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How should we think about inequality?

This pandemic really exposed the extreme amount of inequality in our society. In this episode, we’re going to discuss the depth of the economic inequality, why it matters, and how it is becoming dangerously unsustainable.

• Incomes for all but the highest-income Americans have been stagnant or falling for decades. 
• Median household income in 2018 was only about 3% higher than in 2000 after adjusting for inflation, according to the Census. 
• For the poorest 20%, Incomes had declined 2%. 
• The richest bracket however saw their incomes gain 20%!

We talk Pickety's inescapable book about Inequality "Capital in the 21st Century" which highlights the change of Capitals role and the problem of inequality in both income and wealth.

Additionally, federal minimum wages have not increased in the last 10 years and still stuck at $7.25. To make things worse, debt of the poorest Americans more than doubled during the housing bubble of the 2000s, Fed data show. 

After the bubble burst, borrowers spent several years paying down those loans, which reduced their ability to save. The longer the economy remains shut down, the harder it will be for people to get back on their feet.

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Zana Nanic, is the Founder and Chief Executive Officer of Reclaim a direct to consumer business casual clothing brand that offers working woman top quality and accessible business-casual clothes. Reclaim is an extension of her ethos, merging Italian elegance & quality with Silicon Valley functionality for the modern working woman.

Throughout her career, Zana has been breaking the norm, with sheer willpower & her vision for success. Her journey has been nothing short of incredible & the resilience in her pursuit. Born in troubled Communist Yugoslavia, Zana’s family fled to Italy just prior the unrest resulted in her home country to be dissolved.

In Milan, her family trying to make ends meet started an apparel business. At a very young age, she was involved hands on deck within the business, selling door to door with her mother. Today, she has come full circle as she runs her own company: Reclaim, a business casual fashion brand that is based on enclothed cognition. 

She started her career at the biggest consulting firm, McKinsey & Company, after which she launched products, grew & managed teams at Uber Italy after which she combined strategy and execution at Google. If that wasn’t enough of a rap sheet, she has a Masters in Economics from London School of Economics & did her MBA at Stanford Business School.

It was here where a class pitch to Eric Schmidt, ex- Google CEO resulted in him writing a check to help her build her dreams, and that 20 slide deck has turned into Reclaim

We also talk history of fashion, the role Italy has played in it, and how she's leveraging the varied experiences in consulting, tech & biz school to scale her very own D2C brand.

Check out her incredible collection - This is Reclaim

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Today the Things Have Changed hosts discuss corporate debt, why there is so much of it, and the dangers of it in our economy.

Corporate debt was already at historic highs even before the coronavirus crisis and now it's soaring at an unprecedented pace as companies scramble to ensure they have enough cash to weather the crisis. 

Despite warnings of widespread downgrades, defaults and bankruptcies from various ratings agencies, credit analysts and the Fed itself, bond spreads are narrowing. This  indicates a dangerous bullishness from investors as more of the U.S. economy opens for business. 

What if you are a company that's healthy and have an abundance of assets to collateralize, well you take advantage of these record low rates and borrow even more money just like Apple. 

• In May, Apple borrowed $8.5 B at a decade low rate of 3% even though they have $207B cash in the bank. Borrowing and yields have gotten to the point that if you're not borrowing, you're losing the opportunity cost of not borrowing cheap money. 
• Even Disney, the darling of the stock market, entered into a $5 billion credit agreement as it scrambles to bolster its liquidity to weather the fallout from the coronavirus crisis. 

The reality is that most businesses are not in a a healthy position and are trying to stay alive with shutdowns being enforced and revenue flows freezing up. 

In the coming months companies will have to make tough decisions and be strategic in how they use debt to stay afloat while minimizing the risk of bankruptcy. 

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Humans produce 13 million tons of textile waste annually! Today's guest aims to do something about it, by reimagining the creative process of creating clothing.

Nick Clayton is the CTO & Co-founder of Savitude, a fashion tech company that aims to use its cutting edge artificial intelligence platform to bring your excess clothing inventory to zero.

Savitude was created by industry stalwarts such as Camilla Olson & Jungah Lee, who with the technological backing of Nick Clayton realized they could create a solution to fix the fashion industry problem of designing clothes for one body shape.

Currently, there is a huge problem linking fit, body shape, returns and excess inventory. Savitude solves this by changing the way clothes are designed and sold from the ground up. Their curation technology solution enables fashion designers to deliver the latest styles for all body shapes, with a quicker time to market, resulting in lesser returns and reducing inventory. Taking ideas and parsing data to automate the sketching process thereby allowing the designers to quickly iterating the design process and get to market faster

Additionally, Savitude's intelligent software products augment the creative ability of a fashion designer, & refashions clothes with unique design details to resonate with a brand’s customer base. 

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Supply Chain has never been talked about more, as the pandemic strains the availability of goods and services & the ability of companies to secure raw materials and components.

Today we have Jimmy Anklesaria, supply chain pioneer, tech founder, professor, author and philanthropist, joining us on Things Have Changed Podcast. We dive into his beginnings in the field, his varied larger than life consulting experiences during the heydays at HP, IBM and others, as well as his passion for giving back be it through teaching or through philanthropy.

We dive into what the future of supply chains would look like, with trends such as de-globalization gathering steam, as multi national corporations aim to de-risk their supply lines.
One of the biggest trends in the field has been big data, with Jimmy elucidating an incredible example of how Flex, is able to manage its supply chain using a sophisticated in-house intelligence platform, Pulse which provides deep insight and visibility into its supplier operations.

Jimmy has also authored books such as "Supply Chain Cost Management: The AIM & DRIVE Process for Achieving Extraordinary Results" & "Zero Base Pricing: Achieving World-Class Competitiveness Through Reduced All-In-Costs." 

Over the past three decades, as an Adjunct Professor at UC San Diego & University of San Diego, Jimmy Anklesaria has taught graduate and undergraduate level courses in strategic cost management, finance, investments and supply chain management. 

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The rideshare industry is bleeding.

The Q1 conference calls were basically cost-cutting manifestos— a huge shift from an earlier focus on growth to now a more sustainability/ balance sheet game. Uber & Lyft have been swift to reduce their expenses at all costs, from dropping pool rides, coupons and other marketing expenses as well as cutting staff.

Let's break down the quarter further:

Uber 

• Volumes were down BIG! Almost ~ 70% (Uber) Y/Y in April
• They still managed a Revenue of $3.54 billion, but the Net Loss was $2.9 billion... For the Quarter!

One positive was the lockdowns triggered a surge food delivery and Uber Eats was a big beneficiary of this, with gross bookings up more than 50% year-over-year. Uber has even made a move on Grubhub, as they focus on consolidating the food delivery biz. Whether they get the regulatory approval for this is yet to be seen, as Gruber Eats would effectively be a monopoly in the food delivery market.

Lyft 

• Rideshare volumes were down ~ 70% Y/Y in April 
• Revenue came in at $955.7 million while the net loss widened to $400 million! 

Although with all this cash burning, Lyft and Uber still have significant cash sitting on the side to last a year or two, making it very possible that they outlast the pandemic in their search for profitability.

Uber sees this as an opportunity to bottom hunt & consolidate even the last mile market, with a $170 million investment in scooter company Lime, almost 80% below its previous valuation! The deal also gives Uber the option to buy Lime between 2022 and 2024 at a pre determined price. 

Just goes to show.. Cash is king.

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Are you flying lately? It’s okay, you’re probably not. As governments all over the world try to slow the spread of COVID-19, there has been an overwhelming effort to discourage travel. Travel is down. ALL types of travel are being discouraged, including air travel. Air travel is down 96% and airline companies are struggling to cope with the changes.

Take a seat, Q1 2020 is out

As the close of the first quarter of the year, investors have carefully listened to the financial results coming out to see how bad it looks. Here we are! Q1 2020 results are out and oh boy… if you’ve poured money into the airline industry, you’re going to want to sit down for this one.

Let's open up the hood of the airline industry

Revenues are almost 90% down and it is already a low margin business. Across the board, companies reported pre-tax losses in the amounts of $2B. The leaders of the industry, Delta, American Airlines, United, all had investor relations calls that were similar to a horror story. It is a balance sheet game. Everyone’s checking to see if their B/S is just BS. CFO’s talked about each of their expected cash burn rates on Q2 2020. American Airlines reporting an expected $75M a day rate. Airlines have to decommission underutilized aircrafts by parking them in expensive parking lots. They talked about unencumbered assets (Assets that no credit has claim on - like a paid off car, or a house with no mortgages). They have mentioned how much they’ve received from the CARES act and plead that they will be able to optimize operational expenses.

The Oracle divests

The Oracle of Omaha, Warren Buffett divested his entire portfolio from the industry! Curious how much he owned? Here are some staggering numbers:

• Delta - 11%
• American - 10%
• Southwest - 10%
• United - 9%

Buffett was pretty much THE AIRLINE GUY. That’s not a big vote of confidence at all. 

Some great links:

• https://www.bbc.com/news/world-us-canada-52518186
• https://www.cnn.com/2020/04/09/politics/airline-passengers-decline/index.html
• https://www.theatlantic.com/ideas/archive/2020/05/james-fallows-flying-will-never-be-same/611413/
• https://www.barrons.com/articles/the-case-for-an-airline-industry-shutdown-51584638681

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The leisure industry can be categorized into BEACH stocks:

• B - Bookings 
• E - Entertainment & Live Events
• A - Airlines 
• C - Cruise & Casino 
• H - Hotels & resorts 

Like FAANG stocks, but none of the upside. The BEACH stocks have cumulatively lost 45%, approximately $332B in value washed away since February due to the coronavirus pandemic.

We talk Disney ($DIS), the golden child of the entertainment and the experiences industry, which has gotten bludgeoned by the coronavirus lockdowns in Q1 2020.
The closure of its theme parks and hotels as well as movie theaters have been disastrous. Operating income fell nearly 40% year over year, from $3.8 billion to $2.4 billion.

However, Disney+ is the lone bright spot in the Q1 earnings call, salvaging their top line - which is up more than 20%. But there's only so much Baby Yoda can do as the streaming business is proving very expensive to run. Operating loss more than doubled year over year, while content & licensing costs are huge, and this is without adding ESPN & Hulu!

Also how much money did the NFL & Superbowl not lose by having the season end in early February?

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Kar_part (Jared Karp), is a rising LA street artist and ex-engineer who paints the streets of Los Angeles with elaborate timeless depictions of his understanding of the world. 

When Jared studied Mechanical Engineering in UC Berkeley, he discovered product design at the Stanford D-School. Berkeley, at the time, did not have an established discipline for product design engineering. In spite of this, the ever motivated Jared led the effort to bring a D-School to Berkeley & was instrumental in the fund raising for the soon to be known Jacobs Institute for Design. 

Before diving into the art world, Jared worked in Abbott Laboratories, with our co-host, Shikher. As a mechanical design engineer, Jared was constantly iterating and creating before venturing outside the corporate world to satiate his need for expressing his art & creativity. 

Jared has spent his time creating incredible street art like his depiction of Gretta Thunberg and Elon Musk. Things Have Changed has a casual and fun conversation with Jared about his story as a design engineer turned street artist.

Here are a few places you can check out Jared's work:

• Jared Karp Design 
• Kar_Part Instagram

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