Bloomberg Businessweek Weekend - May 6th, 2022

edition of Bloomberg Business Week. We've got a special program as we bring you highlights from our coverage of the Milk and into two global conference just held in Beverly Hills. There was the installment of the annual Convening of Global Leaders. Everyone was there, government officials, we had people from finance, health, academia and philanthropy, and we were there just ahead of the Federal Reserve's first fifty basis point interest rate hike since the year two thousand. Got to say the world

was open, I mean it was packed. There were a few celebrities floating around everywhere at all. Right, that's for big broader topics that we got to rising rates, storing inflation, and the health of the U S. Consumer. They were among the big subjects that we talked about with the likes of former Bank of England governor Mark Carney, Low CEO Marvin Ellison, and Stitch Fixed CEO Elizabeth Spalding, among

many more. All of that to come. We begin, though with Bloomberg News editor at Large and Bloomberg New Economy editorial director Eric Shatzker, always talking to the heavy weights when it comes to the world of finance, and he joined us Fresh often in depth discussion with Apolo co

founder and CEO Mark Rowan. The thing that makes Apollo interesting, different from Blackstone, different from Carlisle, different from KKR pure firms, if you like, is that the overwhelming percentage of its assets is in fixed income and not just fixed income. You think fixed income, you think bonds, you think loans, publicly traded loans. No, what they do is what you

know we call private credit. In fact, they have what they call a yield business that has three and sixty billion dollars of private credit and it and as a result of that, they have a slightly different perspective on the world. They don't get stressed out by days like the one we've seen. Try inspired today in the stock market where the Dow is down five and then it's up fifty. They can sleep through that stuff quite easily because they for the most part, don't manage daily liquidity vehicles.

And his view is that, um, the correction is not over the you know, he sees what everybody sees, right. He's concerned about inflation, is concerned about rates. UM. If you were in a again, a daily liquidity vehicle, or an individual bond or an individual loan, you'd be more concerned about these things, um, because you have to take that daily hit if the market is weakening. If you're in these vehicles, the funds, for example, I don't have

the vehicle. Sounds like it's a car. It's a fund, right, or a product um where you can't cash out immediately. It's actually much easier to sleep at night, both the managers and for the clients because you can ride out these storms. Right. This is a storm of volatility that we're living through in the market. And it's one of the reasons why the mood here at Milken isn't darker because most of the people here come out of the Mike Milkin, Drexel, Burnham Lambert legacy, and they are managers

of private equity, private credit. Those are the people who can for the time being, we see it with the guests that we talk to in private equity. It's just a very different fel They're not stressed. They aren't stressed

as much. Eric. One of the most fascinating parts about the conversation that you had earlier with Mark Rowan was what he said happens over the next five years when it comes to retail investors and the idea that he thinks that within the next five years or five years from now, we will see retail investor portfolios made up of alternative investments because and a lot of this will

be fixed income replacement. These vehicles that I've been talking about because um their belief Well, first of all, they're designing products that will appeal to the retail investor. Right now, the retail investor only has access to products that resemble institutional products, and the retail investors needs are different from

the institutional investors needs. So first it's about product development, but secondly, it's about the retail investor, particularly at a time like this, waking up to the reality that there's no point paying for public market liquidity if you don't need public market liquidity. This is the same realization that institutional investors like pension funds and endowments came to over the past thirty years, led by the now late David

Swenson from Yale, who pioneered the endowment model. If you don't need the money, now, why put it into a vehicle that gives you access to liquidity? Now it doesn't make sense. You're paying for something you don't need. It is the evolution of a theme. It's not like a switch flipped and all of a sudden we went from a world of public markets to a world of private markets.

As I say, this has been slowly building. It starts with the most sophisticated participants, the Yale endowments, for example, the Harvard Endowments, smart sovereign wealth funds like Norwegian Sovereign well Fun, the Singaporeans for example. They figured this stuff out a long time ago, and now the wisdom of that choice is becoming apparent to other people and this

becomes more urgent for them. If we're living through a time of high inflation, rising rates, declining equity valuations, widening credit spreads, where you're you're losing money, uh due to the fact that you're in a public market. I want to get to Citadel Security, Ken Griffin Big takeaways from your discussion. I must confess part of it happened while we were on Bloomberg Radio, so I didn't get to

tune in. Well, I would say this. Ken also says that, well, the sort of the macro headline out of the conversation is that this is the most uncertain period since two and uncertainty doesn't necessarily mean things have a leg to go lower, but it does mean more volatility. Um, specifically as it concerns Citadel. He said, these are the toughest

four months since two thousand eight. He said, in fact, when we got off the panel and he told me he cracked three teeth wo stress, Yes, because of the stress um and uh like what an anecdote, right, Um, there isn't a nut. He's he's waking up to the reality of crypto. For a long time, Ken was a skeptic and he's still skeptical on the usefulness of crypto and even blockchain. Is it going to matter? Is it going to change the world? Um, But they're building a business.

They're building a big market, making an exchange business around crypto. Fascinating conversation as always, well, both of those conversations. Check him out on the Bloomberg Termol and of course our Eric Shatsker here of bloom Bank. If you're having me, that was Eric Shatsker. He's Bloomberg News Editor at Large and Bloomberg New Economy Editorial Director. Check out his full interviews with Apollo's Mark Rowan and Citadel's Ken Griffin. You

can do that at Bloomberg dot com. Coming up next, much more from Milk in two, including a four dred million dollar question for the team over at Goldman Sachs Asset Management. You're listening to Bloomberg Business Week. This is Bloomberg. This is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes. Tim Stinovik from Bloomberg Radio. Our latest trip to the West Coast where the Milk and Institute Global Conference. It gave us a chance to catch up with company

leaders and policymakers alike. It also allowed us to take the pulse of individual investors. Katie Coach is the Chief Investment Officer of Public Equity at Goldman Sachs Asset Management. Her group oversees some four billion dollars in assets, and she's trying to get her clients used to the level of volatility not seen since the Great Recession. We talked with her just ahead of the FED decision. The public

markets have already priced some of this in. So the fact that markets are down already for the year, and tech assets are down and UM some of the growthiest parts attack down fifty UM actually suggests to me that while it is a tough operated environment, some of it has been priced in. That's the first thing I would say in just a quick second thing is that I

think people have to moderate their return expectations. And that's something I really worry about for a lot of our clients because most of what we're doing at Goldman Successet Management is help people retire with security and dignity. It's also that capital preservation a percent and especially if you're on a fixed income, and I just think it's gonna be the sixty portfolio that returned eight percent real returns in the last cycle has returned negative eight percent this year.

I don't think that we're going to have a lost decade like the seventies, but I think return is going to be harder to come by, and we're working really hard to find those opportunities for clients where we can get some return. What's more realistic returns at this because I do think investors have gotten spoiled a bit. Well, the hundred year return is for that portfolio is about five So I think that's real, right, five percent real returns,

And I think that's a reasonable expectation. Hopefully, you know, we can get to over the next decade. But it's gonna take a it's gonna take a lot of hard work and looking in new places too. That's a that's really moderating from what we saw just in the s the last three years. Yeah, well, it's a little bit

harder to generate returns when capital costs something. Inflation is back and investors are wanna like have and and profitabilities moderating, and investors are not willing to buy growth at any price. It's it's it's a tougher environment. So where are we in the cycle? When when would we see a return to what we saw over the last you know, fifteen years. I think it's going to take a while for us

to to work ourselves out of this. I will say that you know, just most of what we do in our business as we look at the world bottom up for opportunities and I want to acknowledge my bias and saying this because I run an active business. But if you have a more difficult operating backdrop and capital is not free as an example, actually you should get a lot of differentiated returns at the company levels and picking sectors and spots. So I'll just end by saying, you know,

people are throwing in the towel on growth. I think this would be a very inopportune moment, and we're not doing that for our clients to give up on growth if growth is scarce, which we are probably headed into environment where that's true, it will eventually rerate and you can buy some amazing growth opportunities in the tech space at actually valuations that are two thirds cheaper than they were six months ago. But in software in particular. Um So,

there's a very famous quote from Robert Smith. He says software is better than first lean debt um, which meaning that these these this software is so central to the running of a business that these management teams are going to absolutely continue to pay that that software build, maybe even before the means. It's a it's a great phase. When I we meet lots of management companies across the sorry management teams and CEOs across the world. I have yet to meet one that says, you know what, when

this environment becomes difficult, I'm cutting my tech bill. I think they'll cut back on T and A, but I don't think they're gonna stop digitalizing their business if they want to win in their categories. So I like to own things for my clients that my other CEOs are buying and software, digitalization of businesses, working, moving workloads to the cloud. Obviously cyber incredible space to be because the current geopolitical backdrop is creating big tail winds around that.

We're talking with Katie Cotch. She's the CEO of Public Equity of our Goldman Successet Management. It's so funny that you say that about technology. I did a panel here at milk and yesterday about retails new reality. So it was the CEO of Lows, it was the CEO of Kroger, the CEO of stitch Fits. Authentic brands keep saying wrong, authentic brands, thank you. But what's interesting is the theme was technology incluse of it and we saw it even

increasingly so right during the pandemic. And they all said, like that's top of mind for you, Like nobody right, like they've got to be there and they're not like first companies they check enabled. Because what did they say about the consumer where they worried about consumers? I have to say there was like out of the gate cautious optimism.

That was like kind of the theme. Um, they are still seeing consumers spend in terms of authentic brands, said, you know, consumers are buying a larger ticket, but they're spending less time on platforms and they're buying less stuff. So there may be spending on a fewer items and stuff. Um, but Roger still seeing people eat at home and buy food and all that stuff, and and Lows is still busy in terms of the home improvement market. But I do felt like they're is like everybody's sitting in a

little bit on the you know. I mean I think that's the I think that's the right takeaway from that. I mean, the right now data on the consumer is very strong. I run in addition to a fundamental business, a quant business, and we're ingesting that credit card data all day long. And the right now data suggests that consumers strong spent has shift to experience over things, which you alluded to. Carol that's for sure. Travel right now

strong be like concerts as and experience. But I have to say at the margin, I'm a little bit more concerned about the next six and twelve months for the consumer. I don't know if you guys filled up your gas tank. Well you've been out here and just talking about it six dollars ago. And and actually you said the low CEO was on that. We met with the low CEO Home Depot CEO. They said, once gas gets, you know, meaningfully over four dollars, which six is, it really starts

to to hit their their core consumer. I love that you said who you talk to? I mean, who do you talk to? What metrics are you following? That gives you some clues. I mean, obviously there are a lot of metrics we all follow, but I do feel like it's the nuances and data that will tell us be much richer. I think you have to look at a cross sections. So for example, you know Visa MasterCard had

great earnings last week. You know these in particular revenues up five percent, as I said, showing consumer very strong. But if you look at PayPal um, which is actually more e commerce space and generally targets a lower end consumer, it wasn't as good, and so I think you do have to be nuanced about it. You have to be looking at all a cross sections of the consumer, and I think we have to be prepared for some weakness there.

And so pulling that together from yeah, I mean we're gonna I mean I want, um, I want people to stay invested because that's the best thing to do for building wealth long term. UM. And so I don't want to do any fearmongering. But of course, essentially this country is going to have a recession. The world, it's cyclical, and I hope it's a shallow one and I hope the impact on humans is very low, and I hope people stay invested through it because it's really difficult to time.

And actually historically markets have rallied very aggressively once we realized that we were in the in the early innings of a of a recession. So let's you know, stay calm and balanced about that and then own assets that can perform. And I would just end by saying, you know, what are the consumer things that can perform? I already said concerts, that's an affordable experience. I would say beauty, um,

you'll appreciate this, Carol, I had this. This s much a ton of makeup, because you look good, even for a lady on radio. You're looking amazing. But like I got my hair cut two weekends ago, and I asked my hairdresser this question, how do you perform, you know, through recessions? And she said, never, never went negative in two thousand and eight. I mean, that's that's an incredible business. We we don't, we don't, we can't. We can't invest in my hairdresser as amazing as she is. Shout out

to sheer love and Truthsburry in New Jersey. Um, but but actually, alta beauty is something that we own. So we're gonna wear a lipstick in a recession. I mean, I'm not trying to be flipping it back. Yeah, and that stuff will do that. That stuff can do well against even a tougher economic backdrop. That was Katie Cotch. She's c I O of Public Equity at Goldman Sachs Asset Management. Still ahead on Bloomberg Business Week, the former head of the Bank of England says central banks can

tame inflation. The question is do they have the will Brookfield Vice chair Mark Arney breaks it down on the other side. This is Bloomberg Broadcasting from the financial capital of the World, Bloomberg eleven Rio in New York to Washington, d C. Bloomberg to Boston, Bloomberg one O six one to San Francisco, Bloomberg nine six to the country Sirius XM number one ninety and around the globe the Bloomberg

Business and Bloomberg Radio dot Com. This is Bloomberg Business Week with Carol Matter and Bloomberg Quick Takes Tim Stenovan on Bloomberg Radio. For the first time since two thousand, we saw the US Federal Reserve jack up interest rates by fifty basis points, and similar hikes could be in

the offing if inflation doesn't taper off soon. We were at the milk In Institute Global Conference just ahead of the f O m c's announcement, and we asked Brookfield Asset Management Vice chair and former Bank of England Governor Mark Karney if rising prices should be more than a short term concern for policymakers. Central banks ultimately can get on top of inflation if they want to. Now they're

behind the curve. I think we all wreck guys at all the central banks, in different ways of saying it, are admitting that they would prefer to have been in that position that end up in a deflationary spiral because of COVID. So we are where we are, the waters under the bridge. They've got to catch up. Um Now, they have to have the determination to get inflation back to those targets somewhere around two percent over the course

of the next couple of years. The other half of your question, so there, But the importance of your question, Tim is there are some longer term forces that are inflationary. So this element of whether you call it deglobalization, globalization, fragmentation of global economy, that's gonna add costs. Whether you look at elements of the energy transition, not just the short term energy crisis, but the restructuring of a lot

of industries because of that, that's gonna add costs. Where you look at government spending because of additional for spending on defense or healthcare, that adds costs. So all of those things add costs. You need to react to those and by the way, you need you know, better policy um on the fiscal side, on the climate policy side to help smooth that um. So look, we can get ultimately,

inflation is a choice. We can get the level of inflation that we deserve, uh, when central banks do their job, But they are leaning against some pretty big forces that have really built up in the last couple of years. Mark, are you concerned about, especially when it comes to climate initiatives and you know, promises in goals that have been laid out, that if the economy seems to get into a trickier state and a tougher situation, that those positions

and those policies are pushed aside. Again, well, Carol, I think we got again distinguished between the short and the medium term. Now, on the short term side, there's a scramble for energy, particularly in Europe. Many of the sources and and in the emerging world as well, and many of the sources are higher emission emitting sources, in some cases coal, and that's going to use up more of our carbon budget in the short term. So that's you know,

unequivocally bad news for the climate transition. However, what this crisis is doing is concentrating the minds of companies of countries to say, um, well, maybe the system we have right now isn't that great it's highly volatile, it's expensive, it has issues in terms of reliability, um, and it's destroying the climate at the same time. And any major decision on climate takes about five years to have an impact.

So whether you're putting in a new L and G train, um, whether you're constructing large gale off store wind, when you're doing something the nuclear side or hydrogen, it takes that amount of time. So governments and we're seeing this, if I may, just in Europe, we're seeing them take a step back and say, Okay, where do we want to be? And their answer thus far has been we're gonna triple hydrogen, We're gonna aggressively ramp up offshore wind, we're gonna ramp

up solar, we're gonna move on storage. So the answers are all falling on the clean energy side. That's good news. That helps balance the bad news in the short term. Well, and I do think about in the pandemic right that we see, you know, the increasing in digitization, whether it was the embracing of e commerce or telemedicine, like so many things happen in a much shorter time frame. Will we see that it's that's like in terms of energy

and the transition because of what's happening. Like Carl, it's a hugely important point. I agree absolutely with everything you said, because we did see that acceleration. It was forced, you know, necessity. It's out of necessity. Companies had to keep going. We saw the acceleration and there's no turning back from that. UM And actually it's not good for economy. We and for people's livelihoods right where they get better service and more flexibility and work. I see you can't work from home,

but others can. UM seven months from home. Fantastic with your own Bloomberg perfect. But on the energy transition, we've aren't seen this acceleration. I gave you the numbers for Europe. Uh, we've seen a similar thing in the UK. The question though, is, and this is where the jury is still out. There is a knee because of Russia. We're not we we are you know, they don't deserve it. I mean that's

an understatement, but we cannot rely on Russian hydrocarbons. We need to bring other hydrocarbons on stream, and the challenge is going to be to do that in a way that you know that those are going to transition off in time not to lock in a bunch of committed carbon. Well, look, we know the transition is going to be boppy, it's going to be a challenge, it's going to take years.

When is it no longer a transition? When have we transitioned? Well, that's great, right, I mean it's to land it it's twenty I think the key thing, though, tim is what so it's a long way off in many respects, although we have to start now in many respects today. The decisions we take, which is why you're asking me the questions rightly, is the decision we take over the next few years are really going to determine whether we can

make that transition. For now, what we're doing in the financial sector, and one of those acronyms who read out kindly at the start, chief fans, you know, with a hundred and forty trillion of global financial assets, is to assign those assets to the transition, to manage those balance sheets to the transition, and to report to people what proportion of the balance sheets are supporting the transition today, what do they expect to tomorrow and where where where

did they get to? That was former Bank of England Governor Mark Carney now Vice chair over at Brookfield. He's also the UN Special Envoy for Climate Action Finance and chair of g FANS, the Glasgow Financial Alliance for NIT zero. You're listening to Bloomberg Business Week. Coming up next, we dig into the lucrative world of private equity. We do that with a forty year into three veteran. We're gonna catch up with New Mountain Capital founder and CEO Steve Klinsky.

This is Bloomberg. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovy from Bloomberg Radio private equity and venture capital firms. They are coming off a record year of deal making, driven by a pandemic lead, drop in valuations and stockpiles of cash to finance that shopping spree. Funds tapped a billions of dollars in uninvested capital and in the year with dry powder

down about from and at the lowest level in four years. Now, of course, things look a little different in the current market environment, and to find out where we stand today, we turned to Steve Klinsky, founder and CEO at the private equity firm New Mountain Capital. Steve founded the leverage buyout group of Goldman Sacks back in the early nineteen

eighties and spent over a decade at Forceman Little. He joined us at the Milk and Institute Global Conference with insight into the appetite for m and right now, as far as new acquisitions, it's gotten off to a slower start because it was such a busy layer last year. But from what we can see, there's a lot of deal activity picking up under the waves. So I don't think it's a permanent shift and deal activity when you say it's okay, so you don't think it's a permanent ship.

But is there people kind of holding back a little bit because of the volatility? Well, I think valuations could adjust certainly on the ones that were based on you know, a lot of optimism about the future without real earnings. I think there's been a major adjustment. And you know, good pe is tied to discounted cash flows, so it shouldn't have you know, change very much, but the kind

of venturing stuff can really change. How do you watch volatility in the public markets when you look at you know, the SMP five being in a fair market right now being in correction now, Yeah, does it feel pretty good to be in private equity. Well, you know, I'm a huge fan of the private equity class, partly because we don't have all the volatility of the public market. But

you can't ignore it. Well, you know, if you were trying to take a company public, had clearly matters to you, because the window to go public, if you plan, that's pretty well shut. On the other hand, as a private equity firm who's mature, you're always selling companies and always buying companies, so your opportunities for new acquisitions are better than ever. And there you know, it creates a lot of opportunities on the ice side as well, So you

kind of welcome the volatility here. I don't welcome the volatility. I'm glad we're not in the volatility. And all I'm saying is if valuations get lower, it affects you somewhat on what you're selling and makes your life somewhat better on what you're buying. So we're not a one directional, you know field, because we're always buying and selling at

the same time. Stef you wrote a really interesting article for the Harvard Business Review, and it really um you know, I think for a long time, private equity had kind of a bit of a bad rap in terms of buying selling, you know, getting rid of the costs and turn to get around quickly. I mean that was like about a ten year runway with with a particular company that I think you took from about a half a billion valuation too. Was it more than nine or ten

when you're seven? Yeah, pretty significan Again, what is it about? What is it about the significance of private markets in today's environment and having that long runway? Yeah, Well I wrote the article because I've been in private equity for over forty years. It's really evolved from using a lot of leverage with a few investment bankers to really being a form of business. So my own firm has two hundred people at headquarters. We employ over sixty thou in

the field. And what private equity really means is you can be like a small shareholder based like a family business, where you're close to the company, your hands on, but it's all merit based, and you can also bring in all the skills of a big corporation actively you're in it. So it's the combination of like what the world was

before the railroads came around in the eighteen hundreds. Uh, you know, then everything became professionalized and the shareholders were kind of absent to bringing the best of hands on shareholders plus professional skills together, and it's adding value in all sorts of ways. I mean, the company you're talking about that at the article about started as a very sleepily sleepy six million dollar software business ended up being worth over eight billion. And it wasn't because we had

one lucky break. It was just change after change after change to continually make it better in every way. So it's really hands on management of private businesses. So that what tells you it's the outpoint? Is it duration or is it the maturation of the business. What is it? Well, you come to a certain you know, our LPs expect money back at certain times or not, but it sounds like they're more patient, well because we had gotten them a lot of money back along the way as well,

So things are different. And on this particular one, Panasonic had bought and they were ready to buy the rest and otherwise we would have probably held it longer and kept it, you know, because it had great I think I hope Panasonic does great with it. We didn't sell it because we didn't like it, we sold it because you know it was ready to go. But so it's always a judgment question. But the key is to take

a safe business and continually add value. So my firm is called New Mountain because we're trying to build new mountains and the areas where we invest. Steve Um, I'm wondering about allocations to private equity right now. Given the success of private equity returns over the last decade plus, are we going to start seeing institutional investors LPs increase their allocations to private equity. Well, private equity has been

you know it has. It has been the highest returning asset class for a long time, and it's less volatile and it's a good diversifier. So even if public markets were better in a year, it's nice to not have everything on the Fang stocks or everything on a few public stocks. So the the in general, the institutions are putting more money into private equity as as we go.

But it's hard in an environment like this if your public equities take a hit and you look at your asset allocation and suddenly private equity has this outside allocation because the valuation hasn't dropped. The same. Well that you're exactly right. That's called the denominator problem in my business, where they want to give to you, but there are a percentage of a shrinking pie and they say, we

wish we could and we can't. So that it does make it does portend something challenging for this year when it comes to raising capital, Well it might, but that over time they have the chance to go back and get somewhat more allocated. I mean a typical institution might be eight or ten percent of their assets and you know, T bills have been issuing, you know, the fixed income has been terrible for them. Everything other than you know, public's were good until this year. Private has continued to

be very good. So they'll have to go back and get somewhat more allocated. We're still just a small percentage of their buckets. So okay, So opportunities for you in this environment which we're trying to figure out, does it ultimately where is it a higher rate environments, lower growth environment, a stagflationary environment? So is that more opportunities? Like how how do you find the value there? Well, we've always been set up to be as a cliptical as possible,

so I I do worry about stagflation. I think we could be in for very choppy waters. The strategies that could work under stagflation, which we're all doing, is one is taking a good business in a US to have industry and making the business better. So if you really make a business better, you create value to floating rate debt is good. We have a very large credit arm that loans lens floating so as rates, dad's better than ever.

And we also have a strategy where we lease the building back to people on a net lease and you have rent escalators that cover inflation and the building goes up in value. So though those are the three ways we're playing it, we also have a fund that can buy minority interests, so if someone has to delever their balance, we could give them equity to de lever. But what you don't want to do is just, you know, expect good economic conditions, because inflation seems real, supply chain constraints

seem real. I mean, the consumer could slow down. So I'm not optimistic about you're not optimistic. I mean I think we could be in for very choppy water. So what does that mean specifically and for how long? In your view? Well, I don't know. You know, I grew up. I grew up in the seventies and the stock market and I started my job in Goldman and the interest rates were the highest in history of the day before

I started. We're key tenure Tebill World, Treasures World. The stock market was lower in eighty one than it was in sixty eight. So I mean, it doesn't necessarily fix in a month. I mean it could be. So the key is build businesses, add value and then you know floating rate and inflation protection. So let me ask you, because we add nauseams, you know, talk about the FED,

but you know a minute by minute. And I'm not saying it's not important, but I do wonder for someone like yourself, where you're making these investment decisions, how how obviously that affects the macro and maybe some of the deals, But how important is it? I mean for us, I mean if the point to I mean, if the basis points are a hundred basis points higher, interests really doesn't matter.

I mean, we're we're looking at what can we do with the business to take earnings from one level to another by adding technology, adding international markets, changing the business, and that's kind of background. Okay, so even though things might be choppy, you don't think it's going to be toppy for years. That might affect the growth pattern or trajectory. No, I think it affects different industries differently. So if you're a fashion retail or, you may get hit very bad.

If you're upgrading the electric system in America, which we're doing, or you're providing life science supplies, which we do, or you're doing digital transformations, those industries should do well no matter what. And then if you can improve those businesses, you're in a good industry and you really have built the business. That's an effective air strategy. Okay, okay, thirty seconds. I'm doing a panel on E s G later and capital. Yeah, we even talked once about E s G. How important

is the S G t LPs right now? Exceptionally we've had a social dash boards and so eight. One of the reasons they may be head of the you know, the so called industry, is because we've been a leader on that. We've added or created over sixty thousand jobs and net of any job losses, seventy four billion of gains created, never had a bankruptcy, never miss an interest payment, and the whole private equity field is very much on the forefront of formal e s G. You reporting because

their LPs wanted, and we're extremely transparent about that. As an industry. Do you think we do move aggressively in terms of regulars giving us so that we can understand e g. S G. Investment Apple to Apple? Well, I I really believe the LPs absolutely understand every firm down to who works there by name, in a way that they can't in a giant public company. So I think, you know, I don't know that the regulators need to

do what they're trying to do. I don't think it's really driven by the LPs insisting on It does start to seem like there might be more change from within rather than change from outside. If you have consortions towards sort of banning together to come up with his standardized metric to measure esty and impact. Yeah, I mean, you know, there's the LPs are very big and sophisticated institutions. They're getting bigger all the time, and there are clients and

we try to keep them happy and do a good JOPP. Plus, we want our kids to be proud of what we do for Livings. That's Steve Klinsky. He's the founder and CEO of the private equity firm New Mountain Capital. And that rubs up the first hour of the weekend edition, a special edition of Bloomberg Business Week from Bloomberg Radio. We were live at the Milk and Institute Global Conference. I'm Carol Masso and I'm Tim Stanovac. Coming up in

our next hour. Much more from Milk in two with the who's who in private market and publicly traded company's gonna hear from my panel with the chief executives of Loews, Kroger, Stitch Fix and Authentic Brands. And a credit market breakdown with Crescent Capital Groups, Mark at A Nazio. Plus geopolitics and what Russia's invasion of Ukraine means for investors who'll get into that with star Wars Capital Group CEO Barry Sternlock coming up next, though the startup landscape with interest

rates on the rise. This is Bloomberg. This is Bloomberg Business Week inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news as it happened. Sloomberg Business Week with Cairol Messier and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio Plenty ahead in our second hour of the weekend edition of Bloomberg Business Week, including a CEO roundtable from

the Milk and Institute Global Conference. This is a special show. He really is a look at how companies are adapting to the changing taste of American consumers. You've spoke with the heads of Loews, Kroger, stitch Fix and more. Plus Russia's war in Ukraine and China's ongoing COVID struggles will continue to ripple through global financial markets where Starward Capitals Barry Sterlick thinks investors can find a safe haven. First up this hour, look at the environment for investing in

global startups right now. Sheila Patel is a vice chairman of the global multi stage investment firm b Capital, formerly the chairman of Goldman Sachs Asset Management. She joined us at Milkin just ahead of the federal reserves half point rate hike this past week. You get so many different viewpoints at a conference like this, and so many international viewpoints. It's great to see people back from all around the world,

and their perspectives are different. I think you get an insight into technologies that people care about, into areas where they plan to invest, places of innovation. But you also get an under current of what people are really afraid of in the markets, what they're concerned about, um, the perspective on inflation. So answer those questions, what are people afraid about? So, you know, geopolitics, ongoing uncertainty, hard to figure out what what impact that has in so many dynamics.

It's it's of course the incredible loss of life and the tragedy that we see unfolding. It's the follow on tragedies in terms of thinking about global food supply and and and the dislocation of people. And then it's of course the macro implications of that. At the same time you see the FED potentially raising rates, you see inflation and the influence that that's had on on the consumer and on markets. So there's a lot of cross currents. And and as usual, we're in May, so nobody's feeling

too great about the markets today. Well, I'm wondering if all of those challenges, those head winds that you brought up. Because you invest in startups, they create opportunities for companies that see the challenges of today or see the challenges that are around the corner, and they say, we've got a new way to help get us out of these look.

I think that's what makes it so exciting to be in this space and one of the reasons it after having been with Goldman for so many years, I moved into mentor and growth because I see so much hope for the future and technology. We focus on areas like healthcare, UM enterprise climate tech is a new additional, you know, focus area for US, um AI fintech, and you see the ways in which it's helping right the ways in

which it can make change. UM mental health has been a big area of focus for us in the connection with mental health and digital health and access. So whether you think about a company like silver Cloud UM where where we actually had a monetization events because of how successful they've been, or Uplift, a recent investment that really provides a network and access point for psychiatrists and psychologists and access UM for people in a in a new

unique way to those support networks UM. I think we see real potential there for innovation in healthcare and digital access to medicine. In UM creation of new their pays in new growth in that you think about enterprise, you don't necessarily think about help in the world. But enterprise actually helps companies become more efficient and that's that's a really good thing when you're in a challenging market environment

as well, and so on and on. I think you look through what's going on in technology, and what we have to try to do is dislodge this idea that tech is some monolith and it's all the same. There's so many different facets of tech and so many different ways in which it can it can help us in challenging times where if you had to pick one area in terms of whether it's you know, an E. S

G or green aspect, or whether it's healthcare. Like I'm hearing a lot about healthcare again, and maybe it just because we came out the pandemic and realize, right, there's there's ways we can do it, whether it's telemedicine or or how we need to increase access. Is there one area in particular where you feel like you're committing a lot more investments at this point or finding opportunities to Yeah, Look, I think all the areas I mentioned, I'm kind of

passionate about. But I would say, you know, healthcare is a great example. I'm pretty passionate about that, having been a beneficiary of of creative medicine myself and and you know, seeing the benefits that can bring. And I think the pandemic is a good is a good indicator, an example of change in an accelerated pace. Nobody was seeing their doctor digitally, you know, virtually, uh, three years ago. Now people almost crave it, crave that kind of access, including

all different generations. And that generational change is huge because getting the older generations can necessarily want to use that would have taken ten years or never. Instead it's now normalized. Similarly, fintech,

most people think fintech finance companies not benefiting people. Actually ease of payments, reducing friction um particularly think about places like India where they were twenty middlemen and now you can reduce that to no whittle men and really get people, you know, the money that they deserve and allow them to spend it the way they need to for their families. There's there's a lot of innovation out there that can

do good. You mentioned some of the challenge is that the MAC record we're seeing in the macro economic environment, I'm wondering how these are manifesting in the individual companies that you support. In the last minute that we have, how do you take an approach at be Capital to sort of help the challenges that these companies face uh with when it comes to talent, when it comes to technology, when it comes to other obstacles that they're facing. Well,

I think there's two parts. One is we always have a focus, even in the initial stages of investment, in evaluating unit economics, cash flows, really working with companies that get it in terms of how performance has to look

in good and bad. But the second pieces, we're very committed and active in our investments and BCG is our strategic partner, so our companies are very interested in BCG's work on strategic pricing models, potential introductions to new clients, thinking about ways to grow that fit the economy that we're living in today, and that's a huge benefit we

offer to our invested portfolio companies. So when you make the investment, do you think it will be a longer runway like the bringing them to public because you can because there's so much private market just quickly. Absolutely, I think there's plenty of ways to grow. Strategic exits and partnerships with corporates is another way that companies have potential monetization value that is not just related to the public markets. That was Sheli Pittel, vice chairman over at b Capital.

You're listening to Bloomberg Business Week. Coming up Barry sternlickt of Starwood Capital, well known to the Bloomberg audience. He warns billions of dollars remain at stake for global investors as Russia's war in Ukraine intensifies. This is Bloomberg. This is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes.

Tim Stenovian from Bloomberg Radio. Geopolitics, supply, chains and spacks, all topics we covered in depth with our next guest from the Milk and Institute Global Conference this past week. We're talking about Barry stern Licht, the chairman and CEO of Starwood Capital Group, also the founder of the thirty year old private investment firm that oversees a hundred and twenty billion dollars in assets. The firm's primary focus is

on global real estate. Some of those holdings are in europe investments that are being jeopardized by Russia's ongoing war in Ukraine. I'm not even sure Putin knows what his endgame is, so, you know, and and it's not a zero possibility that he escalates this, right because that's where people do desperate things. And it's also like he's not exactly be welcomed into Western society anytime soon. So you know, Russia's chosen a direction which is shocking in the modern age.

I think a lot of people are just astonished that U seeing civilians mass occurred and and the West doesn't know what to do. If there were in nuclear um halo over this whole conversation, they would go in and help. But obviously the West is death and the Europeans having fought two World wars on their on their territories. You know, I was over in Germany just two weeks ago, and Americans are focused on the NFL draft and and the NBA playoffs, and and the Germans are nervous. I mean,

everyone's slightly know. The closer you get to the border, the more nervous you are. And Poland separates them. In the Baltics, we've investments in the Nordics and in Norway and Finland. We're actually selling some stuff we have in Finland right now, so it's um, it's definitely a cloud. It's a sort of a big storm cloud on the investing horizon. Whatever you're investing in. You know, you wake up in the morning and they've done something crazy. You're nervous.

So nervousness needs the equity markets decline. Probably we've slowed done our pace of investing. We invested sixteen billion dollars in property globally last year and that's just equity, so probably was thirty or fourty billion dollars total. And we've we've we're still cherry picking, but it's it's just more cautious and cautiousness is what's going to cause the economy too slow across the board. There's no doubt that it was slow. Okay, you said your cherry picking. What are

the opportunities that you're finding right now? You know, one of the beauties of the public markets, as they screw things up, they go to excess company's way over net asset value and at deep discounts to asset guys. So we try to find that things where we think they're wrong. And uh, we've taken private a company in Japan that owned a bunch of office buildings that we thought the markets had wrong. We've done the same on two transactions in the UK a UH. In the US, um less

take privates right now. Um. Although because the costs of financing has suddenly gotten quite expensive, not just the specter of rates. You know, a lot of real estate players like US black Stone, UM KKR, areas, Oh Tree, we floated debt. We bought properties with floating debt and we'd protect ourselves. The banks required us to buy caps so

that we wouldn't have too much exposure to hire interest rates. UM. Those it's a little expensive right now and um and and obviously interest rates have moved up, but also spreads have moved out, So the credit markets are telling you that things are not normal. I always think the bond

guys are smarter than the equity guys. With the equity guys have a lot of evolved, very emotional, but the credit guys just look at credit and we look at the world situation and like triple as in the real estate world have gapped out from sort of eight to one six seventy so and everything prices off the triple A. So it turns out it costs of financing to acquire anything.

And it's the same as true in the in the private equity world has increased and the banks actually are you know, the stocks are down and they're a little less aggressive on lending. They're also feeling a little bit like the they're a little full, so you know, it's not nervous, both full and nervous. And you know, like things like we're the largest owner of apartments in the United States. You have a d and fifteen thousand units,

both affordable and market rate housing. It's been an unbelievable twelve months, it's really and rents are still galloping ahead, and I'm trying to understand the interplay between inflation and interest rates. Instruments are rising. We can offset a big jump in rates if we have big jumping rents. So you're having that jump. The question is how long will

it last? And and that's where inflation comes in, because normally you'd say it's going to top out, and you're seeing rental growth double digits in almost every major market in the United States, every minor markets, all apartment rents, So it's kind of and and yet you know it's um yields on property or holding fairly steady even though interest rates have gone up. But that feels like that might not hold. I mean, I think the specter of the FED tightening, and the FED showed up so late

to this game. And we still have a lot of spending coming, and and the infrastructure bill, they haven't spent any money. There's at one point two trillion dollars the States haven't even spent. The foreigner a billion they were getting from the American Recovery Act. Some of it hasn't even allocated yet. So I was with the mayor of Miami the other day and he's like, he's getting a billion dollars from the government, can do whatever he wants

with it. That's an inflationary though. I mean, it's like and then China shut down, like it was bad, but it was open. Now they closed, And I can't even imagine these parts and shortages we're gonna have going for this is I see some people say inflation is topping out. The supply chain isn't gonna be impacted by interest rates, right, It's really he can he can cause a slowdown in a way in demand and they'll be layoffs and wage pressure.

That's the wrong thing of inflation that you're trying to doesn't open ports, it doesn't make us more efficient, and it doesn't open the logistics properties that are full and they can't stop sitting the ocean because I can't get into the port and it can't get in a wahouse. So so how should so even though you're not necessarily cautiously optimistic, maybe you're more cautious. I'm cautious right now. What are some takeaways for our investor audience and how

they should be thinking about where they're allocating. I think I think property, you know, I used to say that when my favorite as a class because their liquid you can get out of them so easily. But I think property is a great place to hide. I mean, even now when prices are so high. Well, it depends on

what you're what we're you're hiding, you know? Um, yes, in general, but why inflation is making replacement costs enormously challenging, and you it's probably up the cost of construction, so rents have to rise in order to justify new construction. Plus a lot of new product probably won't get built because it's just instead of taking to two years, is

gonna take three or four years. So property is a short duration assets apartments, hotels, you can mark the rents to market inflation every day, and so you know, I kind of I think it's I think it's a safe place to hide. You know, the mortgage reads we have soured property trust. It pays an eight percent dividend. We'll we'll be paying that a percent of it as far as I can see, as far as I could tell um and right that you could. Well, we have a lot of property games in the book. So you know

we have one last We've got a minute left room. Yeah, could bunch of backs, Yeah, what are you? What are you gonna do with them? I think the two I did our real companies, and I'm long from investors, so I haven't sold a share either one of them. Kind of invalid three D kind of crushing it. I mean, they the revenues have doubled, and since we did it and they beta's quadrupled. The market is throwing the good stuff out with the baby. With the bathwater. We'll sip

through all this. Spacks are going to be the good companies will either figure out how to get back or they'll sell them, they'll be acquired and the bad stuff will go to the way the Dodo bird. There's some really stupid deals that were done, many of which I passed on they went public. I was looking at one the other day. It's a n cents and went probably

a ten. I couldn't believe it. And it was these were name sponsors that basically threw trash into the into the public markets, trying to get out of deals in a moment in time, and you know there but I was talking to Fellow about d D. D D went public at fourteen. It's a dollar e D. It's not as back. It wasn't as back. Yeah, it wasn't a spack regulatory Oscar help Care thirty nine, thirty six, Goldman Sacks led I p O. It's now seven. So the SparcS have gotten a little bit of a bad name.

I mean there were some good companies done, but you know, the market market is everything to excess. It did too many sparks and now it's taking them all to zero practically, so they'll they'll be it'll be great opportunities. That's very stern. Like the chairman and CEO also the founder of Starwood Capital Group still to come on Bloomberg Business Week, Crescent Capital Group's Mark at A Nazio on credit markets and the one area where Americans may finally see relief from inflation.

This is Bloomberg Broadcasting from the financial capital of the world, Bloomberg eleven Frio in New York to Washington, d C. Bloomberg to Boston, Bloomberg one oh six one to San Francisco, Bloomberg nine sixty to the country Sirius XM Chado one nineteen and around the globe the Bloomberg Business app and Bloomberg Radio dot Com. This is Bloomberg Business Week. Well, this past week at the annual Milken Institute Global Conference, we had the chance to hit practically every corner of

global finance, including the private credit market. Caroline I caught up with Mark out A Nazio. He's co founder and managing partner at Crescent Capital Group, and he says a lot has changed in his industry since the two thousand eight financial crisis. I would say, a lot of what we used to, you know, think is, you know, in

our little corner of the world. If a company had good numbers in five when I worked for Mike from for Milkin, As he often says, there were ten thousands who say they worked from a hundred of us actually did work directly from You look at that company, and you didn't worry about whether, you know, China was going to have an accommodate of credit policy and you know, fiscal policy, excuse me, and and then maybe that would spur global growth and which would then help us now

looking forward, so yeah, now you have to look at at everything and with the you know, one world, and uh, you know, there's a lot of there's a lot of reasons to have inflation, starting with you know, energy prices and cost of food, especially in Europe. So you know that all sort of ripples through. Uh, interest rates tend

to work their magic in both directions. But thirty your mortgage at five and a half percent, at some point people are gonna stop buying houses, right because most folks to buy houses are trying to lock in a thirty you know, thirty year mortgage. So we'll see some relief in the housing market. We'll see that inflation come down.

You would, you would think so, Although the question is when saying the real estate investors are going to say, oh, you know, inflation is great for housing prices next two years, and they were all saying next two years in the real estate it's going to be good for them, and it may be, and especially in markets like California where there's usually lag anyway, so you know, we'll we'll see when all this comes to bear, and there may be

some some offsetting moves by the Fed. And also you know in Europe with fiscal policy, and we talked about China that you know it's gonna be it's gonna be a little bit of an ebb and flow. I think, So where's the opportunity for you or how much more

difficult is it? You know? I remember I was in a credit committee my old firm before we spend presting out of TCW into two thousand and seven, and all of the assembled geniuses, including me, and that's the tongue of Jake where where you know noted the idea was sunny Scott. I remember very clearly, you know, bright sunshine, no clouds anywhere. This was in June of oh seven.

Nothing is gonna happen right, exactly wrong. So you know I talked about it being the golden age of private credit when knows I'm bloomberg in October, and there's still a huge amount of reason to see that. You know, there's two trillion dollars of dry powder in private equity. You're gonna need a multiple of that to finance. We only have a fraction of that set up now in private credits. So the supply demand characteristics are terrific. You have floating rates, so as rates go up, our investors

yields and returns go up. We don't you know, you mark quarterly, you don't more daily, so that that's favorable in any event, is going to keep ratcheting up. And uh, you know, frankly, to this point, you have only good news through quarterline. We have two private companies in our portfolio. Virtually everyone is reporting year over year, you know, gained some as high as fifty a year over year. Are

they as positive about the next year? So far, they are passing on for the most case, you know, inflationary costs in terms of price increases. They have learned how to handle supply chain disruption, and they're still struggling with employment and labor costs. So that's you know, but if you can run sensitivity analysis when you're lending it four

to six times. Somebody's paying twelve to twenty times for a company, and you have a huge amount of cash flow coverage even with you know, interest rates spike or quill at three three basis points and economics you know, I should say, company by company downturn and cash for we still have plenty of interest covers. So what what? So then the question, well, what could go wrong? We have? What we have to do as investors is you know, look around the corner and see where you know, what's lurking?

And god's my question, it's not but it's not maybe the same for every company, right in terms of industries, But what what could go on a macro level wrong? Well, obviously the situation in the Ukraine is very troubling, right,

and you have an errant missile which worries me. Doesn't have to even be a nuclear one, you know, it could just be a missile that lands in an adjacent country and and you have you have issues, and that's that's probably my number one concerned because that's completely exciting inside of anybody's hands. And like right now, if you look at at our our business, which example, just looking at what we do and not you know what a

stock picker would look at. You know, we we have exactly I think one company under those two hundreds that has a data center in the Ukraine and and most of our European you know, investments are in developed countries obviously almost back from low right in the US. So there's not that, you know, and I think that you know, some of the challenges in the world is it It feels like it's over there, right, and and it's not affecting us. I mean, you know, wealth creation has been astronomical,

maybe the greatest it's been in history. Yeah, we talked about rising house prices and all that, but you know, there's acute housing shortages and people who need to have a decent place to live can't afford to buy a house. That's that's a big problem. That was Mark at An Asio co founder and a managing partner at Crescent Capitol Group,

also chairman and principal owner of the Milwaukee Brewery. All right, you're listening to Bloomberg Business Week coming up, retails, new reality, my Palem, discussion with the CEOs of Low's, Kroger, Stitch Fix, and more. This is Bloomberg. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovich from Bloomberg Radio. Since the middle of we've seen the

pandemic change consumer behavior and spur digital commerce growth globally. Now, retailers are trying to customize the shopping experience and to better manage their supply chains and inventory. On Monday, at the Milken Institute Global Conference, Carol hosted a panel called

Retails New Reality, Technology, Innovation and Consumer Behavior. It was an all star lineup taking part where Low CEO Marvin Ellison, Kruger CEO Rodney McMullen, Authentic Brand CEO Jamie Salter, Stitch Fix CEO Elizabeth Spaulding, and Wayfair's new Chief Technology Officer Fiona tan I. Began by asking the Low CEO about the customers spending outlook. With the price of goods and

interest rates on the rise. In the US, roughly fifty of the homes are over forty years old, and two thirds of our business is driven in repair and maintenance. So the age of homes, the home price appreciation, and the availability or lackter of of new home construction will he drives demand and so although there are a lot of other macro factors that we are concerned about, whether

it's inflation or interest rates. When we look at the correlation between our business UH and and key macro indicators is age of homes, price of homes, UH, supply and demand of homes and the consumer confidence based on that because that will drive their investments. All right, So optimistic, optimistic, optimistic, but cautiously optimistic. I heard that a lot. How about for you, Rodney, I would definitely would agree with the same thing. But people are shopping and they're cooking at

home still, I know we are. Yeah, it's one of the things for us. People have learned how to cook at home because of COVID and people that had no idea how to cook. And what the customers telling us is they like it. And years ago Columbia University put together a research paper where when families eat as a family, they stay connected as a family, the kids get in less trouble. And what we're finding is people actually enjoyed that.

And one of the things that we work hard on is how do you keep inspiring people on trying to find new ideas. And we actually use our technology and some of our internal AI work in terms of suggesting things that you might like. If you like this, you'll probably like this, and it works and it works. We also do it from a health standpoint. But all those things you know, we want. When you think food, you think Kroger and uh, you know, we think people will

go to the app. Sometimes it will be a store, sometimes it will be pick up, sometimes it will be delivery, and we just want to make it easy on somebody to have an incredibly great meal as a family and or with family and friends, and do ever how much work they want to do. So if they want to go from scratch, they can do that, or if they want to get a meal kit, they can do that where they do a little bit of the work. But the surgery saw on people shopping and cooking at home

because I had to try the pandemic. It's staying. Absolutely everything that we're seeing it's staying. The only trend change is some people that were online has moved back to the store. But it's almost a that's still shopping with us within our infrastructure. Elizabeth, I want to bring you in at this juncture. UM tell me about you. You also put out a physical quarter for the second what are you raise some guidance better than guidance? UM? How

the environment feel? You know, I think we've just seen a real fundamental shift in how consumers shop. And I think for stitch Fix, you know, our mission is to change the way the world gets dressed every day to be their most confident self. And during COVID UM, the

model of stitch Fix became more resonant than ever. We solve these three really fundamental issues that people have around shopping, discovery, fit and human relationships and really the what and the how of people shopping during COVID change, and we think really permanently, you know, we saw consumers asking us, you know, I'm like in I'm on zoom calls, I'm working from home, I don't have comfy clothes, and so we saw like a ten x rise and that of course at the

beginning of COVID. Now we're seeing people like I have no idea what to where when I go back to the office. And so I think what we're hearing is just a shift to comfort, a shift to versatility UM. And then clients really valuing the fact that we can provide and kind of cut through the noise of online shopping and just shopping in general, like such a big fundamental problem is you know, finding style that resonates and

actually clothes that fit me. And so really our focus has been on adapting to those we preferences, but making it easier to access to how and really the original model of stitch Fix, you know, it's all powered by data science and our styling community. It started off sending our clients five items at a time sight up, seeing them keeping what they love, sending back what they didn't. And now we've been able to really lean into fulfilling

even more of their wardrobe given more than ever. Trying close out in the comfort of your own home became more residant than ever during these last two years, and we really think that behavior is here to stay. Jamie, come on in on it. What are you seeing? How does it feel? I would say that the cons you cautiously optimistic too. I think the consumer is changing a lot um dress clothes for sure, for men are very hot right now. Do I think it's here to stay?

I don't. I do think that they will sort of come back to, you know, wearing those comfany clothes. But as we see people go back to work, they are getting out of their sweatpants. Um, the younger generation does not want to go back to work. So that is somewhat of a problem of what's going on right now in America is the younger generation does not want to go back to work. The older generation does want to go back to work. So we are seeing a shift

of what people do where based on really their age demographic. Fiana, what are you guys seeing because I know one of the big plays um we heard from Morvin is just a focus on the home. Uh. And you guys certainly saw it during the pandemic, Yes, for sure, and as Marvin said, write a lot of um work going on at home at with the home and how we're outfitting the home. And so what we saw was in the year, for sure, a lot of customers coming in for the first time and a lot of them have come back,

so they've become repeat customers. And it's a lot of it's going to be for our category, especially how do we help out customers have the largest selection, but so very much so to find what they're looking for because it's a hard category. If you think about it, is like hard. You're mostly unbranded and and very style conscious, very emotional and how do we help people discover and find what they want when you're a digital e commerce company.

And so that's the part around. A lot of the strategy was very similar, right, It's very long term focused on you know, getting getting items to customers very quickly, giving them a large selection, help with them find it, and then being confident that what they bought is what they expected. Again, you know, given the category that we're in, it's very expensive to ship, it's you know, possible of damages and stuff, and we want to make sure also

that they know what they're getting, um excite unseen. So that's something that we've done a lot of investment and a lot of it's pretty similar to what you do. It such fixed but it's like how do you how do you understand the products that we're selling and understand the customer and kind of help them with the best fit. Does it feel like we're even close to pre pandemic? Yes, it depends on It depends on the category, depends on

the business function. As an example, from an online perspective, it's still it feels like you're getting closer to pre pandemic levels, but but you still have an increase in demand then you had pre pandemic, If that makes any sense, I mean, because you've you've witnessed so many people who were reluctant to use digital commerce for things as simple as getting groceries delivered, or getting a prescription delivered, or using a locker to buy online and pick up in

the store, or using curbside. Now that they became comfortable with those types of transactions, those transactions are still relatively on the rise, and there are a larger percent of the digital commerce, at least for my company, that it was before the pandemic. So I think it just depends. Yeah, well, I was just going to try and say, I think the PrePost I don't think there's any going back to

where we were before. And I just think there are all these fundamental changes that have occurred in consumer preferences where they're spending your time. We saw during that first month in lockdown of people who had never shop for clothes online shopped online so kind of broke through this barrier that I think, you know, our category had been just really sticky because a lot of it requires um, you know, so much of e commerce has historically been

search based shopping. You know, people through their whole product catalog online and then we as consumers have to do all the work to filter, scroll, figure out what works for us. And if you think about the last few years, you know, we have more requests than ever people referencing things they've seen on TikTok, and if you think about that channel of recommendation, it's serendipitous discovery. And so we really view ourselves as a model that is playing to

that strength of recommendation and relevance. And more than ever, I think consumers want to replicate that human relationship online and remove all that noise and clutter where it's like will these glows fit me? And does it reflect my style? And so I just I don't think the behavior will you know, what's interesting is like what we're shopping for

has change. But also I don't I don't think people want to go back and spend the time that they were spending the same way that they were spending in the past in terms of you know, trying stuff and

addressing room. I just think that behavior and really shifted, and of course there may be moments you want to do that, but I think we're not going back to the behavior we had back well, Jamie, and I thought your team shared with me that people are buying, maybe spending maybe more, but they they're not spending a lot of time online like they just want to be done

and move on. Well, well, we're seeing is a lot of people go online, they pick it out, they go to the mall, they go to the store, they buy, They go to the store to buy, they go to the store to buy. So we're seeing physical actually outpacing dot com right now when you compare to twenty, for sure, we're we're beating the levels, uh physically versus digitally. If you compare to nineteen, it's a little bit different, but definitely people are going back into shopping, but they are

more precise. They know what they're buying. They come in the store, they don't browse. They come in they know exactly what they want to get. They go right to the section, they pick it out, they go try it on, sometimes sometimes they don't, and they buy it. So you're seeing less traffic, more revenue. That was Authentic Brand CEO Jamie Salter. Part of Carol's panel discussion included Elizabeth Spalding of stitch Fix, Kroger CEO Rodney McMullan, Lows CEO Marvin Ellison,

and Wayfair CTO Fionatan. You can find the full discussion at Milken Institute dot org. And that wraps up the weekend edition of Bloomberg Business Week from Bloomberg Radio. Thanks so much for joining us. I'm Carol Masser and I'm Tim Stanobek. Be sure to tune into Bloomberg Business Week Radio Monday through Friday. It starts at two pm Wall Street Time on Bloomberg Radio. You can also watch your daily broadcast on YouTube. Just search Bloomberg Global News and

check out our Bloomberg Business Week podcast. You can find it at Bloomberg dot com, Apple, or wherever you get your podcasts. Bloomberg Business Week is available on newsstands now, at Bloomberg dot com and on the Bloomberg Terminal. You can also see me on Bloomberg Quick Take, available on Bloomberg dot com, slash qt, and streaming platforms like Roku, Apple TV, Samsung TV, and more. And check out the Milken platform because you can catch all of our panels

that we did there. Yeah, Milken Institute dot org. This is Bloomberg