1 00:00:00,080 --> 00:00:13,040 Speaker 1: Yeah. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Leye. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:33,960 Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg Yeah. So, 5 00:00:34,040 --> 00:00:36,720 Speaker 1: President Donald Trump said he expected your own power to 6 00:00:36,720 --> 00:00:39,680 Speaker 1: be a cheap money FED chairman and lamented to wealthy 7 00:00:39,720 --> 00:00:43,040 Speaker 1: Republican donors at a Hampton's fundraiser this past week that 8 00:00:43,200 --> 00:00:46,400 Speaker 1: his nominee instead has raised interest rates. This according to 9 00:00:46,479 --> 00:00:50,159 Speaker 1: three people who were present in the Hampton's listening to 10 00:00:50,200 --> 00:00:52,040 Speaker 1: the President of the United States. Joining us here in 11 00:00:52,040 --> 00:00:54,680 Speaker 1: New York City. Present with us is John Riding, Anti 12 00:00:54,760 --> 00:00:57,600 Speaker 1: que Economics chief economist and founding partner. Good morning to 13 00:00:57,600 --> 00:01:00,640 Speaker 1: your John, John. I guess the big important is whether 14 00:01:00,680 --> 00:01:04,640 Speaker 1: any of this influences the Federal Reserve. Does it. If 15 00:01:04,680 --> 00:01:08,200 Speaker 1: it does, it's only to be more resolved in getting 16 00:01:08,200 --> 00:01:11,480 Speaker 1: on with the job of renormalizing interest rates. But to 17 00:01:11,520 --> 00:01:13,200 Speaker 1: be honest, the Fed is going to be guided by 18 00:01:13,200 --> 00:01:17,000 Speaker 1: the fact the unemployment rates at three the inflation rate 19 00:01:17,640 --> 00:01:22,000 Speaker 1: is pushing above two uh and that's going to keep 20 00:01:22,000 --> 00:01:25,399 Speaker 1: the Fed on task raising interest rates in September and 21 00:01:25,880 --> 00:01:29,760 Speaker 1: December this year, and I was like spoke with Tom 22 00:01:29,880 --> 00:01:34,120 Speaker 1: and the tv UH in the last hour four more 23 00:01:34,160 --> 00:01:38,600 Speaker 1: times in two thousand nineteen, regardless of what the president said. 24 00:01:38,640 --> 00:01:41,480 Speaker 1: And by the way, there is nothing in h J. 25 00:01:41,640 --> 00:01:44,560 Speaker 1: Pal's background to have led one to believe that he 26 00:01:44,640 --> 00:01:49,120 Speaker 1: was going to be an easy money UM central bank 27 00:01:49,200 --> 00:01:53,880 Speaker 1: head uh and UM. So I don't know. I wasn't 28 00:01:53,920 --> 00:01:57,080 Speaker 1: president in Hampton's. I don't vacation in Hamptons, so I 29 00:01:57,120 --> 00:01:59,720 Speaker 1: can't say what was It wasn't said behind He might 30 00:01:59,760 --> 00:02:02,680 Speaker 1: have been there because Tom King was away Friday and yesterday, 31 00:02:02,720 --> 00:02:04,280 Speaker 1: so maybe Tom, did you make it to the Hampton's? 32 00:02:04,280 --> 00:02:07,320 Speaker 1: Did the temperature went down? Could handle it? Did you? 33 00:02:07,520 --> 00:02:09,640 Speaker 1: Did you get a position in the FX marketing time? 34 00:02:09,760 --> 00:02:12,600 Speaker 1: But no story came out. I mean, that's what's crazy 35 00:02:12,600 --> 00:02:14,760 Speaker 1: about this, right. There were people who were privy to 36 00:02:14,840 --> 00:02:17,280 Speaker 1: some pretty important comments from the President the United States 37 00:02:17,280 --> 00:02:21,600 Speaker 1: and a private setting job, but it doesn't affect policy. 38 00:02:21,919 --> 00:02:27,320 Speaker 1: Mark market moves on headlines, and we have a president 39 00:02:27,360 --> 00:02:30,160 Speaker 1: who can give us more headlines than others from his 40 00:02:30,360 --> 00:02:35,800 Speaker 1: own cell phone. Um. But in the end, as a comeback, 41 00:02:36,120 --> 00:02:41,800 Speaker 1: it's what the FED does uh? And I think ahead, 42 00:02:41,800 --> 00:02:44,800 Speaker 1: please no. I I think that the FED is the 43 00:02:44,800 --> 00:02:48,760 Speaker 1: FED is on task here and will be more truly 44 00:02:48,880 --> 00:02:51,280 Speaker 1: data driven than it comes three or four years ago. 45 00:02:51,360 --> 00:02:54,240 Speaker 1: Then push against the good economists who you agree to 46 00:02:54,320 --> 00:02:57,440 Speaker 1: disagree with on this point, who say it will be 47 00:02:57,560 --> 00:03:01,080 Speaker 1: damaging to raise rates. How do you respond to those 48 00:03:01,160 --> 00:03:08,079 Speaker 1: good and qualified economists. I don't see what the damage. Look, 49 00:03:08,160 --> 00:03:11,799 Speaker 1: we we there's nothing more damaging. Again, you're talking tenurees 50 00:03:11,840 --> 00:03:15,040 Speaker 1: on for the financial crisis and less financial crisis and 51 00:03:15,080 --> 00:03:17,200 Speaker 1: the great recession we went through. And what were the 52 00:03:17,240 --> 00:03:20,679 Speaker 1: origins of that. It wasn't that monetary policy was too 53 00:03:20,720 --> 00:03:24,160 Speaker 1: tight too quickly. It was that monastry policy was far 54 00:03:24,200 --> 00:03:27,960 Speaker 1: too easy for far long in a too likely regulated 55 00:03:28,720 --> 00:03:34,160 Speaker 1: capital market environment. So the thing is that, you know, 56 00:03:34,200 --> 00:03:38,240 Speaker 1: going going back to another famous ahead of the vet, 57 00:03:39,240 --> 00:03:41,520 Speaker 1: the vet's job is to take the punch bowl away 58 00:03:41,520 --> 00:03:43,760 Speaker 1: when just when the party is getting good. And this 59 00:03:43,840 --> 00:03:46,000 Speaker 1: party has been pretty good for a good while, and 60 00:03:46,040 --> 00:03:49,600 Speaker 1: they've only been sort of closing the bar in very 61 00:03:49,640 --> 00:03:52,640 Speaker 1: small stages. And I think that that's what they have 62 00:03:52,840 --> 00:03:55,960 Speaker 1: to continue to do. I think that's what history, doesn't it. 63 00:03:56,200 --> 00:04:00,400 Speaker 1: And when you hear unconventional central banking guide years like 64 00:04:00,440 --> 00:04:02,760 Speaker 1: low interest rates are good, high interest rates caused inflation. 65 00:04:03,040 --> 00:04:05,960 Speaker 1: You're talking about Turkey, you're talking about Venezuela, you're talking 66 00:04:05,960 --> 00:04:10,080 Speaker 1: about Argentina, talking about a very different economics textbook. Um, John, 67 00:04:10,160 --> 00:04:11,920 Speaker 1: I think it's also quite easy to point out and 68 00:04:11,960 --> 00:04:16,640 Speaker 1: maybe the Federal Reserve is still quite accommodative. Absolutely, as 69 00:04:16,680 --> 00:04:21,200 Speaker 1: I said again with Tom before, the short term interest 70 00:04:21,279 --> 00:04:24,960 Speaker 1: rates who below the inflation rate. We have negative real 71 00:04:25,120 --> 00:04:29,520 Speaker 1: interest rates and that is an historical anomaly and one 72 00:04:29,560 --> 00:04:32,760 Speaker 1: that if persisted, would lead to misallocation of capital. And 73 00:04:32,760 --> 00:04:35,800 Speaker 1: it's that misallocation of capital as we had the capital 74 00:04:35,920 --> 00:04:42,280 Speaker 1: misallocated in the in the in the last decade um 75 00:04:42,320 --> 00:04:45,839 Speaker 1: that led to the housing bubble and led to the 76 00:04:45,960 --> 00:04:48,760 Speaker 1: mortgage crisis in the financial Now, this line probably doesn't 77 00:04:48,800 --> 00:04:51,000 Speaker 1: work on the campaign trail, but the yield curve is 78 00:04:51,040 --> 00:04:54,400 Speaker 1: something the FED might respond to. The Atlanta FED President 79 00:04:54,440 --> 00:04:57,840 Speaker 1: Raphael Bostock yesterday claimed that he will not vote for 80 00:04:57,880 --> 00:05:00,560 Speaker 1: anything but that will knowingly invert the curve, and he's 81 00:05:00,600 --> 00:05:03,800 Speaker 1: hopeful that as we move forward he won't be faced 82 00:05:04,040 --> 00:05:07,640 Speaker 1: with that. We seriously face in the prospect that over 83 00:05:07,640 --> 00:05:09,719 Speaker 1: the next couple of meetings, we might see some descent 84 00:05:09,760 --> 00:05:12,160 Speaker 1: at the FED because of whether yield cove is right now, 85 00:05:12,240 --> 00:05:16,279 Speaker 1: yield curve is right now? Look, I suppose that's possible. 86 00:05:16,400 --> 00:05:22,040 Speaker 1: We've had the center at the FED before um in 87 00:05:22,040 --> 00:05:25,360 Speaker 1: in rate hikes last year. But the FED is not 88 00:05:25,680 --> 00:05:29,240 Speaker 1: an innocent actor on the long end of the curve. 89 00:05:29,360 --> 00:05:34,599 Speaker 1: The FED has a massive balance sheet in long term bonds, 90 00:05:34,600 --> 00:05:38,560 Speaker 1: both mortgage bonds and treasury securities that are holding down 91 00:05:38,640 --> 00:05:43,279 Speaker 1: long rates. So I will put the question back, would 92 00:05:43,320 --> 00:05:48,320 Speaker 1: President Bostick want to see a faster wind down of 93 00:05:48,360 --> 00:05:51,800 Speaker 1: the balance sheet or even active sales of long end 94 00:05:51,920 --> 00:05:55,320 Speaker 1: rates which would push interest rates up? As by the way, 95 00:05:55,360 --> 00:05:59,200 Speaker 1: I think will the supply of treasury is that need 96 00:05:59,279 --> 00:06:02,760 Speaker 1: to be issued in order to fund the growing federal deficit? 97 00:06:02,800 --> 00:06:04,719 Speaker 1: And John, let me ask you a slightly technical question 98 00:06:04,720 --> 00:06:06,479 Speaker 1: as well. When the curves should they be looking? Tim 99 00:06:06,520 --> 00:06:08,560 Speaker 1: Dowey of the University of Oregon race this, Does it 100 00:06:08,600 --> 00:06:10,839 Speaker 1: FED funds right out to tends? Is it twos tends? 101 00:06:11,080 --> 00:06:13,400 Speaker 1: What are the FED looking at? Well? When I joined 102 00:06:13,440 --> 00:06:16,560 Speaker 1: the New York Fed in the Fed's expert in that 103 00:06:16,640 --> 00:06:19,920 Speaker 1: area was an economist called Arturo. Yesterday, I worked with him. 104 00:06:21,120 --> 00:06:25,760 Speaker 1: His work was three month te bills to UH ten 105 00:06:25,839 --> 00:06:31,239 Speaker 1: year rates, and that curve is a lot less flat 106 00:06:31,839 --> 00:06:37,080 Speaker 1: than the market popularized two years to ten year curve, 107 00:06:37,160 --> 00:06:40,640 Speaker 1: which is where you know people people tend to look 108 00:06:41,000 --> 00:06:44,279 Speaker 1: but but I think FED fund not FED fund, but 109 00:06:44,279 --> 00:06:46,479 Speaker 1: it's pretty much same thing. Three month bills to ten 110 00:06:46,560 --> 00:06:51,920 Speaker 1: years is where the FEDS research points within within this 111 00:06:52,200 --> 00:06:56,560 Speaker 1: is I guess the people behind German Powell, as you mentioned, 112 00:06:56,600 --> 00:06:59,240 Speaker 1: he's a pragmatist, but at the same time he's not 113 00:06:59,360 --> 00:07:02,400 Speaker 1: an account This line up the governors right now and 114 00:07:02,400 --> 00:07:06,760 Speaker 1: now they will defend this chairman. Well, I I think 115 00:07:07,480 --> 00:07:11,520 Speaker 1: you know j. Pau By by training, you know, is 116 00:07:11,560 --> 00:07:14,320 Speaker 1: a lawyer, is a capital markets guy. I have to 117 00:07:14,360 --> 00:07:20,560 Speaker 1: say that he assimilates and understands research in a way 118 00:07:21,160 --> 00:07:25,400 Speaker 1: um that you know might surprise economists and say, well 119 00:07:25,440 --> 00:07:27,120 Speaker 1: if you don't have a page, so you don't have this, 120 00:07:27,600 --> 00:07:29,480 Speaker 1: you know, how can you get it? He? I mean 121 00:07:29,520 --> 00:07:32,920 Speaker 1: he gets it um uh. And I think he is 122 00:07:32,960 --> 00:07:38,080 Speaker 1: a consensus builder. And I don't think that in terms 123 00:07:38,080 --> 00:07:41,120 Speaker 1: of the governors of the FED, who are all too 124 00:07:41,280 --> 00:07:45,080 Speaker 1: few compared to the seven governors that the FED is 125 00:07:45,120 --> 00:07:50,960 Speaker 1: supposed to have. Uh, they there's no um that that 126 00:07:51,120 --> 00:07:54,640 Speaker 1: all of them would be back. John Bran j Pa 127 00:07:54,920 --> 00:07:57,880 Speaker 1: Good to see It, Q Economics, Chief Economists and found 128 00:07:57,920 --> 00:08:16,160 Speaker 1: in Karna. He is the author of Securities Regulation Cases 129 00:08:16,160 --> 00:08:20,440 Speaker 1: of Materials Edition. John Ferrell read that cover to cover. 130 00:08:21,400 --> 00:08:26,920 Speaker 1: He is the most cited lawyer on entrepreneurial and corporate affairs. 131 00:08:27,320 --> 00:08:30,120 Speaker 1: Of course he is John Coffee. There is only one 132 00:08:31,040 --> 00:08:34,120 Speaker 1: of Columbia Law School, and we are honored. The Professor 133 00:08:34,160 --> 00:08:38,880 Speaker 1: Coffee joins us this morning on Professor Musk. John Coffee, 134 00:08:38,920 --> 00:08:41,920 Speaker 1: if you were advising Elon Musk this morning, what would 135 00:08:41,920 --> 00:08:45,120 Speaker 1: you say to him? Well, he needs to reach an 136 00:08:45,120 --> 00:08:47,480 Speaker 1: agreement with his board, and he needs to reach an 137 00:08:47,520 --> 00:08:51,480 Speaker 1: agreement with the SEC, and he needs very much to 138 00:08:51,600 --> 00:08:56,160 Speaker 1: shrink his shareholder base. To do a going private transaction. 139 00:08:56,440 --> 00:08:59,360 Speaker 1: He has to get the number of shareholders a record 140 00:08:59,360 --> 00:09:04,640 Speaker 1: of Tesla below three. Currently they're around one thousand, one 141 00:09:04,679 --> 00:09:08,760 Speaker 1: hundred and fifties. So it's a shrink that's gonna be 142 00:09:08,880 --> 00:09:13,559 Speaker 1: hard to do. Uh. Simultaneously, he can't do this transaction 143 00:09:13,679 --> 00:09:16,280 Speaker 1: if the SEC is suing him, and I think with 144 00:09:16,400 --> 00:09:19,680 Speaker 1: the SEC really watching him, which he probably should give 145 00:09:19,720 --> 00:09:23,320 Speaker 1: without a fight, is some kind of an agreement about 146 00:09:23,320 --> 00:09:26,600 Speaker 1: how he will make future statements about the company and 147 00:09:26,720 --> 00:09:30,280 Speaker 1: this proposed transaction. Thus, I think the SEC is going 148 00:09:30,280 --> 00:09:33,400 Speaker 1: to insist that you enter an agreement that you won't 149 00:09:33,480 --> 00:09:37,040 Speaker 1: make further statements on Twitter without at least first clearing 150 00:09:37,120 --> 00:09:41,240 Speaker 1: them with your general counsel on the board. Okay, John, 151 00:09:41,320 --> 00:09:44,080 Speaker 1: and you're in your classroom and you mentioned Netflix and 152 00:09:44,080 --> 00:09:47,800 Speaker 1: the re Hastings rule. We're gonna make original law here 153 00:09:47,840 --> 00:09:50,439 Speaker 1: to come out. Are we going to make an original 154 00:09:50,520 --> 00:09:55,360 Speaker 1: law that treats technology companies like industrial companies? Or is 155 00:09:55,440 --> 00:09:58,480 Speaker 1: technology gonna have an asterisk where they have a different 156 00:09:59,000 --> 00:10:03,559 Speaker 1: securities and regulation process. I think investors are the same 157 00:10:03,679 --> 00:10:07,680 Speaker 1: investors invest in both kinds of companies, and investors want 158 00:10:08,040 --> 00:10:12,319 Speaker 1: full information. Twitter statement, limited as it is to something 159 00:10:12,360 --> 00:10:16,000 Speaker 1: like a hundred and fourteen letters, really can't explain the complexity. 160 00:10:16,400 --> 00:10:21,440 Speaker 1: And his statement that funding was secured was extreme overstatement, 161 00:10:21,760 --> 00:10:24,520 Speaker 1: and it's partly the product of having to compress what 162 00:10:24,600 --> 00:10:28,120 Speaker 1: he was saying to a tiny number of letters. Thus, 163 00:10:28,160 --> 00:10:30,920 Speaker 1: I think you need to make a fuller statement and 164 00:10:30,960 --> 00:10:34,960 Speaker 1: then add your social media statements afterwards, but start out 165 00:10:35,040 --> 00:10:38,040 Speaker 1: with something that you disclosed to the SEC, to the 166 00:10:38,040 --> 00:10:41,520 Speaker 1: market generally and in a corporate press release. So, Professor, 167 00:10:41,559 --> 00:10:43,880 Speaker 1: there is a difference, of course between best practice, which 168 00:10:43,920 --> 00:10:46,680 Speaker 1: is something you've just described, and something that is legally 169 00:10:46,720 --> 00:10:50,640 Speaker 1: required and something that would be against SEC roles. You've 170 00:10:50,640 --> 00:10:53,160 Speaker 1: served as a member on the SEC Advisory Committee, and 171 00:10:53,200 --> 00:10:55,680 Speaker 1: I'm interested, Professor, as to whether you would be telling 172 00:10:55,720 --> 00:11:00,760 Speaker 1: them that actually they need to rethink disclosures on social media. Well, 173 00:11:00,800 --> 00:11:04,120 Speaker 1: I think social media is useful. No one wants to 174 00:11:04,200 --> 00:11:07,520 Speaker 1: keep it off of social media, but that's not inconsistent 175 00:11:07,600 --> 00:11:11,640 Speaker 1: with having simultaneous statements. Make your statement on social media 176 00:11:11,679 --> 00:11:13,960 Speaker 1: to that audience, but the rest of the market, not 177 00:11:14,080 --> 00:11:16,959 Speaker 1: all of which goes to social media, is entitled to 178 00:11:17,080 --> 00:11:19,959 Speaker 1: some disclosure that's filed with the SEC and a formate 179 00:11:20,040 --> 00:11:23,200 Speaker 1: K or something that's put on the corporation's website where 180 00:11:23,200 --> 00:11:27,160 Speaker 1: everyone knows they can go. A selective disclosure is problematic. 181 00:11:28,080 --> 00:11:30,280 Speaker 1: What should the board do? And the board is made 182 00:11:30,320 --> 00:11:32,600 Speaker 1: up of different principles. Let me start with the most 183 00:11:32,640 --> 00:11:35,400 Speaker 1: visible member to the audience, and that is Mr Murdoch. 184 00:11:35,880 --> 00:11:40,160 Speaker 1: James Murdoch, of course affiliated with Fox and perhaps Disney. 185 00:11:40,200 --> 00:11:44,240 Speaker 1: How should a board member like James Murdoch act and 186 00:11:44,280 --> 00:11:47,080 Speaker 1: react to all of this? Well, of course, there is 187 00:11:47,120 --> 00:11:50,199 Speaker 1: a committee that doesn't include him. They've appointed a committee 188 00:11:50,200 --> 00:11:53,559 Speaker 1: to engage in valuing the company, and I think everyone 189 00:11:53,600 --> 00:11:56,200 Speaker 1: should be focused on the need to come up with 190 00:11:56,240 --> 00:11:59,839 Speaker 1: an independent investment banker and an independent law firm that 191 00:12:00,040 --> 00:12:03,360 Speaker 1: helps this committee decide with the fair value the company is. 192 00:12:03,800 --> 00:12:08,000 Speaker 1: The price cannot be four dollars just because Mr Musk 193 00:12:08,080 --> 00:12:11,240 Speaker 1: said that. The company has got to sit down and 194 00:12:11,320 --> 00:12:15,000 Speaker 1: evaluate their current value, looking at all the current factors 195 00:12:15,080 --> 00:12:19,360 Speaker 1: and looking at professional help and investment vanking firm. Once 196 00:12:19,400 --> 00:12:22,160 Speaker 1: they do that, they might well decide they're worth more 197 00:12:22,640 --> 00:12:26,880 Speaker 1: because the premium that Musk was offering was only and frankly, 198 00:12:27,040 --> 00:12:31,400 Speaker 1: most going private transactions see something like a thirty premium. John, 199 00:12:31,440 --> 00:12:34,080 Speaker 1: what's the Bard's duty to investors right now after the 200 00:12:34,120 --> 00:12:37,520 Speaker 1: interview of The New York Times, Well, I think right 201 00:12:37,559 --> 00:12:40,360 Speaker 1: now the company has so many problems with their burn 202 00:12:40,480 --> 00:12:43,280 Speaker 1: rate on cash flow that they've got to make sure 203 00:12:43,400 --> 00:12:47,160 Speaker 1: they can communicate clearly that they are viable, that they 204 00:12:47,160 --> 00:12:50,720 Speaker 1: are not burning money at such a negative cash flow 205 00:12:50,960 --> 00:12:53,480 Speaker 1: that they can't afford to issue new debt. They already 206 00:12:53,520 --> 00:12:56,520 Speaker 1: have ten billion of dead outstandings, and the idea that 207 00:12:56,559 --> 00:12:59,600 Speaker 1: you can triple that um is something of a fantasy 208 00:13:00,040 --> 00:13:02,599 Speaker 1: us joining us or without question or interview of the 209 00:13:02,679 --> 00:13:05,319 Speaker 1: day on equities and Tesla and corporate governance. He is 210 00:13:05,400 --> 00:13:09,480 Speaker 1: John Coffee of Columbia Law School. They're bro Professor of Law, 211 00:13:09,800 --> 00:13:14,800 Speaker 1: director of their Center on Corporate Governance. Within the board, 212 00:13:15,520 --> 00:13:17,960 Speaker 1: I guess it's a it's a smaller, more focused board, 213 00:13:18,000 --> 00:13:21,000 Speaker 1: and I guess it's friends of Elon is a board? 214 00:13:21,080 --> 00:13:23,719 Speaker 1: Are they getting enough advice now? And how does the 215 00:13:23,840 --> 00:13:28,680 Speaker 1: board interact with their independent law firm? Well, they need 216 00:13:28,679 --> 00:13:32,160 Speaker 1: to choose the independent law firm. They apparently have one. 217 00:13:32,320 --> 00:13:34,520 Speaker 1: They really got two law firms because they got one 218 00:13:34,559 --> 00:13:38,800 Speaker 1: handling the possible litigation and another dealing with the valuing 219 00:13:38,840 --> 00:13:42,840 Speaker 1: the company. But the committee needs both an independent investsel 220 00:13:42,880 --> 00:13:46,240 Speaker 1: banker and independent law firm that will be there focused 221 00:13:46,240 --> 00:13:49,280 Speaker 1: on what is the fair value of this company today? 222 00:13:49,360 --> 00:13:51,480 Speaker 1: What do we need to know and how do we 223 00:13:51,559 --> 00:13:54,840 Speaker 1: negotiate with Mr Musk? Because it is not their job 224 00:13:55,000 --> 00:13:57,240 Speaker 1: to sit down and say yes to Mr Musk. It 225 00:13:57,360 --> 00:14:00,439 Speaker 1: is their job to say the fair value of this company, 226 00:14:00,480 --> 00:14:02,839 Speaker 1: given all the different range of options in front of us, 227 00:14:03,160 --> 00:14:05,600 Speaker 1: is at least X, and therefore we want you to 228 00:14:05,640 --> 00:14:10,400 Speaker 1: improve your offer is this board independent of Elon Musk? John? Again, 229 00:14:10,640 --> 00:14:13,320 Speaker 1: is this board independent of Elon Musk? Well, I must 230 00:14:13,360 --> 00:14:16,600 Speaker 1: say that they have more relationships with him over a 231 00:14:16,640 --> 00:14:18,760 Speaker 1: twenty year career than any other board I can think 232 00:14:18,800 --> 00:14:22,680 Speaker 1: of right away. It's kind of an incestuous relationship because 233 00:14:23,320 --> 00:14:26,800 Speaker 1: people even on the committee have previously been employees and 234 00:14:26,920 --> 00:14:30,520 Speaker 1: Mr Musk and other firms. What would you do that? 235 00:14:30,680 --> 00:14:33,760 Speaker 1: I mean, what what would be the John Coffee action 236 00:14:33,880 --> 00:14:35,440 Speaker 1: for this board? I mean, they're going through all the 237 00:14:35,520 --> 00:14:38,480 Speaker 1: right things, I get that, but what is the next 238 00:14:38,520 --> 00:14:42,520 Speaker 1: creative step for a board to get control of an 239 00:14:42,640 --> 00:14:47,400 Speaker 1: uncontrollable founder slash ceo? Well, I think the first thing 240 00:14:47,440 --> 00:14:50,520 Speaker 1: would be to establish a protocol. You will make no 241 00:14:50,880 --> 00:14:55,120 Speaker 1: more statements about the company or this transaction without first 242 00:14:55,160 --> 00:14:58,360 Speaker 1: having them cleared by our general Council and by the 243 00:14:58,480 --> 00:15:01,320 Speaker 1: law firm representing the in the committee. We want to 244 00:15:01,320 --> 00:15:04,880 Speaker 1: make sure we don't get an obligation to fight off 245 00:15:05,040 --> 00:15:08,520 Speaker 1: sec and private losses because you are too impulsive and 246 00:15:08,600 --> 00:15:13,680 Speaker 1: saying things too quickly and too glibly. What will be 247 00:15:13,760 --> 00:15:17,240 Speaker 1: the lasting impact on this and Silicon Valley? I mean, 248 00:15:17,280 --> 00:15:19,880 Speaker 1: I know Tessa is unique, but we've had a few 249 00:15:19,880 --> 00:15:24,000 Speaker 1: other entrepreneurial tech types feeling like they play with their 250 00:15:24,000 --> 00:15:27,920 Speaker 1: own record. Bug. I'm afraid that that all depends on 251 00:15:27,960 --> 00:15:30,360 Speaker 1: whether this is a success or a failure. This is 252 00:15:30,400 --> 00:15:34,840 Speaker 1: still to be resolved. Drama every day Like a kaleidoscope. 253 00:15:34,880 --> 00:15:37,120 Speaker 1: This changes in terms of whether people have losses or 254 00:15:37,160 --> 00:15:39,680 Speaker 1: they have gains, whether the burn rate is so high 255 00:15:39,720 --> 00:15:42,480 Speaker 1: nothing seems feasible, or whether the board should be seeking 256 00:15:42,520 --> 00:15:46,720 Speaker 1: more than This has to play out, And I think 257 00:15:47,160 --> 00:15:49,920 Speaker 1: settling with the sec so that you no longer have 258 00:15:50,080 --> 00:15:53,880 Speaker 1: them over your shoulder and putting a cloud in transaction 259 00:15:54,240 --> 00:15:58,320 Speaker 1: and then coming up with evaluation that you're comfortable with 260 00:15:58,720 --> 00:16:01,360 Speaker 1: and that can't be just we're going to do with 261 00:16:01,520 --> 00:16:05,240 Speaker 1: Mr musk Off. John Coffee, author of Entrepreneurial Litigation. It's 262 00:16:05,360 --> 00:16:08,760 Speaker 1: Rise Fall in Future out a few years ago, of 263 00:16:08,800 --> 00:16:24,080 Speaker 1: course at Columbia Law School, thrilled to bring you Professor Coffee, 264 00:16:25,840 --> 00:16:28,160 Speaker 1: Foreign Affairs with a new issue out, and of course 265 00:16:28,200 --> 00:16:31,800 Speaker 1: this September issue is always an important event, but never 266 00:16:31,920 --> 00:16:36,080 Speaker 1: more important than their new issue. Why because you and 267 00:16:36,200 --> 00:16:39,680 Speaker 1: me we are so dumb about the modern Internet. In 268 00:16:39,760 --> 00:16:43,240 Speaker 1: the modern web, the book is the magazine rather is 269 00:16:43,240 --> 00:16:47,200 Speaker 1: the World War Web. And it is absolutely brilliant cover 270 00:16:47,280 --> 00:16:51,240 Speaker 1: to cover on stuff we don't know with this, Gideon Rose, 271 00:16:51,480 --> 00:16:54,720 Speaker 1: he is, of course the editor in chief of Foreigners. Gideon, 272 00:16:54,840 --> 00:16:57,720 Speaker 1: congratulations on this. Let me get right to it. The 273 00:16:57,760 --> 00:17:01,360 Speaker 1: Internet has lost its promise to gus, so thank you 274 00:17:01,440 --> 00:17:04,840 Speaker 1: very much for your kind words about the issue. UM. Basically, 275 00:17:05,280 --> 00:17:07,399 Speaker 1: think of this as a four act play. In the 276 00:17:07,440 --> 00:17:11,159 Speaker 1: first act, the United States Government creates the fundamentals of 277 00:17:11,200 --> 00:17:15,000 Speaker 1: what will now call the Internet, UH, the communications networks, 278 00:17:15,000 --> 00:17:18,520 Speaker 1: the Defense Department stuff, all that. In Act to the 279 00:17:18,560 --> 00:17:22,000 Speaker 1: United States Government pairs with and partners with the private 280 00:17:22,040 --> 00:17:25,480 Speaker 1: sector to develop. This makes it the infrastructure generally public 281 00:17:25,680 --> 00:17:28,800 Speaker 1: and then allows private sector actors to develop all sort 282 00:17:28,840 --> 00:17:31,080 Speaker 1: of applications so forth. This is the golden age of 283 00:17:31,119 --> 00:17:34,240 Speaker 1: the Internet, the nineteen nineties. Things like that. Act three, 284 00:17:35,040 --> 00:17:38,200 Speaker 1: this starts to pray because the system goes on autopilot. 285 00:17:38,560 --> 00:17:42,120 Speaker 1: And what happens is the large private tech companies UH 286 00:17:42,359 --> 00:17:45,359 Speaker 1: take over large course portions of the Internet and become 287 00:17:45,400 --> 00:17:48,040 Speaker 1: a sort of oligopoly running things on their own. Government 288 00:17:48,080 --> 00:17:51,600 Speaker 1: regulators really don't really get involved, and the Internet takes 289 00:17:51,600 --> 00:17:54,680 Speaker 1: on its own life. And during chapter three, Act three, 290 00:17:55,400 --> 00:17:58,199 Speaker 1: various people start to push back against the problems with 291 00:17:58,240 --> 00:18:01,280 Speaker 1: the Internet. The Chinese try to succeed in a cyber 292 00:18:01,320 --> 00:18:03,840 Speaker 1: sovereignty in their own sphere. The Europeans try to do 293 00:18:03,920 --> 00:18:07,800 Speaker 1: regulation with gdp R, the Indians trying to build a 294 00:18:07,800 --> 00:18:11,080 Speaker 1: new Internet from the ground up on more populist public 295 00:18:11,119 --> 00:18:15,000 Speaker 1: good UH bases, and the Americans sit around wondering, g 296 00:18:15,240 --> 00:18:18,960 Speaker 1: can we control the tech companies? But Americans are so 297 00:18:19,440 --> 00:18:23,080 Speaker 1: embedded in an Anglo American view of liberal capitalism, in 298 00:18:23,119 --> 00:18:26,320 Speaker 1: which the government lets the private sector do its stuff, 299 00:18:26,800 --> 00:18:31,440 Speaker 1: that American policy has allowed the Internet to create problems, 300 00:18:31,680 --> 00:18:35,440 Speaker 1: and now other people are stepping in to fix the problems. Explained, 301 00:18:35,520 --> 00:18:38,240 Speaker 1: then who has the power here is? You go chapter 302 00:18:38,320 --> 00:18:41,919 Speaker 1: by chapter brilliantly. Is it China or the power or 303 00:18:42,000 --> 00:18:45,800 Speaker 1: is it a European regulatory structure. So the great question 304 00:18:46,080 --> 00:18:48,960 Speaker 1: is we don't know who's going to have the power 305 00:18:48,960 --> 00:18:51,639 Speaker 1: and act for because what happened in Act one and 306 00:18:51,680 --> 00:18:54,399 Speaker 1: two was the U. S Government created the infrastructure and 307 00:18:54,440 --> 00:18:56,520 Speaker 1: turned it over to the private sector to help run. 308 00:18:56,760 --> 00:18:58,959 Speaker 1: And in Act three we ended up getting a lot 309 00:18:58,960 --> 00:19:02,159 Speaker 1: of pushback. And right now you have governments like China, 310 00:19:02,480 --> 00:19:06,119 Speaker 1: you have regional regulators like those in Europe, you have 311 00:19:06,240 --> 00:19:09,480 Speaker 1: private sector companies like big tech. You have the citizens 312 00:19:09,480 --> 00:19:12,359 Speaker 1: in general and you and you. Nobody knows who is 313 00:19:12,400 --> 00:19:17,000 Speaker 1: going to control the commanding heights of the digital economy, 314 00:19:17,160 --> 00:19:19,680 Speaker 1: like for example, data regulation. Who is going to get 315 00:19:19,680 --> 00:19:22,960 Speaker 1: to keep and control and monetize the data, the individuals, 316 00:19:23,000 --> 00:19:25,639 Speaker 1: the companies, the government. You mentioned commanding heights, which is 317 00:19:25,680 --> 00:19:28,359 Speaker 1: of course Daniel Jurgan in his classic book on the 318 00:19:28,440 --> 00:19:32,120 Speaker 1: nineteenth to the twentieth century capitalism, there were two wars 319 00:19:32,200 --> 00:19:35,439 Speaker 1: in the middle of Dan Jurgen's commanding heights. What's going 320 00:19:35,520 --> 00:19:40,480 Speaker 1: to be the warfare equivalent of this technology in our society? 321 00:19:40,560 --> 00:19:42,439 Speaker 1: So it's not going to be warfare in terms of 322 00:19:42,480 --> 00:19:48,280 Speaker 1: geopolitical conflict between uh the major powers. What's going to 323 00:19:48,400 --> 00:19:54,080 Speaker 1: happen is there was a common American sponsored liberal open 324 00:19:54,240 --> 00:19:58,120 Speaker 1: order of the Internet, somewhat parallel to the globalization order, 325 00:19:58,400 --> 00:20:02,119 Speaker 1: and American officials moved that forward to get all the benefits. 326 00:20:02,240 --> 00:20:05,440 Speaker 1: But they forgot that the destruction. Part of creative destruction 327 00:20:05,720 --> 00:20:09,200 Speaker 1: creates pushback and people resist. And what you're seeing now 328 00:20:09,240 --> 00:20:12,320 Speaker 1: in China, in Europe, in India, even in the US, 329 00:20:12,720 --> 00:20:17,240 Speaker 1: is people reacting against an unfettered private tech or dominated internet. 330 00:20:17,520 --> 00:20:20,200 Speaker 1: But no one knows how to re establish control because 331 00:20:20,200 --> 00:20:22,320 Speaker 1: you don't want to kill the goose that's laying the 332 00:20:22,320 --> 00:20:24,919 Speaker 1: golden eggs. So what's happening right now is a question 333 00:20:25,000 --> 00:20:28,760 Speaker 1: over the future control of the Internet. It's not necessarily 334 00:20:28,840 --> 00:20:30,920 Speaker 1: just gonna be what it was in the last couple 335 00:20:31,000 --> 00:20:34,320 Speaker 1: of decades, which is the United States debating whether or 336 00:20:34,320 --> 00:20:36,840 Speaker 1: not to allow tech companies to have control over things. 337 00:20:37,040 --> 00:20:40,119 Speaker 1: Now other global players are in fact going to be 338 00:20:41,160 --> 00:20:43,720 Speaker 1: the news. Just in the last twenty four hours, Apple 339 00:20:43,960 --> 00:20:46,720 Speaker 1: limit x number of apps to China. I mean within 340 00:20:46,800 --> 00:20:50,720 Speaker 1: your chapter on China. They're making the rules were not 341 00:20:50,880 --> 00:20:55,160 Speaker 1: and even Tim Cook, chief operating officer of Tesla Bound 342 00:20:55,359 --> 00:20:57,879 Speaker 1: Tim Cook asked to bow to China. So what I 343 00:20:57,880 --> 00:20:59,560 Speaker 1: feel about this is it's a little bit like the 344 00:20:59,600 --> 00:21:03,800 Speaker 1: econom nationalism in other areas that we're seeing right. Globalization 345 00:21:03,920 --> 00:21:06,639 Speaker 1: races forward, it produces lots of wonderful things, lots of 346 00:21:06,640 --> 00:21:10,159 Speaker 1: creative destruction and turmoil, but it also produces pushback and 347 00:21:10,359 --> 00:21:14,000 Speaker 1: problems for people inside major developed Western countries, which causes 348 00:21:14,040 --> 00:21:16,359 Speaker 1: them to want to put breaks in the process. Okay, 349 00:21:16,480 --> 00:21:19,360 Speaker 1: the fact is the Chinese are doing the same thing 350 00:21:19,640 --> 00:21:24,440 Speaker 1: with the Internet, and just like American economic nationalists and 351 00:21:24,520 --> 00:21:28,720 Speaker 1: populists and British ones and places elsewhere want to hive 352 00:21:28,800 --> 00:21:32,560 Speaker 1: off their economies from the globe and establish sovereignty. So 353 00:21:32,840 --> 00:21:34,680 Speaker 1: the Chinese are trying to do the same thing for 354 00:21:34,720 --> 00:21:38,919 Speaker 1: the Internet, right, But we're talking about two different different things, right. 355 00:21:38,960 --> 00:21:41,560 Speaker 1: Getting on the one side, it's like cybersecurity and and 356 00:21:41,640 --> 00:21:44,520 Speaker 1: I guess you know, the cyber race on who will 357 00:21:44,560 --> 00:21:47,320 Speaker 1: have supremacy between China and the US. The other one 358 00:21:47,920 --> 00:21:50,800 Speaker 1: is simply who is in the third act? It could 359 00:21:50,800 --> 00:21:53,480 Speaker 1: be regulators, right, and this is Europe. Europe as leading 360 00:21:53,480 --> 00:21:55,560 Speaker 1: the forefront regulation. I know Tom in the past has 361 00:21:55,560 --> 00:21:58,040 Speaker 1: pushed back against it, but when it comes to data protection, 362 00:21:58,520 --> 00:22:01,639 Speaker 1: these are the new p full in town. Yes, but 363 00:22:01,880 --> 00:22:05,520 Speaker 1: it's actually there are several competitors trying to do the 364 00:22:05,600 --> 00:22:08,720 Speaker 1: same thing, and we don't know which way of controlling 365 00:22:08,920 --> 00:22:12,200 Speaker 1: the problems is going to win out. The European approach 366 00:22:12,560 --> 00:22:16,520 Speaker 1: is regulation for the whole system, Okay. The Chinese approaches 367 00:22:16,720 --> 00:22:20,919 Speaker 1: secession from the system cyber sovereignty. Eventually, the goal of 368 00:22:20,920 --> 00:22:24,120 Speaker 1: that is to create essentially a Splinternet in which there's 369 00:22:24,160 --> 00:22:26,600 Speaker 1: a general public Internet. But the Chinese have built their 370 00:22:26,600 --> 00:22:30,280 Speaker 1: own platforms, their own system and twenty years. In effect, 371 00:22:30,359 --> 00:22:32,680 Speaker 1: it will be much more of a Chinese dominated Internet 372 00:22:32,800 --> 00:22:35,919 Speaker 1: than UH than American dominated one. The Indians want to 373 00:22:35,920 --> 00:22:38,320 Speaker 1: re engineer the whole thing from the ground up. Fascinating. 374 00:22:38,359 --> 00:22:43,000 Speaker 1: Our article by Nanda Nilakani UH from Emphasis about what 375 00:22:43,080 --> 00:22:45,800 Speaker 1: the Indians are doing in Internet policy maybe the most 376 00:22:45,880 --> 00:22:48,680 Speaker 1: impressive and interesting of all of the different approaches, even 377 00:22:48,680 --> 00:22:50,760 Speaker 1: though we don't hear much about it, and basically in 378 00:22:50,760 --> 00:22:53,320 Speaker 1: the United States we're still wondering what to do because 379 00:22:53,320 --> 00:22:58,919 Speaker 1: we don't basically have the conceptual ability to direct companies 380 00:22:58,960 --> 00:23:02,000 Speaker 1: the way the government wants. And so for the public 381 00:23:02,040 --> 00:23:06,359 Speaker 1: ones talking about regulation because there's a great, great, great 382 00:23:06,480 --> 00:23:10,680 Speaker 1: article in the latest edition of Foreign Affairs written by 383 00:23:10,800 --> 00:23:16,280 Speaker 1: Helen Dixon saying regulate to liberate? Can Europe save the Internet? Cannet? Well, 384 00:23:16,320 --> 00:23:18,439 Speaker 1: so this is the great question. We tried to present 385 00:23:18,560 --> 00:23:22,040 Speaker 1: a fair picture of this whole, big debate that's going 386 00:23:22,080 --> 00:23:24,080 Speaker 1: forward on the future. So the lead piece in the 387 00:23:24,119 --> 00:23:27,280 Speaker 1: packages by Adam Siegel talking about the transition of power 388 00:23:27,280 --> 00:23:30,360 Speaker 1: from the United States to China. Helen Dixon's article expresses 389 00:23:30,359 --> 00:23:32,480 Speaker 1: the European approach, which is, no, we doesn't have to 390 00:23:32,520 --> 00:23:34,760 Speaker 1: be the U s approach or the Chinese separate one 391 00:23:34,920 --> 00:23:37,600 Speaker 1: we can regulate it. Non Da Nilakani talks about the 392 00:23:37,600 --> 00:23:39,879 Speaker 1: Indian one. We also have a number of different pieces 393 00:23:39,880 --> 00:23:42,679 Speaker 1: on specific challenges of cybersecurity. You should look at the 394 00:23:42,720 --> 00:23:45,920 Speaker 1: European approach, the Chinese approach, the Indian approach, and the 395 00:23:46,000 --> 00:23:49,600 Speaker 1: American approach as variants of the same thing. Now that 396 00:23:49,680 --> 00:23:54,240 Speaker 1: we've unleashed the wonderful creative destruction of digital technology, how 397 00:23:54,240 --> 00:23:56,560 Speaker 1: do we keep it going forward in a positive way 398 00:23:56,560 --> 00:23:59,720 Speaker 1: while controlling the social and political effects of all this 399 00:23:59,760 --> 00:24:04,000 Speaker 1: creative destruction? But with these nations ever come together get 400 00:24:04,000 --> 00:24:05,800 Speaker 1: in I don't know whether it's a plaza chord for 401 00:24:05,840 --> 00:24:08,000 Speaker 1: the Internet, but you know that's the kind of idea. 402 00:24:08,320 --> 00:24:11,280 Speaker 1: So if people like John writing we're controlling this stuff, 403 00:24:11,320 --> 00:24:13,960 Speaker 1: then the answer would be yes, because there's an obvious 404 00:24:14,160 --> 00:24:18,880 Speaker 1: benefit for people to come together in a collective action 405 00:24:19,520 --> 00:24:24,680 Speaker 1: coordination solution to reap the benefits of a coordinated policy 406 00:24:25,119 --> 00:24:27,880 Speaker 1: uh with into a regulation. But the problem is, right 407 00:24:27,920 --> 00:24:30,359 Speaker 1: now we have a tied in infnational politics in the 408 00:24:30,440 --> 00:24:34,359 Speaker 1: United States and elsewhere which is going inward rather than collective. 409 00:24:34,400 --> 00:24:36,480 Speaker 1: And I think the answer is we're moving towards a 410 00:24:36,480 --> 00:24:40,280 Speaker 1: splinternet more than we are towards a new You steal 411 00:24:40,320 --> 00:24:42,480 Speaker 1: that word splinternet, you get a royalty on that. It's 412 00:24:42,520 --> 00:24:46,000 Speaker 1: not mine, but it's royalty. Here's the New York Times today, 413 00:24:46,080 --> 00:24:48,639 Speaker 1: folks all read it for your Russian ackers broad and 414 00:24:48,680 --> 00:24:50,960 Speaker 1: attacks to conservatives. First of all, I got to make 415 00:24:51,000 --> 00:24:53,359 Speaker 1: some news here was this was a counsel on foreign 416 00:24:53,359 --> 00:24:56,879 Speaker 1: relations hacked by by Russians. Is within this article. Like 417 00:24:57,000 --> 00:25:02,280 Speaker 1: everybody else, we're constantly fit an attacked by various different actors. 418 00:25:02,359 --> 00:25:04,560 Speaker 1: But that's just that's like, the Russians don't bother me 419 00:25:04,600 --> 00:25:07,080 Speaker 1: as much. The Russians are like um, butch Casside and 420 00:25:07,119 --> 00:25:10,800 Speaker 1: the Sundance harassing the railroad. Who's the Catherine Ross of 421 00:25:10,840 --> 00:25:14,840 Speaker 1: the World War Web? The Chinese who are gonna be 422 00:25:14,840 --> 00:25:18,320 Speaker 1: building a whole new railroad. So we're worrying, like E. H. 423 00:25:18,359 --> 00:25:21,200 Speaker 1: Harriman and the Union Pacific Railroad about who's stealing our 424 00:25:21,320 --> 00:25:25,119 Speaker 1: little We're worrying about who's stealing or are safe. The 425 00:25:25,200 --> 00:25:28,040 Speaker 1: Chinese are going around buying up the land and running 426 00:25:28,040 --> 00:25:32,120 Speaker 1: the developing engine technology. Twenty years from now, we're gonna 427 00:25:32,119 --> 00:25:34,320 Speaker 1: be running on Chinese trains and we're gonna be wondering, 428 00:25:34,359 --> 00:25:37,600 Speaker 1: how did that happen. Okay, Well, then what Francie's wonderful 429 00:25:37,680 --> 00:25:40,840 Speaker 1: question about how do we get together on this? Where's 430 00:25:40,840 --> 00:25:45,160 Speaker 1: the unifying force, particularly given the fractious politics our presidents 431 00:25:45,200 --> 00:25:49,280 Speaker 1: having with our allies. Karen corn Blue and UH, Michelle 432 00:25:49,280 --> 00:25:52,159 Speaker 1: Flournoy UH and Michael so Meyer have pieces in the 433 00:25:52,240 --> 00:25:55,000 Speaker 1: article in the package telling you what the United States 434 00:25:55,040 --> 00:25:56,680 Speaker 1: should do, and there are a lot of things. Again, 435 00:25:56,680 --> 00:25:58,960 Speaker 1: I would look to the Indian approach of the internet 436 00:25:59,040 --> 00:26:02,440 Speaker 1: as a public good that may hold the best solution 437 00:26:02,880 --> 00:26:05,119 Speaker 1: down the long road. You have a two cook stock 438 00:26:05,160 --> 00:26:09,760 Speaker 1: options is not the public good. The question of the 439 00:26:09,800 --> 00:26:14,160 Speaker 1: regulation of capitalism in a way that is beneficial economically 440 00:26:14,440 --> 00:26:17,280 Speaker 1: but also sustainable politically and socially is going to be 441 00:26:17,280 --> 00:26:21,600 Speaker 1: the question of the mid century. Gideon, do you think 442 00:26:21,640 --> 00:26:24,760 Speaker 1: any of these companies would self regulate for real? Not 443 00:26:24,840 --> 00:26:29,440 Speaker 1: just but just like Martin? Look, yes, yeah, we can 444 00:26:29,560 --> 00:26:32,040 Speaker 1: count on the tech companies to self regulate, just like 445 00:26:32,119 --> 00:26:35,160 Speaker 1: we can count on the pharmaceutical companies to provide low 446 00:26:35,240 --> 00:26:39,720 Speaker 1: cost medicines for everybody without regard to jacking up things 447 00:26:39,760 --> 00:26:43,840 Speaker 1: when they have a scarce monopoly like an EpiPen. Alright, perfect, 448 00:26:44,480 --> 00:26:47,719 Speaker 1: we we uh, we do a little bit of you know, 449 00:26:47,840 --> 00:26:51,000 Speaker 1: that's that's a no. But why not if you listen 450 00:26:51,320 --> 00:26:54,840 Speaker 1: to the rationale of them regulating. It's either you regulate 451 00:26:55,160 --> 00:26:57,320 Speaker 1: or you don't survive if people stop using you because 452 00:26:57,320 --> 00:27:00,440 Speaker 1: you don't. You know, they don't trust. This is they 453 00:27:00,480 --> 00:27:02,440 Speaker 1: make money out of trust. It don't make money out 454 00:27:02,440 --> 00:27:05,399 Speaker 1: of selling drugs. Yes, in the long run, but in 455 00:27:05,440 --> 00:27:07,800 Speaker 1: the short run you make money by increasing your share 456 00:27:07,880 --> 00:27:10,280 Speaker 1: of things. Right, we have a president right now who 457 00:27:10,400 --> 00:27:13,000 Speaker 1: is ignoring the entire costs of a global trade war 458 00:27:13,320 --> 00:27:17,320 Speaker 1: to get some short term, minor advantage in trivial, little issues. 459 00:27:17,600 --> 00:27:19,600 Speaker 1: So that kind of thinking, if it can apply to 460 00:27:19,640 --> 00:27:22,720 Speaker 1: the President of the United States and the entire Republican Party, 461 00:27:22,960 --> 00:27:26,240 Speaker 1: it also applies to individual private sector company managers, so 462 00:27:26,359 --> 00:27:29,280 Speaker 1: we can't rely on them to be responsible for the 463 00:27:29,400 --> 00:27:32,120 Speaker 1: entire global community down the road. Gideon, thank you so much. 464 00:27:32,160 --> 00:27:35,080 Speaker 1: Your most important issue. I I really mean this, folks, 465 00:27:35,080 --> 00:27:37,840 Speaker 1: how dumb I am on our World War Web and 466 00:27:37,880 --> 00:27:40,000 Speaker 1: I've got to read it cover to cover cancer. Enough 467 00:27:40,240 --> 00:27:56,000 Speaker 1: about it. The big question now going forward is what 468 00:27:56,080 --> 00:27:58,720 Speaker 1: will the relationship be between the U S and Turkey, 469 00:27:59,160 --> 00:28:04,760 Speaker 1: and Turkey being it's incredibly important geopolitical location, that it's 470 00:28:04,880 --> 00:28:08,040 Speaker 1: in who is going to come to its rescue? And 471 00:28:08,080 --> 00:28:10,200 Speaker 1: I'm really pleased to say we are now being joined 472 00:28:10,240 --> 00:28:13,159 Speaker 1: by Amanda Sloat, the Robert Bosch Senior Fellow in the 473 00:28:13,200 --> 00:28:16,240 Speaker 1: Center on the United States and Europe at Brookings. Amanda, 474 00:28:16,359 --> 00:28:18,280 Speaker 1: thank you so much for being here. So I want 475 00:28:18,280 --> 00:28:21,040 Speaker 1: to start with now that we do seem to have 476 00:28:21,080 --> 00:28:25,240 Speaker 1: found some stability for today in the Turkish lira, how 477 00:28:25,320 --> 00:28:28,960 Speaker 1: much financial aid will Turkey need and who is going 478 00:28:29,000 --> 00:28:32,320 Speaker 1: to provide it? I well, thank you for having me, 479 00:28:32,359 --> 00:28:34,760 Speaker 1: and that's an excellent question. As you said, we are 480 00:28:34,840 --> 00:28:39,360 Speaker 1: seeing stability today. The money that they got from Qatar 481 00:28:39,480 --> 00:28:42,960 Speaker 1: last week, the fifteen billion, has helped stabilize things. But 482 00:28:43,040 --> 00:28:45,920 Speaker 1: we also had Treasury Secretary Manuchin out last week saying 483 00:28:45,960 --> 00:28:48,880 Speaker 1: that the US was preparing more sanctions, and we had 484 00:28:48,920 --> 00:28:52,600 Speaker 1: President Trump and his wide ranging interview with Reuter's yesterday 485 00:28:52,680 --> 00:28:55,600 Speaker 1: indicate his continued frustration with Turkey. So I think it 486 00:28:55,680 --> 00:28:58,200 Speaker 1: is quite possible that we will see the US imposed 487 00:28:58,200 --> 00:29:02,520 Speaker 1: sanctions or addition measures on on Turkey this week. Then 488 00:29:02,600 --> 00:29:04,320 Speaker 1: we come to the question that you asked, which is 489 00:29:04,320 --> 00:29:06,840 Speaker 1: how the Turkish markets will respond in and what the 490 00:29:06,880 --> 00:29:09,920 Speaker 1: broader challenge of this is Turkey certainly could try and 491 00:29:09,960 --> 00:29:14,840 Speaker 1: find money from other other partners. Uh, they could repair 492 00:29:15,000 --> 00:29:17,680 Speaker 1: US ties as an easy way of dealing with this. 493 00:29:18,040 --> 00:29:20,680 Speaker 1: And then there's still are all the broader structural problems 494 00:29:20,720 --> 00:29:22,640 Speaker 1: that we are seeing in Turkey with one of the 495 00:29:22,680 --> 00:29:25,520 Speaker 1: easiest fixes they could make to is being let the 496 00:29:25,600 --> 00:29:28,600 Speaker 1: central Bank raised interest rates. Yeah, and as you talk 497 00:29:28,720 --> 00:29:31,880 Speaker 1: about the potential for the US to a place further 498 00:29:31,960 --> 00:29:34,520 Speaker 1: sanctions on Turkey, we are just getting some breaking headlines 499 00:29:34,520 --> 00:29:39,040 Speaker 1: that the Treasury is sanctioning Russian vessels and shipping companies, uh, 500 00:29:39,080 --> 00:29:41,720 Speaker 1: and also issuing cyber and North Korea related sanctions to 501 00:29:41,800 --> 00:29:44,920 Speaker 1: just sort of put into context that sanctions are free 502 00:29:44,920 --> 00:29:47,840 Speaker 1: flowing these days. So it isn't a hard stretch to 503 00:29:47,880 --> 00:29:50,080 Speaker 1: think that there might be more on Turkey. But Amanda, 504 00:29:50,320 --> 00:29:52,520 Speaker 1: I guess then the question becomes, you know, we did 505 00:29:52,600 --> 00:29:56,200 Speaker 1: get that loan from Cutter, and I'm wondering we'll Russia 506 00:29:56,360 --> 00:29:59,560 Speaker 1: and will China step in to try to align themselves 507 00:29:59,600 --> 00:30:05,480 Speaker 1: more mostly with Turkey financially at this point, Uh, it's 508 00:30:05,520 --> 00:30:09,840 Speaker 1: certainly possible. Uh. The Turks have been in touch with 509 00:30:10,040 --> 00:30:12,920 Speaker 1: the Russians. There was a call between the Turkish and 510 00:30:12,960 --> 00:30:15,480 Speaker 1: Russian leaders about a week and a half ago, and 511 00:30:15,720 --> 00:30:19,360 Speaker 1: last week we saw the Russian Foreign Minister in Turkey 512 00:30:19,680 --> 00:30:22,719 Speaker 1: uh the challenges that Turkey and Russia have continued to 513 00:30:22,760 --> 00:30:26,600 Speaker 1: have a difficult relationship. You may remember it was less 514 00:30:26,600 --> 00:30:29,400 Speaker 1: than three years ago that Turkey shot down a Russian 515 00:30:29,480 --> 00:30:32,480 Speaker 1: jet that had violated its airspace along the border with Syria, 516 00:30:32,960 --> 00:30:37,560 Speaker 1: leading Russia to slap a number of economic sanctions on Turkey, 517 00:30:37,680 --> 00:30:40,640 Speaker 1: forcing Air Tawan a year later to apologize to Putin 518 00:30:40,720 --> 00:30:43,720 Speaker 1: as a way of getting those lifted. So certainly any 519 00:30:43,800 --> 00:30:47,120 Speaker 1: measures that come from Russia are going to have strings attached. 520 00:30:47,520 --> 00:30:51,200 Speaker 1: From China's perspective, China has been investing quite significantly in 521 00:30:51,240 --> 00:30:53,880 Speaker 1: other parts of Europe, and it would be in China's 522 00:30:53,920 --> 00:30:57,960 Speaker 1: interest to have another foothold in Turkey, which again continues 523 00:30:58,080 --> 00:31:01,000 Speaker 1: to raise questions for Europe in the United States about 524 00:31:01,080 --> 00:31:03,680 Speaker 1: what the longer term implications are going to be from 525 00:31:03,720 --> 00:31:07,160 Speaker 1: from greater Chinese investment in some of these Allied countries. 526 00:31:07,440 --> 00:31:09,760 Speaker 1: Doctor Slot, is wonderful to have you with us, particularly 527 00:31:09,800 --> 00:31:12,240 Speaker 1: after your public service to the nation on the watch 528 00:31:12,320 --> 00:31:16,320 Speaker 1: for Southern Europe and Turkey. Can you enlighten our American 529 00:31:16,400 --> 00:31:21,320 Speaker 1: listeners on the importance and present fragility of this large 530 00:31:21,440 --> 00:31:25,160 Speaker 1: air base we have in Turkey. Is it a threat, 531 00:31:25,400 --> 00:31:28,760 Speaker 1: Is it an important pawn in this debate, or even 532 00:31:28,840 --> 00:31:33,400 Speaker 1: with a rhetoric, is a truly untouchable I it certainly 533 00:31:33,560 --> 00:31:37,320 Speaker 1: is in asset that the Turks could use in retaliation 534 00:31:37,600 --> 00:31:42,000 Speaker 1: for American sanctions on them. It's a Turkish base that 535 00:31:42,080 --> 00:31:45,280 Speaker 1: the US has been using for an extended period of time. 536 00:31:45,360 --> 00:31:49,160 Speaker 1: The UN has various strategic assets that are located there. UH. 537 00:31:49,240 --> 00:31:51,560 Speaker 1: It's also been very helpful to the US in terms 538 00:31:51,640 --> 00:31:54,600 Speaker 1: of prosecuting the fight against the Islamic State in Iraq 539 00:31:54,720 --> 00:31:57,920 Speaker 1: and Sirius, since being able to fly missions from the 540 00:31:57,920 --> 00:32:01,320 Speaker 1: base is much easier than having to fly off carriers 541 00:32:02,120 --> 00:32:05,560 Speaker 1: the Gulf. UH. So far, there has been some using, 542 00:32:06,440 --> 00:32:09,440 Speaker 1: amongst them some lower levels officials. I think in in Turkey, 543 00:32:09,520 --> 00:32:11,720 Speaker 1: some pundits and Turkey that it could be put on 544 00:32:11,760 --> 00:32:13,760 Speaker 1: the chopping block. I am not aware of air to 545 00:32:13,840 --> 00:32:17,200 Speaker 1: Wana or any senior Turkish officials making that threat, although 546 00:32:17,240 --> 00:32:20,600 Speaker 1: it's It's certainly something that has come up periodically in 547 00:32:20,600 --> 00:32:23,080 Speaker 1: in the past when the US has has done things 548 00:32:23,120 --> 00:32:25,840 Speaker 1: that Turkey has not liked. So from where you sit, 549 00:32:26,840 --> 00:32:29,920 Speaker 1: I'm sure the President has his own agenda. Is separate 550 00:32:29,960 --> 00:32:35,040 Speaker 1: from that is the new State Department advising perspective to 551 00:32:35,080 --> 00:32:40,360 Speaker 1: the President on complexities like that air base. I am 552 00:32:40,440 --> 00:32:43,240 Speaker 1: sure the State Department and the Pentagon are feeding all 553 00:32:43,240 --> 00:32:46,400 Speaker 1: of that information into the White House, but as you say, 554 00:32:46,440 --> 00:32:48,920 Speaker 1: it is not clear to me that President Trump is 555 00:32:48,960 --> 00:32:53,040 Speaker 1: taking some of the broader considerations into account. Who who 556 00:32:53,120 --> 00:32:59,080 Speaker 1: is the who is Turkey's ally, Well, it depends on 557 00:32:59,120 --> 00:33:02,080 Speaker 1: the day, and it depends ends on on the the issue. 558 00:33:02,200 --> 00:33:04,640 Speaker 1: I One thing that's been quite striking in Turkey over 559 00:33:04,680 --> 00:33:06,880 Speaker 1: the last couple of weeks is that we're seeing them 560 00:33:06,880 --> 00:33:10,080 Speaker 1: try to mend relations with European countries that they have 561 00:33:10,160 --> 00:33:13,840 Speaker 1: had very fraid relations with. It's quite striking this week 562 00:33:13,880 --> 00:33:16,240 Speaker 1: that you have the Germans coming out musing about whether 563 00:33:16,320 --> 00:33:19,440 Speaker 1: or not they need to provide financial support to Turkey, 564 00:33:19,520 --> 00:33:22,520 Speaker 1: since it's certainly not in Europe's economic interest to to 565 00:33:22,640 --> 00:33:25,720 Speaker 1: see the Turkish economy tank uh And over the last 566 00:33:25,760 --> 00:33:29,040 Speaker 1: couple of years, Germany itself has had very difficult relations 567 00:33:29,120 --> 00:33:33,240 Speaker 1: with Turkey, following accusations of Nazi like behavior. When the 568 00:33:33,280 --> 00:33:37,840 Speaker 1: Germans didn't allow Turkish ministress to campaign to diasporic communities. 569 00:33:37,880 --> 00:33:43,000 Speaker 1: Before constitutional referendum, Turkey was also imprisoning some German citizens 570 00:33:43,040 --> 00:33:46,600 Speaker 1: on spurious charges, and these things lad the Germans to 571 00:33:46,680 --> 00:33:49,760 Speaker 1: impose some of their own economic measures in terms of 572 00:33:49,760 --> 00:33:53,320 Speaker 1: issuing travel advice to citizens, limiting the number of export 573 00:33:53,360 --> 00:33:56,440 Speaker 1: credits that that they were giving to their their own businesses. 574 00:33:56,840 --> 00:33:59,200 Speaker 1: So it's it's quite a role reversal when we now 575 00:33:59,320 --> 00:34:01,959 Speaker 1: have the German having gone through something quite similar, with 576 00:34:02,000 --> 00:34:04,440 Speaker 1: the Turks now wondering if they're going to have to 577 00:34:04,480 --> 00:34:08,000 Speaker 1: come to Turkey's defense to help stabilize its economy. Yesterday 578 00:34:08,040 --> 00:34:11,160 Speaker 1: on Plumber Creator, we were speaking with Admiral James Tavridi's 579 00:34:11,280 --> 00:34:15,200 Speaker 1: who formerly was the military commando of NATO as well 580 00:34:15,239 --> 00:34:18,120 Speaker 1: as the U. S. Navy admiral, and he was saying 581 00:34:18,120 --> 00:34:21,440 Speaker 1: that there is a chance that perhaps Turkey would leave 582 00:34:21,480 --> 00:34:24,680 Speaker 1: NATO and if if it did, it would be disastrous 583 00:34:24,719 --> 00:34:29,719 Speaker 1: for the US. Do you agree, yes, I definitely think 584 00:34:29,719 --> 00:34:32,359 Speaker 1: it would be disastrous. There has been talking about whether 585 00:34:32,440 --> 00:34:35,239 Speaker 1: or not NATO should kick Turkey out. NATO does not 586 00:34:35,360 --> 00:34:38,360 Speaker 1: actually have any mechanisms to do that, so it's a 587 00:34:38,440 --> 00:34:41,279 Speaker 1: decision that Turkey would have to take itself. I have 588 00:34:41,360 --> 00:34:44,800 Speaker 1: not seen any indication from Turkish leadership that that's something 589 00:34:44,880 --> 00:34:47,040 Speaker 1: that they want to do. I think a lot of 590 00:34:47,120 --> 00:34:50,719 Speaker 1: their regional security comes under the offices of the NATO umbrella. 591 00:34:51,040 --> 00:34:54,680 Speaker 1: Turkey has continued to be a good player and and 592 00:34:54,840 --> 00:34:57,600 Speaker 1: member of NATO in the sense of contributing very actively 593 00:34:57,640 --> 00:35:01,640 Speaker 1: to the ongoing mission in Afghanistan. Are the Alliance's second 594 00:35:01,760 --> 00:35:05,120 Speaker 1: largest military uh and actually they are one of the 595 00:35:05,160 --> 00:35:08,200 Speaker 1: countries that is on track to meet defense spending targets 596 00:35:08,239 --> 00:35:10,840 Speaker 1: within the next couple of years. This has been wonderful. 597 00:35:10,920 --> 00:35:14,440 Speaker 1: Don't be a stranger. Doctor Amanda Slote with Brookings or 598 00:35:14,480 --> 00:35:17,400 Speaker 1: Public Service again at the U S Government is Deputy 599 00:35:17,440 --> 00:35:22,040 Speaker 1: Assistant Secretary for Southern Europe and Eastern Mediterranean Affairs. Uh 600 00:35:22,440 --> 00:35:25,520 Speaker 1: Dr Slip thank you again so much, of course serving 601 00:35:25,560 --> 00:35:34,319 Speaker 1: now at Brookings as well. Thanks for listening to the 602 00:35:34,320 --> 00:35:40,839 Speaker 1: Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, 603 00:35:41,200 --> 00:35:45,399 Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at 604 00:35:45,480 --> 00:35:49,719 Speaker 1: Tom Keane before the podcast. You can always catch us worldwide. 605 00:35:50,160 --> 00:35:51,280 Speaker 1: I'm Bloomberg Radio