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Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.

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Speaker 1: Along with my co host Lisa Abramowitz. Each day we

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Speaker 1: bring you the most important, noteworthy, and useful interviews for

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Speaker 1: you and your money, whether you're at the grocery store

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Speaker 1: or the trading floor. Find the Bloomberg p m L

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Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Peter

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Speaker 1: Krauss led Alliance Bernstein through the heart of the financial crisis.

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Speaker 1: He was chairman and CEO of the big asset management

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Speaker 1: firm from two thousand and eight through last year, and

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Speaker 1: now he is starting his own firm. We are broadcasting

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Speaker 1: live from Bloomberg Directive Broger Studios, and Peter Krause joins

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Speaker 1: us right here. Peter, thank you so much for being here.

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Speaker 1: Thanks you at least for having me. All right, So

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Speaker 1: you are founding a new firm, and why good question.

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Speaker 1: It is a new firm, Uh what? The main reason

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Speaker 1: that I think the new firm is exciting is that

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Speaker 1: we're trying to align the revenue model of the firm

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Speaker 1: with the clients objectives. And what I found in time

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Speaker 1: in my experience in the industry is that although we

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Speaker 1: all are here to serve clients. Almost all firms revenue

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Speaker 1: models are fixed fees, so the client pays whether or

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Speaker 1: not the manager performs. An aperture is distinctly different. In

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Speaker 1: that sense, the client only pays more than the passive

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Speaker 1: fee if we perform. What is the hurdle rate? The

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Speaker 1: hurdle rates are different for different products, so it would

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Speaker 1: depend upon the investment services that we have. But let's

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Speaker 1: just take an example in a simple equity fund. Let's

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Speaker 1: say it's US large cap equities. The hurdle rate would

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Speaker 1: be the standard and Poor's index, easily identifiable, recognizable by all. Okay,

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Speaker 1: so let's say that this does gain steam. Would fees

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Speaker 1: be a lot larger once you hit that threshold? Well, actually,

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Speaker 1: you have to earn the S and P return in

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Speaker 1: order to be paid any fee at all. So in

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Speaker 1: other words, let's just say the markets up ten percent,

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Speaker 1: that's the SMP. If the managers performance is ten percent,

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Speaker 1: they're paid exactly no performance fee and only their base fee.

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Speaker 1: So here's what I'm wondering. When you talk about our performance,

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Speaker 1: it depends what index you're looking at. It also depends

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Speaker 1: what time frame you're looking at. So what is the

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Speaker 1: correct time frame to really judge this. So remember that

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Speaker 1: almost all managers have benchmarks in the in the fixed

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Speaker 1: fee space for sure, uh And so it's true that

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Speaker 1: each manager has a different benchmark, and benchmarks can be complex.

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Speaker 1: We're attempting to make those benchmarks simple, easy and recognizable.

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Speaker 1: The time period over which you pay fees is one year.

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Speaker 1: The reason why it's not longer is it's complicated for

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Speaker 1: people to understand fees over more than a year. We

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Speaker 1: actually charge the fee every day, but at the end

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Speaker 1: of the day, we only elect the fee if we

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Speaker 1: actually create performance in the twelve month period in which

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Speaker 1: the client is invested the new company aperture. Is it

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Speaker 1: going to compete against more storied names like Goldman Sachs

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Speaker 1: Or is this designed to go and try to peel

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Speaker 1: away money from other let's say, hedge funds or specific

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Speaker 1: investment strategies. We actually think that we're attempting to disrupt

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Speaker 1: all of those, not just Goldman Sacks, not just a

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Speaker 1: hedge fund, not just tro Price, not just Fidelity, but

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Speaker 1: all the above, because what we're trying to bring to

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Speaker 1: the client is outstanding returns, returns over a benchmark at

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Speaker 1: the end of the day, clients can buy beta or

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Speaker 1: the market exposure for cheap prices. We know that, and

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Speaker 1: we think that they should go and do that. What

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Speaker 1: clients can't get is return in excess of the market.

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Speaker 1: We're actually trying to provide the Okay, so what do

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Speaker 1: you think happens to all the big asset managers if

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Speaker 1: they don't adopt a fee structure structures like this. I

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Speaker 1: think this is a This is an industry that plays

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Speaker 1: out over a long period of time. People don't move

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Speaker 1: their money around, you know, haphazardly, but over long periods,

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Speaker 1: you know, ten to fifteen years. I believe that the

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Speaker 1: amount of money that will be followed by this performance

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Speaker 1: link structure will be very significant in the trillions. And

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Speaker 1: you would look at me and say, well, how could

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Speaker 1: that possibly be? But if you go back to when

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Speaker 1: et F started, if I had said to you twenty

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Speaker 1: plus years later, E t F are going to account

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Speaker 1: for almost fifty of the marketplace, you would have thought

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Speaker 1: it was crazy. I'm just struck by the infrastructure of

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Speaker 1: an asset management, of an asset management for I mean,

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Speaker 1: this is not inexpensive. How do you maintain that with

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Speaker 1: the structure when it's really hard to outperform unless you

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Speaker 1: are investing in less liquid assets. I mean, if you're

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Speaker 1: tied to broader markets, it's chance. Yeah, it's hard to

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Speaker 1: outperform whether you're invested in liquid markets or illiquid or

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Speaker 1: illiquid assets. Don't don't make don't make the mistake that

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Speaker 1: ill liquid assets are easy to create performance from two.

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Speaker 1: Look at the end of the day, we're running a

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Speaker 1: a asset management firm. It's disrupting on three different levels.

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Speaker 1: It's disrupting on the revenue level, it's disrupting on the

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Speaker 1: distribution level, and it's disrupting on the cost structure. We've

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Speaker 1: built a cost structure that essentially outsources virtually all the

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Speaker 1: things that most firms would do internally. Most firms do

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Speaker 1: them internally because it's their legacy. We have the benefit

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Speaker 1: of building a firm today, and given the cloud structure

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Speaker 1: in the world and the available technology, we can replicate

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Speaker 1: what most firms do for millions and millions of dollars

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Speaker 1: for far far less. So our cost structure is structurally

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Speaker 1: competitive relative to anybody else. We actually have a structural

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Speaker 1: benefit that others can't take advantage of. What are your

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Speaker 1: thoughts about starting aperture investors at the time when if

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Speaker 1: you look at the SMP five hundred were four. We've

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Speaker 1: got a record for the DAO at three. You're looking

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Speaker 1: at performance that's pretty good, and a lot of people

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Speaker 1: are starting to think maybe this is the time to

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Speaker 1: lighten up on stocks some sixty six. I started thinking

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Speaker 1: about investing, believe it or not, when I was maybe

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Speaker 1: twelve or thirteen years old. Over that time period, doesn't

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Speaker 1: take anybody, you know, smart to realize that equies are

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Speaker 1: going up over time. People are investing for their lives,

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Speaker 1: they're investing for their savings. Market timing is interesting to

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Speaker 1: talk about, but not interesting as an investment thesis. So

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Speaker 1: Aperture is here for the long run. We expect to

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Speaker 1: be in business for many, many years, tens of years,

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Speaker 1: and our job is to produce alpha, whether the market

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Speaker 1: is going down or the market's going up. Is it

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Speaker 1: hard for you to recruit potential investment managers with a

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Speaker 1: fee structure like this, especially since their compensation is so

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Speaker 1: closely tied to our performance. It's a great question. It's

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Speaker 1: really the key question. Actually, So I've interviewed over almost

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Speaker 1: a hundred people. Can't keep counting. Somewhere over seventy five,

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Speaker 1: and I think it's up to a hundred UM. And

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Speaker 1: I think the people fall into two categories. There are

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Speaker 1: those portfolio managers who grew up in a fixed fee

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Speaker 1: world who look at this and go, well, why would

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Speaker 1: I go to a performance based world when I get

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Speaker 1: paid whether or not I perform? And my view of

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Speaker 1: that is I don't even want to want to hire them,

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Speaker 1: because that's just not the person I want. The person

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Speaker 1: I want is somebody that believes they can perform, has

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Speaker 1: a history of performing, understands how to take risk, and

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Speaker 1: is willing to be paid on the basis of that performance.

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Speaker 1: Because there are two important things to that. One is

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Speaker 1: their risk takers and at the end of the day,

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Speaker 1: you want to invest with the risk here. You can't

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Speaker 1: make money if the person doesn't take risk. And two

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Speaker 1: is they're willing to cap their capacity because capacity is

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Speaker 1: the main issue in the camp in the industry. Any

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Speaker 1: names you can share who have joined the team, no,

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Speaker 1: I mean it'll be public over time. But I think

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Speaker 1: we're a team. I'm sorry rhymes like like Magan, but

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Speaker 1: we're a team and we're going to be a team,

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Speaker 1: all right. We're gonna leave with there Thanks very much

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Speaker 1: for coming in. Peter Krauss is the founder and financial

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Speaker 1: partner for Aperture Investors. They're looking to reshape the fee

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Speaker 1: structure for money managers. Thanks very much for coming in

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Speaker 1: and sharing your thoughts with us. Joining us now as

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Speaker 1: Lenan Union. She's an FX reporter for Bloomberg News Land.

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Speaker 1: Thank you so much for being with us. You know,

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Speaker 1: I have to think it is strange that the dollar

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Speaker 1: is weakening at a time when treasury yields are grinding higher.

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Speaker 1: Doesn't this go against the trend that we've seen recently.

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Speaker 1: It certainly does, Lisa, And that's the really interesting thing

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Speaker 1: we've seen. Positioning in the FX market is max bullish

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Speaker 1: right now. People are piling into long positions. It's the

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Speaker 1: third most crowded trade according to Bank of America's Fund

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Speaker 1: Manager Survey. And yet I'm hearing a lot of people

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Speaker 1: talking about the dollar being a cell um. You know.

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Speaker 1: We we talked to Ben P. Perry Boat Asset Management.

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Speaker 1: They think the dollar could plunge ten percent in the

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Speaker 1: next six to nine months. So what we're looking at

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Speaker 1: is the market saying Feds over We're over it. We

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Speaker 1: know what's happening there. The U S economy is doing well.

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Speaker 1: What's next. We'll just taking a look at the performance

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Speaker 1: of the dollar today one thirty two eighty against the

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Speaker 1: pounds sterling. Perhaps that's in response to the comments from

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Speaker 1: Donald Tusk of the European Union about ongoing negotiations, and

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Speaker 1: also taking a look at the dollar versus the Canadian

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Speaker 1: looney one twenty eight the dollar is weakening. Yeah, And

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Speaker 1: I think with those two stories, particularly with Canada and

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Speaker 1: the pound, we have a lot of videosyncratic political risk

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Speaker 1: and trade risk when it comes to NAFTA. So the

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Speaker 1: dollar has definitely gotten a bid in the last few

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Speaker 1: weeks months because of trade problems. But I think a

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Speaker 1: lot of the being people that I'm looking at on

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Speaker 1: the by side, who are longer term thinkers, think Okay,

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Speaker 1: the trade stuff is just noise. It will eventually be resolved.

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Speaker 1: And what's really important is the fundamental drivers, which is

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Speaker 1: US central bank is already moving, which next, Which central

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Speaker 1: banks are next, and who is going to catch up

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Speaker 1: to the US in terms of that monetary policy convergence.

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Speaker 1: So Dave come on in here. If BNP PRIVA analysts

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Speaker 1: are correct and others that the greenback could decline could

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Speaker 1: appreciate about ten percent in the upcoming year. What does

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Speaker 1: that mean for US equities? And that's kind of almost

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Speaker 1: a tailwind. Now, yeah, I mean you've sort of seeing

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Speaker 1: the dollar pop up and a lot of companies results

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Speaker 1: as something to be concerned about. I mean, let's face it,

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Speaker 1: you know, if you've got a higher dollar than all

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Speaker 1: those overseas earnings just don't count so much when you

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Speaker 1: bring them back home, if only for the sake of

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Speaker 1: the financial statements. And you know, to the extent that

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Speaker 1: the companies are trying to sell overseas, I mean, it

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Speaker 1: becomes an issue as well, so it has the potential

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Speaker 1: to be that. I mean, then again, I'm looking at

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Speaker 1: the Bloomberg Dollar Index and it's sort of sitting in

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Speaker 1: the range. It's been the last few months at the

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Speaker 1: bottom of the range, but it's not like we've had

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Speaker 1: the kind of really substantial move lower that would suggest that,

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Speaker 1: at least for the moment, that things are changing in

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Speaker 1: a meaningful way for US companies. And just to your

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Speaker 1: point at Lisa, I mean, a company like Coca Cola,

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Speaker 1: which derives more than half of its revenue from outside

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Speaker 1: the United States, they would be affected by any of

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Speaker 1: those big moves in US dollar, right, yes, exactly, and

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Speaker 1: so maybe this becomes, you know, a boon if the

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Speaker 1: dollar does start to weaken. We saw that when the

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Speaker 1: FED was tightening rates that um, you know, everyone was

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Speaker 1: really worried about this tightening and financial conditions. The dollar

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Speaker 1: was doing a lot of the tightening for the FED.

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Speaker 1: So maybe we're going in re versus un confused because

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Speaker 1: with treasure yields now at ten year yields climbing above

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Speaker 1: three percent, you're getting real return on everything from three

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Speaker 1: months t bills out through the thirty year treasury. I'm

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Speaker 1: just trying to understand why are we not seeing more

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Speaker 1: foreign investor flood back into the US giving more of

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Speaker 1: a bid to the dollar. I mean, I understand about

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Speaker 1: the FED, but what about the actual yields. I think

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Speaker 1: it's again we're we're looking at the two thousand seventeen

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Speaker 1: story again, which is that people just uh, in the

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Speaker 1: FX market don't see the US as that appealing anymore

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Speaker 1: because we've maxed out, and I think the two markets

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Speaker 1: are definitely dislocated for sure, um and in for an exchange,

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Speaker 1: people say this is as good as it gets in

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Speaker 1: the US. What's next as good as it gets. That

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Speaker 1: seems to be not resonating at all with stock traders

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Speaker 1: today as we hit a new highs, so people seem

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Speaker 1: to think that there's a lot more good head in equities,

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Speaker 1: although currencies can sometimes sometimes have a little bit more

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Speaker 1: of a finger on the pulse, a different pulse perhaps. Davilson,

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Speaker 1: Blomberg Sox editor, columnist and blogger, and m live go

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Speaker 1: on the Bloomberg and Lennian who covers FX for us

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Speaker 1: here at Bloomberg News, and I gotta say, I'm having

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Speaker 1: trouble reconciling higher yields with a weaker dollar. It's something

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Speaker 1: that is not logical you're trying to make sense of. Well, no,

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Speaker 1: it's just it goes against some recent trends that we've seen,

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Speaker 1: and it just it's an interesting dynamic. It'll be interesting

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Speaker 1: to see whether it holds. Right now. We want to

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Speaker 1: shove the focus to China overnight. There are reports that

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Speaker 1: China is considering cutting tariffs on incoming goods as seeming

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Speaker 1: I don't know, olive branch to the rest of the

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Speaker 1: world saying that we're going to lower our high tariff

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Speaker 1: rates a little bit in order to be a leader

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Speaker 1: in trade joining US now Tom or like chief economist

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Speaker 1: for Bloomberg Economics coming to US from Washington, D C. Tom.

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Speaker 1: This seems to go against what we had been seeing.

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Speaker 1: It does seem to break the vibe between the US

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Speaker 1: and China where it was sort of an escalating tariff off.

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Speaker 1: How big of a deal is this? I think we

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Speaker 1: need to wait for the details. UM. If it's a

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Speaker 1: very significant cut in tariff um, then clearly this is

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Speaker 1: going to be big news. UM. If we're just talking

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Speaker 1: about a fraction of a percent or a couple of

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Speaker 1: percents of tariff I think is not going to really

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Speaker 1: move the dial um. It seems to be an indication

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Speaker 1: that China wants to d escalate this situation UM. The US,

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Speaker 1: when with two hundred tariffs on two billion dollars in goods,

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Speaker 1: China responded with tariffs on just sixty billion. The US

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Speaker 1: set tariffs at ten percent and said they were going

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Speaker 1: to China came in at a lower level. And now

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Speaker 1: this move to offer a general concession on tariff's um

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Speaker 1: worldwide UM seems to me an indication that China is

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Speaker 1: trying to de escalate. What about the import tax that

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Speaker 1: China might impose more generally, what would that do to

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Speaker 1: the Chinese economy. So the way that China will present

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Speaker 1: this is part of a longer term reform and opening strategy.

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Speaker 1: Of course, Donald Trump has his prestige in China, Chi

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Speaker 1: Jinping has his prestige. The last thing that China's government

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Speaker 1: wants to do is to be perceived as making concessions

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Speaker 1: um to the US. So this will be presented as

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Speaker 1: part of a longer term reform and opening strate to Gum,

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Speaker 1: and it will have, to your question, pim Um that

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Speaker 1: positive impact in terms of raising consumption, in terms of

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Speaker 1: dealing with some of China's economic imbalances, and so the

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Speaker 1: hope in Beijing will be at the same time as

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Speaker 1: taking some of the heat out of the trade trade dispute,

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Speaker 1: it's also a longer term positive for China's development. So, Tom,

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Speaker 1: this was my big question when I read the news

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Speaker 1: this morning, I was wondering it will China lower tariffs

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Speaker 1: on US goods alongside others that they import, especially considering

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Speaker 1: the fact that they've got no plans to dial back

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Speaker 1: their retaliatory tariffs that they said are going to go

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Speaker 1: into effect on September twenty in tandem with the additional

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Speaker 1: US tariffs and Chinese goods. Right. Um, that's an important question.

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Speaker 1: I don't think we have perfect clarity on it yet.

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Speaker 1: We don't have the details from the Chinese side. UM.

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Speaker 1: My initial take though, is that this reduction in tariffs

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Speaker 1: will be worldwide. It will fly to the U S,

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Speaker 1: it will apply to Europe, it will apply to everybody. UM.

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Speaker 1: So the Chinese are making their domestic market more attractive

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Speaker 1: to foreign firms. At the same time, those punitive tariffs

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Speaker 1: on U S firms um, which the Chinese have said

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Speaker 1: they will impose in retaliation for US tariffs on Chinese firms,

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Speaker 1: will be in place, So the whole market will look

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Speaker 1: more attractive to foreign firms but Chinese, but US terms

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Speaker 1: will face this additional punitive tariff. UM. I think the

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Speaker 1: the logic of that for Beijing is that they hope

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Speaker 1: to turn US corporates into lobbyists on their behalf, because

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Speaker 1: the US corporates will see, oh, the Europeans, the Canadians,

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Speaker 1: the Japanese, they're all going into the Chinese market on

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Speaker 1: these new favorable terms. We can't get in because we're

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Speaker 1: faced with these punitive additional tariffs. Let's go to d C.

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Speaker 1: Let's encourage the Trump administration to call a truce, maybe

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Speaker 1: walk back some of the some of the terrists they've introduced. Tom,

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Speaker 1: just quickly here, if this is all going to happen,

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Speaker 1: what happens to the Chinese currency? I mean it hasn't

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Speaker 1: it been falling in value? And doesn't that make them

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Speaker 1: Chinese products, you know, more competitive? So China has allowed

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Speaker 1: the UNSW to de appreciate somewhat over the course of

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Speaker 1: two thousand and eighteen. There certainly hasn't been an extreme

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Speaker 1: drop in the currency. The fear for China if we

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Speaker 1: saw a big drop would be we'd be back to

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Speaker 1: the world of capital light flows and concerns about financial stability. Um.

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Speaker 1: I think if we see this cut in tarrits and

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Speaker 1: that reduces the tensions in the trade war, then that's

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Speaker 1: going to reduce the need for you and depreciation as

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Speaker 1: a kind of competitiveness offset. I do you want to

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Speaker 1: just remind you we are awaiting law enforcement comments on

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Speaker 1: multiple victims having been shot in Maryland. We will bring

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Speaker 1: you those when we get them. Tom. You know you're

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Speaker 1: talking about how China wants to turn US corporations into

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Speaker 1: lobbyists to get the Trump administration to back away from

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Speaker 1: this trade escalation. But so far they have been lobbyists

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Speaker 1: and they have failed. What makes China confident that perhaps

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Speaker 1: the Trump administration would listen to corporate pushback when it

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Speaker 1: really hasn't worked so far. Yeah, I think that's a

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Speaker 1: that's a key point. And my expectation at the start

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Speaker 1: of the year was that we were going to have

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Speaker 1: much more vigorous corporate pushback from the US business lobby

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Speaker 1: and that was going to be a more significant factor

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Speaker 1: in changing the changing the view on the Trump administration. Clearly,

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Speaker 1: that hasn't happened so far. We'll see what the extent

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Speaker 1: of the tariff cut that China is offering is um.

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Speaker 1: But clearly, if it's a very significant tariff cut, if

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Speaker 1: it's significantly increases the appeal um of doing business in China,

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Speaker 1: and then you would expect those business lobby voices in

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Speaker 1: the US to get that little bit louder um. And

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Speaker 1: of course they don't have a crystal ball into Beijing.

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Speaker 1: I don't know what the government's internal thinking is, um,

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Speaker 1: but the hope I think would be the alloweder voice

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Speaker 1: from the US business lobby would make it more difficult

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Speaker 1: for the Trump administration to proceed with aggressive tariffs. Does

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Speaker 1: this also have an impact on other countries in Asia

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Speaker 1: that maybe have assumed some of the manufacturing work that

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Speaker 1: has been too expensive to do in China, Right, So

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Speaker 1: I think countries like Vietnam, countries like the Philippines, countries

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Speaker 1: like Bangladesh, And we were already seeing a lot of

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Speaker 1: export business, low value added export business moving from China

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Speaker 1: to those countries because they are cheaper now. Um, And

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Speaker 1: this US China trade war, I mean, it could only

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Speaker 1: accelerate that process. Right. If China is getting more expensive

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Speaker 1: in terms of labor, in terms of exchange rate, in

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Speaker 1: terms of all the cost of production, and then you

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Speaker 1: have tariffs on top of that, then all the corporations

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Speaker 1: are going to think, Okay, my next factory is going

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Speaker 1: to be in Southeast Asia. Now. If China reduces his

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Speaker 1: tariffs and dials playing the tension in the trade war, um,

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Speaker 1: clearly that the pressure for that exodus of manufacturing activity

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Speaker 1: will be that bit less. So one thing that I'm

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Speaker 1: struck by is we were speaking with Leland Miller of

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Speaker 1: China beige Book International earlier in the week, and he

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Speaker 1: was saying that on the ground, it seems like manufacturing

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Speaker 1: is slowing in China despite some of the data that

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Speaker 1: we're getting from official sources there. And I'm just I'm wondering,

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Speaker 1: if you do sort of reduce the barrier to imports

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Speaker 1: in China at a time when you're already seeing a

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Speaker 1: slowdown and manufacturing, how much could this actually hurt China's economy.

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Speaker 1: I mean, that's an interesting question. UM. Clearly, if you

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Speaker 1: import more manufactured good things, you have less need to

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Speaker 1: imput the actually less need to produce manufactured goods at

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Speaker 1: home at the same time. UM, Tariffs and not the

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Speaker 1: only factor determining where manufacturing activity takes place. UM, the

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Speaker 1: supply chains are in China. The emphas structure is in China.

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Speaker 1: These things do not move quickly or move overnight. UM.

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Speaker 1: I think the idea that the Chinese government has is

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Speaker 1: probably not so much. Oh, we're going to get more

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Speaker 1: important manufacturing goods, and that's going to be bad for

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Speaker 1: our factories at home. But rather we've got lots of consumers.

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Speaker 1: They've got a demand for goods that have produced globally. UM,

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Speaker 1: we're going to ramp up consumption by reducing import barriers

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Speaker 1: and opening the door to more US cars, more Japanese cars,

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Speaker 1: more of those kind of high end goods that Chinese

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Speaker 1: consumers now want but are not being produced at home.

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Speaker 1: Want to thank you very much for spending time with us.

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Speaker 1: Tom Orlick is Chief economist for a Bloomberg Economics, talking

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Speaker 1: about the effects of the drawn out US China trade

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Speaker 1: war and what that means not only for consumers in

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Speaker 1: the United States, but also for the Chinese economy. So

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Speaker 1: Amazon wants to run our world in every which way,

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Speaker 1: whether it's in our homes, whether it's in our stores,

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Speaker 1: whether it's the music we listen to or the movies

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Speaker 1: we watch. The latest they are planning to open three

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Speaker 1: thousand ghost stores. By Shara over Day, Bloomberg Opinion calumnists

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Speaker 1: covering all things tech. What does an Amazon convenience store

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Speaker 1: look like? Well, what they look like now. Amazon has

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Speaker 1: a handful of these cashier less more or less convenience

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Speaker 1: stores um that they started a couple of years ago

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Speaker 1: in their hometown of Seattle, and they look like a

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Speaker 1: conventional convenience store with prepared foods and a handful of

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Speaker 1: select um packaged food items, except there are no cashiers.

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Speaker 1: You kind of walk in with your smartphone that has

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Speaker 1: a special app on it. You pluck whatever you want

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Speaker 1: off the shelves, and you walk out and your app

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Speaker 1: is automatically figures out what you bought and charges you

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Speaker 1: for it. Now, I don't know, you know, our colleague

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Speaker 1: Spenser Sopa reported this story yesterday about the planned open

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Speaker 1: as many as three thousand of these cashier less stores.

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Speaker 1: In addition to the number which is quite stunning, the

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Speaker 1: other surprising thing was maybe they won't be convenience stores.

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Speaker 1: Maybe they will be more like cashier less. Uh, you

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Speaker 1: know these kind of sandwich joints that we see all

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Speaker 1: over our neighborhood here in Manhattan, more like places where

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Speaker 1: you go to pick up a sandwich or a salad

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Speaker 1: or some other prepared food. So it feels almost like

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Speaker 1: it's in competition with you know, Preda Mager or Chipotle,

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Speaker 1: er these other kind of lunch joints that we see

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Speaker 1: in lots of cities. Do we have any idea about

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Speaker 1: the back the back end of all this, the kitchen preparation.

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Speaker 1: Who's going to do all that work? And is that

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Speaker 1: coming from Whole Foods? For example? I mean, look, the

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Speaker 1: irony of any cashier less store is that it requires

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Speaker 1: an enormous amount of manpower behind the scenes. Right, So,

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Speaker 1: in addition to the people who have to prepare the food,

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Speaker 1: you have people who stuck the shelves. You have people

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Speaker 1: who have to drive food from a centralized kitchen um

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Speaker 1: or or warehouse to the store. Uh, you gotta restocked shelves,

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Speaker 1: you gotta have securities and people and are shoplifting things. Essentially,

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Speaker 1: there are people required, even for something that is billed

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Speaker 1: as cashierless. You know, Spencer's story yesterday reported quite an

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Speaker 1: interesting figure that the original ghost store in Seattle required

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Speaker 1: a million dollars just for the technology hardware, and that

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Speaker 1: doesn't account for all the other costs to set up

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Speaker 1: and operate that store. So obviously a million dollars plus

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Speaker 1: per store does not scale if you're talking about something

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Speaker 1: on the order of three thousand stores. Jeff Bezos is

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Speaker 1: no dope. What's his plan here, what's the what's the

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Speaker 1: big kitting? Okay, so the look, the big prize here

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00:24:49,040 --> 00:24:52,800
Speaker 1: is Americans and people around the world, they spend huge

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Speaker 1: chunks of their household budget every month on groceries, on

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Speaker 1: convenience stores, and on eating out and if Amazon can

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00:25:00,760 --> 00:25:04,600
Speaker 1: pluck you know, good share of each of those pools

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00:25:04,880 --> 00:25:09,680
Speaker 1: of household spending, that's an enormous market for Amazon, particularly

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00:25:09,680 --> 00:25:12,560
Speaker 1: in grocery, but not exclusively. So that is really the

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00:25:12,600 --> 00:25:17,560
Speaker 1: big prize here, is accessing a huge pool of consumer spending.

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00:25:18,280 --> 00:25:21,719
Speaker 1: Do you know that Amazon offers something called Amazon Cloud

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00:25:21,840 --> 00:25:25,679
Speaker 1: Cam for the Alexa smart home. It's a security camera

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00:25:25,920 --> 00:25:32,040
Speaker 1: that has two way audio, night vision and HD resolution. Indeed, yes,

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00:25:32,600 --> 00:25:35,919
Speaker 1: it's one of many of their Alexa power devices. Yes, well,

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Speaker 1: that was where I was going with this, because I

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Speaker 1: believe you said to be an announcement having to do

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Speaker 1: with devices, and I don't know whether it's going to

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Speaker 1: be the Echo Look, the Echo Show, the Echo Spot,

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Speaker 1: the Alexa, the Fire TV. My goodness, Yes, it's so.

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Speaker 1: As you said, in a couple of hours, Amazon is

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Speaker 1: hosting this event in Seattle where they're going to apparently

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Speaker 1: talk about the next wave of the devices they put

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Speaker 1: out with this Alexa kind of smart brain baked in UM.

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Speaker 1: As you point out, they do have a pretty big

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Speaker 1: range of these Alexa powered Amazon devices already, and I

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Speaker 1: think although there are no hard sales figures, it feels

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Speaker 1: like some of those Alexa powered devices have been successful,

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Speaker 1: like the Echo Dots, which is the kind of small

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Speaker 1: form version of the original Echo voice powered speaker, and

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Speaker 1: some of the Alexa powered devices that Amazon is released,

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Speaker 1: um haven't been a successful So I think it's fair

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Speaker 1: to think that Amazon is kind of throwing spaghetti at

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Speaker 1: the wall to see what sticks when it comes to

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Speaker 1: their device strategy. And maybe that's not a bad idea,

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00:26:39,480 --> 00:26:43,040
Speaker 1: right if you're a company of Amazon size, let's do essentially,

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00:26:43,480 --> 00:26:46,560
Speaker 1: you know, experiments in the real world instead of you know,

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Speaker 1: in a laboratory. But there's no cashier when you buy

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00:26:49,760 --> 00:26:53,439
Speaker 1: that spaghetti before you throw it at the wall. Interesting, Well, um,

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Speaker 1: I suppose yeah, you can buy those Amazon devices on Amazon,

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Speaker 1: no people required. Also at whole food stores where there

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Speaker 1: are cashiers. It just gets better and better, doesn't it.

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Speaker 1: I will say, I go to Whole Foods, I full

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Speaker 1: disclosure on an Amazon Dot Prime customer, but I haven't

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00:27:10,720 --> 00:27:14,240
Speaker 1: signed on for the benefit Whole Foods because it just

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00:27:14,240 --> 00:27:17,280
Speaker 1: seems onerous and yet another password. I don't know. I

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Speaker 1: just am not seeing the crossover so much. You get

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Speaker 1: a discount, I know, yeah, it actually costs less, I know,

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Speaker 1: but then it's time. Time is money anyway, sure over

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Speaker 1: day of Bloomberg Opinion columnist. Thank you so much for

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Speaker 1: being with us. Thanks for listening to the Bloomberg P

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00:27:33,880 --> 00:27:36,840
Speaker 1: and L podcast. You can subscribe and listen to interviews

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00:27:36,880 --> 00:27:40,920
Speaker 1: at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer.

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00:27:41,359 --> 00:27:44,920
Speaker 1: I'm Pim Fox. I'm on Twitter at pim Fox. I'm

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00:27:44,920 --> 00:27:48,240
Speaker 1: on Twitter at Lisa Abramo. It's one before the podcast.

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Speaker 1: You can always catch us worldwide on Bloomberg Radio