to the AI frenzy,
Speaker 5: But as you know, there are many others that have
Speaker 5: been trying to scale AI for well over a decade,
Speaker 5: so it might surprise you. Maybe not, but wireless carriers
Speaker 5: like Verizon, so the excitement over AI is happening at
Speaker 5: the same time as the rise of five G. So
Speaker 5: while this may surprise people, Verizons AI engines actually in
Speaker 5: just more than seventy billion data points off the network
Speaker 5: every single day, and that kind of massive volume does
Speaker 5: provide a big opportunity empowering AI models, but it also
Speaker 5: comes with a host of challenges. So joining us. Now
Speaker 5: in the Bloomberg Interactive Broker Studio is Craig Silliman, president
Speaker 5: of Verizon Global Services, to chat with us on how
Speaker 5: the company is using AI, automation and robotics to tackle
Speaker 5: labor challenges. Thanks so much for joining us. It's great
Speaker 5: to have you here.
Speaker 7: How are you?
Speaker 6: Thanks, Jeess, great to be here, and Tim appreciate you
Speaker 6: inviting me.
Speaker 5: We'll walk us through this when it comes to Verizon
Speaker 5: and sort of the parallels when it comes to what
Speaker 5: your company has been doing over the past decade in
Speaker 5: relation to AI and also five G and what this
Speaker 5: means really moving forward.
Speaker 2: Yeah.
Speaker 6: Absolutely, we As you mentioned, everyone right now is talking
Speaker 6: about generality of AI, right that's the thing hitting the headlines.
Speaker 6: But AI has been around for a long time, and
Speaker 6: we've been working with AI now for more than a decade.
Speaker 6: We have more than three dozen AI use cases in
Speaker 6: production in our customer service centers, in our stores, in
Speaker 6: our supply chain. So we've been working on this for
Speaker 6: a while. We continue to refine, we continue to improve it.
Speaker 4: So as a customer of Verizon, whether it's I'm a
Speaker 4: FiOS customer, whether I use Rising for business, whether I
Speaker 4: use Arising, wireless. How am I seeing the manifestation of
Speaker 4: these investments in AI.
Speaker 6: First, thank you. I hope you are customer tim so
Speaker 6: thank you for that.
Speaker 4: Yes, yes, yes, thank you.
Speaker 6: Well, keep it looking to win you over. You know
Speaker 6: you're going to see it in a number of ways
Speaker 6: where you may it may be transparent to you. In fact,
Speaker 6: if we do our job well, it will be transparent
Speaker 6: to you. What we're trying to do constantly is use
Speaker 6: AI to take work away from our employees that's more
Speaker 6: tedious or that's not high value add for you, the customer,
Speaker 6: so that they can focus on you. So we want
Speaker 6: our employees doing the things that humans do best and
Speaker 6: let the AI do things that they do best. Would
Speaker 6: it be customer service at this point? Is a chat?
Speaker 5: Absolutely?
Speaker 6: So if you call it into our customer service reps today.
Speaker 6: In the background, we're going to have a number of
Speaker 6: AI use cases going on. First of all, we have
Speaker 6: intelligent call routing so that we know what you're calling
Speaker 6: in about and we can match you with an agent
Speaker 6: with the skill sets best match to serve your needs. Secondly,
Speaker 6: as you're talking to the agent, the AI is serving
Speaker 6: up in real time information for the agent about what
Speaker 6: they need to answer your So.
Speaker 4: The AI is listening to my voice and sort of
Speaker 4: perhaps coming up with answers to questions that people who've
Speaker 4: spoken things similarly to whe I'm speaking have asked about.
Speaker 6: That's exactly right. And if you think about the number
Speaker 6: of permutations, the number of devices we sell, the number
Speaker 6: of plans we have, there are hundreds of pages of
Speaker 6: material available to our customer service agents to answer your questions.
Speaker 6: We don't want them going through that while they're trying
Speaker 6: to listen to you, So the AI will get clear
Speaker 6: and synthesize it for the agent so they can get
Speaker 6: very quickly to exactly the answer that you need. So
Speaker 6: what you're going to see as a customer is quicker
Speaker 6: time of response and more relevant answers to your questions.
Speaker 5: So does this basically sidestep even if you have some
Speaker 5: maybe simple questions where you don't end up having to
Speaker 5: talk to a customer service rep and you can just
Speaker 5: use the AI to get the answers that you want.
Speaker 6: Yeah, great question, justin And as we continue evolve the models,
Speaker 6: what we want to get to is that you can
Speaker 6: interact directly with We all have chatbots today, but we
Speaker 6: want to make those chatbots far more robust, so they
Speaker 6: give you a more relevant, relevant answer. Of course, once
Speaker 6: you're interacting directly with an AI as a customer, we
Speaker 6: have to make sure we get that right. We take
Speaker 6: very seriously our responsibility to our customers. We all know
Speaker 6: the stories about AIS that have gone rogue, and so
Speaker 6: we do a lot of testing to make sure that
Speaker 6: we get that right before you're interacting directly with an AI.
Speaker 4: We've talked to Earn Mark German a lot about he's
Speaker 4: chief technology correspondent here writes a lot about Apple breaks
Speaker 4: pretty much every big story about Apple about how a
Speaker 4: company like Apple is going to start using AI and
Speaker 4: handsets over I mean, look for asen wireler's a huge
Speaker 4: part of your business. How are you thinking about the
Speaker 4: hardware side of this, the side that you don't control,
Speaker 4: and what that means for your network when there is
Speaker 4: AI in our handsets used in real time.
Speaker 6: Obviously, all of the device manufacturers are big partners of ours,
Speaker 6: so we're in constant conversation with what they have coming out.
Speaker 6: But more from our perspectives we think about the network.
Speaker 6: There are a couple aspects of AI. First, just mentioned
Speaker 6: this stat we're ingesting seventy billion data points off the
Speaker 6: network every single day, and running those through analytics engines
Speaker 6: that we can not only do kind of descriptive analytics
Speaker 6: what's happened and diagnostic analytics of why did it happen,
Speaker 6: but predictive and prescriptive analytics what's going to happen next?
Speaker 6: Where do we see the growth of the network. Where
Speaker 6: do we need the engineers getting ahead of the builds.
Speaker 6: We're using AI to make sure the network stays ahead
Speaker 6: of the usage, but we're also looking at use cases
Speaker 6: as all of us, as consumers use more and more AI,
Speaker 6: we expect that to drive further usage of the network.
Speaker 5: Can you expand more about specifically the data points? When
Speaker 5: you're talking about seventy billion, where are you getting that data?
Speaker 6: So every time you're walking around, driving around the streets,
Speaker 6: your device is constantly communicating with the network and what
Speaker 6: we're looking at there on an aggregated basis. It's not
Speaker 6: personal to you on it, but an aggregated basis.
Speaker 4: Where we spend a lot of time at the office,
Speaker 4: you work way too much.
Speaker 6: We're device. This is on an aggregated and anonymized basis.
Speaker 6: But the data session, how are you communicating with the tower.
Speaker 6: Are we seeing congestion? Are you seeing certain parts of
Speaker 6: the times of the day that certain cell sites are
Speaker 6: getting more congested so that our engineers can get out
Speaker 6: ahead of that and build out capacity things like that.
Speaker 6: Are we seeing certain usage patterns that are driving changes
Speaker 6: in the network And we've seen that over the last
Speaker 6: couple of years changing usage patterns as through COVID drove
Speaker 6: a lot of that shifts from urban environments to more
Speaker 6: rural and that helps us get ahead of the build At.
Speaker 4: The end of the day, Does any of this matter
Speaker 4: for customers serve customer acquisition for getting more people to
Speaker 4: sign up for Verizon.
Speaker 6: Service, Absolutely, because customers are looking for reliability in their connection.
Speaker 6: We all live our lives on these devices, we run
Speaker 6: our businesses on these devices, so we're all looking to
Speaker 6: say how reliable is this? So our ability to get
Speaker 6: ahead of the bill to make sure we're meeting customer
Speaker 6: needs before you ever know that need is there will
Speaker 6: absolutely lead to customer acquisition.
Speaker 5: What's the top question you get from customers related to
Speaker 5: this right now?
Speaker 6: The top question is probably can you do away with
Speaker 6: customers service agents altogether and.
Speaker 4: Just go to AI really get that they don't want
Speaker 4: to put it to people.
Speaker 6: Well, actually it's a great question to but actually know
Speaker 6: they ask that more in a worried way. They're worried
Speaker 6: that we're going to move completely to AI, right, And
Speaker 6: so what we're saying is we really don't see that.
Speaker 6: We see AI as an assist to our employees, not
Speaker 6: a replacement. It makes them more effective. It lets them
Speaker 6: focus on the most rich human parts of their job.
Speaker 6: And we think that'll be good for customers, because customers
Speaker 6: want someone with empathy who's listening to them, but who's
Speaker 6: assisted by all this great new technology.
Speaker 4: I do not want the humans to be gotten rid
Speaker 4: of I promise you that, Craig Silliman, President of Rising
Speaker 4: Global Services. Here in our Bloomberg Interactive at Brokers Studios.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Listen live
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Speaker 2: New York station, Just Say Alexa Play Bloomberg eleven thirty Well.
Speaker 4: Dave Calhoun took over in January of twenty twenty for
Speaker 4: ousted Boeing CEO Dennis Muhlenberg, who downplayed design defects that
Speaker 4: killed three hundred and forty six people when the maxis
Speaker 4: flowed software crashed two planes. Yet four years later, Calhoun
Speaker 4: is out. In addition to losing more than twenty three
Speaker 4: billion dollars during his four years as CEO, Boeing lost
Speaker 4: the trust of flyers, the patients of airline customers, and
Speaker 4: the indulgence of regulators. As our next guest writes, now
Speaker 4: that Calhoun is leaving by year's end, Boeing has also
Speaker 4: lost the fiction that Calhoun was ever the right leader
Speaker 4: to fix the company, and over the long run, that
Speaker 4: could be a good thing. Peter Robinson is Projects and
Speaker 4: investigations reporter for Bloomberg News. He's also the author of
Speaker 4: the New York Times Business bestseller Flying Blind, The seven
Speaker 4: thirty seven max Tragedy and the Fall of Boeing. Peter
Speaker 4: joins us here in the Bloomberg Interactive Broker's Studio. His story,
Speaker 4: by the Way, co written with Julie Johnson, and it's
Speaker 4: featured in the new issue of BusinessWeek magazine, available now
Speaker 4: on newsstands, on the Bloomberg Terminal and at bloomberg dot
Speaker 4: Com slash business Withek Peter. Good to see you here
Speaker 4: in New York. Usually you're out in Seattle, So awesome
Speaker 4: to have you here. This piece not just a great
Speaker 4: overview of Calhoun's failed time at Boeing, but also a
Speaker 4: history of really where the problems at Boeing began. But
Speaker 4: what I want to talk about is that key decision
Speaker 4: back in twenty eleven when the company decided that instead
Speaker 4: of building a brand new airplane, what they were going
Speaker 4: to do is re engineer A seven thirty seven for
Speaker 4: the fourth time.
Speaker 8: Yeah, it is a really key moment, and it's what
Speaker 8: set off what we're seeing now, which seems like a
Speaker 8: recent implosion. And Boeing really had this same choice even
Speaker 8: back in the nineteen nineties. At that time, Airbus had
Speaker 8: stolen a big order. And one of the things I
Speaker 8: write about in my book was a meeting that Boeing held,
Speaker 8: and it was a meeting at that time to say,
Speaker 8: should we, you know, should we match the A three twenty.
Speaker 8: The E three twenty has some advancements in the cockpit
Speaker 8: that provide more more integrated electronic features to the pilots,
Speaker 8: and the cabin is wider, and Boeing said at the time,
Speaker 8: you know, I talked to one former executive Boeing, Gordon Bethune,
Speaker 8: who also ran Continental, and he recalled that he thought
Speaker 8: to himself, you know, maybe, you know, maybe we should
Speaker 8: get a jump on Airbus here and get ahead of this.
Speaker 8: And he was leaning toward voting for an all new plane,
Speaker 8: but he knew that the manager of the seven thirty
Speaker 8: seven factory didn't want that. It's hard to update a factory.
Speaker 8: There's all these sunk costs and tooling, so he voted for,
Speaker 8: you know, doing an update at that time, and the
Speaker 8: vote was five to three. Boeing did an updated seven
Speaker 8: thirty seven, and then again, as you said, in twenty eleven,
Speaker 8: Americans stole this big order and Boeing faced the same choice.
Speaker 8: It had just come out of a very expensive development
Speaker 8: project on the seven eighty seven and didn't have much
Speaker 8: appetite for an all new plane, and so it went
Speaker 8: with the updated seven thirty seven, which has not proved
Speaker 8: of sales success, you know, and that's an understatement against
Speaker 8: the airbus plane.
Speaker 5: Walk us through that key decision back in twenty eleven
Speaker 5: and how we got to where we are now, there.
Speaker 8: Were meetings held in the summer in Dallas secretly with
Speaker 8: Airbus execs and American Airlines execs, and they met at
Speaker 8: a hideaway hotel in Dallas where they didn't think that
Speaker 8: Boeing's on site sales rep would see them, and they
Speaker 8: successfully negotiated a big deal for a three twenties and
Speaker 8: that was a huge coup for Airbus because it was
Speaker 8: a takeaway for Airbus. They didn't at that time American
Speaker 8: Airlines didn't have a three twenties. Boeing was surprised, I
Speaker 8: you know understand that, you know, the head of Boeing
Speaker 8: Commercial Airplanes was upset that his on site sales team
Speaker 8: didn't warn him about this, and Boeing had publicly said
Speaker 8: it didn't. You know, there was no pressure to do
Speaker 8: an all new plane. It could get to that. So
Speaker 8: Boeing reacted by making a short term decision which allowed
Speaker 8: to hold onto market share. And in the long run,
Speaker 8: as we're seeing it's it's cost Boeing quite substantially.
Speaker 4: So we get here to twenty twenty four. By the
Speaker 4: end of the year, Calhoun will be out or perhaps
Speaker 4: sooner if they do come to an agreement. I guess
Speaker 4: the board has to decide on a new CEO to
Speaker 4: what extent is a new plane that would compete with
Speaker 4: the Airbus A three twenty in Boeing's future, something that's
Speaker 4: that's completely a brand new plane.
Speaker 8: But Boeing had at one time, even late in Dennis
Speaker 8: Muhlenberg's tenure, Boeing had a plane called the new middle
Speaker 8: market airplane on its drawing board. It would go right
Speaker 8: after this center of the market, the bread and butter
Speaker 8: roots that a lot of us fly on. And it,
Speaker 8: you know, with the max crisis of the two crashes,
Speaker 8: pulled away from that. So really the debate now is
Speaker 8: between you know, continuing the same strategy, which is cut
Speaker 8: eventually return cash to shareholders, or invest in new products.
Speaker 8: Boeing has really slowed its pace in product investment. So
Speaker 8: a number of analysts, one of them is Bank of
Speaker 8: America's Ron Epstein, says that it would be costly, but
Speaker 8: in the long run it would be beneficial for customers
Speaker 8: beneficial twenty dollars or more, and and but investors would
Speaker 8: hate it. But over the long run they're they're going
Speaker 8: to hate even more. Boeing steadily losing market shared air bus.
Speaker 5: How does Boeing fix this.
Speaker 8: The people that I've talked to say it really starts
Speaker 8: with fixing the culture to be more about collaboration. There's
Speaker 8: a real tension at Boeing between speed and efficiency, which
Speaker 8: has been a focus of their managers, who often come
Speaker 8: from the ge school of management and safety and doing
Speaker 8: things right. And many people have talked to say that
Speaker 8: Boeing in the old days had multiple layers, they had
Speaker 8: multiple checkofs. Their were coordination that added costs, but there
Speaker 8: was a recognition that over the long run that would
Speaker 8: save money because it will be done right and you
Speaker 8: wouldn't have to go back into the airplane and fix
Speaker 8: things later.
Speaker 4: Well, one of those executives from the Jack Welch school
Speaker 4: is of course Calhoun, Dave Calhoun. And one thing that
Speaker 4: was interesting to me and big takeaway from your piece
Speaker 4: that's in the new issue of Bloomberg BusinessWeek, is the
Speaker 4: difference in the way that he talked about regulators publicly
Speaker 4: and especially in recent months, versus what he did behind
Speaker 4: the scenes. Can you talk a little bit about what
Speaker 4: you've learned about Dave Calhoun over the last four years
Speaker 4: and the way his management style was portrayed.
Speaker 8: Yeah, I thought That was interesting to read as I
Speaker 8: was looking at the history of his statements on regulation
Speaker 8: versus what he said immediately after the crash. Immediately after
Speaker 8: the crash, he spoke to employees and encourage them to
Speaker 8: be very open with regulators. He said, I trust every
Speaker 8: step they'll take.
Speaker 4: Is this the January This is after the Yeah Max crash.
Speaker 8: He was on the board for the crashes, so this
Speaker 8: was after the panel. This was soon after the panel
Speaker 8: blow out in January at the seven thirty seven factory,
Speaker 8: and he pledged openness and trust of regulators. But over
Speaker 8: the years in his career he had said something very different.
Speaker 8: He gave an interview that I mentioned in the story
Speaker 8: with Maria Bartiromo and Fox Business in twenty sixteen where
Speaker 8: he said of it was a conversation about government regulation
Speaker 8: and taxes with the theme that it was hammering business,
Speaker 8: and he said it's just not helpful. I view governance
Speaker 8: in general is just slowing everything down. And there was
Speaker 8: also a meeting in November twenty twenty two and he
Speaker 8: talked about, you know, just the fact that and he
Speaker 8: was recognizing that Boeing was in a different moment and
Speaker 8: needed to be open with regulators. And he said, you know,
Speaker 8: let them, let them do all the discovery they need,
Speaker 8: no matter how inefficient you think it is. So it
Speaker 8: felt like he was revealing a bit of his thinking there.
Speaker 5: When you think of the two biggest companies when it
Speaker 5: comes to aerospace, obviously you have Boeing, but then you
Speaker 5: have Airbus. Where's Airbus at this point as a competitor
Speaker 5: When you have the top.
Speaker 8: Two there, Airbus has become what Boeing was when I
Speaker 8: first started covering aerospace in the late nineteen nineties. Airbus
Speaker 8: has sixty percent plus of the commercial market. It is
Speaker 8: in narrow bodies. As we talked about, you know, just
Speaker 8: really you know, putting Boeing behind. I've you know, one
Speaker 8: analyst I've talked to you said that in a natural market,
Speaker 8: if Airbus wasn't constrained by delivery slots, the market share
Speaker 8: might be seventy five twenty five Airbus the A three
Speaker 8: twenties is just the preferred narrowbody at this point.
Speaker 4: How damaging we have thirty seconds left? How damaging is
Speaker 4: this whole debacle to its customer which I remind everyone
Speaker 4: are the airlines not us.
Speaker 8: The customers are suffering because they can't put on the
Speaker 8: extra flights they were looking for, so it's causing them.
Speaker 4: Is having to do It's pretty wild.
Speaker 8: Yeah, it's I mean, traffic is back, but the airplanes
Speaker 8: are not.
Speaker 4: Hey, Peter, A great piece co written with Julie Johnson,
Speaker 4: who covers aerospace and airlines as well, and Boeing too.
Speaker 4: It's in the new issue of BusinessWeek magazine. It's available
Speaker 4: on newstands on the Bloomberg Terminal a at Bloomberg dot
Speaker 4: com slash BusinessWeek. Peter Robinson is Projects and investigations reporter
Speaker 4: for Bloomberg News. He's also the author of the New
Speaker 4: York Times Business bestseller Flying Blind be seven thirty seven,
Speaker 4: Max Tragedy and The Fall of Boeing.
Speaker 8: M Marco.
Speaker 7: A journal.
Speaker 3: Now about you, let me drive?
Speaker 5: Oh no, no, no, no, honey, please, I'll gravel.
Speaker 3: I want to drive.
Speaker 2: Life's champ time. This is the drive to the clothes trim.
Speaker 2: Think we'll drive out. Shout it on on Bloomberg Radio.
Speaker 5: All right, Jessminton and Tim Stenovic heir the Bloomberg Interactive
Speaker 5: Broker Studio. With just under twenty minutes left to go
Speaker 5: before the closing bell. If you do quick check here
Speaker 5: on the s and P five hundred and the NASAC
Speaker 5: one hundred both down over one percent, So that would
Speaker 5: be the first time the S and P five hundred
Speaker 5: would see a decline of that magnitude tim in about
Speaker 5: a month. But I have to also point out just
Speaker 5: down about two percent from its all time high. But
Speaker 5: who better to check in with the latest on the
Speaker 5: market movements here heading into the closing bell than Garghee Chowdery,
Speaker 5: chief investment in portfolio strategist for America's at black Rock,
Speaker 5: who's joining us on zoom in New York City. Thanks
Speaker 5: so much for joining us ahead of the closing bell here,
Speaker 5: break down what you think is sort of turning here
Speaker 5: in the last hour of trade and why we're seeing
Speaker 5: stocks give up their early gains from this morning.
Speaker 7: Had that good afternoon, Tim and Jess, I think a
Speaker 7: couple of things that's booking investors out just a little bit.
Speaker 7: Number one, I think there was some hawkish comments out
Speaker 7: from a couple of Fed speakers, just this idea that
Speaker 7: the Fed may not need to go at all this year.
Speaker 7: I think that's certainly something just based on the timing
Speaker 7: of when the market turned. Number one. Number two in
Speaker 7: this I think is more important is the price action
Speaker 7: and oil prices obviously Brent crude make it going back
Speaker 7: significantly moving significantly higher today. That is something that is
Speaker 7: adding a quote unquote fuel because there was already this
Speaker 7: concern around sticky inflation, and now, of course, if you
Speaker 7: do have oil prices continuing to turn meaningfully higher, if
Speaker 7: Middle East tensions continue to, you know, get even worse.
Speaker 7: Investors are considering what that might mean for consumers, what
Speaker 7: that might mean for interest rates, and of course, as
Speaker 7: a result of those two, what that might mean for
Speaker 7: investment returns in the stock market.
Speaker 4: Yeah, argue when that happened during our two o'clock hour
Speaker 4: on the program, we had Michael McKee on, and he
Speaker 4: made the point that well, one the Fed can't do
Speaker 4: much at if anything, about oil prices, and two they're
Speaker 4: much more interested in the second order effects of the
Speaker 4: way that they move, that a price increase in oil
Speaker 4: and energy would actually move throughout the economy and mess
Speaker 4: with their inflation goals of getting inflation down to two percent.
Speaker 4: Is this move in energy in your opinion? Could this
Speaker 4: be a sustained move higher?
Speaker 7: I think that's the really important question, right, So if
Speaker 7: this is a move that we experience and then we
Speaker 7: sort of come back down to levels that we have
Speaker 7: been in for the last quarter of twenty twenty three.
Speaker 7: I think that's fine, and that's certainly something that both
Speaker 7: the FED and the equity market will look through. But
Speaker 7: if this is something more pernicious, if we are getting
Speaker 7: back towards that or even if there's a fear of
Speaker 7: getting back towards that one hundred dollars price oil level,
Speaker 7: that can be problematic for a couple of reasons. Look,
Speaker 7: of course, the FED looks at core PCE, we know that,
Speaker 7: but higher prices can make their way into core inflation
Speaker 7: as well, because, as we know, every type of good
Speaker 7: that you purchase or service that you've experienced, such as
Speaker 7: an airline ticket for example, has an embedded energy cost
Speaker 7: associated with it. So that is something that we have
Speaker 7: to consider. So the sustainability of this energy rally is important.
Speaker 7: The second thing I think is pretty important is the
Speaker 7: strength of the consumer. So so far growth expectations in
Speaker 7: the US have been so immensely helpful for earnings growth
Speaker 7: as well as, of course, for how consumer sentiment has
Speaker 7: been and consumer sentiment is often driven by what consumers
Speaker 7: are paying at the gas station. I think if that
Speaker 7: is something that continues to move higher, I think sentiment
Speaker 7: is going to be definitely driven, and how consumers feel
Speaker 7: about spending going into the second half of the year,
Speaker 7: especially if interest rates remain high, can be a concern.
Speaker 7: Now I will say that our our base case isn't
Speaker 7: for this to change the FED spot, but I think
Speaker 7: the risk has just risen.
Speaker 4: You know, it's so interesting that you talk about sentiment
Speaker 4: because there's like it's so visceral going in pumping gas
Speaker 4: and you know, you know how much you're paying single time.
Speaker 4: So that's something that certainly the consumer pays attention to. Hey,
Speaker 4: I just want to jump in with a redhead crossing
Speaker 4: the Bloomberg terminal. Toma Bravo targeting a Toma Bravo targeting
Speaker 4: to raise about twenty billion dollars for its next flagship
Speaker 4: buyout fund. According to people with knowledge of the matter,
Speaker 4: the Tech Focus firm discussing commitments to Toma Bravo fund
Speaker 4: XV one LP with potential investors. That's according to the
Speaker 4: people who ask not to be identified discussing confidential information.
Speaker 5: Okay, Gargie, we're only about four trading days into the
Speaker 5: new quarter, but what are you advising your clients to
Speaker 5: buy and sell after we obviously saw a big rally
Speaker 5: around ten percent in the S and P five hundred
Speaker 5: in the first quarter.
Speaker 7: Short thing, Jess, I think, you know, we just came
Speaker 7: out with our Q two outlook earlier this month. The
Speaker 7: focus there is for investors to focus on quality in
Speaker 7: their equity portfolios. So what do I mean by quality?
Speaker 7: We think that companies that have stable earnings growth, companies
Speaker 7: that have a lot of free cash flow, and most
Speaker 7: importantly have low financial leverage. What are those companies that
Speaker 7: are going to Yeah, some of those well, some of
Speaker 7: those companies are the big tech names that you hear,
Speaker 7: some of them are in the healthcare sector, and some
Speaker 7: of them are in the financial sector. It's really not
Speaker 7: about the sector or the industry, but it's really very
Speaker 7: very stock specific and focusing on you know, we think
Speaker 7: investors can access that through a tech qual which has
Speaker 7: some of those companies in it that have those earnings
Speaker 7: growth that are screened for higher earnings growth and stable
Speaker 7: and low financial leverage. So I think that's one way
Speaker 7: that investors can focus on for the remainder of twenty
Speaker 7: twenty four. I also think that in a world where
Speaker 7: growth remains solid and inflation, though sticky, is still come
Speaker 7: continuing to come down, and the FED most likely cuts
Speaker 7: rates at least two times this year. In that world,
Speaker 7: you want to be focused on earning income within your
Speaker 7: fixed income portfolio. So again, keeping where you own duration
Speaker 7: really matters, So keeping that interest rate sensitivity in that
Speaker 7: five year or shorter part of the curve, but earning
Speaker 7: income in higher quality parts of the fixed income market
Speaker 7: also make a lot of sense. So I think, remain invested,
Speaker 7: remain up in quality, clip some coupon, focus on sectors
Speaker 7: like tech as well as you know, financials, if you
Speaker 7: want to look away from that growth area of the
Speaker 7: market and look at a little bit of the value
Speaker 7: areas that we think can still do well, and then
Speaker 7: clip some coupon in the fixed income markets. That's what
Speaker 7: we're telling investors to do right now.
Speaker 5: We only have about forty five seconds left. But you
Speaker 5: mentioned financials, which does have not only big banks in regionals,
Speaker 5: but you do have fintech companies and insurers. We're within financials, do.
Speaker 7: You like, Yeah, So what we're telling investors to do
Speaker 7: is actually stay again in the higher quality part of
Speaker 7: the financials market. So the ticker that we're recommending investors
Speaker 7: is IAI, but really focusing on those large banks and
Speaker 7: brokers where we think the impact of capitol markets reopening,
Speaker 7: the uh steepening of the yield cub all of that
Speaker 7: will come into play. So focus on communications services and
Speaker 7: quality and tech, but also bar well with financials, but
Speaker 7: up in quality.
Speaker 4: Gargy, We're gonna have to leave it there. Thank you
Speaker 4: so much for joining us this afternoon. Gargi Chowdery, chief
Speaker 4: investment and portfolio strategist America's at black Rock, joining us
Speaker 4: from New York City.
Speaker 5: This is the.
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Speaker 1: Mm hmm