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Investing In The Cannabis Market · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
• 0:04
  Speaker 1: my co host Matt Miller. Every business day, we bring
• 0:06
  Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
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  Speaker 1: with essential market moving news. Find the Bloomberg Markets podcast
• 0:15
  Speaker 1: called Apple Podcasts or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg dot com slash podcast. Let's talk right now
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  Speaker 1: about what's going on in the world of cannabis. Alex
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  Speaker 1: Pasternak joins us. He's the executive vice president of BINSK
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  Speaker 1: and he can talk to us about um, the market
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  Speaker 1: and the future. It's it's interesting out because I was
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  Speaker 1: just in New York City for a few weeks and
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  Speaker 1: I started to see these cannabis stores popping up. They
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  Speaker 1: weren't selling real weed yet. It was like Delta eight
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  Speaker 1: th HC, which I guess is kind of a knockoff,
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  Speaker 1: slightly legal version of legit th HC. But it'll come.
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  Speaker 1: And I wonder how you expect this market to develop?
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  Speaker 1: Is it going to be like the liquor market developed? Hey,
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  Speaker 1: how you doing? Thanks for first and foremost thanks for
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  Speaker 1: having me today. UM, I would say that the liquor
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  Speaker 1: market is going to be uh, you know, a little
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  Speaker 1: bit of provides a little bit of insight for us
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  Speaker 1: in terms of as legalization continues to roll out and
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  Speaker 1: how they do it. You'll see differences in terms of
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  Speaker 1: the distribution models in particular in some states that that are,
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  Speaker 1: you know, share some of the characteristics that you see
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  Speaker 1: on the liquor side. But altogether, no, I think cannabis
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  Speaker 1: is going to prove to continue to be its own, um,
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  Speaker 1: its own product category that takes a few few things
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  Speaker 1: in particular from the liquor segment, but no, on its own,
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  Speaker 1: I think it's going to be completely different. To be ho.
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  Speaker 1: Of course, the liquor market has been legal for so long, um,
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  Speaker 1: I guess the cannabis. Cannabis was legal for a long
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  Speaker 1: time before anyone figured out what it really was. But
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  Speaker 1: it's been uh, fairly well demonized in the US. How
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  Speaker 1: you go about now in this kind of quasi legal
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  Speaker 1: state sourcing and selling weed? Is it? Are you looking
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  Speaker 1: over your shoulder all the time depending on which state
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  Speaker 1: you're in? Great question? No, Actually, we were able to
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  Speaker 1: sleep pretty well at night over here. Everything we do
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  Speaker 1: is fully legal. We only operate in legal territories. So
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  Speaker 1: even though it's federally still illegal. Um. As you all know,
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  Speaker 1: it was deemed an essential business during the pandemics. So
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  Speaker 1: the the idea of having concerns at this point, UM,
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  Speaker 1: are are long gone. And it's proven by the fact
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  Speaker 1: that you see more and more investors entering the space
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  Speaker 1: on a daily basis. So the risk factor is almost
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  Speaker 1: fully mitigated at this point. And no, we are only
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  Speaker 1: operating in legal territories. On the liquor comparison, as you
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  Speaker 1: compare it to there, there are some things to look at.
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  Speaker 1: For example, I could go into a liquor store today
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  Speaker 1: and buy fifty handles of vodka and in six kegs
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  Speaker 1: and no one says a word to me. But in
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  Speaker 1: most legal territories, I can only buy a edibles or
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  Speaker 1: announcer to a flower. So there's major compliance and regulatory
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  Speaker 1: issues that we're still battling through here. Alex, you mentioned
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  Speaker 1: the federal legislation, your federal approval. Give us a sense
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  Speaker 1: of where you think that is and how that may fall. Yeah,
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  Speaker 1: great question. Um. Look, I'm a big numbers guy, engineering
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  Speaker 1: background geek out on data and science in particular, there's
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  Speaker 1: nineteen recreational states in thirty six medical nineteen and thirty six.
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  Speaker 1: It doesn't take an engineer to understand that there's really
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  Speaker 1: no turning back at this point. Full legalization is imminent
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  Speaker 1: at the federal level. Look at the latest proposals by
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  Speaker 1: the Schumer Bill and progress on the Stafe Act and
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  Speaker 1: in Congress. I mean, there's just too much money on
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  Speaker 1: the table for the private and public sectors, particularly the government.
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  Speaker 1: Putting aside the money, there's two other major factors that
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  Speaker 1: I want to address. Number one, the opioid crisis and
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  Speaker 1: number two the criminal justice system. Last year alone, we
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  Speaker 1: lost about a hundreds thousand people to an overdo us
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  Speaker 1: on opioids or another synthetic drug. The legalization of cannabis
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  Speaker 1: can immediately help this horrible, horrible opioid epidemic. Lastly, the
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  Speaker 1: war on drugs needs to end with sensible criminal justice reform.
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  Speaker 1: We need to address the fact the imprisonment of more
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  Speaker 1: than forty thousand Americans incarcerated still for activities that are
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  Speaker 1: now legal in a significant portion of the country. Well,
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  Speaker 1: I wonder what kind of people do you have to
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  Speaker 1: deal with then? I mean, when I was a kid,
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  Speaker 1: we drive down to Athens County in Ohio, or at
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  Speaker 1: the Humble County in California, and there was a pretty
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  Speaker 1: shady group of grow ops. Um in those places, you
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  Speaker 1: did not want to tread on someone else's farm. Has
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  Speaker 1: that changed significantly? You know, there is a ton of
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  Speaker 1: black market still going on today. They're estimating in California
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  Speaker 1: alone that the black market is somewhere between two to
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  Speaker 1: five the legal market. That range of two to five
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  Speaker 1: is just so mad, considering the legal market in California
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  Speaker 1: is tracking to be four billion. So you really just
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  Speaker 1: have endless black market cultivators and endless black market producers
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  Speaker 1: at this point. Um, what's going on back there of
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  Speaker 1: theft and stealing from farms and security is uh, it's
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  Speaker 1: definitely a slippery slope. And again we're pretty grateful that
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  Speaker 1: we are nowhere near what's going on in some of
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  Speaker 1: those parts of the country. In particular, what about the
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  Speaker 1: quality and the strength alex of the of the weed
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  Speaker 1: that you guys are getting today, I mean, it has
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  Speaker 1: steadily increased to a point where, um, you've got to
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  Speaker 1: be careful if you want to smoke a joint, especially
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  Speaker 1: if you're an older person. Is that going to be
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  Speaker 1: easier to measure and easier to decipher? Yeah, So think
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  Speaker 1: about like alcohol again to compare as you get as
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  Speaker 1: we grow older, you go into some of these superstores,
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  Speaker 1: these mega stores, in the product variety just ranges from
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  Speaker 1: from lower and lower quality and two dollar bottles of
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  Speaker 1: wines that select stores to thousands and thousands of bottles
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  Speaker 1: of wines in some stores. So I think the same
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  Speaker 1: thing is gonna happen with cannabis. Over time, We're gonna see, uh,
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  Speaker 1: we're gonna see products going again a little bit towards
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  Speaker 1: the race to the bottom on on the value products,
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  Speaker 1: and then we're gonna have continuously higher and higher end
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  Speaker 1: products what you see on the what the first part
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  Speaker 1: of your question what's happening right now is one of
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  Speaker 1: the only data points associated to cannabis is the THC
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  Speaker 1: percentage that's the consumer sees when you go by cannabis
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  Speaker 1: or flower as we call it in the industry. There's
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  Speaker 1: a numerical value associated to that test that strain from
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  Speaker 1: that batch. They usually range between let's say fifteen and thirty.
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  Speaker 1: But if you watch what happens in a given dispensary
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  Speaker 1: on a given day, these these uh, these people come
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  Speaker 1: in these a construction worker after work or um a
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  Speaker 1: an electrician after work and they have a twenty dollar
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  Speaker 1: bill in their hand, and they say, how far can
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  Speaker 1: I take this twenty dollar bill? What is the highest
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  Speaker 1: high I can get from this twenty in in comparison
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  Speaker 1: again to alcohol, what's happening is ever Clear is being
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  Speaker 1: valued at a higher quality product. And let's say a
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  Speaker 1: blue label. Just because ever Clear has a higher alcohol content,
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  Speaker 1: it doesn't mean it's a better product than blue label.
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  Speaker 1: And unfortunately in the cannabis market, it's just not as
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  Speaker 1: educated and it's not as sophisticated yet, and so the
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  Speaker 1: blue label is literally selling for less money than the
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  Speaker 1: ever Clear. And that's part of what I'm trying to
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  Speaker 1: do every day is help educate and help everyone understands all.
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  Speaker 1: Alex Pastron act there from Bens, Thanks very much. This
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  Speaker 1: is Bloomberg Now. We got earnings out today UM from
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  Speaker 1: a number of retailers, and we're going to continue to
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  Speaker 1: get them out over the next couple of sessions from
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  Speaker 1: more Walmart UM coming out this morning, and UM giving
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  Speaker 1: a beat in term of its UM in terms of
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  Speaker 1: its previous earnings and and raising its UM outlook in
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  Speaker 1: terms of its forward earnings. And then we at home Depot,
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  Speaker 1: which disappointed. How to bring Katie Thomas, she is leading
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  Speaker 1: the Kearney Consumer Institute out of Pittsburgh to talk about
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  Speaker 1: retail because it's going to be such a huge theme
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  Speaker 1: this week. Katie, First off, what's your reaction to what
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  Speaker 1: we saw already? You know, honestly, I would say I'm
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  Speaker 1: not that surprise that Walmart and some of the big
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  Speaker 1: box retailers that really stand to benefit from some of
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  Speaker 1: the trends we've been seeing with consumers, so they're set
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  Speaker 1: up to benefit in all the right ways. And to two,
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  Speaker 1: we were seeing them return to stores. The store is
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  Speaker 1: king as much as we hear about convenience. When we
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  Speaker 1: talked to consumers where do you prefer to shop, especially
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  Speaker 1: for groceries, they still still tell us they love this store.
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  Speaker 1: And on top of that, in general getting as much
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  Speaker 1: done in one trip as possible, it's still you know,
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  Speaker 1: relatively attractive to consumers. They're not doing as many of
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  Speaker 1: those quick runs to local grocery store is but instead
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  Speaker 1: really focusing on the big box how much can I
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  Speaker 1: get in one trip? Um the it's competitive pricing, giving
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  Speaker 1: some of the inflationary concerns and so a lot of
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  Speaker 1: positive tail wins for Walmart that I'm not surprised you
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  Speaker 1: saw flow through in those comp uh store sales. So, uh, Katie,
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  Speaker 1: the omni channel strategy where I can maybe order online
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  Speaker 1: pick up at the store, that seems to maybe have
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  Speaker 1: been a pretty good strategy for retail. Is that something
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  Speaker 1: that can boost this industry going forward. Absolutely, So when
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  Speaker 1: we talk to consumers, they really love that as an
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  Speaker 1: additional option because it's really that perfect hybrid approach. So
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  Speaker 1: you're still physically going to the store you forgot something
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  Speaker 1: you can run in, but especially at the store the
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  Speaker 1: size of a big box retailer, whether it's Walmart and
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  Speaker 1: Target or Best Buy, you don't have to wander through
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  Speaker 1: the whole store either. So it's really like those those
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  Speaker 1: different options, the optionality that we didn't have before that
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  Speaker 1: consumer really are excited to take advantage of, and I
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  Speaker 1: think you'll continue to see it not just in those
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  Speaker 1: types of swords, but as we're seeing it with small
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  Speaker 1: retailers and just across the industry in general. What happened
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  Speaker 1: at um Home Depot there their sales forecast is kind
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  Speaker 1: of hinting at a slow down in the boom that
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  Speaker 1: we had seen is that just to be expected. I think, yeah,
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  Speaker 1: I mean a lot of people we've made the investments
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  Speaker 1: we were going to make in our house. Um, and
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  Speaker 1: you know, Walmart really stands to benefit from that everyday consumption,
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  Speaker 1: whereas the delta variant is driving just enough concern in
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  Speaker 1: the eyes of consumers. Now where what we really thought
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  Speaker 1: over the pandemic is people held off on buying things
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  Speaker 1: until they really felt like they wanted it or needed it.
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  Speaker 1: And so with some of those home improvement I think
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  Speaker 1: it's you know, pressing pause for right now. You're not
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  Speaker 1: going to see the impact of the child tax credit
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  Speaker 1: flow through to home improvement as much either. So it's
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  Speaker 1: just kind of a combination of factors that I think
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  Speaker 1: is having home depots often a little bit Katie, one
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  Speaker 1: of the themes of retail in America over the last
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  Speaker 1: decade or so is there's just too many stores were
• 11:07
  Speaker 1: overstored here. Um, where are we in terms of that metric?
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  Speaker 1: You think we still need to reduce the footprint of
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  Speaker 1: the stores across the U S Well, it's an interesting question.
• 11:20
  Speaker 1: I think you're seeing a lot of you know, uh
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  Speaker 1: press around that, a lot of shift to online businesses,
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  Speaker 1: all of that but the challenge there is direct to
• 11:29
  Speaker 1: consumer businesses that are online only really have a challenge
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  Speaker 1: with eyeballs and footprints. So you know, in fact, you're
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  Speaker 1: seeing some of these big box retailers make those strategic
• 11:38
  Speaker 1: partnerships target with Alta Coals, with the Flora and with
• 11:42
  Speaker 1: the DNC smaller brand. So it's hard to say consumers
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  Speaker 1: really like to get out there and shop. Um. I
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  Speaker 1: think it's really what we called at the beginning of
• 11:51
  Speaker 1: the Pennant pandemic, what you saw was the death of
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  Speaker 1: the middle So it's really some of those middle of
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  Speaker 1: the road retailers that lost their value to consumers. Then,
• 12:00
  Speaker 1: you know, consumers do have so many options nowadays, you're
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  Speaker 1: just not ultimately going to be successful unless you have
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  Speaker 1: a real value offering in differentiation. Does the Delta virus
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  Speaker 1: Does at Delta Delta variant of the virus offer any
• 12:13
  Speaker 1: severe headwinds? I don't think so no. If anything, I'm
• 12:18
  Speaker 1: I'm more concerned about some of the ships we're going
• 12:20
  Speaker 1: to see in the labor market to flow through of
• 12:22
  Speaker 1: the supply chain. Right now, you're seeing a little bit
• 12:25
  Speaker 1: of an uptick in avoidance of stores, But ultimately, consumers
• 12:28
  Speaker 1: have money to spend, and they do want to spend it,
• 12:31
  Speaker 1: it's just gonna be a little bit of bumpy um
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  Speaker 1: in terms of spending when they know they'll need it.
• 12:36
  Speaker 1: I think to slow down in the return to work
• 12:38
  Speaker 1: is slowing that down a little bit again. Even apparel,
• 12:41
  Speaker 1: non back to school apparel, apparel for adults is slowing
• 12:44
  Speaker 1: down a little bit in the retail numbers today. And
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  Speaker 1: that's just I'm going to hold off and see how
• 12:48
  Speaker 1: things play out. Katie, real quickly thirty seconds, talk to
• 12:51
  Speaker 1: us about the supply chain. Is stuff gonna be on
• 12:53
  Speaker 1: the shelves back to schooling holidays. There are a certain
• 12:58
  Speaker 1: categories where there are some challenge and it's definitely on
• 13:00
  Speaker 1: consumer's radar. We're hearing from them directly, I should buy
• 13:03
  Speaker 1: student then later. But at the same time, it's it's
• 13:06
  Speaker 1: coming through in pocket. So it's really hard to say
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  Speaker 1: exactly what that's gonna look like. And I think some
• 13:11
  Speaker 1: of these bigger retailers are actually the most protected because
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  Speaker 1: they have so much strength in the market. So if anything, unfortunately,
• 13:18
  Speaker 1: it's going to be some of the smaller retailers that
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  Speaker 1: I think are going to feel more of the impact. Katie,
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  Speaker 1: thank you, so much. We really appreciate it getting your
• 13:25
  Speaker 1: thoughts here is we're in the midst of these retail
• 13:27
  Speaker 1: or earnings Katie Thomas, she's a lead at the Currently
• 13:30
  Speaker 1: Consumer Institute based in Pittsburgh, PA. And again, you know,
• 13:34
  Speaker 1: I think what a lot of investors are are focusing
• 13:37
  Speaker 1: on this quarter as the retailer's report is kind of
• 13:40
  Speaker 1: how is the consumer doing? Is the delta variant causing,
• 13:44
  Speaker 1: as Matt suggests, perhaps some headwinds for some consumers and
• 13:47
  Speaker 1: consumers spending, and so that goes to not only the
• 13:49
  Speaker 1: results that they report, but maybe more importantly to the
• 13:52
  Speaker 1: guidance they provide. So some good numbers out of Walmart
• 13:56
  Speaker 1: certainly a good indicator of the consumer. There gotta sell
• 14:01
  Speaker 1: off in this market. As Greg was just reporting, what
• 14:04
  Speaker 1: really jumps out of me is the Russell Uh. It
• 14:06
  Speaker 1: is off one point five percent. So the small caps
• 14:09
  Speaker 1: are really underperforming. UH. And it's a good time to
• 14:12
  Speaker 1: speak to our next guest, Brian Small, principal portfolio manager
• 14:15
  Speaker 1: at hood River Capital Management. UH. They are located in
• 14:18
  Speaker 1: Florida like everybody else these days and money management business. Brian,
• 14:22
  Speaker 1: thanks so much for joining us here. Give us your
• 14:24
  Speaker 1: thoughts based upon your experience of kind of where you
• 14:28
  Speaker 1: envisioned small cap stocks here again under performing today, but
• 14:32
  Speaker 1: in the reopening, a lot of people like the small cappers. Yeah,
• 14:36
  Speaker 1: we're constructive from here the markets. The biggest concern I
• 14:40
  Speaker 1: think is the impact on the delta variant on the economy,
• 14:44
  Speaker 1: consumer behavior, business behavior. And we're constructive as we look
• 14:48
  Speaker 1: out too small caps that significantly lab lag this year
• 14:53
  Speaker 1: there about flat versus the FMP up. So it's been
• 14:56
  Speaker 1: a lot of multiple compression in these names. And I
• 15:01
  Speaker 1: think as as we kind of go through the peaking
• 15:04
  Speaker 1: phase here of the delta varian, people get their booster shots,
• 15:07
  Speaker 1: case decline and people come to grips that earnings need
• 15:11
  Speaker 1: to go up next sharing earnings estimates than we think
• 15:14
  Speaker 1: small caps will tend to outperform. But we're constructive on
• 15:17
  Speaker 1: the market in general. So small camps is a big universe.
• 15:21
  Speaker 1: Is there are there specific places that you like best?
• 15:25
  Speaker 1: So at Hood River were bombs of stock pickers. So
• 15:29
  Speaker 1: we like to see inefficiencies and stocks that that we're buying.
• 15:34
  Speaker 1: We aren't really making industry top down calls bottom bombs.
• 15:38
  Speaker 1: That basis right now where overweight consumers, loutical financial and
• 15:42
  Speaker 1: industrial stocks in general, those valuations are better. They're tied
• 15:46
  Speaker 1: to more of reopening in the economy, and I think
• 15:50
  Speaker 1: ear introvisions are gonna be good and valuations are attractive,
• 15:54
  Speaker 1: and I'd love to get your thoughts. I'm a former
• 15:56
  Speaker 1: sell side equity research channels, and I know what I've
• 15:59
  Speaker 1: been hearing a lot over the last you know, decade
• 16:01
  Speaker 1: in particular sense of financial crisis, is that the equity
• 16:04
  Speaker 1: research from Wall Street on small and mid cap stocks
• 16:07
  Speaker 1: is as really declined in terms of how many names
• 16:11
  Speaker 1: are in fact covered. How does that impact your job
• 16:14
  Speaker 1: on the bi side as you think about, you know,
• 16:16
  Speaker 1: doing research analysis on the names of you guys invest in. Yeah,
• 16:20
  Speaker 1: that's a great question. So, as you mentioned, there's been
• 16:25
  Speaker 1: a big dislocation on the cell side covering our stocks,
• 16:29
  Speaker 1: which has made those stocks a lot more inefficient. So
• 16:33
  Speaker 1: it's made our job easier, which is why it's been
• 16:36
  Speaker 1: easier in general for active management to our perform in
• 16:38
  Speaker 1: particular product. We see that as being the case going forward.
• 16:43
  Speaker 1: There are a lot of reasons why why that's the case.
• 16:46
  Speaker 1: Commissions have been tougher to come by in general, Compensation
• 16:49
  Speaker 1: for sething Elysis dropped significantly, and so it's just given
• 16:54
  Speaker 1: us more of an opportunity to find stocks where the
• 16:57
  Speaker 1: earnings estimates are inaccurate. Looking out well eighteen twenty four months,
• 17:04
  Speaker 1: so you're looking at Western Alliance, Chart Industries, Coulica, and Cepha,
• 17:09
  Speaker 1: what what what do you like specifically? Are those are
• 17:11
  Speaker 1: some of the names that we like. We like Western Alliance.
• 17:15
  Speaker 1: It's a regional bank that trades it around twelve times earnings.
• 17:18
  Speaker 1: The street has about nine dollars and worty cents for
• 17:21
  Speaker 1: next year. We think that's really low as they continue
• 17:23
  Speaker 1: to grow loans and the north of twelve range. Uh.
• 17:29
  Speaker 1: We like Chart Industries, as you mentioned, it's an infrastructure
• 17:34
  Speaker 1: provider for all sorts of chemicals and gases. And what's
• 17:37
  Speaker 1: growing the fastest there is hydrogen and there's big demand
• 17:41
  Speaker 1: for green hydrogen. Is is the economy more moves to
• 17:44
  Speaker 1: more sustainable energy and it's relatively inexpensive, especially in comparison
• 17:50
  Speaker 1: to other hydrogen plays like plug power and Coolic and
• 17:53
  Speaker 1: Sofa is a semiconductor capital equipment company. Specifically, they make
• 17:58
  Speaker 1: wire bonding equipment and that that's as you've seen the
• 18:02
  Speaker 1: news all over the place, there's been a big shortage
• 18:03
  Speaker 1: there they had great earnings, uh, and they guided to
• 18:08
  Speaker 1: a little north of two dollars per share next quarter,
• 18:11
  Speaker 1: and the street was at a dollar. So obviously that
• 18:14
  Speaker 1: stock has been acting well and it's still cheap around
• 18:17
  Speaker 1: twelve times earnings there as well. Broadly speaking, when you
• 18:20
  Speaker 1: look at the small cap universe, is give us a
• 18:23
  Speaker 1: sense of kind of where we are in terms of
• 18:25
  Speaker 1: historical valuations because ones a lot of fun managers will
• 18:29
  Speaker 1: come on here and say, boy, it's a twenty times
• 18:31
  Speaker 1: forward earnings. That's yes, that's high, but interest rates are
• 18:34
  Speaker 1: so low, so you know, it's not that big an issue.
• 18:38
  Speaker 1: How do you think about evaluations in small cap land? Yeah, so,
• 18:41
  Speaker 1: as I mentioned earlier, relatives multiples have compressed significantly. So
• 18:47
  Speaker 1: what I tend to look at is the the earnings,
• 18:52
  Speaker 1: the positive earnings companies in the index, and what the
• 18:55
  Speaker 1: valuation is there versus the benchmark. And right now that's
• 18:59
  Speaker 1: at parody with the some ps about twenty times next
• 19:02
  Speaker 1: year's earnings. And there's always this large swath of non
• 19:05
  Speaker 1: earnings companies like biotech, and it's a little bit harder
• 19:08
  Speaker 1: to take a swag at that, but we usually are
• 19:11
  Speaker 1: underweight that area. So that's one of the reasons why
• 19:14
  Speaker 1: I like small cap is that when you look at
• 19:17
  Speaker 1: the relative valuation versus the SMP and the higher growth
• 19:21
  Speaker 1: and the higher concentration of domestic focus here in the US,
• 19:26
  Speaker 1: I think it can outperform. What's your screening technique? What
• 19:29
  Speaker 1: do you do uh to start looking at these companies
• 19:32
  Speaker 1: bottoms up? So most of it is just organically talking
• 19:37
  Speaker 1: to a ton of companies. We talked around for Warner.
• 19:39
  Speaker 1: Companies popetrated every single quarter. So really it's just putting
• 19:44
  Speaker 1: together mosaic in terms of how the business is doing
• 19:47
  Speaker 1: and comparing that versus where the streets doing. And obviously
• 19:50
  Speaker 1: those are businesses that we want to be a part
• 19:52
  Speaker 1: of long term. We're looking for companies that are growing
• 19:55
  Speaker 1: north of that have leading market share the in an
• 20:00
  Speaker 1: industry that's growing, and most importantly, have a management team
• 20:03
  Speaker 1: that's going to deliver. We do have some screens that
• 20:06
  Speaker 1: look at the fundamental data and the odds of them
• 20:10
  Speaker 1: exceeding analy assessments over the next twelve and twenty four months.
• 20:14
  Speaker 1: That's but that's really more to stop gap. Again, it
• 20:16
  Speaker 1: just comes down to just having a lot of conversations
• 20:19
  Speaker 1: and talk to a ton of people. Brian, thanks so
• 20:21
  Speaker 1: much for joining us. Brian Smallock, there is the principal
• 20:24
  Speaker 1: and portfolio manager at hood River Capital Management, coming to
• 20:27
  Speaker 1: us out of Florida. Of course, he's a long career
• 20:30
  Speaker 1: in banking. Started it, Sally, this is Bloomberg. Now let's
• 20:38
  Speaker 1: get back to r T oh. We haven't talked about
• 20:42
  Speaker 1: returning to the workplace over the past couple of sessions. Here,
• 20:46
  Speaker 1: let's bring in Shawn Lyons, Global Chief executive Officer at
• 20:49
  Speaker 1: r G A Sean are we are we looking at
• 20:53
  Speaker 1: a future where it basically goes back to the past.
• 20:56
  Speaker 1: Are we going to all eventually go back to our offices,
• 21:01
  Speaker 1: get back on plane, start our long commutes and just
• 21:04
  Speaker 1: forget about the hybrid work that we did over the
• 21:07
  Speaker 1: last couple of years. Well, hi, Paul, I thank you
• 21:11
  Speaker 1: for having me on. I hope not. I really hope not.
• 21:13
  Speaker 1: I think there's too much binary thinking right now in
• 21:16
  Speaker 1: terms of back to office all remote. I think there's
• 21:19
  Speaker 1: a real benefit of of how we've all worked in
• 21:22
  Speaker 1: the past year and a half. I think the tremendous
• 21:24
  Speaker 1: benefit to the technology we've we've used, the diversity of
• 21:27
  Speaker 1: talent we've been able to pull into the company. So
• 21:29
  Speaker 1: I'm we're we're all in on hybrid and I'm all
• 21:31
  Speaker 1: in on the actual long term benefits of a hybrid model,
• 21:34
  Speaker 1: which I think, you know, while maybe require a lot
• 21:38
  Speaker 1: of thought and and burden on management to manage, I
• 21:41
  Speaker 1: think the benefits and the long term we're just gonna
• 21:42
  Speaker 1: be tremendous. So we're fully embracing it. Yeah, it's interesting
• 21:47
  Speaker 1: here in New York City, and obviously Bloomberg we focus
• 21:50
  Speaker 1: a lot on the big financial institutions. Uh, they were talking,
• 21:54
  Speaker 1: some of them were talking a big game about getting
• 21:56
  Speaker 1: people back in full time all the time, and they
• 22:00
  Speaker 1: since push back some of those dates. What are you
• 22:03
  Speaker 1: seeing at there from some of the leading companies about
• 22:07
  Speaker 1: how they're thinking about their back to work. Yeah, I
• 22:10
  Speaker 1: mean I think we I think generally there's a like
• 22:13
  Speaker 1: I mentioned, there's some short term thinking happening right now.
• 22:15
  Speaker 1: There's there's some fear involved in this, which is, how
• 22:18
  Speaker 1: do I make sure I can monitor the proctivity of
• 22:20
  Speaker 1: my employees, how do I make sure that everybody can
• 22:23
  Speaker 1: work together and build team chemistry, because we know how
• 22:26
  Speaker 1: that works in an office environment, It's it's a little
• 22:28
  Speaker 1: bit more unknown when you think about it from from
• 22:30
  Speaker 1: a hybrid of remote environment, but we actually like to
• 22:33
  Speaker 1: think about it as like, well, how do we look
• 22:35
  Speaker 1: at this creatively, where's the opportunities in here where we
• 22:37
  Speaker 1: can actually attract more talent in more places. Where in
• 22:40
  Speaker 1: some of the biggest cities in the world, with fifteen locations,
• 22:44
  Speaker 1: some of them are quite expensive to live in, we
• 22:46
  Speaker 1: now have an opportunity to hire from more broadly, So
• 22:48
  Speaker 1: we're looking at that as an opportunity, I think. But
• 22:50
  Speaker 1: I do think some of this is just based on
• 22:51
  Speaker 1: the concern and fear that leadership has on making sure
• 22:55
  Speaker 1: they can keep everything going, make the machine work, and
• 22:58
  Speaker 1: make sure people are engaged at work every day. I'm
• 23:01
  Speaker 1: not really that that that concerned with that. I think
• 23:03
  Speaker 1: that people are happier when they have a choice, and
• 23:05
  Speaker 1: I think having a physical environment that they can go
• 23:07
  Speaker 1: to and work in, because that's important. I'm also having
• 23:10
  Speaker 1: the opportunity to work remotely at home or somewhere else
• 23:13
  Speaker 1: is equally beneficial, So we fund it as a tremendous
• 23:16
  Speaker 1: advantage for us. You have, over your twenty year or
• 23:20
  Speaker 1: so career, worked with at r g A and havas
• 23:23
  Speaker 1: huge clients. Ibm um her she's Nike Liberty, Liberty, Liberty. Um.
• 23:32
  Speaker 1: Where do you see the biggest success stories in terms
• 23:35
  Speaker 1: of current workforce model? You know, I haven't actually looked
• 23:41
  Speaker 1: at different models to try to follow. I've actually looked
• 23:43
  Speaker 1: at what we need to do, and I've done that
• 23:46
  Speaker 1: deliberately because I think this is so new. It's still
• 23:49
  Speaker 1: new in terms of where we can actually learn from
• 23:50
  Speaker 1: the last year and a half has been remote work.
• 23:53
  Speaker 1: Only nobody would design it that way along, but you
• 23:56
  Speaker 1: really need to do need to think about how you
• 23:57
  Speaker 1: can do the great physical environment where you bring people
• 24:00
  Speaker 1: together and also then kind of combine that with it
• 24:03
  Speaker 1: with great digital tools so people can collaborate and work
• 24:05
  Speaker 1: remotely together. UM. But we found is that our relationships
• 24:09
  Speaker 1: is our clients in many ways have gotten better when
• 24:12
  Speaker 1: we've worked in this way. There's more frequent communications, there's
• 24:14
  Speaker 1: less burden on that one trip you need to take
• 24:16
  Speaker 1: for a two hour meeting, which everybody understands doesn't make
• 24:19
  Speaker 1: sense anymore. So this Harvard work model remote work is
• 24:22
  Speaker 1: actually I think improves client relationships. They've been quite flexible.
• 24:26
  Speaker 1: We're actually going to monitor what each of our clients
• 24:28
  Speaker 1: is doing as we go along to make sure, we
• 24:30
  Speaker 1: understand how they're they're gonna roll out their plans, but
• 24:33
  Speaker 1: I think for us it will be an advantage for us,
• 24:35
  Speaker 1: but also for them because they're gonna get to work
• 24:37
  Speaker 1: with a kind of broader and more diverse team. And
• 24:39
  Speaker 1: sometimes that means, you know, time shifting, where we have
• 24:42
  Speaker 1: teams working in the US for setting number of hours
• 24:44
  Speaker 1: and we can shift the work over to Asia Pacific
• 24:47
  Speaker 1: to continue that work. So that there's benefits to to
• 24:49
  Speaker 1: uh to the model that we're hopefully going to bring
• 24:51
  Speaker 1: to our clients. Sean just thirty seconds. Um, what do
• 24:54
  Speaker 1: you think is the ideal model? Well, I look at
• 24:59
  Speaker 1: e commerce as a example here, right, so everybody has
• 25:02
  Speaker 1: been used to being in the office for what sixty
• 25:04
  Speaker 1: seventy years, just the same kind of method of work
• 25:06
  Speaker 1: where everybody shows up nine to five. I really think
• 25:08
  Speaker 1: if you look at the sweeping changes that happened in
• 25:10
  Speaker 1: digital commerce over the past twenty years, how it forced
• 25:13
  Speaker 1: evolution in retail. So the retail was hit by that,
• 25:16
  Speaker 1: we know that, but it also forced companies to think
• 25:19
  Speaker 1: about what their retail environment spaces was about, not just
• 25:21
  Speaker 1: about shopping should be an experience. So I do believe
• 25:24
  Speaker 1: this is going to require innovation within the physical workspace
• 25:27
  Speaker 1: that's going to benefit everybody, and that's what I see
• 25:30
  Speaker 1: is the biggest change. Hey, Sean, thanks so much for
• 25:32
  Speaker 1: joining us. Really appreciate getting your thoughts in perspective. You're
• 25:34
  Speaker 1: on a really key topic for corporate America. Sawn Lines,
• 25:37
  Speaker 1: Global chief executive Officer for r g A. Thanks for
• 25:40
  Speaker 1: listening to the Bloomberg Markets podcast. You can subscribe and
• 25:44
  Speaker 1: listen to interviews with Apple Podcasts or whatever podcast platform
• 25:48
  Speaker 1: you prefer. I'm Matt Miller. I'm on Twitter at Matt
• 25:51
  Speaker 1: Miller V three and on ball Sweeney I'm on Twitter
• 25:55
  Speaker 1: at pt Sweeney. Before the podcast, you can always catch
• 25:58
  Speaker 1: us worldwide at Bloomberg Radio