Transforming The Way Kids Learn Through LEGO

some cricket occasionally. Also love to play with Legos, or at least I did an I as a kid, and I recently saw that they also have a Seinfeld set, so I might get back into it. Has been Stark joins, us president of Lego Education to talk to us about the pandemics impact on learning and what back to school means um for Lego as well. It has a mission to transform the way kids learn. I guess I didn't even realize I was learning when I was doing it, but I grew up, as did probably everybody around me

as been playing with Legos. It must be one of the staple toys, at least for American children. Absolutely, I think it's a UM. I think it's a stable toy in a lot of places around the world, and isn't it wonderful that that you can learn without knowing that you're learning, and you can learn without being instructed. Has been with the world still dealing with the pandemic, but from an educational perspective, you know, the last year, last academic year was for a lot of places around the

world remote learning. How do you think learning is changing evolving as as you guys look at it from your perspective going forward the pandemic? What was the impact that it will have going forward? Do you think? Well? I think immediately what we know is we're going to welcome a lot of students back into the classroom that that

have faced a learning loss. Their social, emotional learning and development has been impacted as in validity they've been at home, and I think also importantly to many, we've seen reduced engagement in learning and and very unfortunately that that the most severe impact of those most severely impacted are often those already most disadvantaged. So of course we have to face how how do we pick up those students and how do we give them a healthy approach to learning

while closing those gaps. What kind of learning are we talking about? I mean, I um, I think probably the skills that I picked up the most were with engineering, especially as I became a teenager and started buying the more complicated um you know, like a car sets for example, what what what are? What? Are people learning the most

with your products? Our solutions are products are designed of course of all too, the delivered towards the standards and learning goals in the classrooms so that they're really highly re usable. But then of course we're also focused around really developing twenty century skillers as well, also things like creativity, critical thinking, problem solving, and important social emotional skills, also

like collaboration, resilience. So when you have to solve the real world problem in the classroom with with one of your mates, there's a lot of problems solving, there's a lot of negotiations. So it's not the technique because I have so my godson in I got I got him recently the Lego Doukati Panagali V four R. And he's just a kid, he's only I think seven years old. But after he got it put together with his daddy said look, if I turned the crank, the cylinders go

up and down. And I thought it was so cool that there was just that much detail on the set. Yeah, I think imagine that and imagine imagine you know, the imagining of that joy and the engagement that he has. I'm sure he spent sort of hours really deeply engaged in that. And then you layer over intentional content and to then take out learning outcomes of that. So while it's not do CARDI we bring into the classroom, it

is hands on legal based solutions. They are also quoting elements in it where students then solve real world problems having subject based learning, but again also bringing on a lot of those twenty first century skills. And I could imagine that he's also practiced quite a bit of resilience as he's played built that big one and you know, finding the right elements and and ultimately succeeding. So I think take that magic, add the purposefulness of delivering towards

specific outcomes, and then bring it into the classroom. That's what we look to deliver. So what is Lego Education you know doing specifically? I mean you think, I'll think about the last year we had that remote learning and I know you guys support Lego education supports learning through play. I'm guessing that took a pretty big hit last year as kids were working remotely. Um, of course, we try to do what we can to support teachers to have

a learning wherever it takes place. But you're right, our solutions are optimized for using in the classroom where the students can engage in collaborative, iterative problem solving. And I think we've also seen through the pandemic actually the magic that the classroom has and what students are missing there and what's then really important for us to say, how can we make that even stronger? How can we optimize the learning potential in the classroom. And that's why we

talk about the importance of rethinking learning. So again, how can we make learning engaging, personally meaningful, iterative, socially collaborative, so we can really press the students with the skills they need. It said, a very important healthy approach to them. Ashman Stark, thank you so much for joining us. Really appreciate a fascinating discussion here, ashpan Stark, President of Lego Education.

And again, kids going back to school, that's the really good news, and getting them back into the classroom, getting back into activities after school, activities and clubs and sports, and that's the good news. And Lego is a big part of that. We had some better than expected manufacturing I s M data came out this morning. Good news there for the manufacturing front. Let's break it down with Tim Fury, chairman of the Manufacturing Business Survey for the

Institute of Supply Management based in Miami. Tim, thanks so much for joining us here. Better than expected numbers give us the highlights. Yeah, really good demand again and the month of August uh, better than the month of July. And plus I mean that's a great number. The new export order number was really strong. To supporting that new order number. Backlog was again near records, second highest number

ever since we've been keeping record since the nineties. And the customer inventory again was swallow months below forty which is a super too low. Empty cells everywhere. If you've been in any of the stores lately, try to buy a car, you can't. There's a went to a department store, going to a grocery store sells a rampy everywhere, and it's kind of indicative of what this reporter is signed. Our delivery side us a little bit uh, and prices

are backing off there. There is some positive signs for the future go ahead well, I just um spent the my lunch hour trying to order a titanium um connecting pipe for um an a Kropovitch exhaust. And who doesn't do that in their lunch Well, it's just they're impossible to find. I called a ton of distributors and dealerships and they say, you know what, you're gonna be waiting weeks, like hope to get it at the earliest end of October.

And it just feels like that's a long way away from you know, I feel like we just finished August. Um when is this going to When are we gonna see a recovery? Well, so let's let's expand on that. You know, our our number one industry sector that's expanding its furniture. And you go into a furn is to store these days and they'll tell you, well, maybe four weeks, but I don't really know. And even the day before we supposed to deliver, they'll call you up and say

it's going to be another three weeks. A lot of that has to do with poor congestion. I think we're gonna be dealing with this uncertainty for quite some time. You know the fact that the Dela variant raised through UH the US to such an extent it didn't so much impact our panelists, but it's definitely impacting sentiment and you can see it in the conference board in the University of Michigan. So, and that's not a good thing.

Our lead times are out so far we set record Romatory of lead times again, and what's happening is that's driving up our new order number. How much I can't really tell, but you can probably assume it's five points of it. So, and that's essentially advanced demands. That's if you have lead times that are typically six weeks, they're now twelve or fifteen. You're committing to higher prices at some point longer in the future than you normally do.

And that's kind of risky. But but I think you know, overall suppliedment balances, we're in balance, but we're making progress. The input side mad some progress price disease that although they're still expanding not as fast rate as they were in July and June, the suppliers delibered better. You can see that in the rometary inventory account. We manufacturing inventory account. We got to fifty five first time in quite some time.

So but I think We've got a new normal here that we're gonna be dealing with for at least a year. And that's the impacts of variants coming out and the attitude that it has on people tim manufacturing. What are they saying about their labor force? Are they getting the labor they need? Well, that's the big story for the months. We are still struggling attracting people. Hired to fire ratio is still eight or nine to one, Uh no, one is. I think I had one respond in talking about layoffs.

Everybody else is talking about trying to hire. Of the people, I think eight two percent of my comments were higher related and of that, thirty five of those said that they were having difficulty, which is up five points from July. So that's that says a lot of The biggest thing on the labor side, I think in August is that what started in July turnover is now accelerating. So of those hiring clans is related to turnover, including retirements, and

that's a big number. So you hire two, somebody retires, you have to hire three. It's and in most cases it's people chasing wages, and that's a direct result of people raising wages to try to fill up their staffing levels. All right, very interesting stuff. Great to get your take on this, Tim, thanks so much for joining us. The usual Tim Fiori, there's the chairman of the Manufacturing Business Survey out of the Institute for Supply Management in Miami.

Of course, we've got that number. You can see it if you type eCos space US go UM, or you can type w E c O go in the blueboard terminal, click on the American flag and you will see I s M Manufacturing came in at fifty nine point function of nine from fifty eight the survey was fifty eight point five, so beating the survey and more than the

prior reading of point five. We have had a ton of stories, well just daily deluge of stories about the changing regulatory environment and China, and a lot of investors have just said it's uninvestable at this point, but some are seeing opportunities, and Ashroff huck is among them. Among them. He's a senior portfolio manager at Sands Capital, and he joins us to talk about um the companies that could benefit from the regulatory revisions that we're seeing. Ashroff, thanks

very much for joining us. What are you seeing as kind of the overall theme here in terms of what China is doing. Hey, Matt and Paul, thank you for having me on UM. You know, it's been a rocky and the regulation has been fast and furious, and you know, we've taken some hits, but we think the government is focused on strategic priority these improving its demographics, reducing income equality,

moving to higher value manufacturing industries. And we don't think it's a case where they're trying to destroy capitalism or punish the wealthy. And so the attractive areas that they're pushing, uh, you know, they're encouraging more athletic participation, better access to

affordable drugs and healthcare, and cleaning the environment. But when I take a look at big companies like Ali Baba, like ten Cent, which have been such winners not just for shareholders but also arguably for China itself on a global scale, seemed to reflect very well on China. It's surprised a lot of people that the government went after it was such a heavy hand. Those again, those companies that were really representing I thought China well on a

global scale. How do you make make out or make peace with kind of how they're viewing some of their traditional stalwart companies. Yeah, I think that those tech companies have gotten so big, and a lot of the issues that the Chinese regulators are dealing with are the same issues that American and European regulators have with the big tech companies. Here the differences that China can regulate them

much more efficiently and effectively. UM So, I don't think they're trying to destroy the ten cents and the baba's, but they want to ensure fair competition. They want to ensure that that the you know, the term that everyone's talking about common prosperity. They want to ensure that there's more equal participation in the growth that's being generated by those platforms. Are you concerned about the fact that, you know,

things can change in a dime here? I mean it's not like, um, we get a plan that's laid out and we know in advance, they could just change their mind at any point. Yeah, I mean it is a little bit more dynamic. It's complicated, but I also think

China's is too compelling to ignore. Um And as I mentioned, there are they're you know, right now the tech platforms and education, for example, are in the spotlight but there's a lot of growth in consumer businesses there that the government will regulate to make sure that it's it's fair competition, but they're not trying to control those businesses maybe as much. Uh So. For example, we own a business called Anta, which is one of our largest ways. It's a athletic

footwear company. Uh and that's gonna grow as the as the government's pushing more uh kids into you know, stop playing video games and play more soccer. Um so uh And China's about to host the Winter Olympics. They're encouraging people to go skiing and things like that. So Anta, which you see Clay Thompson wearing, will be a big beneficiary of that. And um you know, it's something that we've helped for a long time with growth twenty over

the next five years per year. So astra in in terms of new capital going into China, my guests would be it's gonna go in and demand a much higher risk premium. I'll pay a much lower multiple for my equities, a called demand a higher yield on my credit. Talk to us about what you're seeing in the capital markets there, the financial markets, the funding markets for China. Yeah, that's certainly in the case, and you're seeing that even reflected

in the public company multiples. I mean, you look at a business like Ali Baba versus Amazon UM, you know, very similar growth rates. In fact, Baba is growing probably faster in its core business, and it trades that a much lower multiple, higher risk premiums and than Amazon. So it's certainly something we're seeing, uh, in both private and

public funding markets. Interesting when you see UM everyone sort of rushing out of China heading for the exit, does that provide any kind of UM, any kind of opportunity? And I noticed there's some companies I think of ever Grand for example, that are having fire sales. Yeah, we're not really interested in UM businesses like that. You know, we run global growth portfolios or distressed or distressed assets. Now, yeah,

we're really looking for great growth franchises. Some of those are on sale, but I think less than the fire sale. We're more interested in how innovation and technology are creating new opportunities, and that's certainly happening in China as well as many other parts. I mean, China is a small part portion of our of our global internationally and portfolios UM, so it is I think less you know, the fire sell more the opportunity that's been created by innovation invest

what we're focused on right now. Alright, as, thank you so much. We appreciate that. Getting some thoughts there on China. And again the real question is to what extent, uh is China investable? Is it still investable? But it's such a big part of the m s c I index that you kind of have to be there as astrof, said Ashraff hawk Uh, senior portfolio manager for Sance Capital. Thanks so much. I love the joint. I love the

the athletics shoe point. You know, because if kids are going to stop playing video games and yep, I think that's a very big if. Um, they are going to have to do something else, and it's probably going to involve running around, um, wearing shoes, especially if they're playing basketball, which they love to do. They're getting pushed down on

the ski slopes and need new boots. Yeah, it should be interesting it but I'll be like like you said, Mattabie, I don't know how they're going to regulate Uh, the uh kids are gonna have parents can't do it. Good luck to the Chinese government. We'll have more coming up this is Bloomberg, But we have a good old fashioned price war in the m and a space this time

for Kansas City Southern Railway. We've got the two Canadian railways, Canadian Pacific Railway and Canadian National, both vying for this asset. Would give them a great Canada through the US into Mexico line. There lots of opportunity. Let's dig deep into this deal. We can do it with nobody better than Tony Hatch. He has been covering these rails and truckers for decades on Wall Street, one of the top analysts there.

He is knee deep in this deal. Tony again, it makes a lot of sense to buy for one of these Canadian companies to buy Kansas City Southern. What's the problem here for these two players. It seems like Canadian National had a kind of a setback, So Cannadian and I saying hey, Paul, Canadian National kind of like a combination in the ring yesterday, a straight left by the STB rejecting their voting truest and then a roundhouse by t c I trying to change the manager team out.

So it was not a good day to be in Montreal. Say the deal is that c N was proposing this under new rules, the so called new rules for the STB which came about in two thousand one and require enchanced competition, not not just preventing reduced CP skated by any of the old rules and see and also had horrible timing. This STB is activist and wants to get out to get in the ring and punch it railroads, and c N has provided them with that opportunity. Is it damaging to have this kind of deal up in

the air? I mean, um, what does the management do what when there's so much uncertainty. It's a very good question, you know. I think you would say that there's some lost time really maybe all three carriers involved, because certainly the top strategy lines were focused on on this and in Washington, d C rather than out in the field. I don't think it's you know, ultimately damaging. I think

they all have good prospects. You know, we may see change and see ed which would in some ways be unfortunate, but I think they can get past that level of damage. These deals would whoever would win, would be transformative and may have been worth the time risk, if not the dollar risk. So Canadian Pacific. Now I guess from a regulatar perspective, seems to be in the driver's seat here. But there offers actually lower than what Canadian National did.

So are they have to raise their offer or can there twenty seven billion dollar offers still win the day? I think at this point it probably wins the day. So the key thing, and you may remember, Paul, is the UH the voting trust issue if if C he

has approved. If you if you were a Ryott Pennsy Southern, your board and your chry was voted to approve the CP deal, you could get paid almost instantly if you were to continue with the CN deal, which I don't think will happen, but if you work to you would have to take the entire regulatory review process, time and risk. So the question is is you know it's three hundred

today or maybe in a year or more. So that's why they feel they don't need to raise that they can win with a lower face price face price offer, are there? UH this deal would have gone to Canadian National Railway and maybe it goes to Canadian Pacific now losing Kansas City Southern. It just strikes me as an American that we seem to be seating power to the north. The railroaders, you may recall, have always viewed this as a North American venture. After all, the CEO of the

Canadian Pacific UH is an American. Most of the transformation of c N under Hunter Harrison and American were Americans. So, um, you know, from a rail shipper and a rail investor, you could buy Canadian Pacific and sell Union Pacific or

vice versa. That we don't view it that way. In fact, it would be more likely if somebody were to go buy an American were trying to buy one of the two Canadian headquartered railroads, that would raise nationalistic fears than a fear about somebody buying the smallest American railroad, which really is a play in Mexico, the third country we haven't talked about. Yes, let's talk about this deal strategically. Let's say Canadian Pacific gets Kansas City Southern. Talk to

us about the benefits of putting those two roads together. Well, you know, and I want to say this to if c N had been able to do this without competition or under the old rules, they would have gotten this the old rules, and this does not reduce competition questions as to enhance it for CP under the rules of nearly presenting that it does and hurt anything that currently exists.

Would link you know, every railroad now wants to get access to more water, so it would get them to the US Gulf and get them all the way to Mexico. It would link the autoly industry from parts coming in manufacturing in Mexico. Detroit as well as in Ontario would all be linked. In addition, corn grown into the code is as the largest US import into Mexico and so they have infertile growing fields there and the end up

single line service. So you know the it would create real power north South and most of the rail industry as you well call as focused east West. You know, containers from l A inbound to Chicago and that type of thing. Does it, though, um reduce the amount of competition in the industry, I mean it must it's CP if CPA were to win at the answer is no, because they only touch at one point in Kansas City. So you know, it does create more competitive options, it

doesn't really reduce rail competition. One of them. You bring up a point the STV views this as railroad competition. There's fewer railroads now, etcetera. They ignore the fact that this North South railroad parallels the Mississippi River, which is a huge freight you know highway, as well as the actual highway system, the subsidized you know, interstate highway system. So from the shipper point of view, really neither reduces competition in a big overall in a big, big way,

but CP certainly does not. Hey, Tony, we hear a lot are doing adds to it? Yeah, we we we hear a lot from across the industry's really over the last couple of quarters. And we listen to earnings calls about the supply chain issues in this country. Give us a sense of mer perspective from the railroad and the trucker's kind of how bad is it? Uh? When is it going to get better? Do you think? So? It is bad, but it's not fatal. Um, you and I have lived through worse. Um. This is, you know, a

total supply chain issue in which continuing events. Think of this is not a rock and pond, but you know the biggest boulder you've seen. So the waves come and then they come again. If you shut a port down in China because of a new COVID. You know outbreak that affects ships coming into l a Long Beach. They're they're forty three stacked outside of the Valley Long, which it looks like a D Day photo. You have shortages

of warehouse people, shortage support people. You have railroad issues because the boxes are staying in their terminals which are meant to be through stations, and they're not enough truck drivers or wherehouse people to handle those boxes. So it is a system one problem. Rails are not covering themselves in glory uh this year. They did pretty well last year in the first stages of the recovery. But they're they're they're part of the issue now. They get a

lot of press. Remember Churchill's quote, they've let a good crisis go and used So ship or trade associations are piling on on railroads because they can. That's how the game is played. When will it get done? Probably done until early next year. But it is not something that Wilwoods themselves can solve, and if that they may be done. If you talk to most international shippers, it's the water.

This is the biggest problem not to land all right, Tony, thank you so much for joining us to appreciate it as always expert opinion Tony Hatch railroad, trucking, transportation, animals for a b H Consulting. He's recovering this sector for decades. He's got the goods there. We appreciate it. 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. On Fall Sweeney, I'm on Twitter at pt Sweeney before the podcast. You can always catch us worldwide at Bloomberg Radio