Bloomberg Audio Studios, Podcasts, radio News.
This is Bloomberg Business Week Daily reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy. Plus global business, finance and tech news as it happens. The Bloomberg Business Weekdaily Podcast with Carol Masser and Tim Steneveek on Bloomberg.
Radio, I want to get to our Drive to the Close. Guest back with us is Joyce Swang. She's senior client portfolio manager for American Century Investments.
They have about two.
Hundred and eighty two billion in assets under management, and she's back here in our Bloomberg Interactive Brokers studio. When you're back at American Century and you're surrounded by your team and your colleagues, what is it that you talk most about?
I mean, right now, there's actually a lot of things going on. So as a fixed income person, you usually we're in the boring part of the market, there's a
lot to talk about. So recently it's obviously been the job's number, you know, inflation, looking at the underlying data there, thinking about how to understand the three percent GDP number we saw and we're really talking about tariffs, right, So it's everything of the above, just given how rates have been relatively calm despite a lot of this news coming out.
So when you look at i mean, the tenure yield at four to twenty, we've been talking about a lot of the last couple of days, especially considering the structural measures that should be pushing yields higher.
Right.
We were just talking about with Stuart Paul from Bloomberg Economics, what's holding us down this low for now?
And does that yield bounce?
Yeah, I mean, we think the tenures likely to be range bound for the rest of this year. The issues that are keeping it down would be the data, right, So the hard data is finally starting to soften. At American Century, we've been thinking that the slowdown is the most likely scenario for the economy in the US this year. It's finally showing up, right, Jobs un berbs first, So that fear, even if it's a small risk of recession, is going to keep the tenure below five.
We think likely the range is four to four.
Or five longer term though, you think you know, we talked with our Stuart Paul about demographics, baby boomers, the debt, the US debt that longer term what did he say up above ten?
Six percent of the six percent is the long term natural rate, which, yeah, that's.
Shockingly high for the ten year yield, right, that would be extremely high.
Again, I think fact.
They ever interior discussions when you when you look longer term.
Longer term yees.
So the most frequently asked question I get is the deficit in terms of longer term things. That is obviously going to be a problem that needs to be resolved. As investors, we're thinking more tactically, so let's say six months, a year, two years, it's more short term trends rather than these burgeoning long term trends. But yes, that is something that weighs on our minds. And you do get these bouts of volatility by scaresth.
So you buy what in terms of the US treasury market.
So we're actually liking the short end of the curve right now, so not treasuries, though. We are looking at income opportunities because while spreads are pretty tight across corporates, across securitized markets are at pms, and analysts are looking
for areas of the market that are less trafficked. So looking at, you know, smaller deal secondaries on the corporate side, looking at potentially high yield names that are going to be upgraded rather than downgraded, looking at non traditional asset backed securities, stuff that's not in the index.
By the way, is there a cool name for that? Because I know, if you're like in the BS and you fall down, you're a fallen angel.
Right.
Is there a cool name for junk that becomes investment grade.
It's rising stars.
Oh, that's pretty that's pretty clear.
Look, spreads are so tight, right, and we just saw I thought the Wall Street Banker bonus story was amazing because equity underwriters are not getting paid and debt underwriters are. It tells me that, you know, IPOs just aren't there and everybody wants to sell bonds.
Is that market going to stay open like that?
I hope so.
And I hope that, you know, asset management bonuses for fixed income people.
Are up to I hope so for you also.
But yes, I mean, one of the biggest changes that we've seen since rates have gone up in twenty twenty two is that things that were booming from the global financial crisis until then aren't quite so attractive. Things like IPOs, private equity, private credit. Stuff that worked when rates were at zero suddenly don't when rates are at four.
But why is everybody buying why buy corporate debt when spreads are this type? Is it just they're so happy to be getting some yield?
And I mean, you have to look back to the global financial crisis to get anything close to where we are today. You were there, I was there at least were right. Yeah, So I was there the last time we saw yield this attractive. And I think when you look at institutional investors and retail investors advisors, most people are trying to get let's say, seven percent on their portfolio. If you can get five to six on high quality fixed income, that looks pretty attractive.
But high quality, especially if you think growth is slowing down right at this point, you want to be pretty quickly and pretty chuck.
Highield spreads are tight too, they are they are, so we are selective in high yield.
It's again those rising.
Star stories, very select idiosyncratic names. Not beta definitely. I don't suggest going passive in this environment.
Joyce. What's the implications or impact of tariffs that have an effective rate of fifteen to sixteen percent, the highest since nineteen forty six, very different than the world that we've been living in. What is though, ultimately the impact on companies, You know, as we look longer term and I think about whether it's their debt positions or their equity positions, whether I look at you across the balance sheet in terms of margins, profit growth, like, what's the impact.
It's a different environment, right it is.
And that's what we've been really paying attention to during earnings calls, because while the tariff situation is just getting finalized, I think companies are still deciding how much they have to absorb, how much in concessions they can get from their suppliers, and how much they can pass through to consumers. And that's where I think the active management piece comes in, because it's going to impact companies in different sectors and in different leadership positions differently.
Right.
So, if you have pricing power, you can pass through your price increases to the consumer, and if people love your brand, they're going to be willing to buy it. But in terms of corporations, the debt coverage ratio is very strong, so despite tight credit spreads, corporations are in a great spot. There's no risk of like big defaults happening even in high yield, so we're not terribly concerned about that aspect of it.
Crazy considering like if I had told you at the end of last year, Joyce, we're going to have you know, tariffs at sixteen percent on the rest of the world, what would you forecast?
Yeah, well, I mean we were definitely thinking at the end of the year.
When President Trump.
Was elected and he started, you know, during the campaign, he was targeting stuff and released tariffs up to forty fifty percent on Liberation Day, we were thinking recession was going to be the most likely massive inflation.
Yeah.
Is this just companies really focusing on their balance sheet? I just think about this since the Great Financial Crisis and then you know, layer on top of that the pandemic. I mean, CFOs working with their CEOs making sure that they've got maybe not fortress balance sheets, but pretty close.
Yes.
Absolutely, And that's where our corporate team is actually partnering with CFOs and the finance teams at companies to approach them when they see debt coming due in the next one or two years.
They'll go to them and be like, we know you.
Don't want this to get to the level of attention of your CEO asking how you're going to refinance this debt. Right, Let's work together and come up with a way to refinance your upcoming maturities.
So that group really busy, because that's what's happening.
Yes, exactly. So we're looking for those opportunities. Again, we're not just buying the broad index, but we're looking for these unique opportunities to generate some alf on a security selection basis.
Great to have you here, Thank you, Thank you, so appreciate joy the rest of the summer.
Joyce Wang.
She is senior client portfolio manager at American Century Investments. We mentioned two hundred and eighty billion two hundred eighty two billion in assets.
Under management right here in our interactive broker studio.
Be Well, you're listening to the Bloomberg Business Weekdaily podcast. Catch us live weekday afternoons from two to five pm Eastern Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
Well.
India's government is scrambling to contain the economic fallout from President Trump's threatned tariff action, which has left some officials in New Delhi reeling meantime time in terms of what we got from the President earlier this morning on CNBC, you talked about maybe US tariffs and semiconductors and pharmaceutical imports which would be announced quote within the next week
or so. This as the administration really gets ready to target key economics sectors in its effort to remake global trade.
Heres what the President said.
We'll go into pharmaceuticals. They make a fortune with pharmaceuticals, and they make our pharmaceuticals in China and Ireland and everything else. And pharmaceuticals will be putting a initially small tariff on pharmaceuticals, but in one year, one and a half year's maximum, it's going to go to one hundred and fifty percent, and then it's going to go to two hundred and fifty percent because we want pharmaceuticals made in our country.
All right, That, of course was President Trump earlier on CNBC. One thing that I want to add to that, the US is looking at ways to equip chips with better location trucking capabilities.
So chips, microchips, microchips.
Look, they want to put an air tag on those times incy Ween Sea, itsy bitsy little microchips.
Yeah, like you know that look like that Apple tag. This is the creutail, the flow of semis made by the likes of Nvidia to China. All right, tracking all of it. There's a lot coming at us. Is Bloomberg News Senior editor for Technology and Strategic Industries. He's Michael Shepherd. He's out there in our DC bureau.
Mike. A lot going on here.
Get us up to speed on what we are hearing from the President when it comes to various sectors and what we are getting in terms of still waiting for terms with some big trading partners.
Well in the tariffs front, one of the most significant things that we heard from Donald Trump today was a timeline for both the pharma tariffs and the levees that
we have long been expecting to come on semiconductors. He has been going sector bisector, as we've already seen, in addition to his country by country reciprocal tariffs, but he has already targeted the auto industry, the steel and aluminum industries with levees aimed at trying to boost more output and production here at home, and next moving onto the drug industry and chip makers and the idea is again to try to get them to build more plants here
in the US, spur domestic investment in plants and production, and maybe try to boost hiring as well, and perhaps also goose some exports in those areas.
It's going to be a long road though.
Even if he announces those tariffs in the next week or so, it will take years for those plants to actually be built for companies to migrate, and in the meantime, a number of companies, businesses, consumers will face the prospect of potentially higher costs based on the increases in those inputs. Remember, chips are in everything. It is not just the AI accelerators that we heard so much about from the likes of Meta Platforms and Microsoft Corp. When it comes to
their AI businesses. It goes down to all the way down to things like those light up sneakers that small children wear. They're in cars, they're in everything. So businesses have been bracing for this and they're going to have to really read the fine print when those tariffs come out to see if there are any exemptions whatsoever. We're not expecting any, but some companies are still holding out hope.
You know, we just report the news.
We don't editorialize or give our opinions, but you got to point out when something makes no sense at all. Ship and the President on Sunday said he was going to lower drug prices for American consumers by fourteen hundred to fifteen hundred percent, which is mathematically impossible unless drug producers are paying customers. At the same time, he wants to have tariffs at two hundred and fifty percent on
imported pharmaceuticals, which is almost all of them. So how do you, I mean, how does any of that make any sense at all?
Well, the math really is not working when you lay it out just on paper. He even talked today about increasing the drug tariffs, starting small and then after a year increasing very significantly to one hundred and fifty or two hundred percent.
Matt.
If you think think about trying to build a drug plant, it takes years for that to happen. Let's think on a four or five year timeline, and he is not talking about that. He has a sense of urgency and he wants to see these results immediately. In his mind, these plants should already be underway, and he is expecting investment from US trading partners, including the European Union, from Japan and others, to really start plowing that money into the ground and start getting those factories underway.
Mike, what do we know though?
I mean already we've talked about Puerto Rico right, certainly in the past being a big home to big pharma. There's some back and forth there, but I mean, we already do it. Is it that we've maxed out what we can.
Do or what?
Well.
Part of the problem is that a lot of other jurisdictions outside the US have for years been lower cost and they have offered themselves as a venue to produce these medicines and even medical equipment at a far lower cost. And that actually has benefited consumers here in the US over the years, even though it doesn't look like it. Producing a lot of that material here in the United States would be more expensive based on labor costs, land costs,
regulatory hurdles, and other things. Some of these the President has promised to sweep aside, especially in the land use some permitting and rules bayside. But there are other structural issues too, and that includes the labor supply and whether there is a workforce. And this is especially true for semiconductors and other advanced technology, having enough people who can move into the precision tooling, the advanced engineering jobs in the factories that could step in and take those jobs
right away. And Matt, when you were asking about the math question, when it comes to chip making, one of the biggest inputs in a new plant, and these are the kinds of factories that the President and his team want to see built across. You know, in certain locations in the US, one of the biggest inputs is the semikin doctor manufacturing equipment itself, the deep ultra violet lithography machines made by one company in the world, and that's
ASML in the Netherlands. Now, chips tariffs could increase the cost of those machines, which run about four hundred million dollars apiece, by another as much as one hundred million dollars, and for companies that are planning those plants, it is a big cost that have to absorb all of a sudden.
Well, maybe that's why when President Trump was talking about the TSMC investment in its Arizona chip making plants, which has previously been stated at one hundred and sixty five billion, dollars. The President said, now it's a three hundred billion dollar investment.
He just doubled that number, you know, also for fun.
So I want to ask about chips ship because the idea of putting a tracking device on our you know, teenc weensy, it'sy bitsy most advanced AI semiconductors, I mean, the space constraints, the thermal budget, the power consumption, this signal interference.
Seems like it would be difficult. It's a great question.
And I've asked folks in the chip industry whether this capability is theoretically possible, and they have said yes, but they are wary of doing it for a number of reasons. One is that they don't want to create the appearance of their possibly being some sort of a back door to the US government that other buyers outside the United States might be able to see that, Oh wait, the US government has some means of following us, tracking us, finding us, knowing where we are, and maybe knowing what
we are using these chips. For Invidia Corp, for instance, the maker of the most advanced AI chips, has insisted that there is no such back door, but it is theoretically possible. Matt and it is something that's key to the administration's strategy of exporting more chips, more AI compute globally.
Not to sound like a crazy enough, but Mike, couldn't it already be there trying device?
Well, it is theoretically, yeah, theoretically possible that they're already in there.
I feel like it's terribly unlikely.
You a very small piece of real estate and you're trying to put as much of the tiniest circuitry in the world.
I understand, but do you know what they already put on that tiny, tiny little star no idea amazing capabilities? So tracking would that be such a big deal?
I mean, look, how big an AirTag is?
All Right, this is a little debate that Matt and I are having, all right, Mike Shepherd so appreciated. Bloomberg News, Senior editor for Technology and Strategic Industries out there in our DC bureau works.
This is the Bloomberg Business Week Daily podcast. Listen live each weekday starting at two pm Eastern up on applecar Play and the Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa played Bloomberg eleven thirty.
I feel like you.
Should go like this because there is something happening in the startup community, a twist, if you will, and this is according to a story out from our Bloomberg BusinessWeek team. You can find it on the Bloomberg and at Bloomberg dot com slash BusinessWeek. The twist is that a big tech company pays to hire a startups top talent and licenses technology, but does not actually acquire the company itself, and the remaining crew is left to pick up the pieces.
Not a great way to be, no, but I guess it's kind of like silly season, especially in AI, so they're willing to pay anything to get not as much as previously you would.
Have, and they kind of want the people in a big way.
Let's get into it because it is a Bloomberg BusinessWeek story and it's caught our attention and fascination if you will. Bloomberg News Tech and venture capital reporter Kate Clark is in our Bloomberg Interactive Brokers story to tell us more, and as we mentioned, you can find your story at Bloomberg dot com slash BusinessWeek. All right, welcome, welcome, thank you. Tell us about an aqua hier.
What is it? And what's a reverse aqua hier?
So an AQUHIRER in startup land is just when a company comes in and buys another company, usually a small one, because they want the employees. They don't really care about the tech or anything else. They just want the smart people that are there. Now what's happening, And honestly the name doesn't fully fit, but no one can think of a better name, so we're going with reverse acu hire
for now. You have a bigger company come in, take some of the people, maybe like five or ten or twenty, and license the technology and then leave the existing company. So they're not actually buying the company, they're just taking the good people and leaving the company behind. So, as you can imagine, not everybody is super thrilled with this new deal type.
What are the biggest examples of this and I'm thinking of I'm not sure if they all fit, but you know Microsoft with open Ai and then open Ai with that Apple spinoff hardware company.
Yeah, those are actually not examples, but they are similar. Weird silly things that are happening at startup plan right now. The big examples, there's six of them. There are startups called character AI, Scale AI, Inflection AI, A lot of companies most people haven't heard of who have made deals with larger companies like Google and Microsoft to come in and take their mainly their CEOs, their founders, but not the rank and file of startup employees.
Why has this kind of shift, this twist started to happen.
There are two big reasons. One of them is just the broader antitrust environment. Like people at companies like Meta, they don't think they can actually get these acquisitions over the line, so they created something funky and silly instead.
The other big reason.
Is they want the talent really badly, and they want the talent yesterday, and they don't want to wait a year for us for a deal to close to then get that talent. They need them right now.
Well, and the fact that you have this insane concentration in the market right that gives companies like Microsoft and Meta so much capital doesn't matter if they had to pay one hundred million dollars for one person.
Trying three billion dollars. I mean, these deals are huge, and they like There's been many stories recently that I've reported that people like Mark Zuckerberg are more than willing to pay a billion dollars. Maybe that is on the far end of things, but to get some of these AI researchers in house, because these companies feel they are behind open aie, behind anthropic, and these are big tech, massive companies that can't afford to be behind startups.
Help me understand, because I'm thinking about early on in my career and I worked for media company that was bought by our competitor who was actually not doing so well we were, and it basically took some of that kind of key talent and some of our technology at that point. So it sounds like a very similar thing. So we've seen this kind of before. What is there something distinct or different about it this time around?
Yeah, I mean, I think I'm sure there have been cases of this before, but in Silicon Valley there have never been such high profile, large deals like this before for companies that were otherwise seemed to be in a good place. There is arrange some of these startups were not doing so well, but a company like SCALEAI, I mean that was a company that was generating significant revenue was potentially plotting a massive IPO in the next couple of years.
Like there was a lot like that.
Wasn't a company that people necessarily expected would do a deal like this. So I think that's what's different is the types of companies that are doing.
I can imagine this happening on Wall Street with a hedge fund or media. I would buy any company just to get you as an anchor on my show, and then I don't need the rest of the company. But in I feel like, especially in Silicon Valley, this guts the social contract of startups.
Right.
You go to a startup because you're you're one of the best and vietors. You could go work for Google or Meta too, but you're hoping to, you know, build something amazing, and then all of a sudden, your CEOs like the C suites out and you you kids, are done with your jokes.
Yeah, I mean people are not happy about that. There are people at these companies who do feel betrayed. Some of them have gone public with those complaints. We've seen many many tweets from these people, and yes, it does betray those startup social contract. And I think what I'm hearing from the venture capital the employees.
Of these companies.
That's what's also interesting. The venture capitalists. I'm like, listen, I'm with you from the beginning, right, and I'm going to pony up more. And there's different rounds and so on and so forth, and then all of a sudden you're like, wait, you're out, and what's left for me?
Right?
And like, in some of these cases, you know, they get paid back first. So in many of many cases, they're getting their money back, but they're not making a profit.
Or maybe they are.
All of these have been structured differently, but by and large, this is not a great thing for a venture capitalists who are hoping for a home run return with an IPO. This isn't really they don't want to see their star founder jump to big tech, right.
You tend to know their founders, right, Maybe a little bit better if some of them are jumping ship to go to big companies.
Yep.
You talk about Microsoft back in twenty twenty four and kind of point the finger at what they did.
Do we blame them in some way?
No?
I mean it's interesting because we don't really know who architected the deal that we feel started this trend, which was Microsoft's aqu reverse aqu higher up inflection. We don't really know who was that person center. Who are those people?
You know?
Reid Hoffman was a co founder of Inflection AI. He's also a board member at Microsoft, so you know, imagine he played a role. I would love for him to talk about like how that came together, but it was. It is quite an original method, and I think for a while people were like, oh, so tricky, this is going to totally work. Get past you know, anti trust scrutiny.
Norm will notice.
I do think at this point there have been enough that you wonder, how is the FDC going to respond? They do have investigations into several of these deals already.
They do they do, yeah, because this is meant to or is a way to get around regulation, but still has a lot of the same negatives, totally consequences of the things that the regulation is meant to block in the first place.
So what happens to these companies that are left behind? Do they survive?
Some don't? Did they shift their focus? You write about this.
The all of the above.
Some of them have not survived and have basically become what we just what we called zombie companies, where maybe a couple people work there to kind of like keep a few, you know, keep filing a few different PaperWorks, and then eventually it shuts down. A couple of them have really worked hard to stay afloat and are planning to raise some more money to help. That's Inflection and Character AI, which is a pretty well known chatbot company, right.
But yeah, a lot of them have pivoted because they've had really had no choice, because they've lost, you know, the original people who had the vision and maybe the skills for what they were originally building. They've had to pivot to kind of figure out who are we without those original geniuses or whatever it was that started this company.
There's part of me that says all's fair in love and war and capitalism, and so I do wonder like how that lost, Thank you very much, But I mean I also wonder about, you know, our venture capitalists then going to be thinking, all right, I don't know, is there something they write into future investments? Has become a little bit stickier for those startup entrepreneurs.
I think, yeah, that's a really good question that I've asked, and you know, it's funny, I think right now the answers no, because venture capitalists right now have no leverage with AI founders because everybody wants to give all these AI founders one hundred million a billion dollars. They're competing with every venture capital firm. They can't be like, well, you also promised me that you won't make a deal,
you know, with Microsoft. They can't do that. So for now, no, I think, you know, let's see how the market changes. Let's see where the AI boom, you know, does it. Does the bubble pop? You know, then things will change. For right now, I would say, like the venture capitalists don't have a lot of control over these situations.
Let's feel like an AI power grab right now.
Yeah, okay, so many different in your reporting for this story. Did you talk to anyone who did say, like, this is a ridiculous amount of money being spent and it's just reminding people of nineteen ninety nine or you know, another period when valuations.
Were so frothy that people.
Just twenty twenty one is what comes up the most often. The bubble that occurred, you know, during the end of the pandemic era, the zero interest rate era, that is mostly what people compare it to. I mean absolutely yes, you could compare it to the dot com boom, or even like the crypto boom or there have been many of them in the last twenty years, and I think people right now have a lot of concerns about some of those similarities.
What I love about these stories and BusinessWeek does this so well.
Yeah, it's like a big trend that's happening, and we talk about the execs and the companies and where things go. But you know, at the end of the day, there are people that are left in offices, and I'm assuming you talked to a bunch of them. Tell us about like just some of what you heard from those folks that are kind of left behind.
I mean we heard like after one of these companies, Cognition or sorry, Windsurf, after they completed a reverse ACU higher, we heard that there were many employees who were like sobbing in the offices that weekend, and you know, we're devastated by it, and I think it really just damages,
like we said, the trust in this system. And if you're just an average person working at one of these startups, which you know there are startups all over the country, all over the world, not everybody has the same understanding of like what this is. And I think it's just confusing and It's just created a lot of confusion and distrust in this Silicon valley world.
I would say it's a risk right when you go to a startup risk reward, but there's also you know, maybe things are intensifying because of this, especially when it comes to AI and the grab that we're seeing. Really great story, great reporting, a new risk right, yet another risk right, another thing that you kind of layer into this. Kate, thank you so much, So glad we can get some time with you. Bloomberg News Tech and venture capital reporter
Kate Clark. Check out our story. You can find it on the Bloomberg and at Bloomberg dot com, slash BusinessWeek.
Are you here? Are you based out of New York? You wrote the story with Sharon Gaffrey. I am based out of New York.
Hey.
Yeah, really really well reported story and a great reading on the terminal or in Business Week.
Like a snapshot of where we are right now on so many different things.
You are listening to the Bloomberg Business Weekdaily podcast. Catch us live weekday after News from two to five pm Eastern Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
So We'll keeping a watch on shares of Axon Gaming as much as well. Just shy of nineteen percent today intra day the most sense February enough to reach a record intra day high. Right now, the stock is up just under fifteen percent. This is after the maker of tasers and other public safety equipment reported second quarter earnings per share of that topped expectations. Analysts also noted strong bookings for the company's AI plan.
What look at the five year charts? I know, I mean often who cares about today?
It's up eight hundred and twenty five percent over the past five years.
It's had quite a run and a big move today.
I should point out that coming off of earning several analysts including Barkley's and td Cow and raising their price targets on the stock, it is up more than forty percent year to date.
Let's get to it. Delighted to have.
With us Rick Smith, founder and CEO of Axon, to talk about the business, the outlook.
Welcome, Welcome, Rick, How are you.
I'm having a good day?
All right, great, you are having a good day. Talk to us about the business. Who's buying you know, what's going on? We talk about tasers, but you go to your website, you guys have videos to remind us that you guys.
Are not just about that, You're about a lot more.
Yeah, that's why we changed the name of the company to Axon a few years ago, because Taser is it is a sledgehammer brand associated with our lessing the weapons. That's where we started. That got us into body cameras to basically help protect the public and police by preserving a factual record of what they did. And then from there we got into cloud software to manage all the data,
and then the business just exploded. So today we're the market leader and in car video you know obviously body cameras, record management systems, and drones and robotics through their partnerships or first party things that we do I think the largest virtual reality training business and public safety, and now
we're also expanding into adjacent markets. Any enterprise it as a security function, has to be able to communicate with their local police, and you can either do that through an old school nine to one one call, or we have a number of tools on our platform that allow you, for example, if you're a school or a business, to share your security cameras in an emergency with police. So if you have something like an active shooter, you're not trying to describe it over the phone. You can immediately
give video access to law enforcement at your control. You can shut it off when it's not necessary. And then, of course we're layering artificial intelligence on cross of this entire enormous network of sensors so that we can try to make everybody a little bit safer, but also doing it in a way that is very cautious about privacy, to make sure we're doing this in a way that doesn't create out of control surveillance.
Rick your I mean, your investors will know, analysts will know, but not everyone is familiar with your founding story, which is intensely personal. Give us a quick recap of that, and tell me if you you'll see the company's mission, which is cutting police gun deaths as realistically achievable in say this decade.
Yeah, so I started this. I was in business school in Europe and I was having dinner with some people there who were you know, we were all talking about our hometown and they said I would never go to America because of all the gun violence. And I said, well, hold on, it's not like you see on television, and then one of them asks me, do you know anybody who's been shot and killed? And as I thought about it, well, yeah, there's two guys from my high school football team, and look,
we weren't super close friends. But that's not the point. The point of it was that all of us, I mean I met each of you know people in your immediate circle who've been shot and killed. This is a problem that touches everybody. And by the time I added it up, I think I know five or six people who've been shot and killed. And that just struck me as a bizarre state of the universe that the way we protect ourselves in the nineteen nineties, much less twenty
twenty five, is shooting bullets of people. We were doing that with like pirates in the sixteen hundreds, and so we're on a mission to make the bullet obsolete by creating better technology, basically something similar to Captain Kirk's phaser from Star Trek fame. That's what we're out to build, because if we have that weapon, it would no longer make sense to shoot anybody. And yeah, we're getting pretty close.
Not it's not wireless like Captain Kirks but we are approaching a level of reliability where we now have countries outside of the US talking about using the taser instead of a gun. In the US, you know, we wouldn't suggest that, but we can suggest that the tasers came to the point where you would use it first. It would become your primary weapon and the gun would be more of a backup only for the most extreme cases.
And if we achieve that, then yeah, we think we can cut gun deaths in American policing by fifty percent by twenty thirty three is our goal.
So, as you can understand, we're all feeling a little sensitive this week here in New York City following the active shooter at a office building on Park Avenue last week where individuals lost their lives as well.
As policeman lost his lives.
So tell me about the numbers where you are seeing that as a result of your devices, that things are getting better, at least for police folks and security folks.
Well, we have not yet bent the curve, meaning we're not seeing the numbers coming down, because the overall trend is still slowly inching upward, although this year it's lower than last year. But I think it's premature for us to claim that that is our effect. Yet we do know that over the past thirty years I've been doing this, there's around three hundred thousand uses where police could have been legally justified to use lethal force, but they were
able to resolve it with the taser instead. This next two years is going to really be critical because up until now, taser weapons have been largely used, not really in the most critical situations. They would use it to capture somebody who is potentially violent but not an immediate risk.
We've introduced a couple of key technologies that we're testing now in the field, and I can go into detail if you're interested, that we think move our effective reliability up into the ninety nine percent area, at which point then we think it becomes reasonable that the police would begin using taser as their primary first weapon, always keeping the taser the gun as a fallback.
Rick, you you mentioned business school in Europe. I guess you went to school in Belgium before Chicago, but you studied first neuroscience at Harvard. How does that kind of background influence your decisions today at a company that touches so many nerves.
Yeah, well, I mean the whole name of the company, Axon, is a little bit of neurobio geek speak, because the Axon is the name of the long nerve fibers that connect your brain to your muscles, and indeed it touches a number of ways. When I first wrote my college application and actually showing my son I had a copy of it, they asked, what do you want to do with your life? And I said I wanted to build robotic limbs. And it was like Luke Skywalker's robotic hand.
I love this idea of a machine that can interface to the human body and almost become a part of you. Then, after this incident and I make my interest rising in gun violence, I took a different turn. Instead of building a machine that your brain could control, I build machines that control your body through your nervous system. I mean that's what Ataser does. We plug in, we tune this electricity so that it overwhelms communication, and you have something
that looks like a seizure. Because we're flooding your nervous system with electrical energy. Your muscles lock up. I just saw five people volunteer here in my office this morning. It is a temporary effect, but extremely debilitating. And then if we think about the other parts of our business.
When we got into the camera business, we realized the camera themselves are kind of kind of interesting, but it's it's not nearly the business that if we can connect all these sensors together and begin to think of this like a giant neural network, like for a police department like an NYPD with a thirty five thousand officers. What if we could begin to have live data feeds that would enable command and control in more real time, so we could identify, Hey, this situation is escalating, Let's send
reinforcements before the officer even calls over the radio. Or we might even identify things like, hey, this situation over here is spinning out of control. If you think about all the horrible policing situations like George Floyd over the past ten years, I believe now that any one of those could be detected with AI running on the audio video feed of a camera. And that is a capability
that we're building now. We do have live feeds now, but to have live feeds being AI monitored in real time, that'll happen in the next twelve months, and I think that's going to be a huge boon to make policing more effective, safer, and to help agencies identify if a situation spinning out of control so they can intervene now instead of you know, prosecuting somebody tomorrow, you know, if something wrong is happening.
How much of your business's governments and I'm just curious. It does feel like there's going to be some municipalities under pressure in terms of funding, and I'm just curious how that could play into or impact demand at your company.
Yeah, so we're still majority government business, but the fastest growing segment is enterprise, and so the enterprise security is two to three times larger than public policing in the United States in terms of manpower, and so there's a
huge opportunity there. But if I come back to your question about municipal policing, you know, I remember the two thousand and eight financial crisis and others, And what we have found is if you look at a police agency, the majority of their spend is on cops, cars, in gas. It's that's like ninety percent of their spend. So their tech spend is a relatively small portion of their overall budget.
And when budgets get compressed. What we see is they really look to technology where they're saying, look, we need to get more efficient. We can't just throw bodies at things. And I'll give you one example. Our first major AI product using generatord ai is a service called Draft one, and what we do very simply, we take your body camera footage, we feed it through an AI model, and we actually just use the audio. We don't even need
the video. We use the audio track and we do the first draft of your police report because it turns out, you know, police interactions are pretty standard. You know, he oh man, what's your name? Data birth, you know why I stopped you, and you can from that extract the information that we need to put the structured report narrative together.
It's about the eighty percent completion and that basically means we're cutting the amount of time police spend on bureaucracy by up to sixty or seventy percent, which is meanither're out doing more work.
Huge because only fourteen percent of police departments across the nation are actually fully staffed, and in the most recent survey, seventy five percent of police who responded said they do want AI to help them out. It seems like and this is not a pun on your neuroscience degree, but seems like a no brainer.
It's a little bit of all.
I'm a little biased, but I.
Think so, Hey, just thirty seconds. I'm curious because we talked about I think robotics kind of came.
Up and you talked about your interest.
Empire strikes back the last scene, you know, Luke Skywalker with his hand.
Yes, Like, is robotics something that you guys are thinking in terms of security going forward?
Is that an area that you guys might.
Stay tuned, stay tuned. The solution to the American gun violence problem, in my personal belief is we've got to change the game. And what I mean by that is today, when an active shooter shows up, they have no illusions they're going to come out of it alive. They want to go down in some sick twisted vision of a glorious gun battle with the police. In a couple of years, we are going to deny them that if you show up with a gun somewhere, we will zip in very
quickly with a robot using less lethal force. You'll be arrested and under control very quickly, and we're going to deny them the entire sort of motivation to get in gun fights. And I think we can do things with drones and robotics that you could never do with people, and we can do it without having to resort to lethal force. So stay tuned. We're making a big play in that space.
Sounds like you got to come back real soon. So appreciated, So appreciate it.
Rick Smith be Well, founder and CEO of ex On joining us on this Tuesday. And as we mentioned, we're seeing that stock move in a big way following me its latest results.
Let me just pull it up for.
You can add that guy to the list of guests.
Don't take it.
I steal from your show and use on my show.
Do not have that co host anymore?
Done?
All right?
One story, I mean, what an incredible the stock chart is a maz The story behind it. When he started that company in nineteen ninety three, Well he's been at this for thirty two years.
I love these people who come have different backgrounds. It's like doctors who are engineers who are looking at the body in a different payment. Here he is in terms of his background and understanding how the brain works and the impact on things.
This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from two to five pm Eastern on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business App. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal