The Future of the Diamond Industry

Summary

Bloomberg Businessweek — The Future of the Diamond Industry

Date: May 19, 2026
Hosts: Carol Massar & Tim Stenovec
Main Guest: Natalie Morrison (Founder, Astria London)

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Episode Overview

This episode delves into the seismic shifts occurring in the global diamond industry, with a particular focus on the ascendancy of lab-grown diamonds. Carol Massar and Tim Stenovec are joined by Natalie Morrison, founder of luxury jewelry brand Astria London, to discuss the chemical similarities between mined and lab-created diamonds, the rapid market adoption of synthetic stones, the economic implications for traditional mining economies, and what the future holds for both industry and consumers.

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Key Discussion Points & Insights

1. Market Disruption and Growth of Lab-Grown Diamonds

• The lab-grown diamond market is now valued between $26 and $30 billion, with synthetic stones comprising over 50% of all engagement rings (02:36).
• Surging production and falling prices have severely disrupted the $80 billion traditional diamond industry.
• Carol Massar notes the transformation in jewelry stores: “It’s just amazing the category when you go into a jewelry store.” (02:36)

2. Defining “Real” Diamonds

• Natalie Morrison insists:

  “No, there is zero difference. Chemically, optically, structurally. It’s a seed of carbon… you put in a microwave. But it’s a seed of carbon.” (03:33)

• Tim Stenovec probes whether any expert can tell the difference:

  “Can he tell the difference between the two?” (03:50)
  Natalie responds:
  “No, because there is none. There’s no gemologist in the world who can see the difference... it’s like IVF vs. a natural baby. I’ve got four of them. Trust me, they’re all the same.” (04:03)

3. Technological Advances

• Lab diamonds can now be produced in any shape, size, and quality.

  “There is no limit in anything in color, size, quality. I actually believe today that the quality of lab-grown diamond [is] superior.” (04:30)

• Two main manufacturing processes:
  • Chemical Vapor Deposition (CVD)
  • High Pressure High Temperature (HPHT)

  “It’s a seed of carbon… we basically replicate what happened under the ground with two methods… by doing that, within four to six weeks, a diamond is formed.” (05:16–05:38)

4. Sustainability and Energy Use

• Lab diamonds are not entirely sustainable yet but improving rapidly:

  “It takes a fifth less [energy] approximately in a reactor than under the ground... we only use recycled gold. We don’t use water, there is no deforestation, there’s no human traffic problems.” (05:44–06:35)

• Main challenges: sustainability credentials and resale value.

5. Economic Impact on Mining Regions

• Traditional mining economies like Botswana are deeply impacted:

  “It’s correct that the Botswana economy has relied for years and years on the mine industry. But... the world is evolving...the mining industry...have given a lot of the percentage of their mining results to De Beers. Today they are potentially buying out De Beers or part of it. So maybe it’s not a bad thing for anyone.” (06:55)

6. Market Penetration & Growth Trajectory

• Lab-grown diamonds’ market share:
  • “1% of the market in 2015…5% in 2021…40% last year…70% of engagement rings in the US today are lab grown…Expected 75% by 2030.” (08:05)
  • Morrison is more optimistic: “I actually think it will be faster than that.” (08:15)

7. The Power of Marketing and Perception

• The mined diamond industry, particularly De Beers, created the illusion of rarity:

  “Diamonds are not rare. The reality is there is enough diamonds in the world so that 8 billion people can each have half a carat.” (08:37)

• De Beers’ marketing shaped perception, but true scarcity was always somewhat manufactured.

8. Price and Resale Value

• Lab-grown diamonds are roughly 70% less expensive than mined (09:27).

  “Lab-grown diamonds are cheaper. Right? 70 first, it costs less to make them...the real question today is actually the resale value.” (09:35)

• Example cost comparison:

  “Two carats of lab-grown diamond...probably $6,000. The same equivalent in mine will be $60,000. By the time you leave the shop you’ve already lost $30,000.” (10:08)

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Notable Quotes & Memorable Moments

• On chemical identity:
  “No, there is zero difference. Chemically, optically, structurally.” – Natalie Morrison (03:33)
• On perception vs. reality:
  “It’s a little bit like IVF versus an IVF baby. I’ve got four of them. Trust me, they’re all the same.” – Natalie Morrison (04:03)
• On diamonds’ rarity:
  “Diamonds are not rare. The reality is there is enough diamonds in the world so that 8 billion people can each have half a carat.” – Natalie Morrison (08:37)
• On price difference:
  “The difference of price is approximately 70% between a lab grown diamond and a mined diamond.” – Natalie Morrison (09:27)
• On future market trajectory:
  “70% of engagement rings in the US today are lab grown...the Economist is expecting it to be 75% by 2030. I actually think it will be faster than that.” – Natalie Morrison (08:05)

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Timestamps for Key Segments

• Synthetic diamond market disruption: 02:36–03:10
• Lab vs. mined diamond distinctions: 03:16–04:20
• Technological details (CVD/HPHT): 05:14–05:38
• Sustainability and energy consumption: 05:44–06:35
• Economic impacts on mining nations: 06:35–07:38
• Market share & growth curve: 08:05–08:29
• Marketing myth and rarity: 08:37–09:08
• Cost and resale value: 09:27–10:26

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Tone & Language

• The conversation is lively and informative, with Carol and Tim pressing for direct comparisons and practical implications. Natalie Morrison is candid and passionate, frequently using analogies and personal experience to drive home her points.

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For Listeners: Bottom Line

If you haven’t heard this episode, you’ll walk away understanding why lab-grown diamonds have upended the jewelry world, how technological advances have wiped away differences in quality, why traditional diamond marketing misled generations, and why lower prices and ethical sourcing are set to make synthetic stones the new norm—despite unresolved challenges around sustainability certifications and resale value. The diamond industry’s future, as this discussion makes clear, is being forged in the lab.

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Transcript

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[Carol Massar]

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[Bloomberg Businessweek Daily Podcast Announcer]

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 businessweek Daily Podcast with Carol Massar and Tim Stanweck on Bloomberg Radio

[Carol Massar]

the Global Lab Grown diamond market valued between 26 and $30 billion. We reported this across Bloomberg the synthetic segment now accounts for over 50% of all engagement rings. Surging volume and falling prices have severely disrupted the $80 billion traditional diamond industry. And I got to say, you walk into any jewelry store, I have a jewelry store my mom went to we GRE with and it's like mine, diamonds, real diamonds. I guess you should say synthetic diamonds right next to it. Then you've got like CZ's and some other things. But it's just amazing the category when you go into a jewelry store.

[Tim Stanweck]

I wonder if Natalie Morrison is going to take issue with the word real that you just know.

[Carol Massar]

That's why I hesitated. I hesitated.

[Tim Stanweck]

She is the founder of Astria London, the brand by the way. Count Sarah Jessica Barker as its global creative director. Natalie, welcome. Make the point for us though. This, this, this sort of distinction or no distinction between lab grown diamond and a diamond that's mined in the quote unquote traditional way. Is there a difference?

[Natalie Morrison]

No, there is zero difference. Chemically, optically, structurally. It's a seed of carbon who all grows under the ground and take billions of years to get up the surface. And a lot of money and deforestation and time to extract versus putting it in a microwave. But it's a seed of carbon.

[Tim Stanweck]

But if I, if I take baby at the end, if I take one lab grown and one mined diamond to my friend Brian's dad in midtown who's been doing this for you know, 40 years, can he tell the difference between the two?

[Natalie Morrison]

No, because there is none. There's no gemologist in the world who can see the difference between a lab and a mined diamond. Do you know, I often made a really bad analogy, but it's a little bit like IVF versus an IVF baby. I've got four of them. Trust me, they're all the same.

[Carol Massar]

Well said, well said. I thought early on when they started doing lab grown diamonds that there were limitations in size. But tell me, is that not the case? Can you do anything in terms of size, shape? You can do anything.

[Natalie Morrison]

The more technology advance, the less any constraints we will have. But there is no limits in anything in color, size, quality. I actually believe today that the quality of lab grown diamond are superior. Especially on the very high end of the diamond market that we are in that we can find in the mine.

[Carol Massar]

Do you make them like, you know, I think about what is it? The four C's or whatever. Like do you just make what's grown in the lab? Are they all just the top of the tier if you will in terms. No, no, you do make different.

[Natalie Morrison]

Yeah, that's correct. So any diamonds come from the level of money, investment, quality of the reactors. We have technology behind it. So no diamonds are the same whether it's a mine or whether it's a lab.

[Tim Stanweck]

So what is the technology?

[Natalie Morrison]

So there is two types of technology in order to make them. So as I said early on, it's a seed of carbon. So basically the carbon is the strongest material in the world, which you put in a reactor. And we basically replicate what happened under the ground in those reactors with two methods called CVD and hpht. So pressure, one is the pressure and the one is liplike through the heat.

[Tim Stanweck]

Okay.

[Natalie Morrison]

And by doing that, within four to six weeks, a diamond is formed.

[Tim Stanweck]

Four to six weeks. How much energy does it take?

[Natalie Morrison]

Okay, so that's an interesting question because the biggest challenge at the moment is one, the resale value in one, the sustainability, which are the main question, because it's no more a secret that a diamond is a diamond, whether I come from a lab or mine. So now the two challenges in terms of education we face coming to energy, obviously it takes less energy in, in a reactor than under the ground. So the reality is it takes a fifth less approximately in a reactor than under the ground. However, it's not 100% sustainable yet. I actually don't believe it. However, it's improving every day with technology, with renewable energy, with using. So we only use recycled gold. So everything is improving over time. We don't use water, there is no deforestation, there's no human traffic problems. So there is no many problems that we can talk about.

[Carol Massar]

I know though, before we got going, we talked about the impact certainly on the economies that have depended depended on mining. And I guess it's safe to say that I don't know, is that the downside of all of this?

[Tim Stanweck]

You know, sub Saharan Africa, like Botswana, for example? Jen Jabba Saja was here talking to us about that just a few months ago.

[Carol Massar]

Exactly like. So there is that downside.

[Natalie Morrison]

Yeah, it's correct. It's correct that the Botswana economy has relied for years and years on the mine industry. But actually the world is evolving through technology. And I think countries need to adapt. I think we do need to help those countries. So Australia, for example, give a percentage of their income for giving education to kids in Africa. And I think a lot of companies should do and help anyway in general in the corporate world. However, the mining industry, if you look at it today, also have given a lot of the percentage of their mining results to the beers. And I think today they are potentially buying out the beers or part of it. So maybe it's not a bad thing for anyone. The world needs to diversify and the economy of each country needs to diversify.

[Tim Stanweck]

I want to Talk a little bit about what took so long technologically for us to get here. Because I mean, you know, it was almost like I got engaged a decade ago at this point and this, this wasn't even a thing. Like lab grown diamonds were not even part of the conversation. I talked to young people today and

[Carol Massar]

it's like for your wife to be or just were they around?

[Natalie Morrison]

So the lab grown diamond have been around since after the war in 1950. They were actually made, but they weren't.

[Carol Massar]

But they weren't really.

[Tim Stanweck]

It was prevalent.

[Natalie Morrison]

So out of the diamond market, lab grown diamond was 1% of the market in 2015. Yeah, that's 20 fair. Yeah. 5% of the market in 2021. 40% last year. 70% of the engagement ring of the US today are lab grown diamond. And the Economist is expecting it to be 75% by 2030. I actually think it will be faster than that.

[Tim Stanweck]

Yes. Illustrating my point perfectly. Why did it, why was it such hockey stick growth? And why did for so many years was it under the radar?

[Natalie Morrison]

Well, the reality is the mine industry has been dominating the industry, the diamond industry for 100 years. And I've done an amazing exercise of marketing with De Beers, first of all telling us that the diamond is rare, diamonds are not rare. The reality is there is enough diamonds in the world so that 8 billion people can each have half a carat each and you will still be having hundreds of thousands of them being hidden somewhere. So the reality is diamond is not rare. But they've done a beautiful marketing exercise in order to promote it that way.

[Carol Massar]

Why are diamonds still though then so expensive? Like if so many people are choosing for engagement rings to do lab grown

[Tim Stanweck]

diamonds, I mean the lab grown diamonds that I've seen have not been expensive relative to a mined diamond.

[Carol Massar]

What's the cost difference rental percentage?

[Natalie Morrison]

The difference of price is approximate the difference. I'm out.

[Tim Stanweck]

You're good.

[Carol Massar]

Oh, you're good.

[Natalie Morrison]

You're okay. So the difference of price is approximately 70% between a lab grown diamond and a mined diamond.

[Carol Massar]

70. Cheap, less expensive. Yeah.

[Natalie Morrison]

Lab grown diamonds are cheaper. Right? 70 first, it costs less to make them. You don't have to extract everything from the planet. You don't have them. But you know, the real question today is actually the resale value. The biggest, I will say problems between lab and mind diamond is they should work together. They should work together instead of fighting the biggest critics that mind diamond gives to lab grown diamond is, oh, there is no resale value. And I always say, yes, obviously you may have no resale value. But there is a resale value to everything. So let me give you an example.

[Carol Massar]

Just got about 25 seconds.

[Natalie Morrison]

If you get two carats of lab grown diamond today you will probably in decolor which is a high end. What we do it probably will be $6,000. The same equivalent in mine will be $60,000. By the time you leave the shop you've already lost $30,000. Personally, even if I lose everything, I know what I want to buy.

[Carol Massar]

I'm just going to take this and just like show it to my husband at home. Natalie, he's watching. Natalie Morrison. She's the founder of Astria London. We'll get you back soon.

[Tim Stanweck]

Stay with us. More from Bloomberg Businessweek Daily Coming up after this.

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[Carol Massar]

Hey, last month Bloomberg out reporting on Las Vegas, noting that business on the Strip has cooled as tourists are deterred by rising including parking, resort fees and higher prices for food and drinks. But I'm really curious about what our next has to say.

[Tim Stanweck]

Wouldn't that be everywhere?

[Carol Massar]

I know. Well, you know, they decided to like, you know, focus on Vegas.

[Tim Stanweck]

No, but like I feel like costs are going up everywhere.

[Carol Massar]

They are. They are. But I am curious to see what our next guest has to say because they've opened the Fontainebleau Las Vegas or has you said it much better than I did.

[Tim Stanweck]

I did not say it. Well, that's why you're saying it.

[Carol Massar]

The $3.7 billion property. It opened in late 2023. Let's get it with Brett Muffson. He is present partner at the vertically integrated real Estate and hospitality group.

[Brett Muffson]

It is Fountain Blue Development.

[Carol Massar]

Fountain Blue Development Want to make sure I said it well? They've been involved in more than 100 plus real estate projects and developments worth more than 27 billion in transaction value. And you guys play across the spectrum. Welcome, welcome. I warned you that we're in a little bit of a crazy way today. How are you?

[Brett Muffson]

I'm doing great. Thanks for having me.

[Carol Massar]

It's good to have you here. You do a lot in Miami, you do a lot in Vegas. You know Are those the two places where you see the most opportunities because you can play everywhere and anywhere and you do?

[Brett Muffson]

We do, yeah. I think, you know, for our, our investment thesis is kind of investing, thinking about a paradigm shifts in our business. And what I mean by that is Fontainebleau, large scale luxury resorts kind of span different income streams. So retail, entertainment, groups, leisure, we span kind of the tide of all of it. Right.

[Carol Massar]

Nightlife, wellness, maritime, you guys go everywhere at all.

[Brett Muffson]

Yeah. So I think that those two markets clearly have the diversification of, of consumers that we can address. And we've had a lot of luck doing that in both markets.

[Tim Stanweck]

What do you make of Carol's opening about the focus on Las Vegas and the softness or the cooling that some people are saying we're seeing as a result of higher fees?

[Brett Muffson]

Yeah, I think that, listen, in 2025 was clearly a year of, of normalization. Right. After two record breaking years in the prior year. So I think mean, coming off of COVID Coming off of COVID Yeah. It's a normalization I think that we've experienced in 25. And if you look at just the calendar, it's incredible to see the demand. Right. So lvcva, which is the Las Vegas Convention Center Authority, They've announced that 2026 may be a banner year for meetings and groups. That's huge for our business. Right. Consumer spending, yes, it's up just like you said earlier across the board. But you know, there's been a clear bifurcation in the marketplace. It's a K shaped economy, as a lot of people are talking about. And you know, we have fortunately built our products purpose built for that luxury consumer.

[Tim Stanweck]

So how much pricing power do you have at the, at the higher end?

[Brett Muffson]

We're seeing a lot of prices. I mean, for us, listen, it's a little bit different. We're in our early years of, of growth. So every year we're growing year over year the market.

[Carol Massar]

Double digit, double digit high teens.

[Brett Muffson]

Yeah, about 18% in the first quarter. But if you look at the, our competitors, you know, they have flat growth even with visitation being flat. Right. And so I think that just means that spend is staying pretty consistent. I mean, there's about 26, I think it's about 23.8 billion of revenue, you know, across the Strip in Las Vegas, it's a lot of money and it's about 6 billion, which is about 36% increase since pre Covid levels. And so with that though, you see, you know, there's a clear bifurcation and we Happen to be continuing to grow. And it's, it's the, you know, the numbers and the proofs in the pudding with the numbers, you know, people are spending more per visit. Right. Even with flat visitation across the board.

[Carol Massar]

Right. You mentioned convention. I mean, we're going to be headed out to something in June.

[Tim Stanweck]

I think we still have to buy the tickets.

[Brett Muffson]

Yeah, yeah, we're going, but.

[Carol Massar]

And then yesterday we talked staying with us.

[Tim Stanweck]

I don't even know if we have our tickets. Listen, there's a lot that we have

[Carol Massar]

to figure out today, but we were talking to a colleague who was out at Del World, which was in Vegas. Like, how much of your business, like you guys rise and fall based on convention activity?

[Brett Muffson]

Yeah, it's a mass. It's about 50% of our business. Business. And by the way, that spans also in Miami as well. I mean, that's our bread and butter.

[Tim Stanweck]

So when that's, when that's your business, do you find that individuals are paying or companies are paying?

[Brett Muffson]

So it's, it's those. The wallets for a convention spender are if not better than depending on the group.

[Tim Stanweck]

Yeah.

[Brett Muffson]

Right. So it all depends on the quality of that group. But if you get the right quality, which is where you work on your patterns and finding the right groups, then yes, it could be better than a.

[Tim Stanweck]

Well, the reason, the reason I ask is this is like we're hearing more and more about people going on, you know, sort. It's called leisure. I think it's like business slash leisure. So they go somewhere for work, but then they say a few extra days because they like where they are and it turns into sort of a mini vacation. And that's. Is that a big opportunity for you?

[Brett Muffson]

Yeah, absolutely. I mean, we, we listen at the end of the day, it's a. As you, as, you know, we're in a screen economy. Yeah, right. And so our thesis around all of this and this goes to groups where people need to meet to make deals, for example. Right. They can't do it behind a screen. Or if it's nightlife, which is an experiential experience. Right. So people are enjoying that or just food and beverage and getting in front of people and being, you know, human.

[Tim Stanweck]

How big of a. I think that's

[Brett Muffson]

a big deal in today's environment.

[Tim Stanweck]

How big of a driver is in Las Vegas, at least for you, at Fontainebleau is the sphere. And people coming to see stuff at the Sphere.

[Brett Muffson]

We've seen a major uptick in, in, in our customers actually, you know, combining their they're visiting us because of the sphere.

[Tim Stanweck]

Yeah.

[Brett Muffson]

There's no doubt.

[Tim Stanweck]

You talked to, I mean, I've talked to so many people. We haven't, we've been out there since the sphere was.

[Carol Massar]

We kind of keep hoping for a work event so we could actually go.

[Tim Stanweck]

How much do you like fish?

[Brett Muffson]

Exactly?

[Tim Stanweck]

Big fish head over here. So maybe, you know, I think they're done.

[Carol Massar]

We tend to do a 24 hour trip when it comes to Vegas. When you look at real estate generally though, before I get into like areas and stuff, the rate environment, how is that making, you know, certain projects more attractive? Are you holding off in hopes that it changes maybe in the next few months?

[Brett Muffson]

I think it's a double edged sword. Right. I think new projects are very difficult to get built. You know, interest rates don't make that easier. We would. But on the other side of it, we were very fortunate to own an asset that we got built in a market that had zero supply in 15 years.

[Carol Massar]

Yeah.

[Brett Muffson]

So that's helpful. Right. Barriers to entry are higher for us. So. But yes, there's no doubt, there's no hiding it, that rates are higher than they, you know, than they have been in the past. And I think that's kind of fed through the, the food chain, so to speak. And that's why you're seeing consumer pricing kind of matching that. Right. And offsetting that for, for owners and operators.

[Carol Massar]

Right. Is it making you guys say, you know, let's just hold off on this project, let's just kind of wait and see where the dust settles or no. Are you still saying we want to do this? The market looks good, the opportunity looks good, let's do it.

[Brett Muffson]

Listen, we, we, we play in the, in a, in a premium luxury customer space. And so when you're in that space in a K shaped environment, which we are in, which I think is going to have, you know, no stopping in the foreseeable future. You know, we, we think that you can still build to that customer, but it's not, it's not without challenges.

[Tim Stanweck]

Where else do you go to build?

[Brett Muffson]

Well, we have, I mean we've historically we've been in, in Miami, we have two hot, two large scale hotels there, the Fountain Blue obviously in Miami beach. And then we have Turnberry Isle Resort and Club, which is in Aventura. And then we also have a hotel in Nashville, actually Hilton Nashville, which is right in the center. Right.

[Carol Massar]

Everybody loves Nashville, man.

[Brett Muffson]

It's a great city.

[Tim Stanweck]

But what about expanding beyond where you already have a presence?

[Brett Muffson]

Yeah.

[Tim Stanweck]

Are there what Are the markets that are attractive to you right now?

[Brett Muffson]

Well, we listen, our pipeline is actually pretty robust. We're looking to expand the Fountain Blue brand across the globe. And no better place to kind of launch it than moving it from Miami after 70, 70 years of history, moving to Las Vegas. And so that was our second entree. And we plan to expand our presence in Las Vegas and then beyond. So we're looking at markets like the Middle east and Dubai. We look at Asia markets and across the country.

[Tim Stanweck]

Does the, does the war in the Middle east make you think differently about that as a region?

[Brett Muffson]

Makes you take a pause? But at the same time, I think that there's, it's a short term, you know, situation that they're in and there's a lot of growth going to happen there. And we're believers in that long.

[Tim Stanweck]

Apart from those international markets, what about additional US Markets?

[Brett Muffson]

Any, any market for us that has the ability to, to capture large scale resort product, which is unique. Right. So we need to be in the markets that have enormous group demand, that have an appetite for nightlife. Right. Big food and beverage presence. Our, our skill set is in the lifestyle and luxury resort, but in large scale where you have meetings taking place as well. It's very York. There you go. New York could be on our horizon. I was here for 15 years, so that would be a dream.

[Carol Massar]

Is it, is it on the horizon?

[Brett Muffson]

Not yet, hopefully.

[Carol Massar]

Well, we talked about coming in just all the different things you guys do. Hospitality, residential, commercial aviation, gaming, culinary, maritime, and more wellness too. I mean, is the growth area really hospitality? Is that where you guys get the most bang for your buck or newer?

[Brett Muffson]

It's across the board. You know, Vegas is a diversified demand division, you know, environment.

[Natalie Morrison]

Yeah.

[Brett Muffson]

So, I mean, so is all of our resorts for that matter, just given the diversity of what we do. But Vegas in particular, they did an incredible job making it the entertainment city of the world. Right. The capital of the world.

[Carol Massar]

So for us, it's gone through so many iterations. Remember when it was supposed to be like bring your family, it's for the family. And then it's kind of gone back.

[Tim Stanweck]

A lot of families, but you can

[Brett Muffson]

still do it all. But you really can. I mean, we have a, I mean the sphere is another example of it reinventing itself at Legion Stadium. Doesn't incredible events with the, with the Raiders. VGK is, has an enormous fan base locally. Right. I mean, you can't forget that the town has really gone from a gaming town to, to an entertainment business and

[Carol Massar]

infrastructure is Florida getting crowded.

[Brett Muffson]

Florida. I mean, absolutely. There's been a massive amount of growth.

[Natalie Morrison]

Yeah.

[Carol Massar]

Is it less opportunity? Opportunity?

[Brett Muffson]

No. In fact, I actually think there's an enormous amount of demand and the future is, is bright for, for Miami, especially south Florida. And I mean, I could go on and on and talk about, you know, all the different firms that are moving down there and, you know, moving their offices from New York and that's, we've been the beneficiary of that in the hospitality space.

[Tim Stanweck]

Anything out there give you pause right now?

[Brett Muffson]

Great question. No, I think, listen, the only thing that gives you a pause at the end of the day, the consumer is hurting.

[Carol Massar]

Yeah.

[Brett Muffson]

Right. And we all see that. So, you know, as you invest, I mean, we invest at the high ends or luxury and fortune or, you know, lucky and fortunate to have that. But.

[Tim Stanweck]

Well, what is the typical profile of your customer?

[Brett Muffson]

Our customer spends about two trips a year coming in and out of Vegas. They got about $150,000 of, of net worth on average. Right. We're talking about average is not the, the, you know, the, the, the aspiration.

[Tim Stanweck]

Yeah.

[Carol Massar]

Yeah.

[Brett Muffson]

So, you know, we, we, we look, we're very focused on the data and, and having oil prices where they are and other things. I mean, travels down. Right. Visitations down. But at the same time, you HEAR the Delta CEO talking about how 60% of its revenues are coming from the premium cabins. I mean, that's, that's our business.

[Carol Massar]

Love those premium cabins. I'm just gonna put it out there.

[Brett Muffson]

Who doesn't, who doesn't know?

[Carol Massar]

Again, you talk to the airlines, right.

[Tim Stanweck]

They just keep, and the companies are the ones paying. My willingness to pay on those, my part.

[Carol Massar]

Brett, this is great. Come back.

[Brett Muffson]

No, I appreciate you guys having me.

[Tim Stanweck]

Appreciate it.

[Carol Massar]

Bret Muffsen, he's present partner at Fontainebleau Development, joining us right here in studio.

[Tim Stanweck]

Stay with us. More from Bloomberg businessweek Daily coming up after this.

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[Tim Stanweck]

Well, a big reason of the run up in Nvidia has to do of course with the huge bet that I think it's fair to say the world is making when it comes to AI. One Thing that's not so clear is what the ramifications of this will be for the companies and the executives that are not necessarily in the space, but trying to understand if they need to change their organizations in order to live and thrive in this new economy. Christy Elmer thinks a lot about change. She's managing partner and director at BCG us. She joins us here in the Bloomberg Interactive Brokers studio. She's the author of the brand new book out today, how change really works, seven science based principles for transforming your organization. Welcome. How are you?

[Carol Massar]

Thank you.

[Christy Elmer]

I'm doing great. Excited to be here. Excited for a big day for us.

[Tim Stanweck]

Yeah, it's a big day for you guys. Congratulations on the book. Look, I open with AI because I think that's the change that's the backdrop to really every conversation that I would imagine executives are having right now. Am I off base here?

[Christy Elmer]

No, I think you're exactly right. And the challenge is we're not very good at even basic change. So when we looked at 2000 transformations over the last 20 years, 75% are still failing to deliver the stated results, both in the short term and in the long term.

[Tim Stanweck]

I want to take a step back because we often do talk to consultants who are managing partners, managing directors at these organizations and they talk about, they say things like transformation or change just remind our audience like what you, what BCG is brought in to do. So why you have a good view on what's actually happening inside these companies.

[Christy Elmer]

Yes. So we're brought in often for an organization, a CEO, a board that says, you know, we have to reinvent ourselves. So either we're underperforming, we might be in the bottom third, delivering total shareholder return, or quite frankly, there's been a disruption in our organization. Maybe there is something happening with AI, maybe there's something happening with new technology, new products and new threat. And so they're brought in to sort of say we have to completely change how we do business. Not always from a place of weakness, sometimes even from a place of strength where they might be a top performer, but they see competition coming. And so we look at it as very much of, think about it as like a two year journey. Where you're looking at here is a big set of changes we need to make. We need to get the organization to act differently and drive better results.

[Carol Massar]

We are in a period where companies are cutting costs at the same time that they're trying to reinvent themselves around AI. Can organizations realistically drive transformation? Transformation. When employees are worried about their jobs,

[Christy Elmer]

worried about AI Yes. The exciting part about this book and the findings is actually it's very knowable and repeatable how to drive better outcomes. We spent a lot of time studying the 25% that actually did deliver good results. And what we realized is that actually they spent a lot of time thinking about the system around the employees and actually thinking about how they were going to deliver the outcomes for employees and put them at the center. And so while there's still a lot of change happening, and yes, there will be job loss, what you can do is actually put the ones that will stay in the business at the center to make the business change even stronger.

[Tim Stanweck]

How painful is this for organizations?

[Christy Elmer]

Painful in terms of the outcomes or painful along the way?

[Tim Stanweck]

No, no, the outcome is hopefully something that's not painful. The change part is pain. You said it's hard to change. It's hard to change because it's often painful to change.

[Christy Elmer]

I think what we've realized is people are. The reason it's been hard is there hasn't been the science and the data out there to help people the best way to do it. So we kind of look at it and say we think it's hard to change. And the reality is it doesn't have to be. And there's really knowable, repeatable things that you can do. One of the things that we found in the studies that we did in the book is that actually executives feel much more positive about change than employees. So we call this the change distance. We studied 6,000 employees and executives and we asked them how did they feel about a change before they even knew it was coming. 68% of the executives felt positive, only 49% of the employees did. So there's a real distance in how people feel about it. The reality is, if you ask employees how they feel when they hear a change coming, the first emotion is actually curious. And so as an executive, you have an opportunity to understand the distance, but also have an opportunity to really help your people understand what they can do and how they can be a part of it. And once they're a part of it, they tend to be more excited about it, but also more willing to try new things.

[Carol Massar]

Christy, one of your key ideas is this idea between false alignment and real agreement. How often are executives mistaking compliance for actual buy in from employees?

[Christy Elmer]

Quite a bit, actually. It turns out we've done a bunch of workshops and studies with employees and executives, and in the executives discussion, we would actually ask them, even a year into the transformation, we would ask them to sort of write an article or write something on the computer that says, what is this transformation or change about? And what you would find is real difference. Some might be saying it's about growth. Someone else is saying it's about cost. And they would all look around and said, no, I thought we were in alignment on what we were doing here. But when you got to the real details, you would find that they had false alignment and not true agreement. And you can imagine what we call the mathematics of misalignment, how that plays out in the organization who's trying to execute that change.

[Tim Stanweck]

Yeah, I mean, I don't envy the folks who are taking these tasks on. And I'm wondering how much of this has to do with, you know, it's sort of like the. I forget what it's called. It might be the innovator's dilemma, but it's this idea that you kind of have to cannibalize your own business in order to adapt to the future. And, you know, we've seen a lot of companies not be successful because they haven't transformed. Some are really good examples of companies that have transformed. Netflix comes to mind, for example.

[Brett Muffson]

Right.

[Tim Stanweck]

It had to kill off that DVD by mail business in order to really create this new industry, which is streaming. And I remember when that happened, it was a disaster for the stock in the beginning, and it was a disaster for customers in the beginning because they were like, wait a second, this is how we watch content. And they were like, no, trust us, this is not how you're going to be watching content in the next few years. And look, they were right.

[Christy Elmer]

That's right. That's right. They're actually one of the stories we tell. We tell a few stories in the book about companies that have gotten some of these principles right. And part of their strength was actually creating a culture that could pivot, that actually had sort of this change readiness. And that's sort of our argument is, in today's change economy, the real competitive advantage is actually building an organization that has the resilience and has the ability to keep changing.

[Tim Stanweck]

So with Netflix's example, the culture deck, and the way that Netflix thinks about culture as a team sport rather than as a family. So you get rid of the underperforming players, you pay above market salaries to keep those above average players. Was that key to their successful transformation?

[Christy Elmer]

It was. And that was tactics that they chose. I think the important part is determine how it is you plan to win. Right. So what incentives, what structure, what cultural pieces. What we find is most organizations don't spend enough time actually doing that.

[Tim Stanweck]

So the flip side of that is what doesn't work? What's an example of a pivot that didn't work?

[Christy Elmer]

Pivot that didn't work. If you look at some of the companies that have not actually made that pivot, you can look way back, right? If you're using the Netflix example back to Blockbuster, they didn't see it coming and then they didn't move fast enough. But at the same time, they didn't have a culture where people were able to speak up and say, we need to take a different approach. So what happens is over time, what we would call sort of the frogs in boiled water, right? They actually all of a sudden realize now it's too late. And the problem there is actually one thing is to have a challenge with the strategy. The second is if you have a place where you can't actually highlight that or you have a culture not raising those issues, that's where you end up struggling.

[Carol Massar]

CEOs can often be very reactive. You argue for rituals and not reactions. What does that actually look like?

[Christy Elmer]

Just very quickly, the rituals are really important because what you're looking for is people to feel a sense of occasion. And actually the more you do that and you actually have a system that's designed for employees to engage, you create capacity in the organization and actually reduce cognitive fatigue so that you can actually get more done.

[Tim Stanweck]

Christy Elmer, thanks for joining us and congratulations to you and the team. Thank you on the new book.

[Christy Elmer]

Thank you. Appreciate it.

[Tim Stanweck]

Christy Elmer, Managing partner and director at BCG us, author of the brand new book out today, how change really works. Seven science based principles for transforming your organization.

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[Christy Elmer]

all new Mazda CX5 featuring more connection hey Google, where's the nearest Pilates class

[Brett Muffson]

safety that has your back?

[Christy Elmer]

More discovery on the scenic routes, more passion in the details and more control in changing weather. The all new Mazda CX5 more to

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move every side of you. See it in five [e-mail] Fivesides Google

[Christy Elmer]

is a trademark of Google LLC.

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