Latest / Masters in Business / Barry Ritholtz Discusses WFH’s Impact on the Economy (Podcast)

Transcript

Barry Ritholtz Discusses WFH’s Impact on the Economy (Podcast) · Masters in Business

0:02
Speaker 1: This is Masters in Business with very Ridholts on Bloomberg Radio. Hey,
0:07
Speaker 1: it's an extra special edition of Masters in Business. It's
0:11
Speaker 1: our Shelter in Place version of Good Friday. What we
0:16
Speaker 1: thought might be interesting to do was to reach out
0:19
Speaker 1: to a number of people in a variety of different
0:21
Speaker 1: fields and see if we could have a conversation about
0:26
Speaker 1: how the pandemic is affecting them in their business. So
0:30
Speaker 1: we spoke to a number of people, a real estate attorney,
0:35
Speaker 1: and meat purveyor and economist, a variety of folks who
0:39
Speaker 1: all explained how life has changed under the Shelter in
0:43
Speaker 1: Place provisions. Some of the things we talked about were
0:46
Speaker 1: really amazing and unexpected. Everybody is doing what they can
0:51
Speaker 1: to get by. Everybody's trying their best to get through
0:54
Speaker 1: what is obviously a difficult situation. And there is a
0:58
Speaker 1: lot of ingenuity and a lot of creativity, and a
1:01
Speaker 1: lot of people working to keep the gears of commerce moving,
1:06
Speaker 1: to keep food and essential services flowing. I think you'll
1:09
Speaker 1: find some of this quite fascinating. Some of it is
1:12
Speaker 1: very amusing. So, with no further ado, our special Shelter
1:17
Speaker 1: in Place Masters in Business. This is Masters in Business
1:23
Speaker 1: with very Ridholts on Bloomberg Radio. You're listening to a
1:28
Speaker 1: special Shelter in Place, Good Friday edition of Masters in Business.
1:34
Speaker 1: We thought, given the circumstances of everybody being forced to
1:38
Speaker 1: work from home if you're not in the medical field
1:42
Speaker 1: or providing some other essential services fire, police, grocery, what
1:46
Speaker 1: have you, everybody is trying their best to adapt to
1:51
Speaker 1: these circumstances, and I thought it might be interesting to
1:54
Speaker 1: talk to some people and find out how they are
1:58
Speaker 1: adjusting to these currents. And so my first guest today
2:02
Speaker 1: is Daniel Gershberg. He is a real estate attorney at
2:06
Speaker 1: Roma Devas working in Manhattan and Brooklyn. Daniel Gershberg, normally
2:11
Speaker 1: I would say Walton's Bloomberg, but welcome to wherever you are.
2:15
Speaker 1: Sheltering in Place. Yes, thank you so much for the
2:19
Speaker 1: distraction barrier, and thank you for having me so so, Daniel,
2:23
Speaker 1: tell us a little bit about your practice under normal circumstances.
2:29
Speaker 1: So under under a good month or a good day,
2:33
Speaker 1: I primarily practice in real estate transaction real estate someone
2:37
Speaker 1: buys someone's elves, and also consumer bankruptcy. So for the
2:41
Speaker 1: most part of the last i'd say five or six years,
2:44
Speaker 1: the majority of that was obviously devoted to to real estate.
2:47
Speaker 1: The market UM was doing incredibly well. Uh And so
2:50
Speaker 1: you know I would be involved in closing transactions. Someone's
2:53
Speaker 1: buying a place, so I'd get the closing or negotiating contract.
2:56
Speaker 1: I'd have, for instance, a desk in computers and a
2:59
Speaker 1: working for system, and I plod through those things UM
3:03
Speaker 1: with brokers do normal, normal things during the name. So
3:06
Speaker 1: were you you live in Brooklyn? Were you going into
3:09
Speaker 1: Manhattan on some days? Most days old days? I had
3:14
Speaker 1: my own firm for about twelve years before emerged was
3:16
Speaker 1: Rummer Divas a couple of years back, and I was
3:19
Speaker 1: working very close to home in Brooklyn. Many of my
3:22
Speaker 1: clients are based in Brooklyn, and so I didn't want
3:25
Speaker 1: to commute. Uh. And so I had an office in Brooklyn.
3:28
Speaker 1: About a year or so ago. I began UM going
3:31
Speaker 1: into the main office on Madison Avenue. And for the
3:34
Speaker 1: past year or so, i'd say four and there was
3:36
Speaker 1: five days UM i'd be in the city working from
3:39
Speaker 1: that office base itself. And Brooklyn was afterthought. I've lived
3:44
Speaker 1: now for about three or four years in Williamsburg, Brooklyn
3:48
Speaker 1: as well. So I live in and work there and breathing.
3:52
Speaker 1: So Williamsburg is a very hot neighborhood in Brooklyn for
3:55
Speaker 1: people were not familiar with it. A lot of condos
3:57
Speaker 1: and co ops, prices have gone up, a time of
4:00
Speaker 1: transactions have been taking place there until I'm gonna guess
4:05
Speaker 1: about a month ago. How has the practice of real
4:08
Speaker 1: estate law changed in this current environment? You know, I
4:13
Speaker 1: was practicing UM during two thousands where the market just
4:17
Speaker 1: sell UM. The market has essentially just stopped and any
4:22
Speaker 1: deals that were in contract, and again us this anecdotally.
4:25
Speaker 1: You can speak to other attorneys, maybe they have a
4:26
Speaker 1: different feel for it, but any deals that are in
4:28
Speaker 1: contract literally just time stopped. People are in near going
4:32
Speaker 1: through the contracts themselves, or they're taking a pause, they're
4:35
Speaker 1: renegotiating the prices UM and deals that are currently in contract.
4:41
Speaker 1: You know, when I represent a seller and the sellers
4:43
Speaker 1: are calling me and I'm having more zoom calls than
4:45
Speaker 1: I ever want to have in my entire life, where
4:48
Speaker 1: the sellers are calling me and saying, how do we
4:50
Speaker 1: make this deal happen? And on the flip side, my
4:53
Speaker 1: buyers are calling me and saying how do I get
4:55
Speaker 1: out of this thing? And so real estate just yeah,
4:58
Speaker 1: on on a sort of a large your level Brooklyn right,
5:01
Speaker 1: and again across New York City as well. We're in
5:04
Speaker 1: this sort of unstarted territory right now where um, frankly,
5:08
Speaker 1: there aren't any easy answers, and so people are trying
5:11
Speaker 1: to get out of deals. And and that's where I
5:13
Speaker 1: think of my day is right now, is navigating the
5:17
Speaker 1: ability for someone to get a better price, get out
5:20
Speaker 1: of a deal, or in the seller's side, to stay
5:22
Speaker 1: in the deal itself. So let's talk about the other
5:24
Speaker 1: aspect of your practice, which is Chapter seven and thirteen
5:29
Speaker 1: bankruptcy filings to discharge consumer debt. I'm going to ask
5:34
Speaker 1: you to I'm going to ask you to look forward
5:37
Speaker 1: and imagine that this goes on for two four eight
5:42
Speaker 1: weeks longer before things normalize. What happens in the consumer
5:47
Speaker 1: realm with people carrying credit card debt and auto loans
5:52
Speaker 1: and perhaps even mortgage debt if they lose some or
5:57
Speaker 1: all of their income, either temporarily or comin in what
6:01
Speaker 1: what is on consumer debt world looking like three months
6:04
Speaker 1: from now, I'm going to go out in a limb.
6:08
Speaker 1: And as my wife often reminds me, I'm wrong. Most
6:12
Speaker 1: of the time, I will say that I think Congress
6:16
Speaker 1: has to deal with this in a particular way because
6:18
Speaker 1: I think that, um, you're looking at a deluge of
6:22
Speaker 1: cases that the courts may not be able to handle.
6:24
Speaker 1: So bankruptcy to a certain extent is trailing. You don't
6:28
Speaker 1: file for bankruptcy is the first thing you do. You
6:30
Speaker 1: file for bankruptcy is the last thing. You pay your
6:32
Speaker 1: credit card minimums. You try your best to negotiate with
6:35
Speaker 1: your creditors, You do everything you can because there's a
6:37
Speaker 1: stigma attached. So people will be filing two months from
6:40
Speaker 1: now or three months ago. Remember there's in New York
6:43
Speaker 1: there's a moratory amount evictions and from closures for at
6:46
Speaker 1: least three months, so people are going to sort of
6:49
Speaker 1: stay in place, right, No one's gonna be thinking this way.
6:51
Speaker 1: I think what you'll see is if this continues for
6:53
Speaker 1: let's say three or four or five months, then you
6:56
Speaker 1: begin to see people filing because frankly, they won't have incomes. Um,
7:01
Speaker 1: they won't be able to make And remember again, O,
7:03
Speaker 1: wait was about people not being able to make their
7:06
Speaker 1: mortgage things. Now you have people that can't make their rent,
7:09
Speaker 1: and you you're bringing in this other section of the workforce,
7:14
Speaker 1: and that wasn't there before. You're gonna have a large
7:16
Speaker 1: number of cases. You're gonna have people that are living
7:18
Speaker 1: off of credit cards for a period of time. You're
7:21
Speaker 1: gonna have people that are taking personal loans or cashing
7:24
Speaker 1: out there for one case or getting for one K
7:26
Speaker 1: loans to the extent that they can. And then once
7:28
Speaker 1: all of that stops and they can't take any more
7:32
Speaker 1: credit out from anywhere else, only then do they come
7:34
Speaker 1: to have this sort of come to Jesus moment where
7:37
Speaker 1: they say, oh my God, I think I have to
7:39
Speaker 1: file for bankruptcy, right, And so I would say, trailing,
7:42
Speaker 1: you're looking at it rather than three months, you're looking
7:44
Speaker 1: at six to seven months from now. But I think
7:46
Speaker 1: you're gonna have an enormous number of cases. And I
7:49
Speaker 1: say this, I know it sounds ridiculous because you know,
7:52
Speaker 1: obviously in self interest, more clients is more money that
7:55
Speaker 1: comes in. I don't even want this. Um. You hear
7:59
Speaker 1: these worries sometimes of these people, and and Oheed O
8:02
Speaker 1: nine really changed me in a lot of respects. Um,
8:04
Speaker 1: I would rather people not filing and and there'll sort
8:07
Speaker 1: of be a way out because the emotional toll that
8:10
Speaker 1: this takes on people. Um is underappreciated when it comes
8:13
Speaker 1: to a lot of this stuff. So I think if
8:15
Speaker 1: you see anything, it's gonna be again half a year
8:17
Speaker 1: from now. But I'm hoping that Congress sort of brings
8:19
Speaker 1: some relief even within the laws themselves. Let's talk a
8:22
Speaker 1: little bit about life in a Brooklyn apartment. I'm assuming
8:28
Speaker 1: you're not on a a three thousand square foot giant apartment.
8:33
Speaker 1: You're in a fairly normal Williamsburg um apartment. Are you
8:37
Speaker 1: in a condo or a coh So I'm in a condo.
8:40
Speaker 1: I'm a renter in the condo, and by fairly normal.
8:43
Speaker 1: Just to give your audience some ideas to why it's
8:45
Speaker 1: resiuleous to live in the city. Um, I am in
8:49
Speaker 1: square foot which is big for the purposes of New
8:51
Speaker 1: York and a garage for the rest of the country.
8:54
Speaker 1: Squarefoot apartment UM with my wife, my almost three year
8:58
Speaker 1: old son, and a newborn daughter, which again really really
9:02
Speaker 1: great prior to a pandemic, as well as a seventy
9:06
Speaker 1: pound English bulldog. UM. So I try my best to
9:11
Speaker 1: leave that apartment as much as I can, then work
9:14
Speaker 1: out of my car downstairs. Your no, I kid you,
9:20
Speaker 1: not my my office. I have no problem deducting anything
9:25
Speaker 1: regarding my car, my taxes this year my car. I
9:28
Speaker 1: have a Nissan path funding that I that I that
9:30
Speaker 1: I got this year at least it, and I worked
9:33
Speaker 1: six hours a day out of this vehicle, because to
9:36
Speaker 1: try and get anything done in what is basically an
9:39
Speaker 1: insane asylum upstairs is impossible. I have one area of
9:43
Speaker 1: that apartment, which is my wife's closet um that I
9:46
Speaker 1: work out of sometimes, and I literally put a laptop
9:49
Speaker 1: on the footstool and close the door so there's no
9:52
Speaker 1: light anywhere there because if there's light, my sun will
9:55
Speaker 1: will rip the door open. So I'm two minutes away
9:57
Speaker 1: from a quill pen and a candle UM. So most
10:00
Speaker 1: of the stuff that that I do is is running
10:02
Speaker 1: downstairs taking calls UM, doing zooms again UM, and sending
10:07
Speaker 1: emails out from from my car. Is that where we're
10:10
Speaker 1: speaking to you right now? From your Nissan pathfinder. I
10:14
Speaker 1: am in my Niecean pathfinder as we speak, as as
10:17
Speaker 1: I like to say, my remote office, which see do
10:20
Speaker 1: you win? I'm trying to picture this. I So I'm
10:23
Speaker 1: in the driver's seat because God forbid the cops were
10:26
Speaker 1: to pull up. If I'm double parked or by hydrant,
10:28
Speaker 1: I would be able to to move and continue my
10:31
Speaker 1: zoom call. I would search the audio only, or I
10:33
Speaker 1: would stop the video itself. Um. Occasionally, when I need
10:36
Speaker 1: the laptop, I will go to the back seat. The
10:38
Speaker 1: pathfinder is wonderful and that there's there's a three row
10:41
Speaker 1: capacity here. Um. So I can basically go to the
10:43
Speaker 1: third road to take a nap if I need to.
10:45
Speaker 1: I haven't done that as of yet, Barry, but this
10:47
Speaker 1: is this is where my career has taken me. So so,
10:51
Speaker 1: I lived in the city for a long time. I
10:53
Speaker 1: lived on Lexon and St. And I remember what a
10:57
Speaker 1: pain it was dealing with parking. But I have to
11:00
Speaker 1: imagine that the New York City Traffic Enforcement Division, in
11:05
Speaker 1: the midst of a pandemic of which New York State
11:08
Speaker 1: is a hot spot and New York City is the
11:11
Speaker 1: hottest hot spot within New York State, have eased up
11:14
Speaker 1: on that sort of stuff. Are you Are you telling
11:17
Speaker 1: me alternates out of the street parking is still in effect. No,
11:21
Speaker 1: we're good. I'm just neurotic and I don't want to
11:23
Speaker 1: take it, even through a pandemic. Itself and has nothing.
11:25
Speaker 1: No one wants to get close to anyone Barry. So
11:27
Speaker 1: I'm working. Yeah, so I'm just interest me being theronic. Alright,
11:33
Speaker 1: So you're sitting in your front seat of the Pathfinder.
11:37
Speaker 1: You tell me a little bit about the technology you
11:40
Speaker 1: use to do your job. What what are you working with,
11:45
Speaker 1: and how are you communicating with clients and others? They
11:49
Speaker 1: sort of variety of sort of things. But obviously I'm
11:51
Speaker 1: taking calls on my iPhone. I'm zooming, doing the zoom calls,
11:55
Speaker 1: which to become this this new thing with with my
11:58
Speaker 1: elephone as well most of my files of course it's
12:01
Speaker 1: on a dropbox. I have access to those as well. Look,
12:04
Speaker 1: I've been remote and virtual for for a number of
12:07
Speaker 1: years prior to that, just because of again going from
12:10
Speaker 1: Brooklyn to the city and having two offices. So it
12:12
Speaker 1: hasn't really been that bad. The problem is you can't
12:15
Speaker 1: get a lot of work done um in the car itself.
12:18
Speaker 1: When you have to send emails out. I literally go
12:20
Speaker 1: up to the apartment, um when I know my son
12:23
Speaker 1: is either taking a nap or my wife has them
12:26
Speaker 1: in a different room, and I will hyper focus on
12:28
Speaker 1: sending an hour sort of email out um. In that closet,
12:32
Speaker 1: I mentioned that I have a newborn as well, So
12:35
Speaker 1: at some ungodly hour of let's say three thirty in
12:38
Speaker 1: the morning, when when my daughter is up, I'm also
12:41
Speaker 1: um as i'm as I'm feeding her, um sending out
12:44
Speaker 1: emails from the living room itself. So I leverage as
12:47
Speaker 1: much as anyone can at this point, my MacBook, my
12:50
Speaker 1: iPhone and everything else. Just to again this is you know,
12:54
Speaker 1: I'm not thriving just to survive. And I think what
12:58
Speaker 1: you're really seeing, to be honest with you, uh, maybe
13:00
Speaker 1: it's a left or interest in extent is every lawyer
13:04
Speaker 1: is dealing with the same thing, or every person I'm
13:05
Speaker 1: dealing with is doing the same thing. That famous skit
13:09
Speaker 1: where the guys giving an interview and his two kids
13:11
Speaker 1: running behind him. That's just that's just everyone these days.
13:14
Speaker 1: So you don't feel weird about it. Uh, you don't
13:16
Speaker 1: feel weird about someone showing up with a sweatshirt on
13:19
Speaker 1: on the video on zoom because you know that they're
13:21
Speaker 1: going through the same hell that you're going through on
13:24
Speaker 1: the daily BA which is good. That was a BBC
13:28
Speaker 1: broadcaster whose son came running into the room during a broadcast.
13:31
Speaker 1: He subsequently brought the whole family and during the the lockdown,
13:36
Speaker 1: and nobody even nobody even thought twice about it. So,
13:40
Speaker 1: so if you're using you're using a laptop in the car,
13:44
Speaker 1: are you using any sort of jet pack or or
13:48
Speaker 1: WiFi connection to the laptop or you just using your
13:51
Speaker 1: iPhone as a as a connection or do you not
13:55
Speaker 1: need that? You just use the iPhone for the Zoom
13:58
Speaker 1: conferences and you could deal with the laptop when you
14:00
Speaker 1: get back up to the to the apartment. I try
14:04
Speaker 1: my best to to separate those two things, because the
14:07
Speaker 1: second I do listen, my life resembles that of Larry
14:10
Speaker 1: David quite often. So the last thing I need to
14:12
Speaker 1: do is try and connect the hot spot, and I'm
14:14
Speaker 1: connected to someone else's WiFi and not this virus. I
14:17
Speaker 1: try my best to separate and do the iPhone thing.
14:20
Speaker 1: I have brought the laptop down, used it as a
14:22
Speaker 1: hot spot. You know, sometimes it's better than others. Sometimes
14:25
Speaker 1: emails are unfortunately go out very quickly. Um but I
14:28
Speaker 1: try and make it so that if I need to
14:30
Speaker 1: send that emails, I'm running upstairs to I can't believe
14:33
Speaker 1: I'm saying this on the radio. Interview to my wife's closet,
14:36
Speaker 1: and um, the rest of the time, I'm in my car, uh,
14:39
Speaker 1: doing calls and everything else on my iPhone and zoom
14:41
Speaker 1: on my own phone himself. So, so I'm picturing a
14:44
Speaker 1: street in Williamsburg with all these high rise condos and
14:48
Speaker 1: rows of cars parked. Are you the only person sitting
14:51
Speaker 1: in your car or do you see dozens of other
14:53
Speaker 1: people operating similarly? I am I am probably the only
14:58
Speaker 1: person sitting in their car. Half of this neighborhood has
15:01
Speaker 1: fled um to God knows where to second homes that
15:05
Speaker 1: I don't have to their parents place. And my mother
15:09
Speaker 1: lives in Miamily, my hives pens live in Europe, so
15:11
Speaker 1: we don't we don't have that option. Um. So there's
15:13
Speaker 1: no one in any cars really other than me. Um.
15:16
Speaker 1: I see sometimes the same cops going around and the
15:19
Speaker 1: same sort of people going around and walking their dogs
15:22
Speaker 1: and everything else. There's there's really not a lot of
15:24
Speaker 1: traffic in the street itself, So if you want to
15:26
Speaker 1: picture it, it's it's really just me running a vehicle
15:29
Speaker 1: inside a vehicle it self, doing some calls, sometimes with
15:33
Speaker 1: the windows open when when the weather actually allows me.
15:36
Speaker 1: Thank you. Daniel Gershberg of Rumor dubas real estate and
15:39
Speaker 1: bankruptcy attorney, My next guest on our special Good Friday
15:44
Speaker 1: edition of Shelter in Place, Masters in Business is a
15:48
Speaker 1: former m IB guest, Joe Davis. He is the chief
15:51
Speaker 1: economist and investment giant Vanguard, and I was surprised to
15:56
Speaker 1: learn that he is considered essential person l during a pandemic.
16:01
Speaker 1: Joe Davis, are you not sheltering at home? Are you
16:05
Speaker 1: actually in the Vanguard office? Uh? Hi, very thanks for
16:11
Speaker 1: having me. I am, although we uh, you know, for
16:14
Speaker 1: for some time, we've taken UM, uh you know, pretty
16:18
Speaker 1: pretty significant steps. I'm I'm the only one on my
16:22
Speaker 1: floor here, uh, in the building uh that I work
16:26
Speaker 1: at UM, you know, because I'm a part of the
16:29
Speaker 1: investment management group. UM. There's just very select personnel that
16:33
Speaker 1: UM maybe either in the building or and and what
16:36
Speaker 1: we call hot sites. So it's UM in one sense.
16:39
Speaker 1: Even though I'm I'm in the office, I'm actually alone.
16:42
Speaker 1: So it's uh, and you know, it's a question in
16:45
Speaker 1: my office where I can close the door. So it's
16:48
Speaker 1: the it's pretty much an isolated environment. Any meetings that
16:52
Speaker 1: we're having, clearly our our video, um even for a
16:56
Speaker 1: certain career that maybe on campus, which is, you know,
16:59
Speaker 1: fairly few. So so let me paint a little bit
17:02
Speaker 1: of a picture for those people who have never made
17:05
Speaker 1: it to the enormous campus that Vanguard has uh in Malvern, Pennsylvania.
17:12
Speaker 1: It is like a college campus with lots of three
17:16
Speaker 1: story brick buildings and here's a conference center, and there's
17:20
Speaker 1: an auditorium over there, and here's a parking garage, and
17:23
Speaker 1: it goes on for it feels like thousands of acres.
17:27
Speaker 1: I don't know if I'm overstating it, but it's like
17:30
Speaker 1: a giant, thousand student campus. And when I've been there
17:36
Speaker 1: many times. When you're there, there are cars coming and
17:39
Speaker 1: going and people walking around, and offices filled with people,
17:43
Speaker 1: and um various conference rooms and public facilities. It's a
17:49
Speaker 1: small city kind of in the woods of Pennsylvania. Is
17:53
Speaker 1: is that a fair description? Yeah, Berry, it is. I mean,
17:56
Speaker 1: it's it's it's actually a beautiful campus. We're in the suburbs,
17:59
Speaker 1: about a half power from Philadelphia Airport. So so given
18:04
Speaker 1: that this is normally a bustling city, how different is
18:09
Speaker 1: it today? When you walk in? Is it like a weekend?
18:13
Speaker 1: Is it how do you compare what you're experiencing today
18:17
Speaker 1: compared to the normal day to day operations of Vanguard. Yeah,
18:23
Speaker 1: I mean I think it's for uh, you know, for
18:25
Speaker 1: for for for I would imagine it feels similar to others, uh,
18:31
Speaker 1: in other industries maybe around the country. UM, you know,
18:34
Speaker 1: you're you at best, it feels like a weekend. Although
18:36
Speaker 1: I can see the highway from from my building, UM
18:40
Speaker 1: and you know, very little traffic. UM, so even that
18:44
Speaker 1: seems really out of place. UM, you know, but I
18:48
Speaker 1: think for you know, if I I lead a group
18:51
Speaker 1: of roughly sixty employees around the world, UM, I think
18:56
Speaker 1: the what we're fortunate is that we can do our
19:00
Speaker 1: jobs pretty much anywhere in the world. We have wonderful technology. UM.
19:05
Speaker 1: We're continuing to operate day to day as if it's
19:09
Speaker 1: best you can, as if uh, you know, we didn't
19:11
Speaker 1: have this, um, you know, unfortunate health crisis. UM. But
19:15
Speaker 1: you you try to you know, I think I think
19:17
Speaker 1: many of my team it's just trying to balance what
19:20
Speaker 1: goes on in your personal life with your work life,
19:23
Speaker 1: even more so because you're you're often you know, at
19:26
Speaker 1: home trying to navigate you know, those those two uh,
19:30
Speaker 1: you know those two worlds. You know, I'm isolated here. UM.
19:35
Speaker 1: So again, even if you have a meeting with someone
19:38
Speaker 1: else who may be in a different building, which again
19:40
Speaker 1: are few, and where they're or they're at home, we're
19:43
Speaker 1: just operating all Microsoft teams. And UM, it's been a
19:47
Speaker 1: it's been a real benefit. UM. You know, you get
19:49
Speaker 1: out some of the cadence, UM, you know, some of
19:51
Speaker 1: your habits. UM. But it's I've actually been pleasantly surprised, um,
19:58
Speaker 1: how productive you can be. UM. You know, if you
20:01
Speaker 1: have access to to really good technology into the you know,
20:04
Speaker 1: the information you need to do to do your job.
20:07
Speaker 1: You're telling me that a constant stream of people walking
20:11
Speaker 1: into your office to interrupt you with questions or issues
20:14
Speaker 1: or things somehow reduces your productivity. Is that what the normal, uh,
20:20
Speaker 1: the normal workflow is is? Yeah, well, I tell you
20:23
Speaker 1: know what that what that has been challenging is just
20:26
Speaker 1: keeping up with just the rapidity of events. And again
20:30
Speaker 1: we've we've been watching the the unfolding of this of
20:34
Speaker 1: this unfortunate health crisis. UM, you know, since since December thirtieth.
20:39
Speaker 1: I recall that in China because I recall that because
20:41
Speaker 1: it was my birthday. And you know we we've been
20:44
Speaker 1: you know, using alternative data sources for years and particularly
20:48
Speaker 1: applied them in this situation. And it's um, you know,
20:51
Speaker 1: I'm spending just as much time uh thinking about um,
20:56
Speaker 1: you know, what potential additional solutions we may need unite
21:00
Speaker 1: day from a policy perspective, um, you know, in terms
21:04
Speaker 1: of a public service, as much as I am importantly
21:07
Speaker 1: thinking about the economic conditions and what that may mean
21:10
Speaker 1: for the markets over the coming months and years. So
21:14
Speaker 1: I spend a lot of time with that, with some
21:16
Speaker 1: of my colleagues of Vanguard, you know, to try to
21:18
Speaker 1: help policymakers because because I think we're gonna need additional
21:22
Speaker 1: firepower applied to the situation. Joe, Let's talk a little
21:26
Speaker 1: bit about the impact so far of the coronavirus. We
21:31
Speaker 1: saw the initial unemployment claims two weeks ago at about
21:37
Speaker 1: four million new job losses. This past week it was
21:44
Speaker 1: six million. God knows what we're gonna get uh the
21:48
Speaker 1: week of April five already ten million job losses. That's
21:53
Speaker 1: more than we lost in the entire financial crisis of
21:57
Speaker 1: oh eight oh nine. How significant is the labor market
22:01
Speaker 1: damage today, Well, it's it is pretty significant barry and
22:07
Speaker 1: we're not I don't think we're I don't think we've
22:10
Speaker 1: seen the worst of it, not uh necessarily, which is unfortunate. UM,
22:15
Speaker 1: and I really my heart goes out. In fact, I
22:18
Speaker 1: have a family uh and friends who have who had
22:23
Speaker 1: to go on unemployment insurance. So it's, um, I mean,
22:26
Speaker 1: it's it's it's one of the sigma it's it's certainly
22:29
Speaker 1: we were projecting over over a month ago and yet
22:31
Speaker 1: we've had the revisor estimates. Um, it's it's the worst
22:36
Speaker 1: single quarter in terms of a rate of a change,
22:39
Speaker 1: a deterioration of labor market that that I think is
22:41
Speaker 1: ever on record. Um, you know, I think it's. Uh,
22:45
Speaker 1: it may not be we may not get to unemployment
22:48
Speaker 1: rights there that worth highs the Great Depression, although that
22:50
Speaker 1: played out over you know, three or four years. This
22:53
Speaker 1: is playing out in a matter of weeks and months,
22:56
Speaker 1: and so it's been a significant uh reversal in conditions. Again,
23:01
Speaker 1: it gets back to this, there's just a vacuum of
23:03
Speaker 1: cash flows for many businesses across the entire economy, and
23:09
Speaker 1: which which is why it's important to to really try
23:12
Speaker 1: to arrest that. But it's it's, Um, you know, it's
23:15
Speaker 1: most sectors are are impacted, and it's so it's broad based,
23:19
Speaker 1: it's significant, and it's been fast, and UM, you know
23:23
Speaker 1: we will. We are expecting at least five million uh
23:29
Speaker 1: additional job losses just from the just from the job's
23:32
Speaker 1: report UM over the next month. UM. I think we're seeing,
23:37
Speaker 1: you know, additionally, we are seeing claims UM elevated a
23:42
Speaker 1: little bit. UM. I don't mean to dismiss them, but
23:45
Speaker 1: they are elevated a little bit because the Cares act
23:48
Speaker 1: U makes unemployment benefits a little bit more generous and
23:52
Speaker 1: has changed some of the criteria by which you can
23:55
Speaker 1: qualify for unemployment insurance. It's to be very positive from
23:58
Speaker 1: A from A for the that have been affected right
24:01
Speaker 1: in terms of their job. But that is leading to
24:04
Speaker 1: even additional uh increasing claims over and above just those
24:09
Speaker 1: losing their job. So it's um. But it's I mean,
24:13
Speaker 1: it's I didn't think I might I would be in
24:16
Speaker 1: a place of my career where I'm projecting GDP declines
24:21
Speaker 1: as as large as we are and job losses as
24:24
Speaker 1: high as they are, and yet worrying that perhaps uh,
24:28
Speaker 1: we don't, perhaps there are actually too optimistic. So I
24:32
Speaker 1: know most economic data comes out with a bit of
24:35
Speaker 1: a lag. You're always looking backwards that would just occurred.
24:39
Speaker 1: But I keep hearing anecdotally that people who have been
24:43
Speaker 1: trying to file claims for unemployment they can't get through
24:47
Speaker 1: on the phones, the websites crashing. I'm curious how accurate
24:52
Speaker 1: is the data as to the true state of the
24:55
Speaker 1: labor market damage? Are things worse than the official data
25:00
Speaker 1: UH states or is it possible that we're just not
25:04
Speaker 1: keeping up with of the new job losses? Well, I
25:08
Speaker 1: think it is. I mean again, we're going to have
25:10
Speaker 1: a lag, there's no doubt about that, Barry. But we're
25:12
Speaker 1: trying to triangulate. When you triangulate on I think we're
25:16
Speaker 1: real time data, and we were doing this in China
25:19
Speaker 1: and doing it for Europe as well as the United States.
25:21
Speaker 1: When you look at I don't know the usage of
25:24
Speaker 1: of of credit cards, when you look at Google searches
25:27
Speaker 1: of of certain keywords, we were tracking that over a
25:29
Speaker 1: month ago. We started with airline cancelations, and now you
25:33
Speaker 1: look about unemployment search activity, it tends to correspond, uh,
25:40
Speaker 1: you know with our economic outlook, which is which is
25:43
Speaker 1: really called for a significant fall um, not only for
25:46
Speaker 1: the past quarter which just ended, but for the for
25:48
Speaker 1: the second quarter. UM. So, I I think you know,
25:52
Speaker 1: when you when you look at the distillation of of
25:54
Speaker 1: information and as well some more high frequency UH data,
25:58
Speaker 1: I think it. I think it's generally assistant with the headlines,
26:01
Speaker 1: which are not you know, which are concerning UM. You know.
26:04
Speaker 1: I think though, I will tell you is that we
26:07
Speaker 1: do see as our baseline UM conditions stabilizing and then
26:12
Speaker 1: modestly approving as we get to the back half of
26:15
Speaker 1: the year. Now that rests largely on the big assumption UM,
26:20
Speaker 1: which which we still have as as our most likely outcome,
26:23
Speaker 1: that at some point this year these needs for shelter
26:26
Speaker 1: in place UM dissipate over time. But that's really the
26:31
Speaker 1: key variable is really is the health variable more so
26:35
Speaker 1: than the economic one. Let me ask you a more
26:39
Speaker 1: speculative question that that requires you to use a little
26:42
Speaker 1: bit of your imagination. This has obviously been a wrenching
26:47
Speaker 1: and unprecedented experience for everybody who's been involved. What sort
26:54
Speaker 1: of lasting changes are going to come to the economy,
27:00
Speaker 1: how business is conducted. Just look across the board, UH,
27:04
Speaker 1: service sector, real estate, labor. How is the world changed
27:10
Speaker 1: on a permanent basis by the coronavirus. What's a really
27:14
Speaker 1: good question, Barry. You know, I think when I when
27:16
Speaker 1: I study world history, what at least what I've learned
27:21
Speaker 1: is that when there's profound shocks and crises, UM, it
27:25
Speaker 1: could be war, there's certainly economic shocks. And this clearly qualifies.
27:30
Speaker 1: It usually does two things. One is it accelerates a
27:33
Speaker 1: trend that was already in place before the shock began. UM.
27:37
Speaker 1: And then secondly, UM, there are typically i'll call them
27:42
Speaker 1: social or political reactions to very shock itself. So let's
27:45
Speaker 1: take the first one. I mean, I think things that
27:47
Speaker 1: we were already seen, you've talked about and documented uh
27:52
Speaker 1: in a number of times. I think both the need
27:55
Speaker 1: for UM, I think a revisit of some aspects of
27:58
Speaker 1: the global supply chain will be in order, and I
28:01
Speaker 1: think we may we may see more serious conversations of
28:04
Speaker 1: that from a risk perspective, UM, meaning you know, these
28:08
Speaker 1: shocks may occur every so often, and so from we
28:12
Speaker 1: may see more supply chain changes than we did UH
28:16
Speaker 1: from the trade war. Explain that a moment, how might
28:21
Speaker 1: the supply chain shift? Are you referring to the just
28:24
Speaker 1: in time delivery system or yep, yep, I think, I
28:28
Speaker 1: think so, I mean, you know, you know it's been
28:30
Speaker 1: it's been hugely UH. There's been a number of positive
28:34
Speaker 1: economic benefits of just in time. But you know, because
28:37
Speaker 1: when when when when the industrial economy, when the whole
28:40
Speaker 1: broad based global economy runs so lean for lack of
28:43
Speaker 1: a better word, there is a risk of that, the
28:46
Speaker 1: risk of that as you don't have capacity in the
28:48
Speaker 1: system or um. And we've seen these shocks before, but
28:51
Speaker 1: they weren't at the same magnitude and may you can
28:53
Speaker 1: go back to the unfortunate you know, earthquake in Japan,
28:57
Speaker 1: right and what that did two parts of the electrical
28:59
Speaker 1: can outer industry. So that that I think when you
29:02
Speaker 1: start to say no, they'll trick. You know, if you
29:04
Speaker 1: assign a certain probability to these events occurring ever so
29:08
Speaker 1: often with a very large negative economic loss, you then
29:13
Speaker 1: if you if you're in the in the in the
29:16
Speaker 1: seat of a chief financial officer or CEO, you may
29:19
Speaker 1: start to you know, assign a little bit greater um,
29:23
Speaker 1: you know, assets or investment into uh, adding redundancies into
29:28
Speaker 1: the system. Right then before it's just from a risk
29:31
Speaker 1: control perspective, So I think we'll see some of that
29:33
Speaker 1: in what magnitude. I don't know, but I think it's
29:36
Speaker 1: hard to imagine that in my mind that we'll go
29:39
Speaker 1: as lean as possible in just in time as we
29:41
Speaker 1: did before, because that opens up a business on operational risk.
29:45
Speaker 1: The secondly is that I think we'll see a little
29:47
Speaker 1: bit more. We certainly will see acceleration and automation, but
29:50
Speaker 1: again this was a something that was already occurring. UM.
29:54
Speaker 1: I think we'll also see uh, you know, it'll take
29:58
Speaker 1: some time for some sectors to come back from um,
30:03
Speaker 1: you know, like air travel and you know, things that
30:05
Speaker 1: really are our social you know, social interactions of human beings.
30:10
Speaker 1: I don't think though I think there will be a
30:12
Speaker 1: recovery in business travel. I think there will be a
30:14
Speaker 1: recovery in intervals, individuals going out to eat. I mean,
30:17
Speaker 1: I recall nine eleven there was a significant concern or
30:20
Speaker 1: future of air travel. UM. But it will take time.
30:23
Speaker 1: That's where I think to anybody tests and the ability
30:26
Speaker 1: and you and I and all of our human citizens
30:30
Speaker 1: baried to be able to know that if if I
30:31
Speaker 1: go into you know, a certain social setting, am I
30:34
Speaker 1: and my is my health at risk? I think when
30:36
Speaker 1: we get greater confidence with that right, I think we
30:39
Speaker 1: will eventually see a return to some of those sectors,
30:43
Speaker 1: but it will take a little bit longer um and
30:46
Speaker 1: until until that dissipates, but that we will see a
30:48
Speaker 1: recovery in some parts of the comment that are really
30:51
Speaker 1: on their dress right now. This is part one of
30:54
Speaker 1: our special edition Good Friday's Masters in Business talking to
30:58
Speaker 1: people how they are adapt don to the coronavirus and
31:02
Speaker 1: working at home. Our guest today is Pat La Frida.
31:05
Speaker 1: He is a third generation butcher from a family that's
31:09
Speaker 1: been in the meat business for over a century. Lo
31:13
Speaker 1: Frida's Meat Purveyors supply stakes to many of New York
31:17
Speaker 1: City's high end restaurants, including Minetta, Tavern, Spotted Pig, Union Square, Cafe,
31:22
Speaker 1: Blue Smoke, and Market Table. Perhaps most famously, Danny Myers
31:27
Speaker 1: tapped him to help create the unique shake Shack Burger,
31:31
Speaker 1: which became an immediate hit and is now a global chain,
31:37
Speaker 1: largely attributed to the success of the custom meat blend
31:41
Speaker 1: Pat La Frida created. Patla Frida, welcome to a work
31:46
Speaker 1: from home edition of Bloomberg. Thank you very much for
31:49
Speaker 1: having its pleasure. So your business really developed as a
31:55
Speaker 1: meat supplier to high end restaurants. Obviously, restaurants are on
32:00
Speaker 1: are incredible dress today. What are you hearing from your customers? Well,
32:05
Speaker 1: I'll tell you that the restaurant in the industries is
32:08
Speaker 1: really they're struggling. I would say that they're split between
32:12
Speaker 1: thinking of closing down completely or reorganizing. Um. But but
32:18
Speaker 1: the brighter side of the other fifty, I call it
32:22
Speaker 1: the positive fifty that many of them I've talked off
32:25
Speaker 1: the ledge, which is get off the couch, improvised, and
32:29
Speaker 1: we've seen so much of that. I've seen I've seen
32:32
Speaker 1: more ingenuity in original ideas for restaurants that I've ever seen.
32:39
Speaker 1: And you know, sometimes it takes a chaotic time like
32:44
Speaker 1: this to to to really get um, people's minds rolling.
32:48
Speaker 1: And you know, there are so many great examples. But
32:53
Speaker 1: I think restaurants that had never thought of anything like
32:57
Speaker 1: curbside delivery before thought they were above that. But we
33:01
Speaker 1: don't even wanted to do that. So when we talk
33:03
Speaker 1: about high end restaurants in New York City, they kind
33:07
Speaker 1: of looked down upon, uh, you know, a curbside pick
33:11
Speaker 1: up or take out. Um, they actually didn't permit it.
33:15
Speaker 1: And then but they wanted to um historically. Now this
33:20
Speaker 1: gives them a chance to actually take that that that
33:24
Speaker 1: leap and and to begin that part of this evolution,
33:28
Speaker 1: because that's what this is going to be. Restaurants are
33:30
Speaker 1: going to be different forever. UM. We hope that that
33:34
Speaker 1: there will be some you know, returned to normalcy, but
33:38
Speaker 1: for anything, for for foreseeable future, things are going to
33:43
Speaker 1: be different. We we already feel it, um. And when
33:46
Speaker 1: restaurants get to reopen, I think we're going to see
33:49
Speaker 1: the biggest surgeon and rebound in New York City. Um.
33:54
Speaker 1: You know, despite it being the epicenter of the of
33:58
Speaker 1: the coronavirus. UM, I disagree. I think it's gonna be
34:02
Speaker 1: We'll have more people that have contracted it and have
34:05
Speaker 1: gotten past it, um. And those are the people, the
34:08
Speaker 1: very people that we will be the first back to
34:10
Speaker 1: work at, the first to feel most comfortable in restaurants.
34:14
Speaker 1: But to have restaurants, I think, UM, like they have
34:19
Speaker 1: now to to create concepts um meal kits um. Again.
34:26
Speaker 1: The the car is pulling up to the restaurant, topping
34:31
Speaker 1: the trunk for orders that were already paid for with
34:34
Speaker 1: a credit card, confirming through the window a closed window
34:38
Speaker 1: as the who that customer is with customer that was
34:43
Speaker 1: picking up UH, and then the someone from the restaurant
34:47
Speaker 1: just putting the food in the trunk of the car
34:49
Speaker 1: and the car driving off. Talking about social distancing and
34:53
Speaker 1: restaurants are a place, it's New York City's golf course.
34:56
Speaker 1: It's where we do businesses, where we celebrate, it's where
34:59
Speaker 1: we spend time together. Um. But at the same time,
35:03
Speaker 1: six of New York City residents got their meals from
35:08
Speaker 1: outside of the home. So when you close that down,
35:12
Speaker 1: when you're closing a major part of not just food
35:16
Speaker 1: supply but culture, and you know, how will that culture
35:20
Speaker 1: change in the future. And UM, I certainly hope we
35:23
Speaker 1: get back more to a personal place where where those
35:29
Speaker 1: meals are unique and meaningful. And I really think it's
35:34
Speaker 1: going to take some time so between now and then
35:37
Speaker 1: the restaurants to survive that percent I was talking about
35:41
Speaker 1: those UH restaurants may not be making money right now,
35:45
Speaker 1: and that's really not what it's about. And no one's
35:47
Speaker 1: doing well right now, but it's certainly feels better to
35:53
Speaker 1: the operational in some capacity so that when it is
35:57
Speaker 1: time to come back online and it is time to
36:00
Speaker 1: get the troops back, that that it'll be that much easier,
36:05
Speaker 1: and that feeling of desperation of being on a couch,
36:10
Speaker 1: um watching more cable pay per view and Netflix, and
36:16
Speaker 1: you ever thought you you more to watch? Um? It
36:20
Speaker 1: just there's so much more of a of a life
36:22
Speaker 1: in feeling that. Um. You know, Yes, it's a virus,
36:26
Speaker 1: it's horredness, it's taking lives, but you know what, it's
36:29
Speaker 1: not gonna take my life. It's not gonna take all
36:32
Speaker 1: of our lives. And we need to fight it by living.
36:37
Speaker 1: We need decided by succeeding. That's a great philosophy path.
36:40
Speaker 1: When you say, of your client base, which tends to
36:45
Speaker 1: be middle to high end restaurants, how many are still
36:50
Speaker 1: operating today and doing either curbside or take out um
36:55
Speaker 1: service in New York and and in any of the
36:58
Speaker 1: other boroughs, Well that's I put that number at about
37:02
Speaker 1: fift are still closed from the day that the restaurants
37:07
Speaker 1: were asked to clothes. And that's really scary. That's not
37:11
Speaker 1: just fifty percent of my business. That's not just fifty
37:14
Speaker 1: percent of my receivables. Um, you know, that's fifty of
37:18
Speaker 1: our lives. We've built our lives around supplying restaurants. Um
37:22
Speaker 1: and and I'll tell you that. You know, we had
37:25
Speaker 1: to pivot ourselves and we had to change that our
37:29
Speaker 1: business model. But but and we were already diversified into
37:32
Speaker 1: supply retailers and and and you know our own home
37:36
Speaker 1: delivery service. But we really ramped up our production. Our
37:41
Speaker 1: production has been running six days a week, twelve hours
37:45
Speaker 1: a day. We have not taken a day off from
37:47
Speaker 1: this for during this entire pandemic. Because we are an
37:51
Speaker 1: essential part of the food chain. We were essential personnel.
37:56
Speaker 1: So we've been in the fight from the beginning. And
37:59
Speaker 1: and quite frank we like it that way. Um. We
38:02
Speaker 1: would want to be forced not to be able to
38:04
Speaker 1: come to work. Pat, I notice on your website that
38:07
Speaker 1: you are now delivering directly to consumers. Tell us about that.
38:13
Speaker 1: It's a sector that was always about one or two
38:18
Speaker 1: percent of our annual sales and now we'll probably account
38:22
Speaker 1: for about fifteen or um. And and it is really
38:27
Speaker 1: the access. What we saw in the first few weeks
38:30
Speaker 1: of the pandemic when it was actually called such, is
38:36
Speaker 1: that the run on supermarkets was extreme. And what what
38:42
Speaker 1: none of us want as Americans is panic. I think
38:46
Speaker 1: we can all agree upon that we don't want unnecessary panic.
38:50
Speaker 1: So when you when you don't own a meat company
38:52
Speaker 1: or a food company, and you know you're online for
38:55
Speaker 1: five hours in a supermarket to find out that they
38:58
Speaker 1: have nothing on the shelves that will cause panic, and
39:01
Speaker 1: and and the virus cannot break this country, cannot break
39:05
Speaker 1: our cities. So you cannot break these states. It cannot
39:08
Speaker 1: do it, but panic can. And that's what we felt.
39:13
Speaker 1: We made a statement to ourselves, among our family and
39:18
Speaker 1: among our teams, we need to start to think of
39:22
Speaker 1: how to alleviate this panic. How we are abridge the
39:25
Speaker 1: food between between food and people and we need to
39:30
Speaker 1: get me to people. And we are not going to
39:35
Speaker 1: um tolerate in anyone that we work with. So and
39:39
Speaker 1: I'll explain how we got others involved to help the
39:43
Speaker 1: distribute products. They will not tolerate a price guage by
39:47
Speaker 1: a penny. It's just it's not gonna happen. It's not
39:50
Speaker 1: who we are. This is really to stop panic. And
39:54
Speaker 1: I mean our lives are abridging food with people. And
39:59
Speaker 1: if we will eat with we're able to do that
40:01
Speaker 1: during this then we would have saved so many more
40:06
Speaker 1: um maybe not lives, we maybe lives. I mean, just
40:11
Speaker 1: we've got a lot of that feedback. I mean, we
40:12
Speaker 1: don't like to accept that, but we just save so
40:15
Speaker 1: much worried by staying. So let me ask you a
40:19
Speaker 1: little bit about the supply chain. How is your business adapting?
40:25
Speaker 1: Where are your what are your suppliers doing when they're
40:29
Speaker 1: making their delivery. How do the logistics work? Is this
40:33
Speaker 1: business as usual or have things really changed radically from
40:38
Speaker 1: the farm too? When you ultimately drop off a package
40:42
Speaker 1: of burgers and steaks to a restaurant or somebody's house, well,
40:48
Speaker 1: I have to say that the meat industry has become
40:51
Speaker 1: uh one of the most efficient systems food systems in
40:56
Speaker 1: the world, and it has not been broke. So they're
41:01
Speaker 1: still people still need to eat with girls if it's
41:05
Speaker 1: coming from a restaurant or a retail market, is just
41:07
Speaker 1: getting delivered to your house or getting curbside delivery. People
41:10
Speaker 1: still need to eat. For most people, they eat meat
41:15
Speaker 1: and and it's one of the staples they their family
41:19
Speaker 1: need to see on on that table. So just making
41:24
Speaker 1: sure that our suppliers and our suppliers from out west
41:29
Speaker 1: have been so I mean, they really still think it's
41:33
Speaker 1: it's it's an East Coast and and like New York
41:36
Speaker 1: Center problem, and I'm trying to explain what's happening here
41:41
Speaker 1: is going to happen there a hundred and any one
41:45
Speaker 1: countries in two months. I guarantee you it hit all
41:48
Speaker 1: fifty states. Um, but maybe they won't see at such
41:52
Speaker 1: a rate that work that we saw it. But we're
41:56
Speaker 1: in constant contact about restaurants and up again food were
42:02
Speaker 1: what they are telling me are about one third of
42:05
Speaker 1: the sales that they used to have. However, if you
42:08
Speaker 1: speak to a restaurant that's partially open compared to a
42:11
Speaker 1: restaurant that's completely closed, you'll hear a big difference in
42:15
Speaker 1: in in their voices. You'll you'll know and feel depression
42:20
Speaker 1: for those that haven't opened at all, and and and
42:23
Speaker 1: and boredom. And you'll hear triumphs in those that are
42:27
Speaker 1: going in every day and you know they're losing money,
42:30
Speaker 1: but but their customers are so happy that that that
42:34
Speaker 1: they've stuck it out and that they're providing food. Um.
42:38
Speaker 1: You know, it's it's it's a very strange time. But
42:42
Speaker 1: you know, as things changed in time and we all
42:47
Speaker 1: need to adapt to to to what's ahead of us.
42:51
Speaker 1: I I truly think if we stick to that abl
42:55
Speaker 1: thirtieth reopening, I really think New York is going to
42:59
Speaker 1: be one of the city that bound us back so
43:01
Speaker 1: quickly that we'll be talking for years as to why
43:05
Speaker 1: it was reported internationally that New York was crumbling. I've
43:11
Speaker 1: gotten bolans letters basically from friends and other countries like,
43:15
Speaker 1: I don't know if you guys have heard, but we're okay.
43:17
Speaker 1: The faster we can get through this, the faster we're
43:20
Speaker 1: going to rebound. Let's just talk a little bit more
43:23
Speaker 1: about how your day to day work life has changed.
43:28
Speaker 1: You're an essential service provider. Are you still going into
43:32
Speaker 1: the shop? Are you still supervising the distribution of meat
43:36
Speaker 1: to restaurants and homes? Yes. That's the one thing about
43:40
Speaker 1: being a part of you know, in essential part to
43:45
Speaker 1: the to the meat supply chain, is that as essential personnel,
43:51
Speaker 1: our schedule never changes, never changed. Through Hurricane Sandy at
43:57
Speaker 1: eleven we were we were very close to the tower.
44:00
Speaker 1: Unfortunately UM to have witnessed them, the tragic, the atrocity,
44:07
Speaker 1: UM and we will only close for one day then,
44:09
Speaker 1: so this we well, we haven't closed at all. And
44:14
Speaker 1: actually because of our pivot to to help retailers restop
44:19
Speaker 1: their shelves, and that being a more labor intensive process.
44:22
Speaker 1: My product production team has been working at full capacity
44:27
Speaker 1: ever since this begin Wow. So in my freezer, I
44:32
Speaker 1: have a couple of Australian racks of lamb that are
44:37
Speaker 1: shrink wrapped from La fred to meat distribution. Uh, how
44:42
Speaker 1: are you selling product directly to households? Is everything show
44:46
Speaker 1: up shrink wrapped or is it like going to a
44:49
Speaker 1: local butcher. Everything gets delivered vacuumed. But it's it's it's
44:55
Speaker 1: vacuumed fresh. It's never been frozen. So our product, it's
45:00
Speaker 1: just the way our culture as butchers has always been
45:04
Speaker 1: from my grandfather to my dad to me. UM meets
45:08
Speaker 1: always better fresh. So when we vacuum product where you're
45:13
Speaker 1: actually able to you make the decision if you'd like
45:16
Speaker 1: to freeze your product or run ahead and freezes it
45:18
Speaker 1: will be good for over a year. Um, if you don't,
45:22
Speaker 1: your product would be good in the refrigerator for about
45:25
Speaker 1: twenty one days. So you really have meat as fresh
45:30
Speaker 1: as as a restaurant. We would get it as fresh
45:33
Speaker 1: as a butcher's shop to getting Hey, Pat, tell us
45:35
Speaker 1: a little bit about how you're getting these products directly
45:39
Speaker 1: to consumers. So our product is shipped fresh and it's
45:43
Speaker 1: got ice gel packs in the in the boxes. In
45:47
Speaker 1: the boxes are insulated themselves, so although we ship overnight,
45:53
Speaker 1: that box is good in the temperatory. I think we've
45:56
Speaker 1: tested it up to five days without without having the
46:01
Speaker 1: temperature being compromised. But um, we we do all the
46:07
Speaker 1: fulfillment here and we work all night long. So um,
46:10
Speaker 1: after the virus of chaos, yes, our home delivery business
46:16
Speaker 1: has really shot up. However, um, you know, so has
46:22
Speaker 1: all reacha oil. So whereas most of our business, of
46:27
Speaker 1: our business with supplying restaurants right now, about of our
46:33
Speaker 1: business is supplying retailers to include Amazon, to include shop
46:38
Speaker 1: right Fresh direct, UM in Italy and and and just
46:45
Speaker 1: trying to help resupply the retailers so that we could
46:50
Speaker 1: avoid panic in the city and panic in the try state.
46:53
Speaker 1: We just don't want it to happen because there's no
46:55
Speaker 1: reason for it. The food supply chain has not been broken,
47:01
Speaker 1: and I'm I'm proof of it right here. Like I
47:04
Speaker 1: just said, we have not closed one day. We've been
47:06
Speaker 1: in production every day. I'm in constant contact with my
47:10
Speaker 1: growers out west and the harvesting facilities again out west.
47:17
Speaker 1: You know, everyone is in in in food supply has
47:22
Speaker 1: really been has come together like you see in all
47:25
Speaker 1: the parts of in other industries in our country. Really
47:30
Speaker 1: when when it needs to get together and binding together,
47:33
Speaker 1: it does. So let's talk a little bit about everybody's
47:36
Speaker 1: favorite barbecue item, the hamburger. You have been credited with
47:42
Speaker 1: stoking a giant burger boom in New York City prior
47:47
Speaker 1: to this whole current situation that's taking place. How much
47:52
Speaker 1: of that is hyperbole and how much of that is
47:54
Speaker 1: is true? How responsible are you for all of these
47:59
Speaker 1: lovely high hamburgers at all of our favorite restaurants in Manhattan? Uh?
48:06
Speaker 1: And gildous charged? And you know, uh, I'll tell you
48:12
Speaker 1: that that before we began making blends specifically for restaurants,
48:21
Speaker 1: specifically for the cooking equipment that those restaurants had in them,
48:26
Speaker 1: and specifically for the play buds of the chiefs in
48:29
Speaker 1: those restaurants, really shop beef or ground beef was sold
48:37
Speaker 1: in burger form or in bulk by its fat percentage.
48:42
Speaker 1: So you saw, we never really used those numbers. Those
48:49
Speaker 1: numbers are really in order to calculate those numbers if
48:52
Speaker 1: you didn't send that product to a lab. What you're
48:55
Speaker 1: doing is taking imported trimmings and um that that are
49:01
Speaker 1: tested for it's how lean they are, and then adding
49:05
Speaker 1: it with some domestic trimmings and maybe some mechanically bone beef,
49:10
Speaker 1: making the burger that we've all seen more gray and
49:13
Speaker 1: flavorless than it is a real steak experience. So my
49:19
Speaker 1: grandfather always said, you cannot hide your sins in the
49:23
Speaker 1: chopping machine. So what you put in there is what
49:26
Speaker 1: you're gonna get out of there. And and what he
49:29
Speaker 1: meant was when you use hole muscle only, so full
49:32
Speaker 1: hole cuts of beef, when you're using a whole chuck,
49:36
Speaker 1: and when you're using the clod which has the flat
49:38
Speaker 1: iron attached, which has many many retail cuts in there,
49:44
Speaker 1: you're gonna You're gonna get the flavors of ribbi, You're
49:47
Speaker 1: gonna get the flavors of New York strip um. And
49:51
Speaker 1: a big part of our recipe is to use whole briskets.
49:55
Speaker 1: Briskets have a buttery flavor um from that fat layer
50:00
Speaker 1: that separates the two muscle groups in a brisket. The
50:03
Speaker 1: brisket holds up thirty of the weight of an animal.
50:06
Speaker 1: So it's a it's a real tough, slow cooked, slow
50:11
Speaker 1: cooked type of beef. However, when you chop it, it
50:16
Speaker 1: has great flavor and it really holds back a little
50:19
Speaker 1: bit and give us the burger some fight so that
50:22
Speaker 1: you don't have a mushy, gray cafeteria burger that we
50:26
Speaker 1: had back in high school. And it says the very special.
50:32
Speaker 1: And actually how this started, Um, my grandfather always made
50:38
Speaker 1: great burger meat. And although we didn't sell to some
50:42
Speaker 1: of the really fancy restaurants like Les Banasa, to the
50:47
Speaker 1: Chef Delivier, yet during grilling season they stopped by our
50:53
Speaker 1: place for their burger meat to grill for burgers because
50:58
Speaker 1: my grandfather had such a great reputation for for that
51:02
Speaker 1: and that that really carried through so all of the disciples,
51:08
Speaker 1: So all of the chefs that spawned from from that group,
51:13
Speaker 1: when they move on to other restaurants, they know, um
51:16
Speaker 1: and they know where to get. They wanted the best caviat,
51:20
Speaker 1: if they wanted the best burger, then they know where
51:22
Speaker 1: to go. Let's talk about something that's a little bit blasphemous,
51:26
Speaker 1: and that is the black label burger. How did you
51:30
Speaker 1: ever decide to say, I know let's take the most
51:34
Speaker 1: expensive cut of dry aged meat in our refrigerators, and
51:39
Speaker 1: what the heck, let's just grind it up into hamburgers.
51:42
Speaker 1: A lot of people thought that was just blasphemous. Yes,
51:48
Speaker 1: And you know, as as I experimented with different blends
51:52
Speaker 1: for different restaurants according to what they wanted. I had
51:55
Speaker 1: met with a chef that was going to open a
51:59
Speaker 1: restaurant in six months and wanted something very different. And
52:04
Speaker 1: now have to remember, we were on the cusp of
52:06
Speaker 1: the financial bubble like it bursts them, so in the
52:13
Speaker 1: planning stages of you know, I guess you could say
52:16
Speaker 1: that the financial crash happened during the planning stage of
52:22
Speaker 1: this chef trying to find something special, and I just
52:25
Speaker 1: so happened to have been working run because of my
52:28
Speaker 1: love of dry aged beef, a portion of the burger
52:32
Speaker 1: having dry aged beef in it. I thought I would
52:37
Speaker 1: give a dry aged steak experience with you, not as
52:42
Speaker 1: expensive as a steak, but not as inexpensive as a burger.
52:48
Speaker 1: I was trying to reach somewhere in between, but I
52:50
Speaker 1: still have that great dry age flavor. So that restaurant
52:56
Speaker 1: wound up to be Minetta Tavern, and the chef riad
53:01
Speaker 1: had asked me for an agreement that we would not
53:05
Speaker 1: fell black label did that specific drage blend to anybody else,
53:10
Speaker 1: And we shook hands on it. And he is no
53:13
Speaker 1: longer adminant at tavern, but we still hold our problems.
53:17
Speaker 1: We've never given that blend to anyone else. What was
53:20
Speaker 1: the pushback like to a dollar hamburger in two thousand, Well,
53:29
Speaker 1: so when the restaurant opened the eight the crash had happened,
53:35
Speaker 1: so ownership and the chefs were really considering not not
53:41
Speaker 1: putting it on the menu. Black label almost did not
53:44
Speaker 1: exist because they thought the twenty six dollar hamburger as
53:48
Speaker 1: opposed to the sixteen dollar hamburger, which was a great burger.
53:53
Speaker 1: Also it's a short rim blend. Um. But they figured, okay,
53:57
Speaker 1: let's do it, and they got a little bit. There
54:00
Speaker 1: was a writer or two that that brought it to
54:03
Speaker 1: everyone's attention that you know, during these times, why is
54:06
Speaker 1: there a twenty six dollar hamburger from the menu. Yet
54:09
Speaker 1: they didn't complain about the coat the boof so a
54:14
Speaker 1: dry aged rib steak was ninety dollars, but the burger
54:18
Speaker 1: was twenty seven. After one year, Um, I remember, um,
54:26
Speaker 1: the chef colony and asking me, Pat, do you know
54:29
Speaker 1: how many black label burgers we sold in year one?
54:33
Speaker 1: I said, yes, sixteen thousand, five hundreds. Like, but how
54:35
Speaker 1: would you know that I saw you the beefy they
54:40
Speaker 1: ate iceburger. I know exactly how many ab because of
54:43
Speaker 1: trace ability we track you know, every pound um for
54:47
Speaker 1: our USBA guidelines in their own personal trace ability and
54:53
Speaker 1: of the less expensive short rib burger UM eight thousands,
54:59
Speaker 1: so slightly less than half of the twenty dollar burgers
55:04
Speaker 1: dollar burger is is three hundred a week. Is is
55:07
Speaker 1: back in the envelope calculations. That's a lot of burgers,
55:11
Speaker 1: a lot of burgers, especially a steak house. So so
55:16
Speaker 1: let's talk about some steakhouses, and I want to ask
55:19
Speaker 1: you about two specific ones that you're involved with. Tell
55:23
Speaker 1: us a little bit about the chop House at City
55:27
Speaker 1: Field where the New York Mets play. Well. I had
55:32
Speaker 1: become friends with, you know, the ownership of the Mets.
55:36
Speaker 1: There were big fans of Hours, as we were of theirs.
55:39
Speaker 1: And one day they asked me and they said, Pat,
55:43
Speaker 1: you know there's one thing that our ballpark does not have,
55:46
Speaker 1: and that's a steak sandwich. They had asked me if
55:50
Speaker 1: if it's something that we would consider if we had
55:53
Speaker 1: a steak sandwich in our family, and we did it
55:57
Speaker 1: had skirted steak, we had we had changed that because, um,
56:01
Speaker 1: you know, scool of steak is my favorite cut of beef.
56:04
Speaker 1: But it's just too um, I don't want to say tough.
56:07
Speaker 1: It's it's not tender enough for a sandwich in a ballpark.
56:11
Speaker 1: People would be ripping the lay at it because they
56:13
Speaker 1: don't know what the attributes of the scoop steaks. So um.
56:20
Speaker 1: They asked me to come cook our steak sandwich and
56:25
Speaker 1: I didn't think that I would be cooking it. I
56:28
Speaker 1: thought like the chefs and they would be cooking it
56:31
Speaker 1: and amount of three D and they loved it, and
56:35
Speaker 1: they act. They told me that the season would be
56:37
Speaker 1: starting in twelve days, and did I'd be operational in
56:43
Speaker 1: two locations in twelve days. And I'm not one to
56:47
Speaker 1: say no, I did. And they're still told today big
56:52
Speaker 1: Hits and and at the ballpark that if you haven't
56:56
Speaker 1: been there, to anyone listening, um, it's a ball parking
57:00
Speaker 1: in which there's no better food in any other large
57:04
Speaker 1: format capacity than city field. It's a giant upgrade. It's
57:12
Speaker 1: a giant upgrade from Chase Stadium, to say the least.
57:15
Speaker 1: But since you mentioned ballpark, I have to bring up MSG.
57:20
Speaker 1: You sell Patla Freda steak sandwiches at the Home of
57:24
Speaker 1: the Knicks. In fact, it's really the only reason to
57:26
Speaker 1: go to the garden these days. What what gave you
57:30
Speaker 1: the idea of saying, Hey, here's a venue where we
57:33
Speaker 1: can reach out to the public with a really high
57:37
Speaker 1: quality food experience at a place that usually sells not
57:42
Speaker 1: necessarily the greatest food. Yes, but unfortunately that building is
57:51
Speaker 1: under major renovation to the tone of one billion dollars,
57:58
Speaker 1: so our footprint the gardens will will be suspended until
58:05
Speaker 1: that construction is finished. What we did open, though, was
58:10
Speaker 1: in in the time Out building in Dumbo, which was
58:14
Speaker 1: a great food hall, un though it was closed recently,
58:17
Speaker 1: but we'll reopen when all the restaurants reopened. Is the
58:21
Speaker 1: same concept on the first floor on the fifth floor
58:26
Speaker 1: UM with an additional concept of the first floor. So
58:29
Speaker 1: we have three locations and one food hall that has
58:31
Speaker 1: twenty three concepts. We're the only concept that has more
58:39
Speaker 1: than than one under one roof uh and the most successful,
58:46
Speaker 1: So we're really proud of that, and it's amazing. As
58:49
Speaker 1: a kid, I'm born and raised in Brooklyn, and as
58:52
Speaker 1: a kid, I wasn't leaning allowed in that in those areas.
58:56
Speaker 1: And to see how it's changed in the amount of
58:59
Speaker 1: tour as people that you just you can't even drive
59:03
Speaker 1: them the streets down there on the cobblestone. I mean,
59:06
Speaker 1: it's just littered with with with tourists in a very
59:12
Speaker 1: good way. I don't know how tourists know to go there,
59:17
Speaker 1: but they have found a beautiful place that overlooks New
59:20
Speaker 1: York City at the base of the Brooklyn Bridge in
59:23
Speaker 1: the Manhattan Bridge, and right there overlooking the water is
59:29
Speaker 1: a gorgeous food hall called Time Out. And we really
59:31
Speaker 1: can't wait until we get back. We really can't wait
59:34
Speaker 1: till we get timing, I should say, uh. And and
59:39
Speaker 1: that's those are epic views over there from from the
59:42
Speaker 1: esplanade looking at the skyline of Manhattan. We we keep
59:46
Speaker 1: hearing that there's gonna be another round of stimulus coming
59:50
Speaker 1: out of Washington, d C. If congressional leaders called you
59:54
Speaker 1: and said, Pat, we're trying to figure out what we
59:57
Speaker 1: need to do for restaurants across the country, what sort
1:00:01
Speaker 1: of advice would you give them to help ensure the
1:00:05
Speaker 1: restaurant industry recovers when all this is behind us. That
1:00:10
Speaker 1: that really is a great question because even with this
1:00:14
Speaker 1: current loan that that they are, you know, they're all
1:00:18
Speaker 1: able to access this SPD loan. But what's the one
1:00:22
Speaker 1: thing that they can't do with it? They can't pay
1:00:24
Speaker 1: their mean prevyor they can't pay their product purveyor fish
1:00:30
Speaker 1: prevyor so, you know, not being able to pay bills.
1:00:35
Speaker 1: You see, the whole the whole system has to work
1:00:39
Speaker 1: from from the restaurant suppliers all the way through you know,
1:00:42
Speaker 1: the finished dish. But but let's just think of the
1:00:46
Speaker 1: restaurants for now. They're they're devastated, they don't know what
1:00:50
Speaker 1: to do. So when has any restaurant, you know, as
1:00:58
Speaker 1: a whole when when when has the country ever had
1:01:01
Speaker 1: forced restaurants to close? Never? Not, not in the history
1:01:05
Speaker 1: that we know of. I don't even believe it. In
1:01:08
Speaker 1: nineteen during the Spanish flu did they close all restaurants? Um,
1:01:14
Speaker 1: So it's it's a different difficult question. And I want
1:01:17
Speaker 1: to help the restaurants more than anyone, but where does
1:01:21
Speaker 1: it And then, because there are many industries that I
1:01:24
Speaker 1: don't know an industry that has been profitable during this
1:01:29
Speaker 1: time either. So um, it's again, I want to help restaurants.
1:01:36
Speaker 1: I know that the administration has met with some very
1:01:40
Speaker 1: um well known and celebrity chefs to get their input
1:01:46
Speaker 1: on how to help restaurants. But restaurants are in a
1:01:50
Speaker 1: lot of trouble. And I think that the biggest part
1:01:53
Speaker 1: of the Simbulist bill that helped restaurants in general was
1:01:57
Speaker 1: to help their employees get unemployment. To me, that was
1:02:02
Speaker 1: the most important part because again bell behole and now
1:02:07
Speaker 1: a small business owner is left with a huge chunk
1:02:12
Speaker 1: of of missing revenue. So yet they have read, yet
1:02:17
Speaker 1: they have expenses, Yet they have They've had no no
1:02:22
Speaker 1: incoming money for weeks and and and as opposed to
1:02:30
Speaker 1: what the general public things, restaurants don't make large profits
1:02:35
Speaker 1: at all if all. So it's a really tough question.
1:02:41
Speaker 1: At the same time, I'm a realist. This money was
1:02:45
Speaker 1: not just sitting somewhere in the back shelf. Get ready
1:02:50
Speaker 1: for a stimulus. We're borrowing this money from foreign countries
1:02:54
Speaker 1: and and we're gonna have to pay back as a
1:02:59
Speaker 1: country at some point. Also, so there's got to be
1:03:02
Speaker 1: some balance in there. I originally the stimulus was a
1:03:07
Speaker 1: billion a trillion dollars, then it went to two trillion
1:03:10
Speaker 1: with the idea that we may need more. Um. I
1:03:14
Speaker 1: think the idea of asking for non business related things
1:03:19
Speaker 1: during that time by by certain political leaders was just atrocious. Really,
1:03:27
Speaker 1: we need to learn about the businesses and to help restaurants,
1:03:31
Speaker 1: the administration would really have to have more of these
1:03:35
Speaker 1: small business loans that they could loan restaurants. I wouldn't
1:03:40
Speaker 1: say completely forgivable. I think that when restaurants built back,
1:03:43
Speaker 1: like any other industry, they would have to pay back
1:03:47
Speaker 1: these loans. And if they know, the interest rates right
1:03:51
Speaker 1: now are at all time lows the federal funds rates
1:03:53
Speaker 1: and all time loan so if they could have longer
1:03:58
Speaker 1: term loans, so these loans are two year loans, well,
1:04:02
Speaker 1: why not extend that for restaurants. If we're gonna kick
1:04:05
Speaker 1: a sector that really needs help, let's loan the restaurant
1:04:09
Speaker 1: money so that they could get back on their feet
1:04:12
Speaker 1: with a small interest rate and they pay that loan
1:04:16
Speaker 1: over a ken year period. I think that would be
1:04:18
Speaker 1: a great way to help restaurants, and that's what this
1:04:23
Speaker 1: thing was started. That ways but then it went to
1:04:25
Speaker 1: two years. It's not with forgiveness. I I say no forgiveness.
1:04:31
Speaker 1: I think that the restaurants will even happy to have
1:04:33
Speaker 1: a low interest loan for a longer period of time,
1:04:36
Speaker 1: and that would really make them sound Thanks Pat. We've
1:04:39
Speaker 1: been speaking to Pat Lafreda of La Freda Meat Purveyors
1:04:42
Speaker 1: on how restaurants and the food chain is actually being
1:04:46
Speaker 1: impacted by the coronavirus. If you enjoy this conversation, well,
1:04:51
Speaker 1: be sure and go to your favorite podcast host Apple, iTunes, Stitcher,
1:04:56
Speaker 1: Spotify and you could see any of the previous three
1:04:59
Speaker 1: hundreds such a conversations we've had over the past five
1:05:02
Speaker 1: and a half years. Be sure and check out my
1:05:04
Speaker 1: weekly column on bloomberg dot com slash Opinion. Follow me
1:05:09
Speaker 1: on Twitter at Ritholtz. I'm Barry Riholts. You're listening to
1:05:13
Speaker 1: Masters in Business on Bloomberg Radio.