Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.
Speaker 1: Along with my co host Lisa Abramowitz. Each day we
Speaker 1: bring you the most important, noteworthy, and useful interviews for
Speaker 1: you and your money, whether you're at the grocery store
Speaker 1: or the trading floor. Find the Bloomberg p m L
Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Peter
Speaker 1: Krauss led Alliance Bernstein through the heart of the financial crisis.
Speaker 1: He was chairman and CEO of the big asset management
Speaker 1: firm from two thousand and eight through last year, and
Speaker 1: now he is starting his own firm. We are broadcasting
Speaker 1: live from Bloomberg Directive Broger Studios, and Peter Krause joins
Speaker 1: us right here. Peter, thank you so much for being here.
Speaker 1: Thanks you at least for having me. All right, So
Speaker 1: you are founding a new firm, and why good question.
Speaker 1: It is a new firm, Uh what? The main reason
Speaker 1: that I think the new firm is exciting is that
Speaker 1: we're trying to align the revenue model of the firm
Speaker 1: with the clients objectives. And what I found in time
Speaker 1: in my experience in the industry is that although we
Speaker 1: all are here to serve clients. Almost all firms revenue
Speaker 1: models are fixed fees, so the client pays whether or
Speaker 1: not the manager performs. An aperture is distinctly different. In
Speaker 1: that sense, the client only pays more than the passive
Speaker 1: fee if we perform. What is the hurdle rate? The
Speaker 1: hurdle rates are different for different products, so it would
Speaker 1: depend upon the investment services that we have. But let's
Speaker 1: just take an example in a simple equity fund. Let's
Speaker 1: say it's US large cap equities. The hurdle rate would
Speaker 1: be the standard and Poor's index, easily identifiable, recognizable by all. Okay,
Speaker 1: so let's say that this does gain steam. Would fees
Speaker 1: be a lot larger once you hit that threshold? Well, actually,
Speaker 1: you have to earn the S and P return in
Speaker 1: order to be paid any fee at all. So in
Speaker 1: other words, let's just say the markets up ten percent,
Speaker 1: that's the SMP. If the managers performance is ten percent,
Speaker 1: they're paid exactly no performance fee and only their base fee.
Speaker 1: So here's what I'm wondering. When you talk about our performance,
Speaker 1: it depends what index you're looking at. It also depends
Speaker 1: what time frame you're looking at. So what is the
Speaker 1: correct time frame to really judge this. So remember that
Speaker 1: almost all managers have benchmarks in the in the fixed
Speaker 1: fee space for sure, uh And so it's true that
Speaker 1: each manager has a different benchmark, and benchmarks can be complex.
Speaker 1: We're attempting to make those benchmarks simple, easy and recognizable.
Speaker 1: The time period over which you pay fees is one year.
Speaker 1: The reason why it's not longer is it's complicated for
Speaker 1: people to understand fees over more than a year. We
Speaker 1: actually charge the fee every day, but at the end
Speaker 1: of the day, we only elect the fee if we
Speaker 1: actually create performance in the twelve month period in which
Speaker 1: the client is invested the new company aperture. Is it
Speaker 1: going to compete against more storied names like Goldman Sachs
Speaker 1: Or is this designed to go and try to peel
Speaker 1: away money from other let's say, hedge funds or specific
Speaker 1: investment strategies. We actually think that we're attempting to disrupt
Speaker 1: all of those, not just Goldman Sacks, not just a
Speaker 1: hedge fund, not just tro Price, not just Fidelity, but
Speaker 1: all the above, because what we're trying to bring to
Speaker 1: the client is outstanding returns, returns over a benchmark at
Speaker 1: the end of the day, clients can buy beta or
Speaker 1: the market exposure for cheap prices. We know that, and
Speaker 1: we think that they should go and do that. What
Speaker 1: clients can't get is return in excess of the market.
Speaker 1: We're actually trying to provide the Okay, so what do
Speaker 1: you think happens to all the big asset managers if
Speaker 1: they don't adopt a fee structure structures like this. I
Speaker 1: think this is a This is an industry that plays
Speaker 1: out over a long period of time. People don't move
Speaker 1: their money around, you know, haphazardly, but over long periods,
Speaker 1: you know, ten to fifteen years. I believe that the
Speaker 1: amount of money that will be followed by this performance
Speaker 1: link structure will be very significant in the trillions. And
Speaker 1: you would look at me and say, well, how could
Speaker 1: that possibly be? But if you go back to when
Speaker 1: et F started, if I had said to you twenty
Speaker 1: plus years later, E t F are going to account
Speaker 1: for almost fifty of the marketplace, you would have thought
Speaker 1: it was crazy. I'm just struck by the infrastructure of
Speaker 1: an asset management, of an asset management for I mean,
Speaker 1: this is not inexpensive. How do you maintain that with
Speaker 1: the structure when it's really hard to outperform unless you
Speaker 1: are investing in less liquid assets. I mean, if you're
Speaker 1: tied to broader markets, it's chance. Yeah, it's hard to
Speaker 1: outperform whether you're invested in liquid markets or illiquid or
Speaker 1: illiquid assets. Don't don't make don't make the mistake that
Speaker 1: ill liquid assets are easy to create performance from two.
Speaker 1: Look at the end of the day, we're running a
Speaker 1: a asset management firm. It's disrupting on three different levels.
Speaker 1: It's disrupting on the revenue level, it's disrupting on the
Speaker 1: distribution level, and it's disrupting on the cost structure. We've
Speaker 1: built a cost structure that essentially outsources virtually all the
Speaker 1: things that most firms would do internally. Most firms do
Speaker 1: them internally because it's their legacy. We have the benefit
Speaker 1: of building a firm today, and given the cloud structure
Speaker 1: in the world and the available technology, we can replicate
Speaker 1: what most firms do for millions and millions of dollars
Speaker 1: for far far less. So our cost structure is structurally
Speaker 1: competitive relative to anybody else. We actually have a structural
Speaker 1: benefit that others can't take advantage of. What are your
Speaker 1: thoughts about starting aperture investors at the time when if
Speaker 1: you look at the SMP five hundred were four. We've
Speaker 1: got a record for the DAO at three. You're looking
Speaker 1: at performance that's pretty good, and a lot of people
Speaker 1: are starting to think maybe this is the time to
Speaker 1: lighten up on stocks some sixty six. I started thinking
Speaker 1: about investing, believe it or not, when I was maybe
Speaker 1: twelve or thirteen years old. Over that time period, doesn't
Speaker 1: take anybody, you know, smart to realize that equies are
Speaker 1: going up over time. People are investing for their lives,
Speaker 1: they're investing for their savings. Market timing is interesting to
Speaker 1: talk about, but not interesting as an investment thesis. So
Speaker 1: Aperture is here for the long run. We expect to
Speaker 1: be in business for many, many years, tens of years,
Speaker 1: and our job is to produce alpha, whether the market
Speaker 1: is going down or the market's going up. Is it
Speaker 1: hard for you to recruit potential investment managers with a
Speaker 1: fee structure like this, especially since their compensation is so
Speaker 1: closely tied to our performance. It's a great question. It's
Speaker 1: really the key question. Actually, So I've interviewed over almost
Speaker 1: a hundred people. Can't keep counting. Somewhere over seventy five,
Speaker 1: and I think it's up to a hundred UM. And
Speaker 1: I think the people fall into two categories. There are
Speaker 1: those portfolio managers who grew up in a fixed fee
Speaker 1: world who look at this and go, well, why would
Speaker 1: I go to a performance based world when I get
Speaker 1: paid whether or not I perform? And my view of
Speaker 1: that is I don't even want to want to hire them,
Speaker 1: because that's just not the person I want. The person
Speaker 1: I want is somebody that believes they can perform, has
Speaker 1: a history of performing, understands how to take risk, and
Speaker 1: is willing to be paid on the basis of that performance.
Speaker 1: Because there are two important things to that. One is
Speaker 1: their risk takers and at the end of the day,
Speaker 1: you want to invest with the risk here. You can't
Speaker 1: make money if the person doesn't take risk. And two
Speaker 1: is they're willing to cap their capacity because capacity is
Speaker 1: the main issue in the camp in the industry. Any
Speaker 1: names you can share who have joined the team, no,
Speaker 1: I mean it'll be public over time. But I think
Speaker 1: we're a team. I'm sorry rhymes like like Magan, but
Speaker 1: we're a team and we're going to be a team,
Speaker 1: all right. We're gonna leave with there Thanks very much
Speaker 1: for coming in. Peter Krauss is the founder and financial
Speaker 1: partner for Aperture Investors. They're looking to reshape the fee
Speaker 1: structure for money managers. Thanks very much for coming in
Speaker 1: and sharing your thoughts with us. Joining us now as
Speaker 1: Lenan Union. She's an FX reporter for Bloomberg News Land.
Speaker 1: Thank you so much for being with us. You know,
Speaker 1: I have to think it is strange that the dollar
Speaker 1: is weakening at a time when treasury yields are grinding higher.
Speaker 1: Doesn't this go against the trend that we've seen recently.
Speaker 1: It certainly does, Lisa, And that's the really interesting thing
Speaker 1: we've seen. Positioning in the FX market is max bullish
Speaker 1: right now. People are piling into long positions. It's the
Speaker 1: third most crowded trade according to Bank of America's Fund
Speaker 1: Manager Survey. And yet I'm hearing a lot of people
Speaker 1: talking about the dollar being a cell um. You know.
Speaker 1: We we talked to Ben P. Perry Boat Asset Management.
Speaker 1: They think the dollar could plunge ten percent in the
Speaker 1: next six to nine months. So what we're looking at
Speaker 1: is the market saying Feds over We're over it. We
Speaker 1: know what's happening there. The U S economy is doing well.
Speaker 1: What's next. We'll just taking a look at the performance
Speaker 1: of the dollar today one thirty two eighty against the
Speaker 1: pounds sterling. Perhaps that's in response to the comments from
Speaker 1: Donald Tusk of the European Union about ongoing negotiations, and
Speaker 1: also taking a look at the dollar versus the Canadian
Speaker 1: looney one twenty eight the dollar is weakening. Yeah, And
Speaker 1: I think with those two stories, particularly with Canada and
Speaker 1: the pound, we have a lot of videosyncratic political risk
Speaker 1: and trade risk when it comes to NAFTA. So the
Speaker 1: dollar has definitely gotten a bid in the last few
Speaker 1: weeks months because of trade problems. But I think a
Speaker 1: lot of the being people that I'm looking at on
Speaker 1: the by side, who are longer term thinkers, think Okay,
Speaker 1: the trade stuff is just noise. It will eventually be resolved.
Speaker 1: And what's really important is the fundamental drivers, which is
Speaker 1: US central bank is already moving, which next, Which central
Speaker 1: banks are next, and who is going to catch up
Speaker 1: to the US in terms of that monetary policy convergence.
Speaker 1: So Dave come on in here. If BNP PRIVA analysts
Speaker 1: are correct and others that the greenback could decline could
Speaker 1: appreciate about ten percent in the upcoming year. What does
Speaker 1: that mean for US equities? And that's kind of almost
Speaker 1: a tailwind. Now, yeah, I mean you've sort of seeing
Speaker 1: the dollar pop up and a lot of companies results
Speaker 1: as something to be concerned about. I mean, let's face it,
Speaker 1: you know, if you've got a higher dollar than all
Speaker 1: those overseas earnings just don't count so much when you
Speaker 1: bring them back home, if only for the sake of
Speaker 1: the financial statements. And you know, to the extent that
Speaker 1: the companies are trying to sell overseas, I mean, it
Speaker 1: becomes an issue as well, so it has the potential
Speaker 1: to be that. I mean, then again, I'm looking at
Speaker 1: the Bloomberg Dollar Index and it's sort of sitting in
Speaker 1: the range. It's been the last few months at the
Speaker 1: bottom of the range, but it's not like we've had
Speaker 1: the kind of really substantial move lower that would suggest that,
Speaker 1: at least for the moment, that things are changing in
Speaker 1: a meaningful way for US companies. And just to your
Speaker 1: point at Lisa, I mean, a company like Coca Cola,
Speaker 1: which derives more than half of its revenue from outside
Speaker 1: the United States, they would be affected by any of
Speaker 1: those big moves in US dollar, right, yes, exactly, and
Speaker 1: so maybe this becomes, you know, a boon if the
Speaker 1: dollar does start to weaken. We saw that when the
Speaker 1: FED was tightening rates that um, you know, everyone was
Speaker 1: really worried about this tightening and financial conditions. The dollar
Speaker 1: was doing a lot of the tightening for the FED.
Speaker 1: So maybe we're going in re versus un confused because
Speaker 1: with treasure yields now at ten year yields climbing above
Speaker 1: three percent, you're getting real return on everything from three
Speaker 1: months t bills out through the thirty year treasury. I'm
Speaker 1: just trying to understand why are we not seeing more
Speaker 1: foreign investor flood back into the US giving more of
Speaker 1: a bid to the dollar. I mean, I understand about
Speaker 1: the FED, but what about the actual yields. I think
Speaker 1: it's again we're we're looking at the two thousand seventeen
Speaker 1: story again, which is that people just uh, in the
Speaker 1: FX market don't see the US as that appealing anymore
Speaker 1: because we've maxed out, and I think the two markets
Speaker 1: are definitely dislocated for sure, um and in for an exchange,
Speaker 1: people say this is as good as it gets in
Speaker 1: the US. What's next as good as it gets. That
Speaker 1: seems to be not resonating at all with stock traders
Speaker 1: today as we hit a new highs, so people seem
Speaker 1: to think that there's a lot more good head in equities,
Speaker 1: although currencies can sometimes sometimes have a little bit more
Speaker 1: of a finger on the pulse, a different pulse perhaps. Davilson,
Speaker 1: Blomberg Sox editor, columnist and blogger, and m live go
Speaker 1: on the Bloomberg and Lennian who covers FX for us
Speaker 1: here at Bloomberg News, and I gotta say, I'm having
Speaker 1: trouble reconciling higher yields with a weaker dollar. It's something
Speaker 1: that is not logical you're trying to make sense of. Well, no,
Speaker 1: it's just it goes against some recent trends that we've seen,
Speaker 1: and it just it's an interesting dynamic. It'll be interesting
Speaker 1: to see whether it holds. Right now. We want to
Speaker 1: shove the focus to China overnight. There are reports that
Speaker 1: China is considering cutting tariffs on incoming goods as seeming
Speaker 1: I don't know, olive branch to the rest of the
Speaker 1: world saying that we're going to lower our high tariff
Speaker 1: rates a little bit in order to be a leader
Speaker 1: in trade joining US now Tom or like chief economist
Speaker 1: for Bloomberg Economics coming to US from Washington, D C. Tom.
Speaker 1: This seems to go against what we had been seeing.
Speaker 1: It does seem to break the vibe between the US
Speaker 1: and China where it was sort of an escalating tariff off.
Speaker 1: How big of a deal is this? I think we
Speaker 1: need to wait for the details. UM. If it's a
Speaker 1: very significant cut in tariff um, then clearly this is
Speaker 1: going to be big news. UM. If we're just talking
Speaker 1: about a fraction of a percent or a couple of
Speaker 1: percents of tariff I think is not going to really
Speaker 1: move the dial um. It seems to be an indication
Speaker 1: that China wants to d escalate this situation UM. The US,
Speaker 1: when with two hundred tariffs on two billion dollars in goods,
Speaker 1: China responded with tariffs on just sixty billion. The US
Speaker 1: set tariffs at ten percent and said they were going
Speaker 1: to China came in at a lower level. And now
Speaker 1: this move to offer a general concession on tariff's um
Speaker 1: worldwide UM seems to me an indication that China is
Speaker 1: trying to de escalate. What about the import tax that
Speaker 1: China might impose more generally, what would that do to
Speaker 1: the Chinese economy. So the way that China will present
Speaker 1: this is part of a longer term reform and opening strategy.
Speaker 1: Of course, Donald Trump has his prestige in China, Chi
Speaker 1: Jinping has his prestige. The last thing that China's government
Speaker 1: wants to do is to be perceived as making concessions
Speaker 1: um to the US. So this will be presented as
Speaker 1: part of a longer term reform and opening strate to Gum,
Speaker 1: and it will have, to your question, pim Um that
Speaker 1: positive impact in terms of raising consumption, in terms of
Speaker 1: dealing with some of China's economic imbalances, and so the
Speaker 1: hope in Beijing will be at the same time as
Speaker 1: taking some of the heat out of the trade trade dispute,
Speaker 1: it's also a longer term positive for China's development. So, Tom,
Speaker 1: this was my big question when I read the news
Speaker 1: this morning, I was wondering it will China lower tariffs
Speaker 1: on US goods alongside others that they import, especially considering
Speaker 1: the fact that they've got no plans to dial back
Speaker 1: their retaliatory tariffs that they said are going to go
Speaker 1: into effect on September twenty in tandem with the additional
Speaker 1: US tariffs and Chinese goods. Right. Um, that's an important question.
Speaker 1: I don't think we have perfect clarity on it yet.
Speaker 1: We don't have the details from the Chinese side. UM.
Speaker 1: My initial take though, is that this reduction in tariffs
Speaker 1: will be worldwide. It will fly to the U S,
Speaker 1: it will apply to Europe, it will apply to everybody. UM.
Speaker 1: So the Chinese are making their domestic market more attractive
Speaker 1: to foreign firms. At the same time, those punitive tariffs
Speaker 1: on U S firms um, which the Chinese have said
Speaker 1: they will impose in retaliation for US tariffs on Chinese firms,
Speaker 1: will be in place, So the whole market will look
Speaker 1: more attractive to foreign firms but Chinese, but US terms
Speaker 1: will face this additional punitive tariff. UM. I think the
Speaker 1: the logic of that for Beijing is that they hope
Speaker 1: to turn US corporates into lobbyists on their behalf, because
Speaker 1: the US corporates will see, oh, the Europeans, the Canadians,
Speaker 1: the Japanese, they're all going into the Chinese market on
Speaker 1: these new favorable terms. We can't get in because we're
Speaker 1: faced with these punitive additional tariffs. Let's go to d C.
Speaker 1: Let's encourage the Trump administration to call a truce, maybe
Speaker 1: walk back some of the some of the terrists they've introduced. Tom,
Speaker 1: just quickly here, if this is all going to happen,
Speaker 1: what happens to the Chinese currency? I mean it hasn't
Speaker 1: it been falling in value? And doesn't that make them
Speaker 1: Chinese products, you know, more competitive? So China has allowed
Speaker 1: the UNSW to de appreciate somewhat over the course of
Speaker 1: two thousand and eighteen. There certainly hasn't been an extreme
Speaker 1: drop in the currency. The fear for China if we
Speaker 1: saw a big drop would be we'd be back to
Speaker 1: the world of capital light flows and concerns about financial stability. Um.
Speaker 1: I think if we see this cut in tarrits and
Speaker 1: that reduces the tensions in the trade war, then that's
Speaker 1: going to reduce the need for you and depreciation as
Speaker 1: a kind of competitiveness offset. I do you want to
Speaker 1: just remind you we are awaiting law enforcement comments on
Speaker 1: multiple victims having been shot in Maryland. We will bring
Speaker 1: you those when we get them. Tom. You know you're
Speaker 1: talking about how China wants to turn US corporations into
Speaker 1: lobbyists to get the Trump administration to back away from
Speaker 1: this trade escalation. But so far they have been lobbyists
Speaker 1: and they have failed. What makes China confident that perhaps
Speaker 1: the Trump administration would listen to corporate pushback when it
Speaker 1: really hasn't worked so far. Yeah, I think that's a
Speaker 1: that's a key point. And my expectation at the start
Speaker 1: of the year was that we were going to have
Speaker 1: much more vigorous corporate pushback from the US business lobby
Speaker 1: and that was going to be a more significant factor
Speaker 1: in changing the changing the view on the Trump administration. Clearly,
Speaker 1: that hasn't happened so far. We'll see what the extent
Speaker 1: of the tariff cut that China is offering is um.
Speaker 1: But clearly, if it's a very significant tariff cut, if
Speaker 1: it's significantly increases the appeal um of doing business in China,
Speaker 1: and then you would expect those business lobby voices in
Speaker 1: the US to get that little bit louder um. And
Speaker 1: of course they don't have a crystal ball into Beijing.
Speaker 1: I don't know what the government's internal thinking is, um,
Speaker 1: but the hope I think would be the alloweder voice
Speaker 1: from the US business lobby would make it more difficult
Speaker 1: for the Trump administration to proceed with aggressive tariffs. Does
Speaker 1: this also have an impact on other countries in Asia
Speaker 1: that maybe have assumed some of the manufacturing work that
Speaker 1: has been too expensive to do in China, Right, So
Speaker 1: I think countries like Vietnam, countries like the Philippines, countries
Speaker 1: like Bangladesh, And we were already seeing a lot of
Speaker 1: export business, low value added export business moving from China
Speaker 1: to those countries because they are cheaper now. Um, And
Speaker 1: this US China trade war, I mean, it could only
Speaker 1: accelerate that process. Right. If China is getting more expensive
Speaker 1: in terms of labor, in terms of exchange rate, in
Speaker 1: terms of all the cost of production, and then you
Speaker 1: have tariffs on top of that, then all the corporations
Speaker 1: are going to think, Okay, my next factory is going
Speaker 1: to be in Southeast Asia. Now. If China reduces his
Speaker 1: tariffs and dials playing the tension in the trade war, um,
Speaker 1: clearly that the pressure for that exodus of manufacturing activity
Speaker 1: will be that bit less. So one thing that I'm
Speaker 1: struck by is we were speaking with Leland Miller of
Speaker 1: China beige Book International earlier in the week, and he
Speaker 1: was saying that on the ground, it seems like manufacturing
Speaker 1: is slowing in China despite some of the data that
Speaker 1: we're getting from official sources there. And I'm just I'm wondering,
Speaker 1: if you do sort of reduce the barrier to imports
Speaker 1: in China at a time when you're already seeing a
Speaker 1: slowdown and manufacturing, how much could this actually hurt China's economy.
Speaker 1: I mean, that's an interesting question. UM. Clearly, if you
Speaker 1: import more manufactured good things, you have less need to
Speaker 1: imput the actually less need to produce manufactured goods at
Speaker 1: home at the same time. UM, Tariffs and not the
Speaker 1: only factor determining where manufacturing activity takes place. UM, the
Speaker 1: supply chains are in China. The emphas structure is in China.
Speaker 1: These things do not move quickly or move overnight. UM.
Speaker 1: I think the idea that the Chinese government has is
Speaker 1: probably not so much. Oh, we're going to get more
Speaker 1: important manufacturing goods, and that's going to be bad for
Speaker 1: our factories at home. But rather we've got lots of consumers.
Speaker 1: They've got a demand for goods that have produced globally. UM,
Speaker 1: we're going to ramp up consumption by reducing import barriers
Speaker 1: and opening the door to more US cars, more Japanese cars,
Speaker 1: more of those kind of high end goods that Chinese
Speaker 1: consumers now want but are not being produced at home.
Speaker 1: Want to thank you very much for spending time with us.
Speaker 1: Tom Orlick is Chief economist for a Bloomberg Economics, talking
Speaker 1: about the effects of the drawn out US China trade
Speaker 1: war and what that means not only for consumers in
Speaker 1: the United States, but also for the Chinese economy. So
Speaker 1: Amazon wants to run our world in every which way,
Speaker 1: whether it's in our homes, whether it's in our stores,
Speaker 1: whether it's the music we listen to or the movies
Speaker 1: we watch. The latest they are planning to open three
Speaker 1: thousand ghost stores. By Shara over Day, Bloomberg Opinion calumnists
Speaker 1: covering all things tech. What does an Amazon convenience store
Speaker 1: look like? Well, what they look like now. Amazon has
Speaker 1: a handful of these cashier less more or less convenience
Speaker 1: stores um that they started a couple of years ago
Speaker 1: in their hometown of Seattle, and they look like a
Speaker 1: conventional convenience store with prepared foods and a handful of
Speaker 1: select um packaged food items, except there are no cashiers.
Speaker 1: You kind of walk in with your smartphone that has
Speaker 1: a special app on it. You pluck whatever you want
Speaker 1: off the shelves, and you walk out and your app
Speaker 1: is automatically figures out what you bought and charges you
Speaker 1: for it. Now, I don't know, you know, our colleague
Speaker 1: Spenser Sopa reported this story yesterday about the planned open
Speaker 1: as many as three thousand of these cashier less stores.
Speaker 1: In addition to the number which is quite stunning, the
Speaker 1: other surprising thing was maybe they won't be convenience stores.
Speaker 1: Maybe they will be more like cashier less. Uh, you
Speaker 1: know these kind of sandwich joints that we see all
Speaker 1: over our neighborhood here in Manhattan, more like places where
Speaker 1: you go to pick up a sandwich or a salad
Speaker 1: or some other prepared food. So it feels almost like
Speaker 1: it's in competition with you know, Preda Mager or Chipotle,
Speaker 1: er these other kind of lunch joints that we see
Speaker 1: in lots of cities. Do we have any idea about
Speaker 1: the back the back end of all this, the kitchen preparation.
Speaker 1: Who's going to do all that work? And is that
Speaker 1: coming from Whole Foods? For example? I mean, look, the
Speaker 1: irony of any cashier less store is that it requires
Speaker 1: an enormous amount of manpower behind the scenes. Right, So,
Speaker 1: in addition to the people who have to prepare the food,
Speaker 1: you have people who stuck the shelves. You have people
Speaker 1: who have to drive food from a centralized kitchen um
Speaker 1: or or warehouse to the store. Uh, you gotta restocked shelves,
Speaker 1: you gotta have securities and people and are shoplifting things. Essentially,
Speaker 1: there are people required, even for something that is billed
Speaker 1: as cashierless. You know, Spencer's story yesterday reported quite an
Speaker 1: interesting figure that the original ghost store in Seattle required
Speaker 1: a million dollars just for the technology hardware, and that
Speaker 1: doesn't account for all the other costs to set up
Speaker 1: and operate that store. So obviously a million dollars plus
Speaker 1: per store does not scale if you're talking about something
Speaker 1: on the order of three thousand stores. Jeff Bezos is
Speaker 1: no dope. What's his plan here, what's the what's the
Speaker 1: big kitting? Okay, so the look, the big prize here
Speaker 1: is Americans and people around the world, they spend huge
Speaker 1: chunks of their household budget every month on groceries, on
Speaker 1: convenience stores, and on eating out and if Amazon can
Speaker 1: pluck you know, good share of each of those pools
Speaker 1: of household spending, that's an enormous market for Amazon, particularly
Speaker 1: in grocery, but not exclusively. So that is really the
Speaker 1: big prize here, is accessing a huge pool of consumer spending.
Speaker 1: Do you know that Amazon offers something called Amazon Cloud
Speaker 1: Cam for the Alexa smart home. It's a security camera
Speaker 1: that has two way audio, night vision and HD resolution. Indeed, yes,
Speaker 1: it's one of many of their Alexa power devices. Yes, well,
Speaker 1: that was where I was going with this, because I
Speaker 1: believe you said to be an announcement having to do
Speaker 1: with devices, and I don't know whether it's going to
Speaker 1: be the Echo Look, the Echo Show, the Echo Spot,
Speaker 1: the Alexa, the Fire TV. My goodness, Yes, it's so.
Speaker 1: As you said, in a couple of hours, Amazon is
Speaker 1: hosting this event in Seattle where they're going to apparently
Speaker 1: talk about the next wave of the devices they put
Speaker 1: out with this Alexa kind of smart brain baked in UM.
Speaker 1: As you point out, they do have a pretty big
Speaker 1: range of these Alexa powered Amazon devices already, and I
Speaker 1: think although there are no hard sales figures, it feels
Speaker 1: like some of those Alexa powered devices have been successful,
Speaker 1: like the Echo Dots, which is the kind of small
Speaker 1: form version of the original Echo voice powered speaker, and
Speaker 1: some of the Alexa powered devices that Amazon is released,
Speaker 1: um haven't been a successful So I think it's fair
Speaker 1: to think that Amazon is kind of throwing spaghetti at
Speaker 1: the wall to see what sticks when it comes to
Speaker 1: their device strategy. And maybe that's not a bad idea,
Speaker 1: right if you're a company of Amazon size, let's do essentially,
Speaker 1: you know, experiments in the real world instead of you know,
Speaker 1: in a laboratory. But there's no cashier when you buy
Speaker 1: that spaghetti before you throw it at the wall. Interesting, Well, um,
Speaker 1: I suppose yeah, you can buy those Amazon devices on Amazon,
Speaker 1: no people required. Also at whole food stores where there
Speaker 1: are cashiers. It just gets better and better, doesn't it.
Speaker 1: I will say, I go to Whole Foods, I full
Speaker 1: disclosure on an Amazon Dot Prime customer, but I haven't
Speaker 1: signed on for the benefit Whole Foods because it just
Speaker 1: seems onerous and yet another password. I don't know. I
Speaker 1: just am not seeing the crossover so much. You get
Speaker 1: a discount, I know, yeah, it actually costs less, I know,
Speaker 1: but then it's time. Time is money anyway, sure over
Speaker 1: day of Bloomberg Opinion columnist. Thank you so much for
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Speaker 1: I'm Pim Fox. I'm on Twitter at pim Fox. I'm
Speaker 1: on Twitter at Lisa Abramo. It's one before the podcast.
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