tv Bloomberg Business Week Bloomberg November 10, 2019 4:00pm-5:01pm EST
♪ carol: welcome to bloomberg businessweek. i am carol massar. jason: i am jason kelly. a very special episode for you this week, we are here in lovely california. carol: under the gorgeous sun, and this week, bloomberg businessweek is releasing its annual best school ranking and for the second straight year, stanford is number one. we will hear from the dean, john
lovett. jason: and so many prominent alumni have made their way through the school. we will hear from the ceo of ab invev, the owner of the golden state warriors, and the incoming ceo of nike, and they will talk about their experience here and also what they are seeing in the world of business. carol: so much here from stanford, plus, back at headquarters back in new york, this week it was all about the year ahead summit, a 360 degree view of the most urgent topics facing every executive in the coming year. jason: we sat down with the providence equity ceo, and the ceo of macy's and co-ceo jim coulter, and also i should mention an alum of the school. carol: first let's get to stanford graduate dean on taking the number one spot on the best school rankings for the second year in a row. >> it is a testament to the fantastic students and faculty and staff and alumni we have here and i could not be happier to be the top business school this year. jason: the students will be milling around here very shortly.
what is on their minds right now? it is a topsy-turvy corporate world and as they prepared to get into the next stage of their career, what are they worried about? >> they are arriving at a time of great change in business, technology, society, and globalization, and those things are all on their mind. they are thinking about what job am i going to get, how my career is going to evolve, and that is what they are here for, to get exposed to all sorts of opportunities, ideas, and people and to develop the skills to get them forward in their careers. jason: thinking about where we are in silicon valley, this time there is a lot of talk in washington about silicon valley. it's role in society. how do you square all of that being the face of silicon valley in many ways? >> that is a great question. when i came here, washington just seemed it could not have been further away from silicon
valley, it was irrelevant. we are loading things and trying to make the world a better place, and it doesn't feel that way right now. it feels like washington and silicon valley has come much closer together. there's more talk about regulation and there's going to be more regulation. the impact of silicon valley on government and democracy is enormous, and we are right in the middle of that. it is an important responsibility for stanford to be in the middle of that discussion, and we are trying to do that. jason: one of the interesting things about a business education is for a long time, it was a fairly straightforward investment, you paid tens of thousands of dollars and then you got out on the other end and got paid very well. it seems more complicated now, and maybe even some existential questions why am i getting an
mba? how do you make the case for stanford with the students, you got to make the case that you are better than some of the harvard's and wharton's of the world. >> all of what you said is still true, there are still great economic schools. i think what has changed is the students have evolved. it's a much broader set of students. we had students just like we always did, but we have a student in the first-year class who was a central banker in yemen, a dentist from nigeria, a woman who was an olympic medalist. you put all those people in the mix together that is part of the magic of the place. then, they go on to approximately the same richness of careers. that has changed. the sense the mba can prepare you for anything, all different walks of life. i think that is really fundamental to what we are trying to do.
carol: we turned out to a notable alum from the graduate school of business. jason: he graduated from here in 1989 and now best known as the owner of the golden state warriors who was also pretty successful venture capitalist back in the day. >> it's just not about what is in the books. it's about a lot of other things and there are so many issues that one has to be aware of to be a ceo, if that is your goal, or to be in business. it is a very international world now. you can't just think domestically, as we all know. it affects the business i am in right now. i think you really have to have an experience where you get exposure to all of those issues. i think this is what stanford does. it is very good at doing that. jason: when you think about this place, silicon valley and stanford, so many companies have been born of this, private companies. we seem to be in a moment where
private valuations, what do you make of this moment where people are trying to decide what something is worth and there is some disagreement out there? >> clearly, private valuations are very high and there are some structural issues, with respect to the giant funds that have been raised and the prices they have been willing to pay for some of these startups or later-stage startups. i think that the public markets and private ones have to figure this out. this is no different than what has gone on in the past. we have had times where private valuations have gotten to be what some people believe are too high, and they have to sort of make do. i think it will all work itself out. jason: we have to talk about basketball. i think you have to see people who look at you and say, that's what i want to be when i grow up. i want to own a basketball team. not easy. what do you make of the season so far? there have been some twists and turns.
>> every single player on our roster last year is either gone or injured at this particular moment. it will improve. i like to tell my guys that i am always positive, and i do believe there are silver linings and everything. this, in particular, will allow us to develop younger players. they will get a lot of time and they will get better and we got some really good ones. so from the standpoint of basketball, i think our fans understand it. they will be with us and we will wind up being better. sorry, nba, we will be better when this is all over. jason: let me ask you about china and everything that happened with the nba over there. what happens next in china? >> it is a sensitive subject. i don't think it is something that all of us here, even the players and myself, and fully explain for understand. i think it will work its way out. i think it is like everything else. i think we will get back to
where we were before. that's the optimistic point of view. carol: i want to push a little bit. what is the responsibility of corporate leaders like yourself with what is going on with hong kong? >> i think it is complicated. we have a business to run. our job is not really at its most primary, to look at what is going on there from a political standpoint. or to make decisions about that. jason: coming up, more from the best business school special edition from stanford. we will talk with the faculty driving the program at the number one business school in the united states. carol: we are talking to faculty and talking about some notable alums, like the incoming nike ceo and the ceo of ab invev. lots to come. this is bloomberg businessweek. ♪
jason: welcome back to bloomberg businessweek. i am jason kelly. carol: i am carol massar. join us every day on the radio starting at 2:00 p.m. wall street time. you can also catch up on our daily show by checking out our podcast at apple and at bloomberg.com. jason: you can also find us online and through our mobile app. carol: let's get back to our special from stanford. jason: here is our explainer, all about the annual results. carol: they are celebrating in palo alto where stanford is ranked the number one business school for the second year in a row. the school tallied top scores for entrepreneurship and compensation. the runner up is dartmouth, moving 17 spots due to improved scores for networking and learning. the next three, harvard, university of chicago and university of virginia. bloomberg compiled these rankings from survey responses from students, alumni and recruiters.
we also used job placement data rates. there were a number of surprises. big names don't always translate into the best education. william & mary was ranked top for learning, followed by virginia and texas at dallas. when it comes to networking, dartmouth was first, but ucla was runner up. for entrepreneurship, maryland, utah and mississippi all finished in the top seven. jason: carol, a lot of companies can through trace their roots back to business schools. we are here just to the left of us, the knight management center is here on the graduate school campus. the nike founder wrote a paper while he was here earning his mba. that became the basis for the sports apparel company. carol: i love that story. there incoming ceo is also's part of the stanford alumni
network. >> i was blessed enough to be there between 1984 and 1986, and it was really the most formative experience i had that has set me up for not just my career, but to be honest, my overall life over the last 30 years. i distinctly remember many of my professors as well as my classmates, and what stanford really grounded me in was this notion of leadership. it was a phrase i first heard at stanford. it resonated with me.
if i would say there is one foundational, guiding principle for the last 35 years since then, it's been a real inspiration and attraction towards this notion of servant leadership. jason: silicon valley is certainly developed and developing, a far cry from where it is now. why did you go west? >> i knew i wanted to go to stanford. as a senior in college in 1982, it was known for teamwork. it was known for working with and through others. that was attractive to me. i played sports my whole life. i loved team sports. i hadn't been in business, but i knew a team approach was what i wanted to do. that was the reputation they had. i had never lived in california, so i came with the agreement that i was going to stanford in 1984. when i came out, i was not disappointed. carol: having been so entrenched with several companies here, what do you make of some of the scrutiny about some of the big tech players? >> my perspective is this, soon to be moving to portland, the important part is honest dialogue.
we don't duck the issues. it's not that technology was good and now it is bad, that is not it at all. the reality is technology has had a profound impact on the world, that it is, net, net, and fundamentally positive. it is also true that there can be consequences that are very real. we have to be able to acknowledge those and then engage in what is often messy dialogue where reasonable people can have different perspectives and see if we can get civil dialogue the issues and the remedies, or policies, or frameworks that can help us begin to address some of these issues. it will take time, these are not simple issues. what does not work is the politicians labeling tech as the bad guys. i don't buy it. in the same way, you can't be tech companies and say government and regulation is bad.
i don't buy that either. the reality is, this will be the hard work of dialogue. jason: we have to talk about your new job. as you said, you're moving to portland to become the ceo of nike. you served on the board there. why take this job now? why take this full circle, as you say, with your history and now working for the company? >> i have always deeply resonated with their purpose, which is bring inspiration and innovation to every athlete in the world. asterisk around athlete. if you have a body, you are an athlete. to me that's around human potential. it speaks to each person on the planet around the potential they have within them. and sport is a very powerful institution in the world right now. a lot of other institutions are falling down, polarizing. government or politics. sport is something that brings people together. it brings people together on a level playing field within and across countries. so the purpose of nike and the
role and impact it can have in the world is just something that i have always admired deeply. it has always spoken to me. carol: story in the magazine this week business schools have long trained their students to maximize shareholder value. increasingly though, students really want to master the skills that are needed to lead businesses committed to social missions. jason: well, that's right. it was a big topic while we were here. here is stanford senior-associate dean on social entrepreneurship. >> our students have changed a lot over the past few years. our students have come of age in a very different era than certainly i did. and certainly many of our past students did.
they have come of age on college campuses where their undergraduate professors and peers are talking about issues of diversity, about equity and inclusion, corporate social responsibility. so they come to us as learners who have already and exposed to some of these pressing issues. they come to us hoping that we will give them answers and that we will be able to train them to become better leaders. carol: i have got to say, i do wonder about what the students think about, because i feel like global corporations are talking about the importance of diversity for so many infant -- different reasons. i am curious, do students think the corporate world is doing enough? there's so much conversation, and some of the numbers are getting better, but i think there could be more improvement. >> i think that is kind of mixed. i tend to be an optimist, and i sort of tend to point to the real wins we see, but i believe in transparency and in making
sure that companies are able to tell us what they are doing so we can do better. i think our students really come to us believing that they can make positive change in the world and that they want to make positive change. jason: coming up, more from prominent alumni, including the 2018 commencement speaker. he is also the ceo of ab invev. carol: and jim coulter from the year ahead summit, straight from bloomberg headquarters. this is bloomberg businessweek. ♪
jason: welcome back to bloomberg businessweek, i am jason kelly. carol: and i'm carol massar. you can listen to us on the radio. jason: am 960 here in the bay area, in london on dab digital and through the bloomberg business app. carol: back to our special broadcast at the stanford graduate school of business, bloomberg businessweek releasing its annual best business school rankings this week, and for the
second straight year, stanford is number one. jason: we are here with the ceo of ab invev. his story of getting here is pretty amazing. >> i started researching and back then businessweek had a ranking of business schools and stanford was number one. carol: you actually looked at the magazine? >> yeah, yeah. that was our bible. one. -- the ranking. i said i was going to apply to schools, but stanford for sure is number one. they were number one through the 80's and 90's, and i was accepted, and then i had to fight for scholarship because my parents did not have the kind of money to send me to school. then i went to stanford business school and it changed my life. carol: you have got to talk about the financing to get there. >> long story short, there was a businessman in brazil with a boutique investment bank, one of the top guys today in the world of business. i knew that he had a bank that would give loans to some of the
employees that were pursuing an mba abroad. i was not one of them, i worked for shell oil. but because i was the brazilian accepted at stanford that year i decided to make my case and he decided to pay for my first year, out of his own pocket. so i went to stanford because of him, and it was interesting because he asked three things of me when i went. he said, first, keep in touch, before you can accept any full-time job offer when you are done with stanford, talk to me first. no obligation to work for me. and help someone if you can in the future. pay it forward. so that was it. carol: that was part of the education. talk about your experience at stanford, what you got out of it. >> for me, it transformed the way i view the world. it was very international, so a very open to the world even in those days. it was also a place where i learned talents. i was surrounded by the best
people in the world pretty much at that age group that kind of orientation to business. and i had to up my game. i used to be the top student, always top of my class and when i went to stanford, i was not at the top of my class. i had to work harder. but i got from stanford is it is about first who, then what. i learned that talented people, one guy is worth 10 very good people, but it is hard to find. when you look at stanford in the valley, silicon valley, that is a mirror image of each other. stanford is open minded and is always embraced ideas. other places look at ideas as threats. things are moving, stanford embraces it and they say there is an opportunity. they are open minded. they attracted people of the same kind of mindset and i think the valley is a true reflection of stanford, and stanford gets also retro things from the valley as well. jason: let's talk about your consumer a little bit.
it is an interesting time to say the least. you have a global view. let's go straight to china, where -- >> big business for us. jason: it is a huge business, yet there are concerns about the chinese consumer right now. what do you see? carol: and that plays out in your latest earnings. what is going on in china right now? >> right now, for sure there was some deceleration, but still growing at 6%. in our business, nightlife is an important channel. budweiser dominates most of the share. in nightlife, it got a bit deemphasized given some of the celebrations in china. so, that happens from time to
time. carol: stanford's connection to silicon valley likely helped to take the number one spot in entrepreneurship in our business school rankings. jason: here are some very impressive students who are also entrepreneurs. >> eight years ago, i started a social enterprise with my sister and we work with veteran owned american manufacturers across the country to make accessories, such as this necklace. carol: you have a bag next you. >> i do. this is one, and we also have leather goods. carol: and this is military grade materials from what i understand? >> yes, some of it, like this lining, as well as machine shells, which are in all of our jewelry. they are all made by veteran-owned american manufacturers and we donate 10% of our profits to veteran nonprofit organizations.
jason: we have been looking at some of the products, it is really incredible. give us a sense of what it is like to be a student here. especially at a time where there is a lot expected and a lot of questions about businesses right now. i think we would all love to be in your classroom in some ways. you guys are asking big questions. how do you characterize it? >> yeah, what is actually really interesting about stanford is they really bring out the authenticity in you. the education they give you is surrounded around who you are and staying true to yourself, but then also being good at business. the coolest thing is not only are you in the business school, but you are part of stanford as a whole. there are amazing classes and things outside of school that you can use to supplement your education. jason: coming up, year ahead summit back in new york. we speak with leaders on the most urgent topics facing every
carol: welcome back to "bloomberg businessweek." jason: "bloomberg businessweek" is releasing its annual list of this week. for the second straight year, stanford is number one. carol: they are indeed. go online and check out what went into the rankings of the business schools. we turn now to another top event this week, the year ahead summit in new york city. change is certainly the one constant that unifies global ceos. the pace of change is speeding up. jason: that's why bloomberg
invited industry leaders to discuss the most urgent topics facing every executive in the coming year. every year for the past three, we have turned to an alumnus of this institution. he is also the co-ceo and cofounder. he gave us a sense of what he is telling us -- telling his investors. >> in some ways, the message is similar to what we have seen over the last couple of years. what we are seeing is change. change is to be expected but what is unexpected is the nature and the speed of that change. most of us thought change would look like this. it was darwinian. it was continuous improvement. in fact, we have gone into a world where change has changed in its very nature. there has been a change in the nature of change.
first of all, industries are being remade at a rapid pace. enjoy the equilibrium in the world of business. the record business is radio and records for years. suddenly, it goes through a change and emerges as spotify. the rate of change has become a snowball. it is increasing in speed and size as it rolls down the hill. we used to actually purchase things. we now subscribe. the implications of this are profound. first of all, subscriptions that have existed for a long time, there was a backwater of commerce. the first subscription i found,
1731, ben franklin, books were too expensive so ben franklin's put them together and it was the first library. the first newspaper subscription popped up in the 1830's. 20,000 people subscribed by 1834. it was the first use of subscription in media. that is where subscriptions were most constant through the early years of the 1900s, magazines went from 3000 to 18,000. it was the heyday of reader's digest. 30,000 subscribers until 1980. it began to tail off. outside of media, subscriptions were a backwater. the fruit of the month. columbia record club. you to write checks and wait for things to show up or how about netflix? they would send you a dvd and you would send it back. tiny parts of the marketplace. what we see is a clear change in the amount of share of subscriptions. so why is that? it turns out, psychologically on
both sides of the market, subscriptions are extraordinarily powerful business models. for people, there is a tendency called mental accounting. we are really poor at mental accounting. we put our money down at a casino and they give us chips and we forget we are gambling money. generally, if you want to push subscriber behavior, you separate the purchase decision from how it is consumed. subscribers are deep in this mental accounting. you pay once then forever it seems like it is free. people like that feeling. secondly, we have a flat rate bias. we hate to see a taxi meter tick. that's why uber gives you the price up front. it feels nervous. how far is it going to go? do i have enough money? people will pay more to buy at a flat rate. all you eat is often more expensive than buying off the menu, but people like it better. once you have a subscription, there is something called loss aversion. if you have something, it's more painful to take it away.
as people buy subscriptions they tend to keep them because they would somehow suffer a loss if they were canceled. on the business side, people love subscriptions because in the world of tech, you can sign people up forever with a double-click. it has become really easy to deliver subscriptions. one of the things you hate is if someone opts out of one of your product sets. buying microsoft 365 is great for microsoft. lastly, it turns out the market loves description revenue. -- subscription revenue. if you look at what happened when the software business went from package to subscription, the multiple of the software business exploded. the same dollars delivered a different way gives you a higher multiple. this idea of the two-sided preference for subscriptions both consumers and businesses means that the subscription market is exploding. jason: i caught up with the ceo of providence. arguably one of the most influential investors in the
media space. there's a lot going on out there. >> netflix, we talk about the streaming wars. i think they won. it's the little bit like larry bird in a three point contest. in the locker room before the game, he said which one of you guys going to come in second? jason: you think it's that much of a lead? >> i do. for two reasons. one is, 60 million subscriptions in the u.s. they will be at 200 globally, which means they can and are paying more. they have learned a lot. execution matters. in any business, this is no different. they have a huge advantage. i cannot imagine them not being one of the winners. jason: you can't imagine them not being. >> they will be there. at some point, they will be judged not on subscriber growth and engagement. that makes sense, but ultimately, it's gravity.
you are judged by free cash flow and earnings ultimately. that will be an interesting pivot. disney should be a winner. they have, obviously, enormous valuable brands. they have inspired leadership. they are all in on direct to consumer. they have three strategies. sports through espn, hulu and now disney plus. the combination of those brands, strong leadership, great dna and media, i would put my money on them also. the unknown will be execution. it will matter. it it is a different business. they will be a force. carol: coming up from the summit, we got a sense of what's next for retail in 20. jason: who better to ask that in the ceo of macy's? this is "bloomberg businessweek." ♪
jason: welcome back to "bloomberg businessweek." i'm jason kelly. carol: i'm carol massar. join us every day on the radio starting at 2:00 p.m. wall street time. you can also catch up on our daily show and check us out on our podcast. jason: you can find us online at businessweek.com and through our mobile app. carol: we continue from the year ahead summit in new york this week. what we love about this event is we cover all kinds of industries and topics. that included retail.
jason: there are a lot of big questions about retail to say the least. we had a conversation with the ceo of macy's, david simon on the future of their business and whether brick-and-mortar is going to be a thing. >> in the past, we were not a scalable model. there was not the return on investment we needed. we were spending $10 million on these properties. we would gut most of it. now we are spending $3 million on these properties and that's just one of the strategies we have. we are adding backstage and big ticket. those are two businesses doing well in our portfolio. we are adding new brands. that's one element. it is product in its environment. the other part is focusing on the people. what we are doing with
management, colleagues, commission rates. then, marketing and special events. a lot of these malls, the opportunity to get the community in and for us to go into the community is high. what we can do to get more footsteps into the stores is very high. it is the combination of those five things that is what is driving the overall business. a good example, david in one of our first meetings he was kicking my but on king of prussia. it was one of the best malls in the nation. we had a tired product. the macy's brand was shopworn. he said this is everything i am doing and you are behind and this is the increase i am getting in dollars per square feet. these are the leasing agreements i am changing. get busy. >> i said it much more politely than that. [laughter] >> he was absolutely right. that was one of the first stores
we invested in. that was 2018 and we got a 2% increase and this year we are getting a 4% increase. it's the gift that keeps giving. investment is not a one and done. what we learned in this business is that you have to continue to invest in new content, new experiences. the customers raise the bar on all of us. >> this is beyond real estate. i don't care if you're a technology company, you have to invest in product. going back to your question, new york is the hippest city in the country. let's assume that. >> i'm ok with that. >> that's debatable. in the last five years, three malls have opened. we are not involved in any of them but you have hudson, the world trade center, and one brookfield place. it's interesting that the hippest city in the world opened three malls.
the narrative and i'm not blaming bloomberg at all, maybe slightly. carol: wait a minute. >> the narrative is so negative yet when you look at the facts, you can draw a much different conclusion. jason: staying with retail, you had a conversation with the ceo of nordstrom. he has a lot on his plate. carol: it is a big year for them. after 118 years in business, it just opened its first store in new york city. you can find this story in the magazine. >> customers are more empowered than ever before and less willing to compromise any of their experience. in our industry, we talk about omni channel. i talk to customers every day. i never have a customer use the word channel. it is not how they think. they just want great experiences. the reality is, if you are at a definition of channel, the categories we sell are bought in
stores. much more accurately is people are on their phones and they are in physical locations and they want it when they want it. they wanted on their terms. carol: people think how will nordstrom be different than the troubles than lord and taylor fell into? i'm not saying you guys are apples to apples. how would be different for you? >> we started as a shoe store a hundred years ago. i grew up selling shoes. one of the things about selling shoes, you are literally on your hands and knees in front of the customer trying to take care of them. that is a good metaphor for how we try to continue to run the business. the customer wants things that are different. building a new physical store today gives us advantages. we have technology built into the store. wi-fi cell service, that conductivity. our customers can be on their
phone and a lot of product discovery for what we sell, fashion begins online. we know that over half of our store sales involve a visit to our website. usually on someone's phone. there are a lot of features that we can build there and the architecture of the place is pretty different. historically, we have followed this over the years. historically, retail especially mall-based retail has been inwardly focused. almost like a fortress. you enter a different environment. it is shielded off from the rest. we want to do the opposite. carol: it's interesting you say that because when you look at
the retailers that have had problems, if you shop at nordstrom you know exactly what you're getting. the brand is very clear, the identity in terms of the store. those that don't do it -- what about the fallout we have seen in retail? >> we are over-stored. it's not a newsflash that america has too many stores. when you have a shift, people are online more. will there be no stores? of course not. especially what we sell, people like to touch, feel the sizes. it's interesting that our online return, the vast majority of customers choose to come into the store to do it. we have free shipping online returns that they would rather come to the store. it's easier than putting in a box. customers will do what they want to do. our job is not to try to coerce them into a channel that we prefer.
carol: welcome back to "bloomberg businessweek." i'm carol massar. jason: i'm jason kelly. you can listen to us on the radio. 106.1 in boston. carol: a.m. 960 and on the up. jason: we had to talk cannabis. carol: it was a big story last year, this year and next year. this is my conversation with the ceo on the future of the industry. >> we believe that today, cannabis is a up to $100 billion
industry. importantly, most of it is served by the black market. less than 10% of the transactions in cannabis last year were done through regulated stores. that's what's exciting. we are not trying to tell you this is an industry that needs to be created. it is already there. we just need to transfer out of the black market. carol: you just opened in massachusetts? >> yes, we started as a medical business. what was recognized many years ago was that millions of americans were self-medicating with cannabis. we entered the space to help people that were sick. what has happened over time, the
social attitudes toward cannabis keep changing. it is becoming more mainstream and as states like massachusetts adopt adult use programs, the medical operators are there and they have regulated programs and are the first ones to address that population. carol: what is going to be the biggest part of the market? a lot of companies keep coming in and say try these cbd products. there's medical, recreational, how does the market play out? is it all of that? >> it is all of that. if you think about cannabis or for medical people, the sickest part of our population cancer patients use it and get great benefits. that is a narrow part of the population. there are only so many people that are that sick. there is also the part of the population that uses cannabis
for the recreational or euphoric aspect. maybe people want to replace chardonnay or scotch with cannabis. the biggest opportunity is cannabis as an adult use wellness product. you pointed out cbd. there are millions of americans using it across the country for health benefits. it has the ability to deliver amazing health benefits. one of the main reasons why people go into an adult use store to buy cannabis is to sleep. that's the number one condition. i don't consider sleep a recreational activity it's a life activity. cannabis is going to become a wellness product that people use for sleep, anxiety, pain. i believe that is the biggest opportunity. jason: let's do a little luxury and pursuits. it's a first in the watch industry partner. collectors can now trade in their timepieces.
carol: it's an interesting thing. it used to be that watch companies viewed their old timepieces as the enemy. times are changing. here is my conversation with a founder and ceo. >> we believe that trade in is needed in the space and it is a place that is here to stay. carol: talk to us about, why not do it in-house? we have seen some luxury brands do this in-house. >> we want to find an expertise to evaluate the watch, look at the history of it. we want to trace the history of the servicing of the watch. we like to have an expert to satisfy the customer to evaluate the watch and make an offer and do the trade-in. we thought it was the best way to get an established brand to do it from there. with their expertise. it's all set up. to your point before, what's interesting is it is great for
our brand to be able to have a secure way of getting your secondary market watch. because the risk of secondary market watch is they are not serviced, they are not in great shape. they do not hold time well. when you go through us, we service the watch properly because we have a relationship to guarantee that you will have a watch in good condition. for our website, it is an opportunity to satisfy the demand of having a new watch and converting your watch to a new watch. carol: old watches used to be something you didn't like. that was your competition in terms of someone stepping up to buy a new watch, that used to be what you didn't want. it's a new revenue stream for you potentially. >> being customer centric means you listen to what the customer wants.
they don't mind a secondhand watch but they also want to look at the new models. we were are responding to both needs. of course, when you have a vintage watch, that it is due to your heart and comes from family, you want to keep it and i don't think we will see those watches come back. we launched a new model of the avenger line and that has been very popular for us for many years. we can definitely see people going online and saying of the new avenger. we give you the opportunity to sell your old watch and get a new one. >> when we mention the automobile industry, that's a great example. they have used the power of trade-in for years. they help customers to trade-in an old car and trade up to a new car. this is a similar tool now being used in the watch space. every year, there's roughly $5 billion worth of brand-new watches being sold into the united states at retail. those watches continue to be in circulation, but watches don't go to the scrap yard like cars do.
as a result, there are an estimated $125 billion worth of mechanical watches in people's closets. what this represents is, it is not a challenge, it's an opportunity for an innovative brand to serve their clients. they are watches that they may not using. they could now be buying or upgrading to a watch that they do want. jason: "bloomberg businessweek" is available on newsstands now. carol: also online and on our mobile app. you can find our cover story on disney and the launch of what bob iger calls the most important product in 15 years. it's called disney plus. jason: and the long-term effects of tear gas in hong kong. as much as 88% of the population has come into contact with it since june. carol: in politics, democrats are cool on wall street.
haidi: welcome to "daybreak: australia." i'm haidi stroud-watts in sydney. kathleen: i'm kathleen hays. we are counting down to asia's major market open. haidi: here the top stories we are covering in the next hour. rising food costs and falling prices leave china's leaders with a headache as new doubts over a trade deal. a saudi aramco moves one step closer to the market with an ipo perspective that offers more questions than answers.