Latest / Bloomberg Intelligence / Elon Musk Call Was Reminiscent Of The 2001 Enron Call: Johnson

Transcript

Elon Musk Call Was Reminiscent Of The 2001 Enron Call: Johnson · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Abramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
• 0:15
  Speaker 1: you and your money, whether you're at the grocery store
• 0:17
  Speaker 1: or the trading floor. Find the Bloomberg P M L
• 0:20
  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. Tesla
• 0:33
  Speaker 1: Automobiles they do not burn fossil fuel. Tesla, the company
• 0:38
  Speaker 1: burns a lot of cash. Here to tell us more
• 0:40
  Speaker 1: about the company is Gordon Johnson, Managing Director, Alternative Energy, Metals,
• 0:44
  Speaker 1: Mining and Equipment Analyst for Vertical Group. Gordon Johnson, always
• 0:49
  Speaker 1: a pleasure. You were listening into the call yesterday. Why
• 0:51
  Speaker 1: don't you share with our listeners what you heard and
• 0:54
  Speaker 1: what you took away from it? Yeah, I mean, so
• 0:57
  Speaker 1: what we heard on the call um UM, Surprisingly, I
• 1:00
  Speaker 1: think not just to us, but many was a very
• 1:04
  Speaker 1: defensive um management team from Tesla, specifically Elon Musk. And
• 1:09
  Speaker 1: you know, historically they've been very open to taking questions,
• 1:11
  Speaker 1: and it seems like very important questions with respect to
• 1:15
  Speaker 1: surprisingly low April Model three deliveries. UM, what's going on
• 1:20
  Speaker 1: with the deposits on the Model three given U the
• 1:24
  Speaker 1: cars have been delayed significantly. UM. Questions around these items
• 1:28
  Speaker 1: were essentially deemed boring UM, and they turned it over
• 1:32
  Speaker 1: to a YouTube blogger UM who says he owns fifty
• 1:35
  Speaker 1: four shares UM. So when you're shutting UH analysts from
• 1:39
  Speaker 1: the institutions that you are heavily relying on and heavily
• 1:44
  Speaker 1: rely on to do your business, it's it's very concerning.
• 1:48
  Speaker 1: You know, it's reminiscent to us of you know, in
• 1:50
  Speaker 1: the second quarter of two thousand one when Jeff skilling
• 1:53
  Speaker 1: Um called an analyst on our areas call Um, when
• 1:57
  Speaker 1: the stock was at fifty five and by the end
• 1:59
  Speaker 1: of the year was at nine. Not we're not saying
• 2:01
  Speaker 1: Tesla is in ron, but we are saying that this
• 2:04
  Speaker 1: is a definite shift in tone from from management at
• 2:09
  Speaker 1: at Tesla. So Gordon, given given that shift, why aren't
• 2:13
  Speaker 1: the shares of Tesla down more? They're down more than six, yes,
• 2:18
  Speaker 1: but still somewhat elevated. If you really think that that
• 2:21
  Speaker 1: this is about to collapse, yeah, I mean it's because
• 2:24
  Speaker 1: you have literally this is this is not a you know,
• 2:28
  Speaker 1: an analysis type of stock or fundamentals based stock. It's
• 2:32
  Speaker 1: literally a faith based stock. It's almost a religion um.
• 2:35
  Speaker 1: And I think that a lot of the holders know.
• 2:37
  Speaker 1: If you look at the proxy statement of Tesla, you'll
• 2:40
  Speaker 1: see that Elon Musk is predds thirteen million shares of
• 2:44
  Speaker 1: stock for different debts that the company has. So we
• 2:48
  Speaker 1: don't know exactly what the key levers are to call that.
• 2:52
  Speaker 1: You know the essentially when that stock will be called.
• 2:55
  Speaker 1: But you know if this stock drops to a certain level,
• 2:58
  Speaker 1: it's going to accelerate down. As you know, the death
• 3:01
  Speaker 1: holders um essentially forced Elon Musk to sell stock to
• 3:05
  Speaker 1: to cover those debts. Okay, so let's talk about the
• 3:08
  Speaker 1: death holders and the capital raise that Elon Musk says
• 3:11
  Speaker 1: that he doesn't need to do. He said that they're
• 3:14
  Speaker 1: going to stop burning cash later this year and start
• 3:17
  Speaker 1: turning a profit. Um. How much credibility is there at
• 3:22
  Speaker 1: this point with those pledges And is it true that
• 3:25
  Speaker 1: you think that he won't need to raise capital again
• 3:27
  Speaker 1: in the next time? I don't know nine months. Let's
• 3:31
  Speaker 1: raise the facts, right, they burnt over a billion dollars
• 3:34
  Speaker 1: of free cash. The cash balance dropped by nearly a
• 3:36
  Speaker 1: billion dollars in a quarter. This is the third largest
• 3:40
  Speaker 1: cash burn free cash flow cash burn in any single quarter.
• 3:43
  Speaker 1: I want to be clear here, Elon Musk is saying
• 3:46
  Speaker 1: that he is not and will not raise equity. He
• 3:49
  Speaker 1: has said that before you go back to fifteen, he
• 3:51
  Speaker 1: said the company will never need to raise equity again.
• 3:54
  Speaker 1: Since then, I think they've done in six to seven times.
• 3:58
  Speaker 1: We think they will need to raise and let me
• 4:00
  Speaker 1: be more specific, we think they're gonna do it this quarter,
• 4:03
  Speaker 1: which means over the next two months. Is it gonna
• 4:05
  Speaker 1: be equity? I'm sorry, we think they need to raise capital.
• 4:07
  Speaker 1: Is it gonna be equity? Is gonna be dead? We
• 4:09
  Speaker 1: don't know, but we do think they need to raise
• 4:11
  Speaker 1: capital if they're going to hit their uh, you know,
• 4:14
  Speaker 1: production plans um And that's where we stand, and that's
• 4:17
  Speaker 1: what our analysis suggests, and we stand by that. This
• 4:19
  Speaker 1: quarter affirms that not not not not pushing us further
• 4:22
  Speaker 1: away from that. Gordon, what are some of the specific
• 4:26
  Speaker 1: issues that the Tesla has to deal with in order
• 4:29
  Speaker 1: to let's say, get this model three out the door
• 4:31
  Speaker 1: and onto onto the road. Yeah, so if you look
• 4:36
  Speaker 1: at the electric which is very well respected, they're saying
• 4:38
  Speaker 1: the giga factor is only complete UM. If you look
• 4:42
  Speaker 1: at some of the care downs that respected UM auto
• 4:45
  Speaker 1: analysts have done, and these these on sell side analysts,
• 4:48
  Speaker 1: you know, financialists, these are these are engineers. Uh. They
• 4:51
  Speaker 1: said that the Model three has been built very um UH.
• 4:55
  Speaker 1: I don't want to use their word poorly, but certain
• 4:57
  Speaker 1: items and certain key steps have and skipped. So think
• 5:01
  Speaker 1: about this, Kim, right you have Tessa said that you
• 5:05
  Speaker 1: hate Model three Model threes that have been produced in
• 5:09
  Speaker 1: the first half of April UM and they said there
• 5:12
  Speaker 1: were two thousand Model threes in transit, so that's roughly
• 5:16
  Speaker 1: six thousand Model threes. Yet inside EVS is saying they
• 5:20
  Speaker 1: only delivered fifty. So and then if you use the
• 5:25
  Speaker 1: Brewer numbers the which they tracked the VIN numbers for
• 5:27
  Speaker 1: the Model threes, there was ten thousand produced in April.
• 5:30
  Speaker 1: So it looks like there's thousands of Model threes sitting
• 5:34
  Speaker 1: out there that either are in transit to be the Lute,
• 5:36
  Speaker 1: which it doesn't take long to deliver these cars, that's
• 5:39
  Speaker 1: one option, or you know they have issues. I either
• 5:42
  Speaker 1: have been poorly constructed and they're still waiting to be
• 5:45
  Speaker 1: finalized so they're not really produced UM, or they're just
• 5:48
  Speaker 1: sitting in inventory. Um either three of those scenarios is scary.
• 5:52
  Speaker 1: So to your question, what needs to be done, Uh,
• 5:55
  Speaker 1: it seems like quite a bit needs to be done.
• 5:57
  Speaker 1: And we need to get more color on these production
• 5:59
  Speaker 1: numbers that they're pitting out there, because the deliveries numbers
• 6:02
  Speaker 1: from inside EVS And keep in mind this this is
• 6:04
  Speaker 1: a third party um U analytical company, but you know,
• 6:07
  Speaker 1: very well respected, a very spot on so far over
• 6:10
  Speaker 1: the years with the sector Tesla deliveries on a monthly basis. Uh,
• 6:13
  Speaker 1: they don't match up with Tesla's production numbers. So what
• 6:16
  Speaker 1: do they need to do? Probably spend a lot more
• 6:18
  Speaker 1: CAPEX to get their production facilities up to snuff UM
• 6:22
  Speaker 1: And that's clearly not what the company is indicating. They
• 6:24
  Speaker 1: actually cut their cap X numbers. Well if they don't
• 6:26
  Speaker 1: have the capital to expand. Gordon Johnson, thank you so
• 6:30
  Speaker 1: much for joining us today. Gordon Johnson is Managing director,
• 6:33
  Speaker 1: Alternative Energy, Metals, Mining and Equipment Analyst at Vertical Group
• 6:37
  Speaker 1: in New York. Uh some strong words that the call
• 6:41
  Speaker 1: yesterday that Ellen Musk held with investors reminded him after
• 6:44
  Speaker 1: the two thousand and one n RON call, and that
• 6:48
  Speaker 1: Tesla would have to raise capital within the next few
• 6:51
  Speaker 1: months in order to keep going. We will keep an
• 6:53
  Speaker 1: eye on the shares which are down about six and
• 6:56
  Speaker 1: a half percent right now. Bermuda is an economy that
• 7:13
  Speaker 1: depends heavily on tourism from the United States as well
• 7:16
  Speaker 1: as its desk as it's a it's a well known
• 7:20
  Speaker 1: profile of being a destination for businesses. Here to talk
• 7:23
  Speaker 1: about the nation is the Honorable David Burt, Premier of
• 7:27
  Speaker 1: the Government of Bermuda. He is the youngest ever he
• 7:31
  Speaker 1: joins us now he is thirty eight years old. You
• 7:33
  Speaker 1: went to George Washington University UH and graduated with a
• 7:37
  Speaker 1: business degree, and so I want to talk with you.
• 7:40
  Speaker 1: You've been in the position for about nine months now.
• 7:43
  Speaker 1: SMP just upgraded UH. The outlook to for Bermuda to
• 7:47
  Speaker 1: UH positive outlook. What do you see as the main
• 7:50
  Speaker 1: challenge going forward in the near term for Bermuda. Oh, well,
• 7:54
  Speaker 1: good morning, it's Elie saying good morning. It's him a
• 7:57
  Speaker 1: good morning to your listening audience. I mean, the challenge
• 7:59
  Speaker 1: for Uda is to translate what we've done well for
• 8:02
  Speaker 1: so long into a new future and what that world
• 8:06
  Speaker 1: will look like. So Bermuda has always been a center
• 8:08
  Speaker 1: of innovation and the reason for our success in the
• 8:11
  Speaker 1: insurance spaces that we were able to bring together regulators,
• 8:15
  Speaker 1: the lawmakers and the business sector to figure out regulation
• 8:18
  Speaker 1: that was smart and that could work and that could
• 8:20
  Speaker 1: allow industries to grow. And so from that perspective, our
• 8:24
  Speaker 1: challenges to translate that into new areas of the economy
• 8:28
  Speaker 1: and our the global economy. So whether or not that's
• 8:31
  Speaker 1: dealing um in the space of digital assets, or whether
• 8:33
  Speaker 1: that's dealing in the space of how we're going to
• 8:36
  Speaker 1: look to play a role in what the global economy
• 8:39
  Speaker 1: will be, that's what Bermuda and that's how Bermuda is
• 8:42
  Speaker 1: trying to position itself. Speak if you can about the
• 8:45
  Speaker 1: actual structure of Bermuda. It is a British overseas territories.
• 8:51
  Speaker 1: What does that mean in terms of its governance, its
• 8:54
  Speaker 1: laws and its relationship with the United Kingdom. Bermuda as
• 8:59
  Speaker 1: a over these territory, we have the most advanced constitution
• 9:02
  Speaker 1: out of all the United Kingdom overseas territories and it's
• 9:05
  Speaker 1: a constitution of which we're actually celebrating our fiftieth and
• 9:08
  Speaker 1: adversary ever, thank you very much this year, actually this
• 9:12
  Speaker 1: month uh to be precise. But what our relation is
• 9:17
  Speaker 1: that we have full internal self government. So we make
• 9:19
  Speaker 1: all of our own laws and we set all of
• 9:20
  Speaker 1: our own procedures, and the United Kingdom is responsible for
• 9:24
  Speaker 1: internal security, UM, external affairs and defense. Okay, I'm wondering
• 9:29
  Speaker 1: you're talking about how insurance companies and other businesses have
• 9:33
  Speaker 1: gravitated to the territory. I want to talk about a
• 9:36
  Speaker 1: new UK law that will go into effect I believe
• 9:40
  Speaker 1: in twenty twenty that will force UH different companies to
• 9:44
  Speaker 1: disclose where they file their taxes. That might butchering this,
• 9:47
  Speaker 1: but basically people are concerned that this will give less
• 9:50
  Speaker 1: of a benefit to certain corporations who file in Bermuda.
• 9:54
  Speaker 1: What's your take on this and can you please, you know,
• 9:56
  Speaker 1: give it more detailed. How I'm then what I just
• 9:59
  Speaker 1: tried to do, No problem, I'll be I'll be happy
• 10:02
  Speaker 1: to do that. Let me start by saying that uh
• 10:05
  Speaker 1: in from the Bermuda perspective, we make our own laws.
• 10:08
  Speaker 1: And so for the first time in the fifty years
• 10:11
  Speaker 1: that we've seen an internal squabble which is taking place
• 10:14
  Speaker 1: the United Kingdom get to a point where there was
• 10:17
  Speaker 1: an amendment that was passed to a bill where the
• 10:20
  Speaker 1: parliament seems to think that it can pass laws for
• 10:23
  Speaker 1: people that don't have representation inside their parliament. So that
• 10:27
  Speaker 1: is a completely separate issue and that's something that UM
• 10:29
  Speaker 1: I think UM is unfortunate. But in from the Bermuda perspective,
• 10:33
  Speaker 1: we do not recognize the right of the United Kingdoms
• 10:36
  Speaker 1: who set um our laws because we have full internal
• 10:39
  Speaker 1: self government and the only thing the United Kingdom actually
• 10:41
  Speaker 1: has responsibility for his external affairs internal security and defense. However,
• 10:47
  Speaker 1: because I don't want to conflate the issues, what they
• 10:49
  Speaker 1: had spoken about was an issue of having a public
• 10:52
  Speaker 1: register of beneficial owners of companies, which is not the
• 10:56
  Speaker 1: global standard of which exists. Bermuda has, unlike many countries,
• 11:00
  Speaker 1: for over seventy years, had a central register of beneficial ownership,
• 11:04
  Speaker 1: so we know all the persons who owned the companies
• 11:07
  Speaker 1: that are registered in Bermuda. And what we also have
• 11:10
  Speaker 1: is that we are we are compliant with the international
• 11:12
  Speaker 1: standards which is set by the o E c D
• 11:14
  Speaker 1: of making sure that we exchange that information UM with
• 11:18
  Speaker 1: authorities UM around the world who are looking to get that.
• 11:22
  Speaker 1: So Bermuda has has led the charge. We are one
• 11:25
  Speaker 1: of the leaders UM in international tax transparency and compliant.
• 11:29
  Speaker 1: So we are the first overseas territory to have an
• 11:31
  Speaker 1: agreement with Her Majesty's Revenue Customs in the UK and
• 11:35
  Speaker 1: the first overseas territory to have an agreement with the
• 11:37
  Speaker 1: U s UM Internal Revenue Service here UM in uh
• 11:41
  Speaker 1: IN in the United States. So we UM have led
• 11:44
  Speaker 1: the space in this charge. But Bermuda is not a
• 11:46
  Speaker 1: tax play. Bermuda is a regulatory play as well, and
• 11:50
  Speaker 1: so what you see for the insurance companies, A lot
• 11:52
  Speaker 1: of the insurance companies that are actually in Bermuda UM
• 11:55
  Speaker 1: have taken a eight to get too technical, a nine
• 11:58
  Speaker 1: fifty three election on their UM tax return. So they
• 12:02
  Speaker 1: actually file taxes as a US taxpayer, but they're in
• 12:06
  Speaker 1: Bermuda because we have a unique regulatory environment that allows
• 12:10
  Speaker 1: us too, that allows them to deal with one regulator
• 12:12
  Speaker 1: to access insurance markets the United States as opposed to
• 12:15
  Speaker 1: the fifty different regulators that are in all of these
• 12:17
  Speaker 1: states here in the US. I wish we had more
• 12:20
  Speaker 1: time because the one question I want to ask you
• 12:22
  Speaker 1: has to do with same sex marriage. I don't like,
• 12:24
  Speaker 1: can you do that in twenty seconds? What's the status
• 12:26
  Speaker 1: UM I'm perfectly happy to discuss that. Bermuda. We uh,
• 12:29
  Speaker 1: we are the first UK Overseas Caribbean UK overseas territory
• 12:33
  Speaker 1: to give full legal recognition to same sex couples. It
• 12:37
  Speaker 1: is something that did not exist in Bermuda before our
• 12:40
  Speaker 1: government passed it and we are welcoming to all persons
• 12:43
  Speaker 1: on our shores. We are proud of the records which
• 12:46
  Speaker 1: we have. Uh. If you want to say five years
• 12:48
  Speaker 1: ago there was nothing, but now we recognize um all
• 12:51
  Speaker 1: same sex couples. Thank you very much for being with us.
• 12:54
  Speaker 1: The Premier Bermuda, David Burt, thank you very much. And
• 12:57
  Speaker 1: the happy birthday and congratulations on the constitution anniversary. Absolutely,
• 13:02
  Speaker 1: thank you Bermuda, much appreciated. Amazon just has to hint
• 13:21
  Speaker 1: that it is thinking of getting into an industry to
• 13:24
  Speaker 1: scare shareholders away from all potential competitors in that sector.
• 13:28
  Speaker 1: Here to talk about the skirmish that happened yesterday in
• 13:31
  Speaker 1: the payments sector is David Ritter, Payments and specialty finance
• 13:35
  Speaker 1: analyst with Bloomberg Intelligence. Dave, thank you so much for
• 13:38
  Speaker 1: being with us. Bloomberg News reported that Amazon said that
• 13:42
  Speaker 1: it was more aggressively getting into payments processing to compete
• 13:46
  Speaker 1: with the likes of PayPal, Visa, MasterCard, Square. There was
• 13:50
  Speaker 1: a fierce reaction tell us, what is Amazon exactly thinking
• 13:53
  Speaker 1: of doing? Well, it's interesting. I mean, this is a
• 13:56
  Speaker 1: topic that I've written about, actually going back many months,
• 14:00
  Speaker 1: the possibility that uh, they might decide to sharply cut
• 14:04
  Speaker 1: their rates to and sent merchants to accept their Amazon
• 14:08
  Speaker 1: Pay service. So, I mean, just think about it. Between
• 14:12
  Speaker 1: what are the two hundred million Prime users now, so
• 14:15
  Speaker 1: that's two hundred million stored payment credentials plus non Prime
• 14:19
  Speaker 1: users have their payment credentials stored there. But the challenge
• 14:22
  Speaker 1: has been you know, Amazon has been trying to crack
• 14:25
  Speaker 1: this market for many years, and the difficulty that they
• 14:29
  Speaker 1: have is number one. Obviously, they sell merchandise themselves, so
• 14:34
  Speaker 1: they're competing against merchants. And you know, ever since paypals
• 14:38
  Speaker 1: split away from eBay, uh, their growth has accelerated because
• 14:42
  Speaker 1: that concern that merchants had by doing business with PayPal
• 14:46
  Speaker 1: has gone away. So, I mean, I think the reaction
• 14:50
  Speaker 1: is overdone. I mean, I feel PayPal has been beating
• 14:53
  Speaker 1: back all competitors and its growth has been accelerating in
• 14:57
  Speaker 1: recent years. Of anything David, can you explain this sort
• 15:01
  Speaker 1: of the finances behind doing this. Let's say that someone
• 15:05
  Speaker 1: listening is a producer of a product and they wish
• 15:09
  Speaker 1: to sell it through Amazon. How much does it cost
• 15:13
  Speaker 1: for Amazon to take care of the transaction? Yeah? Amazon,
• 15:18
  Speaker 1: you know, they don't publish their specific cost, but you
• 15:21
  Speaker 1: can assume just like any other very large merchant like
• 15:24
  Speaker 1: Walmart or Target for example, they are getting favorable rates
• 15:30
  Speaker 1: from the credit card processors to process credit and debit
• 15:33
  Speaker 1: card transactions on their site. So they do have that advantage. Um.
• 15:41
  Speaker 1: But right now, the way it works is, you know
• 15:43
  Speaker 1: they're going to charge a merchant, say three rate to
• 15:48
  Speaker 1: process and transaction, just like PayPal does. But then you
• 15:52
  Speaker 1: know they have to turn around. They're they're basically acting
• 15:55
  Speaker 1: as the merchant in that case, so they have to
• 15:58
  Speaker 1: turn around and pay the cost back through the payment
• 16:01
  Speaker 1: card network to take that transaction. So um, so they're
• 16:05
  Speaker 1: not making a full margin on it. And that's where
• 16:07
  Speaker 1: PayPal differs in one key respect is that a lot
• 16:11
  Speaker 1: of folks keep a balance in their PayPal account, so
• 16:14
  Speaker 1: you use that balance to pay, or you use your
• 16:17
  Speaker 1: link to checking account to pay. There's little or no
• 16:20
  Speaker 1: cost in that transaction to PayPal and they're making that
• 16:23
  Speaker 1: full margin from the merchant rate that they're charging. Okay,
• 16:27
  Speaker 1: well that goes that dovetails perfectly into another Amazon initiative
• 16:30
  Speaker 1: people have talked about, speculated frankly, that Amazon will try
• 16:34
  Speaker 1: to get into the customer deposits business, perhaps to compete
• 16:39
  Speaker 1: more directly with the PayPal on this matter. Do you
• 16:42
  Speaker 1: think that they can make inroads into that effect? Yeah,
• 16:47
  Speaker 1: I mean, what's really surprising is how important trust is
• 16:52
  Speaker 1: in this business. Um PayPal consistently ranks right up there
• 16:57
  Speaker 1: with major banks in terms of trust in holding their
• 17:01
  Speaker 1: money and handling their money, which is not something you
• 17:03
  Speaker 1: necessarily think would be the case. But when you've been
• 17:06
  Speaker 1: at it, you know, for twenty years like they have.
• 17:09
  Speaker 1: It sounds silly to say that's an old company, but
• 17:12
  Speaker 1: in the tech world it is. Um you know, they
• 17:15
  Speaker 1: they had that built in advantage. I'm not sure that
• 17:18
  Speaker 1: Amazon people think of it the same way they think
• 17:21
  Speaker 1: of as a neat place to buy stuff. And you know,
• 17:25
  Speaker 1: Amazon's pretty successfully provided a lot of financial services very
• 17:29
  Speaker 1: well through third parties. You know, they have a card
• 17:32
  Speaker 1: with Synchrony and they have a card with Chase that
• 17:34
  Speaker 1: pays a big five percent rebate. That's real popular. Um,
• 17:39
  Speaker 1: you know, I'm not I'm not sure. And there's plenty
• 17:41
  Speaker 1: of ways to add cash into your Amazon account. You know,
• 17:44
  Speaker 1: you just go, you just go buy a prepaid card
• 17:48
  Speaker 1: and moad that money in. And um, you know they
• 17:51
  Speaker 1: have for a debit rewards program now too, So I
• 17:54
  Speaker 1: kind of feel like they're already doing a lot of
• 17:56
  Speaker 1: these things, Dave. What's been the response of Visa and MasterCard?
• 18:00
  Speaker 1: They gonna go the PayPal route? Uh? In terms of well,
• 18:06
  Speaker 1: you know, Visa and master Card have their own, um
• 18:10
  Speaker 1: call them alternative pay buttons that they've been trying to
• 18:12
  Speaker 1: push in recent years, and none of them have really
• 18:16
  Speaker 1: gotten any traction. And you can also throw Apple pay
• 18:18
  Speaker 1: and Samsung Paying, these other alternatives into the mix. Um,
• 18:22
  Speaker 1: at least in the US, they really struggled to gain
• 18:25
  Speaker 1: gain traction. Whereas you know, PayPal's got coming up on
• 18:28
  Speaker 1: twenty million global merchants that excepted as payment. It's really
• 18:32
  Speaker 1: pretty astounding. Amazon, of course, has a hundred million Prime
• 18:35
  Speaker 1: members though, And I want to just home in quickly
• 18:38
  Speaker 1: on the trust issue. Are you implying that consumers don't
• 18:41
  Speaker 1: trust Amazon? No, I'm not employing. They don't trust Amazon,
• 18:46
  Speaker 1: but it's it's one thing. If you're looking to expand
• 18:49
  Speaker 1: further into financial services and holding people's money, I think
• 18:53
  Speaker 1: you're crossing into a little bit different area than Look,
• 18:56
  Speaker 1: I know I'm paying for something and I'm using my
• 18:58
  Speaker 1: my credit card, but that credit card it is from
• 19:00
  Speaker 1: Chase and they're the ones providing the the actual relationship
• 19:04
  Speaker 1: behind that. All right, we want to leave it there,
• 19:06
  Speaker 1: but thanks very much for sharing this information. But it's
• 19:09
  Speaker 1: very interesting and Lisa, as you describe it, the Amazon effect,
• 19:12
  Speaker 1: all they have to do is sort of mention that
• 19:14
  Speaker 1: they're going to be getting into some particular industry. In
• 19:16
  Speaker 1: the stocks of the competitors all react. Yeah. Although it's
• 19:20
  Speaker 1: interesting because when I listened to Dave ritt Or, it
• 19:23
  Speaker 1: really I realized that perhaps this offers up some opportunities
• 19:26
  Speaker 1: to people who are still bullish on specific companies if
• 19:28
  Speaker 1: they think that the if the effect is overdone right indeed,
• 19:31
  Speaker 1: and taking a look at the shares of PayPal, for example,
• 19:34
  Speaker 1: they are down about one percent right now after falling
• 19:39
  Speaker 1: up more than four percent and yesterday's trading. Thanks very
• 19:42
  Speaker 1: much to Dave Ritter, our senior analysts for payments, financial
• 19:46
  Speaker 1: Technology and specialty finance or Bloomberg Intelligence. The world of
• 20:05
  Speaker 1: advertising changes as technology and consumers change their taste, but
• 20:09
  Speaker 1: some things don't change, and that's the emphasis on creativity.
• 20:13
  Speaker 1: John Cyford is the worldwide chairman and the chief executive
• 20:16
  Speaker 1: of Ogilvie and Mather. He joins US now Ogilvie and
• 20:20
  Speaker 1: Mather one of the many companies under the overall corporate
• 20:23
  Speaker 1: banner of w PP Group. John, thank you very much
• 20:26
  Speaker 1: for coming into the studio. Much appreciated. Could you just
• 20:29
  Speaker 1: give people a little sort of maybe a thirty second
• 20:32
  Speaker 1: history of Ogilvie and Mather because they may not recall
• 20:36
  Speaker 1: that they came up with the Dove soap commercial that
• 20:40
  Speaker 1: was kind of that was one of the hallmarks of
• 20:42
  Speaker 1: your agency. But the history goes back to eighteen fifty. Yeah,
• 20:47
  Speaker 1: it's a it's an amazing history. Um. I remember it
• 20:50
  Speaker 1: really in the context of that's when David Ogilvie started
• 20:55
  Speaker 1: Ogilvie and May there in New York. We'll celebrate our
• 20:58
  Speaker 1: seventieth anniversary this coming September, and uh, you know, I'm
• 21:02
  Speaker 1: the ninth chairman and CEO of the company. I'll be
• 21:04
  Speaker 1: the last one to have been mentored by all the
• 21:06
  Speaker 1: previous eight, including David. So it's a founder brand that
• 21:10
  Speaker 1: I have huge passion and heart for. In terms of background,
• 21:14
  Speaker 1: we've David had a list of the clients that he
• 21:17
  Speaker 1: wanted to work for, and uh, he pretty much ticked
• 21:20
  Speaker 1: off everybody on that list. He wanted to work for
• 21:22
  Speaker 1: the Campbell soup company, he wanted to work for Lever Brothers.
• 21:24
  Speaker 1: Dove has been a valued client of ours for right
• 21:28
  Speaker 1: from the beginning. American Expressican Express, which is a client
• 21:32
  Speaker 1: that I've worked with for the last thirty years. You know,
• 21:35
  Speaker 1: David was told that American Express was too small by
• 21:39
  Speaker 1: his president at the time, and David ignored that advice
• 21:42
  Speaker 1: and said, no, I think they're I think these people
• 21:44
  Speaker 1: will do something special, and they certainly did. So. There's
• 21:47
  Speaker 1: been a lot of changes just in the way that
• 21:49
  Speaker 1: people absorbed media in the past two decades. I'm wondering, Uh,
• 21:54
  Speaker 1: just in the past few years, what do you view
• 21:56
  Speaker 1: as the biggest changed for you in your business as
• 21:59
  Speaker 1: far as just reading the message of a brand. Well,
• 22:02
  Speaker 1: we call this the era era of great fragmentation. There
• 22:05
  Speaker 1: have been never been more ways to reach people than
• 22:08
  Speaker 1: ever before. Obviously, the digital revolution has ushered in all
• 22:13
  Speaker 1: sorts of new way ways to engage consumers, and one
• 22:16
  Speaker 1: of the paradoxes of all that choice is that many
• 22:19
  Speaker 1: of our clients are are less confident in what works.
• 22:23
  Speaker 1: And so we're in an era right now where there's
• 22:26
  Speaker 1: lots of experimentation, lots of new ways to build brands
• 22:29
  Speaker 1: through digital engagement, through new new media sources, through personalization,
• 22:36
  Speaker 1: through the big data, and how that can be applied
• 22:38
  Speaker 1: to customizing products just to the particular need of a
• 22:41
  Speaker 1: given customer. But at the same time, many clients are saying,
• 22:44
  Speaker 1: what's how does it all work together? How much should
• 22:47
  Speaker 1: I pay for it? And what's the real value that
• 22:50
  Speaker 1: I'm going to get at the end of the day.
• 22:51
  Speaker 1: And so it's never been more complicated to help clients
• 22:55
  Speaker 1: navigate this this new era. In navigating this new era,
• 22:59
  Speaker 1: you must also recognize that what appears on the Internet
• 23:05
  Speaker 1: is in no way verifiable anymore. I mean, we we
• 23:09
  Speaker 1: have entered the age in which we really do not
• 23:12
  Speaker 1: know what is behind much of the information and the
• 23:14
  Speaker 1: advertising that we see. We don't know who pays for it,
• 23:17
  Speaker 1: we don't know why we see it. All of these things.
• 23:19
  Speaker 1: Do you then have to reinvigorate the what we believe
• 23:23
  Speaker 1: and how we behave ethos of Ogilvy. In fact, I
• 23:27
  Speaker 1: think it's that is the only antidote we have for
• 23:31
  Speaker 1: what some might call this lack of transparency in terms
• 23:34
  Speaker 1: of of of how things show up. You have to
• 23:37
  Speaker 1: believe from where they come. So brand ownership and brand
• 23:41
  Speaker 1: trust never been more vital. And look at the social
• 23:45
  Speaker 1: platforms now right. You know, these are companies that were
• 23:48
  Speaker 1: deemed the companies of the future, the ones that we
• 23:51
  Speaker 1: could all believe in, because they were ushering in this
• 23:53
  Speaker 1: new level of engagement and openness. And yet it's never
• 23:57
  Speaker 1: been harder to kind of be confident that what they
• 24:00
  Speaker 1: represent you can count on, you can believe in. And
• 24:03
  Speaker 1: so it's it isn't It is an aspect of the
• 24:05
  Speaker 1: paradox we live in. So as you speak, I just
• 24:08
  Speaker 1: keep hearing Facebook, Facebook, Facebook, over and over again in
• 24:11
  Speaker 1: my head. I'm just wondering, have you seen any shift
• 24:14
  Speaker 1: in your clients away from Facebook in the wake of
• 24:18
  Speaker 1: the Cambridge Analytica issues. So one of my clients told
• 24:21
  Speaker 1: me that they were at the University of Alabama and
• 24:24
  Speaker 1: they asked a graduating class. So in a light of
• 24:27
  Speaker 1: all of these issues with Facebook, are you you know,
• 24:31
  Speaker 1: are you coming off Facebook and not using it? Not
• 24:33
  Speaker 1: a single hand went up. And so I think one
• 24:36
  Speaker 1: of the things that we're going to face is it
• 24:39
  Speaker 1: is this fundamentally going to change consumer behavior? And and
• 24:43
  Speaker 1: I think the jury is still out on that. I mean,
• 24:45
  Speaker 1: right now, these platforms are so ingrained in people's lives
• 24:49
  Speaker 1: that even if flawed, it's hard to give them up.
• 24:53
  Speaker 1: So I think we're gonna we're gonna see a much
• 24:56
  Speaker 1: greater emphasis on verify, verifying and and being a accountable
• 25:00
  Speaker 1: for both the content and the advertising of their peers
• 25:03
  Speaker 1: in these platforms before we see massive exodus of of consumers.
• 25:08
  Speaker 1: Do you believe that we're going to see a simplification
• 25:10
  Speaker 1: in the advertising business. I think if we don't, we're
• 25:14
  Speaker 1: going to have real problems. Uh, the word it is
• 25:18
  Speaker 1: far too complicated. And and I think one of the
• 25:21
  Speaker 1: things that you're going to find, whether you're talking at
• 25:23
  Speaker 1: a holding company level or in the marketing departments of
• 25:26
  Speaker 1: clients and so on, is that we have to simplify
• 25:29
  Speaker 1: the way we work together. You know, we just can't
• 25:32
  Speaker 1: keep fragmenting and assuming that this is all going to
• 25:34
  Speaker 1: naturally come together. Uh, it takes real leadership. If you're
• 25:38
  Speaker 1: in a client organization today and you're trying to manage
• 25:40
  Speaker 1: a brand, and in some cases these clients are managing
• 25:43
  Speaker 1: hundreds of brands. Um, you have to have a simplified
• 25:47
  Speaker 1: way of coming together, bringing the right expertise, the right information,
• 25:51
  Speaker 1: and ultimately the right accountability for the investment that you make.
• 25:54
  Speaker 1: And if we're not part of solving that problem, I
• 25:57
  Speaker 1: think we will we will suffer the consequences. I hear
• 26:00
  Speaker 1: consolidation in that. Perhaps we've got lots more to talk about.
• 26:04
  Speaker 1: Unfortunately we'll have to leave it until next time. John Seifert,
• 26:07
  Speaker 1: thank you so much for joining us. He has worldwide
• 26:09
  Speaker 1: chairman and chief executive of Ogilvie and Mather, which is
• 26:13
  Speaker 1: based in New York. Thanks for listening to the Bloomberg
• 26:21
  Speaker 1: P and L podcast. You can subscribe and listen to
• 26:23
  Speaker 1: interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer.
• 26:28
  Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm
• 26:32
  Speaker 1: on Twitter at Lisa Abramo wits one. Before the podcast,
• 26:35
  Speaker 1: you can always catch us worldwide on Bloomberg Radio