WEBVTT - An Athleisure Brand That's Defying the Odds 0:00:01.760 --> 0:00:04.400 This is Bloomberg Business Week. I'm Carole Masser and I'm 0:00:04.440 --> 0:00:07.280 Bloomberg Quick Takes Tim Stanovk. We're here every day bringing 0:00:07.280 --> 0:00:09.800 you the latest news from the world of business and finance, 0:00:09.800 --> 0:00:13.640 clus technology, politics, economics, all partnising the power of Business 0:00:13.640 --> 0:00:17.119 Week reporters and editors, not to mention our journalists and 0:00:17.120 --> 0:00:19.560 analyst in more than one and twenty countries. You can 0:00:19.600 --> 0:00:23.200 download Bloomberg Business Week on iTunes, SoundCloud, or Bloomberg dot Com. 0:00:23.360 --> 0:00:25.120 You can also listen to our radio show at two 0:00:25.160 --> 0:00:27.840 pm Eastern Time on Bloomberg Radio, or watch us on 0:00:27.880 --> 0:00:31.400 YouTube search Bloomberg Global News. Just about one year ago, 0:00:31.520 --> 0:00:35.080 the Southern California inspired active where brand Vori got a 0:00:35.080 --> 0:00:37.720 four hundred million dollar investment from soft Bank, giving the 0:00:37.760 --> 0:00:40.800 company at that time a four billion dollar valuation. That 0:00:40.920 --> 0:00:44.720 brand founded in by Joe Couldla. We got Joe Kudla 0:00:44.840 --> 0:00:47.559 joining us now, founder and CEO of Vori joining us 0:00:47.560 --> 0:00:50.640 on the phone from New York City, trading one coast 0:00:50.760 --> 0:00:52.400 for the other coast. Joe, good to have you this 0:00:52.520 --> 0:00:55.600 with us this afternoon. How are you. I'm doing great, 0:00:55.680 --> 0:00:58.000 Thank you so much. Great to be here in New York. Hey, Well, 0:00:58.000 --> 0:01:00.120 thanks so much for joining us on this UM. So 0:01:00.120 --> 0:01:01.920 I want to talk about the company, but before we 0:01:02.040 --> 0:01:03.440 get to the company, I want to talk a little 0:01:03.440 --> 0:01:06.000 bit about the macroeconomic environment and get an understanding from 0:01:06.040 --> 0:01:09.400 you about how the consumer is faring around the world 0:01:09.480 --> 0:01:11.920 right now, because you guys are an expansion mode, which 0:01:11.959 --> 0:01:14.680 is definitely not the same thing as other companies that 0:01:14.720 --> 0:01:16.200 are out there right now that are pulling back a 0:01:16.200 --> 0:01:21.199 little bit. Absolutely, UM. You know, it's an interesting time. 0:01:21.440 --> 0:01:25.000 There is, without question we are you're we're dealing with 0:01:25.120 --> 0:01:30.880 complicated macro economic issues on a global scale, UM. But 0:01:31.000 --> 0:01:34.320 we do feel there's a bifurcation between you know, best 0:01:34.400 --> 0:01:37.679 in class brands that are leaders in their categories, that 0:01:37.720 --> 0:01:41.800 are innovating UM, and folks that are maybe called the 0:01:41.840 --> 0:01:45.880 middle of the pack, more legacy mass market brands UM, 0:01:46.120 --> 0:01:49.720 that are seeing you know, growth really slow as a 0:01:49.760 --> 0:01:52.480 result of this inflationary environment that we're in. You know, 0:01:52.640 --> 0:01:56.360 we feel very fortunate to be UM, you know, experiencing 0:01:56.440 --> 0:02:00.000 dynamic growth this year. I feel our our customer, are 0:02:00.000 --> 0:02:03.760 relationship with our customer has never been stronger. We're excited 0:02:03.800 --> 0:02:07.920 about Q four and holiday. When we look towards we 0:02:07.960 --> 0:02:12.520 are being optimistic but cautiously optimistic. We are planning for 0:02:12.560 --> 0:02:15.440 another year of dynamic growth. We are going to continue 0:02:15.440 --> 0:02:18.639 to expend our fleet of retail stores, but we're not 0:02:18.760 --> 0:02:21.000 trying to swing for the fences. We want to lock 0:02:21.040 --> 0:02:23.720 in a number that we're that we're really content with, 0:02:24.120 --> 0:02:28.559 not overinvest in the business, UM, and be be responsible 0:02:28.840 --> 0:02:31.560 with our growth because there are some macro factors that 0:02:31.600 --> 0:02:34.959 we're watching very closely, and UM, we just don't know 0:02:35.400 --> 0:02:38.519 how things will go. No, And you know it's interesting too. 0:02:38.560 --> 0:02:41.040 I think at the time about a year ago of 0:02:41.120 --> 0:02:45.160 that soft bank investment, which was just about a year ago, UM, 0:02:45.200 --> 0:02:47.680 it was reported that you plan to open more than 0:02:47.720 --> 0:02:50.280 a hundred stores in the US over five years. So 0:02:50.320 --> 0:02:55.280 as you look at those macro concerned, has that number 0:02:55.320 --> 0:03:00.320 been reduced or that plan that forecast been changed? You 0:03:00.320 --> 0:03:02.920 know it hasn't. Actually, you know, the performance of our 0:03:02.960 --> 0:03:07.000 stores today and has never been stronger. UM. We're still 0:03:07.120 --> 0:03:10.960 very bullish on our vertical retail expansion. UM. You know, 0:03:11.080 --> 0:03:16.120 four wall contribution payback still best in class, and you know, 0:03:16.240 --> 0:03:19.000 we're in the unique position because you know, relative to 0:03:19.040 --> 0:03:21.760 the size of the market, theory is still very much 0:03:21.760 --> 0:03:24.320 early stage. You know, we're in our seventh year of 0:03:24.360 --> 0:03:27.960 selling in market UM, and there's a lot of opportunity 0:03:28.080 --> 0:03:31.639 to gain market share UM as we grow into the 0:03:31.720 --> 0:03:33.720 years to come. So while we might be in a 0:03:33.760 --> 0:03:37.560 more challenged macro environment, I think that will be counterpunts 0:03:37.640 --> 0:03:40.880 by the growth and taking market share from some of 0:03:40.920 --> 0:03:43.280 the other more established players. So talk to us about 0:03:43.280 --> 0:03:46.000 growth metrics where Bloomberg we're nerdy, We leve all these numbers, 0:03:46.280 --> 0:03:48.520 so talked about top and bottom line growth. Give us 0:03:48.520 --> 0:03:51.120 an idea same store sales growth. What have you guys 0:03:51.160 --> 0:03:54.680 been seeing? Yeah, I mean this year where we're seeing, 0:03:54.960 --> 0:03:56.760 you know, the business is going to grow north of 0:03:58.120 --> 0:04:03.560 between seventy and upline UM at at a pretty sizeable scale. 0:04:03.760 --> 0:04:06.480 It's a number that we're very proud of. UM. You know, 0:04:06.520 --> 0:04:10.200 our same store sales are still comping very strong over 0:04:10.280 --> 0:04:14.160 prior years, demonstrating you know that you know, it's still 0:04:14.240 --> 0:04:18.000 very much early in our awareness curve. People are experiencing 0:04:18.000 --> 0:04:22.080 the brand, we're converting them into loyalists, they're shopping with 0:04:22.240 --> 0:04:25.599 us for years to come while acquiring more new customers. 0:04:25.600 --> 0:04:28.839 So we see really great year over year growth in 0:04:28.880 --> 0:04:32.400 our existing fleet UM. And then you know, as we 0:04:32.480 --> 0:04:36.080 expand the network across the country. You know, we're leveraging 0:04:36.120 --> 0:04:38.760 e commerce data so we can be really intelligent about 0:04:38.800 --> 0:04:42.920 where we go. UM and we tend to open strong. 0:04:43.160 --> 0:04:46.360 And I think that that trend is really accelerating as 0:04:46.360 --> 0:04:48.840 the brand builds more and more awareness. Joe, how are 0:04:48.839 --> 0:04:52.600 you doing with inventory right now? We saw inventory challenges 0:04:52.600 --> 0:04:55.159 of course from Nike just in the last couple of weeks, 0:04:55.200 --> 0:04:58.200 not to mention, you know, companies that we can't necessarily 0:04:58.240 --> 0:05:00.760 compare you to, like Target for examp ample, How are 0:05:00.760 --> 0:05:04.599 you managing inventory? Yeah, it's a great question. You know, 0:05:04.920 --> 0:05:10.440 we have definitely seen impacts from this complicated supply chain environment. UM, 0:05:10.480 --> 0:05:13.680 although we are seeing it begin to normalize, especially on 0:05:13.720 --> 0:05:17.599 the logistics side of the supply chain, you know, getting 0:05:17.680 --> 0:05:21.080 your product in containers, getting it on boats and delivering 0:05:21.160 --> 0:05:24.479 on time. That has become much more normalized. The cost 0:05:24.560 --> 0:05:26.840 of a container, you know, from Asia to the West 0:05:26.839 --> 0:05:29.760 coast of the United States. You know, pre pandemic was 0:05:29.960 --> 0:05:33.120 you know, called three thousand dollars. It went up as 0:05:33.160 --> 0:05:36.479 high as eighteen thousand dollars. Now back to pre pandemic 0:05:36.560 --> 0:05:40.640 levels or materially close to pre pandemic level. So the 0:05:40.720 --> 0:05:44.280 logistics aspects of supply chain have normalized, where we're still 0:05:44.279 --> 0:05:47.200 seeing a lot of challenges in the ability to source 0:05:47.400 --> 0:05:51.520 raw materials um and get them delivered to your factory 0:05:51.560 --> 0:05:55.520 partners on time. So what happened to the larger marketplaces? 0:05:55.640 --> 0:05:59.040 You know, your spring deliveries delivered late. That created promotion 0:05:59.200 --> 0:06:01.760 as we transition and from spring and summer into fall, 0:06:02.320 --> 0:06:04.680 and then you saw the same thing happen, you know, 0:06:04.839 --> 0:06:06.960 and it was it was a double whammy with the 0:06:06.960 --> 0:06:10.120 deliveries of fall being material delayed for a lot of 0:06:10.120 --> 0:06:13.240 our peers, and that's putting a lot of pressure on 0:06:13.320 --> 0:06:16.800 inventory levels. That's why a lot of folks anticipate highly 0:06:16.880 --> 0:06:21.680 promotional holiday coming up. Viewer. While we're not immune to 0:06:21.760 --> 0:06:25.800 these challenges, we've stayed very close to our supply chain. 0:06:26.040 --> 0:06:29.039 We've dealt with delays, but nothing that's been catastrophic, and 0:06:29.080 --> 0:06:31.640 we've been able to maintain our full price business, which 0:06:31.680 --> 0:06:34.359 has been a goal of ours since we launched in 0:06:34.400 --> 0:06:36.200 the spring of two thousand and fifteen. And we don't 0:06:36.240 --> 0:06:40.400 anticipate in overly promotional holiday. So you probably you probably 0:06:40.440 --> 0:06:43.000 know better than anybody else the competition that's out there, 0:06:43.040 --> 0:06:46.120 whether it's you know, those giant brands, including Nike, You've 0:06:46.160 --> 0:06:48.720 got Lulu Lemon, You've got under Armour. I mean, it's 0:06:48.720 --> 0:06:52.480 a super competitive market that could be on track for 0:06:52.560 --> 0:06:55.560 some slowing growth because you know, what we're seeing is 0:06:55.640 --> 0:06:58.400 people are going back to the office. I've stopped wearing 0:06:58.400 --> 0:07:01.880 my yoga pants during work. You know, I'm back wearing 0:07:02.000 --> 0:07:04.480 you know what I would call grown up clothes um 0:07:04.680 --> 0:07:07.520 in a big way. So tell us, you know how, 0:07:07.600 --> 0:07:11.720 what's the competitive advantage that gives you the optimism that 0:07:11.800 --> 0:07:15.640 you can continue on your growth trajectory. Yeah, I think 0:07:16.400 --> 0:07:20.520 those Yeah, it's a great point, you know. And it's 0:07:20.640 --> 0:07:23.560 it's interesting. When we launched the brand, we were facing 0:07:23.560 --> 0:07:27.080 this competition and we saw nothing but open space. And 0:07:27.120 --> 0:07:30.600 I think it's due to our product positioning, our brand positioning, 0:07:31.000 --> 0:07:33.160 the ethos of the brand, which is built to move 0:07:33.160 --> 0:07:35.560 in style for life. And it all comes down to 0:07:36.160 --> 0:07:38.480 building product that will support you in a workout, but 0:07:38.520 --> 0:07:41.600 it will transition and work across multiple aspects of your life. 0:07:41.680 --> 0:07:46.840 And so we prioritize fabrications that are have performance at 0:07:46.840 --> 0:07:51.440 their core, but they're incredibly soft. We design all of 0:07:51.440 --> 0:07:55.000 our products with a more modern athletics fit that works 0:07:55.000 --> 0:07:58.120 across multiple aspects of your life, and we design our 0:07:58.120 --> 0:08:03.040 product with an aesthetic, color story um that is sophisticated, 0:08:03.120 --> 0:08:05.960 that doesn't identify you as somebody going to the gym, 0:08:06.080 --> 0:08:08.840 are going to compete in a sport, but it just 0:08:09.000 --> 0:08:12.080 again works across multiple aspects of your life. That was 0:08:12.200 --> 0:08:14.480 always the premise of the brand, and we applied it 0:08:14.600 --> 0:08:17.800 first and foremost to activewear product that you would move 0:08:17.840 --> 0:08:20.400 and sweat in. But the brand has really evolved and 0:08:20.440 --> 0:08:22.680 when you look at our assortment and where we're growing, 0:08:22.760 --> 0:08:26.640 it's evolved from core fitness into outdoor, which is rooted 0:08:26.640 --> 0:08:30.880 in outerwear, and the fastest growing segment of our brand 0:08:31.040 --> 0:08:34.920 is travel commute, which is taking the lessons those technical 0:08:35.040 --> 0:08:38.600 fabrications and constructions that we applied to activewear and applying 0:08:38.640 --> 0:08:41.440 it to everyday sports where and that's one of the 0:08:41.480 --> 0:08:44.880 fastest growing segments of our collection. And those are the 0:08:44.880 --> 0:08:47.679 products that you're wearing to the office, you're wearing to travel, 0:08:47.800 --> 0:08:50.080 you're wearing on the golf course. And so I think 0:08:50.120 --> 0:08:52.720 our vision to build a more well rounded collection that 0:08:52.760 --> 0:08:55.640 speaks to multiple aspects of your life is really benefiting us. 0:08:55.679 --> 0:08:58.400 As you see the preferences of the consumer change. So 0:08:58.520 --> 0:09:00.680 there are a couple of different directions that it seems 0:09:00.679 --> 0:09:02.720 like the company could go at this point in terms 0:09:02.720 --> 0:09:05.960 of trajectory. One of them is the Lulu Lemon route 0:09:06.040 --> 0:09:09.920 where you go public. Another one and forgive me, but 0:09:09.960 --> 0:09:11.640 this has happened before. I think of a company like 0:09:11.679 --> 0:09:15.160 Outdoor Voices, which you know, five years ago was the 0:09:15.200 --> 0:09:17.480 talk of the town of the town and has gone 0:09:17.520 --> 0:09:20.760 through several CEO transitions and a New York Times profile 0:09:20.840 --> 0:09:24.319 that essentially said that it imploded after raising about fifty 0:09:24.360 --> 0:09:27.280 million dollars in funding. How do you avoid the fate 0:09:27.320 --> 0:09:30.679 of a company like Outdoor Voices. It all comes down 0:09:30.720 --> 0:09:34.280 to your people, incredible leadership, alignment of your people, but 0:09:34.360 --> 0:09:36.760 higher talent to people that are much better than yourself. 0:09:37.240 --> 0:09:40.600 That's been our ethos from day one is building an incredible, 0:09:40.800 --> 0:09:44.200 incredible team that can see around those corners, you know, 0:09:44.320 --> 0:09:48.880 and prioritizing making incredible products. You know, we are maniacal 0:09:49.080 --> 0:09:52.120 about our products, our level of service. You know, the 0:09:52.320 --> 0:09:55.080 the NPS scores in our stores are off the charts, 0:09:55.440 --> 0:09:57.480 and I think that's the most important thing. You know, 0:09:57.600 --> 0:09:59.720 it's hard comparison. You look at a brand like Outdoor 0:09:59.760 --> 0:10:02.680 Voice is in theory. You know, I wasn't great at 0:10:02.760 --> 0:10:06.520 raising capital in the early days. Admittedly um I didn't 0:10:06.559 --> 0:10:10.080 have a background building an apparel business, and so the 0:10:10.160 --> 0:10:12.360 little capital that I did get, I had to make 0:10:12.400 --> 0:10:15.360 it stretch a long way. And so we prioritized, you know, 0:10:15.480 --> 0:10:19.240 the basics of business, the fundamentals of you know, acquiring 0:10:19.240 --> 0:10:22.760 customers profitably from day one, and we built a business 0:10:22.800 --> 0:10:25.480 that was profitable from early stage and we never had 0:10:25.520 --> 0:10:29.480 to sacrifice that profitability for growth over the years. And 0:10:29.520 --> 0:10:32.400 I think that's why theory received. You know, one of 0:10:32.440 --> 0:10:36.600 the highest private market apparel valuations ever is because we've 0:10:36.600 --> 0:10:41.040 been able to demonstrate a commitment to growth, doing it 0:10:41.080 --> 0:10:44.480 profitably and also responsibly with our commitment to E s 0:10:44.520 --> 0:10:48.680 G and making decisions that prioritize the planet UM as 0:10:48.679 --> 0:10:51.520 we're as we're building, which is an important part. Increasingly 0:10:51.600 --> 0:10:53.760 for consumers, we know that they look at what a 0:10:53.760 --> 0:10:56.840 company stands for their impact on the environment. Hey, Joe, 0:10:56.920 --> 0:10:59.680 just before we wrap up, So what's the endgame here? 0:10:59.800 --> 0:11:03.560 Is it ultimately to go public at some point? I 0:11:03.600 --> 0:11:06.600 think that could be a viable outcome. Right now, we're 0:11:06.679 --> 0:11:09.319 very heads down building the business. We're having a lot 0:11:09.360 --> 0:11:11.360 of fun. I'm a young man. I've got a lot 0:11:11.400 --> 0:11:13.800 of energy for the business. We've got big plans for 0:11:13.840 --> 0:11:16.160 growth both here in the in the US as well 0:11:16.200 --> 0:11:19.200 as abroad, and so today that's what we're focused on. 0:11:19.480 --> 0:11:21.679 But you know, we want to optimize the business and 0:11:21.760 --> 0:11:24.640 provide the best return for our shareholders. A public offering 0:11:24.679 --> 0:11:27.160 could be a viable option down the road. All right, 0:11:27.200 --> 0:11:29.480 We're going to leave it on that note. Great stuff, Joe, 0:11:29.480 --> 0:11:31.800 and stay in touch so that we can, uh, you know, 0:11:31.840 --> 0:11:33.920 here more as you guys continue to grow the business 0:11:33.960 --> 0:11:37.400 here in the US and certainly outside. They're based in Encinitas, California, 0:11:37.400 --> 0:11:40.600 which is like the best place in the world. Okay, 0:11:40.960 --> 0:11:43.960 somebody from southern California like Encinitas is great. I know 0:11:44.200 --> 0:11:46.960 you're kind of talking your book there, Tim Stinovic. All right, 0:11:47.000 --> 0:11:49.079 Joe could thank you so much. Founder and c F 0:11:49.200 --> 0:11:51.960 Vori joining us on the phone in New York City. 0:11:52.280 --> 0:11:56.280 This is Bloomberg Business Week with Carol Messer and Bloomberg 0:11:56.360 --> 0:12:00.559 Quick Takes. Tim Stinovic on Bloomberg Radio. Well, we mentioned 0:12:00.559 --> 0:12:04.000 earlier you know what's past is prologue, which gets us 0:12:04.000 --> 0:12:06.520 to a story in the upcoming issue of Bloomberg Business Week. 0:12:06.559 --> 0:12:08.640 It'll be a new double issue out later this week. 0:12:09.160 --> 0:12:11.640 It's a story about Paul Woker's inflation fight and how 0:12:11.679 --> 0:12:13.800 it hints at what lies ahead for the current Fed 0:12:13.880 --> 0:12:16.400 chief J. Powell. Yeah, the Fed had to inflict a 0:12:16.400 --> 0:12:18.520 lot of pain in the eighties to convince markets. It 0:12:18.640 --> 0:12:21.000 was serious. We've got just a fantastic guest with us 0:12:21.000 --> 0:12:23.679 this afternoon. Christine Harper is Executive editor of Finance and 0:12:23.720 --> 0:12:26.719 Investing at Bloomberg Editorial. She joins us live in the 0:12:26.760 --> 0:12:30.439 Bloomberg Interactive Broker Studio. She's also, along with Paul Woker, 0:12:30.679 --> 0:12:34.000 the co author of Keeping at It, The Quest for 0:12:34.080 --> 0:12:38.240 Sound Money and Good Government. It's paul workers memoir. So, Christine, 0:12:38.240 --> 0:12:41.400 you spent a lot of time, um with the late 0:12:42.080 --> 0:12:44.680 former Chairman of the Federal Reserve. I just want to 0:12:44.720 --> 0:12:47.280 start with with that as some context here, give us 0:12:47.280 --> 0:12:51.760 an idea of you know how he would in your interpretation, Um, 0:12:52.080 --> 0:12:55.360 look at the inflation fight that's J Powell is doing today. Well, 0:12:55.400 --> 0:12:57.199 I can tell you when he was writing his memoir 0:12:57.240 --> 0:13:01.079 back in eighteen No, but he was playing attention to inflation. 0:13:01.120 --> 0:13:03.040 In fact, if they were at all, it was in 0:13:03.400 --> 0:13:06.320 an effort to get more inflation right, So he was 0:13:06.440 --> 0:13:09.600 quite concerned that people were underestimating the risks, and so 0:13:09.800 --> 0:13:12.559 part of the mission of the book was to remind 0:13:12.679 --> 0:13:15.000 people of how important the central bank's role is in 0:13:15.000 --> 0:13:18.720 in in keeping inflation down and maintaining that credibility that 0:13:18.800 --> 0:13:21.920 he fought so hard to maintain. I mean, he had 0:13:21.960 --> 0:13:24.600 been involved in getting the dollar off the gold standard, 0:13:25.000 --> 0:13:27.600 and after that the dollar was not it was not 0:13:27.760 --> 0:13:31.880 connected to any actual value, and so when inflation took root, 0:13:32.440 --> 0:13:36.640 he had to drive interest rates up to unprecedented levels, 0:13:36.640 --> 0:13:40.559 caused all kinds of pain for people, for financial institutions 0:13:41.040 --> 0:13:45.439 and and um. The result was there was more credibility 0:13:45.440 --> 0:13:47.679 in the dollar. It some people talked about it when 0:13:47.720 --> 0:13:51.360 on the Vulcar standard from the gold standard, but you know, 0:13:51.600 --> 0:13:54.720 that's something you can't squander because he fought so hard. 0:13:54.760 --> 0:13:56.720 So it's kind of like having gone to war to 0:13:56.800 --> 0:13:59.160 fight a fight, you know, to win a battle, and 0:13:59.200 --> 0:14:03.680 then discover that your future, you know, commanders are allowing 0:14:03.720 --> 0:14:06.440 you to give up the territory again. So he he 0:14:06.480 --> 0:14:09.080 would have been very upset that inflation was allowed to 0:14:09.080 --> 0:14:11.200 get to where it was. We're talking like Christine Harper 0:14:11.240 --> 0:14:13.160 and as we mentioned this is in the upcoming new 0:14:13.200 --> 0:14:15.560 double issue of Bloomberg Business Week out later this week. 0:14:15.640 --> 0:14:17.640 Also with us is the editor of Bloomberg Business Week, 0:14:17.679 --> 0:14:23.040 Joel Webber. Christine, thank you for this remarks. Uh also 0:14:23.120 --> 0:14:24.960 just wanted to ask, you know, and you might have 0:14:25.000 --> 0:14:27.240 to extrapolate here a little bit, but I mean you 0:14:27.240 --> 0:14:30.320 you got to know Mr Vocal very well. I'm curious 0:14:30.880 --> 0:14:33.920 what you think, if anything, Powell might have learned from 0:14:33.960 --> 0:14:37.080 from him, and if not him directly, then the book. 0:14:37.440 --> 0:14:39.600 Oh yeah, well, I mean, you know, as you and 0:14:39.640 --> 0:14:41.440 I have discussed. I mean, one of the things that's 0:14:41.480 --> 0:14:45.800 so interesting is how often FED Chairman Powell invokes not 0:14:45.880 --> 0:14:50.040 only you know, Volker himself, who he says he's a 0:14:50.040 --> 0:14:52.680 great admirer of, but but the book. I mean, he 0:14:52.800 --> 0:14:55.680 talks about everybody should read it. And he he has 0:14:55.800 --> 0:14:58.240 used this phrase keep at it, which people see as 0:14:58.280 --> 0:15:01.360 an echo of the title keeping at it um let 0:15:02.120 --> 0:15:06.240 one more time keeping at it um And you know, uh, 0:15:06.440 --> 0:15:11.280 the thing that I think Powell sees, and I mean 0:15:11.320 --> 0:15:14.680 one thing that Vulgar made clear was when I was 0:15:14.720 --> 0:15:17.440 speaking to him, was how how much he's he supported 0:15:17.440 --> 0:15:19.920 Powell as FED chairman because he liked the fact that 0:15:19.960 --> 0:15:23.320 Powell had this similar to Vulcar had this experience of 0:15:23.360 --> 0:15:26.200 having worked in the finance in a private financial institution. 0:15:26.720 --> 0:15:29.560 In Vulcar's case it was Chase, in Powell's case it's 0:15:30.200 --> 0:15:33.840 Carlisle and other places, and also working at the Treasury Department. 0:15:33.880 --> 0:15:37.600 So understanding markets, understanding the government is really important to 0:15:37.600 --> 0:15:39.840 being practical in the job, and not just being an 0:15:39.840 --> 0:15:45.360 academic theorist. So I think um Powell shares that sort 0:15:45.360 --> 0:15:49.760 of recognition that you have to win credibility from the markets, 0:15:50.200 --> 0:15:53.120 from the government, all these sides, and be practical in 0:15:53.160 --> 0:15:56.000 your approach and not just you know, not just trust 0:15:56.040 --> 0:15:59.280 all the economists around Christie. How tough was it for 0:15:59.360 --> 0:16:02.160 Vulcar two hike rates? Like what were some of the 0:16:02.200 --> 0:16:04.760 conversations that you all had about that, which was going 0:16:04.760 --> 0:16:07.920 against what everybody wanted, But it was necessary in order 0:16:07.960 --> 0:16:10.040 to write the situation well to that point. I mean, 0:16:10.120 --> 0:16:12.600 he he said that when he came into the role, 0:16:12.800 --> 0:16:14.800 it was clear. I mean the reason he he was 0:16:14.880 --> 0:16:17.160 brought in really was to do something about inflation that 0:16:17.200 --> 0:16:21.440 his predecessors hadn't really succeeded in bringing down. Even so 0:16:21.560 --> 0:16:24.560 at that point the economist had to FED were forecasting recession, 0:16:25.000 --> 0:16:27.280 so he had to sort of ignore that and just 0:16:27.400 --> 0:16:29.880 say we're gonna raise rates. There was a split on 0:16:29.960 --> 0:16:33.000 the on the Federal Reserve Board on the second time 0:16:33.000 --> 0:16:35.960 they voted, and so the markets didn't believe there would 0:16:36.000 --> 0:16:38.400 be any stronger action. They thought the FED was going 0:16:38.440 --> 0:16:41.480 to lose their spine, and so he turned to this 0:16:41.560 --> 0:16:44.920 monitorist approach of just targeting the money supply, and that 0:16:45.160 --> 0:16:48.400 essentially told people, we're tying our hands and we're gonna 0:16:48.440 --> 0:16:50.120 let interest rates go where they have to go. And 0:16:50.160 --> 0:16:53.080 they went up to like, what do you present? You know, 0:16:53.120 --> 0:16:55.080 there's a name in here that I did not expect 0:16:55.120 --> 0:16:57.720 to see that I wanted to ask about Larry Cutlow. 0:16:57.800 --> 0:16:59.840 He was quoted by the Associated Press at the time, 0:17:00.080 --> 0:17:01.640 um and he was at bear Sterns. Then what what 0:17:01.680 --> 0:17:04.399 did Mr Kudlow have to say? Well, I mean, it 0:17:04.440 --> 0:17:06.919 was funny looking back at the clips because when Paul 0:17:07.119 --> 0:17:09.560 Vulker was telling me about this fourth ree vote and 0:17:09.560 --> 0:17:12.080 nobody believed it, and he didn't see under understand really 0:17:12.080 --> 0:17:15.280 why nobody believed it, because he knew that people were 0:17:15.280 --> 0:17:18.399 supporting him would keep supporting him, but the markets didn't so, 0:17:18.600 --> 0:17:21.240 and you know, I did some research and found these 0:17:21.240 --> 0:17:23.399 comments that were made in the press at the time, 0:17:23.440 --> 0:17:28.760 including from then FED bear Sterns economist Larry Cudlow, saying 0:17:28.800 --> 0:17:31.919 that essentially the fact that the vote had split on 0:17:31.960 --> 0:17:34.720 the f O m C showed that there would be 0:17:34.920 --> 0:17:37.920 very timid approach going forward. The markets just didn't see 0:17:38.320 --> 0:17:41.720 the FED being able to stick to their guns. Okay, 0:17:41.760 --> 0:17:45.680 So I gotta ask a question because this this book 0:17:45.720 --> 0:17:48.560 almost had a different title. Oh yes, and we got 0:17:48.560 --> 0:17:50.840 to talk about that, because it's just this little easter egg. 0:17:51.280 --> 0:17:53.520 Can you talk to us about the sharett Sure, of course. 0:17:53.640 --> 0:17:57.640 Um So. As I mentioned earlier, when we started working 0:17:57.960 --> 0:17:59.760 on the book, you know, nobody was really paying a 0:17:59.840 --> 0:18:03.000 time into some of the central parts of Paul Walker's legacy, 0:18:03.600 --> 0:18:06.240 including inflation, and so he was feeling a little I 0:18:06.280 --> 0:18:09.480 think overlooked. And uh so he opened the book with 0:18:09.520 --> 0:18:13.440 this very funny joke about a parrot, a wise parrot 0:18:13.480 --> 0:18:15.760 who's known as the Chairman. And I encouraged people to 0:18:15.800 --> 0:18:18.120 look at the book because it's a very funny little story. 0:18:18.160 --> 0:18:21.159 But um but he went so far as saying he 0:18:21.200 --> 0:18:24.960 wanted to title the book The Wise Old Parrot speaks Now. 0:18:25.000 --> 0:18:28.520 The marketing Department and I all agree that was not 0:18:28.600 --> 0:18:31.439 a great title for this book. So we spent weeks 0:18:31.480 --> 0:18:34.040 trying to offer him other ideas, all of which he rejected. 0:18:34.040 --> 0:18:37.600 He hated all the pompous, kind of you know, pretentious 0:18:37.720 --> 0:18:40.679 titles that a lot of other economists and people use 0:18:40.840 --> 0:18:44.280 on their their books. So we were really going back 0:18:44.280 --> 0:18:45.800 and forth. It was very It was one of the 0:18:45.880 --> 0:18:48.320 most difficult things of working with him because he was 0:18:48.320 --> 0:18:51.199 so stubborn on this. And so finally one day I 0:18:51.240 --> 0:18:53.280 was going through this long list of titles i'd come 0:18:53.359 --> 0:18:55.399 up with, you know, I found a phrase from the 0:18:55.440 --> 0:19:01.760 Fed Minutes at that time, sustained commitment. And he looked 0:19:02.440 --> 0:19:06.359 and he stopped and he said, keeping at it. And 0:19:06.400 --> 0:19:08.520 it was great because that really was him, you know, 0:19:08.560 --> 0:19:12.359 he believed in speaking plainly, and you know, so he 0:19:12.400 --> 0:19:16.200 took the kind of jargoning, jargony phrase and translated it. Um. 0:19:16.240 --> 0:19:18.199 But I do think it would be funny if Powell 0:19:18.280 --> 0:19:21.800 was having to deal with the wise old parrot. Everyone 0:19:22.080 --> 0:19:24.080 just goes to show everyone needs a really good editor. 0:19:24.640 --> 0:19:29.960 That's what it comes down exactly. Hey, Christine, I just 0:19:30.000 --> 0:19:31.560 want to talk a little bit, a little bit about 0:19:31.600 --> 0:19:34.320 his legacy from a market's perspective and from an investing 0:19:34.359 --> 0:19:37.000 perspective as well. Given what we know about the nineteen 0:19:37.000 --> 0:19:40.160 eighties and what markets did and what inflation did after 0:19:40.359 --> 0:19:45.399 he raised rates so significantly, what's in store this time around? Well, 0:19:45.440 --> 0:19:49.320 I mean, I think everybody is seeing that interest rates 0:19:49.320 --> 0:19:52.840 are going to go up. UM. The you know, policymakers 0:19:52.880 --> 0:19:54.680 are making it very clear they're not going to back 0:19:54.680 --> 0:19:58.439 down on this UM if they show any signs of, 0:19:58.720 --> 0:20:01.280 you know, weakness. I think people understand what will happen 0:20:01.440 --> 0:20:04.399 is kind of what happened to Paul Wolker's predecessor. So 0:20:04.480 --> 0:20:06.879 I think that is an example of where Powell sees 0:20:06.920 --> 0:20:10.720 he has to be steadfast. But Um, as you would 0:20:10.760 --> 0:20:14.720 see reading the book, UM, the chapters that follow the 0:20:14.760 --> 0:20:18.200 inflation fight are a series of financial crises that UM 0:20:18.600 --> 0:20:21.120 Paul Wolkers Fed had to deal with in the wake 0:20:21.200 --> 0:20:24.320 of the interest rate increases. And so you know, when 0:20:24.320 --> 0:20:27.720 you hear these experts come on Bloomberg radio and television 0:20:27.760 --> 0:20:31.600 talking about something might break, I think, you know, what 0:20:31.720 --> 0:20:33.560 we saw back in the eighties was a lot of 0:20:33.560 --> 0:20:36.159 things broke, a lot of things weren't. We're sort of 0:20:36.760 --> 0:20:38.879 a lot of risks were built up, everything from the 0:20:38.960 --> 0:20:43.679 Hunt Brothers speculation on silver to Continental Illinois Savings and loans, 0:20:43.720 --> 0:20:46.800 all these different banks that when when belly up and 0:20:46.880 --> 0:20:50.760 so the ultimate one was the Latin American debt crisis, 0:20:51.480 --> 0:20:53.880 and uh that was so bad that in a D two, 0:20:53.920 --> 0:20:56.720 I think that was really what caused Volker to say, Okay, 0:20:56.760 --> 0:20:59.159 we've got it, back off and and and stop the 0:20:59.200 --> 0:21:03.679 inflation fights. So ultimately it is often let something breaks 0:21:03.680 --> 0:21:06.280 that there's a financial crisis. I think it's interesting on 0:21:06.280 --> 0:21:07.959 a day when the I m F has revised its 0:21:08.040 --> 0:21:10.600 estimates and the concern is about global central banks not 0:21:10.720 --> 0:21:14.119 doing enough, it fits right in to your story and 0:21:14.160 --> 0:21:17.439 certainly um your book. Christine. Thank you so much, Christine Harper. 0:21:17.480 --> 0:21:19.120