WEBVTT - Bloomberg Businessweek Weekend - August 11th, 2023 0:00:01.360 --> 0:00:05.680 This is Bloomberg business Week Inside from the reporters and 0:00:05.880 --> 0:00:09.440 editors who bring you America's most trusted business magazine, plus 0:00:09.520 --> 0:00:13.440 gloom oall business finance and tech news. The Bloomberg Business 0:00:13.440 --> 0:00:19.600 Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:20.400 --> 0:00:23.360 Hi, everyone, Welcome to the Bloomberg Business Week Weekend Podcast. 0:00:23.520 --> 0:00:25.800 A nothing like a mellow week during the dog days 0:00:25.800 --> 0:00:27.680 of summer. Not so much hunted. 0:00:27.800 --> 0:00:29.200 I mean, I thought everyone was on vacation. 0:00:29.680 --> 0:00:30.200 Apparently not. 0:00:30.480 --> 0:00:32.000 They might be, but FED officials are not. 0:00:32.520 --> 0:00:33.280 No, not at all. 0:00:33.360 --> 0:00:36.920 We had FED speak more news about banks, inflation, also 0:00:36.960 --> 0:00:40.000 AI's potential impact on the financial system and the job market. 0:00:40.200 --> 0:00:41.960 We're going to get into all of that later on 0:00:42.000 --> 0:00:44.879 this hour, along with a very important story about how 0:00:44.880 --> 0:00:49.160 the US is driving gun exports and fueling violence around 0:00:49.200 --> 0:00:50.880 the world. It's a rather sobering story. 0:00:51.000 --> 0:00:53.519 Yeah, it really is. We be in though, Carol with Disney, 0:00:53.640 --> 0:00:57.080 the world's largest entertainment company, announcing a third quarter earnings beat, 0:00:57.360 --> 0:00:59.840 also saying capital spending and outlays for movies and TV 0:00:59.840 --> 0:01:03.120 sho are coming in lower than projected. About three billion 0:01:03.160 --> 0:01:05.759 dollars worth of those savings are due to production cuts 0:01:05.800 --> 0:01:08.360 tied to the writer and actor strikes that are happening 0:01:08.480 --> 0:01:09.119 in Hollywood. 0:01:09.280 --> 0:01:11.280 Meantime, we learned just ahead of that earnings are part, 0:01:11.319 --> 0:01:14.320 about twenty four hours before it, that Disney is getting 0:01:14.319 --> 0:01:18.440 into the sports betting business with casino operator Penn Entertainment. 0:01:18.800 --> 0:01:21.679 We asked Bloomberg News Entertainment editor Chris Paul Mary about 0:01:21.800 --> 0:01:22.919 the implications. 0:01:23.120 --> 0:01:25.920 Well, big deal for ESPN. You know, this is something 0:01:26.640 --> 0:01:29.720 Disney historically didn't like to get into gambling. They wouldn't 0:01:29.800 --> 0:01:32.800 license their characters the slot machines or put them on 0:01:32.840 --> 0:01:35.759 their cruise lines. But a couple of years ago, then 0:01:35.880 --> 0:01:38.319 CEO Bob Japik said, Oh, I think that's changed. We 0:01:38.400 --> 0:01:40.960 really need to get some money out of the ESPN 0:01:41.080 --> 0:01:45.920 sports betting situation, and that was talked. They talked with 0:01:45.959 --> 0:01:48.960 a lot of people in the business. But now they 0:01:49.000 --> 0:01:53.200 found their partner. Very interesting choice. Pen is a regional 0:01:53.240 --> 0:01:59.000 casino operator that bet big on online sports. Their biggest 0:01:59.640 --> 0:02:04.560 you know that was a Canadian sports betting brand called 0:02:04.600 --> 0:02:07.440 The Score. But they also had bought Barstool for about 0:02:07.440 --> 0:02:11.959 five hundred million, and Barstool, of course very controversial figure 0:02:12.000 --> 0:02:17.520 in Dave Portnoy, caused them trouble with regulators in some states, 0:02:18.720 --> 0:02:22.400 and so the CEO J. Snowden decided to do this 0:02:22.440 --> 0:02:24.240 deal with ESPN and get rid of Barstool. 0:02:24.800 --> 0:02:25.639 What I feel like this? 0:02:25.919 --> 0:02:29.400 I mean from hold on, Sorry, I'm sorry. Yeah, there's 0:02:29.440 --> 0:02:33.079 like no polar opposite, bigger polar opposite to Barstool and 0:02:33.160 --> 0:02:35.440 Dave Portney than Mickey Mouse and Disney. 0:02:35.120 --> 0:02:38.880 Except except wait, go back, right, Chris, Because wasn't it 0:02:38.919 --> 0:02:41.480 a few years ago, two three years ago ESPN didn't 0:02:41.480 --> 0:02:44.839 they create a studio in Vegas and was all about 0:02:44.880 --> 0:02:45.560 sports betting? 0:02:46.639 --> 0:02:49.120 Right? Yeah, they've slowly inched in. They've taken a lot 0:02:49.120 --> 0:02:53.600 of advertising dollars from sports betting companies everybody has, so, 0:02:53.919 --> 0:02:57.280 you know, but to actually use the ESPN brand in 0:02:57.320 --> 0:03:00.440 an online sports app, which is what this is going 0:03:00.440 --> 0:03:03.280 to be, ESPN Bet. This is this is a whole 0:03:03.280 --> 0:03:03.760 new level. 0:03:04.240 --> 0:03:07.000 So is this a Chpeck move or an aigremove. 0:03:08.080 --> 0:03:08.320 Sort of? 0:03:08.400 --> 0:03:11.480 The embracing of sports betting began with Chaypeck, but he 0:03:11.520 --> 0:03:13.720 didn't close a deal, so you got a credit. I 0:03:13.720 --> 0:03:16.160 agree for this. Back then, the rumor was that they 0:03:16.160 --> 0:03:20.160 were going to partner with DraftKings, but that didn't happen. 0:03:21.080 --> 0:03:23.600 So you know, a lot of money for ESPN at 0:03:23.639 --> 0:03:26.160 a time it could use it. Frankly, one point five 0:03:26.200 --> 0:03:28.960 billion dollars to be paid over ten years. They got 0:03:29.000 --> 0:03:34.240 additional stock warrants in Penn, and Penn has the right 0:03:34.320 --> 0:03:37.880 to exclude, you know, sorry, to continue the deal for 0:03:37.920 --> 0:03:42.760 another ten years. So a lot of long term relationship, 0:03:43.200 --> 0:03:44.720 lucrative potentially to both sides. 0:03:44.800 --> 0:03:47.920 All right, so help me out here. We've got a company, Disney, 0:03:47.960 --> 0:03:50.640 well known for so many different businesses. It's one hundred 0:03:50.640 --> 0:03:53.480 and sixty one billion dollar market cap. It does report 0:03:53.520 --> 0:03:56.800 earnings tomorrow, and I'm thinking about the financial side of 0:03:56.800 --> 0:04:00.000 this deal. We're looking at for twenty twenty three, almost 0:04:00.120 --> 0:04:02.640 ninety billion dollars in revenue forecast. If I look at 0:04:02.680 --> 0:04:05.160 the FA function on the Bloomberg, how does a deal 0:04:05.240 --> 0:04:08.360 like this move the revenue needle? Are the earnings needle? 0:04:08.440 --> 0:04:11.120 The financial picture for Disney, it's a. 0:04:11.080 --> 0:04:13.920 Pretty pretty nice bump there, you know, one hundred and 0:04:13.960 --> 0:04:17.440 fifty million dollars a year, and you know, presumably there'll 0:04:17.480 --> 0:04:21.080 be some other gains, you know, on the stock that 0:04:21.080 --> 0:04:24.000 they're they're getting from Pen. So you know that's that's 0:04:24.040 --> 0:04:27.479 not nothing, and it hasn't clear yet they're going to 0:04:27.480 --> 0:04:29.280 do a presentation Ofmorrow how it's going to work in 0:04:29.360 --> 0:04:32.800 terms of advertising. So right now Penn is paying for 0:04:32.839 --> 0:04:36.320 the name. But what about additional advertisements you may put 0:04:36.360 --> 0:04:41.040 on the ESPN networks? You know, ESPN isn't saying if 0:04:41.080 --> 0:04:43.280 this is the exclusive betting partner, but that doesn't mean 0:04:43.320 --> 0:04:45.760 they can't still take ads from FanDuel or Draft Kings 0:04:45.839 --> 0:04:46.520 or some other player. 0:04:46.640 --> 0:04:47.200 That's a good quo. 0:04:47.920 --> 0:04:50.719 Yeah, so potentially still a lot of money here for 0:04:50.720 --> 0:04:51.839 for Disney and ESPN. 0:04:52.040 --> 0:04:54.480 Or if your DraftKings are fandueled, do you really want 0:04:54.520 --> 0:04:57.080 to advertise on on ESPN? You know, it's like you 0:04:57.080 --> 0:05:00.000 saw the card makers pull back from advertising on Twitter 0:05:00.400 --> 0:05:02.960 after Elon Musk bought it because you're not going to 0:05:03.000 --> 0:05:04.360 want to, you know, give the guy who runs your 0:05:04.360 --> 0:05:09.560 biggest EV competitor money. Okay, so lots of questions here, Chris. 0:05:10.120 --> 0:05:12.680 I wanted to start with like a cultural question or 0:05:12.720 --> 0:05:16.640 like a sort of brand tarnishing question. Maybe I'm in 0:05:16.640 --> 0:05:20.039 the minority, but I associate Penn with Barstool and with 0:05:20.120 --> 0:05:22.560 Dave Portnoy, and I'm wondering if there's any brand or 0:05:22.640 --> 0:05:25.479 reputation risk to Disney associating itself with a company that 0:05:25.600 --> 0:05:30.880 literally until you know what ten minutes ago, thirty minutes ago, 0:05:32.160 --> 0:05:34.960 had embraced, had embraced Dave Portney and all the controversy 0:05:34.960 --> 0:05:36.440 that he that he brings with him. 0:05:36.480 --> 0:05:41.159 Right, you know, the worst of the stuff about Portnoy, 0:05:41.400 --> 0:05:46.360 you know, allegations that he really mistreated women came out 0:05:46.880 --> 0:05:52.960 after the acquisition. J. Snowden, the CEO PEN, did defend 0:05:53.240 --> 0:05:57.520 Portnoy kind of publicly after those things. So there is 0:05:57.600 --> 0:05:59.960 that issue. But the very fact that they're sort of 0:06:00.040 --> 0:06:03.479 cutting them loose entirely suggests that you know, they you know, 0:06:03.520 --> 0:06:06.359 they didn't keep them around in some fashion. You know, 0:06:06.480 --> 0:06:09.800 they're saying goodbye. That might have been a condition by 0:06:09.880 --> 0:06:14.280 Disney to your point, But I don't think this necessarily 0:06:14.640 --> 0:06:18.880 hangs on Pen so much, you know, because they are 0:06:18.920 --> 0:06:21.400 cutting them. And the question also is how much poor 0:06:21.480 --> 0:06:23.960 Noise is paying for the business. As I said, they've 0:06:24.360 --> 0:06:26.880 Penn paid about five hundred and fifty million for Barstool 0:06:27.000 --> 0:06:31.160 over a couple of years. I suspect that por Noy's 0:06:31.160 --> 0:06:32.440 buying it back for a whole lot less. 0:06:33.360 --> 0:06:37.320 Well, okay, so as you think about Disney, right, the 0:06:37.440 --> 0:06:40.400 reporting earnings tomorrow, and I'm curious, you know, I'm sure 0:06:40.400 --> 0:06:42.320 there's going to be a few questions about this on 0:06:42.360 --> 0:06:45.640 the call. How are you thinking about the Disney story 0:06:45.720 --> 0:06:47.960 right now and the evolution and now that Bob I 0:06:48.080 --> 0:06:49.279 Go is back and we know he's going to be 0:06:49.279 --> 0:06:52.680 there for a few more years. We got that news 0:06:52.680 --> 0:06:56.479 we last month, So how are you thinking about it 0:06:56.520 --> 0:07:00.680 and what the Disney story, the Disney company story is 0:07:00.720 --> 0:07:01.320 going forward? 0:07:02.480 --> 0:07:04.719 You know, some very interesting language in the press release 0:07:04.760 --> 0:07:08.240 about this deal. He specifically said ESPN was getting the 0:07:08.240 --> 0:07:12.400 one point five billion, ESPN was getting the warrants. You know, 0:07:12.760 --> 0:07:16.800 under Disney only owned eighty percent of ESPN and Hearst 0:07:16.840 --> 0:07:21.440 Corporales the other twenty percent. So that just may all 0:07:21.480 --> 0:07:24.160 there is to it, but it also could be establishing 0:07:24.200 --> 0:07:26.760 that ESPN is this sort of separate business that will 0:07:26.840 --> 0:07:31.280 soon start reporting entirely separate financials, you know, from from Disney. 0:07:31.360 --> 0:07:35.000 Historically it's all been lumped together, so you can read 0:07:35.000 --> 0:07:36.680 what you're made into that. 0:07:37.560 --> 0:07:39.200 I mean, I'm you know, am I reading like a 0:07:39.200 --> 0:07:40.880 private equity coming in and buying. 0:07:40.720 --> 0:07:42.160 It like IPO? You know. 0:07:42.280 --> 0:07:45.920 The last I has had sort of mixed comments about this. 0:07:46.520 --> 0:07:49.679 His most recent statements were that he believed that ESPN 0:07:49.800 --> 0:07:52.880 was a business worth keeping and they needed to be 0:07:52.920 --> 0:07:55.960 in the sports business, so he may elaborate there. They're 0:07:56.000 --> 0:07:58.360 now looking for another strategic partner. This is that's a 0:07:58.440 --> 0:08:01.560 separate issue from this this this is the sports betting partner. 0:08:02.360 --> 0:08:04.880 They're still looking for an investor. It's presumed to be 0:08:04.920 --> 0:08:08.960 a large tech company or possibly one of the sports 0:08:09.040 --> 0:08:11.440 leagues that would sort of offer something more than money 0:08:11.440 --> 0:08:14.840 to them as they make this grand transition into the 0:08:14.920 --> 0:08:16.480 online world. 0:08:16.760 --> 0:08:19.200 I should note that shares of Pen in the after 0:08:19.280 --> 0:08:23.440 hours right now up twenty four percent, so bouncing around, 0:08:23.480 --> 0:08:26.880 but investors are certainly happy in the after after hours. 0:08:27.440 --> 0:08:29.720 Does is this how bad of news is this for? 0:08:29.840 --> 0:08:31.720 And then this is back to you know, less on 0:08:31.760 --> 0:08:35.320 Disney as an entire company. More on this part new partnership, Chris. 0:08:36.440 --> 0:08:38.600 What about for the other companies like the Draft Kings 0:08:38.960 --> 0:08:41.720 and the fan Duels, the points bets. What does it 0:08:41.720 --> 0:08:42.840 mean for them? 0:08:43.120 --> 0:08:47.280 Well, it's it's interesting because the business the battle is 0:08:47.320 --> 0:08:50.520 already in a way. Well then, one, I mean Vanduel 0:08:50.640 --> 0:08:54.199 has something like forty five percent market share sports betting 0:08:54.200 --> 0:08:57.280 in the US. I think DraftKings is twenty two percent. 0:08:58.400 --> 0:09:02.479 Coming up close is MGM, BET MGM, and then Caesar's. 0:09:02.840 --> 0:09:05.880 You put them all together, you're way past eighty percent, 0:09:07.200 --> 0:09:10.200 you know, controlled by just four companies. So so Penn 0:09:10.200 --> 0:09:14.160 in a way was already and also ran. It's you know, 0:09:14.200 --> 0:09:16.280 it's interesting. You know, they're the ones paying one and 0:09:16.280 --> 0:09:19.600 a half billion dollars in cash and their stock jumps 0:09:19.640 --> 0:09:22.840 and Disneys didn't really move much. It seems like Disney's 0:09:22.840 --> 0:09:24.600 getting a pretty good deal out of this. Yeah, that's 0:09:24.600 --> 0:09:29.520 a good point, and you know, it's still a big 0:09:29.640 --> 0:09:33.000 risk for Penn. I mean, yes, they're getting the premier 0:09:33.120 --> 0:09:36.880 name in sports media, no question about that, and all 0:09:36.920 --> 0:09:41.280 the reach that all the ESPN channels have, but they've 0:09:41.280 --> 0:09:43.760 still got to earn it back in the marketplace, which 0:09:43.800 --> 0:09:45.160 is ferociously competitive. 0:09:45.240 --> 0:09:47.680 I will say Carol shares of DraftKings in the after 0:09:47.720 --> 0:09:49.640 hours down more than nine percent on this news. 0:09:49.720 --> 0:09:53.400 Wow, so we're seeing certainly some reaction. So what does 0:09:53.480 --> 0:09:55.880 portnoy end up with? Am I missing something? 0:09:56.000 --> 0:09:57.800 He's tweeted a couple of times, but you know I 0:09:57.800 --> 0:09:59.760 can't read his tweets because I'm not logged into Twitter, 0:09:59.800 --> 0:10:02.680 And you know, Elon Musk changed it, but he tweeted 0:10:02.720 --> 0:10:05.680 the barstools back and that, uh, you know, breaking news 0:10:05.840 --> 0:10:08.360 he bought it. What do you what do you think, 0:10:08.400 --> 0:10:09.160 Chris Well? 0:10:09.160 --> 0:10:13.120 I think he was probably chatting under the corporate you know, ownership, 0:10:13.320 --> 0:10:15.680 the idea that you know, he had to answer to 0:10:15.800 --> 0:10:21.000 casino regularators all around the country. You know that probably 0:10:21.960 --> 0:10:24.360 didn't go well with him. And so now he can 0:10:24.440 --> 0:10:28.480 go back to private ownership of his his business and 0:10:28.480 --> 0:10:31.960 and continue to say whatever he wants without the same 0:10:32.120 --> 0:10:32.920 level of pressure. 0:10:33.000 --> 0:10:35.280 I think in his Twitter bio or x bio he 0:10:35.320 --> 0:10:37.480 says he owns a ton of penstock. Do we know 0:10:37.520 --> 0:10:40.640 anything about how you know that ownership changes? Does he 0:10:40.720 --> 0:10:42.760 still have penstock? Has he divested? 0:10:43.200 --> 0:10:46.360 I haven't heard about that. In fact, we were never 0:10:46.360 --> 0:10:48.720 ever really to crack how much he had of barstool 0:10:48.760 --> 0:10:52.160 to begin with. So but you know, it's it's a 0:10:52.160 --> 0:10:54.640 sizeable amount of money. And I haven't heard anything of 0:10:54.679 --> 0:10:56.040 any divestrogers by him. 0:10:56.280 --> 0:10:59.080 Anything interesting about the timing of this news to. 0:10:59.000 --> 0:11:04.000 You, Chris Well, to your earlier question about Bob Iiger 0:11:04.040 --> 0:11:06.320 and what he's doing. You know, he's had a rough 0:11:06.720 --> 0:11:10.719 time since he came back in November. Really nothing has 0:11:10.800 --> 0:11:15.560 worked a lot of trouble, continued deterioration at TV, continue 0:11:15.600 --> 0:11:20.120 losses in Disney, plus you know, the movie business and 0:11:20.240 --> 0:11:25.360 not doing great. So he's got his work cut out 0:11:25.360 --> 0:11:27.240 for him and he can at least point to this 0:11:27.360 --> 0:11:30.280 as you know, getting one deal done that's a significant one. 0:11:30.600 --> 0:11:30.800 Yeah. 0:11:30.800 --> 0:11:33.920 I do wonder too, Like I mean, you know, obviously 0:11:34.080 --> 0:11:37.360 kind of setting the tone by this deal that is gonna, 0:11:37.600 --> 0:11:39.480 you know, take up a lot of the oxygen on 0:11:39.520 --> 0:11:40.360 the analyst call. 0:11:40.559 --> 0:11:43.240 But Carol, that big of a deal when it comes 0:11:43.280 --> 0:11:46.240 to Disney's business. This is a great question for Chris too. 0:11:46.240 --> 0:11:49.400 I mean, when it comes to Disney's business. Yes, we're 0:11:49.400 --> 0:11:50.800 talking about this and we've been talking about it for 0:11:50.840 --> 0:11:53.000 ten minutes because it's breaking news and it's really interesting. 0:11:53.040 --> 0:11:55.440 But at the end of the day, to what extent 0:11:55.480 --> 0:11:57.600 is this going to affect Disney's bottom line? Like you said, Chris, 0:11:57.679 --> 0:11:59.199 it's not moving Disney shares. 0:11:59.720 --> 0:12:03.720 No, But if you think about a standalone ESPN, it 0:12:03.800 --> 0:12:08.040 becomes more significant. You know, it's not going to solve everything, 0:12:08.200 --> 0:12:11.960 but and it gets them out in the online world 0:12:12.000 --> 0:12:14.520 and you know, they obviously were big players, but you know, 0:12:14.600 --> 0:12:20.079 it establishes that relationship with the betters who are sports fans, 0:12:20.160 --> 0:12:23.920 and so this, you know, this is definitely a positive 0:12:23.920 --> 0:12:24.640 for ESPN. 0:12:26.000 --> 0:12:28.200 So hey, listen, I am wondering, Chris, when it comes 0:12:28.200 --> 0:12:30.480 to the call tomorrow, what is it that you think 0:12:31.000 --> 0:12:33.839 investors or analysts should be asking about this deal when 0:12:33.840 --> 0:12:35.680 it comes to Disney. 0:12:36.600 --> 0:12:39.240 Well, some of the questions there what are the ancillary 0:12:39.280 --> 0:12:43.640 benefits and revenue opportunities for ESPN here? How does it 0:12:43.720 --> 0:12:48.040 impact other you know, stream sports betting companies, Like you said, 0:12:49.760 --> 0:12:52.560 you know, it's what does this say about sort of 0:12:53.040 --> 0:12:57.120 ESPN's future as a standalone company. Does it, you know, 0:12:57.200 --> 0:13:00.600 impact anything with some of the other partners it's seeking 0:13:01.800 --> 0:13:05.280 we talked about these tech companies or leagues. So yeah, 0:13:05.800 --> 0:13:07.880 like you said, this is gonna be a big subject 0:13:07.880 --> 0:13:09.240 on the call tomorrow for Bob Biger. 0:13:09.400 --> 0:13:11.560 You know what's what's interesting I always think about I 0:13:11.600 --> 0:13:13.800 can't even now you'll know better than I will, how 0:13:13.800 --> 0:13:16.320 many years ago was where everybody was like writing off 0:13:16.640 --> 0:13:20.360 ESPN even though it was such a juggernaut for the company. 0:13:20.360 --> 0:13:23.520 But right when those was it, the subscriber numbers started 0:13:23.559 --> 0:13:26.559 to come down, And it's just like interesting, I mean, 0:13:26.559 --> 0:13:30.000 I'm looking at our preview for earnings. Right, we're looking 0:13:30.040 --> 0:13:34.280 at what twenty five point eight million ESPN plus subscribers. 0:13:34.600 --> 0:13:35.920 Chris is like a decent number. 0:13:36.120 --> 0:13:37.760 Chris, just in the last minute that we have with you, 0:13:37.760 --> 0:13:40.680 I'm kind of obsessed with this cultural question and cultural 0:13:40.720 --> 0:13:42.880 fit and whether or not we can still sort of 0:13:42.920 --> 0:13:45.480 like think about Disney as a company the same way 0:13:45.520 --> 0:13:46.760 we thought about it when you're really. 0:13:46.600 --> 0:13:47.960 Worried about meeting Mickey. 0:13:49.040 --> 0:13:49.240 I'm not. 0:13:49.280 --> 0:13:52.640 Here's what Bob. Here's how Bob's take answered that question before. 0:13:52.720 --> 0:13:55.559 Because the issue was could Disney even be in batting 0:13:55.640 --> 0:13:56.319 at all? 0:13:56.480 --> 0:13:56.680 Yeah? 0:13:56.760 --> 0:14:00.480 No, and the they historically fought casinos in Florida forever. 0:14:00.880 --> 0:14:05.600 And so the Chapairs answer was the customers of Disney 0:14:05.679 --> 0:14:09.000 and ESPN were just thinking that the ESPN fans really 0:14:09.120 --> 0:14:12.360 wanted more sports betting. Uh, they didn't see an issue 0:14:12.360 --> 0:14:14.920 with it, and that's why he began this pursuit of 0:14:14.960 --> 0:14:15.880 the sports betting deal. 0:14:16.040 --> 0:14:18.080 Well, just think about it from a content perspective too. 0:14:18.120 --> 0:14:19.760 I mean, you you you know, you see the f 0:14:20.120 --> 0:14:23.920 FX and fx X on Hulu, which is you know, 0:14:25.000 --> 0:14:27.360 you know, Disney owns a big port. Disney owns FX 0:14:27.800 --> 0:14:31.120 from its Fox acquisition. Uh, and you know, the content 0:14:31.160 --> 0:14:33.800 there is like not Disney content by any means, Chris, 0:14:33.840 --> 0:14:34.840 just you know, ten seconds. 0:14:34.960 --> 0:14:38.640 Yeah, there's there's no question that the sports betting has 0:14:38.680 --> 0:14:41.240 just become palatable in a lot of I mean it's 0:14:41.240 --> 0:14:44.280 taken off like wildfire across the country. Uh and it 0:14:44.560 --> 0:14:46.360 you know, it's almost as gold as. 0:14:46.280 --> 0:14:50.360 Mickey Mouse, the betting bars, the betting roller coaster, the 0:14:50.400 --> 0:14:53.520 betting go you can bet on the cruise ships. 0:14:53.200 --> 0:14:56.320 Like look at the SUC getting Space Mountain within an hour, 0:14:56.480 --> 0:14:58.680 witting in this line exactly. 0:14:58.720 --> 0:15:01.360 Chris Paul Mary, Thank you so much. Bloomberg News Entertainment 0:15:01.480 --> 0:15:03.720 editor Chris Paul Mary joining us out there from the 0:15:03.760 --> 0:15:04.360 West coast. 0:15:04.400 --> 0:15:07.600 We should note that Dave Portnoy reacquired the barstool brand 0:15:07.600 --> 0:15:11.600 that he founded for just one dollar. Pen Entertainment said 0:15:11.600 --> 0:15:13.120 it could take a loss of up to eight hundred 0:15:13.120 --> 0:15:14.920 and fifty million dollars on the transaction. 0:15:15.000 --> 0:15:17.120 I think it was in crypto check dollar. What do 0:15:17.120 --> 0:15:17.600 you think it was. 0:15:17.760 --> 0:15:20.400 I mean, the first time, he says, the first time 0:15:20.400 --> 0:15:22.880 in ten years that he's fully owned it. 0:15:22.880 --> 0:15:25.320 It's a really fascinating deal this past week, all right, 0:15:25.400 --> 0:15:28.080 the ESPN and PEN Entertainment News, though, as we said 0:15:28.160 --> 0:15:31.240 just about twenty four hours before Disney actually reported earnings 0:15:31.440 --> 0:15:34.160 that came on Wednesday, and a bit of Disney news. 0:15:34.200 --> 0:15:37.080 On that earnings call, the company announced it's raising prices 0:15:37.080 --> 0:15:39.960 for some streaming subscriptions by as much as twenty seven percent. 0:15:40.400 --> 0:15:43.840 We got reaction and reasoning from Bloomberg Intelligence Technology and 0:15:43.880 --> 0:15:45.920 media analyst Kita Ranganantha. 0:15:45.960 --> 0:15:48.560 They have pricing power, and they know it, and they're 0:15:48.560 --> 0:15:51.160 going to exercise it. And this is what it's really 0:15:51.200 --> 0:15:53.600 coming down to now in the streaming wars, right, So 0:15:54.080 --> 0:15:57.800 the subscriber hyper focus is over and done with. Now 0:15:57.800 --> 0:16:01.000 it's all about our pool, growing rep new per user. 0:16:01.080 --> 0:16:03.840 And that's exactly what Disney is doing. This should pad 0:16:04.000 --> 0:16:06.480 not only the top line, but also the bottom line. 0:16:06.600 --> 0:16:09.120 Okay, I'm not going to defend Disney, Kita, I'm not 0:16:09.120 --> 0:16:11.840 going to defend any of the companies that are raising 0:16:11.880 --> 0:16:14.040 prices left and right here, But I am going to 0:16:14.080 --> 0:16:17.680 point out that in the previous life, when there were 0:16:17.720 --> 0:16:20.160 no streaming services, when we were just paying one single 0:16:20.200 --> 0:16:23.480 cable provider every year for everything, they raise their prices 0:16:23.480 --> 0:16:24.960 every year and no news was ever made. 0:16:27.360 --> 0:16:30.120 Yeah, but they did it gently and they're not a Rabbit. 0:16:30.320 --> 0:16:32.720 I don't think they did a twenty seven percent increase. 0:16:32.760 --> 0:16:35.720 They did it like three to four percent every year, So. 0:16:35.640 --> 0:16:38.440 This one does. Do you expect this to lead to churn? 0:16:39.600 --> 0:16:41.760 So it might lead to some churn, I think on 0:16:41.800 --> 0:16:44.000 the margin, But I think this is really where all 0:16:44.040 --> 0:16:46.840 of the streaming players are headed, right, So it's going 0:16:46.880 --> 0:16:49.600 to come down to a shakeout, and Disney and Netflix 0:16:49.600 --> 0:16:51.880 are actually going to force that shakeout because at the 0:16:51.920 --> 0:16:53.280 end of the day, you're only going to be able 0:16:53.320 --> 0:16:56.480 to spend X amount of dollars per month on streaming, 0:16:56.520 --> 0:16:59.040 and they're basically telling you choose, you know, make your 0:16:59.080 --> 0:17:01.640 pick and see which are the services that you want 0:17:01.680 --> 0:17:04.280 the most, that you need the most. And they're hoping 0:17:04.359 --> 0:17:06.760 that Disney and you know, Netflix is hoping that its 0:17:06.760 --> 0:17:09.080 service will will prominently feature there. 0:17:09.960 --> 0:17:12.520 You know, it's really interesting, right because we also you know, 0:17:12.640 --> 0:17:15.040 you know, and I want to take the bigger picture 0:17:15.080 --> 0:17:18.159 of Disney their post earnings the things jumping at at 0:17:18.160 --> 0:17:20.840 you because they did report right their loss from streaming 0:17:21.359 --> 0:17:23.600 narrow by half to five hundred and twelve million in 0:17:23.640 --> 0:17:25.840 that fiscal third quarter, but it was still far less 0:17:25.840 --> 0:17:28.720 than what management had forecast about three months ago give 0:17:28.840 --> 0:17:31.320 us all the picture that is Disney and how you 0:17:31.359 --> 0:17:31.719 see it. 0:17:32.640 --> 0:17:35.520 Yeah, I think, you know, this quarter was really more 0:17:35.640 --> 0:17:37.840 about you know, of course, we knew that the numbers 0:17:37.840 --> 0:17:40.959 were not going to be the greatest. Having said that, though, 0:17:41.040 --> 0:17:43.520 of course, the profit numbers did come up slightly better 0:17:43.560 --> 0:17:46.840 than expected. As you just pointed out. The streaming subscribers, however, 0:17:47.000 --> 0:17:49.359 was a miss. But I don't necessarily think that's a 0:17:49.359 --> 0:17:52.440 bad thing because the subscribers that they lost were really 0:17:52.480 --> 0:17:54.680 twelve and a half million subscribers lost on their hot 0:17:54.680 --> 0:17:57.320 Star product, which is, you know, their Indian service, that 0:17:57.480 --> 0:18:00.480 is a very low revenue generating product, not a high 0:18:00.560 --> 0:18:03.960 value subscriber that they're losing. And so I think that's okay. 0:18:03.960 --> 0:18:05.679 The Street is kind of okay with that, but. 0:18:06.560 --> 0:18:08.800 Sorry to cut you off their gita. But shouldn't the 0:18:08.800 --> 0:18:12.600 street have expected that because they came in substantially below estimates, 0:18:12.640 --> 0:18:15.600 the Street's estimate. Shouldn't that have been baked into the estimates. 0:18:15.760 --> 0:18:18.520 They did bake in about three and a half four 0:18:18.560 --> 0:18:22.400 million losses. This came and of course substantially higher so cricket. 0:18:22.520 --> 0:18:25.000 You know, I think they kind of underestimated the power 0:18:25.080 --> 0:18:26.800 of cricket in the Indian sub God. 0:18:26.920 --> 0:18:30.280 Okay, what else is important? We see Disney though lower 0:18:30.280 --> 0:18:32.240 in the aftermarket. What else do we need to know? 0:18:32.240 --> 0:18:34.359 And unfortunately got about forty five seconds. 0:18:34.640 --> 0:18:36.879 Yes, I think the other key thing that we really 0:18:36.920 --> 0:18:38.359 need to look at is parks and what are the 0:18:38.400 --> 0:18:41.320 trends at parks. Parks actually brings in seventy percent or 0:18:41.359 --> 0:18:44.119 seventy five percent of Disney's operating profit this year, so 0:18:44.119 --> 0:18:46.919 it's really key to understand what the trends are looking like, 0:18:47.000 --> 0:18:49.680 I think. And the domestic parks we are seeing some 0:18:49.720 --> 0:18:53.760 softness that was kind of offset by international strength because 0:18:53.760 --> 0:18:55.520 this was the first time that we had all of 0:18:55.520 --> 0:18:58.840 the international parks open after all of those COVID closures. 0:18:58.880 --> 0:19:00.520 But it's going to be interesting to see what exactly 0:19:00.520 --> 0:19:02.920 they're saying about attendance and occupancy rates. 0:19:02.720 --> 0:19:05.040 The transformation at Disney, a new Disney. 0:19:05.119 --> 0:19:08.520 It's underway, I definitely hope, so, Carol, So you know 0:19:08.560 --> 0:19:10.680 it's going to be all about the strategic vision. We're 0:19:10.680 --> 0:19:13.359 already seeing some of those. Yeah, those pieces in motion 0:19:13.480 --> 0:19:16.239 with the ESPN deal. We'll have to see and what 0:19:16.280 --> 0:19:16.920 they do next. 0:19:17.280 --> 0:19:20.240 You're incredible. Keita ring Anathan of our Bloomberg Intelligence Team. 0:19:20.280 --> 0:19:20.639 Thank you. 0:19:21.040 --> 0:19:24.640 You're listening to the Bloomberg Business Week podcast. Catch us 0:19:24.640 --> 0:19:28.000 live weekday afternoons from three to six Eastern Listen on 0:19:28.080 --> 0:19:32.119 Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App, 0:19:32.400 --> 0:19:34.199 or watch us live on YouTube. 0:19:34.920 --> 0:19:38.800 All right, everybody, this story definitely cut our attention when 0:19:38.800 --> 0:19:40.920 we were reading in this morning. It is a most 0:19:40.920 --> 0:19:43.440 read on the Bloomberg It's also because it's the Bloomberg 0:19:43.480 --> 0:19:46.400 Big Take, which means our top editors here at Bloomberg 0:19:46.400 --> 0:19:49.280 News deemed this a story that we really all must 0:19:49.640 --> 0:19:52.399 check out and read. It is a Bloomberg exclusive, and 0:19:52.480 --> 0:19:55.200 it gets into tim how the US drives gun exports 0:19:55.240 --> 0:19:57.119 and fuels violence around the world. 0:19:57.200 --> 0:19:58.520 We do want to point out that every Time for 0:19:58.560 --> 0:20:02.320 Gun Safety, which advocates safety measures, is backed by Michael Bloomberg, 0:20:02.359 --> 0:20:05.440 founder and majority owner of Bloomberg News parent Bloomberg LP. 0:20:06.000 --> 0:20:09.080 For more on this story, we welcome Bloomberg News Investigations 0:20:09.119 --> 0:20:12.440 Team Manager Managing editor Flynn and McRoberts joining us from 0:20:12.440 --> 0:20:16.840 our Chicago bureau. Flynn just an incredible deep dive one. 0:20:17.359 --> 0:20:17.480 You know. 0:20:17.520 --> 0:20:18.800 I got to tell you when you read a story 0:20:18.840 --> 0:20:21.200 like this and You're like, I've never considered how American 0:20:21.240 --> 0:20:24.560 made weapons can be exported for terror around the world, 0:20:24.960 --> 0:20:27.119 which is something I had never considered. You know that 0:20:27.160 --> 0:20:29.480 it's just an incredible narrative. Give us an idea of 0:20:29.480 --> 0:20:30.600 how the story came together. 0:20:32.119 --> 0:20:36.040 Thanks Tim So our reporting team Mike Riley, David Kashnevski, 0:20:36.040 --> 0:20:41.320 and Eric fan We're looking at what obviously has been 0:20:41.920 --> 0:20:45.280 much concerned with good reason of domestic with violence and 0:20:45.280 --> 0:20:47.800 mass shootings in the United States. But we wondered what 0:20:47.920 --> 0:20:52.040 is happening with the almost the near saturation point of 0:20:52.280 --> 0:20:53.280 gun ownership in the US. 0:20:53.359 --> 0:20:55.320 We're up to four hundred million. 0:20:56.840 --> 0:20:59.560 Weapons owned by civilians in the United States, more than 0:20:59.560 --> 0:21:03.320 the popular and we wondered what our gun companies doing 0:21:04.160 --> 0:21:06.119 facing those kind of figures. And what we found is 0:21:06.119 --> 0:21:10.439 that they're looking, they're turning overseas to expand sales in 0:21:10.520 --> 0:21:13.320 other countries, and in doing so, they've got. 0:21:13.240 --> 0:21:15.200 Not just the not just. 0:21:15.520 --> 0:21:20.320 The the realization, but the active engagement of the US 0:21:20.600 --> 0:21:22.520 of the federal government to encourage those sales. 0:21:22.600 --> 0:21:24.480 So, Flynn, let's get into it, because you know, we 0:21:24.520 --> 0:21:28.080 often talk about here at Bloomberg the US influence around 0:21:28.080 --> 0:21:32.360 the world on business and culture and trends and politics, 0:21:32.400 --> 0:21:36.920 if you will so much. Many often would argue it's positive. 0:21:37.040 --> 0:21:40.760 Certainly not when it comes to guns. So how is 0:21:40.800 --> 0:21:44.359 it that a big player in the US market two 0:21:44.359 --> 0:21:48.399 decades ago so central to this story and so central 0:21:48.440 --> 0:21:49.800 to what's happening overseas? 0:21:51.119 --> 0:21:53.720 So sixth Hour you're talking about it, that was a 0:21:53.920 --> 0:21:58.400 It was for many for generations. Actually the six Hour 0:21:59.400 --> 0:22:01.600 was making right during the Seven Years War, to give 0:22:01.600 --> 0:22:03.600 you a sense of how old the company was. But 0:22:04.240 --> 0:22:09.640 in two thousand it was sold to new owners and 0:22:09.720 --> 0:22:13.919 they were looking to looking to expand sales, and they 0:22:13.960 --> 0:22:17.480 realized that the gun restrictions, gun export restrictions in Europe, 0:22:17.520 --> 0:22:22.600 particularly Germany, were increasingly increasingly tight, and they wanted to 0:22:22.640 --> 0:22:23.760 find alternatives. 0:22:23.800 --> 0:22:27.359 So in two thousand and four they. 0:22:27.280 --> 0:22:30.719 Hired a man Ron Cohen, who as chief Offerating Officer 0:22:30.760 --> 0:22:34.040 and Officer, and shortly after that as CEO and Cohen 0:22:35.000 --> 0:22:39.919 aggressively pushed the export of weapons and realized, if we're 0:22:39.920 --> 0:22:42.600 going to do that, we need to move our manufacturing 0:22:43.240 --> 0:22:46.160 to the United States, which they did. They're now headquartered 0:22:47.160 --> 0:22:48.560 in New Hampshire and. 0:22:48.520 --> 0:22:49.400 They've been from there. 0:22:49.440 --> 0:22:57.080 They've been able to aggressively aggressively pursue international deals in 0:22:57.119 --> 0:23:02.360 places like Thailand, which we write about in Columbia, and 0:23:02.520 --> 0:23:05.720 they've gone from being a bit player to the largest 0:23:06.440 --> 0:23:08.119 US exporter of firearms. 0:23:09.400 --> 0:23:13.840 It's really remarkable. What about when it comes to regulations 0:23:13.880 --> 0:23:17.080 in other countries when it comes to importing these weapons 0:23:17.200 --> 0:23:20.840 of war Because we oftentimes hear in the narrative here 0:23:20.840 --> 0:23:23.120 in the US, you know, you don't see mass shootings 0:23:23.160 --> 0:23:26.280 happen in other or you don't see gun violence in 0:23:26.320 --> 0:23:28.840 other countries like you see here in the US. But 0:23:29.160 --> 0:23:32.600 reading your story, there were so many examples of this 0:23:32.720 --> 0:23:34.800 type of the story from the team, I should say 0:23:34.800 --> 0:23:36.719 the one that you oversaw is managing editor of the 0:23:36.720 --> 0:23:40.800 investigations team. There are so many examples of mass shootings 0:23:40.840 --> 0:23:43.560 and gun violence outside of the US where laws are different. 0:23:43.720 --> 0:23:48.960 Yes, we looked at Thailand specifically because that is where 0:23:49.080 --> 0:23:55.439 that's the six hours biggest international sales success, and sadly, 0:23:55.480 --> 0:23:57.800 it's also the place that one of the sites of 0:23:57.840 --> 0:24:04.600 one of the worst massacres in Thai history and even globally, 0:24:04.960 --> 0:24:11.640 and that was October of last year. A recently retired 0:24:11.960 --> 0:24:17.160 police officer armed with a sugarcane machete and a six 0:24:17.240 --> 0:24:21.399 hour P. Three sixty five, stormed into a nursery school 0:24:21.520 --> 0:24:25.040 and killed killed twenty three children and two teachers, and 0:24:25.080 --> 0:24:27.200 went on to kill a total of thirty six people. 0:24:27.640 --> 0:24:30.119 And the gun that he used that six hour P. 0:24:30.200 --> 0:24:34.280 Three sixty five he obtained through something what Thailand calls 0:24:34.320 --> 0:24:36.879 the Welfare Gun program, which is a way which is 0:24:36.920 --> 0:24:40.240 a program in a country that has very strict gun 0:24:40.280 --> 0:24:43.560 regulations except this major loophole, and that Welfare Gun program 0:24:43.640 --> 0:24:47.040 allows former police officers a military to buy at a 0:24:47.119 --> 0:24:49.760 very steep discount these pistols. 0:24:49.800 --> 0:24:52.280 The problem was Thailand. 0:24:53.760 --> 0:24:57.200 Gunshops in Thailand, in total, all gun shops in Thailand 0:24:57.240 --> 0:25:01.240 can only sell roughly fifteen thousand pistols a year. That 0:25:01.359 --> 0:25:05.159 six hour contract, just the first of two, flooded the 0:25:05.200 --> 0:25:07.879 country with one hundred and fifty thousand, ten times that amount, 0:25:08.119 --> 0:25:11.399 and that there was it basically became a new asset class. 0:25:11.480 --> 0:25:16.960 Unfortunately they were able to police were many of those 0:25:17.560 --> 0:25:20.520 those weapons wound up being diverted to criminals, to organized 0:25:20.520 --> 0:25:23.399 crime syndicates because they were just it was the incentive 0:25:23.520 --> 0:25:25.120 to resell those guns. 0:25:25.560 --> 0:25:27.720 And which are very difficult to trace. 0:25:28.800 --> 0:25:32.399 It allowed them to allow much to basically flood, the 0:25:33.840 --> 0:25:37.680 flood Thailand with all these what turned into criminal guns. 0:25:37.440 --> 0:25:39.639 Right because they got them at below market prices, right, 0:25:39.640 --> 0:25:41.320 they got a deal on them and then they could 0:25:41.760 --> 0:25:44.960 throw around. And you know what's interesting is there was 0:25:45.000 --> 0:25:46.920 a story at the very beginning, I mean a line 0:25:47.000 --> 0:25:50.960 excuse me, where it said the federal government US federal 0:25:51.000 --> 0:25:55.119 government has helped push international sales of rapid fire guns 0:25:55.119 --> 0:25:56.760 to record levels. I want to kind of make the 0:25:56.800 --> 0:26:02.080 connection of how we can kind of blame the US 0:26:02.880 --> 0:26:05.520 for getting more guns out there. I think many people 0:26:05.520 --> 0:26:08.120 would argue part of the problem is, like you said, 0:26:08.160 --> 0:26:11.320 there's four hundred million consumer guns or guns in the 0:26:11.400 --> 0:26:13.520 hands of consumers here in the United States. That number 0:26:13.560 --> 0:26:16.080 is staggering that when you have more guns around, there's 0:26:16.080 --> 0:26:18.119 going to be more problems. How is it that the 0:26:18.240 --> 0:26:21.520 US federal government, Democrats and Republicans alike, had a role 0:26:22.200 --> 0:26:23.720 in this change? And I kind of want to get 0:26:23.760 --> 0:26:26.919 from the shift of oversight going from the State Department, 0:26:27.119 --> 0:26:29.119 which seems probably like the rules were a little bit 0:26:29.119 --> 0:26:33.280 more stringent to commerce, which is like basically, let's sell stuff. 0:26:33.760 --> 0:26:37.879 That's right and this and to be fair, this started 0:26:39.040 --> 0:26:44.000 under Barack Obama's during a second term, and they were 0:26:44.000 --> 0:26:48.560 trying to rationalize the rules where the State Department would 0:26:48.600 --> 0:26:51.400 handle They thought, well, let's the State Timerichine handle heavy 0:26:51.440 --> 0:26:54.280 military hardware like fighter jets and artillery and so forth, 0:26:54.560 --> 0:26:59.359 but we should let the Commerce Department handle handle civilian weapons, 0:26:59.359 --> 0:27:04.200 small arms. But even even at that time, particularly Democrats 0:27:04.200 --> 0:27:07.080 and Congress raised the concern that this with that that 0:27:07.080 --> 0:27:10.320 that moving oversight to the business friendly Commerce Department would 0:27:10.320 --> 0:27:15.359 inevitably lead to far more sales and looser, looser regulations. 0:27:15.359 --> 0:27:19.360 And in fact, that's exactly what happened. So when when 0:27:19.440 --> 0:27:24.119 once the rules took effect in twenty twenty, the they 0:27:25.359 --> 0:27:29.280 those sales of some automatic weapons went up, depending on 0:27:29.320 --> 0:27:32.280 the year, went up as much as sometimes fifty percent 0:27:32.359 --> 0:27:36.880 times and sometimes even double and and members of Congress 0:27:36.880 --> 0:27:39.720 are saying, this is exactly what we expected when you 0:27:39.960 --> 0:27:42.200 shifted oversight to the to the Commerce department. 0:27:42.440 --> 0:27:44.360 And so the the you know. 0:27:44.280 --> 0:27:46.760 The Commerce department again, it's its role is to help, 0:27:46.920 --> 0:27:49.639 you know, help Boeing sell more planes, help you know, 0:27:49.720 --> 0:27:53.320 Micron sell more chips. But when you when you apply 0:27:53.440 --> 0:27:58.120 that to you to gun manufacturers, it obviously has deadly consequences. 0:27:58.119 --> 0:27:58.760 And we document that. 0:27:58.880 --> 0:28:01.320 Yeah, It's interesting. It actually makes me think of what 0:28:01.400 --> 0:28:03.560 happened with cigarettes as well here in the US. Right 0:28:03.600 --> 0:28:06.600 when we saw regulations change in the US with cigarettes 0:28:06.600 --> 0:28:09.080 and fewer people here smoke, What did the American tobacco 0:28:09.119 --> 0:28:11.520 companies do. What did the global tobacco companies do. They 0:28:11.560 --> 0:28:13.960 went around the world, They went to developing countries, they 0:28:14.000 --> 0:28:17.760 went to emerging economies. Flinn, how much of a boon 0:28:17.840 --> 0:28:20.440 has this been for American manufacturers of guns? 0:28:20.800 --> 0:28:25.680 So we tracked it from two thousand and five, which 0:28:25.720 --> 0:28:29.360 is a year after the assault weapons ban was ended 0:28:29.359 --> 0:28:32.639 in the United States, and since that time, there's been 0:28:32.680 --> 0:28:37.280 a cumulative three point seven million semi automatic pistols and 0:28:37.359 --> 0:28:40.600 rifles that have been that have been sold by US 0:28:41.080 --> 0:28:41.840 gun manufacturers. 0:28:41.880 --> 0:28:44.600 Okay, I gotta tell you, though I hear that number, 0:28:45.360 --> 0:28:49.040 that's tiny compared to the number of guns that Americans own, 0:28:49.080 --> 0:28:52.280 four hundred million more guns than people in this country. 0:28:52.280 --> 0:28:54.600 That's right. But those are three point seven million going 0:28:54.600 --> 0:28:55.680 to countries. 0:28:56.880 --> 0:29:01.320 In places like Guatemala, for instance, where where the where 0:29:01.800 --> 0:29:05.640 the where the institutions are there? You know, the State 0:29:05.680 --> 0:29:09.440 Department has condemned and Guanamal, for instance, the the public 0:29:09.480 --> 0:29:13.040 corruption and the inability of the government to to track 0:29:13.120 --> 0:29:15.360 these guns when they're when they're coming in. So a 0:29:15.400 --> 0:29:17.680 relative which seems like a small number of weapons to 0:29:17.880 --> 0:29:21.640 Americans has an outsize impact in a country country like 0:29:21.640 --> 0:29:24.360 Guatemala or Thailand or even we're seeing in Canada. 0:29:24.840 --> 0:29:27.120 So what about the German owners? Are they okay with 0:29:27.160 --> 0:29:27.480 all of this? 0:29:28.720 --> 0:29:35.200 So they the new owners that were initially initially reluctant 0:29:35.280 --> 0:29:38.720 to the sort of americanization of the company, they were 0:29:38.840 --> 0:29:41.320 interested in. They you know, again, this is a company 0:29:41.320 --> 0:29:43.960 with a history of hunting rifles and and you know, 0:29:44.080 --> 0:29:46.800 high end you know, high end pistols and so forth. 0:29:47.160 --> 0:29:51.480 They initially, uh were concerned about it. But but they 0:29:51.880 --> 0:29:56.640 once Cohen uh reoriented the company, you know, and moved 0:29:56.640 --> 0:29:59.480 manufacturing to the United States and boosted sales. They have 0:29:59.560 --> 0:30:02.840 not you know, they've approved his plans and have not objected. 0:30:02.880 --> 0:30:04.400 We reached out to them to talk to him about this, 0:30:04.440 --> 0:30:05.320 and they did not respond. 0:30:05.400 --> 0:30:07.240 Yeah, there's a point in the story, and I want 0:30:07.240 --> 0:30:08.960 you to talk to me a little bit about Ron Cohen. 0:30:09.000 --> 0:30:12.640 But basically it talks about him hiring X Special Forces 0:30:12.640 --> 0:30:15.800 soldiers and others who understood military culture. He told employees 0:30:15.840 --> 0:30:17.560 he was giving the company a new mission armed the 0:30:17.560 --> 0:30:21.040 good guys. This is a guy who I guess employees 0:30:21.080 --> 0:30:26.280 called the Commander. It's an interesting as you guys you know, 0:30:26.360 --> 0:30:29.400 reported on this specific company. It sounds like there were 0:30:29.640 --> 0:30:32.600 some things going on that weren't so. 0:30:32.680 --> 0:30:37.920 Okay, that's right. That so the first big, big, yes, 0:30:37.960 --> 0:30:38.280 I hear it. 0:30:38.600 --> 0:30:43.320 The first the first big international deal that. 0:30:42.400 --> 0:30:43.520 They that Six Hour inc. 0:30:43.640 --> 0:30:48.920 Made was in two thousand and nine with the Columbia 0:30:49.000 --> 0:30:55.160 National Police and they committed to they committed to selling 0:30:55.880 --> 0:31:01.959 tens of thousands of pistols UH to Columbia. The problem 0:31:02.080 --> 0:31:08.720 was that the American the American arm the Six Hour Incorporated, 0:31:08.920 --> 0:31:12.200 didn't have the capacity to make that many, to. 0:31:13.880 --> 0:31:15.120 Manufacture that many pistols. 0:31:15.560 --> 0:31:19.320 So what they did was they they built built them 0:31:19.480 --> 0:31:22.840 in in Germany and attested to the fact that they 0:31:22.880 --> 0:31:24.760 would be sold into the United States. But once they 0:31:24.760 --> 0:31:27.160 got to the United States, and this is in court 0:31:27.200 --> 0:31:32.520 documents and we found they re labeled them and sent 0:31:32.520 --> 0:31:34.720 them to Columbia. This was news to their colleagues in 0:31:34.720 --> 0:31:37.200 Germany who knew they couldn't be selling weapons to Columbia 0:31:37.240 --> 0:31:41.400 because German law prohibited guns going to conflict zone, which 0:31:41.680 --> 0:31:46.240 that time Columbia was so this became the German authorities 0:31:46.440 --> 0:31:51.920 investigated and in the end the U, SIG and Cohen 0:31:52.640 --> 0:31:56.320 h reached a settlement which they in which they acknowledged 0:31:56.320 --> 0:32:00.880 wrongdoing and Cohen himself was given a suspended eighteen prison 0:32:00.920 --> 0:32:05.720 sentence and SIG paid the highest export fine in German history, 0:32:05.720 --> 0:32:08.920 something like twelve million euros. So that that's not the 0:32:08.960 --> 0:32:11.920 only that's not the only case that they've There have 0:32:11.960 --> 0:32:14.600 been other investigations by SIG as well, so that but 0:32:14.640 --> 0:32:16.640 it has not it clearly has not hurt their sales, 0:32:16.680 --> 0:32:18.400 and frankly, it has not hurt their dealings with the 0:32:18.480 --> 0:32:21.840 US government where they have now they have in the 0:32:21.840 --> 0:32:25.000 wake of those investigations, they have still been awarded the 0:32:25.520 --> 0:32:30.040 two major Pentagon contracts, one one for UH to supply 0:32:30.560 --> 0:32:33.160 MS side arms to the whole to the entire US military, 0:32:33.440 --> 0:32:36.560 and also to provide the what essentially replaced the M 0:32:36.600 --> 0:32:37.640 sixteen as a. 0:32:39.680 --> 0:32:39.960 Flynn. 0:32:39.960 --> 0:32:41.760 We only have about a minute left, a little less, 0:32:42.040 --> 0:32:44.640 but what's the next thread of the story here? What's 0:32:44.640 --> 0:32:46.680 been the response that that you've gotten to the big 0:32:46.720 --> 0:32:49.480 take after it was published late yesterday, And what's the 0:32:49.480 --> 0:32:50.480 next part of the story here? 0:32:50.680 --> 0:32:52.880 So we're looking to see what happens in Congress. 0:32:52.880 --> 0:32:58.000 There there, Elizabeth Warren, Norma Torre's there are various Democrats 0:32:58.000 --> 0:33:00.920 in Congress who have raised concerns about this in the past, 0:33:00.960 --> 0:33:04.440 and we're very curious to see if our revelations do 0:33:04.520 --> 0:33:05.040 anything to. 0:33:06.800 --> 0:33:09.560 Push reform in Washington. 0:33:09.640 --> 0:33:11.360 All right, well, we certainly will be watching, and I 0:33:11.440 --> 0:33:14.600 know you guys will be monitoring and updating us on it. Flynn, 0:33:14.600 --> 0:33:17.000 thank you so much. We really wanted to share this 0:33:17.040 --> 0:33:21.000 story with our viewers and listeners, so appreciate you joining us. 0:33:21.000 --> 0:33:24.160 Flynn McRoberts, Managing editor of the Bloomberg News Investigations team 0:33:24.200 --> 0:33:25.440 from our Chicago bureau. 0:33:32.200 --> 0:33:35.760 You're listening to the Bloomberg Business Week podcast. Catch us 0:33:35.800 --> 0:33:39.920 live weekday afternoons from three to six Easter on Bloomberg Radio, 0:33:40.000 --> 0:33:43.280 the Bloomberg Business app, and YouTube. You can also listen 0:33:43.400 --> 0:33:46.520 live on Amazon Alexa from our flagship New York station, 0:33:46.960 --> 0:33:49.720 Just say Alexa play Bloomberg eleven thirty. 0:33:51.440 --> 0:33:54.160 The remarks in the current issue of Bloomberg BusinessWeek center 0:33:54.200 --> 0:33:56.880 on the head of the US Securities and Exchange Commission, 0:33:57.120 --> 0:34:00.320 Gary Gensler. We know he has been front and center 0:34:00.320 --> 0:34:02.760 in the push to weed out fraud in the crypto space, 0:34:02.840 --> 0:34:06.160 So what about the potential for financial wrongdoing when it 0:34:06.200 --> 0:34:07.920 comes to artificial intelligence? 0:34:08.239 --> 0:34:11.080 But don't worry, Gensler has a framework for dealing with 0:34:11.080 --> 0:34:14.120 AI too. Bloomberg News Deputy team leader for US Equities 0:34:14.160 --> 0:34:16.560 Jess Metten and I sat down with our securities enforcement 0:34:16.600 --> 0:34:19.720 reporter Austin Weinstein and business we get under Joel Weber 0:34:19.920 --> 0:34:20.560 to learn more. 0:34:20.800 --> 0:34:24.000 If there's a financial regulation issue that's been a major 0:34:24.040 --> 0:34:26.520 thing in the US for the last thirty years, there's 0:34:26.560 --> 0:34:29.960 a really high chance. Gary Gensler has a deep and 0:34:30.120 --> 0:34:32.719 rich history with it. One of the most crazy footnotes 0:34:32.760 --> 0:34:34.600 to his career is that he was one of the 0:34:34.600 --> 0:34:37.520 main drafters of the Sarbanes Oxley Law in two thousand 0:34:37.520 --> 0:34:40.719 and one, and that barely comes up in his biography. 0:34:41.120 --> 0:34:44.120 But yes, with AI, we sat down with him and 0:34:44.200 --> 0:34:46.799 learned that his history goes back good amount of time, 0:34:46.880 --> 0:34:51.120 back to when he left the CFTC in twenty fourteen, 0:34:51.640 --> 0:34:54.280 and there was a new administration that came in shortly 0:34:54.320 --> 0:34:56.480 after and he needed to find a job, and he 0:34:56.560 --> 0:35:00.160 went to MIT to teach. They're pretty early on on. 0:35:00.360 --> 0:35:03.240 He zeroed in on two subjects that he really cared about. 0:35:03.280 --> 0:35:06.879 One was crypto, which he's talked a lot about and 0:35:06.920 --> 0:35:09.520 we've all talked a lot about, and the other was 0:35:09.600 --> 0:35:13.600 artificial intelligence. He sat down with Alexander Madri, one of 0:35:13.680 --> 0:35:18.640 the really most respected minds in machine learning, and just 0:35:18.680 --> 0:35:22.600 asked him how do I learn this? And Madra gave 0:35:22.640 --> 0:35:26.440 him an eight hundred page book called deep Learning. I 0:35:26.560 --> 0:35:30.840 tried to read it. I can't and Gerry Gensler apparently 0:35:30.880 --> 0:35:32.360 can and returned months. 0:35:32.200 --> 0:35:34.759 How much of that book did he read, Austin, I 0:35:34.800 --> 0:35:37.680 was wondering the same thing, or how much did he 0:35:37.760 --> 0:35:38.439 say he read? 0:35:39.360 --> 0:35:39.720 Well? 0:35:39.960 --> 0:35:44.319 So he said he read what he could understand. Then 0:35:44.360 --> 0:35:47.520 he also mentioned that he can code and Fortran and 0:35:47.920 --> 0:35:52.120 can do some of the differential equations. Gerty Gensler probably 0:35:52.239 --> 0:35:58.160 can just knowing its record, but there's probably some stuff 0:35:58.160 --> 0:36:00.680 there that you know, everyone what's came out? 0:36:00.760 --> 0:36:02.200 Can you can you code and Fortrane? 0:36:02.280 --> 0:36:05.359 I would be lost upon entry. 0:36:05.480 --> 0:36:06.680 I had to look up what that was? 0:36:09.200 --> 0:36:11.880 Tim Tim two. That's why yeah, I did too. Actually, 0:36:12.120 --> 0:36:14.200 I'm like four Tran four chan. I don't know what's 0:36:14.239 --> 0:36:15.080 going on here. 0:36:15.640 --> 0:36:19.120 Not the four chance right, So so awesome? Stick with 0:36:19.360 --> 0:36:22.000 stick with this because what we've seen this year is 0:36:22.360 --> 0:36:27.040 obviously captivated everyone with what open AI is accomplished and 0:36:27.200 --> 0:36:29.719 sort of what chat GPT could be capable of. 0:36:30.239 --> 0:36:33.320 If you're a regulator, that seems maybe like your nightmare. 0:36:33.440 --> 0:36:34.840 So how is he preparing? 0:36:35.200 --> 0:36:37.640 Well, there's a few ways to prepare if you're a regulator, 0:36:38.719 --> 0:36:42.360 And in fact, two thou start twenty twenty, Derek Giinlill 0:36:42.400 --> 0:36:44.480 wrote a book on how wrote a paper on how 0:36:44.560 --> 0:36:48.440 regulators should prepare to deal with AI's implication on a 0:36:48.480 --> 0:36:53.560 financial system. And for Garrick Denzler, how regulators should prepare 0:36:53.960 --> 0:36:58.879 essentially goes into what powers and what structures do regulators 0:36:59.000 --> 0:37:02.239 have to deal with AI now? And what don't they have? 0:37:02.520 --> 0:37:05.440 And what risks do I have that they'll pose that 0:37:05.520 --> 0:37:09.680 hit that intersection point where their powers fall short And 0:37:09.719 --> 0:37:12.919 a few of those things fall into the concerns like liability. 0:37:12.920 --> 0:37:16.279 And so we had a really intering discussion about, say, 0:37:16.440 --> 0:37:20.000 when you're designing a bot to beat someone in chess, 0:37:20.600 --> 0:37:24.279 are you designing that bot to beat someone or you 0:37:24.440 --> 0:37:28.720 programming them to know the exact pathways that'll make them 0:37:29.320 --> 0:37:32.799 the most percentage more chance of winning each time? And 0:37:32.960 --> 0:37:36.319 is that intention and the question of intention matters a 0:37:36.360 --> 0:37:39.560 lot for a securities regulator because that's the basis of 0:37:39.920 --> 0:37:43.040 most frauds, and most of the crimes that the sec 0:37:43.200 --> 0:37:49.440 charges are frauds. And so there's really interesting questions of explainability. 0:37:49.760 --> 0:37:53.320 If you can't answer why an algorithm made a certain 0:37:53.360 --> 0:37:57.000 decision or created a certain image or published a certain thing, 0:37:57.600 --> 0:37:59.719 can you say that it acted with intent? And so 0:37:59.800 --> 0:38:04.239 Guinser's been thinking a lot about this problem of explainability, 0:38:04.560 --> 0:38:08.120 and he published one of the first rules in the 0:38:08.120 --> 0:38:11.600 broad federal bureocracy on this last month when he said 0:38:11.640 --> 0:38:15.080 that most asset managers and brokers will have to do 0:38:15.160 --> 0:38:18.839 an assessment when they use AI as to will this 0:38:19.120 --> 0:38:22.120 lead to any conflicts of interest for the firm? So 0:38:22.239 --> 0:38:25.880 agnostic of what this tool does, will you look at 0:38:25.920 --> 0:38:28.799 that tool and when you look at that tool, does 0:38:28.800 --> 0:38:31.000 it benefit you at the expense of the client or 0:38:31.040 --> 0:38:33.480 does it benefit the client and perhaps the firm as well. 0:38:34.040 --> 0:38:37.760 So it's really thorny, really philosophical questions. 0:38:38.880 --> 0:38:43.040 Hand here, you also talk about how he argues that 0:38:43.080 --> 0:38:48.279 a lot of this so called decentralized finance isn't really decentralized. 0:38:48.640 --> 0:38:49.600 What's your take on that? 0:38:51.719 --> 0:38:56.440 So it's the sort of theme that Gary Gensler's carried 0:38:56.480 --> 0:39:00.560 with it in both crypto and artificial intelligence, that a 0:39:00.600 --> 0:39:05.680 lot of the words and technologies here obfuscate responsibility, obscate 0:39:05.719 --> 0:39:07.000 what's truly happening. 0:39:07.480 --> 0:39:07.680 You know. 0:39:07.760 --> 0:39:12.280 Cryptocurrency has the root crypto, you know, which is a 0:39:12.320 --> 0:39:15.759 way to hide, to disguise, But at the end of 0:39:15.800 --> 0:39:19.480 the day, most every crypto transaction is traceable from one 0:39:19.480 --> 0:39:22.880 wallet to one wallet without much difficulty. It took some 0:39:22.880 --> 0:39:23.560 time to learn it. 0:39:23.880 --> 0:39:27.360 And then you go into decentralized finance. He brought up 0:39:27.400 --> 0:39:33.440 the question of okay, is a decentralized finance platform decentralized 0:39:33.800 --> 0:39:36.160 in the way it pays its lawyers because at the 0:39:36.239 --> 0:39:40.319 end of the day, some client, some service provider is 0:39:40.320 --> 0:39:43.680 providing that to the system, and so there's an entity 0:39:43.800 --> 0:39:46.319 making a one to one transaction there. And take that 0:39:46.400 --> 0:39:50.520 into artificial intelligence as well. Is it artificial if it's 0:39:50.560 --> 0:39:54.000 programmed to do a specific thing and uses machine learning 0:39:54.040 --> 0:39:56.920 and other tools to get to that specific thing, So 0:39:56.960 --> 0:39:59.920 that these those words and these technologies can only obfuscate 0:40:00.560 --> 0:40:02.879 what's what's really happening here in the eyes of someone 0:40:02.920 --> 0:40:03.680 like your Agaenzel. 0:40:04.080 --> 0:40:07.399 So that seems like a you know, rain Cloud sort 0:40:07.400 --> 0:40:10.040 of take on AI when there's been so much enthusiasm 0:40:10.320 --> 0:40:12.880 in the markets at least for it. So what does 0:40:12.920 --> 0:40:15.160 he think's going to happen, Like, you know, like is 0:40:15.160 --> 0:40:17.719 it is this going to end badly? And you know, 0:40:17.760 --> 0:40:20.480 you look at Crypto and sort of his response to it, 0:40:20.520 --> 0:40:22.960 and it feels like, you know, he's finally bringing down 0:40:22.960 --> 0:40:24.800 a hammer, like what about what about AI? 0:40:25.080 --> 0:40:28.520 With Genzler, that's sort of a twofold thing. He is 0:40:28.840 --> 0:40:32.000 proposing rules now to make sure that you can set 0:40:32.040 --> 0:40:35.400 some guidelines for AI. But he did say in our 0:40:35.480 --> 0:40:38.080 interview it'll be the crisis of twenty thirty two or 0:40:38.160 --> 0:40:41.640 twenty twenty eight or whatever, and the after action report 0:40:41.640 --> 0:40:45.160 will really be about an issue involving machine learning and AI, 0:40:45.840 --> 0:40:46.879 simply because that. 0:40:46.840 --> 0:40:49.080 Makes me think that that report, it makes me think 0:40:49.120 --> 0:40:51.359 that report may not be written by AI. 0:40:51.680 --> 0:40:53.719 At the end of the day, when writing is after 0:40:53.800 --> 0:40:57.440 action reports after a crisis. He brought up the idea 0:40:58.160 --> 0:41:02.080 of model dependency, which is the idea and I'm going 0:41:02.120 --> 0:41:05.080 to explain this terribly. I do not have a PhD 0:41:05.280 --> 0:41:09.759 in computer science, but that at the end of the day, 0:41:09.880 --> 0:41:13.960 all these financial firms will use at about two to 0:41:14.080 --> 0:41:19.239 three base or foundation models, the underlying logic systems that 0:41:19.320 --> 0:41:23.799 make machine learning and AI work. And these models might 0:41:23.960 --> 0:41:27.160 disguise how they all get to the same result, and 0:41:27.200 --> 0:41:30.000 it may determine that they were all training on one 0:41:30.040 --> 0:41:33.399 small piece of data about the mortgage market, or about 0:41:33.480 --> 0:41:38.319 leverage loans, or about treasuries, and without communicating it, they 0:41:38.360 --> 0:41:40.920 had a whole bunch of risk based in these models, 0:41:41.480 --> 0:41:45.120 and that risk blew up when say that one statistic 0:41:45.320 --> 0:41:49.200 was programmed by someone who wasn't putting in the data 0:41:49.280 --> 0:41:51.919 right so or had some malign intent, and that can 0:41:52.080 --> 0:41:56.000 blow up the economy with these huge systems trained on AI. 0:41:56.560 --> 0:42:00.640 So it raises the question, Austin, about what Kensler thinks 0:42:00.680 --> 0:42:03.799 the solution is in terms of guardrails, in terms of regulations. 0:42:03.800 --> 0:42:05.120 I mean, how does he prevent a melt down in 0:42:05.120 --> 0:42:06.960 twenty twenty eight or twenty thirty two that's brought on 0:42:07.040 --> 0:42:07.439 by AI. 0:42:08.040 --> 0:42:11.239 The great question and one that he's definitely trying to 0:42:11.280 --> 0:42:14.600 grapple with and understand. Now, it is important to say 0:42:14.640 --> 0:42:17.319 a lot of the powers here and the regulation of 0:42:17.360 --> 0:42:20.799 AI are beyond the SEC and he really can only 0:42:20.840 --> 0:42:24.760 oversee the capital markets in space if he regulates things 0:42:24.880 --> 0:42:30.440 like responsibility of use and legal liability of questions for Congress, 0:42:30.480 --> 0:42:34.440 the FTC, the jay Treasury, all these other institutions. But 0:42:35.400 --> 0:42:38.320 he is a member of the Financial Stability Oversight Council, 0:42:38.400 --> 0:42:40.319 and he has asked a lot of his staff to 0:42:40.360 --> 0:42:45.520 start looking at issues of concentration stability in ways that 0:42:45.600 --> 0:42:48.480 he can set the economy and set the financial system 0:42:48.560 --> 0:42:52.560 up to be more resilient in the case of AI catastrophe. 0:42:52.719 --> 0:42:55.880 That was Bloomberg News Securities Enforcement reporter Austin Weinstein and 0:42:55.880 --> 0:42:58.400 BusinessWeek editor Joe Weber with Jess Metton and me. 0:42:58.520 --> 0:43:00.640 All right, you're listening to Bloomberg Business Up next, we've 0:43:00.680 --> 0:43:03.400 got more on AI as we examine the impact this 0:43:03.480 --> 0:43:06.600 technology is likely to have on the American worker, maybe 0:43:06.600 --> 0:43:07.320 global workers. 0:43:07.320 --> 0:43:09.960 To be fair, the bottom line is about thirty percent 0:43:10.040 --> 0:43:13.839 of the activities that US workers do today could be 0:43:13.920 --> 0:43:16.120 automated away by the end of twenty thirty. 0:43:16.160 --> 0:43:17.960 So over the next seven years. 0:43:17.760 --> 0:43:20.520 We break down a new McKinsey study on where displaced 0:43:20.520 --> 0:43:23.920 workers will turn and how AI will reshape the labor landscape. 0:43:24.120 --> 0:43:24.960 This is Bloomberg. 0:43:25.239 --> 0:43:28.799 You're listening to the Bloomberg Business Week podcast. Catch us 0:43:28.840 --> 0:43:32.160 Live Weekday afternoons from three to six Eastern Listen on 0:43:32.239 --> 0:43:36.280 Bloomberg dot com, the iHeartRadio app and the Bloomberg Business app, 0:43:36.560 --> 0:43:38.840 or watch us live on YouTube. 0:43:39.600 --> 0:43:40.760 You guys talked about Zoom. 0:43:40.880 --> 0:43:43.480 Yeah, I mean, if you think about perhaps the company 0:43:43.480 --> 0:43:47.200 that most epitomizes working from home, yeah, it's Zoom. I 0:43:47.239 --> 0:43:49.760 mean it was not just a you know, a COVID stock, 0:43:49.960 --> 0:43:51.960 but it was also what we were all learning how 0:43:52.000 --> 0:43:54.239 to use in the early days of the pandemic. Right, 0:43:54.520 --> 0:43:56.960 we talked about it yesterday because even their telling employees 0:43:57.000 --> 0:43:59.480 to get back to the office farrel Yeah, I know, Zoom. 0:43:59.480 --> 0:44:01.600 If you live near Zoom office, you got to come 0:44:01.600 --> 0:44:04.280 in a couple days a week. So we've seen Amazon, Chipotle, 0:44:04.400 --> 0:44:07.560 black Rock companies as varied as those telling hey, workers, workers, Hey, 0:44:07.600 --> 0:44:08.720 you got to come back to the office. 0:44:08.800 --> 0:44:12.160 Yeah, it's interesting, right, we're seeing that post COVID several 0:44:12.239 --> 0:44:14.239 years out and how that is kind of Yep, they're 0:44:14.239 --> 0:44:16.719 coming back to the office. The other thing at play, right, 0:44:16.760 --> 0:44:18.640 we see when it comes to how we are working 0:44:18.719 --> 0:44:22.879 going forward, is just the explosion of what the think 0:44:22.960 --> 0:44:27.879 about AI around artificial intelligence generative AI and what does 0:44:27.920 --> 0:44:29.600 it mean eventually for work. 0:44:29.760 --> 0:44:32.000 Well, Fortunately, McKinzie is out with a new report that 0:44:32.080 --> 0:44:34.279 says twelve million workers are going to move into new 0:44:34.280 --> 0:44:36.279 lines of work by twenty thirty. I guess I'm not 0:44:36.320 --> 0:44:39.560 saying fortunately that's fortunately there's a report. You know, we'll 0:44:39.560 --> 0:44:42.240 see if it's fortunately or unfortunately that AI is forcing 0:44:42.280 --> 0:44:44.600 people to move to new lines of work. Very pleased 0:44:44.640 --> 0:44:48.000 to have with us this afternoon. Qualyon Ellen Grude, partner 0:44:48.040 --> 0:44:51.680 at McKinsey Global Institute, joins us via zoom from Minneapolis, 0:44:51.680 --> 0:44:55.480 a director and senior partner at the McKenzie Global Institute. Quillan, 0:44:55.520 --> 0:44:56.720 how are you great? 0:44:56.760 --> 0:44:58.080 Great to be with you today, Well. 0:44:58.160 --> 0:45:00.960 It's great to have you join us on. So, you know, 0:45:01.600 --> 0:45:03.600 when did you guys start thinking about the impact of 0:45:03.640 --> 0:45:05.360 AI on workers, because I think for a lot of 0:45:05.360 --> 0:45:08.800 people this is relatively new phenomenon with the explosion of 0:45:08.840 --> 0:45:10.080 chat GBT last fall. 0:45:10.400 --> 0:45:13.520 Absolutely, we've been thinking about the future of work now 0:45:13.560 --> 0:45:16.440 for about a decade and modeling what does automation do 0:45:16.680 --> 0:45:22.040 to jobs which are biggest staining jobs losing occupational categories 0:45:22.080 --> 0:45:24.200 and then to your point, just about six months ago 0:45:24.640 --> 0:45:28.360 start a delayer on to automation and COVID nineteen impact 0:45:28.640 --> 0:45:30.840 the impact of Genai. So now we've put all of 0:45:30.840 --> 0:45:33.600 those three things together to say, what do the future 0:45:33.640 --> 0:45:35.320 of jobs look like in the United States? 0:45:35.480 --> 0:45:38.160 All right, so play it out for us. What do 0:45:38.200 --> 0:45:41.160 they look like? I am my robot, absolutely, yeah, I 0:45:41.200 --> 0:45:42.400 am a robots Indeed. 0:45:42.719 --> 0:45:45.080 I think the bottom line is about thirty percent of 0:45:45.080 --> 0:45:49.799 the activities that US workers do today could be automated 0:45:49.880 --> 0:45:51.880 away by the end of twenty thirty, so over the 0:45:51.880 --> 0:45:55.680 next seven years. And that again is through automation COVID 0:45:55.760 --> 0:45:58.719 nineteen impact, mostly affecting interpersonal interactions. 0:45:59.080 --> 0:46:01.520 And then Genai Jenai alone. 0:46:01.520 --> 0:46:05.080 If you just isolate that piece, increase that percentage by 0:46:05.120 --> 0:46:07.680 about nine or s eight or nine percent, So up 0:46:07.760 --> 0:46:11.480 until about thirty percent of overall activities. There are a 0:46:11.520 --> 0:46:15.880 lot of jobs that will be fewer in the future, 0:46:15.880 --> 0:46:18.120 and there will be quite a few more overall. I 0:46:18.120 --> 0:46:22.000 think it's good news to your point earlier. We will 0:46:22.000 --> 0:46:23.680 have more jobs in the future, I think is the 0:46:23.760 --> 0:46:26.480 great news. And those jobs will be higher paying jobs. 0:46:26.760 --> 0:46:29.440 They will be also higher skilled jobs that on average 0:46:29.480 --> 0:46:33.600 require higher average education. The tough news, or the tough 0:46:33.640 --> 0:46:36.920 transition to get there, is we don't necessarily have the 0:46:36.960 --> 0:46:39.600 workforce today that is best suited for those jobs of 0:46:39.640 --> 0:46:42.000 the future. So first, where are we gaining Where are 0:46:42.000 --> 0:46:46.320 we losing? We are gaining jobs in healthcare, in STEM categories, 0:46:46.360 --> 0:46:50.080 and in transportation delivery, all of those other areas we 0:46:50.160 --> 0:46:54.200 are losing jobs in primarily four big occupations, and those 0:46:54.239 --> 0:46:57.439 four occupations make up about eighty percent of the job 0:46:57.520 --> 0:47:01.520 losses between now and twenty thirty. Is customer service, okay, 0:47:02.520 --> 0:47:07.640 food service and sales production or manufacturing and office services 0:47:07.760 --> 0:47:10.680 or assistants. And you've all seen kind of food chiosks 0:47:10.719 --> 0:47:13.040 that fast food restaurants, right, We've seen all of these 0:47:13.040 --> 0:47:13.720 different elements. 0:47:13.760 --> 0:47:15.239 But when you add them together. 0:47:15.239 --> 0:47:18.600 Those four occupations make up eighty percent of the occupational switches, 0:47:18.800 --> 0:47:21.360 which is about twelve million of them between now and 0:47:21.440 --> 0:47:22.040 twenty thirty. 0:47:22.680 --> 0:47:25.239 So before we get into that, it's a lot. But 0:47:25.280 --> 0:47:27.160 I've also seen it. I've done it, right. I'm at 0:47:27.160 --> 0:47:31.440 an airport, I order on an iPad and then stuff 0:47:31.480 --> 0:47:34.359 just gets delivered. I've gone to a retailer here. 0:47:34.600 --> 0:47:37.880 Sorry, but you and I've done this before, and sometimes 0:47:37.880 --> 0:47:41.919 it works. It's sometimes it's also just terrible, not all 0:47:41.960 --> 0:47:44.400 the time. Maybe I'm just thinking of Newark Airport. I 0:47:44.400 --> 0:47:45.360 don't know, no offense. 0:47:45.480 --> 0:47:47.359 Oh come on, I know, pick on the New Jersey. 0:47:47.480 --> 0:47:49.520 We've had some fun times there we have. 0:47:49.920 --> 0:47:50.920 But kind of works. 0:47:51.600 --> 0:47:52.400 God, I don't know. 0:47:52.480 --> 0:47:53.479 It doesn't always work. 0:47:53.600 --> 0:47:55.120 It's like, no, it doesn't always work. 0:47:55.280 --> 0:47:58.520 But I'm amazed at that. I think how many times 0:47:58.560 --> 0:48:00.960 I check out at a super market, I just and 0:48:01.000 --> 0:48:05.440 I go there a target, a retailer. You good, Azara, 0:48:05.560 --> 0:48:06.640 you drop it in a bin. 0:48:07.000 --> 0:48:07.719 That's amazing. 0:48:07.880 --> 0:48:10.680 It shows up. That blows my mind. It shows up 0:48:10.680 --> 0:48:11.560 on like h and. 0:48:11.680 --> 0:48:13.720 M Uniclode does that too. It's amazing. 0:48:13.840 --> 0:48:17.200 Yeah, and you check out and you take off the 0:48:17.239 --> 0:48:20.359 safety you know, uh whatever they what do they call 0:48:20.400 --> 0:48:22.800 them that? You know what I mean? Yeah, the anti 0:48:22.800 --> 0:48:25.000 theft things, the anti theft things, like I do it 0:48:25.040 --> 0:48:28.680 all and like somebody's watching you. But it's like whoa, 0:48:28.880 --> 0:48:30.040 So I don't know. 0:48:31.480 --> 0:48:33.600 Is the experience better though? That's the thing, Like, you know, 0:48:33.600 --> 0:48:35.399 if speaking of airports, we've done this, you know, we've 0:48:35.440 --> 0:48:38.000 gone airports together where there's nobody to actually check us in, right, 0:48:38.040 --> 0:48:39.600 and we're like, you know, we know it's because of 0:48:39.640 --> 0:48:40.360 cost cuts. 0:48:40.200 --> 0:48:42.280 And we're flying business. Thank you, Blueberk. 0:48:43.160 --> 0:48:46.080 We do everything, but what's the balance here Quaylon that 0:48:46.360 --> 0:48:49.000 of actually having like an experience, it's better because who cares. 0:48:49.040 --> 0:48:50.839 If not, who cares. But it's like it's one thing 0:48:50.880 --> 0:48:53.480 to replace people, it's another thing to replace them with, 0:48:53.600 --> 0:48:55.640 you know, an inferior product. 0:48:55.680 --> 0:48:57.760 And I thought all the companies are about customer service 0:48:57.800 --> 0:48:58.960 customers first. 0:48:59.040 --> 0:49:02.200 Not apparently, and there is absolutely a balance, and there's 0:49:02.200 --> 0:49:04.800 also a bit of a transition pain point to get there. 0:49:05.080 --> 0:49:07.760 But I think the alternative is not always great customer 0:49:07.800 --> 0:49:10.799 service in person. It could be they're understaff, they don't 0:49:10.800 --> 0:49:14.040 actually have the people, and so the alternative is do 0:49:14.080 --> 0:49:16.040 you want to wait for ten to fifteen minutes to 0:49:16.040 --> 0:49:18.200 flag somebody down to get your order, or do you 0:49:18.239 --> 0:49:20.239 want to enter it into the iPad? Or do you 0:49:20.280 --> 0:49:22.920 want to pay two dollars more for that sandwich or not? 0:49:23.120 --> 0:49:25.040 And so I think those are the trade offs that 0:49:25.360 --> 0:49:26.160 we're really wrestling. 0:49:26.239 --> 0:49:28.319 Well, when does the cost come to us? Because I've 0:49:28.360 --> 0:49:30.840 go to the supermarket and man, I'm doing all the work, 0:49:31.080 --> 0:49:33.000 and or I go to the airport and they're like 0:49:33.040 --> 0:49:35.319 you want an extra bag? Yeah, you know, So when 0:49:35.360 --> 0:49:37.200 does that cost come back to the customer? 0:49:37.440 --> 0:49:39.359 I think we've already started to see it right on 0:49:39.440 --> 0:49:43.040 so many different products. Some of that has been passed along, 0:49:43.480 --> 0:49:45.680 some of the costs have been kind of captured and 0:49:45.719 --> 0:49:49.200 improved better efficiency and effectiveness, part which has not then 0:49:49.560 --> 0:49:52.640 been passed on in higher prices, even though supply chains 0:49:52.680 --> 0:49:56.480 have been challenged and prices across many categories have gone up, 0:49:56.520 --> 0:50:00.600 most notably in service and gas areas. I think some 0:50:00.680 --> 0:50:02.839 of that will flow through over the next few years. 0:50:02.880 --> 0:50:04.920 We'll see where it all settles out. But I do 0:50:05.000 --> 0:50:08.520 think there are automation improvements that are being made, and 0:50:08.560 --> 0:50:11.520 then consumers do stand to benefit from some of that. 0:50:11.680 --> 0:50:13.920 Hey, really quickly thirty seconds, because we've got a story 0:50:13.960 --> 0:50:17.280 coming up about the lack of workers in the healthcare area. 0:50:17.320 --> 0:50:20.480 You said we are seeing gains in health healthcare thirty 0:50:20.520 --> 0:50:22.680 seconds what specifically. 0:50:22.360 --> 0:50:26.600 Yeah, frankly across the board, given consumers bending aging in 0:50:26.640 --> 0:50:29.720 the United States and frankly in many developed countries around 0:50:29.719 --> 0:50:35.240 the world, so nursing tech in healthcare as well. Overall, 0:50:35.280 --> 0:50:37.160 I think we'll need quite a few more jobs in 0:50:37.200 --> 0:50:38.000 those areas well. 0:50:38.000 --> 0:50:39.640 That certainly fits into the story that we're going to 0:50:39.640 --> 0:50:42.840 talk about. Quailan, thank you so much. Quailn and Ellen Gruge. 0:50:42.840 --> 0:50:45.480 She is director and senior partner at mckensey Global Institute 0:50:45.480 --> 0:50:48.520 on zoom from Minneapolis. Their latest report, Generative AI in 0:50:48.560 --> 0:50:50.480 the Future of Work in America. It wasn't so bad 0:50:50.520 --> 0:50:50.920 in Nework. 0:50:51.040 --> 0:50:53.160 Please please enter your symptoms on this iPad. 0:50:53.840 --> 0:50:56.400 Exactly what do I complain to? That's the thing that 0:50:56.400 --> 0:50:58.680 bothers me. There's no one ever to complain. 0:50:58.880 --> 0:51:00.799 Please to meet Carol, all right, I will. 0:51:07.200 --> 0:51:10.799 You're listening to the Bloomberg Business Week podcast. Catch us 0:51:10.840 --> 0:51:14.840 live weekday afternoons from three to six Easter on Bloomberg Radio, 0:51:15.040 --> 0:51:18.320 the Bloomberg Business app, and YouTube. You can also listen 0:51:18.400 --> 0:51:21.520 live on Amazon Alexa from our flagship New York station, 0:51:21.960 --> 0:51:24.760 Just say Alexa play Bloomberg eleven thirty. 0:51:26.560 --> 0:51:28.439 Play ahead in our second hour of the weekend edition 0:51:28.480 --> 0:51:31.759 of Bloomberg Business Week, including the continuing saga and struggles 0:51:31.800 --> 0:51:35.440 of a once adored startup, Why there is now serious 0:51:35.480 --> 0:51:39.680 concern coworking office space giant we Work could go out 0:51:39.719 --> 0:51:40.920 of business altogether. 0:51:41.320 --> 0:51:44.320 Plus female founders are still having a hard time obtaining 0:51:44.360 --> 0:51:47.400 critical funding for their startups. We'll talk to someone who's 0:51:47.400 --> 0:51:49.880 hell bent on changing the narrative and whether she thinks 0:51:49.920 --> 0:51:53.320 Facebook would have gotten funding if it was Maria Zuckerberg 0:51:53.320 --> 0:51:55.080 behind the company and not Mark. 0:51:55.040 --> 0:51:57.640 First up this hour, Investors continue to take a bite 0:51:57.680 --> 0:52:00.560 out of Beyond Meat. After reporting earnings of past week, 0:52:00.560 --> 0:52:03.000 the company cuted sales guidance and backed off its cash 0:52:03.000 --> 0:52:06.919 flow target. On Tuesday. Following that news, it shares took 0:52:06.920 --> 0:52:09.920 their biggest one day plunge since November twenty twenty on 0:52:09.960 --> 0:52:12.799 an inter day basis. Quite simply, tim it is not 0:52:12.960 --> 0:52:14.400 easy being beyond meat. 0:52:14.560 --> 0:52:16.520 It's not easy being beyond meat here in the US, 0:52:16.560 --> 0:52:18.920 but it's also pretty difficult being beyond meat when you're 0:52:18.960 --> 0:52:21.680 trying to expand into China. We've got a great story 0:52:21.719 --> 0:52:24.000 in the current issue of Bloomberg BusinessWeek. It's all about 0:52:24.040 --> 0:52:27.000 Beyond Meat's challenges in China, by Dina Shanker, Bloomberg News 0:52:27.000 --> 0:52:29.719 Consumer Reporter. It's again again in the current issue oft 0:52:29.719 --> 0:52:32.160 Bloomberg Business Week. Read it now on newsstands, online at 0:52:32.160 --> 0:52:35.120 Bloomberg dot com, slash BusinessWeek, and of course on the 0:52:35.120 --> 0:52:39.040 Bloomberg terminal. Dina in our Bloomberg Interactive Brokers studio right now, 0:52:39.400 --> 0:52:43.560 So Dina, you'll back a few years. Starbucks huge in China, 0:52:44.120 --> 0:52:46.640 made available Beyond Meat and all of its stores more 0:52:46.640 --> 0:52:49.200 than three thousand. You had Beyond Meat doing this big 0:52:49.200 --> 0:52:52.520 marketing campaign on the huge mobile platforms that are there, 0:52:52.920 --> 0:52:57.480 we Chat and Cibo. We excuse me, the other one, 0:52:57.560 --> 0:52:58.360 the social one. 0:52:58.520 --> 0:53:01.799 Do you have a Beyond Meat burger Mouth? What's going on? 0:53:02.360 --> 0:53:04.200 Fast forward a few years, it's nowhere to be found. 0:53:04.239 --> 0:53:04.799 What's going on? 0:53:05.280 --> 0:53:05.520 Yeah? 0:53:05.560 --> 0:53:09.080 You know, after their IPO in twenty nineteen, which was 0:53:09.160 --> 0:53:12.120 just huge and everyone was really excited, Ethan Brown came 0:53:12.200 --> 0:53:14.640 in and did an editorial board and when we asked 0:53:14.680 --> 0:53:16.360 him about China, he said they were going to be 0:53:16.360 --> 0:53:19.200 as aggressive as they could, and they were. They went 0:53:19.239 --> 0:53:21.879 in and they, like you said, they went into Starbucks. 0:53:22.160 --> 0:53:25.000 Three menu items, thirty three hundred locations, they got on 0:53:25.120 --> 0:53:29.400 JD dot com. All kinds of partnerships in China, but 0:53:29.719 --> 0:53:34.120 now going to find one is not so easy, and 0:53:35.040 --> 0:53:38.160 Starbucks doesn't have them online at the menus on menus 0:53:38.200 --> 0:53:41.479 anymore JD dot com they show up, but you can't 0:53:41.600 --> 0:53:41.920 order them. 0:53:41.960 --> 0:53:42.880 They're not available. 0:53:43.920 --> 0:53:46.520 There's just a whole long list of examples of partnerships 0:53:46.520 --> 0:53:49.880 that have sort of disintegrated over there. And you know, 0:53:50.440 --> 0:53:52.560 there are a lot of reasons why. But I think 0:53:52.600 --> 0:53:55.080 when you strip all of the noise out. It really 0:53:55.120 --> 0:53:57.239 just comes down to the fact that, just like in 0:53:57.320 --> 0:54:00.720 the US, in China people tried them and then said, 0:54:01.520 --> 0:54:02.399 I don't really like it. 0:54:02.400 --> 0:54:05.000 It doesn't taste so good. And that's that. 0:54:05.520 --> 0:54:05.719 You know. 0:54:05.800 --> 0:54:08.440 What's interesting too, is I mean you and I and 0:54:08.480 --> 0:54:11.640 Tim were talking, you know, a little bit earlier. It 0:54:11.760 --> 0:54:14.919 just feels like these companies are trying to find strategies, 0:54:14.920 --> 0:54:16.840 and I get it. Going after China, I feel like 0:54:17.239 --> 0:54:20.600 every company that's out there still, even with the tensions, 0:54:20.719 --> 0:54:23.680 think about the potential in the Chinese market. What did 0:54:23.680 --> 0:54:25.680 they get wrong? Or is it just a case that 0:54:25.800 --> 0:54:29.920 China's difficult or is it something about these plant based 0:54:30.800 --> 0:54:31.640 food companies? 0:54:31.960 --> 0:54:34.200 Well, I think it's a whole lot of things. 0:54:34.239 --> 0:54:38.799 The first is that beef is really big here in 0:54:38.840 --> 0:54:42.440 the US and the beyond. Burger was this big blockbuster 0:54:43.360 --> 0:54:47.200 new product, but in China, people really don't eat beef 0:54:47.239 --> 0:54:49.960 the way they eat, for example, pork or chicken. Even 0:54:50.080 --> 0:54:54.480 so starting with a burger was just sort of, you know, 0:54:54.600 --> 0:54:57.640 tone deaf. I think starting with pork would have made 0:54:57.680 --> 0:54:58.560 a lot more sense. 0:54:58.640 --> 0:55:01.520 Why didn't they? Has The company addressed that. 0:55:01.920 --> 0:55:05.040 They declined to comment for our story, So I could 0:55:05.080 --> 0:55:07.359 not tell you. They do have pork product, and they 0:55:07.360 --> 0:55:09.160 eventually launched pork products there. 0:55:09.680 --> 0:55:11.719 They eventually launched dumplings and other things. 0:55:11.760 --> 0:55:14.600 But what it came down to for a lot of 0:55:14.640 --> 0:55:17.600 people was the same thing as here is that it's expensive, 0:55:17.640 --> 0:55:21.600 it doesn't taste that good, it's not particularly healthy, and there, 0:55:21.840 --> 0:55:24.560 of course, they also had the pandemic lockdowns that really 0:55:24.719 --> 0:55:28.640 hurt their opportunities in food service. And of course in 0:55:28.760 --> 0:55:33.000 China they have plenty of plant based meal options that 0:55:33.040 --> 0:55:35.400 fit right in that are just an ancient part of 0:55:35.440 --> 0:55:37.399 their cuisine. So if they don't want to eat meat 0:55:37.440 --> 0:55:39.560 for a meal, they can eat tofu instead. 0:55:39.640 --> 0:55:41.720 Feel like, beyond me, we've been here, We've been here, 0:55:42.680 --> 0:55:43.200 I got this. 0:55:43.400 --> 0:55:46.440 That's exactly right. They had Really it really just didn't 0:55:46.640 --> 0:55:47.120 fit in. 0:55:48.040 --> 0:55:50.000 So does any of the do any of the other 0:55:50.000 --> 0:55:54.480 products stand a chance? If beef didn't work, and if 0:55:54.480 --> 0:55:57.080 they have developed other products, could those work? 0:55:58.280 --> 0:56:01.600 I mean they haven't worked. Poor has it worked the pork. 0:56:03.120 --> 0:56:07.920 They're not on the websites we looked at, and they've 0:56:08.000 --> 0:56:11.720 tried some different products there, but it's just really difficult 0:56:11.760 --> 0:56:13.960 to find a beyond meat product in China right now? 0:56:14.040 --> 0:56:18.520 Why China, Like, why would they choose for international expansion China? 0:56:18.520 --> 0:56:18.799 I mean the. 0:56:21.280 --> 0:56:24.040 Like success in the road to success in China, for 0:56:24.040 --> 0:56:26.680 if you're a US company, Like there are a lot 0:56:26.719 --> 0:56:28.600 of very successful ones, but there are many more that 0:56:28.600 --> 0:56:29.400 have tried and failed. 0:56:30.000 --> 0:56:30.280 Well. 0:56:30.320 --> 0:56:32.279 I think the first is the first piece of it 0:56:32.320 --> 0:56:34.040 is just the sheer number of people, so you have 0:56:34.120 --> 0:56:37.200 so many consumers. They also do consume a lot of 0:56:37.239 --> 0:56:39.479 meat in China, so it seems like a good place 0:56:39.520 --> 0:56:42.440 to try to sell your meat replacement. But that's kind 0:56:42.440 --> 0:56:44.840 of part of the problem in China, just like it 0:56:45.040 --> 0:56:47.160 Just like in a lot of other places, meat is 0:56:47.160 --> 0:56:49.800 a status symbol, and as you rise into the middle class, 0:56:49.840 --> 0:56:52.239 you want to eat more meat because that means you're 0:56:52.400 --> 0:56:56.960 more successful. And so trying to convince someone who maybe 0:56:57.760 --> 0:57:01.120 just sort of broke into the meat bracket, Hey, actually. 0:57:00.920 --> 0:57:01.560 I have something. 0:57:01.600 --> 0:57:07.080 It's more expensive, it doesn't taste as good, and you're 0:57:07.120 --> 0:57:10.040 not really into burgers, but try it. 0:57:10.520 --> 0:57:13.279 No, it's not a good What do. 0:57:13.239 --> 0:57:14.359 We know about its health too? 0:57:14.440 --> 0:57:14.600 Right? 0:57:15.160 --> 0:57:15.640 Right? 0:57:16.640 --> 0:57:19.800 Health wise, it's an ultra processed food, which is the 0:57:19.800 --> 0:57:22.960 exact kind of food that keep hearing is what we're 0:57:23.000 --> 0:57:27.520 supposed to avoid and that's really tough for Beyond Meat 0:57:27.760 --> 0:57:31.080 or its competitors, like impossible. An ultra processed food means 0:57:31.080 --> 0:57:34.600 it's made from like derivatives of other foods. And that's 0:57:34.600 --> 0:57:37.040 what pea protein is, right, It's not made from peas, 0:57:37.080 --> 0:57:38.280 it's made from pea protein. 0:57:38.440 --> 0:57:40.680 What's interesting too, And I like this story, this line 0:57:40.680 --> 0:57:42.960 in your story. The stumbles by international brands have not 0:57:43.040 --> 0:57:45.480 deterred local companies from trying to find a lane for 0:57:45.560 --> 0:57:49.240 plant based businesses. So there are some Chinese companies trying 0:57:49.280 --> 0:57:51.520 to still tap this market. Correct. 0:57:51.640 --> 0:57:56.760 Yes, and actually Decos is a restaurant chain in China 0:57:56.920 --> 0:57:59.840 that started with Beyond Meat and now is actually doing 0:57:59.840 --> 0:58:03.720 a big campaign with a Chinese plant based meat company 0:58:03.800 --> 0:58:07.120 called Starfield. So you know, it's hard to say what's 0:58:07.160 --> 0:58:09.400 going to happen, but you have to imagine that a 0:58:09.520 --> 0:58:12.040 Chinese plant based meat company is going to cater better 0:58:12.120 --> 0:58:13.160 to Chinese consumers. 0:58:13.240 --> 0:58:15.920 I feel like Business because did some great coverage. I 0:58:15.920 --> 0:58:18.200 don't feel like it. They have does some great coverage 0:58:18.200 --> 0:58:22.520 of this plant based protein food world. And it is 0:58:22.600 --> 0:58:25.120 interesting that it's now what ten years in counting, like 0:58:25.160 --> 0:58:27.240 how long these companies have been around. And I feel 0:58:27.240 --> 0:58:28.640 like they're still trying to find their late. 0:58:29.480 --> 0:58:30.640 It's very true. 0:58:30.680 --> 0:58:33.160 I mean, Beyond was founded in two thousand and nine 0:58:33.320 --> 0:58:36.080 and went public in twenty nineteen and. 0:58:36.080 --> 0:58:36.840 A lot of fanfare. 0:58:37.080 --> 0:58:40.520 Yeah really, and it was a hugely successful IPO. And 0:58:40.560 --> 0:58:44.040 I think a lot of people really had huge expectations 0:58:44.120 --> 0:58:47.400 for this kind of product, and I think they suffered 0:58:47.400 --> 0:58:51.520 from a mix of their own bad choices, bad execution, 0:58:51.800 --> 0:58:55.760 and also just you know, the public awareness around our 0:58:55.840 --> 0:58:59.720 diet and nutrition has really evolved so much. We all 0:58:59.760 --> 0:59:01.680 know or not we all, but a lot of people, 0:59:01.720 --> 0:59:03.840 a lot more people know to look at the nutrition facts. 0:59:03.840 --> 0:59:05.440 We all turn the boxes, right, that's right. 0:59:05.480 --> 0:59:08.400 And we didn't used to do that, and we you know, 0:59:08.680 --> 0:59:12.800 look for things like recognizable ingredients and for a little 0:59:12.800 --> 0:59:14.960 while we thought, hey, well it's it's got to be 0:59:14.960 --> 0:59:18.800 better than meat, but then those it's not necessarily the 0:59:18.840 --> 0:59:21.400 case any A lot of people raise questions about that, 0:59:21.640 --> 0:59:23.640 so it's it's a tough sell right now. 0:59:23.680 --> 0:59:28.120 There's also the environmental question. And you know, it's funny, 0:59:28.160 --> 0:59:30.760 like I we went through as a family like a 0:59:30.800 --> 0:59:33.680 whole Okay, we're going to eat the Beyond and impossible stuff. 0:59:33.680 --> 0:59:35.360 And I think it was like summer of twenty twenty 0:59:35.440 --> 0:59:37.400 during the pandemic, when everybody else did it too, and 0:59:37.440 --> 0:59:39.000 I was like, oh, this is so much better than meat, 0:59:39.040 --> 0:59:40.919 and then we got totally sick of it and don't 0:59:40.920 --> 0:59:44.560 eat it anymore. But the one kind of saving grace 0:59:44.680 --> 0:59:47.280 is that environmentally is it better than beef, because we know. 0:59:47.240 --> 0:59:50.160 This isn't that the new lane that they're pursuing the environment. 0:59:50.320 --> 0:59:53.840 It is absolutely no question about it better than meat 0:59:53.880 --> 0:59:57.360 for the environment. There's just that's like beef is so 0:59:57.440 --> 1:00:00.320 bad for the environment that anything is better. Can and 1:00:00.400 --> 1:00:03.000 pork are better too, but beyond meat is better than 1:00:03.040 --> 1:00:04.080 all of those, no question. 1:00:04.480 --> 1:00:07.960 But so are lentils. And I'll just put a shout 1:00:07.960 --> 1:00:10.200 out for caviar lentils, which are really. 1:00:09.960 --> 1:00:11.840 Good and it sounds fancy. 1:00:11.960 --> 1:00:13.920 You would think that they are kind of fancy in 1:00:13.960 --> 1:00:15.760 the lentil world, but they're still a lot cheaper than 1:00:15.920 --> 1:00:16.600 right on meat. 1:00:16.720 --> 1:00:20.640 Putting it on my shopping lists. 1:00:20.280 --> 1:00:21.240 Buy them on Amazon. 1:00:21.480 --> 1:00:22.120 They're right there. 1:00:22.160 --> 1:00:25.240 They're great, and like people are, there's so much more 1:00:25.400 --> 1:00:29.280 in the world of non meat center a plate and 1:00:29.600 --> 1:00:33.720 meal options than just alternative meats, which really, you know, 1:00:33.800 --> 1:00:36.640 it's ten years, isn't or ten plus users. Years is 1:00:36.680 --> 1:00:38.560 in some way a long time for a company to 1:00:38.600 --> 1:00:41.320 find its footing. But in the history of our diets, 1:00:41.400 --> 1:00:44.439 ten years is it's still a pretty new product. And 1:00:44.480 --> 1:00:47.520 we've eaten meatless before them, and we'll eat meatless without them. 1:00:47.560 --> 1:00:48.920 Well, you know, I think about all the reporting you 1:00:48.960 --> 1:00:51.800 guys are doing a business week on the plant based 1:00:51.840 --> 1:00:55.560 protein world, and I do wonder is it a case 1:00:55.680 --> 1:00:58.480 that they just haven't figured it out, because you say, 1:00:58.520 --> 1:01:01.080 ten years is still kind of short, right in terms 1:01:01.080 --> 1:01:03.920 of the food world. It's a company that you note 1:01:03.920 --> 1:01:06.680 in the story hasn't recorded profit since early twenty twenty. 1:01:06.920 --> 1:01:11.360 What do food industry folks say, What does the analyst community, 1:01:11.400 --> 1:01:15.080 investor community say? Well, after there's a time for them 1:01:15.120 --> 1:01:17.000 to pull the cord. Well, one of. 1:01:17.000 --> 1:01:19.920 The questions during earnings this week was maybe they needed 1:01:19.920 --> 1:01:22.320 to recalibrate their expectations and maybe they're more of a 1:01:22.320 --> 1:01:27.720 three hundred million dollar business and Ethan Brown, Yeah, Ethan 1:01:27.720 --> 1:01:31.160 said absolutely not. And he pointed to like what's going 1:01:31.160 --> 1:01:33.720 on on college campuses where young people want to eat 1:01:33.800 --> 1:01:36.320 less meat, And that's true, young people do want to 1:01:36.360 --> 1:01:39.240 eat less meat. But what comes to mind constantly is 1:01:39.280 --> 1:01:42.200 the reference to these products as like a gateway drug 1:01:42.480 --> 1:01:46.280 to eating less meat. A lot of people try them. Okay, 1:01:46.400 --> 1:01:49.840 well not my favorite or maybe I like it. Now 1:01:49.840 --> 1:01:53.520 I'm open to more meatless options, and that's that's actually 1:01:53.600 --> 1:01:57.280 great for the planet, but for beyond me, that's not 1:01:57.480 --> 1:01:57.880 so good. 1:01:58.240 --> 1:02:01.960 Just for some context to that common Dina. So, back 1:02:01.960 --> 1:02:04.560 in twenty nineteen, the market cap was more than fourteen 1:02:04.600 --> 1:02:07.760 billion dollars and now it's under a billion dollars. So 1:02:08.120 --> 1:02:10.360 that's a big move, that is it. That's a huge move. 1:02:10.600 --> 1:02:11.840 Yeah, I want to go back. 1:02:11.680 --> 1:02:13.880 To your story that's in the current issue of Bloomberg 1:02:13.880 --> 1:02:17.120 BusinessWeek talking about the success or rather failure of Beyond 1:02:17.160 --> 1:02:20.080 Meat in China. Are there any examples of sort of 1:02:20.120 --> 1:02:23.360 these new wave of foods, like you know, I don't 1:02:23.360 --> 1:02:27.120 know plant based milks or plant based eggs that actually 1:02:27.120 --> 1:02:28.960 have found success in China that you found. 1:02:29.480 --> 1:02:32.880 So actually, Oatly has done relatively well in China. They're 1:02:32.920 --> 1:02:38.640 in a lot of a lot of restaurant partnerships, coffee shops, 1:02:38.640 --> 1:02:39.120 et cetera. 1:02:39.920 --> 1:02:41.000 They have a pretty wide reach. 1:02:41.080 --> 1:02:43.960 But even Oatly has said that the sales have just 1:02:44.080 --> 1:02:48.600 not recovered as quickly post pandemic as they expected. 1:02:49.480 --> 1:02:51.760 Eat just the plant based egg maker. 1:02:51.880 --> 1:02:54.800 They were doing pretty well on a small scale in 1:02:54.880 --> 1:02:57.920 China pre pandemic, but they're no longer sold there because 1:02:58.040 --> 1:03:00.480 of what they say are basically issues with custom and 1:03:00.720 --> 1:03:03.040 trying to just get their product into the country without 1:03:03.080 --> 1:03:05.360 it spoiling so and impossible. 1:03:05.920 --> 1:03:08.200 Of course, really wanted to go to China and. 1:03:08.280 --> 1:03:11.840 Hasn't entered yet because they have a genetically modified ingredient 1:03:11.880 --> 1:03:13.360 that hasn't gotten approval. 1:03:13.440 --> 1:03:13.919 Is that heme? 1:03:14.120 --> 1:03:14.760 Is that what it is? 1:03:14.760 --> 1:03:18.560 That's the soiling hemoglobin oh okay, which is known as HEME. 1:03:18.840 --> 1:03:20.760 Yeah, so it's okay to be sold in the US, 1:03:20.760 --> 1:03:21.960 but has not been approved for China. 1:03:22.080 --> 1:03:25.000 Yes, And it also hasn't been approved in the EU, 1:03:25.320 --> 1:03:28.160 So yeah, they can't sell there. 1:03:28.480 --> 1:03:31.200 Does it make sense for them to come back and 1:03:31.200 --> 1:03:32.960 focus on the US market and see if they can 1:03:33.000 --> 1:03:33.640 figure it out? 1:03:34.200 --> 1:03:38.400 They've been trying to reduce their expenses and how much 1:03:38.440 --> 1:03:42.040 they're spending, and so I think that's a really good question. 1:03:42.240 --> 1:03:42.919 Why are you. 1:03:42.920 --> 1:03:46.720 Still spending so much money in China where you're just 1:03:46.840 --> 1:03:50.479 not gaining traction. Why don't you bring those resources home? 1:03:50.760 --> 1:03:54.800 And I wish they had commented for the story because 1:03:55.640 --> 1:03:57.000 I think that they should address. 1:03:56.720 --> 1:03:57.560 That they know how to reach you. 1:03:57.600 --> 1:04:00.320 I bet they did me took they do. 1:04:00.560 --> 1:04:03.000 Just to wrap up, how do you think about like 1:04:03.040 --> 1:04:05.240 what you know? Because you guys have done so much 1:04:05.240 --> 1:04:08.560 reporting it with cover like on this whole world, Like 1:04:08.680 --> 1:04:10.680 what's the next thing that's kind of on your radar? 1:04:10.880 --> 1:04:11.760 How you think about it? 1:04:12.080 --> 1:04:15.560 Well, I think we're seeing consolidation in this industry right now, 1:04:15.800 --> 1:04:18.400 and one of the questions is whether all of this 1:04:18.480 --> 1:04:22.840 consolidation will eventually mean better product on the shelf for consumers. 1:04:23.120 --> 1:04:24.280 And what I wonder. 1:04:24.440 --> 1:04:27.160 I am actually pretty confident that this industry is going 1:04:27.200 --> 1:04:29.640 to make better products. I just wonder if by the 1:04:29.680 --> 1:04:32.520 time those products hit shelves whether anybody's even going to 1:04:32.600 --> 1:04:36.040 be interested in buying them that they like. I wonder 1:04:36.080 --> 1:04:38.680 if they had their big shot and they're ever going 1:04:38.680 --> 1:04:40.000 to I wonder if they're going to get it again. 1:04:40.120 --> 1:04:42.720 All right, Really cool stuff and so relevant because we 1:04:42.760 --> 1:04:44.680 all keep talking about it and trying to figure out 1:04:44.680 --> 1:04:46.840 like kind of what is the way forward? If you 1:04:46.880 --> 1:04:48.640 will for it? Dina, thank you so much. 1:04:48.760 --> 1:04:49.160 Thank you. 1:04:49.400 --> 1:04:52.000 The story in the current issue double issue of Bloomberg Business. 1:04:52.000 --> 1:04:55.040 Withekdina Shanker. She's a Bloomberg News consumer reporter joining us 1:04:55.360 --> 1:04:55.880 in studio. 1:04:55.920 --> 1:04:58.040 Yeah, I love her. Anything. Do you cover anything outside 1:04:58.040 --> 1:05:00.640 of because every time we talk to you, it's always 1:05:00.800 --> 1:05:02.760 it's always beyond me. It's impossible. 1:05:02.920 --> 1:05:05.600 I would cover all the package food companies, but it's 1:05:05.680 --> 1:05:08.360 just these companies just keep every I'm always I got 1:05:08.360 --> 1:05:09.360 to get out of this beak. 1:05:09.440 --> 1:05:10.320 No, don't get out of it. 1:05:10.360 --> 1:05:11.720 Oh I want to try. 1:05:11.760 --> 1:05:13.480 Oh this is too much. Else do you read it? 1:05:13.680 --> 1:05:15.280 But I can't do I eat it. I don't. 1:05:15.320 --> 1:05:15.840 Okay, Okay. 1:05:16.680 --> 1:05:18.600 I actually I hate when I go to a barbecue 1:05:18.600 --> 1:05:19.920 and they know I don't eat me and then so 1:05:19.960 --> 1:05:23.080 they think and they give me like a beyond taking notes. 1:05:23.400 --> 1:05:25.800 All right, thank you, thank you. 1:05:25.800 --> 1:05:29.360 You're listening to the Bloomberg Business Week Podcast. Catch us 1:05:29.400 --> 1:05:32.720 live weekday afternoons from three to six Eastern Listen on 1:05:32.800 --> 1:05:36.840 Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App, 1:05:37.120 --> 1:05:39.440 or watch us live on YouTube. 1:05:40.320 --> 1:05:43.440 We've been talking about a lot of different companies, Disney, Amazon, 1:05:44.000 --> 1:05:46.240 We got to talk a little bit about Rework because 1:05:46.360 --> 1:05:49.920 man shares of the company falling off a cliff, down 1:05:49.960 --> 1:05:52.440 more than thirty eight percent today's session. It is a 1:05:52.720 --> 1:05:56.120 twelve cent. Wow, a share stock. 1:05:56.440 --> 1:06:01.360 That's called that's a penny stock sheets, I mean, Carol. 1:06:01.400 --> 1:06:03.800 This is a company whose stock has plunged ninety eight 1:06:03.840 --> 1:06:06.600 percent since it went public in October twenty twenty one, 1:06:06.600 --> 1:06:09.720 wiped out nearly nine billion dollars in market value. It's 1:06:09.760 --> 1:06:12.720 because the company's bleeding cash. Customers of its office rentals 1:06:12.760 --> 1:06:15.200 are canceling their memberships and droves and oh yeah, we 1:06:15.240 --> 1:06:17.720 worked seity yesterday that there's quote substantial doubt about its 1:06:17.720 --> 1:06:20.560 ability to continue operating. This is a stunning fall. I 1:06:20.680 --> 1:06:23.080 just think back to, you know, a few years ago. 1:06:23.600 --> 1:06:26.000 This was the company that bought the you know, Lord 1:06:26.080 --> 1:06:29.959 and Taylor building. Right we were talking about this as like, okay, 1:06:29.960 --> 1:06:33.560 there's nothing more emblematic right now than physical retail being 1:06:33.600 --> 1:06:37.800 overtaken by a coworking space. Remember, it was a company 1:06:37.880 --> 1:06:40.360 that was once valued at forty seven billion dollars, making 1:06:40.360 --> 1:06:43.080 it one of the most prize startups in America. Let's 1:06:43.080 --> 1:06:45.040 get into it with Ellen Hewittt. She's a Bloomberg New 1:06:45.080 --> 1:06:48.000 Startup reporter who writes about we work Today and one 1:06:48.000 --> 1:06:50.720 of the most read stories on the Bloomberg terminal. Ellen, 1:06:50.760 --> 1:06:53.200 good to have you with us. You've been all over 1:06:53.400 --> 1:06:56.240 this story. When did things get really bad for WE Work? 1:06:56.280 --> 1:06:58.560 Because when it went public via that spack there was 1:06:58.600 --> 1:07:00.920 hope that hey, it could actually turn itself. 1:07:00.680 --> 1:07:04.600 Around, right, I mean, it's been a tough journey for 1:07:04.680 --> 1:07:07.880 we Work. They had this huge implosion in twenty nineteen 1:07:07.880 --> 1:07:09.960 when Adam Newman tried to take it public that obviously 1:07:10.000 --> 1:07:12.520 didn't work. He resigned. There was a lot of tumult 1:07:12.840 --> 1:07:13.480 and this new. 1:07:13.360 --> 1:07:16.440 CEO we learned about community adjusted ebitda. 1:07:16.800 --> 1:07:20.160 Yes, okay, and all the good stuff from the perspectives 1:07:20.160 --> 1:07:23.200 if you remember the Wee family, the trademark of the 1:07:23.240 --> 1:07:25.480 trademark family of we and all other things like that. 1:07:25.640 --> 1:07:26.440 It's crazy. 1:07:26.600 --> 1:07:28.600 We work, we live, we grow, we spend. 1:07:28.960 --> 1:07:29.320 Yes. 1:07:29.480 --> 1:07:32.120 Yes, it was the cover of Bloomberg Business Week in 1:07:32.160 --> 1:07:34.680 twenty nineteen. Remember anyway, go ahead, Yeah. 1:07:34.480 --> 1:07:37.400 Remember elevating the world's consciousness all that stuff. That was 1:07:37.440 --> 1:07:39.919 a good time, especially as a reporter covering that company 1:07:40.040 --> 1:07:42.560 was so exciting. There was news every day. And then 1:07:42.640 --> 1:07:44.480 in twenty twenty they had a new CEO come in, 1:07:44.520 --> 1:07:46.919 Sandy Pathroni. He came in in February twenty twenty, which 1:07:46.960 --> 1:07:50.040 is a tough time to be taking over as co, 1:07:50.520 --> 1:07:53.800 you know, CEO of a an office startup, so he 1:07:54.400 --> 1:07:59.120 inherited a pretty tough job. And we work offices emptied 1:07:59.120 --> 1:08:01.280 out in the firsts in the first year of the pandemic, 1:08:01.480 --> 1:08:04.040 you know, dropping to below fifty percent occupancy. It took 1:08:04.080 --> 1:08:07.320 them more than two years to return occupancy levels to 1:08:07.760 --> 1:08:09.680 the levels that they had been in late twenty nineteen. 1:08:10.400 --> 1:08:12.840 And the company, you know, it has survived, but it 1:08:12.880 --> 1:08:15.520 has not thrived. You know, it did go public in 1:08:15.600 --> 1:08:18.400 late twenty twenty one via spack, but the share price 1:08:18.479 --> 1:08:20.880 has dropped, you know today is something like ninety eight 1:08:20.920 --> 1:08:25.160 percent since since its original debut, and it just has 1:08:25.240 --> 1:08:27.720 not been able to have the turnaround that they had 1:08:27.760 --> 1:08:28.080 hoped for. 1:08:28.479 --> 1:08:30.479 So, Ellen, is this a case of a company, you know, 1:08:30.600 --> 1:08:32.960 kind of cool idea in the beginning, oh my gosh, 1:08:33.000 --> 1:08:34.960 pandemic kind of screwed it up. Or is it just 1:08:35.000 --> 1:08:38.120 a company that just kind of didn't really make sense? 1:08:39.200 --> 1:08:41.360 I you know, what's so interesting about we were is 1:08:41.400 --> 1:08:43.639 I think compared to some of the other vaporware ish 1:08:44.000 --> 1:08:46.360 startups that you see in Silicon Valley, we were kind 1:08:46.400 --> 1:08:48.479 of product that worked that people wanted, that they were 1:08:48.560 --> 1:08:51.080 willing to pay for. You know, they wanted to have 1:08:51.200 --> 1:08:54.240 office space. To me, it made sense, I think. You know, 1:08:54.360 --> 1:08:57.080 during the Newman era there was all this abuiliance and 1:08:57.560 --> 1:08:59.920 and sort of extravagant spending and all these reasons that 1:09:00.080 --> 1:09:03.400 the company probably grew too quickly and it spooked investors 1:09:03.400 --> 1:09:05.519 and all that stuff. But you know, since then, one 1:09:05.520 --> 1:09:08.960 would think that it should be able to make things right. Obviously, 1:09:08.960 --> 1:09:11.800 the pandemic was quite difficult, as it would be for 1:09:11.880 --> 1:09:15.880 any office startup, but you're not seeing like Regis and 1:09:15.920 --> 1:09:18.320 other competitors, you know, having the same issue that we 1:09:18.360 --> 1:09:20.920 work as right now. So it raises a question of 1:09:20.920 --> 1:09:23.599 whether this is something specific to we work and why 1:09:23.640 --> 1:09:24.360 that might be the case. 1:09:24.400 --> 1:09:25.840 I want to go back to something that you said. 1:09:25.840 --> 1:09:28.840 They were able to return to twenty nineteen vacancy rates 1:09:28.840 --> 1:09:30.479 within two years after the pandemic. 1:09:31.280 --> 1:09:31.599 Yeah. 1:09:31.960 --> 1:09:35.640 Yeah, that was an announcement in came in summer of 1:09:35.640 --> 1:09:37.360 twenty twenty two, and so yeah, I mean they had 1:09:37.360 --> 1:09:39.320 been making slow progress. They did close a lot of 1:09:39.320 --> 1:09:41.960 their office locations. That was a big push in the 1:09:42.000 --> 1:09:44.880 post Newman era, so exit some of the leases. 1:09:44.960 --> 1:09:46.720 Okay, So so let me just make sure I get 1:09:46.720 --> 1:09:49.600 this stat right then, So that was the rate, that 1:09:49.880 --> 1:09:52.920 being the percentage of occupancy, So it wasn't on a 1:09:52.960 --> 1:09:55.679 basis of you know, total number of people who were there, 1:09:55.680 --> 1:09:57.160 because they actually had fewer. 1:09:56.880 --> 1:10:00.000 They reduced their space, right, Yeah, they reduced their spaces. 1:10:00.040 --> 1:10:02.519 So it's something like seventy two percent occupancy. And of 1:10:02.520 --> 1:10:04.439 course they've tweaked a little bit how that metric is 1:10:04.479 --> 1:10:06.439 measured over the years, but you know, they celebrated it 1:10:06.479 --> 1:10:10.040 at the time as a reasonable marker of you know, 1:10:10.120 --> 1:10:12.479 return to power, and I think that was reasonable. It 1:10:12.600 --> 1:10:14.439 just seems like they haven't been able to hold on 1:10:14.479 --> 1:10:17.719 to that. That number actually dropped in this quarter compared 1:10:17.720 --> 1:10:21.880 to the last quarter, and clearly they're projecting that things 1:10:21.920 --> 1:10:24.280 are not going to are probably not going to work 1:10:24.280 --> 1:10:24.680 out for them. 1:10:24.760 --> 1:10:27.080 It is kind of interesting, right in the uberization of 1:10:27.160 --> 1:10:30.120 the world, as we talk about of like sharing cars, 1:10:30.160 --> 1:10:33.080 sharing homes, airbnb, like all this stuff, like we're kind 1:10:33.120 --> 1:10:35.679 of cool about this, We're open to it. It does feel, 1:10:35.800 --> 1:10:38.400 especially in a post pandemic world, as you said earlier, 1:10:38.720 --> 1:10:42.480 that this would be the ideal model, right of companies. 1:10:42.520 --> 1:10:44.920 I've heard it from companies like post pandemic they're like, yeah, 1:10:44.920 --> 1:10:46.720 when we need some space, we just rent it, you 1:10:46.720 --> 1:10:48.559 know what I mean. When we need to bring employees together, 1:10:48.600 --> 1:10:51.080 we just rent it. Now, mind you, we're hearing more 1:10:51.080 --> 1:10:54.240 about people coming back to the office and so on 1:10:54.280 --> 1:10:56.360 and so forth. But I do wonder about kind of 1:10:56.360 --> 1:10:57.600 what's next for them. 1:10:58.360 --> 1:11:00.840 Yeah, I think it's a big question because it did 1:11:00.920 --> 1:11:04.519 seem like they were putting forth a pretty plausible story, 1:11:04.520 --> 1:11:08.240 which was in a time of uncertain working from home 1:11:08.320 --> 1:11:11.719 versus office and the time of hybrid workplace that employers 1:11:11.800 --> 1:11:14.040 might not want to sign ten year leases to have 1:11:14.080 --> 1:11:16.879 their own office space, but when instead turned to flexible 1:11:16.880 --> 1:11:20.200 office providers like we Work or like any of its rivals, 1:11:19.800 --> 1:11:23.920 and one would think that would make sense. You know, clearly, 1:11:23.920 --> 1:11:26.559 if they're making this disclosure, something is not working at 1:11:26.560 --> 1:11:30.320 We Work, and you know, it could just be that 1:11:30.360 --> 1:11:33.559 they haven't been able to stop the bleeding. They've just 1:11:33.640 --> 1:11:35.799 they've continued to lose money and that hasn't changed. 1:11:35.840 --> 1:11:38.720 All, Right, permanent CEO? Could that help something? Could that 1:11:38.840 --> 1:11:39.920 help help out the story? 1:11:40.360 --> 1:11:40.519 Right? 1:11:40.520 --> 1:11:43.840 They've also been looking for a CEO since May when 1:11:43.960 --> 1:11:47.080 Sandy Pathroni, who had come over to you know, sort 1:11:47.080 --> 1:11:50.080 of oversee this turnaround, left somewhat abruptly, you know, suddenly 1:11:50.160 --> 1:11:52.720 enough that they did not have a replacement in mind. 1:11:52.760 --> 1:11:55.920 So they've had an interan CEO. Their CFO then left 1:11:55.960 --> 1:11:58.519 a week after that. They actually had a big board 1:11:58.520 --> 1:12:01.920 member turnover in this on Tuesday, which they announced, you know, 1:12:01.960 --> 1:12:04.679 three board members tacking down and four new ones replacing them. 1:12:05.080 --> 1:12:07.920 There's tumult and I don't know what kind of person 1:12:07.960 --> 1:12:11.080 wants to become CEO of that company, but hopefully someone 1:12:11.120 --> 1:12:13.120 does and we can we can find out who that 1:12:13.200 --> 1:12:13.559 might be. 1:12:13.720 --> 1:12:16.920 So just thirty seconds left, Ellen, What's what's the future 1:12:16.960 --> 1:12:19.679 of the company if it does end up having issues? 1:12:19.760 --> 1:12:21.800 If you know, it could file for bankruptcy. That's what 1:12:21.800 --> 1:12:24.639 that means essentially, if it has trouble as an ongoing concern, 1:12:25.360 --> 1:12:27.920 what ends up happening with people who who who are 1:12:27.920 --> 1:12:29.240 in the offices? 1:12:30.320 --> 1:12:34.240 You know, I imagine that competitors are excited to see that 1:12:34.320 --> 1:12:37.360 maybe they might be able to benefit from this, either 1:12:37.360 --> 1:12:39.759 by trying to luwer customers over to their own space, 1:12:40.000 --> 1:12:42.600 or you know, maybe there's someone who might want to 1:12:42.640 --> 1:12:45.920 come in and take over individual locations. I think that 1:12:45.960 --> 1:12:48.320 remains to be seen, but certainly there are other people 1:12:48.360 --> 1:12:50.479 who are I'm sure waiting to see if there's something 1:12:50.520 --> 1:12:52.760 they can capitalize on if we were to ends up 1:12:52.760 --> 1:12:53.240 going under. 1:12:53.320 --> 1:12:55.840 It's another great business school case study. Like it's really 1:12:55.880 --> 1:12:59.200 just fascinating, Ellen Hewett. We always love talking with you. 1:12:59.320 --> 1:13:01.880 Thank you, Thank you. Start us reporter at Bloomberg News. 1:13:01.920 --> 1:13:04.680 Check her out at Ellen Hewitt on Twitter or x 1:13:04.720 --> 1:13:07.280 whatever you want to call it on zoom from San Francisco. 1:13:07.360 --> 1:13:09.720 I still can't figure it out. I just can't. This 1:13:09.760 --> 1:13:10.320 is Bloomberg. 1:13:16.920 --> 1:13:20.519 You're listening to the Bloomberg Business Week podcast. Catch us 1:13:20.560 --> 1:13:24.559 live weekday afternoons from three to six Easter on Bloomberg Radio, 1:13:24.760 --> 1:13:28.040 the Bloomberg Business app, and YouTube. You can also listen 1:13:28.160 --> 1:13:31.240 live on Amazon Alexa from our flagship New York station, 1:13:31.680 --> 1:13:34.479 Just say Alexa play Bloomberg eleven thirty. 1:13:36.080 --> 1:13:37.519 One of the things we talk a lot about here 1:13:37.520 --> 1:13:40.280 at Bloomberg, we've done some great reporting what goes on 1:13:40.320 --> 1:13:43.560 with female founded startups. No secret that they account for 1:13:43.640 --> 1:13:47.080 only a tiny, tiny portion of the venture capital that's 1:13:47.080 --> 1:13:49.519 deployed each year. So here's some numbers for you. In 1:13:49.560 --> 1:13:52.759 twenty twenty one, for instance, female founders secured only two 1:13:52.960 --> 1:13:55.160 percent of venture capital in the US. That's according to 1:13:55.200 --> 1:13:57.760 the research firm pitchbook that follows all this tim and 1:13:57.800 --> 1:13:58.080 that was a. 1:13:58.120 --> 1:14:01.080 Year that VC money really flowed. I mean twenty twenty one, 1:14:01.280 --> 1:14:03.680 those were the boom years. The last eighteen months have 1:14:03.720 --> 1:14:07.000 been a different story entirely. We've got with us right 1:14:07.040 --> 1:14:10.000 now Test name do hud Wala, founding partner of excel 1:14:10.120 --> 1:14:13.960 Star Ventures. The VC firm says it invests in quote 1:14:14.000 --> 1:14:17.800 clear disruptive technology. They've got a lot of medtech on there, 1:14:18.840 --> 1:14:20.960 really cool stuff and really cool companies that they've invested in. 1:14:21.000 --> 1:14:23.839 They're also passionate about funding women and minority led companies. 1:14:23.920 --> 1:14:26.840 Very pleased to have a test name with us this afternoon. 1:14:27.560 --> 1:14:30.120 So test name, give us an idea of what you've 1:14:30.120 --> 1:14:33.040 experienced and what you've experienced working as a VC, and 1:14:33.080 --> 1:14:35.760 also what you've experienced as far as the companies that 1:14:36.120 --> 1:14:39.439 you funded. Is this a is the problem? I kind 1:14:39.439 --> 1:14:40.680 of know the answer here, but I'm still going to 1:14:40.720 --> 1:14:43.719 ask this anyway. Is the problem that only two percent 1:14:43.720 --> 1:14:47.639 of the companies are actually founded by female founders? 1:14:48.840 --> 1:14:49.000 No? 1:14:49.080 --> 1:14:51.679 I mean I think that there it's a systemic problem, 1:14:51.720 --> 1:14:54.200 and I think that the issue is that it's an 1:14:54.240 --> 1:14:57.320 everybody problem. It's not just you know the funds that 1:14:57.320 --> 1:15:01.240 are focused on investing in women. Everybody needs to work 1:15:01.280 --> 1:15:05.040 at this problem. So for example, I know that in 1:15:05.520 --> 1:15:09.719 VC firms, only twelve percent of VC firms have women 1:15:09.880 --> 1:15:12.920 as decision makers, and sixty five percent of the VC 1:15:13.040 --> 1:15:16.120 firms still don't even have a single female partner, and 1:15:16.200 --> 1:15:19.439 females are noted to be more likely to invest in 1:15:19.520 --> 1:15:22.640 female led companies. So I think that itself, we just 1:15:22.680 --> 1:15:27.440 don't have enough women investors in decision making roles investing 1:15:27.479 --> 1:15:30.760 in women. So I that's one of the issues, Testy. 1:15:30.840 --> 1:15:32.080 I want to jump in enough there for a moment, 1:15:32.120 --> 1:15:33.920 because I remember Bloomberg did a story I think it 1:15:33.960 --> 1:15:36.719 was out during the pandemic, and it was even about 1:15:37.880 --> 1:15:43.040 female venture capitalists were less inclined to even invest in 1:15:43.080 --> 1:15:46.320 female founded ventures and whether it was pressure within a 1:15:46.360 --> 1:15:51.000 firm or what have you. It's just like everyone stays away. 1:15:51.600 --> 1:15:54.439 Help me out. So go ahead, continue with your reasons why, 1:15:54.439 --> 1:15:56.120 because it's just mind blowing. 1:15:57.080 --> 1:16:00.320 So it's I think there's a little bit, Well, you know, 1:16:00.400 --> 1:16:04.320 this person is experienced entrepreneur, they've had several exits. Well, 1:16:04.360 --> 1:16:08.120 if you keep investing in just experienced entrepreneurs that have 1:16:08.200 --> 1:16:10.719 had prior exits, and you're probably going to keep investing 1:16:10.720 --> 1:16:14.160 in males because a lot of female led companies are 1:16:14.320 --> 1:16:16.760 first time entrepreneurs, and you have to be willing to 1:16:16.760 --> 1:16:19.800 take a risk on a first time entrepreneur, and it 1:16:19.840 --> 1:16:21.920 may appear more risky. But I also think some of 1:16:21.960 --> 1:16:24.480 it has to do with the way we ask questions. 1:16:24.760 --> 1:16:27.360 There's been a lot of research that says that all 1:16:27.920 --> 1:16:32.320 investors ask women more sort of risk mitigation type questions, 1:16:32.360 --> 1:16:35.840 and we ask men growth mindset questions. And so if 1:16:35.840 --> 1:16:38.200 you're going to change the way you ask questions to 1:16:38.240 --> 1:16:41.720 your entrepreneurs, you're going to have a different outcome in 1:16:41.800 --> 1:16:44.599 the way you perceive the company. So, for example, at 1:16:44.640 --> 1:16:49.640 excel Start, we have a really structured way we do diligence, 1:16:49.800 --> 1:16:54.080 and so we make sure that we're asking same type 1:16:54.120 --> 1:16:56.960 of questions to all of our entrepreneurs. We have a 1:16:57.040 --> 1:16:59.800 quantitative and a qualitative way that we do it. We 1:16:59.800 --> 1:17:03.519 have matrix that we fill out and a really robust report. 1:17:03.600 --> 1:17:05.400 But if you're sort of just flying by the cede 1:17:05.439 --> 1:17:08.680 or cuffs, then your own subconscious biases are going to 1:17:08.720 --> 1:17:13.439 determine what type of questions you're asking, and that changes 1:17:13.479 --> 1:17:16.720 the outcome of how you perceive the company and the 1:17:16.800 --> 1:17:19.360 opportunity that it may be that it may have. 1:17:19.840 --> 1:17:22.240 What do the data show as far as returns and 1:17:22.280 --> 1:17:23.320 who's leading companies? 1:17:24.760 --> 1:17:25.720 So I mean, if you. 1:17:25.720 --> 1:17:29.599 Think about the data right now, I think there's only 1:17:29.640 --> 1:17:32.519 been twenty women who have ever led a company to 1:17:32.560 --> 1:17:34.880 an IPO. And I don't think that's because women don't 1:17:34.920 --> 1:17:37.240 want to lead companies to IPOs. I think that there's 1:17:37.280 --> 1:17:42.520 a bias. One of our companies just recently was determining 1:17:42.560 --> 1:17:45.160 whether they wanted to hire a certain executive and not 1:17:45.439 --> 1:17:50.240 the CEO role, but in a very senior important role, 1:17:50.840 --> 1:17:53.080 and there was some question around whether or not that 1:17:53.120 --> 1:17:56.559 women would be able to potentially in a few years 1:17:56.640 --> 1:18:01.920 be a key management director while leading the company to 1:18:01.960 --> 1:18:04.479 an IPO, and a few not just myself, but another 1:18:04.600 --> 1:18:08.120 male board member spoke up and said, well, she we 1:18:08.200 --> 1:18:11.000 haven't even hired her. Let's get her in the door, 1:18:11.080 --> 1:18:13.519 let's see how she does, and we'll make a decision 1:18:13.520 --> 1:18:16.240 when the time comes whether or not she'll be suited 1:18:16.280 --> 1:18:19.640 to be in the role during an IPO. So there 1:18:19.640 --> 1:18:22.000 are some assumptions that are made before women can even 1:18:22.000 --> 1:18:25.400 get into the door and make an impact in the company. 1:18:26.040 --> 1:18:31.719 So Devil's advocate a little bit, because I do believe, 1:18:32.640 --> 1:18:36.840 especially in a capitalistic society, that money talks. And if 1:18:37.160 --> 1:18:40.200 there's a good business, I don't care if a monkey 1:18:40.320 --> 1:18:42.439 or a frog is running it, like people are going 1:18:42.479 --> 1:18:45.920 to invest in it. Is there something else that's missing 1:18:45.960 --> 1:18:49.120 that just I mean, look at the creator of spanks. 1:18:49.240 --> 1:18:52.080 She created a billion dollar business like people women create, 1:18:52.720 --> 1:18:55.400 you know, Kardashians like whatever, go everywhere you want, like 1:18:55.560 --> 1:19:01.520 people create billion dollar Oprah, like people create. Women specifically 1:19:01.600 --> 1:19:05.360 create successful businesses. But I'm just I'm wondering if there's 1:19:05.400 --> 1:19:11.439 something else missing in the trajectory that doesn't allow women 1:19:11.520 --> 1:19:13.760 to take their ideas and really run with it or 1:19:13.760 --> 1:19:19.360 attract again the investors that ultimately create a female run 1:19:19.479 --> 1:19:23.800 Google alphabet, a female run Tesla. You know what I mean? 1:19:24.960 --> 1:19:27.720 Well, I think that I do think that there are 1:19:27.800 --> 1:19:30.720 a female I think a lot of females. When you 1:19:30.760 --> 1:19:33.000 think about entrepreneurs, a lot of them are thinking about 1:19:33.040 --> 1:19:35.400 what is in their realm of expertise or what have 1:19:35.439 --> 1:19:39.000 they experience in life that drives them to found a 1:19:39.000 --> 1:19:44.120 certain company. Right, So, if a female is finding founding 1:19:44.200 --> 1:19:47.679 a company based on the female experience, and she's pitching 1:19:47.760 --> 1:19:52.200 it to male venture partners, there is a possibility that 1:19:52.280 --> 1:19:56.439 isn't going to resonate, and we have to look we 1:19:56.520 --> 1:19:58.400 have to look at the reality that we're faced with. 1:19:58.600 --> 1:20:01.040 If you're if the decision are going to be men 1:20:01.080 --> 1:20:03.559 and they're the ones who are you know, owning the 1:20:03.640 --> 1:20:07.240 lion's share of investment dollars, then you have to I'm 1:20:07.280 --> 1:20:09.920 not telling you to change your idea. What I'm suggesting 1:20:10.040 --> 1:20:12.680 is that you people need to be aware. Women need 1:20:12.720 --> 1:20:15.000 to be aware of these biases and then adjust their 1:20:15.040 --> 1:20:19.760 pitch such that it may still be a wonderful opportunity 1:20:20.080 --> 1:20:23.160 based on the male experience, but they need to make 1:20:23.200 --> 1:20:26.480 sure that they present it in a way that resonates 1:20:26.479 --> 1:20:30.440 with their male counterpart. Not everything about the female experience 1:20:30.520 --> 1:20:33.120 will resonate with males, and so you have to perhaps 1:20:33.200 --> 1:20:36.160 adjust your pitch. Think about how you know, how are 1:20:36.200 --> 1:20:39.439 you doing the market sizing, what are you talking about exits? 1:20:39.479 --> 1:20:42.479 Do you have enough exit potentials? A lot of times, 1:20:42.520 --> 1:20:45.160 for example, if in a women's health company, whether we 1:20:45.400 --> 1:20:48.759 like this or not, in medtech, there aren't that many 1:20:48.960 --> 1:20:53.280 large medtech players that have sizeable women's health divisions, and 1:20:53.320 --> 1:20:56.360 so if you have a women's health med tech company. 1:20:56.479 --> 1:21:01.040 But you don't have perhaps a very distinct way of 1:21:01.120 --> 1:21:05.599 exiting to a sizable acquir that shows an acquisitive nature. 1:21:05.960 --> 1:21:08.360 An investor is going to push back on that, so 1:21:08.400 --> 1:21:10.040 I go ahead. 1:21:10.160 --> 1:21:12.559 No no, no, no, no no no, you're saying really 1:21:12.600 --> 1:21:15.280 smart things. I guess that I'm just thinking again, I'm 1:21:15.320 --> 1:21:18.519 playing Devil's advocate. Like if Mark Zuckerberg had been Maria 1:21:18.640 --> 1:21:22.200 Zuckerberg and she created Facebook, would would she have gotten 1:21:22.240 --> 1:21:23.880 the money to create Facebook? 1:21:23.880 --> 1:21:24.040 Now? 1:21:24.160 --> 1:21:26.840 Meta? 1:21:26.960 --> 1:21:29.120 I don't know, because I do see some of our 1:21:29.120 --> 1:21:33.720 female entrepreneurs and they are fab many of them. I mean, 1:21:33.760 --> 1:21:36.479 some of them have issues just like our male entrepreneurs do. 1:21:37.000 --> 1:21:40.400 But I just find that females also don't have as 1:21:40.520 --> 1:21:42.880 much of a network. I don't know if it's the 1:21:43.080 --> 1:21:46.839 sort of that old boys network that continues to prevail, 1:21:47.040 --> 1:21:50.400 but they just don't seem to know enough investors. And 1:21:50.479 --> 1:21:53.120 I also find them that they're not as assertive with 1:21:53.160 --> 1:21:58.080 their investors and asking for introductions. So only my male 1:21:59.200 --> 1:22:01.080 for example, when we're sitting on the board and we're 1:22:01.120 --> 1:22:04.120 sort of well, I have this company and we're experiencing 1:22:04.280 --> 1:22:06.800 X y Z, this could be helpful. These are why 1:22:06.840 --> 1:22:10.200 my thoughts are this and I'm giving advice to a company. 1:22:10.240 --> 1:22:12.679 Most of the time, my male CEOs will say, hey, 1:22:12.800 --> 1:22:14.720 can you introduce me to that CEO so I can 1:22:14.800 --> 1:22:16.720 learn a little bit more about you know, what you're 1:22:16.760 --> 1:22:19.200 talking about, so I can really understand, whether it be 1:22:19.240 --> 1:22:24.200 clinical design or you know, acquiring customers something another company. 1:22:24.680 --> 1:22:28.640 It's very rare that a female will proactively ask me. 1:22:29.000 --> 1:22:32.960 It happens, but a will proactively ask me to make 1:22:33.040 --> 1:22:36.080 introductions for them. I have to offer. I will go 1:22:36.200 --> 1:22:38.320 back and look at my rolodex and say who can 1:22:38.360 --> 1:22:41.439 I introduce you to? But they will not proactively ask 1:22:41.560 --> 1:22:45.840 me as an investor to make introductions for them, which 1:22:47.479 --> 1:22:50.519 I have some but that makes a big difference. 1:22:50.520 --> 1:22:52.040 We're going to let the guy wait. The guy in 1:22:52.080 --> 1:22:53.599 the room want to say, I just want to ask 1:22:53.640 --> 1:22:54.639 a question quick. 1:22:54.640 --> 1:22:56.880 I just want to ask a question. Okay, just you 1:22:56.920 --> 1:22:59.519 know one phrase. The most exciting area you're investing in 1:22:59.600 --> 1:22:59.920 right now? 1:23:01.000 --> 1:23:01.200 Ooh? 1:23:02.000 --> 1:23:08.920 Personalizable tailored medtech companies that function very much like therapeutics, 1:23:08.960 --> 1:23:14.000 and their functionality is able to basically shift and conform 1:23:14.160 --> 1:23:19.040 to the anatomy of our human bodies and able to 1:23:19.200 --> 1:23:22.760 really create therapy in a way that only therapeutics have 1:23:22.800 --> 1:23:23.960 been able to do in the past. 1:23:24.040 --> 1:23:26.479 I have to say, I have a niece's a doctor 1:23:26.720 --> 1:23:30.360 and she has a good friend that has a doctor 1:23:30.400 --> 1:23:33.760 to and they say, it's amazing, like the differences of 1:23:33.920 --> 1:23:41.000 things that aren't done for women in healthcare and medical devices. Well, 1:23:41.120 --> 1:23:44.120 I'll talk to you about it, but it's just the 1:23:44.240 --> 1:23:48.599 perspective and things that are covered by insurance for men 1:23:48.840 --> 1:23:53.600 versus women. And just Matt talked about it with breastfeeding 1:23:54.800 --> 1:23:58.920 for his wife specifically, and just things you know that 1:23:59.000 --> 1:24:01.719 come problems and stuff that you know there isn't research 1:24:01.800 --> 1:24:05.599 followed for women. So you make such a valid point, 1:24:05.640 --> 1:24:07.639 and you think about the in roads. And I also 1:24:07.680 --> 1:24:10.280 think about if this money isn't going to these companies 1:24:10.360 --> 1:24:13.479 women I was starting companies like you, think about if 1:24:13.479 --> 1:24:15.439 they were allowed to run with it, what kind of 1:24:15.439 --> 1:24:18.439 businesses they would create, What that would mean for you know, 1:24:18.880 --> 1:24:24.040 public companies, market caps, economic momentum, right, job hiring. How 1:24:24.120 --> 1:24:25.679 much we are ignoring at this point. 1:24:26.439 --> 1:24:28.880 There is actually a company that I know that would 1:24:28.920 --> 1:24:32.640 have been a fabulous company, would have changed the trajectory 1:24:32.680 --> 1:24:35.479 of a disease that we all struggle with as women 1:24:35.920 --> 1:24:40.759 and Unfortunately, because the Acquirer spun off their women's health division, 1:24:41.320 --> 1:24:44.680 the technology was shelved even after they paid a lot 1:24:44.680 --> 1:24:47.160 of money for it and never made it to market. 1:24:47.439 --> 1:24:48.320 It's really sad. 1:24:49.240 --> 1:24:53.800 That's amazing. That's amazing. Hey, listen, incredible stuff. Come back soon. 1:24:53.880 --> 1:24:56.160 We'd love to continue this conversation with you. I really 1:24:56.160 --> 1:24:58.280 feel like this was a very productive one because I 1:24:58.280 --> 1:25:00.679 feel like it's a topic we've talked about for years, 1:25:01.439 --> 1:25:03.200 but you really got to some of the core of 1:25:03.640 --> 1:25:08.880 the problems. Tousney Dohadwala, she's founding a partner at Excelstar Ventures, 1:25:09.200 --> 1:25:11.479 joining us on zoom from Boston. Really cool conversation. 1:25:11.560 --> 1:25:13.240 Yeah, a lot of cool companies they've invested in note 1:25:13.240 --> 1:25:15.160 but Data, Augmenis and more. This is Bloomberg. 1:25:15.479 --> 1:25:19.080 You're listening to the Bloomberg Business Week podcast. Catch us 1:25:19.080 --> 1:25:22.439 live weekday afternoons from three to six Eastern Listen on 1:25:22.520 --> 1:25:26.559 Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App, 1:25:26.840 --> 1:25:29.120 or watch us live on YouTube. 1:25:29.880 --> 1:25:32.320 So you might recall our next guests, who we introduced 1:25:32.320 --> 1:25:34.920 to you just a few months ago, two small business 1:25:34.960 --> 1:25:39.000 owners with interesting backstories, Cheri and Tracy Sifax, who also 1:25:39.120 --> 1:25:41.280 happened to be husband and wife. They co founded the 1:25:41.280 --> 1:25:43.320 online dating service Just the Facts. 1:25:43.640 --> 1:25:45.960 It's not just online dating though that they're doing. They're 1:25:45.960 --> 1:25:49.040 also expanding their real estate portfolio. Most recently, the pair 1:25:49.160 --> 1:25:52.920 entered the hospitality sector, purchasing Booker's Restaurant in West Philadelphia 1:25:53.000 --> 1:25:55.720 earlier this year. Bloomberg News Deputy team leader for US 1:25:55.760 --> 1:25:58.599 Equities Jess Menton and I asked Shari and Tracy White, 1:25:58.640 --> 1:26:00.760 now is the right time to take a chance on 1:26:00.800 --> 1:26:02.360 a restaurant the restaurant space. 1:26:02.439 --> 1:26:05.599 But this is going great. We are selled up twenty 1:26:05.640 --> 1:26:08.559 six percent over the first quarter, and we are excited 1:26:08.600 --> 1:26:11.000 to be in this position. As you know, we kept 1:26:11.000 --> 1:26:13.400 the majority of the staff, maybe seventy five percent of 1:26:13.439 --> 1:26:16.160 the staff we kept there, so we didn't change much, 1:26:16.200 --> 1:26:19.720 but we elevated the menu, added some special drinks, and 1:26:19.880 --> 1:26:21.040 it's been a real great ride. 1:26:21.240 --> 1:26:23.760 It's an interesting dynamic because, especially coming out of the 1:26:23.800 --> 1:26:27.120 pandemic right tim when you think about how challenging it's 1:26:27.160 --> 1:26:29.479 been for specific restaurants. 1:26:29.120 --> 1:26:31.720 Exactly where my head was going to go, Yeah, Like, 1:26:31.800 --> 1:26:34.040 if you're going to buy a restaurant twenty twenty three, 1:26:34.080 --> 1:26:36.800 when you're coming out of a pandemic, tracy is not 1:26:36.840 --> 1:26:39.160 really the time to do it. Can't find labor, Yes, 1:26:39.320 --> 1:26:43.000 costs are going through the roof, food costs are going up, 1:26:43.200 --> 1:26:44.960 and then you have this whole pandemic thing that you 1:26:44.960 --> 1:26:47.799 got to worry about. What's the uh, you know, What's 1:26:48.000 --> 1:26:49.200 why take a risk like that? 1:26:49.240 --> 1:26:50.759 Well, we felt we looked at the model. 1:26:51.320 --> 1:26:53.519 The previous on Asaba had built a great model over 1:26:53.640 --> 1:26:55.680 six years, so she had built the sess. It was 1:26:55.720 --> 1:26:58.880 already pretty much there when we inherited the restaurant, and 1:26:58.920 --> 1:27:01.479 we just really felt with our profile and our social 1:27:01.520 --> 1:27:04.200 media presence that we can elevate it and market it 1:27:04.240 --> 1:27:07.800 in a whole different light. Bookers is located not too 1:27:07.840 --> 1:27:11.160 far from the colleges, the hospitals, so it's in a 1:27:11.240 --> 1:27:14.719 prime area for that type of growth. So we really 1:27:14.720 --> 1:27:19.200 felt that we could really enhance Bookers by just our presence. 1:27:19.400 --> 1:27:22.040 I'm curious what y'all are seeing when it comes to 1:27:22.280 --> 1:27:25.000 because Tim brought up labor and obviously when you think 1:27:25.000 --> 1:27:27.840 about inflation issues with what you're seeing, what do you 1:27:27.880 --> 1:27:30.320 think this tells us about the direction of the economy. 1:27:30.880 --> 1:27:32.679 Well, a couple of things. I think the economy is 1:27:32.960 --> 1:27:35.719 doing better than initially when we started talking about recession 1:27:35.760 --> 1:27:37.720 and everyone was concerned and worried, and even we were 1:27:37.720 --> 1:27:39.960 because we were in the middle of negotiations during that time. 1:27:40.360 --> 1:27:43.919 We felt good about our business evaluation and the ability 1:27:43.920 --> 1:27:46.120 to retain employees. The really great thing about being in 1:27:46.160 --> 1:27:50.280 West Philadelphia and Philadelphia period is very neighborhood centric. So 1:27:50.360 --> 1:27:52.480 a lot of our employees come right from the neighborhood. 1:27:52.520 --> 1:27:54.639 They can walk to work. So it's rare that you're 1:27:54.680 --> 1:27:56.240 able to walk to work and not have to work 1:27:56.240 --> 1:27:58.600 in center city and still be able to make a 1:27:58.600 --> 1:28:01.920 really good wage. Those things helped us retain and have 1:28:02.280 --> 1:28:02.960 helped us grow. 1:28:03.080 --> 1:28:05.680 How challenging is that from a business perspective because I 1:28:05.680 --> 1:28:07.800 feel like at Bloomberg Great Tim, we're always talking about, oh, 1:28:07.840 --> 1:28:10.320 the employment costs index, and it's really challenging for businesses 1:28:10.360 --> 1:28:12.000 as far as to keep up with that type of 1:28:12.040 --> 1:28:15.600 wage growth. From your perspective and what you hear anecdotally 1:28:15.840 --> 1:28:17.960 from your employees, what is that challenge like? 1:28:18.120 --> 1:28:20.240 Yeah, So what we think about is every dollar that 1:28:20.280 --> 1:28:21.920 we spend, we have to figure out what that return 1:28:21.920 --> 1:28:23.639 on investment is. So we have to look at every 1:28:23.640 --> 1:28:26.360 single line item. We've done well with having a fractional 1:28:26.400 --> 1:28:29.320 CFO that really helps us look at not just the 1:28:29.439 --> 1:28:30.400 food and things like that. 1:28:30.439 --> 1:28:33.120 We adusait explain what afractional CFO is. I mean, it 1:28:33.200 --> 1:28:36.960 sounds like it's pretty self explanatory, but so differently saying 1:28:37.000 --> 1:28:38.080 a part time CEO. 1:28:38.200 --> 1:28:41.840 Basically a part time CFO. Our accountant has that service 1:28:41.840 --> 1:28:43.559 and they offer that. And I think sometimes when we 1:28:43.600 --> 1:28:45.880 go wrong in business, especially at entrepreneurs, is that we 1:28:45.920 --> 1:28:47.919 try to do it ourselves. We try to wing at ourselves, 1:28:48.160 --> 1:28:51.280 and having that outside help really helps us look at 1:28:51.320 --> 1:28:54.160 every single line item so we know how what percentage 1:28:54.160 --> 1:28:56.080 we want our labor to be. We know what percentage 1:28:56.080 --> 1:28:58.120 we want our expenses to be as far as food, 1:28:58.200 --> 1:28:59.880 so we have to look at those things. Obviously, we 1:28:59.880 --> 1:29:02.479 have to look at everything and make adjustments for inflation 1:29:02.720 --> 1:29:05.280 and look at wind eggs are up, wind, butters up, 1:29:05.280 --> 1:29:07.680 you know, those types of things to adjust pricing accordingly. 1:29:07.840 --> 1:29:10.800 It's funny because McDonald's has this sort of fry indicator 1:29:10.840 --> 1:29:12.920 as far as how many people are adding those on 1:29:13.000 --> 1:29:14.879 to where they can tell this is what an indicator 1:29:14.920 --> 1:29:16.880 means for the economy. I'm curious if you have any 1:29:16.920 --> 1:29:18.720 sort of way to gauge. As far as when it 1:29:18.760 --> 1:29:21.479 comes to spending in the consumer, well, at. 1:29:21.280 --> 1:29:23.719 This point, we're what five four months, and so everything 1:29:23.800 --> 1:29:25.760 is still a first for us. But we're definitely looking 1:29:25.800 --> 1:29:28.439 at the market. We definitely look at our sales versus 1:29:28.479 --> 1:29:30.600 last year. We look at how many seats, not just 1:29:31.280 --> 1:29:33.400 what the revenue number is up, but actually how many 1:29:33.400 --> 1:29:36.439 people are coming into the restaurant. So we're assessing all 1:29:36.439 --> 1:29:38.760 that data and that that helps us with our forecasting 1:29:39.280 --> 1:29:41.960 and it helps us build out knowing how much we 1:29:42.040 --> 1:29:44.759 need to make sure staff is proper we're properly staffed, 1:29:44.760 --> 1:29:46.800 and that we have enough inventory so that we have 1:29:47.160 --> 1:29:49.160 we're able to serve our customers with our menus. 1:29:49.320 --> 1:29:51.439 Hey, Tracy, give us an idea of how you think 1:29:51.479 --> 1:29:54.040 the economy is based not just on the restaurant, but 1:29:54.120 --> 1:29:57.160 the work that you've done in real estate development, what 1:29:57.200 --> 1:29:58.880 you're seeing in your other businesses right now. 1:29:59.000 --> 1:29:59.320 Yeah. 1:29:59.360 --> 1:30:02.280 Well, I always believed in real estate as someone who 1:30:02.439 --> 1:30:05.720 started my first investments in early two thousand. Even when 1:30:05.720 --> 1:30:08.640 the market crash in two thousand and eight and I 1:30:08.720 --> 1:30:11.000 lost millions of dollars in the real estate crash, it 1:30:11.080 --> 1:30:13.360 was still my saving grace as I came out of 1:30:13.400 --> 1:30:16.080 that that allowed me to continue to do business and 1:30:16.120 --> 1:30:19.599 actually eventually buys Booker. So I'm always big on economy. 1:30:19.640 --> 1:30:22.680 I really believe in us. I believe that what we 1:30:22.720 --> 1:30:25.599 can do as a husband and wife team that gives 1:30:25.640 --> 1:30:27.720 me a bright look on what the economy can bring. 1:30:27.760 --> 1:30:30.800 So I really believe that our combination has really been 1:30:30.840 --> 1:30:32.760 the proven recipe. 1:30:32.800 --> 1:30:35.800 It's less about what's happening externally for you, yes, and 1:30:35.880 --> 1:30:37.800 more about what the two of you can sort of 1:30:37.800 --> 1:30:40.559 like what I'm hearing from you is it doesn't matter 1:30:40.560 --> 1:30:42.960 how the economy is because you guys can weather it. 1:30:43.080 --> 1:30:43.240 Oh. 1:30:43.280 --> 1:30:43.880 Absolutely. 1:30:44.240 --> 1:30:47.160 I'm thirty years as being a serial entrepreneur, so I've 1:30:47.240 --> 1:30:49.879 seen the highs and the lows. I really have felt them. 1:30:50.400 --> 1:30:52.919 So really believe that even when we have a bad economy. 1:30:52.960 --> 1:30:56.280 I think good business, good customer sells in any economy. 1:30:56.360 --> 1:30:57.720 But do we have a bad economy right now? 1:30:57.800 --> 1:31:00.040 I don't believe, so, I don't believe so. 1:31:00.120 --> 1:31:03.040 Yeah, And real estate has always been my anchor as well, 1:31:03.080 --> 1:31:06.439 so when we put it all together, that really gave 1:31:06.520 --> 1:31:08.519 us leverage to do a lot of other things. So 1:31:08.680 --> 1:31:11.559 real estate does always tend to be that foundation that 1:31:11.600 --> 1:31:13.240 if you have that and you're able to get in 1:31:13.960 --> 1:31:17.240 on some really good opportunities that that propels you and 1:31:17.280 --> 1:31:19.760 can't propel you to other things, and you always can 1:31:19.880 --> 1:31:20.400 leverage it. 1:31:20.680 --> 1:31:22.559 Do you see any sort of red flags brewing at 1:31:22.600 --> 1:31:24.640 all when it comes to the real estate space? We 1:31:24.680 --> 1:31:27.160 always talk so much about when it comes to commercial 1:31:27.200 --> 1:31:29.800 real estate, But are there things beyond that type of 1:31:29.840 --> 1:31:32.600 area that you think you're a little weary about right now? 1:31:32.640 --> 1:31:34.720 Yeah, commercial real estate. Me and my wife, we was 1:31:34.800 --> 1:31:37.639 just talking about. We visit a lot of malls and 1:31:37.680 --> 1:31:39.600 we were just visiting the mall and some of the 1:31:39.640 --> 1:31:42.840 malls that we've been visited as we've been shopping, that's 1:31:42.880 --> 1:31:46.080 been pretty much non existent when it comes to customers 1:31:46.120 --> 1:31:48.519 inside stores like they used to be. So it's something 1:31:48.600 --> 1:31:51.240 that we definitely noticed in the commercial space. 1:31:51.520 --> 1:31:52.840 Is that something that would give you pause and you 1:31:52.880 --> 1:31:53.880 wouldn't want to go into that. 1:31:53.960 --> 1:31:58.759 I wouldn't want to open up a restaurant on the mall, Right, That's. 1:31:58.560 --> 1:32:01.840 Where I'm headed with that, And I don't know, we 1:32:01.880 --> 1:32:04.600 wouldn't have probably purchased the restaurant without being able to 1:32:04.600 --> 1:32:06.960 purchase the real estate. So we purchased the commercial space 1:32:07.160 --> 1:32:10.000 six apartments and things like that because it gives us 1:32:10.000 --> 1:32:12.679 so many more opportunities in the event that anything happens 1:32:12.720 --> 1:32:13.280 with the restaurant. 1:32:13.400 --> 1:32:16.400 What are you seeing the on the landlord tenants side? 1:32:16.439 --> 1:32:17.920 What are you seeing with the tenants right now? 1:32:18.000 --> 1:32:19.800 Yeah, so far, attendants have been great. We've been really, 1:32:19.840 --> 1:32:22.519 really fortunate. We believe that we offer a good product 1:32:22.920 --> 1:32:25.479 and that they acquiesce and they do their part of 1:32:25.520 --> 1:32:28.400 it too. So we're pretty accessible, We're pretty available, and 1:32:28.439 --> 1:32:30.759 we just haven't had any tenant landlord issues. 1:32:30.920 --> 1:32:33.280 No, but we like to talk to landlords too because 1:32:33.360 --> 1:32:36.160 they start saying, okay, well, late rents are a normal, 1:32:36.240 --> 1:32:38.080 normal part of being a landlord, especially if you have 1:32:38.080 --> 1:32:40.720 a lot of tenants. Absolutely, are we seeing more late 1:32:40.760 --> 1:32:42.200 rents now? Are we seeing people? 1:32:42.439 --> 1:32:45.559 You know? Pretty fortunate through the pandemic. We had two 1:32:45.680 --> 1:32:48.479 people that kind of took advantage of not paying and 1:32:48.520 --> 1:32:53.200 that's of what twenty sumidd tenants that was less than 1:32:53.240 --> 1:32:56.280 ten percent. Like, we were pretty fortunate. I think, you know, 1:32:56.760 --> 1:32:59.360 the beauty of Tracy being a developer. We keep our 1:32:59.360 --> 1:33:02.120 properties really well and things like that, so you have 1:33:02.200 --> 1:33:04.240 a good thing kind of why you know, mess it 1:33:04.280 --> 1:33:07.639 up when you think of certain urban communities and landlarns 1:33:07.640 --> 1:33:11.679 that are not as invested in your quality of life. 1:33:11.800 --> 1:33:14.760 So to Tracey's point about service and customer service, we 1:33:14.920 --> 1:33:18.320 just live the model up, provide a good product, and 1:33:18.360 --> 1:33:19.479 we'll get a good result. 1:33:19.600 --> 1:33:21.400 Do you guys do the day to day with that too, 1:33:22.240 --> 1:33:23.960 meaning do day to day work on that? Or do 1:33:24.000 --> 1:33:25.080 you have a management company? 1:33:25.080 --> 1:33:27.800 We have someone that helps us manage the overall. Yeah, 1:33:27.880 --> 1:33:30.920 but Tracy's able to assess whatever needs to be done 1:33:31.040 --> 1:33:32.599 and is able to, you know, get a team out 1:33:32.600 --> 1:33:33.559 there and take care of things. 1:33:33.840 --> 1:33:35.400 We only have about a minute left, but I have 1:33:35.479 --> 1:33:38.400 to ask about also your dating coaching business. You both 1:33:38.439 --> 1:33:40.840 met during the height of the pandemic virtually, so tell 1:33:40.880 --> 1:33:42.799 us a little bit quickly about your dating business. 1:33:42.960 --> 1:33:43.200 Yeah. 1:33:43.280 --> 1:33:45.559 So, I don't have as much time for it as 1:33:45.560 --> 1:33:48.479 I used to because of the restaurant, however, and it's 1:33:48.479 --> 1:33:50.160 shifted a little bit because it used to be like 1:33:50.200 --> 1:33:52.559 how I attracted my husband and all the positive things 1:33:52.600 --> 1:33:53.800 about that, and now is like how are me and 1:33:53.800 --> 1:33:55.880 my husband really doing business and day to day? But 1:33:56.120 --> 1:33:59.679 ultimately the messages, you know, fall in love with yourself, 1:33:59.680 --> 1:34:01.680 make sure you understand and know what you want. I 1:34:01.720 --> 1:34:05.200 love that the out of the relationship, do you Yeah, 1:34:05.240 --> 1:34:07.960 and then the thing that you want will will come 1:34:08.000 --> 1:34:16.200 and find you. Basically, do you have begtten the results 1:34:16.200 --> 1:34:17.920 you're looking for? You may want to adjust that, yes, 1:34:18.439 --> 1:34:19.559 because that's okay too. 1:34:20.080 --> 1:34:20.600 I love that. 1:34:20.960 --> 1:34:25.240 A great little lotto there. Well, Seri and Tracy Sifax. 1:34:25.280 --> 1:34:28.360 Great to have you both joining Tim Stenovic and myself 1:34:28.400 --> 1:34:31.080 here in the Bloomberg Interactive Brokers studio, who are the 1:34:31.080 --> 1:34:33.160 founders of just the facts, but then also they have 1:34:33.200 --> 1:34:36.240 all of these different small business entrepreneur type areas like 1:34:36.240 --> 1:34:38.280 we were just talking about with Booker's restaurant and bar. 1:34:38.400 --> 1:34:39.760 Oh, don't forget Sure's book too. 1:34:40.160 --> 1:34:42.479 Oh yes, and of course we have to talk about 1:34:42.520 --> 1:34:44.880 what's happening with her book as well with that, so 1:34:44.920 --> 1:34:47.439 people should check it out as far as second act, 1:34:47.520 --> 1:34:50.479 living boldly and abundantly at every age. 1:34:50.840 --> 1:34:56.280 This is the Bloomberg Business Week podcastle Spotify and anywhere 1:34:56.280 --> 1:35:00.240 else you get your podcast. Listen live weekday afternoons from 1:35:00.280 --> 1:35:04.280 three to six Eastern on Bloomberg dot Com, the iHeartRadio app, 1:35:04.360 --> 1:35:06.960 tune In, and the Bloomberg Business App. You can also 1:35:07.040 --> 1:35:10.439 watch us live every weekday on YouTube and always on 1:35:10.479 --> 1:35:11.559 the Bloomberg, Jermal