WEBVTT - Bloomberg Businessweek Weekend - August 26, 2022 0:00:01.040 --> 0:00:05.440 This is Bloomberg Business Week Inside from the reporters and 0:00:05.559 --> 0:00:09.200 editors who bring you America's most trusted business magazine, plus 0:00:09.240 --> 0:00:13.160 global business finance and tech news As it happened. Bloomberg 0:00:13.240 --> 0:00:16.759 Business Week with Carol Messier and Bloomberg Quick Takes Tim 0:00:16.800 --> 0:00:21.400 Stinovic on Bloomberg Radio. Hi, everyone, Welcome to the weekend 0:00:21.520 --> 0:00:25.279 edition of Bloomberg Business Week. Jackson Hole fed J Powell 0:00:25.360 --> 0:00:27.760 all top of mind for the news room this past week, 0:00:28.080 --> 0:00:30.040 and coming up, we're gonna actually zoom out a bit 0:00:30.120 --> 0:00:32.639 for a look at how inflation and the economic slowdown 0:00:32.680 --> 0:00:35.599 have impacted the business world this summer, and really all 0:00:35.640 --> 0:00:38.440 of us consumers. We'll also get a pulse check on 0:00:38.479 --> 0:00:41.720 the venture capital space and dig into the retail sector 0:00:41.760 --> 0:00:45.360 with the CEO of Petco. Plus our cover story details 0:00:45.400 --> 0:00:49.040 the causes and devastating effects of a contaminant found in 0:00:49.040 --> 0:00:52.680 a Michigan baby formula plant earlier this year. It plays 0:00:52.720 --> 0:00:57.080 into the ongoing nationwide shortage, so troubling on many, many levels. 0:00:57.200 --> 0:00:59.360 All right, all of that and more to come. We begin, though, 0:00:59.400 --> 0:01:02.920 with the sun me of shut offs, surging electricity prices 0:01:02.920 --> 0:01:06.000 spurring the worst ever crisis in late utility payments. It 0:01:06.040 --> 0:01:08.440 was a Bloomberg big take from this past week. You 0:01:08.440 --> 0:01:10.560 can also find it in the economic section of the 0:01:10.600 --> 0:01:13.680 new issue of Bloomberg Business Week magazine that is out 0:01:13.720 --> 0:01:16.520 now on newsstands, online at Bloomberg dot com, and of course, 0:01:16.600 --> 0:01:20.200 on the Bloomberg terminal. Will Wade, Mark Chettiac and Ben 0:01:20.240 --> 0:01:23.440 Holland wrote the piece. Will is Bloomberg News Power and 0:01:23.480 --> 0:01:26.600 Renewable Energy editor, and he joins us, Now, well, it's 0:01:26.600 --> 0:01:28.640 good to have you with us. So this is something 0:01:28.680 --> 0:01:32.160 that some twenty million US households are dealing with right now. 0:01:32.240 --> 0:01:34.920 That's about one in six American homes that are unable 0:01:34.959 --> 0:01:40.240 to pay surging electricity bills. Why well, the basic issues 0:01:40.280 --> 0:01:43.479 at the price of electricity keeps going up. It's about 0:01:43.800 --> 0:01:47.039 fift higher than it was a year ago, and it's 0:01:47.040 --> 0:01:49.560 probably gonna keep going up because it's all types of 0:01:49.640 --> 0:01:52.720 natural gas, and natural gas prices have doubled from a 0:01:52.800 --> 0:01:55.520 year ago. You know, it's interesting what I think about. 0:01:55.600 --> 0:01:58.160 And whenever I talk Will with our European colleagues, they're like, 0:01:58.200 --> 0:02:01.200 you know what, We've been dealing with this a while. Um, 0:02:01.280 --> 0:02:03.240 certainly because of the Russian War in Ukraine. Give us 0:02:03.240 --> 0:02:05.400 a little perspective as we kind of you know, even 0:02:05.480 --> 0:02:08.600 zoom out a little bit wider. You know, that's totally fair. 0:02:08.600 --> 0:02:11.440 It is too good to put it in a global context, 0:02:11.560 --> 0:02:13.440 because we're looking at this issue here in the United 0:02:13.440 --> 0:02:17.160 States and it's serious. But we're thinking here about people 0:02:17.200 --> 0:02:19.520 who can't afford to pay their bill, and if you 0:02:19.560 --> 0:02:22.080 go to Europe and Asia, there's places where they're worried 0:02:22.120 --> 0:02:25.560 about not having enough electricity to go around, especially come winter. 0:02:25.919 --> 0:02:29.320 It also comes at a time when, interestingly, enough government 0:02:29.360 --> 0:02:33.280 aid that happened during the coronavirus pandemic dried up. So 0:02:33.320 --> 0:02:37.080 what's the connection between a lack of government help and 0:02:37.120 --> 0:02:40.040 then an inability for so many millions of Americans to 0:02:40.040 --> 0:02:43.000 be unable to afford their bills. Well, during the pandemic, 0:02:43.080 --> 0:02:46.600 the government passed actually with state governments, many states had 0:02:46.680 --> 0:02:50.280 policies that said you can't shut off people's power, and 0:02:50.320 --> 0:02:52.400 that was because so many people were out of work. 0:02:52.840 --> 0:02:56.840 Most of those policies have ended, mostly towards the end 0:02:56.880 --> 0:02:59.200 of last year and the beginning this year. But then 0:02:59.240 --> 0:03:01.840 in a lot of states, especially if North there's winter, 0:03:01.880 --> 0:03:03.919 shut off marchor rams every year they say you can't 0:03:03.919 --> 0:03:07.200 shut off hypoles power when it's really cold, because literally 0:03:07.240 --> 0:03:10.600 people can die. So we're coming out of both of 0:03:10.639 --> 0:03:14.480 those things right into the spring. And in spring is 0:03:14.480 --> 0:03:18.280 when everybody started saying, wait, what's this inflation? Saying why 0:03:18.320 --> 0:03:21.520 is everything so much more expensive? So a few months 0:03:21.560 --> 0:03:24.040 down the road brings us to now, and that's when 0:03:24.080 --> 0:03:27.680 we're seeing people's bills have gotten high, people are behind 0:03:27.720 --> 0:03:31.040 on their bills, and utilities give people grace periods, and 0:03:31.120 --> 0:03:33.560 now they're like, well, the grace periods over, We're gonna 0:03:33.560 --> 0:03:35.400 have to start shutting people off. I guess say, well, 0:03:35.440 --> 0:03:37.120 with a story like this, what's great is you guys 0:03:37.200 --> 0:03:39.280 zoom out and then you zoom in and you talk 0:03:39.360 --> 0:03:43.600 about one family and one individual. Adrian nice Um tell 0:03:43.640 --> 0:03:45.360 us a little bit about when you start to really 0:03:45.760 --> 0:03:49.800 get to the granular level, like what jumps out for you. Well, 0:03:49.800 --> 0:03:52.320 I spoke to her several times while I was doing 0:03:52.320 --> 0:03:56.160 the reporting. She's forty five years old. She's a house cleaner. 0:03:56.280 --> 0:03:59.760 She was with her teenage son in Minneapolis, and she's 0:03:59.840 --> 0:04:02.080 just been really struggling. You know, she's a house cleaner. 0:04:02.120 --> 0:04:05.240 So in when the pandemic happened, one of the first 0:04:05.320 --> 0:04:08.080 things that happened as all our clients said, sorry, I 0:04:08.120 --> 0:04:11.160 don't want you to come over. She's been getting work 0:04:11.240 --> 0:04:13.440 coming back, you know, since in the past few months. 0:04:13.520 --> 0:04:16.800 But the meantime she had a utility bill that climbed 0:04:16.880 --> 0:04:20.240 up to like three thousands dollars. She was getting shot 0:04:20.240 --> 0:04:23.600 off notices from her local utility and she didn't have 0:04:23.760 --> 0:04:26.640 it write that even though a larger family lived in 0:04:26.839 --> 0:04:29.360 the same unit that she was in before, because electricity 0:04:29.440 --> 0:04:32.560 electricity prices have gone up so much. Just for her 0:04:32.560 --> 0:04:35.440 and her son, who weren't using ostensibly that much power, 0:04:35.800 --> 0:04:37.920 their bill was even higher just because of the rise 0:04:37.960 --> 0:04:40.960 in prices. Yeah, exactly. Last year she was sharing apartment 0:04:41.000 --> 0:04:43.440 with a friend and the friend had two children, and 0:04:43.480 --> 0:04:46.360 then the friend and her kids moved out, so there 0:04:46.360 --> 0:04:49.440 were two people instead of five people in the units. 0:04:49.440 --> 0:04:52.600 But the power bill is basically the same even with 0:04:52.760 --> 0:04:55.719 much less consumption, and of course she had to pay 0:04:55.720 --> 0:04:59.520 all of it herself. Natural gas really there's just not 0:04:59.640 --> 0:05:02.080 enough of to go around all around the world. The 0:05:02.160 --> 0:05:05.080 US is the biggest producer of gas in the world, 0:05:05.120 --> 0:05:08.280 but we export a lot, and if we chose to 0:05:08.360 --> 0:05:10.760 keep some here in the US, so prices would go 0:05:10.839 --> 0:05:15.239 down then there'd be more potential power shortages in Asia 0:05:15.240 --> 0:05:17.920 and Europe. You know, our friends over there really needed, 0:05:18.080 --> 0:05:22.120 especially since the war has completely upended the gas market. 0:05:22.520 --> 0:05:24.400 It reminds us of kind of how fragile things are, 0:05:24.520 --> 0:05:26.280 Like I think about will for such a long time 0:05:26.279 --> 0:05:29.320 in the US because of fracking and just a lot 0:05:29.400 --> 0:05:33.600 of development in the energy space um carbon fuel specifically 0:05:33.600 --> 0:05:35.440 here in the United States. That we talked about having 0:05:35.440 --> 0:05:37.760 a glut, right, it was natural gas was so cheap, 0:05:38.160 --> 0:05:43.880 but right, but how quickly unfortunately with the war Russian War, 0:05:44.040 --> 0:05:46.560 you know, and kin, how things have changed pretty quickly. 0:05:46.560 --> 0:05:50.239 And this has really hurt a lot of global pocketbooks, 0:05:50.279 --> 0:05:52.040 it really has. I mean I've been covering this for 0:05:52.080 --> 0:05:55.520 a long time, and just everything about the electricity market 0:05:55.680 --> 0:05:58.600 for years and years it was, well, gas is so cheap, 0:05:58.640 --> 0:06:00.960 we can't compete with this. Let's when we see nuclear 0:06:00.960 --> 0:06:04.520 power plants closing. But gas was like two or three 0:06:04.560 --> 0:06:07.920 bucks for years and years. Hit ten bucks a couple 0:06:07.960 --> 0:06:10.120 of days ago. I think it was mind something now, 0:06:10.240 --> 0:06:14.280 so it's just crazy. In Europe, especially Germany, you hear 0:06:14.320 --> 0:06:17.560 people saying, well, they want to stop using Russian gas, 0:06:17.600 --> 0:06:19.760 but if they stop using Russian gas. Then they got 0:06:19.760 --> 0:06:23.160 to get it from somewhere, and the whole markets tied together. 0:06:23.200 --> 0:06:25.920 It's a big world, but it's all tied together. Well, 0:06:25.920 --> 0:06:28.719 it's a really big story. Was a big take this week. 0:06:28.960 --> 0:06:31.839 A really big thank you to you Will Wade, Bloomberg 0:06:31.839 --> 0:06:34.760 News Power and Renewable Energy editor, for joining us to 0:06:34.760 --> 0:06:38.200 talk about this important subject. US households owing about sixteen 0:06:38.200 --> 0:06:40.359 billion dollars in late energy bills. Team. That's double the 0:06:40.360 --> 0:06:44.680 pre pandemic total, according to uh Well in the team's reporting. Yeah, 0:06:44.680 --> 0:06:46.880 and the question also is you know where's the relief 0:06:46.880 --> 0:06:50.440 in sight? Right right now? No, right, all right? Coming 0:06:50.520 --> 0:06:53.360 up this week's cover story, our Business Week investigative team 0:06:53.360 --> 0:06:56.279 reveals how a deadly bacteria found its way into a 0:06:56.360 --> 0:06:59.719 key link in America's baby formulas supply chain. You're listening 0:06:59.720 --> 0:07:11.680 to Blue Bomberg Business Week. This is Bloomberg. This is 0:07:11.720 --> 0:07:15.600 Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes 0:07:15.680 --> 0:07:19.920 Tim Stinovik from Bloomberg Radio. Well. One of the more 0:07:19.960 --> 0:07:22.760 troubling stories to make headlines so far this year, America's 0:07:22.760 --> 0:07:26.480 shortage of baby formula and supply chain snarls alone not 0:07:26.600 --> 0:07:29.640 the only culprit in this life threatening development affecting children 0:07:29.640 --> 0:07:33.640 across the US. Turns out, a deadly contaminant found its 0:07:33.640 --> 0:07:36.360 way into products at an aging Michigan factory owned by 0:07:36.360 --> 0:07:40.080 Abbott Laboratories. The details this week's cover story Bloomberg Business Week. 0:07:40.120 --> 0:07:42.960 So let's get to it with Bloomberg News senior investigative 0:07:42.960 --> 0:07:46.080 reporters Susan Burfield, who joins us in our interactive broker's 0:07:46.160 --> 0:07:50.440 studio here at Bloomberg Headquarters along with us Bloomberg Business 0:07:50.440 --> 0:07:52.080 Week at or Joe Webber. He's on the access line 0:07:52.080 --> 0:07:54.920 in Massachusetts. I gotta say, Joel Paul and I've been 0:07:54.960 --> 0:07:58.640 talking about this story, how disturbing it is. Yeah, well, 0:07:58.720 --> 0:08:03.720 the circumstances UM have been extremely disturbing for all the 0:08:03.760 --> 0:08:08.080 parents in America who have infants UM. So you know, 0:08:08.160 --> 0:08:12.320 obviously formula is one of these things that you really 0:08:12.400 --> 0:08:14.440 probably take for granted. I know we did when we 0:08:14.480 --> 0:08:16.960 had a child, and then all of a sudden, UM, 0:08:17.120 --> 0:08:21.080 you face a shortage UM and you can't get a 0:08:21.240 --> 0:08:24.880 very essential ingredient for you know, raising a healthy child, 0:08:24.920 --> 0:08:29.680 young child. What was upsetting about this particular reporting was 0:08:29.760 --> 0:08:33.000 that you know that shortage which affected millions of Americans 0:08:33.480 --> 0:08:36.680 actually had a different route than UM. So many other 0:08:36.720 --> 0:08:41.000 supply chain snarls that we've faced UM during the pandemic UH, 0:08:41.040 --> 0:08:45.680 and this one actually was because of bacteria called Chronobacter 0:08:46.400 --> 0:08:50.360 that surfaced UM not only in cans of formula, but 0:08:50.679 --> 0:08:54.520 ultimately in one of the main plants UM that America 0:08:54.600 --> 0:08:58.720 gets its formula from. So so Dusan had been working 0:08:58.760 --> 0:09:00.840 on this and we just kept telling her to go 0:09:01.240 --> 0:09:03.040 bigger and tell us and get to the bottom of 0:09:03.080 --> 0:09:05.959 what happened. And and she did. So, Susan, what get 0:09:06.000 --> 0:09:09.680 to the bottom of it? What what happened? Months and 0:09:09.720 --> 0:09:14.360 months of reporting. Well, UM, you're right that you know. 0:09:14.480 --> 0:09:17.840 The formula shortage. UM was on a lot of people's 0:09:17.880 --> 0:09:21.360 minds and got a lot of attention in May and 0:09:21.640 --> 0:09:25.040 June of this year in particular. But UM, what we 0:09:25.240 --> 0:09:29.760 discovered is that UM. Back in February UM, there was 0:09:30.000 --> 0:09:34.280 a recall of products that were made in the particular 0:09:34.320 --> 0:09:38.240 plant UM as you mentioned, owned by Abbot, located in Sturgis, 0:09:38.360 --> 0:09:43.360 Michigan and responsible for about of the whole supply of 0:09:43.360 --> 0:09:46.400 infant formula in the country. The reason for the recall 0:09:46.800 --> 0:09:49.680 was that there was a bacteria that can be really 0:09:50.400 --> 0:09:54.559 dangerous and even deadly for infants, and it was found 0:09:54.679 --> 0:09:58.960 in the plant and UM it was the reason that 0:09:59.000 --> 0:10:02.439 they had to recall almost seventy million cans of simulac 0:10:02.679 --> 0:10:06.200 and other formulas. UM. What we also found is that 0:10:06.240 --> 0:10:10.839 there was almost a year's worth of warnings UM at 0:10:10.840 --> 0:10:13.880 the company and warnings at the f d A. UM 0:10:13.920 --> 0:10:17.320 probably should have picked up on and didn't UM that, 0:10:17.440 --> 0:10:20.400 you know, had they, maybe none of this would have happened. 0:10:21.040 --> 0:10:22.560 So so that's kind of where I wanted to go. 0:10:22.600 --> 0:10:25.760 I guess we've I don't know, all become somewhat used 0:10:25.760 --> 0:10:30.280 to corporations cutting corners maybe too, you know, boost profits 0:10:30.440 --> 0:10:34.120 or whatever. But that's why we have agencies like the 0:10:34.240 --> 0:10:36.640 f d A to kind of keep an eye on them. 0:10:36.679 --> 0:10:39.080 From your reporting here and your story, I was kind 0:10:39.080 --> 0:10:42.439 of really shocked and disappointed that the FDA really missed 0:10:42.480 --> 0:10:46.480 it here what happened there because of covid um. The 0:10:46.600 --> 0:10:50.720 f d A missed one year's inspection. They inspect infant 0:10:50.760 --> 0:10:53.880 formula plants every year, so they missed one, and when 0:10:53.880 --> 0:10:59.000 they went in September, they saw some troubling signs, but 0:10:59.280 --> 0:11:03.959 they didn't UM elevated to a warning for abbot Um. 0:11:04.000 --> 0:11:08.920 They didn't request that abbot Um recall any product or 0:11:09.080 --> 0:11:11.520 you know, do anything at all other than try to 0:11:11.520 --> 0:11:17.720 fix the problems on its own. Then a whistleblower from 0:11:17.720 --> 0:11:21.520 the plant UH sent a report to the f d 0:11:21.520 --> 0:11:26.120 A outlining problems at the plant, not mentioning Chronobacter this 0:11:26.240 --> 0:11:34.200 particular bacteria, but describing a place where UM procedures were 0:11:34.240 --> 0:11:38.800 sometimes shortcut, as you said, where rules were sometimes bent, 0:11:39.480 --> 0:11:41.800 and where people weren't always held to account when they 0:11:41.840 --> 0:11:45.800 should have been. This report, had the f d A 0:11:46.440 --> 0:11:50.400 taken it seriously enough, UM could have also brought the 0:11:50.440 --> 0:11:53.880 inspectors back into the plants sooner than it did. That 0:11:53.960 --> 0:11:57.040 report the FDA said was lost in their mail room, 0:11:57.360 --> 0:12:00.560 lost in the mail room, lost in the mail room, 0:12:00.600 --> 0:12:02.720 so wherever. You know. The other element that that that 0:12:02.800 --> 0:12:05.959 really raises, though, is this this thing where companies can 0:12:06.000 --> 0:12:10.440 almost self police. But you know, abbott has ended up 0:12:10.440 --> 0:12:13.600 in a place that is actually a little different than 0:12:13.880 --> 0:12:16.480 than a lot of other companies. UM talk to us 0:12:16.480 --> 0:12:20.720 about that development, Susan, because that they basically FDA stepped 0:12:20.760 --> 0:12:23.840 in and said, yeah, we have a over site now, yes, 0:12:23.920 --> 0:12:27.920 you know, as as the shortage really became a crisis 0:12:27.960 --> 0:12:30.719 for a lot of families, and as the f D 0:12:30.840 --> 0:12:34.120 a is confidence in Abbot that it could clean up 0:12:34.120 --> 0:12:39.920 its plant, um waned, Abbott entered into a consent decree 0:12:40.200 --> 0:12:42.719 with the Department of Justice, and it gives the f 0:12:42.880 --> 0:12:48.000 d a extraordinary oversight of the plant's operations and required 0:12:48.480 --> 0:12:52.040 the plant to make changes to almost every way that 0:12:52.120 --> 0:12:57.120 it operates. Legal issues, What are the legal issues facing 0:12:57.760 --> 0:13:00.480 Abbot here, because there really weren't worse and just a 0:13:00.600 --> 0:13:04.040 huge inconvenience plus a lot worse. Yeah, so, you know, 0:13:04.080 --> 0:13:10.640 the chronobacter Um did get into some formula we think UM, 0:13:10.720 --> 0:13:15.080 and of course it's a little bit hard to prove exactly. 0:13:15.520 --> 0:13:19.040 You know that kids who were sick UM had formula 0:13:19.440 --> 0:13:22.719 that we know was recalled, but to find the contaminant, 0:13:22.720 --> 0:13:25.480 which is you know, small cells, is not always easy. 0:13:25.960 --> 0:13:29.680 But there were two kids who died UM, there were 0:13:29.679 --> 0:13:32.640 two kids who were sickened UM. Those four cases the 0:13:32.679 --> 0:13:38.120 FDA investigated, we came across other cases and those families 0:13:38.160 --> 0:13:41.920 are suing Abbott. Altogether, they're facing about two dozen lawsuits. 0:13:42.520 --> 0:13:45.000 Of course, they're operating under a consent decree for the 0:13:45.080 --> 0:13:48.440 next five years with the Department of Justice, and the 0:13:48.440 --> 0:13:52.560 FDA itself is under investigation by the Office of the 0:13:52.600 --> 0:13:56.880 Inspector General. That was Bloomberg News senior investigative reporters Susan Burfield, 0:13:56.880 --> 0:13:59.000 along with the editor of the magazine, Joel Weber on 0:13:59.040 --> 0:14:02.400 this week's cover. Store Also joining us Bloomberg's Paul Sweeney 0:14:02.520 --> 0:14:06.040 and the baby formula crisis exemplifies our next guests point. 0:14:06.520 --> 0:14:09.680 Our world is built around convenience and innovation, but we're 0:14:09.679 --> 0:14:13.240 not always prepared for what nature has in store. Engineers 0:14:13.280 --> 0:14:16.559 have given us this illusion that we can basically use 0:14:16.640 --> 0:14:20.960 technology to construct all these systems, and for the short term, yes, 0:14:21.000 --> 0:14:23.800 they work fine. But in the long term, the stress 0:14:23.880 --> 0:14:26.240 is going to build up eventually, and and that's what 0:14:26.400 --> 0:14:29.800 we have to be conscious of. Professor Salima Lee breaks 0:14:29.840 --> 0:14:33.640 down how natural laws define human life. This is Bloomberg 0:14:40.920 --> 0:14:44.920 broadcasting from the financial capital of the world Bloomberg eleven 0:14:45.000 --> 0:14:49.560 Frio in New York to Washington, d C. Bloomberg to Boston, 0:14:49.680 --> 0:14:53.120 Bloomberg one of six, one does San Francisco, Bloomberg nine 0:14:53.160 --> 0:14:56.440 sixty to the country Sirius XM Chado one nineteen and 0:14:56.520 --> 0:15:00.360 around the globe. The Bloomberg Business app and Bloomberg Radio Vodka. 0:15:01.040 --> 0:15:05.040 This is Bloomberg Business Week, all right. So we've talked 0:15:05.080 --> 0:15:08.840 a lot about energy, alternative energy, and the environment this week. 0:15:08.920 --> 0:15:12.040 It's a topic taking on renewed importance with President Biden 0:15:12.080 --> 0:15:15.360 having recently signed legislation that include billions of dollars in 0:15:15.400 --> 0:15:18.640 climate change initiatives. With some thoughts on how natural and 0:15:18.720 --> 0:15:22.560 social system science can inform planetary crises, we turned to 0:15:22.640 --> 0:15:26.280 Salim Ali, Distinguished Professor of Energy in the Environment at 0:15:26.280 --> 0:15:28.800 the University of Delaware. He's the author of a new book, 0:15:28.880 --> 0:15:32.960 Earthly Order, How Natural Laws Define Human Life. We started 0:15:32.960 --> 0:15:36.600 by asking about the meaning behind the title. It's basically 0:15:36.640 --> 0:15:40.080 looking at some of the fundamental constraints that the planet 0:15:40.240 --> 0:15:43.200 has on us. So you know, when we talk about markets, 0:15:43.520 --> 0:15:48.560 markets are ultimately dependent on some aspect of natural resource constraints. 0:15:48.960 --> 0:15:53.320 We're going back to the basic laws of nature essentially, 0:15:54.000 --> 0:15:56.840 and making sure that we align our economic and social 0:15:56.880 --> 0:16:01.440 systems in congruence with those strains. I've talked about this 0:16:01.480 --> 0:16:03.840 before on air, so listeners will be familiar with it. 0:16:03.880 --> 0:16:05.680 But I grew up in California and I had a 0:16:05.680 --> 0:16:07.800 professor in college. I went to college in Maine, a 0:16:07.840 --> 0:16:10.400 professor in college, you said California is a place where 0:16:11.000 --> 0:16:13.480 nobody should ever have lived because of the lack of 0:16:13.520 --> 0:16:18.240 water and the wildfires. And I'm wondering, professor, if the 0:16:18.320 --> 0:16:20.960 market is failing in that sense, because you see California 0:16:21.080 --> 0:16:23.160 home prices still just out of control. And I say 0:16:23.200 --> 0:16:24.720 to myself, wait a second, and this is somebody who 0:16:24.720 --> 0:16:27.000 has family in California. Why are people living in a 0:16:27.040 --> 0:16:29.560 place where there is no water? Yeah, I mean if 0:16:29.600 --> 0:16:33.160 you go back to that classic Hollywood from Chinatown, you know, 0:16:33.200 --> 0:16:34.880 it goes to that kind of the heart of that 0:16:35.360 --> 0:16:39.000 challenge in California in terms of water security. And one 0:16:39.000 --> 0:16:41.200 could say the same of Phoenix, Arizona. I mean, so 0:16:41.240 --> 0:16:46.120 many places where we have designed human habitation without really 0:16:46.200 --> 0:16:50.840 considering the natural constraints there, and especially the number of 0:16:50.840 --> 0:16:52.840 people who lived there. I mean, perhaps you could have 0:16:53.000 --> 0:16:57.560 some level of population, but that's that's a good example 0:16:57.600 --> 0:17:00.320 of that. And engineers have given us the salute that 0:17:00.440 --> 0:17:05.760 we can basically uh use technology to construct all these systems. 0:17:05.800 --> 0:17:08.280 And for the short term, yes, they work fine, and 0:17:08.359 --> 0:17:10.879 but in the long term, the stress is going to 0:17:10.880 --> 0:17:13.760 build up eventually, and and that's what we have to 0:17:13.800 --> 0:17:17.399 be conscious of. And I do wonder about this order 0:17:17.560 --> 0:17:21.159 and the things that are so connected and maybe and 0:17:21.200 --> 0:17:24.560 how we teach it to our younger generation, like how 0:17:24.560 --> 0:17:26.440 do we need to be rethinking things? Because you know, 0:17:26.480 --> 0:17:28.600 I'm listening to you speak and I've been thinking about 0:17:28.760 --> 0:17:31.120 is it time for us to tell the world back off, 0:17:31.240 --> 0:17:35.399 stop consuming so much because Earth can handle it? Like 0:17:35.400 --> 0:17:39.200 I've really been thinking about or such a consumption let society, 0:17:39.240 --> 0:17:43.119 but it's really being brought down as a result. You know, 0:17:43.200 --> 0:17:45.800 I am very much Um. You know, approaching this from 0:17:45.800 --> 0:17:48.760 a practical point of view, we we are going to 0:17:48.800 --> 0:17:52.600 need to consume in order to sustain livelihoods, but we 0:17:52.640 --> 0:17:57.720 need to move towards constructive consumption rather than having consumption, 0:17:57.800 --> 0:18:01.960 which is not considering some of those natural constraints. So 0:18:02.000 --> 0:18:04.520 I'm all for green growth. I mean, there are many 0:18:04.560 --> 0:18:07.080 ways in which you can use the capitalist system in 0:18:07.119 --> 0:18:10.320 a very constructive way. Um. But what we have done 0:18:10.440 --> 0:18:14.200 is we have not really considered some of those fundamental 0:18:14.280 --> 0:18:17.520 constraints that physics puts on us. I mean, for example, 0:18:17.560 --> 0:18:20.000 many years ago, you know, in the nineteen sixties seventies, 0:18:20.000 --> 0:18:22.919 there was an economist who wrote a book. It was 0:18:22.920 --> 0:18:25.920 published by Harvard university press was called the Entropy Law 0:18:25.960 --> 0:18:29.479 and Economics. His name was Nicholas georgesco Rosin, and what 0:18:29.520 --> 0:18:32.040 it tried to do was to link some of those 0:18:32.080 --> 0:18:36.639 physical constraints to economics. But unfortunately we have we lost 0:18:36.680 --> 0:18:40.399 our way at some point and we could have great growth, 0:18:40.440 --> 0:18:43.000 we could have markets functioning, but we just need to 0:18:43.040 --> 0:18:45.639 do them within those constraints. So then do you think 0:18:45.880 --> 0:18:49.679 when we're seeing the constraints UH energy supplies as a 0:18:49.680 --> 0:18:53.440 result of the Russian warranty Ukraine, that we shouldn't necessarily 0:18:53.600 --> 0:18:57.879 release supplies produce more because ultimately it's a fixed commodity 0:18:58.000 --> 0:19:00.840 at some point it's going to run out by let 0:19:01.000 --> 0:19:04.679 innovation disruption happen. Part of it is that we are 0:19:04.760 --> 0:19:09.080 also very knee jerk in our approach to looking at 0:19:09.720 --> 0:19:13.280 even environmental problems. And so it's not just I don't 0:19:13.320 --> 0:19:15.280 want to just put all the blame on the markets. 0:19:15.359 --> 0:19:18.480 I think environmentalists share the blame that they don't make 0:19:18.520 --> 0:19:21.880 science based decisions. So, for example, with the war in Ukraine, 0:19:22.200 --> 0:19:25.080 you know, three weeks ago Europe had to pass new 0:19:25.200 --> 0:19:31.000 legislation to basically classify nuclear energy as clean energy. And 0:19:31.400 --> 0:19:36.320 that's because they completely had this panic attack after Fukushima, 0:19:36.359 --> 0:19:39.840 and they didn't consider that actually, from a natural science perspective, 0:19:40.119 --> 0:19:44.360 nuclear power, especially existing nuclear power plants which were already operating, 0:19:44.720 --> 0:19:47.560 made a lot of sense to provide baseload power. And 0:19:47.600 --> 0:19:50.040 now they have no baseload power, so they have to 0:19:50.080 --> 0:19:52.679 either be important gas from Russia or they have to 0:19:52.720 --> 0:19:56.280 reclassify nuclear. So the environmentalists share this blame that if 0:19:56.320 --> 0:19:59.239 we do not have science based decision making, we have 0:19:59.359 --> 0:20:01.760 what I call in environmental awareness, but we don't have 0:20:01.880 --> 0:20:05.840 environmental literacy. I really want to make the connection between 0:20:05.920 --> 0:20:10.439 practicism and consumerism. That was Selima Lee, Distinguished Professor of 0:20:10.520 --> 0:20:13.320 Energy in the Environment at the University of Delaware. His 0:20:13.440 --> 0:20:16.560 book Earthly Order, How Natural Laws to Find Human Life. 0:20:16.600 --> 0:20:19.400 It is out now you're listening to Bloomberg Business Week. 0:20:19.800 --> 0:20:22.679 Up next is the pet health and wellness markets starting 0:20:22.680 --> 0:20:25.399 to soften. After so many of us found new furry 0:20:25.440 --> 0:20:28.399 friends during the pandemic. I found one of those new 0:20:28.520 --> 0:20:30.640 furry friends. I'm just gonna put that out there. We're 0:20:30.640 --> 0:20:32.600 gonna sit down with the CEO pet guy. We're gonna 0:20:32.600 --> 0:20:35.959 talk outlook and the reasons for a tougher Corely earnings report. 0:20:36.320 --> 0:20:49.000 This is Bloomberg. You're listening to Bloomberg Business Week with 0:20:49.080 --> 0:20:53.680 Carol Masser and Bloomberg Quick Takes. Tim Steinovich from Bloomberg Radio. 0:20:55.119 --> 0:20:57.880 Shares a pet coast sold off following earnings this week 0:20:57.960 --> 0:21:00.600 after the company cut its adjusted earnings for share and 0:21:00.680 --> 0:21:03.399 net revenue guidance for the full year. An analyst at 0:21:03.440 --> 0:21:06.440 Baird called the pet Health and Wellness Giants forecast reset 0:21:06.520 --> 0:21:09.040 quote much needed, so to find out more about the 0:21:09.040 --> 0:21:11.640 company's miss and where it goes from here mid persistent 0:21:11.680 --> 0:21:14.880 inflation and a tight labor market. Bloomberg Surveillance co host 0:21:14.880 --> 0:21:17.280 Paul Sweeney and I spoke with pet Co chairman and CEO. 0:21:17.560 --> 0:21:20.639 Ron called great companies bro even in tough economies. So 0:21:20.680 --> 0:21:23.520 we had a four percent comp which is a good number. 0:21:23.680 --> 0:21:26.080 You know that we did not have the inventory issues 0:21:26.160 --> 0:21:28.440 that other companies are talking about. Most retailers are talking 0:21:28.440 --> 0:21:31.560 about inventory, excess inventory and having a discount. We didn't 0:21:31.600 --> 0:21:34.439 have that situation. We continue to see a positive nick 0:21:34.480 --> 0:21:37.680 shift towards premium and super premium brands, so a lot 0:21:37.680 --> 0:21:39.639 of good news, but at the same time, there is 0:21:39.680 --> 0:21:44.480 some pressure from the inflation on discretionary items like toys, tennis, 0:21:44.520 --> 0:21:48.200 balls leashes and that pressures. That's our highest profit area, 0:21:48.280 --> 0:21:50.720 so that puts some pressure on the piano. So in 0:21:50.760 --> 0:21:52.960 your piano, on your pan l talked to us about 0:21:53.160 --> 0:21:56.240 I guess inflation in terms of your cost of good sold. 0:21:56.280 --> 0:21:58.280 Where do you guys see it in your piano? Yeah, 0:21:58.359 --> 0:22:01.080 so freight would be a big one. Um, labor would 0:22:01.119 --> 0:22:04.280 be another one. Labor we pretty much have in our model. 0:22:04.359 --> 0:22:07.520 But I don't think anybody had the freight freight inflation 0:22:07.600 --> 0:22:10.159 that we saw in their model because the guests, you know, 0:22:10.440 --> 0:22:14.159 really popped in March April type time coming down? Is 0:22:14.160 --> 0:22:16.560 it helping you? It's starting to come down, But the 0:22:16.680 --> 0:22:19.240 freight gets tied to the inventory, so it doesn't show 0:22:19.320 --> 0:22:21.040 up in the p and l un till later in 0:22:21.160 --> 0:22:23.399 Q three and into Q four. I actually have been 0:22:23.400 --> 0:22:25.520 in a store on Second Avenue bought a bunch of toys. 0:22:25.520 --> 0:22:27.359 I want to do shout out to Chedterly, who was 0:22:27.520 --> 0:22:30.199 really lovely because I have a dog, a puppy that 0:22:30.280 --> 0:22:32.919 shoes through things in thirty seconds. So I came up 0:22:32.920 --> 0:22:34.439 with an armful of toys and I said, help me, 0:22:34.480 --> 0:22:37.520 help me, what's gonna you know last? And she was 0:22:37.560 --> 0:22:40.520 really wonderful I have to say, though, I noticed a 0:22:40.600 --> 0:22:43.280 lot of empty shelves and I was curious in the 0:22:43.320 --> 0:22:47.320 dog toy area, is it supply chain problems? What was it? 0:22:47.359 --> 0:22:49.520