Bloomberg Businessweek Weekend - April 29th, 2022

the last few days. It was a busy week. We had Alphabet, Microsoft, Meta, Apple, Amazon, and oh yeah, Twitter, Yeah that one too, although that one kind of boring. I gotta be honest, Who cares? Who cares? Who cares?

Speaking of Elon Musk making it official his forty four billion dollar bid for the social media platform, it was accepted, though there are still lingering questions about the deal's financing, who will ultimately take over a CEO, the political implications for the company, and what it means for Twitter's user base. That's what we cared about when it comes to Twitter, not the earnings, but this whole big deal. We'll have more in just a moment. Plus a pair of iconic

retail brands going in opposite directions. We're going to talk to Mattel CEO on a possible sale of the company, and then profile a former Levis executive who stands on pandemic related policies. Well, it led to a very public departure and this week's cover story on China's COVID zero trap. We start this week with the man and the story that just keep on giving. We're talking about Elon Musk and his forty four billion dollar deal to take Twitter private.

Every day there are multiple stories on this now his claim on the future of the First Amendment and content moderation on the platform. That's the story we want to get into, and that's exactly what Bloomberg Business Week editor Joel Webber and Features editor Max Chafkin talk to us about. There's free speech, which you know, I think I think most most people, especially most Americans kind of can kind

of have some idea on and agree on. And then there's this kind of like political notion of free speech where um Republicans have started using that phrase and the right started using that phrase to complain like about a very specific and maybe narrower set of issues than one that like a constitutional scholar will be you know, inter sit in, and that is what Elon Musk has gravitated towards and that is why he's currently being celebrated, you know,

on the right. If you if you turn on UM, you know, conservative talk radio or consertive television or whatever, Elon Musk is front and center. They are celebrating this. They're presenting this as you know, uh, Trump and his allies are going to be back on you know, back

on social media. And it's like, you know, the resurgence of Trump is UM and Musk, I think, is embracing that and is trying to take advantage of it, both as a potential business strategy for Twitter, you know where where just just like you know, Fox News came along and presented itself as kind of like a right wing news network to CNNs, Like, I think that's kind of

what Musk is going for here. It also has potential business implications for Tesla, which of course is UM you know, has a huge valuation and is trying to reach a different sector of consumer. Right now, let's talk about trucks, because uh, Elon's got a few that he might need to sell to some people who might lean a little bit more seen they well, right, so you know, we we had that on the cover of last week. You know, there is another cyber truck coming that. Now I think

this is like a pretty savvy move. It's unclear it will work. And of course Tesla stock went you know down at the end of yesterday. But um, but I do think so. So Teslas sold a lot of cars to kind of wealthy environmentalists, right, there's there's sort of a limit to that market. And Americans buy a lot of trucks. And of course trucks are are much bigger in kind of red states they are in blue states. And we've seen Musk. This is not a new strategy

for Musk. We saw him, you know, moving Tesla's operations from California to the Austin area and and talking about that in ideological terms. And of course they launched the the cyber truck, you know, at an event um a few weeks back in Austin cyber rodeo. Very much embracing you know, kind of Texas culture. And I think that's I think the jury is out on whether this will work.

You know, Ford of course has a very strong, uh track record, you know, selling trucks that the f one fifty, as we wrote in our story, is you know, it's like one of the most successful consumer products of all time. But but I think musk is trying to take advantage of these political dynamics to find a niche well, and so are you. So is it basically right now? You know, his businesses, I think you write about his business interests

influencing his political ideology. Is that what we're seeing right now? Yeah? I think with Musk, um, those two things are very closely connected. This is somebody who who has founded a series of companies that do business with the government. When you do business with the government, you know, primarily SpaceX, but of course Tesla got got a huge amount of government loan lending from uh in two thousand nine after

the automotive crisis to benefits from these v credits. And when you do that, when you're in that business, you're you have to be political. So during the you know, the Obama era, must kind of cut this figure as this you know, stakeholder capitalist, this kind of green technocrat. Um. You know, during the Trump era he shifted a little

bit back to the to the MAGA. You know, it's a little more MAGA friendly and now um, you know, with the right kind of research, it with it looks like in the in the United States, of course, U Republicans are likely to take you know, one, if not both, houses of Congress. I think he's he's making a political calculation, but it's also happening against a backdrop of an really important market to Tesla, which is China, and the company

successfully built its factory in Shanghai. A couple of nights ago, we saw tweet from none other than Jeff Bezos, which I think surprised a lot of people because Jeff Bezos is pretty quiet when it comes to Twitter and this stuff. He uh implied that this could be perceived as a conflict of interest, as you right, when Musk's Twitter has to decide how to treat Chinese back to disinformation, how

is this being played in Republican circles? When Republicans in the past have gone really hard after Disney for its presence in China, Nike, the NBA, and more, Musk has been pretty much teflon on this issue, despite um, you know, China critics having having plenty to criticize here. Um. I think for one thing, I think a couple of things going on. One is, look, he's a successful you know

industrialist and and people like that. And and as a result, UM, people are more forgiving of some of these um, you know, connections or hypocrisies or potential vulnerabilities politically. UM. I also think that, you know, conservatives have been very eager to kind of embrace this like made in America thing. You know. Musk, despite having a huge factory in China, also employs, um you know, lots of people in the United States. So so I think it's it's it's a little bit complicated.

I also want to say, you know, on the tweet from Bezos, of course he's got his own political agenda, right, He's competing with Musk also for government contracts. He owns this rocket company, so it's totally in his interest to kind of you know, slime you know, competitor on Twitter, um, you know, as part of that. And we should probably also say that that he sort of immediately backed off.

That was Bloomberg Business Week features editor Max Chafkin and the editor of the magazine, Joe Weber, coming up from a technological innovator to a financial one. We dive into a new book on Wall Street Legend. We're talking about the late Great Jack Bogel, you're listening to Bloomberg Business Week. This is Bloomberg. This is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes. Tim Stinovik from Bloomberg Radio.

I was never in this business to build a colossus, because I told people many times I was too stupid to realize that if we gave investors the best deal I would ever get, I'd be building a colossus. And so here we are on the way to market share of mutual fund assets, something that no one has ever achieved anything like before. There are legendary investors and financial

innovators that, over the decades still stand out. Warren Buffett, of course, on value investing, fidelities, Peter Lynch amid the rise of the mutual fund industry. And then there's the man whose voice you just heard, the late Jack Bogel. That from a Bloomberg interview back in. Bogel's idea of index investing was not only well ahead of its time, it was considered radical when he introduced the strategy at his then f jeling Vanguard Investment Group back in the

nineteen seventies. Hard to think of Vanguard's fledgeling, but back then it was different. Bogel's life and his lasting impact on investing and the financial industry are explored in a new book that's excerpted in the latest issue of Bloomberg Business Week. Bloomberg Intelligence Senior et F analyst Eric Beltunus is here to break down the Bogel Effect, how John Bogel and Vanguard turned Wall Street inside out and saved investors trillions, and why it took so long for the

concept of indexing to catch on. This is why where I think the story has a little more drama than people think. You know, a lot of Wall Street books are about the rise in the fall, and let's Bogel. It's sort of like he just kept, you know, slowly rising. But this guy lived in oblivion for about five years. And the reason it took so long, given what people today think is an obvious trade, why not Why wouldn't I own the whole market? For three basis points is

that he operated outside of the system. He just did the Vanguard refused to pay brokers, and at that time it just there were no r i as it was just brokers, and so if you did not give them money or loads or commissions or kickbacks. Um, they were not going to sell your funds, So he had to get people to leave that system. He also had to try to explain to people that an index fund was

not average. It sounded average. He had a lot of people trying to position it that way, so he had to go above and beyond to try to explain, hey, this is not average. So those two things made it take a long time. Also, the barguard mutual ownership structure, which lowers fees the more assets it gets, took a while to lower fees because the assets weren't quite there yet. So as the assets started to come in the nineties and two thousand's, that's when the fees really started to

dip down. And once they got below twenty fifteen basis points, it was a done deal. And that's part of the point of making the book. Also is the index fund was a kind of a lucky byproduct. The real core nucleus of all the things we're seeing today that we're from Bogel and Vanguard are the mutual ownership structure, UH and the structure of Bogel home self. I must say he was a different kind of guy, and so I think those two things really are what I explore the

most in the book. I think I've I've talked with you about this before, but I remember one of my first shows that I did in financial television and financial broadcast, and it was a mutual fund show, and we would always be like, Okay, you gotta have a Vanguard fund on because it was a low cost, no cost option. And our host was like, why would you pay fees when you can go to Vanguard and get the same strategy and pay no fees. I mean, he really was

iconic in terms of his impact on this industry. Yeah, absolutely, I mean, you know it is it is just a modern miracle that you can just get the whole stock market, the whole bond market, and at this point international stocks for under six seven basis points a six before you now can be gotten for three or four basis points, basically frictionalist exposure. And that's a big theme in the book.

I had this well, is that I think, you know, Bogel's called the father of the index fund, but honestly feel like you should be called either the father of low cost investing or I like this phrase addition by subtraction. What he did over forty five years was just remove all the stuff that kind of gets in the way, be it management, fees, brokers, turnover, trading costs, human emotion. I mean, taking all that out and you get the total market with its almost frictionalist exposure. And that's why

it's a smash it. And it's not just Vanguard, which takes in a billion a day. The rest of the money goes to Vanguard esque index funds, even from Fidelity, right, the fierce rival of Vanguard. That's how fidelities flows come now, just through those low costs inex funds. I mean he totally. The whole industry now basically is governed by Vanguard's mutual ownership structure, which nobody copied, but yet they have to

copy it in a way. Eric, when I was reading this, I thought back to this article I read in The Atlantic about a year ago by Annie Lowry. It's entitled could index funds be quote worse than Marxism? And it's actually a quote from analyst at Bernstein. They're called passive investing worse than Marxism. I see you on the zoom laughing right now about this. What do you make of criticism of passive investing or index funds such as this. Yeah,

and most of it's laughable, I mean the Marxism. Somebody else said that they're worse than the misuse of antibiotics. I mean they're I've heard, I've heard it compared to the Salem which trials people go crazy with this stuff. Look, if you think about it, all people have done is moved from closet indexing. If you look at the Fidelion Magellan, it largely owns Apple, Amazon, Google, right, and they've moved to actual indexing and saved about seventy basis points in

the process. Everybody owned the same stocks, they just now own it in a different format. And indexing isn't really necessarily totally passive. Russell want thousand's different than the SMP. The SMP, by the way, is run by a human committee, has some rules. It's just more rules based active. So I try to get rid of that, that line between active and passive. What really is going on is low cost.

And I promise in the book that let's say indexing wasn't a thing, and Vanguard had their mutual ownership structure and only active mutual funds. In my opinion, they would be the biggest active fund manager six times over because they would have been bringing a gun to a knife fight over and over. It's the low costs, that's the thing. And I don't think anybody who writes these articles would really have too much for a problem. The one thing

we got to watch for is voting power. Vanguarded Blackrock now own about seven eight percent of all stocks, and so we have to wonder how are they going to make sure that they don't vote in a way that is different than their shareholders or misuse that power. So far, I think they're fine, but we have to watch that. That's probably the one thing I would think about watching. What about Bogel Deman, I'm surprised to hear about how

spiritually was um just interesting? Yeah? Look, uh, I asked everybody interviewed this question, why is has nobody copered banguards much to ownership structure? They said, well, because people go to Wall Street to get rich. They don't want to drive a Volvo. And then the other question, I said, well then why did Bogel do it? And they're like, I don't know. Good questions. So a whole chapter is called Explaining Vogel, where I try to explain the ingredients

that went in to create this very unusual person. I almost feel he was miscast uh in this industry, but maybe the industry needed a miscast in this era to sort of bring it to a more fiduciary place. So he was perfectly cast in away but definitely not your average Wall Street titan. And again I explore that in a whole chapter, uh to try to explain to you how he happened. That was Bloomberg Intelligence senior et F analyst Eric Bolchune is his new book. It's out. It's

called The Bogel Effect. How John Bogel and Vanguard turned to Wall Street inside out and saved investors trillions. It's out now still ahead on Bloomberg Business Week, Why a successful retail executive chose to speak out against a series of COVID related health policies and how it ended up costing her a lucrative role in the c suite of

a six billion dollar company. This is Bloomberg broadcasting from the financial capital of the world, Bloomberg eleven Frio in New York to Washington, d C. Bloomberg to Boston, Bloomberg one O six one does San Francisco, Bloomberg nine sixty to the country, Sirius XM jendal one nineteen and around the globe the Bloomberg Business app and Bloomberg Radio dot com. This is Bloomberg Business Week. Well before she quit in February,

Jennifer Say was a brand president at Levi. She had risen to the rank of chief marketing Officer after more than two decades with the Danna maker, and she was seen as a potential CEO candidate. Then along came COVID

nineteen with more. We turned to Bloomberg Business Week senior writer Claire Suteth Claire, good to have you with us, A really great profile of somebody who I think wasn't a household name until she made such a big splash leaving Levi's what happened to Jennifer Say, Yeah, well, you're right. So Jennifer Say was not a hostle name, but she

was very high up that le. She'd been at the company since, worked her way up to chief marketing Officer, which is what she held at the start of the pandemic, and then during the pandemic she was actually promoted to it's called brand president, which took her basically right below the CEO in line to maybe one day become CEO UM. And so she's sort of the person that Levi's who has for years been crafting the brand image reputation. So whatever you think of what do you think of Levi Jeans,

Levi Jeens, that's what she does for a living. UM. Some of that was, you know, inserting Levi's into the culture, holding parties at Clichella, that sort of stuffs to make it cool, and another part of it was really helping be you know, she's part of the executive team that

crafted Levi's response to social issues. This company was very progressive for a very long time, actually, dating all the way back to I think in like n it was the first company to make genes for women, back when women really weren't supposed to even wear pants in public right now different you would not UM. It racially integrated its factories in the forties, like long before there were

anyone's requiring it UM. And then it was actually the first Fortune hundred company that extended benefits to employees name sex partners. UM. So it has this really long history and legacy of these progressive chances UM in the past, I would say, like decade or so, it became a bit more public about them. It has you know, come

out in favor of marriage equality, transgender right. Um, it's very publicly UM sort of promoting UM, you know, fun control for the parks and school shooting and and say it was actually part of the team that came up with all of this, um, and then came the pandemic. So, so tell us what happened, because right it sounds like every company has a line in the sand when it comes to what they're willing to talk about publicly, especially when it's UM some some major issues, and you know,

some things are comfortable. It's some things they're not. What happened and it wasn't just her, it was her and also her husband. Yeah, so you know, I think Levy's you know, this is a really thorny issue. UM. And it's you know, this has been a two year long internal struggle between Advised that only became public when she quit in a very dramatic fashion and gave a bunch

of television interviews about it. UM. But basically what happened is during the pandemic, UM to say and her husband living at the time, they lived in San Francisco UM, and she became I would say, very upset about a number of different UM safety precautions that was put in place, both at the sort of San Francisco city level, California level UM and and just what was happening at the country at large. So we're talking about lockdowns masks her.

The topic that she talked about most frequently and was the most passionate about was UM school reopening, getting kids back in the classroom UM. And I think now in hindsight, nearly everyone recognizes that schools were shut down consists considerably, like, you know, way too long in certain parts of the country. There were many European countries that opened quite early. UM. She was advocating for this in like March, when no one knew what was going on in the depth of

the pandemic. This is a great week. And I have to say, once I started reading the story, I couldn't put it down. We we've run out of time, so we're gonna recommend everybody check out the story online. But Claire, it's like, it's incredible how it plays out. And I feel like this gets to where a lot in your story about you know, when a company can deploy its political muscle really hard to get it right. We're seeing a play out with Disney and some other companies. Tim

it also goes through says political transformation. I mean, this is a woman who had posters of Obama hanging in her dining room and supported the candidacy of Elizabeth Warren, wasn't a fan of Trump, and now she's on Fox News. Yeah, it's it's an incredible story, Claire, and you really get into all the d tale. So as we said, we highly recommend people check it out in the magazine online

or on the Bloomberg terminal. That was Bloomberg Business Week, Senior writer Claire Suddeth, you're listening to Bloomberg Business Week. Up next, another quarter, another earnings beat for the toymaker Mattel. But that's not the only reason the stock got to bump this past week. That's right up next, we're going to be hearing from CEO Inn Cries about reports of

a possible private equity buyout. This is Bloomberg. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes. Tim Stinovy from Bloomberg Radio. But Tell America's second largest toymaker is in preliminary buyout talks with at least two

private equity First, we got that news this week. Yeah, that news emerging ahead of the company reporting first quarter results that beat Wall Street estimates once again, the retailer buoyed by Barbie and hot Wheel cells that defied the usual seasonal slowdown. All right, to break down the firm's latest results and find out more about that potential for a multibillion dollar sale, we caught up once again with

Mattel's chairman and CEO in non cries. This was the highest first quarter we have on record, both revenue and profitability. Our momentum continued across the business with double digit growth in Bobbie, Hotwoods and Fisher Price. We have started the second quarter with strong consumer demand. The Follier outlook is also strong and we expect to grow market here. So all in all, an excellent start of the year and we're firmly in growth mode. And I think we highlighted yesterday.

I mean, you guys have been on a tear if I look at you know, the share price in terms of the moves that you guys have been doing specifically, Um, some would say and I'm going to push a little bit that you're setting it up for a sale. Are you talking with people? Are there conversations going on? But I can't comment on the speculation. But we've been consistently growing the company, UH, and this has happened over the

last four years. You followed the story, so you know that we took our adjusted IBIDA from a hundred six million dollars in two thousand and seventeen two over a billion, and guided for yet another growth this year with higher goals for three So this is not a one quarter situation. This has been consistent delivery and execution on a on a clear strategy and a clear roadmap with Tracking Whale, and we are in a great position to continue to

grow the company. And I will point out that from the end of the stock is up almost so investors have certainly noticed that performance in those changes. On one element that you've had to UH deal with just not just over the last year, but over the last few quarters,

to our inflationary prefer pressures on the supply chain. We've spoken to you in the company in past quarters about moves that you've made to try to make sure that your supply chain remains intact what you've being do ahead of time, but it doesn't mean you've been immune to higher prices. Talk to us about the pricing power that you've had and how much you've had to raise prices

and how consumers are being affected by that. Yeah, we you know, given the anticipated inflation, implementing pricing action UM is one of the things we consider at times of of of inflationary pressures. Uh. We're not the only ones, and it's not unique to the toy industry. Uh. And this is something that we've done, like in the second half of last year, and we expect to do that

again uh in the second half of this year. It's important to say that when raising prices, we always keep the consumer in mind, and we're being very thoughtful and very strategic and remain strategic committed to maintaining the right balance between quality and value for our consumers. Well, you know what's really great is I mean, you guys have some old iconic brands. We've talked about it with you before, whether it's Barbie, whether it's Hot Wheels. I mean, it's

just one brand after another. But then you have folded into the mix and embrace of all that is new through alliances and partnerships. What is it that really drives growth for you guys, What is it that you say, Okay, this is top of mind, you know. In terms of the performance for the company overall, well, we've been growing on the toy side of the company very strongly. We expect further growth this year. We expect growth in the

second quarter and growth for the full year. We expect our power brands to continue to grow this year, Barbie, Hotwells and Fisher Price, as well as American Girl, and we expect to see strong growth in the challenging categories. This is where we're not a global leader, but we're seeing tremendous momentum and growth in categories like action figures and building sets. So we are in a great position

to grow in the toy side of the company. And in addition to that, we're also seeing great momentum on the I P strategy. This is film, television content in general, consumer products, digital experiences. And this week alone, we had two very exciting news to share. One is that we partnered with J. J Abrams to produce the Hot Wheels

movie that we're developing with Warner Brothers. JJ is one of the most prolific, respected producers of this generation filmmakers in general, is also a director and we're very excited to have him partnered with us on Hot Wheels. And in addition, we also announced or Warner Brothers announced at CinemaCon the release date of The Barbie Movie, which will be July one, three, And this film is shaping up

really well to be an iconic cultural event. We could not be more excited with the creative, execution and vision of Great Gelwig, who is also one of the most respected and prolific creative filmmakers of this generation. And an all star cast with Margot Robbie, Ryan Gosling, Will Farrell Simulo, America Ferra and many other you know, very strong talent

and exciting cast. So expect something very special, uh from the Barbie Movie as well as Hot Wheels, and as well as other twelve films that we have in development, you know. And I want to go back to something that you said about challenger categories areas where you're not actually the top of the category. Um, do you think you can become the leader of the pack in those categories? In action figures, for example? What will it take? We

we're seeing tremendous growth and momentum. In the first quarter, we grew by fort in the core and this is on top of six six percent in the same quarter last year, so we're lapping a very strong year with

forty in in the first quarter. Within that action figures actually grew by sev so uh shoes momentum even by our own properties such as Masters of the Universe, as well as third party franchises that we manage on the toy sides such as Jurassic World, Minions and Light Year three, big theatrical releases that are coming up in the second quarter and will further amplify growth in this category in

addition to what we do already. So this is an area where we see an opportunity to position Mattel as a partner of choice for the major entertainment companies and owners of big important franchises to leverage our platform, our capabilities on the design side, supply and supply chain, and commercial execution and really grow these franchises and manage them as evergreen properties that are not just dependent on the

movie launch. But this is where we can bring out capabilities and manage franchises as evergreen I P. And continue great value for our partners. Well, you know, I think about what you said about IP strategy film TV. You guys are already do with the Barbie movie. You're gonna do it, as you said, with Hot Wheels, And I do think about, um, what's the best way for you

to leverage all of that? Is it by doing it as a standalone and just partnering and you know, creating alliances with media and entertainment companies, or is there some kind of you know, going back to our first question, some kind of more significant link up with a specific media house Disney for the matter, you know, that would

make sense and really create some incredible leverage. Our approach has been capitalized in that we don't take capital risk in investing in movies um, and that capitale approach applies also to our manufacturing strategy. What we do do on the content side is with partner with the best the best in their respective field. So we're partnered with the best distributor as a major studio and the best creative

talent per genre, per project. And that gives us the ability to do that at scale and develop multiple projects at the same time and not be limited to UH one or two movie movies coming out every one or

two or three years. So we can do it at scale, work with the best people, per genre, per opportunity across across the industry, and have multiple shots on goal with incredible brands and incredible incredible franchises and still find the right economic balance in terms of risk and reward for matail.

Where our currency, our contribution is the I P the franchises that we know, our expertise and know how of those of those franchises, and making sure that we collaborate and and and bring our understanding and the nuance knowledge of these franchises to the table and create something very excited for exciting for insumers all over the world. All right, you know, and I'm I'm a little persistent, as you might know, having re talked a few times. So go,

So you are firing at all cylinders. Mattel is firing at all cylinders. And you guys have had what three consecutive years of dynamic certainly equity growth. Uh And like I said, investors are noticing. So some would say that is a reason the top perhaps or at a prime moment to sell the company. Others would say it's you know, you are talking about more avenues for growth. What would it take to do a deal that makes sense? Obviously shareholders of the board have to agree. But you know,

is it just about price or is it about strategy. Well, we're here to create shareholder value. We've been very consistent about executing our strategy and always have our shareholders interests as a north star. We have been doing it consistently. We see a lot of runway for the company to continue to grow and to create more shareholder value. That's our job, that's how focus, that's what we've been doing, and this is what we are looking to do going forward.

That's a non christ chairman and CEO of Mattel. And that wraps up our first hour of the weekend edition of Bloomberg Business Week from Bloomberg Radio. I'm Carol Masser and I'm Stovik. Ahead in our next hour, our cover story on how China's campaign to wipe out COVID is crushing its economy, plus the chief technology officer of Chipotle on strong earnings amid rising costs, and then our pursuits team reveals the secrets behind some of the world's most

expensive wedding bashes. We're talking millions and millions of dollars, tens of millions dollars. This is Bloomberg. This is Bloomberg Business Week inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news as it happens. Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes, Tim Stinovic on Bloomberg Radio.

Plenty ahead in our second hour of the weekend edition of Bloomberg Business Week, including Chipotle's chief technology officer on the company's response to inflation, plus how to spend it twenty five million bucks in one weekend. It's actually not as hard as you think. That's, of course, if you have the right wedding planner and if you have the

million alright. First up this hour, this week's cover story the rising cost of China's COVID zero policy, and the entire economics section of the magazine breaking down the ripple effects and also questioning credibility of the country's coronavirus statistics. Bloomberg Business Week Economics editor Christina Lynn Blad overseeing the coverage.

She and Business Week editor Joel Webber help with the damage to China's economy and its people into perspective, Joel, I want to start with you, uh, take us into sort of the idea for the cover here and why you wanted to make China and its response to COVID more than two years into the crisis. The focus well China throughout the pandemic has to a COVID zero policy where borders are closed and whenever there is a uh, you know, an uptick in cases, they meet that with

a lockdown. That has basically not had to happen for two years since Wuhan in the early days of the pandemic, but we've seen within the last couple of months o macron driven cases have started to surge throughout the country. Really this came to a head in Shanghai, where all of a sudden the whole city was basically brought to

its knees uh. And what China has done since then is basically become even more more proactive and shutting down cities and regions whenever cases start to tick up, and that will have profound impacts on the global economy um in addition to to China. And that's when we started to see this unfold and talk to our colleagues in Shanghai.

We realized that this is a much bigger story with way bigger globe implications than than anything that we've really seen in the China conversation over the last two years. And that's when Christina's pulled all this up and we started running with a bunch of stories. And Christina, you know what stuck out to you as we started spooling up this coverage, um and and trying to kind of like wrap it all together. What were the elements that

you wanted to really focus on. Well, for me, a lot of it was the contrast of the fact that when we were all stuck working from home waiting for vaccines to arrive, Chinese people, because they had been so um, you know, committed to stamping out the virus in the initial phase, We're going to the movies, we're going to restaurants. Life had returned to normal in China in you know,

by the by the end of the beginning. And then when I was looking now, I was saying, my god, it's this country is going through now what we all already went through, because um it is committed to not transitioning to a living with the virus phase because it can't, partly because it has less effective vaccines that you know. I mean, I think a lot of the world is sort of looking at China and can't understand the commitment

to this policy. But I think we have to acknowledge the fact that the human cost would be really, really large to try and to do a quick transition. And one of the reasons is that China um has six m R and A vaccines in development, but not a single one will reach the market this year, and they are committed to not allowing foreign made ones UH to

you know, use commercially. So that when you think about that, this this staggering human cost that that China would face if it if it did sort of open up and start to live with the virus, it really reveals what a conundrum President g has there. And keep in mind this is a Congress year. There there will be a big gathering later in the year, and when we talk to our colleagues that it is all about stability, so

there will be no change of policy. They have to stay the course because to do anything other than that would to look like you made their own call. That's right. The political imperative is sticking with the policy. This is all playing out on social media in a really fascinating way in China right now. Traditionally social media has been censored in the country, and a lot of that censorship

has actually come from the companies themselves. What's happening right now in social media in terms of uh, this the people of China pushing back against the government narratives. Well, there's been this huge outpouring of resentment um about the way the policy is being enforced. And also the fact that unlike most Western countries, China has not um done stimulus to households, only to businesses so um. And also people are getting much more creative about avoiding sensors, human

sensors and censorships software. So one of the things we've seen, for example, is that these government hashtags that are used to sort of you know, make pronouncements, well people are hijacking them and actually using them to to sound off, you know, on government policies and have sometimes like ironic messages like oh, it would be so terrible to live in the United States, you know, and people know when

people are saying things like that, what they mean. Another thing that we saw recently, which is really interesting was there was a six minute video that somebody made about life in Shanghai during the lockdown. They just pieced together all these sort of it's very moving um and UM and the sensors UM were quick to to find it

and take it down. But people did things like they loaded it back upside down, They loaded up mirrored versions of the video that because the software wasn't picking up that this was the same clip, you know, and uh. And by the end of that same day they were like, ow many more versions of that video we're in on the internet. You know. Well, it's an incredible package of coverage, including looking at Shanghai and ex pats and people may

be rethinking, um, their exposure to that part of the world. Christina, thank you so much. Bloomberg Business Week economicseditor Christina Limbled and of course Joel Weber, the editor of the magazine you're listening to, Bloomberg Business Week. Coming up, Chipotle seeing robust growth with diners undeterred by price hikes. You gotta get your burrito right too, and avocado. We'll break down the first quarter earnings with the company's chief technology officer.

That's coming up next, and this is Bloomberg. This is Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes Tim Stinovik from Bloomberg Radio. Chipotle Mexican Grill's latest menu price increases help boost comparable sales beyond analyst estimates. That key measure rose nine in the company's latest quarter. Chipoli still wants to expand its brick and mortar footprint as well as its digital reach. For more on the company's earnings in its path forward, it is the threat of

COVID waynes here in the US. Carol spoke with Chief Technology Officer Kurt Garner. Our digital business wouldn't be strong if it wasn't for the great culinary teams at Chipotle. Certainly, the launch of new Pliosada was very, very popular as our most popular protein that we've ever introduced, and there's a lot of excitement now for people to come back and eat in restaurants and come to Chipole. You guys have been able to You are one of the few companies.

You know, as we go through this earning season once again, there are some companies who can raise prices and keep customers still coming back, and there's some that cannot. You guys have been able to push through price increases to combat hire food prices, hired labor costs. That helped her out about this last quarter as well. Can you continue to do that though if needed? We're completely real ingredient company, very much farm to table and are very affordable in

terms of what we provide. Certainly, we hope we don't have to continue to do this and that inflation and the other other pressures in the marketplace moderate or subside. But we're very happy with where we are right now, and we'll continue to take a look at what's going on across the business and across the landscape frankly of our supplier network as we get through the rest of the year. So current is it's safe to say fair to say though that raising prices. Continuing to raise prices

is always on the table if need be well. Again, we're going to continue to investigate and look at what's going on. I would never say that anything's on or off the table permanently. We're a company operated organizations, so we can move quickly as new data becomes available to us. And again we're hopeful that we're past most of the acceleration that we've seen in terms of commodity prices. But we're going to continue to be wise and how we run the business and how we consume that data. Recently

caught up with Jack Cartown. We talked about labor, we talked about supply chains. What's the toughest nut to crack right now? I think for us, it's about continuing to to provide access to our customers, and when we do that and do that really well, we provide growth opportunities for our teams. Um Certainly the last couple of years, there have been a lot of challenges that we've all had to face, uh and frankly adapt our business too.

At the same time. Finding great real estate, continuing to develop our people, innovating and food and technology are all the things that we're focused on right now as we continue to be an extraordinary growth company in this environment. How's the supply chain doing. Our teams have done a great job working with our suppliers. Certainly their stressed within the network. A lot of our relationships are very long standing.

We've been partners for a very long time, and we look at it in a partnership model of how we can work collaboratively with all of our suppliers and vendors to make sure that they're okay as we're going through this, and make sure that we're okay and and stock and able to provide the experience that we need to to provide to our customers. But you know, we all like to mention it like there's some stress points, right, whether it's avocados or some different things. I mean, is it

getting more difficult, is it easy? Is it easing a little bit, or is it just kind of more the same of what we've seen over the last couple of months. It seems like we're getting to a point where it's stabilizing, But uh, it's hard to tell what the next challenge or shock to the system will be. Certainly the avocado issue was more of a political one than it was

a pure supply chain or agricultural challenge. Our suppliers are continuing to face challenges with we all ingredients and with labor, so there are a lot of different things that go on to that or go into that. But again, Carol, it seems like at this point we're starting to hit more of a place where it's moderating, but we're going to continue to again be wise and sure that We're agile and able to react to an even challenges that

might come up. You know, Kurt, all of your management team always talks about the culture at the company, and key to that culture is the employees. Those that in particular, we see front and center center As customers talked to us about the labor market, is that also moderating? Is that plateauing in terms of the stresses there and the difficulty to find workers or pay up for those workers. We're really really excited that our labor situation right now

is the best that it's been in several years. And that's a result of the fact that we're a growth company that's investing heavily within our teams. Of our general managers were internal promotions last year. UH, and that's some power that we have as a company operated growth company. UM. Within three years, you can go from being a crew member to running a Chipotle UH. And we just promoted a regional vice president who runs several hundred restaurants that

have started as a crew member. So that strong career path and the opportunity that provide we, we think is a big part of why our staffing levels frankly, are in really good shape right now, Hey, one thing I wanted to ask you, and and the Bloomberg Green Summit is going on, and I caught up with the founder and head of Daily Harvest and they are big on organic farming and regenerated farming and really speaks to what so many of the initiatives you guys are doing over Chippola.

Talk to me about Cultivate Next because this is your opportunity to invest in those companies that align with your mission. Yeah, we're really excited about Cultivate Next UM and I've I've said it earlier. We're a company operated, restaurant chained, so when we find a new idea, we can be agile and pivot very quickly. We've got a very strong balance sheet, and we've got a great technology foundation. It makes us the ideal sandbox to be an accelerator for new technologies

and new ideas. Since the announcement of the fun UH, our expectations have been certainly surpassed in terms of the interest that we're seeing the amount of a number and diversity, frankly, of companies that have reached out to us to become part of this UH. And and we're looking at this across the business as ways to improve the experience of working within the Chipole That proved the experience as a guest of Chipotle certainly down into the supply chain and

our mission of cultivating a better world. We think there's a lot of good ideas out there looking for a space to show what they can do, and we believe that we're again a great platform for that type of ideation. Yeah, it's interesting to hear the conversations around this. Certainly, moving forward,

I feel like more broadly out in the world. Hey, one last question, Kurt Um, you guys feel confident enough in terms of your cap spend, your increase of stores, all of your missions at this point or do you feel like the outlook is a little murky and you might have to hold back. We're extremely optimistic. We're continuing to grow. We're accelerating our new restaurant account this year.

We're not even halfway to our goal of seven thousand restaurants in North America, and we're not at our goal of what we believe our average unit volumes will be yet. So all of our growth strategies are intact. Certainly, our staff in situation gives us a lot of comfitt confidence and optimist optimism that we're going to have the leaders of the future to help us run the company as we grow, so it's full steam ahead. That was Kurt Garner.

He's chief technology officer at Chipotle Mexican. Grow still to come on Bloomberg Business Week and organic food maker setting its sites even higher after achieving Unicorn status. This is Bloomberg broadcasting from the financial capital of the world Bloomberg eleven Frio in New York to Washington, d C. Bloomberg to Boston, Bloomberg one oh six one does San Francisco, Bloomberg nine sixty to the country Serious XM Chado one nine team and around the globe the Bloomberg Business app

and Bloomberg Radio dot Com. This is Bloomberg Business Week. Bloomberg Green Summit took place this past week. It's where we check in on investors, companies, individuals who are paving the way for more sustainable and climate conscious future. That includes the start up Daily Harvest. It counts Serena Williams, Bobby Flay, and Gwyneth Paltrow among its investors. It's a direct to consumer organic produced vendor, and its latest funding round pushed it past a billion dollar valuation and into

Unicorn territory. I sat down with the CEO and founder Rachel Drury and chief supply chain officer Ricky Silver. We talked about with the government and companies can do to help the organic farming space. People can vote with their dollars, people can can put their their money where their mouth is. Um. But these problems have to be solved at the corporate

and systemic level. Um. There's so much research that needs to be done on regenerative agriculture and um, you know, agriculture and climate change that the government needs to invest in. And you know, I think about farm subsidies where um, you know, soy wheat corn are where the government is still putting their money after all these years, and the downstream effects of those investments, where if we took that money and put it towards investment and research and regenerative agriculture,

we would be in a whole different place. I'd also love to say there's some basic oversight and sort of action of the systems within government that we can uh

push for. So for example, we were down an organic week a couple of weeks back, um, and there's a bill that right now is being pushed called the Continuous Improvement and Accountability Act for Organic that would basically just ensure a twenty year backlog of recommendations and changes to how organic is managed and overseen uh go into effect

or at least get reviewed. And that type of a backlog is exactly why I think the farming community, the AG space hasn't been able to make more progress because government isn't stepping up and even doing the fundamentals, let alone the investments. At Rachel's talk, so you're saying there's a backlog of farmers who want to produce organically and

they just need to be signed off unimproved. More so, the you know, the oversight of the organic certification process something that means a lot to consumers, right, you need to have trust in that. So there's a backlog of recommendations that would make the oversight and the process of becoming organic certified or maintaining it. This is the Green Summit, right, And so we're thinking about things that impact the environment. Why is organic farming? Why is regenerative farming? Which is

what you guys are focusing on. Why is this so important? And part of understanding this is understanding exactly what regenerative farming is about versus conventional farming. Absolutely, I mean, regenerative agriculture just a level set is bringing our soil back to a place where, you know, mother nature can do what mother nature does. It takes a lot of hubris for us as a society to to say like, oh,

we can do better than mother nature. We can you know, use you know, fungicides and pesticides and fertilizers to do something better. So it's kind of bringing agriculture, bringing our soil back to a place where it can sustain human life on this planet for future generations. Yeah. I would just say the other thing that's really important to know is that this is not new, right. Regenerative agriculture is

certainly kind of what farmers did wait way back when. Yeah, And it's it's about a holistic approach to as Rachel said, both soil management and the farm management right, the people on the on the land as well. Can we scale it up? I mean, just looking at some statistics in terms of agriculture and what it you know, the contribution to the economy, but so much is done conventionally. Can

we scale it up? Yes? I think that there's a big misnomer that says, you know, organic agriculture and regenerative agriculture can't be scaled. But the truth is many farmers are doing this already, and so it's not to say that it can't be scaled. But why aren't more then because the organic is what was the statistic you shared with me, So food that we act, that we eat is one percent of US agriculture, only one percent of that is organic, so a really small amount. So why

can't So why aren't were doing it? It's expensive and unproven, and so you think about what the farming community is looking for, right, we we do go out of our way to make sure we listen first. Right, We're not going to tell people what they should do. We're gonna listen. And what's amazing to see is in a more regional, local way there are farmers that are building community around applying these regenerative practices, improving to themselves that it makes

a difference. Right, And so how do you go to the farming community that is you know, Razor thin Margins already and said we need you to spend more to invest This might take five ten years to you know, get to the outposts you need. That's where businesses and government needs to step in and incentivize that transition, and

that's really where we play a role. Right. So we have a belief that if everybody eats more fruits and vegetables every single day, that this is something that is objectively good for humans and objectively good for the planet. But not all fruits and vegetables are grown the same way, and they have to be grown in a way that gives back to the soil that that puts us all

in a in a better position. Um So, giving those farmers a hand and saying that we will help support you through the three year transition from conventional two organic. That was Daily Harvest founder and CEO Rachel Dorry, along with Chief Supply chain Officer Ricky Silver at the Bloomberg Green Summit. Check out the full conversation that Carol had You can do that at Bloomberg Live dot com and

one other note. Daily Harvest also launching its own version of plant based meat, Rachel revealing that touring our discussion, we made some news. You know what's different about it what it's grown from the ground, not in a lab on a meat tree. Plants, you're just gonna have to listen. You're gonna have to go and check out the full conversation. You're listening to Bloomberg Business Week coming up, behind the scenes of the most lavish weddings money can buy. This

is Bloomberg. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg. Quick to Tim Stinovik from Bloomberg Radio. Planning a wedding weather for yourself or your kid or anyone else. You can kind to say, it's among the most stressful social activities on the planet. But what if your reward or job for doing so was, let's say a six or perhaps a seven figure page check, would that kind of help take the edge off? Probably be? Probably,

it's still a very stressful job. Well, Bloomberg Pursuits team has the right person to help us find out. Brandon Presser has already been undercover as a go between for Vegas high Rollers a decade on super Yachts even you'll recall not so long ago as a cast member at Disney World. Now he's taken us behind the scenes at some ultra opulent weddings. I mean we're talking ultra opulent,

like tens of millions of dollars like crazy amount. Brandon spent a week working with some of the top event planners in the world and discovered all the unromantic work that goes into achieving nuptial bliss. He and Bloomberg Pursuits editor Chris Royles are joining us now with a look at the lead story in this week's Pursuit section. Because let me just set you and Brandon of on each other for a while. You've done a lot of these ventures. I gotta say that Disney one was a favor of mine.

So tell me about, Like, how did you suggest this to Brandon? Brandon? Did Brandon come to you with this idea? Brandon came to us with this idea. So we sometimes, um, when we're daydreaming about where to send the amazing Brandon undercover, we'll think, Okay, what's a like a crazy sort of ultra luxury experience that we want to know more about, like you know, being a ski Instarcter at Aspen or

being a waiter at nobu Um. And then Brandon, through this process actually gets to know a lot of the people who work in the in service in these industries, and he can sometimes say, like you know, I haven't in at this place where like I think we can do this. So we he did um like ultra luxury vacations like honeymoon planning, and that kind of led him to this. We started think Brandon with with Colin Cowie. That's a good place to start because he is the

party planner to the stars. Who is he and why do you need at least a million bucks for him to even pay attention to you? Well, I think Colin has cultivated a celebrity status in his own right, and he sort of created a brand around himself long before the idea of branding oneself was a thing. Back about

five years ago. He started working with Oprah and Oprah sort of dubbed him the event center to the Star, So then everyone came running um and then so you know, he's planned events and weddings for everyone from John Travolta to Bruce Willis, Tryan Seacrest to um Mariah carry uh and and and so the brand has solved him around and people who want that sort of star studded experience seek him out, and he can command a million dollars to produce, you know, a sort of entry level wedding

in his in his world? What is he like a supermodel from the nineties. I don't get out of bed for a for a million dollars. That's funny thing you say that, because when I was writing this story, actually was toying with trying to do like a Linda Linda Evandelista lead for the story, and it just totally ended I think a bit of a metaphor, but I was thinking about that the whole time. So, Chris, what was

it that you wanted to know top of mind from Brandon? Well, you know, I a lot of times what's interesting about these undercover stories is a that the people who work that Brandon works with are incredibly talented and they are able to accomplish like superhuman feats of um, you know, making amazing things happen and dealing with insane requests and then be the second most interesting thing is usually the bad behavior or the wild requests of the people who

are indulging in the service. So I wanted to know how crazy the brides and grooms were, and you know, Brandon actually learned that, you know, the whole sort of bride zilla groom zilla thing isn't really as much of a thing at this tier. When people are spending one to eleven million dollars on a wedding, they're getting everything they want, But what about mom Zilla or Dad's right, So the people the zilla's are the people around the bride and groom. And Brandon saw some some bad behavior

on the parts of families of celebrities. So I don't know, Brandon, you want to tell them about some of the family bad behavior you saw? Yeah? No, absolutely, Yeah. Going into this, I was really excited to mind, you know, some of the more classic breend Bill the stories, and it was told to me right from the start. You know, when you're getting everything you want for your wedding, you're the

latitude doesn't come out. But then the mom's that like treaks out, especially amongst um new moneyed individuals, because likely when they were, you know, in their twenties or early threes having their wedding, Um, they didn't get to have the nine million dollar wedding. So um. Some of the funny things that I was hearing about was that a mom would wear white um to the wedding. In college Champagne, there was there was a mom who had the videographer

completely re edit the wedding video. Because she didn't star in it enough. By the way, who goes back and watch of those things anyway? Yeah, well it's interesting too, So tell us about some of the other things that you came about came across I mean, open bars being kind of the devil. There's a great story I'm gonna go there about someone who got so drunk. What happened? Oh yeah, um? So at one oneting, you know, it's really hard to control alcohol consumption. UM. At a wedding,

you bought out the whole resort. Um. You know, you have all the service that you can ever need, um, and you can't water down the drinks because you need to keep everything, you know, at a certain standard. Um. So people just get absolutely shattered. And one woman actually was so drunk she fell over onto her wineglass and it popped her silicone bread. So that is why Colin Cowy always has an ambulance at every event at the

um that he throws popped os or not. Okay, well, I think this perhaps could be the perfect segue to talk about once catering a Game of Thrones themed wedding at a private estate. There was body paint involved, but I'll let you take it away well, I should say so Colin Cowie, that does predate himself with inventing the human food tray. And that's not like the like a regular Thomas. I mean someone had to do it, um

and uh. And so he creates these architectural pieces that you know, he can have his servers go around and you can pick food off of their dress or different things like that. And then you know other people have mimicked that. Um. And so there's an individual um who through a wedding UM that the groom was an art and game of thrones span and he wanted all of that sort of sexiness from you know, medieval sexiness imbued

in the festivities. Um. And he doesn't have to have a b DSM dungeon in his house regular I mean basically all right. I mean you know, if you live in the burbs, why not and and uh and they made fully they made full use of it because it was thrown at his private states. I'm speechless. You get that, you get the wedding. You aren't when you're paying uh that level of money. Brandon, what are the some of the fun or funny things that you had to do? Like uh, I remember you were telling us that there

was some some sneaking of snacks across borders. Yeah. So one of the big things, um is the welcome amenity. Right, So if you're doing a destination wedding, you want to curate, you know, a very special personalized welcome amenity, and that usually is a snass box or something like that. And UM, at the wedding that I was working out in Mexico, UM, the Brandon groom really loved Freedo's and the very specific

type of freedom that you can't get in Mexico. So I was responsible for actually stuffing two duffle bag full of these barbecued flavor twists and kind of having to smuggle them across the border, Otherwise it would have looked like I was trying to sell them in Kanon. Or when I think multimillion dollars weddings, I think barbecue flavor

twist Freedo's for sure first thing that comes to mind. Well, one thing that I speaking of smuggling and just logist logistics of this, getting everything to a destination where the wedding is is a big part of this. And one thing that you wrote about was the use of private aircraft or cargo containers to actually get furniture, food, why meat, The list goes on, uh in the in the realm of the millions of dollars. Yeah, and and the planning

starts so early. So for example, at the wedding that I was working at, UM, they it was a kacher wedding, so they wanted particular meats to be brought down from the United States. And UM there was actually of an overland like a large semi truck that left New York City ten weeks before the wedding to make sure that certain materials arrived to set up a kosher kitchen in Mexico. With all this spending and all this planning, UM, it

doesn't always actually I'll go the way you expect. In other words, it doesn't always happen right, because prenups kind of get in the way sometimes, you know. Yeah, UM, I think the prenup is the ultimate UM weapon UM that is wielded at the last minute. If someone wants to get more money UM in the prenup, they'll wait and sign right before the wedding. And you know, with the threat of cancelation UM and Colin has this incredible ability to befriend a lot of his clients, and sometimes

he gets rolled into the prenup drama. A big thank you to Bloomberg contributor Brandon press Or, of course, also to Bloomberg Pursuits editor Is Rouser. Another great undercover tail. Yeah, a pretty stressful job apparently a wedding planner. That wraps up the weekend edition of Bloomberg Business Week from Bloomberg Radio. Thanks so much for joining us. I'm Carol Masser and I'm Tim Stanovik. Be sure to tune into Bloomberg Business Week Monday through Friday. It starts at two pm Wall

Street Time on Bloomberg Radio. You can also watch our daily broadcast on YouTube. Just search Bloomberg Global News and check out our Bloomberg Business Week podcast. You can find it at Bloomberg dot com, Apple, or wherever you get your podcast. Bloomberg Business Week is available on newstands, now, at Bloomberg dot com, at business week dot com, and

always on the Bloomberg terminal. You can also see me on Bloomberg Quick Take, available at Bloomberg dot com, slash qt, and streaming platforms like Roku, Apple TV, Samsung TV, and more. Have a great weekend, everyone. Did you have a pre nup? Did your wife had a pre up? First of all, that's a personal question. Okay, did you know? I'll be fully there was no prenups, but there was also did you see that? You know it's not too late. You can do postnups too. Do you know in that story

the average wedding I think for most America exactly. Big difference, big difference. All right, everybody, have a good and safe weekend. This is Bloomberg. H