Bloomberg Businessweek Weekend - July 1st, 2022

We're talking about core PC personal consumption expenditures. It was up less than expected for the smallest game since November, still though high. We'll talk though about how persistent inflation might affect your July four festivities. We'll get to that

in just a moment. Also ahead, Nobel Laureate Paul Krugman on where he thinks the US economy is headed, look at the dark side of the late Jack Welch's celebrated corporate legacy, and we'll dig into the Heist Issue, Bloomberg Business Week's annual double issue dedicated to tales of robbery, s ams and snitches. All of that to come first up if you're thinking of having friends over for the Fourth of July, brace yourself. Hosting a party of ten could cost eleven percent more than it did last year.

That's according to the Wells Fargo July fourth Food Inflation Report. Bloomberg News senior markets reporter Katie Greifeld and I spoke with Carol Flynn, ag tech analyst at Wells Fargo, and we asked her where to find some relief this fourth of July. It's absolutely a pain point. Food price inflation is hitting everybody's wallets. Um. And we wrote this UH research just to figure out where that pinch of inflation could be potentially solved by finding relative value and more

palatable price points. And so what walk us through some of those relative value plays? Feelss like I'm talking about stocks here, but when it comes to food in particular, I mean, one are the substitutions that one could make if they are trying to host a party and not you know, pay a fortune for it. Well, that's a great question. You know, it's year over year in UH food price accloration that we're looking at here, and the substitutions are truly going to be UM things like, what

else can we put on our grill. It looks like brisket is going to be more um affordable than try hip this time. Maybe, if you're gonna stick with the Hamburger patties, take a look in the frozen food section, anything that's sort of had shelf stay, book stability, or frozen foods versus perishable. You're gonna see some specials out there in some lost leaders. Um, it's gonna take a little more effort to make sure this is um the

food price, the budget is taken care of. All right, Carol Kate is already weighed in, She goes, I'm not gonna eat shrimp and port tacos. I heard that there are so many prigans in the produce department, and you don't have to have that. That's I mean, that's the beauty of an American food and agricultural system. I mean, we have an incredible, incredible we'll see your foods available.

But are shrimp tacos actually cheaper this time around? The reason we brought up shrimp is actually shrimp prices have not increased over the last five years. But you look at the other proteins on the grill, and they're looking at twelve or fifteen percent year over year increases. So again all about relative value. So we'll see the shoppers looking for relative value. If shrimp is already on your grill,

you may have more of it this time. If there's something else that you like, um, then you're going to be maybe looking for substitutions in the frozen case or some new innovative menu items like shrimp. Uh no, I don't. I was gonna say shrimp prices probably haven't gone up because it's a weird food. It is that a weird food. It's a great food, weird texture, were not a fan.

But in any case, I also want to talk about alcohol because personally I don't really like beer, more of a white wine gal, but a lot of people drink beer and other beverages at the fourth of July. What's the outlook there. It does look like some of the higher priced beverages in the beer case are up, and we're already seeing demand flow to the domestic um super

premium brand, so people are already making a change. And the white wine and especially killed white wine is still out there, and there's some great, amazing brands that are at lower price points. If you're still looking to still you know that, you know, to prepare with a really nice wine, you're gonna be okay, okay, alright, So talk to me too about veggies or things like avocados between now have been expensive. We've talked about shortages. I feel like over the last year or so, where are we

on that. Well, avocado shortages is another story altogether. You know, mostly supply chain. There's always a perishability issue and weather driven issues. Um, But California avocados are just about to come into season, into the peak of the season. So look for your in your protuce department. Again, seasonality is going to drive a lot when their hire supply. You're going to see prices get moderated and things move quickly. It's very dynamic space in the in the protest section, So, um,

talk about sort of weird textures. People talk about that with avocados, but once you are a fan, it's usually a lifetime issue. So so are you saying they're expensive but they're around No, I actually think that price is going to come down because we're gonna better supplies because we're coming into the California see the avocados. Actually, I am not in avocado every single morning half of all. Not an entire avocado left the record ship. But we've

covered the main course, We've covered beverages. What about dessert. What's the outlook there? Well, I think you might want to look at some of the non dairy alternatives. I'm a big fan of the real milk people, so don't forget the real live cream. But it does look like

those are those priceges have gonna be up substantially. That was well Spargo actech analyst Carol Flynn coming up a new book reveals what maximizing shareholder value really entails and says the late Jack Welch has celebrated leadership techniques actually crushed the soul of corporate America. In many corners of the business world, he is still a hero, and that's

part of the debate. I wanted to stir up not just a referendum on Welch himself, but a broader conversation about what we admire, what we look up to, the kind of business leaders we want to be putting up on those pedestals. Author of New York Times reporter David Gillis joins us, next, you're listening to Bloomberg Business Week, this is Bloomberg. This is Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes. Tim Stenovik from Bloomberg Radio.

The Manager of the Century. Fortune called him upon his retirement. Others referred to him as a rock star CEO, a champion of six Sigma and Stack rankings. His name became synonymous with consistent and predictable earnings growth and shareholder gains as well and with M and A chop cuts off

shoring and outsourcing. We are talking about the man who broke capitalism, or at least that's what a new book calls Jack Welch joining us as David gillis Corner Office columnist, an award winning business reporter for The New York Times, author of The Man Who Broke Capitalism. How Jack Welt gutted the heartland and crushed the soul of Corporate American How to undo his legacy. David joins us via zoom in Canada. David um delighted. We've been looking forward to

talking with you. How did he go from being somebody who was, you know, as we said, the Manager of the Century and we lauded him for his consistency, to someone who we realized, you know, was doing some financial engineering. Well, I think that evolution of of how we think about him is still very much underway. You know, there are still people who vehemently dispute with my characterization of him. In many corners of the business world, he is still

a hero, and that's part of the debate. I wanted to stir up not just a referend him on Welch himself, but a broader conversation about what we admire, what we look up to, the kind of business leaders we want to be putting up on those pedestals. So listen, Welch himself had ups and downs during his tenure. We have to remember, shortly after taking over, he wasn't called the manager of the center. He was called neutron Jack because everyone was so upset with his mass layoffs and factory closures.

But over the course of his twenty years as CEO, he was able to repair that initial damage to his reputation and go out from the company on top. So this, you know, process of thinking about the legacy of a man so consequential. I don't know that it's ever over. And what I'm trying to do with this book is put his tenure in perspective, yes, but also make it a conversation, I hope about more than just one man,

but about a system. And it's a system that I don't need to tell you both has created all sorts of bizarre negative externalities and strange consequences and inequalities that we as a society are still wrestling with every day. Well, David talked more about that system, and you know, we'll just roll in it. I mean, how do we go from the manager of the century into, as you say, the man who broke capitalism? I think the story for

me really begins in the post war years. Actually, that was what some people call the golden age of capitalism. And it was so fun to hear just g. S. Stock, you know, mentioned in the ticket right before this segment, because g E. It's a reminder has been this influential

Bell Weather Bedrock Corporation for more than a century. But back then, in the late forties, the fifties, the sixties, the way GE treated its employees, the way IBM and Johnson and Johnson treated their frontline employees was just fundamentally different than the way we think about major multinational corporations treated most of their employee is today, which is to say, back then, in this golden age of capitalism, companies and ceo s were excited about paying people better and better wages.

They were eager to share the wealth that they were creating with their employees, with their suppliers, and even with the government. In the book, I cite the nineteen fifty three g E annual report where the company boasts about paying so many taxes. That's a world away from where

we are today. And part of the way, a big part of the way we got there was through the way Welch changed g E. Upon taking over g E, everything I just described basically went out the window, and Welch brought to the job this maniacal focus on increasing shareholder value and on making g E the most valuable

company in the world. And we can talk about the ways in which a kit it, but it's that it's that change in perspective that has partnered us from there to so one thing I'm curious about, and you get very much into ge capital and again that was another thing that we said, Oh, how great they've got this finance arm. Geither into all these things. They're a microcosm of the economy but they were actually overexposed to financial But that, you know, and some of what we're talking

about is not new. Like I think about people who came on and were critical of G and its consistency and were suspect um, you know, there were those certainly naysayers that were out there. Um, when you we look back, should somebody have been held accountable? I mean they did pay some fines correct sec fines, um later on in

terms of I believe they're accounting. I'm not sure if I'm saying it exactly correctly, but um, should they Should people have been held accountable for what they were doing or what they were doing was it was legal but maybe a little squishy, well a lot in there. It's not my job to say how and when we hold executives accountable. And I think it's also parting to point out that during the eighties and nineties there was just much less transparency than there is today. You know, Sarvings

Oxley was passed after Jack Walts required. What happened though, is right after he retired. Bill Gross, who of course married child, just wrote a great book about UH, was among the first to say you know this eighty quarters in a row of meeting or beating analyst expectations like

that doesn't happen naturally. Something is going on here. And then it was several years after that, as you referenced that under mult g E settled sweeping accounting fraud charges with the SEC that pointed to years and years of impropriety in terms of how they managed the books, how

they managed their earnings. So listen, I don't think we can ever know exactly what was going on there, but what is clear and what welch is owned deputies said on the record then and even to this day, was that g E Capital was the key that let the company, let the parent corporation meet or beat those analysts expectations quarter after quarter in this most unnatural way, and that they did it with a flurry, you know, within the last week or two of a quarter, just funding tuning

exactly whatever numbers wanted to you know, hit the number that they thought that the street wanted to see. And David, I want to talk about the the end of the title, how to undo his legacy? Walk us through that. Well, it's not easy. Listen. Uh, We're in a moment and I've covered CEOs for the last decade or so. You all know this. There's a different ethos in business today. CEOs are talking about their responsibilities and who they serve

in new ways. You know. Called it stakeholder capitalism, call it cs R, E, S G, whatever you want. There's I think a broad recognition from companies, from CEOs, from the Business Roundtable that this era of shareholder primacy has probably run its course and that it's time to start considering a whole, much broader group of stake horse And that's easy to say, in practice, it's super hard to do.

That was David Gallis. He's a New York Times reporter, author of the new book The Man Who Broke Capitalism, How Jack Welch gutted the heartland and crushed the soul of corporate America and How to undo his legacy. That book it is out now. Katie Gray felt of course, joining us there as well. Still ahead on Bloomberg Business Week, why the recent landmark rulings on abortion and guns shows the Supreme Court is ready to jolt America's Google system.

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 O six one to San Francisco, Bloomberg nine sixty to the country, Sirius XM Chado one nine team and around the globe the Bloomberg Business app and Bloomberg Radio dot Com. This is Bloomberg Business Week.

Big recent High Court decision. You know that the Supreme Court overturning Roe versus Wade were now roughly half of the United States have either already or are expected to enact bands and other restrictions on abortions. And just one day before that ruling came out, the Court's conservative majority struck down a New York law that prevented most people from carrying a handgun in public. Greg Store covers the

High Court for Bloomberg News. He writes that a group of republic injustices are poised to jolt the US legal system. It's a court that has been very aggressive. The Conservatives

clearly have their seat. Collective sea legs. Uh. You know, these rulings on abortion and guns in the last few days were notable not only for the tremendous practical implications, but also the way they went about the reasoning, very sweeping reason reasoning about how to interpret the Constitution and in particular what rights are in there and what rights aren't. So how do we as US citizens think that this continues to play out. Well, the Court's going to have

another huge term next next year. Um, they have big cases on affirmative action, religious and gay rights, UH, clean Water Act case, and they're just getting started the Uh you know, based on what we've seen from what the Court did this term. Uh, they are determined to They're

willing to overturn precedents. They read the Constitution through that originalist lens of looking at the words and what they meant at the time, and they're going to evaluate American tradition and history as as they see it to see what sorts of rights were protected at the time the Constitution or perhaps the Fourteenth Amendment were enacted. And for the most part, that mode of analysis gives you very very conservative results. What are the cases that are set

to be argued before them? And given what we know about this court already, I think it's I don't know, I mean, it seems like it's we have a good understanding of what these justices believe and how they've interpreted the Constitution thus far. So I don't even know if you know this better than I would. But are things actually up in the air at all with some of these cases, because it's kind of clear how some of

these justices think. Yeah, it certainly is. And oftentimes the question is just whether the court's going to choose to get into an area once they've taken up a case. Uh, it's pretty clear which way they're going to go. So good example is the I mentioned affirmative action. They're gonna in the fall take up cases challenging the use of race and college admissions at at Harvard and the University

of North Carolina. There's also a case, a variation of that case a few years ago, where the baker didn't want to make a cake to celebrate the same sex wedding. In this case, it involves a website designer who doesn't want to design web pages for same sex weddings. And UH, with both those cases and some others, there's not a huge amount of doubt about which way the court's going

to go. Maybe there's some question about how far they'll go. Um, But but in terms of the direction, UH, get been given the makeup of this court, and you know their their their willingness to issue rulings that may prove unpopular, like like quite possibly the abortion or ruling will prove unpopular. Uh. Again, it's it's pretty clear which way the court is going

to go. Greg. You know, I do wonder and I wonder what's the conversations you're having with academic scholars of the Supreme Court and you too, who have followed it for so long about there are issues in modern life that I think it's safe to say the fathers of the Constitution couldn't even think about, you know what I mean. So, how do we have to think about an evolution of

our Supreme Court, maybe a more modern Supreme Court. Yeah, that's a really you know, it's interesting, Carl, he used the word fathers there, because of the Constitution was drafted by men, the fourteenth of men meant, and it was ratified in eighteen sixty eight by men. And in the case of abortion, you know, very much a right that affects women, uh in a way that it doesn't affect men.

And I think that's actually going to be a real uh A point of contention going forward is that this is a court that looks to as I said earlier,

you know what what rights had traditionally been there. You know, they did a survey of American law and and and talked about you know what, what where abortion was allowed, where it wasn't allowed throughout throughout history and to the extent that history doesn't reflect all the modern realities, including the modern reality that you know, women women vote that uh, black people vote in a way that they it was

very hard for them to do before the civil rights era. Um. You know, it's a question of whose constitution are they interpreting And so very much what I'm talking to to folks on on the liberal side of things over the last few days, that's the kind of stuff I'm hearing. So Um, it's just interesting to think about the history of the courts and kind of where this goes ultimately.

Should we anticipate any kind of structural changes? I know, right off of you know, Friday's decision, people are talking about, you know, expanding the Supreme Court. Does anything change? Well, you know, the problem of course for those who want to expand the court is, uh, you know, they don't have the votes right now, and there's no sign that they're going to have the vote. Our thanks to Bloomberg

Supreme Court reporter Greg Store. We should note that Stephen Bryer officially retired from his post this past week, and Katangi Brown Jackson was sworn in as the Court's first black female justice. You're listening to Bloomberg Business Week. Up next, world famous economist Nobel Laureate Paul Krugman on the High Court, inflation, and the biggest risk facing the Federal Reserve. This is Bloomberg. You're listening to Bloomberg Business Week with Carol Messer and

Bloomberg Quick Takes. Tim Stinovik from Bloomberg Radio. Our next guest is a Nobel Laureate columnist for the New York Times. He's also the author editor of more than two dozen books, as well as Distinguished Professor of Economics at the City University of New York Graduate Center, and he is someone we want to hear from at pivotal moments for the U S economy and really the country as a whole.

He really looks at everything. While talking about, of course, the one and only Paul Kruegeman, My co host him Stanivic and Paul Sweeney of Bloomberg Surveillance spoke with Krugman recently about the FEDS path forward, and other pressing macro economic concerns, such as the potential impact of the Supreme

Court's abortion ruling on our labor landscape. One of the big driving forces of change in the US economy of the past couple of decades has been this um kind of unequalizing as the knowledge economy has wanted to gravitate

towards big cities with highly educated populations. Um. And now there's gonna be additional factor, which is um, if companies want the kind of workers that they can get in those locations, are they going to want to locate in the states that are going to be have really overregressive social policies. The kinds of social policies that that they're

the workers they want really don't like. So you really have to think, you know, how how does Texas or Florida fair in this kind of competition for business, in this new legal environment, this federal reserve. They have a balancing act, they're very tough balancing act to reign in inflation while not going too far and pushing this economy into a recession. How do you think that plays out? Well, it's I mean, the fundamental problem is not does not

actually look to me to be all that hard. It's a weird thing to say, but it's pretty clear that the US economy got overheated. UH fiscal monentary policy, Um, it was misjudged. I was among the people who misjudged it. And the U s economy got overheated. And so we have most of the inflation we're seeing as special factors that will go away. Russia won't invade Ukraine every every month, but there's a good, solid extra maybe two points of inflation.

Excess inflation that results from an overheated economy. Cooling off that overheating is not fundamentally a hard thing to do, and and needn't be all that hard, needn't even involve a recession, just a little bit of a an uptick in the unemployment rate. The problem is precision. I mean, the Fed is not sure however heated the economy is. It doesn't know exactly how much of our of a

rate rise is needed to do this. So the chance of of you know, overdoing it, of slamming that breaks a little too hard and causing a bit of a skid is definitely there. So it's a reasonable chance that will have something that will be formally a recession. But the chance of a really you know, sort of early eighties type grueling and anti inflation flight, uh that that doesn't look serious. How deep of a recession could we have? How long have the recession? How high could unemployment go?

It's well, how high it could go could be over I mean, it probably has to rise over four. And it's not hard to come up with a story in which the FED bobbles the thing badly enough that it briefly goes above five. But briefly. There's nothing at all in there to suggest that we need um an unemployment rate that's over five for any extended period of time, and the Fed will of course correct if it does

look like we're heading in that direction. So, just to that point, Paul Larry Sumners is out with an idea of five years a five percent unemployment needed to bring down CPI. That doesn't necessarily seem to hold water to you. That looks to me like Larry is for reasons, I do not understand thinking that we need something that's like a um a sort of a half vulcar, that we need a massive period of excess unemployment for an extended

period of time. To crush inflationary expectations, so, which is what we had in the early eighties, Except everything every indicator I look as says that inflationary expectations are actually pretty mute. It when you consider the price of gas, the fact that surveys are showing that people expect only three percent inflation over the next five years, um that they break even rate, and the bond market is is

well under three percent. Now, I just don't understand where the idea that we need to do something like a vulcre in the economy of twenty two is coming from. But what about the idea that so much of this inflation is outside of the Fed's control and so much is due to demand to supply constraints. Excuse me? And the FED, you know, has famously blunt tools. How can the FED get this under control? If if they can't drill for oil, if they can't refine oil, and if

they can't build houses. Know what the FED does? Is it? It? It? Uh? You know, give me the monitary policy to deal with the things I can and to accept the things I can't. The Montreal J. Powell, it's a it's a these these things will pass. That's the whole point. I mean, the big misjudgment that many of us made was to focus only on these things and that they were transitory and

uh um and would pass fairly quickly. But they will pass, and so what the FED needs to do is to get some kind of underlying inflation rate back to around his two percent range, and then the other stuff will eventually. I mean, gas prices are already coming down. So think about the the things that really are the appropriate targets of monetary policy on a global perspective, Paul, I mean, you know a lot of folks have said that the US federal reserves behind the curve, but I look across

the pond and I see the Bank of England. Okay, twenty five basis points. We heard from Christine Leogard at the ECB that they're thinking about raising interest rates next meeting. How do you think about the the European response, and maybe from the Bank in Japan as well, relative of where there the fet is. Well, what's the funny thing

about Monterrey policy? Is it? Um? It's it Terrey policy starts having an effect before it actually happens, right the uh So we look at the actual amount by which the FED has raised rates, and it isn't that much yet, but if you look at the rates that matter for the economy, mortgage rates, corporate bond rates, they're way way up. So the anticipation of future FED rate hikes has already

done a lot. And the peculiar thing is that although the e c B hasn't raised rates as much as the FED, um the those indicators of what people are expecting are every bit as big, if anything bigger in Europe than they are right now. The the fact of the e c B is is pursuing a tighter monetary policy than the FED is, which seems to me to be crazy. I mean, the the underlying inflation rate in

Europe is probably substantially lower than it is here. They didn't have an American rescue plan, they don't have the rapid wage increases that we've been seeing. So I'm my concern is not that the e CP is behind the curve. My concern is actually that the e CP is way ahead of the curve and that that they're going to do what historically the ECP has tended to do, which is to over contract. Interesting, all right, so you mentioned kind of wages. That's kind of where I wanted to go.

The the labor market has been just spectacular. We've got, you know, more job openings than we know what to do with here. Are you concerned? Do you think we will in fact see meaningful wage inflation because the five percent uh, you know, we we see it's just not

keeping up with that headline number. Yeah. Well, the the numbers, I mean, wage rates now are are rising depends on We're having a lot of problems with adjusting because we have a changing composition of the pandemic and all of that has really screwed up with our ability to interpret

the data. But I would have said that we seem to be having wage growth in the fine ish percent range, which given productivity growth, is underlying inflation, and the probably full or a bit less range, which is consistent with the other indicators we have. So basically and wage growth, if anything, seems to be slowing, even though we haven't yet had a uh significant as an unemployment, it looks as if they wage numbers are are coming down a bit. So wages are not They're they're not They're not an

additional problem. They're basically telling the same story as everything else is. We'll have some anecdotal evidence of inflation. Did you get a raise? The best hogies in the world are hog Haven from Princeton, New Jersey, and they actually did raise the prices on the hogies. There was down there a couple of weeks ago, and they haven't raised I mean, I don't think so. So they're making up for some lost time. Paul Krugman, down in Princeton, you're

seeing some inflation down there. Oh yeah, well, I mean it looked lots of things. I mean, it's ah um. I'm surprised to actually give them the way that a lot of companies that behave. They didn't just make the hogies smaller, which would both be a way to conceal the price increase and probably be good for your health. Inflation, it's a real thing. I've actually noticed it happening with ice cream containers I'm buying are smaller. Uh. Paul, I'm

wondering about the peak federal funds rate. If you would give a prediction and as to where you think it will end up. Yeah, I mean that this is that's that's that's a that's a mystical art. And even the people who do it well do it badly. Uh. So you know, I'd say three hundred paces points. What do I know it's And the truth is nobody knows. J. Powell doesn't know. We're we really are. The FIT is

feeling its way forward here as it should be. I mean, the at any time, any attempt to lock in a rigid path, given the uncertainties about not just about the effects of policy, but even about where we are. I mean, the US economies clearly overheated. How much overheated? I don't know, so no, I mean this is yeah, I I mean I I don't have any reason to think that the No.

I my guess is that the markets are probably overstating how much the FET is going to raise rates that it's probably um, We're probably going to be seeing just as inflation went up faster than people thought it would as the economy overheated, inflation probably come down faster than people thought it would as the economy cluls off. Our thanks to Nabell Lauride economist Paul Krugman for joining Bloomberg's Paul Sweeney joining Tim Steneviek for that interview as well.

That wraps up our first hour of the weekend edition of Bloomberg Business Week from Bloomberg Radio. I'm Carol Masser. Ahead. In our next hour, we dig into the annual Bloomberg Business Week heist issue and some of the wildest, most lucrative crimes ever uncovered. Plus how serial entrepreneur Mark Laurie's latest multibillion dollar venture aims to put your favorite restaurants

on wheels. This is Bloomberg. This is Bloomberg Business Week inside from the reporters and editors who bring you America's most trusted business magazine. Plus global business finance and tech news as it happened, s Bloomberg Business Week, Carol Messer

and Bloomberg Quick Takes Tim Stenovik on Bloomberg Radio. Plenty ahead in our second hour of the weekend edition of Bloomberg Business Week, including the growing trend of using cannabis for chronic pain and sexual wellness, plus the startup with an e commerce pedigree and reportedly multibillion dollar valuation that may turn out to be the next big idea in mobile food delivery. The CEO of Mark Laurie's Wonder Group

stops by first up. Though this hour we get into a special double issue of the magazine Bloomberg Business Week is all about the heist issue. This week and always it's a great, great Summer read. Includes a story about how the one hundred forty year old security firm a d T linked up with tech giant Google, which also happens to be one of its biggest threats. Bloomberg Business Week editor Joel Webber and Bloomberg News technology reporter Austin Carr have more. It's a company that got its roots

started in the telegraph business. Ad T actually stands for American District Telegraph UM. And they've really been around the security space for for that many years, you know, investing in alarm systems and and those yard signs that everyone recognized in the suburbs UM. But in the last couple of years they've faced a lot of disruption from Silicon Valley, particularly from companies like Amazon and Apple, Microsoft, Samsung, and

especially Google. And this is a story really about these two companies that in many ways we're competing just a few years ago, now realizing they actually need each other to get to the next stage of growth in the Spark Home and Spark Security spake. All Right, so you say they both need each other. How come they were missing components to to sort of really grow out their market share in the smart home. UM. Basically, Google has

an insanely sophisticated AI infrastructure. They have thousands of engineers expert in everything from facial recognition to voice recognition. Uh. They have this massive portfolio of of beloved consumer hardware, uh you know them under the brand Nest they make really high tech service stats and cameras and video O doorbells. UM A D Team. Meanwhile, it's a boke ratone based company that they didn't really have much tech to be honest,

they really outsourced all their hardware development. UM. You know, I've spent a lot of time at the A D T offices and it looks nothing like the Google's offices and Mountain View. There's not you know, the sort of R and D labs that we're sort of used to writing about. UM. But what they do have is this massive army of thousands of installers who go around they're really expert at at wiring up homes with all this

security infrastructure, and then they also handle seven installation. And so basically the idea is that these two companies came together, one that was focused on more uh do it yourself devices with with Google and the other that wants to do the professional installation for you, and the question will be whether that's something consumers want to pay for and indeed subscribe for him for months on end. Well, let's talk about to do it yourself angle and for that

we bring in Joel Webber. He's the editor of Bloomberg Business Week. He's with us in the Bloomberg Interactive Broker studio. Joel, I'm I'm you know. I was reading this, this story by Austin that's on the upcoming issue, the Heist issue of Bloomberg Business Week, and there was this part where Google thought that people would want to you know, drill drill holes in their wall and set up their own nest, drop draw or drop cameras. And I thought back to the anxiety attack I had when I was trying to

install the next thermostat, which is owned by Google. Austin writes, I couldn't. I could not get it hooked up, and I had to actually call a professional in order to make sure that we had heat that night, because you know that over here. Yeah, I can't figure. I don't even if you supposed to do that, when the when the temperatures wildly uh influx. UM. So to bring it to a place not about us Austin UM Boca ra Tone,

not not known for being a hotbed of of tech innovation. UM, And I'm curious, you know what, what did you learn about the company and its culture? I mean, a hundred year old company, there's not that many of those to begin with. It was pretty fascinating going down there. You know this this is really a company that is really obsessed with its its history. When you go to their

headquarters UM, which is in boke Raton. First of all, they do have a big at T blue octgon yard sign out front, which is perhaps uh the one place where you don't need that sign because no one's going to likely break into an ad T company. In the front hall, they have you know, hundreds of a hundred plus years of history all arranged there from the original what was called the callback call box back the day

with telegraph dials to call the police or the fire department. UM. They have the original nineteen eighties call boxes that the key pads and the control panels that you're used to seeing in sort of mcmansion's in the suburbs that are sort of yellowing because they haven't been upgraded for decades.

And this is a company that's trying to jump into the twenty one century, even though it's sunk in many ways in the twentieth and nineteenth century, if not um and so what I learned from going down there is just that they didn't really have much infrastructure to build on. When I went to their tech lab, which is called the Boca Lab, it's around the corner from their headquarters,

and it's it's basically had a little strip mall. I mean it was next to a children's gymnastics center, a custom closet denied uh you know, uh custom closet designer office, And when I went inside, it's a lot of cubicles, it's very small, it's just got a brown carpet it And from most of the time they just they're mostly validating other people's hardware. They're not actually inventing their own.

They didn't have a product arm. In fact, their product group used to report to marketing or the I T department. It was really about building you know, sales channels or web tools to make things easier for their installers. But they didn't have really a design group as their ct O to only we've never done an industrial design of a product before, which is, for for someone who writes a lot about Silicon Valley, pretty shocking to hear at

this point. There's also this element within this story, Austin, that it's like you set up of what could be a heist within a heist, which is the best kind of heist, as you know from prior heist excursions with us, which is basically like a T, A D and T is getting into business with someone that maybe eventually doesn't need them. How does the company tackle something like that? So A d C actually spells that out in their

their ten K risk factors. They do note that one of the ironies of this big partnership, which involves Google taking a four fifty million dollar steak in ad T, is that Google could just end up a major competitor if they decide to offer their own security services and sort of supplant uh the A D T subscriptions that that they offer directly to customers. Um, and that's a

huge risk. That story from Bloomberg News technology reporter Austin Carr, who joined us along with the editor of Bloomberg business Week, Joe Weber up next our Heist issue cover story and Art Crime for the Ages takes us from the jungles of Cambodia all the way to New York's Metropolitan Museum of Art. Stick around, that's coming up. This is Bloomberg. This is Bloomberg business Week with Carol mass here and

Bloomberg Quick Takes Tim Stinnovan from Bloomberg Radio. Let's get to the cover story, the latest installment of the Bloomberg business Week Heist issue. It takes readers on a journey from Southeast Asia all the way to the Big Apple and explains how an art dealer's empire thrived on decades of epic plunder. Here with that tale are Matt Campbell, Asia editor for Bloomberg business Week, along with Bloomberg Business

Week Editor Joe Weber. Is incredible. But the story, though, is that it really speaks to Cambodia and artifacts at Cambodia, but also the sea change within the art world, where artifacts that were looted decades ago are now in the crosshairs of investigators who are trying to actually return them. Um so, so Matt talked to us about Douglas Slashford,

who is he? Exactly so Drega Slashford, the late Douglas Flashford, who died was a British businessman who lived virtually his whole adult life in Bangkok, uh and among other activities, he was for a period of about forty years arguably the top dealer in the world of statues from Cambodia, the spectacular Khmer Empire sculptures and some of them a thousand years old or more. And he really built an

art dealing empire. And there are works in a very fancy private collections and huge important museums like the met in the British Museum with links to Latchford all over the world. But but as has now become a parent, he was a part of a looting network and was facilitating essentially the looting and laundering of statues that were being ripped from temple, having their origins obscuward and then trafficked onto the international art market. So what did that

network really look like? There is there has been a perception of Latchford sometimes in the past as as kind of a tomb raider himself, and that in fact is not true. He directed this operation and he did everything that he did essentially from his apartment in Bangkok. But what he did was by whatever was coming over the border from this network of looters and brokers within Cambodia,

who do the last was a buyer. He helped create a huge market for stolen antiquities uh, and certainly had contact with the brokers who were deciding to some extent what got looted and what caught out of Cambodia. So while he was not himself smashing and grabbing statutes, he was really the essential node in this operation. Without him, and particularly without his very energetic salesmanship which made these Cambodian statutes into really big money objects, you know, selling

for for high six and even seven figure prices. Uh, this looting would never have occurred on the scale that it did. And what are the artworks themselves? So we need to do a little bit of a little bit of background history here. Cambodia a thousand or so years ago was the center of something called the Khmer Empire, which was the Hindu and Buddhist monarchy stretching encompassing all of contemporary Cambodia as well as much of Thailand and Vietnam.

Was this very powerful civilization Ongore with the capital Onger a lot being the site of people are familiar with. And these Cambodian kings commissioned massive statues. You know, these are four ft tall five ft tall, you know, six hundred pounds stone objects depicting gods and warriors or themselves, you know, or or their wives and children. Really beautiful figures. And actually when you spend a little time with these objects, as I have, it's very easy to see how you

could become obsessed with them, as Douglas Flatchford was. You went to the Cambodian Jungles, tell us about what you saw and kind of the massive I mean some of these there's some pictures in the magazine. They really are are stunning, but they're they're massive and take us to also where you know, who knew that feet would be so key in figuring out this high stiff you will? Well.

So one of the things that that strikes you about visiting temples in Cambodia is, first of all, they are spectacular, and they are amazing places and and and sort of overwhelming to see you in person. But but as you look a little more closely, you realize what's not there is that these buildings are empty because there were statues. They used to be full of statues. But the statues are all gone. They were all taken years and years ago.

Some were taken under the French, others later, you know, during the Cambodian Civil War and the camer Rouge period and then this really big period of looting which I described in the story in the nineties, and that was

really the golden age of Temple Robin in Cambodia. And however, this looting was sort of crude and left behind remnants and fragments and actually, as you alluded to, feet uh and and one of the key anecdotes and the story relates to matching a pair of statues that had made it into Western collections to their feet which were still

in fit you on the ground broken off. And of course it's possible, you know, with with computer technology, to three D match these objects together and to determine this statue came from this place. And then if you can interview witnesses, find people who remember that being taken, you can actually nail down the when as well, when and

how did this heist begin to unravel. So this has been a long and kind of interesting, very interesting process where You've had a number of private citizens, heritage activists, archaeologists, other people involved in antiquities in one way or another who have had suspicions about this trafficking network for over a decade now. But things really began to unravel in the mid when US prosecutors, specifically in the Southern District of New York, began to take an interest in antiquities

trafficking and antiquities trafficking from Cambodia. So there have been a series of indictments now at both federally and at the state level in New York of people involved in one way or another with the Lashford operation. And in nineteen lash for himself was indicted on fraud and conspiracy charges by St. N Y and that really signaled that there was this extremely serious law enforcement effort underway. However,

Latchford died about a year after that indictment. He was very sick at the time, eight years old and never went to trial. I feel like there are three key players in your story, and we've covered um Douglas Latchford. There's the individual who helped him in digging up in you know, finding they aren't getting it out of Cambodia. There was also an internationally connected attorney that the U

s Department of Justice turned to, Brad Gordon. How important was he in kind of helping figure this all out? Brad Gordon is a really crucial character in this narrative

and and is really a remarkable character. He is an American lawyer who's lived in Asia much of his career, had lived in Cambodia for over a decade now, and he was hired by the d J about ten years ago to begin investigating some of these staffs on behalf of the US government on the Cambodian side, and Brad really became obsessed by it, totally hooked on the challenge of figuring out where these objects were taken and UH

and how they might be returned to Cambodia ultimately. And in that effort he found a really crucial witness, a Cambodian man named talk Tick, who actually Brad referred to with a code name Lyons and Lyon it turned out, was a master looter, an extremely prolific looter, and someone who helped Brad and measurably put it all together. And of course, another great story from Bloomberg Business Week Asia editor Matt Campbell. Check out the entire read in the magazine.

Tell Webber with us there as well. Still to come on Bloomberg Business Week, how government regulation of the cannabis industry could help lead to safer conception. 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 oh six one, does San Francisco, Bloomberg nine sixty to the country Sirius xm Chado one nineteen and around the globe the Bloomberg Business app and Bloomberg

Radio dot Com. This is Bloomberg Business Week. So about two weeks ago, the Bloomberg noted that the U s. Cannabis market size is expected to reach forty billion by and expected to expand at a compound annual growth rate of nearly fift over that time. That's a new report, tim, that's up by grand View Research. Growth driven, at least, this report said, by increased legalization. Okay, so with this increased legalization, how are people who are using cannabis using it? Well,

curely just got some new data. They did this survey with Harris Paul, and it found that of adults who are over the age of twenty one who have ever consumed cannabis, they've actually done so for health and wellness purposes, Carol as opposed to well, you know, recreational I would alright, So let's get to our guests with us is Stacia would cook She is clinical cannabis pharmacistic purely joining us via zoom in New York City. So tell us a bit more about how people are using it, because we

do see growth um stasia in the industry. So tell us a bit more though about specifically where people are using it and for what reasons. Yeah, you know, I think um this survey really helped clear up a lot of the stigma surrounding cannabis. People think that it's for escapism, for you know, fun, recreational purposes. But what we're really seeing is it, by and large, the people that are consuming cannabis are doing so for help and wellness. It's

for stress, it's for anxiety, it's for sleep. And the bigger takeaway is it over half of these people are using cannabis instead of pharmaceuticals. And I think one thing the COVID nineteen pandemic did was sort of shift people towards more UM natural homeopathic sort of remedies, and cannabis falls into that. For a lot of people, How are they using it? Not? Not? What are they using it for? How are they using it? Are they being edibles? Are they smoking it? Or are they Yeah? I mean, I

think that's the most fascinating fascinating thing about it. People think cannabis, they think smoking UM. Smoking is actually bad for you, no matter what it is. So we see a lot of vaporization UM and I think that's a good opportunity to remind people that we're talking about legal, regulated products. So these are products that are sold through legal state markets. They're tested, they don't have pesticides, they

don't have contaminants. There's nothing else in these vaporized products other than pure cannabis oil and the turpenes found within the plant. UM. That's really important because illicit market products are not regulated that way. We're seeing a lot of contaminated products. So these regulated products are are much safer for people to consume. But we're also seeing the pharmaceutical

industry technology brought into cannabis. So if you think of a traditional cannabis edible that takes like an hour to kick in and can last for eight hours. We can change that with nanoformulation that makes cannabis easier to be absorbed by the body. So you can can stumeent in a beverage in a gummy formation. It's going to work in like fifteen minutes and only last for an hour or two. So people can really customize the products that you're they're using to the symptoms that they're looking for.

If you want to sleep all night, you can use something that's gonna last all night. If you just need something for anxiety or stress, right now, we have products for that too. So the versatility of the products really determined sort of what you're using them for. So tell me, though, Stacia, who should be using it? Because when you say homeopathic, and I know there's been um, you know, a lot moving forward in terms of greater oversight of homeopathic remedies,

but I mean, you know, I want transparency. I want to know what I'm kind of getting into. Yeah. Absolutely. I think one of the things that we see a lot are people that are comfortable with the idea of cannabis for cancer, for multiple sclerosis, for Parkinson's disease, like these really severe disease states, and there's a lack of understanding that it actually can be utilized for things like arthritis,

for menstrual ramps, for migraines, for stress, for anxiety. I mean, we have patients and consumers coming in all the time for much simpler symptoms. And even more importantly, not all cannabis causes euphoria. I think that's also a huge misunderstanding that if you use cannabis you're going to be stoned. That's absolutely not the case. The products come in a lot of different formulations, doses, ratios, so we can really customize what you're getting and how it's going to affect

you for your lifestyle. But I guess what I wanted to go back to is remind me where we are in terms of f d A oversight of all of this. There's, yeah, there is no FDA oversight right now. It's all state by state regulated, but that's where that regulation comes into place. So the testing, the formulations, all of that is essentially

pharmaceutical grade um even without FDA oversight. Do we get to a point where there is that FDA oversight or we get to a point where you know, I'm actually going to my primary care physician and she or he is recommending that I go to the pharmacy and pick up some cannabis, not going to you know, a dispensary exactly. Yeah. I mean that would require federal, federal legalization, and that's something I think the industry is definitely moving toward UM

because access is huge. Like right now, UM, someone who is a patient in New York say they can't travel to a different state legally with their medicine UM, and that's a problem. So we need that accessibility to open up UM for people to be able to consume and have, you know, whatever they're using it for, to be able to cross state lines, have consistent product UM. You know, that's all something we're moving toward. But I think, you know, removing the stigma and seeing what people are using it

for is a huge step in that direction. That's Stacia Woodcock, she's clinical cannabis pharmacist Overy. Curately, you're listening to Bloomberg Business Week coming up? Can you really really get a stake? By Bobby Flay from a food truck, The CEO of startup Wonder explains how his company is putting gourmet meals on wheels. We'll talk to Scott Hilton on the other side.

This is Blee. You're listening to Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes Tim Stinovik from Bloomberg Radio. Earlier this month, we noted that the food trucks startup Wonder, led by Jet dot Com founder Mark Lori, has raised three d fifty million dollars. That was another three fifty million, and that latest funding raise giving Wonder a three and a half billion dollar valuation according to people familiar with

the matter. With more and how Wonder is putting investors money to work and how the business is going, we caught up with Scott Hilton. He's the CEO of Wonder. He worked with Mark Lori at Jet and then Walmart. Scott was former chief Revenue officer of the US e commerce operation at Walmart. We though, wanted to hear more about Wonder, So food truck, that's kind of the first thought that people have, but it really is something completely different. So what what we are is it's on demand dining,

so customers can order be an app. They have access to a range of restaurants from everyday food you know, pizza, burgers all the way up to find dining like Bobby Flay steak uh. As soon as they order, a mobile restaurant will show up at their location and cook that food hot uh and fresh right there at their location and serve it through their door. So within minutes after ordering, they enjoy really a restaurant quality meal wherever they are at their home or at a park or at work.

I'm so in after getting delivery after delivery that's cold and not at all, even if it's from a great restaurant, it just doesn't doesn't fly. Um So, tell us about the growth that you're seeing. Give us an idea of the metrics, who are your customers, where you're seeing the growth, and what you want to do with all this money. Yeah, so we uh we serve twenty two towns now in

New Jersey. It's about a hundred households uh and it ranges in old demographics from something that looks more Middle America all the way up to a little bit wealthier towns. All those towns are growing. Customers have been really going crazy for this, um are We have really high scores and it's it is a truly a great experience. UM. It was one of the reasons that the company was founded is is looking at the delivery platforms, Uber, Eat, Store, Dash, etcetera.

They were growing like crazy before the pandemic UM, but the but the customer experience was really lacking. UM. There was the quality of the food problem, cold or you know, uh, you know, kind of moist food as a steams on the way to the customer, as well as just having access to those great restaurants. So that's really at the core of what we're what we're trying to solve, and it's working in all segments, and so we're continuing to expand.

Most of the money that we've raised is going into the mobile restaurants themselves, the fleet UM, as well as just covering normal operating expenses, but the bulk of the bulk of the money is for expanding and going and using it for the mobile restaurants. One thing that caught my eye though, in reading about this a few weeks ago in the Wall Street Journal, is that Mark Laurie said to the Washington and All that the company have aims to have a national footprint by twenty thirty five.

That's many, many, many years away, And I mean you've worked at several different companies in that time period and the number of years that it would it would have I think Marcus probably started and sold two different companies for hundreds of millions of dollars and several billion dollars in that you know, thirteen years that it would take

to get to five. Why such a long period of time, Well, uh, we're starting here in the northeast, um, in the Tri State area, and will the time being be focused there as we grow out, but very quickly. The way how we structured this model is we've been building up the infrastructure. It actually has taken its years to get the methods figured out how to do this. We prep and park cook our food in a fairly large scale central kitchens. That food is sent out in her cold chain to

this fleet. Um. We can do that in parallel, you know, in many cities. So as we continue to grow, we'll be opening up different areas simultaneously across the country. But it just takes time to kind of get that infrature infrastructure going before we uh you know, start to scale beyond the northeast. What the trickiest part of it is it people is it is. You talked about this infrastructure that you know takes a while to set up. Um, what is the trickiest part. There's no single thing that

stands out. You know if you ask me that same question maybe two years ago, Uh, it was could we actually create this incredible food in this process? And that the answer is hands down, yes, we can do it. And so after that, it's really just more kind of vanilla flavored execution. It's not to say that there's not a lot of hard parts, but uh, we have a fleet production capability. We build these mobile restaurants, upfit them ourselves as well as outside parties do it for us. Uh,

scaling the food production, hiring the labor. So far, we haven't bumped into anything that really stands out. It's just a bunch of little things. What about prices. It sounds like something great to do for a party, But how much does it cost to bring a Bobby Flay steak to your house? Yeah, so Bobby Flays that are that's our most expensive restaurant. That's definitely a fine nine experience, and we see people doing it as a special occasion.

For example, Bobby Flay State went crazy on Valentine's day, but we serve all the way down to sort of like you said at the beginning, Burgher's Pizza one of our restaurants. A couple of our restaurants we serve family style. It's even more affordable. We have to currently and we're gonna be offering more. But for one of his his Takorea, it's effectively a taco bar. You can it feeds a

family of four to five. You pick your proteins, you know, like cardinas or chicken, your side of rice, side of beans, corn, you can add on guacamole, so that goes for fifty dollars. So it's a very affordable. It's official. I'm on the wait list and Wonder is gonna let me know when

they are near my home. So I'm kind of looking forward to Scott when it's gonna be, He'll tell you now, all right, Scott Hilton, chief executive officer at Wonder, former chief revenue officer of US e Commerce at Walmart, When will you come to Jersey City. I can't give a specific date, but it will be probably in the next couple of years. Right now, we're headed north to Bergen County right now in the Westfield. Every serving towns around there,

and then we're headed north. All right, Well that's where I grew up in Bergen County. I get it. Like I was thinking about how this works, and it's probably easier right for your trucks to pull up somewhere where they can easily park. You've also got a neighborhood that's um to be fair, uh, a wealthier neighborhood where they can do this. I mean, I'm curious about the metrics and how you kind of price this all out. You know, how do you cover costs and where do you kind

of you know, weird weird does profits come from? Ultimately? Is it? Is it just building it up on volume? How do you how does this play out? Now? Actually, in this business, the margins and food are really really good, very different than than say retail. When you're looking at it, say a typical restaurant, you know, they're they're looking at a food cost that's maybe in some cases. So you're starting off with really good margins. And we we're verticalized.

We own this whole thing. We're we're developing, uh the processes for the food we prep at our own facility. So we've got a nice, healthy juicy variable profit UM, and that's how we get it to work. It's very different than UM if you're logistics player, uh like a door Dash or Uber each where you're really just trying to take a cut. Or even in retail UM, you know you're you're not getting as healthy and margin as you see in the food industry. And by the way,

you see that in the multiples that restaurant change. The big restaurant chains get their typically three x multiple on their top line versus retailers are typicate one x. Companies like Amazon obviously get a little bit of an extra kicker there because they're the platform play, you know, high growth UM. But restaurant chains have really, really healthy margins. I wonder what the competitive moat here is. What if somebody's listening in California right now and says, hey, this

is a great idea. We know that wonder is not going to be here, you know, for five ten years, I'm going to start doing this. Why won't they Why won't they succeed? Like you? Yeah, well, we may be in California before before ten years, but um, the reality is we've been at this for years and have spent an enormous amount of energy. UM, it's definitely not for the faint hearted, and we have to deconstruct every single

dish and get them to work in this process. And it's getting them to work means having amazing, amazing food quality, but also being able to serve it at the speed that supports the profitability because we definitely want to move through move food through the mobile restaurant in a fast pace we can get onto the next customer. What did you learn from your e commerce experience, whether it's Walmart or elsewhere that applies to what you're doing now or what you're doing do you kind of throw out the

old rules completely? Well, look, every situation you really have to tailor to what's going on and what the business is. There's some general rules of thumb that always applies. Making sure that you first of all have a good strategy UH, you know in terms of being able to execute on it and having economics workout. But after that, it's really getting the right team assembled. We've got some of the best UH team members that have stayed with us from

company to company that we've been on this journey. UM. As well as making sure you've got the right structure structures of the team's work well together. Every every team member needs to be in the right position. Uh. And that's the only way you can really scale and grow it quickly. That's Scott Hilton, chief executive Officer of Wonder And that wraps up the weekend edition to Bloomberg Business Week from Bloomberg Radio. Thanks so much for joining us.

I'm Carol Masser. Be sure to tune into Bloomberg Business Week Monday through Friday, starting at two p m. Mall Street Time on Bloomberg Radio. You can also watch our daily broadcast on YouTube. Just search Bloomberg Global News and check out our Bloomberg Business Week podcast. Find that at Bloomberg dot com, Apple, or wherever you get your podcasts. Bloomberg Business Week is available on newsstands now at Bloomberg

dot com and on the Bloomberg terminal. For Tim Stanovic and the whole Bomberg Business Week team, I'm Carol Masser. Have a great and happy holiday weekend. We'll have full coverage of the Boston Pops Fireworks Spectacular on Bloomberg beginning at five pm Wall Street Time on Monday July four. Stay safe, everyone, This is Bloomberg