WEBVTT - Businessweek Extra - David Mussafer & Calvin McDonald

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<v Speaker 1>This is Bloomberg Business Week from Bloomberg Radio. I'm Jason

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<v Speaker 1>Kelly and I'm Carol Masser. Welcome to the Bloomberg Business

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<v Speaker 1>Week Extra. It's our weekly podcast bringing you an in

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<v Speaker 1>depth interview you will not hear anywhere else. And Jason,

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<v Speaker 1>this week it's timely it's all about Lulu Levin. Well,

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<v Speaker 1>that's right. This is tied to a story I actually

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<v Speaker 1>have in Business Week magazine, the print edition and online

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<v Speaker 1>of course. But underneath all of that is a long

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<v Speaker 1>conversation that I had that really no one's had before,

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<v Speaker 1>at least in public, with David Mustafer. He is the

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<v Speaker 1>lead director over at Lulu Lemon, and Calvin McDonald the

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<v Speaker 1>relatively new CEO. He's only been in the Seed about

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<v Speaker 1>a year and a half or so. This is a

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<v Speaker 1>company that has gone through a massive transformation, all while

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<v Speaker 1>becoming one of the most influential retailers of our time. How,

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<v Speaker 1>for lack of better term, sort of broken was it

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<v Speaker 1>when you sort of got back in? I mean, I

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<v Speaker 1>think the business was had its challenge is but at

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<v Speaker 1>the core the issue was alignment. And so part of

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<v Speaker 1>the power that that private equity can bring is that

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<v Speaker 1>alignment and so in this case, we had a situation

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<v Speaker 1>where the founder wasn't aligned with the board and the

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<v Speaker 1>management team, and so you've seen some turnover of the

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<v Speaker 1>senior management. You also didn't have the company uh in

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<v Speaker 1>sync with the ability to make investments. They were following

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<v Speaker 1>Wall Street and thinking about what they needed to do

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<v Speaker 1>that quarter. And so I feel like what we saw

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<v Speaker 1>as this fundamental opportunity was to help regain that alignment

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<v Speaker 1>and put the platform in place so that the company

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<v Speaker 1>could establish a really strategic proposition, not just here and now,

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<v Speaker 1>but part of the real opportunity is to help them

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<v Speaker 1>get out of the penny a share game, uh, you know,

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<v Speaker 1>and make some of these investments that had deferred. Right.

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<v Speaker 1>I want to get to the moment where Calvin you

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<v Speaker 1>come into the company, but sort of leading up to that,

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<v Speaker 1>you do have a series of of C e O

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<v Speaker 1>s um so leadership becomes something at the at the

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<v Speaker 1>top level that you also have to deal with in

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<v Speaker 1>terms of the the various issues you have to address. Well, firstly,

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<v Speaker 1>we had a situation where the board really was interested,

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<v Speaker 1>loves this company and wanted to see its succeed and

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<v Speaker 1>so in that regard, when we came back, we were

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<v Speaker 1>able to create some of that alignment pretty easily and

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<v Speaker 1>help create the um, the ability to put some of

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<v Speaker 1>these ideas in place, the idea of a longer term plan.

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<v Speaker 1>But you're right, I think some of those challenges with

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<v Speaker 1>the founder made it hard and so UM at the

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<v Speaker 1>point that that the founder exited the company in two

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<v Speaker 1>thousand fifteen, we were really able to begin assembling a

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<v Speaker 1>world class management team and so UH with a CFO

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<v Speaker 1>who is initially with Stewart now CEO, and then talent

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<v Speaker 1>along the way, leading to people like Glenn and Calvin

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<v Speaker 1>and Son and a host of really world class business leaders.

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<v Speaker 1>And the exciting part is that this business had that potential,

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<v Speaker 1>it just needed the opportunity and the the framework. From

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<v Speaker 1>this point and beyond, it really feels like the business

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<v Speaker 1>is just getting started. And so at that moment where

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<v Speaker 1>you where you do start to dig in, Calvin, I mean,

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<v Speaker 1>what's what's the opportunity do you see to sort of

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<v Speaker 1>take it to the next level. So for me, the

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<v Speaker 1>first assessment was as an opportunity here to be even

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<v Speaker 1>more than what Lululemon is, not just with the North

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<v Speaker 1>America but internationally. UH, and I think the clear resounding answers. Absolutely.

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<v Speaker 1>I mean, the vision we have today is to knite

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<v Speaker 1>a community of people to live the sweat life UH.

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<v Speaker 1>And we're going to express that not just through incredible

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<v Speaker 1>product that will keep developing because there's so much opportunity

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<v Speaker 1>and white space for us to develop into, but also

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<v Speaker 1>through our strategy of events on what we do with

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<v Speaker 1>our grow initiatives and seeing what Calvin and the team

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<v Speaker 1>have already done with the manifestation of this some of

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<v Speaker 1>this next step vision in Chicago and with the membership

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<v Speaker 1>and loyalty program, you already are beginning to see some

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<v Speaker 1>of the seeds of thinking about what the broader vision

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<v Speaker 1>might look like. And so what does that look like

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<v Speaker 1>going forward? Because it does feel like we're at a

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<v Speaker 1>very interesting moment in the world of retail. We have

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<v Speaker 1>a huge runway of growth. UM. Not only is our

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<v Speaker 1>women's business continuing to grow at double digit, with a

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<v Speaker 1>lot of growth opportunity being entering into new categories or

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<v Speaker 1>we mentioned to and from OTC that doesn't even really

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<v Speaker 1>in our women's UH category exist UH and into our

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<v Speaker 1>omniguest experience with our digital platform, and as good as

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<v Speaker 1>we are, there's a ton of opportunity to even more.

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<v Speaker 1>This is an emotional brand, and our online continues to

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<v Speaker 1>be more transactional, and then finally, you know, expanding into markets.

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<v Speaker 1>We still have a lot of opportunity in North America,

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<v Speaker 1>not to mention what's happening internationally and in Europe as

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<v Speaker 1>well as in China. We feel we're early innings and

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<v Speaker 1>everything we're trying to create through you know, we're going

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<v Speaker 1>to double our men's business, proven that this brand resonates

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<v Speaker 1>as much with women as men, which is super exciting

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<v Speaker 1>for our category. It's a dual gender category. Absolutely, there's

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<v Speaker 1>no reason why we would be able to do that.

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<v Speaker 1>What's the private equity lesson here, David? I mean, what

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<v Speaker 1>do you take away as you talk to your investors,

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<v Speaker 1>as you talk to your partners? I mean, this will

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<v Speaker 1>stand out clearly as a a lesson to some extent

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<v Speaker 1>in doubling down in a lot of ways going back

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<v Speaker 1>in UH, is it replicable? Like, what's the what do

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<v Speaker 1>you take from this that you apply to future investments.

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<v Speaker 1>We don't have the expectation that all of a sudden

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<v Speaker 1>magic happens just because we've been a successful with a

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<v Speaker 1>particular investment. But the thing that I think we began

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<v Speaker 1>to get excited about is the power of the alignment

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<v Speaker 1>that we could bring. In this case, we only owned

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<v Speaker 1>of the company, and yet we were able to work

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<v Speaker 1>with the management team and the board and then ultimately

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<v Speaker 1>the shareholders to create a really powerful runway for this company.

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<v Speaker 1>And I think the idea of of thinking about how

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<v Speaker 1>we might be able to do that more broadly is

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<v Speaker 1>something that we've begun thinking. UH those propositions through our

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<v Speaker 1>phone is ringing, and so in this regard, I think

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<v Speaker 1>the idea that there shouldn't be any arbitrary boundaries between

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<v Speaker 1>a private company and a public company. The idea of

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<v Speaker 1>applying this longer term UH strategy and approach is what

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<v Speaker 1>a lot of these public companies need. Not every situation

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<v Speaker 1>will will be applicable, but that's at least part of

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<v Speaker 1>the thing that we've kept an open mind around well.

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<v Speaker 1>And I do wonder about that in the same way

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<v Speaker 1>that it feels like we're at an inflection point of

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<v Speaker 1>sorts around experiences and lifestyles and things like that, where

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<v Speaker 1>it's something at an inflection point for private equity where

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<v Speaker 1>people are asking a lot of big questions around you know,

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<v Speaker 1>adding value, you know, looking beyond the bottom line. We're

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<v Speaker 1>hearing that from the Business Roundtable and others. What does

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<v Speaker 1>private equity look like going forward with this? You know,

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<v Speaker 1>you've got a couple of fresh pools of capital to

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<v Speaker 1>deploy at this point. What are people looking for from you?

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<v Speaker 1>I mean, I think that people are rightly concerned that

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<v Speaker 1>we're at the peak of the economic cycle, and what

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<v Speaker 1>does that mean as you're leaning into a private equity

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<v Speaker 1>industry that's grown really rapidly over the last ten years.

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<v Speaker 1>And so one of the things that I think has

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<v Speaker 1>given uh ME some comfort is seeing that the industry

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<v Speaker 1>learned a lot from the last downturn. And so while

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<v Speaker 1>you're always going to have pressure, I think there's been

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<v Speaker 1>a tremendous strides that our industry has taken to really

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<v Speaker 1>lean into really savvy operational strategies for their companies and

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<v Speaker 1>so really thinking like an industrialist as opposed to a financier.

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<v Speaker 1>And that vision is part of where private equity can

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<v Speaker 1>help think about best practices. We get the benefit with

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<v Speaker 1>seventy five portfolio companies that we have around the world.

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<v Speaker 1>We're eager to bring any of these best ideas to

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<v Speaker 1>our companies as soon as we can. That was David

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<v Speaker 1>Mussifer Lulu Lama lead director and Calvin McDonald Lulu Lemon ceo.

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<v Speaker 1>It was a really fun conversation. We met at one

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<v Speaker 1>of their stores here in New York City before regular

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<v Speaker 1>business hours, so you sort of get to get a

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<v Speaker 1>sense of all the merchandise. Clearly a bigger focus on men,

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<v Speaker 1>a bigger focus on growth. This is a company that

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<v Speaker 1>in many ways has defined the way we dress, do

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<v Speaker 1>any shopping. I didn't, not this time around. Not this

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<v Speaker 1>time around. You've been listening to the Bloomberg Business Week Extra,

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<v Speaker 1>be sure to tune into Bloomberg Business Week Radio Live

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<v Speaker 1>Monday through Friday to be in Wall Street time on

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<v Speaker 1>Bloomberg Radio. I'm Carol Masser and I'm Jason Kelly. This

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<v Speaker 1>is Bloomberg