Bloomberg Businessweek Weekend - January 28th, 2022

of Jerome Powell is no more. He's definitely gone more hawkets. Yeah, you can see that again, the Fed chair saying that he's open to more interest rate increases than forecast if needed to help curb inflation. Those hikes almost certain to begin in mid March. Risk assets taking big hits so far this year, and there's a big chill settling over market sentiment these days. It is the subject of this week's cover story of More than That in just a Moment.

Also ahead in the broadcast, how the US is preparing for a major attack on its power grid, the next big breakthrough in genetic testing, and we'll also to hear how monetary policy and inflation are affecting main Street. We're gonna do that with Jeff Jones. He's the CEO of H and R Block. All of that to come first up, though, let's welcome the editor of Bloomberg Business Week magazine, Joel Webber and Joe. We're gonna go in depth on the cover story in our next segment. Um, we know a

big sell office underway. Your team, though, was all over it was it almost impossible not to do the markets as the cover story this week. Yeah, sometimes you just have to recognize that something is happening and that um, it's involving the markets and and uh, that's where we kind of went to with this one. And we just have this had a spiky sense that there's this change that's underway um uh, and that markets are trying to

figure out what what to make of a rising rate environment. Um. And you know, we had this statement from Jay Pal that really took the markets in another direction. Um. And to see the boomerang that started at the beginning of the week where things were read and then rebounded, that was it was just really funny and we were like, what's going on here? And who can we talk to to get it right, and that's what led us to

Mike Creagan. And we're gonna hear much more from Mike Reagan in just a few minutes with details on that cover story from cold Markets though to hot Sauce, because we did hear Joel and look, this is how the sausage is made right, we heard that there was another candidate in the running for this week's cover story. Had it not been for the big dip in markets, we likely be talking more about Austin Carr's great feature on

big Hot Sauce. Um. I'm a big hot sauce guy and I do my I do my part to support big hot sauce. What do we need to know? Yeah, we can still talk about hot sauce. Um. So there's a company called McCormick and I think for the most part you probably know McCormick as a spice company. Yeah, um, you know you. I opened my spice s rawer and there's a bunch of red capped little little containers of spices.

That's McCormick. Um. But in the last few years, and under a new CEO, they've really um doubled down on a growth strategy, which is hot sauce UM and it actually started. The first acquisition they made was Fringes the mustard Um, and then they went for Frank's Hot Sauce and then and they recognized that that was going well, and so they decided they needed more hot sauce and they went for Cholula. That's my Yeah, that's a lot

of people feel that same way. So they've really turned into this little it's like a hot sauce roll up almost, and that's giving the company new growth, new markets, UM and it could you know, unlock some There's the condiment rivalry is just priceless. There's the catch up world, there's the mayonnaise world, and the hot sauce one. You know, people just keep coming back for more and more and more UM and it could give them a leg up in terms of what the next kind of condiment breakthroughs

might look like. Okay, well, we can't talk about McCormick though without talking about you know that the surge in at home cooking at the beginning of the pandemic. And I thought you were gonna say you can't talk about it without talking about pet prikup. But well, we'll talk about that later. We will talk about that later. And I'm just wondering about how the company sees Hot Sauces sort of getting them through and pass the pandemic and

beyond beyond spices that they're known for. Well, the the spice thing is really interesting, just to kind of take a moment with that. Um And And Austin Carr writes about this Tamaric shortage, which is I think one of the kind of great things in the story, just like thinking through logistics of like, you know your main source of tamaric, suddenly you're not gonna be able to rely on them. It's one of the ingredients. And in the mustard American give became very close to having this massive

mustard shortage that people probably didn't realize. People really have these brand affinities, right, and we think about that through consumer goods a lot. Um and Hot Sauce is sort of like a way that I think people um have an affinity for brands. And so McCormick is moving in behind the scenes. You don't necessarily know that in the same way that their Red Cap spices. You don't know that Cholula even owns is owned by McCormick. McCormick's name

shows up. Now we're on the bottle, and yet they get all the goodness that comes from a brand that people have affinity for. You know, it was really cool about this story. It was such a deep dive into the company's history and understanding, like its origins. But it also I had no idea about the work that McCormick does for a lot of other well known brands in

terms of developing products. Yeah, you won't get a whole lot of details from this because flavor since fragrances, all of that stuff, it's pretty uh covert, top secret stuff because people don't wanna let it be known that they partner with others. So one of the things that McCormick is it's pretty quiet about this side of its business. But it basically consults with a lot of different brands and food manufacturers on the flavoring side, and that is

another opportunity for growth. Part of that has been driven by tech um. For instance, one of the sources that we talked to is said that basically, you know, not so long ago, there was not that many types of cherry flavoring, and now there's kind of hundreds of them because of what they've been able to unlock. Yeah, and who knew that snack espionage was a threat? I think about cyber so cybersecurity and other things. Um. It is a great deep dive and a really great read by

Austin carr Um. Joel. Thank you so much, Burg Business. We get her Joel Webber and he's gonna stick around with us. For our next segment, we're gonna talk about this week's cover story. Yeah, we're gonna break down the stock markets ugly start too and why investors might want to have the CFO put on their radar. You're listening to Bloomberg Business Week. This is Bloomberg. This is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim

Stinovik from Bloomberg Radio. As we mentioned at the top of our program, this week's cover story zeroing in on the sharp downturn in markets to start off this year. It was also Bloomberg big take by the way this week, and it couldn't have been time to any better. Talk about the magazine just hitting it right on the money. Yeah, shout out to Joel Webber and the team at Bloomberg

Business Week. This story Carol coinciding with the Federal Reserve Chair Jerome Powell, saying that the Central Bank its poised to move away from what he called quote highly accommodative policy definitely a much more hawkish jay back to help investors find out what's real and what's not in a bid. All the talk of bubbles and high flyers is Bloomberg Business Week editor Joe Weber and the individual who wrote the piece we're talking about, Bloomberg Market Senior editor Mike Reagan.

You know, the so called uh FED put the notion that the Fed would sort of come to the rescue of the stock market if their plans to tighten policy. Uh, you know, cause some volatility that is not exactly alive and healthy right now, you know, and if it is, you know, it's certainly going to take a lot more than what we've seen. It's going to take enough flatility in the market that it really starts to threaten the economy. And I think that's the underlying tension here. Uh, for

a lot of investors, is okay. You know this easy money monetary policy really and low interest states really sort of boosted valuations, lifted all boats among the boats that were left at the most clearly though we're highly speculative, you know, innovative but not yet profitable companies in the market. So I think it's just a down draft that is

that is infected the blue chips as well. But I do think, you know, the comparison everyone likes to make is to the dot com bubble, because it was very much UH evaluations got out of hand and then you know, the fall was much harder as a result. I think the big difference is those blue chips this time, they're just so healthy, They're so integral to UH, you know,

the backbone of the economy. Your Amazon's, your Microsoft, your Apple, um, and there's just so much cash on their balance sheets that I think, rather than thinking about the FED put, I tend to think about sort of we call it the CFO put. You know, the notion that there's so much cash sitting UH in accounts at these firms that what are they gonna do about it if their own stocks get caught up in this down draft. Well, maybe they'll increase buybacks, Maybe they'll buy up some of the

weaker names that are getting hit the hardest. I want to bring in Bloomberg Busines, we get it, or Joel Webber Chris Joel. You know, Tim and I were talking about what we're thinking about Mike's story back in December. A wild emotional year has changed investing maybe forever. And the wild emotional year continues in UM markets, no doubt about it. It is the big story this week. That was really good radio voice that thank you very much. UM. Yeah, so you look like we uh we we kind of

spooled this one up. I like it to picking up a bat or putting a bat light up in the the sky for for Mike to see. And after last week and heading into this week, I was we knew we needed to do something big in the magazine about it. UM We called it the Big Chill as the cover story, and then of course we publish it in the morning.

Markets go up and with like holding my breath about like wow, did I just make a mistake, And then on behold uh j Pal speaks and and things turn red, and and you know, I feel like it's all worked out, except rooting for Red can be slightly weird. I want your crystal ball, That's all I'm gonna say. But it does feel like there's this kind of just mood change.

It feels like the winds have really changed, Mike, that that you know, this euphoria that um, and this big punch bowl where everybody was having a good time suddenly like maybe the party's really ending here, right, Yeah. Absolutely, And I think you know, we've grown so accustomed in the decade after the financial crisis to sort of, you know, rely on the FED to kind of you know, pause or to get a little more stimulative whenever ever we needed, you know, the market needed it. It's just such an

different different environment this time. I mean, obviously cp I at seven percent unemployment rate, near those pre pandemic lows, you know, some of the lowest unemployment readings of our lifetime. So you know, you just get back to the basics. What's the FEDS role, what's their duty? Well, it's to keep inflation reasonable around two not seven, and it's to

keep the job market strong. So um, you know, the job markets fine, there's no need to keep you know, keep stimulating the economy with the job market the way it is. But that inflation, and you know, I think probably a hundred years from now, we'll be able to figure out how much of it was just the supply chain problems, how much of it was the easy monetary accommodations umal talked about in the press conference, you know, in terms of I hope I'll be here to look

back and see how we assess everything exactly. But certainly, you know, their back is sort of to the wall that um, they have to they have to do whatever they have in their tool kit to attain this inflation, um, regardless of the of the cause of it, because they, you know, put their money, put all their chips on it being transitory. Uh. That's clearly transitory. Has clearly turned out to be a lot longer than anyone realized. And

look the market. The U S stock market has been up in average of twenty four percent per year for the last three years, uh, two thousand twenty. So it's really hard to make the case that this temper cent dip in the SPI is enough to cause the FED to to reverse course. Um. And I think that was hammered home in the market action. But the third part of the FED mandate is to reduce my four A

one came. I didn't hear that from didn't get that memo. Well, but Mike, how you mentioned the CFO put earlier, which I thought was just a genius part of the story. How how big and how did that compare? So like you know with the fed put has looked like and like just break that down for for folks are well, you know it's not going to be the type of thing.

I mean, the fed put can get exercised, uh in the blink of an eye if if pal says, you know, gives a speech or the statement indicates that they're they're pausing. I think you know this CFO put that we made up, it's something that is gonna play out over time, you know, uh, and not all at once. It's uh, you know what does a company and that The example I used in

the story was, um, Microsoft's takeover of Activision Blizzard. You know, uh, a stock that just went through the roof during the pandemic. Everyone was Stockholm playing video games and then that you for your faded fast and the stock crashed and then Microsoft comes in and swoops in and says, you know, we've got a lot of cash on the bounce sheet. This is a company that fits in perfectly as a bolt on acquisition, uh for US. So um, you know they took a big swing at that, a big premium

on what the stock was trading at. That's those type of things. You know, they'll support the target company obviously, but they kind of have a halo effect on the whole space. Now everyone's thinking, Okay, what's the next company like that that these tech shians are gonna be shopping for? So, you know, I think we'll have to see it play out over time. That was Bloomberg Market Senior editor Mike Reagan and the editor of Bloomberg Business Week, Joel Weber.

I feel like I'm not kidding that crystal ball that Joel has so right on. How does he know? I don't know. He's just smart, all right. Coming up next, the power and influence a big tech on Capitol, what lawmakers are investing in, and whether a stock trading band for members of Congress could be in the offing. Finally, haven't they been talking about this for a long time? They have, but now we're finally hearing more and more

public calling for it. This is Bloomberg Broadcasting from the financial capital of the World, Bloomberg eleven Rio in New York to Washington, d C. Bloomberg to Boston, Bloomberg one O six one does San Francisco, Bloomberg nine six to the country, Sirius XM, Chamber one nine and around the globe, the Bloomberg Business and Bloomberg Radio dot Com. This is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes

Tim Stenovan on Bloomberg Radio. So we talked a lot about the influence of America's largest tech companies have on the stock market, and some feel they also have sway of the members of Congress as well. In the politics section this week, Bloomberg Business Week National correspondent Josh Green takes a look at a brewing antitrust fight on Capitol Hill. It's getting a bit awkward, Carol, for lawmakers to own

big tech stocks. One of the things that sort of launched this piece was, you know, there's just a lot of talk in Washington, a lot of joking among congressional staffers that if somebody wanted to start a hedge fund and opening ETF, what they ought to do is just mimic Nancy Pelosi's trade to make some of the money.

You know, I went through painstakingly congressional disclosure filings to look at how many members of Congress own the four big tech stocks that I wrote about, and I chose the four Apple, Amazon, Google Alphabet, and Facebook Meta because they're the ones targeted by an anti trust build. It's moving through the Senate that that, unlike most things in Washington, actually has some biports and support. And yeah, I mean the numbers that come out that we shown the new

issues that big, we are just shocking. I mean they are. We found ninety five congressmen and senators to collectively own um tens of millions, if not over a hundred millions of dollars of these just these four tech stocks alone. And of course these are the same members of Congress they're ultimately going to be designing these companies regulatory fate when it comes time to vote on this bill. Do you think it could possibly sway them in any way?

Just say something? I have to say. We talked about this so much in the newsroom and it's been something that our team we've really been thinking a lot about. Like, I am amazed that there isn't already something um uh in terms of the Laura are on the books already that says no, of course you can't own them. It's it's absolutely insane and I think it's right in the piece you know, I did a little research, a little reporting on like like how did we get to this state?

And one of the answers I got from people in Congress is that, look, it's actually kind of hard. A Comress doesn't make it easy to find this stuff. They do have to publish disclosure of filings, but like some of them are handwritten, like in pen you know what I mean. It's not the kind of thing we can

easily be searched for and rogated. And then it's also difficult to figure out from legislation moving through Congress, like to be able to connect the dots will center so and so owned this company and this bill is going to affect it. What makes the current moment so interesting is that there's a nanti trust will going through the Senate.

It really only affects four big companies that are all hot tech stocks, and so it was this rare moment of convergence what was unusually easy to see and the fact that the ownership is so extreme and the public has begun to notice this. Uh, you know, there's a center from North Carolina, Richard Burr, who was just investigated by the SEC. They're not pressing charges, but for his

ample stock trading. David Produce, a Georgia senator who lost his reelection last November in part because of stock trades and the impression that he was doing inside of trading. So I think the public is finally kind of cottoning onto their realization that, oh my gosh, there's so much money at stake here, should they really be allowed to

do this? Most people, if you look at Pole City, answer is no. Well it's so interesting, Josh, and I remember Senator Kelly Leffler falling under similar criticism in about her stock trades. Former senator, everyone's always surprised when I tell them that business journalists, if you work for, you know, a respectable media outlet, you are not allowed to hold individual stock and companies that you follow, Like no brainer.

Like it's a no brainer because there could be an appearance of a conflict of interest, and I'm including myself in that category. Right, So it's like it's just I think mind blowing to a lot of people that the people who are making the rules can also benefit uh because of information that they know about what they're going

to do. Not just that though, but it's about the regulatory part of this, right, So okay, take us now to where we are because they're The tone has shifted a little, even coming from Nancy Pelosi, who has said recently that you know, it's a free market, that she doesn't think that she should not be allowed to trade stocks. Um, what has she said lately? Well, so she said, it's just a couple of day reporters went to her and said, hey,

should this really be allowed? And like, you know, you just have ungodly amounts of money any stock that you're regulating, and she she kind of haughtily dismissed the idea. Today, it's the free country. I should be litist. I mean, since then, there has been all sorts of criticism, not just a Pelosi um about members of Congress and generally, but it's it's just such an easy um. It's so easy to the public to see the conflict of interest,

and it really did draw criticism. Pelosi yourself was criticized quite vocally by a former President Trump who who said, look, an enormous conflict of interest here. That's coming from a guy who knows a thing or two about conflicts of interest. I need Pelosi decided that it was just impossible to keep up that guy until last week she came out and said, well, you know, look, if if Congress decides they wants to pass rules, you know, that's up to them.

And in speaking to kind of good government types who are usually very down on this kind of thing, there really is some optimism that that these rules are finally going to pass and there may finally be um some kind of a ban on congressional stock rating. But we'll just ratching it back to like what we had Bloomberger allowed to do. Right, we can invest our foreign case and index funds. No reason that members of the Congress

shouldn't have to do that too. That was our national correspondent for the magazine, Josh Green, also joining as Bloomberg Business Week editor Joel Webber. You're listening to Bloomberg business Week. Coming up a company well known for its assist come tax time, it's now lending a helping hand to its main street base. We'll speak with H and R. Blocks Yo Jeff Jones on the other side. This is Bloomberg. You're listening to Bloomberg Business Week with Carol Messer and

Bloomberg Quick Takes. Tim Stinovik from Bloomberg Radio in Environment with there are so many questions about the outlook. It is always great when we can catch up with today's leaders in the corporate world, and one that we talked with this week was Jeff Jones. He's the president CEO at H and R Block. Jeff I spend time in the c suite at the likes of Gap and Target as well as at Uber, and now he has a front row seat to the trends that affected consumers in

a time of growing financial uncertainty, particularly on main street. Well, I don't know if any of us know what normal means anymore, I think, is the honest answer. I certainly don't think that going backwards is what's going to happen. When I think about the consumer, and especially the consumers financial health, we think about in twenty nineteen, we were all talking about the fact that of Americans struggled to deal with a four dollar surprise FEDS that we all

knew and cited it. Then jumped to the pandemic, personal savings rates at record high, media and check balances up more than fifty people, you know, lockdown, they can't spend, and now child tax credit payments have ended for tens of millions of people. Inflation is here we seek consumers potentially about to get refund surprises on the negative. So, you know, I think we're in an unstable world and the consumers trying to find the the new normal and balance,

just like companies are. Well, how do we how do we reconcile that? With what we heard this week from FED chair J Powell. He was asked a question about inflation and it affecting Americans differently at different elements of the income spectrum, and he said it was less about inflation affecting some people more than others, but the issue was that people were who were living paycheck to paycheck. We're now spending so much on gas, so much on food that it was becoming an issue, and it is

an issue. Explain that, Yeah, Well it's here's what we see. And you know, there's a great stat from the Financial Health Network that two thirds of Americans are not financially healthy. And I can tell you in our business. You know, when I travel around the country and I visit our offices and I here are consumers talk. We serve Main Street America, and I consistently hear that this tax refund is the most important check they get all year. But it's already spent um. They're using it to pay bills

and reduce debt um. We here way too often that they're relying on payday lending or overdraft fees or other things just to get by in short term cash. So on the ground in communities across this country where we operate, we see every day our clients still struggling managing cash flow day to day, and you guys are working on

helping those individuals. I'm curious about how that's going. And I also do wonder in this macro environment and be it FED strategy or what the FED says, how does that impact some of the business strategies that you've got out there, Jeff, and being able to implement them this year. Yeah. Absolutely. And So to two things that I'm thinking a lot about right now. One is our launch of Spruce, which is our mobile banking platform, and it is it is designed and built with that insight in mind that we

hear from our customers this struggle. And so Spruce is really a product help people be good with their money, to save a little more UH, to make their dollar go father further with rewards um. You know, we think that product is right for the times given the real financial struggles that we know people have no fees, no minimum balances, no hidden fees, those kinds of things. That's that's one part of our business that we're very excited about. With this product, you and you can move forward no

matter what the outlook this year. Absolutely, and we think in an environment where people are looking for tools to help them be better with money, that Spruce is even more right for the times because it is you know, no hidden fees, no minimum balances, and they're able to you know, set up really easy savings accounts. When they use the card at thousands of major retailers, they automatically get cash back into savings. So we think, you know

that we know there's a large problem in America. That problem seems to still be real, and we think Spruces is right for the time. So, Jeff, what are your ambitions with Spruce? What firms are you try and to replace?

Are you're trying to become a full replacement for a bank? Yeah, So when we looked at the landscape, this was this was very interesting for us because most people don't know that H and R Block used to be a federally chartered bank and we sold that charter years ago, but we've been offering multiple different financial products in the meantime.

But as we looked at the at the banking landscape, you know, we see the traditional banks that that obviously have stability, um depending on the brand, they have questionable trust. We know banks are not widely trusted and they generally have have have been missing the modern user experiences in

digital features. And then on the other side, those challenger banks are our feature rich, but we see the technology becoming less and less of a differentiator now and it's really about relationship and trust and brand and we know that that Block has that combination. So we think Spruce can be a really viable product in the market because it has the latest tech in features, but it's from a brand that people come to every single year, you know,

when they're sharing their most intimate financial details. So talk a little bit, Jeff about you know, we talked a little about ambitions, but can you can you clarify to what extent you want H and R Block to be viewed as a bank. You talked about the banking charter that H and R Block sold off years ago, but what does the ultimate what does Spruce ultimately look like. So, Tim, we we are absolutely building H and R Block to be a financial services company for Main Street America. What

does that mean a bank? Does that include a bank charter? No, it doesn't, you know. I mean we we have been down that path, UM, and we believe today with the partnership we have with Meta Bank, we have very favorable economics with them. They're a great partner and as a program sponsor, we can deliver the customer experience, the product, the customer service without having to be a bank ourselves.

And so we feel very good about that relationship, not only with Spruce, but that's how we've been operating our Emerald Card and our Emerald Advance and other products now for many years. It's something that we see with a lot of fintech players. We see it with Wealth Front, we see it with other companies like Chime for example. We've got Chris Britt, the founder and CEO on our show here before UM, Why is that a route that's

the right route to take? I think what we've learned from the customer is many many times they don't know who the bank actually is, UM, and what they're focused on in today's world is the customer experience, and I think that's how the fin techs really launched their disruptive start versus traditional banks by building wonderful mobile apps that were fitture, feature rich, and you know, just really elegant to use. I think technology is caught up, and you know,

we're now launching the same kind of tech um. But you know, the bank is what's on the back of the card. It's very important to us as a business partner. But in this context, you know, the customer knows their relationship with Block and Spruce. How do you look more

broadly at everything that's going on, Jeff. In the financial industry, we talking this week about UBS buying the robo advisor wealth Front, and it's interesting to see kind of older banks are older financial companies who kind of maybe you know, turned away from some of the up starts a few years ago, are now saying, wait a minute, because there's a lot of money to be made in these alternative platforms and a lot of money being managed, how do

you think about it against your business? Obviously not apples to apples, but I'm just curious from a big picture of view, there's no question that technology is playing a role in everything we do UM. That could be how we've digitized our assisted tax preparation business, so you can get full expert help from somebody, but you do it all virtually. Or with our company Wave, which is a small business UM SASS software company, banking, account seeing, payroll, invoicing,

all completely integrated into one product. And it's a d I Y product obviously spruce, but even at a maybe a more simple level. You know, the way we think about our machine learning models and AI to enable our tax professionals to have more specific and relevant tax advice. It doesn't replace them in their relationship, but allows them to focus on serving the client, not on data entry. And and we absolutely see that and we embrace it

as a company. So I am curious. We talked a little bit at the beginning about outlook and what you're seeing, and there was this was a crazy week in the financial markets, certainly with a FED meeting one and done, but a lot more to come in terms of specifics of running your business, Jeff, whether it's access to labor, the labor labor costs in particular, which we know J Powell of the Federals I've talked about a lot in

his meeting. This week. Um, what's what's the biggest things that you find difficult managing or difficulty managing you and your team. Well, there's no question we're we're focused on transformation and growth and so you know, there are many

things that are hard about that. With respect to labor, we're an interesting company because on one hand, we are a retailer with a lot of retail footprint, but those that work in our offices are tax professionals and the way they're paid is based on the service they provide in their level of certifications, so they're not an hourly worker. Uh and on average, we have about ten years of tenure with our tax bros. So they come back year in,

year out. We obviously, you know, compete heavily for the best engineering and data science talent, but I think that's more that's more common across companies that are doing what we're doing. So it's manageable. It sounds like knit net. It has been manageable for us because us our labor model is just different from how people view, you know, retailers in general. That's Jeff Jones, president CEO at H

and R Block. That company, by the way, set to report earnings on Tuesday, and that reps up the first hour of the weekend edition of Bloomberg Business Week from Bloomberg Radio. I'm Carol Masser and I'm Tim Stanivik. Coming up in our next hour, we may be on the

cusp of the next big breakthrough in precision medicine. We're going to explore the promise of genomic testing and analysis with the CEO of gene d X and a new player in the market for baby food, one that's projected to approach a hundred billion dollars in the next five years that entire market. We're going to catch up with the co founders of you Me and Up next on Bloomberg Business Week, the US government has been using a

remote island to simulate hacks on the electrical grid. Here's the question, are we truly prepared for the real thing? Stick around to find out. This is Bloomberg. This is Bloomberg Business Week. Inside from the reporters and editors who bring you Americas is trusted business magazine plus global business, finance and tech news As it happened, Sloomberg Business Week with Carol Messer and Bloomberg Quick Takes. Tim Stinovic on

Bloomberg Radio. I am Carol Masser and plenty ahead in our second hour of the weekend addition to Bloomberg Business Week, including a look at the promising and increasingly competitive world of genetic testing. We'll do that with the CEO of gen d X. We're also going to be joined by the co founders of the baby food startup you Me. They're looking to crack a fast growing market and blaze a trail for women and venture capital. You know a little bit about baby food? Yeah too much actually, alright.

Plus our Bloomberg Pursuits team it's out with its special wellness section, everything from prehab and hitting monks. Yep, that's a thing. It is a thing to help avocado oil and blueberries as food and perhaps even skincare. It's kind of getting fluid back and forth there. Yeah, but you know, not necessarily you want to don't want to eat the stuff that you're supposed to put on your face, right,

I don't know, alright. First up this hour, this week's Technology section takes a look at the potential devastation of a cyber attack on America's power infrastructure and what the federal government is doing to get us ready for such an event. A large part of what it's been doing is running drills on a small island that's actually not too far from where we are right now. These exercises have been taking place on Plumb Island. It's an isolated spit of land just off of the northeastern tip of

Long Island, New York. Let's bring in Bloomberg new cybersecurities are Mike Riley. He wrote the story with help from William Turton and Jordan Robertson. Mike joins us. Now, So, Mike, I have passed Plumb Island, gone through Plumb Gut. Uh in Long Island sound? Um, I'm glad you're okay now suffering from Plumb Gut. Well, it comes up on maps and it's like you cannot go there, if you're if somebody who spends time in the waters, you're not allowed

to stop there. Tell us about Plumb Island. Um, Yeah, it's got a long and interesting history. It's also an object of curiosity for people who live in the area because you're not allowed to access that. There's a private ferry that's run by the government that's behind the guard post. That's the only way that you can get to the island what and you if you get too close to it as a boat like you, you're told about it because another boat will come out and shoot you away.

And what's on the island is a lab for studying animal diseases. UM. One of the reasons why this is so isolated is because they're worried that terrorists might attack a lab like that and use the diseases for for bio terrorism. But the other thing that they've been doing on and is running these exercises of UH to try and understand and get better at responding to a major

hack on the grid. And so they literally built out a small version of a grid with substations and transmission lines, and over a period from UH they would run these exercises that involved the National Guard and utility crews from some of the major utilities, and they would practice what happens trying to recover from a major cyber attack. And it suffice to say that it's a it's a really really hard thing to do and and you too, these are not trained well enough to do it, and so

often things went badly wrong. Okay, So so talk to us a little bit about that, because what exactly is the worst case scenario here that the DARPA and other authorities are actually trying to plan for, and why aren't we in a great position to actually respond to it. Well, it turns out the the grid is a unique kind of target for a cyber attack, very different than just about anything else you know, gas pipeline or uh, you know, other upport other infrastructure because of the physics involved in

operating the grid. So even though we don't think much about it, there's a very delicate balance that has to go on of electricity going onto the grid and electricity

coming off of the grid. And usually this is like computerized, and they do a lot of planning for this, and usually it all goes swimly well, but in very unique cases, if they gets out of balance and that balance uh disturbs the physics of the grid enough, the entire grid or large section of it i should say, can collapse the power essentially that that that is and then and

that can lead millions of people without power. The last time this really happened in a significant scale was interesting, Yeah, where where basically the whole grid went down in the Northeast and millions of people were without power. So getting it back up from that state is really really hard, and if hackers are already in the system, it's especially hard.

And so they practiced doing that, trying to recover a system from from the grid after it's been depowered and it's and and the hackers were able to create all sorts of chaos and make that that recovery very difficult. Bottom line is the attackers could extend a blackout from what might have been a few hours to days or

even weeks under these circumstances. Well, and what's interesting, Mike, and you remind us hackers are in the system, and thank the United States, go back to what was uh and you guys were doing the hacking when it comes to what was going on in Iran. That's right. There's a special kind of of hacking that sort of is meant to impact actual the real world that packs physical

systems and a it's hacking of industrial computers. And the big example of your citing is stuck net that where hackers from you know, thousands of miles away, we're able to destroy centrifuges in Iran's nuclear development program. But it's that exactly that kind of of hacking, in that approach, which is hitting these industrial computers that can also do things like shut down airports or shut down the electrical grid,

and so cyber warriors. The people like Russia has, in the US has and China has, they have some pretty unique tools to make these kinds of things happen in the circumstances where there's a either an active conflict or even less than that. I mean, there's U s Intelligence is worrying more and more that we'll see that Russia might try one of these hacks. Not and when there's an actual shooting more going on, but in a situation

like what we're seeing in Ukraine. So I've seen Plumb Island before, but I didn't know what it was used for before. Right from Afar, it probably looks like, wow, this would be a nice island to go to. R Yeah,

minus the fences. It's interesting, as you heard. I mean, I've spent a lot of time in the water, and it's on nautical charts, but it's also said like don't go there in your previous life as a pirate, I told you that was okay, Okay, anyway, it's a great story, so highly recommend you read all of its in its entirety. You're listening to Bloomberg Business Week, Still Ahead, How advanced genetic testing methods are being used to uncover complicated disease

causing DNA changes. I gotta say, I love this field. How a company called gene d X is unlocking this field's vast potential by turning data into diagnoses. You're listening to Bloomberg Business Week. This is Bloomberg. This is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim

Stinovik from Bloomberg Radio. So you might recall a November Bloomberg Business Week cover story about the company twenty three and Me and how it's looking to leverage all the genetic information it collects to enable it to make and sell its own therapies, basically become a drug maker. Yeah, far cry from what it was, you know, at least

starting out to do right well. The world of genetic testing and its applications as a diagnostic tool, it continues to grow, Carol, You and I recently caught up with Katherine Steulin. She's spent more than two decades in healthcare. Now she serves as president and CEO of the genetic testing and genomic company gene d X. Kavin joined us with an up close look at the company's history and how it's solidifying its place on the cutting edge of

precision medicine. I had to share with you what I think is really a new era in terms of delivering on the promise of the Human Genome Project, as well as UM something that we've been talking about quite a bit, which which is precision medicine. Um gen d X was fun out of the n i H twenty years ago and really was known as a company that was who doctor has relied on to the hardest to diagnose patients.

But over time, our scientists have been quietly pioneering the next generation of genetic testing that looks deeply at the totality of the human genome to be able to provide a faster diagnosis for patients and in turn be able, based on the results of our genetic test, be able to tell you what therapeutics might be able to help

you get on a healthier path sooner. Well, help me understand where patients use this and at what point in their lives they use it, because up till now, and you know, I don't want to give away too much of my medical history. I'm talking on you know, national radio here. Uh. But my only encounter with genetic testing personally has has been when my wife got pregnant with our son. And I think that's where a lot of people first interact with it, when you know the person

who's pregnant and then the partner get tested. But that was it for me, that that's true for so many people. UM. Right now, genetic testing is being used in in that setting. UM. You know, frequently when a woman is thinking about having a baby, or she's pregnant and she will she'll do a test, she and her partner will do a test

called carrier screening. UM. But then what we're able to do on the other side, once there is hopefully a healthy baby, is be able to ensure that when there is a symptom um that that child may be displaying if God forbid, the babies in the neonates neonatal intense of care unit or as a toddler UM, we're able to provide based on that baby's genome um rapid information that helps get to a diagnosis, a definitive diagnosis sooner,

which is critically important when you're thinking about neurological conditions. That could be impassing that child and then getting them on that treatment. UM. The other time that people are utilized in genetic information often is when they have a cancer diagnosis. So right now it really is being used UM in the symptomatic setting UM. But genetic information can actually be used in a preventive way UM to be able to get ahead of UM developing symptoms and being

able to keep people healthy versus diagnosed a disease. It's already in progress. So I think about things, you know, UM, Katherine, that are just like diabetes, right, which is really we talk about pandemics, right, you know, it's really becoming a global pandemic in terms of the amount of people who have diabetes. How can we use genetic testing. How are we maybe already in terms of anticipating it or somehow getting better control of it, because it really just seems

like it's out of control. So genetic testing right now is really best utilized UM and and settings such as cardiovascular disease in oncology and the pediatric setting for neurological disorders or autism UM, as well as, as you mentioned earlier, in the prenatal setting when when we're trying to assess

risk when it comes to a pregnancy. For for more common conditions that are metabolic in nature, like diabetes, there's still a lot of work that needs to be done from a technology standpoint to really help us better understand the specific role of genetics that might predisposite, predispose somebody to to being uh, somebody who will have a more severe condition. Um. So there's a lot of work going

into that. You'll hear in the future more about something called polygenic risk risk scores, which is for the broader um more common conditions like diabetes UM. And I think that that's going to be on the horizon over the next five to ten years. We're still in the earlier stages for those sorts of cons And Catherine, I want to talk more about the business here because I think when it comes to products such as yours, the customer

isn't necessarily the end patient. The customer is the provider who is prescribing it or who is actually um telling the patient that they should get it. How do you how does that, how does that sales process work? And how do you get your product more in the hands

of more providers. So it's it's a really important partnership that we have with a provider a patient as well as with a payer UM and and we very much believe that it is the most responsible approach to be working UM in that partnership because we're delivering information that is actionable UM, meaning we're providing a genetic report that is saying whether or not somebody may have a health condition that they may need to, you know, go undergo some sort of therapy for UM or change another aspect

of their life. So it's really important that we are working in partnership there. UM. The way that we work today is we we sell our testing directly to clinicians. Mainly this has been to medical geneticists, who are kind of the the experts experts when it comes to genetics, but we're seeing a broader group of clinicians. As we mentioned earlier, OBEs are using it in terms of assessing risk for pregnancy on collogists are using it to assess risk overall as well as what treatment might be best

for a patient. So we're starting to see a shift from UM the expert setting of medical geneticist into broader mainstream medicine. And so we educate providers about our services and we work with them to ensure that they have all the tools that they need to inform their patient

as clearly as possible. That's Katherine Steln, She's President CEO of gen d X. We should mention that earlier this month, the publicly traded health intelligence company Semaphore are agreed to acquire gen d X for about six and twenty three million dollars. So once that deal has completed, Catherine will service co CEO still to come. On Bloomberg Business Week. They call themselves nerds on a mission. How a pair of longtime friends are looking to reshape the multibillion dollar

baby food market. I thought we were nerds on a mission. Yeah we are. Okay, well we're just nerds. This is Bloomberg Broadcasting from the financial capital of the world, Bloomberg eleven Frio in New York to Washington, d C, Bloomberg to Boston, Bloomberg one oh six one, to San Francisco, Bloomberg nine sixty to the country Sirius XM Channel one nine, and around the globe the Bloomberg Business and Bloomberg Radio dot Com. This is Bloomberg Business Week with Carol Messer

and Bloomberg Quick takes Tim Stenovan on Bloomberg Radio. But what estimate? The baby food market is forecast to reach more than ninety six billion dollars by the compound annual growth rate of six percent. That's a lot of most string beans and corn. Yea, definitely well. One of the newer participants in that world is the organic food company you Me. The company recently raised nearly sixty seven million dollars from investors, all of whom were women. Love that.

Former journalist Evelyn roose Lee and one time financial analyst Angelis Sutherland, they co founded the Director consumer brand. Evelyn explained why the two decided to leave their prior careers behind in pursuit of healthier food choices for kids. That's

where we started our conversation. We are on a mission to change transparency and baby food and what it actually represents and what it means and so how nutritious it can be and making sure it's clean of heavy metals, and so we're reaching it's money to take on big baby. So Evelyn, come on in on the conversation because it's a massive market. We've all been there where we're you know, looking at the shelves and when once you have a kid, everything you put in their mouth, you wanted to be

like perfect. You want to keep them safe, you want to make sure they're eating. Well, how did you guys approach this and how did you know that there was a need for what you guys are doing. Yeah? Absolutely so, I guess we could start at the beginning in terms of the origin story, because that definitely informed how we built a company. UM. So, just as a brief background, I used to be on the other side of the table.

I used to be actually a journalist like you guys. UM. I was a journalist for about a decade or so, and I've been friends with Angela for years that predate the company. Um Angela her background I love to brag about her, which she's sort of this this math nerd math savant was in a career in finance and also worked at Toyota working on algorithms on their actual risk and such. And you know, when Angela had her first child.

As friends, we were kind of nording out on all the research that she was discovering, and there was one theme that she kept coming back and back to again. That was the importance of nutrition and how it really does impact every prison of health right from neurological development, physical development, metabolic health, like even your caste preferences are largely set by the age of three, and what impacts that is everything that you're consuming or even in the womb,

what you're getting from your mother. And so what we found so astounding was that if you can really control for the interventions, the nutrition that you're getting during these first years of life, you know, you can really change the state of metabolic health in this country and change the state of you know, health outcomes in general, so whether for the individual for an entire generation. So we always say that our mission is to build a health

your resperation. And yeah, I mean, you know, I think what was so interesting, like, you know, obviously we know kind of where the food system is today, and we realize that there was such innovation needed, particularly in the category of baby in terms of you know, really focusing on foods that are nutrient dens that are you know, really built for the massive needs that a child has during this period. And so at the end of the day, and we kind of stepped back, we realized this wasn't

about just replacing a product on the shelf. It really was a question of what should the future food be. So it's it's one thing to go from an idea of evalent to uh, actually building a company, Angela. So I'm wondering, Angela, how you then take that idea and you find the farmers to partner with, you find the way to produce it. And look, we're talking baby food here. I mean there's a little room for error, right, You

can't you can't get a contaminant in there. I mean, we know what happens if if God forbid, that were to happen with something that we were to give our children. Angela. Yeah, absolutely. I Mean one of the things we did really early on was bringing some like a list people to our teams we run our CEO from Beyond Me to build up their entire supply chain there manufacturing, and we knew that was really important internally to do the same thing.

I mean, again to your point, safety there number one concern is always like our number one priority, and so we've always focused on quality control and around like who our suppliers are and how many how much testing we can do. We do weekly testing as well as you know, seasonal testing on suppliers, were testing our finished goods as well as like our product forehand, I mean we are you know, like laser focused on making sure that this is the safest and best products four children your director

consumer right, Yes, correct. So so in order to actually even see the prices, you have to log in and create some sort of plan. Um, how much does it cost to get a baby on on the UNI plan? The alex places around four dollars with jar and there's seven different stages that I see, So to help us understand how that work works, Yeah, you can get small box unifax or large boxes is one a day? At

two a day or three a day? Um, we average around like four dollars a jar um, depending obviously on the side and how like the frequency of you're getting it. But that's sort of how it works. That was Evelyn Rooseley and Angela Sutherland, the co founders of the Baby Food Company. You mean you're listening to Bloomberg Business Week coming up a guide to wellness by our Bloomberg Pursuits team. We're talking to prehab, not rehab, Carol. We're also talking

delicious foods that are also subtly healthy. You're gonna sneak some help in there too. Also, the most expensive yoga ball you've never heard of until now. This is Bloomberg. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovich from Bloomberg Radio. This week, our Bloomberg Pursuits team is out with its special Wellness Section. It's a series of stories dedicated to helping you take

charge of your well being, both physically and mentally. I don't know about you, Tim, but I need all of it. You know, kind of makes sense for the new year. I think, I think this is the timing of this is really good. People are kind of, you know, off of their New Year's resolutions already, but they're still thinking, Okay, well, how can I make get it off to at least

a better start than the stock market. Well, here to give us an overview of the section and maybe help give us a few tips on how to approach a more healthy lifestyle and year is Bloomberg Pursuits Editor Chris rouser Um. Chris, I want to start with just the how how you thought about these? Right? Because it's it's kind of like wellness with a twist. It's the influence of the pandemic and the idea of people not necessarily going to gym's and still working out at home. Um,

how can we be healthier coming out of it? Yeah, this past year we people really looked at what they were doing and their lives because they had nothing else to do, and really got into wellness and figuring out what was working and what wasn't working for them. Um. And so wellness is a huge buzzword. It has been for a few years, but never and more than now. It's something like a four trillion dollar global industry and

it's only growing. So every year around this time we like to look around and what's out there, tell people kind of what's real, what not to worry so much about, and what you can actually do that will help in in a realistic way. So I have to worry about prehab. What the heck is that rehab? We're trying to make you go to prehab? Carol said, no, no, no, it's and lovely Dulce. Atone that you're hearing is Kate Crater, our food editor. She's going to join us in on

this conversation. So what is prehab though? So, prehab is the the art and practice of training yourself to work out better. To live better and to be more physically prepared for everything that you go through in your life. So I'm I'm a person that loves Barry's boot Camp, right, but when I started doing it, I didn't prepare myself

at all. I just threw myself in. And if you're if you're on your own these classes, you can kind of build imbalances and you cannot be doing it right because you're not working one on one with a personal trainer, or if you're just sitting at home at your work from home space and you're hunched over your little laptop, which I was for a long time, and your posture

gets screwed up. It really can help to go see someone who can train you how to train and like teach you how to sit and exercises and even how to think about your posture. Uh, And that sets you up better for healthy living in the long term and you feel better. What about when it comes to stretching, I mean, I think a lot of people don't even they struggle to fit in the time of working out, let alone prehab or stretching. But in this issue of

Bloomberg Pursuits, you give us some some stretches. Actually, it looks like I'm at the physical therapist right now. Through this We don't you know this our in our section, we don't always have those little drawings of people doing different stretches or gestures or exercises. But you know, we talked to groups like MYO D Talks in l a UM and Body Evolved in New York to tell to sort of give us certain stretches and exercise that that

are generally helpful for everyone. So if you go to the Pursuit section week this week, uh, there are six that are really great, some of which I already do. Foam rolling. You may know about the world's Greatest stretch rolling hurts me too much, but that's because I need it. Yeah, And you're just shaking your head and you're saying it's no, I'm I believe it, um. And these are just things that you can do every day to really set yourself up for success and just to feel better generally. You know,

it's interesting. I had to do some physical therapy for like this next thing, and it was all because of working at home, and I feel like everybody should do like at that point that physical therapy and work out, like it made sense to me in turn of that combination of having somebody who understood the body and how things interact, but also then including some work out. It just made sense to me, and it helps if you have a goal actually honestly like because then that makes

you do it every you know, every morning. If it's going to take ten I have to do it. Well, then you're you're like, Okay, I want to run a marathon or you know, I wanna I want to have, you know, be able to do this thing with my kids, like take an adventurous trip or something, and that actually really makes you do it rather than you're like, I'm doing the stretching. I don't really know what the difference it's making. Um, So it helps us set those goals

for the future. Speaking of running, can we talk about running on neutral? Yeah, let's do it. Do you know about monk? Hey? Do you know about mung? Am? I saying it? Ready? Tell me about it all right, Chris, tell us about So hitting mung is this craze in South Korea. Um, And basically what you're trying. Mung is basically a state it's a slang term for like a state of blankness in your mind. And what hitting mong

is is basically meditation or contemplation combined with nature. So you know, there's a movie that's running in theaters in South Korea where you just sit and watch forty minutes of clouds going by an airplane window. Um or okay, creater, was that an ey roll? I was gonna say, that's a decompress after squid Games? Right, how do you reconcile hat? Tell me? Yeah. So the theory is that you know, um, our brains are were we used to live in nature.

I don't know if none of us remember, but there was once a time, and you know, our brains are evolved to have a certain amount of downtime. So like you know, doing Crossford puzzles is sort of restorative in the way that you you exercise your brain. Yeah, but that's like active using your brain, and and meditation and hitting mong is passive, and that actually like clears out

your thoughts. And people have done studies where if you take a walk in a city for fifty minutes and you take a walk in nature for fifty minutes afterwards, the people who took walks in nature had better short term memory capacity. So it really actually is this sort of necessary thing that people in modern life are realizing like, oh god, okay, so how do how do we do this Christ in an urban environment without access to nature?

You you mean you a you can watch like videos that seems you know the time when we used to be in nature was when I wasn't staring at my phone for five hours a day. Go and walk by the East River, walk in a park, sit and look at a river. I mean, this sounds dumb. And you know, some scientists recommend, you know, two to five hours of this every week. I don't think any one of us are doing five hours. So let me get this straight. Um, we have to fit in time for prehab okay, okay,

that's you. We have to stretch better, okay. Um, we got to exercise, yeah, but that's prehab is exercise. Prehab is exercise, okay. Um, and then we got to go mong yeah okay, so I'm I'm getting there. You're getting there. Were not even healthy eating yet. Okay, that's true, but eating your price eating with eating so you're not losing any time to it. Talking about is the first step though, right,

They're almost there to him, thank you. Let's talk about clean food because we feel like you've been you follow this industry for so long, and I feel like people have been thinking more and more about what they put in their mouth. I feel like this is the next chapter of it a little bit. It really is like the big trend in two is healthy eating. And it's not a brand new situation. You know, people have been you know, on special diets for years and decades and

all of it. But following the pandemic, when a lot of people I eat everyone was cooking for themselves and started to see what was in their food and how it made them feel directly when they were done with it. Now that people are going back out to eat, there's a lot of food hangovers going on because you're eating food that wasn't prepared by you and you don't know

everything that goes in. And it goes from like saturated fats to the kind of oils the people are using, and they've become the public has become increasingly conscious of what is in their food and they want to pay more attention to it. The ideas of substitutes, right sweetening traditional condiments for example with maybe beat sugar or or something like that. And you describe in your subterfuge um

so the idea. But the idea is it's it's transparency too, right, because it's it's replacing ingredients with ones that what are they healthier? Many it's a good question. Um, In many ways there are you should always look at the ingredient labels and that's something that's becoming increasingly popular, or something called clean labels that have minimal ingredients and then you can recognize and pronounce all of them instead of something

like methyl cellulos run in the other direction. Very yeah, exactly put that back on the shelf. But um, but now, so that's been something that's happening a lot of the Whole Foods they've seen, um, a big trend in the blurring between supplement and grocery aisles. They called that out as one of their big trends for two. But it's also happening at restaurants, which is something that we hadn't

really seen before. There was, I mean, with the exception of Los Angeles where you can really live that life, there were um, sort of you would go to one kind of restaurant after you went to Barry's boot camp. But if you're going on a date, then you hopefully going then you were probably going somewhere else and in a place like Austin, you know where. Maybe not Coincidentally,

there's a whole big tech segment moving in. They are starting to open places that thread the needle, that where you can get your grain bowl, but you can also have a Texas wago. All right, can we also talk about superfoods for your skin? Chris? Chris? First of all, I want to know when they pitch this to you, because you do, you guys cover a lot of like products and skin car I love it, I love it, I love it, love and so can we eat like the creams we're putting on our face? Basically, YO, might

be on your own with that one. Tell us you you try and tell us people's like products smell like fruits and roses, and some people smell like science and I usually smell like science. Um. But there is a big trend in superfoods being market being added into um, into skin products and also marketed as such. Okay, I want to end just with something for the body. Okay, because here I am hunched over in a chair with a microphone, hunched over computer with a couple of monitors.

Should I be sitting on yoga ball? I mean, if you ask your luxury editor. Yes, uh, the one this week is a Christian do Your Yoga ball which you are meant to sit on and um, it's a it's a sort of a standard yoga ball that has this this very plush, cushy cover that's very beautiful. We suggest maybe you would want to sit on it and take selfies.

It's part of a collaboration with Technogym, which actually the whole Do Your technologym partnership has these really cool, very useful tools like a little mini efficient work bench with weights built into it and a treadmill. Um, so we we wanted to showcase the yoga ball as a stand in for the whole set, which we actually really like. Do you have one? Do I have one? I do know I have a yoga ball. I don't have. This one looks really cozy. Can't you just write Christians? Do

you are on it? Her? Yes you can, Yes you can. Thank you all right, guys, we gotta run. Thank you so hich really appreciate it. That's Kate Creator and Bloomberg Pursuits editor Chris Rose are. A big thanks to them for joining us with a look at this week's wellness special. In Bloomberg Pursuits and that reps up the weekend edition of Bloomberg Business Week from Bloomberg Radio. Thanks so much for joining us. I'm Carol Masser and I'm Tim Stunk.

Be sure to tune into Bloomberg Business Week. It's Monday through Friday. It starts at two pm All Street time on Bloomberg Radio. You can also watch our daily broadcast on YouTube. Just search Bloomberg Global News. Also check out our Bloomberg Business Week podcast. You can find it at Bloomberg dot com, Apple, or wherever you get your podcast. Bloomberg Business Week is available on newstands now, at Bloomberg

dot com and always on the Bloomberg terminal. You can also see me on Bloomberg Quick Take, available at Bloomberg dot com, slash qt, and streaming platforms like Roku, Apple TV, Samsung TV, and more. Have a great weekend everyone. I'm hungry. I want some facial products, some skincare cream, and I do not want to work out right now? What about yoga? Maybe little pricey? This is Bloomberg