This is Bloomberg Business Wait 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.
All right, we want to kind of ship back to the markets if we may, because one name that's certainly been front and center and that has balent here soaring more than twenty percent. We saw it in the aftermarket, we saw it in today's trade. I was just going to pull it up on the Bloomberg and see where we are. Were up twenty three percent, so pretty much holding on to its gains. A lot of it is because they talk so much about AI on the call
with analysts. So let's get to it with our guest, Bloomberg News VC and Startups reporter Lisette Chapman in our San Francisco bureau, and Andrew McAfee, MIT scientist and work Helix, co founder at the MIT Sloan School of Management. He joins us via zoom in Boston. Folks, Thanks so much for being here with Matt and myself, Lazette. First off, just brief Lee kind of what we heard from Palenteer, in particular the excitement and narrative around AI. Tell us kind of what we got from the company.
Yeah.
Sure. Palunteer, of course is a you know, tech company that's been unprofitable for two decades up until this past quarter. So that was another thing that's been driving the surge and the stock price. They did a surprise profit, and then they pivoted very quickly to talking about this AI platform that they say that they've been working on for
the past several months. They will be releasing to select customers they didn't say who a little later this month, and then it'll be available more broadly for their hundreds of customers in the months to come. Of course, their customers include some of the largest branches of the military here in the US, as well as that of our allies, along with a bunch of commercial customers. So that's driving the news.
So and Andy, let me ask you about you know what kind of worry this could be. When I read the Palenteer story and I saw that they deal with very sensitive data, criminal databases, DMV records, phone data, and that they would be providing solutions AI solutions to the military to bring to dig through this data as well as you know other institutions. I thought it's a little bit scary, and then I saw the CEOs quote Alex Carpi says the machine must remain subordinate to its creator,
as if the alternative is even a possibility. You and he wrote the book Raise Against the Machine with my buddy John Brynielsen's brother Eric, So it's great to have you on the program. Should we be worried about this AI, especially in the hands of a company like Palenteer.
We should always be mindful when extraordinarily powerful new technologies come out, and generative AI is an extremely powerful new technology. One way to think about it is, we have finally built a technology that understands this that is fluent in human languages. This is kind of wild and we were and expecting it, and Matt, like you point out, it can be used for all kinds of purposes.
I'm actually optimistic.
I think Palenteer has a pretty long preck record of safeguarding the sensitive information that it's given and of building very powerful technologies that normal human beings can work effectively with. I think it's an ideal match for this new category of generative AI, which is all about letting us do this and interact with with huge amounts of data.
Well, well, ways like Liz that and Andy, this is why I wanted also to talk to you because I feel like we need to be rationalble rational as we talk about AI, because I feel like there's a lot of folks out there saying, oh my god, you know the world's coming to an end. Andy, what is the smart conversation? As you say, you know, there's lots of data and information in the hands of a lot of companies already, I would say and argue just about every
company that's out there on all of us. So what is the smart, rational conversation to have around AI and a company like Palenteer.
And what's not going to happen is that chat GPT is inadvertently or with Palanteer's help, going to take all the things that the NSA knows about it and tell the Internet about all that sensitive information.
That's so unlikely. We don't need to spend a lot of time on that.
What it's going to do instead is let an analyst at the NSA use different techniques to interact with huge amounts of information and draw conclusions with it. Now again, there are risks associated with that, but I think it's fundamentally a quantum jump in productivity and in our ability to deal with machines and huge amounts of information.
Well, you could, I mean see AI, Lizette.
You could see the AI using for example, the way back machine and digging into Carol's old social media profiles. Maybe she posted a picture that wasn't very flattering on friends to her back in the day.
And not all Facebook, and now.
Someone could go and find it. Isn't this a concern?
I mean, you could find it anyway, but this is a giant machine helping you to do that kind of things.
That kind of stuff come on in Lizet.
Yeah, I was just going to say, I think it's really worth keeping some sense of context around this. This is information and data that Palenters software has allowed, has aggregated, cleaned and integrated for you know, the intelligence communities, for the IRS, for the veterans affairs, for all sorts of military operations of ourselves and our and our allies for
over a decade, if not more. The AI tweaked to it, if you will, is simply applying that data against large language models to go ahead and make it more accessible to more users that have the permissions to access this different information, this different data sets. You're not allowed to access it, you're not allowed to use it without it being logged in. Pallenteer software, which they say is going to make them more secure or already more secure than some of the alternatives on the market.
But Andy my understanding, there was a great thing. I think it was in the times of just kind of a very big understanding of how generative AI works and how it like initially it's kind of code and gobblygook, and then it gets smarter and smarter the more information that's kind of put into it, So something like whatever Palanteer is using or anybody out there, gets better and smarter and more accurate the more data that goes into it.
So two mats concerns and sentient. He's freaking out here, he's heading for the hills.
I'm amazing.
Let me use that word.
That's the traperator worry that we don't need to discovers.
What's the balance of making our next level of AI maybe incredible for our world and smarter and safer, and also securing that it doesn't get into the wrong hands.
Well, I think, like we just heard, companies like Pealantry have a long trek record of segregating the data and making sure that it can't jump over those walls very easily. So that's not a thing that I'm worried about. You point out, Carol correctly, that these large language models tend to get better, they get more fluent, they get more nuanced as we give them more data.
Great.
I would like to interact with an extraord narrowly fluent, nuanced, very flexible technology. I spend a lot of time filling out spreadsheets, making budgets, doing stuff like that. I would love to be able to say to a piece of technology, hey, give me the first draft of.
This and let me tweak it from there. That's what I think is the real innovation here.
Well, and you know the limit on that is going to be the ip that the large language model has access to, right, Lizette. So I mean, for example, I would love to generate an AI chatbot that can comb through all the different used car sites and find me the exact nineteen eighty five nine to eleven sc that I want without us on roof, please, But it can't because Auto Trader, car Gurus classic cars, Hemmings. They don't allow these large language models to come in and look
at all of their pictures. If they don't have the IP, they really can't do business, can they exactly?
And so that's what we're going to be seeing and that's what they're working on now at Pallenteer. In the weeks and in the months to come, they talked about refocusing the engineering resource of their three thousand plus mostly
engineers on staff. They have a very small sales team and they're looking right now to build you know, this platform on somewhat of a bespoke basis for customer after customer because like everyone has mentioned before me, it really comes down to each individual use case, what data they have access to and what you know, how they can bring that forward with AI to too larger use cases that are that are generative.
Hey, you guys, I want to put this to both of you. What's the company to watch when it comes to AI right now? Is it feels like everybody that's right, any earnings call, that's the words that have been dropped.
It's obviously not IBM.
It's because Peers is we have new AI and the stuff goes up twenty three percent ibs.
We have new AI and the stock falls person.
To both of you was that you first is polunteer. The company to watch is it Microsoft? Who is it?
Let's see how they do and their results. Okay, you know this is a platform that they still haven't figured out a pricing strategy, Carp Alex CEO Alex Karp said, our strategy is to take the whole market. They're building it on the fly. They are pricing it as well on the fly, and we'll have to see how that works out in earnings. They have a big event coming up at June first to say more about it, but proof's going to be in the pudding.
Andy, who are you watching? Who's the company that all of us here at Bloomberg should be watching when it comes to AI?
Is it?
Can we whittle it down to one person or one company?
No, But the company that I'm going to be watching very closely is Google. Because a team at Google wrote the paper in twenty seventeen that presented the architecture that OpenAI is now using.
For GPT four and chat GPT. That was a Google innovation.
They published it openly and another company has taken the first steps with it now I don't have any inside information, but I'm pretty sure that Google is very keenly aware of that and would like to get the momentum back in the AI space, the generative AI space.
They also have an extraordinarily deep.
Bench of talent here, So that's the company that I'm really watching with keen interest.
I just wanted to ask what you and Eric are up to now, you know, you know, what are you doing?
Andy, Eric and I talked about this stuff all day.
We are the co founders of a startup that is working in the generative AI space. We are plotting our next book and our next research that Matt. These are fascinating times. We haven't seen progress this fast with an important technology in my career, and my career is long enough to encompass the web and the smartphone and the social web. This stuff is crazy, and it's getting better so quickly, and more capable so quickly.
Bigger than the Internet, bigger engine.
Compare it to I don't quite know.
Okay, it's up there, it's up there, pretty.
Much just developed so quickly.
I know, well, well, actually AI has been around for a long time. This is just a whole other level and it just keeps getting right exactly.
And we weren't expecting this particular leap this quickly. And then the companies have demonstrated who are leading the charge here how quickly their technologies get better. If you go look at the images that AI can generate and you go back just twelve months, you will see these staggering improvements in the kinds of images they can generate in response to a prompt.
Sounds like it called them off guard as well as the world.
I actually saw AI make a trailer for a new Wes Anderson version of Star Wars, and it's pretty impressive.
It is pretty amazing what we lost, Andy, Andy, come back soon. We want to continue this conversation, both of you. Incredible Annie McPhee McAfee excuse me, co director, as we said, am I yes, yes, yes, MIT scientist and work Helix co found I just want to get it right at the MIT Slow School of Management and then of course our thanks to our Lyzit Chapman VC and Startups Supporter.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen on Bloomberg the iHeartRadio app and the Bloomberg Business app or wants us live on YouTube looking at the.
Global fresh fruits and veggie's market over one hundred and forty four billion last year, forecast to grow to some two hundred eleven billion by twenty twenty eight. So we're talking about a lot of stuff.
It's also something I haven't really thought about it before. But this is something that I buy almost every day, and you know, at least every other day, I find myself at the supermarket down the street buying fresh fruit and vegetables because you know, that's the stuff that you have to You can't buy it and keep it for a week or two like I do with like salami for example, you know, or bread. So is this something
you have to keep going and getting all the time. Well, I've never really thought about that.
Well, we take it for granted, it's just going to be there. Our next guest, though, doesn't take it for granted. He's got a company that is working with buyers and sellers in the fruit and veggie market, the fresh fruit and veggie markets. Let's get to it with Patrick McCulla, CEO of the Digital Marketplace for the Global produce industry. We're calling and talking about produce pay he's here in our studio. I'm good to have you here with Matt myself.
Tell us about your company and what you guys are doing.
Thanks Carol. Yeah, we're trying to solve a big waste problem. So this is a one point three trillion dollar industry. It's analog still, it's push supply, and we're attacking sixty six zero percent economic waste. Most people don't know this, but forty percent of the harvested fruit and vegetables perishes before it's consumed. How much forty percent?
I imagine if I buy a box of grapes, more often than not they go bad before I finish them, you know. And that's just at my home. So if you talk about from the farm into the truck, ship to the store and then to me, it's got to be I mean, obviously it's very big.
It is, and if you think about what can be done about this. We offer access to market, access to financial products, trade protection. So we're trying to help starting with the farm, the ability to pull through for the US consumerster fresher riper, healthier produce.
So where do you where do you start?
I mean, such a how do you do a huge fragmented market, and you know, do you go to every farm out there?
That seems like a very difficult communication.
That makes us unique.
We started with the farm. A lot of people attack the middle, the wholesale distribution or some people think, oh, the answers in retail grocery, and there's certainly problems to be solved there. We believe the farm makes key decisions
and how they produce, how they grow. There's human rights, there's water rights, and there's carbon footprint consequences, but they also make decisions whether to let let's say, a grape hang and become a Tier one grade a premium grape, or if they don't crop thin and they take weight to market and they do that through the open market, then you've got speculators brokers that might be playing for arbitrage who might hold onto those grapes try to corner
the market weight for prices to come up at the expense of the US consumer.
So how do you get to this? How do you fix this? Because it sounds to me like to some extent we need to MA Maybe I don't know, do we need to reduce supply so there's not so much out there that ultimately ends up as waste, Like how do we fix this?
So you know, there's there's always an argument about, you know, world hunger and is it a distribution problem? And I can tell you looking at the path to the US consumer, one of the healthiest things we put in our mouths has one of the dirtiest paths there. So if you think about four to eight middle people actually touching produce
that don't always add value. There are some that add great value if you're bringing capital to a farm or to a distributor, if the distributor is packing, shipping with quality control, brand recognition. But we're trying to lean out the beginning and the end. We're trying to take out the arbitrage specialists in the middle, these brokers that don't add real value for the benefit of speed to the consumer. If you can shorten that journey, how do you do that.
You do that by redesigning the whole vertical.
So in other words, it goes from farmer Joe or Jane.
Straight to the idea is bring retail, grocers and farmers together through our marketplace, through our financial and trade assurance products. A lot of what's happened in this industry is because it's been rampant with speculators and a lot of volatility, worth the changes in our world, think weather, there's a lot of inefficiencies built in a lot and a lack of trust. We're trying to bridge the beginning and the end for the benefit of efficiency and attacking that sixty percent economic ways.
So first of all, do you always wash fruit before.
You eat it? Yees? Well, most of the time.
My wife tells me to do it, but I feel like most of the time I have a stronger immune system because I don't.
I cater to that belief myself.
I don't wash my fruit either.
So a lot of this is about financing, right right, because I look on your website says three billion plus in fresh produce financed.
What does that count?
I'm finding counterparties correct.
That's right.
So the biggest problem farms have is there if they have tremendous input costs labor, seed, fertilizer, and they're waiting for harvest five or six months later. We bridge that working capital gap. That's our primary product today. But by doing that super well and doing that with the best farms in the world, we're able to then take them to the right distributor marketer partners who will introduce us
to the right retailers. And then we can take the speculative spot market out by creating programmatic negotiations where we tell the farm.
Great, So you are kind of, to some extent become a financial middleman, but you take out the physical middleman.
That's right?
Is that that's right? Kind of what you do.
We're redesigning how the industry works. We're asking retail come earlier with fixed pricing so that farmers can plant and take risks and breed the right programs that might perish buying an EV.
You got to put the money up front, right.
So talk to us about the market.
I mean, I'm interested to know about price fluctuation shortages. Do you see you know our strawberry is gonna shoot through the roof in terms of the price. Are we going to be able to get grapes cheaper? What do you see out there?
Fires and chill a recently floods in California impact of the strawberry market. So grapes and strawberries, Yes, supply and demand is upset right now. So in the new term, we're gonna have premiums on those products.
Do nuts count as produced? Do you do nuts?
We don't do nuts today, but it's in our future.
But patrick aren't we always going to have, you know, disruptions in terms of prices because climate change. It's real, that's right.
It is climate change, and it's the global nature of what the US consumers asking for. We're asking for twelve months a year organic blueberries. Well, we don't grow organic blueberries in North America twelve months a year, so we have to go to South America or South Africa to fill in those voids.
Do we stop that?
That's the question.
Well do you stop that? You want fresh blueberries? You probably go buy fresh blueberries or whatever you want.
Okay.
The dilemma is the out of seasoned blueberries hold a premium because they're scarcer, so there's more money to be made there. So I think this is a trend that continues.
Yeah.
Also you've got to ship them from wherever they come dirty diesel, cold stored into cold stories, so terrible for the enviro produce.
Yeah, think about I love the example of a tomato at your farmer's market in the summer, right, just quickly ripe and red the thing in the grocery store, Orange and Heart agree.
It's like different, It's just not the same. Come back love too interesting. Certainly, we talked about the food space. There needs to be some disruption, innovation. Patrick McCullough, CEO at Produce Page, joining us here in studio, Carol Master, Matt Miller. Matt loves is blueberries all the time, all the time. This is Bloomberg all right, Yeah, come on, us and China, why can't you be friends? This story is in the upcoming new issue of Bloomberg Business Week.
It's actually the remarks of the upcoming new issue, which will be on newsstands later this week, already online at Bloomberg dot com slash Business Weekend on the Bloomberg It really gets to the decoupling that has been going on between the US and China and.
What hey, don't call it decoupling.
What I'm going to call it decoupling. But Biden officials are saying, whoa, whoa, whoa slow your role on decoupling. Let's get into it with Bloomberg Sean Donn and he's senior economics writer at Bloomberg News with us on zoom in Washington, d C. And then we've got the editor of Bloomberg Business Week, Jill Weber, here in our interactive broker's studio. Jill, whatever you call it, it's kind of a little bit dysfunctional.
It is.
I think it's like maybe the Great American Walk back. What do you what do you think, Sean? Is that is that accurate?
You know?
The coupling is a word that I've hated for years. It's it's a word that is it implies like a divorce. And I think the US and China are you always going to be kind of neighbors that try to get along, that have a relationship, and they just try and put up fences here and there.
Are they staying together for the kids? That's what we want to know, Sean. Are they staying together for the kids?
Jill?
I mean the coupling feels a little bit like that, right. I mean, it's kind of it's it's it's one of those hard ones. Look, do you US in China have this immense economic relationship. They are among each other's top trading partners. They will continue to be among each each other's top trading partners for some years to come. I think what the US has been trying to do in recent years has been to try and cut off certain strategic parts of the relationship. You know, we've all been
reading about semiconductors. There's this big competition over electric vehicles and so on. In the US wants to try and get ahead of China and compete. It's tired of having its intellectual property stolen. That's something we've seen in recent years or recent decades really, and so it's a dysfunctional relationship. The US is trying to reset it. It's trying to put some boundaries there, and the Chinese are saying, well, if you're trying to do that, you're trying to contain us,
and that's really impolite and that's awful. And so there's a terrible shouting match that's going on. The problem for all of us and for the global economy. These are the world's two largest economies, and if they can't get along, if they can't find a floor for their relationship, then it really is going to be a terrible bust up. And it's not just the kids that are going to get hurt, it's the whole neighborhood.
That neighborhood being the world so interesting.
We've heard Janet Yellen and Jake Sullivan recently kind of say as much in their remarks and speeches and whatnot. Wondering what was the language that jumped out to you that sort of attempted to reset with this narrative is Yeah, So look, I.
Mean it's it's there's two things. One, US officials have been trying with increasing frequency to get out there and say we are not trying to decouple. We're not trying to have this big rerupture with with the Chinese economy. We're trying to have a sensible, strategic and focused change in the relationship. And then something interesting happened when Janet Yellen talking that she took that a step further and talked about the relationship between national security and the economy.
And then a week later, Jake Sullivan, the National Security Advisor, came out and he started using a term that the Europeans have been using and said, rather than the cup, when we're looking for a de risking of the economy, which is kind of a more polite Yeah, and it's a very European term.
It makes perfect sense to me, as Jean.
Let me first say that I think it's an incredibly well written story I loved it. I breathed through from start to finish, which isn't that I always do with my attention span on exactly.
I have the problems learning disabilities.
But I think it's right in this you know, black and white world where everybody's either in bed together or at war, to acknowledge that there can be nuance. Right, We're not kind of completely decouple. We're not going to totally isolate China. We just want to de risk and diversify. And that makes sense because we've been so concentrated in terms of the supply chain. We found out over COVID nineteen, over the pandemic, that we had way too many eggs in that basket and we need to move a few out.
But that doesn't mean we're totally leaving.
Right, and that totally makes sense. We all get that there's a problem, though, and that is that the world is more complicated and that there aren't these simple levers that you pull the kind of d risk or decouple.
The fact is is that you and I have been buying a whole lot of Chinese goods in recent years, and even though you know we've had the trade wars of the trunk years, that we all remember the trade between US and China last year was at a record level in part because of our appetite for Chinese goods and a lot of companies, a lot of big American companies still want to do business in China. Tesla still wants to sell cars in China. In fact, it's adding
to its factories there. So you know, the relationship is we can try and have this kind of Washington Beltway conversation about the risking and so on, but in some ways it's not just the governments that get to choose companies, and consumers are going to affect that decision in a
lot of ways. And the problem is that people are worried not just about an economic conflict, right, people are worried that you get this rhetoric building and building, and it gets into things like Taiwan and worries about a move on Taiwan by mainland China and how the US might respond and a more belligerent world, and that gets out of hand, and then it's going to be an even the uglier world.
So we also don't want to encourage slave labor. We don't want to support the Russians and their war in Ukraine. You know, there are things that we definitely need to be conscious of and make decisions based on those.
I find this to be a tricky pass for American leadership to walk, you know, because it's like they can't go maybe full Trump here, because we know what that looks like. And there's some version of backpedaling that is happening. But they can't backpedal too much because then if it's going to be Biden in the election, like you know, we've got.
Back pedaling on China and on Saudi Arabia come on the rematch.
And I think that's and I think that's one of the big issues that we have right now, and it's why we're seeing this language now. The administration is trying very hard to tamp down the relationship, to tamp down the rhetoric, because it knows that in the next year, as we go into a presidential cycle, things are going to ratchet up again and it's going to get even
more heated. So let's try and bring things down for earth a little bit now, because we know what's what's coming ahead, and we also you know, it's a relationship that's not going to go away. And I think, you know, you're trying to set these new guardrails for the relationship.
The administration has worked very hard to try and keep it focused, but the rest of the world is really worried about this, And as much as the language which is aimed towards Beijing coming out of Washington right now to try and reduce the temperature there, it's also about telling allies that, look, we're not trying to get into a conflict here. We're not trying to have a major
rupture between the world's two largest economies. We know that this is an important economic relationship and it's one that's going to endure no matter what we do, and we don't want the rest of the world to suffer as a result of us going down a chaotic path.
Sean, do you think the Biden administration would have wanted to have had this out in the open like this earlier if not for spy balloons entering the lexicon?
Yeah, so, I mean, we know, you know, one of the things I heard from from folks as I was reporting this piece was a desire to get back to Bali and that's the phrase that they use, and Bali is where last November, as an a Biden and ches.
This really is a romantic comedy.
We got to get back.
They shot down, and they had their you know, they had their rot had to promise more engagement. They were going to get along better. Anthony Blincoln was going to head over there earlier this year, and then of course that balloon drifted over uh and everything uh went the pot And and you know what what people in administration are trying to do now is to get things back into a place where we can start getting that engagement again.
There can be a frank conversation and and you can talk through your issues rather than yell at each other. It's completely unclear whether that's actually going to happen.
Yeah, But at the same time, and I'm going to bring up something Matt you shared, but it's also shown in your story that you know, it's not just the Biden administration in the US, you know, with a delicate balance when it comes to a relationship with China. And I understand that these two are the biggest superpowers out there, and I understand why it's so important. But Matt, you shared earlier that Italy has signaled to the US that it tends to pull out of an investment packed with
China before the end of the year. We're talking about Belt Road, which has been such a big Chinese initiative. There's a bigger, broader global thing going on where everybody's being very delicate. It feels like slowly when it comes to China and their relationship, even Apple as they pivot to India a little bit, there's still like, you know, Tim Cooks over there, I love you, I love you, China present shit, you know what I mean. Like it's this delicate balance.
Yeah, and look, the rest of the world hates where it's stuck right now, right because they're stuck in between these two quarreling parents, and it has they have important relationships with both.
But the world.
But isn't it like the whole world kind of stepping back a little bit from China.
Yeah, the whole world is everyone's reconsidering their their relationship with China, you know, and for all the reasons he talked about, whether it's slave labor in Hinjiang or whether it's just an over reliance on everything from semiconductors to
antibiotics coming out of China. At the same time, I think if you talk to allies of the US, a lot of them are also have their concerns about US industrial policy right now and what they feel like is a more selfish economic policy coming out of the United States and the potential consequences for them there. And they also are more broadly concerned about a world that will
become more fragmented and what that might mean. And IMF came about, you know, a few weeks ago, so that was going to mean slower growth in the world, which no one wants.
So it's you know, I would just I want to talk about what's going to dead ceiling, but I do want to tell our listeners to encourage them to go to the website, read your story because it's a great piece, and even better, buy the magazine because I like the actual paper copy.
You're listening to the Bloomberg Business Week Podcast. Catch us live weekday afternoons from three to six East on Bloomberg Radio, the Bloomberg Business App, and YouTube. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa playing Bloomberg eleven thirty Brother Marco a journal.
How about you let me drive?
Oh no, no, no, no, please going to drive Hory Please, I'll do gravels.
Let's wat I want to drive.
It's a good question.
This is the drive to the clothes dot com.
Think we'll buy around Yelda Don on Bloomberg Radio.
All right, everybody, we've got just about just under eighteen minutes left in today's trading session. A lot going on here, stocks bouncing around, little change. Uh, it does feel like we're focusing on the debt ceiling. What's going on ultimately in those talks later that are expected between President Biden and congressional leaders. Having set that, curious Matt would on the mine of Nancy Tangler. We were both excited that she was going to join as chief investment officer at
Laffer Tangler Investments on Zoom from Scottsdale, Arizona. Nancy, how are you, Caeryl?
I'm well, thank you, sunshine. As far as the I can see.
Well, speaking of those, as far as we can see, what kind of visibility do you feel like you have on this financial market environment right now?
Like see what I like to It was very sweet, very sweet. Yeah, so it is a little challenging. I mean, for the last year I've been saying this is the most complex investing environment of my long career. It, and it remains so. But I do think we're starting to kind of come out of the fog. The FED is, if not done, almost done. We have seen better earnings than we're advertised. The economy still seems pretty decent, the
consumers in good shape. I think you're starting to see a crack in the job market, which in the labor market, so I think that will help things as well. So we're we're starting I mean, we've been adding risk back in October and adding to technology and consumer discretionary, and we're continuing in this volatility. We expected me to be volatile, and so we are actually in the markets today and tomorrow. So I can't talk about some of the names.
But no selling may, no selling may and go away.
Huh No, absolutely not.
Let me go back to your crack in the labor market comment, because even though I know what you're talking about, having read your notes to the listener, the listener is going to say, what, we had a bang up jobs number on Friday, Like there's no problem. Is there's no crack in the labor market. Three point four percent unemployment. That's lower than you know, we've any of the three of us has ever seen.
This is why Nancy is there, Matt, you are here? Okay, see why?
Well, because of the revisions, So most people weren't talking about the reviision provisions to the previous month and the previous months before that. And separately, we have a labor force participation rate problem, particularly in the fifty five and older age cohort. So the baby boomers, I think I'm the last one still working, and they're not coming back. And I think that's important to note. They are not
going to come back. Their financial assets are at higher levels than they were pre pandemic, even with the bear market last year, and they're settled down into retirement. And I think that's one of the reasons that you're seeing restaurant sales continue to be strong. You're seeing services sales continue to be strong. That's the baby boomers who have retired for good.
Well, then how do we get to how do we get this inflation down? I mean, even if there is a crack in the labor market, we're still looking at a lot of people having jobs, right, A lot of people can afford what they're doing. So how do we get prices to budge wages are still way too high?
Well, real wages though Matt aren't. And that's been part of the problem is that, you know, after inflation and most of the sort of blue collar segment of the economy and even the white collarme have experienced real wage declines. And so I think one of the ways we do this is some of it's already started, like housing has already rolled over. It just hasn't shown up in the
numbers yet. It's a lagging indicator. But you get companies that are spending on productivity, so they're buying our investment theme, which is the digitization of old economy companies and the suppliers of those arms that are needed to run a digital business.
Well, I want to pick up on that because Matt and I were talking earlier about Pallanteer, which is just off like a rocket today at more than twenty percent. I know you can't talk about necessarily what you're buying today, tomorrow or yesterday, but I am curious about the generative AI play, Nancy, because this is certainly going to factor into the productivity of workers at some point. We're just kind of figuring it out. Is there a play for you here?
Yes, And that's what we were adding to I can talk about what we own and what we've purchased, I just can't talk about what we're buying today. So what we were doing in the fall was we were adding to names like Microsoft, We were adding to Palo Alto Networks, We added to Adobe, which is sort of on the fringes of this AI boom, and we added across the board in technology. So the reason for that was that
we didn't think. We think there's a secular tailwind to this whole narrative of not just cloud adoption but also AI, and that is where we're going to continue to be adding as we get presented with great opportunities. Another name we added in January was Tesla, and that you know that has its own sort of interesting dynamics, but we're pretty happy with that investment, even with the stock coming off recently. You can't fight this trend and robotics AI.
You know, the digital economy is now ten and a half percent of GDP, it's growing every year. Robotics installations or we're up twenty two percent last year. I mean, this is going to be the solution. And you know, you hear the handbringers saying, well, AI is going to take away jobs. I mean, every technology that we've introduced since the Industrial Revolution has taken away a certain kind of job and provided for a new kind of job.
And so that's what we're in the midst of, I think, kind of the fourth Industrial Revolution, if you will.
I'm curious what you like about Tesla.
Do you think that the new technology is going to be able to bring down.
Costs at Tesla?
Because in terms of demand, it seems as though they have a little problem at least they've had to goose it with prices. And you know, Elon Musk, you know, all of a sudden sort of in a way, kind of outing himself as a Trump Republican on Twitter can't be good for his Tesla customer base, right.
I like the CEO. He is so entertaining. No, but one of the names I also should have mentioned, sorry, Carol, was Service. Now that's one of our largest holdings. Yeah. So I think a couple of things. He's either the smartest pricing meister around. I mean, he's forced Forward to have to cut prices twice this year, where his whereas his margins, though they've come down, are still four times that of Ford's. So I think he's using pricing as
a hammer to get people into the ecosystem. Think of kind of like Apple, which is another one of our holdings. You know, it's not really about the handset, it's about the ecosystem. And and so I think that's what I just stated myself. I should have said the iPhone hands on.
I love that.
That's okay, you're allowed.
You're allowed.
It is a handset. That's not wrong.
Yeah, So I think he's he's using this as an opportunity. Yes, demand has slowed somewhat, but if you look at combustble engine vehicles, they were flat year over year, and evs are still growing in the you know, the high double digits teams yea teen percent of sales.
I think it's pretty wild.
Yeah, I would say, I mean, I don't want one, But I get why people, Why don't you want one? Well, because I drive from Scottsdale to Incline Village and betake eout four weeks and might have to stomp and and charge up every wood.
Well, we're getting in there.
Hey, Nancy, this was fun.
I'm smart.
Nancy Tanglar, she's chief investment officer at Laughter Tangler Investments. On Zoom from Scottsdale, Arizona.
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