Bloomberg Businessweek Weekend - October 22nd, 2021

of our show. This week. We're gonna bring you highlights from our coverage of the Milk and Institute Global Conference in Beverly Hills. It's an annual convening of global leaders in government, finance, health, academia and philanthropy. Last year's event it was scaled down and completely remote due to COVID nineteen. But this year we were there once again on the ground at the Beverly Hilton Hotel and it was a reduced crowd size, about half of the attendees as usual

and Carol, everybody was wearing masks, vaccinated and tested. This year's event it centered on the theme of charting a new course. We spent three jam pack days examining the disruptions and innovation brought on by the global pandemic along with social crises, economic hardships that we've seen developed over the past year and a half. Some of those hardships

spurred on by ongoing supply chain shortages. That was something that came into so many of our conversations at MILK and we're gonna get into that and specifically what the White House is doing to relieve some of those pressures. Will do that with the seamen's USA President and CEO, Barbara Humptons. I have to say, overall, Tim, it was just so many of the main macro themes, whether it's supply chains, whether it's tensions with China, whether it's finding

enough UM employees the workforce. You know that that was really top of mind for everybody at MILK and one of the highlights of the conference, at least for me, and I know it was for you as well, was when you got to sit down for forty minutes with none other than Ark Invests. Cathy would Yeah, she's the founder, she's the CEO, she's the c i O of really one of the e t f S funds that in the last seven years has just taken the world on

big time with her disruptive and innovative investing strategy. We had a wide ranging discussion, everything from China to test love course. She says ARCS base case is three thousand dollars a share. We even did a little bit of crypto talk as well. It was timely because we sat down on the day that the new pro Shares Bitcoin e t F made its debut, and I asked her about that. Speaking of crypto, Toro calls itself the world's largest social trading network and it is seeing explosive growth

in the crypto space. We talked to Toro co founder and CEO Yonia. He still expects to go public with a spack in the fourth quarter of the year. We also talked some politics. Former Labor and Transportation Secretary Lane Chaw she stopped by to talk infrastructure, the job market, and the shadow cast by former President Donald Trump over the Republican Party, particularly in the wake of the January

six riote at the U S. Capitol Building. Plus, the woman behind one of the biggest E s G stories of the year, Engine Number One, CEO, Jennifer Grancio, shed light on her company's impact investing rategy and the company's new Total Value Framework, which establishes forward valuations of public companies based on their progress with E s G initiatives. You heard about the story with x On Mobile. I mean it really truly was that David versus Goliath story.

I gotta say, I'm a fan girl. Can I say that? You can say it? I'll allow it. Okay, thank you all of that. More to come. We begin with Orlando Bravo. He is founder and managing partner at Tomo Bravo. He joined us to talk about the state of specs and he could not have been more excited to get back to doing business in person after a year and a half of Zoom's and virtual meetings. You could just feel how much happiness he had to be there in person

at millkne The conference is awesome. Think about it. We're here in l A. A lot of it is outside. The weather's perfect. I've gotten to see some of our limited partners that I haven't seen in two to three years, so some of the old friends, and also meet a lot of new people. So it's just been great, one eating after the other, right fifteen minute meetings and then trying to see as many people face to face, like it's remarkable, right, unbelievable. So okay, let's talk about SPACs

because I was looking at some of the indexes. They're down as as a group about ten percent so far this year. They're down about if you look at certain indexes from the mid February high. Where are we because people are talking about the death of SPACs um and as to mentioned earlier, I mean, these are cycles that things go through. SPACs are not a new investment vehicle exactly. Sparks are going to come back. They are They've been

around for whatever five or thirty years. But why do why do we think that there was this incredible craze to SPACs. It's because technology companies. There's so much innovation and so much new business creation and so many tech companies being performed that are getting to scale that the financial markets are trying to adapt of how can we absorb all these new assets into the market because we're not seeing a lot of I I mean, we saw the I p O market fall off a little bit,

right it didn't now it's now it's back. But I'm just saying that you know that there's alternatives for going public here, and the alternatives are great. Direct list things are great, and The spact provides a great alternative because it really really does is it allows a company to be able to openly talk about its projections with its investors.

Every investor think about it. If you're looking to buy a company, if you're if we are together going to buy a private company, wouldn't we like to sit down with management and say, let's see what you've done in the past, and how do you think about next year and the following year, and how does your operating plan and strategic plan aligned with that financial plan that you have. It gives you so much insights as to how management

thinks about their own business. But are you concerned at all that there is a lack of quality companies to be acquired by SPACs that are out there looking for targets right now, I'm always concerned about quality. What ended up happening as well with this pac boom is a number of companies went public through spacts or merged with SPACs that are venture capital companies that are really young

companies now. Retail investors in particular participated in that because the regulatory environment doesn't allow them to participate in venture capital and private equity, so they rushed to this market, and then the regulators get worried that, oh, they're gonna lose money, or these companies have lack of a track record, or they're going to miss their numbers. Now we'll see what ultimately happens. But one of the things you said

at the beginning is SPACs are out of favor. Now, of course nobody likes bacs, but the trading should be the underlying company. Forget of whether it was a SPAC or I p O or direct listing. It's what matters is the underlying business. That was Orlando Bravo, the founder and managing partner at Toma. Bravo obviously enthusiastic about the spack market, and look, he's undeterred with the recent struggles

that we've seen. Yeah, definitely, all right, coming up a close look at the U S. Labor market and the need for a bipartisan infrastructure spending bill. Look at that from someone with deep knowledge of both areas. Former Labor and Transportation Secretary A Lane chall Plus, she weighs in on whether or not she'd support Donald Trump in if she runs. 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. Two of the hottest political topics of the nation these days. Yeah, they seem to be infrastructure and the job market, rightfully, So really specifically, we're talking about the tug of war between employers who want people back in the office and the millions of workers who want more flexibility in the wake of the pandemic. Well, our next guest has expert knowledge in both issues. Her career in public service has spanned

it nearly four decades. She's worked in three different presidential administrations, including as Secretary of Labor under George W. Bush and most recently, as Transportation Secretary under President Donald Trump. Were,

of course talking about eline show. She took part in a panel discussion surrounding the future of work at this year's Milk and Institute Global Conference, and then she joined us to break down how companies are approaching America's labor landscape and what sort of work patterns they can expect from employees going forward. They're taking polling more, they're asking their employees more, and clearly some kind of hybrid working

environment arrangement will be much more accepting two employees. And I think employers are trying to work this out right. And you know, at first they were going to come back to work. The workforce is going to come back to work lass September. Then it was lost December, then it was the spring, then it was going to be September, and now people are talking about spring of So clearly we're all feeling our way as to how to come

back at that. There is this imbalance happening though right now when we look at the labor market, there is an oversupply of workers, and but they are not actually returning to the workforce. Do you think we ever get back to a workforce that looks like it looked before the pandemic? Like is it really from those numbers? Yeah, it's even more. Before the pandemic. When I was Labor secretary, the labor participation rate was about sixty with the workforce

of about hundred and fifty seven million people. And then we have a great recession and then the labor participation rad dropped to about sixty three and it kind of never recovered. And with the COVID then it went from sixty three point you know, three or four down to sixty one point seven sixty one point one. So we're continuing to see declines in labor participation, which is terrible because we need these workers to come back to fuel

a full recovery. But there's also another factor, another dynamic at play here, and that is the skills gap. Well, we had tired of this for years, a lame just like and I'm gonna throw in another problem. We've been talking about infrastructure for years. How many administrations, right, and

this is something that has had bipartisan support. What ultimately, from your perspective, do we have to start spending on when it comes to infrastructure, Well, look at the supply chains on four obviously, you know, investing in transportation infrastructure. The reason that the Trump administration was never able to succeed in the infrastructure propos so was because there was a big debate about whether there should be one dollar

or for one dollar of investment spending. And the Republicans believe that there can be leverage, that we can use public private partnerships and leverage you know, existing government dollars, and the Democrats felt that they wanted one dollar for one dollar deficits spending, which obviously the pros and const to both, so we were never able to galvanize enough consensus around public private partnerships this time around. You know, I think there could be there. I think there's an

infrastructure bill, a transportation infrastructure bill to be had. Unfortunately now it's being held hostage to the Budget Reconciliation Bill. If it were to be standard alone, there is a deal to be made and passed on the infrastructure bill, and I'm hopeful that it would be passed before your end. I feel like politics. I mean, I want to ask you because you've been in politics or I'm not in politics. I am a public servant. I've always viewed myself as

being in public service. Did say you are? We're a long time public servant. Um the Republican Party, the You know, if I think about the January six Capital riot, you resigned after that. I left the Trump administration. You were there, you know, almost to the to the to the end. Um, do you regret being part of that administration. I'm very grateful for the opportunity to serve my country. I'm an immigrant to this country. I came when I was eight

years old. I didn't get my citizenship until nineteen and it used to be that. If the president asked, the only answer you can give is yes, I didn't know the president very well, but I also believe that the American people deserve to have a functioning government. But going back to the infrastructure bill, the real drama is on the Democrats side, because, as I mentioned, there's a bill to be had. There was bipartisan support. Republicans signed on

to this infrastructure bill. But the Speaker, and you know she and I share birthday, by the way, Uh, she's in a tough Yes, she's in a tough spot because she's got moderates who want to hold back on the spending. Well, she's got progressive that want to spend more. So she's trying to balance that. But if left alone, that infrastructure bill can move on its own. Many all the drama

is on the Democrats side. And you know this, you know you follow what's been going on the economy, certainly in the pandemic milk and covers this left and right, the inequities that we have seen and it's not new, and there are people who have not shared in the wealth creation and so that softer infrastructure that the presidents team are trying to get through. I mean, this is part of the battle. And I think for those people that are questioned that they're not saying that these social

infrastructure proposals are unworthy. What they're saying basically is should they be included? You know, what was originally going to be called a transportation infrastructure politics works that, you know, but therastructure done, We're done. So it was originally the original infrastructure bill had only six percent of what is traditionally defined as transportation infrastructure. If you expand the explanation and the description a bit more generously, you get up

to thirty of the dollars. But clearly there's a need for transportation infrastructure. Rhodes bridges, transports, airports, drive around New York. Absolutely. I mean the governor got elected on this. We've got her slogan. We have to ask because we have about I know you consider yourself a public servant, but we got to ask more politics. Oh shoot, why are you talking? I heard from Donald Trump at all. Uh, we have not spoken, not at all. So but I'm not you know,

like I'm out of politics the public policy. You served in three administrations. Do you consider President Trump is the leader right now of the Republican party. Well, I think that is in the process of being decided and sorted out. There's still some time to go. There's two coming up, and then there's should he be the leader of the Republican Party. That's up to the people. You know. I think for those who wonder about his appeal, they should be asking what is it that prompts so many Americans

to support him? And I think that's a very the answer will be very, very revealing, and you and it's a teaching you know, it's it's something that I think, um, you know, the leadership should unders. But as somebody who's came to this country as an immigrant, um and became a citizen, do you think a voting citizen that he should be president leader of the repeblic? I will support the nominee. I mean, I'm a Republican, so I will

support whoever the nominee is. That was former Labor and Transportation Secretary Elaine Show an important conversation, especially for lawmakers gearing up for mid term elections next year. Also, fiscal spending will continue to be a source of contention between now and next November. I thought her comments about not necessarily considering herself a politician were particularly interesting. Yeah, I agree with you, considering how much time she spend in Washington.

I mean a ton of time, and she still spends a lot of time in Washington. She is, of course the wife have SENTI Minority Leader Mitch McConnell. We'll dig into the labor side of things a bit more. We're gonna catch up with the CEO of a company called Bright Machines. He says automation might actually be a good thing. Yes, a good thing, you heard right for workers. Coming up next on Bloomberg Business Week, Etro calls itself the world's

largest social trading network. The company is ready to go public. It is, indeed the CEO of e Touro joining us next. This is Bloomberg broadcasting from the financial capital of the World, Bloomberg eleven Frio in New York to Washington, d C. Bloomberg to Boston, Bloomberg one O six one to San Francisco, Bloomberg nine sixty to the country Sirius XM Chado one nineteen and around the globe the Bloomberg Business app and Bloomberg Radio dot Com. This is Bloomberg Business Week. Retail investors.

They have become a dominant market moving force over the last year and a half, and those investors are also trending younger with platforms like robin Hood and wee bull. Those platforms give millions of novice traders easy access to public markets just through their smartphones. Toro has also been working on this for more than a decade, building its user base, and it since grown into what it says

is the world largest social trading network. It previously delayed its planned ten point for billion dollars back public listing due to the secs increased scrutiny of such deals. They've been looking very deeply into the transparency of SPACs. We know that well now. E Toro's i p O back on track. That's thanks in part to storing interest and investment in bitcoin and other cryptocurrencies. That's at least according to the company's co founder and CEO, who expects that

trend to continue. You see A traveled to the Milk and Institute Global Conference all the way from Israel, where his company is based. He told us it was his first visit to l A in about twenty five years

as first company. He was very optimistic. We've seen explosive growth over the past eighteen months really starting as we talked about before, UH with the beginning of the pandemic, just at inflection point in the rise of retail investors, with a whole new generation across the world, millennials realizing that they want to invest in the markets, whether it's stock markets, whether it's US stock markets, or whether it's

crypto markets, just increased interest all around the world. We founded the company in two thousand seven with a vision of opening the global markets for everyone to trade investments simpler and transparent way. And up until twenty twenty, beginning of twenty twenty, we had about twelve million registered users, and since then we added more than eleven a new million registered users by the end of the first half twenty one, so basically we doubled the company, more than

double the company. So twenty three million registered users worldwide grew by five point six million mergisitry users the first six month this year, after growing about five million registered

users the entire of last year. We've so we've grown significantly our business, and we've seen the shift from the first crypto rally in two thousand and seventeen, we've seen our business grow rapidly from sixty million dollar commission to three nine million dollars from two thousand and sixteen to eighteen, really driven by the first Crypto Rally, and then we saw Crypto Winter, and then Crypto Winter we sort of drove, We drove our customers who came to it or to

trade back. Then you know, x RAP three ariam to diversify into equities through the social network where they can actually see what other people are trading and see each other's performance and copy the most successful investors. And and then we saw Crypto Winter, shifted the business into equities and commission free stock trading worldwide, and then started this year with Crypto Rally two point which is just an amazing rally. Only I hear what you're saying, and imagine

some of our listeners are thinking of themselves. Wait a second. This is a similar story as to what propelled robin Hood to the public markets in a relatively short time into such massive growth in one But we are seeing that robin Hood shairs are down more partly due to some softness with the company referred to as seasonality earlier

this year. Are you seeing any of that decline in activity, any of that seasonality that we heard from Robin Hood, so sensitive to the fact that during the process of transforming from a private company to a public company, I can only share company's data relevant for the first six month which we published, which were very good. We did update the markets that Q three. And this is something

you can look at exchange data. So equities have been software in Q three if you look just an exchange data, options data, volumes and equities and volatility September have gone down generally in the markets. Uh. And now we're seeing obviously crypto rally two point oh the longest crypto rally in crypto history in Q four, sort of returning with a roar. So hoping to see Bitcoin reach all time high. Already peaked and touched actually market cap all time high

over the last forty eight hours. So very interesting to see what's happening in crypto in Q four. Um, you who are you competing against? Is it Robin Hood? Is it? All of the online trading platforms, even the establishment? Who is it? So the way we see it, and again we're very global and we have our businesses Europe, US, Asia, Latin America, Middle East, were regulated across the world and

in I single country. What we see is the discount brokerage one point was very much consolidated by the local banks. So here you know schwab Bot t D. Morgan Stanley bought the trade and we see the same in Germany

and Italy and Spain, in the UK everywhere. But who were really competing in against is those super apps, right, apps like Toro, who are attractive to a new audience, new customers, customers that are beginning their trading activity are looking for new tools for ways to engage and learn how to trade the markets, how to participate in the markets. And there's a lot of great companies just expending the audience and expending the markets. That's only a c He's

the co founder and CEO already Toro. You're listening to Bloomberg business Way coming up next. One of the headliners at Milk in this year. Our audience very familiar with her. Our invest founder CEO and ce IO Cathy would and not surprisingly Carol her biggest bets. Well, they're continuing to pay off. Her commitments to Asslin Bitcoin as strong as ever. She also explains the rold Jack Mo played in her

China investment strategy. This is Bloomberg. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovik from Bloomberg Radio. When you want to talk innovation, disruption, how to place your bets on the future. If there's one person you need to hear from, it's Kathy would Tim.

The Arc invest founder, CEO and ce IO, is known for her foresight on game changing technology, and so far she's proving to be right on a number of those big bets, specifically Tesla and e VS, as well as of course Bitcoin. I sat down with her for a wide ranging discussion at Milk and she was one of the headliners, and it happened just ahead of Tesla's latest earnings release. The company would report third quarter revenue that fell short of Wall Street estimates, but it did manage

to beat profit projections. In this actrap, Kathy began by explaining her initial attraction to investing in what is now the world's pre eminent EV maker, Tesla. We actually took our cues from a value investor who said to us, I would never buy one stock in your portfolio, but I like your research and you might be right, So I'm going to just put five, there's a value investor five as a hedge, and as did our first institutional

investor UM, which is value oriented. Uh, and kind of thought we were behaving like a value manager, long term time horizon and looking for extreme values. Well, value investors are using price to book and dividend yield and that sort of thing. We're using growth, you know, we're using spectacular growth rates that no one is expecting. And Tesla was our first proof of concept, I would say, a very visible one where people are saying, what are they

talking about? And all we had done was used rights law, which is the centerpiece of our our research, to try and figure out how quickly cost would decline in battery pack systems and therefore how how much prices would fall for electric vehicles and how quickly the uptake would be. And we saw Elon Musk magnificent things happening into it. It It wasn't so easy to be invested in Tesla early on.

For us, it was easy because you just believe the story or we well, the most important call that we made initially with Tesla was all right, Tesla's battery technology, who is unlike any other auto manufacturers battery technology. Tesla was riding down the cost curve of the consumer electronics industry. So laptop, cell phones, image volumes, right, and you get a scaling like that, cost come down. It's called a learning curve in in the tech industry. So, Elen, you

have auto manufacturers and auto analysts laughing at him. Ellen is building his car on top of cell phone batteries, isn't that funny? And what they didn't believe was that the engineering was possible, right, So there was a It wasn't that they just didn't think it was possible, and

he did. Uh, And so even today, Uh, these cylindrical batteries that he's been using, relative to lithium ion pouch lower cost and will remain lower cost for at least three years, we think, which means that any other auto manufacturer who wants the same performance and the same range at the same price, we'll have to lose money on every car sold. So it keeps him in a really great position. And that's only one of four. Barrywte Entry. Well, but that was the first call we had to make,

so elon Musk and Tesla. So there is a point that you would get out, I know, there's a story you've talked about. You've put a mark on the stock price. I think it was three thousand. Yeah, three thousand is our base case, not our bull case, but our base case. Okay, so there is a point where you could say, okay, I'm moving on. You've gotten out of Apple. I mean, these are backward looking companies or technologies that you don't think are or not necessary, not necessarily. They are very

well understood. Uh, their dynamics are well understood. They are the fangs, They're well owned, and we just want our clients to be exposed to the next fangs, which are not going to be in the fang category, but the next fangs and Tesla, Tesla is becoming a fang. You know. I think I end up in that grouping at some point. So yeah, we would sell. So our minimum hurdle rate of return expectation for a stock is fifteen at an annual and ALAS rate over five years, so doubling over

five years UM. Tesla is about nearly a quadrupling over five years, so well within our range. So you know, we we have been taking profits and uh, and that's because Tesla in here. I think it's becoming very obvious now that electric vehicles are taking massive share from traditional gas powered vehicles. So we've talked Tesla, we've talked a little bit. Tell me a bit more about bitcoin and

where you see. I mean, I've never seen anything so debated. Obviously, we're seeing more legitimization as we see regulators, certainly in the US and around the world moving forward. Um, what is the long term play when it comes to something like cryptocurrencies in bitcoin? So Bitcoin specifically. Um, we we got involved when it was a six billion dollar market cap. And here's Art Laugher again in In My Life and in arcs Life. Um, it was a six billion dollar cap. Fan.

Now it's over a trillion, which is But we were asking the question, this was two thousand fifteen. Could bitcoin serve the three rules of money? And we came to the conclusion that it was possible. Art Laugher collaborated. He tore our original paper up and as we were going through it, he said, this is the first this is the rules based monastery monetary system I've been waiting for since we left the gold exchange standards, right, And I

said to him, oh, how big could this be? And he said, well, how big is the U S monetary base and back then, remember this is six billion dollar cap. Back then it was a four and a half trillion dollar monetary base. Today where it eight and a half trillion. China have been in, you've been out, and sometimes we're

trying to understand. So, so how are we supposed to look at China right now and the clamptowns that we've seen in the government, certainly on different sectors that have just decimated those sectors in terms of the value of that. So what is what is what do you expect kind of to be your involvement. Yes, our first move away from China was when China was you had a very strong move and what you know, the innovation there was being deeply appreciated while ours was not. So that was

that kind of move. Um. The second time we moved or then then we moved in why we saw the reaction to COVID and we got more interested because it was the most disciplined country in terms of both monetary and fiscal policy UH during the crisis, and I thought that China had the possibility of becoming the Germany and Switzerland of the world, you know, in terms of discipline monetary UM. As soon as jack MA was banished effectively last November, we started pulling back because what we're doing,

and especially during February through May, where our strategy. Just to give you a sense how volatile it is. Our strategy from mid February through mid May. Most people wouldn't admit this, maybe, but this, this is how volatile. Transparency was down thirty peak to trough. So we have come back. But during that period what we do, as we always do,

we concentrated our portfolio towards our highest conviction names. China was moving away because almost every week and month there was a new regulatory move, crackdown and uh so, so it was easy to do that. It was great because I'm always scrambling looking for cash during a correction. Okay, where is the confidence lower? Where? Where? Where Let's buy into some of our favorites here, uh now, common prosperity. So what have we done? No China in our flagship.

We do own some China in UM. A few of our portfolio is the ones focused on autonomous technology and robotics. But we're very particular, very low margin companies because margin is clearly not appreciated by the government. Anymore common prosperity. Uh and uh and very beneficially beneficial to Tier three tier four cities common prosperity so j D Logistics, JD dot Com, Pindo. Does it stay this way? Do you think in China for a while? Well, I mean it's

hard to say, but China is a certainly country. When they make a decision, it's long longer term, it's longer term planning to President g certainly seems to be on this mission, and I think he is very unsettled that the three child policy is not working, and so there's a big social engineering um. And by the way, this is all very forecastable, right, I mean demographics, he knew, they knew fifty years ago what was going to happen, right,

So I think that that's part of it. And uh, you know, there there is, there is, There are the halves and the have nots in China like there are like there is around the world. I think China is taking it more seriously because there's probably more social unrest than we now appreciate. What I don't understand is they're going after real estate, which is seventy of the consumer savings in China that was Ark invest CEO c I O and of course founder Cathy Wood from the Milk

and Institute Global Conference. Check out the full interview on the Bloomberg terminal and at Bloomberg dot com. And that wraps up the first hour of the weekend edition of Bloomberg Business Week from Bloomberg Radio, a special edition the West Coast l a cool Beverly Hills edition. I'm Carol Masser and I'm Tim Staniver. I had in our next hour more heavyweights for milk. We'll talk supply chain troubles

and the buying administration's planned to ease the pain. Siemens USA President and CEO Barbara Humpton takes us inside the White House. She was there talking about some of the problems. Plus we'll hear from one executive who sees a parallel between current market conditions and the post World War two economy. Tim and I were talking about this a lot after this conversation. And then we've got another one who expects increased automation to be a potential net positive for the workforce.

You heard that right, And one of the biggest names in the growing field of impact investing, Engine Number one CEO, Jennifer grants. She got Excen's attention and everyone else's. It's a David and Goliath story. You know it. 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 Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. I am Carol Messer and I'm

Tim Stanovick. Plenty ahead in our second hour of the weekend edition of Bloomberg Business Week, as we bring back some of our favorite conversations from the Milk and Institute Global Conference, back in full force this year after the event was completely remote due to the COVID pandemic and just a bit in fact, we'll here from Barbara Humpton, PRESIDENTCY of Siemens USA, who says the White House has a good plan to help relieve certain supply chain bottlenecks.

She should know being involved in a meeting at the White House. Plus we'll talk with Bright Machine CEO Amar Hans Ball on what the next wave of automation and AI technology means for the modern worker. Maybe it's not all bad. Also it Scott minored of Guggenheim investments on Modern Monetary Theory MMT becoming a reality hashtag MMT. It's happening. First up this hour, let's focus on impact investing. Earlier

this year, a company called Engine number one. You know who we're talking about, Well, they scooped up three seats on Exon's board of directors. It was a big, big win for investors who are demanding that their profits come with a greater purpose. The Small Activist Fund now is the world's attention as it pushes for more emphasis on sustainability at the oil giant, and it's touting what it calls a total value framework. It ties progress on E

S G initiatives directly to the financial value creation. The company CEO, Jennifer Grantsio explains, we've set out with Engine number one to do things in a different way, and so instead of what we all think of as slightly older school E S and G. People aren't sure if

it works, people aren't sure. I think it returns. We built Engine number one to take the data, the environmental or the climate or the governments data and use it to drive returns, and so as I've watched and talked with lots of people over the last couple of days, large pools of assets as well as younger people. People are ready, but they're ready because the performance is there, or they're just ready because it's the right thing to do.

What is it they're they're ready, they're ready to have impact in their investments, but they're not willing to do it with giving up returns. So the way they think about it is, we care. We care about people and wages and workers would care about climate, but we need investors to do it for us in a way where we don't give up returns. So, Jennifer, is it harder though for a company that is delivering their returns to

kind of get them to make the changes? And investors are We're not going to be so supportive because they're like, listen, I like these returns. So give me an idea. Yeah, we think it's all We think it's all about using the data on climate or environment people using it to drive returns over time. So to take an example, let's

take General Motors. Um. So, Mary bar has got up a great business, she's a great CEO, she's got a strong board um, but they can actually make more money if they get to an e V transition faster, longer term. Longer term. But if you think about it from a scale perspective, So what's the you know, the what's the multiple of GM today compared to Tesla. Let's take that example.

If you can get to an e V transition sooner and you're doing nine million electric cars a year, that's a huge increase in multiple for GM, and we get to the climate transition sooner. So yes, it takes more than a quarter, but it's the way to do it at scale. Hey talked to us about your investing framework

and how you think about potential targets. Our audience absolutely familiar with what Engine number one has done and did earlier the here at x on Mobile and also of course at General Motors too, But how do you think about your next potential targets. Yeah, we think about it as being active owners in all these companies, as opposed to target or old school activism. And so what does that mean. That means we're running with all the public companies,

every single one. We run through their wages, their workers, their social impact, and their climate and environmental impact. We do it in dollar sense, and then we forecast how does that change their evaluation over time. And so we will work with both companies that are laggards where we think they're not managing the business as well as they could, and we'll do that constructively. We won't try to do it, uh you know the way we did with that Exon

better to do it working constructively with companies. And so we're working with a number of companies now. But behind the scenes, we don't talk about that as much. Tim was doing. You know, we're doing some research. Tim shared a story with me and we've been following this down. Jones, you know, had reported that X and x On is debating abandoning some of its biggest oil and gas projects. Do you feel like when Well, I think the first

win is get the right people on the board. So that was a big victory in getting three people with great energy transition experience UM and the second win we're looking for is what's the long term capital all occasion strategy. And if X and we're not in the boardroom, they're independent directors. But if X in with the new people on the board, comes to a decision to rethink long term petroleum development, we think that's very smart for business

and the environment and the environment. Well, what does that Excel mobile look like to you? I mean, help us understand that, because I think people think of ex On mobile is like the opposite of a It's think about the business that it's in, right, it drills for fossil fuels. Uh, it's an energy company. And so if you think about the expertise that Exon has, they have, you know, they have huge I p in great technologies and lithium batteries.

Traditionally they were a founder pioneer from research perspective, and then they have an ability to execute things at huge scale. If you want to do energy, even a new kind of energy at scale, think about the engineering capability of a Chevron or an Exxon to do that. So they're an energy company. They don't only have to be an oil company ten and twenty years in the future. So in terms of industries, I know you can't probably reveal I don't want to say the word targets. I know

that's what we keep thinking. But I mean, what are the industries that you think you are going to be looking at or are currently looking at pretty um aggressively. When it comes to doing the research that you know are transitioning, need to be transitioning for the better of all mankind. Yeah, I think. I think the heavy fossil fuel industries are definitely, I mean definitely, That's an obvious one, which is why you see us talking about energy and

talking about transportation. That's a place where you transform and companies can be much more profitable and you get to climate better, climate impacts sooner. They're also financial services Squares an example where Squares business is cash app in particular serving underserved communities. It's driving financial inclusion that has huge positive benefit. That was Jennifer Grancio, the CEO of Engine Number One, the activist hedge fund. She joined us earlier

this week at the milk In Institute Global Conference. You're listening to Bloomberg Business Week coming up more of our conversations. You know, the Biden administration pulling out all the stops to relieve bottlenecks at the nation's most critical ports of entry, and industrial executives definitely taken notice. Siemens USA President and CEO Barbara Humpton takes us inside the White House's blueprint

to fix America's fractured supply chains. This is Bloomberg. This is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovik from Bloomberg Radio. So, supply chains, that was definitely one of the topics we talked about a lot at Milk in this past week. Supply chains, they connect nearly every component of the global economy, and even the world's wealthiest and most powerful companies are proving vulnerable

to shocks. Among those. As Semens, the engineering and manufacturing company, it focuses on areas of electrification, automation, digitization, transportation, all of those being hit by the global semiconductor shortage. Right. We've seen a play out a lot of the earnings reports as well that have been coming out fast and furiously well. We spoke with Siemens USA President and CEO Barbara Humpton at this week's Milk and Institute Global Conference.

She was among a group of executives tapped by the White House to help figure out how to remove the roadblocks to critical US imports. While we're a net exporter in the US, we actually do rely on supplies coming from elsewhere in the world. Our supply chain team that maybe they became unsung here heroes of our pandemic time frame, where they just came forward with all kinds of creative workarounds, risk management, UM, diversifying our supply chain, making sure that

we could be on station for our customers. Well, give us some examples of that, Barbara, and how the team has been able to do that, because how do you diversify of supplies are just not there. Well, what we are finding is that this is a moment when the supply chain is becoming very creative. You know that there are certain things like some conductors, where it will literally take years for us to increase supply in the US.

But meanwhile, you know you're seeing this. I'm sure companies all over the world are doing the same thing, aggregating chips from multiple suppliers and then understanding priorities across the business. In our case, it's making sure that our customers who are most critical to the societies they serve. We're in the backbone of economies around the world, and so we really do have to prioritize where are these chips going.

We have to stay with chips. Because you were at the White House right or you were in that meeting, tell us about that. The conversations and what are the expectations coming out of it. Yeah, well, kudos to the White House and Department of Commerce for bringing together players all along the supply chain, those who are you know, end users putting chips into end products, all the way back to fabs, etcetera. And and really what they're what the White House and and Commerce are looking for is

how can they remove roadblocks? How can they help set up set up systems so that we improve the supply chain all long. One of the big things is transparency. It's very much like cyber chips. I'll tell you and you know how in cybersecurity, what we've committed as an industry is to tell each other when we encounter issues, and it keeps everybody else alert and aware. We know that a threat to one is a threat to all. Same things with chips, where are we encountering bottlenecks? Where

what types of chips are we having issues with? And by sharing that information, then where the federal government can help is if there's anything they can do, regulatory or otherwise to unblock those blockades, then they'll get involved. Has that happened yet? Have you been able to see anything changed since that meeting just a couple of weeks ago. Well, the number one thing is we've just started the reporting, so you know, yes, and and I do know that

this is a very open administration. They're taking phone calls incessantly from folks who are dealing with issues. It's easy to get to the White House right now in this absolutely a top top issue for when you talk about chips and like just the problems. What is the problem. Is it just that there's just not enough being manufact Actually, like what is the real nut that we're trying to crack? Here? Here's where we are. We were absolutely we had a global supply chain that was tuned to just in time.

And when folks looked at forecasts of what's going to be the demand post COVID, right midst of code, I could say, con COVID and post COVID, you know what's the demand going to be, and they reduced their orders when they did that. What that meant is there was going to be a surge, when in fact demand came surging back and now there's huge demand everywhere for those parts. He is just in time over was COVID the end

of just in time. I've heard a lot of things I've heard just in time, just in case, right, But but actually one of the things we're looking at is glocalization. What I think is actually localization localization, taking global technologies and then manufacturing making them in regions all around the world so that there can be more immediate sources of supply. Easier said than done, though it can take three years

to build a chet manufacturing facilities, well it can. I mean, what I've been doing is talking to adiences everywhere about the idea of a smart investment these days would be in flex factories. By the way, this is something the US government can do. Some people don't know that there's a organic industrial base maintained by the Department of Defense. They have the ability to put new automation technology in

that will make them more flexible. This is so interesting because you go back several decades, right, and the government got so involved in the semi the U S semi industry because we were falling behind. The government has to play a much more active role in your view, Well, what we're seeing is things like the Chips Act. We are such fans of this idea of the government actually making an investment to help jump start chip production. The

demand will be there. You know that as we go from the Internet of people right into this next decade where it will be people creating the Internet of things, that there's going to be demand for semi conductors everywhere. We need to talk about people. Yeah, I want to get an update because a few months ago, You're did an interview with Bloomberg TV said there were two thousand open roles at Semens US. Give us an update. There

are you able to fill those roles. We are constantly, constantly working to fill open jobs, and I will tell you today we still have about two thousand open jobs. Yes, we're experiencing growth, and we are also experiencing what so many companies are, with people saying, hey, I'd like to do something different. So a couple of things I want to do. I want to change the great resignation to

the great reassignment. Get managers thinking about you know what, I may lose an employee, but I'd rather lose them to one of my colleagues and semens if there's somebody who wants to do something different, so let's keep them in the family. I'm really hoping a lot of folks are will be coming back as well, because We've got this vibrant, growing business. Meanwhile, we're putting a ton of investment into creating programs that will bring young people into

the fields we and our customers are engaged in. Most recently, working with Wake techn Wake Technical Community College in North Carolina, we've created an apprenticeship program for eleventh graders to come out learn the tools of the trade for building electric vehicle starting earlier and earlier. High school apprenticeship is the new wave of the future. What is the thing that keeps you up at night? Because I think about all right, supply chain, we talked about it, chips. I mean, these

are still issues. We're not over COVID yet, there are still some questions about the economy trying to fill all these jobs. What is it that really kind of stresses you out right? Yeah? Now, Carol, I I sleep well because I've got a great I've got a great team. But the thing we focus on as a number one priority, we use the term sustainability. It means a lot of things to a lot of people. But look at where

we are right now. We're entering a winter where there's a real question about where will the power come from? So we're doing our part at Siemens to make sure that utilities are prepared, that communities are prepared. We've been installing micro grids, nano grids, helping people get ready and so that they'll have greater flexibility control on how they use power. That Semens USA President and CEO Barbara Humpton a nice follow on to our discussion with Jennifer Granzio

of Engine Number One. Sustainability not just key to fighting climate change, but also to maintaining supply chains and sources of energy. We did see these common threads through all of our conversations. Barbara Hampton of Siemens also touched on something that we'll get into with our next guest, giving workers the skills they need to succeed and stay viable in the post pandemic economy. Coming up on Bloomberg Business Week, the CEO of Bright Machines, mar Hants Ball on the

next level of industrial automation. As we continue our coverage from the Milk and Institute Global Conference, 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. So Bright Machines was founded back in just a few years ago. It's an industrial company that's leveraging a software first of approach to help reimagine how we manufacture various goods. The company is set out to bring automation to assembly lines around the world, essentially giving eyes and brains two machines

to help speed up the production process. The company's CEO, Mr. Haunts Ball stop By are set at the Milk and Global Conference this past week to talk about the potential for the tools his company provides and the net effect on the global labor force. Look at the products surrounding us, So you think think of the network infrastructure that's connecting our computers to the Internet. You think of the electric vehicles, all the components that go in them, all those pieces.

So let's take a piece of network infrastructure. You look at a modern day router. Assembling that router used to be done by hand in a place like China or Mexico. That's the thing that we have replaced using our autonomous assembly lines or robots and other machines are basically putting all the pieces in place and building network boxes. And we're doing that. I think that's what was kind of surprising and kind of reading in for this is that I think I had thought so much was all ready automated.

Give us you are snaps out of what you see. I mean, the reality is less than eight percent of the assembly lines in the world are automated. And you see all you know, robots moving around for forty years. But the reality has been that to set up these systems takes so much time and cost so much and requires the level of expertise that only you know, the big automotive or the big aerospace companies that have lots of money and a five year product cycles have been

able to automate. You look at the you know, any kitchen appliance in your house that's not automated because it takes too long to configure or cost too much. You're saying, my bullet that I used to make my shake good example, Really it's not automated. It's the again, the like you look at that bullet pieces of the steel and the plastic are made by machines, but they're all assembled by hand.

And that's the kind of thing that when you you know, and and you bring it, you bring technology like arts to bear, you can you know, assemble that using a modern When if ultimately we reached the point where humans are replaced on automation, knew were going to go there, then it creates a massive it's a transformational shift when it comes to labor market. It's something we talked about

earlier with David hunting Piga. Right, you know, this is the type of thing that that can actually prevent inflation from getting out of control exactly. But yeah, when does that happen and what is what is the massive shifts? So let me give you three parts of the ends. First of all, this kind of high level of automation has happened in other industries and bank banks are a

great example. When a t m S came, it didn't result in like unemployment for all the people that you know, you automated the most repetitive and kind of mind taxing um work. And that's what's happening in manufacturing. If you think about people and this is it's not meant to be dystopian. But when you go into factories today, there are robots everywhere, but the robots are humans, and you see humans in factories doing the same operation a hundred

thousand times a day. Literally insert screws, you know, four screws into a box and screw like that is my numbing work, right, And so that's the kind of thing that the systems like us replaces. But you're right, when we do that, there is somebody that's affected. But what we've seen our customers do is that this they look at automation as an augmentation exercise, that they're increasing the ability of a single person to do multiple, you know, more work, or have them do more valuable work like

better customer service, to better engineering, do better design. And that's what I think will happen. It will take definitely you go through a curve where people need to be retrained, but on the other side of it, it's a much better experience for everybody. Aymar, how do you future prove these assembly lines? If the customer makes a big purchase, it's a good point. It automates it. How do they know two years from now it's going to be so

glad you ask that questions. Software is a secret sauce because what we do through software is make our lines programmable so effectively, since our our secret sources, we use software to configure and run these machines. That software can be used to modify the same line to build a different product. So it's so we can upgrade. The software doesn't impact the hardware, the existing hardware if you completely change the product. Let's say you're building your bullet and

now you're going to build a network rowder. Yes, you need to change the end of armed grippers and some of the feeding systems. But if you're you know, you're upgrading the bullet or you're doing a second model of that, then you don't need to do this. So you're public this year. That is the plan. We announced ours transaction, yeah and uh seventeenth of May or a SPAC merger,

and we are in the process of these packing. We filed our s for today and you know, when the SEC gives us to go ahead, then we shall be a public company. That's our haunts ball to see of Bright Machines. Looking forward to speaking with him again once his company hits the public markets. Definitely you're listening to Bloomberg Business Week. Coming up more from Milk In We're gonna wrap up our coverage with Scott Minored. He's the ce IO over at Guggenheim Investments, very well known to

the Bloomberg audience. Yeah he is. He's going to tell us why the search for value has never been more difficult and why the US is starting to resemble a post war economy. This is Bloomberg. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes. Tim Stinovich from Bloomberg Radio. All Right, everybody, it's the question of one inflation, transitory or perpetual. We're gonna put a buck in the jar. Who's doing that? Bostick? Afael Bostick

of the Atlanta Fette. Every time somebody in the office says transitory inflation, they have to put a buck in the jar. Well, anyway, the never ending question came up a lot at the Milk and Global conference this past week out on the West coast. It's getting to a point where even market experts are really kind of unsure where to find value. As a result, that's the story we heard from Scott Minor, the CEO over at Googenheim Investments.

He's a familiar name, of course to the Bloomberg audience, and he told us the upward movements and asset prices are unlike any he's seen in his career, and then he sees modern monetary theory MMT becoming a reality. I have never seen a time like this where there is nothing that I can point to that I can call cheap.

You know, historically, I remember being interviewed on Bloomberg in two thousand and six and telling, uh, the interviewer that the cheap thing was ten year treasury notes at five and a quarter and I said, want who would want ten year treasury notes? Well, you know, I was concerned about the housing crisis. Today, I can't point to anything that I think that if we got ourselves into trouble that would actually be cheap to buy today that has value.

So you're left in this world, which I'm not comfortable in, where you have to find things that are expensive, they are probably going to become more expensive. And so you know, you know, well, I mean cryptocurrency, right, you know, I mean Sheba If you'd invested in Sheba coin back in the first quarter of this year, A thousand dollars today would be worth two point one million, right, I mean, can I find another sheba coin? I don't know, but okay, but we're talking about I mean that a lot of

people think it's a joke. Well sheba coin was a joke created to mimic doze coin, which was a joke, right, So I mean, yeah, well I don't know it's it's a second derivative joker cryptocurrency. But you know, it just shows you how much cash is out there, how it's lifting asset prices. Like I was asked that the Federal Reserve to do a thing on bubbles and what markets did I think we're in bubbles? And I went through every market I could think of, and the one, I uh,

sports memorabilia isn't a bubble. Baseball cards are clearly in a bubble, right, Um? But you know you look at stocks, right, are they in a bubble? Well? Not with interest rates where they're at. It isn't it? And isn't it so much of it's got kind of bounced back from falling off a cliff and things recovering or do you think you know we've done that? And then we've gone a

little bit more. Well, I think, you know, normally at this point in a recovery, I would say, oh, you know, we're kind of in the second or third ending, right like when the Dodgers are winning the World Series. But uh that you know, this is like we went right to the fifth ending, you know, the immedately, the incredible rally that we've got coming out of the pandemic and the amount of stimulus. You know, people compare this to uh,

a war, right, the pandemic was a war. And so I've gone back and I've studied wars, and when you get what's there is an interesting corollarya is you you you have a major war, like the First World War, the Second World War. Right after the war is over and there's been all this stimulus from defense spending and money printing, you get a spike in inflation, which is transitory. So when people talk to me about is this transitory,

which I'm always like, everything's transitory. Life is transitory. But but you know, is you know, is this something that is permanent and should we be worried about it in the long run? And I think today the answer is no. Well, if you look at all the things that have gone up in price that have that are in the CPI components. You've got hospitality industries to hotels, airlines, automobiles, right, which

are due to the supply chain interruption. Um, you know, it's really a bounce back from what we had in the decline. And you can say, wait a minute's got autos. Well, the supply chain interruption to me looks like the retooling that occurred at the end of the Second World War. Right, all of every all output auto plants, everything had been

converted to wartime production. There was a transition period in the in the earl in the mid forties, and during that transition period, people who had saved all this money from the stimulus from the war wanted to spend it, and so auto prices went up. But you know it's interesting is there was one one period in there, I think it was in forty six or forty seven where inflation actually was at twenty but bond yields never went above two and a quarter, which doesn't quite make sense,

does it. Well, I think we're living in it today, So that's interesting. So so what's the interest rate environment? Can we make a projection here? Scott longer term. Is there's something different about the relationships here? Well, you know, I love the the phrase is there's something different? You know, I'm a great had I loved the Ken Rogue Off and Carmen Ryknocks book. This time it's different. And when I met Ken Rogoff, I had to ask him where

did this title come from? I guess it's never different, right, So you know, to to your point, I don't think it's different from the standpoint of what I just talked about in the periods of time that we're talking about, where you had lots of government spending, lots of money printing, and then you transition, your transition, but there is something

fundamentally different in it. We now have socialized credit. We have now made the central bank the backstop for everything, and this is really unusual because central banks were never designed for this. The Federal Reserve was created after the Panic of n to provide some short term elasticity to money to avoid periods of time where you had spikes and interest rates because of exogenous events like the earthquake in San Francisco right so um that of course ended

up setting off a financial crisis. So the idea was Okay, we had this, this temporary elasticity of credit. This is permanent. I mean, this is MMT. No, no matter what any rhetoric ors out there, we are living in MMT. Well. You know, as I tell people, the history of money is checkered. Right, Kings would scrape the engine edges of silver coins so they could build palaces or flight wars, and they slowly debase their currency. Right. Well, the history

of paper money is a more. Right, there has never been a paper money regime that doesn't ultimately end in some sort of hyper inflation. Right. And if you go back and you look at Rogos work on this subject, he says, you get three options. Right. You default if you're a government, Okay, not likely, right, unless we can't

get a budget ceiling pass. You can you can restructure, but that's what people like Argentina do, right, Or you can inflate your way out of it, and so ultimately, And it's interesting because you know, people say, oh, you know, all this money is inflationary, and I agree with that, but you know, Milton Friedman famously said that, you know, inflation is always in everywhere a monetary phenomenon. It isn't based on the size of the budget deficit. It isn't

based on physical spending. It's a monetary phenomenon. But the thing that people forget is the rest of the statement, which is inflation is always in everywhere a monetary phenomenon subject to long and variable lags, right, and we're living in the age of a long and variable leg thirty seconds? What then do investors do? How do they need to

approach the market? You said there's a lot of bubbles out there just well, you know, it's interesting because every investor I have is a long term investor, and after about three months I find out what the definition of the long terms. If you're truly a long term investor, what you really need to do is buy things that

will perform them well in the long run. Real estate, residential real estate, despite everything people say, is still more affordable than any other period except right after the Great Financial Crisis. The difference today is there's financing available, you know, uh there exactly, and you get the option to prepay in our country. So you know, there are a lot of things out there like that. I like. Also, you know a lot of the unicorn stocks that are out there.

I don't want to mention anything names because we're invested in some of them. But you know, this is gonna be like the Internet, this is gonna be transformational. We will probably go through a washout. So if you're a short term investor, you know, if you're worried about the next year or two, maybe you don't want to go there. But the reality is, intend to twenty years, it'll be There are the companies out there today that are that

are Amazon, and I was a genius. I bought Amazon at nine dollars of share and I sold it at fourteen. So you know, so there's a big opportunity out there for people who who want to wait for the crash. But you know, ultimately, if you're in it for the long run, it's Mary Meeker pointed out back in the Internet bubble, by a broad portfolio of these companies and at the end of the day, you're going to do really well. That was Scott Minor, the ce IO over

at googen Him Investments. Well, a ton of great conversations. It was so much fun to be back live and in person there at the Beverly Hilton. Um it was it was your first time, right, my first time being at the Milk and Institute Global Conference, and it was fun. It was a lot of fun. What it's what's great about it? It is really um across section of obviously the financial community, but there's wellness, there's technology, there's media,

there's entertainment. It's just you know what business week is all about, right, a snapshot of our world. Right, you can be walking around in the hotel and bump into a movie star, the governor. I didn't. I didn't either, but I could have. She was there. She was there as well as were many others. All Right. That reps up the weekend edition of Bloomberg Busines this week from

Bloomberg Radio. If you missed any of our interviews or want to hear the full interviews, just from milk and just go to the Bloomberg terminal also at Bloomberg dot com. Thanks so much for joining us. I'm Carol Masser and I'm Tim Stanavak. Be sure to tune into our Bloomberg Business Week Daily show Monday through Friday. It starts at two pm Wall Street Time on Bloomberg Radio. You can also watch our daily broadcast on YouTube. Just search Bloomberg

Global News. Also check out our Bloomberg Business Week podcast You can find it at Bloomberg dot com, Apple, or wherever you get your podcast. Bloomberg Business Week is available on newsstands now. It's the special Double Persuasion issue, so

check that out. Lots of great stories there. Find it at Bloomberg dot com, business Week dot com, and on the Bloomberg terminal, and 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. Have a great weekend. Stay safe everyone. This is Bloomberg