Speaker 1: This is Bloomberg Business Week Daily reporting from the magazine
Speaker 1: that helps global leaders stay ahead with insight on the people, companies,
Speaker 1: and trends shaping today's complex economy. Plus global business, finance
Speaker 1: and tech news as it happens. Bloomberg Business Weekdaily with
Speaker 1: Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 2: Hi, everyone, welcome to the weekend edition of Bloomberg Business Week.
Speaker 2: This week, the spotlight was on the World Economic Forums
Speaker 2: Annual meeting in Davos, Switzerland, and a keynote given by
Speaker 2: US President Donald Trump.
Speaker 3: It's great to be back in beautiful Davos, Switzerland and
Speaker 3: to address so many respected business leaders, so many friends,
Speaker 3: few enemies.
Speaker 4: As you've learned, when the United States goes up, you follow.
Speaker 4: I want Europe to do great, I want UK to
Speaker 4: do great. We want strong allies, not seriously weakened ones.
Speaker 2: All right, That, of course was President Trump at Davos, Switzerland,
Speaker 2: the World Economic Forums Annual Meeting. Got to say the
Speaker 2: President tim grabbing a lot of global attention leading up
Speaker 2: to and at and after the meeting there in Davos
Speaker 2: because of renewed terwer threats on Europe and really reviving
Speaker 2: that idea of a US takeover of Greenland the outcome,
Speaker 2: and I got to say, there are a lot of
Speaker 2: twists and turns in this. No new tariffs on europe
Speaker 2: markets like that, and then a framework of a future
Speaker 2: deal that includes mineral rights we think in Greenland. It
Speaker 2: does still feel like a lot of details yet unknown
Speaker 2: and to be worked out. So stay tuned, check out
Speaker 2: the Bloomberg and Bloomberg dot com for the latest on this.
Speaker 5: So, just to reiterate a lot coming from the president
Speaker 5: flooding the zone as others have described, That's what Steve
Speaker 5: Bannon said during the first term is sort of the
Speaker 5: strategy when it comes to communications. Raising the question two
Speaker 5: once again about the logic behind the administration's decisions that
Speaker 5: are often pulled back. It's something that we seen quite
Speaker 5: a bit during President Trump's first full year back in
Speaker 5: the oval office, such that there's a term that has
Speaker 5: become popular. We've heard it a lot in the financial
Speaker 5: press and the financial media. I've heard a lot on
Speaker 5: Bloomberg the idea of the taco trade Trump always chickens out.
Speaker 2: Yeah, that definitely came back into the narrative this week. Hey,
Speaker 2: it also begs the question is there a method to
Speaker 2: what some might say is the madness in terms of
Speaker 2: logic and strategy of the Trump White House. One Nobel
Speaker 2: Prize winning economist looked into it and offers up a
Speaker 2: theory of Trump.
Speaker 5: Also, this hour arc invests Kathy Wood. She's giving us
Speaker 5: where last year's disruption may be creating this year's opportunities,
Speaker 5: and from the c suite, Charles Schwab's chief executive officer,
Speaker 5: Rick Worcester, stops by on everything from a record quarter
Speaker 5: and the White House's moves to opportunities that he sees
Speaker 5: in prediction.
Speaker 6: Markets or doesn't. Maybe he's got.
Speaker 5: A really interesting view, especially compared to the competitors out there.
Speaker 2: I thought it was really smart and detailed, So stick
Speaker 2: around for that. Hey, all of this to come over
Speaker 2: the next couple of hours. We begin with what some
Speaker 2: are calling the theory of Trump. We've entered year two
Speaker 2: of President Trumps second term, and for years his critics
Speaker 2: and supporters alike have described his politics as chaotic, impulsive
Speaker 2: tweets in the middle of the night, norm breaking decisions,
Speaker 2: and a governing style that often seems driven by instinct
Speaker 2: rather than ideology.
Speaker 5: But what if it isn't chaos at all. In a
Speaker 5: recent Bloomberg BusinessWeek story, drone Asamoglu, Institute Professor in the
Speaker 5: Department of Economics at the Massachusetts Institute of Technology, also
Speaker 5: a Nobel Laureate in economics, argues there is a unified
Speaker 5: theory behind Trump's actions, one rooted in leverage, disruption, and
Speaker 5: a willingness to weaken institutions in order to strengthen negotiating power.
Speaker 5: Darn joined us with more.
Speaker 6: You took a step back.
Speaker 2: You looked at this, and we're just trying to understand
Speaker 2: this NonStop White House news cycle. Is it about the
Speaker 2: president and his team controlling that news cycle?
Speaker 6: And this is what we all chase, you know?
Speaker 2: Is it something more significant beyond just kind of a
Speaker 2: flood the zone concept that we often associate with President
Speaker 2: Trump and his team.
Speaker 6: What did you come up with?
Speaker 7: Look, I mean, obviously there is a flood the zone
Speaker 7: element in there, and it looks chaotic, But in my mind, worryingly,
Speaker 7: there is a bit of a theory, which is that
Speaker 7: all of these actions are aimed at centralizing power in
Speaker 7: the hands of an executive presidency with fewer and weaker
Speaker 7: checks which come either from institutions or norms. So even
Speaker 7: the foreign actions are all about increasing domestic power. Even
Speaker 7: the sort of unconventional appointments are about weakening norms that
Speaker 7: control what the president can do and bringing in more
Speaker 7: loyalists that have now more for maneuver because all the
Speaker 7: norms that had guided US political dynamics have been broken.
Speaker 5: So you write that it would have been viewed as
Speaker 5: completely unacceptable for Bill Clinton, George W. Bush, or Barack
Speaker 5: Obama to ask his attorney general or the DOJ to
Speaker 5: go after enemies. It would also have been considered beyond
Speaker 5: the pale for a president to invoke what you describe
Speaker 5: as a poorly documented crime emergency as a pretext for
Speaker 5: sending the National Guard into US cities, or for a
Speaker 5: president to continue to be involved in his family business
Speaker 5: well in office. Why is it being viewed, at least
Speaker 5: by members of Congress Republicans in Congress as acceptable for
Speaker 5: President Trump to do these things.
Speaker 7: Well, you know, part of the reason why those actions
Speaker 7: would not have been taken in the past is because
Speaker 7: they go against norms. There weren't explicit laws that said
Speaker 7: these things, so it was part of an institutional equilibrium
Speaker 7: with norms of acceptance and backed up by other politicians
Speaker 7: deviating and sort of distancing themselves if a president did that,
Speaker 7: or bigger sort of pushback from civil society or the media.
Speaker 7: But President Trump and his team have been breaking these
Speaker 7: norms systematically for the first year. But even if you
Speaker 7: go to the first term of the president, there was
Speaker 7: already the same attempt and all of these have now
Speaker 7: culminated in Trump controlling the party and the rest of
Speaker 7: the party, even part of the judicial system, are no
Speaker 7: longer able to stand up to him, and all of
Speaker 7: the norms that would have helped them sort of mobilize
Speaker 7: around some sort of objection saying this is not acceptable.
Speaker 7: You know, we don't see them now. Recently, for the
Speaker 7: FED case, a few senators have started making grumbling, So
Speaker 7: perhaps there might be some limit to what the legislature
Speaker 7: is going to put up with. But the part of
Speaker 7: the agenda that is I think now very clearly visible
Speaker 7: is sort of break down one piece after another of
Speaker 7: this edifice that was constraining other presidents that are now
Speaker 7: gone for President Trump.
Speaker 2: So Jerron so basically right, we thought this checks and
Speaker 2: balances would work right three branches of the government. It
Speaker 2: made such sense, and it for so long has pretty
Speaker 2: much worked pretty well, but there was this strategy when
Speaker 2: it comes to the legal part, certainly of the government
Speaker 2: as well as the legislative. But let's just talk the
Speaker 2: legal part, because we did have you know, a judge
Speaker 2: saying Dominion Energy can resume a win project that President
Speaker 2: Trump had halted. So we have seen him lose some
Speaker 2: of the judicial actions out there. Having said that, if
Speaker 2: he didn't have that in terms of the Supreme Court justices,
Speaker 2: would we not be maybe having this conversation today, Is
Speaker 2: that what's so much about it? Or is it all
Speaker 2: of it? That and the legislative side of it, and everybody,
Speaker 2: you know, even them GOP members of Congress saying, yeah,
Speaker 2: do what you want to do. You know, it's kind
Speaker 2: of interesting because that's their job kind of being taken away.
Speaker 7: Yeah, I mean exactly, the sort of separation of powers
Speaker 7: with you know, not just the Congress and the judiciary,
Speaker 7: but also the independent agencies acting like the Fourth Brunch.
Speaker 7: Those were the things that constrained presidents and if today
Speaker 7: those constraints were working well, we wouldn't be in this
Speaker 7: turmoil in terms of the domestic situation. And part of
Speaker 7: the concern is that right now it's really the parts
Speaker 7: of the judicial branch that is that are standing up
Speaker 7: against Trump indeed, but that's that's got its limits because
Speaker 7: there are a lot of Trump appointees, and the Supreme Court,
Speaker 7: with lots of Republican and Trump appointees, hasn't really taken
Speaker 7: a very strong stance either. So all of these are
Speaker 7: piling up and taking us more and more to a
Speaker 7: situation where I think many of the former sort of
Speaker 7: presidents or constitutional scholars would find very scary because the
Speaker 7: structural US government wasn't meant to function this way.
Speaker 5: So then I'm trying to understand. And one thing that
Speaker 5: we do each and every day is we look at
Speaker 5: the markets, and we look at market reaction. Markets were
Speaker 5: and have been kind of seen as a backstop here
Speaker 5: to at least some of the things that the President
Speaker 5: has said he will do or wants to do. Do
Speaker 5: you think they're reacting to his decisions or do you
Speaker 5: think they're saying, hey, it's all fine and good at
Speaker 5: least up until now.
Speaker 7: Yeah, it is hard to understand why the markets haven't
Speaker 7: reacted more because some of the effects that are already
Speaker 7: seen from the tariffs. I think that just really underlies
Speaker 7: that you know, the stock market is not the fifth
Speaker 7: branch of government. It's not really a hard constraint in
Speaker 7: the same way that the other ones were supposed to
Speaker 7: be on the sort of centralization of power in the
Speaker 7: hands of one person or one group, And the tariff
Speaker 7: debacle demonstrates that the administration is much bolder and is
Speaker 7: willing to take actions that could lead to market reactions,
Speaker 7: at least in the short run. Now some people are saying, Oh,
Speaker 7: it's the bond market really that we need to watch
Speaker 7: out for. I don't know why. You know, right now,
Speaker 7: the bond market would be much more important than the
Speaker 7: stock market, and sometimes both of them are things that
Speaker 7: both the administration and the business community are watching. But
Speaker 7: I wouldn't you know, bet on, you know, the market
Speaker 7: mechanism being a strong enough guardrail against this kind of
Speaker 7: executive imperial presidency emerging. And if it does, I think
Speaker 7: it has really sweeping implications for how business is done again.
Speaker 7: You can see that from the fact that the President
Speaker 7: Trump can invite people to his office and say give
Speaker 7: us twenty percent of your shares.
Speaker 6: Yeah something.
Speaker 2: Yeah, there's just a moment after a moment where many
Speaker 2: would say this is it's kind of remarkable. So I
Speaker 2: am curious is this lasting, Like I am wondering who
Speaker 2: this emboldens in terms of whoever might be in the
Speaker 2: White House next.
Speaker 6: Is this the playbook? The new US playbook? And to
Speaker 6: be sorry, that's.
Speaker 7: What I'm worried about exactly. I mean, look, I mean
Speaker 7: Trump is an agent of change, He's really reshaping norms
Speaker 7: and institutions, but he is himself a symptom of what
Speaker 7: was wrong in some sense with the US system. There
Speaker 7: was a lot of inequality, there was a lot of discontent,
Speaker 7: and there was also some gridlock. You see more executive
Speaker 7: orders by Bush than by Obama than by Biden. So
Speaker 7: Trump is, you know, accelerating that trend, but he's continuing
Speaker 7: that trend. And I do not trust that the next
Speaker 7: Democrat or Republican is going to be much better behaved.
Speaker 7: Once the floodgates are open, I think we're going to
Speaker 7: go to a place where, you know, presidents could have
Speaker 7: much more arbitrary power, both in terms of their ideological agenda,
Speaker 7: but also in terms of corruption and cryptocracy.
Speaker 5: That was Drone Asimoglu, a Nobel Laureate in economics and
Speaker 5: Institute professor in the Department of economics at MIT. Check
Speaker 5: out his full piece on a Bloomberg dot com and
Speaker 5: on the Bloomberg terminal.
Speaker 2: Coming up, what last year's market turbulence could mean for
Speaker 2: this year's winners.
Speaker 5: And who may have the power to disrupt like Elon Musk?
Speaker 2: Is there another Elon like individual out there? We're going
Speaker 2: to ask arcinvest Kathy Wood, she joins us. Next This
Speaker 2: is Bloomberg.
Speaker 1: This is Bloomberg Business Week Daily with Carol Masser and
Speaker 1: Tim Stenovek on Bloomberg Radio.
Speaker 6: After the S and P.
Speaker 2: Five hundred index rebounded from the brink of a bear
Speaker 2: market in April last April and then spent the remainder
Speaker 2: of twenty twenty five going from one record to the next,
Speaker 2: President Donald Trump built it as a sign that he
Speaker 2: had transformed the United States, as he likes to put it,
Speaker 2: into the world's hottest country.
Speaker 5: Measured against stock markets from Tokyo to Frankfurt to financial
Speaker 5: capitals across the developing world. The verdict on Trump's return
Speaker 5: to the White House is decidedly less triumphant. In fact,
Speaker 5: equity's worldwide once the US is excluded, have risen around
Speaker 5: thirty percent since he took office a year ago. Roughly
Speaker 5: double the S and P five hundred schain. That's according
Speaker 5: to msci's index.
Speaker 2: Here to talk about twenty twenty six the economy investment ideas.
Speaker 2: Great to have back with us the founder, CEO and
Speaker 2: CIO of ARC invest Kathy, which he joins us from
Speaker 2: Saint Petersburg, Florida. Kathy, great to have you here, Happy
Speaker 2: New Year.
Speaker 8: Happy new Year, Carol and Tim very happy to be
Speaker 8: here again.
Speaker 2: Well, it's great to have you here. And I want
Speaker 2: to start with what stocks did here in the US
Speaker 2: really well last year, but if you look at global stocks,
Speaker 2: you could say that there was certainly some underperformance by
Speaker 2: the US. You've invested in a lot of US names,
Speaker 2: but also a lot outside the US. And I think
Speaker 2: about Chinese companies buid By. Do you, Ali Baba, are
Speaker 2: you looking for more opportunities outside the US at this
Speaker 2: point or And I wonder if you think it's time
Speaker 2: for maybe US docs and takele.
Speaker 8: I think we're very focused on the deregulation, lower taxes
Speaker 8: and what we believe will be lower inflation, much lower inflation,
Speaker 8: and lower interest rates in the US, and we think
Speaker 8: the combination of those is actually going to drive the
Speaker 8: returns on invested capital in the US up relative to
Speaker 8: those in the rest of the world. And I think
Speaker 8: many people are underestimating, especially on the corporate tax side,
Speaker 8: that thanks to the new depreciation schedules, our effective corporate
Speaker 8: tax rate, not the statutory, but the effective will drop
Speaker 8: to one of the lowest in the world at roughly
Speaker 8: ten percent, certainly near a record low for the US.
Speaker 5: So do you think, Kathy, that's not priced in yet
Speaker 5: to US equities, Like, have investors not realized that and
Speaker 5: therefore it's not pricing you know.
Speaker 8: It's very interesting. Maybe a lot of your guests have
Speaker 8: been talking about the depreciation schedules how massively they are
Speaker 8: going to encourage capital investment here in the United States.
Speaker 8: So we've never had full depreciation in year one of
Speaker 8: manufacturing facilities, full depreciation in the first year of service.
Speaker 8: That means corporations will get huge tax refunds that they
Speaker 8: will be able to reinvest into innovation because we also
Speaker 8: equipment domestic R and D, and software those three full
Speaker 8: depreciation first year of service that has been legislated. Normally
Speaker 8: we get oh a few years of this you know
Speaker 8: this cut and not cut, but that has been legislated
Speaker 8: Now it's all the time, So we don't think people
Speaker 8: understand how profound some of these tax changes are.
Speaker 2: So what does that mean for something like the AI trade,
Speaker 2: specifically Kathy, where I think people are worried about pockets
Speaker 2: of it with a you know, being in a bit
Speaker 2: of a bubble. Does it benefit everyone who is somehow associated,
Speaker 2: whether it's the chip companies, whether it's the energy companies.
Speaker 2: Do you see the benefits playing out there and giving
Speaker 2: it more room to move to the upside?
Speaker 8: Absolutely? Absolutely. I mean we're having huge buildouts of data
Speaker 8: centers and power facilities, all of that, all of those
Speaker 8: depreciation schedules will apply to this boom in investment and
Speaker 8: contribute to it. So yes, any in fact, Carol, Yeah, yeah,
Speaker 8: I was just going to say, many people think we're
Speaker 8: in a bubble, and yes, the data center spending last
Speaker 8: year was about five hundred billion dollars And you can
Speaker 8: see all of this in our Big Ideas Report we
Speaker 8: just released it. Thank you Bloomberg for featuring it. But
Speaker 8: five hundred billion dollars is a two and a half
Speaker 8: times increase from where it had been trending for years.
Speaker 8: So big increase, no doubt about it. But we think
Speaker 8: that number needs to go to one point four trillion
Speaker 8: in the next five years to accommodate the AI boom
Speaker 8: that is now under way and is going to drive
Speaker 8: productivity gains incredibly.
Speaker 6: I want to get into that in just a moment.
Speaker 2: I'm really also pequked or interested in the healthcare aspect
Speaker 2: of it, because I feel like there's a lot going
Speaker 2: on before we do.
Speaker 4: So.
Speaker 2: We also have your twenty twenty six outlook, and what's
Speaker 2: interesting is you note that this is an important economic
Speaker 2: historical moment.
Speaker 6: How so.
Speaker 8: Well, we are in a technology revolution, and many people
Speaker 8: thought that the Internet was a technology revolution, and to
Speaker 8: some extent it was. But today instead of just one
Speaker 8: major platform evolving, we have five, so robotics, energy storage, AI,
Speaker 8: blockchain technology, and multiomic sequencing in the life science space,
Speaker 8: which which we believe is the most profound application of
Speaker 8: AI healthcare. And so this boom. If you look back
Speaker 8: at the railroad boom, the amount of investment that we
Speaker 8: saw back then was about six percent of GDP at
Speaker 8: its peak, five to six percent. The internet boom was
Speaker 8: more like the auto boom in the early nineteen hundreds
Speaker 8: was more in the three to four percent of GDP range.
Speaker 8: We believe this this five platform innovation strategy or BOOM,
Speaker 8: is going to move to twelve percent of GDP, and
Speaker 8: we do believe also that productivity growth will accelerate to
Speaker 8: the four to six percent range and be sustained there.
Speaker 8: Normally we see a cyclical peak around there and then
Speaker 8: it falls back. We think it will be sustained and
Speaker 8: we think that by the end of this decade, real
Speaker 8: GDP growth could be averaging more than seven percent per year.
Speaker 8: And I know that sounds shocking, given that we've been
Speaker 8: at three percent for one hundred and twenty five years,
Speaker 8: but it is the history associated with technology revolutions, a
Speaker 8: step change up in GDP.
Speaker 5: Growth, the productivity increase, the GDP growth that you are
Speaker 5: forecasting as a result of these disruptive technologies, to what
Speaker 5: extent is that the result of fewer people doing more?
Speaker 5: My question is about job losses as a result of
Speaker 5: this technology, because if everything that investors are betting on
Speaker 5: when it comes to this AI revolution comes true, it
Speaker 5: means that companies aren't going to need as many people
Speaker 5: to do a lot more. What does that look like.
Speaker 8: Well, GDP growth at seven percent plus per year tells
Speaker 8: you there's going to be a lot of economic activity,
Speaker 8: more economic activity from a sustained growth point of view
Speaker 8: than we've seen in quite some time. The history of
Speaker 8: technology is it's a net job creator. In the early nineties,
Speaker 8: when developers were evolving the Internet, we could not have
Speaker 8: imagined uber or Airbnb back then, and I think the
Speaker 8: same is true now. We cannot imagine the kinds of
Speaker 8: jobs that are going to exist in the future. And
Speaker 8: the other thing that we're excited about from a job
Speaker 8: creation point of view is we're seeing new worlds being created.
Speaker 8: And by that I mean most of us think about Earth,
Speaker 8: but now we're moving into space, even data centers. We
Speaker 8: think elon leading that charge will start moving into space
Speaker 8: and we won't have the not in my backyard and
Speaker 8: the bureaucracy associated with data centers. There's going to be
Speaker 8: huge job creation around the space exploration and all of
Speaker 8: the opportunities out there. And then the other one, and
Speaker 8: you'll find this in our Digital Assets section of Big
Speaker 8: Ideas is the digital world immutable private property rights. We
Speaker 8: know from economic history the best way to lift people
Speaker 8: and countries out of poverty is with private property rights
Speaker 8: that are immutable. Well, that is now moving into the
Speaker 8: digital world for the first thanks to blockchain technology. So
Speaker 8: we're not worried about job creation, but for those who are,
Speaker 8: because there is something happening that I know is concerning
Speaker 8: to many people. The unemployment rate for sixteen to twenty
Speaker 8: four year old has moved to twelve percent. Twelve percent,
Speaker 8: big increase. And what is that saying. That's saying that
Speaker 8: entry level jobs are not being created the way they
Speaker 8: used to be. To those people, I say, you know,
Speaker 8: you must have in your mind an idea for a
Speaker 8: new business, something that frustrates you, an unmet need. Well,
Speaker 8: now you can go to chat GBT, you can go
Speaker 8: to groc and you can have an assistant help you
Speaker 8: build out that business. Just interview for jobs, but also
Speaker 8: think about new business ideas. I think we're going to
Speaker 8: see entrepreneurs explosion here.
Speaker 2: Well, and you know, speaking of entrepreneurial explosion, I think about,
Speaker 2: you know, how long you have certainly been with Tesla
Speaker 2: and a backer of Elon.
Speaker 6: Musk a long time.
Speaker 2: And I think about, you know, when we first talked
Speaker 2: and you likened him to mister Einstein, Albert Einstein. But
Speaker 2: I just wonder Elin at Davos earlier today and he
Speaker 2: talked about the carmaker's fortunes will be increasingly dependent on
Speaker 2: humanoid machines. Kathy, how are you modeling this, I mean
Speaker 2: into the thesis of Tesla, and is that where the
Speaker 2: growth is more so than EV's for Tesla going.
Speaker 8: Forward without a doubt. We've always said Tesla is not
Speaker 8: an auto company. It is actually the convergence of three
Speaker 8: of the platforms I mentioned, so robotics, energy storage, and AI.
Speaker 8: Each one of those technologies it has its own s
Speaker 8: curve and now they're feeding each other and we're seeing
Speaker 8: that in robotaxis. Robotaxis we believe will account for ninety
Speaker 8: percent of Tesla's valuation by the end of the decade.
Speaker 8: We're in print at twenty six hundred. That includes nothing
Speaker 8: for Optimist robots, and we're beginning to understand how quickly
Speaker 8: Tesla is moving on that front. Why Because it's the
Speaker 8: convergence of the same three technologies, robotics, energy storage, and AI.
Speaker 8: So I think that price target obviously if Optimis is successful,
Speaker 8: and we believe it will be, we think that humanoid
Speaker 8: robots is evolving into a twenty six trillion dollar opportunity.
Speaker 8: Half in the home half in manufacturing plants.
Speaker 5: That was ourk Invest's Kathy Wood. That full conversation available
Speaker 5: on the Business Week podcast feed and of course on
Speaker 5: the Bloomberg terminal.
Speaker 2: Still ahead on Bloomberg Business Week. Market swings, geopolitical uncertainty,
Speaker 2: navigating risks, that's coming out investors this past week alone,
Speaker 2: actually already in twenty twenty six.
Speaker 5: On that of you from the c suite and into
Speaker 5: the minds of investors and if prediction markets are what
Speaker 5: they want, the CEO of Charles Schwab, that's next. This
Speaker 5: is Bloomberg.
Speaker 6: This is Caroline Hyde and I'm Ed Ludlow.
Speaker 9: Join us for Bloomberg Technology, a daily podcast focusing exclusively
Speaker 9: on technology, innovation and the future of business.
Speaker 10: We bring you the latest headlines from Silicon Valley and
Speaker 10: conversations with tech's biggest decision makers.
Speaker 11: You have to have a pro innovation mindset.
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Speaker 1: This is Bloomberg Business Week Daily with Carol Masser and
Speaker 1: Tim Stenovek on Bloomberg Radio.
Speaker 2: Charles Schwab reported earnings this past week that beat Wall
Speaker 2: Street expectations after the company reported a surge and average
Speaker 2: daily trading volume in the fourth quarter. All of this
Speaker 2: happening as retail investors sought to take advantage of the
Speaker 2: end of a strong year for the stock market.
Speaker 5: Retail investors are still looking for guidance as they saw
Speaker 5: markets whip saw in response to President Trump's global tariffs
Speaker 5: and geopolitical uncertainty, plus a rising popularity in prediction markets.
Speaker 2: That's why we wanted to hear directly from the top
Speaker 2: and from someone who understands this space and markets in
Speaker 2: a big way. Rick Worster is President and CEO of
Speaker 2: Charles Schwab. You kicked things off with us talking about
Speaker 2: the company's latest earnings update, well.
Speaker 13: As a record quarter for us as a firm. Our
Speaker 13: our earning screw fifty percent year over year, our revenue
Speaker 13: was up twenty two percent year over year, and we
Speaker 13: saw net new client assets to the firm of five
Speaker 13: hundred and nineteen billion dollars on the year, including an
Speaker 13: all time record quarter in the fourth quarter of one
Speaker 13: hundred and sixty three billion dollars. And importantly, what we
Speaker 13: are seeing is a ball market for convenience, not just
Speaker 13: in financial services, but I think across most industries. The
Speaker 13: way that reflects itself for us is a desire for
Speaker 13: clients to have more of their financial life conducted with
Speaker 13: one institution, and we've been the institution for many that
Speaker 13: they're turning to. We can help them with their investing needs,
Speaker 13: we can help them with their trading needs, with their
Speaker 13: wealth needs, with their banking and lending needs, and so
Speaker 13: bringing together a client's financial life, we're able to help
Speaker 13: them more. When we do that, they're satisfactionally actually increases
Speaker 13: in our business growth. So it's a win for them
Speaker 13: because we're bringing convenience, and then's a win for us
Speaker 13: because we're doing more business with them and doing more
Speaker 13: to help them in their financial life.
Speaker 5: You mentioned financial lives, and you just went through a
Speaker 5: whole list of things that people do with these apps
Speaker 5: and services. What about prediction markets? Can you talk a
Speaker 5: little bit about whether you're planning on exploring options for
Speaker 5: customers when it comes to prediction markets. It's all a
Speaker 5: rage right now, as you very well.
Speaker 6: Know, and you thought we were going to warm you
Speaker 6: up we weren't.
Speaker 13: We're just going right in at the moment. It's not
Speaker 13: high on our client's list of things they want us
Speaker 13: to innovate for them, and so we've been focused our
Speaker 13: innovations in other areas that are more interest to clients.
Speaker 13: But I distinguish that between that and sports gambling. And
Speaker 13: if you look at ninety five percent of the volume
Speaker 13: of what people call prediction markets is actually just sports gambling,
Speaker 13: and that's not something that is we're keenly interested in
Speaker 13: getting into for a very simple reason, which is our
Speaker 13: mission as a firm is to make clients better off
Speaker 13: in their financial life. And less than five percent of
Speaker 13: people who go on to one of these gambling apps
Speaker 13: take out more money than they put in in the
Speaker 13: first place. That's the complete antithesis of what we do
Speaker 13: at schwab. Our client's wealth is at an all time high,
Speaker 13: the level advice we're giving them is that an all
Speaker 13: time high, and the amount we're doing to try to
Speaker 13: help them is that an all time high. So we'll
Speaker 13: leave the sports gambling, which constitutes ninety five percent of
Speaker 13: the prediction markets volume, We'll leave that to the gambling houses,
Speaker 13: to the van duals, the DraftKings and the Robin Hoods.
Speaker 5: So it's funny. It's interesting that you say robinhood. We'll
Speaker 5: get back to that because I think Robinhood w would
Speaker 5: probably like to position itself as a competitor to Charles
Speaker 5: Schwab in a lot of areas. If we stick with
Speaker 5: the ninety five percent of what you believe prediction markets
Speaker 5: a sports gambling, what is the five percent that is
Speaker 5: of interest to you that we could potentially see at
Speaker 5: one point on Schwab's platform. Give us some examples there.
Speaker 7: Well.
Speaker 13: I think if you want to take a position on
Speaker 13: what the employment report's going to be, you know, at
Speaker 13: the end of the month, or how inflation's going to print,
Speaker 13: those things could have an impact on your portfolio. If
Speaker 13: you have a big bond position, you may have interest
Speaker 13: in what's going to happen in the inflation report. And
Speaker 13: it's a simple way of taking a position based on
Speaker 13: a yes or no position, And so that could be
Speaker 13: of interest to clients. But the reason I think we
Speaker 13: see haven't seen much volume in those and the reason
Speaker 13: why ninety five percent of the volume is in sports
Speaker 13: gambling is because if you want to take a position
Speaker 13: on the employment report or the inflation report. There are
Speaker 13: countless ways to do that in financial market spense already
Speaker 13: doing that, whether it's in the bond market, in the
Speaker 13: futures market through options, there's plenty of ways to do
Speaker 13: that today. And I think that's part of the reason
Speaker 13: why the true idea of prediction markets really haven't taken off,
Speaker 13: and why the firms that offer this have pivoted to
Speaker 13: sports scambling, because there's a lot more interest in that
Speaker 13: than there is in taking a position on the employment
Speaker 13: or inflation report.
Speaker 2: All right, So then safe to say, Rick, if you
Speaker 2: were a betting man, I would guess that there's nothing
Speaker 2: in terms of a prediction market on the Schwab platform
Speaker 2: in the next year or so, or maybe never.
Speaker 13: Well, we've been innovating at a very fast rate. Twenty
Speaker 13: twenty five was all about how do we meet the
Speaker 13: wealth lending active trading needs of our clients, and we
Speaker 13: had significant innovations in every one of those areas. We
Speaker 13: went to twenty four by five trading for our active traders.
Speaker 13: We continue to make our mobile app even stronger for
Speaker 13: those that want to actively trade and do so via
Speaker 13: the mobile app. For our wealth clients, we launched new
Speaker 13: tax trusts and estate capabilities, including an investment made in
Speaker 13: wealth dot Com to bring trust capabilities directly to our clients.
Speaker 13: We launched a series of new capabilities for our advisor clients,
Speaker 13: and in particularly really leaned into innovations around making it
Speaker 13: easier for them to work with us. All of those
Speaker 13: are things that we think are far more impactful to
Speaker 13: our clients' ability to grow their wealth than prediction markets.
Speaker 13: And when we go out and survey our clients about
Speaker 13: what they want from us, prediction markets is low on
Speaker 13: the list, So it's something we are actively looking at.
Speaker 13: I think at some point in the future we will
Speaker 13: have true prediction markets at some point, but it's just
Speaker 13: not high on our innovation list because we're firmly focused
Speaker 13: on those innovations they're going to have the most impact
Speaker 13: on our clients'.
Speaker 6: Wealth, right.
Speaker 2: Unlike something we talked about when we were at SWAB
Speaker 2: Impact with you in November that you had just done
Speaker 2: a deal which would give investors access to private companies,
Speaker 2: as was buying Forge Global, So I get that's more
Speaker 2: of a priority for clients.
Speaker 13: Yeah, I think you go back to the eighties when
Speaker 13: I believe it was KKR that did the first leveraged
Speaker 13: buyout instants have been benefiting from the diversification and the
Speaker 13: return enhancement from alternatives investments, and you know, in the
Speaker 13: past decades or multiple decades, they're really wealthy have also
Speaker 13: been able to participate in those return and diversification benefits,
Speaker 13: but the everyday retail investor has not been able to.
Speaker 13: And our Forge acquisition was really about democratizing investments and alternatives.
Speaker 13: We're now going to be able to bring it to
Speaker 13: all of our investors in multiple different forms and allow
Speaker 13: them to participate in private markets the way institutions and
Speaker 13: the very wealthy have been able to. And we're thrilled
Speaker 13: to bridge that gap and excited for what that could
Speaker 13: mean for our client's wealth.
Speaker 2: I want to bring this into the conversation because I
Speaker 2: feel like when Tim and I and you were together
Speaker 2: at Tuama Impact in Denver, it was pretty upbeat. I
Speaker 2: think about the market environment and the outlook, and there's
Speaker 2: been a lot that's happened here in twenty twenty six.
Speaker 2: It feels like volatility is back. I'm just curious, you know,
Speaker 2: have any of the assumptions about the White House and
Speaker 2: policy and changes changed.
Speaker 13: In your view. I don't think any of that surprises us.
Speaker 13: We're still within percent or two of all time highs
Speaker 13: and markets. I think there's going to be geopolitical noise
Speaker 13: from time to time. If you've read the book The
Speaker 13: Art of the Deal, I think it begins with starting
Speaker 13: big in your requests and then negotiating to something that
Speaker 13: is workable for both parties. And my guess is that
Speaker 13: that may be the playbook that's followed here. But for
Speaker 13: our clients, we're not seeing an undue amount of concern
Speaker 13: and this is a kind of environment in which we
Speaker 13: thrive because we're not just an investment app. We're so
Speaker 13: much more than that. We took thirty million calls from
Speaker 13: clients last year and answered them in less than thirty seconds.
Speaker 13: We're in all many local communities across this country with
Speaker 13: actual people that are there to help coach our clients
Speaker 13: and how to navigate periods like this and how to
Speaker 13: see through the noise and be diversified and stick with
Speaker 13: it for the long term so that they can build
Speaker 13: their wealth. So whatever markets and geopolitics bring, we're going
Speaker 13: to be ready for it, and it's going to help
Speaker 13: us distinguish what we stand for here at Schwab, which
Speaker 13: is helping our clients grow their wealth.
Speaker 5: You know, we had some reporting in recent days about
Speaker 5: the New York Stock Exchange exploring ways for twenty four
Speaker 5: to seven trading of certain assets, and I'm curious crypto
Speaker 5: kind of paved the way for that because a lot
Speaker 5: of people can trade crypto twenty four to seven. What
Speaker 5: do you think of the ability for people to trade
Speaker 5: stocks twenty four to seven.
Speaker 13: Well, I think we're very open to that and would
Speaker 13: certainly participate. We're already twenty four by five. Today, we
Speaker 13: see very little market activity or very little client activity
Speaker 13: outside of market hours. It's usually only a couple of
Speaker 13: a percent. The vast majority of trading happens within the
Speaker 13: market hours, and I think the market hours are a feature,
Speaker 13: not a bug. And what I mean by that is
Speaker 13: by limiting the marketing hours market hours, you draw people
Speaker 13: in at the same time and create a lot of
Speaker 13: liquidity so that spreads are tight and trading efficiency is
Speaker 13: very high. I think the convenience of twenty four to
Speaker 13: seven is certainly very appealing, but we need to make
Speaker 13: sure that those trades are done in a way that
Speaker 13: makes sense for clients. And you know, as we see
Speaker 13: clients trade on our twenty four by five platform. We
Speaker 13: make very certain that they trade in a way that
Speaker 13: they're recognizing the higher spreads, and we make that very
Speaker 13: clear to them and they live with that for the convenience.
Speaker 13: But we just need to be careful as we go
Speaker 13: to twenty four by seven that we don't lose the
Speaker 13: efficiency of the market and the benefits of getting everyone
Speaker 13: into the market at around the same time, which is
Speaker 13: great for trading efficiency.
Speaker 6: Hey, Rick, superquick ten seconds. It feels optimistic this year.
Speaker 7: I think.
Speaker 13: So there's a lot you know, the economies on strong footing.
Speaker 13: Market's been up three years in a row. Unless something changes,
Speaker 13: things look pretty good.
Speaker 5: Thanks to Rick Worcester, President and CEO of Charles Schwab.
Speaker 2: We should point out after the company reported earnings, there
Speaker 2: were a few analysts on this street, including UBS and
Speaker 2: td COW and that actually raised their price target on
Speaker 2: Charles Schwab, which really outperformed last year and is already
Speaker 2: trading higher here in twenty twenty six.
Speaker 5: So I really that conversation with Rick for a couple
Speaker 5: of reasons. One, I thought he was really candid with
Speaker 5: us when it came to prediction markets, and he mentioned
Speaker 5: some competition, and what was notable to me, Carol is
Speaker 5: he put robin Hood, which I would say is among
Speaker 5: the biggest competitors to Charles Schwab at least with the
Speaker 5: the you know, retail investing audience. He sort of alluded
Speaker 5: to that company in the same breath as he referred
Speaker 5: to you know, callsh and poly market as prediction platforms.
Speaker 5: And he was very quick to say, we're not interested
Speaker 5: in sports prediction markets. We think that's gambling. And if
Speaker 5: you go to robin Hood's website and you just look
Speaker 5: at prediction markets, it's like all sports that are featured,
Speaker 5: it's we're recording this, you know, when we're talking about
Speaker 5: the Australian Open. So there's Australian Open, there's Denver Washington,
Speaker 5: there's some other NBA stuff, there's some pro hockey, there's
Speaker 5: some pro football, there's some soccer, Like those are those
Speaker 5: are the events that Robinhood highlights on its website.
Speaker 2: Well, and this is going to interesting, and I feel
Speaker 2: like there's going to be, you know, a moment where
Speaker 2: regulators are going to say, well, wait a minute, are
Speaker 2: these sports gambling sites? And so what's the oversight that's required,
Speaker 2: Like is it just like the other gambling sites right
Speaker 2: where there are rules and regulations that are keeping an
Speaker 2: eye on them. I did think what Rick said, as
Speaker 2: you said not interested in offering sports gambling at Schwab.
Speaker 2: He said he could see where clients, as you heard,
Speaker 2: you know, doing wagers on like an employment report, something
Speaker 2: like that.
Speaker 5: And that wraps up the first hour of the weekend
Speaker 5: edition of Bloomberg Business Week from Bloomberg Radio Ahead. In
Speaker 5: our next hour, the CEO of Barnes and Noble on
Speaker 5: the company's post COVID revival.
Speaker 2: I love this conversation. Plus look out Uber. The future
Speaker 2: is self driving cars. Think something like way moo. This
Speaker 2: is Bloomberg Business Week. I'm Carol Masser and.
Speaker 5: I'm Tim Stenavec. Stay with us. Today's top stories in
Speaker 5: global business. Headlines are coming up right now.
Speaker 1: This is Bloomberg Business Week Daily, reporting from the magazine
Speaker 1: that helps global leaders stay ahead. With insight on the people, companies,
Speaker 1: and trends shaping today's complex economy. Plus global business, finance
Speaker 1: and tech news as it happens. Bloomberg Business Week Daily
Speaker 1: with Carol Masser and Tim Steneveek on Bloomberg.
Speaker 2: Radio Plenty Ahead in our second hour of the weekend
Speaker 2: edition of Bloomberg Business Week, including the CEO of Full
Speaker 2: Speed Automotive on the health of the consumer.
Speaker 5: Plus from cars people are buying and holding on to
Speaker 5: to testing the next level of AI. Behind the wheel,
Speaker 5: our own Hannah Elliott takes us for a spin in
Speaker 5: the Mercedes that almost drives itself.
Speaker 2: First up this hour, just about one year ago, Bloomberg
Speaker 2: Business Week had a great story about Barnes and Nobles
Speaker 2: unlikely comeback thanks to a pandemic era swarm to what's
Speaker 2: called BookTalk, us readers are more quickly discovering titles and
Speaker 2: recommending them to friends and followers. That's good for the
Speaker 2: book industry.
Speaker 5: It's offered Barnes and Noble, which reported seven straight years
Speaker 5: of falling sales before it became the target of a
Speaker 5: billionaire hedge fund owner back in twenty nineteen, a chance
Speaker 5: to resurrect itself.
Speaker 2: Which seems to be now in full swing. The company,
Speaker 2: which is owned by Paul Singer's Elliott Advisors, has six
Speaker 2: hundred bookstores in the United States right now. It opened
Speaker 2: more than fifty last year and planned to open another
Speaker 2: sixty more this year.
Speaker 5: James Honest, CEO of Barnes and Noble. He's managing director
Speaker 5: of Waterstones' bookstores in the UK. He's founder and owner
Speaker 5: of the independent bookstore chain Don Books Too. He joins
Speaker 5: us here in the Bloomberg Interactive Brokers Studio. Welcome, Thank
Speaker 5: you for having me. So it's a private company now,
Speaker 5: so we don't get all the numbers that we get.
Speaker 5: But right before it was taken private, Barnes and Noble
Speaker 5: had a loss of one hundred and twenty five point
Speaker 5: five million dollars on revenues of three point seven billion dollars.
Speaker 5: That was for the fiscal year that ended April of
Speaker 5: twenty eighteen. Same store sales were down more than five percent.
Speaker 5: What are and metrics you can give us right now
Speaker 5: that speak to the health of the company.
Speaker 11: Well, I think generally the book market has rebounded, so
Speaker 11: it's not just us, though it is definitely US along
Speaker 11: with books and COVID was a difficult time for us.
Speaker 11: Obviously a lot of US stores were closed, but people
Speaker 11: rediscovered reading. But also I think always bookstores are great
Speaker 11: places in which all all ages, all types, but particularly
Speaker 11: young people like together and like to read. And I
Speaker 11: think we run our bookstores better. Our lecture say, but
Speaker 11: I think also the independents are opening up great stores
Speaker 11: around and people are discovering the pleasures of a physical bookstore,
Speaker 11: and we're benefiting.
Speaker 6: I love that you go that, why do you think
Speaker 6: it's come back?
Speaker 2: Because it used to be just lovely little bookstores in
Speaker 2: towns and cities, and then of course the big guys
Speaker 2: came in, and I mean.
Speaker 6: There was always the tug of war between the big
Speaker 6: and the small.
Speaker 5: There was an old Tom Hanks Meg Ryan movie.
Speaker 6: It was a cute You've Got.
Speaker 2: Me Out, and then it just felt like it was
Speaker 2: really bad for the selling of books. Amazon came on
Speaker 2: on the market place, and now I too have seen
Speaker 2: a resurgence of little bookstores.
Speaker 6: Why do you think that is?
Speaker 11: Well, Amazon is why people lost confidence, and then the
Speaker 11: rise of Kindle and that those are general notion and
Speaker 11: a media sense that physical books will gone. Reading was disappearing,
Speaker 11: and I think collectively, including the big chains and the
Speaker 11: small guys, a lot of people lost their way. And
Speaker 11: then we got ourselves sorted out, and the good independence
Speaker 11: have sorted themselves out, and we're all now running much
Speaker 11: nicer stores, and people are back and have embraced us.
Speaker 11: Now the independents who did not lose their confidence, they
Speaker 11: wouldn't have even noticed the trials and tribulations that the
Speaker 11: rest of us went through.
Speaker 5: So what is it about the experience inside a bookstore?
Speaker 5: And we're not just talking Birds and Noble here, because
Speaker 5: you have experience at books, you're also managing director of
Speaker 5: Waterstones Bookstores in the UK. What is the experience that
Speaker 5: you try to create inside a bookstore that makes it
Speaker 5: so people don't order them online or download them on
Speaker 5: an e reader.
Speaker 11: But I think the great independent bookstores have magic of curation,
Speaker 11: which is selecting the titles they have, matching those to
Speaker 11: the community in which they sit, and having a really
Speaker 11: nice physical space and a welcoming and vibrant one. What we,
Speaker 11: as a chain bookstore and now need to do and
Speaker 11: have done, is abandon all of the consistency and operational
Speaker 11: disciplines of a chain bookstore and hand power to our
Speaker 11: individual store teams and allow them to replicate that independence.
Speaker 5: So essentially, you're trying to create a community bookstore within
Speaker 5: every Marn's and Noble location.
Speaker 11: And that has worked dramatically well in many better generally
Speaker 11: in most and not so well in some whereas it
Speaker 11: startware where the teams don't quite understand or don't have
Speaker 11: the skill set, or where we haven't built up the
Speaker 11: experience because bookselling is a trade, is a vocational trade,
Speaker 11: and the skills that are attached to that you have
Speaker 11: to be learned and developed. So we haven't completely that journey,
Speaker 11: I would say, but in most of our stores are
Speaker 11: a lot better than they ever were, and some of
Speaker 11: them are really fantastic.
Speaker 2: So when it comes to the Barnes and Noble, does
Speaker 2: that mean there are certain things when you walk in
Speaker 2: that are going to be consistent whatever Barnes and Noble
Speaker 2: you come in, and then there's going to be certain
Speaker 2: nuances to the community and the environment or or what
Speaker 2: how do you kind of hand over?
Speaker 11: Well, the consistent thing is they're full of books and
Speaker 11: the book store but we and because there are books
Speaker 11: obviously that our best sellers and books that people want,
Speaker 11: and you know, everybody has to have capturing the rye
Speaker 11: because every bookstore does independent or thing. But we leave
Speaker 11: it entirely up to them. We give them no constraints,
Speaker 11: no budget constraints, no visual constraints. We just say, use
Speaker 11: common sense and make it the best possible book store
Speaker 11: you can, and generally they get on with that dramatically
Speaker 11: better than when they were given very strict rules to
Speaker 11: do it in precisely the same way everywhere.
Speaker 5: I want to know about how your your role works.
Speaker 5: It's not every day we speak to the CEO of
Speaker 5: a large company that has two other jobs as well. So,
Speaker 5: as I mentioned your CEO of Barnes and Noble, you're
Speaker 5: managing director of Waterstones Bookstores, you're the founder and owner
Speaker 5: of the bookstore chain books. How does that relationship work
Speaker 5: just in your professional life? Like, how do you how
Speaker 5: are you the CEO of Barnes and Noble but also
Speaker 5: the managing director of these other stores.
Speaker 11: I think the only advantage of professional advantage I have
Speaker 11: is I really do understand how to run a really
Speaker 11: good bookstore because I ran by myself for twenty plus
Speaker 11: years longer and continue in a sense to do so.
Speaker 11: So I understand what my teams need, what my stores need,
Speaker 11: and then my job is to just make sure from
Speaker 11: a central perspective that we don't get in their way
Speaker 11: and that we provide what they required or run a
Speaker 11: really good bookstore, and what they generally require is frankly money.
Speaker 11: They need clean carpets, and they need their h fact fixed,
Speaker 11: and they need books to turn up on time when
Speaker 11: they order them. But I don't tell them what to order,
Speaker 11: and I don't get in their way, and that allows
Speaker 11: me to do the job reasonably well. And frankly, the
Speaker 11: less I do now, the better it goes.
Speaker 2: Are people as interested in reading classics and old time
Speaker 2: you know books that were just very popular years ago.
Speaker 6: I'm just curious about, like, what is it that people
Speaker 6: are buying?
Speaker 11: Say you mentioned BookTalk earlier, Book doc coming out of
Speaker 11: COVID was exploded with the love of classics. Everyone was
Speaker 11: reading Middle March and Jane Austin and that was hugely
Speaker 11: exciting and continues still. But at the same time, you
Speaker 11: know the roving eye because you know kids want to
Speaker 11: read the same thing, because they want to talk about
Speaker 11: books and engage. At the moment, it's it's romanticy, and
Speaker 11: it's it's relatively spicy romanticy. But at the same time
Speaker 11: you know they're reading the great books as well.
Speaker 5: Books are only part of what Barnes and Noble sells.
Speaker 5: What else do you use to get people in the
Speaker 5: door and get them walking out? Parting with money?
Speaker 11: Well, we have sort of become really the last place
Speaker 11: in which quite a lot of the of these sort
Speaker 11: of dying categories actually have rejuvenated. So we have a
Speaker 11: fantastic music business, vinyl, even DVD cds' there's been an
Speaker 11: increase in sales of those. But we have a fantastic
Speaker 11: news stand offer, and now we do toys and games,
Speaker 11: board games and the rest really properly. Again a mean
Speaker 11: for those to be educational, to support effectively the intellectual
Speaker 11: engagement that you have around books. And therefore they sit,
Speaker 11: we believe, naturally alongside books, and you know that's our job.
Speaker 11: We call it related product. We have to keep them
Speaker 11: tightly tied into a love of learning and development which
Speaker 11: is encapsulated by books.
Speaker 2: We're talking about James Don't. He's the CEO of Barnes
Speaker 2: and Noble. He's also managing director of Waterstones Bookstores in
Speaker 2: the UK, founder and owner of the independent bookstore chain
Speaker 2: Dot Books. He's here in our Bloomberg Interactive Broker studio. James,
Speaker 2: what about like live events for doing stuff like I've
Speaker 2: done some things at local bookstores, you know, at Q
Speaker 2: and a chat with someone on a new book. But
Speaker 2: I'm just curious, how do you kind of think about that,
Speaker 2: whether it's in your own bookstores, but also for Barnes
Speaker 2: and Noble, making it a place where people go to
Speaker 2: meet up.
Speaker 11: I think we are social spaces and that can at
Speaker 11: it's sort of modest level, that can be the story
Speaker 11: time a bookseller has to learn how to read a
Speaker 11: book upside down to three and four year olds, all
Speaker 11: the way to obviously being the interaction between authors and
Speaker 11: read and so holding talks, events, question and answer interviews,
Speaker 11: all of the myriad of ways in which you can
Speaker 11: make a bookstore an exciting place in which to come.
Speaker 11: It's easier to do in the metropolitan cities because you
Speaker 11: can get the great authors, but you can do it
Speaker 11: wherever you are on a more modest scale.
Speaker 5: I mentioned same store sales back in April of twenty eighteen.
Speaker 5: We're down more than five percent. Can you tell us
Speaker 5: same store sales are? Are they positive?
Speaker 4: Now? Yeah?
Speaker 11: The book market has been going up, so, I mean
Speaker 11: there are plenty of publishers whose public numbers will show
Speaker 11: you that, and there's been a huge boom since COVID
Speaker 11: and generally the publishers have been doing very well. And
Speaker 11: you know, we're in that market and we're doing very well.
Speaker 11: And when you have an increasing store count, and we
Speaker 11: are now over seven hundred stores, in fact, we're below
Speaker 11: six hundred a short while ago, then you're going to
Speaker 11: sell an awful lot more.
Speaker 5: The Wall Street Journal reported a possible IPO as early
Speaker 5: as the second half of this year. Is that still
Speaker 5: the plan?
Speaker 11: Well, luckily that is above my pay grade, so.
Speaker 6: It will affect me.
Speaker 11: But I own the place. As sad as that may be.
Speaker 5: Do you think you would stay on as CEO?
Speaker 11: I enjoy what I do, and I have a feel
Speaker 11: that what we do and the people who work for
Speaker 11: me are hugely vocationally mophiltated. We were not as important
Speaker 11: as public libraries by any close measure, but what we
Speaker 11: do we do do with an immense respect for the
Speaker 11: power of books, and I think all of us, including myself,
Speaker 11: hope to continue to do that better.
Speaker 2: I think it's interesting you brought up libraries because I
Speaker 2: do feel like there's less and less funding for libraries
Speaker 2: in different towns.
Speaker 6: I know growing up that that was a big deal.
Speaker 2: You get your library car, you'd go to the library.
Speaker 6: That was a big deal.
Speaker 2: But is some of that also maybe fueling where people
Speaker 2: just have to go buy their own books, especially for kids.
Speaker 11: I don't think that's to our benefit. I think it's
Speaker 11: only to the detriment generally of reading and generates for
Speaker 11: the engagement with books. And I speak actually as an Englishman,
Speaker 11: and what's happened in the United Kingdom where public libraries
Speaker 11: have not been funded for really a decade and more,
Speaker 11: and it's hugely to the detriment of.
Speaker 5: Society, AI and books. This is wild. I mean, if
Speaker 5: this has been happening for a few years, but if
Speaker 5: you like a big news event happens, you can go
Speaker 5: find like a self published AI written book on Amazon
Speaker 5: to download right away. Are you going to carry AI books?
Speaker 11: We generally don't, and we go to very great efforts
Speaker 11: to exclude them from our online operation. Other than it's
Speaker 11: a challenge, it is a big challenge. But actually AI
Speaker 11: is absolutely fantastic at hunting out AI, so that's helpful.
Speaker 11: But in and of itself, as long as AI it
Speaker 11: is clearly communicated that a book is created by AI
Speaker 11: and if readers want to read it, then we should
Speaker 11: provide that. That's our role in life. And so I'm
Speaker 11: not you know, an evangelist saying, you know, never AI
Speaker 11: but I am saying it should be very clearly indicated
Speaker 11: whether it is a real author, to whom, by the way,
Speaker 11: as booksellers, we feel huge duty of care or.
Speaker 2: If it's a how big is AI category when it
Speaker 2: comes to books now in your store?
Speaker 6: Is nothing?
Speaker 11: I mean not nothing nothing, but as far as we
Speaker 11: can possibly determine, it's nothing.
Speaker 5: Our thanks to James Dont, CEO of Barnes and Noble.
Speaker 2: You're listening to Bloomberg Business Week coming up from bookshelves
Speaker 2: to oil changes. What consumers are spending money on when
Speaker 2: it comes to their cars.
Speaker 9: I think they're frugal and they're very, very cautious about
Speaker 9: spending anything unnecessarily out of their pocketbook. They're also in
Speaker 9: the customer wants efficiency. They don't want to be there long,
Speaker 9: they want to be quick, get it in, get it out.
Speaker 9: And it's also not lost on us that about seventy
Speaker 9: percent of people distrust the folks that work in my industry,
Speaker 9: and we are trying our best to reverse that trend.
Speaker 5: The CEO of Full Speed Automotive joins us. Next, this
Speaker 5: is Bloomberg.
Speaker 14: This is the Bloomberg Business of Entertainment Report. Paramounts Guidance
Speaker 14: is looking to return to the days or many of
Speaker 14: us were.
Speaker 1: Saying, I want my OWNTV sloombergs.
Speaker 14: Lucas Shaw tells us Paramount is looking to revive MTV
Speaker 14: and has spoken with several major companies and leading music
Speaker 14: industry figures about acquiring a.
Speaker 15: Stake, and they would like to find someone in the
Speaker 15: music business who wants to partner with them, invest in it,
Speaker 15: bring in some assets. Most of the feedback that I've
Speaker 15: heard from the music business has sort of been what
Speaker 15: is in it for us?
Speaker 14: MTV began in nineteen eighty one airing music videos before
Speaker 14: it evolved into a home for reality TV programming with
Speaker 14: shows like Jersey Shore and the Real World.
Speaker 6: This is the true story story.
Speaker 14: Shaw says. Paramount believes it can reinvigorate MTV by recasting
Speaker 14: it is more than just a cable network and bringing
Speaker 14: the focus back to music, but he says is a
Speaker 14: tall order.
Speaker 15: I say the odds are pretty low. People have tried
Speaker 15: to reboot MTV many times before and it hasn't worked.
Speaker 14: Paramount shut down MTV's twenty four hour music channels and
Speaker 14: select countries at the end of last year. Karen Moscow
Speaker 14: Bloomberg Radio.
Speaker 1: This is Bloomberg Business Week Daily with Carol Masser and
Speaker 1: Tim Stenevek on Bloomberg Radio.
Speaker 2: So morning signs in the global car market. You might
Speaker 2: recall earlier this month, Porsche reported its sharpest sales decline
Speaker 2: since two thousand and nine, way down by weaker demand
Speaker 2: in China, tariffs and rising evy costs. Meantime, a shortage
Speaker 2: of memory chips caused by the data center Boom is
Speaker 2: leading the auto sector to brace for yet another potential
Speaker 2: supply chain disturbance.
Speaker 5: Let's talk about the US story and the auto industry
Speaker 5: and sort of a different take on it. We've got
Speaker 5: Brian Masiak with us. He's CEO of Full Speed Automotive.
Speaker 5: It's the parent company of the automotive repair and service
Speaker 5: facilities including Grease, Monkey, Speed, Oil Change, n Auto Service
Speaker 5: and Quickcar and more so think oil changes, tire sales
Speaker 5: and rotations, break services and the like. Brian joins us
Speaker 5: here in the Bloomberg Interactive Broker's studio. Welcome, how are you.
Speaker 9: Hey, I'm doing great. I appreciate the opportunity.
Speaker 5: Yeah, So, you've got a really interesting view on the
Speaker 5: country and the economy because Full Speed Automotive, through its
Speaker 5: different brands, franchise, and company owned nine hundred of these
Speaker 5: stores throughout the US. You serve millions of customers each year.
Speaker 5: How is it out there? Like, what are you seeing
Speaker 5: from your customers?
Speaker 9: Yeah, so it's very very clear if you listen to
Speaker 9: the customer exactly what they want. They want value, they
Speaker 9: want efficiency. They don't want to be there. I mean,
Speaker 9: let's you know, in all honesty, nobody wakes up in
Speaker 9: the morning and is excited to go get an oil change, right.
Speaker 9: No one wants to spend the dollars. It's it's a
Speaker 9: grudge purchase, right, It's a chore. And we understand that
Speaker 9: that doesn't mean that we can't deliver a delightful service
Speaker 9: for them, right, And so when they show up, we
Speaker 9: want to treat them like they're a guest in our house.
Speaker 9: We want to open the door for them, we want
Speaker 9: to escort them into the waiting area, we want to
Speaker 9: offer them water, coffee, and we want to provide them
Speaker 9: honesty of what that service needs.
Speaker 5: Are Are they on time in general with the recommended
Speaker 5: rotations with replacing tires with oil changes or are they
Speaker 5: letting that slip? And are they driving cars longer without
Speaker 5: getting them service, like, I'm looking for any economic signals
Speaker 5: that you can send us from what you see.
Speaker 9: Sure, sure, no, Our space is fairly resilient to whatever
Speaker 9: fluctuations in the economy exist.
Speaker 7: Right now.
Speaker 9: The average cost to buy a new vehicle is about
Speaker 9: fifty thousand dollars. People are spending an average of about
Speaker 9: seven hundred dollars a month on their vehicle. And so
Speaker 9: what's that you know, you think back.
Speaker 6: That does include you're talking about you're talking about a
Speaker 6: car payment.
Speaker 9: I'm car payment alone, yeah right, wow, And so that
Speaker 9: is forcing people to keep their cars longer. Average age
Speaker 9: of the vehicle on the road right now, and there's
Speaker 9: about three hundred million of them about thirteen and a
Speaker 9: half years. They're still continuing to drive about thirteen thousand
Speaker 9: miles a year. So they're driving longer or yeah, they're
Speaker 9: driving you know, normal miles. They're keeping their cars longer,
Speaker 9: and that means they have to they have to go
Speaker 9: to preventative maintenance. They have to get that car done,
Speaker 9: but they're trying to watch their pocketbook, and so they
Speaker 9: are stretching as long as possible before they need to
Speaker 9: get it into our base and perform the oil jot.
Speaker 6: How long have you started seeing that that people are
Speaker 6: stretching out?
Speaker 9: Yeah, so you know, there was a time when we
Speaker 9: used to see every three months on the dot and
Speaker 9: now it's around five six months. We might see that
Speaker 9: customer only two times a year.
Speaker 6: When did that start? Last six months?
Speaker 9: Last Yearly about the last twelve months, Yeah, last twelve
Speaker 9: to eighteen months we started to see it slip. But
Speaker 9: that's where it is right now, is about five to
Speaker 9: six months we'll see that customer.
Speaker 6: But how would you, Brian, describe the consumer?
Speaker 2: Because I think it's safe to say that when we
Speaker 2: talk about this economy, folks say, we'll wait. You know,
Speaker 2: in your records on Wall Street, we've got economic growth.
Speaker 2: There's a lot of metrics out there. Even though we're
Speaker 2: starting to be a little bit concerned about the job market,
Speaker 2: unemployment rate's still pretty low.
Speaker 6: So I'm just.
Speaker 2: Trying to understand, how would you describe today's consumer.
Speaker 9: Yeah, I think they're frugal. I think they're frugal and
Speaker 9: they're very very cautious about spending anything unnecessarily out of
Speaker 9: their pocketbook. They're also in the customer wants efficiency. They
Speaker 9: don't want to be there long, they want to be quick,
Speaker 9: get it in, get it out. And it's also not
Speaker 9: lost on us that about seventy percent of people distrust
Speaker 9: the folks that work in my industry, and we are
Speaker 9: trying our best to reverse that trend. And how we're
Speaker 9: looking to do it is infusing some technology into the
Speaker 9: customer experience. We don't want you to take our word
Speaker 9: for it anymore when we come to you and say.
Speaker 6: Yeah, no, no, keep going.
Speaker 9: When we say you know you need a you need
Speaker 9: a transmission flush or a break flush, we want to
Speaker 9: show you visually. We want to send you a digital
Speaker 9: vehicle inspection on your phone so you can see it
Speaker 9: and we start to build that stickiness and that trust together.
Speaker 1: Well, isn't that.
Speaker 6: Kind of what cars are about? I mean, I remember
Speaker 6: a few years ago.
Speaker 2: It's kind of a little embarrassing, but we had a
Speaker 2: car and you know, there was I guess a rainstorm
Speaker 2: and there was some water runoff and we could kind
Speaker 2: of go through it. It didn't look so high and
Speaker 2: ended up frying all the electronics and we had to
Speaker 2: just we lost the complete car. But I'm just isn't
Speaker 2: it today that you just basically plug in and the
Speaker 2: car tells you what it needs to have done in
Speaker 2: a lot of ways.
Speaker 9: In some yes, you can do those diagnostic, it doesn't
Speaker 9: hit every single code, and sometimes the customer just doesn't
Speaker 9: want to pay that extra fifty seventy dollars for that
Speaker 9: diagnostic they're requiring on our sixteen point inspection visually, And
Speaker 9: we don't want to just we don't want them to
Speaker 9: just simply take our word for it. We want to
Speaker 9: show them in a video so that there is no
Speaker 9: ambiguity whatsoever.
Speaker 6: So what do you show them?
Speaker 7: So funny?
Speaker 5: Yeah, I know, I mean a few a couple of
Speaker 5: years ago, my uncle, my uncle had this prius for
Speaker 5: years that, like you know, he drove for years. Then
Speaker 5: my it went to my cousin, his son, and he
Speaker 5: showed me this video a couple of years ago, and
Speaker 5: it was like the car had just been beat up.
Speaker 5: I mean it parked on the streets of New York
Speaker 5: for years. It was a complete beater. And he showed
Speaker 5: me this video is like check this out. And it
Speaker 5: was a video from a mechanic that was showing all
Speaker 5: the places where the rats had shoot up inside of
Speaker 5: the car. This is very what happens in New York City,
Speaker 5: especially in the winter. Like, it's really gross, but it's
Speaker 5: a very New York City thing. And what I was
Speaker 5: I was struck by the video was it was because
Speaker 5: it was basically like the mechanic was offering this as
Speaker 5: proof of this happening. It wasn't like, hey, check this out,
Speaker 5: this is crazy.
Speaker 6: So you went inside the car and key He's like, this.
Speaker 5: Is why we are replacing this, this is why we're
Speaker 5: doing this. It's this like environment where there's a real
Speaker 5: lack of trust because I think there's a power dynamic
Speaker 5: imbalance when it comes to the customer and when it
Speaker 5: comes to the person who's working in your car, customer
Speaker 5: doesn't know anything. When Google and Chat GPT, the person
Speaker 5: working on the car seems to have all the power.
Speaker 5: And I think that's a hard thing for me as
Speaker 5: a customer to come to terms with, especially when that
Speaker 5: check comes.
Speaker 9: You got it right. So we want to go through
Speaker 9: our sixteen seventeen point inspection. We want to tell you, hey,
Speaker 9: your tires look good. We want to show you. We
Speaker 9: want to show you the measurement that you're fine. You
Speaker 9: don't if anyone tells you need new tires, you don't.
Speaker 9: And then we want to show you some things that
Speaker 9: this needs to be place, but maybe not right now,
Speaker 9: so maybe it's thirty sixty days from now. And that
Speaker 9: gives our marketing team then an opportunity to reach out
Speaker 9: back out to that customer in a month or two
Speaker 9: and say it's about that time, bring it back in.
Speaker 9: Here's a coupon to do.
Speaker 2: So it sounds like it's also labor intensive, like you
Speaker 2: do need a lot of folks in order to the
Speaker 2: cars come in.
Speaker 6: Do the evaluation, walk us through that you do?
Speaker 9: Yeah, ok, so cars are becoming much more more technologically
Speaker 9: advanced and difficult, and that's good and bad. I remember
Speaker 9: the days when my dad would change his oil in
Speaker 9: the in the in the parking lot.
Speaker 6: Now these my dad taught all of us had a
Speaker 6: lot how to do it.
Speaker 2: Yeah, now you can't get not changer, but we had
Speaker 2: to learn how to check it. Now, can't get rid
Speaker 2: of the track of our milet like we had to
Speaker 2: do a lot of You can't get.
Speaker 5: Rid of the oil now, so you actually need to
Speaker 5: go somewhere.
Speaker 1: That's right, Yeah, that's right.
Speaker 9: So we have shifted from a do it yourself to
Speaker 9: a do it for me, right, but we need skilled
Speaker 9: labor in order to do that, and we have really
Speaker 9: good relationships with trade schools, and trade school enrollment is increasing.
Speaker 9: We also have found partnering with the military folks that
Speaker 9: are getting out of the military and needing jobs. I mean,
Speaker 9: these are people that are well trained, they show up
Speaker 9: on time, they're loyal, very very good, good workers, and
Speaker 9: they stay with you.
Speaker 7: For a while.
Speaker 5: Can you find them? Because there was this Wall Street
Speaker 5: Journal story just the last few days, the one hundred
Speaker 5: and sixty thousand dollars mechanic job that Ford cannot fill.
Speaker 5: It's sort of turned into this lore as an illustration
Speaker 5: of the trade skills gap in this country. Can you
Speaker 5: find everybody you need?
Speaker 9: Not everybody? There's definitely there's always a race for the
Speaker 9: you know, those master mechanics, no question about it.
Speaker 6: But do you need master mechanics?
Speaker 9: We don't, okay, and so Ford would be different. Right,
Speaker 9: They're doing heavy engine work, transmission work, and we don't
Speaker 9: do that. We focus on quick loube and then some
Speaker 9: ancillary services that you really don't have to drop off
Speaker 9: the car. You can still stay in the waiting room
Speaker 9: twenty thirty minutes and you're on your way.
Speaker 5: Can someone who has no experience but has drive and
Speaker 5: motivation come in learn what they need to do there?
Speaker 5: Do they need some sort of training ahead of time?
Speaker 9: Yeah, so certainly you can take a newbie. For sure.
Speaker 9: Not every employer is going to do that. We have
Speaker 9: a really robust training program. We won't let you work
Speaker 9: on a car until you pass the certifications, but for
Speaker 9: the right candidate, we'll absolutely put them through it.
Speaker 5: Franchise versus company owned, like close to one thousand total.
Speaker 5: What's the breakdown of franchise versus coming?
Speaker 9: So we have three hundred company owned and then the
Speaker 9: remainder are franchisees and licensees.
Speaker 5: And you're owned by mid Ocean Partners, private equity firm
Speaker 5: acquired just about five six years ago.
Speaker 9: That's right, five years ago.
Speaker 5: What's the plan? What's the next iteration of this?
Speaker 9: So right now we're doing well from a cash flow standpoint.
Speaker 9: At some point, you know, they may want to do
Speaker 9: a transaction. I'm sure they will right but right now
Speaker 9: we're just focused on on the growth, growing top line
Speaker 9: and then growing our rooftops, largely on the franchise side.
Speaker 2: Why have so many different brands, why not put it
Speaker 2: all under one brand name?
Speaker 9: Yeah, that's a fantastic question. And my initial thought was, yeah,
Speaker 9: let's just all convert it to one national brand. But
Speaker 9: what we have found is in some pockets, in some regions,
Speaker 9: Michigan being one of them, they really want to go
Speaker 9: to their small regional brand that they've gone to all
Speaker 9: the time. There's name Cache are there, and for us
Speaker 9: to change it would be a silly business decision. So,
Speaker 9: you know, it costs a little more on the marketing side,
Speaker 9: right for sure, but that's what the customer wants and
Speaker 9: that's what we want to deliver. Where we think we
Speaker 9: can convert the name, we will.
Speaker 5: Evs don't need new they need new tires, they need
Speaker 5: new breaks, but they don't need the lubrication services that
Speaker 5: you guys do.
Speaker 6: Right, Yeah, is it a concern, it's not.
Speaker 9: You know, I think a few more years ago we
Speaker 9: all or I don't want to buy to say about all,
Speaker 9: but some of us thought, oh my goodness, if this
Speaker 9: is going to take over the quick loop space is
Speaker 9: going to dry up pretty quickly. And it really hasn't
Speaker 9: transferred transferred to that, right. Hybrids are important. Hybrids are selling,
Speaker 9: but hybrids need oil changes. Where we're trying to even
Speaker 9: see those evs are we offer a diversified, you know,
Speaker 9: menu of services, so they still need the breaks, They
Speaker 9: still need you know, a lot of the other ancillary services,
Speaker 9: so we still see them.
Speaker 5: That was Brian Masiak a full speed automotive.
Speaker 2: Still to come on Bloomberg BusinessWeek. She rode in a
Speaker 2: Mercedes with Next level AI and said it made everything
Speaker 2: else feel well, kind of dumb.
Speaker 12: This has been developed with NVIDIAs, So this is truly
Speaker 12: AI in your car, driving your car on a fully
Speaker 12: other level than some of these lesser self driving systems.
Speaker 12: MB driver syst Pro is so smart that it does
Speaker 12: know when it can turn right on red and when
Speaker 12: it can't.
Speaker 5: Our car guru Hannah Elliott on the driver's Seat of
Speaker 5: the Future. That's next. This is Bloomberg.
Speaker 1: This is Bloomberg Business Week Daily with Carol Masser and
Speaker 1: Tim Stenovek on Bloomberg Radio.
Speaker 2: So imagine the car you're driving could think faster than
Speaker 2: you anticipate every stop, turn and lane change, basically hands
Speaker 2: the city streets on its own.
Speaker 6: Sounds ideal.
Speaker 5: Even read a sign that says, you know, no right
Speaker 5: turn on red.
Speaker 6: I think that's amazing.
Speaker 5: Okay, So we've been talking about the potential for self
Speaker 5: driving cars for many years now, but that could soon
Speaker 5: become reality with us is Bloomberg News autoclumnist Hannah Elliott.
Speaker 5: She testrove a Mercedes with the latest AI system with
Speaker 5: some surprising results. I gotta tell you, Hannah, I loved Okay,
Speaker 5: Carol and I like, it's no secret how much we
Speaker 5: love Way Moos when we go and you know, go
Speaker 5: to San Francisco or l or Phoenix or whatever like
Speaker 5: Way Moos. Yeah, Sam, what shocked me the most about
Speaker 5: One of the things that shocked me the most about
Speaker 5: reading your story was the price of the car you
Speaker 5: drove was under fifty thousand dollars.
Speaker 6: Me too, I was surprised. Okay, what is it tell
Speaker 6: us about this car?
Speaker 12: Okay, so yes, this isn't the whole thing is kind
Speaker 12: of about this car, which is the Mercedes CLA and
Speaker 12: the starting price on the car is forty seven, two
Speaker 12: hundred and fifty dollars, which is amazing. This is now
Speaker 12: the new entry level car for Mercedes. It's an electric vehicle,
Speaker 12: fully electric, but they are coming out with a hybrid
Speaker 12: version later in the year for those of us who
Speaker 12: still want our combustion engine along with our electric power,
Speaker 12: and it is a direct attack on Tesla and on
Speaker 12: some of these more affordable cars that people are selling
Speaker 12: in the rest of the world, especially in China. Mercedes
Speaker 12: has decided we're going to take them on, and we
Speaker 12: think we can give consumers a really good product at
Speaker 12: a very very competitive price. And I think they nailed it.
Speaker 12: I really really liked this car.
Speaker 2: All right, and I love you say my takeaway after
Speaker 2: driving around an hour in a car driven by AI
Speaker 2: makes everything else feel well dumb walk us through because
Speaker 2: there's actually two levels here, and full disclosure, I've had
Speaker 2: a few more Mercedes and like the atest one which
Speaker 2: is now probably over ten years old, has a lot
Speaker 2: of safety features in it that basically I take my
Speaker 2: hands off the wall the wheel, it drives itself. This
Speaker 2: sounds like the next level.
Speaker 12: Yes, this is the one that we should really talk about,
Speaker 12: is the MB Drive Assist Pro. Now, there is an
Speaker 12: MB Drive Assist system that is already in the car
Speaker 12: that is level two advanced semi autonomous driving, which means
Speaker 12: you can drive without your hands on the wheel for
Speaker 12: lengths of time and the car will drive itself. Okay, great.
Speaker 12: The Drive Assist Pro, which is coming out later this year,
Speaker 12: in which I really spent the most time testing. Is
Speaker 12: a system that allows you to navigate to any point,
Speaker 12: any place and not touch the wheel at all.
Speaker 6: The car does everything.
Speaker 12: This is a subscription system that costs under one thousand
Speaker 12: dollars for three years, so in light of everything, I
Speaker 12: think that's a very good priceload. It downloads to the car,
Speaker 12: and this has been developed with Nvidios, So this is
Speaker 12: truly AI in your car, driving your car on a
Speaker 12: fully other level than some of these lesser self driving systems,
Speaker 12: and tim you kind of hit on it. The real
Speaker 12: difference here is that this NB Drive Assist pro is
Speaker 12: so smart that it does know when it can turn
Speaker 12: right on red and when it can't turn right on red.
Speaker 12: It knows when it can roll through a yellow light
Speaker 12: and when it needs to stop because the light's about
Speaker 12: to turn red. It was really really interesting, and I
Speaker 12: think the key takeaway is it felt more humanistic than
Speaker 12: any other sort of self driving system that I've been
Speaker 12: in before. It felt like it was reading and understanding
Speaker 12: and comprehending street situations in a way that felt closer
Speaker 12: to human than we've had before.
Speaker 5: We should note that you still couldn't take this on
Speaker 5: a highway, right, That's right.
Speaker 6: This system is only for city streets.
Speaker 12: The NB Drive Assist, which is the lesser system, does
Speaker 12: go on highways and city streets. This system right now
Speaker 12: is only for city streets. So yeah, that's kind of
Speaker 12: the caveat. We're not to this like bright future of
Speaker 12: robot cars driving us everywhere except for waymos, which we
Speaker 12: could talk about too, But they're getting there and the
Speaker 12: technology is there. The highway thing is really more related
Speaker 12: to regulations and legislation and that sort of thing. But yeah,
Speaker 12: this was a really interesting fund way to navigate around
Speaker 12: a city that I don't know very well, San Francisco.
Speaker 12: The car handled it, and dare I say it was
Speaker 12: relax It was kind of great.
Speaker 6: How does it work?
Speaker 2: I mean, I know there's ten cameras, five radar sensors, yes,
Speaker 2: twelve ultrasonic sensors. But this end to end stack, from
Speaker 2: the role of Nvidia and its expertise, sounds like it's
Speaker 2: crucial in all of this.
Speaker 12: Yes, yes, so Nvidia has This is their fully full stack,
Speaker 12: which means that they developed the entire system internally for Mercedes.
Speaker 12: But Nvidia has collaborated with a lot of different car makers, Toyota, Volvo, Rivian,
Speaker 12: Lucid helping develop these AI autonomous driving systems. This particular
Speaker 12: system in Mercedes, like you say, uses ten cameras, five radars,
Speaker 12: and a dozen ultrasonic sensors. It's kind of like what
Speaker 12: we see in a Weimo. For anybody who has written
Speaker 12: in weaimos, waimos use lightar, radar cameras, and high definition
Speaker 12: maps to read and anticipate the environment. This is very similar.
Speaker 12: It's not exactly the same, but from a user standpoint,
Speaker 12: when you're in the car, it feels very similar. So
Speaker 12: if you have been in a Waimo, it's like, imagine
Speaker 12: that the Weimo is driving your own personal car and
Speaker 12: you're in the driver seat, which is a good thing.
Speaker 12: I have a lot of friends who are a little
Speaker 12: bit still uncertain about Weimo. They're not sure it's safe,
Speaker 12: and I understand that apprehension. But for me and you
Speaker 12: guys can speak to this too. It took like two
Speaker 12: or three minutes for me to be in the car
Speaker 12: before I trusted it, and then it was like, oh, yeah,
Speaker 12: this is fine.
Speaker 4: Yeah.
Speaker 5: I was going to say, I think anybody who doesn't
Speaker 5: think a WEAIMO is safe, and I hope I don't
Speaker 5: ever eat my words here, Hannah. But I think anyone
Speaker 5: who doesn't they just haven't been in it truly, right,
Speaker 5: because once you get in it, once you sit in
Speaker 5: and have that experience, you're like, wait a second, this
Speaker 5: thing is safer than the random guy who is driving me. Yeah,
Speaker 5: called up on my iPhone. Hey, yes'm oh go ahead,
Speaker 5: go ahead, Hannah, because you actually do I'm just stats
Speaker 5: in here.
Speaker 12: Well yeah, well, I was just gonna say too, no
Speaker 12: no knock on the wonderful taxi and Uber drivers of
Speaker 12: New York City, and I'm grateful for them. But yes,
Speaker 12: I was going to say, WAMO was a better driver
Speaker 12: than half of those guys.
Speaker 6: And those guys know it too, So it really is true.
Speaker 12: And a lot of my friends speaking out about Waymo
Speaker 12: for a second, actually enjoy not having another stranger in
Speaker 12: the car. So, like you say, it's like once you
Speaker 12: try it, once, you're kind of sold.
Speaker 6: Typically I have to say.
Speaker 5: Like like Gateway drug to Autonomy.
Speaker 2: Yeah, the first time I did, I have to say,
Speaker 2: I felt like I was in a spa.
Speaker 6: It was like immaculate them.
Speaker 2: The music was the music was moody, and I was
Speaker 2: amazed how at how quickly like you write about like
Speaker 2: I close my eyes because I had like a forty
Speaker 2: minute ride to the airport. I think it was Arizona,
Speaker 2: and it was like I couldn't believe, and it was night.
Speaker 2: I couldn't believe how relaxed I.
Speaker 12: Was, totally and I and I have to say too,
Speaker 12: And we've talked about this all the time.
Speaker 6: I love driving.
Speaker 12: I own old car. I'm a big fan of driving.
Speaker 12: I'm honestly, I have old combustion cars. You know. I'm
Speaker 12: all about the right tool for the job. I don't
Speaker 12: think we have to live in a world where there's
Speaker 12: only one option. I actually love the idea of a
Speaker 12: lot of variety and you pick the right tool for
Speaker 12: the job.
Speaker 6: And my point is, if.
Speaker 12: You have a self driving car like the CLA, this
Speaker 12: Mercedes CLA that truly is budging up on being fully
Speaker 12: self driving, that's level three. This is level two plus plus.
Speaker 12: But we're very very close. It doesn't mean you can't
Speaker 12: also have fun driving. It just means that when you're
Speaker 12: sitting in traffic and your eyes are glazing over and
Speaker 12: you want to pull your hair out, the car can
Speaker 12: handle it. You can feel like you're in a ba
Speaker 12: For instance.
Speaker 6: Hannah, I'm without the essential oils. That's the only thing
Speaker 6: that was missing exactly, although.
Speaker 12: I maybe I need to start traveling with those just exactly.
Speaker 5: You do live in California, so I think that's kind
Speaker 5: of part for the core these days.
Speaker 2: Hey, more broadly, give another story and it's entitled look
Speaker 2: at Uber. The future is self driving cars like Waimo?
Speaker 2: Is that where we're headed? And it seems like there's
Speaker 2: a lot that we still need to tackle before we
Speaker 2: can get there.
Speaker 12: Yes, I think we are increasingly headed toward semi and
Speaker 12: full self driving cars in urban centers, yes, and lacross
Speaker 12: ride sharing platforms. Yes.
Speaker 6: I don't know if you guys have.
Speaker 12: Seen zekes going around zukes Is Francisco and there's a
Speaker 12: there are a few testing programs around the country as well. Yes,
Speaker 12: we are moving this direction, and even in private cars
Speaker 12: with AI defined vehicles like the CLA that Mercedes it. Yes,
Speaker 12: everything is moving in that direction.
Speaker 6: Now.
Speaker 12: Do I think we're going to have a world that
Speaker 12: is dominated by self driving cars that are level three
Speaker 12: and above? Level five is like full full self driving
Speaker 12: like robot taxi. You can take a sleep, take a
Speaker 12: nap in the back. We're not there yet. We're at
Speaker 12: level two plus.
Speaker 6: Plus.
Speaker 12: Experts that I talk to say we have another ten
Speaker 12: years before we'll see anything close to a predominance of
Speaker 12: self driving cars on the road, So we don't want
Speaker 12: to get ahead of ourselves. Yes, we're moving in that direction. Yes,
Speaker 12: we're going to see it more and more and more,
Speaker 12: especially as automakers. Let's be honest, try to stay competitive
Speaker 12: with China, because China is leading the way. They're making
Speaker 12: great products that cost less. So yeah, we're leading, we're
Speaker 12: leaning that way. Is it going to be another ten
Speaker 12: years before we're like quote unquote living in the future. Yes.
Speaker 12: And also I should mentioned, and I said this before,
Speaker 12: we've got to figure out the legal implications of all
Speaker 12: of this. Whose responsibility is it when inevitably there's an incident.
Speaker 12: We've got to sort through all of that, which is
Speaker 12: also why way Moo's not running in New York City
Speaker 12: right now. You know they're figuring that out. So yeah,
Speaker 12: we're moving in that direction there yet.
Speaker 2: No, And I highly recommend everybody check out Manna's stories
Speaker 2: because I think there was the one thing that you
Speaker 2: mentioned too that kind of frustrated me is that it
Speaker 2: didn't always drop me where I wanted to drop. But
Speaker 2: we're gonna make people go to the Bloomberg or Bloomberg
Speaker 2: dot com.
Speaker 6: To read second walk a little further. No, it ticked
Speaker 6: me off. I was like, wait, where's my car? Where's
Speaker 6: my car? Hannah? Great stuff.
Speaker 2: We love, love love catching up with you and looking
Speaker 2: forward to the Tesla story as well.
Speaker 5: That was Hannah Elliott. She's Bloomberg News auto columnist.
Speaker 2: And that wraps up our weekend edition at Bloomberg Business
Speaker 2: Week from Bloomberg Radio. Thank you so much for joining us.
Speaker 2: I should point out that even where I live, just
Speaker 2: across from Lower Manhattan, starting to see some testing of.
Speaker 5: Way most Ooh, so there's a driver in the driver's seat.
Speaker 6: Still, yes, we did see drivers, Okay.
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Speaker 6: Have a good and safe weekend, everybody. I'm Carol Masser
Speaker 6: and I'm Tim Stenevac.
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