WEBVTT - Pfizer Reversing Price Hikes After Trump Bullying Won’t Last 0:00:05.800 --> 0:00:08.360 Welcome to the Bloomberg P and L Podcast. I'm Pim 0:00:08.400 --> 0:00:11.200 Fox along with my co host Lisa A. Brahmowitz. Each 0:00:11.240 --> 0:00:14.440 day we bring you the most important, noteworthy, and useful 0:00:14.480 --> 0:00:17.079 interviews for you and your money, whether you're at the 0:00:17.120 --> 0:00:20.360 grocery store or the trading floor. Find the Bloomberg P 0:00:20.520 --> 0:00:32.280 M L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. 0:00:32.320 --> 0:00:35.080 I want to shift your focus to the pharmaceutical industry. 0:00:35.080 --> 0:00:37.720 We've been talking a lot about when President Trump is 0:00:37.760 --> 0:00:41.720 going to shift his focus to lowering drug prices. It 0:00:41.720 --> 0:00:43.720 appears to be that the time is now and joining 0:00:43.800 --> 0:00:46.919 us as Max Neeson Biotech, pharma and healthcare columnists for 0:00:47.120 --> 0:00:50.400 Bloomberg Opinion, our oracle of the pharmaceutical industry and all 0:00:50.400 --> 0:00:53.120 things healthcare. Max, so just lay out what happened with 0:00:53.200 --> 0:00:57.160 Fiser and President Trump's involvement here. Well, as it always 0:00:57.200 --> 0:01:00.680 is with drug pricing, there there's more uh, and there 0:01:00.680 --> 0:01:03.800 appears to be on the surface so UM as it 0:01:03.960 --> 0:01:07.120 usually does kind of on a six month basis. Um 0:01:07.240 --> 0:01:09.639 Fightser raised drug prices on on a number of Medica 0:01:09.920 --> 0:01:13.039 a number of its medications. The President took to Twitter 0:01:13.080 --> 0:01:16.840 to criticize them for that on July nine, and then 0:01:17.240 --> 0:01:21.080 yesterday evening he announced that after speaking to the to 0:01:21.240 --> 0:01:24.360 Fightser CEO on the phone with the Health and Human 0:01:24.400 --> 0:01:27.200 Services sectary alex as R, they had agreed to roll 0:01:27.319 --> 0:01:30.600 back the price hikes they had planned to take, probably 0:01:30.640 --> 0:01:34.880 sometime in the next few weeks, but not permanently. It's 0:01:34.959 --> 0:01:39.880 either until January one or until the President's Drug Price 0:01:40.200 --> 0:01:45.160 Blueprint is enacted, though no difficient definition of enacted there so, 0:01:45.280 --> 0:01:48.800 UM it is a temporary rollback of prices opposed to 0:01:48.840 --> 0:01:53.000 something permanent or drastic max. Is this really what the 0:01:53.000 --> 0:01:57.200 pharmaceutical industry is looking for, which is an ad hoc 0:01:57.520 --> 0:02:00.920 kind of strategy on the part of the administration to 0:02:01.080 --> 0:02:04.800 deal with drug prices? Um? You know, I don't think 0:02:04.800 --> 0:02:08.040 this is how they really prefer to to operate. UM. 0:02:08.080 --> 0:02:13.120 Just kind of unilateral public negotiations UM in kind of 0:02:13.160 --> 0:02:15.960 the public sphere and then just kind of the President 0:02:16.040 --> 0:02:18.960 using the bully probed on an individual basis. I think 0:02:19.000 --> 0:02:20.560 that's what they've been scared up for a long time, 0:02:20.760 --> 0:02:23.799 which is probably why Fiser kind of chose to engage 0:02:23.800 --> 0:02:25.760 in this way. But I think they actually got a 0:02:25.800 --> 0:02:28.400 decent deal out of it. They kind of remove themselves 0:02:28.440 --> 0:02:32.680 from criticism without really giving up all that much. There. 0:02:32.800 --> 0:02:35.840 The reason I asked you is because maybe this is 0:02:35.880 --> 0:02:37.960 the way to do it. I mean, maybe this is 0:02:38.000 --> 0:02:40.919 the way to avoid having the back and forth of 0:02:41.040 --> 0:02:46.639 lobby interests in the Congress trying to manipulate or to 0:02:47.000 --> 0:02:51.239 massage the let potential legislation that would create some kind 0:02:51.240 --> 0:02:55.679 of consistent plan. And maybe this is the way that 0:02:55.760 --> 0:02:58.640 the President has decided to go at it because he 0:02:58.720 --> 0:03:01.280 doesn't want to have to do with the special interest 0:03:01.280 --> 0:03:05.360 groups or the pressure that's been previously applied to drug 0:03:05.400 --> 0:03:07.600 price that that actually makes a lot of sense in 0:03:07.600 --> 0:03:09.519 the sense you give the president kind of a big 0:03:09.560 --> 0:03:14.000 public victory. He gets to play um master negotiator, which 0:03:14.080 --> 0:03:16.920 is a favorite role of his, and and you know, 0:03:17.000 --> 0:03:18.919 have this sort of talking point like, look at me, 0:03:19.280 --> 0:03:22.400 I brought drug prices down, um, even though the actual 0:03:22.440 --> 0:03:26.480 impact on you know, fiser, on patients, on the drug 0:03:26.520 --> 0:03:30.880 pricing problem at all is actually quite minimal. Well, okay, 0:03:31.040 --> 0:03:34.720 so President Trump is one part of this, and fightser 0:03:35.040 --> 0:03:38.560 is certainly a specific story, but more broadly, there were 0:03:38.560 --> 0:03:40.720 a number of drug makers that lowered their prices in 0:03:40.800 --> 0:03:43.640 response to a new California law that aims to provide 0:03:43.640 --> 0:03:48.320 more transparency to the pharmaceutical industry. So even if President 0:03:48.320 --> 0:03:51.360 Trump is taking that out ad hoc approach, states are 0:03:51.360 --> 0:03:55.960 being more systematic in this case California absolutely, and um, 0:03:55.960 --> 0:03:58.560 you know, it's difficult to tell exactly how much of 0:03:58.960 --> 0:04:02.000 those price rollbacks are are ascribable to the law as 0:04:02.000 --> 0:04:05.160 opposed to whether we just happen to find out about them, 0:04:05.720 --> 0:04:07.680 because of the way that the laws of structure. Basically 0:04:08.000 --> 0:04:10.680 it requires drug makers to to kind of report and 0:04:10.760 --> 0:04:14.720 justify price increases that are of a certain magnitude. But 0:04:14.920 --> 0:04:18.320 it's pretty clear that the transparency has some effect. Having 0:04:18.360 --> 0:04:21.280 to let health plans know in advance, um, which gives 0:04:21.279 --> 0:04:23.719 them time to kind of push back, to react, and 0:04:23.760 --> 0:04:25.800 then having all that sort of in the public sphere 0:04:26.040 --> 0:04:28.800 clearly has an effect. And that's sort of um kind 0:04:28.839 --> 0:04:31.919 of a blueprinted other states or potential the government can follow, 0:04:32.320 --> 0:04:34.440 um if they actually want to have kind of a 0:04:34.440 --> 0:04:38.400 a sustained impact as opposed to this kind of one time, 0:04:38.960 --> 0:04:42.440 short duration sort of thing. Max. Has there been any 0:04:42.480 --> 0:04:46.160 discussion about the way in which healthcare is delivered? I 0:04:46.200 --> 0:04:49.680 don't mean drug prices, but the actual healthcare And the 0:04:49.720 --> 0:04:52.640 reason I ask is because yesterday we had a segment 0:04:52.640 --> 0:04:57.240 in which we focused on innovation in healthcare delivery having 0:04:57.320 --> 0:05:01.920 to do with hospitals. For example, where some hospitals would 0:05:01.960 --> 0:05:06.520 specialize in heart surgery, other hospitals would specialize in other 0:05:06.680 --> 0:05:10.640 kinds of surgical procedures or services. Right now, you have 0:05:10.839 --> 0:05:14.160 no idea how much they cost from hospital to hospital, 0:05:14.400 --> 0:05:18.080 so every hospital ends up almost duplicating the services and 0:05:18.120 --> 0:05:21.320 they compete with each other rather than delivering uh, what 0:05:21.320 --> 0:05:25.800 would be called efficient healthcare. So I think the lack 0:05:25.880 --> 0:05:29.799 of price transparency and the lack of UM really prices 0:05:29.839 --> 0:05:33.520 and healthcare that are just available or interpretable to the 0:05:33.560 --> 0:05:37.000 average consumer is really one of the most difficult things. 0:05:37.040 --> 0:05:41.279 It's it's basically impossible to comparison shop UM with any 0:05:41.360 --> 0:05:44.240 kind of like real pricing data or real data on 0:05:44.400 --> 0:05:49.640 outcomes on quality UM. The the data is bad. Hospitals 0:05:50.680 --> 0:05:53.520 usually for the most part, are interested in obfuscating that 0:05:53.600 --> 0:05:56.839 data about what something costs and why, which is why 0:05:56.920 --> 0:05:59.560 you hear about those bills where you have you know, 0:05:59.680 --> 0:06:03.160 thous and dollar charges for for aspirin, for for minor 0:06:03.279 --> 0:06:06.440 care UM just because you know they that's not the 0:06:06.480 --> 0:06:08.280 real price the one they negotiate with your insurance, the 0:06:08.320 --> 0:06:10.640 real price, but it's impossible to find the real price 0:06:10.640 --> 0:06:13.880 and compare it. So yeah, it's a miserable situation. Well, 0:06:13.960 --> 0:06:16.880 and and trying to to fix the entire healthcare system 0:06:17.200 --> 0:06:18.920 is a heavy one and one that we could spend 0:06:18.920 --> 0:06:21.719 hours on. Uh. There are some things that are going 0:06:21.880 --> 0:06:24.840 on right now though with respect to Obamacare, which is 0:06:24.880 --> 0:06:27.680 sort of heralded as a solution but has been uh 0:06:28.240 --> 0:06:30.800 really kind of tried to at least the attempt has 0:06:30.800 --> 0:06:33.400 been to try to pare it back in the recent 0:06:33.600 --> 0:06:37.480 few years, and the latest events have to do with 0:06:37.920 --> 0:06:42.880 reducing the payments to high risk pools as well as 0:06:43.520 --> 0:06:46.640 President Trump cutting some of the grants that help consumers 0:06:46.640 --> 0:06:51.640 get Obamacare. How significant are these developments in your view? Um, 0:06:51.680 --> 0:06:54.360 You know, for the most part, it depends on particularly 0:06:54.360 --> 0:06:58.240 the major one, which is the risk corridors or the sorry, 0:06:58.240 --> 0:07:01.760 the risk adjustments. Basically that UM ensures that have the 0:07:01.800 --> 0:07:05.640 sickest population UM they get paid back to a certain 0:07:05.640 --> 0:07:09.080 extent by insurers that have a healthier population UM. It 0:07:09.120 --> 0:07:11.520 helps them kind of stay in business and just adjust 0:07:11.560 --> 0:07:16.840 and and make basically ensuring those sacre patients more viable. Um, 0:07:16.880 --> 0:07:20.120 it's I bet like that it's likely that those payments 0:07:20.160 --> 0:07:22.240 will resume at some point. It was due to kind 0:07:22.240 --> 0:07:26.480 of just this weird, quirky New Mexico court case. But um, 0:07:26.600 --> 0:07:30.080 and even though that's going on just today or last night, 0:07:30.160 --> 0:07:33.160 rather we just got news that another insurer was expanding 0:07:33.200 --> 0:07:36.440 in a couple of A markets. So even though things 0:07:36.480 --> 0:07:39.800 are kind of still uncertain and and kind of prone 0:07:39.800 --> 0:07:42.000 to shake up and and prone to what many would 0:07:42.040 --> 0:07:46.080 call sabotage, um, there are still people interested in this market, 0:07:46.200 --> 0:07:48.960 as opposed to years past where everyone's just kind of fleeing. Well, 0:07:49.080 --> 0:07:51.320 but this is actually fascinating to me. And one thing 0:07:51.320 --> 0:07:53.840 that I'm wondering. As insures expand in a c A 0:07:53.920 --> 0:07:58.800 expand their Obamacare coverage, does that mean that people still 0:07:58.840 --> 0:08:01.960 like this program? Does that mean that the program is 0:08:02.000 --> 0:08:06.400 being made more lucrative for the health insurers? Um. I 0:08:06.440 --> 0:08:09.280 think it's a little bit of both. The in the 0:08:09.360 --> 0:08:12.040 sense that insurers are are a little bit more experienced 0:08:12.040 --> 0:08:14.320 with what it takes to be profitable in this market, 0:08:14.520 --> 0:08:17.720 even though it keeps changing and getting weird every year. 0:08:18.120 --> 0:08:21.880 But um, as for the consumer experience, it's very much 0:08:21.920 --> 0:08:26.960 bifurcated between people that get subsidies and people that don't. UM. 0:08:27.080 --> 0:08:29.960 For someone who gets a subsidy, you can get relatively 0:08:30.000 --> 0:08:33.800 affordable insurance without paying that much. But because of the 0:08:33.840 --> 0:08:36.680 fact that the law has been sort of systematically undermined 0:08:37.240 --> 0:08:40.000 um or at the very least not helped as in um. 0:08:40.080 --> 0:08:42.040 You know, things that could be done to improve it 0:08:42.120 --> 0:08:45.640 have have just not happened because of the administration Congress. 0:08:46.160 --> 0:08:49.760 Um premiums have gone up for people that have just 0:08:50.360 --> 0:08:52.880 aren't in that kind of income cut off the lots 0:08:52.880 --> 0:08:55.600 some good subsidies, so it's it's really terrible for them, 0:08:55.640 --> 0:08:58.480 but but still good for a good chunk of the market, 0:08:58.480 --> 0:09:02.040 which is more than that to its subsidies. Max. You know, 0:09:02.080 --> 0:09:04.319 one of the things that happens when you have the 0:09:04.440 --> 0:09:08.720 healthcare reform debate is always here about the cost of 0:09:09.080 --> 0:09:12.280 end of life care and how much that is outsized. 0:09:12.920 --> 0:09:15.760 That turns out to not necessarily be so. I mean, 0:09:15.800 --> 0:09:21.760 there's an estimate that between eleven to of total health 0:09:21.840 --> 0:09:27.400 care spending is on that end of life time for patients. 0:09:28.080 --> 0:09:31.480 Is is the focus should the focus then be on 0:09:31.800 --> 0:09:37.360 chronic long term conditions? Is that really where the bulk 0:09:37.440 --> 0:09:39.920 of the money goes. I mean, if if there's anywhere 0:09:39.920 --> 0:09:41.640 that you can move the dial just sort of in 0:09:41.640 --> 0:09:45.440 the largest possible population that requires, um the greatest amount 0:09:45.440 --> 0:09:47.640 of healthcare spending over the longer term and has the 0:09:47.679 --> 0:09:51.800 most benefit if you can kind of manage those conditions. Well, UM, 0:09:51.840 --> 0:09:54.760 it's definitely that population. And for the most part, it's 0:09:54.760 --> 0:09:58.000 something that's that's not done especially well unless you're lucky 0:09:58.080 --> 0:10:01.240 enough to have UM, you know, series of healthcare providers 0:10:01.240 --> 0:10:04.559 that are are really engaged or UM un employer that's 0:10:04.600 --> 0:10:07.880 kind of actively engaging and managing those costs. Otherwise you 0:10:08.120 --> 0:10:12.120 kind of just get left alone. And you know, it's, uh, 0:10:12.240 --> 0:10:15.880 it's not easy without kind of expert advice and input 0:10:16.200 --> 0:10:18.320 and monitoring and on all of that. And we're only 0:10:18.840 --> 0:10:21.120 just starting to get better than that. And uh that 0:10:21.200 --> 0:10:23.280 that's something where there's a lot of very for improvement. 0:10:23.600 --> 0:10:25.640 Just real quick. I do want to note that the 0:10:25.720 --> 0:10:29.920 SMP five Healthcare index has fallen nearly a percentage point 0:10:29.960 --> 0:10:32.880 today and that this a lot of people are attributing 0:10:32.920 --> 0:10:37.160 this to what happened with Visor. Do you expect President 0:10:37.200 --> 0:10:40.000 Trump to take a similar tap with other pharmacy companies 0:10:40.000 --> 0:10:42.520 in the near future. Um, you know, now now that 0:10:42.559 --> 0:10:45.679 he's gotten the sense that if he gets uh gets 0:10:45.679 --> 0:10:49.040 a CEO on on the phone and and uh jets 0:10:49.040 --> 0:10:51.360 them a while, that they might actually do something, he 0:10:51.679 --> 0:10:53.920 may very well give it, give it a shot again, 0:10:54.559 --> 0:10:57.160 especially because you know we're we're in this is drug 0:10:57.200 --> 0:10:59.880 price hike season middle of the year July one, so 0:11:00.000 --> 0:11:01.960 there are a number of other kind of prominent firms 0:11:02.000 --> 0:11:05.600 that have increased prices. He may give it a shot. Um, 0:11:05.640 --> 0:11:07.720 you know I would have even if it happens, even 0:11:07.760 --> 0:11:10.800 if the entire drug industry rolls back this round of 0:11:10.840 --> 0:11:13.240 drug price increases. You have to keep in mind that 0:11:13.520 --> 0:11:15.640 every single price hike that they've done for the past 0:11:15.720 --> 0:11:19.200 decade is still there. So this is really uh, at 0:11:19.200 --> 0:11:21.760 the end of the day. On the margins, Um, I'm 0:11:21.800 --> 0:11:25.960 hopeful that some something more materialized, but you know, this 0:11:26.040 --> 0:11:29.319 might stick shake stocks in the near term. I don't 0:11:29.360 --> 0:11:32.040 think it's going to be a wait for the long term, 0:11:32.040 --> 0:11:34.240 like a fig leaf, I guess you could describe it. 0:11:34.280 --> 0:11:38.800 Thanks very much, Max Neeson, Bloomberg Opinion columnists for all 0:11:38.880 --> 0:11:42.920 things related to healthcare. Of course, we appreciate your comments 0:11:43.000 --> 0:11:45.840 and your thoughts. You can follow Max on Twitter at 0:11:46.240 --> 0:12:06.160 Max Neeson. Our next guest is here in Reality. He 0:12:06.440 --> 0:12:09.560 is budget art. He is the co founder and president 0:12:09.600 --> 0:12:13.400 of hi A Technologies. They're based in Los Angeles. And 0:12:13.440 --> 0:12:15.560 the reason why I say object that you are here 0:12:15.600 --> 0:12:18.840 in reality is because you are focused on the world 0:12:19.320 --> 0:12:24.680 of artificial intelligence and avatars and creating the software and 0:12:24.679 --> 0:12:31.640 the platforms to actually have meaningful conversations with machines exactly. 0:12:31.760 --> 0:12:37.600 This is a technology that has been used through the 0:12:37.600 --> 0:12:41.600 the Institute of Creative Technologies at USC the un University 0:12:41.640 --> 0:12:44.679 of Southern California and the West Coast, and it was 0:12:44.760 --> 0:12:48.280 a military funded research. Forty million dollars went into it, 0:12:48.720 --> 0:12:52.200 and um, we're the first ones to commercialize this outside 0:12:52.240 --> 0:12:56.640 of the institute. They use it for military training and 0:12:56.720 --> 0:13:02.240 avatar interacting with humans to to test out certain situations 0:13:02.280 --> 0:13:09.319 with them and more specifically PTSD therapy Teumatic stress disorders therapy, right, 0:13:09.800 --> 0:13:13.720 so UM veterans with PTSD. It turns out respond to 0:13:13.800 --> 0:13:18.680 avatars much better in the in terms of opening up 0:13:18.880 --> 0:13:22.520 and revealing more about themselves, feeling more comfortable, taking more 0:13:22.600 --> 0:13:28.199 time to be interviewed than psychiatrists. So they had some 0:13:29.320 --> 0:13:32.400 famous papers published on this and it's been a couple 0:13:32.400 --> 0:13:34.600 of years, but now it's the technology has come to 0:13:34.600 --> 0:13:38.040 a point that it's cloud based, you know, client server, 0:13:38.400 --> 0:13:42.320 it's very easily transported to mobile devices, et cetera. So 0:13:42.440 --> 0:13:45.280 we decided to commercialize it. We have an exclusive license 0:13:45.320 --> 0:13:49.679 from USC and we're going to use it for HR 0:13:49.800 --> 0:13:55.440 and specifically in recruiting. We will conduct pre screening interviews 0:13:55.520 --> 0:13:59.679 for companies that hire large numbers of people and find 0:13:59.679 --> 0:14:03.920 itficult to do a good job in screening candidates and 0:14:03.960 --> 0:14:07.160 finding the right kind of people. Can we just talk 0:14:07.200 --> 0:14:11.559 a little bit about the concept of replicating a conversation 0:14:12.080 --> 0:14:15.880 in real time with a computer, Because when you have Alexa, 0:14:15.920 --> 0:14:18.959 for example, and you ask her a question, so give 0:14:19.000 --> 0:14:22.320 you a response based on an Internet search, but it's 0:14:22.320 --> 0:14:25.960 not carrying on a conversation. So how how does that work? 0:14:26.040 --> 0:14:29.320 Is that? Is that incredibly complicated to make happen? It 0:14:29.400 --> 0:14:32.960 is complicated, and it starts out with a lot of 0:14:33.600 --> 0:14:38.720 manual work. You have to script these conversations. But the 0:14:38.760 --> 0:14:42.640 magical thing behind it is the machine learning. It learns 0:14:42.960 --> 0:14:45.800 from its experiences and then it gets better and better 0:14:45.840 --> 0:14:48.920 over time. It gets better much quicker than humans get 0:14:48.920 --> 0:14:53.360 better in anything. So um, yes, it is complex, but UM, 0:14:53.480 --> 0:14:56.280 you know you you you have to start with a 0:14:56.360 --> 0:15:01.360 base product. For example, UM, in interviewing, we have these 0:15:01.720 --> 0:15:05.720 job modules. It's a question and answer module. So for 0:15:05.840 --> 0:15:09.400 a junior accountant position, there is a set of twenty 0:15:09.840 --> 0:15:14.119 questions that the company has decided to ask their potential employees. 0:15:14.920 --> 0:15:20.440 And uh, these are crafted by combination of our experts 0:15:20.440 --> 0:15:24.840 that we found and they're specific questions. So the questions 0:15:24.840 --> 0:15:28.120 are listed and then there's buckets of answers for each question. 0:15:28.920 --> 0:15:31.080 What we do is we listen to the answer. We 0:15:31.160 --> 0:15:36.640 assign what we heard to a particular bucket. Okay, can 0:15:36.760 --> 0:15:42.520 can avatars be funny? Yes? So there's an algorithm for 0:15:42.520 --> 0:15:47.240 for humor. Yes, And you have to understand we have 0:15:47.320 --> 0:15:50.600 to be very careful in applying that to situations like this. 0:15:50.720 --> 0:15:54.520 So we have actually tested that you know, uh, people 0:15:54.960 --> 0:15:57.280 UM do not take it lightly. And this is this 0:15:57.360 --> 0:16:02.280 happened in Syrie and Alexa as well. UM, the majority 0:16:02.320 --> 0:16:06.840 of the people do not think it's funny enough, or 0:16:07.120 --> 0:16:11.640 it's it's it's it's appropriate. So what we decided to do, 0:16:11.960 --> 0:16:15.520 literally in this particular case, since it's a an enterprise 0:16:15.520 --> 0:16:18.320 sale for us, we decided to stay on the safe 0:16:18.320 --> 0:16:21.160 side and not quite go there, and we just go 0:16:21.560 --> 0:16:24.840 very polite and very curious, and we just we just 0:16:25.040 --> 0:16:28.960 don't go there. But it's definitely possible. Tell us a 0:16:29.000 --> 0:16:31.120 little bit about how you got involved in this, because 0:16:31.160 --> 0:16:36.480 you have a wide ranging career in technology in Silicon Valley. Uh, 0:16:36.520 --> 0:16:41.640 Fabricate Labs for example of micro Fabrica is another one 0:16:41.680 --> 0:16:45.800 of the companies. I believe that you were uh involved 0:16:45.800 --> 0:16:50.440 with your You seem to have this sort of perspective 0:16:50.440 --> 0:16:55.960 of turning what is sort of almost mundane thing, you know, 0:16:56.040 --> 0:17:00.360 concepts into something uh precious and and and you know 0:17:00.440 --> 0:17:05.520 driven by technology. Yeah. Um, you know, pioneering brand new 0:17:05.600 --> 0:17:11.960 ideas um is my passion and uh that is a 0:17:12.040 --> 0:17:15.560 pattern in my background to some of those ideas. Some 0:17:15.600 --> 0:17:18.679 of the pioneering efforts have not been that successful, but 0:17:19.200 --> 0:17:23.439 it is what I like and changing paradigms, changing the 0:17:23.480 --> 0:17:27.560 way things are done today, um, disrupting the way things 0:17:27.600 --> 0:17:31.439 are done today, especially when it comes to making people 0:17:31.520 --> 0:17:36.760 more productive, um, and making people more accurate in the 0:17:36.760 --> 0:17:39.840 way they do things. Well what we do for example, 0:17:39.960 --> 0:17:43.520 let me say analogy is an Excel sheet. You know, Uh, 0:17:43.640 --> 0:17:48.919 we didn't Excel sheet did not dislodge accountants from their jobs. 0:17:49.440 --> 0:17:51.919 It's a tool and it doesn't you know, much like 0:17:52.000 --> 0:17:56.200 Ai is Budget. I could spend the next hour speaking 0:17:56.200 --> 0:17:58.480 with you, probably more. Thank you so much for being here. 0:17:58.600 --> 0:18:00.280 It was really great having you A have to have 0:18:00.320 --> 0:18:03.200 you back. Budget A rat is co founder and president 0:18:03.240 --> 0:18:07.240 of hi A Technologies in Los Angeles, creating technology that 0:18:07.280 --> 0:18:26.960 will soon replace me. When we talk about trade skirmishes 0:18:27.000 --> 0:18:30.000 between China and the US, many are quick to point 0:18:30.000 --> 0:18:33.520 out that China's imports from the US aren't large enough 0:18:33.560 --> 0:18:37.280 to match Trump's tariffs taller for dollar, meaning that they're 0:18:37.400 --> 0:18:41.359 unable to hit back really with the same force that 0:18:41.400 --> 0:18:44.800 the U s is. But is that true? Joining us now, 0:18:44.880 --> 0:18:49.200 Carl Weinberg, He's chief economist high Frequency Economics in New York. Carl, 0:18:49.480 --> 0:18:51.760 thank you so much for being here. So let's just 0:18:51.840 --> 0:18:54.320 start there. I mean, is it true that China really 0:18:54.359 --> 0:18:57.000 can't hit back dollar for dollar just due to the 0:18:57.040 --> 0:19:00.600 fact that isn't import enough from the US. High Lisa, 0:19:00.640 --> 0:19:03.280 good morning, Thanks for having me on your program. Um, 0:19:03.359 --> 0:19:05.199 China has a lot of weapons that can use that 0:19:05.280 --> 0:19:08.680 aren't strictly tariffs that could be engaged in the trade war. 0:19:09.320 --> 0:19:12.439 The most likely that we are that we are prone 0:19:12.480 --> 0:19:15.439 to see and perhaps have already started to see, are 0:19:15.480 --> 0:19:19.280 just boycotts against American branded goods. Um. You know, US 0:19:19.320 --> 0:19:23.040 automobile makers reported drop in sales in May of U 0:19:23.240 --> 0:19:26.840 S branded vehicles. That we've seen the Chinese do this before, 0:19:26.960 --> 0:19:30.960 boycotting brands from Japan and South Korea when tensions have 0:19:31.320 --> 0:19:35.439 risen on the political front against those nations. UM. The 0:19:35.520 --> 0:19:39.000 US companies have about a hundred billion dollars of direct 0:19:39.080 --> 0:19:44.240 investment in in China in projects to make goods for 0:19:44.440 --> 0:19:47.800 Chinese consumers in China, and every one of those companies 0:19:47.840 --> 0:19:50.240 is vulnerable. And there's some of our biggest corporate names, 0:19:50.920 --> 0:19:54.800 Carl Weinberg as an example. BMW says it will build 0:19:54.880 --> 0:19:59.200 more of its SUVs overseas and not in South Carolina 0:19:59.720 --> 0:20:04.399 be because of China's retaliation in the auto industry. Do 0:20:04.440 --> 0:20:07.560 you believe that? Sorry, go ahead exactly, Tim, And we 0:20:07.880 --> 0:20:11.680 just reported on Bloomberg the story yesterday of Tesla promising 0:20:11.720 --> 0:20:13.720 to build a plant there to build half a million 0:20:13.800 --> 0:20:16.520 vehicles per year in China. We don't know how real 0:20:16.600 --> 0:20:19.120 that is, but the intention is certainly real. And if 0:20:19.160 --> 0:20:22.880 Tesla can do it, others can do it GM right now. 0:20:22.880 --> 0:20:25.080 According to an article I read on Bloomberg a few 0:20:25.080 --> 0:20:28.920 weeks ago, produces more cars in China under ten joint 0:20:29.000 --> 0:20:31.600 ventures and two direct investments than it does in the 0:20:31.640 --> 0:20:35.280 United States. So big companies are vulnerable, and some companies 0:20:35.560 --> 0:20:38.280 get a great proportion of their profit, does not most 0:20:38.280 --> 0:20:42.120 of them from transactions in China. So, Carl, how much 0:20:42.119 --> 0:20:44.679 of this is being priced in that China will retaliate 0:20:44.920 --> 0:20:47.560 in the manner that you say, with sort of boycotting 0:20:47.680 --> 0:20:52.320 or discriminating against US companies they're doing business in China. Lisa, 0:20:52.359 --> 0:20:54.120 I wish I could give you an answer to that. 0:20:54.160 --> 0:20:56.880 There's no way to know. We've never really seen anything 0:20:56.920 --> 0:21:00.000 like this before. The only prior that we can point 0:21:00.080 --> 0:21:03.280 two is that when China has engaged in a spat 0:21:03.359 --> 0:21:07.679 with Japan, Japanese brands were boycotted. When they engaged in 0:21:07.720 --> 0:21:11.119 a spat with Korea, Korean brands were boycotted. And this 0:21:11.160 --> 0:21:15.960 can be a very very effective counter tool in any case. 0:21:16.400 --> 0:21:18.919 You know the name of the game here. The objective 0:21:19.080 --> 0:21:21.800 of the Trump tariffs is to try to short circuit 0:21:21.880 --> 0:21:26.080 China's Made in China program, and that's worth about a 0:21:26.119 --> 0:21:29.520 trillion dollars a year to China's economy forever once they 0:21:29.600 --> 0:21:32.680 succeeded it, and I think they will. And whatever pain 0:21:32.800 --> 0:21:35.680 that China feels on tariffs and on this trade war 0:21:36.040 --> 0:21:40.199 is peanuts compared to the potential gains from China, all right, 0:21:40.320 --> 0:21:42.880 So that is one way that China could hit back 0:21:43.160 --> 0:21:45.480 is through some of the measures that could take against 0:21:45.520 --> 0:21:48.000 US companies. What about its treasury holdings, I mean, do 0:21:48.040 --> 0:21:50.320 you expect that that to be on the table with 0:21:50.400 --> 0:21:55.280 China potentially liquidating it's holdings. Well, there's a risk of 0:21:55.359 --> 0:21:58.639 that at any time that China could decide to let go. 0:21:58.720 --> 0:22:01.800 Of course, they do have their own capital invested in 0:22:01.840 --> 0:22:05.320 those bonds, so that if they undermine the market, they 0:22:05.359 --> 0:22:08.399 do undermine the present value of their portfolio. But if 0:22:08.400 --> 0:22:14.040 they're planning on holding to maturity, then they can finesse 0:22:14.119 --> 0:22:17.879 the capital losses and they can probably make a profit 0:22:17.920 --> 0:22:20.040 on the bonds that they sell. So I would say 0:22:20.080 --> 0:22:23.200 that there is a risk, but I would say it's 0:22:23.200 --> 0:22:27.000 a tail risk right now, mainly because China sees itself 0:22:27.000 --> 0:22:30.879 as a world player and its future is involved in globalism, 0:22:31.200 --> 0:22:33.720 and to undermine the U S Treasury market would undermine 0:22:33.760 --> 0:22:37.240 the world economy, and that's not in China's interest. It 0:22:37.280 --> 0:22:41.240 has more focused tools at its disposal that it can use. 0:22:42.119 --> 0:22:47.240 Carl or about using currency as a weapon in this war, Well, 0:22:47.480 --> 0:22:49.919 it would seem, you know almost that they are. You know, 0:22:50.000 --> 0:22:53.560 we see the yuan getting cheaper, and um, you know 0:22:53.680 --> 0:22:56.679 that certainly is one way to offset the impact of tariffs. 0:22:57.160 --> 0:23:00.800 The thing is they don't really have to go that route. 0:23:01.280 --> 0:23:04.520 I'm writing tonight from our customers at High Frequency Economics, 0:23:04.560 --> 0:23:08.359 where our readers hear a story about trade diversion and 0:23:08.400 --> 0:23:14.159 alternative sources for goods, and um, China can can really 0:23:14.560 --> 0:23:17.720 escape through this tariff war with very little effect on 0:23:17.800 --> 0:23:21.480 its domestic economy. Um, the losses that they would face 0:23:21.520 --> 0:23:24.439 on sales to the US would be minimal, and the 0:23:24.480 --> 0:23:27.080 impact on their consumers of the tariffs the US is 0:23:27.119 --> 0:23:30.880 proposing would be I think negligible. Thank you very much 0:23:30.920 --> 0:23:33.320 for spending time with us. Carl Weinberg is the chief 0:23:33.320 --> 0:23:38.280 economist for High Frequency Economics. You can follow Carl on 0:23:38.280 --> 0:23:43.800 Twitter at c B Weinberg. The topic tariffs and President 0:23:43.840 --> 0:24:04.760 Donald Trump's trade war and retaliation from China. Fake accounts, Yes, 0:24:04.840 --> 0:24:08.400 fake accounts at Twitter, potentially fake accounts at Facebook, fake 0:24:08.440 --> 0:24:12.760 accounts almost everywhere. Here to tell us more about social 0:24:12.800 --> 0:24:16.359 media and advertising is David Garrity. He is the chief 0:24:16.359 --> 0:24:19.679 executive of g v A Research and you can of 0:24:19.720 --> 0:24:22.879 course follow David as we do on Twitter at a 0:24:22.960 --> 0:24:26.280 g v A Research. David always a pleasure, Thanks for 0:24:26.359 --> 0:24:30.920 coming into the studio. Uh, you're not a fake account. 0:24:31.400 --> 0:24:34.160 But how do we know that there isn't someone out 0:24:34.160 --> 0:24:39.840 there on social media impersonating David Garrity? Um, apart from 0:24:39.880 --> 0:24:42.200 the fact of you know, my own activity and those 0:24:42.200 --> 0:24:45.600 of people who basically host my social media activities, you know, 0:24:45.600 --> 0:24:48.440 trying to make sure that nobody's out there squatting. Uh. 0:24:48.480 --> 0:24:51.920 So there's a certain amount of self policing that takes place. 0:24:51.960 --> 0:24:55.840 But clearly we have a circumstance here with social media platforms, 0:24:56.160 --> 0:24:59.679 you know, not necessarily subscribing to the good business practices 0:25:00.440 --> 0:25:05.199