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This is Bloomberg Business Week Insight from the reporters and editors that bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Masser and Tim Stenoveek on Bloomberg Radio.
Hi, everyone, Welcome to the Bloomberg Business Week Weekend Podcast. Another busy week with investors contemplating the impact of US tariffs against its biggest trading partners, end of the role of Elon in the US government. It was a week two with a lot of earnings as Alphabet, Amazon, AMDARM, quoncom Ford, and Uber were among those that reported it kept us pretty busy.
We also got another big read Friday on the US jobs market. All of the details can be found on the Bloomberg terminal and at Bloomberg dot com. You add it up and you've got a lot coming at financial markets and at leaders. So this hour we're going to get an update on trust of government, business media, and more with the CEO of the global pr and communications company Edelman.
Plus we mentioned Elon a look at how his government takeover has been as swift as it has been chaotic, and understanding the possible land and resource grabs of President Trump's geopolitical plays.
All of that to come. We begin, though, with the importance of trust, as political polarization and growing class divisions have led to a widespread loss of trust in large institutions. According to the Edelman Trust Barometer, now in its twenty fifth year, sixty one percent of respondents now hold grievances against government, business, and the rich.
To help us understand the report's findings, we spoke with Edelman CEO, Richard Edelman, who had just returned from the World Economic Form in Davas, and there he got the pulse of global business leaders.
So I think the American CEOs were quite bullish. They felt, you know, deregulation, lower taxes, a chance to you know, increase investment. Meanwhile, the European CEOs felt deeply depressed and they were nervous about trade, they were nervous about regulation. I heard one CEO tell me he has thirty five thousand data points to give to the EU on environmental
regulation every year, and that's a huge burden. So also I would say it was a very business like Davos, you know, Other than Trump's last day appearance and Malay of Argentina. There were very few government leaders, so it was a much more business like Davos.
It's interesting that you say that you're probably the second person to tell us that the mood of European CEOs was pretty gloomy.
Well, they're gloomy because I think they feel trapped between the US and China. They have big sales in China, cars, et cetera. Their energy costs are high, their regulation is high, and frankly, they're nervous about the German economy, the French economy, both of them wobbling along. So they don't have domestic demand like the US does.
So it's interesting, as you know, we navigate from day to day, hour to hour the headlines that come out of the White House in the Oval Office, and so I am curious was there a perspective among the global CEOs are more importantly the American CEOs, that it's kind of a wait and see that we think some of it is a lot of talk, and that ultimately, as you said, policies will make business sense and they might not be as extreme as some of the conversations around them are.
I think you can tell me I'm wrong.
No, no, look, I think our trust barometer came out in time for Davos. And the thing that was so noteworthy, Carol, is that we see the world slipping into grievance, and then sixty percent of the world's moderate or high grievance, and especially in Germany, thirty five percent of people highly
agrieve just before their elections. And why is that? It's inflation, it's the sense that my family won't be better off in the next generation, lack of hope, fear of job loss, to AI and so I think business has every way to solve this. You know, give me a good job, reskill me, have affordable products. That's the playbook. And CEOs need to make sure that it's about their business.
Why do you think we see this happening around the world? You know, it's not This idea of grievance is not particular to one single country or one single region. What's Is this a post COVID phenomenon? Is it a rise of the cost of living phenomenon? Is it a globalization phenomenon? Is it all of the above?
What is it? It's absolutely it's like dominoes, and so you know, you start with the mass class divide, and you have a battle for truth, and you have this problem of COVID five years on, where people mental health and other things, and then you have all the geopolitical issues and so all of this is a lot, and people feel continuously punched, and so I think they used to take it and just have fears, and then now they're aggrieved and they're prepared to fight back, and whether
it's misinformation or even violence, this is what we start to see. And business has every reason to be concerned about this because business is distrusted by the highly aggrieved. It's different than most because business is the most component and most ethical except for the highly aggrieved. So business has to try to pull people back from this cliff and make people feel as if they have good jobs, they can get well paid, they will be reskilled and can compete.
So what's the problem. Is it that workers aren't sharing in the profits? I mean, you know, we're an earning season, we see it. I mean companies are doing well, and is it a case that they're not sharing all of those with their workers.
Well, here's an example. In Japan, there hasn't been really a raise for workers for thirty years, okay, and so you get the idea of why people in the lowest coretile of income feel deeply aggravated relative to the higher.
So why aren't CEOs appreciating those workers at that level?
I think that they are in the sense that they use them, they put them in jobs. But the truth is, there's been outsourcing, there's been globalization, there's now AI. All of this is towards cost and effectiveness, and so CEOs are balancing a lot of these factors. But they do want employees to work hard and be satisfied, and the key to that is pay.
We saw CEOs stand behind the president at the inauguration, some exactly, not all. We saw many prominent ones there. In general, we have seen some CEOs share their views politically, more so in recent weeks, in recent months than we're sort of accustomed to. You said, there's this idea that they're cheering deregulation, they're cheering lower taxes. But what about the chaos that's associated with the administration thus far. Is
it a distraction to them? Is it what you get with Donald Trump because we knew that in the first term, or is it something that concerns them because they need to make decisions about their businesses in China, in Canada, in Mexico.
I think CEOs need to argue for agenda items that suit their business. So, for example, if trade is a key part of your business, you should go out and advocate for a free trade and say this is going to cause inflation, or it's going to make my supply chain inefficient, or it's actually going to cost jobs in America. But also the non American companies need to make the case for investing in the US, putting more manufacturing here, making sure that it's aligned to the president's agenda. It's both.
But I don't believe that ceo should stick their heads up and be very political. I think they should do their businesses.
But you know, I want to go back to what you said, sixty one percent globally have a moderate or high sense of grievance, which is defined by a belief that government and business make their lives harder and serve narrow interests and wealthy people benefit unfairly from the system. I'm waiting for like the deluge of emails of like yeah we got that, Carol, Like that explains politics that are going on, But like Richard, how do. Is it
just a case of paying workers more. I'm not saying just I don't mean that, but I mean, is that the fix? Because there are a lot of disillusioned individuals here in the United States and around the globe, I think just feel completely left behind.
So inflation is corrosive. Got to get inflation under control so that people feel as if when they run hard, they're not running into the wind. Second, they got to feel as if they have a chance for the future rescaling upskilling core. And then third is pay and continuous ability to get to a better place.
It seems like such an easy fix. Why then aren't we getting there? Like paying workers more. We've had guests on right talking about a living wage, and then some why aren't we Why isn't it being done?
Because we're not taking full advantage of what's possible. AI is actually an enhancement tool for workers to be able to produce more. I mean, in my business, can see how much faster people turn out press releases and message points and things like this. Everyone's got to put AI into their workflows. Also, we've got to be sure this reskilling thing so that everyone feels as if he or she can compete, not just the twenty two year old is just out of school.
I feel like we've talked reskilling for years.
Yeah, true, but we've never done it. We've never done it in an effective way. And also, business can't do this alone. Business should do this with government and NGOs. And the secret here is NGOs non governmental organizations. They're local. They're also actually believable for the high grievance people business is not. So business should partner with community organizations.
We were supposed to see reskilling after NAFTA, and obviously that didn't happen to the extent that many people thought it would or were told that it would. How do these workers use AI if they're not in part of the knowledge economy, or if they're not writing press releases, if they're not writing message points like what is the way that for people to embrace AI rather than be scared of it.
So one of our clients, Honeywell, is using AI on the factory floor and making their workers more productive. That's the key to the future. And actually blue collar workers have much less job risk than white collar in insurance and other things where they're repetitive skills. So blue collar workers could thrive This is a very important message that most people haven't absorbed, and we need to keep telling this.
And we also need optimism back in this country. We need to make sure that people believe again that the country can do better, because in the moment there's this inundation of negativity. And I think competence and ethics will get you so far. But if you want to run an eight minute mile, it's aspirational for me these days, but I have to believe that I can.
Yeah, I think it's I think it's fascinating that we also at the same time, I've been talking about American exceptionalism, like in comparison to what's going on in Europe and so on and so forth, But there's so many people in our society that don't feel that. Talk about stock market, well, well not everybody's in the market.
Only half the people are in the market, correct.
And I look in my world people I talk to a younger generation of like, I'm not going to have kids. How am I going to afford kids? I can't even buy a house, Like it's just crazy.
But again, the chance to get to optimism is based on specific actions, and if there's a national reskilling campaign or even by cities. I think this is interesting, Carol. The trust has gone local. Trust in my mayor my company. My CEO is much higher than anybody else. So this is a channel that companies should use.
There you have it, Edelman CEO, Richard Edelman.
Coming up on Bloomberg Business Week, Elon Musk's Doze disruption and his impact in just a few short weeks.
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Now to two well known tech companies, both with government contracts and huge tech billionaires connected to each. We are talking about Palenteer and SpaceX.
Palenteer share soaring to a record following earnings this past week after the company gave a full year revenue forecast that exceeded analyst estimates, driven by quote untamed organic growth and demand for its AI software.
And then they're SpaceX and its founder Elon Musk and his Doze teams seemingly taking over of the US government. It's a move that sparked concern among various unions now urging the courts to block Doze from getting treasury and labor data.
We knew we needed a roundtable on this, and so we caught up with a Bloomberg Business Week columnist Max Chafkin and Bloomberg News technology reporter Kurt Wagner. Max kicking it off with Palenteer and why it's garnering so much interest from investors.
So two things.
One is AI. This is a company that has sort of made its embrace of AI sort of central to how it talks about what it does. This is a company that makes software that helps governments and big companies organized data. So so part of it is that this general sense that big companies and the government are going for AI. And the second part is related to the other thing you mentioned, which is Elon Musk Donald Trump, this sense that the Trump administration is likely to embrace
things like Palenteer. I think both because you have Doge and you have Elon Musk saying we need to make things more efficient. Palanteer has a value proposition there. But also, of course there is a political connection. You know, Palenteer co founded by Peter Teel Peter Teel still a major
shareholder in this company. You know, they are going to have you would think at least some kind of inside lane in terms of trying to get additional contracts, both because of the relationships with the Teal network, because of their AI stuff, and because of Teal himself.
Okay, speaking of government contractors, Palentteer is a government contractor, so too is SpaceX. SpaceX founder Tesla, the guy who built Tesla Co'm fair to say, Elon Musk they have or had relationships with President Trump. So that's where we want to go, and we want to bring in Kurt Wagner. What do we know about all that Elon and his team of engineers and others linked to his own company
and the DOGE team. What exactly they're doing at what parts of the US government, what they're asking, and what they're trying to accomplish.
Generally, what you can assume is that Elon and his team are are taking a bit of a forceful approach, right. I Mean, we saw stories come out about them, you know, essentially bullying their way into having full access to the
Treasury Department's payment system. We saw them, you know, single handedly closed USAID right, like this idea that they could go in and just sort of say, hey, this agency, this this federal agency, we don't think they're doing a good job, and we're just gonna you know, shut them
down right then and there. And we hear these sort of horror stories come out from employees of these you know, different agencies, sort of saying, hey, we're trying to maybe stop this this group of people, We're trying to make sure that they have appropriate you know, access levels to read this classified information, and essentially they're just forcing.
Their way through.
And so what I wrote about was just sort of the parallels between what we're seeing there and what we saw with the Twitter takeover, right, which was obviously a very brute force effort as well. Elon shows up, he brings his crew of people who are loyal to him and sort of just span out and start causing chaos and recon havoc. And I think we're seeing that now, but on the government scale, which is obviously a very different and I think a bit of a scarier situation for people.
Max, I want to bring you in, I mean, in terms of when you guys talk about you know, Elon on the podcast and just you know, the coverage that you have done.
That.
On one hand, I think Elon's probably like this is pretty cool to ask, like, oh my god, I want to like.
Fix this right.
And on the other hand, I'm like, wait a minute, he's got to be like, look at what I have access too, Like, what do you think.
Is his goal?
What is you know he learning or wanting to learn in this process? Is it altruistic or is it.
Well, I think you have a swirrel.
It's probably both, right.
I got both out, both a sense of altruism and a profit motivation, and I think for someone like Elon Musk, those two things are tangled up. You know, Elon Musk he believes, and I think this is a genuine belief, not a cynical belief put on to make money. But he believes that yes, humanity needs.
To get to Mars.
He needs we should spend tens of billions of dollars, you know, as a country put on a Mars mission, and that Elon Musk, having the market leading rocket, should get a large chunk of that money. Now, of course, like that raises some significant questions in terms of conflict of interest. And I'd say in addition to being a guy who's very motivated by these kind of big picture things.
He is also a guy who tends not to pause much for concerns about conflict of interest, and that's kind of what we're seeing in some of these incidents over the past couple of weeks that Kurt's talking about. You know, so this actual like almost a physical confrontation between Musk's sort of representatives at DOGE going into USID and attempting to get access to these classified documents, and you had USAID personnel trying to stop them.
Kurt.
One thing that's unique about this situation, and it's not the you know it, certainly there are a lot of parallels as you write about between what happened at TESLA and what's happening right now with DOGE. He does report to the president ultimately in this and I'm wondering if that changes things at all for the Elon Musk playbook. What do you make of it?
I mean, it feels like we haven't seen him, you know, slowed down at all to this point, right. I presume perhaps behind the scenes he's saying, Hey, I really want to cut this thing, and President Trump is saying no, no, no, don't touch that. I don't really see that maybe playing out in that way.
Right.
It feels like Trump has certainly given him a wide you know, birth or to go out and do this thing, and to do it in the way that he thinks he should. I think the point that I was trying to make earlier in the Tech column was that, you know, with Twitter, that was a private company that was purchased with private money, Right, Like, if he wants to sort of run that thing, aggressively, run it into the ground in certain cases, and deal with the consequences, that's his choice.
The issue here is that all these decisions he is making and making them at an incredibly fast speed, have impact on you know, every US citizen, including nobody who voted for him, because he wasn't voted, he wasn't elected to this role, right, And so I think the distinction there is like, okay, private business, private ownership versus public funds, public you know impact. And that's I think the big thing that we need to keep in mind.
That was Bloomberg Business we call him this Max Chafkin and Bloomberg News technology reporter Kurt Wagner. We should note, after our conversation with Max and Kurt. The White House said Elon Musk will determine himself if there are conflicts of interest between his own work reviewing federal spending and his overlapping empire of six companies.
All right, We're going to stay with tech for a moment. We shift a little bit thanks to the world of social media and how our digital footprints are providing more information about ourselves, probably more than we realize.
Columbia Business School professor Sandra Motts writes about this in her new book mind Masters, The Data Driven Science of Predicting and Changing Human Behavior. She went in on Meta's recent decision in January to end third party fact checking and what it means for user engagement and the fight against misinformation.
Frankly, I think misinformation is just such a small piece of the entire puzzle because a lot of the information that's out there is not necessarily fake and not true, but it's just slant in so it's not necessarily that it's actually inaccurate, but it has like a certain angle and a certain spin that speaks to what we want to hear. And for me, that's even a bigger problem because it's much harder to regulate right. It's much harder to take down from contum model or as metas trying
to do now just from a consensus among users. Right, that's an even higher bar when we think about these news that are maybe not factually inaccurate, but certainly tailored to a certain opinion.
Is this the way of the future though? Are we sort of moving past this idea of a fact based society and one that's more based on interpreting what you see that's thrown at you. And I think it takes on a different The question takes on something different when you know, as I'm asking, I'm thinking about AI generated content and what we do know is real and what we don't know is not real.
Yeah, I think it's a risky gamble to think about this moving post or pastly what I think of shared reality, Right, it's the idea that as a society, as people living together, frankly, we can make sense of the world in a way that at least offers us the opportunity to have a discussion. And I think the moment that we entered this world where I have a completely different reality than you and we're not even discussing it because we're cut in in these echo chain online right where I don't even see
what you see. I think that's a really risky gamble because it's not even out there anymore. We don't have the public square anymore where we can say, well, this is something that you've seen. I've seen this, Well, what do you think is actually true? How should we be moving forward? I think that is what is missing.
Well, it's so funny. I think we thought social media it's been great sparking all these conversations, but it's really kind of a one one, you know, pathway dump if you will, right, and then you kind of have to deal with it. What I want to ask you is your book Mind Masters, The Data Driven Science of Predicting and Changing Human Behavior. I want to get into the predictability. Do you say that if we had really monitored social media we would have been able to predict the January
sixth uprising? Could we have predicted some other things, you know, in terms of what has happened in society?
Yeah, So what I'm mostly interested in is actually trying to understand individuals. So what you're talking about is like predicting these macro level trends, right, It's like, how is the collective acting, and I do think that you might have been able to pret that right, because it's this is all coming down to sentiment. It's like people are angry, people want to change, So the fact that people hands it's like what we call social listening. It's trying to see what is it that people care about.
And you talk specifically about something called psychological targeting, which I don't know that tim have we kind of really I don't know that I've heard that terminology.
What is that?
Yeah, So psychological targeting is the way in which algorithms can translate your data into psychological constructs. So it's really trying to make sense of you as a person.
Right.
If I told you what, I can get access to everything you post on social media to maybe your credit card spending, your Google searches, the sensors that I embedded in your smartphone which keep track youration via the GPS.
Sensor, for example.
It doesn't seem that intimate, but once I can tell you, well, I can translate these traces into and understanding of whether you might be extroverted, impulsive, neurotic, whether you vote for a certain Candada, your political orientation, your sexual identity. Those are all really intimate insights, and that is the cracks of psychological targeting. It's making use of AI and machine learning to translate data into human understandable profile.
Do you have to use AI and data? Because your book opens up talking about your own personal experience, the first eighteen years of your life spent in a very small village of what five hundred people, and an accident that you had that then immediately everybody knew about what's the connection between that and where technology is today and what tech can do?
Yeah, So I think it's absolutely right, and that the fact that we oftentimes observe people's behavior and make inferences about who they are isn't new. Right in this village that I grew up and people observe what I was doing, They saw me running to the bus every morning, and they probably figured out that I wasn't the most organized person in the world. And so the incident that you were referring to is essentially I had this motorcycle crash
and the whole village knew about it. So in an instance, those new spread and it's not just like an isolated while this is what happened. It's like, Okay, I'm gonna now understand who Sandra is, and I'm going to use that knowledge moving forward to maybe push her in certain directions. But maybe if she's not organized, maybe she's not the one that I want to rely on when I have to move my stuff and when I have to organize
something that has to be perfectly done. So I think that the shift to the digital world just means that we have neighbors all around us, and they're not really physical neighbors. They're neighbors that are algorithms, and they observe everything we do based on the data and then make very similar inferences.
That was Columbia Business School professor Sandra Motts on her new book Mind Masters. The full conversation can be found on our podcast feed.
Still Ahead on Bloomberg Business Week, President Trump's plans for Gaza and Ukraine.
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Thirty a lot coming our way from the White House when it comes to gel politics and I guess foreign policy. Perhaps there was President Trump's idea of depopulating and taking over Gaza, which he mentioned following a meeting with Israeli Prime Minister Benjamin Netanyahu at the White House, and then was toned down by President Trump's aides.
The president's idea was broadly welcomed in Israel, with officials praising the surprise proposal as a means to beef up security following the war with mos In the Arab world, though the suggestion was taken differently. Saudi Arabia called the plan quote an infringement on the legitimate rights of the Palestinian people. It's a position echoed by governments across the Middle East.
For some insight on the region and the difficult relationships there, we talked with Bloomberg Opinion International affairs columnist Mark Champion and Dana Stroll, Senior Fellow and research director at the Washington Institute for Near East Policy think tank. Dan is also a recent former Deputy Assistant Secretary of Defense for the Middle East, the Pentagon's top civilian official with responsibility for the region.
What worries me slightly is that you know, here, you are at a juncture. You're you know, you're in a peace process that's in several stages. The second one is going to come up faster and when we you know, then think and it will require the kind of further forward looking strategy and planning in order to get that through that has not been there until now because Israel has not been willing and certainly Hamas has not been
willing to you know, to engage. So you know what worries me is that, you know, the the administration will be you know, thinking of and talking in these terms right which really aren't going to go anywhere, and in the meantime, we have an unsolved problem that will simply return to fighting.
Dana, come on here, I'm wondering if, given your experience in the region, your experience when it comes to diplomatic affairs, if you see this as having any weight to it, or maybe perhaps an off the cuff re mark or something that doesn't necessarily or should not necessarily be taken seriously, how are you looking into it?
Well, first of all, I don't think it's an off
the cuff remark. I think it's quite consistent with the negotiating strategy we've seen from President Trump and just his first weeks in office here, which is to create a crisis, mostly with words and threats, animate his team to then have backchannel negotiations which de escalate a situation, and then largely if you look at Columbia or Mexico or Canada, each government has come with modest or moderate reactions that appear to address Trump's concerns, and then all of a
sudden there's a delay in what he has promised in terms of a harsh response. In this case, Netanyahu was about to face a fork in the road if the Gaza ceasefire moves to phase to Israel would have had to end this war. And we've seen with all of these hostage releases Hamas come out in their uniforms. It certainly doesn't look like the total victory that Prime Minister
and Nathan Yahoo promised the Israeli people. Now, rather than talk about what Israel's going to do, or the Palestinians or the region, all the talk is about what the United States is going to do. It's totally shifted the dynamics and the focus of this conversation, and I think Trump knows exactly what he's doing here.
Well, and that's a really good point. And you know, Mark, come on back in, because I think some of what we've been hearing is that, you know, this is about President Trump taking the focus of what really matters, what is the next phases of the ceasefire between Hamas and Israel, and really figuring that out.
Do you agree that it's.
Kind of like the flashy thing, you know, look over here, but it kind of gets everybody off the hook of thinking about what's the next phase of this ceasefire?
I think it is. I do think that's part of what he's doing. It's simply the don't believe he has a thought through strategy that he's trying to you know, unlike with the trade, where you know, he had things that he could get. I simply don't think that he has a strategy that will be able, you know, to to get a movement forward, to get the Israelis to on board, to to to you know, get to a place where you can have a serious proposal. And therefore, you know, this kind of real estate talk and so on.
I think it is serious in the sense that it's a real distraction, you know, you know, I take it that he knows what he's doing when he's doing making, you know, throwing up all these you know, balls of fire in the air. So everybody's looking a different way. But you need to have something underneath there that you can realistically get people to do, and that I think it's missing, you know, Dana.
One of the things I think we keep thinking about as we watch, you know, what's been going on in terms of threats of tariffs, then maybe a little bit of a rollback and you know, or things change or they're postponed in terms of their enactment. Having said that, you know, we thought about with tariffs, what's the goal here in your view of President Trump in terms of meeting with Benjamin Nett Yahoo and what his real aim is. President Trump's aim is for Israel and for the Palestinians.
Well, first of all, what Trump wants is Israel's security, and he doesn't want to see Homos return to a position of governance. And right now, the Arab leaders of the rest of the Middle East aren't really cooperating. They're unwilling to commit any sort of security presence or boots on the ground, meaningful resources beyond humanitarian aid. Pressure on the Palestinian authority in terms of what its leadership could look like in God's or reconstruction or an actual day
after planned for Gaza. All he's heard from Arab leaders is mostly know what they're unwilling to bring to the table. And now you see the dynamics sort of shifting. And of course, next week the table is set for King of Dullah of Jordan, followed by perhaps Egyptian President c c All coming to Washington, and this is going to be the focus. So you see a lot of movement because of what Trump has said.
Mark, does it threaten relationships that the US has in the region, such as President Trump's relationship with the Kingdom of Saudi Arabia for.
Example, Well not at this point. I do think that there's a huge difference in the situation between his first term and this his second term. You know, in his first term, the interests of the Gulf States and Israel were more or less aligned. Their biggest concern was Iran, the threat from Iran. And you know, so he was able then to get the Abrams Accords, and after that the Biden administration was able to talk to the Saudi a lot about similar deals because there was no real impediment.
And this time around since October twenty three, when you've got the you know, you've had the war in Gaza in between, and also the sort of interests of Saudi Arabian particular have changed much more focused on the economy
and stability, less worried about Iran. You now have a different situation, and I just think it's going to be quite difficult to bring these different interests together where you've got the domestic political concerns of Saudi Arabia and the Gulf State's now focused on their own populations and their view of Gaza, and it just makes it harder to bring everybody together. And I'm not clear that you know, he's got a plan for that.
Dana, when we think about what is the plan though for Palestinians, you know, Mar's column gets into you know, Gaza is a demolition site. You know, it's a mess, and to think about the Palestinians going back there, I mean, how do they live. There's no infrastructure, so there needs to be some kind of rebuild. And you do wonder how, you know, how this happens going forward, how do you see it playing out in terms of Yeah.
First of all, The estimates for the cost of rebuilding Gaza are upwards of eighty billion dollars and we're probably talking about decades to clear out the rubble and rebuild Gaza,
so there's not really a temporary relocation of Palestinians. And based on past US experiences for example, post conflict reconstruction in Iraq and then Afghanistan, the difference in Gaza is how concentrated the destruction is and the closed nature of the border, so civilians can't move around when we're trying to get ordnance, unexploded mines and bombs and the rubble
cleared out. So this was always going to be a huge challenge just on the on the remarks about the region, what's totally different from Trump's first term is the strategic needs of the Middle East. Iran is more vulnerable today than it ever has been because of Israel's military strikes that have taken out its air defenses, but charl Ossad has gone in Syria. There's also a ceasefire in Lebanon and a chance an opportunity to reimagine Lebanon without a
stranglehold of Hazbolah governance. And the same thing in Hamas in Gaza. Trump can't do this alone. He needs the Europeans, he needs the Arab leaders, and I think there's an opportunity here for different leaders to bring things to the table.
It's not only about Gaza.
Well, sticking on Gaza does raise the question of what the future of Gaza is. What is the plan for Gaza? If the United States does not go through with the plan that President Trump said ye at the White House.
On the current trajectory, without anything other than what we see right now, Gaza is probably going to become something like Mogadishu on the Mediterranean. There's no non Hamas alternative to governing Gaza. We've seen that there's plenty of Hamas guys who have come out of the time, put their uniforms back on, are distributing humanitarian aid and telling people we're going to help you get back to your homes
and we're going to help you rebuild. So that means that Hamas reconstitutes, it regains governance over Gaza, and its remaining leaders have already threatened to do October seventh, over and over and over.
Hey, Mark, before we wrap up with you, we did want to ask you about Russia and Ukraine. The role of the US and President Trump will play in what happens next. We know US allies expect the Trump administration to present a long awaited plan to end Russia's war in Ukraine at the Munich Security Conference in Germany next week. This according to folks in the know, You've got a second column out about President Trump saying he wants some
of Ukraine's resources in return for continuing aid. You note that this is a price worth paying.
Why well, first of all, is something that presidents Zelensky of Ukraine offered. So he put out this victory plan last year, and one of the five baskets in there was incentives for the West. But you know, it's quite clear that he had a transactional Donald Trump in mind, incentives to say, look, you're not just helping us. You know, you're helping yourselves after the war. We have a lot of resources, and you know, we're willing to open them
up and you know, make them available to you. So there's lithium, there's you know, magnesium, there's you know a number of different resources that would be useful in industry and the ev industry and so on. So you know, he was just it's already there offered. Trump has taken up the offer. It's exactly what Zelensky was trying to do. And you know, given Europe's weakness militarily, its failure to really build military capabilities, you know what's became clear that
the peace devon of the Coal War was over. It really is able to do it on its own. So Ukraine needs the US and Europe. You could describe this as the price that Europe should be willing to pay allowing the US unto Trump to have access to some of these materials. Just keep quiet about it because they need the American military. They need Trump.
That was Bloomberg Opinions Mark Champion and Dana Stroll, Senior Fellow and Research director at the Washington Institute for Nearest Policy.
And that wraps up our first hour of the weekend edition of Bloomberg Business Week from Bloomberg Radio Head on our next hour, why almost everything we are told about business is wrong.
Plus the founder and CEO of farm Girl Flowers, Christina Stembul on getting ready for the big day next week and navigating everything from tariffs to turmoil.
And Tovago CEO on travel demand in twenty twenty five.
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 or watch us live on YouTube.
Plenty ahead in our second hour of the weekend edition of Bloomberg Business Week, including the Corporation in the twenty first century, Why almost everything we are told about business is wrong?
Plus Trevago's CEO on whether or not we are all still traveling, and the founder and CEO of farm Girl Flowers on Valentine's Day, and Ai.
First up this hour, the so called Magnificent Seven. We talk about them each and every day. You know, Apple, Microsoft, Alphabet, Amazon and VideA, Metaplatforms and Tesla. As a group, they were up nearly seventy percent last year and one hundred and seven percent in twenty twenty three.
Yet our next guest writes in his new book that quote the dominance of the seven is likely to be as transitory is that of the large businesses of earlier generations. And he offers US Steel, General Motors and IBM as examples of companies who shares investors once clamored to buy.
Sir John k is a writer, professor, economist, economic consultant, fellow at Saint John's College, Oxford and more. He has spent years studying the interplay between business economics and finance, and his new book is The Corporation in the twenty first Century Why almost everything we are told about business is wrong. Sir John joined us from London.
There are two kinds of business books and bookshops right. One of the ones that are five tips is how I run my ho have to run my business better on Monday, and the others are how awful capitalism is and how terrible these tech titans are, and how they ought to be cut down to size, if not put in jail. And I want to write for intelligent people who take a view somewhere in between the two, or I just want to know about business the way people want to know about history or science.
Well, when you look at business works, Sir John, when you look at businesses today, it does feel like increasingly, even though a few years ago it was all about multiple stakeholders, employees, customer companies, so on and so forth, it does feel like it is not necessarily the case, and increasingly it's about profitability and the c suite.
Many would say this.
Is that fair, and I mean would be right.
Yeah, well it would be partly right. And the truth is that business is about creating great businesses and we were striking example of that at the moment. We have many, but one that is absolutely on your lips at the moment is Boeing. And in the second half of the twentieth century, people at Boeing built a great business, the world's dominant aviation producer, and they were clear that that was what they were doing. Bill Hallan, who was CEO of Boeing for some time, said we were here to live,
eat and breathe the world about aeronautics. That was what his Boeing was about, and it built planes that came to dominate the world. Then in turn of the twentieth century, there was a takeover or a merger rather which was effectively a cultural although not a financial takeover by McDonald douglas of Boeing and Harvest sow In Cipher, who was CEO of it, became CEO of Boeing. He had been
a McDonald douglas executive. He became CEO of Boeing, and he said, people say, this is a great engineering company it is, but people invest in a company because they want to make money. And we know the things that followed from that, the seven three seven Max which ended in disaster, and now we have this part of astronauts have stranded in the International Space Station waiting for Elin Musk ironically to come and rescue them. So John set
up the great business. They did then they emphasized shareholder value and they're destroyed in the aird, not only the business but the shareholder value.
Well, it sounds like that's a case of incentives not necessarily being aligned here. And I know as an economist you study incentives. Are the incentives of the structure that we have that exists today, are they misaligned? Because companies are rewarded for what they're able to do on the top line and what they're able to do on the bottom line, that's what they're rewarded for. Is that the wrong thing for them to be rewarded for.
We're not really rewarded on what they do in the top line. They're rewarded on a basis of some three year metrics and what happens to the stock price. They're not rewarded for creating shareholder value in the long run, which is what these twentieth century Boeing executives actually did. The way you create shareholder value actually is you build a great business, and if you build a great business, shareholder sharehold of value follows from that. It's that way round.
I was interested that one of the reviewers of my book was someone who had been an English Test international cricketer, and he drew my attention to the book by football coach Bill Walsh that says the score takes care of itself, and that's the message. If you build a great business, sharehold of value follows from that. Maybe the guys who took over Boeing in the twenty first century created shareholder value.
They certainly paid it quite a lot back to shareholders in the twenty tens, but they did a damage, irrevocably, the reputation of the business.
So John's part of the problem. You know, My husband and I talk about this all the time, is that we don't make a lot of stuff anymore. We're such a service led economy. And I don't know if that has changed the dynamics within companies and leaders and so on and so forth.
Is that part of the problem.
It certainly has happened, but I don't think it's part of the problem, and it's almost the opposite of the problem. Because it used to be that businesses were created by capitalists, by rich men who spent some of their fortunes on building seal mills and textile plants and so on, and employed typically rather unskilled workers to work in them. The great businesses now are groups of highly qualified, technically proficient people, and the business of running the business is to put
together the right combinations of people. So we've had that change which has happened so that the means of production are now the people, not the plant.
So what is the purpose of a company.
The purpose of a company is to satisfy a whole range of stakeholders. The reason we allow companies to exist is that they do a lot of things we want done, to produce a great product, to give people satisfying jobs, to make money for shareholders. It isn't any one of these things. And if you try to make any emphasize any one of these things, you do so at the expense of totality. And the people who break built great businesses.
Whether we're talking about Sloan at General Motors, whether we're talking about alan others are Boeing, or whether we're talking about the people who built the Magnificent Seven, the tech companies we all talk about now. They didn't set out, I want to make as much money as possible. I want to make They certainly didn't say it's set out to say I want to make a lot of money for shareholders. They said I want to build a great business, and they did, and the course of doing that, they
made a lot of money for shareholders. And that's the way round it is, the sure the score takes care of itself.
So let's go back to the Magnificent Seven into the way that we open this, because you do argue in the introduction of the book that the mag seven, even though people are clamoring to buy the shares of those companies, they're going to be just as transient as some of those large businesses of earlier generations.
Why is that, Well, they maybe even be more transient because there's strength lies in their people rather than their plant. Whereas a Carnegie or Ford or General Motives it was the plant that determined the business. These dominances are always, almost always transient. Thirty years ago, when people understood that information technology was going to be a big thing. It was IBM who as sure as they bought, they made that the most valuable company in the world. Now Facebook
and Meta are top of many people's lists. I know that Facebook. My grandchildren now think that's something for people of my age.
That's not something we maybe not Instagram and that's and WhatsApp, and that's what has been their saving grace.
Right well, and there's an issue there that we need to talk about, which is the nature of antitrust policy. And we allowed, mistakenly, in my view, companies like Meta to take over Instagram and WhatsApp, whereas the whole strength of the market economy comes from people devising new things to take the place of the things that went before. Actually, Facebook took over from MySpace, which was the predecessor of Facebook in providing the kind of space services that Facebook does.
People have forgotten about MySpace now. Interestingly, MySpace and I talked to executives there as to why things had gone wrong. They said because it was bought by News Corp. And read group of murder were mainly interested in creating shareholder value.
Your title is why almost everything we are told about business is wrong. So if that's the case. If we're getting it wrong, what's the outcome of that? And if we don't get it right, If we don't maybe perhaps change the academic research about how we think about companies. If we don't do that, what's the outcome.
I think the outcome is that we get things wrong in a pretty fundamental way. And in the first half of the twentieth century, people saw themselves as trying to create a profession of management, which was a respected profession like me law or medicine or the priesthood or whatever. When people were called to do that and derived a lot of the satisfaction of their job, not just from what they were paid, but from the feeling that they
were doing contributing something worthwhile to society. We've lost a lot of that, and I think it's made business a good deal worse as a result. And we can see the kind of loss of legitimacy that has followed. The murder of Brian Thompson three or four weeks ago is a pretty good example of that. The fact that almost forty percent of respondents to a poll suggested that that
murder was at least partly they were justified. It seems a terrible commentary on the way business is now regarded among a large section of the population, particularly the young population.
That was Sir John k a fellow at Saint John's College, Oxford and the author of The Corporation in the twenty first century, Why almost everything we are told about business is wrong?
Still ahead On Bloomberg Business Week. It's the most wonderful and one of the busiest times of the year for the founder and CEO of farm Girl Flowers.
We talk Valentine's Day, tariffs, and the stickiness of the flower supply chain.
This is Bloomberg. You are 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.
Not sure Tim if you're aware, but fun Wednesday? Does your wife give you answer?
Is it a big We're not big with that stuff. It's like, it's actually kind.
Of great, to be honest, we aren't too either. We knew though, because Christina Stemble often joins usdoring big months for the flower industry, so I think Mother's Day and yes, of course, Valentine's Day, which is this coming Friday. However, a little box from my husband is always welcome.
Yeah, I think I even got like I.
Think I have One year, I got a toaster, which sounds so boring, but it was this really cool old fashioned toaster because I was making like waffles every morning and I still have it and I love it. It's like a duel lit or something.
Also, like you look at it every day you remember.
It's like so sweet, It's so sweet.
I love it.
Well.
Christina is founder and CEO of farm Girl Flowers. It's a company that she bootstrapped into a thirty five million dollar business. She was in from Seattle and she stopped by our studio.
This is good.
I mean, we're in our second busiest time of year.
We're holding study with exactly where we thought we'd be.
Where did the flowers come from? And how do you think about tariffs?
Yeah, so most of the flowers that everyone purchases in the United States come from South America. So Colombia was the first one that put everybody on edge in the floral industry. It would been too late to really impact Valentine's Day numbers, but by Mother's Day our prices would increase dramatically with Columbia. So that's on pause right now as well, which is really wonderful. Canada in Mexico differently, so Mexico is going
to impact us all as well. About eighty percent of all the flowers that are sold in the United States come from other countries.
Ours is less.
We're about fifty five to sixty percent domestic right now, but that's going to increase. That's our domestic production is going to be increased because everyone's going to be fighting for it because they're not going to be able to get the same prices elsewhere.
You think, you know, how much you know in anticipation of this impacting how much does it, like when do people start to change in terms of growing more here in the United States? How much more can you grow in the United States because you're competing for land against everything else. So I'm just curious how quickly can the model change from importing to having it grown domestically.
I don't even know if it's possible to change it.
I mean, following, you know, the CEO four, I feel very similarly to him. We don't have the infrastructure here, you know, there's not a lot of succession planning in farming in general. You know, in agriculture of any kind. Flowers are the same way. So you know, there's I mean, the land has been sold. You know, the grandfathers that started farms, their grand children have already sold a lot
of the farmland. Almost everything that was written I should say everything, but a large percentage of what was grown in California, which is the largest growing state in the United States, is now in Baja Mexico, so they call it Baja California. We know that's not true. So the Turffs are going to you know, definitely impact that. There's not the land. Also, the labor, I mean there's not for agriculture jobs.
There's not the labor availability.
The infrastructure costs too much, the insurance, you know, it just people aren't going to spend three hundred dollars on a bouquet. And you know, in order to turn around the ship, it's going to require American consumers to be willing to spend a lot more on sending a gift, and that isn't probably going to happen.
So it's scary to think about all these things.
So if you if we were to see tariffs go into effect on on Mexico. And you know if obviously the President has used this as a way to negotiate, at least he did that with Columbia a few weeks ago. Where would the prices increase, you said, it would increase for you. You would have to pass those along to the consumer. Wouldn't be able to absorb those.
Plural industry is notoriously low margin. You know, I'm very proud of the single digit profit margins that we have at farm Real Flowers. They are hard fought for that. We work a lot of hours. We work really hard for that single digits. You know, the largest companies in our industry that are you know, public companies, so you can go look at their earnings have single digit profits when they have profits. So there's no way for us
not to pass it on to consumers. We're already subsidizing shipping by a large percentage, you know, now if we have to subsidize our you know, our gross margins are tiny compared to almost every other industry.
I joke a lot I have with you guys before. I wish we sold sweaters, right we don't, so, you know, yeah, exactly perfew something with like very large.
You know us you considered developing exactly exactly well, so I mean it's all going to have to be passed on. You know, we are you know, because we have that little bit of profit that we've focused on in the last two years, we're able to supplement a small amount, you know, like the CEO Ford said, like he has a couple of weeks, like we can supplement it a bit, but not you know, it's also.
Not like you guys can buy ahead in stock pilot and warehouse right there. You know, flowers just last just a certain amount of time.
Five days. We have five days, you have five five So.
Like it's wild. You know, I do wonder about this whole idea of globalization that has happened over the last couple of decades, right and global supply chains. And then we feel like we've talked a lot about nearshoring and onshoing. It sounds like for the flower industry it's not even like financially.
It won't work.
It's even if we do it, or it might not even be doable because there might not be the land or farm farming.
To do it. Absolutely.
I mean, when we first started talking, we had a large you know, pre COVID, we had a large manufacturing facility in San Francisco, so forty thousand square feets. We had three hundred teamers there and we were losing our shirts. I'll just say we were not We were just breaking even enough to pay paychecks.
With that, we can't even do it.
Not growing the flowers, just designing them into bouquets. At that scale, there's not enough workers and with you know, I mean costco just raising them in a wage of thirty two dollars, which is wonderful, we wouldn't have that ability to So we're trying to all compete with a workforce an hourly workforce that we can't. So there's just so many reasons why this is going to have a ripple effect much greater than what most consumers would think.
So what do you do for assembly?
Now?
We have a very diversified models, so we use farm partners that we teach them how to design them and ship them out. We have boquet production facilities. We have very little owned ourself. It's been smarter for us.
So you've essentially outsourced the design or assemblage of the bouquets.
Yes, we do it different than our competitors in a way that we control the design aspect of it, and so that way we could keep our quality where we need it to be. But it's not how it used to be pre COVID.
So when you say you've done, you've outsourced it to farmers. So if it comes from South America on a plane, it's already in a bouquet.
Yes, now most of ours are with US farmers, but we do have some in Columbia where just we have one in Ecuador, so we do have facilities elsewhere. Some of them are designed there, some of them are shipped raw materials to other facilities in the US. We diversify to get closer to the end consumer to help with
our shipping costs. We're killing us before when we first started talking as well, in order to be able to compete with lower price points that we need to have to compete with our competitive set.
Is it getting easier or harder to do this? How long have you been doing this now?
Fourteen? This our fifteenth year, and.
I thought it was a god so you know, and it's you who has been doing it. So I'm just curious, as a small business owner who has seen pandemics and you name it like some really incredible things kind of test your ability to keep it going, Like is it an easier business environment? And I'm curious to what you're anticipating from the new administration in terms of small business policy, if at all.
Yeah, I'm worried.
I'm worried about this administration and what it's going to mean for us as a company. I mean because those the tariffs and things that and the uncertainty, like I've gotten used to. The easier part has been I've gotten used to more uncertainty. I understand now that there is should be a line item in my budget every year, which there is now for unplanned expenses things I didn't
understand before. And I think my mindset shifting from you know, growth at all cost to profitability has helped us tremendously. But I had to sacrifice something for that. You know, I wanted the Silicon Valley dream. I wanted to build a company. I wanted to be the you know, cover of Entrepreneur magazine.
I wanted all.
Those things, and that now I have a very different reality, and I'm happy with that reality.
I'm happy that I can provide good jobs.
That are more stable, but the level of uncertainty with things I can't control right now, you know, definitely keeps me up at night.
So is it easier in general?
I think because I have it's easier because the education that I've reept from doing it. If it's harder, it's definitely more complex. But because I'm wiser now, it's it's a bit easier.
I guess.
Yeah.
Yeah, you bootstrap the company, so you don't have the same pressure that a lot of startups. And I'm not even considering you a startup because you've been around for fifteen years at this point that small businesses have after they raise outside funding, and that's for an exit. Last time we spoke with you, you said you were in this for the long pull. I'm sure there are companies that come by who want to acquire you. How are you thinking about that?
Yeah, absolutely so. I feel I actually used to think this is my biggest curse. I actually owned the unfundable Christina stumble dot com by.
The way, and the unfundable.
I used to think I would complain about it, you know, to you, but I would been playing constantly and be like, nobody will give me any money, Like do I not look justworthy.
You know, look at our numbers, and now.
I think it's the greatest gift because I see all of my friends that have you.
Know, startups are not startups anymore, but.
Have you know board meetings every three months that they are just in so much pain about and everybody is expecting them to work miracles in an economy that's not it's not possible, you know, And you know I right now, I'm just you know, really happy that it happened.
I think it's a big gift I was given.
And how I'm looking at it for the long run now, is you know, doing some smart strategic things that I think will help us in five to ten years, not thinking about the next quarter, not thinking even this year, like you know, it's a building year for us. I'm I'm you know, will comp last year and have the same you know, single digits profit hopefully, but that single digit profit is allowing us to do things like lockdown some supply chain, We're vertically integrating, we're growing some flowers
for the first time. We're doing things like that that I think will help us five to ten years from now.
Where do you think you will be in five to ten years?
Hopefully? Still here talking to you. We hope so too.
That's my dream and you know, hopefully, you know, we'll do sustainable growth, so we'll be bigger five to ten, you know, ten years from now, but we'll done it the right way in a way that we could be here fifty years if we wanted to.
Yeah, when you say sustainable growth, you're talking about financial sustainable growth. I'm also I'm curious about, like, you know, the impact on the environment and how your approach and stuff like that can be challenging.
Absolutely can be challenging. You know, it's always wayne, what's the best thing we can do in our opinion, right, Like we're very careful not to call ourselves like an eco, you know, like we get this title a lot and more always like no, no, no, don't Like there's nothing.
Sustainable about flowers.
Really, there's lots of transportation back and forth inbound outbound there. You know. They bring joy to people's lives and we love that. But we do the best we can. We always make the right decision, even if it impacts the bottom line in a negative way for us. We spend more money to do it the right way, but we don't ever tout our you know, environmental consciousness.
How has what people want changed? Like, how has what you offer changed you to change the consumer taste? So I was talking to somebody who's way younger than I am, and she just got engaged. She has a huge diamond and it's a lab grown diamond, and she was saying, all my friends who are getting engaged right now are getting these lab grown diamonds, and we're seeing that kill diamond industry and kill some of these retailers out there.
Is that happening with flowers? Like, are there changing consumer tastes for younger people?
I don't think it's taste really, It is price points though, Yeah, what consumers will spend. I mean Valentine's is the only exception to this rule. People are looking for deals right now. People are looking for a good value. So that does you know, I'm still had a product. I make every bouquet you see on our site. And when we're doing it, we are, you know, always weighing like we need to.
Keep our AOV our average order value up.
You know, as high as possible, but we need to not you know, right now we have kind of a gap in the good customer. We have better and best but we're working on creating a better, you know, offering for the good customer that is more price sensitive. Especially going into next year, I think it's going to be even more and more necessary. And also people are looking for to feel like they got a deal. So discount codes.
We used to be like anti We're like, we give you the best deal we can, and now we're like, okay, here's a discount code.
You know, here's a free ship shop.
So it looks like you're getting free shipping, but shipping costs a lot of money, so it's not free shipping.
No such thing as free shipping, such free shipping.
So I feel like shark tank what your customer acquisition costs, Like is it expensive or do you find like most of your customer base their repeat you know, buyers and so on and so forth, Like give us an idea.
Yeah, so about half are our repeat and half or not. We do not exceed twenty five dollars in customer acquisition costs, okay, because we can't, right So that's why we're smaller than we want to be right now. But we're doing that because if we go over that, we know that we are paying more money than we can afford to be financially healthy, so we just cut it off. There.
That's Christina Stambul, founder and CEO of farm Girl Flowers. You're listening to Bloomberg business Week. Coming up, more of our conversation with Christina, looking at how AI is lending a helping hand.
Yeah, she's using it. We're trying to still figure out how to use it, but she is on it. You're listening to Bloomberg Business Week.
This is Bloomberg. 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 the Android Auto with the Bloomberg Business app, or watch us live on YouTube.
We're back with Christina Stambule, founder and CEO farm Girl Flowers, who created her business fifteen years ago from the ground up. She did it all, putting in long hours, dealing with supply chain crunches and a global pandemic, and today is getting an assist from AI. We use looking everybody's brands because we're not using it as probably and everybody's like you should be, and we're like, all right, so how are you doing it?
I mean, I use it a lot personally for writing, do you know, Yeah, absolutely, I have it. It knows my tone now.
Like every job description.
I have it writing for me now and the tone that I everything is. So I use it a lot personally for that. In emails as well, I'm always like, make this take off the emotion in this email.
Things like. That's why I use it a lot for that personally.
And it helps from business, you know, because I can get my soapbox out and stuff I need to not sometimes.
So I use it for that. We use it a little bit in customer service.
There's even like with the platform I use, there's a make it Nicer button that you know that uses AI to make our you know, after customer service, you know, but they're getting hit with a snowstorm.
So you have a button you get it. You like, when you're sending an email to a customer, you have a button you press that says make.
It nicer, You're nicer, Wow, thank you.
Glas.
Is it in an LLM.
It's it's Gladly, which is a software program for customer service, which we love, and you know, I was all of our team was in customer service last Monursday when we had a big snowstore Valentine's Day and we had a big you know, delay because of that, and we were all like, at the end of the day, make.
It nicer, make it nicer, you know, because it gets hard.
So what's hard about running a small business right now?
Yeah? I think, But do you if.
You need funding, can you get it?
Yeah?
Absolutely? Like you know, you can only get it when you don't need it. I mean, I you know, that's a good point. That's a good point.
Well do you like?
Yeah, So how do you manage?
Like, I don't know what's the economic backdrop that you think about for the United States right now? As you said, there's a lot of questions, there's a lot coming at us. I mean I'm just curious, how are you managing for Like what kind of a consumer, a consumer that's going to constantly look for a value? Like give us some idea.
I think marketing is actually the hardest thing by far, like getting traffic to your site in an affordable way, cutting through all the noise. I mean you see your inbox, people are sending emails, some companies get me three a date.
It's annoying, Yeah, it is, right.
And one of those people that's once to day. I'm sorry, we won't go for that, but you know, it's trying to cut through that noise with like I said, our customer acquisition costs, Like if we could spend sixty or seventy dollars, but why would we for one hundred and four dollars? AOV like that doesn't make any sense and a you know one point seven to two point two LTV like you know, like we know how it's not worth it.
It's just not worth it.
So I think the hardest thing is trying to figure out creative ways with limited team members because you also have to run really lean right now, so you don't have a ton of team members to be able to do like lots more partnerships or things like that that will actually help you with the customer acquisition cost.
Have you had a chance while you've been in New York City to see any of the bodega flower displays?
No?
I have not.
How do they do this because it's such a low margin business, but you can still get ocy of flower? Yeah, yeah, how do they do that?
They're all imported?
Okay, they're imported from you know, and the flower types that are there are ones that will hold up for a very long time. So like if I'm going to use button chrysanthemums, you know, those can be outside of that deli or vedega, you know, for you know, you can buy it for twenty dollars and it can sit there for three weeks.
David Austin Rose. You can't. David Austin Rose is.
Going to cost you two dollars at wholesale, you know, a dollar fifty to two dollars at wholesale price, which means going to cost you six dollars for that, David Austin Rose, and you have about three days. So it's a type of flowers they use. It's where it's coming from. It's the colors that a lot of people don't, you know.
If we like peaches and pinks and things like that, you're gonna get bright purples and bright yellows and things like that that are the kind of the leftovers people don't want.
They cut deals to them.
It's not always the greatest colors. There's a lot of carnations, a lot of foundation.
Not just gonna say no.
It's interesting to hear though, with the wholesale prices of like a great rose or something is because you realize, like when when you're doing a bouquet and you're like, oh my god, but you realize that your cost is expensive.
Really expensive.
I mean King Prote's are my favorite flowers and we get them for about seven dollars.
King Proteos. They're awesome.
They're from like Australia, New Zealand area, South Africa. Normally, like we have a lot of buying power, but if you were smaller'd be like twelve to.
Fifteen dollars per stem, you know.
So, I mean you, if you're going to a local flower shop, it's going to cost you forty five dollars a stem for it.
Our thanks to farm Girl Flowers founder and CEO Christina stambol.
So flowers work for Valentine's Day, so too does a surprise trip to say, hey, honey, I bought tickets to the Caribbean.
Or to Europe.
Just to clarify. My wife would be very into that.
On it, on it all right.
This past week, the global hotel and accommodation search platform Travago reported fourth quarter revenue that beat the average analyst estimate. The stock, however, traded down on the results, but it has soared this year.
Travago CEO Johannes Thomas joined us from Dusseldorf, Germany to talk about the business and the outlook.
I think based customer is the travel world. It's a one point five trillion market in size, so pretty exciting. It's also growing five to ten percent a year, so a big and growing business. And Travago's a leading brand across the globe in travel and we have been working on the last one and a half years to re establish the brand after a new death experience, during near death experience during the pandemic.
How's that refresh going right now? What can you point to to show a recovery from that near death experience as you described it.
Yeah, I was returning to the company one and a half years ago together with a leadership team, and we all have been folks that we were at Trivago for a decade, brought it to the IPO, and then during the pandemic we left basically and then out of the pandemic the company didn't come strong, and we think a result that is a result of low investment during the pandemic. Travago's built as a brand, so brand investment is important.
If you invest into a brand during a period where nobody's traveling is pretty inefficient, so there was not a good place to invest in brand. And then after the pandemic stopped around the beginning of twenty twenty two, Travago was pretty conservative and investing in an inter brand. Other companies basically recovered in size other travel companies, Sravago didn't, and that's one one of the founders gave me another as a call if we want to come back to
bring back a blueprint that has proven successful. And the last one and a half years we worked hard on getting the company back on track. When we arrived in Q two twenty twenty three, we were a shrinking fourteen percent. Now we've stabilized and brought the business back into growth last quarter, and we see a strong double digit growth in Q one, which we are very excited about.
So talk to us about what you are seeing in terms of travel demand specifically and how that compares with the year ago. So, in other words, is travel up.
You guys just reported your numbers, and you did break it down into various regions of the world, So give us some perspective, a little bit more insight into those earnings because investors seem a little bit disappointed here, But talk to us about what you are seeing and how that plays into your business, whether it's more upbeat than a year ago, or if you're seeing you know, consumer where as travelers being a little bit more cautious.
Yeah, so I think last year was the year where we exceed at twenty nineteen levels quite upset here. So travel is hot. People want to travel, it's exciting, they want to spend and experience the world. It's the number one discretionary expense people have, and that is what continues to be true. We see the travel strong across all segments, being at a US, being at a Europe, rest of
the world, Asia, a pretty strong travel demand. We see prices slightly up, but I think at fairly fairly consistent levels. So travel is strong and we expect it to be a strong year, maybe an even stronger year than last year.
Hey, you' honest curious about sentiment just across Europe right now and what you're seeing As a European CEO or CEO, I should say, in Europe, we've spoken quite a bit to folks in the last couple of weeks who've returned from Davos and two of them have told us that there is just a feeling of optimism when it comes to American CEOs and CEOs of American companies, but a feeling of pessimism when it comes to the way that
CEOs of European companies feel. Certainly there's some generalizations in there, but I'm curious about your view.
Yeah, I'm skeptical about the level of bureaucracy and the pace of execution of German companies as well and European companies as well. There's just a lot of regulations and things that make companies slow here. I think we try to be very different, having a growth mindset, fanatic learning mindset. As a company, we are in the digital space, we are operating at global scale. We do TV marketing campaigns in more than twenty markets, we operate in more than
forty markets. So it's not for us a European or German game for all. I think Europe has to endbup and have has to put a mindset in place where hard and smart work is needed to be successful. And I think there needs to be a mindset, mindset shift in Europe otherwise it will be a decade that is difficult for the region.
But are you seeing so you're not seeing that weakness across your platforms or you are seeing it.
We are not seeing it in our developed European segment that travel is weak. I mean people have money. It's not that there's no money in this region. It's more a question of can you keep growing or will you be outgrown from other regions over time? They have still good budget to invest into travel, but what destinations will you go to in the future. Hotels are thirty percent up compared to pre pandemic, and people are feeling that. The number one struggle for it for travel for travelers
is security and safety. Number one geopolitical issues, people stay closer to home, and number two is price. They increased expensive and that's also true across across the world. A price pressure because travel became so expensive is a big challenge for travelers.
So Europe even.
More the apologies. What would you say is the way for European regulators to sort of decrease bureaucracy, to encourage innovation, to create real competition, so there isn't this last decade.
You know, I'm not an expert in this topic. I just think less rules, more freedom to people. So they can actually take decisions themselves. If I have somebody that's taking decisions for me all the time, you know, I stopped taking decisions myself, and I think that's where a
lot of you know, collective intelligence is being lost. So I think that would be a good start just to for every rule or legislat as you put in place, you kill five and then you may get to a way where where it's less wild of regulation.
Now, Johannes, before you go, just got about thirty thirty five seconds here, geopolitics, trade wars, tariffs, all of this plays out in global financial markets, plays out in the FX market, which can certainly impact whether or not a consumer feels like their currency will go further along. How is all of this impacting travel demand if at all? And again only got about thirty seconds.
So I think travel hugely correlates with GDP. So it depends where the economy is going and whether level will be well off or not, and it's rather reacting quickly on it. People delay demand, delay investments. Otherwise, we see that people already walk early in advance to make sure they get a good deal. They compare prices, and that's where our product fits pretty well into the proposition that you use are looking.
For our thanks to Trevago Si Johannes Thomas that.
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