Bloomberg Businessweek Weekend - January 24th, 2020

familiar with the nuances of this. We've talked, as you say, so much about trade, but this could be a major inflection point for how goods and services move throughout the world. We're also going to talk, speaking of goods and services, about credit cards, how you use them, and what may be going on on the other side of the equation with credit card companies raising the amount you can borrow. That could be our new debt trap. That's a little bit of a scary story. We finish up, though with

something fun. Polly Moss ends did a story and it takes a look at the Goop Lab with Gwyneth Paltrow making its debut on Netflix. She watched this series. It's a series. Every episode Jason begins with a warning, so uh fascinating. Another fun bit is the exclusive look and exclusive sound of the new Super Bowl ad from Porsche. They haven't been in the big game for decades. They're back. First up, though, we talked about this week's issue with

the editor of Bloomberg business Week, Jill Webber. Jill Webber, the editor of Business Week, here with us in New York City. Let's start with the cover and arresting image and a reminder that for all the haters against Tesla, that stocks doing awesome. Yeah, so the company's way up

so far this year, but also over the past few months. Uh. This is the story of by Dana Hole about a really vocal minority of Tesla haters, Elon muskaters on Twitter go by uh tesla q. And these are short sellers who are really hurting right now because as this stock is swared, they've felt the front of that. Well, that's what I love about this. George, Like Danna gets to this one individual in particular who's really had a heated

social media relationship with Elon muss. Yeah, it's an incredible story about sort of the battle between this one guy who really didn't like the company's fundamentals and his interactions with Tesla as a company, and how he really uh took things to a different place and sort did Tesla in response, right, I mean, and it's just a reminder of how binary this is. We talked about it, I feel like just about every day on our show, and we have the ball and we have the Theirs and

never the Twain shall meet. I mean, there's nobody who essentially is like Tesla Ansca. Yeah, that's right. So what Danna's story really does well is like there is this wider community of haters and they're almost like hive minded with each other about the company. And it's sort of the case study of like one guy who actually you know, got into the ire of Elon and Tesla, and that's remarkable timing for this as the company goes through the

roof in terms of evaluation. Well, it's safe to say that one of the reasons that Tesla has become so popular and is captured the imagination is the environment and people really caring about the impact of the planet, the car industry, etcetera, which leads us tog and Green and Bloomberg Green, which announced We've just announced this week big launch. This is the company really down the newsroomally doubling down on a space that we think there's going to be

some amazing coverage around, all rooted in data. But look like climate change is the story of the moment um and it's not one that's going away, and we really wanted to root that story in in data and stories that are going to be really memorable. So that's what you should expect from Bloomberg Green. And in this issue of Bloomberg Business Week, we use that data as a centerpiece and a story about quants and how they're looking

at is G data. Yeah, and if you think about who's got the most data is the quant and they're really good at using it, right, but the catches, not all of the data really completes the picture. And what quants are actually really good at our plugging those holes in smart ways, well, Bloombergreen kind of helping to complete

the picture too, right. This is just an all in platform, you know, online TV radio, they have this incredible dashboard, but it's all about things that impact the environment and really tracking what's going on and bringing it back to data, like quantifiable things that we can look at and like where we're applicable, where are places that we can actually make change? And I think that will be that impact will be a really amazing element of this Bloombergreen project.

A story of our time for sure. Another story of our time, obviously is China and sports. We love talking about it and a phenomenal profile by Ira blud Way of Joe Psi, the owner of the Brooklyn Nets, vice chairman, co founder of Ali Baba. Talk about a man in the center of it all. So what's interesting about this is that I don't think many people knew who this guy was until the NBA and nine of fiasco happened

a couple of months ago. And that was immediately when we're like, wait, that guy who just acquired the nets Brooklyn Nets, now uh is the co founder Valley Baba. His story is even more remarkable than that. He's taiwan He's born Ivy League educated, lives in Hong Kong, speaks Mandarin, you know, billionaire and yet in the middle of this whole dilemma between how the NBA and China are gonna interact, he put out a really thoughtful note and it made us go, we want to talk to that guy, because

he's really in the thick of everything that's transpiring between worlds. Well, and Ira not only got to talk to him, he got to talk to Jack mat and really presents this portrait of someone who represents the biggest story about time. As I said, and he looked at the Brooklyn Nets and said, you know what's the best investment better than a Park Avenue apartment? Professional sports and NBA, And that's Bloomberg Business Week editor Joel Webber the benefits of free trade, Jason.

They have been touted for decades, and based on what's going on in the world, that era a free trade maybe coming to an end. So I learned something very interesting this week from reading this story. I always learned something from Peter Coy. He's here with us in New York City. Managed trade is a term that I don't think if I had heard, I really understood until I

read your story. Tell us what it is. Managed trade is where, instead of started letting the chips fall where they may, letting private parties work things out for themselves, you sort of dictate terms. So, for example, the Voluntary Restraining Agreement on autos with Japan, that was a form of managed trade. It was quote unquote voluntary and effect.

It was a quota on Japanese imports of cars. We seem to be going through another era of that now, and the US China Deal, the Phase one deal that was signed by Trump earlier this month, is an example of that. According to Gary Clyde Hoffbauer from the Peterson Institute for International Economics, recall, the deal has a provision that China will buy two billion in dollars worth of products from the US of a certain period of time.

And there's a secret provision in that agreement, secret we haven't seen it, that specifies what products and what volumes. So this is not free trade by any means. This is an agreement between two countries where it's just hammered out in a in a back room, and you can argue as good or as bad. But it's clearly not ordinary less a fair free trade. So why are you

writing about it? Why is it so significant? You think that maybe we be that we're pushing back on the error free trade and remind us of free trade was the whole concept right of nations doing what they do best, that buying what they needed, and everybody kind of doing the best that they could and everybody benefits. That's the ideal econ one a one version of trade, and it

it can work, does work in many cases. Now, the argument in favor of managed trade would be, look, um, China is just not whole ending up its end of the bargain, and they're not a market economy, so why are we pretending they are a market economy. Let's just knock heads and get a deal done. And that is what the Robert Leightheiser, the U s Trade representative, and

Trump seems to have concluded. Because I feel like it's like, well, sometimes a nation, maybe China, because they don't necessarily play like everybody else on the developed world stage, that maybe they need a little bit of nudging, Maybe they need some are so so that is the pro argument. The con argument is that there is harm done here, and one form of harm is that you end up um China is buying absurd amounts of things that doesn't really need, which course is not a US concerned, but it's just

like creating inefficiencies on both sides. The other harm here is that let's say that the US we don't know what the terms of deal are, but I can imagine there's probably a lot of soybeans in there. So um, Canada, Brazil had captured a lot of the soybean market from the US. Now the US is kind of capturing it back. Well more generally speaking, what happens is that the country that is suddenly um frozen out of the market because the US is coming in as a legitimate complaint, can

go to the World Trade Organization. In fact, the Europeans have already, uh we had Phil Hogan, he's the US I mean the European Union Trade commissioner in Washington this past week. He said, we haven't read it yet, or we'll take a close look at this, and if we believe that this is managed trade, which is against the principles of the World Trade Organization, we could bring a complaint.

So one of the lines in your story that I think is really revealing in many ways, and I think we'll resonate with a lot of our readers, listeners and viewers, is that managed trade is about cutting deals rather than following the rules. And I think any one who has watched this administration will say, yep, that checks out right. I mean, this is the whole ethos of the Trump administration in many ways, and you know, makes no bones about it. That's what he wants to do. He's doing it.

And uh, there are people who would say it's it's achieving certain objectives. Um. But in the broad picture, the US, going back to Franklin delan or Roosevelt pastor Recipolical Trade Agreements Act, that was about trying to pull back from the smooth holly terrorist which contributed to the onset of the Great Depression. The idea that we want to increase commerce between countries and the US for decades has generally been in the forefront of promoting free trade. We have

the General givement on tarris and trade. That's gap. Then we then we had the World Trade Organizations successor and and I think we'll forget it. So I didn't run. But like the w t OH that was just created in the ninety nineties, right, I mean, that's a relatively recent invention, and the whole goal is to that everyone benefits when there's more commerce, and in fact we've seen that. I mean, certainly the rise of China and India lifting hundreds of millions of people from poverty, has a lot

to do with their joining the World trade UH system. So, Peter, is this just something that the US is pursuing. Well, it's most conspicuous in the United States thanks to Trump's whole philosophy and trade. In fact, we've seen some examples of free trade elsewhere. There's a year ago the European Union in Japan struck a free trade agreement. Just in UH this month earlier January one, UH, China actually pulled back on some tariffs. So it's a it's a little

bit of a jiu jitsu thing, you know. It's not that China is suddenly a free trade country, but they see the advantages of striking agreements like this. Now, I do believe that the United States is so influential that when managed trade starts to come into the U S agreements, there's a good chance that other countries could look at and say, hey, we can either fight this or we

could join it, and I might start doing the same thing. Well, and I do wonder and you address this a bit in your story, Peter, how do you square or how does this managed trade phenomenon and the resurgence of it relate to the lack of multilateralism and sort of a move towards bilateralism is part of it. I talked to Myron Brilliant, He's the person who handles trade issues for the US Chamber of Commerce, and he said, you know, we had an air of multilateralism. Trump has been quite specific.

He does not believe in multilateral bilateralism, and he believes that tariffs are a useful weapon. In fact, that's the card you will be able to play. He believes that since the US of the world's largest market, and it does that the best way to strike a deal is to threaten to withhold access to that market. That's Peter Coy,

economics editor of the magazine. I think what's interesting. We've talked about free trade and how important it has been Jason to lifting so many people around the world out of poverty. But maybe that era is over well, and that era may be over for a long time. I think one of the things that Peter does a nice job of illustrating this story is these are not things that change overnight, and once a shift like this happens, we could be looking at a very different world for decades,

maybe even a century to come. The protests in Hong Kong what now in their seventh month? Jason and the impact has been felt on a city that is known for its wealth and its high end retail and services. It's also well known for those who really know about it, for a vast sea of income inequality. It's amazing when you look at the numbers that disparity when it comes to how much people earn. Jim Allis is here, business editor for Bloomberg Business Week to alp us understand the

employment and unemployment picture that is fast changing. I mean, a lot of people have always thought of Hong Kong not just as this sort of shopping mecca, but also is this place of extreme wealth in in Asia, particularly in China. And that's true. It has lots of millionaires. It's to play place for the rich. The issue is it has an awful lot of people who don't make much money. The minimum wage in um Hong Kong is actually a little less than five U S dollars. I

mean that it comes out to being very low. It's also the lowest in the A C D. And it turns out that what what you have there is a gigantic income gap that really gets felt as the you know, slow down in the economy happens now because of the protests has the biggest inequality gap in the world. Right. I think it's is that the Jinny coefficient right where they measure that, So it's it's huge, it is a

it's a it's a giant difference. And I think what happens is that you really see it now that the economy is slowing down rather dramatically because of the protests, all of a sudden employment. This is a place where employment has always been extremely high and unemployment has always been traditionally. Traditionally, unemployment is less than two percent in

Hong Kong and UM. So when you see the kinds of employment numbers we're looking at now, in retail workers, unemployment has gone closer to five percent in UM restaurant workers, it's about six percent. Now, that sounds not that for a lot of economies, but for Hong Kong, that's double triple what traditionally is an unemployment rate. What's happening there is that people are discovering folks have stopped coming because of the protests and other reasons. So we're going to

basically start firing people. And they have and they have, and they've been firing them, and now there's a fear in Hong Kong, that there will be more firings to come, simply because we're starting the Lunar New Year celebration. One of the quirks of that is that people get lunar near Lunar New Year bonuses and they'll get an extra

month's salary. But a lot of people are afraid that, ah, they'll use that extra months salary that comes with the bonus to also count as your month severance that you're required to pay, and so as soon as you pay the bonus, you'll fire people. And that's the big fear well.

And one of the things you pointed out in the story, which I find so interesting is this notion that there's a knock on effect too that if people aren't working, if the economy slows a little bit, even some of those essentially like safety net that exists, you know, meals being delivered and things like that, that starts to get cut. A lot of meals that were given um are sometimes

given by restaurants for free. And but now the restaurants themselves have fewer visitors because tourism is so far down in Hong Kong since the time the protests started, I mean tourism has dropped, I guess in November dropped probably close to That's hard to imagine. I mean, what's happened is a lot of Mainlanders and they depend on Mainlanders for their tourism because of visitors to Hong Kong come

from the mainland. A lot of them either afraid to come right now are They're angry that the protesters in Hong Kong seem to be anti China, and so from mainland there's this has become a nationalistic issue, and so they're saying, why should I spend why should I go over and uh, you know, do my vacation there when

I can go elsewhere in the world. Well, and what's interesting too from a worker's perspective, if you're a banker, you're just picking up stakes and either moving back to London, New York or maybe you're relocating to Singapore if you want to stay generally in the region. That's what's happening. And a lot of banquages are saying, you know, is this worth that? Are A lot of companies are saying, do we really want to be around there right now

while this term all is going on? And so the beneficiaries of that would be another financial center like Singapore are sometimes jobs just go back home. I have to say, though, okay, all right, as you say the bankers can find another place to live. I mean, what's great about this story?

What's tragic about this story? And you guys give a lot of personal examples of people who don't live on much to begin with, right, and some of them they talk about these part time workers in the restaurant industry that are basically being told to take unpaid leave until the economy recovers. It's like, how do you do that? Well, there's not much you can do. Um. One of the interesting people in the story is a woman who pilots a boat that takes diners from the mainland to the

jumbo restaurant that sits out in Hong Kong Harbor. We've all seen pictures of the red restaurant floating there, and she used to make thirteen, sometimes twenty six dollars a day. Now she's making many days nothing, and that's because fewer people are going. The restaurant itself, which is world famous, you know, has had to fire half of its employees, cut down the number of hours that it operates, and cut down the number of days a week that it's open.

I mean, this is really serious business. And that's Jim Ellis talking about Hong Kong and of course Carrol. This story got only more complicated this week with the spread of that virus that started in Wuhan now has been commented in cases in Hong Kong and Singapore, even here in the United States. So the Chinese Lunar New Year off to a very difficult start, that city being impacted

from so many different angles. Safe to say, one of the more polarizing stocks, companies and individuals is Tesla and Elon Musk. I think that is the understatement of the year that's going to take the cake, and so much of it plays out on Twitter. Absolutely it is the place to go if you want to figure out who's where on anything. We count a lot on Dana Hall to keep us on us on all things Tesla, all things Elon, and all things Twitter when it comes to

this company. She joins us from San Francisco, an amazing story in this latest edition of the magazine. Dana, thanks so much for being with us. My pleasure, all right, So take us inside this confrontation. It feels like this ongoing confrontation between the two sides of the Tesla equation because there's a community that's essentially been created on Twitter that is, shall we say not fans. Yeah, so it's sort of known as Tesla Q, and the que is

added to a company's stock symbol when it files for bankruptcy. Clearly, Tesla has not filed for bankruptcy, but there is a fairly significant group of people who sort of either feel like that's inevitable or they just are not buying what

Elon Musk is selling. And you know, there have always been critics of Tesla on you know, Yahoo Finance and Seeking Alpha, but kind of over time, the criticism of Tesla migrated to Twitter and the and the hashtag tesla q really kind of came into vogue over the past couple of years. And with every big news announcement or big news event like when Ellen attempted to take the company private at fo share, you just saw the tesla

q hashtag more and more. So it's this sort of fascinating world of people that are very critical of Musk. Some of them are short sellers, some of them are just critics, and it's almost like a alter bubble where, you know, if you just follow the tesla Q hashtag and you get a completely different view of the company that if you follow Musk and all of his adoring fans. There's one critic in particular data that you go into

Randy Pothy. Tell us about him? Who is he? And how did he come to have such a big ward seems like Twitter war with Elon Musk? Sure, so, Randy Pothy is a really fascinating person. You know, tesla Q is filled with all kinds of people, and as I was kind of trying to explore this world, I was looking for a character who could kind of explain what

this community was all about. And Heathy is an individual whose real claim to fame is that he really dogged tesla on production at their Fremont factory in eighteen and he would post these photographs of the logistics lot and the finished vehicle lot and he seemed to really have like a beat on daily production numbers. And everyone was

trying to figure out who is this Skabushka character? Is he a contractor a supplier, a former employee at current employee like he seems to be in Fremont every day? Like who who is this person? And um And as I got to know him. I just you know, found him to be sort of a really intriguing figure. He has short of Tesla stock, but to be clear, he's not like a major short seller in the way that we think of, you know, Jim Chainos or David iin Horn.

He's actually a graduate student at the University of Michigan. And so why is he so passionate about this? Because he spends a lot of time on this, Dana, Yeah, he certainly, he certainly did. I mean I think that you know, he's just sort of you know he, I mean, he's a he's a very research based, uh you know, fellow who has been a lifelong student. He got interested

in the stock market and capitalism. He grew up in Fremont, not far from where Tesla has its factory, and the more he kind of dug into Tesla's financials, the more alarmed he grew by, you know, the pronouncements that the company was making. And because he um, you know, lives in the Bay Area, he was kind of in a position to do on the ground research. You know that that is very value ball to a lot of people.

So he just started putting his research out and it all came to a head in April of twenty nineteen, when he actually followed a Tesla car that was testing autopilot, tweeted about that, and then Tesla actually went to court to get a restraining order against him. Why well, Tesla argued that he was, you know, driving dangerously close to their employees, was trying to sort of mess up the demo, that he was a threat, and um, you know, I

mean they were clearly kind of you know, threatned. They felt Tesla's a company, felt threatened by his research, and they felt like they, you know, needed to sort of do something to keep him away from their employees. This all was coming about right before Tesla was having its big autonomy day for investors as well. And what's interesting too is somewhere and helped me out with the timeline. There was a Dauphier on Hothie that was released as well.

I mean, he's also been kind of feeling a little threatened as well and right targeted. Yeah, I mean it's called doxing. So you know a lot of people who are on Twitter use you know, sort of aliases or pseudonyms because there's sort of a history of people who have been critical of Tesla and Musk being docksed. Hothie was docked as well in July, and people didn't really notice it at the time, but yes, someone on Twitter kind of release this this dossier that linked him to,

you know, his graduate school where his brother worked. I mean, so he was definitely feeling exposed as well. So, Dana, you know, you followed this company as closely, more closely than almost anyone certainly that that I know or am able to read and keep up with. And you have a quote from Gene Munster, He's been a guest on our show as well, that I think really is an interesting take on this battle. The broader Battle. I'm just gonna read it says they, meaning the folks who have

really started to, you know, question Tesla. They put Tesla under a microscope, and they've succeeded in diluting the company's success. It leaves the average person who loosely follows Tesla infused and concerned. And I have to say I agree at least with the confused part, because you have these unbelievably rabid people on both sides. It feels very binary in a lot of ways. What's the net effect of that? Yeah,

I mean absolutely it's incredibly binary. And if you and if you subscribe to sort of one set of people and not the other, you get a completely deluded sense of what the company is all about. So, you know, a classic example is if there's a Tesla accident involving one of the vehicles, tesla Q will amplify those accidents, but often I mean, and you might not see anything anything about it otherwise from the fans. Um. You know, with everything that the company does, it is under a

microscope and um and so. But but I do think that tesla Q, you know, they are a lot of them, are very smart. They dig deep into the company's financials, and they've been right. I mean, they haven't always been right, but they have been right about some things. And so their their ability to kind of influence perception um is an interesting one. At the same time, you know, we

have to remember that Musk is a celebrity. He has thirty million Twitter followers, and so the sort of publicity that Musk is able to garnish himself far outweighs whatever tesla Q is able to do. I mean, it's a little bit like a bunch of David's taking on Goliath. I have to say, like you, I'm also one of

the followers, one of those thirty million. Hey Dana, what's interesting is I feel like, as you write out right your story, I mean, Elon Musk is kind of having the last laugh here, right, because the stock has just taken off and they've had a series I feel like, of recent successes, um that have been the catalyst for the stock taking off, and that's really hurt those short sellers.

Oh yeah, I mean the Tesla stock has doubled doubled in the past six months, which has sort of unheard of for a for you know, a company, for a company, particularly in the auto industry. Um. You know, a lot of things that people predicted would go wrong have seemed to go right. And you know, Tesla had record deliveries in the fourth quarter. This China factory is up and running. But with Tesla Q, there's always going to be another event.

So for example, you know, Tesla reports earnings on January twenty nine, everyone is going to be very focused on that, and uh, you know, as a journalist, what's sort of amazing to me is, you know, the earnings hit and just as I'm still reading through it carefully, you see instant analysis all over Twitter from all kinds of people who are very sharp, and you know, as others have noted, i mean Twitter is now kind of a kind of an ancillary trading tool, so a lot of traitors who

are in the stock really do pay attention to the conversation on Twitter. I don't think any other company has that kind of social media activity when it comes to, you know, talking about the company. It's unbelievable too, And you do such a great job describing that this character and one of the quotes I love as he says, people are always like, never bet against Elon, but I'm like,

always bet against Elon. I mean, it's just an amazing sort of moment and a company that is wildly influential and as we say, and as you know, better than anyone, wildly polarizing as well. Apps Really yeah, I mean I think that there's like you know, there's sort of a public narrative and a public perception of Musk, and then there's sort of a counter narrative that a lot of people don't know, but that a pretty dedicated community subscribes to.

And and these people have done their research. I mean, they seem to have an incredible amount of time on their hands. But but it is kind of amazing to me the lengths to which people will go to kind of uncover things, and you know, it's I just I think it's just unparalleled in finance. I mean, other companies like Amazon and Netflix and Apple are also shorted. But there's no community known as Apple Q or Netflix que on Twitter that I'm aware of. I mean, if it is,

it's it's not nearly as significant. And the other thing I wanted to mention is, you know it's not just on Twitter. Now. You know, one of the one of the folks, his name, he goes by the name Tesla Charts. He just started a podcast. So now there's like a Tesla q podcast that is I think seven or eight episodes under its belt. So you know, the content that's generated, it's not just a bunch of you know, crazy tweets. I mean, it's getting into you know, more more social

media venues. Does it help and create greater transparency for this company? And I do wonder if we're getting somewhere with social media being kind of good in terms of ferreting at a lot of information about a particular company. Advocates or we would say that tesla Q has brought due diligence to the investment process and that this kind of crowdsourcing work, you know, made it more possible for

investors to know what's really going on. You know. At the same time, you have to remember that I mean longs and shorts. I mean they're sort of diametrically opposed in terms of what their what their hopeful outcome is. So there, you know, there's no pieces, there's no peace agreement between the two sides any anytime soon. That's Dana Halla. I mean, she covers in much detail the comings and

goings of all things Tesla and Elon Musk. So we love, love talking to her and this story, no doubt about it, this whole community of short sellers and naysayers when it comes to Elon and Tesla, she really covers it, she does and really takes us inside the binary nature of this stock and this company. There are very few people, as you and I have joked about her, like yeah, it's okay, yeah exactly. Banks of the credit card issuers, Jason, they seem to be setting a trap once again for borrowers.

This story you and I've been talking about in the newsroom. It really is worrisome. Well, it's a reminder of the complicated, volatile, some might say, and maybe even at times predatory relationship that exists between credit card companies and US as consumers. Michelle Davis did a fantastic job in this story. She's here with us in New York City, so remind us what we're talking about, because, as I said, this relationship

is a tortured one at times. Right. So we're seeing the comeback of this practice that was really popular before the financial crisis. It's kind of been in banks, like you know, it's been in their their strategy book for a really long time. UM. And it's where they boost people's credit limits without them asking. It's called a productive credit line increase. It's different then if you go to the bank and say, hey, I want a credit line increase.

The strategy behind it is bank of rue analysis. UM. The fed as run analyses that show that if I boost someone's credit line who already is borrowing money, they of the time are going to borrow that much more money. So after the crisis, the Card Act was enacted and the regulators were like, you can't do this anymore, Like we're gonna have more stringent guidelines. We're gonna you're gonna have to have um income from the last twelve months

for the consumers. You aren't going to be able to just do some of the predatory things they were doing to do pc L Eyes. Why is it that there was so much pushback, because I do wonder, like I was thinking a lot about this story. Is it you know, when they app the credit of somebody, is it because they're great customers and they pay it back and they're

responsible or not necessarily not necessarily? So what I found was interesting when I was reporting out this story is that what sources were telling me is that the ideal candidate for one of these would not be someone who is just you know, paying off their balance every time. It would actually be someone who has a balance, someone who is near their um, you know, near the math on their card. I was told, if you don't care ballence like, you would probably not get one of these.

And it's because the whole goal is to you know, kind of boost revenue more right, because it's worth reminding people and I sort of had to remind myself as I was reading this. They're essentially just two basic ways that credit card companies make money on transaction fees and then on interest. It's not that complicated at the end of the day, right and so and then and even I can understand this from a math perspective. Interest on a bigger part is more money and ultimately more revenue exactly.

So it's kind of it's a psychology game that banks are playing. Like some banks use this as a way to get your spending happening on their cards. So if I'm at Capital One and I see that you're spending a lot on AMEXES card, I might boost your limit because I want to kind of flatter you and get

you to spend more on that card. But something else that Capital One is doing that our sources told us is that actually they had run all this all this data and analysis of like past payment behavior, and they saw that always after they boosted some one's credit limit, if their utilization was that it would stay at thirty. So this was a way for a Capital One to really show revenue growth pretty quickly if they needed to.

They knew this was kind of a lever that could be pulled to you because again it's of a bigger exact of money and ultimately that's right, and you write in this story and keep me honest here at Michelle. The Capital One actually resisted doing this for for a time, right, The CEO was like, I'm not sure that's a level we want to pull. So after the crisis, as I said before, you know, the rules in terms of awarding the has got a lot harder. Banks got better at

navigating the rules. You know, technology helped them collect income more quickly. When all of this happened. Capital One saw a huge revenue opportunity and you know, Richard Fairbank, the CEO, said, we might if we do this too aggressively, like we might set up customers to become perpetual borrowers. We don't want to do that. So they put up these kind of guard rails to make sure that they weren't going

to set up people to be perpetual borrowers. Three years later, um know, as the stock was falling, they ran into some problems. Uh, they remembered that this was a lever that they could pull, and they loosened the guard rails a little bit. This isn't about they don't want their customers, those the card issuers. They don't want their customers to default They just want them to carry higher and higher balances that they can somewhat manage. But because they're getting

higher fees, are getting higher interest off it. That's what it's all about. Yeah, it's really walking a fine line, you know. You you want them to be borrowing, but you don't want them to default. But that fine line is what's interesting. And I think people are spending more and more time talking about the risk of this. I was like blown away by some of the stats. You know, you talk about younger borrowers being hurt the most. The number of card holders at least ninety days behind on

payments has reached the highest levels in a decade. So the concern is, especially in an economic downturn, like what happens to these balances, what happens to these default rates? And that impacts the banks halt. Yeah, and because right now, like we're already seeing these cracks in the market, and we have the lowest jobless rate in god knows how long. You know, the stock market is at all time highs. Everything's great, So why are their cracks already in the

credit card market? Um? You know, one of the credit agencies put out reports saying that this year um delinquencies for everyone are going to probably reach the highest and ten years and credit cards as they fall from mortgages, auto other types of consumer loans. So it is something you know to be thinking about right now. Consumer credit card debt is actually growing at a faster rate than student loans mortgage loans. And that's Michelle Davis bringing us

a really important story. This is an area of the consumer credit market that probably was forgotten about a little bit in the post financial crisis or in the recovery from the financial crisis, but that behavior by the credit card companies something to watch. I have to say, the statistics in that story alone about the folks that are passed due on their credit card balances and the number of young borrowers who seem to be maybe potentially running

into trouble really a worrisome thought. The Lab with Gwyneth Paltrow made its debut on Netflix this week. Every episode, though Jason begins with a warning, well and fair warning. It feels like and this is a type of warning and a type of ethos it seems that's followed Gwyneth Paltrow ever since the beginning of Goop. Polly Mosins is here with us. She watched it, she's got to take what do you think? Um, well, I can say I was exhausted just watching it because I don't think I

can be trained to be a psychic medium. I'm not super into fasting energy healing isn't my jam back For those who have been maybe living under a rock and don't know what Goop is all about, tell us what the premise of the series is all about. So it's Gwyneth Paltrow's brand, and they've always been into alternative medicines and alternative healings. They've been in trouble before with the law. It's been him for a few years now. Oh yeah, it's been around for a little while, and it's kind

of caused a controversy. Every little while, they'll have something pop up and everyone's like, what on earth is that? So that was the jade egg issue, you where they said that that was good for a woman's vaginal health. And then we're later fine, I'm just gonna say, if you don't know what it's about, just google it. Yeah, and we won't go to all the details. Um, And that was sort of the big conspiracy for a little bit.

And then this show is basically every episode it takes one alternative healing method and basically puts it to the test, and the people who are testing it are called Goopers sometimes also Goopies, mostly Cooper's and the is Gwyneth Paltrow's staff at group and so take us inside the sort

of whole group mindset because it's really important. I mean, it seems to be a reflection of what Gwyneth Paltrow really thinks life should be about, in products that she likes and the way she wants to live her life. I mean, one of the things that strikes me is there's a photo that accompanies the story that has the Goop war room, and it looks like exactly what you would think a Goop war room would be. No war Uh,

it's barely a room in this sense. It's just this sort of spacious, very sunny, sunlit, yeah, exactly, pain couches and um, a lot of presumably like affluent white people sitting around and like solving problems that no one really knew they had. Yes, I think the trailer puts it best when they say that they're there to test ideas that are maybe too scary or too out there, and they're going to test them to see if they're therapeutic, if they're healing in any way, if they can help

their staff. Be it something that they should, you know, would usually seek therapy for, or a medicine that they're taking, this might be an alternative to it. So that's what every single episode aims for, is to test that theory. And in some cases the ideas are not too crazy, like eating right and exercising are the keys to a

long life, yes, we all agree. And then in other cases, it's a breathing technique that allows you to withstand very very cold weather, taught by a man who has a bunch of World Guinness records in that space of being able to you know, be outside and crazy crazy temperatures or swimming crazy temperatures. And the Gooper's test this breathing technique to see if it works. They cry. There's always cry.

Every episode. Someone christ and they you know, are doing this kind of arm gesture, which is just amazing to watch from a comedic perspective. But at the end of the episode, one of the main goopers actually says that her anxiety is more under control and she is working with a doctor to wean off of her medicine well, and you actually have an alternative motto which I love quoting uh someone in the show, just because something isn't proven doesn't mean it doesn't work, and that seems it

really is that that says it all. Absolutely. I think that definitely says it all. And you know, maybe it doesn't work, and it could work one day. But I think any time that something is presented, especially on a platform like Netflix, as maybe this will work, you have to look at the potential risks of that. You have to wonder if there are viewers that are going to see this technique and opt for that rather than a more proven, traditional scientific method. It comes at a very

interesting time, Jason. How many times in our show we're talking with individuals who in the illness space and or the medical space, which is increasingly embracing the wellness space.

And I do wonder about some of the information that might come out that, you know, as we explore alternatives, whether it's acupunctural alternative medicine that's lowly kind of the traditional world is embracing, like to be kind of careful about how this is presented, right because there isn't necessarily a lot of science or R and D or medicine behind this writer or research that has shown that these

theories are correct exactly. When you're looking at things that are too out there, as they say, then you run that risk. And I think we really have to look at it from the viewer's perspective. Are people going to be swayed by sort of the power and the celebrity of Gwyneth Paltrow? And I think that's the ultimate question about the show. Well, and it's a really good point to this notion that we do talk a lot about and and people want to believe right, they want to

believe they are increasingly skeptical. I think we all are to some about big pharma, about sort of being over medicated and hoping, you know, we think about a plant based diet that like, there will be these things that we can do that will ultimately make us feel better

and maybe less polluted as as people. Yeah, And I think that gets to sort of one of the episodes that I think was actually the best, where they try pescyterian diet, they try a vegan diet, they try fasting, and the analysis they come to is that eating right and exercise is what is good for you. And in that episode they try. My parents told me that years ago. So I think there are moments where you have to look at the show and go, you know what, this

is a valid, normal, rational point about wellness. I think where I kind of have to scrunch up my nose and look sideways at it is when you're looking at you know, energy healing and psychic mediums, things that are just a little bit too out there, at least for my sensibilities. But I'm sure someone views as foul. Are they very clear like we we I kidded like in the introduction that there's a warning at the beginning of

every show, but you start your story that way. I mean, they're very clear about saying, you know, just f y I you know, there hasn't been either scientific research that'st Are they very clear about saying what we present ent you know, take it or leave it kind of thing. There's quite literally a warning at the beginning, so I think that they're very transparent about that. I personally wish that there were a warning like every five to seven minutes, but I have to give them credit for giving that

warning up front. And I do think that one of the good things about the show is that it is important, as you said, to question big pharma and to question these things that we are you know, maybe not so, Sharon, but I think when it comes to questioning medicine that is scientific and that has proven, that's where I start to worry, well, because that's what's let us down this

path where people aren't vaccinating. Their comments exacsolutely, and I will say Group has made it very clear their pro vaccination, and they've written that on their website extensively, so I think where credit is due, I'll give that to them. I think that that's very important to have that kind of warning, even on a site like that. One last question the Group brand Man, it just seems like it's

getting bigger and bigger evaluation on this. I believe the last evaluation I saw was a quarterbillion dollars, which is obviously very impressive, and I think it's getting bigger culturally as well as financially. I think that the fact that there are these retail stores now there's one in sag Harbor, in the Hampton's, there's in New York, in Santa Monica, California. Online,

there's a huge presence for them. And I even think the pushback that they're getting is ultimately part of the brand because it keeps us all talking about the website, about Gwyned That's Polly Moss ends her story taking a look at the new Netflix series The Goop Lab with Gwyneth Paltrow, and I gotta say, I just kind of want to watch it based on what she had to say,

I kind of want to watch it with Polly. As she said that warning which comes at the top of every episode, it kind of maybe should have been flashed maybe several times throughout the episode, allowed to dig into there will be interesting to see what the next turn that story takes will be. Is she investing taking into account environmental, social and governance factor has been making investment This form Jason has been around for years, no doubt

about it. It absolutely has and yet and yet, and yet, I feel like this is the end yet episode of Bloomberg Business Week. But you know what we're talking at is this notion that it hasn't totally caught on or maybe it is now. But what I love about this story is it's very Bloomberg. Take all of this once at the table. Emily Chason is here with us. Nice

to see you. Nice to see you. All right, So tell us about this piece, because as we alluded to, and you have said yourself, this is sort of Bloomberg taking on E s G in many ways. Yeah, Well, so E s G has been out there for a while. There's about thirty trillion in assets in the space now, so it's grown a lot um, but a lot of those assets are sort of like negative screening, where they just take out companies they don't like kind of um, alcohol, tobacco, porn,

anything like that, they'll take out UM. And that's most of the assets in the E s G space. And then there's been this E s G integration to get sort of risks into your portfolio. So the environmental risk, which everybody is talking about right now, social risk, UM, customer risks, all of that to get into your portfolio. And this is sort of the next evolution of that because that really relies on data and UM, the data is not very clear. It's kind of a mess in

E s G. It's not regulated um a lot. And this I just have to say, because I feel like Jason and I've had a lot of conversations about h G and I'm sure you have too. That it's not like you can compare one fund to another. Everybody's using different metrics to kind of screen for those eh G factors. And I mean every company that produces e s G data is often using different metrics as well or their data, yeah, or sometimes they don't produce it at all. So the

story is about quants and how quants are betting. You know, we're good with bad data, We're good with problems um in data, and we can use this to our advantage and build sort of models that incorporate all the data and let us trade better. So tell us about some of the quants, because you're talking about some well known folks here. One of them is our Besque Acid Management.

It is a firm that's based in London and Frankfurt and they are building a huge artificial intelligence model that works to see how to incorporate e s G factors so that they think they can tilt their portfolio and get a better return. But is a huge model. They run it across six thousand computers, so leven different data centers. That you conclude that in your story, that kind of blew my mind. It just gave us an idea in terms of the scale of information in data that they

have to play. This is a lot of unstructured data. It's data you know, from governments, it's data from m G o s, It's data from all sorts of groups UM that are producing this e s G data. It's not just the companies UM and trying to part it all together and make estimates about it as really a

gargantuan task. And what's interesting about that too, is right they're finding as a results of some of the e s G work they're doing, right, I think that they can use it were generally right and just investment applications at their firm. Yeah, a lot of the quants that are betting on this, they're not just betting on finding

good companies are bad companies. What they're betting on is that E s G information will produce better information for trades, and that incorporating more information is better than not well, and talk about that element of this, because this is something you've done a lot of work. You and the team have done a lot of work on Emily, which is this notion of not treating e s G as something other, as something separate, but actually integrating it into

a broader portfolio approach. How far along are we in out where this becomes more normal courts of business. Well, one of the quants we interviewed in the story is a Katie and Asset Management UM, one of the really big quant firms out there, and they've just sided they're going to take E s G and put it into their portfolio metrics. So the same way they say, if you're a corrupt country, we're going to give you a discount for corruption UM if your company is based there,

they'll do that for carbon pricing. And what they found is like really fascinating that carbon pricing UM in places where there is an actual carbon tax is affecting stock prices in those regions. So in places where there isn't a carbon tax, big emitters, they saw we're also getting affected.

So what they did was they said, let's put in an implicit carbon tax into our portfolio, and we're gonna go extrapolate based on all forty companies based on their emissions, and even if they don't report emissions, we're going to estimate what their missions are based on their revenue, based on their UM, their size, just to see if we get their industry, just to see if we can figure it out and sort of use this information instead of pretending it doesn't exist. I have to I love this

quote too in your story. I think this was from the CEO of q m A and they are unit a prudential financial Right, we all know about that firm. Quants are used to filling in the gaps. I mean, this is what's kind of crucial. I think this is what's been needed in the E s G space, right, that there are a lot of gaps, and really, you know, defining the metrics that measure E s G each of these different ones um categories, do it really well? Yeah? And this is also really about the hunt for alpha. Right,

there's so many E s G metrics. There's so many different ways you can see a company of which metrics are actually going to influence the market and influence returns. And I think the quants are really trying to find that out. And so when you think about the quants, I mean there is this sense I think historically when you think about hedge funds and other money managers, that

as the quants go sort of so go others. I mean, is this sort of the tip of the sphere in many ways, because I'm thinking about the news that I think we talked to you about a couple of weeks ago of Black Rock taking this more into account. Well, actually black Rocks also been publishing quant papers on this, so they're they're in this too because but the quant models have taken longer to develop, So the quants are sort of almost the other side, almost a later entrance

for some ways into it. But they all so you know, see this as an opportunity for them. Um, maybe other firms don't see. And that's Emily Chason, part of the ever growing team here at Bloomberg covering climate and really with a very Bloomberg twist, right, Carol, this idea that the quants they're onto this and maybe have some solutions,

but they're certainly identifying some places where there are some gaps. Well, we're realizing with e s G. That figuring out those factors E s G. Factors, picking those out that are better than others, it's not so easy. But the quantzman they have a lot of data that certainly can help in this process. So it's been a big year for Porsche and Jason, no doubt about it. This company reported record deliveries for last year and they predicted that its

first all electric model. We're talking about. The Takon will generate further growth in Porsche Cars North America alone, reporting record US retail sales last year. We're delighted to have Klaus Delmer's CEO of Porsche North America back with us. He joins us from Atlanta and a little further south from where you are. Klaus, the big game coming up, the Super Bowl in just a few weeks, and you are going to unveil a huge new ad. Tell us

about it. Yes, you know, Porsche is looking at Super Bowl as a an opportunity to share the Porsche story and of course the new arrival of a family member right at the big Game, and we're really excited about it. Last time we were there was seven, so quite some time ago. So we chose, we chose to choose those moments carefully well and tell us about kind of why now, why this car? I mean, this is a big game obviously.

Is this about going after kind of a younger audience for Porsche generally speaking, it's going after new audiences and making new friends out there. Uh. And the Ticon that's the entry now for us into the battery electric vehicle era, which is momentous for Porsche, and that's why we want to share the story about Porsche. We've been making, developing and producing selling sports cars for over seventy years now, and we want to show a couple of cars through

those decades in that spot. But we also want to show the tychon on the battery electric vehicle. Alright, So Claus notably and you mentioned this, there's a little bit of a history lesson embedded in this ad, and you do show some older cars as well. Tell us about you know what you're going for, and I do wonder in a field where you know there's some notable upstarts here. Maybe you're trying to show a little bit of a

legacy and history and experience. Well, you know, we think every Porsche ever build in over seventy years has got a soul and now we talk about soul electrified. So you want to see some of those cars that this brand stands on. I give you one example. There's a racing car in that spot, a nine seventeen K that was built purposely for winning the twenty four Hours of Lemore nineteen seventy. In nineteen seventy one, it was the

main feature of Steve McQueen's lement movie. Um and that car is part of a highst highest of cars that are trying to catch up with a Taikon going through a interesting scenery in Germany. So talk to us little bit about the Tykon. We were lucky you brought a car here to Bloomberg, JA and I got to sit in it with our own Hannah Elliott. As you know, well now are our car guru here at Bloomberg. Tell us how car sales are going. What kind of numbers

are you seeing? Um across the world? Demographically? Where's it selling? Well, generally speaking, we have just started delivering, and the United States was actually the first country in the world getting those cars on the ground delivered to customers. So we've sold a hundred and thirty last year in two thousand nineteen, so that's not big numbers. But we're aiming, of course, to bring this car to the States in in larger numbers. Um uh. And the big swing that we see coming

up is also connected to seasonality. So spring this year you're gonna see quite a few Takons in Port dal Ships and hopefully also all the prospects, hand raisers, depositors and people who already ordered the car then being enthusiastic about that new arrival. You know what's interesting too, And I want to go back to the Super Bowl commercial because it really does get into the history where Porsche has come from where it is today and just kind of all the walks in terms of the auto industry

that you guys have been involved in. Why TV though, I think in a world where social media has become so important, why is TV such an important medium, if you will, in terms of ADVERTI advertising, is it still relevant to get new customers? You know? The equation of the Big Game actually is about a hundred million people on the game day are watching the game. Um and there is actually no other marketing or advertising platform in

the United States with such an impact. So if you want to spread some big news about your company, and as I said, we don't do that every year, you might want to look at that stage too to engage people then in what you have to say. And that's why Super Bowl, the TV at of course for us, is important. But you're right, social media plays a big role when you want to create some awareness and get

your car on people's shopping list. Uh, and social media picks up Super Bowl and all the ads you know, weeks before the actual game and in the aftermath as well. So it's it's a big multiplier for us, and that's why we're in there. And Claus tell us about the customer for the Ticon specifically, is this how much I should say, does this sort of widen the aperture as it were, to a different audience, a younger audience, a different geography. Who's going to buy this car that might

not have bought a Porsche before? I mean, is Jason your customers that who you're going after? Who is it? Okay? Well, you know what we can derive data from at the moment is our database with all all our depositors and people who actually that the car looking at that. That's a couple of thousands of people. So that's interesting that come within the brand. So they they're driving approche right now and they want to either add the tay Kon to their garage or they want to replace one of

our cards. But come from the outside of our current client here and the outside the main competitor in the outside world that is currently then engaging with the tykon Um is from tesla Um. So we respect that brand. We respect them preparing the market for better electric vehicle, but we also respect their customers now looking into driving a Porsche when it comes to better electrics. So what I'm hearing classes that you're saying, some of them are new to the brand, new to the Porsche brand that

you're bringing in. That's right, Yeah, fifty are new to the brand, so they have never owned a Porsche before. And a conquest rate of more always is a very good indication for having the right strategy in our business model. And so Klaus, tell us about some of the impact on your other well known brands and your other well known lines, and specifically maybe the nine eleven. I mean, that's such an iconic brand in many ways, an iconic car. You know, how much does that change the way you

think about it? And maybe maybe your customers think about it if they're transitioning to this new electric You know, from my point of view, the nine eleven stands on its own within our brand, maybe even in the industry, especially with our fans. It's Nike and off the brand. Um so people who gravitate towards the nine eleven. And we've been building a car since nineteen sixty three's it's now in its eighth generation. Um, they will remain with that car. Um. Of course they're gonna try out Tychon

and see what that car is like. But the leven will always remain a nine eleven from our point of view. However, if I look at the Deposito data, yes, they are some customers to currently drive a nine eleven either want to add the Tykon to the garage or potentially have a break from the nine eleven and then drive the Tykon. So there's going to be a little bit of movement

in there. But we're not worried about the nine eleven because that car is so rock solid in that segment of two door sports cars, um that there won't be much substitutional cannibalization from our point of view. Wait, so do I hear that a nine eleven will ultimately, I know, go go electric. I think it's the last line that you're going to do it. It will happen eventually. Well, everything is going to go electric eventually, you know that's you guys have made that commitment. Yeah, that's the name

of the game. And yes, the nine eleven will most probably be the very last one in the line for that transition, and it might happen, you know, in in a decade from now. We don't know. We just know that from our current plans, fifty of our car sold in will actually have a plug, so will either we battery electrically, will or will be a plug in hybrid. Alright, so it's the beginning of the year. As Carol mentioned

at the top, twenty nineteen was a great year. I believe you were recently returned from world headquarters over there in Germany. What's the message that's been put out to the senior executive team in terms of what to expect in Well, you know, we've we've seen record years now for portion has ten record years in a row, so a decade full of records. Now, we all know that the economy goes in cycles, so we need to be cautious, we need to be flexible. We shouldn't be anxious, We

should be ambitious, and we are. But of course the economy globally is potentially slowing down and we can't expect those record years to carry on forever. So we have to have a business model in place that is flexible, flexible enough to cater for those fluctuations. In the economy classes.

It's safe to say that as you guys can tinue the transition to electric vehicles, that there is going to be some extra costs as a result of it, and there's going to be some changing dynamics within the brand mix and how customers see it or how customers are purchasing that there might be, you know, some challenges when it comes to meeting the top and bottom lines better

electric vehicles in terms of the investment costs. Development costs are more expensive than our of course, you know decades of experience with combustion engines and that type of technology. It's going to take years until we have scale and better electric vehicles in a way, so we will have costs comparable to combustion engines. However, this is the way we have to go and it's not a revolution, it

will be an evolution. That's class Salmo or the Presidency of Portion of North America, and last year we had some fun with him. He brought around the Ticon, their first electric vehicle, and they're going all in over the next few years when it comes to electric well and so appropriate that we talked to him, and probably not an accident that Porsche is making a bigger splash at

the Super Bowl this year. Given what we've already talked about as it relates to Tesla e Vis, They're having a moment, and really the question is are the traditional carmakers going to be able to keep up with Tesla. We spent a lot of time with Class Selmer of Porsche North America for the full conversation. We sure to download the Bloomberg Business Week Extra wherever you download your podcast. And that's going to wrap up the weekend edition of

Bloomberg Business Week from Bloomberg Radio. Thank you so much for joining us. I'm Jason Kelly and I'm Carol Masser. Be sure to tune into Bloomberg Business Week Radio Live Monday through Friday starting at two pm Wall Street Time. And if you can't catch us live, get our daily podcast wherever you download your podcast. You can also watch the show live on YouTube. Just search for Bloomberg Global News and get this week's edition of the magazine on

newsstands now. We'll be back next week at the same time. This is Bloomberg