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Hi, everyone, Welcome to the Bloomberg Business Week Weekend Podcast. This past week brought US tariff talk too hot, inflation prints fetchier, J Powell saying that the US Central Bank is in no rush to lower interest rates as there is still more work to do on inflation, and an AI summit in Paris where Vice President j. D Vance said artificial intelligence chips need to be made in the United States. That sent higher shares of Intel and Global Founderies.
Investors took their cues from that and really from the comments out of the Oval Office and President Trump and his Head of Government Efficiency Elon Musk, on that we look at what critics say is the chaos caused by his DOGE office that may threaten many safety nets.
Plus we get a read on the all important housing market with the CEO of Zillo, and to look at tech spend in the business application software space with the co founder and CEO of IT, Lassian.
He also had news to announce in the world of auto racing. All that to come, we begin with Elon Musk's attemp set a government makeover via his DOGE team.
President Trump earlier in the week signed an executive order with Elon standing by his side, directing federal agencies to coordinate and consult with DOGE to cut jobs and limit hiring, essentially giving the billionaire more power within the US government.
On January thirty, first, Doze acquired access to payment systems inside the Department of the Treasury. Musk has targeted certain organizations, including Lutheran charities, one of which we've talked to here on Bloomberg business Week. He suggested that they are involved in illegal activities, leading to fears that their funding will be cut off.
Now, this too is about what some say is the DOGE chaos and that it threatens the safety net of many. Writing all about it is Bloomberg Business Week columnist and co host of the Elon Inc. Podcast Max Chafkin.
Over the weekend that Elon Musk got access to the Treasury payment.
System, which was basically right when Trump became president.
Yeah, it was. I think it was about a week after Trump became president. You had all these doze employees fan onto the government. They're all kind of finding stuff, right, and it's like some of this stuff is sort of big stuff, some of it's small stuff. A lot of it is outrageous, at least from the perspective of Elon Musk. And during this sort of flurry of activity, Mike Flynn, who was the National security advisor to President Trump briefly in like twenty seventeen, he had a whole back legal
back and forth or whatever. He's now kind of a right wing activist. He tweets this spreadsheet containing the names of about a dozen charities. These are small, These are basically mostly local charities, a lot of them in the Midwest, and all affiliated with the Lutheran Church, or most of them were affiliated with the Lutheran Church. And says, basically, this is money laundering. Someone should do something about it.
Elon Musk tweets, all right, we're shutting it down. And that kind of just throws this whole part of business of the world into a kind of chaos, right. And I spent some time talking to some of these Lutheran charities about what it was like, and what you hear is, you know, confusion, anger, frustration. You know, they don't in a lot of cases know exactly why they're being targeted, what it's about. And when you actually look at the
work they're doing, they're doing it's like basic. It's a lot of it is like just basic social safety and that stuff. The main kind of character in this piece runs a charity in Ohio. They operate food pantries, homeless shelters, domestic violence shelters, They rent out affordable housing, nursing homes. And you start to think about it like this is a big part of the American social safety net, these
charitable organizations that get money from the federal government. It's it's like how we take care of the needy in this country? And and and I think the point here is that you know, while Musk is doing all this stuff, you're seeing groups that are getting getting caught up in the drag net, and there's damage being done potentially to the infrastructure of how we I mean, in this case,
how we provide healthcare and housing to poor people. But I think you're going to see this across the government where there are there are aspects of the DOGE transformation that really speak to government efficiency, But then you have all of this kind of collateral damage and or is it collateral damage. It's it's it's really unclear what Elon Musk thinks or what Donald Trump thinks.
I gotta say when this story, you know, kind of hit and we were trying to understand these organizations. We actually caught up with one Chris Amara Vignaraja. She's president and CEO of Global Refuse, a recipient of funding from USA. She shared with us what it means not to receive the funding.
These are individuals who had gone through every hoop in order to come because we had made a military promise to them that they were going to risk their lives to protect US troops and that we wouldn't leave them
behind to face Taliban retribution. So we've been impacted in the fact that we no longer can serve them, but they can no longer even get off the military base because the stop work order that we're talking about also affects UN agencies, So they're not even able to get off the military base to travel, even if they were able to afford their own flight to come here to the US, so it is paralyzing. We operate across the country. We partner with local nonprofits right in the redit of
red states and the bluest of blue states. None of them receive funding because we are not able to receive funding.
Okay again, that's Krishamara Vignaraja, Presidency E of Global Refuge. She started off with talking about how we haven't been able to help our Afghan allies, but talks a little bit about kind of almost the supply chain of groups in terms of helping others. I mean, what more are we getting about exactly where this aid in this money goes.
I mean, the thing is we don't even know what's been cut off. And what was so interesting about getting into the story is these organizations don't know. I mean, they have not been paid in many cases, but it's not like it's been a huge it's not like there's been a lot large delay or something. So they don't know if Elon Musk was just spouting off, if he just was tweeting a thing, or if what he tweeted kind of had the full force of the federal government.
And it's it's a lot of this this has been this is kind of a microcosm of what's been happening across the government. You know, you have Elon Musk go on Twitter and say we fed we fed USAID into the wood chipper last night, and and and on one hand, like there is truth to that, right, like the Trump administration is trying to substantially cut down USI AID, arguably to shut it down, but that is being challenged in court.
So these employees are still getting paid, like they haven't actually done the thing that Elon Musk said they had done, at least not yet because the courts have intervened. So you have a lot of this where where Musk is saying something or Trump is saying something, and then the reality on the ground is maybe a little bit more muddied. And as it becomes clear, right, that could lead to some cost savings, it could also lead to pain. You know, in the case of this Ohio charity, we're talking about
seven hundred people. You know, the human services industry, it employees a lot of people, and including in red states and blue states and so on, and so you're going to see political pain that I think will be something that the Trump administration has to contend with. This is the kind of thing where like if you voted for
Elon Musk and Donald Trump. I mean, no one voted for Elon Musk, but if you voted for Donald Trump to clean up the government, you may not be thinking, yeah, that would be great if they defund my local Lutheran nursing home or something like that. And so I think that's the I think there's I think there's real real risk here for the Trump administration and frankly for Elon Musk because he's the face of this.
It sounds like, in other words, there's a risk of throwing the baby out with the bathwater here, because I think it's fair to say a lot of people do think there is, to quote President Trump, waste fraud and abuse when it comes to government spending. It's not hard to find examples of that.
Yeah, I mean the issue is that our deficit is you know that this two trillion dollar deficit that was and that was the goal that Elon Musk promised to cut. It seems like wishful thinking to think you're going to get there by cutting waste, fraud and abuse. Even you know he can, he could keep himself very busy cutting waste fraud, and abuse, and he's not going to be that far along in terms of meeting his goal. And that's you hear that both when you talk to critics
on the right and critics on the left. People essentially on the left, they're saying, there's no constitutional authority to do this. This is a crisis. You know, you saw Elizabeth Warren giving kind of a really a press con conference presenting this is kind of a catastrophe. And on the right you have people saying, like, look, this is not that big a deal. The Defense Department is a big deal. Social Security is a big deal. If you
talked to like fiscal hops and stuff. So there is this kind of gap between between reality and then and then the hopes and dreams. And in that gap are a bunch of programs where that have constituencies and you know, you think about like NIH. Right, they do this big announcement essentially saying that anyone who gets an NIH grant has to have a lower amount of overhead. And when you hear Elon Musk talk about it, right, he's saying that some of these programs have sixty percent overhead. We're
making you know, we're making it fifteen percent overhead. That gap, that cutting that funding is going to mean jobs in a lot of states, and those and those congress people and senators, some of them Republicans, some of them Democrats, are going to be either loudly trying to change it or quietly, in the case of Republicans, trying to adjust things.
Right because midterms are just two years away. Having said that, where is Congress and all of this and where is that argument about Congress controls you know, the power of the purse that in terms of when they're spending it's got the approval of it or the cut pack of it somehow has to go through US lawmakers.
Well, I mean, you know, Republicans control Congress right now, and they are for the They are either being you know, sort of quietly grumbling or being super supportive. There's no there's no real there's no Republican opposition right now. The closest thing you can you see toward Republicans sort of like feeling uncomfortable, would be like, you know, maybe there's a tweet or whatever. Senator Bill Cassidy tweeted about pep FAR a couple of weeks back.
This is the AIDS program exactly the same in Africa, that Anthony Fatchi had actually had a big part in it during the George W. Bush administration.
And it's a Republican program. It's it's seen by many as like a pro life program. So there's that. Katie Britt the other day, senator from Alabama, gave an interview with her local newspaper sort of not quite complaining about these nh NIH cuts, but sort of saying, we're going to need to make sure we negotiate so that there's not we don't get huge cuts to the university hospital system in Alabama that employs a ton of people.
But this is exactly what has prevented government cuts in the past. The idea that and I'm not calling it all pork, but the idea that constituencies are affected. And you have these lawmakers in Congress saying, don't touch stuff in my district. And I do think this is where the Defense Department, in the defense contracting for example.
Well, the defense is an interesting issue because because Elon Musk is a major defense contractor, he may not be the you know, he's got obvious conflicts and interests may be difficult. But leaving that aside, people who like this, I think what they liked is that Elon Musk is
an amazing marketer. Yes, good governance types on the right and the left have tried to do this stuff before, and they always fail because politics intervenes, because because cutting these programs, each of these programs, you can they sound ridiculous maybe on a spreadsheet, but when you really get
down to it, there are people benefiting and those people vote. Now. Musk, of course is kind of like a transformer marketer, a transformative storyteller, and so I think the bull case would be like he is able to tell a story that
causes people to go along with this. But again I do think you when you start reading about some of these cases of defunding or some of the stuff that's happening in the civil service, like even Elon Musk, the great electric car salesman, may not be able to sell some of these cuts to the American people.
All Right, great read, and great you know, kind of pulling it all together in terms of the headlines that have been coming us, coming at us in terms of doge over the last week or two. Max Chakin, thank you so much, Bloomberg Business Week columnist. You can catch a story, you can find it at Bloomberg dot com and also on the Bloomberg Terminal. Max by the Way, co host of the elon Inc Podcast, where you can also find on the Bloomberg and at Bloomberg dot com
slash elon Ink. He is also author of The Contrariant Peter Tiel and Silicon Valley's Pursuit of Power.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
This week's shares of Zillo tumbled after delivered a revenue forecast for the first quarter that fell short of analyst estimates, and the company said it also expects a more challenging housing market in the first quarter.
For more on Zillo's business and the outlook of the US housing market, we spoke to Zillo CEO Jeremy Waxman.
The housing market remains challenged.
It was challenged in twenty twenty four, and we're expecting it to be so again.
In twenty twenty five.
Zillo reported great results Q four revenue up seventeen percent, and we hit our goals of growing revenue double digits last year and expanding our margins, and we also guided yesterday that we expect to continue to do that again this year with revenue growth in the low to mid teens, more margin expansion, and positive GAT and income for the first time in a long time. And as you said,
that's against a persistently challenged housing market. So we're able to grow and gain share both in twenty four and we plan do you it again in twenty twenty five, while the market remains depressed for volume and challenging for buyers.
Jeremy, do you think investors have it wrong in terms of pushing your share price down a lot in reaction to what they got on the quarter and the outlook?
We don't really focus on the day to day voting machine of the stock market. If you zoom out and look over the long the long couple quarters, a couple of years, we made great progress on our integrated super apps strategy. We're growing revenue nicely, we're out growing the category, and we can plan to continue to do that in twenty twenty five, and so over time, the stockcacre of itself, the company grows in value as we really deliver on our promise of helping more buyers and sellers get home.
That's really our goal at Zillo is to help more of our audience turn into transactions.
Yeah, and I will point out the stock was up about twenty eight percent last year and up about almost eighty percent and twenty twenty three. In terms of the stress though, or maybe you're you know, kind of cautious outlook in terms of the housing market, is it all about mortgage rate to higher mortgage rates.
Yeah, the challenge or the housing market starts with mortgage rates, but it's really about availability and supply. We are expecting flat ish total dollar value housing market in Q one and load to mid single digit growth for the year. And as you said, if you look, it's not like twenty twenty four was that much better from a volume standpoint. The real challenge is with mortgage rates. Saying Hi, affordability is a challenge for buyers, but that really locks a
lot of sellers into their homes as well. Right a seller is thinking about do they want to trade out of that mortgage? Do they feel locked into that mortgage? And many are foregoing listing their home and making that move. So you're seeing still very low inventory. Inventory is up eighteen percent from last year, but it's still down sharply from pre pandemic norms, and so lack of supply really
makes a challenging for buyers. And then you add elevated rates and what they can afford of what there is to buy.
Jemmy, the cost of housing certainly a theme on and last year's presidential race. I'm wondering if you think that the federal government will be able to achieve bringing more supply of housing online. This came up with the vice presidential debate when Jade Vance talked about using federal lands to build homes. Do you think the federal government will have a meaningful effect on housing supply?
The real challenge was supply.
We talked about existing home inventory and what sellers are doing, but we are chronically under built right we. Zilo estimates about four and a half million homes have not been built to keep up with the demand needed since the global financial crisis. And the solution of those problems really is at the state and local level. You need things like permitting reform and removing red tape in the process
to get starts done quickly. You need tax incentives and financing options so that builders can get their projects online more quickly. So the totality of the problem, you know, all nearly five million homes that we need to catch up on. We're not going to do that overnight, but slow and steady will definitely bring more supply to the market.
I do wonder though, too, you know, Jeremy, how much the YEP I get that permitting. I mean, these are problems that have played certainly the housing market I feel like forever in terms of supply. But having said that, how much too, is there some cautiousness on the part of home builders who still everybody still remembers two thousand and eight and the over bills. So is there also a part of that as some of the components in terms of supply.
Well, you're seeing places where it works well, right, I mean Austin, Texas is one good example that we've highlighted where a lot of multi family inventory and the rental market has come online and you've actually seen rent prices come down even with the population growth in Austin, And so you know, you have to remember, if you zoom out, there are still the counter forces of for sale and rentals working together, and you know, when folks can't get it done and find the home to buy, they end
up re renting, and you're seeing you know, rental inventory, you know, grow to satisfy that demand as well. So it is, as you said, it's a local issue. But there are places where it's working well and there are places where it can work even better.
We got a hotter than expected CPI print earlier today, and my question is about how that changes the outlook for rates for the year, and then in turn, how that affects your business. Does your outlook for twenty twenty five change if rates don't come down.
No, our outlook assumes a pretty lousy housing market. We are expecting flatish housing market in Q one and load of mid single digits for the year. And I think we were maybe a little bit more embarrassed than most heading into the year on how the housing market's going to do.
Now.
The good news for Zillo is we're out growing the category and we're gaining share. We did that in twenty twenty four and we expected it again in twenty twenty five, and that's in our for sale business, where we're helping more buyers meet their agents. We're helping originate more mortgages. That's also when our rentals business. Our rentals business grew twenty five percent in Q four. We expect that to accelerate in Q one as we bring more rental inventory to more renters across slow Hey.
One thing I do wonder in our conversation coming off of the hot CPI print Jeremy, is that maybe we so certainly the rates market, the US rates market, the treasury market reacts and move up today, but now the talk has moved to maybe even the next move we need to start thinking about the Fed raising rate. If we see the Fed start to raise rates, what does that do in your view to the housing market and how might that impact your business?
Long term?
Real estate is a growth industry. You see volumes and total value grow. Right now you're seeing depressed volumes because of all the challenges, especially in the financial market with affordability for buyers. But folks are getting it done and they will get it done. And what we're here at ZILLA to do is help them. Buyers who need to buy, many of them are starting that conversation with financing rather
than just dreaming. We now see about as many buyers start with what can I afford and can I even buy right now? As they do dreaming, shopping and going media an agent. So we've brought online tools like Buyability to help them truly understand their personalized payment information. What can they actually afford for themselves given their financial information, so they can have confidence, go get a pre approval letter,
go make an offer and win a house. So it is tough out there, it will remain challenging in twenty twenty five, but folks can get it done. We're there to help, and that's exactly what's driving the results you saw from US in Q four and why we expect to continue to grow and not go the category in twenty twenty five.
Jeremy, you mentioned those buyability tools that you guys have on your platform. What does that show you about? Is it the first time home buyer that continues to find it really difficult? Is it the trade up home buyer? What does it tell you about kind of the home buyer and in essence, the US consumer out there when it comes to buying a house.
Yeah, I mean the demand and desire to buy a home still persists and exists across all demographics. You're seeing folks having to wait longer, save up more to make that down payment, and so it gets tougher.
But you see, the strong.
Desire to buy a home really persist across all demographics, and we see that in folks who are using Zillo.
Again.
As I said, one of the things that is interesting to us is how much more financing and total cost of ownership is front and center for a buyer before they even start. You know, five ten years ago, everyone wanted to start by shopping, by touring, by virtual touring, by going into open houses, and now it's kind of a balance as many folks want to start in that state, as they want to start with just the reality of what's my budget look like?
How do I set my budget.
And work with an agent to make sure the homes I fall in love with the ones that can actually buy.
Hey.
One thing we also learned recently from you guys is that Redfinn is teaming up with Zillo for rental listings. This partnership, to me, it sort of looks like frenemies teaming up. Like you guys are competitors here. Redfinn's market cap is about two billion dollars. You're about eighteen billion dollars. Do you end up buying Redfinn at a certain point.
We're really excited about this partnership we just announced with Redfinn. It's a big step in our overall rental strategy. It's important to zoom out and remember, unlike the for sale marketplace, there's no national database for rentals. The big challenge a renter has is they can't find all the supply. They have a very short timeframe to find a place to rent, and so they scour the internet, they scour offline looking.
So that's zilla strategy.
Can we organize more and more of the rental listings out there nationwide so that renters on Zillo and on our partner sites can find them.
That strategy is working great.
That's what's driving having the leading audience and growing audience of renters, and that's bringing more property managers to Zillo and our partner sites to want to advertise that audience. So this partnership with Redfinn to power their rentals business
is just the next step in that strategy. Adding on to this great partnership we forged with realter dot com last year, it allows advertisers to come to Zilo and get advertising in front of Zillo sites, redfin sites and realtor sites to reach an even bigger set of renters. And then renters get more choice, right, they see more inventory, which, again, as I started, that's the big problem in rentals is you cannot find all the inventory.
And forgive me that Redfinn market cap about one point one billion dollars, so shy of two billion dollars. I didn't hear a yes or a no, and no answer to my question about whether or not.
Oh, no, no plans, now, no plans. We're very excited about the partnership. We've worked with them on some other things before and we love how culturally align they are and just digitizing the transaction in real estate.
Well, along those lines, how are real estate companies holding up through this extended housing market trough? I mean, any opportunities for you guys to do some acquisitions as a result, along maybe the lines of I don't know, partnerships, but maybe even acquisitions.
Yeah.
The bright side of a challenge real estate market is it really allows the best professionals to gain share. Right when it's rainy and cloudy outside, those that do best sometimes come out ahead. And what's great about that is that aligns so nicely with Zillo strategy, right. Zillo strategy is to partner with the best agents and agent teams in the industry. Eighty percent of the agents that we partner with are in that top twenty percent of producers nationwide.
So these are the folks that are operating businesses at scale, training great agent teams to help delight customers. So even when there's less transactions to do, and even when it's a challenging conversation with many buyers and sellers, those folks command great price, hold share and grow their business. And so in some ways having a choppier or a depressed housing market can advantage some of the best professionals.
Hey, we're asking every CEO we talked to these days a couple of different questions about politics, about AI. Politics is where I want to go and just hear from you about how you view this new Trump administration in terms of changes that you've made at the company as a result, or what it means for you as a business.
One of the things you will focuses a lot on is AI and AI as it comes to the list industry. Right, both for us as employees, but more so for our customers.
And our partners, our agents, our loan officers, and we've been investing in and innovating around AI for decades and so now as general of AI comes to the forefront, you know, we've been really advocating for responsible regulation around AI that encourages and supports innovation so that companies like Zilo can continue to innovate on behalf of the customer. So one thing we're very excited about is to continued
progress on the ability to progress with AI. And you know, AI for us is a feature, it is a tool for our customers, for our employees, but in the real estate industry, it's really about making the professionals more efficient and effective.
Right, there's so much wasted.
Work, busy work, paperwork, back office work, and when you talk to a great real estate agent or a great loan officer, that's not what they want to be doing. They want to be delighting customers, they want to be winning more business, they want to be getting more transactions done.
So we're really excited about the.
Ability to continue to lean in and innovate not just on our tech platform generally, but on AI specifically, to really bring more of this transaction into your smartphone, make it more delightful and faster for the customer.
All right, Jeremy, One last question is also a question we are asking to heads of company CEOs and a like anything that could come out of Washington and the new administration that could help or hurt your business.
Zillow is really focused on ensuring that real estate stays accessible for the customer. We've outlined our principles for the consumer, which are around transparency, access, and affordability, and any policies that come we look to help make sure they push forward and ensure that consumers have access to all the information that's out there, have access to great professionals, and have better education on how the real estate industry works.
Real estate is one of the largest industries that there is and it's the single biggest decision that most individuals are going to make. So making sure that people understand how it works, making sure that they have access to hiring the best professionals, that's one of the things we're very focus on Zilla, and we continue we will continue to be so you're.
Hopeful that the administration the policies will be supportive of the housing market.
Yeah, We've been around for twenty years and have been fortunate to work with both both administrations, and again, as we talked about earlier, one of the real challenges in our industry is so much is done at the state and the local level to make sure that real estate can flow for the benefit of the buyer and seller.
Really good point, Jeremy, Thank you for all this time. Jeremy Waxman. He's chief executive officer of Zilo, joining us.
You're listening to the Bloomberg Business Week Podcast. Catch us live weekday afternoons from two to five pm Eastern Listen on Apple, CarPlay and Android with the Bloomberg Business app, or watch us live on YouTube at Lassian.
It's the more than eighty billion dollar market cap enterprise software company behind Jira, Confluence, Trello, and more. It has more than three hundred thousand customers all over the world, so it's got a great view on the health of tech spending and businesses both big and small.
The company was co founded by Mike cannon Brooks, who's also CEO. The billionaire invests in renewable energy and efforts to combat climate change. He joined us to talk about his company, current macro issues, yes, tariffs, and some news he had this week. In the world of F one.
Racing, there's no doubt it's a busy world at the moment, and it there's a lot going on. My strategy has been almost ridiculously simple most of the time, which is just to work out what the business needs. And normally the best way you can figure out what we should spend our time on a new given day is to look at your customers and go talk to them. And that doesn't mean it's simple. They are facing low, different global effects in parts of the world, and so you know,
if we work out how we can help them. That usually is our simplest way to gain some focus in an otherwise highly confusing world when.
There's a lot going on.
To what extent, though, do you have to increase your value to them because their margins get squeezed as the result of tariffs, as the result of a potential trade war. What do you have to do to prove to them that you're worth spending money on?
Sure?
Look at Lastian's products are all about collaboration and efficiency for companies. Right We help teams of people. Our mission is to unleash the potential of every team has been for decades and our job is to make sure that we explain to customers how our software can do that, then have those customers adopt the software. Whether they're running projects, whether they're looking at their strategic plans, whether they're building technology, whatever it is that they're doing. We help them make
their technology teams work better with their business teams. And we have always been an incredibly value conscious offering. You get an incredible amount of value from Alastin for a very low price, and that helps in tricky economic times. But fundamentally we have to justify with the customers and have them demonstrate to themselves ideally the value of our software and how it makes them more efficient and work together.
And that's where I think we've kept a pretty clear north star for a long time and why we have, you know, three hundred thousand customers and it's still growing strongly at the size we are today.
Well those three hundred customers, three hundred thousand customers, excuse me, all over the world when you hear updates from your global salesforce, are you hearing from that about any particular concern in different regions of the world that could be affected by tariffs, that are seeing weakness for other reasons what's the read that you have on the globe from your salesforce.
Look, there's always challenges in different parts of the world. This is not new.
I think in any given small slice of time, we see that we have very global companies, we have very local companies in that three hundred thousand. Our customer base has always spanned small businesses through to very very large businesses, some of the largest.
Companies in the world.
In fact, we have like eighty five percent of the Fortune five hundred as customers. You have a lot of issues going on for a lot of different companies. Our job is to make those companies more efficient. They still have to deal with those issues. They have to run projects and collaborate and communicate with each other. We help
them do that. We always have, and so whatever issues they're dealing with, whether it's an issue of growth, whether it's an issue with the tariff or a challenge Atlastian's trying to help their teams deal with that issue more efficiently. If we can't demonstrate their value, we're not going to be around. So again, just sticking to that as the north Star has been a very simple principle for a long time.
But so Mike you're not seeing any signs of any kind of slow down or pullback by some of your customers as they kind of wait for the desk to settle. I mean, we certainly feel like we're in it, you know, as we have kicked off a new administration here and every day are dissecting different headlines that come out of the White House. But you know, there's geopolitical turbulence, as you well know, around the world, and I think there's you know, dust that needs to settle in different places.
So is there any signs of any hesitation that you're seeing among customers or not yet?
Look from up one of you.
We continue to see you know, really good growth across our customer base and especially.
In the enterprise segment.
So our largest customers those organizations with you know, more than a thousand people around the world. We have more than five hundred customers that spend more than a million dollars a year now with at Lassian, and that is our fastest growing customer segment. So I'm sure that those businesses are having to deal with all of that dust in the air as you talked about, but at the same time they have their own customers to deal with.
They still have their business to run, and whatever the problems are, they have to deal with it, and so our software helps their teams deal with whatever it is that they need to do, how they handle their customers, and also how do they handle whatever is going on in whichever part of the world. As long as we keep that value ratio great for our customers. We invest very heavily in R and D and continue to develop and build our software every single day. We have a
fantastic team. I'm not sure focusing on all that sort of thing is very helpful for us all for our customers.
To be honest, they have their own customers to do with and.
I should put out last month, you guys reported second quarter results that beat expectations to raise your full your forecast, and investors have definitely rewarded you big time. The ADRs that trade in the United States are at more than fifty percent tim in the past year.
Mike, I do want to talk a little bit about different industries that you serve. We talk a lot about AI. I know you guys are doing a lot with AI as far as customers go, Customers that are using your product, customers that are leaning into AI right now, are you seeing more growth on the tech side of your business in terms of those types of customers, given what we're seeing come from the tech community over the last couple of years.
Great question, I know as a huge topic among our customer base. From a Lastian's point of view, we certainly believe.
All of the progress making in AI every week, in every quarter at the moment is fantastic for our ability to achieve our mission right. We can build better and better products that more tailor and our.
Customized to the work that our customers are trying to do.
There's no doubt our core customer base what we like to call technology driven companies, So companies that believe like Williams Racing.
Or like a financial services company, they.
Both be the same that believe technology is their source of competition. It's the way that they are going to get an edge, survive or thrive in their industry. Any of those businesses are deeply investing in AI in lots of different ways. They are trying to work out how this technology makes them more efficient, how it helps them to compete. Fundamentally, at Lassian's role there is to invest very heavy is we have done in the R and
D of actually bringing AI to our customers. So we're a big believer that if we don't ship software that people can use, the rest of it doesn't matter.
It's all just kind of talk.
So our investment has been in taking those AI innovations and developments every week, every month, incredibly rapidly and getting them to our customers in a form that they can use. We have done that, and it's one of the things it's one of the things that last and Williams raising
teams most excited about it. It's one of the things that all our customers are talking about is how they can make their businesses more efficient, especially as you mentioned in the Current Times, which is a big challenge.
One last question about AI before we talk about some of the news you guys had this week. Our Bloomberg Intelligence team, our in house group of analysts noting that it may threaten your seat based sales model. They say deep seeks, cost effective model of training llms can bolster AI adoption, driving a shift of work to digital agents from humans, and so they say that's a risk for some of the enterprise software players with CP based revenue models,
including yourself and some others. So will it could the deep seek have an impact like that on your business.
Look, we certainly deeply believe in the fact that agents are going to make a huge difference to businesses around the world. We're already seeing that we are very much on the leading edge of that technology. We shipped our product Rovo a year and almost a year and a half ago now and have continued to update it and have now more than a million users waking up and using Lassian AI technologies, including all of our agents every day.
You know, we take the position that AI fundamentally is about unleashing some form of human creativity.
Right.
It lets people do more with less. It helps them to be creative. It's a fantastical tool. That tool, there's no doubt, makes people able to do more. You can write more software, you can answer more emails, you can do whatever it is that you want to do, and you can do it more creatively and at a higher level.
The thing with most of the industries that we work in, right we sell to knowledge workers around the world, people that spend the day sitting at a laptop or behind a computer and using fundamentally brain creativity to try to improve whatever business they're working in. Those are usually not
supply limited by human creativity. If you take software engineering as a field, if we made all software engineers in the world twice as effective, the question is would we have half as many software engineers or would we build twice as much software. I think we'd end up building twice as much software, not the other way around, because we don't have a shortage of ideas of what we would like to build. In the world, most businesses don't get everything they need to get done.
All our agents are doing is helping.
Those businesses to achieve more, and they'll all be competitive with each other as well, so there's a natural are of conservation of profits there as well.
Hey, Mike, I want to talk about some news you had this week, and this is your partnership with Williams Racing the F one team. Tell us about this partnership and what you guys are going to be doing and why you wanted to do it.
It's an incredibly exciting partnership for us.
It's from an Elastian point of view, it's the first major brand deal. From the Williams point of view, it's the first time it's the largest deal they've done. It is the first time they've had a title partner and a technology partner. Look, obviously, Williams is an amazing, storied race team, right, one of the winningest teams of all time and has had a challenging you know, last decade. However, there is huge renewal going on in the Elasti Williams team.
Right.
This partnership is just one step new partnership, new driver, new principles, new ownership, huge investment in digital transformation and technology as a way to catch up and to win. We are you know, I think eighty percent of the teams on the Greed or more are Elassian customers and have been for decades.
So this is a sport where technologies really important. It is a sport where.
Technology teams, those building you know, fluidynamics models and wind tunnels and cars and all of the monitoring technology that goes into it, have to meet with the business teams, those in the sponsorship groups. So our fundamental system of work is what the company, well what at LASSI Williams is trying to do and trying to embody we.
Then, obviously it's a global sport.
We have customers all around the world, but more importantly, you know, having spent a lot of time now over the last six months with the Williams team. This is a really great cultural fit for Alassian. This is a team of people who are working incredibly hard every day to use technology to try to change their fundamental outcome.
They're on a massive journey of rebuild the culture. The palpability of getting back to the Winner's circle is phenomenal, and we just we fell in love with the story and we're like, okay, we can help you do this. Leaning very heavily into technology partnership, we have a lot of things we can help them with to make their business far more efficient and hopefully change the results of the team, which is a mission that at Lastian now has thousands of people working on.
So it's a sad.
About that it's a long term deal. It's been described as a record breaking deal. Just for context. Can you give us some of the numbers behind this deal, how much it costs?
I can, Unfortunately, I can tell you that it is certainly a long term deal. We're on the at Lastian William's journey right and we are trying to use all of our software and all of our technology in all of our culture and our practices of how we work to show fundamentally our customers and to show the world that we can make a massive difference in what is obviously an incredibly competitive industry. Right, it comes down to
hundreds of milliseconds. The gap between first and last on the grid in the last race of last year was the smallest it's ever been.
Is Okay, So we don't have the details on the exact figures, but how do you justify ROI on this given that it's such a big deal, and you know, it's kind of hard to measure how many people will become lass and customers as a result of this title sponsorship.
Look, we're we always have been an incredibly metric focused organization.
As a large bootstrap company. You don't get that way without a numbers quickly. Look, we have a number of success metrics here.
Firstly, always from a brand point of view, Formula one is a very fast growing and global sport, and we have, as I mentioned, customers in almost every country on the planet. So we need to continue to have our brand and our presence and our story told in a larger and larger way around the world. But that's obviously worth a lot of money to us. Secondly, as an enterprise opportunity, the Formula one is you know, it's like a mobile executive briefing center, right. It takes it's business. This is
a fantastical customer of it. Lastly, that we can take to twenty four cities around the world, and in those twenty four cities we can bring our biggest customers to show them how Williams works, what we are doing to help the team. And this is incredibly powerful in the enterprise to be able to show real world examples of what we can.
Do to help a customer.
Mike, just real quick. One last question the Formula one, the FW four to seven car forty seven car that's going to have your branding. I guess it gets unveiled. I don't know really soon. Are you going to be able to take it around the track? Have you been told that you're good or.
Look, my driving skills might need a little bit of work for that one. I've certainly sat in the car and let me tell you that that is a challenging job that is not as comfortable as my daily driver.
That's for sure.
It does get unveiled on Tuesday, and we're certainly really exciting we've done some really innovative actually, I think for for Formula one design work between the Elassin design team
and the Williams design team. So super excited to show the world the car on Tuesday, and super excited to show how we're trying to bring our collaboration and teamwork practices, you know, right into that into that car in fact, and into the garage, into all the mechanics and all the strategist that work on the race as well.
So we're not just a digital company you'll see on Tuesday.
Don't totally need a AI for that, right, You just need a really cool car, just going to say.
A lot of things to compete in the sport.
So we're on there, We're on the journey, we're learning a lot, and we're putting our shoulder behind it.
Carol, I do feel like if you signed the check, you can drive the car.
Yeah.
I'm just gonna say, Mike, you know, you do get some leverage with all of this. I'm just gonna you know, and the company name is going to be on the car, so you should be able to take it out for a spin.
Look, I would also say it might not be a good idea for the Williams team or the Elassin team. I'm not sure my team would think that's a great idea for me to be driving. It's a three hundred or more guys an hour round the track.
I hear, I hear you listen.
Thank you so much for notes later where you are, but we so appreciate you joining us on this Thursday, really really appreciating. Good luck with that partnership.
This is the Bloomberg Business Week Podcast. Listen live each weekday starting at two pm Eastern on Apple car Play and the Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa Play Bloomberg eleven thirty.
Plenty ahead in our second hour of the weekend edition oft Bloomberg Business Week, including how technology can humanize classrooms with the founder of con Academy.
Plus Valentine's Day may now be in the rear view mirror, which means those in the flower industry are already thinking about their next big push. Mother's Day, The CEO of the online flower delivery company Urban Stem stops by to talk growth, tariffs, margins, and collaborations with the NFL.
And when Harry met Sally Sleeveless in Seattle, The Notebook notting Hill, Bridget Jones, you know, Tim, those movies.
I cannot believe there's another Bridget Jones.
Can I just say that, I know, I know, Well, I gotta tell you the Romance movie apparently is getting a bit of a makeover, and it might go in a direction you uh probably weren't expecting. Also getting a makeover gaming PCs. We're going to tackle Bloomberg pursuits a little bit later on this hour.
First up, though, as the US Department of Education maybe on the chopping block in the new administration, US Education gets its annual report card, and let's just say it's not great. That's right.
Reading scores for eighth graders have hit a record low, math performance is struggling, and achievement gaps are whining despite major federal investments.
Focusing on these gaps is Salcon, founder and CEO of Cohn Academy, the nonprofit that provides free lessons in math, history, economics, computer programming, and more. We started asking him if the bad results surprised him.
Unfortunately not.
You know, we've and the Nate folks made this clear. Also in their report. I think we still have the effects of the pandemic nationwide. The scores nationally, both in math and reading, both in fourth and eighth grade, still haven't recovered from the twenty nineteen level. This is true in almost every state as well. And it's you know, we had big gaps then a lot of kids kind of fell off the rails then and haven't fully gotten back on.
And then there's just a lot of you.
Know, complexity in serving different groups of students and demographic mix, etc.
That probably has made it even harder. You know.
What's worrying too, is that I think some would say it's it's the pandemic, yes, but we've had problems with our education system right across the country for a while here, and it feels like the gaps are widening. I mean, I want to ask you, I am curious, so because you've been in this world for a long time, I mean, what's happening with American education?
You know?
Unfortunately it's kind of a tale of two cities is the right metaphor here? But and the NAPE scores validated that the higher performing students actually started to pull further and further ahead, and a lot of times when you look at some of these Pieza rankings, when we compare ourselves to other countries, et cetera. If you were to separate some of the higher performing, wealthier schools and the suburbs, et cetera, they actually can compete with anyone in the world,
actually do better than anyone in the world. But I think you have other large chunks of America where they're really really lagging, And these NAPE scores only only validated you had a third of eighth graders didn't even have
basic reading comprehension. I just visited a school yesterday out here in northern California, and I met two English language learners who, you know, not only are they you know obviously can't speak English, but they haven't gone to school before, they haven't read before, or they can't read at all, even in their native language. So I think when you I think those types of difficulties are some of what you're seeing here on top of on top of the pandemic.
And unfortunately I don't I don't think just doing more of the same is actually the solution here. This is something that we've always talked about at Kin Academy, is how do we personalize education more, you know, And I saw that teacher that that same teacher that had these two students who couldn't read, who are fifth graders, also had some students who are ready for ninth grade math. So they had a huge spread in that same classroom. And you can't just do one thing for all of
those thirty students. And that's where we think technology can help that teacher address the needs of each each individual student.
You know, the President has has cited how the US lags behind other Western nations despite federal spending on students, and you know, he is looking to potentially dismantle the Department of Education. Do you think that would be helpful?
You know, it's it. We'll need to see how it all evolves. A lot of folks have been asking me this. Even in our own team. We work obviously with a lot of school districts. The Department of Education does a lot of things, but they aren't a major major funder of schools. Depending on what year you look at and what schools, anywhere between three and ten percent of funding in a given year comes from the federal Department of Education, and it tends to be tied to certain programs so
some of those might suffer. Some of those are there
by law. One of our board members is a for under Secretary of Education, and he was explaining to me yesterday a day before yesterday at our board meeting, that there are certain things in there that are just part of law that even if the Department of Education were dismantled, someone else would have to take it over the Department of the Treasury, Department or Health and Human Services, etc. So it's too early to tell exactly what the implications are,
but most of education spending and policy actually does happen at the state and local level.
Yeah, so this is where you think about like state taxes, right, or city taxes and so on and so forth that really are the determining factor. How can AI help with all of this? This is something you guys are certainly in the middle of and improve the gaps that we see within education across the United States.
Yeah, this is something that we're definitely leaning into.
And it's very easy to get enamored with technology, but I remind everyone this isn't about the technology. It's about the core problem you're trying to solve, And the problem we're trying to solve is The one we started talking about is you have a teacher in a classroom. Before the pandemic, your average teacher had three grade levels in the same classroom. They're all fifth graders, but some are operating in a second or third grade level. Some of them are ready to operate at a sixth or seventh
grade level. It's gotten worse since the pandemic, as we just talked about. So if you're a teacher, how do you address all of those needs? How do you make sure some of the kids aren't bored and all some of the kids aren't lost. And so the opportunity is, well, what if you could personalize? In world class education has always looked like one to one. I always point out Alexander the Great had Aristotle as his personal tutor. We
couldn't afford to give every student that. But what kind academy has been trying to do over the last fifteen twenty years is well, maybe we could approximate element of that with on demand video, with software and now generative AI. I write a lot about it in my book Brave
New Words. We think generative AI. It's it's not going to do everything, it's not on a silver bullet, but Over time, it's going to get better and better at being able to provide even more personalized support, not just for students, but also also for teachers with things like lesson plans and grading papers and writing progress reports.
Sally had you on back in May when Brave New Words came out how AI will revolutionize education and why that's a good thing. I spoke to someone yesterday who talked about the pace of development when it comes to AI is just unbelievable. Like he says, the world changes every few months as a result of this technology. How much has it changed since you wrote the book.
It was actually one of my fears when I was writing the book.
Write a book by AI, I will to be outdated of the day it comes out.
Luckily, I still think it's pretty you know.
I tried to make it pretty general, and even a year ago, when when you know, I was finishing up the writing, it was pretty clear how fast this was moving, so I tried to make a little bit more evergreen. But yeah, it's been mind blowingly fast. Not even every few months, I would say, sometimes on a daily basis. Things are things are evolving. A lot of what I challenged the con Academy team is what can we uniquely do as a nonprofit that other people aren't going to
have the horizon or the motivation to work on? And what are we going to do that's really AI proof? And we think a lot of it is how do we connect humans together? Maybe using AI, but how do we for more human connections?
Maybe?
How do how do people create proof that they know something credentially? Once again, how do you how do you make sure it's pedagogically sound as opposed to just you know, throwing an AI in front of people.
But yes, it is definitely.
Something my head has spins almost on a daily basis. But you know everyone feels that way.
You know, it's funny.
Forgive me for doing this, but I guess because it's been front and center. You know, we're talking AI and we've been watching what's been going on in the US government, and The Washington Post had said representatives from Elon Musk's Dose Service have had sensitive data from across the Education Department into AI software to look into the agency's programs and spending to people familiar AI being used to investigate where there's personal data possibly accessed? You are in this world?
Is that something we should be concerned about whether it's Department of Education or the Treasury Department.
Well, you know, I don't I'm not an expert on exactly what has happened.
But yes, anytime we're talking about.
Data, data related to education in particular, you have to be super cautious about how it's being used, especially if it's potentially student data. This is something where we as we take this very seriously as a nonprofit, and when we go work with school districts we point out like not every for profit company has the same incentives.
That we do. You have to be very cautious here on how you use it.
Now if it's all on the up and up, and I don't know, I don't know what the fine print is on this data. You know, there could be uses of AI where you can use it to make sense of large amounts of information that otherwise, of you know, an individual human being would never be able to sift through. But yeah, I don't know details of how they're using it.
No, that's fair. Hey.
One other news thing that obviously we've been obsessed about the last couple of weeks Deep Seek, you know, and the prospect of AI maybe being less expensive to do, and the models to be able to do. When I think about education, might that make it even more accessible for students around the globe?
Yeah, I mean I thought it was great news from from our point of view. The costs have already come down even before deep Seek by a factor of ten, and so I expected that to continue. And then deep Seek and some of their techniques I think is only going to accelerate it.
But you know, I.
Also point out there's an unending amount of things that we can use AI for. You know, basic chat bots are going to become close to free, very cheap. But now if the compute or if the if the applications use less compute and the compute gets cheaper, we're going to be able to do more real time, more audio, more visual things. And yes, in education in other places, I think that's only that's only a win for the application developers.
What's the balance of technology in the classroom. It's a discussion that we had with you last time, but it seems like it's only becoming more and more of a thing. How do you use technology as a tool but not as a distraction.
Yeah, And we have a school out here in Northern California's where my kids go to school con Lab School, and you know, if you were to visit the school, people say, oh, so sociocon Academy must be technology all the time.
No, you'd actually see more human to.
Human interaction than you would see I think at almost any other school. And I think it's all about I would say maybe depending on the age as you get older, middle school, high school, college, you could get up to thirty forty fifty percent leveraging technology. You're going to code, you're going to write a paper, you're going to edit video, you're going to do personalized practice on con academy to
fill in your gaps. And then what that does is that liberates the class time so that you don't have to give the lectures anymore. You don't have a bunch of kids with their fingers on their lips just passively listening. You can have the kids work on harder problems. You can they can do simulations, they can do games, and
that's what we try to do. And you know, I always point out, even without technology, you can have very dehumanizing classrooms, but if you use technology, well you could have very humanizing classrooms.
Yeah.
Right, You just think about kind of where it could go. And especially the idea of personalization in terms of teaching could be really a cool thing.
You know.
The other thing I think about with teaching and AI is I just think about if you're I was a pretty shy kid and hard to believe, but like might be afraid to like offer up an answer or something because you think it's silly. But maybe if you're working with an AI teacher or ta oh, like just think about what you can maybe get out of that.
I think du Lingo said that they have these AI educators rather than live people because they find that people who are learning languages want to interact with that tech. Yeah, that makes.
Completely sense on because you feel embarrassed about like your pronunciations or something.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern Listen on Apple CarPlay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
Valentine's Day and the time around it among the biggest times a year when it comes to the flower industry, So needless to say, Minakhi Lala is pretty busy right now. She's the CEO at the online flower delivery company, Urban Stems. She joins us from one of those facilities. Minakshi, thanks so much for joining us. How's business?
Thank you so much for having me. It's busy, It's our super Bowl weekend.
I mean contextualize that a little bit for us, Like, okay, super Bowl sounds big. We know Mother's Day is big also in terms of your revenue, Like how big is this time period for the company?
So Urban Stems will ship about one point eight million floral stems to people across forty eight states this weekend. This holiday is our second peak bite cycle. Like you said, Mother's Day is definitely our peak. But what has changed this year is we are seeing consumers spend more than they have in years prior on this holiday. Consumers are expected to spend a record of twenty seven point five billion dollars this year versus twenty five point eight billion
in last year. This is just slightly or cozy now for slightly above the record breaking twenty seven point four billion that was set in twenty twenty during COVID times.
Hey, so is that because things are costing more or that there are actually more individual transactions?
They are more individual transactions. But what we are seeing is that our customer is responding to higher value product. If they see better design, better quality product that is meaningful to them, they are investing dollars in It.
Remind us where you play in the ecosystem of flowers, because the cost really runs the gamut. I mean, you can spend as much as you want to spend to get ab okay of flowers delivered to somebody. Where does urban Where's Urban stems sweet spot?
So Urban Stems takes a lot of pride in saying that we are we play in the higher average order value in the higher AOV game, and our average basket size is one hundred and twenty five dollars, already high for flowers and for flowers that are shipped like flowers for an e commerce business. And also to your point earlier, yes, the cost of product has gone up. However, we have seen that our customers tend to resonate towards the special.
They want uniqueness, they want differentiation, they want special product. They don't want the conventional, the predictable, the standard one dozen roses for Valentine's Day. They want something above and beyond that. And we have seen ten percent growth in our AOV year over year, and we are also seeing our higher priced arrangements are selling ahead of plan with a thirteen percent growth in average.
So you've been doing this for a while. Year after year,
You've gone through, right, some difficult times. I think about, you know, so many of the businesses that we've talked to you that had to kind of get themselves through the pandemic, although I sent a fair amount of flowers sometimes during the pandemic, and just you know, give us an idea of how this business cycle is feeling versus what we've seen maybe over the last few years, which has you know, included some regular cycles and some very unusual cycles.
Yeah, there was definitely a post pandemic adjustment in this business. But our customers are opting in for more premier gift options and they continue to be really focused on uniqueness and value. When we talk about people celebrating, whether it's Valentine's dates, birthdays, or anniversaries, they are coming to us for unique product offerings and our partnership strategy. If we give them reasons to buy, they are coming to us
and price does not seen to be a barrier. And hence, you know, the metric I quoted earlier ten percent ao we growth year over year. For a business like ours that plays in the premium space, it's quite extraordinary.
We got to talk about what's happening in Washington right now in the idea of tariffs, because we know that so many flowers that come to the United States come well that's sort of in the definition, they come from around the world, these flowers. Where do you get your flowers?
So we get our flowers from eight countries around the world, but a large percentage comes from Colombia and Ecuador and Europe.
So you must have been breathing a huge sigh of relief when Columbia and the United States decided not to impose tariffs and retaliatory tariffs on one another just a few weeks ago.
That's right.
That was a close call, and that could have had massive ripple effects on the industry, not just for floral businesses like ours, but also for consumers, wholesalers, logistics partners, and even local florists. You know, the floral industry is a three point eight billion dollar market within the United States. There are tons of jobs tied to this industry, and
eighty percent of US flower imports come from Columbia. A tariff so close to a peak cycle would have drastically increased costs across the entire floral supply chain.
Well, it could have been a twenty five percent tariff on goods from Colombia. We don't know all the details. Of course, we're speaking kind of hypothetically at this point because it laid out and was resolved before it actually happened. But what would that mean for your margins and what would it mean for your prices? Can you give us some numbers about how that would increase prices for you?
Yeah, even a temporary tariff to your point, we don't have the specifics. Twenty five percent was a number that was, you know, in being discussed.
But even a.
Temporary tariff increase could have increased our prices overnight. It could have taken consumer It would have hit the consumer average retail value by ten to fifteen percent, and that's a huge swing. During the peak cycles like Valentine's Day or Mother's Day, supply chain costs are very high during peak seasonality. We work with perishable product, so we are dealing with scale ten x, fifteen x twenty x scale
during these holidays. So in an environment when your supply chain costs are high because you're catching time, you're matching speed, you're building scale in the same timeframe. Additional tariffs would have really impacted the end consumer, you.
Know, M two.
When you think about the flower industry, your industry, it's not like it's so easy to just flip a switch right and get us farmers to all of a sudden be growing what you need. It's just it's not how it works. It wouldn't be easy. There's not necessarily the ability maybe to even do that.
No, it's not our projections. You know, it is very difficult for consumers to appreciate what they have in front of them and what the cycle of that looks like. The flowers that are sitting in your homes, on your coffee table or your dining table, the planning and forecasting cycle for those florals is a year ahead, So we forecast Valentine's Day or Mother's Day or Easter or holiday volumes a year ahead, so our farms know what to plant and what to offer businesses out there, and each
business is different. But for urban stems, we play in the premium space, so we do not necessarily work with commodity stems. That are grown in bulk. We build projections with our farms for the unique stems that we put out in our assortments, and we source from eight countries around the world and create bookquets that have stems from
eight countries around the world. It's a very very complex supply chain and pivoting at that scale so close to a large volume week, which is ten, you know, ten x of our average week, it's quite a challenge and candidly almost impossible to pull off.
I am also curious, you know, is it like the fashion industry where there are trends every year or there might be I don't know, certain you know, suppliers that are designing certain types of you know, fabric or designs. In the floral industry, are you guys, can you kind of do whatever you want every year? Or is it like, listen, you know, this is a crop of flowers that basically really came in good or we're expecting it to be good, Like how does it work?
Yeah, so that's a very interesting question. So I spent twenty two years of my life in fashion retail before coming to earth Ms and running this business. There are there are a lot of similarities between fashion retail and floral trends. You know, when we look at trends beyond Valentine's Day into Mother's Day into the spring summer cycle of this year, we're seeing customers lean into a lot of color, more brighter colors, and more whimsical florals. We
have also seen shorter arrangements, centerpiece style arrangements. That category has exploded as home entertaining trends continued to rise in popularity. Our customers are asking for the unexpected, and a lot of our design process does take, you know, a nod from the fashion trends, the color palettes, the color of the years, the messaging around you know, big trends happening in the business we do. We do work very closely with those forecasts and with those trend predictions to build
our collection. What makes this business, you know, what's a blessing and a curse for us is the perishability aspect of the product. So weather plays a huge factor. So we can plan ahead, we can design the product, but if the you know, if there's too much rain in Ecuador or there's too much rain in Holland like they have been experiencing this year, the productivity changes and in
in weeks of production, we have to pivot. We have to alter our designs, pivot and strategize on ensuring that we're still bringing that uniqueness and that premium flavor to our customers.
And actually, forgive me, because I know that nobody wants to hear about competitors when they're in an interview, but I can't believe you're doing I'm doing it. We spoke recently to Christina Stembelover at farm Girl Flowers and she was pretty candid with us about the margin pressure that the company that you know, they that the industry experiences.
Despite the fact that you know you could spend over one hundred dollars on a bouquet, the margins are really tough to make work between the cost of the product, the labor, and then of course the shipping. How are your margins?
Look, Christina has a great business, and we love a healthy competition, and she's definitely one of the best in the business. But I believe our margins have grown stronger over the years. We have driven high amount of efficiency in our operations, in supply chain planning, but also you know, our our unique differentiators. We bring sheet stylish arrangements designed in New York by our in house floral designers. We design with unique florals and botanicals from around the world.
You will not find that anywhere else. They're hands selected from the farms around the world, and the designs are created in partnership with our farms. And we we you know, we stand by what we ship and what we design and when you put out on our site, you will see you will get what you see on urbanstems dot com. It's a very transparent, trusted farm to door delivery with next day service, with same day service. The product is you know handled. We have eyes on it end to end,
and our differentiator is really important for our customer. They value that white glove service and hence, you know, the AOV increases. We hear, we hear our competitors on the margin pressure, but we believe our differentiator is what stands out to our customer and they continue to work with you know, they continue to come to us for that higher EOEI product.
Hey just to wrap up here, So as people are enjoying their Valentine's debouquets throughout the weekend.
Is it mostly going to be roses? Like?
Is that a should we assume it's roses or is it a lot of other stuff?
Well, there's a lot of other stuff, especially at Urban Stams. We as I said, we believe in bringing florals and botanicals from all around the world, so your arrangements are special. We have, you know, sixty five varieties of floral arrangements on our side. We have the plans. We have a wide assortment for you to pick from. But I think what highlights this holiday and the future holidays to come in the future. Collections to come on Urban Stams is
including bundles. We have bundles with iconic partners. We have a partnership with eight and H Bagels where you can enjoy Valentine's weekend with a dozen bagels and Urban Stems flowers. We also have a bouquet designed by NFL Ravens Wide Receivers Dave Flowers, who's serving as our chief flowers this season. So yeah, so we have a bunch of fun partnerships. So when you come to Urban Stems, you come for that premium gift option and you come for you know, come and have fun with it. There are a lot
of highlights. There are a lot of fun partnerships coming up. We also did you have skews around mod sexual products? You know, so there's there's all kinds of fun offerings.
They're not just.
Roses Manactually, La La ceo of the online flower delivery company Urban Stems.
Still ahead on Bloomberg Business Week, putting the horror in romance movies and iconic Swiss swashmaker's latest mega creation, customized gaming pieces in the all inclusive getting an upgrade.
Bloomberg Pursuits is up next.
This is Bloomberg.
You're listening to Bloomberg Business Week with Carol Masser and Tim Steneveek on Bloomberg Radio.
Watches out most of the time perceived as a time.
So it's very chic and posh.
The most powerful car made in the US.
You get the beautiful interior or the iconic design here.
Now it's time to take a look at luxury with Bloomberg Pursuits.
How does an iconic Swiss watchmaker celebrate it's two hundred and seventieth anniversary. Or romance movies get a.
Refresh can you call it a refresher or we'll talk about that at the moment.
Or gaming pieces get a reboot as users think literally outside the gray box.
All that more, it's time for Bloomberg Pursuits and some of the stories featured in the February issue of Bloomberg BusinessWeek magazine, out on newsstands, now online, and always on the Bloomberg terminal. With us is the editor of Bloomberg Pursuits, Chris Rouser. Chris, two hundred and seventy years. It doesn't feel like a typical milestone for any sort of anniversary.
Yeah, that's a good point. So Vastron Constantine is one of the oldest watchmaking brands, and they've been in continual existence for two hundred and seventy years, so they've been making pocket watches and clocks and watches for that long. A lot of brands that you know that are very old went away, came back, people bought the rights to the brand. So I think they feel like any five year milestone is like a big celebration because we've been oh, we've been doing this a long time.
What does one do for a two hundred and seventieth celebration.
They're throwing a bunch of parties, they're releasing some new watches. But the big thing that we wrote about this month is that they released this watch which has been very anticipated by its clients. It's called the Historieks two to two and it's in steel and it is a steel
sports watch with an integrated bracelet. It looks very seventies because it was originally a watch in the seventies and then they revived it, and they revived it a couple of years ago in gold and it became like the watch that everybody talked about for a while, but people
were waiting for a steel version. And the steel version came out this year in honor of the two hundred and seventieth anniversary, and it costs less than the gold version, but it's still thirty two thousand dollars, which is a lot.
Can I ask you, you know, I've read this story and I don't know if we ask you this all the time, why do they cost so much? I mean, is the margins just off the charts or I know they're complicated.
Yeah, so this watch is actually not very not very complicated.
Right.
It tells the time and it tells the date. And you know, this company is one of the holy Trinity of Swiss watch making. Everybody really revers it and they make only about thirty five thousand watches a year, they average like forty two thousand dollars, and it's because people want them, honestly, like supply demand. Yeah, they're very beautifully made, they're handcrafted, and they just they look very cool. They're very hard to get and people are willing to pay
that much. And that's what the margin is on watches at that level.
You mentioned. They've been in continual existence for two hundred and seventy years, whereas many other companies and brands have not. How have they been able to pull that off?
Well, they're Swiss, so they're very patient and they are and diligent and careful and they just have not messed around with quality. And they you know, during the Court's watch crisis, when a lot of brands started making electric watches basically with batteries, they they didn't go too far down that road and they continue to focus on mechanical precision and stuff.
And you know, the story kicks off with the so called holy Trinity of Swiss watchmakers and these guys are among them. Is that just three brands that have just been around forever or just the kind of iconic ones protect.
Leap and yeah, yeah, they're they're called that. It's called that because they're really focused on craftsman ship and quality.
And they are.
They don't make that many watches, So rolex Is probably is the most powerful watch company and it and people love it and it's maybe the most coveted certain models. But they make a million watches.
A year and get one on Fifth Avenue for like thirty bucks.
Yeah, yes, canals. I don't say that.
I don't know, police might come after you.
I don't know if that's a real roll.
It's not.
I'm just kidding.
Go ahead, So you're just saying they're just.
Yeah, they're rare, they're hard to get, and they're very beautiful.
I love it. I love it.
I love the clean.
I got to go to the romance.
Story because I'm like reading this, Jack Quad.
This.
Tell us about what's going on with romance movies.
So for a while now, romance like rom coms have not succeeded at the box office. People have been have had a hard time doing big budget rom comms. So a lot of times what you'll see is they'll do like you'll watch Netflix and like a huge like rom com that you think of as like a big deal with like Channing Tatum and Sandra Bullock or something will be on netflixkisty, yeah, and not and not any judge me, because people are just aren't going to theaters for that.
They are going to theaters for horror. And so now you're seeing a bunch of tours and directors making romance movies that are also horror films. So you mentioned Jack Quade, He's in Companion, which came out at the end of January, which is about Jack Quade who gets a like a love robot, and it's sort of a romance slash horror about her name is Iris. Her name is Iris, so he kind of programs.
Her right to like love him, love him.
Yeah, and then things go awry.
Bridget Jones is back. Yes, Bridgitte Jones, this is news to me. Maybe I live under a rock.
No Bridget to I love bridge Jones. So Bridget Jones mad about the boy coming out around Valentine's Day and it is not a horror, it's not horror. It's still like kind of a oh poor Bridget Jones. But it's based on the premise that Mark Darcy died and so she has to find love in her fifties poor Colin Firth and do you know find in Love in your fifties? Nothing's more horrifying than that.
But it sad but true.
Kids only it's on streaming. You know that movie was a huge movie in theaters when it originally came out, the first one, and now theater it's just direct to streaming.
There's a great quote in here. I guess is it by the guy who did.
I don't know.
He doesn't know which one you're gonna say.
It says, I was just like, I want to see a movie where Meg Ryan gets decapitate. It says Hard Eyes co writer Christopher Landon. I mean, I get it. It's just a changing thing. But who knew that? I mean, we talk about right the rise of Horror. We've talked about that. I feel like our screen screen Time team of Time.
Because it's very creative. It's a very very creative field now. And even Honora, which everybody really likes from last year is starts out as a love story and then is really not that all right?
Where do you want to go?
Kids?
I want to go to Mexico. Where do you want to go?
I want to go to me three.
So there's this thing I like about what's written about in Pursuits this this edition, Chris, where it's the idea that you have this all inclusive resort and you're not surrounded by students from business school.
They say children.
There are children in a certain extent, little people. They're there for the all you can eat, all you can drink, stay up all night partying and getting wasted.
Yeah, so Mary and a bunch of other hotel companies are really prioritizing all inclusive resorts over the next few years and not what you think of as like spring break places like I went to the Dominican Republic for spring break and stated and all you can eat and drink resort and it was a problem. Now you recently did this no the first break and you bore a bracelet and it was all you can eat buffets, and you were always kind of like, ill.
I don't want to hear about that.
That's like a red passage.
But people, it's actually the vibe of an all inclusive resort can be nice because you're not signing, you know, very expensive bills all the time. You're just going in and out. And so Marriott thinks they can create a line of hotels where it's adults only, so there's no children, and it's uh, it's not buffets, it's meals for lunch and dinner at fancy restaurants. And you're just not paying bills all the time. You're just walking around as if it's like your house, but your house is like this big,
beautiful resort. And so we sent Lily on our team to go to al Mare, which is on Elam Harris in mex and she checked it out and it was like mostly people in their forties. It was not a party party scene. You could hear the parties at the neighboring resorts. I love that, but this one like you couldn't get a drink at the bar after ten pm. And it was very much wake up in the morning, go to the beach, go to the pool, workshops, do workshops.
But she did right that some of the things that she did, the excursions that sound great, we're kind of sparsely attended.
Yeah, so they're trying to also add this layer which a lot of hotels are doing now, which is to connect you with the community around the resort so you more conscious travel. Right, So money goes back into more people in businesses that live around resorts, and also you just become aware of a space and you have a
better experience of that space and in community. And so she went to like a ceramics class and she went to some other like a run hiking run kind of thing, and she thought, Oh, I'll beat like other people at the resort. And people turns out I want to hang out by the pool, yeah, which I get, which I totally can.
Hey listen, we only got about a minute or so left.
I just want to Carol, I'm gonna blow up your spot here. She's Carol's like looking at these gaming PCs and what is this?
What are these things?
We have said, they're beautiful.
We have a story by Cecilia on the by Cecilia Donasasio on the Tech Team, which is about gaming PCs, which are computers like the computer that you would have in your house that people use to play video games. So it's not a console like an Xbox that you play specifically for games. It's a computer that you've used it for games. And people have taken these old gray boxes like that you used to get from HP and really kitted them out with like additional processing power and
visual visually beautiful stuff. So you know, like pink chords fans that are Neon lights and they have glass sides, like it's an old Ferrari where you can see the engines through the glass roof. And so we we shot a bunch of them and they're very cool. And you can either do it yourself, which seems insane to me, or you can buy it from a company that will.
Do it for you.
So like the average like PC costs like six hundred and seven hundred dollars and these ones cost more like sixteen hundred twenty.
To call him like hot rod PC builders. Right, it's like how you kind of like, I guess trick up a car or something.
I will say, my cousin who's a bit of a gamer, actually for Christmas got his dad my uncle uh a like kit and they built this together. And that they've done this, it's very cool. It was like their gift. It was pretty cool.
Yeah.
And gaming is I mean three billion people gamed during the pandemic, Like it's a huge thing obviously, and it's a many many billion dollar industry. And so some of these companies that make these kid it out PCs are making a billion more than a billion a.
Year I'll be honest. Sometimes I walk by Carol's desk in the middle of the day and she's just playing Fortnite, and I'm like Carol, Like, Carol's have to get to work. We ever showed you a lot of these that don't stop gaming.
Yeah, mine would have like, you know, be pink and have Barbie's probably.
All over it, and these billions of views on TikTok, by the way.
And have the most advanced and video chips. That was also kind of cool that these these people are lining up for you know, the n video We think about Nvidia and AI, but the gaming.
Chips, well, that's that's in videos, uh in DNA, that's like you know, I know, I know that's what they were.
Doing because without it you can't the games are so crazy beautiful now that they render. Without that kind of compute, you can't render like individual hairs on Link's head, you know. So people want to want all of that experience.
I am not.
Playing what do you play? If you're not playing Fortnite, then what are you doing?
World of Warcraft?
Oh?
World of Craft that's what it is. But unlike Elon Musk who allegedly had someone else play for him, Carol's getting the high scores herself.
Yes, I know, I didn't know that either.
You're just full of like lots of information.
Okay, we're a little wacky on this.
Uh.
This edition of Bloomberg Pursuits good stuff as always, Chris, thank you so much.
We really appreciate it.
That is the editor of Bloomberg Pursuits, Chris Rouser, and that.
Wraps up the weekend edition of Bloomberg Business Week from Bloomberg Radio. Thank you so much for joining us.
This is the Bloomberg Business Week podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from two to five pm Eastern on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business App. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal.