Bloomberg Businessweek Weekend - November 1st, 2024

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This is Bloomberg business Week inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.

Hi, everyone, welcome to the weekend edition of Bloomberg Business Week. We are just a few days out from election day in the US, and the presidential contest between Donald Trump and Kamala Harris could not be any closer. But it's not just the election that we're focused on. We're in the midst of earning season. In this past week, five of the most valuable companies in the S and P

You could argue about whether the move in the market has influenced what people are expecting, but I think it's fairly clear that most Wall Street, most financial markets are now working on the assumption that a Trump victory is about a two in three shot, so clearly more likely than a Harris victory, but not something anybody would want to bet their entire life savings on, because the markets still think that there's a one time in every three Kamala Harris in the election.

But that's roughly where we are.

That means that that's the huge difference this time compared to Donald Trump's first electoral victory assumeing he's going to get a second eight years ago, was that at that time it was generally regarded as highly unlikely, depending on which prediction market you looked at. In fact, it was not as big a surprise as some people remember it

John, One thing I first want to get kind of where we started. I mean, the financial markets in guessing presidential election outcomes, as you said, kind of the predictive market last time around for Donald Trump's first term. I mean, they got it wrong. They didn't expect them to get it right, and so I guess I don't know how you know, someone like yourself, someone like a lot of us who've seen market cycles and election cycles, you know, are we not wise to do the cause and effect

I mean, investors are usually pretty smart because they've got money on the line and because it matters. Generally speaking, most of the time, the market is pretty darn difficult to beat. That said, markets do overshoot. They always do that. It's part of the physics of markets.

At this point.

And it's precisely because it's difficult to talk in these terms because so many of us do care so much about who is going to win this election. At this point, I'm inclined to agree that I think Donald Trump is more likely to win than Kamala Harris. And I also think at the current odds, I would bet on Kamala Harris. Why do you say that you only get one hundred You're going to get two hundred percent for your money.

She's gonna triple your money for you. If you put a dollar on her now in the.

Prediction markets, you'll get three dollars back next Wednesday if they manage to call the election.

That wait, wait, so you're not looking into some crystal political crystal ball and making a prediction you're just saying in terms of a bet. It makes more sense.

In terms of a bet in terms of the way people think about the NFL or Baseball these days. Who's going to beat the spread? With the spread I'm currently being offered, I'll take Kamela. If you get what I mean, I get it. And in terms of where I see the bond and stock markets at this moment, I would also be inclined to get ready for a surprise Camela trend, which would be good for bonds and bad for stocks in the short term.

Sonically, talk a little bit about that, because we haven't seen the bond market. Yes, has shifted in the last month, but the stock market has continued to move higher, and it's continued a trend that was kind of interrupted, that was not interrupted, excuse me, despite the fact that these prediction markets seemed to change, John, when you look at the index level.

I'm not sure I agree with that totally. I think you had two months in August and September when they were really quite sharp sell offs on the wave of data, normal economic data. At the beginning of the month, you did get the unemployment data which were surprisingly strong, surprisingly good for stock surprisingly bad for bonds, suggesting that we weren't going to need so many rate cuts after all.

This time, I would.

Argue, I also do remember was it election night when Donald Trump won his first term?

Right?

Didn't we see futures initially sell off and then we saw a turnaround?

It was right, it was.

This was the other fascinating thing was that, yes, for months ahead of that result, anytime it looked as though Trump might somehow win.

There was a huge sell off. Huge There was.

A sell off right.

When on election night, Tokyo and the Asian markets tank on the news, the S and P futures tank on the news. Everything has come back within a matter of hours. The stock market opens up the following morning, once once the cash market opens. So yes, that that was a remarkably swift response. Everybody did what they had been planning to do in reaction to a Trump victory, and then they had time to think, Actually, am I so negative

That was Bloomberg opinion columnist John Authors sticking with the election. It's close, needless to say, and that has some political analysts fueling visions of a sequel to the two thousand election. If you're of a certain age, you know exactly what I'm talking about. When it comes to the state of Florida, the Supreme Court determining the outcome, remember the Hanging Chad.

One of them is legal and one of them is mathematical. The legal issue is that the Supreme Court in recent years has sort of narrowed the scope, narrowed the universe of issues that might actually get there. So there was a case last year, you may recall. It had to do with the power of state legislatures and in particular, whether the Supreme Court could overrule state supreme courts in

And then the second thing is math.

So I am old enough to remember the hanging chads in Bushtigor and that was a fight over five hundred and thirty seven votes in a single state that was going to determine the outcome of the election. And unless you have that sort of dynamic, then there's not the opportunity for the Supreme Court if it wants to get involved, to resolve a single legal issue and effectively resolve the election.

But greg at the same time, it doesn't mean there isn't going to be legal challenges regardless of the outcome here. And you write about that the wow, more than one hundred lawsuits already that are shaping the twin twenty four US presidential election. So just because it won't be decided or I won't say won't, it's unlikely to be decided by the Supreme Court. Doesn't mean the lawyers will not be getting paid.

They will be getting paid, and we'll get some things going to the Supreme Court, much like we did in twenty twenty. If you recall, there were a lot of things that came to the Supreme Court. Now, some of those were pandemic related, particular issues involving voting by mail

The Supreme Court.

What at this point is probably unlikely is one of these election determining fights like versus Gore.

So this is good, we're so concerned or so much has been written about the politicization of the US Supreme Court. So is this a good thing in your view as you watch what may happen and what is expected to be potentially a fair amount of litigation after the election results, depending on the outcome.

I think certainly from the standpoint of the Supreme Court's institutional standing, having them not be involved in the case is a good thing. The Supreme Court took a hit with Bush versus Gore, and of course the Court's been under enormous scrutiny the last few years. You've got the three Trump appointees have joined the court, made it much more conservative, some really far reaching rulings like the abortion one, and then all these ethical scandals that have.

Surrounded the court.

And you know, the court, every justice likes to say, we don't do politics here, we do law. But any decision that they issue that determines or significantly shapes the outcome of the presidential election undoubtedly is going to look political, and that's not the kind of thing they want.

So it raises the question about how the campaigns are dealing with this ahead of time. Given that, and we spoke a couple of weeks ago to reporters who around the big take about the way that you know, Greg, this isn't really how the founders envisioned democracy, working the idea of votes then being litigated or elections being litigated. What are their campaigns doing to prepare for the scenarios here.

Well, certainly they are laying legal groundwork. Yes, there are scores of cases that are out there now that potentially could just be, you know, one step away from the Supreme Court. If it turns out that I'm wrong in one of those cases, is enough to shift the balance here.

Forty eight hours, they already have it at the ready.

So both sides are ready to go in the event we end up with a Supreme Court showdown.

What we won't know is whether that's going to be necessary.

You know, you finish the piece with a quote and forgive me, I'm just trust to you who said this. And what you get into the quote is you need one state being a tipping point and a very narrow margin of victory, and then you need some kind of hook that gets the Supreme Court's attention. And I do think about that, greg, about what would ultimately get the Supreme Court's attention here.

Yeah, and so just going back to to thousand, you mentioned those hanging chads. That was something that got the Supreme Court's attention. It got everybody's attention, this notion that around the state of Florida, it wasn't clear whether these votes were going to counter or not, and it was they were being judged by individuals who didn't have clear standards,

Margin, and so you would need something like that.

And you know, it doesn't necessarily necessarily have to be just one issue, just one hook. It could be a couple of them that add up, but something where there's some dispute where one side can say, hey, those whatever two thousand votes shouldn't have counted, and that might have been enough to shift the balance. That would be the sort of thing where the Supreme Court pretty much would have to get involved.

Hey, one thing I want to ask you. I think we constantly just default to that the litigation would come from the Trump team, But there is potential that there could be litigation on each side, especially if it's super close.

Yes, yeah, absolutely.

I mean if if you know, imagine a world where you know, Donald Trump, Pennsylvania is the key state and Donald Trump wins it by a few hundred votes, absolutely, the Harris campaign will be looking for ways to challenge.

Okay, so how are you how sharp is your pencil in terms of how you're thinking about your job after election day?

Well, you know, as the Supreme Court reporter, I have a little bit of a luxury that almost everything goes through a couple of lower courts beforehand. So you know, some other colleagues will be following cases at the lower court level. That's where it will start to play out, and the Supreme Court probably will stay its hand.

Now.

You know, you mentioned how long bushby Gore went along. You know, that was decided on December the twelfth. The Supreme Court agreed to take that particular case up on December the ninth, so you know, quite a lot had happened between you know, when the last vote was cast on election day and when the Supreme Court jumped in in that case.

And so there's you know.

Different cases, different elections will play out different ways. But it's certainly very very possible that any Supreme Court involvement, should it happen in this election, won't happen for a number of weeks.

Interesting stuff, Like I said, how many times have we said interesting the US election?

Do we talk about Elon Musk at all? And the must giveaways?

Oh?

Go ahead, Greg, Yeah, we should get Greg.

I'm curious how you're thinking about this, you know, from a legal standpoint, from your perch, How are you watching these giveaways?

Well, there are certainly questions about those. I'm not going to pretend like I know what the answer is. But to the extent money is going to people, because they are only to people who have registered to vote, there are questions about whether that is legal. Now that being said, I'm not yet sure how that would translate to something that would determine who wins or who loses in this case, into something that is, you know, Trump v. Harris like,

That was Bloomberg News Supreme Court reporter Greg Store coming up leadership any Time of Crisis with the President and CEO of the Nine to eleven Memorial and Museum. You're listening to Bloomberg Business Week This is Bloomberg.

You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm. Easter Listen on Apple card Play and then brought auto with a Bloomberg Business app or watch us live on YouTube.

All right, Tim, So, you know, we often look at history and past market cycles, past economic cycles to really understand where we are today and where we may be going. It's not a given, as shocks like the Great Financial Crisis and the global pandemic showed us, but the past can help in gaming out the possible scenarios that investors and all of us may be dealing with. And that is something that the nine to eleven Memorial Museum thinks about.

With more with us here in the studio, the President and CEO of the nine to eleven Memorial and Museum, Beth Hellman. The Memorial and museum. It is supported by Michael R. Bloomberg, founder of Bloomberg Philanthropies and at Bloomberg LP.

Yeah, very involved in the nine to eleven memorial and museum.

Beth.

Great to have you here with us. We've kind of been talking about the environment before we got going. Nine to eleven for me always makes me kind of stop and think about where we are in terms of, first of all, what happened that day and how we as Americans began to think very different differently. I think it's safe to say about what national security means and the role of geopolitics in it all. How do you guys continue to think about what security means here for Americans?

For you, Carol and for me, nine to eleven brings up those memories. There were a hundred million Americans born since we're too young to remember nine to eleven for themselves. Yet, there's so many crises upon us now and ahead of us environmental, geopolitical health that will need the kind of leadership that helped us respond to nine to eleven in

For me, it's hard to think about this as being history because it didn't happen to It didn't feel like it happened that long ago. And I think for many of us who were alive and old enough to remember what happened, it's still so vivid and the images are still so vivid in our heads. But how at the museum and at the memorial do you convey what happened that day and what happened after to a generation that didn't live it well.

I think the value of visiting the Memorial in the in person is really unmatched in helping to convey what happened because of the power of the design, of the text, of the images, of the care that went into virtually every decision about how our visitors encounter the memorial and then the museum itself. We have work, though to reach the people who can't come in person to the memorial and to the museum, So we now have programs that

Beth.

We always talk about the Great Financial Crisis and how the role of CFO changed dramatically, right because they had to figure out how to keep companies their company around. Same thing for the global pandemic nine to eleven. In terms of what is needed in leaders today, how has that impacted it?

You hit it.

The security function that we didn't really realize was at the center of what every organizational leader has to reckon with after nine to eleven was certainly on the table, and our Summit on Security brings together private and public sector leaders in the security fields who are working to make sure their employees are safe, their customers, their clients, their communities are safe because without that baseline of knowing what to expect and how you'd respond when something goes wrong,

Well, I was going to ask you, because when you came in, I was like, okay, underachiever. You have a BS in electrical engineering from Duke An MA in history from the University of Pennsylvania, a jd from Yale Law School, PhD in history from Yale University, and I feel like it just gives you what an incredible view on kind of the world and how we look at things. What are the specific skills that you think a leader needs today in order to deal with threats that may come from all different places.

I think that being empathetic and understanding the impact that any crisis has on the people who are experiencing it, Realizing that they're already responding and their contributions have to be recognized. Being able to communicate effectively. It's so important today, you can't communicate too often or too much and then

The thing is, though, is security has changed a lot in terms of what threats are in you know, a quarter of a century. We have this whole element of what foreign states are bad actors could do online targeting, infrastructure, cybersecurity, ransomware and the like. How have you seen the conversations around that shift from those types of targets to perhaps, you know, not a stadium necessarily full of people, right.

It's interesting. One of the speakers in this year's Summit on Security is the NFL head of Security. So, Kathy Lanier, you know, no one who's taking care of people at a stadium thinks they don't have to worry about cybersecurity. They realize there's a connection between the virtual and the real. That means that their preparedness in all of those arenas that you just described as essential to the actual physical security of people. Protecting our water safety, for instance, isn't

Jamie Diamond said something about it being like the most threats in terms of geopolitics that he can remember of his career, and forgive me if I'm not quoting it, you know exactly. I mean, he's Jp Morgan has hired someone on climate, but he's looking at the world and where the threats are coming from is the world? I don't know, how do you how do you assess it?

I think that eternal vigilance is always the lesson of people trying to keep others safe and protect our communities and our nation in the world. I think that we didn't realize how dangerous the world was on September tenth.

We never thought something.

Like that thousand one.

You know, we felt differently on the twelfth, and then we responded since.

You know you were talking about this, Carol, and you brought this up too. We never thought it would happen. I can remember January sixth, twenty twenty one. I think a lot of Americans never thought that would happen. And that type of attack actually happening from within the United States. What do you hear from executives at a time when

I think that a sense of community, creating the kind of culture within an organization that can hold people through difficult times, and also remembering I'm trained as a historian. I think we've seen a lot before. We've forgotten about a lot of what we've seen. The nine to eleven Memorial Museum is committed to making sure we don't forget what happened on nine to eleven, but we have forgotten many of the tremendous challenges and periods of turmoil that

You know, it's interesting I think about that a lot. Bath I think, you know, my dad and his three brothers all thought in World War Two, and I wish they were still around because I'm like, how did I want to pick their brain about the stresses they felt

I think you're right, it's definitely different conditions the when we face these challenges in the past. But we also have a lot more muscle than we used to in terms of During World War Two, it was a time when most women didn't contribute to the economy, to the polity, to the intellectual life of the nation, as well as many other marginalized groups. That's a lot more intellectual firepower. That's a lot more people who can help. It's a

The summit is coming up.

On launches on the twelfth, November twelfth, it launches and we're very excited. Is a set of virtual programs with the top leaders across the public and private sector, the nation's top law enforcement official, the director of the FBI, Christopher Ray. There's just there's a tremendous number of people to learn from and to listen to, the director of an agency, the administrator of an agency created after nine

Is it amazing?

Like you think there was a time when there was no TSA right remember when we also walk right up to the gate.

Did you have to take your shoes off when you were going through airport security?

Meet our families coming right off the plane. It's great stuff and we participate in some of the panels and definitely learn a lot. So thank you so much for joining us, for your support.

Thank you.

That was Beth Hillman, President and CEO of the nine to eleven Memorial and Museum, and a reminder. The Memorial and Museum is supported by Michael R. Bloomberg and Bloomberg Philanthropies. Michael Bloomberg is founder and majority owner of Bloomberg LP, the parent company of Bloomberg Radio. Still ahead on Bloomberg Business Week, a roundup of this week's earnings from me mag seven's heavy hitters. This is Bloomberg.

You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on Apple car Play and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa Play.

Bloomberg eleven thirty Thursday wrapped up the biggest week of tech earnings for the quarter, with names like Amazon, Apple, and Intel reporting after the bell. James Chokmonk, technology analyst at Clockwise Capital, joined Emily GRIFFEO and me right as the results were crossing the terminal. We started off with Amazon. Total third quarter revenue increased eleven percent to one hundred and fifty eight point nine billion dollars. That exceeded estimates.

I think it's just what Andy Jassey has laid out basically about a year ago, that the path of profitability on the retail side of the business will continue and continue in a in a bigger and bigger way as as they achieve the efficiencies across their fulfillment network and and and further optimized for for shorter duration delivery time. So I think you're seeing what you want to see

With the core.

You know, one big theme that we were looking at is whether these big tech companies are seeing the results in their earnings from all of the capex that they've done on AI. What does this Amazon earnings tell us about whether Amazon is able to kind of show all of the investments the fruit of their investments.

Yeah, I haven't gone through it with a fine tooth thoe to change the NSS kind of the returns this quarter, but I think that from a bigger picture perspective, you know, you're not going to see a lot of trickle down to the bottom lane or or accretion to revenue on a short term basis. I think that these are much longer term investment cycles that will bear fruit over a longer term. So you know, that is a question that

So let's let's zoom out a little bit and talk specifically about AWS, because this is the number that you know, everybody cares about. It was pretty amazing to see net sales up nineteen percent year over year. We heard from Alphabet earlier this week in Google Cloud. We also heard from Microsoft Amazon with AWS James, they're the company that started at all. What's their competitive advantage? How do they continue to win business or compete again the second and

Yeah, I think it's going to be more of a rising tide lifts all boat situation. You know, obviously is the number one scale player in the space, and all companies that are looking to the cloud, you know, will utilize them in some capacity. I think that the spend over AI and the shift from analog to digital will only get stronger and get faster, So all three of these companies will benefit. It's really for us, it's around what are the expectations around those growth rates and are

We've spoke to a number of guests about the Mag seven and whether this is a time to hold or to buy the Mag seven or to kind of play tech and AI in different names. What do you think when you're looking at you know, how to play the MAG seven.

We think that it's good to be there.

For us, it's a question of what size, Uh, you know, these companies were our top weight a couple of quarters ago five six seven percent weights in the portfolio, you know, but now we've trimmed those back between two and four and we've all been we've exited Google for example, we no longer hold that, and you know which much smaller

You know.

We're going into value names at the same time, like the commodities. You know, we're not sure that the inflation trade is off the table.

That's interesting. Yeah, I see Alcoa in here.

So yeah, we have our CoA US steel we think could be a real winner.

You know.

We also like gold, you know, so we are you know, we're betting on that. We added General Motors, for example, so I think that that could be a great stock for as we look into twenty twenty five.

That was James Chockmack, technology analyst at Clockwise Capital. Keeping with Tech earnings, we moved now to Intel, which saw share surge after the company gave a revenue forecast slightly above estimates, fueling investor hopes that a turnaround could be in store for the chip maker. For more on the report and the comments from Intel CEO, we spoke with Bloomberg Technology co host ed lud though.

And there's a lot to unpick here. It's not straightforward because in the quarter gone, Intel which was previously like one of the world's leading chip makers, has given us a mixed bag. It's data center chips business did better than expected, but it's PC business, where it has historically been the lead, did worse. The answer to that is customers had inventories and they worked through backlogs, and that the almost three billion dollars of impairment charges that Intel

They're reducing headcount by sixteen five hundred employees. Is that on top of the other headcount productions this year.

This is a confirmation of the previously stated plan for headcount reduction and that the literal update is that the Audit Committee of Intel, a section of its board, has approved that plan. So the number is final sixteen five hundred staff to be cut. And again I go back to the impairment charges. If you look at the adjusted loss per chare in the quarter gone much much wider

Okay, well' speina much more to discuss. The Intel CEO Pat Gelsinger saying in a statement that he intends to keep the company together. Yeah, he says that distinct but better together is the strategy. The context for this is is reporting from earlier this year that said they were exploring a separation of parts of the company.

So it's complicated. And first off, the headlines from Pat Gelsinger were a part of a brief conversation that our colleaguey and King had with him on the phone, and the context is, yes, Intel is a chip company. It offers chip products processors that go into computers and data centers and other business areas, but it also has a manufacturing business, which historically the reason that Intel was so

Ed.

You have to wonder how much patience investors have right now to see this turnaround play out, because, like Tim had mentioned, Intel stock is down almost sixty percent year to date. So what do we know right now about just how urgent the need for the turnaround is. When you think about the share price, I.

Mean, do we have to wait? What Intel told us for the final three months of this year is here's a range of revenues we think we're going to have. At the midpoint of that range, it was just slightly ahead of consensus estimates. But the market is you know, what's the saying, you guys that the investors vote with their feet, right, and you know, I think that's the read here. They look at the commentary from Intel and say, you've done some really painful things in the course is gone.

Here our thanks to Bloomberg Technology co host ed Ludlow. Also big thank you to Emily Graffeo stepping in while Carol Masser was out this week. And that wraps up the first hour of the weekend edition of Bloomberg Business Week from Bloomberg Radio. Coming up in our next hour, we are all in on AI. We explore the notions of thinking and intelligence in large language models with the

You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on applecar Play and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa play Bloomberg eleven thirty.

Plenty ahead in our second hour of the weekend edition of Bloomberg Business Week, including a new cycling craze harnessing the power of AI, plus the tequila brand co founded by Michael Jordan and counting stars such as Derek Jeter, Serena Williams, and Michael Strahan as investors. The story of sin Quodo Tequila coming up first up this hour. We cannot seem to stop talking about AI, and perhaps for good reason. Just look at what's happened to the companies

I think that what's happening right now is really unbelievable. I was there at the beginning. Jeffrey Hinton and I collaborated in the nineteen eighties. All the learning algorithms that are being used today for these large language models and deep learning were developed by us back in that era. And of course what we didn't have back then were computers that were fast enough that could scale up these models to be you know, be able to solve these

So I want to ask you, how did you think about neural networks in large language models in the nineteen eighties, How do you think about them today?

Well, we actually had a premonition that these large language models, they were small language models back were really good at language. And that was a particular project, a summer project for a gratitude in my lap called net talk, which was trained on a dictionary to be able to pronounce English text. You know, if you give it an article from the Wall Street Journal and they would pronounce it in an understandable way. And this in linguistics is a very difficult

That's really what I wanted to talk about the idea of super intelligent AI. What are we not thinking about? What's the threat out there?

My good friend Jeff is very concerned, and I think he's one of the smartest people I've ever met. And if he's worried about it, then there's some as a concern. However, I think that even if you're concerned, it's very difficult to know when that's going to happen, if it ever

But paint that picture for us, because I think a lot of people are worried about doomsday scenarios here and if Jeffrey Hinton is worried about that stuff, I mean, should we we should be worried about it?

You're saying, I think that we should be cautious, that is to say we we should be constantly thinking along the lines that Jeff is in terms of what could possibly happen, and you know, be cautious and put in precautions so that it can't happen.

What I'm really concerned about are the unintended consequences, things that you cannot predict. Something may happen that you know, no one thought.

Of, even Jeff.

Yeah, and like you know, we have learned certainly right, great financial crisis, pandemic like the un the unthinkable can happen, and you throw technology into it and you just kind of don't know where it's going to go exactly. I got to ask you because I am still trying to understand, and I get worried that we throw these words around.

So this is something that is emerging, and I have since the book was sent to press in the summer, I have a sub stack where I have tried to fill in with, you know, the new things that are happening. And I'm preparing something a new twelfth version the blog on the question of whether AI is overhyped or under hyped, And you know, I've thought a lot about this, and you know, I think that it depends on the timescale. I think that on the short timescale it is overhyped.

But is it is it different? Like the Internet is not I wanted to say comfortable, but it's not because there's some really bad things that happen and we know that, right and that's the battle we have with social media, and we want to talk to you about kind of regulatory oversight of AI in a moment. But I just I'm just trying to understand. You know, it does feel so seamless and just such a part of everything we do. But it hasn't necessarily replaced a ton of jobs. It's

No, Well, first of all, it uses the Internet, so I mean that's like the the machinery that you need to reach to scale up and reach a large population. But it's more intimate than the Internet in the following sense that it talks to us, right, I mean, it's as if an alien landed on the Earth and could talk to us in English and it knew everything about you know, what humans, history, everything, and the only thing we can be sure if it's not human. But it's

Well wait, but doesn't it depends on the data like we talk about.

It wasn't getting trained on judgmental data.

It was you know, actually, it's a good question, what was it trained on. I think that it was fine tuned with data from real subjects that we're talking with a doctor. But even without that, I'll tell you again, it's shocking is that it is actually empathy. These large language models can empathize with humans. And why is it?

Well. I wanted to hear a little bit of your thoughts on what we heard from Elon Musk. He actually participated in a surprise conversation at the Future Investment Initiative to discuss the future of AI.

It's most likely going to be great, and there's this some chance which could be tense twenty percent, that it goes bad. The chances on zero, it goes bad. But overall, at one point, what you said, the covers eighty percent full is one positive way to look at it. Maybe ninety percent.

Okay, eighty or ninety percent positive. The question I have for you is do we need an international regulatory body to ensure or help ensure that this goes the right way?

Well, as you know, in the UK they have passed an ai Act which is like one hundred pages long and you know, incredibly detailed, and it's already absolute. I just moving blasting forward and you know you're trying to catch up with it. But I do believe that it's absolutely essential that it be regulated, and it should be regulated by people who are building it. The government, okay, is the business of protecting people. And we'll see how that plays out. But in for example, genetics, this happened,

Okay, So when does as you said, ten years for the Internet to really kind of make its impact and presence really known and maybe, you know, integrated into our lives. So is it a decade before we see LMS and AI at this level integrated into our lives.

We are at a stage that aviation was at when at Kitty Hawk the Wright Brothers made the first flight. It was ten feet up and one hundred feet long. And that really was the you know, something that then took decades and decades to build. And the most difficult thing, by the way that airplanes, you know, design of airplaces had to solve was control. How you how do you make a go where you want to go without crashing?

That was doctor Terrence Sanowski Francis krik Cher at the Salk Institute for Biological Studies and Distinguished Professor at the University of California at San Diego. His new book chat GPT in the Future of AI, The Deep Language Revolution is out.

Now.

You're listening to Bloomberg Business Week coming up from the Road to the Web. How one app is harnessing the power of AI to improve your cycling routine. This is Bloomberg.

You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern. Listen on Apple car Play and then brout Auto with a Bloomberg Business app, or watch us live on YouTube.

Well full disclosure, People who know me know I ride bikes a lot.

You certainly do.

I'm a big swifter too. Zwift is well known among cyclists as a way to train or compete when it's too cold or rainy to go on your bike outside, or if you want to get a quick workout. In the app, connect cyclists riding their bikes inside to real time races in virtual worlds through a mobile device, a computer, or an Apple TV. Think about it like kind of

No, I remember it well.

It was pretty cool.

Yeah, I thought you were going to wear the outfit.

I'm not wearing that.

You got your helmet over there.

I got the helmet here. Don't need that for swift. But there's a lot has happened. There was a there was a round of layoffs earlier this year, a big hardware pivot. But I think you being back as sole CEO of the company is sort of among the biggest news. Give us an update. How's the business going.

The business is doing really well. I mean it's doing better than we expected. We've had some change earlier this year, and we've pivoted and really the focus for the business has been really around like what can we do to supercharge our community, I think, which is the most valuable asset that we have. So we are a leaner team and we're finding that we're moving faster. Of course we're doing less, but we're you know, we get to focus on the things that I think we'll really move the

I do want to explain to people who might not know what Swift is. When Eric says new hardware, we're talking about an actual like bike that Zwift has released. It's called the Swift Right smart bike. And typically the way that people use Swift as they hook up their own bike to what's called a trainer and one that can be hooked up to a virtual world using Bluetooth or another type of connection. So instead of using or you're using a you're still using a trainer with the

Yeah, I mean the price point is an important one. It's probably less than half or third of what you would typically pay for a smart bike. So we've i think innovated on price. We've also developed and designed it in a way that you can leverage existing hardwad that you've already invested in. So what you have is essentially a bike frame that slides onto a trainer that you probably already purchased. The other piece of innovation that we pushed about a year ago is what we call the ziftcog.

We got rid of all that.

With a single cog and then what we layered on top of that is a little device that can control and create the gears virtually. And you know, our goal is to of course bring down the cost of the hardware to get ontos with, but also just to simplify the onborne experience, and that is how we open up the market. All our studies have suggested that those are the two drivers for holding us back from growing even more.

Well, let's talk a little bit more about your business. I assume you make money off of a subscription based sort of membership. There where are you when it comes to membership. I think the last time you guys spoke, you said around a million members. How has that number changed?

We're over a million. I think the pandemic that wonders for us, it also had it was a double edged sword because you know, of course, like many companies, we thought the growth would continue forever. But what we're finding today is that it's these these are we're growing. We're certainly growing on a number of different level, both revenue and subscribers. But I think, you know, to double your business like we did during the pandemic is just an

One thing that you've also done within the last year is actually increased prices. I believe since the first time, since twenty seventeen. So for years it costs about fifteen bucks a month. Now it's twenty dollars per month. If not an annual membership, that's a monthly membership. How did members respond? What has churn been like?

Well, you know, I don't think anyone likes price increases, let's be honest, right, but I think I certainly we feel very good about it. The value that we offer to our community at twenty dollars a month and two hundred for the year, is is really good value given you know, all the other products that are out there

Any more price shikes on the horizon.

Look, you know things, I would never say that there will never be future price hikes. I you know, I think the five dollars move on a relative basis is big. If we do have future price rise, I think we should do it more incrementally, like I see from Netflix almost every year.

Well, i'd love to talk about, you know what went into that? Like Tim mentioned first price sikes since twenty seventeen, what did that decision try look like? Because you think about everything that's happened since twenty seventeen, it's exhausting and it's been a really strange economic moment.

Well, we delayed and delayed our price increase, and we've done this twice before, every time we've done a rice increase. The you know how we feel about it is we should have done it much earlier. And you know, look, things do get more expensive. Our costs have gone up, and we haven't passed that on to our customers. The product is vastly improved since twenty and seventeen. So we feel really good about it and we stand behind it when we you know, we were committed to making that change.

Yeah, that's actually one thing that I that I haven't talked about the heads of display the worlds. There's been a lot of changes to the gaming environment since I started swifting, which was during the pandemic. Personally, I don't see myself. That's the main way I actually ride and get exercised because I have two little kids and going on a five hour bike ride on a Saturday like I used to do.

Your wife isn't into that.

She's just not feasible right now. So Swift is where I do it. You run a lot here I do. Are you a Strava person? No, okay, that's interesting. She's a garment person.

I feel like I killed a line of questioning you were about to go.

That's fine, I'm going to turn this way. I'll talk to Eric about it.

You did.

One thing I know just recently with Strava is the AI sort of integration that they're experimenting with. How are you using AI? You recently launched for me recently virtual ride Partners, which I find a really helpful thing.

For me.

So this is like a pacer that will kind of go at a specific speed that you can keep up with, and it's really helpful for training and for riding. How are you thinking about AI?

So we already use AI in our engineering development, so that's already been happening. I think in terms of how we can expose these types of technology for consumer related features, we're absolutely thinking about that. And the two obvious places will be the conversational you know AI experience that you know, for example, Strava is doing, and I think that's going to be table mistakes for many many products. You know, it's not going to be something you know so innovative,

To figure out exactly.

What to offer in terms of content and when and with whom. That I think is the next innovation that's.

More like an Instagram timeline approach, where it like serves you what you think you are, yes.

Yes, yes, And I think you know it can factor into you know your usage behavior, who your friends are, when you know what kind of events you like, what kind of fitness you have today and we can serve up the right content at the right time. I think that that is innovation that no one has really, you know, produced yet, But that's an exciting opportunity for us.

What about AI and coaching, I asked, because I think about myself, you know, my world revolves around me, and the thing that I miss about college is having a coach. And I was part of a running club, but it was just too much, so I sort of like making up my own trains. I could see a lot of value in having an AI coach be able.

To see your SATs, see.

What you're doing, and suggest workouts.

Let's face it, if you can afford it, you'd rather have a human coach right right, because they will motivate you more than any any tool that you have in

Two hundred to two hundred and fifty dollars three hundred dollars a month or more, by the way, for a coach, for a coach that you've never met, and just like puts, you know, yeats in Swift.

And so I mean, I just I you know, I'm not like I'm not going to the Olympics. You did go to the Olympics, then I didn't compete with the devastated to say, it feels like a steep bill for my ambitions.

Eric, I'm wondering about competition here because you guys were pretty much the only game in town for a while with what you did. At least Copy Trainer was around before. But Training Peaks bought Indie Vello and now they have Training Peaks Virtual. I remember before I joined Strava, I used Training Peaks and I quit Training Peaks during the pandemic or to go to Swift. Excuse me, not Strava. How are you thinking about competition right now?

Well, we have a lot of competition, it's not surprising and we've had it all along. I think the Training Peaks and indievelopment makes absolute sense. For Training Peaks. I mean we are partners with many different training platforms that are out there. We launched something called the Training API, and we've onboarded multiple training apps. So we continue to will continue to be a platform where coaches and these coaching apps can push activities and event you know, activities

Let's talk a little bit more about the future. This is something I love to ask private companies. Are you thinking about IPO? Would you be open to either acquiring a business or being acquired? What are you thinking about along those lines.

I think we should always look at opportunities to acquire, merge. Those are opportunities we should be looking at all the time. In terms of you know, you know, what is our end go in terms of like a liquidity event, I think that just will take some time. But I think we all have aspirations of being a public listed company. Whether that happens you know, in three years or five years, I don't know whether you know we do that alone or we do it with with others. You know, these

I mentioned that you raised more than six hundred million dollars since inception. Last time you and I spoke, you said you didn't need to raise money in the near future. Yeah, how's the cash balance looking right now?

We're very fortunate we we didn't spend all that capital, so we have a pretty strong balance sheet. I don't think we need to raise any more capital. That's helpful, and that gives us ever ever, I just yeah, ever, which is great. It gives us a lot of optionality. But you know, look, having just a lot of cash doesn't help either. We need to deploy it and smartly, and we need to think of how we can leverage that to build a business.

Last question, how do you you know the cycling business? There's a ceiling there there are only so many people who want to be riding bikes in their basement. How do you get people like Katie?

Well, first you have to get rid of the basement or the garage thing.

And that's why we launched the ride.

It's beautiful, it's it's in white. We deliberately picked white instead of black because in our testing it resonated really well with women.

It's interesting.

Yeah, and I think you know, we're not just going after cyclist. We're going after people who want to exercise and who want to get fit and cycling just the indoor bike and cycling in general happens to be just it's a great activity. You can do it for a long time, it's low impact, and you have access with your hands, and you can get engaged with an experience like Swift. So it's not just recyclists. We hope that the bike really opens up the addressable market for us.

Our thanks to Eric Mann, co founder and CEO of Swift, still adad on Bloomberg Business Week five rival NBA owners meet for dinner and craft a premium tequila the story of Sincoto Tequila. On the other side, this is Bloomberg.

You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern. Listen on Apple, car Play and and Broud Auto with a Bloomberg Business at or watch us live on YouTube.

Okay, Carol Masser, I'm with you. Picture this. Yes, Michael Jordan cool, Yes.

That's Michael Jordan.

Really, that's what I thought.

Genie Buss of the La Lakers, Cool West Edens of the Milwaukee Oh, my bos, god Wick Grausebeck, and Amelia Fessalari of the Celtics. They all get together for dinner. No, it's not the start of some sort of you know, NBA on her joke.

No, it's sort of a really cool company.

Tequila company, Sinkora Tequila.

Right and company lore has it that the dinner happened back in twenty sixteen. This is like, you can almost feel like it should be a streaming series already. Fast forward to today and sin Koro Tequila has sold more than two and a half million bottles. It's won more than two dozen awards. Investors now include Serena Williams, Derek Jeter, who was just in our studio a couple.

Of weeks ago.

He wasn't drinking tequila.

He was not No, also Michael Strahan and more. Amelia Fazzalari is co founder and executive chairperson of Sincoro Tequila. She joins us here in our Bloomberg studio.

Amelia, it is.

So good to see you.

How are you great?

And it's great to be back in the building.

What do you think?

I love it. I missed bringing back some good memories one hundred percent. I was here twenty three years.

It's a long time.

You did everything from head of marketing for Bloomberg TV, you ran the trading system department, you led the product strategy department, and this by tequila tequila.

I know.

Well, you know, we always love like someone's journey and how they get to something like what is it about kind of your background and the things that you did got you to where you are to be.

Well, actually, that's really interesting because there is a connection because most of my time at Bloomberg I was involved in startups and involved in starting new businesses. And so when and I remember Mike Bloomberg saying to me a long time ago, it doesn't really matter what the subject matter is. It's your approach to starting and running a business that matters because you can learn the subject matter right.

So it's interesting because you know the story that dinner goes back at twenty sixteen is company law, right, But you didn't launch for a few years because you just celebrated your five year anniversary.

True, I'm glad you're asking that.

Why did it take so long? Is that normal for tequila? I don't know.

I don't think that is normal for tequila, but it was the norm for us. And the reason for that is and one of the unique aspects about Sincoro is we created this tequila. We literally created the recipe and the liquid was our north star from day one. Nothing else mattered. We had to get the liquid right. And when from that first famous dinner now in the summer of twenty sixteen, you know, Michael was a true tequila Commosseewer in the group, and.

He told me Michael Jordan.

Michael Jordan, that would be mj that would be Michael Jordan, and he taught us how to drink tequila, and we realized we had a shared love for tequila and that really was the you know, we had to make the most delicious tequila. That's what we talked about. We wanted a tequila that was super smooth and had a long, beautiful finish, like a fine cognac or bourbon. And so

That was the cork popping.

Yeah, that in the moment, keep going, keep going.

What I think is so interesting about this is when you look at especially celebrity backed alcohol companies, oftentimes they sort of go with, Okay, what is the hot spirit of the moment. And it seems like you guys were a little ahead of tequila becoming such a big part of American culture, at least because in the last few years you've had some huge exits when it comes to tequila. But you guys had this idea close to a decade ago.

We did.

And for us, you know, Michael Jordan's part of the group, and now we've got other incredible celebrities part of the group. But it was never about the celebrity for us. And if you notice in our marketing, we're not celebrity focused or you know, there's no one standing up saying please, you know, buy this tequila because of me. We want people that you may hear about Sincoro because of Michael

Oh my god, it's a lot of thought went into that.

Oh my god.

One thing I want to take me back to because you said with Michael Jordan that you sampled about a thousand tequilas that process. Were you down in Mexico, because we've did a lot of reporting on you know, kind of where all the tequila comes from and talked about it.

Tell us about that process. Yeah, so I did go down to Mexico a ton Wes and Wick joined me on a few of those trips, and we actually started with more than one distillery because we actually had them compete and we wanted to really refine the taste profile. And then we finally landed on one and we would get samples, bring them back and we would meet as a group and taste through a whole table of tequila.

Was there a lot of like debate and disagreement, like as you went through the process. I'm just curious about that.

I think, you know, not really honestly, And that's been an incredibly magical thing about my partners and I. We we have been really aligned from day one. They're true collaborators and incredible team players. But we did align on the taste profile from the second. You know, from right out of the.

Gate, what do you see as the market for this?

Who?

Who?

Who do you think wants it? Who has been buying it? How do you grow it?

Yeap?

So the great thing about Cincoro is that the taste profile is a very is appealing to a very wide audience. We don't have that traditional Gabi burn. So if you had that bad tequila experience, you love cincorro. If you like whiskey, I've had that bad tequila, You're gonna love Cincoro and college. The one word that everybody uses to describe Cincoro is delicious. And so it's a high end tequila. It's a high end sipping tequila. You know, we gravitate towards the you know, more affluent consumer.

Is that more is the price point aligned with that? Yeah, I've heard horror stories about liquor distribution, and I'm wondering how competitive is how you make sure to get in with the right I've talked to owners of local stores who are like, I'm not allowed to carry this one brand because my distributor is this distributor and carries this one brand. Like it's a really tough it's really tough for independence in some cases. How do you navigate that hard work?

There's that's possible, well, one hundred percent, you know, you've.

Got to I mean, I've heard the words like cartel, mafia like to describe.

The industry, right right, I think that it starts with having an amazing product, and we want the product to speak to for itself. And so there are difficult accounts, and there are you know, it's a super competitive market in the United States, but you grind through it, and you know, we have a product that we are so out of and that when people taste it, they are so proud to have it on their backbar.

You know, sports, it's pretty amazing. Bloomberg spends so much time on the business of sports, and it does feel like investor interest, the value of teams. There's so much interesting stuff going on. And my understanding is that your husband's thinking of selling. Yeah, I mean, I know.

You put your way, but I.

Mean it's just interesting.

I don't know if there's anything about timing or you know, owned it for a while and you just move on, like like what is it?

Yeah?

No, well I think that's for Wick to talk about. But you know it's he's got two families, a Celtics family and his family, and his family's interested in selling. So that's what's going on.

We find too.

We have a lot of guests, whether it comes to the Spirits world, whether it comes to tequila, tell us about because there's two options, tell us about the second one that you brought us.

Yes, So the second one is our brand new Crystallino. This is a limited addition. It's this beautiful platinum silver bottle and this Crystallino is it's really actually a super hot category for tequila right now. They're staying that the category will be about six percent of the tequila market by twenty twenty eight and it's a really key driver of premisation. The liquid is our Nyeho liquid and it's charcoal filtered to remove the color and it's absolutely delicious.

What are you thinking in terms of product growth and product category growth? You obviously have these two different lines, but how do you.

So this is a different yeah taste, It is a different taste. So we actually have a Blanco a repisodo, which is slightly less age than the Nyeh. We also have an Extra and Yeh which is aged forty four months and that's in a black crystal bottle and that's really our halo expression. That's about seventeen hundred dollars a bottle. It's Michael Jordan's favorite. And we have a Sincoro Gold and it's in a gold metallic bottle. And that gold is a combination of our Blanco Repo and a Yaho

So how much do you expand it? Because that's a lot of choices already. When you think about the portfolio, how do you think about where you want to go?

Yeah, so innovation is really in our DNA. We've been innovating the brand since we launched. We've come out with either interesting bottle or you know, for example, a limited edition new expression. So where we're going next year is, like I said, we're going to do three different innovations to our collaboration with some super cool people. So I'll be back to tell you about those. Yeah, and you know that's how we're going to stay current and really in the news.

How do you think about who you want to partner in or partner with or bring in as additional business partners on this, because it sounds like Michael Jordan has a very specific vision. It sounds like you do as well, right, So I'm just curious how you figure that out.

Yeah.

The first thing is you got to love it authentically and just really live the brand and then really embody the ethos of the brand, which is doing things right, working hard, and striving for greatness.

What's the hardest part of this because I do think you know, it's a crowded space, but it sounds like you guys are trying to carve out a certain space. What's the hardest part of.

This, it's you know, it's a long game. Yeah, this is not the business is not something that you do. It's not a quick in and out. We're in this for the long term, you know, we really want what's happening internationally is really exciting because I think in many of these markets we're in the first or second inning of the game, and so it's going to be really exciting to watch it grow and have people have an appetite.

For this tough to import or once you figure it out, you figured it out.

You figure it out. I mean, there's definitely teething pains of doing all of that, and there's a lot of legalities around the liquor business on a global scale, but it's not insurmountable.

That was Amelia Fazalari, co founder and executive chairperson of sin Quota a Tequila, And that wraps up the weekeet edition of Bloomberg Business Week from Bloomberg Radio. Thanks so much for joining us. Be sure to tune into Bloomberg Business Week Monday through Friday starting at two pm Wall Street Time on Bloomberg TV, Bloomberg Radio, and on Serious XM Channel one twenty one, and you can listen to us on Apple car Our Play and Android Auto Free in the Apple app Store or on Google Play. You

This is the Bloomberg BusinessWeek podcast, available on Apple, Spotify, and anywhere else you can get your podcast. Listen live weekday afternoons from two to five pm Eastern on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.