WEBVTT - Bloomberg Businessweek Weekend - May 1st, 2020 0:00:02.520 --> 0:00:06.200 This is Bloomberg Business Week from Bloomberg Radio. Hi, I'm 0:00:06.280 --> 0:00:08.880 Jason Kelly and I'm Carol Masser. Welcome to the weekend 0:00:09.000 --> 0:00:11.520 edition of Bloomberg Business Week. Over the next couple of hours, 0:00:11.520 --> 0:00:13.080 we're going to bring you some of the most important 0:00:13.080 --> 0:00:16.680 and informative coronavirus conversations that we had this week on 0:00:16.720 --> 0:00:19.640 our daily radio show. And Jason, it was week seven 0:00:19.680 --> 0:00:22.560 again for most of us working from home this week. 0:00:22.600 --> 0:00:24.439 I feel like some of the things that we focused 0:00:24.440 --> 0:00:27.280 on was certainly continued to on the energy market, we'll 0:00:27.280 --> 0:00:29.720 get to that in just a moment, but also earnings 0:00:29.720 --> 0:00:34.640 and expectations about life after COVID nineteen dominated the Bloomberg 0:00:34.680 --> 0:00:37.320 and our reporting once again and really our interviews, and 0:00:37.360 --> 0:00:40.240 I feel like we continue to talk about life after 0:00:40.280 --> 0:00:42.560 the virus that continues to be a big question, whether 0:00:42.600 --> 0:00:47.600 it's the auto industry, education, hotels, restaurants and entertainment productions 0:00:47.840 --> 0:00:50.040 and so how do we tackle all that. We go 0:00:50.240 --> 0:00:52.680 to people in the know, We go to people who 0:00:52.760 --> 0:00:55.920 are actually on the front lines as we're making these decisions, 0:00:55.920 --> 0:00:58.720 making these plan We talked to CEO s, we talked 0:00:58.720 --> 0:01:01.360 to investors as we offered do this is after all Bloomberg, 0:01:01.400 --> 0:01:04.639 but even a chef, a top chef out there about 0:01:04.680 --> 0:01:07.320 how they're handling this and as you say, not just 0:01:07.440 --> 0:01:09.680 what's going on now, but what they see when they 0:01:09.720 --> 0:01:12.319 look around the corner. Because what we do know is 0:01:12.800 --> 0:01:16.280 life will be different, very very different. We're also going 0:01:16.319 --> 0:01:19.320 to hear from Keith Barr, here's the CEO of Intercontinental 0:01:19.360 --> 0:01:22.679 Hotel Group, talk about another industry that certainly will be different. 0:01:23.120 --> 0:01:25.840 It is one of the world's largest hotel companies, and 0:01:25.920 --> 0:01:27.800 so we caught up with him about the impact. They've 0:01:27.800 --> 0:01:30.280 had a big impact, but also what does life look 0:01:30.319 --> 0:01:35.000 like afterwards. And also Max Levchin. He may be best 0:01:35.040 --> 0:01:37.880 known to many of you as the co founder of PayPal, 0:01:37.920 --> 0:01:40.399 but he's got a couple of new companies, one of 0:01:40.440 --> 0:01:44.279 which affirm it is making loans to folks to buy things. 0:01:44.400 --> 0:01:47.760 And so talk about someone who's got insights into what 0:01:47.800 --> 0:01:50.480 people are buying and not Yeah, so entrenched in the 0:01:50.520 --> 0:01:52.400 startup world. So I'm so glad we were able to 0:01:52.440 --> 0:01:55.360 catch up with him. We also caught up with another industry, 0:01:55.400 --> 0:01:58.200 like the hotel industry that has really been beaten up 0:01:58.240 --> 0:02:01.720 because of the virus. Also restaurants around the nation and 0:02:01.720 --> 0:02:06.280 in particular in New York City, crafted hospitality owner and chef. 0:02:06.320 --> 0:02:09.600 He's well known. Tom Calichio really a big advocate for 0:02:09.639 --> 0:02:14.000 the hospitality industry and restaurants in particular. We talked with 0:02:14.080 --> 0:02:16.320 him about what he's trying to do to get more 0:02:16.320 --> 0:02:19.800 support really from the government to help out the restaurant industry. 0:02:19.840 --> 0:02:21.720 It's one of the big questions out there, not just 0:02:21.760 --> 0:02:24.520 in the restaurant industry, but for everyone as we start 0:02:24.560 --> 0:02:28.280 to see this rescue and stimulus get put out. First up, though, 0:02:28.440 --> 0:02:30.760 let's go inside the magazine. We take a look at 0:02:30.840 --> 0:02:35.040 Exxon's fall from oil juggernaut to kind of run of 0:02:35.080 --> 0:02:38.320 the mill, mediocre company. It's the cover story this week. 0:02:38.480 --> 0:02:41.040 We heard from Blueberg business Week editor Joel Webber and 0:02:41.120 --> 0:02:44.840 one of the writers of the story, Brian Gruley. Started 0:02:44.880 --> 0:02:50.000 behaving less, in a less disciplined way. Then it had 0:02:50.080 --> 0:02:53.480 into you know, the early odds where you know, they 0:02:53.520 --> 0:02:58.240 would announce the deal for some acreage or another company, 0:02:58.320 --> 0:03:01.200 and it was clear to the street, here's how they're 0:03:01.200 --> 0:03:05.280 going to make money off this in the near term. 0:03:05.320 --> 0:03:08.440 And so in oh nine they bought a really big 0:03:08.520 --> 0:03:13.519 natural gas company to get in on shale gas, and 0:03:13.639 --> 0:03:18.840 I think gas prices started dropping even before they closed 0:03:18.880 --> 0:03:22.960 the deal, UM, and they could have gone into shale oil. 0:03:23.320 --> 0:03:25.959 They totally didn't, um because it made a lot of 0:03:26.000 --> 0:03:28.440 money then at that time. But they did gas. They 0:03:28.480 --> 0:03:32.520 got creams uh. Same thing. Uh. They went into the 0:03:32.560 --> 0:03:37.880 oil sands in the Western Canada, very expensive way to 0:03:38.000 --> 0:03:42.320 get oil out of sand. Essentially it's more like mining 0:03:42.680 --> 0:03:47.360 than drilling. And that turned out to be sixteen billion 0:03:47.400 --> 0:03:52.240 dollars spent, not for not very much. Russia another they're 0:03:52.240 --> 0:03:54.640 going to be a great big deal with the old 0:03:54.680 --> 0:03:59.040 excell On CEO Rex Phillerson is comrad the Vladimir Putin 0:03:59.720 --> 0:04:03.320 in asion in three to five billion dollars in the Arctic, 0:04:03.680 --> 0:04:08.160 and then Plutin went after Crimea and Obama said, you're 0:04:08.160 --> 0:04:11.320 not doing business over there anymore, Exxon, and that kind 0:04:11.360 --> 0:04:14.360 of killed that deal. And so it was going after 0:04:14.440 --> 0:04:20.680 these great, big, risky deals. And underlying this was to 0:04:20.800 --> 0:04:23.840 some degree the assumption that we all held for many, 0:04:23.880 --> 0:04:28.400 many years, decades even that oil is a finite resource 0:04:28.920 --> 0:04:31.239 and it's gonna run out, We're gonna hit peak oil. 0:04:32.520 --> 0:04:34.960 And and as as all they were doing all that, 0:04:34.960 --> 0:04:39.919 that assumption was changing radically because of the technology that 0:04:39.960 --> 0:04:46.200 the navals companies to uh break into very tight spaces 0:04:46.240 --> 0:04:51.280 of oil and gas and bring out these huge deposits 0:04:51.279 --> 0:04:55.160 of oil and gas that just weren't acceptable before. So 0:04:55.279 --> 0:05:01.239 we went from uh scarce assumed scarcity to and abundance. Brian, 0:05:01.279 --> 0:05:03.200 I feel like you and Kevin have the makings of 0:05:03.240 --> 0:05:06.159 a book here. And there have been several books written 0:05:06.160 --> 0:05:09.720 about x because I think you cite um one where 0:05:09.760 --> 0:05:12.159 they called x M one of the most powerful businesses 0:05:12.200 --> 0:05:15.680 ever produced by American capitalism. And they have been a 0:05:15.680 --> 0:05:19.000 company right, just great, a sign of great corporate America 0:05:19.040 --> 0:05:22.920 and just have plowed ahead decade after decade. So here 0:05:22.920 --> 0:05:25.760 we are now and they're in a tough spot on 0:05:25.800 --> 0:05:31.400 a many different levels. Can they plow ahead? Oh yeah? 0:05:31.400 --> 0:05:34.600 I mean, first of all, you know, they're not going bankrupt. 0:05:36.360 --> 0:05:39.320 They're not. They're not in that kind of trouble. Um. 0:05:40.440 --> 0:05:45.440 They have a reasonably strong balance sheet. Given the circumstances 0:05:45.480 --> 0:05:49.000 of the market and what's going to happen in oil 0:05:49.040 --> 0:05:52.200 in the next several months, there is there is a 0:05:52.240 --> 0:05:57.600 good chance that a lot of the independent, smaller players 0:05:57.640 --> 0:06:00.880 in the shale fields in West Sex Is in the 0:06:00.920 --> 0:06:03.680 North Dakota are just you know, but I canna be 0:06:03.720 --> 0:06:05.760 able to make it, and so they're gonna look to 0:06:05.800 --> 0:06:08.039 the big boys to buy them out. And you know, 0:06:08.360 --> 0:06:10.640 the Excens and Chevron to the world not going to 0:06:10.720 --> 0:06:13.520 pay them nine on the dollar. They're going to buy 0:06:13.560 --> 0:06:16.200 them on the chief. And that's writer Brian Grueley of 0:06:16.240 --> 0:06:20.000 the cover story. Entil Webber, the editor of Bloomberg Business Week, 0:06:20.080 --> 0:06:23.320 and I have to say a departure over the last 0:06:23.320 --> 0:06:27.000 few weeks, Carol from covers that are all are really 0:06:27.040 --> 0:06:31.640 strictly about coronavirus. Clearly the pandemic plays into the oil story, 0:06:31.839 --> 0:06:33.760 but it's much bigger well, and it's also how the 0:06:33.839 --> 0:06:35.839 mighty have fallen. Right, Who would have thought that we'd 0:06:35.839 --> 0:06:37.919 be talking about X on this way if you go 0:06:38.000 --> 0:06:40.080 back a decade or so. But it is certainly in 0:06:40.080 --> 0:06:43.320 a different place because of the global energy markets and 0:06:43.320 --> 0:06:45.279 where we are today. We're gonna more on that story too. 0:06:45.320 --> 0:06:47.760 In the Bloomberg Business we cover podcasts, so look for 0:06:47.800 --> 0:06:50.719 that as well. You're listening to Bloomberg Business Week, coming 0:06:50.800 --> 0:06:53.520 up our conversation with Tom Doll. He's the president and 0:06:53.600 --> 0:06:57.400 CEO of Subaru of America. Again another industry. Right, nobody's 0:06:57.400 --> 0:06:59.840 out there shopping for cars. They've been hit hard in 0:07:00.000 --> 0:07:07.760 across hairs. This is Bloomberg. You're listening to Bloomberg Business 0:07:07.839 --> 0:07:11.920 Week with Carol Masser and Jason Kelly from Bloomberg Radio. Well, 0:07:11.920 --> 0:07:13.720 today we're bringing you some of the most important, we 0:07:13.760 --> 0:07:17.160 hope informative conversations we had this week on our daily 0:07:17.200 --> 0:07:21.400 Bloomberg Business Week radio show, all about the coronavirus. Looking 0:07:21.600 --> 0:07:25.440 far and wide, Carol for what happens next, and Jason, 0:07:25.520 --> 0:07:28.320 let's remind everybody our interviews this week again happening in 0:07:28.360 --> 0:07:31.280 real time news continuing to cross the Bloomberg at every 0:07:31.280 --> 0:07:34.880 minute of the day, about all industries impacted by the virus. 0:07:34.880 --> 0:07:37.840 One of those industries the auto industry. And with that 0:07:37.960 --> 0:07:40.600 we spoke with Tom Doll, he's the presidency of Subaru 0:07:40.680 --> 0:07:44.600 of America U. This sector, the auto industry man hit hard. 0:07:44.640 --> 0:07:47.080 Nobody out there shopping for cars. So we talked with 0:07:47.120 --> 0:07:49.679 them about how they're adapting and how they're helping others 0:07:49.760 --> 0:07:51.840 get through the virus. This is gonna be a little 0:07:51.880 --> 0:07:54.360 bit longer recovery than people thought only because of the 0:07:54.440 --> 0:07:56.920 depth of it. Remember, we can say we're going to 0:07:57.000 --> 0:07:59.080 start up our factories and we're they're supposed to start 0:07:59.160 --> 0:08:02.160 up on maybe eleven, but we're dependent on our suppliers 0:08:02.280 --> 0:08:03.800 to be able to make sure that we've got the 0:08:03.840 --> 0:08:06.080 parts to be able to produce the cars and the 0:08:06.120 --> 0:08:08.600 volumes that we need them to produce. And the other 0:08:08.640 --> 0:08:10.880 issue that's going to happen in the car business, I believe, 0:08:11.000 --> 0:08:13.320 is so many of the other manufacturers have so much 0:08:13.360 --> 0:08:15.480 inventory that have to be disposed of, and what's been 0:08:15.520 --> 0:08:18.640 happening in the fleet and rental car markets is something 0:08:18.680 --> 0:08:20.960 that we have to pay attention to because those cars 0:08:21.040 --> 0:08:24.120 ultimately have to be disposed of in the marketplace as well. 0:08:24.160 --> 0:08:26.120 So it's gonna be interesting when the market finally does 0:08:26.200 --> 0:08:29.360 open up and we see what happens in terms of 0:08:29.400 --> 0:08:32.720 the competitive actions by some of the competitors. So let's 0:08:32.800 --> 0:08:34.720 unpack that a little bit, Tom, if we can, because 0:08:34.840 --> 0:08:36.280 I want to take you back to something sent a 0:08:36.320 --> 0:08:38.840 minute ago about the supply chain, because we were talking 0:08:38.840 --> 0:08:42.040 about this as it relates to Apple and many other companies, 0:08:42.520 --> 0:08:47.360 UM your global company obviously, and cars are complicated. I 0:08:47.400 --> 0:08:49.160 don't have to tell you that you know much better, 0:08:49.640 --> 0:08:52.720 uh than than we do. What have you seen so 0:08:52.840 --> 0:08:56.360 far in terms of the pain points and and how 0:08:56.400 --> 0:08:58.760 you're able to deal with them when it comes to 0:08:58.800 --> 0:09:02.400 the supply chain. It's fascinating because I've been around a 0:09:02.400 --> 0:09:05.319 long time at our company and around the car industry. 0:09:05.400 --> 0:09:08.800 Go back to the company, Is that right, I do, Yes, 0:09:08.920 --> 0:09:12.480 I've been around. I'm dating myself right. You've seen some things. 0:09:13.200 --> 0:09:16.520 I've seen a lot. I've never seen anything like this. 0:09:17.600 --> 0:09:20.480 I've seen my share of recessions, and this is completely 0:09:20.520 --> 0:09:22.760 different because you know, I believe when I tell you 0:09:22.760 --> 0:09:25.640 it just shut down. You don't just simply close an 0:09:25.640 --> 0:09:29.200 automobile manufacturing plan for nine weeks and then just expect 0:09:29.200 --> 0:09:31.520 it to start right back up again. The same thing 0:09:31.559 --> 0:09:33.680 with our suppliers. You just don't shut them down for 0:09:33.760 --> 0:09:36.319 that length of a period of time and not expect. 0:09:36.320 --> 0:09:38.920 There's going to be some hiccups once the factories start 0:09:38.960 --> 0:09:40.880 to get moving again, and I think we have to 0:09:40.920 --> 0:09:43.079 plan for that as we begin to bring up our 0:09:43.120 --> 0:09:45.440 production capacity. It's going to be a little bit of 0:09:45.440 --> 0:09:48.000 a while, I think, before we get back to the 0:09:48.120 --> 0:09:50.800 levels of production that we had seen prior to the 0:09:51.240 --> 0:09:53.920 to the shutdown. But it's gonna be interesting to see 0:09:53.960 --> 0:09:55.640 how it all comes together. I know our folks are 0:09:55.640 --> 0:09:57.719 working very hard to make it happen. Tell me, I 0:09:57.760 --> 0:10:01.000 am curious what worries you more what the economy looks like, 0:10:01.200 --> 0:10:03.400 and you know, the confidence that consumers have to go 0:10:03.440 --> 0:10:06.040 out there and hopefully have jobs that they can buy cars, 0:10:06.720 --> 0:10:10.600 or is it more the logistics of getting the suppliers 0:10:10.760 --> 0:10:13.000 and everything back up and running. What worries you more 0:10:13.480 --> 0:10:16.120 the economy. Well, we'll get the suppliers all figured out. 0:10:16.160 --> 0:10:19.319 They know what they're doing, and our production engineers are fantastic. 0:10:19.679 --> 0:10:21.800 We'll get the factories back up and running. I'm not 0:10:21.840 --> 0:10:25.040 worried about that. I'm worried about the long term impact 0:10:25.080 --> 0:10:28.440 that this might have on consumer consumers and their willingness 0:10:28.480 --> 0:10:31.520 to buy and spend on important things like a car 0:10:31.600 --> 0:10:34.240 and expensive things like a car or home. Right, a man, 0:10:34.280 --> 0:10:36.439 great news right now? Right? Mortgage interest rates you probably 0:10:36.440 --> 0:10:39.640 reported this earlier, are down to the lowest level ever, right, 0:10:39.720 --> 0:10:42.280 But people aren't. But the housing markets in the tank 0:10:42.679 --> 0:10:45.760 um people who have to People need to have some 0:10:45.760 --> 0:10:47.800 some stability before they're going to be willing to go 0:10:47.880 --> 0:10:51.280 back out there. So how quickly can these can jobs 0:10:51.400 --> 0:10:53.480 be added back into the economy and we get back 0:10:53.480 --> 0:10:56.720 to the point where people now feel more comfortable right, Well, 0:10:56.760 --> 0:10:58.680 you know, and the auto industry, as you well know, 0:10:59.000 --> 0:11:01.160 you know, incentive have often been a part of it. 0:11:01.200 --> 0:11:03.640 Does that make a difference in this kind of environment 0:11:03.720 --> 0:11:06.559 or what what we perceive will be the economic environment 0:11:06.559 --> 0:11:08.800 on the other side of this, Well, there's no question 0:11:08.840 --> 0:11:11.800 that demand curve is shifted down dramatically. You know, before 0:11:12.000 --> 0:11:14.600 before the shutdown, we were probably at a sixteen point 0:11:14.600 --> 0:11:19.000 eight to seventeen million unit sales projection for this calendar year. 0:11:19.559 --> 0:11:22.160 Now everybody thinks, and myself included, that we're going to 0:11:22.240 --> 0:11:25.839 be somewhere between thirteen and fourteen million vehicles for the year. 0:11:26.240 --> 0:11:28.800 So it's been a big shift. And up until that point, 0:11:28.840 --> 0:11:31.959 as you know, production was was being done to support that. 0:11:32.559 --> 0:11:34.320 So when you come out of this thing, there's it's 0:11:34.360 --> 0:11:37.600 definitely gonna be a buyer's market, and manufacturers are going 0:11:37.600 --> 0:11:39.600 to try to figure out how they can get that 0:11:39.800 --> 0:11:43.720 market share amongst themselves in that in that much smaller market, 0:11:44.360 --> 0:11:46.400 And and you know, there probably are going to be 0:11:46.440 --> 0:11:48.800 significant levels of incentives that are going to be out 0:11:48.800 --> 0:11:51.560 there once it opens up. Um, you know, we have 0:11:51.600 --> 0:11:54.040 to be smart and how we play that game, because 0:11:54.040 --> 0:11:56.439 we're not we don't have the resources that a lot 0:11:56.480 --> 0:11:59.080 of the other manufacturers have. Because of our science, we 0:11:59.120 --> 0:12:01.000 have to do things a little bit differently. One thing 0:12:01.040 --> 0:12:04.600 I do wonder about, and I'm curious about workers, Tell 0:12:04.640 --> 0:12:07.080 me about your workforce and whether or not you've been 0:12:07.080 --> 0:12:10.920 able to hold onto people or what sure For our 0:12:11.440 --> 0:12:14.120 headquarters people here that are based in Camaden, we haven't 0:12:14.200 --> 0:12:17.280 laid off anybody. We've essentially have a policy now where 0:12:17.320 --> 0:12:19.440 people are working from home. There's only about a handful 0:12:19.480 --> 0:12:21.920 of us that come in here every day because we 0:12:21.960 --> 0:12:24.720 have to essentially kind of keep the business running. But 0:12:25.160 --> 0:12:27.640 we're very concerned about the health and the safety and 0:12:27.640 --> 0:12:30.400 the welfare of our people being in being in New Jersey, 0:12:30.400 --> 0:12:33.120 one of the states that's most affected by it UM, 0:12:33.360 --> 0:12:35.360 so we're very We're very concerned. We're making sure that 0:12:35.400 --> 0:12:38.319 we we disinfect our building, We're making sure that we're 0:12:38.360 --> 0:12:42.079 taking all the protocols uh they keeping the social distancing 0:12:42.120 --> 0:12:45.600 and so forth. But so far we haven't know. We're 0:12:45.679 --> 0:12:48.120 keeping everybody on. Although there's a lot less work to 0:12:48.120 --> 0:12:50.640 do right because we don't have a lot of business 0:12:50.720 --> 0:12:53.240 that we had before. But so far we're trying to 0:12:53.280 --> 0:12:55.720 do what we can for our most valuable asset, which 0:12:55.760 --> 0:12:59.440 is our which our employees, our staff right well, and 0:12:59.520 --> 0:13:02.000 Tom is alluded to you know, you're there in New Jersey. 0:13:02.200 --> 0:13:03.880 Carroll's in New Jersey. I'm in New York. You know, 0:13:03.920 --> 0:13:06.720 we're all at the epicenter of this in many ways, 0:13:06.800 --> 0:13:10.040 and so sort of seeing firsthand at the effect of this, 0:13:11.040 --> 0:13:12.839 you know, and we've been talking a lot about this 0:13:12.880 --> 0:13:15.800 notion of you know, what is the responsibility of a 0:13:15.880 --> 0:13:18.600 company to the broader community. I know that you guys 0:13:18.600 --> 0:13:22.360 have been involved with Feeding and Feeding America pretty closely 0:13:22.480 --> 0:13:25.600 along the way here. Tell us what you're up to 0:13:25.679 --> 0:13:29.240 and how that works at this time. Yeah. Sure. What 0:13:29.360 --> 0:13:32.560 happened was we were when the pandemic first started. Uh, 0:13:32.880 --> 0:13:35.000 we saw all the lines. What struck me was the 0:13:35.040 --> 0:13:38.360 lines that occurred in San Antonio was the ten thousand 0:13:38.360 --> 0:13:41.640 people coming to a food donation center to get food. 0:13:41.720 --> 0:13:43.520 And so we came back to the office that day 0:13:43.520 --> 0:13:47.240 and we said, what can we do to help alleviate 0:13:47.280 --> 0:13:49.360 the hunger crisis immediately? And we came up with the 0:13:49.400 --> 0:13:52.880 idea of working with Feeding America in order for us 0:13:52.920 --> 0:13:55.959 to be able to move quickly because Speedy America, as 0:13:56.000 --> 0:13:58.839 you probably know, they're they're very, very very good at 0:13:59.440 --> 0:14:02.640 uh partnering with two food banks around the country where 0:14:02.679 --> 0:14:05.199 we also have retailers, and so our retailers can then 0:14:05.240 --> 0:14:07.760 partner with those food banks to make sure that they 0:14:07.760 --> 0:14:09.760 get the three So we're donating I'm sure you know 0:14:09.760 --> 0:14:13.280 that we're donating fifty million meals to Feeding America, enough 0:14:13.320 --> 0:14:18.040 to enough to um, you know, satisfy almost about four 0:14:18.040 --> 0:14:19.920 point which i'd be four point one or four point 0:14:19.960 --> 0:14:22.880 two million families for a day in terms of their meals. 0:14:22.920 --> 0:14:26.000 That's Tom Doll, the Presidency of Subaru of America and Jason. 0:14:26.040 --> 0:14:30.120 We know, like the hotel industry, the hospitality industry, restaurants, 0:14:30.160 --> 0:14:33.000 this industry, the car industry also hurt. Well. This is 0:14:33.040 --> 0:14:36.600 a business that already was in a state of dramatic change, 0:14:36.600 --> 0:14:40.640 in existential crisis, you might say. So interesting to get 0:14:40.720 --> 0:14:43.760 some time with Tom and figure out what people think 0:14:43.800 --> 0:14:46.320 about when it comes to transportation. And also it's a 0:14:46.360 --> 0:14:49.960 manufacturing intensive business, to say the least. You're listening to 0:14:49.960 --> 0:14:52.720 Bloomberg bus Wee coming up a conversation with David Edelman. 0:14:52.920 --> 0:14:56.000 He's the founder of Darko Capital and owner of sports Teams, 0:14:56.120 --> 0:14:59.440 long time investor, a lot of big thoughts and really 0:14:59.440 --> 0:15:02.360 looking ahead with him. His world contains so much so 0:15:02.440 --> 0:15:04.880 it was great to catch up with him. This is Bloomberg. 0:15:08.200 --> 0:15:11.760 This is Bloomberg Business Week with Carol Masser and Jason 0:15:11.840 --> 0:15:15.200 Kelly from Bloomberg Radio. We're bringing you some of the 0:15:15.240 --> 0:15:18.360 most important and informative conversations that we had throughout the 0:15:18.440 --> 0:15:20.400 week on our daily radio show. A lot of it, 0:15:20.440 --> 0:15:23.760 of course, Jason relating to the virus, the impact and 0:15:23.840 --> 0:15:27.000 what's our way forward after COVID nineteen. Well, and we're 0:15:27.000 --> 0:15:30.720 always looking for folks, Carol, who have their fingers in 0:15:30.760 --> 0:15:34.920 a number of pies. That is so true about David Edelman. 0:15:35.000 --> 0:15:38.360 He's the founder of Darko Capital down in Philadelphia, also 0:15:38.440 --> 0:15:41.920 has interests in the sports world, in the movie world. 0:15:42.240 --> 0:15:45.720 He's got it all, and he also had some pretty 0:15:45.720 --> 0:15:48.000 hot takes about what we're seeing now and what we 0:15:48.080 --> 0:15:50.920 may see in the not too distant future. From my perspective, 0:15:50.960 --> 0:15:53.960 because we do touch a lot of businesses, from you know, 0:15:54.000 --> 0:15:58.520 student housing and colleges and universities to you know, private equity, 0:15:58.560 --> 0:16:00.720 I think first and foremost is have to look at 0:16:00.760 --> 0:16:04.720 the impact this is having on people and you know employment, 0:16:04.960 --> 0:16:08.040 and that the economy. You went from having almost three 0:16:08.080 --> 0:16:11.080 percent unemployment to you know, this is gonna be a 0:16:11.160 --> 0:16:13.760 big differ instance a big numbers than months ahead come 0:16:13.800 --> 0:16:15.840 And I think, you know, kind of the insight into 0:16:15.840 --> 0:16:18.960 seeing industries that are just getting you know, decimated is 0:16:19.320 --> 0:16:22.320 just really sad and unfortunate. Well, let's talk about the 0:16:22.640 --> 0:16:25.320 world of education first and foremost. Carol and I talked 0:16:25.320 --> 0:16:26.680 about it a lot, in part because we both have 0:16:26.760 --> 0:16:28.840 juniors in high school, and so we're thinking about it 0:16:29.160 --> 0:16:31.600 all the time with a senior in high school. So 0:16:31.720 --> 0:16:33.880 there you go. So a friend of mine for you 0:16:33.920 --> 0:16:37.600 as well, I mean, and I know nothing has been decided. 0:16:37.640 --> 0:16:41.120 We here sort of drips and drabs from various college presidents, 0:16:41.120 --> 0:16:44.120 and many of them appear on our air here with us. 0:16:44.240 --> 0:16:47.080 They're not sure what they're gonna do. Tell us about 0:16:47.120 --> 0:16:50.160 how you think about it. From someone who is in 0:16:50.200 --> 0:16:53.840 the business of housing these students, how do you determine 0:16:54.240 --> 0:16:56.160 what to do and when to do it? So we 0:16:56.160 --> 0:16:59.480 were able to kind of really get some very interesting 0:16:59.520 --> 0:17:03.760 insight into what happened from the moment the school's transitioned 0:17:03.800 --> 0:17:08.080 from you know, on campus to online. And I think 0:17:08.080 --> 0:17:13.040 the most surprising data point was across the country about 0:17:14.560 --> 0:17:19.000 students that we house somewhere in the neighborhood, of of 0:17:19.080 --> 0:17:22.840 them sheltered and quarantined in our apartments versus going to 0:17:23.119 --> 0:17:28.119 what i'll say, quote home correct and you know, some 0:17:28.160 --> 0:17:32.040 places like Texas and Louisiana was in the eighties and higher. 0:17:32.400 --> 0:17:35.639 And we we learned a lot from that, which was 0:17:35.760 --> 0:17:38.560 a you know, one, you know, not everyone has a 0:17:38.560 --> 0:17:41.159 traditional family unit where you know, maybe going home was 0:17:41.240 --> 0:17:44.399 conducive to I think not everyone wants to be you know, 0:17:44.640 --> 0:17:48.239 quarantined with their family. And three, I think that a 0:17:48.280 --> 0:17:51.520 lot of these students made the decision that in order 0:17:51.520 --> 0:17:53.480 for them to stay focused on their education, they needed 0:17:53.520 --> 0:17:56.440 kind of the comfort of where they were in their apartment. 0:17:56.520 --> 0:17:59.280 And so it was a staggering number for us. I 0:17:59.320 --> 0:18:02.679 think it real firmed that you know, these students are 0:18:02.760 --> 0:18:05.560 young adults and uh, you know, kind of putting themselves 0:18:05.640 --> 0:18:08.280 first as too far as far as a focus on 0:18:08.440 --> 0:18:10.680 education and what they wanted to accomplish. So you know 0:18:10.760 --> 0:18:12.439 that that was the first data point that we just 0:18:12.480 --> 0:18:15.439 really kind of took us all by surprise. And I 0:18:15.480 --> 0:18:18.240 think the other part that we learned is that the 0:18:18.280 --> 0:18:22.199 online experience that these students received was not what they 0:18:22.480 --> 0:18:26.080 didn't live up to their expectations or candidly the expectations 0:18:26.080 --> 0:18:30.200 of the university. And I think, you know, one thing 0:18:30.240 --> 0:18:33.120 we've always looked at in our business of student housing is, hey, 0:18:33.160 --> 0:18:37.000 what's the durability of universities compared to online learning? You know, 0:18:37.040 --> 0:18:40.000 prior to this, you know that that online learning was uh, 0:18:40.200 --> 0:18:42.800 you know, you know, kind of becoming more prevalent. And 0:18:42.840 --> 0:18:45.440 we had always said that you can't replace the college experience. 0:18:46.200 --> 0:18:48.639 And now more than ever, I'm convinced to that, and 0:18:48.840 --> 0:18:51.600 I think this really proved it. And I where I'm 0:18:51.640 --> 0:18:54.360 headed with that is that based on the universities we've 0:18:54.359 --> 0:18:58.240 spoken with, they really want to get open in the fall. Uh. 0:18:58.400 --> 0:19:00.960 The economics, of course, you know where this is a 0:19:00.960 --> 0:19:03.520 bloomberg business. Let's talk about the economics that they can't 0:19:03.520 --> 0:19:07.680 afford not to open um and not have the students there, 0:19:07.760 --> 0:19:10.280 number one. But number two, I think they acknowledge that 0:19:10.320 --> 0:19:13.800 the quality of the education online is not the same 0:19:13.840 --> 0:19:16.000 as kind of in the classroom. Well, and you have 0:19:16.119 --> 0:19:20.280 to imagine this scenario where a student or a parent 0:19:21.160 --> 0:19:24.439 like us is going to, shall we say, balk at 0:19:24.480 --> 0:19:28.040 the idea of paying you know, fifties sixty seventy thousand 0:19:28.080 --> 0:19:30.680 dollars a year for an online education, right, I mean 0:19:30.800 --> 0:19:33.640 fair to say I think it's fair. Yeah, think it's 0:19:33.640 --> 0:19:35.800 fair well, and I do you have to think educational 0:19:35.800 --> 0:19:38.520 institutions are are looking at that, David and saying, man, 0:19:38.560 --> 0:19:40.119 if we don't get our act together, people are going 0:19:40.160 --> 0:19:42.800 to be like, especially if the online goes really if 0:19:42.840 --> 0:19:45.200 it was going really well, to kind of rethink how 0:19:45.200 --> 0:19:48.680 we do all of this. You know, and I've always 0:19:48.680 --> 0:19:53.400 said that, you know, there's over colleges and universities out there, 0:19:53.680 --> 0:19:56.520 and certainly from the campus apartment's perspective, when we're looking 0:19:56.560 --> 0:19:59.439 to build apartments, we want to pick universities that we 0:19:59.560 --> 0:20:03.520 think our value proposition, and a lot of universities that 0:20:03.600 --> 0:20:07.000 exist don't offer, in my opinion, the value proposition, uh 0:20:07.080 --> 0:20:09.399 for you know, for the for the cost. But to 0:20:09.440 --> 0:20:13.280 your point, the value proposition and paying you for dollars 0:20:13.320 --> 0:20:16.480 for a purely online experience probably doesn't make sense long term. 0:20:16.560 --> 0:20:19.359 And that's David Edelman, the founder of Darko Capital. I 0:20:19.400 --> 0:20:21.119 have to say one of my favorite conversations of the 0:20:21.119 --> 0:20:24.239 week Carol, because we started up and he basically was like, 0:20:24.359 --> 0:20:26.480 look this is what it's going to be. This is 0:20:26.520 --> 0:20:28.240 where we're going to go, so the things we have 0:20:28.280 --> 0:20:29.919 to worry about. Well, and what I loved is he 0:20:29.960 --> 0:20:33.440 really had some great insight on education, uh and thoughts 0:20:33.440 --> 0:20:35.600 about online education. He's talking to a lot of folks 0:20:35.600 --> 0:20:38.639 who are running colleges and universities. He's all about, you know, 0:20:38.680 --> 0:20:41.120 housing for students. But he also got some inside about 0:20:41.160 --> 0:20:43.600 how the online world is working when it comes to education. 0:20:43.840 --> 0:20:47.040 But also, as you said, sports, private aviation so much 0:20:47.080 --> 0:20:48.640 so I'm really glad we got some time with him. 0:20:48.680 --> 0:20:50.919 You're listening to Bloomberg Business Week. Coming up, we hear 0:20:50.960 --> 0:20:54.600 from PayPal co founder Max Levchin on his latest company affirm. 0:20:54.680 --> 0:20:57.240 This is someone to Jason at the crossroads of startups, 0:20:57.240 --> 0:21:00.359 technology and the impact it's having on our world. His 0:21:00.400 --> 0:21:03.440