This is Bloomberg Business Week Daily, reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy. Plus global business, finance and tech news as it happens. Bloomberg Business Week Daily with Carol Masser and Tim Stenebek on Bloomberg Radio.
Hi, everyone, welcome to the weekend edition of Bloomberg Business Week. Yeah, a lot coming out investors in a holiday shortened trading week, no trading, just a reminder in the US on Thursday because of the Juneteenth holiday.
Still a log coming at US again, including the escalating conflict between Israel Andy Ron, the fourth FED decision of the year, and a G seven meeting of global leaders.
Yeah, that is our macro. Our guest this week, the CEO of the publicly held connect One Bancorp, on the FED business environment and consumer credit.
Speaking of consumers, Dana Telsey knows retail like no other, so we're concerned about this week's retail sales data that dropped for a second month and was the largest decline since the start of the year. It's a question we'll post to her.
We do, indeed, and we've got a global view on tariffs and trade and President Trump with the head of Ireland's foreign Direct Investment Agency. That's one reaction. We get another reaction from the CEO of Synergy Maritime and United Maritime, and then in our next hour the CEO of Axiom Space on building Era defining space infrastructure and oh wine from Uruguay.
It's really good.
And Carol knows it's really good because she tried it.
I did.
Okay, all that to come, we begin with a read on the US economy banking, especially regional banking. Just before this week's FED decision, we caught up with Frank Sorrentino, chairman and CEO at the publicly held New Jersey based community bank Connect one Bank Corp. Which is the parent company of Connect One Bank.
That's right.
Connect One Bank counts small businesses and construction companies among its customers. The bank recently merged with First of Long Island Corp, which brings its total assets to about fourteen billion dollars. CEO Frank Sorenttino kicked off our conversation about why he's optimistic, still optimistic about this US economy.
Yeah, it's interesting, you know, if you go back a couple of months the Liberation Day, and you took a nap on that day and woke up today, you'd say, well, I don't know, things don't look too bad. Other than what's going on overseas, the market is pretty much rebounded or recovered most of the ground. You know, people feel the economy is on more sturdy ground today than they
thought in those weeks after that news. But the economy still is quite robust in the markets that we served, as you know, Connect one is in the New York metro market in New Jersey, New York now Long Island in a pretty big way, and the vast majority over the client base that we have is still seeing strong demand for products and services, a lot of service oriented businesses.
There's still an enormous amount of demand for housing, for apartments, for all types of construction, warehousing, uh, even office, which has, as you know, been you know, the subject of you know, a lot of conversation over the last two two or three years or so, has is seeing a tremendous rebound As we're moving, you know, through this period of time.
I'm getting to a few questions from loyal listener Ryan Horan reaching out over the instant Bloomberg. He's glad we're talking to you because a great check of small business and the consumer. He's curious about any worrying trends or any pullback in underwriting that you're seeing. Are you adding to reserves to shield any non performing loans?
You know, most banks are reporting that they're seeing a fairly benign credit perspective out there. I know there was a lot of tariff talk UH sixty days or so ago, and a lot of investors were very concerned about how tariffs may impact bank earnings, you know, through the through the credit cycle, through any sort of credit cycle that's really quite diminished these you know, recently in the past few days or weeks UH, and banks are still reporting
a fairly benign credit period. There are certainly one offs, as we would always expect there to be, and there's appropriate reserving going on at most banks, But there's nothing systematic that's out there that where banks are feeling that there are particular segments of the market that are showing more signs of weakness than than normal.
Why is that?
When we start I always start with we have a four percent unemployment rate. Everyone has a job, and anyone who's looking for a job can get a job, and so things are good. People are getting raised, There's, you know, plenty of opportunity in the market. There's been an enormous amount of liquidity put in the market over the last dozen years or so. That is just driving our economy to all time highs. The market is reacting to that. You can't buy a car, you people are waiting in
line for homes and apartments. Luxury goods are on fire. You go to the airport, you can't get on a plane. It's the economy. I keep saying the economy is robust, and everyone keeps challenging me why I use that word. Well, it just is. And so all of these things are driving GDP is growing it over three three and a
half percent. That's what's driving. What's going on, notwithstanding all the news that you're hearing about, you know a lot of global issues and other you know political you know craziness that's going on in the marketplace.
Well, what do you make you know, we talked the retail sector earlier with Dana Telsey, and we talked about everyone trading down. So you're seeing discount retail doing better than most airlines pulling guidance. It feels like there's stuff brewing, and I think it's safe to say that employers are really gun shy about letting go of workers. There is some labor hoarding going on because they remember all too well, Frank, what happened after COVID and nobody could find workers, right.
So I just you know, I just wonder if you've seen a lot of economies.
I know I ask you this all the time, but I just do wonder, are you hearing anything autecnotally where people are like, we're a little nervous and you know, these tariffs are more onerous or yeah.
Yeah, I think we are seeing consumers being a bit more price sensitive, and I think they are, you know, maybe not spending as lavishly as they might have in the past, and they got a little shook up with the tariffs, and they're looking at some specific products that you know, may have changed in price. There's been some hoarding going on that I do think impacted some of that consumer spending. I know for a fact that's impacted you know, building supplies and building goods. You know, people
front loaded buying things and anticipation of the tariffs. So there's a lot of turbulence going on in the marketplace today. My read, however, is though if you strip out you know, some of the you know, gas and tariff related items out of the consumer spending, you'll actually see numbers were
actually up a bit, not down. And even what they're reporting that that you know, the consumer spending was down a bit, it's down less than one percent or point something percent, So it's not a it's not a sea change that's going on. There is you know, some volatility here, but overall, I still see I don't I do not see a recession, and I still see a fairly robust economy ahead, you.
Know, I I we're talking to you on Tuesday, June seventeenth, the day before we hear from Fed Shair J.
Powell.
We don't know what he's going to say say. I think I know what he's gonna say to some question when he answered some questions specifically about politics and his own future, because he said those same answers for months. But Frank, I'm curious what you see of the as the path of the Federal Reserve for the remainder of the year. Give us your dot plot.
Well, based on what I just said to you if that, if that in fact is what's going on in the economy, then the expectation has to be that the FED does not lower rates because the economy is still quite strong, and so my belief would be that you'll see a You will definitely see some commentary about the uncertainty that lies in the marketplace as we move forward. There are
lots of things to be uncertain about. You know, tariff's being won, the war in the Middle East, the war in Ukraine, and how those things are impacting you know, gasoline prices, which happened to be down, but you know, could rise dramatically depending on where things go. So there's going to be a lot of things that are inputs that the FED will be looking at that will determine what's going to happen in the future, and they may give some guidance about what they think those things would
be going forward. The market expects the FED to cut at least one, if not two times this year. I believe it'll be closer to one, and be careful what you wish for. I do believe that again, this economy will continue to roll on and the FED is going to have a tough time to lower interest rates as we move through the cycle, Frank, I.
Do wonder too.
You know, this was an interesting past earning cycle where we actually did have folks give you two scenarios like, if everything's good, here's what our numbers will be. If they're not, here's you know where they will be, and quite arrange. And I'm not saying everybody did that, but it was just for those of us who have covered publicly held companies for a long time and earned the earning season. I don't remember people doing that. I've seen
people pulling guidance a lot, but not giving scenarios. How many heurius about the conversation do you have with your team? Do you talk about a lot of different scenarios in this environment because it could go a lot of different ways, or no, you feel much more confident to say this is probably the course, and here's why we.
Can make decisions based on this course.
We definitely have those discussions. We're definitely keeping our ear close to what's happening. And the thing that I constantly bring back to the table is, let's listen to what our clients are telling us. And so you know, it's one thing for us to predict what we think is going to happen based on facts, figures, whatever. But earing in from our clients and what they're experiencing in each of the various segments that we do business with, to me, is much more important than any view we may have
on our own. So we're still hearing that folks in general are in good shape. There's a fair amount of liquidity still in you know, folks checking accounts and their ability to borrow still remains strong. And so we continue to see a fairly robust economy going forward. And that's what we're modeling for and that's what we're predicting for the future.
Some people say uncertainty. Frank's word is robust. That's the word he is. He's used over and over again.
Co existent, You've been consistent, and uncertainty is is a challenge though, and it is impacting you know, people's decision making ability. And so, you know, one of the things that I always look at and always counsel people is, hey, look at what's really going on on the ground, and you know, try not to get caught up in all the headlines of you know, what may be going on
around you that don't that doesn't necessarily impact you. I've had conversations with clients we're talking to me about tariffs, and tariffs don't actually impact their business, right, So I'm saying, well, okay, why are we focused on that? So uncertainty absolutely can change the direction of the economy.
That was Frank Sorrantino, chairman and CEO at the publicly held New Jersey based community bank connect One Bank Corp.
You're listening to Bloomberg Business Week coming up. Banking a great way to get a read on what's going on right now, So too is the good Old US consumer.
Dana Telsey is up next on retail.
Expectations are second half of July into back to school is when you'll see the price optics and when you speak to companies, it'll more be on some of the goods that are newer and have more product or make or embellishment in them. Essentials are going to be watched very carefully. The phrasing is surgical and select items where there are price increases. That's where it will happen.
It won't be across everything.
This is Bloomberg.
This is Bloomberg Business Week Daily with Carol Masser and Tim Steneveek on Bloomberg Radio.
US monetary policymakers voted unanimously to hold US interest rates study for a fourth straight meeting this past week on Wednesday, as they await clarity on whether tariffs will leave a one time or more lasting mark on inflation. FED Chair J Powell said is still unclear how much of the bill will fall on the shoulders of US consumers, but he expects to learn more about tariffs this summer.
The amount of the tariff effects, the size of the tariff effects, their duration, and the time it will take her all highly uncertain. So that is why we think the appropriate thing to do is to hold where we are as we learn more, and we think our policy stances is in a good place where we're well positioned to react to incoming developments.
After the Powell news conference, we caught up with Ross Mayfield, investment strategists at BAIRED Private Wealth Management in Bloomberg Intelligence, Chief US rate strategist Ira Jersey. Iira put the decision in some context for US.
Yeah, I think there's some people who think that firstly, that the Federal Reserve does have to cut interest rates because they see cracks in certain parts of the economy and then there's other people who are fearful of tariffs and think that, you know, inflation might increase. And you know, I this was as I expected. And what's always interesting about this, you know, and we have to as market professionals kind of parse every single thing coming out of the FED Reserve.
Is the reaction function? Right?
What is the Fed's reaction function? So we heard a number of if van statements from Jare Powell, and you know, those fan statements could mean, you know, give us at least a little bit of an indication under what circumstances they'll make any kind of policy adjustments.
Hey, Ross, come on in here and just give us your general overview of how the meeting went, your expectations, Where they met, where they not met. What was your big takeaway?
Yeah?
I think they were largely met.
I mean, don't I don't know anyone who expected much action at this meeting or a resolution of all the uncertainty that they've been discussing at this meeting, given that we're still in this kind of tarff pause. You know, we have the potential for oil prices to swing and impact headline inflation.
So I didn't expect much.
I'm on the side of the camp that thinks the FED should be a little more aggressive and cutting. I think the cracks in the labor market are starting to really accumulate. And to hear FED sch our pals say that the labor market is I forget the exact language, but on solid footing.
Yeah, he wouldn't agree with you. I think ross that the cracks are starting to appear. What data are you paying attention to that he's not.
Yeah, certainly, the anecdotal evidence of layoffs is rising. But if you look at something like warn notices or initial claims and continued claims, I mean we're sitting at multi year highs for a lot of those levels. If you look at some of the employment statistics about people fresh into the job for us out of college, you know that the unemployment rate there is a not record highs by any means, but is significantly higher than the overall
on employment rate. So I think it's a labor market where we have tight supply, and especially in this you know, given the immigration policy, but it is not a robust labor market and we are well north of a neutral policy. I think that getting to neutral should be more more of a goal for the Fed who doesn't seem to want to get there until the end of twenty twenty six if you look at the CCP.
All right, come on in uh irah.
Yeah.
So I just want to want to say I think that's part of this debate, like where is neutral? And you know there's you know, the FED will say that they're still have restrictive policy, but a lot of the other information that some of us me included, have looked at suggests that actually they're probably pretty close to neutral. So unless there's a deceleration of the economy, the FED
probably doesn't have to adjust interest rates. Now, the question is, and to Cross's point, like they can't wait until the economy is clearly really bad before they cut interest rates. But I do suspect that because of this overhang of inflation and the recent past episode that we just had, that the FED will try to wait until almost the last minute, and then once it cuts, it'll cut faster. And I go back to the.
Statement that J.
Powell made in May at his at the press conference where he said, like, look, we know how to deal with a weak economy. We could just cut more aggressively and get down below the neutral rate to stimulate the economy. We don't want to have to go the other way and have to hike interest rates rate if inflation were to remain relatively high.
Hey, Ira, a couple more to you, and then we're going to bring ross back in here. But I'm wondering about a couple of things here. One specifically, is the question of AI and the labor force. The bed chair was asked about that. Carol, and I cannot stop talking about this. What did you make of the way that he answered this question about AI and the effect on the labor force?
Feels like there's a pig pile of all of a sudden, people are waking up and saying, Okay, there's going to be a lot of jobs lost because of AI.
Well, there's always disruptions. Whenever you have new technologies, there's always disruptions and you wind up having you know, layoffs in some sectors, and then the new economy creates other jobs and new jobs. We've done that over centuries since, you know, even before the Industrial Revolution, you've always seen you know, things replacing other things. I mean, we did it thirty years ago, right when you think about the Internet, and you know, in nineteen ninety five, very.
Few firms had websites.
Yet today everyone does, right and this is kind of an extension of that. So we created a whole new economy around the Internet that now is creating more jobs. Whereas robotics and other things like manufacturing, they're less people are needed to do the same amount of work in labor than was needed in nineteen seventies.
That's Bloomberg Intelligence Chief US rate strategist Ira Jersey and Ross Mayfield of Bear.
We also got some economic data this past week, specifically US retail sales falling nine tenths of a percentage point in the month of May. That is the largest decline since the start of the year, with seven of thirteen categories posting declines.
We've got a trusted a voice on retail, somebody who's analyzed this area through multiple cycles and gets into the details like no one else. The founder, CEO and chief Research Officer of Telsey Advisory Group, Dana Telsea here in our Bloomberg BusinessWeek Studio. I want to start with the big picture data data, the data that we got earlier today,
the largest decline since the start of the year. Obviously, people not buying cars has a lot to do with this, But is it proof that tariffs do affect the way that customers think about buying things?
So a couple things you have, Yes, it was one of the weakest months. You look at cars, which were the real week link it's twenty percent of retail sales. You've seen some of the other data points where the sporting goods department stores frankly did a touch better. I think overall, the pull forward of sales, I think we're seeing some of that. We put out a tracker every Tuesday of eighty items and how the prices have changed. We've done this for nine weeks now, we're going to
continue to do it. We haven't seen much change in prices yet. Expectations are second half of July into back to school is when you'll see the price upticks. And when you speak to companies, it'll more be on some of the goods that are newer and have more product or make or embellishment in them. Essentials are going to be watched very carefully. The phrasing is surgical and select items where there are price increases. That's where it will happen.
It won't be across everything, but the mood and the sentiment look at the numbers you got from the sentiment index. Those are better than expected, a little surprising given the headwinds that you're seeing in some of the services. The restaurant numbers certainly continue to show a downturn.
So yeah, so add it up for us, like you've seen cycles, you've seen stress points that we have gone through, whether you know great financial crisis code, like, there's a lot of things.
How would you.
Describe the retail environment?
And I know it's hard to throw everything in one bucket because there's so many different verticals.
I think right now it's more uncertain the change that's different this retail environment than others. Even luxury has come down, even your luck, so your high income spender isn't spending in the same magnitude and you don't have the flood of taurusts that have come to the United States like you had in the past to buy those discretionary items. We still seeing essentials, grocery, that's where the consumer is spending. They'll spend selectively on some services, but take a look.
We've seen airfares well Cojet Blue today talk about reduced demand. So how I added up is it feels a little bit more uncertain because of the volatility, and it's not complete down trends across the board. It's very selective and I think could it come yes. I think it's more let's go into the summer through the second half of the summer and see what these price increases are. But there's more concern over slowing than growing.
It's interesting that you brought in tourism here, especially when it comes to retail. I'm wondering on the other side of things, We've heard from executives and companies, including Coca Cola, that the crackdown on immigration is actually affecting their sales. I'm wondering from a retail environment, is the ice crackdown on undocumented immigrants weighing on sales for any retailers out there at this point? People being afraid to shop, people afraid to go out, that sort of thing.
And you think about it for restaurants in terms of the workers working in restaurants. You've certainly seen it some of the low end points and the retailers. It's interesting that the dollar stores performed okay, so that's where you would think you would, yeah, show up, but it hasn't shown up there as much. And also you look at Walmart. Walmart's sales were better than expected.
So we are seeing I hate to say trading down. I feel so like not nice, but I just feel like maybe just people are being smart right I'm looking for the best bar.
They are trading down. Look where Walmart has talked about the biggest growth coming from is their highest income consumer. You've seen it from others. Look at TJ Max on the off price side. You've seen what they have and they're an umbrella for pricing, so they'll always be lower than everyone else. And I think they're going to be a beneficiary as we go through the back half of the year.
When you and I spoke earlier this spring, you mentioned that we could be seeing some empty shelves later this year. Has that materialized in anything that you cover and is that still a possibility.
It's a possibility. It hasn't materialized yet because the goods that are on the shelves right now, there's still some of the low cost goods. Ordering for holiday is happening right now, and it would show up frankly first when you get to the holiday season. But you know what you have TJX buyers overseas in China right now looking to take over and take control of and acquire those canceled items, So go to the off pricers.
Yeah, kind of fascinating. Well, you know, and I just wonder, you know, ultimately in terms of supply chains, right, we talked about so much of that because of the tariffs, Dana. When you think about you know, clothes and things like that, I mean, it's already been moving away from China, correct, Like, give me some perspective on where all of the stuff that we are wearing, where it really is manufacting.
Where things are coming from. Yes, they've all looked to reduce their exposure to China. Vietnam has been very popular, Mexico, Cambodia, Brazil hard to come back into North America and the US given the high labor costs. But it's been Mexico, it's been Vietnam, it's been Brazil and Cambodia that we hear goods are going towards.
How much is still made in China.
Depends on which type of retail retailer. Everyone is trying to get to single digits. No one wants to stick stick there at double digits.
Connect was that happening ahead of it's.
Been happening since the last time we had tariffs. Everyone had accelerated it. But keep in mind one of the beneficiies of China labor costs are compelling, and the make that they put into the product and the expertise is faster and better than others. As a long time sourcing executive always tells me, there's no China like China.
Wow, Okay, but it.
Seems like Dana, at least for President Trump. It doesn't matter if it's made in China or it's made in Vietnam. It's not made in the US. It's going to be hit with a tariff. Yes, So how are retailers dealing with that?
They'll raise prices on some selective goods, and it's a third to third, A third, a third they'll diversify their sourcing, a third they'll share the cost of the manufacture, and a third they'll raise prices on select goods to the end consumer.
When you say select goods, do you mean obviously it's we can't put them all in the same bucket.
Higher price goods.
Higher price goods because the consumer has a higher willingness to pay because.
It's new and different, it's something that isn't a basic okay, which makes.
Me wonder like which companies are going to see it hurt in terms of their balance sheets on that you know, first quarter retail sales. Right, We've seen all these numbers. So which names do you think stand out? Really is the biggest winners? Which are the biggest loser?
You look at Birkenstock with their closed toad shoes, very popular, still doing really well. I think that there's.
Definitely some moment in there that was Dana Telsey, founder and CEO of the Telsea Advisory Group.
Still ahead on Bloomberg Business Week Global Shipping and global leaders on edge in today's uncertain environment?
Or are they the CEO of Synergy Maritime and the head of Ireland's Foreign direct Investment Are They're up next? This is Bloomberg.
This is Bloomberg Business Week Daily with Carol Masser and Tim Stenovek on Bloomberg Radio.
This past week, two giant ocean going tankers collided and caught fire off the coast of the United Arab Emirates near the Strait of Harmmu's energy choke point.
Separately, two vessels were approached by Iranian boats near the Strait of horn Mouz, which is noteworthy during regional tensions. The incidents rattled global oil and shipping markets, with forward freight agreements rallying an oil tanker rate surging more than fifty percent at one point due to the increased tensions.
The Israel Iran conflict was definitely on the radar of the global shipping industry, was really on the mind of all of us. Just ask Stamatus Santanus, which we did. He is chairman and chief executive officer of the publicly held global shipping company Synergy Maritime.
He's also CEO of United Maritime. United was spun off from Synergy back in twenty twenty two. We talked with him early in the week and he explained how geopolitical uncertainty is forcing him to adjust shipping routes.
I mean, we were going through the Red Sea all the time, connecting let's say Australia to Europe and all that. Now we have around the Cape of Good Hope. So that has added a lot to the tone mild effect, and of course the pollution. Because you do more miles, you emit more co twos, it's more expensive for the consumers. You go longer distance. So the answer is yes, I mean, every little thing that happens or bigger thing, it's good for ratees, but but for the Earth, I guess.
Do you see it getting worse in the strait of horm moves anytime in the near future. I know you said you're optimistic, and you're optimistic by nature, but that's a real energy choke point. As Carol mentioned, I.
Want to believe that there's nothing serious is going to happen, and the collision you had today is not actually a product of wars. The shadow fleet. You know, the shadow fleet has been going around since the Russian invasion, and you have all these undocumented and shadow ships going around, and there's like a danger and it's only a miracle that we haven't seen more of these things happening because of the shadow fleet. It's yeah, that's a product of the previous war, not like this war.
Now, how are you, as someone right who's got to watch these things so closely determine like or think about, Okay, this is not such a big issue, this could be something more substantial.
Well, we try to be prepared, I mean, except for the insurance and stuff we whenever we see like any conflict arising, we don't want to put the risk health, risk of our crews, of our people, so we just stay out of that. And we are lucky to have partnered with some of the world's biggest chatters, and whenever we tell them that we want to avoid what there is, they listen to us, so they're not going to push us to go through the war areas.
What tools do you have on ships to prevent from pirate attacks or defend from pirate attacks.
We I mean, if anyone says that they have sophisticated tools avoiding that they're lying because you know, we just avoid these areas and whenever we have to cross pirate there is, we always have armed guards on board of ships.
Otherwise there's no other way to do it, no other way to do it.
I mean, whoever says that, yeah, these are commercial ships, slow going commercial.
Ships, targets targets.
Yeah, so you just avoid it all together.
It's very big, but yeah, right, super big.
Okay.
One thing I want to ask you what's great is tim and I love to watch money flows, right, money tells you so much, but I also love to watch when it comes to transportation. Transportation flows tells us a lot about what's going on in the world. The US more protectionist policies. How has that impacted global drive? Back to Mead, what are you seeing in that regard.
Well, I'm sureful it is what the right resion eventually, but so far it has created a lot of uncertainty. A lot of people are just don't know what to do. I mean, imports in the United States have really dropped significant in the last few months because of the potential tartifs that I don't even know if they have kicked in or not kicked in already. So we need certainty and we need to make sure that people will be able to trade always for the benefit of the US
consumer and always for the benefit of everybody. But it really has to be like a dependable and you know, to know what you expect. That's the thing.
Certain things already changing in terms of you like flows back to the United States. We have seen changes right already.
Indeed, yes, I mean what we do which is at On or Cole and Box site doesn't really change. It's still super strong the demand for these raw materials because you needed for infrastructure. As you know, a lot of investors in including a lot of people here in the government have invested significantly in infrastructure in the Middle East. We have one point six three million dollars of investments happening there, new nice buildings and all that. So this
is going to happen. They're all fully funded and it's good for our business.
I guess on the protectionist policies, I'm wondering what you're seeing in terms of goods flowing to and from China, and specifically of China is looking elsewhere for commodities that are typically sourced from the US. I mean, we could talk grains, we could talk corns, so I being wheat and the like, or we could talk other commodities too.
What are you seeing, Well, suddenly the last few weeks we saw a surge in exports from the US golf, the American golf. So we see a surge in Yeah, we see a surge of America. Yes, okay, exactly exactly. Well, I just want to hear what you So we see surge in you know, coin products, maze, you know, grains and all that. So that has been good. Actually we're not expecting that, and we came into it coming from Yes, and we do a lot of coal, lot of going
where to India and in China as well. We see that picking up slowly, slowly.
That's but it was. It did slow down, It did slow down a lot.
Yeah, but now it's picking up again. I don't know if it's going to be there to stay, but for the time being, it's going quite well the last few weeks. Let's hope it's going to remain. And we do a lot of coal trades out of India to sorry, Baltimore to India. So we've done a couple of trades recently which we hadn't done for a while.
So in terms of any of the flows that have shifted, is it just, in your view, kind of defensive maneuvers and just a result of maybe short term blips and you think things are going to go back to the way it is, or do you see some new long term trade flows based on the shipping demand.
Well, China's reliance to the used grains has dropped a lot. I mean they learned their in the previous administration, not the immediate previous, but the previous before that. Yeah, and they have now dependent they're more dependent now in South American corps, you know. So that's that's the corpse, you know, So that's the thing. If it ever gets back to you know, importing more and more grain products from the US, I hope it does, but it doesn't really seem like that in the near future.
Before we let you go just thirty seconds, I think right now there's a focus on where ships are built that hasn't been yes, in focus really ever in my career, specifically Chinese built ships. Are there any Chinese built ships in your fleet?
In our fluidat of the twenty nine we only have one, which is basically a Japanese yard based in China, So I don't know if that qualifies for Chinese altogether. But the vast, vast majority is made in China. Yes, made in China, but not really by Chinese yard. So Chinese interesting. So I'm not concerned about us. The only good thing I need to say is we've been in discussions with the US administration about that issue, and they're listening. They're positive,
and they're listening. They want to find a solution, so they're not like totally black or white.
That was the modest Santanas, chairman and CEO of the global shipping company Synergy.
Geopolitics a major theme of this past week with G seven global leaders gathering in Canada to talk wars, conflicts, trade, tariffs, and a lot more.
Another global voice to put it all in context for US, Michael Loewen, CEO of IDA Ireland. It's the Foreign Direct Investment Agency of the Irish government.
When we last met actually just in March of this year, I think we've gone through a loss in those intervening weeks. To be honest, probably as much as I've seen in my career in foreign direct investment. A lot has happened
in a very short space of time. And when you think about from the tariffs in terms of what tariffs means, where they're going to be composed, at what level and what timeframe, A lot of those questions still remain unanswered as we sit today, and I think from a European perspective of we are very clear that, you know, bringing negotiation, trying to get to a point of as opposed consensus
around what this looks like. It's so critically important for investment flows and indeed for the economic prosperity of the world. You know, whether it's the US or whether it's the Europe, or indeed whether it's the Asia, So that's a that's a real area of focus from a European perspective and
indeed the Irish government perspective. And of course you're correct, this is all against the backdrop then of some other conflicts across the world, and you know, we see that increasing, so you know, it's we're very mindful of that in the context of trade flows and trade investments as well, because that brings another level of uncertainty into the equation.
Yeah, it's been pretty much exactly three months since we last saw you. You were here in New York right before you went to Washington with the Prime Minister to visit the White House, that you met with the President, you met with his team. How did the meeting go?
So you're correct, the last time was here, I left them. I went to d C with On T. Shuck or our Prime minister. The medium went very well, actually, and I think actually it was was in reflecting on it, you'd say that, you know, the President was actually very gracious in terms of his engagement. Yes, there was fourth Right discussions and you know he talked about the challenges in terms of trade, trade deficits in particular.
And this was before all the teriffs were announced.
Yeah, this is before but remember this was all very you know, it was all very live and active at that point because you were this we were talking about this is the fifteenth, sixteenth of March, so it was all becoming very transparent or apparent as to what was
always going to come down the tracks. So I would say that that that that meeting and engagement very much reflect this the relationship which is one hundred years between Ireland and the US, and I think in any relationship there can be pints of let's call it discussion, and that was the discussion that we had, but would think it was very respectful on both on both sides.
Michael, what changes have you guys seen in investment flowers? What are you seeing from your vantage point?
Yeah, so what we're seeing today, actually, Carrol, it is interesting. So I can sit here today and actually in two weeks time I'll be sharing with her Minister Peter Burke are results for the first half of the year. And what I can't disclose them to you on what I could, yeah, but I won't. But what I can say is this
is that we continue to see investment flows. In fact, it is a power with last year in terms of the first half of last year, which is maybe somewhat maybe surprising giving the level of uncertainty that you see across the globe. But the reasons where we see that is and we're seeing across a number of different areas. We're seeing reinvestment in research and innovation continuing and companies looking to double down on their investments in Ireland in innovation.
We're also seeing a lot of investment as well in terms of new entrants into the Irish economy, which is really important, and that's because they're looking for global marketplace, stable locations where they who's just trusted and proven, I believe, and that's what they're seeing in Ireland in terms of the future world.
I know you can't reveal all, but I am curious so on that where there's new investments coming in. Are there conversations you're having with entities, global companies, US companies who say we want to do more stuff with you guys because we don't necessarily want to be in the US.
Or other like give me an idea.
There's anything that's a repercussion or you know the result of an action by the White House.
Yeah, So I don't think it's it's it's a scenario of we don't want to do it in location A, so we're doing location B. I actually think companies are looking to actually, how can we grow our business, Where can we grow that from? What markets do we want to serve and where can we get the skills or are the policies that support that. That's really what we're seeing and what we do in Ireland is that, you know, we make sure we bring is stability and certainty to
those areas of policy. In terms of talent and talent availability, not just Irish talent, but international talent. These are the pieces that are setting I believe investors apart when they're looking at locations around the globe, because I said previously at the very core of FDI and of multinational companies, they look to international markets. They needing to national markets, need international supply chains, they need international talent. That's what
the need in order to be successful. And that success isn't just success in the country they're located in. It actually comes back to their entire supply chain.
That was Michael Loewen, CEO of IDA Ireland. It's the Foreign Direct Investment Agency of the Irish government and.
That wraps up the first hour of the weekend edition of Bloomberg Business Week from Bloomberg Radio Ahead. In our next hour, sending everyone Someday into Space with the CEO of Axiom Space.
Plus Meta, paying billions to tap into scale AIS intelligence.
And experiencing wine in Uruguay. This is Bloomberg Business Week. I'm Carol Masser.
And I'm Tim Steneveeck. Stay with us today's top stories and global business headlines. They are coming up right now.
This is Bloomberg Business Weekdaily, reporting from the magazine that helps global leaders stay ahead with insight on the people, companies and trends shaping today's complex ECONO plus global business, finance and tech news as it happens. Bloomberg Business Week Daily with Carol Maser and Tim Steneveek on Bloomberg Radio.
Plenty Ahead in our second hour of the weekend edition of Bloomberg Business Week, including AI for commerce and retail and building the next generation space Economy. We'll talk about that with the CEO of Axiom Space.
Plus Meta gets out its checkbook to catch up in the AI race, and the Little Tuscany in Uruguay with Christian Wiley of Bodega Garzon.
First up this hour, a little bit of AI news. This past week, Elon Musk's AI startup, Xai is burning through one billion dollars a month, with expected losses of thirteen billion dollars this year due to the high cost of building advanced AI models. Now to cover the gap, Xai is trying to raise nine point three billion dollars in debt and equity, with plans to spend over half of it in the next three months, and expects to be profitable by twenty twenty seven.
That is a lot of cash burning. Certainly, the big spend is on and we recently caught up with one part on the AI spectrum, and that is the AI that customers deal with. That's where Daniel Wagner comes in. He's chairman and CEO of Resolve AI. Resolve is a suite of AI powered products. It's meant to help companies with customer attention, engagement, loyalty and support.
It is nice to have you here with us.
Tell us a little bit more about your company and the environment right now.
Sure, so you know, I'm a multi decade entrepreneur in the tech business and Resolve AI is the culbination of my career in many respects, having built market leaders in e commerce and search. The development of Genai as a technology is an enabler and we use it to really
enhance the digital experience for consumers. Right now, when you go onto an e commerce site, it's a very perfunctory experience, and it's actually very ineffectual because seven out of ten people who go into a physical store end up buying a product, and seven out of ten people to go into a digital store end up not buying a product. And the reason for that is because I believe they don't get the answers to their questions that they need.
You know, if my wife wanted to go and buy me a mobile phone, she couldn't do it online because she couldn't get She doesn't know what iOS is or Android. She doesn't know what a megabyte is or a megapixel. But if she went into the AT and T store on Lexington Avenue, the salesman would help her through that process. So what we're doing with Jenai is we're changing, you know,
e commerce into a conversational commerce. We've created a language model that is the best salesman on the planet with deep product knowledge empathy.
So with your wife, what might it do with her? Who where you say? She doesn't have that?
So she would go I'm in that camp too, which is why my husband buys all of our phones.
But I'm just saying, like, how would that help her?
So she would be able to go to a website now and say, hey, I need to buy my husband a mobile phone.
What you know, what would you recommend?
And the answer would be verbally or typed up on the screen. Well, tell me a little bit more about Osmond. Does he use a PC or a Mac? Is he a business person or a creative? Does he use his phone all day?
Or you know?
And the answers to those questions will will guide her to a phone with a long lasting battery or a phone with you know, an Android or an iOS and she would result probably with buying a phone from that digital site.
Do you use your own LM that you've trained yourself or are you using a clod.
Or We started developing this in twenty sixteen, so a lot before it became fashionable. I come from as an information services and as I mentioned before, commerce and retail, so we understood about data structure, We understood the implications
of the algorithms that the foundational algorithms for Genai. So we started building a language model initially that could replicate the best salesman on the planet, and then we built products that sit on top of it that allow our customers to deploy it really as a plug into their existing sites. So it's a very easy deployment from it.
But if it's if it's a plug, and then how does it know if you're shopping? How is an expert in shoes and running shoes, for example, versus an expert in phone.
So think about our LLLM as a sort of blank sheet of paper when we approach a customer.
It doesn't have the world's knowledge.
It just has conversational skills. And then what we do is we import the product catalog of that retailer, so it could be shoes or whatever. Then there would be context around that.
So you still have to train after a company side.
Really it's already training you in jest, We've already trained the model to be a salesman. The training quote unquote of its product catalog is literally a matter of minutes, probably hours at most. And then the everything else about the language model and the technology is that it is a very proficient salesperson.
So if you take a digital information, let's just take.
A physical analogy.
Okay, if I've running If I'm running a camera camera store and I need a new sales guy, and new sales guy or girl joins my retail.
Store, the first thing I do say, hey, here's our products.
You better learn about the products. Do you know anything about photography? You know, so that the next time somebody walks in, they can sell a camera. Now we're able to do that piece in a matter of minutes. And then from that point forward, all of the best sales capabilities are inherently built into our model.
Where did you train it?
Where did we train it?
What information do you we use?
We used the Canadian Book Repositor, which is two hundred million books, open source books, Wikipedia for language and context, and then so it has three hundred billion token data sets as the foundational model to it. We did this over a period of years, so unlike many others, we didn't throw bucket loads of cash, you know, into a big black hole. We trained it over period using a much more efficient model, and so it took us, you know,
six or seven years. But then we ended up with the foundational model that has been recognized by Microsoft and Google, who are partnered with US as one of the leaders in the field.
One of the examples you use on your website is saying, you have any dinner party, you want it vegetarian? You have six people coming, Yeah, more or less? Give me some recipes or what should I make? I could use chatch ept for that, yes, now, but why you.
Couldn't do it on Degasino's website or on you know, a target. So we're sending to retailers. We're not selling, We're not providing you know, Google, we're providing best Bard.
But is it a huge good? Sorry? Go ahead.
So if your wife was looking for a phone, she would go to let's say Apple, well go to she'd.
Go to Google and end up probably on AT and T side or Charison or something that.
But with yours, she's going to either start with Verizon or start with Apple or Samsung or something.
Right, No, not necessarily, I mean, because how do you compare?
How do you get that?
Like you've got to You've got to remember, right, there are millions of retailers out there. You're driving traffic to their sites all the time. When you get to that site, seven out of ten people drop out. So what we're doing is that when you arrive at that site, you're welcomed, you get answers to your questions, you get detailed information about the products you're looking at you and you're guided
through the sales process. So if I went to Mace's today and I said, hey, I got to buy gift for my niece for her twenty first birthday, It's not gonna give me an answer. I'm going to have to navigate through lots of categorism try and figure out do I want to get her a candle?
Do I want to get it? You know, I don't know.
But if I was to ask that question of a salesperson in Maces, they say, hey, we've got.
Lots of ideas for you.
So they put how we're.
Leveling up commerce from what was a poor experience to a very rich, engaging experience, which we believe and have shown results in better conversion, which has a material impact.
Change in the conversion.
Well, it's only been going, you know, a short period of time, but we announced only a few weeks ago that we've seen twenty five percent uplift in conversion, which is massive massive.
What's to stop a company like chat GPT from just selling directly to Target or Deagostino and saying, Hey, this is the this is the this is what's going to power it. Yeah, come to us because we have this data set.
So they're a generalist, right.
So the issue with that is that they already think they know everything, and that contaminates the model. Okay, so if you ingest a whole load of cosmetics and fragrances, they're going to have names like savage and beast, and their descriptions are going to be things like BlackBerry notes with sandalwood and barbecue.
Right now.
A GENAI model like open ai doesn't understand that well and will hallucinate thinking you're talking.
About a beast in the world. We don't.
We have a clean slate. We're ingesting fragrances. We tell the model it's just fragrances you're ingesting, and then it knows how.
To sell that.
So it's a it's a different approach, and it's why Microsoft and Google partner with us because they recognize, both of them with significant investments in AI, recognize that we have really, you know, focused on this vertical to make this the most appropriate solution.
Well, it sounds like each one because you're dealing with a particular retailer.
It's their kind of closed data.
Sets in some respect, it is, right, Yeah.
And so you just kind of whittle it down. All right, I pull up the FA function. I know you're a young company, you just started, So what are your expectations in terms of revenue growth?
Like, where do you see this company?
We're getting it out of the park straight away.
Of growth are you seeing?
Well, you started at the beginning last.
I mean it's easy to ramp last year.
We had nothing beginning of this year. You know, we announced a couple of weeks ago forty one million consumers have our technology on their phones. I mean it's like almost instant. We're going to exit this year with one hundred million dollars of arr and we are. And we signed a deal only two or three weeks ago in partnership with Google, which was a ten million dollar annual deal with Liverpool in Mexico, a very large department.
When is that partnership with Google? Because that's fascinating, Right, they're doing their own thing. They're worried about potentially being replaced in terms of a search engine, which is why they're doing Gemini. But they're watching very carefully right in terms of how people are now communicating online.
Find Yourself and Google both wanted to do an exclusive deal with me. I rejected both of those advances and we ended up doing a non exclusive deal with both. It demonstrates our position in the market and the valuable asset that we have in this vertical.
Google, So what's the deal with them? Tell me how that?
So Google are introducing our technology to their retail customers as a solution which ties in those customers to Google Cloud and to us, so they see us as a sticky enhancement to Google Cloud. Microsoft are doing exactly the same thing and see us as a sticky enhancement to AZOR. Both Azore and Google Cloud are competitive cloud services that are really it's a you know, you can move from onto the other very easily. But with our technology sort of embedded in those customer accounts, they see.
Us as you know, retaining those.
Customers when they come up for renewal, and as a result, they're pushing us out to ninety percent of the retailers on the planet. Because those two companies basically deal with pretty much everybody.
You've got a few different products in the suite of software as a service products. How do you know that consumers are okay with this at this point?
Well, I think it's Look, I'm an innovator. All the products and services I've created in my career, which have all gone on to become market leaders, have always been very, very innovative. The first company I set up in ninety eighty four was a pioneer and online information. In fact, Mike Bloomberg licensed my content newspapers for the terminals back in eighty six, So we were pioneering stuff back then. We're pioneering stuff in the late nineties, and we're doing
it again now. I started this in twenty sixteen, we're nine years in and now we're productizing it and going to market. We're way ahead of anybody else in the space, I believe, and I think it's being shown by the takeup we're seeing in the last few.
Months that we're on to a winner.
This is a this is a step up for commerce, and right now I believe the environments and the interfaces that we're using in commerce are so out of date they're forty years old, that they're due a complete refresh.
Just really quickly thirty seconds. I haven't heard Amazon. Are you talking with Amazon?
No?
Obviously Amazon is the big competitor to every retailer on the planet.
They do a great job.
We're not going to try and sell to them, and we're certainly not going to be partnering with them. You know, our customers are everybody else.
That was Daniel Wagner, chairman and CEO of Resolve AI.
The AI race is on. Yes, indeed, so too is the next generation space race.
Where we go with the CEO of Axiom Space.
No single country, no single company, can get off the planet alone. And if you believe we are destined to be off planet, to be multiplanetary, which I do, we have to do it together. So that's what you're seeing. It can't be done alone.
That story is next. You're listening to Bloomberg Business Week. This is Bloomberg.
This is Bloomberg Business Week Daily with Carol Masser and Tim Steneveek on Bloomberg Radio.
Some recent news from the world of space. NASA and Axiom Space postpone the launch of the Axiom mission for to the International Space Station.
Everyone's familiar with NASA, of course, but axiom Space perhaps not so much. XIM is focused on developing private space stations, human spaceflight, space suits and more. Yeah, it's kind of rocket.
Science, it is indeed. Tej Paul Batya is CEO of axiom Space. He stopp by our Bloomberg studio recently.
You know, at axiom Space, we're developing the products and platforms for humanity to thrive off Earth. And you said, you want to talk about the macro and how the geopolitical situation right now impacts us. If we were to go a little more macro than of that, you know, up to the level of space looking down space has proven to be the ultimate experiment for international diplomacy through crisis.
You know, the International Space Station is a collaboration of fifteen nations over the last couple of decades and over the last few years access to many more nations thanks to companies like Axiom Space and our public private partnership with NASA and other companies companies. What you really see is through the crisis times, what's happening down here is
not really what's reflected up there. They're working together to develop this platform in this lab for the future of humanity, and what we see is what's happening down here does impact a lot of decision making, but ultimately up there it is the ultimate collaboration. And if you think about the International Space Station, it's the largest object ever created by humans. It is the most expensive product created by humanity in a time where it wasn't as connected in
real time as this. You know, think about thirty years ago they were doing this across languages, across borders on phones, you know, in the Soviet Union and the US, in Europe, in Japan and Canada, and they got that thing built.
You know, speaking of collaboration, I'm curious about the recent announcements that ACXIOM has made with foreign governments. I mean, we're talking Egypt, Check Public Portugal, among others. Perhaps there are some out there who might say that it looks like there could be AXIOM being a private sector arm of the State Department, essentially in the sense of boosting soft power globally, sort of as the US has used in the past space to diplomacy to compete against China.
I'm curious about your take on this, and you know, if you have any coordination with the State Department or NASA when it comes to these deals.
You know, it's spot on. I wouldn't necessarily say it as a space diplomacy arm of the State Department. What I'd say is what Axiom has proven is commercial companies can drive US diplomatic interests overseas. So we're a private company, We're an American company.
Is this the new soft power?
It is?
And go ahead, And it's exactly what I mean. I would expand that a little bit also given the light of the news today. It's power, it's hard power, it's soft power, and its economic power. And what you see is a eight year old startup and you were saying that it's rocket space, rocket science. I joined the company a little under four years ago. I invested it, just became CEO. I invested in the company about five years ago. I don't have a space background besides being fascinated since
I was three years old. Right, I'm not a rocket scientist, I'm not a billionaire. But here this outsider from the startup world, the tech world, the Google world, comes into space and in a very short period of time can have this outsized impact. And what we saw in this last week. I just arrived from Florida. We were down there for our launch.
We're gonna talk about that in a minute.
We were at tables and conversations with NASA, SpaceX, the Russians, the Indian Space Agency, the European Space Agency, the Hungarians.
And the Polish.
This is the future of international collaboration. And right in the center, in the front was a startup, an American startup, so being able to drive US diplomatic interests but also overall diplomatic interests. You mentioned the Chinese, they've had a space station since twenty twenty two, fully manned.
Yeah, we remember the.
First space race, which was the US versus the Soviet Union. The second space race is China versus the West and its industry. And the third space race is the first to create the next applications that are going to change humanity. So we see this rapidly scaling from sixty years down to six years to the next six months. I think you're going to see rapid development in space commercials.
I have to ask you, my father was a rocket scientist and involved in the first space race, so I kind of liked tim, like, we just look.
Love this world.
But what I'm curious about is it was a race, yes, for the United States to succeed before others, and it just what you are laying out for me is a lot more collaboration between nations and regions of the world, where I feel like our headlines are often showing all of those that you were talking about, kind of with stress points and tensions. So tell me, I mean, does that really show a much more true picture of what is going on globally in terms of relationships. Help me make sense out of it?
I think it does. And this comes back to your first macro question, and I will start macro and then I'll bring it very micro back to the first space race, the second space race, and what I think is a third space race. The macro point here is a little more philosophical, but it is actually a collaboration question. Is no single country, no single company can get off the planet alone. And if you believe we are destined to be off planet, to be multiplanetaryary, which I do, we
have to do it together. So that's what you're seeing. It can't be done alone, despite what you're hearing down here and what you see on Twitter, and these problems are very very It's not a.
Race though, to be the first nation to.
Do It's a different race. So the first space race getting back to time was actually a race two countries. It was so hard and expensive and impossible that two countries were racing to get the first human, the first astronaut off planet. In those sixty years following that, there was an average of about eight humans per year that went off planet. In the last six years that average has jumped to twenty two people per year. So in just the last six years we've almost tripled the number
of people that go up. Sixteen of those were with AXIOM, which is just in the last three years.
Can you explain TAJ exactly where you work within the context of SpaceX for example, I think a lot of people are familiar with SpaceX. The launches get so much attention, the Dragon capsule and what it does with the ISS. Just explain where you sit in the ecosystem.
Absolutely.
So when we pull these missions together, like the AX four mission India, Hungary, Poland pulling through the European Space A and C, AXIOM is pulling that mission together. So we are going out getting the customers, creating the crew, procuring the vehicle, SpaceX being the launch provider, getting the permit from the ISS, primarily Nasai.
Guys are essentially the producer.
That's a great way of putting it. Actually, I don't think that language would necessarily translate to the space industry. Hollywood and Houston speak very different languages. It's both English, but it's very different languages Hollywood.
But that sounds like what you're describing to make it happen.
Yeah, and think about when a producer puts together a package, right, that's also an order that probably wouldn't resonate in the space industry. That packaging has a ton of value. Yes, the physical film or theater or studio or camera groups, but think about the intellectual property. Think about the products that created, get are created, and the derivatives that create value. So when we pull together these missions, there isn't a bit.
There is a very large element of mission integration training, kayload integration, but the key is locking in the demand. Those countries are trusting us, and these decisions aren't made at a space agency level. These are done at the prime minister president level. You're not sending up a Humanto space with a startup with an American launch company without significant consideration and trust.
You mentioned you were just back from Florida, where you were for the X four mission launch. It was ultimately scrubbed. When are we going to see a new date and what exactly have you been told about leakage on the ISS?
Sure, So the mission was scheduled to launch earlier this week. We had some weather delays, which is normal for a lot of our guests who have gone down to Florida and wanted to see an anticipated a launch. While it's normal for the space business, it's not really normal for someone who flew down to Florida to see it, but it happens. I've been through four launches myself with Axiom now and the delays usually go you know, sometimes months and weeks, then day by day based on minor things.
So we had a weather delay, totally normal. There was some data that came back from the launch vehicle which was resolved, also completely normal. Sometimes that happens during a test or readiness review. Sometimes it happens on the launch pad. Better to happen before than on the launch pad. But these are all measures for safety. Then this issue on the ISS, the leaks have been happening for a while. There is an effort to improve it, to fix it.
The ISS is old, you know, it's a thing. You can think of it as a piece of equipment, not.
Really like a building.
It has a lifespan, which is it's coming to its end. The whole reason Axiom exists is we won an award. We are the exclusive company, the only company that can connect its modules commercial private modules to the ISS. The reason for that is to prevent a gap in human presence in lower thorbit. So Axiom connects what I'd say is a bridge, but it's actually physically a tunnel onto the ISS. We make sure we preserve whatever assets and
value we have on the ISS. We connect our second module, and then we can separate and be a free flying commercial platform. So with the ISS itself, that's where we go right now. So in this production, imagine this as the studio or where we're going for So their risk profile and their safety profile is what we follow. But remember our risk profile is a little different. When NASA sends up astronauts with SpaceX, they're sending us astronauts. We
are sending other countries astronauts. So we don't take any risks.
Here since you rely on SpaceX for launching. What happens if Elon Musk has a fallout with President Trump and the US decides to move away from SpaceX, what happens to you.
So what we have right now is what i'd call a supplier constrained market, and that's okay. There's only one way to go up and down. And what SpaceX has done is phenomenal, and I really hope it doesn't go away. Right It's important, it's important. It's very important. What I see from SpaceX's point of view and their mission. I understand, not the feud that's going on, not the rhetoric, not what's on Twitter.
None of us understand it to be there.
But I can understand the magnitude of what it takes to get off planet. Now, what they've created from a launch standpoint, it is phenomenal. It's elite, it is, you know, really a wonderful thing for humanity, and I'd hate to see it go away. With that said, in a supplier constrained market, certain dynamics are created so to be the other power player. If supply is locked in, you want to lock in demand because that gives you leverage. And we've seen this model. You brought up the producer angle.
I got my start at ESPN in media, and we can go back to the seventies and eighties of cable and satellite how content companies how Bloomberg TV probably got its opportunity how ESPN, MTV, CNA and MTV when there was the cable satellite wars. Who benefited the content companies and the consumers. So I believe we're in that kind of market dynamic right now. So our hypothesis really been about the customer demand.
That was tees.
Paul Batya, CEO of Axiom Space.
Still ahead on Bloomberg BusinessWeek, Meta spending megabucks on Scale AI and tapping into a mega wine experience in Uruguay.
Those stories. Next, This is Bloomberg.
This is Bloomberg Business Week Daily with Carol Masser and Tim Steneveek on Bloomberg Radio.
Meta Platforms taking a forty nine percent steak in Scale AI with Alexander Wang, who's twenty eight years old, joining Meta as a top executive to build AI super intelligence. Steak, Right, it's a steak.
It's sgak, yeah, not something you a steak and steak put in the ground.
CA.
It's not an acquisition, yeah, Okay.
If it works like an acquisition, Davie.
Says, do not call it an acquisition for a host of reasons, okay deeply. As US technology columnists for Bloomberg Opinion, he spent about fifteen years reporting on tech at the FT and BBC before joining Bloomberg. He joins us here in the Bloomberg Interactive brokers at studio, do we just not call this an acquisition? Why are we not acquired? Why are companies not acquiring things right now?
Because they're afraid to They're afraid that the courts are going to undo their old acquisition. So at this time they're thinking probably too risky, too complicated. If the stake was fifty percent as opposed to forty nine percent, that would of course be a takeover rather than an investment, and immediately that would trigger all kinds of reviews. They'd have to wait, they'd have to get clearances, not only in the US but also around the world different regulators.
There's no time for that in the AI era. They've got they've got to get to work straight away. And so we're seeing this sort of new approach which I sort of likened in a column I wrote to sort where a football team buys a great young prospect, you know, they pay a transfer for to compensate wherever he's leaving. In this case, for Wang, it's about you know, making investors hole at the Scale AI, the company he founded, and they bring on this young talent with the view
that he's going to be, you know, the what. He's going to run a super intelligence team at Meta and this is obviously what Mark Zuckerbo thinks is needed to bring his team up to up to speed to compete against the other big teams.
He's going to be sitting by. Mark Zuckerberg reportedly what is superintelligence?
What is?
And also scally Eyes not building its own super intelligence either, that's what That's what's confusing to me.
So Scale Eye is an interesting company. It's kind of right at the very early stages of AI development. It's about hiring humans to dough data labeling and say that's a tree, that's a bus, and so forth.
It doesn't sound like super intelligence to me.
The crucial thing and a colleague, one of my colleagues, Ellen who Hewittt, wrote this fantastic piece about Alexander Wang today sort of talking about how this guy knows everybody in AI and he knows everything that's going on. And one of the things about Scale AI that makes it particularly useful for Meta is that it's a company that
other companies would go to when they needed data. So they were working with open Ai, they were working with Google, They're working with several other companies, and so they have a bit of an insight into what those companies are working on and what sort of data they were needing to have. So now Mark Zuckerberg gets a bit of that intelligence.
We want what you have, we want we wan't what you know about what kind of the whole landscape is doing when it comes to AI.
What have these companies come to you for?
Yeah, exactly. And also Alexander Wung is just known as a great networker, and so when so much of this AI race is about talent and bringing people on, we're hearing bug Zuckerberg is emailing people personally and saying, come and join us. I'll give you ten million bucks if you do it. This is this is just a signal of how fierce the AI rate is.
A different type of signing bonus.
Right like a smart star, but considerably bigger in terms of the numbers of.
What's the promise though, I mean, what is this superintelligence that they're working toward? What is the world dev that meta Platforms wants to build and be ready for.
I'm not sure I want to imagine it, frankly, but it's you and me both. There's various names for it now. Superintelligence or artificial general.
Intelligence is a very EGI and super intelligence are the same thing.
It's all basically the same goal, This idea that you can create this essentially one machine or you know, one technology that people can use for whatever sort of varied juices they want an AI to do. And there is this feeling that somebody will get there first. Right now, I'm of the view personally that there'll be several players doing this and that's how it's going to the land's
going to turn out. However, I think there is a sort of panic to make sure that we've got to be you know, first, or very very close behind.
To be fair, right.
I mean Microsoft has done some similar moves right to try and position themselves by acquiring you know, either different people that seem to have certainly some AI insight or know how. I think alphabet has done the same thing, right, So they're all kind of jocking for position.
They're all joking position, and they're also taking the same approach of we can't be seen to be acquiring companies, so but we can try and acquire people.
Now.
I think they're not as clever as they think in this regard. I think the Federal Trade Commission, the Department of Justice, they know what's happening here. They know this is competition, just in a different form. Because if you've got companies that are spending crazy money on wages, does that mean a smaller company just can't compete for talent? I guess not right, So there's going to be and we already know the FEC is looking into some of these deals.
They are I'm looking what they're going to do. Yeah, what's going on when it comes to innovation at these huge companies. I mean, I read your column and I think to myself, this is turning into like a PEPSI buys Poppy for two billion dollars type of thing, because we want to let the startups duke it out for shelf space. When it comes to probiotic soda, we're not going to develop it ourselves.
Is that happen?
I thought I thought the startup ecosystem, I thought there was you know, a decade ago, I thought Facebook killed the startup ecosystem.
Well, I mean, look, I guess it's a question of the shifting purpose of the ecosystem to those big companies, right. I mean, it used to be if you started a startup, you had several exit opportunities U IPO, you get acquired. You know, both of those channels have almost been closed off. We're not seeing so many tech companies IPO anymore. That's really dried up, and it's becoming much harder for tech
companies to acquire companies at all. But at the same time, the startup ecosystem still has this fantastic ability to work quickly and bring out new ideas. And I wrote that in that Columny reference that you know, I'm not sure if Alexander Wang joins Meta as like a junior engineer, I'm not sure he rises through the ranks.
That becomes this guy.
I think that's only something you could do outside of the company, And that's just the nature of startups.
That's Dave Lee, technology columnist for Bloomberg Opinion.
Before we go, how about a journey to a family owned winery in Uruguay. Since nineteen ninety nine, Bodega Garzone have been making wine and developing a mega wine experience.
Christian Wiley is Bodega Garzon's managing director. He stopped by to tell us all about it. It is.
It is a time uncertain times. The tariffs, of course, came on top of a lot of complications into the alcohol wine industry, and you just basically need to keep going. You have a long term strategy and the most beautiful thing is that wines just get better with age, so we have to be patient. But it is, it is a challenge right now.
It's tough. You know, when we think about so called New World wines. I think a lot of people often think of in South America, maybe Argentina or Chile, Uruguay not really on the map as a wine destination as much as other areas.
Why well, I mean it's not on the map because they've been drinking all their wine they've been making for the last threes three centuries. But then got Song comes into play. And this is an incredible investment of Don Alejandro Uldoni. It's two hundred and fifty million dollars capex. It is the largest investor invest investment ever in the industry of wine. And this is right now in the region in the world, in the world world.
So this is right.
Next to the beach to the Uruguayan Riviera.
So you have.
Jossei Nacio, which is like the San Trope. So it's and it's it's done in a in a very if you like, forward thinking way of the most committed to sustainability. We were the first winery in the world to be one hundred percent LEAD certified and we work, you know, to express the place. It's a new troire that is, you know, the vision is for Albert Antonini, who's like
the top wine maker from from Tuscany. And then we one of our pillars is the experiences, so we have Francis malmon Is our chef, so you experience these beautiful wines with an incredible view right next to the ocean in a place is that it's like the Senterpeo South America.
You don't spend tw.
Hundred and fifty million dollars on capex unless there's growth going on. Tell us about the business and in terms of top line growth, but it also sounds like it's also experiential that you guys have incorporated, so give us you.
Know, we're Bloomberg.
We love all the numbers so give us an idea in terms of the growth that you guys have seen.
Well, we've basically gone from a place that didn't grow vines to a vineyard that has more than a thousand little parcels, little blocks. We've gone from zero to sixty markets. We're selling all over the world. It's become the main brand in Uruguay, but it's also the leader in the States and to Brazil, to Japan, China, UK and it's it's growing very fast normally.
And what's fast is it high teens? Is it above that?
Many years doubling the business, many years in a row, including COVID, and as you said, all the different cycles. Toasted to our first year with our new partners in the US with a wine bow. And again we did really well in a very tough year.
But you.
Have a level of investment that it's really projected very very long term. We have projects for hotels, we have a real estate on the beach. Mister Volgeroni has an incredible a golf course designed by Phil Michelson and Acha Caria that it's a PGA Tour preferred golf course. We make our own extra virgin olive oil so that we talked about there are.
Some universe What is the biggest revenue driver? Is it the winer, is it the real estate? Where I ask if it's even the olive oil.
Yeah, the first one was the olive oil, the extra virgin olive oil, and it's one like the best extra virgin olive oil in the world. A couple of times. The winery is the wines. It was driving the revenue. And it's not just setting wine as a product, it's also the experiences. So we have fifty thous visitors a year and this is in the middle of nowhere, as you just mentioned ou Wai. Yeah, and it's all very
high income and networth people. It goes from twenty thousand people living there in Punta de Les de Anderson to two million tourists around New Years. It's a lot and a lot of them are celebrities like Clooney or Winneth Paltrow or Messi or it's ours.
That's kind of our crew. Care well, I'm here to invite you.
You have to corroborate this story, right.
We only have Unfortunately about a minute and a half or so left. You did bring in some bottles of wine and tell us about what you brought. I don't want to mispronounced Blasto, tanate.
Alberino, Alvardino.
It will start with the white wine. Yeah, it's this is Albardino. We are the main grower of Alberdino in the Americas. It's the white great variety that like the Queen of Spain. We have the same kind of granite and Atlantic Ocean influence, similar to Galicia. And this is our actually our setting line in the US, perfect for summer or the end of the of the spring, if you like Top one hundred white spectator.
So an awesome valley. This is like a twenty two dollars retail.
That's great.
So there's a beautiful opportunity there.
That was Christian Wiley Bodega. Garzon's a managing director.
And that wraps up the weekend edition at Bloomberg Business Week from Bloomberg Radio. Thank you so much for joining us.
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