Latest / Bloomberg Intelligence / China Can Be Pressured on Korea Prior to Crucial Party Congress, Rhodes Says

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China Can Be Pressured on Korea Prior to Crucial Party Congress, Rhodes Says · 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
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  Speaker 1: you and your money, whether you're at the grocery store
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  Speaker 1: or the trading floor. Find the Bloomberg P and L
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  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. All right,
• 0:32
  Speaker 1: the China's Central Bank has ordered online payment groups to
• 0:36
  Speaker 1: operate through a centralized clearinghouse. Now, this could undercut the
• 0:40
  Speaker 1: dominance of companies like and Financial intencent because they didn't
• 0:44
  Speaker 1: have to share that data with competitors. Let's talk about
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  Speaker 1: China and its effects on trade and the political events
• 0:52
  Speaker 1: in Asia with William Roar Rhodes. Bill Rhodes is the
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  Speaker 1: author of a bank or to the World, Leadership Lessons
• 0:59
  Speaker 1: from the front Lines of Global Finance, and he is
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  Speaker 1: the president and chief executive of William R. Rhodes Global Advisors.
• 1:06
  Speaker 1: Bill Bill Rhodes, you know are looking at the subtitle
• 1:09
  Speaker 1: of the book Leadership Lessons from the front Lines of
• 1:12
  Speaker 1: Global Finance. Those leadership lessons and having read the book
• 1:16
  Speaker 1: can be applied not just to the world of finance,
• 1:18
  Speaker 1: but to the world of politics, and they seem to
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  Speaker 1: intersect very clearly right now when it comes to Asia
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  Speaker 1: and the Korean Peninsula. Based on what you know from
• 1:28
  Speaker 1: the leaders of China, what and South Korea, for example,
• 1:32
  Speaker 1: what do you well, what kind of conversations do you
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  Speaker 1: believe that they are currently having. Well, I think the
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  Speaker 1: most important thing right now for Shijian paying the President
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  Speaker 1: of China is the Nineteenth Party Congress, which happens every
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  Speaker 1: five years, which will occur sometime at the end of October,
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  Speaker 1: maybe the beginning of November, but I think October because
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  Speaker 1: that's when he gets the chance to make sure he
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  Speaker 1: gets all his people on the seven member Standing Committee
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  Speaker 1: of the Polar Pier of the Communist Party, because they
• 2:00
  Speaker 1: are the ones are going to take the decisions for
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  Speaker 1: where China goes for the next five years. And he is,
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  Speaker 1: without a doubt, the strongest leader China has had, probably
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  Speaker 1: since Don Joe Pang, and many people think he's got
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  Speaker 1: elements of both Mausetong and Dong Jao peg with him,
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  Speaker 1: and so he's obviously not very happy with what's going
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  Speaker 1: on in Korea because this disturbs sort of the piece
• 2:24
  Speaker 1: and the pace of what's going on for the Party Congress.
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  Speaker 1: He also has a problem with with with his financial
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  Speaker 1: system in the sense of you have a very high
• 2:34
  Speaker 1: UH rate there of death to g g P, which
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  Speaker 1: is two percent and growing up from a hundred and
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  Speaker 1: fifty percent at the time of the Great Recession. Also,
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  Speaker 1: you have shadow banking levels UH almost eighties seven eighty
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  Speaker 1: eight percent of total GDP nine trillion dollars. And now
• 2:54
  Speaker 1: the asset management UH situation is now becoming a problem.
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  Speaker 1: That's almost nine trillion dollars. So what he needs to
• 3:02
  Speaker 1: do is to clean up the financial system, but he
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  Speaker 1: really can't get into that too hard until the Party Congress.
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  Speaker 1: And you already seeing what's going on with Mbang, Fusan,
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  Speaker 1: Dali and Wanda UH, the Highland Island Group and all
• 3:17
  Speaker 1: of those. Because he's the regulators under his instructions are
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  Speaker 1: sorry to say, uh, you know, to the financial sector, Look,
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  Speaker 1: you've got to be more prudent in your lending. But
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  Speaker 1: I see a major crackdown coming. So all of what's
• 3:29
  Speaker 1: going on in Korea is a very bad distraction for
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  Speaker 1: his plans to get through the Party Congress. You mentioned
• 3:35
  Speaker 1: prudent lending, and I'm wondering if it is also a
• 3:38
  Speaker 1: pullback from foreign investments. They want more of the money
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  Speaker 1: to go two projects in China, not based on asset
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  Speaker 1: purchases outside the country. That is why the four companies
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  Speaker 1: I mentioned they're leaning on because in all of those
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  Speaker 1: cases UH, these companies have been doing massive UH purchases
• 4:01
  Speaker 1: outside of China, like the Waldorf A story I could
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  Speaker 1: run through all of these and what that did was
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  Speaker 1: it dropped the reserves of China from four trillion to
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  Speaker 1: where they are today about three trillion, and they had
• 4:13
  Speaker 1: to put on capital controls. So all of this is
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  Speaker 1: leading up to the nineteenth Party Congress, which to me,
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  Speaker 1: other than a black Swan event which could you know,
• 4:21
  Speaker 1: could always happen in with North Korea with Kim Jong Oon,
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  Speaker 1: this is the most important event that's going to take
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  Speaker 1: place in the world, and not many people are focused
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  Speaker 1: on it now. When you get to Korea, I know
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  Speaker 1: President Moon and new President of South Korea. I dealt
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  Speaker 1: with him on the free trade Agreement when I was
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  Speaker 1: leading the private sector for those negotiations because he was
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  Speaker 1: chief of staff to to President No at the time.
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  Speaker 1: He is very much to the left. He has been
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  Speaker 1: a great one on reconcign with North Korea, and he's
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  Speaker 1: been caught in a difficult situation because North Korea don't
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  Speaker 1: want to reconcile, and so he's been fighting the the
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  Speaker 1: establishment and usage of the fad SOL. But I think
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  Speaker 1: he's going to have to back off now because I
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  Speaker 1: think what you're gonna need to resolve this question is
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  Speaker 1: less bombastic UH statements from the part of the United
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  Speaker 1: States and action. What is action. We really need to
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  Speaker 1: enforce thee sanctions which have not been done in the past.
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  Speaker 1: Particularly we ought to get into oil because we caught
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  Speaker 1: off his oil supplies. He's going to be in deep trouble. UH.
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  Speaker 1: So we've had a lot of talk over the last
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  Speaker 1: twenty years, starting with the Clinton administration, Bush Obama, and
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  Speaker 1: all they've done is talked, and they've allowed Kim Jong
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  Speaker 1: il first and then Kim Jong un there now to
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  Speaker 1: build missiles that could strike, if not Guam, uh, somewhere
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  Speaker 1: pretty close and probably the West coast of the United States.
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  Speaker 1: And they're getting the technology to miniaturize an atomic warhead.
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  Speaker 1: You know, most of the world players in this uh
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  Speaker 1: current go round of tensions. What do you see as
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  Speaker 1: some of the possible ways through this. Well. First of all,
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  Speaker 1: you've got to understand that Kim Jong says that he
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  Speaker 1: basically is not his father's son, he's his grandfather's son, uh,
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  Speaker 1: and his grandfather, Kim Il sung, was a person who
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  Speaker 1: started the Korean War because he wanted to unify Korea
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  Speaker 1: under communist rule, and that many people think is the
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  Speaker 1: ultimate objective of his grandson. And what he wants as
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  Speaker 1: a starter is u S troops to leave. He wants
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  Speaker 1: South Korea to disarm, and then that opens the way
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  Speaker 1: for him. We have to be very careful that we
• 6:31
  Speaker 1: don't do uh what we have been doing, which is
• 6:34
  Speaker 1: making a lot of tough statements that we don't live
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  Speaker 1: up to with North Korea threatening them, because the Koreans
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  Speaker 1: basically are tough people, and you should be speaking softly
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  Speaker 1: and carrying a big stick. In other words, what we
• 6:49
  Speaker 1: need to be doing is to make sure that we
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  Speaker 1: put these sanctions on and we live up to him.
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  Speaker 1: And if the Chinese don't want to follow us, and
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  Speaker 1: companies in China deal with him on petroleum, coal and
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  Speaker 1: other things, we should put secondary sanctions on the Chinese
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  Speaker 1: companies to show the Chinese that we're serious because as
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  Speaker 1: I said, uh, the president of China, U shi Jin
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  Speaker 1: Pink wants no problems until this party congress in a
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  Speaker 1: few months. So I think we have to really show
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  Speaker 1: that we can live up to what we're saying. Uh.
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  Speaker 1: And if we don't do that, uh, Kim Jong n
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  Speaker 1: is not going to take us seriously. At the same time,
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  Speaker 1: the president of South Korea, who, as I mentioned, I know,
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  Speaker 1: president who has got to tell the North that he's
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  Speaker 1: serious about installing the fat missiles, if necessary, more batteries
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  Speaker 1: than we have, and that he is not going to,
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  Speaker 1: you know, back down on this, and then we have
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  Speaker 1: to be steady on Now. I've read three statements that
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  Speaker 1: have come out from the administration in the last forty
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  Speaker 1: eight hours, one by the two by the president actually,
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  Speaker 1: one by our Secretary of State to listen, and one
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  Speaker 1: by the Secretary of Defense matters, and the only one
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  Speaker 1: that makes sense. He sense to me, that's not an
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  Speaker 1: idle threat or that we don't worry, there's no problem,
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  Speaker 1: which is what Tillerson said. The present made all of
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  Speaker 1: these threats and stuff maddess. Basically, I think was the sanest,
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  Speaker 1: uh best statement, which is saying, be careful what you
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  Speaker 1: do because remember who you're up against and just left
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  Speaker 1: it at that, UH, And that is the attitude we
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  Speaker 1: should have. And we should make sure that UH, we're
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  Speaker 1: serious about anything we say we're gonna do if we
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  Speaker 1: make it tough enough for uh Kim Jong un in
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  Speaker 1: the sense of butter, because remember we're talking about guns
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  Speaker 1: and butter here, and so far he has not had
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  Speaker 1: a problem with the sanctions on his economy, so when
• 8:48
  Speaker 1: we talk about putting sanctions on, they're not implemented. So
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  Speaker 1: unless he takes us seriously, I think we're gonna see
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  Speaker 1: more of the same. And I wouldn't be surprised if
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  Speaker 1: he does try and send some missile just to demonstrate
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  Speaker 1: us in the waters around Guam, unless he really thinks
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  Speaker 1: we're serious. So I think this is a major problem.
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  Speaker 1: We have to coordinate with our allies with Japan, South Korea,
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  Speaker 1: and our major allies with NATO, UH, and then we
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  Speaker 1: have to sit with the Chinese and tell the Chinese, look,
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  Speaker 1: if you don't support us on these sanctions, and you
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  Speaker 1: don't support us because they're they're the biggest single supporter
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  Speaker 1: that that the North Koreans have on him backing down,
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  Speaker 1: then we're gonna put secondary sanctions on you. And let
• 9:29
  Speaker 1: me tell you, the President China wants no problems before
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  Speaker 1: this party Congress. So I think we would find that
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  Speaker 1: if that, if the Chinese sinc we're serious, uh, they
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  Speaker 1: will try and help us more than now. They basically
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  Speaker 1: look at us as a paper tiger. We allowed the
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  Speaker 1: South China Sea to go to them. Remember all the
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  Speaker 1: threats under the Obama administration. We're not going to allow
• 9:49
  Speaker 1: the South China See to be dominated by China. We
• 9:51
  Speaker 1: allowed them to to to build all these artificial islands.
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  Speaker 1: And now it's basically a done deal. And so if
• 9:58
  Speaker 1: we are not for in what we say, then we
• 10:01
  Speaker 1: shouldn't say it. And that's the only way to deal
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  Speaker 1: with people like Kim Jong un and others of his
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  Speaker 1: ilk As far as a president of China, Jijing Ping,
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  Speaker 1: and you are a veteran banker, if you were going
• 10:15
  Speaker 1: to meet with the President of China and say, look,
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  Speaker 1: you seem to brook no opposition when it comes for
• 10:23
  Speaker 1: what goes on in China. Why do you seem to
• 10:27
  Speaker 1: allow this to happen in North Korea? What value does
• 10:31
  Speaker 1: it have for you when your focus is on your
• 10:34
  Speaker 1: financial system and on your economy. Very good question, Pim,
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  Speaker 1: And I think the reason is that you have to
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  Speaker 1: go back to the to the Korean War. When McArthur
• 10:44
  Speaker 1: initially said he was going to you know, uh reconquer
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  Speaker 1: South Korea across the thirty eighth parallel. Yeah, when he
• 10:51
  Speaker 1: when he decided not only across the thirty eighth parallel
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  Speaker 1: of McArthur, but to go right up to the Yellow.
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  Speaker 1: Then the Chinese said they couldn't brook you know, American
• 10:59
  Speaker 1: in fluence uh, you know, on the Yellow. So he
• 11:02
  Speaker 1: came in massively with millions of troops, uh, and there
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  Speaker 1: that became the most dangerous part of the Korean War.
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  Speaker 1: So they do not want to see American influence on
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  Speaker 1: the Yellow. That's number one. Number two, they're concerned that
• 11:15
  Speaker 1: you could have massive you know, illegal immigration with immigration,
• 11:19
  Speaker 1: you know, with the North Korean's fleeing population. I think
• 11:24
  Speaker 1: about million in North Korea and about fifty million, one
• 11:27
  Speaker 1: million in South exactly, and these people in North Korea
• 11:29
  Speaker 1: would all go over there at the same time. Though,
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  Speaker 1: they do not want a disturbance because of this Party Congress.
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  Speaker 1: So I think we've got to let the Chinese know
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  Speaker 1: that we're very serious on these sanctions, and they have
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  Speaker 1: the ability, although they say they don't because it's suesome
• 11:47
  Speaker 1: to say they don't, they have the ability to put
• 11:50
  Speaker 1: a stop to this if they want it, because they
• 11:52
  Speaker 1: can cut off all the oil supplies, they can stop
• 11:55
  Speaker 1: buying things from North Korea, and then you won't have
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  Speaker 1: the butter end of the guns and butter it. And
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  Speaker 1: I think that uh, if our present is deliberate in
• 12:06
  Speaker 1: what he says and follows up, then I think the
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  Speaker 1: Chinese will be more willing to help us stop this guy.
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  Speaker 1: Thank you very much, Bill Rhodes. He is the author
• 12:16
  Speaker 1: of Banker to the World, Leadership Lessons from the front
• 12:19
  Speaker 1: Lines of Global Finance, and the President chief executive of
• 12:22
  Speaker 1: William R. Rhodes Global Advisors. Well, let's say you're attempting
• 12:38
  Speaker 1: to purchase a new home and you need to have
• 12:40
  Speaker 1: a roof inspection, such as one that my colleague Greg
• 12:44
  Speaker 1: Jarrett is planning for Friday. Imagine if instead of having
• 12:47
  Speaker 1: an expector come out, you actually just saw and met
• 12:51
  Speaker 1: a drone that would do all the work and send
• 12:53
  Speaker 1: the data back and take care of everything for less
• 12:56
  Speaker 1: money and in less time. How would that happen, Well,
• 12:58
  Speaker 1: you probably would call George Matthew. He is the chief
• 13:01
  Speaker 1: executive and the chairman of CASPRI. They are based in
• 13:05
  Speaker 1: Menlo Park, California, and Kespri is a industrial drone maker. George,
• 13:09
  Speaker 1: thank you very much for being with us. M thanks
• 13:12
  Speaker 1: so much for having me appreciate it all right, I
• 13:14
  Speaker 1: just want to set up the whole thing with the
• 13:16
  Speaker 1: topic saying that Goldman Sacks forecasts that the market for
• 13:19
  Speaker 1: drones is going to reach about a hundred billion dollars
• 13:22
  Speaker 1: by twenty twenty. Uh where would you find Kespri in
• 13:27
  Speaker 1: that big market? Yeah, when we look at that market,
• 13:30
  Speaker 1: the drones space is continuing to evolve across multiple vectors.
• 13:34
  Speaker 1: I think that Golden Sacks report refers to a few areas,
• 13:37
  Speaker 1: the commercial market, the consumer market, and of course the
• 13:40
  Speaker 1: military market. In that context, we're very focused at CASPRI
• 13:44
  Speaker 1: in the commercial market, specifically on these heavier industrial use
• 13:48
  Speaker 1: cases like being able to fly over a brief and
• 13:50
  Speaker 1: get dimensional measurement as well as understanding of what the
• 13:53
  Speaker 1: extent of hail damage might be on a roof. We
• 13:56
  Speaker 1: do work in the mining aggregate space where we enable
• 13:59
  Speaker 1: the drone to fly overhead to get the measurement of
• 14:02
  Speaker 1: what a stockpile looks like and how much material you
• 14:05
  Speaker 1: might have. We work in the construction arena where we
• 14:08
  Speaker 1: get full topic logical analysis of how much material that
• 14:12
  Speaker 1: you have to move on an earthworks project before a
• 14:14
  Speaker 1: construction effort proceeds. So it's these industrial use cases inside
• 14:18
  Speaker 1: of the commercial aspect of the market temp that we're
• 14:20
  Speaker 1: really focused on a crestwork. George, you mentioned this idea
• 14:23
  Speaker 1: of for example, if there is a hail storm and
• 14:26
  Speaker 1: there is damage to your home and claims adjuster has
• 14:30
  Speaker 1: to come out, tell us about a program that you
• 14:32
  Speaker 1: have now with Farmers Insurance because we're not going to
• 14:35
  Speaker 1: get necessarily a claims adjuster, we're going to get a
• 14:38
  Speaker 1: fleet of drones. Well, when you think about it, those
• 14:41
  Speaker 1: claims adjusters are still going to be coming out to
• 14:44
  Speaker 1: do the assessment of the extent of damage on a home.
• 14:47
  Speaker 1: And when you look at even the relationship with Farmers,
• 14:50
  Speaker 1: the adjuster is still coming to the home. But when
• 14:53
  Speaker 1: you think about what that adjuster is doing, the effort
• 14:56
  Speaker 1: for them to manually climb that roof to be able
• 14:59
  Speaker 1: to take a measurement of how much material you have
• 15:02
  Speaker 1: on the roof the extent of the damage. That's a
• 15:05
  Speaker 1: very laborious and dangerous process. It's actually the third most
• 15:09
  Speaker 1: significant occupationally hazardous job in the country roofs or anyone
• 15:14
  Speaker 1: who has to climb on a roof to do that
• 15:15
  Speaker 1: kind of work. With the assistance of the cast free drone,
• 15:19
  Speaker 1: that same claims adjuster can come on site and be
• 15:23
  Speaker 1: five to six times more productive and way more safer
• 15:27
  Speaker 1: because they can actually cover that roof by the drones
• 15:29
  Speaker 1: flying overhead, not only taking a visual image but creating
• 15:33
  Speaker 1: a full topological model as well as being able to
• 15:36
  Speaker 1: automate the hail detection of what's occurred on as far
• 15:40
  Speaker 1: as damage directly on that roof, and so the workload
• 15:43
  Speaker 1: of that individual becomes way more faster and able to
• 15:46
  Speaker 1: accomplish more than a single day, whereas they go from
• 15:50
  Speaker 1: covering two to three roots per day for as much
• 15:52
  Speaker 1: as ten to fifteen and when there's a heavy hail
• 15:55
  Speaker 1: stricken region. It's about speed and customer experience, and that
• 16:00
  Speaker 1: are Casper is really assisting that claims adjuster to just
• 16:03
  Speaker 1: do their work in a more expeditious fashion. I just
• 16:06
  Speaker 1: want to focus also on another industry group that you
• 16:09
  Speaker 1: have a lot of experience with. This is the mining industry,
• 16:12
  Speaker 1: if you wanted to start a mind or open a
• 16:15
  Speaker 1: mind or do a mind safety check. Uh, you've got
• 16:18
  Speaker 1: examples that this would take hours, if not days, and
• 16:23
  Speaker 1: it would take quite a number of people. Now it's
• 16:25
  Speaker 1: just like one person and a half hour. Well, this
• 16:28
  Speaker 1: is where we started in this business. When we looked
• 16:31
  Speaker 1: at these opportunities for industrial work, it was always about
• 16:34
  Speaker 1: the drone very reliably and consistently collecting data. And we
• 16:39
  Speaker 1: think of that as effectively a full aerial intelligence platform.
• 16:43
  Speaker 1: But the drones is not just working to collect that data.
• 16:45
  Speaker 1: Then we're providing an entire cloud infrastructure and a set
• 16:49
  Speaker 1: of applications to support these industrial use cases. So we
• 16:52
  Speaker 1: exactly right started in the mining aggregate space, where literally
• 16:56
  Speaker 1: now the drone flies overhead of open minds and looks
• 17:00
  Speaker 1: at what the topology of that landscape is, measures the
• 17:03
  Speaker 1: amount of material that might be stockpiled, and gives you
• 17:07
  Speaker 1: a full volumetric assessment of the material that you have
• 17:11
  Speaker 1: on that specific mind location or that aggregate stockpile. And
• 17:15
  Speaker 1: in that regard, In that regard, I was just going
• 17:17
  Speaker 1: to mention that the accuracy of what we're now delivering
• 17:20
  Speaker 1: them is actually now within one percent of forecast variants
• 17:24
  Speaker 1: because you're able to get highly accurate view basically taking
• 17:28
  Speaker 1: the imagery and converting that into a synthesized three dimensional model.
• 17:32
  Speaker 1: I was just gonna add that it's also in the
• 17:34
  Speaker 1: construction industry. I mean it, it would make sense that,
• 17:37
  Speaker 1: you know, if you're trying to figure out how much
• 17:38
  Speaker 1: earth you're going to have to move or do a
• 17:40
  Speaker 1: civil survey or something like that, that the drone, the
• 17:43
  Speaker 1: information and the and the ability to analyze the info
• 17:46
  Speaker 1: that would be useful in that industry as well. Right,
• 17:50
  Speaker 1: that's exactly right. And when you think about the relationship
• 17:52
  Speaker 1: with Kestfrey and John Deere. A few months ago we
• 17:55
  Speaker 1: announced at context BO the exclusive relationship with H. Deer's
• 18:00
  Speaker 1: Forestry and Construction division, it was exactly for this purpose
• 18:04
  Speaker 1: that we can actually drive the John Dear material and
• 18:09
  Speaker 1: excuse me, that the John Deer equipment material into a
• 18:12
  Speaker 1: construction work site, and supporting that equipment could be exactly
• 18:17
  Speaker 1: this drone that in our cases provided by Casprey that
• 18:21
  Speaker 1: would actually get the topological analysis, the accuracy of the
• 18:25
  Speaker 1: survey assessment in place, so that you know where to
• 18:27
  Speaker 1: move the earth, you know what the leveling and grading
• 18:30
  Speaker 1: on that site looks like. And of course, when you
• 18:31
  Speaker 1: think about these earthworks projects, getting that right is probably
• 18:35
  Speaker 1: some of the most important aspect of a construction project
• 18:38
  Speaker 1: because if you don't get it right, that's when buildings
• 18:40
  Speaker 1: lean and kind of fall into the ground and sync
• 18:43
  Speaker 1: where you have all kinds of liability issues. Clint to
• 18:46
  Speaker 1: a construction project coming online. All right, now, I imagine
• 18:50
  Speaker 1: there's no one size fits all to this. But what
• 18:52
  Speaker 1: about cost? What does something like this cost for a project?
• 18:56
  Speaker 1: And is there a subscription or a license for the
• 18:59
  Speaker 1: analytics that come with it. Yeah, this is exactly how
• 19:02
  Speaker 1: we think about it. And the solution that we're providing
• 19:06
  Speaker 1: is not just the drone itself, but the analytics software,
• 19:09
  Speaker 1: the decision making capabilities, the flight insurance that's surrounding the
• 19:13
  Speaker 1: drone all being packaged up. So the packaging is literally
• 19:17
  Speaker 1: in the tens of thousands of dollars per unit, and
• 19:20
  Speaker 1: so we make a very natural experience for our customers
• 19:23
  Speaker 1: to land with initial unit of KEST free drone and
• 19:26
  Speaker 1: then very quickly expands. We have customers now that are
• 19:30
  Speaker 1: literally in the country and the rest of North America
• 19:33
  Speaker 1: have twenty thirty units of KEST Free drones that are
• 19:36
  Speaker 1: very actively working in these industrial work sites. Georgia, last
• 19:40
  Speaker 1: point to you is, uh, you know, I know this
• 19:43
  Speaker 1: is the painful part. But if you were advising people
• 19:46
  Speaker 1: whose jobs were under threat and telling them, look, you
• 19:49
  Speaker 1: better learn about this new drone technology because what you're
• 19:52
  Speaker 1: doing is going to be automated in the next five years.
• 19:55
  Speaker 1: Do you have any estimates as to who or how many. Well,
• 19:58
  Speaker 1: when you think about this opportunity, at least like Casprey,
• 20:02
  Speaker 1: we don't wake up and think about this as a
• 20:05
  Speaker 1: situation where that work is replaced. In fact, in most
• 20:08
  Speaker 1: of the cases where we have worked in the mining
• 20:10
  Speaker 1: aggregate space, when we've worked in the insurance sector, when
• 20:13
  Speaker 1: we work in the construction sector. You notice that I
• 20:15
  Speaker 1: mentioned the productivity of that individual that's actually working. So
• 20:19
  Speaker 1: this is an opportunity that I had to go to
• 20:21
  Speaker 1: the White House a few months back and really spend
• 20:24
  Speaker 1: time with President and the rest of the administration really
• 20:27
  Speaker 1: helping understand what the extent of that labor potential is
• 20:31
  Speaker 1: and what we can actually develop. I gotta we gotta run, George.
• 20:35
  Speaker 1: I'm sorry, but George Matthew, he's the chief executive and
• 20:37
  Speaker 1: the chairman of kespre They're based in Menlo Park, California.
• 20:41
  Speaker 1: Look up in the sky, it's a bird. It's a plane. No,
• 20:44
  Speaker 1: it's a drone. This is Bloomberg. Well, we all know
• 20:59
  Speaker 1: about A B and B and what it's done for
• 21:01
  Speaker 1: the hospitality industry and how it has disrupted the hotel business.
• 21:05
  Speaker 1: Here to help us understand how a similar approach might
• 21:08
  Speaker 1: be working on the yachting and boat industries. Jackie bound
• 21:12
  Speaker 1: Garden the chief executive and co founder of Boat Center. Jackie,
• 21:16
  Speaker 1: thank you very much for being with us. Thank you
• 21:18
  Speaker 1: for having me. Tell us first about what is boats
• 21:22
  Speaker 1: Center and how did you come to found this. Certainly so,
• 21:27
  Speaker 1: Boats that Are is the leading online boat rental community,
• 21:30
  Speaker 1: so you can think of us as an Airbnb for boats.
• 21:33
  Speaker 1: What Boats that Are is is an online platform where
• 21:36
  Speaker 1: we present privately owned vessels with US Coast Guard license
• 21:39
  Speaker 1: captains and incredible on the water experiences. What we're doing
• 21:43
  Speaker 1: is connecting people in the boating industry in a way
• 21:45
  Speaker 1: that's never been done before. What we have is thousands
• 21:48
  Speaker 1: of boats to choose from across key markets in the
• 21:51
  Speaker 1: United States, the Caribbean, and the med So whether you're
• 21:54
  Speaker 1: looking to go cruising on a power yacht, fishing with
• 21:57
  Speaker 1: your buddies, sailing on a Hankley, or celebrating a special
• 22:00
  Speaker 1: day with friends and family. We have incredible and amazing
• 22:03
  Speaker 1: boats and captains to choose from. Jack, Sorry, thank your
• 22:06
  Speaker 1: parton go Ahead. You had asked me as well, how
• 22:09
  Speaker 1: how how did you? Yeah, that's what I wanted to know.
• 22:11
  Speaker 1: How did you get into this? Certainly so there was
• 22:13
  Speaker 1: a very personal story. Actually, Um, some of my happiest
• 22:17
  Speaker 1: memories from childhood were times spent out on the water
• 22:21
  Speaker 1: with my father and my three brothers on the lakes
• 22:23
  Speaker 1: Michigan and Chicago. And I wanted to be able to
• 22:26
  Speaker 1: offer that opportunity to anyone. And in two thousand and twelve,
• 22:31
  Speaker 1: my two brothers, who are boat owners, called me about
• 22:34
  Speaker 1: two weeks apart from one another, complaining that they were
• 22:36
  Speaker 1: going to have to sell their boats because they hadn't
• 22:38
  Speaker 1: used them once in an entire year. And you know
• 22:41
  Speaker 1: their their challenge is not an exception. The average boat
• 22:45
  Speaker 1: owner only uses their boat fourteen days a year. So
• 22:48
  Speaker 1: I suggested, why don't you rent out your boats instead
• 22:50
  Speaker 1: of selling them? And their reaction was, I can't, my
• 22:54
  Speaker 1: insurance doesn't allow it. And they were correct. At the time,
• 22:58
  Speaker 1: recreational vote insurance policies did not allow for rentals or charters.
• 23:02
  Speaker 1: So I spent eight months hitting the global insurance markets
• 23:05
  Speaker 1: and worked with leading maritime underwriters to establish the first
• 23:09
  Speaker 1: of its kind peer to peer marine insurance policy. And
• 23:12
  Speaker 1: that's what launched the peer to peer boating industry back
• 23:14
  Speaker 1: in two thousand fourteen. How did that agreement and relationship
• 23:20
  Speaker 1: with the insurance companies change? Did add costs take away
• 23:23
  Speaker 1: cost What happened as a result of that, Well, it
• 23:27
  Speaker 1: was fundamentally a new policy and approach. The policy itself
• 23:30
  Speaker 1: becomes primary and exclusive only during the rental on boat
• 23:35
  Speaker 1: setter's platform, and it protects the boat, the boat owner,
• 23:39
  Speaker 1: the renter, and captain and crew. So it's the most
• 23:41
  Speaker 1: comprehensive policy im peer to peer in the industry. And
• 23:46
  Speaker 1: what that did was it fundamentally changed the relationship and
• 23:49
  Speaker 1: allowing private owners to be able to allow their boats
• 23:53
  Speaker 1: for rent on a marketplace like ours. And the way
• 23:55
  Speaker 1: it works is when the renter rents, there's a premium
• 23:58
  Speaker 1: associated for each mental to ensure and protect everyone involved
• 24:02
  Speaker 1: at the renter pays and that varies depending on the value,
• 24:05
  Speaker 1: the age and the quality of the vessel. Speak a
• 24:08
  Speaker 1: little bit about the state by state oversight of the
• 24:12
  Speaker 1: voting industry, because I know in Florida, for example, there
• 24:16
  Speaker 1: is an effort in the Florida Senate, I believe, to
• 24:19
  Speaker 1: get a new law pass that allows people to get
• 24:22
  Speaker 1: a discount on their registration for additional safety measures. So
• 24:29
  Speaker 1: you know, in the US, everything is governed by by
• 24:32
  Speaker 1: maritime law, so it's not technically state by state. And
• 24:36
  Speaker 1: unlike vehicles, there isn't a general license that one can have.
• 24:41
  Speaker 1: You can get a U S Coast Guard license, but
• 24:43
  Speaker 1: it's not required to go voting. So there are a
• 24:46
  Speaker 1: lot of initiatives underway through various associations. Vote US, for example,
• 24:51
  Speaker 1: has a non water training course. Various states are trying
• 24:54
  Speaker 1: to provide state safety training, voting safety courses and encouraging
• 24:59
  Speaker 1: it and cases requiring, depending on your age, that someone
• 25:03
  Speaker 1: complete a boat safety course prior to getting out on
• 25:05
  Speaker 1: the water. Tell us about some of the boats. Let's
• 25:09
  Speaker 1: maybe start with the more affordable and tell us about
• 25:12
  Speaker 1: some of the deals, and then give us the luxury version.
• 25:15
  Speaker 1: You've got it. Well, the beauty is, with thousands of
• 25:18
  Speaker 1: boats on the site, we can offer pretty much anything
• 25:21
  Speaker 1: to anyone depending on what they're looking for. Anything from
• 25:24
  Speaker 1: going um, you know, touring the inner coastal and taking
• 25:27
  Speaker 1: out a center console for two hundred and fifty to
• 25:31
  Speaker 1: three hundred for half a day, up to beautiful luxury
• 25:34
  Speaker 1: hundred and thirty foot yachts for five thousand a day.
• 25:38
  Speaker 1: Now you can customize the duration that you want to
• 25:41
  Speaker 1: go out on a boat. So if you want to
• 25:43
  Speaker 1: take it out for half a day or a month,
• 25:45
  Speaker 1: that could be accommodated. And you know, for those of
• 25:48
  Speaker 1: you in New York who are interested, you could take
• 25:50
  Speaker 1: out in ninety seven foot beautiful power yacht for a day,
• 25:54
  Speaker 1: or if you want to sail, we have you know,
• 25:55
  Speaker 1: thirty five ft in gleaves that you can take out.
• 25:58
  Speaker 1: There's a wide variety of inventory, boat size, boat type,
• 26:02
  Speaker 1: and the plus side to our platform is that we
• 26:05
  Speaker 1: also have the largest database of US Coast Guard license
• 26:08
  Speaker 1: captains and making me assigned to any boat, so you
• 26:11
  Speaker 1: don't even have to be an experienced voter to enjoy
• 26:13
  Speaker 1: boats Center. Well, thank you very much, Jackie boun Garten,
• 26:17
  Speaker 1: and I noticed for about for a half day you
• 26:20
  Speaker 1: can take out a nice Hinckley UH thirty five on
• 26:24
  Speaker 1: the on the Hudson River. Thank you very much for
• 26:26
  Speaker 1: being with us. Very interesting. Yes, well, we're gonna talk
• 26:40
  Speaker 1: about Blue Apron, a recent initial public offering, and here
• 26:43
  Speaker 1: to help us is Alex Brinka, our initial public offering
• 26:46
  Speaker 1: reporter for Bloomberg. Alex, see, you get to cover the
• 26:50
  Speaker 1: I p O and then you get to cover the
• 26:52
  Speaker 1: earnings call of let's say, Blue Apron. We'll get to
• 26:54
  Speaker 1: snap in a second. What did we learn from Blue
• 26:56
  Speaker 1: Apron other than the fact that people seem to be
• 26:58
  Speaker 1: on a diet, people are not eating as much. Blue
• 27:01
  Speaker 1: Apron is what it seems. But the main thing that
• 27:04
  Speaker 1: I'm looking at here, it's something that did come up
• 27:07
  Speaker 1: when this company went public a couple of months ago,
• 27:10
  Speaker 1: is looking at customers and looking at how much customers
• 27:14
  Speaker 1: are spending. Revenue per customer, and customers did decline quarter
• 27:20
  Speaker 1: over quarter nine percent, not great and average revenue per
• 27:24
  Speaker 1: customer was two fifty one bucks in the second quarter,
• 27:28
  Speaker 1: and it was two d sixty four dollars in the
• 27:30
  Speaker 1: second quarter, So that's gone down to so not great things.
• 27:35
  Speaker 1: But put in context of Blue Apron, this company went
• 27:38
  Speaker 1: public as losing a lot of money, spending a lot
• 27:42
  Speaker 1: of money on marketing and right now it's not showing
• 27:47
  Speaker 1: that path to profitability. UM. And that's something that was
• 27:50
  Speaker 1: concerning when this company listed and will continue to be
• 27:53
  Speaker 1: concerning and marketing spending to frankly, UH came down, which
• 27:58
  Speaker 1: could be perceived as a good sign, but when you
• 28:00
  Speaker 1: when it coincides with that decline and customers as well,
• 28:03
  Speaker 1: there's this fear then if they if this trend of
• 28:07
  Speaker 1: them having to basically buy customers UH doesn't work if
• 28:11
  Speaker 1: there's no UM you know, if if they if they
• 28:13
  Speaker 1: raign in that spending and customers acquisition doesn't go up,
• 28:17
  Speaker 1: that's another profitability question. They also mentioned, I believe, on
• 28:21
  Speaker 1: the call talking about their Linden, New Jersey facility and
• 28:24
  Speaker 1: also a facility in California and their ongoing challenges. That's right,
• 28:30
  Speaker 1: And so Blie brands business model. Remember they send out
• 28:32
  Speaker 1: these meal kids to customers. Um, you you cook and
• 28:34
  Speaker 1: chop and kind of cook the food yourself, but they
• 28:38
  Speaker 1: preportion everything in these boxes and these boxes are made
• 28:41
  Speaker 1: at what they call these fulfillment centers. This Linden, New
• 28:44
  Speaker 1: Jersey location. UM, they did talk about that location does
• 28:49
  Speaker 1: look like it's going to be a little bit delayed,
• 28:50
  Speaker 1: which is not helpful for the second quarter, but it
• 28:53
  Speaker 1: does also drag down on margins, is what it looked like.
• 28:57
  Speaker 1: The chief executive officer said, and um, this delayed New
• 29:02
  Speaker 1: Jersey ramp up. Their cost of goods sold also increased
• 29:06
  Speaker 1: twenty year every year, and they attributed that as well
• 29:10
  Speaker 1: to kind of getting settled in this New Jersey location.
• 29:14
  Speaker 1: So these fulfillment centers are very important for Blabran. It
• 29:17
  Speaker 1: is the hub that all of the food comes into
• 29:20
  Speaker 1: that they prepackaged. So any kind of you know, delay
• 29:24
  Speaker 1: or trouble or increase in kind of the cost of
• 29:28
  Speaker 1: running one of these locations could be an issue. They
• 29:31
  Speaker 1: did say that down the road, this New Jersey fulfillment
• 29:34
  Speaker 1: center is larger, it will help in terms of facilitating
• 29:37
  Speaker 1: kind of their operations. But for now it's not a
• 29:41
  Speaker 1: great sign. And if you look at the shares, they
• 29:43
  Speaker 1: are down about pent right now, bringing the company down
• 29:49
  Speaker 1: since it's listing in June. Well, that's just my flush
• 29:53
  Speaker 1: out anybody who was a bull on the on the
• 29:56
  Speaker 1: I p O. But you know that the future remains
• 29:58
  Speaker 1: to be seen. But I think it's just the played
• 30:00
  Speaker 1: devil's advocate. For a second, I got it's impressive that
• 30:03
  Speaker 1: they are at a billion dollar run rate already. They
• 30:05
  Speaker 1: are at a billion dollar run rate and annually, right,
• 30:08
  Speaker 1: I mean, so this is I mean, you gotta hand
• 30:10
  Speaker 1: it to I mean, in an industry which, you know,
• 30:12
  Speaker 1: a couple of years ago, this did not really exist
• 30:14
  Speaker 1: other than you know, in the memory of people who
• 30:16
  Speaker 1: ate Swanson's TV dinners. Um, this is kind of impressive,
• 30:20
  Speaker 1: it is, And that's that's what the kind of buying
• 30:23
  Speaker 1: into the I p O was all about. This company
• 30:25
  Speaker 1: is relatively young. Their revenue increased to almost a billion dollars,
• 30:30
  Speaker 1: basically a billion dollar run rate in just a few years.
• 30:32
  Speaker 1: They were the first mover in this male kid space.
• 30:35
  Speaker 1: But just since literally three days before this company uh
• 30:39
  Speaker 1: launched it road show for this I p O, you
• 30:41
  Speaker 1: have Amazon buying cold foods. Now you have Amazon looking
• 30:45
  Speaker 1: to patent its own meal kits. So the competitive dynamics
• 30:48
  Speaker 1: have changed quite a bit just in the last two months.
• 30:51
  Speaker 1: So yes, great kind of onboarding of initial customers, great
• 30:55
  Speaker 1: initial kind of trajectory for revenue, but now they have
• 30:59
  Speaker 1: to really get to scale, figure out a way to
• 31:01
  Speaker 1: make money and block and tackle with a girl I
• 31:04
  Speaker 1: like Amazon, Well, it's just gonna also mention just to
• 31:06
  Speaker 1: sort of, uh offer a coda to Blue Apron. Right now,
• 31:11
  Speaker 1: the I p O price was ten dollars a share,
• 31:14
  Speaker 1: right and we're trading right now at five dollars and cents.
• 31:17
  Speaker 1: So if you thought it was great at ten, maybe
• 31:19
  Speaker 1: you think it's even greater at about five and a
• 31:21
  Speaker 1: half bucks to share. Right. Potentially, we will keep an
• 31:24
  Speaker 1: eye on those analyst ratings as well. There aren't that
• 31:27
  Speaker 1: many on this stock, but they right now a lot
• 31:31
  Speaker 1: of a lot more buys than you have holds and cells,
• 31:33
  Speaker 1: and some of that might be due to that share price.
• 31:35
  Speaker 1: All right, Now, let's turn to something that disappears after
• 31:38
  Speaker 1: you created a Snap shares a snap down. Today, they
• 31:43
  Speaker 1: were trading at about thirteen and a half bucks to share.
• 31:45
  Speaker 1: What's up with Snap? We're going to get their results
• 31:46
  Speaker 1: later on, that's right, we will get their results later on.
• 31:49
  Speaker 1: This is the second earnings report since the I p O.
• 31:52
  Speaker 1: You remember, on that first earnings report, Snap disappointed on
• 31:56
  Speaker 1: user growth, they disappointed on revenue. And so these are
• 32:00
  Speaker 1: or those are kind of the two metrics that I
• 32:01
  Speaker 1: expect people will be paying a lot of attention to
• 32:04
  Speaker 1: last earnings, Uh, they're a fiscal first quarter earnings that
• 32:08
  Speaker 1: they reported. Uh, the stock fell about that day. Folks
• 32:12
  Speaker 1: were not happy. It's recovered a little bit since then,
• 32:15
  Speaker 1: but you know, people will be looking at those two
• 32:18
  Speaker 1: numbers and also they will be looking for more clarity
• 32:21
  Speaker 1: on how they continue to want to fight against their
• 32:25
  Speaker 1: adversary in this fight, which is Facebook and Facebook's Instagram
• 32:28
  Speaker 1: property um, which is basically copied snaps, disappearing photo features,
• 32:32
  Speaker 1: their story features every step of the way. So this
• 32:35
  Speaker 1: company is very secretive. Management doesn't like to give much
• 32:39
  Speaker 1: when it comes to the product roadmap or how they
• 32:41
  Speaker 1: prove to advertisers that advertisers are getting the eyeballs and
• 32:45
  Speaker 1: making money off the ads they're putting on their app.
• 32:47
  Speaker 1: But that's what investors will be looking for from chief
• 32:51
  Speaker 1: executive Officer Evan Spiegel and potentially chief strategy officer in
• 32:54
  Speaker 1: Ron Con as well. A pleasure always, and I'm if
• 32:57
  Speaker 1: Evan Spiegel's listening or someone knows him, I think it
• 33:00
  Speaker 1: he ought to talk to you. That way, you won't
• 33:01
  Speaker 1: be so reclusive. Thanks very much for joining us. Alex
• 33:04
  Speaker 1: Brinka our i p O reporter for Bloomberg News, Thanks
• 33:10
  Speaker 1: for listening to the Bloomberg P and L podcast. You
• 33:13
  Speaker 1: can subscribe and listen to interviews at Apple Podcasts, SoundCloud,
• 33:17
  Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm
• 33:20
  Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa Abramo.
• 33:24
  Speaker 1: It's one before the podcast. You can always catch us
• 33:27
  Speaker 1: worldwide on Bloomberg Radio