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. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Hi, everyone, Welcome to the Bloomberg Business Week Weekend Podcast. It was a busy summer week that included another FED rate hike, a regional bank takeover, a historic run of gains for the Dow, and a batch of earnings from megacaps you know, Microsoft, Alphabet and Meta, and the subject of AI and the cloud came up in those reports, and on that in the magazine, a story about big data centers and their use of a very precious commodity.
That story coming right up. And speaking of the big tech companies, Amazon reports this coming week, and a range of topics may come up on the call, including what might be the most intrusive scrutiny in the company's history. Plus we'll talk with the CEO of Mattel on earnings, a key figure leaving the c suite, and whether that Hollywood labor dispute is hurting the toy maker's film ambitions even as Barbie keeps breaking it in at the box office.
All of that to come, We begin with a lesson in behavioral economics from one of the pioneers in the field. Peter Atwater is an adjunct professor of economics at William and Mary. He coined the term CA shaped recovery. He's here to help us navigate these unusual economic and market times with his new book, The Confidence Map, Charting a Path from Chaos to Clarity. We began by asking for his reaction to the latest round of US monetary policy
tightening from j Powell and the FED this past Wednesday. Tim, no doubt about it. We're living in interesting economic and market times. We're coming off a pandemic unprecedented, and we're going to talk about that word, unprecedented. Stimulus and easing to ensure the function of the financial system and really to help protect the livelihoods of many. The end result an economy that stopped short then was revved up again big time. But we got persistent inflation which has come
down less. It was an interesting time. It was the backdrop certainly for the FED the last couple of years, but it's a recovery too. That wasn't felt by all, and that was something that was coined the Case Shaped Recovery by our next guest.
And so with all of that going on and more, we are so delighted to have with us in our Bloomberg Interactive Broker's studio Peter Atwater. He's Adjunct Professor of Economics at William and Mary. He's a former banker and someone who spent many years in financial services and in the securitization of assets. He's been a financial consultant, and he's also got a way forward for all of us thanks to his brand new book out brand new book. It came out this week. It's called The Confidence Map,
Charting a Path from Chaos to Clarity. It's a book that our very own Mike Reagan says is a great beach read.
Which is a big endorsement.
Welcome Peter.
It's good to have you in the studio and congratulations on the book.
Thanks so much, Tim and Carol.
Great to be here.
Well, it's so great to have you here. First up, we would be remiss if we didn't ask you about the FED meeting and what you make of it, Anything unusual or telling, especially as you think about your book.
Yeah, it was the lack of unusual to day. This was like a dive that hit the water and there was no splash. You know, Normally after a FED announcement there's a lot of battling in social media and different takes. There were no takes today.
It was kind of boring.
It was beyond boring. This was nothing about nothing today. And it's been interesting because in the last couple of weeks, we've seen investors take everything off the worry list, and I think this came off the worry list too. There is a sense that everything is going to be okay. We're not worried about a recession. Inflation looks like it's going to keep coming down or is coming down to
a reasonable level. And if I have a take from today, it's this sense of where's the shoe that's going to drop next.
Yeah, it's sort of like a complacency. And I think it was Tom Keen who was asking Diane Swank about parallels to what we saw before the Nasdaq crash in there two thousands.
Yeah, this is what's been interesting on the NASTAC front is we've seen investors racing into all these abstract stocks two years ago the SPACs, and that that NFT Mania this year they're charging into the stalwarts, the thoroughbreds that are well tested, you know, Apple, that the Magnificent Seven, and that to me is an indicator that we're not as risk taking as we were a couple of years ago.
That we're looking for certainty in the companies that we're investing in and too much possibility scares us.
Take us to the confidence quadrant, then, all right, this is your book and explain this because there's stress center versus comfort zone, passenger seat versus launch pan. But I love this and you, as you write, can kind of apply to anything and everything. So take us to is should we be in the stress center a comfort zone right now? Because it does feel like there's so much grow both in terms of optimism, whether it's S and P strategists or economistsying a recession to help us out.
Yes, So for the benefit of your listeners, this is a book that looks at the impact of certainty and control and the choices we make because we use the word confidence all the time and we don't know what it means. And so what I tried to do is to really dig into it. And those two things are really important. I need to know what's coming and I need to feel like I'm prepared for that. That's what creates confidence. And I would say that if I.
Look at it, so does not elon musk confidence.
No, that's confidence theater. That's that's and that's you know, and we see a lot of that, and maybe too much of it, And I worry that a lot of people think that that's what you need to be confidence. It's like no, no, no, that's an act. That's a show that people put on.
Really well, So can you explain the framework that you developed here and what to do if you find yourself basically in the wrong quadrant?
Yeah.
So the framework takes confidence or takes certainty and control and puts them on two oxes. It's a simple four box chart, and none of them is inherently good or bad, but they but we feel very different in them. And I would say today most investors feel like they're in the comfort zone. Things feel easy. It's like they've been they're driving on a clear highway on a clear day. And that's both good and bad. Because the more confident we are, the less we think, the less we pay attention.
And so that's a big risk, and we also take more risk than we should, and that's that's the potential consequence that we need to consider. But I also then look at the consumer, and there are a lot of consumers in the stress centry today, particularly those who are trying to buy a house, are buying a car, because interest rates have been very punitive to those at the bottom. Those at the top, it's been wonderful. Cash is now earning four percent, five percent, But for those at the bottom,
there's been a real, a real headwind. That's that's come about because they're on a payment they paid by month, and these heights and interest rates have made their lives far more expensive.
So why is it important though to understand kind of where you are, whether you're too complacent or you're comfortable, or whether you're stressed out? Like why is it important? And I think about you know, when you think about stress, we've been there a lot, as in a market environment, in an economic environment where it's the pandemic nine to eleven, the Great financial crisis.
Right like help me out here, Yeah, So we forget that. Real life moves us around, so we can be in the stress center in one moment and then be in the comfort zone the next but we forget that when we're in the stress center. If you go back to the COVID, we were catastrophizing that the end of the world was here, and we forget that as we're moving
into the stress center and panics occurring. Panic is almost God's way of telling us the worst is behind us, and certainly that's proven over and over in the markets, but we fall victim to it, and we respond impulsively and emotionally, rather than stepping back to say, oh, panic means we're nearing a low in confidence, and rather than throwing the baby out with the bath water, we should be preparing for what's coming next, because it's going to surprise everybody.
So how do we do that right now in the context of this run up that we've seen in the markets? How does an investor use these tools?
I think investors need to look and see that our preferences have changed. We're getting more conservative behind the scenes, even though the indices are moving to record highs. So you want to recognize that while we're in the comfort zone, we're nowhere near as craving possibility and abstraction as we
were two years ago. And also appreciate that there's an enormous disconnect between market confidence today and main street confidence, and with wealth so concentrated in so few hands, that tension will certainly play out if the economy turns down. You know, I always think if we're in the comfort zone, we don't anticipate a recession, and that becomes really dangerous when we all think that moment has passed.
Well, it's so interesting that you say that, because I think about how much we talk about consumer sentiment, our consumer confidence, our business sentiment and business confidence. Right, these things can certainly shape our actions and certainly as investors are expectations of kind of where assets should go.
Yeah, they how we think out, how we feel shapes our actions also shapes the stories we tell, and so the narrative, the narrative, The narrative is simply a reflection on how we feel. And here again the narrative today is the coast is clear.
Relax.
If there's going to be a recession, it's going to be shallow if it. Inflations come down considerably from where we were, and so we're investors are looking out ahead and not appreciating that risks come out of nowhere.
Well, that's what I was going to say, and well, we've got to do a little bit of news. But you know, when you're in the comfort zone and you're kind of relaxed, I mean, this is when all of a sudden there's a regional bank problem or there's a cryptical lapse, right like those are. So it feels like what you're saying is we can kind of anticipate, maybe not exactly what's going to go wrong, but that's something's going to wrong go wrong, absolutely, and we can kind
of figure it out. Could we anticipate that a burning made off was going to happen?
Yeah, because the more confident we are, the less we scrutinize, and we fall a victim to content at both extremes financial fomo a fomo, and it loads in confidence we follow the wrong people.
I want to get right back to Peter Attwater, his new book The Confidence Map, Charting a Path from Chaos to Clarity. A professor at William and Mary so I said, I'm events being unprecedented. Do you know that they are entirely predictable? Is that true? Even black Swans are entirely predictable.
If you look at the backdrop of how people feel. They're much more predictable than we realize. The means may change, but extremely vulnerable people always do the same five things. People who are extremely confident have a similar series of things that they do. And so if I know how people feel, I'm not going to be nearly as surprised by what they do. And I live this with my class as COVID was beginning to take hold, and we would every week we would say is confidence higher or lower?
And if it got lower and lower, and each week they would say, so, if since it's lower, what are people going to do next? And as we approached March, they were the ones who told me, professor, you need to pack everything up for spring break, and because we're not going to come back if confidence continues to fall. And so we tend to overlook that confidence is changing. Our choices change, and there are clear connections between what
we want and what we feel. And we look at events as being the event, not the decisions made moment before the event. If I think about nine to eleven, we would say that caused American confidence to fall, But if you look at the backdrop, confidence in them add least was really low and so you could understand why people who are feeling hopeless might undertake that samely with the Arab spring.
So a skeptic of your framework might say, it's very easy to connect the dots when you look back, but how do we look forward and use this framework to predict the future.
So that's what I try to do with investors in real time with corporate executives in trying to help them to realize that the choices are being are changing quickly based on how we feel. And I found myself in COVID working with corporations trying to rejigger their messages because when we lack confidence, we need simplicity, We crave nostalgia, and so you can if we can watch as people are changing their mood, we can better anticipate what to
do in response. And that was one of the things that emergency room doctors and first responders really showed me that these are things you can prepare for and train to anticipate how to behave in a crisis.
Right there, many of them were prepared for trauma, right so in that when it came so okay, I'm thinking people are at home, or they're driving, are they're going to download this podcast or download this later as a podcast, and they're like, Okay, so how do I apply that to investing and how should I be thinking it about it in today's market environment.
So one of the things I think investors need to be careful about today is the historical relationship between stocks and bonds seems to have broken down. That we think of this in terms of a diversified pool, that owning stocks helps you because they do better when stocks do worse. And the reality is that not that long ago, confidence
in both stocks and bonds was staggeringly high. We had trillions of dollars worth of negative yielding bonds at the same time we're stampeding into crypto and all of these crazy things, and we didn't realize that every piece of that pie, that diversified pie, was piping hot. So you need to think about not historical correlations, but how do
investors feel about what you own? Because you want to own people, you want to own hopeless at the same time, you want to own things that we're excited because it's tomorrow land and having a mix of moods in your portfolio, because that's where the real benefit of diversification comes from. A mix of moods, A mix of moods.
It's interesting like that.
I mean, what does a mix of moods look like? Obviously it depends on your age and your risk tolerance. But how do you take a mood and apply that to an ETF or to a fund or to a stock.
Well, price is a great way to discover it, because I think prices market prices are a barometer of mood. So you could have looked at the price of natural gas last summer and scene that. You know, we were terrified that there was going to be enormous scarcity, and now there's immense complacency in that sector, that there's views of abundance forever. And so you want to be thinking about where is there intense scarcity, where are people stampeding in and where they stampeding out?
All right, I'm going to go dark for you, charting a path from chaos to clarity. I feel like climate change is one of those. This is an existential question for all of us in situation. So how do you think about that?
So climate change is a very abstract concept, and if you look at our eagerness to address climate change, it migrates with our level of confidence, And what you'll find is that when confidence is high, we want to tackle climate change proactively, that our focus is prevent the problem. And when confidence falls, our response to climate change is we need to deal with the consequences of having not
dealt with it. And so if confidence falls, I think you'll start to see that our interest in solving it is swapped out for our need to address the fact that we didn't. And so that's a behavioral change because we move from abstract possibility to immediate need and vulnerability.
I just because it's just it's all I think about. But then a lot.
Ability effects different people depending on where they live, if they live, and I think maybe one thing that changes was when you know, the skies over so much of this part of the country turned red a few months ago because of Canadian wildfires. I mean, we're in an area that's not traditionally affected by wildfires, but we're seeing the effects of that.
Yeah, so we need abstract vulnerabilities to become real. Think about COVID. COVID did not become real for most Americans until March eleventh, the night the Tom Hanks and Rudy Gobert were the.
Headlines and the NBA.
And suddenly that was the tipping point and boom. We all felt it and you could see it.
It was like a.
Wildfire of a shift in sentiment.
It's so true for so long we're like, it's not going to be our problem. It's not going to be our problems that all the stories went along with that. Yeah, And I have to say, as a journalist or you know, it felt kind of stupid, like on the other side, like how did we what is this when we're thinking how could this not impact us? Thank you so much, Peter Atwater, Thank you so much. Such a treat to have you in studio. The book is the Confidence Map,
charting a path from chaos to Clarity. I'm actually heading to a beach, so I'm taking this with me because I've just done a little bit of reading, but I want to read it which just came out Carol, I know, Peter, Thank you, good luck with it. Come back soon. This is Bloomberg.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen on.
Bloomberg dot com, the iHeartRadio app, and the.
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We have been focusing big time on Megacap tech earnings, Microsoft Alphabet, You got Amazon next week, and as they report, we always focus on a very key metric, tim and it is all about their cloud business. We did that last night with Microsoft. A little bit of a disappointment. It's a big business we know when it comes to cloud. And as a new story in Business Week notes, the cloud is part of an ecosystem that consumes many resources, including water.
Yeah, this was really surprising to me because I've heard the cloud consumes a lot of energy. Check out this story in the new issue. It's on newstands later this week. It's already online at Bloomberg dot com. Slash business Week is of course on the Bloomberg terminal. It's also among the most read on the terminal today. The editor on the story, Bloomberg BusinessWeek Technology editor Joshua breustein with us here in our Bloomberg Interactive broker's studio. It's incredible to
see this story. We knew view that they use a lot of energy, but water, Just how much water do data centers use?
Well?
Data centers are Actually it's a bit of a question because tech companies haven't generally been reporting on how much water their data centers are using. As you said, electricity has been a big deal. But basically what happens is you have these computer servers running, they're running very hot,
and they use water to cool them down. As an example, Meta is planning on building a data center in a drought stricken area of Spain and it's expected to use about six hundred and sixty five million liters year.
So let's talk geography here because the story goes into why these data centers are located where they are. Why not put this somewhere near that's not drought stricken.
Yeah, it's a good question. I think they're looking for a couple of things. When you're citing a data center, you want access to cheap electricity, you want access to water, and you want access to a government that will allow you to build a data center. And what you found is that some areas where there is plentiful water have started to oppose these data centers exactly for the tax they put on resources.
I thought what was really interesting is a quote in the story that says people don't realize that the cloud is real, that it is part of an ecosystem that consumes many resources. I mean, you're right, we're learning. Like we all talk about cloud and we just think it's just where our photos go. And if your a business, just a lot of information goes. And all we know is with AI, it's going to be even more in demand. Correct, And so we're going to continue to see data centers
all around the world, if you will. And there are costs to.
That, Yeah, absolutely, I think like that with so much things with tech, it just seems so clean, so easy, and then behind it there's a lot going on that we don't have to think about if we don't want to.
What are companies doing?
Though?
So listen, And I'm curious about the oversight Joshua, Like, aren't companies they talk about being green and sustainable, So what's the oversight of understanding the impact if you build a data center here? This is what it's going to mean for the environment.
Yeah.
So obviously there are different environmental review processes and different jurisdictions, and the tech companies are saying that they do care a lot about the environmental impacts. Obviously, if they can cut down on energy use, on water use, it will also make their data centers cheaper. So all of the companies are working on ways to reduce water consumption, and I think what you see is that they are getting more efficient at this, but the problem is their capacity.
Their need for capacity is growing so much faster than their ability to increase efficiency that overall it's going up.
This seems well, my thoughts are going in a lot of different places right now, Joshua, But it seems like the type of problem that tech could solve.
Right.
Can't you create something that doesn't need to be cool? It's like a nuclear power plant core? Can you create something that doesn't create as much heat? This seems like there's some brilliant person somewhere who's going to be able to do this and it just hasn't happened yet. Am I being too optimistic?
Yeah?
I mean I think that there is a limit to how much to how much you can get this down. I mean, these things are running computers, They use power, they create heat. You have to deal with that, and there are efforts to make these things more energy efficient. The question is can they beat the can't?
It's a race?
Basically, their capacity needs are growing up. They need to come up with better ways to do it and like, who's.
Going to get their first And it's not like the water, it's not like the water gets run through this and then you know, it's just warm water. On the other side, you talk about water just evaporating into the atmosphere as a result of this cooling process.
Yeah, that's a big way that the consumption happens is actually the data centers use the water the water evaporates as a way to cool them down, and then the water is you know, effectively gone on site.
Tell us about the conversation. I want to take a step back because we often when we talk with Jill Weber, the editor of the magazine, it's like, how does this story come to be and how do you guys what's the conversation in the newsroom that ultimately leads to what we are reading today. What was the germination of the story.
Yeah, well, obviously this came out of Europe. There's been a lot of talk about the effects on drought and heat in Europe this summer, and there is one large data center that I mentioned that Meta is planning in Spain, and because it's happening in an area that's really being hard hit, there's a lot of questions around that data center in particular, and when you look at that conflict, you quickly realize that this is a stand in for
a larger conflict that's happening in a lot of different places.
It's kind of amazing because you, well are not amazing because you understand governments they want these facilities built. Right, It typically means economic impact, right or jobs created in data centers. I guess right, there's a fair amount of people in there.
Yeah, I think there's some question about how much how many jobs are created by data centers. Obviously, if you think about what a data center is, the whole ideas that it is running not with people, but just running computer right service.
But the doing but the construction of them takes local labor, and it creates tax revenue.
Absolutely, there is some economic impact here and that's why people want them. And also just sort of overall, I think tech is an economic driver and this is a part of the infrastructure that has to be cited somewhere.
You probably have to have the data center set right closer to kind of where some of the activity maybe is also happening. Can you take us to a photo the umbrellas. This is umbrellas in Spain. It's how you guys wrap up the story. But it's a canopy to protect locals, you know, And it was kind of interesting in terms of I guess, I don't know, to help the environment, I don't know.
Yeah, I think we were just trying to show like how panicked people are in this area and like how much people are trying to come up with ways to even deal with the you know, the activity that's already there. This is really straining everyone, and you know, adding a data center is just an extra complication to the mix.
It still seems like to me there could be just better places for data centers in the.
World, like Norway.
Well, Norway has expensive energy, I think is what is what the article said, Correct me if I'm wrong, Joshua. And the amounts of water, but lots of water exactly. Isn't there a place where there's you know, lots of
water and hydro. I mean, I think of the bitcoin mining issue as well, and you know, when we talk about the energy, and some would call it waste some wooden, but there are places where you could co locate these facilities that would be a lot more, would have a better environmental impact, perhaps near renewable sources.
Yeah, absolutely, I think that's what people are looking for. And when you mentioned bitcoin mining and so that's not even a related issue, that is the same issue. I mean, bitcoin mining operations are data centers. So you want to locate, as you said, in places with large amounts of renewable energy. Oftentimes that is hydro electricity, So those can be places
where there's also plentiful water. But when you have a need for so many data centers and they need to be geographically spread out, you're going to end up going into a lot of places with different tensions.
I do feel like Europe's going to ultimately lead the way, like they do on so much in terms of oversight and regulation. So where does it go from here at this point? I mean, you guys are certainly putting it on the radar by writing this story, but I'm just curious. It hasn't been something we talk a ton about, and I just wonder when it becomes one of those things that lawmakers and policy makers globally you're like, well, wait a minute, we got to think about this.
Yeah, I think this is going to be an issue that you'll be hearing about more as resources continue to be taxed more and more.
Yeah, especially with AI. Like I love the I don't know that I love it, but what it says about AI that the chips that they use for AI generate lots and lots of more more heat.
In the reporting for this story, I'm wondering if and you were the editor on the story, but I'm wondering if if you know, we found that there are some governments that are so enthusiastic about this despite the environmental consequences. And we should note in the piece, it's not like these companies are coming in and advertising the fact that these are data centers. You know, the author's right that
these things just look like they could be warehouses. They look like any other huge building, industrial building.
Yeah.
Absolutely.
I don't think that this is something that the companies that are building them are necessarily wanting to go in and make a big show of things. They're just trying to set these things up and quietly go about their business and maybe talk about They really want to talk about more of the consumer facing things that people might care about or even notice.
You know what's so interesting too is I was thinking a lot about Apple when I was reading this story, and a few years ago, Apple decided to when when the materials that go into phones, that go into chips came under such scrutiny the mining practices around those, Apple decided to make changes to the way it discloses its supply chain. And you can read all this on their website. But I haven't heard anything about data center usage and transparency.
There is that something we're going to see a demand for.
I think we're already seeing a demand for it. I think that came up in this story is what you see government saying to tech companies is well, you have to at least tell us more about how you're using water, if just so at the least we can plan for what you're doing. And obviously once they see those stats, they may want to say, well, you've got to come up with a way to use less. And the first thing to do is just get the information right.
And carbon offsets don't do it. Yeah, it's like my big pet peeve, as of like, because it doesn't.
It just kind of well, there is an interesting parallel to carbon offsets, which is that if we use this water, we will restore water. We will restore water somehow. And you run into a lot of the same issues where well, where is it going to be restored? How's that going to work?
Exactly?
No, it's like, stop doing the bad stuff. I'm sorry. I just think for how we we've the Corent off sets. It's the answer to everything. It's like, no, stop doing the bad stuff right at this point. No, But and I think about again, you know, there's just going to be more and more of these around the world, So you just think, Okay, this is just going to become a much more serious problem, especially if you look at the summer we're having in terms of the weather, right,
and the impact of that. Absolutely all right, great story.
I think twice about saving your photos to the cloud, Carol, You just you're just not winning as a consumer.
It's if you think about like your your car, your footprint. This is part of it.
I just got to notice that eighty five percent full on Google Storage.
We need more clouds.
It gotta buy some more cloud Yeah, it's really fascinating. Anyway, Thank you so much for bringing us the story. Absolutely so appreciate it. Joshua Brustin. He is technology editor and oversees the Tech section of Bloomberg BusinessWeek magazine. This story is in the New issue. It's coming out on newsstands tomorrow. It's already on the Bloomberg and of course at Bloomberg Dot.
But I feel like all the climate stuff that's coming out, like you're just getting different pieces about, you know, our impact on our world.
Yeah, and again, this is one of those things that you don't necessarily think about the environmental impact of what you're doing on your phone or what you're doing with your digital life and the real world impact that it has because these things are not actual things, right. These photos are digital, they're not you know, and it's not just photos, right, it's like AI powered in the cloud.
It's everything. Can I ask you one thing? Did you oh did what did the companies say or does it just kind of like.
Well, what the companies say is we know that climate change is real, we know it's a big deal, and we're working really hard to be more efficient at this which I think is true. Yeah, they are trying to come up with ways to use less water and energy, but they're also coming up with ways to put AI into everything.
Is it only water though? That does it? That cools it?
Like at this point, Yeah, that the main that those are the main techniques.
Yeah, So while we still have you, I do want to say that there's a good there's a really good quantity way to quantify how much water is being used. And there's a team at the University of California Riverside, and this is in the piece. They've calculated that every short conversation of twenty to fifty questions and answers with chat GPT represents about five hundred milli liters of water.
So stop doing it, Matt Miller. Stop talking with chat GPT.
If you're just ask a few a questions, you're just watering the sidewalk when you do that, just pouring water out onto the CEM.
Just stop it. Everybody, thank you, We really appreciate it. Joshua Bustin, as we said, technology editor at Bloomberg Business Week, And of course the new issue is coming out coming up. We've got a really treat for everyone. He's certainly a friend of the show. We're talking about Peter atwater over at William and Mary, but former banker, someone who understands how Wall Street and the financial markets work and financial
services works. And he's got a new book. It's about the Confidence Map, and you're going to have to draw a square.
I love this because it offers a framework for how to think about decision making, how to think about decisions that you make in your life. He made a really big decision when he was forty five and left financial services and decided to research confidence instead. And I think it's fair to say this this book is the product of that sort of second act that he's had.
Speaking of decisions, we'll maybe ask him two a little bit about what he makes about the FOMC decision.
Oh that's a good idea.
Yeah, I just see what he has to say, and then we'll kind of broaden it out. All right, You are listening and watching Bloomberg Business Week. Carol Master, long it, Tim Stanic, This is Bloomberg.
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On Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App, or watch us live on YouTube.
Can you talk about it? We all talk about a few certainties in life, right, death taxes, and the American healthcare system is, for lack of a better word, it's a mess. Yeah, like disruption, innovation. Come on, come do something.
So remember, we have the Affordable Care Act Obamacare, right, right, that's supposed to solve all of the problems for uninsured Americans. Well, guess what. In twenty twenty one, nearly thirty million people, more than eight percent of the US population, didn't have help insurance. That's according to the US Census Bureau. Now, don't get me wrong, this is a lot better than things were in the decade leading up to the Affordable Care Act, when more than fifteen percent of people did
not have health insurance. But this is still millions of people who are at risk.
It's a lot of people in a very rich or so we're told, wealthy country. So let's get to one of the co authors, Amy Finkelstein. She is a professor of economics at MIT, director of the Healthcare Program at the National Bureau of Economic Research, and among other things, a twenty eighteen MacArthur fellow. And actually get a genius grant. Correct, Yeah, that's correct.
I don't know if the geniuses are supposed to call them genius grants. That's for just us lay people.
Carrol, We're going to call you a geni. We've been calling it teasing you up. She is on Zoom in Cambridge on them.
Well, I got to tell you it's going to take a genius to figure out healthcare in this country.
So we're lucky to have you help us. Help us because you know, Tim and I talk with a lot of folks and we talk about disruption, innovation, We've got the metaphorse coming, we've got generative AI, all these wonderful things coming at us, and yet it still feels like in some ways healthcare is way behind the times. How do you see it? How do you think about it?
Yeah, thanks a lot for having me on. I'd say, you know, we didn't my co author Lauran and av and I didn't go into this thinking about disruption, but we concluded that it was the only solution. And part of the reason is related to that fact that you started with that thirty million Americans are one in ten Americans under sixty five lack health insurance at any given moment.
That gets talked about endlessly, But a really, really important statistic that gets very little coverage is the fact that more than twice as many Americans, in fact, one in four Americans under sixty five will have some period of time without health insurance.
Coverage over a.
Two year period. In other words, health insurance, whose very purpose is to be secure and certain, is in fact highly uncertain. We all live if we are lucky enough to have health insurance with the risk of losing.
That coverage is that because it's tied to our jobs.
For people with employer provided health insurance, that you know half about half of the population that haves that Yes, For people with publicly provided health insurance, the risk is like Medicaid or Medicare for certain diseases, the risk is you can lose your coverage if your income changes, or you get older, or you have a disease specific coverage program and you get cured of that disease, or and this is kind of the most heartbreaking part, or you
can simply lose your coverage because you fail to realize that you need it to file forms to demonstrate that you're still eligible under some income category. And that's why we realized further patches and incremental reform won't work. We have to tear this down and start over. Because whenever you have different pathways to eligibility and coverage through a myriad of programs, you're going to have gaps at the themes, and that's where people are falling through.
All right, So the professor Finglestein could wave your magic wand and change one thing that you think would be a game changer in terms of improving healthcare in the United States. What would it be? I'm just curious, who would you wave the magic wand over? Is it the health insurance is Is it politicians?
Is it?
What?
To fix our coverage problem? We need automatic universal basic coverage that's free for everyone, no patient payments, and then the option to buy supplemental coverage if you want more than the basic.
Is this sounds forgive me, I'm not sixty five, but my parents are over sixty five, and this sounds like medicare.
It may sound like Medicare, it's not. Here's one very important difference, and that I think a lot of the proponents of Medicare for all don't realize that Medicare for some is actually very very incomplete insurance. So, for example, for doctor visits, people have to pay twenty percent of the doctor bill out of their own pocket, with no limit, no cap. So you can, if you're unfortunate enough to be quite ill, you have cancer, say and you rack
up lots of physicians visits and bills. You can be on the hook for tens of thousands of dollars that you have to pay despite having coverage. A startling fact is not only that there's enormous amounts of medical debt in the United States, but that three fifths of that is incurred by people who have health insurance. So in that sense, our plan would be much better than the current Medicare plan and there'd be no risk of having
to pay anything out of pocket. On the other hand, because we are realists at least in the economic in terms of the economics, we have that coverage be much more basic than the current Medicare coverage. People are so concerned about Medicare costs growing so fast and going through the roof One reason they do that is because there's no budget constraint on the system. Patients want care, physicians
are willing to provide it. There's no gatekeeper on the back end saying no, maybe we need to, you know, check to make sure you really need that CT scam because you came in with a headache. So we would have much more constraints on the nature of the care that's provided, But anything that was provided would be completely free.
So how do we help you know, you know where that gets to, like people making decisions about who gets what, like, how do we make sure that is done in a pure way.
That's a good question. So the first thing I want to emphasize is that the whole point of a universal basic health insurance system is to fulfill the social commitment that we clearly have and it's revealed by all our patchwork policies to provide essential medical care when people are ill,
regardless of their ability to pay for it. And so the basic coverage has to cover what's medically essential, but it doesn't have to cover things that we all might like but that aren't actually essential medical care, such as you know, so you can have longer wait times for non urgent care, you can have a fewer fewer amenities of the non medical part, you know, like more people to a hospital room or and this is what other
countries do. Countries like Singapore or Australia, they provide universal basic coverage, but if you want a private hospital room or good hospital food, that's what you pay extra for.
I will say, like, there was one point my husband got ill over in the UK and we were initially in I guess their public system and right and yeah, and it was a ton of people in a room and you had to get up to get your own food. It wasn't great, I'm going to be quite honest. And he was with an employer who pulled him out and put him over to a hospital that is was like a nice hotel and you know, got a bunch of tests that they could do as soon as he walked in.
Although we had to see the finance person. That was the first person we saw to make sure that it was going to be paid for. Like, it was just such a contrast. And I guess, so I'm trying to understand, you know, how we move forward and get to something where more people are getting better care, and I'm wondering, how do we pay for all of this?
So I think those are related questions. The example we give in the book is, you know, how do we fulfill our obligation obligations but without you know, all the extra stuff. So your husband's example is a perfect one. It's it's I can totally understand why you liked going outside of the system more you had, you know, a
private room, more convenience, et cetera. But I think our commitment as a society is not to provide everyone with luxury, high end medical care, such as your husband was fortunate to receive, but to provide essential medical care. And that's also how we keep the price down. So if you are fortunate enough to be able to afford it, and you want to buy those extra amenities, that's great, but that's not what we're committed to as a society. We're
not committed to providing a luxury experience. We're committed to providing essential medical care. And as we discuss in the book, that's also how we keep the price tag.
Guy great.
And I certainly wasn't arguing in favor of the other because he wasn't fixed. He was basically just fixed enough to get on a plan and come back home to the United States. But it was just such a contrast, and I was trying to get my head around, like, how do we figure this out? Professor Finkelstein, don't go anywhere. We want to continue this conversation. We are talking with Amy Finkelstein. She is a co author of a new book it's called We've Got You Covered, Rebooting American Healthcare.
Professor of Economics at MIT, and director of Healthcare Program at the National Bureau of Economic Research. I mean, really is coming at this from just checking all the boxes of someone I think who needs to understand how to fix this.
She's at the NBER. I wonder if she can tell us if there's a recession.
That's our next question. Carol Masser along with Tim Stenovik here on Bloomberg Business Week, and we want to get back to Amy Finkelstein. She's co author We've Got You Covered Rebooting American Healthcare, Professor of economics at MIT, director of the Healthcare Program at the National Bureau of Economic Research. And as we mentioned earlier at twenty eighteen, MacArthur fell on Zoom in Cambridge. So do you know is it a recession? Is a recession coming.
That? Acist?
We had a great Bloomberg story a few months ago. Amy and the group of folks at the NBER were described as eggheads, who are the ones who decide whether or not we're in a recession. So I guess we'll have to go to you for how we fix American healthcare.
What' just the egghead on health?
Hey, that's good enough for us. We appreciate that. What is the one country that is doing this the best every.
High income country, but the US is doing it much better than we are. None of them do are doing it exactly as we propose.
Which one is closest not a fair question.
We're like some of them in some dimensions and like others on others. What I can say that every other high income country is doing, which is what we propose, is automatic universal basic coverage and the option to supplement or top it up if you want more. And the third element, which is really key, a budget that is enforced in terms of how much can be spent by the taxpayer on healthcare. One thing that's shocking about the US system is there is no healthcare budget in the
sense of what a budget really means. A budget constraint, an amount that you can't spend beyond. When people talk about the Medicare budget, they mean how much Medicare has spent or will spend, not the cap on how much it can spend. So we need to enforce a budget and use that taxpayer money that we've allocated to provide
universal basic coverage. Now you ask which country we're like, Well, in one dimension, we're very much like the UK and Canada in having absolutely, no patient copays in the basic coverage. No patients don't have to pay anything out of pocket. On the other hand, in terms of the design of the supplemental coverage, we very much don't want to do it the way the UK does it, but we want to do it the way say Singapore or Australia do it, where you can just pay the extra cost to top
up upgrading, you know, to business class. You don't have to repurchase the entire ticket to get a little extra ligruy and just pay for the additional cost.
But doesn't that create again inequities because obviously not everybody can can upspend if you will.
Absolutely, we you know, we see the key mission of health care policy to make sure that everyone has access to essential medical care, regardless of resources. And beyond that. We tolerate inequality in you know, the supplemental and the same way we tolerate inequality in other aspects of our society, you know, housing, food, et cetera. Our proposals about a
floor not a ceiling. And one thing that's really important to understand because I know that makes a lot of people uncomfortable because however we feel about inequality in say clothing, you know, many people feel rightly that the health is different, that it occupies a, you know, a sort of special
place in our moral firmament. One of the things we make very clear in the book is that there's an enormous body of research that makes it clear that, as counterintuitive as it may seem, if you're concerned, and you should be about the shocking health disparities it exists in the United States between high end low income, between black and white, health insurance policy is simply not the lever to lean on health insurance would make reform would have
little effect on those health disparities. And probably the clearest way to see that is from work that some economists have done ich In Chen Maria Poliakova and Petra Parson, who shows it in a country like Sweden, And there's other work showing this in Norway, despite universal health insurance and cradle to the grave social safety net, the health inequality across the income distribution is as large in say, Sweden, as it is in.
The United Wow, that's surprising to hear. So, yeah, if you look, I have two questions for you, one yes or no. But you can also tell me it's not a fair question. Do doctors in the US make too much money?
It's not relevant to our proposal.
So that's my next question. When you look at the when you look at the value chain across patient access, and you know you hear the stat thrown around all the time that you know, a fifth of our GDP goes to healthcare costs. Where is that money going? Who is getting that money? Who doesn't deserve it.
One of the key things about our proposal is to realize that you can separate the question of how do we make sure that everyone has access to es central medical care regardless of resources, from the very hard questions that you're raising about how to fix you know, healthcare spending, how to make sure that we can you know, spend less and still achieve good outcomes. The coverage problem turns out to be a really easy one. As I said,
basically every other high income country has done it. The question you're asking, which is a good question, is one that no one knows the answer to, and I don't care what they're claiming. It's a very very hard problem. But the way we can afford it is to realize that, yes, that statistic you said is right. We spend twice as much as any other country on healthcare fifth of our economy as a share of the economy, but only half of that is publicly funded. So taxpayer dollars in the
US are not more than in other countries. We're already paying for universal coverage through the tax system. We're just not getting it all.
Right, So just got about a minute left here, so forgive me, and I'm just maybe a little brain day, But I mean, so, what's the step one towards what you are talking about? What would we have to change? What is it?
We'd have to completely tear down the current system and build system in quotations, the current patchwork of policies we have in place and actually design and build a coherent, automatic universal.
Basically, how does that start? Is it politics? Is it politicians? Is it the private sector? How do we start?
It's public policies?
So, yes, we need it, we need it. We're waiting for the first, you know, would be presidential candidate to sign on board for our plan. The book just came out today, so you know, I'm willing to give it a week or two.
I guess what, you know, and listen, I wish we had more time because this is a really I think difficult. I always feel like health care and education, these are the two things that really need some disruption to happen in But healthcare, I feel like there's so much money in it. You know that it complicates it?
Is that fair?
I just got about fifteen seconds. It complicates it, right.
It does. But once we agree on the solution, then we can start trying to figure out how to achieve it.
I got to say, I love a book that says more than fifty shades of gray, but it has to do what's going to be considered, you know, kind of basic coverage, right, what things go? Fertility treatments is it basic? I don't know, physical therapy anyway. Amy Finkelstein, incredible. Check out the book.
Everybody, you're listening to the Bloomberg Business Week podcast cat just live weekday afternoons from three to six Eastern Listen.
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All right, we're going to talk a little bit about those who work specifically at Amazon their fulfillment centers, because it is a subject of a story that's in the upcoming new issue of Bloomberg BusinessWeek, And you got to keep in mind that coming up this month there are hearings into Amazon's labor practices in Washington State, just the beginning of a widening government crackdown on the company's safety record.
That I guess many would argue, Matt, that they are the most intrusive scrutiny in the company's history, that is, the investigation into them.
So you mean that they are monitoring these employees with cameras and electronic devices, really watching what they were doing to see how difficult a job it can be at an Amazon fulfillment fulfillment center sounds like such.
A we're fulfilling.
I'm trashing that term. Come on, it's a warehouse, all marketing.
It's all marketing, data, democratization, right, finances? All right, So let's get to the two reporters who wrote it. This story, as we said, featured in the upcoming new issue of Bloomberg Business Week on newsstands later this week, already online at Bloomberg dot com, slash BusinessWeek, and of course on the Bloomberg terminal. So let's get to it with Bloomberg News Technology and e Commerce reporter Spencer Soper on the phone in Seattle and Josh Idelson, labor reporter at Bloomberg
News on Zoom in San Francisco. Spencer, let me kick it off with you, because you take us back. You kick off the story and take us to December twenty twenty one. Tell us a little bit about what was going on.
Yeah, so that's when state inspectors and so these will be people with Washington State Department of Labor and Industry, based on some concerns, including media reports about warehouse injuries as well as the injury rate at the facility itself, entered and looked around and in a huge little investigation, they'll bring cameras and survey the workplace. And ordinarily these things don't even escalate to this point of contention. It's more like a cooperative thing where an employer wants to
know how to solve injuries. But in this case, they actually had a court order to enter the warehouse in Amazon's home state of Washington. Use electronic devices to put on workers and measure all kinds of things like how frequently they stoop and bend and twist, and calculate the rates that they're performing lifts every minute or every hour, and basically just surveying this workplace for ergonomic risk because they're trying to find out and answer questions what can
be done. There's a high level of injury in this workplace. What can we do to make it safer?
Yeah, I mean, I've been in a lot of car factories and you'll always see signs that say, like, you know, sixteen days without an injury, right, and they count higher and hire. But at Amazon warehouses, nearly one hundred people are injured every single day.
That's a lot.
And Josh, it doesn't make much sense to me from the business perspective. Don't they want to keep their staff from getting injured, because if you hurt yourself on the job, then you're out not for like a day or two, but for a month or two.
Well, Amazon, of course says that they are working hard to prevent their staff from being injured. We talk to people, including one of the ergonomists from the state of Washington who's testifying in this proceeding, and a warehouse safety equipment makers director who argue that there are things the company could be doing and it's not doing. And as you say that those would save the company money. It costs money to have people out injured. It costs money to
bring in new employees. Now, the measures that are being urged by Washington State would also cost the company money, both because of operational changes and because fundamentally, this case in Washington State is partly about the pace of work, an issue that has dogged Amazon for years now, This question of how much the company expects workers to do in an hour and how that expectation impacts the likelihood of getting hurt.
Well, this goes to the core right there. But their business model is really on trial, is what you guys report about. And Spencer, I mean so much we talked about all the time. We've all gotten used to I order and I get the next day or get it in two days, like we just all expect that. But that puts a lot of pressure right on Amazon workers to really churn stuff out.
Yeah, and so there's a variety of jobs and tasks right and Amazon it's tough to get them to pin down a specific quota because I say, it kind of moves around depending on how people are performing in their own operations and stuff. But what's coming out and what Amazon is acknowledging is saying, listen, if someone's in our warehouse performing a job, and their pace of work is you know, below ninety five percent of what their peers are doing. That you know, that's the only thing that's
going to trigger them getting spoken to. And what the state is saying is like, listen, that's a little bit too tight of a work expectation because you have pretty broad difference in the physical capabilities and the stamina of a workforce. You know, that's going to range from kids fresh out of high school, you know, to people in their fifties and sixties. So it's basically their operation is on trial, and the main question is is it safe?
And if the answer to that is no, how can it be how can it be made more safe?
Well?
And they found that they're not safe in a lot in a lot of these cases, right. And by the way, they use extremely high tech gear to monitor the workers. I guess they have a Dutch company x Sense technology that that makes these motion sensors that they were putting on Amazon employees arms or legs or whatever. I thought they were gonna start using gear like that to help
these workers do their jobs. Like ten years ago, I did a piece about robotics that would help you at a Mason, Right, yeah, Josh, do they not have this kind of tech or Spencer, I mean, are they putting is Amazon putting any you know, mechanical helpers in place. I don't know which one of you is a better person to ask for these for these questions. Oh right, Josh, I'll go with you.
I would defer to Spencer on what the Okay, we'll.
Go with Spencer.
Spencer, Spencer, Yeah, yeah, I can answer that. And so, yes, there are there's a lot of automation within Amazon warehouses, and a lot of it is just focused on pushing product through the facility as quickly as possible. They have robots that shuffle things around. You're a worker, you might be if you're a picker, which is someone who's actually you know, you ordered a toothbrush on Amazon. I'm a picker. I'm going to be the one who actually retrieves that
from a bin. A robot will bring that bin to me and I will retrieve that item that you've ordered. So there are robots and automation in there, but there's still extra things, and some of it is very simple. Like so, the hearings actually began today and I've been watching them, and one thing coming up is, hey, they've got they've got step ladders, which help people if they're going to minimize like reaching over your head, which is a very serious hazard if you're reaching a high above
your head to grab a box. But the step ladders they're using aren't tall enough. They need to be taller. So some of these things are very aren't high tech at all, fairly simple solutions and also just rotating workers through different jobs. And the state inspector who is testifying today said he found no schedule of an actual rotation and that it just seemed to be kind of willy nilly, you know. So again, it's not necessarily high tech solutions.
Some of them are. Some of them require investment, but some are pretty simple, things like step letterers and shifting people through different roles.
Well, and you get into some of the different roles, the stuffers, fluid loaders, those who place outbound packages onto trucks, the stuffers who unload boxes from trucks. I mean, some of this is repetitive. It's probably pretty heavy one way.
A mandatory overtime. By the way, don't forget right that they're not these are not eight hour no right.
They might go really long. What I want to ask you, though, josh is has the law not kept up with kind of the way how we work has evolved. I mean, first of all, we've had assembly lines for a long time. This is a different type of assembly line, if you will. But I'm just wondering what the law has said, labor law.
Well.
One of the things that's interesting about this case is in several decades, it's one of the only times that there's a trial about ergonomic issues, and there is no really specific federal ergonomic standard, which is not something.
No one has thought of.
In fact, there were efforts in parallel a couple decades ago in Washington State and at the federal level there were what would have been ergonomic rules put in place, which then were swept away quickly because at the federal level, when George W. Bush won the two thousand election, the Republicans in Congress and President Bush used the Congressional Review Act to undo Clinton's new ergonomic rules. In inl on Washington State, there was actually a voter referendum to undo
ergonomics rules. That means that instead, at the state and federal level, the enforcers are stuck using what's called the General Duty Clause in federal law, which is a more general requirement that the employer avoid hazards that are known and could cause serious harm. Of course, there's tremendous debate about what would count as such a violation, and we're going to see that play out in Washington State in this trial over the coming days.
You know, it's interesting they had one of the senators quoted in the story says that she I think it was a She is one of those people who loves getting her box the next day, right, right, and now she feels guilty. But that's still achievable. It would seem to me, you just don't make one person, you know,
pack two hundred boxes, you know, for twelve hours a day. So, Spencer, did you look at that, like if it's possible for Amazon to still achieve the same end with just you know, maybe more employees or more centers, or is the only answer to slow things down a little bit?
Yeah, it's a it's a critical question, and I don't know, because the bottom line is Amazon basically has made you know, think about this. You used to drive to the store yourself, You used to walk yourself to the aisle to get the item. You needed, you would walk that aisle to a cash register, you would pay someone for that item, you would drive it home. Right, So basically stores were relying kind of meeting you half way to get you the product. Amazon is doing you know, all of that,
saving you that trip to the store. They're using you know, another worker, paying them gas, you know, paying you know, the gas for the vehicle, the trip to your house, all that stuff, and doing it at a price that's competitive of you going to a store that's very difficult to pull off. And if you start turning knobs and increasing costs, this thing could could unravel. So that's that
is that is the critical question. Can this business be done in a way that is comparable to to going to the store at the same cost or is it more of like a boutique service that you're gonna have to pay a little extra forcuse just because the cost of doing it safely is higher.
Hey, real quickly, Josh, how quickly or how long is this trial expected to last? Just got about twenty five seconds.
So the trial will be going on for weeks and then there is a potential appeals process that could drag this on far into the future.
All Right, so we'll be talking about it for a while. All right, guys, thank you so much. Bloomberg News Technology and e commerce reporter Spencer Soaper joining us on the phone in Seattle. Josh Iidlson, labor reporter at Bloomberg News on Zoom in San Francisco. As we said this story in the upcoming new issue Bloomberg Business Week, I do wonder Matt, like, do they have to rethink their business model and start to say, well, maybe take long what.
Or should we pay more if we want, you know, instant fulfillment?
We used to, but we used to do that. Think about it, if you wanted something right away or overnight, like you would have to pay a company.
I still do, I think I think you do more and more often. I was just ordering, for example, cricket shirts out of Austin, Texas, and they have a more normal like it takes a week or two for the shirts to get to you. If you want a faster you pay an extra twenty or thirty dollars. And I think a lot more companies are going back to that rather than promising you next day delivery.
Right, And maybe we all just manage our expectations. And I have to have everything the next day. All right, this is Bloomberg.
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Thirty Plenty ahead in our second hour of the weekend edition of Bloomberg Business Week, including fun with the maker of Ken and Barbie. Mattel CEO inon cries on the movie The Toy Business and losing a topic Zech, plus a classically trained French chef who is big time into the vegetarian space, including plant based seafood. We talked with the founder of Conscious Foods, also joining us, Laura ray Dickey. She's the CEO of the more than eighty year old
family run franchise Dicky's Barbecue Restaurants. First up this hour, Mattel reported sales and profit that beat analyst expectations, but it didn't get much help from Barbie, the fashion doll that was the focus of the top movie in the world last weekend. Those earnings came out late Wednesday, just hours after we got word that Richard Dixon, the MATEL chief operating officer who oversaw a recent Barbie turnaround, will become CEO of The Gap next month with more on
all things Mattel. We were delighted to have back with us in on Cries, Chairman and CEO of Mattel. First of all, congratulations on Barbie, because we have been talking about that with you for a while. I almost feel like since the beginning and your strategy of bringing Mattel toys to life, what does the success of the movie mean to you and the company.
Yes, that's right, Carol, Then thank you for having me on the show. As you remember from the very beginning,
this was never about just making a movie. This was about creating a cultural event, a societal moment, and we could not be happier where we are today with such strong performance right out of the gate the first week, with over five hundred million dollars in growth in box office receipts, and more importantly the audience reaction, with people going two and even three times already in the first week to see the movie, a very broad audience including Man,
and a very strong performance internationally that is stronger than the US, and it's not because the US is not doing well. It's just a very strong performance across the world. And all in all, it really is an exciting moment and a showcase for the cultural resonance of our brands, our ability to attract and collaborate with top creative talent and marketing and demand creation capabilities to create what is now, you know, a cultural phenomenon.
You know what does it mean for merchandise? I mean, I've actually bought some Barbie products, to be quite honest, I grew up with Barbie's, introduced them to my daughter, My older sisters introduced me to them, and it's nostalgic for me. But I also have been in the stores where all ages are snapping out products. How how does that move the needle for you guys financially as well?
All those Yeah, well, it's see incredible take up of the movie related merchandise. We have handing been sixty more than having a sixty five different consumer product partners, different different industry, different products all over the world, and we're seeing incredible excitement and as you say, you know, product is setting out quickly. This is a movie related merchandise.
Does it financially have a material financial material impact on you guys, Well.
We haven't broken it out, but this is already part of what we expect will be an uplift in Barbie sales in the second half. This is really where it kicked in. And of course don't forget the Hello effect on the overall Barbie brand with the significant improvement in consumer demand already in the third quarter, and expect Barbie to grow in the third quarter and and the full year.
Nan you called it a cultural moment, and certainly that means that it can polarize some people, at least here in the United States. Got to ask about the high profile people on the right who've criticized the film. Ben Shapiro made this forty minute YouTube video. It's been viewed nearly two million times. He says he destroys the movie. He actually burns Barbies in it. Elon Musk says, if you take a sh every time Barbie says the word patriarchy,
you'll pass out before the movie ends. How do you react to that criticism?
Barbie has been a flag carrier for diversity and inclusivity. Barbie inspired the limitless potential in every girl, and and
the genius of Greta is what she did. She took this message, you know that that focuses on female empowerment and made this movie appealing and relevant to everyone, and people who go to the movie, you know, whether you're a Barbie fan or or you know, or looking to be entertained and inspired by by a modern day interpretation of one of the most iconic brands in modern culture. This movie Will Will Will Be, Will Be, Will Be
an experience for you. And what we believe is this movie will recontextualize the way people think of Barbie and what Barbie means for the world. And we could not be more proud of the of the messages and the unique voice that Greta has in this movie.
Well, and I'm curious too, does it mean that we're going to see a Barbie sequel? Or is it a case of you guys move on to other toys?
You know, we have an announced sequel, and you know, we're still barely a week into the religion.
But how we journalists are, We're like, okay, now, now, what what's next?
You know, you're not alone, You're not alone and asking the question. But of course you know, it's such a success, such a phenomenal success, you know, of course we'd be looking to extend, extend this, and we've always said that our goal is not this is broadly not just about Barbie is We're not looking to create single movies, but to build film franchises for the long term. And of course this is part of our strategy in terms of capturing the full value from our intellectual properties.
You know, does that intellectual property be it in movies or streaming series or what have you. How you guys, you know, whichever ways you go, does that ultimately become a big generator of revenues.
We absolutely said that our strategy in capturing the full value of our IP outside the toy isle can be meaningful in success, you know, and we're looking to scale this. This is not just about a movie or a TV series. This is about participating in the highly accreative business verticals outside the toy isle that are all driven by big franchises, big brands, and in some cases these verticals are larger
than the toy industry. So we believe that we have you know, the assets, the capabilities, the relationship and with the Barbie movie, this really positions us in a very strong way as a key player that can participate in this, in these verticals and create meaningfully shareholder value and build a meaningful business out of this.
You know, It's like Carol said, this has been a busy week for you. Got to ask about the big news yesterday the co president and CEO Richard Dixon moving on to be CEO of the Gap. Let's get your comments on that. How big of a loss is this for the company.
Richard is a friend and has been a great colleague and partner for me since I joined the company. But one of Richard's biggest accomplishments is that we built a very very strong team of leaders, of designers, of innovators, of creative talent within the company and the executives who take over from Richard. Between Lisa McKnight, who has been the head of Barbie since twenty and sixteen and very much manage the transformation together with Richard and the head
of Dools in twenty nineteen. And Josh Silverman, who has been a Disney for twenty years that is now where he oversaw all of business third party relationships with licensees, now running our non point commercial activities.
So You're not worried.
Two world class leaders really taking charge and we could not be more confident of our team. He's running this business, you know.
On ten seconds, got to be quick. Did you give tips to Will Farrell on playing a CEO of Mattel?
I can learn a lot from him on the comedy side, but I'm a big fan and it's great to see him playing the role.
Well, congratulations and we're looking forward to following more of this story and what comes next. In on christ Gairman and chief executive officer at Mattel, on the phone from elsin Gundo, California. This is Bloomberg.
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We're gonna talk about something different right now. We have a really cool guess or.
The same, depending on your pet.
That's true. He has bicycled more than thirty four hundred miles from Montreal to the Pacific Ocean. Classically trained French chef, he's founded a couple of food companies, he has sold them. He has spent more than three decades thinking about the vegetarian food world, creating everything from a veggie hot dog and more. Matt, so he knows the space.
All right, I'm interested. I'm very interested to hear about this because I would love to be a vegetarian if I could. The way we treat, especially factory farm, which is almost all of our animals, from cows to chickens, is disgusting.
Yeah, processes.
On the other hand, meat is so yummy and it's packed with protein.
Right.
Also yummy is seafood, and he's now got a new venture involving vegan seafood. It's known as Conscious Foods. So with us is chef Eve Potfinn. He's present and founder of Garden. I believe I'm saying it, I hopefully correctly Conscious Food with Us on Zoom from Vancouver, British Columbia. And forgive me if I've mispronounced. I studied a lot of Spanish, not a lot of French.
Next, well, it's a famous name here in New York, pot Dan, you know, yes, it is?
It is?
That is true. Welcome, Welcome, tell us a little bit about yourself because you have done some really interesting stuff, and you've really spent a lot of time on you know, the vegetarian world and the plant based food world.
Hot come well, Matt, I'm like you. I'm a flexitarian, so you know, I believe there's you should always try to make a contribution for a bit of world. And so I was, like you said, a trained chef, and somehow I humble into the plant based business. And for the last over thirty years I've been developing different brand and very excited to present Conscious Conscious with a Cave today.
So we're a new innovative brand. We're on a mission to change the way that people eat by providing a line of frozen sushi or NIGHERI and Poke boll that this is close to my heart, that it tastes good first, and it's good for the people, good for the planet, and we're so excited to launch our nationwide with folk Food this week.
I mean, it's I think an issue that's close to our hearts as well. Carol and I are both scuba divers and we've all seen the problems. All of us that have been underwater have seen the problems that giant fishing expeditions create and then for a while I thought, Okay, well, factory farm salmon, that must be a better alternative. Turns out it really isn't because they don't do a good job of raising those fish either. But the taste has
been a problem for me. I've only tried artificial you know, plant based beef burgers like Impossible Burger or what's the other one beyond beyond meat. I couldn't really stomach either one of them. So how do you overcome that problem?
And that's why I'm so excited to be here talking to you, Matthew Caroll, because evidently you are conscious, You are aware of your environment and the way the younger population today they vote with them mout and they say, well, I want a better future, So it has to be something that tastes good, it's good for the environment. And another thing that we're excited about conscious is that we
have price parity. So a lot of the company that you mentioned before, I think it's something like twenty percent of the population that would like to incorporate plant based protein in their diet, but they say it's too expensive. Well, with the person I think of this new generation innovative brand that it's price parity it's not a more expensive than nutuitional traditional protein, but because of my chef background,
it has to taste good. And a consumer now they're looking for sustainable choice that are affordable, and so you can go to Whole Food and buy a California role, a Japanese courreer, the gary or salmon poke bol and it's going to cost you seven ninety nine or eight ninety nine. You don't have to break the bank to eat consciously.
Now, I guess the one thing too I will go back to is things like impossible and beyond me. What I had had a problem with Eve is that there was a lot of sodium in them, and to me, that wasn't I think of planet based proteins and I think healthier and less impact on the environment. Like it has to take off a bunch of boxes for me
in order and it has to taste good. So tell us about the nutritional value or some of the metrics so that if I turn over the box, what am I going to see when it comes to sodium or whatever.
The way there's a lot of boxes has to tick better for the environment, Yep. It has to cost the same or around the same, right, it's got to taste good, and it's got to be good for you because obviously, Eve, you know, there's a lot of protein and meat and it's not packed with salt, as Carol says.
Yeah, totally right, And so we are looking and Matt, You're totally right. You know, in our lifetime, we know that somewhere in the next twenty thirty years we're going to drive elect a car or any other form of car that is not fueled by petroleum. But it's the same thing in our life. We know most of the farm, most of the official's going to EAT's going to be farm farm raised, and you know, a lot of salmon in the market went now it's artificial color, artificial flavor,
et cetera. So we're on a mission to change the way we eat. I said earlier, is because we have a third of the sodium of traditional sushi that you eat in the supermarket, we have less fat, and we have ingredient that are easily recognizable. So our tuna as first ingredients is organic tomato. The second one is conjact. Conjact is a mood vegetable that has tremendous dietary fiber and it's good for you. So yes, there's many books that the customer is looking. First of all is the price. Well,
we take care of that one. Nutritional We have about half of the protein right now that salmon or tuna has. But it's okay. Most people don't buy just because of the protein, they buy because of the whole package. But we are working very closely to trying to increase the level of protein. No artificial ingredient, non gmo, organic ingredients, etc. So I think we've done a good job putting the package. But most important, it's convenient. My wife likes to say
frozen to me in five minutes. So and people ask me that why do youse in sushi? Well there's twenty thousand sushi restaurant in North America. There's a need for it to have it in your freeze.
But you know, something like salmon, right, I go for it because of the omega three fatty acids. Right, that's good for me, and I would rather you know, kind of grew up with a family. You know, everything in moderation and better to eat as true to how it is grown or cultivated, hopefully and do less of it. So do I get that benefit?
You do? We have only got three comes from different sorts. One of them is the fish oil, but it's also vegetable oil that we incorporate in our product that has the same level as ome got three that you have in traditional.
Fish Interesting, really interesting, are.
You I'm convinced. I'll tell you what. I'm convinced enough. We have a whole Foods right down here. Try on third and fifty seventh. I'll walk down there and get some for sure.
Yeah, I'm right.
Just follow the instruction, very tree easy way to prepare it microwave one minute. If you don't like microwave, you can put the patent pending packaging in hot water for eight minutes, or you could leave it at room temperature and it sweady.
Polunch, We're talking with Eve Puffin, president and founder of Conscious Foods, on Zoom from Vancouver, British Columbia. Hey, one thing I wanted to ask you. I mean, Matt and I talk a lot about food and just the way we produce things and trying to feed this world, and a lot of the ways that we do it are not great for the environment. There's also a lot of food waste. And there's an interesting Bloomberg opinion columnist that
talks about big food should be esg's next target. Basically, just going after the alter processed food makers.
Should be esg's first target. Should have been esg's first target, because if you do, you want to stop carbon emissions, right, you got to go after the beef industry, even before you go after the internal combustion engine.
So how do you think about all of this? You know, you've been working in the food industry for a long time. How do you think about it? And what is a better way forward?
Well, it's about diversity. You know. Last year August, we reached a milestone of eight billion in population. We know that, and that's what's one of the reasons. You know, I have a younger daughter. When she was born not that long ago, twenty five years ago, the population was three point seven billion. Now we're at eight and we're going to be at ten billion. So and that was my idea,
and I said, it makes a lot of sense. We know, and taking Vancouver Simon reached the price of thirty dollars a pound this summer, So traditional protein is going to go higher and higher in price, So why not diversify the protein and use the plant base, you know, and the question is having manufactured and processor like the innovator that takes those protein, the p protein, all the different sourts of protein, put it in a way and forming
in the shape that people are accustomed to. Because people won't start feeding themselves lentil and chickpea and a thing like this is too complicated. So and that's what we do. We use traditional sushi and we make our own snow crab or on now on salmon. And I'm really excited for you, Matt, to go try it because you're going to say, Wow, this tastes great. And I feel very proud about what we accomplish. And I think the world
is changing. The younger population is voting with them out and I think it's a question of using all our source of protein. That is what we're going to find a solution, not beef, not just seafood, but using the protein from a variety of sorts. Seaweed is fantastic source of protein.
All right. So and the sushi, it's packed full of protein. What's the protein and the calorie value of that of that sushi those California roles.
Calorie is about three hundred and fifty calorie for eight coin and it's about you know, traditional sushi is about eight percent protein. This is about four percent. So but most people don't go to the sushi and say I'm eating there because of protein. Most people have too much protein and dead dye. That's that's that's the reality. So I think it's more about nutrition. What you bring nutrition, and I think our product is pack of nutrition. We have all the vitamin d A, b et cetera that
your body need, so and it. But most important is what we're offering is convenience. You can have sushi on a giary, poke bol at lunch, dinner, smack, have a party with your friend, so having the product available in your freezer and ready in five minutes. And it's about giving a choice to the consumer that whenever you want, you can have a product that you like. Like I said earlier, twenty thousand sushi, five thousand, poke bowl, wrestlant, there's a.
Market for so Eve as demand. Let's assume that this takes off and as demand picks up, can you keep it at the cost level that you have now or will just like with kind of regular food, it just feels like, as you said, the growing population, like demand just has gotten out of control. And as the developed world has a much more or the developing world has more of a developed diet, like right, there's more demand
of that traditional food thing. So the cost, I'm just curious about the process and the cost as demand ramps up.
One of the main inputs pease, Well, the rice comes from California.
All our vegetables are from British Columbia, so we're trying to buy local as possible. But we have a thirty four thousand square feet facility in Vancouver. Over here we can produce four thousand row an hour, so that's a pair amount of volume. But our plan is to open a factory or a processing facility in the US, one in Asia, and one in Europe. So your question, Carol
is more about ingredient. Has you increased the demand? Well, the view with root vegetable is you can grow more, you know, from a I'm not anti beef, I'm not anti fish, but it's just it's not a logical way to grow your protein. It takes eighteen months to raise a cattle and half of the you know, take you feed it more than what you get at the end, so versus the plant based protein. That's why it makes so much sense.
Even with climate change, even with climate change making it sometimes more problematic or difficult.
And depending what you're growing, Carol, you see if you're growing more corn or more wheat or more soy. But you know, there's a lot of place in Asia, for example, that's where the root vegetable conscious. It's all over Asia. But rice, there's lots of room to grow rice and so and you need to you need to eat something. You know, at one point people asking me why in my previous business, why are you using wheat or soy? Except what I said, I don't use nil, I don't
use dairy, I don't use egg. You need to eat food something you can't just live with with water and air. And I think the food we grow, the food we use that conscious is very good. And yes, it's sustainable.
Interesting, all right, we're going to leave it on that note. Really really fascinating. And I do feel like more and more we continue to see the food space slowly being disrupted, if you will.
Yeah, well, And I also the deeper I look into it, the more problems I have with the way our food is produced or farmed or caught. And as I said, you know, salmon is one of the biggest conundrums because I don't want to support industrial fishing and I don't want to support the factory farming of salmon, but I love salmon.
There was just a story did you see at the New York Times about the fate of Alaska's king salmon and starving orcas at orcas like don't have enough food, and so they're trying to figure out what to do, and they're thinking about maybe that we have to stop fishing them. But then you've got, you know, folks that rely on it.
For we can't and you can't, they won't stop.
I don't know, it's just tricky. Eve. Thank you so much, really appreciate it, Eve Pop, and hopefully you'll come back soon and give us an update on the business. President and founder of Conscious Foods. Showing us on zoom from Vancouver, British Columbia.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Easter on Bloomberg Radio, the Bloomberg Business app, and YouTube. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa Play Bloomberg eleven thirty.
So we're gonna take a little bit of a break from earnings from FED, talk from yeal curves. And because it's summer, we're gonna talk some barbecue.
Okay with that, Well, I mean not, It's not just like a summer fun session, right, because this actually is very closely connected to markets, to inflation, to the FED, because the costs have been soaring.
I just said we're gonna take a break. Okay, gosh, okay, can you just follow my lead? Okay, all right, let's get to it.
Lower.
Ray Dickie is with us. She's CEO of the more than eighty year old family run barbecue franchise business, Dicky's Barbecue Restaurant. It's based in Dallas. Six hundred and fifty Dickeys Barbecue pits locations in forty four US dates eight other countries. I want to confirm some of these numbers with her. Laura joining us on Zoom in Texas. Laura is so delighted to have you here with Matt and myself.
And I hate to say it, I'm going to say he is right because labor beef, this is certainly our world. First of all the business of barbecue. How's it going? Tell us about it.
You know, in general, the business of barbecue is good, but you are absolutely right, those macroeconomic factors that you see and you talk about every day all the time are definitely affecting us because you know, I hate to say this for Duncan, but America runs on trucks actually, and so every part of the supply chain has stress for us, whether that's it's all the fuel costs, labor costs are beef packers, for example, going to a shorter work week is directly affecting the price of beef in
the market. You know, the beef average this year has been out about about four dollars and eighty three cents. That's about two cents higher than it was in an all time last year. You know, our price actually is about three thirty four pound because of our purchasing power, we're actually with the number of restaurants that we have one of the largest, the largest purchaser of beef brisket in the country in the restaurant space. And so you know,
we really really feel that food inflation. And so while business is good, we've certainly had to be very proactive. We've taken many reductions, you know, actually in our eighty two year history, and this is the largest menu reduction we've ever taken. We've cut our menu by forty one percent to fight food inflation, to keep from passing on all of those costs to our guests.
So certainly, chet, let me, let's let's try and break this down a little bit. Because so first of all, on your menu, when you see prices of beef, I think have risen a lot more than pork, has risen more than chicken. If i'm if I'm not mistaken, I know that feed costs are much higher than cattle, it is smaller. And so what does this mean for your menu? Do you raise the price then of your beef products?
Are people choosing more chicken? Are you trying to offer more interesting chicken, you know, entrees so that people take those instead of pork? How does it? How do you work it out?
Absolutely well? So, first, you're absolutely right, beef has been
the most effective. It has the largest market cycle, if you will, it's actually a ten year cycle, but the last three years or really make the most difference in that price per pound that you're seeing when you pay you go to the grocery store, you certainly go to restaurants, and so that price per pound hid an all time high last year, and again we're two cents above that this year, and we expect that to stay stable, but in order to you know, not pass all of that
onto guests, which there's certainly a tolerance that that market tolerance that guests just can't simply absorb you price yourself out of the market. So we certainly do shift to pork. It's certainly that for us the summer of pulled pork, if you will. We have a wonderful pulled pork sandwich, our kicken comeback sandwich, which is great pulled pork with some wonderful kicking comeback claw on it. And we're doing that intentionally to guide guests towards pork. Chicken is in
a good place. It's still high, but not as high as it has been. It's about three dollars and sixty two cents a pound right now. It's certainly taken a break from its high two years ago. And you can see the influx of the wing business as well as the Avian flu and some other things like that, but chicken has just a much shorter market cycle, so it can recover much quicker so that you'll see the flux of chicken more so, and that's why you'll see specials
roll on and off with chicken with more frequency. Although there's a lot of chicken in the market, it's one of the most popular proteins out there, so you have to be kind of careful with that because it can really fluctuate pricing again due to that short of market.
So there's nothing like that. I'm I'm going to say, there's nothing like a brisket sandwich.
I agree with you.
I love brisket well. So then how do you guys deal with some of the stress points? I'm assuming wages too, and labor is another issue, right.
It is, And that's where it's really challenging for folks in the business at large, in the restaurant industry is because again going back to that supply chain, there is stress at every point in the supply chain, whether it's the fuel costs for the trucks to get there. And with the restaurant business, you have labor not only in the supply chain, but obviously in the restaurants themselves, and then the food inflation that all guests all consumers are feeling.
We certainly feel as well. So you have that and you have to be really, really really careful about where you can take price, but you also have to maintain value. And so for us, we shrunk our menu down to our core proteins. We cut anything from the menu that we didn't feel that we could pass on, you know, what we would have to in order to sell that.
For example, we cut smoke turkey, which has been a staple for us and it will only be here for the holidays, but we just didn't feel that we could pass that on to the guest, and so we made that menu reduction.
Go back to diesel. Because I just looked at Matt, I'm like, how many energy costs come down? Is like diesel?
Right?
You guys use diesel to cook it?
All?
Right?
Usually? Well we do, so we use it. There's lots of different pieces, but yes we do. But it's certainly in the restaurant in the cooking process, but it's also in the freight everything. And sometimes what people forget is when you look at all of the markets that you see a lot of different opportunities in retail or folks that have longer shelf life on their products. But for us, because we have two to three days of perishable product on hand, we're so susceptible to what the markets are doing.
And so it's very, very very hard to be able to work around that labor cost of stress points, that fuel costs, the labor shortages, and then what the commodity
markets do. And so we're thankfully in a position where we have enough restaurants and we have enough purchasing power in the market that we can again kind of speculate out by buy with speculation, buy and hold, do those sorts of things that a lot of smaller restaurant chains don't have the opportunity to do, or mom and pop may not have the opportunity.
Take us back, Laura Ray, and talk to us about the business and your involvement in it, because I think a lot of people are listening. You know, they think of Dickies as this family owned business and they're like, how come you know, I don't know, Travis, Dicky's granddaughter is like a PhD economist. But you actually have extensive experience in the markets. You've worked with agencies and covered
big restaurant chains like Chick fil A and others. So you have you come to this CEO position with real experience in the industry and you have really grown the business. You have six hundred and fifty restaurants around the world. It's not just like one barbecue pit in Texas. So tell us, tell us about the business.
My family in Texas would say just would not be the way to say Texas is a good place to be.
Anyway, go ahead, Well, you know, actually I'm married in I will say that, so I'm actually the granddaughter in law. I missed a meeting and got demoted to CEO, is how I like to put it. But I did. I did have a lot of experience in the industry before I joined actually married and met Roland and then was drafted into service and thought it would be temporary. And here I stand today. But it's been just that kind of.
Journey of working always in hospitality, technology and strategic planning and a lot of restaurant clients in that genre, and so have worked with lots of different brands and there's a lot of similarity, and then there's a.
Lot that's unique about Dickies. But we certainly have grown it. We are now third generation. We are still family owned and operated. I would love for guests to just think that their neighborhood Dickies is the only Dickies. I think, then we're doing something right, because that's how barbecue should feel. It's that passion food. It's really an experience. We smoke all of our meats on site. You go in and
you should be able to smell that hickory smoke. You should be able to have that experience where you're hand chopped, sliced or if you are a pulled coort fan that brass stop.
I'm starving, pet starving now, So wait, just quickly, we only have about thirty seconds. Where's the growth come? Because you led the company into international expansion? Is that the growth and unfortunately just got about thirty seconds left.
Yes, there's international growth, but there is still domestic growth. Believe it or not. California is our second largest market, so it's not all vegan country out there. Folks still do like their barbecue, and there's just opportunity in barbecue. There's a lot of burgers, there's a lot of chicken, but there's less and less a really really great barbecue. So there's still markets here.
It's funny you said californ because I was gonna say, what about plant based barbecue? Is that something that you have to think about just real quick?
Yeah, God, no, no, no, you know what that's I like to say, we can serve something for everybody. That's where we would do a giant stuff baker without meat, but everything else will be real traditional barbecue.
All right, Well, come back soon, Loorery Dicky, but you have to bring some barbecue next time. Louray Dicky. She's chief executive officer of Dicky's Barbecue Restaurants. On Zoom from Dallas. I'm starved.
I can't wait to go to a Dickie's. I'm going to find any reason to get on a plane and go.
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People are going on vacation, folks. We are in the thick of summer. We're from the US airlines too. Over the past week or so, United just yesterday, latest major US carrier to benefit from strength and global travel. Yeah, aren't you going overseas?
I'm going to Spain next week.
See, so everybody's on vacation.
Not looking forward to it?
Why so hot?
I know it's hot, It's yeah, it's going to be rough.
I want to go to Alaska. Do you want to go to the Arctic right now? I need to be somewhere cool.
Fyi it's melting.
Yeah, I know, but at least it's still chilly.
All right, So let's get to it. Let's talk about vacationing, demand and pricing. I'm curious what our next guest to see. Montage International founder, chairman and CEO, Alan Firstman is with us on zoom is in Maui. Montage is a luxury hospital to that, but at a luxury hospitality management company. Try that again. It's got properties in California, Mexico, Bahamas and more. Alan, Nice to be talking with you again. How are you. I think it's been about a year. Talk to us about great.
Great to be back.
Well, great to have you. How busy are you guys? What are you seeing?
We're in the middle of summer. Busy summer. The resorts have been the place to escape the heat and enjoy the relaxation. See a lot of families traveling and an exciting time for us.
So what's it like out there? I mean, Hawaii is like a bucket list place for me. I've also seen Mawana like a thousand times, so he has a young daughter, Maui. The name Maui has a special place in my heart. But it's hot here. I can't imagine wanting to go outside. What's it like there?
Well, here, it's tropical beautiful.
I mean, the beaches and the pools amazing. I'm here with five grandchildren and extended family. It's just a great opportunity to work a little bit in the morning and relax and enjoy the afternoons with the family.
But eighty one degrees Matt, Oh, that's nice humidity.
I'm just trying to get to what this heat wave and what these air quality issues. What kind of effect has that had on travel?
Well, I mean there's an escape to markets that aren't as.
Hot I would imagine, and it's important that those areas that are hot are taking all the necessary precautions to make sure the staff stays hydrated. And there's plenty of water stations for guests. We've taken some additional steps of late to make sure that there's plenty of water everywhere, but hotels and resources are a good place generally to escape the heat.
All Right, So let's like we said, it's about a year since we last talked with you. Give me an idea. You say, great, everything is a good place to be, But give me an idea in terms of demand and pricing. What it's like. Is demand up from a year ago? Is it down from a year ago? What's pricing light? Is pricing like in terms of deals? Is it softer?
I will say, allan, we saw AMX today. They had record volumes, but since they had such difficult comps because last year was so great, the market was a little bit disappointed.
Yeah, I think I think pricing might have has come down a little bit over the highs of last year when you think about so much of the luxury travel heading to Europe and other markets that have opened up that weren't available a year ago, but well above conditions pre pandemic. So we're seeing some relatively strong numbers still. So that's a very positive sign. And we're just seeing that there's continued demand for highly differentiated special places.
What about for you guys specifically, right, you're involved in the management of these properties. Do you have the workers you need? Are you again having to pay up for them?
Well, we've had to pay up, but there's been certainly a rise in costs, and again it's been market by market. Some markets have been less difficult to attract labor, but it's an important component of what we do. You've seen though, part of the pricing increases that have been passed on to guests have come from the need to pay up, both for wages and for cost of goods. That's been the story of the inflationary time period we've been going through. It's good to see it settling down a little bit
and we're somewhat optimistic that things will stabilize. We've had a very strong workforce fect we're in the process of opening Pendry Newport Beach, which is going to open in September, and we're hiring over four hundred new associates there and have had great success in attracting and finding superior talent.
Are there any have trend shifted at all, you know, pre pandemic to now in terms of where people want to go, what they want to do what they're budgeting. I mean, are they focused more on vacations, because certainly I think a lot of employees are focused more on life in the work life balance.
Yeah, I think so, And I think the advent of being able to work remotely means doesn't mean working just remotely from home.
Why not extend your.
Stay at a vacation destination no longer and there's a lot of combination. I'll work a little bit, but I'll also be enjoying. So we're seeing longer length of stays as a result of the need not to get back to the office as promptly as we may have years a few years back. So that's been a plus for us being able to work from our hotels and resorts effectively.
Ell where are people going? Because you guys have properties in Los Cabos, Mexico. I've see in Hawaii where you guys are Utah, Laguna Beach, California. I know I'm leaving stuff out other places.
Big Big Sky, Montana, for example.
It's it's such a such a cool temperature wise and otherwise get away. And when we opened there a year ago, essentially the first luxury hotel in that market. It's opened up a new market, and in the case of Big Sky, you're an hour from Yellowstone and you get to experience the park but also the luxury amenities, the outdoor lifestyle. So we're seeing some newer destinations like Big Sky, Montana, and certainly great strength in in the other mountain destinations.
We were in Deer Valley, we're in we have a penry in Park.
City, so good, good breath across our portfolios. So we're seeing we're seeing strong travel throughout.
Big Sky's also close to Bozeman, so it's an easy uh from the airport. And I have to say my family, we go skiing in Big Sky, do you love that big backcountry? You know, nice off piece, a lot of powder, very cool.
It looks gorgeous.
Can I ask you, unlus, You've got a very exclusive resort on the backside of the mountain. Sounds like Yellowstone?
Okay, sold? Sold? Is it the But in the Bahamas there's a forty eight acre private island resort and community that I guess you can rent out.
We're under construction.
There were building abacos called Montage Key Private Island. We're selling real estate there now, homes, amazing homes, on the on the ocean front and building building the resort. Well, we should open the end of twenty four, early twenty five, and it will be an amazing destination, easily accessible the entire East coast, and it'll be a truly global destination, very special resort under construction.
Allen, what's the rates? How is the rates picture affected that? Because when you say that, I think, well, I want to buy a house there, But then I realize I don't want a seven percent mortgage. I guess those people maybe pay cash.
Yes, I think there's the buyer for that market is less?
Is less interest rates sensitive?
Yeah?
Sorry, Matt, Hey, listen twenty years in that you guys are happy twentieth anniversary. What's what do you think about? You talk about the you know, the development you're doing in the Bahamas, but how do you think about what's to come.
The next twenty years?
Now, we've got fourteen hotels open today, seven Montages and seven Pendries, so we have the two luxury brands. We have another twelve projects that are either under construction or in design right now, and of those, eight are Pendries and four are Montages. And we're seeing some real international growth. Initially mostly North America. Now we're expanding globally. We've announced
a couple of projects in the Middle East. We've just announced two hotels in Puntomita, which is near Porta Viarta, Mexico, both a Montage and a Pendri there.
We announced a project in Barbados.
So I think you're going to continue to see both domestic and international growth for our company.
Sounds like you're moving ahead. You're not worried about a recession. Are those higher rates? Is that fair? Just got about thirty seconds or tell me, yeah, we are.
But high interst rates are concerning obviously for capitalizing new projects.
It's obviously a.
Big concern, and we're hopeful that we've seen the height of the interest rates.
But we are very optimistic.
We build hotels for generations to come, so we'll withstand small blips if they happen, which.
Are due to happen.
So cool, you know, to think that a kid from New Milford could go to Gettysburg, then he runs the Phoenician, then he runs the Bolagio and you found this great, big business. I think it's a super a super cool story inspiring dream.
I've got to say how fortunate I've been and yeah now I'm truly lucky.
Well enjoy Maui and always good to check in with you. Alan Firstman, founder, chairman and CEO of Montage International joining us. As we said from Hawaii.
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