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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. This is Bloomberg Business Week Daily reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy. Plus global business finance and tech news as it happens. The Bloomberg Business Week Daily Podcast with Carol Masser and Tim Stenebeck on Bloomberg Radio.
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Speaker 2: Let's get to the micro and Houston, we kind of have a problem. OpenAI said it's advanced artificial intelligence models inadvertently hacked hugging face in an unprecedented incident that prompted fresh calls for curbs the technology.
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Speaker 3: Are you worried?
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Speaker 4: I am among those who might be a little worried, a little perturbed. Yeah, let's see if I Love Love says we need to be worried. He's the house of Bloomberg Tech. He joins us from our San Francisco bureau. And I got a text message just minutes ago from some friends. They sent this article to the group chat and said, be honest, how many years do we have left?
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Speaker 5: This is a big story, but it's not a scandal, and it's really important to understand what happened. Chronologically.
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Speaker 6: Okay.
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Speaker 5: So open ai was testing GPT five point six Soul, which is its most advanced publicly released model, and it was testing another more powerful but unreleased model for their advanced cyber capabilities. Okay, they were running in evaluation of them, and what they did was reduce the guardrails on those because it was in what's called a sandboxed environment, a closed environment, which open ai had control over. And so that was the instruction to the models, we want to test your cyber capabilities, evaluate them. So the models were like, okay. In order to do this to pass the evaluation, the models wanted more information, so they exposed what's called a zero day floor, basically a floor in the code. It's called zero day because the engineers, the human engineers, had literally zero days to find and patch it, and in doing that, the model has got access to the Internet.
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Speaker 7: So their next.
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Speaker 5: Logical step was, Okay, our instruction is to pass this evaluation. We could do that if we had more information, and hugging Face seems like a really logical place to get that information because it's a platform that host models specialize in this area. So it breached hugging Face systems to get the information to try and cheat the evaluation, So that part is a concern. But Hugging Face detected that this was happening. So this is a lab experiment essentially under closed parameters, and the way that the industry has reacted is there is some concern because the big takeaways it shows what these frontier moors are capable.
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Speaker 4: Okay, I'm glad that's where I wanted to go with this, because maybe it's fine in a lab if it's Open AI and Hugging Face, but if this technology, let's say, gets out, and who's to say that the same guardrails will be in place with a model maybe one year, two years from now in China, for example, that that may not have the same guardrails. I think that's concern.
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Speaker 5: Now we're getting to the story, you know, the story behind all of this, which is these were two American companies and open Ai is neconnect with Anthropic, but it's a leading frontier lab that was testing American made models closed models. Hugging fences defense was to rely on an open source model, but where the guardrails limited the ability of that model to defend it against a cyber attack, which in this case, so happens to have been instigated by a US made frontier model. I know that that's hard to track, but you're quite rightly pointing out the question that loads of people in industry have, which is, what if this wasn't open AI. What if this was a China model where hugging faces the defender, the defender of what's going on isn't able to properly protect itself. That is the debate that's been opened.
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Speaker 2: I guess my question is, ed, if there are guard rails which we all assume will be in place, is that one hundred percent or ninety nine point nine percent guarantee that things will not go wrong or astray or we don't know?
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Speaker 5: Okay, So again it's important to go back to open AI was testing two specific models with the guardrails intentionally reduced. And the way to think about it is, when you have the guardrails on, you are testing how a model behaves on public roads. I know you guys doing a car segment, So say on public roads you want the guard rails there in a sandbox environment, a closed environment you control, you pair back the guardrails because you want to see how it can perform at its greatest capabilities closed models, you can do that, you have control that. The worrying part here is the Ugging Face part that they relied on an open source model, where the guardrails that are there for very good reasons also diminish that model's ability to defend it against a malicious action, whether it was a mistaken action or not.
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Speaker 2: Okay, so then all right, this story has definitely caught our attention. Just got about forty to fifty seconds left, So anybody who's listening, and somebody comes up and like did you see this story? You would say not a big deal or yeah.
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Speaker 5: So the cybersecurity industry, the AI industry, and their investors basically think this is a good thing because they want the leading labs open AI in this case, to be testing what these models are capable of and then reporting back. So Open Ai and Hugging Face have got together, they have partnered, They've taken steps to make safe the situation and do a full investigation, and that report will come out. But that's being cheered is a good thing. The information from this whole experience will be valuable, all right.
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Speaker 2: That makes sense and giving us the context and understand.
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Speaker 4: So we're safe for now ED, thank you for now for.
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Speaker 2: Now Sky It to be continued DVD ED Ludlow, thank you so much. Host to Bloomberg Tech.
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Speaker 4: Stay with us. More from Bloomberg Business Week Daily coming up after this.
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Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from two to five e's During this listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
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Speaker 2: BMW pulling out of this year's Paris Car Show as its new CEO cut costs following a major profit warning. Also on the Bloomberg Tesla's cyber truck maybe on its way to becoming viewed as the greatest automotive flop of all time, similar to the Ford Etzel, which was introduced back in nineteen fifty seven.
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Speaker 8: There is always, you.
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Speaker 4: Know, it's see a lot of them on the road today, No, always a.
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Speaker 2: Lot going on in the global auto industry, covering all the twists and turns the tight curves of the global auto industry, from bailouts and buyouts Elon and Nevis to China's coming of age. Bloomberg's Keith nultaon who began his career back in nineteen eighty five, coming to Bloomberg in two thousand and nine amid the Great Financial Crisis and the Big three auto bailout. He has written about all of it and more. We are delighted to have him in New York. His home perch has been in the Detroit area, but he is getting ready to wrap up his valued and very respected career here at Bloomberg. We can't even believe we're not going to be like cal Keith.
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Speaker 7: How to talk to him about it?
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Speaker 4: I can't believe they're letting you retire.
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Speaker 3: Yeah, yeah, yeah, Well you know that's time. It's time.
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Speaker 8: Every good career, career has its moment and you know, leave out on a high note.
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Speaker 4: Well, we are really happy for you. It is sad for us, as Carol mentioned, and we do want to start at the beginning of your career, all the way back in nineteen eighty five, forty one years ago. Take us back to that time. You were at the Indianapolis News and it's where you began your career. And I think it's so because it's like that was when so many US automakers were concerned about Japanese.
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Speaker 8: Yeah, so that was the big story in that time. The way I got the auto beat is my business editor at the Indianapolis News, this guy named Ed Lawler. He said, So I grew up in Detroit. He said, so you're from Detroit, so then you'll cover the auto industry.
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Speaker 3: And it's like.
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Speaker 8: Okay, but yeah, so you know, it was all about the Japanese coming to America in those days. Sounds like an echo, doesn't it. And so one of the big stories I was covering at that time was Toyota was looking for the location of their first American factory India. All the states were, you know, vying for it, Indiana included. It ended up going to Georgetown, Kentucky. So I was there for the groundbreaking of that one and interviewing the governor at the time, Martha Laine Collins, and yeah, you know, and now here we are with the when will the Chinese come to America and where will they locate?
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Speaker 3: And the states want them? And you know it'll be very similar.
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Speaker 2: Do you remember what car are you we driving?
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Speaker 3: Yeah?
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Speaker 8: In those days I had a Renault Alliance Oh wow, uaw hands and Kenosha Wisconsin. When Chrysler and Renot had a joint venture.
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Speaker 2: Well, I'm so glad you mentioned Chrysler because one of the icons or iconic figures of the auto industry is Leiah Coca and we actually have a picture nineteen eighty nine of you with him, and we'll bring it up for everybody. Yea, yeah, tell us about this moment for this on radio. It is Keith Norton a few years ago, a couple.
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Speaker 7: Of decades ago.
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Speaker 8: Poor hair, no no mustache, though Leah Coca was like he was iconic. Yeah no, So that's obviously a scrum and I'm clearly laughing too hard to try and impress the chairman.
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Speaker 3: But no, he was something.
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Speaker 8: I mean, I remember when he came back from Japan and this is when the original George Bush had gotten sick on the lap of the Prime Minister of Japan, or if you remember that moment in history. So Leito comes back and he gives a speech.
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Speaker 2: She'ms so charming amid the geopolitical backdrop today, but go ahead.
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Speaker 3: He goes back and.
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Speaker 8: Gives a speech the Detroit Economic Club all about how we should essentially and he used this kind of verbiage go to war with the Japanese, which you know, given the whole World War II thing was probably not the right way to put it, but but that was Leiah Coca.
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Speaker 2: He pulled no punches and had to deal with his own crisis.
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Speaker 8: Though it is absolutely I mean he kind of he saved not more than kind of. He definitely saved Chrysler. They were in dire straits. I remember he got fired by Henry Ford the second right, Hank the Deuce fired him Ayakoka's father and Mustang, and then he you know, rehabilitated himself by saving Chrysler. It was a great time to cover the industry because there were such swashbuckling characters in those days, Bob Lotts, all these guys that just said what was on their mind.
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Speaker 4: It wasn't all the auto industry for you, though, some other highlights in your career. Even before coming to Bloomberg. Senior correspondent BusinessWeek, you covered the auto industry your auto reporter, the Detroit News before Bloomberg, though you were Detroit bureau chief for ten years over at Newsweek. We covered the auto industry there, but also some other stories, including.
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Speaker 2: Stewart and this little known man put on the cover. Oh yeah, he's president today, Donald Trump.
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Speaker 8: Yeah, I spent a couple of days with the Donald and Milania. Yeah there's the cover. Yeah, that's the one I wrote for those on radio.
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Speaker 2: It says it's Donald Trump back in his apprentice days.
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Speaker 3: You're fired, right, So he was.
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Speaker 8: I mean, the story on how that ended up on the cover was This all sounds braggy, But I was talking to Jack Welch. I did this all in one day. I was talking to Jack Welch, former chairman of GE, and he told me it was his favorite show to watch. He and Susie would watch it every night.
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Speaker 7: Run his network, Right, it's.
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Speaker 3: On his network.
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Speaker 8: And so then and so then we reached out to Trump, who in those days there were no PR people. You just called his secretary and he gets on the phone and he told me that, in no uncertain terms, we should put him on the cover. And I'm like, well, right now, it's just a business story. We're going to do a business dury in the business section. No, you should tell Rick Smith, who was you know, the publisher at the time, put me on the cover. And then when it went to the the meeting that day, the editor said, okay, let's put him on the cover. I called him back and he said, I'm glad you listened.
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Speaker 7: So so then.
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Speaker 3: We both flew to mar A Lago and hung out for a couple of days.
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Speaker 4: Well, what did you find about him on that on that trip to mar Alago? Obviously no prediction that he would one day become president, and.
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Speaker 8: So well, I mean he was he was a Democrat then, and and he had run as a Democrat sort of run for more of a marketing exercise in the in the Gore Bush election, the election of two thousands. So we talked a little bit about that, and he and Malania at that time were engaged. They got married a year later, and of course Bill and Hillary were at the wedding. There's the famous picture of the four.
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Speaker 3: Of them together right time.
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Speaker 8: So yeah, but yeah, he was, you.
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Speaker 3: Know, he was the Donald.
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Speaker 8: We watched The Apprentice together and he would, you know, turn down the sound when it was the contestants segments, and then he was on, he would turn it up to a deafening volume so no one in the room could talk.
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Speaker 2: So fascinating, like the places that being a journalist takes you, right and to certain people. All right, let's talk to your time at Bloomberg seventeen years you came at what was a really difficult time for the world, for the US, for the financial industry, and for automakers. Who can forget right, the automakers be hauled before Congress.
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Speaker 6: The CEOs right, the bailout.
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Speaker 8: Yeah, no, it was amazing because it was right as I was leading Newsweek and starting at Bloomberg. When I was here from my training in New York, Obama was being inaugurated for his first term, and you know, George W. Bush had sort of handed them behind him to save those companies. And famously they were all asked, you know, they'd got in trouble for oh yeah, there we go. They got in trouble for flying in for the hearings and they're told they should.
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Speaker 3: Drive in for them. So that's what they did.
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Speaker 8: They were all asked to, you know, give up their pay, and everybody except Alan Malalley at Ford said they would. Alan Malalley said, yeah, I'm fine. Another ones who didn't take the bail I was just going to say they didn't did that.
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Speaker 3: Well.
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Speaker 4: A lot has happened in the auto industry since then, and it kind of brings us to almost two today, the rise of evs and the way that you know, even conversations that we had with you on our program in the last six years at the beginning of that, and that's that's how long I've been doing this. That's why I went with the six year number. At the beginning of that, we talked to you about the huge investments that these US companies were making in evs, how difficult it was to get a Ford Mocky, and the wait list that a customer would have to wait on, and getting a lightning pickup truck. And just a few years after that, we're learning that these investments are being paired back and the customers just aren't there for.
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Speaker 8: These It was one of the biggest misses ever. And I think we sometimes our view of it isn't long enough. We think, Okay, so Trump got an office and you took away the EV incentives and that killed the market. No, the market was withering before he got elected. Americans just we live in a very big country, so range anxiety is real. It's easier in other places that are more compact, that have a better infrastructure for recharging vehicles. So particularly in the vast middle of the country where I live, you know, people just aren't sold on evs, particularly.
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Speaker 3: People who drive pickup trucks.
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Speaker 8: The big bust of the whole EV American EV cycle was putting in pickup trucks first, because if you use an EV pickup truck to tow or haul, the battery is depleted in no time. So it's just not practical. So everybody has taken a step back. I actually think in some ways Trump does them a favor because it gives them time to regroup as long as they keep those barriers to the Chinese and hopefully they'll come up with a better solution.
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Speaker 2: You know, we have another picture of you, I believe with Allan Malay, and this was in two thousand and nine, former Ford CEO. You said you reminded us he didn't take the bail out. Then where are you, guys?
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Speaker 3: Were?
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Speaker 8: I think in that picture being inducted into the Automotive Hall of Fame and we're in Detroit. I think, is it two thousand and nine, Yeah, it might be a little.
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Speaker 3: Later than that.
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Speaker 8: I think it's more at the end of his time. But it was in two thousand and nine that he avoided the bailout, and you know, he saved Ford along with his boss Bill Ford never forget the Ford family runs forward. So but yeah, but no, he was a rock star and he was great to work with, and he also was one of those guys who pulled no punches and had things on his mind.
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Speaker 2: You know, we were thinking about you. You really you're a lot of fun to talk to and we just love covering this world with you. You've inspired a lot of us, and it seems like you've also inspired someone who's very near and dear to your daughter or of another picture we want to pull up and maybe you could tell us a little bit about this. That's you For those on radio, it's Keith obviously, and then there's your daughter.
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Speaker 8: Yeah, that's Nora behind me and we're both scrumming Jim Farrar, who is now Ford CEO. I think that's at a New York auto show maybe in twenty nineteen. So yeah, Nara has worked in different places. She was also at the Detroit News like I was. She was the Wall Street Journal business insider. So she's she's she's great, and it's great to have your your child in the days with you.
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Speaker 3: So she's she's, she's wonderful.
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Speaker 8: And that was a great moment, and that was taken That picture was taken by Ford's chief communications officer, Mark Truby. He was he was monitoring the scrum and he saw that shot and got our voices, our faces of skepticism.
00:17:37
Speaker 2: Which sometimes have to do when you're covering an industry. We've got to wrap up. But as you look forward to your world, and are you going to be keeping an eye on the auto industry?
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Speaker 3: Oh, I mean I live in Detroit. It's hard not to.
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Speaker 2: Yeah, you know, well, what's your thoughts? Like you've only got thirty or forty seconds?
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Speaker 8: Like, yeah, I think it's a really perilous for the American auto industry. They really do need to reinvent themselves before the Chinese arrive. And as Bill Ford said last week, they are going to arrive.
00:18:08
Speaker 3: And if the.
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Speaker 8: American auto industry isn't ready lower priced cars, electric vehicles, if they aren't ready.
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Speaker 3: They won't survive.
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Speaker 2: Are you driving a ev I'm not.
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Speaker 4: I'm a moss back, not even a hybrid.
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Speaker 6: No.
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Speaker 3: My brother, my older brother has a hybrid. But yet I do not.
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Speaker 2: I keep waiting for what's the car? Here's another one. You're a jem. We wish you well. Thank you, Keith not and Bloomberg News Auto Reporter. You will be missed. This is Bloomberg.
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Speaker 4: Stay with us. More from Bloomberg Business Week Daily coming up after this.
00:18:47
Speaker 1: You're listening to the Bloomberg Business Week Daily podcast. Catch us live weekday afternoons from two to five e's during Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on you Tube.
00:19:02
Speaker 2: And you know, fast forward to kind of where we are today, right Tim, I mean in a big way. So much is coming at us, and you layer on AI and how everything is moving so rapidly. You do think how it's transforming so much. And our next guest talks about how AI is quietly quietly transforming some of the world's biggest industrial sectors. So we're talking about automotive, defense, aviation, and that many companies still risk being left behind.
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Speaker 4: Here we got with us Roy high Loca, Oliver Wyman's partner in the firm's Transportation and Services and Digital Practices group. Rory, good to have you with us this afternoon. You and the folks at Oliver Wyman have this big report out on the industrial AI divide. How AI is quietly transforming, As Carol mentioned, some of these big industrial sectors. What is happening and who could get left behind?
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Speaker 9: That's a great question, and I think we're seeing a couple of things happen right now, and it varies a bit sector bi sector where AI is rapidly becoming a focus area for you know, automotive manufacturers and automotive companies, airlines, rail companies, industrial mining, you name it, and it's become something that is already starting to generate real revenue returns for companies that have embraced it early. If you think about leveraging AI for better price decision, better servicing of offers for consumer facing transportation companies, you're starting to see those benefits. But at the same time you're seeing, you know, real differences in how companies are evolving when it comes to embracing AI for delivering you know, complex, very real world transportation offering. So think about you know, rail network, airlines and airspace, you know, cars on the road.
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Speaker 6: So there's there's a lot that's happening.
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Speaker 9: We're seeing some real differences in kind of company that have always been more focused on deploying AI as a real transformation of the business and their people versus companies leaving it kind of more as a This is something that the technology team has to go and figure out for how we embedded in our business. And so we're seeing real, real differences across the industries. It still feels like really early days in terms of the level of change and evolution that we're going to see, though, you know.
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Speaker 2: I'm looking at some various you know, technology statists, excuse me. In this report, like here, fifty eight percent of aviation maintenance, repair, and overhaul professionals said that their value expectations from AI investments are being met or exceeded. That's up from twenty percent and twenty twenty four. How much when we look at stuff moving around, whether it's you know, planes, trains, or automobiles and go where you want, Yeah, is actually utilizing AI and it's making a difference. Are they all just at the beginning, Because it feels like, you know, AI's been around for a long time, and I understand what's happened in the last three three years is taking it to a whole other level. But give us an idea of how much is already happening.
00:22:05
Speaker 6: It's a great question.
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Speaker 9: I think if you think about certain things like manufacturing, parts or cars or engines. AI and particularly machine learning have already helped companies realize substantial value. It allows you to much better model and predict behaviors of a closed system, allows you to design things, keep a factory up and running at a higher rate, which creates better economics. You're seeing it really in use and at scale in a number of those kinds of use cases. You mentioned airline maintenance, great example where just having better visibility into the likelihood of a maintenance event and then being able to put the part in the right place, have the team ready to go. That drives a real efficiency and we've really seen that take off when you think about using AI to do things like manage complex airspace and improve what it's like on a third stay in LaGuardia or going into Heathrow. You know, we're starting to see that technology be put to the test. But you're dealing with a need to change a massive open system, you know, use the interplay of the weather, aircraft, networks, things on the ground, and that's a much harder problem to solve. So I think we're still in the early days of really figuring out how that's going to come together, and so I think there's a lot of change to come and that will impact companies that touch all aspects of those operations and of that kind of value chain.
00:23:31
Speaker 4: I think a lot of people are thinking about AI as a sort of layer of technology the same way that we thought of the Internet and just being online, you know, maybe twenty five years ago, and how that's sort of everything we do now is online. What areas though right now are missing the not missing the opportunity, but have the most have the most opportunity for disruption, Like we don't see it yet because the technology is not quite there, but maybe we will in two or three years.
00:23:56
Speaker 6: Yeah, it's a great question.
00:23:58
Speaker 9: I mean, I think the the one sector we've probably seen, how you know, seen play out really quickly over the last couple of years, given just the nature of what's happening in the world is the defense sector.
00:24:10
Speaker 6: Certainly the role that.
00:24:11
Speaker 9: AI plays in using drones in the battlefield, we've seen that and we've seen the effects of disruption happening. New entrants into that sector bring that technology to life. If I think about, you know, in other areas like rail or aviation, I think the companies that are able to really rethink and transform how they manage their business, run their business, automate their business, change the role of people in the workforce, and do that quickly. They are going to find both economic efficiency and frankly improve the consumer and customer experience. And I think that's where you're going to see some real divides. And the challenge is for a lot of these companies, you still need all of your technology infrastructure to come to get other and be able to support the use of AI. And that's one of the really big lists, you know, modernizing systems, making the data available to inform, train and support these kinds of models and tools, Putting the physical infrastructure in place so you have computer vision.
00:25:15
Speaker 6: All those things are really key.
00:25:17
Speaker 2: Rory, just thirty seconds left here, US versus China, US versus Europe in terms of industries, embracing AI for the good if you will, and just quickly, if you could.
00:25:28
Speaker 9: Yeah, really quickly. I think all three are going to make great strides. I know that's a bit of a you know, muted answer, but.
00:25:36
Speaker 2: If you have to pick one, who's ahead of the race here.
00:25:39
Speaker 9: If I have to pick one, I think the innovation coming out of the US is really remarkable. I think you know, and we're going to We're going to see that play out in the next couple of years.
00:25:49
Speaker 2: All right, really appreciate it. Good stuff in depth report, that's for sure. Rory Haylaka He is Oliver Wyman's partner in the firms Transportation and Services and Digital Practices Group. Joining us right here in New New York City.
00:26:02
Speaker 4: Stay with us. More from Bloomberg Business Week Daily coming up after this.
00:26:10
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from two to five e's during Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
00:26:24
Speaker 2: Well, when you think about what's going on in our world to spend the AI build and so on and so forth, I feel like there's a lot of big money in that, and I don't know, there's a lot of big money in interesting places. We just came off the World Cup. We've talked so much about money in sport. There's a lot going on in our world.
00:26:39
Speaker 4: I'm glad you mentioned money in sports. That's a good segue.
00:26:41
Speaker 2: You're welcome.
00:26:42
Speaker 4: We got Chris mor Angi with US President co cio of Value also portfolio manager, the goals ETF at the gabelly opportunities in live sports. That's what goals stands for. We're gonna get to the sports ETF in just a minute. We talked about this with you in the past, Chris, but we want to talk about the market environment first, and you know, earnings is the backdrop part, but it also has to do with five dollars a gallon diesel, four dollars a gallon gas and challenges when it comes to geopolitics and when it comes to politics as well. What do you make of the environment that we're in right now?
00:27:14
Speaker 10: So, yeah, a lot to keep track of. First of all, delighted to be here. We categorize them as the three t's, Trump, technology, and treasuries. Not meant to be political, but obviously these are the things that people are thinking about. It's as you mentioned around the price of gas, tariffs, the midterms, technology, AI need I say more, and then treasuries in the back of everyone's mind, sticky inflation, a two trillion dollar deficit and almost forty trillion debt and how we're going to deal with that long term. And you know, a lot has been thrown at this market this year and we're still up a lot. And one way to read that is we've successfully climbed that wall of worries. That's what markets do. Another read is that market is being complacent. I tend to lean a little towards the ladder, but on the former earnings are up a lot, and if you look at it, the market is actually cheaper than it was at the beginning of the year.
00:28:07
Speaker 2: Doesn't mean it can't get cheaper, right.
00:28:10
Speaker 10: That is for sure, and a lot of that is going to have to do with what we hear from Google in just forty five minutes or so. This locomotive is being pulled by AI spend and you know post Close is going to spend.
00:28:24
Speaker 7: Three hundred billion, four hundred billion next year. It's going to be a big number.
00:28:27
Speaker 10: There's a reason they did their offering last month, and that really is just dragging the utilities, the energy complex, all these other picks and shovels plays that are driving earnings and driving the market.
00:28:38
Speaker 3: Yeah, that's right.
00:28:38
Speaker 2: The company did what an eighty five billion dollar equity raise last month, and let's pull by factset are expecting one hundred and eighty seven point one billion in capital.
00:28:47
Speaker 4: Expenditures this year, So that's real money.
00:28:50
Speaker 2: That is real money.
00:28:51
Speaker 4: Hey, Chris, you mentioned that you know you're you're leaning toward the ladder, and that's the idea of the market being complacent. So one side of the coin is earnings and AI spend driving, but the other side of the coin is complacency, and I'm wondering if you're seeing any of that.
00:29:07
Speaker 7: Yeah, again, I think there is a little complacency some of it.
00:29:09
Speaker 10: By the way, you know, we used to use the initials or of the name Tina, and there really isn't an alternative at the moment. Well, we'll talk about an alternative in a minute, probably, but you know, gold is underperformed a little bit for probably some idiosyncratic reasons.
00:29:22
Speaker 7: There aren't a lot of great places.
00:29:24
Speaker 10: To put your money, especially one where inflation remains untamed. So you go to the equity markets, and so far that's worked out for US investors.
00:29:33
Speaker 4: You put your money on the Knicks. Is one way to I bet or.
00:29:38
Speaker 2: In Spain or Venezuela or Spain.
00:29:40
Speaker 7: Spain was a good bet.
00:29:41
Speaker 4: Well, maybe this is a good segue to talk about the goals ETF and the top holding is Madison Square garden sports. It's about eight percent of the ETF. So I say, you know, put your money on the next. But when you were alluding to this idea of where to put your money, you you still think that that's sports and live op oor tunities are a real opportunity for investors right now.
00:30:04
Speaker 10: Absolutely, And you know, part of the reason that we started this ETF, and we've been following public sports franchises for decades. Actually when I got into this business twenty something years ago, started by Volume Cable Vision, which is which is the predecessor to Madison Square Garden of course in Liberty, which spun out the Lan Rais. And you know, there's a reason that really rich people buy sports franchises because over history they've been great stores of value. They are economically resilient, they're sort of tribal. There's a limited number of them, and guess what, they're also ai resilient. There aren't a lot of sectors that can say that this is one of them. There's about thirty or so publicly traded sports franchises in leagues around the world. Some of them are hard to access, they're in Europe, they lightly trade. We've got all of them here, and obviously the big holding is about in the square Garden Sports, the Knicks and the Rangers. They're separating that entity towards the end of the year. We think that opens up a lot of.
00:30:58
Speaker 7: Options for them.
00:31:00
Speaker 2: So why our treasury is the top holding.
00:31:04
Speaker 10: Well, no, that's not right. The we we got about five percent and five percent in cash Madison, Square Garden Sports are about ten percent, and then the Braves are a number two at eight percent. Ok. Sorry, So yeah, you know, we're getting a lot of floes and we're putting those to work.
00:31:20
Speaker 7: Judiciously.
00:31:21
Speaker 2: Okay, maybe this, maybe this isn't updated. Yeah, because eighty percent, right, you're looking to make sure is allocated at any given time.
00:31:28
Speaker 3: That's right.
00:31:30
Speaker 2: Do higher valuations of various teams and so on and so forth make for a good thing for you guys?
00:31:37
Speaker 10: Yeah, I mean, listen, you look at at how sports franchises have performed over the last twelve or so years. There's a lot of third party data sets that show that the value of the Big four teams, the teams in the big four leagues in the United States have gone up about fifteen percent. That's out paced the S and P five hundred and you know, you just pick up the paper every few days and you'll find other sports transaction. If it's we had the Seahawks most recently, the big ones for of course, the Lakers and the Giants trading recently for record values. I think should any of the teams that we own in public form trade, they'll also trade it at big numbers.
00:32:18
Speaker 7: So, you know those we're.
00:32:19
Speaker 10: Buying those franchises, anybody can buy those franchises by buying them in the market. We're buying a package of them for well below what we think they're intrinsic value might be.
00:32:27
Speaker 7: Hey, talk to us.
00:32:28
Speaker 2: About flows, interests by investors to actually come into this fund. What can you tell us about what kind of money has been coming in.
00:32:35
Speaker 10: Yeah, so you know, ETFs are a bit of a chicken and egg. You know, investors want to see flows, they want to see liquidity. We just launched this in January and we're seeing a lot of interest. And it's funny, it's not just from retail investors, your average Joe who wants to participate in this. We're having calls with family offices who you know, desperately want to own sports franchises. Maybe aren't big enough to write a billion dollar check to get a minority stake, and they want liquidity, and so they're looking at US, and so we've had a lot of really great conversations about it, getting a lot of interest, and you know, we think that the universe of potential targets is going to grow. You'll see uplistings of European soccer clubs to the US, perhaps even some leagues go public, franchises go public.
00:33:21
Speaker 2: Yeah, it's been interesting. Yeah, you do wonder I mean, do you feel like so there is interest like coming off the World Cup just real quickly?
00:33:27
Speaker 7: Yeah, absolutely, the World Cup smashing success.
00:33:30
Speaker 10: Yeah, you know, ratings forty million households tune into the final.
00:33:33
Speaker 7: That's a big number. Spurred interests in the US and that's good for US for global soccer teams. Yeah, absolutely, ball teams.
00:33:40
Speaker 2: Sorry, Chris Moranji, thank you so much. He's president in cos Cio over at the Gabelli Opportunities in Live in Sports.
00:33:50
Speaker 1: This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from two to five pm Eastern on Bloomberg dot Com. The iHeartRadio app tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal
Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. This is Bloomberg Business Week Daily reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy. Plus global business finance and tech news as it happens. The Bloomberg Business Week Daily Podcast with Carol Masser and Tim Stenebeck on Bloomberg Radio.
00:00:32
Speaker 2: Let's get to the micro and Houston, we kind of have a problem. OpenAI said it's advanced artificial intelligence models inadvertently hacked hugging face in an unprecedented incident that prompted fresh calls for curbs the technology.
00:00:45
Speaker 3: Are you worried?
00:00:47
Speaker 4: I am among those who might be a little worried, a little perturbed. Yeah, let's see if I Love Love says we need to be worried. He's the house of Bloomberg Tech. He joins us from our San Francisco bureau. And I got a text message just minutes ago from some friends. They sent this article to the group chat and said, be honest, how many years do we have left?
00:01:07
Speaker 5: This is a big story, but it's not a scandal, and it's really important to understand what happened. Chronologically.
00:01:16
Speaker 6: Okay.
00:01:16
Speaker 5: So open ai was testing GPT five point six Soul, which is its most advanced publicly released model, and it was testing another more powerful but unreleased model for their advanced cyber capabilities. Okay, they were running in evaluation of them, and what they did was reduce the guardrails on those because it was in what's called a sandboxed environment, a closed environment, which open ai had control over. And so that was the instruction to the models, we want to test your cyber capabilities, evaluate them. So the models were like, okay. In order to do this to pass the evaluation, the models wanted more information, so they exposed what's called a zero day floor, basically a floor in the code. It's called zero day because the engineers, the human engineers, had literally zero days to find and patch it, and in doing that, the model has got access to the Internet.
00:02:11
Speaker 7: So their next.
00:02:12
Speaker 5: Logical step was, Okay, our instruction is to pass this evaluation. We could do that if we had more information, and hugging Face seems like a really logical place to get that information because it's a platform that host models specialize in this area. So it breached hugging Face systems to get the information to try and cheat the evaluation, So that part is a concern. But Hugging Face detected that this was happening. So this is a lab experiment essentially under closed parameters, and the way that the industry has reacted is there is some concern because the big takeaways it shows what these frontier moors are capable.
00:02:51
Speaker 4: Okay, I'm glad that's where I wanted to go with this, because maybe it's fine in a lab if it's Open AI and Hugging Face, but if this technology, let's say, gets out, and who's to say that the same guardrails will be in place with a model maybe one year, two years from now in China, for example, that that may not have the same guardrails. I think that's concern.
00:03:14
Speaker 5: Now we're getting to the story, you know, the story behind all of this, which is these were two American companies and open Ai is neconnect with Anthropic, but it's a leading frontier lab that was testing American made models closed models. Hugging fences defense was to rely on an open source model, but where the guardrails limited the ability of that model to defend it against a cyber attack, which in this case, so happens to have been instigated by a US made frontier model. I know that that's hard to track, but you're quite rightly pointing out the question that loads of people in industry have, which is, what if this wasn't open AI. What if this was a China model where hugging faces the defender, the defender of what's going on isn't able to properly protect itself. That is the debate that's been opened.
00:04:11
Speaker 2: I guess my question is, ed, if there are guard rails which we all assume will be in place, is that one hundred percent or ninety nine point nine percent guarantee that things will not go wrong or astray or we don't know?
00:04:24
Speaker 5: Okay, So again it's important to go back to open AI was testing two specific models with the guardrails intentionally reduced. And the way to think about it is, when you have the guardrails on, you are testing how a model behaves on public roads. I know you guys doing a car segment, So say on public roads you want the guard rails there in a sandbox environment, a closed environment you control, you pair back the guardrails because you want to see how it can perform at its greatest capabilities closed models, you can do that, you have control that. The worrying part here is the Ugging Face part that they relied on an open source model, where the guardrails that are there for very good reasons also diminish that model's ability to defend it against a malicious action, whether it was a mistaken action or not.
00:05:14
Speaker 2: Okay, so then all right, this story has definitely caught our attention. Just got about forty to fifty seconds left, So anybody who's listening, and somebody comes up and like did you see this story? You would say not a big deal or yeah.
00:05:30
Speaker 5: So the cybersecurity industry, the AI industry, and their investors basically think this is a good thing because they want the leading labs open AI in this case, to be testing what these models are capable of and then reporting back. So Open Ai and Hugging Face have got together, they have partnered, They've taken steps to make safe the situation and do a full investigation, and that report will come out. But that's being cheered is a good thing. The information from this whole experience will be valuable, all right.
00:06:01
Speaker 2: That makes sense and giving us the context and understand.
00:06:04
Speaker 4: So we're safe for now ED, thank you for now for.
00:06:07
Speaker 2: Now Sky It to be continued DVD ED Ludlow, thank you so much. Host to Bloomberg Tech.
00:06:16
Speaker 4: Stay with us. More from Bloomberg Business Week Daily coming up after this.
00:06:23
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from two to five e's During this listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
00:06:37
Speaker 2: BMW pulling out of this year's Paris Car Show as its new CEO cut costs following a major profit warning. Also on the Bloomberg Tesla's cyber truck maybe on its way to becoming viewed as the greatest automotive flop of all time, similar to the Ford Etzel, which was introduced back in nineteen fifty seven.
00:06:55
Speaker 8: There is always, you.
00:06:56
Speaker 4: Know, it's see a lot of them on the road today, No, always a.
00:07:01
Speaker 2: Lot going on in the global auto industry, covering all the twists and turns the tight curves of the global auto industry, from bailouts and buyouts Elon and Nevis to China's coming of age. Bloomberg's Keith nultaon who began his career back in nineteen eighty five, coming to Bloomberg in two thousand and nine amid the Great Financial Crisis and the Big three auto bailout. He has written about all of it and more. We are delighted to have him in New York. His home perch has been in the Detroit area, but he is getting ready to wrap up his valued and very respected career here at Bloomberg. We can't even believe we're not going to be like cal Keith.
00:07:33
Speaker 7: How to talk to him about it?
00:07:34
Speaker 4: I can't believe they're letting you retire.
00:07:36
Speaker 3: Yeah, yeah, yeah, Well you know that's time. It's time.
00:07:39
Speaker 8: Every good career, career has its moment and you know, leave out on a high note.
00:07:44
Speaker 4: Well, we are really happy for you. It is sad for us, as Carol mentioned, and we do want to start at the beginning of your career, all the way back in nineteen eighty five, forty one years ago. Take us back to that time. You were at the Indianapolis News and it's where you began your career. And I think it's so because it's like that was when so many US automakers were concerned about Japanese.
00:08:05
Speaker 8: Yeah, so that was the big story in that time. The way I got the auto beat is my business editor at the Indianapolis News, this guy named Ed Lawler. He said, So I grew up in Detroit. He said, so you're from Detroit, so then you'll cover the auto industry.
00:08:17
Speaker 3: And it's like.
00:08:18
Speaker 8: Okay, but yeah, so you know, it was all about the Japanese coming to America in those days. Sounds like an echo, doesn't it. And so one of the big stories I was covering at that time was Toyota was looking for the location of their first American factory India. All the states were, you know, vying for it, Indiana included. It ended up going to Georgetown, Kentucky. So I was there for the groundbreaking of that one and interviewing the governor at the time, Martha Laine Collins, and yeah, you know, and now here we are with the when will the Chinese come to America and where will they locate?
00:08:51
Speaker 3: And the states want them? And you know it'll be very similar.
00:08:54
Speaker 2: Do you remember what car are you we driving?
00:08:56
Speaker 3: Yeah?
00:08:56
Speaker 8: In those days I had a Renault Alliance Oh wow, uaw hands and Kenosha Wisconsin. When Chrysler and Renot had a joint venture.
00:09:05
Speaker 2: Well, I'm so glad you mentioned Chrysler because one of the icons or iconic figures of the auto industry is Leiah Coca and we actually have a picture nineteen eighty nine of you with him, and we'll bring it up for everybody. Yea, yeah, tell us about this moment for this on radio. It is Keith Norton a few years ago, a couple.
00:09:27
Speaker 7: Of decades ago.
00:09:28
Speaker 8: Poor hair, no no mustache, though Leah Coca was like he was iconic. Yeah no, So that's obviously a scrum and I'm clearly laughing too hard to try and impress the chairman.
00:09:41
Speaker 3: But no, he was something.
00:09:42
Speaker 8: I mean, I remember when he came back from Japan and this is when the original George Bush had gotten sick on the lap of the Prime Minister of Japan, or if you remember that moment in history. So Leito comes back and he gives a speech.
00:09:56
Speaker 2: She'ms so charming amid the geopolitical backdrop today, but go ahead.
00:10:00
Speaker 3: He goes back and.
00:10:01
Speaker 8: Gives a speech the Detroit Economic Club all about how we should essentially and he used this kind of verbiage go to war with the Japanese, which you know, given the whole World War II thing was probably not the right way to put it, but but that was Leiah Coca.
00:10:14
Speaker 2: He pulled no punches and had to deal with his own crisis.
00:10:17
Speaker 8: Though it is absolutely I mean he kind of he saved not more than kind of. He definitely saved Chrysler. They were in dire straits. I remember he got fired by Henry Ford the second right, Hank the Deuce fired him Ayakoka's father and Mustang, and then he you know, rehabilitated himself by saving Chrysler. It was a great time to cover the industry because there were such swashbuckling characters in those days, Bob Lotts, all these guys that just said what was on their mind.
00:10:47
Speaker 4: It wasn't all the auto industry for you, though, some other highlights in your career. Even before coming to Bloomberg. Senior correspondent BusinessWeek, you covered the auto industry your auto reporter, the Detroit News before Bloomberg, though you were Detroit bureau chief for ten years over at Newsweek. We covered the auto industry there, but also some other stories, including.
00:11:05
Speaker 2: Stewart and this little known man put on the cover. Oh yeah, he's president today, Donald Trump.
00:11:12
Speaker 8: Yeah, I spent a couple of days with the Donald and Milania. Yeah there's the cover. Yeah, that's the one I wrote for those on radio.
00:11:19
Speaker 2: It says it's Donald Trump back in his apprentice days.
00:11:22
Speaker 3: You're fired, right, So he was.
00:11:25
Speaker 8: I mean, the story on how that ended up on the cover was This all sounds braggy, But I was talking to Jack Welch. I did this all in one day. I was talking to Jack Welch, former chairman of GE, and he told me it was his favorite show to watch. He and Susie would watch it every night.
00:11:42
Speaker 7: Run his network, Right, it's.
00:11:43
Speaker 3: On his network.
00:11:44
Speaker 8: And so then and so then we reached out to Trump, who in those days there were no PR people. You just called his secretary and he gets on the phone and he told me that, in no uncertain terms, we should put him on the cover. And I'm like, well, right now, it's just a business story. We're going to do a business dury in the business section. No, you should tell Rick Smith, who was you know, the publisher at the time, put me on the cover. And then when it went to the the meeting that day, the editor said, okay, let's put him on the cover. I called him back and he said, I'm glad you listened.
00:12:14
Speaker 7: So so then.
00:12:16
Speaker 3: We both flew to mar A Lago and hung out for a couple of days.
00:12:18
Speaker 4: Well, what did you find about him on that on that trip to mar Alago? Obviously no prediction that he would one day become president, and.
00:12:25
Speaker 8: So well, I mean he was he was a Democrat then, and and he had run as a Democrat sort of run for more of a marketing exercise in the in the Gore Bush election, the election of two thousands. So we talked a little bit about that, and he and Malania at that time were engaged. They got married a year later, and of course Bill and Hillary were at the wedding. There's the famous picture of the four.
00:12:46
Speaker 3: Of them together right time.
00:12:49
Speaker 8: So yeah, but yeah, he was, you.
00:12:51
Speaker 3: Know, he was the Donald.
00:12:52
Speaker 8: We watched The Apprentice together and he would, you know, turn down the sound when it was the contestants segments, and then he was on, he would turn it up to a deafening volume so no one in the room could talk.
00:13:06
Speaker 2: So fascinating, like the places that being a journalist takes you, right and to certain people. All right, let's talk to your time at Bloomberg seventeen years you came at what was a really difficult time for the world, for the US, for the financial industry, and for automakers. Who can forget right, the automakers be hauled before Congress.
00:13:28
Speaker 6: The CEOs right, the bailout.
00:13:31
Speaker 8: Yeah, no, it was amazing because it was right as I was leading Newsweek and starting at Bloomberg. When I was here from my training in New York, Obama was being inaugurated for his first term, and you know, George W. Bush had sort of handed them behind him to save those companies. And famously they were all asked, you know, they'd got in trouble for oh yeah, there we go. They got in trouble for flying in for the hearings and they're told they should.
00:13:55
Speaker 3: Drive in for them. So that's what they did.
00:13:57
Speaker 8: They were all asked to, you know, give up their pay, and everybody except Alan Malalley at Ford said they would. Alan Malalley said, yeah, I'm fine. Another ones who didn't take the bail I was just going to say they didn't did that.
00:14:10
Speaker 3: Well.
00:14:11
Speaker 4: A lot has happened in the auto industry since then, and it kind of brings us to almost two today, the rise of evs and the way that you know, even conversations that we had with you on our program in the last six years at the beginning of that, and that's that's how long I've been doing this. That's why I went with the six year number. At the beginning of that, we talked to you about the huge investments that these US companies were making in evs, how difficult it was to get a Ford Mocky, and the wait list that a customer would have to wait on, and getting a lightning pickup truck. And just a few years after that, we're learning that these investments are being paired back and the customers just aren't there for.
00:14:48
Speaker 8: These It was one of the biggest misses ever. And I think we sometimes our view of it isn't long enough. We think, Okay, so Trump got an office and you took away the EV incentives and that killed the market. No, the market was withering before he got elected. Americans just we live in a very big country, so range anxiety is real. It's easier in other places that are more compact, that have a better infrastructure for recharging vehicles. So particularly in the vast middle of the country where I live, you know, people just aren't sold on evs, particularly.
00:15:20
Speaker 3: People who drive pickup trucks.
00:15:22
Speaker 8: The big bust of the whole EV American EV cycle was putting in pickup trucks first, because if you use an EV pickup truck to tow or haul, the battery is depleted in no time. So it's just not practical. So everybody has taken a step back. I actually think in some ways Trump does them a favor because it gives them time to regroup as long as they keep those barriers to the Chinese and hopefully they'll come up with a better solution.
00:15:48
Speaker 2: You know, we have another picture of you, I believe with Allan Malay, and this was in two thousand and nine, former Ford CEO. You said you reminded us he didn't take the bail out. Then where are you, guys?
00:15:59
Speaker 3: Were?
00:16:00
Speaker 8: I think in that picture being inducted into the Automotive Hall of Fame and we're in Detroit. I think, is it two thousand and nine, Yeah, it might be a little.
00:16:09
Speaker 3: Later than that.
00:16:10
Speaker 8: I think it's more at the end of his time. But it was in two thousand and nine that he avoided the bailout, and you know, he saved Ford along with his boss Bill Ford never forget the Ford family runs forward. So but yeah, but no, he was a rock star and he was great to work with, and he also was one of those guys who pulled no punches and had things on his mind.
00:16:33
Speaker 2: You know, we were thinking about you. You really you're a lot of fun to talk to and we just love covering this world with you. You've inspired a lot of us, and it seems like you've also inspired someone who's very near and dear to your daughter or of another picture we want to pull up and maybe you could tell us a little bit about this. That's you For those on radio, it's Keith obviously, and then there's your daughter.
00:16:56
Speaker 8: Yeah, that's Nora behind me and we're both scrumming Jim Farrar, who is now Ford CEO. I think that's at a New York auto show maybe in twenty nineteen. So yeah, Nara has worked in different places. She was also at the Detroit News like I was. She was the Wall Street Journal business insider. So she's she's she's great, and it's great to have your your child in the days with you.
00:17:19
Speaker 3: So she's she's, she's wonderful.
00:17:22
Speaker 8: And that was a great moment, and that was taken That picture was taken by Ford's chief communications officer, Mark Truby. He was he was monitoring the scrum and he saw that shot and got our voices, our faces of skepticism.
00:17:37
Speaker 2: Which sometimes have to do when you're covering an industry. We've got to wrap up. But as you look forward to your world, and are you going to be keeping an eye on the auto industry?
00:17:49
Speaker 3: Oh, I mean I live in Detroit. It's hard not to.
00:17:51
Speaker 2: Yeah, you know, well, what's your thoughts? Like you've only got thirty or forty seconds?
00:17:54
Speaker 8: Like, yeah, I think it's a really perilous for the American auto industry. They really do need to reinvent themselves before the Chinese arrive. And as Bill Ford said last week, they are going to arrive.
00:18:08
Speaker 3: And if the.
00:18:09
Speaker 8: American auto industry isn't ready lower priced cars, electric vehicles, if they aren't ready.
00:18:15
Speaker 3: They won't survive.
00:18:16
Speaker 2: Are you driving a ev I'm not.
00:18:19
Speaker 4: I'm a moss back, not even a hybrid.
00:18:23
Speaker 6: No.
00:18:24
Speaker 3: My brother, my older brother has a hybrid. But yet I do not.
00:18:27
Speaker 2: I keep waiting for what's the car? Here's another one. You're a jem. We wish you well. Thank you, Keith not and Bloomberg News Auto Reporter. You will be missed. This is Bloomberg.
00:18:40
Speaker 4: Stay with us. More from Bloomberg Business Week Daily coming up after this.
00:18:47
Speaker 1: You're listening to the Bloomberg Business Week Daily podcast. Catch us live weekday afternoons from two to five e's during Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on you Tube.
00:19:02
Speaker 2: And you know, fast forward to kind of where we are today, right Tim, I mean in a big way. So much is coming at us, and you layer on AI and how everything is moving so rapidly. You do think how it's transforming so much. And our next guest talks about how AI is quietly quietly transforming some of the world's biggest industrial sectors. So we're talking about automotive, defense, aviation, and that many companies still risk being left behind.
00:19:28
Speaker 4: Here we got with us Roy high Loca, Oliver Wyman's partner in the firm's Transportation and Services and Digital Practices group. Rory, good to have you with us this afternoon. You and the folks at Oliver Wyman have this big report out on the industrial AI divide. How AI is quietly transforming, As Carol mentioned, some of these big industrial sectors. What is happening and who could get left behind?
00:19:54
Speaker 9: That's a great question, and I think we're seeing a couple of things happen right now, and it varies a bit sector bi sector where AI is rapidly becoming a focus area for you know, automotive manufacturers and automotive companies, airlines, rail companies, industrial mining, you name it, and it's become something that is already starting to generate real revenue returns for companies that have embraced it early. If you think about leveraging AI for better price decision, better servicing of offers for consumer facing transportation companies, you're starting to see those benefits. But at the same time you're seeing, you know, real differences in how companies are evolving when it comes to embracing AI for delivering you know, complex, very real world transportation offering. So think about you know, rail network, airlines and airspace, you know, cars on the road.
00:20:55
Speaker 6: So there's there's a lot that's happening.
00:20:57
Speaker 9: We're seeing some real differences in kind of company that have always been more focused on deploying AI as a real transformation of the business and their people versus companies leaving it kind of more as a This is something that the technology team has to go and figure out for how we embedded in our business. And so we're seeing real, real differences across the industries. It still feels like really early days in terms of the level of change and evolution that we're going to see, though, you know.
00:21:23
Speaker 2: I'm looking at some various you know, technology statists, excuse me. In this report, like here, fifty eight percent of aviation maintenance, repair, and overhaul professionals said that their value expectations from AI investments are being met or exceeded. That's up from twenty percent and twenty twenty four. How much when we look at stuff moving around, whether it's you know, planes, trains, or automobiles and go where you want, Yeah, is actually utilizing AI and it's making a difference. Are they all just at the beginning, Because it feels like, you know, AI's been around for a long time, and I understand what's happened in the last three three years is taking it to a whole other level. But give us an idea of how much is already happening.
00:22:05
Speaker 6: It's a great question.
00:22:06
Speaker 9: I think if you think about certain things like manufacturing, parts or cars or engines. AI and particularly machine learning have already helped companies realize substantial value. It allows you to much better model and predict behaviors of a closed system, allows you to design things, keep a factory up and running at a higher rate, which creates better economics. You're seeing it really in use and at scale in a number of those kinds of use cases. You mentioned airline maintenance, great example where just having better visibility into the likelihood of a maintenance event and then being able to put the part in the right place, have the team ready to go. That drives a real efficiency and we've really seen that take off when you think about using AI to do things like manage complex airspace and improve what it's like on a third stay in LaGuardia or going into Heathrow. You know, we're starting to see that technology be put to the test. But you're dealing with a need to change a massive open system, you know, use the interplay of the weather, aircraft, networks, things on the ground, and that's a much harder problem to solve. So I think we're still in the early days of really figuring out how that's going to come together, and so I think there's a lot of change to come and that will impact companies that touch all aspects of those operations and of that kind of value chain.
00:23:31
Speaker 4: I think a lot of people are thinking about AI as a sort of layer of technology the same way that we thought of the Internet and just being online, you know, maybe twenty five years ago, and how that's sort of everything we do now is online. What areas though right now are missing the not missing the opportunity, but have the most have the most opportunity for disruption, Like we don't see it yet because the technology is not quite there, but maybe we will in two or three years.
00:23:56
Speaker 6: Yeah, it's a great question.
00:23:58
Speaker 9: I mean, I think the the one sector we've probably seen, how you know, seen play out really quickly over the last couple of years, given just the nature of what's happening in the world is the defense sector.
00:24:10
Speaker 6: Certainly the role that.
00:24:11
Speaker 9: AI plays in using drones in the battlefield, we've seen that and we've seen the effects of disruption happening. New entrants into that sector bring that technology to life. If I think about, you know, in other areas like rail or aviation, I think the companies that are able to really rethink and transform how they manage their business, run their business, automate their business, change the role of people in the workforce, and do that quickly. They are going to find both economic efficiency and frankly improve the consumer and customer experience. And I think that's where you're going to see some real divides. And the challenge is for a lot of these companies, you still need all of your technology infrastructure to come to get other and be able to support the use of AI. And that's one of the really big lists, you know, modernizing systems, making the data available to inform, train and support these kinds of models and tools, Putting the physical infrastructure in place so you have computer vision.
00:25:15
Speaker 6: All those things are really key.
00:25:17
Speaker 2: Rory, just thirty seconds left here, US versus China, US versus Europe in terms of industries, embracing AI for the good if you will, and just quickly, if you could.
00:25:28
Speaker 9: Yeah, really quickly. I think all three are going to make great strides. I know that's a bit of a you know, muted answer, but.
00:25:36
Speaker 2: If you have to pick one, who's ahead of the race here.
00:25:39
Speaker 9: If I have to pick one, I think the innovation coming out of the US is really remarkable. I think you know, and we're going to We're going to see that play out in the next couple of years.
00:25:49
Speaker 2: All right, really appreciate it. Good stuff in depth report, that's for sure. Rory Haylaka He is Oliver Wyman's partner in the firms Transportation and Services and Digital Practices Group. Joining us right here in New New York City.
00:26:02
Speaker 4: Stay with us. More from Bloomberg Business Week Daily coming up after this.
00:26:10
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from two to five e's during Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
00:26:24
Speaker 2: Well, when you think about what's going on in our world to spend the AI build and so on and so forth, I feel like there's a lot of big money in that, and I don't know, there's a lot of big money in interesting places. We just came off the World Cup. We've talked so much about money in sport. There's a lot going on in our world.
00:26:39
Speaker 4: I'm glad you mentioned money in sports. That's a good segue.
00:26:41
Speaker 2: You're welcome.
00:26:42
Speaker 4: We got Chris mor Angi with US President co cio of Value also portfolio manager, the goals ETF at the gabelly opportunities in live sports. That's what goals stands for. We're gonna get to the sports ETF in just a minute. We talked about this with you in the past, Chris, but we want to talk about the market environment first, and you know, earnings is the backdrop part, but it also has to do with five dollars a gallon diesel, four dollars a gallon gas and challenges when it comes to geopolitics and when it comes to politics as well. What do you make of the environment that we're in right now?
00:27:14
Speaker 10: So, yeah, a lot to keep track of. First of all, delighted to be here. We categorize them as the three t's, Trump, technology, and treasuries. Not meant to be political, but obviously these are the things that people are thinking about. It's as you mentioned around the price of gas, tariffs, the midterms, technology, AI need I say more, and then treasuries in the back of everyone's mind, sticky inflation, a two trillion dollar deficit and almost forty trillion debt and how we're going to deal with that long term. And you know, a lot has been thrown at this market this year and we're still up a lot. And one way to read that is we've successfully climbed that wall of worries. That's what markets do. Another read is that market is being complacent. I tend to lean a little towards the ladder, but on the former earnings are up a lot, and if you look at it, the market is actually cheaper than it was at the beginning of the year.
00:28:07
Speaker 2: Doesn't mean it can't get cheaper, right.
00:28:10
Speaker 10: That is for sure, and a lot of that is going to have to do with what we hear from Google in just forty five minutes or so. This locomotive is being pulled by AI spend and you know post Close is going to spend.
00:28:24
Speaker 7: Three hundred billion, four hundred billion next year. It's going to be a big number.
00:28:27
Speaker 10: There's a reason they did their offering last month, and that really is just dragging the utilities, the energy complex, all these other picks and shovels plays that are driving earnings and driving the market.
00:28:38
Speaker 3: Yeah, that's right.
00:28:38
Speaker 2: The company did what an eighty five billion dollar equity raise last month, and let's pull by factset are expecting one hundred and eighty seven point one billion in capital.
00:28:47
Speaker 4: Expenditures this year, So that's real money.
00:28:50
Speaker 2: That is real money.
00:28:51
Speaker 4: Hey, Chris, you mentioned that you know you're you're leaning toward the ladder, and that's the idea of the market being complacent. So one side of the coin is earnings and AI spend driving, but the other side of the coin is complacency, and I'm wondering if you're seeing any of that.
00:29:07
Speaker 7: Yeah, again, I think there is a little complacency some of it.
00:29:09
Speaker 10: By the way, you know, we used to use the initials or of the name Tina, and there really isn't an alternative at the moment. Well, we'll talk about an alternative in a minute, probably, but you know, gold is underperformed a little bit for probably some idiosyncratic reasons.
00:29:22
Speaker 7: There aren't a lot of great places.
00:29:24
Speaker 10: To put your money, especially one where inflation remains untamed. So you go to the equity markets, and so far that's worked out for US investors.
00:29:33
Speaker 4: You put your money on the Knicks. Is one way to I bet or.
00:29:38
Speaker 2: In Spain or Venezuela or Spain.
00:29:40
Speaker 7: Spain was a good bet.
00:29:41
Speaker 4: Well, maybe this is a good segue to talk about the goals ETF and the top holding is Madison Square garden sports. It's about eight percent of the ETF. So I say, you know, put your money on the next. But when you were alluding to this idea of where to put your money, you you still think that that's sports and live op oor tunities are a real opportunity for investors right now.
00:30:04
Speaker 10: Absolutely, And you know, part of the reason that we started this ETF, and we've been following public sports franchises for decades. Actually when I got into this business twenty something years ago, started by Volume Cable Vision, which is which is the predecessor to Madison Square Garden of course in Liberty, which spun out the Lan Rais. And you know, there's a reason that really rich people buy sports franchises because over history they've been great stores of value. They are economically resilient, they're sort of tribal. There's a limited number of them, and guess what, they're also ai resilient. There aren't a lot of sectors that can say that this is one of them. There's about thirty or so publicly traded sports franchises in leagues around the world. Some of them are hard to access, they're in Europe, they lightly trade. We've got all of them here, and obviously the big holding is about in the square Garden Sports, the Knicks and the Rangers. They're separating that entity towards the end of the year. We think that opens up a lot of.
00:30:58
Speaker 7: Options for them.
00:31:00
Speaker 2: So why our treasury is the top holding.
00:31:04
Speaker 10: Well, no, that's not right. The we we got about five percent and five percent in cash Madison, Square Garden Sports are about ten percent, and then the Braves are a number two at eight percent. Ok. Sorry, So yeah, you know, we're getting a lot of floes and we're putting those to work.
00:31:20
Speaker 7: Judiciously.
00:31:21
Speaker 2: Okay, maybe this, maybe this isn't updated. Yeah, because eighty percent, right, you're looking to make sure is allocated at any given time.
00:31:28
Speaker 3: That's right.
00:31:30
Speaker 2: Do higher valuations of various teams and so on and so forth make for a good thing for you guys?
00:31:37
Speaker 10: Yeah, I mean, listen, you look at at how sports franchises have performed over the last twelve or so years. There's a lot of third party data sets that show that the value of the Big four teams, the teams in the big four leagues in the United States have gone up about fifteen percent. That's out paced the S and P five hundred and you know, you just pick up the paper every few days and you'll find other sports transaction. If it's we had the Seahawks most recently, the big ones for of course, the Lakers and the Giants trading recently for record values. I think should any of the teams that we own in public form trade, they'll also trade it at big numbers.
00:32:18
Speaker 7: So, you know those we're.
00:32:19
Speaker 10: Buying those franchises, anybody can buy those franchises by buying them in the market. We're buying a package of them for well below what we think they're intrinsic value might be.
00:32:27
Speaker 7: Hey, talk to us.
00:32:28
Speaker 2: About flows, interests by investors to actually come into this fund. What can you tell us about what kind of money has been coming in.
00:32:35
Speaker 10: Yeah, so you know, ETFs are a bit of a chicken and egg. You know, investors want to see flows, they want to see liquidity. We just launched this in January and we're seeing a lot of interest. And it's funny, it's not just from retail investors, your average Joe who wants to participate in this. We're having calls with family offices who you know, desperately want to own sports franchises. Maybe aren't big enough to write a billion dollar check to get a minority stake, and they want liquidity, and so they're looking at US, and so we've had a lot of really great conversations about it, getting a lot of interest, and you know, we think that the universe of potential targets is going to grow. You'll see uplistings of European soccer clubs to the US, perhaps even some leagues go public, franchises go public.
00:33:21
Speaker 2: Yeah, it's been interesting. Yeah, you do wonder I mean, do you feel like so there is interest like coming off the World Cup just real quickly?
00:33:27
Speaker 7: Yeah, absolutely, the World Cup smashing success.
00:33:30
Speaker 10: Yeah, you know, ratings forty million households tune into the final.
00:33:33
Speaker 7: That's a big number. Spurred interests in the US and that's good for US for global soccer teams. Yeah, absolutely, ball teams.
00:33:40
Speaker 2: Sorry, Chris Moranji, thank you so much. He's president in cos Cio over at the Gabelli Opportunities in Live in Sports.
00:33:50
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