January 15, 2025 • 35 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Eva Dou, Technology Policy Reporter at the Washington Post, discusses her book House of Huawei: The Secret History of China’s Most Powerful Company. Katie Thomas, Lead at the Kearney Consumer Institute, shares the details of her report Keeping up with the Consumer.
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Speaker 1 (00:00):
Bloomberg Audio Studios, podcasts, radio News. You're listening to Bloomberg
BusinessWeek with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 2 (00:14):
Well, our next guest calls it the most powerful technology
company that China has ever built. No, we're not talking
about byte Dance, the parent company of TikTok. It's the
app that has a you know, future that's up in
the air. We're not talking about ten Cent, which last
week was blacklisted by the Biden administration for alleged links
to the Chinese military. No, we're not talking about Ali
Baba or JD dot Com or Mayitwan. We're talking about Huawei,
(00:38):
the privately held maker of telecom equipment that really, I
think came into focus for a lot of people a
few years ago, back in twenty eighteen, when the company's CFO,
Menguanzhou was arrested in Canada and set off an unprecedented
diplomatic uproar. We've got with us the person who wrote
the book on Huawei. Evadou is technology policy reporter at
(00:58):
The Washington Post and the author of the new book
out today, House Ofhuahwei, The Secret History of China's most
powerful company. She joins us from Washington, DC. EVA. Welcome,
congratulations on the book. We're going to spend quite a
bit of time talking about Huawei in just a minute,
but you also write a lot about TikTok us China
technology security. You've been very busy, so we wanted to
(01:19):
pick your brain a little bit about the latest in
that realm. Let's start with TikTok, because the fate of
this app is up in the air. What do you
see as the probable future for TikTok.
Speaker 3 (01:35):
Well, the Supreme Court is supposed to be ruling very soon,
probably this week and after, and many people think that
the Supreme Court will be upholding the ban on TikTok,
and that would mean the only its only hope for
being saved is probably going to be President Trump's administration
(02:00):
and doing something to make this app continue to be
operational in the United States.
Speaker 2 (02:07):
What sort of like, what could the Trump administration do
to save it?
Speaker 3 (02:12):
Well, under the law, UH, TikTok could continue to operate
if it is sold to other ownership. This is of
course something that the company and Beijing are strongly resistant to,
so it probably would involve UH diplomatic negotiations between the
(02:35):
Trump administration and the company in Beijing to to convince
them to do that.
Speaker 4 (02:41):
Is it likely though? If that's the case, and I
think about the powerful algorithm, does that go with it
or is it a very different TikTok that would end
up in the hands of a different owner.
Speaker 3 (02:52):
Well, those are some of the questions that are that
are on there. So there's a lot of piece that
moving pieces here and the incoming Trump administration's plans for China,
including tariffs, including a really tough policy on trade, and
so TikTok is going to be part of it. And yeah,
(03:16):
so it really depends how they prioritize it and how
they negotiate it.
Speaker 4 (03:21):
I feel like this transitions well into your new book
out and what I guess what I want to ask
is the outcome of what happens with TikTok, does that
indicate to you a very serious and significant change in
US China relations and really the global business environment and
global tech environment. Or is that TikTok or Huawei which
(03:46):
we're going to start talking about. Are they separate? Are
they individual cases?
Speaker 3 (03:51):
Well, certainly, I think both of them are part of
this same trend of there's heightened secure already awareness about
technology and becoming a priority. An app like TikTok just
a few years ago, the idea that it would be
banned in the United States was was viewed as ludicrous.
(04:14):
There was much more space for technology that was seen
as consumer technology, and there's been you know, the line
in the sand has really moved very rapidly to where
security concerns are taking precedence. And you know, both with
an app like TikTok and with the telecommunications equipment that
(04:35):
Quawey makes, there is this growing understanding among policymakers that
just enormous amounts of data flow through these systems and
that yeah, that that is that that the security angle
is now taking precedence.
Speaker 4 (04:55):
Well, Eva and I would also then ask maybe about
the flip side of us in terms.
Speaker 3 (04:59):
Of our own giants.
Speaker 4 (05:01):
But I think it is fair to say the assumption
that it's maybe different for a Chinese tech giant. Can
we assume that a company like Huawei, I mean your
new book out is the House of Huawei, The Secret
History of China's most Powerful Company. I mean, for a
company to become as giant and successful as Huawei, should
we assume that there is some Chinese involvement, some Chinese oversight,
(05:26):
some understanding among Huawei, and the access that the Chinese
government can and will probably have to that company or
their information or their abilities.
Speaker 3 (05:39):
Well, this is really the question that has been debated
by policymakers around the world and key to whether they
keep Huawei in their systems or not. And so I
think one thing to remember is that the companies are
not necessarily in control. They can't necessarily stay sure if
(06:00):
someone is accessing their systems or not. Certainly the equipment
being developed in a certain country would mean there's an
elevated risk of it being accessed by intelligence agencies, you know,
whether in the development process or in the shipment process.
(06:21):
And sometimes that happens even without the company's knowledge. So yeah,
so security experts do say that is a legitimate risk
and something where it's very hard to sort of find
smoking guns. So what policy makers have been saying is
sort of, you know, we're not necessarily saying there's a
(06:43):
smoking gun, but there's old and so it's a preventative measure.
Speaker 2 (06:50):
So let's let's just take a big step back here
and talk a little bit about what Huawei does and
what Huawei is because I think, like I said, a
lot of people, it wasn't really on their radar until
this arrest back in twenty eighteen and the extradition process
that was really a year that took years. Yes, there
(07:13):
were some consumer devices in the United States available in
the US, they didn't really take off. What do people
need to understand about what Huawei makes and where they
are able to sell it.
Speaker 3 (07:28):
I think to many people where they've heard of Huawei
is from their smartphones, which for years it's been one
of the largest smartphone brands in the world. But really
the reason it's become such a policy concerns it's also
the largest maker of the equipment that goes into phone
and internet networks around the world. And of course these
(07:50):
networks they carry all sorts of information, you know, phone calls, emails,
internet traffic, and from that perspective, it's become something that
policymakers have become very concerned about. Is this one company
and it's global footprint. It's far head and shoulders the
(08:13):
dominant supplier in developing nations around the world, and even
in Europe is a dominant supplier in many countries.
Speaker 4 (08:26):
You know, one thing we want to ask you know,
we've spent a lot of time over the last few
years talking with Andy Purty, who was the chief Security
office for Huawei America.
Speaker 2 (08:34):
You would come in every few months, Yeah, and.
Speaker 4 (08:36):
We would talk to him about kind of the strainer
growing strained relationships certainly in the tech environment.
Speaker 2 (08:43):
About Huawei not being a security risk to the United
States right exactly.
Speaker 4 (08:48):
And so I am wondering in this environment access to
an administration you've got Elon Musk, you know, a certainly
high profile of the tech community. I mean, what what
are your expectations of Huawei having a strong communication line
with the incoming Trump administration and maybe it's future changing
(09:14):
in a more favorable way here when it comes to
the United States.
Speaker 3 (09:20):
Well, I think if that happens, that they make this
kind of rebounding communications in the United States, that would
be defying expectations in that the incoming Trump administration. If
you look at who is in Trump's team, there's there,
there's a lot of security hawks, a lot of people
(09:43):
have been vocal critics of China for many years, and
so I think what we can expect is for policy
to be, you know, even more stringent than it has
been in recent years as far as control of technology
being transferred to China, and from that point of view,
I would say it's it's hard to see where the
(10:06):
bright spot is for Huawei in the US market and
the foreseeable future.
Speaker 2 (10:12):
Oh that's interesting, okay. So I have a few questions
around this, one of them being the opportunity for Huawei
outside of the US, because you know, we've talked a
lot in the past few years about China's growing influence
with the Belton Road initiative, and I'm wondering from a
cybersecurity perspective, from a telecom infrastructure perspective, are they able
(10:37):
to use that as a lever in any way?
Speaker 3 (10:42):
Well, I think so, And part of that is just
there have been so few alternatives in this market. There's
very few players, and so the question is if you
don't use Huawei, what do you use for these developing countries.
And so that's sort of been what officials in many
of these countries have been saying, which is, you know,
(11:02):
the United States wants US to take Wilwey equipment out,
but what do we do then? Sort of the only
comparable vendors for the most part, have been European companies
whose equipment is far more expensive and that's just outside
of the budget for many countries to do. So. Part
(11:24):
of the US policy under the Biden administration has been
to programs to develop new competitors making this kind of
gear so that countries do have an alternative if they
if they actually want to switch.
Speaker 2 (11:39):
Hey, one more question on the administration, because Carol mentioned
Elon Musk being tech friendly and being in the you know,
part of the administration in a certain capacity. When you
mentioned China hawks, Elon's not one of those. You know,
he has a business in China. He has Tesla there
and he was able to do something that nobody else
has been able to do in the past by building
(12:00):
his own Tesla facility that doesn't have a you know,
a joint venture with a Chinese doing it really quickly,
doing it really quickly that that had never been done
does does What is his influence in your view when
it comes to tech policy in China.
Speaker 3 (12:18):
Well, yeah, so Elon Musk is very interesting from this perspective.
He's both because he's on he has business interests on
both sides. As you mentioned, Tesla, China is a huge
market for them and also a production based and at
the same time for SpaceX very much they are uh
(12:41):
they're a military US military supplier, and so very much
sort of building up seeing their customer base being very
skeptical about China. So I think specific to Huawei, actually,
Elon Musk is a direct competitor, though it's not often
(13:02):
thought of that way his Starlink satellite system. It provides
an alternative for many countries to using these terrestrial phone
and internet networks that Huawei and other companies built. So
and Starlink has been expanding at an extraordinarily rapid rate
(13:23):
around the world. We'll probably see more of that competitive
dynamic between the companies in coming years.
Speaker 4 (13:31):
We're talking with Evado. She's technology policy reporter at the
Washington Post. She's the author of the new book out
today hasse Huawei, The Secret History of China's Most Powerful Company.
Eva I am curious, you know, you really get into
the details of the history of this company that I
think most people didn't even think about until we had
the problems and the issues right of a few years ago.
(13:54):
Why is it important to understand the history of this
company in light of the security considerations that many global
leaders are concerned about when it comes to this company,
tie it up for me.
Speaker 3 (14:09):
Yeah, I think part of it is just understanding how
we got to this point where the US and China
are so acrimonious and there's so much distrust, especially regarding
the technology industry now, and so I think Huawei is
such a good case study and that it was one
(14:31):
of the very first private tech companies founded in China
in the early eighteen hundreds, and it's been on the
front waves of these changing sentiments. You know, China's globalization,
that heady period where China was very much embraced by
the world and these tech companies were embraced by the
(14:52):
world and moving towards you know, this current moment when
you know the fear that trying to is a real
rival and adversary capable adversary to the United States is
so on the forefront of policy decision making today.
Speaker 2 (15:11):
Okay, So bring us to twenty eighteen. When the company's CFO,
menguan Zhou was arrested in Canada. It set off that
unprecedented diplomatic uproar. She was held for years as this
played out in the courts. What happened there?
Speaker 3 (15:30):
Yeah, So that was the moment when the rubber kind
of hit the road. So for years there have been
these concerns bubbling up in the United States and other
Western countries about Huawei, but it really was that moment
when the CFO was detained and at the same point
the Trump administration put these sort of unprecedented sanctions on
(15:53):
Huawei that sort of moved us to a new sort
of Cold War s era where it was clear, like
this era of globalization has come to an end. Now
we're into something new, and as far as just seeing
(16:17):
China as a competitive rival in a very different way
and reacting in a very very different way.
Speaker 2 (16:24):
In a sense, it's a big part of the story
is about the shift in China over the years that
Huawei has existed. Listen, you did a ton of research
on this, interviews, archival research, You have reported from China,
You've reported from Taiwan during your career. Can you answer
the question for us whether or not Huawei is a
(16:48):
security risk to the United States?
Speaker 3 (16:53):
A security risk, I would say, I would say probably,
and that's something that's outside strictly the company's control, and
that what we've seen. I think the clearest evidence we've
seen has come out in Edward Snowden's leaks, which is
(17:15):
that tech companies equipment can be used by and is
used by intelligence agencies who find backdoors or build back
doors into them even without the company's knowledge. So in
a way it's not entirely in Huawei's executive's hands. They
can say, you know, our equipment is safe. We're doing
(17:38):
everything that we can, but it's not entirely the company's control.
Speaker 4 (17:46):
So I am curious just for size and scope, something
we're very into, certainly here at Bloomberg. What are the capabilities?
I mean, how should we be thinking about them? In
terms of Huawei surveillance systems which are used by government,
it's all over.
Speaker 3 (18:03):
Yeah, So this has very much become something that's part
like a new business line, these sort of citywide surveillance systems.
That has to do with you know, data networks becoming
fast enough that you can transmit huge amounts of data,
so you can have video cameras and other sorts of
(18:25):
sensors all across the city that are just streaming all
sorts of information. And so there's a number of governments
around the world that are using these systems from Huawei. Yeah,
and it's very controversial. Huawei is not the only company
(18:47):
that supplies them. IBM was actually the US company was
actually the first company that started supplying these kinds of systems.
But yeah, it's very much a debate, ongoing debate about
just how much data governments should be collecting and to
(19:07):
what degree citizens have privacy or not.
Speaker 2 (19:11):
We're speaking with Evado, technology policy reporter at the Washington Post,
also the author of the new book out today, House
of Huawei, The Secret History of China's Most Powerful Company.
Speaker 4 (19:20):
You know, Tim and I we spend a lot of
time I'm sure you do too, as we know, talking
about large language models, generative AI, what's next in terms
of the impact continuing to track? So I think about
what you are saying, what you have learned in the
context of Huawei. You know their role, whether it come,
whether it's five G in terms of communications, are AI technologies,
(19:45):
the AI races on. We know that. So I'm just wondering,
how are you thinking about that next chapter and the
concerns that we should have considering Huawei's dominance.
Speaker 3 (19:59):
Yeah, so is going to continue to be in the
in the conversation for this AI era. So they are
China's most advanced company for designing these chips, these chips
that drive these AI systems and so so. China has
(20:23):
been importing huge amounts of US chips for years to build,
you know, their big data centers for large language models,
and US sanctions have really been tightened in the past
couple of years, which means they're more reliant on Huawei
chips than ever before.
Speaker 4 (20:42):
Do you think they're so are they being hurt by
these restrictions and maybe not having access and you know,
we continue to see headlines about what this means for
Nvidia being able to share you know, it's higher and technology.
I mean, are they is China? Is Huawei being hurt
as a result of all of this or does it
just make them double down? From what you have learned,
(21:02):
does it just make China and Huawei double down to
make sure that they have the best and greatest.
Speaker 3 (21:10):
Well, certainly they've very much been hurt in that. If
you look at their trajectory before these sanctions began, they
were growing year after year at enormous clip, and now
that growth has stopped. I think the question during the
first Trump administration was, you know, can they survive? And
(21:31):
so the question, so the answer to that is clear
now that you know they're too important to China that
China is not going to let this company die. It's
going to do everything possible for it to survive. That
being said, yeah, they've very much been sort of hurt
and slowed down by by these growing restrictions from the
(21:55):
United States.
Speaker 2 (21:57):
It's interesting too, because it's not a public held company.
It's a private held company. Ownership structure, what is it?
Who owns it? And do they remain Does it remain
a private company for the foreseeable future.
Speaker 3 (22:10):
Yeah, so it's privately held, but with the shares dispersed
among numerous current and former Huawei employees, and that for
years has been a major part of the incentive program
of how Huawei's founder and Ovey got engineers to work
incredibly hard towards this cause, which was part of their
(22:33):
compensation was in the dividends they would receive from the
company's performance. Since it's privately owned, that means it does
not have much of the scrutiny of a publicly owned company.
There's definitely limitations of what they have to disclose to
the public, and they also aren't at the winds of
(22:56):
the stock market, and so that's been actually part of
their success and that they've been able to execute really
long term plans and sort of long term expensive investments
that you know, short term investors would not necessarily be
on board with. And so at at this point, it's
(23:17):
hard to see why Huawei would go public. They have
plenty of funding. China's state policy banks are very supportive
when they need funding for their projects, and so it's
probably going to remain private for the foreseeable future.
Speaker 4 (23:36):
I think about consumers, you know, people who are listening.
I mean when the Bloomberg audience, right, there's obviously investors,
there's consumers, you know, and they continue to look at
their goods and their security breaches and so and so forth,
especially when it comes to telecom. How I mean the
consumer base do they they need to be concerned, right,
and they I assume you're going to say they want
(23:56):
their governments to make sure that they're overseeing global technologlogy
because this is the new world order. And to be fair,
I mean, can we say that US companies I mean,
I mean, obviously I would assume the US government is
not involved in those technologies. I mean, it's not apples
to apples, it's different. Right when it's China and the
Chinese government when it comes to some of their big companies,
(24:17):
particularly tech companies.
Speaker 3 (24:21):
Yeah, I think so. One thing is just that technology
systems are hacked all the time, and probably hacked more
than the average consumer would would realize. And so to
an extra certain extent, it is just what is your
risk level if you work for the government, if you
(24:43):
work for you know, certain sensitive industries, Yeah, you probably
want to think twice about exactly what kind of equipment
you're using, and in fact, your employer probably has already
guidelines in place. For the average consumer, you know, there
(25:04):
there is a certain risk that your data could be hacked,
but that probably existed, whether whether you knew it or not.
Speaker 4 (25:14):
Even just one last question, got about a minute and
a half here, what was the most revealing thing to
you in writing this book, doing the deep dive, going
into the archive, talking to so many different voices, What
was again, the most revealing thing in this process for you.
Speaker 3 (25:31):
I think one of the most fun parts for me
was just seeing all the places and all the historical
moments where Huawei popped up. While I was sort of
researching in archives in the US and China and around
the world, and it really gave me an appreciation of
(25:52):
companies like this, just all plugged in how they are
affected and how they affect events going on around the globe.
You know, in China, for the Hong Kong, the historic
Hong Kong Handover, when Hong Kong was returned from being
a British colony to China, Huawei was there and helping
(26:14):
to do the serve video surveillance for it. You know,
for the Arab Spring, the Iraq War, Huawei was on
the ground, So they were there far more than a
consumer company. When you supplied the phone and internet networks,
those are crucial and the first thing that you're expected
(26:39):
to be first on the ground when anything big happening.
Speaker 4 (26:42):
Listen, great stuff, and so glad we got so much time,
even though she's technology policy reporter at Washington Post. Her
new book House of Huawei.
Speaker 1 (26:52):
This is Bloomberg Business Week, insight from the reporters and
editors that bring you America's most trusted business magazine, plus
global business, finance and tech news as it happens. Bloomberg
Business Week with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 2 (27:10):
It is Bloomberg Business Week that is Carol Master. I'm
Tim Stenevek.
Speaker 4 (27:14):
Carol.
Speaker 2 (27:14):
We learned it yesterday. The US consumers said they will
see higher inflation over the next few years than previously thought.
This came from a monthly Federal Reserve Bank of New
York survey. It showed that it's the latest sign of
mounting concerns about prices coming after November's elections.
Speaker 4 (27:30):
Yeah, that's likely not a surprise to Katie Thomas. She's
lead at the Carney Consumer Institute. It's the company that
studies consumers and their behavior to understand the current business
and economic environment. We know sentiment can be certainly consumer
sentiment so powerful. She usually joins us from Pittsburgh, which
he's here in our Bloomberg Interactive Broker studio. Really, nice
to have you in studio. How are you.
Speaker 5 (27:50):
I'm great. It's great to be here. Makes it feel
much more excited in your life.
Speaker 4 (27:54):
We are fun in studio.
Speaker 5 (27:55):
Yeah, if we may say so, exactly, Pat on the back,
on the back, Hey, how's the consumer doing? You know,
the consumer is an interesting place right now because ultimately
we're still hearing a lot of voiced stress about everyday
purchases such as grocery, but in reality, we all know
they're still spending. Right The question I keep asking is
why are we so concerned about groceries when mals and
(28:17):
airports are more crowded than they've ever been.
Speaker 2 (28:19):
Okay, I'm really glad you brought that up because I
was digging through your website the report that you have
out about the power of the consumer and how the
keeping up with the consumer watch what people do, not
what they say, And what you guys do is you
look at behavior. You don't necessarily look at what people
are telling you about their behavior because there's this distinction there.
Speaker 5 (28:43):
Yeah, you have to kind of combine the two because
perception is reality. So if people are talking about things
or voicing stress, you can't completely disregard it. But what
we're seeing right now is really a parsing out of
the needs versus wants. So for a long time we've
heard the narrative of oh, people are expending on experience
over things, but I was always questioning that, like what
(29:03):
things are losing? Well, actually, what we're starting to see
is people are willing to save on their everyday items
like groceries. You're seeing aldi Walmart, those kinds of companies
strong value props report, well, people want to spend and
optimize their needs so they really can spend on their wants.
And so you're starting to see that really shake out
(29:24):
in terms of how people are thinking about where they spend.
Speaker 4 (29:27):
I guess, you know, I think about was it Walmart
their last earnings and even the higher end. I think
that's becoming an even important aspect of their business. They're
seeing that kind of upscale consumer shopping more and more
at Walmart.
Speaker 5 (29:40):
Exactly. Consumers want to get the best bang for their
buck on their everyday items so that then they can
spend it on the things they want to, whether that's
luxury clothes, you know, going my ald has an altar
across the street, whatever that may be.
Speaker 2 (29:53):
So what does that mean for the way that consumers
are making choices what they're choosing to You say that
the airports are crowded and flights are hotels are expensive,
but yet they're also saying that grocery prices are expensive.
Speaker 5 (30:06):
Right, So that's I mean, that's kind of that voiced
stress and reality. When you run the numbers, you can
see that the percentage of food as compared to wages
is basically flat so we started to run this from
twenty nineteen to twenty twenty four. The biggest challenge we're
seeing is that consumer psychology, which people are stuck on
reference prices and anchor prices from twenty nineteen.
Speaker 2 (30:27):
That's because for many people, Carol, I mean, correct me
if I'm wrong, but we never experienced inflation as adults.
Speaker 4 (30:33):
Yeah, I think I totally agree with you that. I
think our perspective was like, well, this was the norm,
and then all of a sudden it's like, well, what
is this? Why am I I don't know, why have things?
It just feels so unusual and it feels like it's
very out of whack exactly.
Speaker 5 (30:47):
But and it is from a historical perspective, but not
from a math perspective in terms of someone's budget. And
the good thing was a rising tide lifted all ships,
when wages lifted. It wasn't just you know, white collar,
it was across the board. But so people still feel
they do feel the straight and the price increases are real,
of course, yeah, but they can afford because the prices
(31:09):
haven't come down.
Speaker 4 (31:10):
Right, we keep stressing this, right, the rate, the pace
of inflation of prices going up has come down. But
it's not like all of a sudden we're seeing decreasing pricing.
Speaker 5 (31:21):
Right, And that's why you're seeing people want to optimize
in their high frequency, everyday items. That's why you're seeing
a lot of the retailers with strong value prop and
grocery in some of those core categories, even a pair
all do well.
Speaker 4 (31:33):
So let me ask you, Katie, So in terms of
the consumers or the retail environment, like we just talked about,
who are we talking about, oh remain, Like we were
talking about having to be you were talking about signatjewelers
and that He's like, I wouldn't want to be a
retailer trying to figure out what the consumer is going
to do, when they're going to do it, how they're
going to do it. It's really really tricky. So are
there parts of the retail environment that you think, well,
(31:56):
you should watch out that, especially as we get into earnings,
it could be really difficult for them.
Speaker 5 (32:00):
So one of the things that we're talking a lot
about in our research is the idea of consumer tensions,
and in particular as it relates to the proliferation of choice.
So we've seen optionality just go through the roof. And
that's part of the reason consumers are really able to
optimize their spend is they can they have all these
options and retailers and brands where they can really pick
(32:21):
and choose, and they.
Speaker 2 (32:21):
Can also just do it online and type something in
and see many different options exactly. They and those copanies
are competing with each other. That's probably why Business Week
back in twenty nineteen, and I just looked this up,
Carol Joel would always remind us of this formerriter Bloomberg
business Week. There was that cover that asked, did capitalism
kill inflation? It was a picture of a dinosaur. Twenty
nineteen people thought inflation was over?
Speaker 4 (32:43):
Yeah, that was it, right.
Speaker 5 (32:45):
So, I mean that's exactly the challenge we're seeing with consumers.
I mean they've really been able to start to figure
out where they're going to pick and choose and where
they're going to buy. On the brand side, that actually
calls into question this ongoing choice for innovation's sake, this
growth strategies, portfolio strategies. So that's a lot of what
(33:05):
we're we're watching with retailers is who's actually got that
relevant choice figured out. That's really tapping into what the
consumer wants actually arguably tightening up how much new is
on the shelves in favor of having something that like,
because the other thing we are hearing from consumers is
I'm totally overwhelmed a lot of times. Yeah, my analysis paralysis.
(33:26):
I get so overwhelmed, I don't even buy I abandoned cart,
you know, I give up?
Speaker 4 (33:32):
All right? So then do you have a clear like
I'm thinking about our audience who are listening right and
thinking about certainly the publicly held retailers that are out there.
I mean, who's at risk?
Speaker 5 (33:42):
I would say the people at risk are the ones
that really you know, we've talked for a while about
the death of the middle, of the mushy middle. I
think that a little bit of what you're still seeing,
which is those mid tier players that don't seem to
quite know what they stand for with the consumers.
Speaker 4 (33:56):
The department stores, it sometimes struggle or is it more specialty?
Speaker 5 (34:00):
Yeah, I think it's more specialty. Frankly, I think department
stores are navigating, but they have the advantage of being
cross category. So I think when you're like a little
bit tighter on a category or even a consumer segment,
so at leisure, I think is a sector that I
would be a little bit wary of. Those can be
very like cool brands to kind of rise and fall quickly,
(34:20):
even athletics, same things happening they get, Those can go
in pretty big waves. So those are the kinds of
companies I'm watching. Are you really understanding your consumer? Are
you innovating too much? Are you optimizing effectively?
Speaker 2 (34:33):
What companies are poised to do really well in an environment.
Speaker 3 (34:37):
Such as this?
Speaker 5 (34:38):
So I think it's in some cases it's the ones
that are able to merchandise effectively and really give a
consumer that curated experience. So one that comes to mind,
for instance, is just Trader Joe's. People will tell you
they like you, and I know that's like a you know,
a bit of an obvious example. But my argument here
is people will say, oh, I like it for this
seasonality and my special treats, But really that's a tight
(35:00):
merchandise selection. And I think people don't realize the reason
they like it is it's easy to shop so easy.
Speaker 4 (35:06):
Yes, I agree with you. I get very very overwhelmed.
Speaker 2 (35:09):
Don't go to the ones in New York City while
you're here, because that is not easy. Yeah, they I
don't Ben.
Speaker 5 (35:13):
Yeah, it's true, right, it's curious for nightmarish parking lots
though all around the country, Like the parking lots are
never big about.
Speaker 4 (35:21):
Yeah, it's kind of. It's very very interesting. We'll be
fun as we head into earning season. I mean the
retailers come kind of later on the consumer. Would you
say any signs that we're headed towards a recession in
terms of consumer spending? Just got about twenty seconds.
Speaker 5 (35:37):
Yeah, short answer is no. The biggest thing I'm watching
is personal job security. If that gets worse, then I'm worried.
Speaker 4 (35:43):
All right, good stuff, Nice to have you in studio.
Well be well happy twenty five, twenty twenty five, Katie Thomas,
lead at the Carnie Consumer Institute, joining us here in
our studio.
Bloomberg Audio Studios, podcasts, radio News. You're listening to Bloomberg
BusinessWeek with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 2 (00:14):
Well, our next guest calls it the most powerful technology
company that China has ever built. No, we're not talking
about byte Dance, the parent company of TikTok. It's the
app that has a you know, future that's up in
the air. We're not talking about ten Cent, which last
week was blacklisted by the Biden administration for alleged links
to the Chinese military. No, we're not talking about Ali
Baba or JD dot Com or Mayitwan. We're talking about Huawei,
(00:38):
the privately held maker of telecom equipment that really, I
think came into focus for a lot of people a
few years ago, back in twenty eighteen, when the company's CFO,
Menguanzhou was arrested in Canada and set off an unprecedented
diplomatic uproar. We've got with us the person who wrote
the book on Huawei. Evadou is technology policy reporter at
(00:58):
The Washington Post and the author of the new book
out today, House Ofhuahwei, The Secret History of China's most
powerful company. She joins us from Washington, DC. EVA. Welcome,
congratulations on the book. We're going to spend quite a
bit of time talking about Huawei in just a minute,
but you also write a lot about TikTok us China
technology security. You've been very busy, so we wanted to
(01:19):
pick your brain a little bit about the latest in
that realm. Let's start with TikTok, because the fate of
this app is up in the air. What do you
see as the probable future for TikTok.
Speaker 3 (01:35):
Well, the Supreme Court is supposed to be ruling very soon,
probably this week and after, and many people think that
the Supreme Court will be upholding the ban on TikTok,
and that would mean the only its only hope for
being saved is probably going to be President Trump's administration
(02:00):
and doing something to make this app continue to be
operational in the United States.
Speaker 2 (02:07):
What sort of like, what could the Trump administration do
to save it?
Speaker 3 (02:12):
Well, under the law, UH, TikTok could continue to operate
if it is sold to other ownership. This is of
course something that the company and Beijing are strongly resistant to,
so it probably would involve UH diplomatic negotiations between the
(02:35):
Trump administration and the company in Beijing to to convince
them to do that.
Speaker 4 (02:41):
Is it likely though? If that's the case, and I
think about the powerful algorithm, does that go with it
or is it a very different TikTok that would end
up in the hands of a different owner.
Speaker 3 (02:52):
Well, those are some of the questions that are that
are on there. So there's a lot of piece that
moving pieces here and the incoming Trump administration's plans for China,
including tariffs, including a really tough policy on trade, and
so TikTok is going to be part of it. And yeah,
(03:16):
so it really depends how they prioritize it and how
they negotiate it.
Speaker 4 (03:21):
I feel like this transitions well into your new book
out and what I guess what I want to ask
is the outcome of what happens with TikTok, does that
indicate to you a very serious and significant change in
US China relations and really the global business environment and
global tech environment. Or is that TikTok or Huawei which
(03:46):
we're going to start talking about. Are they separate? Are
they individual cases?
Speaker 3 (03:51):
Well, certainly, I think both of them are part of
this same trend of there's heightened secure already awareness about
technology and becoming a priority. An app like TikTok just
a few years ago, the idea that it would be
banned in the United States was was viewed as ludicrous.
(04:14):
There was much more space for technology that was seen
as consumer technology, and there's been you know, the line
in the sand has really moved very rapidly to where
security concerns are taking precedence. And you know, both with
an app like TikTok and with the telecommunications equipment that
(04:35):
Quawey makes, there is this growing understanding among policymakers that
just enormous amounts of data flow through these systems and
that yeah, that that is that that the security angle
is now taking precedence.
Speaker 4 (04:55):
Well, Eva and I would also then ask maybe about
the flip side of us in terms.
Speaker 3 (04:59):
Of our own giants.
Speaker 4 (05:01):
But I think it is fair to say the assumption
that it's maybe different for a Chinese tech giant. Can
we assume that a company like Huawei, I mean your
new book out is the House of Huawei, The Secret
History of China's most Powerful Company. I mean, for a
company to become as giant and successful as Huawei, should
we assume that there is some Chinese involvement, some Chinese oversight,
(05:26):
some understanding among Huawei, and the access that the Chinese
government can and will probably have to that company or
their information or their abilities.
Speaker 3 (05:39):
Well, this is really the question that has been debated
by policymakers around the world and key to whether they
keep Huawei in their systems or not. And so I
think one thing to remember is that the companies are
not necessarily in control. They can't necessarily stay sure if
(06:00):
someone is accessing their systems or not. Certainly the equipment
being developed in a certain country would mean there's an
elevated risk of it being accessed by intelligence agencies, you know,
whether in the development process or in the shipment process.
(06:21):
And sometimes that happens even without the company's knowledge. So yeah,
so security experts do say that is a legitimate risk
and something where it's very hard to sort of find
smoking guns. So what policy makers have been saying is
sort of, you know, we're not necessarily saying there's a
(06:43):
smoking gun, but there's old and so it's a preventative measure.
Speaker 2 (06:50):
So let's let's just take a big step back here
and talk a little bit about what Huawei does and
what Huawei is because I think, like I said, a
lot of people, it wasn't really on their radar until
this arrest back in twenty eighteen and the extradition process
that was really a year that took years. Yes, there
(07:13):
were some consumer devices in the United States available in
the US, they didn't really take off. What do people
need to understand about what Huawei makes and where they
are able to sell it.
Speaker 3 (07:28):
I think to many people where they've heard of Huawei
is from their smartphones, which for years it's been one
of the largest smartphone brands in the world. But really
the reason it's become such a policy concerns it's also
the largest maker of the equipment that goes into phone
and internet networks around the world. And of course these
(07:50):
networks they carry all sorts of information, you know, phone calls, emails,
internet traffic, and from that perspective, it's become something that
policymakers have become very concerned about. Is this one company
and it's global footprint. It's far head and shoulders the
(08:13):
dominant supplier in developing nations around the world, and even
in Europe is a dominant supplier in many countries.
Speaker 4 (08:26):
You know, one thing we want to ask you know,
we've spent a lot of time over the last few
years talking with Andy Purty, who was the chief Security
office for Huawei America.
Speaker 2 (08:34):
You would come in every few months, Yeah, and.
Speaker 4 (08:36):
We would talk to him about kind of the strainer
growing strained relationships certainly in the tech environment.
Speaker 2 (08:43):
About Huawei not being a security risk to the United
States right exactly.
Speaker 4 (08:48):
And so I am wondering in this environment access to
an administration you've got Elon Musk, you know, a certainly
high profile of the tech community. I mean, what what
are your expectations of Huawei having a strong communication line
with the incoming Trump administration and maybe it's future changing
(09:14):
in a more favorable way here when it comes to
the United States.
Speaker 3 (09:20):
Well, I think if that happens, that they make this
kind of rebounding communications in the United States, that would
be defying expectations in that the incoming Trump administration. If
you look at who is in Trump's team, there's there,
there's a lot of security hawks, a lot of people
(09:43):
have been vocal critics of China for many years, and
so I think what we can expect is for policy
to be, you know, even more stringent than it has
been in recent years as far as control of technology
being transferred to China, and from that point of view,
I would say it's it's hard to see where the
(10:06):
bright spot is for Huawei in the US market and
the foreseeable future.
Speaker 2 (10:12):
Oh that's interesting, okay. So I have a few questions
around this, one of them being the opportunity for Huawei
outside of the US, because you know, we've talked a
lot in the past few years about China's growing influence
with the Belton Road initiative, and I'm wondering from a
cybersecurity perspective, from a telecom infrastructure perspective, are they able
(10:37):
to use that as a lever in any way?
Speaker 3 (10:42):
Well, I think so, And part of that is just
there have been so few alternatives in this market. There's
very few players, and so the question is if you
don't use Huawei, what do you use for these developing countries.
And so that's sort of been what officials in many
of these countries have been saying, which is, you know,
(11:02):
the United States wants US to take Wilwey equipment out,
but what do we do then? Sort of the only
comparable vendors for the most part, have been European companies
whose equipment is far more expensive and that's just outside
of the budget for many countries to do. So. Part
(11:24):
of the US policy under the Biden administration has been
to programs to develop new competitors making this kind of
gear so that countries do have an alternative if they
if they actually want to switch.
Speaker 2 (11:39):
Hey, one more question on the administration, because Carol mentioned
Elon Musk being tech friendly and being in the you know,
part of the administration in a certain capacity. When you
mentioned China hawks, Elon's not one of those. You know,
he has a business in China. He has Tesla there
and he was able to do something that nobody else
has been able to do in the past by building
(12:00):
his own Tesla facility that doesn't have a you know,
a joint venture with a Chinese doing it really quickly,
doing it really quickly that that had never been done
does does What is his influence in your view when
it comes to tech policy in China.
Speaker 3 (12:18):
Well, yeah, so Elon Musk is very interesting from this perspective.
He's both because he's on he has business interests on
both sides. As you mentioned, Tesla, China is a huge
market for them and also a production based and at
the same time for SpaceX very much they are uh
(12:41):
they're a military US military supplier, and so very much
sort of building up seeing their customer base being very
skeptical about China. So I think specific to Huawei, actually,
Elon Musk is a direct competitor, though it's not often
(13:02):
thought of that way his Starlink satellite system. It provides
an alternative for many countries to using these terrestrial phone
and internet networks that Huawei and other companies built. So
and Starlink has been expanding at an extraordinarily rapid rate
(13:23):
around the world. We'll probably see more of that competitive
dynamic between the companies in coming years.
Speaker 4 (13:31):
We're talking with Evado. She's technology policy reporter at the
Washington Post. She's the author of the new book out
today hasse Huawei, The Secret History of China's Most Powerful Company.
Eva I am curious, you know, you really get into
the details of the history of this company that I
think most people didn't even think about until we had
the problems and the issues right of a few years ago.
(13:54):
Why is it important to understand the history of this
company in light of the security considerations that many global
leaders are concerned about when it comes to this company,
tie it up for me.
Speaker 3 (14:09):
Yeah, I think part of it is just understanding how
we got to this point where the US and China
are so acrimonious and there's so much distrust, especially regarding
the technology industry now, and so I think Huawei is
such a good case study and that it was one
(14:31):
of the very first private tech companies founded in China
in the early eighteen hundreds, and it's been on the
front waves of these changing sentiments. You know, China's globalization,
that heady period where China was very much embraced by
the world and these tech companies were embraced by the
(14:52):
world and moving towards you know, this current moment when
you know the fear that trying to is a real
rival and adversary capable adversary to the United States is
so on the forefront of policy decision making today.
Speaker 2 (15:11):
Okay, So bring us to twenty eighteen. When the company's CFO,
menguan Zhou was arrested in Canada. It set off that
unprecedented diplomatic uproar. She was held for years as this
played out in the courts. What happened there?
Speaker 3 (15:30):
Yeah, So that was the moment when the rubber kind
of hit the road. So for years there have been
these concerns bubbling up in the United States and other
Western countries about Huawei, but it really was that moment
when the CFO was detained and at the same point
the Trump administration put these sort of unprecedented sanctions on
(15:53):
Huawei that sort of moved us to a new sort
of Cold War s era where it was clear, like
this era of globalization has come to an end. Now
we're into something new, and as far as just seeing
(16:17):
China as a competitive rival in a very different way
and reacting in a very very different way.
Speaker 2 (16:24):
In a sense, it's a big part of the story
is about the shift in China over the years that
Huawei has existed. Listen, you did a ton of research
on this, interviews, archival research, You have reported from China,
You've reported from Taiwan during your career. Can you answer
the question for us whether or not Huawei is a
(16:48):
security risk to the United States?
Speaker 3 (16:53):
A security risk, I would say, I would say probably,
and that's something that's outside strictly the company's control, and
that what we've seen. I think the clearest evidence we've
seen has come out in Edward Snowden's leaks, which is
(17:15):
that tech companies equipment can be used by and is
used by intelligence agencies who find backdoors or build back
doors into them even without the company's knowledge. So in
a way it's not entirely in Huawei's executive's hands. They
can say, you know, our equipment is safe. We're doing
(17:38):
everything that we can, but it's not entirely the company's control.
Speaker 4 (17:46):
So I am curious just for size and scope, something
we're very into, certainly here at Bloomberg. What are the capabilities?
I mean, how should we be thinking about them? In
terms of Huawei surveillance systems which are used by government,
it's all over.
Speaker 3 (18:03):
Yeah, So this has very much become something that's part
like a new business line, these sort of citywide surveillance systems.
That has to do with you know, data networks becoming
fast enough that you can transmit huge amounts of data,
so you can have video cameras and other sorts of
(18:25):
sensors all across the city that are just streaming all
sorts of information. And so there's a number of governments
around the world that are using these systems from Huawei. Yeah,
and it's very controversial. Huawei is not the only company
(18:47):
that supplies them. IBM was actually the US company was
actually the first company that started supplying these kinds of systems.
But yeah, it's very much a debate, ongoing debate about
just how much data governments should be collecting and to
(19:07):
what degree citizens have privacy or not.
Speaker 2 (19:11):
We're speaking with Evado, technology policy reporter at the Washington Post,
also the author of the new book out today, House
of Huawei, The Secret History of China's Most Powerful Company.
Speaker 4 (19:20):
You know, Tim and I we spend a lot of
time I'm sure you do too, as we know, talking
about large language models, generative AI, what's next in terms
of the impact continuing to track? So I think about
what you are saying, what you have learned in the
context of Huawei. You know their role, whether it come,
whether it's five G in terms of communications, are AI technologies,
(19:45):
the AI races on. We know that. So I'm just wondering,
how are you thinking about that next chapter and the
concerns that we should have considering Huawei's dominance.
Speaker 3 (19:59):
Yeah, so is going to continue to be in the
in the conversation for this AI era. So they are
China's most advanced company for designing these chips, these chips
that drive these AI systems and so so. China has
(20:23):
been importing huge amounts of US chips for years to build,
you know, their big data centers for large language models,
and US sanctions have really been tightened in the past
couple of years, which means they're more reliant on Huawei
chips than ever before.
Speaker 4 (20:42):
Do you think they're so are they being hurt by
these restrictions and maybe not having access and you know,
we continue to see headlines about what this means for
Nvidia being able to share you know, it's higher and technology.
I mean, are they is China? Is Huawei being hurt
as a result of all of this or does it
just make them double down? From what you have learned,
(21:02):
does it just make China and Huawei double down to
make sure that they have the best and greatest.
Speaker 3 (21:10):
Well, certainly they've very much been hurt in that. If
you look at their trajectory before these sanctions began, they
were growing year after year at enormous clip, and now
that growth has stopped. I think the question during the
first Trump administration was, you know, can they survive? And
(21:31):
so the question, so the answer to that is clear
now that you know they're too important to China that
China is not going to let this company die. It's
going to do everything possible for it to survive. That
being said, yeah, they've very much been sort of hurt
and slowed down by by these growing restrictions from the
(21:55):
United States.
Speaker 2 (21:57):
It's interesting too, because it's not a public held company.
It's a private held company. Ownership structure, what is it?
Who owns it? And do they remain Does it remain
a private company for the foreseeable future.
Speaker 3 (22:10):
Yeah, so it's privately held, but with the shares dispersed
among numerous current and former Huawei employees, and that for
years has been a major part of the incentive program
of how Huawei's founder and Ovey got engineers to work
incredibly hard towards this cause, which was part of their
(22:33):
compensation was in the dividends they would receive from the
company's performance. Since it's privately owned, that means it does
not have much of the scrutiny of a publicly owned company.
There's definitely limitations of what they have to disclose to
the public, and they also aren't at the winds of
(22:56):
the stock market, and so that's been actually part of
their success and that they've been able to execute really
long term plans and sort of long term expensive investments
that you know, short term investors would not necessarily be
on board with. And so at at this point, it's
(23:17):
hard to see why Huawei would go public. They have
plenty of funding. China's state policy banks are very supportive
when they need funding for their projects, and so it's
probably going to remain private for the foreseeable future.
Speaker 4 (23:36):
I think about consumers, you know, people who are listening.
I mean when the Bloomberg audience, right, there's obviously investors,
there's consumers, you know, and they continue to look at
their goods and their security breaches and so and so forth,
especially when it comes to telecom. How I mean the
consumer base do they they need to be concerned, right,
and they I assume you're going to say they want
(23:56):
their governments to make sure that they're overseeing global technologlogy
because this is the new world order. And to be fair,
I mean, can we say that US companies I mean,
I mean, obviously I would assume the US government is
not involved in those technologies. I mean, it's not apples
to apples, it's different. Right when it's China and the
Chinese government when it comes to some of their big companies,
(24:17):
particularly tech companies.
Speaker 3 (24:21):
Yeah, I think so. One thing is just that technology
systems are hacked all the time, and probably hacked more
than the average consumer would would realize. And so to
an extra certain extent, it is just what is your
risk level if you work for the government, if you
(24:43):
work for you know, certain sensitive industries, Yeah, you probably
want to think twice about exactly what kind of equipment
you're using, and in fact, your employer probably has already
guidelines in place. For the average consumer, you know, there
(25:04):
there is a certain risk that your data could be hacked,
but that probably existed, whether whether you knew it or not.
Speaker 4 (25:14):
Even just one last question, got about a minute and
a half here, what was the most revealing thing to
you in writing this book, doing the deep dive, going
into the archive, talking to so many different voices, What
was again, the most revealing thing in this process for you.
Speaker 3 (25:31):
I think one of the most fun parts for me
was just seeing all the places and all the historical
moments where Huawei popped up. While I was sort of
researching in archives in the US and China and around
the world, and it really gave me an appreciation of
(25:52):
companies like this, just all plugged in how they are
affected and how they affect events going on around the globe.
You know, in China, for the Hong Kong, the historic
Hong Kong Handover, when Hong Kong was returned from being
a British colony to China, Huawei was there and helping
(26:14):
to do the serve video surveillance for it. You know,
for the Arab Spring, the Iraq War, Huawei was on
the ground, So they were there far more than a
consumer company. When you supplied the phone and internet networks,
those are crucial and the first thing that you're expected
(26:39):
to be first on the ground when anything big happening.
Speaker 4 (26:42):
Listen, great stuff, and so glad we got so much time,
even though she's technology policy reporter at Washington Post. Her
new book House of Huawei.
Speaker 1 (26:52):
This is Bloomberg Business Week, insight from the reporters and
editors that bring you America's most trusted business magazine, plus
global business, finance and tech news as it happens. Bloomberg
Business Week with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 2 (27:10):
It is Bloomberg Business Week that is Carol Master. I'm
Tim Stenevek.
Speaker 4 (27:14):
Carol.
Speaker 2 (27:14):
We learned it yesterday. The US consumers said they will
see higher inflation over the next few years than previously thought.
This came from a monthly Federal Reserve Bank of New
York survey. It showed that it's the latest sign of
mounting concerns about prices coming after November's elections.
Speaker 4 (27:30):
Yeah, that's likely not a surprise to Katie Thomas. She's
lead at the Carney Consumer Institute. It's the company that
studies consumers and their behavior to understand the current business
and economic environment. We know sentiment can be certainly consumer
sentiment so powerful. She usually joins us from Pittsburgh, which
he's here in our Bloomberg Interactive Broker studio. Really, nice
to have you in studio. How are you.
Speaker 5 (27:50):
I'm great. It's great to be here. Makes it feel
much more excited in your life.
Speaker 4 (27:54):
We are fun in studio.
Speaker 5 (27:55):
Yeah, if we may say so, exactly, Pat on the back,
on the back, Hey, how's the consumer doing? You know,
the consumer is an interesting place right now because ultimately
we're still hearing a lot of voiced stress about everyday
purchases such as grocery, but in reality, we all know
they're still spending. Right The question I keep asking is
why are we so concerned about groceries when mals and
(28:17):
airports are more crowded than they've ever been.
Speaker 2 (28:19):
Okay, I'm really glad you brought that up because I
was digging through your website the report that you have
out about the power of the consumer and how the
keeping up with the consumer watch what people do, not
what they say, And what you guys do is you
look at behavior. You don't necessarily look at what people
are telling you about their behavior because there's this distinction there.
Speaker 5 (28:43):
Yeah, you have to kind of combine the two because
perception is reality. So if people are talking about things
or voicing stress, you can't completely disregard it. But what
we're seeing right now is really a parsing out of
the needs versus wants. So for a long time we've
heard the narrative of oh, people are expending on experience
over things, but I was always questioning that, like what
(29:03):
things are losing? Well, actually, what we're starting to see
is people are willing to save on their everyday items
like groceries. You're seeing aldi Walmart, those kinds of companies
strong value props report, well, people want to spend and
optimize their needs so they really can spend on their wants.
And so you're starting to see that really shake out
(29:24):
in terms of how people are thinking about where they spend.
Speaker 4 (29:27):
I guess, you know, I think about was it Walmart
their last earnings and even the higher end. I think
that's becoming an even important aspect of their business. They're
seeing that kind of upscale consumer shopping more and more
at Walmart.
Speaker 5 (29:40):
Exactly. Consumers want to get the best bang for their
buck on their everyday items so that then they can
spend it on the things they want to, whether that's
luxury clothes, you know, going my ald has an altar
across the street, whatever that may be.
Speaker 2 (29:53):
So what does that mean for the way that consumers
are making choices what they're choosing to You say that
the airports are crowded and flights are hotels are expensive,
but yet they're also saying that grocery prices are expensive.
Speaker 5 (30:06):
Right, So that's I mean, that's kind of that voiced
stress and reality. When you run the numbers, you can
see that the percentage of food as compared to wages
is basically flat so we started to run this from
twenty nineteen to twenty twenty four. The biggest challenge we're
seeing is that consumer psychology, which people are stuck on
reference prices and anchor prices from twenty nineteen.
Speaker 2 (30:27):
That's because for many people, Carol, I mean, correct me
if I'm wrong, but we never experienced inflation as adults.
Speaker 4 (30:33):
Yeah, I think I totally agree with you that. I
think our perspective was like, well, this was the norm,
and then all of a sudden it's like, well, what
is this? Why am I I don't know, why have things?
It just feels so unusual and it feels like it's
very out of whack exactly.
Speaker 5 (30:47):
But and it is from a historical perspective, but not
from a math perspective in terms of someone's budget. And
the good thing was a rising tide lifted all ships,
when wages lifted. It wasn't just you know, white collar,
it was across the board. But so people still feel
they do feel the straight and the price increases are real,
of course, yeah, but they can afford because the prices
(31:09):
haven't come down.
Speaker 4 (31:10):
Right, we keep stressing this, right, the rate, the pace
of inflation of prices going up has come down. But
it's not like all of a sudden we're seeing decreasing pricing.
Speaker 5 (31:21):
Right, And that's why you're seeing people want to optimize
in their high frequency, everyday items. That's why you're seeing
a lot of the retailers with strong value prop and
grocery in some of those core categories, even a pair
all do well.
Speaker 4 (31:33):
So let me ask you, Katie, So in terms of
the consumers or the retail environment, like we just talked about,
who are we talking about, oh remain, Like we were
talking about having to be you were talking about signatjewelers
and that He's like, I wouldn't want to be a
retailer trying to figure out what the consumer is going
to do, when they're going to do it, how they're
going to do it. It's really really tricky. So are
there parts of the retail environment that you think, well,
(31:56):
you should watch out that, especially as we get into earnings,
it could be really difficult for them.
Speaker 5 (32:00):
So one of the things that we're talking a lot
about in our research is the idea of consumer tensions,
and in particular as it relates to the proliferation of choice.
So we've seen optionality just go through the roof. And
that's part of the reason consumers are really able to
optimize their spend is they can they have all these
options and retailers and brands where they can really pick
(32:21):
and choose, and they.
Speaker 2 (32:21):
Can also just do it online and type something in
and see many different options exactly. They and those copanies
are competing with each other. That's probably why Business Week
back in twenty nineteen, and I just looked this up,
Carol Joel would always remind us of this formerriter Bloomberg
business Week. There was that cover that asked, did capitalism
kill inflation? It was a picture of a dinosaur. Twenty
nineteen people thought inflation was over?
Speaker 4 (32:43):
Yeah, that was it, right.
Speaker 5 (32:45):
So, I mean that's exactly the challenge we're seeing with consumers.
I mean they've really been able to start to figure
out where they're going to pick and choose and where
they're going to buy. On the brand side, that actually
calls into question this ongoing choice for innovation's sake, this
growth strategies, portfolio strategies. So that's a lot of what
(33:05):
we're we're watching with retailers is who's actually got that
relevant choice figured out. That's really tapping into what the
consumer wants actually arguably tightening up how much new is
on the shelves in favor of having something that like,
because the other thing we are hearing from consumers is
I'm totally overwhelmed a lot of times. Yeah, my analysis paralysis.
(33:26):
I get so overwhelmed, I don't even buy I abandoned cart,
you know, I give up?
Speaker 4 (33:32):
All right? So then do you have a clear like
I'm thinking about our audience who are listening right and
thinking about certainly the publicly held retailers that are out there.
I mean, who's at risk?
Speaker 5 (33:42):
I would say the people at risk are the ones
that really you know, we've talked for a while about
the death of the middle, of the mushy middle. I
think that a little bit of what you're still seeing,
which is those mid tier players that don't seem to
quite know what they stand for with the consumers.
Speaker 4 (33:56):
The department stores, it sometimes struggle or is it more specialty?
Speaker 5 (34:00):
Yeah, I think it's more specialty. Frankly, I think department
stores are navigating, but they have the advantage of being
cross category. So I think when you're like a little
bit tighter on a category or even a consumer segment,
so at leisure, I think is a sector that I
would be a little bit wary of. Those can be
very like cool brands to kind of rise and fall quickly,
(34:20):
even athletics, same things happening they get, Those can go
in pretty big waves. So those are the kinds of
companies I'm watching. Are you really understanding your consumer? Are
you innovating too much? Are you optimizing effectively?
Speaker 2 (34:33):
What companies are poised to do really well in an environment.
Speaker 3 (34:37):
Such as this?
Speaker 5 (34:38):
So I think it's in some cases it's the ones
that are able to merchandise effectively and really give a
consumer that curated experience. So one that comes to mind,
for instance, is just Trader Joe's. People will tell you
they like you, and I know that's like a you know,
a bit of an obvious example. But my argument here
is people will say, oh, I like it for this
seasonality and my special treats, But really that's a tight
(35:00):
merchandise selection. And I think people don't realize the reason
they like it is it's easy to shop so easy.
Speaker 4 (35:06):
Yes, I agree with you. I get very very overwhelmed.
Speaker 2 (35:09):
Don't go to the ones in New York City while
you're here, because that is not easy. Yeah, they I
don't Ben.
Speaker 5 (35:13):
Yeah, it's true, right, it's curious for nightmarish parking lots
though all around the country, Like the parking lots are
never big about.
Speaker 4 (35:21):
Yeah, it's kind of. It's very very interesting. We'll be
fun as we head into earning season. I mean the
retailers come kind of later on the consumer. Would you
say any signs that we're headed towards a recession in
terms of consumer spending? Just got about twenty seconds.
Speaker 5 (35:37):
Yeah, short answer is no. The biggest thing I'm watching
is personal job security. If that gets worse, then I'm worried.
Speaker 4 (35:43):
All right, good stuff, Nice to have you in studio.
Well be well happy twenty five, twenty twenty five, Katie Thomas,
lead at the Carnie Consumer Institute, joining us here in
our studio.
Hosts And Creators
Tim Stenovec
Carol Massar
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