Bloomberg Businessweek Weekend - November 22nd, 2024

Published Nov 22, 2024, 10:20 PM

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This is Bloomberg BusinessWeek inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebek from Bloomberg Radio.

Hi, everyone, welcome to the weekend edition of Bloomberg Business Week. Well this week, gail politics and US politics all front and center for US, and yes, Nvidia did report earnings. You can check out that huge market focus by heading to Bloomberg dot Com or the Bloomberg We did want to just highlight that for us, though, as we said, we were all in about the new political reality, facing serious issues globally and right here at home.

On that, we ponder President elect Trump's impossible task. He's made promises of policy for both the working class and the rich. How does that actually work?

It's a great question. Plus one of President Elect Donald Trump's more controversial nominees, RFK Junior as the nation's top health official. On what it may mean for healthcare in America and the next generation, and.

Another win for Elon in the new administration, and venture capital and innovation in the Middle East. All that to come. We begin with Bloomberg BusinessWeek national correspondent Josh Green.

Josh is the author of Devil's Bargain, Steve Bannon, Donald Trump in the Nationalist Uprising. He also wrote The Rebels Elizabeth Warren, Bernie Sanders, Alexandria Ocasio Cortes, and the Struggle for a New American Politics.

Josh's BusinessWeek story. It tackles how Trump is attempting to pull off what Josh calls quote pollutocratic populism, but the math just doesn't square well.

Yeah, I think it was a surprise to a lot of people, but in a lot of ways, it's a much more impressive victory than his win in twenty sixteen, which took a lot of people by surprise. He did not win a majority of the popular vote that time. Looks almost certain that he will this time. And I think what's most important is that coalition that Trump put together in winning the twenty twenty four election. There were both the kind of high wattage billionaire supporters, people like Howard lutt Nick and Elon Musk, But on the other hand, Trump cobbled together a really racially diverse working class coalition that we hadn't seen the last time around. A lot of voters that traditionally vote Democrat were persuaded to come over and vote for Trump, and as a result, he has a really big coalition. As I write about in the new issue of BusinessWeek, Trump has pursued this kind of what I call plutocratic populism, and I think the main tension in his second presidency is going to be how to balance the interests of working class people with the interests of the billionaire and Wall Street crowd, who are another important coalition.

For So let's talk a little bit about that, Josh. Because you came with receipts, you have the numbers here. Why is that an impossible task? Why is he unable to do that and make good on really every promise that he made on the campaign trail.

Well, if you look at exit poll numbers and just in my own interviews with undecided voters and people were trying supporters, a lot of what drove Trump's support was voter anger, especially working class voter anger over inflation high prices, for which they blamed Kamala Harris personally. They didn't want her back in there. They remember the Trump era, rightly or wrongly, as a time of lower prices, lower inflation, strong paychecks for everybody, and so they voted for Trump in the hopes that.

He would bring that back.

But if you look at what some of Trump is planning to do, you know, the first item on his agenda looks to be extending his twenty seventeen tax cuts and maybe even cutting corporate taxes deeper than he did the first time around, which would be very exciting to his Wall Street contingent, to his billionaire contingent, But it could certainly help exacerbate inflation, as could.

A steep round of tariffs.

So on the one hand, you know, you could satisfy one half of the coalition, But if the cost of that was for prices, inflation, and interest rates to rise again, then a lot of the same working class voters who supported him two weeks ago could potentially turn on him and Republicans in the midterm elections and handpower back to the Democrats.

Hey, how much do you think though Donald J. Trump thinks about the midterms at this point?

All?

Right?

I mean essentially, right, is this his second term.

He's a lame duck president.

He can do a lot of stuff, and he's got a congress, But how much do you think he thinks about what happens at midterms versus following through on his mandate.

It's a great question, Carrol.

It's one I've asked to some people around him, and the truthful answer I got is he doesn't really care at all. What he cares about is this approval rating. He'd like to have a booming stock market the way he did in his first term, and so part of the thinking in Trump world is that even if he did promote someone a Treasury secretary who got behind this tariff regime and things went badly in the economy, if the market were to fall, that might be a kind of disciplining mechanism for Trump to step back a little bit, because he really does view the stock mark at the S and P as a kind of verdict on the success or failure of his presidency. But certainly, thinking about the fortunes of congressional Republicans in twenty twenty six, it is probably not top of mind for Donald Trump right now.

That's interesting to hear.

Why do you think that is? Because it sort of does provide, to a certain extent a check on what he's able to do, because if he puts policies into place that are unpopular among his base, then he could really pay a price in the midterms.

Yeah, he could.

I mean, I've gotten a couple answers from that in my reporting. One is that Trump simply does not believe what most mainstream economists believe, and that is that tariffs are inflationary and the cost will be passed along to consumers in the form of higher prices. I am my business We colleagues got to ask Trump about that for a Business We Cover story cover interview we did with Donald Trump back in July at Mara a Lago, and he simply disagrees. He said, well, if tariffs were inflationary, we would have had inflation during my first presidency. I imposed rounds of tariffs and we didn't, and therefore it's not going to be a problem. A lot of people around Trump publicly surrogates, have taken to echoing those points. So, as one of my sources pointed out to me in my current Business Week story, Trump doesn't believe that tariffs are inflationary. Therefore he's not going to believe it until they're implemented and until we see inflation. So to me, that suggests that we may be in for a rocky ride financially economically over the next four years if Trump is able to go ahead and do what he says he's going to do. And there are fewer guardrails and fewer breaks with Republicans controlling all three branches of Congress now than there were last time around. So I think I think his theories on tariffs and everything else make it a real test run.

I also do wonder, Josh, do you think Donald Trump thinks about his legacy? You know two assassination tempts, you know, one that we you know, obviously more serious it seems in certainly than the other one. But I do wonder if he's an older man, right, we all get older, we start to think about kind of our life's impact. Is this your understanding of him? You think he's thinking about that?

In the second I'll say this, I'll say, you know, he and I have never had that discussion. But from everything I've seen from him, from everything I've heard from people around him, Trump tends to live in the here and now. I mean, he is responsive to the cable chirons that he sees on TV. He's responsive to the closing price in the stock market, not so much thinking about how his obituary will look in the New York Times. But that being said, look, all presidents like to succeed. I'm sure Trump would like high approval numbers and a lot of the signifiers that Trump looks to for validation, things like the level of the stock market, the wealth of the United States, the trade deficit. Those are all measuring sticks that I think Trump is going to use to measure his own performance. And we'll have to see if he can get those boosted along the lines that I know he wants to based on the policies that he said he's going to pursue, and if he can do it without breaking apart that broad coalition of both Wall Street folks and working class folks that got him elected on November.

Fifth, Josh, speaking of policies, do you believe that he will actually make good based on the folks you talk to of deporting millions of people who are here illegally on day one.

He's certainly shown every sign that he intends to do that, both from the people he's put in top level positions, people like Stephen Miller, and Tom Holmans that would lead that effort to some of the comments he's made more recently about being willing to deputize US law enforcement to help carry out this deportation. So, everything we've seen so far suggests that yes, Trump is very serious about that and intends to pursue it as president.

Hey, just thirty seconds here to wrap up, and you've wrap up your piece. I mean, Donald Trump may also just be lucky in terms of timing right policies put in place by the Body administration. He may reap the benefits up just quickly.

Yeah. I mean.

The thing that galls so many bidens people in so many democratic sources is look at the economy Joe Biden has bequeathed Donald Trump. We have inflation coming down, the stock market is at record highs. We have all these new jobs in manufacturing factories being built all across the country with money that Biden really helped put in place. And now Donald Trump is about to take over as president and reap the political benefits and credit for all of those things. Great timing for Donald Trump, not so great timing for Joe Biden.

That was Josh Green Bloomberg, BusinessWeek, National correspondent an author of the book Devil's Bargain, Steve Bannon, Donald Trump and the Nationalist Uprising, and more recently The Rebels Elizabeth Warren, Bernie Sanders, AOC and The Rise of the New Left.

Both great takes on politics in America. Well a lot this week regarding possible people and policies around the second Trump White House. On that, another story we've been looking at this week, Donald Trump's federal framework for self driving vehicles.

If new rules enable wider deployment of cars without human controls think no pedals, no steering wheel, it will directly benefit Tesla's CEO and big donor buddy of the President elect. Yes, we are talking about Elon Musk. Elon has bet the future of the ev maker on self driving tech and AI. David Welsh is Bloomberg News Detroit Bureau chief. He breaks it all down.

What we're talking about is a federal framework governing av's in pretty much every way, but specifically looking at vehicles that don't have those human controls. That's a truly driverless vehicle. That's what Elon Musk wants to put on the road in a couple of years with Tesla and that's what has basically changed the valuation in the stock. Investors were worried that the eede business was kind of settling into a decently profitable, slow growth sort of thing, and he energized interest in the stock again with this robotaxi business. So, when you don't have a federal framework for that, you're relying on different states, this patchwork quild of regulations. It is actually very tough to run them. In California, they get monitored strictly, almost impossible in New York, but states like Arizona and Texas are pretty permissive.

There's nothing at the federal level.

What they do is they try to kind of shoehorn avs into existing rules that were ridden before autonomous vehicles were around. And there have been several efforts in Congress and then the Senate to pass rules, and they've always tripped up over something or other. What the Transportation Department could do is they could streamline permitting and they could expand the use of evs from what they have now, which basically says if you get an exemption for a vehicle that doesn't have a steering wheel and brake pedal, for example, you can run twenty five hundred of those a year.

That's it. General Motors tried.

To get this exemption two years, they waited around, they finally dropped the project. And only one other company that I know of, neuro a startup that has that delivers goods, not people in their robotaxis or in their autonomous vehicles, got an exemption. So it's tough to get and very limited.

Hey, listen, one thing I want to ask you.

I mean, I get it that having a patch work is probably not great on something like that, So I kind of get the understanding of the need for a federal framework. Having said that, don't we still have a lot of safety issues to figure this one out.

There are, And that's why I think the fact that the Transportation Department under Trump wants to do this is good news for autonomous vehicle companies because you get the start of a framework, you know, at that level, and maybe instead of twenty five hundred vehicles, they could expand that and they could streamline that process. But to really scale this up and to make this a regular thing, you're probably still going to need a law passed by Congress. You're going to need the Senate in the House to both weigh in and to prove this, and that's what's always been tough. You have safety groups, you have trial lawyers groups, you have unions who come in and weigh in, and politicians get cold feet because these constituents aren't crazy about autonomy. And look, you do have safety concern here with you know, if you just get too permissive, this is the wild Western. You've got robotaxis and autonomous trucks all over the place.

You know, some people are going to be concerned about that. And we'll still have a debate on this.

Holy shit, Hey, David, how's all this playing out in Detroit? I mean, you're in motor City right now. This is a state that was considered a toss up swing state, battleground state, call it whatever you want. It went for it for Trump this time. If you're one of the folks who works at one of these American auto manufacturers and you see Elon Musk by the side of Donald Trump day in and day out, what are you thinking right now?

I think the biggest worry they would have it wouldn't be for robotaxi, by the way, I think the bigger fear is that with few economy rules and with incentives for electric vehicles that you know, Elon Musk is sitting next to Donald Trump down on mar Lago if he's okay with getting rid of the seventy five hundred hour consumer tax credit to buy evs because.

His company makes pretty good money on them.

And sells a lot of them without tax credits, and he thinks it'll be worse on General motors, worse on Ford, Toyota, et cetera. Then that's what happened because Trump doesn't doesn't want to keep funding these tax credits. They're just tough run on these companies that are trying to build up a supply base, trying to build up a customer base, and trying to drive down costs because they're kind of at the early part of their EV business. That's worrisome to them. And then you know what happens with few economy rules. You know, are they written in a way or changed in a way that's better for Tesla adventages for the other company?

Yep.

So that's what I wanted to get at, is like, what about Elon's influence. It's not like you have you know, Mary Bara having the ear of the incoming president day in and day out or another auto executive. I mean, Elon Musk is on the plane. He's going to UFC fights. He's down to mar A Lago. He's there the whole time.

That's right.

He's spending an awful lot of time there. So he's going to have he's going to be weighing in on the agenda for the auto industry. Pretty have we we'll see.

But are folks in Detroit, the major executives at the major US auto manufacturers like wait a minute, unfair advantage.

They're in a tough spot because they didn't always get their way with Trump or with Biden for that matter, when they were lobbying the old fashioned way, and now they've got this new gigantic wrinkle where one of their prime competitors is basically probably the most influential personality in President elect Trump's center circle.

That was David Welsh, Bloomberg News Detroit bureau chief.

Coming up, the vocal vaccine skeptic that is now the pick to become the nation's top health official.

What the selection of Rfk Junior may mean for healthcare in America. You're listening to Bloomberg Business Week. This is Bloomberg.

You're listening to the Bloomberg Business Week podcast. Catch US Live weekday afternoons from two to five pm Eastern. Listen on Apple card Play and the Broud Auto with a Bloomberg Business app, or watch US Live on YouTube.

Well.

Robert F.

Kennedy Junior's selection to serve as president like Donald Trump's top health official is prompting questions from policy watchers over how the pick will handle the range of health and really key health policies that would fall under his purview.

He's an environmental lawyer and vocal vaccine skeptic. He's publicly taken positions against food additives and immunization recommendations, but the nominee for Secretary of the US Department of Health and Human Services has been relatively quiet on many of the other issues he would oversee while leading thirteen supporting agencies in more than eighty thousand federal employees. So let's get to the interview we got with us doctor Paul Offitt, director of the Vaccine Education Center at the Children's Hospital of Philadelphia, who joins us from Philadelphia. Doctor, good to have you with us. How might RFK Junior impact healthcare, food, medical research and more? Here in the US.

He is a very long anti vaccine activist. He is a science denihilist, and he is a conspiracy theorist. This is not the kind of person you want to head health agencies. I mean, he has said that no vaccine is a benefit. He has said that the polio vaccine killed more people than it ever saved. He thinks that HIV human am deficiency virus is not the cause of AIDS. He's an AIDS denialist. He thinks we should drink raw milk, which will put us once again in a position of risking things like campelo backer and he call I and salmonella. He thinks that the SARS virus was created in the laboratory and specifically designed to spare Ashkenazi Jews in Chinese and target whites and blacks. I mean, this is the man you want to head health agencies.

I don't think So what scares you the most, Well, what scares.

Me the most is is that that he now has has a bigger platform to be anti vaccine. So, I mean, he's always had a platform owing to the famous name, but now that he's even considered for this position gives him a certain level of credibility which he certainly doesn't deserve. Let's suppose you have a vaccine that is submitted to the FDA for licensure, and it's it's excellent, and it's better than what we've had. I think, you know, say I'm on the FDA Vaccine Devisory Committee. Let's say that we recommend a licensure, and then the FDA considers that recommendation and degrees he could say, no, I think they're to be more study. Similarly, he could try and strip away the CDC's capacity to recommend vaccines. He could take the advisory committees to both those agencies, FDA and CDC and try and stock it with people who are similarly like minded science denialists, such as himself. I don't understand this. And when he talks about, for example, something that makes sense, which is trying to make our country healthier, decrease obesity, decrease type two diabetes and the consequences of those disorders such as strokes and heart attacks, I'm all for that great idea, but there are a lot of people out there who could do that job much better than he can, given his science denialism.

Doctor Offitt on vaccine specifically, Robert F. Kennedy, as you know, has often been referred to as a vaccine skeptic. You call yourself a vaccine skeptic.

What's the difference.

A skeptic is somebody who says, prove it to me, show me you're right. So when we sit around the table at the FDA Vaccine Advisor Committee and consider vaccines, as we did for the COVID vaccines, for example, in December of twenty twenty, show us the data, prove that it's effect, that prove that it's safe, so that we can then recommend it in good conscience. That's skepticisms. Skepticism is healthy. He's a cynic. He's a vaccine cynic. He doesn't believe the data. He thinks that there are dark, evil forces working behind the scenes that are misrepresenting data. What he doesn't realize is that that there is no hiding. Even a farm pharmacytical company misrepresented data on safety or efficacy that will soon be found out because there are post marketing studies like that can be done by the Vaccine Safety Data Link, where you'll know if there's a problem immediately. There is no hiding. So his whole premise is wrong.

One thing that I've been wondering is how different are we than other developed countries or other wealthy countries when it comes to vaccine schedules. Doctor, Do we do things differently than other countries around the world.

We tend to recommend more vaccines than most other countries. So, for example, the chicken pox vaccine, which came onto the market in nineteen ninety five, is not used in a number of developed world countries. They're willing to have children suffer ticken pox. In this country, obviously, there would be millions of cases of chicken pox a year, and there'd be about seventy five to two hundred people who would die of chicken pox, and there would be tens of thousands of hospitalizations. So we thought that was worth eliminating. But you know, not all countries felt the same way.

Other than that, though, are there aren't big differences?

No, No, For the most part, the developed world doesn't like children.

So we would.

So if you did over end up overseeing the CDC and changing the recommendations, we'd be an outlier in this country. Based on some of the recommendations that he.

Could make, right, I think his fanatical anti vaccine activism has already scared people. I mean, if you look, for example, over the last few years, their number of cases of measles have increased dramatically. Last year we had three thousand cases of protessler hooping cough. This year we have seventeen thousand. We've had more than two hundred children less than eighteen years of eight dive influenza over the pissure. That's a high number. So you're already seeing an erosion in trust, already seeing an erosion in vaccine rates among kindergartens, and as a consequence, you're seeing an increase in infectious diseases that are preventable. It's unconscionable.

I have to say.

I have talked with colleagues and friends and associates who have autistic children now adults, and who are open to the idea that maybe vaccines cause this problem. So like there is you know, I've had these discussions. I guess what I wonder about, are we going to maybe depending on what comes out, if RFK is indeed our next top health voice here in the administration, that will that potentially lead to maybe some kind of ruling or mandate that comes down that says we don't believe in vaccines, and then are they not covered by insurance? Like, how does this potentially play out realistically?

Right?

So, so there's the Vaccine for Children's Program, which was born in the nineteen nineties, and the Clinton administration, which basically covers about half of the vaccines in this country for children who are either under insured or uninsured. I don't think he could touch that. I mean, that's really a congressional program. The Congress would have to agree to that. I can't imagine that happened. He could make it more difficult to get insurance generally for vaccines, making them more expensive for the consumer, that's possible. I mean, I think he'll do everything he can to lessen the imunization rate. This is what he says. I think that, you know, the parents should make decisions well with their doctor and basically pull the CCC out of it. Let let us look at the real data. And he's going to show us the real data because only he knows the real data because he's a conspiracy theorist. It's it's hard to watch. I do think there'll be an erosion in vaccine rates and regarding autism, it's fair to ask the question. My child was fine, they got a vaccine, Now they're not fine. Could the vaccine have done it? That's an answerable question, and it's been answered. There's been eighteen studies done in seven country on three con instead have shown vaccines don't cause autism. Question asked unanswered.

Is the medical community get, you know, gearing up to fight back?

Yes, but again, you know we're not good at this stuff. I mean I think, well, fight will certainly fight back the way we knew how, which is which is to try and present all the data that we know supports vaccines. But this is really becoming a political issue, so I think it's going to have to have a political solution. I think we're gonna have to find those senators who, assuming there is a confirmation hearing, that are reasonable enough to say that this is not the guy you want in that position.

So, after RFK was announced, the governor of Colorado, Jared Polis, sent a post on accident said he was excited because of a vaccine choice and he helped push back in Colorado when it came to this particular topic. Can you share your view as to why it's important for lots of people to get vaccines? Because if it is a parent's choice, and you know that parent chooses to get their kid vaccinate against something, it's not necessarily that that kid is actually protected if other kids aren't protected.

Exactly right. So if you step on a rusty nail and you go to the doctor and you say I don't want a tennis vaccine and you get tetanus, no one's going to catch tennis from you. It's not a contagious disease. Measles is, influenza is, and others are. So a choice not to get vaccine is a choice not only for yourself, but for those with whom you come in contact. And remember there are about nine million people in this country who can't be vaccinated because they're getting chemotherapy for their cancer or immute suppressive therapy for the autoimmune diseases. They depend on those around them to protect them. Do we have any responsibility for our neighbors? It is hard to watch. If you look what happened with Stars Kobe two, those counties that were generally under vaccinated had much higher rates of hospitalization and death than those counties that were highly vaccinated, And that affects the people. If you're better off, actually being unvaccinated living in a highly vaccinated community than being vaccinated living in a highly unvaccinated unity.

That's wild to hear.

What about the power of states and local municipalities over this? For example, I have a kid in the New York City public school district and he has to get a certain number of vaccines in order to actually be able to go to school. That's a way for them to say, Okay, well we are making this choice, or for the parent to make this choice to vaccinate vaccinate their kids against these things. Isn't there power are there at the local level?

Yeah? Well, mandates are state ron I mean, there's not federal mandates. I mean the school vaccine mandates are done by states in different states actually have different vaccines that day mandate. But we've had school mandates from the books for decades. There was about by nineteen sixty four to five, about twenty five schools states had school mandates. By the mid seventies, that went up to forty. By nineteen eighty one, all fifty states had school vaccine mandates. And with that, with the enforcement of school vaccine mandates, we went from forty seven thousand cases of measles a year seventy five thousand cases of measles a year and one hundred and fifty deaths from measles a year to eliminating that disease from this country by the year two thousand. But it's come back in part because the critical percentage of parents are choosing not to vaccinate their children.

Yeah, numbers tell a story. Hey, listen, speaking of choice revaccination. You know we do have choices what to eat, We have choices. McDonald's is clearly a favorite a president like Donald Trump.

During the campaign.

He even helps serve customers at one restaurant. I got to say, I'm a fan of their fries.

Full disclosure.

We've seen Donald Trump and RFK Junior and Elon and others chowing down on McDonald's together.

Oh, to be fair, rfk's holding the burger. He's not chowing yet.

Okay, so maybe he's just holding.

Maybe's a little osmosis going on there. Just got about thirty seconds here. I do think about the role of Donald Trump, what impact he might have in terms of his thinking about health and medical care and all that good stuff. I mean, we saw what he did during his first term with COVID and getting a vaccine, So how do you think his impact might be on what goes on in this area?

Now, I think he's hard to predict Donald Trump, but I think that scene, though, with him sitting there and Elon Musk and RFK Junior and Mike Johnson and others eating Donald's I think my take home from a message from that scene was Donald Trump telling Robert Kennedy Jr. You'll eat what I tell you.

To our thanks to doctor Paul Offitt, director of the Vaccine Education Center at the Children's Hospital in Philadelphia.

Still ahead on Bloomberg Business she calls herself the only Arab woman in the Middle East running a VC fund.

And she's investing in everything from agtech to AI. This is Bloomberg.

You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting a two pm Easter on applecar Play and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa play Bloomberg eleven thirty Carol.

We know that Dubai is the Middle East main business hub, but get this, Abu Dhabi and Riad now each control over a trillion dollars in sovereign wealth, making them the biggest pools of capital in the world.

It's massive, well talk about a viable competitor. That has prompted firms like Blackrock CEO Larry Fink setting up operations in the two countries, and earlier this week Blackrock received a commercial license to operate in Abu Dhabi. It's the latest sign that the asset manager is looking to deepen its ties across the region.

Someone who's got her finger on the pulse of all things when it comes to capital in the Middle East is North Swede. She's founder and managing partner at the UAE based international VC firm Global Ventures. Her company has got offices all over the region, including in Dubai, Cairo and riod And. Noor says she's the only Arab women in the Middle East running a VC fund.

So last quarter was the first quarter where we had fifty one percent of venture dollars in the region actually coming from abroad, So that ecosystem is going very.

Quickly versus domestics.

Domestically, which is usually I mean five years ago it was seventy five percent domestic. Now it's forty nine percent domestic domestic meaning regional vcs investing. So we have many of the international vcs looking at the region not just for regional opportunity, but for true innovation, which is different.

And you see that especially in the UAE.

So in the UEA specifically, last year, seventy three percent of the GDP was non oil sector. So it's not that the region's trying to diverse.

Say that again.

The reason I think about that, I remember, I don't know, thirty years ago, like a national geographic and it just talked about the Middle East was thinking about kind of a non carbon based economy, like they knew things were going to change. Say that number again.

So seventy three percent of ua GDP last year was non oil related. So when you think about what that means, it's not that the regions trying to diversify had diversified, or at least the UAE has Saudi's following suit and the next ones, and so it is really an innovation economy and knowledge economy moving towards you know, new sectors rather than just we're stuck in oil. So that correlated with how much international funding is coming in, really puts us in a position where all sectors are innovative right now, we are leap flogging and some innovations where we haven't had legacy incumbents really you know, take over those sectors in the past.

So what are the exciting areas in the economy that you're seeing right now?

So right now, the two most exciting areas that we are focused on are supply chain. So anything that's supply chain technology focused really reinventing supply chain. So even if you think through my manufacturing, so where we've historically manufactured things around the world and then ship them, can you manufacture regionally? So we don't have incumbents in manufacturing. We've never had a large manufacturing industry. It's such a small percentage GDP. But if you were to take the world's best technology today, what does that look like. It's added of manufacturing. It's three D printing. So we have companies in the region like IMENSA, which are generally just building the best in class technology globally, building the rule books globally to do spare part manufacturing using three D printing for oil and gas and other industries.

And so we start thinking that what's going on.

Haven't we had like talked about three D printing so many times the iterations the site.

Yeah, there was the whole like consumer push. I was at CEES one year where there was like this whole section of like here the you know, plastic injected three D printers that can make whatever you design, and everyone's going to have one of these and they're going to be able to repair their own stuff.

We're not.

There's nobility, but we are so. I mean, even if you take a look at goodness, some makeup companies, the brushes that you can use for blush, those are for a large company, us for your blush, sorry for your blush, all of our so we all look alive. But ultimately those are large three D printed, so you can take a look at you don't know that it's three D printed, but a lot of those have been three D printed. Now when you take a look at more industrial applications, so for example, the oil and gas industry has ninety billion dollars sitting in square parts, right, So these are made using raw materials, shipped across the world and then stored in a warehouse, draining working capital just in case they're needed. Twenty to thirty percent of each of that warehouse gets thrown away each year for HSU.

So now you can do kind of just in time, just.

In time manufacturing, not just in time inventory. So you've completely shifted that. And you said, is it cost effective?

It's very cost effective.

It's cheaper, especially because you're not shipping a half your cost the world. It's more sustainable, right, You're using new materials. So the reason it's really come forward to the last ten years is the material science has now allowed you to really use materials that are strong alloys, not just natural ones. So as you think through supply chains, it starts with manufacturing. Where are you making stuff? And then how are you shipping it? And how does your last miole logistics look like? Can you use drones to deliver in parts of the world? So Global South generally doesn't have as much infrastructure in terms of roads infrastructure, so why would you ever use diesel trucks that are twenty years old on rickety roads in large, large economies, larger markets. Our geography is when you could use drones.

To do be to be deliveries.

So you think about how do you leap frog supply chains? How do you get to a world where five years from now it's unrecognizable five years ago, and that's where we're investing.

That's what we're seeing that. And then the other sector is really food.

Security, So the whole world has had to push towards food security. The Mini region or the GCC both still import eighty five percent of the food. So if you think about how do we produce food, how do we move towards not just vertical farming as we've known it, but better versions of it. So we look at companies that, for example, reduce energy consumption for vertical farming or indoor farming by up to ninety percent because of the way they treat water, because of the material science to prove these farms, and now they're exporting this technology everywhere in the world. Fifteen different countries in the US are using this technology to reduce energy consumption for indoor farming so that you can have more sustainable food production. So when you think about food security, when you think about supply chain, our part of the world and MINA and then GCC is still nascent in that we don't have the legacy incumbents and that industry sorted that you're trying to improve it. You're just trying to invent it, and so with that comes a lot of this innovation, the really quick adoption that allows you to leapfrog and create these new markets with the legacy overhang to some of the legacy overhang.

I'm I'm just curious that what the fund looks like right now, given that there are all these opportunities out there. But at the same time, what we've heard over the last few years is that with rates higher across the world, it's been tougher to raise money. You have four hundred million dollars that you manage, how much of that is deployed right now versus how much you know you have on the sidelines.

So we're deploying out of our third fund, which is a two hundred million lower fund, and we're about a third way into deployment. Out of that fund, funds went and who are fully deployed, we're exiting them. We just had an exit two weeks ago. That's about twenty eight times money on our post seed position, eight times on our A position. So we're seeing a lot of innovation in the regions start to materialize.

It's our sixth exit. For our young firm.

To have that many exits behind us is a really good sign of the region's ability to materialize.

Those who are the LPs, where are you getting the money?

So it's half regional, half international.

So we have we can't name them, but it's a lot of international LPs that are looking at the region. A lot of them it's their first time investing in the region. Family offices and institutions, any sovereign wealth funds internationally or regionally. Internationally internationally one pension fund and large financial institutions and regionally regionally both.

Yeah.

So we were about the last first fund in the region six years ago. Until then they had invested mainly internationally. We WEREDQ nowlinates first fund in the region. So we work with all the regional sovereigns in smaller capacities. They are looking at the region to say where can we enable growth because it's for them it's not just capital, it's also economic growth.

They can put their money back into their own economy.

Yeah, it's similar to the pension funds and thennowments in the US how they enabled the venture ecosystem. In Europe, they enabled the venture ecosystem and then they're able to enable economic growth along with financial returns.

What would surprise people that what's going on in the Middle East in Africa right now.

I think it's interesting to witness in some parts of relief. So in the UAE, for example, we have a lot of second and third time international founders have come in in the last three years and building new companies there. So they had their first exit in the US maybe or in Europe, and then as they get to their second and third ideas and they want to really address the global South because that's the fastest economic growth over the next ten to twenty years. Is more the global South than the US and Europe. We have the world's youngest population. We're sixty percent under age thirty and so as you have this population starting to grow and build. This is across Mid East Africa and Southeast age is also very young, so I used to have these populations growing. The economic growth that is ahead of us is tremendous and so being able to capitalize on that. You have many second and third time founders that are moving back specifically to the UAE or moving to the UAE.

They may not be from the region and building new companies.

Nor what assist is the governments that you over in the Middle East providing to support those founders, whether it's as an incubator or something to kind of there is ailing and attract them back.

So there are several incubators accelerators, and there's Hub seventy one and OBAD which was Mobile de La funded and founded. There's Area twenty seventy one in the UAE, which in Deviai, which is from the Duay Future Foundation. But I think the government's forward thinking this is the most important thing. So you were talking about AI earlier. We've had a Ministry of AI since twenty seventeen.

Walk us through some of maybe your newest investments in some of the different areas you play in fintech, digital health, mobility, future of work.

All of these are fascinating.

Well, they're all industries that are right for disruption. We started investing in twenty eighteen, and back then our heavy focus was fintech and it was the argument of the region was still eighty five percent unbanked and you were never going to.

Have really in the region.

In the region.

Wow.

So with pockets of difference like maybe Dubai or the UAU was a bit different, but the broader four hundred million people living across me now were eighty five.

Where was that concentrated though? Was that in like where geographically were I.

Mean that's across Saudi Arabia, Egypt, Algeria, Jordan, so just generally.

So not everybody's rich royalty, right, No, that that would be very But I think there's an assumption.

I know that's a stupid question, but I just think there's an.

Assumption that the wealth permeates every everywhere.

So I think it's it's interesting.

You know, if you think Europe, you have Sweden, and then you have Greece, and then and that spread of GDP goes from thirty thousand to ninety thousand dollars across the region is similar, but even more extreme, more extream. So if you think of Syria, if you think of love and on, you're in the few thousand dollars a year gdpeper capita. And then if you think about cut lady, or in the ninety thousand dollars, and if you think about the population dispressment between those, it's not equal.

Right, So you.

Actually have one hundred million people in Egypt, you have forty million, not even forty million in Saudi Arabia, right, you have ten million, less than ten mine in the UAE. So you hear about the ones that are exciting and innovation and leading the way and the largest sovereignal funds in the world.

Right, But a lot of people don't live within that realm.

So when we talk about unbanked at eighty five percent, you're not talking about a small pocket. You're talking about a lot of rural Saudi most of Egypt, most of Jordan. And so when we brought fintech into the ecosystem alongside the regulators and the governments in twenty eighteen, that number shrunk by about fifteen percent for five years because suddenly people went straight to fintech, right, so no one built banks. Yeah, so you're not going to s and similarly exactly so it's a similar thing. So and then healthcare is the same way. So in healthcare, we have one doctor of per thousand people. In the US, you're about four doctors per thousand people. So if you come to the conclusion of you'll never have enough doctors, you'll never have enough hospital.

So how do you use health tech to.

Give primary access to care? How do you use mobile phones? We have the highest digital penetration in the world for mobile phones and social media usage, so how do you use those to enable people to have access to health care? And then you take that same thinking philosophy of how do you use technology to leapfrog and provide basic access not just to fintech and.

Health tech, but also to food, to education.

We have the highest percentage of population in school age in the world, so we're at thirty four percent of our population school age in Europe that's about twelve percent. So how do you provide education and it's going to be technology enabled?

Where do those students go when they're done being students? So they stay in the region.

A lot of them stay in the region.

Well, many of them don't have second passports, so they're not going to be able to leave the region.

So when you think.

About it, that's why you have such an emphasis right now on entrepreneurship. So our youth unemployment is one of the highest in the world, because what is it. It ranges from twenty five to thirty five percent depending on who you askah and the country, and that's.

Been a concern of the governments.

Then yes, so I think that's part of how do you have these people create jobs, participate in the SME sectors, the SEME sector is ninety percent of the GDP in the region, and become productive members small many of enterprise.

Yes small me to dementators.

So that is the focus and then hence the entrepreneurship push and the innovation push. And over the last five years we've seen really a move from emulation so Uber for the region Kareem which then was acquired by Uber, to all the way to innovation, which is how do you sold for supply chains which we talked about earlier, how do you sold for food security and agutec and really innovate with the IP, with the research and with the ability to scale those companies globally. So in our portfolio of sixty one companies, twelve now have more revenues in Europe in the US than in the region. And when we invested, they were just in the region. And you think about that and you say that's because that's real innovation. You're thinking outside the box, or you're thinking there is no box. There are no legacy incumbents to compete with, So how do we.

Solve You know, I said in teas that we were going to ask about what does it mean when a black rock moves more aggressively into the region.

What does it mean when these global.

Whether it's US based, European based, what have you move in, you know, to increase ties, financial ties in the region.

They see opportunity.

Good for you, bad for you?

What does it mean great for us?

It's it's really a move into the region, moving capital, finding opportunity, helping more money around.

Right.

So venture in the region is two point six billion dollars last year, our entire venture ecosystem.

That's it.

That's it.

The world for Contact was a two hundred and eighty five billion, right. But where very pleased because six years ago when I started the firm, we were at four hundred million. So to move from four hundred million to two point six billion is significant. It's still a drop in the bucket. It's like doing venture in the Bay Area in the seventies, right when founders need a lot of handholding. There was real innovation, there's a lot of government support, and you're trying to move this ecoystem forward and it's still small.

That's where we are.

So it's really only upside from here. And I think a lot of the international religio students see that move to the region, see the economic growth coming in the global South and really want to be positioned there to leverage it.

Our thanks to North Swayede, founder and managing partner at the UAE based international venture capital firm Global Ventures.

And that wraps up our first hour of the weekend edition of Bloomberg Business Week from Bloomberg Radio.

Ahead.

In our next hour, we take a break from the heavy stuff. Don't you need this? I need it, and perhaps allfer up at the same time, some ideas for your upcoming Thanksgiving festivities.

Cut to the chase.

Tim, We're talking beverages from.

The enslaved man who taught Jack Daniel, Yes that Jack Daniel, how to make whiskey to enjoying some cocktails in a cant.

Plus for we non alcoholic types, or should I say you, Tim raising my hand, Yes, you are how one coffee chain is growing by franchising in small towns and becoming part of their communities. This is Bloomberg Business Week.

I'm Carol and I'm Tim Steneveek. This is Bloomberg.

You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm. Easter Listen on Apple car play and and Broyd Auto with a Bloomberg Business app or watch us live on YouTube.

Plenty a head in our second hour of the weekend edition of Bloomberg Business Week, including with Thanksgiving just around the corner, maybe you are planning your menus, including your cocktail and drink offerings for friends and family, and so this hour we tap into some perfect drinks and it's not all alcohol.

We talk with the CEO of Ziggy's Coffee on managing economic challenges in the specialty coffee space and how sometimes smaller is better. Plus bringing the party anywhere with cocktails in a can sounds like a plan.

First up this hour, a fascinating story about the enslaved man who taught Jack Daniel, yes that Jack Daniel, how to make whiskey and later became the first African American master distill at the Jack Daniels Distillery.

That story caught the attention of Fawn Weaver. Fawn's the CEO of Uncle Nearest It's the Whiskey company named after the enslaved man. She's also the author of Love and Whiskey, The remarkable true story of Jack Daniel, his master distiller, Nearest Green and the improbable rise of Uncle Nearest tell us all about Nearest Green, the namesake of your whiskey. This story goes back more than one hundred and fifty years.

Absolutely.

Nearest Green is the first known African American master distiller. He was the teacher and mentor of a young Jack Daniel. He later became his first master distiller, master distiller for Jack Daniel Distillery Number seven, and until nineteen seventy eight, when Jack Daniel and his own family essentially had stewardship of that company, Nearest Green and his boys, George and Eli were always a part of the story. Their significance, the importance of the process that Africans brought to America. That is, taking a traditional bourbon distill it, running it through sugar maple charcoal before putting it in a barrel, which distinguishes Kentucky bourbon from Tennessee whiskey, even though both are a straight bourbon whiskey. It's what distinguishes essentially the styles that the two different states make, and that process was brought in by the Africans. Jack and his family always credited Africans for bringing that in. The enslaved people is exactly how they put it and so well. Actually, at that time they called it, They said the slaves brought it in. We now refer to them as enslaved people. But that is a story that continued until seventy eight. Then between seventy eight and seventy nine, after Jack's own family was no longer overseeing that company, the story disappeared.

And it wasn't until twenty seventeen.

When I introduced new research that the world really began to know what this story was, how remarkable it was, and that story is now and that research is now contained in my.

Book Love and Whiskey.

What else did you learn in terms of doing that progress? I think it's so important. I guess maybe the older I get, I feel like history is so much more important to me and understanding whether it's the history of our country, the history of my background, the history of just so many different aspects of our society, Understanding it so that I can hopefully have a smarter view going forward. But as you wrote your book and you did this research, tell us about some of the other things you found out.

Absolutely, first, I should say what the research was, and it was not like research. I interviewed about one hundred of nears Green's descendants, Jack Daniel's descendants African American elders of Lynchburg, Tennessee, anywhere between seventy five years old and one hundred and six. Neares Green's granddaughter was still alive when I arrived in Lynchburg. Jack's eldest descendant was one old when I arrived, and she passed away at one oh four, and her faculties were fully intact, And so I had the benefit of being able to learn from so many people. And one of the things that I found that I think is so relevant to the conversations we're having in America right now is at the time when Jack Daniel was alive and he ran the distillery, and then after his descendants, they all worked side by side with either nearest nearest boys or nearest grandchildren. And one of the things I found fascinating is the percentage of African Americans in Lynchburg.

Was not that great.

Yet all of the African American elders tell me that worked at Jack Daniels that the workforce was about fifty percent African American. And the only way I could explain that, the only way it made sense to me, is that because Jack and his family hired based on skill set, and they paid based on tenure, not on color. They saw complete equality between the two groups of people that that just spread around this area of outside of Lynchburg, Tennessee. And you had African Americans coming in here and saying, hey, I hear y'all have jobs and we're treated fairly. And so when after prohibition, prohibition shut down the distillery here for thirty years, and after Prohibition there, I mean thousands of distilleries shuttered their doors and never reopened. But here it comes Jack Daniels roaring back with an enormous amount of power. And I have to believe it's because they were always pulling from the entire work pool that was available. And I think that that's something that we can absolutely learn from today. But also this notion that in the nineteenth century you had in the Deep South, I mean, we're right above the Alabama border, in the Deep South, you had equality between blacks and whites and the work place. That is something that we're still trying to figure out how to do now.

Yeah, I'm kind of glad you went there, because I do feel like it's kind of amazing right that we were there, and then we went backwards, and I would safe to say with some of the recent rulings, and we talk a lot about what's going on with colleges and college applications and so on and so forth, but we still talk about the lack of diversity in our world. What is it that continues to hold it back?

Well, the irony is is I think that if we fix the gender problem, we'll fix the race problem. And by that I mean women are fifty percent of this population, but when you go into those boardrooms, when you go into those c suites, we are a fraction of the percentage of those that are in there. And we, by nature are more empathetic.

It is how we're wired.

And so I do believe that if we can fix the gender issue, that we will naturally fix the race issue because you have more women, see, and they're going to be looking around and saying, hey, why is everyone in this room?

Why?

Yeah?

Yeah, And those are things that I do believe women pay attention to. But men have run the suite sea suites for so long, and I think that that is what continues to hold us back as we need to see that fifty to fifty equality in those c suites and the rest I think will start to work itself out.

I've been doing this a fair amount of time, and I feel like easily for twenty years have been talking about putting more women in the C suite, and I still count, certainly with the big publicly.

Held companies, how many CEOs they are.

I know, when you get into smaller business and so on and so forth, women certainly have a lot more progress. But we're still talking about this, and I'm not quite sure why it just hasn't turned yet.

I wish I could answer that question.

Even when you look at just education in this country, by far, it's been black women who are literally take it all, the master's degrees, the PhDs, And when you're looking at these numbers, you have to then start to wonder, why aren't there more than leading that have done so much work to get there? And I don't have that answer other than the fact that of how this country began, and we have to remember that. And I say it jokingly but not really. There are literally cognacs older than our country, and so when you put it in that context, you have to remember that children make foolish decisions. Youth make foolish decisions, and when you look at the age of our country, we're essentially adolescents compared to the rest of the world, and so we're still trying.

To figure out a lot.

And I just hope that we continue to have patience and grace because traveling this world, I know without question that we are the greatest nation in the world, without question, and we just have to do the work of being better ourselves.

And we've come a long way.

If we go back sixty years, I could have been water host literally in the middle of the street and no one been charged for it.

Wow.

So we are advancing right, and we do have to give ourselves grace about that. While we continue to challenge our country, we need to also honor the progress.

We want to talk a little bit more about whiskey, but your own path. I mean, you wrote Happy Wives Club, One woman's worldwide Search for the Secrets of a Great Marriage.

That was back in twenty fourteen.

You mentioned the book on whiskey that you have written, Love and Whiskey, The Remarkable True Story of Jack Daniel. You're a ted speaker, you are on the board of Endeavor Group Holdings. I'm sure I'm leaving something out there's.

Another book in there, the Argument Free Marriage twenty eight days to creating the marriage you've always wanted with the spouse you already have.

You're super fascinating and interesting. I am curious about on the board of Endeavor Group Holdings, and I do think about the importance of we are in the media, the importance of media, movies, entertainment in terms of pushing and helping things change, bring about change. I am curious about your role at Endeavor does how much that is a big part of the conversation, the importance of what we see up on.

Screens, big screens, little screens, what we.

See out there, and helping make people think differently about what society where we need to move towards.

Absolutely, I've been on the board of Endeavor since prior to it going public, and I will tell you being in those boardrooms, I would put my money on our Emmanuel, Patrick Weisall and Mark Shapiro every day of the week and twice on Sunday. Their ability to understand entertainment and content is something that is.

Pretty unparallel in the industry.

I know a lot of the CEOs of the entertainment studios and the other agencies and things of that nature, and the way they look at bringing diversity to the forefront.

They really are ahead of the curve.

And how they look at that and how they're positioning that, and how they're thinking about even packaging different deals together so that we can move our country forward, but not even just our country, because our entertainment that we put out of America goes around the world. It influences how the entire world sees us. So if there's any area, any industry in that's coming out of America that is the most important for progress, it would absolutely be the entertainment industry because people mirror what they do in their countries based on what they're seeing in our entertainment.

Hey, fun, I want to go back to your path and how you got to where you are today and sort of like understand how you've been able to pivot and kind of play in all these different areas because you've been doing restaurant, food and beverage, real estate, you're an author, you're on the board of Endeavor, as we mentioned, and then whiskey help us understand how you can how you know as somebody yeah, how somebody goes yeah and he's able to play in all these different places.

You know, I think a lot of people box themselves in and they don't really see the overlap and so many different things. So my first company, almost thirty years ago, was a public relations and special events firm. And if you look at the way that we've built Uncle Nearest into the fastest growing bourbon and American whiskey.

And US history and some of the other accolades and things of that.

Nature, one of the things that you will find is is that our company has grown really going directly to the people through unearned media, through through the press.

Because I can't spend one hundred million dollars like my competitors can.

I can't go out there and you know, buy menu placements like they do. I just came back from London and they'll spend fifty thousand dollars to I am Menu so that they have all their different alcohols on there for a year.

I can't do that.

But what I can do is I can tell the story of Uncle Ners and our brands to Bloomberg and I can do that.

So that's literally everything I've ever done.

Any company I've ever been involved in, there has always been two through lines. One is they've been built utilizing earned media, being able to the power of storytelling. Consumers do, in fact care about stories, and quite frankly, they prefer the stories to be real, and so to dive into research that I've done for every book has been consistent. But the other thing that you'll find with the three books that I've written and the Ted Talk, I'm always talking about love and what our society has done is decided we have our work life, we have our personal life. Love exists in our personal life, but it does not exist in our work life. And that simply isn't realistic. You need to that has to carry throughout everything. You have to love your work. You have to love the people that you work around, or you're going to have a miserable existence.

Twelve hours a day or however many hours do you work.

Amen, Because I love my job. I love the people I work with. I know seriously, seriously, and if you know, you walk in and you're like, Okay, this is pretty cool stuff. One more minute left here. I'm going to your website. I'm looking at you've got old fashioned cocktail kits. I am a whiskey sour kind of girl. Something my dad used to make when we were growing up. Believe it or not, tell us about we're Bloomberg too. Just real quickly, last minute kind of growth that you're seeing in.

Your business, Oh, Uncle Ners, it's phenomenal.

The industry and this is a whole other conversation, but the industry is down.

Overall double digits.

The on premise, which is bars and restaurants, are down eight point eight percent.

Uncle Nerross is up fifty five percent. And I believe that that has a.

Lot to do with the fact that people are realizing, boy, Uncle Nerors tastes really good old fashion. It's really good in a whiskey sour, it's really good in the peniculin. And so the restaurants and the bars are the ones that are really driving the growth of Uncle Nearest. And it's both the story and the fact that we're the most awarded bourbon five years running.

Our thanks to Von Weaver, CEO of Uncle Nearest and author of the book Love and Whiskey, The remarkable true story of Jack Daniel, his master disciller, Nearest Green and the Improbable Rise of Uncle Nearest.

You're listening to Bloomberg BusinessWeek coming up from college dropouts to co founders of a growing coffee chain now in its twentieth year of existence. We talk with one half of the husband and wife duo behind Ziggy's Coffee and how engaging with small communities has led to their success. To me, like your coffee, don't you?

I love coffee, don't leave home without You're.

Kind of a connoisseur of coffee.

Yeah, I've been known to pull a shot of espresso or two in my life. Yes, Indeed, this is Bloomberg.

You're listening to the Bloomberg Business Week podcast. Listen live each weekday. He's starting a two pece Eastern on applecar Play and Android Auto with the Bloomberg Business Ad. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa playing Bloomberg eleven.

Thirty twenty years ago, the first Ciggy's Coffee opened up in Longmont, Colorado, just northeast of Boulder. The idea behind it from the husband and wife team was, in the words of the company, to create a space where people could gather and feel right at home.

Fast forward to today, Ziggie's has recently opened its one hundred location. The vast majority of these stores are franchised. They're in eighteen states and counting. The company sold more than eleven million drinks, and the founders have done it all by bootstrapping the business. For more on what led to the company's success, we spoke to the CEO and co founder of Ziggi's Coffee, Brandon Knudsen.

Yeah, it really goes back to college. My wife and I were kind of lost in school and she got a job at a little drive through coffee shop, and I had the great idea that, you know, hey, let's just drop out of school and you know, we could do this.

How hard you it be?

And I did convince her. Her parents didn't love that, but I did convince her to drop We're doing drop out of school and pursue our dream of open and drive through coffee shop.

But it is hard, and like we're you know, you kind of run into like whatever the psychological phenomenon is when you're to only talking to people who've done it successfully that you know, it sounds like it's easier than it is. But there are a lot of people like you who aren't still doing this because what they did did not succeed. What made it work for Ziggies.

When we opened our first it was actually called Gizzies at first. I quit my job and we're living out of the tip jar, living out of the you know, whatever little money we could make, and we're just a position where, no matter how hard it get, we didn't have a choice, and so we fought through it and listen to customers and just grinded away.

But it's interesting, right, Like I think, I certainly in New York there's a million places you can go get coffee, well known big chains, No Ziggies, not yet, smaller places. I tend to like kind of local places, small coffee shops, but there's so more of a third wave coffee person. I am a more of a third wave or make it at home because there's so many great devices.

How in two decades has the market.

Changed well, I mean drive through is huge now and you know, you know, give a lot of credit to Dutch Bros. They really put drive through coffee on the map. I know Starbucks has done a great job as that with that as well. You know, I think it's become you know, if you look at the product makes it. You know, I think we first started, we were probably eighty percent hot coffee and twenty percent cold and it's switched. It's like seventy cold between energy drinking smooth.

That's what Starbucks is too.

Yeah, yeah, it's it's just what people are looking for. It's very interesting.

You know.

It's funny that you're the drive through is so big for you because when you started this company, it wasn't about drive through. It was about creating a space, similar to what Howard Schultz has talked about when he expanded Starbucks into the so called third place. Have you been able to kind of keep to the core of creating the space for people to gather and hang out even with drive through.

Yeah, I think it's one of those unanswered prayers. We wanted a drive through. We did not want to do a cafe. We just couldn't afford it. We were broke college dropouts, moving to a new state where just knew my sister, and so the only thing we could really afford to do was we got really lucky and got this brick and mortar place in downtown Longmont. What we learned there was, you know, we're really in the service business, and no matter I joke. I made horrible coffee back then, but I had great relationship with customers. So we learned that first and then translated that into the drive throughs.

Were there moments?

I mean, I feel like whenever we talked to an entrepreneur, even super successful ones like yourself, you know, are those who are now co founders and heads of you know, publicly held companies or used to be, there's always a moment where you're like, I'm not sure we're going to make it. I am curious how many times you felt that way?

For twelve years? Probably ten years?

Wow?

And the thing with us is every time, you know, every time we made it. If you got our first store really running and making some money, then I begged my wife to do a second one, and then we went back to, oh my gosh, what did we do when we're gonna make it? And then we got there and we open a third and it's it's kind of it's been an ongoing battle for sure.

So talk a little bit about growth, because Carolin, I do talk to a lot of folks who are in the franchise business, and you know, the idea that it's really asset light is I think appealing to a lot of folks because they are able to grow without actually taking on that risk, they can offload that risk.

I think it's an interesting business model. I mean, how does that make it so much easier for you guys to grow without the risk. But you've also got to make sure the brand doesn't get tarnished.

Yeah, exactly. I mean it comes down to training.

We have a team of over fifty people here for you know, ninety seven locations, because it's all about support and I think of every store as our store from the standpoint of not wanting to fail and from a risk standpoint, we were very close with all of our franchise ease. So again, yes, it's it's capital, it's it's a lot easier on the balance sheet, but we still fill the burden and we take restore seriously as if it were our home.

Brandon, how do you decide where you grow and how you grow the rate with which you grow? Like, you know, we want to ask you a little bit about Starbucks do and kind of where they are. It feels like they're always the one everybody is measured against. But having said that, it felt like it got to a point where there's one on every corner and how could it not be eating into the business of one or the other. So how do you guys proceed with growth in a smart and thoughtful way that really pays off in the bottom and top lines.

Well, there's two areas that we have success, and the first one is people. We need to find great franchise ease, great operators. At the end of the day, we're in the service business and employees look up to their owners and they need to respect them, like them, and that's when they'll do a really, really good job is when they really care about the owners. And so the people are We're not like targeting, you know, a certain wave across the country. We don't care if we're in Maine or if we're in southern California. But have a great operator, we feel really good. The next piece is like we love bids, small markets fifteen thousand, twenty thousand person, towns fifty thousand, getting over. We love those smart small markets.

Like meaed where you're joining us from.

Yeah, we have thirty five hundred people and this is one of the best stores in the company. We're plugged in the community. We have community events, we sponsor high school things. My kids go to high school and middle school and elementary school here and so people just buy in.

We are the coffee shop.

How much capital does somebody need to start at ziggies?

It's a it's a wide range, we say, you know, on the lower end, maybe one hundred, one hundred and fifty thousand on cash if you're going to buy land and build and develop, three fifty four hundred thousand if you're going to buy the land with down payment and those sort of things.

How quickly does that initial investment get paid off?

How quickly is the return?

It depends on what year we're talking about. Now, you know, interest rates, it's such a wide variety for folks, it'd be hard to even tell you what that is.

It's okay, so it's obviously been harder in a higher rate environment.

Correct, Oh, it's tough.

I mean, you know, between interest rates and labor and goods and those sort of things. It's it's it's always moving and we're just just trying to adjust as it goes.

What about franchise fees that get paid to you, I mean that's how you guys end up making the money. How do those how do those sort of tabulate?

Yeah, so franchise fees are really the upfront fees to buy the rights of the license, and that money gets used to open stores and train with big believers in heavy training. We send a team of six people out for at least two weeks to open stores wherever they are, because it's really importantly open, open, really strong. Where the money is made on our end, where the revenue comes in to support our team that supports our franchisees is the royalty of six percent on the kind of adjusted growth.

Okay, so let's go to You know, we mentioned Starbucks before, and it's certainly a story that has been front and center for us as it's getting a new CEO, very well known in.

The fast casual space, well known to you too. Yeah, Brian Nicol.

You've known him for years.

We've you know, known him for a while.

Yeah, you've interviewed him a lot.

You and I have also both talked to him and yeah, and followed him because he came in, you know, just as the pandemic was getting underway, a tough time with a well known chain that was you know, certainly had its issues and really got deep into digital in terms of automating some things at the chain. Starbucks fighting off sloping demand. You know, customers are having to make choices, and I wonder what you think about price point. They're also dealing with some concerns in the Chinese market. They're looking to you know, cut weight times. They've got activist investors. There's a lot going on. What do you make of starbucks woes? How do you think about where they are? And I understand you operate in a very different space, but I'm just curious what you watch in terms of their woes.

I mean, it's crazy to, you know, put ourselves up next to Starbucks, and they are.

They are the reason that we're all in this business.

They educated to the consumer and we all should be saying thank you, and so I will never ever speak poorly on them. I think a little bit's just a little bit of tiredness of the brand. I mean, I think people are excited about new brands. Like I said, Rose and Siggies, it's new. I think the comparisons with f of them we have. We have a big food menu, our food mixes twenty five percent, and which makes this different than a lot of other brands.

I just think that it's hard to stay on top.

I think everyone's trying to knock you down, and I think they'll figure it out. They always seem to. You know, we try to stay out of all the things that are polarizing. We just focus on giving great, authentic service to our customers. And I could see them going back to that, but honestly, we're head down focus on our franchise ease, just trying to help them be successful and what's you know, it's a tough market out there. We want to really spend our time just focusing on our customers.

What do you find when it comes to loyalty, Brandon that like, when people find out about the shop, do they come back? How do you have loyalty programs that track that?

Yeah, yeah, we have a loyalty are We're we're in the mid to high fifty percent as far as our in our app usage, So those are our loyal members. You know, right now people are not frequent in stores as much and that's definitely our goal.

But it's all all about regulars for us.

What about like app ordering and stuff.

Yeah, we do some app order and it's it's not a ton it's single digits order ahead. We're working on that. We just released our new app about a year ago and working through some kings there but it's definitely a big part of it.

So what's next for you guys? And I am curious? You say, you know, it's fun to kind of put yourself in the league of Starbucks. Having said that, is there a growth that you want to stay at or size that you want to stay at? Do you think about going public? Like, what's what's the future?

I couldn't think of anything worse than going public for me personally, it just looks like it does look like a whole lot of fun to me. You know, we're going to open I mean, we'd love it. We're targeting forty five fifty stores a year. We're going to let the franchise de dictate that if we can find awesome people to open one hundred stores a year, will do that. But you can't force it. And that's what's great about not being public. We can grow at a pace that makes sense for us and it makes sense for franchisees and make sure we're putting them in positions to be successful.

Well, it doesn't necessarily you don't necessarily have the pressure on you to go public or have an exit because you haven't accepted any outside financing, right correct, No, our goal.

Is to just help every franchise you make as much money as possible right now, and there's no pressures outside of that.

So profitable I assume you are given that you haven't had to take on any venture fundraising or private equity funds.

Yeah, yes, it's we've really invested in our team and so that's been the biggest challenge for us as a company is you know, we have fifty people for our headcounts, over fifty for ninety seven stores.

It's a big number, but we really believe.

Especially right now with how tough it is out there, that we need to provide a ton of support and a ton of train and information, and we need to be relevant with ltos and there are sort of things, which is why we have just an amazing creative team and operations team here which does cut into that. But we're looking down the line.

That was Brandon Nudsen, CEO and co founder of Ziggi's Coffee.

Still ahead on Bloomberg Business Week. Nothing like wrapping up the week with a ready to drink cocktail?

Are you in non alcoholical?

Dude?

You know what I mean? You don't want me having a drinking getting on air?

I don't know some days I do fair.

This is Bloomberg.

You're listening to the Bloomberg Business Week podcast. Catch us Live weekday afternoons from two to five pm. Easter, Listen on Apple car Play and then brout Auto with a Bloomberg Business act or want us Live on YouTube.

As a former colleague of ours used to say, it's five o'clock summer, doesn't Jimmy Buffett didn't. He used to say that all the time.

To you, a lot of people do.

One of the trends we are increasingly seeing from startups and the establishment alike is pre mad cocktails, easy to.

Buy, no shaking nor stirring necessary.

And that brings us to the family owned Jeloso Group of Companies, whose parent company was founded nearly six decades ago in Montreal, Canada and now produces over one hundred alcoholic beverage products in the US and Canada with over three hundred and fifty employees and seven warehouses.

Although Jeloso runs the second generation of the family owned Jelosa Group of Companies, which in clues Jealosa Beverage Group USA. He sat down in studio joining Bloomberg's Matt Miller and me taking us back to how it all began.

We're a family owned business. Immigrant parents immigrated in nineteen fifty seven, came here for a better life. We're from the south of Italy, and basically my father ventured into important grapes from California because in Canada you have liquor boards, and my father realized that in Quebec you only drink beer, and he said, we don't drink beer as Italian. So basically there was no wines to be had, and the wines that were available were very expensive. And being a farmer, he said, you know what, let me bring in grapes for the immigrant community. And then that's the story.

So he brought in grapes to make your own wine in Quebec for immigrants exactly so, because you know, we're a legislative state, so there's a lot of taxation.

It's not free market like it is here in the US. So that's how we start. And basically from there it went on and when people started hearing about my father making wine, he was never really making wine. He was crushing grapes and the must people would be bringing it home to ferment it. And the local authorities got wind of this and said hey, this man is bootlegging. He's actually making wine. We're in control of the wine industry in Quebec, and they sequestered all the liquids that were in my father's warehouse and the liquids were then juice. Then six months later, my father's lawyer contacts him, says, by the way, mister Jeloso, you know what, you're going to be charged with bootlegging. He goes, what it? You know what? They did a test and it's wine, He goes, But naturally it's going to ferment, it will turn into wine. So basically, my father brought in an anologist from Europe and my father won the case. And the lawyer asked my father, listen, now's the time to sue the government. My father said, I came here as an immigrant for a better life. I want them to give me a wine permit. That's why our family has the first wine permit in Quebec. Zero zero role.

What a story.

So tell us about what you got, what it's grown in.

You've turned this into a company that does do you deal with beer now as well?

We deal with beer, we deal with cider, we deal with spirits. We represent Bacardi, we represent Boston Beer in Quebec. Basically we are a one stop shop.

And this is like one of the hottest growing areas of the alcoholic beverage segment, right, I mean everything from the from the lowest level too. I mean there's really uppity mixed cock te pre mixed cocktails that you can order at a restaurant.

What you have to realize is that whenever you're drinking a cocktail at a restaurant, you'll never You'll never find unisons and taste. Somebody will add one more ounce of cognac, one more ounce of vodka. So what we venture out was basically creating a malt. Why malt, because malt gives us access to people, to markets, whereby spirits you're limited in general. So we actually patented the process whereby we clean the malt and we add the proper salts, the proper sugar levels, so that at the end of the day you can receive the natural flavors of whatever cocktail you want to build on. And what you have here cocktails being the first original cocktail and Sonny Margarita is the number one selling cocktail in the ussev Wow, it beats up every every other cocktail and this from Quebec.

Could you believe that it's pretty cool stuff. It's a crowded market though increasingly. How do you get yourself noticed or how do you think about that? Because it feels like we talk to a lot of folks in the beverage in the alcohol space, and I just feel like there's a lot of startups, there's a lot of the establishment that are coming out with different brands. So how do you distinguish yourself or get noticed.

You need agility, you need flexibility. You have to address not what the consumer wants, what you believe they want. One of the things that we pride ourselves is having the proper contacts with distributors because, like you said, Carol, there are so many people out there wanting to load up the warehouses of all these distributors, whereby, at the end of the day, you saw it in the craft beer business, whereby everybody got on board and everybody got stinged by it because the craft beer business somehow sued.

Right.

So what we've done is we provide proper quantities, We provide constant updates and flavor profiles. But at the same time we are authentic in terms of flavor. There is no natural there is no unnatural ingredients. And what we do is, okay, that's the sunny margarita. You're gonna enjoy it.

It sounds like a beer, guys, it's not.

It's not a beer like you know what. At the beginning, everybody used to tell me. By the way, it's molled, I go tell me something. You like Scotch's malt. So you have to get the people to understand that it's only the alcohol stream that gives you access to a network. So it tastes exactly like spirits because we redesigned it as spirits.

All right, Carol is taking a sip. Now you've poured it.

Into margarita, and it's nice.

It has a hint of salt, and I'm.

Picky about margarita's.

It does have a hint of salt. That's an important part. So I haven't had a drink.

I'm not going to put it near you.

I haven't had a.

Drink in two years, but I did drink alcohol. I loved the salt in the Martin margarita.

Right, Yeah, that's incredible.

What does this cost into retail? Yeah, that's a good question.

I have no idea you have to go to your website.

It's like it's like I would say a thing about sorry, I mean to do that's a twenty two ounce can.

So it's like a tall boy, right.

What do you think because I think about when you go to a bar, right, like a margarita is.

Like ten twelve dollars and tea. Yeah, depending on do you make an alcohol free version or do you make alcohol free cocktails as well?

We are the biggest producers of non alcoholic beverages. We started in nineteen eighty nine with wine coolers and what and what you have to realize we have we have brands that are non alcoholic because the demographics, the population, age, aging, better lifestyle. I say between now and twenty fifty fifty percent of the people won't be drinking alcohol.

Although I do wonder you know, Map brought up a great point about how a lot of people don't want any alcohol anymore.

There's that trend.

There's also a wellness healthier trend, no sugars, that kind of thing that's a real concern for a lot of individuals called bucha. How are you thinking about that in terms of how you guys do things well and are you seeing that in adaptay as?

I mean you see you when you see plays like moltsen Cores change their name to the Molten Cores Beverage Company, They're starting to realize they have to walk away from beers of certain staple items. So you have non alcoholic was always considered zero point five because of the changing demographics. Now everybody's focusing on zero point zero because we have to attend certain other demographics or religious beliefs going forward because the population is changing. And the wellness, I mean, there's hydration, there's longevity. You have to address it today and how we do it. Also, A non alcoholic and non acoholic is that we started in the eighties for the simple reason that we knew that people need an alternative and children. To make sure that children don't drink, they have to have products that are non alcoholic with a name that is alcoholic. So it takes that stigma away from them and that pressure because pure pressure is very strong. So we have nono, non alcoholic champagnes, non alcoholic cocktails and yeah, when you look at that, we offer that that range across the board.

Have you seen a lot of growth in that area?

So much, and especially when you see big players themselves like Heineken, Budweis or and everybody.

Yeah, what about for something like this where I think, I mean, I've actually you know, been either on a vacation or I sail and like there's not a lot of we don't keep a lot of stuff on them, you know. There and I've picked up these pre made cocktails and there it's really nice and convenient. So I am curious, what kind of growth are you seeing in this area.

Well, we have grown double digit ready to drink Yeah, last six years. Every month we control the category in terms of margarita. We're the third largest in America and we still do Our runway is still is still there because you know, it's like at the end of the day, we're fighting big boys, And like Matt was saying, what makes us pertinent is the fact that we keep our ear with the distributor. We may, we attend to their needs in terms of inventory levels, and at the end of the day, people only come back for only one simple reason puffability. It has to taste good. People will adopt it once, but they have to I've had some.

Non alcoholic stuff and I have to be honest with you, I didn't like it.

That's probably beer, right, non alcoholic beer and wine is no bueno, right. But you can easily make a non alcoholic Sex on the beach, you know, because these cocktails. I'm looking through what you got, Carol's drinking the margarita, you got the screwdriver. Obviously you've got Alabama Slammer, Sex on the Beach. Yes, Sex on the Beach, a long islandized tea. Most of these cocktails were mixed originally so that you couldn't taste the alcohol in them, and I imagine that makes it easy to make non alcoholic, non alcoholic versions. How important is your distributor relationship. You must get all your intel that way.

Our intel comes from the fact that we know the industry. Our distributor is our segue to the market. They have to believe in us. So our intel comes from the fact that we develop quaffable products and that are pure and taste and have no sugars in them. The only sugars are basically the alcohol itself, that is naturally sugar.

That's although Jeloso of the family owned Geloso Group of companies, which includes Jeloso Beverage Group Usa, along with Bloomberg's Matt Meller, who.

Like you, is also into non alcoholic beverages. Yeah, been like sober for or not Soper. I shouldn't say that, but that's staining. You can say that was my word, not Mads. He's just been you know, he's been on a healthier kind of kick. Yeah.

I mean, he's like one of many right now, I think.

Yeah, I agree.

I think a lot of people are rethinking this.

Also. It's interesting to see research coming out rethinking you know, a glass of wine or alcohol, you know the impact it can have on your health longer term.

I think for Matt and me, I don't want to speak for him, but he's got young kids too, Like you know, Saturday morning, Sunday morning, you want to be there to chase them around j J and love me.

They come over and they open up your eyes.

Yeah, yeah, that's great.

All right.

That wraps up our weekend edition of Bloomberg Business Week from Bloomberg Radio. Thank you so much for joining us.

Be sure to tune into Bloomberg Business Week Monday through Friday starting at two pm Wall Street Time, on Bloomberg TV, Bloomberg Radio, and on SERIOUSXM Channel one twenty one. You can also listen to us on Apple CarPlay and Android Auto Free in the Apple app Store or on Google Play.

You can also watch our daily broadcast on YouTube search Bloomberg Global News. We're a summlcast on Bloomberg Originals, available at Bloomberg dot com, Slash Originals, and strewing platforms including Roku, Amazon, fireTV, Samsung TV Plus and more.

Find our Bloomberg BusinessWeek podcast at Bloomberg dot com, Apple, or wherever you get your podcasts, and the latest edition of the magazine is available on newsstands now at Bloomberg dot com and always on the Bloomberg Terminal.

I'm Tim Standeveek and I'm Carol Masser. Have a good and safe weekend everyone.

This is the Bloomberg Business Week Podcast.

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