Bloomberg Businessweek Weekend - August 12, 2022

No summer duldrums for sure. Now the big economic news of our week something we addressed with many of our guests. The latest CPI and pp I prints, both headline and core coming in better than expected in the month of July. Even so, with a still hot headline inflation reading on CPI of eight point five percent year of a year, feteficials are expected to continue on a path of raising

interest rates. Also this week, a major legislative policy initiative four hundred thirty seven billion dollars to bring down America's deficit, healthcare costs and carbon emissions. Head On our broadcast, we catch up with the CEO of Plug Power on what it all means for key climate change initiatives. And the

company's business and Green Hydrogen. Will also hear from the head of H and R Block on the health of the American consumer and the company's blistering share price gains, plus the CEO of Trovago on the persistently high cost of travel and the outlook for the hospitality industry. All of that to come. We begin with today's sobering reality

of the world's worsening climate conditions. Bloomberg Big Take this week explains how from the Rhine to the Danube, Europe's rivers are drying up as temperatures post record highs across the continent, disrupting trade, commerce and more. Bloomberg's Mike Reagan and I spoke with Bloomberg News Oil products reporter Jack Whittles to help us understand the crisis across the Atlantic is really hot in Europe, it's been a very hot summer and as a result, a lot of the river

levels extremely low. Probably the most important of them is a river cool to Rhyme that's about eight hundred miles long. It starts in the switch Out, so it goes all the way down through Europe to the North Sea, and that is used to ship a lot of really important commodity through the continent, so talking energy, coal, gas oil, diesel, gasoline,

but also stuff like gravels. Some men iron ore. When the water level on the Rhine gets really low, the barges that are used to transport all this stuff they can't take on enough. They can't take on their full loads of these commodities because the more you load, the lower you get in the water. And then when the river is really shallow, they'll, you know, they'll hit the bottom.

So it's swing the low water. It's really choking off the supply of energy and commodities in Europe, just as just as there's a war in Ukraine and we've got problems with Russian gas supply. So it's it's a little bit of a perfect norm at the moment, you know, Jack, this strikes me as a very difficult problem to solve, you know, save doing a rain dance or something. I

don't know how you fix this. So I'm wondering is there any hope that this problem couldn't be solved or is it more a matter of you know, shipping stuff via truck and rail instead? How are how are people dealing with this? There aren't many very easy short term solutions for companies. You know you can't, You're right, you can. You can use rail, you can use road. So you know, Switzerland for instance, gets imports some oil products by the rhyme, but it can of it doesn't also get through roads

and rails and pipeline. I believe companies can do that, but it's it's much more expensive, so that's not always great. The economics are not always going to look very good on that. The other thing companies can do is they can invest in ships that are specifically designed to you to go in shallow water. Sobers the chemicals company they they invested in a couple of ships to do that.

But it's not easy. And with climate change, personally think it's probably just going to get worse and worse, to be honest, Well, and that's where I want to go because this wouldn't be happening. Is it fair for me to make this jump if it wasn't for climate change? Right?

If the rhine is fed by a combination of rain and melting glass ears, and the more the the lower and lower the glassis getting, and the less they can feed the rhine, I'm not a kind to climate scientists, so I'm not going to try and say this specific event was pinned down to kind of change, but in general that's the way it's going and I can only see it getting worse really, Right, those alpine glaciers, right, they feed into all of this, and we know kind

of to some extent, maybe some of that's you know, going away. They're getting smaller. Yeah, They're getting smaller and smaller. Yeah, Jack, I'm wondering where we should look for this crisis to sort of have the most potential damage. You know, is it a matter of BMW Mercedes not being able to produce cars at some point because they can't get supplies, or is it there's something more acute, you know, like electricity going off in Germany. Where will this really start

to cause the most problems? Well, as an energy reporter, I'm convinced in the end, as you were, the lass of what you were saying. Switzerland, for instance, it's already said it's releasing oil from its strategic reserves. Austria and Hungary which are in that sort of general neck of the woods. Also, they've also said in recent months that they're doing the same you've had from the finary outages

in those areas as well. The diesel market in Europe is already very tight, and we are going to lose In theory, you is going to lose supply from Russia in February as well that you sanctioned. So on oil it's tight, you know, then on power as well. Uniper has warned it may have to cut output two the coal fired power plants in Germany because the company is struggling to get full supplies along the line. So getting that coal in to Germany to make the power just

as the gas gets cut off from Russia. That's another sort of more immediate crisis, you know, Jack, is this sort of fueling the whole debate about alternative energy in Europe and especially Germany. Are are people reconsidering uh nuclear more aggressively because of this and everything else going on

in the world, I strongly imagine. So, you know, I was talking to one one of my energy contacts recently and he was saying he was still criticizing Germany's decision actually to shut off it's it's nuclear capacity, you know, saying,

what a crazy time to do that. And so I think this this will certainly spurred the argument in general about renewable was doing it faster because nobody knew wants to be reliant on fossil fields, because you're at the markey of other countries, and it was the mercy of this sort of infrastructure that doesn't always hold up well

under climate change. That was Bloomberg News, Oil Products reporter Jack Whittles and Bloomberg's Mike Regain coming up more on climate change as it in America's energy transition gets a big boost from Congress. The CEO of Plug Power on the importance of growing green hydrogen. You're listening to Bloomberg Business Week. This is Bloomberg. This is Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes. Tim Stenovik from

Bloomberg Radio. Well our next guest we last caught up with back in June, and so much has happened since then, including key tax, climate and healthcare policies, which Democrats call the largest investment in fighting climate change ever made in the United States. Shares in the alternative energy space rallied on the news this week. That includes the stock of plug Power, which is up more than a hundred percent

since mid May. Andy Marsh is the President CEO of Plug Power and Bloomberg Markets, Mike Regan and I talked with him about the potential impact of new congressional climate and alternative energy initiatives. We began though. With the company's earnings release out this past week, market was excited about plug for a few reasons. We have an electricalizer business

which takes green electricity produced green hydrogen. Before even in the announcements of the production the production tax credit for green hydrogen, we have seen bookings fifty higher for the year and we expected for the whole year, we've done one point five giggle wats that excited the market. I think the second I am that excited the market is that, you know, our path to three billion dollars oh I you know even becomes brighter when you include the production

tax credit that was passed. And I think on top of that, we were able to reiterate guidance for this year. And I think that made investors comfortable with the direction the company has taken. And I wonder is there any visibility on when you think Plug Power will turn to profitability either on a quitterly annual basis uh the next few years or any sense on that. Sure our CFO is very clear in pronouncing that the company would be

profitable in what's the take to get there? What is it just a matter of uh, you know, reducing R and D and that sort of thing, and seeing some of these projects just just start to bring in the revenue. I would never reduce R and D. This industry is just starting, Mike. Where it's coming from is the build out of our green hydrogen network across the United States. We have first mover advantage. We'll have five tons deployed per day in the States, seventy tons by the end

of this year. It dramatically impacts our cost of fuel, which really is one of the big big items in keeping us from being profitable. And we're becoming vertically integrated to make sure that we're providing it to ourselves costs effectively, and that's really one of the big items that changes our income statement. How do you you know in terms of hydrogen and how much does it continue to be a part of our energy society? Hydrogen ultimately, and Carol,

these are not my numbers. These are numbers like, uh, your organization, Bloomberg thinks this will be of world's energy by twenty by and it's growing from growing from now. You know, if you take a look at Walmart where we announced a thirty tons per day green hydrogen agreement with them, Uh, that is helping them in their path to reduce their carbon footprint by one giga ton. So

the real work is happening now. And certainly the bill that Centers Schumer and Center and Manchion were instrumental and having passed, will just accelerate this move in the world to a green economy. Yeah, and I wanted to ask you about that. How does hydrogen in general and plug powers specifically sort of fit into this inflation Reduction Act which has so many perks for green energy um and on top of that, is there a risk, you know,

in the midterms, of of some of that being undone? Well, I think that I'm gonna answer your last question first. When there was an investment tax credit for fuel cells, Actually the house built have more Republican co signers and Democrat co signers. I've met with people like Centator Cassidy

from Louisiana. They are strong supporters of hydrogen. This act that look, it's obviously Centator Schumer Mansion, who are both huge supporters, has a three dour production tax credit for green hydrogen, which makes hydrogen from green sources competitive with any other form of hydrogen. It's a big deal because the market for hydrogen's launched today from natural gas. Now we're lower costs and competitive with natural gas hydrogen today.

It helps our electricalizer business, it helps our fuel cell business because it will be able to drive all sorts of applications like the backup power system we developed for Microsoft which ekes fuel cost effective with today's diesel and green hydrogen. I mean, just remind everybody you're using it, but it's this is hydrogen power that's generated by renewables right, whether it's win, whether it's solar or or hydro power.

I mean, one of my favorite plants is of one were ability in New York and uh, just like George Westinghouse built the first electrical network using Niagara Falls power, we're using Niagara Falls power to create green hydrogen. What is the biggest thing that's holding back green hydrogen right now? Well, I think the biggest I I first, I think the

Sentence will be the big accelerator for this market. I think they put us in a position where green hydrogen will now be cost competitive and it's our our our responsibility to make sure that we leverage this time like they did in solar and wind, so that the cost of green hydrogen will always be lower with or without

government support in the long run. You know, Andy, It's it's interesting in addition to the top line and bottom line of your company, which is obviously very important, but we've also got a planet to consider here, And I'm wondering, you know, how optimistic are you about everything that's been done by Congress and about the future of the hydrogen power industry to really help save the world, help reduce this climate damage that is really starting to come to

roost now with all these weather anomalies and everything. Is there a reason to be optimistic about, you know, the climate going forward giving all these developments this year, You know, absolutely, Mike.

Let me tell you, I worked in wireless in three when nobody knew what wireless was, and I've seen creation of industries and this bill by Congress is good for the national security of the United States, it's good for climate change, it's good for creating jobs, and it will create momentum with customers like Amazon who want to be carbon you know, are looking to be carbon neutral by. It's good for customers like Microsoft which want to eliminate

diesel from their process. This bill will help make it happen, and it actually puts United States in a unique leadership position. So I I think the kids running around are going to be really happy with what the Senate did in that was Andy marsh Presidency. A plug power coming up next to new app aims to help users have an understanding of what it's like to work at a Wall Street hedge fund without the risk. Find out how and why.

This is Bloomberg Broadcasting from the financial capital of the World Bloomberg 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 Sirius XM Chadal one nineteen and around the globe the Bloomberg Business app and Bloomberg Radio dot Com. This is Bloomberg Business Week. Mary's is a company and app founded by two Wall Street veterans.

It aims to democratize Wall Street recruiting and more. The platform simulates the experience of working at a fast paced hedge fund on your mobile device. To find out how Bloomberg's Mike Reagan and I caught up with the company's

founder and CEO, Neil Dotta. My backgrounds. I've been an institutional allocator to hedge funds for last fifteen years, um, really having exposure to some of the most well known, best performing hedge fund managers in the space, and uh, over the course of that time, you know, it became abundantly obvious that the folks that are in the position of making investment decisions and managing money for folks that are you know, whether they're they're fire men or police

officers or institutional investors like myself. It's not necessarily the people that have the most talent, but a lot of times it's the folks that had the best resumes and found themselves in the position to uh manage that capital. And really what we wanted to do with Maritas was to kind of create a platform that democratizes this access that forever has been limited to folks who have specific resumes,

came to specific schools. UM. So that's the platform in a nutshell, and really what we do is we extend this access to folks regardless of their ability to financier trading or their actual education. So it's a free app that you download that allows you to simulate working at a at a hedge fund and trading equities and crypto, and your experience generates an alpha score, and we take that alpha score and we allow you to apply for

jobs on Wall Street with that score. So it's really bringing that experience to to everyone through their mobile devices. And one thing that was kind of, you know, really obvious to me was that, you know, for I've been managing large pools of capital and my my co founder Gabel as well, and we realize that even at the scale and scope that we invest, even ourselves, we don't

actually own our own track record. And this is what we think we should do to everyone and give everyone the opportunity to you know, whether you're you're a junior analyst at a bank and you want to leverage your experience, most of the time, your employer owns your actual ideas, and we give folks like that and the ability to say, hey, this is why I'm talented, and this is why you should hire me based upon my talent, not what based on my resume says. Let me make sure I'm picturing

this right. So I log in and I basically can start doing some paper trading and you'll be able to track my P and L sort of rank me among other traders. What happens if say, my strategy is some algorithm, you know, fast twitch type of thing. Uh am I able to sort of input input a automated strategy into this thing as well. That's a great question, And the answers, no, actually, and we we take the view that being allocators into

these strategies. So I know, the folks that you can think of that are kind of at the forefront of high frequency and systematic trading. We take the view that it's very difficult for a typical person to compete against a big ten billion dollar hedge fund. So really we're meant for fundamental investing. We're meant for people that do you know, research and individual companies and take views on

things like market share and earnings and growth potential. We're not focused on kind of day trading or systematic trading because the thinking is that that's not a game that a typical person can succeed that. So now I'm wondering how Maritas makes money off of this. It is a free app. I'm guessing the the users, the traders get to use it for free, and then maybe the hedge funds pay for access to to see who's doing what. Yeah, exactly,

So we're effectively a recruiting platform. So the way I like to think of us as we're kind of like the n C Double Afe or Wall Street where you you join our platform, you showcase your skills, and if your skills happen to match un employer who finds that valuable, then they'll reach out to you directly, and then we'll get paid on the recruiting fee that the employer will

pay us. Hey, Neil, how does this maybe help create more diversity when it comes to financial firms hedge funds specifically, because that is certainly something we've talked about a lot over the last couple of years, and well, there's progress being made, there's a lot a long way to go. So how might what you guys are doing help with that? Can you make it kind of color blind? Um, sex blind?

Like can you or gender blind? Can you do that so that we maybe up the up the diversity anti Sure, great question, And if you think of the way recruiting is done at hedge funds and big banks, it really hasn't changed in the last hundred years. UM, it's effectively a network of who you know and how well you're connected, and those are the metrics that typically place people, particularly in most highest income roles like portfolio manager and analysts.

So we take the view that it should be a democratized system that should be based solely on your talent. So through us, we don't care what you look like, we don't care what your resume says. We don't even care where you went to school. We only care about your ideas, and those ideas can can potentially get you paid or get you recruited. Are big thanks to Neil Dotta, the founder and CEO of Maritas. You're listening to Bloomberg

Business Week. Still to come. We're talking planes, trains, and automobiles. Well, we're really talking about getting out and about the CEOs of car parts dot Com and travel services company Travago are up next. This is Bloomberg. You're listening to Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes Tim Stinovik from Bloomberg Radio. Earlier, we heard about Europe's worsening climate situation and in America's hopes for an expedited transition

to clean energy. A large part of that effort will come from the auto industry. A recent report from the Bloomberg An e F says we are just fourteen years away from peak car, when an estimated one and a half billion passenger vehicles globally are expected on the road by nine Well before we get there, buyers, you know this, they're still looking at months, perhaps even years worth of inflation and supply chain snarls that could hinder them from getting the cars they want and when they want them.

That's where car Parts dot Com comes in. Bloomberg News senior markets reporter Katie Greifeld and I asked CEO David begnon how his company can help car Parts dot Com. We're direct to consumer, pure play online player of auto parts and accessories. We've been in business for twenty five years, and what makes us very unique is that we have

a vertically integrated supply chain. So we buy our own parts from globally a combination of collision parts and replacement parts, and then we sell them direct to consumer via our own distribut and channel. So we're in a very good spot to see what's going on in the auto world. And the auto parts industry. Um, you know, the the auto industry is just gigantic. You guys know that you cover it all the time. Auto parts is three hundred

billion dollars market. And believe it or not, the average age of a car on the road it's twelve point two years. So the average American drives an older car. And in order to keep that car going and running longer. Uh, they rely on retailers like us to buy you know, quality parts at the competitive prices. You know, David, During the last couple of years, we heard so much about how the actual automakers were struggling to source the chips they need and other parts. I'm curious how you guys

fared with all the supply chain disruptions we've had. I can only imagine it must have been a giant headache. Was it was it tough to source the parts you needed? Uh? In the last few years. I mean, supply chain was basically top of mind for the last two years, right before inflation and Ukraine and and everything else. Uh. You know, we were very aggressive early on in the pandemic in

in ramping up inventory buys. Um. You know, we've build capabilities in house so we increase the quantities of our buy we increase our safety stock requirements, we open more distribution centers just to carry more inventory. What we found was it took longer and it was more complicated to get the parts. So in order to keep going and to keep growing, we just had to carry more inventory.

And so if you look at it from a financial investor perspective, we basically had to sacrifice inventory turns just to make sure that we have the parts in stock. And of course, the other big shock this year is inflation, and I'm wondering how that plays into your business. I mean, does it sort of cause this effect where consumers are maybe more willing to try to work on their own car and and find those parts on your ciders. Is you know, how's the price problems we've seen this year

sort of translating into your everyday business. Yeah. Absolutely, And historically auto parts and auto repair in general is pretty um inflation and resistant. You know, if you need a car, if you're a school teacher or a nurse and you need your car to get to work, you're gonna have to do what you need to do to to keep it going. So obviously for every retailer and for all the consumers out there. Inflation is is hitting everyone. Um,

and we're not We're not immune. You know. What we had to do was really kind of make sure that we found efficiencies in the supply chain to be able to pass on our savings of that, you know, direct to consumer, factory to consumer, uh, to the consumer. Um. Having said that, you know you're you're absolutely right in

terms of inflation. UM. What it does is that if historically you will do it for me and needed a friend or a mechanic to do the repair, UM, chances are you're going to go on YouTube or on Google and figure out a way to source the parts and do it cheaper. All my friends are on YouTube these days trying to figure out how to fix their car. It's amazing. I had to go on YouTube to find out how to change the tire in my jeep Cherokee. I'm not I'm not too embarrassed to admit YouTube just

creating a lot of mechanics. I have a feeling, David. I'm sure you say a lot of money, but you're absolutely right. YouTube is creating a lot of mechanics and ultimately, if you want to do the labor yourself and you could find that ten or fifteen minute video. Um, you know, companies like us were a good alternative because you know you can get the parts for fifty cheaper than in

the store. You said you built up inventory. Does that mean you're going to be working down inventory, maybe not demanding or buying so much from your suppliers over the next few months that that is a great question and the answer is yes, we're seeing some signs of of easing up in the supply chain. So as the league time start compressing, we have to carry less safety stock

or buffer inventory. Uh. And what you're going to see from us, and I'm assuming other companies out there, is converting that inventory back to cash and seeing some working capital improvements. Okay, speaking of working capital, and I'm just reading off of your press release. You guys, have you entered in an amended and restated seventy five million dollar credit facility the ability to increase a hundred and fifty million Are you looking to get hold of whatever cash again?

Because it's you know, you're concerned about maybe what the the environment might be and I don't know, a few months, it might be a tougher environment. Yeah, I think there's definitely a lot of signs that the economic environment is getting tougher. Having said that, you know, we're growing, we're profitable, we have positive unit economics on every transaction, we have no debt, and we're well funded and well capitalized. So you know, that line of credit is just a safety

net that we basically don't need. That was car Parts dot Com CEO David Midion. Katy Greifeld with us there as well. Now, declining gas prices were a big reason for July is cooler than expected inflation reading. One area that is still seeing costs sore the travel and hospitality sector. For insight into how those pressures might persist, Bloomberg's Mike

Reagan and I spoke with Trobago CEO Axel Heifer. The the the industry is is an interesting point where it's benefiting from a lot of pent up demand and a lot of money that has been saved over the last couple of years by not doing trips, by not going out during offt etcetera. At the same time, the industry has actually you do stuffing that v was quite a bit in the pandemic. Everybody had to and it's now

struggling to stop up. So so there is a lot more demand than there is supply, and and that's exactly what you're describing. The service is actually suffering from that, um And that's why we are more cautious on the outlook, and we think that this this imbalance will you know, will start to balance again, which means that the prices will continue to slopen and demand will will come down. Accel.

You know, you can't talk to someone from Bloomberg for more than about thirty seconds without getting a question about inflation this week, so I'm curious, you know, is inflation having any sort of ripple effects in the travel industry, Is a changing behavior at all or anything like that? Yeah, I mean for sure. I mean I I don't think we see it yet because the what we've seen in the last couple of years is that the summer vacation

is actually the key thing. I mean, even in the pandemic, you want to make sure that you get a break with your family, with your friends for a couple of days. So I don't think that that this summer period is necessarily representatives, but we see it in in all of our main markets. Inflation is is hitting um the disposable income of many, many people. And what that means is that they will they will need to think twice how to spend their money and how to get um the

best vocation possible. And in travel is actually different than then a lot of other sectors. You can you have quite a few choices. You can decide whether you spend money on air tickets or whether you go by cars. So the destinations are are your choice. Destinations are very differently priced. We can go for a different kind of accommodation and you can compare prices, which is actually why

we are actually looking into the future quite positively. People being more price conscious means that they will spend more time on researching prices, and that's exactly where we're helping them. Well, that's you know, you guys have access to so much data. What kind of you know talk to us about that that you know, consumers are are searching looking for the best deal. What other trends are you noting when it comes to you travel at this point? Yeah, I mean

you have overall obviously higher prices. Price I've gone up quite a bit. Um not every destination to the same extent, and you have a couple of finn anecdotes that there's just support what what you're you're describing. I mean, for example, searches for um for hotels close to the airport in the UK have doubled compared to twenty nine because now you don't know whether you have to show up two hours before or four before or five hours before because of the lack of starting so a lot of people

decide to just say all the night. So that's what you see already, but I think what we will see over the next twelve months there is more a fundamental change in in really saving costs because the summer vacation that the people are now on um that they have made up their mind to to do that trip quite a while back, and the inflation has got a lot of work over the last couple of months. Act. So

I'm curious what the story is with business travels. As Carol said, she's jet setting all over the place for work. They don't let me out of the office. But as Carol an anomaly, I don't get the impression that business

travel is quite back where it was. Yeah, I mean so so we we are not really big in business travel, to be honest, And and the sad thing said, The true thing is that that a lot of business travelers don't really care as much how much they are spending on their accommodation because the employer is paying so so we have a few business travelers that tend to be you know, self employed as an easy cetera. Um, that's

why we don't have the best visibility. But our expectation for the overall market is that with the economy slowing down, that the not essential business travel will come down. And there was also a bit of a catch up effect. You hadn't seen business partners in two or three years. That was accel he for the CEO of Travago. And that wraps up the first hour of the weekend. Addition to Bloomberg Business Week from Bloomberg Radio, I'm Carol Masser

a head. In our next hour, the CEO of H and R Block gives us an update on the American consumer and small business, both key to the US economy. He also weighs on his company's red hot stock price, plus why Mark Zuckerberg wants you to think of Facebook as a social media underdog Wait What? And also coming up next, we turn back to this week's special double issue of Bloomberg Business Week. It's all about why American

women are at their breaking point. When story on that looks at what the end of Roe versus Wade could mean for access to IVF treatments, that story is coming up. 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 happened. Sloomberg Business Week with Carol Messier and Bloomberg

Quick takes Tim Stinovic on Bloomberg Radio. Plenty ahead in our second hour of the weekend edition of Bloomberg Business Week, including the CEO of H and R Block and how new policy moves might impact taxpayers as well as the agency that collects our cash, the I R S. Plus why Mark Zuckerberg is hitting the panic button even as

Facebook breaks in billions of dollars. And we've also got the upside of Internet and app addictions with the author, lecturer, and investor known in Silicon Valley as the Habit Skuy. First up this hour the latest edition of Bloomberg Business Week magazine. It's a special double issue that takes a look at the dwindling support for women's rights and resources in America. One area of concern in the wake of the Supreme Court's reversal of Roe v. Wade involves fertility treatments.

Bloomberg contributor Jill Filipovic breaks down the new threat to in vitro fertilization access with my co host Tim Stenovic and Bloomberg's Katie Greifeld. As it stands, IVF remains legal in all fifty states in in the US, with some

restrictions depending on the state. However, with road falling, you're seeing a real push from the right to life movement to establish essentially fetal and embryonic personhood and if personhood old path which essentially in view a fertilized egg from the moment of fertilization with full rights do process rights and certainly a right to life, You're going to see

IVS become either extremely difficult, if not potentially criminal. And that's because IVF procedures typically results in the creation of multiple embryos, and the embryos that are not viable are discarded. Embryos that don't form a successful pregnancy or can't form a successful pregnancy will be discarded, and couples often create more embryos than they actually implant at one time and then store those embryos for future youth. If those embryos have full rights, you can see how that would get

quite legally complicated. IVF it's all about creating more life. It's about, you know, creating a baby for a couple

to have. But I mean, I guess that's the crux of the issue is that you know, these embryos, theoretically, under the vision they would be people, they would have those rights that you're talking about, right exactly, And so there's a question of whether that would necessarily make IBF illegal or whether it would just make the legal landscapes so dangerous and so complicated that providers essentially wouldn't want

to practice. So, for example, part of what happens in IVF is if you create multiple embryos, those embryos going to a storage facility and they're frozen, and if you want to use one later on, you you defrost it essentially, and you have an embryologist who who defrost that embryo.

Most embryos survive that process, some don't. If if an embryo has full personhood rights, and it doesn't survive the process, embryologists could become legally liable, potentially criminally liable, and certainly potentially civily liable, and so there's real questions about whether anyone is going to want to practice IBS under those conditions. What did you hear from Elizabeth, which we should note is a pseudonym, tell us her story. Elizabeth is a

woman who lives in New Orleans. She has one daughter, who was conceived through IVF after two grueling years of infertility, and Elizabeth and her husband both want a second child, but they weren't planning on starting that process for at least a few more months and potentially into next year.

When the Supreme Court decision and Dobbs overturning Robe Wade came down, Elizabeth and her husband decided to pretty significantly move up their plans for a second child, so she made an appointment right away at the fertility clinic that she had used previously. She when I met her, was already taking hormones to prepare her body for an embryo transfer, and then the night before I met Elizabeth, she was

actually kind of reeling. When I talked to her because her husband had turned to her in bed and essentially said, I'm really nervous about you being pregnant in this environ it. I think both of them have been reading many of the horror stories that have come out post Row of women who weren't appropriately treated to act topic pregnancies, who weren't appropriately treated for miscarriages, you know. And her husband said, you're a woman in your mid thirties, this is an

IVF pregnancy. It's going to be a high risk pregnancy. I don't want to lose you. And so the couple is now struggling with that question. Do they stick with just one child? Do they speed up the IVF process because they're afraid that they won't have the ability to do it later, But in doing so, do they potentially risk Elizabeth's life? And these are questions coupled all over the US. Women all over the US are asking themselves

and just impossible questions. And Jill put this into context for us about you know how common IVF is, how many people like Elizabeth could be out there in the U S right now. IVS is incredibly common. And to be clear, while i VS is the fertility treatment most at risk it's not the only fertility treatment available, and it's not the only one put at risk by new

anti abortion laws. Right now, roughly two of every one hundred children born in the US we're conceived via some sort of fertility treatment, so that includes IBS, but also a series of others and IVS is particularly crucial to same sex couples, crucial to couples who have individuals who have survived cancer, and then obviously anyone struggling with infertility. And it's only growing as as more and more women delayed child bearing and once a plan when they have children.

Where does this leave providers? Jill. Providers that I've spoken to, including the providers I spoke to for this piece, really are in frankly a bit of a panic. A lot of their work has been thrown into question. They can provide care right now. Many of them are consulting with lawyers pretty regularly. But yes, it does open up questions. And if you haven't picked up the double issue a Bloomberg business Week or checked it out online, definitely do so.

You can find it at Bloomberg dot com, slash business Week, on the Bloomberg terminal and on newsstands. Really, I must read. Our thanks to Bloomberg contributor Jill Filipovich for her story and for talking about it with my co host Tim Stanovic and Bloomberg's Katie Greifeld. You're listening to Bloomberg Business Week coming out, taxes boring, H and R Blocks record share price not so boring. The CEO joins us on

the other side, This is Bloomberg. This is Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes Tim Stenovic from Bloomberg Radio. This past week, the company best known for tax prep, H and R Block reported a beat race, some guidance for fiscal and approved a new share buy back of one and a quarter billion dollars. Jeff Jones is president CEO of the company, and we like to remind everyone that Jeff has spent his career at a

host of well known companies. That includes as chief marketing officer at the Gap and Target and also president of ride sharing over at Uber. Now he is shepherding H and R Block to its next era. Bloomberg's Mike Reagan and I asked him how he's doing it. Well, let's start with, you know, our bread and butter, the core

consumer tax business. You know, we continue to make improvements in revenue and client volume, in market share, and our assistant business, really demonstrating just how strong that industry is. You know, we we talked about going into the pandemic and nineteen coming out in twenty two, up in revenue, up in market share up and earnings reducing shares outstanding. So the core consumer tax business has been very strong.

We had a record year in small business and so that means more and more small business owners are recognizing our expertise and turning us for tax. And then we had a really successful initial launch of Spruce, which is our new challenger bank. You know, Cheff, the big news in politics this week, obviously, h is that Inflation Reduction Act. Part of that is, UH, they want to add thousands

and thousands of IRS agents. I've got to think that's very big opportunity opportunity for you, but also potentially a challenge. I'm just curious how you're thinking about the ramp up of the i R S enforcement. Well, we've been very vocal in support of the i r S receiving more funding. They touch more American consumers than any other agency, and they have not had the resources to be equipped to

do that. So we absolutely support that. And what we've seen, I guess over history is when the I r S steps up enforcement, the consumer looks for expertise more and more. You know, keep in mind the stakes for our clients are very high. Getting this right matters, getting me every dollar they deserve matters whether you're a small business owner, a gig worker, or a consumer. And so you know, we're glad they're getting more support and we're here to

help the customer. You know, your core businesses the tax services, but you are ending in small business. You mentioned spruce your mobile banking. What kind of growth are we seeing on those platforms and do you anticipate that there is a time where they are as equally as important as your core tax business. Well, there's no question there strategically as important today. Of course, they're earlier stage. We've been

in the tax business for decades. In small business, we had a record gear We grew that business clients five percent on top of four percent last year. And believe there's still lots of upside in serving small businesses. Just looking at the landscape, those people that have side hustles ten ninety nine gig workers. They may not consider themselves to be a small business owner, but they absolutely have tax and bookkeeping, potentially payroll needs just like a small

business would. And then with Spruce, we had a fantastic launch. That product has been in the market only a handful of months. We've had seven major releases of the app since we launched, and right now the team is focused on testing customer acquisition outside of tax season and then getting ready to launch it in our retail channel next tax season. Obviously, we have a very large install base of customers and we want to take full advantage of

introducing them to Spruce next year. Jeff, what's cool about talking to you? You talk about small business? You know, it's funny. Our colleague on television, Caroline Hyde, she talked about the small cap the Russell doing really well and out performing the broader market, and a lot of that has to play with kind of domestic businesses here in the US maybe upbeat about the outlook in the economy. So I love hearing what you have to say about

small business. I love hearing about Spruce because you get some insight into consumers and really kind of maybe how much money they've been able to save and so on and so forth. Based on what you are seeing, based on your business overall, would you say, yep, we are headed for a recession in the next year, or we're not. If I just had to simply call it, I would say we're not. But like you all do as well.

I mean we're looking at the same data. There are days to be optimistic and then the next day you need to be cautious. What is it that maybe troubles you a little bit? Is there some concern about the FED over doing it and putting some slow momentum ultimately into the economy. Part of our diversification is to participate in different parts of the market. In the tax business, you know that business over many, many decades has not been sensitive to recession because of the obligation we have

as American filers. In fact, when economic times get tough, the stakes rise, that's when our expertise and value really kick in. So obviously we have to execute and continue

to build on the momentum we have. But that business looks different than, for example, in our financial products portfolio, where you know, if savings rates are lower and maybe credit is starting to rise again, and every dollar matters and government subsidies are gone, then what we have to do with RUSS make sure people know that product is a almost completely fee free product that offers incredible value

to help you spend and save and plan. And so we try to lean into how our value proposition is helping consumers because we know that every dollar really matters. How do you think about how to return that share that capital to shareholders? Is it is it best to do a little bit of each like like you're doing, or you know what's the calculus that goes into deciding how to do that? Well, Mike, I guess I would also say the first part is investing in our business,

which we are absolutely doing now. We're able to still, Jennifer, generate significant free cash flow to invest in dividends and share repurchase because of our expense management discipline. If you think about on a given year, I think you know roughly couple hundred million dollars to continue to invest in our dividend and the rest two to three hundred millions

in share by back. So because of the profitability of this business, I think we're in a unique position to be able to really do all three at an effective way. As you guys have been broadening out, expanding services. I mean, part of it is so that you can kind of, you know, not be see so much of kind of positive results. Are so much business momentum kind of during tax season, right, So are you seeing signs of it

that there's more business throughout the year. Um, yes, But we're not even close to being down the road of that journey yet. So you know, again, the lion's share of our business today still happens in tax season. As we serve more small businesses, those dates extend, bookkeeping in payroll becomes year round, and clearly the goal for Spruce is to be a year around financial products business. We're just in the early innings, but that's absolutely the strategy.

That's Jeff Jones, president CEO of H and R Block. Here are full conversation with Jeff. You can find that at Bloomberg dot com. Still to come on Bloomberg Business Week. Met Is Mark Zuckerberg has a new strategy convincing you that is multibillion dollar social media company is really an underdog. Facebook is under scrutiny, and it's to its advantage to

play up competition. So I think it's important to take it with a grain of fault every time they talk about fear of TikTok and sewn more and why you

shouldn't feel so sorry for Meta. This is Bloomberg Broadcasting from the financial capital of the World, Bloomberg Eleve in Frio in New York to Washington, d C. Bloomberg to Boston, Bloomberg one O six one to San Francisco, Bloomberg nine sixty to the Country Sirius XM Chado one nine and around the globe the Bloomberg Business Apt and Bloomberg Radio

dot Com. This is Bloomberg Business Week. We've often talked about Meta platforms, the company formerly known as Facebook getting beaten up by investors, down about fifty this year alone, down from its all time high back in September one. Well as Bloomberg This Week, calumnist Max Chafkin rights, despite Mark Zuckerberg's attempt to present Meta as an underdog, Max says it's not time to feel sorry for the social

media giant. So let's get to it. This story on the Bloomberg and at Bloomberg dot com, Slash Business Week and Max joining us on the phone from Queen's So, Max,

why shouldn't we feel sorry for Meta. So what's happened over over this year basically is the economy and kind of the social media ecosystem is sort of reverting to pre COVID norm So there was this moment, you know, in twenty people are spending all of their time, you know, on the internet, spending huge sums of money on you know, online shopping, and that was amazing for Facebook's business and

excuse me metas business. And what's happened is we've seen a reversion which has led to you know, all these kind of like doom and gloom predictions, both from inside the company and from analysts. The thing is, the pre COVID version of Facebook was still dominant, and when you look at the competitive landscape, yes, TikTok Um is gaining ground in terms of cultural mind share. They do have a lot of young people on the platform, but it's

not even close. Facebook still basically owns social media and and that isn't changing anytime soon. And I think, what's what's happening more Zuckerberg is attempting to position the company both because it's in this uh Ani trust conversation and as a way to of course get more productivity out of his employees to to sort of try to find ways, you know, to continue to stay ahead of TikTok, you know. Max. The other big story obviously with Facebook is this pivot

to the metaverse. Uh though, is it possible that is an underdog story? I mean, is Zuckerberg seeing something in the metaverse that everyone else isn't meta? Facebook already controls a lot of the metaverse as part of their push into VR, into new platforms. Right, they paid around two billion dollars for this company called Oculus that turned into Facebook Meta's you know, VR a R thing, And the

question is how big does this market get? Right, Zuckerberg is spending billions of dollars and rebranding a company and so on with the hopes that this is the next big platform, as big as mobile phones or something like that. But we don't actually know that will be the case. So in in sort of the best case scenario, this becomes huge. It's the biggest pieces And that's the vision

that Zuckerberg has talked about for years. Really, you know, the worst cases, Facebook just controls relatively small market and then continues to dominate social media as it does today. I mean, it's still further and one billion dollar market cap company. I mean, it's it's it's exactly. And I think about there's so many companies when we talk about the law of large numbers. I mean you're looking at revenue still for this year forecasting to be something like

a d eighteen billion dollars. I mean, this company still still makes a lot of money. Well. And and one thing that I think people have sort of missed is there's been this conversation like, oh, maybe maybe uh meta, Facebook is lost it's cool, right, the young people are going to TikTok and what what It's easier to forget that that has been going on for basically a decade. You know, it's about about a decade ago that Facebook first lost it's cool, maybe a little bit earlier than that.

And Zuckerberg has found ways time and again to adjust, you know. And originally that that adjustment meant buying Instagram and then copying aspects of Snapchat, buying WhatsApp, um, And we're seeing that play out again. He can't buy TikTok because of antitrust scrutiny, but he can't copy it and and and the company is making progress there. It hasn't

yet found ways to generate revenue. But but these these TikTok like products are definitely gaining in terms of users, time span, and that sort of thing you got back. So I'm wondering a lot of times when you see a company sort of stumble like this, at least its share price, you know, I would start wondering about the guy at the top. Zuckerberg is is both CEO and chairman of the company. Is it just insane to think

that there could be some risk to him? So, I mean he would have The important thing is he would have to do it right. It he controls Facebook in addition to being the CEO and chairman through these super voting shares, So he would have to conclude or I guess suppose like be forced by a court or something that that this would be you know, better for the company. And I don't think that's going to happen anytime soon.

So the point is what that you know, and I think about as we talk about this story, and you're right, I think I feel like some of the conversations around it is like, oh, whoa is you know? Meta? But I mean, this is a company still even if numbers maybe are the growth numbers aren't as strong as they used to be. I mean when it comes to things

like advertising. I mean, this is still where folks go. Yeah, it's unavoidable from an advertising perspective, And I think it's just worth keeping in mind that there's this political story playing at the same time, which is that Facebook is under scrutiny and it's to its advantage to play up competition. So I think it's important to, you know, just take that, take it with a grain of salt. Every time they

talk about fear of TikTok and so on. That was Bloomberg business Week columnist Max Chafkin, along with Bloomberg's Mike Regan. You're listening to Bloomberg business Week Still ahead, how to harness the psychology of social media addiction in a way that can actually help strengthen our minds and bodies. We only hear about Facebook and Snapchat melting kids brains. We also need to talk about the good examples of how

we can actually use habit forming technology for good. Yes, for good, especially when it comes to health and wellness at least, so says our next guest. Stick around. We've got more. This is Bloomberg. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovik

from Bloomberg Radio. Okay, you know, tech startups are always promising to make us better, to help us lose weight, get more sleep, read more, And the reason very few of them actually work is because users never get hooked down them. At least that's according to Near All, Silicon Valley's Habits Guy. He's an angel investor, former lecture at Stanford's Graduate School of Business. He also wrote a couple of books, including Hooked, how to build habit forming products.

He wrote back in and then put out another book in the title Indistractable, How to Control your attention and Choose your Life. Bloomberg's Mike Reagan and I spoke with near in studio this past week, and we had to know all of this app tracking, information gathering, optimizing, Is it really really good for us? It's a great question. Is it good? Is it bad? The answers yes, it's both. Pauvarlio has a wonderful quote. He said, when we invented

the ship, we invented the shipwreck. So of course, every new technology, especially one on such a massive scale as the internet is going to have goods and beds about how we manage those. You know, you're I'm wondering about sort of the chemicals that are at play, like the brain chemicals. You know you always hear about, Well, if you get a notifications on your is that a real thing?

You know, do is there dopamine or whatever? You know, happiness chemicals at work when you when you get addicted to an app and you're and you're you know, I love to see those notifications and stuff like that. Yes and no. I hate to give a wishy washing answer, but typically if you hear somebody talk about dopamine squirts, just discount everything they say because it's so overused. It's so overplayed. Everything releases dopamine. When you hug somebody, you

get dopamine. When you learn to play the piano or play tennis, you get a squirt of dopamine. Dopamine is not cocaine in the brain. It's like a different scale than using an app. So the whole idea of getting addicted to an app or hijacking your brain is so overplayed. If you actually look at the research and you talk to the people who study this stuff, some people get addicted,

of course, just like some people get addicted to alcohol. Right, alcohol is highly addictive, but not everybody who has a glass of wine with dinner is an alcoholic. Right. About three to five of population is addicted, But it's not. It's certainly not everyone. Addiction is a pathology, and just because some people get addicted doesn't mean everyone will. So these little dopamine hits that we get aren't It's something pretty natural that we'd probably be getting something. And we remember,

we want products to get better products. Being engaging is not a problem. It's progress. Are we gonna say, hey, Apple, your phones are really easy to use. Stop that Netflix your shows? I want to watch them all the time? Can you please make boring shows? It's ridiculous. It's a wonderful thing that the world is becoming more engaging, But the cost of this is that we have to learn some new manner, some new norms and new ways of being in the world so that we can get the

best of these products without letting them. Yeah, because I can't imagine, you know how many times you walk into like a subway train and just people are just involved, you know, so engaged, either in their phone or something, and you feel kind of rude, kind of moving around, And I do feel like we need to kind of rethink how we interact and engage in society as a whole.

How do you think about how we could get so much more in the healthcare and wellness space When it comes to apps and you know whether it's workable technology, how do you see it? How do you see that it should play out? Is playing at So we were talking about before we went on air about how I get a gadget. Almost every week somebody sends me something to try out. Because I'm in this health change space. Healthcare is specifically taking off. I mean, I think one

thing I'm super excited about our continuous glucose monitors. Have you seen those around for? It used to be something that only diabetics war and it's it's a game changer. My mother in law and a family member who and you start seeing them on people's arms. What you start seeing now is that people who don't have diabetes are now tracking their glucost because it's so easy to do that.

Now you can track it throughout the day. And and there's several companies I work with a few that will tell you before you eat, right before you get a snack, R check your glucose. Why because it will tell you whether you are psychologically hungry or physically hungry. And sometimes it's hard for us to tell the difference. So by looking at this app and saying, actually, my blood glucose is fine, I really don't need a snack. Let me wait fifteen minutes, that can delay snacking. So that's just

one small example. But I think we're gonna see an explosion of these new behavior change apps. All right, So what are some of your favorite you know, either apps are products that are out there, let's say for working out, because there's so many. Yeah. So, one of the apps I talked about in my book Hooked is an app called fit bod f I T B O D. And I love this app because I actual put on a blog post. I was so frustrated with how bad most

fitness apps were. I put out a blog post that the title was why your fitness app is making you fat? Because they were so bad. All of them were so terrible. And then somebody told me about fit body so bad? Was it just because they didn't form a habit? Okay, got it? And so I I downloaded fit Bond and I started using it and I said, oh my goodness, this is actually really great and it looks like it's

following the hook model. Hook models what I based my book on my class at Stanford on and so I just went to the customer support email thing and I sent them to said do you have you by chance read my book? Within thirty seconds, the founder wrote me back and said, yes, we actually built the hook model into the app. And I use fit bod every time I work out. I'm in the I'm forty four years old, best shape of my life because of this app. It's fantastic.

Well near cuts the chase here. How can Carol and I make this show more habit? For me? The most important part, the fuel that we see is the backbone of every habit forming product is a variable reward, right, some kind of intermittent reinforcement. Of course you have it in that you product. By the news, the first three years of news, any w K new it's all about variability.

So that's what makes sports engaging, what makes slot machines so so intoxicating, what makes social media fun, It's all about the new, new new, the variability um peloton right, somewhere addicted. There's something that really rode a high no pun intended, and then obviously has has come undone a bunch. What do you think about that? Yeah, it's it's a super interesting story because I think it's a great example of why variability is so important for habit formation, that

if something is not variable, if it's predictable, it's boring. Right. I think about game games, right, everybody wants to gamify everything, put points, advagines and leaders, but most games people burn out on. Right, think about member Farmville. Farmville was like the biggest thing ever back in what two thousand and twelve. Who's playing Farmville anymore? Nobody? Why? Because after Farmville it

was Chefville and uh whatever, Frontierville was like the same. Yea, you're telling me nobody's gonna be playing Wortle in a few years. You may be surprised. It's long, is that? You know? What's great about word is that it's social. Yeah, as opposed to solitary expanses like Peloton. So Peloton during the pandemic, when you couldn't go to the gym, you couldn't do the things that used to do. It was very novel it's this this screen on your on your bike.

It's so interesting, so in with people. But then you do it three or four times and you kind of got the idea. Right, It's say, it's the same routine. It's not variable enough. Let alone the fact that it's hard work, right, You're you're really pushing yourself. So it's uh that I think was what what what went wrong

was that it they didn't maintain the sense of variability. Yeah, you know, and your talk to us a little bit about some of the companies you've invested in over the year and how this notion of habit forming it has sort of played into your thesis of whether or not a company's worth investing in. If you give us some examples of sere where it worked, well, yeah, it's it's been amazing. So the book came out in Hooked, How to Build Habit Forming Products, and uh, it's been used

in every conceivable industry. Education is one I'm super proud of whenever I see a company using the hook model. A few years ago, I got a call from these young entrepreneurs in Norway building this little app. They showed me the hook model. I was so impressed. Immediately said please take my money. I want to. I want to, I want in because they showed me how they really applied the book. And today that company's cohoot. It's the

most widely used educational software in the world. Uh and uh the last time I checked that a multibillion dollar evaluation. And what are they doing. They're getting kids hooked onto online learning. So how are they doing that? What are some of the techniques? Yeah, so they have this really innovative it's like a it's uh, you you get the so the hook model. I'm trying to summarize, uhhand page

book and and don't do any seconds. But essentially what they're doing is, uh, they're getting kids to invest in making these quizes on their own to share with their peers. And so that investment phase this is really special. That that's great. Yeah, the investment phase where you put effort into something to make it better. So when you are the person making the quiz, right as opposed to saying that when we were in school it was a pop quiz.

Today that sucks right horrible. Here the kids are making it for their peers and then in a class they're playing these quizzes. So anyway, body with kids, you know under probably fourteen. I bet you your kids have know all about CAHOT and that's a wonderful examp. You only we only hear about the bad cases. We only hear about Facebook and Snapchat melting kids brains. I think that story is overblown. But we also need to talk about the good examples of how we can actually use habit

for me technology for good. You know, near you did sort of flick at the idea of there can be a backlash too products that are too habit forming, whether it be a parent saying as you said, the social media is melting my kid brain. So how do you sort of assess that risk when you're trying to decide in a company to invest? You know, is that risk still there for say, the big social media for the robin hoods? You know, how how important is that risk

do you think to these companies going forward? It's a great question. I spent a lot of time working on ethics. There's actually a chapter in my book called the Morality of Manipulation where I talk about all this, but I propose what I call the regret tests. And the regret test comes out of my search for how do you make sure that you're ethical when you use these behavioral design techniques, because, as we talked about, they can be used for good. You can help people exercise more and

uh save money and form all these great habits. But how do you make sure you do it ethically? So the regret test says, you don't do it with DraftKings or or one of the gambling apps. That's that's a that's a great example. Robin Hood also potentially a great example. So the regret test says that the he asks would the user do what we have designed for them to do, knowing everything we know summarized as would they regret using

our product? Because people aren't dumb, right, people aren' dumb that if they regret doing business with you, guess what, not only are they not going to do business with you, they're going to tell all their friends on social media not to do business with you. Yes, indeed, nothing like the power of a bad online review that was near a all Angel investor, author and Silicon Valleys habits guy. And that wraps up the wee Can edition to Bloomberg

Business Week from Bloomberg Radio. Thank you so much for joining us. I'm Carol Masser. Many thanks to Bloomberg News Senior Markets Reporter Katie I. Felt and Bloomberg Market Senior editor Mike Reagan for joining us as well over the past week. Be sure to tune into Bloomberg Business Week Monday through Friday, starting at two pm Wall Street Time on Bloomberg Radio. Catch us too on YouTube. Just search Bloomberg Global News and check out our Bloomberg Business Week podcast.

You can catch our full conversations with so many of our guests. Find that at Bloomberg dot com, Apple, or wherever you get your podcasts. Bloomberg Business Week is available on newsstands now, at Bloomberg dot com and always on the Bloomberg Terminal. Have a good weekend, everyone, Stay safe and sound. This is Bloomberg