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Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside my co host Matt Miller.
Every business day we bring you interviews from CEOs, market pros, and Bloomberg experts, along with essential market moven News.
I'm the Bloomberg Markets podcast called Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot Com slash podcast. We want to bring in Bloomberg TV's David Weston for a conversation on the life and legacy of Henry Kischinger. First, I want to bring you part of David's discussion with Bloomberg opinion commist Neil Ferguson, who wrote a book on the life of Henry Kischinger and spent extensive time with him.
Here's part of their discussion on the role of Kissinger played in the Yamkipoor War.
For Kissinger, the moral imperative in the Cold War was to avoid World War three, and that was one of the reasons that he pursued a policy of deton of understanding of improving relations with the Soviet Union, because I think reasonably he thought the worst possible outcome for the world would be a hot war between two nuclear armed superpars, and so in practice, when he entered the realm of power as Richard Nixon's national security advisor, I think he
remained an idealist, but an idealist who was having to deal with some extremely difficult choices between, as I've said, greater and lesser evils. So I don't think the idealism was ever entirely eradicated. Certainly, working with Richard Nixon, you were working with somebody who saw himself as a very tough realist who wasn't afraid to do very difficult and even nasty things. So I think there was an element
of compromise just in accepting a job with Nixon. But once Nixon has gone, it's very interesting to see Kissinger under Ford shift in a much more idealistic direction, and a lot of Kissinger's later career, about which one hears much much less, owed a lot more to his earlier roots in German idealism.
It was Bloomberg Television's David Weston speaking with Bloomberg Opinion Calmnesst Neil Fergus. I want to bring in David western right now. David, thanks so much for joining us here in our Bloomberg studio here.
What a life. It's been your life, my life.
That has been US diplomacy, whether it's official or nonofficial, it's been Henry Kissinger.
Yeah, he's been the only diplomat i'd ever heard of. Frankly, I mean when you first pointed, I was in high school. Actually I'm old enough to remember that when Richard Nixon appointed him. But and as Ray Dalio actually just posted something saying this, you can't think of it who studied history as deeply as Henry Kissinger did as an academic
at Harvard. He would have had a distinguished career in that and then lived the diploma say was responsible for it, and then got to know pretty much every world leader and didn't just know them. They hung on his every word. And that's China, that's Soviet Union, that's anwar, Sadat and Egypt around the world. I mean, it's quite strang If you read his book on leadership, he goes through the
six leaders that he had respect for. He starts with Charles de Gaulle, who we knew personally, and he goes on to Conrad Adenauer, whom he knew personally, and Maggie Thatcher thinks it's really extraordinary life wow.
And David, you knew him personally as well. So maybe if you could tell us a little bit about some of your memories with Henry Kissinger and what you'll think of him most.
Yeah, I would say, I'm not sure Henry would say this if he were here, But he sort of adopted me when I came to New York in the mid nineties. I think he took pity on me and took me under and he used to invite me to breakfast that he had with like twenty people or so at a club where he'd have visiting dignitaries in people he'd known through the years where we'd have an off the record discussion about what was going on in Asia, in Europe and the Middle East, and it was wonderful. It was
one of his experiences. And so he really and I had lunches with him where he would He was a teacher forever and he wanted to teach you, and he had an amazing mind. You could agree with them, you could disagree with them, but he had thought it all through many times, and he could explain to you how everything was connected to everything else. He was already fastening. Last thing. He was a huge dog person.
Really.
He and Nancy loved dogs. I mean, I can't believe they always were with a dog constantly. And he was a charming, actually very warm man in many ways.
It's amazing what did he think of what's happened, not just the United States over the last five six, seven years, in terms of the nationalism America first in the US, with Brexit in the UK and the elections. It seems like internationalism, which I think you and I kind of grew up with post World War Two, is not necessarily the leading role or the leading thought here in international relations these days.
Well, these are my words, not his, but I think he would say it's dangerous. We have to remember he came out of Nazi Germany, fleeing it in nineteen thirty eight with his family as a Jew, and he studied. In his work. He started with the post Napoleonic Wars, putting it together Europe and talking about the balance of powers, people like Metternik that he really valued as a way to avoid war. He wanted to avoid conflict at all costs.
And I think he would say, if we were here today, there are real dangers in everybody going to their respective corners and fighting with whether people get hurt that way. And in fact, he talked about this just last month was the last time I saw him. He appeared live at the Al Smith dinner here in New York, and he gave a speech on this very subject, warning people about the dangers here that we have in front of us if we keep going this way.
Well, one of the bigger parts of his legacy was, of course brokering the peace in the Middle East, and certain hearkens now to what we're seeing between the Born Israel and with Hamas. So did you speak to him more recently to know what he was thinking as far as the conflict now, or what you might imagine he would have to say thinking about this current conflict.
Yeah, I don't want to be so presumptuous as to speak with him for him, but I think he would definitely say it's very different in many respects. The attack was different hamas terrorists going in and slaughtering children was
different from a surprise attack from Egypt. In Syria and Israel at the same time, there are some parallels because what happened there if you remember, is Henry Kissinger with President Nixon, came in strong on the side of Israel and shift them a lot of weapons and material and support in the early stage. But then there was a pivot where they started saying, Israel, you've got to back off.
You can't go too hard against Egypt. And in fact, at one point he really interviewed very forcefully because he was concerned that if Israel tried to destroy one of the armies of Egypt, which they could have done, the Soviet Union would come in and there'd be a shooting war, and we ended up with US against the Soviet Union. So he actually played a key role in saying to Israel you've got it back down, and he had some real, real conflicts of gold in my ear at the time.
And of course Israel he's getting different pressure now to back down, not for fear of Russia coming into the conflict, but kind of similar to what we're seeing now in that sense.
David, some of the criticism of mister Kishinger maybe as a release to human rights.
And his pursuit of global diplomacy.
What he would say, what I've read, would I'm making some hard choices here, and some of the hard choices might result in some human rights being violated in.
Various places around the world. How did he deal with that or how did he talk about that?
Well, he did talk about it, and I would say he would deny this. I would say he was a bit defensive particular things like Cambodia. But you can't talk about the legacy of Andrew Kitchen without talking about so of the countries, with Cambodia and the so called Secret War, with what happened in Chile, with the coup, what happened
in Argentina, and even what happened in Pakistan. But I think, I think and Walter Isaacson also wrote a book about Henry Kustinger quotes Henry quoting a version of Gerta that basically said, if you make me choose between injustice and order and justice and disorder, I will take injustice and order, I think, which comes partly from his background, because he saw what disorder in World War two in Europe could do,
and so he did make some tough decisions. I'm sure he would say the session and he would say, look, I can't say I was right. I just tell me would have been better? Give me what the better alternati would have been at the time that was the one that would preserve the most order that we could have.
When we're thinking back now to the war that we're seeing in the Middle East, and you know, current Secretary of State Anthony Blincoln, he's gone out to Israel to you know, to speak with the officials over there. Do you think that there would like, you know, speaking onto How you think that the current Secretary of State and really what their role is in this conflict, and how it's different from Kissinger's roll back at the Camp David Accords.
Ironic, isn't it that we're seeing shuttle diplomacy even as we speak right now with Tony blinkin over there in Israel and going to Romala, going to the West Bank and trying to keep things under control as much as they can. It's ironic, it's very difficult because, I mean, for those of us who are around, Henry Kinsinger was larger than life. I mean, he dated superstar models and things like that, and he was on the front pages of paper all the time, and he had such a
powerful position in Nixon. I'm not sure there are figures anywhere right now that are loom Is large. But I think what we're seeing from Secretary of State Blincoln and from President Biden right now is a version of what Henry Kinsinger tried to pursue, which is basically, let's talk to all the parties, figure out where the interests are,
find the right balance, and keep things under control. Even if we can't come to an overall solution of the problem, let's manage the problem and try to minimize the damage and yes, the loss of human life.
David mister Kissinger was one of the architects of Dayton with the Soviet Union. What were some of his thoughts about the rise of Vladimir Putin kind of what we're seeing from Russian activities over the last decade or so.
Well, he obviously, I suppose, thought that that was very dangerous and very risky and a much different situation to what we had before, in part because actually Russia today is not as powerful as the Soviet Union was then. I mean, if we think back to that Cold War,
I mean, there were two superpowers they're scaring up. If there are two superpowers today, it's China and the United States, and Russia is a smaller player, which in some ways makes it more dangerous because they feel they have less to lose and they feel that they have more to gain. And certainly, if you read what Vladimir Putin says, he feels he was really done wrong. Russia was done wrong with the fall of Wall, and he's got to resume restore that prestige, which makes it more dangerous.
China, I mean, that's the new thing that I mean, I can't imagine he's very happy with what's kind of chilled over relationship over the last four or five six years between US and China.
Well, perhaps his last international trip was to Beijing, very good, where he got to meet with President gi personally, when else nobody else in the United it could meet with President G. G you wanted to do with him, And you can underestimate the reverence point that the Chinese leadership has and has had for generations for Henry Kissinger. Now, part of that is part of the culture. They really revere the elderly people who have a lot of experience.
I mean, it reminds me actually of Charlie Munger right now, where Charlie Munger said, boy, you get a good executive, you keep him there forever. You don't turn them over five or six years. But the Chinese really revered that. But also if you think of from China's point of view, imagine where China was when he went there first and where it is now and would it have gotten there. I'm not sure it would have gotten as far or as fast without Henry Kissinger and Richard Nixon, because it
was Richard Nixon's idea. Henry Kinsinger implemented it, but it was actually Richard Nixon's strategy.
David, thank you so much for joining us. David Weston, he is the host of Wall Street Week, which is one of my favorite brands ever on Wall Street. Wall Street Week bearing both on radio and television with his thoughts, his perspectives on the extraordinary life of Henry Kissinger, passed away at the AI.
You're listening to the Team Ken's are Live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot Com, the iHeartRadio app and the Bloomberg Business App, or listen on demand wherever you get your podcasts.
I don't know if the uh the cyber truck thing Majiggi's got Apple Play, but we'll check in with our next guest.
Dan.
I've held everything about this stuff.
Dan Ives is a managing director senior equity analyst web Bush Securities UH and a Penn State Rabbit fan of note there. All right, Dan, I'm seeing the video of the cyber truck. I just don't get it. Dude, I don't see It's not a truck man. I can't throw a ball of hay in the back of the truck.
More importantly, why are you carrying builds of hay?
Well, because I'm gonna get I'm a rancher. Maybe I'm gonna get a ranch, you know, thinking about that. I watch I watch Yellowstone. So Dan, talk to us about this cyber truck. What's it mean for Tesla.
This is important. I call it a historical event for Tesla and Mosque in terms of this new category four years in the making. I mean you got two million reservations, even if forty percent of those convert base in our estimates eight hundred thousand, I mean, this is gonna be a new growth vehicle, obviously on the edge the mad Max design. But I think this is gonna be successful, and I think book people like Miller they're gonna be driving us around New York.
Wow, Matt, I hope you're listening in to hear that one.
He's not gonna get his way to sign off on this.
He's got the challenger with the scat pack.
That's enough.
One.
Well, we're gonna have to see if it can strap in a baby counter in the back, so that would be the most important for him. Right now, Dan, tell us of what you're so you think this is gonna be successful. I'll tell us a little bit about some of the projections you've run and just how you know breaks down the numbers for us in terms of how this is going to play out for Tesla.
Look, the important thing today is about pricing, because that's that's really the unknown we think pricing is probably sweet spot sixty to seventy K, and that's important. You'll also get tax credit there at that level at scale two to two and five two thousand per year. As we get into twenty twenty five. In terms of units now coming out, this is gonna be complex to build. It's all gonna be built out of Austin. That's where the
launch will be today. But this is important because it goes back to you know, something we've talked about in the show. Lout is a refresh. There's just more categories. It's part of the Hello effect. Contrast at GM four pulling back a little on evs, yet test A Musk actually doubled down.
So I think Elon himself has even said Dan that this kind of thing is, I guess in his opinion, kind of a profitability disaster production disaster. It's so hard. Can you make any money on this truck? Is there any profitability in this truck?
Yeah, Paul, first twelve to eighteen months, no, I mean they'll essentially lose money, will be cash on negative. But as you get into twenty twenty five, it actually could be pretty significant in terms of the accretive level. As it all plays out at scale now two thousand units. We think that's pily max twenty twenty four, probably about forty thousand in terms of what they ultimately deliver. But
this is all about next two to three years. It's given them their other growth vehicle, and I think this is really the start of just the next fees of the Tesla growth story. This is four years in the making. In terms of today's launch, Dan tell.
Us a little bit more about the competition that the cyber truck is going to be stacked up against. You think, you know the Ford, you know F series, particularly the F one fifty or that's the best side truck in America, is a little bit fifty lightning. Yeah, so the electric one there, sure, and then you've got the Ram, the Shelvy, the Chevy Silverado. I mean, how is this. How's the cyber truck you think going to stack up against those?
Well, F one fifty, I mean, that's that's the target on the back. I mean, they're really trying to go for some sort of churn there. You look what Rithan's done. The success now, they've had a lot of difficulty in terms of building it out. In terms of success from a demand perspective, you look at that opportunity, you look at what received coming at a GM. Look, this is really creating a new category. But it's par the hello fact.
And I think the difference today four or five years ago, everyone kind of viewed it as Okay, Tesla, they're not gonna be successful. Today there's not an auto manufacturer executive around the world that won't be watching the event because you can no longer just say that it's not gonna be relevant. It's actually the opposite in terms of their leading in terms of really innovation technology.
Hey, Dan, when when you speak with the folks at Tesla, when you also speak to the other auto manufacturers, what are they what's the thinking today about maybe the ultimate demand curve for evs over the next five years. It seems to have lost a little enthusiasm out there.
Yeah, I mean, look, I think it's no secret you've definitely seen a moderation. But I think the view among many in the industry is, Okay, let's say it doesn't go to fifty to sixty percent penetration. Let's say it goes to thirty forty percent penetration next five six years. That's two trillion in terms of the amount of ultimately opportunity out there in terms of electric vehicles, So you continue to see aggressive push towards this. I think the
big thing it's price discovery. You're not gonna have eighty ninety thousand. You need to be in that sweet spot forty to fifty k. And that's what we're seeing in terms of that price war that's played out well known in terms of what's happening in China. It's really price discovery. But finally we're seeing some sort of supply demand equilibrium. But I don't really see a pulling back GM four that's essentially UAW that really forced that hand to pull back a little in terms of spending.
So speaking of the economics of this, this is a tough time right now to be buying a car and to be you know, persuaded and consumers that this is the time to be getting really excited about that when you have auto loan rates as high as they are. I mean, certainly the holidays, you know, big time to roll out a lot of incentives on price and maybe rates if you can. But what exactly is the pitch right now to like financially that people might be getting excited about this.
Well, the big thing too is tax credit. Tonight' expect some more tax credit incentives as we go into twenty four from Biden administration, because that's a key point. If you go back historically what's called seventy eighty thousand, Now you're getting some of these ed vehicles, especially for Tessa Why and others thirty five forty thousand. When it's all
said and done here, you're going to have incentives. But no doubt because what we've seen from a rising rate environment that's been a huge headwind that does start to reverse in twenty four. That's why the comms get easier in twenty four. And I do believe we are still going into what I view as a golden age pro electric vehicle and I think that's why it's important today for this event pricing. It's really gonna be a flext muscles event from Musk and Tesla.
Uh Dan.
The stock Tesla's up ninety seven percent year to date, clawing its way back to its all time high that had a couple of years ago. You've been I would argue, one of the biggest bulls on Tesla, on EV's in general, and then by extension Elon Musk. How frustrating is it for you to see yesterday, for example, another situation where Elon Musk really comes into the news in not necessarily a good way on a company that's not even related
to Tesla. How do you how do you and investors kind of deal with the Elon Musk risk factor?
Yeah, it's part of that spider web. I mean, even what we saw over AX and obviously you know he went to Israel in terms of the trip, and then if you look at the interview yesterday, I mean clearly there's no gonna be no champagne dinner between Musk and Eiger anytime soon. I do think relative to Tesla it is a bit contained relative to any sort of like brand teroration. But as we talked about, I mean, Musk is Musk. He's gonna go to the beat of a
different drum. That's that's why you have the loyalist. But then of course the heaters as well, and that's just I think it's more accepted to some extent from a Tessa perspective, But no doubt it's a fine balance between from a brand issue or any short of deterioration. Right now, it's contained, but it's not what you want to see yesterday. Ultimately, as a as a Tesla holder.
All right, Dan, thanks so much for joining us as always really appreciated. Dan Ives, Managing Director, Senior Equity Analyst at Wedbush Securities. A rabid Penn State nitle Lion fan. We're waiting to see which Bowl game the Penn State will go to.
You're listening to the tape Can's a line program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business App. You can also listen live on Amazon Alexa from our FLO New York station just say Alexa playing Bloomberg eleven thirty.
Let's get to our next guest, Commercial real estate. Let's talk to Scott Kelly, founder and CEO of ATOS Capital or real Estate. He joins his life here in our Bloomberg Interactive Broker studio. Scott, thanks and welcome to Bloomberg. Talk to us about commercial real estate. It is on everybody's mind, from anybody who thinks about real estate, commercial real estate, to invest in banks that have finance commercial real estate, to everybody else involved.
An ecosystem. It is ugly out there.
Is it time to dip your toe in there and start maybe buying some of these properties?
Well, I think I think it's uglier than even the headline news would tell you because there's a confluence of events which has really never happened before. First of all, the level of commercial mortgage maturities over the next couple of years is extraordinary.
It's like one point.
Five trillion dollars over the next couple of years. Second, it's a sequical business. And whether it's a hard landing or a soft landing, it's a landing. We're not in a great part of the economic cycle. There are secular trends that are really powerful, whether it's work from home, shop from home, stay in an airbnb, move out of big cities in the Northeast to the Sunbelt. I mean, there are powerful secular trends which are influencing the performance
of different properties. And this interest rate spike has got an enormous impact on what's essentially a leveraged business because you want to leverage out a lot of the return for the real estate to drive equities. And then then I would say, lastly, the regulatory environment has changed. You know, the for a long time during COVID, it was sort of hands off, nobody foreclosed on anything. There was a lot of leeway given to bar where. It's just because
that was the economic reality of things. That's changing as well. So all those things put together on.
Anywhere near this space.
Well but but but there are going to be winners and losers, you know, and and and I do think it creates, like like every disaster, it creates great investment opportunities. And you know, there are iconic buildings here in New York that are just going to be fine. You know, they're not gonna you don't want to seem going through the roof, but they're going to be fine. And you look at what office owners, as an example, have done. We're over at the GM building a couple of weeks ago,
they put in the Savoy Club. You know, is really an amenity to tenants. If you go to one Vanderbilt, they've got you know, terrific restaurants and a Centurion club. I mean, all of a sudden, you know, the owners I think of these iconic buildings are able to put things into keep tenants. The disaster I think is going to be for the kind of B and C quality properties which are going to have a very hard time retaining tenants.
And this is an a property by the way, I don't care who's talking about this is.
This is.
Will that right now would not be a HQ, not going anywhere.
An AOK part of this scale.
So relative to those B and C properties, we had Igle Namdar, president of non Dar Realty in not so long ago, and of course his firm, he's best known for being a big buyer of zombie malls and going in at their the lowest price. He's sort of doing the same playbook here in New York relative to the
office properties. Because of exactly what you're talking about now, he was willing to put a value on the non trophy properties, and he said, so, if you go to a random building out here in Third Avenue, depending whether it's in the middle of the block or a corner, he said that it could go anywhere for twenty five cents on the dollar or seventy five cents on the dollar as for where it was before. Does that sound extreme to you or does that match up to what you're seeing as well?
No, it does not sound extreme to me at all. I would say twenty five cents is more likely because you have to understand what the property taxes that and the and the operating expenses, particularly of you know, these buildings in New York. You know, when rental rates drop, you can have buildings that can't make any money. And I think that's a realistic prospect for some of these really bad buildings. So the question is how low is low?
You know?
And so you know, something I've talked to a lot on this show here, Scott is I've been on this journey to buy an apartment in New York, provided for great newsworthy content for the show, as well as some stress in my own personal life. But something that has come up in this latest apartment that I'm looking at is that the commercial properties that are on the street
level are right now perhaps not renewing the leases. And what that means then for the residential building above that owns this whole building and the income that they rely upon from these commercial tenants. So is that some thing that you're seeing as well, that like this distress in the commercial sector perhaps could have bigger implications for the real the residential side, which of course has a number of problems of its own right now.
Right, well, yes, And I think the issue is the whole ecosystem has to work. Right if if there aren't people in the office buildings, the guys selling sandwiches on the first floor are going out of business. You know, if the tenants aren't in residential you know, buildings, it's very difficult for the for the ground floor tenants to be a dry cleaner, be a you know, whatever that services the tenants.
I think the big issue.
That that people don't talk enough about, which has to be confronted, is it's going to take a long time to work this out, and it's got to be a cooperation between government and the property owners and because people are going to need a break on property taxes, on you know, on zoning regulations and all that sort of thing.
And you know, unfortunately, good public policy which would say get these buildings up and running tend to be bad politics because you're, you know, kind of giving money to people that are viewed as being wealthy and don't need it.
That's not the case.
I mean the cities, I think in New York's one example, but I think you can talk about it in San Francisco and Chicago and in place South. If you don't have a vibrant real estate market, the tax base is just going to erode in the cities, and so it's going to take a thoughtful, you know, public policy approach to moving some of this office space to residential and
other things, you know. And that's New York's big problem, right It's there's way too much office and there's too little residential, and so it's.
Incredibly expected to resone it.
Well and resonte You've got to rezone it. You've got to give incentives to make those changes. And frankly, a lot of those kind of seventies style office buildings are not you know, particularly able to be renovated into residential. We did, the company that we're partnered with for our domestic effort here did a redevelopment of an office building
in Washington into residential and it's worked out beautifully. But those opportunities are it takes a lot of expertise and a lot of you know, help with the government and patience to get it done.
So switching gears just a little bit, Scott. You know, we've been talking to about this epic opportunity in office distressed office here in the US but your real wheelhouse over the last twenty years, although I should add you were one of the big mds at Morgan Stanley back in the day, so your wheelhouse is real estate period. You have just such a broad base of knowledge. But you've done a tremendous amount of investing in China and
in Asia. You were in China, I believe, in September, and you told me privately that it's worse, similar to what you're saying about the US, that it's worse than what's being reported. So talk to us a little bit about China and does that seep into the global economy? Does that seep into the US? And when do we hear those headlines more so?
Again, well, I think you're starting to see them now. I mean the Chinese property companies. And again, we ran a series of private equity funds. Most of our investing in Asia, we've been at it for twenty two years. Most has been in Japan, but we did put six hundred million of equity into China in a variety of basically joint ventures. Residents are joint ventures to build condominiums to sell, and we all remember the lines around the block of people wanting to buy these things. There are
no lines there today. But the issue with these you know, this capitalism stuff's a little bit tricky, and these Chinese property companies have gotten themselves run aground with terrible capital structures. And when I say that they've got they've got like five different branches of creditors. First are people that were buying condominiums that weren't delivered. Second were the construction lenders. When that dried up, they then borrowed money from sort
of private funds that were raised in China. Then they went public in Hong Kong, and then they did high yield you know, bonds in Hong Kong. So I mean, it's a big, big problem, and the Chinese government can fix it. It's gonna take a lot of money, and it's gonna take a lot of expertise. You know, there's no Hank Paulson over there to say, give me a bazukah.
I don't necessarily need to use it.
But she is pretty much indicated that he's not willing or he's not interested in saving. So what would what would force his hand in putting in terms of putting that money into the market.
I think it's a I think it's a guns and butter issue. You know what, there's only so much money. What are you going to do?
You know, what are you going to do with it?
And I think civil unrest is the thing that they're really worried about.
And we've seen some pictures of that.
Hey, Scott, thanks so much for joining us. Really appreciate you coming into our studio. Scott Kelly, founder and CEO of Atos Capital Real Estate, historically has been investing, as Scott mentioned, in Asia, mostly Japan, but also maybe take a look here at the US. And to me, it's the lipstick building on Third Avenue. When I see something like that trade, I can't wait to see what the evaluation is. It could be a big, big haircut.
You're listening to the tape Cansur Live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa, playing Bloomberg eleven thirty sub Topa.
Marty joins us. She's a Chief Technology Officer Whipro.
Whipro's a publicly traded company New York Stock Exchange w IT is the ticker twenty five point two billion dollar market cap stocks a year to date up about three point eight percent, So that's good news there. So, but thanks so much for joining us here. Software Company Artificial Intelligence. Ge tell us kind of where your company fits in the tech stack.
What do you guys do it? Whippro So, we are.
A technology services provider and we serve fourteen hundred customers across twenty five plus verticals across the globe. We are anywhere from managing cloud and infrastructure migrations to managing full cloud stack, to application development, to tech support, to consulting and strategy consulting. So we are a full service firm and I'm really excited to talk a little bit more about what we're doing on Jenny I on the.
Show with you.
Yeah, tell us about that. I think you know, this year it seemed like the biggest historian AI was well Chat GPT, and now it's going on with open AI and sam Almon. A bit of a different development there. But tell us as far as far as investment opportunities for AI, what we can expect to see in the new year.
You know I see GENEI impacting.
It is going to impact every business and every vertical and every technology stack.
And we know this already.
What is interesting is the categories.
That are emerging.
I would specifically put GENEI impact in four specific categories. The first one is the entire SDLC process from software development life cycle. Internally, we have we have been experimenting with this technology for the last ten months and we see twenty five to thirty percent productivity gains, you know, from requirements to you know, testing to everything in between. The second area which is emerging is around content generation.
I mean the idea that you're able to reduce how much it takes, how much time it takes to create content generate content is is quite fascinating and that's where we see significant improvement in productivity gains.
The third area we see emerging.
Is this entire RPA two DOT or the entire idea that in the past it was around automation, but now it is mostly the new avatar or the reinvention of business process optimizations through generative AI. And the last category, the way I see it is right now, most of us have experienced generative AI through large language models applying the same architecture to other modalities other data's structured data, which will then start to impact these various layers in
stack that I just referred to. I think becomes quite fascinating. These are kind of the four trends I'm seeing beginning to at least I'm seeing emerging, and the application of these four areas will be fascinating and we'll see what plays out in the next year, which will be very interesting.
So we've heard some numbers from a various technologists about the spending associated on artificial intelligence on AI across the whole range of industry. From your perspective, how much of that spending, that AI specific spending is new incremental tech spending or they simply maybe taking their spending from another period period of their place in their tech budget.
See, most of our technologists, we don't get a lot of budget. When I say that, I say that because we are we are very much tied. Technology is tied to have business outcomes. You know, it's top line growth and bottom line optimizations and growth for us. I mostly what we tend to do is start the RGB and create the headroom, so to speak, and invest in new areas and new technologies. The idea here is productivity gains.
The idea here is how can I run the business smarter, more efficiently with better predictability so that I can generate those business outcomes. And when I look at it from that lens, it is quite quite interesting the question, because the question self is an.
Answer, right.
I mean, you won't get you always have the same pie. You'll just have to debat up in ways that that that will add generate value for business.
When we're looking about AI, this is obviously such a rapidly evolving space. I would love to hear suba some of the biggest lessons and takeaways that you had from twenty twenty three and how you're going to bring that into the new year.
Specifically around Jenny I.
Our biggest learning has been that and it's been a good learning, which is experiment fast and move fast. This space is evolving rapidly. The number of technology startups that we are investing at Whippro. We have venure arm and we also do significant amount of work with startups because that is how we create this robust ecosystem that will then offer the right solutions for our customer problems. We are we were very very rapid in terms of investments.
We announced a billion dollar investment for our firm in summer.
And the idea here.
Is you invest fast, fail fast, learn from it. And what is fascinating to us is because of our investments early on, patterns are beginning to emerge. We understand that middleware, as an example, in this space, is going to be an explosive opportunity in twenty four and twenty five.
It is a very evolving space. How what does a stack?
How what kind of stack would emerge out of gen AIH the middle tier, middlewars are It's going to be fascinating. There will be new startups and new companies born out of it with rapid adoption. And those patterns have to be recognized early on. And the only way you can do that is by experimenting and failing fast and making sure that you're able to invest at the right time.
So, but talk to us about the risk here associated with AI. You know, whether it's just data security, privacy, all those issues.
How do you guys think about that?
Now?
We are a very responsible company. In fact, the very first tenant when we announce this investment is responsiblely I framework and I see this as two sides of two sort of a coin responsible and and innovation. I think it's going to be interesting in the next few months and years. And obviously we all heard about what the US come and sign in terms of responsibili framework and
in terms of privacy and other other implications. I think more regulations will emerge, but we specifically here we are taking a proactive action, sort of proactive decision in terms of how we want to develop, adopt, and productionalize, operationalize GENEI based applications. I think this is going to be more regulated into the future because it is I could on data and privacy, for instance, what kind of data sets was the model trained on? How what is water marking,
you know, how does it manifest itself? How do you ensure that the output from gender to AI when water marked? What are the commercial commercial ways of monetizing or sorry, basically, how do you monetize? So all these patterns will begin to emerge in the next three to six months, and I feel that regulation is catching up in this case.
This is the first time I've seen regulation catching up somewhat faster than in the past in other technologies, and I think I think it'll it'll be interesting to see how the industry then shifts to accommodate those regulations and.
Policy changes.
So last one here real quickly, Suba, so whippro really big company. You guys have got two hundred and forty five thousand employees based out of India. Tell us what the AI adoption is like over there.
We are in AI first company.
We are bound to be air plus company because we play in the technology space. You're right, two one ff three thousand employees primarily based out of India, but also worldwide.
We are a global company and the very first.
Thing we ended up doing was to make sure that we build our own internal Genera to AI platform from various use cases.
We are slated to have all our two and fifty.
Thousand employees on the platform in the next couple of months as we roll out various use cases. We're also again very very acted in Genera DVII training, so we have we are in the process of training all the two and fifty thousand employees into in general and responsible AI.
Yes, all right, so, but thank you so much for joining us. Really appreciate you taking the time.
Fascinating story, they're fascinating discussions subaut Tatavardi, chief technology officer for whippro.
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