Latest / Bloomberg Intelligence / Palantir Is Bad-Mouthing Big Tech While Taking Its Tech Public: Chafkin

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Palantir Is Bad-Mouthing Big Tech While Taking Its Tech Public: Chafkin · Bloomberg Intelligence

• 0:01
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along
• 0:04
  Speaker 1: with my co host of Bonnie Quinn. Every business day
• 0:06
  Speaker 1: we bring you interviews from CEOs, market pros, and Bloomberg experts,
• 0:10
  Speaker 1: along with essential market moving news. Kind the Bloomberg Markets
• 0:13
  Speaker 1: Podcast on Apple Podcasts or wherever you listen to podcasts,
• 0:17
  Speaker 1: and on Bloomberg dot com. Well, another big tech I
• 0:21
  Speaker 1: p O is coming Palentteer Technologies, a widely anticipated IPO
• 0:26
  Speaker 1: is making its way through the process. Here. It's a
• 0:29
  Speaker 1: fascinating story, fascinating company, fascinating founders and names as well.
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  Speaker 1: To help us bring us up to speed on all
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  Speaker 1: things Paloteer, we welcome Max Chaffkin, Features editor for Bloomberg
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  Speaker 1: Business Week. Max, thanks so much for joining us here.
• 0:42
  Speaker 1: I thought I saw your piece and I love the headline.
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  Speaker 1: Paloteers really no friend to Silicon Valley, are they? Well,
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  Speaker 1: it's kind of interesting, and I have to correct you
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  Speaker 1: here that it's actually a direct list thing, which is
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  Speaker 1: that's right, I mean, very similar to an I p O.
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  Speaker 1: But but but they're not issuing new shares and the
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  Speaker 1: shares have sold somewhat differently. Um kind of new hot
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  Speaker 1: phenomena in Silicon Valley. You know, it's interesting the question
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  Speaker 1: because Palentteer for years was basically the Silicon Valley defense contractor.
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  Speaker 1: That was kind of a pitch. You know. Peter Thiel, uh,
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  Speaker 1: the the venture capitalist entrepreneur, founder of PayPal, uh was
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  Speaker 1: that you know, basically came up with the idea and
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  Speaker 1: and and this company was pitching you know, the US
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  Speaker 1: government for a long time as the like we're gonna
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  Speaker 1: bring kind of Silicon Valley thinking, um and try to
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  Speaker 1: display some of these entrenched defense contractors, you know, like
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  Speaker 1: names like Raypeon. Now, um, what's happened is Palanteer is
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  Speaker 1: now one of those defense contractors and we're seeing sort
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  Speaker 1: of a pivot where where as Silicon Valley has sort
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  Speaker 1: of uh as things have become polarizing Silicon Valley. You know,
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  Speaker 1: obviously a lot of liberals, um, who are who are
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  Speaker 1: very against Trump are are work at work at the
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  Speaker 1: Silicon Valley companies, Palentteers kind of trying to chart a
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  Speaker 1: slightly different path. Is there enough for somebody to get involved,
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  Speaker 1: so private equity or one of these SPACs that's roaming
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  Speaker 1: around the place. So it's talent here. I mean the
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  Speaker 1: direct list thing is happening. Although they did today just
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  Speaker 1: uh you know update the day it was supposed to
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  Speaker 1: happen on in September twenty three. It looks like now
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  Speaker 1: the stock will begin listing on the twenty nine. But
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  Speaker 1: but this is happening in the next you know, this month. Um, So,
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  Speaker 1: so there's definitely not a not a spack situation or
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  Speaker 1: although I suppose, you know, anything could happen. I mean,
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  Speaker 1: one thing that is interesting here is Talent here is
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  Speaker 1: kind of typically described as a startup, but it's been
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  Speaker 1: around for a really long time. It's been around for
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  Speaker 1: seventeen years um, which is again another way in which
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  Speaker 1: is not not exactly a conventional Pilicon Valley company. And
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  Speaker 1: they've raised you know, a turn of late stage capital.
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  Speaker 1: So so it's not it's it's a little bit different
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  Speaker 1: than than a conventional startup. And that's actually one of
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  Speaker 1: the reasons we've seen some skepticism from investors an analysts
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  Speaker 1: because they've been around for a really long time um
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  Speaker 1: and are still not making any money. So, Max, what's
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  Speaker 1: the feeling on the street as to this company? We've
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  Speaker 1: seen some really well received technology uh new issues Uh
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  Speaker 1: this year, is there a sense that this is a
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  Speaker 1: stock that big tech investors need to own. Well, you
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  Speaker 1: have a really wide range of sort of expectations and valuations,
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  Speaker 1: which is part of a feature of these direct listings. UM.
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  Speaker 1: But but what what kind of what's driving the conversation? Uh,
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  Speaker 1: it was basically COVID. So Palentteer in many ways COVID
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  Speaker 1: is a great opportunity for this company. What what Palentteer
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  Speaker 1: does is data integration. They take UM numbers from all
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  Speaker 1: different parts of businesses or or governments and they make
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  Speaker 1: it easy for companies, governments to make sense of them.
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  Speaker 1: So if you think about, you know, the typical things
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  Speaker 1: that these these large corporations are dealing with with COVID
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  Speaker 1: in terms of like looking at where are the outbreaks,
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  Speaker 1: what kind of PPE do I have? How do I
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  Speaker 1: allocate that PP? How do I know project sale? That's
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  Speaker 1: all stuff that palent here Um can do. So so
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  Speaker 1: that and and so that's kind of like a new
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  Speaker 1: source of demand. And as we report in our story,
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  Speaker 1: you know, they've done a lot of new deals over
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  Speaker 1: the last six months or so. And you know, cost
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  Speaker 1: has been a huge thing for this company, where they
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  Speaker 1: were spending huge amounts of money flying these um you
• 4:21
  Speaker 1: know sort of pseudo sales people that they call them
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  Speaker 1: forward to Floyd engineers all around the world pitching the software,
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  Speaker 1: you know, spending a portion basically selling this stuff. And
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  Speaker 1: now they're doing that you know obviously over zoom like
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  Speaker 1: like the rest of us. So that's kind of a
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  Speaker 1: huge um sort of change in the business. Now it's
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  Speaker 1: not totally clear how sustainable it is, how big those
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  Speaker 1: deals are gonna be. And you have this big wild
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  Speaker 1: card in the election. Palanteers a company that has done
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  Speaker 1: very well um over the last four years with the
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  Speaker 1: current administration, and you know, obviously no guarantees that that
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  Speaker 1: that continues UM past November. Peter t obviously owns a
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  Speaker 1: lot of it, max is they suggestion that he will
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  Speaker 1: sell some of what he owns UM. I don't think
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  Speaker 1: we know exactly how how that's all going to shake out.
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  Speaker 1: There is an immediate lock up where where the investors
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  Speaker 1: are are prevented from selling you know, most of their
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  Speaker 1: stock within the first couple of months. Um. You know,
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  Speaker 1: I think the nature of the direct list thing is
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  Speaker 1: you would expect existing investors, especially these big investors, and
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  Speaker 1: Peter Teel owns a lot of this stock as you say, uh,
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  Speaker 1: to to start, you know, pering down their their holdings,
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  Speaker 1: especially if we see it, you know, open up with
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  Speaker 1: a big valuation because you know it'll that will suddenly
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  Speaker 1: be like a lot of Peter Teel's net worth UM.
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  Speaker 1: And And the other thing that's kind of interesting is
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  Speaker 1: Palanteer has a very unusual structure. So it's it's it's
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  Speaker 1: there's um, there's a trust, and that trust has has
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  Speaker 1: three sort of main shareholders, one of whom is Peter Teal.
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  Speaker 1: This group can basically control the company even if they
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  Speaker 1: start paring down UM their shares. So so so there
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  Speaker 1: are a lot of reasons why why you would think
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  Speaker 1: that some of these large shareholders will at least start
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  Speaker 1: to pair back if not, if not sell kind of
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  Speaker 1: a substantial amount UM in the next year or so.
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  Speaker 1: So Max, I hate to ask a nitpicky question, but
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  Speaker 1: does this company make any money? No? As I said, uh,
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  Speaker 1: the loss, uh, the loss that have been huge. You know,
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  Speaker 1: on the top of my head, I think, you know,
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  Speaker 1: something like four million dollars last year, four hundred five
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  Speaker 1: hundred million dollars last year on seven eight million in
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  Speaker 1: revenue UM. Uh. But the crucial thing is the losses
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  Speaker 1: have gotten a lot better. If you look at it,
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  Speaker 1: their their revenue went has gone way up first half
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  Speaker 1: of compared to losses have gone way down. And that's
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  Speaker 1: because of of partly because of COVID and partly because
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  Speaker 1: other parts of their business were doing really well. They've
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  Speaker 1: got this huge contract um with the army and and
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  Speaker 1: that money is starting to come in. So the bet,
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  Speaker 1: the long term bet for investors is that you know,
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  Speaker 1: this is just the beginning and these trends are going
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  Speaker 1: to continue. And of course the kind of bear case
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  Speaker 1: is that, look is a quote unquote startup that's been
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  Speaker 1: around for seventeen years and it's still losing huge amounts
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  Speaker 1: of money. You know what makes us think that this
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  Speaker 1: is gonna that this is gonna get any better in
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  Speaker 1: the future. Max, It's a great read, and thanks for
• 7:19
  Speaker 1: coming on and explaining all about Volunteered to us. Looking
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  Speaker 1: forward to hearing more from you on that score. Max Chafkin,
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  Speaker 1: author of Volunteer is bad mouthing Big Tank while taking
• 7:28
  Speaker 1: its tech public. He's also Bloomberg business Week Features editor
• 7:33
  Speaker 1: and you can follow him on Twitter as well. Very
• 7:35
  Speaker 1: interesting guy to follow on Twitter. Well. The markets have
• 7:40
  Speaker 1: certainly taken their cue from the Federal Reserve. The feed
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  Speaker 1: has been pumping liquidity into this marketplace, providing a backstop
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  Speaker 1: for risk assets across the board, particularly the equity assets.
• 7:52
  Speaker 1: The question is where do we go from here? Is
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  Speaker 1: fiscal stimulus needed for a next move up? How at
• 7:58
  Speaker 1: risk is this market? Useef A Bassi, global market strategist
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  Speaker 1: for stone X Group, joins us uh. You said, thanks
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  Speaker 1: so much for joining us here. I mean, there's so
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  Speaker 1: many variables for investors to discount here just over the
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  Speaker 1: next couple of months. We've got the elections, We've got
• 8:13
  Speaker 1: potential fiscal stimulus, and of course we have the path
• 8:16
  Speaker 1: of the pandemic and potential vaccines. How do you put
• 8:20
  Speaker 1: all that together into a market call? Yeah, I mean
• 8:24
  Speaker 1: it's it's incredibly difficult, right you. You've highlighted several factors,
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  Speaker 1: and some of which you're exogenists and we're not used
• 8:31
  Speaker 1: to really dealing with, so it does become a little
• 8:33
  Speaker 1: bit challenging. Now we are fairly cautious into year end.
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  Speaker 1: We understand that most of the market risks have really
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  Speaker 1: been dulled by the FED and the level of stimulus
• 8:43
  Speaker 1: that has been conducted but at the same time, there
• 8:47
  Speaker 1: is a rebasing going on in the market currently, and
• 8:49
  Speaker 1: you have to listen to what the market is currently
• 8:51
  Speaker 1: telling you. The NASDAC is poised to have its worst
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  Speaker 1: months since uh December two eighteen, and who can forget
• 8:57
  Speaker 1: that massive unwined stuff off we've experienced end, So you
• 9:00
  Speaker 1: have to listen to this market right now and from
• 9:03
  Speaker 1: where sentiment is lying, we are searching for leadership. Unfortunately
• 9:06
  Speaker 1: we haven't found it. So in terms of moving forward
• 9:10
  Speaker 1: with regards to a vaccine, with regards to a second wave,
• 9:14
  Speaker 1: you really don't understand exactly where they are and prognosticators
• 9:17
  Speaker 1: can try to predict which comes first, but the reality
• 9:19
  Speaker 1: is right now, the best way to play this is
• 9:22
  Speaker 1: to be cautious, have some cash ready on the sidelines,
• 9:25
  Speaker 1: and probably take a barbell approach to your investment. Right now,
• 9:29
  Speaker 1: what would the other side of the barbell be, So,
• 9:32
  Speaker 1: if you are looking at how we would want to
• 9:35
  Speaker 1: play this barbell, we think that you should be taking
• 9:37
  Speaker 1: advantage of looking at some of the very high quality
• 9:40
  Speaker 1: tech names that have seen pullbacks that have basically given
• 9:44
  Speaker 1: back almost the entire Q three move. And if you're
• 9:47
  Speaker 1: looking at those franchises. We think that there are interesting
• 9:49
  Speaker 1: opportunities to buy them on weakness and that will position
• 9:52
  Speaker 1: you well on the growth side. On the value side,
• 9:55
  Speaker 1: we think that you cannot ignore the fact the the
• 9:58
  Speaker 1: materials and industrials have really been the sectors that haven't
• 10:01
  Speaker 1: really broken trend while the rest of the market seem
• 10:04
  Speaker 1: to be risking, and that's in a large part due
• 10:06
  Speaker 1: to the fact that there is still an overwhelming demand
• 10:08
  Speaker 1: for hard commodities and hard assets. So gold, copper, or
• 10:11
  Speaker 1: silver continue to act well, and those materials names continue
• 10:15
  Speaker 1: to be a play we want to be in in
• 10:16
  Speaker 1: value also in value. We'd like to complement that by
• 10:19
  Speaker 1: looking at them aligned banks. The sector is unloved, under owned,
• 10:23
  Speaker 1: obviously going through a round two of a stress test,
• 10:26
  Speaker 1: but we think most financial investors understand the capital returns
• 10:29
  Speaker 1: aren't going to return anyway, and we think that if
• 10:33
  Speaker 1: we do get a vaccine, these banks will be poised
• 10:36
  Speaker 1: to come back to be able to maybe even unwind
• 10:39
  Speaker 1: some of the reserves they've built and put those back
• 10:41
  Speaker 1: into earnings usef we have elections coming up November three,
• 10:47
  Speaker 1: there's a lot of concern, I would say, some growing
• 10:49
  Speaker 1: concern in the marketplace that to the extent that this
• 10:52
  Speaker 1: is a contested election, in an election that could be
• 10:55
  Speaker 1: contested for a long period of time heading into next year,
• 10:58
  Speaker 1: that that could be a really real issue for the market.
• 11:01
  Speaker 1: How do you figure that into your calculus. Yeah, So
• 11:05
  Speaker 1: consensus thought right now is that this will be a
• 11:08
  Speaker 1: contested election, right, So, considering the fact that we've seen
• 11:12
  Speaker 1: the market kind of understand that for at least a
• 11:14
  Speaker 1: few weeks now and start to digest it, We've seen investors,
• 11:18
  Speaker 1: rather than really taking risk off dramatically in the market,
• 11:21
  Speaker 1: attempt to hedge by going along, you know, vix options
• 11:25
  Speaker 1: out of the money. Vixed calls were a popular way
• 11:28
  Speaker 1: to hedge. We saw sizeable trades in that over the
• 11:30
  Speaker 1: past two weeks. So I would say, you know, people
• 11:32
  Speaker 1: are thinking about a volatility move rather than taking money
• 11:36
  Speaker 1: off the table for equities. And I think to some
• 11:38
  Speaker 1: extent that speaks to the fact that people do believe
• 11:41
  Speaker 1: that the FED has dubed some of the impacts of
• 11:44
  Speaker 1: these risks. So yes, at this point, I think everyone
• 11:47
  Speaker 1: on the street or the majority of the street, is
• 11:48
  Speaker 1: expecting a contested election. I think the aftermath is certainly
• 11:52
  Speaker 1: going to be interesting. Smooth transition of powers, and question
• 11:55
  Speaker 1: potential civil unrest is in question. You can argue that
• 11:58
  Speaker 1: some of these could potentially be inflationary factors. So in
• 12:02
  Speaker 1: the calculus, this is why one of the reasons we
• 12:05
  Speaker 1: do want to keep that Barbell approach. We want to
• 12:07
  Speaker 1: keep you exposed to tech and growth in case we
• 12:09
  Speaker 1: see those disinflationary or deflationary factors, which should help multiples,
• 12:14
  Speaker 1: And we want you exposed to value because if there
• 12:16
  Speaker 1: is any semblance, even transitory inflation, you could see multiples
• 12:21
  Speaker 1: start to come in and you can see values start
• 12:22
  Speaker 1: to out. For one, where do you see inflation coming from?
• 12:27
  Speaker 1: So this is a great question, right because the FED
• 12:30
  Speaker 1: has been an apt at impacting inflation. So the real
• 12:34
  Speaker 1: potential for inflation comes from fiscal stimulus. Right, So we
• 12:37
  Speaker 1: do get another fiscal stimulus package that could be inflationary. Now,
• 12:41
  Speaker 1: the odds of one happening before an election have dwindled dramatically.
• 12:45
  Speaker 1: But we think about stimulus in another way, and I
• 12:48
  Speaker 1: think this is how people have to think about it
• 12:50
  Speaker 1: as well. Corporates are going to want to control their
• 12:53
  Speaker 1: supply chains more adequately. On the back of COVID nineteen.
• 12:56
  Speaker 1: We are going to see a move with regards to
• 12:59
  Speaker 1: re onshore, we are going to see a shift in
• 13:02
  Speaker 1: the economy and rein shoring is going to be one
• 13:05
  Speaker 1: of those places where we see more investment in the U.
• 13:08
  Speaker 1: S economy and we could potentially start to see inflation
• 13:11
  Speaker 1: from that. Now, that's not to say that we're not
• 13:13
  Speaker 1: already seeing inflation and hard asset prices. Right, food prices,
• 13:16
  Speaker 1: for example, We're already seeing signs of inflation. So it
• 13:19
  Speaker 1: just depends on if that inflation hits the real economy
• 13:23
  Speaker 1: significantly enough. What will the FED do then? Right? And
• 13:26
  Speaker 1: I understand average inflation targeting clearly tempers expectations and they
• 13:30
  Speaker 1: can point to transitory inflation, but still the impact to
• 13:34
  Speaker 1: asset prices might be real. All right, Well, thank you
• 13:37
  Speaker 1: very much, much appreciated there. From a stone X group,
• 13:41
  Speaker 1: we were talking to Youth of Embassy, whose global market strategist.
• 13:46
  Speaker 1: This on a day we're we're not seeing too much
• 13:48
  Speaker 1: movement in the markets, but what movement we are seeing
• 13:50
  Speaker 1: is lower and as Dave Wilson said earlier on really
• 13:53
  Speaker 1: wait till the close of trading today to see all
• 13:56
  Speaker 1: that action. It is time for Boomberg opinion we're joined
• 14:01
  Speaker 1: by Sarah Howzac Bloomberg Opinion retail columnists out with a
• 14:05
  Speaker 1: fascinating uh column just recently talking about or comparing Amazon
• 14:11
  Speaker 1: to Walmart, and these companies are increasingly looking a lot
• 14:15
  Speaker 1: like each other. I think back to the news where
• 14:17
  Speaker 1: Amazon's opening up a thousand small delivery facilities and suburbs
• 14:21
  Speaker 1: and cities and kind of putting out a kind of
• 14:24
  Speaker 1: a footprint that is replicating in some respects Amazon, and
• 14:27
  Speaker 1: of course Amazon getting into a Walmart, getting into a
• 14:30
  Speaker 1: kind of a prime like business. Sarah, thanks so much
• 14:33
  Speaker 1: for joining us here, talk to us about your column
• 14:36
  Speaker 1: here and how these two companies are starting to kind
• 14:38
  Speaker 1: of look like mirror images of one another exactly. So
• 14:42
  Speaker 1: with these many warehouses that Amazon is rolling out, they're
• 14:45
  Speaker 1: effectively making a concession to a premise that Walmart has
• 14:49
  Speaker 1: held for a long time, which is that it matters
• 14:52
  Speaker 1: to be close to your consumer when it comes to
• 14:54
  Speaker 1: delivery speed. So Walmart has four thousand stores around the
• 14:58
  Speaker 1: country and they've been using those in particular to deliver
• 15:01
  Speaker 1: groceries quickly. And they have stores the U S population
• 15:06
  Speaker 1: lives within ten minutes of a Walmart. You can see
• 15:08
  Speaker 1: the benefit of being close to the consumer right in
• 15:10
  Speaker 1: the towns where they live, as opposed to in some
• 15:12
  Speaker 1: far flung warehouse, uh far down the highway. And so
• 15:16
  Speaker 1: by making these mini warehouses, Amazon is kind of agreeing
• 15:19
  Speaker 1: with that as a business model and embracing it. How
• 15:22
  Speaker 1: much development of technology has Walmart been doing behind the scenes, Sarah,
• 15:26
  Speaker 1: because it seems to me that suddenly it's trying to
• 15:29
  Speaker 1: be and is being, a technology company. It also made
• 15:32
  Speaker 1: a bid for a part of the TikTok Us operations,
• 15:35
  Speaker 1: remember exactly. So digital advertising in particular has been a
• 15:40
  Speaker 1: big focus for Walmart recently. They believe that they have
• 15:43
  Speaker 1: a big trove of data on their customers both they's
• 15:46
  Speaker 1: done what they do in stores and online. A hundred
• 15:48
  Speaker 1: sixty million people trapped with Walmart every week. That's a
• 15:51
  Speaker 1: lot of data. And they see how Amazon has become
• 15:55
  Speaker 1: a really big force in the digital advertising space based
• 15:58
  Speaker 1: on the data and information they have with out their customers,
• 16:01
  Speaker 1: and so Walmart wants to replicate something similar, become a
• 16:04
  Speaker 1: digital advertising jugger not and in turn have this more
• 16:08
  Speaker 1: profitable revenue stream that helps offset some of the expense
• 16:11
  Speaker 1: that they're incurring. Is more and more of their business
• 16:13
  Speaker 1: moves online. So Walmart's business Sarah, it's it's amazing they're
• 16:18
  Speaker 1: digital business. I started really following closely several years ago,
• 16:21
  Speaker 1: and they really after some fits and starts, they've really
• 16:24
  Speaker 1: seem to get their uh dot com platform really ramping up,
• 16:28
  Speaker 1: putting up you know, solid plus kind of growth. Um
• 16:31
  Speaker 1: where do they think their digital business is going to
• 16:34
  Speaker 1: ultimately end up? They haven't offered a lot of specifics
• 16:38
  Speaker 1: on that, but I think that they see grocery as
• 16:41
  Speaker 1: the key to winning in that space. It's an area
• 16:44
  Speaker 1: where they really feel like they have an advantage to Amazon.
• 16:47
  Speaker 1: And it's also an area they really simply cannot afford
• 16:49
  Speaker 1: to lose on fift of Walmart US businesses grocery, so
• 16:53
  Speaker 1: they cannot seed market share there to Amazon. And that's
• 16:56
  Speaker 1: where this Walmart Plus membership that they just rolled out
• 16:59
  Speaker 1: comes into way. Grocery is sort of the centerpiece of it.
• 17:02
  Speaker 1: For ninety eight dollars a year, you get unlimited free
• 17:05
  Speaker 1: grocery deliveries, and that is clearly a bid to, among
• 17:09
  Speaker 1: other things, hang on to their grocery shopping customers and
• 17:12
  Speaker 1: continue to be the leader in in that space. Will
• 17:17
  Speaker 1: the other companies be able to stave off the Walmart advance.
• 17:21
  Speaker 1: And I'm talking about Amazon, I suppose mainly, I think
• 17:26
  Speaker 1: so look at Walmart Plus. I suspect what it's not
• 17:29
  Speaker 1: going to do is make a dent in Prime membership.
• 17:32
  Speaker 1: But one d fifty million people who already have Prime
• 17:34
  Speaker 1: memberships are locked into that ecosystem, and of course that
• 17:38
  Speaker 1: ecosystem is loaded up with all sorts of other goodies,
• 17:41
  Speaker 1: you know, TV programming, music, that kind of thing. So
• 17:43
  Speaker 1: I don't think Walmart Plus is going to have that
• 17:45
  Speaker 1: much sick stuss peeling away prime members I think it's
• 17:48
  Speaker 1: key function is going to be hanging onto the people
• 17:50
  Speaker 1: who already shop at Walmart and giving them a real
• 17:54
  Speaker 1: value play. Also, the pandemic has brought a lot of
• 17:56
  Speaker 1: new people to online shopping, or at least mean people
• 17:59
  Speaker 1: who are in frequent online shoppers into more frequent online shoppers,
• 18:03
  Speaker 1: and those people are just now considering some kind of
• 18:05
  Speaker 1: membership set up. Walmart has a good chance of getting
• 18:09
  Speaker 1: those shoppers business. It's interesting Walmart, you know, I see
• 18:12
  Speaker 1: they're kind of raising the pay for some of their employees,
• 18:18
  Speaker 1: and of course Walmart's a huge, huge employer in the US.
• 18:21
  Speaker 1: What do you make of that is that kind of
• 18:22
  Speaker 1: a competitive response to what's going on in the marketplace.
• 18:26
  Speaker 1: M I think so. I think that UH and Walmart
• 18:29
  Speaker 1: has found over the years. Look a number of years
• 18:31
  Speaker 1: ago in the economy was first starting to turn and
• 18:34
  Speaker 1: they made a decision to raise their minimum wage. They
• 18:38
  Speaker 1: clearly saw the benefits of that in terms of talent retention.
• 18:42
  Speaker 1: And they had this big focus at that time called clean, fast, friendly,
• 18:45
  Speaker 1: trying to make their stores that are stopped and trying
• 18:49
  Speaker 1: to make them less messy, and it really worked when
• 18:52
  Speaker 1: they started paying people more. They really saw the results
• 18:54
  Speaker 1: of that and it showed up in their comparable sales
• 18:56
  Speaker 1: growth numbers. And I think that lesson from a few
• 18:59
  Speaker 1: years ago, it's fresh in their mind. And so as
• 19:01
  Speaker 1: they approach this kind of unprecedented time as the pandemic
• 19:04
  Speaker 1: and are trying to address all this demand in their
• 19:06
  Speaker 1: stores and their website, they see pay as a way
• 19:09
  Speaker 1: to get the best out of their employees. Right. But
• 19:12
  Speaker 1: is it not a little bit more complicated, Sarah, in
• 19:14
  Speaker 1: the sense that they are taking out complete layers of
• 19:17
  Speaker 1: management by doing this. So they're going to have teams
• 19:21
  Speaker 1: and stores, you know, pods if you like, of workers
• 19:24
  Speaker 1: and everybody will have to do various different tasks, whereas
• 19:28
  Speaker 1: I'm sure before if you reach managerial level, there were
• 19:31
  Speaker 1: certain tasks that you wouldn't have to do. Uh, and
• 19:34
  Speaker 1: presumably they if there are certain fewer ranks of managers,
• 19:38
  Speaker 1: that's the potential right there for lower salaries across the board. Sure,
• 19:44
  Speaker 1: that's a good point, And I think it's also worth
• 19:46
  Speaker 1: pointing out that these pay increases they just announced, I
• 19:49
  Speaker 1: think it only affects something like a hundred thousand workers
• 19:51
  Speaker 1: of one and a half exactly exactly, So you know,
• 19:55
  Speaker 1: this is this is not we shouldn't be loby posed
• 19:58
  Speaker 1: in rainbows about it. Um, they're you know, clearly, it
• 20:00
  Speaker 1: is only affecting a small portion of the workforce. And
• 20:03
  Speaker 1: I think what you pointed out, and and the relatively
• 20:06
  Speaker 1: small pool of workers that are being effected here is
• 20:08
  Speaker 1: worth pointing out to Sarah. Any feedback already color on
• 20:11
  Speaker 1: how back to school was or is in terms of
• 20:14
  Speaker 1: retail sales. Yeah, so I think what we've heard anecdotally
• 20:20
  Speaker 1: from retailers is that it seems like it's happening later.
• 20:24
  Speaker 1: And that makes a lot of sense because there was
• 20:25
  Speaker 1: so much uncertainty right about what school was going to
• 20:28
  Speaker 1: look like, was your kid going to be going back
• 20:30
  Speaker 1: in person? Were they going to be going back digitally?
• 20:32
  Speaker 1: And clearly that effect whether you need to buy, say
• 20:34
  Speaker 1: a lunch box or a laptop um. And so the
• 20:37
  Speaker 1: theory is that something that spending it typically would have
• 20:40
  Speaker 1: happened in July or August was moving to late August
• 20:43
  Speaker 1: or perhaps September UM. So that was that was certainly different.
• 20:47
  Speaker 1: And I think now we get into this strange time
• 20:50
  Speaker 1: period where retailers are really trying to encourage people to
• 20:54
  Speaker 1: do their holiday shopping early by trying to move holiday
• 20:57
  Speaker 1: shopping more into October in order to able to fin
• 21:00
  Speaker 1: out crowds and make people feel comfortable social distancing in
• 21:03
  Speaker 1: their stores. And so now I feel like we're approaching
• 21:06
  Speaker 1: a strange time where it's going to be both the
• 21:08
  Speaker 1: way back to school shopping in an attempt at early
• 21:10
  Speaker 1: holiday shopping, which means we're a merchandizing challenge for these retailers.
• 21:14
  Speaker 1: And if anyone's guest held all manage it, Sarah, thank
• 21:17
  Speaker 1: you so much. I think it's also worth pointing out
• 21:19
  Speaker 1: that Walmart has been sending warnings to Washington as well,
• 21:22
  Speaker 1: but doesn't appear Washington is listening to Walmart, the biggest
• 21:25
  Speaker 1: employer in the country, on what will happen when you know,
• 21:28
  Speaker 1: stimulus runs out for the average American. Sarah Holzac always
• 21:33
  Speaker 1: keeping us up to date on the latest retail She
• 21:35
  Speaker 1: is Bloomberg opinion columnist and part of the Woomberg editorial
• 21:39
  Speaker 1: stuff as well, and we thank her very much. Paul,
• 21:42
  Speaker 1: do you live within how many minutes of Walmart? Did
• 21:44
  Speaker 1: they say? I'm pretty close to Walmart. But it's just extraordinary,
• 21:49
  Speaker 1: you know, they're obviously they're everywhere, and they're just massive
• 21:52
  Speaker 1: when you go in there. Palates of of merchandise amazing. Well,
• 21:57
  Speaker 1: we will continue to monitor retail obviously, it's one of
• 21:59
  Speaker 1: the first channels for the economic data. Well, the tech
• 22:06
  Speaker 1: cold war between the US and China is heating up
• 22:10
  Speaker 1: once again the Commerce Department. The US Commerce Department prohibiting
• 22:14
  Speaker 1: wheat chat and TikTok transactions. To get more color, we
• 22:18
  Speaker 1: welcome Nick Wadham's foreign policy reporter for Bloomberg News. He
• 22:22
  Speaker 1: joined us in Washington, d C. On the phone. Nick,
• 22:24
  Speaker 1: thanks so much for joining us here. Give us the
• 22:26
  Speaker 1: latest on what is going on here in terms of TikTok.
• 22:30
  Speaker 1: Wee Chat and all things tech. Well, it was a
• 22:33
  Speaker 1: business prize this morning when Commerce Department came out and
• 22:37
  Speaker 1: and said, listen, uh, we Chat, we're basically shutting you down.
• 22:41
  Speaker 1: And TikTok you're not going to be able to get
• 22:44
  Speaker 1: any updates on on your phone if you have that app,
• 22:47
  Speaker 1: you may not even be able to download it if
• 22:49
  Speaker 1: you're a new user. Um. But what we also learned
• 22:53
  Speaker 1: was that this deadline that's been talked about a lot
• 22:57
  Speaker 1: about the need for a sale of TikTok uh to
• 23:01
  Speaker 1: u S investors, which was really looming for September twentie
• 23:07
  Speaker 1: we now see that in some ways that was a
• 23:08
  Speaker 1: fiction and actually they haven't still November twelve to wrap
• 23:11
  Speaker 1: that up. So, uh, two contrasting forces going on. One
• 23:17
  Speaker 1: is it looks like we Chat in the US is
• 23:19
  Speaker 1: really being almost totally neutered. But the other, uh, it
• 23:23
  Speaker 1: looks like Oracle and the others who are looking to
• 23:26
  Speaker 1: make a big investment in TikTok do actually have a
• 23:29
  Speaker 1: couple of months to pin this thing down. How are
• 23:33
  Speaker 1: the two in sync? I mean, um, I don't understand
• 23:38
  Speaker 1: how Oracle can be given the chance to fix social media,
• 23:42
  Speaker 1: if you like, in the United States and we Chat
• 23:44
  Speaker 1: is being bound. It's a it's a great point. I mean, essentially,
• 23:49
  Speaker 1: what you're seeing here is action by this administration on
• 23:53
  Speaker 1: two fronts. One is the belief that TikTok poses a
• 23:56
  Speaker 1: threat to user data. There is a heavy, heavy political
• 23:59
  Speaker 1: element that the President was extremely upset a couple of
• 24:03
  Speaker 1: months ago when TikTok users basically spoofed his campaign by
• 24:07
  Speaker 1: pretending that they had bought a bunch of tickets to
• 24:09
  Speaker 1: a rally in Tulsa, Oklahoma, and it turned out not
• 24:12
  Speaker 1: to be the case. Uh So, so there's that whole
• 24:15
  Speaker 1: element the TikTok cases is very very political. And then
• 24:18
  Speaker 1: there's also the concern about we chat, which is UH
• 24:21
  Speaker 1: more specific concern about what user data, what uh financial
• 24:26
  Speaker 1: data UH users private information is being hoovered up by
• 24:30
  Speaker 1: China uh and sent back there because we chat obviously
• 24:34
  Speaker 1: is as a messaging app, but it's also primarily used
• 24:39
  Speaker 1: essentially to do every transaction you would need to do
• 24:41
  Speaker 1: in China, so payments and things like that. So you
• 24:44
  Speaker 1: you sort of see both things happening at once. Oracle
• 24:48
  Speaker 1: may come in with UH to buy a stake in
• 24:52
  Speaker 1: in Wich sorry in TikTok um, But that's something that
• 24:55
  Speaker 1: we now looks like, yeah, we've got We've got a
• 24:57
  Speaker 1: little more time, and the president has so much of
• 25:00
  Speaker 1: his reputation to that We've got Steven Nuchin working behind
• 25:04
  Speaker 1: the scenes desperately to get that deal done. So any
• 25:08
  Speaker 1: sense of what a response could be coming out of Beijing, Uh,
• 25:14
  Speaker 1: that is what we've been chasing. That is that is
• 25:16
  Speaker 1: the big unknown. Will China look, you know this, this
• 25:19
  Speaker 1: TikTok demand would have has to come do after the election.
• 25:24
  Speaker 1: So there's maybe a hope by Beijing that Joe Biden
• 25:28
  Speaker 1: would then start to signal that he's going to de escalate.
• 25:31
  Speaker 1: But China has always responded. In the last several months
• 25:34
  Speaker 1: of the US has pressed, China has pushed back. So
• 25:38
  Speaker 1: a lot of things can happen. What happens to Apple,
• 25:40
  Speaker 1: for example, huge operation gets a huge amount of its
• 25:45
  Speaker 1: sales and China could Could China put the squeeze on
• 25:48
  Speaker 1: on Apple and limited in some way, um could ad
• 25:51
  Speaker 1: ban the sale of TikTok? There there had been some
• 25:54
  Speaker 1: open this over night, we were getting signals that China
• 25:56
  Speaker 1: was actually much more open than we had earlier thought up.
• 26:00
  Speaker 1: The idea of by debts selling off a big portion
• 26:02
  Speaker 1: of TikTok. China could reverse itself and scuttle this whole
• 26:05
  Speaker 1: process and just say no, we're not going to do it. Um.
• 26:08
  Speaker 1: So still very much in the air, and China has
• 26:11
  Speaker 1: shown in the past that they're willing to hit hard,
• 26:14
  Speaker 1: hit the US very hard. Um So, really anything is
• 26:17
  Speaker 1: on the table at the nick. Why would Oracle agreed
• 26:21
  Speaker 1: to buy something that's banned. I mean, doesn't this change
• 26:25
  Speaker 1: the whole arithmetic for Oracle? Or is the Oracle deciding
• 26:28
  Speaker 1: that this is going to be a temporary event on
• 26:30
  Speaker 1: the part of President Trump ofp TikTok, Well Wilver Ross
• 26:34
  Speaker 1: said this morning, Listen, if the if the deal goes through,
• 26:36
  Speaker 1: then all our concerns about TikTok are taken off the table.
• 26:41
  Speaker 1: So a huge caveat there. They're they're essentially saying, here's
• 26:45
  Speaker 1: what will happen to TikTok if the deal doesn't doesn't
• 26:48
  Speaker 1: go through. So some minor inconveniences. Now, if if you
• 26:51
  Speaker 1: have the app, you won't be able to get updates.
• 26:53
  Speaker 1: All that goes away if the deals goes through. So
• 26:56
  Speaker 1: they're really signaling we are we are going to make
• 26:59
  Speaker 1: it very very difficult to you for you to use
• 27:01
  Speaker 1: we chat, and that's not going away. TikTok, on the
• 27:04
  Speaker 1: other hand, has a huge escape hatch, which is the
• 27:07
  Speaker 1: Oracle deal. It's it's just extraordinary what's going on here.
• 27:12
  Speaker 1: Nick Wadams, Bloomberg Foreign Policy Reporter, Thanks so much for
• 27:15
  Speaker 1: joining us, Havanni. You just think about some of these
• 27:17
  Speaker 1: things TikTok. You know, it's it's not quite our demo, Vanni,
• 27:21
  Speaker 1: but you know, for that kind of I've done a
• 27:24
  Speaker 1: you yeah, the fourteen demo. It is just huge and
• 27:29
  Speaker 1: it is a massive platform, huge growth. Um. You know,
• 27:32
  Speaker 1: it's there's a lot of people watching what's going on here,
• 27:34
  Speaker 1: and it's hard to separate the political from what really
• 27:37
  Speaker 1: is potentially viable national security. Well, it really is fascinating
• 27:41
  Speaker 1: how it became innovative. I mean, we had all of
• 27:43
  Speaker 1: these other social media platforms and suddenly TikTok is doing
• 27:47
  Speaker 1: something just that slide bit differently, and it is engaging
• 27:51
  Speaker 1: young users in politics, Paul, in political activity. It's pretty
• 27:55
  Speaker 1: it's it's just amazing with the younger demo, so be
• 27:58
  Speaker 1: fascinating to see how this plays out. Thanks for listening
• 28:03
  Speaker 1: to Bloomberg Markets podcast. You can subscribe and listen to
• 28:06
  Speaker 1: interviews at Apple Podcasts or whatever a podcast platform you prefer.
• 28:10
  Speaker 1: I'm Bonnie Quinn, I'm on Twitter at Bonnie Quinn. And
• 28:13
  Speaker 1: I'm Paul Sweeney. I'm on Twitter at pt Sweeney. Before
• 28:16
  Speaker 1: the podcast, you can always catch us worldwide at Bloomberg
• 28:19
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