WEBVTT - Amazon, Apple Earnings and Musk's DOGE Days 0:00:02.520 --> 0:00:07.040 Bloomberg Audio Studios, Podcasts, radio news. 0:00:08.920 --> 0:00:13.240 This is Bloomberg business Week Daily reporting from the magazine 0:00:13.240 --> 0:00:17.880 that helps global leaders stay ahead with insight on the people, companies, 0:00:17.920 --> 0:00:22.800 and trends shaping today's complex economy. Plus global business, finance 0:00:22.840 --> 0:00:26.160 and tech news as it happens. The Bloomberg Business Week 0:00:26.239 --> 0:00:32.240 Daily Podcast with Carol Masser and Tim Steneveek. On Bloomberg Radio. 0:00:32.720 --> 0:00:36.040 Tesla's Sheriff Deny to report that ZAID board members started 0:00:36.040 --> 0:00:38.960 a search forach CEO to succeed you on Musk, saying 0:00:39.000 --> 0:00:42.440 directors are quote highly confident in his abilities. 0:00:42.479 --> 0:00:44.760 All right. At the same time as Elena's promised to 0:00:44.760 --> 0:00:47.360 spend more time at his company, Musk will maintain a 0:00:47.400 --> 0:00:49.520 presence in the White House and the President's inner circle, 0:00:49.560 --> 0:00:51.839 and we'll continue to work on the initiative from his 0:00:51.960 --> 0:00:54.840 microoffice in the West Wing. Both of those stories are 0:00:54.840 --> 0:00:56.520 among the most read on the Bloomberg Let's get to 0:00:56.600 --> 0:01:00.280 It lots to cover. Bloomberg News Senior reporter Jennifer Lowe 0:01:00.720 --> 0:01:02.960 is with us. She is at the White House. Also 0:01:03.000 --> 0:01:06.560 here in studio, Bloomberg Business Week columnist Max Chafkin, co 0:01:06.680 --> 0:01:09.480 host of the Elon podcast, Elon Inc. Podcast and the 0:01:09.480 --> 0:01:12.639 author of the Contrarian Peter Thiel and Silicon Valley's Pursuit 0:01:12.680 --> 0:01:13.000 of Power. 0:01:13.080 --> 0:01:16.920 Max is in our macro office, our macro studio. 0:01:17.720 --> 0:01:19.080 Max is going to come in just a moment. 0:01:19.200 --> 0:01:20.200 Jed, we got to start with you. 0:01:20.200 --> 0:01:22.759 You talked with Elon along with some other reporters, set 0:01:22.800 --> 0:01:25.720 the scene the chat yesterday, what you all asked about 0:01:25.880 --> 0:01:26.640 and what he said. 0:01:27.640 --> 0:01:30.720 Well, I mean, this was really a remarkable opportunity. Remarkable 0:01:30.720 --> 0:01:34.600 because we haven't had many of them to hear directly 0:01:34.600 --> 0:01:38.319 from Elon Musk as he discusses his government role. Of course, 0:01:38.319 --> 0:01:40.520 he's been at you know, cabinet meetings, he's been in 0:01:40.520 --> 0:01:44.240 the Oval Office and spoken to reporters occasionally, but in 0:01:44.240 --> 0:01:46.679 this moment in the Roosevelt Room with other reporters, he 0:01:46.760 --> 0:01:49.720 was really opening up much more about what he's done 0:01:49.880 --> 0:01:52.240 over the last one hundred or so days leading the 0:01:52.840 --> 0:01:56.880 DOGE effort, the Department of Governmentment efficiency program that he's 0:01:56.920 --> 0:01:59.840 been running for President Trump. And you know, he spoke 0:02:00.280 --> 0:02:03.880 quite colorfully about, you know, the experience, not just the 0:02:03.920 --> 0:02:07.640 one hundred and sixty billion dollars in government savings that 0:02:07.720 --> 0:02:09.880 he says he's been able to root out with this 0:02:09.960 --> 0:02:14.400 program and cut. You know, he told us about flying 0:02:14.400 --> 0:02:17.760 on Air Force One, about staying in the Lincoln bedroom 0:02:17.800 --> 0:02:20.800 at at the President's request, and even tucking into, you know, 0:02:20.919 --> 0:02:24.680 ice cream from the White House fridge. So it was 0:02:24.800 --> 0:02:27.320 really remarkable and it told us a lot about I 0:02:27.320 --> 0:02:31.639 think his access to the president, about his status really 0:02:31.800 --> 0:02:35.560 in Trump's orbit even as he is making this retreat 0:02:35.639 --> 0:02:37.080 from the White House. 0:02:37.280 --> 0:02:41.040 Well Jennifer on that retreat. Investors cheered the news last 0:02:41.040 --> 0:02:43.880 week in Tesla that he would be spending more time 0:02:43.880 --> 0:02:46.360 away from Washington, d C. Now we're hearing he'll have 0:02:46.400 --> 0:02:49.280 this micro office. What can you tell us about how 0:02:49.320 --> 0:02:51.520 much time he will be in DC or how much 0:02:51.520 --> 0:02:56.200 time he'll be spending on DOGE Moving forward, right, he's. 0:02:56.360 --> 0:02:59.440 He told us that he anticipates spending about two one 0:02:59.440 --> 0:03:03.440 to two days a week on average and coming into Washington, 0:03:03.520 --> 0:03:06.280 d C. Basically once every other week. So you could 0:03:06.320 --> 0:03:08.919 see a situation where he's in town for three days 0:03:08.960 --> 0:03:12.440 working and then comes back a couple weeks later. This is, 0:03:12.520 --> 0:03:14.760 of course a marked contrast from the beginning of the term, 0:03:14.800 --> 0:03:17.079 when you know it was an all hands on deck situation, 0:03:17.240 --> 0:03:19.600 really intense, as he described it, and he would spend 0:03:19.800 --> 0:03:23.480 you know, seven days a week here sometimes working just 0:03:23.520 --> 0:03:27.400 to get into these agencies and start figuring out a 0:03:27.440 --> 0:03:30.800 plan for accessing data and examining their spending. 0:03:31.240 --> 0:03:32.200 Max, I want to bring you in. 0:03:32.320 --> 0:03:35.440 You're listening to Jen talk about this conversation kind of 0:03:35.520 --> 0:03:38.360 him talking about his time in the White House, and 0:03:38.360 --> 0:03:40.280 I think we were all glued to the cabinet meeting 0:03:40.320 --> 0:03:41.920 where he had the two hats on. Took him off 0:03:41.960 --> 0:03:43.920 and it kind of got he got kind of serious. 0:03:44.000 --> 0:03:48.360 It felt like, yeah, tonally kind of a valedictory tone. 0:03:48.400 --> 0:03:51.200 I don't know, the messaging is a little bit. 0:03:51.080 --> 0:03:55.680 Confusing because on one hand, he's saying, yeah, taking steps back. 0:03:55.720 --> 0:03:57.880 On the other hand, one to two days a week 0:03:58.120 --> 0:04:00.000 is a lot of that's a lot of days. 0:04:00.280 --> 0:04:03.960 This is a guy who is running simultaneously five companies. 0:04:04.960 --> 0:04:06.960 You know, he's got a lot of responsibilities. Even if 0:04:07.000 --> 0:04:10.280 he is, you know, as Jen says, scaling down from 0:04:10.480 --> 0:04:13.440 spending like all his time in Washington, spending a significant 0:04:13.520 --> 0:04:14.600 chunk of time in Washington. 0:04:15.200 --> 0:04:20.679 Yeah, So on that, Jennifer, the timing that he's doing here. Also, 0:04:20.720 --> 0:04:22.520 the figures of one hundred and sixty billion dollars, I 0:04:22.560 --> 0:04:25.600 think getting a lot of attention, especially earlier this year, 0:04:25.680 --> 0:04:28.000 when or maybe even a few months ago, and we 0:04:28.040 --> 0:04:30.640 heard that two trillion dollars was his goal of cutting 0:04:30.640 --> 0:04:33.680 from the government. Have we learned if that goal was 0:04:33.720 --> 0:04:35.960 over a ten year period, over a five year period, 0:04:36.040 --> 0:04:37.800 or how the one hundred and sixty billion dollars sort 0:04:37.800 --> 0:04:39.760 of fits into that goal, or if that goal has changed. 0:04:40.800 --> 0:04:46.440 What we do know is that the ambition is clearly 0:04:46.480 --> 0:04:50.880 being ratcheted downward. And while he is not willing to 0:04:51.080 --> 0:04:54.760 forego reaching, you know, a one trillion dollar target, he 0:04:54.760 --> 0:04:58.760 wouldn't rule that out completely. He did say that doing 0:04:58.800 --> 0:05:03.560 so on any base would require a lot of you know, 0:05:03.600 --> 0:05:06.680 willpower from elected officials, and he's just not sure that 0:05:06.720 --> 0:05:09.520 the willpower is there. He wouldn't roll it out, but 0:05:09.680 --> 0:05:11.840 it did seem very much like a concession that this 0:05:11.960 --> 0:05:15.520 is he's gotten a lot of the easier, lower hanging fruit, 0:05:15.680 --> 0:05:19.279 and that this is hard to do on an enduring basis. 0:05:19.360 --> 0:05:21.920 And by the way, I'll just say, on his time here, 0:05:22.000 --> 0:05:25.159 he is limited as a special government employee to one 0:05:25.240 --> 0:05:28.000 hundred and thirty days of service per calendar year. 0:05:28.760 --> 0:05:30.880 Yeah, I mean, and it was two trillion in fact, 0:05:30.960 --> 0:05:34.200 was his original claim and that that was an annual number, 0:05:34.240 --> 0:05:36.719 that's a budget deficit. When he was at Madison Square 0:05:36.760 --> 0:05:39.880 Garden before the election, you know, Howard Lutnik asked him 0:05:40.160 --> 0:05:41.599 how much he was going to cut the deficit. He 0:05:41.640 --> 0:05:44.360 said easily two trillion or something along those lines. So 0:05:44.400 --> 0:05:48.880 it's a huge difference and really an unusual you know, 0:05:48.960 --> 0:05:51.560 just for Elon Musk. This is somebody who is kind 0:05:51.560 --> 0:05:55.120 of used to projecting dominance, who just tends to go 0:05:55.160 --> 0:05:56.919 from victory to victory to victory. 0:05:57.120 --> 0:05:59.800 This is a come down, I mean, and and he is. 0:06:00.160 --> 0:06:02.640 He's doing his best, and I think that's part of 0:06:02.680 --> 0:06:07.359 why you're seeing these media availabil as effort to, you know, 0:06:07.440 --> 0:06:09.640 to actually have a voice in the story, because it 0:06:09.680 --> 0:06:12.320 is it is. It is a it's a failure at 0:06:12.400 --> 0:06:14.120 least in the terms that he set for what he 0:06:14.160 --> 0:06:14.720 was trying to do. 0:06:14.920 --> 0:06:16.600 Ten before we let you go, I mean to re 0:06:16.720 --> 0:06:20.080 assume that Elon will still have a voice or have 0:06:20.360 --> 0:06:24.320 the president's ear ongoing, even though he maybe isn't physically 0:06:24.839 --> 0:06:27.440 at the White House. There are limitations, right, how many 0:06:27.520 --> 0:06:31.159 days he can serve the government in this capacity that 0:06:31.440 --> 0:06:33.520 he will still pick up the phone, The President will 0:06:33.520 --> 0:06:35.279 still pick up the phone. There will be that constant 0:06:35.279 --> 0:06:38.760 communication or has something changed in that relationship. 0:06:39.160 --> 0:06:42.200 You know, there's all the indications are that he will 0:06:42.240 --> 0:06:45.120 continue to have this status around the president. I mean, 0:06:45.279 --> 0:06:49.840 he's clearly had altercations and disagreements with members of the administration, 0:06:50.520 --> 0:06:52.839 and it is perhaps one of the only folks who 0:06:52.839 --> 0:06:55.960 can do that right now. He's, as we noted at 0:06:55.960 --> 0:06:58.400 the top of this conversation, you know, he's got a 0:06:58.440 --> 0:07:00.279 micro office in the West wing of the White House, 0:07:00.279 --> 0:07:03.120 and he's not giving that up. You know, office space 0:07:03.160 --> 0:07:05.120 in this building is pretty difficult to come by, and 0:07:05.160 --> 0:07:07.760 that alone is an indication of the fact that he 0:07:07.880 --> 0:07:10.640 has he is stature with a president and that seems 0:07:10.640 --> 0:07:11.240 to be enjoyed. 0:07:11.280 --> 0:07:12.840 Did we figure out what a micro office is? 0:07:13.120 --> 0:07:14.400 It's like an office but smaller. 0:07:15.080 --> 0:07:16.040 What is that? I don't know. 0:07:16.080 --> 0:07:17.800 That's just what I'm going Do you have to share desks? 0:07:17.840 --> 0:07:20.560 You know, that's kind of a thing nowadays. I know, 0:07:20.720 --> 0:07:24.200 all right, Jen, incredible reporting, So appreciate Jen Deloewey, a 0:07:24.320 --> 0:07:26.520 senior reporter at Bloomberg News there at the White House. 0:07:26.520 --> 0:07:27.880 We're going to stay with Max though. 0:07:27.720 --> 0:07:29.120 Max I wanted to follow up on one thing that 0:07:29.160 --> 0:07:31.360 you said about the status as a special government employee, 0:07:31.400 --> 0:07:33.600 because you talk about this a lot on the Elon Inc. Podcast. 0:07:33.880 --> 0:07:37.400 How is that defined? If he's planning on spending one 0:07:37.520 --> 0:07:40.720 or two days a week still, I mean, yeah, does 0:07:40.720 --> 0:07:42.800 that violate that status? How does that work? 0:07:43.160 --> 0:07:45.600 It's my guess is the accounting here can be is 0:07:45.760 --> 0:07:47.880 probably a little bit fuzzy. It's one hundred and thirty 0:07:48.000 --> 0:07:50.960 work days. Like I don't know if Elon Musk was. 0:07:51.160 --> 0:07:53.960 He has been staying here, as Jen was saying, weeks 0:07:54.040 --> 0:07:57.520 at a time, essentially in Donald Trump's orbit. Now he's 0:07:57.640 --> 0:08:01.320 also been, of course, attending space X meetings, and he's. 0:08:01.200 --> 0:08:03.760 Played video games from his Westling office. If you're playing 0:08:03.800 --> 0:08:05.400 video games in the office, does it count as work? 0:08:05.800 --> 0:08:06.280 I don't know. 0:08:06.920 --> 0:08:08.360 I don't know if does account as a work day. 0:08:08.360 --> 0:08:08.760 I don't know. 0:08:08.920 --> 0:08:11.520 My suspicion work when you play video games at the air. 0:08:11.600 --> 0:08:13.400 I never play video games at the office. 0:08:13.800 --> 0:08:14.560 My suspicion. 0:08:14.600 --> 0:08:17.880 I mean taking it down from semi full time or 0:08:17.920 --> 0:08:20.000 whatever he was to one to two days of days 0:08:20.040 --> 0:08:20.320 a week. 0:08:20.360 --> 0:08:22.600 What I think that does is two things. One is it. 0:08:22.520 --> 0:08:25.960 Allows him to tell Tesla's shareholders, hey, I'm not distracted 0:08:26.240 --> 0:08:29.160 The second thing is it probably gives them a little 0:08:29.160 --> 0:08:32.480 bit of flexibility as far as like not being not going. 0:08:32.280 --> 0:08:33.840 Over that one hundred and thirty days. 0:08:34.160 --> 0:08:36.599 You know, I have to think that he's going to 0:08:36.720 --> 0:08:39.840 have as much time in the White House with Donald 0:08:39.840 --> 0:08:42.720 Trump as he wants, and the administration will will figure 0:08:42.720 --> 0:08:44.920 out a way to account for his time. 0:08:44.960 --> 0:08:46.239 So that's so it's not bringing. 0:08:45.960 --> 0:08:48.560 Along because the President likes this relationship pretty cool and 0:08:48.600 --> 0:08:50.439 also because of Elon steep Pockets. 0:08:50.559 --> 0:08:53.040 Yeah, I mean he is a really important I mean 0:08:53.080 --> 0:08:55.560 there there's a lot of ink has been spilled about 0:08:55.600 --> 0:08:58.160 the sort of popularity of DOGE and the lack there 0:08:58.200 --> 0:09:00.840 are of the fact that making these has not, in 0:09:00.880 --> 0:09:04.640 addition to falling well short of the claims of deficit reduction, 0:09:04.920 --> 0:09:06.280 this has been very unpopular. 0:09:06.640 --> 0:09:08.800 On the other hand, Trump really needs Elon Musk. 0:09:08.840 --> 0:09:11.840 He is the most important donor on the Republican side 0:09:11.920 --> 0:09:14.280 right now. He's going to be key if the Republicans 0:09:14.360 --> 0:09:16.920 want to do well on the midterms. And you know, 0:09:17.000 --> 0:09:19.120 as Trump looks forward to his legacy, you know twenty 0:09:19.160 --> 0:09:20.959 twenty eight, who the candidate is going to be. That 0:09:21.000 --> 0:09:23.560 person is going to need Elon Musk in their corner. 0:09:24.440 --> 0:09:26.840 Can we ask about you're going there? 0:09:27.080 --> 0:09:27.800 Yeah, go there? 0:09:27.840 --> 0:09:30.320 Does Elon have to be worried about the Tesla board 0:09:30.360 --> 0:09:32.520 replacing him? I mean, the board chair has come out 0:09:32.559 --> 0:09:35.800 and said nope, but we had another bad data point 0:09:35.800 --> 0:09:38.520 for Tesla out of France. So I'm just curious, does 0:09:38.559 --> 0:09:39.760 he really have to be worried? 0:09:40.000 --> 0:09:42.160 So this report you're referring to the Wall Street Journal 0:09:42.280 --> 0:09:46.360 report that the board had contacted executive search forms. Look, 0:09:46.440 --> 0:09:47.880 we're talking about a normal company. 0:09:48.000 --> 0:09:50.640 This will be nothing, right, the fact that the stock's 0:09:50.640 --> 0:09:52.880 been all over the place, He's clearly distracted. Of course 0:09:52.920 --> 0:09:55.840 they'd be talking to other companies. And what makes this 0:09:56.040 --> 0:09:58.880 crazy and what makes the boards denial not that surprising 0:09:58.960 --> 0:10:02.840 is the board has been so behind Elon Musk for years. 0:10:02.880 --> 0:10:04.880 And you know, this is the same board who has 0:10:04.920 --> 0:10:08.480 been fighting in court to pay him like the largest 0:10:08.559 --> 0:10:11.720 bonus you know, in history, despite the fact that Tesla's 0:10:11.720 --> 0:10:12.400 stock price has. 0:10:12.360 --> 0:10:15.640 Been very iffy. So so the board, you know, is. 0:10:15.720 --> 0:10:18.360 Very much still in Elon Musk's corner. 0:10:18.360 --> 0:10:20.160 If you look at the makeup of the board, you're 0:10:20.200 --> 0:10:23.720 looking at his brother of people he has close relationships to. 0:10:24.240 --> 0:10:26.360 So I think you know, a couple of things are 0:10:26.400 --> 0:10:30.280 possible here, assuming that the journal sources are legit, which 0:10:30.320 --> 0:10:33.000 I do, is that you know, there may be some 0:10:33.160 --> 0:10:36.840 opponent on the board who's been talking to search firms, 0:10:37.120 --> 0:10:38.880 or perhaps this is somebody on the board trying to 0:10:38.880 --> 0:10:40.880 send a message to Elon Musk, trying to get through 0:10:40.880 --> 0:10:44.280 to him saying you know, hey, this is real, we 0:10:44.320 --> 0:10:46.280 need you to be involved. But in any case, I 0:10:46.320 --> 0:10:48.319 wouldn't expect him to be leaving. 0:10:48.000 --> 0:10:49.280 A CEO anytime soon. 0:10:49.720 --> 0:10:52.400 If he were to leave, the stock price would would 0:10:52.400 --> 0:10:53.480 be in trouble, be my prediction. 0:10:53.640 --> 0:10:56.200 Some other members of the board. You mentioned Elon's brother 0:10:56.280 --> 0:10:58.319 Kimball Musk on the board. He's been on the board 0:10:58.320 --> 0:11:01.480 for twenty one years. You've got James Murdoch who's been 0:11:01.480 --> 0:11:04.679 on the board for close to eight years, Jeff Straubel 0:11:04.679 --> 0:11:06.480 who's been on the board for two years, and then 0:11:06.800 --> 0:11:11.079 Joe Gebbia, among others including Kathleen Wilson Thompson, as well 0:11:11.320 --> 0:11:14.360 Robin Dnelm, the chair of the board. We should note 0:11:14.800 --> 0:11:18.640 Max before we let you go, why do you think 0:11:19.400 --> 0:11:20.960 is it still is? Are we still at a point 0:11:20.960 --> 0:11:24.520 where Elon is so closely tied to Tesla and Tesla's 0:11:24.520 --> 0:11:31.040 future because couldn't some investors or perhaps even institutional investors 0:11:31.040 --> 0:11:33.280 see this as like, wait a second, this could actually 0:11:33.320 --> 0:11:36.280 be a positive sign for Tesla because it would help 0:11:36.320 --> 0:11:39.880 get it beyond the you know, being inextrictly bound to politics. 0:11:40.000 --> 0:11:42.640 Yeah, if you talk to investors, you do hear that view, 0:11:42.920 --> 0:11:45.600 but it's very much a minority view. And the reason 0:11:45.600 --> 0:11:48.360 it's a minority view I'm saying among Tesla investors, not 0:11:48.360 --> 0:11:52.200 necessarily among outside observers, is because the valuation of Tesla 0:11:52.280 --> 0:11:56.079 right now is very much not about its automotive ambition. 0:11:56.240 --> 0:11:58.720 So if you replaced Elon Musk with a normal CEO, 0:11:58.960 --> 0:12:01.360 what you have as a car company. But many of 0:12:01.360 --> 0:12:03.640 Tesla's investors don't want to have a car company. They 0:12:03.679 --> 0:12:06.640 want to have an AI company. And it's not clear 0:12:07.040 --> 0:12:09.600 who runs that company, who can sell the muscles. 0:12:10.040 --> 0:12:13.000 Musk has got an AI company, a second one, he does. 0:12:13.040 --> 0:12:16.839 He has got Xai absolutely, But but you know, Musk 0:12:16.880 --> 0:12:20.480 has told this story about driverless taxis and the optimist 0:12:20.559 --> 0:12:22.959 robot that's a humanoid robot. And when you look at 0:12:22.960 --> 0:12:26.719 the bullish valuations, if you listen to the bulls, they 0:12:26.720 --> 0:12:28.839 are not counting on the model three or the model. 0:12:28.920 --> 0:12:31.360 Why these the Tesla's kind of normal cars, which are 0:12:31.480 --> 0:12:35.240 very successful in their own terms. They're expecting this entirely 0:12:35.320 --> 0:12:39.720 new AI driven revenue stream, which really mostly just exists 0:12:39.720 --> 0:12:40.920 in Elon Musk's head. 0:12:41.120 --> 0:12:44.280 And if you take Elon Musk out of the equation, how. 0:12:44.120 --> 0:12:45.080 Do you do that model? 0:12:45.120 --> 0:12:49.400 It becomes harder and and people, you know, you're laughing, 0:12:49.440 --> 0:12:52.520 but you know, Elon Musk has achieved impressive things. And 0:12:52.520 --> 0:12:54.880 from the point of the investors, if anyone can do it, 0:12:54.960 --> 0:12:55.280 he can. 0:12:55.520 --> 0:12:58.559 And laughing, but I feel like they're investing in Elon 0:12:58.679 --> 0:13:02.280 right and all all the craziness and all the innovation 0:13:02.360 --> 0:13:03.000 that comes with him. 0:13:03.080 --> 0:13:04.320 Yeah, pretty good, That's how it goes. 0:13:04.960 --> 0:13:07.439 Thank you, Max Chaffkin, Thank you so much, Bloomberg Business. 0:13:07.440 --> 0:13:10.320 We recommnist Max Chafkin, co host of the Elining podcast and, 0:13:10.320 --> 0:13:12.720 as we remind you, author of the contrarian Peter Tiel 0:13:12.760 --> 0:13:14.520 and Silicon Valley's Pursuit of Power. 0:13:14.720 --> 0:13:18.679 You're listening to the Bloomberg Business Weekdaily podcast. Catch us 0:13:18.760 --> 0:13:22.160 live weekday afternoons from two to five pm Eastern. Listen 0:13:22.240 --> 0:13:25.000 on Apple CarPlay and the Android Auto with the Bloomberg 0:13:25.040 --> 0:13:27.720 Business app, or watch US live on YouTube. 0:13:27.760 --> 0:13:29.760 On the sales side, I want to bring on Punham Boyle, 0:13:29.840 --> 0:13:32.800 senior analyst for e commerce at Leisure Off Price Retail 0:13:33.080 --> 0:13:35.680 for Bloomberg Intelligence. She joins U from New York City 0:13:35.920 --> 0:13:38.800 this afternoon. Let's talk about this miss when it comes 0:13:38.840 --> 0:13:42.360 to second quarter operating income. The outlook there is that 0:13:42.559 --> 0:13:45.600 a result of tariffs? In your view, it. 0:13:45.520 --> 0:13:47.720 Has to be, because when I think about the operating 0:13:47.760 --> 0:13:51.080 margin that they just posted with AWS, you know, incredible 0:13:51.120 --> 0:13:54.920 near forty percent the downside that we're seeing going into 0:13:54.920 --> 0:13:57.640 two Q, I can't think of anything else that could 0:13:57.640 --> 0:13:59.800 be driving that and higher costs that they'll have to 0:14:00.240 --> 0:14:02.439 orb due to the tariffs. 0:14:02.640 --> 0:14:05.040 Are you surprised that, like we kind of you know, 0:14:05.400 --> 0:14:08.840 went through that press release, there's really nothing on tariffs. 0:14:08.880 --> 0:14:10.960 There's like that disclosure that kind of dumps everything at 0:14:10.960 --> 0:14:13.800 the very bottom of the page. Not surprising to see 0:14:13.800 --> 0:14:15.920 that they didn't really address it in the release, And 0:14:15.960 --> 0:14:17.480 I guess it's all going to come out on the call. 0:14:18.600 --> 0:14:19.760 Yeah, I think there's going to be a lot of 0:14:19.840 --> 0:14:22.160 questions about tariffs. Keep in mind that, you know, Amazon 0:14:22.200 --> 0:14:25.120 is directly exposed on the one P side, so roughly 0:14:25.200 --> 0:14:27.200 forty percent of its business is where they do have 0:14:27.280 --> 0:14:30.240 to deal with tariffs. The other sixty percent, that's three 0:14:30.360 --> 0:14:33.600 P the sellers have to deal with them, but Amazon 0:14:33.840 --> 0:14:36.360 helps you set the price on its platform to make 0:14:36.360 --> 0:14:38.880 it competitive. So there's just a lot of back and 0:14:38.880 --> 0:14:41.360 forth that's going on, and with some suppliers they are 0:14:41.400 --> 0:14:43.920 working one on one to see where they can help 0:14:44.080 --> 0:14:48.320 offset the price increases. But the biggest delta between one 0:14:48.400 --> 0:14:51.600 Q and two Q is tariffs. So the guidance that 0:14:51.640 --> 0:14:53.920 we see here has to be a result of that 0:14:54.120 --> 0:14:55.520 wide net that they've casted. 0:14:56.000 --> 0:14:58.800 You mentioned the ps, but translate for. 0:14:58.760 --> 0:15:03.760 US sure, third party and first party first party when 0:15:03.840 --> 0:15:07.480 Amazon owns the goods, so basically they take on the 0:15:07.520 --> 0:15:11.560 cost and they directly source it from the supplier. Third 0:15:11.600 --> 0:15:13.360 party is if you and I go on to Amazon 0:15:13.400 --> 0:15:14.960 and we start selling stuff. 0:15:14.800 --> 0:15:17.760 What's the breakdown in terms of actual goods that are 0:15:17.760 --> 0:15:19.400 sold third party versus first party? 0:15:20.040 --> 0:15:22.920 Sure, third party, we estimate is about sixty five percent 0:15:23.440 --> 0:15:25.720 and third and first party is about thirty five to 0:15:25.720 --> 0:15:26.200 forty percent? 0:15:26.360 --> 0:15:29.320 Okay, sixty four And is there more like third party 0:15:29.360 --> 0:15:31.520 is more from China or do we not know than 0:15:31.560 --> 0:15:32.120 first party? 0:15:32.160 --> 0:15:34.800 Well we Amazon doesn't tell you how much they get 0:15:34.840 --> 0:15:37.200 from China. But just by looking at what's on their 0:15:37.240 --> 0:15:41.520 platforms and third party data, irrespective third party or first party, 0:15:41.560 --> 0:15:45.200 it's estimated that over seventy percent of what's sold on 0:15:45.240 --> 0:15:49.480 the Amazon dot Com platform is from China. So it's 0:15:49.520 --> 0:15:52.040 a large, large, large piece of their market place. 0:15:52.240 --> 0:15:54.480 Just to remind everybody, I mean, you you you study 0:15:54.480 --> 0:15:56.960 e commerce at leisha off price retail, this is you know, 0:15:57.000 --> 0:16:01.560 this is your world. This stuff is made overseas, like 0:16:01.880 --> 0:16:03.960 very little of it is made here in the US, 0:16:04.920 --> 0:16:05.480 very little. 0:16:05.520 --> 0:16:07.760 I mean food is the only thing we may procure 0:16:07.840 --> 0:16:11.720 locally that Amazon sells. Really everything else, the bulk of 0:16:11.760 --> 0:16:14.560 what you buy in retail in the US is made 0:16:14.640 --> 0:16:16.840 outside of the US. It doesn't matter who you are. 0:16:18.400 --> 0:16:22.680 What I don't know, Okay, I'll let him have a moment. 0:16:23.440 --> 0:16:24.040 You know what's. 0:16:23.840 --> 0:16:26.160 Interesting put in We kind of just laugh that Normally 0:16:26.200 --> 0:16:28.800 when we're talking Amazon, we're all over Amazon Web Services 0:16:28.800 --> 0:16:31.640 and it's like, oh yeah, that retail business. So what 0:16:31.680 --> 0:16:33.720 an interesting kind of report to go through and what 0:16:33.720 --> 0:16:36.160 we're focusing on. I do want to point out though, 0:16:36.240 --> 0:16:40.320 that AWS reported first quarter sales gain seventeen percent to 0:16:40.400 --> 0:16:42.880 twenty nine point three billion, in line with analyst testaments. 0:16:42.920 --> 0:16:46.240 It was the unit's slowest growth in a year. So 0:16:46.920 --> 0:16:49.160 it does feel like I don't know, like, what do 0:16:49.200 --> 0:16:49.920 we get out of that. 0:16:51.440 --> 0:16:53.240 I think it's okay, I mean, okay, I'm going to 0:16:53.280 --> 0:16:57.240 see businesses pull forward spend, pulled back on spend. There's 0:16:57.240 --> 0:16:59.800 still a lot of momentum here on the AWS side. 0:17:00.040 --> 0:17:02.560 And really, you know, while the sales were just in line, 0:17:02.920 --> 0:17:07.720 the margin was incredible thirty nine percent operating margins thirty 0:17:07.800 --> 0:17:11.880 nine point five percent roughly, that's huge. Consensus is looking 0:17:11.880 --> 0:17:14.199 for about thirty five percent. So we do think, you know, 0:17:14.240 --> 0:17:17.840 this business will abb and flow and you'll have high margins, 0:17:17.880 --> 0:17:20.040 you'll have low margins depending on where they invest. But 0:17:20.080 --> 0:17:24.399 the long term potential of AWS is still pretty sizable 0:17:24.480 --> 0:17:26.040 and there's a long runway here. 0:17:26.720 --> 0:17:28.920 Okay. So if we think about this in the context 0:17:29.000 --> 0:17:31.120 of what we heard from what we've heard from other 0:17:31.160 --> 0:17:34.879 companies thus far, what we heard from Microsoft yesterday, and 0:17:34.960 --> 0:17:36.920 as a reminder, I mean, you cover the e commerce 0:17:37.119 --> 0:17:39.600 at leisure, the off price retail. How do you think 0:17:39.640 --> 0:17:41.639 about this in terms of the retail world, like the 0:17:41.680 --> 0:17:44.400 Walmart's of the world, the targets of the world. How 0:17:44.440 --> 0:17:48.520 does this report sort of inform the way we should 0:17:48.520 --> 0:17:50.520 be thinking about and investor should be thinking about those 0:17:50.520 --> 0:17:51.160 other companies. 0:17:52.119 --> 0:17:55.080 I think if Amazon's facing these tariff headwinds, so is 0:17:55.119 --> 0:17:59.960 everyone else, including Walmart, including smaller companies, medium sized companies, 0:18:00.240 --> 0:18:02.960 And really there is no escape from this unless we 0:18:03.320 --> 0:18:05.680 see things come from here. The one hundred and forty 0:18:05.720 --> 0:18:08.639 five percent here iff that you see on China is sizable. 0:18:09.680 --> 0:18:13.240 If that stays that way, the consumer is going to 0:18:13.280 --> 0:18:16.399 be paying higher prices. We will see some out of 0:18:16.440 --> 0:18:19.920 stocks on shelves in the coming months, as most companies 0:18:19.960 --> 0:18:23.359 have halted shipments from China, and it's not going to 0:18:23.400 --> 0:18:25.920 be an overnight switch to take everything that you make 0:18:25.960 --> 0:18:27.399 in China to somewhere. 0:18:27.000 --> 0:18:31.600 Else, or even impossible for something. Some analysts have said, well, 0:18:31.640 --> 0:18:33.800 you said empty shelves, where are we going to see them? 0:18:33.920 --> 0:18:34.840 What do you think we'll see them? 0:18:35.000 --> 0:18:37.760 Saw empty shelves in like a drugstore, But I don't 0:18:37.760 --> 0:18:39.960 know that's because everybody. 0:18:39.600 --> 0:18:40.400 Stole everything there. 0:18:40.520 --> 0:18:40.800 Terrible. 0:18:40.880 --> 0:18:42.320 I don't you know how this works. 0:18:42.359 --> 0:18:44.080 I know it's always a little war perspective. 0:18:44.080 --> 0:18:46.120 Go ahead, BuNos, Sorry, well, you. 0:18:46.080 --> 0:18:49.040 Won't see empty shelves on Amazon but you will see 0:18:49.080 --> 0:18:50.600 out of stocks. In fact, you know, I was just 0:18:50.640 --> 0:18:53.719