WEBVTT - Bloomberg Businessweek Weekend - December 13th, 2024 0:00:00.080 --> 0:00:07.320 Bloomberg Audio Studios, Podcasts, radio news. 0:00:08.320 --> 0:00:12.719 This is Bloomberg Business Week Inside from the reporters and 0:00:12.880 --> 0:00:16.440 editors who bring you America's most trusted business magazine, plus 0:00:16.520 --> 0:00:20.680 global business, finance and tech news. The Bloomberg Business Week 0:00:20.720 --> 0:00:25.640 Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:26.800 --> 0:00:30.360 Hi, everyone, Welcome to the Bloomberg Business Wee Weekend Podcast. Well, 0:00:30.400 --> 0:00:33.640 this past week felt like NonStop news from the world 0:00:33.680 --> 0:00:38.040 of artificial intelligence. Among the headlines, TSMC posted a thirty 0:00:38.040 --> 0:00:41.560 four percent surge in November sales, reflecting a sustained growth 0:00:41.800 --> 0:00:45.160 from AI demand despite concerns that data center building will slow. 0:00:45.360 --> 0:00:49.280 Reddit launched an AI powered chatbot. Amazon announced it's building 0:00:49.360 --> 0:00:53.680 a MEGAAI supercomputer with Anthropic Apple is working on an 0:00:53.680 --> 0:00:56.880 AI chip with Broadcom, and Donald Trump's appointment of venture 0:00:56.880 --> 0:00:59.760 capitalist David Sachs as the AI cryptos are is seen 0:00:59.800 --> 0:01:01.000 as a big win for big tech. 0:01:01.320 --> 0:01:02.080 Are you done? 0:01:02.320 --> 0:01:02.560 No? 0:01:02.640 --> 0:01:04.720 Oh, You're not done? Okay, keep going please. 0:01:04.840 --> 0:01:07.800 Trump's pick to run the FDC, the Federal Drake Commission, 0:01:07.840 --> 0:01:11.120 Andrew Ferguson, wants to, among other things, promote innovation in 0:01:11.160 --> 0:01:11.920 the AI market. 0:01:12.080 --> 0:01:12.840 You're done now right? 0:01:13.240 --> 0:01:13.479 No? 0:01:13.600 --> 0:01:13.720 Oh? 0:01:13.720 --> 0:01:17.920 Okay, and then there's Alphabet hitting new records in terms 0:01:17.920 --> 0:01:21.120 of a share price due to excitement over major development 0:01:21.160 --> 0:01:24.000 and quantum computing through the use of its Willow quantum ship. 0:01:24.200 --> 0:01:24.440 Okay. 0:01:24.480 --> 0:01:25.920 Yeah, there's an AI angle there. 0:01:26.120 --> 0:01:26.400 Okay. 0:01:26.480 --> 0:01:29.120 The bottom line here a lot of AI related stories 0:01:29.120 --> 0:01:31.319 and happenings. It's like top of mind. It's a huge 0:01:31.360 --> 0:01:33.920 theme of what we talked about this week. It's kind 0:01:33.920 --> 0:01:35.880 of a thread under everything right now. So for the 0:01:35.880 --> 0:01:38.880 next two hours, we highlight some of our recent chats. No, 0:01:38.959 --> 0:01:41.880 not with chat bots. Sometimes we talked about that, Yeah, 0:01:42.760 --> 0:01:46.360 speak for yourself. Conversations in and around AI, though, including 0:01:46.600 --> 0:01:48.400 one with the author of a new book about the 0:01:48.440 --> 0:01:50.720 company at the center of it all, in Vidia, that's 0:01:50.720 --> 0:01:51.440 in our next hour. 0:01:51.680 --> 0:01:54.680 Coming up this hour. Some thoughts also on how AI 0:01:54.800 --> 0:01:57.880 is reshaping the tech sector and which companies stand to game. 0:01:57.920 --> 0:01:59.920 We're going to talk about that with the president of IDC, 0:02:00.120 --> 0:02:01.080 Crawford del Prett. 0:02:01.160 --> 0:02:04.440 Plus, tech giants excited about AI are pouring ever bigger 0:02:04.480 --> 0:02:07.800 sums of money into energy intensive data centers to power it, 0:02:08.280 --> 0:02:11.600 and yet not everyone is so excited. That includes one 0:02:11.760 --> 0:02:15.560 Blackstone funded data center developer that's getting a major resistance 0:02:15.600 --> 0:02:16.920 in one Georgia neighborhood. 0:02:17.080 --> 0:02:19.799 All of that to come. We begin, though, with Cisco Systems. 0:02:20.000 --> 0:02:22.840 It's the biggest maker of computer networking equipment, a bell 0:02:22.880 --> 0:02:26.720 weather for corporate technology spending. Last month when it reported earnings, 0:02:26.840 --> 0:02:29.919 Cisco's CFO saying Cisco is seeing a strong rebound in 0:02:29.960 --> 0:02:34.080 spending by corporations across all sectors and geographies. It's also 0:02:34.120 --> 0:02:37.880 benefiting from spending on the machinery needed to support AI computing. 0:02:38.320 --> 0:02:42.280 In October, Cisco expanded its data center infrastructure portfolio to 0:02:42.280 --> 0:02:47.480 sustain GPU intensive AI workloads with Nvidia Accelerated Computing, with 0:02:47.600 --> 0:02:51.480 the hope it will help Cisco customers accelerate their AI adoption. 0:02:51.880 --> 0:02:54.919 After earning, some analyst raised price targets on Cisco's stock, 0:02:55.000 --> 0:02:57.880 citing AI traction. So there was a lot that we 0:02:58.080 --> 0:03:01.320 wanted to talk about with frankeutsutis, executive vice president and 0:03:01.360 --> 0:03:04.920 chief People, Policy and Purpose Officer at Cisco Systems. We 0:03:05.000 --> 0:03:07.680 kicked it off asking about the impact on business dynamics 0:03:07.680 --> 0:03:08.720 following the US election. 0:03:08.960 --> 0:03:11.960 What I find is that as a company, we have 0:03:12.040 --> 0:03:17.120 worked with all administrations and we build strong partnerships and 0:03:17.240 --> 0:03:22.120 relationships in the broader community with governments, and so actually 0:03:22.280 --> 0:03:25.080 we're meeting with a Trump advisor to just do some 0:03:25.200 --> 0:03:29.000 planning and to understand a little bit of the priorities 0:03:29.280 --> 0:03:32.520 in the next year as well. It's so interesting because 0:03:32.600 --> 0:03:36.160 this year there were sixty elections around the globe, and 0:03:36.240 --> 0:03:38.920 so I think around the world you have people stepping 0:03:39.080 --> 0:03:42.880 into new administrations and we're absolutely doing that and planning 0:03:42.920 --> 0:03:43.640 for that as well. 0:03:43.760 --> 0:03:45.120 What did you could I just ask you to follow? 0:03:45.280 --> 0:03:47.040 What did you feel like we're the priorities you got 0:03:47.200 --> 0:03:48.440 or what can you share with us? 0:03:48.520 --> 0:03:52.200 Yeah, you know, I think right now we're learning, and 0:03:52.240 --> 0:03:55.400 of course we're waiting. I think there probably is some 0:03:55.520 --> 0:03:58.200 planning from a tariff perspective and to understand, okay, what 0:03:58.600 --> 0:04:01.920 does that really look like. I think there's some conversations 0:04:01.960 --> 0:04:05.640 from a tax perspective as well. And then, as you know, 0:04:05.840 --> 0:04:09.520 there are other really important policy issues, whether we're talking 0:04:09.560 --> 0:04:12.320 about security or AI and I think we'll have to 0:04:12.520 --> 0:04:14.920 wait to see where that sits from a priority perspective 0:04:14.920 --> 0:04:15.280 as well. 0:04:15.360 --> 0:04:18.120 When you think about your supply chain and the potential 0:04:18.200 --> 0:04:21.359 for tariffs, what are the conversations that you're having around that, 0:04:21.520 --> 0:04:22.600 How could you be affected? 0:04:22.839 --> 0:04:26.240 Yeah, I think always from a supply chain perspective, and 0:04:26.279 --> 0:04:29.760 this came out of COVID. There's a level of agility 0:04:29.839 --> 0:04:33.240 and planning that is going on now that is like 0:04:33.320 --> 0:04:35.720 ten x what all companies were doing before. And I 0:04:35.760 --> 0:04:38.480 think we've learned that. And on the tariff side, kind 0:04:38.480 --> 0:04:41.920 of understanding what do the numbers look like where and 0:04:42.000 --> 0:04:44.839 what impact does that have from a cost perspective to 0:04:45.000 --> 0:04:47.960 Cisco and potentially to our customers. 0:04:48.040 --> 0:04:49.040 Is it going to cost more? 0:04:49.320 --> 0:04:52.640 Because you could, it could, And I think at this 0:04:52.760 --> 0:04:55.800 moment we just have to wait and see and probably 0:04:55.839 --> 0:04:59.360 not get too excited or nervous one way or another. 0:04:59.400 --> 0:05:00.839 Let's wait and se and then we'll react. 0:05:00.960 --> 0:05:04.880 But is it worth thinking about changing your supply chain 0:05:04.920 --> 0:05:10.560 in the sense of finding different suppliers, moving manufacturing facilities, 0:05:10.680 --> 0:05:14.000 or having suppliers move manufacturing facilities as a result of 0:05:14.360 --> 0:05:15.000 these tariffs. 0:05:15.200 --> 0:05:17.120 You know what I would say, tim, is we have 0:05:17.279 --> 0:05:22.880 been building redundancy even before the worry about tariffs. And 0:05:22.920 --> 0:05:25.560 I think right now you have to be so fluid 0:05:25.600 --> 0:05:29.520 whether you're responding to a disaster that occurs in a 0:05:29.560 --> 0:05:34.360 particular location, whether there are suppliers shortages. I think this 0:05:34.440 --> 0:05:36.680 is the new name of the game. And so I 0:05:36.720 --> 0:05:39.400 would say there's a ton of planning going on against 0:05:39.440 --> 0:05:40.720 a ton of different scenarios. 0:05:40.880 --> 0:05:42.599 I got to ask you only because it's so front 0:05:42.640 --> 0:05:44.400 and center for all of us, and we're looking at 0:05:44.400 --> 0:05:47.400 what happened to the United Healthcare CEO. You are in 0:05:47.520 --> 0:05:50.960 charge of overseeing your people almost you know, more than 0:05:51.040 --> 0:05:54.200 ninety thousand around the globe. I am curious about some 0:05:54.240 --> 0:05:56.680 of the conversations and you know, some of what we've 0:05:56.680 --> 0:06:01.000 had maybe with friends, family are peers here. People are 0:06:01.000 --> 0:06:04.840 frustrated and not justifying anything, but I think people are 0:06:04.880 --> 0:06:08.320 trying to figure out how to be heard. So I'm 0:06:08.320 --> 0:06:11.719 just curious how you guys are thinking about that. Are 0:06:11.760 --> 0:06:12.800 your executives scared? 0:06:13.520 --> 0:06:15.440 I think the first thing that I would say is 0:06:15.480 --> 0:06:18.839 that there was a tremendous amount of shock and sadness 0:06:20.120 --> 0:06:24.040 for Brian and the family, and I think we start there. 0:06:24.720 --> 0:06:28.640 But to your point, the next conversation with our employees 0:06:28.720 --> 0:06:32.440 is always worry about security, and I think those are 0:06:32.440 --> 0:06:37.160 conversations that we've also had a lot of. And then 0:06:37.200 --> 0:06:40.560 the secondary piece. I do think it's important for us 0:06:40.640 --> 0:06:45.680 always to have conversations about those pain points, and I 0:06:45.720 --> 0:06:49.279 think we're always looking at what is going on from 0:06:49.279 --> 0:06:54.000 a broader health perspective, well being, healthcare, and so I 0:06:54.000 --> 0:06:56.520 think the most important thing that we can do is 0:06:56.600 --> 0:07:01.320 drive conversations so that when we talk to companies, we're 0:07:01.320 --> 0:07:03.600 really clear on the priorities and what we're hearing from 0:07:03.640 --> 0:07:04.080 our people. 0:07:05.160 --> 0:07:07.040 When you say talk to the companies, you mean in 0:07:07.080 --> 0:07:11.840 your role as chief people officer correct overseeing benefits at 0:07:11.840 --> 0:07:15.120 the company, getting feedback from employees about their own healthcare. 0:07:15.360 --> 0:07:18.160 I'll give us some examples how you've made changes in 0:07:18.240 --> 0:07:21.760 recent years to plans in that sense and what employees 0:07:21.760 --> 0:07:22.160 have said. 0:07:22.560 --> 0:07:24.480 Yeah, you know, it's so interesting when I go back 0:07:24.600 --> 0:07:27.520 about a decade, I think about the fact that at 0:07:27.520 --> 0:07:32.040 that moment we were realizing our employees have very different 0:07:32.560 --> 0:07:35.640 wants and priorities, and so as an example, that was 0:07:35.680 --> 0:07:37.920 the time where we started realizing, hey, there's a subset 0:07:37.960 --> 0:07:41.480 of our employees that want more benefits around elderly care. 0:07:42.200 --> 0:07:45.360 And we talk a lot about the Sandwich generation, right, Yeah, 0:07:45.400 --> 0:07:48.360 and so it's a real thing. Yeah, you know, our 0:07:48.440 --> 0:07:52.200 belief at Cisco is that you have to be assessing 0:07:52.400 --> 0:07:56.680 your benefits on a regular basis. And the nice thing 0:07:56.840 --> 0:07:59.880 is with some of the breakthroughs around things like can't 0:08:00.080 --> 0:08:04.440 your treatments. It has allowed us to try different benefits 0:08:04.480 --> 0:08:07.840 for our people. One of the things that I think 0:08:07.880 --> 0:08:10.360 Tim was so important to us several years ago was 0:08:10.440 --> 0:08:14.400 just introducing elements like second opinion support for our people. 0:08:14.440 --> 0:08:18.640 When something comes up, when something happens, that's the moment 0:08:18.680 --> 0:08:19.600 that you need support. 0:08:19.680 --> 0:08:22.840 Of course, how has the conversation around corporate and executive 0:08:22.840 --> 0:08:25.520 security changed in the wake of this tragedy. I've read 0:08:25.560 --> 0:08:30.560 reports that you have not you, but corporate security offices. 0:08:30.760 --> 0:08:34.280 Phones are just ringing off the hook, calling private security 0:08:34.720 --> 0:08:37.120 consultants and security officials and the like. 0:08:37.720 --> 0:08:40.840 Yeah, I would say that on a pretty regular basis, 0:08:40.880 --> 0:08:44.080 we're always assessing security for employees around the globe. I 0:08:44.120 --> 0:08:47.120 just think that's a good practice to have. But when 0:08:47.120 --> 0:08:50.840 you have a tragedy happen like what occurred last week, 0:08:51.160 --> 0:08:54.160 I think it does remind people how important it is 0:08:54.200 --> 0:08:57.920 to think about this, to think about those executives that 0:08:57.960 --> 0:08:59.839 are a bit more visible and what needs to be done. 0:09:00.000 --> 0:09:02.160 Of course, I want to ask you about the business environment. 0:09:02.200 --> 0:09:04.040 It was tap you. You guys did report about a 0:09:04.040 --> 0:09:07.240 month ago. We talked about it coming into it. Tell 0:09:07.320 --> 0:09:09.080 us about the business environment. Is there a little bit 0:09:09.120 --> 0:09:10.760 of like wait and see in terms of how the 0:09:10.800 --> 0:09:13.720 policies all play out or how are you guys seeing it. 0:09:13.760 --> 0:09:17.240 I think you gave, you know, an upbeat forecast or 0:09:17.280 --> 0:09:20.439 conservative annual forecast, but an upbeat outlook for the current period. 0:09:21.000 --> 0:09:24.240 So how much visibility do you feel comfortable around? 0:09:24.600 --> 0:09:27.080 Yeah, you know, I think it's really natural that there's 0:09:27.120 --> 0:09:30.280 going to be an element from a policy perspective that 0:09:30.360 --> 0:09:33.480 is wait and see. Okay, But I do think that 0:09:33.600 --> 0:09:37.640 when I look at some of our technologies, when you're 0:09:37.679 --> 0:09:41.640 talking about security as an example, and against the backdrop 0:09:41.720 --> 0:09:46.240 of a very dynamic cybersecurity world, that's something that our 0:09:46.360 --> 0:09:51.200 customers continue to prioritize, and that's something that's going to 0:09:51.200 --> 0:09:54.319 be separate from any change from an administration perspective. I 0:09:54.360 --> 0:09:59.360 also think as it relates to AI, our customers are 0:10:00.120 --> 0:10:02.640 getting more and more prepared. I would say on the 0:10:02.640 --> 0:10:05.760 web scale side, they're in it, they're working. On the 0:10:05.840 --> 0:10:09.760 enterprise side, I think it's probably the prioritization of use 0:10:09.840 --> 0:10:12.120 cases for the future. I don't know if you saw this, 0:10:12.200 --> 0:10:14.600 but we just put out our new AI Readiness Report, 0:10:15.240 --> 0:10:17.640 and what was so interesting was that we did one 0:10:17.760 --> 0:10:21.880 last year and What was consistent across the two years 0:10:22.600 --> 0:10:27.080 was the pressure that companies and IT individuals are feeling 0:10:27.320 --> 0:10:30.520 around AI readiness. 0:10:30.880 --> 0:10:32.160 But where we didn't. 0:10:31.840 --> 0:10:36.480 See any improvement is around having the talent for the 0:10:36.520 --> 0:10:37.600 AI play. 0:10:37.440 --> 0:10:39.120 Which is really fascinating. 0:10:39.600 --> 0:10:42.439 No, and especially because eighty five percent of the participants 0:10:42.440 --> 0:10:45.120 said that they feel pressure to have a plan within 0:10:45.160 --> 0:10:47.960 the next eighteen months, and so it just tells us 0:10:47.960 --> 0:10:50.880 there's a lot of practical work that needs to be done. 0:10:51.040 --> 0:10:54.440 From a Cisco perspective, our focus is on AI infrastructure 0:10:55.280 --> 0:10:58.120 and that's something that will create a lot of demand. 0:10:58.320 --> 0:11:01.600 From a network perspective, just goodness as we move forward. 0:11:01.880 --> 0:11:03.640 But I would say internally, there's a lot of work 0:11:03.640 --> 0:11:05.440 that we're doing with our people, and our hope is 0:11:05.440 --> 0:11:07.480 that we can share this more broadly with our customers 0:11:07.520 --> 0:11:07.880 as well. 0:11:08.000 --> 0:11:10.480 Are you having any issues finding employees right now? 0:11:11.240 --> 0:11:16.080 So I would say there's always a shortage for great talent. 0:11:16.160 --> 0:11:17.040 That's how it feels. 0:11:18.040 --> 0:11:22.559 And so whats the forward or there's certain categories. I 0:11:22.559 --> 0:11:26.480 would say there's certain categories, okay, So I would say absolutely, 0:11:26.520 --> 0:11:31.240 from an AI talent perspective, people are building skills right now, 0:11:31.280 --> 0:11:34.840 and so what's really fascinating is we start with a 0:11:35.160 --> 0:11:38.240 huge funnel of talent, and what we're finding is that 0:11:38.280 --> 0:11:41.840 a small percentage of that funnel has the AI skills 0:11:41.880 --> 0:11:44.600 that we're looking for. What that means on a positive 0:11:44.679 --> 0:11:47.760 side is that companies like Cisco have to build that 0:11:47.880 --> 0:11:50.800 talent internally and it's going to create a lot of 0:11:50.800 --> 0:11:51.880 opportunities for our people. 0:11:52.000 --> 0:11:53.760 Feels like we're companies are going to be very involved 0:11:53.800 --> 0:11:57.040 right and making sure their employees have the skills. Two 0:11:57.080 --> 0:11:58.600 quick things I want to get to. First of all, 0:11:58.640 --> 0:11:59.240 can we tell. 0:11:59.160 --> 0:11:59.920 That you're getting ready to go? 0:12:01.120 --> 0:12:01.360 Sure? 0:12:01.440 --> 0:12:02.920 Okay, what you guys are? 0:12:03.080 --> 0:12:03.360 Sorry? 0:12:03.720 --> 0:12:07.640 Sorry that there you just but your global company and 0:12:07.679 --> 0:12:09.560 you are getting ready to go to Africa. We talked 0:12:09.600 --> 0:12:12.559 a little bit about offline about India. What is going 0:12:12.600 --> 0:12:15.200 on in those markets that you think is really important 0:12:15.200 --> 0:12:16.360 for the Bloomberg audience to know. 0:12:16.600 --> 0:12:18.560 Yeah, I'll start with Africa for just a moment. I 0:12:18.559 --> 0:12:22.319 think what we see there is that the demographics and 0:12:22.440 --> 0:12:28.200 the number of young people embracing technology creates a tremendous opportunity. 0:12:28.600 --> 0:12:31.080 And so from a Cisco perspective, there's a lot of 0:12:31.120 --> 0:12:34.439 work that we're doing around key topics like cyber resilience. 0:12:35.000 --> 0:12:38.640 We did a report several months ago that basically showed 0:12:38.640 --> 0:12:41.560 that the number of cyber attacks on the African continent 0:12:41.640 --> 0:12:45.400 continue to increase and in fact it actually impacted GDP 0:12:45.559 --> 0:12:49.600 by about ten percent. And so you see tremendous opportunities 0:12:49.679 --> 0:12:54.640 around policy around skills. We see a shortage of security 0:12:54.679 --> 0:12:58.599 skills around the world, but on the African continent opportunities 0:12:58.600 --> 0:13:02.480 too in that only ninety percent of cyber professionals on 0:13:02.520 --> 0:13:05.240 the continent or women, and so there's huge opportunities there. 0:13:05.280 --> 0:13:07.640 So a big part of my visit in addition to 0:13:07.679 --> 0:13:10.000 the digital projects, is looking at how we can drive 0:13:10.080 --> 0:13:12.760 digital skilling on the continent. And then I would say 0:13:12.800 --> 0:13:17.000 from an Africa perspective, there's tremendous opportunity and growth and 0:13:17.640 --> 0:13:19.679 it's exciting to see. I think it gives us an 0:13:19.679 --> 0:13:23.640 opportunity from a Cisco perspective to be even bolder within 0:13:23.679 --> 0:13:27.480 the country to really look at the AI opportunity there 0:13:27.520 --> 0:13:31.800 as well. I'll probably be in India early in the 0:13:31.840 --> 0:13:35.400 new year and just kind of planning seconds. Yeah, we 0:13:35.440 --> 0:13:37.240 plan to do a lot more around side. 0:13:37.280 --> 0:13:41.880 There's a lot going on, yes already already around the world. 0:13:42.200 --> 0:13:44.800 I know we ran out of time good luck, good 0:13:44.880 --> 0:13:47.319 luck with your travels. I know we'll be checking in again, 0:13:47.360 --> 0:13:50.760 but so appreciate it as always. Fran Casudas. She's executive 0:13:50.800 --> 0:13:53.920 vice president, chief People, Policy and Purpose Officer at Cisco Systems. 0:13:53.960 --> 0:13:56.559 Joining us right here. 0:13:59.360 --> 0:14:02.920 You're listening to the Bloomberg Business Week Podcast. Catch us 0:14:02.960 --> 0:14:06.240 live weekday afternoons from two to five pm. Easter Listen 0:14:06.280 --> 0:14:08.400 on Apple car Play and then brout Auto with a 0:14:08.440 --> 0:14:12.120 Bloomberg Business app, or watch us live on YouTube. 0:14:13.120 --> 0:14:16.439 This past week, Broadcom shares jumped after the Information reported 0:14:16.440 --> 0:14:18.880 that it's working with Apple on a server chip specially 0:14:18.960 --> 0:14:21.520 designed for AI. We also got earnings from the company. 0:14:21.640 --> 0:14:25.120 Check all of that out online or on the Bloomberg terminal. Meantime, 0:14:25.240 --> 0:14:28.080 Google debut Gemini two point zero, a new version of 0:14:28.080 --> 0:14:31.120 its flagship AI model that's set to be twice as fast. 0:14:31.400 --> 0:14:34.600 Shares of Google's parent Alphabet hit a record this past week, 0:14:34.640 --> 0:14:36.160 fueled in part by that news. 0:14:36.640 --> 0:14:40.200 Earlier this month, HPE reached a record high after reporting 0:14:40.200 --> 0:14:43.400 better than expected quarterly revenue, driven by a sixteen percent 0:14:43.440 --> 0:14:46.560 increase in AI system sales and a thirty two percent 0:14:46.640 --> 0:14:50.040 jump in server sales used to power AI work demand 0:14:50.080 --> 0:14:53.080 for high powered computing to run AI workloads has led 0:14:53.080 --> 0:14:56.920 to a boom for hardware makers, including companies like HPE, Dell, 0:14:57.000 --> 0:14:58.280 and super micro Computer. 0:14:58.600 --> 0:15:01.000 So to help give us an idea which companies stand 0:15:01.000 --> 0:15:03.960 to benefit from all this spending is Crawford del Pratt. 0:15:04.240 --> 0:15:06.880 He is president of the Global market intelligence firm IDC, 0:15:07.040 --> 0:15:10.080 of course short for the International Data Corporation, and he 0:15:10.160 --> 0:15:12.360 caught up with Tim and Bloomberg's Jess meant. 0:15:12.640 --> 0:15:16.800 IDC overall we forecast, wait for it, thirty seven percent 0:15:16.920 --> 0:15:20.920 growth in servers and storage this year in dollars. Okay, 0:15:20.960 --> 0:15:25.200 So what's driving that? It's an architectural shift to AI, right, 0:15:25.400 --> 0:15:29.000 and we are seeing that service providers and then ultimately 0:15:29.120 --> 0:15:33.040 enterprises will need to upgrade their infrastructure to support these 0:15:33.080 --> 0:15:34.880 new what we call AI workloads. 0:15:35.320 --> 0:15:37.600 So especially because when you hear AI, always think of 0:15:37.680 --> 0:15:40.560 maybe companies like an Nvidia, maybe not as sexy as 0:15:40.560 --> 0:15:42.640 a name quite like this, But when it comes to you, 0:15:42.800 --> 0:15:46.240 especially sort of the IT spending side of things with 0:15:46.520 --> 0:15:49.400 HPE as well as some of its other competitors, who 0:15:49.400 --> 0:15:51.280 do you think can really benefit from this? Beyonce, when 0:15:51.280 --> 0:15:55.080 we're talking about other type of chip type semiconductor type stocks. 0:15:54.960 --> 0:15:57.800 Yeah, So when you start looking at what's happening with 0:15:57.880 --> 0:16:01.960 AI is that you have to upgrade your overall infrastructure. 0:16:02.000 --> 0:16:05.720 So that means that companies like HPE are benefiting, companies 0:16:05.760 --> 0:16:10.880 like Dell are benefiting. You're seeing also ultimately you'll see 0:16:10.960 --> 0:16:15.960 the software stack associated with managing your infrastructure. Ultimately your 0:16:16.000 --> 0:16:18.960 applications will benefit. But that's gonna that's going to take 0:16:18.960 --> 0:16:21.680 a longer period of time. But in the near term, 0:16:21.840 --> 0:16:24.480 you know, beyond the Nvidia, you're seeing that the entire 0:16:24.520 --> 0:16:27.000 infrastructure stack needs to get grinded. Now for let's just 0:16:27.040 --> 0:16:29.720 get back to HPE for a second. What's also happening 0:16:29.720 --> 0:16:32.200 at HPE is that a number of years ago they 0:16:32.240 --> 0:16:36.000 went on a diversification strategy. They bought a company called 0:16:36.120 --> 0:16:39.880 Uruba Networks and a Ruben Networks expanded their footprint in 0:16:39.920 --> 0:16:43.720 the enterprise. So last quarter, HPE, you know, had a 0:16:43.720 --> 0:16:46.000 tougher reaction from Wall Street because they saw the gross 0:16:46.000 --> 0:16:48.600 margins dip. They saw them dip again, but that was 0:16:48.640 --> 0:16:51.800 really related to a slow down and a stall in 0:16:51.840 --> 0:16:54.640 the enterprise infrastructure space. In a Ruba networks, what'll we 0:16:54.680 --> 0:16:57.880 call the edge of the network, the wireless and wireless infrastructure, 0:16:58.040 --> 0:17:01.480 and as that infrastructure now is working, it's inventory. HP 0:17:01.560 --> 0:17:04.040 saw a sequential increase in that business, even though it's 0:17:04.040 --> 0:17:07.240 still down twenty percent year over year. Sequentially, that business 0:17:07.280 --> 0:17:10.119 is starting to stabilize and their gross margins will start 0:17:10.160 --> 0:17:12.640 to have started the stabilized as well, although like I said, 0:17:12.680 --> 0:17:14.960 they were down about four hundred BIPs. Now, I think 0:17:14.960 --> 0:17:17.560 going forward, what you're seeing at the company is and 0:17:17.600 --> 0:17:19.720 you're seeing this in other companies as well, like Dell, 0:17:20.119 --> 0:17:24.480 the demand is just sustained for infrastructure and the demand 0:17:24.600 --> 0:17:28.000 for nhp's case, hpe s case, the demand for infrastructure 0:17:28.040 --> 0:17:30.919 around the network will likely increase. And don't forget they 0:17:30.960 --> 0:17:34.640 announced that they have the air intent required Juniper Networks 0:17:35.000 --> 0:17:38.320 that will add their ability to get the service provider 0:17:38.440 --> 0:17:40.080 side of the network and they expect to close that 0:17:40.119 --> 0:17:43.160 deal sometime in early twenty five. So it's a very 0:17:43.160 --> 0:17:46.320 interesting story. Is this company is really reinventing itself and 0:17:46.400 --> 0:17:48.720 is seeing the benefit of that reinvention in their numbers. 0:17:48.880 --> 0:17:49.959 What's it trying to leave behind? 0:17:50.400 --> 0:17:53.400 So what it's trying to leave behind is running on 0:17:53.560 --> 0:17:58.480 that X eighty six Intel treadmill of commoditization, right, I mean, 0:17:58.640 --> 0:18:00.800 so you know, HPE SAP back a number of years 0:18:00.840 --> 0:18:03.679 ago and said, where are the largest profit pools that 0:18:03.760 --> 0:18:07.160 we can prosecute in the enterprise? Networking hit the top 0:18:07.160 --> 0:18:09.600 of the list. That's why they went after Arouba Software. 0:18:09.640 --> 0:18:12.520 That's why they brought out things like es Morale Storage. 0:18:12.640 --> 0:18:14.600 That's why they and by the way, Dell Body MC 0:18:14.760 --> 0:18:18.680 Right in the case of HPE, they brought out Electra, 0:18:18.760 --> 0:18:21.679 which is their new storage platform. Now they're looking at 0:18:22.040 --> 0:18:24.760 at networking and saying, huh, well, there's also this service 0:18:24.800 --> 0:18:29.960 provider networking, this really high capacity, high bandwidth networking. Juniper 0:18:30.160 --> 0:18:32.879 adds that that's so what they're trying to do is 0:18:32.880 --> 0:18:36.000 they're they're basically the gravitational force of commoditization is what 0:18:36.000 --> 0:18:38.200 they're leading. They're trying to leave behind Another stock. 0:18:38.280 --> 0:18:39.960 I wanted to point out that a lot of tension 0:18:40.000 --> 0:18:42.919 is given to is super Micro SMCI. Now, at a 0:18:42.960 --> 0:18:46.280 certain point, it was one of the worst performing stocks 0:18:46.280 --> 0:18:48.000 in the S and P five hundred this year just 0:18:48.040 --> 0:18:51.119 because of those questions surrounding its accounting practices. Though if 0:18:51.160 --> 0:18:53.200 you look here to date, it's recovered some of those 0:18:53.200 --> 0:18:55.840 losses and it's actually help around forty five percent. 0:18:56.160 --> 0:18:57.480 You were talking about. 0:18:57.240 --> 0:18:59.760 Kind of the exposure when it comes to service providers, 0:19:00.119 --> 0:19:04.879 thinking about like Meta Salesforce, Microsoft SMCI doesn't exactly have 0:19:04.960 --> 0:19:07.040 the same kind of broad reach that some of its 0:19:07.080 --> 0:19:09.199 competitors do when it comes to a company like this. 0:19:09.640 --> 0:19:11.640 How do you make of this and its stock performance 0:19:11.680 --> 0:19:12.000 so far? 0:19:12.520 --> 0:19:15.520 Yeah, So when you look at super Micro, it's a 0:19:15.520 --> 0:19:19.800 fascinating company because where an HPE or a Dell or 0:19:19.880 --> 0:19:24.840 Lenovo sells a broad range of products that address the 0:19:24.880 --> 0:19:27.800 needs of many many different kinds of enterprises and also 0:19:27.840 --> 0:19:31.960 service providers, Certainly super Micro has a range of products, 0:19:32.000 --> 0:19:34.920 but really what they do is a significant amount of 0:19:34.960 --> 0:19:39.320 engineering and innovation really for what we call ultra dense 0:19:39.640 --> 0:19:43.480 service provider applications. And so you know you're a hyperscaler, 0:19:43.560 --> 0:19:46.160 so you're a Microsoft, or you're a or you're a Meta, 0:19:46.280 --> 0:19:48.359 or you're a Google. Super Micro is going to do 0:19:48.400 --> 0:19:52.600 that really really tight engineering between the component suppliers as 0:19:52.600 --> 0:19:55.399 well as the actual physical box and bring that box 0:19:55.440 --> 0:19:59.520 out and allow you to have very dense environment. The 0:19:59.640 --> 0:20:01.760 down side of that is that they don't have the 0:20:01.800 --> 0:20:04.960 same distribution channel, They don't have the same reach that 0:20:05.040 --> 0:20:06.800 you would see at a Lenovo we're in a Dell. 0:20:07.280 --> 0:20:10.639 So the concentration of customers is very, very high. 0:20:10.640 --> 0:20:13.440 Oh, it's incredible. You go to this, well, the concentration 0:20:13.480 --> 0:20:17.560 of customers, the concentration of who they're buying from both Okay, yeah, yeah, 0:20:18.000 --> 0:20:20.080 because they see that on both, it's like it's pretty remarkable. 0:20:20.440 --> 0:20:24.440 I mean, they're a huge customer of Nvidia. Yeah, oh absolutely, 0:20:24.800 --> 0:20:26.480 it's like they're one of the top customers there. 0:20:26.560 --> 0:20:29.919 So so think about the AI and actually this this 0:20:30.040 --> 0:20:32.560 is a great metamor think about the AI kind of 0:20:32.720 --> 0:20:35.919 market right now as an upside down triangle. At the 0:20:35.960 --> 0:20:38.120 top of the triangle where the service providers and that's 0:20:38.119 --> 0:20:41.119 where the majority of your demand is coming. Okay, that's 0:20:41.160 --> 0:20:44.360 the animal. It's eating all the Nvidia processors right now. 0:20:44.600 --> 0:20:47.000 So that's the Microsoft's and the Amazon's. 0:20:46.640 --> 0:20:50.879 Hyperscarers, the Microsofts, the Amazons, the salesforces, the de metas, 0:20:51.760 --> 0:20:54.800 and as that triangle comes down, it gets narrow or 0:20:54.920 --> 0:20:59.640 narrow because the enterprise customers haven't really stepped up and 0:20:59.760 --> 0:21:04.680 bought into generative AI in the same way within their 0:21:04.760 --> 0:21:05.280 data center. 0:21:05.600 --> 0:21:08.000 Is that but if they do it, wouldn't they just 0:21:08.040 --> 0:21:11.400 go to a hyperscaler. Well, that's just it rather than 0:21:11.480 --> 0:21:13.880 doing it on prem potentially. 0:21:14.200 --> 0:21:18.840 But what we see is we see a lot of customers. 0:21:18.880 --> 0:21:20.560 I'm not saying this is a customer, but a customer 0:21:20.720 --> 0:21:22.639 like a a JP Morgan or someone like that, but 0:21:23.000 --> 0:21:27.840 significant an investment in custom applications, and those custom applications 0:21:27.840 --> 0:21:29.760 they want to be able to take those data stores 0:21:29.760 --> 0:21:32.560 that they're creating in their custom applications. Those are in 0:21:32.600 --> 0:21:35.879 their own data centers, and they will ultimately want to 0:21:36.160 --> 0:21:39.200 train their own large language models and have their custom 0:21:39.240 --> 0:21:41.959 applications be able to use those large language models to 0:21:41.960 --> 0:21:44.560 be able to get generative AI answers to serve their 0:21:44.600 --> 0:21:47.679 customers and their employees in new ways. That is when 0:21:48.160 --> 0:21:51.560 the bottom of the pyramid starts to get wider, because 0:21:51.600 --> 0:21:55.080 then enterprises start buying into this technology. But we're not 0:21:55.280 --> 0:21:57.880 there yet. Where we are is the top is what's 0:21:57.960 --> 0:22:02.040 consuming the vast majority of these processors. And what's interesting 0:22:02.359 --> 0:22:06.160 about generative AI is that usually with these compute architectures, 0:22:06.520 --> 0:22:08.960 it becomes a law of diminishing returns, where the performance 0:22:09.000 --> 0:22:12.040 starts to tap out no matter how much capacity you 0:22:12.040 --> 0:22:14.640 throw at it. We haven't seen that yet. With gener AI. 0:22:14.920 --> 0:22:17.600 You can keep throwing processing capacity at it and the 0:22:17.600 --> 0:22:20.320 system gets more and more and more capable, and you 0:22:20.320 --> 0:22:21.920 can also get significant speed gains. 0:22:22.000 --> 0:22:23.879 Yeah, one of my favorite functions in the terminal is 0:22:24.080 --> 0:22:26.159 s PLC so you to see the supply chains. I'm 0:22:26.200 --> 0:22:29.520 sure this is what timmy have been looking at the customerlier, 0:22:31.400 --> 0:22:33.520 but just for our radio listeners so that they know 0:22:34.000 --> 0:22:36.520 so you can get engauge there. So super Micro has 0:22:36.520 --> 0:22:37.960 been in the S and P five hundred for less 0:22:37.960 --> 0:22:41.720 than a year. It got added, Yeah, it got added 0:22:41.720 --> 0:22:44.240 to turn the end of the first quarterback in March. 0:22:44.359 --> 0:22:45.919 So I mean, what do you make of kind of 0:22:45.960 --> 0:22:48.120 like what's next here after it's trying to get over 0:22:48.160 --> 0:22:49.880 this hurdle with the accounting issues. 0:22:50.240 --> 0:22:51.840 Yeah again, you know, and I d see you know, 0:22:51.880 --> 0:22:54.320 we we we don't pick stocks, but I but I 0:22:54.359 --> 0:22:57.879 will tell you that from a from a performance standpoint, 0:22:57.880 --> 0:23:00.679 there is such a significant amount of eng hearing and 0:23:00.720 --> 0:23:03.160 so much as a significant amount of demand within that company. 0:23:03.320 --> 0:23:05.760 I believe that in the long term they are going 0:23:05.800 --> 0:23:09.639 to benefit continue to benefit from this AI boom, particularly 0:23:09.640 --> 0:23:13.320 as service providers continue to invest. So you know, take that, 0:23:13.400 --> 0:23:15.960 take that with what you will. But I don't see 0:23:15.960 --> 0:23:18.719 a world where super Micro is not continuing to participate 0:23:18.880 --> 0:23:19.520 in this market. 0:23:19.600 --> 0:23:22.000 Okay, Crawford, I'm going to go off script a little bit, sure, 0:23:22.000 --> 0:23:23.639 because I want to get your take on this. You're 0:23:23.680 --> 0:23:25.720 in Boston, that's where you're absolutely okay. You spend a 0:23:25.720 --> 0:23:27.680 lot of time in the Bay Area. Have you taken 0:23:27.720 --> 0:23:28.119 a Weimo. 0:23:29.040 --> 0:23:31.960 I have not taken a weaimo, but I have crossed 0:23:31.960 --> 0:23:33.120 the street in front of one. 0:23:33.119 --> 0:23:35.320 And it didn't hit you didn't. It didn't hit You're 0:23:36.480 --> 0:23:38.720 That's what I like to see. Yeah, here's why I ask. 0:23:38.920 --> 0:23:41.160 I was out in San Francisco a few weeks ago. Now, 0:23:41.280 --> 0:23:43.040 anyone can take these weaymos. You don't have to be 0:23:43.040 --> 0:23:45.080 on a list anymore. I down the media further, right, 0:23:45.240 --> 0:23:46.800 I don't. I mean it was I was only able 0:23:46.840 --> 0:23:48.760 to go within San Francisco. That's all I needed to do. 0:23:49.000 --> 0:23:51.560 I know they're training them, Yeah, they're they're training them 0:23:51.560 --> 0:23:53.280 to go to the airport. Now you can't get on 0:23:53.320 --> 0:23:56.520 the highway with them. Yet it blew my mind. It 0:23:56.600 --> 0:23:59.760 was incredible. I was a skeptic. I'm totally sold now 0:24:00.080 --> 0:24:01.480 for this one twenty eight minute trip. 0:24:01.640 --> 0:24:02.040 What are the. 0:24:02.000 --> 0:24:04.720 Companies that you cover play in that space? Like, if 0:24:04.920 --> 0:24:07.560 we're working to a world where these are all going 0:24:07.600 --> 0:24:09.320 to be these are going to be all over. How 0:24:09.320 --> 0:24:11.200 do the companies that you cover benefit. 0:24:11.480 --> 0:24:15.199 Boy, there's number there's a number of ways. And it 0:24:15.200 --> 0:24:16.880 also blew my mind. One of my team members sent 0:24:16.920 --> 0:24:18.720 me a video of her in a wamo and the 0:24:18.760 --> 0:24:22.679 thing bananas. It's driving itself. It's driving itself around a 0:24:22.720 --> 0:24:26.199 lot of ways. So companies like so think of a 0:24:26.280 --> 0:24:30.640 driverless vehicle as a little data center, a little smart 0:24:30.680 --> 0:24:33.600 connected node on the network. It has its own network 0:24:33.600 --> 0:24:36.440 inside of it, and it's obviously consuming a lot of 0:24:37.080 --> 0:24:40.119 processing power from the network. But what's different about a 0:24:40.119 --> 0:24:42.920 self driving vehicle is the amount of processing it needs 0:24:42.960 --> 0:24:45.520 to do. We call this compute at the edge of 0:24:45.560 --> 0:24:48.520 the network because it has to decide very very rapidly. 0:24:48.680 --> 0:24:50.320 Is that a human, is that a mailbox? Is that 0:24:50.359 --> 0:24:52.920 a dog? Is that a shadow? And it has to 0:24:52.960 --> 0:24:55.639 be able. It can't compute that at the core of 0:24:55.640 --> 0:24:57.439 the network. It's got a computer at the edge. So 0:24:57.480 --> 0:24:59.960 the kinds of companies that benefit from that is surprise 0:25:00.200 --> 0:25:03.000 in Nvidia, where you know they've been a key partner 0:25:03.040 --> 0:25:06.480 to FSD so full self driving at Tesla for quite 0:25:06.480 --> 0:25:09.639 some time. Also, over time, maybe companies. People don't think 0:25:09.640 --> 0:25:12.320 as much about Samsung, so they are going to be 0:25:12.320 --> 0:25:14.840 making a lot of the semiconductor content as well as 0:25:14.880 --> 0:25:17.800 the LED technology where you see these cars are become 0:25:17.880 --> 0:25:19.560 big curve displays over time. 0:25:19.920 --> 0:25:24.119 I do envision a world where we see auto accidents 0:25:24.520 --> 0:25:27.359 just plummet as a result of technology such as this. 0:25:27.880 --> 0:25:30.080 Am I am I dreaming? Or is that something that 0:25:30.080 --> 0:25:31.040 happens in our lifetime? 0:25:31.920 --> 0:25:34.200 No, I don't think you're dreaming. I think it does 0:25:34.240 --> 0:25:36.440 fall in the category of the old Paul Sappho from 0:25:36.480 --> 0:25:38.840 Stanford Free so don't confuse a clear view with a 0:25:38.880 --> 0:25:39.520 short distance. 0:25:40.280 --> 0:25:41.040 He's a futurist. 0:25:41.240 --> 0:25:44.600 Yeah, he's he's he's a futurist. And I think we 0:25:44.720 --> 0:25:46.159 are going to get there, but I think we're going 0:25:46.240 --> 0:25:48.600 to go through kind of an icky period. And that 0:25:48.640 --> 0:25:50.960 period is where the self driving cars don't make mistakes, 0:25:50.960 --> 0:25:53.399 but the humans do. And I think that's going to 0:25:53.480 --> 0:25:57.440 have really tough situation, a tough impact on things like insurance, 0:25:57.880 --> 0:26:00.000 and it's going to make it, you know, potentially more expensive. 0:26:00.080 --> 0:26:02.119 And that may actually get to a point where people 0:26:02.320 --> 0:26:04.560 start to say, do I want to be the person 0:26:04.640 --> 0:26:07.119 not using self driving because it's costs a lot for 0:26:07.160 --> 0:26:09.200 me to get in this vehicle and use this vehicle, 0:26:09.240 --> 0:26:12.080 because the risk that I may be distracted by doing something, 0:26:12.119 --> 0:26:14.359 looking at a phone, having a bad day, whatever, the 0:26:14.400 --> 0:26:18.159 car never never has that. So I think eventually we 0:26:18.200 --> 0:26:20.719 will get there, but it's going to take us probably 0:26:20.760 --> 0:26:24.160 longer than people think, because roads are complicated, and they're 0:26:24.160 --> 0:26:26.480 complicated all over the world, and all I mean self 0:26:26.520 --> 0:26:29.359 driving in Rome. You know, it gives me, It gives me, 0:26:29.880 --> 0:26:31.880 it gives me, gives me a headache. But I think 0:26:31.920 --> 0:26:35.000 that we are very close to being able to see 0:26:35.040 --> 0:26:38.520 it on highways, being able to see it on UH 0:26:38.640 --> 0:26:41.120 in a lot of US cities and in a lot 0:26:41.119 --> 0:26:44.359 of North American cities, and I think we're probably fat. 0:26:44.480 --> 0:26:46.480 It's probably closer than people think. I think it's you know, 0:26:46.520 --> 0:26:49.240 probably in the next in the next five years, you're 0:26:49.280 --> 0:26:52.000 probably going to start to see more and more modes, 0:26:52.680 --> 0:26:55.280 more and more companies bringing out the kind of technology 0:26:55.280 --> 0:26:57.200 the Tesla can bring out, where you know, you've got 0:26:57.240 --> 0:26:59.080 one hand on the steering wheel, but really, if you 0:26:59.160 --> 0:27:01.719 want to go pretty full sell driving, you can. 0:27:02.160 --> 0:27:05.320 I've actually never been in AWEIMO or. 0:27:05.200 --> 0:27:05.840 Anything like that. 0:27:05.880 --> 0:27:07.919 You're not the only one, are only a few cities 0:27:07.920 --> 0:27:09.480 where they do this. They do it in Austin, they 0:27:09.520 --> 0:27:11.440 do it in Phoenix, there was a story about Miami. 0:27:11.680 --> 0:27:13.480 Of course San Francisco, Yeah, in San Francisco. 0:27:13.840 --> 0:27:17.520 So when you're thinking about legislation coming out of Washington, 0:27:17.560 --> 0:27:19.560 obviously we have a new administration coming in, but kind 0:27:19.560 --> 0:27:22.240 of realistically over the course of years, because this will 0:27:22.240 --> 0:27:24.960 take a while. As you were mentioning, what do you 0:27:25.000 --> 0:27:27.400 think would need to happen, because also you were talking 0:27:27.400 --> 0:27:29.960 about the complications of roads and depending on what type 0:27:30.000 --> 0:27:31.000 of city you're in. 0:27:31.480 --> 0:27:33.520 Yeah, so there's going to be a lot of legislation 0:27:33.600 --> 0:27:35.760 that's going to need to be addressed here, which is 0:27:35.760 --> 0:27:38.240 why I think it's going to take a long time, 0:27:38.320 --> 0:27:40.720 much longer than the five years I mentioned for full 0:27:40.800 --> 0:27:43.679 self driving. But the kind of assist where you know, 0:27:43.680 --> 0:27:46.439 what Tesla has today is really only what Tesla has 0:27:46.480 --> 0:27:48.359 where you have won a little couple fingers on the 0:27:48.359 --> 0:27:50.960 steering wheel and the car is doing the vast majority 0:27:51.000 --> 0:27:53.680 of the driving. That's going to go to multiple manufacturers. 0:27:53.880 --> 0:27:55.520 What I was in, what I was in was full 0:27:55.520 --> 0:27:57.280 self driving. I mean I wasn't even in the Yeah. 0:27:57.320 --> 0:27:58.960 Yeah, So what you were in is going to take 0:27:58.960 --> 0:28:01.760 a lot longer from alegislation standpoint, where we're going to 0:28:01.880 --> 0:28:05.040 have to see again, this is going to get complicated 0:28:05.080 --> 0:28:08.320 because our state's comfortable with it is the federal government 0:28:08.600 --> 0:28:10.879 going across you know, if you want to go across 0:28:10.920 --> 0:28:13.600 state lines, states have to have agreements, and if states 0:28:13.640 --> 0:28:15.919 don't have agreements, then it becomes a federal issue. And 0:28:16.359 --> 0:28:18.280 I think that could take, you know, a lot longer 0:28:18.280 --> 0:28:19.320 than the technology could take it. 0:28:19.359 --> 0:28:21.280 It's also hard from a rules perspective, and I mean 0:28:21.359 --> 0:28:23.200 rules in the sense of like rules of the road. 0:28:23.520 --> 0:28:26.320 For example, I had to drive recently and I was 0:28:26.440 --> 0:28:29.040 driving my car in New York City and there was 0:28:29.520 --> 0:28:31.600 a car double parked in front of me, so I 0:28:31.640 --> 0:28:33.640 couldn't get around it. In order to get around it, 0:28:34.040 --> 0:28:36.159 I had to actually go over a double yellow line. 0:28:36.200 --> 0:28:39.040 There were no cars coming right. But what I did 0:28:39.200 --> 0:28:42.720 was not considered following the rules in the sense of 0:28:42.760 --> 0:28:44.360 like if a computer, like I don't know if a 0:28:44.400 --> 0:28:46.280 computer would actually do that. If I were in a 0:28:46.280 --> 0:28:48.240 self driving car, would I have just sat. 0:28:48.160 --> 0:28:50.640 Would you have just sat there and been frustrated because 0:28:50.680 --> 0:28:53.120 you it's an obvious solution that's not going to harm 0:28:53.160 --> 0:28:55.520 any right, and you know, it's the kind of thing 0:28:55.520 --> 0:28:58.640 you could do potentially. And now those kinds of things, 0:28:58.680 --> 0:29:00.680 you know, can be those kinds of canations can be 0:29:00.720 --> 0:29:04.040 programmed in, but probably not for a long time. I'll 0:29:04.040 --> 0:29:06.400 give you another example. What about the example where people 0:29:06.440 --> 0:29:11.520 start to figure out where the vulnerabilities are in these vehicles. 0:29:11.640 --> 0:29:13.120 So if you want to see that, you know, I'm 0:29:13.120 --> 0:29:14.280 making this up, but if you want to see the 0:29:14.360 --> 0:29:16.920 vehicle behave in maybe a strange way, come up very 0:29:16.920 --> 0:29:18.640 close to the back corner of it, or you know, 0:29:19.080 --> 0:29:22.000 you need to figure out sort of bad actors, not 0:29:22.000 --> 0:29:24.440 necessarily bad actors, but just people that try to figure 0:29:24.480 --> 0:29:27.720 out where the vulnerabilities are so that they can get 0:29:27.720 --> 0:29:30.440 around them faster potentially, or you know, potentially you know, 0:29:30.800 --> 0:29:32.520 try to gain the system in some way when you're 0:29:32.520 --> 0:29:35.280 a driver and you're and you're driving sort of against 0:29:35.280 --> 0:29:37.760 if you will, a full sell driving vehicle. 0:29:37.960 --> 0:29:40.760 Looks like Alphabet's robotaxi service is going to launch in 0:29:40.800 --> 0:29:47.080 Miami in twenty twenty six, So maybe that's more. 0:29:45.920 --> 0:29:46.920 Of the cropping up. 0:29:46.960 --> 0:29:48.120 I'm just waiting for New York. 0:29:48.600 --> 0:29:49.200 That's right. 0:29:49.400 --> 0:29:51.280 How how complicated is that? 0:29:51.440 --> 0:29:54.960 Like will never see that? I mean, you start. 0:29:54.760 --> 0:29:56.880 Getting outo some of those boroughs. You start getting downtown, 0:29:57.240 --> 0:29:58.760 it starts to get a little bit complicated. But I 0:29:59.080 --> 0:30:02.880 would say I don't think New York is meaningfully more complicated. 0:30:03.240 --> 0:30:05.160 San Francisco can be pretty complicated as well. 0:30:05.320 --> 0:30:09.080 Yeah, I'm talking to you a friend who works Intact 0:30:09.120 --> 0:30:11.960 and he was saying, New York's tough because there aren't 0:30:12.000 --> 0:30:14.760 very many legal places to pull over where San Francisco 0:30:14.800 --> 0:30:16.720 there are a lot of driveways that people can pull 0:30:16.760 --> 0:30:19.760 into to get into one of these things. But yeah, 0:30:19.840 --> 0:30:22.880 it could be complicated here. See Crawford, always love it 0:30:23.120 --> 0:30:25.400 when you stop by. Thanks for sticking us. 0:30:25.360 --> 0:30:27.360 For you both. Thanks so much for the time. 0:30:27.320 --> 0:30:29.720 Crawford Del Pratt, President at IDC. 0:30:31.760 --> 0:30:35.600 You're listening to the Bloomberg Business Week podcast. Listen live 0:30:35.720 --> 0:30:38.880 each weekday starting at two pm Eastern on applecar Play 0:30:38.920 --> 0:30:41.800 and Android Auto with the Bloomberg Business ad. You can 0:30:41.800 --> 0:30:45.080 also listen live on Amazon Alexa from our flagship New 0:30:45.120 --> 0:30:48.760 York station. Just say Alexa Play Bloomberg eleven thirty. 0:30:50.200 --> 0:30:53.440 The rise in artificial intelligence is turbo charging demand for 0:30:53.480 --> 0:30:56.840 bigger data centers. This is transforming the land that they're 0:30:56.880 --> 0:31:01.240 being built on and taxing a region's energy grids. In April, 0:31:01.280 --> 0:31:04.040 Goldman Sax estimated that data centers in the United States 0:31:04.200 --> 0:31:06.720 are projected to use eight percent of total power by 0:31:06.760 --> 0:31:10.600 twenty thirty, up from three percent in twenty twenty two. 0:31:10.920 --> 0:31:13.960 These data centers have the capacity to consume it combined 0:31:14.000 --> 0:31:17.440 five hundred and eight tarawatt hours of electricity per year 0:31:17.720 --> 0:31:20.200 if they were to run constantly. Okay, so what does 0:31:20.240 --> 0:31:23.840 that mean. That's greater than the total annual electricity production 0:31:23.920 --> 0:31:28.080 in for Italy or Australia. Needless to say, data centers, well, yeah, 0:31:28.080 --> 0:31:29.080 they're power intensive. 0:31:29.200 --> 0:31:33.160 That's some great context and perspective. Meantime, developers are meeting 0:31:33.200 --> 0:31:36.520 resistance at every turn from locals and property owners over 0:31:36.560 --> 0:31:40.320 how to accommodate the unprecedented power needs in their communities. 0:31:40.640 --> 0:31:44.360 One example is QTS. It's the data center developer that 0:31:44.480 --> 0:31:50.280 asset management giant Blackstone bankrolls. They are building QTS ten 0:31:50.360 --> 0:31:53.760 bunkers over six hundred acres of land in Georgia that'll 0:31:53.760 --> 0:31:57.400 house thousands of computers for companies such as Microsoft. 0:31:57.720 --> 0:32:00.760 The complex is expected to consume as much electricity is 0:32:00.760 --> 0:32:04.920 about a million US households, leaving utility Georgia power rushing 0:32:04.960 --> 0:32:07.840 to build the infrastructure to meet demand. Some of that 0:32:07.920 --> 0:32:11.040 infrastructure falls on the land of homeowners upset with high 0:32:11.080 --> 0:32:14.320 voltage wires on their front lawns. Writing all about it 0:32:14.360 --> 0:32:17.920 is Josh Saul, Bloomberg News Energy and climate disasters reporter 0:32:18.280 --> 0:32:19.600 who joined Katie Griefeld in me. 0:32:19.880 --> 0:32:21.960 What my colleague Dawn and I found was not that 0:32:22.000 --> 0:32:24.160 people were so upset about the data center itself. I mean, 0:32:24.160 --> 0:32:26.520 it's enormous. It's almost as big as Central Park, big 0:32:26.520 --> 0:32:29.680 as Disneyland. But what people are really angry about is 0:32:29.720 --> 0:32:33.360 the power lines necessary to electrify this data center, to 0:32:33.440 --> 0:32:36.800 run all those servers, to run the cooling, to run everything. 0:32:37.360 --> 0:32:40.280 Those are cutting through people's lawns. Basically, people feel like 0:32:40.520 --> 0:32:44.120 cutting through their lives. This is a quiet wooded area. 0:32:44.200 --> 0:32:46.600 People love watching the birds come in and rest on 0:32:46.640 --> 0:32:49.680 the lakes and etc. So people are really upset that 0:32:49.720 --> 0:32:52.040 the power company has to build these lines in order 0:32:52.080 --> 0:32:53.760 to power the data center. And this is something we're 0:32:53.760 --> 0:32:54.960 seeing across the country. 0:32:55.280 --> 0:32:57.400 And this is a simple question, but I assume that's 0:32:57.440 --> 0:33:00.160 a non negotiable that to power the data centers, there 0:33:00.280 --> 0:33:02.760 needs to be these big, ugly things. They can't put 0:33:02.800 --> 0:33:04.560 them underground or something I was going to ask the 0:33:04.600 --> 0:33:07.239 same thing. Okay, good run the same wavelength. 0:33:06.720 --> 0:33:09.320 Without the transmission lines, it's just a big empty Walmart. 0:33:09.360 --> 0:33:12.320 You can't do anything without the power. Putting them underground 0:33:12.400 --> 0:33:15.200 is really expensive. That's basically it turned out to be 0:33:15.200 --> 0:33:18.760 a non starter. Some in the community, including the local church, asked, hey, 0:33:18.800 --> 0:33:21.760 can we bury these but it would raise the costs 0:33:21.800 --> 0:33:25.360 and created some other issues beyond what the power company 0:33:25.400 --> 0:33:27.120 and QTS were willing to deal with. 0:33:27.480 --> 0:33:29.479 I have to imagine it would be disruptive too, if 0:33:29.520 --> 0:33:30.840 you have to, you know, dig it up. 0:33:31.160 --> 0:33:32.920 Yeah, they do it here in New York City. That's 0:33:32.960 --> 0:33:35.360 a lot of the power lines and most neighborhoods are aried. Yeah, 0:33:35.440 --> 0:33:38.240 but yeah, what happens in New York City is not 0:33:38.280 --> 0:33:40.320 necessarily what happens around the country. 0:33:40.480 --> 0:33:42.880 Right, So it's as much power as a million homes 0:33:42.920 --> 0:33:44.800 just for this one one data center. 0:33:44.840 --> 0:33:45.800 That's one data center. 0:33:45.920 --> 0:33:48.760 That's one huge data center. Yeah, one point four gigawatts 0:33:48.920 --> 0:33:51.000 for people watching this area. You want to get start 0:33:51.040 --> 0:33:53.320 to get used to the terms of megawats and gigawats. Okay, 0:33:53.320 --> 0:33:55.960 what's a giga gigawats a thousand megawa? What's a megaway 0:33:56.160 --> 0:33:59.040 megawatt is one megawhy let's let's move on here. Okay, 0:34:01.240 --> 0:34:02.200 a huge amount of power. 0:34:02.200 --> 0:34:02.800 And what that. 0:34:02.720 --> 0:34:07.560 Creates is issues with the local power generation. So you 0:34:07.600 --> 0:34:11.520 know the power company in the state Southern they have 0:34:11.640 --> 0:34:16.160 goals to shut off coal plants, to build fewer gas plants. 0:34:16.520 --> 0:34:18.200 Those are things that you do to get your carbon 0:34:18.200 --> 0:34:22.520 emissions down and hopefully have less climate change. But when 0:34:22.600 --> 0:34:25.080 you have when you keep adding more and more demand 0:34:25.239 --> 0:34:27.560 to the grid, you have to add more supply to 0:34:27.560 --> 0:34:29.400 the grid. And as one utility exec put it to me, 0:34:29.480 --> 0:34:30.640 that's just basic physics. 0:34:30.880 --> 0:34:32.239 Where does Blackstone come in here. 0:34:32.560 --> 0:34:36.400 Blackstone owns the data center developer QTS. They bought them 0:34:36.440 --> 0:34:38.480 a couple of years ago and QTS is now a 0:34:38.480 --> 0:34:42.000 major part of their major part of their portfolio. QTS 0:34:42.040 --> 0:34:44.440 builds data centers across the country. They have a footprint 0:34:45.080 --> 0:34:47.560 fifty billion dollars worth of data centers and they have 0:34:47.880 --> 0:34:50.799 plans for another fifty billion dollars of data centers in 0:34:50.840 --> 0:34:51.640 their pipeline. 0:34:52.360 --> 0:34:55.480 That's really interesting, and I mean, Blackstone isn't alone in this, 0:34:56.120 --> 0:34:58.600 but Blackstone is going particularly big. 0:34:58.640 --> 0:34:59.960 It sounds like that's right. 0:35:00.000 --> 0:35:03.600 Blackstone is a big player in this and along with 0:35:03.640 --> 0:35:05.879 all the big tech firms which are also building their 0:35:05.880 --> 0:35:08.239 own data centers to run their own operations. 0:35:08.719 --> 0:35:12.840 I mean, you think about this fight that's happening in Fayetteville, Georgia. 0:35:13.440 --> 0:35:15.600 It doesn't feel like this is going away, that this 0:35:15.719 --> 0:35:18.320 problem is only going to get bigger. You think about 0:35:18.360 --> 0:35:21.319 how Wall Street in particular is going all in on 0:35:21.480 --> 0:35:23.680 AI playing out in Georgia right now. But I have 0:35:23.719 --> 0:35:27.360 to imagine that something similar is happening across the US exactly. 0:35:27.400 --> 0:35:28.960 It feels like, it feels to me like all of 0:35:29.000 --> 0:35:31.000 our systems are set up to build more and more 0:35:31.000 --> 0:35:33.480 of these things and to power them. You have the 0:35:33.520 --> 0:35:36.160 tech firms that are in this AI race and want 0:35:36.160 --> 0:35:38.440 the data centers because they need that compute power. You 0:35:38.480 --> 0:35:42.800 have private developers like QTS that are incentivized to build 0:35:42.800 --> 0:35:45.240 lots of these things. And then you have power companies 0:35:45.280 --> 0:35:48.680 which their mandate these are regulated utilities, but their mandate 0:35:48.760 --> 0:35:51.920 is to provide power to customers in their area. So 0:35:51.960 --> 0:35:56.400 when a big new power demand shows up, their job 0:35:56.560 --> 0:35:59.360 is to provide power to that and build the power 0:35:59.360 --> 0:36:01.920 lines to it with a threat of eminent domain behind them. 0:36:01.960 --> 0:36:03.919 So it kind of feels like just everything is set 0:36:04.000 --> 0:36:07.919 up to get as many of these onto the ground 0:36:07.920 --> 0:36:08.480 as possible. 0:36:08.520 --> 0:36:11.960 What do we know about what happens when a high 0:36:12.200 --> 0:36:17.480 power line like this goes on someone's property or goes 0:36:17.520 --> 0:36:20.319 through their property, Like, does it change the value of 0:36:20.360 --> 0:36:24.799 a home? Does it make noise constantly? Are you hearing 0:36:24.880 --> 0:36:26.000 buzzing those sorts of things? 0:36:26.000 --> 0:36:29.319 It doesn't make noise. It certainly affects people's appreciation or 0:36:30.040 --> 0:36:32.400 love for their own home. You know, we talked to 0:36:32.400 --> 0:36:33.799 lots of people who are like, you know, I moved 0:36:33.800 --> 0:36:36.160 to I moved to Georgia because I wanted to take 0:36:36.200 --> 0:36:38.080 care of my mom, and we bought this place. It 0:36:38.120 --> 0:36:39.920 was going to be kind of our It felt like 0:36:39.960 --> 0:36:41.960 our little paradise, and now it feels like that paradise 0:36:42.000 --> 0:36:44.680 is crumbling. So people certainly don't like looking at power 0:36:44.719 --> 0:36:48.040 lines and then more in you know, more brass tacks here. 0:36:48.440 --> 0:36:51.279 Appraisers we talked to said that big transmission lines can 0:36:51.320 --> 0:36:54.840 cut the value of a home by ten to thirty percent, 0:36:54.960 --> 0:36:57.239 depending on how big the line is, how close it 0:36:57.320 --> 0:37:00.200 is the house, how expensive the house is, or and 0:37:00.239 --> 0:37:02.920 the rural character is to the home and to the property. 0:37:03.560 --> 0:37:05.319 So to have you know, these are some of these 0:37:05.320 --> 0:37:08.279 are nicer homes. They're in an area with where that 0:37:08.360 --> 0:37:11.040 rural character is important. Some of them could be seeing 0:37:11.120 --> 0:37:12.920 big drops in their value. 0:37:13.239 --> 0:37:16.680 To approach this like an economist, though, I mean you 0:37:16.760 --> 0:37:18.960 have to imagine that more people are going to move 0:37:19.040 --> 0:37:21.919 to some of these towns, that that's going to bring 0:37:21.920 --> 0:37:25.200 in more business, there will be more spending in the 0:37:25.239 --> 0:37:28.040 local economy. I mean, are there any benefits here. 0:37:28.360 --> 0:37:30.640 It's not so much people because these data centers don't 0:37:30.680 --> 0:37:33.160 actually have many employees. You have some construction jobs on 0:37:33.200 --> 0:37:35.640 the front end, but you have sort of the stereotypical 0:37:35.680 --> 0:37:38.960 guy with the silver ponytail when by himself when the 0:37:39.000 --> 0:37:42.160 data center actually opens. But in terms of benefits, big 0:37:42.200 --> 0:37:44.239 tax benefits, a lot of you know, QTS is going 0:37:44.320 --> 0:37:46.080 to pay a lot, you know, different number, you know, 0:37:46.200 --> 0:37:50.000 a huge, huge amount of money over time. Already the 0:37:50.040 --> 0:37:52.840 school local school district has separately received enough money and 0:37:52.880 --> 0:37:56.680 tax benefits to you know, retain seven teachers, half dozen teachers. 0:37:57.280 --> 0:37:59.719 So certainly, I mean it's economic development. That's why these 0:37:59.760 --> 0:38:02.200 local boards of commerce are saying like, please come here, 0:38:02.239 --> 0:38:04.280 and they sort of like actually sought out and wanted 0:38:04.360 --> 0:38:05.359 QTS to come there. 0:38:05.600 --> 0:38:08.239 You've been You've been writing about and reporting on this 0:38:08.360 --> 0:38:10.960 space for quite a while at this point. Every time 0:38:10.960 --> 0:38:12.839 I see like a new big story from you, it 0:38:12.880 --> 0:38:15.600 has to do with AI and data centers. What is 0:38:15.640 --> 0:38:19.440 it about this area that makes it appealing to this 0:38:19.520 --> 0:38:23.359 company QTS? And what are the other areas that that 0:38:23.440 --> 0:38:27.040 people should think about when thinking, Okay, well is my 0:38:27.120 --> 0:38:28.279 community next for one of. 0:38:28.200 --> 0:38:31.880 These Yeah, this area is attractive because they have a 0:38:31.920 --> 0:38:35.760 big stable power company. Georgia Power is owned by Southern 0:38:36.120 --> 0:38:37.959 and that's a you know, a great company for these 0:38:38.080 --> 0:38:41.839 developers to work with. And the developers were able to 0:38:42.080 --> 0:38:44.440 find a plot of land and talk to the power 0:38:44.480 --> 0:38:49.160 company about having having electricity provided. As far as where 0:38:49.160 --> 0:38:51.200 else they're coming, I mean it's almost like where else 0:38:51.239 --> 0:38:53.520 are they not coming? You know, you have Northern Virginia's 0:38:53.600 --> 0:38:58.000 Data Center Alley, massive amounts of data center development there. 0:38:58.280 --> 0:39:01.960 There's also you know, Arizona, but they're really coming up 0:39:02.000 --> 0:39:04.960 in just large parts lots and lots of the US 0:39:05.000 --> 0:39:05.960 and also around the world. 0:39:06.040 --> 0:39:09.160 I would think of like, you know, relatively cheap electricity, 0:39:09.200 --> 0:39:12.600 but that's tough to kind of come by in a 0:39:12.600 --> 0:39:13.439 stable way, right. 0:39:13.440 --> 0:39:16.319 We actually heard more about We actually heard more about 0:39:16.360 --> 0:39:18.719 cheap electricity. When I was writing about bitcoin miners and 0:39:18.760 --> 0:39:22.239 their search for power, the hyperscalers have so much money 0:39:22.280 --> 0:39:26.359 and the race for AI is so big that they 0:39:26.400 --> 0:39:29.440 actually are more concerned about stable and large amounts of power, 0:39:29.640 --> 0:39:31.400 with the price being secondary. 0:39:31.560 --> 0:39:35.840 That's interesting. One thing that I think about with a 0:39:35.840 --> 0:39:38.960 story like this, Josh, is how fast innovation happens, and 0:39:39.040 --> 0:39:43.120 the way that things change so quickly when computers become 0:39:43.160 --> 0:39:47.520 more powerful. And I wonder if they're overbuilding when it 0:39:47.520 --> 0:39:50.439 comes to this stuff, given that they're able to make 0:39:50.520 --> 0:39:54.640 these GPUs more and more powerful with every iteration, like 0:39:54.680 --> 0:39:57.080 do they need data centers that suck this much power 0:39:57.400 --> 0:39:58.400 and that are this big? 0:39:58.840 --> 0:40:00.480 One complaint I hear is that the is not some 0:40:00.600 --> 0:40:03.280 kind of you know, more central or more organized planning, 0:40:03.400 --> 0:40:05.360 you know. So it's not that, you know, data centers 0:40:05.360 --> 0:40:08.240 aren't being built in one specific area for one specific purpose. 0:40:08.600 --> 0:40:12.440 But certainly the tech companies are pretty sure that they 0:40:12.480 --> 0:40:15.799 need a lot of these are building them rapidly for 0:40:15.840 --> 0:40:16.280 that reason. 0:40:16.680 --> 0:40:18.399 It's today's big Take. It's one of the most read 0:40:18.440 --> 0:40:22.320 stories on the Bloomberg terminal. Josh Saul is at Bloomberg 0:40:22.400 --> 0:40:26.080 News Energy and Climate disasters reporter. He wrote the story 0:40:26.239 --> 0:40:30.080 along with Don Lim who covers private equity here at Bloomberg. 0:40:30.800 --> 0:40:34.080 Josh joining us here in the Bloomberg Interactive Brokers Studio. 0:40:34.440 --> 0:40:36.799 Check out Josh's story and more from Bloomberg The Big 0:40:36.840 --> 0:40:39.520 Take on the Bloomberg Terminal, and at Bloomberg dot com 0:40:39.520 --> 0:40:40.680 Slash Big Take. 0:40:46.200 --> 0:40:49.719 You're listening to the Bloomberg Business Week podcast. Catch us 0:40:49.760 --> 0:40:53.000 live weekday afternoons from two to five pm Eastern. Listen 0:40:53.040 --> 0:40:56.120 on Applecarplay and then brout Auto with a Bloomberg Business 0:40:56.120 --> 0:40:58.279 act or watch us live on YouTube. 0:41:00.120 --> 0:41:02.080 Plenty Ahead in our second hour of the weekend edition 0:41:02.120 --> 0:41:05.920 of Bloomberg Business Week, as our focus on artificial intelligence continues, 0:41:06.280 --> 0:41:09.600 including a conversation with the former US Navy fighter pilot 0:41:09.680 --> 0:41:12.920 who built Amazon's global air network. She joins us to 0:41:12.920 --> 0:41:15.360 talk about the new technologies Amazon is rolling out this 0:41:15.400 --> 0:41:18.319 holiday season, also the role of AI, and yes, what 0:41:18.400 --> 0:41:20.120 it was like flying fighter jets. 0:41:20.360 --> 0:41:22.719 First up this hour, we begin with the one struggling 0:41:22.800 --> 0:41:25.480 upstart that's become the three trillion dollar king of AI. 0:41:25.719 --> 0:41:28.720 It's the world's second most valuable company at least currently 0:41:28.960 --> 0:41:32.320 it's like recently been neck and neck with Apple. Apple 0:41:32.760 --> 0:41:35.560 recently pulled ahead. But look in videos right there it 0:41:35.640 --> 0:41:37.879 is they just go back and forth, right, yeah, look 0:41:37.960 --> 0:41:40.120 safe to say no name is more associated with the 0:41:40.120 --> 0:41:43.279 aieuphoria over the last couple of years than video. 0:41:43.160 --> 0:41:45.840 Absolutely, and video shares, by the way, are up about 0:41:45.920 --> 0:41:48.759 nine hundred percent since the start of twenty twenty three. 0:41:48.880 --> 0:41:51.120 It's come a long way from when it was founded 0:41:51.120 --> 0:41:54.240 out of Denny's in Silicon Valley more than thirty years ago. 0:41:54.520 --> 0:41:57.160 Writing about in Video's journey is Take Kim, senior tech 0:41:57.200 --> 0:42:00.400 writer for Barons, a former columnist for Bloomberg Opinion, and 0:42:00.440 --> 0:42:02.799 he's the author of the new book The Nvidia Way, 0:42:03.080 --> 0:42:05.280 Jensen Wang and the Making of a Tech Giant. 0:42:05.560 --> 0:42:08.560 It all started with three D graphics, and then program 0:42:08.600 --> 0:42:12.360 Mobile GPUs, and then Kuda, and now with the tensor 0:42:12.440 --> 0:42:15.600 cores and AI chips and Jensen Huang, who's the co 0:42:15.719 --> 0:42:20.120 founder and CEO, every single major computer shift in computer 0:42:20.200 --> 0:42:23.440 chips and three D graphics, he's learned to position in 0:42:23.520 --> 0:42:26.880 video to take advantage of it. I compare him in 0:42:26.880 --> 0:42:30.000 the book to read Hastings with Netflix. Hastings had this 0:42:30.080 --> 0:42:33.040 intuitive sense as someday we're just going to watch video 0:42:33.080 --> 0:42:35.920 over the Internet, but the technology wasn't ready yet, so 0:42:36.000 --> 0:42:39.880 he started the DVB by rental business and just stayed 0:42:39.920 --> 0:42:43.880 around and invested in the technologies. And when the internet 0:42:43.880 --> 0:42:47.160 infrastructure was broad band got good enough for consumers and 0:42:47.200 --> 0:42:49.520 the video streaming technology was there, he jumped on it 0:42:49.520 --> 0:42:52.400 and was the first mover and dominated that market. Jensen 0:42:52.440 --> 0:42:55.560 and Vidia did that like with three four different markets. 0:42:55.800 --> 0:42:58.440 Like every single time he positions the company, he doesn't 0:42:58.440 --> 0:43:01.200 know exactly when it's going to take off, like maybe 0:43:01.280 --> 0:43:03.719 it's five years from now, maybe seven years from now, 0:43:03.880 --> 0:43:07.040 but he positions a company in this tremendous amount of 0:43:07.080 --> 0:43:10.360 capital and R and D, and this the software ecosystem 0:43:10.480 --> 0:43:13.200 is actually huge competitive advantage that he invested in. 0:43:13.640 --> 0:43:15.799 Well, let's talk about him as a leader, him as 0:43:15.800 --> 0:43:18.040 a visionary. What did you you spend some time with 0:43:18.120 --> 0:43:20.799 him during the writing of this book, you interviewed him 0:43:20.800 --> 0:43:23.520 earlier this year. What would you say it is about 0:43:23.520 --> 0:43:28.120 his personality, his leadership style, the way he conducts himself 0:43:28.160 --> 0:43:31.120 that has created this culture ad in video that has 0:43:31.120 --> 0:43:34.320 allowed it allowed it to not just succeed but dominate. 0:43:34.880 --> 0:43:37.239 I would say there are three pillars, and the n 0:43:37.360 --> 0:43:39.440 video way is basically the Jensen a way, because I 0:43:39.480 --> 0:43:41.480 mean he's there from the beginning and create this. 0:43:41.560 --> 0:43:42.839 Remember there's a Netflix way too. 0:43:43.080 --> 0:43:46.440 Oh well, but this is like, this is Jenson's way. 0:43:46.480 --> 0:43:52.239 I would say three pillars are insane work ethic, talent, cultivation, 0:43:52.800 --> 0:43:56.359 and speed and velocity. So I'll just talk through each 0:43:56.440 --> 0:43:59.560 three work ethic. No one works harder than Jensen. I 0:43:59.560 --> 0:44:02.360 mean he is reading one hundred emails from his employees 0:44:02.400 --> 0:44:06.279 every day. He works all week. Maybe Elon Musk is 0:44:06.360 --> 0:44:09.400 up there. Sorry, sorry, but I'd even argue compared to 0:44:09.480 --> 0:44:11.880 you On, maybe Jensen works more. Like he says he 0:44:11.960 --> 0:44:14.600 can't when he goes to the movie theater, he can't 0:44:14.640 --> 0:44:17.399 remember the movie because he's constantly thinking about work all day. 0:44:17.520 --> 0:44:21.080 He like lives in breezes work and work is relaxing. 0:44:21.160 --> 0:44:24.879 Like he drinks a Highland Parks Scotch Lane at night 0:44:24.880 --> 0:44:27.840 and Sunday and he's going through emails and like peppering 0:44:27.840 --> 0:44:30.840 his employees do this, do that, and that's his life. 0:44:31.000 --> 0:44:34.120 So even at the beginning, like I have these stories 0:44:34.120 --> 0:44:36.520 when I talk to these early employees, like they're working 0:44:36.560 --> 0:44:39.919 past midnight, waking up at four or five in the morning. Yeah, 0:44:39.920 --> 0:44:42.239 and this is a time when Intel was about to 0:44:42.280 --> 0:44:45.760 crush them, and I had this one employee telling me, well, 0:44:46.000 --> 0:44:48.879 Jensen just inspired me to work even harder. So even 0:44:48.880 --> 0:44:51.080 though like I should go back to bed, and I 0:44:51.120 --> 0:44:52.520 really want to go back to bed, I'm going to 0:44:52.560 --> 0:44:55.680 get to work early and work even harder. So work ethic. 0:44:56.120 --> 0:44:58.160 No one, No one's going to be Gensen tumtrt worth. 0:44:58.640 --> 0:45:01.920 He just he's a work ofhol and will outwork anywhere 0:45:02.560 --> 0:45:07.080 in terms of talent cultivation. He knows that the only 0:45:07.120 --> 0:45:10.440 way you win in this in technology is hiring the 0:45:10.480 --> 0:45:14.719 best people. So he's constantly recruiting, you know, he's every 0:45:14.760 --> 0:45:17.560 time he interviews or talks to someone, he goes, who 0:45:17.600 --> 0:45:19.800 have you worked with in the past that were rock stars? 0:45:20.040 --> 0:45:22.239 And he pockets that knowledge and then three years later 0:45:22.280 --> 0:45:26.160 he's like recruiting that person, constantly badgering them and sometimes 0:45:26.160 --> 0:45:27.719 they say no. In the beginning, it's like no, no, no, 0:45:27.760 --> 0:45:30.680 I don't want to leave my cozy company. But he 0:45:30.760 --> 0:45:33.280 usually gets the people and then they stay for twenty 0:45:33.280 --> 0:45:36.680 five thirty years. And the reason is partly in video 0:45:36.719 --> 0:45:39.200 wins and everyone wants to stay on the winning team. 0:45:39.960 --> 0:45:43.680 But second it's just there's this great culture inside video 0:45:44.080 --> 0:45:47.600 that even though there's thirty thousand people. I write a 0:45:47.640 --> 0:45:50.520 lot about this in the book. I think large parts 0:45:50.560 --> 0:45:54.760 of corporate America and technology industry suffer from dysfunction, from 0:45:55.360 --> 0:45:58.960 internal politics where you're spending half your day trying to 0:45:59.000 --> 0:46:01.960 please your boss's instead of doing what's right for the 0:46:02.000 --> 0:46:05.279 customer and for the company itself. And video costs this 0:46:05.400 --> 0:46:08.879 missions the boss. Make sure you're making decisions where you're 0:46:09.080 --> 0:46:12.920 fulfilling the company's mission, not you know, all the Game 0:46:12.920 --> 0:46:16.080 of Thrones type internal in fighting. The other big part 0:46:16.120 --> 0:46:17.680 is when I talk to the video boys that leave 0:46:17.719 --> 0:46:21.319 in video, they can't adjust to the new companies when 0:46:21.360 --> 0:46:24.839 they go to Google, Microsoft, Apple, because because there is 0:46:24.960 --> 0:46:29.959 so much endless meetings, internal paralysis. Like one person says, 0:46:29.960 --> 0:46:32.600 it's like swimming through quicksand and I think they. 0:46:32.520 --> 0:46:33.960 Should just retire and count their money. 0:46:34.840 --> 0:46:35.040 Yeah. 0:46:35.120 --> 0:46:37.400 Yeah, but a lot of it didn't just need to 0:46:37.440 --> 0:46:40.080 talk about we talk about company culture. We work with 0:46:40.120 --> 0:46:43.560 a company that's got a very distinct culture as well. 0:46:43.680 --> 0:46:46.640 And but it makes me think and Video wasn't just oh, 0:46:46.680 --> 0:46:48.200 we were at the right place at the right time. 0:46:49.360 --> 0:46:52.880 It sounds like has been constantly checking where does this 0:46:52.960 --> 0:46:55.719 market go? Because if you think about the timing of 0:46:56.280 --> 0:46:59.680 a like just how it all happened. This wasn't just accidental. 0:47:00.000 --> 0:47:00.480 Oh I got it. 0:47:00.520 --> 0:47:03.240 Right, No, not at all. I mean he was investing 0:47:03.239 --> 0:47:05.680 in Kuda, which is the reason why in Vidia is 0:47:05.800 --> 0:47:09.200 kind of doing really well in AI, the ecosystem Kuda. 0:47:09.239 --> 0:47:11.319 He invested that in two thousand and six, and then 0:47:11.320 --> 0:47:14.239 when deep learning took off in twenty thirteen, Yeah, he 0:47:14.520 --> 0:47:17.240 was like, we need to invest in AI software libraries, 0:47:17.239 --> 0:47:20.640 and we need to go to campuses and expread the 0:47:20.640 --> 0:47:21.520 religion of Kuda. 0:47:21.680 --> 0:47:22.640 Explain what Kuda is. 0:47:22.880 --> 0:47:27.799 Kuda is a programming platform for parallel computing, which is 0:47:28.320 --> 0:47:32.320 what Nvidia GPUs do basically. In videas, they call it 0:47:32.360 --> 0:47:35.720 accelerate computing, but it's basically just parallel computing where each 0:47:36.040 --> 0:47:41.120 GPU has thousands of tiny little processors, and most computer 0:47:41.239 --> 0:47:45.560 PCs run on CPUs which have four to eight processors normally, 0:47:45.920 --> 0:47:50.759 So in Vidia's kind of computing architecture is based on 0:47:50.800 --> 0:47:55.560 this parallel you know, tiny processor mentality, and Jensen from 0:47:55.600 --> 0:47:57.960 the beginning, even in nineteen ninety three, saw this as 0:47:58.000 --> 0:48:01.240 the future of computing, like you're going to break apart 0:48:01.320 --> 0:48:03.960 all the workloads into tiny little processes and they're going 0:48:04.040 --> 0:48:06.400 to work on GPUs and he saw that from the 0:48:06.480 --> 0:48:09.080 beginning that this is the way the world of computing 0:48:09.160 --> 0:48:11.520 is going to go. So when AI took off. 0:48:11.520 --> 0:48:13.720 In the video was sixteen years. 0:48:13.760 --> 0:48:16.120 So that's amazing, Like, how. 0:48:16.000 --> 0:48:18.920 Does you kind of keep going keep going because he. 0:48:19.000 --> 0:48:21.279 Made like I said about Netflix, he knows where the 0:48:21.280 --> 0:48:23.719 future is going to go. Yeah, and he will keep 0:48:23.760 --> 0:48:23.920 in that. 0:48:24.120 --> 0:48:24.359 I mean. 0:48:24.480 --> 0:48:27.279 The amazing thing about Kuda is all these I talked about. 0:48:27.320 --> 0:48:29.120 I have a chapter in the book about Starboard Value, 0:48:29.120 --> 0:48:31.680 which is a very famous activist hed. Yeah, they were 0:48:32.200 --> 0:48:34.920 board members and Video were worried when Starboard took a 0:48:34.920 --> 0:48:37.120 big position that they were going to, you know, clamp 0:48:37.160 --> 0:48:39.760 down on Kuda because Wall Street was all over Jensen 0:48:39.840 --> 0:48:42.359 for investing so much in Kudah. It was taking die 0:48:42.440 --> 0:48:45.120 space on the chip, it was crushing their gross margins 0:48:45.120 --> 0:48:47.920 for years, and he kept doing it because he was 0:48:47.920 --> 0:48:51.280 convicted this would be the future. And you know, luckily 0:48:51.320 --> 0:48:54.480 for Nvidia, Starboard didn't go activists. They they kind of 0:48:54.480 --> 0:48:57.000 pressured Nvidia. They did, and Video did a big stock 0:48:57.160 --> 0:48:59.600 buy back. The stock went up for twenty percent and 0:48:59.640 --> 0:49:03.200 the very peared and star wars like, I'll take that gain. 0:49:03.840 --> 0:49:06.400 Then Jess Smith told me that he was like, hmm, 0:49:06.840 --> 0:49:09.480 I should have never sold in video He met with Jensen. 0:49:09.520 --> 0:49:10.560 He was impressed by Jensen. 0:49:10.640 --> 0:49:11.000 Seriously. 0:49:11.040 --> 0:49:13.600 Yeah, he took the short term gain and you know 0:49:13.840 --> 0:49:17.439 that's history. But yeah, Jensen does that all the time. 0:49:17.640 --> 0:49:22.000 I mean the two key technologies for video game GPUs 0:49:22.040 --> 0:49:26.640 that the reason why gamers spend up to sixteen dollars 0:49:26.840 --> 0:49:30.400 to play video games on computer is DLSS, which is 0:49:30.400 --> 0:49:36.239 this AI upscaling technology, and raytracing, which helps the GPUs 0:49:36.320 --> 0:49:40.400 do do lighting better. Like it's amazing. He invested in 0:49:40.520 --> 0:49:43.880 ray tracing for ten years before it was commercialized, Like 0:49:43.960 --> 0:49:46.120 ten years. Most companies will invest it for two three 0:49:46.160 --> 0:49:49.759 years and then give up. The LSS took six years, right, 0:49:49.880 --> 0:49:53.200 So this is this is a company where he tells 0:49:53.239 --> 0:49:57.480 me like he's paranoid about getting disrupted by small he's 0:49:57.520 --> 0:50:00.359 a student of history and all that stuff where coming 0:50:00.360 --> 0:50:02.759 for him. Yes, every company is coming for him, and 0:50:02.840 --> 0:50:04.800 he knows that they're going to come up from underneath. 0:50:05.120 --> 0:50:07.920 And companies get complacent, and that's the thing. He is 0:50:07.960 --> 0:50:11.400 paranoi about being complacent, so he will he knows that 0:50:11.480 --> 0:50:14.480 if one thing he said, if you don't invest your 0:50:14.520 --> 0:50:15.759 debt in technology, he. 0:50:15.719 --> 0:50:19.400 Knows that that's This is capitalism. This is like the 0:50:19.440 --> 0:50:23.520 way that efficient markets work. If something is incredibly successful, 0:50:24.200 --> 0:50:26.720 you're going to have other players try to enter the market. 0:50:26.960 --> 0:50:29.000 Who's coming after in Vidia? How big of a barrier 0:50:29.080 --> 0:50:29.960 or a moat do they have? 0:50:30.640 --> 0:50:33.640 So most Wall Street analysts investors are worried about the 0:50:33.640 --> 0:50:39.200 big hyperscalers. So the Microsoft Azures, the Google Clouds, Amazon, 0:50:39.320 --> 0:50:41.840 so all of them are making their own versions of aichips. 0:50:41.920 --> 0:50:44.080 Yeah, we had an Amazon story just a couple of 0:50:44.080 --> 0:50:48.440 weeks ago about the effort in Austin, Texas, right that 0:50:48.480 --> 0:50:50.719 they're doing there to try to take on in video. 0:50:50.640 --> 0:50:53.360 And empirically, it makes sense. These are huge companies that 0:50:53.440 --> 0:50:55.920 can invest billions of dollars in R and D. But 0:50:56.080 --> 0:50:59.000 I'm not worried about the hyperscalers at all. The problem 0:50:59.080 --> 0:51:04.640 is why, because Google has amazing technology for TPUs, but 0:51:04.760 --> 0:51:07.400 no one uses it because everyone's afraid of getting locked 0:51:07.440 --> 0:51:10.080 in and the performance is as good. So when I 0:51:10.080 --> 0:51:12.960 talk to startup AI startups, they're like, I'm not going 0:51:13.040 --> 0:51:15.040 to lock myself into Google. I mean, Google has your 0:51:15.080 --> 0:51:17.799 reputation of like building stuff and then giving up and 0:51:17.840 --> 0:51:20.360 moving on. I mean we've seen that time at Google. 0:51:20.360 --> 0:51:24.160 Studia is a great example with the cloud video game streaming, 0:51:24.760 --> 0:51:26.880 and no one wants to get locked into one vendor. 0:51:27.120 --> 0:51:30.960 And with Nvidia you get the best performance. So also 0:51:31.040 --> 0:51:34.440 the most important thing is Nvidia with Kuda has been 0:51:34.480 --> 0:51:37.400 optimized for over fifteen years, so if you ever have 0:51:37.440 --> 0:51:39.719 a problem, you could look up and say, oh, this 0:51:39.800 --> 0:51:41.359 is how to fix it. And they ironed out all 0:51:41.360 --> 0:51:43.960 the bugs. And if you're an AI startup, you have 0:51:44.000 --> 0:51:46.600 one hundred problems. You're working on one. CEO told me, 0:51:46.880 --> 0:51:50.279 I don't want another problem where if you port your 0:51:50.320 --> 0:51:54.200 software to a different AI chip platform you always have problems. 0:51:54.440 --> 0:51:57.399 It's like going from XA six to power PC back 0:51:57.400 --> 0:51:59.520 in the day. So you don't want that problem. And 0:51:59.560 --> 0:52:01.720 then the other their problem is one of the biggest 0:52:01.719 --> 0:52:05.160 competitive vantages is they accelerate product cycles. So back in 0:52:05.200 --> 0:52:07.720 the nineteen nineties, the way they drove all their comparison 0:52:07.719 --> 0:52:11.040 at business was the typical video game chick took eighteen 0:52:11.080 --> 0:52:14.560 months to design and ship, and they're like, forget that, 0:52:14.560 --> 0:52:17.560 We're gonna do every six months. And because they're so 0:52:18.560 --> 0:52:21.440 the work ethic and relentless execution. It drove all the 0:52:21.440 --> 0:52:24.640 comparison at business. So last October it took them two 0:52:24.719 --> 0:52:27.680 years to make a major GPU chip platform, and they're like, 0:52:27.800 --> 0:52:31.399 forget that, We're gonna do that every year. So why 0:52:31.440 --> 0:52:34.719 would you switch to a different platform to save a 0:52:34.760 --> 0:52:38.040 little money on the hardware side when Jensen is gonna 0:52:38.040 --> 0:52:41.920 come out with a better AIGPU platform every twelve months. 0:52:42.040 --> 0:52:44.600 That's thirty times fast. Hard to compete with that, Yeah, 0:52:44.640 --> 0:52:48.040 you can't. And the technical risk is a huge thing 0:52:48.080 --> 0:52:51.080 because if you poort your stuff over it might not work, 0:52:51.080 --> 0:52:53.440 there might be bugs, and you don't want to risk that. 0:52:53.960 --> 0:52:56.719 Like time to market if you're an AI startup right 0:52:56.760 --> 0:52:59.840 now is everything, and the fastest time to market is 0:53:00.239 --> 0:53:01.120 by using video. 0:53:01.280 --> 0:53:05.800 And yet, as you're right, Jensen's always looking ahead, what's next? 0:53:05.920 --> 0:53:08.960 He sounds like he's constantly churning and looking at where, 0:53:09.320 --> 0:53:11.120 whether it's five years from now, ten years from now. 0:53:11.200 --> 0:53:13.440 As you talk about the things that he was investing 0:53:13.480 --> 0:53:16.360 in for a really long time, including these AI chips, 0:53:16.760 --> 0:53:19.520 so where is he looking next? 0:53:19.760 --> 0:53:22.560 So I've listened to hundreds of hours of the speeches 0:53:22.600 --> 0:53:25.319 the last few years. The Internet's an amazing thing. I've 0:53:25.360 --> 0:53:27.879 talked to him directly, and I know the two most 0:53:27.920 --> 0:53:32.359 important things he's most excited about. Number one is digital biology. 0:53:33.160 --> 0:53:38.440 This area is just perfect for the AI computation power 0:53:38.520 --> 0:53:44.640 that's just going going up exponentially, so making drugs exactly. 0:53:44.680 --> 0:53:47.919 It's drug discovery, molecule. 0:53:47.480 --> 0:53:49.680 Similar medicine, stuff like that. 0:53:49.560 --> 0:53:52.920 All that stuff. And I've talked to a drug startup, 0:53:53.360 --> 0:53:55.240 a drug startup. I talked to the head of Bristol 0:53:55.239 --> 0:54:00.839 Meyers squib Digital and they're seeing vast productivity gains by 0:54:00.960 --> 0:54:04.480 using Nvidia AI service systems. And it makes sense. All 0:54:04.520 --> 0:54:08.640 these companies, especially to big companies, have decades of clinical 0:54:08.719 --> 0:54:12.560 data that they could put into these AI GPU systems. 0:54:13.040 --> 0:54:17.759 And the thing that really is really critical that's leading 0:54:17.760 --> 0:54:22.279 to innovation is that you're getting these AIGPU clusters that 0:54:22.360 --> 0:54:27.520 are scaling from sixteen thousand GPUs and now to one 0:54:27.600 --> 0:54:30.759 hundred thousands, and now they're building one million. You know 0:54:30.800 --> 0:54:33.080 that it's just a matter of time. So this vast 0:54:33.160 --> 0:54:37.320 amount of computing power can access and digest all that data, 0:54:37.440 --> 0:54:42.560 figure out all the commutations, and simulate all the biological interactions, 0:54:42.880 --> 0:54:46.240 and you could figure out drugs that could cure disease, 0:54:46.600 --> 0:54:47.680 be very specific. 0:54:47.480 --> 0:54:49.960 It does seem like in Nvidia is inextricably bound to 0:54:50.280 --> 0:54:53.759 Jensen and Jensen too and video. What's the succession plan? 0:54:54.719 --> 0:55:00.719 I cust First of all, he doesn't I him giving 0:55:00.800 --> 0:55:02.960 up in video anytime soon. This is his life, this 0:55:03.040 --> 0:55:06.359 is this is what he enjoys. So I'm complete, one 0:55:06.400 --> 0:55:09.399 hundred percent convicted that he's not planning to lead anytime soon. 0:55:09.600 --> 0:55:12.360 I mean, this is the love of his life, he says, 0:55:12.400 --> 0:55:13.760 I love the video all the time. 0:55:14.600 --> 0:55:16.400 Everybody gets older, everybody gets older. 0:55:16.440 --> 0:55:18.719 But how much of the company is him? Like we 0:55:18.760 --> 0:55:21.560 talk about this when you've got an individual so identified 0:55:21.560 --> 0:55:26.560 with a company that, if God forbid, you know, are 0:55:26.600 --> 0:55:31.080 there individuals I mean, after Tim Cook they were able 0:55:31.120 --> 0:55:33.560 to figure out their way forward after Steve Jobs. I mean, 0:55:33.560 --> 0:55:36.439 I'm just forgiving I'm sorry, sorry Tim after Steve Jobs. 0:55:36.440 --> 0:55:37.799 But you know what I'm saying, Yeah, I mean, I 0:55:37.840 --> 0:55:40.839 think that's the critical question. He talks about how he 0:55:41.120 --> 0:55:43.960 kind of configured and structured in video to be a 0:55:44.040 --> 0:55:47.200 race car that he could steer perfectly. It's like perfectly 0:55:47.400 --> 0:55:52.800 matches his way of managing the company. I think that's 0:55:52.840 --> 0:55:54.879 the big that's a question for every big company right 0:55:55.120 --> 0:55:59.560 like this, this the assessing CEO. Who it is matters. 0:55:59.560 --> 0:56:02.040 I mean, you get a John Scully who almost drove 0:56:02.400 --> 0:56:05.120 people a business, or do you get a Satie Nadella 0:56:05.200 --> 0:56:07.640 who just took Microsoft to new heights. I mean that's 0:56:07.680 --> 0:56:08.720 a question for every company. 0:56:08.800 --> 0:56:10.400 One question we really want to know. Did you get 0:56:10.440 --> 0:56:12.239 to see the closet where all the leather jackets are? 0:56:12.640 --> 0:56:12.799 No? 0:56:14.800 --> 0:56:18.200 Come on, but you know it's such a part of him, right, yes, 0:56:18.480 --> 0:56:21.719 like yeah, no questions or anything came up. 0:56:22.320 --> 0:56:24.280 I did not focus on the leather jackets. I probably 0:56:24.280 --> 0:56:25.759 should have. I did not ask about that. 0:56:25.800 --> 0:56:26.640 But Part two. 0:56:26.880 --> 0:56:30.799 Future column Future columns, great dive, deep dive about a 0:56:30.800 --> 0:56:32.680 company that we talk about I feel like on a 0:56:32.760 --> 0:56:35.719 daily basis and really has kind of changed certainly the 0:56:35.760 --> 0:56:36.959 investment narrative. 0:56:36.640 --> 0:56:37.200 In a big way. 0:56:37.760 --> 0:56:40.960 Take him senior technology writer for Barons, a former columnist 0:56:41.040 --> 0:56:43.480 for Bloomberg Opinion. The new book It is out today, 0:56:43.920 --> 0:56:48.080 The Video Way Jensen Wong and Making of a Tech Giant. 0:56:54.160 --> 0:56:58.000 You're listening to the Bloomberg Business Week podcast. Listen live 0:56:58.120 --> 0:57:00.920 each weekday. He's starting a two PM's You're don Applecar 0:57:01.040 --> 0:57:04.000 Play and Android Auto with the Bloomberg Business Ad. You 0:57:04.040 --> 0:57:07.320 can also listen live on Amazon Alexa from our flagship 0:57:07.360 --> 0:57:11.160 New York station, Just Say Alexa playing Bloomberg eleven thirty. 0:57:12.560 --> 0:57:16.000 This year, Amazon unveiled its next generation of fulfillment centers, 0:57:16.280 --> 0:57:18.520 ones that will be powered by AI and will have 0:57:18.680 --> 0:57:22.080 ten times more robotics. The company known for its automated 0:57:22.080 --> 0:57:25.320 warehouses and use of technology, has seven hundred and fifty 0:57:25.400 --> 0:57:27.960 thousand industrial mobile robots in use today. 0:57:28.160 --> 0:57:31.720 It's not just robots. Amazon now using Jenerative AI to 0:57:31.800 --> 0:57:35.040 develop models for demand forecasting, and it's starting to roll 0:57:35.040 --> 0:57:39.000 out their AI powered vision assisted package retrieval to help 0:57:39.040 --> 0:57:39.840 delivery workers. 0:57:40.160 --> 0:57:42.800 Sarah Roose is involved in all of this. She's vice 0:57:42.880 --> 0:57:46.120 president of Global Operations at Amazon and also a former 0:57:46.240 --> 0:57:49.200 US Navy Fighter jet pilot. And yeah, Tim and I 0:57:49.240 --> 0:57:50.360 wanted to start there with her. 0:57:50.680 --> 0:57:54.320 Well, I've been with Amazon approaching fourteen years. Started out 0:57:54.320 --> 0:57:57.960 as an operations manager in Lexington, Kentucky in our fulfillment operations. 0:57:58.280 --> 0:58:01.280 Spent time in Kentucky, Texas, spent three years in the UK, 0:58:01.320 --> 0:58:03.840 which was an amazing experience. We turned to the US 0:58:03.920 --> 0:58:06.560 in twenty seventeen and led a team that built out 0:58:06.600 --> 0:58:08.480 our hair haul network. So we have a fleet of 0:58:08.520 --> 0:58:10.680 Boeing seven sixty seven seven three sevens. 0:58:11.320 --> 0:58:13.960 You really do have your own airlines, well kind of. 0:58:14.000 --> 0:58:16.680 That's something like that, and a lot of them in 0:58:16.800 --> 0:58:20.920 Kentucky around We have our main air hub at the 0:58:20.960 --> 0:58:24.680 Cincinnati Northern Kentucky Airport. They process over thirty flights a day, 0:58:25.120 --> 0:58:27.200 hundreds of thousands of packages daily. 0:58:27.320 --> 0:58:29.120 I didn't hear any stories about fighter jets. 0:58:29.320 --> 0:58:30.680 I'll get you, I'll get you after sure. 0:58:30.800 --> 0:58:31.120 Yeah. 0:58:31.160 --> 0:58:34.000 So spent six years building out the air haul network 0:58:34.000 --> 0:58:36.800 in the US, Europe, and India, and then a year 0:58:36.800 --> 0:58:38.320 and a half ago I took on the leadership of 0:58:38.320 --> 0:58:40.360 our global workplace Health and Safety team. So we have 0:58:40.360 --> 0:58:43.040 a workforce today of over in laian employees globally across 0:58:43.080 --> 0:58:45.920 six continents. Prior to Amazon, yes, I was a Navy 0:58:46.000 --> 0:58:48.120 F eighteen Super Hornet fighter pilot. So if you've seen 0:58:48.120 --> 0:58:50.120 the movie Top Gun, Maverick the jet and the main 0:58:50.160 --> 0:58:51.720 part of that movie, that's that's what I had the 0:58:51.720 --> 0:58:54.520 privilege of flying. Definitely a childhood dream. 0:58:54.840 --> 0:58:55.680 Do you still fly now? 0:58:56.360 --> 0:58:58.720 Not currently. I do have a commercial pilot's license, but 0:58:59.440 --> 0:59:02.240 Amazon can seemed busy on a day to day basis. 0:59:02.360 --> 0:59:04.919 What do you find a lot of your colleagues from 0:59:04.960 --> 0:59:08.520 the Armed services are doing now who were pilots. 0:59:08.240 --> 0:59:11.720 Then, Many fly for the airlines, Many went into business. 0:59:11.840 --> 0:59:14.200 I have several fellow aviators that are in business now 0:59:14.240 --> 0:59:18.600 as well, and many have joined companies like Amazon. In fact, 0:59:18.600 --> 0:59:22.080 Amazon's very veteran friendly. We've hired over forty thousand veterans 0:59:22.080 --> 0:59:25.840 over the last several years. So it tracks people that 0:59:26.080 --> 0:59:28.800 are accustomed to working with large teams of people and 0:59:29.360 --> 0:59:31.360 familiar with operational type of environments. 0:59:31.480 --> 0:59:32.840 Well, I was going to ask you, Sarah, like, what 0:59:32.880 --> 0:59:35.960 about that experience that you just has, I don't know, 0:59:36.200 --> 0:59:38.800 helped you tremendously in the job that you do at Amazon, 0:59:38.840 --> 0:59:40.840 And you've done multiple jobs and made your way through, 0:59:41.000 --> 0:59:42.840 So give us an idea of like how that carried over. 0:59:42.960 --> 0:59:45.240 Yeah, I actually get that question quite a bit, And 0:59:45.360 --> 0:59:48.200 I know it's great because it is something that people 0:59:48.240 --> 0:59:50.800 are curious about because it doesn't necessarily seem like a 0:59:50.840 --> 0:59:51.480 common path. 0:59:52.240 --> 0:59:54.960 But I think about that Fighter jet like, yes, this coordination, 0:59:55.080 --> 0:59:57.480 but a lot is what you do on your own right. 0:59:57.880 --> 1:00:00.120 It is a lot of decision making, for sure, but 1:00:00.160 --> 1:00:01.120 it also takes a team. 1:00:01.160 --> 1:00:01.320 You know. 1:00:02.240 --> 1:00:04.880 Jet pilot is merely an extension of the team that 1:00:04.960 --> 1:00:07.160 helps ensure that jet is up and ready to go, 1:00:07.280 --> 1:00:09.360 the folks on the flight deck of an aircraft carrier, 1:00:09.840 --> 1:00:12.880 the folks that ensure that aircraft carrier runs safely. 1:00:13.320 --> 1:00:13.560 You know. 1:00:13.680 --> 1:00:15.720 So it is definitely a team effort, and so taking 1:00:15.720 --> 1:00:18.160 a lot of that teamwork in that team environment into 1:00:18.200 --> 1:00:20.280 the operational workspace is one thing. 1:00:20.840 --> 1:00:21.000 You know. 1:00:21.000 --> 1:00:23.760 I think decision making a bias for action, being proactive 1:00:23.760 --> 1:00:26.640 about things, looking ahead. These are some of the traits 1:00:26.680 --> 1:00:31.240 I think that translate pretty well. And yeah, I think 1:00:31.280 --> 1:00:34.800 that it's a combination of thinking big and also diving deep. 1:00:34.960 --> 1:00:36.680 Over any given day, we are going to move on. 1:00:36.640 --> 1:00:37.760 I promise, Yeah, it's okay. 1:00:37.760 --> 1:00:38.720 We have plenty of times. 1:00:39.640 --> 1:00:43.920 Well, we just your backgrounds are like pretty fascinating tense 1:00:43.960 --> 1:00:45.200 moments that you. 1:00:45.240 --> 1:00:50.040 Had flying, yes, landing on a moving ship at night 1:00:50.200 --> 1:00:53.320 in bad weather, and you know, landing at one hundred 1:00:53.320 --> 1:00:55.360 and thirty five knots and going to zero in less 1:00:55.400 --> 1:00:58.000 than two seconds. And you know, we call it trapping 1:00:58.080 --> 1:01:01.480 aboard an aircraft carrier. That that's just a lot thought, right, yes, yes, 1:01:01.600 --> 1:01:03.440 a carrier, yes, And so it takes a lot of 1:01:03.480 --> 1:01:07.360 training and concentration and precision to do that. Well and 1:01:07.400 --> 1:01:10.520 do that safely, so SOPs to you. 1:01:10.600 --> 1:01:11.880 They're probably like, yeah, I got this. 1:01:12.000 --> 1:01:14.680 Well it does help to put things into context. 1:01:15.400 --> 1:01:16.200 Yeah, exactly. 1:01:17.120 --> 1:01:18.480 All right, a little more on flying. 1:01:18.840 --> 1:01:20.920 I don't know, no, I don't know, no, no, no, sorry, 1:01:20.920 --> 1:01:22.400 were I can talk about flying all day? 1:01:22.520 --> 1:01:23.400 So good? 1:01:23.520 --> 1:01:25.800 Yeah, but you know it is. But it is actually 1:01:25.840 --> 1:01:28.320 interesting though, what what you've done at Amazon in terms 1:01:28.320 --> 1:01:30.880 of building out that logistics network. It like used to 1:01:30.880 --> 1:01:32.720 be a unique thing to sort of, you know, get 1:01:32.760 --> 1:01:36.160 to an airport and see a prime air yeahane, But 1:01:36.360 --> 1:01:38.800 what a little over a decade ago the team over 1:01:38.840 --> 1:01:41.520 at Amazon started building out its own fleet. I think 1:01:41.520 --> 1:01:43.160 you worked with Atlas Air Is that right? 1:01:43.720 --> 1:01:44.680 That was one of our carriers. 1:01:44.800 --> 1:01:48.120 Yes, And now what's the relationship now is it? Does 1:01:48.200 --> 1:01:51.000 Amazon own its own planes? Does it contract out its planes? 1:01:51.000 --> 1:01:51.600 How does that work? 1:01:51.640 --> 1:01:54.080 Well, we have a combination of we own some aircraft 1:01:54.120 --> 1:01:56.680 and we lease out other aircraft that they're all operated 1:01:56.720 --> 1:02:00.240 on our behalf by air carriers. So the pilots aren't 1:02:00.240 --> 1:02:03.360 actually Amazon employees, but they fly our branded aircraft. But 1:02:03.440 --> 1:02:06.600 going back to your point about seeing a primary aircraft 1:02:06.680 --> 1:02:08.160 is kind of a unique thing. I think back to 1:02:08.240 --> 1:02:11.440 when I joined Amazon. At twenty eleven, our operations basically 1:02:11.600 --> 1:02:14.280 ended at the dock door of our fulfillment centers, and 1:02:14.480 --> 1:02:17.880 so over time, especially in twenty thirteen, we recognized in 1:02:17.960 --> 1:02:19.720 order to keep up with our own growth, we really 1:02:19.720 --> 1:02:22.960 had to start build building out our mile last mile 1:02:23.040 --> 1:02:26.480 transportation network. So it wasn't long after twenty thirteen that 1:02:26.560 --> 1:02:30.040 you started seeing branded trailers out on our interstates. You 1:02:30.080 --> 1:02:33.240 started seeing branded final mile delivery vehicles out on our roads. 1:02:33.480 --> 1:02:36.120 We built out sorts centers, delivery stations, and you started 1:02:36.120 --> 1:02:39.720 seeing branded aircraft out there at various airports throughout the country, 1:02:39.800 --> 1:02:42.440 including JFK here as well, not too far from US. 1:02:42.480 --> 1:02:45.040 So does that just continue in terms of the build out, Like, 1:02:45.080 --> 1:02:47.520 I'm curious, what's the next iteration or next stage of that. 1:02:48.080 --> 1:02:53.280 Well, we worked to also make for an efficient operation 1:02:53.400 --> 1:02:55.600 as well. So I think about something that we as 1:02:55.600 --> 1:02:58.280 a network have done differently this year as we had 1:02:58.400 --> 1:03:03.320 versus years past, to regionalize our network. And I'm talking holistically, 1:03:03.360 --> 1:03:07.200 not specific to air but if I think about if 1:03:07.640 --> 1:03:10.520 customers here in New York City and places in order, 1:03:10.880 --> 1:03:14.920 over seventy six percent of customer orders are fulfilled within region, 1:03:14.960 --> 1:03:17.439 which means within a couple hundred miles of each other. 1:03:17.680 --> 1:03:20.080 And what that allows for is it means fewer touches, 1:03:20.120 --> 1:03:23.640 which means less on transportation costs. We work to keep 1:03:23.640 --> 1:03:26.200 those prizes low for our customers. And how we've done 1:03:26.240 --> 1:03:29.320 that is basically, we're just more sophisticated with the placement 1:03:29.440 --> 1:03:32.400 of our most common and most popular products. So we're 1:03:32.600 --> 1:03:35.960 a bit smarter in how we place that that product. 1:03:36.240 --> 1:03:38.680 Right Like, if I'm ordering diapers on Amazon, which I 1:03:38.680 --> 1:03:40.760 do all the time, it turns out that they're being 1:03:40.840 --> 1:03:43.880 shipped oftentimes from Staten Island rather than from a few 1:03:43.960 --> 1:03:45.280 years ago, they would actually be showed. 1:03:45.400 --> 1:03:47.640 They could have been Kentucky, they could have been sent 1:03:47.680 --> 1:03:51.640 from anywhere Pennsylvania. We're working hard to make sure that 1:03:51.680 --> 1:03:54.320 we're getting them closer to our customers. 1:03:54.360 --> 1:03:59.040 So building out that kind of localized distribution network makes 1:03:59.080 --> 1:04:03.000 complete sense in terms of time, I'm assuming money saved 1:04:03.480 --> 1:04:05.520 and access, right Like, it just makes sense. 1:04:05.400 --> 1:04:08.400 Yes, Like the shorter transportation distances, so that reduces the 1:04:08.400 --> 1:04:10.520 cost or reduces the number of touches that need to 1:04:10.520 --> 1:04:12.840 be placed on the package to process. And of course 1:04:12.840 --> 1:04:15.320 we still have some unique items, so not every item 1:04:15.440 --> 1:04:18.760 is located near every customer. So that's why we still 1:04:18.800 --> 1:04:21.800 have an air air network to ensure that two day delivery, 1:04:21.880 --> 1:04:24.960 especially if there's something very unique, maybe located in California, 1:04:24.960 --> 1:04:26.160 and we want to get it to you within two 1:04:26.240 --> 1:04:27.080 days here in New York. 1:04:27.120 --> 1:04:29.960 I know we've ten, we're gonna have another chunk of time. 1:04:30.120 --> 1:04:33.840 Are people opening up and saying, yeah, I'm okay with 1:04:33.880 --> 1:04:35.520 a two day delivery. It's not like I have to 1:04:35.520 --> 1:04:38.040 have it this afternoon anymore. Are you seeing increasingly people 1:04:38.120 --> 1:04:40.320 do that? Like I know in my household, we now 1:04:40.360 --> 1:04:43.280 are maybe starting a bucket and maybe letting the week 1:04:43.320 --> 1:04:45.840 go or even a couple of weeks before we kind 1:04:45.880 --> 1:04:47.880 of hit the buy button and so on and so forth. 1:04:47.960 --> 1:04:49.800 It's not like everybody's like, I gotta have this now. 1:04:49.840 --> 1:04:51.600 Everybody ten multiple. 1:04:51.360 --> 1:04:54.240 Order unless unless which happens, which. 1:04:54.040 --> 1:04:55.560 You gotta do. Are you running around the corner and 1:04:55.560 --> 1:04:57.480 pick them by? But are you thirty seconds and then 1:04:57.480 --> 1:04:59.240 we'll come back and talk more. Are you increasingly seeing 1:04:59.280 --> 1:05:00.680 people comfortable like waiting? 1:05:01.040 --> 1:05:03.800 It is such a personal preference, And that's why when 1:05:03.840 --> 1:05:07.240 a customer checks out, they have multiple options. You've probably 1:05:07.280 --> 1:05:09.680 noticed that one. Yeah, so if you would like it 1:05:09.800 --> 1:05:11.640 next day and that's an option, get it next day. 1:05:11.720 --> 1:05:14.440 Sometimes you'll see order within the next two hours and 1:05:14.480 --> 1:05:17.640 you'll get up by four pm this afternoon. Sometimes it 1:05:17.720 --> 1:05:19.920 might be a two day delivery, or for folks that 1:05:20.000 --> 1:05:23.120 do want to consolidate their orders, they can specify the 1:05:23.200 --> 1:05:25.680 day delivery and we work to consolidate into one shipment. 1:05:26.080 --> 1:05:27.400 I want to talk a little bit about the next 1:05:27.400 --> 1:05:29.880 stage of innovation and how you're thinking about delivery, because 1:05:29.880 --> 1:05:32.360 you talked about just this incredible build up that's happened 1:05:32.400 --> 1:05:35.439 over the past twenty years at Amazon. When it comes 1:05:35.480 --> 1:05:39.760 to aviation, when it comes to last mile, when it 1:05:39.760 --> 1:05:41.200 comes to your own brand. I mean, we see we 1:05:41.200 --> 1:05:44.400 have Rivians all over our neighborhoods delivering Amazon packages in 1:05:44.400 --> 1:05:47.480 addition to the Dodge rams. But it seems like more Rivians. Now, 1:05:47.800 --> 1:05:50.680 what's the next area of innovation? What makes it more efficient? 1:05:50.800 --> 1:05:52.960 Oh? Well, actually, speaking of Rivian, we just announced last 1:05:52.960 --> 1:05:56.200 week we have over twenty thousand electric Ribvian vehicles on 1:05:56.240 --> 1:05:58.920 the road. So when we think about sustainability and the 1:05:58.960 --> 1:06:01.240 efforts that we're leaning into there, we're continued to invest 1:06:01.280 --> 1:06:04.840 and lean in on the electric vehicle technology. So if 1:06:04.840 --> 1:06:08.680 I think about innovation to answer your question specifically, I 1:06:08.720 --> 1:06:11.560 think about the innovation that we're doing on behalf of 1:06:11.600 --> 1:06:13.880 our customers and to also help our customers with their 1:06:14.000 --> 1:06:17.440 shopping experience. So we have a new AI power tool 1:06:17.520 --> 1:06:21.720 called Rufus on our storefront and so people can use 1:06:21.760 --> 1:06:25.640 it to maybe get more information about a certain product, 1:06:25.720 --> 1:06:27.720 or maybe they need some help with some sizing, or 1:06:27.960 --> 1:06:30.720 maybe like me, I need some gift ideas for my nephew. 1:06:31.120 --> 1:06:33.520 Whatever the case may be, they can use that tool 1:06:33.640 --> 1:06:36.400 to help them out. And so that's really exciting to 1:06:37.440 --> 1:06:40.160 lean into that and there's more to come in that space. 1:06:40.440 --> 1:06:43.800 And we're also leaning in on AI within our operations 1:06:43.800 --> 1:06:46.840 as well. So we have a tool, for example, that 1:06:46.880 --> 1:06:50.720 our employees can use called Dragonfly, and from the palm 1:06:50.880 --> 1:06:53.680 of our employees' hands, they can enter any kind of 1:06:53.720 --> 1:06:57.840 safety suggestion, operational suggestion and it goes directly to their 1:06:57.880 --> 1:07:00.960 manager for action. And that's just one of many tools 1:07:00.960 --> 1:07:02.840 in the toolkit that our employees can use. 1:07:02.960 --> 1:07:03.720 Are they using it? 1:07:03.800 --> 1:07:04.000 Oh? 1:07:04.120 --> 1:07:06.920 Yes, And it's awesome and the amount of feedback that 1:07:06.960 --> 1:07:09.160 we get and the ideas that are generated. And the 1:07:09.280 --> 1:07:13.280 really cool thing is one suggestion from an employee may 1:07:13.320 --> 1:07:16.080 not just be for that particular site, but it could 1:07:16.160 --> 1:07:20.919 impact operations across the network. So we're seeing some really 1:07:20.920 --> 1:07:24.320 great ideas coming from our frontline workforce, which is which 1:07:24.360 --> 1:07:28.000 is awesome, and it's a great tool that is one 1:07:28.040 --> 1:07:30.080 of many, Like I mentioned the toolkit for us to 1:07:30.160 --> 1:07:33.080 maintain that direct dialogue with our teams. 1:07:33.320 --> 1:07:35.080 Where else do you think of AI? Like, I do 1:07:35.200 --> 1:07:37.760 feel like we're scratching the surface and just beginning to 1:07:37.760 --> 1:07:40.680 play around with it, either on a corporate or personal level. Right, 1:07:41.400 --> 1:07:43.960 But it's it's just I think we're all trying to 1:07:43.960 --> 1:07:46.440 figure out how do you think about? Okay, this is 1:07:46.480 --> 1:07:48.200 how AI is going to change. I mean, you guys 1:07:48.200 --> 1:07:51.200 are such a massive world globally, Like, how do you 1:07:51.240 --> 1:07:51.840 think about all? 1:07:51.880 --> 1:07:52.080 Right? 1:07:52.320 --> 1:07:55.520 I see AI doing this for us at Amazon someday. 1:07:55.800 --> 1:07:57.920 Well, we have a bit of a glimpse into the 1:07:57.960 --> 1:08:01.360 future of AI automation and robotics with the site that 1:08:01.400 --> 1:08:05.240 we just launched in Streepoint Shreeport, Louisiana. We call it 1:08:05.280 --> 1:08:08.040 Shive one for short, and I was just down there 1:08:08.120 --> 1:08:10.400 a couple of weeks ago, and it is the most 1:08:10.440 --> 1:08:14.480 automated site we have anywhere in the world. We've incorporated 1:08:14.960 --> 1:08:20.240 robotics AI automation. We as Amazon have been using AI 1:08:20.280 --> 1:08:24.360 and machine learning for several years actually, but it's now 1:08:24.520 --> 1:08:27.680 really kind of coming all together. And so when I 1:08:27.720 --> 1:08:30.479 think about the site in shreport that we launched, we 1:08:30.560 --> 1:08:34.920 now have autonomous robotic drives that move carts full of 1:08:34.960 --> 1:08:36.679 packages from one point to another. 1:08:37.120 --> 1:08:39.080 How's that different from a Kiva robot, like, because you 1:08:39.120 --> 1:08:40.400 guys have been doing those. 1:08:40.800 --> 1:08:44.200 Yeah, the Kiva robots, the traditional robotic drives that we use, 1:08:44.280 --> 1:08:47.920 they run off of basically a grid. So think of 1:08:48.200 --> 1:08:53.599 they are basically are guided by technology that uses what's 1:08:53.640 --> 1:08:55.760 called fiducials. So think of it like a two D 1:08:55.880 --> 1:08:58.080 barcode on the floor and it's going from one point 1:08:58.080 --> 1:09:01.120 to another. Whereas Proteus is automous, it doesn't rely on 1:09:01.160 --> 1:09:04.439 a grid. It knows it needs to go from one 1:09:04.520 --> 1:09:07.439 station all the way to a doctor without any type 1:09:07.479 --> 1:09:10.759 of grid. But there's a lot of safety features involved, 1:09:10.760 --> 1:09:15.080 so it goes yes. So when it senses a person, 1:09:15.120 --> 1:09:18.000 it'll make some noise. It has a looks like a 1:09:18.120 --> 1:09:20.360 smiley face, and so it can looks like it can 1:09:20.439 --> 1:09:22.840 kind of see the person and it smiles and helps 1:09:22.920 --> 1:09:26.519 ensure that you know, it stops and yields to people, 1:09:26.920 --> 1:09:30.200 and we actually use similar technology on our traditional robotics 1:09:30.240 --> 1:09:33.599 floors are texts that help to maintain the robotic drives. 1:09:33.880 --> 1:09:36.040 They actually have a vest that they put on when 1:09:36.040 --> 1:09:39.520 they go out onto the robotic floor and it stops 1:09:39.800 --> 1:09:42.719 all robotic drives within six feet. So it's pretty cool 1:09:43.240 --> 1:09:45.600 watching that because it looks like the person has a 1:09:45.640 --> 1:09:49.360 superpower stopping those robots, which is which is a huge 1:09:49.400 --> 1:09:53.080 safety a great safety feature that is definitely you know, 1:09:53.120 --> 1:09:55.920 necessary to help ensure that we're keeping that area safe. 1:09:56.000 --> 1:09:59.040 What about when it comes to robotics and automation in 1:09:59.080 --> 1:10:02.439 the picking process, where you still have people actually you know, 1:10:02.560 --> 1:10:04.679 going and fulfilling those orders putting them in boxes. 1:10:04.800 --> 1:10:09.760 Right, So we've incorporated robotic arms into some of our 1:10:09.800 --> 1:10:11.760 processes as well. So if we think of some of 1:10:11.800 --> 1:10:15.439 the repetitive motion or working to engineer that out, because 1:10:15.479 --> 1:10:18.720 the repetitive motion can lead to ergonomic injuries, which is 1:10:19.200 --> 1:10:22.080 one of it is the most common injury type across 1:10:22.080 --> 1:10:24.200 the industry, So not just at Amazon, but think of 1:10:24.200 --> 1:10:27.200 warehousing and logistics in general. So if we can engineer 1:10:27.240 --> 1:10:30.240 that out, we're doing that. However, the site and shreetport, 1:10:30.320 --> 1:10:34.000 we still employed twenty five hundred employees, but thirty percent 1:10:34.040 --> 1:10:37.600 of those jobs are more technical than the jobs that 1:10:37.600 --> 1:10:41.360 we've had traditionally, Meaning what so to think of You know, 1:10:41.400 --> 1:10:45.840 we need folks to maintain our robotics and automation, so 1:10:46.000 --> 1:10:49.439 it takes some technical certifications in order to do that, 1:10:49.880 --> 1:10:52.919 and our teams can gain those certifications through a program 1:10:52.960 --> 1:10:57.000 called Career Choice at Amazon and so at no cost 1:10:57.040 --> 1:11:00.560 our employees. So it's a it's a great benefit that's available. 1:11:00.680 --> 1:11:02.200 The question that has to be asked when if we're 1:11:02.200 --> 1:11:05.679 talking about AI and robotics kind of merging together. We 1:11:05.680 --> 1:11:09.400 were out on the West Coast at an investment event 1:11:09.600 --> 1:11:12.240 and I was involved in a panel that was about AI, 1:11:12.360 --> 1:11:14.479 and the question that everybody says was a, I going 1:11:14.520 --> 1:11:17.559 to take my job, So help me understand. There's got 1:11:17.600 --> 1:11:20.400 to be efficiencies when you're dealing with robotics and so 1:11:20.439 --> 1:11:23.160 on and so forth. But what is the thinking about 1:11:23.600 --> 1:11:26.080 will it take some jobs? Will it create some jobs? 1:11:26.120 --> 1:11:27.680 Give us your insight on that. 1:11:28.160 --> 1:11:31.400 We call it a collaborative environment, and there's a balance 1:11:31.439 --> 1:11:33.479 for sure. But again, when I go back to when 1:11:33.479 --> 1:11:36.919 I started in twenty eleven, we didn't have robotic drives, 1:11:37.439 --> 1:11:39.840 or robots in general across our network, and we had 1:11:39.880 --> 1:11:43.920 fifty thousand employees total across the globe. Fast forward to 1:11:44.760 --> 1:11:47.639 twenty twenty four and we have over a million employees 1:11:47.680 --> 1:11:52.599 across the globe, and we've incorporated robotics in our sites 1:11:52.600 --> 1:11:55.720 across the US and in other countries including Europe. I 1:11:55.800 --> 1:11:57.760 was just in Japan a few weeks ago. We used 1:11:57.840 --> 1:12:02.479 robotics in Japan were I look at this holiday season, 1:12:02.479 --> 1:12:04.560 we're hiring two hundred and fifty thousand employees. 1:12:04.920 --> 1:12:06.879 So we have said the same as last year. 1:12:07.400 --> 1:12:10.240 It's on park with what we hire to as we 1:12:10.280 --> 1:12:13.120 go into the holiday season, and we continue that throughout 1:12:13.160 --> 1:12:15.919 the year, and so there are plenty of jobs available 1:12:15.920 --> 1:12:18.719 to include more technical jobs for folks that are interested 1:12:18.720 --> 1:12:20.840 in that more technical part of the work experience. 1:12:21.000 --> 1:12:24.880 Do you think given technological upgrades that we've seen in 1:12:24.920 --> 1:12:28.200 recent years, we've sort of peaked when it comes to 1:12:28.600 --> 1:12:33.360 humans in fulfillment center jobs. Like you know, if we 1:12:33.400 --> 1:12:36.439 think about it from an efficiency perspective, you don't need 1:12:36.479 --> 1:12:39.120 as many people now, and even next year you'll need 1:12:39.160 --> 1:12:41.240 fewer and fewer people. Not that they's taking their jobs 1:12:41.280 --> 1:12:44.200 by any means, but efficiency. 1:12:44.479 --> 1:12:47.120 When I think of efficiencies. I actually think more of 1:12:47.160 --> 1:12:50.320 our logistics network as a whole. So we talked earlier 1:12:50.320 --> 1:12:54.080 about regionalization. That's really where we're seeing the efficiencies of 1:12:54.160 --> 1:12:57.600 removing additional touches. That doesn't mean removing people, it just 1:12:58.080 --> 1:13:01.160 removes some of the inefficiencies that we have in our network. 1:13:01.200 --> 1:13:05.040 And we're continued to still grow. We're launching buildings new 1:13:05.080 --> 1:13:09.799 operations just about every month, multiple per month in some cases. 1:13:09.800 --> 1:13:12.400 In fact, this year, we just launched our first Amazon 1:13:12.439 --> 1:13:16.479 operation in Hawaii and it complements the air operation that 1:13:16.520 --> 1:13:18.839 we have there as well, So we have an Amazon 1:13:18.840 --> 1:13:21.840 delivery station outside of Honolu, which is pretty exciting. 1:13:21.880 --> 1:13:23.800 Any update on drones, It's been more than ten years 1:13:23.800 --> 1:13:27.840 since Jeff Bezos was on sixty Minutes Sunday after Thanksgiving 1:13:27.880 --> 1:13:30.680 Monday before Cyber Monday. I remember covering that it was 1:13:30.760 --> 1:13:33.800 great marketing, by the way, but still I haven't never 1:13:33.840 --> 1:13:35.240 had anything delivered with a drone. 1:13:35.400 --> 1:13:38.920 Yeah, we're continuing to invest in that program, and I 1:13:38.960 --> 1:13:42.040 am excited to say that we are actually operating drones 1:13:42.439 --> 1:13:46.120 for customer fulfillment outside of Phoenix, Tallis in Arizona. 1:13:45.720 --> 1:13:47.280 To be is it scalable? 1:13:47.920 --> 1:13:49.720 I think over time, it will be you know, there's 1:13:49.720 --> 1:13:50.960 obviously a lot of regulations. 1:13:50.960 --> 1:13:53.559 So TAM's going to get his diapers in Brooklyn High 1:13:53.560 --> 1:13:55.040 a drone from Amazon. 1:13:55.479 --> 1:13:58.160 It may take some time, but I'm optimistic. 1:13:58.920 --> 1:14:02.320 Actually, gone are my daughter's diapers? 1:14:02.640 --> 1:14:03.439 You were going to go there? 1:14:03.479 --> 1:14:04.120 I take it back. 1:14:04.800 --> 1:14:08.320 I take it back at your daughter's diapers now, But 1:14:08.400 --> 1:14:11.360 I do wonder, like Ken, is it scalable in a 1:14:11.439 --> 1:14:12.400 city that's so dense. 1:14:13.960 --> 1:14:18.960 Yeah, we're continuing to iterate on the drone design itself. 1:14:18.960 --> 1:14:22.320 It's all design in house. We're working with the regulators, 1:14:22.320 --> 1:14:26.400 of course, because drone delivery in general is a relatively 1:14:26.439 --> 1:14:30.000 new space and so there's been a lot of innovation, 1:14:30.320 --> 1:14:34.439 invention and iteration over the last several years. But it's 1:14:34.520 --> 1:14:35.960 exciting and I'm excited about it. 1:14:36.080 --> 1:14:40.800 Okay, Cyber Monday, we promised, we promised. How are things 1:14:40.800 --> 1:14:41.400 looking so far? 1:14:42.120 --> 1:14:45.280 They're they're looking strong. We had a record breaking Black Friday. 1:14:45.320 --> 1:14:47.840 Of course, Cyber Monday isn't over yet. In fact, deals 1:14:47.840 --> 1:14:50.240 are still dropping. But I was just at a fulfillment 1:14:50.320 --> 1:14:54.759 center in New Jersey this morning and despite the amount 1:14:54.840 --> 1:14:58.839 of volume, they're processing hundreds of thousands packages at one site. 1:14:59.160 --> 1:15:01.920 It's very calm, home organized. We spend the entire year 1:15:02.040 --> 1:15:05.760 preparing for this this season, and it's people. It's really 1:15:05.800 --> 1:15:08.799 fun for the teams as well. I personally have experienced 1:15:08.800 --> 1:15:12.120 our holiday season in fulfillment centers. So it's been a 1:15:12.120 --> 1:15:14.720 great day and overall a great weekend for the for 1:15:14.760 --> 1:15:16.479 the teams and more so for our customs. 1:15:16.479 --> 1:15:18.960 When is it the most stressfulst two weeks before one 1:15:19.000 --> 1:15:21.800 week before Christmas? When does it just get? Like when 1:15:21.840 --> 1:15:23.519 I get those start getting all those emails, like if 1:15:23.520 --> 1:15:25.160 you want to buy by now or you want to 1:15:25.160 --> 1:15:27.439 buy now, Like, when does it get Is it the 1:15:27.479 --> 1:15:28.280 toughest point for you? 1:15:28.680 --> 1:15:30.599 I want to I want to equate it with stressful, 1:15:30.680 --> 1:15:33.879 because it's always a controlled operation, in the safe operation. 1:15:34.280 --> 1:15:37.400 I think it's really more so if if folks are 1:15:37.439 --> 1:15:39.760 like me who have a tendency to procrastinate to the 1:15:39.800 --> 1:15:43.200 last minute, it's just hard to purchase maybe those those 1:15:43.479 --> 1:15:46.439 last minute gifts. You know, there does come a point 1:15:46.520 --> 1:15:51.720 where there's a cutoff period for the Christmas delivery, So 1:15:51.800 --> 1:15:54.920 it's really just keeping an eye on those those cut 1:15:54.960 --> 1:15:55.599 off periods. 1:15:55.840 --> 1:15:57.519 I got to ask you, Sarah, I think Tim and 1:15:57.520 --> 1:15:59.960 I both think about this. You because your VP of 1:16:00.080 --> 1:16:02.559 Level Operations and you've talked about kind of just everything 1:16:02.600 --> 1:16:05.080 around the world, how would you describe the global economy 1:16:05.160 --> 1:16:05.559 right now? 1:16:06.360 --> 1:16:08.240 Well, what I what I can speak to and what 1:16:08.280 --> 1:16:10.960 I can say is what we are seeing in terms 1:16:10.960 --> 1:16:14.200 of trends is that our customers, and I would use 1:16:14.200 --> 1:16:17.960 that broadly, are looking to save money, they're looking for 1:16:18.000 --> 1:16:20.960 a bast selection, and they're looking for fast deliveries. And 1:16:21.200 --> 1:16:24.240 so we see that across the US, across the globe, 1:16:24.600 --> 1:16:27.360 and because we focus on our customer, that's what we 1:16:27.400 --> 1:16:29.599 continue to do ensure that the best experience for our 1:16:29.640 --> 1:16:30.439 Amazon customers. 1:16:30.479 --> 1:16:33.719 Do you also handle grocery delivery and whole foods and stuff? 1:16:33.840 --> 1:16:40.679 There's grocery whole food. It's separate, but we have visibility. 1:16:40.080 --> 1:16:42.200 On it because that's a completely different animal. 1:16:41.960 --> 1:16:45.639 It is, and that's growing space for sure. 1:16:46.040 --> 1:16:47.240 Interesting. Yeah, very cool. 1:16:47.280 --> 1:16:50.000 It's your favorite plane to fly in nowadays? Is it 1:16:50.080 --> 1:16:50.439 just like. 1:16:50.360 --> 1:16:54.920 A Well, I'll always buias to the S eighteen super Hornet, 1:16:54.920 --> 1:16:56.519 So if I have the chance to fly out again, 1:16:56.520 --> 1:17:00.080 that would be great. But you know, in general, the 1:17:00.160 --> 1:17:03.240 thing about aviation is first and foremost is safety. And 1:17:03.400 --> 1:17:05.320 I think that's one thing that one of many things 1:17:05.320 --> 1:17:08.759 that the aviation industry does in general is do safety 1:17:08.800 --> 1:17:11.000 really well. And we've taken a lot of those practices 1:17:11.080 --> 1:17:15.479 from aviation and applied them to safety at Amazon, which 1:17:15.520 --> 1:17:18.120 have proven over the last especially the last year and 1:17:18.120 --> 1:17:19.120 a half to be very succesful. 1:17:19.120 --> 1:17:20.519 Think about right the standards you have to have for 1:17:20.560 --> 1:17:21.280 flying people. 1:17:21.120 --> 1:17:22.200 Absolutely around the world. 1:17:22.240 --> 1:17:24.200 Absolutely, Sarahoz, thank you so much. 1:17:24.439 --> 1:17:25.280 Thank you for having her. 1:17:25.360 --> 1:17:27.960 What a pleasure, VPA of Global Operations at Amazon, joining 1:17:28.000 --> 1:17:29.719 us right here in our interactive brokers studio. 1:17:29.800 --> 1:17:30.759 This is Business Week. 1:17:31.240 --> 1:17:36.120 This is the Bloomberg Business Week podcastle Apple, Spotify, and 1:17:36.280 --> 1:17:39.719 anywhere else you can get your podcast. 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