Markets, Twitter, Labor, And Baby Formula (Podcast)

and how before we get to inflation the economy? Um? Jerome Powell, Paul and I were just saying, you're in the commercial break. Everybody we know who went to Brand Dice is either like on the board of the f f MC or incredibly successful on the street, every one of them. What what's the deal with that school? You guys are so funny. Well, first of all, thanks so much for having me in Happy Friday. You know what, I don't know, maybe it's just the luck of the draw,

hard workers, a little bit of scrappiness. I think it kind of comes down to that fundamental right there. All right, so um in your hard work now at KKR. Looking at the fundamentals, what do you see in terms of this economy. It's a little bit scary going by the volatility we've been through in um markets and the the inflation um that we're seeing is you know, generational, and you've just got to be worried about the growth even

if your base case isn't for a recession. Sure, yeah, I know, it's a fantastic question, and I think, look, the markets have a level of inkst and we haven't lived through something like this in a very long time, and the inflationary levels are certainly very real and something

to be extremely mindful of, especially across the investment landscape. Now, it's all that being said, I think we look back at the last twenty four months and we think about kind of the big vacuum of different drivers that the economy and the markets have had, and we have to take a moment to pause and say, you know, the FED is probably sitting between a rock and a hard place and need to act. And there's a little bit

of this great unlined happening. But even looking further beyond that, like the last ten years of growth have really accelerated, and there's this globalization of markets, So all that symbiosis coming together and then you're tweaking one lever like that's going to have network effects. And I think that's what we're living through right now with this volatility as we recalibrate.

Tell obviously KKR has been around for a long time, tremendous pedigree, lots of experience there, but there's probably a lot of folks on a lot of your investment teams that have not lived through periods of you know, really serious inflation or rate increases or rate increases for that matter. So how are you what's what's the feeling was inside your firm about how to deal with inflation and how

to kind of adjust that when you think about investment opportunities. Absolutely, Look, you know, KKR, we've been doing this for six years and history is the greatest teacher and informant of the future. And I think right now with multi gender Asians kind of living through maybe their first bout of real volatility, these are learning experiences where we're kind of playing together.

The way we move and pivot across the firm as a global team, I'm really into use and so I would say, even though there might be a level of first, for some of the more junior folks across the team, they're actually they're actually an incredible opportunities for us to kind of figure out how we could be more agile and creative as we structure investment opportunities, as we think about capital solutions, if we lean into different sectors or

segments of the public markets. And honestly, one of the things that I love about working here is that it's one team, and so we're kind of exchanging colors, like across the pond, figuring out how we can work better together and figure out how we navigate this market. And for those on the front lines and especially in the first few years of their career, that's super exciting. Do you go over to I'm sure that Barbarians at the

Gate is required reading when you get hired there. Do you go to Henry Travis and ask him for his nineteen seventies playbook? Because so many people are concerned that we are looking at the possibility of a stagflation the likes of which we haven't seen since that decade. You know, we are so fortunate at this firm to still be led by Henry and George and Scott and Joe to really put into play all the lessons of history. And quite honestly, I will demystify that our Barians of the

Gate is not required reading. But we certainly know very much, like you know, the things that the different decades have taught us across these markets. Markets are fundamentally different now if we think about where they worry even pre GFC, you're talking about, you know, so much of the credit market being equity linked, daily liquidity vehicles. You have different inputs where if you see a sell off and equities there could be permutation into credit. That was not the case,

you know, before the crisis. You doesn't a lot of talk about the sixty portfolio, the decoupling of the stock market and credit. I think we're starting to see that there's a lot of new stuff here. And I would also argue that, like you know, after the pandemic, or since the onset of the pandemic, the rules of the game have kind of changed. And I think that's also what you're seeing a little bit as this, you know,

this story on the wines of bent so Tell. I mean, KKR obviously is a global firm, global reach, global view. Do you have parts of the world where you're a little bit more focused on right now, whether it be emerging markets or the developed markets. How do you think about that, given you know, coming out of a two year pandemic. Yeah, absolutely, so, You're right. We do have

our global lenses on all the time. You know, I would say we're being we're being really selective in Europe obviously given the unfortunate situation there um with the war. We also know that everything is intrinsically tiede um Asia is super interesting to us. On the credit side, We're still find a lot of interesting opportunities um in the US.

But I would say we're in a walk run moment right now, and so we are being We're cautious, but we're walking, and we're finding compelling areas to invest, but we're not reaching and overly reaching for risk it. If I think what you're going to see is a little this will probably carry on for a little bit more. The market now understands what the Fed is doing. I think they already knew what was coming, but they're ingesting

that reality. All right, tal great, great stuff. As always, tal reback director k K R and a proud graduate of Brandeis University, which again everybody I've come across on my thirty year Wall Street career from Brandeis have been really really sharp people, so that they do a good job. All right, I don't know what's going on. I'm looking at Twitter stocks down nine per cent. Elan's got presumably a bit up there for fifty four dollars and twenty cents. Do we have a bid? Do we not have a bid?

I don't know. I'm gonna bringing a couple of experts here. They kind of do this stuff for Let me man Deep saying he's Bloomberg Intelligence senior tech analyst. And then I add on the left coast, I think we're gonna put the blame on him. Is Ed Ludlow, Bloomberg News correspondent. Um, Mandy, if you're here in a Bloomberg interactive broker studios, I'm gonna go to you first. Is Ellen just trying to

negotiate a lower price here? Well, so look at what has happened in the market over the last two three weeks. Uh Internet companies, software companies multiples have compressed and appear like Snapchat is trading at about five six time sales. This deal was announced at seven time forward sales and if you use any metric evy two daily active user uh ask for the deal, it's around two hundred dollars.

Snapchat is around you know, hundred and fifteen dollars. So you can see how the deal can be negotiated lower and clearly at that price for the users. And you know the growth that Twitter had. Twitter is in the

highest growing asset in the social media space. Yeah, before the tweet came out this morning, it was like five thirty, right, And when we kicked off my show Bloomberg Surveillance Early Edition UM simulcast on both Bloomberg Radio and Bloomberg Television, I said, you guys, I don't want to talk about us anymore. I'm so sick of the Twitter story. And God love Elon Musk. You know, I'll give him all the credit that he is due. And it doesn't matter what credit I give him. He's still the richest man

in the world. So good for him, But so annoying? Am I wrong? Ad? Is? This? Is he not annoying as all get out. Let's set a baseline, and the baseline is no one knows what's going on inside Elon Musk's head. Yeah, but that's what's that's what's so annoying? Like, I get it, it was interesting for a while. He's such a smarty and good for good for him, I'm a fan, but this is super lame for me. That

the thing is that comes back to bots. Right. If you try and find things that he has been consistent about, one of them is that he doesn't like bots on the platform. He said multiple times I will remove bots from the platin good point this is. Then this leads me to the question. When I first saw the tweet, I thought, oh, he thinks what oh, no, it's less than five percent bots? Does that mean he no longer needs to buy Twitter because his whole asition in the

first place was to get rid of the box. And if it's less than he's like, why bother, it's not even broken, so I'm not going to try and fix it. Or does this mean like his bitcoin investments have dropped, so he now doesn't have enough money to really buy Twitter, and so he's gonna say, um, oh, there's too many bots. I didn't know that before the transaction and try and use an excuse to cancel. Well, I think on the final I think he's in a strong financial position right.

We reported Thursday night that he's trying to get even more equity financing and completely eliminate the margin loan opponent of the deal. But I actually have a question from Mandy focused on the box, which is Mandy, why does he need Twitter to be a private entity to pull all of this off? Anyway? Like Twitter, if you read the boiler plate at the regulatory filing, they clearly know about the bots, they know about the science about how they tracked the bots. Why does taking Twitter private make

any difference to this whole scenario. Well, so Twitter has underperformed in terms of you know, just the product enhancements that that they have done over they and it's not just about bonds, in terms of harnessing that engagement monetization. So and their cost structure is bloated. So Twitter's revenue per employee is way lower than all their competitors. So there are multiple things that need to happen for Twitter to turn around. And you could argue once they go private,

they don't need to raise more capital. So that's the thing about taking Twitter private is this is a self sufficient model. You don't need more capital after you take a private and look, you can cut costs and improve the margin structure. The problem in the deal was there was too much debt. So that's what he is I think solving for in terms of taking them, not taking that margin loan, and really getting more private investors to

partner with him to pay that cash portion. Also, ed, isn't the idea um These bots make their user numbers look better, right, It makes interactions look stronger. If you take away the bots as a public company, it'll be super disappointing, like Netflix with no subscribers. So but if you're if you're private, nobody's looking and who cares. We'll hold on. Also, if it's only five percent of us, is that there is the box, So that then wouldn't

the opposite be true? But I guess the thing that interests me most is that, you know, Twitter did put in the boiler plate that their number maybe a little bit off because they're constantly using algorithms to remove bots, but at the same time new accounts are being set up. There's an irony in all of this, right that the biggest complaint for many uses is crypto related bots. You know the crypto community on Twitter. But Elon Musk is one of the great victims of the Great bot attack, right,

he might be a crypto bot. Well, for all we know, we could just be living in a simulation and Musk is a crypto. But by the way, look I'm looking at my my Twitter account, Um, Matt Miller and nineteen seventy three, I have seventeen point eight thousand followers. There is no way I have seventeen point eight thousand followers. I interact with like four people on Twitter. Um, you know, no one ever tweets me besides Ed and Creedy, And I don't believe that I have eighteen thousand followers. That's

got to be fake. Well, I want man need to jump in this point if there's time. But what I would say is that there are thematic things. So when I tweet about Elon, Musk and Tesla, which I do regularly, there's a very engaged, active, real community, but there are also a very quick flood of bots that sees on this idea that Musk is one of the biggest users on the platform and one of the most followed, but

he also engages and you know, the bots. And when we say bots, I mean bots in the sense of automation, but also the people behind those accounts, there must be some they sense an opportunity with Musk, and that's the ir N I'm talking about. I mean, the other thing could keep in mind is there are a lot of passive users. So what you're talking about, Matt is being a creator. Yes, there are fewer creators on the platform

than there are users. And look, engagement time for Twitter has totatily gone up, so all their metrics look okay, and and the Twitter platform has a decent engagement when you think about it. But look, bots is a unique problem for Twitter because over the years they didn't do a good job of really taking improving their ads stack behind the scenes, and that is where all the monetization problems emanate from who's your Mandy, who's your favorite Twitter?

Which Twitter adds the most value to your Twitter experience? Well, so I think Musk is right up there in terms of coming up with ideas, and look he is or the real Elon Musk account, the real Elon Musk and and look, I think there are plenty of people politicians that you can follow, and there there is value in terms of being a passive user. So the thing about Twitter is it has more of the white collar workers. So there are poo if you try to model it.

The traditionally should be higher than some of the other social media platforms, but that's not the case because they have done a very poor job of showing ads to their users. Made seeing Bloomberg Intelligence. Thanks so much, Ed Ludlow, Bloomberg News bringing you all the latest. Ian single, CEO and co founder of zip Recruiter joins us here and it's time you discussions. We talk about the labor market. But and I know you guys your publicly traded company

z i P on the New York Stock Exchange. You guys just reported some numbers recently, You're earnings. What were the highlights? First off, thanks for having me guys. Yeah, we have another exceptional quarter our business crew eighty one per cent. We beat on both top line and on bottom line, as well as raised guidance for the full year.

Talk to us about us about the labor market. The one question I have for labor and I'm not sure I've heard a really good answer, but the four to five million people that left the labor force, who are they? Where did they go? And are they coming back? Yeah? Well that if you look, there's really there's two trends going on in the labor market right now that are really interesting. So number one, you have a robust demand

from employers. There's eleven million open jobs in the country, and you could compare that to the pre COVID period where we thought we had a white hot hiring market and there were seven million open jobs. So obviously a lot of employers have had to staff back up in a post COVID reopening of the economy. And then the other factor that's really hurting employers right now is for the last nine months, you've had four million people quitting their job every month, and in a normal healthy economy

that was more like two and a half million. So substantial demand for new openings from employers as well as real struggle to retain the people they have. And that's just creating sort of a hiring tsunami where there's rampant demand for talent and a shortage of it. And what you're seeing is a lot of job speakers in the post COVID world are looking for a different type of work and that is what is driving a lot of

the shortage of labor that we're seeing today. I'll tell you what I feel a little bit of a rivalry with Ian And it's kind of like you know, when um there's a sports rivalry, only one school cares about it and the other one, and the other one really doesn't. Because I went to Antioch and he went to Oberlin. We always consider ourselves the champions of kind of the progressive movement, right right, But Oberlin was too smart to

really care about us. Do you think Ian Uh, our founder at Antioch horse man to be ashamed to die until you've won some great victory for mankind? Do you think you're in a good position to do that right now? It zip recruiter because the pandemic has really changed the way labor struggles against capital in a in a positive way for the former and um, you know, opened up doors for diversity and really made UM employment a place

where you can do good. Yeah, and I think you know, the biggest thing that changed in a post COVID world was this desire for remote work. There's an economist over at Stanford named Nick Bloom who has accelerated the transitions to remote work by fifty years. And if you look at it too, what we have right now is a job seeker or currently employed population that has become aware of their leverage and they are they are utilizing that leverage to get significantly higher pay in a number of

different ways. The wage story, the wage growth, doesn't tell the whole story because of new jobs are being offered, signing bonuses in order to induce people to change jobs. And then on top of that, um employers are discovering that they are the ones who have to go first. Thirty seven percent of people hired in the last six months we're recruited to those positions. That's compared to nineteen per cent in the pre COVID period. So there's just been a huge flip in the job market and a

dip recruiter. You know, through both design and through good fortune. Our primary feature is software that enables employers to go first and reach out and recruit job seekers. We were able to create more than seven million great natches last quarter using algorithmic techniques to give those employers the right list of job seekers to recruit, and that has been a big part of our success. We were effectively where

the puck went when this post COVID reality happened. Good stuff, all right, Ian Segel, thanks so much for joining us. Ian Siegel he's a c and co founder ZIP recruiter. You know mean, I'm not My kids are all grown, so I'm not in the baby formula market. But this story has really got my attention because I know it's impacting so many families across the country. Uh, this baby formula shortage, and we want to get somebody who can really shed a light on it for us. We have

Laura Modi, CEO and co founder of A Bobby Um. Laura, I love for you just to explain how we got to where we are here in the United States with baby formula. Yeah, and lovely shout with you. I wish it was hunder better better terms though is it is a very very scary situation. What's happening. I will say like even as a mom, I can emphasize greatly. But yeah, as as the CEO of in for formula company, it's complex,

as the industry is complex in itself. To make infunt formula, it requires an immense amount of safety, so breaking into it isn't easy. But we are here because when very few players own the market, and when one of those players has a recall, it's going to leave a gap in the market. And that's exactly what we're trying to fill. So what can be done? Laura? You know, UM, as a father, I understand the fear as well. Um, I have an eighteen month year old baby. Eight month year old.

That's not eighteen month old one and a half year old baby. She's she's perfect, eighteen going on eighteen exactly. But um, you know, we had an issue. Breastfeeding was a real problem, and there was a point where we had to term to formula. And for a lot of people, this is a reality that I don't think, Um, I don't think the man in our society are aware of. That means that baby formula is the only choice for so many developing um infants. What what would you do

if you couldn't get hold of baby formula? Yeah, I takin. That's a point that's getting missed in this shortage. A lot of people are reading it like it's the toilet paper situation, and it's not. Sevent babies use some type of formula by the time they are six months old, and it is the only alternative to breaston It's not

like you can turn to anything else. And what happens during the moment where you can find food for your baby is you see behaviors that are honestly unacceptable, like making homemade formula in your kitchen, rationing formula, theft, all of these things that are frankly dangerous and only increased safety issues. This is a crisis and we have to solve for it before we see these behaviors get worse. Mark, can you just again, just to shed some light on

the story again, how did we get here? Why? Why? What baby formula manufacturer? Just give us a sense of the structure of the baby formula market. Where do we get it and who produces it and who had a problem and you know, kind of how do we get here? Yeah, well we go here because you know, the infant formula industry, this is the basic supply and demand issue, right There's only so many mouths to feed when it comes to infant formula. And up until the recall we had, now

who had a recall? This Abbot Nutrition that makes similar at one of the largest infant formula manufacturers in the country, and they've been making high quality infant formula for decades and they're very good at what they do. What we have been unprepared for and not you know, pointing fingers at anyone company here either. This is as you look at it as an industry, it's what we are unprepared for is when one of those goliaths has a recall, are we prepared as a nation to be able to

support the gap? And what we've realized in this moment is we're not what what what can you do? Laura? I mean, Bobby is not the size of Abbot, Let's say, and I'm sure your production facilities are are limited right now. What kind of demand are you looking at for your

formula and what kind of production can you achieve? We're producing I mean, honestly, we are producing as much as can but we have actually made the decision in the last few weeks to only serve our current customers and made a very what was a tough decision to decide to stop growing the business temporarily while we just focus on serving those that are currently embody. That gives them the peace of minds that we have to supply to

be able to serve them during this uncertain time. And it also ensures that from a production standpoint, the production of infant formula can be prioritized for formulas that are maybe for those more vulnerable and and and again zooming back out of the greater issue here. This goes far beyond any one brand right now or anyone company, and hence why you see the government stepping in. We have to look at what we are doing to use the current production on the market to be able to support

with products that are feeding this country right now. Laur do you have a sense, given your position in the industry, of when this short form maybe UM kind of fixed if you will um in the last fourty eight hours, I'll be honest, I've been very impressed watching both the FDA and the White House step forward with some very

clear points about how they plan on taking action. And it's action that, if I were to put put solutions together, is exactly what what we should be doing, which is creating flexibilities in the system, looking to bring formula from overseas,

especially especially for specialty formulas. So I think while we are right at the peak of the crisis right now, all eyes are on it, FDA, White House and companies are doing everything they can, and I would expect in the next few weeks we're going to see this try down, okay, And that's kind of where I wanted to go this if from what I read and learn, this is primarily a US issue, not a global issue. So perhaps some of the supply from other parts of the world can

be directed here. We can we can order hip for double the price from Germany. Right, no car, but honest on that. But you are you are absolutely correct, insane that this is not a global issue. This is a US issue and is an issue that we are beginning to look outside of the US and say, how can we get other formulas to be able to support in this moment? Are you part of growing avant garde of UM, of better and of higher quality baby and child nutrition?

I just noticed you work with Gwyneth Paltrow, my friend Sophia Laurel who does Tiny Organics UM also I think works with Gwyneth or Samski. It seems like there's a group of women that are just improving the quality of nutrition for for infants and babies. You know, this journey

has been entirely personal. UM. I went into feeding my own child and realized I just wanted to see better options on the market, and you know, set out on the journey to for juice or organic clean formula that we could be proud of and have had the fortune of being able to feed it to two more babies of my own afterwards. That's great, Laura, thank you so much for joining us. Really appreciate you taking time explaining to us what this important issue is and for a

lot of families across the United States. UM didn't see that one coming, but it's out there and hopefully we can address that shortfall very soon. Laur Modi, CEO and co founder of Bobby, which is a baby formula delivery startups, so a perfect source to get some information on this issue. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter

at Matt Miller three. Put on fal Sweeney I'm on Twitter at pt Sweeney Before the podcast. You can always catch us worldwide at Bloomberg Radio.