Bloomberg Businessweek Weekend - July 23rd, 2021

our guests. But before we do, Tim, We've got to talk about where you were this week on location with Jeff Bezos and the Blue Origin crew in West Texas. That was in Van Horne, Texas, Carroll the high desert of West Texas, not that far from El Paso, but about a hundred miles from pretty much anything. Van Hornten is this tiny town, about two thousand people, but it's the jumping off point for Jeff Bezos. Is Space Race ST two one look Controlled business Day ever a great

place for space flight. It is a great place for space flight, except in the Afternia. I know there were some weather problems also on that subject, the future of space. It's bigger than Bezos, Branson and Musk. This is a Bloomberg big take Yeah, it's a great story. All that to come. But Tim, let's get back to your trip. So let's talk a little bit more about you being on the ground. First of all, you had to get on an airplane. Yeah, I did for the first time

in gosh since last March. Um was crowded. There was not an empty seat on on either of the flights that I ended up taking. Carol. The big takeaway that I had, apart from everybody was totally mass compliant on the airlines. I was just how crowded everything was in

every airport that that I went through. There are no direct flights to El Paso from New York City, so both times when I flew to and from, there were layovers, crowds, crowds, crowds, really long lines for for coffee, really long lines for restaurants. I couldn't help but thinking, Hey, this is the labor shortage that we keep hearing about. That's what I was just thinking as you were talking. It's real and you

saw it firsthand. So you were headed, of course to West Texas to catch up with Jeff Bezos and the Blue Origin crew. What's interesting is we've had a lot going on in the private space race as of late. What was different about the Bezos trip versus Richard Branson and his crew, Well, they're really apples and oranges when you think about how they get to what they define as space. So the first thing is you notice is the craft and the difference between the Bezos and Branson crafts.

Branson's is much more of a space plane and it's indeed ferried by this huge dual fuselage aircraft to about fifty feet and then it's dropped from the belly of the craft and then it shoots straight up like a rocket would, but it appears much more like an airplane. And the way that it comes back to to Earth, it glides back to Earth and lands on a runway like a traditional airplane, or maybe a better comparison would be like the actual Space Shuttle Woodland. Uh. Bezos was

on a legit rocket. I mean, this is like when we think about rockets going to space, Like that's what what Bezos did. And the launch profile was really similar to Alan Shepherd's launch profile back in nine one. I mean, it was a capsule on on top of a rocket that shot straight into the sky and kept going for

a couple of minutes. The capsule was released, and uh, the capsule went beyond what's identified as the International definition of space, the Carmen line on KOs high and then they came back down in a capsule um three parachutes, three drug shoots. And I think among the most innovative things about this is something that we see from SpaceX two,

which is that reusable booster. That thing went almost as high as the capsule, came down and landed right where it was supposed to, just a couple of miles from where it took off. You you know this because I've talked about this. My dad was involved in the early Space Race and involved in guidance systems with all the early Apollo and Gemini missions. But what's interesting cause I think he would be blown away that you're now reusing rockets because that's not the way it was. No. You know,

I saw somebody point this out on Twitter. This is not my my my original thought, but he or she basically said, Uh, imagine every time you flew on a seven thirty seven, that they would have to dispose of it. Exactly, and that's that's how we've got into space in the past, right, disposing of this stuff. So the reusability is huge. This particular stack, the capsule and rocket combination that Bezos went on,

had it already been flown twice before. It's pretty remarkable, and then to see it come down and hit it smart is just mind blowing. Um would you go? I think I would? I think I would. Yeah, I mean Bezos said like, hey, if if this is a vote of confidence, right, Like, if it's not safe enough for me to go, then it's not safe enough for anyone to go, big time, big time. You and I have talked a lot in the last couple of weeks. You

and I both get excited about this. I have to say I was glued to my phone watching Jeff Bezos and his crew go up. I just couldn't stop watching. Uh. There are those though, that I even talked about on the day. I'm like, did you see it? And they're like, yeah, you couldn't pay me to go up in there, and just we're so dismissive of it. Some would say, we have some really big problems in our world. Why are

we spending so much time so much energy. Even as a news organization, Why are we focusing on it um when there are some other big problems in this world? There is the significance to continue space exploration. Jeff Bezos talked about it a lot, he did, and I think that criticism is absolutely fair and absolutely warranted. And in fact, it was brought up to Jeff Bezos and his crew ahead of the launch, and Bezos, I think had a pretty good answer. He said, we have to do both,

and there is room to do both. One thing that he talked about a lot after he landed was how important it is to preserve Earth and in order to do that, and this is part of the long term vision of Blue Origin. I mean, Beazos has been working

on this for twenty one years. Blue Origins established in the year two thousand and his long term vision is moving the polluting producing activities that we do here on Earth, moving those to space, because he said over and over again, Earth is the best planet that we've got in the Solar system. But the way things are going right now, with population growth, with energy usage, it's not going to

support future generations. I mean, look at the past week in terms of climate change and the floods we've seen in Germany, the floods that we've seen in China, I mean, the fires out in the Pacific Northwest. This is not just the last week, but the last few weeks here. It's just a reminder that our climate here on Earth

is definitely at risk. It is. I mean, you were you were here in New York, but as I was in Texas, I kept seeing posts and hearing from people about the sky here thousands of miles away, the smoke from fires making its way to the East coast. All right, coming up, we're gonna do more on the new space race and how the future of space is bigger than Bezos, Branson and Musk. You're listening to Bloomberg Business Week. This is Bloomberg. This is Bloomberg Business Week with Carol Masser

and Bloomberg Quick Takes. Tim Stinovik from Bloomberg Radio. We're going to stay with the private missions into space. A store that cut our attention. It was a Bloomberg big

take featured also in Bloomberg Business Week magazine. Tim, it was about how the future of space it is bigger than Bezos, Branson and must But before we get into that, discussion Bloomberg's Janet who takes a look at the historic flight and what happened right after the touchdown to one a merror ten minute mission, years and billions of dollars in the making, How it felt, Oh my god. Space flight has been the dream of Amazon founder Jeff Bezos

since childhood. In his first words post touchdown, Bezos thank the team, all of the engineers a blue origin who have toiled hard to get this stud and then this surprising remark. I also I want to thank every Amazon employee and every Amazon customer, because you guys paid for all of this. He also spoke of the implications and impact of space travel. This is important. We're going to build a road space so that our kids and their kids can build the future. And we need to do that.

We need to do that to solve the problems here on Earth. This is not about eskeeping Earth. Much has been made of the billionaires race to space, with Bezos, Elon Musk, and Richard Branson, who did his suborbital flight a couple of weeks ago, all making space travel their

passion projects. Along for the historic ride, the first paying passenger, the eighteen year old son of a Dutch venture capitalist and eight two year old Wally Funk, the Mercury aviator who was denied entry into the astronaut ranks because of her gender. We had a great time. I want to go get fast. Damon and Funk just became the youngest and oldest people to reach space. So what happened up? There a lot of fun that included throwing candy around

the American billionaires race to space. Well less independence on Russia for launches, and Bezos says demand and innovation will bring the cost down, in part from criticism over the billion spent since Blue Origin was founded. In two thousand, Bezos announced two major grants. Dream Corps founder Van Jones and chef Jose Andress of World Central Kitchen were given a hundred million dollars each to gift to philanthropies, including their own. As for Blue Origin, two more flights with

humans are expected this year. Bezos says they are approaching a hundred million in ticket sales. Asked if he will go again? Hell, yes, how fast can refuel that thing? Let's go. Janet Wu Bloomberg News Thanks to Janet Wu for that report. For more on the future of space, we also caught up with Bloomberg business Week features writer Ashley Vance. He's also the author of Elon Musk Testla,

SpaceX and The Quest for a Fantastic Future. I mean, you know, that's the space tourism sort of piece of all this, and then it's kind of these layers of building a true economy for the first time in low Earth orbit around the Earth. So we've got the space tourism, you's got space X doing really well, spending satellites and people to space. A company in New Zealand called rocket Lab has already sent up dozens of rockets carrying satellites.

You know, if you look at the launch manifest of all these rocket companies were to send up about a hundred thousand satellites over the next decade, which would be about its currently about three thousand satellites around the Earth. And so it's just the point that I wanted to make is that this has been his dream for a long time, and you know it's still just a handful of governments really that of controlled space for the last six decades and that's changing now. Well, I love this

line in your story. What happens up above us will be one of the most important economic and technological stories of the next decade, whether or not Musk ever settles Mars. Uh. It's just like in some ways, or is it different from the space race back in the XTSE, I mean, which led to a lot of R and D, a lot of you know, innovation and just different thinkings about our world. Well, we're talking about in the story a lot is is something that's just it's kind of more

basic in some ways. It's building a the next great computing infrastructure. I think of it as like a computing shell around the Earth, full of communications, satellites, imaging science, all kinds of things and and you know, just like we had the Internet build out over the last twenty thirty years. Um, you know, I think this is going to be where the next part of the cloud goes, is actually into the avot. You talk about a senior

at Read College in Portland, Oregon. It's a great story and I think it's a great example of what you are talking about. More broadly, Here tell us who this person is, Decker Eve Lithas am I saying it correctly, Yeah, that's right. I mean, so this is an example of how far we have common people don't always notice you know, a couple of weeks ago, the story broke all throughout the news that we'd uncovered about a hundred twenty missile

silos in China that had not previously been disclosed. It seemed to be evidence that they're in the process of a very large nuclear weapons build out. You know, in the past, this kind of thing would have been discovered

by a military satellite. Um in this case, it was an undergrad read college necker who was on his laptop and he was using just commercial satellite imagery from a company called Planet Laps, and it happens to be you know, these these silos are in the deserts, and so even the military satellites would not usually be looking there because

it's not a point of interest. But in this case, Planet has so many imagery satellites that it photographs every spot on the Earth every day, and so they had you know, hundreds to thousands of images over years of this spot. Actually you drew a parallel here just that shows how far we've come in such a short period

of time, roughly seventy years. You write that when the U S went spit to space looking for Soviet weapons of mass destruct in the late nineteen fifties, it had to use rockets to carry bulky satellites into orbit where they took photos and then they dropped their film canisters back to Earth to be rather incredibly caught in mid

air by planes. This was the start of the satellite imagery, you know, business as it was, and that was at the end of nineteen We basically had to develop rocket technology, new optics and and all these these amazing ways to attatch film canisters coming back to Earth all at once, and it didn't work very often at the beginning, and

they finally figured it out. But then you know, you cut forward all this time and any one of us now could open up um this planet last software and start poking around and the look that was Bloomberg business Week features writer Ashley Vance, author of Elon Musk, Testla, SpaceX and The Quest for a Fantastic Future. Reminder, it's not just about the trip itself, but the implications and what we find out and what we can improve upon

here on Earth. It's hard to imagine that sixty years ago we'd be sitting here and have the ability to have satellites deliver Internet took places all over the world like Elon Musk is trying to do because we didn't even know what the Internet was sixty years ago, and I think that's a really important way for us to think about what could be in the future when it comes to space exactly. Still ahead on Bloomberg Business Week.

You know, space was a big story this week, so too was the COVID delta variant, and on that we've got a warning for everyone that's next. 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. The world of financial markets obsessed this week with the COVID delta variant. And in another Bloomer big take this week, a story that's also in the new issue of the magazine. It's a story to him with a warning that more COVID variants are coming in the US isn't ready to track them Bloomberg News US health care reporters Cynthia Kons wrote all about it. She joined us along with the editor

of Bloomberg business Week, Joel Weber. We actually started talking about this story um a while ago, and the thing that just made me um my ears perk cup was because at that time, variants, I don't they were not part of the bigger conversation. And and Cynthia was like, you know, there's this the threat that variants are going to come at us. We're gonna have more than one of them. But the bigger thing is we don't actually know how to track them the US. Other people actually

do do a better job of this. But the sort of the takeaway from the story is genetic sequencing is not something that has really been prioritized in the US. So the little kernel of hope is that there is this little patchwork quilt that I think we're gonna talk about a little bit. But but Cynthia, why is the US not doing jen sequencing at scale? And and why are we effectively flying blind without it? Yeah, well, it's

a money issue. Um, there's no real center. Now. The CDC has some money from the Biden administration, but they're giving it out. It's not moving very quickly from what I hear from scientists in the field. But when it came down to it, we had these genomic labs at academic universities and they would seek you know, grants, or they would apply for money and they would get rejected. And this happened to so many scientists. I know one turn to crowdfunding, but he didn't get much money from that.

Another one actually was very dejected and about to run out of money, and someone who turned her down five months prior because they didn't realize the importance of variant tracking came back and said, wait, wait, we want to give you money. So she reapplied. So it was a lot of really slap dash getting money where and how you could. And it wasn't hey, here's a substantial amount

of money. It's going to be invested through academic centers and different parts of the healthcare system to get this done. Why is it so important that we do this sequencing? So this is how we find mutations and so virus like covids changing all the time, and you have to do a lot of sequencing to figure out what's important in that there are tons of changes within the virus that don't matter, and to matter, it has to be you know, significant in terms of its infectiousness or how

it harms a person. Potentially they get sicker things of that nature, artifects younger patients worse, or something like that. There are distinct things that make mutations concerning. But the very virus is changing all the time, so you need to be keeping an eye on it in such a huge way in order to get enough data to say that this specific mutation is doing X, y or z to patients. And once you have that data, then you

have a better handle on how to enact measures. This is how they decide, say the mask mandate may come back, or there may be longer quarantine times. Waiting to see the impact on the population we need to see is too late because then the disease just continues to exactly exactly. That's kind of how you would think of it in terms of the best key scenario of public health officials had the information fast enough, they could lock it down

really fast. Granted, it feels like we're in a post lockdown world, but not necessarily just in the US, it doesn't. It seems like that might not be the next that might not be a strategy that's readily employed at this stage, but still it could be. If we know we have a highly infectious or highly deadly version, things could be done to stop it from spreading too quickly. So the some of this sequencing is actually happening in New York in in Queens right. Talk to us about the Pandemic

Response Lab and the work that they do. It's Pearl for those of us who are cool chill so Pearl, as it's called. This was an effort by a company called open Trons. They do they create robots that help automate labs, and they basically applied to be a COVID testing center and they became this pandemic response lab and they were a COVID testing center for New York City and they augmented the city health efforts and that started in the fall. And what happened was early on they thought, okay,

but let's figure out what's going on mutations. So they tried to, you know, convene with health officials and figure out if they could get some money to start sequencing, and there was just no money for it. Again, coming back to the initial issue of money. So because there's no money for it, but they were actually in a good position. They had a lot of the technology. They decided to set this up and do the sequencing on

their own dime to start out. And so they're doing the sequencing and they're giving New York all their data and now they're participating in trying to get funding from other sources. But they did it basically on their own dime, which is pretty remarkable when you consider that's not how businesses typically operate. Right Who else is doing a good job of this in the US. There's states that are doing better than others, but they're still not There's still

a lot of limitations within state based systems. But Michigan has a really strong system, but it's still takes up to two weeks to identify and communicate a variant through the system that Michigan set up. But they are one of the bigger systems. There are some big labs around the country doing a lot of it, like Scripts in California. UM there's different UM. The Chance Zuckerberg Group was doing

it for a while. Now they're trying to move into helping educate labs around the country and get up and going. But there are definitely a lot of places that are doing it. The problem is there there's a lack of cohesion to create something that we would consider really system through which these books are all participating in the same way. That's Bloomberg News US healthcare reporter Cynthia Coon. She wrote that story. She joined us along with the editor of

Bloomberg Business Week, Joel Weber. You're listening to Bloomberg Business Week. Up next day, continuation of our latest installment of the b W Talk series, This one with Raytheon Technology CEO Greg Hayes. This about the success of a major aerospace and defense industry merger that came together in the early days of the pandemic. That's coming up next. This is Bloomberg. You're listening to Bloomberg Business Week with Carol Messer and

Bloomberg Quick Takes Tim Stinovik from Bloomberg Radio. This week in the magazine, another edition of BW talks with the chairman and CEO of Raytheon Technologies. We're talking about Greg Hayes. He finds himself at the helm of the second largest defense company in the United States. We featured some of that conversation last week. Him a little bit of a teaser. And now here's part two of the executives in depth

interview on the cutting edge of military technology. Also his reflections on guiding his old company, United Technologies into a twenty three billion dollar merger with raytheon last April, just as the pandemic was grounding, flights in the aerospace business came to a near standstill. What is transitory? Is that a word that CEOs can get their head around, you know? I asked that questions, you know, several weeks ago when I first heard German poll talk about the effect of

transitory price increases. And my concern there is what is really transitory? Because if you start to see inflation in labor, that's not transitory because labor costs don't go down. They may go up more slowly. But what we're seeing right now is a lot of a lot of cost pressure at the very low end of the labor scale, and I don't think that goes away. Now. Will that translate into higher prices across all of the economic spectrum, I don't know. But we're also we're seeing inflation in commodities

in some of the raw materials as well. It's impacting what you guys are doing absolutely every day, and so I worry that transitory, especially with all of these deficits that we we're talking to and a half trillion dollar deficits, We're pumping a lot of money into the economy. People are flush with cash and they're going to spend it. That's going to drive prices up. Are we going to get off of that drug soon? I don't think so.

Would you go as so far to say that FED policy is wrong based on what you're seeing in terms of economic growth and momentum from your clients and customers, Well, I don't know that. I would say Chairman Pole is necessarily wrong. I think we have to think about not

just FED policy monetary policy, but fiscal policy. That is, how much can we continue to borrow and burden the next generation and the generation after that with these huge deficits just to satisfy our desire to have faster growth today? Is it better to have slower, steadier growth that is more sustainable? And I think that's the that's the calculus we have to think about. There's it's not just monetary

it's fiscal policy as well. So when you look at the economic growth projectory or trajector excuse me, over the next six to twelve months, how does it look to you? That's great? I mean, as I think about it, and you know, we have two businesses at raytheon technology. We have a commercial aerospace business which was just devastated last year down and then we have a very very big defense business. Both of those businesses are going to experience growth in the next twelve months, in the next two

or three years. But I think the growth on the commercial aeroside, because we're coming off such a low base, is going to be phenomenal. And I think that's the that's the thing that gives me, gives me hope. But I think again, the overall economy, we're probably gonna see six seven GDP growth this year. We haven't seen that in forever. And the question is when you get that is inflation than inevitable? But do you think that's sustainable? That's six to seven percent. I mean, listen, we're coming

from terrible situations. I think it really goes back to this fiscal policy. Do we continue to pump money into the economy because that is what's going to drive this kind of outsize growth in the near term because people will have cash. I want to talk about commercial aerospace. I'm just curious, are your executives you and I were talking to how much you were able to work at home? Right you weren't flying around on planes? Planes are in Cordan to you and what you do? Um, what do

you anticipate for business travel? What are your guys doing in terms of business travel? So interestingly, you know what, we just really resumed business travel within the last month or so, where I've been out on the road, visiting factories, talking to folks on the on the front lines and the shops and in the in the engineering organizations around the the company, and we're starting to see it pick up. But certainly business travel is forever changed. I would think

because of Zoom, we don't go back to pre pandemic level. Well, again, if you think about commercial air traffic, about seventy commercial air traffic is um for leisure that has come back, and it's come back faster, stronger than I think anybody would have said that. You can just you know, talk to Gary Kelly at Southwest or Doug Park or American The thirty percent of business travel is the question. And what we think is like half of that of the

total is mandatory travel. That is, we've got to send our technicians out to visit our products. We've got to service our products. That's going to come back and will come back relatively quickly. You know. Will we still see big conventions in Las Vegas? Will we still see you get together for sales conventions? I think that will come back. But there's the other question. Will all of it come back?

And how soon our own views who probably don't see a full recovery in business travel until But again, you know, maybe I hope we're wrong, But again it's Zoom has zoom or or WebEx or whatever your your favorite pick, pick your pick, your your vehicle. But the fact is it's really changed our thinking in terms of productivity and

that I think about return to the office. You know, we've had a hundred thousand people showing up to the factory floors or the engineering organizations every day during the pandemic. But I've had eighty thousand people working at home. And I don't think all eighty thousand will ever come back. So this is a fundamental change in the in the economy and how you do business. There's a lot of

deals going on. You guys just finished a big deal combining assets and combining with United Technologies assets, and then you took over as the CEO of it all. Uh And that was just as the pandemic was getting going. How tough was it to get that deal done in terms of the backdrop of where we were, So you have to really step back and think utc Over the last couple of years, we had done a lot of M and A, but we really made a decision after we had purchased Rockwell Columns that we were going to

split off into three businesses. Otis Elevator is a standalone business, Carrier as a standalone business, and then U T s Arrow as a standalone business. As we were in the middle of that those three spins, Tom Kennedy was the chairman and CEO of Atheon, called me and said we should do a deal, which I thought was absolutely insane at the time, but but hey, hey, here you are, here we are um and it turned out and again the more time and I talked about it, the more

sense it made. But the last four weeks before the deal closed, and we closed on April third of last year, we were working from home and the commercial airline industry was absolutely in the tank. Did you have a moment we were like, oh my god, what what did we just do? Probably not, because you've thought it through and you I think that, you know, there was there was a question because we had made some big commitments to share owners if we were to bring this company together.

We said we're gonna return eighteen to twenty billion dollars of cash to share owners in the first three years after the merger. And it became very apparent that that was going to be tough to do, and so, you know, we quickly pivoted and said, Okay, it's gonna take us four years, but we had faith that the commercial aerospace business was going to come back. We continue to pay a very good dividend, We continued to drive cash, and we took a lot of costs out of the business.

And it was interesting. I always tell people, you know, let's not waste a good crisis, and I know that's probably over from a lot of leaders, and fact is the crisis. That crisis gave us a chance to reshape the company. We were able to take a cost out that we thought was impossible to do, so I think again it gave us the impetus to do the really

hard things that sometimes people don't want to do. So if there's a net net, Greg in terms of what you and we're talking with Greg Hayes e every theon technologies, he's of course the CEO. What did you learn from that merger? Is there something? And again it was like I feel like that was happening and then the pandemic layered on top. But is there something when you do a consolidation like that, emerging of cultures, what do you

learn from it? So interestingly, um, you know, we had an aerospace and defense business at UTC which was about forty billion dollars merging with the billion dollar primarily defense business. What we found is that the cultures weren't all that different. But we spent a lot of time talking about values, because to bring two companies together, you have to make sure that your values are the same. So we talked about diversity, equity and inclusion. We talked about the need

to trust one another. We talked about the need to empower our workforce. These are things that I that resonated with our workforce and it really it allowed us to come together by focusing not on a business problem, but on the values that we bring in them on the mission that we have. And I always say the mission of Atheon Technology is to solve our customer's hardest problems. And that is that is something that resonates with people. When they have a mission, they come to work and

they enjoy what they do. Part of that mission is innovation. You guys spend a lot on R and D. What is the innovation for you guys going forward? And I think about things like AI. Is that increasingly a part of whether you look at how defense systems are operating, our will look at you know, AI is table steaks. I think in the next in the next battle space. If you think about the challenge of the next war, the future war, it's a war that we fought in cyberspace,

outer space. And the key to defending this country, defending our allies is having real time information. And that means taking data off of the satellite, taking data off of an underseas sensor, off of an airborne sensor, processing it quickly, and getting it to a combatant commander in a in the time frame that he can make an actionable decision.

And I just give you one example. UM last December, we work with the Missile Defense Agency and we detected, we did a test, we launched, or the Navy launched and I cb M off of the coast of Australia. Our sensors up in space picked it up, tracked it down to our ground station, fed it out to a ship in the Pacific, transmitted that to our missile, one of our missiles, and s M two three A launched and intercepted the missile over Hawaii. All of that without

human intervention, which is phenomenal. That's what AI is. You have to have that type of machine learning AI if you're going to be successful, because hypersonics are coming right, all right, think about hypersonics, right, We're talking about things that travel mock five plus. You don't have time for someone to say, how do I target that. You have to have the systems that know how to get through those things and can take action. And that's the chairman

and CEO of Raytheon Technologies, Greg Hayes. See the magazine and Bloomberg business Week dot Com from more. Also check out our podcast Speed for that entire conversation. Find that at Bloomberg dot Com. And that wraps up the first hour of the weekend edition of Bloomberg Business Week. From

Bloomberg Radio. I'm Carol Masser and I'm Tim Stanivac Ahead in our next hour, our cover story when Donald Trump called for a big, beautiful wall, A man named Tommy Fisher spent millions to build a three mile stretch along the US border with Mexico. Now he needs someone to buy it back. He does indeed. Plus, one of the world's largest retailers is setting aggressive green goals, Walmart's chief sustainability officer, Kathleen McLoughlin, breaking down the company's E s

G priorities. 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 with Carol Messer and Bloomberg Quick Takes Tim Stenovik on Bloomberg Radio.

Hi am Carol Masser and I'm Tim stock Plenty head in our second hour of the weekend edition of Bloomberg Business Week, including We've got a deep dive into sustainability and E s G. We're gonna talk to a couple of different players in that world, including the chief Sustainability officer over at Walbar. We're also going to hear on the subject from the C suite at Cisco and the co found and CEO of Gotham Green's he is back and expanding the business well. First up this hour the

week's magazine cover. When former President Donald Trump demanded a big, beautiful wall be constructed along the US southern border, a guy from North Dakota spent millions to build a three mile stretch on the Rio Grand. Now he just needs someone to buy it back. Here's more from Bloomberg Business Week editor Joel Webber, along with the editor on the story,

Jeremy Keene. Tommy Fisher is a guts from North Dakota originally, and he, you know, he's long dreamed of building an epic piece of infrastructure, and he's built, I believe, one of the longest cathedral arch bridges out there. Um. And but you know that didn't really bring him the kind of renown he was after. So you know, when Trump started talking about a wall, he got him fulf on Scher, got himself on Fox News and kind of got his name out there and ended up hooking up with Steve

Bennon and Brian Colefage's We Build the Wall organization. They built one quick, small wall and then came to this project and just as the money was starting to come in for it, Mr Bannon and Mr col Flag run into some legal issues that you know around that around that same year that for the scuttled the project. So Fisher said, well, I'm gonna keep doing the wall and struction deals with Texas Landovers put what he says is

thirty million bucks into it, and off he went. Yeah, it's I feel like this is a story to some extent of a wall, a builder, a radio host, the journalist. Like I love the way he's told and how it unfolds. Um, what's you know? I always wonder about the pitch that you guys got for this story. Um, Joel, what can you tell us about? I mean, obviously we've all been obsessed with this ball. We know the President was obsessed

with this wall. I think we were all a little surprised that there was to find that there was some that was built. But then you've got this guy who wants to like sell it. You know. I think that that element um that really drew us in. Uh, when when Simon um pitched it to us. Is this idea that I mean, I did not know that Tommy Fisher existed.

I didn't know that he had built a wall, you know, like you know, literally, and like the feat that he was able to accomplish here worked is worth discussing a little bit, which is, you know, there's plenty of wall that's already been built, and President Trump rebuilt a lot of existing wall. What what he What Fisher's accomplished here was to actually put three miles of wall on private land in Texas, which is really this is along the Rio Grand which will probably talk about a little bit

more here in a second. In doing so and accomplishing this on private land, that has always been the thing that sort of anybody who wanted to build a wall couldn't quite figure out a way to do it. And so the fact that he was able to crack it is why I think as he go, you know, part of his pitch here is and I think he's looking at the state of Texas at this point because Governor Abbott there is seems to be the one who's willing

to probably do something. The fact that he was able to do this on private land and on a river is sort of. I think there's a little bit more discussion. And Jeremy, why why don't you talk about that? Because the fact that he was able to do this so close to the river is actually like where a lot of the controversy stems from, right. So, you know, Simon was curious about this part, you know, really began with his curiosity about all this talk about walls and whether

they work and that kind of thing. And so he went down there and got the big tour and you know, one of the things he drove around with some of some of Fisher subcontractors. Fisher talked to some next border agents, talked to residents, talk to people who really opposed the wall, and um, you know, one of the things that's really unusual about it is where there's federal wall in Texas, it tends to be built quite a ways away from the will border, the Rio Grand and the Rio Grand Valley,

and that's because it's privately held land. Fisher struck all these deals with private landowners, managed to build the wall where there's only you know, a few hundred feet or something like that separating the wall from the border, and that you know, the border patrol guys sort of say, that's made it a little easier to patrol that one three mile stretch. Um. As the cover shows you, you know, you can literally walk around it if once you reach

the end of it. UM. But um, you know that what what ended up happening though, is you know, Fisher got sued lawsuits to these that he's contesting, um, the National Butterfly Center FO you know, sort of claiming that um, that that there was going to be sort of environmental damage caused by flooding, um if you know, in the event of heavy rain because of the way the wall

was built. Um. And Uh, the US government actually ironically launched a suit the Boundary and Water Commission because it argued that that it's illegal to actually move the border in a physical sense, and they argued that the wall itself could displace the borderline because the river would get, would get the banks would change like that kind of thing. And so, UM, yeah, it's created. I mean, you know,

there's a lot of controversy over that. There's controversy over whether it's actually going to accomplish the thing that you know, all the past governments have tried to accomplish and building border wall elsewhere that was Bloomberg Business We get her Joel Webber along with the editor of the story, Jeremy Keane. You're listening to Bloomberg Business Week. Coming up. For the rest of the hour, we're going to focus on being green with the chief sustainability Officer at Walmart and the

founder and CEO over Gotham Green's. And in keeping with that, straight ahead, Cisco's CFO on the business outlook and how e s G is part of the company's long term growth strategy. This is Bloomberg. This is Bloomberg bus In this week with Carol Messer and Bloomberg Quick Takes Tim Stenovan from Bloomberg Radio. All right, everybody, so grab a green smoothie, relax because for the rest of the hour yesterday, Carol, Well, for the rest of the hour, we're going green. First up,

it spout. A week and a half ago, Bloomberg hosted its Sustainable Business Summit Global. At that event, I got a chance to catch up with two senior executive at Cisco. Friend kauseudas longtime Cisco Exact Che's executive VP in Chief People, Policy and Purpose Officer, along with Scott Heron, he is Executive VP and Chief Financial officer at Cisco. So, Carol, you were there to talk about the sustainability steps and initiatives that Cisco has been taking for years, also the

impact that that's had on long term growth. You began, know, as we often do, asking about today's business environment. Business activity is picking up. We're coming out of the pandemic. Um it's picking up rapidly, to the point now that it looks like inflation is you know, it's not just something that's being projected, it's something that we're actually seeing measured at this point. So I think the business environment in general is air strengthened pretty significantly, certainly from where

it was there in the pandemic. And friend, come on in on this as well, because you're dealing with the people at Cisco, right, there's so many different policies that may be changing and so on and so forth. How do you see it when you look at the economic environment, the business environment, the market environment. Yeah, it's an interesting time because in addition to seeing a recovery across all industries, which is wonderful, you see a very active talent market place.

You see people moving, you also see talent right now looking at how companies plan to work moving forward and that guiding some of the decisions that they're making. And so I would just say we're seeing a ton of movement across the industry, a lot of opportunity and candidates feeling like they really have their choice of where they're going to work and how they want their career to progress. There's no friend just to follow. There's no going back to the way it was pre pandemic. When it comes

to how we work, it's different, right, It's changed. Yeah, it's fine. I was talking to a customer and we were sharing that we don't believe there is any going back to where we were. Um, we do think that both from a company perspective, but also from an employee perspective, there's a realization that we're going to work differently. Some of the research that we've done shows us now that of meetings will have someone who is not in the office, so we'll have someone who is remote, and now the

technology and the people practices need to accommodate that. We also see that across the industry, employees in general are saying that they want to be in the office only two to three days of the week. And so I don't think there's going back to the way that it was before. Well A Scott, what does that mean for your business? You guys infrastructure, you know you this is your world in terms of connecting people. Um, is that good or bad going forward? Yeah? Let me start by saying,

I think in general it's good, right. I think the the there's a lot of terrible outcome from the pandemic. Obviously no one wished for this, but I think it it proved a few things that have been theorized and shown in spots previously, like hybrid work, like the ability to be effective and lead teams effectively when they're not all sitting at there, you know, at their desk in the office. And so I view it and just as a general societal good that that's come out of this.

From a business standpoint, you know, the hybrid work and remote meetings will continue to be an upside for US and Cisco. It's to the extent that we're meeting like this instead of sitting in a conference room, we're meeting using technology, and it uses not just our collaboration technologies and WebEx but it uses a lot of network capacity and bandwidth right inside the network out to the cloud and finally to the endpoint in the home. So I think it's a in general, it's a tail wind for us.

All right, So let's talk about why you both are here, because I really want to get into this issue, and we're talking about, you know, the initiative that you folks have done in terms of sustainability and really how that has contributed to long term growth. I was looking at some of the key points. You launched Cisco Networking Academy back in nine set your first greenhouse gas emissions reduction goal in two thousand six. That's fifteen years ago. You

put out sixteen years of sustainability reporting. Correct me if I'm wrong, You're getting ready. I believe though for the seventeenth The reason I go through some of this and I'm only scratching the service is that this is part of your DNA. It really has been for a long time. Uh, share with us some of the history of this, of how it came together in friend, I want to start with you. You've been at Cisco for almost seventeen years. Helped me out with how it all evolved and came

to be. Yeah, So I would say, first of all, it is a big part of who we are. The networking academies was our first real push into understanding that through education we could create access and careers for people around the world. And it's interesting the networking academy these feed all of our competitors are peers in the marketplace, and we want that we're trying to create careers for others.

We have trained, if you can believe it, about twelve point six million students since that time, and so this is something that's incredibly important to us. I think from an employee perspective, our employees care deeply and we want to have both impact from a business perspective, but we want to feel like we have left the world in

a better place. A year ago, we created our new purpose, which is the Power and Inclusive Future for All, And as you would imagine, this purpose will guide us as it relates to doing our part, as it relates to the digital divide, inclusion, UH, climate sustainability, and how we

partner with governments around the globe. The interesting thing is that we put that purpose together right before we understood the impact of the pandemic, and I will tell you that it guided us through the last almost year and a half now around how we want to show up how we want to have impact, how we want to work with our peers to address some of the biggest issues. And so I'm so proud of the team um that worked on this. The fact that our first sustainability report

was in two thousand and five is wonderful. The last thing I'll say here is I think there's a big difference to and where we are today. If you look back in the early two thousand's, sustainability was something that you did in addition to your business. It felt like it's sat on the side. It was powerful. But now the biggest difference is it's embedded in who we are and how we work. It's got your new to Cisco, but you've been in the tech industry. You're at Autodesk.

Like the things that you're bringing to Cisco, you've been thinking about and doing for a long time. I came across this quote where you said, fundamentally believe that climate changes are still Sustainability is our generations problem to solve. We don't have a lot of time anymore, do we know? We don't. And you know that that comment came from looking at the greatest generation and the issues that they had to solve and you know, kind of work your

way forward. Um, this is a massive issue. This is a worldwide It's a global issue that needs global solutions, and everybody has to take it upon themselves to be a part of the answer. I have a personal responsibility to this and I've got a corporate responsibility to this, and I think that's the way. So when I say that, the idea is to spur more people to say, you know what, I can't do everything, but I can do something, and I need to take personal accountability for going out

and doing that. That's francut Suit is Cisco's Chief People, Policy and Purpose Officer. Also Scott Herron, executive vice president and CFO at the company. Still the common Bloomberg Business Week, we'll talk more s G with the chief sustainability officer over at Walmart. Also up next the co founder and CEO of Gotham Green's on growing the business and product line. This is Bloomberg Broadcasting from the financial capital of the

World Bloomberg. He live in 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 nine team and around the globe, the Bloomberg Business app and Bloomberg Radio dot com. This is Bloomberg Business Week. You know, we like to talk a lot on Bloomberg Business Week about how the world is changing,

being disrupted, right tim, We do. And one thing we also like to talk about is food production and where the food is going to come from that's going to feed the world. And one voice we've leaned on to know more about this is Viage Purity, co founder and CEO of Gotham Green's, which is growing plants and climate controlled hydroponic greenhouses. We've got an update on last year's capital raise and the business overall. It's going very well.

We are under construction for several large scale climate controlled greenhouse facilities that we're building in cities across America to grow high quality, perishable fresh produce using a fraction of the water compared to conventional farming. So we raised an eight seven million or so capital raised in the third quarter of last year. Busy putting it to use. There have been a lot of supply chain issues with construction materials. We've seen a lot of congestion, UH in the ports

for imported materials. So it's certainly been challenging, but the time is rife, given all the drought that's going on and all these other supply chain issues on the proteas side, for us to really get these greenhouse buildings up and operational and getting healthy food into supermarkets um as soon as possible. Got a million questions how much less water

remind our audience? How much less? Because this is real and uh, you know, coming off of our conversation about Jeff Bezos, you know, going up into space, increasingly we are having conversations about our climate. It's real, uh, and the impact it's having on food access, food sustainability. How much less water remind our guys? How much you guys, you are less? Yeah, we use about less water than

conventional farming. So in other words, Gotham Greens can grow a full head of lettuce, a mature head of lettuce in one of our company owned greenhouses using under two gallons of water and out in the field, and say California or Arizona, where these crops are typically grown, it would require about forty gallons of water. So as water continues to become a more scarce, resource. Uh, you know, we and others believe that this form of farming is

going to play a much greater role to come. I mean where the drought conditions right now are more widespread than at any point in like the last twenty five years. So it's it's significant. Are you guys at neutral on the environment of Yeah, where we're winning in addition to the water conservation is really on land use. So there's been a lot of talk about regenerative farming, right, which basically allowing farmland to sequest her carbon and keep carbon

in the ground and in the soil. Right and by by growing in these high tech greenhouses, we don't need to use arable land, We can use city property, we can use asphalt, concrete, all these types of things because we don't grow in the soil, and we can locate these farms anywhere. And what we can grow in one acre of our greenhouses would require about thirty acres out in the field. So I think from a land use perspective,

greenhouse farming comes on top. And we looked at a lot of different types of indoor farming and if you have actually selective greenhouses, uh, deliberately because we rely on natural sunlight to grow for photosynthesis, So from an energy perspective, it uses considerably less energy than other forms of climate controlled indoor farming. And we have a commitment to source

of our electricity from renewable sources. So a combination of the renewable energy, the equipment selection as well as our proxivity to market really keeps a lot of trucks off of the road. And so you know, the lettis today in the US and Canada shifted an average of three thousand miles from farm to supermarket, a lot of carbon

emissions there. Conversely, for Gotham Green's greenhouse, we're shipping probably a hundred miles at most from greenhouse to supermarket distribution center, so a lot fresher product, less, less food waste, and less emissions than the transportation barage. Can we ultimately grow everything this way? Technically you can grow anything this way,

but that doesn't mean you should not. Everything is sort of commercially viable currently where the where the technology and the seed variety and where the genetics are are primarily on leaf crops, so all of your lettuces, leafy greens, herbs, and then binding crops like tomatoes, cucumbers, peppers. These are very large total addressable markets. We're looking at over dollar markets just in the US and Canada alone, and many believe that strawberries and other types of fruits and vegetables

are are going to be commercially viable soon. So very large addressable markets can be hoarded by this technology, but certainly not. It's not a silver bullet or a panacea for all types of food production, but it's a very important tool in the overall tool kid. We believe for much more sustainable um and secure food supply going forward. All right, so I gotta ask your latest expansion and the foods that you're doing is too new plant based, dairy,

freestyle addressings. Why are you doing that? It's a vegan caesar and a vegan ranch. It is. The consumer tail winds are staggering. The amount of people who really want to transition too a plant based diet and eat less dairy, less meat products and things that it's really staggering the amount of consumer pail winds behind this. That's Varage Pery, co founder and CEO of Gotham Greens. Well transparency eat

their greens, so do I? Alright? Coming up more on the green economy, this time from a giant in the retail space that's leaning in big time as well on being a regenerative company. Walmart's chief sustainability officer joins us, you're listening to Bloomberg Business Week. This is Bloomberg. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg

Quick Takes Tim Stinovich from Bloomberg Radio. They are the nation's biggest private employer, well known household corporate name one, also known big time to our financial investment audiences. Tim, we're talking Walmart. It's also a company that's on a mission to become a regenerative company. We talked about that with Walmart Executive vice president and chief sustainability Officer Kathleen McLaughlin. Yeah. Well, you know, our focus when it comes to E s

G really is on shared value meeting. How do we as a business address the issues that are most important to our stakeholders, the societal issues that are relevant to our business, important to the stakeholders are we can make a difference through our business. And boy, what are year it's been um COVID obviously, climate, what we're hearing about, nature, equity,

economic opportunity for people. You know, we had it all and you know many ways when when COVID really struck, we thought, gosh, this is gonna make it things really challengeing, graphistic step back. If anything, it's actually strengthened their resolved and how us go faster on just about everything. Well,

you know, that's a great point. And I do wonder this last year laid bare things that we knew were already existing in our society but nonetheless kind of hit us bam in the face because we were all at home and kind of taking it in or feeling it. Has it helped in terms of the timelines and aggressiveness that you can apply to E s G goals at your company. Yeah, it has, you know, as you say, it really has been a moment when all of us UM, you know, I had to sit back and take notice.

And I think we realized a few things. One is the power of individual action. You know, everybody acting together can really turn the corner on something that's global and scale. We learned that with COVID. We're seeing the same thing with climate or equity or other things. So it really did help us UM elevate our ambition and in many ways,

we have moved faster. So you know, for example, in terms of the response to COVID, our first concern was associate safety and could we even continue to operate in terms of PPE and protective equipment, plexic glass, all those kinds of safeguards, additional emergency paid time off leave policies, hiring an additional five thousand people to put some slack in the system and make it easier for folks to stay all that they felt they needed to, and so on,

So all of those kind of things. But in terms of our omni channel transformation to serve the customer well in a contact less way, we accelerated our expansion of O g P, for example online grocery pickup sites, and we now offered that in three thousand seven hundreds could see locations, So we moved faster on that. You know. In terms of climate, we elevated our ambition. We were the first retailer years ago, back in two thousands sixteen

to set a science based target for emissions reduction. Um this last year we eleve it at our ambition and said, okay, let's set as a date to get to zero emissions in our own operations, not met zero, but euro and let's go faster, you know, Um, we did set out a broader aspiration to be to become a regenerative company, which for us means needing to go beyond just being sustainable but actually build back, whether you're talking about climate

or natural ecosystems or equity. And you know that's huge, right, Like it's not just about reducing your impact, but then kind of bringing back our climate and our environment. Right, that's just one example. You know, we're now at a point we know from the science that we actually need to draw down emissions, you know, not just avoid further emissions.

So it's a it's a higher bar. And similarly on equity, you know, we all felt the impact in a very visible way of what happened with George Floyd, and like many others, caused us to reconsider what could we do, what more could we do with the assets that we have When it's our jobs, our purchase orders around equity and it's it's not a matter of holding steady on equity. We got a lot of work to do, right to elevate people and to address some of the wrongs of

the past and newly addressed your harbors of systemic racism. Hey, I wanted to ask you because you pointed out that you guys are working towards zero missions across your global operations by you know, without relying on all of those carbon offsets that a lot of companies put into effect and use. Why does it take help me out here? So that's what nineteen years from now, Um, part of

me wants to say. And to be fair, I asked this of all the companies when we talk E. S. G and all the big companies like yourself, why does it take so long? What is so difficult? Because most scientists are saying we're running out of time. If you look at what's going on the Pacific Northwest, just this like couple of weeks, the flooding in Germany, the flooding in China. Yeah, we just maybe don't have another twenty years. Yeah. So let's be clear. Is the date will zero in

Scope one and two? It's not the date that you know we'll start working on stuff, right. Scope one and two is direct impact and indirect impact like through suppliers and things. Correct, Um, that's scope three. So our science based target covers all of it. Here's what we're doing and here's to answer your question about So for our own operations, that includes the electricity to power our stores and our dcs, you know, fulfillment centers and so on.

It's our on site fuels, it's refrigeration equipment, refrigerants, and it's the tractor trailers you see on the road that our labeled Walmart, right, it's the heavy rigs that are carrying products around. So all of that getting to zero takes time. Some of it goes fast, and by the way, we're working on it every day. So the science based target has us reducing emissions every year. It's not as

if we wait. So you'll see if you look at our reporting, we've reduced our cumulative admission since two thousands, five teams substantially you started on this, and every year we reduced further. What will take the longest in what requires the technical breakthrough in those categories transportation and Kathleen, you know it is impressive. You go to your website and you look at the different you know, programs and

initiatives that you guys are working on specifically and making progress. Uh. And when it comes to your impact on the environment,

I do wonder when you set out goals. We had an interesting Bloomberg story last week that just said governments need to get more proactive, that we almost need a response to climate and e s g. We need the government to kind of create crisis programming just like they did for the pandemic, to get to be able to kind of help the world, and companies get two goals faster.

What's the company's take on that. Yeah, you know, absolutely, science based government policy that's consistent about a predictable operating environment and creates the appropriate intentive. You know, again, a line with the science is needed. Um, we saw it in COVID. I think the same can be said for climate. Um. So having some type of mechanism to encourage climate action as something we would really welcome. Are there any specific

initiatives that you think that the government could be helpful on? Well, I think what you raised in terms of climate action, um, and you know, I'm not a policy maker. I don't know the specific public policy mechanisms that would be best, but something that would encourage climate action in line with what we need to get to around a one and a half degree warming scenario, you know, that's what we're

shooting for through our own actions. And you know, I'd say we're going to do what we're doing in line with the science regardless, but I think it would help, especially in some of these areas. I mentioned transportation as one where we need technological innovation to actually achieve our goal by forty for certainly long haul transportation. Having favorable policy environment for something like the carbonizing transportation would be

just an example. Well it did stink too, because I've been talking we had a Bloomberg Global Sustainable Summit here recently and talking with the Cisco CFO and the cfovert A b MBV and their chief sustainability officers as well, and you know, there's lots of conversations about, you know, using government policy maybe to impact truckers to some extent because they create the most usage and destruction, if you will, to our roadways when we're talking about infrastructure, and how

by doing so that might help create more innovation right to a more sustainable way. And so I hear what you're saying when it comes to trucking, because that's a big initiative, and you do wonder whether you know government policy along those lines can make a difference, right right, So, and then you know, coming back something you're asking me

before the break in terms of emissions reduction. Um, you asked a really good question, which is, gosh, doesn't twenty four you seem the late certainly would be late for the action. But the science based targets shet out a trajectory that we are following that how justus reducing um,

you know, day by day. So, for example, the most recent reporting of our calendar year two dozen nineteen emissions, we're down over twelve percent where we started in our two fifteen baseline, and we're about to come out with our latest numbers for which you'll see that you know, for the decrease. So um, please don't take me as suggestibly. Wait till we're moving as quickly as week and day by day, that's the that's the day we get to

zero on our scope one and two. Well, I have to say, what really caught my attention, and we were talking about this in our planning, is you guys are committed to protecting, restoring fifty million acres of land, one million square miles of ocean. Uh, you know you are doing these things aggressively. You're thinking about our community at large. What really moves the needle do you think when it comes to reducing our world, our corporate world, are everyone's

impact on the environment. We're now we're now learning that natural ecosystems are as challenged as climate. So that's why we set that goal. And it is about you wiring food production, production of other products so that the way we do that is regenerative to nature. We enhance for our health, we can improve water quality, we can improve our diversity. That's what's needed in our secret claus as Walmart,

and we invite other companies to do this too. Is to connect the big goals that we have to achieve a society to the practical action we can take through you know, in our case business to reach other business and it's true for any company. And that's really what he has c is about and recognizing that those things create value, financial value for the company as well as health society address these tough challenges. That's Walmart Executive vice

president and Chief Sustainability Officer Kathleen McLoughlin. That wraps 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 Stovik. Be sure to tune into our Bloomberg Business Week daily show Monday through Friday, starting at two pm Wall 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. Bloomber Business Week is available on newsstands, now, at Bloomberg dot com and on the Bloomberg Terminal. You can also see me at Bloomberg quick Take. It's available at Bloomberg dot com, slash Qt, and streaming platforms like Roku, Apple TV, Samsung TV, and more. Have a great weekend, Stay safe for everyone. This is Bloomberg