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This is Bloomberg Business Wait 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.

This is Bloomberg Business Wait 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.

Well, Wholefood's Market is going small. The Amazon owned grocer is opening new small format stores aimed at serving quick trip urban consumers. You've heard this throughout the day from Charlie Pellett. It's called Whole Foods Market Daily Shop. The stores will range between seven to fourteen thousand square feed, so to put that in perspective, a typical Whole food store averages about forty thousand square feed, so pretty small compared to a typical store. The Daily Shop is also going to offer similar but slimmer assortment of products, ranging from fresh produce and frozen food to prepackaged meals in the three sixty five branded products, but they will not have buffet bars or meat counters. For more, we go to Christina Minorti, executive vice president of Growth and Development at Whole Foods Market and Amazon. She joins us here in the Bloomberg Interactive Brokers Studio Christina, how are you.

Well, Wholefood's Market is going small. The Amazon owned grocer is opening new small format stores aimed at serving quick trip urban consumers. You've heard this throughout the day from Charlie Pellett. It's called Whole Foods Market Daily Shop. The stores will range between seven to fourteen thousand square feed, so to put that in perspective, a typical Whole food store averages about forty thousand square feed, so pretty small compared to a typical store. The Daily Shop is also going to offer similar but slimmer assortment of products, ranging from fresh produce and frozen food to prepackaged meals in the three sixty five branded products, but they will not have buffet bars or meat counters. For more, we go to Christina Minorti, executive vice president of Growth and Development at Whole Foods Market and Amazon. She joins us here in the Bloomberg Interactive Brokers Studio Christina, how are you.

I'm great, Thank you for having me today.

I'm great, Thank you for having me today.

Well, thanks so much for joining us.

Well, thanks so much for joining us.

So I remember this is not the first time that Amazon has experimented with Whole Foods going smaller, or even Whole Foods has experimented with it. So back in twenty sixteen, Whole Foods open smaller stores called three sixty five by by Whole Foods Market. If consumers remember that, how is this different, Well.

So I remember this is not the first time that Amazon has experimented with Whole Foods going smaller, or even Whole Foods has experimented with it. So back in twenty sixteen, Whole Foods open smaller stores called three sixty five by by Whole Foods Market. If consumers remember that, how is this different, Well.

Thank you for bringing that one up. The three sixty five store was actually before Amazon acquired us, and it was a time when we really needed to work on our value image prior to Amazon. And you know, we learned a lot from the three sixty five. You know, we did close them and not close them, but we converted them over to Whole Foods markets.

Thank you for bringing that one up. The three sixty five store was actually before Amazon acquired us, and it was a time when we really needed to work on our value image prior to Amazon. And you know, we learned a lot from the three sixty five. You know, we did close them and not close them, but we converted them over to Whole Foods markets.

So you made them like the main Whole food yeah.

So you made them like the main Whole food yeah.

Into twenty nineteen. And this one's a little different because the three sixty five stores were twenty five five thousand square feed yeah, so this is smaller. The idea around Whole Food's market daily shop is really for a convenient shop. If we learned one thing over the last few years, as you were saying earlier. You love home shopping, you love it being delivered to your house. People want things quickly, So we envision for Daily Shop is our customers will still shop our regular stores here in Manhattan, but they'll have another avenue to shop Whole Foods Market that's quick and easy. If you want to come in and you need to get something just for dinner tonight, or you're going to have a dinner party, we'll have all of the items that you need.

Into twenty nineteen. And this one's a little different because the three sixty five stores were twenty five five thousand square feed yeah, so this is smaller. The idea around Whole Food's market daily shop is really for a convenient shop. If we learned one thing over the last few years, as you were saying earlier. You love home shopping, you love it being delivered to your house. People want things quickly, So we envision for Daily Shop is our customers will still shop our regular stores here in Manhattan, but they'll have another avenue to shop Whole Foods Market that's quick and easy. If you want to come in and you need to get something just for dinner tonight, or you're going to have a dinner party, we'll have all of the items that you need.

What's the difference, right, I'm one of those shoppers that I go into a Whole Foods or my local grocery stores to look at all the cheeses and find a new gem. And you know, I do it for fun and it's my it's my therapy. So I'll come over anytime to for just stock hold sometimes to stock Christina. What can't you find at these places? If you're one of those people that likes to explore.

What's the difference, right, I'm one of those shoppers that I go into a Whole Foods or my local grocery stores to look at all the cheeses and find a new gem. And you know, I do it for fun and it's my it's my therapy. So I'll come over anytime to for just stock hold sometimes to stock Christina. What can't you find at these places? If you're one of those people that likes to explore.

Yeah, everything you just mentioned, and you'll be able to find a daily Shop. The difference is how we're delivering it to the customer. So when you go into a typical Foods, you know we'll have a full service meet counter. This store will have the same selection of meat. It just won't be in the counter. It's how we're delivering it. It's packaged. We'll still going to have all of our beautiful cheese, and my refrigerators the same lots of cheese, so we'll still have the same selection, but it'll be wrapped and ready to go again, quick in, quick out. That's the idea behind it.

Yeah, everything you just mentioned, and you'll be able to find a daily Shop. The difference is how we're delivering it to the customer. So when you go into a typical Foods, you know we'll have a full service meet counter. This store will have the same selection of meat. It just won't be in the counter. It's how we're delivering it. It's packaged. We'll still going to have all of our beautiful cheese, and my refrigerators the same lots of cheese, so we'll still have the same selection, but it'll be wrapped and ready to go again, quick in, quick out. That's the idea behind it.

So Amazon has owned Whole Foods for a number of years at this point, and I think people in Manhattan will be familiar with the Amazon ghost stores. Is there any sort of relationship or like learnings that you took from what Amazon brought to Amazon Go in terms of technology, in terms of consumer habits that you then brought over to this version of Whole Foods.

So Amazon has owned Whole Foods for a number of years at this point, and I think people in Manhattan will be familiar with the Amazon ghost stores. Is there any sort of relationship or like learnings that you took from what Amazon brought to Amazon Go in terms of technology, in terms of consumer habits that you then brought over to this version of Whole Foods.

Well, the Amazon Ghost stores, you know, we have them in different cities and they're significantly smaller. They're only about twenty five hundred square feet. But you know, that's what I love so much about Whole Foods Market and Amazon. We all learn from each other, and you know, we lean on Amazon obviously for technolog Like the store is going to have Amazon Palm.

Well, the Amazon Ghost stores, you know, we have them in different cities and they're significantly smaller. They're only about twenty five hundred square feet. But you know, that's what I love so much about Whole Foods Market and Amazon. We all learn from each other, and you know, we lean on Amazon obviously for technolog Like the store is going to have Amazon Palm.

Which is some Whole Foods that I go to.

Which is some Whole Foods that I go to.

All the Whole Foods have it now. Kay and we will have it obviously in Daily Shop. So we really learned from each other and you know, just like we did a deep dive on the three sixty five concept as we were developing this concept. We've worked closely with the Amazon Go team, so we are constantly learning and we really lean on.

All the Whole Foods have it now. Kay and we will have it obviously in Daily Shop. So we really learned from each other and you know, just like we did a deep dive on the three sixty five concept as we were developing this concept. We've worked closely with the Amazon Go team, so we are constantly learning and we really lean on.

In for he treless technology. At this point.

In for he treless technology. At this point.

No, we'll not have JWO at least the first couple of stores. We'll have self check out, We'll have a manned register, and then it will also have the POM.

No, we'll not have JWO at least the first couple of stores. We'll have self check out, We'll have a manned register, and then it will also have the POM.

Do you envision it ever having ever having this technology? You know, I ran into this technology at a ski mountain recently and I think it was actually probably it might have been actually Amazon technology.

Do you envision it ever having ever having this technology? You know, I ran into this technology at a ski mountain recently and I think it was actually probably it might have been actually Amazon technology.

Yeah, you're finding more and more of it now.

Yeah, you're finding more and more of it now.

But do you envision like a seven thousand, fourteen thousand square foot store having this tech.

But do you envision like a seven thousand, fourteen thousand square foot store having this tech.

It could be possible for the first few or not. We really want to concentrate on how we're displaying the product. We have a little more freedom when you don't have JWO in a store, of how abundant. And that's the thing about Daily Shop. When we designed the store, we use some new designers and every place that you turned you're going to see product. I mean, we really used every inch of this space to really just celebrate food. So you'll definitely find your cheeses.

It could be possible for the first few or not. We really want to concentrate on how we're displaying the product. We have a little more freedom when you don't have JWO in a store, of how abundant. And that's the thing about Daily Shop. When we designed the store, we use some new designers and every place that you turned you're going to see product. I mean, we really used every inch of this space to really just celebrate food. So you'll definitely find your cheeses.

I just want to say, I don't know what JW is, but I imagine it.

I just want to say, I don't know what JW is, but I imagine it.

Just walk out, just walk out.

Just walk out, just walk out.

Okay.

Okay.

So it's like you know some places, some airports have it. Now you know, you walk in and you leave and you still get charged, so you're not still on it.

So it's like you know some places, some airports have it. Now you know, you walk in and you leave and you still get charged, so you're not still on it.

Let's take a step back for a second, because what was the demand you felt that you were meeting here. Is there a reason that was there a trend among shoppers that you saw that you said, hey, this would work.

Let's take a step back for a second, because what was the demand you felt that you were meeting here. Is there a reason that was there a trend among shoppers that you saw that you said, hey, this would work.

Yeah, I think you said what I said earlier is convenience. You know, I have a very good friend of mine who's lived in the city most of her life. She lives fourteen blocks away from the store right down street, fifty seventh Street store. She won't shop there because it's fourteen blocks away, but she loves whole foods, So yeah, she can get delivery. But if she wants to experience, like you said, have that experience while you're going in the store. We're going to pop these in between whole food stores and you'll be able to experience Whole Foods in a convenience.

Yeah, I think you said what I said earlier is convenience. You know, I have a very good friend of mine who's lived in the city most of her life. She lives fourteen blocks away from the store right down street, fifty seventh Street store. She won't shop there because it's fourteen blocks away, but she loves whole foods, So yeah, she can get delivery. But if she wants to experience, like you said, have that experience while you're going in the store. We're going to pop these in between whole food stores and you'll be able to experience Whole Foods in a convenience.

But is that stores being busier? Is it New Yorker's being lazier?

But is that stores being busier? Is it New Yorker's being lazier?

Right?

Right?

What is driving them to want more convenience when you can already get your food delivered?

What is driving them to want more convenience when you can already get your food delivered?

Having delivery I think is great for a good segment of our customers. But like you said earlier, you love shopping our stores. We find with our customers is they use delivery and they shop our stores. So this is just going to give them another avenue to shop our stores in a convenient way.

Having delivery I think is great for a good segment of our customers. But like you said earlier, you love shopping our stores. We find with our customers is they use delivery and they shop our stores. So this is just going to give them another avenue to shop our stores in a convenient way.

Talk to us a little bit about this relationship that Amazon has had critics. I don't. Critics have said that Amazon has not figured out retail yet, which is pretty remarkable given or physical retail. I should say pretty remarkable given their footprint, and they haven't really figured out like the Whole Food's.

Talk to us a little bit about this relationship that Amazon has had critics. I don't. Critics have said that Amazon has not figured out retail yet, which is pretty remarkable given or physical retail. I should say pretty remarkable given their footprint, and they haven't really figured out like the Whole Food's.

Identity and how they work that in.

Identity and how they work that in.

You've been at Whole Foods for well since the nineteen nineties at this point, so you've seen many different iterations of it. How would you respond that if critics said.

You've been at Whole Foods for well since the nineteen nineties at this point, so you've seen many different iterations of it. How would you respond that if critics said.

That, you know, it's been a wonderful partnership. It really has again to lean on the technology that Amazon has The discipline and running your business the processes. That's been really great. And I think now the competition the people like myself where we're overseeing I'm overseeing Amazon teams and whole foods market teams. So bringing those teams together, we've had just really good results. You have forty years of retail on the whole food side, and then you have all this experience of Amazon. We're going to win in grocery. We're going to be a world class grocer for each of the segments, whether it's a conventional shopper or a whole foods market shopper. Amazon, We're going to win in grocery.

That, you know, it's been a wonderful partnership. It really has again to lean on the technology that Amazon has The discipline and running your business the processes. That's been really great. And I think now the competition the people like myself where we're overseeing I'm overseeing Amazon teams and whole foods market teams. So bringing those teams together, we've had just really good results. You have forty years of retail on the whole food side, and then you have all this experience of Amazon. We're going to win in grocery. We're going to be a world class grocer for each of the segments, whether it's a conventional shopper or a whole foods market shopper. Amazon, We're going to win in grocery.

What do you think is kind of the thing that New Yorkers will like most about this? And how do you see it expanding onto other cities? I mean, does this only work for really big cities?

What do you think is kind of the thing that New Yorkers will like most about this? And how do you see it expanding onto other cities? I mean, does this only work for really big cities?

Good question, you know, for right now, we're going to concentrate on cities. Obviously New York. We've been very successful here, but we've done a lot of work the last few years and really trying to realize what's the right size store for the market. Even if we're looking at a suburban store, you know, is it a forty thousand is it a twenty five thousand. So we've we've got a great science team on the Amazon team that's helping us figure that out. So we're making really good real estate decisions.

Good question, you know, for right now, we're going to concentrate on cities. Obviously New York. We've been very successful here, but we've done a lot of work the last few years and really trying to realize what's the right size store for the market. Even if we're looking at a suburban store, you know, is it a forty thousand is it a twenty five thousand. So we've we've got a great science team on the Amazon team that's helping us figure that out. So we're making really good real estate decisions.

Does does it work if people have cars? Or is this a store concept for people who aren't driving?

Does does it work if people have cars? Or is this a store concept for people who aren't driving?

No, I think it could definitely be both. Like I said, we're concentrating on the on the cities right now, but I envision again that we could have stores like this even in suburban areas, suburbandense areas.

No, I think it could definitely be both. Like I said, we're concentrating on the on the cities right now, but I envision again that we could have stores like this even in suburban areas, suburbandense areas.

Which yeah, suburban dents areas. If you think about it, does it allow you to somehow open more stores because you can open smaller ones? Yeah?

Which yeah, suburban dents areas. If you think about it, does it allow you to somehow open more stores because you can open smaller ones? Yeah?

Absolutely. I mean finding a real estate box that's, you know, a seven or eight thousand square feet as opposed to fifty thousand square feet. We can move a lot quicker with our growth.

Absolutely. I mean finding a real estate box that's, you know, a seven or eight thousand square feet as opposed to fifty thousand square feet. We can move a lot quicker with our growth.

With the Nashville, Upstate New York. What do we think, Tim?

With the Nashville, Upstate New York. What do we think, Tim?

Wait, if as long as we can do Bloomberg Radio from there, then I'm good. Hey, I really appreciate you coming by, Christina, Thanks so much. That's Christina Minorti, executive vice president of Growth and Development at Whole Foods Market and Amazon, talking about the new Whole Foods Market Daily shop the smaller footprint stores that are fraction of the size of a typical Whole Foods.

Wait, if as long as we can do Bloomberg Radio from there, then I'm good. Hey, I really appreciate you coming by, Christina, Thanks so much. That's Christina Minorti, executive vice president of Growth and Development at Whole Foods Market and Amazon, talking about the new Whole Foods Market Daily shop the smaller footprint stores that are fraction of the size of a typical Whole Foods.

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

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

We each week here at Bloomberg, The Market's Live team doesn't investor survey. It's the m Live Pulse and ask questions about different elements of financial markets. This week, it's all about private credit, and a majority of respondents in the latest Bloomberg Markets Live Pulse survey said that private loans are a safer bet than the risky publicly traded bonds this if the US economy stumbles, So if the US does go into recession.

We each week here at Bloomberg, The Market's Live team doesn't investor survey. It's the m Live Pulse and ask questions about different elements of financial markets. This week, it's all about private credit, and a majority of respondents in the latest Bloomberg Markets Live Pulse survey said that private loans are a safer bet than the risky publicly traded bonds this if the US economy stumbles, So if the US does go into recession.

That's not all though.

That's not all though.

More than forty percent said private credit is most likely to perform best in credit over the next twelve months, and that's despite a majority also predicting weaker returns and lower quality and direct loans as competition between lenders intensifies. Well, I want to focus on that competition between lenders intensifying at least at the beginning of our conversation with Christina Paget, curious what she has to say about all of this. She's set of leverage finance research and Analytics for Moody's Investor Service. She joins us once again from New York. Christina, good to have you back.

More than forty percent said private credit is most likely to perform best in credit over the next twelve months, and that's despite a majority also predicting weaker returns and lower quality and direct loans as competition between lenders intensifies. Well, I want to focus on that competition between lenders intensifying at least at the beginning of our conversation with Christina Paget, curious what she has to say about all of this. She's set of leverage finance research and Analytics for Moody's Investor Service. She joins us once again from New York. Christina, good to have you back.

How are you, I'm good, Thank you, well, thanks.

How are you, I'm good, Thank you, well, thanks.

For joining us on this. So I wanted to start the idea. I'll start on the idea of weaker returns and lower quality when it comes to direct loans, because back in the fall, late summer fall, your team wrote about a so called quote race to the bottom as a result of competition between banks and direct lenders, likely resulting in more defaults as riskier debt deals get done. Have we seen that at all play out in your opinion over the last few months.

For joining us on this. So I wanted to start the idea. I'll start on the idea of weaker returns and lower quality when it comes to direct loans, because back in the fall, late summer fall, your team wrote about a so called quote race to the bottom as a result of competition between banks and direct lenders, likely resulting in more defaults as riskier debt deals get done. Have we seen that at all play out in your opinion over the last few months.

Well, I think the first part of the story has emerged. So in twenty twenty three, we really saw most risky deals just go directly to the private credit entity, you know, and the public sector deals really remained on the sidelines as investors really didn't show a lot a large degree of interest in the riskier part of the of the rating spectrum. So what we've seen in January and again in February were deals that had gone to the direct lenders coming back to the syndicated loan market. As I think investor optimism improved the belief that rates are probably going lower so that the syndicate loan market is decidedly cheaper. And so that's the primary motivation, and so we did see deals come back to this market, and I think fundamentally behind that story will be a tightening in spreads for both markets as they compete. But the other thing that we generally see when competition intensifies is terms get worse for the creditor. In other words, the loan agreements get much more flexible, much more favorable to the barrow and the borrower in this case is primarily a private equity backed LBO so Christina.

Well, I think the first part of the story has emerged. So in twenty twenty three, we really saw most risky deals just go directly to the private credit entity, you know, and the public sector deals really remained on the sidelines as investors really didn't show a lot a large degree of interest in the riskier part of the of the rating spectrum. So what we've seen in January and again in February were deals that had gone to the direct lenders coming back to the syndicated loan market. As I think investor optimism improved the belief that rates are probably going lower so that the syndicate loan market is decidedly cheaper. And so that's the primary motivation, and so we did see deals come back to this market, and I think fundamentally behind that story will be a tightening in spreads for both markets as they compete. But the other thing that we generally see when competition intensifies is terms get worse for the creditor. In other words, the loan agreements get much more flexible, much more favorable to the barrow and the borrower in this case is primarily a private equity backed LBO so Christina.

That might be good for the borrower, but not as good for the lender. And if you're the lender, how do you know that many more private credit firms, many more banks are not chasing risk at their own expense?

That might be good for the borrower, but not as good for the lender. And if you're the lender, how do you know that many more private credit firms, many more banks are not chasing risk at their own expense?

How do I how do you know that they're not chasing it at their own expense?

How do I how do you know that they're not chasing it at their own expense?

Yeah?

Yeah?

How do you know that they're not diving into riskier and riskier deals to chase some return here.

How do you know that they're not diving into riskier and riskier deals to chase some return here.

I mean, I think that's what we will see right now as a consequence, as we see riskier deals coming to market. I would still say that the most risky deals really still primarily go to the direct lenders, so that's where you have really the least visibility.

I mean, I think that's what we will see right now as a consequence, as we see riskier deals coming to market. I would still say that the most risky deals really still primarily go to the direct lenders, so that's where you have really the least visibility.

Do you think that the market needs to be more transparent, right? I mean, this is a market that really it's it's not as publicly available to see when things are going south in private deals. Would you recommend that this market does become more transparent over time?

Do you think that the market needs to be more transparent, right? I mean, this is a market that really it's it's not as publicly available to see when things are going south in private deals. Would you recommend that this market does become more transparent over time?

I mean, I think that is generally speaking, where you get a better sense of what's going on in the market and you can prepare yourself for a variety of outcomes. And this market is particularly opaque, not small part of the market is comprised of the business development corps or the BDCs. They are less opaque than other parts of the market in that they do report the loans on their books, but they don't have the same obligations as a bank has, for example, where there is actually prudential oversight as well. The regulatory burden is much different. It is a much more lightly regulated part of the overall financial market, and it doesn't allow for as much preparation for some more consequential dynamics that could happen if the economy weekends, if the rate market changed materially. You know, at the moment, I think everybody feels pretty good about where leverage is going. From the perspective of a lower rate environment, it tends to be supportive. And you know, twenty three and twenty two were pretty painful for highly leveraged entities as rates just went up pretty dramatically over a relatively short period of time.

I mean, I think that is generally speaking, where you get a better sense of what's going on in the market and you can prepare yourself for a variety of outcomes. And this market is particularly opaque, not small part of the market is comprised of the business development corps or the BDCs. They are less opaque than other parts of the market in that they do report the loans on their books, but they don't have the same obligations as a bank has, for example, where there is actually prudential oversight as well. The regulatory burden is much different. It is a much more lightly regulated part of the overall financial market, and it doesn't allow for as much preparation for some more consequential dynamics that could happen if the economy weekends, if the rate market changed materially. You know, at the moment, I think everybody feels pretty good about where leverage is going. From the perspective of a lower rate environment, it tends to be supportive. And you know, twenty three and twenty two were pretty painful for highly leveraged entities as rates just went up pretty dramatically over a relatively short period of time.

Well, speaking of lending, I do want to jump in with Redhead crossing the Bloomberg terminal Banks stuck with X debt. This is the company formerly known as Twitter held refinancing talks with Elon Musk. A bank groups spearheaded by Morgan Stanley, held discussions with Elon Musk and his team about refinancing a roughly twelve point five billion dollar debt package that supported the tech billionaires take private of the social media platform MACS. This according to people with knowledge of the matter.

Well, speaking of lending, I do want to jump in with Redhead crossing the Bloomberg terminal Banks stuck with X debt. This is the company formerly known as Twitter held refinancing talks with Elon Musk. A bank groups spearheaded by Morgan Stanley, held discussions with Elon Musk and his team about refinancing a roughly twelve point five billion dollar debt package that supported the tech billionaires take private of the social media platform MACS. This according to people with knowledge of the matter.

Yeah, it's interesting. Tim. The parties discussed options that could reduce the cost of the debt to make it less risky for the banks to hold the top had faltered earlier this year. You know, Christina, it's interesting.

Yeah, it's interesting. Tim. The parties discussed options that could reduce the cost of the debt to make it less risky for the banks to hold the top had faltered earlier this year. You know, Christina, it's interesting.

We're talking a perfect segue.

We're talking a perfect segue.

It is a perfect segue, Christina. We're talking a lot about why these banks are able to really reopen the leverage finance markets, and it's because they're not held with as much hung debt as they were, say a year or so ago. Are there lessons learned about the financings that were done in this era where people were kind of fast and loose. Are there kinds of companies that you think, either either banks or private credit lenders will be wary of financing at this point in time.

It is a perfect segue, Christina. We're talking a lot about why these banks are able to really reopen the leverage finance markets, and it's because they're not held with as much hung debt as they were, say a year or so ago. Are there lessons learned about the financings that were done in this era where people were kind of fast and loose. Are there kinds of companies that you think, either either banks or private credit lenders will be wary of financing at this point in time.

I think in general you can say that. You know, if you looked at twenty twenty one, everybody was very optimistic. Rates were low. The expectation was actually for the economy to be strong. So while there was a lot of risk taking that went on, and that's where a lot of the hung deals came from. You know, it was kind of hard to anticipate where rates were going with the you know, the war in Ukraine, that the impact of supply constraints. There were a lot of exogenous events that would have been fairly hard to anticipate. But I think that's why what you see among the banks are a certain kind of prudential regulation, right to sort of limit the amount of exposure they might have too riskier credits. And I guess the converse is true among the private credit direct lenders, right, they have less constraints and they have different ways of addressing that risk. They have a different relationship with the borrower than you do in the syndicated loan market, where they're much The relationships tend to be closer. They tend to be fewer lenders, and negotiating is different and perhaps one could argue more efficient, But I think there will always be periods of generous lending and then regret. You know, I don't think that's really going away, and I think that's why we look to certain kinds of constraints on that behavior. The BDCs do have limitations on leverage, and so that does prevent some ultimate risk in terms of how much they're willing to take on in any particular case.

I think in general you can say that. You know, if you looked at twenty twenty one, everybody was very optimistic. Rates were low. The expectation was actually for the economy to be strong. So while there was a lot of risk taking that went on, and that's where a lot of the hung deals came from. You know, it was kind of hard to anticipate where rates were going with the you know, the war in Ukraine, that the impact of supply constraints. There were a lot of exogenous events that would have been fairly hard to anticipate. But I think that's why what you see among the banks are a certain kind of prudential regulation, right to sort of limit the amount of exposure they might have too riskier credits. And I guess the converse is true among the private credit direct lenders, right, they have less constraints and they have different ways of addressing that risk. They have a different relationship with the borrower than you do in the syndicated loan market, where they're much The relationships tend to be closer. They tend to be fewer lenders, and negotiating is different and perhaps one could argue more efficient, But I think there will always be periods of generous lending and then regret. You know, I don't think that's really going away, and I think that's why we look to certain kinds of constraints on that behavior. The BDCs do have limitations on leverage, and so that does prevent some ultimate risk in terms of how much they're willing to take on in any particular case.

Well, Christy, this is why we love checking in with you every few months. You give it us an update on what you guys over at Moody's and Investor Services are looking at when it comes to private credit. That's Christina Paget, head of Leverage, Finance, Research and Analytics for Moody's Investor Service.

Well, Christy, this is why we love checking in with you every few months. You give it us an update on what you guys over at Moody's and Investor Services are looking at when it comes to private credit. That's Christina Paget, head of Leverage, Finance, Research and Analytics for Moody's Investor Service.

This is Bloomberg Business Week.

This is Bloomberg Business Week.

You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern 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.

You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern 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.

Well.

Well.

He grew Printson's endowment nearly ten fold over his almost thirty year tenure, from three point five billion dollars to thirty four billion dollars, generating an average annual return of ten point five percent over the past few decades. Past two decades, I should say the recent years have been a bit challenging. It is an important fund, of course. Earnings provide roughly two thirds of Princeton's operating revenue and seventy percent of the undergraduate financial aid budget. Princeton is the richest US university when measured by endowment per student. Those are all tidbits from a recent profile of Andrew Golden, President of the Princeton university investment company. That profile courtesy of Bloomberg News Higher Education finance reporter Janet Lauren. We're lucky to have with us both of them this afternoon, Janet and Andrew here in the Bloomberg Interactive Brokers studio.

He grew Printson's endowment nearly ten fold over his almost thirty year tenure, from three point five billion dollars to thirty four billion dollars, generating an average annual return of ten point five percent over the past few decades. Past two decades, I should say the recent years have been a bit challenging. It is an important fund, of course. Earnings provide roughly two thirds of Princeton's operating revenue and seventy percent of the undergraduate financial aid budget. Princeton is the richest US university when measured by endowment per student. Those are all tidbits from a recent profile of Andrew Golden, President of the Princeton university investment company. That profile courtesy of Bloomberg News Higher Education finance reporter Janet Lauren. We're lucky to have with us both of them this afternoon, Janet and Andrew here in the Bloomberg Interactive Brokers studio.

Good to have you with us.

Good to have you with us.

Andrew, I want to start with you.

Andrew, I want to start with you.

How are you?

How are you?

I am groovy?

I am groovy?

Thank you, very groovy.

Thank you, very groovy.

You've got a few more months until you know, officially.

You've got a few more months until you know, officially.

Hang up your hat.

Hang up your hat.

We got to ask you, though, before we get into your history at Princeton. Shanala reminded me that if we close in the Green today, we're sixteen record. It's for the S and P five hundred just so far this year.

We got to ask you, though, before we get into your history at Princeton. Shanala reminded me that if we close in the Green today, we're sixteen record. It's for the S and P five hundred just so far this year.

I had nothing to do with that.

I had nothing to do with that.

We'll talk to us a little bit about how you see this market. Is it Is it a market that has too much concentration in tech? Is it a market where things have moved too quickly too fast? Are you seeing froth? What are your impressions?

We'll talk to us a little bit about how you see this market. Is it Is it a market that has too much concentration in tech? Is it a market where things have moved too quickly too fast? Are you seeing froth? What are your impressions?

Well, I want to emphasize that whatever I see in the market anyone given point in time really doesn't influence how we invest. So I'm not particularly good at making predictions in terms of just evaluations. Yes, valuation seem quite high in maybe the case that for some companies that's justified, but it's not clear that that would be true across the board. So I sleep a little less well than normal.

Well, I want to emphasize that whatever I see in the market anyone given point in time really doesn't influence how we invest. So I'm not particularly good at making predictions in terms of just evaluations. Yes, valuation seem quite high in maybe the case that for some companies that's justified, but it's not clear that that would be true across the board. So I sleep a little less well than normal.

How well, okay, so a little less well than normal. I think it's fair to say that that's a a market take from somebody.

How well, okay, so a little less well than normal. I think it's fair to say that that's a a market take from somebody.

So I appreciate that, Janet.

So I appreciate that, Janet.

I want to broaden out the conversation a little bit and just give us an idea of of how all this got in your radars hiary education finance reporter. I mean, you covered the performance of endowments. It's a big deal that somebody like Andrew, who's been there for close to three decades is leaving.

I want to broaden out the conversation a little bit and just give us an idea of of how all this got in your radars hiary education finance reporter. I mean, you covered the performance of endowments. It's a big deal that somebody like Andrew, who's been there for close to three decades is leaving.

Yes, And I have to say, my colleague Joe Mysik pointed out this very funny mention in a bond offering document, which is a very staid document. And Joe emailed me and said, what is going on here? Because the bond offering, which Andy can talk about in a little bit, mentioned some of Andy's nicknames that he goes by Sparky in the Commodore, and I said, this would be a great time to write about his retirement after almost thirty years. So I'd like to start with what did the endowment look like when you came in nineteen ninety five. Was it mostly stocks that were directly hold held bonds? And how did you go about to change this program that produced such spectacular returns.

Yes, And I have to say, my colleague Joe Mysik pointed out this very funny mention in a bond offering document, which is a very staid document. And Joe emailed me and said, what is going on here? Because the bond offering, which Andy can talk about in a little bit, mentioned some of Andy's nicknames that he goes by Sparky in the Commodore, and I said, this would be a great time to write about his retirement after almost thirty years. So I'd like to start with what did the endowment look like when you came in nineteen ninety five. Was it mostly stocks that were directly hold held bonds? And how did you go about to change this program that produced such spectacular returns.

You know, Princeton was in the early days of diversifying the program, so it was not it was mostly stocks and bonds. But the chair of Princo had articulated a few years prior three initiatives that meant more private investing, more engagement hedge funds, and a less successful program that was originally called Global Balance Management, giving trusted advisors very large blocks of money and say do what you will invest all over the world. So it was definitely making progress there. It was funny the governments was different that we had to bring every major decision to the chair to Dick Fisher, who had this day job as being a CEO of Morgan Stanley. And so my early years was to work on changing that government so that we could have a much more complicated roster to invest with the world's best investors, pursuing niche strats. Jason to create that broadly diversified program.

You know, Princeton was in the early days of diversifying the program, so it was not it was mostly stocks and bonds. But the chair of Princo had articulated a few years prior three initiatives that meant more private investing, more engagement hedge funds, and a less successful program that was originally called Global Balance Management, giving trusted advisors very large blocks of money and say do what you will invest all over the world. So it was definitely making progress there. It was funny the governments was different that we had to bring every major decision to the chair to Dick Fisher, who had this day job as being a CEO of Morgan Stanley. And so my early years was to work on changing that government so that we could have a much more complicated roster to invest with the world's best investors, pursuing niche strats. Jason to create that broadly diversified program.

Andrew, what is the art of choosing fund managers here. You know, you look today and it's like every private equity firm, every private credit firm, and every hedge fund is holding their own investors to a different metric. So how do you kind of parse to the noise?

Andrew, what is the art of choosing fund managers here. You know, you look today and it's like every private equity firm, every private credit firm, and every hedge fund is holding their own investors to a different metric. So how do you kind of parse to the noise?

Yeah, well, it's a great question, and it is mostly art. I like to describe myself as a recovering quant and that means that I understand just what the limitations.

Yeah, well, it's a great question, and it is mostly art. I like to describe myself as a recovering quant and that means that I understand just what the limitations.

Are of just so nice failed quant.

Are of just so nice failed quant.

Still, these are not mutually exclusive. There's a reason why I'm in recovery. That assessment of who's going to be a great partner is really critical, and it is art. I when I make my pitch to recruit Princess Best and Bryce and others to come join us, I say, this is one of those ten thousand hour things that it's going to take you a long time to learn, but in some sense you already know. It's the equivalent of saying, who do I want in my study group? Who do I want to partner with? People have written books about this. I would say the underappreciated element of this is what I call seeking an alignment of appetites. That sounds like alignment of interest, but interest can be contracted. Appetites are those natural things. What is motivating someone to come to work every day, work hard and try. Is it to be the very best at what they do? Or is it simply to make themselves as rich as possible.

Still, these are not mutually exclusive. There's a reason why I'm in recovery. That assessment of who's going to be a great partner is really critical, and it is art. I when I make my pitch to recruit Princess Best and Bryce and others to come join us, I say, this is one of those ten thousand hour things that it's going to take you a long time to learn, but in some sense you already know. It's the equivalent of saying, who do I want in my study group? Who do I want to partner with? People have written books about this. I would say the underappreciated element of this is what I call seeking an alignment of appetites. That sounds like alignment of interest, but interest can be contracted. Appetites are those natural things. What is motivating someone to come to work every day, work hard and try. Is it to be the very best at what they do? Or is it simply to make themselves as rich as possible.

Andrew remind us of what the asset allocation is right now?

Andrew remind us of what the asset allocation is right now?

Roughly roughly well, our mission is to produce very high returns forever and to be inflation, so it has to be quite aggressive. We have just eight percent of our long term target to our fixed income portfolio. You know, interestingly, we have a relatively small portion in traditional call it a dozen points in traditional long only accounts in developed markets, a similar sized amount in emerging markets. We have a good bit in what we call independent return, which is a subset of what the world calls hedge funds. These are managers who are given a little bit broader license to invest in ways that we think will produce high equity like returns, but without so much dependence on market movements in most environments, so if you short out some stocks, then you're reducing your e equality beta. The big gorilla, of course, is our private equity program, which is in the high thirty percent range in a smaller amount in real assets across the border. We're just trying to invest where we think we have a competitive advantage.

Roughly roughly well, our mission is to produce very high returns forever and to be inflation, so it has to be quite aggressive. We have just eight percent of our long term target to our fixed income portfolio. You know, interestingly, we have a relatively small portion in traditional call it a dozen points in traditional long only accounts in developed markets, a similar sized amount in emerging markets. We have a good bit in what we call independent return, which is a subset of what the world calls hedge funds. These are managers who are given a little bit broader license to invest in ways that we think will produce high equity like returns, but without so much dependence on market movements in most environments, so if you short out some stocks, then you're reducing your e equality beta. The big gorilla, of course, is our private equity program, which is in the high thirty percent range in a smaller amount in real assets across the border. We're just trying to invest where we think we have a competitive advantage.

And can you talk about that venture or capital portfolio. I think there was one year that it had like a one hundred percent return if I'm remembering correctly. And where do you go from here in terms of find what are you looking for in new managers?

And can you talk about that venture or capital portfolio. I think there was one year that it had like a one hundred percent return if I'm remembering correctly. And where do you go from here in terms of find what are you looking for in new managers?

Well, we're very excited, particularly Vetric Cappell, about finding new managers because it's an industry that needs to refresh itself, you know, as you well know, a big emphasis for us has been to really expand our networks as to how we find those managers, which is motivated by and actually has resulted in a much greater amount of diversity in terms of the individuals who are running our program. And we're doing that simply because we think we can make more money if we're tapping previously under tapped sources of talent. That gives us an advantage. Of course, in trying to deal with the issues of investing, bringing multiple ways of thinking to the tabe creates a huge advantage. So what we're looking for in venture capital generally can be summarized as because venture capitalists have to convince the investments to allow them to invest. We're looking for people that are not just smart, not just hard working, but have that special quality of folks are going to root for their success.

Well, we're very excited, particularly Vetric Cappell, about finding new managers because it's an industry that needs to refresh itself, you know, as you well know, a big emphasis for us has been to really expand our networks as to how we find those managers, which is motivated by and actually has resulted in a much greater amount of diversity in terms of the individuals who are running our program. And we're doing that simply because we think we can make more money if we're tapping previously under tapped sources of talent. That gives us an advantage. Of course, in trying to deal with the issues of investing, bringing multiple ways of thinking to the tabe creates a huge advantage. So what we're looking for in venture capital generally can be summarized as because venture capitalists have to convince the investments to allow them to invest. We're looking for people that are not just smart, not just hard working, but have that special quality of folks are going to root for their success.

So can you talk a little bit about the bonds since we are you know, we're here because of the bond issuance. We found that fun little tidbit. What are these bonds funding? And you can talk a little bit about spending money at Princeton, right.

So can you talk a little bit about the bonds since we are you know, we're here because of the bond issuance. We found that fun little tidbit. What are these bonds funding? And you can talk a little bit about spending money at Princeton, right.

We have a very ambitious capital h plan. We feel that we owe it to society to uh do as much as we can within our area of expertise, and that capital plan includes simply an expansion, doing more of what we always done, bringing more students, but it also means keeping up in areas like engineering, which obviously there's new things to research and to teach in that area, and it seems that critical for future leaders, which we hope we're trading to have some exposure to that. So at the same time as well, we're funding additional space in engineering. We also, i think you said that you were in campus recently, we have this amazingly ambitious and amazing art museum project. So the whole idea is to just really allow for folks to have a full range of understanding human knowledge and wisdom in a very diverse said way.

We have a very ambitious capital h plan. We feel that we owe it to society to uh do as much as we can within our area of expertise, and that capital plan includes simply an expansion, doing more of what we always done, bringing more students, but it also means keeping up in areas like engineering, which obviously there's new things to research and to teach in that area, and it seems that critical for future leaders, which we hope we're trading to have some exposure to that. So at the same time as well, we're funding additional space in engineering. We also, i think you said that you were in campus recently, we have this amazingly ambitious and amazing art museum project. So the whole idea is to just really allow for folks to have a full range of understanding human knowledge and wisdom in a very diverse said way.

Hey, speaking of human knowledge and wisdom, you worked under the legendary David Swinson Yell Chanalie. I don't know about you, but this was we went to Chaneli and I went to different business schools, but I think this was the first case study that I did in business school, was the Yell endowment. What did you learn from David Swinson and how did you bring it to Princeton.

Hey, speaking of human knowledge and wisdom, you worked under the legendary David Swinson Yell Chanalie. I don't know about you, but this was we went to Chaneli and I went to different business schools, but I think this was the first case study that I did in business school, was the Yell endowment. What did you learn from David Swinson and how did you bring it to Princeton.

You know, David was very good at teaching all of us the importance of first principle thinking UH, and that gave him the wherewithal to plow ahead even when it was against conventional wisdom. So I think I learned a lot from just that idea of UH, do whatever you think is the right thing, subject to the constraint that you won't get completely run over for attempting to do it. And I mentioned in the word completely, because you know, David did not shy away from any challenge.

You know, David was very good at teaching all of us the importance of first principle thinking UH, and that gave him the wherewithal to plow ahead even when it was against conventional wisdom. So I think I learned a lot from just that idea of UH, do whatever you think is the right thing, subject to the constraint that you won't get completely run over for attempting to do it. And I mentioned in the word completely, because you know, David did not shy away from any challenge.

Well, so on that note too, we're talking about first principles, we're talking about the ten thousand hours. You know, so many rules of thumb when you kind of look around the investment community these days, what are some things that you think have become flyaway behaviors? You know, are there things that you know you would advise have become normal ways of thinking in the markets these days that maybe shouldn't be.

Well, so on that note too, we're talking about first principles, we're talking about the ten thousand hours. You know, so many rules of thumb when you kind of look around the investment community these days, what are some things that you think have become flyaway behaviors? You know, are there things that you know you would advise have become normal ways of thinking in the markets these days that maybe shouldn't be.

Well again, going back to Dave, you know, he wrote the second book on basically, don't try this at home, right, even if there.

Well again, going back to Dave, you know, he wrote the second book on basically, don't try this at home, right, even if there.

And now everybody is trying, even if there's a case study, don't try it at all, right.

And now everybody is trying, even if there's a case study, don't try it at all, right.

And so I think there's a whole slew of things that people are doing because Yale and Princeton and I might tell you others of doing it, but they don't have the staffs and they don't importantly have the governance structure. There's an old saying that good clients make for good architects, and it's true that good bosses make for good investment officers. So to be blessed with a board and you know, entire governance chain that actually comprises sophisticated investors and understand that uh uh, you know Mama's warning. Mama said, there be days like this when things don't exactly work out the way you would hope. And to have that sympathetic view and to get into the quality of analysis as opposed to saying, well, you know, we're just going to do.

And so I think there's a whole slew of things that people are doing because Yale and Princeton and I might tell you others of doing it, but they don't have the staffs and they don't importantly have the governance structure. There's an old saying that good clients make for good architects, and it's true that good bosses make for good investment officers. So to be blessed with a board and you know, entire governance chain that actually comprises sophisticated investors and understand that uh uh, you know Mama's warning. Mama said, there be days like this when things don't exactly work out the way you would hope. And to have that sympathetic view and to get into the quality of analysis as opposed to saying, well, you know, we're just going to do.

Whatever.

Whatever.

You know has outperformed over the last several years.

You know has outperformed over the last several years.

A question to Janet's great reporting here. Also we were talking about the reason for the bond. Why did a bond document needs so many personal details about you?

A question to Janet's great reporting here. Also we were talking about the reason for the bond. Why did a bond document needs so many personal details about you?

Look, I think the answer is that the personal details are so compelling it the market demanded that. I know that, I know the bond's priced very very well, and I'd like to believe it was because of that extra details of that give it a sense of just how the sausage was getting made. In terms of the studies.

Look, I think the answer is that the personal details are so compelling it the market demanded that. I know that, I know the bond's priced very very well, and I'd like to believe it was because of that extra details of that give it a sense of just how the sausage was getting made. In terms of the studies.

Well, it is great for Janet right well, and of course that endowment performance does signal a strength to bond investors. But you know, looking back at thirty years, what has made you the most proudest in terms of the investments? And also you know how the money has been spent?

Well, it is great for Janet right well, and of course that endowment performance does signal a strength to bond investors. But you know, looking back at thirty years, what has made you the most proudest in terms of the investments? And also you know how the money has been spent?

Yeah, I think it's actually how the money has been spent is the most important one to focus on.

Yeah, I think it's actually how the money has been spent is the most important one to focus on.

You know.

You know.

Early on, I think I've been here about three four years and Princeton announced its first major step up in financial aid, which was not just about undergraduately, but making our graduate student's life much better. My son was on the playground when his best friend, whose father was an important professor at Princeton, came up to him and said, my dad says that your dad's a hero. Right, So that that was a proud, just ego moment, you know. But I think our leadership on things like financial aid and and better access and importantly better support for students who do come here. So you know that the graduation rates or what they are, you know, on the investment front, it's a thousand little things. And I would say as opposed to it being something that you could write in your story about. You know, always remember looking out my window and thinking about the problem. It's more knowing that connected with people on my team, knowing that connected with our partners.

Early on, I think I've been here about three four years and Princeton announced its first major step up in financial aid, which was not just about undergraduately, but making our graduate student's life much better. My son was on the playground when his best friend, whose father was an important professor at Princeton, came up to him and said, my dad says that your dad's a hero. Right, So that that was a proud, just ego moment, you know. But I think our leadership on things like financial aid and and better access and importantly better support for students who do come here. So you know that the graduation rates or what they are, you know, on the investment front, it's a thousand little things. And I would say as opposed to it being something that you could write in your story about. You know, always remember looking out my window and thinking about the problem. It's more knowing that connected with people on my team, knowing that connected with our partners.

Hey, that's that is with us right now.

Hey, that's that is with us right now.

Very pleased to have Andrew Golden, President of Princeton University Investment Company and higher education finance. Reporter Janet Lauren, this is Bloomberg.

Very pleased to have Andrew Golden, President of Princeton University Investment Company and higher education finance. Reporter Janet Lauren, 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 then brout Auto with a Bloomberg Business act or watch us live on YouTube occasionally.

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 then brout Auto with a Bloomberg Business act or watch us live on YouTube occasionally.

It's five foot nine inches, it walks like a bird. It's got glowing white eyes, and it's got one job plucking empty yellow bins off a shelf and faring them several feet to a conveyor. And it does it over and over again and.

It's five foot nine inches, it walks like a bird. It's got glowing white eyes, and it's got one job plucking empty yellow bins off a shelf and faring them several feet to a conveyor. And it does it over and over again and.

Has a really cute name.

Has a really cute name.

Digit Don't worry. It's just in the testing phase. It's not going to transform the logistics industry anytime soon, but it is a major technological leap forward, and it positions its maker at the vanguard of an effort to build machines that can toil alongside human workers. Matt Day writes all about digit in and automation in the forthcoming issue at Bloomberg Business Week. You can read the story now on the Bloomberg terminal and at Bloomberg dot com Slash BusinessWeek. Matt joins us from our Seattle bureau. Matt, good to have you with us this afternoon. If we think about a product like digit this is a humanoid ish robot that is set to do well what many people and I think the numbers prove it dangerous repetitive tasks this is like the holy Grail when it comes to automation if they can figure this out.

Digit Don't worry. It's just in the testing phase. It's not going to transform the logistics industry anytime soon, but it is a major technological leap forward, and it positions its maker at the vanguard of an effort to build machines that can toil alongside human workers. Matt Day writes all about digit in and automation in the forthcoming issue at Bloomberg Business Week. You can read the story now on the Bloomberg terminal and at Bloomberg dot com Slash BusinessWeek. Matt joins us from our Seattle bureau. Matt, good to have you with us this afternoon. If we think about a product like digit this is a humanoid ish robot that is set to do well what many people and I think the numbers prove it dangerous repetitive tasks this is like the holy Grail when it comes to automation if they can figure this out.

Yeah, it sure looks like it. It looks like we're on the cusp of something. Predictions like this are kind of dangerous territory for humanoid robots. And know they've been around for decades in some form, but mostly as kind of stand in a wave machines or other kind of experiments. But it really looks like, especially with Agility turning on manufacturing later this year, that they're actually going to step out into the world and do some some useful stuff for.

Yeah, it sure looks like it. It looks like we're on the cusp of something. Predictions like this are kind of dangerous territory for humanoid robots. And know they've been around for decades in some form, but mostly as kind of stand in a wave machines or other kind of experiments. But it really looks like, especially with Agility turning on manufacturing later this year, that they're actually going to step out into the world and do some some useful stuff for.

The first time.

The first time.

Okay, So that's a point that you make in the piece that I think is really important here. I think it was late last month we covered the huge funding round from figure dot ai that included investors such as Nvidia and others about humanoid robots. But you make the point in the piece that there are lots of startups working on this type of thing, but the company that makes digit Agility, these ones are actually among the first to be tested in a real environment.

Okay, So that's a point that you make in the piece that I think is really important here. I think it was late last month we covered the huge funding round from figure dot ai that included investors such as Nvidia and others about humanoid robots. But you make the point in the piece that there are lots of startups working on this type of thing, but the company that makes digit Agility, these ones are actually among the first to be tested in a real environment.

No, Yeah, that's right.

No, Yeah, that's right.

They were tested by Amazon are being tested by Amazon starting last October. GXO Logistics, the XPO warehousing spin off the did over the holiday rush, having Digit actually in a warehouse to use to the ship spinks, So just moving tote from conveyor to conveyor. Yeah, these guys look like, at least when it comes to the hardware, they're they're pretty far ahead, at least cutting edge, but likely ahead of the rest of the pack out there.

They were tested by Amazon are being tested by Amazon starting last October. GXO Logistics, the XPO warehousing spin off the did over the holiday rush, having Digit actually in a warehouse to use to the ship spinks, So just moving tote from conveyor to conveyor. Yeah, these guys look like, at least when it comes to the hardware, they're they're pretty far ahead, at least cutting edge, but likely ahead of the rest of the pack out there.

We're seeing images right now on our YouTube broadcasts and on our Bloomberg Originals broadcast of actually what Digit looks like in the warehouse. Were you able to These are hard, tough, tough places to get into. Were you able to actually witness? Did you do and work?

We're seeing images right now on our YouTube broadcasts and on our Bloomberg Originals broadcast of actually what Digit looks like in the warehouse. Were you able to These are hard, tough, tough places to get into. Were you able to actually witness? Did you do and work?

I was, Yeah, just it was real real early days the first week they had these things on site at a warehouse outside of Seattle. But yeah, it's it's you know, as advertised, they kind of boop along. It's pretty pretty strange and nerving to see them actually working in person. I don't know, there's just something about the human the human form factor, and then that the noise they make. There's this kind of like you know, if they're as they're actuators are lifting things and they're squatting down, like there's a little they do like kind of a funny, funny little dance handwalks.

I was, Yeah, just it was real real early days the first week they had these things on site at a warehouse outside of Seattle. But yeah, it's it's you know, as advertised, they kind of boop along. It's pretty pretty strange and nerving to see them actually working in person. I don't know, there's just something about the human the human form factor, and then that the noise they make. There's this kind of like you know, if they're as they're actuators are lifting things and they're squatting down, like there's a little they do like kind of a funny, funny little dance handwalks.

How do humans feel about these robots? I mean, at the end of the day, when you think about AI and what it does do that could help out workers and the way that it can kind of step into jobs at workers would have otherwise had, I mean, how do people feel about this?

How do humans feel about these robots? I mean, at the end of the day, when you think about AI and what it does do that could help out workers and the way that it can kind of step into jobs at workers would have otherwise had, I mean, how do people feel about this?

You know, I think there haven't been enough cases where actual sort of line workers and work sites have been exposed to folks like digit, folks robusts like Digit to have to have strong reactions. One thing we did learn from Agility is, you know, they didn't tell us exactly who had this experience, but in one of the trials, you know, the employees put up best on digital safety vest, just the same kind that workers used, and there was kind of a kind of a shocks reaction to it. So they decided to go another route and label it, you know, for safety in some other manner. But just the notion that like, oh, this is wearing the same vest as me, this is here to take my job. That was kind of a different certainly different optically than you know, just a little green robot.

You know, I think there haven't been enough cases where actual sort of line workers and work sites have been exposed to folks like digit, folks robusts like Digit to have to have strong reactions. One thing we did learn from Agility is, you know, they didn't tell us exactly who had this experience, but in one of the trials, you know, the employees put up best on digital safety vest, just the same kind that workers used, and there was kind of a kind of a shocks reaction to it. So they decided to go another route and label it, you know, for safety in some other manner. But just the notion that like, oh, this is wearing the same vest as me, this is here to take my job. That was kind of a different certainly different optically than you know, just a little green robot.

That's really interesting to hear. I'm looking at the Bloomberg terminal Matt Amazon is one million, five hundred and twenty five thousand employees, very high proportion of those are employees who work in the warehouse and do deliveries. This is as of December thirty First, does Amazon talk about, or, based on your reporting about Amazon talk about a world where the company has fewer employees because they're able to use robots such as these.

That's really interesting to hear. I'm looking at the Bloomberg terminal Matt Amazon is one million, five hundred and twenty five thousand employees, very high proportion of those are employees who work in the warehouse and do deliveries. This is as of December thirty First, does Amazon talk about, or, based on your reporting about Amazon talk about a world where the company has fewer employees because they're able to use robots such as these.

You know, internally, they've targeted what they call fully automated or highly automated warehouses for years now. It's been definitely a goal for them to at least explore theoretically, could we do this with basically no people in the warehouse? And they've they've backed off of that in recent years, you know, in part because the technology just seemed always too pie in the sky and there were more practical things they could do right now. You know, now when it comes to sort of public relations and the stuff they say outside the house, they've said, listen, you know, we've been using robots in our facilities for a decade. In that time, we've hired hundreds of thousands of people. Like, our intent with this stuff is not to you know, just whack away at our workforce. We're trying to make you know, things more productive, trying to get goods outside of our warehouses as quickly as possible, And they say that remains remains their goal. But certainly when you introduce humanoids into a warehouse, that's going to raise some new questions.

You know, internally, they've targeted what they call fully automated or highly automated warehouses for years now. It's been definitely a goal for them to at least explore theoretically, could we do this with basically no people in the warehouse? And they've they've backed off of that in recent years, you know, in part because the technology just seemed always too pie in the sky and there were more practical things they could do right now. You know, now when it comes to sort of public relations and the stuff they say outside the house, they've said, listen, you know, we've been using robots in our facilities for a decade. In that time, we've hired hundreds of thousands of people. Like, our intent with this stuff is not to you know, just whack away at our workforce. We're trying to make you know, things more productive, trying to get goods outside of our warehouses as quickly as possible, And they say that remains remains their goal. But certainly when you introduce humanoids into a warehouse, that's going to raise some new questions.

No, Amazon has had a huge history of how it's operated with robotics in the past. How does this kind of fall into the big picture from how it's interacted with robotics for the last decade in automation, so.

No, Amazon has had a huge history of how it's operated with robotics in the past. How does this kind of fall into the big picture from how it's interacted with robotics for the last decade in automation, so.

So, most of the robots to date in Amazon facilities have been little wheeled robots that no one would confuse with a person. Right, They're more in common with a scooter or a self driving car than a humanoid. Those things today hold all of Amazon's inventory. They drag the shelves around to waiting human employees. You know, what we're looking at with humanoids in their warehouses and in other facilities if the technology proves out is kind of being able to PLoP a robot down in a space that wasn't specially built for it. Right, you can think about robots working in the back office of a post office, robots working in a storeroom, right, you know, not requiring kind of chain link fences and you know giant industrial facilities, you know, purpose built or purpose retrofitted for their pre's right, presumably we could just PLoP down these these bipeds wherever we need them.

So, most of the robots to date in Amazon facilities have been little wheeled robots that no one would confuse with a person. Right, They're more in common with a scooter or a self driving car than a humanoid. Those things today hold all of Amazon's inventory. They drag the shelves around to waiting human employees. You know, what we're looking at with humanoids in their warehouses and in other facilities if the technology proves out is kind of being able to PLoP a robot down in a space that wasn't specially built for it. Right, you can think about robots working in the back office of a post office, robots working in a storeroom, right, you know, not requiring kind of chain link fences and you know giant industrial facilities, you know, purpose built or purpose retrofitted for their pre's right, presumably we could just PLoP down these these bipeds wherever we need them.

Bipeds, two legs, humanoid, It's all stuff like out of science fiction. We were referring earlier to the Kiva Systems purchased that Amazon made back in twenty twelve, which for a long time was its biggest acquisition. It was seven hundred and seventy five million dollars at the time. A lot has happened obviously since then. Hey, Matt, I'm wondering if if these things have to look like people, if these robots have to be humanoid in order to do the things that people do, Matt, do do they do you think they have to look like human beings, like you know, the Kiva ones that you mentioned are on wheels.

Bipeds, two legs, humanoid, It's all stuff like out of science fiction. We were referring earlier to the Kiva Systems purchased that Amazon made back in twenty twelve, which for a long time was its biggest acquisition. It was seven hundred and seventy five million dollars at the time. A lot has happened obviously since then. Hey, Matt, I'm wondering if if these things have to look like people, if these robots have to be humanoid in order to do the things that people do, Matt, do do they do you think they have to look like human beings, like you know, the Kiva ones that you mentioned are on wheels.

They don't.

They don't.

They wouldn't be confused for a robot, but like or for for a person do in order for for these these robots to actually be productive, do they actually need to look like human beings?

They wouldn't be confused for a robot, but like or for for a person do in order for for these these robots to actually be productive, do they actually need to look like human beings?

I'm not sure they need to look like us, but there's a debate in the industry about how much they need to look like us. They have to, they have to have our similar shapes and dimensions to be able to move around the same space. But if you look at the startups that are plugging away at this like Agility, you know, definitely from the pictures you've shown, it takes a kind of minimalist approach, like it's clearly a robot. They're not trying to pass these things off as human. There's no you know, fake nose or mouth. If you look at some of some of their rivals, including some of the ones that are raising money right now, they have much different approach, right you know, you can you see robotic arms covered in and fabric material to make it sort of blend in a little bit better. You see attempts at faces with you know, more human features, so that there really is a range of opinion on whether they need to shoot for you know, hey, this thing looks you know, plausibly human ish or you know, no, sorry, this is a this is a work machine. And the work machine approach is the one that Agility has taken so far and the one that's paying some dividends with Amazon.